Midland States Bancorp, Inc.
For the period ended Sep 30, 2026. Filed Oct 29, 2026.
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, 2026 · Filed Oct 29, 2026
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 2026-06-30; filed 2026-07-30.
0001466026-26-000078
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-29.
0001466026-26-000099
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 136 previous paragraphs and 139 current paragraphs.
65 unchanged; 68 reworded; 6 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 22 previous and 22 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 (6)
Current report
Interchange revenue. Interchange revenue increased $0.5 million, or 15.6%, and $1.0 million, or 10.0%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily attributable to performance-based incentives earned upon achieving specified qualified volume targets.
Current report
Residential mortgage banking revenue. Residential mortgage banking revenue decreased $0.5 million and $0.6 million for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The decrease for the three-month period was primarily driven by lower mortgage production, while the decrease for the nine-month period primarily reflected lower servicing fees following the sale of our residential servicing portfolio. Loans originated for sale in the secondary market for three and nine months ended September 30, 2026 totaled $20.4 million and $79.2 million, respectively, compared to $29.6 million and $75.2 million for the same periods in 2025.
Current report
Other expense. Other expense increased$0.8 million and $1.3 million for thethree and nine months ended September 30, 2026, respectively, compared to the same periods in 2025, primarily driven by interest paid to the IRS associated with amended tax returns filed in connection with the restatement of prior period financial statements and higher debit card dispute-related losses.
Current report
•Specialty finance historically provided nationwide bridge financing for FHA and HUD developments, primarily multi-family, assisted and senior living and multi-use properties, to support borrowers prior to obtaining permanent financing. The Company ceased originating new construction loans in the fourth quarter of 2024. Specialty finance also includes tax credit lending.
Current report
Total deposits increased $193.1 million to $5.62 billion at September 30, 2026, compared to December 31, 2025. Increases in interest-bearing checking, money market, and savings of $300.0 million, $57.7 million, and $10.7 million, respectively, during the period, were partially offset by decreases in noninterest-bearing demand and time deposits of $67.0 million and $108.2 million, respectively. Interest-bearing checking deposits reflected growth in existing consumer and small business customer relationships, growth in new accounts as a result of targeted initiatives and seasonal growth in public funds, while the decrease in time deposits primarily reflected maturities and targeted reductions in higher-cost deposits. Brokered time deposits decreased $26.0 million to $17.1 million at September 30, 2026.
Current report
On October 6, 2026, the Company filed a universal shelf registration statement on Form S-3 with the SEC covering up to $250 million in aggregate offering price of securities that the Company may issue from time to time, subject to market conditions and the Company’s capital needs.
Removed paragraphs (3)
Previous report
Average balances of interest-bearing deposit accounts decreased $487.5 million to $4.47 billion for thefirst six months of 2026 compared to the same period in 2025.
Previous report
•Specialty finance provides bridge loan financing for commercial real estate projects, primarily multi-family and healthcare. These projects include short term financing in anticipation of obtaining permanent secondary market financing. The loans are typically outside of the Company’s primary market areas. The Company ceased originations of new construction loans in the fourth quarter of 2024.
Previous report
Total deposits increased $282.9 million to $5.71 billion at June 30, 2026, compared to December 31, 2025. Retail and commercial deposits increased $180.0 million and $132.0 million, respectively, driven largely by growth in new accounts as a result of targeted initiatives. Public funds deposits increased $102.8 million due to seasonal growth. Deposits among wealth management clients declined $22.2 million, reflecting normal fluctuations in client cash balances. Higher-cost brokered deposits decreased $118.2 million.
Reworded paragraphs (68)
Previous wording
Management's discussion and analysis explains the significant factors affecting the Company's financial condition and results of operations as reflected in the unaudited consolidated balance sheet as of June 30, 2026, as compared to December 31, 2025, and unaudited consolidated operating results for the three and six months ended June 30, 2026 and 2025. This discussion should be read in conjunction with the Company's unaudited consolidated financial statements and accompanying notes included in this Form 10-Q and the audited financial statements and accompanying notes provided in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 2, 2026.
