EFSC 10-Q Quarterly Report Sept. 30, 2024

ENTERPRISE FINANCIAL SERVICES CORP

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efsc-20240930

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 September 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 October 30, 2024, the Registrant had 37,127,800 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						58

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

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)	September 30, 2024		December 31, 2023
Assets
Cash and due from banks	$	210,984	$	193,275
Federal funds sold	2,533		2,880
Interest-earning deposits	212,863		236,874
Total cash and cash equivalents	426,380		433,029
Interest-earning deposits greater than 90 days	3,523		3,856
Securities available-for-sale	1,786,793		1,618,273
Securities held-to-maturity, net	851,647		750,434
Loans held-for-sale	304		359
Loans	11,079,892		10,884,118
Allowance for credit losses on loans	( 139,778 )		( 134,771 )
Total loans, net	10,940,114		10,749,347


Other investments	75,754		66,195
Fixed assets, net	44,368		42,681




Goodwill	365,164		365,164
Intangible assets, net	9,400		12,318

Other assets	450,678		476,934
Total assets	$	14,954,125	$	14,518,590

Liabilities and Shareholders' Equity
Noninterest-bearing demand accounts	$	3,934,245	$	3,958,743
Interest-bearing demand accounts	3,048,981		2,950,259
Money market accounts	3,568,476		3,399,280
Savings accounts	553,067		595,175
Certificates of deposit:
Brokered	480,934		482,759
Customer	879,619		790,155
Total deposits	12,465,322		12,176,371
Subordinated debentures and notes	156,407		155,984
FHLB advances	150,000		—
Other borrowings	170,815		297,829



Other liabilities	179,570		172,338
Total liabilities	$	13,122,114	$	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 liquida tion preference)	71,988		71,988
Common stock, $ 0.01 par value; 75,000,000 shares authorized; 37,183,784 and 37,416,028 shares issued and outstanding	372		374

Additional paid in capital	992,642		995,208
Retained earnings	845,844		749,513
Accumulated other comprehensive loss, net	( 78,835 )		( 101,015 )
Total shareholders' equity	1,832,011		1,716,068
Total liabilities and shareholders' equity	$	14,954,125	$	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 September 30,				Nine months ended September 30,
($ in thousands, except per share data)	2024		2023		2024		2023
Interest income:
Loans	$	191,505	$	180,241	$	567,280	$	503,006
Debt securities:
Taxable	13,067		10,141		36,251		29,046
Nontaxable	5,921		5,700		17,484		16,956

Interest-earning deposits	5,348		4,509		13,306		7,799
Dividends on equity securities	463		315		1,350		1,029
Total interest income	216,304		200,906		635,671		557,836
Interest expense:




Deposits	68,768		55,354		199,615		121,387
Subordinated debentures and notes	2,695		2,466		7,863		7,306
FHLB advances	59		141		1,649		2,752
Other borrowings	1,313		1,306		4,818		4,531
Total interest expense	72,835		59,267		213,945		135,976
Net interest income	143,469		141,639		421,726		421,860
Provision for credit losses	4,099		8,030		14,674		18,552
Net interest income after provision for credit losses	139,370		133,609		407,052		403,308
Noninterest income:
Deposit service charges	4,649		4,187		13,614		12,225
Wealth management revenue	2,599		2,614		7,733		7,602
Card services revenue	2,573		2,560		7,482		7,362


Tax credit income (loss)	3,252		( 2,673 )		2,936		( 492 )


Other income	8,347		5,397		17,307		16,576
Total noninterest income	21,420		12,085		49,072		43,273
Noninterest expense:
Employee compensation and benefits	45,359		40,771		135,145		124,915
Deposit costs	23,781		20,987		65,764		50,687
Occupancy	4,372		4,198		12,895		12,213
Data processing	5,548		3,830		15,226		11,201
Professional fees	1,595		1,407		4,328		4,604




Other expense	17,352		17,451		52,167		51,963
Total noninterest expense	98,007		88,644		285,525		255,583

Income before income tax expense	62,783		57,050		170,599		190,998
Income tax expense	12,198		12,385		34,167		41,468
Net income	$	50,585	$	44,665	$	136,432	$	149,530
Dividends on preferred stock	938		938		2,813		2,813
Net income available to common shareholders	$	49,647	$	43,727	$	133,619	$	146,717

Earnings per common share
Basic	$	1.33	$	1.17	$	3.57	$	3.93
Diluted	1.32		1.17		3.56		3.91

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 September 30,				Nine months ended September 30,
($ in thousands)	2024		2023		2024		2023
Net income	$	50,585	$	44,665	$	136,432	$	149,530
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on available-for-sale securities	38,033		( 41,257 )		21,585		( 30,956 )
Reclassification of gain on the sale of available-for-sale securities	—		—		—		( 285 )
Reclassification of gain on held-to-maturity securities	( 619 )		( 647 )		( 1,864 )		( 1,971 )
Change in unrealized gain (loss) on cash flow hedges	5,492		( 2,684 )		1,375		( 4,747 )
Reclassification of loss on cash flow hedges	398		224		1,084		462
Total other comprehensive income (loss), net of tax	43,304		( 44,364 )		22,180		( 37,497 )
Total comprehensive income	$	93,889	$	301	$	158,612	$	112,033

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 nine months ended September 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 June 30, 2024	75	$	71,988	37,344	$	373	$	994,116	$	810,935	$	( 122,139 )	$	1,755,273
Net income	—	—		—	—		—		50,585		—		50,585





Other comprehensive income	—	—		—	—		—		—		43,304		43,304
Common stock dividends ($ 0.27 per share)	—	—		—	—		—		( 10,065 )		—		( 10,065 )
Preferred stock dividends ($ 12.50 per share)	—	—		—	—		—		( 938 )		—		( 938 )


Repurchase of common stock	—	—		( 195 )	( 2 )		( 5,239 )		( 4,548 )		—		( 9,789 )
Issuance under equity compensation plans, net	—	—		35	1		1,201		( 125 )		—		1,077


Share-based compensation	—	—		—	—		2,564		—		—		2,564




Balance at September 30, 2024	75	$	71,988	37,184	$	372	$	992,642	$	845,844	$	( 78,835 )	$	1,832,011

Balance at December 31, 2023	75	$	71,988	37,416	$	374	$	995,208	$	749,513	$	( 101,015 )	$	1,716,068
Net income	—	—		—	—		—		136,432		—		136,432
Other comprehensive income	—	—		—	—		—		—		22,180		22,180
Common stock dividends ($ 0.78 per share)	—	—		—	—		—		( 29,171 )		—		( 29,171 )
Preferred stock dividends ($ 37.50 per share)	—	—		—	—		—		( 2,813 )		—		( 2,813 )
Repurchase of common stock	—	—		( 420 )	( 4 )		( 11,233 )		( 7,148 )		—		( 18,385 )
Issuance under equity compensation plans, net	—	—		188	2		1,089		( 969 )		—		122
Share-based compensation	—	—		—	—		7,578		—		—		7,578
Balance at September 30, 2024	75	$	71,988	37,184	$	372	$	992,642	$	845,844	$	( 78,835 )	$	1,832,011


Three and nine months ended, September 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 June 30, 2023	75	$	71,988	37,359	$	374	$	988,355	$	680,981	$	( 123,465 )	$	1,618,233
Net income	—	—		—	—		—		44,665		—		44,665




Other comprehensive loss	—	—		—	—		—		—		( 44,364 )		( 44,364 )
Common stock dividends ($ 0.25 per share)	—	—		—	—		—		( 9,346 )		—		( 9,346 )
Preferred stock dividends ($ 12.50 per share)	—	—		—	—		—		( 938 )		—		( 938 )



Issuance under equity compensation plans, net	—	—		26	—		1,014		( 59 )		—		955


Share-based compensation	—	—		—	—		2,675		—		—		2,675



Balance at September 30, 2023	75	$	71,988	37,385	$	374	$	992,044	$	715,303	$	( 167,829 )	$	1,611,880

Balance at December 31, 2022	75	$	71,988	37,253	$	373	$	982,660	$	597,574	$	( 130,332 )	$	1,522,263
Net income	—	—		—	—		—		149,530		—		149,530
Other comprehensive loss	—	—		—	—		—		—		( 37,497 )		( 37,497 )
Common stock dividends ($ 0.75 per share)	—	—		—	—		—		( 28,014 )		—		( 28,014 )
Preferred stock dividends ($ 37.50 per share)	—	—		—	—		—		( 2,813 )		—		( 2,813 )
Issuance under equity compensation plans, net	—	—		132	1		1,575		( 974 )		—		602
Share-based compensation	—	—		—	—		7,809		—		—		7,809
Balance at September 30, 2023	75	$	71,988	37,385	$	374	$	992,044	$	715,303	$	( 167,829 )	$	1,611,880

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)


	Nine months ended September 30,
($ in thousands)	2024		2023
Cash flows from operating activities:
Net income	$	136,432	$	149,530
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	3,906		3,818
Provision for credit losses	14,674		18,552
Deferred income taxes	1,975		( 103 )
Net amortization of discount/premiums on debt securities	3,109		2,996
Net amortization on loan discount/premiums	1,386		3,819
Amortization of intangible assets	2,918		3,493
Amortization of servicing assets	881		1,307
Mortgage loans originated-for-sale	( 18,292 )		( 14,560 )
Proceeds from mortgage loans sold	18,451		15,648
Net loss (gain) on:
Sale of investment securities	—		( 381 )
Sale of SBA loans	( 1,415 )		( 2,015 )
Sale of other real estate	( 3,157 )		( 187 )
Sale of fixed assets	—		10
Sale of state tax credits	( 768 )		( 215 )


