Washington, D.C. 20549

Illinois

37-1233196

~~ILLINOIS~~

~~37-1233196~~

(State of other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.☒ Yes☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).☒ Yes☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

☐

Accelerated filer ☐

☒

Non-accelerated filer ☒

☐

Smaller reporting company

☐

Emerging growth company ☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).☐ Yes☒ No

As of ~~October 31, 2017,~~April 26, 2024, the Registrant had ~~19,098,890~~21,481,762 shares of outstanding common stock, $0.01 par value.

MIDLAND STATESBANCORP, INC.

Consolidated Balance Sheets at ~~September 30, 2017~~ March 31, 2024(Unaudited) and December 31, ~~2016~~

2023

Consolidated Statements of Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~ March 31, 2024 and ~~2016~~

2023

Consolidated Statements of Comprehensive Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~

2023

Consolidated Statements of Shareholders’ Equity (Unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~

2023

Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2024 and ~~2016~~

2023

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

As used in this report, references to the "Company," "we," "our," "us," and similar terms refer to the consolidated entity consisting of Midland States Bancorp, Inc. and its wholly owned subsidiaries. Midland States Bancorp refers solely to the parent holding company and Midland States Bank (the "Bank") refers to our wholly owned banking subsidiary.

The acronyms and abbreviations identified below are used throughout this report, including the Notes to the Consolidated Financial Statements. You may find it helpful to refer to this page as you read this report.


2019 Incentive Plan			The Amended and Restated Midland States Bancorp, Inc. 2019 Long-Term Incentive Plan
ACL			Allowance for credit losses on loans
ASU			Accounting Standards Update
BaaS			Banking-as-a-Service
Basel III Rule			Basel III regulatory capital reforms required by the Dodd-Frank Act
BHCA			Bank Holding Company Act of 1956, as amended
CBLR			Community Bank Leverage Ratio
CFPB			Consumer Financial Protection Bureau
CISA			Cybersecurity and Infrastructure Security Agency
COVID			Coronavirus Disease
CRA			Community Reinvestment Act
CRA Proposal			Joint Proposal to Strengthen and Modernize Community Reinvestment Act Regulations
CRE			Commercial Real Estate
CRE Guidance			Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance
DFPR			Illinois Department of Financial and Professional Regulation
DIF			Deposit Insurance Fund
EAD			Exposure at default
Exchange Act			Securities Exchange Act of 1934
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
Federal Reserve			Board of Governors of the Federal Reserve System
FHA			Federal Housing Administration
FHLB			Federal Home Loan Bank
FinTech			Financial Technology
FRB			Federal Reserve Bank
GAAP			U.S. generally accepted accounting principles
Greensky			GreenSky, LLC
Illinois CRA			Illinois Community Reinvestment Act
LendingPoint			LendingPoint, LLC
LGD			Loss given default
LIBOR			London Inter-Bank Offered Rate
Midland Trust			Midland States Preferred Securities Trust
Nasdaq			Nasdaq Global Select Market
NII at Risk			Net Interest Income at Risk
OREO			Other real estate owned
PCAOB			Public Company Accounting Oversight Board
PCD			Purchased credit deteriorated
PD			Probability of default
Q-Factor			Qualitative factor
Regulatory Relief Act			Economic Growth, Regulatory Relief and Consumer Protection Act
SBA			Small Business Administration
SEC			U.S. Securities and Exchange Commission
SOFR			Secured Overnight Financing Rate
Treasury			U.S. Department of the Treasury
TDR			Troubled debt restructuring

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

MIDLAND STATES BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

The accompanying notes are an integral part of the consolidated financial statements.

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF ~~INCOME—~~INCOME — (UNAUDITED)

(dollars in thousands, except per share data)

The accompanying notes are an integral part of the consolidated financial statements.

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME—~~INCOME — (UNAUDITED)

(dollars in thousands)

The accompanying notes are an integral part of the consolidated financial statements.

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ ~~EQUITY—~~EQUITY — (UNAUDITED)

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016~~

(dollars in thousands, except per share data)

Accumulated

other

Total

Preferred

Common

Capital

Retained

comprehensive

shareholders'

stock

stock

surplus

earnings

(loss) income

equity
Balances, December 31, 2016

$
—

$
155

$
209,712

$
112,513

$
(610)

$
321,770
Net income

—

—

—

14,065

—

14,065
Compensation expense for stock option grants

—

—

413

—

—

413
Amortization of restricted stock awards

—

—

599

—

—

599
Preferred dividends declared

—

—

—

(102)

—

(102)
Amortization of preferred stock premium

(56)

—

—

56

—
Common dividends declared ($0.60 per share)

—

—

—

(10,159)

—

(10,159)
Acquisition of CedarPoint Investment Advisors, Inc.

—

1

3,350

—

—

3,351
Acquisition of Centrue Financial Corporation

3,071

32

112,480

—

—

115,583
Issuance of common stock under employee benefit plans

—

3

3,380

—

—

3,383
Other comprehensive income

—

—

—

—

1,786

1,786
Balances, September 30, 2017

$
3,015

$
191

$
329,934

$
116,373

$
1,176

$
450,689

Balances, December 31, 2015

$
—

$
118

$
135,822

$
90,911

$
6,029

$
232,880
Cumulative effect of change in accounting principle

—

—

87

(87)

—

—
Balances, January 1, 2016

—

118

135,909

90,824

6,029

232,880
Net income

—

—

—

19,959

—

19,959
Compensation expense for stock option grants

—

—

315

—

—

315
Amortization of restricted stock awards

—

—

387

—

—

387
Common dividends declared ($0.54 per share)

—

—

—

(7,057)

—

(7,057)
Initial public offering of 3,590,065 shares of common stock, net of issuance costs

—

36

71,439

—

—

71,475
Issuance of common stock under employee benefit plans

—

—

489

—

—

489
Other comprehensive income

—

—

—

—

3,301

3,301
Balances, September 30, 2016

$
—

$
154

$
208,539

$
103,726

$
9,330

$
321,749

The accompanying notes are an integral part of the consolidated financial statements.

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH ~~FLOWS—~~FLOWS — (UNAUDITED)

(dollars in thousands)

Nine Months Ended

September 30,

2017

2016

Cash flows from operating activities:

Net income

$
14,065

$
19,959

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses

3,480

3,146

Depreciation on premises and equipment

3,666

3,816

Amortization of intangible assets

2,291

1,613

FDIC loss-sharing expense

—

1,661

Amortization of restricted stock awards

599

387

Compensation expense for stock option grants

413

315

Increase in cash surrender value of life insurance

(2,016)

(1,547)

Investment securities amortization, net

1,358

840

Other-than-temporary impairment on investment securities

—

824

Gain on sales of investment securities, net

(219)

(315)

Gain on sales of other real estate owned

(54)

(112)

Write-down of other real estate owned

171

219

Origination of loans held for sale

(630,601)

(894,445)

Proceeds from sales of loans held for sale

679,217

907,306

Gain on loans sold and held for sale

(20,844)

(28,827)

Amortization of mortgage servicing rights

4,254

4,410

Impairment of mortgage servicing rights

1,830

6,093

Loss on mortgage servicing rights held for sale

3,617

—

Net change in operating assets and liabilities:

Accrued interest receivable

(1,095)

(1,114)

Accrued interest payable

1,035

896

Accrued income taxes receivable

3,653

7,304

Other assets

159

460

Other liabilities

(2,341)

(2,620)

Net cash provided by operating activities

62,638

30,269

Cash flows from investing activities:

Investment securities available for sale:

Purchases

(221,617)

(64,396)

Sales

11,250

31,191

Maturities and payments

192,791

22,038

Investment securities held to maturity:

Purchases

(2,929)

(2,401)

Maturities

10,480

6,646

Net increase in loans

(160,266)

(325,009)

Purchases of premises and equipment

(5,261)

(1,410)

Purchase of bank-owned life insurance

—

(20,000)

Purchases of nonmarketable equity securities

(16,575)

(3,428)

Sales of nonmarketable equity securities

9,837

90

Proceeds from sales of other real estate owned

4,525

4,423

Net cash paid in acquisitions

(18,519)

—

Net cash used in investing activities

(196,284)

(352,256)

Cash flows from financing activities:

Net (decrease) increase in deposits

(29,766)

52,384

Net increase in short-term borrowings

7,452

30,751

Proceeds from FHLB borrowings

347,357

850,000

Payments made on FHLB borrowings

(229,857)

(652,500)

Proceeds from other borrowings, net of issuance costs

39,964

—

Payments made on other borrowings

(1,770)

—

Payments made on subordinated debt

—

(8,000)

Cash dividends paid on common stock

(10,159)

(7,057)

Cash dividends paid on preferred stock

(102)

—

Proceeds from issuance of common stock in initial public offering, net of issuance costs

—

71,475

Proceeds from issuance of common stock under employee benefit plans

3,383

489

Net cash provided by financing activities

126,502

337,542

Net (decrease) increase in cash and cash equivalents

$
(7,144)

$
15,555

Cash and cash equivalents:

Beginning of period

$
190,716

$
212,475

End of period

$
183,572

$
228,030

Supplemental disclosures of cash flow information:

Cash payments for:

Interest paid on deposits and borrowed funds

$
14,677

$
11,078

Income tax paid

637

157

Supplemental disclosures of noncash investing and financing activities:

Transfer of loans to other real estate owned

$
2,659

$
4,245

Transfer of premises and equipment to assets held for sale

2,858

—

Transfer of mortgage servicing rights at lower of cost or market to mortgage servicing rights held for sale

10,618

—

Theaccompanying notes are an integral part of the consolidated financial statements.

MIDLAND STATES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—~~STATEMENTS — (UNAUDITED)

NOTE 1 – ~~Business Description~~

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Midland States Bancorp, Inc. ~~(the “Company,” “we,” “our,” or “us”)~~ is a diversified financial holding company headquartered in Effingham, Illinois. Our ~~136-year old~~wholly owned banking subsidiary, Midland States Bank, ~~(the “Bank”),~~ has branches across Illinois and in Missouri, and ~~Colorado, and~~ provides a ~~broad array~~full range of ~~traditional community~~commercial and consumer banking products and ~~other complementary financial~~ services, ~~including commercial lending, residential mortgage origination, wealth~~business equipment financing, merchant credit card services, trust and investment management ~~merchant~~ services, and ~~prime consumer lending. We also originate~~insurance and service government sponsored mortgages for multifamily and healthcare facilities through our subsidiary, Love Funding Corporation (“Love Funding”), based in Washington, D.C. and operate a commercial equipment leasing business on a nationwide basis through our subsidiary, Heartland Business Credit Corporation (“Business Credit”), based in Denver, Colorado.

~~On June 9, 2017, we completed the acquisition of Centrue Financial Corporation (“Centrue”) and its banking subsidiary, Centrue Bank, as more fully described in Note 3 to the consolidated~~ financial ~~statements. Through the Centrue acquisition, we greatly expanded our commercial and retail banking presence in northern and central Illinois.~~

planning services.

Our principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. We have derived income principally from interest ~~earned~~charged on loans ~~and leases~~ and, to a lesser extent, from interest and dividends earned on investment securities. We have also derived income from noninterest sources, such as: fees received in connection with various lending and deposit services; wealth management services; ~~residential~~ mortgage loan originations, sales and servicing; and, from time to time, gains on sales of assets. ~~Our income sources also include Love Funding’s commercial Federal Housing Administration (“FHA”) loan origination and servicing income.~~ Our principal expenses include interest expense on deposits and borrowings, operating expenses, such as salaries and employee benefits, occupancy and equipment expenses, data processing costs, professional fees and other noninterest expenses, provisions for ~~loan~~credit losses and income tax expense.

~~Initial Public Offering~~

~~On May 24, 2016, we~~

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with GAAP and guidance provided by the SEC for interim financial information. Accordingly, the condensed financial statements do not include all of the information and footnotes required by GAAP for completed ~~our initial public offering~~financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and ~~received gross proceeds of $67.0 million for~~assumptions that affect the ~~3,044,252 shares of common stock sold by us~~amounts reported in the offering. On June 6, 2016, we received additional gross proceeds of $12.0 million for the 545,813 shares of common stock sold when the underwriters fully exercised their option to purchase additional shares of common stock. After deducting underwriting discountsconsolidated financial statements and ~~offering expenses, we received total net proceeds of $71.5 million~~accompanying notes. Actual results may differ from ~~the initial public offering.~~

~~Note 2 – Basis of Presentation and Summary of Significant Accounting Policies~~

~~Basis of Presentation~~

these estimates.

The consolidated financial statements of the Company ~~are unaudited and~~ should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2023, filed with the ~~Securities and Exchange Commission (the “SEC”)~~SEC on March 10, 2017. The consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and conform to predominant practices within the banking industry. Management of the Company has made a number of estimates and assumptions related to the reporting of assets and liabilities to prepare the consolidated financial statements in conformity with GAAP. Actual results may differ from those estimates. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of the results of operations for the interim periods presented herein, have been included.February 23, 2024. Certain reclassifications of ~~2016~~2023 amounts have been made to conform to the ~~2017~~2024 presentation. All significant transactions and accounts between subsidiaries have been eliminated. Assets held for customers in a fiduciary or agency capacity are not assets of the Company and, accordingly, other than trust cash on deposit with the Bank, are not included in the accompanying unaudited balance sheets. Management has evaluated subsequent events for potential recognition or disclosure. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~

~~Principles of Consolidation~~

The consolidated financial statements include the accounts of the parent company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Assets held for customers in a fiduciary2024 or

~~agency capacity, other than trust cash on deposit with the Bank, are not assets of the Company and, accordingly, are not included~~Accounting Guidance Adopted in ~~the accompanying unaudited consolidated financial statements.~~

The Company operates through its principal wholly owned banking subsidiary, Midland States Bank. The Bank operates through its branch banking offices and principal subsidiaries: Love Funding and Business Credit.

~~Summary of Significant Accounting Policies~~

~~Mortgage Servicing Rights Held for Sale.~~ Mortgage servicing rights held for sale consist of residential mortgage servicing rights that management has committed to a plan to sell and has the ability to sell them to a buyer in their present condition. Mortgage servicing rights held for sale are carried at the lower of their carrying value or fair value less estimated costs to sell. Decreases in the valuation of mortgage servicing rights held for sale are included in loss on mortgage servicing rights held for sale in the consolidated statements of income.

~~Impact of Recently Issued Accounting Standards~~

~~FASB Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”;~~ 2024

FASB ASU ~~2015-14, “Revenue from Contracts with Customers~~No. 2023-02, Investments—Equity Method and Joint Ventures (Topic ~~606)~~323): ~~Deferral of~~Accounting for Investments in Tax Credit Structures Using the Effective Date”; FASB ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; FASB ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”; FASB ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” Proportional Amortization Method – In May 2014, the Financial Accounting Standards Board (the “FASB”) amended existing guidance related to revenue from contracts with customers. This amendment supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer. These amendments are effective for us for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period. The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09. The Company has determined the result of applying ASU 2014-09 to the individual revenue streams affected, as well as on an aggregate basis, will not be material to the Company’s consolidated financial statements. The Company continues to evaluate the impact of the disclosure requirements associated with ASU 2014-09.

~~FASB ASU 2016-02, “Leases (Topic 842)”~~–~~In February 2016,~~March 2023, the FASB issued ASU No. ~~2016-02, “Leases (Topic 842).” This update revises~~2023-02, which allows for reporting entities to elect to account for qualifying tax equity investments using the ~~model to assess how a lease should be classified and provides guidance for lessees and lessors, when presenting right-of-use assets and lease liabilities on~~proportional amortization method, regardless of the ~~balance sheet. This update~~type of program the tax credits are related to. The ASU is effective for us on January 1, 2019, with early adoption permitted. We have not yet decided whether we will early adopt the new standard. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available. The Company has developed a project plan for evaluating the provisions of the new lease standard, but has not yet determined the overall impact of the new guidance on the Company’s consolidated financial statements. The Company is continuing to evaluate the pending adoption of ASU 2016-02 and its impact on the Company’s consolidated financial statements.

~~FASB ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”~~ ~~– In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”~~ The objective of this update is to improve financial reporting by providing timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will use forward-looking information to better understand their credit loss estimates. For public companies that are filers with the SEC, this update is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, ~~2019. Early application is permitted for any organization for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.~~

~~We have formed a committee that is assessing our data and system needs and are evaluating the impact of adopting the new guidance.~~ ~~While the~~2023. The Company generally expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, the Company cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the newadopted this guidance on ~~the Company’s consolidated financial statements.~~January 1, 2024 on a prospective basis. The ~~Company is continuing to evaluate the potential impact on the Company’s consolidated financial statements.~~

~~FASB ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”~~ ~~– In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,”~~ which amends FASB Accounting Standards Codification (“ASC”) 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. For public business entities, this update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early application is permitted for any organization in any interim period or fiscal year. The Company elected to early adopt the new guidance in the first quarter of 2017. Adoptionadoption of this ~~ASU~~accounting pronouncement did not have a material impact on the ~~Company’s~~ consolidated financial statements.

Accounting Guidance Not Yet Adopted

FASB ASU ~~2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20)~~No. 2023-07, Segment Reporting (Topic 280): ~~Premium Amortization on Purchased Callable Debt Securities”~~ – Improvements to Reportable Segment Disclosures - In ~~March 2017,~~December 2023, the FASB issued ASU No. ~~2017-08, “Receivables – Nonrefundable Fees~~2023-07, which requires public entities to disclose significant segment expenses, an amount and ~~Other Costs (Subtopic 310-20): Premium Amortization~~description for other segment items, the title and position of the entity's chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measures of profit or loss to assess segment performance, and, on ~~Purchased Callable Debt Securities.”~~ ~~This guidance shortens the amortization period for premiums~~an interim basis, certain segment related disclosures that previously were required only on ~~certain callable debt securities to the earliest call date, rather than contractual maturity date as currently required under GAAP. For public business entities, this~~an annual basis.The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within ~~those~~ fiscal years beginning after December 15, ~~2018. Early application is permitted for any organization in any interim period or fiscal year.~~2024. The Company ~~elected~~will update the related disclosures upon adoption.

FASB ASU No. 2023-09, Income Taxes (Topic 740): Improvements to ~~early adopt~~Income Tax Disclosures - In December 2023, the ~~new guidance~~FASB issued ASU No. 2023-09, which requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the ~~first quarter~~reconciling items in some categories if items meet a quantitative threshold. The pronouncement also requires entities to disclose income taxes paid, net of ~~2017. Adoption of~~refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the ~~ASU did not have a material impact on the Company’s consolidated financial statements.~~

~~Note 3 – Acquisitions~~

~~Centrue Financial Corporation~~

~~On June 9, 2017, the Company completed its acquisition of Centrue and its banking subsidiary, Centrue Bank, which operated 20 full-service banking centers located principally in northern Illinois.~~ In the aggregate, the Company acquired Centrue for approximately $176.6 million, which consisted of approximately $61.0 million in cash and the issuance of 3,219,238 shares of the Company’s common stock, 181 shares of Series G preferred stock and 2,635.5462 shares of Series H preferred stock. This acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values. Through September 30, 2017, transaction and integration costs of $15.0 million associated with the acquisition have been expensed as incurred.

~~Under the acquisition method of accounting, the consideration paid is allocated to net tangible and intangible assets~~information by jurisdiction based on current estimated fair values on the date of acquisition. During the third quarter of 2017, the Company updated the preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which required a measurement period adjustment of $169,000 to increase goodwill. Based on management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the consideration paidquantitative threshold, among other things. The ASU is effective for ~~the acquisition is allocated as follows (in thousands):~~

Assets acquired:

Cash and cash equivalents

$
42,461

Investment securities available for sale

149,013

Loans

681,870

Loans held for sale

531

Premises and equipment

17,147

Other real estate owned

4,759

Nonmarketable equity securities

8,168

Accrued interest receivable

2,376

Mortgage servicing rights

1,933

Intangible assets

11,070

Cash surrender value of life insurance policies

36,349

Deferred tax assets, net

33,461

Other assets

2,256

Total assets acquired

991,394

Liabilities assumed:

Deposits

739,867

Short-term borrowings

14,434

FHLB advances and other borrowings

95,332

Trust preferred debentures

7,565

Accrued interest payable

275

Other liabilities

3,429

Total liabilities assumed

860,902

Net assets acquired

130,492

Goodwill

46,087

Total consideration paid

$
176,579

Prior to the end of the one year measurement period for finalizing the consideration paid allocation, if information becomes available which would indicate adjustments are required to the allocation, such adjustments will be included in the allocation in the reporting period in which the adjustment amounts are determined.

Goodwill of $46.1 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of Centrue into the Company. The goodwill is assigned as part of the Company’s Banking reporting unit. The portion of the consideration paid allocated to goodwill will not be deductible for tax purposes.

The identifiable assets acquired included the establishment of $11.1 million in core deposit intangibles, which are being amortized on an accelerated basis over an estimated useful life of eight years.

~~Acquired loan data for Centrue can be found in the table below (in thousands):~~

Best Estimate at

Acquisition Date of

Fair Value

Gross Contractual

Contractual Cash

of Acquired Loans

Amounts Receivable

Flows Not Expected

at Acquisition Date

at Acquisition Date

to be Collected
Acquired receivables subject to ASC 310-30

$
13,352

$
20,719

$
5,256
Acquired receivables not subject to ASC 310-30

668,518

821,338

4,518

The following table provides the unaudited pro forma information for the results of operations for three and nine months ended September 30, 2017 and 2016, as if the acquisition had occurred on January 1, 2016 (in thousands, except per share data). The pro forma results combine the historical results of Centruefiscal years beginning after December 15, 2024, with the Company’s consolidated statements of income, adjusted for the impact of the application of the acquisition method of accounting including loan discount accretion, intangible assets amortization, and deposit and trust preferred securities premium accretion, net of taxes. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations had the acquisition actually occurred on January 1, 2016. No assumptions have been applied to the pro forma results of operations regarding revenue enhancements, expense efficiencies or asset dispositions. Only the acquisition related expenses that have been incurred as of September 30, 2017 are included in net income in the table below. Acquisition related expenses that were recognized and are included in the pro forma net income for the three and nine months ended September 30, 2017 totaled $7.3 million and $15.0 million, respectively, on a pre-tax basis.

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Revenue (1)

$
52,168

$
52,139

$
156,851

$
152,532
Net income

2,036

8,850

15,299

23,490
Diluted earnings per common share

$
0.10

$
0.46

$
0.71

$
1.37

~~(1)~~

~~Net interest income plus noninterest income~~

~~CedarPoint Investment Advisors, Inc.~~

On March 28, 2017, the Company acquired all of the outstanding capital stock of CedarPoint Investment Advisors, Inc. (“CedarPoint”), an SEC registered investment advisory firm, pursuant to an Agreement and Plan of Merger, dated as of March 15, 2017. CedarPoint had approximately $180.0 million of assets under administration.early adoption permitted. The Company ~~acquired CedarPoint for $3.7 million, which consisted of~~will update the issuance of 102,000 shares of the Company’s common stock and an accrual in other liabilities of $345,000 for the fair value of 18,000 shares that will be held in a special purpose escrow account (the “escrow shares”) as additional consideration until at least March 31, 2019. Payout of the escrow shares is contingent on CedarPoint reaching certain target revenue levels. Intangible assets recognized as a result of the transaction consisted of approximately $2.4 million in goodwill and $2.0 million in customer relationship intangibles. The customer relationship intangibles are being amortized on a straight-line basis over 12 years.

~~Acquisition of Wealth Management Assets~~

On November 10, 2016, the Bank completed its acquisition of approximately $400.0 million in wealth management assets from Sterling National Bank of Yonkers, New York (“Sterling”) for approximately $5.2 million in cash. Intangible assets recognized as a result of the transaction consisted of approximately $2.3 million in goodwill and $2.3 million in customer relationship intangibles. The customer relationship intangibles are being amortized on a straight-line basis over 20 years.

~~Note 4~~related disclosures upon adoption.

NOTE 2 – INVESTMENT SECURITIES

Investment Securities Available for Sale

Investment securities ~~classified as~~ available for sale ~~as of September 30, 2017~~at March 31, 2024 and December 31, ~~2016 are~~2023 were as ~~follows (in thousands):~~

September 30, 2017

Gross

Gross


Amortized

unrealized

unrealized

Fair


cost

gains

losses

value

U.S. Treasury securities

$
47,979

$
—

$
72

$
47,907

Government sponsored entity debt securities

19,290

104

5

19,389

Agency mortgage-backed securities

229,382

1,103

631

229,854

State and municipal securities

39,385

376

45

39,716

Corporate securities

56,404

1,070

167

57,307

Equity securities

2,705

115

8

2,812

Total

$
395,145

$
2,768

$
928

$
396,985

follows:


	March 31, 2024
(dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Investment securities available for sale

U.S. government sponsored entities and U.S. agency securities	$	69,487	$	126	$	1,890	$	67,723
Mortgage-backed securities - agency	763,902		1,517		83,899		681,520
Mortgage-backed securities - non-agency	93,146		456		4,074		89,528
State and municipal securities	66,902		233		6,505		60,630
Collateralized loan obligations	33,558		102		46		33,614
Corporate securities	117,145		142		9,896		107,391
Total available for sale securities	$	1,144,140	$	2,576	$	106,310	$	1,040,406


	December 31, 2023
(dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Investment securities available for sale
U.S. Treasury securities	$	1,097	$	—	$	—	$	1,097
U.S. government sponsored entities and U.S. agency securities	74,161		176		1,765		72,572
Mortgage-backed securities - agency	650,119		2,325		77,944		574,500
Mortgage-backed securities - non-agency	87,019		414		3,904		83,529
State and municipal securities	62,952		258		5,750		57,460
Collateralized loan obligations	27,646		3		84		27,565
Corporate securities	109,598		41		10,467		99,172
Total available for sale securities	$	1,012,592	$	3,217	$	99,914	$	915,895

December 31, 2016




Gross

Gross


Amortized

unrealized

unrealized

Fair

cost

gains

losses

value

U.S. Treasury securities

$
75,973

$
—

$
72

$
75,901

Government sponsored entity debt securities

7,653

57

22

7,688

Agency mortgage-backed securities

90,629

373

932

90,070

Non-agency mortgage-backed securities

1

—

—

1

State and municipal securities

25,826

15

567

25,274

Corporate securities

47,443

403

441

47,405

Total

$
247,525

$
848

$
2,034

$
246,339

The following is a summary of the amortized cost and fair value of the investment securities available for sale, by maturity, at March 31, 2024. Expected maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be prepaid without penalties. The maturities of all other investment securities available for sale are based on final contractual maturity.


