Midland States Bancorp Swings to $129M Loss on Goodwill Impairment

TL;DR

**MSBI's massive goodwill write-down is a red flag, signaling past overpayments and a tough road ahead for profitability.**

AI Summary

Midland States Bancorp, Inc. (MSBI) reported a significant net loss of $128.95 million for the six months ended June 30, 2025, a sharp decline from a net income of $48.38 million in the same period of 2024. This loss was primarily driven by a substantial goodwill impairment of $153.98 million. Total assets decreased to $7.11 billion from $7.51 billion at December 31, 2024, while total liabilities also fell to $6.53 billion from $6.80 billion. Net interest income saw a slight decrease to $116.99 million for the six months ended June 30, 2025, compared to $118.67 million in the prior year. The provision for credit losses remained relatively stable at $28.22 million for the six months ended June 30, 2025, versus $28.22 million in 2024. Noninterest income decreased significantly to $41.30 million from $69.83 million, largely due to a drop in credit enhancement income from $30.98 million to $3.27 million. Diluted earnings per common share plummeted to a loss of $6.13, down from a gain of $1.99 in the first half of 2024.

Why It Matters

This substantial net loss, primarily due to a $153.98 million goodwill impairment, signals potential overvaluation of past acquisitions and could erode investor confidence in MSBI's long-term growth strategy. For investors, this raises questions about future profitability and dividend sustainability, as common dividends declared were $0.62 per share for the six months ended June 30, 2025. Employees might face uncertainty if the company seeks to cut costs in response to financial pressures. In the broader market, this impairment could prompt closer scrutiny of other regional banks' goodwill valuations, especially those with aggressive acquisition histories, potentially impacting competitive dynamics in the Illinois and Missouri banking sectors.

Risk Assessment

Risk Level: high — The company reported a net loss of $128.95 million for the six months ended June 30, 2025, primarily due to a $153.98 million impairment on goodwill. This significant non-cash charge indicates a substantial reduction in the perceived value of prior acquisitions, directly impacting shareholder equity, which decreased from $710.85 million at December 31, 2024, to $573.71 million at June 30, 2025.

Analyst Insight

Investors should exercise caution and thoroughly review the underlying causes of the goodwill impairment. Consider reducing exposure to MSBI until a clear strategy for restoring profitability and asset value is articulated, as the significant loss and reduced shareholder equity indicate increased financial risk.

Financial Highlights

debt To Equity

11.39

revenue

$158.29M

operating Margin

N/A

total Assets

$7.11B

total Debt

$6.53B

net Income

-$128.95M

eps

-$6.13

gross Margin

N/A

cash Position

$175.897M

revenue Growth

-10.19%

Revenue Breakdown

Key Numbers

• $128.95M — Net Loss (For the six months ended June 30, 2025, a significant decline from $48.38M net income in 2024.)
• $153.98M — Goodwill Impairment (A major noninterest expense contributing to the net loss for the six months ended June 30, 2025.)
• $7.11B — Total Assets (Decreased from $7.51B at December 31, 2024, indicating asset contraction.)
• $6.13 — Diluted Loss Per Share (For the six months ended June 30, 2025, a sharp reversal from $1.99 diluted earnings per share in 2024.)
• $116.99M — Net Interest Income (Slightly decreased for the six months ended June 30, 2025, from $118.67M in 2024.)
• $41.30M — Total Noninterest Income (Significantly decreased for the six months ended June 30, 2025, from $69.83M in 2024.)
• $573.71M — Total Shareholders' Equity (Decreased from $710.85M at December 31, 2024, primarily due to the net loss.)
• $28.22M — Provision for Credit Losses (Remained stable for the six months ended June 30, 2025, compared to $28.22M in 2024.)
• $3.27M — Credit Enhancement Income (Substantially lower for the six months ended June 30, 2025, compared to $30.98M in 2024.)
• 21,543,555 — Shares Outstanding (As of August 22, 2025, indicating the total common shares.)

