efsc-20240630

Please wait

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


☒						Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2024.


☐						Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission file number 001-15373

ENTERPRISE FINANCIAL SERVICES CORP

Incorporated in the State of Delaware

I.R.S. Employer Identification # 43-1706259

Address: 150 North Meramec

Clayton, MO 63105

Telephone: (314) 725-5500

___________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

EFSC

Nasdaq Global Select Market

Depositary Shares, each representing a 1/40th interest in a share of 5.00% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A

EFSCP

Nasdaq Global Select Market

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 every Interactive Data File required to be submitted 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 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 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 Exchange Act)

Yes ☐ No ☒

As of July 24, 2024, the Registrant had 37,367,430 shares of outstanding common stock, $0.01 par value per share.

This document is also available through our website at http://www.enterprisebank.com.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

TABLE OF CONTENTS


						Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)						1

Condensed Consolidated Statements of Income (Unaudited)						2

Condensed Consolidated Statements of Comprehensive Income (Unaudited)						3

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)						4

Condensed Consolidated Statements of Cash Flows (Unaudited)						5

Notes to Condensed Consolidated Financial Statements (Unaudited)						7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						33

Item 3. Quantitative and Qualitative Disclosures About Market Risk						57

Item 4. Controls and Procedures						58

PART II - OTHER INFORMATION

Item 1. Legal Proceedings						58

Item 1A. Risk Factors						59

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						59

Item 3. Defaults Upon Senior Securities						59

Item 4. Mine Safety Disclosures						59

Item 5. Other Information						59

Item 6. Exhibits						60

Signatures						62

Glossary of Acronyms, Abbreviations and Entities

The acronyms and abbreviations identified below are used in various sections of this Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.


ACL	Allowance for Credit Losses	Federal Reserve	Federal Reserve Board
ASU	Accounting Standards Update	FHLB	Federal Home Loan Bank
Bank	Enterprise Bank & Trust	GAAP	Generally Accepted Accounting Principles (United States)
C&I	Commercial and Industrial	GDP	Gross Domestic Product
CCB	Capital Conservation Buffer	ICE	The Intercontinental Exchange
CECL	Current Expected Credit Loss	LIBOR	London Interbank Offered Rate
Company	Enterprise Financial Services Corp and Subsidiaries	NIM	Net Interest Margin
CRE	Commercial Real Estate	NM	Not meaningful
EFSC	Enterprise Financial Services Corp and Subsidiaries	SBA	Small Business Administration
Enterprise	Enterprise Financial Services Corp and Subsidiaries	SEC	Securities and Exchange Commission
FASB	Financial Accounting Standards Board	SOFR	Secured Overnight Financing Rate
FDIC	Federal Deposit Insurance Corporation	We, Us, Our	Enterprise Financial Services Corp and Subsidiaries

PART I - ITEM 1 - FINANCIAL STATEMENTS

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)


($ in thousands, except share data)	June 30, 2024		December 31, 2023
Assets
Cash and due from banks	$	176,698	$	193,275
Federal funds sold	1,710		2,880
Interest-earning deposits	214,367		236,874
Total cash and cash equivalents	392,775		433,029
Interest-earning deposits greater than 90 days	3,265		3,856
Securities available-for-sale	1,615,930		1,618,273
Securities held-to-maturity, net	772,648		750,434
Loans held-for-sale	606		359
Loans	11,000,007		10,884,118
Allowance for credit losses on loans	(139,464)		(134,771)
Total loans, net	10,860,543		10,749,347


Other investments	71,971		66,195
Fixed assets, net	44,831		42,681




Goodwill	365,164		365,164
Intangible assets, net	10,327		12,318

Other assets	477,606		476,934
Total assets	$	14,615,666	$	14,518,590

Liabilities and Shareholders' Equity
Noninterest-bearing demand accounts	$	3,928,308	$	3,958,743
Interest-bearing demand accounts	2,951,899		2,950,259
Money market accounts	3,474,278		3,399,280
Savings accounts	565,348		595,175
Certificates of deposit:
Brokered	494,870		482,759
Customer	867,680		790,155
Total deposits	12,282,383		12,176,371
Subordinated debentures and notes	156,265		155,984
FHLB advances	78,000		—
Other borrowings	178,269		297,829



Other liabilities	165,476		172,338
Total liabilities	$	12,860,393	$	12,802,522

Commitments and contingent liabilities (Note 5)

Shareholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 75,000 shares issued and outstanding ($1,000 per share liquidation preference)	71,988		71,988
Common stock, $0.01 par value; 75,000,000 shares authorized; 37,343,548 and 37,416,028 shares issued and outstanding	373		374

Additional paid in capital	994,116		995,208
Retained earnings	810,935		749,513
Accumulated other comprehensive loss, net	(122,139)		(101,015)
Total shareholders' equity	1,755,273		1,716,068
Total liabilities and shareholders' equity	$	14,615,666	$	14,518,590

The accompanying notes are an integral part of these Consolidated Financial Statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)


	Three months ended June 30,				Six months ended June 30,
($ in thousands, except per share data)	2024		2023		2024		2023
Interest income:
Loans	$	189,211	$	170,159	$	375,775	$	322,765
Debt securities:
Taxable	11,765		9,619		23,184		18,905
Nontaxable	5,798		5,659		11,563		11,256

Interest-earning deposits	4,389		2,095		7,958		3,290
Dividends on equity securities	481		365		887		714
Total interest income	211,644		187,897		419,367		356,930
Interest expense:




Deposits	66,374		41,372		130,847		66,033
Subordinated debentures and notes	2,684		2,431		5,168		4,840
FHLB advances	561		1,279		1,590		2,611
Other borrowings	1,496		2,123		3,505		3,225
Total interest expense	71,115		47,205		141,110		76,709
Net interest income	140,529		140,692		278,257		280,221
Provision for credit losses	4,819		6,339		10,575		10,522
Net interest income after provision for credit losses	135,710		134,353		267,682		269,699
Noninterest income:
Deposit service charges	4,542		3,910		8,965		8,038
Wealth management revenue	2,590		2,472		5,134		4,988
Card services revenue	2,497		2,464		4,909		4,802


Tax credit income (loss)	1,874		368		(316)		2,181


Other income	3,991		5,076		8,960		11,179
Total noninterest income	15,494		14,290		27,652		31,188
Noninterest expense:
Employee compensation and benefits	44,524		41,641		89,786		84,144
Deposit costs	21,706		16,980		41,983		29,700
Occupancy	4,197		3,954		8,523		8,015
Data processing	5,339		3,661		9,678		7,371
Professional fees	1,298		1,566		2,733		3,197




Other expense	16,953		18,154		34,815		34,512
Total noninterest expense	94,017		85,956		187,518		166,939

Income before income tax expense	57,187		62,687		107,816		133,948
Income tax expense	11,741		13,560		21,969		29,083
Net income	$	45,446	$	49,127	$	85,847	$	104,865
Dividends on preferred stock	937		937		1,875		1,875
Net income available to common shareholders	$	44,509	$	48,190	$	83,972	$	102,990

Earnings per common share
Basic	$	1.19	$	1.29	$	2.24	$	2.76
Diluted	1.19		1.29		2.24		2.75

The accompanying notes are an integral part of these Consolidated Financial Statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Three months ended June 30,				Six months ended June 30,
($ in thousands)	2024		2023		2024		2023
Net income	$	45,446	$	49,127	$	85,847	$	104,865
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on available-for-sale securities	(5,375)		(13,677)		(16,448)		10,301
Reclassification of gain on the sale of available-for-sale securities	—		—		—		(285)
Reclassification of gain on held-to-maturity securities	(619)		(686)		(1,245)		(1,324)
Change in unrealized loss on cash flow hedges	(1,175)		(3,338)		(4,117)		(2,063)
Reclassification of loss on cash flow hedges	421		211		686		238
Total other comprehensive income (loss), net of tax	(6,748)		(17,490)		(21,124)		6,867
Total comprehensive income	$	38,698	$	31,637	$	64,723	$	111,732

The accompanying notes are an integral part of these Consolidated Financial Statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)


Three and six months ended June 30, 2024
	Preferred Stock			Common Stock
($ in thousands, except per share data)	Shares	Amount		Shares	Amount		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at March 31, 2024	75	$	71,988	37,515	$	375	$	995,969	$	778,784	$	(115,391)	$	1,731,725
Net income	—	—		—	—		—		45,446		—		45,446





Other comprehensive loss	—	—		—	—		—		—		(6,748)		(6,748)
Common stock dividends ($0.26 per share)	—	—		—	—		—		(9,728)		—		(9,728)
Preferred stock dividends ($12.50 per share)	—	—		—	—		—		(937)		—		(937)


Repurchase of common stock	—	—		(225)	(2)		(5,994)		(2,600)		—		(8,596)
Issuance under equity compensation plans, net	—	—		54	—		1,502		(30)		—		1,472


Share-based compensation	—	—		—	—		2,639		—		—		2,639




Balance at June 30, 2024	75	$	71,988	37,344	$	373	$	994,116	$	810,935	$	(122,139)	$	1,755,273

Balance at December 31, 2023	75	$	71,988	37,416	$	374	$	995,208	$	749,513	$	(101,015)	$	1,716,068
Net income	—	—		—	—		—		85,847		—		85,847
Other comprehensive loss	—	—		—	—		—		—		(21,124)		(21,124)
Common stock dividends ($0.51 per share)	—	—		—	—		—		(19,106)		—		(19,106)
Preferred stock dividends ($25.00 per share)	—	—		—	—		—		(1,875)		—		(1,875)
Repurchase of common stock	—	—		(225)	(2)		(5,994)		(2,600)		—		(8,596)
Issuance under equity compensation plans, net	—	—		153	1		(112)		(844)		—		(955)
Share-based compensation	—	—		—	—		5,014		—		—		5,014
Balance at June 30, 2024	75	$	71,988	37,344	$	373	$	994,116	$	810,935	$	(122,139)	$	1,755,273


Three and six months ended, June 30, 2023
	Preferred			Common
($ in thousands, except per share data)	Shares	Amount		Shares	Amount		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at March 31, 2023	75	$	71,988	37,311	$	373	$	984,281	$	642,153	$	(105,975)	$	1,592,820
Net income	—	—		—	—		—		49,127		—		49,127




Other comprehensive income	—	—		—	—		—		—		(17,490)		(17,490)
Common stock dividends ($0.25 per share)	—	—		—	—		—		(9,340)		—		(9,340)
Preferred stock dividends ($12.50 per share)	—	—		—	—		—		(937)		—		(937)



Issuance under equity compensation plans, net	—	—		48	1		1,409		(22)		—		1,388


Share-based compensation	—	—		—	—		2,665		—		—		2,665



Balance at June 30, 2023	75	$	71,988	37,359	$	374	$	988,355	$	680,981	$	(123,465)	$	1,618,233

Balance at December 31, 2022	75	$	71,988	37,253	$	373	$	982,660	$	597,574	$	(130,332)	$	1,522,263
Net income	—	—		—	—		—		104,865		—		104,865
Other comprehensive income	—	—		—	—		—		—		6,867		6,867
Common stock dividends ($0.50 per share)	—	—		—	—		—		(18,668)		—		(18,668)
Preferred stock dividends ($25.00 per share)	—	—		—	—		—		(1,875)		—		(1,875)
Issuance under equity compensation plans, net	—	—		106	1		561		(915)		—		(353)
Share-based compensation	—	—		—	—		5,134		—		—		5,134
Balance at June 30, 2023	75	$	71,988	37,359	$	374	$	988,355	$	680,981	$	(123,465)	$	1,618,233

The accompanying notes are an integral part of these Consolidated Financial Statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six months ended June 30,
($ in thousands)	2024		2023
Cash flows from operating activities:
Net income	$	85,847	$	104,865
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	2,591		2,547
Provision for credit losses	10,575		10,522
Deferred income taxes	939		776
Net amortization of discount/premiums on debt securities	2,056		2,039
Net amortization on loan discount/premiums	1,004		2,108
Amortization of intangible assets	1,991		2,375
Amortization of servicing assets	606		1,006
Mortgage loans originated-for-sale	(14,177)		(9,578)
Proceeds from mortgage loans sold	14,017		10,279
Loss (gain) on:
Sale of investment securities	—		(381)
Sale of SBA loans	(1,415)		(501)
Sale of other real estate	2		(188)
Sale of fixed assets	—		10
Sale of state tax credits	(769)		(215)


Share-based compensation	5,014		5,134




Net change in other assets and liabilities	(1,884)		8,988







Net cash provided by operating activities	106,397		139,786
Cash flows from investing activities:

Net increase in loans	(150,911)		(789,370)


Proceeds received from:
Sale of debt securities, available-for-sale	—		28,741
Paydown or maturity of debt securities, available-for-sale	107,671		119,794
Paydown or maturity of debt securities, held-to-maturity	3,471		3,623
Redemption of other investments	50,387		75,843
Sale of SBA loans	25,090		9,502
Sale of state tax credits held for sale	4,319		1,225
Sale of other real estate	207		457
Sale of fixed assets	—		43

Payments for the purchase of:
Available-for-sale debt securities	(127,647)		(154,787)
Held-to-maturity debt securities	(28,480)		(21,146)
Other investments	(57,134)		(76,454)

State tax credits held for sale	(2,803)		(75)
Fixed assets	(4,741)		(1,603)
Net cash used in investing activities	(180,571)		(804,207)


	Six months ended June 30,
($ in thousands)	2024		2023
Cash flows from financing activities:
Net decrease in noninterest-bearing deposit accounts	(30,435)		(762,171)
Net increase in interest-bearing deposit accounts	136,447		1,552,881
Net increase in FHLB advances	78,000		50,000



Repayments of notes payable	(11,429)		(2,857)




Net decrease in other borrowings	(108,131)		(121,872)




Repurchase of common stock	(8,596)		—
Cash dividends paid on common stock	(19,106)		(18,668)
Cash dividends paid on preferred stock	(1,875)		(1,875)
Other	(955)		(353)



Net cash provided by financing activities	33,920		695,085
Net increase (decrease) in cash and cash equivalents	(40,254)		30,664
Cash and cash equivalents, beginning of period	433,029		291,359
Cash and cash equivalents, end of period	$	392,775	$	322,023
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	142,563	$	74,691
Income taxes	14,401		21,703
Noncash investing and financing transactions:
Transfer to other bank owned assets	3,219		—

Right-of-use assets obtained in exchange for lease obligations	985		3,137

The accompanying notes are an integral part of these Consolidated Financial Statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used by the Company in the preparation of the condensed consolidated financial statements are summarized below:

Business and Consolidation

Enterprise is a financial holding company that provides a full range of banking and wealth management services to individuals and corporate customers primarily located in Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico, and SBA loan and deposit productions offices throughout the country through its banking subsidiary, Enterprise Bank & Trust.

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2024. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC.

Basis of Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated.

In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the statements of financial position, results of operations, and cash flow for the interim periods.

Recent Accounting Pronouncements

FASB ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 was issued in June 2022 to (1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) amend a related illustrative example, and (3) introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The adoption of ASU 2022-03 did not have a material effect on the consolidated financial statements.

FASB ASU 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 was issued in March 2023 to allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits. If certain conditions are met, a reporting entity may elect to account for its tax equity investments by using the proportional amortization method regardless of the program from which it receives income tax credits, instead of only low-

income-housing tax credit (“LIHTC”) structures. This amendment also eliminates certain LIHTC-specific guidance aligning the accounting with other equity investments in tax credit structures. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The adoption of ASU 2023-02 did not have a material effect on the consolidated financial statements.

