[Executive Summary & Second Quarter 2025 Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Second%20Quarter%202025%20Highlights) This chapter provides an overview of Midland States Bancorp, Inc.'s financial performance and strategic outlook for Q2 2025, highlighting key financial results and management's perspective on future direction [Second Quarter 2025 Financial Performance](index=1&type=section&id=2.1%20Second%20Quarter%202025%20Financial%20Performance) Midland States Bancorp, Inc. reported net income available to common shareholders of $9.8 million, or $0.44 per diluted share, for Q2 2025, a significant recovery from a net loss in Q1 2025 but a decrease from Q2 2024 Net Income and Diluted EPS | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--------------------------------- | :------ | :-------- | :------ | | Net Income Available to Common Shareholders | $9.8M | ($143.2M) | $23.5M | | Diluted EPS | $0.44 | ($6.58) | $1.06 | - Adjusted earnings for Q2 2025 were **$9.8 million**, or **$0.44** per diluted share, compared to **$10.8 million**, or **$0.49** per diluted share, in the prior quarter[7](index=7&type=chunk) - Pre-provision net revenue (PPNR) increased to **$32.2 million**, or **$1.48** per diluted share, in Q2 2025, up from **$27.0 million**, or **$1.24** per diluted share, in Q1 2025[7](index=7&type=chunk) [President & CEO's Discussion of Outlook](index=1&type=section&id=2.2%20President%20%26%20CEO's%20Discussion%20of%20Outlook) President & CEO Jeffrey G. Ludwig highlighted Q2 2025 as a step towards a more normalized operating environment, with progress in community banking growth and credit quality improvement - Non-performing assets decreased to **$111 million** (**1.56%** of total assets) in Q2 2025, down from **$151 million** (**2.08%** of total assets) in Q1 2025[6](index=6&type=chunk)[7](index=7&type=chunk) - Post-quarter-end, the bank exited two larger non-performing relationships totaling **$29 million** in July, which would further reduce the non-performing asset ratio by **41 basis points**[6](index=6&type=chunk) - The company continues to target growing its common equity tier 1 capital ratio to **10.0%**, with current levels at **9.02%**[5](index=5&type=chunk)[7](index=7&type=chunk) - Profitability trends were favorable, with net interest margin expanding **7 basis points** to **3.56%** and strong contribution from wealth management, with further improvement expected over the balance of 2025[8](index=8&type=chunk) [Asset Quality and Loan Portfolio Management](index=2&type=section&id=Asset%20Quality%20and%20Loan%20Portfolio%20Management) This section details the company's credit quality trends, including changes in nonperforming assets and net charge-offs, along with strategic adjustments to its loan portfolio composition [Credit Quality Trends](index=2&type=section&id=3.1%20Credit%20Quality%20Trends) Midland States Bancorp demonstrated an acceleration of credit clean-up in Q2 2025, with significant reductions in nonperforming assets and loans, though net charge-offs increased primarily from specialty and equipment finance portfolios Credit Quality Metrics (in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------- | :------------ | | Loans 30-89 days past due | $40,959 | $48,221 | $54,045 | | Nonperforming loans | $109,512 | $145,690 | $112,124 | | Nonperforming assets | $111,174 | $151,264 | $123,774 | | Substandard accruing loans | $58,478 | $77,620 | $135,555 | | Net charge-offs | $29,854 | $16,878 | $13,883 | | Nonperforming assets to total assets | 1.56% | 2.08% | 1.61% | - Net charge-offs for the quarter totaled **$29.9 million**, including **$13.9 million** in specialty finance (with **$10.2 million** previously reserved) and **$3.9 million** in equipment finance, mainly from the trucking industry[12](index=12&type=chunk) - Provision for credit losses on loans was **$17.4 million**, primarily due to continued trends in the equipment finance portfolio[12](index=12&type=chunk) [Loan Portfolio Changes](index=2&type=section&id=3.2%20Loan%20Portfolio%20Changes) Total loans increased slightly to $5.06 billion at June 30, 2025, driven by Community Bank and non-core loan growth, offset by intentional reductions in higher-risk portfolios Loan Segment (in millions) | Loan Segment | June 30, 2025 (in millions) | Change from March 31, 2025 (in millions) | | :-------------------------- | :-------------------------- | :--------------------------------------- | | Total Loans | $5,064.7 | +$46.6 | | Community Bank Loans | $3,318.2 | +$58.9 (1.8%) | | Non-core loans (third-party) | $333.5 | +$212.8 | | Specialty Finance | $701.2 | -$173.3 | | Equipment Finance | $711.7 | -$51.8 | - The increase in non-core loans was a result of financing the sale of the GreenSky portfolio[14](index=14&type=chunk) - The company continues to reduce exposure to higher-risk portfolios like Specialty Finance and Equipment Finance through tightened underwriting standards[6](index=6&type=chunk)[14](index=14&type=chunk) [Deposits, Funding, and Net Interest