UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September 30, 2021.~~March 31, 2022.


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

For the transition period from ______ to ______

Commission file number 001-15373

ENTERPRISE FINANCIAL SERVICES CORP

Incorporated in the State of Delaware

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

Address: 150 North Meramec

Clayton, MO 63105

Telephone: (314) 725-5500

___________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

EFSC

Nasdaq Global Select Market

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

EFSCP

Nasdaq Global Select Market

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

As of ~~November 2, 2021,~~April 27, 2022, the Registrant had ~~38,372,237~~37,241,812 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						3027

Item 3. Quantitative and Qualitative Disclosures About Market Risk						5146

Item 4. Controls and Procedures						5248

PART II - OTHER INFORMATION

Item 1. Legal Proceedings						5248

Item 1A. Risk Factors						5248

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						5349

Item 3. Defaults Upon Senior Securities						5349

Item 4. Mine Safety Disclosures						5349

Item 5. Other Information						5349

Item 6. Exhibits						5349

Signatures						5652

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

FCBP

First Choice Bancorp

ASU

Accounting Standards Update

FHLB

Federal Home Loan Bank

Bank

Enterprise Bank & Trust

GAAP

Generally Accepted Accounting Principles (United States)

C&I

Commercial and Industrial

LIBOR

London Interbank Offered Rate

CECL

Current Expected Credit Loss

MD&A

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

Company

Enterprise Financial Services Corp

NIM

Net Interest Margin

CRE

Commercial Real Estate

PCD

Purchased Credit Deteriorated

EFSC

Enterprise Financial Services Corp

PPP

Paycheck Protection Program

Enterprise

Enterprise Financial Services Corp

SBA

Small Business Administration

FASB

Financial Accounting Standards Board

~~Seacoast~~SEC

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

FCB

First Choice Bank

~~SEC~~

~~Securities and Exchange Commission~~

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)	(in thousands, except share and per share data)	September 30, 2021		December 31, 2020		(in thousands, except share and per share data)	March 31, 2022		December 31, 2021
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	179,826	$	99,760	Cash and due from banks	$	252,706	$	209,177
Federal funds sold	Federal funds sold	3,398		1,519		Federal funds sold	224		1,356
Interest-earning deposits (including $21,075 and $36,525 pledged as collateral, respectively)		1,206,063		436,424
Interest-earning deposits (including $135 and $14,595 pledged as collateral, respectively)						Interest-earning deposits (including $135 and $14,595 pledged as collateral, respectively)	1,728,390		1,811,156
Total cash and cash equivalents	Total cash and cash equivalents	1,389,287		537,703		Total cash and cash equivalents	1,981,320		2,021,689
Interest-earning deposits greater than 90 days	Interest-earning deposits greater than 90 days	7,009		7,626		Interest-earning deposits greater than 90 days	7,094		6,996
Securities available-for-sale	Securities available-for-sale	1,219,814		912,429		Securities available-for-sale	1,392,444		1,366,006
Securities held-to-maturity, net	Securities held-to-maturity, net	438,472		487,610		Securities held-to-maturity, net	541,039		429,681
Loans held-for-sale	Loans held-for-sale	5,068		13,564		Loans held-for-sale	4,270		6,389
Loans	Loans	9,116,583		7,224,935		Loans	9,056,073		9,017,642
Allowance for credit losses on loans	Allowance for credit losses on loans	(152,096)		(136,671)		Allowance for credit losses on loans	(139,212)		(145,041)
Total loans, net	Total loans, net	8,964,487		7,088,264		Total loans, net	8,916,861		8,872,601

Other investments	Other investments	59,156		48,764		Other investments	60,444		59,896
Fixed assets, net	Fixed assets, net	48,697		53,169		Fixed assets, net	46,900		47,915

Goodwill	Goodwill	365,415		260,567		Goodwill	365,164		365,164
Intangible assets, net	Intangible assets, net	23,777		23,084		Intangible assets, net	20,855		22,286

Other assets	Other assets	366,834		318,791		Other assets	370,378		338,735
Total assets	Total assets	$	12,888,016	$	9,751,571	Total assets	$	13,706,769	$	13,537,358

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Noninterest-bearing deposit accounts	Noninterest-bearing deposit accounts	$	4,375,713	$	2,711,828	Noninterest-bearing deposit accounts	$	4,881,043	$	4,578,436
Interest-bearing transaction accounts	Interest-bearing transaction accounts	2,253,639		1,768,497		Interest-bearing transaction accounts	2,547,482		2,465,884
Money market accounts	Money market accounts	2,822,259		2,327,066		Money market accounts	2,794,536		2,890,976
Savings accounts	Savings accounts	748,993		627,903		Savings accounts	883,599		800,210
Certificates of deposit:	Certificates of deposit:					Certificates of deposit:
Brokered	Brokered	128,923		50,209		Brokered	129,017		128,970
Other	Other	498,248		499,886		Other	468,458		479,323
Total deposits	Total deposits	10,827,775		7,985,389		Total deposits	11,704,135		11,343,799
Subordinated debentures and notes	Subordinated debentures and notes	204,103		203,637		Subordinated debentures and notes	155,031		154,899
FHLB advances	FHLB advances	50,000		50,000		FHLB advances	50,000		50,000
Other borrowings	Other borrowings	219,484		271,081		Other borrowings	228,846		353,863
Notes payable		24,286		30,000

Other liabilities	Other liabilities	122,733		132,489		Other liabilities	95,580		105,681
Total liabilities	Total liabilities	$	11,448,381	$	8,672,596	Total liabilities	$	12,233,592	$	12,008,242

Commitments and contingent liabilities (Note 7)
Commitments and contingent liabilities (Note 5)						Commitments and contingent liabilities (Note 5)	0		0

Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock, $0.01 par value; 75,000,000 and 45,000,000 shares authorized, respectively; 40,352,097 and 33,190,306 shares issued, respectively		404		332
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 75,000 shares issued and outstanding						Preferred stock, $0.01 par value; 5,000,000 shares authorized; 75,000 shares issued and outstanding	71,988		71,988
Common stock, $0.01 par value; 75,000,000 shares authorized; 39,496,569 and 39,799,615 shares issued, respectively						Common stock, $0.01 par value; 75,000,000 shares authorized; 39,496,569 and 39,799,615 shares issued, respectively	395		398
Treasury stock, at cost; 1,980,093 shares	Treasury stock, at cost; 1,980,093 shares	(73,528)		(73,528)		Treasury stock, at cost; 1,980,093 shares	(73,528)		(73,528)
Additional paid in capital	Additional paid in capital	1,031,146		697,839		Additional paid in capital	1,010,446		1,018,799
Retained earnings	Retained earnings	461,711		417,212		Retained earnings	523,136		492,682
Accumulated other comprehensive income		19,902		37,120
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(59,260)		18,777
Total shareholders' equity	Total shareholders' equity	1,439,635		1,078,975		Total shareholders' equity	1,473,177		1,529,116
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	12,888,016	$	9,751,571	Total liabilities and shareholders' equity	$	13,706,769	$	13,537,358

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 September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2021		2020		2021		2020		(in thousands, except per share data)	2022		2021
Interest income:	Interest income:									Interest income:
Interest and fees on loans		$	94,353	$	62,648	$	250,390	$	194,295
Interest on debt securities:
Loans										Loans	$	96,123	$	76,973
Debt securities:										Debt securities:
Taxable	Taxable	4,435		5,554		13,293		19,698		Taxable	5,351		4,540
Nontaxable	Nontaxable	3,585		2,241		10,058		5,542		Nontaxable	3,942		3,079

Interest on interest-earning deposits		480		113		906		500
Interest-earning deposits										Interest-earning deposits	817		189
Dividends on equity securities	Dividends on equity securities	375		231		942		631		Dividends on equity securities	348		179
Total interest income	Total interest income	103,228		70,787		275,589		220,666		Total interest income	106,581		84,960
Interest expense:	Interest expense:									Interest expense:

Deposits	Deposits	2,740		3,712		7,870		17,983		Deposits	2,859		2,663
Subordinated debentures and notes	Subordinated debentures and notes	2,855		2,826		8,521		7,061		Subordinated debentures and notes	2,220		2,819
FHLB advances	FHLB advances	212		720		604		2,070		FHLB advances	195		195
Notes payable and other borrowings		148		175		460		997
Other borrowings										Other borrowings	142		160
Total interest expense	Total interest expense	5,955		7,433		17,455		28,111		Total interest expense	5,416		5,837
Net interest income	Net interest income	97,273		63,354		258,134		192,555		Net interest income	101,165		79,123
Provision for credit losses		19,668		14,080		17,045		55,935
Provision (benefit) for credit losses										Provision (benefit) for credit losses	(4,068)		46
Net interest income after provision for credit losses	Net interest income after provision for credit losses	77,605		49,274		241,089		136,620		Net interest income after provision for credit losses	105,233		79,077
Noninterest income:	Noninterest income:									Noninterest income:
Deposit service charges	Deposit service charges	4,520		2,798��		11,466		8,557		Deposit service charges	4,163		3,084
Wealth management revenue	Wealth management revenue	2,573		2,456		7,572		7,283		Wealth management revenue	2,622		2,483
Card services revenue	Card services revenue	3,186		2,498		8,657		6,970		Card services revenue	3,040		2,496

Tax credit income		3,325		748		3,654		2,563
Tax credit income (expense)										Tax credit income (expense)	2,608		(1,041)

Miscellaneous income		4,015		4,129		13,764		10,624
Other income										Other income	6,208		4,268
Total noninterest income	Total noninterest income	17,619		12,629		45,113		35,997		Total noninterest income	18,641		11,290
Noninterest expense:	Noninterest expense:									Noninterest expense:
Employee compensation and benefits	Employee compensation and benefits	33,722		22,040		91,416		66,114		Employee compensation and benefits	35,827		29,562
Occupancy	Occupancy	4,496		3,408		11,776		9,940		Occupancy	4,586		3,751
Data processing	Data processing	3,328		2,167		9,068		6,393		Data processing	3,260		2,890
Professional fees	Professional fees	901		755		3,189		2,904		Professional fees	1,177		988

Branch-closure expenses		3,441		—		3,441		—

Merger-related expenses	Merger-related expenses	14,671		1,563		19,762		1,563		Merger-related expenses	—		3,142
Other		16,326		9,591		43,573		29,195
Other expense										Other expense	17,950		12,551
Total noninterest expense	Total noninterest expense	76,885		39,524		182,225		116,109		Total noninterest expense	62,800		52,884

Income before income tax expense	Income before income tax expense	18,339		22,379		103,977		56,508		Income before income tax expense	61,074		37,483
Income tax expense	Income tax expense	4,426		4,428		21,733		11,055		Income tax expense	13,381		7,557
Net income	Net income	$	13,913	$	17,951	$	82,244	$	45,453	Net income	$	47,693	$	29,926
Dividends on preferred stock										Dividends on preferred stock	1,229		—
Net income available to common shareholders										Net income available to common shareholders	$	46,464	$	29,926

Earnings per common share	Earnings per common share									Earnings per common share
Basic	Basic	$	0.38	$	0.68	$	2.48	$	1.73	Basic	$	1.23	$	0.96
Diluted	Diluted	0.38		0.68		2.48		1.73		Diluted	1.23		0.96

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

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021
Net income	Net income	$	13,913	$	17,951	$	82,244	$	45,453	Net income	$	47,693	$	29,926
Other comprehensive income (loss), after-tax:	Other comprehensive income (loss), after-tax:									Other comprehensive income (loss), after-tax:
Change in unrealized gain (loss) on available-for-sale debt securities		(7,870)		94		(15,941)		21,642
Reclassification adjustment for realized gain on sale of available-for-sale debt securities		—		(314)		—		(317)
Change in unrealized loss on available-for-sale debt securities										Change in unrealized loss on available-for-sale debt securities	(79,353)		(10,920)

Reclassification of gain on held-to-maturity securities	Reclassification of gain on held-to-maturity securities	(805)		(705)		(2,791)		(1,190)		Reclassification of gain on held-to-maturity securities	(704)		(1,149)
Change in unrealized gain (loss) on cash flow hedges arising during the period		9		110		651		(6,247)
Change in unrealized gain on cash flow hedges arising during the period										Change in unrealized gain on cash flow hedges arising during the period	1,751		847
Reclassification of loss on cash flow hedges	Reclassification of loss on cash flow hedges	296		514		863		871		Reclassification of loss on cash flow hedges	269		279
Total other comprehensive income (loss), after-tax		(8,370)		(301)		(17,218)		14,759
Comprehensive income		$	5,543	$	17,650	$	65,026	$	60,212
Total other comprehensive loss, after-tax										Total other comprehensive loss, after-tax	(78,037)		(10,943)
Comprehensive (loss) income										Comprehensive (loss) income	$	(30,344)	$	18,983

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

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three and nine months ended September 30, 2021
(in thousands, except per share data) Common Stock Treasury Stock Additional paid in capital Retained earnings Accumulated
other
comprehensive income (loss) Total
shareholders’ equity
Balance at June 30, 2021 $ 330 $ (73,528) $ 688,945 $ 474,282 $ 28,272 $ 1,118,301
Net income — — — 13,913 — 13,913
Other comprehensive loss — — — — (8,370) (8,370)
Cash dividends paid on common shares, $0.19 per share — — — (7,305) — (7,305)
Repurchase of common shares (4) — (3,412) (17,820) — (21,236)
Issuance under equity compensation plans, 13,234 shares, net — — 1,376 (649) — 727
Share-based compensation — — 1,325 — — 1,325
Shares issued in connection with acquisition of First Choice Bancorp, 7,777,272 shares, net
(gross issuance of 7,808,459 shares) 78 — 342,912 (710) — 342,280
Balance at September 30, 2021 $ 404 $ (73,528) $ 1,031,146 $ 461,711 $ 19,902 $ 1,439,635
Balance at December 31, 2020 $ 332 $ (73,528) $ 697,839 $ 417,212 $ 37,120 $ 1,078,975
Net income — — — 82,244 — 82,244
Other comprehensive loss — — — — (17,218) (17,218)
Cash dividends paid on common shares, $0.55 per share — — — (18,566) — (18,566)
Repurchase of common shares (6) — (15,243) (17,820) — (33,069)
Issuance under equity compensation plans, 106,568 shares, net — — 1,530 (649) — 881
Share-based compensation — — 4,108 — — 4,108
Shares issued in connection with acquisition of First Choice Bancorp, 7,777,272 shares, net
(gross issuance of 7,808,459 shares) 78 — 342,912 (710) — 342,280
Balance at September 30, 2021 $ 404 $ (73,528) $ 1,031,146 $ 461,711 $ 19,902 $ 1,439,635
Three and nine months ended September 30, 2020
(in thousands, except per share data) Common Stock Treasury Stock Additional paid in capital Retained earnings Accumulated
other
comprehensive income (loss) Total
shareholders’ equity
Balance at June 30, 2020 $ 281 $ (73,528) $ 527,734 $ 380,667 $ 32,809 $ 867,963
Net income — — — 17,951 — 17,951
Other comprehensive loss — — — — (301) (301)
Cash dividends paid on common shares, $0.18 per share — — — (4,718) — (4,718)
Issuance under equity compensation plans, 13,583 shares, net 1 — 331 — — 332
Share-based compensation — — 1,040 — — 1,040
Balance at September 30, 2020 $ 282 $ (73,528) $ 529,105 $ 393,900 $ 32,508 $ 882,267
Balance at December 31, 2019 $ 281 $ (58,181) $ 526,599 $ 380,737 $ 17,749 $ 867,185
Net income — — — 45,453 — 45,453
Other comprehensive income — — — — 14,759 14,759
Cash dividends paid on common shares, $0.54 per share — — — (14,176) — (14,176)
Repurchase of common shares — (15,347) — — — (15,347)
Issuance under equity compensation plans, 122,583 shares, net 1 — (563) — — (562)
Share-based compensation — — 3,069 — — 3,069
Reclassification for the adoption of ASU 2016-13 (CECL) — — — (18,114) — (18,114)
Balance at September 30, 2020 $ 282 $ (73,528) $ 529,105 $ 393,900 $ 32,508 $ 882,267


Three months ended March 31, 2022
($ in thousands, except per share data)	Preferred Stock		Common Stock		Treasury Stock		Additional paid in capital		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at December 31, 2021	$	71,988	$	398	$	(73,528)	$	1,018,799	$	492,682	$	18,777	$	1,529,116
Net income	—		—		—		—		47,693		—		47,693





Other comprehensive loss	—		—		—		—		—		(78,037)		(78,037)

Cash dividends paid on common shares, $0.21 per share	—		—		—		—		(7,915)		—		(7,915)
Cash dividends paid on preferred shares, $16.389 per share			—		—		—		(1,229)		—		(1,229)
Repurchase of common shares, 351,090	—		(4)		—		(9,457)		(7,513)		—		(16,974)
Issuance under equity compensation plans, 48,044 shares, net	—		1		—		(582)		(582)		—		(1,163)

Share-based compensation	—		—		—		1,686		—		—		1,686




Balance at March 31, 2022	$	71,988	$	395	$	(73,528)	$	1,010,446	$	523,136	$	(59,260)	$	1,473,177





















Three months ended March 31, 2021
($ in thousands, except per share data)	Preferred Stock		Common Stock		Treasury Stock		Additional paid in capital		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at December 31, 2020	$	—	$	332	$	(73,528)	$	697,839	$	417,212	$	37,120	$	1,078,975
Net income	—		—		—		—		29,926		—		29,926

Other comprehensive loss	—		—		—		—		—		(10,943)		(10,943)

Cash dividends paid on common shares, $0.18 per share	—		—		—		—		(5,627)		—		(5,627)




Issuance under equity compensation plans, 48,970 shares, net	—		—		—		(1,109)		—		—		(1,109)

Share-based compensation	—		—		—		1,275		—		—		1,275



Balance at March 31, 2021	$	—	$	332	$	(73,528)	$	698,005	$	441,511	$	26,177	$	1,092,497

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

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


		Nine months ended September 30,					Three months ended March 31,
(in thousands, except share data)	(in thousands, except share data)	2021		2020		(in thousands, except share data)	2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	82,244	$	45,453	Net income	$	47,693	$	29,926
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	Depreciation	4,609		4,573		Depreciation	1,472		1,581
Provision for credit losses		17,045		55,935
Provision (benefit) for credit losses						Provision (benefit) for credit losses	(4,068)		46
Deferred income taxes	Deferred income taxes	(8,813)		(9,609)		Deferred income taxes	5,248		3,834
Net amortization of debt securities	Net amortization of debt securities	5,704		4,775		Net amortization of debt securities	1,625		1,937
Net accretion on loan premiums		(1,672)		(5,976)
Net amortization (accretion) on loan discount/premiums						Net amortization (accretion) on loan discount/premiums	429		(736)
Amortization of intangible assets	Amortization of intangible assets	4,199		4,256		Amortization of intangible assets	1,429		1,415
Amortization of servicing assets	Amortization of servicing assets	690		—		Amortization of servicing assets	648		165
Mortgage loans originated-for-sale	Mortgage loans originated-for-sale	(120,700)		(164,151)		Mortgage loans originated-for-sale	(27,811)		(49,065)
Proceeds from mortgage loans sold	Proceeds from mortgage loans sold	128,687		157,377		Proceeds from mortgage loans sold	29,636		52,908
Loss (gain) on:
Sale of investment securities		—		(421)
Gain on:						Gain on:

Sale of other real estate	Sale of other real estate	(931)		13		Sale of other real estate	(19)		(47)

Sale of state tax credits	Sale of state tax credits	(437)		(290)		Sale of state tax credits	(9)		(326)
Asset impairment		3,441		—

Share-based compensation	Share-based compensation	4,108		3,069		Share-based compensation	1,686		1,275

Changes in other assets and liabilities, net	Changes in other assets and liabilities, net	(12,544)		5,243		Changes in other assets and liabilities, net	(8,076)		(46,588)

Net cash provided by operating activities		105,630		100,247
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	49,883		(3,675)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from acquisition, net		212,642		—
Net decrease (increase) in loans		42,865		(800,812)

Net increase in loans						Net increase in loans	(39,536)		(69,907)

Proceeds received from:	Proceeds received from:					Proceeds received from:
Sale of debt securities, available-for-sale		27,135		20,221