FASB ASU 2023-07, Improvements to Reportable Segment Disclosures. ASU 2023-07 was issued in November 2023 to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment disclosures. The amendments in this update require annual and interim disclosures on significant segment expenses that are regularly provided to the chief operating decision maker and require annual and interim disclosures on “other segment items” that comprise the difference between segment revenue less segment expense compared to the reported measure of segment profit or loss. In addition, the amendments will require all annual disclosures that are currently required to be reported on an interim basis and requires disclosure of the title and position of the chief operating decision maker and how that position uses the information to assess segment performance and the allocation of resources. ASU 2023-07 also requires entities that have a single reportable segment, such as the Company, to provide all disclosures required in this update and the existing segment disclosures in Topic 280. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the accounting and disclosure requirements of ASU 2023-07 and does not expect them to have a material effect on the consolidated financial statements.

FASB ASU 2023-09, Income Tax Disclosures. ASU 2023-09 was issued in December 2023 to require annual disclosures on specific categories in the income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Annual disclosures are required on income taxes paid, including the amounts paid for federal, state and foreign taxes and the amount paid in individual jurisdictions if the amount is equal to or greater than 5% of total income taxes paid (net of refunds received). Additional annual disclosures are required on pre-tax income from continuing operations and income tax expense, disaggregated by domestic and foreign amounts. The amendments in this update are effective for fiscal years beginning after December 15, 2024. The Company is evaluating the accounting and disclosure requirements of ASU 2023-09 and does not expect them to have a material effect on the consolidated financial statements.

NOTE 2 - EARNINGS PER SHARE

Basic earnings per common share data is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method.

The following table presents a summary of per common share data and amounts for the periods indicated.


	Three months ended June 30,				Six months ended June 30,
(in thousands, except per share data)	2024		2023		2024		2023
Net income available to common shareholders	$	44,509	$	48,190	$	83,972	$	102,990








Weighted average common shares outstanding	37,485		37,347		37,488		37,326

Additional dilutive common stock equivalents	55		148		76		185
Weighted average diluted common shares outstanding	37,540		37,495		37,564		37,511

Basic earnings per common share:	$	1.19	$	1.29	$	2.24	$	2.76
Diluted earnings per common share:	1.19		1.29		2.24		2.75

For the three and six months ended June 30, 2024, common stock equivalents of approximately 634,000 and 621,000, respectively, were excluded from the earnings per share calculations because their effect would have been anti-dilutive. Comparatively, there were 462,000 and 411,000 common stock equivalents excluded in the three and six months ended June 30, 2023, respectively.

NOTE 3 - INVESTMENTS

The following tables present the amortized cost, gross unrealized gains and losses, allowance for credit losses and fair value of securities available for sale and held to maturity:


	June 30, 2024
($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:
Obligations of U.S. Government-sponsored enterprises	$	322,502	$	129	$	(19,675)	$	302,956
Obligations of states and political subdivisions	494,340		3		(86,102)		408,241
Agency mortgage-backed securities	782,236		385		(63,613)		719,008
U.S. Treasury bills	180,836		2		(2,943)		177,895
Corporate debt securities	8,750		—		(920)		7,830
Total securities available for sale	$	1,788,664	$	519	$	(173,253)	$	1,615,930
Held-to-maturity securities:

Obligations of states and political subdivisions	$	599,916	$	3,250	$	(57,686)	$	545,480
Agency mortgage-backed securities	50,226		—		(5,630)		44,596
Corporate debt securities	122,820		243		(9,619)		113,444
Total securities held-to-maturity	$	772,962	$	3,493	$	(72,935)	$	703,520
Allowance for credit losses	(314)
Total securities held-to-maturity, net	$	772,648


	December 31, 2023
($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:
Obligations of U.S. Government-sponsored enterprises	$	316,511	$	303	$	(20,368)	$	296,446
Obligations of states and political subdivisions	500,881		57		(68,767)		432,171
Agency mortgage-backed securities	758,283		1,181		(59,083)		700,381
U.S. Treasury Bills	184,709		62		(3,070)		181,701
Corporate debt securities	8,750		—		(1,176)		7,574
Total securities available for sale	$	1,769,134	$	1,603	$	(152,464)	$	1,618,273
Held-to-maturity securities:

Obligations of states and political subdivisions	$	575,699	$	7,078	$	(47,461)	$	535,316
Agency mortgage-backed securities	52,100		—		(5,424)		46,676
Corporate debt securities	123,420		216		(8,981)		114,655
Total securities held to maturity	$	751,219	$	7,294	$	(61,866)	$	696,647
Allowance for credit losses	(785)
Total securities held-to-maturity, net	$	750,434

The balance of held-to-maturity securities in the “Amortized Cost” column in the table above includes a cumulative net unamortized unrealized gain of $12.5 million and $14.1 million at June 30, 2024 and December 31, 2023, respectively. Such amounts are amortized over the remaining life of the securities.

At June 30, 2024 and December 31, 2023, there were no holdings of securities of any one issuer in an amount greater than 10% of shareholders’ equity, other than U.S. Government agencies and sponsored enterprises. The agency mortgage-backed securities are all issued by U.S. Government agencies and sponsored enterprises. Securities of $1.2 billion and $1.6 billion at June 30, 2024 and December 31, 2023, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract provisions, in addition to collateral securing borrowing bases with the FHLB and the Federal Reserve Bank.

The amortized cost and estimated fair value of debt securities at June 30, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average life of the mortgage-backed securities is approximately four years.


	Available for sale				Held to maturity
($ in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	168,521	$	166,950	$	5,322	$	5,205
Due after one year through five years	293,374		275,862		124,793		115,538
Due after five years through ten years	182,181		156,953		159,925		154,200
Due after ten years	362,352		297,157		432,696		383,981
Agency mortgage-backed securities	782,236		719,008		50,226		44,596

	$	1,788,664	$	1,615,930	$	772,962	$	703,520

The following tables presents a summary of available-for-sale investment securities in an unrealized loss position:


	June 30, 2024
	Less than 12 months				12 months or more				Total
($ in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government-sponsored enterprises	$	20,179	$	85	$	259,528	$	19,590	$	279,707	$	19,675
Obligations of states and political subdivisions	1,905		32		405,833		86,070		407,738		$	86,102
Agency mortgage-backed securities	124,783		1,207		533,940		62,406		658,723		$	63,613
U.S. Treasury bills	61,914		134		95,914		2,809		157,828		$	2,943
Corporate debt securities	—		—		7,830		920		7,830		$	920
	$	208,781	$	1,458	$	1,303,045	$	171,795	$	1,511,826	$	173,253


	December 31, 2023
	Less than 12 months				12 months or more				Total
($ in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government-sponsored enterprises	$	25,886	$	85	$	247,027	$	20,283	$	272,913	$	20,368
Obligations of states and political subdivisions	1,168		163		428,171		68,604		429,339		68,767
Agency mortgage-backed securities	58,249		417		540,032		58,666		598,281		59,083
U.S. Treasury bills	41,857		49		103,588		3,021		145,445		3,070
Corporate debt securities	—		—		7,574		1,176		7,574		1,176
	$	127,160	$	714	$	1,326,392	$	151,750	$	1,453,552	$	152,464

The unrealized losses at both June 30, 2024 and December 31, 2023 were attributable primarily to changes in market interest rates after the securities were purchased. At each of June 30, 2024 and December 31, 2023, the Company did not have an allowance for credit losses on available-for-sale securities.

Accrued interest on held-to-maturity debt securities totaled $6.9 million and $6.5 million at June 30, 2024 and December 31, 2023, respectively, and is excluded from the estimate of expected credit losses. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts. The ACL on held-to-maturity securities was $0.3 million at June 30, 2024 and $0.8 million at December 31, 2023.

There were no sales of available-for-sale securities during neither the three and six months ended June 30, 2024, nor the three months ended June 30, 2023. The Company sold $28.4 million of available-for-sale securities during the six months ended June 30, 2023 for a gain of $0.4 million.

Other Investments

At June 30, 2024 and December 31, 2023, other investments totaled $72.0 million and $66.2 million, respectively. As a member of the FHLB system administered by the Federal Housing Finance Agency, the Bank is required to maintain a minimum investment in capital stock with the FHLB consisting of membership stock and activity-based stock. The FHLB capital stock of $12.2 million at June 30, 2024 and $7.8 million at December 31, 2023 is recorded at cost, which represents redemption value, and is included in other investments in the consolidated balance sheets. The remaining amounts in other investments primarily include investments in Small Business Investment Companies, Community Development Financial Institutions, private equity investments, and the Company’s investment in unconsolidated trusts used to issue trust preferred securities to third parties.

NOTE 4 - LOANS

The following table presents a summary of loans by category:


($ in thousands)	June 30, 2024		December 31, 2023
Commercial and industrial	$	4,622,028	$	4,674,056
Real estate:
Commercial - investor owned	2,468,895		2,452,402
Commercial - owner occupied	2,380,957		2,344,117
Construction and land development	893,776		760,122
Residential	351,588		371,995
Total real estate loans	6,095,216		5,928,636
Other	285,149		285,653
Loans, before unearned loan fees	11,002,393		10,888,345
Unearned loan fees, net	(2,386)		(4,227)
Loans, including unearned loan fees	$	11,000,007	$	10,884,118

The loan balance includes a net premium on acquired loans of $9.2 million and $9.6 million at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024 and December 31, 2023, loans and securities of $5.5 billion and $4.8 billion, respectively, were pledged to FHLB and the Federal Reserve Bank.

Accrued interest totaled $70.1 million and $66.7 million at June 30, 2024 and December 31, 2023, respectively, and was reported in “Other Assets” on the consolidated balance sheets.

SBA 7(a) guaranteed loans sold during the six months ended June 30, 2024 totaled $23.1 million, resulting in a gain on sale of $1.4 million. SBA 7(a) guaranteed loans sold during the six months ended June 30, 2023 totaled $8.8 million, resulting in a gain on sale of $0.5 million. There were no sales in the three months ended June 30, 2024 and 2023, respectively.

No consumer mortgage loans secured by residential real estate were in the process of foreclosure at June 30, 2024, compared to $1.0 million at December 31, 2023.

A summary of the activity, by loan category, in the ACL on loans for the three and six months ended June 30, 2024 and 2023 is as follows:


($ in thousands)	Commercial and industrial		CRE - investor owned		CRE - owner occupied		Construction and land development		Residential real estate		Other		Total
Allowance for credit losses on loans:
Balance at March 31, 2024	$	58,714	$	31,196	$	24,807	$	9,825	$	6,479	$	4,477	$	135,498
Provision (benefit) for credit losses	1,808		724		1,253		1,655		(1,087)		218		4,571
Charge-offs	(556)		(17)		(1,755)		—		(244)		(158)		(2,730)
Recoveries	1,512		—		11		24		440		138		2,125
Balance at June 30, 2024	$	61,478	$	31,903	$	24,316	$	11,504	$	5,588	$	4,675	$	139,464



($ in thousands)	Commercial and industrial		CRE - investor owned		CRE - owner occupied		Construction and land development		Residential real estate		Other		Total
Allowance for credit losses on loans:
Balance at December 31, 2023	$	58,886	$	31,280	$	23,405	$	10,198	$	6,142	$	4,860	$	134,771
Provision (benefit) for credit losses	6,786		864		2,753		1,276		(681)		164		11,162
Charge-offs	(5,909)		(322)		(1,867)		—		(741)		(541)		(9,380)
Recoveries	1,715		81		25		30		868		192		2,911
Balance at June 30, 2024	$	61,478	$	31,903	$	24,316	$	11,504	$	5,588	$	4,675	$	139,464


($ in thousands)	Commercial and industrial		CRE - investor owned		CRE - owner occupied		Construction and land development		Residential real estate		Other		Total
Allowance for credit losses on loans:







Balance at March 31, 2023	$	59,149	$	36,266	$	22,328	$	8,889	$	6,997	$	4,666	$	138,295
Provision (benefit) for credit losses	3,857		(2,420)		299		3,898		618		(255)		5,997
Charge-offs	(3,289)		(7)		—		—		(421)		(251)		(3,968)
Recoveries	601		37		73		8		227		49		995
Balance at June 30, 2023	$	60,318	$	33,876	$	22,700	$	12,795	$	7,421	$	4,209	$	141,319



($ in thousands)	Commercial and industrial		CRE - investor owned		CRE - owner occupied		Construction and land development		Residential real estate		Other		Total
Allowance for credit losses on loans:
Balance at December 31, 2022	$	53,835	$	36,191	$	22,752	$	11,444	$	7,928	$	4,782	$	136,932
Provision (benefit) for credit losses	8,940		(2,198)		(141)		1,320		(533)		(292)		7,096
Charge-offs	(3,996)		(177)		—		(9)		(523)		(443)		(5,148)
Recoveries	1,539		60		89		40		549		162		2,439
Balance at June 30, 2023	$	60,318	$	33,876	$	22,700	$	12,795	$	7,421	$	4,209	$	141,319

The ACL on sponsor finance loans, which is included in the categories above, represented $19.9 million and $23.0 million, respectively, as of June 30, 2024 and December 31, 2023.

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 40%, 30%, and 30%, respectively, which added approximately $14.6 million to the ACL on loans over the baseline model at June 30, 2024. The baseline forecast incorporates an expectation that the federal funds rate has peaked at the range of 5.25% to 5.50% and will begin falling in the latter half of 2024. It is also assumed that the bank failures in early 2023 were not an indication of a broader problem in the industry. The Company has also recognized various risks posed by loans in certain segments, including the commercial office and agricultural sectors, by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are market reactions to the Federal Reserve policy actions that could push the economy into a recession, persistently higher inflation, tightening in the credit markets, and further weakness in the financial system.

In addition to the CECL methodology, the Company incorporates qualitative adjustments into the ACL on loans to capture credit risks inherent within the loan portfolio that are not captured in the CECL model. Included in these risks are 1) changes in lending policies and procedures, 2) actual and expected changes in business and economic conditions, 3) changes in the nature and volume of the portfolio, 4) changes in lending management, 5) changes in volume and the severity of past due loans, 6) changes in the quality of the loan review system, 7) changes in the value of underlying collateral, 8) the existence and effect of concentrations of credit and 9) other factors such as the regulatory, legal and competitive environments and events such as natural disasters and pandemics. At June 30, 2024, the ACL on loans included a qualitative adjustment of approximately $42.2 million. Of this amount, approximately $12.6 million was allocated to Sponsor Finance loans due to their mostly unsecured nature.