Margin](index=3&type=section&id=Deposits%2C%20Funding%2C%20and%20Net%20Interest%20Margin) This section analyzes the company's deposit growth and mix, funding costs, and the factors influencing the expansion of its net interest margin during the quarter [Deposit Trends and Mix](index=3&type=section&id=4.1%20Deposit%20Trends%20and%20Mix) Total deposits increased modestly to $5.95 billion at June 30, 2025, driven by commercial and public fund growth, partially offset by decreases in other deposit categories, with a significant servicing deposit reduction post-quarter-end Deposit Type (in millions) | Deposit Type | June 30, 2025 (in millions) | Change from March 31, 2025 (in millions) | | :-------------------------- | :-------------------------- | :--------------------------------------- | | Total Deposits | $5,946.9 | +$10.5 | | Commercial Deposits | $1,145.4 | +$70.5 | | Public Fund Deposits | $618.2 | +$127.8 | | Noninterest-bearing Deposits | $1,074.2 | -$16.5 | | Retail Deposits | $2,811.8 | -$34.7 | | Servicing Deposits | $785.7 | -$56.9 | | Brokered Deposits | $248.7 | -$109.4 | - Servicing deposits decreased by **$284.4 million** in July 2025 due to the acquisition of a servicing customer, which is anticipated to positively impact future net interest margin[14](index=14&type=chunk) [Net Interest Margin Performance](index=4&type=section&id=4.2%20Net%20Interest%20Margin%20Performance) The net interest margin expanded by 7 basis points to 3.56% in Q2 2025, primarily due to a continued decline in the cost of funding following Federal Reserve rate cuts Net Interest Margin | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :---------------- | :------ | :------ | :------ | | Net Interest Margin | 3.56% | 3.49% | 3.33% | | Cost of Deposits | 2.19% | 2.29% | 2.55% | - The decline in the cost of deposits to **2.19%** in Q2 2025 was attributed to Federal Reserve rate cuts implemented in late 2024[15](index=15&type=chunk) [Noninterest Income and Expense Trends](index=5&type=section&id=Noninterest%20Income%20and%20Expense%20Trends) This section examines the changes in the company's noninterest income, including specific drivers, and analyzes the significant fluctuations in noninterest expenses, particularly the impact of the prior quarter's goodwill impairment [Noninterest Income](index=5&type=section&id=5.1%20Noninterest%20Income) Noninterest income increased to $23.5 million in Q2 2025, significantly boosted by $3.8 million in credit enhancement income related to fully reimbursed charge-offs Total Noninterest Income (in millions) | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | | :---------------------- | :-------------------- | :-------------------- | | Total Noninterest Income | $23.5 | $17.8 | | Credit Enhancement Income | $3.8 | ($0.6) | - The credit enhancement income of **$3.8 million** was primarily due to an increase in charge-offs in third-party loan origination and servicing programs, which were fully reimbursed by the program sponsor[22](index=22&type=chunk) [Noninterest Expense](index=5&type=section&id=5.2%20Noninterest%20Expense) Noninterest expense significantly decreased to $50.0 million in Q2 2025, primarily due to the absence of the $154.0 million goodwill impairment charge recorded in Q1 2025 Total Noninterest Expense (in millions) | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | | :-------------------- | :-------------------- | :-------------------- | | Total Noninterest Expense | $50.0 | $203.0 | | Impairment on Goodwill | $0.0 | $154.0 | - The Q1 2025 noninterest expense included a **$154.0 million** goodwill impairment charge[3](index=3&type=chunk)[22](index=22&type=chunk) - The company is experiencing elevated professional services, legal fees, and other expenses associated with loan collections and the restatement of financial statements[22](index=22&type=chunk) [Capital Adequacy](index=5&type=section&id=Capital%20Adequacy) As of June 30, 2025, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, with Midland States Bank qualifying as a 'well-capitalized' financial institution, and the company targeting a 10.0% Common Equity Tier 1 capital ratio Capital Ratios | Capital Ratio | Midland States Bank | Midland States Bancorp, Inc. | Minimum Regulatory Requirements (2) | | :---------------------------------- | :------------------ | :--------------------------- | :---------------------------------- | | Total capital to risk-weighted assets | 13.74% | 14.50% | 10.50% | | Tier 1 capital to risk-weighted assets | 12.49% | 12.07% | 8.50% | | Common equity Tier 1 capital to risk-weighted assets | 12.49% | 9.02% | 7.00% | | Tier 1 leverage ratio | 9.93% | 9.59% | 4.00% | - The company's Common Equity Tier 1 capital ratio was **9.02%**, with a target of **10.0%**[5](index=5&type=chunk)[7](index=7&type=chunk)[20](index=20&type=chunk) [Key Performance Indicators (KPIs)](index=5&type=section&id=Key%20Performance%20Indicators%20%28KPIs%29) The company's key performance indicators for Q2 2025 show a rebound in profitability metrics like Return on Average Assets and Pre-provision Net Revenue to Average Assets, alongside