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Dwayne Hyzak

Thanks, Zach. Good morning, everyone, and thank you for joining us. We appreciate your participation on this morning's call, and we hope that everyone is doing well. On today's call, I will provide my usual update regarding our performance in the quarter. We'll also provide an update on our asset management activities, our recent dividend declarations, our expectations for dividends going forward, our recent investment activities and current investment pipeline and several other noteworthy updates.
Following my comments, Dave and Ryan will provide additional comments regarding our investment strategy, investment portfolio, financial results, capital structure and leverage, and our expectations for the fourth quarter, after which we'll be happy to take your questions.
We're pleased with our performance in the third quarter, which resulted in an annualized return on equity of 18.8%, DNII per share that continued to exceed the dividends paid to our shareholders, and a new record for NAV per share for the ninth consecutive quarter. We believe that these continued strong results demonstrate the sustainable strength of our overall platform, the benefits of our differentiated and diversified investment strategies, the unique contributions of our asset management business, and the continued underlying strength and quality of our portfolio companies.
We are also pleased that we further enhanced our strong capital structure and liquidity position during the quarter, which Ryan will discuss in more detail. And we continue to maintain very strong liquidity and a conservative leverage profile, which we believe is important in the current economic environment.
We maintain attractive investment pipelines in both our lower middle market and private loan investment strategies, and we remain excited about the opportunities in our lower middle market and private loan investment portfolios and in our asset management business, each of which has us well positioned for the future and provide us a continued favorable outlook for the fourth quarter.
We remain confident that these strategies, together with our cost-efficient operating structure will allow us to continue to deliver superior results for our shareholders in the future. Our positive results for the third quarter, combined with our favorable outlook for the fourth quarter resulted in a recommendation to our Board of Directors for our most recent dividend announcements, which I'll discuss in more detail later.
Our NAV per share increased in the quarter primarily due to the impact of net fair value increases in our investment portfolio and our asset management business and the accretive impact of our equity issuances, which Ryan will discuss in more detail.
The continued favorable performance of the majority of our lower middle market portfolio companies resulted in another quarter of strong dividend income contributions and significant net fair value appreciation in the equity investments in our lower middle market portfolio.
We are also excited to have several portfolio companies in the advanced stages of completing strategic acquisitions, which if successful will provide the opportunity for additional future fair value appreciation in addition to providing us highly attractive incremental debt investments in these high performing portfolio companies.
We also continue to see increased interest from potential buyers in several of our lower middle market portfolio companies and could lead to favorable realizations over the next few quarters and which we believe further highlights the strength and quality of our portfolio companies.
Our lower middle market investment activity in the third quarter included total investments of $52 million, which after repayments and other investment activity, resulted in a net increase in lower middle market investments of $2 million.
Although this investment activity was lower than our expectations for the quarter, we're pleased to have completed two new lower middle market platform company investments shortly after quarter end, which David will cover in more detail. And we expect to have additional lower middle market investment activity before year end.
We're very pleased with our private loan investment activity in the quarter. This activity included total private loan investments of $309 million, which after repayments and other investment activity resulted in a net increase in our private loan investments of $163 million. Given our conservative capital structure and strong liquidity position, we remain very well positioned to continue the growth of our investment portfolio over the next few quarters.
We've also continued to produce positive results for our asset management business. The funds we advise through our external investment manager continued to experience favorable performance in the third quarter, resulting in significant incentive fee income for our asset management business for the eighth consecutive quarter, and together with our recurring base management fees, a significant contribution to our net investment income.
We also benefited from significant fair value appreciation in the value of our External Investment Manager due to a combination of the continued increase in fee income, growth in assets under management, and broader market based drivers.
We remain excited about our plans for the external funds that we manage as we execute our investment strategies and other strategic initiatives, and we are optimistic about the future performance of the funds and the attractive returns we are providing to the investors of each fund and about our strategy of growing our asset management business within our internally managed structure.
As part of these efforts, we are very pleased with our progress in exploring a potential listing of the shares of MSC Income Fund, a non-listed BDC advised by our External Investment Manager. As detailed in MSC Income Fund's recent definitive proxy statement, upon the approval of the fund's shareholders and effective upon a listing of the fund's shares, the fund would transition its investment strategy to be solely focused on its private loan investment strategy, accompanied by an amendment to its investment advisory agreement to among other things, align its fee structure with the go-forward investment strategy.
The fund plans to hold a special meeting of its shareholders in early December to consider and vote on the proposals set forth in the fund's definitive proxy statement, each of which is intended to position the fund's listed shares. We're very excited about these potential activities and changes, which we believe represent significant catalysts to the future growth of the fund and the opportunity for significant future benefits to both to fund's shareholders and our asset management business.
Based upon our results for the third quarter, combined with our favorable outlook in each of our primary investment strategies and for our asset management business, earlier this week, our Board declared a supplemental dividend of $0.30 per share payable in December, representing our 13th consecutive quarterly supplemental dividend and an increase to our regular monthly dividends for the fourth quarter of 2025 to $0.25 per share.
The first quarter regular monthly dividends are payable in each of January, February, and March and represent a 4% increase from the regular monthly dividends paid in the first quarter of 2024. The supplemental dividend for December is a result of our strong performance in the third quarter and will result in total supplemental dividends paid during the trailing 12 month period of $1.20 per share, representing an additional 41% paid to our shareholders in excess of our regular monthly dividends, and total dividends for the trailing 12 months of over $4 per share and the current total yield we are providing to our shareholders of approximately 8%.
We currently expect to recommend that our Board continue to declare future supplemental dividends to the extent DNII significantly exceeds our regular monthly dividends paid in future quarters and we maintain a stable to positive NAV. Based upon our expectations for continued favorable performance in the fourth quarter, we currently anticipate proposing an additional supplemental dividend payable in March 2025.
Now turning to our current investment pipeline. As of today, I would characterize our lower middle market investment pipeline as above average. We believe that the unique and flexible financial solutions that we can provide to lower middle market companies and their owners and management teams and our differentiated long-term to permanent holding periods represent an attractive solution to the needs of many lower middle market companies. And we are confident in our expectations for favorable lower middle market investment activity over the next few months.
We also continue to be very pleased with the performance of our private credit team and the significant growth that they have provided for our private loan portfolio and our asset management business. And as of today, I would characterize our private loan investment pipeline as average.
With that, I will turn the call over to David.

