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 March 31, ~~2020~~.

2021.



☐						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,, MO63105

Telephone: (~~314~~) (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

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. ~~(Check one):~~

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~~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 ~~May 4, 2020,~~April 27, 2021, the Registrant had ~~26,161,001~~31,259,491 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 Operations (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)						6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						2423

Item 3. Quantitative and Qualitative Disclosures About Market Risk						44

Item 4. Controls and Procedures						45

PART II - OTHER INFORMATION

Item 1. Legal Proceedings						45

Item 1A. Risk Factors						45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						4845

Item 3. Defaults Upon Senior Securities						4845

Item 4. Mine Safety Disclosures						4845

Item 5. Other Information						4845

Item 6. Exhibits						4946

Signatures						5148

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

~~FASB~~FHLB

~~Financial Accounting Standards Board~~

~~ACLL~~

~~Allowance for Credit Losses on Loans (excludes allowance for securities and allowance for unfunded commitments)~~

~~FDIC~~

~~Federal Deposit Insurance Corporation~~

~~ASC~~

~~Accounting Standards Codification~~

~~FHLB~~

Federal Home Loan Bank

~~ASU~~ASC

Accounting Standards ~~Update~~Codification

GAAP

Generally Accepted Accounting Principles (United States)

~~Bank~~ASU

Accounting Standards Update

LIBOR

London Interbank Offered Rate

Bank

Enterprise Bank & Trust

~~LIBOR~~MD&A

~~London Interbank Offered Rate~~

~~C&I~~

~~Commercial and Industrial~~

~~MD&A~~

Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~CECL~~C&I

Commercial and Industrial

NIM

Net Interest Margin

CECL

Current Expected Credit Loss

PCD

Purchased Credit Deteriorated

Company

Enterprise Financial Services Corp and Subsidiaries

PCI

Purchased Credit Impaired

CRE

Commercial Real Estate

PPP

Paycheck Protection Program

DCF

Discounted Cash Flow

SBA

Small Business Administration

EFSC

Enterprise Financial Services Corp

~~SEC~~SCBH

~~Securities and Exchange Commission~~Seacoast Commerce Banc Holdings

Enterprise

Enterprise Financial Services Corp and Subsidiaries

~~Trinity~~Seacoast

~~Trinity Capital~~Seacoast Commerce Bank

FASB

Financial Accounting Standards Board

SEC

Securities and Exchange Commission

FDIC

Federal Deposit Insurance Corporation

SOFR

Secured Overnight Financing Rate

PART 1 - ITEM 1 - FINANCIAL STATEMENTS

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)


(in thousands, except share and per share data)	March 31, 2020			December 31, 2019			(in thousands, except share and per share data)	March 31, 2021		December 31, 2020
Assets							Assets
Cash and due from banks	$	98,619		$	74,769		Cash and due from banks	$	103,367	$	99,760
Federal funds sold	3,068			3,060			Federal funds sold	1,638		1,519
Interest-earning deposits (including $43,315 and $15,285 pledged as collateral, respectively)	81,996			89,427
Interest-earning deposits (including $23,835 and $36,525 pledged as collateral, respectively)							Interest-earning deposits (including $23,835 and $36,525 pledged as collateral, respectively)	778,810		436,424
Total cash and cash equivalents	183,683			167,256			Total cash and cash equivalents	883,815		537,703
Interest-earning deposits greater than 90 days	3,730			3,730			Interest-earning deposits greater than 90 days	8,016		7,626
Securities available-for-sale	1,161,514			1,135,317			Securities available-for-sale	945,660		912,429
Securities held-to-maturity, net	178,932			181,166			Securities held-to-maturity, net	467,059		487,610
Loans held-for-sale	8,430			5,570			Loans held-for-sale	8,531		13,564
Loans	5,457,517			5,314,337			Loans	7,288,781		7,224,935
Less: Allowance for credit losses on loans	92,187			43,288			Less: Allowance for credit losses on loans	131,527		136,671
Total loans, net	5,365,330			5,271,049			Total loans, net	7,157,254		7,088,264

Other investments	41,703			38,044			Other investments	51,099		48,764
Fixed assets, net	59,358			60,013			Fixed assets, net	52,078		53,169

Goodwill	210,344			210,344			Goodwill	260,567		260,567
Intangible assets, net	24,585			26,076			Intangible assets, net	21,670		23,084

Other assets	263,034			235,226			Other assets	334,950		318,791
Total assets	$	7,500,643		$	7,333,791		Total assets	$	10,190,699	$	9,751,571

Liabilities and Shareholders' Equity							Liabilities and Shareholders' Equity
Noninterest-bearing deposit accounts	$	1,354,571		$	1,327,348		Noninterest-bearing deposit accounts	$	2,910,216	$	2,711,828
Interest-bearing transaction accounts	1,389,603			1,367,444			Interest-bearing transaction accounts	1,990,308		1,768,497
Money market accounts	1,925,415			1,713,615			Money market accounts	2,405,451		2,327,066
Savings accounts	554,413			536,169			Savings accounts	688,118		627,903
Certificates of deposit:							Certificates of deposit:
Brokered	170,667			215,758			Brokered	50,209		50,209
Other	595,237			610,689			Other	471,142		499,886
Total deposits	5,989,906			5,771,023			Total deposits	8,515,444		7,985,389
Subordinated debentures and notes	141,336			141,258			Subordinated debentures and notes	203,778		203,637
FHLB advances	222,000			222,406			FHLB advances	50,000		50,000
Other borrowings	173,061			230,886			Other borrowings	202,246		271,081
Notes payable	32,857			34,286			Notes payable	27,143		30,000

Other liabilities	95,047			66,747			Other liabilities	99,591		132,489
Total liabilities	$	6,654,207		$	6,466,606		Total liabilities	$	9,098,202	$	8,672,596

Commitments and contingent liabilities (Note 5)							Commitments and contingent liabilities (Note 5)

Shareholders' equity:							Shareholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding	—			—			Preferred stock, $0.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding	0		0
Common stock, $0.01 par value; 45,000,000 shares authorized; 28,140,602 and 28,067,087 shares issued, respectively	281			281
Treasury stock, at cost; 1,980,093 and 1,523,842 shares, respectively	(73,528		)	(58,181		)
Common stock, $0.01 par value; 45,000,000 shares authorized; 33,239,276 and 33,190,306 shares issued, respectively							Common stock, $0.01 par value; 45,000,000 shares authorized; 33,239,276 and 33,190,306 shares issued, respectively	332		332
Treasury stock, at cost; 1,980,093 shares							Treasury stock, at cost; 1,980,093 shares	(73,528)		(73,528)
Additional paid in capital	525,838			526,599			Additional paid in capital	698,005		697,839
Retained earnings	370,748			380,737			Retained earnings	441,511		417,212
Accumulated other comprehensive income	23,097			17,749			Accumulated other comprehensive income	26,177		37,120
Total shareholders' equity	846,436			867,185			Total shareholders' equity	1,092,497		1,078,975
Total liabilities and shareholders' equity	$	7,500,643		$	7,333,791		Total liabilities and shareholders' equity	$	10,190,699	$	9,751,571

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

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)


	Three months ended March 31,					Three months ended March 31,
(in thousands, except per share data)	2020		2019		(in thousands, except per share data)	2021		2020
Interest income:					Interest income:
Interest and fees on loans	$	67,169	$	61,025	Interest and fees on loans	$	76,973	$	67,169
Interest on debt securities:					Interest on debt securities:
Taxable	7,557		5,475		Taxable	4,540		7,557
Nontaxable	1,489		447		Nontaxable	3,079		1,489

Interest on interest-earning deposits	300		447		Interest on interest-earning deposits	189		300
Dividends on equity securities	173		223		Dividends on equity securities	179		173
Total interest income	76,688		67,617		Total interest income	84,960		76,688
Interest expense:					Interest expense:

Deposits	9,888		11,820		Deposits	2,663		9,888
Subordinated debentures and notes	1,919		1,648		Subordinated debentures and notes	2,819		1,919
FHLB advances	895		1,398		FHLB advances	195		895
Notes payable and other borrowings	618		408		Notes payable and other borrowings	160		618
Total interest expense	13,320		15,274		Total interest expense	5,837		13,320
Net interest income	63,368		52,343		Net interest income	79,123		63,368
Provision for credit losses	22,264		1,476		Provision for credit losses	46		22,264
Net interest income after provision for credit losses	41,104		50,867		Net interest income after provision for credit losses	79,077		41,104
Noninterest income:					Noninterest income:
Service charges on deposit accounts	3,143		2,935		Service charges on deposit accounts	3,084		3,143
Wealth management revenue	2,501		1,992		Wealth management revenue	2,483		2,501
Card services revenue	2,247		1,790		Card services revenue	2,496		2,247
Tax credit income	2,036		158

Tax credit income (expense)					Tax credit income (expense)	(1,041)		2,036

Miscellaneous income	3,481		2,355		Miscellaneous income	4,268		3,481
Total noninterest income	13,408		9,230		Total noninterest income	11,290		13,408
Noninterest expense:					Noninterest expense:
Employee compensation and benefits	21,685		19,352		Employee compensation and benefits	29,562		21,685
Occupancy	3,347		2,637		Occupancy	3,751		3,347
Data processing	2,082		1,906		Data processing	2,890		2,082
Professional fees	862		746		Professional fees	988		862

Merger-related expenses	—		7,270		Merger-related expenses	3,142		0
Other	10,697		7,927		Other	12,551		10,697
Total noninterest expense	38,673		39,838		Total noninterest expense	52,884		38,673

Income before income tax expense	15,839		20,259		Income before income tax expense	37,483		15,839
Income tax expense	2,971		4,103		Income tax expense	7,557		2,971
Net income	$	12,868	$	16,156	Net income	$	29,926	$	12,868

Earnings per common share					Earnings per common share
Basic	$	0.49	$	0.68	Basic	$	0.96	$	0.49
Diluted	0.48		0.67		Diluted	0.96		0.48

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


	Three months ended March 31,
(in thousands)	2021		2020
Net income	$	29,926	$	12,868
Other comprehensive income (loss), after-tax:
Change in unrealized gain (loss) on available-for-sale debt securities	(10,920)		10,564
Reclassification adjustment for realized gain on sale of available-for-sale debt securities	0		(3)
Reclassification of gain on held-to-maturity securities	(1,149)		(156)
Change in unrealized gain (loss) on cash flow hedges arising during the period	847		(5,180)
Reclassification of loss on cash flow hedges	279		123
Total other comprehensive income (loss), after-tax	(10,943)		5,348
Comprehensive income	$	18,983	$	18,216

Three months ended March 31,
(in thousands) 2020 2019
Net income $ 12,868
$ 16,156
Other comprehensive income (loss), after-tax:
Change in unrealized gain on available-for-sale debt securities 10,564
11,502
Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities (3 ) 220
Reclassification of (gain) loss on held-to-maturity securities (156 ) 2
Change in unrealized loss on cash flow hedges arising during the period (5,180 ) (952 )
Reclassification of loss on cash flow hedges 123
—
Total other comprehensive income, after-tax 5,348
10,772
Comprehensive income $ 18,216
$ 26,928

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

comprehensive income (loss)

shareholders’ equity

comprehensive income (loss)

shareholders’ equity

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)


	Three months ended March 31,
(in thousands, except share data)	2021		2020
Cash flows from operating activities:
Net income	$	29,926	$	12,868
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	1,581		1,524
Provision for credit losses	46		22,264
Deferred income taxes	3,834		(183)
Net amortization of debt securities	1,937		1,054
Amortization of intangible assets	1,415		1,491

Mortgage loans originated-for-sale	(49,065)		(33,537)
Proceeds from mortgage loans sold	52,908		30,888
Loss (gain) on:
Sale of investment securities	0		(4)
Sale of other real estate	(47)		52

Sale of state tax credits	(326)		(124)

Share-based compensation	1,275		960

Net accretion of loan discount	(736)		(2,510)


Changes in other assets and liabilities, net	(46,423)		(2,181)







Net cash (used in) provided by operating activities	(3,675)		32,562
Cash flows from investing activities:

Net increase in loans	(69,907)		(134,482)


Proceeds received from:
Sale of debt securities, available-for-sale	0		207
Paydown or maturity of debt securities, available-for-sale	69,953		55,932
Paydown or maturity of debt securities, held-to-maturity	18,220		1,595
Redemption of other investments	752		24,310
Sale of state tax credits held for sale	1,632		1,186
Sale of other real estate	450		443

Payments for the purchase of:
Available-for-sale debt securities	(118,791)		(69,336)
Other investments	(3,660)		(28,809)

State tax credits held for sale	0		(3,780)
Fixed assets, net	(489)		(918)
Net cash used in investing activities	(101,840)		(153,652)
Cash flows from financing activities:
Net increase in noninterest-bearing deposit accounts	198,389		27,223
Net increase in interest-bearing deposit accounts	331,666		191,659

Proceeds from FHLB advances, net	0		(300)


Repayments of notes payable	(2,857)		(1,429)




Net decrease in other borrowings	(68,835)		(57,825)
Cash dividends paid on common stock	(5,627)		(4,743)



Payments for the repurchase of common stock	0		(15,347)


Payments for the issuance of equity instruments, net	(1,109)		(1,721)


Net cash provided by financing activities	451,627		137,517
Net increase in cash and cash equivalents	346,112		16,427
Cash and cash equivalents, beginning of period	537,703		167,256
Cash and cash equivalents, end of period	$	883,815	$	183,683
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	4,836	$	13,026
Income taxes	30,167		0
Noncash transactions:
Transfer to other real estate owned in settlement of loans	$	1,236	$	0

Right-of-use assets obtained in exchange for lease obligations	0		200

Three months ended March 31,
(in thousands, except share data) 2020 2019
Cash flows from operating activities:
Net income $ 12,868
$ 16,156
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 1,524
1,162
Provision for credit losses 22,264
1,476
Deferred income taxes (183 ) 2,727
Net amortization of debt securities 1,054
407
Amortization of intangible assets 1,491
838
Mortgage loans originated-for-sale (33,537 ) (4,087 )
Proceeds from mortgage loans sold 30,888
3,825
Loss (gain) on:
Sale of investment securities (4 ) 292
Valuation adjustments and sale of other real estate 52
(66 )
Sale of state tax credits (124 ) (158 )
Share-based compensation 960
921
Net accretion of loan discount (2,510 ) (596 )
Changes in other assets and liabilities, net (2,181 ) (7,185 )
Net cash provided by operating activities 32,562
15,712
Cash flows from investing activities:
Acquisition cash purchase price, net of cash and cash equivalents acquired —
(23,376 )
Net decrease (increase) in loans (134,482 ) 13,855
Proceeds received from:
Sale of debt securities, available-for-sale 207
259,420
Paydown or maturity of debt securities, available-for-sale 55,932
27,684
Paydown or maturity of debt securities, held-to-maturity 1,595
1,269
Redemption of other investments 24,310
11,744
Sale of state tax credits held for sale 1,186
2,381
Sale of other real estate 443
66
Payments for the purchase of:
Available-for-sale debt securities (69,336 ) (221,711 )
Other investments (28,809 ) (14,977 )
State tax credits held for sale (3,780 ) (1,852 )
Fixed assets, net (918 ) (1,268 )
Net cash (used in) provided by investing activities (153,652 ) 53,235
Cash flows from financing activities:
Net increase (decrease) in noninterest-bearing deposit accounts 27,223
(83,290 )
Net increase (decrease) in interest-bearing deposit accounts 191,659
(48,770 )
Repayments of FHLB advances, net (300 ) 105,025
Proceeds from notes payable —
40,000
Repayments of notes payable (1,429 ) (2,000 )
Net decrease in other borrowings (57,825 ) (49,279 )
Cash dividends paid on common stock (4,743 ) (3,763 )
Payments for the repurchase of common stock (15,347 ) —
Payments for the issuance of equity instruments, net (1,721 ) (1,940 )
Net cash provided by (used in) financing activities 137,517
(44,017 )
Net increase in cash and cash equivalents 16,427
24,930
Cash and cash equivalents, beginning of period 167,256
196,552
Cash and cash equivalents, end of period $ 183,683
$ 221,482
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 13,026
$ 14,020
Noncash transactions:
Transfer to other real estate owned in settlement of loans $ —
$ 1,372
Right-of-use assets obtained in exchange for lease obligations 200
—
Common shares issued in connection with acquisition —
171,885

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 Enterprise Financial Services Corp (the “Company,” “EFSC,” or “Enterprise”) 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 ~~the~~ Arizona, California, Kansas, Missouri, Nevada, and New Mexico ~~markets~~ through its banking subsidiary, Enterprise Bank & Trust.

Operating results for the three months ended March 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, ~~2020.~~2021. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the ~~Securities and Exchange Commission.~~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 with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. 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, ~~2019.~~2020.

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.

~~Recently Adopted~~Recent Accounting Pronouncements

~~On January 1, 2020, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”~~ which replaces the incurred loss methodology with an expected loss methodology commonly referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. In addition, this standard made changes to the accounting for available-for-sale debt securities, including the requirement for credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities.

The Company adopted this standard using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under the new standard while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded an after-tax decrease to retained earnings of $18.1 million as of January 1, 2020 for the cumulative effect of adopting this standard.

The Company adopted this standard using the prospective transition approach for PCD assets that were previously classified as PCI assets. Management did not reassess whether PCI assets met the criteria of PCD assets as of the date of the adoption.

The Company elected not to maintain PCI pools for certain loans which are now accounted for individually. Thus they are now included in nonperforming and classified loans. Management did not reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption.

~~The following table illustrates the impact of adoption:~~

($ in thousands) December 31, 2019 Impact of Adoption January 1, 2020
Assets:
Loans $ 5,314,337
$ 7,091
$ 5,321,428
Allowance for credit losses on loans 43,288
28,387
71,675
Allowance for credit losses on held-to-maturity debt securities —
303
303
Deferred tax asset 14,851
5,898
20,749

Liabilities:
Reserve for unfunded commitments 430
2,413
2,843

Shareholders’ Equity
Retained Earnings 380,737
(18,114 ) 362,623

~~The Company also adopted ASU 2018-13,~~ ~~“Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”~~ on January 1, 2020. The Company previously selected the option to adopt the removal or modification of disclosures during the second quarter of 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments are applied retrospectively to all periods presented upon their effective date. The adoption of this update did not have a material effect on the Company's consolidated financial statements.

~~Accounting Standards Issued but not yet Adopted~~

FASB ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In March 2020, the FASB issued “Reference Rate Reform (Topic 848)” which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance is effective for contract modifications as of March 12, 2020 through December 31, 2022. The Company is actively working to amend and address impacted contracts to allow for a replacement index. Additionally, the Company is currently evaluating the optional expedients and exceptions and has not yet determined the impact this standard may have on its consolidated financial statements.

The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense.

~~Accrued interest receivable totaled $16.7 million at March 31, 2020 and was reported in Other Assets on the consolidated balance sheets.~~

The Company has purchased loans, some of which have experienced more than significant credit deterioration since origination. PCD loans are recorded at the amount paid. An ACL is determined using the same methodology as other loans held for investment. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and ACL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the ACL are recorded through provision expense.

