Midland States Bancorp Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
MSBI$31.72+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001466026-24-000018
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001466026-24-000035
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 112 previous paragraphs and 121 current paragraphs.
52 unchanged; 50 reworded; 14 added; 8 removed; 2 previous and 5 current paragraphs rearranged.
Tables are not compared: 20 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
The Federal Reserve announced at its June 2024 FOMC meeting that it would maintain the overnight federal funds rate at the current range of 5.25% to 5.50%. This decision marks the seventh consecutive meeting at which Federal Reserve officials have opted to hold rates steady and keeps the federal funds rate at the highest target range in 23 years.
Current report
The FOMC statement was largely unchanged. As expected, the Federal Reserve officials reiterated their commitment to its dual goals of lowering inflation to its 2% target and achieving maximum employment. While inflation has slowed recently and the job market has become more balanced this year, the uncertain economic outlook keeps the Federal Reserve “highly attentive to inflation risks." The FOMC statement reiterated its view that the economy continues to grow at a pace that is too strong to achieve its dual mandate, hence the need for interest rates to be held higher in the short term.
Current report
During thesix months ended June 30, 2024, net interest income, on a tax-equivalent basis, decreased to $111.4 million with a tax-equivalent net interest margin of 3.15% compared to net interest income, on a tax-equivalent basis, of $119.8 million and a tax-equivalent net interest margin of 3.31% for thesix months ended June 30, 2023.
Current report
Average loans decreased $440.5 million to $5.85 billion in the second quarter of 2024 compared to the same quarter of 2023, due primarily to continued reductions in our equipment financing and consumer loan portfolios. Average equipment finance loan and lease balances decreased $213.7 million to $917.6 million in the second quarter of 2024, compared to the second quarter of 2023. The Company continued to reduce its concentration of this product within the overall loan portfolio. Consumer loans decreased $322.4 million during the second quarter to $807.2 million due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated average loan balances decreased $273.0 million in the second quarter of 2024 to $569.1 million, compared to the second quarter of 2023. In addition, as previously disclosed, during the fourth quarter of 2023, the Company ceased originating loans through LendingPoint.
Current report
For the six months ended June 30, 2024, interest income, on a tax-equivalent basis, increased $8.9 million to $205.4 million as compared to the same period in 2023, primarily due to growth in earning assets. The yield on earning assets increased 37 basis points to 5.80% from 5.43%, primarily due to the impact of increasing market interest rates.
Current report
Average earning assets decreased to $7.12 billion in the first six months of 2024 from $7.30 billion in the same period in 2023. Average loans decreased $374.5 million, which was partially offset by an increase in investment securities of $207.8 million. The changes in average loan mix on a year-to-date basis is consistent with the quarter-to-date changes described previously.
Current report
For the six month period ended June 30, 2024, interest expense increased$17.3 million to$94.0 million compared to the six months ended June 30, 2023. The cost of interest-bearing liabilities increased to 3.29% for the first six months of 2024 compared to 2.65% for the same period of 2023. Interest expense on deposits increased to $78.7 million from $60.0 million for the comparable period in 2023, primarily due to increases in interest rates on deposits.
Current report
Provision for Credit Losses. The Company's provision for credit losses totaled $16.8 million for the three months ended June 30, 2024, compared to $5.9 million for the three months ended June 30, 2023. For the six months ended June 30, 2024 and 2023, the Company recorded provision expense of $30.8 million and $9.0 million, respectively.The provision expense was attributable to loans, with the exception of $0.2 million recapture attributable to unfunded commitments in the three and six months ended June 30, 2024.
Current report
The elevated loan provision in the second quarter of 2024 was primarily due to credit deterioration and servicing issues involving one of our FinTech partners, LendingPoint, subsequent to their system conversion in late 2023. The Company recognized provision expense of $14.0 million related to this portfolio. In addition, the provision expense for the first quarter of 2024 included a specific reserve of $8.0 million on a multi-family construction project.
Current report
Income Tax Expense. The Company's effective tax rates were 19.9% and 22.6% for the three and six months ended June 30, 2024, respectively, compared to 25.1% and 24.6% for the three and six months ended June 30, 2023, respectively. The decrease in the effective tax rate from the three and six months ended June 30, 2023 is due primarily to the decrease in estimated 2024 taxable income.