David Magdol

Thanks, Dwayne, and good morning, everyone. As Dwayne highlighted in his remarks, we believe our strong third quarter financial results continue to demonstrate the strength of Main Street's platform, our differentiated investment approach and our unique operating model. We are pleased to report that the overall operating performance for most of our portfolio companies continue to be positive, which contributed to our attractive third quarter financial results.
We did, however, experience continued softness in certain portfolio companies with a consumer discretionary focused products or services, which we have been monitoring for several quarters, and we are actively working to maximize our recoveries on these specific investments. As we've discussed in the past, the largest portion of our investment portfolio and a primary driver of our long-term success has been and continues to be our focus on the underserved lower middle market and specifically, our strategy of investing in both the debt and the equity of lower middle market companies.
In our view on the relative attractiveness of investing in the lower middle market remains unchanged, and we expect this will continue to be our primary area of focus in the future. Each quarter, we try to highlight key aspects of our investment strategy and differentiated approach. For today's call, we thought it would be useful to spend some time discussing the support we provide to our lower middle market portfolio companies.
In addition to our ongoing investment management activities and the managerial systems we offer to our lower middle market portfolio companies, we specifically want to highlight an annual event we host for the leaders of our lower middle market portfolio companies, the eighth annual Main Street Presidents' Meeting.
For those of you who are not familiar with our Presidents Meeting, it's an annual event Main Street hosts for our lower middle market portfolio company leaders to network, build relationships, share best practices, learn from each other, and benefit from being on Main Street's portfolio.
Based on post-event feedback we received from our lower middle market portfolio company executives, the event is highly valued by the participants, and the event improves each year as we refine our agenda based on the feedback we received. Topics covered in the most recent meeting included an M&A panel with several portfolio companies' CEOs, considerations for effectively utilizing artificial intelligence, Q&A on today's political landscape, an economic update, and cybersecurity best practices.
As a result of this annual event, our portfolio companies have done business together, referred business to each other, utilized each other as operational resources, and made long-term friendships that are invaluable. To provide more context, one panel we received very positive feedback on this year was focused on M&A best practices for add-on acquisitions.
The panel was comprised of a peer group of our lower middle market portfolio company leaders a discussion on the benefits of pursuing an add-on acquisition strategy, developing and executing a successful integration plan, and lessons learned while executing an external growth strategy. We are highly confident the lessons learned that were shared by the panelists will be very helpful examples for other portfolio company executives to consider as they execute acquisition strategies in the future.
Another valuable topic we covered was best practices for a CEO considering using artificial intelligence in their business. This session was led by an experienced industry expert who presented the benefits and potential pitfalls of AI. The discussion explored various use cases, technical implications, and takeaways to evaluate how AI can be used to potentially accelerate and improve various business processes and sales and marketing strategies.
The engagement from the audience for both sessions was robust and led to several post-event discussions, including the sharing of key third-party resources and best practices that we believe will ultimately improve the financial results and operating performance for our portfolio companies in the future.
Given our focus on our lower middle market strategy and the unique benefits it could provide, we are excited to bring together the key leadership from our lower middle market portfolio companies at this highly effective annual Presidents Meeting event.
We always leave the event very excited about the quality of the individuals leading our lower middle market portfolio companies and the future value creation that we expect they and their teams can generate for our mutual benefit in the future. We left this year's event more excited than ever.
Now turning to the overall composition and results from our investment portfolio as of September 30, we continue to maintain a highly diversified portfolio of investments in 193 companies spanning across numerous industries and end markets.
Our largest portfolio companies, excluding our External Investment Manager represented only 3.6% of our total investment income for the trailing 12-month period and 3.2% of our total investment portfolio fair value at quarter end. The majority of our portfolio investments represented less than 1% of our income and our assets.
Our investment activity in the third quarter included total investments in our lower middle market portfolio of $52 million, which after aggregate repayments on debt investments and return of invested equity capital, resulted in the net increase in our lower middle market portfolio of $2 million. As Dwayne mentioned in his remarks, post quarter end, in the first half of October, we closed two additional lower middle market platform investments representing an additional $116 million of invested capital.
Driven by the capabilities and relationships of our private credit team, we also completed $309 million in total private loan investments, which after aggregate repayments and sales of several private loan portfolio debt investments and return of invested capital from a private loan portfolio of company equity investment, resulted in a net increase in our private loan portfolio of $163 million. Our private loan investment activity also included significant benefits of a $26 million realized gain on an equity investment that resulted in an impressive 5.6 times multiple of invested capital.
At the end of the third quarter, our lower middle market portfolio included investments in 84 companies, representing $2.5 billion of fair value, which is over 28% above our cost basis. We had 92 companies in our private loan portfolio representing $1.9 billion at fair value. Total investment portfolio at fair value at quarter end was 115% of the related cost cases.
In summary, Main Street's investment portfolio continues to perform at a high level and deliver on our long-term results and goals. Additional details on our investment portfolio at quarter end are included in the press release that we issued yesterday. With that, I'll turn the call over to Ryan to cover financial results, capital structure, and liquidity.