Paydown or maturity of debt securities, available-for-sale	Paydown or maturity of debt securities, available-for-sale	222,993		234,267		Paydown or maturity of debt securities, available-for-sale	63,506		69,953
Paydown or maturity of debt securities, held-to-maturity	Paydown or maturity of debt securities, held-to-maturity	42,874		25,833		Paydown or maturity of debt securities, held-to-maturity	5,097		18,220
Redemption of other investments	Redemption of other investments	16,952		26,350		Redemption of other investments	1,248		752
Sale of state tax credits held for sale	Sale of state tax credits held for sale	5,534		5,621		Sale of state tax credits held for sale	261		1,632
Sale of other real estate	Sale of other real estate	5,915		652		Sale of other real estate	1,419		450
Settlement of bank-owned life insurance policies	Settlement of bank-owned life insurance policies	—		1,993		Settlement of bank-owned life insurance policies	534		—
Payments for the purchase of:	Payments for the purchase of:					Payments for the purchase of:
Available-for-sale debt securities	Available-for-sale debt securities	(547,526)		(274,677)		Available-for-sale debt securities	(313,875)		(118,791)
Held-to-maturity debt securities						Held-to-maturity debt securities	(1,120)		—
Other investments	Other investments	(7,629)		(40,714)		Other investments	(8,154)		(3,660)

State tax credits held for sale	State tax credits held for sale	(6,688)		(11,026)		State tax credits held for sale	(7,212)		—
Fixed assets, net		(1,635)		(1,633)
Net cash provided by (used in) investing activities		13,432		(813,925)
Fixed assets						Fixed assets	(457)		(489)
Net cash used in investing activities						Net cash used in investing activities	(298,289)		(101,840)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in noninterest-bearing deposit accounts	Net increase in noninterest-bearing deposit accounts	666,480		602,192		Net increase in noninterest-bearing deposit accounts	302,607		198,389
Net increase in interest-bearing deposit accounts	Net increase in interest-bearing deposit accounts	335,477		303,011		Net increase in interest-bearing deposit accounts	57,729		331,666

Net increase (decrease) in FHLB advances		(160,000)		27,700

Repayments of notes payable	Repayments of notes payable	(5,714)		(4,286)		Repayments of notes payable	(1,429)		(2,857)

Proceeds from issuance of subordinated debentures, net		—		61,953

Net decrease in other borrowings	Net decrease in other borrowings	(51,597)		(21,848)		Net decrease in other borrowings	(123,589)		(68,835)

Payments for the repurchase of common stock		(33,069)		(15,347)
Repurchase of common stock						Repurchase of common stock	(16,974)		—
Cash dividends paid on common stock	Cash dividends paid on common stock	(18,566)		(14,176)		Cash dividends paid on common stock	(7,915)		(5,627)
Cash dividends paid on preferred stock						Cash dividends paid on preferred stock	(1,229)		—

Other		(489)		(562)

Taxes paid in net settlement of equity awards						Taxes paid in net settlement of equity awards	(1,163)		(1,109)

Net cash provided by financing activities	Net cash provided by financing activities	732,522		938,637		Net cash provided by financing activities	208,037		451,627
Net increase in cash and cash equivalents		851,584		224,959
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(40,369)		346,112
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	537,703		167,256		Cash and cash equivalents, beginning of period	2,021,689		537,703
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	1,389,287	$	392,215	Cash and cash equivalents, end of period	$	1,981,320	$	883,815
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	16,679	$	26,858	Interest	$	4,725	$	4,836
Income taxes	Income taxes	45,230		7,514		Income taxes	979		30,167
Noncash transactions:
Noncash investing and financing transactions:						Noncash investing and financing transactions:
Transfer to other real estate owned in settlement of loans	Transfer to other real estate owned in settlement of loans	$	3,227	$	261	Transfer to other real estate owned in settlement of loans	$	—	$	1,236
Sales of other real estate financed		228		48

Right-of-use assets obtained in exchange for lease obligations	Right-of-use assets obtained in exchange for lease obligations	4,319		200		Right-of-use assets obtained in exchange for lease obligations	4,178		—
Common shares issued in connection with acquisition		343,650		—

Transfer of securities from available for sale to held to maturity		—		163,592

Transfer of securities from available-for-sale to held-to-maturity						Transfer of securities from available-for-sale to held-to-maturity	116,927		—

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 Arizona, California, Kansas, Missouri, Nevada, and New Mexico through its banking subsidiary, Enterprise Bank & Trust.

Operating results for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, ~~2021.~~2022. 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, ~~2020,~~2021, as filed with the SEC.

Basis of Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and 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, ~~2020.~~2021.

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

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

Recent Accounting Pronouncements

FASB ASU ~~2020-04, “Reference~~2021-01, 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~~Scope (ASU 2021-01). ~~provides~~ASU 2021-01 was issued in January 2021 and provided optional expedients and exceptions ~~for~~in ASC 848 to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to 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 provided by the amendments will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update were effective immediately upon issuance and did not ~~yet determined~~have a material effect on the ~~impact this standard may have on its~~ consolidated financial statements.

FASB ASU 2022-02,

~~NOTE 2 - ACQUISITION~~

Financial Instruments–Credit Losses (Topic 326); Troubled Debt Restructurings and Vintage Disclosures.

ASU 2022-02 was issued in March 2022 and eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ~~acquisition noted below has been accounted~~ASU also updates the requirements related to accounting for ~~as a business combination using the acquisition method of accounting which requires assets acquired~~credit losses under ASC 326 and ~~liabilities assumed~~adds enhanced disclosures for creditors with respect to ~~be recognized at fair value as of the acquisition date. Goodwill arising from the acquisitions consist largely of the synergies~~loan refinancings and ~~economies of scale expected from combining the operations into Enterprise. None of the goodwill recognized is expected to be deductible~~restructurings for ~~income tax purposes.~~

borrowers experiencing financial difficulty. The amendments in this update will

be effective for fiscal years beginning after December 15, 2022 for entities that have adopted the amendments in ASU 2016-13, ~~Acquisition~~Financial Instruments–Credit Losses (Topic 326) Measurement of ~~First Choice Bancorp~~Credit Losses on Financial Instruments. The Company is evaluating the additional disclosure requirements and does not expect them to have a material effect on the consolidated financial statements.

~~On July 21, 2021,~~Acquisitions and Divestitures

Acquisitions and business combinations are accounted for using the ~~Company closed its~~ acquisition method of ~~100%~~accounting. The assets and liabilities of ~~FCBP and its wholly-owned subsidiary, FCB, which operated 8 full-service branches in California.~~

~~FCBP shareholders received 0.6603 shares~~the acquired entities have been recorded at their estimated fair values at the date of ~~EFSC common stock for each FCBP common share and cash in lieu~~acquisition. Goodwill represents the excess of ~~any fractional shares. In connection with~~ the ~~merger, Enterprise issued approximately 7.8 million shares of EFSC Common Stock valued at $44.01 per share, which was~~purchase price over the ~~closing price of Enterprise common stock on July 21, 2021. The~~fair value of net assets acquired, including the ~~transaction consideration was approximately $346 million, which includes approximately $2.1 million payable~~amount assigned to holders of FCBP stock options. For the three and nine months ended September 30, 2021, the Company recognized $14.7 million and $16.6 million, respectively, of merger-related costs recorded in noninterest expense in the statement of operations related to the FCBP acquisition.identifiable intangible assets.

The ~~following tables present~~purchase price allocation process requires an estimation of the fair values of the assets acquired and the liabilities assumed. ~~The consideration exchanged, assets acquired and liabilities assumed~~When a business combination agreement provides for an adjustment to the cost of ~~FCBP were recorded at estimated~~the combination contingent on future events, the Company includes an estimate of the acquisition-date fair value as part of the cost of the combination. To determine the fair values, the Company relies on ~~the date of acquisition.~~third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Fair values are considered preliminary until final fair values are determined, or the measurement period has passed, which is no later than one year from the date of acquisition.

(in thousands) As Recorded by First Choice Adjustments As Recorded by EFSC
Assets acquired:
Cash and cash equivalents $ 214,794 $ — $ 214,794
Securities 34,533 (44) (a) 34,489
Loans 1,937,635 5,508 (b) 1,943,143
Allowance (19,626) 12,620 (b) (7,006)
Other investments 19,178 138 (c) 19,316
Fixed assets 1,869 (820) (c) 1,049
Accrued interest receivable 7,131 (242) (c) 6,889
Goodwill 73,425 (73,425) (d) —
Intangible assets 4,517 375 (e) 4,892
Deferred tax assets 7,558 (2,440) (c) 5,118
Other assets 23,024 2,103 (c) 25,127
Total assets acquired $ 2,304,038 $ (56,227) $ 2,247,811
Liabilities assumed:
Deposits $ 1,840,716 $ (287) (c) $ 1,840,429
FHLB advances 160,000 — 160,000
Accrued interest payable 124 — 124
Other liabilities 8,464 (2,160) (c) 6,304
Total liabilities assumed $ 2,009,304 $ (2,447) $ 2,006,857
Net assets acquired $ 294,734 $ (53,780) $ 240,954
Consideration paid:
Cash $ 2,152
Common stock1
343,650
Total consideration paid $ 345,802
Goodwill $ 104,848

1 ~~Common stock consideration was $342,280, net~~The results of ~~$1,370 for shares withheld on the settlement of share-based awards of FCBP employees.~~

~~(a)Fair value adjustments based on the Company’s evaluation~~operations of the acquired ~~securities portfolio.~~

~~(b)Fair value adjustments based on the Company’s evaluation of the acquired loan portfolio, write-off of net deferred loan costs and elimination of the allowance for loan losses recorded by FCBP.~~

~~(c)Other miscellaneous fair value adjustments.~~

~~(d)Adjustment to eliminate goodwill.~~

~~(e)~~Eliminate acquired intangibles and record the core deposit intangible asset on the acquired core deposit accounts. Amount to be amortized using a sum-of-years digits method over a useful life of 10 years.

The following table provides the unaudited pro forma information for the results of operations for the nine months ended September 30, 2021 and 2020, as if the acquisition had occurred on January 1, 2020. The pro forma results combine the historical results of FCBP with the Company’s Consolidated Statements of Income, adjusted for the impact of the application of the acquisition method of accounting including amortization and accretion of fair value adjustments. The pro forma results have been prepared for comparative purposes only andbusiness are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2020. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions. Only the acquisition-related expenses that have been incurred as of September 30, 2021 are included in net income in the table below.

Nine months ended September 30,
(in thousands, except per share data) 2021 2020
Total revenues (net interest income plus noninterest income) $ 363,426 $ 296,148
Net income 135,920 28,776
Diluted earnings per common share 3.49 0.84

For the three and nine months ended September 30, 2021, total revenue and pre-tax net income from FCBP of $18.1 million and $11.2 million (excluding the provision for credit losses of $25.4 million on the acquired loan portfolio and unfunded loan commitments) were included in the Company’s consolidated financial statements from the date of acquisition. Merger-related expenses include costs directly related to merger or acquisition activity and include legal and professional fees, system consolidation and conversion costs, and compensation costs such as severance and retention incentives for employees impacted by acquisition activity. The Company accounts for merger-related expenses in the periods in which the costs are incurred and the services are received.

For divestitures, the Company measures an asset (disposal group) classified as held-for-sale at the lower of its carrying value at the date the asset is initially classified as held-for-sale or its fair value less costs to sell. The Company reports the results of operations of an entity or group of components that either has been disposed of or held-for-sale as discontinued operations only if the disposal of that component represents a strategic shift that has or will have a major effect on an entity’s operations and financial results.

Any incremental direct costs incurred to transact the sale are allocated against the gain or loss on the sale. These costs typically include items such as legal fees, title transfer fees, broker fees, etc. Any goodwill and intangible assets associated with the portion of the reporting unit to be disposed of is included in the carrying amount of the business in determining the gain or loss on the sale.

NOTE 32 - EARNINGS PER SHARE

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

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


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2021		2020		2021		2020		(in thousands, except per share data)	2022		2021
Net income as reported		$	13,913	$	17,951	$	82,244	$	45,453
Net income available to common shareholders										Net income available to common shareholders	$	46,464	$	29,926

Weighted average common shares outstanding	Weighted average common shares outstanding	36,898		26,217		33,158		26,290		Weighted average common shares outstanding	37,788		31,247

Additional dilutive common stock equivalents	Additional dilutive common stock equivalents	49		11		47		21		Additional dilutive common stock equivalents	70		59
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	36,947		26,228		33,205		26,311		Weighted average diluted common shares outstanding	37,858		31,306

Basic earnings per common share:	Basic earnings per common share:	$	0.38	$	0.68	$	2.48	$	1.73	Basic earnings per common share:	$	1.23	$	0.96
Diluted earnings per common share:	Diluted earnings per common share:	0.38		0.68		$	2.48	$	1.73	Diluted earnings per common share:	1.23		0.96

For the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 common stock equivalents of approximately ~~151,000 and 153,000, respectively,~~276,000 were excluded from the earnings per share calculations because their effect would have been anti-dilutive. Comparatively, there were ~~132,000~~ ~~and 139,000~~222,000 common stock equivalents excluded in the prior year ~~periods, respectively.~~period.

NOTE 43 - INVESTMENTS

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


		September 30, 2021						March 31, 2022
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:	Available-for-sale securities:										Available-for-sale securities:
Obligations of U.S. Government-sponsored enterprises	Obligations of U.S. Government-sponsored enterprises	$	115,567	$	35	$	(665)		$	114,937	Obligations of U.S. Government-sponsored enterprises	$	247,906	$	—	$	(12,322)	$	235,584
Obligations of states and political subdivisions	Obligations of states and political subdivisions	516,659		3,641		(4,884)			515,416		Obligations of states and political subdivisions	508,912		61		(59,615)		449,358
Agency mortgage-backed securities	Agency mortgage-backed securities	496,330		12,166		(2,730)			505,766		Agency mortgage-backed securities	607,080		1,034		(27,918)		580,196
U.S. Treasury bills	U.S. Treasury bills	70,987		308		(3)			71,292		U.S. Treasury bills	116,100		77		(596)		115,581
Corporate debt securities	Corporate debt securities	11,750		653		—			12,403		Corporate debt securities	11,750		91		(116)		11,725
Total securities available for sale	Total securities available for sale	$	1,211,293	$	16,803	$	(8,282)		$	1,219,814	Total securities available for sale	$	1,491,748	$	1,263	$	(100,567)	$	1,392,444
Held-to-maturity securities:	Held-to-maturity securities:										Held-to-maturity securities:

Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	238,031	$	1,302	$	(1,634)		$	237,699	Obligations of states and political subdivisions	$	352,799	$	10	$	(40,625)	$	312,184
Agency mortgage-backed securities	Agency mortgage-backed securities	74,972		1,303		(318)			75,957		Agency mortgage-backed securities	63,281		—		(2,970)		60,311
Corporate debt securities	Corporate debt securities	126,109		4,860		—			130,969		Corporate debt securities	125,517		123		(4,793)		120,847
Total securities held-to-maturity	Total securities held-to-maturity	$	439,112	$	7,465	$	(1,952)		$	444,625	Total securities held-to-maturity	$	541,597	$	133	$	(48,388)	$	493,342
Allowance for credit losses	Allowance for credit losses	(640)									Allowance for credit losses	(558)
Total securities held-to-maturity, net	Total securities held-to-maturity, net	$	438,472								Total securities held-to-maturity, net	$	541,039


		December 31, 2020									December 31, 2021
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
Obligations of U.S. Government-sponsored enterprises	Obligations of U.S. Government-sponsored enterprises	$	14,978	$	186	$	(3)	$	15,161	Obligations of U.S. Government-sponsored enterprises	$	175,409	$	3	$	(1,901)	$	173,511
Obligations of states and political subdivisions	Obligations of states and political subdivisions	335,271		8,994		(33)		344,232		Obligations of states and political subdivisions	571,587		5,907		(2,410)		575,084
Agency mortgage-backed securities	Agency mortgage-backed securities	506,703		20,190		(321)		526,572		Agency mortgage-backed securities	509,243		8,485		(3,869)		513,859
U.S. Treasury Bills	U.S. Treasury Bills	10,980		486		—		11,466		U.S. Treasury Bills	90,971		220		(21)		91,170
Corporate debt securities	Corporate debt securities	14,750		248		—		14,998		Corporate debt securities	11,750		632		—		12,382
Total securities available for sale	Total securities available for sale	$	882,682	$	30,104	$	(357)	$	912,429	Total securities available for sale	$	1,358,960	$	15,247	$	(8,201)	$	1,366,006
Held-to-maturity securities:	Held-to-maturity securities:									Held-to-maturity securities:

Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	248,324	$	2,814	$	—	$	251,138	Obligations of states and political subdivisions	$	236,379	$	1,794	$	(730)	$	237,443
Agency mortgage-backed securities	Agency mortgage-backed securities	112,742		2,295		(496)		114,541		Agency mortgage-backed securities	68,105		940		(666)		68,379
Corporate debt securities	Corporate debt securities	126,993		8,851		—		135,844		Corporate debt securities	125,811		3,039		—		128,850
Total securities held to maturity	Total securities held to maturity	$	488,059	$	13,960	$	(496)	$	501,523	Total securities held to maturity	$	430,295	$	5,773	$	(1,396)	$	434,672
Allowance for credit losses	Allowance for credit losses	(449)								Allowance for credit losses	(614)
Total securities held-to-maturity, net	Total securities held-to-maturity, net	$	487,610							Total securities held-to-maturity, net	$	429,681

During the three months ended March 31, 2022, the Company transferred $116.9 million of securities from available-for-sale to held-to-maturity. The Company believes the held-to-maturity category is consistent with the Company’s intent for these securities. The transfer of securities was made at fair value at the time of transfer. The unamortized portion of the unrealized holding gain at the time of transfer is retained in accumulated other comprehensive income and in the carrying value of held-to-maturity securities. The balance of held-to-maturity securities in the “Amortized cost” column in the table above includes a cumulative net unamortized unrealized gain of $20.3 million and $21.0 million at March 31, 2022 and December 31, 2021, respectively. Such amounts are amortized over the remaining life of the securities.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~$582.3~~$581.4 million and ~~$525.8~~$752.7 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~September 30, 2021,~~March 31, 2022, 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 45 years.


		Available for sale				Held to maturity					Available for sale				Held to maturity
(in thousands)	(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	Due in one year or less	$	71,157	$	71,191	$	209	$	214	Due in one year or less	$	91,716	$	91,680	$	888	$	891
Due after one year through five years	Due after one year through five years	93,074		93,129		12,942		13,250		Due after one year through five years	245,541		234,843		18,315		17,994
Due after five years through ten years	Due after five years through ten years	53,898		54,375		142,672		147,389		Due after five years through ten years	54,940		52,433		150,791		144,456
Due after ten years	Due after ten years	496,834		495,353		208,317		207,815		Due after ten years	492,471		433,292		308,322		269,690
Agency mortgage-backed securities	Agency mortgage-backed securities	496,330		505,766		74,972		75,957		Agency mortgage-backed securities	607,080		580,196		63,281		60,311

		$	1,211,293	$	1,219,814	$	439,112	$	444,625		$	1,491,748	$	1,392,444	$	541,597	$	493,342

109

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


															March 31, 2022
															Less than 12 months				12 months or more				Total
(in thousands)														(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government-sponsored enterprises														Obligations of U.S. Government-sponsored enterprises	$	208,467	$	11,431	$	11,109	$	891	$	219,576	$	12,322
Obligations of states and political subdivisions														Obligations of states and political subdivisions	425,420		55,979		17,224		3,636		442,644		59,615
Agency mortgage-backed securities														Agency mortgage-backed securities	405,833		22,383		47,576		5,535		453,409		27,918
U.S. Treasury bills														U.S. Treasury bills	105,513		596		—		—		105,513		596
Corporate debt securities														Corporate debt securities	9,634		116		—		—		9,634		116
															$	1,154,867	$	90,505	$	75,909	$	10,062	$	1,230,776	$	100,567

		September 30, 2021													December 31, 2021
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
(in thousands)	(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government-sponsored enterprises	Obligations of U.S. Government-sponsored enterprises	$	102,905	$	665	$	—	$	—	$	102,905	$	665	Obligations of U.S. Government-sponsored enterprises	$	163,634	$	1,775	$	4,874	$	126	$	168,508	$	1,901
Obligations of states and political subdivisions	Obligations of states and political subdivisions	323,227		4,871		557		13		323,784		4,884		Obligations of states and political subdivisions	242,188		2,361		1,776		49		243,964		2,410
Agency mortgage-backed securities	Agency mortgage-backed securities	205,761		2,710		1,647		20		207,408		2,730		Agency mortgage-backed securities	259,047		3,685		6,467		184		265,514		3,869
U.S. Treasury bills	U.S. Treasury bills	59,983		3		—		—		59,983		3		U.S. Treasury bills	60,961		21		—		—		60,961		21

		$	691,876	$	8,249	$	2,204	$	33	$	694,080	$	8,282		$	725,830	$	7,842	$	13,117	$	359	$	738,947	$	8,201

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

		$	75,062	$	357	$	—	$	—	$	75,062	$	357

The unrealized losses at both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were primarily attributable to changes in market interest rates after the securities were purchased. At ~~September 30, 2021~~each of March 31, 2022 and December 31, ~~2020,~~2021, the Company had not recorded an ACL on available-for-sale securities.