Current report
The allowance allocated to consumer loans totaled $14.3 million, or 1.92% of total consumer loans, at June 30, 2024, compared to $3.8 million, or 0.40%, at December 31, 2023. Credit deterioration and servicing related issues with the LendingPoint portfolio, as previously discussed, resulted in an increase of the allowance of $10.7 million. The Company's consumer portfolios benefit from credit enhancements provided by LendingPoint and Greensky. The Company calculated its expected loss estimate based on delinquent loans, as reported by LendingPoint, net of expected credit enhancements. Specific allocations for consumer loans that were evaluated for expected credit losses on an individual basis decreased $0.1 million.
Current report
2023, totaled $3.6 million and $1.5 million, respectively, primarily due to continued weakness within the trucking and transportation sector. The Company did recognize a $2.0 million partial recovery in the second quarter of 2024 related to a third quarter of 2023 charge off .
Current report
Net charge-offs for the six months ended June 30, 2024 totaled $7.3 million, compared to $5.1 million for the same period one year ago. Charge-offs of equipment financing loans and leases totaled $7.2 million for the six months ended June 30, 2024, compared to $2.7 million for the same period one year ago.
Current report
The Company adopted the five-year CECL transition option in 2020 provided for by the Office of the Comptroller of the Currency, the Federal Reserve, and the FDIC in March 2020. At the end of 2024 this transition will be complete.
Removed paragraphs (8)
Previous report
At its March 20, 2024 meeting, the Federal Reserve held its key interest rate steady for the fifth consecutive meeting, as the central bank awaits more data to determine when, and if, to cut rates. Federal Reserve officials also released an updated set of economic projections that show they now expect fewer rate cuts in the coming years than they estimated in December 2023. A majority of policymakers continue to expect three rate cuts this year, but they now see fewer in 2025 and 2026. They expect interest rates in the longer run to be slightly higher than they projected in December. Economic growth is also expected to be much higher this year than officials previously estimated. In 2023, the Federal Reserve increased the federal funds rate 100 basis points to a target range of 5.25%-5.50%, the highest since August 2007. The benchmark federal funds rate remains at a target range between 5.25%-5.50%, compared to a target range of 4.25%-4.50% at the beginning of 2023.
Previous report
Average loans decreased $308.4 million in the first quarter of 2024 compared to the same quarter of 2023. Average commercial loans decreased $120.6 million. Included in this category are commercial FHA warehouse lines, which decreased $12.1 million to $1.2 million in the first quarter of 2024.
Previous report
Interest expense on trust preferred debentures increased $0.2 million for the three months ended March 31, 2024, from the comparable period in 2023, due to interest rate increases, as these debt instruments reprice quarterly.
Previous report
Provision for Credit Losses. The Company's provision for credit losses on loans was$14.0 millionfor the three months ended March 31, 2024, compared to $3.1 million for the three months ended March 31, 2023. The Company recorded a specific reserve of $8.0 million on one large construction and land development loan. Net charge-offs for the quarter totaled $4.4 million compared to $2.1 million for the comparable quarter of 2023.
Previous report
Income Tax Expense. Income tax expense was $4.4 million for the three months ended March 31, 2024, as compared to $6.9 million for the three months ended March 31, 2023. The resulting effective tax rates were 23.9% and 24.0% for the three months ended March 31, 2024 and 2023, respectively.
Previous report
Total deposits increased $14.5 million to $6.32 billion at March 31, 2024, as compared to December 31, 2023. Increases in noninterest-bearing demand accounts and time deposits of $67.0 million and $76.0 million, respectively, during this period, were partially offset by decreases in interest-bearing checking, money market and savings account balances. Noninterest-bearing demand commercial accounts, servicing deposits and treasury services accounts increased $20.3 million, $21.4 million, and $16.7 million, respectively during the first quarter of 2024. Our noninterest-bearing deposits increased to 19.2% of total deposits at March 31, 2024 compared to 18.1% at December 31, 2023.
Previous report
Short-term Borrowings. Short-term borrowings, consisting of federal funds purchased and securities sold under agreements to repurchase totaled $214.4 million and $34.9 million at March 31, 2024 and December 31, 2023, respectively. The Company utilized additional short-term liquidity resources and reduced our reliance on FHLB advances to optimize contingent liquidity and improve our cost of funds.
Previous report
In December 2018, the Office of the Comptroller of the Currency, the Federal Reserve, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the CECL accounting standard. In March 2020, the Office of the Comptroller of the Currency, the Federal Reserve, and the FDIC published an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company is adopting the capital transition relief over the permissible five-year period.
Reworded paragraphs (50)
Previous wording
The following is management's discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of March 31, 2024, as compared to December 31, 2023, and operating results for the three months ended March 31, 2024 and 2023. These comments should be read in conjunction with the Company's unaudited consolidated financial statements and accompanying notes appearing elsewhere herein and our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024.