Ryan Nelson

Thank you, David. To echo Dwayne's and David's comments, we are pleased with our operating results for the third quarter. Our total investment income for the third quarter was $136.8 million, increasing by $13.6 million or 11% over the third quarter of 2023, and by $4.7 million or 3.5% from the second quarter of 2024.
Our results for the third quarter of 2024 included strong levels of investment income which, as Dwayne and David touched on demonstrates the continued strength of our differentiated investment in asset management strategies.
Interest income increased by $11.2 million from a year ago and by $10.5 million when compared to the second quarter. The increase over the prior year was driven primarily by the impact of increased net investment activity over the last year, partially offset by the impact of an increase in investments on non-accrual status and a decrease in interest rates on our floating rate debt investments, primarily resulting from decreases in benchmark index rates. The increase over the prior quarter was driven primarily by the impact of increased net investment activity.
Dividend income increased by $2 million or 9.7% when compared to a year ago, including a $300,000 increase in unusual or non-recurring dividends and decreased by $3.4 million or 12.9% from the second quarter after the impact of a $1.9 million decrease in unusual or nonrecurring dividends.
The continued underlying strength of the majority of our lower middle market portfolio companies, together with the unique benefits of our asset management business drove the strong level of dividend income in the third quarter.
Fee income increased by $0.4 million from a year ago and decreased by $2.4 million from the second quarter. The decrease in fee income over the prior quarter was primarily driven by lower closing fees on new and follow-on investments during the third quarter. Fee income related to refinancing and prepayment fees considered non-recurring decreased by $0.4 million compared to a year ago and decreased by $1 million compared to the second quarter.
For the third quarter, the impact of certain income list considered less consistent or non-recurring in nature, including dividends from our equity investments and accelerated prepayment, repricing and other activity related to our debt investments totaled $2.2 million.
In the aggregate, these items were $2.4 million or $0.03 per share lower than the average of the prior four quarters and $2.9 million or $0.03 per share lower than the second quarter and $1.6 million or $0.02 per share higher than the third quarter of last year.
Our operating expenses increased by $8.2 million from a year ago, largely driven by increases in interest expense, share-based compensation expense, and deferred compensation expense. The increase in interest expense from a year ago was primarily driven by an increase in weighted average rate on our debt obligations and an increase in average borrowings to fund a portion of the growth of our investment portfolio.
The ratio of our total operating expenses, excluding interest expense as a percentage of our average total assets was 1.3% for the quarter on an annualized basis and continues to be among the lowest in our industry.
Our External Investment Manager contributed $7.9 million to our net investment income during the third quarter, representing an increase of $0.3 million from a year ago and a decrease of $1.3 million from the second quarter. The Manager earned $2.4 million in incentive fees during the quarter decreasing by $0.2 million from the prior year and $1.7 million from the second quarter. The Manager ended the quarter with total assets under management of $1.6 billion.
During the quarter, we recorded net fair value appreciation, including net realized gains and net unrealized depreciation on the investment portfolio of $48.1 million. We recorded net fair value appreciation of our External Investment Manager, our lower middle market portfolio and our other portfolio, partially offset by net fair value depreciation in our private loan portfolio and our legacy middle market portfolio.