Accrued interest receivable on held-to-maturity debt securities totaled ~~$3.5~~$4.1 million and ~~$3.6~~$3.4 million at ~~September 30, 2021~~March 31, 2022 and December 31 ~~2020,~~2021, respectively, and is excluded from the estimate of expected credit losses. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts. ~~During the three months ended September 30, 2021, the Company recorded a provision for credit losses on held-to-maturity securities of $0.2 million. At September 30, 2021, the~~The ACL on held-to-maturity securities was $0.6 million ~~compared to $0.4 million~~ at March 31, 2022 and December 31, ~~2020.~~2021.

~~During the three and nine months ended September 30, 2021, the Company received proceeds of $27.1 million from the sale of available-for-sale investment securities. Proceeds from~~There were no sales of available-for-sale investment securities during the three ~~and nine~~ months ended ~~September 30, 2020 totaled $20.0 million and $20.2 million, respectively.~~March 31, 2022 or 2021.

Other Investments

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, other investments totaled ~~$59.2~~$60.4 million and ~~$48.8~~$59.9 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 $12.1 million ~~and $10.8 million~~ at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 investments in SBICs, CDFIs, private equity investments, and the Company’s investment in unconsolidated trusts used to issue preferred securities to third parties.

1110

NOTE 54 - LOANS

The following table presents a summary of loans by category:


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Commercial and industrial	Commercial and industrial	$	3,386,599	$	3,100,299	Commercial and industrial	$	3,400,574	$	3,396,590
Real estate:	Real estate:					Real estate:
Commercial - investor owned	Commercial - investor owned	2,121,251		1,589,419		Commercial - investor owned	2,184,126		2,141,143
Commercial - owner occupied	Commercial - owner occupied	2,058,460		1,498,408		Commercial - owner occupied	2,094,012		2,035,785
Construction and land development	Construction and land development	747,759		546,686		Construction and land development	702,630		734,073
Residential	Residential	542,690		319,179		Residential	432,639		454,052
Total real estate loans	Total real estate loans	5,470,160		3,953,692		Total real estate loans	5,413,407		5,365,053
Other	Other	270,037		187,083		Other	250,433		265,137
Loans, before unearned loan fees	Loans, before unearned loan fees	9,126,796		7,241,074		Loans, before unearned loan fees	9,064,414		9,026,780
Unearned loan fees, net	Unearned loan fees, net	(10,213)		(16,139)		Unearned loan fees, net	(8,341)		(9,138)
Loans, including unearned loan fees	Loans, including unearned loan fees	$	9,116,583	$	7,224,935	Loans, including unearned loan fees	$	9,056,073	$	9,017,642

PPP loans totaled ~~$446.4~~$136.0 million at ~~September 30, 2021,~~March 31, 2022, or ~~$439.0~~$134.1 million net of deferred fees of ~~$7.4~~$1.9 million. The loan balance at ~~September 30, 2021~~March 31, 2022 includes a net premium on acquired loans of ~~$4.1~~$11.5 million. At ~~September 30, 2021~~March 31, 2022 loans of ~~$2.7~~$2.9 billion were pledged to FHLB and the Federal Reserve Bank.

PPP loans totaled ~~$709.9~~$276.2 million at December 31, ~~2020,~~2021, or ~~$698.6~~$272.0 million net of ~~unearned~~deferred fees of ~~$11.3~~$4.2 million. The loan balance includes a net premium on acquired loans of ~~$16.1~~$11.9 million at December 31, ~~2020.~~2021. At December 31, ~~2020~~2021 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 ~~$31.6~~$29.6 million and ~~$31.1~~$30.6 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, and was reported in Other Assets on the consolidated balance sheets.

A summary of the activity in the ACL on loans by category for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 is as follows:


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

Balance at December 31, 2021																Balance at December 31, 2021	$	63,825	$	35,877	$	17,560	$	14,536	$	7,927	$	5,316	$	145,041
Provision for credit losses																Provision for credit losses	(1,481)		121		(582)		(1,574)		(456)		(336)		(4,308)
Charge-offs																Charge-offs	(2,159)		—		(180)		—		(887)		(86)		(3,312)
Recoveries																Recoveries	790		196		240		21		525		19		1,791
Balance at March 31, 2022																Balance at March 31, 2022	$	60,975	$	36,194	$	17,038	$	12,983	$	7,109	$	4,913	$	139,212

Balance at June 30, 2021		$	53,351	$	36,003	$	15,564	$	11,632	$	4,677	$	6,958	$	128,185
Initial allowance on acquired PCD loans		1,077		3,651		1,504		37		—		737		7,006
Provision for credit losses		9,836		1,475		1,909		2,215		5,271		(1,951)		18,755
Charge-offs		(2,829)		(117)		(259)		(3)		(840)		(203)		(4,251)
Recoveries		452		1,623		15		171		115		25		2,401
Balance at September 30, 2021		$	61,887	$	42,635	$	18,733	$	14,052	$	9,223	$	5,566	$	152,096


(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)		—		(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

(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
Initial allowance on acquired PCD loans 1,077 3,651 1,504 37 — 737 7,006
Provision (benefit) for credit losses 8,538 7,715 686 (7,833) 5,374 2,305 16,785
Charge-offs (8,019) (2,489) (503) (3) (1,155) (389) (12,558)
Recoveries 1,479 1,696 34 438 419 126 4,192
Balance at September 30, 2021 $ 61,887 $ 42,635 $ 18,733 $ 14,052 $ 9,223 $ 5,566 $ 152,096

The ACL on sponsor finance loans, which is included in the categories above, represented ~~$17.2~~$19.1 million and ~~$19.0~~$18.2 million, respectively, as of ~~September 30, 2021~~March 31, 2022 and December 30, ~~2020.~~

~~A summary of the activity in the ACL on loans by category for the three and nine months ended September 30, 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 June 30, 2020 $ 50,139 $ 25,019 $ 11,088 $ 15,962 $ 6,333 $ 1,729 $ 110,270
Provision for credit losses 8,929 4,869 (1,854) 2,873 (1,132) 342 14,027
Charge-offs (2,006) (272) (30) — (173) (103) (2,584)
Recoveries 808 55 268 83 303 40 1,557
Balance at September 30, 2020 $ 57,870 $ 29,671 $ 9,472 $ 18,918 $ 5,331 $ 2,008 $ 123,270

(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 — (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 27,688 10,692 1,740 11,220 1,623 1,150 54,113
Charge-offs (5,372) (498) (30) (31) (327) (294) (6,552)
Recoveries 1,605 2,821 348 152 686 102 5,714
Balance at September 30, 2020 $ 57,870 $ 29,671 $ 9,472 $ 18,918 $ 5,331 $ 2,008 $ 123,270
2021.

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 40%, 30%, and 30%, respectively, which added approximately ~~$18.3~~$14.7 million to the ACL over the baseline model. These forecasts incorporate an ~~accommodative monetary policy~~expectation that government stimulus will decline, the Federal Reserve will wind down quantitative easing and continue raising the ~~current~~federal funds rate, that the pandemic will begin to slowly recede, and ~~anticipated impact of government stimulus.~~that the Russia-Ukraine military conflict will have a limited disruption on the economy. The Company has also recognized the risk posed by loans that have received multiple deferrals of principal and interest payments, ~~loans in~~including the 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 iffrom another significant wave of COVID, ~~hits, the vaccination process stalls, supply chain issues persist, small-business bankruptcies occur at higher levels,~~continued or ~~unemployment increases.~~worsening supply-chain disruptions, labor shortages and declines in job growth, or a tightening of financial market conditions.

~~Loans acquired during the period are initially recorded at fair value at the date of acquisition, which includes a credit related discount.~~ In addition ~~a provision for~~to the CECL methodology, the Company incorporates qualitative adjustments into the ACL on loans to capture credit ~~losses is recorded~~risks inherent within the loan portfolio that are not captured in the ~~period~~discounted cash flow (DCF) model. Included in these risks are 1) changes in lending policies and procedures, 2) actual and expected changes in business and economic conditions, 3) changes in the nature and volume of ~~acquisition for estimated lifetime~~the portfolio, 4) changes in lending management, 5) changes in volume and the severity of past due loans, 6) changes in the quality of the loan review system, 7) changes in the value of underlying collateral, 8) the existence and effect of concentrations of credit ~~losses~~and 9) other factors such as the regulatory, legal and competitive environments and events such as natural disasters and pandemics.At March 31, 2022, the ACL on ~~non-PCD acquired loans.~~loans included a qualitative adjustment of approximately $41.0 million. Of this amount, approximately $7.0 million was allocated to Sponsor Finance loans due to their unsecured nature.

The following tables present the recorded investment in nonperforming loans by category:


		September 30, 2021											March 31, 2022
(in thousands)	(in thousands)	Nonaccrual		Restructured, accruing		Loans over 90 days past due and still accruing interest		Total nonperforming loans		Nonaccrual loans with no allowance		(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	Commercial and industrial	$	27,655	$	2,870	$	5	$	30,530	$	12,137	Commercial and industrial	$	13,721	$	2,663	$	13	$	16,397	$	1,699
Real estate:	Real estate:											Real estate:
Commercial - investor owned	Commercial - investor owned	1,846		—		—		1,846		425		Commercial - investor owned	1,565		—		—		1,565		1,364
Commercial - owner occupied	Commercial - owner occupied	6,892		—		—		6,892		2,800		Commercial - owner occupied	2,075		—		—		2,075		1,786

Residential	Residential	2,185		77		—		2,262		1,562		Residential	1,027		75		—		1,102		1,027
Other	Other	13		—		11		24		12		Other	10		—		11		21		—
Total	Total	$	38,591	$	2,947	$	16	$	41,554	$	16,936	Total	$	18,398	$	2,738	$	24	$	21,160	$	5,876

December 31, 2020
(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 $ 18,158 $ 3,482 $ 130 $ 21,770 $ 8,316
Real estate:
    Commercial - investor owned 9,579 — — 9,579 716
    Commercial - owner occupied 2,940 — — 2,940 6,024
    Residential 4,112 77 — 4,189 —
Other 29 — — 29 3,190
       Total $ 34,818 $ 3,559 $ 130 $ 38,507 $ 18,246


	December 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	$	17,052	$	2,783	$	1,703	$	21,538	$	5,685
Real estate:
Commercial - investor owned	1,575		—		—		1,575		168
Commercial - owner occupied	2,839		—		—		2,839		2,550

Residential	1,971		76		1		2,048		1,348
Other	12		—		12		24		—
Total	$	23,449	$	2,859	$	1,716	$	28,024	$	9,751

The total nonperforming loan balances at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 exclude government guaranteed balances of ~~$5.1~~$4.0 million and ~~$5.4~~$6.5 million, respectively.

No interest income was recognized on nonaccrual loans during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 or ~~2020.~~2021.

The amortized cost basis of collateral-dependent nonperforming loans by class of loan is presented for the periods indicated:


		September 30, 2021									March 31, 2022
		Type of Collateral									Type of Collateral
(in thousands)	(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien		Other		(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien
Commercial and industrial	Commercial and industrial	$	10,804	$	300	$	11,761	$	—	Commercial and industrial	$	4,271	$	79	$	5,064
Real estate:	Real estate:									Real estate:
Commercial - investor owned	Commercial - investor owned	426		1,209		—		—		Commercial - investor owned	165		1,200		—
Commercial - owner occupied	Commercial - owner occupied	6,689		88		—		—		Commercial - owner occupied	2,049		26		—

Residential	Residential	—		2,262		—		—		Residential	—		1,102		—
Other	Other	—		—		—		12		Other	—		—		—
Total	Total	$	17,919	$	3,859	$	11,761	$	12	Total	$	6,485	$	2,407	$	5,064


	December 31, 2021
	Type of Collateral
(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien
Commercial and industrial	$	4,271	$	209	$	9,312
Real estate:
Commercial - investor owned	169		1,200		—
Commercial - owner occupied	2,807		32		—

Residential	—		2,048		—
Other	—		—		—
Total	$	7,247	$	3,489	$	9,312

1413

December 31, 2020
Type of Collateral
(in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Other
Commercial and industrial $ 8,316 $ — $ 394 $ —
Real estate:
Commercial - investor owned 9,579 — — —
Commercial - owner occupied 2,940 — — —
Residential — 4,135 — —
Other — — — 17
Total $ 20,835 $ 4,135 $ 394 $ 17

During the three and nine months ended September 30, 2021, 1 residential real estate loan totaling $0.2 million was modified as a troubled debt restructuring. The recorded investment by category for troubled debt restructurings that occurredThere were no loans restructured during the three months ended ~~September 30, 2020 are as follows:~~March 31, 2022 or 2021.

September 30, 2020
(in thousands, except for number of loans) Number of loans Pre-Modification Outstanding Recorded Balance Post-Modification Outstanding Recorded Balance
Commercial and industrial 2 $ 3,716 $ 3,716
Real estate:
Residential 1 217 217
Total 3 $ 3,933 $ 3,933

~~The recorded investment by category for troubled debt restructurings that occurred during the nine months ended September 30, 2020 are as follows:~~

September 30, 2020
(in thousands, except for number of loans) Number of loans Pre-Modification Outstanding Recorded Balance Post-Modification Outstanding Recorded Balance
Commercial and industrial 3 $ 7,447 $ 7,447
Real estate:
Residential 3 372 372
Total 6 $ 7,819 $ 7,819

No troubled debt restructurings subsequently defaulted during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 or ~~2020.~~

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. Deferrals under the CARES Act or interagency guidance are not included above as troubled debt restructurings. As of September 30, 2021, nearly all of these loans have returned to a paying status.2021.

The aging of the recorded investment in past due loans by class is presented for the periods indicated.


		September 30, 2021											March 31, 2022
(in thousands)	(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total		(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	Commercial and industrial	$	17,470	$	11,752	$	29,222	$	3,349,949	$	3,379,171	Commercial and industrial	$	3,086	$	5,204	$	8,290	$	3,390,433	$	3,398,723
Real estate:	Real estate:											Real estate:
Commercial - investor owned	Commercial - investor owned	298		—		298		2,120,953		2,121,251		Commercial - investor owned	1,461		1,565		3,026		2,181,100		2,184,126
Commercial - owner occupied	Commercial - owner occupied	9,900		4,560		14,460		2,044,000		2,058,460		Commercial - owner occupied	4,692		1,698		6,390		2,087,622		2,094,012
Construction and land development	Construction and land development	169		—		169		747,590		747,759		Construction and land development	2,680		—		2,680		699,950		702,630
Residential	Residential	138		1,309		1,447		541,243		542,690		Residential	3,534		454		3,988		428,651		432,639
Other	Other	274		11		285		266,967		267,252		Other	35		10		45		243,898		243,943
Total	Total	$	28,249	$	17,632	$	45,881	$	9,070,702	$	9,116,583	Total	$	15,488	$	8,931	$	24,419	$	9,031,654	$	9,056,073


		December 31, 2020											December 31, 2021
(in thousands)	(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total		(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	Commercial and industrial	$	8,652	$	12,928	$	21,580	$	3,067,415	$	3,088,995	Commercial and industrial	$	24,447	$	14,158	$	38,605	$	3,353,770	$	3,392,375
Real estate:	Real estate:											Real estate:
Commercial - investor owned	Commercial - investor owned	734		9,301		10,035		1,579,384		1,589,419		Commercial - investor owned	3,880		—		3,880		2,137,263		2,141,143
Commercial - owner occupied	Commercial - owner occupied	328		4,647		4,975		1,493,433		1,498,408		Commercial - owner occupied	10,070		289		10,359		2,025,426		2,035,785
Construction and land development	Construction and land development	13		—		13		546,673		546,686		Construction and land development	24		—		24		734,049		734,073
Residential	Residential	2,071		2,118		4,189		314,990		319,179		Residential	3,181		1,305		4,486		449,566		454,052
Other	Other	1,731		50		1,781		180,467		182,248		Other	37		11		48		260,166		260,214
Total	Total	$	13,529	$	29,044	$	42,573	$	7,182,362	$	7,224,935	Total	$	41,639	$	15,763	$	57,402	$	8,960,240	$	9,017,642

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.

1715

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


		September 30, 2021																			March 31, 2022
		Term Loans by Origination Year																			Term Loans by Origination Year
(in thousands)	(in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total		(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass (1-6)	Pass (1-6)	$	1,025,274	$	600,089	$	359,330	$	156,889	$	127,622	$	95,642	$	15,631	$	773,641	$	3,154,118	Pass (1-6)	$	424,229	$	1,011,220	$	404,515	$	268,244	$	85,451	$	174,346	$	1,500	$	812,823	$	3,182,328
Watch (7)	Watch (7)	37,465		27,305		10,397		9,662		3,520		14,758		6,128		62,883		172,118		Watch (7)	20,941		28,450		16,364		2,060		9,312		10,728		—		78,321		166,176
Classified (8-9)	Classified (8-9)	19,268		2,554		5,443		2,426		271		911		1,944		13,718		46,535		Classified (8-9)	6,231		7,950		2,144		3,840		1,585		3,416		—		10,383		35,549
Total Commercial and industrial	Total Commercial and industrial	$	1,082,007	$	629,948	$	375,170	$	168,977	$	131,413	$	111,311	$	23,703	$	850,242	$	3,372,771	Total Commercial and industrial	$	451,401	$	1,047,620	$	423,023	$	274,144	$	96,348	$	188,490	$	1,500	$	901,527	$	3,384,053

Commercial real estate-investor owned	Commercial real estate-investor owned																			Commercial real estate-investor owned
Pass (1-6)	Pass (1-6)	$	497,726	$	499,617	$	367,055	$	153,179	$	133,202	$	235,601	$	3,668	$	62,184	$	1,952,232	Pass (1-6)	$	200,862	$	617,625	$	429,282	$	321,521	$	149,180	$	303,994	$	2,047	$	47,800	$	2,072,311
Watch (7)	Watch (7)	9,701		44,311		33,781		8,944		2,365		47,826		—		3,231		150,159		Watch (7)	937		20,600		31,411		18,304		79		27,153		—		2,062		100,546
Classified (8-9)	Classified (8-9)	1,396		8,744		264		341		1,167		4,364		—		—		16,276		Classified (8-9)	—		1,268		3,306		829		798		5,010		—		50		11,261
Total Commercial real estate-investor owned	Total Commercial real estate-investor owned	$	508,823	$	552,672	$	401,100	$	162,464	$	136,734	$	287,791	$	3,668	$	65,415	$	2,118,667	Total Commercial real estate-investor owned	$	201,799	$	639,493	$	463,999	$	340,654	$	150,057	$	336,157	$	2,047	$	49,912	$	2,184,118

Commercial real estate-owner occupied	Commercial real estate-owner occupied																			Commercial real estate-owner occupied
Pass (1-6)	Pass (1-6)	$	495,546	$	462,729	$	285,680	$	182,073	$	155,216	$	255,326	$	—	$	47,128	$	1,883,698	Pass (1-6)	$	159,921	$	599,394	$	408,931	$	261,247	$	144,644	$	341,211	$	438	$	49,568	$	1,965,354
Watch (7)	Watch (7)	16,007		13,284		25,665		33,631		10,725		17,548		—		352		117,212		Watch (7)	1,800		10,888		16,575		3,925		13,188		18,550		—		390		65,316
Classified (8-9)	Classified (8-9)	1,868		653		12,257		4,750		6,581		6,651		—		63		32,823		Classified (8-9)	423		892		1,808		9,883		16,051		12,082		—		95		41,234
Total Commercial real estate-owner occupied	Total Commercial real estate-owner occupied	$	513,421	$	476,666	$	323,602	$	220,454	$	172,522	$	279,525	$	—	$	47,543	$	2,033,733	Total Commercial real estate-owner occupied	$	162,144	$	611,174	$	427,314	$	275,055	$	173,883	$	371,843	$	438	$	50,053	$	2,071,904