Current wording
The following is management's discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of June 30, 2024, as compared to December 31, 2023, and unaudited consolidated operating results for the three and six months ended June 30, 2024 and 2023. These comments should be read in conjunction with the Company's unaudited consolidated financial statements and accompanying notes appearing elsewhere herein and our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024.
Previous wording
In addition to the historical information contained herein, this Form 10-Q includes “forward-looking statements” within the meaning of such term under the Private Securities Litigation Reform Act of 1995. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including prevailing interest rates and the rate of inflation; changes in the financial markets; changes in business plans as circumstances warrant; risks related to mergers and acquisitions and the integration of acquired businesses; changes to U.S. tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the SEC. Readers should note that the forward-looking statements included herein are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “will,” “propose,” “may,” “plan,” “seek,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” or “continue,” or similar terminology. Any forward-looking statements presented herein are made only as of the date of this document, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Current wording
In addition to the historical information contained herein, this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of such term under the Private Securities Litigation Reform Act of 1995. These statements are subject to many risks and uncertainties, including interest rates and other general economic, business and political conditions, including the rate of inflation; changes in the financial markets; changes in business plans as circumstances warrant; risks related to legal proceedings; risks related to mergers and acquisitions and the integration of acquired businesses; changes to U.S. tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the SEC. Readers should note that the forward-looking statements included herein are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “will,” “propose,” “may,” “plan,” “seek,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” or “continue,” or similar terminology. Any forward-looking statements presented herein are made only as of the date of this document, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Previous wording
Each item listed below affects the comparability of our results of operations for the three months ended March 31, 2024 and 2023, and our financial condition as of March 31, 2024 and December 31, 2023, and may affect the comparability of financial information we report in future fiscal periods.
Current wording
Each item listed below affects the comparability of our results of operations for the three and six months ended June 30, 2024 and 2023, and our financial condition as of June 30, 2024 and December 31, 2023, and may affect the comparability of financial information we report in future fiscal periods.
Previous wording
Balance sheet repositioning. The Company took advantage of certain market conditions during 2023 to reposition out of lower yielding securities into other structures, which were expected to result in improved overall margin, liquidity and capital allocations. These transactions resulted in losses of $0.6 million in the three months ended March 31, 2023.
Current wording
Balance sheet repositioning. The Company took advantage of certain market conditions during 2023 and the first half of 2024 to reposition out of lower yielding securities into other structures, which were expected to result in improved overall margin, liquidity and capital allocations. These transactions resulted in losses of $0.2 million in both the three and six months ended June 30, 2024 compared to losses of $0.9 million and $1.5 million in the three and six months ended June 30, 2023, respectively.
Previous wording
In addition, in the third quarter of 2023, the Company surrendered certain low-yielding life insurance policies and purchased additional policies. The Company recognized a $4.5 million tax charge related to the surrender of the policies.
Current wording
In addition, in the third quarter of 2023, the Company surrendered certain low-yielding life insurance policies and purchased additional policies resulting in improved income. The Company recognized a $4.5 million tax charge related to the surrender of the policies.
Previous wording
Redemption of Subordinated Notes. In the second quarter of 2023, the Company redeemed $6.6 million of outstanding subordinated notes. The weighted average redemption price was 89.2% of the aggregate principal amount of the subordinated notes, plus accrued and unpaid interest. The Company recorded gains totaling $0.7 million on these redemptions.
Current wording
Redemption of Subordinated Notes. In the second quarter of 2024, the Company redeemed $2.0 million of outstanding subordinated notes. The weighted average redemption price was 91.5% of the aggregate principal amount of the subordinated notes, plus accrued and unpaid interest. The Company recorded gains totaling $0.2 million on these redemptions.
Previous wording
Overview. The following table sets forth condensed income statement information of the Company for the three months ended March 31, 2024 and 2023:
Current wording
Overview. The following table sets forth condensed income statement information of the Company for the three and six months ended June 30, 2024 and 2023:
Previous wording
During the three months ended March 31, 2024, we generated net income of $13.9 million, or diluted earnings per common share of $0.53, compared to net income of $21.8 million, or diluted earnings per common share of $0.86, in the three months ended March 31, 2023. Earnings for thefirst quarter of 2024 compared to thefirst quarter of 2023 decreased primarily due to a $4.6 million decrease in net interest income, a $10.9 million increase in provision for credit losses, and a $0.4 million increase in noninterest expense. These results were partially offset by a $5.4 million increase in noninterest income and a $2.5 million decrease in income tax expense.