Share-based compensation	7,578		7,809




Net change in other assets and liabilities	27,745		( 269 )







Net cash provided by operating activities	195,423		189,252
Cash flows from investing activities:

Net increase in loans	( 238,646 )		( 943,905 )


Proceeds received from:
Sale of debt securities, available-for-sale	—		28,741
Paydown or maturity of debt securities, available-for-sale	185,167		171,923
Paydown or maturity of debt securities, held-to-maturity	4,583		5,086
Redemption of other investments	55,791		88,863
Sale of SBA loans	25,090		44,975
Sale of state tax credits held for sale	4,317		1,225
Sale of other real estate	11,017		457
Sale of fixed assets	—		83

Payments for the purchase of:
Available-for-sale debt securities	( 325,665 )		( 198,962 )
Held-to-maturity debt securities	( 110,172 )		( 30,893 )
Other investments	( 66,841 )		( 84,023 )

State tax credits held for sale	( 2,810 )		( 75 )
Fixed assets	( 5,594 )		( 2,193 )
Net cash used in investing activities	( 463,763 )		( 918,698 )


	Nine months ended September 30,
($ in thousands)	2024		2023
Cash flows from financing activities:
Net decrease in noninterest-bearing deposit accounts	( 24,498 )		( 790,246 )
Net increase in interest-bearing deposit accounts	313,449		1,871,003
Net increase (decrease) in FHLB advances	150,000		( 100,000 )



Repayments of notes payable	( 11,429 )		( 4,286 )




Net decrease in other borrowings	( 115,586 )		( 137,461 )




Repurchase of common stock	( 18,385 )		—
Cash dividends paid on common stock	( 29,171 )		( 28,014 )
Cash dividends paid on preferred stock	( 2,813 )		( 2,813 )
Other	124		602



Net cash provided by financing activities	261,691		808,785
Net increase (decrease) in cash and cash equivalents	( 6,649 )		79,339
Cash and cash equivalents, beginning of period	433,029		291,359
Cash and cash equivalents, end of period	$	426,380	$	370,698
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	214,819	$	129,205
Income taxes	27,192		34,013
Noncash investing and financing transactions:
Transfer to other bank owned assets	6,659		6,933

Right-of-use assets obtained in exchange for lease obligations	1,387		6,001
Transfer to securities available-for-sale in settlement of loans	10,448		—

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 nine months ended September 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 September 30,				Nine months ended September 30,
(in thousands, except per share data)	2024		2023		2024		2023
Net income available to common shareholders	$	49,647	$	43,727	$	133,619	$	146,717








Weighted average common shares outstanding	37,337		37,405		37,437		37,353

Additional dilutive common stock equivalents	146		115		110		140
Weighted average diluted common shares outstanding	37,483		37,520		37,547		37,493

Basic earnings per common share:	$	1.33	$	1.17	$	3.57	$	3.93
Diluted earnings per common share:	1.32		1.17		3.56		3.91

For the three and nine months ended September 30, 2024, common stock equivalents of approximately 441,000 and 572,000 , respectively, were excluded from the earnings per share calculations because their effect would have been anti-dilutive. Comparatively, there were 440,000 and 430,000 common stock equivalents excluded in the three and nine months ended September 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:


	September 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	$	311,531	$	639	$	( 12,496 )	$	299,674
Obligations of states and political subdivisions	493,704		70		( 69,597 )		424,177
Agency mortgage-backed securities	921,704		4,672		( 43,707 )		882,669
U.S. Treasury bills	160,814		70		( 1,189 )		159,695
Corporate debt securities	21,198		—		( 620 )		20,578
Total securities available for sale	$	1,908,951	$	5,451	$	( 127,609 )	$	1,786,793
Held-to-maturity securities:

Obligations of states and political subdivisions	$	680,211	$	7,942	$	( 44,954 )	$	643,199
Agency mortgage-backed securities	49,168		—		( 3,868 )		45,300
Corporate debt securities	122,521		256		( 5,727 )		117,050
Total securities held-to-maturity	$	851,900	$	8,198	$	( 54,549 )	$	805,549
Allowance for credit losses	( 253 )
Total securities held-to-maturity, net	$	851,647


	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 $ 11.7 million and $ 14.1 million at September 30, 2024 and December 31, 2023, respectively. Such amounts are amortized over the remaining life of the securities.

At September 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 September 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 September 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	$	152,459	$	151,840	$	5,307	$	5,256
Due after one year through five years	283,921		273,695		124,724		119,447
Due after five years through ten years	200,448		179,565		184,490		182,739
Due after ten years	350,419		299,024		488,211		452,807
Agency mortgage-backed securities	921,704		882,669		49,168		45,300

	$	1,908,951	$	1,786,793	$	851,900	$	805,549

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


	September 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	$	999	$	1	$	250,613	$	12,495	$	251,612	$	12,496
Obligations of states and political subdivisions	3,338		100		418,471		69,497		421,809		$	69,597
Agency mortgage-backed securities	42,873		180		509,144		43,527		552,017		$	43,707
U.S. Treasury bills	—		—		83,626		1,189		83,626		$	1,189
Corporate debt securities	—		—		8,130		620		8,130		$	620
	$	47,210	$	281	$	1,269,984	$	127,328	$	1,317,194	$	127,609


	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 September 30, 2024 and December 31, 2023 were attributable primarily to changes in market interest rates after the securities were purchased. At each of September 30, 2024 and December 31, 2023, the Company did no t have an allowance for credit losses on available-for-sale securities.

Accrued interest on held-to-maturity debt securities totaled $ 7.8 million and $ 6.5 million at September 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 September 30, 2024 and $ 0.8 million at December 31, 2023.

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

Other Investments

At September 30, 2024 and December 31, 2023, other investments totaled $ 75.8 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 $ 15.5 million at September 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)	September 30, 2024		December 31, 2023
Commercial and industrial	$	4,631,613	$	4,674,056
Real estate:
Commercial - investor owned	2,526,696		2,452,402
Commercial - owner occupied	2,381,636		2,344,117
Construction and land development	896,768		760,122
Residential	354,888		371,995
Total real estate loans	6,159,988		5,928,636
Other	290,052		285,653
Loans, before unearned loan fees	11,081,653		10,888,345
Unearned loan fees, net	( 1,761 )		( 4,227 )
Loans, including unearned loan fees	$	11,079,892	$	10,884,118

The loan balance includes a net premium on acquired loans of $ 8.5 million and $ 9.6 million at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024 and December 31, 2023, loans and securities of $ 5.5 billion and $ 4.8 billion, respectively, were pledged to the FHLB and the Federal Reserve Bank.

Accrued interest totaled $ 52.5 million and $ 66.7 million at September 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 nine months ended September 30, 2024 totaled $ 23.1 million, resulting in a gain on sale of $ 1.4 million. SBA 7(a) guaranteed loans sold during the three and nine months ended September 30, 2023 totaled $ 33.3 million and $ 42.1 million, respectively. A gain on sale of $ 1.5 million and $ 2.0 million was recognized for the three and nine months ended September 30, 2023, respectively. There were no SBA 7(a) guaranteed loans sold in the three months ended September 30, 2024.

No consumer mortgage loans secured by residential real estate were in the process of foreclosure at September 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 nine months ended September 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 June 30, 2024	$	61,478	$	31,903	$	24,316	$	11,504	$	5,588	$	4,675	$	139,464
Provision (benefit) for credit losses	2,360		1,050		( 935 )		1,766		266		( 343 )		4,164
Charge-offs	( 440 )		—		( 906 )		( 3,224 )		( 19 )		( 184 )		( 4,773 )
Recoveries	662		30		25		21		140		45		923
Balance at September 30, 2024	$	64,060	$	32,983	$	22,500	$	10,067	$	5,975	$	4,193	$	139,778



($ 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	9,146		1,914		1,818		3,042		( 415 )		( 179 )		15,326
Charge-offs	( 6,349 )		( 305 )		( 2,773 )		( 3,224 )		( 760 )		( 725 )		( 14,136 )
Recoveries	2,377		94		50		51		1,008		237		3,817
Balance at September 30, 2024	$	64,060	$	32,983	$	22,500	$	10,067	$	5,975	$	4,193	$	139,778


($ 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 June 30, 2023	$	60,318	$	33,876	$	22,700	$	12,795	$	7,421	$	4,209	$	141,319
Provision (benefit) for credit losses	3,914		2,851		2,705		( 1,662 )		( 939 )		801		7,670
Charge-offs	( 2,794 )		( 4,692 )		—		—		( 131 )		( 686 )		( 8,303 )
Recoveries	1,038		27		28		14		271		69		1,447
Balance at September 30, 2023	$	62,476	$	32,062	$	25,433	$	11,147	$	6,622	$	4,393	$	142,133



($ 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	12,854		653		2,564		( 342 )		( 1,472 )		509		14,766
Charge-offs	( 6,790 )		( 4,869 )		—		( 9 )		( 654 )		( 1,129 )		( 13,451 )
Recoveries	2,577		87		117		54		820		231		3,886
Balance at September 30, 2023	$	62,476	$	32,062	$	25,433	$	11,147	$	6,622	$	4,393	$	142,133

The ACL on sponsor finance loans, which is included in the categories above, represented $ 23.0 million at both September 30, 2024 and December 31, 2023, respectively.