Construction real estate	Construction real estate																			Construction real estate
Pass (1-6)	Pass (1-6)	$	298,041	$	232,249	$	79,465	$	36,419	$	15,157	$	9,394	$	388	$	3,487	$	674,600	Pass (1-6)	$	83,014	$	321,327	$	189,864	$	35,507	$	23,155	$	14,797	$	—	$	4,079	$	671,743
Watch (7)	Watch (7)	38,496		16,080		60		1,208		11,143		2,377		—		—		69,364		Watch (7)	408		20,751		3,183		60		1,190		2,283		—		—		27,875
Classified (8-9)	Classified (8-9)	53		—		379		423		—		24		96		—		975		Classified (8-9)	—		—		—		12		416		19		—		—		447
Total Construction real estate	Total Construction real estate	$	336,590	$	248,329	$	79,904	$	38,050	$	26,300	$	11,795	$	484	$	3,487	$	744,939	Total Construction real estate	$	83,422	$	342,078	$	193,047	$	35,579	$	24,761	$	17,099	$	—	$	4,079	$	700,065

Residential real estate	Residential real estate																			Residential real estate
Pass (1-6)	Pass (1-6)	$	136,636	$	78,641	$	41,755	$	15,737	$	26,345	$	114,292	$	283	$	101,199	$	514,888	Pass (1-6)	$	13,065	$	100,396	$	64,873	$	20,400	$	13,256	$	113,869	$	5,356	$	93,591	$	424,806
Watch (7)	Watch (7)	1,277		16,881		2,450		1,284		261		1,286		—		87		23,526		Watch (7)	36		2,123		1		166		441		1,379		—		137		4,283
Classified (8-9)	Classified (8-9)	879		222		563		76		12		2,245		—		75		4,072		Classified (8-9)	126		423		—		57		743		1,863		—		5		3,217
Total residential real estate	Total residential real estate	$	138,792	$	95,744	$	44,768	$	17,097	$	26,618	$	117,823	$	283	$	101,361	$	542,486	Total residential real estate	$	13,227	$	102,942	$	64,874	$	20,623	$	14,440	$	117,111	$	5,356	$	93,733	$	432,306

Other	Other																			Other
Pass (1-6)	Pass (1-6)	$	110,977	$	70,441	$	20,206	$	24,006	$	7,781	$	20,193	$	—	$	10,683	$	264,287	Pass (1-6)	$	1,551	$	101,746	$	66,095	$	21,453	$	22,437	$	14,845	$	—	$	7,521	$	235,648
Watch (7)	Watch (7)	—		—		—		4		—		2,490		—		1		2,495		Watch (7)	—		—		—		—		3		2,391		—		5		2,399
Classified (8-9)	Classified (8-9)	—		—		13		14		—		18		—		1		46		Classified (8-9)	—		—		—		8		9		14		1		—		32
Total Other	Total Other	$	110,977	$	70,441	$	20,219	$	24,024	$	7,781	$	22,701	$	—	$	10,685	$	266,828	Total Other	$	1,551	$	101,746	$	66,095	$	21,461	$	22,449	$	17,250	$	1	$	7,526	$	238,079

Total loans classified by risk category																				Total loans classified by risk category	$	913,544	$	2,845,053	$	1,638,352	$	967,516	$	481,938	$	1,047,950	$	9,342	$	1,106,830	$	9,010,525
Total loans classified by performing status																				Total loans classified by performing status																	45,548
Total loans																				Total loans																	$	9,056,073

1816


		December 31, 2020																			December 31, 2021
		Term Loans by Origination Year																			Term Loans by Origination Year
(in thousands)	(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total		(in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass (1-6)	Pass (1-6)	$	1,402,276	$	454,729	$	262,258	$	132,832	$	25,057	$	58,315	$	14,118	$	527,170	$	2,876,755	Pass (1-6)	$	1,180,601	$	477,374	$	317,869	$	132,851	$	116,738	$	82,846	$	11,648	$	854,102	$	3,174,029
Watch (7)	Watch (7)	44,922		15,369		9,585		7,509		19,613		110		—		60,448		157,556		Watch (7)	35,005		17,502		9,404		9,880		12,217		10,979		4,037		53,595		152,619
Classified (8-9)	Classified (8-9)	6,602		9,219		3,115		3,964		4,490		1,080		1,281		22,432		52,183		Classified (8-9)	14,917		3,530		3,840		1,689		2,988		813		787		10,996		39,560
Total Commercial and industrial	Total Commercial and industrial	$	1,453,800	$	479,317	$	274,958	$	144,305	$	49,160	$	59,505	$	15,399	$	610,050	$	3,086,494	Total Commercial and industrial	$	1,230,523	$	498,406	$	331,113	$	144,420	$	131,943	$	94,638	$	16,472	$	918,693	$	3,366,208

Commercial real estate-investor owned	Commercial real estate-investor owned																			Commercial real estate-investor owned
Pass (1-6)	Pass (1-6)	$	481,867	$	338,843	$	189,305	$	131,718	$	138,288	$	161,439	$	6,509	$	32,058	$	1,480,027	Pass (1-6)	$	651,740	$	476,946	$	346,245	$	146,107	$	112,043	$	217,808	$	3,625	$	68,236	$	2,022,750
Watch (7)	Watch (7)	32,308		19,722		6,656		—		9,647		17,370		—		—		85,703		Watch (7)	16,871		35,908		32,755		1,003		502		17,478		300		2,062		106,879
Classified (8-9)	Classified (8-9)	—		5,278		8,716		5,830		1,245		2,620		—		—		23,689		Classified (8-9)	1,376		3,135		835		817		1,159		4,141		—		50		11,513
Total Commercial real estate-investor owned	Total Commercial real estate-investor owned	$	514,175	$	363,843	$	204,677	$	137,548	$	149,180	$	181,429	$	6,509	$	32,058	$	1,589,419	Total Commercial real estate-investor owned	$	669,987	$	515,989	$	379,835	$	147,927	$	113,704	$	239,427	$	3,925	$	70,348	$	2,141,142

Commercial real estate-owner occupied	Commercial real estate-owner occupied																			Commercial real estate-owner occupied
Pass (1-6)	Pass (1-6)	$	419,142	$	287,001	$	215,181	$	179,382	$	104,470	$	167,456	$	2,672	$	45,323	$	1,420,627	Pass (1-6)	$	604,975	$	423,263	$	278,830	$	164,210	$	140,515	$	235,973	$	250	$	48,349	$	1,896,365
Watch (7)	Watch (7)	13,657		5,257		3,113		6,198		4,338		8,460		1,776		941		43,740		Watch (7)	12,825		13,585		4,301		16,774		10,274		15,764		—		300		73,823
Classified (8-9)	Classified (8-9)	2,420		7,427		5,822		6,140		1,309		10,860		—		63		34,041		Classified (8-9)	2,048		556		9,181		17,016		6,432		6,959		—		—		42,192
Total Commercial real estate-owner occupied	Total Commercial real estate-owner occupied	$	435,219	$	299,685	$	224,116	$	191,720	$	110,117	$	186,776	$	4,448	$	46,327	$	1,498,408	Total Commercial real estate-owner occupied	$	619,848	$	437,404	$	292,312	$	198,000	$	157,221	$	258,696	$	250	$	48,649	$	2,012,380

Construction real estate	Construction real estate																			Construction real estate
Pass (1-6)	Pass (1-6)	$	223,069	$	156,360	$	45,460	$	18,579	$	11,539	$	9,144	$	—	$	28,880	$	493,031	Pass (1-6)	$	310,140	$	229,396	$	70,531	$	35,936	$	14,860	$	7,180	$	568	$	2,992	$	671,603
Watch (7)	Watch (7)	2,544		86		34,179		11,632		—		2,499		—		—		50,940		Watch (7)	28,947		15,348		60		1,199		11,068		2,330		—		—		58,952
Classified (8-9)	Classified (8-9)	56		2,124		503		1		—		31		—		—		2,715		Classified (8-9)	—		—		387		419		—		22		—		—		828
Total Construction real estate	Total Construction real estate	$	225,669	$	158,570	$	80,142	$	30,212	$	11,539	$	11,674	$	—	$	28,880	$	546,686	Total Construction real estate	$	339,087	$	244,744	$	70,978	$	37,554	$	25,928	$	9,532	$	568	$	2,992	$	731,383

Residential real estate	Residential real estate																			Residential real estate
Pass (1-6)	Pass (1-6)	$	57,059	$	27,907	$	17,718	$	17,138	$	27,443	$	92,657	$	1,172	$	66,902	$	307,996	Pass (1-6)	$	116,352	$	66,481	$	21,356	$	14,841	$	24,778	$	103,840	$	9,980	$	87,146	$	444,774
Watch (7)	Watch (7)	210		840		526		—		514		1,603		287		511		4,491		Watch (7)	2,425		2		622		1,157		248		1,305		—		79		5,838
Classified (8-9)	Classified (8-9)	571		733		121		14		898		3,181		—		253		5,771		Classified (8-9)	414		169		554		—		12		2,024		—		—		3,173
Total residential real estate	Total residential real estate	$	57,840	$	29,480	$	18,365	$	17,152	$	28,855	$	97,441	$	1,459	$	67,666	$	318,258	Total residential real estate	$	119,191	$	66,652	$	22,532	$	15,998	$	25,038	$	107,169	$	9,980	$	87,225	$	453,785

Other	Other																			Other
Pass (1-6)	Pass (1-6)	$	43,526	$	28,195	$	30,074	$	9,646	$	5,641	$	17,027	$	—	$	40,779	$	174,888	Pass (1-6)	$	108,209	$	68,806	$	22,684	$	23,145	$	6,924	$	13,832	$	1,500	$	9,166	$	254,266
Watch (7)	Watch (7)	—		1		8		—		—		2,637		—		1		2,647		Watch (7)	—		—		—		4		—		2,440		—		1		2,445
Classified (8-9)	Classified (8-9)	—		18		19		13		—		17		8		4		79		Classified (8-9)	—		—		10		10		—		16		—		2		38
Total Other	Total Other	$	43,526	$	28,214	$	30,101	$	9,659	$	5,641	$	19,681	$	8	$	40,784	$	177,614	Total Other	$	108,209	$	68,806	$	22,694	$	23,159	$	6,924	$	16,288	$	1,500	$	9,169	$	256,749

Total loans classified by risk category																				Total loans classified by risk category	$	3,086,845	$	1,832,001	$	1,119,464	$	567,058	$	460,758	$	725,750	$	32,695	$	1,137,076	$	8,961,647
Total loans classified by performing status																				Total loans classified by performing status																	55,995
Total loans																				Total loans																	$	9,017,642

In the tables above, loan originations in ~~2021~~2022 and ~~2020~~2021 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 tables presents the recorded investment on loans based on payment activity as of the periods indicated:


		September 30, 2021							March 31, 2022
(in thousands)	(in thousands)	Performing		Non Performing		Total		(in thousands)	Performing		Non Performing		Total
Commercial and industrial	Commercial and industrial	$	6,395	$	5	$	6,400	Commercial and industrial	$	14,657	$	13	$	14,670
Real estate:	Real estate:							Real estate:
Commercial - investor owned	Commercial - investor owned	2,584		—		2,584		Commercial - investor owned	8		—		8
Commercial - owner occupied	Commercial - owner occupied	24,727		—		24,727		Commercial - owner occupied	22,108		—		22,108
Construction and land development	Construction and land development	2,820		—		2,820		Construction and land development	2,565		—		2,565
Residential	Residential	204		—		204		Residential	333		—		333
Other	Other	413		11		424		Other	5,853		11		5,864
Total	Total	$	37,143	$	16	$	37,159	Total	$	45,524	$	24	$	45,548


		December 31, 2020							December 31, 2021
(in thousands)	(in thousands)	Performing		Non Performing		Total		(in thousands)	Performing		Non Performing		Total
Commercial and industrial	Commercial and industrial	$	2,502	$	—	$	2,502	Commercial and industrial	$	26,166	$	1	$	26,167
Real estate:	Real estate:							Real estate:

Commercial - investor owned								Commercial - investor owned	1		—		1
Commercial - owner occupied								Commercial - owner occupied	23,405		—		23,405
Construction and land development								Construction and land development	2,690		—		2,690
Residential	Residential	921		—		921		Residential	267		—		267
Other	Other	4,612		21		4,633		Other	3,453		12		3,465
Total	Total	$	8,035	$	21	$	8,056	Total	$	55,982	$	13	$	55,995

The Company has purchased loans through the FCBP acquisition, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:


~~($ in thousands)~~	~~At July 21, 2021~~
~~Par value of acquired loans~~	$	~~180,440~~
~~Allowance for credit losses~~	~~(7,006)~~
~~Non-credit discount~~	~~(6,428)~~
~~Purchase price of acquired loans~~	$	~~167,006~~

~~NOTE 6 - BRANCH CLOSURE~~

During the quarter ended September 30, 2021, the Company commenced the process to close 3 branch locations in California related to the First Choice acquisition. A lease and fixed asset impairment charge of $0.4 million was recognized and reported in merger-related expenses. Additionally, the Company has also commenced the process to close 2 branches in St. Louis and consolidate the operations and customers of these branches with other nearby locations. An impairment charge of $3.4 million on these branches was recognized in the third quarter 2021 for buildings, leases and fixed assets.

NOTE 75 - 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 are as follows:


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Commitments to extend credit	Commitments to extend credit	$	2,422,097	$	1,946,068	Commitments to extend credit	$	2,710,183	$	2,481,173
Letters of credit	Letters of credit	67,071		50,971		Letters of credit	78,568		77,314

Off-Balance Sheet Credit Risk

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments usually have fixed expiration dates or other termination clauses, may have significant usage restrictions, and may require payment of a fee. Of the total commitments to extend credit at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, approximately ~~$269.7~~$244.2 million and ~~$160.6~~$238.7 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 includes ~~$7.0~~$8.4 million and ~~$5.7~~$7.6 million for estimated losses attributable to the unadvanced commitments at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 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 ~~September 30, 2021,~~March 31, 2022, the approximate remaining terms of standby letters of credit range from 1 month to 511 years.

Contingencies

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

2119

NOTE 86 - 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. The Company has executed a series of cash flow hedges 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%.

Select terms of the 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~~The gain or loss on derivatives designated and ~~that qualify~~qualified as cash flow hedges of interest rate risk ~~the gain or loss on the derivative is~~are 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 ~~$1.5~~$0.5 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.

2220

The table below presents the fair value of the Company’s derivative financial instruments:


		Notional Amount				Derivative Assets				Derivative Liabilities					Notional Amount				Derivative Assets				Derivative Liabilities
(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Derivatives Designated as Hedging Instruments:	Derivatives Designated as Hedging Instruments:													Derivatives Designated as Hedging Instruments:
Interest rate swap	Interest rate swap	$	61,962	$	61,962	$	—	$	—	$	3,971	$	5,987	Interest rate swap	$	61,962	$	61,962	$	—	$	—	$	212	$	2,911

Derivatives not Designated as Hedging Instruments:	Derivatives not Designated as Hedging Instruments:													Derivatives not Designated as Hedging Instruments:
Interest rate swap	Interest rate swap	$	932,666	$	1,026,016	$	17,442	$	28,703	$	17,457	$	28,980	Interest rate swap	$	922,532	$	918,698	$	7,771	$	12,869	$	7,778	$	12,883

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

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


As of September 30, 2021
As of March 31, 2022														As of March 31, 2022
								Gross Amounts Not Offset in the Statement of Financial Position													Gross Amounts Not Offset in the Statement of Financial Position
(in thousands)	(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 Received/ Pledged		Net Amount
Assets:	Assets:													Assets:
Interest rate swap	Interest rate swap	$	17,442	$	—	$	17,442	$	633	$	—	$	16,809	Interest rate swap	$	7,771	$	—	$	7,771	$	1,796	$	4,150	$	1,825

Liabilities:	Liabilities:													Liabilities:
Interest rate swap	Interest rate swap	$	21,428	$	—	$	21,428	$	633	$	20,519	$	276	Interest rate swap	$	7,990	$	—	$	7,990	$	1,796	$	75	$	6,119
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	219,484		—		219,484		—		219,484		—		Securities sold under agreements to repurchase	207,417		—		207,417		—		207,417		—

As of December 31, 2020
As of December 31, 2021														As of December 31, 2021
								Gross Amounts Not Offset in the Statement of Financial Position													Gross Amounts Not Offset in the Statement of Financial Position
(in thousands)	(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 Received/ Pledged		Net Amount
Assets:	Assets:													Assets:
Interest rate swap	Interest rate swap	$	28,703	$	—	$	28,703	$	2	$	—	$	28,701	Interest rate swap	$	12,869	$	—	$	12,869	$	1,033	$	—	$	11,836

Liabilities:	Liabilities:													Liabilities:
Interest rate swap	Interest rate swap	$	34,967	$	—	$	34,967	$	2	$	34,903	$	62	Interest rate swap	$	15,794	$	—	$	15,794	$	1,033	$	14,031	$	730
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	271,081		—		271,081		—		271,081		—		Securities sold under agreements to repurchase	331,006		—		331,006		—		331,006		—

2321

As of ~~September 30, 2021,~~March 31, 2022, the fair value of derivatives in a net liability position was $5.9 million, which includes accrued interest but excludes any adjustment for nonperformance ~~risk, related to these agreements was $22.2 million. Further, the~~risk. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of ~~$20.5 million.~~$0.1 million related to derivatives in a net liability position. Furthermore, the Company has received cash collateral from derivative counterparties on contracts that were in a net asset position as noted in the tables above.