Current wording
Management's discussion and analysis explains the significant factors affecting the Company's financial condition and results of operations as reflected in the unaudited consolidated balance sheet as of September 30, 2026, as compared to December 31, 2025, and unaudited consolidated operating results for the three and nine months ended September 30, 2026 and 2025. This discussion should be read in conjunction with the Company's unaudited consolidated financial statements and accompanying notes included in this Form 10-Q and the audited financial statements and accompanying notes provided in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 2, 2026.
Previous wording
Each factor listed below affects the comparability of our results of operations for the three and six months ended June 30, 2026 and 2025, and our financial condition as of June 30, 2026 and December 31, 2025, and may affect the comparability of financial information we report in future fiscal periods.
Current wording
Each factor listed below affects the comparability of our results of operations for the three and nine months ended September 30, 2026 and 2025, and our financial condition as of September 30, 2026 and December 31, 2025, and may affect the comparability of financial information we report in future fiscal periods.
Previous wording
Sale of equipment finance portfolio. During the fourth quarter of 2025, we sold substantially all of our equipment finance portfolio resulting in a loss on sale of $21.4 million. As previously disclosed, we ceased originating new equipment finance loans and leases effective as of September 30, 2025.
Current wording
Sale of equipment finance portfolio. During the fourth quarter of 2025, we sold substantially all of our equipment finance portfolio resulting in a loss on sale of $21.4 million. We ceased originating new equipment finance loans and leases effective as of September 30, 2025.
Previous wording
Overview. The following table sets forth condensed income statement information of the Company for the three and six months ended June 30, 2026 and 2025:
Current wording
Overview. The following table sets forth condensed income statement information of the Company for the three and nine months ended September 30, 2026 and 2025:
Previous wording
Net income for thesecond quarter of 2026 was$19.9 million, or $0.82 per diluted common share, compared with net income of $12.0 million, or $0.44 per diluted common share, in thesecond quarter of 2025. The increase reflected a $0.9 million increase in net interest income, a $10.6 million decrease in provision for credit losses, and a $0.2 million increase in noninterest income. These benefits were partially offset by a $0.8 million increase in noninterest expense, and a $3.1 million increase in income tax expense.
Current wording
Net income available to common shareholders for thethird quarter of 2026 was$20.6 million, or $0.95 per diluted common share, compared to net income available to common shareholders of $5.3 million, or $0.24 per diluted common share, in thethird quarter of 2025. The increase reflected a $1.6 million increase in net interest income, a $16.3 million decrease in provision for credit losses, and a $3.2 million increase in noninterest income. These benefits were partially offset by a $3.0 million increase in noninterest expense and a $2.8 million increase in income tax expense.
Previous wording
Net income for thefirst six months of 2026 was $38.4 million, or $1.56 per diluted common share, compared with a net loss of $129.0 million, or a diluted loss per common share of $6.13, in thefirst six months of 2025. The increase reflected a $151.8 million decrease in noninterest expense (which included the prior year goodwill impairment charge), a $16.4 million decrease in provision for credit losses, and a $4.6 million increase in noninterest income. These benefits were partially offset by a $5.5 million increase in income tax expense. Net interest income was essentially unchanged.
Current wording
Net income available to common shareholders for thefirst nine months of 2026 was $54.5 million, or $2.51 per diluted common share, compared with a net loss available to common shareholders of $128.1 million, or a diluted loss per common share of $5.88, in thefirst nine months of 2025. The increase reflected a $148.8 million decrease in noninterest expense (which included the prior year goodwill impairment charge), a $1.6 million increasein net interest income, a $32.7 million decrease in provision for credit losses, and a $7.8 million increase in noninterest income. These benefits were partially offset by an $8.3 million increase in income tax expense.
