This in-depth analysis, updated on October 27, 2025, provides a comprehensive evaluation of Midland States Bancorp, Inc. (MSBI) by examining its business moat, financial statements, past performance, future growth, and intrinsic fair value. Our findings are contextualized by benchmarking MSBI against key competitors such as Busey Corp (BUSE), German American Bancorp, Inc. (GABC), and Enterprise Financial Services Corp (EFSC), with takeaways framed within the investment philosophy of Warren Buffett and Charlie Munger.
Mixed: High risk currently overshadows potential value.
Midland States Bancorp is facing significant financial distress, highlighted by a recent major net loss.
Core earnings are under pressure, and high provisions for bad loans suggest worsening credit quality.
On the positive side, the stock appears undervalued, trading at a discount to its assets.
It also offers an attractive dividend yield of 7.30%, providing a strong income stream.
However, the bank lags behind more profitable and efficient competitors.
This is a high-risk stock; investors should wait for clear signs of recovery before buying.
US: NASDAQ
Midland States Bancorp, Inc. (MSBI) operates as a diversified financial services holding company primarily serving communities in Illinois and Missouri. The company’s business model is centered on a dual-pronged approach: traditional community banking and a substantial wealth management operation. The community banking segment, which forms the core of its operations, involves gathering deposits from local individuals and businesses and using those funds to originate a variety of loans. These include commercial and industrial loans, commercial real estate loans, residential mortgages, and consumer loans. This traditional banking activity generates the majority of its revenue through net interest income—the difference between the interest earned on loans and the interest paid on deposits. The second, and highly significant, pillar of MSBI's business is its wealth management division. This segment provides trust, investment management, and brokerage services to individuals, families, and institutions, generating a steady stream of noninterest, or fee-based, income. This dual-engine model aims to create a more resilient and diversified revenue stream compared to a bank solely reliant on lending margins.
The largest and most critical service offered by MSBI is its commercial lending portfolio, which is the primary driver of its net interest income. This portfolio is heavily weighted towards Commercial Real Estate (CRE), which constituted approximately 59% of the total loan book as of early 2024. This includes loans for owner-occupied properties, non-owner-occupied properties, and construction projects. Net interest income, primarily from this portfolio, accounts for over 70% of the company's total revenue. The market for commercial lending in MSBI's footprint of Illinois and Missouri is highly competitive and fragmented, populated by small community banks, regional players like Commerce Bancshares and Old National Bancorp, and the local presence of national giants like JPMorgan Chase. The target customers are small-to-medium-sized businesses (SMBs) that value personalized service and local decision-making. The stickiness of these relationships is moderate to high, as businesses often bundle loans with treasury management and deposit services, creating switching costs. MSBI's competitive position in this area relies almost exclusively on its long-standing community ties and relationship-based service model. However, its heavy concentration in CRE presents a significant vulnerability, as a downturn in this specific property sector could disproportionately impact the bank's financial health. The moat here is narrow, based on local relationships rather than scale or cost advantages.
MSBI's second key service is its Wealth Management division, which is a significant differentiator among its community bank peers and contributes the majority of its noninterest income. In the first quarter of 2024, wealth management fees were $10.8 million, representing nearly half of the bank's total noninterest income of $22.7 million. This division managed assets of approximately $4.3 billion at year-end 2023. The market for wealth management services is vast and growing, driven by an aging population and the accumulation of private wealth. Competition is fierce, ranging from local registered investment advisors (RIAs) to brokerage firms and the private banking arms of large national banks. MSBI's wealth management customers are typically high-net-worth individuals, families, and institutional clients within its geographic footprint. Customer stickiness in wealth management is exceptionally high due to the deep trust, personal relationships, and complexity involved in transferring managed assets, creating substantial switching costs. The competitive moat for this division is strong and durable, built on a reputable local brand, generations of client relationships, and the integrated service offering that links wealth management with private banking. This provides a stable, high-margin revenue stream that is not directly tied to interest rate fluctuations, adding significant resilience to MSBI's overall business model.
On the other side of the balance sheet, deposit gathering is a fundamental service that fuels the bank's lending operations. MSBI offers a standard suite of deposit products, including checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs) to both individual and commercial customers. This function is critical, as a stable, low-cost deposit base is the lifeblood of any bank. The market for deposits is intensely competitive, especially in a rising rate environment where customers seek higher yields. MSBI competes with every other financial institution in its markets, from local credit unions to online-only banks offering high-interest savings accounts. The customers are the general public and local businesses in its service area. The stickiness of core deposits (like checking and savings accounts) is generally high because they are tied to a customer's daily financial life, creating inertia. However, a growing portion of deposits, particularly CDs and money market accounts, is more rate-sensitive and less sticky. MSBI's moat in deposit gathering is relatively weak. It relies on its branch presence and existing customer relationships, but lacks the national scale, marketing budget, or technological edge of larger competitors to attract low-cost deposits aggressively. This can put pressure on its funding costs, directly impacting its net interest margin and profitability.
In conclusion, Midland States Bancorp's business model presents a study in contrasts. The company has successfully built a formidable wealth management franchise that provides a durable competitive advantage. This high-margin, fee-based business offers revenue diversification and stability that many peers lack, built on a moat of high switching costs and a trusted local brand. This is a clear and valuable asset for the company. However, the core banking operation, while functional, shows signs of weakness in its competitive positioning. The heavy concentration in commercial real estate lending creates a significant, undiversified risk tied to the health of a single, cyclical sector.
Furthermore, the bank's deposit franchise appears average at best, without a clear cost advantage that would signal a strong moat. Its lower-than-average level of noninterest-bearing deposits suggests a reliance on more expensive funding sources, which can compress margins, especially when interest rates are high. Therefore, the overall resilience of MSBI's business model is mixed. While the wealth management arm provides an excellent ballast, the traditional banking operations face significant competitive pressures and concentration risks. An investor should view MSBI as a hybrid entity: a stable, valuable wealth manager attached to a more vulnerable, geographically-focused community bank.
An analysis of Midland States Bancorp's recent financial statements indicates a period of significant financial strain. The most alarming event is the staggering net loss of $-140.97 million reported in Q1 2025, which erased a substantial portion of the bank's equity. Although profitability returned in Q2 2025 with a net income of $12.02 million, the underlying trends remain concerning. Revenue has declined year-over-year in both recent quarters, with a 21.47% drop in the latest quarter, driven by a contracting net interest income. This suggests the bank is struggling to maintain its core earnings power in the current interest rate environment.
The balance sheet shows signs of weakness. Total shareholders' equity has decreased from $710.85 million at the end of fiscal 2024 to $573.71 million by mid-2025, a troubling erosion of its capital base. The tangible common equity to total assets ratio, a key measure of loss-absorbing capacity, is calculated to be a relatively low 6.26%. A notable red flag is the high provision for loan losses, which was $120.33 million for the full year 2024 and remains elevated in 2025, signaling management's concerns about the quality of its loan portfolio. This directly impacts profitability and suggests potential future write-offs.
On a more positive note, the bank's funding and liquidity profile appears stable. Its loan-to-deposit ratio stood at a healthy 83.1% in the most recent quarter, indicating that it funds its lending primarily through customer deposits rather than more volatile wholesale borrowing. The bank also continues to generate positive operating cash flow, reporting $28.06 million in Q2 2025. However, this is not enough to offset the severe issues in profitability and credit quality. Overall, while the deposit base provides some stability, the bank's financial foundation appears risky due to significant credit concerns, eroding capital, and declining core profitability.
An analysis of Midland States Bancorp's performance over the last five fiscal years (FY2020–FY2024) reveals a track record marked by significant volatility rather than steady execution. The bank's financial results show a clear boom-and-bust cycle within this period. Revenue and net income surged to a peak in FY2022, with revenue hitting $327.8 million and net income reaching $100.2 million. However, this momentum reversed sharply in the subsequent two years, with revenue and net income falling to $254.5 million and $38.0 million, respectively, by FY2024. This inconsistency suggests vulnerability to changes in the economic and interest rate environment.
This earnings volatility is reflected in the company's profitability and balance sheet trends. Return on Equity (ROE), a key measure of profitability, has been erratic, swinging from a low of 3.51% in 2020 to a high of 14.09% in 2022, before collapsing back to 5.34% in 2024. This performance lags behind key competitors like Busey Corp and German American Bancorp, which consistently generate higher and more stable ROE. Furthermore, the bank's loan portfolio, a primary driver of earnings, contracted from $6.2 billion in 2022 to $5.1 billion in 2024, erasing two years of growth. This contraction, coupled with a dramatic increase in the provision for credit losses from $3.4 million in 2021 to $120.3 million in 2024, indicates deteriorating credit quality and a more cautious outlook from management.