(dollars in thousands)	Amortized cost		Fair value
Investment securities available for sale
Within one year	$	12,571	$	12,566
After one year through five years	101,298		98,686
After five years through ten years	136,040		122,565
After ten years	37,183		35,541
Mortgage-backed securities	857,048		771,048
Total available for sale securities	$	1,144,140	$	1,040,406

Proceeds and gross realized gains and losses on sales of investment securities available for sale for the three months ended March 31, 2024 and 2023 are summarized as follows:


	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Investment securities available for sale
Proceeds from sales	$	—	$	84,493
Gross realized gains on sales	—		338
Gross realized losses on sales	—		(986)

Unrealized losses and fair values for investment securities available for sale as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are summarized as ~~follows (in thousands):~~

follows:

September 30, 2017

Less than 12 Months

12 Months or more

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized


value

loss

value

loss

value

loss

U.S. Treasury securities

$
42,936

$
47

$
4,971

$
25

$
47,907

$
72

Government sponsored entity debt securities

6,467

5

—

—

6,467

5

Agency mortgage-backed securities

50,978

370

10,569

261

61,547

631

State and municipal securities

4,609

14

2,569

31

7,178

45

Corporate securities

4,957

52

5,412

115

10,369

167

Equity securities

2,606

8

—

—

2,606

8

Total

$
112,553

$
496

$
23,521

$
432

$
136,074

$
928


	March 31, 2024
	Less than 12 Months				12 Months or more				Total
(dollars in thousands)	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
Investment securities available for sale

U.S. government sponsored entities and U.S. agency securities	$	28,789	$	50	$	21,364	$	1,840	$	50,153	$	1,890
Mortgage-backed securities - agency	160,215		6,769		383,450		77,130		543,665		83,899
Mortgage-backed securities - non-agency	30,644		453		18,920		3,621		49,564		4,074
State and municipal securities	51,422		6,505		—		—		51,422		6,505
Collateralized loan obligations	14,712		46		—		—		14,712		46
Corporate securities	3,671		62		88,991		9,834		92,662		9,896
Total available for sale securities	$	289,453	$	13,885	$	512,725	$	92,425	$	802,178	$	106,310

December 31, 2016

Less than 12 Months

12 Months or more

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

value

loss

value

loss

value

loss

U.S. Treasury securities

$
75,901

$
72

$
—

$
—

$
75,901

$
72

Government sponsored entity debt securities

4,107

22

—

—

4,107

22

Agency mortgage-backed securities

57,882

930

402

2

58,284

932

State and municipal securities

20,215

567

—

—

20,215

567

Corporate securities

11,111

334

8,312

107

19,423

441

Total

$
169,216

$
1,925

$
8,714

$
109

$
177,930

$
2,034


	December 31, 2023
	Less than 12 Months				12 Months or more				Total
(dollars in thousands)	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
Investment securities available for sale
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government sponsored entities and U.S. agency securities	42,826		87		8,323		1,678		51,149		1,765
Mortgage-backed securities - agency	130,106		7,386		348,476		70,558		478,582		77,944
Mortgage-backed securities - non-agency	8,852		353		19,418		3,551		28,270		3,904
State and municipal securities	51,497		5,750		—		—		51,497		5,750
Collateralized loan obligations	14,763		84		—		—		14,763		84
Corporate securities	4,688		53		84,662		10,414		89,350		10,467
Total available for sale securities	$	252,732	$	13,713	$	460,879	$	86,201	$	713,611	$	99,914

At ~~September 30, 2017, 63~~March 31, 2024, 285 investment securities available for sale had unrealized losses with aggregate depreciation of ~~0.68%~~11.70% from their amortized cost basis. The unrealized losses relate principally to the fluctuations in the current interest rate environment. In analyzing an issuer’s financial condition, we consider whether the securities are issued by the federal government or its agencies and whether downgrades by bond rating agencies have occurred. The Company does not have the intent to sell and it is not more likely than not that it will be required to sell a security in an unrealized loss position; therefore, the Company does not consider these securities to be other than temporarily impaired at September 30, 2017.

For the three and nine months ended September 30, 2017, there was no OTTI recognized on investment securities available for sale. During the three and nine months ended September 30, 2016, the Company recognized $0 and $824,000, respectively, of OTTI on its investment securities available for sale.

The amortized cost and fair value of the available-for-sale investment securities as of September 30, 2017 are shown by expected maturity in the following table (in thousands). Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Amortized

Fair

cost

value

Debt securities:

Within one year

$
37,340

$
37,307

After one year through five years

235,754

236,319

After five years through ten years

102,922

104,113

After ten years

16,424

16,434

Equity securities

2,705

2,812

Total

$
395,145

$
396,985

Proceeds from the sale of securities available for sale were $2.7 million and $11.3 million for the three and nine months ended September 30, 2017, respectively. Gross realized gains from the sale of securities available for sale were $98,000 and $219,000 for the three and nine months ended September 30, 2017, respectively. There were no gross realized losses for the three and nine months ended September 30, 2017.

Proceeds from the sale of securities available for sale were $865,000 and $31.2 million for the three and nine months ended September 30, 2016, respectively. Gross realized gains from the sale of securities available for sale were $39,000 and $315,000 for the three and nine months ended September 30, 2016, respectively. There were no gross realized losses for the three and nine months ended September 30, 2016.

~~Note 5 – Investment Securities Held to Maturity~~

~~Investment securities classified as held to maturity as of September 30, 2017 and December 31, 2016 are as follows (in thousands):~~

September 30, 2017

Gross

Gross

Amortized

unrecognized

unrecognized

Fair

cost

gains

losses

value

State and municipal securities

$
70,867

$
4,381

$
106

$
75,142

December 31, 2016

Gross

Gross

Amortized

unrecognized

unrecognized

Fair

cost

gains

losses

value

State and municipal securities

$
78,672

$
3,517

$
237

$
81,952

Unrecognized losses and fair value for investment securities held to maturity as of September 30, 2017 and December 31, 2016, aggregated by investment category and length of time that individual securities have been in a continuous unrecognized loss position, are summarized as follows (in thousands):

September 30, 2017

Less than 12 Months

12 Months or more

Total

Fair

Unrecognized

Fair

Unrecognized

Fair

Unrecognized

value

loss

value

loss

value

loss

State and municipal securities

$
3,343

$
32

$
3,490

$
74

$
6,833

$
106

December 31, 2016

Less than 12 Months

12 Months or more

Total

Fair

Unrecognized

Fair

Unrecognized

Fair

Unrecognized

value

loss

value

loss

value

loss

State and municipal securities

$
13,991

$
140

$
2,699

$
97

$
16,690

$
237

For all of the above investment securities, the ~~unrecognized~~unrealized losses ~~are~~were generally due to changes in interest rates and ~~continued financial~~other market ~~stress~~conditions, and ~~unrecognized~~unrealized losses ~~are~~were considered to be ~~temporary.~~

~~We evaluate securities for OTTI on a quarterly basis, at a minimum, and more frequently when economic or market concerns warrant such evaluation. In estimating OTTI losses, we consider~~temporary as the ~~severity and duration of the~~

~~impairment; the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades; and the intent and ability of the Company~~fair value is expected to ~~hold the security for a period of time sufficient for a recovery in value.~~

At September 30, 2017, 27 investment securities held to maturity had unrecognized losses with aggregate depreciation of 1.53% from their amortized cost basis. The unrecognized losses relate principally to the fluctuations in the current interest rate environment. In analyzing an issuer’s financial condition, we consider who issuedrecover as the securities approach their respective maturity dates. The issuers are of high credit quality and ~~whether downgrades by bond rating agencies have occurred.~~all principal amounts are expected to be paid when securities mature. The Company does not ~~have the intent~~intend to sell and it is ~~not more~~ likely ~~than~~that the Company will not ~~that it will~~ be required to sell ~~a security in an unrecognized loss position; therefore,~~ the ~~Company does not consider these~~ securities prior to ~~be other than temporarily impaired at September 30, 2017.~~

~~The amortized cost and fair value~~their anticipated recovery.

Amortized

Fair

cost

value

Within one year

$
871

$
877

After one year through five years

19,055

19,709

After five years through ten years

35,164

38,478

After ten years

15,777

16,078

Total

$
70,867

$
75,142

The following table presents total loans outstanding by portfolio ~~which includes non-purchased credit impaired (“Non-PCI”) loans and purchased credit impaired (“PCI”) loans,~~class, as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 (in thousands):~~

September 30, 2017

December 31, 2016

Non-PCI

PCI

Non-PCI

PCI

Loans

Loans (1)

Total

Loans

Loans (1)

Total

Loans:

Commercial

$
510,457

$
3,087

$
513,544

$
454,310

$
3,517

$
457,827

Commercial real estate

1,456,620

15,664

1,472,284

963,895

5,720

969,615

Construction and land development

181,763

750

182,513

165,175

12,150

177,325

Total commercial loans

2,148,840

19,501

2,168,341

1,583,380

21,387

1,604,767

Residential real estate

438,973

6,774

445,747

247,156

6,557

253,713

Consumer

342,863

175

343,038

269,705

312

270,017

Lease financing

200,846

—

200,846

191,479

—

191,479

Total loans

$
3,131,522

$
26,450

$
3,157,972

$
2,291,720

$
28,256

$
2,319,976

2023:


(dollars in thousands)	March 31, 2024		December 31, 2023
Commercial:
Commercial	$	813,963	$	825,938
Commercial other	601,704		656,592
Commercial real estate:
Commercial real estate non-owner occupied	1,591,455		1,622,668
Commercial real estate owner occupied	450,149		436,857
Multi-family	287,586		279,904
Farmland	67,923		67,416
Construction and land development	474,128		452,593
Total commercial loans	4,286,908		4,341,968
Residential real estate:
Residential first lien	316,310		317,388
Other residential	62,273		63,195
Consumer:
Consumer	99,157		107,743
Consumer other	737,935		827,435
Lease financing	455,879		473,350
Total loans	$	5,958,462	$	6,131,079

~~(1)~~

~~The unpaid principal balance for PCI loans totaled $38.9 million and $34.6 million as of September 30, 2017 and December 31, 2016, respectively.~~

Total loans include net deferred loan ~~fees~~costs of ~~$11.4~~$3.5 million and ~~$3.1~~$3.8 million at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively, and unearned discounts of ~~$20.7~~$64.4 million and $66.4 million within the lease financing portfolio at ~~both September 30, 2017~~March 31, 2024 and December 31, ~~2016.~~

2023, respectively.

At ~~September 30, 2017 and December~~March 31, ~~2016,~~2024, the Company had ~~commercial and~~ residential real estate loans held for sale totaling ~~$35.9~~$5.0 million, ~~and $70.6~~compared to $3.8 million ~~respectively. During the three and nine months ended September 30, 2017, the~~at December 31, 2023. The Company sold ~~commercial~~loans and ~~residential real estate loans~~leases with proceeds totaling ~~$206.2~~$17.6 million and ~~$679.2~~$6.3 million ~~respectively,~~during the three months ended March 31, 2024 and ~~sold commercial and residential real estate loans with proceeds totaling $450.9 million and $907.3 million for the comparable periods in 2016,~~2023, respectively.

Classifications of Loan Portfolio

The Company monitors and assesses the credit risk of its loan portfolio using the classes set forth below. These classes also represent the segments by which the Company monitors the performance of its loan portfolio and estimates its allowance for ~~loan losses.~~

credit losses on loans.

Commercial—Loans to varying types of businesses, including municipalities, school districts and nonprofit organizations, for the purpose of supporting working capital, operational needs and term financing of equipment.

~~Table of Contents~~

Repayment of such loans is generally provided through operating cash flows of the business. Commercial loans are ~~predominantly~~predominately secured by equipment, inventory, accounts receivable, and other sources of repayment.

Commercial FHA warehouse lines of $8.0 million as of March 31, 2024 were included in this classification.

Commercial real estate—Loans secured by real estate occupied by the borrower for ongoing operations, including loans to borrowers engaged in agricultural production, and non-owner occupied real estate leased to one or more tenants, including commercial office, industrial, special purpose, retail and multi-family residential real estate loans.

Construction and land development—Secured loans for the construction of business and residential properties. Real estate construction loans often convert to a ~~commercial~~ real estate commercial loan at the completion of the construction period. Secured development loans are made to borrowers for the purpose of infrastructure improvements to vacant land to create finished marketable residential and commercial lots/land. Most land development loans are originated with the intention that the loans will be paid through the sale of developed lots/land by the developers within twelve months of the completion date. Interest reserves may be established on real estate construction loans.

Table of Contents

Residential real estate—Loans, secured by residential properties, that generally do not qualify for secondary market sale; however, the risk to return and/or overall relationship are considered acceptable to the Company. This category also includes loans whereby consumers utilize equity in their personal residence, generally through a second mortgage, as collateral to secure the loan.

Consumer—Loans to consumers primarily for the purpose of home improvements ~~and~~or acquiring automobiles, recreational vehicles and boats. Consumer loans consist of relatively small amounts that are spread across many individual borrowers.

Lease financing—~~Indirect~~Our equipment leasing business provides financing leases to ~~small~~varying types of businesses, nationwide, for purchases of business ~~equipment. All indirect~~equipment and software. The financing ~~leases require~~is secured by a first priority interest in the financed assets and generally requires monthly ~~payments, and the weighted average maturity of our leases is less than four years.~~

payments.

Commercial, commercial real estate, and construction and land development loans are collectively referred to as the Company’s commercial loan portfolio, while residential real estate, ~~and~~ consumer loans and lease financing receivables are collectively referred to as the Company’s other loan portfolio.

We have extended loans to certain of our directors, executive officers, principal shareholders and their affiliates. These loans were made in the ordinary course of business upon ~~normal~~substantially the same terms, including collateralization and interest rates prevailing at the ~~time, and did not involve more than the normal risk of repayment by the borrower.~~time. The aggregate loans outstanding to the directors, executive officers, principal shareholders and their affiliates totaled $26.5 million at both September 30, 2017 and December 31, 2016. During the three and nine months ended September 30, 2017, there were $982,000 and $4.0 million, respectively, of new loans, ~~and~~ other additions, ~~while~~ repayments and other reductions ~~totaled $948,000~~for the three months ended March 31, 2024 and ~~$4.0~~2023, are summarized as follows:


	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Beginning balance	$	20,990	$	19,776

Repayments and other reductions	(264)		(257)
Ending balance	$	20,726	$	19,519

The following table represents, by loan portfolio segment, a summary of changes in the allowance for credit losses on loans for the three months ended March 31, 2024 and 2023:


	Commercial Loan Portfolio						Other Loan Portfolio
(dollars in thousands)	Commercial		Commercial real estate		Construction and land development		Residential real estate		Consumer		Lease financing		Total
Changes in allowance for credit losses on loans for the three months ended March 31, 2024:
Balance, beginning of period	$	21,847	$	20,229	$	4,163	$	5,553	$	3,770	$	12,940	$	68,502
Provision for credit losses on loans	1,776		1,677		8,466		82		(11)		2,010		14,000
Charge-offs	(2,410)		(691)		—		(35)		(235)		(1,665)		(5,036)
Recoveries	116		152		—		55		87		181		591
Balance, end of period	$	21,329	$	21,367	$	12,629	$	5,655	$	3,611	$	13,466	$	78,057








Changes in allowance for credit losses on loans for the three months ended March 31, 2023:
Balance, beginning of period	$	14,639	$	29,290	$	2,435	$	4,301	$	3,599	$	6,787	$	61,051
Provision for credit losses on loans	1,998		(330)		7		63		700		697		3,135
Charge-offs	(969)		(746)		—		(31)		(263)		(390)		(2,399)
Recoveries	94		2		—		17		93		74		280
Balance, end of period	$	15,762	$	28,216	$	2,442	$	4,350	$	4,129	$	7,168	$	62,067

The Company utilizes a combination of models which measure probability of default and loss given default in determining expected future credit losses.

Table of Contents

The probability of default is the risk that the borrower will be unable or unwilling to repay its debt in full or on time. The risk of default is derived by analyzing the obligor’s capacity to repay the debt in accordance with contractual terms. Probability of default is generally associated with financial characteristics such as inadequate cash flow to service debt, declining revenues or operating margins, high leverage, declining or marginal liquidity, and the inability to successfully implement a business plan. In addition to these quantifiable factors, the borrower’s willingness to repay also must be evaluated.

The probability of default is forecasted, for most commercial and retail loans, using a regression model that determines the likelihood of default within the twelve month time horizon. The regression model uses forward-looking economic forecasts including variables such as gross domestic product, housing price index, and real disposable income to predict default rates. The forecasting method for the equipment financing portfolio assumes a rolling twelve-month average of the through-the-cycle default rate, to predict default rates for the twelve month time horizon.

The loss given default component is the percentage of defaulted loan balance that is ultimately charged off. As a method for estimating the allowance, a form of migration analysis is used that combines the estimated probability of loans experiencing default events and the losses ultimately associated with the loans experiencing those defaults. Multiplying one by the other gives the Company its loss rate, which is then applied to the loan portfolio balance to determine expected future losses.

Within the model, the loss given default approach produces segmented loss given default estimates using a loss curve methodology, which is based on historical net losses from charge-off and recovery information. The main principle of a loss curve model is that the loss follows a steady timing schedule based on how long the defaulted loan has been on the books.

The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data. The Company’s historical look-back period includes January 2012 through the current period on a monthly basis. When historical credit loss experience is not sufficient for a specific portfolio, the Company may supplement its own portfolio data with external models or data.

Historical data is evaluated in multiple components of the expected credit loss, including the reasonable and supportable forecast and the post-reversion period of each loan segment. The historical experience is used to infer probability of default and loss given default in the reasonable and supportable forecast period. In the post-reversion period, long-term average loss rates are segmented by loan pool.

Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience. The analysis takes into consideration other analytics performed within the organization, such as enterprise and concentration management, along with other credit-related analytics as deemed appropriate. Management attempts to quantify qualitative reserves whenever possible.

The Company segments the loan portfolio into pools based on the following risk characteristics: financial asset type, collateral type, loan characteristics, credit characteristics, outstanding loan balances, contractual terms and prepayment assumptions, industry of borrower and concentrations, historical or expected credit loss patterns, and reasonable and supportable forecast periods. Within the probability of default segmentation, credit metrics are identified to further segment the financial assets. The Company utilizes risk ratings for the commercial portfolios and days past due for the consumer and the lease financing portfolios.

Within the probability of default segmentation, credit metrics are identified to further segment the financial assets. The Company utilizes risk ratings for the commercial portfolios and days past due for the consumer and the lease financing portfolios.

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The Company has defined five transitioning risk states for each asset pool within the expected credit loss model. The below table illustrates the transition matrix:


Risk state	Commercial loans risk rating	Consumer loans and equipment finance loans and leases days past due
1	0-5	0-14
2	6	15-29
3	7	30-59
4	8	60-89
Default	9+ and nonaccrual	90+ and nonaccrual

Expected Credit Losses

In calculating expected credit losses, the Company individually evaluates loans on nonaccrual status with a balance greater than $500,000, loans past due 90 days or more and still accruing interest, and loans that do not share risk characteristics with other loans in the pool. The following table presents the amortized cost basis of individually evaluated loans on nonaccrual status as of March 31, 2024 and December 31, 2023:


	March 31, 2024						December 31, 2023
(dollars in thousands)	Nonaccrual with allowance		Nonaccrual with no allowance		Total nonaccrual		Nonaccrual with allowance		Nonaccrual with no allowance		Total nonaccrual
Commercial:
Commercial	$	3,572	$	—	$	3,572	$	3,560	$	—	$	3,560
Commercial other	6,251		—		6,251		4,941		—		4,941
Commercial real estate:
Commercial real estate non-owner occupied	6,544		14,902		21,446		1,614		14,098		15,712
Commercial real estate owner occupied	4,198		6,500		10,698		4,276		6,500		10,776
Multi-family	3,413		2,652		6,065		240		6,015		6,255
Farmland	1,265		—		1,265		1,148		—		1,148
Construction and land development	15,724		10,594		26,318		39		—		39
Total commercial loans	40,967		34,648		75,615		15,818		26,613		42,431
Residential real estate:
Residential first lien	2,658		590		3,248		2,583		490		3,073
Other residential	670		—		670		635		—		635
Consumer:
Consumer	91		—		91		134		—		134

Lease financing	10,185		15		10,200		9,097		36		9,133
Total loans	$	54,571	$	35,253	$	89,824	$	28,267	$	27,139	$	55,406

There was no interest income recognized on nonaccrual loans during the three months ended March 31, 2024 and 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.

Collateral Dependent Financial Assets

A collateral dependent financial loan relies solely on the operation or sale of the collateral for repayment. In evaluating the overall risk associated with a loan, the Company considers character, overall financial condition and resources, and payment record of the borrower; the prospects for support from any financially responsible guarantors; and the nature and degree of

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protection provided by the cash flow and value of any underlying collateral. However, as other sources of repayment become inadequate over time, the significance of the collateral’s value increases and the loan may become collateral dependent.

The table below presents the value of individually evaluated, collateral dependent loans by loan class, for borrowers experiencing financial difficulty, as of March 31, 2024 and December 31, 2023:


	Type of Collateral
(dollars in thousands)	Real Estate		Equipment		Total
March 31, 2024
Commercial:
Commercial	$	—	$	1,972	$	1,972
Commercial other	—		1,399		1,399
Commercial real estate:
Non-owner occupied	20,293		—		20,293
Owner occupied	9,275		—		9,275
Multi-family	20,461		—		20,461
Construction and land development	26,204		—		26,204



Total collateral dependent loans	$	76,233	$	3,371	$	79,604

December 31, 2023
Commercial:
Commercial	$	—	$	1,972	$	1,972
Commercial other	—		1,232		1,232
Commercial real estate:
Non-owner occupied	14,147		—		14,147
Owner occupied	9,275		—		9,275
Multi-family	5,143		—		5,143




Total collateral dependent loans	$	28,565	$	3,204	$	31,769

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The aging status of the recorded investment in loans by portfolio as of March 31, 2024 was as follows:


	Accruing loans
(dollars in thousands)	30-59 days past due		60-89 days past due		Past due 90 days or more		Total past due		Nonaccrual		Current		Total
Commercial:
Commercial	$	4,164	$	640	$	450	$	5,254	$	3,572	$	805,137	$	813,963
Commercial other	12,247		4,474		3		16,724		6,251		578,729		601,704
Commercial real estate:
Commercial real estate non-owner occupied	7,072		4,339		—		11,411		21,446		1,558,598		1,591,455
Commercial real estate owner occupied	284		265		—		549		10,698		438,902		450,149
Multi-family	—		—		14,483		14,483		6,065		267,038		287,586
Farmland	3		—		—		3		1,265		66,655		67,923
Construction and land development	—		—		—		—		26,318		447,810		474,128
Total commercial loans	23,770		9,718		14,936		48,424		75,615		4,162,869		4,286,908
Residential real estate:
Residential first lien	429		—		212		641		3,248		312,421		316,310
Other residential	142		52		—		194		670		61,409		62,273
Consumer:
Consumer	39		22		—		61		91		99,005		99,157
Consumer other	6,735		4,126		2		10,863		—		727,072		737,935
Lease financing	8,646		5,174		5		13,825		10,200		431,854		455,879
Total loans	$	39,761	$	19,092	$	15,155	$	74,008	$	89,824	$	5,794,630	$	5,958,462

The aging status of the recorded investment in loans by portfolio as of December 31, 2023 was as follows:


	Accruing loans
(dollars in thousands)	30-59 days past due		60-89 days past due		Past due 90 days or more		Total past due		Nonaccrual		Current		Total
Commercial:
Commercial	$	9,340	$	504	$	—	$	9,844	$	3,560	$	812,534	$	825,938
Commercial other	11,156		5,990		781		17,927		4,941		633,724		656,592
Commercial real estate:
Commercial real estate non-owner occupied	384		—		—		384		15,712		1,606,572		1,622,668
Commercial real estate owner occupied	—		—		—		—		10,776		426,081		436,857
Multi-family	14,506		8,140		—		22,646		6,255		251,003		279,904
Farmland	—		120		—		120		1,148		66,148		67,416
Construction and land development	211		10,593		—		10,804		39		441,750		452,593
Total commercial loans	35,597		25,347		781		61,725		42,431		4,237,812		4,341,968
Residential real estate:
Residential first lien	69		299		161		529		3,073		313,786		317,388
Other residential	100		50		—		150		635		62,410		63,195
Consumer:
Consumer	62		20		—		82		134		107,527		107,743
Consumer other	7,225		4,561		3		11,789		—		815,646		827,435
Lease financing	7,622		1,826		—		9,448		9,133		454,769		473,350
Total loans	$	50,675	$	32,103	$	945	$	83,723	$	55,406	$	5,991,950	$	6,131,079

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Loan Restructurings

The Company adopted the accounting guidance in ASU No. 2022-02, effective as of January 1, 2023, which eliminated the recognition and measurement of a TDR. Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Therefore, the disclosures related to loan restructurings are for modifications which have a direct impact on cash flows.

The Company may offer various types of concessions when modifying a loan. Commercial and industrial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested.

Loans modified in a loan restructuring for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for loans that have been modified in a loan restructuring is measured based on the probability of default and loss given default model, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

Commercial and consumer loans modified in a loan restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further loss. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

In some cases, the Company will modify a loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession such as an interest rate reduction or principal forgiveness, may be granted. During the three months ended March 31, 2024 the Company restructured four loans and three leases for borrowers experiencing financial difficulties with principal balances totaling $1.5 million. Each of the restructured loans and leases were provided a term extension. The Company has not committed to lend any additional amounts to the borrowers that have been granted a loan modification.

Credit Quality Monitoring

The Company maintains loan policies and credit underwriting standards as part of the process of managing credit risk. These standards include making loans generally within the Company’s four ~~main regions, which include eastern, northern~~geographic regions. In addition, our specialty finance division does nationwide bridge lending for FHA and ~~southern Illinois~~HUD developments and ~~the St. Louis metropolitan area.~~originates loans for multifamily, assisted and senior living and multi-use properties. Our equipment leasing business ~~based in Denver,~~ provides financing to business customers across the country.

The Company has a loan approval process involving underwriting and individual and group loan approval authorities to consider credit quality and loss exposure at loan origination. The loans in the Company’s commercial loan portfolio are risk rated at origination based on the grading system set forth below. All loan authority is based on the aggregate credit to a borrower and its related entities.

The Company’s consumer loan portfolio is primarily comprised of both secured and unsecured loans that are relatively small and are evaluated at origination on a centralized basis against standardized underwriting criteria. The ongoing measurement of credit quality of the consumer loan portfolio is largely done on an exception basis. If payments are made on schedule, as agreed, then no further monitoring is performed. However, if delinquency occurs, the delinquent loans are turned over to the Company’s Consumer Collections Group for resolution. Credit quality for the

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entire consumer loan portfolio is measured by the periodic delinquency rate, nonaccrual amounts and actual losses incurred.

Loans in the commercial loan portfolio tend to be larger and more complex than those in the other loan portfolio, and therefore, are subject to more intensive monitoring. All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay abreast of credit quality during the life of the loans. The risk ratings of loans in the commercial loan portfolio are reassessed at least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various individuals within the Company at least quarterly.

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The Company maintains a centralized independent loan review function that monitors the approval process and ongoing asset quality of the loan portfolio, including the accuracy of loan grades. The Company also maintains an independent appraisal review function that participates in the review of all appraisals obtained by the Company.

Credit Quality Indicators

The Company uses a ten grade risk rating system to monitor the ongoing credit quality of its commercial loan portfolio. These loan grades rank the credit quality of a borrower by measuring liquidity, debt capacity, and coverage and payment behavior as shown in the borrower’s financial statements. The risk grades also measure the quality of the borrower’s management and the repayment support offered by any guarantors.