NOTE 97 - FAIR VALUE MEASUREMENTS

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


		September 30, 2021									March 31, 2022
(in thousands)	(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		(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	Assets									Assets
Securities available for sale	Securities available for sale									Securities available for sale
Obligations of U.S. Government-sponsored enterprises	Obligations of U.S. Government-sponsored enterprises	$	—	$	114,937	$	—	$	114,937	Obligations of U.S. Government-sponsored enterprises	$	—	$	235,584	$	—	$	235,584
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		515,416		—		515,416		Obligations of states and political subdivisions	—		449,358		—		449,358
Agency mortgage-backed securities	Agency mortgage-backed securities	—		505,766		—		505,766		Agency mortgage-backed securities	—		580,196		—		580,196
U.S. Treasury bills	U.S. Treasury bills	—		71,292		—		71,292		U.S. Treasury bills	—		115,581		—		115,581
Corporate debt securities	Corporate debt securities	—		12,403		—		12,403		Corporate debt securities	—		11,725		—		11,725
Total securities available for sale	Total securities available for sale	—		1,219,814		—		1,219,814		Total securities available for sale	—		1,392,444		—		1,392,444

Other investments	Other investments	217		2,782		—		2,999		Other investments	—		2,843		—		2,843

Derivatives	Derivatives	—		17,442		—		17,442		Derivatives	—		7,771		—		7,771
Total assets	Total assets	$	217	$	1,240,038	$	—	$	1,240,255	Total assets	$	—	$	1,403,058	$	—	$	1,403,058

Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	—	$	21,428	$	—	$	21,428	Derivatives	$	—	$	7,990	$	—	$	7,990
Total liabilities	Total liabilities	$	—	$	21,428	$	—	$	21,428	Total liabilities	$	—	$	7,990	$	—	$	7,990


		December 31, 2020									December 31, 2021
(in thousands)	(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		(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	Assets									Assets
Securities available for sale	Securities available for sale									Securities available for sale
Obligations of U.S. Government-sponsored enterprises	Obligations of U.S. Government-sponsored enterprises	$	—	$	15,161	$	—	$	15,161	Obligations of U.S. Government-sponsored enterprises	$	—	$	173,511	$	—	$	173,511
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		344,232		—		344,232		Obligations of states and political subdivisions	—		575,084		—		575,084
Residential mortgage-backed securities	Residential mortgage-backed securities	—		526,572		—		526,572		Residential mortgage-backed securities	—		513,859		—		513,859
Corporate debt securities	Corporate debt securities	—		14,998		—		14,998		Corporate debt securities	—		12,382		—		12,382
U.S. Treasury bills	U.S. Treasury bills	—		11,466		—		11,466		U.S. Treasury bills	—		91,170		—		91,170
Total securities available-for-sale	Total securities available-for-sale	—		912,429		—		912,429		Total securities available-for-sale	—		1,366,006		—		1,366,006

Other investments										Other investments	—		3,012		—		3,012

Derivative financial instruments	Derivative financial instruments	—		28,703		—		28,703		Derivative financial instruments	—		12,869		—		12,869
Total assets	Total assets	$	—	$	941,132	$	—	$	941,132	Total assets	$	—	$	1,381,887	$	—	$	1,381,887

Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	—	$	34,967	$	—	$	34,967	Derivatives	$	—	$	15,794	$	—	$	15,794
Total liabilities	Total liabilities	$	—	$	34,967	$	—	$	34,967	Total liabilities	$	—	$	15,794	$	—	$	15,794

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


		September 30, 2021									March 31, 2022
(in thousands)	(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)		(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)~~	Nonaccrual loans ~~(1)~~	$	1,373	$	—	$	—	$	1,373	Nonaccrual loans ~~(1)~~	$	3,591	$	—	$	—	$	3,591

Fixed assets		940		—		—		940
Other real estate										Other real estate	674		—		—		674
Loan servicing asset										Loan servicing asset	3,005		—		3,005		—
Total	Total	$	2,313	$	—	$	—	$	2,313	Total	$	7,270	$	—	$	3,005	$	4,265

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


	December 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	$	6,406	$	—	$	—	$	6,406
Other real estate	632		—		—		632
Loan servicing asset	3,146		0		3,146		—
Total	$	10,184	$	—	$	3,146	$	7,038

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

Three months ended Nine months ended
(in thousands) September 30, 2021 June 30, 2021 September 30, 2021 September 30, 2020
Nonaccrual loans $ 1,126 $ — $ 1,126 $ 4,756
Other real estate — — — 1,000
Fixed assets 2,546 — 2,546 —
Total $ 3,672 $ — $ 3,672 $ 5,756




	Three months ended
(in thousands)	March 31, 2022
Nonaccrual loans	$	(1,781)
Other real estate	(121)
Loan servicing asset	156
Total	$	(1,746)

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


		September 30, 2021					December 31, 2020						March 31, 2022					December 31, 2021
(in thousands)	(in thousands)	Carrying Amount		Estimated fair value		Level	Carrying Amount		Estimated fair value		Level	(in thousands)	Carrying Amount		Estimated fair value		Level	Carrying Amount		Estimated fair value		Level
Balance sheet assets	Balance sheet assets											Balance sheet assets

Securities held-to-maturity, net	Securities held-to-maturity, net	$	438,472	$	444,625	Level 2	$	487,610	$	501,523	Level 2	Securities held-to-maturity, net	$	541,039	$	493,342	Level 2	$	429,681	$	434,672	Level 2
Other investments	Other investments	59,156		59,156		Level 2	48,764		48,764		Level 2	Other investments	57,601		57,601		Level 2	56,884		56,884		Level 2
Loans held for sale	Loans held for sale	5,068		5,068		Level 2	13,564		13,564		Level 2	Loans held for sale	4,270		4,270		Level 2	6,389		6,389		Level 2

Loans, net	Loans, net	8,964,487		8,954,895		Level 3	7,088,264		7,067,562		Level 3	Loans, net	8,916,861		8,908,849		Level 3	8,872,601		8,869,891		Level 3
State tax credits, held for sale	State tax credits, held for sale	37,184		41,306		Level 3	36,853		39,925		Level 3	State tax credits, held for sale	34,954		34,212		Level 3	27,994		30,686		Level 3

Servicing asset	Servicing asset	7,965		7,965		Level 2	5,721		5,721		Level 2	Servicing asset	6,066		6,066		Level 2	6,714		6,714		Level 2

Balance sheet liabilities	Balance sheet liabilities											Balance sheet liabilities
Certificates of deposit	Certificates of deposit	$	627,171	$	628,425	Level 3	$	550,095	$	553,946	Level 3	Certificates of deposit	$	597,475	$	587,009	Level 3	$	608,293	$	606,177	Level 3
Subordinated debentures and notes	Subordinated debentures and notes	204,103		193,752		Level 2	203,637		192,889		Level 2	Subordinated debentures and notes	155,031		155,408		Level 2	154,899		155,972		Level 2
FHLB advances	FHLB advances	50,000		51,527		Level 2	50,000		51,871		Level 2	FHLB advances	50,000		48,627		Level 2	50,000		51,527		Level 2
Other borrowings and notes payable	Other borrowings and notes payable	243,770		243,770		Level 2	301,081		301,081		Level 2	Other borrowings and notes payable	228,846		228,846		Level 2	353,863		353,863		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, ~~2020,~~2021, as filed with the SEC.

2524

~~NOTE 10 - GOODWILL AND INTANGIBLE ASSETS~~

~~Goodwill increased $104.8 million to $365.4 million at September 30, 2021 from $260.6 million at December 31, 2020 due to the acquisition of FCBP.~~

~~The table below presents a summary of intangible assets:~~


	~~Nine months ended~~
~~(in thousands)~~	~~September 30, 2021~~
~~Core deposit intangible, net, beginning of period~~	$	~~23,084~~
~~Established through acquisition~~	~~4,892~~
~~Amortization~~	~~(4,199)~~
~~Core deposit intangible, net, end of period~~	~~23,777~~

Amortization expense on the core deposit intangibles was $1.5 million and $1.4 million for the three months ended September 30, 2021 and 2020, respectively, and $4.2 million and $4.3 million for the nine months ended September 30, 2021 and 2020, respectively. The core deposit intangibles are being amortized over a 10-year period.

~~The following table reflects the amortization schedule for the core deposit intangible at September 30, 2021:~~

Year
Core Deposit Intangible
(in thousands)
2021 $ 1,491
2022 5,367
2023 4,601
2024 3,834
2025 3,068
After 2025 5,416
$ 23,777

NOTE 118 - SHAREHOLDERS’ EQUITY ~~AND COMPENSATION PLANS~~

Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

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


Three months ended	Three months ended									Three months ended
(in thousands)	(in thousands)	Net Unrealized Gain on Available-for-Sale Debt Securities		Unamortized Gain (Loss) on Held-to-Maturity Securities		Net Unrealized Gain (Loss) on Cash Flow Hedges		Total		(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities		Unamortized Gain (Loss) on Held-to-Maturity Securities		Net Unrealized Gain (Loss) on Cash Flow Hedges		Total
Balance, June 30, 2021		$	14,250	$	17,322	$	(3,300)	$	28,272
Balance, December 31, 2021										Balance, December 31, 2021	$	5,271	$	15,684	$	(2,178)	$	18,777
Net change	Net change	$	(7,870)	$	(805)	$	305	$	(8,370)	Net change	$	(79,353)	$	(704)	$	2,020	$	(78,037)
Transfer from available-for-sale to held-to-maturity										Transfer from available-for-sale to held-to-maturity	$	(197)	$	197	$	—	$	—
Balance, March 31, 2022										Balance, March 31, 2022	$	(74,279)	$	15,177	$	(158)	$	(59,260)

Balance, September 30, 2021		$	6,380	$	16,517	$	(2,995)	$	19,902

Balance, June 30, 2020		$	27,872	$	13,099	$	(8,162)	$	32,809
Net change		$	(220)	$	(705)	$	624	$	(301)

Balance, September 30, 2020		$	27,652	$	12,394	$	(7,538)	$	32,508

Nine months ended

Three months ended										Three months ended
(in thousands)	(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities		Unamortized Gain (Loss) on Held-to-Maturity Securities		Net Unrealized Gain (Loss) on Cash Flow Hedges		Total		(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities		Unamortized Gain (Loss) on Held-to-Maturity Securities		Net Unrealized Gain (Loss) on Cash Flow Hedges		Total
Balance, December 31, 2020	Balance, December 31, 2020	$	22,320	$	19,308	$	(4,508)	$	37,120	Balance, December 31, 2020	$	22,320	$	19,308	$	(4,508)	$	37,120
Net change	Net change	$	(15,940)	$	(2,791)	$	1,513	$	(17,218)	Net change	$	(10,920)	$	(1,149)	$	1,126	$	(10,943)
Balance, September 30, 2021		$	6,380	$	16,517	$	(2,995)	$	19,902
Balance, March 31, 2021										Balance, March 31, 2021	$	11,400	$	18,159	$	(3,382)	$	26,177

Balance, December 31, 2019		$	14,977	$	4,934	$	(2,162)	$	17,749
Net change		$	21,325	$	(1,190)	$	(5,376)	$	14,759
Transfer from available-for-sale to held-to-maturity		$	(8,650)	$	8,650	$	—	$	—
Balance, September 30, 2020		$	27,652	$	12,394	$	(7,538)	$	32,508

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

Three months ended September 30,
2021 2020
(in thousands) Pre-tax Tax effect After-tax Pre-tax Tax effect After-tax
Change in unrealized gain (loss) on available-for-sale debt securities $ (10,479) $ (2,609) $ (7,870) $ 125 $ 31 $ 94
Reclassification adjustment for realized gain on sale of available-for-sale debt securities(a)
— — — (417) (103) (314)
Reclassification of gain on held-to-maturity securities(b)
(1,072) (267) (805) (936) (231) (705)
Change in unrealized gain on cash flow hedges arising during the period 12 3 9 146 36 110
Reclassification of loss on cash flow hedges(b)
395 99 296 683 169 514
Total other comprehensive income $ (11,144) $ (2,774) $ (8,370) $ (399) $ (98) $ (301)
Nine months ended September 30,
2021 2020
(in thousands) Pre-tax Tax effect After-tax Pre-tax Tax effect After-tax
Change in unrealized gain (loss) on available-for-sale debt securities $ (21,226) $ (5,285) $ (15,941) $ 28,741 $ 7,099 $ 21,642
Reclassification adjustment for realized gain on sale of available-for-sale debt securities(a)
— — — (421) (104) (317)
Reclassification of gain on held-to-maturity securities(b)
(3,716) (925) (2,791) (1,580) (390) (1,190)
Change in unrealized gain (loss) on cash flow hedges arising during the period 867 216 651 (8,296) (2,049) (6,247)
Reclassification of loss on cash flow hedges(b)
1,149 286 863 1,157 286 871
Total other comprehensive income $ (22,926) $ (5,708) $ (17,218) $ 19,601 $ 4,842 $ 14,759


	Three months ended March 31,
	2022						2021
(in thousands)	Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax
Change in unrealized loss on available-for-sale debt securities	$	(106,087)	$	(26,734)	$	(79,353)	$	(14,541)	$	(3,621)	$	(10,920)

Reclassification of gain on held-to-maturity securities(b)	(941)		(237)		(704)		(1,530)		(381)		(1,149)
Change in unrealized loss on cash flow hedges arising during the period	2,341		590		1,751		1,128		281		847
Reclassification of loss on cash flow hedges(b)	359		90		269		372		93		279
Total other comprehensive loss	$	(104,328)	$	(26,291)	$	(78,037)	$	(14,571)	$	(3,628)	$	(10,943)

(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

~~Compensation Plans~~

~~Employee Stock Options~~

~~During the nine months ended September 30, 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 Exercise Price
Options Outstanding, December 31, 2020 —
Options granted 118,604 $ 43.80
Options forfeited (4,597)
Options Outstanding, September 30, 2021 114,007 9.5

~~At September 30, 2021, none of the outstanding stock options were exercisable.~~

2825

NOTE 129 - ~~SUBSEQUENT EVENT~~SUPPLEMENTAL FINANCIAL INFORMATION

The ~~Company redeemed its $50.0 million fixed-to-floating subordinated debentures on~~following table presents miscellaneous income and other expense components that exceed one percent of the ~~first call date~~aggregate of ~~November 1, 2021.~~total interest income and other income in one or more of the periods indicated:


	Quarter ended March 31,
($ in thousands)	2022		2021
Other income:
Community development fees	$	2,166	$	172
Gain on sale of mortgages	294		1,191
Other income	3,748		2,905
Total other noninterest income	$	6,208	$	4,268

Other expense:
Amortization expense	$	1,430	$	1,415
Banking expense	1,501		1,194
Deposit costs	4,260		2,342
FDIC and other insurance	1,855		963
Loan, legal expenses	1,733		1,583

Outside services	1,262		1,237
Other expense	5,909		3,817
Total other noninterest expense	$	17,950	$	12,551

2926

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

RESULTS OF OPERATIONS

Forward Looking Statements

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

~~Given the ongoing~~The COVID-19 pandemic is continuing to adversely affect us, our customers, counterparties, employees, and ~~dynamic nature of the COVID-19 pandemic,~~third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects remain uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause or contribute to such differences include, but are not limited to: our ability to efficiently ~~consummate and~~ integrate acquisitions, including the ~~FCBP~~First Choice acquisition, into our operations, retain the customers of these businesses and grow the acquired operations; credit risk; changes in the appraised valuation of real estate securing impaired loans; our ability to recover our investment in loans; fluctuations in the fair value of collateral underlying loans; outcomes of litigation and other contingencies; exposure to general and local economic conditions; risks associated with rapid increases or decreases in prevailing interest rates; changes in business prospects that could impact goodwill estimates and assumptions; consolidation within the banking industry; competition from banks and other financial institutions; ~~our~~the ability to attract and retain relationship officers and other key personnel; burdens imposed by federal and state regulation; changes in regulatory requirements; changes in accounting policies and practices or accounting ~~standards, including ASU 2016-13 (Topic 326), “Measurement~~standards; changes in the method of ~~Credit Losses on Financial Instruments,” commonly referenced as CECL model, which has changed how we estimate credit losses; uncertainty regarding~~determining LIBOR and the ~~future~~phase-out of LIBOR; natural ~~disasters,~~disasters; war (including the war in Ukraine) or terrorist activities, or pandemics, orincluding the ~~outbreak of~~ COVID-19 ~~or similar outbreaks,~~pandemic, and their effects on economic and business environments in which we ~~operate; increased unemployment rates~~operate, including the ongoing disruption to the financial market and ~~defaults as a result of the~~other economic ~~disruptions~~activity caused by ~~COVID-19;~~ the ~~impact of governmental orders issued in response to COVID-19;~~COVID-19 pandemic; and other risks discussed under the caption “Risk Factors” under Part 1, Item 1A of our ~~2020~~2021 Annual Report on Form 10-K, and other reports filed with the SEC, all of which could cause the Company’s actual results to differ from those set forth in the forward-looking statements.

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

Introduction

The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first ~~nine~~three months of ~~2021~~2022 compared to the financial condition as of December 31, ~~2020.~~2021. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to the linked ~~second~~fourth quarter (“linked quarter”) in 2021 and the results of operations, liquidity and cash flows for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period in ~~2020.~~2021. 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.~~2021. 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, ~~2020.~~2021.

Critical Accounting Policies

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

A full description of our critical accounting policies and the impact and any associated risks related to those policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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 September 30, 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

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 loan loss experience, adjusted for current and forecasted economic conditions, including unemployment, changes in GDP, and commercial and residential real estate prices. The Company’s forecast of economic conditions uses internal and external information

and considers a weighted average of a baseline, upside, and downside scenarios. Because economic conditions can change and are difficult to predict, the anticipated amount of estimated loan defaults and losses, and therefore the adequacy of the allowance, could change significantly and have a direct impact on the Company’s credit costs. The Company’s allowance for credit losses on loans was ~~$152.1~~$139.2 million at ~~September 30, 2021~~March 31, 2022 based on the weighting of the different economic scenarios. As a hypothetical example, if the Company had only used the upside scenario, the allowance would have decreased ~~$22.3~~$4.2 million. Conversely, the allowance would have increased ~~$45.2~~$48.4 million using only the downside scenario.

3229

Executive Summary

The Company closed its acquisition of FCBP ~~and it’s wholly owned subsidiary, FCB,~~ on July 21, 2021. ~~FCBP operated eight full service branches in Southern California. The Company closed its acquisition of Seacoast on November 12, 2020.~~ The results of operations of FCBP ~~and Seacoast~~ are included in our results from ~~the acquisition dates forward, which may affect certain comparisons to the linked quarter and the nine months ended September 30, 2020.~~this date forward.

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


(in thousands, except per share data)	(in thousands, except per share data)	At or for the three months ended									At or for the nine months ended						(in thousands, except per share data)	Three months ended
		September 30, 2021			June 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020				March 31, 2022			December 31, 2021			March 31, 2021
EARNINGS	EARNINGS																EARNINGS
Total interest income	Total interest income	$	103,228		$	87,401		$	70,787		$	275,589		$	220,666		Total interest income	$	106,581		$	107,641		$	84,960
Total interest expense	Total interest expense	5,955			5,663			7,433			17,455			28,111			Total interest expense	5,416			5,581			5,837
Net interest income	Net interest income	97,273			81,738			63,354			258,134			192,555			Net interest income	101,165			102,060			79,123
Provision (benefit) for credit losses	Provision (benefit) for credit losses	19,668			(2,669)			14,080			17,045			55,935			Provision (benefit) for credit losses	(4,068)			(3,660)			46
Net interest income after provision for credit losses	Net interest income after provision for credit losses	77,605			84,407			49,274			241,089			136,620			Net interest income after provision for credit losses	105,233			105,720			79,077
Total noninterest income	Total noninterest income	17,619			16,204			12,629			45,113			35,997			Total noninterest income	18,641			22,630			11,290
Total noninterest expense	Total noninterest expense	76,885			52,456			39,524			182,225			116,109			Total noninterest expense	62,800			63,694			52,884
Income before income tax expense	Income before income tax expense	18,339			48,155			22,379			103,977			56,508			Income before income tax expense	61,074			64,656			37,483
Income tax expense	Income tax expense	4,426			9,750			4,428			21,733			11,055			Income tax expense	13,381			13,845			7,557
Net income	Net income	$	13,913		$	38,405		$	17,951		$	82,244		$	45,453		Net income	$	47,693		$	50,811		$	29,926
Preferred stock dividends																	Preferred stock dividends	1,229			—			—
Net income available to common shareholders																	Net income available to common shareholders	$	46,464		$	50,811		$	29,926

Basic earnings per share	Basic earnings per share	$	0.38		$	1.23		$	0.68		$	2.48		$	1.73		Basic earnings per share	$	1.23		$	1.33		$	0.96
Diluted earnings per share	Diluted earnings per share	$	0.38		$	1.23		$	0.68		$	2.48		$	1.73		Diluted earnings per share	$	1.23		$	1.33		$	0.96

Return on average assets	Return on average assets	0.45		%	1.50		%	0.86		%	1.01		%	0.76		%	Return on average assets	1.42		%	1.52		%	1.22		%
Return on average common equity	Return on average common equity	3.96		%	13.79		%	8.06		%	9.14		%	6.96		%	Return on average common equity	12.87		%	13.81		%	11.07		%
Return on average tangible common equity1	Return on average tangible common equity1	5.37		%	18.44		%	10.94		%	12.31		%	9.51		%	Return on average tangible common equity1	17.49		%	18.81		%	14.92		%
Net interest margin (tax equivalent)	Net interest margin (tax equivalent)	3.40		%	3.46		%	3.29		%	3.45		%	3.52		%	Net interest margin (tax equivalent)	3.28		%	3.32		%	3.50		%

Efficiency ratio	Efficiency ratio	66.92		%	53.56		%	52.02		%	60.09		%	50.80		%	Efficiency ratio	52.42		%	51.08		%	58.49		%
Core efficiency ratio1	Core efficiency ratio1	51.30		%	51.86		%	51.04		%	52.59		%	50.97		%	Core efficiency ratio1	52.43		%	49.22		%	55.02		%
Book value per common share	Book value per common share	$	37.52		$	35.86		$	33.66								Book value per common share	$	37.35		$	38.53		$	34.95
Tangible book value per common share1	Tangible book value per common share1	$	27.38		$	26.85		$	24.80								Tangible book value per common share1	$	27.06		$	28.28		$	25.92

ASSET QUALITY	ASSET QUALITY																ASSET QUALITY
Net charge-offs	Net charge-offs	$	1,850		$	869		$	1,027		$	8,366		$	2,518		Net charge-offs	$	1,521		$	3,263		$	5,647
Nonperforming loans	Nonperforming loans	41,554			42,252			39,623									Nonperforming loans	21,160			28,024			36,659
Classified assets	Classified assets	104,220			100,063			84,710									Classified assets	93,199			100,797			114,713
Nonperforming loans to total loans	Nonperforming loans to total loans	0.46		%	0.58		%	0.65		%							Nonperforming loans to total loans	0.23		%	0.31		%	0.50		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.35		%	0.44		%	0.53		%							Nonperforming assets to total assets	0.17		%	0.23		%	0.42		%
ACL on loans to total loans	ACL on loans to total loans	1.67		%	1.77		%	2.01		%							ACL on loans to total loans	1.54		%	1.61		%	1.80		%
Net charge-offs to average loans (annualized)	Net charge-offs to average loans (annualized)	0.08		%	0.05		%	0.07		%	0.14		%	0.06		%	Net charge-offs to average loans (annualized)	0.07		%	0.14		%	0.32		%

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

3330

Financial results and other notable items include:

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


		At or for the three months ended						At or for the nine months ended							Quarter ended
(in thousands)	(in thousands)	September 30, 2021			June 30, 2021			September 30, 2021			September 30, 2020			(in thousands)	March 31, 2022			December 31, 2021
PPP loans outstanding, net of deferred fees	PPP loans outstanding, net of deferred fees	$	438,959		$	396,660		$	438,959		$	396,660		PPP loans outstanding, net of deferred fees	$	134,084		$	271,958

Average PPP loans outstanding, net	Average PPP loans outstanding, net	489,104			664,375			614,470			483,832			Average PPP loans outstanding, net	194,382			365,295
PPP average loan size		210			171			200			147
PPP interest and fee income		6,048			7,940			22,463			9,309
PPP deferred fees		7,428			12,243			7,428			12,243
PPP interest and fee income recognized														PPP interest and fee income recognized	2,858			4,864
PPP deferred fees remaining														PPP deferred fees remaining	1,851			4,215
PPP average yield	PPP average yield	4.91		%	4.79		%	4.89		%	2.57		%	PPP average yield	5.96		%	5.28		%

PPP has impacted the Company’s financial metrics in all periods since the Company began participating in April 2020. Loan and deposit growth, earnings per share, and return on assets all increased due to the PPP. Conversely, the allowance coverage ratio, the leverage ratio and the ratio of tangible common equity to tangible assets all decreased. The net interest margin has benefited in quarters where loan forgiveness has been approved by the SBA and related loan fees have been accelerated into income. 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.