an improved efficiency ratio, reflecting ongoing credit management efforts Key Performance Indicators | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------- | :------------ | | Return on average assets | 0.67% | (7.66)% | 1.33% | | Pre-provision net revenue to average assets | 1.81% | 1.47% | 2.07% | | Net interest margin | 3.56% | 3.49% | 3.33% | | Efficiency ratio | 60.60% | 64.29% | 55.79% | | Noninterest expense to average assets | 2.80% | 11.02% | 2.62% | | Net charge-offs to average loans | 2.34% | 1.35% | 0.94% | | Tangible book value per share at period end | $20.68 | $20.54 | $21.07 | | Diluted earnings (loss) per common share | $0.44 | ($6.58) | $1.06 | | Trust assets under administration | $4,181,180 | $4,101,414 | $3,996,175 | [Company Overview and Disclosures](index=6&type=section&id=Company%20Overview%20and%20Disclosures) This section provides essential background information about Midland States Bancorp, Inc., clarifies the use of non-GAAP financial measures, and includes important disclaimers regarding forward-looking statements [About Midland States Bancorp, Inc.](index=6&type=section&id=7.1%20About%20Midland%20States%20Bancorp%2C%20Inc.) Midland States Bancorp, Inc. is an Illinois-based community financial holding company with approximately $7.11 billion in total assets and $4.18 billion in assets under administration as of June 30, 2025, offering a comprehensive suite of financial services - Midland States Bancorp, Inc. is headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank[23](index=23&type=chunk) - As of June 30, 2025, total assets were approximately **$7.11 billion**, and Wealth Management Group assets under administration were approximately **$4.18 billion**[23](index=23&type=chunk) - The company provides a full range of commercial and consumer banking products, business equipment financing, merchant credit card services, trust and investment management, insurance, and financial planning services[23](index=23&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=7.2%20Non-GAAP%20Financial%20Measures) The press release includes several non-GAAP financial measures to offer management and investors a more complete understanding of the company's funding profile and profitability, serving as supplemental information rather than substitutes for GAAP measures - Non-GAAP financial measures include Pre-provision net revenue, Pre-provision net revenue per diluted share, Pre-provision net revenue to average assets, Efficiency ratio, Tangible common equity to tangible assets, and Tangible book value per share[25](index=25&type=chunk) - These measures are considered supplemental and are not substitutes for GAAP financial measures, aiming to provide a more complete understanding of the company's funding profile and profitability[25](index=25&type=chunk) [Forward-Looking Statements](index=6&type=section&id=7.3%20Forward-Looking%20Statements) The report contains forward-looking statements regarding future performance, goals, and earnings, which are subject to various risks and uncertainties, and the company does not undertake to update or revise them - Forward-looking statements include those about the Company's plans, objectives, future performance, goals, and future earnings levels, including anticipated noninterest income and operating expenses[26](index=26&type=chunk) - These statements are subject to risks and uncertainties such as changes in interest rates, economic conditions, financial markets, and regulatory developments[26](index=26&type=chunk) - The company does not undertake any obligation to update or revise any forward-looking statements[26](index=26&type=chunk) [Consolidated Financial Statements](index=7&type=section&id=Consolidated%20Financial%20Statements) This section presents the detailed consolidated balance sheet, income statement, and breakdowns of the loan and deposit portfolios, offering a comprehensive view of the company's financial position and performance [Consolidated Balance Sheet](index=7&type=section&id=8.1%20Consolidated%20Balance%20Sheet) The consolidated balance sheet shows total assets of $7.11 billion at June 30, 2025, a decrease from $7.28 billion at March 31, 2025, with key changes in loans held for sale, cash, and shareholders' equity Consolidated Balance Sheet (dollars in thousands) | (dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :---------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | **Assets** | | | | | | | Cash and cash equivalents | $176,587 | $102,006 | $114,766 | $121,873 | $124,646 | | Investment securities | 1,354,652 | 1,368,405 | 1,212,366 | 1,216,795 | 1,099,654 | | Loans, net | 4,972,005 | 4,912,877 | 5,056,370 | 5,577,170 | 5,673,614 | | Loans held for sale | 7,899 | 287,821 | 344,947 | 8,001 | 5,555 | | Goodwill | 7,927 | 7,927 | 161,904 | 161,904 | 161,904 | | Total assets | $7,107,878 | $7,284,804 | $7,506,809 | $7,704,189 | $7,708,074 | | **Liabilities and Shareholders' Equity** | | | | | | | Total deposits | 5,946,919 | 5,936,434 | 6,197,243 | 6,256,836 | 6,118,023 | | FHLB advances and other