The Company considers all loans with Risk Grades of 1 –- 6 as acceptable credit risks and structures and manages such relationships accordingly. Periodic financial and operating data combined with regular loan officer interactions are deemed adequate to monitor borrower performance. Loans with Risk Grades of 7 are considered ~~“watch credits”~~"watch credits" categorized as special mention and the frequency of loan officer contact and receipt of financial data is increased to stay abreast of borrower performance. Loans with Risk Grades of 8 –- 10 are considered problematic and require special care. Risk Grade 8 is categorized as substandard, 9 as substandard - nonaccrual and 10 as doubtful. Further, loans with Risk Grades of 7 –- 10 are managed ~~and monitored~~ regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive and senior management of the Company, which includes highly structured reporting of financial and operating data, intensive loan officer intervention and strategies to exit, as well as potential management by the ~~Company’s~~Company's Special Assets Group. Loans not graded in the commercial loan portfolio are ~~small loans that are~~ monitored by aging status and payment activity.

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The following ~~table presents~~tables present the recorded investment of the commercial loan portfolio ~~(excluding PCI loans)~~ by risk category as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 (in thousands):~~

September 30, 2017

December 31, 2016

Commercial

Construction

Commercial

Construction

Real

and Land

Real

and Land

Commercial

Estate

Development

Total

Commercial

Estate

Development

Total

Acceptable credit quality

$
474,513

$
1,408,398

$
174,115

$
2,057,026

$
426,560

$
925,244

$
159,702

$
1,511,506

Special mention

16,543

9,121

—

25,664

10,930

8,735

—

19,665

Substandard

17,695

13,639

—

31,334

12,649

21,178

450

34,277

Substandard – nonaccrual

1,469

21,454

—

22,923

3,559

7,145

21

10,725

Doubtful

—

—

—

—

—

—

—

—

Not graded

237

4,008

7,648

11,893

612

1,593

5,002

7,207

Total (excluding PCI)

$
510,457

$
1,456,620

$
181,763

$
2,148,840

$
454,310

$
963,895

$
165,175

$
1,583,380

2023:


			March 31, 2024
			Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)			2024		2023		2022		2021		2020		Prior		Revolving loans		Total
Commercial	Commercial	Acceptable credit quality	$	34,179	$	161,363	$	94,071	$	63,411	$	32,308	$	51,224	$	343,792	$	780,348
		Special mention	—		—		450		—		—		169		1,103		1,722
		Substandard	970		3,321		13,192		420		322		5,229		4,867		28,321
		Substandard – nonaccrual	—		1,308		—		1,321		—		273		670		3,572
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	—		—		—		—		—		—		—		—
		Subtotal	35,149		165,992		107,713		65,152		32,630		56,895		350,432		813,963

	Commercial other	Acceptable credit quality	31,164		117,553		177,957		89,308		49,811		49,197		77,454		592,444
		Special mention	2		—		400		368		109		94		1,071		2,044
		Substandard	—		36		220		—		—		—		709		965
		Substandard – nonaccrual	—		2,301		2,437		654		148		595		116		6,251
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	—		—		—		—		—		—		—		—
		Subtotal	31,166		119,890		181,014		90,330		50,068		49,886		79,350		601,704

Commercial real estate	Non-owner occupied	Acceptable credit quality	183,143		181,438		540,756		294,180		102,842		185,288		6,923		1,494,570
		Special mention	—		4,423		—		181		452		277		—		5,333
		Substandard	17,978		19,027		11,474		—		—		21,627		—		70,106
		Substandard – nonaccrual	—		5,256		—		96		860		15,234		—		21,446
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	—		—		—		—		—		—		—		—
		Subtotal	201,121		210,144		552,230		294,457		104,154		222,426		6,923		1,591,455

	Owner occupied	Acceptable credit quality	11,641		37,180		108,068		111,372		47,480		95,805		793		412,339
		Special mention	—		5,750		—		127		—		546		5		6,428
		Substandard	—		—		7,644		265		—		12,775		—		20,684
		Substandard – nonaccrual	—		109		9,419		5		159		702		304		10,698
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	—		—		—		—		—		—		—		—
		Subtotal	11,641		43,039		125,131		111,769		47,639		109,828		1,102		450,149

	Multi-family	Acceptable credit quality	59,782		12,834		111,585		25,660		27,987		20,888		112		258,848
		Special mention	—		—		—		—		—		—		—		—
		Substandard	8,140		—		—		—		—		14,533		—		22,673
		Substandard – nonaccrual	—		1,658		—		899		—		3,508		—		6,065
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	—		—		—		—		—		—		—		—
		Subtotal	67,922		14,492		111,585		26,559		27,987		38,929		112		287,586

	Farmland	Acceptable credit quality	1,017		9,720		4,654		15,117		12,037		21,322		1,040		64,907
		Special mention	—		—		—		1,451		—		—		—		1,451
		Substandard	—		—		—		14		—		286		—		300
		Substandard – nonaccrual	—		—		—		117		—		1,100		48		1,265
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	—		—		—		—		—		—		—		—
		Subtotal	1,017		9,720		4,654		16,699		12,037		22,708		1,088		67,923

Construction and land development		Acceptable credit quality	9,176		69,390		229,815		88,372		—		1,566		27,125		425,444
		Special mention	—		—		9,851		3,810		—		40		—		13,701
		Substandard	—		—		—		6,000		—		—		—		6,000
		Substandard – nonaccrual	—		—		—		26,278		—		40		—		26,318
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	264		1,601		421		355		—		24		—		2,665
		Subtotal	9,440		70,991		240,087		124,815		—		1,670		27,125		474,128

Total		Acceptable credit quality	330,102		589,478		1,266,906		687,420		272,465		425,290		457,239		4,028,900
		Special mention	2		10,173		10,701		5,937		561		1,126		2,179		30,679
		Substandard	27,088		22,384		32,530		6,699		322		54,450		5,576		149,049
		Substandard – nonaccrual	—		10,632		11,856		29,370		1,167		21,452		1,138		75,615
		Doubtful	—		—		—		—		—		—		—		—
		Not graded	264		1,601		421		355		—		24		—		2,665
Total commercial loans			$	357,456	$	634,268	$	1,322,414	$	729,781	$	274,515	$	502,342	$	466,132	$	4,286,908

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December 31, 2023
Term Loans
Amortized Cost Basis by Origination Year
(dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving loans Total
Commercial Commercial Acceptable credit quality $ 157,498 $ 96,295 $ 71,366 $ 36,680 $ 14,688 $ 42,827 $ 369,297 $ 788,651
Special mention 3,015 450 4 — 181 43 983 4,676
Substandard 4,485 13,651 420 342 253 4,961 4,940 29,052
Substandard – nonaccrual 1,238 — 1,321 25 79 360 536 3,559
Doubtful — — — — — — — —
Not graded — — — — — — — —
Subtotal 166,236 110,396 73,111 37,047 15,201 48,191 375,756 825,938
Commercial other Acceptable credit quality 139,057 195,726 100,946 59,392 32,848 28,946 90,928 647,843
Special mention — 532 399 114 107 4 1,682 2,838
Substandard 37 220 — — — — 639 896
Substandard – nonaccrual 1,819 1,918 449 184 361 94 116 4,941
Doubtful — — — — — — — —
Not graded 74 — — — — — — 74
Subtotal 140,987 198,396 101,794 59,690 33,316 29,044 93,365 656,592
Commercial real estate Non-owner occupied Acceptable credit quality 237,215 653,057 309,013 110,743 82,563 124,430 6,328 1,523,349
Special mention 4,480 — 181 457 — 274 — 5,392
Substandard 35,811 1,658 — — 17,835 22,911 — 78,215
Substandard – nonaccrual 5,573 — 154 999 7,597 1,389 — 15,712
Doubtful — — — — — — — —
Not graded — — — — — — — —
Subtotal 283,079 654,715 309,348 112,199 107,995 149,004 6,328 1,622,668
Owner occupied Acceptable credit quality 32,972 100,893 113,264 48,415 23,671 77,854 1,803 398,872
Special mention 5,750 — 129 — 149 177 8 6,213
Substandard — 7,716 265 — 705 12,310 — 20,996
Substandard – nonaccrual 126 9,431 28 171 27 689 304 10,776
Doubtful — — — — — — — —
Not graded — — — — — — — —
Subtotal 38,848 118,040 113,686 48,586 24,552 91,030 2,115 436,857
Multi-family Acceptable credit quality 4,483 170,519 25,835 28,137 10,185 11,538 254 250,951
Special mention — — — — — — — —
Substandard 8,140 — — — — 14,558 — 22,698
Substandard – nonaccrual 1,700 — 899 — 104 3,552 — 6,255
Doubtful — — — — — — — —
Not graded — — — — — — — —
Subtotal 14,323 170,519 26,734 28,137 10,289 29,648 254 279,904
Farmland Acceptable credit quality 10,104 4,735 13,405 12,255 3,723 18,636 1,439 64,297
Special mention — — 1,451 — — 96 — 1,547
Substandard — — 133 — 22 269 — 424
Substandard – nonaccrual — — — — — 1,100 48 1,148
Doubtful — — — — — — — —
Not graded — — — — — — — —
Subtotal 10,104 4,735 14,989 12,255 3,745 20,101 1,487 67,416
Construction and land development Acceptable credit quality 65,538 233,660 88,047 — 677 916 29,385 418,223
Special mention — — — — — 40 — 40
Substandard — — 16,594 — — — 15,349 31,943
Substandard – nonaccrual — — — — — 39 — 39
Doubtful — — — — — — — —
Not graded 1,535 432 356 — — 25 — 2,348
Subtotal 67,073 234,092 104,997 — 677 1,020 44,734 452,593
Total Acceptable credit quality 646,867 1,454,885 721,876 295,622 168,355 305,147 499,434 4,092,186
Special mention 13,245 982 2,164 571 437 634 2,673 20,706
Substandard 48,473 23,245 17,412 342 18,815 55,009 20,928 184,224
Substandard – nonaccrual 10,456 11,349 2,851 1,379 8,168 7,223 1,004 42,430
Doubtful — — — — — — — —
Not graded 1,609 432 356 — — 25 — 2,422
Total commercial loans $ 720,650 $ 1,490,893 $ 744,659 $ 297,914 $ 195,775 $ 368,038 $ 524,039 $ 4,341,968

Table of Contents

The following table presents the gross charge-offs by class of loan and year of origination on the commercial loan portfolio for the three months ended March 31, 2024:


		Term Loans by Origination Year
(dollars in thousands)		2024		2023		2022		2021		2020		Prior		Revolving Loans		Total










For the three months ended March 31, 2024
Commercial	Commercial	$	—	$	—	$	—	$	—	$	10	$	1	$	102	$	113
	Commercial Other	—		866		1,074		294		20		43		—		2,297
Commercial Real Estate	Non-owner occupied	—		—		—		—		—		—		—		—
	Owner occupied	—		—		—		—		138		553		—		691
	Multi-family	—		—		—		—		—		—		—		—

Construction and land development		—		—		—		—		—		—		—		—
Total gross commercial charge-offs		$	—	$	866	$	1,074	$	294	$	168	$	597	$	102	$	3,101

The Company evaluates the credit quality of its other loan ~~portfolio~~portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity. Accordingly, loans on nonaccrual status ~~any loan~~and loans past due 90 days or more and still accruing interest ~~and loans modified under troubled debt restructurings~~ are considered to be ~~impaired~~nonperforming for purposes of credit quality evaluation. The following ~~table presents~~tables present the recorded investment of our other loan portfolio ~~(excluding PCI loans)~~ based on the credit risk profile of loans that are performing and loans that are ~~impaired~~nonperforming as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 (in thousands):~~

September 30, 2017

December 31, 2016


Residential



Lease


Residential



Lease


Real Estate

Consumer

Financing

Total

Real Estate

Consumer

Financing

Total

Performing

$
433,653

$
342,586

$
199,784

$
976,023

$
242,127

$
269,492

$
190,148

$
701,767

Impaired

5,320

277

1,062

6,659

5,029

213

1,331

6,573

Total (excluding PCI)

$
438,973

$
342,863

$
200,846

$
982,682

$
247,156

$
269,705

$
191,479

$
708,340

~~Impaired Loans~~

Impaired loans include loans on nonaccrual status, any loan past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings. Impaired loans at September 30, 2017 and December 31, 2016 do not include $26.5 million and $28.3 million, respectively, of PCI loans. The risk of credit loss on acquired loans was recognized as part of the fair value adjustment at the acquisition date.

~~A summary of impaired loans (excluding PCI loans) as of September 30, 2017 and December 31, 2016 is as follows (in thousands):~~

September 30,

December 31,


2017

2016

Nonaccrual loans:

Commercial

$
1,469

$
3,559

Commercial real estate

21,454

7,145

Construction and land development

—

21

Residential real estate

4,355

4,629

Consumer

273

187

Lease financing

1,062

1,330

Total nonaccrual loans

28,613

16,871

Accruing loans contractually past due 90 days or more as to interest or principal payments:

Commercial

2,212

2,378

Commercial real estate

—

—

Construction and land development

45

—

Residential real estate

193

—

Consumer

4

26

Lease financing

—

1

Total accruing loans contractually past due 90 days or more as to interest or principal payments

2,454

2,405

Loans modified under troubled debt restructurings and still accruing:

Commercial

319

611

Commercial real estate

1,214

11,253

Construction and land development

59

63

Residential real estate

772

400

Consumer

—

—

Lease financing

—

—

Total loans modified under troubled debt restructurings and still accruing

2,364

12,327

Total impaired loans (excluding PCI)

$
33,431

$
31,603

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 30, 2017 and 2016 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 $124,000 and $532,000 for the three and nine months ended September 30, 2017, respectively, and $243,000 and $484,000 for the three and nine months ended September 30, 2016, respectively. The Company recognized interest income on commercial and commercial real estate loans modified under troubled debt restructurings of $40,000 and $59,000 for the three and nine months ended September 30, 2017, respectively, and $90,000 and $196,000 for the comparable periods in 2016, respectively.

2023:


			March 31, 2024
			Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)			2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
Residential real estate	Residential first lien	Performing	$	5,943	$	43,221	$	73,140	$	36,738	$	28,978	$	124,818	$	12	$	312,850
		Nonperforming	—		176		—		331		—		2,953		—		3,460
		Subtotal	5,943		43,397		73,140		37,069		28,978		127,771		12		316,310

	Other residential	Performing	542		2,465		1,039		329		375		2,542		54,311		61,603
		Nonperforming	—		—		—		24		—		169		477		670
		Subtotal	542		2,465		1,039		353		375		2,711		54,788		62,273

Consumer	Consumer	Performing	2,856		27,585		21,508		29,044		5,203		11,971		900		99,067
		Nonperforming	—		15		42		9		—		23		1		90
		Subtotal	2,856		27,600		21,550		29,053		5,203		11,994		901		99,157

	Consumer other	Performing	20		183,855		350,647		128,536		50,076		24,798		—		737,932
		Nonperforming	—		—		—		—		—		3		—		3
		Subtotal	20		183,855		350,647		128,536		50,076		24,801		—		737,935

Leases financing		Performing	30,896		128,315		144,134		65,687		43,798		32,844		—		445,674
		Nonperforming	—		1,342		5,107		2,720		261		775		—		10,205
		Subtotal	30,896		129,657		149,241		68,407		44,059		33,619		—		455,879

Total		Performing	40,257		385,441		590,468		260,334		128,430		196,973		55,223		1,657,126
		Nonperforming	—		1,533		5,149		3,084		261		3,923		478		14,428
Total other loans			$	40,257	$	386,974	$	595,617	$	263,418	$	128,691	$	200,896	$	55,701	$	1,671,554

Table of Contents

~~The following table presents impaired loans (excluding PCI loans) by portfolio and related valuation allowance as of September 30, 2017 and December 31, 2016 (in thousands):~~

September 30, 2017

December 31, 2016

Unpaid

Related

Unpaid

Related

Recorded

Principal

Valuation

Recorded

Principal

Valuation

Investment

Balance

Allowance

Investment

Balance

Allowance

Impaired loans with a valuation allowance:

Commercial

$
3,047

$
3,111

$
500

$
3,877

$
3,888

$
882

Commercial real estate

16,454

17,540

3,570

2,142

2,331

309

Construction and land development

104

104

10

84

84

8

Residential real estate

3,056

3,634

490

3,735

4,404

604

Consumer

277

289

31

213

190

23

Lease financing

757

757

186

1,331

1,331

356

Total impaired loans with a valuation allowance

23,695

25,435

4,787

11,382

12,228

2,182

Impaired loans with no related valuation allowance:

Commercial

953

5,874

—

2,671

7,567

—

Commercial real estate

6,214

8,291

—

16,256

17,058

—

Construction and land development

—

813

—

—

—

—

Residential real estate

2,264

2,500

—

1,294

1,462

—

Consumer

—

—

—

—

26

—

Lease financing

305

305

—

—

—

—

Total impaired loans with no related valuation allowance

9,736

17,783

—

20,221

26,113

—

Total impaired loans:

Commercial

4,000

8,985

500

6,548

11,455

882

Commercial real estate

22,668

25,831

3,570

18,398

19,389

309

Construction and land development

104

917

10

84

84

8

Residential real estate

5,320

6,134

490

5,029

5,866

604

Consumer

277

289

31

213

216

23

Lease financing

1,062

1,062

186

1,331

1,331

356

Total impaired loans (excluding PCI)

$
33,431

$
43,218

$
4,787

$
31,603

$
38,341

$
2,182

The difference between a loan’s recorded investment and the unpaid principal balance represents: (1) a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan’s principal balance and management’s assessment that the full collection of the loan balance is not likely and/or (2) payments received on nonaccrual loans that are fully applied to principal on the loan’s recorded investment as compared to being applied to principal and interest on the unpaid customer principal and interest balance. The difference between the recorded investment and the unpaid principal balance on loans was $9.8 million and $6.7 million at September 30, 2017 and December 31, 2016, respectively.


			December 31, 2023
			Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)			2023		2022		2021		2020		2019		Prior		Revolving loans		Total
Residential real estate	Residential first lien	Performing	$	42,550	$	74,613	$	37,009	$	29,628	$	19,647	$	110,703	$	4	$	314,154
		Nonperforming	179		50		335		—		139		2,531		—		3,234
		Subtotal	42,729		74,663		37,344		29,628		19,786		113,234		4		317,388

	Other residential	Performing	3,245		1,113		377		409		836		2,009		54,571		62,560
		Nonperforming	—		9		—		—		—		178		448		635
		Subtotal	3,245		1,122		377		409		836		2,187		55,019		63,195

Consumer	Consumer	Performing	30,748		24,190		31,946		6,116		2,313		10,794		1,502		107,609
		Nonperforming	11		55		6		6		—		56		—		134
		Subtotal	30,759		24,245		31,952		6,122		2,313		10,850		1,502		107,743

	Consumer other	Performing	190,018		392,184		149,791		63,461		23,991		7,987		—		827,432
		Nonperforming	—		—		—		—		—		3		—		3
		Subtotal	190,018		392,184		149,791		63,461		23,991		7,990		—		827,435

Leases financing		Performing	143,334		157,059		74,359		50,174		30,428		8,863		—		464,217
		Nonperforming	1,485		5,043		1,482		317		612		194		—		9,133
		Subtotal	144,819		162,102		75,841		50,491		31,040		9,057		—		473,350

Total
		Performing	409,895		649,159		293,482		149,788		77,215		140,356		56,077		1,775,972
		Nonperforming	1,675		5,157		1,823		323		751		2,962		448		13,139
Total other loans			$	411,570	$	654,316	$	295,305	$	150,111	$	77,966	$	143,318	$	56,525	$	1,789,111

~~Table of Contents~~

The average balance of impaired loans (excluding PCI loans) and interest income recognized on impaired loans during the three months ended September 30, 2017 and 2016 are included in the table below (in thousands):

Three Months Ended September 30,

2017

2016




Interest Income


Interest Income

Average

Recognized

Average

Recognized

Recorded

While on

Recorded

While on

Investment

Impaired Status

Investment

Impaired Status

Impaired loans with a valuation allowance:

Commercial

$
3,054

$
6

$
6,426

$
23

Commercial real estate

16,243

34

2,170

65

Construction and land development

104

2

65

3

Residential real estate

3,090

9

3,157

13

Consumer

289

—

115

—

Lease financing

757

—

727

—

Total impaired loans with a valuation allowance

23,537

51

12,660

104

Impaired loans with no related valuation allowance:

Commercial

2,912

—

439

2

Commercial real estate

6,238

—

15,610

—

Construction and land development

—

—

—

—

Residential real estate

2,276

2

1,341

1

Consumer

—

—

91

—

Lease financing

305

—

—

—

Total impaired loans with no related valuation allowance

11,731

2

17,481

3

Total impaired loans:

Commercial

5,966

6

6,865

25

Commercial real estate

22,481

34

17,780

65

Construction and land development

104

2

65

3

Residential real estate

5,366

11

4,498

14

Consumer

289

—

206

—

Lease financing

1,062

—

727

—

Total impaired loans (excluding PCI)

$
35,268

$
53

$
30,141

$
107

~~Table of Contents~~

The average balance of impaired loans (excluding PCI loans) and interest income recognized on impaired loans during the nine months ended September 30, 2017 and 2016 are included in the table below (in thousands):

Nine Months Ended September 30,

2017

2016

Interest Income

Interest Income

Average

Recognized

Average

Recognized

Recorded

While on

Recorded

While on

Investment

Impaired Status

Investment

Impaired Status

Impaired loans with a valuation allowance:

Commercial

$
3,068

$
8

$
8,115

$
24

Commercial real estate

16,808

51

2,273

115

Construction and land development

106

3

66

6

Residential real estate

3,032

12

3,234

24

Consumer

311

—

118

—

Lease financing

757

—

727

—

Total impaired loans with a valuation allowance

24,082

74

14,533

169

Impaired loans with no related valuation allowance:

Commercial

3,199

—

313

1

Commercial real estate

6,332

—

15,742

56

Construction and land development

—

—

—

—

Residential real estate

2,174

3

1,364

3

Consumer

—

—

91

—

Lease financing

305

—

—

—

Total impaired loans with no related valuation allowance

12,010

3

17,510

60

Total impaired loans:

Commercial

6,267

8

8,428

25

Commercial real estate

23,140

51

18,015

171

Construction and land development

106

3

66

6

Residential real estate

5,206

15

4,598

27

Consumer

311

—

209

—

Lease financing

1,062

—

727

—

Total impaired loans (excluding PCI)

$
36,092

$
77

$
32,043

$
229

~~Table of Contents~~

The following table presents the ~~aging status~~gross charge-offs by class of ~~the recorded investment in loans by portfolio (excluding PCI loans) as of September 30, 2017 (in thousands):~~

Accruing Loans

30-59

60-89

Past Due

Days

Days

90 Days

Nonaccrual

Total

Total

Past Due

Past Due

or More

Loans

Past Due

Current

Loans

Commercial

$
3,395

$
2,161

$
2,212

$
1,469

$
9,237

$
501,220

$
510,457

Commercial real estate

364

1,044

—

21,454

22,862

1,433,758

1,456,620

Construction and land development

115

67

45

—

227

181,536

181,763

Residential real estate

2,271

228

193

4,355

7,047

431,926

438,973

Consumer

2,055

1,228

4

273

3,560

339,303

342,863

Lease financing

598

—

—

1,062

1,660

199,186

200,846

Total (excluding PCI)

$
8,798

$
4,728

$
2,454

$
28,613

$
44,593

$
3,086,929

$
3,131,522

~~The following table presents the aging status of the recorded investment in loans by portfolio (excluding PCI loans) as of December 31, 2016 (in thousands):~~

Accruing Loans

30-59

60-89

Past Due

Days

Days

90 Days

Nonaccrual

Total

Total

Past Due

Past Due

or More

Loans

Past Due

Current

Loans

Commercial

$
3,326

$
138

$
2,378

$
3,559

$
9,401

$
444,909

$
454,310

Commercial real estate

648

787

—

7,145

8,580

955,315

963,895

Construction and land development

—

—

—

21

21

165,154

165,175

Residential real estate

3,472

13

—

4,629

8,114

239,042

247,156

Consumer

1,701

588

26

187

2,502

267,203

269,705

Lease financing

94

—

1

1,330

1,425

190,054

191,479

Total (excluding PCI)

$
9,241

$
1,526

$
2,405

$
16,871

$
30,043

$
2,261,677

$
2,291,720

~~Troubled Debt Restructurings~~

A loan is categorized as a troubled debt restructuring (“TDR”) if a concession is granted to provide for a reduction of either interest or principal due to deterioration in the financial condition of the borrower. TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans with market terms on one loan and ~~concessionary terms~~year of origination on the other ~~loans, receipts~~loan portfolio for the three months ended March 31, 2024:


		Term Loans by Origination Year
(dollars in thousands)		2024		2023		2022		2021		2020		Prior		Revolving Loans		Total








For the three months ended March 31, 2024
Residential real estate	Residential first lien	$	—	$	—	$	11	$	—	$	—	$	—	$	—	$	11
	Other residential	—		—		16		—		—		—		8		24
Consumer	Consumer	—		—		—		—		6		27		—		33
	Consumer other	—		—		—		—		—		202		—		202
Lease financing		—		123		1,371		114		37		20		—		1,665
Total gross other charge-offs		$	—	$	123	$	1,398	$	114	$	43	$	249	$	8	$	1,935

Table of Contents

NOTE 4 – PREMISES, EQUIPMENT AND LEASES

A summary of premises, equipment and leases at March 31, 2024 and December 31, 2023 is as follows:


	March 31,		December 31,
(dollars in thousands)	2024		2023
Land	$	15,968	$	15,968
Buildings and improvements	78,196		78,104
Furniture and equipment	35,461		35,797
Lease right-of-use assets	7,492		7,673
Total	137,117		137,542
Accumulated depreciation	(55,286)		(54,728)
Premises and equipment, net	$	81,831	$	82,814

Depreciation expense for the three months ended March 31, 2024 and 2023 was $1.2 million for each period.

The Company has entered into operating leases, primarily for banking offices and operating facilities, which have remaining lease terms of 7 months to 14 years, some of which may include options to extend the lease terms for up to an additional 10 years. The options to extend are included in the remaining lease term if they are reasonably certain to be exercised. The Company had operating lease right-of-use assets ~~from a debtor~~of $7.5 million and $7.7 million as of March 31, 2024 and December 31, 2023, respectively, included in ~~partial or full satisfaction of a loan, the extension~~premises and equipment on our consolidated balance sheets. The operating lease liabilities of the ~~maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction~~Company were $9.0 million and $9.3 million as of ~~the face amount or maturity of the debt as stated~~March 31, 2024 and December 31, 2023, respectively, and are included in ~~the instrument or other agreement, the reduction of~~ accrued interest payable and other liabilities on our consolidated balance sheets.