The one area of clear consistency has been shareholder capital returns. MSBI has diligently increased its dividend per share each year throughout the analysis period and has modestly reduced its share count through buybacks. Total dividends paid grew from $25.0 million in 2020 to $36.0 million in 2024. However, the quality of these returns is questionable when earnings are weak. The dividend payout ratio exceeded 94% in both 2020 and 2024, suggesting that in tougher years, the dividend is not well-covered by profits, which could pose a risk to future increases if profitability does not recover.
In conclusion, Midland's historical record does not inspire high confidence in its operational resilience or consistent execution. While the commitment to the dividend is a positive for income-focused investors, the underlying business performance has been unreliable. The sharp decline in earnings and loan growth, combined with rising credit costs, paints a picture of a bank that has struggled to maintain momentum and has underperformed against higher-quality regional peers.
The U.S. regional and community banking industry is navigating a period of significant change, with the next 3-5 years expected to be defined by consolidation, digital transformation, and margin pressure. The trend of industry consolidation is likely to accelerate, driven by the need for scale to absorb rising technology and compliance costs. Banks are increasingly investing in digital platforms to meet customer expectations for convenience and to lower operating expenses, leading to a strategic optimization of physical branch networks. This shift is critical as competition intensifies not only from other banks but also from fintech companies that are adept at capturing market share in payments, lending, and wealth management. The market for U.S. regional banks is projected to grow assets at a modest CAGR of 2-3%, highlighting the importance of efficiency and non-interest income for earnings growth.
Several factors are fueling these shifts. First, the volatile interest rate environment following the rapid hikes of 2022-2023 has highlighted the risk of relying solely on net interest income, pushing banks to diversify into fee-generating businesses like wealth management and treasury services. Second, regulatory scrutiny has increased substantially since the bank failures of early 2023, with a greater focus on capital adequacy, liquidity, and interest rate risk management, which adds to the compliance burden, especially for smaller institutions. A key catalyst for growth could be a more stable interest rate environment, which would improve loan demand and margin predictability. Competitive intensity is expected to remain high, making it harder for banks without a distinct niche or cost advantage to thrive. The rise of non-bank lenders and digital-first banks means that traditional community banks must innovate to retain their client relationships.
Looking at Midland’s core Commercial Real Estate (CRE) lending business, which represents about 59% of its loan book, future growth appears constrained. Current consumption is limited by high interest rates that deter new development projects and by the bank's own tighter underwriting standards. The primary activity is refinancing existing debt rather than new origination. Over the next 3-5 years, lending for challenged sub-sectors like office and some retail properties is expected to decrease, while opportunities may arise in more resilient areas like industrial and multi-family housing. The main driver of activity will be the so-called “maturity wall,” where a large volume of CRE loans made in a lower-rate environment will need to be refinanced. A significant catalyst for new growth would be a material decline in interest rates. The US CRE loan market is massive, but growth is projected to be nearly flat in the near term. MSBI competes with a host of other regional and community banks, where relationships and local market knowledge are key differentiators. MSBI may outperform on deals where it has a long-standing client relationship but will likely lose to larger competitors on price. A key risk for MSBI is a downturn in the CRE market, where falling property values could lead to higher defaults. Given the bank's high concentration, this risk is medium to high and could directly impact earnings and capital.
In stark contrast, MSBI’s Wealth Management division is poised for steady growth. With approximately $4.3 billion in assets under management (AUM), this segment is a key differentiator and a stable source of fee income. Current consumption is strong among high-net-worth clients in its geographic footprint, limited mainly by its number of financial advisors and brand reach. Over the next 3-5 years, growth is expected to come from acquiring new clients, deepening relationships with existing ones, and cross-selling wealth services to the bank's commercial clients. The ongoing intergenerational wealth transfer represents a major tailwind for the entire industry. The US Wealth Management market is expected to grow at a 4-6% CAGR, and MSBI is well-positioned to capture a piece of this in its local markets. Competition is fragmented, ranging from large brokerage firms to independent advisors. MSBI’s advantage lies in its integrated bank-plus-wealth model and trusted local brand. A primary risk is the potential departure of key wealth advisors, who could take clients with them, making talent retention critical. This risk is considered low-to-medium but would have a significant impact on this high-margin business.
Deposit gathering remains a significant challenge and a drag on future growth. The bank's deposit base is currently constrained by intense competition, which has pushed up its cost of funds to 2.41%. Its relatively low proportion of noninterest-bearing deposits (21%) means it is more reliant on more expensive, rate-sensitive funding sources like CDs and money market accounts. Over the next 3-5 years, the bank must focus on growing core operating accounts from its commercial clients, likely through enhanced treasury management services, to improve its funding mix. Consumption of basic, low-rate savings accounts will likely decrease as customers continue to seek higher yields elsewhere. A major catalyst for improving the deposit franchise would be a significant investment in and successful rollout of a superior digital platform for business banking. MSBI competes with every financial institution in its markets, and it will continue to lose on price to online-only banks. Its best path to winning is by embedding its deposit services within broader commercial relationships. The primary risk here is a persistent inability to improve the funding mix, which would keep its net interest margin compressed and cap profitability growth. The probability of this risk is high, as the competitive landscape is unlikely to change.
Finally, MSBI's path forward will be heavily influenced by its capital allocation strategy, particularly regarding mergers and acquisitions. As a bank with roughly $8.5 billion in assets, it sits in a challenging competitive position—lacking the scale and efficiency of larger regional banks but also the agility of smaller community banks. A disciplined M&A strategy could be a crucial lever for growth, allowing MSBI to gain scale, enter new adjacent markets, or acquire new capabilities, such as a specialized lending team or another wealth management firm. Successful execution of M&A could significantly accelerate its growth trajectory by expanding its earnings base and improving efficiency. However, M&A comes with inherent risks, including overpaying for an acquisition and challenges with cultural and system integration. The bank’s ability to identify the right targets and successfully integrate them will be a key determinant of its long-term shareholder value creation. Without M&A, the bank will need to focus intensely on operational efficiency, using technology and process improvements to drive earnings growth in a slow-growth environment.
As of October 24, 2025, with a stock price of $16.98, Midland States Bancorp, Inc. (MSBI) presents a classic case of a value stock priced significantly below its intrinsic asset value, largely due to a recent period of poor earnings. A triangulated valuation approach suggests the stock is currently undervalued, with the most weight given to its asset-based valuation, a standard for the banking industry. Analysis points to a fair value range of $20.68–$24.82, implying a potential upside of over 30% from the current price.
MSBI's valuation on a multiples basis is mixed but leans positive. The trailing twelve-month (TTM) P/E is not meaningful due to a net loss. However, the forward P/E ratio is an attractive 6.72, substantially lower than the regional bank average of around 11.8x. The most telling metric is the Price-to-Tangible-Book (P/TBV) ratio. With a tangible book value per share of $20.68 and a price of $16.98, the P/TBV ratio is 0.82x. This represents a significant discount to peers, which typically trade at or above 1.0x book value. Applying a conservative peer median P/TBV of 1.0x to MSBI's tangible book value implies a fair value of $20.68.
The dividend yield provides another perspective. With an annual dividend of $1.24 per share, the stock offers a very high yield of 7.30%, more than double the sector average. While attractive, such a high yield can sometimes signal market concern over its sustainability, especially following a period of losses. However, looking at the most recent profitable quarter, the earnings power appears sufficient to cover the dividend. A simple Gordon Growth Model suggests the stock is fairly valued from an income perspective, providing a floor for the valuation.
Combining these methods, the stock appears undervalued. The multiples approach, specifically P/TBV, suggests the most significant upside and is weighted most heavily as it reflects the liquidation value of the bank's assets. The dividend yield check suggests the price is fair, assuming the dividend is secure. This leads to a triangulated fair-value range of $20.50–$23.00. The deep discount to tangible book value, coupled with a low forward earnings multiple, indicates that the market has heavily penalized the stock for its recent TTM loss, creating a potential opportunity if management can restore consistent profitability.