borrowings | 345,000 | 498,000 | 258,000 | 425,000 | 600,000 | | Total liabilities | 6,534,173 | 6,713,367 | 6,795,962 | 6,932,968 | 6,971,295 | | Total shareholders' equity | 573,705 | 571,437 | 710,847 | 771,221 | 736,779 | [Consolidated Income Statement](index=8&type=section&id=8.2%20Consolidated%20Income%20Statement) The consolidated income statement for Q2 2025 shows net interest income of $58.7 million, a significant increase in total noninterest income, and a substantial decrease in total noninterest expense due to the absence of the Q1 goodwill impairment, resulting in a net income of $12.0 million Consolidated Income Statement (dollars in thousands, except per share data) | (dollars in thousands, except per share data) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Net interest income | $58,695 | $58,290 | $58,570 | $59,110 | $58,895 | | Total provision for credit losses | 17,369 | 10,850 | 74,183 | 17,925 | 8,282 | | Total noninterest income | 23,534 | 17,763 | 35,371 | 33,545 | 31,984 | | Total noninterest expense | 49,992 | 203,005 | 58,699 | 49,764 | 50,784 | | Income (loss) before income taxes | 14,868 | (137,802) | (38,941) | 24,966 | 31,813 | | Net income (loss) | 12,024 | (140,974) | (30,769) | 20,431 | 25,719 | | Net income (loss) available to common shareholders | $9,796 | ($143,202) | ($32,997) | $18,202 | $23,491 | | Diluted earnings (loss) per common share | $0.44 | ($6.58) | ($1.52) | $0.83 | $1.06 | [Loan Portfolio Mix](index=9&type=section&id=8.3%20Loan%20Portfolio%20Mix) The loan portfolio mix at June 30, 2025, shows a slight increase in total loans, with growth in commercial loans and non-core programs, while specialty finance and equipment finance portfolios continued to decline, and commercial real estate remains the largest segment Loan Portfolio Mix (dollars in thousands) | Loan Portfolio Mix (dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :---------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Commercial loans | $1,178,792 | $879,286 | $934,847 | $879,590 | $955,667 | | Equipment finance loans | 364,526 | 390,276 | 416,970 | 442,552 | 461,409 | | Equipment finance leases | 347,155 | 373,168 | 391,390 | 417,531 | 428,659 | | Total commercial loans and leases | 1,891,541 | 1,642,730 | 1,751,211 | 1,789,871 | 1,845,735 | | Commercial real estate | 2,412,761 | 2,592,325 | 2,591,664 | 2,510,472 | 2,421,505 | | Construction and land development | 258,729 | 264,966 | 299,842 | 422,253 | 476,528 | | Residential real estate | 361,261 | 373,095 | 380,557 | 378,658 | 378,393 | | Consumer | 140,403 | 144,937 | 144,300 | 626,983 | 706,896 | | Total loans | $5,064,695 | $5,018,053 | $5,167,574 | $5,728,237 | $5,829,057 | | **Loan Portfolio Segment** | | | | | | | Total Community Bank | 3,318,247 | 3,259,350 | 3,202,551 | 3,178,882 | 3,134,309 | | Specialty finance | 701,244 | 874,567 | 1,038,238 | 1,018,961 | 1,107,508 | | Equipment finance | 711,681 | 763,444 | 808,359 | 860,083 | 890,068 | | Non-core loan program and other | 333,523 | 120,692 | 118,426 | 670,311 | 697,172 | [Deposit Portfolio Mix](index=9&type=section&id=8.4%20Deposit%20Portfolio%20Mix) The deposit portfolio mix shows a slight increase in total deposits, with growth in interest-bearing checking and money market accounts, while noninterest-bearing demand and brokered deposits declined, and commercial and public funds channels saw increases Deposit Portfolio Mix (dollars in thousands) | Deposit Portfolio Mix (dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Noninterest-bearing demand | $1,074,212 | $1,090,707 | $1,055,564 | $1,050,617 | $1,108,521 | | Interest-bearing: Checking | 2,180,717 | 2,161,282 | 2,378,256 | 2,389,970 | 2,343,533 | | Interest-bearing: Money market | 1,216,357 | 1,154,403 | 1,173,630 | 1,187,139 | 1,143,668 | | Interest-bearing: Savings | 511,470 | 522,663 | 507,305 | 510,260 | 538,462 | | Interest-bearing: Time | 818,813 | 818,732 | 822,981 | 849,413 | 852,415 | | Interest-bearing: Brokered time | 145,350 | 188,647 | 259,507 | 269,437 | 131,424 | | Total deposits | $5,946,919 | $5,936,434 | $6,197,243 | $6,256,836 | $6,118,023 | | **Deposit Portfolio by Channel** | | | | | | | Retail | $2,811,838 | $2,846,494 | $2,749,650 | $2,695,077 | $2,742,494 | | Commercial | 1,145,369 | 1,074,837 | 1,209,815 | 1,218,657 | 1,217,068 | | Public Funds | 618,172 | 490,374 | 505,912 | 574,704 | 568,889 | | Servicing | 785,659 | 842,567 | 896,436 | 958,662 | 931,892 | | Brokered Deposits | 248,707 | 358,063 | 473,451 | 390,558 | 238,708 | [Non-GAAP Financial Measure Reconciliations](index=10&type=section&id=Non-GAAP%20Financial%20Measure%20Reconciliations) This section provides detailed reconciliations of non-GAAP financial measures, including adjusted earnings, pre-provision net revenue, efficiency ratio, and tangible common equity, to their most directly comparable GAAP measures [Adjusted Earnings Reconciliation](index=10&type=section&id=9.1%20Adjusted%20Earnings%20Reconciliation) The adjusted earnings reconciliation shows the impact of non-recurring items, primarily the