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 $ 14.5 million to the ACL on loans over the baseline model at September 30, 2024. The baseline forecast incorporates an expectation that the federal funds rate will continue to fall in the last quarter 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 September 30, 2024, the ACL on loans included a qualitative adjustment of approximately $ 49.1 million. Of this amount, approximately $ 16.1 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:


	September 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	$	312	$	2	$	1,414	$	35	$	66	$	767	$	—	$	3,589	$	6,185
Real estate:
Commercial - investor owned	—		—		—		160		—		145		—		—		305
Commercial - owner occupied	—		—		41		475		10		2,262		—		—		2,788
Construction and land development	—		—		—		—		3,224		—		—		—		3,224
Residential	—		—		94		15		—		425		202		24		760
Other	—		—		—		58		—		79		101		1		239
Total charge-offs by origination year	$	312	$	2	$	1,549	$	743	$	3,300	$	3,678	$	303	$	3,614	$	13,501
Total gross charge-offs by performing status																	635
Total gross charge-offs																	$	14,136


	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:


	September 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	$	6,648	$	227	$	6,875	$	296
Real estate:
Commercial - investor owned	14,284		—		14,284		—
Commercial - owner occupied	6,432		—		6,432		4,577
Construction and land development	527		—		527		527
Residential	258		—		258		—

Total	$	28,149	$	227	$	28,376	$	5,400


	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 September 30, 2024 and December 31, 2023 exclude government guaranteed balances of $ 11.9 million and $ 10.7 million respectively.

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

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


	September 30, 2024
	Type of Collateral
($ in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien		Other
Commercial and industrial	$	296	$	—	$	—	$	3,733
Real estate:
Commercial - investor owned	14,284		—		—		—
Commercial - owner occupied	3,715		482		736		—


Total	$	18,295	$	482	$	736	$	3,733


	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.


	September 30, 2024
($ in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	8,262	$	2,452	$	10,714	$	4,620,899	$	4,631,613
Real estate:
Commercial - investor owned	273		14,284		14,557		2,512,139		2,526,696
Commercial - owner occupied	16,310		9,397		25,707		2,355,929		2,381,636
Construction and land development	—		1,907		1,907		894,861		896,768
Residential	6,594		258		6,852		348,036		354,888
Other	—		—		—		290,052		290,052
Loans, before unearned loan fees	$	31,439	$	28,298	$	59,737	$	11,021,916	$	11,081,653
Unearned loan fees, net									( 1,761 )
Total									$	11,079,892


	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)	September 30, 2024		Percent of Total Loan Class
Commercial and industrial	$	9,996	0.22	%
Real estate:
Commercial - investor owned	258		0.01	%




Total	$	10,254












	Term Extension				Payment Delay				Total
	Nine months ended				Nine months ended				Nine months ended
($ in thousands)	September 30, 2024		Percent of Total Loan Class		September 30, 2024		Percent of Total Loan Class		September 30, 2024		Percent of Total Loan Class
Commercial and industrial	$	60,256	1.30	%	$	567	0.01	%	$	60,823	1.31	%
Real estate:
Commercial - investor owned	8,667		0.34	%	—		—	%	8,667		0.34	%
Commercial - owner occupied	94		NM		—		—	%	94		NM

Residential	7,644		2.15	%	—		—	%	7,644		2.15	%

Total	$	76,661			$	567			$	77,228












	Term Extension
	Three months ended				Nine months ended
($ in thousands)	September 30, 2023		Percent of Total Loan Class		September 30, 2023		Percent of Total Loan Class
Commercial and industrial	$	66	—	%	$	26,033	0.59	%
Real estate:
Commercial - investor owned	1,000		0.04	%	1,000		0.04	%
Commercial - owner occupied	—		—	%	94		—	%
Construction and land development	—		—	%	1,137		0.16	%
Residential	28		0.01	%	102		0.03	%
Total	$	1,094			$	28,366

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	Nine months ended
($ in thousands)	September 30, 2024		September 30, 2024
Commercial and industrial	7		5	$	85
Real estate:
Commercial - investor owned	—		4	—
Commercial - owner occupied	12		3	—

Residential	—		12	—


	Weighted Average Term Extension (in months)
	Three months ended	Nine months ended
	September 30, 2023	September 30, 2023
Commercial and industrial	4	9
Real estate:
Commercial - investor owned	3	3
Commercial - owner occupied	—	5
Construction and land development	—	10
Residential	60	22

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


	September 30, 2024
($ in thousands)	Current		30-89 Days Past Due		90 or More Days Past Due		Total
Commercial and industrial	$	52,488	$	—	$	—	$	52,488
Real estate:
Commercial - investor owned	259		—		—		259
Commercial - owner occupied	—		92		—		92

Residential	70		70		—		140

Total	$	52,817	$	162	$	—	$	52,979


	September 30, 2023
($ in thousands)	Current		30-89 Days Past Due		90 or More Days Past Due		Total
Commercial and industrial	$	25,483	$	550	$	—	$	26,033
Real estate:
Commercial - investor owned	—		1,000		—		1,000
Commercial - owner occupied	94		—		—		94
Construction and land development	741		396		—		1,137
Residential	102		—		—		102

Total	$	26,420	$	1,946	$	—	$	28,366

The following table summarizes loans that experienced a default during the nine months ended September 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 September 30, 2024 or September 30, 2023, subsequent to being granted a modification in the preceding twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off.


		Term Extension
	Nine months ended
($ in thousands)		September 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 September 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:


	September 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)	$	1,082,070	$	1,097,726	$	680,423	$	201,756	$	137,028	$	81,666	$	18,343	$	1,022,691	$	4,321,703
Special Mention (7)	34,554		49,464		10,172		2,247		959		676		689		77,906		176,667
Classified (8-9)	20,350		3,565		24,641		—		93		265		3,818		44,109		96,841
Total Commercial and industrial	$	1,136,974	$	1,150,755	$	715,236	$	204,003	$	138,080	$	82,607	$	22,850	$	1,144,706	$	4,595,211

Commercial real estate-investor owned
Pass (1-6)	$	356,106	$	447,856	$	496,385	$	445,628	$	283,675	$	307,900	$	7,301	$	49,160	$	2,394,011
Special Mention (7)	762		4,552		12,488		65,821		2,051		8,573		—		1,998		96,245
Classified (8-9)	259		—		273		42		13,158		4,653		—		—		18,385
Total Commercial real estate-investor owned	$	357,127	$	452,408	$	509,146	$	511,491	$	298,884	$	321,126	$	7,301	$	51,158	$	2,508,641

Commercial real estate-owner occupied
Pass (1-6)	$	333,337	$	356,368	$	448,514	$	421,894	$	254,424	$	389,046	$	6,100	$	29,814	$	2,239,497
Special Mention (7)	9,660		9,792		3,931		14,196		8,961		18,482		—		—		65,022
Classified (8-9)	—		3,019		4,803		5,729		3,953		37,019		828		1,708		57,059
Total Commercial real estate-owner occupied	$	342,997	$	369,179	$	457,248	$	441,819	$	267,338	$	444,547	$	6,928	$	31,522	$	2,361,578

Construction real estate
Pass (1-6)	$	304,590	$	239,275	$	220,377	$	79,666	$	30,526	$	3,920	$	6	$	4,645	$	883,005
Special Mention (7)	10,486		35		1,093		297		—		226		—		—		12,137
Classified (8-9)	—		—		600		—		—		583		—		—		1,183
Total Construction real estate	$	315,076	$	239,310	$	222,070	$	79,963	$	30,526	$	4,729	$	6	$	4,645	$	896,325

Residential real estate
Pass (1-6)	$	28,158	$	49,246	$	36,088	$	41,609	$	28,738	$	83,305	$	2,171	$	79,021	$	348,336
Special Mention (7)	1,399		41		607		—		67		1,547		149		585		4,395
Classified (8-9)	—		91		109		—		—		1,623		71		—		1,894
Total residential real estate	$	29,557	$	49,378	$	36,804	$	41,609	$	28,805	$	86,475	$	2,391	$	79,606	$	354,625

Other
Pass (1-6)	$	25,386	$	6,514	$	54,482	$	60,313	$	50,988	$	32,456	$	5	$	42,474	$	272,618
Special Mention (7)	—		3,023		—		—		—		1,799		—		7,377		12,199
Classified (8-9)	—		—		—		—		—		5		—		—		5
Total Other	$	25,386	$	9,537	$	54,482	$	60,313	$	50,988	$	34,260	$	5	$	49,851	$	284,822

Total loans classified by risk category	$	2,207,117	$	2,270,567	$	1,994,986	$	1,339,198	$	814,621	$	973,744	$	39,481	$	1,361,488	$	11,001,202
Total loans classified by performing status																	78,690
Total loans																	$	11,079,892


	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:


	September 30, 2024
($ in thousands)	Performing		Non Performing		Total
Commercial and industrial	$	33,051	$	226	$	33,277
Real estate:
Commercial - investor owned	17,352		—		17,352
Commercial - owner occupied	27,605		—		27,605

Residential	654		—		654
Other	( 198 )		—		( 198 )
Total	$	78,464	$	226	$	78,690


	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)	September 30, 2024		December 31, 2023
Commitments to extend credit	$	2,733,949	$	2,937,760
Letters of credit	126,842		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 September 30, 2024 and December 31, 2023, $ 169.2 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 $ 5.7 million and $ 6.6 million for estimated losses attributable to the unadvanced commitments at September 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 September 30, 2024, the approximate remaining terms of standby letters of credit range from 1 month to 4 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 $ 0.5 million will be reclassified as a decrease to interest expense and $ 0.2 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)	September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023
Derivatives designated as hedging instruments
Interest rate swaps	$	282,064	$	211,962	$	4,283	$	1,389	$	—	$	233
Interest rate collar	100,000		100,000		657		514		—		—
Total	$	382,064	$	311,962	$	4,940	$	1,903	$	—	$	233