Information related to operating leases for the ~~release of a personal guarantee in a bankruptcy situation or any other concessionary type of renegotiated debt. Loans are not classified~~three months ended March 31, 2024 and 2023 was as ~~TDRs when~~follows:


	Three Months Ended March 31,
(dollars in thousands)	2024			2023
Operating lease cost	$	476		$	484
Operating cash flows from leases	572			590
Right-of-use assets obtained in exchange for lease obligations	222			1,130

Weighted average remaining lease term	7.61 years			8.10 years
Weighted average discount rate	3.44		%	3.26		%

The projected minimum rental payments under the ~~modification is short-term or results in only an insignificant delay or shortfall in the payments to be received.~~

Loans modified as TDRs for commercial and commercial real estate loans generally consist of allowing commercial borrowers to defer scheduled principal payments and make interest only payments for a specified period of time at the stated interest rate of the original loan agreement or lower payments due to a modification of the loans’ contractual terms. TDRs that continue to accrue interest and are greater than $50,000 are individually evaluated for impairment, on a quarterly basis, and transferred to nonaccrual status when it is probable that any remaining principal and interest payments due on the loan will not be collected in accordance with the contractual terms of the ~~loan. TDRs that subsequently default are individually evaluated for impairment at the time of default. The allowance for loan losses on TDRs totaled $2.4 million and $203,000~~leases as of ~~September 30, 2017 and December~~March 31, ~~2016, respectively. The Company had no unfunded commitments in connection with TDRs at September 30, 2017 and December 31, 2016.~~

~~Table of Contents~~

The Company’s TDRs are identified on a case-by-case basis in connection with the ongoing loan collection processes. The following table presents TDRs by loan portfolio (excluding PCI loans) as of September 30, 2017 and December 31, 2016 (in thousands):

September 30, 2017

December 31, 2016

Accruing (1)

Non-accrual (2)

Total

Accruing (1)

Non-accrual (2)

Total
Commercial

$
319

$
—

$
319

$
611

$
—

$
611
Commercial real estate

1,214

14,812

16,026

11,253

5,098

16,351
Construction and land development

59

—

59

63

—

63
Residential real estate

772

614

1,386

400

527

927
Consumer

—

—

—

—

—

—
Lease financing

—

—

—

—

—

—
Total loans (excluding PCI)

$
2,364

$
15,426

$
17,790

$
12,327

$
5,625

$
17,952

~~(1)~~

~~These loans are still accruing interest.~~

~~(2)~~

~~These loans are included in non-accrual loans in the preceding tables.~~

The following table presents a summary of loans by portfolio that were restructured during the three and nine months ended September 30, 2017 and the loans by portfolio that were modified as TDRs within the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2017 (dollars in thousands):

Commercial Loan Portfolio

Other Loan Portfolio

Commercial

Construction

Residential

Real

and Land

Real

Lease

Commercial

Estate

Development

Estate

Consumer

Financing

Total

For the Three Months Ended September 30, 2017:

Troubled debt restructurings:












Number of loans

—

—

—

1

—

—

1

Pre-modification outstanding balance

$
—

$
—

$
—

$
91

$
—

$
—

$
91

Post-modification outstanding balance

—

—

—

90

—

—

90

Troubled debt restructurings that subsequently defaulted

Number of loans

—

—

—

—

—

—

—

Recorded balance

$
—

$
—

$
—

$
—

$
—

$
—

$
—

For the Nine Months Ended September 30, 2017:

Troubled debt restructurings:












Number of loans

1

—

—

3

—

—

4

Pre-modification outstanding balance

$
362

$
—

$
—

$
475

$
—

$
—

$
837

Post-modification outstanding balance

339

—

—

474

—

—

813

Troubled debt restructurings that subsequently defaulted

Number of loans

—

—

—

—

—

—

—

Recorded balance

$
—

$
—

$
—

$
—

$
—

$
—

$
—

~~Table of Contents~~

The following table presents a summary of loans by portfolio that were restructured during the three and nine months ended September 30, 2016 and the loans by portfolio that were modified as TDRs within the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2016 (dollars in thousands):

Commercial Loan Portfolio

Other Loan Portfolio

Commercial

Construction

Residential

Real

and Land

Real

Lease

Commercial

Estate

Development

Estate

Consumer

Financing

Total

For the Three Months Ended September 30, 2016:

Troubled debt restructurings:



















Number of loans

—

2

—

—

—

—

2

Pre-modification outstanding balance

$
—

$
10,207

$
—

$
—

$
—

$
—

$
10,207

Post-modification outstanding balance

—

10,207

—

—

—

—

10,207

Troubled debt restructurings that subsequently defaulted

Number of loans

—

—

—

—

—

—

—

Recorded balance

$
—

$
—

$
—

$
—

$
—

$
—

$
—

For the Nine Months Ended September 30, 2016:

Troubled debt restructurings:



















Number of loans

3

2

—

—

—

—

5

Pre-modification outstanding balance

$
685

$
10,207

$
—

$
—

$
—

$
—

$
10,892

Post-modification outstanding balance

647

10,207

—

—

—

—

10,854

Troubled debt restructurings that subsequently defaulted

Number of loans

—

—

—

—

—

—

—

Recorded balance

$
—

$
—

$
—

$
—

$
—

$
—

$
—

~~Purchased Credit Impaired Loans~~

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. PCI loans are purchased loans that have evidence of credit deterioration since origination, and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include factors such as past due and nonaccrual status. The difference between contractually required principal and interest at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in impairment, which is recorded as provision for loan losses in the consolidated statements of income. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from non-accretable to accretable with a positive impact on interest income. Further, any excess cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. Accretion recorded as loan interest income totaled $1.1 million and $4.3 million during the three and nine months ended September 30, 2017, respectively, and $1.8 million and $7.1 million during the three and nine months ended September 30, 2016, respectively.

~~Accretable yield of PCI loans, or income expected to be collected, is as follows (in thousands):~~

Nine Months Ended

September 30,

2017

2016

Balance, beginning of period

$
9,035

$
10,526

New loans purchased – Centrue acquisition

2,111

—

Accretion

(4,276)

(7,066)

Other adjustments (including maturities, charge-offs and impact of changes in timing of expected cash flows)

(1,558)

(96)

Reclassification from non-accretable

1,519

4,302

Balance, end of period

$
6,831

$
7,666

~~Table of Contents~~

~~Allowance for Loan Losses~~

The Company’s loan portfolio is principally comprised of commercial, commercial real estate, construction and land development, residential real estate and consumer loans and lease financing receivables. The principal risks to each category of loans are as follows:

~~Commercial~~ – The principal risk of commercial loans is that these loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans. Most often, this collateral consists of accounts receivable, inventory and equipment. Inventory and equipment may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired. As such, repayment of such loans is often more sensitive than other types of loans to adverse conditions in the general economy.

~~Commercial real estate~~ – As with commercial loans, repayment of commercial real estate loans is often dependent on the borrower’s ability to make repayment from the cash flow of the commercial venture. While commercial real estate loans are collateralized by the borrower’s underlying real estate, foreclosure on such assets may be more difficult than with other types of collateralized loans because of the possible effect the foreclosure would have on the borrower’s business, and property values may tend to be partially based upon the value of the business situated on the property.

~~Construction and land development –~~ Construction and land development lending involves additional risks not generally present in other types of lending because funds are advanced upon the estimated future value of the project, which is uncertain prior to its completion and at the time the loan is made, and costs may exceed realizable values in declining real estate markets. Moreover, if the estimate of the value of the completed project proves to be overstated or market values or rental rates decline, the collateral may prove to be inadequate security for the repayment of the loan. Additional funds may also be required to complete the project, and the project may have to be held for an unspecified period of time before a disposition can occur.

~~Residential real estate~~ – The principal risk to residential real estate lending is associated with residential loans not sold into the secondary market. In such cases, the value of the underlying property may have deteriorated as a result of a change in the residential real estate market, and the borrower may have little incentive to repay the loan or continue living in the property. Additionally, in areas with high vacancy rates, reselling the property without substantial loss may be difficult.

~~Consumer~~ – The repayment of consumer loans is typically dependent on the borrower remaining employed through the life of the loan, as well as the possibility that the collateral underlying the loan may not be adequately maintained by the borrower.

~~Lease financing~~ – Our indirect financing leases are primarily for business equipment leased to varying types of small businesses. If the cash flow from business operations is reduced, the business’s ability to repay may become impaired.

~~Table of Contents~~

~~Changes in the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):~~

Three Months Ended September 30,

2017

2016

Non-PCI

PCI

Non-PCI

PCI

Loans

Loans

Total

Loans

Loans

Total

Balance, beginning of period

$
14,037

$
1,387

$
15,424

$
13,629

$
1,123

$
14,752

Provision for loan losses

1,435

54

1,489

1,156

236

1,392

Loan charge-offs

(335)

—

(335)

(806)

(58)

(864)

Loan recoveries

278

5

283

250

29

279

Net loan (charge-offs) recoveries

(57)

5

(52)

(556)

(29)

(585)

Balance, end of period

$
15,415

$
1,446

$
16,861

$
14,229

$
1,330

$
15,559

Nine Months Ended September 30,

2017

2016

Non-PCI

PCI

Non-PCI

PCI

Loans

Loans

Total

Loans

Loans

Total

Balance, beginning of period

$
13,744

$
1,118

$
14,862

$
14,093
   ��
$
1,895

$
15,988

Provision for loan losses

3,260

220

3,480

3,752

(606)

3,146

Loan charge-offs

(2,856)

—

(2,856)

(4,228)

(58)

(4,286)

Loan recoveries

1,267

108

1,375

612

99

711

Net loan (charge-offs) recoveries

(1,589)

108

(1,481)

(3,616)

41

(3,575)

Balance, end of period

$
15,415

$
1,446

$
16,861

$
14,229

$
1,330

$
15,559

~~The following table represents, by loan portfolio, a summary of changes in the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016 (in thousands):~~

Commercial Loan Portfolio

Other Loan Portfolio

Commercial

Construction

Residential

Real

and Land

Real

Lease

Commercial

Estate

Development

Estate

Consumer

Financing

Total

Changes in allowance for loan losses for the three months ended September 30, 2017:

Beginning balance

$
5,381

$
3,996

$
147

$
3,377

$
1,385

$
1,138

$
15,424

Provision for loan losses

(745)

2,715

55

(433)

(92)

(11)

1,489

Charge-offs

—

—

—

(128)

(105)

(102)

(335)

Recoveries

54

56

13

47

81

32

283

Ending balance

$
4,690

$
6,767

$
215

$
2,863

$
1,269

$
1,057

$
16,861

Changes in allowance for loan losses for the three months ended September 30, 2016:

Beginning balance

$
6,186

$
3,511

$
569

$
2,584

$
827

$
1,075

$
14,752

Provision for loan losses

1,216

(12)

(271)

220

326

(87)

1,392

Charge-offs

(251)

(214)

(1)

(153)

(91)

(154)

(864)

Recoveries

36

129

13

32

20

49

279

Ending balance

$
7,187

$
3,414

$
310

$
2,683

$
1,082

$
883

$
15,559

Changes in allowance for loan losses for the nine months ended September 30, 2017:

Beginning balance

$
5,920

$
3,225

$
345

$
2,929

$
930

$
1,513

$
14,862

Provision for loan losses

(630)

3,577

(178)

113

678

(80)

3,480

Charge-offs

(737)

(470)

—

(455)

(536)

(658)

(2,856)

Recoveries

137

435

48

276

197

282

1,375

Ending balance

$
4,690

$
6,767

$
215

$
2,863

$
1,269

$
1,057

$
16,861

Changes in allowance for loan losses for the nine months ended September 30, 2016:

Beginning balance

$
6,917

$
5,179

$
435

$
2,120

$
749

$
588

$
15,988

Provision for loan losses

2,619

(1,520)

(154)

886

479

836

3,146

Charge-offs

(2,513)

(461)

(1)

(454)

(225)

(632)

(4,286)

Recoveries

164

216

30

131

79

91

711

Ending balance

$
7,187

$
3,414

$
310

$
2,683

$
1,082

$
883

$
15,559

~~Table of Contents~~

The following table represents, by loan portfolio, details regarding the balance in the allowance for loan losses and the recorded investment in loans as of September 30, 2017 and December 31, 2016 by impairment evaluation method (in thousands):

Commercial Loan Portfolio

Other Loan Portfolio

Commercial

Construction

Residential

Real

and Land

Real

Lease

Commercial

Estate

Development

Estate

Consumer

Financing

Total

September 30, 2017:

Allowance for loan losses:

Loans individually evaluated for impairment

$
212

$
3,549

$
5

$
248

$
—

$
115

$
4,129

Loans collectively evaluated for impairment

288

21

5

242

31

71

658

Non-impaired loans collectively evaluated for impairment

3,702

2,872

204

1,893

1,086

871

10,628

Loans acquired with deteriorated credit quality (1)

488

325

1

480

152

—

1,446

Total allowance for loan losses

$
4,690

$
6,767

$
215

$
2,863

$
1,269

$
1,057

$
16,861

Recorded investment (loan balance):

Impaired loans individually evaluated for impairment

$
1,384

$
22,482

$
59

$
3,124

$
—

$
420

$
27,469

Impaired loans collectively evaluated for impairment

2,616

186

45

2,196

277

642

5,962

Non-impaired loans collectively evaluated for impairment

506,457

1,433,952

181,659

433,653

342,586

199,784

3,098,091

Loans acquired with deteriorated credit quality (1)

3,087

15,664

750

6,774

175

—

26,450

Total recorded investment (loan balance)

$
513,544

$
1,472,284

$
182,513

$
445,747

$
343,038

$
200,846

$
3,157,972

December 31, 2016:

Allowance for loan losses:

Loans individually evaluated for impairment

$
878

$
296

$
6

$
379

$
—

$
285

$
1,844

Loans collectively evaluated for impairment

4

13

2

225

23

71

338

Non-impaired loans collectively evaluated for impairment

4,539

2,684

337

1,968

877

1,157

11,562

Loans acquired with deteriorated credit quality (1)

499

232

—

357

30

—

1,118

Total allowance for loan losses

$
5,920

$
3,225

$
345

$
2,929

$
930

$
1,513

$
14,862

Recorded investment (loan balance):

Impaired loans individually evaluated for impairment

$
6,504

$
18,275

$
63

$
2,920

$
—

$
670

$
28,432

Impaired loans collectively evaluated for impairment

44

123

21

2,109

213

661

3,171

Non-impaired loans collectively evaluated for impairment

447,762

945,497

165,091

242,127

269,492

190,148

2,260,117

Loans acquired with deteriorated credit quality (1)

3,517

5,720

12,150

6,557

312

—

28,256

Total recorded investment (loan balance)

$
457,827

$
969,615

$
177,325

$
253,713

$
270,017

$
191,479

$
2,319,976

~~(1)~~

Loans acquired with deteriorated credit quality were originally recorded at fair value at the acquisition date and the risk of credit loss was recognized at that date based on estimates of expected cash flows.

~~Table of Contents~~

~~Note 7 – Mortgage Servicing Rights~~

At September 30, 2017 and December 31, 2016, the Company serviced mortgage loans for others totaling $5.95 billion and $5.64 billion, respectively. A summary of mortgage loans serviced for others as of September 30, 2017 and December 31, 2016 is as follows (in thousands):

September 30,

December 31,

2017

2016

Commercial FHA mortgage loans

$
3,895,455

$
3,811,066

Residential mortgage loans

2,053,933

1,833,443

Total loans serviced for others

$
5,949,388

$
5,644,509

~~Changes in our mortgage servicing rights~~2024 were as ~~follows for the three and nine months ended September 30, 2017 and 2016 (in thousands):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Mortgage servicing rights:

Balance, beginning of period

$
75,705

$
68,395

$
71,710

$
67,218

Servicing rights acquired – residential mortgage loans

—

—

1,933

—

Servicing rights transferred to held for sale - residential mortgage loans

(16,229)

—

(16,229)

—

Servicing rights capitalized – commercial FHA mortgage loans

1,432

3,506

5,020

5,777

Servicing rights capitalized – residential mortgage loans

435

1,125

1,656

2,764

Amortization – commercial FHA mortgage loans

(650)

(592)

(1,928)

(1,741)

Amortization – residential mortgage loans

(857)

(1,085)

(2,326)

(2,669)

Balance, end of period

59,836

71,349

59,836

71,349

Valuation allowances:

Balance, beginning of period

5,428

5,587

3,702

567

Additions

104

1,073

1,942

6,301

Reductions

—

—

(112)

(208)

Servicing rights transferred to held for sale - residential mortgage loans

(1,995)

—

(1,995)

—

Balance, end of period

3,537

6,660

3,537

6,660

Mortgage servicing rights, net

$
56,299

$
64,689

$
56,299

$
64,689

Fair value:

At beginning of period

$
70,277

$
62,960

$
68,008

$
66,700

At end of period

$
56,299

$
64,689

$
56,299

$
64,689

During the third quarter of 2017, the Company transferred $14.2 million of residential mortgage servicing rights, net of valuation allowance, to mortgage servicing rights held for sale. The Company has committed to a plan to sell certain residential mortgage servicing rights and has the ability to sell them to a buyer in their present condition. During the three and nine months ended September 30, 2017, the Company recognized a $3.6 million loss on mortgage servicing rights held for sale to reflect them at the lower of their carrying value or fair value less estimated costs to sell. As a result of recognizing this loss, mortgage servicing rights held for sale had a net carrying value of $10.6 million at September 30, 2017.

follows:


(dollars in thousands)	Amount
Year ending December 31:
2024 remaining	$	1,475
2025	1,402
2026	1,277
2027	1,132
2028	1,074
Thereafter	3,976
Total future minimum lease payments	10,336
Less imputed interest	(1,305)
Total operating lease liabilities	$	9,031

~~Table of Contents~~

The following table is a summary of key assumptions, representing both general economic and other published information and the weighted average characteristics of the commercial and residential portfolios, used in the valuation of servicing rights at September 30, 2017 and December 31, 2016. Assumptions used in the prepayment rate consider many factors as appropriate, including lockouts, balloons, prepayment penalties, interest rate ranges, delinquencies and geographic location. The discount rate is based on an average pre‑tax internal rate of return utilized by market participants in pricing the servicing portfolios. Significant increases or decreases in any one of these assumptions would result in a significantly lower or higher fair value measurement.

Remaining






Servicing

Interest

Years to

Prepayment

Servicing

Discount

Fee

Rate

Maturity

Rate

Cost

Rate
September 30, 2017:

Commercial FHA mortgage loans

0.13
%

3.67
%

30.3

8.25
%

$
1,000

10 - 12
%
Residential mortgage loans

0.26
%

3.93
%

22.6

11.52
%

$
67

9 - 11
%

December 31, 2016:

Commercial FHA mortgage loans

0.13
%

3.72
%

30.2

8.31
%

$
1,000

10 - 13
%
Residential mortgage loans

0.26
%

3.89
%

24.2

9.72
%

$
60

9 - 11
%

We recognize revenue from servicing commercial FHA and residential mortgages as earned based on the specific contractual terms. This revenue, along with amortization of and changes in impairment on servicing rights, is reported in commercial FHA revenue and residential mortgage banking revenue in the consolidated statements of income. ~~Mortgage servicing rights do not trade in an active market with readily observable prices.~~ The fair value of mortgage servicing rights and their sensitivity to changes in interest rates is influenced by the mix of the servicing portfolio and characteristics of each segment of the portfolio. The Company’s servicing portfolio consists of the distinct portfolios of government-insured residential and commercial mortgages and conventional residential mortgages. The fair value of our servicing rights is estimated by using a cash flow valuation model which calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, ~~cost to service, contractual servicing fee income, ancillary income, late fees, replacement reserves and other economic factors that are determined based on current market conditions.~~

~~Note 8~~NOTE 5 – ~~Goodwill and Intangible Assets~~

At September 30, 2017 and December 31, 2016, goodwill totaled $97.4 million and $48.8 million, respectively. Goodwill increased $46.1 million as a result of the acquisition of Centrue on June 9, 2017 and $2.4 million as a result of the acquisition of CedarPoint on March 28, 2017, as further discussed in Note 3 to the consolidated financial statements.

~~The Company’s intangible assets, consisting of core deposit and customer relationship intangibles,~~ ~~as of September 30, 2017 and December 31, 2016~~ ~~are summarized as follows (in thousands):~~

September 30, 2017

December 31, 2016

Gross

Gross

Carrying

Accumulated

Carrying

Accumulated

Amount

Amortization

Total

Amount

Amortization

Total

Core deposit intangibles

$
31,612

$
(17,998)

$
13,614

$
20,542

$
(16,181)

$
4,361

Customer relationship intangibles

7,471

(3,119)

4,352

5,471

(2,645)

2,826

Total intangible assets

$
39,083

$
(21,117)

$
17,966

$
26,013

$
(18,826)

$
7,187

In conjunction with the acquisition of Centrue on June 9, 2017, we recorded $11.1 million of core deposit intangibles, which are being amortized on an accelerated basis over an estimated useful life of eight years, as further discussed in Note 3 to the consolidated financial statements.

In conjunction with the acquisition of CedarPoint on March 28, 2017, we recorded $2.0 million of customer relationship intangibles, which are being amortized on a straight-line basis over 12 years, as further discussed in Note 3 to the consolidated financial statements.

Amortization of intangible assets was $1.2 million and $2.3 million for the three and nine months ended September 30, 2017, respectively, and $514,000 and $1.6 million for the comparable periods in 2016, respectively.

DERIVATIVE INSTRUMENTS

~~Table of Contents~~

~~Note 9 – Derivative Instruments~~

As part of the Company’s overall ~~management of~~ interest rate ~~sensitivity,~~risk management, the Company utilizes derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility, including interest rate lock commitments, ~~and~~ forward commitments to sell mortgage-backed ~~securities.~~

securities, cash flow hedges and interest rate swap contracts. The notional amount does not represent amounts exchanged by the parties, rather the amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements.

Table of Contents

Interest Rate Lock Commitments / Forward Commitments to Sell Mortgage-Backed Securities

~~Derivative instruments issued by the~~

The Company ~~consist of~~issues interest rate lock commitments ~~to originate~~on originated fixed-rate residential real estate loans to be sold. ~~Commitments to originate fixed-rate loans consist of commercial and residential real estate loans.~~ The interest rate lock commitments and loans held for sale are hedged with forward contracts to sell mortgage-backed securities. The fair value of the interest rate lock commitments and forward contracts to sell mortgage-backed securities are included in other assets or other liabilities in the consolidated balance sheets. Changes in the fair value of derivative financial instruments are recognized in ~~commercial FHA revenue and~~ residential mortgage banking revenue in the consolidated statements of income.

The following table summarizes the interest rate lock commitments and forward commitments to sell mortgage-backed securities held by the Company, their notional amount and estimated fair values ~~and the location in which the derivative instruments are reported in the consolidated balances sheets~~ at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 (in thousands):~~

2023:

Notional Amount

Fair Value Gain


September 30,

December 31,

September 30,

December 31,

2017

2016

2017

2016

Derivative Instruments (included in Other Assets):

Interest rate lock commitments

$
337,280

$
264,359

$
6,421

$
6,253

Forward commitments to sell mortgage-backed securities

349,945

301,788

5

125

Total

$
687,225

$
566,147

$
6,426

$
6,378


	Notional amount				Fair value gain
(dollars in thousands)	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Derivative instruments (included in other assets):
Interest rate lock commitments	$	5,564	$	2,405	$	116	$	62

~~Net losses of $1.1 million~~


	Notional amount				Fair value loss
(dollars in thousands)	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Derivative instruments (included in other liabilities):

Forward commitments to sell mortgage-backed securities	$	8,500	$	5,000	$	19	$	83

During both the three months ended March 31, 2024 and 2023, the Company recognized net gains of ~~$48,000 were recognized~~$0.1 million on derivative instruments for the three and nine months ended September 30, 2017, respectively. Net losses of $5.2 million and net gains of $527,000 were recognized on derivative instruments for the three and nine months ended September 30, 2016, respectively. Net gains and losses on derivative instruments were recognized in ~~commercial FHA revenue and~~ residential mortgage banking revenue in the consolidated statements of income.

Cash Flow Hedges

The Company periodically enters into interest rate swap agreements, which qualify as cash flow hedges, to manage the risk of changes in future cash flows due to interest rate fluctuations. The following table summarizes the Company's receive-fixed, pay-variable interest rate swaps on certain pools of loans indexed to prime at March 31, 2024 and December 31, 2023


(dollars in thousands)	March 31, 2024			December 31, 2023
Notional Amount	$	425,000		$	400,000
Fair value loss included in other liabilities	(8,895)			(8,443)
Tax effected amount included in accumulated other comprehensive (loss) income	(5,693)			(6,164)
Average remaining life	2.56			2.67
Weighted average pay rate	6.37		%	6.55		%
Weighted average receive rate	5.40		%	5.41		%

Interest Rate Swap Contracts

Not Designated as Hedges

The Company entered into ~~derivative instruments related to~~ interest rate swap contracts sold to commercial customers who wish to modify their interest rate sensitivity. These swaps are offset by contracts simultaneously purchased by the Company from other financial dealer institutions with mirror-image terms. Because of the mirror-image terms of the offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in the fair value subsequent to initial recognition have a minimal effect on earnings. These derivative contracts do not qualify for hedge accounting.

The notional amounts of ~~these~~the customer derivative instruments and the offsetting counterparty derivative instruments were ~~$10.1~~$6.8 million and $6.9 million at ~~September 30, 2017.~~March 31, 2024 and December 31, 2023, respectively. The fair value of the customer derivative instruments and the offsetting counterparty derivative instruments was ~~$121,000~~$0.4 million and $0.3 million at ~~September 30, 2017,~~March 31, 2024 and December 31, 2023, respectively, which are included in other assets and other liabilities, respectively, on the consolidated balance sheets.

~~Note 10~~NOTE 6 – ~~Deposits~~

DEPOSITS

The following table summarizes the classification of deposits as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 (in thousands):~~

2023:

NOTE 7 – ~~Short-Term Borrowings~~

SHORT-TERM BORROWINGS

The following table presents the distribution of ~~short-term borrowings~~securities sold under agreements to repurchase and federal funds purchased and the related weighted average interest rates as of ~~and for the nine months ended September 30, 2017 and as of and for the year ended December~~March 31, ~~2016 (in thousands):~~

Repurchase Agreements

September 30,

December 31,

2017

2016
Outstanding at period-end

$
153,443

$
131,557

Average amount outstanding

157,388

130,228

Maximum amount outstanding at any month end

183,327

168,369

Weighted average interest rate:

During period

0.22
%

0.23
%
End of period

0.23
%

0.21
%

~~At September 30, 2017, the Company had federal funds lines of credit totaling $55.0 million. The lines of credit were unused at September 30, 2017.~~

Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction, which represents the amount of the Bank’s obligation. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. Investment securities with a carrying amount of $185.7 million and $140.0 million at September 30, 2017 and December 31, 2016, respectively, were pledged for securities sold under agreements to repurchase.

The Company had lines of credit of $23.2 million and $35.1 million at September 30, 2017 and December 31, 2016, respectively, from the Federal Reserve Discount Window. The lines are collateralized by a collateral agreement with respect to a pool of commercial real estate loans totaling $31.5 million and $43.3 million at September 30, 2017 and December 31, 2016, respectively. There were no outstanding borrowings at September 30, 2017 and December 31, 2016.