Key Players & Entities

• Midland States Bancorp, Inc. (company) — registrant
• Midland States Bank (company) — wholly owned banking subsidiary
• SEC (regulator) — U.S. Securities and Exchange Commission
• Nasdaq Stock Market LLC (company) — exchange where MSBI and MSBIP are registered
• FASB (regulator) — Financial Accounting Standards Board
• $128.95 million (dollar_amount) — net loss for six months ended June 30, 2025
• $153.98 million (dollar_amount) — impairment on goodwill for six months ended June 30, 2025
• $7.11 billion (dollar_amount) — total assets at June 30, 2025
• $6.13 (dollar_amount) — diluted loss per common share for six months ended June 30, 2025
• $573.71 million (dollar_amount) — total shareholders' equity at June 30, 2025

FAQ

Risk Factors

• Goodwill Impairment [high — financial]: The company recorded a significant goodwill impairment of $153.98 million for the six months ended June 30, 2025. This substantial write-down indicates a severe decline in the value of acquired assets, impacting profitability and equity.
• Net Loss and Equity Erosion [high — financial]: MSBI reported a net loss of $128.95 million for the first half of 2025, a stark contrast to the $48.38 million net income in the prior year. This has led to a decrease in total shareholders' equity from $710.85 million to $573.71 million.
• Asset Contraction [medium — financial]: Total assets have decreased from $7.51 billion at December 31, 2024, to $7.11 billion as of June 30, 2025. This reduction in asset base may signal a slowdown in business activity or strategic divestitures.
• Decline in Noninterest Income [medium — financial]: Total noninterest income fell significantly to $41.30 million from $69.83 million year-over-year. The primary driver was a drastic reduction in credit enhancement income, which dropped from $30.98 million to $3.27 million.
• Loan Portfolio Changes [medium — financial]: Total loans, net, decreased from $5.06 billion to $4.94 billion. While the allowance for credit losses also decreased from $111.20 million to $92.69 million, the overall loan book contraction warrants monitoring.
• Capital Adequacy [medium — regulatory]: While not explicitly detailed as a risk factor in the provided text, a significant net loss and erosion of equity can put pressure on regulatory capital ratios. Maintaining adequate capital is crucial for financial institutions.
• Integration and Performance of Acquisitions [medium — operational]: The goodwill impairment suggests that previous acquisitions may not have performed as expected. Future integration and performance of acquired entities will be critical to avoid further write-downs.
• Interest Rate Sensitivity [medium — market]: As a bank, MSBI is exposed to interest rate risk. Fluctuations in interest rates can impact net interest income and the fair value of investment securities, as seen in the slight decrease in net interest income.

Industry Context

Midland States Bancorp operates in the highly competitive U.S. banking sector, characterized by a trend of consolidation and increasing regulatory scrutiny. Community banks like MSBI face pressure from larger national institutions and fintech companies, necessitating a focus on niche markets, customer service, and efficient operations. The current economic environment, marked by fluctuating interest rates and potential economic slowdowns, presents challenges in managing net interest margins and credit risk.

Regulatory Implications

The significant goodwill impairment and net loss could attract increased regulatory attention regarding capital adequacy and risk management practices. Regulators will likely scrutinize the company's ability to maintain sufficient capital buffers and its strategies for addressing the underlying issues that led to the impairment. Compliance with evolving banking regulations remains a constant operational requirement.

What Investors Should Do

1. Monitor Goodwill and Intangible Asset Impairments
2. Analyze Noninterest Income Drivers
3. Evaluate Capital Adequacy and Equity Trends
4. Assess Loan Portfolio Health
5. Scrutinize Management's Strategy for Recovery

Key Dates

• 2025-06-30: Six Months Ended — Reporting period marked by a significant net loss of $128.95 million, primarily due to a $153.98 million goodwill impairment.
• 2024-06-30: Six Months Ended — Prior year period showed a net income of $48.38 million, highlighting the dramatic shift in financial performance.
• 2025-12-31: As of — Total assets were $7.51 billion and total shareholders' equity was $710.85 million.
• 2025-06-30: As of — Total assets decreased to $7.11 billion and total shareholders' equity fell to $573.71 million.

Glossary

Goodwill

An intangible asset that arises when one company acquires another for a price greater than the fair market value of its assets and liabilities. It represents the value of brand recognition, customer loyalty, and other intangible factors. (A significant $153.98 million impairment of goodwill was the primary driver of the company's net loss for the period.)

Credit Enhancement Asset

An asset that provides credit support or protection against potential losses, often related to securitization or other financial transactions. (A substantial decrease in credit enhancement income (from $30.98M to $3.27M) significantly impacted noninterest income.)

Allowance for Credit Losses

A contra-asset account that reduces the carrying amount of loans to their estimated net realizable value. It represents management's estimate of probable credit losses inherent in the loan portfolio. (The allowance decreased from $111.20 million to $92.69 million, while the total loan portfolio also contracted.)