Current wording
During the three months ended June 30, 2024, we generated net income of $6.8 million, or diluted earnings per common share of $0.20, compared to net income of $21.6 million, or diluted earnings per common share of $0.86, in the three months ended June 30, 2023. Earnings for thesecond quarter of 2024 compared to thesecond quarter of 2023 decreased primarily due to a $3.8 million decrease in net interest income, a $10.9 million increase in provision for credit losses, a $1.1 million decrease in noninterest income and a $4.6 million increase in noninterest expense. These results were partially offset by a $5.6 million decrease in income tax expense.
Previous wording
During the three months ended March 31, 2024, net interest income, on a tax-equivalent basis, decreased to $56.1 million compared to $60.7 million for the three months ended March 31, 2023. The tax-equivalent net interest margin decreased to 3.18% for the first quarter of 2024 compared to 3.39% for the first quarter of 2023.
Current wording
During the three months ended June 30, 2024, net interest income, on a tax-equivalent basis, decreased to $55.2 million compared to $59.0 million for the three months ended June 30, 2023. The tax-equivalent net interest margin decreased to 3.12% for the second quarter of 2024 compared to 3.23% for the second quarter of 2023.
Previous wording
Average Balance Sheet, Interest and Yield/Rate Analysis. The following tables present the average balance sheets, interest income, interest expense and the corresponding average yields earned and rates paid for the three months ended March 31, 2024 and 2023. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments.
Current wording
Average Balance Sheet, Interest and Yield/Rate Analysis. The following tables present the average balance sheets, interest income, interest expense and the corresponding average yields earned and rates paid for the three and six months ended June 30, 2024 and 2023. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments.
Previous wording
Interest Income. Interest income, on a tax-equivalent basis, increased $6.1 million to $101.9 million in the three months ended March 31, 2024 as compared to the same quarter in 2023, primarily due to improved yields on earning assets. The yield on earning assets increased 41 basis points to 5.76% from 5.35% primarily due to the impact of increasing market interest rates.
Current wording
Interest Income. Interest income, on a tax-equivalent basis, increased $2.8 million to $103.5 million in the three months ended June 30, 2024 as compared to the same quarter in 2023, primarily due to improved yields on earning assets. The yield on earning assets increased 33 basis points to 5.84% from 5.51% primarily due to the impact of increasing market interest rates.
Previous wording
Average earning assets decreased to $7.11 billion in the first quarter of 2024 from $7.26 billion in the same quarter of 2023. Decreases in average loans and federal funds sold and cash investments of $308.4 million and $15.8 million, respectively, were partially offset by a $178.9 million increase in investment securities.
Current wording
Average earning assets decreased to $7.13 billion in the second quarter of 2024 from $7.33 billion in the same quarter of 2023. The decrease in average loans of $440.5 million was partially offset by a $237.0 million increase in investment securities.
Previous wording
Average commercial real estate loans and leases also decreased this quarter by $44.8 million and $37.5 million, respectively, compared to prior year's first quarter. Average construction loans increased this quarter by $136.9 million, compared to the prior year's first quarter, primarily due to funding draws on existing multifamily project lines. Average balances in our consumer loan portfolio decreased this quarter by $252.0 million compared to the prior year first quarter. During the fourth quarter of 2023, the Company ceased originating consumer loans through both Greensky and LendingPoint.
Current wording
Average construction loans increased this quarter by $118.0 million, compared to the prior year's second quarter, primarily due to funding draws on existing multifamily project lines.
Previous wording
Interest Expense. Interest expense increased$10.7 million to$45.8 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The cost of interest-bearing liabilities increased to 3.22% for the first quarter of 2024, compared to 2.46% for the first quarter of 2023, due to the increase in deposit costs as a result of the rate increases announced by the Federal Reserve.
Current wording
Interest Expense. Interest expense increased $6.6 million to $48.2 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The cost of interest-bearing liabilities increased to 3.36% for the second quarter of 2024 compared to 2.83% for the second quarter of 2023 due to the increase in deposit costs as a result of the rate increases previously enacted by the Federal Reserve.
Previous wording
Interest expense on deposits increased $12.8 million to $39.2 million for the three months ended March 31, 2024 from the comparable period in 2023. The increase was primarily due to an increase in rates paid on deposits. Average balances of interest-bearing deposit accounts increased $141.2 million, or 2.8%, to $5.20 billion for the three months ended March 31, 2024 compared to the same period one year earlier. The increase in volume was attributable to increases of brokered deposits and reciprocal deposits of $194.0 million and $227.5 million, respectively. Our retail, commercial, servicing and public fund deposits decreased $26.3 million, $156.8 million, $49.0 million, and $48.1 million, respectively.
