Midland States Bancorp (MSBI) Q1 2025 earnings summary

Executive summary

• Q1 2025 reported a net loss of $141.0 million, primarily due to a $154.0 million goodwill impairment charge, while preliminary unaudited results indicate $12.6 million net income available to common shareholders, reflecting updated accounting for third-party lending and servicing; actual results may differ after audit completion.

• Net interest income decreased year-over-year, but net interest margin increased to 3.49%, with strong Community Bank loan growth and continued wealth management revenue contribution.

• Provision for credit losses decreased by $9.1 million compared to Q1 2024, and no significant new substandard or nonperforming loans were identified; two-thirds of net charge-offs were fully reimbursed.

• Sale of non-core consumer loan portfolios, including $330 million in GreenSky loans, was completed or committed, with significant charge-offs recognized and tighter equipment finance underwriting expected to reduce risk exposure.

• Results are preliminary and unaudited, with ongoing review of third-party lending and potential goodwill impairment; delays in filing 2024 Annual Report and restated financials expected.

Financial highlights

• Net loss available to common shareholders was $143.2 million, or $(6.58) per diluted share, compared to net income of $20.4 million, or $0.92 per share, in Q1 2024; preliminary unaudited net income for Q1 2025 was $12.6 million, or $0.57 per diluted share.

• Net interest margin increased to 3.49% from 3.39% year-over-year; net interest income for Q1 2025 was $58.2 million.

• Noninterest income fell by $20.1 million year-over-year, totaling $17.8 million in Q1 2025, including losses on limited partnership investments and credit enhancement.

• Noninterest expense was $48.9 million, impacted by $1.4 million in severance and $0.7 million in professional fees.

• Return on average assets was (7.66)% in the audited report and 0.80% in preliminary unaudited results.

Outlook and guidance

• Management expects continued focus on credit quality improvement, strategic reduction of non-core loan portfolios, and stronger profitability with growing capital ratios over the balance of 2025.

• Near-term noninterest income projected at $17.0–$17.5 million per quarter; operating expense run rate expected at $48.0–$49.0 million.

• The Federal Reserve's steady interest rate policy and potential future rate cuts are expected to influence net interest income and margin.

• Ongoing evaluation of goodwill impairment, which would not affect tangible equity or regulatory capital.