Warren Buffett approaches the banking sector by seeking simple, understandable businesses with durable competitive advantages, like a low-cost deposit base, that consistently generate high returns on shareholder equity. While Midland States Bancorp's community banking model is straightforward and its valuation appears attractive—often trading below its tangible book value of around 0.9x—Buffett would be deterred by its mediocre profitability. The bank's return on equity (ROE), a key measure of profitability, lingers around 9-10%, which is significantly below the 12-15% he prefers and sees in higher-quality peers, indicating the business struggles to compound value effectively. Furthermore, its efficiency ratio, which measures non-interest expenses as a percentage of revenue, is in the mid-60s%, a sign of operational inefficiency compared to top-tier banks in the low- to mid-50s% range. Management primarily uses its cash to pay a relatively high dividend (yielding around 4.5%), which confirms a lack of high-return internal growth opportunities. Buffett would much rather invest in superior operators like German American Bancorp (GABC) or Wintrust Financial (WTFC), which demonstrate ROEs above 13% and offer better long-term compounding potential. Therefore, he would almost certainly avoid MSBI, viewing it as a classic value trap where the low price reflects an average-quality business. Only a clear strategic shift or management change that drives ROE sustainably above 12% would cause him to re-evaluate his position.
Charlie Munger would approach Midland States Bancorp by first appreciating its straightforward community banking model, a business type he understands well. However, his enthusiasm would quickly fade upon reviewing the bank's key performance metrics. An average Return on Equity (ROE) of around 9-10% and a middling efficiency ratio in the mid-60s% fall short of the 'great business' standard Munger demands, as top-tier banks consistently generate ROEs of 13-15% and operate more efficiently. While the stock's valuation below tangible book value (~0.9x) might seem cheap, Munger would view this not as a bargain but as a fair price for a mediocre business, preferring to pay a premium for a superior operator. The takeaway for retail investors is that Munger would likely avoid MSBI, seeing it as a classic example of a business that is too hard to turn into a brilliant investment. If forced to choose top banks, Munger would likely favor German American Bancorp (GABC) for its stellar ROE of 13-15%, Wintrust Financial (WTFC) for its dominant market position and 13-15% ROE, and Independent Bank Corp (INDB) for its best-in-class efficiency and 12-14% ROE, as these companies demonstrate the superior, durable profitability he seeks. Munger's decision on MSBI would only change if management demonstrated a clear and sustained path to lifting its ROE above 12% through improved operational efficiency, not just financial engineering.
Bill Ackman would likely view Midland States Bancorp as an underperforming institution rather than a high-quality, simple, predictable business he typically favors. While he might be initially attracted to its valuation below tangible book value (P/TBV of ~0.9x), indicating a potential bargain, he would be deterred by its mediocre profitability metrics. The bank's Return on Equity lingers around 9-10%, which is barely above its likely cost of capital and significantly trails superior peers like Wintrust or German American Bancorp, whose ROEs are in the 13-15% range. Ackman's thesis often requires either a best-in-class operator or a clear, actionable catalyst to unlock value in an underperformer, and MSBI currently presents as a stable but uninspiring 'value trap' without an obvious catalyst. For retail investors, the takeaway is that while the stock is statistically cheap, it lacks the quality and operational excellence Ackman demands, making it an investment he would almost certainly avoid in favor of more dominant and profitable franchises.
Midland States Bancorp, Inc. operates as a classic community-focused financial holding company, primarily serving communities in Illinois and Missouri. Its competitive position is built on a foundation of long-term customer relationships, a strategy that resonates well in smaller markets where personal service can be a significant differentiator. Unlike larger national banks, MSBI's success is deeply intertwined with the economic health of its specific geographic footprint. This localized approach can be a double-edged sword: it fosters deep community ties and a loyal deposit base but also concentrates its risk, making it more vulnerable to regional economic downturns than its more diversified competitors.
One of MSBI's key strategic differentiators is its significant Wealth Management division. This segment provides a valuable source of non-interest income, which helps to diversify its revenue streams away from the traditional lending model that is highly sensitive to interest rate fluctuations. For a bank of its size, having a wealth management operation that oversees billions in assets is a notable strength. This provides a stickier customer relationship and cross-selling opportunities that many peers of similar size cannot match, offering a partial buffer against the cyclical nature of the banking industry.
However, when stacked against the broader competitive field, MSBI's operational metrics reveal areas for improvement. The bank has historically operated with a higher efficiency ratio compared to best-in-class peers, meaning it costs more to generate a dollar of revenue. While management has focused on improving this, it remains a point of competitive weakness. Furthermore, its growth has often been driven by acquisitions, a strategy that carries integration risks and can be more difficult to execute consistently than pure organic growth. Investors must weigh the bank's stable community presence and valuable wealth management arm against its middling profitability and efficiency metrics when comparing it to more operationally streamlined competitors.
Busey Corp (BUSE) and Midland States Bancorp (MSBI) are direct competitors, both operating as community-focused banks with a heavy presence in Illinois. Busey is slightly larger and generally demonstrates superior operational performance, particularly in profitability and efficiency. MSBI offers a competitive dividend yield and holds a strong position in its specific local markets, but Busey's more consistent financial execution and slightly larger scale give it an edge in terms of overall quality and investment appeal, though this is often reflected in its valuation.
In terms of business and moat, both banks rely on the traditional community banking model, which creates sticky customer relationships and high switching costs. Busey's larger scale, with assets around $12 billion compared to MSBI's $10 billion, gives it a slight advantage in operational leverage. Brand strength is comparable within their respective core geographies. For switching costs, Busey's slightly higher percentage of noninterest-bearing deposits (~25% vs. MSBI's ~23%) suggests a marginally stickier customer base. Regulatory barriers are identical for both, with both maintaining solid capital ratios well above requirements (Tier 1 capital ratio around 12% for both). Overall, Busey's modest scale advantage gives it a slight edge. Winner: Busey Corp.
From a financial statement perspective, Busey consistently outperforms. Busey's revenue growth has been more stable, and it operates with superior profitability, posting a Return on Equity (ROE) of around 11-12%, while MSBI's ROE is typically in the 9-10% range. The key differentiator is efficiency; Busey's efficiency ratio is often in the low 60s%, whereas MSBI's is higher in the mid-60s%. A lower efficiency ratio means a bank is more profitable. Both banks maintain healthy balance sheets with similar liquidity profiles (loan-to-deposit ratios in the 85-90% range) and strong capital positions. However, Busey's superior profitability and efficiency make it the clear winner. Overall Financials winner: Busey Corp.
Reviewing past performance, Busey has delivered more consistent shareholder returns. Over the last five years, Busey's total shareholder return (TSR) has generally outpaced MSBI's, driven by more reliable earnings growth. Busey's 5-year EPS CAGR has been in the mid-single digits, slightly ahead of MSBI's. Margin trends also favor Busey, which has better protected its Net Interest Margin (NIM) during periods of interest rate volatility. From a risk perspective, both stocks exhibit similar volatility (beta ~1.0-1.2), but MSBI has experienced slightly larger drawdowns during market downturns, reflecting its weaker profitability metrics. Busey's steadier performance gives it the win. Overall Past Performance winner: Busey Corp.
Looking at future growth, both banks face similar macroeconomic headwinds and opportunities tied to the economic health of the Midwest. Growth will primarily be driven by organic loan growth in their local communities and potential small-scale acquisitions. Busey's stronger operational efficiency gives it more flexibility to invest in technology and expansion, providing a slight edge. MSBI's well-established wealth management division is a key growth driver for non-interest income. However, consensus estimates for next-year earnings growth are typically slightly more favorable for Busey, reflecting its stronger execution track record. The outlook is similar, but Busey's foundation is stronger. Overall Growth outlook winner: Busey Corp.
In terms of valuation, MSBI often trades at a discount to Busey, which is justified by its weaker performance metrics. MSBI frequently trades below its tangible book value (P/TBV ~0.9x), while Busey typically trades at or slightly above its tangible book value (~1.0-1.1x). MSBI's dividend yield is often higher, around 4.5% versus Busey's ~4.0%, which may appeal to income investors. However, Busey's premium is warranted by its higher ROE. An investor is paying more for a higher quality, more profitable bank. For those seeking quality at a reasonable price, Busey is arguably better value, while deep value and income investors might prefer MSBI's discount and higher yield. Given the quality difference, Busey represents better risk-adjusted value. Winner: Busey Corp.
Winner: Busey Corp over Midland States Bancorp, Inc. The verdict is based on Busey's consistently superior profitability and operational efficiency. Busey's key strength is its ability to generate a higher Return on Equity (~11-12% vs. MSBI's ~9-10%) driven by a more efficient operation (efficiency ratio in the low 60s% vs. mid 60s% for MSBI). While MSBI's notable weakness is this operational lag, its primary strength is a slightly higher dividend yield and a solid wealth management business. The main risk for both is their geographic concentration in the Midwest, but Busey's stronger financial profile makes it better equipped to handle economic downturns. This evidence supports the conclusion that Busey is the higher-quality operator in this head-to-head comparison.