The fair value appreciation of our External Investment Manager was a result of a combination of an increase in the valuation multiples of publicly traded peers, which we use as well as benchmarks for valuation purposes and an increase in the fees generated by the External Investment Manager driven by the continued strong performance of our asset management business.
The net fair value appreciation in our lower middle market was largely driven by the continued positive performance of certain of our portfolio companies. The net fair value depreciation in our private loan portfolio was driven by the net impact of increases in market spreads and specific portfolio company underperformance, partially offset by the net fair value appreciation related to favorable exit of a portfolio company at a $25.5 million realized gain in the quarter, as David discussed.
We ended the third quarter with investments on non-accrual status comprising approximately 1.4% of the total investment portfolio at fair value and approximately 3.9% at cost. Net asset value or NAV increased by $0.77 per share or 2.6% over the second quarter to a record NAV per share of $30.57 at the end of the third quarter.
Our regulatory debt-to-equity leverage, calculated as total debt excluding our SBIC debentures, divided by net asset value was 0.69 times, and our regulatory asset coverage ratio was 2.44 times, and these ratios continue to be more conservative than our long-term targets of 0.8 times to 0.9 times and 2.1 times to 2.25 times respectively.
We continue to be active in the quarter on capital activities. In September of this year, we issued an additional $100 million of unsecured notes maturing in June 2027, resulting in a yield to maturity of approximate 5.6% on such issuance.
The additional issuance increased the total amount of our June 2027 notes to $400 million, and we borrowed an additional $63.8 million SBIC debentures, increasing our total outstanding amount to a $350 million regulatory limit.
We also amended our SPV facility in September, increasing commitments by $170 million to $600 million, decreasing the interest rate by 25 basis points, and extending maturity to September 2029. We were also active in our at the market or ATM program, raising net proceeds of $65.6 million during the quarter. After the investment in capital activities in the third quarter, we continue to maintain very strong liquidity, including cash and availability under our credit facilities in excess of $1.3 billion.
We continue to believe that our conservative leverage, strong liquidity and continued access to capital are significant strengths that have proven to benefit us historically and have us well positioned for the future, allowing us to continue to execute our attractive investment strategies.
As we discussed last quarter with the current level of liquidity, we currently expect to fund our new investment activity for the next few quarters through a greater portion of debt financing, and as such, we would expect leverage to continue to increase during this time period to be closer to our long-term stated targets.
Coming back to our operating results. As a result of strong performance for the quarter, our return on equity for the third quarter and the first nine months of the year was 18.8% and 17.4% on an annualized basis respectively. DNII per share for the quarter of $1.06 was $0.02 or 1.9% higher than DNII per share for the third quarter of last year and was $0.01 or 0.9% lower than the DNII per share for the second quarter.
These results were the impact of certain investment income considered less consistent or nonrecurring in nature, as I discussed earlier, which was $0.03 per share below the second quarter, $0.03 below the average of the last four quarters and $0.02 below per share above the same quarter a year ago.
Looking forward, given the strength of our underlying portfolio, we expect another strong top line and earnings quarter in the fourth quarter with expected DNII of at least $1.08 per share, with a potential for upside driven by the actual level of dividend income and portfolio investment activities during the quarter.
With that, I will now turn the call back over to the operator so we can take any questions.

