Midland States Bancorp Inc
For the period ended Sep 30, 2024. Filed Nov 6, 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.
Sep 30, 2024 · Filed Nov 6, 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 2024-06-30; filed 2024-08-08.
0001466026-24-000035
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0001466026-24-000041
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 121 previous paragraphs and 122 current paragraphs.
58 unchanged; 56 reworded; 7 added; 7 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 21 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 (7)
Current report
The Federal Reserve announced at its September 2024 FOMC meeting that it is cutting its benchmark interest rate by 0.50 percentage points, marking the first reduction in four years. This rate cut lowers the federal funds rate into a range of 4.75% to 5.00%, down from its prior range of 5.25% to 5.50%, which had been its highest level in 23 years. The half-point move signals that the Federal Reserve is acting aggressively to keep the U.S. economy from stalling, given that historically most rate cuts are 0.25 percentage points.
Current report
The FOMC statement indicated that the Committee has gained greater confidence that inflation is moving sustainably toward two percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The committee noted that “job gains have slowed and the unemployment rate has moved up but remains low.” FOMC officials raised their expected unemployment rate this year to 4.4%, from the 4.0% projection at the last update in June, and lowered the inflation outlook to 2.3% from 2.6%.
Current report
Salaries and employee benefits. For the three and nine months ended September 30, 2024, salaries and employee benefits expense increased $2.1 million and $1.9 million, respectively, as compared to the same period in 2023, primarily due to annual salary increases and increased incentive expense. The Company employed 907 employees at September 30, 2024 compared to 911 employees at September 30, 2023.
Current report
Data processing fees. The $0.5 million and $1.6 million increases in data processing fees for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023, were primarily the result of our continuing investments in technology to better serve our growing customer base and increased transaction volumes.
Current report
Loan expense. The $1.1 million and $1.3 million increases in loan expense for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023, were primarily for loan collection expenses due to the increased volume of nonperforming loans and assets.
Current report
Other expense. Other expense increased $3.8 million for the nine months ended September 30, 2024, as compared to the same period in 2023. OREO expenses, including impairment and property taxes, increased $1.8 million. In addition, the Company recognized expenses of $3.1 million related to various legal actions.
Current report
Collateral Dependent Financial Assets
Removed paragraphs (7)
Previous 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.
Previous 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.
Previous report
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 report
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 report
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 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 .
Previous report
FHLB Advances and Other Borrowings. FHLB advances and other borrowings totaled $600.0 million and $476.0 million as of June 30, 2024 and December 31, 2023, respectively. The Company utilized additional short-term FHLB advances to offset the decrease in deposits.
Reworded paragraphs (56)
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 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.
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 September 30, 2024, as compared to December 31, 2023, and unaudited consolidated operating results for the three and nine months ended September 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 the audited financial statements and accompanying notes provided in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024.
Previous 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.
Current wording
Each item listed below affects the comparability of our results of operations for the three and nine months ended September 30, 2024 and 2023, and our financial condition as of September 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 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.
Current wording
Balance sheet repositioning. The Company took advantage of certain market conditions during 2023 and the first nine months 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 the nine months ended September 30, 2024 compared to losses of $5.0 million and $6.5 million in the three and nine months ended September 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 resulting in improved income. 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 income tax charge related to the surrender of the policies.
Previous 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.
Current wording
Redemption of Subordinated Notes. In the second and third quarters of 2024, the Company redeemed a total of $11.0 million of outstanding subordinated notes. The weighted average redemption price was 97.7% 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 and six months ended June 30, 2024 and 2023:
Current wording
Overview. The following table sets forth condensed income statement information of the Company for the three and nine months ended September 30, 2024 and 2023:
Previous 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.
Current wording
During the three months ended September 30, 2024, we generated net income of $18.5 million, or diluted earnings per common share of $0.74, compared to net income of $11.4 million, or diluted earnings per common share of $0.41, in the three months ended September 30, 2023. Earnings for thethird quarter of 2024 compared to thethird quarter of 2023 increased primarily due to a $7.8 million increase in noninterest income, a $7.5 million decrease in income tax expense and a $0.2 million decrease in provision for credit losses. These results were partially offset by a $3.6 million decrease in net interest income, and a $4.7 million increase in noninterest expense.
Previous wording
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 wording
During the nine months ended September 30, 2024, we generated net income of $39.1 million, or diluted earnings per common share of $1.47, compared to net income of $54.7 million, or diluted earnings per common share of $2.14, in the nine months ended September 30, 2023. Earnings for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 decreased primarily due to a $21.6 million increase in provision for credit losses, a $12.0 million decrease in net interest income and a $9.7 million increase in noninterest expense. These results were partially offset by a $12.1 million increase in noninterest income, and a $15.6 million decrease in income tax expense.
Previous 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.
Current wording
During the three months ended September 30, 2024, net interest income, on a tax-equivalent basis, decreased to $55.2 million compared to $58.8 million for the three months ended September 30, 2023. The tax-equivalent net interest margin decreased to 3.10% for the third quarter of 2024 compared to 3.20% for the third quarter of 2023.