Current wording
Interest expense on deposits increased $5.9 million to $39.5 million for thethree months ended June 30, 2024 from the comparable period in 2023. The increase was primarily due to an increase in rates paid on deposits. Average balances of interest-bearing deposit accounts decreased $157.8 million, or 3.0%, to $5.10 billion for the three months ended June 30, 2024 compared to the same period one year earlier. Our retail, commercial, servicing and public fund deposits decreased $38.6 million, $142.2 million, $22.2 million, and $42.2 million, respectively. These declines in volume were partially offset by increases in brokered deposits and reciprocal deposits of $71.0 million and $16.3 million, respectively.
Previous wording
Interest expense on FHLB advances and other borrowings decreased $3.0 million for the three months ended March 31, 2024, from the comparable period in 2023. Average balances decreased $227.2 million for the three months ended March 31, 2024, from the comparable period in 2023, as loan paydowns and increases brokered deposits replaced this funding source.
Current wording
Interest expense on FHLB advances and other borrowings decreased $2.5 million for the six months ended June 30, 2024, from the comparable period in 2023. Average balances decreased $99.0 million for the six months ended June 30, 2024, from the comparable period in 2023, as loan paydowns permitted a decrease in the use of this funding source.
Previous wording
The provision for credit losses on loans recognized during the three months ended March 31, 2024 was made at a level deemed necessary by management to absorb estimated losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for credit losses is completed quarterly by management, the results of which are used to determine provision for credit losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and reasonable and supportable forecasts along with other qualitative and quantitative factors.
Current wording
The provision for credit losses on loans recognized during the three and six months ended June 30, 2024 was made at a level deemed necessary by management to absorb estimated losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for credit losses is completed quarterly by management, the results of which are used to determine provision for credit losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and reasonable and supportable forecasts along with other qualitative and quantitative factors.
Previous wording
Noninterest Income. Noninterest income increased 34.3% for the three months ended March 31, 2024, compared to the same period one year prior. The following table sets forth the major components of our noninterest income for the three months ended March 31, 2024 and 2023:
Current wording
Noninterest Income. Noninterest income decreased 5.85% for the three months ended June 30, 2024, compared to the same period one year prior and and increased 12.48% for the six months ended June 30, 2024, compared to the same period one year prior. The following table sets forth the major components of our noninterest income for the three and six months ended June 30, 2024 and 2023:
Previous wording
Wealth management revenue. Income from our wealth management business increased $0.7 million for the three months ended March 31, 204, as compared to the same period in 2023. Assets under administration increased to $3.89 billion at March 31, 2024 from $3.50 billion at March 31, 2023, primarily due to an increase in the market performance as a result of economic growth between the two periods.
Current wording
Wealth management revenue. Wealth management revenue increased $0.5 million and $1.3 million for the three and six months ended June 30, 2024, as compared to the same periods in 2023. Assets under administration increased to $4.00 billion at June 30, 2024 from $3.59 billion at June 30, 2023, primarily due to improved sales activity and an increase in market performance.
Previous wording
Company-owned life insurance income. Income on company-owned life insurance income increased $0.9 million for the three months ended March 31, 2024, as compared to the same period in 2023. As previously discussed, the Company surrendered certain low-yielding life insurance policies and purchased additional policies in the third quarter of 2023.
Current wording
Company-owned life insurance income. Income on company-owned life insurance income increased $1.0 million and $2.0 million for the three and six months ended June 30, 2024, as compared to the same periods in 2023. As previously discussed, the Company surrendered certain low-yielding life insurance policies and purchased additional policies in the third quarter of 2023, resulting in the increase in revenue.
Previous wording
Other noninterest income. Other income totaled $5.3 million for the three months ended March 31, 2024, an increase of $2.7 million, as compared to the same period of 2023. Other noninterest income in 2024 included incremental servicing revenues of $3.7 million related to Greensky portfolio. In addition, we recognized amortization expense of $0.6 million on our commercial serving portfolio in the current quarter but no expense in the first quarter of 2023, as the portfolio was classified as held for sale.
Current wording
Other noninterest income. Other income decreased $3.7 million for the three months ended June 30, 2024, as compared to the same period in 2023. The Company recognized losses of $0.6 million on the disposition of repossessed leased assets in the second quarter of 2024. As mentioned previously, the Company recognized a gain of $0.2 million on the redemption of subordinated debt in the second quarter of 2024 compared to $0.7 million in the second quarter of 2023. Also in the second quarter of 2023, the Company recognized a gain of $0.8 million on the sale of OREO. In addition, the Company recognized amortization expense of $0.6 million on our commercial serving portfolio in the current quarter but no expense in the second quarter of 2023, as the portfolio was classified as held for sale.