German American Bancorp (GABC) is a high-performing community bank based in Indiana, making it a strong regional peer for MSBI. While smaller than MSBI in total assets, GABC consistently punches above its weight, showcasing elite-level profitability and credit quality that MSBI struggles to match. GABC represents a best-in-class operator in the community banking space, serving as a benchmark for what strong execution can achieve. MSBI competes on its larger scale and significant wealth management arm, but GABC's financial performance is clearly superior.
Regarding business and moat, GABC's strength lies in its dominant market share in its core southern Indiana markets, where it has operated for over a century, building a powerful local brand. MSBI's brand is strong in its own Illinois and Missouri territories, but GABC's is more concentrated and dominant. Both benefit from high switching costs typical of community banking. In terms of scale, MSBI is larger with assets of $10 billion versus GABC's $7.5 billion. This gives MSBI a theoretical advantage in spreading corporate overhead costs. Both have robust regulatory capital (Tier 1 capital >12%). However, GABC's deep-rooted, market-leading brand in its core territory gives it a stronger, more defensible moat despite its smaller size. Winner: German American Bancorp, Inc.
Financially, GABC is in a different league. It consistently produces a Return on Assets (ROA) above 1.2% and a Return on Equity (ROE) in the 13-15% range, figures that are significantly higher than MSBI's ROA of ~0.8% and ROE of ~9-10%. This superior profitability is driven by a very strong Net Interest Margin (NIM) and excellent efficiency, with an efficiency ratio typically in the mid-50s%, far better than MSBI's mid-60s%. Furthermore, GABC has a long history of pristine credit quality, with net charge-offs consistently lower than peers. MSBI's financials are adequate, but GABC's are excellent. Overall Financials winner: German American Bancorp, Inc.
Historically, GABC's performance has been exceptional and far more consistent than MSBI's. GABC has a multi-decade track record of increasing its dividend, a testament to its stable earnings power. Its 5-year and 10-year total shareholder returns have significantly outperformed MSBI and the broader regional bank index. GABC's revenue and EPS growth have been steadier, supported by strong organic loan growth and disciplined acquisitions. From a risk standpoint, GABC's stock has shown lower volatility and smaller drawdowns in downturns, reflecting its superior balance sheet and earnings stability. Overall Past Performance winner: German American Bancorp, Inc.
For future growth, both banks are tied to the economic prospects of their respective Midwest markets. GABC's growth strategy is focused on organic expansion into adjacent markets in Indiana and Kentucky, leveraging its strong brand and service reputation. MSBI's growth may rely more on acquisitions and the expansion of its wealth management services. While MSBI's wealth management arm provides diversification, GABC's proven ability to generate strong organic loan growth in healthy markets gives it a more reliable and predictable growth path. Analysts' consensus estimates generally project more stable, albeit modest, growth for GABC. Overall Growth outlook winner: German American Bancorp, Inc.
Valuation reflects GABC's superior quality. GABC consistently trades at a premium to MSBI and many other peers, often at a Price-to-Tangible Book Value (P/TBV) of 1.4x to 1.6x, compared to MSBI's sub-1.0x multiple. Its dividend yield is typically lower, around 3.0%, versus MSBI's 4.5%. This is a classic case of quality commanding a premium. While MSBI appears cheaper on paper, its lower valuation is a direct result of its lower returns. GABC's high ROE justifies its premium valuation, as it generates more profit for every dollar of shareholder equity. For a long-term investor, paying a premium for GABC's quality is the better value proposition. Winner: German American Bancorp, Inc.
Winner: German American Bancorp, Inc. over Midland States Bancorp, Inc. This verdict is decisively in favor of GABC due to its vastly superior profitability and operational excellence. GABC's key strengths are its industry-leading Return on Equity (~14% vs. MSBI's ~9%) and its highly efficient operations (efficiency ratio in the mid-50s% vs. mid-60s%). In contrast, MSBI's primary weakness is its average financial performance, though its larger size and wealth management unit are notable strengths. The risk for GABC is that its premium valuation could contract if its performance falters, but its long track record suggests this is unlikely. The evidence overwhelmingly shows GABC is a higher-quality institution and a better long-term investment.
Enterprise Financial Services Corp (EFSC), based in Missouri, presents a compelling comparison as a high-growth, commercially-focused bank operating in MSBI's backyard. EFSC is larger, with over $13 billion in assets, and has a more specialized business model centered on commercial and industrial (C&I) lending and private banking. This focus allows it to generate stronger loan growth and higher returns than MSBI's more generalized community banking model. While MSBI benefits from its diversified wealth management income, EFSC's specialized model has proven to be more dynamic and profitable.
Regarding business moat, EFSC's is built on deep expertise in niche commercial lending areas (e.g., life insurance premium finance, tax credits), creating high switching costs for its specialized business clients. This specialization gives it a stronger brand identity among business customers than MSBI's broader community focus. MSBI's moat is based on traditional community relationships. In terms of scale, EFSC's asset base of $13 billion+ provides greater operational leverage than MSBI's $10 billion. Regulatory barriers are identical. EFSC's specialization creates a more defensible niche and pricing power with its target clients. Winner: Enterprise Financial Services Corp.
EFSC's financial statements highlight the benefits of its commercial focus. The company has consistently delivered stronger organic loan growth than MSBI, often in the high-single or low-double digits. This drives superior revenue growth. Profitability is also stronger, with EFSC's Return on Equity (ROE) typically in the 12-14% range, well above MSBI's 9-10%. EFSC also runs a more efficient operation, with its efficiency ratio often below 60%, compared to MSBI's mid-60s%. Both maintain strong capital levels (Tier 1 capital >11%), but EFSC's ability to generate higher growth and profitability from its asset base makes it the clear financial winner. Overall Financials winner: Enterprise Financial Services Corp.
An analysis of past performance shows EFSC has been a superior growth story. Over the past five years, EFSC has compounded revenue and earnings at a much faster rate than MSBI, driven by both strong organic growth and successful, large-scale acquisitions. This has translated into significantly better total shareholder returns (TSR) for EFSC investors. In terms of risk, EFSC's commercial loan focus makes it theoretically more sensitive to the business cycle, but its historical credit performance has been excellent. MSBI has been more stable but slower-growing. For investors prioritizing growth, EFSC's track record is far more compelling. Overall Past Performance winner: Enterprise Financial Services Corp.
Looking forward, EFSC's future growth prospects appear brighter. Its specialized lending platforms give it a national reach in certain niches, providing growth opportunities beyond its Midwest geographic base. This contrasts with MSBI's more localized growth potential. Analyst consensus generally projects higher EPS growth for EFSC than for MSBI, reflecting continued momentum in its commercial lending businesses. While a potential economic slowdown poses a greater risk to EFSC's commercial borrowers, its specialized model is designed to navigate these cycles. MSBI's growth is likely to be slower and more tied to M&A. Overall Growth outlook winner: Enterprise Financial Services Corp.
From a valuation standpoint, EFSC's higher quality and growth profile typically earn it a premium valuation over MSBI. EFSC generally trades at a Price-to-Tangible Book Value (P/TBV) of 1.2x to 1.4x, while MSBI often trades below 1.0x. Their dividend yields are often comparable, in the 3-4% range, but EFSC's lower payout ratio provides more room for future dividend growth. The quality vs. price argument is clear: EFSC's premium is justified by its superior growth and ROE (~13% vs ~9%). It offers investors a better combination of growth and profitability for a reasonable premium. Winner: Enterprise Financial Services Corp.
Winner: Enterprise Financial Services Corp over Midland States Bancorp, Inc. EFSC wins due to its superior growth profile, higher profitability, and specialized business model that creates a stronger competitive moat. EFSC's key strengths are its robust organic loan growth and a Return on Equity (~13%) that consistently surpasses MSBI's (~9%). MSBI's main advantage is its diversified wealth management income, but its core banking operation is less dynamic. The primary risk for EFSC is its higher concentration in commercial loans, which could underperform in a sharp recession. However, its history of strong credit management mitigates this risk, and its overall financial outperformance makes it the superior choice.
Comparing Midland States Bancorp to Wintrust Financial Corporation (WTFC) is a study in scale and market strategy within the same broader geography. Wintrust, with over $50 billion in assets, is a dominant force in the Chicago metropolitan area and southern Wisconsin, dwarfing MSBI. It operates a unique model of community-based bank charters under a single holding company, combining the feel of a small bank with the resources of a large one. This allows it to compete more effectively for larger commercial clients while maintaining a community touch, a combination MSBI cannot replicate.