Derivatives not designated as hedging instruments
Interest rate swaps	$	750,241	$	779,152	$	11,637	$	15,886	$	11,640	$	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 September 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	$	15,920	$	—	$	15,920	$	1,969	$	13,080	$	872
Interest rate collar	657		—		657		—		—		657

Liabilities:
Interest rate swaps	$	11,640	$	—	$	11,640	$	1,969	$	—	$	9,671
Interest rate collar	—		—		—		—		—		—
Securities sold under agreements to repurchase	134,612		—		134,612		—		134,612		—

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 September 30, 2024, the fair value of derivatives in a net liability position, which includes accrued interest, was $ 10.2 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:


	September 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	$	—	$	299,674	$	—	$	299,674
Obligations of states and political subdivisions	—		424,177		—		424,177
Agency mortgage-backed securities	—		882,669		—		882,669
Corporate debt securities	—		20,578		—		20,578
U.S. Treasury bills	—		159,695		—		159,695
Total securities available for sale	—		1,786,793		—		1,786,793

Other investments	—		3,049		—		3,049

Derivatives	—		16,577		—		16,577
Total assets	$	—	$	1,806,419	$	—	$	1,806,419

Liabilities
Derivatives	$	—	$	11,640	$	—	$	11,640
Total liabilities	$	—	$	11,640	$	—	$	11,640


	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.




	September 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	$	10,816	$	—	$	—	$	10,816
Other real estate	4,516		—		—		4,516

Total	$	15,332	$	—	$	—	$	15,332


	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:


	September 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	$	851,647	$	805,549	Level 2	$	750,434	$	696,647	Level 2
Other investments	72,705		72,705		Level 2	63,255		63,255		Level 2
Loans held-for-sale	304		304		Level 2	359		359		Level 2

Loans, net	10,940,114		10,616,466		Level 3	10,749,347		10,392,551		Level 3
State tax credits, held-for-sale	21,204		23,057		Level 3	22,115		23,897		Level 3

Servicing asset	2,466		3,710		Level 2	2,861		3,799		Level 2

Balance sheet liabilities
Certificates of deposit	$	1,360,553	$	1,355,848	Level 3	$	1,272,914	$	1,265,905	Level 3
Subordinated debentures and notes	156,407		154,969		Level 2	155,984		154,354		Level 2
FHLB advances	150,000		150,000		Level 2	—		—		Level 2
Other borrowings	170,815		148,461		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, June 30, 2024	$	( 129,292 )	$	9,335	$	( 2,182 )	$	( 122,139 )
Net change	38,033		( 619 )		5,890		43,304

Balance, September 30, 2024	$	( 91,259 )	$	8,716	$	3,708	$	( 78,835 )

Balance, June 30, 2023	$	( 134,533 )	$	11,861	$	( 793 )	$	( 123,465 )
Net change	( 41,257 )		( 647 )		( 2,460 )		( 44,364 )

Balance, September 30, 2023	$	( 175,790 )	$	11,214	$	( 3,253 )	$	( 167,829 )

Nine 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	21,585		( 1,864 )		2,459		22,180

Balance, September 30, 2024	$	( 91,259 )	$	8,716	$	3,708	$	( 78,835 )

Balance, December 31, 2022	$	( 144,549 )	$	13,185	$	1,032	$	( 130,332 )
Net change	( 31,241 )		( 1,971 )		( 4,285 )		( 37,497 )

Balance, September 30, 2023	$	( 175,790 )	$	11,214	$	( 3,253 )	$	( 167,829 )

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


	Three months ended September 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	$	50,576	$	12,543	$	38,033	$	( 55,156 )	$	( 13,899 )	$	( 41,257 )

Reclassification of gain on held-to-maturity securities (a)	( 823 )		( 204 )		( 619 )		( 865 )		( 218 )		( 647 )
Change in unrealized gain (loss) on cash flow hedges	7,303		1,811		5,492		( 3,588 )		( 904 )		( 2,684 )
Reclassification of loss on cash flow hedges (b)	529		131		398		299		75		224
Total other comprehensive loss	$	57,585	$	14,281	$	43,304	$	( 59,310 )	$	( 14,946 )	$	( 44,364 )

	Nine months ended September 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	$	28,703	$	7,118	$	21,585	$	( 41,385 )	$	( 10,429 )	$	( 30,956 )
Reclassification of gain on sale of available-for-sale securities (a)	—		—		—		( 381 )		( 96 )		( 285 )
Reclassification of gain on held-to-maturity securities (a)	( 2,479 )		( 615 )		( 1,864 )		( 2,635 )		( 664 )		( 1,971 )
Change in unrealized loss on cash flow hedges	1,828		453		1,375		( 6,346 )		( 1,599 )		( 4,747 )
Reclassification of loss on cash flow hedges (b)	1,441		357		1,084		616		154		462
Total other comprehensive gain (loss)	$	29,493	$	7,313	$	22,180	$	( 50,131 )	$	( 12,634 )	$	( 37,497 )

(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, including items that exceed one percent of the aggregate of total interest income and noninterest income in one or more of the periods indicated:


	Three months ended September 30,				Nine months ended September 30,
($ in thousands)	2024		2023		2024		2023
Other income:
Bank-owned life insurance	$	1,123	$	822	$	2,842	$	2,410
Community development fees	1,177		338		2,143		3,010
Net gain on sales of other real estate owned	3,159		—		3,157		187
Gain on SBA loan sales	—		1,514		1,415		2,015
Other income	2,888		2,723		7,750		8,954
Total other noninterest income	$	8,347	$	5,397	$	17,307	$	16,576

Other expense:
Amortization of intangibles	$	927	$	1,119	$	2,918	$	3,493
Banking expenses	2,337		1,863		6,146		6,003
FDIC and other insurance	3,288		2,868		10,030		8,060
Loan, legal expenses	2,215		2,132		6,639		5,922

Outside services	1,548		1,704		4,747		4,861
Other expenses	7,037		7,765		21,687		23,624
Total other noninterest expenses	$	17,352	$	17,451	$	52,167	$	51,963

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 nine 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 September 30, 2024, compared to the linked second quarter of 2024 (“linked quarter”) and the results of operations, liquidity and cash flows for the nine months ended September 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 $139.8 million at September 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 $26.5 million. Conversely, the allowance would have increased $45.8 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									Nine months ended
	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
EARNINGS
Total interest income	$	216,304		$	211,644		$	200,906		$	635,671		$	557,836
Total interest expense	72,835			71,115			59,267			213,945			135,976
Net interest income	143,469			140,529			141,639			421,726			421,860
Provision for credit losses	4,099			4,819			8,030			14,674			18,552
Net interest income after provision for credit losses	139,370			135,710			133,609			407,052			403,308
Total noninterest income	21,420			15,494			12,085			49,072			43,273
Total noninterest expense	98,007			94,017			88,644			285,525			255,583
Income before income tax expense	62,783			57,187			57,050			170,599			190,998
Income tax expense	12,198			11,741			12,385			34,167			41,468
Net income	$	50,585		$	45,446		$	44,665		$	136,432		$	149,530
Preferred dividends	938			937			938			2,813			2,813
Net income available to common shareholders	$	49,647		$	44,509		$	43,727		$	133,619		$	146,717

Basic earnings per share	$	1.33		$	1.19		$	1.17		$	3.57		$	3.93
Diluted earnings per share	$	1.32		$	1.19		$	1.17		$	3.56		$	3.91

Return on average assets	1.36		%	1.25		%	1.26		%	1.24		%	1.47		%
Adjusted return on average assets 1	1.32		%	1.27		%	1.26		%	1.24		%	1.46		%
Return on average common equity	11.40		%	10.68		%	11.00		%	10.55		%	12.73		%
Adjusted return on average common equity 1	11.09		%	10.90		%	11.00		%	10.58		%	12.69		%
Return on average tangible common equity 1	14.55		%	13.77		%	14.49		%	13.56		%	16.90		%
Adjusted return on average tangible common equity 1	14.16		%	14.06		%	14.49		%	13.60		%	16.85		%
Net interest margin (tax equivalent)	4.17		%	4.19		%	4.33		%	4.17		%	4.50		%

Efficiency ratio	59.44		%	60.26		%	57.66		%	60.65		%	54.95		%
Core efficiency ratio 1	58.42		%	58.09		%	56.18		%	58.89		%	53.55		%

Book value per common share	$	47.33		$	45.08		$	41.19
Tangible book value per common share 1	$	37.26		$	35.02		$	31.06

ASSET QUALITY
Net charge-offs	$	3,850		$	605		$	6,856		$	10,319		$	9,565
Nonperforming loans	28,376			39,384			48,932
Nonaccrual loans	28,149			38,067			48,746
Classified assets	179,883			169,822			184,393
Total assets	14,954,125			14,615,666			14,025,042
Total loans	11,079,892			11,000,007			10,616,820
Classified assets to total assets	1.20		%	1.16		%	1.31		%
Nonperforming loans to total loans	0.26		%	0.36		%	0.46		%
Nonperforming assets to total assets	0.22		%	0.33		%	0.40		%
ACL on loans to total loans	1.26		%	1.27		%	1.34		%
Net charge-offs to average loans (annualized)	0.14		%	0.02		%	0.26		%	0.13		%	0.13		%

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:

• PPNR 1 of $65.1 million for the third quarter 2024 and $185.7 million for the nine months ended September 30, 2024 increased $1.8 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 and higher net interest income that benefited from an increase in average earning assets. The increase in noninterest income was primarily from tax credit income, a net gain on the sale of other real estate owned and an increase in income on community development investments. The increase in operating revenue was partially offset by an increase in noninterest expense, primarily deposit services costs and employee compensation and benefits. 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 deposit services charges, as well as an increase in employee compensation and benefits.