The current year-to-date gross charge-offs by loan class and year of origination is presented in the following tables:


	June 30, 2024
	Term Loans by Origination Year
($ in thousands)	2023		2022		2021		2020		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total
Commercial and industrial	$	2	$	1,414	$	—	$	66	$	768	$	—	$	3,544	$	5,794
Real estate:
Commercial - investor owned	—		—		160		—		145		—		—		305
Commercial - owner occupied	—		41		214		10		1,602		—		—		1,867

Residential	—		94		—		—		425		202		20		741
Other	—		—		58		—		80		101		—		239
Total charge-offs by origination year	$	2	$	1,549	$	432	$	76	$	3,020	$	303	$	3,564	$	8,946
Total gross charge-offs by performing status															417
Total gross charge-offs															$	9,363


	December 31, 2023
	Term Loans by Origination Year
($ in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total
Commercial and industrial	$	600	$	2,999	$	1,940	$	2,539	$	—	$	—	$	12,533	$	15,178	$	35,789
Real estate:
Commercial - investor owned	—		—		170		—		4,692		7		—		—		4,869

Construction and land development	—		—		—		—		—		9		—		—		9
Residential	—		—		—		—		—		480		176		—		656
Other	—		3		459		—		—		319		12		—		793
Total charge-offs by origination year	$	600	$	3,002	$	2,569	$	2,539	$	4,692	$	815	$	12,721	$	15,178	$	42,116
Total gross charge-offs by performing status																	1,099
Total gross charge-offs																	$	43,215

The following tables present the recorded investment in nonperforming loans by category, excluding government guaranteed balances:


	June 30, 2024
($ in thousands)	Nonaccrual		Loans over 90 days past due and still accruing interest		Total nonperforming loans		Nonaccrual loans with no allowance
Commercial and industrial	$	6,978	$	364	$	7,342	$	335
Real estate:
Commercial - investor owned	18,417		—		18,417		961
Commercial - owner occupied	11,404		945		12,349		7,135
Construction and land development	1,268		—		1,268		527

Other	—		8		8		—
Total	$	38,067	$	1,317	$	39,384	$	8,958


	December 31, 2023
($ in thousands)	Nonaccrual		Loans over 90 days past due and still accruing interest		Total nonperforming loans		Nonaccrual loans with no allowance
Commercial and industrial	$	7,641	$	115	$	7,756	$	6,179
Real estate:
Commercial - investor owned	20,404		—		20,404		19,466
Commercial - owner occupied	12,972		363		13,335		9,010
Construction and land development	1,205		64		1,269		464
Residential	959		—		959		959
Other	—		5		5		—
Total	$	43,181	$	547	$	43,728	$	36,078

The nonperforming loan balances at June 30, 2024 and December 31, 2023 exclude government guaranteed balances of $12.9 million and $10.7 million respectively.

Interest income recognized on nonaccrual loans was immaterial during the three and six months ended June 30, 2024 and 2023.

Collateral-dependent nonperforming loans by class of loan is presented as of the dates indicated:


	June 30, 2024
	Type of Collateral
($ in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien		Other
Commercial and industrial	$	653	$	—	$	—	$	4,018
Real estate:
Commercial - investor owned	18,417		—		—		—
Commercial - owner occupied	4,943		1,511		3,468		—
Construction and land development	—		741		—		—

Total	$	24,013	$	2,252	$	3,468	$	4,018


	December 31, 2023
	Type of Collateral
($ in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien		Other
Commercial and industrial	$	527	$	1,864	$	344	$	3,445
Real estate:
Commercial - investor owned	19,467		—		—		—
Commercial - owner occupied	5,904		1,638		1,831		—
Construction and land development	528		741		—		—
Residential	—		959		—		—
Total	$	26,426	$	5,202	$	2,175	$	3,445

The aging of the recorded investment in past due loans by class and category is presented as of the dates indicated.


	June 30, 2024
($ in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	9,192	$	9,238	$	18,430	$	4,603,598	$	4,622,028
Real estate:
Commercial - investor owned	245		17,455		17,700		2,451,195		2,468,895
Commercial - owner occupied	17,058		17,671		34,729		2,346,228		2,380,957
Construction and land development	2,750		2,648		5,398		888,378		893,776
Residential	461		—		461		351,127		351,588
Other	26		8		34		285,115		285,149
Loans, before unearned loan fees	$	29,732	$	47,020	$	76,752	$	10,925,641	$	11,002,393
Unearned loan fees, net									(2,386)
Total									$	11,000,007


	December 31, 2023
($ in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	3,445	$	9,037	$	12,482	$	4,661,574	$	4,674,056
Real estate:
Commercial - investor owned	1,905		18,395		20,300		2,432,102		2,452,402
Commercial - owner occupied	8,409		14,142		22,551		2,321,566		2,344,117
Construction and land development	770		1,908		2,678		757,444		760,122
Residential	1,620		959		2,579		369,416		371,995
Other	82		4		86		285,567		285,653
Loans, before unearned loan fees	$	16,231	$	44,445	$	60,676	$	10,827,669	$	10,888,345
Unearned loan fees, net									(4,227)
Total									$	10,884,118

The allowance for credit losses on loans incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses on loans is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default and loss given default model to determine the allowance for credit losses on loans.

An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses on loans because of the measurement methodologies used to estimate the allowance.

The most common concession the Company provides to borrowers experiencing financial difficulty is a term extension. In limited circumstances, the Company may modify loans by providing principal forgiveness or an interest rate reduction. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses on loans. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses on loans.

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.

The following tables show the recorded investment at the end of the dates listed for loans modified to borrowers experiencing financial difficulty, disaggregated by loan class and type of concession granted:












	Term Extension
	Three months ended
($ in thousands)	June 30, 2024		Percent of Total Loan Class
Commercial and industrial	$	5,619	0.12	%












	Term Extension				Payment Delay				Total
	Six months ended				Six months ended				Six months ended
($ in thousands)	June 30, 2024		Percent of Total Loan Class		June 30, 2024		Percent of Total Loan Class		June 30, 2024		Percent of Total Loan Class
Commercial and industrial	$	50,260	1.09	%	$	567	0.01	%	$	50,827	1.10	%
Real estate:
Commercial - investor owned	8,409		0.34	%	—		—	%	8,409		0.34	%
Commercial - owner occupied	94		NM		—		—	%	94		NM

Residential	7,644		2.17	%	—		—	%	7,644		2.17	%

Total	$	66,407			$	567			$	66,974












	Term Extension
	Three months ended				Six months ended
(in thousands)	June 30, 2023		Percent of Total Loan Class		June 30, 2023		Percent of Total Loan Class
Commercial and industrial	$	6,533	0.15	%	$	27,690	0.63	%
Real estate:

Commercial - owner occupied	95		—	%	95		—	%
Construction and land development	396		0.06	%	1,138		0.17	%
Residential	74		0.02	%	74		0.02	%
Total	$	7,098			$	28,997

The following tables summarize the financial impacts of loan modifications made to borrowers experiencing financial difficulty and outstanding at the date indicated:


	Weighted Average Term Extension (in months)		Weighted Average Term Extension (in months)	Payment Delay
	Three months ended	Six months ended
($ in thousands)	June 30, 2024		June 30, 2024
Commercial and industrial	7		4	$	85
Real estate:
Commercial - investor owned	—		3	—
Commercial - owner occupied	—		3	—

Residential	—		12	—


	Weighted Average Term Extension (in months)
	Three months ended	Six months ended
	June 30, 2023	June 30, 2023
Commercial and industrial	5	6
Real estate:

Commercial - owner occupied	3	3
Construction and land development	6	8
Residential	5	5

The following table shows the aging of the recorded investment in modified loans in the last 12 months by class at the date indicated:


	June 30, 2024
($ in thousands)	Current		30-89 Days Past Due		90 or More Days Past Due		Total
Commercial and industrial	$	44,450	$	500	$	—	$	44,950
Real estate:

Commercial - owner occupied	—		92		—		92
Construction and land development	—		—		741		741
Residential	94		72		—		166

Total	$	44,544	$	664	$	741	$	45,949


	June 30, 2023
($ in thousands)	Current		90 or More Days Past Due		Total
Commercial and industrial	$	27,029	$	661	$	27,690
Real estate:

Commercial - owner occupied	95		—		95
Construction and land development	1,138		—		1,138
Residential	74		—		74

Total	$	28,336	$	661	$	28,997

The following table summarizes loans that experienced a default during the six months ended June 30, 2024, subsequent to being granted a modification in the preceding twelve months. All of these loans were charged off during the preceding period. There were no loans that experienced a default during the three months ended June 30, 2024, subsequent to being granted a modification in the preceding twelve months.


		Term Extension
	Six months ended
($ in thousands)		June 30, 2024		Percent of Total Loan Class
Commercial and industrial		$	1,000	0.02	%
Real estate:


Construction and land development		1,748		0.20	%

Other		4		NM
Total		$	2,752

As of June 30, 2023, commercial and industrial loans totaling $0.7 million experienced a default subsequent to being granted a term extension modification in the prior twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off.

As of June 30, 2024, the Company allocated an immaterial amount in specific reserves to loans that have been restructured.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

•Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.

•Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.

•Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.

•Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.

•Grade 7 – Special Mention credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.

•Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.

•Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on non-accrual.

The recorded investment by risk category of the loans by class and year of origination is presented in the following tables as of the dates indicated:


	June 30, 2024
	Term Loans by Origination Year
($ in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total
Commercial and industrial
Pass (1-6)	$	806,687	$	1,263,986	$	732,677	$	248,485	$	145,095	$	104,330	$	14,802	$	1,037,021	$	4,353,083
Special Mention (7)	15,953		47,110		24,119		2,483		334		767		366		66,698		157,830
Classified (8-9)	20,159		4,402		10,919		1,876		112		293		4,047		40,023		81,831
Total Commercial and industrial	$	842,799	$	1,315,498	$	767,715	$	252,844	$	145,541	$	105,390	$	19,215	$	1,143,742	$	4,592,744

Commercial real estate-investor owned
Pass (1-6)	$	204,356	$	467,322	$	508,800	$	469,794	$	292,377	$	348,941	$	6,476	$	48,289	$	2,346,355
Special Mention (7)	774		4,842		12,258		52,169		3,519		7,447		—		1,998		83,007
Classified (8-9)	—		—		276		42		16,336		4,695		—		—		21,349
Total Commercial real estate-investor owned	$	205,130	$	472,164	$	521,334	$	522,005	$	312,232	$	361,083	$	6,476	$	50,287	$	2,450,711

Commercial real estate-owner occupied
Pass (1-6)	$	192,817	$	408,883	$	461,485	$	445,101	$	270,500	$	426,480	$	4,595	$	31,631	$	2,241,492
Special Mention (7)	7,412		8,255		5,206		13,226		9,541		19,780		—		1,717		65,137
Classified (8-9)	1,175		3,869		3,881		3,291		3,384		34,860		3,560		—		54,020
Total Commercial real estate-owner occupied	$	201,404	$	421,007	$	470,572	$	461,618	$	283,425	$	481,120	$	8,155	$	33,348	$	2,360,649

Construction real estate
Pass (1-6)	$	240,582	$	226,597	$	289,506	$	83,531	$	30,767	$	4,233	$	8	$	4,562	$	879,786
Special Mention (7)	10,485		38		1,043		300		—		226		—		—		12,092
Classified (8-9)	—		741		578		—		—		475		—		—		1,794
Total Construction real estate	$	251,067	$	227,376	$	291,127	$	83,831	$	30,767	$	4,934	$	8	$	4,562	$	893,672

Residential real estate
Pass (1-6)	$	14,804	$	52,575	$	37,717	$	47,372	$	29,351	$	86,968	$	2,125	$	73,827	$	344,739
Special Mention (7)	1,404		43		834		—		68		1,289		150		670		4,458
Classified (8-9)	—		94		111		—		—		1,691		72		108		2,076
Total residential real estate	$	16,208	$	52,712	$	38,662	$	47,372	$	29,419	$	89,948	$	2,347	$	74,605	$	351,273

Other
Pass (1-6)	$	6,630	$	6,887	$	54,931	$	62,290	$	51,609	$	29,192	$	4	$	38,059	$	249,602
Special Mention (7)	—		3,721		—		10,000		—		1,151		—		10,197		25,069
Classified (8-9)	—		—		—		—		—		6		—		—		6
Total Other	$	6,630	$	10,608	$	54,931	$	72,290	$	51,609	$	30,349	$	4	$	48,256	$	274,677

Total loans classified by risk category	$	1,523,238	$	2,499,365	$	2,144,341	$	1,439,960	$	852,993	$	1,072,824	$	36,205	$	1,354,800	$	10,923,726
Total loans classified by performing status																	76,281
Total loans																	$	11,000,007


	December 31, 2023
	Term Loans by Origination Year
($ in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total
Commercial and industrial
Pass (1-6)	$	1,567,738	$	1,052,462	$	345,292	$	194,972	$	123,425	$	71,205	$	12,163	$	1,108,233	$	4,475,490
Special Mention (7)	52,523		6,845		8,597		544		453		242		272		19,590		89,066
Classified (8-9)	12,824		19,306		1,833		812		339		363		508		45,830		81,815
Total Commercial and industrial	$	1,633,085	$	1,078,613	$	355,722	$	196,328	$	124,217	$	71,810	$	12,943	$	1,173,653	$	4,646,371

Commercial real estate-investor owned
Pass (1-6)	$	495,131	$	544,223	$	492,974	$	323,175	$	165,343	$	236,914	$	5,222	$	51,413	$	2,314,395
Special Mention (7)	3,626		22,725		51,851		1,657		164		5,526		—		—		85,549
Classified (8-9)	9,411		1,034		43		15,838		2,831		4,919		48		—		34,124
Total Commercial real estate-investor owned	$	508,168	$	567,982	$	544,868	$	340,670	$	168,338	$	247,359	$	5,270	$	51,413	$	2,434,068

Commercial real estate-owner occupied
Pass (1-6)	$	407,901	$	486,701	$	489,589	$	301,399	$	183,872	$	313,474	$	5,083	$	30,036	$	2,218,055
Special Mention (7)	13,739		2,521		4,652		10,492		5,439		15,833		—		1,493		54,169
Classified (8-9)	3,389		3,413		2,247		3,181		8,878		24,857		5,056		—		51,021
Total Commercial real estate-owner occupied	$	425,029	$	492,635	$	496,488	$	315,072	$	198,189	$	354,164	$	10,139	$	31,529	$	2,323,245

Construction real estate
Pass (1-6)	$	292,689	$	325,010	$	96,426	$	30,956	$	1,413	$	3,408	$	10	$	3,700	$	753,612
Special Mention (7)	42		2,958		1,046		210		123		114		—		—		4,493
Classified (8-9)	1,137		704		—		—		13		466		—		—		2,320
Total Construction real estate	$	293,868	$	328,672	$	97,472	$	31,166	$	1,549	$	3,988	$	10	$	3,700	$	760,425

Residential real estate
Pass (1-6)	$	59,259	$	41,956	$	51,436	$	30,713	$	17,793	$	77,327	$	1,464	$	78,351	$	358,299
Special Mention (7)	322		—		—		—		75		1,801		—		614		2,812
Classified (8-9)	127		1,073		69		—		30		1,492		74		7,500		10,365
Total residential real estate	$	59,708	$	43,029	$	51,505	$	30,713	$	17,898	$	80,620	$	1,538	$	86,465	$	371,476

Other
Pass (1-6)	$	10,071	$	55,923	$	67,766	$	53,569	$	9,382	$	19,657	$	7	$	28,464	$	244,839
Special Mention (7)	—		—		14,472		—		—		—		—		11,645		26,117
Classified (8-9)	—		—		—		—		—		8		—		—		8
Total Other	$	10,071	$	55,923	$	82,238	$	53,569	$	9,382	$	19,665	$	7	$	40,109	$	270,964

Total loans classified by risk category	$	2,929,929	$	2,566,854	$	1,628,293	$	967,518	$	519,573	$	777,606	$	29,907	$	1,386,869	$	10,806,549
Total loans classified by performing status																	77,569
Total loans																	$	10,884,118

In the tables above, loan originations in 2024 and 2023 with a classification of “special mention” or “classified” primarily represent renewals or modifications initially underwritten and originated in prior years.

For certain loans, the Company evaluates credit quality based on the aging status.