goodwill impairment, on reported earnings, with Q2 2025 adjusted earnings of $9.8 million consistent with GAAP net income due to no significant adjustments Adjusted Earnings Reconciliation (dollars in thousands, except per share data) | (dollars in thousands, except per share data) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Income (loss) before income tax (benefit) expense - GAAP | $14,868 | ($137,802) | ($38,941) | $24,966 | $31,813 | | Impairment on goodwill | — | (153,977) | — | — | — | | Adjusted earnings (loss) pre tax - non-GAAP | 14,868 | 16,175 | (38,894) | 24,933 | 31,798 | | Adjusted earnings (loss) available to common shareholders | $9,796 | $10,775 | ($32,963) | $18,178 | $23,480 | | Adjusted diluted earnings (loss) per common share | $0.44 | $0.49 | ($1.52) | $0.82 | $1.06 | [Pre-Provision Net Revenue Reconciliation](index=10&type=section&id=9.2%20Pre-Provision%20Net%20Revenue%20Reconciliation) The reconciliation of Pre-provision Net Revenue (PPNR) highlights the company's profitability before accounting for credit losses and goodwill impairment, with PPNR for Q2 2025 increasing to $32.2 million, reflecting improved operational performance Pre-Provision Net Revenue Reconciliation (dollars in thousands) | (dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :--------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Income (loss) before income taxes | $14,868 | ($137,802) | ($38,941) | $24,966 | $31,813 | | Provision for credit losses | 17,369 | 10,850 | 74,183 | 17,925 | 8,282 | | Impairment on goodwill | — | 153,977 | — | — | — | | Pre-provision net revenue | $32,237 | $27,025 | $35,242 | $42,891 | $40,095 | | Pre-provision net revenue per diluted share | $1.48 | $1.24 | $1.62 | $1.98 | $1.84 | | Pre-provision net revenue to average assets | 1.81% | 1.47% | 1.83% | 2.21% | 2.07% | [Efficiency Ratio Reconciliation](index=11&type=section&id=9.3%20Efficiency%20Ratio%20Reconciliation) The efficiency ratio reconciliation adjusts noninterest expense for goodwill impairment and net interest income for tax-exempt income, showing an improved adjusted efficiency ratio of 60.60% in Q2 2025, indicating better cost management Efficiency Ratio Reconciliation (dollars in thousands) | (dollars in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :--------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Noninterest expense - GAAP | $49,992 | $203,005 | $58,699 | $49,764 | $50,784 | | Impairment on goodwill | — | (153,977) | — | — | — | | Adjusted noninterest expense | $49,992 | $49,028 | $58,699 | $49,764 | $50,784 | | Adjusted total revenue | $82,496 | $76,261 | $94,208 | $92,827 | $91,034 | | Efficiency ratio | 60.60% | 64.29% | 62.31% | 53.61% | 55.79% | [Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share](index=11&type=section&id=9.4%20Tangible%20Common%20Equity%20to%20Tangible%20Assets%20Ratio%20and%20Tangible%20Book%20Value%20Per%20Share) The tangible common equity to tangible assets ratio improved to 6.27% at June 30, 2025, from 6.08% at March 31, 2025, and tangible book value per share increased to $20.68, reflecting a stronger capital position excluding intangible assets Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share (dollars in thousands, except per share data) | (dollars in thousands, except per share data) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Total shareholders' equity—GAAP | $573,705 | $571,437 | $710,847 | $771,221 | $736,779 | | Tangible common equity | 444,868 | 441,773 | 426,295 | 485,717 | 450,324 | | Total assets—GAAP | $7,107,878 | $7,284,804 | $7,506,809 | $7,704,189 | $7,708,074 | | Tangible assets | $7,089,589 | $7,265,688 | $7,332,805 | $7,529,233 | $7,532,167 | | Tangible Common Equity to Tangible Assets | 6.27% | 6.08% | 5.81% | 6.45% | 5.98% | | Tangible Book Value Per Share | $20.68 | $20.54 | $19.83 | $22.70 | $21.07 |

Core Viewpoint - The market anticipates Midland States Bancorp (MSBI) will report a year-over-year increase in earnings driven by higher revenues for the quarter ended June 2025, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is expected on July 24, with a consensus EPS estimate of $0.63, reflecting a year-over-year increase of +215%. Revenues are projected to be $77.4 million, up 6.5% from the previous year [3][2]. Estimate Revisions - The consensus EPS estimate has been revised 1.47% higher in the last 30 days, indicating a collective reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate for Midland States Bancorp is lower than the consensus estimate, resulting in an Earnings ESP of -3.18%, indicating a bearish outlook from analysts [12]. Historical Performance - In the last reported quarter, Midland States Bancorp exceeded the expected EPS of $0.52 by delivering $0.57, resulting in a surprise of +9.62%. Over the last four quarters, the company has beaten consensus EPS estimates twice [13][14]. Conclusion - Despite the potential for an earnings beat, Midland States Bancorp does not appear to be a strong candidate for exceeding earnings expectations based on current estimates and rankings [17].