Previous wording
Noninterest Expense. The following table sets forth the major components of noninterest expense for the three months ended March 31, 2024 and 2023:
Current wording
Noninterest Expense. The following table sets forth the major components of noninterest expense for the three and six months ended June 30, 2024 and 2023:
Previous wording
Total noninterest expense increased $0.4 million, or 0.9%, in the three months ended March 31, 2024, as compared to the same period of 2023.
Current wording
Total noninterest expense increased $4.6 million and $5.0 million in the three and six months ended June 30, 2024, as compared to the same period of 2023. Other expense for the second quarter of 2024 included $4.1 million related to OREO impairment, OREO property taxes, and expenses related to various legal actions.
Previous wording
Assets. Total assets were $7.83 billion at March 31, 2024, as compared to $7.87 billion at December 31, 2023.
Current wording
Assets. Total assets were $7.76 billion at June 30, 2024, as compared to $7.87 billion at December 31, 2023.
Previous wording
Total loans decreased $172.6 million to $5.96 billion at March 31, 2024, as compared to December 31, 2023, as the Company originated loans in a more selective and deliberate approach to balance liquidity and funding costs. An increase in construction and land development loans of $21.5 million was offset by decreases in all other loan categories. The increase in our construction and land development portfolio was primarily driven by draws on existing lines.
Current wording
Total loans decreased $279.1 million to $5.85 billion at June 30, 2024, as compared to December 31, 2023. Increases in commercial real estate loans and construction and land development loans of $14.7 million and $23.9 million, respectively, were offset by decreases in all other loan categories. The Company originated loans in a more selective and deliberate approach to balance liquidity and continued the intentional reduction of our equipment finance and consumer portfolios.
Previous wording
Consumer loans decreased $98.1 million to $837.1 million at March 31, 2024 compared to December 31, 2023, due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated loan balances decreased $77.5 million during the first quarter of 2024 to $606.0 million at March 31, 2024. In addition, during the fourth quarter of 2023, the Company ceased originating loans through LendingPoint. At March 31, 2024, the Company had $112.7 million in loans outstanding that were originated through LendingPoint, which will continue to be serviced by LendingPoint.
Current wording
Consumer loans decreased $189.1 million to $746.0 million at June 30, 2024 compared to December 31, 2023, due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated loan balances decreased $145.3 million during the first half of 2024 to $538.3 million at June 30, 2024. In addition, during the fourth quarter of 2023, the Company ceased originating loans through LendingPoint. At June 30, 2024, the Company had $114.2 million of loans outstanding that were originated through LendingPoint, which continue to be serviced by LendingPoint.
Previous wording
Loans secured by office space totaled $154.3 million and $153.8 million at March 31, 2024 and December 31, 2023, respectively, primarily located in suburban locations in Illinois and Missouri.
Current wording
Loans secured by office space totaled $152.6 million and $153.8 million at June 30, 2024 and December 31, 2023, respectively, primarily located in suburban locations in Illinois and Missouri.
Previous wording
Residential real estate loans. Our residential real estate loans, secured by residential properties, that generally do not qualify for secondary market sale.
Current wording
Residential real estate loans. Our residential real estate loans are loans secured by residential properties that generally do not qualify for secondary market sale.
Previous wording
Analysis of the Allowance for Credit Losses on Loans. The allowance for credit losses on loans was $78.1 million, or 1.31% of total loans, at March 31, 2024 compared to $68.5 million, or 1.12% of total loans, at December 31, 2023. The following table allocates the allowance for credit losses on loans by loan category:
Current wording
Analysis of the Allowance for Credit Losses on Loans. The allowance for credit losses on loans was $92.2 million, or 1.58% of total loans, at June 30, 2024 compared to $68.5 million, or 1.12% of total loans, at December 31, 2023. The following table allocates the allowance for credit losses on loans by loan category:
Previous wording
In estimating expected credit losses as of March 31, 2024, we utilized certain forecasted macroeconomic variables from Oxford Economics in our models. The forecasted projections included, among other things, (i) U.S. gross domestic product ranging from 1.5% to 3.0% over the next four quarters; (ii) the 10-year treasury rate decreasing from 4.2% in the first quarter of 2024 to 3.7% by the first quarter of 2025; and (iii) Illinois unemployment rate averaging 4.9% through the first quarter of 2025.