The following tables present the recorded investment on loans based on payment activity as of the dates indicated:


	June 30, 2024
($ in thousands)	Performing		Non Performing		Total
Commercial and industrial	$	26,665	$	39	$	26,704
Real estate:
Commercial - investor owned	17,530		—		17,530
Commercial - owner occupied	27,861		—		27,861

Residential	661		—		661
Other	3,517		8		3,525
Total	$	76,234	$	47	$	76,281


	December 31, 2023
($ in thousands)	Performing		Non Performing		Total
Commercial and industrial	$	26,076	$	112	$	26,188
Real estate:
Commercial - investor owned	17,885		—		17,885
Commercial - owner occupied	28,373		—		28,373

Residential	712		—		712
Other	4,406		5		4,411
Total	$	77,452	$	117	$	77,569

NOTE 5 - COMMITMENTS AND CONTINGENT LIABILITIES

The Company issues financial instruments in the normal course of its business of meeting the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company’s extent of involvement and maximum potential 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 not more than the contractual amount of these instruments.

The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets.

The contractual amounts of significant off-balance-sheet financial instruments are as follows:


($ in thousands)	June 30, 2024		December 31, 2023
Commitments to extend credit	$	2,675,628	$	2,937,760
Letters of credit	123,983		107,082

Off-Balance Sheet Credit Risk

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments usually have fixed expiration dates or other termination clauses, may have significant usage restrictions, and may require payment of a fee. Of the total commitments to extend credit at June 30, 2024 and December 31, 2023, $182.8 million and $191.6 million, respectively, represent fixed rate loan commitments. Since certain of the commitments may expire without being drawn upon or may be revoked, the total commitment amounts do not necessarily represent future cash obligations. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate. Other liabilities includes $5.9 million and $6.6 million for estimated losses attributable to the unadvanced commitments at June 30, 2024 and December 31, 2023, respectively.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are issued to support contractual obligations of the Company’s customers. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. As of June 30, 2024, the approximate remaining terms of standby letters of credit range from 1 month to 9 years.

Contingencies

The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Management believes there are no such proceedings pending or threatened against the Company or its subsidiaries which, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.

NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management

of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loans and borrowings. The Company does not enter into derivative financial instruments for trading purposes.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.

For hedges of the Company’s variable-rate loans, interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts and the Company making variable rate payments. The Company has executed cash flow hedges to reduce a portion of variability in cash flows on the Company’s prime based loan portfolio. Select terms of the hedges are as follows:


($ in thousands)
Notional		Fixed Rate		Effective Date	Maturity Date
$	50,000	6.56	%	January 25, 2023	February 1, 2027
$	100,000	6.63	%	December 20, 2022	January 1, 2028
$	100,000	6.66	%	April 1, 2025	April 1, 2030

In addition, the Company has a prime based interest rate collar with a notional amount of $100.0 million. The collar includes a cap of 8.14% and a floor of 5.25%. This transaction, commonly referred to as a zero cost collar, involves the Company selling an interest rate cap where payments will be made when the index exceeds the cap rate, and the purchase of a floor where payments will be received if the index falls below the floor. The collar became effective on October 27, 2022 and matures on October 1, 2029.

For hedges of variable-rate liabilities, interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company has executed a series of cash flow hedges to fix the effective interest rate for payments due on $32.1 million of junior subordinated debentures to a weighted-average-fixed rate of 2.64%.

Select terms of the hedges are as follows:


($ in thousands)
Notional		Fixed Rate		Maturity Date
$	18,558	2.64	%	March 15, 2026
$	13,506	2.64	%	March 17, 2026

The gain or loss on derivatives designated and qualified as cash flow hedges of interest rate risk are recorded in accumulated other comprehensive income and subsequently reclassified into interest income or expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income or expense as interest payments are paid on the Company’s variable-rate loans and debt. During the next twelve months, the Company estimates $0.8 million will be reclassified as a decrease to interest expense and $2.3 million will be reclassified as a decrease to interest income.

Non-designated Hedges

Derivatives not designated as hedges are not considered speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings as a component of other noninterest income.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet:


	Notional Amount				Derivative Assets				Derivative Liabilities
($ in thousands)	June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023
Derivatives designated as hedging instruments
Interest rate swaps	$	282,064	$	211,962	$	1,181	$	1,389	$	3,501	$	233
Interest rate collar	100,000		100,000		—		514		572		—
Total	$	382,064	$	311,962	$	1,181	$	1,903	$	4,073	$	233

Derivatives not designated as hedging instruments
Interest rate swaps	$	746,534	$	779,152	$	17,094	$	15,886	$	17,114	$	15,951



Derivative assets are classified on the balance sheet in other assets. Derivative liabilities are classified on the balance sheet in other liabilities.

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments subject to offsetting. The gross amounts of assets or liabilities can be reconciled to the tabular disclosure of fair value. The fair value table above provides the location of financial assets and liabilities presented on the Balance Sheet.


As of June 30, 2024
							Gross Amounts Not Offset in the Statement of Financial Position
($ in thousands)	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments		Fair Value Collateral Posted		Net Amount
Assets:
Interest rate swaps	$	18,275	$	—	$	18,275	$	4,368	$	13,907	$	—


Liabilities:
Interest rate swaps	$	20,615	$	—	$	20,615	$	4,368	$	—	$	16,247
Interest rate collar	572		—		572		—		—		572
Securities sold under agreements to repurchase	142,066		—		142,066		—		142,066		—

As of December 31, 2023
							Gross Amounts Not Offset in the Statement of Financial Position
($ in thousands)	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments		Fair Value Collateral Posted		Net Amount
Assets:
Interest rate swaps	$	17,275	$	—	$	17,275	$	1,105	$	16,170	$	—
Interest rate collar	514		—		514		—		—		514

Liabilities:
Interest rate swaps	$	16,184	$	—	$	16,184	$	1,105	$	—	$	15,079

Securities sold under agreements to repurchase	250,197		—		250,197		—		250,197		—

As of June 30, 2024, the fair value of derivatives in a net liability position, which includes accrued interest, was $17.4 million. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and posts collateral related to derivatives in a net liability position. The Company has received cash collateral from derivative counterparties on contracts in a net asset position as noted in the tables above.

NOTE 7 - FAIR VALUE MEASUREMENTS

The following table summarizes financial instruments measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	June 30, 2024
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets
Securities available for sale
Obligations of U.S. Government-sponsored enterprises	$	—	$	302,956	$	—	$	302,956
Obligations of states and political subdivisions	—		408,241		—		408,241
Agency mortgage-backed securities	—		719,008		—		719,008
Corporate debt securities	—		7,830		—		7,830
U.S. Treasury bills	—		177,895		—		177,895
Total securities available for sale	—		1,615,930		—		1,615,930

Other investments	—		2,906		—		2,906

Derivatives	—		18,275		—		18,275
Total assets	$	—	$	1,637,111	$	—	$	1,637,111

Liabilities
Derivatives	$	—	$	21,187	$	—	$	21,187
Total liabilities	$	—	$	21,187	$	—	$	21,187


	December 31, 2023
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets
Securities available for sale
Obligations of U.S. Government-sponsored enterprises	$	—	$	296,446	$	—	$	296,446
Obligations of states and political subdivisions	—		432,171		—		432,171
Agency mortgage-backed securities	—		700,381		—		700,381
Corporate debt securities	—		181,701		—		181,701
U.S. Treasury bills	—		7,574		—		7,574
Total securities available-for-sale	—		1,618,273		—		1,618,273

Other investments	—		2,941		—		2,941

Derivative financial instruments	—		17,789		—		17,789
Total assets	$	—	$	1,639,003	$	—	$	1,639,003

Liabilities
Derivatives	$	—	$	16,184	$	—	$	16,184
Total liabilities	$	—	$	16,184	$	—	$	16,184

From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets measured at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. The amounts reported in the following tables include balances measured at fair value during the reporting period and still held as of the reporting date.




	June 30, 2024
($ in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Individually-evaluated loans	$	3,544	$	—	$	—	$	3,544
Other real estate	3,219		—		—		3,219

Total	$	6,763	$	—	$	—	$	6,763


	December 31, 2023
($ in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Individually-evaluated loans	$	5,138	$	—	$	—	$	5,138
Other real estate	5,736		—		—		5,736

Total	$	10,874	$	—	$	—	$	10,874

Following is a summary of the carrying amounts and fair values of certain financial instruments:


	June 30, 2024					December 31, 2023
($ in thousands)	Carrying Amount		Estimated fair value		Level	Carrying Amount		Estimated fair value		Level
Balance sheet assets




Securities held-to-maturity, net	$	772,648	$	703,520	Level 2	$	750,434	$	696,647	Level 2
Other investments	69,065		69,065		Level 2	63,255		63,255		Level 2
Loans held-for-sale	606		606		Level 2	359		359		Level 2

Loans, net	10,860,543		10,601,848		Level 3	10,749,347		10,392,551		Level 3
State tax credits, held-for-sale	21,197		22,491		Level 3	22,115		23,897		Level 3

Servicing asset	2,742		4,075		Level 2	2,861		3,799		Level 2

Balance sheet liabilities
Certificates of deposit	$	1,362,550	$	1,361,271	Level 3	$	1,272,914	$	1,265,905	Level 3
Subordinated debentures and notes	156,265		154,781		Level 2	155,984		154,354		Level 2
FHLB advances	78,000		78,000		Level 2	—		—		Level 2
Other borrowings	178,269		157,918		Level 2	297,829		274,658		Level 2

For information regarding the methods and assumptions used to estimate the fair value of each class of financial instruments refer to Note 18 – Fair Value Measurements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC.

NOTE 8 - SHAREHOLDERS’ EQUITY

Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) after-tax by component:


Three months ended
($ in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Securities		Unamortized Gain on Held-to-Maturity Securities		Net Unrealized Gain (Loss) on Cash Flow Hedges		Total
Balance, March 31, 2024	$	(123,917)	$	9,954	$	(1,428)	$	(115,391)
Net change	(5,375)		(619)		(754)		(6,748)

Balance, June 30, 2024	$	(129,292)	$	9,335	$	(2,182)	$	(122,139)

Balance, March 31, 2023	$	(120,856)	$	12,547	$	2,334	$	(105,975)
Net change	(13,677)		(686)		(3,127)		(17,490)

Balance, June 30, 2023	$	(134,533)	$	11,861	$	(793)	$	(123,465)

Six months ended
($ in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities		Unamortized Gain on Held-to-Maturity Securities		Net Unrealized Gain (Loss) on Cash Flow Hedges		Total
Balance, December 31, 2023	$	(112,844)	$	10,580	$	1,249	$	(101,015)
Net change	(16,448)		(1,245)		(3,431)		(21,124)

Balance, June 30, 2024	$	(129,292)	$	9,335	$	(2,182)	$	(122,139)

Balance, December 31, 2022	$	(144,549)	$	13,185	$	1,032	$	(130,332)
Net change	10,016		(1,324)		(1,825)		6,867

Balance, June 30, 2023	$	(134,533)	$	11,861	$	(793)	$	(123,465)

The following table presents the pre-tax and after-tax changes in the components of other comprehensive income (loss):


	Three months ended June 30,
	2024						2023
($ in thousands)	Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax
Change in unrealized loss on available-for-sale securities	$	(7,148)	$	(1,773)	$	(5,375)	$	(18,285)	$	(4,608)	$	(13,677)

Reclassification of gain on held-to-maturity securities(a)	(823)		(204)		(619)		(918)		(232)		(686)
Change in unrealized loss on cash flow hedges	(1,563)		(388)		(1,175)		(4,463)		(1,125)		(3,338)
Reclassification of loss on cash flow hedges(b)	560		139		421		282		71		211
Total other comprehensive loss	$	(8,974)	$	(2,226)	$	(6,748)	$	(23,384)	$	(5,894)	$	(17,490)

	Six months ended June 30,
	2024						2023
($ in thousands)	Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax
Change in unrealized gain (loss) on available-for-sale securities	$	(21,872)	$	(5,424)	$	(16,448)	$	13,771	$	3,470	$	10,301
Reclassification of gain on sale of available-for-sale securities(a)	—		—		—		(381)		(96)		(285)
Reclassification of gain on held-to-maturity securities(a)	(1,656)		(411)		(1,245)		(1,770)		(446)		(1,324)
Change in unrealized loss on cash flow hedges	(5,475)		(1,358)		(4,117)		(2,758)		(695)		(2,063)
Reclassification of loss on cash flow hedges(b)	912		226		686		318		80		238
Total other comprehensive gain (loss)	$	(28,091)	$	(6,967)	$	(21,124)	$	9,180	$	2,313	$	6,867

(a)The pre-tax amount is reported in noninterest income/expense in the Consolidated Statements of Income.
(b)The pre-tax amount is reported in interest income/expense in the Consolidated Statements of Income.

NOTE 9 - SUPPLEMENTAL FINANCIAL INFORMATION

The following table presents other income and other expense components that primarily exceed one percent of the aggregate of total interest income and noninterest income in one or more of the periods indicated:


	Three months ended June 30,				Six months ended June 30,
($ in thousands)	2024		2023		2024		2023
Other income:
Bank-owned life insurance	$	855	$	797	$	1,719	$	1,588
Community development fees	381		2,077		966		2,672
Gain on SBA loan sales	—		—		1,415		501
Other income	2,755		2,202		4,860		6,418
Total other noninterest income	$	3,991	$	5,076	$	8,960	$	11,179

Other expense:
Amortization of intangibles	$	944	$	1,136	$	1,991	$	2,375
Banking expenses	2,003		2,292		3,809		4,140
FDIC and other insurance	3,135		2,620		6,742		5,192
Loan, legal expenses	2,316		1,886		4,424		3,790

Outside services	1,535		1,612		3,199		3,157
Other expenses	7,020		8,608		14,650		15,858
Total other noninterest expenses	$	16,953	$	18,154	$	34,815	$	34,512

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Forward Looking Statements

This Quarterly Report on Form 10-Q contains information and statements that are considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company, and include, without limitation, statements about the Company’s plans, strategies, goals, objectives, expectations, or consequences of statements about the future performance, operations, products and services of the Company and its subsidiaries, as well as statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, products and services, shareholder value creation and the impact of acquisitions. Forward-looking statements are typically identified with the use of terms such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “continue,” “intend,” and the negative and other variations of these terms and similar words and expressions, although some forward-looking statements may be expressed differently. Forward-looking statements are inherently subject to risks and uncertainties and our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. You should be aware that our actual results could differ materially from those contained in the forward-looking statements.

While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation: our ability to efficiently integrate acquisitions into our operations, retain the customers of these businesses and grow the acquired operations; credit risk; changes in the appraised valuation of real estate securing impaired loans; our ability to recover our investment in loans; fluctuations in the fair value of collateral underlying loans; outcomes of litigation and other contingencies; exposure to general and local economic and market conditions, including risk of recession, high unemployment rates, higher inflation and its impacts (including U.S. federal government measures to address higher inflation), U.S. fiscal debt, budget and tax matters, and any slowdown in global economic growth; risks associated with rapid increases or decreases in prevailing interest rates; changes in business prospects that could impact goodwill estimates and assumptions; consolidation within the banking industry; competition from banks and other financial institutions; the ability to attract and retain relationship officers and other key personnel; burdens imposed by federal and state regulation; changes in legislative or regulatory requirements, as well as current, pending or future legislation or regulation that could have a negative effect on our revenue and business, including rules and regulations relating to bank products and financial services; changes in accounting policies and practices or accounting standards; natural disasters; terrorist activities, war and geopolitical matters (including the war in Israel and potential for a broader regional conflict and the war in Ukraine and the imposition of additional sanctions and export controls in connection therewith), or pandemics, or other health emergencies and their effects on economic and business environments in which we operate, including the related disruption to the financial market and other economic activity; and other risks discussed under the caption “Risk Factors” under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and other reports filed with the SEC, all of which could cause the Company’s actual results to differ from those set forth in the forward-looking statements. The Company cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Company’s results.