~~Allowance for Credit Losses on Loans~~

The ACLL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected. Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

~~The ACLL is measured on a collective basis when similar risk characteristics exist. The Company has identified the following portfolio segments:~~

~~C&I~~ – C&I loans consist of loans to small and medium-sized businesses in a wide variety of industries. These loans are generally collateralized by inventory, accounts receivable, equipment, real estate and other commercial assets, and may be supported by other credit enhancements such as personal guarantees. Risk arises primarily due to a difference between expected and actual cash flows of the borrower. However, the recoverability of these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans. The fair value of the collateral securing these loans may fluctuate as market conditions change. Included within C&I are revolving loans supported by borrowing bases that fluctuate depending on the amount of underlying collateral. A portion of C&I loans consists of enterprise value lending, which are loans with senior debt exposure to private equity backed companies.

~~CRE~~ – CRE loans include various types of loans for which the Company holds real property as collateral. Commercial real estate lending activity is typically restricted to owner-occupied properties or to investor properties that are owned by customers with a current banking relationship. The primary risks of CRE loans include the borrower’s inability to pay, material decreases in the value of the real estate being held as collateral and significant increases in interest rates, which may make the real estate mortgage loan unprofitable. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.

~~Construction and Land Development~~ – The Company originates loans to finance construction projects including one- to four-family residences, multifamily residences, commercial office, and industrial projects. Construction loans are generally collateralized by first liens on the real estate and have floating interest rates. Construction loans are considered to have higher risks due to construction completion and timing risk, and the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans. Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change.

~~Residential Real Estate~~ – The Company originates loans to finance one- to four-family residences, secured by both first and second liens. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral. Residential loans with a second lien are inherently riskier due to the junior lien position.

~~Agricultural~~ – Agricultural loans are generally secured with equipment, cattle, crops or other non-real property and at times the underlying real property. Agricultural loans are included as a component of CRE and C&I loans.

~~Consumer~~ – The Company provides a broad range of consumer loans to customers, including personal lines of credit, credit cards and automobile loans. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral.

The Company utilizes a DCF method to measure the ACL on loans collectively evaluated that are sub-segmented by credit risk levels. The DCF method incorporates assumptions for probability of default, loss given default, prepayments and curtailments over the contractual term of the loans. In determining the probability of default, the Company utilized a regression analysis to determine certain economic factors that are relevant loss drivers in the portfolio segments based on historical or peer evaluations. National unemployment is a loss driver used in nearly all portfolios, except Consumer. The annual percentage change in gross domestic product is also used in C&I, Construction, Agricultural and Consumer portfolios. The annual percentage change in a commercial real estate index, national house price index and the consumer price index are used in the CRE, Residential Real Estate and Consumer portfolios, respectively. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

The Company uses a one-year reasonable and supportable forecast that considers baseline, upside and downside economic scenarios. For periods beyond the forecast period, the Company reverts to historical loss rates on a straight-line basis over a six-month period.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

NOTE 2 - EARNINGS PER SHARE

Basic earnings per common share data is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Common shares outstanding include common stock and restricted stock awards where recipients have satisfied the vesting terms. 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 March 31,
(in thousands, except per share data) 2020 2019
Net income as reported $ 12,868
$ 16,156

Weighted average common shares outstanding 26,473
23,927
Additional dilutive common stock equivalents 66
156
Weighted average diluted common shares outstanding 26,539
24,083

Basic earnings per common share: $ 0.49
$ 0.68
Diluted earnings per common share: 0.48
0.67


	Three months ended March 31,
(in thousands, except per share data)	2021		2020
Net income as reported	$	29,926	$	12,868








Weighted average common shares outstanding	31,247		26,473

Additional dilutive common stock equivalents	59		66
Weighted average diluted common shares outstanding	31,306		26,539

Basic earnings per common share:	$	0.96	$	0.49
Diluted earnings per common share:	0.96		0.48

For the three months ended March 31, ~~2020 and 2019~~2021 common stock equivalents of approximately ~~62,000 and 122,000, respectively,~~222,000 were excluded from the earnings per share calculations because their effect would have been anti-dilutive. Comparatively, there were 62,000 common stock equivalents excluded in the prior year period.

NOTE 3 - INVESTMENTS

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


	March 31, 2021
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:
Obligations of U.S. Government-sponsored enterprises	$	23,484	$	137	$	(176)	$	23,445
Obligations of states and political subdivisions	404,087		3,132		(3,662)		403,557
Agency mortgage-backed securities	477,151		16,841		(1,911)		492,081
U.S. Treasury bills	10,982		427		0		11,409
Corporate debt securities	14,750		425		(7)		15,168
Total securities available for sale	$	930,454	$	20,962	$	(5,756)	$	945,660
Held-to-maturity securities:

Obligations of states and political subdivisions	$	244,030	$	900	$	(2,491)	$	242,439
Agency mortgage-backed securities	96,777		1,432		(458)		97,751
Corporate debt securities	126,701		3,208		0		129,909
Total securities held-to-maturity	$	467,508	$	5,540	$	(2,949)	$	470,099
Less: Allowance for credit losses	449
Total securities held-to-maturity, net	$	467,059


	March 31, 2020													December 31, 2020
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses			Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:													Available-for-sale securities:
Obligations of U.S. Government-sponsored enterprises	$	9,960	$	270	$	—		$	—		$	10,230	Obligations of U.S. Government-sponsored enterprises	$	14,978	$	186	$	(3)	$	15,161
Obligations of states and political subdivisions	243,863		10,373		(205		)	—			254,031		Obligations of states and political subdivisions	335,271		8,994		(33)		344,232
Agency mortgage-backed securities	863,698		23,465		(496		)	—			886,667		Agency mortgage-backed securities	506,703		20,190		(321)		526,572
U.S. Treasury bills	9,973		613		—			—			10,586
U.S. Treasury Bills													U.S. Treasury Bills	10,980		486		0		11,466
Corporate debt securities													Corporate debt securities	14,750		248		0		14,998
Total securities available for sale	$	1,127,494	$	34,721	$	(701	)	$	—		$	1,161,514	Total securities available for sale	$	882,682	$	30,104	$	(357)	$	912,429
Held-to-maturity securities:													Held-to-maturity securities:

Obligations of states and political subdivisions	$	11,688	$	153	$	—		$	(1	)	$	11,840	Obligations of states and political subdivisions	$	248,324	$	2,814	$	0	$	251,138
Agency mortgage-backed securities	44,720		1,924		—			—			46,644		Agency mortgage-backed securities	112,742		2,295		(496)		114,541
Corporate debt securities	122,827		162		(3,090		)	(302		)	119,597		Corporate debt securities	126,993		8,851		0		135,844
Total securities held-to-maturity	$	179,235	$	2,239	$	(3,090	)	$	(303	)	$	178,081
Total securities held to maturity													Total securities held to maturity	$	488,059	$	13,960	$	(496)	$	501,523
Less: Allowance for credit losses	303												Less: Allowance for credit losses	449
Total securities held-to-maturity, net	$	178,932											Total securities held-to-maturity, net	$	487,610

December 31, 2019
(in thousands) Amortized Cost Gross
Unrealized Gains Gross
Unrealized Losses Fair Value
Available-for-sale securities:
    Obligations of U.S. Government-sponsored enterprises $ 9,954
$ 92
$ —
$ 10,046
    Obligations of states and political subdivisions 207,269
6,118
(363 ) 213,024
    Agency mortgage-backed securities 888,129
15,083
(1,191 ) 902,021
U.S. Treasury Bills $ 9,971
$ 255
$ —
$ 10,226
          Total securities available for sale $ 1,115,323
$ 21,548
$ (1,554 ) $ 1,135,317
Held-to-maturity securities:
   Obligations of states and political subdivisions $ 11,704
$ 170
$ —
$ 11,874
   Agency mortgage-backed securities 46,346
675
—
47,021
Corporate debt securities 123,116
128
(200 ) 123,044
          Total securities held to maturity $ 181,166
$ 973
$ (200 )
$ 181,939

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 having a fair value of ~~$431.7~~$465.9 million and ~~$484.8~~$525.8 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract provisions.

The amortized cost and estimated fair value of debt securities at March 31, ~~2020,~~2021, 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 3 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 $ 2,018
$ 2,054
$ —
$ —
Due after one year through five years 26,301
27,369
4,444
4,503
Due after five years through ten years 10,205
10,576
130,071
126,934
Due after ten years 225,272
234,848
—
—
Agency mortgage-backed securities 863,698
886,667
44,720
46,644
$ 1,127,494
$ 1,161,514

$ 179,235

$ 178,081

The following ~~table represents~~tables presents a summary of available-for-sale investment securities ~~that had~~in an unrealized ~~loss:~~loss position:

March 31, 2020
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 states and political subdivisions $ 10,475
$ 205
$ —
$ —
$ 10,475
$ 205
Agency mortgage-backed securities 82,614
415
5,198
81
87,812
496
$ 93,089
$ 620

$ 5,198

$ 81

$ 98,287

$ 701

The following table represents a summary of investment securities that had an unrealized loss:

December 31, 2019
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 states and political subdivisions 56,327
363
—
—
56,327
363
Agency mortgage-backed securities 131,693
756
41,491
435
173,184
1,191
Corporate debt securities 67,964
200
—
—
67,964
200
$ 255,984
$ 1,319

$ 41,491

$ 435

$ 297,475

$ 1,754

The unrealized losses at both March 31, ~~2020~~2021 and December 31, ~~2019,~~2020 were primarily attributable to changes in market interest rates ~~since~~after the securities were purchased. Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. This analysis requires management to consider various factors, which include among other considerations (1) the present value of the cash flows expected to be collected compared to the amortized cost of the security, (2) duration and magnitude of the decline in value, (3) the financial condition of the issuer or issuers, (4) structure of the security, and (5) the intent to sell the security or whether it is more likely than not the Company would be required to sell the security before its anticipated recovery in market value. At March 31, ~~2020, management performed its quarterly analysis of all securities with~~2021, the Company had not recorded an ~~unrealized loss and concluded no individual securities were other-than-temporarily impaired. Accrued interest receivable~~ACL on available-for-sale ~~debt securities totaled $4.5 million at~~securities. At March 31, ~~2020 and is excluded from~~2021, the ~~estimate of credit losses.~~Company had not recognized an other-than-temporary impairment.

Accrued interest receivable on held-to-maturity debt securities totaled ~~$1.4~~$3.5 million at March 31, ~~2020~~2021 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. At March 31, ~~2020,~~2021, the ACL on held-to-maturity securities was ~~$0.3~~$0.4 million.

During the three months ended March 31, 2021, there were no sales of available-for-sale investment securities. Proceeds from sales of available-for-sale investment securities during the three months ended March 31, 2020 were $207 thousand and gross gains were $4 thousand.

At March 31, 2021 and December 31, 2020, other investments totaled $51.1 million and $48.8 million, respectively. As a member of the FHLB system administered by the Federal Housing Finance Agency, the Bank is required to maintain a minimum investment in capital stock with the FHLB consisting of membership stock and activity-based stock. The FHLB capital stock of $12.0 million and $10.8 million at March 31, 2021 and December 31, 2020, respectively, 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 various investments in SBICs, CDFIs, and the Company’s investment in unconsolidated trusts used to issue preferred securities to third parties.

~~Below is~~The following table presents a summary of loans by ~~category~~category:


(in thousands)	March 31, 2021		December 31, 2020
Commercial and industrial	$	3,096,319	$	3,100,299
Real estate:
Commercial - investor owned	1,669,215		1,589,419
Commercial - owner occupied	1,517,755		1,498,408
Construction and land development	510,501		546,686
Residential	303,047		319,179
Total real estate loans	4,000,518		3,953,692
Other	212,068		187,083
Loans, before unearned loan fees	7,308,905		7,241,074
Unearned loan fees, net	(20,124)		(16,139)
Loans, including unearned loan fees	$	7,288,781	$	7,224,935

PPP loans totaled $754.4 million at March 31, ~~2020 and December 31, 2019:~~

(in thousands) March 31, 2020 December 31, 2019
Commercial and industrial $ 2,469,013
2,361,157
Real estate:
Commercial - investor owned 1,327,814
1,299,884
Commercial - owner occupied 720,543
697,437
Construction and land development 469,627
457,273
Residential 346,758
366,261
Total real estate loans 2,864,742
2,820,855
Consumer and other 126,212
134,941
Loans, before unearned loan fees 5,459,967
5,316,953
Unearned loan fees, net (2,450 ) (2,616 )
Loans, including unearned loan fees $ 5,457,517
$ 5,314,337

2021, or $737.7 million net of deferred fees of $16.7 million. The loan balance at March 31, ~~2020~~2021 also includes a ~~discount~~net premium on acquired loans of ~~$24.5~~$17.7 million. At March 31, ~~2020~~2021 loans of $2.7 billion were pledged to FHLB and the Federal Reserve Bank.

PPP loans totaled $709.9 million at December 31, 2020, or $698.6 million net of unearned fees of $11.3 million. The loan balance includes a net premium on acquired loans of $16.1 million at December 31, 2020. At December 31, 2020 loans of $2.5 billion were pledged to FHLB and the Federal Reserve Bank.

The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, to exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense.

Accrued interest receivable totaled $30.7 million at March 31, 2021 and was reported in Other Assets on the consolidated balance sheets.

A summary of the activity in the ~~ACLL~~ACL on loans by category ~~through~~for the three months ended March 31, 2021 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 December 31, 2020	$	58,812	$	32,062	$	17,012	$	21,413	$	4,585	$	2,787	$	136,671



Provision for credit losses	541		3,381		3,226		(7,091)		(152)		598		503
Charge-offs	(3,739)		(2,372)		(28)		0		(271)		(64)		(6,474)
Recoveries	327		34		9		235		143		79		827
Balance at March 31, 2021	$	55,941	$	33,105	$	20,219	$	14,557	$	4,305	$	3,400	$	131,527

The ACL on sponsor finance loans, which is included in the categories above, represented $19.7 million and $19.0 million, respectively, as of March 31, 2021 and December 31, 2020.

A summary of the activity in the ACL on loans by category for the three months ended March 31, 2020 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 December 31, 2019	$	27,455	$	5,935	$	4,873	$	2,611	$	1,280	$	1,134	$	43,288
CECL adoption	6,494		10,726		2,598		5,183		3,470		(84)		28,387
PCD loans immediately charged off	0		(5)		(57)		(217)		(1,401)		0		(1,680)
Balance at January 1, 2020	$	33,949	$	16,656	$	7,414	$	7,577	$	3,349	$	1,050	$	69,995
Provision for credit losses	11,591		3,224		1,994		2,309		2,011		566		21,695
Charge-offs	(63)		(2)		0		(31)		(122)		(86)		(304)
Recoveries	504		14		69		40		157		17		801
Balance at March 31, 2020	$	45,981	$	19,892	$	9,477	$	9,895	$	5,395	$	1,547	$	92,187

(in thousands) Commercial and industrial CRE - investor owned
CRE -
owner occupied
Construction and land development Residential real estate Consumer and other Total
Allowance for credit losses on loans:
Balance at December 31, 2019 $ 27,455
$ 5,935
$ 4,873
$ 2,611
$ 1,280
$ 1,134
$ 43,288
CECL adoption 6,494
10,726
2,598
5,183
3,470
(84 ) 28,387
PCD loans immediately charged off —
(5 ) (57 ) (217 ) (1,401 ) —
(1,680 )
Balance at January 1, 2020 $ 33,949
$ 16,656
$ 7,414
$ 7,577
$ 3,349
$ 1,050
$ 69,995
Provision for credit losses 11,591
3,224
1,994
2,309
2,011
566
21,695
Charge-offs (63 ) (2 ) —
(31 ) (122 ) (86 ) (304 )
Recoveries 504
14
69
40
157
17
801
Balance at March 31, 2020 $ 45,981
$ 19,892

$ 9,477

$ 9,895

$ 5,395

$ 1,547

$ 92,187

On January 1, 2020, the Company adopted the CECL methodology which added $28.4 million to the ACLL. Upon adoption, $1.7 million of nonaccrual PCD loans that were less than $100,000 were immediately charged-off. Under the CECL method, the Company recorded a $21.7 million provision for credit losses on loans in the first quarter 2020, compared to a $1.5 million provision for loan losses in the first quarter 2019 under the incurred loss method. The increase in the provision for credit losses on loans is due to the Company’s forecast of macroeconomic factors over the next 12 months, which significantly decreased in the first quarter 2020 due to the COVID-19 pandemic. The CECL methodology incorporates various economic ~~scenarios, including~~scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside ~~scenarios. In the first quarter 2020, the~~forecast. The Company ~~changed its weighting of economic~~weights these scenarios ~~to capture more downside risk in the economy. This changed~~at 70%, 5%, and 25%, respectively, which added ~~$2.2~~approximately $5.4 million to the ~~ACLL~~ACL over the baseline model. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. The Company has also recognized the risk posed by loans that have received multiple deferrals of principal and interest payments, loans in the ~~first quarter 2020.~~hospitality sector, and loans with other specific identified risks 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 additional shutdowns and self-quarantines if another significant wave of COVID hits, the vaccination process stalls, small-business bankruptcies occur at higher levels, or unemployment increases.

The following tables present the recorded investment in nonperforming loans by ~~category at March 31, 2020 and December 31, 2019, is as follows:~~category:


	March 31, 2021
(in thousands)	Nonaccrual		Restructured, accruing		Loans over 90 days past due and still accruing interest		Total nonperforming loans		Nonaccrual loans with no allowance
Commercial and industrial	$	18,372	$	3,243	$	893	$	22,508	$	8,239
Real estate:
Commercial - investor owned	7,379		0		0		7,379		455
Commercial - owner occupied	2,589		0		0		2,589		2,331
Construction and land development	0		0		0		0		0
Residential	3,868		77		0		3,945		2,795
Other	17		0		221		238		0
Total	$	32,225	$	3,320	$	1,114	$	36,659	$	13,820

~~There was no~~No interest income was recognized on nonaccrual loans induring the ~~first quarter~~three months ended March 31, 2021 or 2020.