Previous wording
The Federal Reserve held its interest rates steady during the second quarter of 2026 by maintaining the target range for the federal funds rate at 3.50% to 3.75%. Interest rates have remained unchanged following the three 25-basis-point rate reductions in September, October and December 2025. The FOMC recently noted indicators suggest economic activity has continued to expand at a solid pace, labor market conditions remain solid, and the unemployment rate remains low, while inflation continues to be somewhat elevated. The Committee reiterated that future monetary policy decisions will continue to depend on incoming economic data, the evolving economic outlook, and the balance of risks to its dual mandate of maximum employment and price stability. As a result, the future path of interest rates remains uncertain and will continue to influence loan and deposit repricing, funding costs, and the Company's net interest income and net interest margin.
Current wording
During the third quarter of 2026, the Federal Reserve increased the target range for the federal funds rate by 25 basis points from 3.75% to 4.00%. At its October 2026 meeting, the Federal Reserve maintained the target range at 3.75% to 4.00%, citing continued elevated inflation. These actions followed three 25-basis-point rate reductions in September, October and December 2025. The FOMC has continued to assess incoming economic data, the evolving economic outlook and the balance of risks in determining the appropriate stance of monetary policy. The future path of interest rates remains uncertain and will continue to influence loan and deposit repricing, funding costs, and the Company's net interest income and net interest margin.
Previous wording
For the second quarter of 2026, net interest income, on a tax-equivalent basis, increased $0.8 million to $59.8 million, and tax-equivalent net interest margin increased 42 basis points to 3.98% compared to the second quarter of 2025.
Current wording
For the third quarter of 2026, net interest income, on a tax-equivalent basis, increased $1.6 million to $62.9 million, and tax-equivalent net interest margin increased 24 basis points to 4.03% compared to the third quarter of 2025.
Previous wording
For thefirst six months of 2026, net interest income, on a tax-equivalent basis, was essentially unchanged at $117.4 million, while tax-equivalent net interest margin increased 42 basis points to 3.94% compared tothe first six months of 2025.
Current wording
For thefirst nine months of 2026, net interest income, on a tax-equivalent basis, increased $1.6 million to $180.4 million, and tax-equivalent net interest margin increased 36 basis points to 3.97% compared tothe first nine months of 2025.
Previous wording
Average Balance Sheet, Interest and Yield/Rate Analysis. The following table presents average balances, interest income and expense and the corresponding average yields earned and rates paid for the three and six months ended June 30, 2026 and 2025. 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 table presents average balances, interest income and expense and the corresponding average yields earned and rates paid for the three and nine months ended September 30, 2026 and 2025. 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 $0.2 million and $0.3 million for the three months ended June 30, 2026 and 2025, 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 $0.2 million for both the three months ended September 30, 2026 and 2025, respectively.
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 and $0.5 million for the six months ended June 30, 2026 and 2025, 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 and $0.7 million for the nine months ended September 30, 2026 and 2025, respectively.
Previous wording
Interest Income. Interest income, on a tax-equivalent basis, decreased $9.8 million to $88.4 million for the second quarter of 2026 compared to the same period in 2025, primarily due to a decline in average interest-earning assets. The yield on interest-earning assets decreased five basis points to 5.88% from 5.93%.
Current wording
Interest Income. Interest income, on a tax-equivalent basis, decreased $5.5 million to $93.2 million for the third quarter of 2026 compared to the same period in 2025, primarily due to a decline in average interest-earning assets. The yield on interest-earning assets decreased 14 basis points to 5.97% from 6.11%.
Previous wording
Average interest-earning assets decreased $609.0 million to $6.03 billion in the second quarter of 2026 compared to the same period in 2025. A decrease in average loans of $855.4 million was partially offset by an increase in average investment securities of $250.3 million.
Current wording
Average interest-earning assets decreased $213.0 million to $6.20 billion in the third quarter of 2026 compared to the same period in 2025. A decrease in average loans of $712.5 million was partially offset by an increase in average investment securities and federal funds sold and cash investments of $441.5 million and $70.5 million, respectively.