Readers are cautioned not to place undue reliance on our forward-looking statements, which reflect management’s analysis and expectations only as of the date of such statements. Forward-looking statements speak only as of the date they are made, and the Company does not intend, and undertakes no obligation, to publicly revise or update forward-looking statements after the date of this report, whether as a result of new information, future events or otherwise, except as required by federal securities law. You should understand that it is not possible to predict or identify all risk factors. Readers should carefully review all disclosures we file from time to time with the SEC which are available on our website at www.enterprisebank.com under “Investor Relations.”

Introduction

The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first six months of 2024 compared to the financial condition as of December 31, 2023. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the three months ended June 30, 2024, compared to the linked first quarter of 2024 (“linked quarter”) and the results of operations, liquidity and cash flows for the six months ended June 30, 2024 compared to the same period in 2023 (“prior year-to-date period”). In light of the nature of the Company’s business, the Company’s management believes that the comparison to the linked quarter is the most relevant to understand the financial results from management’s perspective. For purposes of the Quarterly Report on Form 10-Q, the Company is presenting a comparison to the corresponding prior year-to-date period. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Critical Accounting Policies and Estimates

The Company’s critical accounting policies are considered important to the understanding of the Company’s financial condition and results of operations. These accounting policies require management’s most difficult, subjective and complex judgments about matters that are inherently uncertain. Because these estimates and judgments are based on current circumstances, they may change over time or prove to be inaccurate based on actual experience. If different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of a materially different financial condition and/or results of operations could reasonably be expected.

A full description of our critical accounting policies and the impact and any associated risks related to those policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The Company has prepared all of the consolidated financial information in this report in accordance with GAAP. The Company makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Such estimates include the valuation of loans, goodwill, intangible assets, and other long-lived assets, along with assumptions used in the calculation of income taxes, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using loss experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statement in future periods. There can be no assurances that actual results will not differ from those estimates.

Allowance for Credit Losses on Loans

The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to as the ACL. The ACL is a valuation account to adjust the cost basis to the amount expected to be collected, based on management’s experience, current conditions, and reasonable and supportable forecasts. For purposes of determining the allowance for funded and unfunded loans, the portfolios are segregated into pools that share similar risk characteristics and are then further segregated by credit grades. Loans that do not share similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. The Company estimates the amount of the allowance based on loan loss experience, adjusted for current and forecasted economic conditions, including unemployment, changes in GDP, and commercial and residential real estate prices. The Company’s forecast of economic conditions uses internal and external information and considers a weighted average of a baseline, upside, and downside scenarios. Because economic conditions can change and are difficult to predict, the anticipated amount of estimated loan defaults and losses, and therefore the adequacy of the allowance, could change significantly and have a direct impact on the Company’s credit costs. The Company’s allowance for credit losses on loans was $139.5 million at June 30, 2024 based on the weighting of the different economic scenarios. As a hypothetical example, if the Company had only used the upside scenario, the allowance would have decreased $27.8 million. Conversely, the allowance would have increased $47.3 million using only the downside scenario.

Executive Summary

Below are highlights of the Company’s financial performance for the periods indicated.


($ in thousands, except per share data)	Three months ended									Six months ended
	June 30, 2024			March 31, 2024			June 30, 2023			June 30, 2024			June 30, 2023
EARNINGS
Total interest income	$	211,644		$	207,723		$	187,897		$	419,367		$	356,930
Total interest expense	71,115			69,995			47,205			141,110			76,709
Net interest income	140,529			137,728			140,692			278,257			280,221
Provision for credit losses	4,819			5,756			6,339			10,575			10,522
Net interest income after provision for credit losses	135,710			131,972			134,353			267,682			269,699
Total noninterest income	15,494			12,158			14,290			27,652			31,188
Total noninterest expense	94,017			93,501			85,956			187,518			166,939
Income before income tax expense	57,187			50,629			62,687			107,816			133,948
Income tax expense	11,741			10,228			13,560			21,969			29,083
Net income	$	45,446		$	40,401		$	49,127		$	85,847		$	104,865
Preferred dividends	937			938			937			1,875			1,875
Net income available to common shareholders	$	44,509		$	39,463		$	48,190		$	83,972		$	102,990

Basic earnings per share	$	1.19		$	1.05		$	1.29		$	2.24		$	2.76
Diluted earnings per share	$	1.19		$	1.05		$	1.29		$	2.24		$	2.75

Return on average assets	1.25		%	1.12		%	1.44		%	1.18		%	1.58		%
Adjusted return on average assets1	1.27		%	1.14		%	1.44		%	1.21		%	1.58		%
Return on average common equity	10.68		%	9.52		%	12.48		%	10.10		%	13.64		%
Adjusted return on average common equity1	10.90		%	9.70		%	12.48		%	10.30		%	13.64		%
Return on average tangible common equity1	13.77		%	12.31		%	16.53		%	13.04		%	18.18		%
Adjusted return on average tangible common equity1	14.06		%	12.53		%	16.53		%	13.30		%	18.18		%
Net interest margin (tax equivalent)	4.19		%	4.13		%	4.49		%	4.16		%	4.60		%

Efficiency ratio	60.26		%	62.38		%	55.46		%	61.30		%	53.61		%
Core efficiency ratio1	58.09		%	60.21		%	54.04		%	59.13		%	52.25		%

Book value per common share	$	45.08		$	44.24		$	41.39
Tangible book value per common share1	$	35.02		$	34.21		$	31.23

ASSET QUALITY
Net charge-offs	$	605		$	5,864		$	2,973		$	6,469		$	2,709
Nonperforming loans	39,384			35,642			16,112
Nonaccrual loans	38,067			35,501			15,411
Classified assets	169,822			185,150			108,065
Total assets	14,615,666			14,613,338			13,871,154
Total loans	11,000,007			11,028,492			10,512,623
Classified assets to total assets	1.16		%	1.27		%	0.78		%
Nonperforming loans to total loans	0.36		%	0.32		%	0.15		%
Nonperforming assets to total assets	0.33		%	0.30		%	0.12		%
ACL on loans to total loans	1.27		%	1.23		%	1.34		%
Net charge-offs to average loans (annualized)	0.02		%	0.22		%	0.12		%	0.12		%	0.05		%

1 A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.”

Financial results and other notable items include:

•PPNR1 of $63.3 million for the second quarter 2024 and $120.6 million for the six months ended June 30, 2024 increased $5.9 million and decreased $23.3 million from the linked quarter and prior year-to-date period, respectively. The increase from the linked quarter was primarily due to higher noninterest income, primarily tax credit income, and higher net interest income that benefited from higher average loan balances and expanding yields on earning assets. These increases were partially offset by an increase in deposit interest expense. The decrease compared to the prior year-to-date period was primarily due to the higher interest rate environment that increased deposit interest expense and the cost of variable deposit services charges, which are influenced by current market rates.

•Net interest income of $140.5 million for the second quarter 2024 and $278.3 million for the six months ended June 30, 2024 increased $2.8 million and decreased $2.0 million from the linked and prior year-to-date period, respectively. The NIM was 4.19% for the second quarter 2024 and 4.16% for the six months ended June 30, 2024, compared to 4.13% and 4.60% for the linked and prior year-to-date period, respectively. Compared to the linked quarter, net interest income increased due to higher average loan and interest-earning asset balances, along with an increase in the earning-asset yield that expanded more than the cost of interest-bearing liabilities. The decrease from the prior year-to-date period reflects higher interest expense on the deposit portfolio, as lagged deposit rates have increased, partially offset by the benefit of higher market interest rates on interest-earning assets and organic growth.

•Noninterest income of $15.5 million for the second quarter 2024 and $27.7 million for the six months ended June 30, 2024 increased $3.3 million and decreased $3.5 million from the linked quarter and prior year-to-date period, respectively. The increase from the linked quarter was primarily due to an increase in tax credit income on higher activity that was partially offset by an increase in market interest rates that decreased the fair value of certain tax credits. Compared to the prior year-to-date period, the decrease was primarily due to a decrease in tax credit income of $2.5 million. Market interest rates in 2024 have increased more than the same period in 2023. The increase in market rates has had more of an impact on the fair value of certain tax credits in the current year.

•Noninterest expense of $94.0 million for the second quarter 2024 and $187.5 million for the six months ended June 30, 2024 increased $0.5 million and increased $20.6 million from the linked quarter and prior year-to-date period, respectively. The increase from the linked quarter was primarily driven by higher variable deposit costs ($1.4 million) and expenses related to the core system conversion ($0.9 million), partially offset by a decrease in employee compensation ($0.7 million) and the FDIC special assessment ($0.6 million). The increase from the prior year-to-date period was primarily due to variable deposit servicing costs ($12.3 million) and employee compensation ($5.6 million).

Balance sheet highlights:

•Loans – Total loans increased $115.9 million, or 1.06%, to $11.0 billion at June 30, 2024, compared to $10.9 billion at December 31, 2023. Average loans totaled $10.9 billion for the six months ended June 30, 2024 compared to $10.0 billion for the six months ended June 30, 2023.

•Deposits – Total deposits increased $106.0 million, to $12.3 billion at June 30, 2024 from $12.2 billion at December 31, 2023. Total estimated insured deposits1, which includes collateralized deposits, reciprocal deposits and accounts that qualify for pass through insurance, totaled $8.7 billion at June 30, 2024, compared to $8.3 billion at December 31, 2023. Average deposits totaled $12.3 billion for the six months ended June 30, 2024 compared to $11.2 billion for the prior year-to-date period. Noninterest-bearing deposit accounts represented 32.0% of total deposits and the loan to deposit ratio was 89.6% at June 30, 2024, compared to 32.5% and 89.4%, respectively, at December 31, 2023.

•Asset quality – The allowance for credit losses on loans to total loans was 1.27% at June 30, 2024, compared to 1.24% at December 31, 2023 The ratio of nonperforming assets to total assets was 0.33% at June 30, 2024 compared to 0.34% at December 31, 2023. A provision for credit losses of $4.8 million and $10.6 million was recorded in the second quarter of 2024 and the six months ended June 30, 2024, respectively. This compares to $5.8 million in the linked quarter and $10.5 million in the prior year-to-date period.

•Shareholders’ equity – Total shareholders’ equity was $1.76 billion at June 30, 2024, compared to $1.72 billion at December 31, 2023, and the tangible common equity to tangible assets ratio2 was 9.18% at June 30, 2024 compared to 8.96% at December 31, 2023. The Company and the Bank’s regulatory capital ratios exceeded the “well-capitalized” levels at June 30, 2024.

The Company’s board of directors approved a quarterly dividend of $0.27 per common share, payable on September 30, 2024 to shareholders of record as of September 16, 2024. The board of directors also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) June 15, 2024 to (but excluding) September 15, 2024. The dividend will be payable on September 15, 2024 and will be paid on September 16, 2024 to holders of record of Series A Preferred Stock as of August 30, 2024.

1 PPNR and total estimated insured deposits are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

2 Tangible common equity to tangible assets ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Average Balance Sheet

The following tables present, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as the corresponding interest rates earned and paid, all on a tax equivalent basis.


	Three months ended June 30,						Three months ended March 31,						Three months ended June 30,
	2024						2024						2023
($ in thousands)	Average Balance		Interest Income/Expense		Average Yield/ Rate		Average Balance		Interest Income/Expense		Average Yield/ Rate		Average Balance		Interest Income/Expense		Average Yield/ Rate
Assets
Interest-earning assets:
Loans1, 2	$	10,962,488	$	189,346	6.95	%	$	10,927,932	$	186,703	6.87	%	$	10,284,873	$	170,314	6.64	%
Taxable securities	1,417,147		12,246		3.48		1,423,795		11,825		3.34		1,328,891		9,984		3.01
Non-taxable securities2	979,372		7,710		3.17		976,776		7,666		3.16		969,104		7,566		3.13
Total securities	2,396,519		19,956		3.35		2,400,571		19,491		3.27		2,297,995		17,550		3.06
Interest-earning deposits	325,452		4,389		5.42		268,068		3,569		5.35		173,785		2,095		4.84
Total interest-earning assets	13,684,459		213,691		6.28		13,596,571		209,763		6.20		12,756,653		189,959		5.97
Noninterest-earning assets	961,922						959,548						915,332
Total assets	$	14,646,381					$	14,556,119					$	13,671,985

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,950,827	$	18,801	2.56	%	$	2,924,276	$	18,612	2.56	%	$	2,509,805	$	10,120	1.62	%
Money market accounts	3,434,712		31,926		3.74		3,401,802		31,357		3.71		2,920,079		20,499		2.82
Savings accounts	573,115		335		0.24		587,113		303		0.21		686,973		227		0.13
Certificates of deposit	1,412,263		15,312		4.36		1,341,990		14,201		4.26		1,219,500		10,526		3.46
Total interest-bearing deposits	8,370,917		66,374		3.19		8,255,181		64,473		3.14		7,336,357		41,372		2.26
Subordinated debentures and notes	156,188		2,684		6.91		156,046		2,484		6.40		155,632		2,431		6.27
FHLB advances	40,308		561		5.60		73,791		1,029		5.61		98,912		1,279		5.19
Securities sold under agreements to repurchase	158,969		1,401		3.54		204,898		1,804		3.54		162,606		704		1.74
Other borrowings	36,203		95		1.06		42,736		205		1.93		133,770		1,419		4.25
Total interest-bearing liabilities	8,762,585		71,115		3.26		8,732,652		69,995		3.22		7,887,277		47,205		2.40
Noninterest-bearing liabilities:
Demand deposits	3,973,336						3,925,522						4,051,456
Other liabilities	162,220						159,247						111,915
Total liabilities	12,898,141						12,817,421						12,050,648
Shareholders' equity	1,748,240						1,738,698						1,621,337
Total liabilities & shareholders' equity	$	14,646,381					$	14,556,119					$	13,671,985
Net interest income			$	142,576					$	139,768					$	142,754
Net interest spread					3.02	%					2.98	%					3.57	%
Net interest margin					4.19	%					4.13	%					4.49	%

1 Average balances include nonaccrual loans. Interest income includes loan fees of $2.2 million, $2.4 million, and $3.7 million for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.
2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $2.1 million, $2.0 million, and $2.1 million for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.