2024:

~~Note 12~~NOTE 8 – FHLB ~~Advances and Other Borrowings~~

ADVANCES AND OTHER BORROWINGS

The following table summarizes our ~~Federal Home Loan Bank (“FHLB”)~~FHLB advances and other borrowings as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 (in thousands):~~

2023:

September 30,

December 31,


2017

2016

Midland States Bancorp, Inc.

Term loan - variable interest rate equal to LIBOR plus 2.25%, which was 3.50% at September 30, 2017 – maturing through May 25, 2020

$
38,539

$
—

Series G redeemable preferred stock - 181 shares at $1,000 per share

181

—

Midland States Bank

FHLB advances – fixed rate, fixed term of $176.0 million and $112.5 million, at rates averaging 1.28% and 1.00% at September 30, 2017 and December 31, 2016, respectively – maturing through June 2021, and putable fixed rate of $235.0 million and $125.0 million at rates averaging 1.10% and 0.79% at September 30, 2017 and December 31, 2016, respectively, – maturing through August 2023 with call provisions through June 2019

411,144

237,500

FHLB advances – variable rate, fixed term, at rates averaging 0.85% at September 30, 2017 – maturing through March 2018

39,000

—

Other

6

18

Total FHLB advances and other borrowings

$
488,870

$
237,518


(dollars in thousands)	March 31, 2024		December 31, 2023


FHLB advances – fixed rate, fixed term at rates averaging 4.64% and 4.94% at March 31, 2024 and December 31, 2023 - maturing through February 2029	$	100,000	$	150,000
FHLB advances – putable fixed rate at rates averaging 3.11% and 3.07% at March 31, 2024 and December 31, 2023, respectively – maturing through February 2028 with call provisions through October 2024	155,000		160,000

FHLB advances – Short term fixed rate at rates averaging 5.45% at December 31, 2023 – matured January 2024	—		166,000
Total FHLB advances and other borrowings	$	255,000	$	476,000

NOTE 9 – ~~Subordinated Debt~~

SUBORDINATED DEBT

The following table summarizes the Company’s subordinated debt ~~as of September 30, 2017~~at March 31, 2024 and December 31, ~~2016 (in thousands):~~

September 30,

December 31,

2017

2016

Subordinated debt issued June 2015 – fixed interest rate of 6.00% for the first five years through June 2020 and a variable interest rate equivalent to three month LIBOR plus 4.35% thereafter, $40,325 maturing June 18, 2025

$
39,783

$
39,729

Subordinated debt issued June 2015 – fixed interest rate of 6.50%, $15,000 maturing June 18, 2025

14,798

14,779

Total subordinated debt

$
54,581

$
54,508

2023:


	Subordinated debt
	Fixed to Float
(dollars in thousands)	Issued September 2019			Issued September 2019			Total
At March 31, 2024
Outstanding amount	$	66,750		$	27,250		$	94,000
Carrying amount	66,632			26,985			93,617
Current rate	5.00		%	5.50		%
At December 31, 2023
Outstanding amount	$	66,750		$	27,250		$	94,000
Carrying amount	66,573			26,973			93,546
Current rate	5.00		%	5.50		%
Maturity date	9/30/2029			9/30/2034
Optional redemption date	9/30/2024			9/30/2029
Fixed to variable conversion date	9/30/2024			9/30/2029
Variable rate	3-month SOFR plus 3.61%			3-month SOFR plus 4.05%
Interest payment terms	Semiannually			Semiannually

~~Note 14 – Trust Preferred Debentures~~

The ~~following table summarizes the Company’s trust preferred debentures as of September 30, 2017 and December 31, 2016 (in thousands):~~

September 30,

December 31,


2017

2016

Grant Park Statutory Trust I – variable interest rate equal to LIBOR plus 2.85%, which was 4.16% and 3.74%, at September 30, 2017 and December 31, 2016, respectively – $3,000 maturing January 23, 2034

$
2,043

$
1,996

Midland States Preferred Securities Trust – variable interest rate equal to LIBOR plus 2.75%, which was 4.06% and 3.63% at September 30, 2017 and December 31, 2016, respectively – $10,000 maturing April 23, 2034

9,959

9,957

Love Savings/Heartland Capital Trust III – variable interest rate equal to LIBOR plus 1.75%, which was 3.07% and 2.71% at September 30, 2017 and December 31, 2016, respectively – $20,000 maturing December 31, 2036

13,253

13,141

Love Savings/Heartland Capital Trust IV – variable interest rate equal to LIBOR plus 1.47%, which was 2.79% and 2.42% at September 30, 2017 and December 31, 2016, respectively – $20,000 maturing September 6, 2037

12,425

12,311

Centrue Statutory Trust II - variable interest rate equal to LIBOR plus 2.65%, which was 3.97% at September 30, 2017 - $10,000 maturing June 17, 2034

7,587

—

Total trust preferred debentures

$
45,267

$
37,405

~~In conjunction with the acquisition of Centrue on June 9, 2017, as further discussed in Note 3 to the consolidated financial statements, the Company assumed $10.0 million~~value of subordinated debentures ~~that were recorded at fair value of $7.6 million at~~have been reduced by the ~~time of acquisition. In April 2004,~~debt issuance costs, which are being amortized on a straight line basis through the Centrue Statutory Trust II (“Centrue Trust II”) issued 10,000 shares of preferred securities with a liquidation amount of $1,000 per preferred security. Centrue issued $10.0 million of subordinated debentures to Centrue Trust II in exchange for ownership of all the common securitiesearlier of the ~~trust. The Company is not considered the primary beneficiary~~redemption option or maturity date. All of ~~Centrue Trust II, therefore, the trust is not consolidated in the Company’s consolidated financial statements, but rather~~ the subordinated debentures ~~are shown as a liability, and the Company’s investment in the common stock of Centrue Trust II of $310,000 is~~above may be included in ~~other assets.~~

~~Note 15~~Tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

NOTE 10 – ~~Preferred Stock~~

~~Series G Preferred Stock~~

In conjunction with the acquisition of Centrue on June 9, 2017, as previously discussed in Note 3 to the consolidated financial statements, each share of Centrue’s Series B preferred stock was converted into the right to receive a share of a newly created series of Series G preferred stock of the Company, which are shown in FHLB advances and other borrowings in Note 12 to the consolidated financial statements. Preferential cumulative cash dividends are payable quarterly at an annual rate of $60.00 per share. Dividends accrue on each share of Series G preferred stock from the date of issuance and from day to day, thereafter, whether or not earned or declared.

~~Fixed Rate Non-Voting Perpetual Non-Cumulative Preferred Stock, Series H~~

Each share of Centrue’s Series D preferred stock was converted into the right to receive a share of a newly created series of Series H preferred stock of the Company, and was recorded at fair value of $3.1 million at the time of acquisition. Dividends are payable at a fixed rate of 12.5% per annum, payable quarterly and are non-cumulative. No dividends may be paid on shares of common stock, shares of preferred stock that rank junior to Series H preferred stock (other than dividends payable solely in shares of common stock), or shares of preferred stock that rank on parity with Series H preferred stock, if a dividend is not paid in full on the Series H preferred stock, for a period of three calendar quarters from the date of the missing dividend payment date. The Company has the option to redeem, in whole or in part, the shares of Series H preferred stock at any time after July 29, 2019. The per share price payable by the Company for such shares of Series H preferred stock will be equal to $1,000 per share, plus any accrued but unpaid dividends.

EARNINGS PER COMMON SHARE

~~Note 16 – Earnings Per Share~~

Earnings per common share ~~are~~is calculated utilizing the ~~two‑class~~two-class method. Basic earnings per common share ~~are~~is calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share ~~are~~is calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock ~~awards using the treasury stock method (outstanding stock options and unvested restricted stock) and common stock warrants.~~awards. Presented

below are the calculations for basic and diluted earnings per common share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016 (dollars in thousands, except~~2023:

NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS

~~Note 17 – Fair Value of Financial Instruments~~

~~ASC 820,~~ ~~Fair Value Measurements,~~ ~~defines fair value, establishes a framework for measuring fair value including a three‑level valuation hierarchy, and expands disclosures about fair value measurements.~~ Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

~~Level 1: Unadjusted quoted prices for identical assets or liabilities traded in active markets.~~

~~Level 2: Observable~~•Level 1: Unadjusted quoted prices for identical assets or liabilities traded in active markets.

•Level 2: Significant other observable inputs other than Level 1, including quoted prices for similar assets and liabilities in active markets, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: Inputs to a valuation methodology that is unobservable, supported by little or no market activity, and significant to the fair value measurement. These valuation methodologies generally include pricing models, discounted cash flow models, or a determination of fair value that requires significant management judgment or estimation. This category also includes observable inputs from a pricing service not corroborated by observable market data, such as pricing corporate securities.

~~Fair value is used on a recurring basis to account for securities available for sale and derivative instruments, and for financial assets for which the Company has elected the fair value option. For~~ assets and liabilities ~~measured at the lower of cost~~in active markets, quoted prices in less active markets, or ~~fair value, the fair value measurement criteria may or may not~~other observable inputs that can be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for impaired loans and other real estate owned and also to record impairment on certain assets, such as mortgage servicing rights, goodwill, intangible assets and other long-lived assets.

corroborated by observable market data.

Assets and liabilities measured and recorded at fair value, including financial assets for which the Company has elected the fair value option, on a recurring and nonrecurring basis as of September 30, 2017 and December 31, 2016, are summarized below (in thousands):

September 30, 2017

Quoted prices

in active

Significant

markets

other

Significant

for identical

observable

unobservable

assets

inputs

inputs

Total

(Level 1)

(Level 2)

(Level 3)

Assets and liabilities measured at fair value on a recurring basis:













Assets

Securities available for sale:

U.S. Treasury securities

$
47,907

$
47,907

$
—

$
—

Government sponsored entity debt securities

19,389

—

19,389

—

Agency mortgage-backed securities

229,854

—

229,854

—

State and municipal securities

39,716

—

39,716

—

Corporate securities

57,307

—

52,558

4,749

Equity securities

2,812

—

2,812

—

Loans held for sale

35,874

—

35,874

—

Interest rate lock commitments

6,421

—

6,421

—

Forward commitments to sell mortgage-backed securities

5

—

5

—

Interest rate swap contracts

121

—

121

—

Total

$
439,406

$
47,907

$
386,750

$
4,749

Liabilities

Interest rate swap contracts

$
121

$
—

$
121

$
—

Assets measured at fair value on a non-recurring basis:

Mortgage servicing rights

$
56,299

$
—

$
—

$
56,299

Mortgage servicing rights held for sale

10,618

—

—

10,618

Impaired loans

18,311

—

6,227

12,084

Assets held for sale

2,858

—

2,858

—

December 31, 2016

Quoted prices

in active

Significant

markets

other

Significant

for identical

observable

unobservable

assets

inputs

inputs

Total

(Level 1)

(Level 2)

(Level) 3

Assets and liabilities measured at fair value on a recurring basis:













Assets

Securities available for sale:

U.S. Treasury securities

$
75,901

$
75,901

$
—

$
—

Government sponsored entity debt securities

7,688

—

7,688

—

Agency mortgage-backed securities

90,070

—

90,070

—

Non-agency mortgage-backed securities

1

—

—

1

State and municipal securities

25,274

—

25,274

—

Corporate securities

47,405

—

39,925

7,480

Loans held for sale

70,565

—

70,565

—

Interest rate lock commitments

6,253

—

6,253

—

Forward commitments to sell mortgage-backed securities

125

—

125

—

Total

$
323,282

$
75,901

$
239,900

$
7,481

Liabilities

None

Assets measured at fair value on a non-recurring basis:

Impaired loans

$
10,202

$
—

$
6,635

$
3,567

Other real estate owned

165

—

165

—

Assets held for sale

1,550

—

1,550

—

~~The following table presents losses recognized on assets measured on a non‑recurring basis for the three and nine months ended September 30, 2017 and 2016 (in thousands):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Mortgage servicing rights

$
104

$
1,073

$
1,830

$
6,093

Mortgage servicing rights held for sale

3,617

—

3,617

—

Impaired loans

1

144

564

310

Other real estate owned

—

4

180

219

Assets held for sale

—

—

1,130

—

Total loss on assets measured on a nonrecurring basis

$
3,722

$
1,221

$
7,321

$
6,622

~~The following table presents activity for assets measured at fair value on a recurring basis using significant~~•Level 3: Significant unobservable inputs ~~(Level 3) for~~that reflect a company’s own assumptions about the ~~three and nine months ended September 30, 2017 (in thousands):~~

Non-Agency

Corporate

Mortgage-Backed

Securities

Securities

Three Months

Nine Months

Three Months

Nine Months

Ended

Ended

Ended

Ended

September 30,

September 30,

September 30,

September 30,

2017

2017

Balance, beginning of period

$
4,740

$
7,480

$
—

$
1

Total realized in earnings (1)

54

235

—

—

Total unrealized in other comprehensive income

—

242

—

—

Net settlements (principal and interest)

(45)

(3,208)

—

(1)

Balance, end of period

$
4,749

$
4,749

$
—

$
—

assumptions that market participants would use in pricing an asset or liability.

~~(1)~~

~~Amounts included in interest income from investment securities taxable in the consolidated statements of income.~~

The ~~following table presents activity for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for~~Company used the ~~three and nine months ended September 30, 2016 (in thousands).~~

Non-Agency

Corporate

Mortgage-Backed

Securities

Securities

Three Months

Nine Months

Three Months

Nine Months

Ended

Ended

Ended

Ended

September 30,

September 30,

September 30,

September 30,

2016

2016

Balance, beginning of period

$
9,765

$
—

$
2

$
—

Transferred from Level 2

—

6,749

—

2

Transferred to Level 2

(2,000)

(2,000)

—

—

Purchases of investment securities recognized as Level 3

—

3,000

—

—

Total realized in earnings (1)

93

251

—

—

Total unrealized in other comprehensive income

(294)

(296)

—

—

Net settlements (principal and interest)

(84)

(224)

(1)

(1)

Balance, end of period

$
7,480

$
7,480

$
1

$
1

~~(1)~~

~~Amounts included in interest income from investment securities taxable in the consolidated statements of income.~~

~~ASC Topic 825,~~ ~~Financial Instruments, requires disclosure of the estimated fair value of certain financial instruments and the~~following methods and significant assumptions ~~used~~ to estimate ~~such fair values. Additionally, certain financial instruments and all nonfinancial instruments are excluded from the applicable disclosure requirements.~~

~~The following tables are a summary of the carrying values and fair value estimates of certain financial instruments as of September 30, 2017 and December 31, 2016 (in thousands):~~

September 30, 2017

Quoted prices

in active

Significant

markets

other

Significant

for identical

observable

unobservable

Carrying

assets

inputs

inputs

Amount

Fair Value

(Level 1)

(Level 2)

(Level 3)

Assets

Cash and due from banks

$
180,807

$
180,807

$
180,807

$
—

$
—

Federal funds sold

2,765

2,765

2,765

—

—

Investment securities available for sale

396,985

396,985

47,907

344,329

4,749

Investment securities held to maturity

70,867

75,142

—

75,142

—

Nonmarketable equity securities

34,391

N/A

N/A

N/A

N/A

Loans, net

3,141,111

3,142,910

—

—

3,142,910

Loans held for sale

35,874

35,874

—

35,874

—

Accrued interest receivable

11,673

11,673

—

11,673

—

Interest rate lock commitments

6,421

6,421

—

6,421

—

Forward commitments to sell mortgage-backed securities

5

5

—

5

—

Interest rate swap contracts

121

121

—

121

—

Liabilities

Deposits

$
3,114,467

$
3,112,541

$
—

$
3,112,541

$
—

Short-term borrowings

153,443

153,443

—

153,443

—

FHLB and other borrowings

488,870

488,196

—

488,196

—

Subordinated debt

54,581

50,055

—

50,055

—

Trust preferred debentures

45,267

43,114

—

43,114

—

Accrued interest payable

2,355

2,355

—

2,355

—

Interest rate swap contracts

121

121

—

121

—

December 31, 2016

Quoted prices

in active

Significant

markets

other

Significant

for identical

observable

unobservable

Carrying

assets

inputs

inputs

Amount

Fair Value

(Level 1)

(Level 2)

(Level 3)

Assets

Cash and due from banks

$
189,543

$
189,543

$
189,543

$
—

$
—

Federal funds sold

1,173

1,173

1,173

—

—

Investment securities available for sale

246,339

246,339

75,901

162,957

7,481

Investment securities held to maturity

78,672

81,952

—

81,952

—

Nonmarketable equity securities

19,485

N/A

N/A

N/A

N/A

Loans, net

2,305,114

2,305,206

—

—

2,305,206

Loans held for sale

70,565

70,565

—

70,565

—

Accrued interest receivable

8,202

8,202

—

8,202

—

Interest rate lock commitments

6,253

6,253

—

6,253

—

Forward commitments to sell mortgage-backed securities

125

125

—

125

—

Liabilities

Deposits

$
2,404,366

$
2,404,231

$
—

$
2,404,231

$
—

Short-term borrowings

131,557

131,557

—

131,557

—

FHLB and other borrowings

237,518

236,736

—

236,736

—

Subordinated debt

54,508

49,692

—

49,692

—

Trust preferred debentures

37,405

33,054

—

33,054

—

Accrued interest payable

1,045

1,045

—

1,045

—

The following is a description of the valuation methodologies used to measure our assets recorded at fair value (under ASC Topic 820) and for estimating fair value for financial instruments not recorded at fair value (under ASC Topic 825):

~~Cash and due from banks and federal funds sold.~~ ~~The carrying amounts are assumed to be~~ the fair value ~~because~~ of ~~the liquidity~~each type of ~~these instruments.~~

financial instrument:

calculated based on market prices of similar securities (Level 2). In determining the fair value of investment securities available for sale categorized as Level 2, we obtain a report from a nationally recognized broker‑dealer detailing the fair value of each investment security we hold as of each reporting date. The broker‑dealer uses observable market information to value our fixed income securities, with the primary source being a nationally recognized pricing service. The fair value of the municipal securities is based on a proprietary model maintained by the broker‑dealer. We review all of the broker‑dealer supplied quotes on the securities we own as of the reporting date for reasonableness based on our understanding of the marketplace, and we consider any credit issues related to the bonds. As we have not made any adjustments to the market quotes provided to us and they are based on observable market data, they have been categorized as Level 2 within the fair value hierarchy.

For investment securities available for sale where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). During the nine months ended September 30, 2016, $6.7 million of corporate securities and $2,000 of non-agency mortgage backed securities were transferred from Level 2 to Level 3 because observable market inputs were not available and the securities were not actively traded; therefore, the fair value was determined utilizing third-party valuation services through consensus pricing. There were no investment securities available for sale transferred from Level 2 to Level 3 during the three and nine months ended September 30, 2017.

~~Corporate securities~~Securities classified as Level 3 are not actively traded, and as a result, fair value is determined utilizing third-party valuation services through consensus pricing. ~~The significant unobservable input used in~~There were no transfers between Levels 1, 2 or 3 during the fair value measurement of Level 3 corporate securities is net market price (range of -2.0% to 2.5%; weighted average of 1.5%). Significant changes in any of the inputs in isolation would result in a significant change to the fair value measurement. Net market price generally increases when market interest rates decline and declines when market interest rates increase.

~~During both the three and nine months ended September 30, 2016, $2.0 million of corporate securities were transferred from Level 3 to Level 2 because a more liquid market~~period presented for ~~these securities had developed and prices supported by observable market inputs had become available.~~

~~Investment securities held to maturity.~~ Investment securities held to maturity are those debt instruments which the Company has the positive intent and ability to hold until maturity. Securities held to maturity are recorded at cost, adjusted for the amortization of premiums or accretion of discounts.

For investment securities held to maturity where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). In determining the fair value of investment securities held to maturity categorized as Level 2, we obtain a report from a nationally recognized broker‑dealer detailing the fair value of each investment security we hold as of each reporting date. The fair value of the municipal securities is based on a proprietary model maintained by the broker‑dealer. We review all of the broker‑dealer supplied quotes on the securities we own as of the reporting date for reasonableness based on our understanding of the marketplace, and we consider any credit issues related to the bonds. As we have not made any adjustments to the market quotes provided to us and they are based on observable market data, they have been categorized as Level 2 within the fair value hierarchy.

~~Nonmarketable equity securities.~~ Nonmarketable equity securities are primarily FHLB and Federal Reserve Bank stock. The Company is a member of the FHLB and the Federal Reserve System. The carrying value is our basis because it is not practical to determine the fair value due to restrictions placed on transferability.

~~Loans.~~ Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type and further segmented into fixed and adjustable rate interest terms and by credit risk categories. The fair value estimates do not take into consideration the value of the loan portfolio in the event the loans have to be sold outside the parameters of normal operating activities. The fair value of performing fixed rate loans is estimated by discounting scheduled cash flows through the estimated maturity using estimated market prepayment speeds and estimated market discount rates that reflect the credit and interest rate risk inherent in the loans. The estimated market discount rates used for performing fixed rate loans are the Company’s current offering rates for comparable instruments with similar terms. The fair value of performing adjustable rate loans is estimated by discounting scheduled cash flows through the next repricing date. As these loans reprice frequently at market rates and the credit risk is not considered to be greater than normal, the market value is typically close to the carrying amount of these loans. The method of estimating fair value does not incorporate the exit‑price concept of fair value prescribed by ASC Topic 820.

~~Impaired loans.~~ ~~Impaired loans are~~assets measured ~~and recorded~~ at fair value on a recurring basis. The fair value of equity securities is determined using quoted prices or market prices for similar securities (Level 2).

Loan servicing rights. In accordance with GAAP, the Company records impairment charges on loan servicing rights on a non-recurring ~~basis.~~basis when the carrying value exceeds the estimated fair value. The fair value of our servicing rights is estimated by using a cash flow valuation model which calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs, replacement reserves and other economic factors which are estimated based on current market conditions (Level 3).

Nonperforming loans. All of our nonaccrual loans ~~and restructured loans~~ are considered ~~impaired~~nonperforming and are reviewed individually for the amount of impairment, if any. ~~Most of our loans are~~We measure collateral dependent ~~and, accordingly, we measure impaired~~nonperforming loans based on the estimated fair value of such collateral. In cases where the Company has an agreed upon selling price for the collateral, the fair value is set at the selling price (Level 1). The fair value of each loan’s collateral is generally based on estimated market prices from an independently prepared appraisal, which is then adjusted for the cost related to liquidating such ~~collateral; such valuation inputs result in a nonrecurring fair value measurement that is categorized as a Level 2 measurement.~~collateral (Level 2). When adjustments are made to an appraised value to reflect various factors such as the age of the appraisal or known changes in the market or the collateral, such valuation inputs are considered unobservable ~~and the fair value measurement is categorized as a Level 3 measurement.~~(Level 3). The ~~impaired~~nonperforming loans categorized as Level 3 also include unsecured loans and other secured loans whose fair values are based significantly on unobservable inputs such as the strength of a guarantor, cash flows discounted at the effective loan rate, and management’s judgment. ~~The loan balances shown in~~

Other Real Estate Owned. OREO is initially recorded at fair value at the ~~above tables represent nonaccrual and restructured loans for~~date of foreclosure less estimated costs of disposal, which impairment was recognized during the three and nine months ended September 30, 2017 and 2016. The amounts shown as losses represent, for the loan balances shown, the impairment recognized during those same years.

~~Loans held for sale.~~ ~~Loans~~establishes a new cost basis. After foreclosure, OREO is held for sale and is carried at the lower of cost or fair value less estimated costs of disposal. Fair value for OREO is based on an appraisal performed upon foreclosure. Adjustments are ~~carried~~routinely made in the appraisal process by the independent appraisers to adjust for differences between comparable sales and income data available. Property is evaluated regularly to ensure the recorded amount is supported by its fair value less estimated costs to dispose. After the initial foreclosure appraisal, fair value is generally determined by an annual appraisal unless known events warrant adjustments to the recorded value (Level 2).

Assets and liabilities measured and recorded at fair value, ~~determined individually, as of~~including financial assets for which the ~~balance sheet date. Fair value measurements on loans held for sale are based on quoted market prices for similar loans in~~Company has elected the ~~secondary market.~~

~~Other real estate owned.~~ ~~The~~ fair value option, on a recurring and nonrecurring basis at March 31, 2024 and December 31, 2023, are summarized below:


	December 31, 2023
(dollars in thousands)	Carrying amount		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets and liabilities measured at fair value on a recurring basis:
Assets
Investment securities available for sale:
U.S. Treasury securities	$	1,097	$	1,097	$	—	$	—
U.S. government sponsored entities and U.S. agency securities	72,572		—		72,572		—
Mortgage-backed securities - agency	574,500		—		574,500		—
Mortgage-backed securities - non-agency	83,529		—		83,529		—
State and municipal securities	57,460		—		57,460		—
Corporate securities	99,172		—		99,172		—
Equity securities	4,501		4,501		—		—
Loans held for sale	3,811		—		3,811		—
Derivative assets	372		—		372		—

Total	$	924,579	$	5,598	$	918,981	$	—
Liabilities
Derivative liabilities	$	8,836	$	—	$	8,836	$	—

Total	$	8,836	$	—	$	8,836	$	—

Assets measured at fair value on a non-recurring basis:


Nonperforming loans	$	4,633	$	—	$	3,964	$	669
Other real estate owned	9,112		—		9,112		—

The following table presents losses recognized on estimated market prices from independently prepared current appraisals or negotiated sales prices with potential buyers; such valuation inputs result in a fair value measurement that is categorized as a Level 2 measurementassets measured on a nonrecurring ~~basis. When~~basis for the three months ended March 31, 2024 and 2023:

The following tables present quantitative information about significant unobservable inputs used in fair value measurements of Level 3 assets measured on a ~~current appraised value is not available or management determines~~nonrecurring basis at March 31, 2024 and December 31, 2023:

Range (weighted average)(1)

ASC Topic 825, Financial Instruments, requires disclosure of the ~~appraised value as a result of known changes in the market or the collateral and there is no observable market price, such valuation inputs result in a~~estimated fair value ~~measurement that is categorized as a Level 3 measurement. To~~of certain financial instruments and the ~~extent a negotiated sales price or reduced listing price represents a~~methods and significant ~~discount~~assumptions used to ~~an observable market price,~~estimate such ~~valuation input would result in a~~ fair ~~value measurement that is also considered a Level 3 measurement.~~

~~Assets held for sale.~~ ~~Assets held for sale represent~~values. Additionally, certain financial instruments and all nonfinancial instruments are excluded from the applicable disclosure requirements.

~~call dates using estimated market discount rates that reflect rates offered at that time for borrowings with similar remaining maturities and other characteristics.~~

~~Trust preferred debentures.~~ Debentures are carried at amortized cost. The fair value of variable rate debentures is calculated by discounting scheduled cash flows through the estimated maturity or call dates using estimated market discount rates that reflect spreads offered at that time for borrowings with similar remaining maturities and other characteristics.