In business and moat, Wintrust's scale is its primary advantage. With assets 5x that of MSBI, it benefits from significant economies of scale, allowing for greater investment in technology and marketing. Its brand is exceptionally strong in the lucrative Chicago market (top 5 in deposit market share). Wintrust's diversified business lines, including a large commercial finance and wealth management division, create a wide moat. MSBI's moat is based on relationships in smaller, less competitive markets. Both have sticky deposits, but Wintrust's network of ~175 locations and specialized national lending businesses creates a far more formidable competitive barrier. Winner: Wintrust Financial Corporation.
Financially, Wintrust's performance metrics are stronger across the board. Its scale and diversified revenue streams contribute to a more stable and higher Return on Equity, typically in the 13-15% range, compared to MSBI's 9-10%. Wintrust operates more efficiently, with an efficiency ratio consistently below 60%, while MSBI is in the mid-60s%. Wintrust's larger, more sophisticated treasury function allows it to manage its funding costs and Net Interest Margin more effectively. While both are well-capitalized, Wintrust's ability to generate capital internally through higher earnings is far superior. Overall Financials winner: Wintrust Financial Corporation.
Historically, Wintrust has been a powerful growth engine. Over the last decade, it has compounded earnings and assets at a double-digit pace through a mix of strong organic growth and a programmatic M&A strategy. This has resulted in total shareholder returns that have massively outperformed MSBI and the regional bank index over nearly all long-term periods. Wintrust has proven its ability to perform well through various economic cycles, with its diversified loan book providing resilience. MSBI's performance has been much more subdued and less consistent. The historical record is not a close contest. Overall Past Performance winner: Wintrust Financial Corporation.
Future growth prospects also favor Wintrust. Its commanding position in the dynamic Chicago market provides a strong foundation for organic growth. Its specialized commercial finance businesses have a national scope, offering diversification and growth opportunities that are unavailable to MSBI. Wintrust is also a likely consolidator in its market, with the financial capacity to continue making strategic acquisitions. MSBI's growth is limited to smaller bolt-on deals and the slower-growth economies of its core markets. Wintrust's path to future growth is wider and more varied. Overall Growth outlook winner: Wintrust Financial Corporation.
Given its superior performance, Wintrust deservedly trades at a premium valuation to MSBI. Wintrust typically trades at a Price-to-Tangible Book (P/TBV) multiple of 1.5x to 1.8x, reflecting its high ROE and consistent growth. This is substantially higher than MSBI's sub-1.0x multiple. Wintrust's dividend yield is lower, usually around 2.0%, as it retains more capital to fund its high-growth initiatives. An investor in Wintrust is buying a best-in-class growth and quality story, whereas an investor in MSBI is buying a value/yield story. The premium for Wintrust is well-earned. Winner: Wintrust Financial Corporation.
Winner: Wintrust Financial Corporation over Midland States Bancorp, Inc. This is a clear victory for Wintrust, which excels on nearly every metric due to its superior scale, market position, and execution. Wintrust's key strengths are its dominant Chicago market share, diversified business model, and high-teen Return on Equity, which MSBI cannot match. MSBI's only competitive advantage in this comparison is its higher dividend yield, a trait common among slower-growing, lower-valued banks. The risk for Wintrust is that its growth could slow as it gets larger, but its current momentum and strategic position are formidable. Wintrust is a superior company and a more compelling investment for growth-oriented investors.
Simmons First National Corporation (SFNC) is a multi-state bank holding company with assets of over $27 billion, making it significantly larger than MSBI. Headquartered in Arkansas, SFNC has grown rapidly through a series of large acquisitions across the South and Midwest, including Missouri, where its territory overlaps with MSBI. The comparison highlights the difference between MSBI's steady, smaller-scale community model and SFNC's strategy of becoming a larger, more formidable regional player through aggressive M&A. SFNC's scale provides advantages, but its rapid integration of acquired banks presents its own set of challenges.
SFNC's business moat is derived from its larger scale and broader geographic diversification across six states. This reduces its dependence on any single regional economy, a risk MSBI faces with its concentration in Illinois and Missouri. Brand strength varies by market, but its size (>$27B assets vs MSBI's $10B) gives it the ability to serve larger clients. Both banks benefit from sticky core deposits, but SFNC's larger balance sheet provides greater operational leverage. The regulatory burden is similar, but managing a multi-state operation is more complex. SFNC's diversification and scale provide a wider moat. Winner: Simmons First National Corporation.
Financially, the comparison is nuanced. SFNC's aggressive acquisition history can muddy its underlying performance metrics. However, its core profitability is generally stronger than MSBI's, with a target Return on Equity in the 11-13% range, versus MSBI's 9-10%. SFNC has been focused on driving operating leverage from its acquisitions, targeting an efficiency ratio below 55%, which is much better than MSBI's mid-60s%. On the other hand, MSBI's balance sheet has been less complex and has grown more organically in recent years. Still, SFNC's higher targeted profitability and scale give it the financial edge. Overall Financials winner: Simmons First National Corporation.
Looking at past performance, SFNC has a long history of creating shareholder value through its M&A strategy, though this can lead to periods of volatility during integrations. Its long-term total shareholder return has generally been stronger than MSBI's, reflecting its successful transformation into a large regional bank. SFNC's EPS growth can be lumpy due to merger-related expenses, but its underlying franchise growth has been robust. MSBI's performance has been more stable but has lacked the high-growth periods that SFNC has delivered. The risk profile is different, with SFNC carrying M&A integration risk while MSBI has economic concentration risk. Overall Past Performance winner: Simmons First National Corporation.
Future growth for SFNC will be driven by extracting efficiencies from its recent acquisitions and leveraging its larger platform to win market share. Its broader geographic footprint in faster-growing Southern states provides a tailwind that MSBI lacks. While SFNC may pause on large M&A to focus on integration, its long-term potential for growth, both organic and inorganic, is greater than MSBI's. MSBI's growth is more constrained by its smaller size and the slower economic growth of its core markets. The runway for growth is simply longer for SFNC. Overall Growth outlook winner: Simmons First National Corporation.
In terms of valuation, SFNC and MSBI often trade at similar, and often discounted, multiples. Both frequently trade at Price-to-Tangible Book Value ratios below 1.2x. SFNC's valuation can be depressed during periods of M&A integration as the market waits for synergies to be realized. Their dividend yields are also often comparable, in the 4% range. Given that SFNC offers a path to higher profitability (ROE ~12% vs MSBI's ~9%) and greater growth potential for a similar valuation, it arguably presents a better value proposition. An investor gets a larger, more diversified bank with higher return potential for a similar price. Winner: Simmons First National Corporation.
Winner: Simmons First National Corporation over Midland States Bancorp, Inc. SFNC is the winner based on its superior scale, greater growth potential, and higher profitability targets. Its key strengths are its successful M&A platform that has built a diversified $27B+ asset franchise and its clear path to improved efficiency. MSBI is a stable community bank, but its weakness lies in its limited growth outlook and average returns compared to SFNC's potential. The primary risk for SFNC is execution risk related to integrating its large acquisitions, but its experienced management team has a strong track record. For a similar valuation, SFNC offers investors a stake in a much larger and more dynamic regional bank.
Independent Bank Corp. (INDB) is a leading regional bank based in Massachusetts with over $18 billion in assets. Comparing it to MSBI provides an interesting contrast between a bank operating in the densely populated, competitive Northeast and one in the Midwest. INDB has a track record of strong organic growth, pristine credit quality, and above-average profitability. It serves as an example of a high-quality, conservatively managed bank that executes its straightforward business model exceptionally well, generally outperforming MSBI on key financial metrics.
INDB's business moat is built on its strong brand and significant market share in eastern Massachusetts, a wealthy and stable economic region. Its focus on commercial lending and relationship banking in this attractive market gives it a strong competitive position. MSBI operates in less economically dynamic markets. In terms of scale, INDB's $18 billion in assets provides a clear advantage over MSBI's $10 billion. While both benefit from regulatory barriers and high switching costs, INDB's location in a more prosperous region and its larger scale give it a superior moat. Winner: Independent Bank Corp.
From a financial standpoint, INDB consistently demonstrates superior performance. Its Return on Equity (ROE) is typically in the 12-14% range, significantly ahead of MSBI's 9-10%. INDB also operates with greater efficiency, with an efficiency ratio often in the low-50s%, one of the best in its peer group and far better than MSBI's mid-60s%. This is a direct result of disciplined cost control and a high-quality loan portfolio that generates strong revenue. INDB is also known for its conservative underwriting, which leads to very low credit losses over time. Overall Financials winner: Independent Bank Corp.
