Midland States Bancorp: Navigating 2024's Challenges and Opportunities

As we step into 2025, let's take a moment to reflect on Midland States Bancorp's (MSBI) journey through 2024. The year was marked by both challenges and opportunities, with the company's earnings per share (EPS) missing analyst expectations. But don't worry, Midland States Bancorp is no stranger to adversity, and they've got the know-how to bounce back. Let's dive in and explore the factors that contributed to the EPS miss and how the company is positioning itself for a stronger 2025.



Credit Quality Issues and Portfolio Restructuring

Midland States Bancorp faced significant credit quality issues in 2024, primarily within three sectors of its business: non-core consumer loans, Specialty Finance Group, and Midland Equipment Financing. These issues led to substantial charge-offs and provision for credit losses, which negatively impacted earnings. To address these challenges, the company took proactive steps to exit its non-core consumer loan portfolios, selling the LendingPoint and Greensky portfolios and recognizing net charge-offs and provision for credit losses of $17.3 million and $33.4 million, respectively (Source: Q4 2024 Earnings Release).

Strategic Review and Capital Management

Midland States Bancorp conducted a strategic review of its Specialty Finance Group, resulting in charge-offs of $6.6 million and $18.8 million for non-performing loans. The company also tightened credit standards and decided not to originate new construction loans in this group. These actions, along with the sale of non-core consumer loan portfolios, contributed to a decline in outstanding loans by $103.2 million, or 1.8%, during the third quarter of 2024 (Source: Q3 2024 Earnings Release).

The company's balance sheet management and capital ratios evolved positively throughout 2024. Capital ratios, tangible book value per share, and loan-to-deposit ratio all improved, indicating that Midland States Bancorp has taken proactive steps to address credit quality issues, enhance its capital position, and improve its long-term financial health (Source: Q3 2024 Earnings Release).

Focus on Community Banking and Wealth Management

Midland States Bancorp's strategic focus on community banking and wealth management has contributed to its earnings performance in 2024. The company has been reducing its concentration in equipment financing and consumer loans, instead focusing on commercial loan opportunities in its community banking regions. This shift has led to growth in wealth management revenues due to an increase in assets under administration, partially driven by the new wealth advisors added in recent quarters (Source: Q3 2024 Earnings Release).



Looking Ahead: Opportunities and Growth

As Midland States Bancorp navigates the challenges of 2024, it's essential to recognize the opportunities that lie ahead. The company's strategic focus on community banking and wealth management, combined with its proactive approach to credit quality issues and capital management, positions it well for a stronger 2025. By continuing to invest in talent and technology, expanding in the St. Louis market, and focusing on in-market relationship lending, Midland States Bancorp is poised to drive further growth and improve its earnings performance.

In conclusion, Midland States Bancorp's journey through 2024 was marked by both challenges and opportunities. The company's EPS missed analyst expectations due to credit quality issues and portfolio restructuring, but its proactive approach to addressing these challenges and focusing on community banking and wealth management sets the stage for a stronger 2025. By continuing to invest in talent and technology, expanding in the St. Louis market, and focusing on in-market relationship lending, Midland States Bancorp is well-positioned to drive growth and improve its earnings performance in the coming year.