• Net interest income of $143.5 million for the third quarter 2024 and $421.7 million for the nine months ended September 30, 2024 increased $2.9 million and decreased $0.1 million from the linked and prior year-to-date period, respectively. The NIM was 4.17% for both the third quarter 2024 and the nine months ended September 30, 2024, compared to 4.19% and 4.50% for the linked and prior year-to-date period, respectively. Compared to the linked quarter, the increase in net interest income reflects the benefit of organic growth and an additional day in the quarter. 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. In late September 2024, the Federal Reserve reduced the federal funds target rate by 50 basis points. In response, the Company has adjusted deposit pricing to partially mitigate the impact on income from the repricing of variable rate loans.

• Noninterest income of $21.4 million for the third quarter 2024 and $49.1 million for the nine months ended September 30, 2024 increased $5.9 million and $5.8 million from the linked quarter and prior year-to-date period, respectively. The increase from the linked quarter and prior year-to-date period was primarily due to an increase in tax credit income, a net gain on the sale of other real estate and an increase in income on community development investments.

• Noninterest expense of $98.0 million for the third quarter 2024 and $285.5 million for the nine months ended September 30, 2024 increased $4.0 million and $29.9 million from the linked quarter and prior year-to-date period, respectively. The increase from the linked quarter was primarily driven by higher deposit costs ($2.1 million), employee compensation ($0.8 million) and expenses related to the core system conversion ($0.1 million). The increase from the prior year-to-date period was primarily due to deposit servicing costs ($15.1 million) employee compensation ($10.2 million), and expenses related to the core system conversion ($3.0 million).

Balance sheet highlights:

• Loans – Total loans increased $195.8 million, or 1.80%, to $11.1 billion at September 30, 2024, compared to $10.9 billion at December 31, 2023. Average loans totaled $11.0 billion for the nine months ended September 30, 2024 compared to $10.2 billion for the nine months ended September 30, 2023.

• Deposits – Total deposits increased $289.0 million, to $12.5 billion at September 30, 2024 from $12.2 billion at December 31, 2023. Total estimated insured deposits 1 , which includes collateralized deposits, reciprocal deposits and accounts that qualify for pass through insurance, totaled $8.8 billion at September 30, 2024, compared to $8.3 billion at December 31, 2023. Average deposits totaled $12.4 billion for the nine months ended September 30, 2024 compared to $11.4 billion for the prior year-to-date period. Noninterest-bearing deposit accounts represented 31.6% of total deposits and the loan to deposit ratio was 88.9% at September 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 1.26% at September 30, 2024, compared to 1.24% at December 31, 2023. The ratio of nonperforming assets to total assets was 0.22% at September 30, 2024 compared to 0.34% at December 31, 2023. A provision for credit losses of $4.1 million and $14.7 million was recorded in the third quarter of 2024 and the nine months ended September 30, 2024, respectively. This compares to $4.8 million in the linked quarter and $18.6 million in the prior year-to-date period.

• Shareholders’ equity – Total shareholders’ equity was $1.83 billion at September 30, 2024, compared to $1.72 billion at December 31, 2023, and the tangible common equity to tangible assets ratio 2 was 9.50% at September 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 September 30, 2024.

The Company’s board of directors approved a quarterly dividend of $0.28 per common share, payable on December 31, 2024 to shareholders of record as of December 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) September 15, 2024 to (but excluding) December 15, 2024. The dividend will be payable on December 15, 2024 and will be paid on December 16, 2024 to holders of record of Series A Preferred Stock as of November 29, 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 September 30,						Three months ended June 30,						Three months ended September 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:
Loans 1, 2	$	10,971,575	$	191,638	6.95	%	$	10,962,488	$	189,346	6.95	%	$	10,521,966	$	180,382	6.80	%
Taxable securities	1,512,338		13,530		3.56		1,417,147		12,246		3.48		1,330,828		10,456		3.12
Non-taxable securities 2	990,786		7,874		3.16		979,372		7,710		3.17		972,022		7,620		3.11
Total securities	2,503,124		21,404		3.40		2,396,519		19,956		3.35		2,302,850		18,076		3.11
Interest-earning deposits	402,932		5,348		5.28		325,452		4,389		5.42		335,771		4,509		5.33
Total interest-earning assets	13,877,631		218,390		6.26		13,684,459		213,691		6.28		13,160,587		202,967		6.12
Noninterest-earning assets	971,824						961,922						908,273
Total assets	$	14,849,455					$	14,646,381					$	14,068,860

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	3,018,309	$	20,002	2.64	%	$	2,950,827	$	18,801	2.56	%	$	2,672,084	$	13,701	2.03	%
Money market accounts	3,551,492		33,493		3.75		3,434,712		31,926		3.74		3,079,221		26,427		3.40
Savings accounts	561,466		345		0.24		573,115		335		0.24		646,187		250		0.15
Certificates of deposit	1,368,339		14,928		4.34		1,412,263		15,312		4.36		1,519,119		14,976		3.91
Total interest-bearing deposits	8,499,606		68,768		3.22		8,370,917		66,374		3.19		7,916,611		55,354		2.77
Subordinated debentures and notes	156,329		2,695		6.86		156,188		2,684		6.91		155,769		2,466		6.28
FHLB advances	4,565		59		5.14		40,308		561		5.60		10,326		141		5.42
Securities sold under agreements to repurchase	140,255		1,217		3.45		158,969		1,401		3.54		146,893		969		2.61
Other borrowings	36,226		96		1.05		36,203		95		1.06		50,571		337		2.66
Total interest-bearing liabilities	8,836,981		72,835		3.28		8,762,585		71,115		3.26		8,280,170		59,267		2.84
Noninterest-bearing liabilities:
Demand deposits	4,046,480						3,973,336						4,005,923
Other liabilities	161,625						162,220						134,162
Total liabilities	13,045,086						12,898,141						12,420,255
Shareholders' equity	1,804,369						1,748,240						1,648,605
Total liabilities & shareholders' equity	$	14,849,455					$	14,646,381					$	14,068,860
Net interest income			$	145,555					$	142,576					$	143,700
Net interest spread					2.98	%					3.02	%					3.28	%
Net interest margin					4.17	%					4.19	%					4.33	%

1 Average balances include nonaccrual loans. Interest income includes net loan fees of $2.6 million, $2.2 million, and $3.3 million for the three months ended September 30, 2024, June 30, 2024, and September 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 for each of the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively.



	Nine months ended
	September 30, 2024						September 30, 2023
($ in thousands)	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets
Interest-earning assets:
Loans 1, 2	$	10,954,063	$	567,687	6.92	%	$	10,203,291	$	503,458	6.60	%
Taxable securities	1,451,317		37,601		3.46		1,327,595		30,075		3.03
Non-taxable securities 2	982,342		23,250		3.16		968,890		22,668		3.13
Total securities	2,433,659		60,851		3.34		2,296,485		52,743		3.07
Interest-earning deposits	332,409		13,306		5.35		206,110		7,799		5.06
Total interest-earning assets	13,720,131		641,844		6.25		12,705,886		564,000		5.93
Noninterest-earning assets	964,458						921,562
Total assets	$	14,684,589					$	13,627,448

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,964,667	$	57,415	2.59	%	$	2,462,988	$	29,728	1.61	%
Money market accounts	3,462,993		96,777		3.73		2,942,970		62,397		2.83
Savings accounts	573,853		983		0.23		688,157		707		0.14
Certificates of deposit	1,374,176		44,441		4.32		1,139,489		28,555		3.35
Total interest-bearing deposits	8,375,689		199,616		3.18		7,233,604		121,387		2.24
Subordinated debentures and notes	156,188		7,863		6.72		155,633		7,306		6.28
FHLB advances	39,427		1,649		5.59		73,020		2,752		5.04
Securities sold under agreements to repurchase	167,939		4,422		3.52		174,783		2,422		1.85
Other borrowings	38,381		395		1.37		79,396		2,109		3.55
Total interest-bearing liabilities	8,777,624		213,945		3.26		7,716,436		135,976		2.36
Noninterest-bearing liabilities:
Demand deposits	3,982,015						4,178,038
Other liabilities	161,033						119,883
Total liabilities	12,920,672						12,014,357
Shareholders' equity	1,763,917						1,613,091
Total liabilities & shareholders' equity	$	14,684,589					$	13,627,448
Net interest income			$	427,899					$	428,024
Net interest spread					2.99	%					3.57	%
Net interest margin					4.17	%					4.50	%

1 Average balances include nonaccrual loans. Interest income includes net loan fees of $7.2 million and $10.7 million for the nine months ended September 30, 2024 and September 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 $6.2 million for both the nine months ended September 30, 2024 and September 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 September 30, 2024						Nine months ended September 30, 2024
	compared to						compared to
	Three months ended June 30, 2024						Nine months ended September 30, 2023
	Increase (decrease) due to						Increase (decrease) due to
($ in thousands)	Volume 1		Rate 2		Net		Volume 1		Rate 2		Net
Interest earned on:



Loans	$	1,755	$	537	$	2,292	$	38,571	$	25,658	$	64,229
Taxable securities	945		339		1,284		2,974		4,552		7,526
Non-taxable securities 3	166		(2)		164		329		253		582
Interest-earning deposits	1,075		(116)		959		5,039		468		5,507
Total interest-earning assets	$	3,941	$	758	$	4,699	$	46,913	$	30,931	$	77,844

Interest paid on:
Interest-bearing demand accounts	$	532	$	669	$	1,201	$	6,991	$	20,696	27,687
Money market accounts	1,453		114		1,567		12,308		22,072		34,380
Savings accounts	(6)		16		10		(133)		409		276
Certificates of deposit	(333)		(51)		(384)		6,606		9,280		15,886
Subordinated debentures and notes	6		5		11		26		531		557
FHLB advances	(460)		(42)		(502)		(1,377)		274		(1,103)
Securities sold under agreements to repurchase	(151)		(33)		(184)		(98)		2,098		2,000
Other borrowed funds	1		—		1		(784)		(930)		(1,714)
Total interest-bearing liabilities	1,042		678		1,720		23,539		54,430		77,969
Net interest income	$	2,899	$	80	$	2,979	$	23,374	$	(23,499)	(125)

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 $145.6 million for the quarter ended September 30, 2024 and $427.9 million for the nine months ended September 30, 2024, increased $3.0 million and decreased $0.1 million from the linked and prior year-to-date period, respectively. The increase from the linked quarter was primarily due to higher interest-earning asset balances and an extra day in the quarter. 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 the current quarter was 5.27%, a decrease of 6 basis points compared to the linked quarter. The effective federal funds rate for the first nine months of 2024 was 5.31%, an increase of 38 basis points compared to the prior year-to-date period.

Compared to the linked quarter, tax equivalent interest income increased $4.7 million primarily due to a $193.2 million increase in all average interest earning balances, including loans, securities and interest-earning cash accounts. Interest on securities increased $1.4 million from the linked quarter due to a $77.5 million increase in average balances, and a 5 basis point increase in yield.

Tax equivalent interest income increased $77.8 million over the prior year-to-date period due to a $64.2 million increase in loan interest and a $13.6 million increase in interest on securities and interest-earning cash. Loan yields in the first nine months of 2024 increased 32 basis points to 6.92%, compared to 6.60% in the prior year-to-date

period. Average loans increased $750.8 million, or 7.36% over the prior year-to-date period. Average securities increased $137.2 million, or 6.0% over the prior year-to-date period.

Compared to the linked quarter, interest expense increased $1.7 million primarily due to an increase in interest expense on money market accounts. Average money market balances increased $116.8 million in the third quarter 2024. The average cost of interest-bearing deposits was 3.22%, an increase of 3 basis points compared to the linked quarter. The total cost of deposits, including noninterest-bearing demand accounts, was 2.18% during the third quarter 2024, compared to 2.16% in the linked quarter. While the total cost of deposits increased over the linked quarter, the monthly cost of total deposits has been relatively stable since March 2024.

Interest expense increased $78.0 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 94 basis points year-over-year. The total cost of deposits, including noninterest-bearing demand accounts, was 2.16% during the nine months ended September 30, 2024, compared to 1.42% during the prior year-to-date period.

NIM, on a tax equivalent basis, was 4.17% in the third quarter 2024 and the first nine months of 2024, a decrease of 2 basis points and 33 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								Nine months ended
($ in thousands)	September 30, 2024		June 30, 2024		Increase (decrease)				September 30, 2024		September 30, 2023		Increase (decrease)
Service charges on deposit accounts	$	4,649	$	4,542	$	107	2	%	$	13,614	$	12,225	$	1,389	10	%
Wealth management revenue	2,599		2,590		9		—	%	7,733		7,602		131		2	%
Card services revenue	2,573		2,497		76		3	%	7,482		7,362		120		2	%
Tax credit income (loss)	3,252		1,874		1,378		74	%	2,936		(492)		3,428		117	%

Other income	8,347		3,991		4,356		109	%	17,307		16,576		731		4	%

Total noninterest income	$	21,420	$	15,494	$	5,926	38	%	$	49,072	$	43,273	$	5,799	12	%

Total noninterest income for the third quarter 2024 was $21.4 million, an increase of $5.9 million from the linked quarter. The increase from the linked quarter was primarily due to an increase in tax credit income from a positive change in credits carried at fair value, and a net gain on the sale of other real estate owned that is included in Other income. Tax credit income varies based on transaction volumes and fair value changes on credits carried at fair value.

Total noninterest income for the nine months ended September 30, 2024 was $49.1 million, an increase from the prior year-to-date period of $5.8 million which was primarily due to increases in tax credit income ($3.4 million), deposit service charges ($1.4 million), and other income ($0.7 million). Other income for the nine months ended September 30, 2024 increased compared to the prior year-to-date period primarily due to a net gain on the sale of other real estate owned ($3.0 million), partially offset by a lower level of income on community development investments ($0.9 million) 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											Nine months ended
($ in thousands)	September 30, 2024			June 30, 2024			Increase (decrease)					September 30, 2024			September 30, 2023			Increase (decrease)
Employee compensation and benefits	$	45,359		$	44,524		$	835		2	%	$	135,145		$	124,915		$	10,230		8	%
Deposit costs	23,781			21,706			2,075			10	%	65,764			50,687			15,077			23	%
Occupancy	4,372			4,197			175			4	%	12,895			12,213			682			5	%
Data processing	5,548			5,339			209			4	%	15,226			11,201			4,025			26	%
Professional fees	1,595			1,298			297			23	%	4,328			4,604			(276)			(6)	%




Other expense	17,352			16,953			399			2	%	52,167			51,963			204			—	%
Total noninterest expense	$	98,007		$	94,017		$	3,990		4	%	$	285,525		$	255,583		$	29,942		10	%

Efficiency ratio	59.44		%	60.26		%	(0.82)		%			60.65		%	54.95		%	(1.21)		%
Core efficiency ratio 3	58.42		%	58.09		%	0.33		%			58.89		%	53.55		%	(0.47)		%

Noninterest expense was $98.0 million for the third quarter 2024, an increase of $4.0 million from $94.0 million in the linked quarter. Employee compensation and benefits increased $0.8 million from the linked quarter primarily due to an increase in the number of work days in the quarter and the success in recruiting new relationship bankers. Deposit costs relate to certain deposit accounts that receive an earnings credit allowance for expenses related to the maintenance of the deposit accounts. These expenses are impacted by interest rates and average balances. Deposit costs increased $2.1 million from the linked quarter primarily due to an increase of $151.6 million in average deposit vertical balances from the linked quarter. Expenses related to the core system conversion included in Data processing for the current and linked quarters were $1.4 million and $1.3 million, respectively, due to the continued progress on the project.

Total noninterest expense of $285.5 million for the first nine months of 2024 increased $29.9 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 $15.1 million increase in variable deposit costs due to higher earnings credit rates and average balances.

Income Taxes

The Company’s effective tax rate was 19.4% for the third quarter 2024 and 20.0% for the nine months ended September 30, 2024. This compares to the linked quarter and prior year-to-date effective tax rate of 20.5% and 21.7%, respectively. The decreases from the linked and prior year-to-date effective tax rates were 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)	September 30, 2024		December 31, 2023		Increase (decrease)
Total cash and cash equivalents	$	426,380	$	433,029	$	(6,649)	(2)	%
Securities, net	2,638,440		2,368,707		269,733		11	%
Total loans	11,079,892		10,884,118		195,774		2	%
Total assets	14,954,125		14,518,590		435,535		3	%
Deposits	12,465,322		12,176,371		288,951		2	%
Total liabilities	13,122,114		12,802,522		319,592		2	%
Total shareholders’ equity	1,832,011		1,716,068		115,943		7	%

Total assets were $15.0 billion at September 30, 2024, an increase of $435.5 million from December 31, 2023 primarily due to a $195.8 million increase in loans and a $269.7 million increase in investment securities. Total liabilities of $13.1 billion increased $319.6 million from December 31, 2023 primarily due to a $289.0 million increase in deposits.

Investment Securities

Investment securities were $2.6 billion or 18% of total assets at September 30, 2024. At December 31, 2023, investment securities were $2.4 billion or 16% of total assets. 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:


	September 30, 2024				December 31, 2023
($ in thousands)	Amount		%		Amount		%
Obligations of U.S. Government sponsored enterprises	$	299,674	11.4	%	$	296,446	12.5	%
Obligations of states and political subdivisions	1,104,388		41.9	%	1,007,870		42.5	%
Agency mortgage-backed securities	931,837		35.3	%	752,481		31.8	%
U.S. Treasury Bills	159,695		6.1	%	181,701		7.7	%
Corporate debt securities	143,099		5.4	%	130,994		5.5	%
Total	$	2,638,693	100.0	%	$	2,369,492	100.0	%


Net Unrealized Losses
($ in thousands)	September 30, 2024		December 31, 2023
Available-for-sale securities	$	(122,158)	$	(150,861)
Held-to-maturity securities	(46,351)		(54,572)
Total	$	(168,509)	$	(205,433)

Investment purchases in the third quarter 2024 had a weighted average, tax equivalent yield of 4.97%. The average duration of the investment portfolio was 4.9 years at September 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 $434.5 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)	September 30, 2024		December 31, 2023		Increase (decrease)
Commercial and industrial	$	4,628,488	$	4,672,559	$	(44,071)	(1)	%
Commercial real estate - investor owned	2,525,993		2,451,953		74,040		3	%
Commercial real estate - owner occupied	2,389,183		2,351,618		37,565		2	%
Construction and land development	896,325		760,425		135,900		18	%
Residential real estate	355,279		372,188		(16,909)		(5)	%
Other	284,624		275,375		9,249		3	%
Total loans	$	11,079,892	$	10,884,118	$	195,774	2	%

Loans totaled $11.1 billion at September 30, 2024 compared to $10.9 billion at December 31, 2023. The increase was primarily due to an increase of $135.9 million in construction loans and an increase of $111.6 million in CRE loans, partially offset by a decrease in C&I loans of $44.1 million. Average revolving line draw utilization was 44% for the third quarter 2024, compared to 43% for the year ended December 31, 2023.