~~Accrued interest payable.~~ ~~The carrying amounts approximate their fair values.~~

~~Derivative financial instruments.~~ The Company enters into interest rate lock commitments which are agreements to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. These commitments are carried at fair value in other assets on the consolidated balance sheet with changes in fair value reflected in commercial FHA revenue andnewly originated residential ~~mortgage banking revenue in the consolidated statements of income. The Company also has forward loan sales commitments related to its interest rate lock commitments and its~~ loans held for sale. These ~~commitments~~loans are intended for sale and are hedged with derivative instruments. We have elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplification.

The following table presents the difference between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has been elected as of March 31, 2024 and December 31, 2023:


	Three Months Ended March 31,
(dollars in thousands)	2024		2023

Residential loans held for sale	$	18	$	99

The carrying values and estimated fair value ~~reflected in commercial FHA revenue and residential mortgage banking revenue in the consolidated statements~~ of ~~income. The interest rate swaps are~~certain financial instruments not carried at fair value ~~on a recurring basis based upon the amounts required~~at March 31, 2024 and December 31, 2023 were as follows:

The methods utilized to ~~settle the contracts.~~

~~Note 18~~measure fair value of financial instruments at March 31, 2024 and December 31, 2023 represent an approximation of exit price; however, an actual exit price may differ.

NOTE 12 – ~~Commitments, Contingencies and Credit Risk~~

COMMITMENTS, CONTINGENCIES AND CREDIT RISK

In the normal course of business, there are outstanding various contingent liabilities such as claims and legal actions, which are not reflected in the consolidated financial statements. No material losses are anticipated as a result of these actions or claims.

We are a party to financial instruments with ~~off-balance‑sheet~~off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank used the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The commitments are principally tied to variable rates. Loan commitments as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 are~~2023 were as ~~follows (in thousands):~~

follows:

~~ended September 30, 2017, and $83,000 for the nine months ended September 30, 2016. There were no losses incurred~~ for the three months ended ~~September 30, 2016.~~March 31, 2024 and 2023. The liability for unresolved repurchase demands totaled ~~$366,000 and $329,000~~$0.1 million at ~~September 30, 2017~~both March 31, 2024 and December 31, ~~2016, respectively.~~

~~Note 19~~2023.

NOTE 13 – ~~Segment Information~~

~~Our business~~SEGMENT INFORMATION

The Company's reportable segments are ~~defined as Banking, Commercial FHA Origination~~comprised of strategic business units primarily based upon industry categories and, ~~Servicing,~~to a lesser extent, the core competencies relating to product origination, distribution methods, operations and ~~Other. The reportable business segments are~~servicing. Segment determination also considers organizational structure and is consistent with the ~~internal reporting~~presentation of financial information to the chief operating decision maker to evaluate segment performance, develop strategy and ~~evaluation of~~allocate resources. The Company's chief operating decision maker is the ~~principle lines of business~~Chief Executive Officer of the Company. Management has determined that the Company has three reportable segments consisting of Banking, Wealth Management and Corporate.

The ~~banking~~Banking segment provides a wide range of financial products and services to consumers and businesses, including commercial, commercial real estate, mortgage and other consumer loan products; commercial equipment ~~leasing;~~financing; mortgage loan sales and servicing; letters of credit; various types of deposit products, including checking, savings and time deposit accounts; merchant services; and corporate treasury management services.

The ~~commercial FHA origination and servicing~~Wealth Management segment provides for the origination and servicing of government sponsored mortgages for multifamily and healthcare facilities. The other segment includes the operating results of the parent company, our wealth management business unit, our captive insurance business unit, and the elimination of intercompany transactions. Wealth management activities consistconsists of trust and fiduciary services, brokerage and retirement planning services.

The Corporate segment includes the holding company financing and investment activities, administrative expenses, as well as the elimination of intercompany transactions. The Corporate segment also included our captive insurance business unit for the three months ended March 31, 2023. This business was dissolved as of December 31, 2023.

Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. The accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies” in Note 1 of the Company’s 2023 Form 10-K.

Selected business segment financial information ~~as of and~~ for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 were as ~~follows (in thousands):~~

Commercial FHA




Origination and

Banking

Servicing

Other

Total

Three Months Ended September 30, 2017

Net interest income (expense)

$
38,598

$
(79)

$
(1,754)

$
36,765

Provision for loan losses

1,489

—

—

1,489

Noninterest income

8,571

3,966

2,866

15,403

Noninterest expense

42,425

3,910

2,028

48,363

Income (loss) before income taxes (benefit)

3,255

(23)

(916)

2,316

Income taxes (benefit)

996

(9)

(707)

280

Net income (loss)

$
2,259

$
(14)

$
(209)

$
2,036

Total assets

$
4,370,600

$
121,514

$
(144,353)

$
4,347,761

Three Months Ended September 30, 2016

Net interest income (expense)

$
28,394

$
215

$
(1,344)

$
27,265

Provision for loan losses

1,392

—

—

1,392

Noninterest income

9,714

3,557

1,666

14,937

Noninterest expense

23,640

3,511

1,506

28,657

Income (loss) before income taxes (benefit)

13,076

261

(1,184)

12,153

Income taxes (benefit)

4,573

104

(575)

4,102

Net income (loss)

$
8,503

$
157

$
(609)

$
8,051

Total assets

$
3,252,421

$
100,516

$
(105,210)

$
3,247,727

Commercial FHA




Origination and

Banking

Servicing

Other

Total

Nine Months Ended September 30, 2017

Net interest income (expense)

$
97,580

$
325

$
(4,279)

$
93,626

Provision for loan losses

3,480

—

—

3,480

Noninterest income

24,339

15,189

5,836

45,364

Noninterest expense

99,214

11,639

5,952

116,805

Income (loss) before income taxes (benefit)

19,225

3,875

(4,395)

18,705

Income taxes (benefit)

4,870

1,550

(1,780)

4,640

Net income (loss)

$
14,355

$
2,325

$
(2,615)

$
14,065

Total assets

$
4,370,600

$
121,514

$
(144,353)

$
4,347,761

Nine Months Ended September 30, 2016

Net interest income (expense)

$
82,939

$
712

$
(4,357)

$
79,294

Provision for loan losses

3,146

—

—

3,146

Noninterest income

21,347

19,212

1,013

41,572

Noninterest expense

69,784

12,203

5,212

87,199

Income (loss) before income taxes (benefit)

31,356

7,721

(8,556)

30,521

Income taxes (benefit)

9,348

3,088

(1,874)

10,562

Net income (loss)

$
22,008

$
4,633

$
(6,682)

$
19,959

Total assets

$
3,252,421

$
100,516

$
(105,210)

$
3,247,727

~~Note 20 – Related Party Transactions~~

A member of our board of directors has an ownership interest in the office building located in Clayton, Missouri and three of the Bank’s full-service branch facilities. During the three and nine months ended September 30, 2017, the Company paid rent on these facilities of $166,000 and $553,000, respectively, and $165,000 and $540,000 for the comparable periods in 2016, respectively.

A member of our board of directors is an executive and board member of a company we utilize for relationship and marketplace studies. During the nine months ended September 30, 2017, the Company paid $116,000 for these services.

follows:

~~Note 21~~NOTE 14 – ~~Subsequent Events~~

~~On October 16, 2017,~~REVENUE FROM CONTRACTS WITH CUSTOMERS


	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Noninterest income - in-scope of Topic 606
Wealth management revenue:
Trust management/administration fees	$	6,267	$	5,636
Investment advisory and brokerage fees	423		431

Other	442		344
Service charges on deposit accounts:
Nonsufficient fund fees	1,822		1,698
Other	1,294		870
Interchange revenues	3,358		3,412
Other income:
Merchant services revenue	344		358
Other	98		630
Noninterest income - out-of-scope of Topic 606	7,139		2,400
Total noninterest income	$	21,187	$	15,779

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and investment securities. In addition, certain noninterest income streams such as commercial FHA revenue, residential mortgage banking revenue and gain on sales of investment securities, net, are also not in scope of Topic 606. Topic 606 is applicable to noninterest income streams such as wealth management revenue, service charges on deposit accounts, interchange revenue, gain on sales of other real estate owned, and certain other noninterest income streams. The noninterest income streams considered in-scope by Topic 606 are discussed below.

Wealth Management Revenue

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of ~~Company common stock at closing differs from $33.10 per share. The transaction is expected~~fees received under depository agreements with customers to ~~close during the first quarter~~provide access to deposited funds, serve as custodian of ~~2018, subject to the receipt~~deposited funds, and when applicable, pay interest on deposits. These service charges primarily include non-sufficient fund fees and other account related service charges. Non-sufficient fund fees are earned when a depositor presents an item for payment in excess of ~~regulatory approvals, the approval of Alpine’s~~available funds, and the Company, at its discretion, provides the necessary funds to complete the transaction. The Company generates other account related service charge revenue by providing depositors proper safeguard and remittance of funds as well as by delivering optional services for depositors, such as check imaging or treasury management, that are performed upon the depositor’s request. The Company’s ~~shareholders,~~performance obligation for the proper safeguard and remittance of funds, monthly account analysis and any other monthly service fees is generally satisfied, and the ~~satisfaction of other customary closing conditions.~~

~~On October 13, 2017,~~related revenue recognized, over the ~~Company issued,~~period in which the service is provided. Payment for service charges on deposit accounts is typically received immediately or in the following month through a ~~private placement, $40.0 million aggregate principal amount of subordinated debentures with~~direct charge to a maturity date of October 15, 2027. The subordinated debentures bear a fixed rate of interest of 6.25% for the first five years, payable semiannually in arrears beginning April 15, 2018, and a floating rate of interest equal to the three-month LIBOR plus 422.9 basis points thereafter, payable quarterly in arrears beginning January 15, 2023. The subordinated debentures will be redeemable by the Company, in whole or in part, on or after October 15, 2022, and are not subject to redemption at the option of the holders. The value of the subordinated debentures is expected to be reduced by approximately $0.6 million related to debt issuance costs, which will be amortized on a straight line basis through the maturity of the subordinated debentures. The subordinated debentures will be included in Tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

customer’s account.

Interchange revenue includes debit / credit card income and ATM user fees. Card income is primarily comprised of interchange fees earned for standing ready to authorize and providing settlement on card transactions processed through the MasterCard interchange network. The levels and structure of interchange rates are set by MasterCard and can vary based on cardholder purchase volumes. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with completion of the Company’s performance obligation, the transaction processing services provided to the cardholder. Payment is typically received immediately or in the following month. ATM fees are primarily generated when a Company cardholder withdraws funds from a non-Company ATM or a non-Company cardholder withdraws funds from a Company ATM. The Company satisfies its performance obligation for each transaction at the point in time when the ATM withdrawal is processed.

Other Noninterest Income

The other noninterest income revenue streams within the scope of Topic 606 consist of merchant services revenue, safe deposit box rentals, wire transfer fees, paper statement fees, check printing commissions, gain on sales of other real estate owned and other noninterest related fees. Revenue from the Company’s merchant services business consists principally of transaction and account management fees charged to merchants for the electronic processing of transactions. These fees are net of interchange fees paid to the credit card issuing bank, card company assessments, and revenue sharing amounts. Account management fees are considered earned at the time the merchant’s transactions are processed or other services are performed. Fees related to the other components of other noninterest income within the scope of Topic 606 are largely transactional based, and therefore, the Company’s performance obligation is satisfied and related revenue recognized, at the point in time the customer uses the selected service to execute a transaction.

ITEM 2 –~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion ~~explains our~~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 ~~and nine~~ months ended ~~September 30, 2017. Annualized results for these interim periods may not be indicative of results for the full year or future periods. The following discussion~~March 31, 2024 and ~~analysis~~2023. These comments should be read in conjunction with the Company's unaudited consolidated financial statements and ~~related~~accompanying notes ~~presented~~appearing elsewhere ~~in this report~~herein and our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2023, filed with the SEC on ~~March 10, 2017.~~

February 23, 2024.

In addition to the historical information contained herein, this Form 10-Q includes “forward-looking statements” within the meaning of such term inunder 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.~~

otherwise.

Critical Accounting Policies

The preparation of our consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under current circumstances. These estimates form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes have the most effect on the Company’s reported financial position and results of operations are set forth in ~~Note~~“Note 1 – Summary of Significant Accounting ~~Policies~~Policies” of the Notes to Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2023. There have been no significant changes in critical accounting policies or the assumptions and judgments utilized in applying these policies since ~~the year ended~~ December 31, ~~2016.~~

~~Overview~~

~~Midland States Bancorp, Inc. is a diversified financial holding company headquartered in Effingham, Illinois. Our 136‑year old banking subsidiary, Midland States Bank, has branches across Illinois~~2023.

Significant Developments and in Missouri and Colorado, and provides a broad array of traditional community banking and other complementary financial services, including commercial lending, residential mortgage origination, wealth management, merchant services and prime consumer lending. Our commercial FHA origination and servicing business through our subsidiary, Love Funding, based in Washington, D.C., is one of the top originators of government sponsored mortgages for multifamily and healthcare facilities in the United States. Our commercial equipment leasing business through our subsidiary, Business Credit, based in Denver, Colorado, provides financing to business customers across the country. As of September 30, 2017, we had $4.3 billion in assets, $3.1 billion of deposits and $450.7 million of shareholders’ equity.

In late 2007, we developed a strategic plan to build a diversified financial services company anchored by a strong community bank. Since then, we have grown organically and through a series of acquisitions, with an over‑arching focus on enhancing shareholder value and building a platform for scalability. In November 2016, we completed the acquisition of approximately $400.0 million in wealth management assets from Sterling National Bank of Yonkers, New York. In March 2017, we acquired CedarPoint, an SEC registered investment advisory firm located in Delafield, Wisconsin, which added $180.0 million of wealth management assets. In June 2017, we completed the acquisition of Centrue Financial Corporation and its subsidiary, Centrue Bank, a regional, full-service community bank headquartered in Ottawa, Illinois. At closing, Centrue had 20 bank branches located principally in northern Illinois and total assets of $991.4 million.

On October 16, 2017, the Company announced it had entered into a definitive agreement to acquire Alpine Bancorporation, Inc., a regional, full-service community bank headquartered in Belvidere, Illinois. Alpine has 19 bank

Transactions

branches located principally in northern Illinois and had total assets of $1.3 billion as of June 30, 2017. The total consideration will be paid with $33.3 million in cash and 4,463,200 shares of Midland common stock, which has an estimated value of $181.0 million based on an assumed value of $33.10 per share of Midland common stock, which was the closing price on NASDAQ on the trading day preceding the announcement of the transaction. The transaction is expected to close during the first quarter of 2018, subject to regulatory and shareholder approvals. In connection with the Company’s entry into the transaction with Alpine, the Company issued $40.0 million of subordinated notes in October 2017 to certain institutional investors. These subordinated notes, which mature in October 2027, have a fixed interest rate of 6.25% for the first five years and a floating rate based on LIBOR plus 422.9 basis points thereafter.

Our principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. We have derived income principally from interest earned on loans and leases and, to a lesser extent, from interest and dividends earned on investment securities. We have also derived income from noninterest sources, such as: fees received in connection with various lending and deposit services; wealth management services; commercial FHA mortgage loan originations, sales and servicing; residential mortgage loan originations, sales and servicing; and, from time to time, gains on sales of assets. Our principal expenses include interest expense on deposits and borrowings, operating expenses, such as salaries and employee benefits, occupancy and equipment expenses, data processing costs, professional fees and other noninterest expenses, provisions for loan losses and income tax expense.

~~Significant Transactions~~

Each item listed below ~~materially~~ 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 ~~for the three and nine months ended September 30, 2017 and 2016,~~December 31, 2023, and may affect the comparability of financial information we report in future fiscal periods.

~~Recent Acquisitions.~~ ~~On June 9, 2017,~~

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.

In addition, in the third quarter of 2023, the Company ~~acquired Centrue for total consideration~~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 ~~$176.6 million. Consideration transferred by~~ the policies.

Redemption of Subordinated Notes. In the second quarter of 2023, the Company ~~consisted~~ ~~of $61.0 million in cash, 3.2 million shares of common stock and 2,636 shares of Series H preferred stock. At closing, Centrue primarily consisted of Centrue Bank and $10.0~~redeemed $6.6 million of trust preferred debentures. All identifiable assets acquired and liabilities assumed were adjusted to fair value as of June 9, 2017 and the results of Centrue’s operations have been included in the consolidated statements of income beginning on that date.outstanding subordinated notes. The ~~resultant purchase accounting adjustments have been reflected in the enclosed consolidated balance sheet as of September 30, 2017. Intangible assets recognized as a result~~weighted average redemption price was 89.2% of the ~~transaction consisted of $46.1 million in goodwill and $11.1 million in core deposit intangibles.~~

~~On March 28, 2017, the Company acquired for $3.7 million all~~aggregate principal amount of the ~~outstanding capital stock~~subordinated notes, plus accrued and unpaid interest. The Company recorded gains totaling $0.7 million on these redemptions.

Results of assets under administration. In conjunction with this agreement, the Company issued 120,000 shares of common stock of which 18,000 shares were deposited into a special purpose escrow account (the escrow shares). PayoutOperations

Overview. The following table sets forth condensed income statement information of the escrow shares to CedarPoint is contingent on CedarPoint reaching certain target revenue levels. Intangible assets recognized as a result of the transaction consisted of $2.4 million in goodwill and $2.0 million in customer relationship intangibles. The customer relationship intangibles are being amortized on a straight-line basis over 12 years.

~~On November 10, 2016, the~~ Company acquired approximately $400.0 million in wealth management assets from Sterling for $5.2 million in cash. Intangible assets recognized as a result of the transaction consisted of approximately $2.3 million in goodwill and $2.3 million in customer relationship intangibles. The customer relationship intangibles are being amortized on a straight-line basis over 20 years.

~~Purchased Credit‑Impaired (“PCI”) Loans.~~ Our net interest margin benefits from favorable changes in expected cash flows on our PCI loans and from accretion income associated with purchase accounting discounts established on the non-PCI loans included in our acquisitions. ~~Our reported net interest margin~~ for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016 was 3.78%~~2023:


	Three Months Ended March 31,
(dollars in thousands, except per share data)	2024			2023
Income Statement Data:
Interest income	$	101,675		$	95,539
Interest expense	45,755			35,035
Net interest income	55,920			60,504
Provision for credit losses	14,000			3,135
Noninterest income	21,187			15,779
Noninterest expense	44,867			44,482
Income before income taxes	18,240			28,666
Income taxes	4,355			6,894
Net income	13,885			21,772
Preferred dividends	2,228			2,228
Net income available to common shareholders	$	11,657		$	19,544
Per Share Data:
Basic earnings per common share	$	0.53		$	0.86
Diluted earnings per common share	$	0.53		$	0.86
Performance Metrics:
Return on average assets	0.72		%	1.12		%
Return on average shareholders' equity	7.07		%	11.51		%

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 the first quarter of 2024 compared to the first 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 ~~4.00%~~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.

Net Interest Income and Margin. Our primary source of revenue is net interest income, which is the difference between interest income from interest-earning assets (primarily loans and securities) and interest expense of funding sources (primarily interest-bearing deposits and borrowings). Net interest income is influenced by many factors, primarily the volume and mix of interest-earning assets, funding sources, and interest rate fluctuations. Noninterest-bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning assets. Net interest margin is calculated as net interest income divided by average interest-earning assets. Net interest margin is presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to a pretax-equivalent income, assuming a federal income tax rate of 21% for 2024 and 2023.

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%, ~~respectively. Accretion~~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.

During the second quarter of 2016, we received payment in full on a PCI loan that was a covered asset from an FDIC-assisted acquisition. We recognized the financial impact of this transaction by recording $1.8 million of accretion income into interest income on loans and a $0.8 million credit against the provision for loan losses offsetting the allowance amount that was previously recorded against this loan. In accordance with the loss-sharing agreement with the FDIC, we also recorded loss-sharing expense of $1.5 million for reimbursement of covered losses previously paid by the FDIC on this loan.

~~Mortgage Servicing Rights.The Company sells residential and commercial mortgage loans in the secondary market and typically retains the right to service the loans sold.~~ Mortgage servicing rights (“MSR”) are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value. MSR are amortized in proportion to and over the period of estimated net servicing income, and assessed for impairment at each reporting date.

During the third quarter of 2017, the Company transferred $14.2 million of residential MSR, net of valuation allowances, to MSR held for sale. The Company has committed to a plan to sell these residential MSR and has the ability to sell them to a buyer in their present condition. During the three and nine months ended September 30, 2017, the Company recognized a $3.6 million loss on MSR held for sale to reflect them at the lower of their carrying amount or fair value less estimated costs to sell. As a result of recognizing this loss, MSR held for sale had a net carrying value of $10.6 million at September 30, 2017.

There were no impairment charges on our residential MSR in the third quarter of 2017 and $0.7 million of impairment recognized during the nine months ended September 30, 2017. For the three and nine months ended September 30, 2016, we recorded impairment charges on our residential MSR totaling $22,000 and $5.0 million, respectively. Impairment charges on our commercial FHA MSR totaled $0.1 million and $1.1 million during the three and nine months ended September 30, 2017, respectively. For the three and nine months ended September 30, 2016, we recorded impairment charges on our commercial FHA MSR totaling $1.1 million and $1.1 million, respectively.

~~Sale of Previously Covered Non-Agency Mortgage-Backed Securities~~ – In October 2016, we sold previously covered non-agency mortgage-backed securities (“CMOs”) with a carrying value of $72.1 million. As a result of the sale, we recognized a gain totaling $14.3 million in the fourth quarter of 2016.

~~Branch Network Optimization Plan –~~ ~~In November 2016, the Company announced a branch network optimization plan that led to the closure of~~ ~~seven banking offices in~~ the first quarter of ~~2017. As a result~~2024 compared to 3.39% for the first quarter of the Centrue acquisition, the Company announced the closure of six additional Bank facilities. During the second and third quarters of 2017, we recorded $1.1 million and $0.4 million, respectively, of asset impairment on the six banking facilities to be closed and classified $3.9 million of branch related assets as held for sale by reclassifying this amount from premises and equipment to other assets on the consolidated balance sheet at September 30, 2017.

2023.

Average Balance Sheet, Interest and Yield/Rate ~~Analysis~~

Analysis.The following ~~table presents~~tables present the average balance ~~sheet information,~~sheets, interest income, interest expense and the corresponding average yields earned and rates paid for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016.~~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.

For the Three Months Ended September 30,

2017

2016

Average

Interest

Yield /

Average

Interest

Yield /

(tax-equivalent basis, dollars in thousands)

Balance

& Fees

Rate


Balance

& Fees

Rate

Earning Assets

Federal funds sold and cash investments

$
202,407

$
607

1.19
%

$
154,764

$
195

0.50
%
Investment securities:

Taxable investment securities

359,370

1,905

2.12

229,670

2,766

4.82

Investment securities exempt from federal income tax (1)

114,846

1,481

5.16

100,230

1,373

5.48

Total investment securities

474,216

3,386

2.86

329,900

4,139

5.02

Loans:

Taxable loans (2)

3,126,325

38,689

4.91

2,136,642

26,047

4.85

Loans exempt from federal income tax (1)

46,702

482

4.10

40,875

391

3.80

Total loans

3,173,027

39,171

4.90

2,177,517

26,438

4.83

Loans held for sale

46,441

438

3.74

90,661

858

3.77

Nonmarketable equity securities

31,224

331

4.20

18,365

174

3.77

Total earning assets

3,927,315

$
43,933

4.44
%

2,771,207

$
31,804

4.57
%
Noninterest-Earning Assets

498,364

330,036

Total assets

$
4,425,679

$
3,101,243

Interest-Bearing Liabilities

Checking and money market deposits

$
1,448,228

$
1,139

0.31
%

$
1,008,028

$
448

0.18
%
Savings deposits

286,199

92

0.13

163,867

62

0.15

Time deposits

511,761

1,094

0.85

425,269

957

0.90

Time, brokered deposits

281,302

1,052

1.48

206,025

722

1.39

Total interest-bearing deposits

2,527,490

3,377

0.53

1,803,189

2,189

0.48

Short-term borrowings

182,015

100

0.22

134,052

81

0.24

FHLB advances and other borrowings

434,860

1,494

1.36

165,774

306

0.73

Subordinated debt

54,570

873

6.40

54,470

873

6.41

Trust preferred debentures

45,201

637

5.60

37,266

472

5.03

Total interest-bearing liabilities

3,244,136

$
6,481

0.79
%

2,194,751

$
3,921

0.71
%
Noninterest-Bearing Liabilities

Noninterest-bearing deposits

688,986

550,816

Other noninterest-bearing liabilities

39,240

36,816

Total noninterest-bearing liabilities

728,226

587,632

Shareholders’ equity

453,317

318,860

Total liabilities and shareholders’ equity

$
4,425,679

$
3,101,243

Net interest income / net interest margin (3)

$
37,452

3.78
%

$
27,883

4.00
%


	Three Months Ended March 31,
	2024						2023
(tax-equivalent basis, dollars in thousands)	Average balance		Interest & fees		Yield/ Rate		Average balance		Interest & fees		Yield/ Rate
Interest-earning assets:
Federal funds sold and cash investments	$	69,316	$	951	5.52	%	$	85,123	$	980	4.67	%
Investment securities:
Taxable investment securities	933,785		10,179		4.38		731,075		5,370		2.98
Investment securities exempt from federal income tax (1)	54,931		529		3.87		78,773		625		3.22
Total securities	988,716		10,708		4.36		809,848		5,995		3.00
Loans:
Loans (2)	5,964,454		88,995		6.00		6,264,591		87,459		5.66
Loans exempt from federal income tax (1)	47,578		494		4.17		55,811		538		3.91
Total loans	6,012,032		89,489		5.99		6,320,402		87,997		5.65
Loans held for sale	3,405		55		6.56		1,506		16		4.41
Nonmarketable equity securities	35,927		687		7.69		47,819		795		6.75
Total interest-earning assets	7,109,396		101,890		5.76		7,264,698		95,783		5.35
Noninterest-earning assets	671,671						610,811
Total assets	$	7,781,067					$	7,875,509
Interest-bearing liabilities:
Deposits:
Checking and money market deposits	$	3,605,946	$	29,237	3.26	%	$	3,686,192	$	22,955	2.53	%
Savings deposits	555,668		477		0.34		650,138		243		0.15
Time deposits	852,440		7,310		3.45		703,039		3,121		1.80
Brokered time deposits	181,064		2,190		4.86		14,572		86		2.39
Total interest-bearing deposits	5,195,118		39,214		3.04		5,053,941		26,405		2.12
Short-term borrowings	65,182		836		5.16		38,655		25		0.26
FHLB advances and other borrowings	313,121		3,036		3.90		540,278		6,006		4.51
Subordinated debt	93,583		1,280		5.50		99,812		1,370		5.57
Trust preferred debentures	50,707		1,389		11.02		50,047		1,229		9.96
Total interest-bearing liabilities	5,717,711		45,755		3.22		5,782,733		35,035		2.46
Noninterest-bearing liabilities:
Noninterest-bearing deposits	1,151,542						1,250,899
Other noninterest-bearing liabilities	121,908						74,691
Total noninterest-bearing liabilities	1,273,450						1,325,590
Shareholders’ equity	789,906						767,186
Total liabilities and shareholders’ equity	$	7,781,067					$	7,875,509
Net interest income / net interest margin (3)			$	56,135	3.18	%			$	60,748	3.39	%

~~(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 35%. Tax- equivalent adjustments totaled $687,000 and $617,000 for the three months ended September 30, 2017 and 2016, respectively.