INDB's past performance reflects its high-quality execution. The bank has delivered consistent, high-single-digit organic loan growth for years, which has translated into steady revenue and EPS growth. This strong fundamental performance has driven superior long-term total shareholder returns compared to MSBI. INDB's stock has also proven to be more resilient during downturns, reflecting the market's confidence in its conservative management and pristine balance sheet. MSBI's performance has been decent but lacks the consistency and strength of INDB's. Overall Past Performance winner: Independent Bank Corp.
Looking at future growth, INDB is well-positioned to continue taking market share in the fragmented New England banking landscape. Its strong capital base and reputation make it an acquirer of choice for smaller banks in the region. Its organic growth engine remains robust, driven by its strong commercial banking team. MSBI's growth prospects are more limited by the slower economic growth of its core markets. While both face similar macroeconomic pressures, INDB's operating environment and proven execution give it a clear edge in future growth potential. Overall Growth outlook winner: Independent Bank Corp.
Valuation typically reflects INDB's high-quality status. It usually trades at a premium to MSBI, with a Price-to-Tangible Book (P/TBV) multiple in the 1.4x to 1.7x range, compared to MSBI's sub-1.0x multiple. Its dividend yield is generally lower than MSBI's, reflecting both the higher valuation and a lower payout ratio that prioritizes retaining capital for growth. This is another clear case where the premium valuation is justified by superior returns on equity, growth, and safety. INDB is the more expensive stock, but it is also the far superior business. Winner: Independent Bank Corp.
Winner: Independent Bank Corp. over Midland States Bancorp, Inc. INDB is the decisive winner, representing a higher-quality institution across all major categories. INDB's key strengths are its excellent profitability (ROE ~13%), best-in-class efficiency (ratio in low 50s%), and consistent organic growth in an attractive market. MSBI's main weakness in this comparison is its fundamentally average performance across these same metrics. While MSBI offers a higher dividend yield, it comes with lower growth and higher operational risk. INDB's main risk is its geographic concentration in the Northeast, but this has historically been a source of strength. INDB is a prime example of a top-tier regional bank, and the evidence shows it is a better long-term investment.
Based on industry classification and performance score:
Midland States Bancorp operates a traditional community banking model focused on lending and deposit-gathering, but sets itself apart with a significant wealth management business. This division provides a strong, stable source of fee income, making the bank less reliant on interest rate spreads than many of its peers. However, the company's competitive advantages are tempered by a high concentration in commercial real estate loans and a funding base with a lower proportion of noninterest-bearing deposits than the industry average. For investors, the takeaway is mixed; the valuable fee-generating arm provides a buffer, but the risks in the loan portfolio and funding structure warrant caution.
The bank possesses a strong and diversified stream of noninterest income, primarily driven by its significant wealth management business, which reduces its dependence on lending profits.
MSBI stands out from its peers due to its robust noninterest income, which provides a valuable buffer against fluctuations in net interest margin. In the first quarter of 2024, noninterest income was $22.7 million, accounting for a strong 28.1% of total revenue. This is ABOVE the typical community bank average, which often hovers between 20% and 25%. The quality of this income is high, with the wealth management division contributing $10.8 million, or nearly half of the total. This recurring, fee-based revenue from asset management is less volatile and more predictable than income from sources like mortgage banking. This strong contribution from a non-lending business line is a key strategic advantage, providing stability and a diversified earnings stream that many competing banks lack.
MSBI maintains a reasonably diversified deposit base with a manageable level of uninsured deposits, suggesting no major concentration risks from its funding sources.
Midland States Bancorp appears to have a well-balanced mix of depositors, which is crucial for funding stability. The bank serves a combination of retail consumers, small-to-medium-sized businesses, and municipalities, preventing over-reliance on a single customer segment. A key metric for assessing risk is the level of uninsured deposits (balances over the $250,000 FDIC limit). As of December 31, 2023, uninsured deposits represented approximately 29% of total deposits. This level is considered manageable and is IN LINE with or even better than many peers, some of whom saw levels exceeding 50% during the banking turmoil of 2023. This indicates that MSBI is not overly dependent on a few large 'hot money' depositors who might flee during times of stress. This prudent management of deposit concentrations reduces liquidity risk and supports a stable funding profile.
Rather than a differentiated niche, the bank has a heavy concentration in commercial real estate lending, which represents a significant risk rather than a competitive advantage.
While expertise in a specific lending area can be a moat, over-concentration creates risk. MSBI's loan portfolio is heavily tilted towards Commercial Real Estate (CRE), which accounted for approximately 59% of its total loan portfolio at the end of 2023. While the bank has deep experience in this area, such a high concentration in a single, cyclical asset class is a major vulnerability. This is not a diversified niche strategy but rather a significant bet on one sector. In the current economic environment with concerns around property valuations and refinancing risks, this concentration is a source of concern for investors. The portfolio lacks meaningful exposure to more differentiated or counter-cyclical niches like agriculture or government-guaranteed SBA lending, which could otherwise balance its risk profile. This makes the bank's performance highly correlated with the health of the local commercial property market.
The bank's deposit base is less advantageous than peers, with a lower proportion of noninterest-bearing deposits that results in a higher overall cost of funding.
A bank's ability to attract and retain low-cost, stable deposits is a critical competitive advantage. For MSBI, this appears to be a point of weakness. As of the first quarter of 2024, noninterest-bearing deposits constituted only 21% of total deposits. This is WEAK, sitting noticeably BELOW the regional bank average, which is typically in the 25% to 30% range. A smaller base of these 'free' deposits means MSBI must rely more on interest-bearing accounts and time deposits to fund its loans, leading to higher costs. The bank's total cost of deposits stood at 2.41% in Q1 2024, a figure that has risen sharply along with market interest rates, reflecting this funding structure. While deposit growth was positive year-over-year, the composition and cost of these deposits do not provide a strong moat, making the bank's profitability more sensitive to interest rate changes.
MSBI operates a lean and highly productive branch network, generating significantly more deposits per branch than typical community banks, which points to efficient operations and strong local market penetration.
Midland States Bancorp demonstrates strong efficiency in its physical footprint. As of the end of 2023, the bank operated 47 branches and held approximately $6.2 billion in total deposits, translating to an average of over $132 million in deposits per branch. This figure is substantially ABOVE the typical community bank average, which often falls in the $70 million to $90 million range. This high productivity per branch suggests that MSBI's locations are well-placed in their respective markets and that the bank has been successful in cultivating deep relationships with its local customer base. A more productive branch network can lead to better operating leverage, as the bank can support a larger asset base with lower fixed costs relative to less efficient peers. This strong performance indicates a well-managed and effective physical distribution strategy.
Midland States Bancorp's recent financial statements reveal significant distress, highlighted by a massive $-140.97 million net loss in the first quarter of 2025 and declining revenue. While the bank recovered to a modest profit in the second quarter, high provisions for credit losses ($17.37 million in Q2 2025) and shrinking net interest income point to underlying pressures on credit quality and profitability. The bank's tangible equity also appears thin relative to its assets. Given the recent volatility and negative trends in core earnings, the investor takeaway is negative.
While the bank maintains a healthy loan-to-deposit ratio, its capital levels appear thin, leaving it with a reduced buffer to absorb potential future losses.
The bank's capital position is a major concern. The Tangible Common Equity to Total Assets ratio, a critical measure of a bank's ability to absorb losses, was approximately 6.26% in Q2 2025 (calculated as $444.87 million in tangible book value divided by $7108 million in total assets). While specific regulatory benchmarks are not provided, a ratio this low is generally considered weak and offers a limited cushion against economic stress. The bank's total shareholders' equity has also fallen sharply over the last six months. In contrast, the bank's liquidity appears more stable. The loans-to-deposits ratio was a solid 83.1% in Q2 2025, indicating strong funding from its core deposit base. However, the weak capital levels overshadow the healthy liquidity profile, as insufficient capital is a more fundamental risk.
Persistently high provisions for credit losses and a massive recent net loss strongly suggest deteriorating credit quality, despite seemingly adequate reserve levels.
The bank's readiness for credit losses is a significant red flag. Management set aside a very large $120.33 million for loan losses in fiscal 2024 and continued with substantial provisions of $10.85 million and $17.37 million in the first two quarters of 2025, respectively. These actions are typically taken in anticipation of, or in reaction to, problem loans. This concern is underscored by the $-140.97 million net loss in Q1 2025, which was driven by write-downs. As of Q2 2025, the allowance for credit losses stood at $92.69 million against a gross loan portfolio of $5084 million, resulting in a reserve coverage ratio of 1.82%. While this ratio itself may appear reasonable, the sheer size of recent provisions and the associated net loss indicate that realized and expected losses are a severe and ongoing issue for the bank. The evidence points to a reactive rather than proactive stance on credit problems.