	Six months ended
	June 30, 2024						June 30, 2023
($ in thousands)	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets
Interest-earning assets:
Loans1, 2	$	10,945,211	$	376,049	6.91	%	$	10,041,312	$	323,076	6.49	%
Taxable securities	1,420,471		24,071		3.41		1,325,951		19,619		2.98
Non-taxable securities2	978,074		15,376		3.16		967,298		15,048		3.14
Total securities	2,398,545		39,447		3.31		2,293,249		34,667		3.05
Interest-earning deposits	296,759		7,958		5.39		140,206		3,290		4.73
Total interest-earning assets	13,640,515		423,454		6.24		12,474,767		361,033		5.84
Noninterest-earning assets	960,735						928,317
Total assets	$	14,601,250					$	13,403,084

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,937,551	$	37,413	2.56	%	$	2,356,708	$	16,027	1.37	%
Money market accounts	3,418,257		63,283		3.72		2,873,715		35,970		2.52
Savings accounts	580,115		637		0.22		709,490		457		0.13
Certificates of deposit	1,377,126		29,514		4.31		946,527		13,579		2.89
Total interest-bearing deposits	8,313,049		130,847		3.17		6,886,440		66,033		1.93
Subordinated debentures and notes	156,117		5,168		6.66		155,565		4,840		6.27
FHLB advances	57,049		1,590		5.60		104,887		2,611		5.02
Securities sold under agreements to repurchase	181,933		3,205		3.54		188,958		1,453		1.55
Other borrowings	39,470		300		1.53		94,048		1,772		3.80
Total interest-bearing liabilities	8,747,618		141,110		3.24		7,429,898		76,709		2.08
Noninterest-bearing liabilities:
Demand deposits	3,949,429						4,265,521
Other liabilities	160,734						112,625
Total liabilities	12,857,781						11,808,044
Shareholders' equity	1,743,469						1,595,040
Total liabilities & shareholders' equity	$	14,601,250					$	13,403,084
Net interest income			$	282,344					$	284,324
Net interest spread					3.00	%					3.76	%
Net interest margin					4.16	%					4.60	%

1 Average balances include nonaccrual loans. Interest income includes loan fees of $4.6 million and $7.4 million for the six months ended June 30, 2024 and June 30, 2023, respectively.
2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $4.1 million for both the six months ended June 30, 2024 and June 30, 2023, respectively.

Rate/Volume

The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume.


	Three months ended June 30, 2024						Six months ended June 30, 2024
	compared to						compared to
	Three months ended March 31, 2024						Six months ended June 30, 2023
	Increase (decrease) due to						Increase (decrease) due to
($ in thousands)	Volume1		Rate2		Net		Volume1		Rate2		Net
Interest earned on:



Loans	$	345	$	2,298	$	2,643	$	30,855	$	22,118	$	52,973
Taxable securities	211		210		421		1,484		2,968		4,452
Non-taxable securities3	22		22		44		219		109		328
Interest-earning deposits	820		—		820		4,112		556		4,668
Total interest-earning assets	$	1,398	$	2,530	$	3,928	$	36,670	$	25,751	$	62,421

Interest paid on:
Interest-bearing demand accounts	$	189	$	—	$	189	$	4,731	$	16,655	21,386
Money market accounts	569		—		569		7,771		19,542		27,313
Savings accounts	16		16		32		43		137		180
Certificates of deposit	1,111		—		1,111		7,659		8,276		15,935
Subordinated debentures and notes	—		200		200		—		328		328
FHLB advances	(468)		—		(468)		(822)		(199)		(1,021)
Securities sold under agreements to repurchase	(403)		—		(403)		86		1,666		1,752
Other borrowed funds	—		(110)		(110)		(701)		(771)		(1,472)
Total interest-bearing liabilities	1,014		106		1,120		18,767		45,634		64,401
Net interest income	$	384	$	2,424	$	2,808	$	17,903	$	(19,883)	(1,980)

1 Change in volume multiplied by yield/rate of prior period.

2 Change in yield/rate multiplied by volume of prior period.

3 Nontaxable income is presented on a tax equivalent basis.

NOTE: The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Net interest income on a tax equivalent basis of $142.6 million for the quarter ended June 30, 2024 and $282.3 million for the six months ended June 30, 2024, increased $2.8 million and decreased $2.0 million from the linked and prior year-to-date period, respectively. The decrease from the linked quarter was primarily due to an expansion of the loan portfolio and securities yields, and to a lesser extent, an increase in average earning assets. This increase was partially offset by an increase in cost and average interest-bearing deposit balances. The decrease from the prior year-to-date period reflects higher interest expense on the deposit portfolio, as lagged deposit rates have increased. The effective federal funds rate for both the linked and current quarter was 5.33%. The effective federal funds rate for the first six months of 2024 was 5.33%, an increase of 57 basis points compared to the prior year-to-date period.

Compared to the linked quarter, tax equivalent interest income increased $3.9 million primarily due to a $34.6 million increase in average loan balances, as well as an 8 basis point increase in yield. The average interest rate of new loan originations in the second quarter 2024 was 8.07%, an increase of 23 basis points from the linked quarter. Interest on cash accounts increased $0.8 million from the linked quarter due to a $57.4 million increase in average balances, and interest on securities increased $0.5 million due to an 8 basis point increase in yield.

Tax equivalent interest income increased $62.4 million over the prior year-to-date period due to a $53.0 million increase in loan interest and a $9.4 million increase in interest on securities and interest earning cash. Loan yields in the first six months of 2024 increased 42 basis points to 6.91%, compared to 6.49% in the prior year-to-date period.

Average loans increased $903.9 million, or 9.0% over the prior year-to-date period. Average securities increased $105.3 million, or 4.6% over the prior year-to-date period.

Compared to the linked quarter, interest expense increased $1.1 million primarily due to an increase in interest expense on certificates of deposit that includes brokered amounts. Average certificates of deposit increased $70.3 million and the cost increased 10 basis points in the second quarter 2024. The average cost of interest-bearing deposits was 3.19%, an increase of 5 basis points compared to the linked quarter. The total cost of deposits, including noninterest-bearing demand accounts, was 2.16% during the second quarter 2024, compared to 2.13% in the linked quarter. While the total cost of deposits increased over the linked quarter, the monthly cost of total deposits has been stable since March 2024.

Interest expense increased $64.4 million over the prior year-to-date period, primarily due to the higher rate environment and organic growth in deposit balances. The average cost of interest-bearing deposits increased 124 basis points year-over-year. The total cost of deposits, including noninterest-bearing demand accounts, was 2.15% during the six months ended June 30, 2024, compared to 1.19% during the prior year-to-date period.

NIM, on a tax equivalent basis, was 4.19% in the second quarter 2024 and 4.16% for the first six months of 2024, an increase of 6 basis points and a decrease of 44 basis points from the linked and prior year-to-date period, respectively.

Noninterest Income

The following table presents a comparative summary of the major components of noninterest income for the periods indicated.


	Linked quarter comparison								Prior year comparison
	Quarter ended								Six months ended
($ in thousands)	June 30, 2024		March 31, 2024		Increase (decrease)				June 30, 2024		June 30, 2023		Increase (decrease)
Service charges on deposit accounts	$	4,542	$	4,423	$	119	3	%	$	8,965	$	8,038	$	927	10	%
Wealth management revenue	2,590		2,544		46		2	%	5,134		4,988		146		3	%
Card services revenue	2,497		2,412		85		4	%	4,909		4,802		107		2	%
Tax credit income (loss)	1,874		(2,190)		4,064		186	%	(316)		2,181		(2,497)		(790)	%

Other income	3,991		4,969		(978)		(20)	%	8,960		11,179		(2,219)		(25)	%

Total noninterest income	$	15,494	$	12,158	$	3,336	27	%	$	27,652	$	31,188	$	(3,536)	(13)	%

Total noninterest income for the second quarter 2024 was $15.5 million, an increase of $3.3 million from the linked quarter primarily due to an increase in tax credit income. Tax credit income is typically highest in the fourth quarter of each year and will vary in other periods based on transaction volumes and fair value changes on credits carried at fair value. The decrease in other income from the linked quarter was primarily driven by gains on the sale of SBA loans that were recognized in the linked quarter.

Total noninterest income for the six months ended June 30, 2024 was $27.7 million, a decrease from the prior year-to-date period of $3.5 million which was primarily due to decreases in tax credit income and other income. The increase in market interest rates used as a discount rate in the fair value of certain tax credits was higher in the six months ended June 30, 2024, compared to the prior year-to-date period. This resulted in a larger reduction in fair value during 2024 compared to the prior year. The decrease in other income for the six months ended June 30, 2024, compared to the prior year-to-date period, is primarily due to a lower level of income on community development investments which are not a consistent source of income and fluctuate based on distributions from the underlying funds.

Noninterest Expense

The following table presents a comparative summary of the major components of noninterest expense for the periods indicated.


	Linked quarter comparison											Prior year comparison
	Quarter ended											Six months ended
($ in thousands)	June 30, 2024			March 31, 2024			Increase (decrease)					June 30, 2024			June 30, 2023			Increase (decrease)
Employee compensation and benefits	$	44,524		$	45,262		$	(738)		(2)	%	$	89,786		$	84,144		$	5,642		6	%
Deposit costs	21,706			20,277			1,429			7	%	41,983			29,700			12,283			29	%
Occupancy	4,197			4,326			(129)			(3)	%	8,523			8,015			508			6	%
Data processing	5,339			4,339			1,000			23	%	9,678			7,371			2,307			24	%
Professional fees	1,298			1,435			(137)			(10)	%	2,733			3,197			(464)			(17)	%




Other expense	16,953			17,862			(909)			(5)	%	34,815			34,512			303			1	%
Total noninterest expense	$	94,017		$	93,501		$	516		1	%	$	187,518		$	166,939		$	20,579		11	%

Efficiency ratio	60.26		%	62.38		%	(2.12)		%			61.30		%	53.61		%	(1.04)		%
Core efficiency ratio3	58.09		%	60.21		%	(2.12)		%			59.13		%	52.25		%	(1.04)		%

Noninterest expense was $94.0 million for the second quarter 2024, an increase of $0.5 million from $93.5 million in the linked quarter. Employee compensation and benefits decreased $0.7 million from the linked quarter primarily due to employer payroll taxes that are seasonally higher in the first quarter each year and a decline in self-insured medical claims. Deposit costs relate to certain specialized deposit businesses that receive an earnings credit allowance for deposit related expenses that are impacted by interest rates and average balances. Deposit costs increased $1.4 million from the linked quarter primarily due to the expiration of unused allowances that reduced expense in the first quarter and growth in deposits. Expenses related to the core system conversion increased $0.9 million from the linked quarter due to the continued progress on the project and are included in the data processing line item.

Total noninterest expense of $187.5 million for the first six months of 2024 increased $20.6 million from the prior year-to-date period, primarily due to an increase in the associate base, merit increases throughout 2023 and 2024, and a $12.3 million increase in variable deposit costs due to higher earnings credit rates and average balances.

Income Taxes

The Company’s effective tax rate was 20.5% for the second quarter 2024 and 20.4% for the six months ended June 30, 2024. This compares to the linked quarter and prior year-to-date effective tax rate of 20.2% and 21.7%, respectively. The decrease from the prior year-to-date effective tax rate was driven by tax credit opportunities the Company has deployed as part of its tax planning strategy.

3 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

Summary Balance Sheet


($ in thousands)	June 30, 2024		December 31, 2023		Increase (decrease)
Total cash and cash equivalents	$	392,775	$	433,029	$	(40,254)	(9)	%
Securities, net	2,388,578		2,368,707		19,871		1	%
Total loans	11,000,007		10,884,118		115,889		1	%
Total assets	14,615,666		14,518,590		97,076		1	%
Deposits	12,282,383		12,176,371		106,012		1	%
Total liabilities	12,860,393		12,802,522		57,871		—	%
Total shareholders’ equity	1,755,273		1,716,068		39,205		2	%

Total assets were $14.6 billion at June 30, 2024, an increase of $97.1 million from December 31, 2023 primarily due to a $115.9 million increase in loans. Total liabilities of $12.9 billion increased $57.9 million from December 31, 2023 primarily due to a $106.0 million increase in deposits.

Investment Securities

Investment securities were $2.4 billion, or 16% of total assets, at both June 30, 2024 and December 31, 2023. The portfolio is comprised of both available-for-sale and held-to-maturity securities.

The table below sets forth the carrying value of investment securities, excluding the allowance for credit losses:


	June 30, 2024				December 31, 2023
($ in thousands)	Amount		%		Amount		%
Obligations of U.S. Government sponsored enterprises	$	302,956	12.7	%	$	296,446	12.5	%
Obligations of states and political subdivisions	1,008,157		42.2	%	1,007,870		42.5	%
Agency mortgage-backed securities	769,234		32.2	%	752,481		31.8	%
U.S. Treasury Bills	177,895		7.4	%	181,701		7.7	%
Corporate debt securities	130,650		5.5	%	130,994		5.5	%
Total	$	2,388,892	100.0	%	$	2,369,492	100.0	%


Net Unrealized Losses
($ in thousands)	June 30, 2024		December 31, 2023
Available-for-sale securities	$	(172,734)	$	(150,861)
Held-to-maturity securities	(69,442)		(54,572)
Total	$	(242,176)	$	(205,433)

Investment purchases in the second quarter 2024 had a weighted average, tax equivalent yield of 5.43%. The average duration of the investment portfolio was 5.1 years at June 30, 2024. The Company leverages the investment portfolio to lengthen the overall duration of the balance sheet, primarily using high-quality municipal securities. The expected cash flow from pay downs, maturities and interest over the next 12 months is approximately $375.3 million.

Loans by Type

The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio, including the C&I category, is secured by real estate. The ability of the Company’s borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.

The following table sets forth the composition of the loan portfolio by type of loans


($ in thousands)	June 30, 2024		December 31, 2023		Increase (decrease)
Commercial and industrial	$	4,619,448	$	4,672,559	$	(53,111)	(1)	%
Commercial real estate - investor owned	2,468,241		2,451,953		16,288		1	%
Commercial real estate - owner occupied	2,388,510		2,351,618		36,892		2	%
Construction and land development	893,672		760,425		133,247		18	%
Residential real estate	351,934		372,188		(20,254)		(5)	%
Other	278,202		275,375		2,827		1	%
Total loans	$	11,000,007	$	10,884,118	$	115,889	1	%

Loans totaled $11.0 billion at June 30, 2024 compared to $10.9 billion at December 31, 2023. The increase was primarily due to an increase of $133.2 million in construction loans, offset by a decrease in C&I loans of $53.1 million. Average revolving line draw utilization was 46% for the second quarter 2024, compared to 43% for the year ended December 31, 2023.

The following table provides additional information on certain categories of specialty loans that are included in total loans above:



($ in thousands)	June 30, 2024		December 31, 2023		Increase (decrease)
SBA Loans	$	1,269,145	$	1,281,632	$	(12,487)	(1)	%
Sponsor finance	865,883		872,264		(6,381)		(1)	%
Life insurance premium financing	996,154		956,162		39,992		4	%
Tax credits	738,249		734,594		3,655		—	%

Specialty lending products, including sponsor finance, life insurance premium financing, and tax credits, consist primarily of C&I loans. Sponsor finance and life insurance premium financing loans are sourced through relationships developed with private equity funds and estate planning firms and are not bound geographically by our markets. These specialized loan products offer opportunities to expand and diversify geographically by entering new markets. The Company continues to focus on originating high-quality C&I relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. Life insurance premium financing and tax credits are typically lower risk products due to the high collateral value securing the loans.

SBA loans are also generated on a national basis, and primarily consist of loans collateralized by first lien, owner-occupied real estate properties. These loans predominantly have a 75% guarantee from the SBA. The Company may sell the guaranteed portion of the loan and retain servicing rights, and in the first quarter 2024, SBA loans totaling $23.1 million were sold.

Provision and Allowance for Credit Losses

The following table presents the components of the provision for credit losses:


	Quarter ended				Six months ended
($ in thousands)	June 30, 2024		March 31, 2024		June 30, 2024		June 30, 2023
Provision for credit losses on loans	$	4,571	$	6,591	$	11,162	$	7,096
Provision for available-for-sale securities	—		—		—		5,076
Benefit for off-balance sheet commitments	(263)		(507)		(770)		(1,839)
Provision (benefit) for held-to-maturity securities	(36)		(435)		(471)		123
Charge-off of accrued interest	547		107		654		66
Provision for credit losses	$	4,819	$	5,756	$	10,575	$	10,522

The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the ACL on loans at a level consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date. The Company also records reversals of interest on nonaccrual loans and interest recoveries directly through the provision of credit losses.