December 31, 2019
(in thousands) Nonaccrual Restructured, accruing Loans over 90 days past due and still accruing interest Total nonperforming loans
Commercial and industrial $ 22,328
$ —
$ 250
$ 22,578
Real estate:
    Commercial - investor owned 2,303
—
—
2,303
    Commercial - owner occupied 213
—
—
213
    Residential 1,251
79
—
1,330
Consumer and other 1
—
—
1
       Total $ 26,096
$ 79
$ 250
$ 26,425

The following table presents the amortized cost basis of collateral-dependent nonperforming loans by class of loan at March 31, ~~2020:~~2021:


	Type of Collateral
(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien		Other
Commercial and industrial	$	10,737	$	0	$	3,064	$	0
Real estate:
Commercial - investor owned	7,155		0		0		0
Commercial - owner occupied	2,387		0		0		0

Residential	0		3,891		0		0
Other	0		0		0		215
Total	$	20,279	$	3,891	$	3,064	$	215

Type of Collateral
(in thousands) Commercial Real Estate Residential Real Estate Blanket Lien
Commercial and industrial $ 13,051
$ —
$ 5,910
Real estate:
Commercial - investor owned 4,115
—
—
Commercial - owner occupied 1,521
—
—
Construction and land development —
214
—
Residential —
3,927
—
Total $ 18,687
$ 4,141
$ 5,910

~~The recorded investment by category for loans restructured during the three months ended March 31, 2020 is as follows:~~

March 31, 2020
(in thousands, except for number of loans) Number of loans Pre-Modification Outstanding Recorded Balance Post-Modification Outstanding Recorded Balance
Commercial and industrial 1
$ 3,731
$ 3,731
Real estate:
Residential 2
155
155
Total 3
$ 3,886
$ 3,886

There were no loans restructured during the three months ended March 31, ~~2019.~~

~~There were no~~2021. The recorded investment by category for troubled debt ~~restructured loans~~restructurings that occurred during the three months ended March 31, 2020 are as follows:


	March 31, 2020
(in thousands, except for number of loans)		Number of loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial and industrial		1	$	3,731	$	3,731
Real estate:



Residential		2	155		155

Total		3	$	3,886	$	3,886

No troubled debt restructurings subsequently defaulted during the three months ended March 31, ~~2020~~2021 or ~~2019.~~2020.

The aging of the recorded investment in past due loans by class at March 31, ~~2020~~2021 is shown below.


	March 31, 2021
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	25,976	$	17,091	$	43,067	$	3,036,576	$	3,079,643
Real estate:
Commercial - investor owned	768		6,700		7,468		1,661,747		1,669,215
Commercial - owner occupied	312		3,987		4,299		1,513,456		1,517,755
Construction and land development	400		0		400		510,101		510,501
Residential	2,371		1,090		3,461		299,586		303,047
Other	486		237		723		207,897		208,620
Total	$	30,313	$	29,105	$	59,418	$	7,229,363	$	7,288,781

March 31, 2020
(in thousands)
30-89 Days
Past Due

90 or More
Days
Past Due

Total
Past Due
Current Total
Commercial and industrial $ 24,898
$ 9,491
$ 34,389
$ 2,434,624
$ 2,469,013
Real estate:
Commercial - investor owned 1,996
3,438
5,434
1,322,380
1,327,814
Commercial - owner occupied 3,870
1,182
5,052
715,491
720,543
Construction and land development 95
—
95
469,532
469,627
Residential 5,124
1,482
6,606
340,152
346,758
Consumer and other 459
75
534
123,228
123,762
Total $ 36,442
$ 15,668

$ 52,110

$ 5,405,407

$ 5,457,517

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 – Watch 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 at this time, 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 nonaccrual.

~~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 – Watch~~ 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 at this time, 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 nonaccrual.

The recorded investment by risk category of the loans by class at March 31, ~~2020,~~2021, which is based upon the most recent analysis performed is as follows:

Term Loans by Origination Year
(in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Converted to Term Loans Revolving Loans Total
Commercial and industrial
Pass (1-6) $ 274,021
$ 623,511
$ 328,712
$ 188,489
$ 53,064
$ 126,446
$ 2,557
$ 660,675
$ 2,257,475
Watch (7) 780
17,643
5,258
11,986
23,454
524
506
66,449
126,600
Classified (8-9) 649
20,887
8,438
3,881
5,253
3,581
431
26,687
69,807
Total Commercial and industrial $ 275,450
$ 662,041
$ 342,408
$ 204,356
$ 81,771
$ 130,551
$ 3,494
$ 753,811
$ 2,453,882

Commercial real estate-investor owned
Pass (1-6) $ 114,369
$ 356,099
$ 229,830
$ 154,406
$ 173,623
$ 204,948
$ 1,745
$ 52,875
$ 1,287,895
Watch (7) 113
10,395
1,305
400
12,614
1,623
—
—
26,450
Classified (8-9) —
978
8,043
445
246
3,757
—
—
13,469
Total Commercial real estate-investor owned $ 114,482
$ 367,472
$ 239,178
$ 155,251
$ 186,483
$ 210,328
$ 1,745
$ 52,875
$ 1,327,814

Commercial real estate-owner occupied
Pass (1-6) $ 50,382
$ 226,562
$ 99,918
$ 89,750
$ 58,499
$ 96,149
$ 2,797
$ 44,271
$ 668,328
Watch (7) 2,775
8,802
370
9,904
8,641
5,313
—
5,900
41,705
Classified (8-9) —
1,131
5,212
—
—
4,167
—
—
10,510
Total Commercial real estate-owner occupied $ 53,157
$ 236,495
$ 105,500
$ 99,654
$ 67,140
$ 105,629
$ 2,797
$ 50,171
$ 720,543

Construction real estate
Pass (1-6) $ 23,035
$ 184,561
$ 123,931
$ 63,034
$ 28,407
$ 14,672
$ —
$ 17,410
$ 455,050
Watch (7) 966
11,448
1,262
69
—
563
—
—
14,308
Classified (8-9) —
226
—
—
—
43
—
—
269
Total Construction real estate $ 24,001
$ 196,235
$ 125,193
$ 63,103
$ 28,407
$ 15,278
$ —
$ 17,410
$ 469,627

Residential real estate
Pass (1-6) $ 12,356
$ 37,811
$ 23,381
$ 24,306
$ 38,082
$ 132,715
$ 245
$ 65,660
$ 334,556
Watch (7) 1
1,045
875
—
4
2,683
—
1,093
5,701
Classified (8-9) —
1,715
767
13
131
2,882
—
49
5,557
Total residential real estate $ 12,357
$ 40,571
$ 25,023
$ 24,319
$ 38,217
$ 138,280
$ 245
$ 66,802
$ 345,814

Consumer and other
Pass (1-6) $ 1,257
$ 26,478
$ 20,911
$ 1,735
$ 5,535
$ 35,940
$ —
$ 29,311
$ 121,167
Watch (7) —
2
—
—
—
1
—
1
4
Classified (8-9) —
2
4
6
—
24
10
24
70
Total consumer and other $ 1,257
$ 26,482
$ 20,915
$ 1,741
$ 5,535
$ 35,965
$ 10
$ 29,336
$ 121,241


	Term Loans by Origination Year
(in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total
Commercial and industrial
Pass (1-6)	$	510,640	$	1,044,599	$	403,420	$	196,752	$	121,210	$	65,492	$	8,432	$	515,327	$	2,865,872
Watch (7)	20,506		34,164		8,303		15,706		4,378		15,002		191		57,994		156,244
Classified (8-9)	3,731		6,220		9,270		2,823		354		1,761		407		19,277		43,843
Total Commercial and industrial	$	534,877	$	1,084,983	$	420,993	$	215,281	$	125,942	$	82,255	$	9,030	$	592,598	$	3,065,959

Commercial real estate-investor owned
Pass (1-6)	$	125,834	$	471,216	$	351,386	$	195,605	$	129,903	$	252,747	$	3,712	$	38,880	$	1,569,283
Watch (7)	2,782		32,554		13,017		6,588		0		24,282		0		0		79,223
Classified (8-9)	0		6,012		5,300		6,651		0		2,746		0		0		20,709
Total Commercial real estate-investor owned	$	128,616	$	509,782	$	369,703	$	208,844	$	129,903	$	279,775	$	3,712	$	38,880	$	1,669,215

Commercial real estate-owner occupied
Pass (1-6)	$	88,848	$	422,455	$	253,188	$	205,203	$	161,983	$	258,470	$	0	$	42,003	$	1,432,150
Watch (7)	2,111		8,967		5,212		17,006		6,130		9,732		0		1,752		50,910
Classified (8-9)	383		1,794		7,595		5,976		7,726		11,158		0		63		34,695
Total Commercial real estate-owner occupied	$	91,342	$	433,216	$	265,995	$	228,185	$	175,839	$	279,360	$	0	$	43,818	$	1,517,755

Construction real estate
Pass (1-6)	$	76,142	$	180,898	$	120,004	$	30,559	$	7,843	$	15,954	$	0	$	24,405	$	455,805
Watch (7)	16,333		62		85		20,748		11,287		2,468		0		0		50,983
Classified (8-9)	0		55		3,030		499		0		29		0		100		3,713
Total Construction real estate	$	92,475	$	181,015	$	123,119	$	51,806	$	19,130	$	18,451	$	0	$	24,505	$	510,501

Residential real estate
Pass (1-6)	$	15,166	$	56,188	$	23,567	$	15,421	$	14,844	$	109,575	$	112	$	57,997	$	292,870
Watch (7)	0		313		801		513		0		1,725		0		379		3,731
Classified (8-9)	220		887		717		77		14		3,543		0		72		5,530
Total residential real estate	$	15,386	$	57,388	$	25,085	$	16,011	$	14,858	$	114,843	$	112	$	58,448	$	302,131

Other
Pass (1-6)	$	33,630	$	56,052	$	21,753	$	27,503	$	9,290	$	25,300	$	0	$	31,640	$	205,168
Watch (7)	0		0		1		7		0		2,588		0		5		2,601
Classified (8-9)	0		0		16		18		1		23		0		1		59
Total Other	$	33,630	$	56,052	$	21,770	$	27,528	$	9,291	$	27,911	$	0	$	31,646	$	207,828

In the table above, loan originations in ~~2020~~2021 and ~~2019~~2020 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years.

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

The following table presents the recorded investment on loans based on payment activity:

March 31, 2020
(in thousands) Performing Non Performing Total
Commercial and industrial $ 15,060
$ 71
$ 15,131
Real estate:
Residential 944
—
944
Consumer and other 2,465
56
2,521
Total $ 18,469
$ 127
$ 18,596


	March 31, 2021
(in thousands)	Performing		Non Performing		Total
Commercial and industrial	$	13,682	$	2	$	13,684
Real estate:



Residential	916		0		916
Other	771		21		792
Total	$	15,369	$	23	$	15,392

~~The recorded investment by risk category of loans by class at December 31, 2019, was as follows:~~

December 31, 2019
(in thousands) Pass (1-6) Watch (7) Classified (8 & 9) Total*
Commercial and industrial $ 2,151,084
$ 124,718
$ 70,021
$ 2,345,823
Real estate:
Commercial - investor owned 1,242,569
17,572
2,840
1,262,981
Commercial - owner occupied 643,276
28,773
6,473
678,522
Construction and land development 437,134
12,140
106
449,380
Residential 348,246
4,450
2,496
355,192
Consumer and other 132,096
3
51
132,150
Total $ 4,954,405
$ 187,656

$ 81,987
$ 5,224,048

*Excludes $90.3 million of loans accounted for as PCI

In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. As of April 30, 2020, $392.1 million loans have participated in the programs, including $190.8 million loans deferring interest payments of $2.2 million. In addition, the Company has been actively participating in the PPP since the SBA began accepting applications in April 2020. In the second quarter 2020, the Company expects to fund $856.5 million in PPP loans that have been approved by the SBA.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company issues financial instruments with off balance sheet risk in the normal course of the 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 represented by 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 off-balance-sheet financial instruments ~~as of March 31, 2020, and December 31, 2019,~~ are as follows:

(in thousands) March 31, 2020 December 31, 2019
Commitments to extend credit $ 1,411,151
$ 1,469,413
Letters of credit 50,981
47,969

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 March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, approximately ~~$138.1~~$178.5 million and ~~$144.8~~$160.6 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 requirements. 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 ~~include $3.7~~includes $5.4 million and ~~0.4~~$5.7 million for estimated losses attributable to the unadvanced commitments at March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance or payment of a customer to a third party. These standby 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 March 31, ~~2020,~~2021, the approximate remaining terms of standby letters of credit range from 1 month to 4 years,. 9 months.

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 risk 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 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 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. 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. These derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. ~~These~~The Company has executed a series of cash flow hedges ~~include: (1) swaps of variable three-month LIBOR~~to fix the effective interest rate for payments due on $62.0 million of LIBOR-based junior subordinated debentures to a weighted-average-fixed rate of 2.62% ~~over approximately six years, (2) a swap~~. Select terms of the federal funds effective rate on $100.0 million of rolling FHLB overnight advances to a fixed rate of 1.12% for three years, and (3) a swap of three-month LIBOR on $100.0 million of rolling three-month FHLB advances for five years.hedges are as follows:


$ in thousands
Notional		Fixed Rate		Maturity Date
$	15,465	2.60	%	March 15, 2024
$	14,433	2.60	%	March 30, 2024
$	18,558	2.64	%	March 15, 2026
$	13,506	2.64	%	March 17, 2026

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest 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 expense as interest payments are paid on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional ~~$2.2~~$1.5 million will be reclassified as an increase to interest expense.

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 as of March 31, 2020 and December 31, 2019.~~instruments:


	Notional Amount				Derivative Assets				Derivative Liabilities
(in thousands)	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Derivatives Designated as Hedging Instruments:
Interest rate swap	$	61,962	$	61,962	$	0	$	0	$	4,488	$	5,987


Derivatives not Designated as Hedging Instruments:
Interest rate swap	$	1,007,417	$	1,026,016	$	20,271	$	28,703	$	20,311	$	28,980



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

Derivative Assets Derivative Liabilities
March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019
(in thousands) Notional Amount Balance Sheet Location Fair Value Notional Amount Balance Sheet Location Fair Value Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives Designated as Hedging Instruments
Interest rate swap $ 261,962
Other Assets $ —
$ 61,962
Other Assets $ —
Other Liabilities $ 9,587
Other Liabilities $ 2,872
Total $ —
$ —
$ 9,587
$ 2,872

Derivatives not Designated as Hedging Instruments
Interest rate swap $ 842,899
Other Assets $ 33,697
$ 749,819
Other Assets $ 11,055
Other Liabilities $ 33,732
Other Liabilities $ 11,875
Total $ 33,697
$ 11,055
$ 33,732
$ 11,875

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are subject to ~~offsetting as of March 31, 2020 and December 31, 2019.~~offsetting. The gross amounts of assets or liabilities can be reconciled to the tabular disclosure of fair value. The ~~tabular disclosure of~~ fair value table above provides the location that financial assets and liabilities are presented on the Balance Sheet.


As of March 31, 2020
As of March 31, 2021													As of March 31, 2021
							Gross Amounts Not Offset in the Statement of Financial Position													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		(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:													Assets:
Interest rate swap	$	33,697	$	—	$	33,697	$	13	$	—	$	33,683	Interest rate swap	$	20,271	$	0	$	20,271	$	1,322	$	0	$	18,949

Liabilities:													Liabilities:
Interest rate swap	$	43,319	$	—	$	43,319	$	13	$	42,746	$	560	Interest rate swap	$	24,799	$	0	$	24,799	$	1,322	$	23,090	$	387
Securities sold under agreements to repurchase	173,061		—		173,061		—		173,061		—		Securities sold under agreements to repurchase	202,246		0		202,246		0		202,246		0

As of December 31, 2019
As of December 31, 2020													As of December 31, 2020
							Gross Amounts Not Offset in the Statement of Financial Position													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		(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:													Assets:
Interest rate swap	$	11,055	$	—	$	11,055	$	56	$	—	$	10,999	Interest rate swap	$	28,703	$	0	$	28,703	$	2	$	0	$	28,701

Liabilities:													Liabilities:
Interest rate swap	$	14,747	$	—	$	14,747	$	56	$	14,573	$	118	Interest rate swap	$	34,967	$	0	$	34,967	$	2	$	34,903	$	62
Securities sold under agreements to repurchase	230,886		—		230,886		—		230,886		—		Securities sold under agreements to repurchase	271,081		0		271,081		0		271,081		0

As of March 31, ~~2020,~~2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was ~~$43.3 million.~~ $25.6 million. Further, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of ~~$43.3~~$23.8 million.

NOTE 7 - FAIR VALUE MEASUREMENTS

The following table summarizes financial instruments measured at fair value on a recurring basis ~~as of March 31, 2020 and December 31, 2019,~~ segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

March 31, 2020
(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 $ —
$ 10,230
$ —
$ 10,230
Obligations of states and political subdivisions —
254,031
—
254,031
Agency mortgage-backed securities —
886,667
—
886,667
U.S. Treasury bills —
10,586
—
10,586
Total securities available for sale —
1,161,514

—

1,161,514
Derivatives —
33,697
—
33,697
Total assets $ —
$ 1,195,211

$ —

$ 1,195,211

Liabilities

Derivatives $ —
$ 43,319
$ —
$ 43,319
Total liabilities $ —
$ 43,319

$ —

$ 43,319


	December 31, 2020
(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	$	0	$	15,161	$	0	$	15,161
Obligations of states and political subdivisions	0		344,232		0		344,232
Residential mortgage-backed securities	0		526,572		0		526,572
Corporate debt securities	0		14,998		0		14,998
U.S. Treasury bills	0		11,466		0		11,466
Total securities available-for-sale	0		912,429		0		912,429



Derivative financial instruments	0		28,703		0		28,703
Total assets	$	0	$	941,132	$	0	$	941,132

Liabilities
Derivatives	$	0	$	34,967	$	0	$	34,967
Total liabilities	$	0	$	34,967	$	0	$	34,967

December 31, 2019
(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 $ —
$ 10,046
$ —
$ 10,046
Obligations of states and political subdivisions —
213,024
—
213,024
Residential mortgage-backed securities —
902,021
—
902,021
U.S. Treasury bills —
10,226
—
10,226
Total securities available-for-sale —
1,135,317

—

1,135,317
Derivative financial instruments —
11,055
—
11,055
Total assets $ —
$ 1,146,372

$ —

$ 1,146,372

Liabilities

Derivatives $ —
$ 14,747
$ —
$ 14,747
Total liabilities $ —
$ 14,747

$ —

$ 14,747

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.



	March 31, 2021
(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)
Nonaccrual loans (1)	$	2,503	$	0	$	0	$	2,503



(1) The amounts represent only balances measured at fair value during the period and still held as of the reporting date.

(1) (1) (1) (1)
(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)
Impaired loans $ 288
$ —
$ —
$ 288
Other real estate 3,902
—
—
3,902
Total $ 4,190
$ —

$ —

$ 4,190

(1) The amounts represent only balances measured at fair value during the period and still held as of the reporting date.

The following table presents the losses recorded in relation to assets measured on a nonrecurring basis and still held as of the reporting date.