Noninterest Income

Revenue generated by a financial institution from sources other than net interest income, such as fees, service charges, and gains on sales of assets. (A sharp decline in noninterest income, largely due to credit enhancement income, contributed to the overall negative financial performance.)

Net Interest Income

The difference between interest income generated by a financial institution's interest-earning assets and the interest expense paid on its interest-bearing liabilities. (Remained relatively stable, showing a slight decrease from $118.67 million to $116.99 million for the six-month period.)

Diluted Earnings Per Common Share

A measure of a company's profit allocated to each outstanding share of common stock, assuming that all convertible securities (like stock options and convertible bonds) were exercised or converted into common stock. (Plummeted to a loss of $6.13 per share from a gain of $1.99 per share in the prior year, reflecting the significant net loss.)

Total Shareholders' Equity

The net worth of a company, representing the difference between its total assets and total liabilities. It includes common stock, preferred stock, retained earnings, and accumulated other comprehensive income/loss. (Decreased significantly from $710.85 million to $573.71 million, largely due to the substantial net loss.)

Year-Over-Year Comparison

Compared to the six months ended June 30, 2024, Midland States Bancorp has experienced a dramatic financial downturn. Revenue from net interest income saw a slight decrease from $118.67 million to $116.99 million, while noninterest income plummeted from $69.83 million to $41.30 million, largely due to a sharp decline in credit enhancement income. The most significant change is the reversal from a net income of $48.38 million to a net loss of $128.95 million, driven by a substantial goodwill impairment of $153.98 million. Consequently, diluted earnings per common share shifted from a gain of $1.99 to a loss of $6.13, and total shareholders' equity decreased from $710.85 million to $573.71 million.

Key Financial Figures

• $0.01 — ange on which registered Common stock, $0.01 par value MSBI The Nasdaq Stock Market

Filing Documents

• msbi-20250630.htm (10-Q) — 5082KB
• msbi-20250630exx311.htm (EX-31.1) — 14KB
• msbi-20250630exx312.htm (EX-31.2) — 14KB
• msbi-20250630exx321.htm (EX-32.1) — 9KB
• msbi-20250630exx322.htm (EX-32.2) — 8KB
• 0001466026-25-000038.txt ( ) — 22976KB
• msbi-20250630.xsd (EX-101.SCH) — 68KB
• msbi-20250630_cal.xml (EX-101.CAL) — 148KB
• msbi-20250630_def.xml (EX-101.DEF) — 435KB
• msbi-20250630_lab.xml (EX-101.LAB) — 900KB
• msbi-20250630_pre.xml (EX-101.PRE) — 718KB
• msbi-20250630_htm.xml (XML) — 6437KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements: Consolidated Balance Sheets at June 30, 2025 (Unaudited) and December 31, 2024 3 Consolidated Statements of Income (Unaudited) for the three and six months ended June 30, 2025 and 2024 4 Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 2025 and 2024 5 Consolidated Statements of Shareholders' Equity (Unaudited) for the three and six months ended June 30, 2025 and 2024 6 Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2025 and 2024 7

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 47 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 72 Item 4.

Controls and Procedures

Controls and Procedures 73

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 73 Item 1A.

Risk Factors

Risk Factors 73 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 74 Item 5. Other Information 74 Item 6. Exhibits 75

SIGNATURES

SIGNATURES 76 1 Table of Contents GLOSSARY OF ABBREVIATIONS AND ACRONYMS As used in this report, references to the "Company," "we," "our," "us," and similar terms refer to the consolidated entity consisting of Midland States Bancorp, Inc. and its wholly owned subsidiaries. Midland States Bancorp refers solely to the parent holding company and Midland States Bank (the "Bank") refers to our wholly owned banking subsidiary. The acronyms and abbreviations identified below are used throughout this report, including the Notes to the Consolidated Financial Statements. You may find it helpful to refer to this page as you read this report. 2019 Incentive Plan The Amended and Restated Midland States Bancorp, Inc. 2019 Long-Term Incentive Plan ACL Allowance for credit losses on loans ASU Accounting Standards Update ATM Automated teller machine BaaS Banking-as-a-Service Basel III Rule Basel III regulatory capital reforms required by the Dodd-Frank Act BHCA Bank Holding Company Act of 1956, as amended CBLR Community Bank Leverage Ratio CFPB Consumer Financial Protection Bureau CISA Cybersecurity and Infrastructure Security Agency CRA Community Reinvestment Act CRA Proposal Joint Proposal to Strengthen and Modernize Community Reinvestment Act Regulations CRE Commercial Real Estate CRE Guidance Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance DFPR Illinois Department of Financial and Professional Regulation DIF Deposit Insurance Fund EAD Exposure at default Exchange Act Securities Exchange Act of 1934 FASB Financial Accounting Standards Board FDIC Federal Deposit Insurance Corporation Federal Reserve Board of Governors of the Federal Reserve System FHA Federal Housing Administration FHLB Federal Home Loan Bank FinTech Financial Technology FOMC Federal Open Market Committee FRB Federal Reserve Bank GAAP U.S. generally accepted accounting principles GreenSky GreenSky, LLC Illinois CRA Illinois Community