(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 each of the three months ended March 31, 2024 and 2023.

~~(2)~~

~~Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.~~

(2)Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

~~(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.

(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.

Table of Contents

For the Nine Months Ended September 30,

2017

2016

Average

Interest

Yield /

Average

Interest

Yield /

(tax-equivalent basis, dollars in thousands)

Balance

& Fees

Rate


Balance

& Fees

Rate

Earning Assets

Federal funds sold and cash investments

$
186,539

$
1,405

1.01
%

$
203,514

$
762

0.50
%
Investment securities:

Taxable investment securities

281,156

4,705

2.23

221,091

8,222

4.96

Investment securities exempt from federal income tax (1)

107,831

4,338

5.36

99,985

4,215

5.62

Total investment securities

388,987

9,043

3.10

321,076

12,437

5.16

Loans:

Taxable loans (2)

2,674,770

97,016

4.85

2,049,891

75,741

4.94

Loans exempt from federal income tax (1)

46,719

1,467

4.20

41,742

1,382

4.42

Total loans

2,721,489

98,483

4.84

2,091,633

77,123

4.93

Loans held for sale

60,590

1,926

4.25

76,586

2,401

4.19

Nonmarketable equity securities

24,547

788

4.29

16,881

504

3.99

Total earning assets

3,382,152

$
111,645

4.41
%

2,709,690

$
93,227

4.60
%
Noninterest-Earning Assets

402,889

324,116

Total assets

$
3,785,041

$
3,033,806

Interest-Bearing Liabilities

Checking and money market deposits

$
1,254,706

$
2,565

0.27
%

$
1,010,734

$
1,391

0.18
%
Savings deposits

217,753

224

0.14

162,890

181

0.15

Time deposits

446,025

2,928

0.88

436,975

2,933

0.90

Time, brokered deposits

264,035

2,853

1.44

216,075

2,196

1.36

Total interest-bearing deposits

2,182,519

8,570

0.52

1,826,674

6,701

0.49

Short-term borrowings

157,388

262

0.22

123,192

217

0.24

FHLB advances and other borrowings

325,120

2,901

1.19

150,213

698

0.62

Subordinated debt

54,544

2,619

6.40

59,324

2,985

6.71

Trust preferred debentures

40,613

1,635

5.38

37,181

1,373

4.93

Total interest-bearing liabilities

2,760,184

$
15,987

0.77
%

2,196,584

$
11,974

0.73
%
Noninterest-Bearing Liabilities

Noninterest-bearing deposits

598,874

528,238

Other noninterest-bearing liabilities

45,426

34,363

Total noninterest-bearing liabilities

644,300

562,601

Shareholders’ equity

380,557

274,621

Total liabilities and shareholders’ equity

$
3,785,041

$
3,033,806

Net interest income / net interest margin (3)

$
95,658

3.78
%

$
81,253

4.01
%

~~(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 35%. Tax- equivalent adjustments totaled $2.0 million for both the nine months ended September 30, 2017 and 2016, respectively.

~~(2)~~

~~Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.~~

~~(3)~~

~~Table of Contents~~

Interest Rates and Operating Interest ~~Differential~~

Differential. Increases and decreases in interest income and interest expense result from changes in average balances (volume) of ~~interest‑earning~~interest-earning assets and ~~interest‑bearing~~interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our ~~interest‑earning~~interest-earning assets and the interest incurred on our ~~interest‑bearing~~interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. Changes which are not due solely to volume or rate have been allocated proportionally to the change due to volume and the change due to rate. ~~Interest income and average rates for tax‑exempt loans and securities were calculated on a tax‑equivalent basis, assuming a federal income tax rate of 35%.~~


	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017
	Compared with						Compared with
	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016
	Change due to:				Interest		Change due to:				Interest
		Three Months Ended March 31, 2024 compared with Three Months Ended March 31, 2023
		Three Months Ended March 31, 2024 compared with Three Months Ended March 31, 2023
		Three Months Ended March 31, 2024 compared with Three Months Ended March 31, 2023
		Change due to:
		Change due to:
		Change due to:
(tax-equivalent basis, dollars in thousands)	Volume		Rate		Variance		Volume		Rate		Variance
Earning Assets
(tax-equivalent basis, dollars in thousands)
(tax-equivalent basis, dollars in thousands)
Earning assets:
Earning assets:
Earning assets:
Federal funds sold and cash investments
Federal funds sold and cash investments
Federal funds sold and cash investments	$	102	$	310	$	412	$	(96)	$	739	$	643
Investment securities:
Investment securities:
Investment securities:
Taxable investment securities
Taxable investment securities
Taxable investment securities		1,124		(1,985)		(861)		1,619		(5,136)		(3,517)
Investment securities exempt from federal income tax		194		(86)		108		323		(200)		123
Total investment securities		1,318		(2,071)		(753)		1,942		(5,336)		(3,394)
Loans:
Taxable loans		12,209		433		12,642		22,831		(1,556)		21,275
Investment securities exempt from federal income tax
Investment securities exempt from federal income tax
Total securities
Total securities
Total securities
Loans:
Loans:
Loans:
Loans
Loans
Loans
Loans exempt from federal income tax
Loans exempt from federal income tax
Loans exempt from federal income tax		58		33		91		160		(75)		85
Total loans		12,267		466		12,733		22,991		(1,631)		21,360
Total loans
Total loans
Loans held for sale
Loans held for sale
Loans held for sale		(417)		(3)		(420)		(506)		31		(475)
Nonmarketable equity securities		129		28		157		237		47		284
Nonmarketable equity securities
Nonmarketable equity securities
Total earning assets	$	13,399	$	(1,270)	$	12,129	$	24,568	$	(6,150)	$	18,418
Interest-Bearing Liabilities
Total earning assets
Total earning assets
Interest-bearing liabilities:
Interest-bearing liabilities:
Interest-bearing liabilities:
Checking and money market deposits
Checking and money market deposits
Checking and money market deposits	$	272	$	419	$	691	$	417	$	757	$	1,174
Savings deposits		43		(13)		30		58		(15)		43
Savings deposits
Savings deposits
Time deposits		191		(54)		137		59		(64)		(5)
Time, brokered deposits		274		56		330		501		156		657
Time deposits
Time deposits
Brokered time deposits
Brokered time deposits
Brokered time deposits
Total interest-bearing deposits
Total interest-bearing deposits
Total interest-bearing deposits		780		408		1,188		1,035		834		1,869
Short-term borrowings		28		(9)		19		58		(13)		45
Short-term borrowings
Short-term borrowings
FHLB advances and other borrowings
FHLB advances and other borrowings
FHLB advances and other borrowings		712		476		1,188		1,186		1,017		2,203
Subordinated debt		2		(2)		—		(235)		(131)		(366)
Subordinated debt
Subordinated debt
Trust preferred debentures
Trust preferred debentures
Trust preferred debentures		106		59		165		131		131		262
Total interest-bearing liabilities	$	1,628	$	932	$	2,560	$	2,175	$	1,838	$	4,013
Total interest-bearing liabilities
Total interest-bearing liabilities
Net interest income	$	11,771	$	(2,202)	$	9,569	$	22,393	$	(7,988)	$	14,405
Net interest income
Net interest income

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 ~~$12.1~~$178.9 million increase in ~~interest income on a tax-equivalent basis, offset~~investment securities.

Average loans decreased $308.4 million in ~~part by a $2.6 million increase in interest expense.~~

~~For~~ the first ~~nine months~~quarter of ~~2017, net interest income on a tax-equivalent basis was $95.7~~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 ~~an increase of $14.4~~to $1.2 million ~~or 17.7%, from the $81.3 million of net interest income we generated on a tax-equivalent basis for~~in the first ~~nine months~~quarter of ~~the prior year. This increase was mainly due to an $18.4 million increase in interest income on a tax-equivalent basis, offset in part by a $4.0 million increase in interest expense.~~

~~Interest Income.~~ ~~Total interest income on a tax-equivalent basis was $43.9~~Average commercial real estate loans and leases also decreased this quarter by $44.8 million and ~~$111.6~~$37.5 million, ~~for the three and nine months ended September 30, 2017,~~ respectively, compared to $31.8 million and $93.2 million for the three and nine months ended September 30, 2016, respectively. These increases were primarily attributable to increases in interest income on loans and cash investments, offset in part by decreases in interest income on investment securities.

~~Interest income on~~prior year's first quarter. Average construction loans increased ~~to $39.2~~this quarter by $136.9 million, ~~and $98.5 million for the three and nine months ended September 30, 2017, respectively,~~ compared to ~~$26.4~~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 ~~$77.1~~LendingPoint.

Interest Expense. Interest expense increased $10.7 million for the three and nine months ended September 30, 2016, respectively. Increases of 45.7% and 30.1% in the average balances of loans outstanding for the three and nine months ended September 30, 2017, respectively, were primarily driven by the addition of loans from the Centrue acquisition combined with organic loan growth over the past year. A seven basis point increase in the average yield on loans to $45.8 million for the three months ended September 30, 2017 was primarily driven by a $0.3 million increase in accretion income from purchase accounting discounts on acquired loans. For the nine months ended September 30, 2017, a nine basis point decrease in the average yield on loans resulted primarily from a $2.5 million decrease in accretion income from purchase accounting discounts on acquired loans, offset in part by an increase in prepayment penalties and the impact of higher market rates.

~~The average rate on loans benefits from purchase accounting discount accretion on loan portfolios acquired (see “Significant Transactions –~~ ~~Purchased Credit-Impaired (PCI) Loans” above). The reported yield on total loans for~~March 31, 2024, compared to the three months ended ~~September 30, 2017 and 2016 was 4.90% and 4.83%, respectively. Accretion income associated with purchase accounting discounts established~~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.

Provision for Credit Losses.The Company's provision for credit losses on loans was $14.0 million ~~and $5.3 million~~ for the three ~~and nine months ended~~

~~September 30, 2016, respectively. The $1.4 million and $2.1 million increases in interest expense on borrowings for the three and nine~~ months ended September 30, 2017, respectively, were primarily due to increased usage of both short-term and long-term FHLB advances, the addition of $90.0 million of FHLB advances and $10.0 million of trust preferred debentures from Centrue, entering into a $40.0 million term loan in May 2017, and the impact of higher market interest rates on new FHLB advances. For the nine months ended September 30, 2017, the impact of these increases was offset in part by a decrease in interest expense on subordinated debt due to the payoff of $8.0 million of 8.25% subordinated debt on June 28, 2016.

~~Provision for Loan Losses.~~ ~~The provision for loan losses totaled $1.5 million and $3.5 million for the three and nine months ended September 30, 2017, respectively,~~March 31, 2024, compared to ~~$1.4 million and~~ $3.1 million for the three ~~and nine~~ months ended ~~September 30, 2016, respectively. For~~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 ~~first nine months~~quarter totaled $4.4 million compared to $2.1 million for the comparable quarter of ~~2017, t~~he2023.

Noninterest Income. Noninterest income ~~totaled $15.4 million in~~increased 34.3% for the ~~third quarter of 2017~~three months ended March 31, 2024, compared to ~~$14.9 million in~~ the ~~third quarter of 2016. For the nine months ended September 30, 2017, noninterest income increased $3.8 million, or 9.1%, to $45.4 million.~~same period one year prior. The following table sets forth the major components of our noninterest income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016:~~

For the Three Months Ended

September 30,

Increase

(dollars in thousands)

2017

2016

(decrease)

Noninterest income:







Commercial FHA revenue

$
3,777

$
3,260

$
517

Residential mortgage banking revenue

2,317

4,990

(2,673)

Wealth management revenue

3,475

1,941

1,534

Service charges on deposit accounts

2,133

1,044

1,089

Interchange revenue

1,724

920

804

FDIC loss-sharing expense

—

—

—

Gain on sales of investment securities, net

98

39

59

Other-than-temporary impairment on investment securities

—

—

—

Gain on sales of other real estate owned

22

33

(11)

Other income

1,857

2,710

(853)

Total noninterest income

$
15,403

$
14,937

$
466

For the Nine Months Ended

September 30,

Increase

(dollars in thousands)

2017

2016

(decrease)

Noninterest income:







Commercial FHA revenue

$
14,625

$
18,360

$
(3,735)

Residential mortgage banking revenue

7,563

7,148

415

Wealth management revenue

9,754

5,596

4,158

Service charges on deposit accounts

4,147

2,916

1,231

Interchange revenue

3,816

2,829

987

FDIC loss-sharing expense

—

(1,661)

1,661

Gain on sales of investment securities, net

219

315

(96)

Other-than-temporary impairment on investment securities

—

(824)

824

Gain on sales of other real estate owned

54

112

(58)

Other income

5,186

6,781

(1,595)

Total noninterest income

$
45,364

$
41,572

$
3,792

2023:

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.

~~Commercial FHA revenue.~~ ~~Noninterest~~Company-owned life insurance income. Income on company-owned life insurance income ~~from our commercial FHA business~~ increased ~~$0.5~~$0.9 million ~~or 15.9%,~~for the three months ended March 31, 2024, as compared to ~~$3.8 million~~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 ~~2017. Love Funding generated gains~~2023.

Loss on ~~loans held for~~ sale of ~~$3.4~~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.

Other noninterest income.Other income totaled $5.3 million ~~and net~~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 ~~$0.4~~$3.7 million related to Greensky portfolio. In addition, we recognized amortization expense of $0.6 million on our commercial serving portfolio in the ~~third~~current quarter of 2017 compared to gains on loans held for sale of $3.8 million and a net servicing loss of $0.5 million in the third quarter of 2016. Rate lock commitments totaled $112.5 million in the third quarter of 2017 compared to $73.4 million in the third quarter of 2016. Although rate lock commitments were higher in the third quarter of 2017, the decrease in gains recognized on loans held for sale resulted from a rate lock cancellation that led to the reversal of $0.9 million of commercial FHA revenue that had been initially recognizedbut no expense in the first quarter of ~~2017. The increase in servicing revenue~~2023, as the portfolio was ~~primarily due to $1.1 million of MSR impairment recorded in the prior year third quarter compared to $0.1 million of MSR impairment recognized in the third quarter of 2017~~.

~~For the first nine months of 2017, noninterest income from our commercial FHA business decreased $3.7 million, or 20.3%, to $14.6 million. Love Funding generated gains on loans~~classified as held for sale of $14.3 million and net servicing revenues of $0.3 million for the first nine months of 2017 compared to gains on loans held for sale of $17.8 million and net servicing revenue of $0.6 million for the first nine months of 2016. The $3.5 million decrease in gains on loans held for sale resulted primarily from a decrease in commercial FHA interest rate lock commitments to $481.0 million in the first nine months of 2017 compared to $581.8 million in the first nine months of 2016. The $0.2 million decrease in net servicing revenue primarily resulted from a $0.1 million increase in impairment recorded against our commercial FHA MSR during the first nine months of 2017 combined with higher amortization of commercial FHA MSR.

~~Residential mortgage banking revenue.~~ Our residential mortgage banking activities generated gains on loans held for sale of $1.8 million and net servicing revenue of $0.6 million in the third quarter of 2017 compared to gains on loans held for sale of $4.8 million and net servicing revenue of $0.2 million in the third quarter of 2016. The $3.0 million decrease in gains on loans held for sale was primarily due to a 60.2% decrease in interest rate lock commitments in the third quarter of 2017 compared to the prior year third quarter. The $0.3 million increase in net servicing revenue primarily resulted from a decrease in MSR amortization.

For the first nine months of 2017, our residential mortgage banking activities generated gains on loans held for sale of $6.5 million and net servicing revenue of $1.0 million compared to gains on loans held for sale of $11.0 million and a net servicing loss of $3.9 million in the first nine months of 2016. The $4.5 million decrease in gains on loans held for sale was primarily due to a 37.1% decline in interest rate lock commitments during the first nine months of 2017. The $4.9 million increase in net servicing revenue primarily resulted from $5.0 million of impairment recorded against our residential mortgage servicing rights during the first nine months of 2016 compared to $0.7 million of impairment in the first nine months of 2017. The increase in net servicing revenue was also impacted by a decrease in MSR amortization.

~~Wealth management revenue.~~ Noninterest income from our wealth management business totaled $3.5 million and $9.8 million for the three and nine months ended September 30, 2017, respectively, compared to $1.9 million and $5.6 million for the corresponding three and nine month periods in the prior year, respectively. These increases in wealth management revenue for both the three- and nine-month periods were primarily due to growth in assets under administration of $766.0 million, or 62.0%, to $2.0 billion at September 30, 2017 compared to September 30, 2016. The increase in assets under administration consisted of $400.0 million of wealth management assets added from the Sterling acquisition that closed in November 2016, $180.0 million of assets under administration added from the CedarPoint acquisition and organic growth experienced during the past year.

~~Service charges on deposit accounts.~~ Noninterest income from service charges on deposit accounts totaled $2.1 million and $4.1 million for the three and nine months ended September 30, 2017, respectively, compared to $1.0 million and $2.9 million for the corresponding three and nine month periods in the prior year, respectively. These increases primarily resulted from the addition of transactional deposit accounts associated with the Centrue acquisition that closed in June 2017.

sale.


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	MSBI	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/40th interest in a share of 7.75% fixed rate reset non-cumulative perpetual preferred stock, Series A	MSBIP	The Nasdaq Stock Market LLC


			Page
PART I. FINANCIAL INFORMATION
		~~Page~~
~~PART I.FINANCIAL INFORMATION~~

Item 1.	Financial ~~Statements~~Statements:

		Consolidated Balance Sheets at ~~September 30, 2017~~ March 31, 2024(Unaudited) and December 31, ~~2016~~ 2023	3 1

		Consolidated Statements of Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~ March 31, 2024 and ~~2016~~ 2023	4 2

		Consolidated Statements of Comprehensive Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~ 2023	5 3

		Consolidated Statements of Shareholders’ Equity (Unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~ 2023	6 4

		Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2024 and ~~2016~~ 2023	7 5

		Notes to Consolidated Financial Statements (Unaudited)	8 6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	37 44

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	54 70

Item 4.		Controls and Procedures	55 70

PART II.OTHER INFORMATION

Item 1.		Legal Proceedings	55 70

Item 1A.		Risk Factors	55 71

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	56 71

Item 5.		Other Information	56

Item 6.		Exhibits	57 72

SIGNATURES			58 73


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Net income
Net income
Net income	$	2,036	$	8,051	$	14,065	$	19,959
Other comprehensive income (loss):
Other comprehensive income (loss):
Other comprehensive income (loss):
Investment securities available for sale:
Unrealized gains (losses) that occurred during the period		305		(233)		3,245		5,789
Reclassification adjustment for realized net gains on sales of investment securities included in net income		(98)		(39)		(219)		(315)
Investment securities available for sale:
Investment securities available for sale:
Unrealized (losses) gains that occurred during the period
Unrealized (losses) gains that occurred during the period
Unrealized (losses) gains that occurred during the period

Reclassification adjustment for realized net losses on sales of investment securities included in net income

Reclassification adjustment for realized net losses on sales of investment securities included in net income

Reclassification adjustment for realized net losses on sales of investment securities included in net income
Income tax effect
Income tax effect
Income tax effect		(94)		110		(1,188)		(2,203)
Change in investment securities available for sale, net of tax		113		(162)		1,838		3,271
Investment securities held to maturity:
Amortization of unrealized gain on investment securities transferred from available-for-sale		(25)		(3)		(83)		(42)
Change in investment securities available for sale, net of tax
Change in investment securities available for sale, net of tax
Cash flow hedges:
Cash flow hedges:
Cash flow hedges:
Net unrealized derivative gains on cash flow hedges
Net unrealized derivative gains on cash flow hedges
Net unrealized derivative gains on cash flow hedges

Income tax effect		9		1		31		17
Change in investment securities held to maturity, net of tax		(16)		(2)		(52)		(25)
Cash flow hedges:
Change in fair value of interest rate swap		—		32		—		93

Income tax effect

Income tax effect		—		(13)		—		(38)
Change in cash flow hedges, net of tax		—		19		—		55
Other comprehensive income (loss), net of tax		97		(145)		1,786		3,301
Change in cash flow hedges, net of tax
Change in cash flow hedges, net of tax
Other comprehensive (loss) income, net of tax
Other comprehensive (loss) income, net of tax
Other comprehensive (loss) income, net of tax
Total comprehensive income	$	2,133	$	7,906	$	15,851	$	23,260
Total comprehensive income
Total comprehensive income


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	13,885	$	21,772
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses on loans	14,000		3,135
Depreciation on premises and equipment	1,231		1,208
Amortization of intangible assets	1,089		1,291
Amortization of operating lease right-of-use asset	402		421
Amortization of loan servicing rights	676		88
Share-based compensation expense	701		625
Increase in cash surrender value of life insurance	(1,801)		(876)

Investment securities accretion, net	(1,296)		(47)

Loss on sales of investment securities, net	—		648

Gain on sales of other real estate owned	(22)		—

Origination of loans held for sale	(14,070)		(7,507)
Proceeds from sales of loans held for sale	17,627		6,261
Gain on sale of loans held for sale	(442)		(264)



Net change in operating assets and liabilities:
Accrued interest receivable	(997)		(221)
Other assets	1,034		4,423
Accrued expenses and other liabilities	(5,100)		(14,949)
Net cash provided by operating activities	26,917		16,008
Cash flows from investing activities:
Purchases of investment securities available for sale	(172,715)		(136,881)
Proceeds from sales of investment securities available for sale	—		84,493
Maturities and payments on investment securities available for sale	42,464		13,748
Purchases of equity securities	(93)		(139)

Net decrease (increase) in loans	163,694		(49,923)

Purchases of premises and equipment	(527)		(2,788)
Proceeds from sale of premises and equipment	—		8
Purchases of nonmarketable equity securities	(58,162)		(11,315)
Proceeds from redemptions of nonmarketable equity securities	68,107		4,385

Proceeds from sales of other real estate owned	301		—


Net cash provided by (used in) investing activities	43,069		(98,412)
Cash flows from financing activities:
Net increase in deposits	14,455		60,549
Net increase (decrease) in short-term borrowings	179,581		(11,138)
Net (decrease) increase in short-term FHLB borrowings	(166,000)		92,000
Proceeds from long-term FHLB borrowings	35,000		235,000
Payments made on long-term FHLB borrowings	(90,000)		(305,000)




Cash dividends paid on preferred stock	(2,228)		(2,228)
Cash dividends paid on common stock	(6,772)		(6,749)

Common stock repurchased	(1,944)		(2,801)
Proceeds from issuance of common stock under employee benefit plans	177		450
Net cash (used in) provided by financing activities	(37,731)		60,083
Net increase (decrease) in cash and cash equivalents	32,255		(22,321)
Cash and cash equivalents:
Beginning of period	135,061		160,631
End of period	$	167,316	$	138,310
Supplemental disclosures of cash flow information:
Cash payments for:
Interest paid on deposits and borrowed funds	$	46,187	$	34,888
Income tax paid (net of refunds)	985		1,409
Supplemental disclosures of noncash investing and financing activities:

Transfer of loans to other real estate owned	51		—
Right of use assets obtained in exchange for lease obligations	222		1,130


Note 1: Business Description			8

Note 2 : Investment Securities			9
Note 3 : Loans			12
Note 4 : Premises, Equipment and Leases			24

Note 5 : Derivative Instruments			24
Note 6 : Deposits			26
Note 7 : Short-Term Borrowings			26
Note 8 : FHLB Advances and Other Borrowings			26
Note 9 : Subordinated Debt			27

Note 1 0 : Earnings Per Common Share			27
Note 1 1 : Fair Value of Financial Instruments			28
Note 1 2 : Commitments, Contingencies and Credit Risk			33
Note 1 3 : Segment Information			34
Note 1 4 : Revenue from Contracts with Customers			35


									Accumulated
									other		Total
	Preferred		Common		Capital		Retained		comprehensive		shareholders'
	stock		stock		surplus		earnings		(loss) income		equity
Balances, December 31, 2016	$	—	$	155	$	209,712	$	112,513	$	(610)	$	321,770
Net income		—		—		—		14,065		—		14,065
Compensation expense for stock option grants		—		—		413		—		—		413
Amortization of restricted stock awards		—		—		599		—		—		599
Preferred dividends declared		—		—		—		(102)		—		(102)
Amortization of preferred stock premium		(56)		—		—		56				—
Common dividends declared ($0.60 per share)		—		—		—		(10,159)		—		(10,159)
Acquisition of CedarPoint Investment Advisors, Inc.		—		1		3,350		—		—		3,351
Acquisition of Centrue Financial Corporation		3,071		32		112,480		—		—		115,583
Issuance of common stock under employee benefit plans		—		3		3,380		—		—		3,383
Other comprehensive income		—		—		—		—		1,786		1,786
Balances, September 30, 2017	$	3,015	$	191	$	329,934	$	116,373	$	1,176	$	450,689


Balances, December 31, 2015	$	—	$	118	$	135,822	$	90,911	$	6,029	$	232,880
Cumulative effect of change in accounting principle		—		—		87		(87)		—		—
Balances, January 1, 2016		—		118		135,909		90,824		6,029		232,880
Net income		—		—		—		19,959		—		19,959
Compensation expense for stock option grants		—		—		315		—		—		315
Amortization of restricted stock awards		—		—		387		—		—		387
Common dividends declared ($0.54 per share)		—		—		—		(7,057)		—		(7,057)
Initial public offering of 3,590,065 shares of common stock, net of issuance costs		—		36		71,439		—		—		71,475
Issuance of common stock under employee benefit plans		—		—		489		—		—		489
Other comprehensive income		—		—		—		—		3,301		3,301
Balances, September 30, 2016	$	—	$	154	$	208,539	$	103,726	$	9,330	$	321,749


	Preferred stock		Common stock		Capital surplus		Retained earnings		Accumulated other comprehensive (loss) income		Total shareholders' equity











Balances, December 31, 2023	$	110,548	$	216	$	435,463	$	322,379	$	(76,753)	$	791,853
Net income	—		—		—		13,885		—		13,885
Other comprehensive loss	—		—		—		—		(4,666)		(4,666)

Common dividends declared ($0.31 per share)	—		—		—		(6,772)		—		(6,772)
Preferred dividends declared ($19.375 per share)	—		—		—		(2,228)		—		(2,228)
Common stock repurchased	—		(1)		(1,943)		—		—		(1,944)
Share-based compensation expense	—		—		701		—		—		701
Issuance of common stock under employee benefit plans	—		—		177		—		—		177
Balances, March 31, 2024	$	110,548	$	215	$	434,398	$	327,264	$	(81,419)	$	791,006

Balances, December 31, 2022	$	110,548	$	222	$	449,196	$	282,405	$	(83,797)	$	758,574
Net income	—		—		—		21,772		—		21,772
Other comprehensive income	—		—		—		—		6,000		6,000