	Three months ended
(in thousands)	March 31, 2021		March 31, 2020
Nonaccrual loans	$	1,742	$	11
Other real estate	0		777
Total	$	1,742	$	788

Following is a summary of the carrying amounts and fair values of ~~the Company’s~~certain financial ~~instruments on the consolidated balance sheets at March 31, 2020 and December 31, 2019.~~instruments:


	March 31, 2021					December 31, 2020
(in thousands)	Carrying Amount		Estimated fair value		Level	Carrying Amount		Estimated fair value		Level
Balance sheet assets




Securities held-to-maturity, net	$	467,059	$	470,099	Level 2	$	487,610	$	501,523	Level 2
Other investments	51,099		51,099		Level 2	48,764		48,764		Level 2
Loans held for sale	8,531		8,531		Level 2	13,564		13,564		Level 2

Loans, net	7,157,254		7,099,662		Level 3	7,088,264		7,067,562		Level 3
State tax credits, held for sale	34,287		37,802		Level 3	36,853		39,925		Level 3


Balance sheet liabilities
Certificates of deposit	$	521,351	$	525,000	Level 3	$	550,095	$	553,946	Level 3
Subordinated debentures and notes	203,778		193,071		Level 2	203,637		192,889		Level 2
FHLB advances	50,000		51,694		Level 2	50,000		51,871		Level 2
Other borrowings and notes payable	229,389		229,389		Level 2	301,081		301,081		Level 2

March 31, 2020 December 31, 2019
(in thousands) Carrying Amount Estimated fair value Level Carrying Amount Estimated fair value Level
Balance sheet assets
Securities held-to-maturity 178,932
178,081
Level 2 181,166
181,939
Level 2
Other investments 41,703
41,703
Level 2 38,044
38,044
Level 2
Loans held for sale 8,430
8,430
Level 2 5,570
5,570
Level 2
Loans, net 5,365,330
5,255,133
Level 3 5,271,049
5,205,651
Level 3
State tax credits, held for sale 39,521
44,539
Level 3 36,802
39,046
Level 3

Balance sheet liabilities
Certificates of deposit 765,904
772,208
Level 3 826,447
825,203
Level 3
Subordinated debentures and notes 141,336
127,064
Level 2 141,258
130,985
Level 2
FHLB advances 222,000
223,074
Level 2 222,406
221,402
Level 2
Other borrowings 205,918
205,894
Level 2 265,172
265,172
Level 2

For information regarding the methods and assumptions used to estimate the fair value of each class of financial instruments refer to Note 19 – Fair Value Measurements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the ~~Securities and Exchange Commission.~~SEC.

~~NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE INCOME~~

(in thousands) Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities Unamortized Gain (Loss) on Held-to-Maturity Securities Net Unrealized Loss on Cash Flow Hedges Total
Balance, December 31, 2019 $ 14,977
$ 4,934
$ (2,162 ) $ 17,749
Net change 10,561
(156 ) (5,057 ) 5,348
Balance, March 31, 2020 $ 25,538
$ 4,778
$ (7,219 ) $ 23,097

(in thousands) Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities Unamortized Gain (Loss) on Held-to-Maturity Securities Net Unrealized Loss on Cash Flow Hedges Total
Balance, December 31, 2018 $ (9,047 ) $ (235 ) $ —
$ (9,282 )
Net change 11,722
2
(952 ) 10,772
Balance, March 31, 2019 $ 2,675
$ (233 ) $ (952 ) $ 1,490

NOTE 8 - SHAREHOLDERS’ EQUITY AND COMPENSATION PLANS

Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

The following ~~table presents~~tables present the changes in accumulated other comprehensive income after-tax by component:


Three months ended March 31, 2021
(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities		Unamortized Gain (Loss) on Held-to-Maturity Securities		Net Unrealized Loss on Cash Flow Hedges		Total
Balance, December 31, 2020	$	22,320	$	19,308	$	(4,508)	$	37,120
Net change	$	(10,920)	$	(1,149)	$	1,126	$	(10,943)

Balance, March 31, 2021	$	11,400	$	18,159	$	(3,382)	$	26,177






Three months ended March 31, 2020
(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities		Unamortized Gain (Loss) on Held-to-Maturity Securities		Net Unrealized Loss on Cash Flow Hedges		Total
Balance, December 31, 2019	$	14,977	$	4,934	$	(2,162)	$	17,749
Net change	$	10,561	$	(156)	$	(5,057)	$	5,348
Balance, March 31, 2020	$	25,538	$	4,778	$	(7,219)	$	23,097

The following tables present the pre-tax and after-tax changes in the components of other comprehensive income:

Three months ended March 31,
(in thousands) 2020 2019
Pre-tax Tax effect After-tax Pre-tax Tax effect After-tax
Change in unrealized gain on available-for-sale debt securities $ 14,029
$ 3,465
$ 10,564
$ 15,275
$ 3,773
$ 11,502
Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities^(a)
(4 ) (1 ) (3 ) 292
72
220
Reclassification of (gain) loss on held-to-maturity securities^(b)
(207 ) (51 ) (156 ) 3
1
2
Change in unrealized loss on cash flow hedges arising during the period (6,879 ) (1,699 ) (5,180 ) (1,264 ) (312 ) (952 )
Reclassification of loss on cash flow hedges^(b)
163
40
123
—
—
—
Total other comprehensive income $ 7,102
$ 1,754
$ 5,348
$ 14,306
$ 3,534
$ 10,772


	Three months ended March 31,
(in thousands)	2021						2020
	Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax
Change in unrealized gain (loss) on available-for-sale debt securities	$	(14,541)	$	(3,621)	$	(10,920)	$	14,029	$	3,465	$	10,564
Reclassification adjustment for realized gain on sale of available-for-sale debt securities(a)	0		0		0		(4)		(1)		(3)
Reclassification of gain on held-to-maturity securities(b)	(1,530)		(381)		(1,149)		(207)		(51)		(156)
Change in unrealized gain (loss) on cash flow hedges arising during the period	1,128		281		847		(6,879)		(1,699)		(5,180)
Reclassification of loss on cash flow hedges(b)	372		93		279		163		40		123
Total other comprehensive income	$	(14,571)	$	(3,628)	$	(10,943)	$	7,102	$	1,754	$	5,348

^(a)The pre-tax amount is reported in noninterest income/expense in the Consolidated Statements of Operations

^(b)The pre-tax amount is reported in interest income/expense in the Consolidated Statements of Operations

Employee Stock Options

During the three months ended March 31, 2021, employee stock options were granted under the Amended and Restated 2018 Stock Incentive Plan.

Various information related to the stock options is shown below.


	Employee Stock Options	Weighted Average Life	Weighted Average Price		Shares Exercisable	Weighted Average Exercise Price
Options Outstanding, December 31, 2020	0
Options granted	111,804	9.9	$	43.81	0	$	0
Options Outstanding, March 31, 2021	111,804

NOTE 9 - SUBSEQUENT EVENT

On April 26, 2021 the Company and the Bank entered into a definitive merger agreement with First Choice Bancorp (“FCBP”), the holding company of First Choice Bank (“First Choice”) pursuant to which the Company will acquire FCBP in an all-stock merger. Under the terms of the merger agreement, FCBP will merge with and into the Company, and First Choice will subsequently merge with and into the Bank (with the Company and the Bank as the surviving entities) in a transaction valued at approximately $397.7 million, or $33.40 per FCBP share, based on the closing price of EFSC’s common stock on April 23, 2021. On a pro forma consolidated basis, the combined company would have approximately $12.7 billion in consolidated total assets as of March 31, 2021.

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

RESULTS OF OPERATIONS

~~Some of the information in this~~

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 the FCBP acquisition and other acquisitions.Forward-looking statements are typically ~~are~~ identified with the use of terms such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” ~~“continue”~~“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 ~~also include, but~~ are ~~not limited~~inherently subject to ~~statements regarding plans, objectives, expectations or consequences of statements about the future performance, operations products~~risks and ~~services of the Company~~uncertainties and ~~its subsidiaries. Our~~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.

The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first three months of ~~2020~~2021 compared to the financial condition as of December 31, ~~2019.~~2020. In addition, this discussion summarizes the significant factors affecting the results of operations, liquidity and cash flows of the Company for the three months ended March 31, ~~2020,~~2021, compared to the ~~same periods~~linked fourth quarter (“linked quarter”) in ~~2019.~~2020. In light of the nature of the Company’s business, which is not seasonal, 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 year-to-date period in 2020. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

~~COVID-19 Pandemic~~

On January 31, 2020, the Secretary of Health and Human Services declared a public health emergency due to the global outbreak of a new strain of coronavirus (COVID-19). On March 13, 2020, the President of the United States proclaimed the COVID-19 as a national emergency, following the World Health Organization’s categorization of the outbreak as a pandemic. COVID-19 continues to aggressively spread globally, including throughout the United States. The pandemic and resulting travel bans, closure of non-essential businesses, social distancing measures and government responses across the country have had a profound impact on the global economy, financial markets and how business has been conducted across all industries and have affected many of the Company’s customers and clients. To the extent that the economic impacts of the pandemic continue for a prolonged period and conditions stagnate or worsen, our provision for credit losses, noninterest income, and profitability may be adversely affected.

The Company has taken proactive and disciplined steps to promote the safety and overall wellbeing of its employees, customers and stakeholders, as well as to manage its financial performance. Steps taken include activation of the Company’s business continuity plan, formation of a communication and action task force, cost containment measures, restrictions on business travel, conversion of in-person meetings to virtual and a work-from-home mandate. The Company has also worked with its customers to implement appropriate loan deferral strategies in certain circumstances.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law. The CARES Act contains provisions to assist individuals and businesses, including the SBA’s Paycheck Protection Program. The PPP provided $349 billion in guaranteed loans that are forgivable if certain requirements are met. On April 24, 2020, an additional $310 million was added to the PPP program. The Company has been actively participating in the PPP since the SBA began accepting applications in April 2020. In the second quarter 2020, the Company expects to fund $856.5 million in PPP loans that have been approved by the SBA. The CARES Act included a provision that allowed depository institutions the option to defer adoption of the CECL standard to the earlier of (1) the end of the COVID-19 national emergency or (2) December 31, 2020. The Company did not elect the deferral option.

On April 7, 2020, the U.S. banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the CARES Act. The statement also encourages institutions to work constructively with borrowers affected by COVID-19 and states that the agencies will not criticize supervised institutions for prudent loan modifications. Both the CARES Act and the interagency statement provide relief from the accounting and reporting implications of troubled debt restructurings. The Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. As of April 30, 2020, $392.1 million loans have participated in the programs, including $190.8 million loans deferring interest payments of $2.2 million.

Critical Accounting Policies

The ~~following~~Company’s critical accounting policies are considered ~~most critical~~important to the understanding of the Company’s financial condition and results of operations. These ~~critical~~ 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. ~~The~~

A full description of our critical accounting policies and the impact and any associated risks related to ~~our critical accounting~~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, ~~2019.~~2020.

The Company has prepared 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. The three months ended March 31, ~~2020 were~~2021 continued to be characterized by heightened uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management. 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 January 1, 2020, the Company adopted Accounting Standard Update 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard, referred to as CECL, requires an estimate of lifetime expected credit losses on certain financial assets measured at amortized cost.~~

~~The~~Utilizing the CECL methodology, the Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively the ACL. The ACL is a valuation account to adjust the cost basis to the amount expected to be collected, based on management’s estimate of 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 that 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 ~~historical~~ 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.

~~Goodwill and Other Intangible Assets~~

The ~~Company completes~~Company’s allowance for credit losses was $131.5 million at March 31, 2021 based on the weighting of the different economic scenarios. As a ~~goodwill impairment test in the fourth quarter each year or whenever events or changes in circumstances indicate~~hypothetical example, if the Company ~~may not be able to recover~~had only used the ~~goodwill, or intangible assets, respective carrying amount. The impairment test involves~~upside scenario, the ~~use of various estimates and assumptions. Management believes~~allowance would have decreased $21.9 million. Conversely, the ~~estimates and assumptions utilized are reasonable.~~allowance would have increased $19.4 million using only the downside scenario.

Goodwill is evaluated for impairment at the reporting unit level. Reporting units are defined as the same level as, or one level below, an operating segment. An operating segment is a component of a business for which separate financial information is available that management regularly evaluates in deciding how to allocate resources and assess performance. The Company has one reporting unit and one operating segment.

Potential impairments to goodwill must first be identified by performing a qualitative assessment that evaluates relevant events or circumstances to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount. If this test indicates it is more likely than not that goodwill has been impaired, then a quantitative impairment test is completed. The quantitative impairment test calculates the fair value of the reporting unit and compares it with its carrying amount, including goodwill. If the carrying amount of goodwill exceeds its implied fair market value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

Intangible assets other than goodwill, such as core deposit intangibles, determined to have finite lives are amortized over their estimated remaining useful lives. These assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

In the first quarter 2020, an assessment of goodwill and intangibles was performed due to a decrease in the Company’s market capitalization below book value. The impairment evaluation of goodwill and intangible balances did not identify any impairment in the first quarter 2020, though there can be no assurance that prolonged market volatility resulting from the COVID-19 pandemic will not result in impairments to goodwill or other intangibles in future periods.

Executive Summary

The Company closed its acquisition of ~~Trinity~~Seacoast on ~~March 8, 2019.~~November 12, 2020. The results of operations of ~~Trinity~~Seacoast are included in our results from this date forward, which may affect certain comparisons to the ~~first quarter of 2019.~~three months ended March 31, 2020.

Below are highlights of our financial performance for the three months ended March 31, 2021, December 31, 2020 and ~~2019.~~March 31, 2020.


(in thousands, except per share data)	At or for the three months ended
	March 31, 2021			December 31, 2020			March 31, 2020
EARNINGS
Total interest income	$	84,960		$	84,113		$	76,688
Total interest expense	5,837			6,667			13,320
Net interest income	79,123			77,446			63,368
Provision for credit losses	46			9,463			22,264
Net interest income after provision for credit losses	79,077			67,983			41,104
Total noninterest income	11,290			18,506			13,408
Total noninterest expense	52,884			51,050			38,673
Income before income tax expense	37,483			35,439			15,839
Income tax expense	7,557			6,508			2,971
Net income	$	29,926		$	28,931		$	12,868

Basic earnings per share	$	0.96		$	1.00		$	0.49
Diluted earnings per share	$	0.96		1.00			$	0.48

Return on average assets	1.22		%	1.26		%	0.70		%
Return on average common equity	11.07		%	11.60			5.98		%
Return on average tangible common equity1	14.92		%	15.73			8.22		%
Net interest margin (tax equivalent)	3.50		%	3.66			3.79		%

Efficiency ratio	58.49		%	53.20			50.37		%
Core efficiency ratio1	55.02		%	50.93			51.21		%
Book value per common share	$	34.95		$	34.57		$	32.36
Tangible book value per common share1	$	25.92		25.48			$	23.38

ASSET QUALITY
Net charge-offs (recoveries)	$	5,647		$	(612)		$	1,183
Nonperforming loans	36,659			38,507			37,204
Classified assets	114,713			123,808			104,754
Nonperforming loans to total loans	0.50		%	0.53		%	0.68		%
Nonperforming assets to total assets	0.42		%	0.45			0.56		%
ACL on loans to total loans	1.80		%	1.89			1.69		%
Net charge-offs (recoveries) to average loans (annualized)	0.32		%	(0.04)			0.09		%

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

(in thousands, except per share data) At or for the three months ended
March 31,
2020 March 31,
2019
EARNINGS
Total interest income $ 76,688
$ 67,617
Total interest expense 13,320
15,274
Net interest income 63,368
52,343
Provision for credit losses 22,264
1,476
Net interest income after provision for credit losses 41,104
50,867
Total noninterest income 13,408
9,230
Total noninterest expense 38,673
39,838
Income before income tax expense 15,839
20,259
Income tax expense 2,971
4,103
Net income $ 12,868
$ 16,156

Basic earnings per share $ 0.49
$ 0.68
Diluted earnings per share 0.48
0.67

Return on average assets 0.70 % 1.10 %
Return on average common equity 5.98
9.89
Return on average tangible common equity¹
8.22
12.93
Net interest margin (tax equivalent) 3.79
3.87
Core net interest margin¹
3.71
3.79
Efficiency ratio 50.37
64.70
Core efficiency ratio¹
51.21
54.06
Book value per common share $ 32.36
$ 29.68
Tangible book value per common share¹
23.38
20.80

ASSET QUALITY
Net charge-offs $ 1,183
$ 1,826
Nonperforming loans 37,204
9,607
Classified assets 104,754
79,750
Nonperforming loans to total loans 0.68 % 0.19 %
Nonperforming assets to total assets 0.56
0.24
ACLL to total loans 1.69
0.86
Net charge-offs to average loans (annualized) 0.09
0.16

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

For the ~~first quarter 2020~~three months ended March 31, 2021 compared to the ~~first quarter 2019,~~three months ended December 31, 2020, and March 31, 2020, the Company notes the following trends:

~~For~~•The Company was active in continuing to support its customers in the PPP. Details of the PPP loans are noted in the following table:


	Quarter ended
(in thousands)	March 31, 2021			December 31, 2020
PPP loans outstanding, net of deferred fees	$	737,660		$	698,645


Average PPP loans outstanding, net	692,161			806,697
PPP average loan size	220			187
PPP interest and fee income	8,475			10,261
PPP deferred fees	16,676			11,304
PPP average yield	4.97		%	5.06		%

PPP has impacted the Company’s financial metrics in all periods since the quarter ending June 30, 2020 due to the Company’s participation that started in April 2020. Loan and deposit growth, earnings per share, and return on assets all increased due to the PPP. Conversely, net interest margin, the allowance coverage ratio, the leverage ratio and the ratio of tangible common equity to tangible assets all decreased. Since the PPP loans are guaranteed by the SBA, CET1, Tier 1 and total risk-based capital are not impacted by the PPP loan balances.

•Net income in the first quarter ~~2020, the Company had net income~~2021 was $29.9 million, an increase of ~~$12.9~~$1.0 million ~~and earnings per share of $0.48,~~ compared to ~~net income~~the linked quarter and an increase of ~~$16.2~~$17.1 million ~~and earnings per share of $0.67 in~~from the prior year ~~period. Net income and earnings~~quarter. EPS was $0.96 per diluted share for the first quarter ~~2020 were impacted~~2021, compared to $1.00 and $0.48 per diluted share for the linked and prior year quarter, respectively. Merger-related expenses from ~~$22.3~~the Seacoast transaction reduced net income $2.4 million ~~pretax ($16.8 million after tax), of provision for credit losses.~~in the current quarter, or $0.07 per share. The increase in net income and EPS from the prior year quarter was primarily due to a decrease in the provision for credit ~~losses~~losses.

•Pre-provision net revenue1 (“PPNR”) of $40.7 million in the first quarter 2021 decreased $6.8 million and increased $2.6 million from the linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to a ~~change~~decline in tax credit revenue and PPP fees. The increase from the prior year quarter was primarily from the Seacoast acquisition that was completed in the ~~economic forecast~~fourth quarter and income from PPP that started in the ~~first~~second quarter of 2020.

1 PPNR is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

•Net interest income of $79.1 million for the first quarter ~~2020~~2021 increased ~~$11.0~~$1.7 million ~~to $63.4~~and $15.8 million ~~over~~from the linked quarter and prior year ~~period. The acquisition of Trinity along with organic loan growth and an expanded investment portfolio supported the increase in net~~quarter, respectively. Net interest ~~income over the prior year period. A decrease in earning-asset yields~~margin (“NIM”) was ~~offset by a corresponding decrease in interest-bearing yields.~~

•

~~The net interest margin for the first quarter 2020 decreased eight basis points to 3.79% over the prior year period. The core net interest margin,~~¹ which excludes incremental accretion on non-core acquired loans, had a corresponding decrease. The decline in net interest margin was primarily caused by the reduction in short-term rates since the first quarter 2019. Additionally, the overall mix of interest-earning assets negatively impacted net interest margin due to a larger investment portfolio that represented 21% of average earning assets in the first quarter 2020, compared to 18% in the first quarter 2019.