The bank's balance sheet shows significant sensitivity to interest rates, with unrealized losses on its securities portfolio representing a meaningful drag on its tangible equity.
Midland's balance sheet appears vulnerable to changes in interest rates. A key indicator is the Accumulated Other Comprehensive Income (AOCI), which is captured in the comprehensiveIncomeAndOther line item and stood at a negative $-73.99 million as of Q2 2025. This negative balance primarily reflects unrealized losses on the bank's investment securities portfolio due to higher interest rates. When compared to the bank's tangible book value of $444.87 million, these unrealized losses represent approximately 16.6% of its tangible equity. This is a significant figure that reduces the bank's capital flexibility and highlights the negative impact of its asset-liability management in the current rate environment. While specific data on the duration of its portfolio or the percentage of variable-rate loans is not provided, the large negative AOCI is a clear sign of risk.
The bank's core earnings from lending are under pressure, as evidenced by a consistent year-over-year decline in net interest income.
The quality of the bank's primary revenue stream, net interest income (NII), is declining. NII is the difference between the interest earned on loans and the interest paid on deposits. For Q2 2025, the bank's NII was $58.7 million, representing a 0.34% decrease from the prior year. This follows a 2.48% year-over-year decline in Q1 2025 and a 5.01% decline for the full year 2024. This persistent negative trend indicates that the bank's net interest margin (NIM) is being compressed. The likely cause is that its cost of funding, such as interest paid on deposits ($32.29 million in Q2), is rising faster than the yield it earns on its loans and investments. As NII is the bedrock of a bank's profitability, this ongoing erosion is a fundamental weakness.
The bank's efficiency has worsened recently, with its ratio for turning revenue into profit climbing to unfavorable levels, indicating weakening cost discipline.
Midland's cost control has shown signs of deterioration. The efficiency ratio, which measures noninterest expense as a percentage of revenue, is a key metric for banks. In Q2 2025, the ratio was 60.8% (calculated from $49.99 million in expenses against $82.23 million in revenue), and it was even weaker in Q1 2025 at 64.5%. This is a negative trend compared to the stronger 52.5% achieved for the full fiscal year 2024. While industry benchmarks are not provided, an efficiency ratio above 60% is generally considered weak for a community bank, suggesting that expenses are consuming a large portion of income. With revenues declining, the inability to control costs is putting additional pressure on the bank's already stressed profitability.
Midland States Bancorp's past performance has been inconsistent and volatile, presenting a mixed picture for investors. A key strength is its steady dividend growth, with payments per share increasing from $1.07 in 2020 to $1.24 in 2024. However, this is overshadowed by significant weaknesses, including erratic earnings, which peaked in 2022 and have since declined sharply. Core metrics like Return on Equity have been unstable, recently falling to a low of 5.34%, and the bank's loan portfolio shrank significantly in the last year. Compared to peers who demonstrate more stable and higher profitability, MSBI's record is less impressive, leading to a mixed-to-negative investor takeaway.
The bank's balance sheet history is poor, marked by stagnating deposits and a significant contraction in its loan portfolio over the last two years.
The historical trend in MSBI's core balance sheet items indicates a loss of momentum. While total deposits saw strong growth from $5.1 billion in FY2020 to a peak of $6.4 billion in FY2022, they have since stagnated, ending FY2024 at $6.2 billion. This suggests the bank is struggling to attract or retain customer funds in the current competitive environment.
The more concerning trend is in the loan portfolio. After growing net loans to $6.2 billion in FY2022, the portfolio shrank dramatically to $5.1 billion by FY2024, returning to the same level as FY2020. A shrinking loan book is a major red flag for a bank, as loans are the primary source of interest income. This decline suggests either weak loan demand in its markets, a conscious decision by management to reduce risk, or losing out to competitors. Regardless of the cause, the inability to sustain growth in its core asset base is a significant failure in its recent performance.
Core profitability trends are negative, with declining net interest income and a persistently high efficiency ratio compared to more profitable peers.
MSBI's historical performance on core profitability drivers has been weak. Net Interest Income (NII), the profit from the bank's core lending activities, peaked in FY2022 at $256.7 million but has since fallen for two consecutive years to $236.4 million in FY2024. This decline shows that the bank is struggling with either pricing pressure on its loans and deposits (a shrinking Net Interest Margin, or NIM) or the contraction of its loan book.
Simultaneously, the bank has not demonstrated strong cost discipline. Competitor analysis repeatedly highlights that MSBI's efficiency ratio—a measure of non-interest expenses as a percentage of revenue—is stuck in the mid-60s% range. This is significantly less efficient than high-performing peers like German American Bancorp or Independent Bank Corp., which operate in the mid-to-low 50s%. A lower efficiency ratio is better. The combination of falling core revenue and a high, inflexible cost base is a poor historical trend that has directly contributed to the bank's declining profitability.
The bank's earnings per share (EPS) have been extremely volatile, with a sharp decline in the last two years that erases prior gains and falls short of peers.
Midland's EPS track record is the opposite of consistent. Over the past five years, diluted EPS followed a rollercoaster pattern: $0.95 (2020), $3.58 (2021), $4.29 (2022), $2.33 (2023), and $1.32 (2024). While the period includes a strong recovery and peak in 2021-2022, the subsequent 70% collapse from the peak demonstrates a lack of durable earnings power. This level of volatility makes it difficult for investors to rely on the company's performance.
This inconsistency is also visible in its Return on Equity (ROE), which fell from a strong 14.09% in 2022 to just 5.34% in 2024. This recent performance is significantly weaker than that of competitors like Busey Corp (9-10% ROE) or Enterprise Financial (12-14% ROE), who have demonstrated a much more stable and superior ability to generate profits for shareholders. A consistent growth path is a key indicator of quality management and a resilient business model, and MSBI's record fails this test.
Credit metrics have deteriorated significantly, with provisions for loan losses soaring in recent years, signaling concerns about the quality of past lending.
The bank's credit performance has shown clear signs of instability and deterioration. The most telling metric is the provision for credit losses, which is money set aside to cover expected loan defaults. This figure jumped from a very low $3.4 million in FY2021 to $76.8 million in FY2022, $82.6 million in FY2023, and a substantial $120.3 million in FY2024. This dramatic and sustained increase indicates that management anticipates significantly higher loan losses in the future.
While building a loan loss allowance is a necessary part of prudent banking, the sheer magnitude of the increase suggests that underwriting standards in prior years may have been too loose or that the bank's loan portfolio is highly sensitive to economic headwinds. This trend undermines confidence in the stability of the bank's earnings, as rising credit costs directly reduce net income. A history of stable, low credit costs is a hallmark of a disciplined lender, and MSBI's recent record does not meet that standard.
The bank has a strong record of consistently increasing its dividend and buying back shares, though the high payout ratio during periods of weak earnings is a concern.
Midland States Bancorp demonstrates a clear commitment to returning capital to shareholders, which is a significant positive. The dividend per share has grown steadily every year over the past five years, rising from $1.07 in FY2020 to $1.24 in FY2024. This represents a five-year compound annual growth rate (CAGR) of approximately 3.8%. Additionally, the company has actively repurchased shares, reducing its total common shares outstanding from 22.33 million in 2020 to 21.49 million in 2024, which helps boost earnings per share for remaining shareholders.
However, the sustainability of these returns is a valid concern. In years with depressed earnings like FY2020 and FY2024, the dividend payout ratio was very high, at 110.7% and 94.6% respectively. This means the dividend consumed nearly all, or even more than, the company's net income. While stronger earnings in 2021-2022 provided ample coverage, this pattern indicates that the dividend's safety depends heavily on a rebound in profitability. Despite this risk, the consistent growth in payments warrants a passing grade for its historical track record.
Midland States Bancorp faces a mixed future growth outlook. The company's standout strength is its wealth management division, which provides a stable and growing source of fee income, insulating it from some of the pressures facing traditional banks. However, this positive is offset by significant headwinds in its core banking operations, including a heavy concentration in the slow-growing commercial real estate sector and intense competition for low-cost deposits that will likely continue to squeeze profit margins. Compared to peers, its fee income is a distinct advantage, but its loan growth potential is limited. The investor takeaway is mixed, as the stability of the wealth business may not be enough to overcome the challenges in the core lending franchise.
The future loan growth outlook is weak, constrained by a heavy concentration in the challenged commercial real estate sector and a lack of clear guidance from management.