Common dividends declared ($0.30 per share)	—		—		—		(6,749)		—		(6,749)
Preferred dividends declared ( $19.375 per share)	—		—		—		(2,228)		—		(2,228)
Common stock repurchased	—		(1)		(2,800)		—		—		(2,801)
Share-based compensation expense	—		—		625		—		—		625
Issuance of common stock under employee benefit plans	—		—		450		—		—		450
Balances, March 31, 2023	$	110,548	$	221	$	447,471	$	295,200	$	(77,797)	$	775,643


Assets acquired:
Cash and cash equivalents	$	42,461
Investment securities available for sale		149,013
Loans		681,870
Loans held for sale		531
Premises and equipment		17,147
Other real estate owned		4,759
Nonmarketable equity securities		8,168
Accrued interest receivable		2,376
Mortgage servicing rights		1,933
Intangible assets		11,070
Cash surrender value of life insurance policies		36,349
Deferred tax assets, net		33,461
Other assets		2,256
Total assets acquired		991,394
Liabilities assumed:
Deposits		739,867
Short-term borrowings		14,434
FHLB advances and other borrowings		95,332
Trust preferred debentures		7,565
Accrued interest payable		275
Other liabilities		3,429
Total liabilities assumed		860,902
Net assets acquired		130,492
Goodwill		46,087
Total consideration paid	$	176,579


					Best Estimate at
					Acquisition Date of
	Fair Value		Gross Contractual		Contractual Cash
	of Acquired Loans		Amounts Receivable		Flows Not Expected
	at Acquisition Date		at Acquisition Date		to be Collected
Acquired receivables subject to ASC 310-30	$	13,352	$	20,719	$	5,256
Acquired receivables not subject to ASC 310-30		668,518		821,338		4,518


	September 30, 2017
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
	cost		gains		losses		value
U.S. Treasury securities	$	47,979	$	—	$	72	$	47,907
Government sponsored entity debt securities		19,290		104		5		19,389
Agency mortgage-backed securities		229,382		1,103		631		229,854
State and municipal securities		39,385		376		45		39,716
Corporate securities		56,404		1,070		167		57,307
Equity securities		2,705		115		8		2,812
Total	$	395,145	$	2,768	$	928	$	396,985


	December 31, 2016
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
	cost		gains		losses		value
U.S. Treasury securities	$	75,973	$	—	$	72	$	75,901
Government sponsored entity debt securities		7,653		57		22		7,688
Agency mortgage-backed securities		90,629		373		932		90,070
Non-agency mortgage-backed securities		1		—		—		1
State and municipal securities		25,826		15		567		25,274
Corporate securities		47,443		403		441		47,405
Total	$	247,525	$	848	$	2,034	$	246,339


	September 30, 2017						December 31, 2016
	Non-PCI		PCI				Non-PCI		PCI
	Loans		Loans (1)		Total		Loans		Loans (1)		Total
Loans:
Commercial	$	510,457	$	3,087	$	513,544	$	454,310	$	3,517	$	457,827
Commercial real estate		1,456,620		15,664		1,472,284		963,895		5,720		969,615
Construction and land development		181,763		750		182,513		165,175		12,150		177,325
Total commercial loans		2,148,840		19,501		2,168,341		1,583,380		21,387		1,604,767
Residential real estate		438,973		6,774		445,747		247,156		6,557		253,713
Consumer		342,863		175		343,038		269,705		312		270,017
Lease financing		200,846		—		200,846		191,479		—		191,479
Total loans	$	3,131,522	$	26,450	$	3,157,972	$	2,291,720	$	28,256	$	2,319,976


	September 30, 2017								December 31, 2016
	Residential				Lease				Residential				Lease
	Real Estate		Consumer		Financing		Total		Real Estate		Consumer		Financing		Total
Performing	$	433,653	$	342,586	$	199,784	$	976,023	$	242,127	$	269,492	$	190,148	$	701,767
Impaired		5,320		277		1,062		6,659		5,029		213		1,331		6,573
Total (excluding PCI)	$	438,973	$	342,863	$	200,846	$	982,682	$	247,156	$	269,705	$	191,479	$	708,340


	September 30, 2017						December 31, 2016
			Unpaid		Related				Unpaid		Related
	Recorded		Principal		Valuation		Recorded		Principal		Valuation
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans with a valuation allowance:
Commercial	$	3,047	$	3,111	$	500	$	3,877	$	3,888	$	882
Commercial real estate		16,454		17,540		3,570		2,142		2,331		309
Construction and land development		104		104		10		84		84		8
Residential real estate		3,056		3,634		490		3,735		4,404		604
Consumer		277		289		31		213		190		23
Lease financing		757		757		186		1,331		1,331		356
Total impaired loans with a valuation allowance		23,695		25,435		4,787		11,382		12,228		2,182
Impaired loans with no related valuation allowance:
Commercial		953		5,874		—		2,671		7,567		—
Commercial real estate		6,214		8,291		—		16,256		17,058		—
Construction and land development		—		813		—		—		—		—
Residential real estate		2,264		2,500		—		1,294		1,462		—
Consumer		—		—		—		—		26		—
Lease financing		305		305		—		—		—		—
Total impaired loans with no related valuation allowance		9,736		17,783		—		20,221		26,113		—
Total impaired loans:
Commercial		4,000		8,985		500		6,548		11,455		882
Commercial real estate		22,668		25,831		3,570		18,398		19,389		309
Construction and land development		104		917		10		84		84		8
Residential real estate		5,320		6,134		490		5,029		5,866		604
Consumer		277		289		31		213		216		23
Lease financing		1,062		1,062		186		1,331		1,331		356
Total impaired loans (excluding PCI)	$	33,431	$	43,218	$	4,787	$	31,603	$	38,341	$	2,182


	Three Months Ended September 30,
	2017				2016
			Interest Income				Interest Income
	Average		Recognized		Average		Recognized
	Recorded		While on		Recorded		While on
	Investment		Impaired Status		Investment		Impaired Status
Impaired loans with a valuation allowance:
Commercial	$	3,054	$	6	$	6,426	$	23
Commercial real estate		16,243		34		2,170		65
Construction and land development		104		2		65		3
Residential real estate		3,090		9		3,157		13
Consumer		289		—		115		—
Lease financing		757		—		727		—
Total impaired loans with a valuation allowance		23,537		51		12,660		104
Impaired loans with no related valuation allowance:
Commercial		2,912		—		439		2
Commercial real estate		6,238		—		15,610		—
Construction and land development		—		—		—		—
Residential real estate		2,276		2		1,341		1
Consumer		—		—		91		—
Lease financing		305		—		—		—
Total impaired loans with no related valuation allowance		11,731		2		17,481		3
Total impaired loans:
Commercial		5,966		6		6,865		25
Commercial real estate		22,481		34		17,780		65
Construction and land development		104		2		65		3
Residential real estate		5,366		11		4,498		14
Consumer		289		—		206		—
Lease financing		1,062		—		727		—
Total impaired loans (excluding PCI)	$	35,268	$	53	$	30,141	$	107


	Nine Months Ended September 30,
	2017				2016
			Interest Income				Interest Income
	Average		Recognized		Average		Recognized
	Recorded		While on		Recorded		While on
	Investment		Impaired Status		Investment		Impaired Status
Impaired loans with a valuation allowance:
Commercial	$	3,068	$	8	$	8,115	$	24
Commercial real estate		16,808		51		2,273		115
Construction and land development		106		3		66		6
Residential real estate		3,032		12		3,234		24
Consumer		311		—		118		—
Lease financing		757		—		727		—
Total impaired loans with a valuation allowance		24,082		74		14,533		169
Impaired loans with no related valuation allowance:
Commercial		3,199		—		313		1
Commercial real estate		6,332		—		15,742		56
Construction and land development		—		—		—		—
Residential real estate		2,174		3		1,364		3
Consumer		—		—		91		—
Lease financing		305		—		—		—
Total impaired loans with no related valuation allowance		12,010		3		17,510		60
Total impaired loans:
Commercial		6,267		8		8,428		25
Commercial real estate		23,140		51		18,015		171
Construction and land development		106		3		66		6
Residential real estate		5,206		15		4,598		27
Consumer		311		—		209		—
Lease financing		1,062		—		727		—
Total impaired loans (excluding PCI)	$	36,092	$	77	$	32,043	$	229


	September 30, 2017						December 31, 2016
	Accruing (1)		Non-accrual (2)		Total		Accruing (1)		Non-accrual (2)		Total
Commercial	$	319	$	—	$	319	$	611	$	—	$	611
Commercial real estate		1,214		14,812		16,026		11,253		5,098		16,351
Construction and land development		59		—		59		63		—		63
Residential real estate		772		614		1,386		400		527		927
Consumer		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Total loans (excluding PCI)	$	2,364	$	15,426	$	17,790	$	12,327	$	5,625	$	17,952


					Remaining
	Servicing		Interest		Years to	Prepayment		Servicing		Discount
	Fee		Rate		Maturity	Rate		Cost		Rate
September 30, 2017:
Commercial FHA mortgage loans	0.13	%	3.67	%	30.3	8.25	%	$	1,000	10 - 12	%
Residential mortgage loans	0.26	%	3.93	%	22.6	11.52	%	$	67	9 - 11	%

December 31, 2016:
Commercial FHA mortgage loans	0.13	%	3.72	%	30.2	8.31	%	$	1,000	10 - 13	%
Residential mortgage loans	0.26	%	3.89	%	24.2	9.72	%	$	60	9 - 11	%


	Repurchase Agreements
	September 30,			December 31,
	2017			2016
Outstanding at period-end	$	153,443		$	131,557
Average amount outstanding		157,388			130,228
Maximum amount outstanding at any month end		183,327			168,369
Weighted average interest rate:
During period		0.22	%		0.23	%
End of period		0.23	%		0.21	%


	As of and for the quarter ended
	March 31, 2024
(dollars in thousands)	Repurchase agreements			Federal funds purchased
Outstanding at period-end	$	7,446		$	207,000
Average amount outstanding	7,347			57,835
Maximum amount outstanding at any month end	7,446			207,000
Weighted average interest rate:
During period	0.26		%	5.78		%
End of period	0.25		%	5.44		%


	September 30, 2017
			Quoted prices
			in active		Significant
			markets		other		Significant
			for identical		observable		unobservable
			assets		inputs		inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets and liabilities measured at fair value on a recurring basis:
Assets
Securities available for sale:
U.S. Treasury securities	$	47,907	$	47,907	$	—	$	—
Government sponsored entity debt securities		19,389		—		19,389		—
Agency mortgage-backed securities		229,854		—		229,854		—
State and municipal securities		39,716		—		39,716		—
Corporate securities		57,307		—		52,558		4,749
Equity securities		2,812		—		2,812		—
Loans held for sale		35,874		—		35,874		—
Interest rate lock commitments		6,421		—		6,421		—
Forward commitments to sell mortgage-backed securities		5		—		5		—
Interest rate swap contracts		121		—		121		—
Total	$	439,406	$	47,907	$	386,750	$	4,749
Liabilities
Interest rate swap contracts	$	121	$	—	$	121	$	—

Assets measured at fair value on a non-recurring basis:
Mortgage servicing rights	$	56,299	$	—	$	—	$	56,299
Mortgage servicing rights held for sale		10,618		—		—		10,618
Impaired loans		18,311		—		6,227		12,084
Assets held for sale		2,858		—		2,858		—


					Non-Agency
	Corporate				Mortgage-Backed
	Securities				Securities
	Three Months		Nine Months		Three Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30,		September 30,		September 30,		September 30,
	2017				2017
Balance, beginning of period	$	4,740	$	7,480	$	—	$	1
Total realized in earnings (1)		54		235		—		—
Total unrealized in other comprehensive income		—		242		—		—
Net settlements (principal and interest)		(45)		(3,208)		—		(1)
Balance, end of period	$	4,749	$	4,749	$	—	$	—


			Commercial FHA
			Origination and
	Banking		Servicing		Other		Total
Three Months Ended September 30, 2017
Net interest income (expense)	$	38,598	$	(79)	$	(1,754)	$	36,765
Provision for loan losses		1,489		—		—		1,489
Noninterest income		8,571		3,966		2,866		15,403
Noninterest expense		42,425		3,910		2,028		48,363
Income (loss) before income taxes (benefit)		3,255		(23)		(916)		2,316
Income taxes (benefit)		996		(9)		(707)		280
Net income (loss)	$	2,259	$	(14)	$	(209)	$	2,036
Total assets	$	4,370,600	$	121,514	$	(144,353)	$	4,347,761

Three Months Ended September 30, 2016
Net interest income (expense)	$	28,394	$	215	$	(1,344)	$	27,265
Provision for loan losses		1,392		—		—		1,392
Noninterest income		9,714		3,557		1,666		14,937
Noninterest expense		23,640		3,511		1,506		28,657
Income (loss) before income taxes (benefit)		13,076		261		(1,184)		12,153
Income taxes (benefit)		4,573		104		(575)		4,102
Net income (loss)	$	8,503	$	157	$	(609)	$	8,051
Total assets	$	3,252,421	$	100,516	$	(105,210)	$	3,247,727


(dollars in thousands)	Banking		Wealth Management		Corporate		Total
Three Months Ended March 31, 2024
Net interest income (expense)	$	58,216	$	(8)	$	(2,288)	$	55,920
Provision for credit losses	14,000		—		—		14,000
Noninterest income	14,491		7,132		(436)		21,187
Noninterest expense	40,098		5,412		(643)		44,867
Income (loss) before income taxes (benefit)	18,609		1,712		(2,081)		18,240
Income taxes (benefit)	4,461		690		(796)		4,355
Net income (loss)	$	14,148	$	1,022	$	(1,285)	$	13,885
Total assets	$	7,810,328	$	33,103	$	(11,622)	$	7,831,809











Three Months Ended March 31, 2023
Net interest income (expense)	$	62,608	$	—	$	(2,104)	$	60,504
Provision for credit losses	3,135		—		—		3,135
Noninterest income	9,621		6,411		(253)		15,779
Noninterest expense	39,847		4,841		(206)		44,482
Income (loss) before income taxes (benefit)	29,247		1,570		(2,151)		28,666
Income taxes (benefit)	7,206		439		(751)		6,894
Net income (loss)	$	22,041	$	1,131	$	(1,400)	$	21,772
Total assets	$	7,918,339	$	29,828	$	(17,993)	$	7,930,174


	For the Nine Months Ended September 30,
	2017						2016
	Average		Interest		Yield /		Average		Interest		Yield /
(tax-equivalent basis, dollars in thousands)	Balance		& Fees		Rate		Balance		& Fees		Rate
Earning Assets
Federal funds sold and cash investments	$	186,539	$	1,405	1.01	%	$	203,514	$	762	0.50	%
Investment securities:
Taxable investment securities		281,156		4,705	2.23			221,091		8,222	4.96
Investment securities exempt from federal income tax (1)		107,831		4,338	5.36			99,985		4,215	5.62
Total investment securities		388,987		9,043	3.10			321,076		12,437	5.16
Loans:
Taxable loans (2)		2,674,770		97,016	4.85			2,049,891		75,741	4.94
Loans exempt from federal income tax (1)		46,719		1,467	4.20			41,742		1,382	4.42
Total loans		2,721,489		98,483	4.84			2,091,633		77,123	4.93
Loans held for sale		60,590		1,926	4.25			76,586		2,401	4.19
Nonmarketable equity securities		24,547		788	4.29			16,881		504	3.99
Total earning assets		3,382,152	$	111,645	4.41	%		2,709,690	$	93,227	4.60	%
Noninterest-Earning Assets		402,889						324,116
Total assets	$	3,785,041					$	3,033,806
Interest-Bearing Liabilities
Checking and money market deposits	$	1,254,706	$	2,565	0.27	%	$	1,010,734	$	1,391	0.18	%
Savings deposits		217,753		224	0.14			162,890		181	0.15
Time deposits		446,025		2,928	0.88			436,975		2,933	0.90
Time, brokered deposits		264,035		2,853	1.44			216,075		2,196	1.36
Total interest-bearing deposits		2,182,519		8,570	0.52			1,826,674		6,701	0.49
Short-term borrowings		157,388		262	0.22			123,192		217	0.24
FHLB advances and other borrowings		325,120		2,901	1.19			150,213		698	0.62
Subordinated debt		54,544		2,619	6.40			59,324		2,985	6.71
Trust preferred debentures		40,613		1,635	5.38			37,181		1,373	4.93
Total interest-bearing liabilities		2,760,184	$	15,987	0.77	%		2,196,584	$	11,974	0.73	%
Noninterest-Bearing Liabilities
Noninterest-bearing deposits		598,874						528,238
Other noninterest-bearing liabilities		45,426						34,363
Total noninterest-bearing liabilities		644,300						562,601
Shareholders’ equity		380,557						274,621
Total liabilities and shareholders’ equity	$	3,785,041					$	3,033,806
Net interest income / net interest margin (3)			$	95,658	3.78	%			$	81,253	4.01	%


	For the Three Months Ended
	September 30,				Increase
(dollars in thousands)	2017		2016		(decrease)
Noninterest income:
Commercial FHA revenue	$	3,777	$	3,260	$	517
Residential mortgage banking revenue		2,317		4,990		(2,673)
Wealth management revenue		3,475		1,941		1,534
Service charges on deposit accounts		2,133		1,044		1,089
Interchange revenue		1,724		920		804
FDIC loss-sharing expense		—		—		—
Gain on sales of investment securities, net		98		39		59
Other-than-temporary impairment on investment securities		—		—		—
Gain on sales of other real estate owned		22		33		(11)
Other income		1,857		2,710		(853)
Total noninterest income	$	15,403	$	14,937	$	466


	For the Nine Months Ended
	September 30,				Increase
(dollars in thousands)	2017		2016		(decrease)
Noninterest income:
Commercial FHA revenue	$	14,625	$	18,360	$	(3,735)
Residential mortgage banking revenue		7,563		7,148		415
Wealth management revenue		9,754		5,596		4,158
Service charges on deposit accounts		4,147		2,916		1,231
Interchange revenue		3,816		2,829		987
FDIC loss-sharing expense		—		(1,661)		1,661
Gain on sales of investment securities, net		219		315		(96)
Other-than-temporary impairment on investment securities		—		(824)		824
Gain on sales of other real estate owned		54		112		(58)
Other income		5,186		6,781		(1,595)
Total noninterest income	$	45,364	$	41,572	$	3,792


	Three Months Ended March 31,				Increase (decrease)
(dollars in thousands)	2024		2023
Noninterest income:
Wealth management revenue	$	7,132	$	6,411	$	721
Service charges on deposit accounts	3,116		2,745		371
Interchange revenue	3,358		3,412		(54)
Residential mortgage banking revenue	527		405		122
Income on Company-owned life insurance	1,801		876		925
Loss on sales of investment securities, net	—		(648)		648

Other income	5,253		2,578		2,675
Total noninterest income	$	21,187	$	15,779	$	5,408


	For the Nine Months Ended				For the Year Ended
	September 30, 2017				December 31, 2016
			Net				Net
			Growth				Growth
(dollars in thousands)	Acquired		(Attrition)		Acquired		(Attrition)
Loans:
Commercial	$	104,812	$	(49,095)	$	—	$	(41,746)
Commercial real estate		485,984		16,685		—		92,831
Construction and land development		28,458		(23,270)		—		27,059
Total commercial loans		619,254		(55,680)		—		78,144
Residential real estate		59,569		132,465		—		90,489
Consumer		3,047		69,974		—		108,505
Lease financing		—		9,367		—		47,249
Total loans	$	681,870	$	156,126	$	—	$	324,387


		September 30, 2017
		Within One Year				One Year to Five Years				After Five Years
				Adjustable				Adjustable				Adjustable
	March 31, 2024																					March 31, 2024
	Within One Year
(dollars in thousands)		Fixed Rate		Rate		Fixed Rate		Rate		Fixed Rate		Rate		Total
Loans:
(dollars in thousands)
(dollars in thousands)																Fixed Rate	Adjustable Rate	Fixed Rate	Adjustable Rate	Fixed Rate	Adjustable Rate		Fixed Rate	Adjustable Rate	Total
Commercial		$	42,516	$	156,556	$	112,807	$	112,299	$	78,785	$	10,581	$	513,544
Commercial real estate			149,549		95,752		646,331		201,995		70,036		308,621		1,472,284
Construction and land development			16,478		51,473		23,219		72,137		776		18,430		182,513
Total commercial loans			208,543		303,781		782,357		386,431		149,597		337,632		2,168,341
Residential real estate			3,823		13,507		16,050		40,116		133,677		238,574		445,747
Consumer			3,947		6,620		61,087		17,635		252,513		1,236		343,038
Lease financing			7,503		—		193,046		—		297		—		200,846
Total loans		$	223,816	$	323,908	$	1,052,540	$	444,182	$	536,084	$	577,442	$	3,157,972


	As of and for the						As of and for the
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2017			2016			2017			2016
Balance, beginning of period	$	15,424		$	14,752		$	14,862		$	15,988
Charge-offs:
Commercial		—			251			737			2,513
Commercial real estate		—			214			470			461
Construction and land development		—			1			—			1
Residential real estate		128			153			455			454
Consumer		105			91			536			225
Lease financing		102			154			658			632
Total charge-offs		335			864			2,856			4,286
Recoveries:
Commercial		54			36			137			164
Commercial real estate		56			129			435			216
Construction and land development		13			13			48			30
Residential real estate		47			32			276			131
Consumer		81			20			197			79
Lease financing		32			49			282			91
Total recoveries		283			279			1,375			711
Net charge-offs		52			585			1,481			3,575
Provision for loan losses		1,489			1,392			3,480			3,146
Balance, end of period	$	16,861		$	15,559		$	16,861		$	15,559
Net charge-offs to average loans		0.01	%		0.11	%		0.07	%		0.23	%
Allowance to total loans		0.53	%		0.67	%		0.53	%		0.67	%


					Commercial				Construction &
	Commercial				Real Estate				Land Development
	Risk Category				Risk Category				Risk Category
(dollars in thousands)	7		8 (1)		7		8 (1)		7		8 (1)		Total
September 30, 2017	$	16,543	$	17,376	$	9,121	$	13,484	$	—	$	—	$	56,524
December 31, 2016		10,930		12,037		8,735		11,039		—		450		43,191


(dollars in thousands)	~~(1)~~	Year Ended March 31, 2024
Balance, beginning of period	~~Includes only those 8‑rated~~	$	56,351
New nonperforming loans ~~that are not included in impaired loans.~~		56,119
Return to performing status		(1,471)
Payments received		(3,452)
Transfer to OREO and other repossessed assets		(522)
Charge-offs		(2,046)
Balance, end of period		$	104,979


(dollars in thousands)	Balance		Percent		Weighted average yield
Investment securities available for sale:







U.S. government sponsored entities and U.S. agency securities:
Maturing within one year	$	—	—	%
Maturing in one to five years	33,923		3.3		5.82
Maturing in five to ten years	33,800		3.2		4.65
Maturing after ten years	—		—		—
Total U.S. government sponsored entities and U.S. agency securities	$	67,723	6.5	%	5.23	%

Mortgage-backed securities - agency:
Maturing within one year	$	13,461	1.3	%	4.92	%
Maturing in one to five years	335,140		32.2		4.45
Maturing in five to ten years	179,363		17.2		3.17
Maturing after ten years	153,556		14.8		2.85
Total mortgage-backed securities - agency	$	681,520	65.5	%	3.73	%

Mortgage-backed securities - non-agency:
Maturing within one year	$	—	—	%	—	%
Maturing in one to five years	79,896		7.7		4.69
Maturing in five to ten years	4,230		0.4		2.24
Maturing after ten years	5,402		0.5		3.21
Total mortgage-backed securities - non-agency	$	89,528	8.6	%	4.45	%

State and municipal securities (1):
Maturing within one year	$	1,175	0.1	%	2.82	%
Maturing in one to five years	9,253		0.9		2.59
Maturing in five to ten years	25,760		2.5		2.15
Maturing after ten years	24,442		2.3		3.99
Total state and municipal securities	$	60,630	5.8	%	2.95	%

Collateralized loan obligations:
Maturing within one year	$	6,395	0.6	%	6.82	%
Maturing in one to five years	16,120		1.5		6.99
Maturing in five to ten years	—		—		—
Maturing after ten years	11,099		1.1		6.49
Total collateralized loan obligations	$	33,614	3.2	%	6.79	%

Corporate securities:
Maturing within one year	$	4,997	0.5	%	8.41	%
Maturing in one to five years	39,390		3.8		4.42
Maturing in five to ten years	63,004		6.1		3.87
Maturing after ten years	—		—		—
Total corporate securities	$	107,391	10.4	%	4.25	%
Total investment securities, available for sale	$	1,040,406	100.0	%	3.98	%


	September 30, 2017
			% of Total		Weighted
	Book		Investment		Average
(dollars in thousands)	Value		Securities		Yield
Investment securities, available for sale
U.S. Treasury securities:
Maturing within one year	$	27,939	6.0	%	0.9	%
Maturing in one to five years		19,968	4.3		1.5
Maturing in five to ten years		—	0.0		0.0
Maturing after ten years		—	0.0		0.0
Total U.S. Treasury securities	$	47,907	10.3	%	1.2	%

Government sponsored entity debt securities:
Maturing within one year	$	—	0.0	%	0.0	%
Maturing in one to five years		6,930	1.5		2.0
Maturing in five to ten years		11,887	2.5		2.5
Maturing after ten years		572	0.1		2.5
Total government sponsored entity debt securities	$	19,389	4.1	%	2.3	%

Agency mortgage-backed securities:
Maturing within one year	$	923	0.2	%	2.5	%
Maturing in one to five years		191,912	41.0		2.2
Maturing in five to ten years		30,602	6.5		2.7
Maturing after ten years		6,417	1.4		3.0
Total agency mortgage-backed securities	$	229,854	49.1	%	2.3	%

State and municipal securities (1):
Maturing within one year	$	5,442	1.2	%	2.3	%
Maturing in one to five years		12,937	2.8		2.6
Maturing in five to ten years		14,704	3.1		3.6
Maturing after ten years		6,633	1.4		4.4
Total state and municipal securities	$	39,716	8.5	%	3.2	%

Corporate securities:
Maturing within one year	$	3,003	0.6	%	1.7	%
Maturing in one to five years		4,572	1.0		2.6
Maturing in five to ten years		46,920	10.0		4.9
Maturing after ten years		2,812	0.6		5.5
Total corporate securities	$	57,307	12.2	%	4.6	%

Equity securities:
No stated maturity	$	2,812	0.6	%	2.2	%
Total investment securities, available for sale	$	396,985	84.9	%	2.2	%

Investment securities, held to maturity
State and municipal securities (1):
Maturing within one year	$	871	0.2	%	5.8	%
Maturing in one to five years		19,055	4.1		5.7
Maturing in five to ten years		35,164	7.5		6.8
Maturing after ten years		15,777	3.4		5.5
Total state and municipal securities	$	70,867	15.2	%	6.2	%
Total investment securities	$	467,852	100.0	%	3.1	%