~~Noninterest income~~3.50% for the first quarter ~~2020 increased $4.2 million~~2021, compared to 3.66% and 3.79% for the linked quarter and prior year ~~period due to contributions from Trinity in wealth management and card services revenue. Tax credit~~quarter, respectively.

•Noninterest income ~~swap fees and a claim on bank-owned life insurance also contributed to the year-over-year increase.~~

~~Noninterest expense~~of $11.3 million for the first quarter ~~2020~~2021 decreased ~~$1.2~~$7.2 million ~~compared to~~and $2.1 million from the linked quarter and prior year ~~period.~~quarter, respectively. The decrease iswas primarily due to a ~~reduction~~decline in ~~merger-related expenses, offset by the ongoing operating expenses~~tax credit activity, which declined $5.1 million from the ~~Trinity acquisition, including planned cost savings~~linked quarter and $3.1 million from the ~~transaction.~~prior year quarter.

Balance sheet highlights:

•Loans – Total loans increased $63.8 million, or 3.6% on an annualized basis, from the linked quarter to $7.3 billion as of March 31, 2021. Year-over-year, loans grew ~~$143.2 million~~33.6% from ~~December 31, 2019, or 10.8% annualized, to~~ $5.5 billion as of March 31, 2020, primarily due to Seacoast loans of $1.2 billion upon acquisition and PPP loans of $737.7 million. Average loans totaled $7.2 billion for the quarter ended March 31, 2021 compared to $6.8 billion and $5.4 billion for the linked and prior year quarters, respectively.

•Deposits – Total deposits increased $530.1 million, or 6.6%, from the linked quarter to $8.5 billion as of March 31, 2021. Year-over-year, deposits grew $2.5 billion, or 42.2%, from $6.0 billion as of March 31, 2020. ~~Growth in~~Average deposits totaled $8.2 billion for the quarter ended March 31, 2021 compared to $7.3 billion and $5.8 billion for the linked and prior year quarters, respectively. Deposits from the Seacoast acquisition and PPP loans contributed to the increase over the prior year period. Specialty deposits increased $163.4 million over the linked quarter primarily attributable to community associations and sponsor finance. The St. Louis, Kansas City, and New Mexico regions also experienced significant growth of $132.5 million, $129.3 million, and $77.5 million, respectively, over the linked quarter. Noninterest deposit accounts represented 34.2% of total deposits and the loan ~~portfolio~~to deposit ratio was ~~broad-based across most lending categories. Subsequent~~85.6% at March 31, 2021.

•Asset quality – The allowance for credit losses on loans to total loans was 1.80% at March 31, 2021, compared to 1.89% and 1.69% at December 31, 2020 and March 31, 2020, respectively. Nonperforming assets to total assets was 0.50% at March 31, 2021 compared to 0.45% and 0.56% at December 31, 2020 and March 31, 2020, respectively. The decline in the ~~Company facilitated~~allowance to total loans ratio in the ~~SBA’s Paycheck Protection Program for its customers,~~the first quarter 2021 was primarily due to loan charge-offs of $6.5 million, the majority of which ~~provides small businesses~~had been reserved in a prior period. High-quality credit metrics, continued improvement in economic forecasts and relatively stable loan ~~to keep their workforce employed during the COVID-19 crisis. In the second quarter 2020, the Company expects to fund $856.5 million~~volumes resulted in ~~PPP loans that have been approved by the SBA.~~

•

~~Deposits~~ – Total deposits grew $218.9 million from December 31, 2019, or 15.3% annualized, to $6.0 billion as of March 31, 2020 from the end of 2019. Core deposits, defined as total deposits excluding time deposits, were $5.2 billion at March 31, 2020, an increase of $279.4 million, or 6% compared to December 31, 2019. The ratio of noninterest-bearing deposits to total deposits was stable at 23% at both March 31, 2020 and December 31, 2019.

•

~~Asset quality~~ – Nonperforming loans were $37.2 million at March 31, 2020, compared to $26.4 million at December 31, 2019. Nonperforming loans represented 0.68% and 0.50% of total loans at March 31, 2020 and December 31, 2019, respectively. The adoption of CECL on January 1, 2020, increased nonperforming loans by $6.8 million due to the reclassification of loans previously accounted for in performing pools of loans.

~~The~~a nominal provision for credit losses in the current quarter.

•Shareholders’ equity – Total shareholders’ equity was ~~$22.3 million for~~$1.1 billion and the ~~first quarter 2020,~~tangible common equity to tangible assets ratio was 8.2% at March 31, 2021, compared to ~~$1.5 million for~~8.4% at December 31, 2020. Balance sheet growth from the ~~prior year period. See “Item 1. Note 4 – Loans,~~PPP was the primary cause of the decline in the tangible common equity to tangible assets ratio. The Bank’s regulatory capital ratios remain “well-capitalized,” with a common equity tier 1 ratio of 12.4% and ~~“Provision~~a total risk-based capital ratio of 13.6% as of March 31, 2021. The Company’s common equity tier 1 ratio and ~~Allowance for Credit Losses” of this Quarterly Report on Form 10-Q for more information.~~total risk-based capital ratio was 11.0% and 15.1%, respectively, at March 31, 2021.


•	~~Shareholders’ equity~~ – The ~~Company repurchased 456,251 shares at an average price of $33.64 per share in the first quarter of 2020. As of March 31, 2020, the~~ Company has ~~temporarily suspended its repurchase of shares through the share repurchase plan. There are~~ 95,907 shares available for repurchase ~~under the existing authorization.~~

¹~~A non-GAAP measure. A reconciliation has been included in this section~~ under the ~~caption “Use~~existing common stock repurchase authorization.

The Company’s Board of ~~Non-GAAP Financial Measures.”~~Directors approved a quarterly dividend of $0.18 per common share, payable on June 30, 2021 to shareholders of record as of June 15, 2021.

RESULTS OF OPERATIONS

Net Interest Income

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. Non-core acquired loans noted in the table below were acquired from the FDIC and were previously covered by shared-loss agreements.


	Three months ended March 31,						Three months ended December 31,						Three months ended March 31,
	2021						2020						2020
(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:
Taxable loans (1)	$	7,157,961	$	76,674	4.34	%	$	6,745,388	$	75,638	4.46	%	$	5,315,068	$	66,799	5.05	%
Tax-exempt loans (2)	34,815		399		4.65		35,314		406		4.57		37,175		491		5.31


Total loans	7,192,776		77,073		4.35		6,780,702		76,044		4.46		5,352,243		67,290		5.06
Taxable debt and equity investments	849,123		4,719		2.25		885,484		5,195		2.33		1,117,249		7,730		2.78
Non-taxable debt and equity investments (2)	568,182		4,099		2.93		510,322		3,791		2.96		239,719		1,978		3.46
Short-term investments	679,659		189		0.11		347,629		120		0.14		92,248		300		1.31
Total securities and short-term investments	2,096,964		9,007		1.74		1,743,435		9,106		2.08		1,449,216		10,008		2.80
Total interest-earning assets	9,289,740		86,080		3.76		8,524,137		85,150		3.97		6,801,459		77,298		4.58
Noninterest-earning assets	650,312						617,022						572,146



Total assets	$	9,940,052					$	9,141,159					$	7,373,605

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	1,887,059	$	328	0.07	%	$	1,584,369	$	265	0.07	%	$	1,375,154	$	1,338	0.39	%
Money market accounts	2,350,592		975		0.17		2,175,111		1,016		0.19		1,811,090		4,740		1.05
Savings	654,662		48		0.03		620,248		46		0.03		542,993		143		0.11
Certificates of deposit	537,166		1,312		0.99		567,456		1,739		1.22		793,213		3,667		1.86
Total interest-bearing deposits	5,429,479		2,663		0.20		4,947,184		3,066		0.25		4,522,450		9,888		0.88
Subordinated debentures	203,694		2,819		5.61		203,564		2,824		5.52		141,295		1,919		5.46
FHLB advances	50,000		195		1.58		244,730		603		0.98		220,453		895		1.63
Securities sold under agreements to repurchase	231,527		60		0.11		231,836		64		0.11		201,887		343		0.68
Other borrowed funds	28,650		100		1.42		30,095		110		1.45		34,270		275		3.23
Total interest-bearing liabilities	5,943,350		5,837		0.40		5,657,409		6,667		0.47		5,120,355		13,320		1.05
Noninterest bearing liabilities:
Demand deposits	2,777,900						2,363,890						1,315,267
Other liabilities	122,321						127,843						62,948
Total liabilities	8,843,571						8,149,142						6,498,570
Shareholders' equity	1,096,481						992,017						865,035
Total liabilities & shareholders' equity	$	9,940,052					$	9,141,159					$	7,363,605
Net interest income			$	80,243					$	78,483					$	63,978
Net interest spread					3.36	%					3.50	%					3.53	%
Net interest margin					3.50	%					3.66	%					3.79	%

(1)Average balances include nonaccrual loans. Interest income includes loan fees of $8.1 million, $9.5 million, and $1.3 million for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020 respectively.

(2)Interest income and yields have been adjusted to reflect a tax-equivalent basis.

Three months ended March 31,
2020 2019
(in thousands) Average Balance Interest
Income/Expense
Average
Yield/
Rate
Average Balance Interest
Income/Expense
Average
Yield/
Rate
Assets
Interest-earning assets:
Taxable portfolio loans (1) $ 5,299,837
$ 65,318
4.96 % $ 4,468,412
$ 59,227
5.38 %
Tax-exempt portfolio loans (2) 37,175
491
5.31
28,021
424
6.14
Non-core acquired loans - contractual 15,231
208
5.49
14,954
322
8.73
Non-core acquired loans - incremental accretion 1,273
33.62
1,157
31.37
Total loans 5,352,243
67,290
5.06
4,511,387

61,130
5.50
Taxable debt and equity investments 1,117,249
7,730
2.78
831,627
5,698
2.78
Non-taxable debt and equity investments (2) 239,719
1,978
3.46
65,309
594
3.69
Short-term investments 92,248
300
1.31
102,166
447
1.77
Total securities and short-term investments 1,449,216
10,008
2.80
999,102

6,739
2.74
Total interest-earning assets 6,801,459
77,298
4.58
5,510,489
67,869
4.99
Noninterest-earning assets 572,146
445,597

Total assets $ 7,373,605
$ 5,956,086

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 1,375,154
$ 1,338
0.39 % $ 1,077,289
$ 1,790
0.67 %
Money market accounts 1,811,090
4,740
1.05
1,521,878
6,515
1.74
Savings 542,993
143
0.11
299,731
183
0.25
Certificates of deposit 793,213
3,667
1.86
712,269
3,332
1.90
Total interest-bearing deposits 4,522,450
9,888
0.88
3,611,167

11,820
1.33
Subordinated debentures 141,295
1,919
5.46
124,154
1,648
5.38
FHLB advances 220,453
895
1.63
215,420
1,398
2.63
Securities sold under agreements to repurchase 201,887
343
0.68
187,297
274
0.59
Other borrowed funds 34,270
275
3.23
14,900
134
3.65
Total interest-bearing liabilities 5,120,355
13,320
1.05
4,152,938

15,274
1.49
Noninterest bearing liabilities:
Demand deposits 1,315,267
1,088,323

Other liabilities 62,948
52,371

Total liabilities 6,498,570
5,293,632

Shareholders' equity 865,035
662,454

Total liabilities & shareholders' equity $ 7,363,605
$ 5,956,086

Net interest income $ 63,978
$ 52,595

Net interest spread 3.53 % 3.50 %
Net interest margin 3.79 % 3.87 %
Core net interest margin (3) 3.71 % 3.79 %

~~(1)~~

Average balances include nonaccrual loans. The income on such loans is included in interest but is recognized only upon receipt. Loan fees, net of amortization of deferred loan origination fees and costs, included in interest income are approximately $1.3 million and $1.1 million for the three months ended March 31, 2020 and 2019 respectively.


~~(2)~~	~~Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate in 2020 and 2019. The tax-equivalent adjustments were $0.6 million and $0.3 million for the~~ ~~three~~ ~~months ended March 31, 2020 and 2019, respectively.~~


~~(3)~~	~~A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial measures.”~~

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.


											Quarter ended March 31, 2021						Quarter ended March 31, 2021
	2020 compared to 2019										compared to						compared to
	Three months ended March 31,										Quarter ended December 31, 2020						Quarter ended March 31, 2020
	Increase (decrease) due to										Increase (decrease) due to						Increase (decrease) due to
(in thousands)	Volume(1)			Rate(2)			Net			(in thousands)	Volume(1)		Rate(2)		Net		Volume(1)		Rate(2)		Net
Interest earned on:										Interest earned on:
Taxable loans	$	10,865		$	(4,774	)	$	6,091		Taxable loans	$	3,492	$	(2,456)	$	1,036	$	19,904	$	(10,030)	$	9,874
Tax-exempt loans (3)	129			(62		)	67			Tax-exempt loans (3)	(10)		3		(7)		(31)		(61)		(92)
Non-core acquired loans	33			(31		)	2

Taxable debt and equity investments	2,032			—			2,032			Taxable debt and equity investments	(259)		(217)		(476)		(1,678)		(1,333)		(3,011)
Non-taxable debt and equity investments (3)	1,423			(39		)	1,384			Non-taxable debt and equity investments (3)	352		(44)		308		2,464		(342)		2,122
Short-term investments	(40		)	(107		)	(147		)	Short-term investments	99		(30)		69		379		(490)		(111)
Total interest-earning assets	$	14,442		$	(5,013	)	$	9,429		Total interest-earning assets	$	3,674	$	(2,744)	$	930	$	21,038	$	(12,256)	$	8,782

Interest paid on:										Interest paid on:
Interest-bearing transaction accounts	$	417		$	(869	)	$	(452	)	Interest-bearing transaction accounts	$	63	$	—	$	63	$	360	$	(1,370)	$	(1,010)
Money market accounts	1,117			(2,892		)	(1,775		)	Money market accounts	75		(116)		(41)		1,068		(4,833)		(3,765)
Savings	99			(139		)	(40		)	Savings	2		—		2		26		(121)		(95)
Certificates of deposit	402			(67		)	335			Certificates of deposit	(94)		(333)		(427)		(962)		(1,393)		(2,355)
Subordinated debentures	244			27			271			Subordinated debentures	—		(5)		(5)		847		53		900
FHLB advances	33			(536		)	(503		)	FHLB advances	(640)		232		(408)		(673)		(27)		(700)
Securities sold under agreements to repurchase										Securities sold under agreements to repurchase	(4)		—		(4)		45		(344)		(299)
Other borrowings	159			(18		)	141			Other borrowings	(7)		(3)		(10)		(37)		(122)		(159)
Total interest-bearing liabilities	2,494			(4,448		)	(1,954		)	Total interest-bearing liabilities	(605)		(225)		(830)		674		(8,157)		(7,483)
Net interest income	$	11,948		$	(565	)	$	11,383		Net interest income	$	4,279	$	(2,519)	$	1,760	$	20,364	$	(4,099)	$	16,265

(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 using the combined statutory federal and state income tax rate in effect for each tax year.~~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) for the ~~first~~three months ended March 31, 2021 increased 2% over the linked quarter prior primarily due to the full quarter of earnings on acquired Seacoast assets and lower interest expense on paying liabilities, partially offset by reduced income from PPP loans and purchase accounting accretion. The decrease in interest expense was primarily due to the repayment of FHLB advances in the fourth quarter 2020 and a continued run-off of higher yielding certificates of deposit. Loan yields declined 11 basis points for the three months ended March 31, 2021 compared to the linked quarter primarily due to the decline in PPP fees accelerated on forgiveness and lower accretion on purchase accounting discounts due to reduced prepayments on acquired loans. An increase in short-term investment balances also negatively impacted the yield on earning assets, as the average balance increased ~~21% over~~$332.0 million in the linked quarter due to continued deposit growth and PPP loan forgiveness.

Compared to the prior year ~~period primarily from higher loan and investment volumes, both of which benefited from the Trinity acquisition and organic growth in the loan portfolio. The benefit to~~quarter, net interest income increased $16.3 million, primarily due to the Seacoast acquisition and income from ~~higher earning-asset volumes and a decrease in funding costs was~~PPP. These increases were partially offset by a ~~decrease~~decline in ~~earning-asset yields.~~the yield on earning assets from 4.58% in the first quarter 2020 to 3.76% in the first quarter 2021, as the Federal Open Markets Committee reduced the target federal funds rate by 150 basis points in the first quarter of 2020.

~~The tax-equivalent net interest margin~~

NIM was ~~3.79%~~3.50% for the first quarter ~~2020~~2021, compared to ~~3.87%~~3.66% and 3.79% in the linked and prior year quarters, respectively. NIM decreased 16 basis points from the linked quarter primarily due to a 21 basis point decrease in earning asset yields. The decrease in the earning asset yield was primarily due to higher levels of cash related to PPP funds and deposit growth (13 bps), reduced income from PPP forgiveness (11 bps) and lower levels of income from purchase accounting (5 bps), partially offset by the full-quarter impact of acquired Seacoast assets (8 bps).

Compared to the prior year, ~~period. The net interest margin~~NIM was impacted by the decline in short-term rates as approximately 60% of the ~~Company’s~~ loan portfolio (excluding PPP) has variable rates, with most indexed to one-month LIBOR. LIBOR ~~that~~ has declined ~~approximately 150 basis points~~significantly over the past ~~year. An increase~~year in conjunction with the investment portfolio in the first quarter 2020 over the first quarter 2019 has contributed to growth in net interest income, but the shift in earning assets between loans and investments has reduced the net interest margin. Total investments were 21% of average interest earning assets for the first quarter 2020, compared to 18% in the prior year period. Net interest income and margin both benefited from a 45-basis point decrease in the target federal funds rate ~~paid on interest-bearing deposits in the first quarter 2020 compared~~discussed above. Higher levels of low-yielding, short-term investments also contributed to the ~~first quarter 2019.~~decline in NIM, as the average balance increased $587.4 million.

The Company manages its balance sheet to defend against pressures on core net interest margin, which could be negatively impacted from continued competition for deposits, current interest rate conditions, and downward movement in LIBOR rates.

