Midland States Bancorp, Inc. (MSBI) stock intrinsic value fair value estimate & owner earnings analysis

Midland States Bancorp is the holding company for Midland States Bank, headquartered in Effingham, Illinois. It takes deposits (about $5 billion) and makes commercial, commercial real estate, equipment-finance and residential loans, and also earns fee income from wealth management, mortgage servicing and related activities. Loans have shrunk from about $6.1 billion at the end of 2023 to about $4.35 billion at the end of 2025 as management sold or exited consumer-loan portfolios (LendingPoint, GreenSky) and other lending lines. How we measured earnings. We start from operating cash flow, remove swings in working capital (for a bank, mainly the balance of loans held for sale awaiting sale to investors, which caused reported operating cash flow to balloon to $300-540 million a year in 2019-2022 and is not repeatable), subtract share-based pay, and subtract maintenance capital spending (small, about $3-9 million a year). On that basis earnings per share ran $2.4-$4.7 in 2018-2021, $7.96 in 2022, $6.72 in 2023, $7.49 in 2024 and $4.46 in 2025. Those figures look far higher than net income because the accounting adds back the provision for credit losses ($120 million in 2024, $60 million in 2025) as a non-cash charge. For a lender that provision is the recognised cost of real loan losses: net charge-offs were $52 million in 2023, $167 million in 2024 and $103 million in 2025. We therefore treat credit losses as a genuine recurring cost and deduct the provision, which gives about $2.99 (2023), $1.96 (2024) and $1.73 (2025) per share. The $154 million goodwill write-off in 2025 is non-cash, is a sunk acquisition cost, and does not affect earning power. We also deduct roughly $0.40 per share for the dividends owed on the company's $110 million of perpetual preferred stock, which ranks ahead of common shareholders. Base case: about $27 per share. We take a normalised level of about $1.9 per share after preferred dividends, well below the 2022-2024 figures and roughly the median of the last three years' credit-adjusted results. Year 1 is set somewhat above the 2025 result (which fell 12% on our credit-adjusted basis) for a dated reason in the filings: net income for the first half of 2026 was $38.4 million versus about $25 million in the first half of 2025 excluding the goodwill charge, with the second quarter at $19.9 million. Two quarters is a short record, so we credit only a return to that middle level, not the full run rate. We assume no growth: the loan book has been shrinking and nothing secured or repeatedly proven supports expansion. We do credit the durable deposit franchise of a bank more than a century old, which we assume keeps earning this level for many years and then gradually fades. We give no credit for share gains, new products or cost programmes. Bear case: about $9 per share. Credit losses stay near the 2024-2025 levels (net charge-offs of 2.1-2.9% of loans), leaving about $1 of earnings per share after preferred dividends, followed by a fade. The 2025 restatement of prior-year statements and the recent goodwill write-off also show that acquisitions and controls have gone wrong before. Bull case: about $42 per share. The first-half 2026 profit rate holds (about $77 million a year, roughly $3.2 per share after preferred dividends) because the exited consumer portfolios no longer produce the losses of 2024-2025, and that level lasts for many years before fading. We do not assume growth. What would make these estimates wrong. The main risk is credit: if losses in the remaining commercial and equipment-leasing books stay high, even the base case is too generous. On the upside, sustained quarterly profits above $19 million would show earning power above our base. Common equity is roughly $455 million (about $21 per share after excluding preferred), so our base value is a modest premium to accounting book value and the margin-of-safety price sits below it. Some items, such as the exact split between recurring and one-time provisions in 2025, could not be fully separated from the filings.