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



($ in thousands)	September 30, 2024		December 31, 2023		Increase (decrease)
SBA Loans	$	1,272,679	$	1,281,632	$	(2,101)	—	%
Sponsor finance	819,079		872,264		(46,101)		(5)	%
Life insurance premium financing	1,030,273		956,162		26,676		3	%
Tax credits	724,441		734,594		6,058		1	%

These lending categories, 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 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				Nine months ended
($ in thousands)	September 30, 2024		June 30, 2024		September 30, 2024		September 30, 2023
Provision for credit losses on loans	$	4,164	$	4,571	$	15,326	$	14,766
Provision for available-for-sale securities	—		—		—		5,076
Benefit for off-balance sheet commitments	(181)		(263)		(951)		(2,286)
Provision (benefit) for held-to-maturity securities	(61)		(36)		(532)		50
Charge-off of accrued interest	177		547		831		946
Provision for credit losses	$	4,099	$	4,819	$	14,674	$	18,552

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 $4.1 million for the third quarter 2024 and $14.7 million for the nine months ended September 30, 2024, decreased $0.7 million and $3.9 million from the linked quarter and prior year-to-date period, respectively. The provision for credit losses in the third quarter 2024 was primarily related to charge-offs and updates to qualitative factors used in the allowance calculation.The provision for credit losses for the nine months ended September 30, 2024 declined primarily due to a $5.1 million decrease in the provision for available-for-sale securities related to the impairment of an investment security in the prior year-to-date period.

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


	September 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	$	64,060	41.8	%	$	58,886	42.9	%
Real estate:
Commercial	55,483		44.4	%	54,685		44.1	%
Construction and land development	10,067		8.1	%	10,198		7.0	%
Residential	5,975		3.2	%	6,142		3.4	%
Other	4,193		2.5	%	4,860		2.6	%
Total	$	139,778	100.0	%	$	134,771	100.0	%

The ACL on loans was 1.26% of total loans at September 30, 2024, compared to 1.24% of loans at December 31, 2023. The decrease in the ratio of ACL on loans to total loans is primarily due to loan growth and charge-offs. Excluding guaranteed loans, the ACL on loans to total loans was 1.38% 4 at September 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
	September 30, 2024						June 30, 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	$	(222)	$	4,575,990	(0.02)	%	$	(956)	$	4,701,482	(0.08)	%
Real estate:
Commercial	851		4,863,865		0.07	%	1,761		4,751,311		0.15	%
Construction and land development	3,203		877,668		1.45	%	(24)		845,290		(0.01)	%
Residential	(121)		354,676		(0.14)	%	(196)		363,874		(0.22)	%
Other	139		298,793		0.19	%	20		299,629		0.03	%
Total	$	3,850	$	10,970,992	0.14	%	$	605	$	10,961,586	0.02	%

(1) Excludes loans held for sale.

(2) Annualized.



	Nine months ended
	September 30, 2024						September 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	$	3,972	$	4,660,167	0.11	%	$	4,213	$	4,153,634	0.14	%
Real estate:
Commercial	2,934		4,795,545		0.08	%	4,665		4,697,142		0.13	%
Construction and land development	3,173		837,578		0.51	%	(45)		706,615		(0.01)	%
Residential	(248)		360,480		(0.09)	%	(166)		358,391		(0.06)	%
Other	488		299,424		0.22	%	898		286,957		0.42	%
Total	$	10,319	$	10,953,194	0.13	%	$	9,565	$	10,202,739	0.13	%
(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)	September 30, 2024			December 31, 2023
Nonaccrual loans	$	28,149		$	43,181
Loans past due 90 days or more and still accruing interest	227			547

Total nonperforming loans	28,376			43,728
Other real estate	4,516			5,736

Total nonperforming assets	$	32,892		$	49,464

Total assets	$	14,954,125		$	14,518,590
Total loans	11,079,892			10,884,118

Total ACL on loans	139,778			134,771

ACL on loans to nonaccrual loans	497		%	312		%
ACL on loans to nonperforming loans	493		%	308		%
ACL on loans to total loans	1.26		%	1.24		%
Nonaccrual loans to total loans	0.25		%	0.40		%
Nonperforming loans to total loans	0.26		%	0.40		%

Nonperforming assets to total assets	0.22		%	0.34		%

Nonperforming loans based on loan type were as follows:



($ in thousands)	September 30, 2024		December 31, 2023
Commercial and industrial	$	6,875	$	7,756
Commercial real estate	20,716		33,739
Construction and land development	527		1,269
Residential real estate	258		959
Other	—		5
Total	$	28,376	$	43,728

The following table summarizes the changes in nonperforming loans:


	Nine months ended
($ in thousands)	September 30, 2024



Nonperforming loans, beginning of period	$	43,728
Additions to nonaccrual loans	21,761


Charge-offs	(14,136)
Principal payments	(17,063)
Moved to other real estate and repossessed assets	(5,914)


Nonperforming loans, end of period	$	28,376

Nonperforming loans at September 30, 2024 decreased $15.4 million, or 35%, when compared to December 31, 2023. The decrease in nonperforming loans during the nine months ended September 30, 2024 was primarily due to gross charge-offs and the positive resolution and repayment of certain nonperforming loans.

Other real estate

The following table summarizes the changes in other real estate:


	Nine months ended
($ in thousands)	September 30, 2024
Other real estate, beginning of period	$	5,736
Additions	6,659
Change in valuation allowance	(44)
Sales	(7,835)
Other real estate, end of period	$	4,516

Deposits

The following table shows the breakdown of deposits by type:


($ in thousands)	September 30, 2024			December 31, 2023			Increase (decrease)
Noninterest-bearing demand accounts	$	3,934,245		$	3,958,743		$	(24,498)	(1)	%
Interest-bearing demand accounts	3,048,981			2,950,259			98,722		3	%
Money market accounts	3,568,476			3,399,280			169,196		5	%
Savings accounts	553,067			595,175			(42,108)		(7)	%
Certificates of deposit:
Brokered	480,934			482,759			(1,825)		—	%
Customer	879,619			790,155			89,464		11	%
Total deposits	$	12,465,322		$	12,176,371		$	288,951	2	%



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
	September 30, 2024				June 30, 2024				September 30, 2023
($ in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing deposit accounts	$	4,046,480	—	%	$	3,973,336	—	%	$	4,005,923	—	%

Interest-bearing demand accounts	3,018,309		2.64		2,950,827		2.56		2,672,084		2.03
Money market accounts	3,551,492		3.75		3,434,712		3.74		3,079,221		3.40
Savings accounts	561,466		0.24		573,115		0.24		646,187		0.15
Certificates of deposit	1,368,339		4.34		1,412,263		4.36		1,519,119		3.91
Total interest-bearing deposits	$	8,499,606	3.22		$	8,370,917	3.19		$	7,916,611	2.77

Total average deposits	$	12,546,086	2.18		$	12,344,253	2.16		$	11,922,534	1.84



	Nine months ended
	September 30, 2024				September 30, 2023
($ in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing deposit accounts	$	3,982,015	—	%	$	4,178,038	—	%

Interest-bearing demand accounts	2,964,667		2.59		2,462,988		1.61
Money market accounts	3,462,993		3.73		2,942,970		2.83
Savings accounts	573,853		0.23		688,157		0.14
Certificates of deposit	1,374,176		4.32		1,139,489		3.35
Total interest-bearing deposits	$	8,375,689	3.18		$	7,233,604	2.24

Total average deposits	$	12,357,704	2.16		$	11,411,642	1.42

Total deposits excluding brokered certificates of deposits were $12.0 billion at September 30, 2024, an increase of $290.8 million from December 31, 2023. The Company has deposit verticals focusing on property management, community associations, and escrow industries. These deposits increased to $3.1 billion at September 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 September 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 September 30, 2024, estimated uninsured/uncollateralized deposits totaled $3.7 billion, or 30% of total deposits, compared to $3.8 billion, or 31% of total deposits, at December 31, 2023.

The total cost of deposits was 2.18% for the current quarter, compared to 2.16% for the linked quarter. For the nine months ended September 30, 2024, the total cost of deposits was 2.16%, compared to 1.42% in the prior year-to-date period.