Current wording
In estimating expected credit losses as of June 30, 2024, we utilized certain forecasted macroeconomic variables from Oxford Economics in our models. The forecasted projections included, among other things, (i) U.S. gross domestic product ranging from 1.7% to 2.2% over the next four quarters; (ii) the 10-year treasury rate decreasing from 4.5% in the second quarter of 2024 to 3.8% by the fourth quarter of 2025; and (iii) Illinois unemployment rate averaging 5.0% through the fourth quarter of 2025.
Previous wording
We qualitatively adjust the model results based on this scenario for various risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factor adjustments are based upon management judgment and current assessment as to the impact of risks related to changes in lending policies and procedures; economic and business conditions; loan portfolio attributes and credit concentrations; and external factors, among other things, that are not already fully captured within the modeling inputs, assumptions and other processes. Management assesses the potential impact of such items within a range of severely negative impact to positive impact and adjusts the modeled expected credit loss by an aggregate adjustment percentage based upon the assessment. The qualitative factor adjustment at March 31, 2024, was approximately 42 basis points of total loans, consistent with 41 basis points at December 31, 2023.
Current wording
We qualitatively adjust the model results based on this scenario for various risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factor adjustments are based upon management judgment and current assessment as to the impact of risks related to changes in lending policies and procedures; economic and business conditions; loan portfolio attributes and credit concentrations; and external factors, among other things, that are not already fully captured within the modeling inputs, assumptions and other processes. Management assesses the potential impact of such items within a range of severely negative impact to positive impact and adjusts the modeled expected credit loss by an aggregate adjustment percentage based upon the assessment. The qualitative factor adjustment at June 30, 2024, was approximately 65 basis points of total loans. The additional provision expense related to the LendingPoint portfolio resulted in the increase in the qualitative factor adjustment when compared to 41 basis points at December 31, 2023.
Previous wording
The allowance allocated to commercial loans totaled $21.3 million, or 1.51% of total commercial loans, at March 31, 2024, compared to $21.8 million, or 1.47%, at December 31, 2023. Modeled expected credit losses increased $0.2 million and qualitative factor adjustments related to commercial loans decreased $0.3 million. Specific allocations for commercial loans that were evaluated for expected credit losses on an individual basis decreased $0.4 million from $1.8 million at December 31, 2023.
Current wording
The allowance allocated to commercial loans totaled $24.2 million, or 1.73% of total commercial loans, at June 30, 2024, compared to $21.8 million, or 1.47%, at December 31, 2023. Modeled expected credit losses increased $0.4 million and qualitative factor adjustments related to commercial loans increased $2.8 million. A certain portion of the LendingPoint portfolio is classified as commercial loans. The Company recognized provision expense of $3.2 million on this portfolio. Specific allocations for commercial loans that were evaluated for expected credit losses on an individual basis decreased $0.8 million from $1.8 million at December 31, 2023.
Previous wording
The allowance allocated to commercial real estate loans totaled $21.4 million, or 0.89% to total commercial real estate loans, at March 31, 2024, increasing $1.1 million, from $20.2 million, or 0.84% of total commercial real estate loans, at December 31, 2023. Modeled expected credit losses were unchanged from prior quarter. Specific allocations for commercial real estate loans that were evaluated for expected credit losses on an individual basis increased from $0.7 million at December 31, 2023, to $2.3 million at March 31, 2024. The commercial real estate portfolio does not include significant exposure to urban office properties.
Current wording
The allowance allocated to commercial real estate loans totaled $22.2 million, or 0.92% of total commercial real estate loans, at June 30, 2024, increasing $2.0 million, from $20.2 million, or 0.84% of total commercial real estate loans, at December 31, 2023. Modeled expected credit losses were unchanged from prior quarter. Specific allocations for commercial real estate loans that were evaluated for expected credit losses on an individual basis increased from $0.7 million at December 31, 2023, to $3.0 million at June 30, 2024. The commercial real estate portfolio does not include significant exposure to urban office properties.
Previous wording
The allowance allocated to construction and land development loans totaled $12.6 million, or 2.66% to total construction loans, at March 31, 2024, increasing $8.5 million, from $4.2 million, or 0.92% of total constructions loans, at December 31, 2023. Specific allocations for construction loans that were evaluated for expected credit losses on an individual basis total $8.0 million and $0.0 million at March 31, 2024 and December 31, 2023, respectively. This represents the specific reserve of $8.0 million on one large construction and land development loan recognized in our first current period provision for credit losses. Modeled expected credit losses decreased $0.1 million and qualitative factor adjustments related to construction loans increased $0.6 million.