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								Quarter ended
(in thousands)	March 31, 2021		December 31, 2020		Increase (decrease)				March 31, 2020		Increase (decrease)
Service charges on deposit accounts	$	3,084	$	3,160	$	(76)	(2)	%	$	3,143	$	(59)	(2)	%
Wealth management revenue	2,483		2,449		34		1	%	2,501		(18)		(1)	%
Card services revenue	2,496		2,511		(15)		(1)	%	2,247		249		11	%

Tax credit income (expense)	(1,041)		4,048		(5,089)		(126)	%	2,036		(3,077)		(151)	%



Miscellaneous income	4,268		6,338		(2,070)		(33)	%	3,481		787		23	%

Total noninterest income	$	11,290	$	18,506	$	(7,216)	(39)	%	$	13,408	$	(2,118)	(16)	%

2020 compared to 2019
Three months ended March 31,
(in thousands) 2020 2019 Increase (decrease)
Service charges on deposit accounts $ 3,143
$ 2,935
$ 208
7 %
Wealth management revenue 2,501
1,992
509
26 %
Card services revenue 2,247
1,790
457
26 %
Tax credit income 2,036
158
1,878
1,189 %
Miscellaneous income 3,481
2,355
1,126
48 %
Total noninterest income $ 13,408
$ 9,230
$ 4,178
45 %

~~Noninterest~~Total noninterest income ~~increased $4.2 million, or 45%,~~ for the first quarter ~~2020, compared to the same period in 2019. The first quarter 2020 benefited from~~2021 was $11.3 million, a ~~full quarter~~decrease of ~~income~~$7.2 million from the ~~Trinity acquisition,~~linked quarter and a decrease of $2.1 million from the prior year quarter. The decrease from the linked quarter and prior year quarter was primarily wealth management and card services revenue. The Company’s tax credit income increased in 2020 over 2019 partially due to fair value adjustments on tax credits. The fair value of these projects increased due to a decline in ~~LIBOR component of the discount rate. Miscellaneous income increased $1.1 million~~tax credit income. Several tax credit projects that were expected to close in the first quarter ~~2020 over 2019~~2021 were delayed and did not close. In addition, projects carried at fair value recognized a reduced valuation during the quarter due to ~~a $0.9 million~~an increase in the longer-term LIBOR swap ~~fees and a $0.7~~rates used in the valuation process. The decline in miscellaneous income from the linked quarter was due to income earned on community development investments in the fourth quarter 2020 that did not reoccur in the current period.

Compared to the prior year quarter, the decline of $2.1 million ~~claim on a life insurance policy,~~in noninterest income was primarily due to the decline in tax credit income discussed above, partially offset by ~~a $0.5 million decrease in non-core acquired fee income.~~noninterest income contributions from the Seacoast acquisition of $1.1 million.

Noninterest Expense

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


	2020 compared to 2019												Linked quarter comparison											Prior year comparison
	Three months ended March 31,												Quarter ended											Quarter ended
(in thousands)	2020			2019			Increase (decrease)					(in thousands)	March 31, 2021			December 31, 2020			Increase (decrease)					March 31, 2020			Increase (decrease)
Employee compensation and benefits	$	21,685		$	19,352		$	2,333		12	%	Employee compensation and benefits	$	29,562		$	26,174		$	3,388		13	%	$	21,685		$	7,877		36	%
Occupancy	3,347			2,637			710			27	%	Occupancy	3,751			$	3,517		234			7	%	3,347			404			12	%
Data processing	2,082			1,906			176			9	%	Data processing	2,890			$	2,657		233			9	%	2,082			808			39	%
Professional fees	862			746			116			16	%	Professional fees	988			$	1,036		(48)			(5)	%	862			126			15	%

Merger-related expenses	—			7,270			(7,270		)	(100	)%	Merger-related expenses	3,142			$	2,611		531			20	%	—			3,142			—	%
Other	10,697			7,927			2,770			35	%	Other	12,551			$	15,055		(2,504)			(17)	%	10,697			1,854			17	%
Total noninterest expense	$	38,673		$	39,838		$	(1,165	)	(3	)%	Total noninterest expense	$	52,884		$	51,050		$	1,834		4	%	$	38,673		$	14,211		37	%

Efficiency ratio	50.37		%	64.70		%	(14.33		)%			Efficiency ratio	58.49		%	53.20		%	5.29		%			50.37		%	8.12		%
Core efficiency ratio¹	51.21		%	54.06		%	(2.85		)%			Core efficiency ratio1	55.02		%	50.93		%	4.09		%			51.21		%	3.81		%
¹A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.”	¹A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.”											1A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.”

Noninterest expense ~~decreased $1.2~~was $52.9 million ~~or 3%,~~ for the first quarter ~~2020,~~2021, compared to $51.1 million for the ~~same period in 2019. The decrease from the prior year period was impacted by merger-related expenses of $7.3~~linked quarter, and $38.7 million ~~from the Trinity transaction in~~for the first quarter ~~2019. Offsetting~~2020. The increase from the ~~decrease in merger expenses~~linked quarter and prior year quarter was primarily due to having a full quarter of ~~operating expenses from the Trinity acquisition, most notably in employee compensation and benefits, that are included in the Company’s~~

~~ongoing expense run-rate. Employee compensation has also increased from merit increases. Other noninterest expense increased $2.8~~Seacoast operations, which totaled $10.2 million in the first quarter ~~2020 over~~2021. Merger-related expenses were $3.1 million and $2.6 million in the ~~same period in~~current and linked quarters, respectively. The Company does not expect to recognize any additional material merger expenses related to the Seacoast transaction.

For the first quarter 2021, the Company’s efficiency ratio was 58.5% compared to 53.2% and 50.4% for the linked quarter and prior year quarter, respectively. The Company’s core efficiency ratio2 was 55.0% for the quarter ended March 31, 2021, compared to 50.9% for the linked quarter and 51.2% for the prior year primarily due to a $0.8 million OREO write-down, a $0.7 million increase in core deposit amortization from the Trinity acquisition, and a $0.6 million increase in other expenses from the Company’s contribution to an employee support fund and higher card processing costs. These increases were partially offset by a decrease in FDIC assessment costs.

quarter.

Efficiency gains that have resulted in net interest income and noninterest income growth exceeding the growth in noninterest expense have resulted in continued improvements to the Company’s core efficiency ratio.2 ¹ ~~The core~~Core efficiency ratio ~~was 51.21%~~is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the ~~first quarter 2020 compared to 54.06% in the first quarter 2019.~~accompanying financial tables.

Income Taxes

The Company’s effective tax rate was ~~18.8%~~20.2% for the first quarter ~~2020,~~2021, compared to ~~20.3%~~18.4% and 18.8% for the ~~same period in 2019.~~linked and prior year quarters, respectively. The ~~decrease in the effective tax rate is primarily due to non-deductible merger expenses recognized in the first quarter 2019 that increased the~~ effective tax rate in ~~that period.~~the linked and prior year quarters was lower due to higher tax credits from tax planning activities and excess tax benefits on share-based compensation.

Summary Balance Sheet


(in thousands)	March 31, 2021		December 31, 2020		Increase (decrease)				March 31, 2020		Increase (decrease)
Total cash and cash equivalents	$	883,815��	$	537,703	$	346,112	64	%	$	183,683	$	700,132	381	%
Securities	1,412,719		1,400,039		12,680		1	%	1,340,446		72,273		5	%
Loans (excluding PPP)	6,469,681		6,526,290		(56,609)		(1)	%	5,457,517		1,012,164		19	%
PPP loans, net	737,660		698,645		39,015		6	%	—		737,660		NM
Total assets	10,190,699		9,751,571		439,128		5	%	7,500,643		2,690,056		36	%
Deposits	8,515,444		7,985,389		530,055		7	%	5,989,906		2,525,538		42	%
Total liabilities	9,098,202		8,672,596		425,606		5	%	6,654,207		2,443,995		37	%
Total shareholders’ equity	1,092,497		1,078,975		13,522		1	%	846,436		246,061		29	%

(in thousands) March 31,
2020 December 31,
2019 Increase (decrease)
Total cash and cash equivalents $ 183,683
$ 167,256
$ 16,427
10 %
Securities 1,340,446
1,316,483
23,963
2
Loans held for investment 5,457,517
5,314,337
143,180
3
Total assets 7,500,643
7,333,791
166,852
2
Deposits 5,989,906
5,771,023
218,883
4
Total liabilities 6,654,207
6,466,606
187,601
3
Total shareholders’ equity 846,436
867,185
(20,749 ) (2 )

Assets

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. In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. As of April 30, 2020, $392.1 million loans have participated in the programs, including $190.8 million loans deferring interest payments of $2.2 million.

The following table summarizes the composition of the Company’s loan portfolio:


(in thousands)	March 31, 2021		December 31, 2020		Increase (decrease)
Commercial and industrial	$	3,079,643	$	3,088,995	$	(9,352)	—	%
Commercial real estate - investor owned	1,669,215		1,589,419		79,796		5	%
Commercial real estate - owner occupied	1,517,755		1,498,408		19,347		1	%
Construction and land development	510,501		546,686		(36,185)		(7)	%
Residential real estate	303,047		319,179		(16,132)		(5)	%
Other	208,620		182,248		26,372		14	%
Loans held for investment	$	7,288,781	$	7,224,935	$	63,846	1	%

(in thousands) March 31,
2020 December 31,
2019 Increase (decrease)
Commercial and industrial $ 2,469,013
$ 2,361,157
$ 107,856
5 %
Commercial real estate - investor owned 1,327,814
1,299,884
27,930
2
Commercial real estate - owner occupied 720,543
697,437
23,106
3
Construction and land development 469,627
457,273
12,354
3
Residential real estate 346,758
366,261
(19,503 ) (5 )
Consumer and other 123,762
132,325
(8,563 ) (6 )
Loans held for investment $ 5,457,517
$ 5,314,337
$ 143,180
3 %

Loans grew $143.2 million to $5.5 billion at March 31, 2020, when compared to December 31, 2019. The increase is primarily attributable to growth in the C&I, CRE, and construction categories, partially offset by a decline in residential real estate and consumer loans. The increase in C&I was primarily from tax credit lending, life insurance premium financing and enterprise value lending.

The following table illustrates ~~loan~~the change in loans:



(in thousands)	March 31, 2021		December 31, 2020		Increase (decrease)
C&I	$	1,048,839	$	1,103,060	$	(54,221)	(5)	%
CRE investor owned	1,491,244		1,420,905		70,339		5	%
CRE owner occupied	805,581		825,846		(20,265)		(2)	%
SBA Loans	941,075		895,930		45,145		5	%
SBA PPP loans	737,660		698,645		39,015		6	%
Sponsor finance	394,207		396,487		(2,280)		(1)	%
Life insurance premium financing	543,084		534,092		8,992		2	%
Residential real estate	299,517		318,091		(18,574)		(6)	%
Construction and land development	438,303		474,399		(36,096)		(8)	%
Tax credits	387,968		382,602		5,366		1	%
Other	201,303		174,878		26,425		15	%
Total loans	$	7,288,781	$	7,224,935	$	63,846	1	%

Note: Certain prior period amounts have been reclassified among the categories to conform to the current period presentation.

Loans totaled $7.3 billion at March 31, 2021, increasing $63.8 million, or 3.6% on an annualized basis, compared to the linked quarter. Year-over-year, loans increased $1.8 billion, or 33.6%. The year-over-year increase was primarily due to the Seacoast acquisition and PPP loans. The largest growth ~~with selected specialized lending detail:~~categories, excluding PPP, compared to the linked quarter were CRE, other, life insurance premium finance, and tax credits. Line draw utilization continues to decline. At March 31, 2021 line draw utilization was 37.6% compared to 38.1% and 47.3% at December 30, 2020 and March 31, 2020, respectively.

(in thousands) March 31,
2020 December 31,
2019 Increase (decrease)
C&I - general $ 1,186,240
$ 1,186,667
$ (427 ) — %
CRE investor owned - general 1,319,316
1,290,258
29,058
2
CRE owner occupied - general 584,491
582,579
1,912
—
Enterprise value lending¹
440,764
428,896
11,868
3
Life insurance premium financing¹
496,471
472,822
23,649
5
Residential real estate - general 346,461
366,261
(19,800 ) (5 )
Construction and land development - general 445,909
428,681
17,228
4
Tax credits¹
354,046
294,210
59,836
20
Agriculture¹
168,237
139,873
28,364
20
Consumer and other - general 115,582
124,090
(8,508 ) (7 )
Total loans $ 5,457,517
$ 5,314,337
$ 143,180
3 %

Note: Certain prior period amounts have been reclassified among the categories to conform to the current period presentation.
¹Specialized categories may include a mix of C&I, CRE, construction and land development, or consumer and other loans.

Specialized lending products, especially ~~enterprise value lending,~~sponsor finance, life insurance premium financing, and tax credits, consist primarily of ~~primarily~~ C&I loans. These loans are sourced through relationships developed with estate planning firms and private equity funds and are not bound geographically by our four markets. These specialized loan products offer opportunities to expand and diversify geographically by entering ~~into~~ 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. ~~C&I~~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 typically have a 75% guarantee from the SBA. Occasionally, the Company may sell the guaranteed portion of the loan ~~growth, coupled with typically fixed-rate CRE lending, supports management’s efforts~~and retain servicing rights. At March 31, 2021, the Company was servicing $288.6 million of SBA loans sold to ~~maintain a flexible asset sensitive interest rate risk position.~~third parties. Guaranteed portions of SBA loans totaled $617.1 million at March 31, 2021.

In response to the COVID-19 pandemic, the Company provided short-term payment deferrals to certain customers in 2020, primarily for 90 days or less. As of March 31, 2021, nearly all of these loans of have resumed payments and are no longer on deferral status.

Provision and Allowance for Credit Losses

The adoption of CECL on January 1, 2020 increased the ~~ACLL~~ACL on loans by $28.4 million, or 65%, and the allowance for unfunded commitments by $2.4 million. These increases were primarily offset in retained earnings and did not impact the consolidated statement of operations. The following table summarizes changes in the ~~ACLL~~ACL on loans arising from CECL adoption; loan charge-offs and recoveries by loan category, and additions to the allowance charged to expense.


	Quarter ended
(in thousands)	March 31, 2021		December 31, 2020		March 31, 2020
Allowance, at beginning of period	$	136,671	$	123,270	$	43,288

CECL adoption	—		—		28,387
PCD loans immediately charged-off	—		—		(1,680)
Allowance at beginning of period, adjusted for adoption of CECL	136,671		123,270		69,995
Initial allowance on acquired PCD loans	—		3,524		—
Provision for credit losses	503		9,266		21,695
Charge-offs:
Commercial and industrial	(3,739)		(9)		(63)
Real estate:
Commercial	(2,400)		—		(2)
Construction and land development	—		—		(31)
Residential	(271)		(81)		(122)
Other	(64)		(97)		(86)
Total charge-offs	(6,474)		(187)		(304)
Recoveries:
Commercial and industrial	327		243		504
Real estate:
Commercial	43		28		83
Construction and land development	235		232		40
Residential	143		281		157
Other	79		14		17
Total recoveries	827		798		801
Net charge-offs (recoveries)	(5,647)		611		497

Allowance, at end of period	$	131,527	$	136,671	$	92,187

Three months ended March 31,
(in thousands) 2020 2019
Allowance, at beginning of period $ 43,288
$ 43,476
CECL adoption 28,387
—
PCD loans immediately charged-off (1,680 ) —
Allowance at January 1 69,995
43,476
Charge-offs:
Commercial and industrial (63 ) (1,853 )
Real estate:
Commercial (2 ) (156 )
Construction and land development (31 ) (45 )
Residential (122 ) (67 )
Consumer and other (86 ) (129 )
Total charge-offs (304 ) (2,250 )
Recoveries:
Commercial and industrial 504
29
Real estate:
Commercial 83
9
Construction and land development 40
9
Residential 157
364
Consumer and other 17
13
Total recoveries 801
424
Net charge-offs 497
(1,826 )
Provision for loan losses 21,695
1,476
Other —
(31 )
Allowance, at end of period $ 92,187
$ 43,095

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


	Quarter ended
(in thousands)	March 31, 2021		December 31, 2020		March 31, 2020
Provision for loan losses	$	503	$	709	$	21,695
Day 2 provision on Seacoast acquired loans	—		8,557		—
Provision for off-balance sheet commitments	(370)		527		849
Provision for held-to-maturity securities	—		(195)		—
Recovery of accrued interest	(87)		(135)		(280)
Provision for credit losses	$	46	$	9,463	$	22,264

Three months ended March 31,
(in thousands) 2020 2019
Provision for loan losses $ 21,695
$ 1,476
Provision for off-balance sheet commitments 849
—
Provision for accrued interest (280 ) —
Provision for credit losses $ 22,264
$ 1,476
The following table summarizes the allocation of the ACL:


	March 31, 2021				December 31, 2020				March 31, 2020
(in thousands)	Allowance		Percent		Allowance		Percent		Allowance		Percent
Commercial and industrial	$	55,941	42.5	%	$	58,812	43.0	%	$	45,981	49.9	%
Real estate:
Commercial	53,324		40.5	%	49,074		35.9	%	29,369		31.9	%
Construction and land development	14,557		11.1	%	21,413		15.7	%	9,895		10.7	%
Residential	4,305		3.3	%	4,585		3.4	%	5,395		5.8	%
Other	3,400		2.6	%	2,787		2.0	%	1,547		1.7	%
Total	$131,527		100.0	%	$136,671		100.0	%	$92,187		100.0	%

The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the ACL 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. ~~Due to current economic conditions, the~~

The provision for credit losses was ~~$22.3 million for~~$46 thousand in the first quarter 2020, compared to ~~$1.5~~$9.5 million ~~for~~and $22.3 million in the linked and prior year quarters, respectively. While the majority of the $6.5 million of charge-offs in the first quarter ~~2019. CECL requires economic forecasts~~

~~to be factored into determining estimated losses. As~~2021 were reserved in a ~~result, CECL will typically require~~prior period, a ~~higher level~~provision of ~~provision at~~approximately $3.0 million was recognized on a retail loan that defaulted and was partially charged-off in the ~~start of an economic downturn.~~quarter. The ~~increase in~~impact on the provision for credit losses of this loan was offset by an improvement in the ~~first quarter 2020 was primarily due to a change in~~ economic ~~forecasts, which worsened significantly in March due to the COVID-19 pandemic, the resulting slow-down~~forecast, net of ~~business activity and rise in unemployment.~~qualitative adjustments. Two of the primary economic loss drivers used in estimating the ACL include the percentage change in GDP and unemployment. Forecasts of these metrics improved in both the fourth quarter 2020 and the first quarter 2021, which reduces the ACL and the provision for credit losses. In the first quarter 2021, a $2.3 million charge-off on a hotel loan was recognized. The ~~Company’s forecast~~Company qualitatively increased its reserve on hospitality loans as a result of this loss, partially offsetting the improvement in the economic forecast.

The $9.5 million provision for credit losses in the fourth quarter 2020 primarily consisted of the ~~percentage change~~ACL recorded on the loans acquired in ~~GDP included a range of (9.6)%~~the Seacoast acquisition, commonly referred to ~~2.1%~~as the “CECL double-count”. The ~~Company’s forecast~~$22.3 million provision for credit losses in the first quarter 2020 was primarily due to the dramatic decline in economic forecasts at the start of ~~unemployment included a range of 6.0% to 13.0%. The Company utilizes a one-year reasonable and supportable forecast.~~the COVID-19 pandemic.

To the extent ~~that~~ the Company does not recognize charge-offs and economic forecasts improve in future periods, the Company could recognize a reversal of provision for credit losses. Conversely, if economic conditions and the Company’s forecast ~~continue to worsen,~~worsens, the Company could recognize elevated levels of provision for credit losses. The provision is also reflective of ~~loan growth and~~ charge-offs in the period.