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

– FINANCIAL STATEMENTS

ITEM 1 – FINANCIAL STATEMENTS MIDLAND STATES BANCORP, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share data) June 30, 2025 December 31, 2024 (unaudited) Assets Cash and due from banks $ 175,897 $ 114,055 Federal funds sold 690 711 Cash and cash equivalents 176,587 114,766 Investment securities available for sale, at fair value 1,350,357 1,207,574 Equity securities, at fair value 4,295 4,792 Loans 5,035,295 5,167,574 Allowance for credit losses on loans ( 92,690 ) ( 111,204 ) Total loans, net 4,942,605 5,056,370 Loans held for sale 37,299 344,947 Premises and equipment, net 86,240 85,710 Other real estate owned 393 4,941 Nonmarketable equity securities 37,692 33,723 Accrued interest receivable 25,053 25,329 Loan servicing rights, at lower of cost or fair value 16,720 17,842 Goodwill 7,927 161,904 Other intangible assets, net 10,362 12,100 Company-owned life insurance 214,392 211,168 Credit enhancement asset 5,800 16,804 Other assets 192,156 208,839 Total assets $ 7,107,878 $ 7,506,809 Liabilities and Shareholders' Equity Liabilities: Deposits: Noninterest-bearing demand deposits $ 1,074,212 $ 1,055,564 Interest-bearing deposits 4,872,707 5,141,679 Total deposits 5,946,919 6,197,243 Short-term borrowings 8,654 87,499 Federal Home Loan Bank advances and other borrowings 345,000 258,000 Subordinated debt 77,759 77,749 Trust preferred debentures 51,518 51,205 Accrued interest payable and other liabilities 104,323 124,266 Total liabilities 6,534,173 6,795,962 Shareholders' Equity: Preferred stock, $ 2.00 par value; 4,000,000 shares authorized; 115,000 Series A shares, $ 1,000 per share liquidation preference, issued and outstanding at June 30, 2025 and December 31, 2024, respectively 110,548 110,548 Common stock, $ 0.01 par value; 40,000,000 shares authorized; 21,515,138 and 21,494,485 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively 215 215 Capital surplus 436,2

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (UNAUDITED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (UNAUDITED) Note 1: Summary of Significant Accounting Policies 8 Note 2: Investment Securities 10 Note 3: Loans 12 Note 4: Premises, Equipment and Leases 28 Note 5: Operating Leases - Lessor 29 Note 6: Goodwill 30 Note 7: Derivative Instruments 30 Note 8: Deposits 33 Note 9: FHLB Advances and Other Borrowings 33 Note 10: Subordinated Debt 34 Note 11: Accumulated Other Comprehensive Income 35 Note 12: Earnings per Common Share 36 Note 13: Fair Value of Financial Instruments 36 Note 14: Commitments, Contingencies and Credit Risk 41 Note 15: Segment Information 42 Note 16: Revenue from Contracts with Customers 45 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Midland States Bancorp, Inc. is a diversified financial holding company headquartered in Effingham, Illinois. Our wholly owned banking subsidiary, Midland States Bank, has branches across Illinois and in Missouri, and provides a full range of commercial and consumer banking products and services, business equipment financing, merchant credit card services, trust and investment management services, and insurance and financial planning services. Our principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. We have derived income principally from interest charged on loans and, to a lesser extent, from interest and dividends earned on investment securities. We have also derived income from noninterest sources, such as: fees received in connection with various lending and deposit services; wealth management services; mortgage loan originations, sales and servicing; and, from time to time, gains on sales of assets. Our principal expenses include interest expense on deposits and borrowings, operating expenses, such as salaries and employee benefits, occupancy and equipment expenses, data processing costs, professional fees

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