A provision for credit losses of $4.8 million for the second quarter 2024 and $10.6 million for the six months ended June 30, 2024, decreased $0.9 million and increased $0.1 million from the linked quarter and prior year-to-date period, respectively. The provision for credit losses in the second quarter 2024 was primarily related to an increase in reserves on individually evaluated loans, and updates to qualitative factors used in the allowance calculation. The provision for credit losses for the six months ended June 30, 2024 was stable with the prior year-to-date period. However, the provision for credit losses on loans in 2024 included an increase of $4.2 million due to higher charge-offs when compared to the prior year-to-date period. This was partially offset by a $5.1 million decrease in the provision for available-for-sale securities related to the impairment of an available-for-sale investment security in the prior year-to-date period.

The following table summarizes the allocation of the ACL on loans:


	June 30, 2024				December 31, 2023
($ in thousands)	Allowance		Percent of loans in each category to total loans		Allowance		Percent of loans in each category to total loans
Commercial and industrial	$	61,478	42.0	%	$	58,886	42.9	%
Real estate:
Commercial	56,219		44.2	%	54,685		44.1	%
Construction and land development	11,504		8.1	%	10,198		7.0	%
Residential	5,588		3.2	%	6,142		3.4	%
Other	4,675		2.5	%	4,860		2.6	%
Total	$	139,464	100.0	%	$	134,771	100.0	%

The ACL on loans was 1.27% of total loans at June 30, 2024, compared to 1.24% of loans at December 31, 2023. The increase in the ratio of ACL on loans to total loans is primarily due to the increase in reserves on impaired loans. Excluding guaranteed loans, the ACL on loans to total loans was 1.38%4 at June 30, 2024, compared to 1.35% at December 31, 2023.

4 ACL on loans to total loans adjusted for guaranteed loans is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

The following table is a summary of net charge-offs (recoveries) to average loans for the periods indicated:


	Quarter ended
	June 30, 2024						March 31, 2024
($ in thousands)	Net Charge-offs (Recoveries)		Average Loans(1)		Net Charge-offs (Recoveries)/Average Loans(2)		Net Charge-offs (Recoveries)		Average Loans(1)		Net Charge-offs (Recoveries)/Average Loans(2)
Commercial and industrial	$	(956)	$	4,701,482	(0.08)	%	$	5,150	$	4,707,968	0.44	%
Real estate:
Commercial	1,761		4,751,311		0.15	%	322		4,750,876		0.03	%
Construction and land development	(24)		845,290		(0.01)	%	(6)		797,669		NM
Residential	(196)		363,874		(0.22)	%	69		370,438		0.07	%
Other	20		299,629		0.03	%	329		299,856		0.44	%
Total	$	605	$	10,961,586	0.02	%	$	5,864	$	10,926,807	0.22	%

(1) Excludes loans held for sale.

(2)Annualized.



	Six months ended
	June 30, 2024						June 30, 2023
($ in thousands)	Net Charge-offs (Recoveries)		Average Loans(1)		Net Charge-offs (Recoveries)/Average Loans(2)		Net Charge-offs (Recoveries)		Average Loans(1)		Net Charge-offs (Recoveries)/Average Loans(2)
Commercial and industrial	$	4,194	$	4,703,684	0.18	%	$	2,457	$	4,051,506	0.12	%
Real estate:
Commercial	2,083		4,755,574		0.09	%	28		4,678,103		NM
Construction and land development	(30)		818,313		(0.01)	%	(31)		685,034		(0.01)	%
Residential	(127)		366,883		(0.07)	%	(26)		355,409		(0.01)	%
Other	349		299,743		0.23	%	281		270,776		0.21	%
Total	$	6,469	$	10,944,197	0.12	%	$	2,709	$	10,040,828	0.05	%
(1) Excludes loans held for sale.
(2)Annualized.

To the extent the Company does not recognize charge-offs and economic forecasts improve in future periods, the Company could recognize provision reversals. Conversely, if economic conditions and the Company’s forecast worsens and charge-offs increase, the Company could recognize elevated levels of provision for credit losses. The provision is also reflective of charge-offs (recoveries) in the period.

Nonperforming assets

The following table presents the categories of nonperforming assets and other ratios, excluding government guaranteed portions, as of the dates indicated.


($ in thousands)	June 30, 2024			December 31, 2023
Nonaccrual loans	$	38,067		$	43,181
Loans past due 90 days or more and still accruing interest	1,317			547

Total nonperforming loans	39,384			43,728
Other real estate	8,746			5,736

Total nonperforming assets	$	48,130		$	49,464

Total assets	$	14,615,666		$	14,518,590
Total loans	11,000,007			10,884,118

Total ACL on loans	139,464			134,771

ACL on loans to nonaccrual loans	366		%	312		%
ACL on loans to nonperforming loans	354		%	308		%
ACL on loans to total loans	1.27		%	1.24		%
Nonaccrual loans to total loans	0.35		%	0.40		%
Nonperforming loans to total loans	0.36		%	0.40		%

Nonperforming assets to total assets	0.33		%	0.34		%

Nonperforming loans based on loan type were as follows:



($ in thousands)	June 30, 2024		December 31, 2023
Commercial and industrial	$	7,342	$	7,756
Commercial real estate	30,766		33,739
Construction and land development	1,268		1,269
Residential real estate	—		959
Other	8		5
Total	$	39,384	$	43,728

The following table summarizes the changes in nonperforming loans:


	Six months ended
($ in thousands)	June 30, 2024



Nonperforming loans, beginning of period	$	43,728
Additions to nonaccrual loans	13,649


Charge-offs	(9,363)
Principal payments	(6,185)
Moved to other real estate and repossessed assets	(2,445)


Nonperforming loans, end of period	$	39,384

Nonperforming loans at June 30, 2024 decreased $4.3 million, or 10%, when compared to December 31, 2023. The decrease in nonperforming loans during the six months ended June 30, 2024 was primarily due to gross charge-offs of $9.4 million and principal payments of $6.2 million, offset by additions of $13.6 million.

Other real estate

The following table summarizes the changes in other real estate:


	Six months ended
($ in thousands)	June 30, 2024
Other real estate, beginning of period	$	5,736
Additions	3,219

Sales	(209)
Other real estate, end of period	$	8,746

Deposits

The following table shows the breakdown of deposits by type:


($ in thousands)	June 30, 2024			December 31, 2023			Increase (decrease)
Noninterest-bearing demand accounts	$	3,928,308		$	3,958,743		$	(30,435)	(1)	%
Interest-bearing demand accounts	2,951,899			2,950,259			1,640		—	%
Money market accounts	3,474,278			3,399,280			74,998		2	%
Savings accounts	565,348			595,175			(29,827)		(5)	%
Certificates of deposit:
Brokered	494,870			482,759			12,111		3	%
Customer	867,680			790,155			77,525		10	%
Total deposits	$	12,282,383		$	12,176,371		$	106,012	1	%



Demand deposits / total deposits	32		%	33		%

The following table shows the average balance and average rate of the Company’s deposits by type:


	Quarter ended
	June 30, 2024				March 31, 2024				June 30, 2023
($ in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing deposit accounts	$	3,973,336	—	%	$	3,925,522	—	%	$	4,051,456	—	%

Interest-bearing demand accounts	2,950,827		2.56		2,924,276		2.56		2,509,805		1.62
Money market accounts	3,434,712		3.74		3,401,802		3.71		2,920,079		2.82
Savings accounts	573,115		0.24		587,113		0.21		686,973		0.13
Certificates of deposit	1,412,263		4.36		1,341,990		4.26		1,219,500		3.46
Total interest-bearing deposits	$	8,370,917	3.19		$	8,255,181	3.14		$	7,336,357	2.26

Total average deposits	$	12,344,253	2.16		$	12,180,703	2.13		$	11,387,813	1.46



	Six months ended
	June 30, 2024				June 30, 2023
($ in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing deposit accounts	$	3,949,429	—	%	$	4,265,521	—	%

Interest-bearing demand accounts	2,937,551		2.56		2,356,708		1.37
Money market accounts	3,418,257		3.72		2,873,715		2.52
Savings accounts	580,115		0.22		709,490		0.13
Certificates of deposit	1,377,126		4.31		946,527		2.89
Total interest-bearing deposits	$	8,313,049	3.17		$	6,886,440	1.93

Total average deposits	$	12,262,478	2.15		$	11,151,961	1.19

Total deposits excluding brokered certificates of deposits, were $11.8 billion at June 30, 2024, an increase of $93.9 million from December 31, 2023. Brokered certificates of deposit at June 30, 2024 increased $12.1 million from December 31, 2023 and continue to be used as a stable funding source. The Company has deposit verticals focusing on property management, community associations, and escrow industries, in addition to deposits related to its specialty lending products. These deposits increased to $3.0 billion at June 30, 2024 from $2.8 billion at December 31, 2023 due to continued success at generating organic deposit growth.

To provide customers a deposit product with enhanced FDIC insurance, the Company participates in several programs through third parties that provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Total reciprocal deposits were $1.2 billion at both June 30, 2024 and December 31, 2023. The Company considers reciprocal accounts as customer-related deposits due to the customer relationship that generated the transaction.

At June 30, 2024, estimated uninsured/uncollateralized deposits totaled $3.6 billion, or 29% of total deposits, compared to $3.8 billion, or 31% of total deposits, at December 31, 2023.

The total cost of deposits was 2.16% for the current quarter, compared to 2.13% for the linked quarter. For the six months ended June 30, 2024, the total cost of deposits was 2.15%, compared to 1.19% in the prior year-to-date period.

Shareholders’ Equity

Shareholders’ equity totaled $1.8 billion at June 30, 2024, an increase of $39.2 million from December 31, 2023. Significant activity during the first six months of 2024 was as follows:

•Increase from net income of $85.8 million,

•Decrease in fair value of securities and cash flow hedges of $21.1 million, and

•Decrease from dividends paid on common and preferred stock of $21.0 million.

•Decrease from common stock repurchases of $8.6 million

Liquidity and Capital Resources

Liquidity

The objective of liquidity management is to ensure we have the ability to generate sufficient cash or cash equivalents in a timely and cost-effective manner to meet our commitments as they become due. Typical demands on liquidity are changes in deposit levels, maturing time deposits which are not renewed, and fundings under credit commitments to customers. Funds are available from a number of sources, such as the core deposit base and loan and security repayments and maturities.

Additionally, liquidity is provided from lines of credit with the FHLB, the Federal Reserve Bank, and correspondent banks; the ability to acquire large and brokered deposits, sales of the securities portfolio, and the ability to sell loans or loan participations to other banks. These alternatives are an important part of our liquidity plan and provide flexibility and efficient execution of the asset-liability management strategy.

The Company’s Asset-Liability Management Committee oversees our liquidity position, the parameters of which are approved by the Bank’s Board of Directors. Our liquidity position is monitored daily. Our liquidity management framework includes measurement of several key elements, such as the loan to deposit ratio, a liquidity ratio, and a dependency ratio. The Company’s liquidity framework also incorporates contingency planning to assess the nature and volatility of funding sources and to determine alternatives to these sources. While core deposits and loan and investment repayments are principal sources of liquidity, funding diversification is another key element of liquidity management and is achieved by strategically varying depositor types, terms, funding markets, and instruments.

Liquidity from assets is available primarily from cash balances and the investment portfolio. Cash and interest-bearing deposits with other banks totaled $392.8 million at June 30, 2024 and $433.0 million at December 31, 2023. Investment securities are another important tool in liquidity planning. Securities totaled $2.4 billion at both June 30, 2024 and December 31, 2023, and included $1.2 billion and $1.6 billion at June 30, 2024 and December 31, 2023, respectively, pledged as collateral for deposits of public institutions, loan notes and other requirements. The unpledged portion of the securities portfolio could be pledged or sold to enhance liquidity, if necessary. The Company also has a portfolio of SBA guaranteed loans, a portion of which could be sold in the secondary market to generate earnings and liquidity.

Available on- and off-balance sheet liquidity sources include the following items:


($ in thousands)	June 30, 2024
Federal Reserve Bank borrowing capacity	$	2,610,652
FHLB borrowing capacity	1,230,978
Unpledged securities	1,162,838
Federal funds lines (7 correspondent banks)	140,000
Cash and interest-bearing deposits	392,775
Holding Company line of credit	25,000
Total	$	5,562,243

Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at June 30, 2024, the Company could borrow an additional $1.2 billion from the FHLB of Des Moines under blanket loan pledges and has additional real estate loans that could be pledged. In the first half of 2024, the Company pledged additional loans to the FHLB to increase the borrowing capacity by $279.1 million. The Company also has $2.6 billion available from the Federal Reserve Bank under a pledged loan agreement. In the first quarter 2024, the Federal Reserve Bank borrowing capacity declined due to the expiration of the Bank Term Funding Program on March 11, 2024. The Company also has unsecured federal funds lines with seven correspondent banks totaling $140 million.

In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The Company has $2.8 billion in unused commitments to extend credit as of June 30, 2024. However, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.

At the holding company level, the primary funding sources are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises, stock offerings) and debt instruments. The main use of this liquidity is to provide the funds necessary to pay dividends to shareholders, service debt, invest in subsidiaries as necessary, repurchase common stock and satisfy other operating requirements. The holding company maintains a revolving line of credit for an aggregate amount up to $25 million, all of which was available at June 30, 2024. The line of credit has a one-year term and was renewed in February 2024 for an additional one-year term. The proceeds can be used for general corporate purposes.

The Company has an effective automatic shelf registration statement on Form S-3 allowing for the issuance of various forms of equity and debt securities. The Company’s ability to offer securities pursuant to the registration statement depends on market conditions and the Company’s continuing eligibility to use the Form S-3 under rules of the SEC.

Strong capital ratios, credit quality and core earnings are essential to retaining cost-effective access to the wholesale funding markets. Deterioration in any of these factors could have a negative impact on the Company’s ability to access these funding sources and, as a result, these factors are monitored on an ongoing basis as part of the liquidity management process. The Bank is subject to regulations and, among other things, may be limited in its ability to pay dividends or transfer funds to the parent company. Accordingly, consolidated cash flows as presented in the consolidated statements of cash flows may not represent cash immediately available for the payment of cash dividends to the Company’s shareholders or for other cash needs.

Through the normal course of operations, the Company has entered into certain contractual obligations and other commitments. Such obligations relate to funding operations through deposits or debt issuances, as well as leases for premises and equipment. As a financial services provider, the Company routinely enters into commitments to extend credit. While contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Company. The Company also enters into derivative contracts under which the Company either receives cash from or pays cash to counterparties depending on changes in interest rates. Derivative contracts are carried at fair value on the consolidated balance sheet with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of these contracts changes daily as market interest rates change.

Capital Resources

The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and its bank affiliate must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The banking affiliate’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total, Tier 1, and common equity tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. To be categorized as “well capitalized”, banks must maintain minimum total risk-based (10%), Tier 1 risk-based (8%), common equity tier 1 risk-based (6.5%), and Tier 1 leverage ratios (5%). In addition, the Company must maintain an additional CCB above the regulatory minimum ratio requirements. The CCB is designed to insulate banks from periods of stress and impose constraints on dividends, share repurchases and discretionary bonus payments when capital levels fall below prescribed levels. As of June 30, 2024, and December 31, 2023, the Company and the Bank met all capital adequacy requirements to which they are subject and exceeded the amounts required to be “well capitalized”.