~~In the first quarter 2020, the Company had net charge-offs of $1.2 million, primarily due to the administrative charge-off of nonaccrual~~The ACL on loans ~~less than $100,000 under the Company’s credit policy. Most of these charge-offs were loans added to nonaccual as part of the CECL adoption. The ACLL~~ was ~~1.69%~~1.80% of loans at March 31, ~~2020,~~2021, compared to ~~0.86%~~1.89% at December 31, 2020 and 1.69% at March 31, ~~2019.~~2020.

Nonperforming assets

Prior to the adoption of CECL, PCI loans were accounted for in performing pools of loans and were not individually identified as nonaccrual or classified. Under the CECL accounting model, the Company elected not to maintain PCI pools for certain loans which are now accounted for individually and are now included in nonperforming and classified loans. PCI loans are referred to as PCD under CECL.

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


(in thousands)	March 31, 2021			December 31, 2020			March 31, 2020
Nonaccrual loans	$	32,225		$	34,818		$	33,268
Loans past due 90 days or more and still accruing interest	1,114			130			126
Troubled debt restructurings	3,320			3,559			3,810
Total nonperforming loans	36,659			38,507			37,204
Other real estate	6,164			5,330			5,072

Total nonperforming assets	$	42,823		$	43,837		$	42,276

Total assets	$	10,190,699		$	9,751,571		$	7,500,643
Total loans	7,288,781			7,224,935			5,457,517

Nonperforming loans to total loans	0.50		%	0.53		%	0.68		%

Nonperforming assets to total assets	0.42		%	0.45		%	0.56		%

ACL on loans to nonperforming loans	359		%	355		%	248		%

(in thousands) March 31,
2020 December 31,
2019 March 31,
2019
Nonaccrual loans $ 33,268
$ 26,096
$ 9,416
Loans past due 90 days or more and still accruing interest 126
250
—
Restructured loans 3,810
79
191
Total nonperforming loans 37,204
26,425
9,607
Other real estate 5,072
6,344
6,804
Total nonperforming assets $ 42,276
$ 32,769
$ 16,411

Total assets $ 7,500,643
$ 7,333,791
$ 6,932,757
Total loans 5,457,517
5,314,337
5,017,077
Nonperforming loans to total loans 0.68 % 0.50 % 0.19 %
Nonperforming assets to total assets 0.56
0.45
0.24
ACLL to nonperforming loans 248 % 164 % 449 %

Nonperforming loans ~~increased $10.8~~decreased $1.8 million to ~~$37.2~~$36.7 million at March 31, ~~2020~~2021 from ~~$26.4~~$38.5 million at December 31, ~~2019~~2020. The addition of a $1.5 million nonaccrual retail loan was offset by nonaccrual charge-offs of $3.3 million. The increase in loans past due 90 days or more and still accruing interest was due to one C&I loan of $0.9 million in process of renewal. The increase in other real estate of $0.9 million in the first quarter 2021 was primarily due to the ~~adoption~~addition of ~~CECL~~a $1.2 million property in California that added $6.8 million in PCD loans that were previously accounted for in an accruing pool of loans. Other real estate decreased during the first quarter 2020 due to write-downs of $0.8 million and sales of $0.5 millionhas a 75% SBA guarantee.

Nonperforming loans

Nonperforming loans based on loan type were as follows:



(in thousands)	March 31, 2021		December 31, 2020		March 31, 2020
Commercial and industrial	$	22,508	$	21,770	$	26,531
Commercial real estate	9,968		12,519		6,225
Construction and land development	—		—		214
Residential real estate	3,945		4,189		4,154
Other	238		29		80
Total	$	36,659	$	38,507	$	37,204

(in thousands) March 31, 2020 December 31, 2019 March 31, 2019
Commercial and industrial $ 26,531
$ 22,578
$ 7,205
Commercial real estate 6,225
2,516
1,995
Construction and land development 214
—
—
Residential real estate 4,154
1,330
407
Consumer and other 80
1
—
Total $ 37,204
$ 26,425

$ 9,607

The following table summarizes the changes in nonperforming loans:


	Quarter ended
(in thousands)	March 31, 2021		December 31, 2020		March 31, 2020
Nonperforming loans, beginning of period	$	38,507	$	39,623	$	26,425
CECL adoption	—		—		8,462
PCD loans immediately charged off	—		—		(1,680)
Nonperforming loans, beginning of period	$	38,507	$	39,623	$	33,207
Additions to nonaccrual loans	5,226		3,150		2,569

Additions to restructured loans	—		—		3,750
Charge-offs	(6,474)		(187)		(390)
Other principal reductions	(1,584)		(2,388)		(1,808)
Moved to other real estate	—		(537)		—
Moved to performing	—		(355)		—
Change in loans past due 90 days or more and still accruing interest	984		(799)		(124)
Nonperforming loans, end of period	$	36,659	$	38,507	$	37,204

Three months ended March 31,
(in thousands) 2020 2019
Nonperforming loans, beginning of period $ 26,425
$ 16,745
CECL adoption 8,462
—
PCD loans immediately charged off (1,680 ) —
Nonperforming loans, January 1 $ 33,207
$ 16,745
Additions to nonaccrual loans 2,569
1,453
Additions to restructured loans 3,750
—
Charge-offs (390 ) (2,135 )
Other principal reductions (1,808 ) (4,947 )
Moved to other real estate —
(835 )
Moved to performing —
(674 )
Loans past due 90 days or more and still accruing interest (124 ) —
Nonperforming loans, end of period $ 37,204
$ 9,607

Other real estate

Other real estate was ~~$5.1~~$6.2 million at March 31, ~~2020~~2021 compared to ~~$6.8~~$5.3 million at ~~March~~December 31, ~~2019.~~2020.

The following table summarizes the changes in other real estate:


	Three months ended
(in thousands)	March 31, 2021		December 31, 2020
Other real estate beginning of period	$	5,330	$	4,835
Additions and expenses capitalized to prepare property for sale	1,236		495



Sales	(402)		—
Other real estate end of period	$	6,164	$	5,330

Three months ended March 31,
(in thousands) 2020 2019
Other real estate beginning of period $ 6,343
$ 469
Additions and expenses capitalized to prepare property for sale —
1,372
Additions from acquisition —
4,963
Writedowns in value (777 ) —
Sales (495 ) —
Other real estate end of period $ 5,071
$ 6,804

Writedowns in fair value are recorded in other noninterest expense based on current market activity shown in the appraisals.

Deposits


(in thousands)	March 31, 2021			December 31, 2020			Increase (decrease)
Noninterest-bearing deposit accounts	$	2,910,216		$	2,711,828		$	198,388	7	%
Interest-bearing transaction accounts	1,990,308			1,768,497			221,811		13	%
Money market accounts	2,405,451			2,327,066			78,385		3	%
Savings accounts	688,118			627,903			60,215		10	%
Certificates of deposit:
Brokered	50,209			50,209			—		—	%
Other	471,142			499,886			(28,744)		(6)	%
Total deposits	$	8,515,444		$	7,985,389		$	530,055	7	%

Core deposits / total deposits	94		%	93		%
Demand deposits / total deposits	34		%	34		%

(in thousands) March 31,
2020 December 31,
2019 Increase (decrease)
Noninterest-bearing deposit accounts $ 1,354,571
$ 1,327,348
$ 27,223
2 %
Interest-bearing transaction accounts 1,389,603
1,367,444
22,159
2 %
Money market accounts 1,925,415
1,713,615
211,800
12 %
Savings accounts 554,413
536,169
18,244
3 %
Certificates of deposit:
Brokered 170,667
215,758
(45,091 ) (21 )%
Other 595,237
610,689
(15,452 ) (3 )%
Total deposits $ 5,989,906
$ 5,771,023
$ 218,883
4 %

Non-time deposits / total deposits 87 % 86 %
Demand deposits / total deposits 23 % 23 %

Total deposits at March 31, ~~2020~~2021 were ~~$6.0~~$8.5 billion, an increase of ~~4%,~~$530.1 million from December 31, ~~2019. The~~2020, and an increase of ~~$0.2~~$2.5 billion infrom March 31, 2020.

Core deposits, defined as total deposits ~~is primarily attributable to money~~excluding certificates of deposits, were $8.0 billion at March 31, 2021, an increase of $558.8 million from the linked quarter. Money market and savings accounts ~~offset by a decline in certificates of deposits. Noninterest bearing~~increased $138.6 million compared to the linked quarter, while interest-bearing and noninterest-bearing deposits ~~as a percentage~~increased $221.8 million and $198.4 million, respectively. Noninterest-bearing deposits were $2.9 billion at March 31, 2021, or 34.2% of total deposits. Certificates of deposit decreased $28.7 million from the linked quarter and $244.6 million from the prior year quarter. The Company has a specialty deposit portfolio focusing on property management, community associations, 1031 exchange and escrow industries, in addition to deposits related to its specialty lending products. These deposits totaled $1.3 billion at March 31, 2021 and $1.1 billion at December 31, 2020.

The total cost of deposits was ~~23% at both March 31, 2020~~0.13% for the current quarter compared to 0.17% and ~~December 31, 2019,~~0.68% for the linked quarter and prior year quarter, respectively.

Shareholders’ Equity

Shareholders’ equity totaled ~~$846.4 million~~$1.1 billion at March 31, ~~2020, a decrease~~2021, an increase of ~~$20.7~~$13.5 million from December 31, ~~2019.~~2020. Significant activity during the first ~~quarter 2020~~three months of 2021 was as follows:

•increase from net income of ~~$12.9~~$29.9 million,

•net ~~increase~~decrease in fair value of securities and cash flow hedges of ~~$5.3~~$10.9 million, and

~~decrease from CECL adoption of $18.1 million,~~

•decrease from dividends paid on common shares of ~~$4.7 million,~~$5.6 million.

~~decrease from the issuance under equity compensation plans of $0.8 million, and~~

~~decrease from share repurchases of $15.3 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 ~~run-off from demand deposits,~~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 ~~from~~ the core deposit base and ~~from~~ loans and securities repayments and maturities.

Additionally, liquidity is provided from ~~sales~~lines of credit with the ~~securities portfolio, fed fund lines with correspondent banks, borrowings from~~FHLB, the Federal Reserve, and ~~the FHLB,~~correspondent banks; the ability to acquire large and brokered deposits, sales of the securities portfolio, and the ability to sell 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 ~~Bank’s~~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 ~~monthly by measuring the amount of liquid versus non-liquid assets and liabilities.~~daily. Ourliquidity 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 asset categories is provided through cash and interest-bearing deposits with other banks, which totaled $883.8 million at March 31, 2021, compared to $537.7 million at December 31, 2020. The low interest rate environment, coupled with an uncertain outlook and government stimulus, such as the PPP, have increased liquidity for the banking industry, including the Company. Investment securities are another important tool to the Company’s liquidity objectives. Securities totaled $1.4 billion at March 31, 2021, and included $466 million pledged as

~~Parent~~

collateral for deposits of public institutions, treasury, loan notes, and other requirements. The remaining $950 million could be pledged or sold to enhance liquidity, if necessary.

Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts currently borrowed, at March 31, 2021, the Bank could borrow an additional $819 million from the FHLB of Des Moines under blanket loan pledges, and has an additional $923 million available from the Federal Reserve Bank under a pledged loan agreement. The Bank has unsecured federal funds lines with six correspondent banks totaling $90 million.

In the normal course of business, the Company ~~liquidity~~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 $2.1 billion in unused commitments as of March 31, 2021. 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, our 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 ~~parent company’s~~main use of this liquidity is ~~managed~~ to provide the funds necessary to pay dividends to shareholders, service debt, invest in subsidiaries as necessary, and satisfy other operating requirements. The ~~parent company’s primary funding sources~~holding company maintains a revolving line of credit for an aggregate amount up to ~~meet its liquidity requirements are dividends~~$25 million, all of which is available at March 31, 2021. The line of credit has a one-year term and ~~payments from the Bank and~~matures in February 2022. The proceeds ~~from the issuance of equity (i.e. stock option exercises, stock offerings). Another source of funding~~can be used for ~~the parent company includes the issuance of subordinated debentures and other debt instruments.~~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.

On ~~November 1, 2016, the Company issued $50 million aggregate principal amount of 4.75% fixed-to-floating rate subordinated notes with a maturity date of~~ ~~November 1, 2026, which initially bear an annual interest rate of 4.75%, with interest payable semiannually. Beginning~~ ~~November 1, 2021, the interest rate resets quarterly~~Strong capital ratios, credit quality and core earnings are essential to retaining cost-effective access to the ~~three-month LIBOR rate plus~~wholesale funding markets. Deterioration in any of these factors could have a ~~spread~~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 ~~338.7 basis points, payable quarterly.~~

the liquidity management process. The Company has a senior unsecured revolving credit agreement (the “Revolving Agreement”) with another bank allowing for borrowings up to $25 million that matures in February 2021. The proceeds can be used for general corporate purposes. The Revolving AgreementBank is subject to ~~ongoing compliance with a number of customary affirmative~~regulations and, ~~negative covenants~~among other things, may be limited in its ability to pay dividends or transfer funds to the parent company. Accordingly, consolidated cash flows as ~~well as specified financial covenants. As of March 31, 2020, no amount was outstanding under the Revolving Agreement.~~

The Company entered into a five-year term note for $40 million that matures in March 2024. The Company principally used the proceeds from the issuance of the note to fund the cash consideration at the closing of the acquisition of Trinity. The remaining balance at March 31, 2020 was $33 million.

~~As of March 31, 2020, the Company had $92 million of outstanding subordinated debentures as part of 13 statutory trusts which includes $23 million acquired~~presented in the Trinity acquisition. These debentures are classified as debt but are included in regulatory capital and the related interest expense is tax-deductible, which makes them an attractive source of funding.

~~Management believes our current level~~consolidated statements of cash atflows may not represent cash immediately available for the ~~holding company~~payment of ~~$14 million, along with~~cash dividends to the Company’s shareholders or for other ~~available funding sources, will be sufficient to meet all projected~~ cash ~~needs for the remainder of 2020.~~needs.

~~Bank liquidity~~

The Bank has a variety of funding sources available to increase financial flexibility. In addition to amounts currently borrowed, at March 31, 2020, the Bank had borrowing capacity of $591 million from the FHLB of Des Moines under blanket loan pledges, and has an additional $1.1 billion available from the Federal Reserve Bank under a pledged loan agreement. The Bank has unsecured federal funds lines with six correspondent banks totaling $90 million, and $296 million of unsecured credit through the American Financial Exchange.

Investment securities are another important tool in managing the Bank’s liquidity objectives. Securities totaled $1.3 billion at March 31, 2020, and included $432 million pledged as collateral for deposits of public institutions, treasury,

~~loan notes, and other requirements. The remaining $908 million could be pledged or sold to enhance liquidity, if necessary.~~

In the normal course of business, the Bank enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Bank’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 Bank has $1.5 billion in unused commitments as of March 31, 2020. The nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.

Capital Resources

~~The Company~~EFSC and the Bank are subject to various regulatory capital requirements administered by the 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~~EFSC 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%). As of March 31, ~~2020,~~2021, and December 31, ~~2019, the Company~~2020, EFSC and the Bank met all capital adequacy requirements to which they are subject.

The Bank ~~continues to exceed regulatory standards and~~ met the definition of “well-capitalized” ~~(the highest category)~~ at March 31, ~~2020.~~2021.

The following table summarizes ~~the Company’s~~EFSC’s various capital ratios at the dates indicated:


(in thousands)	March 31, 2021			December 31, 2020			Minimum Capital Requirement Including Capital Conservation Buffer
Total capital to risk-weighted assets	15.1		%	14.9		%	10.5	%
Tier 1 capital to risk-weighted assets	12.3		%	12.1		%	8.5	%
Common equity tier 1 capital to risk-weighted assets	11.0		%	10.9		%	7.0	%
Leverage ratio (Tier 1 capital to average assets)	9.5		%	10.0		%	4.0	%
Tangible common equity to tangible assets1	8.2		%	8.4		%
Total risk-based capital	$	1,120,678		$	1,094,601
Tier 1 capital	914,459			889,527
Common equity tier 1 capital	820,806			795,873

1 Not a required regulatory capital ratio

(in thousands) March 31,
2020 December 31, 2019 Well Capitalized Minimum % Minimum Capital Requirement Including Capital Conservation Buffer
Total capital to risk-weighted assets 12.85 % 12.90 % N/A 10.50 %
Tier 1 capital to risk-weighted assets 11.03
11.40
N/A 8.50
Common equity tier 1 capital to risk-weighted assets 9.58
9.90
N/A 7.00
Leverage ratio (Tier 1 capital to average assets) 9.94
10.05
N/A 4.00
Tangible common equity to tangible assets¹
8.42
8.89
N/A
Total risk-based capital $ 825,805
$ 804,273

Tier 1 capital 709,207
710,480

Common equity tier 1 capital 615,552
616,825

¹ Not a required regulatory capital ratio

The following table summarizes the Bank’s various capital ratios at the dates indicated:


(in thousands)	March 31, 2021			December 31, 2020			Well Capitalized Minimum %		Minimum Capital Requirement Including Capital Conservation Buffer
Total capital to risk-weighted assets	13.6		%	13.7		%	10.0	%	10.5	%
Tier 1 capital to risk-weighted assets	12.4		%	12.5		%	8.0	%	8.5	%
Common equity tier 1 capital to risk-weighted assets	12.4		%	12.5		%	6.5	%	7.0	%
Leverage ratio (Tier 1 capital to average assets)	9.5		%	10.3		%	5.0	%	4.0	%
Total risk-based capital	$	1,008,945		$	1,004,839
Tier 1 capital	916,253			913,169
Common equity tier 1 capital	916,200			913,116

(in thousands) March 31,
2020 December 31, 2019 Well Capitalized Minimum % Minimum Capital Requirement Including Capital Conservation Buffer
Total capital to risk-weighted assets 12.37 % 12.40 % 10.00 % 10.50 %
Tier 1 capital to risk-weighted assets 11.33
11.70
8.00
8.50
Common equity tier 1 capital to risk-weighted assets 11.33
11.69
6.50
7.00
Leverage ratio (Tier 1 capital to average assets) 10.25
10.31
5.00
4.00
Total risk-based capital $ 793,715
$ 769,254

Tier 1 capital 727,118
725,461

Common equity tier 1 capital 727,063
725,406

In March 2020, the U.S. banking agencies issued an interim final rule that provides banking organizations that implement CECL before the end of 2020 the option to delay for two years an estimate of CECL’s effect on regulatory capital followed by a three-year transition period. The Company adopted CECL on January 1, 2020. For additional information regarding the adoption of CECL, see “Item 1. Note 1 – Summary of Significant Accounting Policies.” The Company has elected the transition provisions provided by the U.S. banking agencies’ rule. Accordingly, the regulatory capital effects resulting from adoption of the CECL methodology will not be fully reflected in the Company’s regulatory capital until January 1, 2025. Based on the Company’s regulatory capital position as of March 31, ~~2020,~~2021, the estimated impact of adopting CECL ~~methodology~~ would reduce the Common Equity Tier 1 Capital ratio by approximately 3545 basis points. The actual impact of adopting CECL on the regulatory capital ratios may change as the final impact is not determined until the end of the second year of the transition period.