Shareholders’ Equity

Shareholders’ equity totaled $1.8 billion at September 30, 2024, an increase of $115.9 million from December 31, 2023. Significant activity during the first nine months of 2024 was as follows:

• Increase from net income of $136.4 million,

• Increase in fair value of securities and cash flow hedges of $22.2 million,

• Decrease from dividends paid on common and preferred stock of $32.0 million, and

• Decrease from common stock repurchases of $18.4 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 $426.4 million at September 30, 2024 and $433.0 million at December 31, 2023. Investment securities are another important tool in liquidity planning. Securities totaled $2.6 billion and $2.4 billion at September 30, 2024 and December 31, 2023, respectively and included $1.2 billion and $1.6 billion at September 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)	September 30, 2024
Federal Reserve Bank borrowing capacity	$	2,557,147
FHLB borrowing capacity	1,214,524
Unpledged securities	1,388,918
Federal funds lines (7 correspondent banks)	140,000
Cash and interest-bearing deposits	426,380
Holding Company line of credit	25,000
Total	$	5,751,969

Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at September 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 nine months of 2024, the Company pledged additional loans to the FHLB to increase the borrowing capacity by $334.6 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 $2.9 billion in unused commitments to extend credit as of September 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 September 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 September 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:


	September 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	11.9	%	12.5	%	11.3	%	12.2	%	6.5	%	7.0	%
Tier 1 Capital to Risk Weighted Assets	13.2	%	12.5	%	12.7	%	12.2	%	8.0	%	8.5	%
Total Capital to Risk Weighted Assets	14.8	%	13.6	%	14.2	%	13.2	%	10.0	%	10.5	%
Leverage Ratio (Tier 1 Capital to Average Assets)	11.2	%	10.6	%	11.0	%	10.6	%	5.0	%	N/A
Tangible common equity to tangible assets 1	9.50	%			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, the gain or loss on the sale of other real estate owned, 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									Nine months ended
($ in thousands)	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Net interest income (GAAP)	$	143,469		$	140,529		$	141,639		$	421,726		$	421,860
Tax-equivalent adjustment	2,086			2,047			2,061			6,173			6,164
Net interest income - FTE (non-GAAP)	$	145,555		$	142,576		$	143,700		$	427,899		$	428,024
Noninterest income (GAAP)	21,420			15,494			12,085			49,072			43,273
Less gain on sale of investment securities	—			—			—			—			381
Less net gain on sale of other real estate owned	3,159			—			—			3,157			187
Core revenue (non-GAAP)	$	163,816		$	158,070		$	155,785		$	473,814		$	470,729

Noninterest expense (GAAP)	$	98,007		$	94,017		$	88,644		$	285,525		$	255,583
Less FDIC special assessment	—			—			—			625			—
Less core conversion expense	1,375			1,250			—			2,975			—
Less amortization on intangibles	927			944			1,118			2,918			3,493


Core noninterest expense (non-GAAP)	$	95,705		$	91,823		$	87,526		$	279,007		$	252,090

Core efficiency ratio (non-GAAP)	58.42		%	58.09		%	56.18		%	58.89		%	53.55		%

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


(in thousands, except per share data)	September 30, 2024			June 30, 2024			December 31, 2023
Shareholders' equity (GAAP)	$	1,832,011		$	1,755,273		$	1,716,068
Less preferred stock	71,988			71,988			71,988
Less goodwill	365,164			365,164			365,164
Less intangible assets	9,400			10,327			12,318
Tangible common equity (non-GAAP)	$	1,385,459		$	1,307,794		$	1,266,598

Common shares outstanding	37,184			37,344			37,416
Tangible book value per share (non-GAAP)	$	37.26		$	35.02		$	33.85

Total assets (GAAP)	$	14,954,125		$	14,615,666		$	14,518,590
Less goodwill	365,164			365,164			365,164
Less intangible assets	9,400			10,327			12,318
Tangible assets (non-GAAP)	$	14,579,561		$	14,240,175		$	14,141,108

Tangible common equity to tangible assets (non-GAAP)	9.50		%	9.18		%	8.96		%

ACL on Loans to Total Loans Adjusted for Guaranteed Loans


	At
($ in thousands)	September 30, 2024			June 30, 2024			September 30, 2023
Total loans (GAAP)	$	11,079,892		$	11,000,007		$	10,616,820
Less: Guaranteed loans, net	928,272			923,794			950,909
Total adjusted loans (non-GAAP)	$	10,151,620		$	10,076,213		$	9,665,911

ACL on loans	$	139,778		$	139,464		$	142,133
ACL on loans to total loans	1.26		%	1.27		%	1.34		%
ACL on loans to total adjusted loans	1.38		%	1.38		%	1.47		%

Pre-Provision Net Revenue (PPNR)


	Quarter ended				Nine months ended
($ in thousands)	September 30, 2024		June 30, 2024			September 30, 2023		September 30, 2024		September 30, 2023
Net interest income	$	143,469	$	140,529		$	141,639	$	421,726	$	421,860
Noninterest income	21,420		15,494			12,085		49,072		43,273
FDIC special assessment	—		—			—		625		—
Core conversion expense	1,375		1,250			—		2,975		—
Less gain on sale of investment securities	—		—			—		—		381
Less net gain on sale of other real estate owned	3,159		—			—		3,157		187
Less noninterest expense	98,007		94,017			88,644		285,525		255,583


PPNR (non-GAAP)	$	65,098	$	63,256		$	65,080	$	185,716	$	208,982

Return on Average Common Equity, Return on Average Tangible Common Equity (ROATCE) and Return on Average Assets (ROAA)


	Quarter ended									Nine months ended
($ in thousands)	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Average shareholder’s equity (GAAP)	$	1,804,369		$	1,748,240		$	1,648,605		$	1,763,917		$	1,613,091
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	9,855			10,783			13,967			10,799			15,094
Average tangible common equity (non-GAAP)	$	1,357,362		$	1,300,305		$	1,197,486		$	1,315,966		$	1,160,845

Net income (GAAP)	$	50,585		$	45,446		$	44,665		$	136,432		$	149,530
FDIC special assessment (after tax)	—			—			—			470			—
Core conversion expense (after tax)	1,034			940			—			2,237			—
Less gain on sale of investment securities (after tax)	—			—			—			—			287
Less net gain on sales of other real estate owned (after tax)	2,375			—			—			2,374			141
Net income adjusted (non-GAAP)	$	49,244		$	46,386		$	44,665		$	136,765		$	149,102
Less preferred stock dividends	938			937			938			2,813			2,813
Net income available to common shareholders adjusted (non-GAAP)	$	48,306		$	45,449		$	43,727		$	133,952		$	146,289

Return on average common equity (GAAP)	11.40		%	10.68		%	11.00		%	10.55		%	12.73		%
Adjusted return on average common equity (non-GAAP)	11.09		%	10.90		%	11.00		%	10.58		%	12.69		%
ROATCE (non-GAAP)	14.55		%	13.77		%	14.49		%	13.56		%	16.90		%
Adjusted ROATCE (non-GAAP)	14.16		%	14.06		%	14.49		%	13.60		%	16.85		%

Average assets	$	14,849,455		$	14,646,381		$	14,068,860		$	14,684,589		$	13,627,448
Return on average assets (GAAP)	1.36		%	1.25		%	1.26		%	1.24		%	1.47		%
Adjusted return on average assets (non-GAAP)	1.32		%	1.27		%	1.26		%	1.24		%	1.46		%

Calculation of Estimated Insured Deposits


	Quarter ended
($ in thousands)	Sep 30, 2024		Jun 30, 2024

Estimated uninsured deposits per Call Report	$	4,180,066	$	4,020,979
Collateralized/affiliate deposits	(463,103)		(454,084)
Accrued interest on deposits	(5,830)		(5,632)
Adjusted uninsured/uncollateralized deposits	3,711,133		3,561,263
Estimated insured/collateralized deposits	8,754,189		8,721,120
Total deposits	$	12,465,322	$	12,282,383

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 September 30, 2024:


Rate Shock			Annual % change in net interest income
+ 300 bp			10.0%
+ 200 bp			6.8%
+ 100 bp			3.5%
- 100 bp			(3.6)%
- 200 bp			(7.5)%
- 300 bp			(11.2)%

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 September 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.”

As of September 30, 2024, the Financial Conduct Authority has ceased publishing the most common USD LIBOR settings (overnight, 1-month. 3-month, 6-month and 12-month). 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 September 30, 2024. Of these loans, $4.5 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 $806.6 million indexed to other rates.

At September 30, 2024, the Company’s available-for-sale and held-to-maturity investment securities totaled $1.8 billion and $851.6 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 September 30, 2024, net unrealized losses were $122.2 million and $46.4 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 September 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 September 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
July 1, 2024 through July 31, 2024	—	$	—	—	1,774,865
August 1, 2024 through August 31, 2024	98,314	48.24		98,314	1,676,551
September 1, 2024 through September 30, 2024	96,800	51.26		96,800	1,579,751
Total	195,114	$	49.74	195,114	1,579,751

(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 September 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 September 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 November 1, 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

TABLE OF CONTENTS

Part I - Item 1 - Financial Statements Note 1 - Summary Of Significant Accounting Policies Note 2 - Earnings Per Share Note 3 - Investments Note 4 - Loans Note 5 - Commitments and Contingent Liabilities Note 6 - Derivative Financial Instruments Note 7 - Fair Value Measurements Note 8 - Shareholders Equity Note 9 - Supplemental Financial Information Item 2: Management S Discussion and Analysis Of Financial Condition and Item 3: Quantitative and Qualitative Disclosures About Market Risk Item 4: Controls and Procedures Part II - Other Information Item 1: Legal Proceedings Item 1A: Risk Factors Item 2: Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3: Defaults Upon Senior Securities Item 4: Mine Safety Disclosures Item 5: Other Information Item 6: Exhibits

Exhibits

EFSC 10-Q Quarter ended Sept. 30, 2024

Exhibits