Question and Answer Session

Operator

Thank you. We will now be conducting a question and answer session. (Operator instructions)
Bryce Rowe, B Riley Securities.

Bryce Rowe

Thanks. Good morning all. I wanted to, Dwayne, maybe start on your commentary around the pipeline. Last quarter, you had the well above-average comment, and it sounds like some of the lower middle market activity might have slipped here to the fourth quarter.
Just wanted to make sure I'm kind of reading into that the right way. And then any commentary around the move from well above to above for lower middle market and then within the private loan book going from well-above to average.

Dwayne Hyzak

Sure, Bryce. Thanks for the question. I'll give some initial comments. I'll let David add on any additional comments he has. I think when you look at the lower middle market pipeline guidance, I'd say there's a couple of things.
One is what we touched on in the script. We had a couple of investments that we were expecting or hoping would close in the third quarter that just slipped into the first week or two of October. So that was about $115 million of new investment activity. So that was part of the movement or underperformance relative to our expectations on lower middle market investment activity in the third quarter.
But we've also had a number of transactions or investments that we were actively actually getting on in due diligence and legal documentation that just, for one reason or another, just slipped away. Some of it was due diligence issues in at least one case.
It was the owner operator of the company rethinking what he and they were doing and deciding to hold off on doing a transaction. So we had at least 3 transactions, off the top of my head, that because of one of those two reasons did not end to closing in the third quarter and won't close in the fourth quarter.
Despite that, we continue to feel good about the pipeline. We do have a number of transactions in the lower middle market focus area or strategy that we expect to close between now and year end. And if we achieve that, we think we'll be in good shape both for Q4 and heading into 2025.
On the private loan side, I'd say the team there has been very active. If you look back not just to the third quarter but also the second quarter, we had a significant amount of investment activity. And I would say that the pipeline for that group as they executed those activities has just cooled off a little bit.
So it's not a negative pipeline but I'd say it's returned back into that average classification after two quarters of significant activity and a lot of efforts on the investment side. David, anything you would add on the lower middle market side?

David Magdol

No, I think you've covered it.

Bryce Rowe

Good deal. And Dwayne on the, you noted a pretty active third quarter for private loan. Can you talk a little bit about kind of what you're seeing from a pricing and terms perspective, especially in light of all the talk of, spreads compressing and then, obviously lower base rates that we're, we're starting to see flow through portfolios. So any any commentary around competitive levels within the private loan market around both pricing and terms?

Dwayne Hyzak

Sure, Bryce. Again, I'll give a couple of initial comments and I'll let Nick, our Managing Director that leads our Private Credit team, let him add on anything that he has. I would say we obviously can't control the base rate market component. So that is what it is. We just like other BDCs and other private credit funds. Our results will continue to be impacted by that. So we don't really focus on that just because we can't control (inaudible) to be in the space. That's just part of your investment management that you're going to have to deal with.
On the spread side, I'd say we have seen some pressure. The way I would categorize it is probably 25 basis points of pressure since quarter end, maybe 75 to 100 basis points since a year ago. So we're seeing some pressure. We continue to have the view based upon what we hear from other BDCs that are focused on the larger companies, kind of the upper middle market that we're seeing less pressure than they are, but we are seeing some pressure there.
And we wish that pressure wasn't there, but we still find the spread levels and the quality of the investment opportunities to be good for our strategy and investments that we think we can still do really well on in our private credit, private loan strategy. So it hasn't deterred us from investing, but we have seen some pressure there.
The other thing I'd say we've seen is we have seen some regional local commercial banks that have surprised us, and it really stepped up on some of our portfolio companies when they come in and beat us by a wide margin in terms of spread. Again, that's not something we can control.
We do expect that to be more sporadic as opposed to a permanent part of the marketplace, but we have seen that more on some repayment activity as opposed to new investment activity. But that's the way I would kind of respond to your question, but I'm happy to let Nick add any additional color.