Financial Results Announcement - Midland States Bancorp, Inc. will issue its second quarter 2025 financial results after market close on July 24, 2025 [1] - An investor presentation will accompany the financial results and will be available on the company's investor relations website [1] Company Overview - Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois [2] - The company is the sole shareholder of Midland States Bank and had total assets of approximately $7.28 billion as of March 31, 2025 [2] - The Wealth Management Group of the company had assets under administration of approximately $4.10 billion [2] - The company offers a full range of commercial and consumer banking products and services, including business equipment financing, merchant credit card services, trust and investment management, insurance, and financial planning services [2]

Financial Position - As of December 31, 2024, the company had total assets of $7.51 billion and wealth management assets under administration of approximately $4.15 billion[26] - The commercial real estate and construction loan portfolio totaled $2.89 billion as of December 31, 2024, with a diversified composition across various property types[35] - The company reported a market share of 37.66% in Effingham County, IL, with total deposits of $1.06 billion as of June 30, 2024[42] - The multi-family property loans represented 18.9% of the commercial real estate loan portfolio, increasing from 18.1% in 2023[35] - The company had 896 employees as of December 31, 2024, with a focus on competitive salaries and employee development[43] Regulatory Environment - The Company is subject to extensive regulation under federal and state law, which affects its growth and earnings performance[48] - The Company has regulatory capital in excess of the Federal Reserve's requirements and meets the Basel III Rule requirements to be well-capitalized as of December 31, 2024[66] - The Basel III Rule increased the required minimum capital ratios, including a Common Equity Tier 1 Capital ratio of 4.5% of risk-weighted assets[63] - The Company is not subject to a directive from the Federal Reserve or the DFPR to increase its capital as of December 31, 2024[66] - The Regulatory Relief Act enacted in May 2018 provided regulatory relief for community banks, eliminating certain Dodd-Frank Act requirements[49] - The Basel III Rule requires banking organizations to maintain a capital conservation buffer of 2.5% in Common Equity Tier 1 Capital for capital distributions[60] - The Company believes that the reforms from the Regulatory Relief Act are favorable to its operations[49] - The supervisory framework for U.S. banking organizations subjects banks to regular examination, impacting their business conduct and growth[50] - The Basel III Endgame Proposal, proposed in July 2023, is not expected to significantly impact the Company or the Bank[61] - The Company has not yet elected to comply with the Community Bank Leverage Ratio (CBLR) framework, which requires a CBLR greater than 9% for eligibility[68] - The Company is subject to capital requirements including a Common Equity Tier 1 Capital ratio of 6.5% or more and a Total Capital ratio of 10% or more[71] - The FDIC's special assessment for banking organizations with assets of $5 billion or more is set at an annual rate of 13.4 basis points, effective from the first quarterly assessment period of 2024[90] - The Bank paid approximately $0.5 million in supervisory assessments to the DFPR during the year ended December 31, 2024[91] - The Dodd-Frank Act increased the minimum reserve ratio for the Deposit Insurance Fund (DIF) from 1.15% to 1.35% of estimated insured deposits[89] - The Company is required to maintain sufficient liquidity to withstand a range of stress events, as highlighted by recent banking failures[93] - The Federal Reserve has indicated that bank holding companies should eliminate or significantly reduce dividends if net income is insufficient to fund them[78] - The Company is legally obligated to act as a source of financial and managerial strength to the Bank under the Bank Holding Company Act (BHCA)[69] - The Company must maintain its status as a financial holding company by being well-capitalized and well-managed[74] - The Federal Reserve requires prior approval for any merger or acquisition involving the Company[70] - The Bank exceeded its capital requirements under applicable guidelines as of December 31, 2024[98] Risk Management - The liquidity coverage ratio (LCR) requires large financial firms to hold sufficient liquid assets to protect against funding constraints during financial turmoil[95] - The net stable funding ratio (NSFR) promotes more medium- and long-term funding of assets and activities over a one-year horizon[95] - The Bank is subject to restrictions on dividend payments, which cannot exceed the bank's calendar year-to-date net income plus retained income for the two preceding calendar years without Federal Reserve approval[97] - The Bank's CRA ratings