Previous wording
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 wording
During thenine months ended September 30, 2024, net interest income, on a tax-equivalent basis, decreased to $166.5 million with a tax-equivalent net interest margin of 3.13% compared to net interest income, on a tax-equivalent basis, of $178.6 million and a tax-equivalent net interest margin of 3.27% for thenine months ended September 30, 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 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.
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 nine months ended September 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
(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 wording
(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 $0.6 million for each of the nine months ended September 30, 2024 and 2023, respectively.
Previous 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.
Current wording
Interest Income. Interest income, on a tax-equivalent basis, increased $1.2 million to $105.0 million in the three months ended September 30, 2024 as compared to the same quarter in 2023, primarily due to improved yields on earning assets. The yield on earning assets increased 26 basis points to 5.91% from 5.65% primarily due to the impact of increasing market interest rates.
Previous 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.
Current wording
Average earning assets decreased to $7.07 billion in the third quarter of 2024 from $7.28 billion in the same quarter of 2023. The decrease in average loans of $514.2 million was partially offset by a $299.8 million increase in investment securities.
Previous wording
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 wording
Average loans decreased $514.2 million to $5.78 billion in the third 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 $215.3 million to $868.2 million in the third quarter of 2024, compared to the third quarter of 2023. The Company continued to reduce its concentration of this product within the overall loan portfolio. Consumer loans decreased $358.7 million during the third quarter to $722.1 million due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated average loan balances decreased $280.0 million in the third quarter of 2024 to
Previous wording
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 wording
For the nine months ended September 30, 2024, interest income, on a tax-equivalent basis, increased $10.1 million to $310.4 million as compared to the same period in 2023, primarily due to the increase in market rates year over year. The yield on earning assets increased 34 basis points to 5.84% from 5.50%, primarily due to the impact of increasing market interest rates.
Previous wording
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 wording
Average earning assets decreased to $7.10 billion in the first nine months of 2024 from $7.29 billion in the same period in 2023. Average loans decreased $421.4 million, which was partially offset by an increase in investment securities of $238.7 million. The changes in average loan mix on a year-to-date basis is consistent with the quarter-to-date changes described previously.
Previous 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.
Current wording
Interest Expense. Interest expense increased $4.9 million to $49.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The cost of interest-bearing liabilities increased to 3.45% for the third quarter of 2024 compared to 3.01% for the third 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 $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.
Current wording
Interest expense on deposits increased $4.2 million to $42.0 million for thethree months ended September 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 $221.7 million, or 4.1%, to $5.13 billion for thethree months ended September 30, 2024 compared to the same period one year earlier.
Previous wording
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 wording
For the nine month period ended September 30, 2024, interest expense increased$22.2 million to$143.9 million compared to the nine months ended September 30, 2023. The cost of interest-bearing liabilities increased to 3.34% for the first nine months of 2024 compared to 2.77% for the same period of 2023. Interest expense on deposits increased to $120.7 million from $97.8 million for the comparable period in 2023, primarily due to increases in interest rates on deposits.
Previous 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.
Current wording
Interest expense on FHLB advances and other borrowings decreased $2.3 million for the nine months ended September 30, 2024, from the comparable period in 2023. Average balances decreased $56.8 million for the nine months ended September 30, 2024, from the comparable period in 2023, as loan paydowns permitted a decrease in the use of this funding source.
Previous wording
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 wording
Provision for Credit Losses. The Company's provision for credit losses totaled $5.0 million for the three months ended September 30, 2024, compared to $5.2 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024 and 2023, the Company recorded provision expense of $35.8 million and $14.2 million, respectively. The provision expense was attributable to loans, as further described below, with the exception of $0.2 million recapture attributable to unfunded commitments in the three and nine months ended September 30, 2024.
Previous wording
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 wording
The elevated provision for credit losses for the nine months ended September 30, 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 in the second quarter of 2024 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.
Previous 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.
Current wording
The provision for credit losses on loans recognized during the three and nine months ended September 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 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:
Current wording
Noninterest Income. Noninterest income increased $7.8 million and $12.1 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods one year prior. The following table sets forth the major components of our noninterest income for the three and nine months ended September 30, 2024 and 2023:
Previous 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.
Current wording
Wealth management revenue. Wealth management revenue increased $0.8 million and $2.1 million for the three and nine months ended September 30, 2024, as compared to the same periods in 2023. Assets under administration increased to $4.27 billion at September 30, 2024 from $3.50 billion at September 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 $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.