Current wording
The allowance allocated to construction and land development loans totaled $13.0 million, or 2.72% of total construction and land development loans, at June 30, 2024, increasing $8.8 million, from $4.2 million, or 0.92% of total constructions loans, at December 31, 2023. Specific allocations for construction loans that were evaluated for expected credit losses on an individual basis totaled $8.0 million and $0.0 million at June 30, 2024 and December 31, 2023, respectively. This represents the specific reserve on one large construction and land development loan recognized in the first quarter of 2024 provision for credit losses. Modeled expected credit losses increased $0.2 million and qualitative factor adjustments related to construction loans increased $0.6 million.
Previous wording
The allowance allocated to the lease portfolio totaled $13.5 million, or 2.95% of total commercial leases, at March 31, 2024, increasing $0.5 million, from $12.9 million, or 2.73% of total commercial leases at December 31, 2023. Modeled expected credit losses related to commercial leases increased $0.3 million and specific allocation reserves increased $0.4 million.
Current wording
The allowance allocated to the lease portfolio totaled $13.3 million, or 3.10% of total commercial leases, at June 30, 2024, increasing $0.3 million, from $12.9 million, or 2.73% of total commercial leases at December 31, 2023. Modeled expected credit losses and specific allocation reserves each increased $0.3 million. Qualitative factor adjustments related to commercial leases decreased $0.2 million.
Previous wording
The following table provides an analysis of the allowance for credit losses on loans, provision for credit losses on loans and net charge-offs for the three months ended March 31, 2024 and 2023:
Current wording
The following table provides an analysis of the allowance for credit losses on loans, provision for credit losses on loans and net charge-offs for the three and six months ended June 30, 2024 and 2023:
Previous wording
Charge-offs of equipment financing loans and leases for the three months ended March 31, 2024 and 2023, totaled $3.6 million and $1.2 million, respectively, primarily due to continued weakness within the trucking and transportation sector. Net charge-offs for the three months ended March 31, 2024 totaled $4.4 million, compared to $2.1 million for the same period one year ago.
Current wording
Net charge-offs for the three months ended June 30, 2024 totaled $2.9 million, compared to $3.0 million for the same period one year ago. Net charge-offs of equipment financing loans and leases for the three months ended June 30, 2024 and
Previous wording
Non-performing loans increased $48.6 million to $105.0 million at March 31, 2024, compared to $56.4 million as of December 31, 2023. Four loans totaling $47.4 million account for the increase. Of these, three loans totaling $40.8 million are multi-family construction or multi-family projects.
Current wording
Non-performing loans increased $55.7 million to $112.1 million at June 30, 2024, compared to $56.4 million as of December 31, 2023. Four loans totaling $47.2 million account for the increase. Of these, three loans totaling $40.8 million are multi-family construction or multi-family projects.
Previous wording
We did not recognize interest income on nonaccrual loans during the three months ended March 31, 2024 or 2023 while the loans were in nonaccrual status. Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $1.3 million and $0.8 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
We did not recognize interest income on nonaccrual loans during the three months ended June 30, 2024 or 2023 while the loans were in nonaccrual status. Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $2.3 million and $3.6 million for the three and six months ended June 30, 2024, respectively, and $0.8 million and $1.6 million for the three and six months ended June 30, 2023, respectively.
Previous wording
The following table presents the change in our non-performing loans for the three months ended March 31, 2024:
Current wording
The following table presents the change in our non-performing loans for the six months ended June 30, 2024:
Showing the first 40 of 50 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
In addition, in the second quarter of 2023, the Company redeemed $6.6 million of outstanding subordinated notes. The weighted average redemption price was 89.2% of the aggregate principal amount of the subordinated notes, plus accrued and unpaid interest. The Company recorded gains totaling $0.7 million on these redemptions.
Current report — wording carried from elsewhere
During the six months ended June 30, 2024, we generated net income of $20.6 million, or diluted earnings per common share of $0.73, compared to net income of $43.3 million, or diluted earnings per common share of $1.72, in the six months ended June 30, 2023. Earnings for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 decreased primarily due to an $8.4 million decrease in net interest income, a $21.8 million increase in provision for credit losses, and a $5.0 million increase in noninterest expense. These results were partially offset by a $4.3 million increase in noninterest income and an $8.1 million decrease in income tax expense.
Current report — wording carried from elsewhere
(1)Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.4 million for each of the six months ended June 30, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
(2)Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.
Current report — wording carried from elsewhere
(3)Net interest margin during the periods presented represents: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Loss on sale of investment securities. The Company took advantage of certain market conditions during the three months ended March 31, 2023 to reposition out of lower yielding securities into other structures, which are expected to result in improved overall margin, liquidity and capital allocations. These transactions resulted in net losses of $0.6 million.
Previous report — wording carried elsewhere
(option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and SOFR (basis risk).