•Pre-provision net revenue1 (“PPNR”) of ~~$56.1~~$57.0 million in the ~~third~~first quarter ~~2021 increased $8.7~~2022 decreased $6.3 million from the linked quarter PPNR of ~~$47.4 million. PPNR for the nine months ended September 30, 2021 of $144.2~~$63.3 million and increased ~~$30.2~~$16.3 million from ~~$114.0~~$40.7 million in the prior year ~~period.~~quarter. The ~~increase~~decrease from the linked quarter was primarily due to a decline in PPP loan income as the ~~FCBP acquisition~~PPP loan portfolio winds down and lower noninterest income that ~~added $11.2 million of PPNR.~~typically declines from a peak in the fourth quarter. The increase ~~for the nine months ended September 30, 2021 compared to~~from the prior year ~~period~~quarter was primarily ~~from~~due to the ~~Seacoast and~~acquisition of FCBP ~~acquisitions and income from PPP that started~~ in the ~~second~~third quarter ~~2020.~~2021, partially offset by a decline in PPP income.

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

•Net interest income of ~~$97.3~~$101.2 million for the ~~third~~first quarter ~~2021 increased $15.5~~2022 decreased $0.9 million ~~or 19.0%,~~ from the linked quarter, primarily due to ~~the FCBP acquisition, partially offset by~~ a decline in PPP income. Net interest margin (“NIM”) was ~~3.40%~~3.28% for the ~~third~~first quarter ~~2021,~~2022, compared to ~~3.46%~~3.32% for the linked quarter. Net interest income ~~was $258.1 million~~ for the ~~nine months ended September 30, 2021, compared to $192.6~~first quarter 2022 increased $22.0 million ~~in the prior year period. NIM was 3.45% for the nine months ended September 30, 2021, compared to 3.52% for the prior year period.Net interest income in 2021 increased over the prior year primarily due to the Seacoast and FCBP acquisitions and PPP loan fees and interest. NIM for the nine months ended September 30, 2021, declined~~ from the prior year ~~period~~quarter. This was due primarily ~~due~~ to ~~a lower rate environment~~the acquisition of FCBP, organic growth in the loan portfolio, and an ~~increase~~expanded investment portfolio, partially offset by a decline in ~~cash on the balance sheet.~~PPP income.

•Noninterest income of ~~$17.6~~$18.6 million for the ~~third~~first quarter ~~2021 increased $1.4~~2022 decreased $4.0 million from the linked quarter and increased $7.4 million from the prior year quarter. A decline in tax credit income from a seasonally strong linked quarter and a decline in other income were the primary drivers of the linked quarter decrease. The increase from the prior year quarter was due primarily ~~due~~ to an increase in noninterest income from the FCBP acquisition and higher tax credit ~~activity and the FCBP acquisition, offset by~~income due to a ~~decline in Other income from a private equity distribution received in the linked quarter. For the nine months ended September 30, 2021, noninterest income was $45.1 million, compared to $36.0 million~~low volume quarter in the prior ~~year period.~~year.~~The increase was primarily due to the Seacoast acquisition, tax credit income and income on private equity investments.~~

•Branch Consolidation - As part of the integration of FCBP, the Company commenced the process to close three branch locations in California. A lease and fixed asset impairment charge of $0.4 million was recognized and reported in merger expenses. The Company expects to realize annual cost savings of approximately $0.8 million from these locations. Additionally, the Company has also commenced the process to close two branches in St. Louis and consolidate the operations and customers of these branches

with other nearby locations. An impairment charge of $3.4 million on these branches was recognized in the third quarter 2021 for buildings, leases and fixed assets. The Company expects to realize annual cost savings of approximately $1.5 million on these two branches. These branch closures are reflective of current trends in the industry and traffic as a result of technology adoption and other business climate trends.

Balance sheet highlights:

•Loans – Total loans increased ~~$1.9 billion~~$38.4 million to $9.1 billion at ~~September 30, 2021,~~March 31, 2022, compared to ~~$7.2~~$9.0 billion at December 31, ~~2020. The FCB acquisition added $1.9 billion of loans, while organic growth added an additional $413.9 million. These increases were offset by a decline in~~2021. PPP loans ~~of $466.0~~declined $137.9 million. Excluding PPP, loans grew $176.3 million, ~~during~~or 8%, on an annualized basis from December 31, 2021. Loan growth was primarily attributed to the ~~first nine months of 2021 due~~specialty lending niches. Average loans totaled $9.0 billion for the quarter ended March 31, 2022 compared to ~~higher loan forgiveness and~~$9.0 billion for the ~~end of the statutory deadline for new PPP originations.~~fourth quarter 2021.

•Deposits – Total deposits increased ~~$2.8 billion,~~$360.3 million, to ~~$10.8~~$11.7 billion at ~~September 30, 2021~~March 31, 2022 from ~~$8.0~~$11.3 billion at December 31, ~~2020.~~2021. The ~~FCBP acquisition added $1.9 billion and~~specialty deposit groups have had continued success in generating deposit growth, increasing deposits ~~from PPP loans and the low-rate environment has contributed to the increase during~~by $273.7 million in the first ~~nine months of~~quarter 2022 compared to December 31, 2021. ~~Specialty~~Average deposits ~~increased $316.4 million in 2021 primarily due~~totaled $11.5 billion for the quarter ended March 31, 2022 compared to ~~community associations and sponsor finance.~~$11.2 billion for the fourth quarter 2021. Noninterest deposit accounts represented ~~40.4%~~41.7% of total deposits and the loan to deposit ratio was ~~84.2%~~77.4% at ~~September 30, 2021.~~March 31, 2022.

•Asset quality – The allowance for credit losses on loans to total loans was ~~1.67%~~1.54% at ~~September 30, 2021,~~March 31, 2022, compared to ~~1.89%~~1.61% at December 31, ~~2020.~~2021. Nonperforming assets to total assets was ~~0.35%~~0.17% at ~~September 30, 2021~~March 31, 2022 compared to ~~0.45%~~0.23% at December 31, ~~2020. In~~2021. Due to the ~~third quarter 2021, an ACL on the acquired FCBP loan portfolio~~improvement in credit quality and macroeconomic forecasts, a provision benefit of ~~$30.5~~$4.1 million was recorded ~~representing 1.57%~~in the first quarter 2022, compared to a provision benefit of $3.7 million in the ~~acquired loans. Approximately $7.0 million of this ACL was allocated~~fourth quarter 2021. Loan growth and the provision benefit in the first quarter 2022 contributed to the ~~PCD portfolio. The~~ decline in the ~~allowance to total loans~~ ratio ~~in the first nine months~~ of 2021 was primarily due to the comparatively lower ACL on the FCBP loan portfolio, net loan charge-offs of $8.4 million, improved credit metrics, and continued improvement in economic forecasts. Loans acquired during the period are initially recorded at fair value at the date of acquisition, which includes a credit related discount. In addition, a provisionallowance for credit losses ~~is recorded in the period of acquisition for estimated lifetime credit losses on non-PCD acquired~~to total loans. ~~This additional provision for credit losses on the FCBP acquisition increased the provision for credit losses for the three and nine months ended September 30, 2021.~~

•Shareholders’ equity – Total shareholders’ equity was ~~$1.4~~$1.47 billion at ~~September 30, 2021,~~March 31, 2022, compared to ~~$1.1~~$1.53 billion at December 31, ~~2020,~~2021, and the tangible common equity to tangible assets ratio2 was ~~8.40%~~7.62% at ~~both September 30, 2021 and~~March 31, 2022 compared to 8.13% at December 31, ~~2020.~~2021. The decline in the tangible common equity ratio was primarily due to a $78.0 million decrease in accumulated other comprehensive income driven primarily from a decrease in the fair value of the available-for-sale investment portfolio. The Company and the Bank’s regulatory capital ratios exceeded the “well-capitalized” level at ~~September 30, 2021.~~March 31, 2022.

The Company ~~issued 7,808,459~~repurchased 351,090 shares totaling ~~$343.7~~$17.0 million in the ~~third~~first quarter ~~2021 as merger consideration in connection with the FCBP acquisition.~~

2022 for an average price of $48.35 per share. The Company has ~~1,277,951~~349,383 shares available for repurchase under its common stock repurchase authorization. ~~The Company repurchased 722,049 shares totaling $33.1 million in the first nine months of 2021.~~

The Company’s Board of Directors unanimously approved a quarterly dividend of ~~$0.20~~$0.22 per common share, payable on ~~December 31, 2021~~June 30, 2022 to shareholders of record as of ~~December~~June 15, ~~2021,~~2022, an increase of $0.01, ~~from~~or 5.0%, compared to the ~~third~~first quarter ~~dividend.~~2022. The Board of Directors also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) March 15, 2022 to (but excluding) June 15, 2022. The dividend will be payable on June 15, 2022 to shareholders of record on May 31, 2022.

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

3532

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.


		Three months ended September 30,						Three months ended June 30,						Three months ended March 31,				Three months ended December 31,						Three months ended March 31,
		2021						2021						2022				2021						2021
(in thousands)	(in thousands)	Average Balance		Interest Income/Expense		Average Yield/ Rate		Average Balance		Interest Income/Expense		Average Yield/ Rate			(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	Assets														Assets
Interest-earning assets:	Interest-earning assets:														Interest-earning assets:
Taxable loans (1)		$	8,626,780	$	94,016	4.32	%	$	7,272,209	$	78,769	4.34	%
Tax-exempt loans (2)		39,573		449		4.50		34,262		393		4.60

Total loans		8,666,353		94,465		4.32		7,306,471		79,162		4.35
Taxable debt and equity investments		904,338		4,810		2.11		856,439		4,706		2.20
Non-taxable debt and equity investments (2)		690,600		4,773		2.74		646,143		4,520		2.81
Short-term investments		1,251,988		480		0.15		806,928		237		0.12
Total securities and short-term investments		2,846,926		10,063		1.40		2,309,510		9,463		1.64

Total loans1.2															Total loans1.2	9,005,875		96,301		4.34	%	9,030,982		98,412		4.32	%	7,192,776		77,073		4.35	%
Taxable securities															Taxable securities	1,151,743		5,699		2.01		1,021,007		5,070		1.97		849,123		4,719		2.25
Non-taxable securities2															Non-taxable securities2	772,226		5,270		2.77		732,152		5,076		2.75		568,182		4,099		2.93
Total securities															Total securities	1,923,969		11,786		2.31		1,753,159		10,736		2.30		1,417,305		8,818		2.52
Interest-earning deposits															Interest-earning deposits	1,781,272		817		0.19		1,589,008		590		0.15		679,659		189		0.11
Total interest-earning assets	Total interest-earning assets	11,513,279		104,528		3.60		9,615,981		88,625		3.70			Total interest-earning assets	12,711,116		108,087		3.45		12,373,149		109,148		3.50		9,289,740		86,080		3.76
Noninterest-earning assets	Noninterest-earning assets	821,279						665,363							Noninterest-earning assets	902,887						894,044						650,312

Total assets	Total assets	$	12,334,558					$	10,281,344						Total assets	$	13,614,003					$	13,267,193					$	9,940,052

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity														Liabilities and Shareholders' Equity
Interest-bearing liabilities:	Interest-bearing liabilities:														Interest-bearing liabilities:
Interest-bearing transaction accounts	Interest-bearing transaction accounts	$	2,228,466	$	459	0.08	%	$	1,985,811	$	336	0.07	%		Interest-bearing transaction accounts	$	2,505,319	$	536	0.09	%	$	2,383,059	$	491	0.08	%	$	1,887,059	$	328	0.07	%
Money market accounts	Money market accounts	2,675,405		1,294		0.19		2,344,871		988		0.17			Money market accounts	2,872,302		1,460		0.21		2,853,655		1,412		0.20		2,350,592		975		0.17
Savings	Savings	747,927		61		0.03		718,193		52		0.03			Savings	817,431		66		0.03		776,695		64		0.03		654,662		48		0.03
Certificates of deposit	Certificates of deposit	604,594		927		0.61		522,633		1,091		0.84			Certificates of deposit	607,133		797		0.53		616,347		831		0.53		537,166		1,312		0.99
Total interest-bearing deposits	Total interest-bearing deposits	6,256,392		2,741		0.17		5,571,508		2,467		0.18			Total interest-bearing deposits	6,802,185		2,859		0.17		6,629,756		2,798		0.17		5,429,479		2,663		0.20
Subordinated debentures	Subordinated debentures	204,011		2,855		5.55		203,849		2,847		5.60			Subordinated debentures	154,959		2,220		5.81		171,453		2,439		5.64		203,694		2,819		5.61
FHLB advances	FHLB advances	89,457		211		0.94		50,000		197		1.58			FHLB advances	50,000		195		1.58		50,000		199		1.58		50,000		195		1.58
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	216,403		58		0.11		209,062		58		0.11			Securities sold under agreements to repurchase	262,252		60		0.09		246,525		60		0.10		231,527		60		0.11
Other borrowed funds	Other borrowed funds	25,699		90		1.39		27,147		94		1.39			Other borrowed funds	22,841		82		1.46		24,270		85		1.39		28,650		100		1.42
Total interest-bearing liabilities	Total interest-bearing liabilities	6,791,962		5,955		0.35		6,061,566		5,663		0.37			Total interest-bearing liabilities	7,292,237		5,416		0.30		7,122,004		5,581		0.31		5,943,350		5,837		0.40
Noninterest bearing liabilities:	Noninterest bearing liabilities:														Noninterest bearing liabilities:
Demand deposits	Demand deposits	4,040,761						3,008,703							Demand deposits	4,692,027						4,537,247						2,777,900
Other liabilities	Other liabilities	107,739						94,106							Other liabilities	93,518						112,546						122,321
Total liabilities	Total liabilities	10,940,462						9,164,375							Total liabilities	12,077,782						11,771,797						8,843,571
Shareholders' equity	Shareholders' equity	1,394,096						1,116,969							Shareholders' equity	1,536,221						1,495,396						1,096,481
Total liabilities & shareholders' equity	Total liabilities & shareholders' equity	$	12,334,558					$	10,281,344						Total liabilities & shareholders' equity	$	13,614,003					$	13,267,193					$	9,940,052
Net interest income	Net interest income			$	98,573					$	82,962				Net interest income			$	102,671					$	103,567					$	80,243
Net interest spread	Net interest spread					3.25	%					3.33	%		Net interest spread					3.15	%					3.19	%					3.36	%
Net interest margin	Net interest margin					3.40	%					3.46	%		Net interest margin					3.28	%					3.32	%					3.50	%

~~(1)~~1Average balances include nonaccrual loans. Interest income includes loan fees of ~~$6.5~~$5.2 million, $6.3 million, and ~~$7.6~~$8.1 million for the three months ended ~~September 30,~~March 31, 2022, December 31, 2021, and ~~June 30,~~March 31, 2021, respectively.

~~(2)~~2~~Interest~~ Non-taxable income ~~and yields have been adjusted to reflect~~is presented on a fully tax-equivalent ~~basis.~~

Nine months ended September 30,
2021 2020
(in thousands) Average Balance Interest
Income/Expense Average
Yield/
Rate Average Balance Interest
Income/Expense Average
Yield/
Rate
Assets
Interest-earning assets:
Taxable loans (1) $ 7,691,030 $ 249,458 4.34 % $ 5,796,713 $ 193,277 4.45 %
Tax-exempt loans (2) 36,234 1,241 4.58 36,655 1,353 4.93
Total loans 7,727,264 250,699 4.34 5,833,368 194,630 4.46
Taxable debt and equity investments 870,169 14,235 2.19 1,059,957 20,329 2.56
Non-taxable debt and equity investments (2) 635,423 13,392 2.82 296,839 7,359 3.31
Short-term investments 914,954 906 0.13 188,849 500 0.35
Total securities and short-term investments 2,420,546 28,533 1.58 1,545,645 28,188 2.44
Total interest-earning assets 10,147,810 279,232 3.68 7,379,013 222,818 4.03
Noninterest-earning assets 712,946 576,993
Total assets $ 10,860,756 $ 7,956,006
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 2,035,029 $ 1,123 0.07 % $ 1,464,144 $ 1,836 0.17 %
Money market accounts 2,458,146 3,257 0.18 1,911,584 6,738 0.47
Savings 707,269 161 0.03 579,619 233 0.05
Certificates of deposit 555,045 3,329 0.80 713,633 9,176 1.72
Total interest-bearing deposits 5,755,489 7,870 0.18 4,668,980 17,983 0.51
Subordinated debentures 203,853 8,521 5.59 171,465 7,061 5.50
FHLB advances 63,297 603 1.27 240,596 2,070 1.15
Securities sold under agreements to repurchase 218,942 176 0.11 197,776 479 0.32
Other borrowed funds 27,154 285 1.40 32,836 518 2.11
Total interest-bearing liabilities 6,268,735 17,455 0.37 5,311,653 28,111 0.71
Noninterest bearing liabilities:
Demand deposits 3,280,414 1,684,107
Other liabilities 108,001 87,302
Total liabilities 9,657,150 7,083,062
Shareholders' equity 1,203,606 872,944
Total liabilities & shareholders' equity $ 10,860,756 $ 7,956,006
Net interest income $ 261,777 $ 194,707
Net interest spread 3.31 % 3.32 %
Net interest margin 3.45 % 3.52 %

~~(1)Average balances include nonaccrual loans. Interest income includes loan fees of $22.1~~basis using a 25.2% tax rate. The tax-equivalent adjustments were $1.5 million, $1.4 million, and ~~$8.9~~$1.1 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, December 31, 2021, and ~~2020,~~March 31, 2021, respectively.