Previous wording
Average loans decreased $855.4 million in the second quarter of 2026 compared to the same period in 2025. During the fourth quarter of 2025, the Company sold substantially all of its equipment finance portfolio. As a result, equipment finance loan and lease average balances decreased $685.1 million (to $47.6 million) in the second quarter of 2026. Proceeds from the sale of substantially all of the portfolio were used to purchase investment securities and reduce higher-cost funding for the Company.
Current wording
Average loans decreased $712.5 million in the third quarter of 2026 compared to the same period in 2025. During the fourth quarter of 2025, the Company sold substantially all of its equipment finance portfolio. As a result, equipment finance loan and lease average balances decreased $637.3 million, to $38.1 million, in the third quarter of 2026. Proceeds from the sale of substantially all of the portfolio were used to purchase investment securities and reduce higher-cost funding for the Company.
Previous wording
For the first six months of 2026, interest income, on a tax-equivalent basis, decreased $23.1 million to $174.6 million compared to the same period in 2025, primarily due to a decline in average interest-earning assets. The yield on interest-earning assets decreased six basis points to 5.87% from 5.93%.
Current wording
For the first nine months of 2026, interest income, on a tax-equivalent basis, decreased $28.6 million to $267.8 million compared to the same period in 2025, primarily due to a decline in average interest-earning assets. The yield on interest-earning assets decreased nine basis points to 5.90% from 5.99%.
Previous wording
Average interest-earning assets decreased $716.6 million to $6.00 billion in the first six months of 2026 compared to the same period in 2025. Average loans and average loans held for sale decreased $829.4 million and $177.1 million, respectively. These decreases were partially offset by an increase in average investment securities of $265.3 million.
Current wording
Average interest-earning assets decreased $546.9 million to $6.07 billion in the first nine months of 2026 compared to the same period in 2025. Average loans and average loans held for sale decreased $789.9 million and $118.6 million, respectively. These decreases were partially offset by an increase in average investment securities and federal funds sold and cash investments of $324.7 million and $44.2 million, respectively.
Previous wording
Average loans decreased $829.4 million in the first six months of 2026 compared to the same period in 2025, primarily due to the sale of substantially all of its equipment finance portfolio during the fourth quarter of 2025. As a result, equipment finance loan and lease average balances decreased $706.8 million (to $51.5 million) in the first six months of 2026.
Current wording
Average loans decreased $789.9 million in the first nine months of 2026 compared to the same period in 2025, primarily due to the sale of substantially all of its equipment finance portfolio during the fourth quarter of 2025. As a result, equipment finance loan and lease average balances decreased $683.4 million, to $47.0 million, in the first nine months of 2026.
Previous wording
The $184.7 million of average loans held for sale in the first six months of 2025 included $178.0 million of GreenSky consumer loans. The Company completed the sale of this portfolio in the second quarter of 2025.
Current wording
The $125.7 million of average loans held for sale in the first nine months of 2025 included $118.0 million of GreenSky consumer loans. The Company completed the sale of this portfolio in the second quarter of 2025.
Previous wording
Interest Expense. Interest expense decreased $10.6 million to $28.6 million for the second quarter of 2026 compared to the same period in 2025. The cost of interest-bearing liabilities decreased to 2.35% from 2.91% due toa decrease in both rates paid on deposits and average balances.
Current wording
Interest Expense. Interest expense decreased $7.1 million to $30.3 million for the third quarter of 2026 compared to the same period in 2025 due toa decrease in both rates paid on and average balances of interest-bearing liabilities. The cost of interest-bearing liabilities decreased to 2.37% from 2.84%.
Previous wording
Interest expense on deposits decreased $7.8 million to$24.5 million for thesecond quarter of 2026 compared to the same period in 2025, driven primarily by the rate cuts enacted by the Federal Reserve Bank beginning in late 2024 and a decrease in average balances.