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 ~~GAAP~~generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as ~~net interest margin,~~tangible common equity, PPNR, PPNR ROAA, financial metrics adjusted for PPP impact, core efficiency ~~ratios, return on average assets, return on average equity,~~ratio, and the tangible common equity ratio, in this ~~report~~release 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 ~~core net interest margin,~~tangible common equity, PPNR, PPNR ROAA, financial metrics adjusted for PPP impact, core efficiency ratio, ~~return on average assets, return on average equity,~~ and ~~return on average~~the tangible common equity ratio, collectively “core performance measures,” presented in this ~~report~~earnings release 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 ~~non-core acquired loans, which were acquired from the FDIC and previously covered by loss share agreements, and the related income and expenses, the impact of~~ certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures include contractual interest on non-core acquired loans, but exclude incremental accretion on these loans. Core performance measures also exclude expenses directly related to non-core acquired loans. Core performance measures also exclude certain other income and expense items, such as merger-related expenses, facilities charges, and the gain or loss on sale of investment securities, 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 ~~following~~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 ~~measure~~measures for the periods indicated.

Core Performance Measures


	For the three months ended
(in thousands)	March 31, 2021			December 31, 2020			March 31, 2020
Net interest income	$	79,123		$	77,446		$	63,368
Less: Incremental accretion income	—			856			1,273
Core net interest income	79,123			76,590			62,095

Total noninterest income	11,290			18,506			13,408


Less: Gain on sale of investment securities	—			—			4


Core noninterest income	11,290			18,506			13,404

Total core revenue	90,413			95,096			75,499



Total noninterest expense	52,884			51,050			38,673

Less: Other expenses related to non-core acquired loans	—			8			12


Less: Merger related expenses	3,142			2,611			—



Core noninterest expense	49,742			48,431			38,661













Core efficiency ratio	55.02		%	50.93		%	51.21		%

For the three months ended
(in thousands) March 31,
2020 March 31,
2019
Net interest income $ 63,368
$ 52,343
Less: Incremental accretion income 1,273
1,157
Core net interest income 62,095
51,186

Total noninterest income 13,408
9,230
Less: Gain on sale of investment securities 4
—
Less: Other income from non-core acquired assets —
365
Core noninterest income 13,404
8,865

Total core revenue 75,499
60,051

Total noninterest expense 38,673
39,838
Less: Other expenses related to non-core acquired loans 12
103
Less: Merger related expenses —
7,270
Core noninterest expense 38,661
32,465

Core efficiency ratio 51.21 % 54.06 %

~~Net Interest Margin to Core Net Interest Margin (tax equivalent)~~

Three months ended March 31,
(in thousands) 2020 2019
Net interest income $ 63,978
$ 52,595
Less: Incremental accretion income 1,273
1,157
Core net interest income, tax equivalent $ 62,705
$ 51,438

Average earning assets $ 6,791,459
$ 5,510,489
Reported net interest margin 3.79 % 3.87 %
Core net interest margin 3.71 % 3.79 %

~~Tangible Common Equity Ratio~~

(in thousands) March 31, 2020 December 31, 2019
Total shareholders' equity $ 846,436
$ 867,185
Less: Goodwill 210,344
210,344
Less: Intangible assets 24,585
26,076
Tangible common equity $ 611,507
$ 630,765

Total assets $ 7,500,643
$ 7,333,791
Less: Goodwill 210,344
210,344
Less: Intangible assets, net 24,585
26,076
Tangible assets $ 7,265,714
$ 7,097,371

Tangible common equity to tangible assets 8.42 % 8.89 %

Tangible Common Equity Ratio


(in thousands)	March 31, 2021			December 31, 2020
Total shareholders' equity	$	1,092,497		$	1,078,975
Less: Goodwill	260,567			260,567
Less: Intangible assets	21,670			23,084
Tangible common equity	$	810,260		$	795,324

Total assets	$	10,190,699		$	9,751,571
Less: Goodwill	260,567			260,567
Less: Intangible assets, net	21,670			23,084
Tangible assets	$	9,908,462		$	9,467,920

Tangible common equity to tangible assets	8.18		%	8.40		%

Average Shareholders’ Equity and Average Tangible Common Equity


	For the three months ended
(in thousands)	March 31, 2021		December 31, 2020		March 31, 2020
Average shareholder’s equity	$	1,096,481	$	992,017	$	865,035
Less: Average goodwill	260,567		237,639		210,344
Less: Average intangible assets, net	22,346		22,565		25,301
Average tangible common equity	$	813,568	$	731,813	$	629,390

Three months ended March 31,
(in thousands) 2020 2019
Average shareholder’s equity $ 865,035
$ 662,454
Less: Average goodwill 210,344
141,422
Less: Average intangible assets, net 25,301
14,472
Average tangible common equity $ 629,390
$ 506,560

Critical Accounting Policies

The impact and any associated risks related to the Company’s critical accounting policies on business operations are described 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 description 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, ~~2019.~~2020.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures set forth in this item are qualified by the section captioned “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995” included in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report 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 minimize or eliminate any impact from market interest rate changes. In order to measure earnings sensitivity to changing rates, the Company uses an earnings simulation model.

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 (due to the current level of interest rates, the 300 basis point downward shock scenario is not shown in the table below.)~~modeling. The simulation of earnings 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 net interest income amount calculated using flat rates. ~~This difference represents the Company’s~~The Company uses an earning sensitivity model to track earnings sensitivity to a ~~plus~~positive or ~~minus~~negative 100 basis points parallel rate shock.

The following table summarizes the expected impact of interest rate shocks on net interest income:


Rate Shock1		Annual % change in net interest income
+ 300 bp		12.2%
+ 200 bp		7.1%
+ 100 bp		2.3%


~~Rate Shock~~		~~Annual % change~~ ~~in net interest income~~
~~+ 300 bp~~			~~9.9%~~
~~+ 200 bp~~	~~6.8%~~
~~+ 100 bp~~	~~3.5%~~
~~- 100 bp~~	~~(6.3)%~~
~~- 200 bp~~	~~(7.0)%~~ 1 Due to the current levels of interest rates, the downward shock scenarios are not shown.

In addition to the rate shocks shown in the table above, the Company models net interest income under various dynamic

interest rate scenarios. ~~Generally, positive~~In general, changes in interest rates ~~result~~are positively correlated with changes in ~~higher levels of net interest income, while scenarios based on declining rates, particularly those involving decreases in long-term rates, result in reduced~~ net interest income.

At March 31, 2020, models resulting in a steeper yield curve through a reduction in short-term rates over a 12-month horizon, as well as those based on stable short-term and modestly lower long-term rates, all result in a marginal decrease to net interest income over a one-year forecast.

At March 31, 2020, the Company had $3.2 billion in variable rate loans including $2.6 billion based on LIBOR and $372 million based on Prime. Approximately 86% of the LIBOR based loans are indexed to one-month LIBOR. Of the total variable rate loans, $1.2 billion, or 37%, had a rate floor of which approximately $585 million, or 49%, were currently priced at the floor.

The Company occasionally uses interest rate derivative financial 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 March 31, 2021, the Company had $62.0 million in derivative

contracts used to manage interest rate risk. Derivative financial instruments are also discussed in “Item 1. Note 6 – Derivative Financial Instruments.”

At March 31, 2021, the Company had $4.1 billion in variable rate loans including $2.4 billion based on LIBOR and $1.3 billion based on Prime. Approximately 87% of the LIBOR based loans are indexed to one-month LIBOR. Of the total variable rate loans, $1.7 billion, or 23%, had a rate floor of which approximately $1.6 billion, or 92%, were currently priced at the floor.

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 (CEO) and the Chief Financial Officer (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 March 31, ~~2020.~~2021. 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 March 31, ~~2020~~2021 to provide reasonable assurance of the achievement of the objectives described above.

Changes to Internal Controls

The adoption of ASU 2016-13 required the implementation of new accounting policies and procedures, including enhancements to our information systems, which changed the Company’s internal controls over financial reporting for the analysis of the allowance for credit losses and related disclosures. Other than the change related to the adoption of ASU 2016-13, thereThere 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, ~~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.

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 Report on Form 10-Q, and Part I, Item 1A of our Report on Form 10-K for the fiscal year ended December 31, ~~2019, which is supplemented by the additional risk factors set forth below.~~

~~The recent global coronavirus (COVID-19) pandemic has led to periods of significant volatility in financial, commodities and other markets and could harm our business and results of operations.~~

In December 2019, a novel strain of coronavirus (COVID-19) was first reported in Wuhan, Hubei Province, China. Since then, COVID-19 infections have spread to additional countries including the United States. In March 2020, the World Health Organization declared COVID-19 to be a pandemic. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus pandemic on our business, and there is no guarantee that our efforts to address or mitigate the adverse impacts of the coronavirus will be effective. The impact to date has included periods of significant volatility in financial, commodities and other markets. This volatility, if it continues, could have an adverse impact on our customers and on our business, financial condition and results of operations as well as our growth strategy.

Our business is dependent upon the willingness and ability of our customers to conduct banking and other financial transactions. The spread of COVID-19 has caused and could continue to cause severe disruptions in the U.S. economy at large, and has resulted and may continue to result in disruptions to our customers’ businesses, and a decrease in consumer confidence and business generally. In addition, recent actions by US federal, state and local governments to address the pandemic, including travel bans, stay-at-home orders and school, business and entertainment venue closures, may have a significant adverse effect on our customers and the markets in which we conduct our business. The extent of impacts resulting from the coronavirus pandemic and other events beyond our control will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus pandemic and actions taken to contain the coronavirus or its impact, among others.

Disruptions to our customers could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans as well as declines in wealth management revenues. The escalation of the pandemic may also negatively impact regional economic conditions for a period of time, resulting in declines in local loan demand, liquidity of loan guarantors, loan collateral (particularly in real estate), loan originations and deposit availability. If the global response to contain COVID-19 escalates or is unsuccessful, we could experience a material adverse effect on our business, financial condition, results of operations and cash flows.

The Company has implemented restrictions on employee business travel, conversion of in-person meetings to virtual, and a work-from home mandate. The Company has also worked with its customers to implement appropriate loan deferral strategies in certain circumstances. These actions in response to the COVID-19 pandemic, and similar actions by our vendors and business partners, have not materially impaired our ability to support our employees, conduct our business and serve our customers, but there is no assurance that these actions will be sufficient to successfully mitigate the risks presented by COVID-19 or that our ability to operate will not be materially affected going forward. For instance, our business operations may be disrupted if key personnel or significant portions of our employees are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the COVID-19 pandemic. Similarly, if any of our vendors or business partners become unable to continue to provide their products and services, which we rely upon to maintain our day-to-day operations, our ability to serve our customers could be impacted.

The spread of the COVID-19 outbreak and the governmental responses may disrupt banking and other financial activity in the areas in which we operate and could potentially create widespread business continuity issues for us.

The outbreak of COVID-19 and the US federal, state and local governmental responses may result in a disruption in the services we provide. We rely on our third-party vendors to conduct business and to process, record, and monitor transactions. If any of these vendors are unable to continue to provide us with these services or experience interruptions in their ability to provide us with these services, it could negatively impact our ability to serve our customers. Furthermore, the coronavirus pandemic could negatively impact the ability of our employees and customers to engage in banking and other financial transactions in the geographic areas in which we operate and could create widespread business continuity issues for us. We also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to infection, quarantine or other effects and restrictions of a COVID-19 outbreak in our market areas. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective. If we are unable to promptly recover from such business disruptions, our business and financial conditions and results of operations would be adversely affected. We also may incur additional costs to remedy damages caused by such disruptions, which could adversely affect our financial condition and results of operations.

Our participation in the SBA PPP loan program exposes us to risks related to noncompliance with the PPP, as well as litigation risk related to our administration of the PPP loan program, which could have a material adverse impact on our business, financial condition and results of operations.

The Company is a participating lender in the PPP, a loan program administered through the SBA, that was created to help eligible businesses, organizations and self-employed persons fund their operational costs during the COVID-19

pandemic. Under this program, the SBA guarantees 100% of the amounts loaned under the PPP. The PPP opened on April 3, 2020; however, because of the short window between the passing of the CARES Act and the opening of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company to risks relating to noncompliance with the PPP. For instance, other financial institutions have experienced litigation related to their process and procedures used in processing applications for the PPP. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations. In addition, the Company may be exposed to credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced. If a deficiency is identified, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

~~Unpredictable future developments related to or resulting from the COVID-19 pandemic could materially and adversely affect our business and results of operations.~~

~~Because there~~2020. There have been no comparable recent global pandemics that resulted in similar global impact, we do not yet know the full extent of the COVID-19 pandemic’s effects on our business, operations, or the global economy as a whole. Any future development will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the effectiveness of our work from home arrangements, third party providers’ ability to support our operation, and any actions taken by governmental authorities and other third parties in responsematerial changes to the pandemic. We are continuing to monitor the COVID-19 pandemic and related risks, although the rapid development and fluidity of the situation precludes any specific prediction as to its ultimate impact on us. However, if the pandemic continues to spread or otherwise results in a continuation or worsening of the current economic and commercial environments, our business, financial condition, results of operations and cash flows as well as our regulatory capital and liquidity ratios could be materially adversely affected and many of the risksrisk factors described in ~~our~~such Annual Report on Form ~~10-K for the year ended December 31, 2019 will be heightened.~~10-K.

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

None.

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
January 1, 2020 through January 31, 2020 —
—
—
552,158
February 1, 2020 through February 29, 2020 114,235
42.85
114,235
437,923
March 1, 2020 through March 31, 2020 342,016
30.58
342,016
95,907
Total 456,251
$ 33.64
456,251
95,907

(a) In May 2015, 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 in open market or privately negotiated transactions and the stock repurchase program will remain in effect until fully utilized or until modified, superseded or terminated. Although the Company has temporarily suspended repurchases as a result of the COVID-19 pandemic and resulting economic uncertainty, the Company may resume repurchases at any time. In that event, the timing and exact amount of common stock repurchases will depend on a number of factors including, among others, market and general economic conditions, economic capital and regulatory capital considerations, alternative uses of capital, the potential impact on our credit ratings, and contractual and regulatory limitations.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

On April 29, 2021, the Company’s Board of Directors approved a new share repurchase program, which will replace and supersede the prior share repurchase program initially announced on May 4, 2015. Pursuant to the new share repurchase program, the Company will be authorized to repurchase up to 2,000,000 shares of its common stock from time to time in the open market or through privately negotiated transactions. The amount approved for repurchase pursuant to the new share repurchase program represents approximately 6% of the Company’s issued and outstanding shares of common stock as of March 31, 2021, and approximately 5% of the Company’s pro forma issued and outstanding shares of common stock as of March 31, 2021, taking into account the anticipated number of shares issuable to FCBP’s shareholders based upon FCBP’s issued and outstanding shares of capital stock as of that date.

ITEM 6: EXHIBITS


~~Exhibit No.~~	~~Description~~

Exhibit No.Description

~~2.1~~

2.1 Agreement and Plan of Merger, ~~among Enterprise Financial Services Corp, Enterprise Bank & Trust, Trinity Capital Corporation and Los Alamos National Bank,~~ dated ~~November 1, 2018 (incorporated herein by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on November 2, 2018 (File No. 001-15373)).~~April 26, 2021 , by and among Enterprise Financial Services Corp, Enterprise Bank & Trust, First Choice Bancorp and First Choice Bank (incorporated herein by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on April 26, 2021 (File No. 001-15373)).

2.2 Agreement and Plan of Merger, dated August 20, 2020, by and among Enterprise Financial Services Corp, Enterprise Bank & Trust, Seacoast Commerce Banc Holdings and Seacoast Commerce Bank (incorporated herein by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on August 21, 2020 (File No. 001-15373)).

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 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)).

3.7 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)).

3.8 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)).

3.9 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.


~~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~~	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)).


~~3.7~~	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)).


~~3.8~~	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)).


~~3.9~~	~~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

*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.


*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~~	~~XBRL Taxonomy Extension Schema Document~~


~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.LAB Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.

101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase ~~Document~~Document.

104 The cover page of Enterprise Financial Services Corp’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, 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 ~~May 6, 2020.~~April 30, 2021.



			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




($ in thousands)	December 31, 2019		Impact of Adoption			January 1, 2020
Assets:
Loans	$	5,314,337	$	7,091		$	5,321,428
Allowance for credit losses on loans	43,288		28,387			71,675
Allowance for credit losses on held-to-maturity debt securities	—		303			303
Deferred tax asset	14,851		5,898			20,749

Liabilities:
Reserve for unfunded commitments	430		2,413			2,843

Shareholders’ Equity
Retained Earnings	380,737		(18,114		)	362,623


	Available for sale				Held to maturity
(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	11,176	$	11,316	$	0	$	0
Due after one year through five years	23,972		24,517		12,733		13,109
Due after five years through ten years	32,875		33,175		132,553		135,497
Due after ten years	385,280		384,571		225,445		223,742
Agency mortgage-backed securities	477,151		492,081		96,777		97,751

	$	930,454	$	945,660	$	467,508	$	470,099


	March 31, 2021
	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	$	13,324	$	176	$	0	$	0	$	13,324	$	176
Obligations of states and political subdivisions	$	222,901	$	3,662	$	0	$	0	$	222,901	$	3,662
Agency mortgage-backed securities	89,591		1,911		0		0		89,591		1,911

Corporate debt securities	4,493		7		0		0		4,493		7
	$	330,309	$	5,756	$	0	$	0	$	330,309	$	5,756


	December 31, 2020
	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	$	4,997	$	3	$	0	$	0	$	4,997	$	3
Obligations of states and political subdivisions	$	4,079	$	33	$	0	$	0	$	4,079	$	33
Agency mortgage-backed securities	65,986		321		0		0		65,986		321


	$	75,062	$	357	$	0	$	0	$	75,062	$	357



(in thousands)	March 31, 2020		December 31, 2019		Increase (decrease)
Total cash and cash equivalents	$	183,683	$	167,256	$	16,427		10	%
Securities	1,340,446		1,316,483		23,963			2
Loans held for investment	5,457,517		5,314,337		143,180			3
Total assets	7,500,643		7,333,791		166,852			2
Deposits	5,989,906		5,771,023		218,883			4
Total liabilities	6,654,207		6,466,606		187,601			3
Total shareholders’ equity	846,436		867,185		(20,749		)	(2	)



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
January 1, 2020 through January 31, 2020	—	—		—	552,158
February 1, 2020 through February 29, 2020	114,235	42.85		114,235	437,923
March 1, 2020 through March 31, 2020	342,016	30.58		342,016	95,907
Total	456,251	$	33.64	456,251	95,907

(a) In May 2015, 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 in open market or privately negotiated transactions and the stock repurchase program will remain in effect until fully utilized or until modified, superseded or terminated. Although the Company has temporarily suspended repurchases as a result of the COVID-19 pandemic and resulting economic uncertainty, the Company may resume repurchases at any time. In that event, the timing and exact amount of common stock repurchases will depend on a number of factors including, among others, market and general economic conditions, economic capital and regulatory capital considerations, alternative uses of capital, the potential impact on our credit ratings, and contractual and regulatory limitations.