Nicholas Meserve

Dwayne, I think you nailed it there. I think we've really just seen a consistent tightening of 75 to 100 basis points over the year. I think we'll see a little bit more pricing, 25 basis points since quarter end. I think we'll maybe crack a little bit tighter as year end. We're seeing a few competitors step in that might need to spend for the year in their budget, and they're willing to kind of come down on pricing to win some deals.

Bryce Rowe

That's helpful.

Dwayne Hyzak

Bryce, just one other comment. I'd say that the significant activity we had in Q2 and Q3, we feel really good about it, given some of that spread compression.

Bryce Rowe

Yes, understood. Maybe last one for me. You guys have certainly made the comment about maybe leaning into the available debt capital to fund. And just kind of curious, in the third quarter, we saw net balance sheet leverage go down. Was that just your conservative nature, not knowing what might come here in the fourth quarter? Just kind of curious why you didn't lean on that debt capital a little bit more in the third quarter. And relative to the comments about future quarters here, you'll likely use debt capital to fund new investments.

Dwayne Hyzak

Yes, Bryce, I'd say some of it was just our continued conservative nature. But I'd say the biggest factor was, we had a really, really large lower middle market pipeline. Some of that pipeline did not come to fruition. So we were probably more active under the ATM program in the quarter than we would have otherwise been if we had known what the actual lower middle market activity was going to be. So nothing significant other than the expectations for that well above average, lower middle market investment pipeline not coming to fruition in the third quarter.

Bryce Rowe

Okay. All right. I'll jump back in queue. Thanks guys.

Dwayne Hyzak

Thanks, Bryce.

Operator

Robert Dodd, Raymond James.

Robert Dodd

Hi guys. Thank you. Just an immediate follow-on to that one from price first. So the ATM usage, obviously, in Q3, you just explained why. Those deals have closed, well, some of them are at least closing in Q4. So should we expect lower ATM usage in Q4 because you're essentially prefunded in the sense of the deals with the ATM in Q3 that have been closed into Q4? Or can you give us any color on like what the trends are going to be near term there without giving too much away?

Dwayne Hyzak

Yes. Robert, I think that is the right conclusion. In the absence of the lower middle market pipeline, you're really building significantly from here. You should expect us to see to have less activity under the ATM in Q4.

Robert Dodd

Got it. Thank you. On the dividend income, I mean, there was a lot of like the dividend that come in the quarter was below the, nonrecurring dividend income was lower than normal average. I mean, it's not recurring but this typically happens.
So, but it didn't happen as much this quarter. Was there any theme there? Was it we're holding on to maybe a little bit of incremental capital ahead of something like that? Do you say, do you think that might catch up in Q4? Or was it non-recurring that's just not going to happen, it's not been deferred, but any thoughts there?

Dwayne Hyzak

Sure, Robert. So I'll give a couple of comments and then again, David can add on anything else he has. But I'd say the lower middle market portfolio continues to perform really well across the Board. And specifically for the companies that are the key contributors to dividend income, they continue to perform really, really well. So we're not seeing anything that is a concern. But as you've always sort of say, we have high levels of predictability and visibility to interest income.
We don't have as much visibility or predictability on the dividend income, and it's not just the performance of the companies but it's what they decide to do with their capital. I think we've mentioned that for a couple of quarters, we have several companies that are pursuing acquisition growth strategies.
But if they're executing with strategies, they're likely going to be a focus on paying dividends. I think you see just some impact of that, but the other is just the quarterly monthly variability from one quarter to the next that drives that. So nothing that's concerning on our side is just the normal variability.
I will point out, you probably saw this in the results or if you did, you'll see it when you get the 10-Q. But one part of the dividend income movement quarter-to-quarter was on the asset management business. So you saw less incentive fees come through and that has a direct impact on dividend income. So just make sure you caught that when you look at the quarter-over-quarter fluctuation.