Current wording
Interest expense on deposits decreased $4.0 million to$26.3 million for thethird quarter of 2026 compared to the same period in 2025, driven primarily by the rate cuts enacted by the Federal Reserve Bank beginning in late 2024.
Previous wording
Interest expense on FHLB advances decreased $1.4 millionin the second quarter of 2026 compared to the same period in 2025, due to a decrease in both rates paid on FHLB advances and average balances.
Current wording
Interest expense on FHLB advances decreased $1.9 millionin the third quarter of 2026 compared to the same period in 2025, due to a decrease in both rates paid on FHLB advances and average balances.
Previous wording
Interest expense on subordinated debt decreased $1.0 millionin the second quarter of 2026 compared to the same period in 2025, driven primarily by a decrease in average balances of $50.7 million, due to the redemption of$50.8 million of debt in September 2025.
Current wording
Interest expense on subordinated debt decreased $1.0 millionin the third quarter of 2026 compared to the same period in 2025, driven primarily by a decrease in average balances of $50.2 million, due to the redemption of$50.8 million of debt in September 2025.
Previous wording
For the first six months of 2026, interest expense decreased$23.1 million to$57.2 million compared to the same period in 2025. The cost of interest-bearing liabilities decreased to 2.38% from 2.95%due to a decrease in both the rates paid on deposits and average balances.
Current wording
For the first nine months of 2026, interest expense decreased$30.2 million to$87.5 million compared to the same period in 2025 due to a decrease in both the rates paid on and average balances of interest-bearing liabilities. The cost of interest-bearing liabilities decreased to 2.38% from 2.92%.
Previous wording
Interest expense on deposits decreased $18.2 million to $48.7 million for the first six months of 2026 compared to the same period in 2025, driven primarily by the rate cuts enacted by the Federal Reserve Bank beginning in late 2024 and a decrease in average balances.
Current wording
Interest expense on deposits decreased $22.1 million to $75.0 million for the first nine months of 2026 compared to the same period in 2025, driven primarily by the rate cuts enacted by the Federal Reserve Bank beginning in late 2024 and a decrease in average balances.
Previous wording
Average balances of interest-bearing deposit accounts decreased $332.9 million to $4.51 billionin the second quarter of 2026 compared to the same period in 2025. Proceeds from the sales of substantially all of our equipment financing portfolio and non-core consumer loan portfolios in 2025 were used to reduce higher-cost funding for the Company, including servicing deposits and brokered deposits.
Current wording
Average balances of interest-bearing deposit accounts decreased $298.1 million to $4.56 billion for thefirst nine months of 2026 compared to the same period in 2025. Proceeds from the sales of substantially all of our equipment financing portfolio and non-core consumer loan portfolios in 2025 were used to reduce higher-cost funding for the Company, including servicing deposits and brokered deposits.
Previous wording
Interest expense on FHLB advances decreased $1.9 million for thefirst six months of 2026 compared to the same period in 2025, due to a decrease in both rates paid on FHLB advances and average balances.
Current wording
Interest expense on FHLB advances decreased $3.8 million for thefirst nine months of 2026 compared to the same period in 2025, due to a decrease in both rates paid on FHLB advances and average balances.
Previous wording
Interest expense on subordinated debt decreased $2.0 million for thefirst six months of 2026 compared to the same period in 2025, driven primarily by a decrease in average balances of $50.7 million, due to the redemption of$50.8 million of debt in September 2025.
Current wording
Interest expense on subordinated debt decreased $3.0 million for thefirst nine months of 2026 compared to the same period in 2025, driven primarily by a decrease in average balances of $50.5 million, due to the redemption of$50.8 million of debt in September 2025.
Previous wording
Provision for Credit Losses. The provision for credit losses totaled $6.8 million and $17.4 million for the three months ended June 30, 2026 and 2025, respectively. For thesix months ended June 30, 2026 and 2025, the Company recorded provision expense of $11.8 million and $28.2 million, respectively. Provision expense forthe three and six months ended June 30, 2026 included recapture of provision for credit losses on unfunded commitments of $0.3 million and $0.7 million, respectively. The decrease in provision for credit losses for the three and six months ended June 30, 2026, compared to the same periods in 2025, was due in part to the sale of the equipment finance portfolio that occurred in late 2025, and the Company's continued efforts to remediate nonperforming loans and improve credit underwriting.