Current wording
Income on company-owned life insurance. Income on company-owned life insurance increased $1.1 million and $3.0 million for the three and nine months ended September 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
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:
Current wording
Noninterest Expense. The following table sets forth the major components of noninterest expense for the three and nine months ended September 30, 2024 and 2023:
Previous wording
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 wording
Income Tax Expense. The Company's effective tax rates were 18.1% and 20.6% for the three and nine months ended September 30, 2024, respectively, compared to 50.3% and 31.9% for the three and nine months ended September 30, 2023, respectively. The decrease in the effective tax rate from the three and nine months ended September 30, 2023 is due primarily to tax expense of $4.5 million associated with a surrender of company-owned life insurance policies recognized in the third quarter of 2023, as previously discussed, and a $1.4 million return to provision adjustment also recognized in the third quarter of 2023.
Previous wording
Assets. Total assets were $7.76 billion at June 30, 2024, as compared to $7.87 billion at December 31, 2023.
Current wording
Assets. Total assets were $7.75 billion at September 30, 2024, as compared to $7.87 billion at December 31, 2023.
Previous 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.
Current wording
Total loans decreased $382.3 million to $5.75 billion at September 30, 2024, as compared to December 31, 2023. Increases in commercial FHA warehouse lines and commercial real estate loans of $50.2 million and $103.6 million, respectively, were offset by decreases in all other loan categories. The Company continued to shrink its equipment financing and consumer loan portfolios, and focus on commercial loan opportunities in our community bank footprint.
Previous 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.
Current wording
Equipment finance loan and lease balances decreased $144.4 million to $860.1 million at September 30, 2024 compared to December 31, 2023 as the Company continued to reduce its concentration of this product within the overall loan portfolio. Consumer loans decreased $271.9 million due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated loan balances decreased $208.2 million during the first nine months of 2024 to $475.3 million at September 30, 2024. In addition, as previously disclosed, during the fourth quarter of 2023, the Company ceased originating loans through LendingPoint. As of September 30, 2024, the Company had $96.5 million in loans that were originated through and serviced by LendingPoint. Equipment financing and consumer loans comprised 15.0% and 11.5%, respectively, of the loan portfolio at September 30, 2024, compared to 16.4% and 15.2%, respectively, at December 31, 2023.
Previous wording
Commercial real estate loans. Our commercial real estate loans consist of both real estate occupied by the borrower for ongoing operations and non-owner occupied real estate properties. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner occupied offices, warehouses and production facilities, office buildings, hotels, mixed-use residential and commercial facilities, retail centers, multifamily properties and assisted living facilities. Our commercial real estate loan portfolio also includes farmland loans. Farmland loans are generally made to a borrower actively involved in farming rather than to passive investors.
Current wording
Commercial real estate loans. Our commercial real estate loans consist of both real estate occupied by the borrower for ongoing operations and non-owner occupied real estate properties. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner occupied offices, warehouses and production facilities, office buildings, hotels, mixed-use residential and commercial facilities, retail centers, multifamily properties, skilled nursing and assisted living facilities. Our commercial real estate loan portfolio also includes farmland loans. Farmland loans are generally made to a borrower actively involved in farming rather than to passive investors.
Previous 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.
Current wording
Loans secured by office space totaled $147.2 million and $153.8 million at September 30, 2024 and December 31, 2023, respectively, primarily located in suburban locations in Illinois and Missouri.
Previous 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:
Current wording
Analysis of the Allowance for Credit Losses on Loans. The allowance for credit losses on loans was $85.8 million, or 1.49% of total loans, at September 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 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.
Current wording
In estimating expected credit losses as of September 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 2.5% to 3.1% over the next four quarters; (ii) the 10-year treasury rate decreasing from 4.0% in the third quarter of 2024 to 3.9% by the fourth quarter of 2025; and (iii) Illinois unemployment rate averaging 5.5% 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 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.
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 September 30, 2024, was approximately 56 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 $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.
Current wording
The allowance allocated to commercial loans totaled $24.1 million, or 1.78% of total commercial loans, at September 30, 2024, compared to $21.8 million, or 1.47%, at December 31, 2023. Modeled expected credit losses increased $0.5 million and qualitative factor adjustments related to commercial loans increased $2.7 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 during the nine months ended September 30, 2024. Specific allocations for commercial loans that were evaluated for expected credit losses on an individual basis decreased $1.0 million from $1.8 million at December 31, 2023.
Previous 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.
Current wording
The allowance allocated to commercial real estate loans totaled $22.5 million, or 0.90% of total commercial real estate loans, at September 30, 2024, increasing $2.3 million, from $20.2 million, or 0.84% of total commercial real estate loans, at December 31, 2023. Modeled expected credit losses increased $0.7 million and qualitative factor adjustments decreased $0.1 million. 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 $1.5 million at September 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 $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.
Current wording
The allowance allocated to construction and land development loans totaled $12.1 million, or 2.86% of total construction and land development loans, at September 30, 2024, increasing $7.9 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 September 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 decreased $0.4 million and qualitative factor adjustments related to construction loans increased $0.3 million.
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Current report — wording carried from elsewhere
$504.6 million, compared to the third quarter of 2023. In addition, as previously disclosed, during the fourth quarter of 2023, the Company ceased originating loans through LendingPoint.