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

3733

Rate/Volume

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


		Three months ended September 30, 2021						Nine months ended September 30, 2021			Quarter ended March 31, 2022								Quarter ended March 31, 2022
		compared to						compared to			compared to								compared to
		Three months ended June 30, 2021						Nine months ended September 30, 2020			Quarter ended December 31, 2021								Quarter ended March 31, 2021
		Increase (decrease) due to						Increase (decrease) due to			Increase (decrease) due to								Increase (decrease) due to
(in thousands)	(in thousands)	Volume(1)		Rate(2)		Net			Volume(1)			Rate(2)		Net		(in thousands)	Volume(1)		Rate(2)		Net		Volume(1)		Rate(2)		Net
Interest earned on:	Interest earned on:															Interest earned on:
Taxable loans		$	15,595	$	(348)	$	15,247		$	61,401		$	(5,220)	$	56,181
Tax-exempt loans (3)		65		(9)		56			(16)			(95)		(111)

Taxable debt and equity investments		285		(181)		104			(3,354)			(2,741)		(6,095)
Non-taxable debt and equity investments (3)		353		(100)		253			7,274			(1,241)		6,033
Short-term investments		167		76		243			887			(481)		406

Loans(3)																Loans(3)	(1,124)		(987)		(2,111)		19,244		(16)		19,228
Taxable securities																Taxable securities	542		86		628		1,527		(547)		980
Non-taxable securities(3)																Non-taxable securities(3)	172		23		195		1,405		(234)		1,171
Interest-earning deposits																Interest-earning deposits	71		156		227		434		194		628
Total interest-earning assets	Total interest-earning assets	$	16,465	$	(562)	$	15,903		$	66,192		$	(9,778)	$	56,414	Total interest-earning assets	$	(339)	$	(722)	$	(1,061)	$	22,610	$	(603)	$	22,007

Interest paid on:	Interest paid on:															Interest paid on:
Interest-bearing transaction accounts	Interest-bearing transaction accounts	$	57	$	66	$	123		$	550		$	(1,263)	$	(713)	Interest-bearing transaction accounts	$	13	$	32	$	45	$	111	$	97	$	208
Money market accounts	Money market accounts	167		139		306			1,546			(5,027)		(3,481)		Money market accounts	5		43		48		236		249		485
Savings	Savings	9		—		9			44			(116)		(72)		Savings	2		—		2		18		—		18
Certificates of deposit	Certificates of deposit	161		(325)		(164)			(1,720)			(4,127)		(5,847)		Certificates of deposit	(34)		—		(34)		154		(669)		(515)
Subordinated debentures	Subordinated debentures	4		4		8			1,346			114		1,460		Subordinated debentures	(276)		57		(219)		(696)		97		(599)
FHLB advances	FHLB advances	116		(102)		14			(1,670)			203		(1,467)		FHLB advances	(2)		(2)		(4)		—		—		—
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	—		—		—			46			(349)		(303)		Securities sold under agreements to repurchase	4		(5)		(1)		6		13		19
Other borrowings	Other borrowings	(4)		—		(4)			(80)			(153)		(233)		Other borrowings	(6)		3		(3)		(22)		(15)		(37)
Total interest-bearing liabilities	Total interest-bearing liabilities	510		(218)		292			62			(10,718)		(10,656)		Total interest-bearing liabilities	(294)		128		(166)		(193)		(228)		(421)
Net interest income	Net interest income	$	15,955	$	(344)	$	15,611		$	66,130		$	940	$	67,070	Net interest income	$	(45)	$	(850)	$	(895)	$	22,803	$	(375)	$	22,428

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

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

(3) Nontaxable income is presented on a tax equivalent basis.

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

Net interest income (on a tax equivalent basis) for the three months ended ~~September 30, 2021 increased $15.6~~March 31, 2022 decreased $0.9 million, over the linked quarter. The decrease in net interest income from the linked quarter ~~prior~~was primarily due to ~~the addition of $1.7 billion of earning-assets~~a $2.0 million decline in PPP income as this loan portfolio continues to wind down. This decline was partially offset by an increase in income from loan growth, an expanded investment portfolio and a decline in interest expense from the ~~FCBP acquisition. PPP loans (excluding FCBP) decreased $164.0~~redemption of $50.0 million of subordinated debentures in the ~~current~~fourth quarter ~~compared to a decline of $341.0 million in the linked quarter. Forgiveness of these loans by the SBA accelerates deferred loan fees into income that benefits net interest income.~~2021. Total PPP income in the current quarter was ~~$6.0~~$2.9 million, compared to ~~$7.9~~$4.9 million in the linked quarter.

During the nine months ended September 30, 2021, tax equivalent net interest income increased $67.1 million from the nine months ended September 30, 2020, primarily due to the FCBP and Seacoast acquisitions and income from PPP loans that began originating in the second quarter 2020. These increases were partially offset by a decline in the yield on earning assets from 4.03% in the first nine months of 2020 to 3.68% in the same period of 2021. The ~~decline in yield was primarily due to the~~ Federal Open Markets Committee ~~reduction of~~increased the target federal funds rate by ~~150~~25 basis points in the first quarter of ~~2020.~~2022. Net interest income will generally benefit from interest rate increases due to the asset-sensitive position of the balance sheet.

Compared to the prior year, net interest income increased $22.0 million, primarily due to the FCBP acquisition, organic loan growth, and an expanded investment portfolio. These increases were offset by a $5.6 million decline in PPP income.

NIM was ~~3.40%~~3.28% for the ~~third~~first quarter ~~2021,~~2022, compared to ~~3.46%~~3.32% and 3.50% in the linked ~~quarter.~~and prior year quarter, respectively. NIM decreased ~~six~~four basis points from the linked quarter primarily due to a ~~ten~~five basis point decrease in earning asset yields. The decrease in the

earning asset yield was primarily due to a shift in the composition of earning assets to a higher ~~levels~~level of cash related to payoffs of PPP loans and deposit growth and ~~lower yields on~~an increase in investment ~~securities and loans.~~securities. Average interest-bearing cash accounts totaled ~~$1.3~~$1.8 billion in the ~~third~~first quarter ~~2021,~~ 2022,

compared to ~~$806.9 million~~$1.6 billion in the linked quarter. The cost of interest-bearing liabilities declined ~~two~~one basis points from the linked quarter, primarily due to ~~lower rates on time deposits. While NIM declined due to~~ the ~~aforementioned factors,~~redemption of $50.0 million of subordinated debentures in the ~~FCBP acquisition benefited NIM for the~~fourth quarter ~~and partially offset the increase in low-yielding cash balances.~~2021.

~~NIM was 3.45% for the nine months ended September 30, 2021, a 7 basis point decrease compared~~Compared to ~~3.52% in~~ the prior year, ~~period.~~ NIM was ~~impacted~~compressed by growth in deposit portfolio that expanded available liquidity in both cash and investment balances. This expanded liquidity shifted the ~~decline in short-term rates~~composition of earning assets to these lower yielding categories (cash and investments), as ~~approximately 63%~~loans represented 77% of ~~the loan portfolio has variable rates, with most indexed to one-month LIBOR and Prime. LIBOR and Prime have declined significantly over the past year in conjunction with the decrease~~average earnings assets in the ~~target federal funds rate discussed above. Higher levels of low-yielding, short-term investments also contributed~~first quarter 2021, compared to 71% in the ~~decline in NIM, as the average balance increased $726.1 million.~~first quarter 2022.

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									Linked quarter comparison								Prior year comparison
		Quarter ended								Nine months ended									Quarter ended								Quarter ended
(in thousands)	(in thousands)	September 30, 2021		June 30, 2021		Increase (decrease)				September 30, 2021		September 30, 2020		Increase (decrease)				(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)				March 31, 2021		Increase (decrease)
Deposit service charges	Deposit service charges	$	4,520	$	3,862	$	658	17	%	$	11,466	$	8,557	$	2,909	34	%	Deposit service charges	$	4,163	$	3,962	$	201	5	%	$	3,084	$	1,079	35	%
Wealth management revenue	Wealth management revenue	2,573		2,516		57		2	%	7,572		7,283		289		4	%	Wealth management revenue	2,622		2,687		(65)		(2)	%	2,483		139		6	%
Card services revenue	Card services revenue	3,186		2,975		211		7	%	8,657		6,970		1,687		24	%	Card services revenue	3,040		3,223		(183)		(6)	%	2,496		544		22	%
Tax credit income		3,325		1,370		1,955		143	%	3,654		2,563		1,091		43	%
Tax credit income (expense)																		Tax credit income (expense)	2,608		4,374		(1,766)		(40)	%	(1,041)		3,649		351	%

Miscellaneous income		4,015		5,481		(1,466)		(27)	%	13,764		10,624		3,140		30	%
Other income																		Other income	6,208		8,384		(2,176)		(26)	%	4,268		1,940		45	%

Total noninterest income	Total noninterest income	$	17,619	$	16,204	$	1,415	9	%	$	45,113	$	35,997	$	9,116	25	%	Total noninterest income	$	18,641	$	22,630	$	(3,989)	(18)	%	$	11,290	$	7,351	65	%

Total noninterest income for the ~~third~~first quarter ~~2021~~2022 was ~~$17.6~~$18.6 million, ~~an increase~~a decrease of ~~$1.4~~$4.0 million from the linked quarter and an increase of $7.4 million from the prior year quarter. The linked quarter decrease was due primarily to a decline in miscellaneous income and tax credit income. Miscellaneous income in the fourth quarter 2021 included $5.0 million of income on community development investments, compared to $2.2 million in the first quarter 2022. Income from community development investments is not a consistent source and will vary among periods. Offsetting the decline from community development investments in miscellaneous income was a $1.1 million increase in customer swap income from higher activity and $0.6 million from higher servicing income and a life insurance death benefit. The $1.8 million decline in tax credit income from the fourth quarter 2021 was consistent with the normal trend of this product line that typically peaks in the fourth quarter each year. Certain tax credit investment projects are carried at fair value. An increase in interest rates will also increase the discount rate used in the fair value of these investments, resulting in a lower fair value. Future rate increases may result in fair value changes that will lower tax credit income.

Compared to the prior year quarter, the increase of $7.4 million was primarily due to an increase in tax credit income, as tax credit project activity was stronger in the first quarter 2022 compared to the same period in 2021. In addition, other income increased due to higher swap fee income on increased customer swap transactions. The FCBP acquisition ~~of FCBP that added $1.4~~also contributed $1.3 million ofto the overall noninterest income ~~primarily in deposit service charges and servicing income. Tax credit income increased $2.0 million~~increase in the first quarter ~~partially offset by a $1.9 million decline in miscellaneous income from lower gains on the sale of real estate and private equity fund distributions in the linked quarter.~~

~~Noninterest income for the nine months ended September 30, 2021, increased $9.1 million~~2022 compared to the prior year period, due to the FCBP and Seacoast acquisitions ($2.2 million), private equity income ($2.9 million), card services and tax credit income ($2.7 million) and gains on the sale of mortgages and other real estate owned ($1.7 million). The increaseprimarily in card services, tax credit income and mortgage sales were due to higher volumes and business activity in 2021. Private equity distributions and gains on the sale of other real estate owned are not consistent sources of revenue. As the Company has exceeded $10 billion in assets during 2021, the Durbin Amendment to the Dodd-Frank Act will begin limiting the amount of interchange fees that the Company receives as part of card services revenue in July 2022.deposit service charges.

3935

Noninterest Expense

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


		Linked quarter comparison											Prior year comparison												Linked quarter comparison											Prior year comparison
		Quarter ended											Nine months ended												Quarter ended											Quarter ended
(in thousands)	(in thousands)	September 30, 2021			June 30, 2021			Increase (decrease)					September 30, 2021			September 30, 2020			Increase (decrease)					(in thousands)	March 31, 2022			December 31, 2021			Increase (decrease)					March 31, 2021			Increase (decrease)
Employee compensation and benefits	Employee compensation and benefits	$	33,722		$	28,132		$	5,590		20	%	$	91,416		$	66,114		$	25,302		38	%	Employee compensation and benefits	$	35,827		$	33,488		$	2,339		7	%	$	29,562		$	6,265		21	%
Occupancy	Occupancy	4,496			3,529			967			27	%	11,776			9,940			1,836			18	%	Occupancy	4,586			4,510			76			2	%	3,751			835			22	%
Data processing	Data processing	3,328			2,850			478			17	%	9,068			6,393			2,675			42	%	Data processing	3,260			3,174			86			3	%	2,890			370			13	%
Professional fees	Professional fees	901			1,300			(399)			(31)	%	3,189			2,904			285			10	%	Professional fees	1,177			1,100			77			7	%	988			189			19	%

Branch closure expenses		3,441			—			3,441			NM		3,441			—			3,441			NM

Merger-related expenses	Merger-related expenses	14,671			1,949			12,722			653	%	19,762			1,563			18,199			1,164	%	Merger-related expenses	—			2,320			(2,320)			(100)	%	3,142			(3,142)			(100)	%
Other		16,326			14,696			1,630			11	%	43,573			29,195			14,378			49	%
Other expense																								Other expense	17,950			19,102			(1,152)			(6)	%	12,551			5,399			43	%
Total noninterest expense	Total noninterest expense	$	76,885		$	52,456		$	24,429		47	%	$	182,225		$	116,109		$	66,116		57	%	Total noninterest expense	$	62,800		$	63,694		$	(894)		(1)	%	$	52,884		$	9,916		19	%

Efficiency ratio	Efficiency ratio	66.92		%	53.56		%	13.36		%			60.09		%	50.80		%	9.29		%			Efficiency ratio	52.42		%	51.08		%	1.34		%			58.49		%	(6.07)		%
Core efficiency ratio1	Core efficiency ratio1	51.30		%	51.86		%	(0.56)		%			52.59		%	50.97		%	0.33		%			Core efficiency ratio1	52.43		%	49.22		%	3.21		%			55.02		%	(2.59)		%

1 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.	1 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.																							1 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
NM - Not meaningful	NM - Not meaningful																							NM - Not meaningful

Noninterest expense was ~~$76.9~~$62.8 million for the ~~third~~first quarter ~~2021,~~2022, compared to ~~$52.5~~$63.7 million for the linked quarter and $52.9 million in the prior year quarter. The ~~increase~~decrease from the linked quarter was due primarily to a decline in merger expenses and other expenses, offset by an increase in employee compensation and benefits. Merger expenses in the linked quarter of $2.3 million were related to the acquisition of First Choice in July 2021. All merger-related costs were recognized in 2021 and no future merger expenses will be incurred related to the First Choice acquisition. Other expenses declined $1.1 million, primarily due to ~~merger-related expenses~~lower operational losses and the loss on the redemption of ~~$14.7 million (an increase of $12.7 million from~~debt that was recognized in the linked ~~quarter), FCBP noninterest expense~~quarter. The $2.3 million increase in employee compensation and benefits was primarily from seasonally higher payroll taxes and the partial quarter impact of ~~$7.0 million, and branch closure expenses of $3.4 million.~~

merit increases that went into effect on March 1, 2022.

~~Noninterest expense was $182.2 million for the nine months ended September 30, 2021, compared~~

Compared to ~~$116.1 million for~~ the prior year ~~period.The~~quarter, the $9.9 million increase ~~from the prior year~~ was primarily due to the FCBP acquisition that added $6.8 million in noninterest expense, an increase in employee compensation and benefits from merit increases in 2021, and higher deposit servicing costs. Certain deposit specialty accounts receive an earnings credit that pays costs used to service the customer. These costs are recorded as noninterest expense and will fluctuate with the amount of the underlying deposit balances and the related earnings credit rate. Excluding FCBP, these costs increased $1.4 million to $3.7 million in the first quarter 2022, compared to $2.3 million in the prior year quarter. The increase was primarily due to continued success in generating new customer activity in the deposit specialties. Offsetting these increases was a decline of $3.1 million in merger expenses that were recognized in the prior year quarter on the acquisition of Seacoast ~~acquisitions ($38.5 million), merger-related expenses ($18.2 million), and branch closure expenses ($3.4 million).~~Commerce Banc Holdings in the fourth quarter 2020.

Income Taxes

The Company’s effective tax rate was ~~24.1%~~21.9 % for the ~~third~~first quarter ~~2021,~~2022, compared to 21.4% in the linked quarter and 20.2% in the prior year quarter. The tax rate was relatively stable in the first quarter 2022 compared to the linked quarter. The increase ~~reflects~~from the ~~impact of non-deductible merger expenses and an increase in state taxes. For the nine months ended September 30, 2021 and 2020, the effective tax rate~~prior year quarter was ~~20.9% and 19.6%, respectively. The increase in the effective tax rate in 2021 over 2020 was partially~~primarily due to ~~higher state tax expense from~~ the Company’s expanded geographic ~~footprint.~~footprint and the related state tax apportionment.

4036

Summary Balance Sheet


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		Increase (decrease)				(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)
Total cash and cash equivalents	Total cash and cash equivalents	$	1,389,287	$	537,703	$	851,584	158	%			Total cash and cash equivalents	$	1,981,320	$	2,021,689	$	(40,369)	(2)	%
Securities	Securities	1,658,286		1,400,039		258,247		18	%			Securities	1,933,483		1,795,687		137,796		8	%
Loans (excluding PPP)	Loans (excluding PPP)	8,677,624		6,829,606		1,848,018		27	%			Loans (excluding PPP)	8,921,989		8,745,684		176,305		2	%
PPP loans, net	PPP loans, net	438,959		698,645		(259,686)		(37)	%			PPP loans, net	134,084		271,958		(137,874)		(51)	%
Total assets	Total assets	12,888,016		9,751,571		3,136,445		32	%			Total assets	13,706,769		13,537,358		169,411		1	%
Deposits	Deposits	10,827,775		7,985,389		2,842,386		36	%			Deposits	11,704,135		11,343,799		360,336		3	%
Total liabilities	Total liabilities	11,448,381		8,672,596		2,775,785		32	%			Total liabilities	12,233,592		12,008,242		225,350		2	%
Total shareholders’ equity	Total shareholders’ equity	1,439,635		1,078,975		360,660		33	%			Total shareholders’ equity	1,473,177		1,529,116		(55,939)		(4)	%

Assets

Loans by Type

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

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


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		Increase (decrease)				(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)
Commercial and industrial	Commercial and industrial	$	3,379,171	$	3,088,995	$	290,176	9	%			Commercial and industrial	$	3,398,723	$	3,392,375	$	6,348	—	%
Commercial real estate - investor owned	Commercial real estate - investor owned	2,121,252		1,589,419		531,833		33	%			Commercial real estate - investor owned	2,184,126		2,141,143		42,983		2	%
Commercial real estate - owner occupied	Commercial real estate - owner occupied	2,058,460		1,498,408		560,052		37	%			Commercial real estate - owner occupied	2,094,012		2,035,785		58,227		3	%
Construction and land development	Construction and land development	747,758		546,686		201,072		37	%			Construction and land development	702,630		734,073		(31,443)		(4)	%
Residential real estate	Residential real estate	542,690		319,179		223,511		70	%			Residential real estate	432,639		454,052		(21,413)		(5)	%
Other	Other	267,252		182,248		85,004		47	%			Other	243,943		260,214		(16,271)		(6)	%
Loans held for investment	Loans held for investment	$	9,116,583	$	7,224,935	$	1,891,648	26	%			Loans held for investment	$	9,056,073	$	9,017,642	$	38,431	—	%

4137

The following table illustrates the change in loans:


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		Increase (decrease)				(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)
C&I	C&I	$	1,458,078	$	1,103,060	$	355,018	32	%			C&I	$	1,498,151	$	1,538,155	$	(40,004)	(3)	%
CRE investor owned	CRE investor owned	1,935,284		1,420,905		514,379		36	%			CRE investor owned	1,982,645		1,955,087		27,558		1	%
CRE owner occupied	CRE owner occupied	1,163,236		825,846		337,390		41	%			CRE owner occupied	1,138,106		1,112,463		25,643		2	%
SBA Loans*	SBA Loans*	1,199,758		895,930		303,828		34	%			SBA Loans*	1,249,929		1,241,449		8,480		1	%
Sponsor finance*	Sponsor finance*	454,431		396,487		57,944		15	%			Sponsor finance*	641,476		508,469		133,007		26	%
Life insurance premium financing*	Life insurance premium financing*	572,492		534,092		38,400		7	%			Life insurance premium financing*	636,096		593,562		42,534		7	%
Tax credits*	Tax credits*	462,168		382,602		79,566		21	%			Tax credits*	518,020		486,881		31,139		6	%
SBA PPP loans	SBA PPP loans	438,959		698,645		(259,686)		(37)	%			SBA PPP loans	134,084		271,958		(137,874)		(51)	%
Residential real estate	Residential real estate	519,859		318,091		201,768		63	%			Residential real estate	410,173		430,985		(20,812)		(5)	%
Construction and land development	Construction and land development	652,227		474,399		177,828		37	%			Construction and land development	610,830		625,526		(14,696)		(2)	%
Other	Other	260,091		174,878		85,213		49	%			Other	236,563		253,107		(16,544)		(7)	%
Total loans	Total loans	$	9,116,583	$	7,224,935	$	1,891,648	26	%			Total loans	$	9,056,073	$	9,017,642	$	38,431	—	%

*Specialty loan category	*Specialty loan category											*Specialty loan category

Loans totaled $9.1 billion at ~~September 30, 2021~~March 31, 2022 compared to ~~$7.2~~$9.0 billion at December 31, ~~2020. The acquisition of FCBP added $1.9 billion in~~ 2021. PPP loans declined ~~$260~~$137.9 million ~~($466.0 million excluding FCBP) in 2021~~ as PPP forgiveness by the SBA ~~accelerated and the deadline for new originations passed in the second quarter 2021.~~continued. All specialty loan categories ~~have~~ increased in ~~2021, led by SBA 7(a)~~the first quarter 2022, particularly sponsor finance loans. ~~At September 30, 2021,~~Average line draw utilization was ~~38.2% compared to 38.1% at December 31, 2020.~~39.9% for both the first quarter 2022 and the linked quarter.