Current wording
Provision for Credit Losses. Provision for credit losses totaled $3.7 million and $20.0 million for the three months ended September 30, 2026 and 2025, respectively, and $15.6 million and $48.2 million for thenine months ended September 30, 2026 and 2025, respectively. Provision for credit losses for the three and nine months ended September 30, 2026 included a provision of credit losses on unfunded commitments of $0.1 million and a recapture of credit losses on unfunded commitments of $0.6 million, respectively, compared with a $0.5 million recapture for both the three and nine months ended September 30, 2025. The decrease in provision for credit losses for the three and nine months ended September 30, 2026, compared to the same periods in 2025, was due in part to the sale of the equipment finance portfolio that occurred in late 2025, and the Company's continued efforts to remediate nonperforming loans.
Previous wording
The provision for credit losses on loans recognized during the three and six months ended June 30, 2026 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, 2026 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. The following table presents the major components of our noninterest income for the three and six months ended June 30, 2026 and 2025:
Current wording
Noninterest Income. The following table presents the major components of our noninterest income for the three and nine months ended September 30, 2026 and 2025:
Previous wording
Wealth management revenue. Wealth management revenue increased $1.4 million, or 18.8%, and $2.3 million, or 15.5%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025, driven by growth in assets under administration. Assets under administration increased 14.4% to $4.78 billion at June 30, 2026 from $4.18 billion at June 30, 2025.
Current wording
Wealth management revenue. Wealth management revenue increased $0.6 million, or 7.9%, and $2.9 million, or 12.8%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025, driven by growth in assets under administration. Assets under administration increased 9.3% to $4.77 billion at September 30, 2026 from $4.36 billion at September 30, 2025.
Previous wording
Credit enhancement income. In 2025 and through December 30, 2025, the Company was party to one third-party loan origination program, wherein the third-party provider offered various credit enhancements with respect to loans originated under the program, including contributions to reserve accounts, yield maintenance and certain other payments. When the allowance for credit losses on loans was recorded, a credit enhancement derivative was also recorded on our balance sheet with a corresponding entry to credit enhancement income in recognition of the partner's legal commitment to indemnify or reimburse the Company. The credit enhancement asset was relieved as credit enhancement payments and recoveries were received from the partner or taken from the partner's cash reserve account. Effective December 31, 2025, the Company modified its third-party lending and servicing arrangements with its sole partner, eliminating the credit enhancement derivative. The new arrangements provide a credit enhancement by the partner which protects the Company by indemnifying or reimbursing incurred losses. We estimate and record an allowance for expected credit losses and a corresponding credit enhancement asset on the balance sheet through credit enhancement income.
Current wording
Credit enhancement income. In 2025 and through December 30, 2025, the Company was party to one third-party loan origination program, wherein the third-party provider offered various credit enhancements with respect to loans originated under the program, including contributions to reserve accounts, yield maintenance and certain other payments. When the allowance for credit losses on loans was recorded, a credit enhancement derivative was also recorded on our balance sheet with a corresponding entry to credit enhancement income. The credit enhancement asset was reduced as credit enhancement payments and recoveries were received from the partner or taken from the partner's cash reserve account. Effective December 31, 2025, the Company modified its third-party lending and servicing arrangements with its sole partner, eliminating the credit enhancement derivative. The new arrangements provide a credit enhancement by the partner which protects the Company by indemnifying or reimbursing incurred losses. We estimate and record an allowance for expected credit losses and a corresponding credit enhancement asset on the balance sheet through credit enhancement income.
Previous wording
The Company recognized$3.1 million and $6.4 million of credit enhancement income during the three and six months ended June 30, 2026, respectively, which correlated to a similar amount of provision for credit losses as a result of the new arrangement entered into at December 31, 2025.