Robert Dodd

Thank you. I did catch that. (Laughter) Sorry, go ahead.

David Magdol

No, all I was going to say to echo Dwayne's comments, there's nothing thematically in the portfolio that's being pulled back. You just have various contributors that are not only doing pursuing acquisition strategies but also reinvesting in their own platform by way of assets and new product innovation and such. So it just ebbs and flows quarter-by-quarter. There's nothing thematic there.

Robert Dodd

Got it. Thank you. And then one more, if I could. You mentioned a realized gain, I think, in the private loan portfolio, I think a $26 million realized gain on that side. Was that after quarter end or is that in, obviously, I haven't gone through it yet. But can you give me, what was the source of that and was that after quarter end? And if it was, was that asset also held? Is it going to affect incentive fee income from the asset manager if it was in Q4? I'm just trying to figure out when that actually happens.

Dwayne Hyzak

It was in Q3, Robert. It will not impact the incentive fees.

Robert Dodd

Got it. Thank you.

Operator

(Operator instructions)
Mark Hughes, Truist Securities.

Mark Hughes

Yeah. Thank you. Good morning. Just out of curiosity, was the lower middle market activity influenced by the election?

Dwayne Hyzak

I don't think we would say it was influenced by the election at all. Like I said in the earlier response to Bryce, it was in two situations. When you get into due diligence, you're expecting certain banks. If those things aren't there, we're going to be very consistent and we may want to still move forward but at bit different terms.
So when you have that happen, the other side has to agree with that. I'd say in at least two of those situations, it was diligence factors that resulted in a transaction not closing, and then the other one was the owner operator changing his mind.

Mark Hughes

Yes. On non-accruals, just a slight uptick. I think you had mentioned the consumer discretionary, you're continuing to work through that. Any sense on timing or what end markets that might be in where you could potentially see improvement?

Dwayne Hyzak

Yes. The new non-accrual was also in a business focused on the consumer. So it's kind of a consistent or continued trend there. I do think that we expect to see significant progress on that specific name over the next couple of months, whether it happens in Q4 or early Q1 remains to be seen but we do expect to see progress there. But in each of the situations that we have, it's a consumer focused business. I think we expect it to be a longer-term road to recovery as opposed to something that's going to happen quickly.

Mark Hughes

Understood. Then the EBITDA growth within the lower middle market portfolio, I think you've kind of touched on some of the contours of this, but anything that you're seeing about growth last quarter versus, say, the first six months?

Dwayne Hyzak

Yes, we didn't kind of put out any numbers, Mark. What I would tell you from a more of a qualitative standpoint is the portfolio as a whole continues to perform well. I do think if you looked at it and kind of put it into three buckets, companies overperforming on one end, companies underperforming on the other then a bunch of companies kind of in the middle.
The companies on the right end of that, the overperforming side are really, really, continue to perform exceptionally well. The groups in the middle, I'd say it's probably flat to maybe just slightly down a little bit, nothing concerning. But definitely, a portfolio where the really good performers are just performing exceptionally well.

Mark Hughes

Yes. And then you talked about the prepayment activity or repayment activity that maybe some banks, regional banks getting involved selectively. I'll ask the question again. How far through that process would you say you are? Is there much more to go in your portfolio or has that stabilized?

Ryan Nelson

I'd say, Mark, the regional banks or local banks we come across, it's usually more idiosyncratic where they've banked the company in the past and used before a private sponsor bought them. They did take part in the buyout and then they'd come back a year or two years into it after it's performed well and refinance us at a much cheaper rate.
So a recent example of business, I think in the first quarter of '24, an S plus 650 and then we got (inaudible) two weeks ago at S plus 225. (inaudible)

Mark Hughes

Yes. So no particular trend there, just idiosyncratic as you say?

Ryan Nelson

Exactly. I'd say it's much more localized banks than our regional bank.

Mark Hughes

Thank you.

Dwayne Hyzak

Thanks, Mark.

Operator

This concludes the question and answer session. I would like to turn the floor back over to management for closing comments.

Dwayne Hyzak

I just want to say thank you again, everyone, for joining us this morning. We appreciate your long-term interest and support of Main Street. And we look forward to talking to you again in late February after our year-end earnings release.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.