The outlook for loan growth at MSBI appears muted. The bank has not provided specific loan growth guidance for the upcoming year, which creates uncertainty for investors. Furthermore, its loan portfolio is heavily weighted towards commercial real estate (~59%), a segment facing significant headwinds from higher interest rates and shifts in property usage. This concentration in a slow-growing, higher-risk category limits the bank's overall growth potential. Without clear disclosure of a strong pipeline, robust unfunded commitments, or a strategy to accelerate growth in other loan categories, the prospects for the bank's primary revenue driver appear limited in the near term.
The bank maintains strong capital levels but appears to have a passive approach to M&A and buybacks, leaving key drivers of shareholder value growth underutilized.
MSBI's capital position is robust, with a CET1 ratio comfortably above regulatory requirements, providing a strong foundation and flexibility. However, a strong capital base is not a strategy in itself. For a bank of its size, shareholder value is often created through disciplined M&A to gain scale or through consistent share repurchase programs. The company has not recently announced any significant acquisitions, nor has it outlined an aggressive share buyback plan. This lack of a clear, forward-looking capital deployment strategy suggests a conservative posture that may lead to slower growth in earnings per share and tangible book value compared to more active peers.
MSBI runs a highly efficient branch network but lacks a clearly articulated strategy for digital user growth, which is essential for future efficiency gains.
Midland States Bancorp demonstrates impressive efficiency in its physical footprint, with an average of over $132 million in deposits per branch, a figure that significantly exceeds the community bank average. This indicates strong local market penetration and well-managed physical operations. However, future growth and profitability in banking are increasingly tied to digital adoption. The bank has not provided specific, forward-looking targets for digital active user growth or quantified cost savings from its digital investments. Without clear goals for shifting routine transactions to lower-cost digital channels, it is difficult to underwrite future improvements in the bank's efficiency ratio, a key measure of profitability.
The outlook for net interest margin (NIM) is negative, as the bank's high-cost funding base is expected to remain under pressure from intense deposit competition.
MSBI faces a challenging path for its Net Interest Margin. The bank's deposit base has a lower-than-average percentage of noninterest-bearing accounts (21%), resulting in a higher cost of deposits (2.41% in Q1 2024) that is sensitive to market rate changes. While some loans will reprice higher, the fierce competition for deposits will likely prevent funding costs from declining meaningfully. Management has not offered specific guidance pointing to a significant NIM recovery, and there are no obvious catalysts, such as a large portfolio of variable-rate loans, that would drive substantial asset yield expansion to outpace the high funding costs. This structural weakness suggests continued pressure on the bank's core profitability.
The bank's large and growing wealth management division provides a clear and credible path to expanding high-quality fee income, a significant strategic advantage.
Midland's most compelling growth story lies in its noninterest income, driven by its formidable wealth management business. This division, with approximately $4.3 billion in assets under management, already contributes nearly half of the bank's fee income, providing a stable, high-margin revenue stream. Management has identified this as a key growth area, with clear opportunities to attract new clients and cross-sell services to the bank's existing customer base. This strong foundation in a recurring-revenue business provides a reliable growth engine that meaningfully diversifies earnings away from the more volatile net interest income, a key differentiator from many community banking peers.
As of October 24, 2025, with a stock price of $16.98, Midland States Bancorp, Inc. (MSBI) appears undervalued. This conclusion is primarily based on its significant discount to its tangible book value and a low forward P/E ratio, suggesting the market is pricing in past issues more heavily than future earnings potential. Key metrics supporting this view include a Price-to-Tangible-Book (P/TBV) ratio of approximately 0.82x, a forward P/E of 6.72, and a compelling dividend yield of 7.30%. The stock is currently trading in the lower third of its 52-week range, which reflects recent poor performance but may also present a value opportunity. The primary investor takeaway is positive for those with a tolerance for risk, as the current valuation offers a potentially attractive entry point if the bank's profitability rebounds as expected.
The stock trades at a meaningful discount of approximately 18% to its tangible book value, which is a primary indicator of undervaluation for a bank.
This factor is a clear pass. MSBI's Price-to-Tangible-Book (P/TBV) ratio is a key strength in its valuation case. With a tangible book value per share of $20.68 and a current price of $16.98, the stock trades at a P/TBV of 0.82x. This is significantly below the typical regional bank valuation, which often is at or above 1.0x. Banks trading below their tangible book value are often considered undervalued, as it implies the market values the company at less than the value of its physical and financial assets. Coupled with a positive Return on Equity of 8.4% in the most recent quarter, this discount appears unwarranted, suggesting a strong margin of safety for investors.
The Price-to-Book ratio of 0.79x appears well-justified and potentially low relative to its current Return on Equity of 8.4%.
A bank's P/B ratio should ideally reflect its ability to generate profits from its equity, measured by Return on Equity (ROE). A common benchmark is that a 10% ROE justifies a 1.0x P/B multiple. For MSBI, the ROE in the most recent quarter was 8.4%, while the P/B ratio is 0.79x. This alignment is quite reasonable. Given that an 8.4% return on equity is being generated, a P/B ratio slightly below 1.0x is logical. The current P/B of 0.79x suggests that the stock is fairly priced, if not slightly undervalued, relative to its current profitability level. Global banks have seen ROEs rise towards 11.5% in 2025, suggesting that if MSBI can improve its profitability, its P/B multiple has room to expand.
A significant trailing-twelve-month loss makes the TTM P/E ratio useless and highlights recent performance issues, despite a low forward P/E suggesting a recovery.
The P/E and growth check fails due to poor recent performance. The company has a TTM EPS of -$6.82, rendering its TTM P/E ratio meaningless and highlighting a significant recent loss. While the forward P/E of 6.72 appears very attractive compared to the industry average of ~11.8x, it is based on future estimates that carry inherent uncertainty. The EPS growth in the most recent quarter was a concerning -58.49%. This combination of a historical loss and steep recent earnings decline represents a significant risk, making it difficult to pass this factor despite the optimistic forward-looking multiple.
The stock offers a very high dividend yield of 7.30%, which is substantially above the peer average, providing a strong income stream for investors.
MSBI's dividend yield of 7.30% is a standout feature, especially when compared to the average for regional banks, which is around 3.31%. This high yield provides investors with a significant return through income alone. The annual dividend is $1.24 per share. While the TTM payout ratio is negative due to the recent loss, the payout appears manageable based on projected forward earnings and the most recent profitable quarter's results. There has been minimal change in shares outstanding, indicating that the company is not diluting shareholder value to a significant degree. For income-focused investors, this high yield is a major positive, assuming the dividend is sustainable.
On a relative basis, the stock appears cheap with a P/TBV well below peers and a dividend yield that is more than double the industry average.
MSBI looks attractive when its key valuation metrics are stacked against industry benchmarks. Its P/TBV of 0.82x is a steep discount compared to the peer average of around 1.15x. Furthermore, its dividend yield of 7.30% is substantially higher than the regional bank average of 3.31%. The stock's beta of 0.7 suggests it is less volatile than the broader market. While the negative TTM P/E and the stock price hovering near its 52-week low are negatives, the significant discounts on asset value and high income yield provide a compelling relative value proposition.
The primary risk for Midland States Bancorp is its sensitivity to the broader economy and Federal Reserve policy. In a 'higher-for-longer' interest rate scenario, the bank's funding costs—what it pays for customer deposits—could rise faster than the income it earns from loans. This would compress its net interest margin (NIM), a key profitability metric for banks. Conversely, a sharp economic downturn would heighten credit risk, potentially leading to more loan defaults. While the bank's credit quality is currently stable, its large portfolio of commercial loans, including commercial real estate ($3.4 billion as of early 2024), remains vulnerable to business slowdowns and declining property values.
The regional banking sector is intensely competitive, and Midland is no exception. It competes directly with national giants like JPMorgan Chase and Bank of America, which have vast resources for technology and marketing, as well as other community banks fighting for the same local customers. Furthermore, the rise of digital-first fintech companies presents a long-term threat by offering more convenient and lower-cost alternatives for loans and deposits. This competitive pressure can make it difficult for Midland to grow its loan book and deposit base profitably. The regulatory environment has also become stricter for regional banks following the 2023 banking crisis, likely leading to higher compliance costs and capital requirements that could dampen shareholder returns.
From a company-specific standpoint, Midland's operational footprint is concentrated in Illinois and Missouri, making it heavily dependent on the economic health of these specific regions. A localized economic slump would impact the bank more severely than a geographically diversified competitor. The bank has also historically used acquisitions to fuel growth, a strategy that carries inherent risks, including the potential to overpay for a target or struggle with integrating different systems and cultures. While its balance sheet appears solid, investors should watch for any increase in nonperforming assets, which stood at 0.65% of total loans in early 2024, and monitor its ability to manage deposit costs in an environment where customers are actively seeking higher yields.
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