Current wording
The Company recognized$3.1 million and $9.5 million of credit enhancement income during the three and nine months ended September 30, 2026, respectively, which correlated to a similar amount of provision for credit losses as a result of the new arrangement entered into at December 31, 2025.
Previous wording
Other noninterest income. Other income decreased$0.6 million for the three months ended June 30, 2026, compared to the same period in 2025, driven primarily by the elimination of operating lease revenue due to the sale of our equipment finance portfolio in the fourth quarter of 2025. Operating lease revenue totaled $0.5 million in the second quarter of 2025.
Current wording
Other income. Other income decreased$0.7 million and $0.1 million for thethree and nine months ended September 30, 2026, respectively, compared to the same periods in 2025, driven primarily by the elimination of operating lease revenue due to the sale of our equipment finance portfolio in the fourth quarter of 2025. Operating lease revenue totaled $0.5 million and $1.8 million during the third quarter and first nine months of 2025, respectively. In the first nine months of 2026, the
Previous wording
For the six months ended June 30, 2026, other income increased$0.6 million, compared to the same period in 2025. In 2026, the Company recognized $2.1 million in gains from the sale of our residential servicing portfolio and a portion of our commercial servicing portfolio, partially offset by the elimination of operating lease revenue due to the sale of our equipment finance portfolio in the fourth quarter of 2025. Operating lease revenue totaled $1.3 million in the first half of 2025.
Current wording
Company recognized $2.1 million in gains from the sale of our residential servicing portfolio and a portion of our commercial servicing portfolio.
Previous wording
Noninterest Expense. The following table sets forth the major components of noninterest expense for the three and six months ended June 30, 2026 and 2025:
Current wording
Noninterest Expense. The following table sets forth the major components of noninterest expense for the three and nine months ended September 30, 2026 and 2025:
Previous wording
Salaries and employee benefits. For the three and six months ended June 30, 2026, salaries and employee benefits expense increased$1.7 million and $1.4 million, respectively, compared to the same periods in 2025, primarily due to increased variable compensation expense, including annual bonuses, and increased medical insurance expense. These increases were partially offset by lower severance expense in both periods compared to the same periods in 2025.
Current wording
Salaries and employee benefits. For the three and nine months ended September 30, 2026, salaries and employee benefits expense increased$2.1 million and $3.5 million, respectively, compared to the same periods in 2025, primarily due to increased variable compensation expense and medical insurance expense. These increases were partially offset by lower severance expense in both periods compared to the same periods in 2025.
Previous wording
FDIC insurance expense. The decrease in FDIC insurance expense for the three and six months ended June 30, 2026, compared to the same periods in 2025 was due to a lower assessment base in both the second quarter and first six months of 2026, a shift in loan mix due to the sale of the equipment finance and non-core loan portfolios in 2025, and a decline in nonperforming loans.
Current wording
FDIC insurance expense. The decrease in FDIC insurance expense for the three and nine months ended September 30, 2026, compared to the same periods in 2025 was due to a lower assessment base in both the third quarter and first nine months of 2026, a shift in loan mix due to the sale of the equipment finance and non-core loan portfolios in 2025, and a decline in nonperforming loans.
Previous wording
Professional services expense. For the three and six months ended June 30, 2026, professional services expense decreased$1.1 million and$1.6 million, respectively, compared to the same periods in 2025. The Company incurred additional audit and consulting expenses in 2025 as a result of the restatements of prior years' financial statements and as a result of contractual changes in the Company's third-party lending and servicing arrangements.
Current wording
Professional services expense. For the three and nine months ended September 30, 2026, professional services expense decreased$0.3 million and$2.0 million, respectively, compared to the same periods in 2025. The Company incurred additional audit and consulting expenses in 2025 as a result of the restatements of prior years' financial statements and as a result of contractual changes in the Company's third-party lending and servicing arrangements.
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