can significantly impact its ability to engage in certain activities, including acquisitions[110] - As of December 31, 2024, the Bank did not exceed the guidelines for commercial real estate loan concentrations[116] - The Bank must maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer to pay unrestricted dividends[98] - The federal banking agencies have identified elevated operational risk and strategic risks from non-depository financial institutions as key risk themes for 2024[106] - The Bank is required to implement a comprehensive information security program to protect customer records and information[107] - The Bank must comply with stringent economic and trade sanctions regimes administered by the Office of Foreign Assets Control[115] Financial Performance - The fair value of the Company's Banking reporting unit exceeded its carrying amount by approximately 7% as of December 31, 2024, indicating no impairment loss[332] - The Company expects to recognize goodwill impairment expense between $135.0 million and $154.0 million in the first quarter of 2025 due to deteriorated credit quality and stock price trends[337] - The Company has a net interest income sensitivity (NII at Risk) of $2,395 thousand for a -200 basis point shock and -$5,596 thousand for a +200 basis point shock as of December 31, 2024[323] - The Company reported a 1.1% increase in net interest income sensitivity for a -200 basis point change in rates as of December 31, 2024[323] - The Company is actively managing interest rate risk through monitoring loan and deposit flows, investment, funding, and hedging activities[318] Loan Programs - The Company operates three significant programs for unsecured commercial and consumer loans, with terms ranging from five months to 25 years[338] - As of December 31, 2024, loans outstanding in the programs were $110.4 million, a decrease from $853.4 million in 2023[341] - $336.7 million is included in loans held for sale at lower of cost or market due to the decision to pursue a sale of that portion of the portfolio[341] - The servicer guarantees a targeted return paid first by customer payments, supplemented if necessary[340] - Excess yield on the portfolio after realized charge-offs is paid to the servicer as a "performance fee" if above the agreed target rate[340] - Charge-offs exceeding the performance fee amount roll over to future periods to offset potential performance fees[340] - The program sponsor also guarantees a targeted return, similarly structured to the servicer's arrangement[340] - Excess yield after charge-offs is paid to the program sponsor as a "performance fee" if above the agreed target rate[340] - The program sponsor reimburses the Company for all excess charge-offs if they exceed the performance fee amount[340]

Financial Performance - Total assets reached $7.5 billion[7] - Net loss available to common shareholders was ($54.8 million), resulting in ($2.52) diluted EPS[9] - Pre-tax, pre-provision earnings amounted to $21.5 million[9] - Noninterest income was strong at $19.6 million[9] Loan Portfolio & Credit Quality - Total loans decreased by $581.2 million from the prior quarter, reaching $5.17 billion[19] - Net charge-offs to average loans was 7.23%[57] - Sold 100% of $87.1 million LendingPoint portfolio at a loss of $17.3 million[10] - Committed to sell 89% of $371.7 million GreenSky portfolio at a loss of $33.4 million, expected to close in Q1'25[10] Deposits & Liquidity - Total deposits decreased by $59.6 million from the prior quarter to $6.197 billion[26] - Loan-to-deposit ratio decreased to 83.4% from 91.9% at the end of the prior quarter[9] - Total estimated liquidity was $2.6162 billion as of December 31, 2024[15] Capital & Ratios - YTD Adjusted Return on Average Assets (ROAA) was (0.17)%[7] - YTD Adjusted Return on Tangible Common Equity (TCE) was (4.40)%[7] - Tangible Common Equity to Tangible Assets (TCE/TA) ratio was 6.14%[7]

Core Viewpoint - Midland States Bancorp (MSBI) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - For the fiscal year ending December 2025, Midland States Bancorp is projected to earn $2.60 per share, reflecting a substantial increase of 347.6% from the previous year's reported figure [8]. Analyst Sentiment and Market Implications - Analysts have been consistently raising their earnings estimates for Midland States Bancorp, with a 3% increase in the Zacks Consensus Estimate over the past three months [8]. - The upgrade to Zacks Rank 2 places Midland States Bancorp in the top 20% of Zacks-covered stocks, suggesting potential for higher stock prices in the near term [10]. Zacks Rank System Overview - The Zacks Rank system categorizes stocks based on earnings estimates into five groups, with a proven track record of performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7]. - The Zacks rating system maintains a balanced distribution of 'buy' and 'sell' ratings, ensuring that only the top 20% of stocks are recognized for their superior earnings estimate revisions [9][10].