The following table summarizes the Company’s various capital ratios:


	June 30, 2024				December 31, 2023
($ in thousands)	EFSC		Bank		EFSC		Bank		To Be Well-Capitalized		Minimum Ratio with CCB
Common Equity Tier 1 Capital to Risk Weighted Assets	11.7	%	12.4	%	11.3	%	12.2	%	6.5	%	7.0	%
Tier 1 Capital to Risk Weighted Assets	13.0	%	12.4	%	12.7	%	12.2	%	8.0	%	8.5	%
Total Capital to Risk Weighted Assets	14.6	%	13.5	%	14.2	%	13.2	%	10.0	%	10.5	%
Leverage Ratio (Tier 1 Capital to Average Assets)	11.1	%	10.6	%	11.0	%	10.6	%	5.0	%	N/A
Tangible common equity to tangible assets1	9.18	%			8.96	%




1 Not a required regulatory capital ratio.

The Company believes the tangible common equity ratio is an important measure of capital strength, even though it is considered a non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.”

Use of Non-GAAP Financial Measures:

The Company’s accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides additional financial measures, such as tangible common equity, adjusted ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, estimated insured deposits, tangible book value per common share and the tangible common equity ratio, in this report that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.

The Company considers its tangible common equity, adjusted ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, estimated insured deposits, tangible book value per common share and the tangible common equity ratio, collectively “core performance measures,” presented in this report and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as the FDIC special assessment, core conversion expenses, merger-related expenses, facilities charges, and the gain or loss on sale of investment securities, that the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.

The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company’s performance and capital strength. The Company’s management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company’s operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measures for the periods indicated.

Core Efficiency Ratio


	Quarter ended									Six months ended
($ in thousands)	June 30, 2024			March 31, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Net interest income (GAAP)	$	140,529		$	137,728		$	140,692		$	278,257		$	280,221
Tax-equivalent adjustment	2,047			2,040			2,062			4,087			4,103
Net interest income - FTE (non-GAAP)	$	142,576		$	139,768		$	142,754		$	282,344		$	284,324
Noninterest income (GAAP)	15,494			12,158			14,290			27,652			31,188
Less gain on sale of investment securities	—			—			—			—			381
Less gain (loss) on sale of other real estate owned	—			(2)			97			(2)			187
Core revenue (non-GAAP)	$	158,070		$	151,928		$	156,947		$	309,998		$	314,944

Noninterest expense (GAAP)	$	94,017		$	93,501		$	85,956		$	187,518		$	166,939
Less FDIC special assessment	—			625			—			625			—
Less core conversion expense	1,250			350			—			1,600			—
Less amortization on intangibles	944			1,047			1,136			1,991			2,375


Core noninterest expense (non-GAAP)	$	91,823		$	91,479		$	84,820		$	183,302		$	164,564

Core efficiency ratio (non-GAAP)	58.09		%	60.21		%	54.04		%	59.13		%	52.25		%

Tangible Common Equity, Tangible Book Value per Share, and Tangible Common Equity Ratio


(in thousands, except per share data)	June 30, 2024			March 31, 2024			December 31, 2023
Shareholders' equity (GAAP)	$	1,755,273		$	1,731,725		$	1,716,068
Less preferred stock	71,988			71,988			71,988
Less goodwill	365,164			365,164			365,164
Less intangible assets	10,327			11,271			12,318
Tangible common equity (non-GAAP)	$	1,307,794		$	1,283,302		$	1,266,598

Common shares outstanding	37,344			37,515			37,416
Tangible book value per share (non-GAAP)	$	35.02		$	34.21		$	33.85

Total assets (GAAP)	$	14,615,666		$	14,613,338		$	14,518,590
Less goodwill	365,164			365,164			365,164
Less intangible assets	10,327			11,271			12,318
Tangible assets (non-GAAP)	$	14,240,175		$	14,236,903		$	14,141,108

Tangible common equity to tangible assets (non-GAAP)	9.18		%	9.01		%	8.96		%

Return on Average Common Equity and Return on Average Tangible Common Equity (ROATCE)


	Quarter ended									Six months ended
($ in thousands)	June 30, 2024			March 31, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Average shareholder’s equity (GAAP)	$	1,748,240		$	1,738,698		$	1,621,337		$	1,743,469		$	1,595,040
Less average preferred stock	71,988			71,988			71,988			71,988			71,988
Less average goodwill	365,164			365,164			365,164			365,164			365,164
Less average intangible assets	10,783			11,770			15,094			11,277			15,667
Average tangible common equity (non-GAAP)	$	1,300,305		$	1,289,776		$	1,169,091		$	1,295,040		$	1,142,221

Net income available to common shareholders (GAAP)	$	44,509		$	39,463		$	48,190		$	83,972		$	102,990
FDIC special assessment (after tax)	—			470			—			470			—
Core conversion expense (after tax)	940			263			—			1,203			—
Net income available to common shareholders adjusted (non-GAAP)	$	45,449		$	40,196		$	48,190		$	85,645		$	102,990

Return on average common equity (GAAP)	10.68		%	9.52		%	12.48		%	10.10		%	13.64		%
Adjusted return on average common equity (non-GAAP)	10.90		%	9.70		%	12.48		%	10.30		%	13.64		%
ROATCE (non-GAAP)	13.77		%	12.31		%	16.53		%	13.04		%	18.18		%
Adjusted ROATCE (non-GAAP)	14.06		%	12.53		%	16.53		%	13.30		%	18.18		%

Return on Average Assets (ROAA)


	Quarter ended									Six months ended
($ in thousands)	June 30, 2024			March 31, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Net income (GAAP)	$	45,446		$	40,401		$	49,127		$	85,847		$	104,865
FDIC special assessment (after tax)	—			470			—			470			—
Core conversion expense (after tax)	940			263			—			1,203			—
Net income adjusted (non-GAAP)	$	46,386		$	41,134		$	49,127		$	87,520		$	104,865

Average assets	$	14,646,381		$	14,556,119		$	13,671,985		$	14,601,250		$	13,403,084
ROAA (GAAP)	1.25		%	1.12		%	1.44		%	1.18		%	1.58		%
Adjusted ROAA (non-GAAP)	1.27		%	1.14		%	1.44		%	1.21		%	1.58		%

ACL on Loans to Total Loans Adjusted for Guaranteed Loans


	At
($ in thousands)	June 30, 2024			March 31, 2024			June 30, 2023
Total loans (GAAP)	$	11,000,007		$	11,028,492		$	10,512,623
Less: Guaranteed loans, net	923,794			924,633			977,287
Total adjusted loans (non-GAAP)	$	10,076,213		$	10,103,859		$	9,535,336

ACL on loans	$	139,464		$	135,498		$	141,319
ACL on loans to total loans	1.27		%	1.23		%	1.34		%
ACL on loans to total adjusted loans	1.38		%	1.34		%	1.48		%

Pre-Provision Net Revenue (PPNR)


	Quarter ended				Six months ended
($ in thousands)	June 30, 2024		March 31, 2024			June 30, 2023		June 30, 2024		June 30, 2023
Net interest income	$	140,529	$	137,728		$	140,692	$	278,257	$	280,221
Noninterest income	15,494		12,158			14,290		27,652		31,188
FDIC special assessment	—		625			—		625		—
Core conversion expense	1,250		350			—		1,600		—
Less gain on sale of investment securities	—		—			—		—		381
Less gain (loss) on sale of other real estate owned	—		(2)			97		(2)		187
Less noninterest expense	94,017		93,501			85,956		187,518		166,939


PPNR (non-GAAP)	$	63,256	$	57,362		$	68,929	$	120,618	$	143,902

Calculation of Estimated Insured Deposits


	Quarter ended
($ in thousands)	Jun 30, 2024		Mar 31, 2024

Estimated uninsured deposits per Call Report	$	4,020,979	$	4,062,505
Collateralized/affiliate deposits	(454,084)		(515,439)
Accrued interest on deposits	(5,632)		(5,542)
Adjusted uninsured/uncollateralized deposits	3,561,263		3,541,524
Estimated insured/collateralized deposits	8,721,120		8,712,177
Total deposits	$	12,282,383	$	12,253,701

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures set forth in this item are qualified by the cautionary language regarding forward-looking statements in the introduction to Item 2 of Part I of this Quarterly Report on Form 10-Q and other cautionary statements set forth elsewhere in this report.

Interest Rate Risk

Our interest rate risk management practices are aimed at optimizing net interest income, while guarding against deterioration that could be caused by certain interest rate scenarios. Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. We attempt to maintain interest-earning assets, comprised primarily of both loans and investments, and interest-bearing liabilities, comprised primarily of deposits, maturing or repricing in similar time horizons in order to manage any impact from market interest rate changes according to our risk tolerances. The Company uses a simulation model to measure the sensitivity to changing rates on earnings.

The Company determines the sensitivity of its short-term future earnings to a hypothetical plus or minus 100 to 300 basis point parallel rate shock through the use of simulation modeling. The simulation includes the modeling of the balance sheet as an ongoing entity. Future business assumptions involving administered rate products, prepayments for future rate-sensitive balances, and the reinvestment of maturing assets and liabilities are included. These items are then modeled to project net interest income based on a hypothetical change in interest rates. The resulting net interest income for the next 12-month period is compared to the baseline amounts calculated using flat rates. The difference represents the Company’s sensitivity to a positive or negative 100 basis points parallel rate shock.

The following table summarizes the expected impact of interest rate shocks on net interest income at June 30, 2024:


Rate Shock			Annual % change in net interest income
+ 300 bp			11.1%
+ 200 bp			7.5%
+ 100 bp			3.8%
- 100 bp			(3.9)%
- 200 bp			(8.1)%
- 300 bp			(12.4)%

In addition to the rate shocks shown in the table above, the Company models net interest income under various dynamic interest rate scenarios. In general, changes in interest rates are positively correlated with changes in net interest income.

The Company occasionally uses interest rate derivative instruments as an asset/liability management tool to hedge mismatches in interest rate exposure indicated by the net interest income simulation described above. They are used to modify the Company’s exposures to interest rate fluctuations and provide more stable spreads between loan yields and the rate on their funding sources. At June 30, 2024, the Company had derivative contracts to manage interest rate risk, including $350.0 million in notional value on derivatives to hedge the cash flows on floating rate loans and $32.1 million in notional value on derivative on floating rate debt. Derivative financial instruments are also discussed in “Item 1. Note 6 – Derivative Financial Instruments.”

The Financial Conduct Authority has announced that the most common USD LIBOR settings (overnight, 1-month. 3-month, 6-month and 12-month) will cease publication after September 30, 2024. LIBOR was the most liquid and common interest rate index in the world and was commonly referenced in financial instruments. With the cessation of LIBOR, the Company has selected term SOFR as the replacement index for the majority of its variable rate loans and began providing customer notifications in early 2023. The Company ceased using LIBOR and ICE swap rates in new contracts and began issuing SOFR based loans in December 2021.

The Company had $6.7 billion in variable rate loans at June 30, 2024. Of these loans, $4.4 billion have an interest rate floor and nearly all of those loans were at or above the floor. Variable rate loans include $2.8 billion indexed to the prime rate, $3.1 billion indexed to SOFR, and $823.3 million indexed to other rates.

At June 30, 2024, the Company’s available-for-sale and held-to-maturity investment securities totaled $1.6 billion and $772.6 million, respectively. These portfolios consist primarily of fixed-rate securities that are subject to changes in market value due to changes in interest rates. At June 30, 2024, net unrealized losses were $172.7 million and $69.4 million on the available-for-sale and held-to-maturity investment portfolios, respectively.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15, as of June 30, 2024. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, the CEO and CFO concluded the Company’s disclosure controls and procedures were effective as of June 30, 2024 to provide reasonable assurance of the achievement of the objectives described above.

Changes to Internal Controls

There were no changes during the period covered by this Quarterly Report on Form 10-Q in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, those controls.

PART II - OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Management believes there are no such legal proceedings pending or threatened against the Company or its subsidiaries in the ordinary course of business, directly, indirectly, or in the aggregate that, if determined

adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.

ITEM 1A: RISK FACTORS

For information regarding risk factors affecting the Company, please see the cautionary language regarding forward-looking statements in the introduction to Item 2 of Part I of this Quarterly Report on Form 10-Q, and Part I, Item 1A of our Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes to the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



Period	Total number of shares purchased (a)	Weighted-average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
April 1, 2024 through April 30, 2024	36,214	$	37.89	36,214	1,963,786
May 1, 2024 through May 31, 2024	29,323	38.00		29,323	1,934,463
June 1, 2024 through June 30, 2024	159,598	38.13		159,598	1,774,865
Total	225,135	$	38.07	225,135	1,774,865

(a) In May 2022, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock. The repurchases may be made from time to time in the open market or through privately negotiated transactions.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

During the quarter ended June 30, 2024, no officer or director of the company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of the company’s common stock that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement as defined in 17 CFR § 229.408(c).

ITEM 6: EXHIBITS

Exhibit No. Description

3.1 Certificate of Incorporation of Registrant, (incorporated herein by reference to Exhibit 3.1 of Registrant's Registration Statement on Form S-1 filed on December 16, 1996 (File No. 333-14737)).

3.2 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 4.2 to Registrant's Registration Statement on Form S-8 filed on July 1, 1999 (File No. 333-82087)).

3.3 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the period ending September 30, 1999 (File No. 001-15373)).

3.4 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 99.2 to Registrant's Current Report on Form 8-K filed on April 30, 2002 (File No. 001-15373)).

3.5 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Appendix A to Registrant's Proxy Statement on Form 14-A filed on November 20, 2008 (File No. 001-15373)).

3.6 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the period ending June 30, 2014 (File No. 001-15373)).

3.7 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 3.8 to Registrant’s Quarterly Report on Form 10-Q filed on July 26, 2019 (File No. 001-15373)).

3.8 Amendment to Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 3.9 to Registrant's Quarterly Report on Form 10-Q filed on July 30, 2021 (File No. 001-15373)).

3.9 Certificate of Designations of Registrant for Fixed Rate Cumulative Perpetual Preferred Stock, Series A, dated December 17, 2008 (incorporated herein by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed on December 23, 2008 (File No. 001-15373)).

3.10 Certificate of Elimination of Registrant’s Certificate of Designation, Preferences, and Rights of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, dated November 9, 2021 (incorporated herein by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on November 9, 2021 (File No. 001-15373)).

3.11 Certificate of Designation of Registrant of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, dated November 16, 2021 (incorporated herein by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on November 17, 2021 (File No. 001-15373)).

3.12 Amended and Restated Bylaws of Registrant (incorporated herein by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed on June 12, 2015 (File No. 001-15373)).

4.1 Long-term borrowing instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company undertakes to furnish copies of such instruments to the Securities and Exchange Commission upon request.

*31.1 Chief Executive Officer’s Certification required by Rule 13(a)-14(a).

*31.2 Chief Financial Officer’s Certification required by Rule 13(a)-14(a).

**32.1 Chief Executive Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002.

**32.2 Chief Financial Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase Document.

104 The cover page of Enterprise Financial Services Corp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline XBRL (contained in Exhibit 101).

* Filed herewith

** Furnished herewith. Notwithstanding any incorporation of this Quarterly Statement on Form 10-Q in any other filing by the Registrant, Exhibits furnished herewith and designated with two (**) shall not be deemed incorporated by reference to any other filing unless specifically otherwise set forth herein or therein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri, on the day of July 26, 2024.


			ENTERPRISE FINANCIAL SERVICES CORP

			By:			/s/ James B. Lally
						James B. Lally
						Chief Executive Officer

			By:			/s/ Keene S. Turner
						Keene S. Turner
						Chief Financial Officer