Core Viewpoint - Midland States Bancorp, Inc. received a deficiency notification from Nasdaq due to the late filing of its Annual Report on Form 10-K and Quarterly Report on Form 10-Q, indicating non-compliance with Nasdaq Listing Rule 5250(c)(1) [1][3]. Company Compliance Status - The notification does not have an immediate effect on the listing or trading of the Company's common stock on the Nasdaq Global Select Market [2]. - The Company has until June 2, 2025, to submit a plan to regain compliance with the Listing Rule, with a potential extension until September 29, 2025 [3]. Financial Reporting Evaluation - The Company is currently evaluating its accounting and financial reporting related to third-party lending and servicing arrangements, including assessing goodwill impairment [4]. Company Overview - Midland States Bancorp, Inc. is a community-based financial holding company with total assets of approximately $7.46 billion as of March 31, 2025, and its Wealth Management Group manages assets of about $4.10 billion [6].

Group 1 - Midland States Bancorp reported revenue of $75.95 million for the quarter ended March 2025, a year-over-year decline of 1.5% [1] - The company's EPS for the same period was $0.57, compared to $0.53 a year ago, indicating an increase [1] - The reported revenue exceeded the Zacks Consensus Estimate of $72.75 million by 4.40%, and the EPS also surpassed the consensus estimate of $0.52 by 9.62% [1] Group 2 - Key metrics for Midland States Bancorp include an efficiency ratio of 64.2%, better than the estimated 67.7% [4] - Average interest-earning assets were reported at $6.80 billion, slightly above the estimated $6.77 billion [4] - Net charge-offs to average loans were 1.4%, significantly higher than the estimated 0.4% [4] Group 3 - The net interest margin was reported at 3.5%, exceeding the average estimate of 3.2% [4] - Wealth management revenue was $7.35 million, slightly above the estimated $7.30 million [4] - Total noninterest income was $17.76 million, below the average estimate of $19 million [4] Group 4 - Shares of Midland States Bancorp have returned -4.2% over the past month, underperforming the Zacks S&P 500 composite's -0.2% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance in the near term [3]

Core Viewpoint - Midland States Bancorp (MSBI) reported quarterly earnings of $0.57 per share, exceeding the Zacks Consensus Estimate of $0.52 per share, and showing an increase from $0.53 per share a year ago, representing an earnings surprise of 9.62% [1][2] Financial Performance - The company posted revenues of $75.95 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 4.40%, although this is a decrease from $77.11 million in the same quarter last year [2] - Over the last four quarters, Midland States Bancorp has exceeded consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Midland States Bancorp shares have declined approximately 32.5% since the beginning of the year, compared to a decline of 5.5% for the S&P 500 [3] - The current Zacks Rank for the stock is 5 (Strong Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.64 on revenues of $73.95 million, and for the current fiscal year, it is $2.52 on revenues of $296.8 million [7] - The trend of estimate revisions for Midland States Bancorp has been unfavorable ahead of the earnings release [6] Industry Context - The Zacks Industry Rank for Banks - Northeast, to which Midland States Bancorp belongs, is currently in the top 25% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Performance - Net income available to common shareholders for Q1 2025 was $12.6 million, or $0.57 per diluted share[6] - Pre-tax, pre-provision earnings for Q1 2025 were $27.0 million, or $1.12 per diluted share[6] - Net income available to common shareholders for the same period was $12,571,000, resulting in basic and diluted earnings per share of $0.57[29] - The company reported pre-tax, pre-provision earnings of $27,024,000 for the three months ended March 31, 2025[33] Loan and Asset Management - Total loans as of March 31, 2025, were $5.02 billion, a decrease of $149.5 million from December 31, 2024[12] - Nonperforming loans were $140.0 million, representing 2.79% of total loans as of March 31, 2025[10] - Net charge-offs for Q1 2025 were $16.9 million, with $11.1 million fully reimbursed related to third-party lending programs[11] - Total loans as of March 31, 2025, were $5,018,053,000, with a provision for credit losses on loans of $8,250,000[29] - The loan portfolio mix included $2,592,325,000 in commercial real estate loans as of March 31, 2025[31] Deposits and Interest - Total deposits were $5.94 billion as of March 31, 2025, a decrease of $260.8 million from December 31, 2024[12] - Total deposits as of March 31, 2025, were $5,936,434,000, with noninterest-bearing demand deposits of $1,090,707,000[31] - Net interest income for the three months ended March 31, 2025, was $58,186,000, with interest income of $99,251,000 and interest expense of $41,065,000[29] - Net interest margin was 3.48%, with the cost of deposits declining to 2.29%[13] Wealth Management - Wealth Management revenue totaled $7.4 million in Q1 2025, with assets under administration of $4.10 billion[12] - Wealth management revenue for the three months ended March 31, 2025, was $7,350,000[29] Regulatory Compliance and Capital - The Company exceeded all regulatory capital requirements under Basel III as of March 31, 2025[18] - Tangible common equity to tangible assets ratio was 6.32% as of March 31, 2025[35] Efficiency Metrics - The efficiency ratio for the three months ended March 31, 2025, was 64.24%[34] Future Projections - The Company expects noninterest income in the near term to be approximately $17.0 million to $17.5 million[20] Total Assets - Total assets as of March 31, 2025, amounted to $7,457,753,000[27]