Specialty lending products, especially sponsor finance, life insurance premium financing, and tax credits, consist primarily of 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 markets. These specialized loan products offer opportunities to expand and diversify geographically by entering new markets. The Company continues to focus on originating high-quality C&I relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. Life insurance premium financing and tax credits are typically lower risk products due to the high collateral value securing the loans.

SBA loans are also generated on a national basis, and primarily consist of loans collateralized by first lien, owner-occupied real estate properties. These loans ~~typically~~predominantly have a 75% guarantee from the SBA. However, the guarantee was temporarily increased to 90% for loans issued between December 27, 2020 and September 30, 2021 as part of the Economic Aid Act. Occasionally, the Company may sell the guaranteed portion of the loan and retain servicing rights. ~~At September 30, 2021, the unsold guaranteed portion of SBA loans totaled $808.2 million at September 30, 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 September 30, 2021, nearly all of these loans have returned to a paying status.

Provision and Allowance for Credit Losses

The adoption of CECL on January 1, 2020 increased the 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 ACL on loans arising from CECL adoption; loan charge-offs and recoveries by loan category, and additions to the allowance charged to expense.

Three months ended Nine months ended September 30,
(in thousands) September 30, 2021 June 30, 2021 2021 2020
Allowance, at beginning of period $ 128,185 $ 131,527 $ 136,671 $ 43,288
CECL adoption — — — 28,387
PCD loans immediately charged-off — — — (1,680)
Allowance at beginning of period, adjusted for adoption of CECL 128,185 131,527 136,671 69,995
Initial allowance on acquired PCD loans 7,006 — 7,006 —
Provision (benefit) for credit losses on loans 18,755 (2,473) 16,785 54,113
Charge-offs:
Commercial and industrial (2,829) (1,451) (8,019) (5,372)
Real estate:
Commercial (376) (216) (2,992) (528)
Construction and land development (3) — (3) (31)
Residential (840) (44) (1,155) (327)
Other (203) (121) (389) (294)
Total charge-offs (4,251) (1,832) (12,558) (6,552)
Recoveries:
Commercial and industrial 452 700 1,479 1,605
Real estate:
Commercial 1,638 49 1,730 3,169
Construction and land development 171 32 438 152
Residential 115 161 419 686
Other 25 21 126 102
Total recoveries 2,401 963 4,192 5,714
Net charge-offs (1,850) (869) (8,366) (838)
Allowance, at end of period $ 152,096 $ 128,185 $ 152,096 $ 123,270

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

Quarter ended Nine months ended September 30,
(in thousands) September 30, 2021 June 30, 2021 2021 2020
Provision (benefit) for credit losses on loans $ (5,149) $ (2,473) $ (7,119) $ 54,113
Day 2 provision on First Choice acquired loans 23,904 — 23,904 —
Provision for off-balance sheet commitments 1,641 38 1,309 2,350
Provision for held-to-maturity securities 190 — 190 342
Accrued interest (918) (234) (1,239) (870)
Provision (benefit) for credit losses $ 19,668 $ (2,669) $ 17,045 $ 55,935

~~The following table summarizes the allocation of the ACL:~~

September 30, 2021 December 31, 2020
(in thousands) Allowance Percent Allowance Percent
Commercial and industrial $ 61,887 40.7 % $ 58,812 43.0 %
Real estate:
Commercial 61,368 40.3 % 49,074 35.9 %
Construction and land development 14,052 9.2 % 21,413 15.7 %
Residential 9,223 6.1 % 4,585 3.4 %
Other 5,566 3.7 % 2,787 2.0 %
Total $152,096 100.0 % $136,671 100.0 %


	Quarter ended
(in thousands)	March 31, 2022		December 31, 2021
Provision (benefit) for credit losses on loans	$	(4,308)	$	(3,792)
Provision for off-balance sheet commitments	725		602
Provision (benefit) for held-to-maturity securities	(56)		(25)
Recovery of accrued interest	(429)		(445)
Provision (benefit) for credit losses	$	(4,068)	$	(3,660)

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.

~~The~~A provision ~~for credit losses~~benefit of $4.1 million was ~~$19.7 million for the third quarter 2021 and $17.0 million~~recognized for the first ~~nine months of 2021,~~quarter 2022, compared to a benefit of ~~$2.7~~$3.7 million for the linked quarter and an expense of $55.9 million in the same period of 2020. The provision for credit losses for the three and nine months ended September 30, 2021 was due to the establishment of the $23.9 million ACL on acquired FCBP non-PCD loans and a $1.6 million provision on unfunded commitments that was primarily related to FCBP loan commitments. The provision for credit losses on FCBP loans was offset by a provision benefit on the pre-existing loan portfolio.quarter. The Company’s strong asset quality metrics and strengthening customer credit risk profiles, along with an improvement in the economic forecast used to calculate the allowance, particularly ~~GDP~~the commercial real estate index and unemployment, led to the provision benefit in ~~2021.~~both the current and linked quarters.Conversely, the Company was in the middle of the pandemic at September 30, 2020 when economic forecasts were severely constrained, which led to the provision expense of $41.9 million in the prior year period.

~~Gross~~The following table summarizes the allocation of the ACL:


	March 31, 2022				December 31, 2021
(in thousands)	Allowance		Percent of loans in each category to total loans		Allowance		Percent of loans in each category to total loans
Commercial and industrial	$	60,975	37.5	%	$	63,825	37.6	%
Real estate:
Commercial	53,232		47.2	%	53,437		46.3	%
Construction and land development	12,983		7.8	%	14,536		8.1	%
Residential	7,109		4.8	%	7,927		5.1	%
Other	4,913		2.7	%	5,316		2.9	%
Total	$139,212		100.0	%	$145,041		100.0	%

The ACL on loans was 1.54% of loans at March 31, 2022, compared to 1.61% at December 31, 2021. Loan growth, net charge-offs ~~of $4.3 million~~and the provision benefit in the first quarter ~~primarily consisted of one commercial loan that had previously defaulted and~~2022 drove the decrease in the ACL to total loans ratio. Excluding guaranteed loans, the ACL to total loans was ~~fully reserved for in 2020. During the first nine months of 2021, gross charge-offs totaled $12.6 million,~~1.73% at March 31, 2022, compared to ~~$6.6 million in~~1.84% at December 31, 2021.

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


	Quarter ended
	March 31, 2022						December 31, 2021
($ in thousands)	Net Charge-offs (Recoveries)		Average Loans(1)		Net Charge-offs (Recoveries)/Average Loans		Net Charge-offs (Recoveries)		Average Loans(1)		Net Charge-offs (Recoveries)/Average Loans
Commercial and industrial	$	1,369	$	3,389,243	0.16	%	$	3,885	$	3,270,854	0.48	%
Real estate:
Commercial	(256)		4,202,934		(0.02)	%	(451)		4,009,356		(0.05)	%
Construction and land development	(21)		738,329		(0.01)	%	(16)		758,927		(0.01)	%
Residential	362		415,786		0.35	%	(179)		442,914		(0.16)	%
Other	67		256,033		0.11	%	24		543,396		0.02	%
Total	$	1,521	$	9,002,325	0.07	%	$	3,263	$	9,025,447	0.15	%

(1) Excludes loans held for sale.

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

The ACL on loans was 1.67% of loans at September 30, 2021, compared to 1.77% at June 30, 2021 and 1.89% at December 31, 2020. The ACL coverage ratio of 1.57% on the FCBP acquired loans contributed to the decline in the combined coverage ratio at September 30, 2021.

4439

Nonperforming assets

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

(in thousands) September 30,
2021 December 31,
2020
Nonaccrual loans $ 38,591 $ 34,818
Loans past due 90 days or more and still accruing interest 16 130
Troubled debt restructurings 2,947 3,559
Total nonperforming loans 41,554 38,507
Other real estate 3,493 5,330
Total nonperforming assets $ 45,047 $ 43,837
Total assets $ 12,888,016 $ 9,751,571
Total loans 9,116,583 7,224,935
Nonperforming loans to total loans 0.46 % 0.53 %
Nonperforming assets to total assets 0.35 % 0.45 %
ACL on loans to nonperforming loans 366 % 355 %

Nonperforming loans increased $3.0 million to $41.6 million at September 30, 2021 from $38.5 million at December 31, 2020. Other real estate decreased during 2021 and the Company has recognized gains on sale of $0.9 million from the disposition of these properties.

~~Nonperforming loans~~


(in thousands)	March 31, 2022			December 31, 2021
Nonaccrual loans	$	18,398		$	23,449
Loans past due 90 days or more and still accruing interest	24			1,716
Troubled debt restructurings	2,738			2,859
Total nonperforming loans	21,160			28,024
Other real estate	1,459			3,493

Total nonperforming assets	$	22,619		$	31,517

Total assets	$	13,706,769		$	13,537,358
Total loans	9,056,073			9,017,642

Total allowance for credit losses	139,212			145,041

ACL to nonaccrual loans	757		%	619		%
ACL to nonperforming loans	658		%	518		%
ACL to total loans	1.54		%	1.61		%
Nonaccrual loans to total loans	0.20		%	0.26		%
Nonperforming loans to total loans	0.23		%	0.31		%

Nonperforming assets to total assets	0.17		%	0.23		%

Nonperforming loans based on loan type were as follows:


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Commercial and industrial	Commercial and industrial	$	30,530	$	21,770	Commercial and industrial	$	16,397	$	21,538
Commercial real estate	Commercial real estate	8,738		12,519		Commercial real estate	3,640		4,414

Residential real estate	Residential real estate	2,262		4,189		Residential real estate	1,102		2,048
Other	Other	24		29		Other	21		24
Total	Total	$	41,554	$	38,507	Total	$	21,160	$	28,024

The following table summarizes the changes in nonperforming loans:

~~Nine~~Three months ended

(in thousands)

~~September 30, 2021~~March 31, 2022

Nonperforming loans, beginning of period

~~38,507~~28,024

Additions to nonaccrual loans

~~35,361~~917

Charge-offs

~~(12,558)~~(3,312)

~~Other principal reductions~~Principal payments

~~(16,235)~~(4,469)

~~Moved to other real estate~~

~~(1,937)~~

~~Moved to performing~~

~~(1,582)~~

~~Change in loans past due 90 days or more and still accruing interest~~

~~(2)~~

Nonperforming loans, end of period

~~41,554~~21,160

Deposits


(in thousands)	(in thousands)	September 30, 2021			December 31, 2020			Increase (decrease)				(in thousands)	March 31, 2022			December 31, 2021			Increase (decrease)
Noninterest-bearing deposit accounts	Noninterest-bearing deposit accounts	$	4,375,713		$	2,711,828		$	1,663,885	61	%	Noninterest-bearing deposit accounts	$	4,881,043		$	4,578,436		$	302,607	7	%
Interest-bearing transaction accounts	Interest-bearing transaction accounts	2,253,639			1,768,497			485,142		27	%	Interest-bearing transaction accounts	2,547,482			2,465,884			81,598		3	%
Money market accounts	Money market accounts	2,822,259			2,327,066			495,193		21	%	Money market accounts	2,794,536			2,890,976			(96,440)		(3)	%
Savings accounts	Savings accounts	748,993			627,903			121,090		19	%	Savings accounts	883,599			800,210			83,389		10	%
Certificates of deposit:	Certificates of deposit:											Certificates of deposit:
Brokered	Brokered	128,923			50,209			78,714		157	%	Brokered	129,017			128,970			47		—	%
Other	Other	498,248			499,886			(1,638)		—	%	Other	468,458			479,323			(10,865)		(2)	%
Total deposits	Total deposits	$	10,827,775		$	7,985,389		$	2,842,386	36	%	Total deposits	$	11,704,135		$	11,343,799		$	360,336	3	%

Core deposits / total deposits		94		%	93		%

Demand deposits / total deposits	Demand deposits / total deposits	40		%	34		%					Demand deposits / total deposits	42		%	40		%

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


	Three months ended
	March 31, 2022				December 31, 2021				March 31, 2021
($ in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing deposit accounts	$	4,692,027	—	%	$	4,537,247	—	%	$	2,777,900	—	%

Interest-bearing demand accounts	2,505,319		0.09	%	2,383,059		0.08	%	1,887,059		0.07	%
Money market accounts	2,872,302		0.21		2,853,655		0.20		2,350,592		0.17
Savings accounts	817,431		0.03		776,695		0.03		654,662		0.03
Certificates of deposit	607,133		0.53		616,347		0.53		537,166		0.99
Total interest-bearing deposits	$	6,802,185	0.17		$	6,629,756	0.17		$	5,429,479	0.20

Total average deposits	$	11,494,212	0.10		$	11,167,003	0.10		$	8,207,379	0.13

Core deposits, defined as total deposits excluding certificates of deposits, were ~~$10.2~~$11.1 billion at ~~September 30, 2021,~~March 31, 2022, an increase of ~~$2.8 billion~~$371.2 million from December 31, ~~2020. The increase was primarily from the FCBP acquisition that added $1.7 billion in core deposits.~~2021. Noninterest-bearing and interest-bearing deposits have also increased due to elevated deposits from customers who received PPP loans and customers who have retained excess liquidity due to the low yield of alternative short-term investments. ~~Noninterest-bearing deposits were $4.4 billion at September 30, 2021,~~As rates increase, deposit balances may decline or ~~40.4%~~the composition of ~~total deposits.~~ the deposit portfolio may shift to higher-yielding deposit products, such as money market accounts or certificates of deposit.

The Company has a specialty deposit portfolio focusing on property management, community associations, and escrow industries, in addition to deposits related to its specialty lending products. These deposits totaled ~~$1.9~~$2.5 billion at ~~September 30, 2021~~March 31, 2022 and ~~$1.1~~$2.2 billion at December 31, ~~2020.~~2021.

The total cost of deposits was ~~0.11%~~0.10% for both the current ~~quarter compared to 0.12% for~~and the linked quarter.

Shareholders’ Equity

Shareholders’ equity totaled ~~$1.4~~$1.5 billion at ~~September 30, 2021, an increase~~March 31, 2022, a decrease of ~~$360.7~~$55.9 million from December 31, ~~2020.~~2021. Significant activity during the first ~~nine~~three months of ~~2021~~2022 was as follows:

•increase from net income of ~~$82.2~~$47.7 million,

•~~increase from the issuance of 7.8 million shares in the acquisition of FCBP totaling $343.7 million ($342.3 million net of shares withheld for taxes on employee share based equity awards)~~

•net decrease in fair value of securities and cash flow hedges of ~~$17.2~~$78.0 million,

•decrease from shares repurchased of ~~$33.1~~$17.0 million, and

•decrease from dividends paid on common and preferred shares of ~~$18.6~~$9.1 million.

Liquidity and Capital Resources

Liquidity

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

Additionally, liquidity is provided from lines of credit with the FHLB, the Federal Reserve, and 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 company also has a high-quality investment portfolio that has been structured to provide a continuous flow of cash payments.~~

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

Liquidity from ~~asset categories~~assets is ~~provided through~~available primarily from cash balances and the investment portfolio. Cash and interest-bearing deposits with other banks, which totaled ~~$1.4~~$2.0 billion at ~~September 30, 2021, compared to $545.3 million at~~both March 31, 2022 and December 31, ~~2020.~~2021. The low interest rate environment, coupled with an uncertain outlook and government stimulus, such as the PPP, ~~have~~has increased liquidity ~~for~~within the banking industry, including the Company. Investment securities are another important tool to the Company’s liquidity objectives. Securities totaled ~~$1.7~~$1.9 billion at ~~September 30, 2021,~~March 31, 2022, and included ~~$582~~$581 million pledged as collateral for deposits of public institutions, treasury, loan notes, and other requirements. The remaining ~~$1.1~~$1.3 billion 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 ~~September 30, 2021,~~March 31, 2022, the ~~Bank~~Company could borrow an additional ~~$704~~$870 million from the FHLB of Des Moines under blanket loan pledges, and has an additional ~~$1.1~~$1.2 billion available from the Federal Reserve Bank under a pledged loan agreement. The ~~Bank~~Company has unsecured federal funds lines with six correspondent banks totaling $90 million.

In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The Company has ~~$2.5~~$2.8 billion in unused commitments to extend credit as of ~~September 30, 2021. The~~March 31, 2022. While this commitment level would exhaust the majority the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.

At the holding company level, the primary funding sources are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises, stock offerings) and debt instruments. The main use of this liquidity is to provide the funds necessary to pay dividends to shareholders, service debt, invest in subsidiaries as necessary, and satisfy other operating requirements. The holding company maintains a revolving line of credit for an aggregate amount up to $25 million, all of which is available at ~~September 30, 2021.~~March 31, 2022. The line of credit has a one-year term and ~~matures~~was renewed in February ~~2022.~~2022 for an additional one-year term. The proceeds can be used for general corporate purposes.

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

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

47Through the normal course of operations, the Company has entered into certain contractual obligations and other commitments. Such obligations relate to funding of operations through deposits or debt issuances, as well as leases for premises and equipment. As a financial services provider, the Company routinely enters into commitments to extend credit. While contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Company. The Company also enters into derivative contracts under which the Company either receives cash from or pays cash to counterparties depending on changes in interest rates. Derivative contracts are carried at fair value on the consolidated balance sheet with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of these contracts changes daily as market interest rates change.

Capital Resources

~~EFSC~~The Company 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 ~~EFSC~~the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total, Tier 1, and common equity tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. To be categorized as “well capitalized”, banks must maintain minimum total risk-based (10%), Tier 1 risk-based (8%), common equity tier 1 risk-based (6.5%), and Tier 1 leverage ratios (5%). As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, EFSC~~2021, the Company and the Bank met all capital adequacy requirements to which they are subject and exceeded the amounts required to be “well capitalized”.

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

(in thousands) September 30,
2021 December 31, 2020 Minimum Capital Requirement to be considered “Well Capitalized”, including Capital Conservation Buffer
Total capital to risk-weighted assets 14.5 % 14.9 % 10.5 %
Tier 1 capital to risk-weighted assets 12.2 % 12.1 % 8.5 %
Common equity tier 1 capital to risk-weighted assets 11.2 % 10.9 % 7.0 %
Leverage ratio (Tier 1 capital to average assets) 9.7 % 10.0 % 4.0 %
Tangible common equity to tangible assets1
8.4 % 8.4 %
Total risk-based capital $ 1,385,389 $ 1,094,601
Tier 1 capital 1,166,529 889,527
Common equity tier 1 capital 1,072,876 795,873
1 Not a required regulatory capital ratio

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

(in thousands) September 30,
2021 December 31, 2020 Well Capitalized Minimum % Minimum Capital Requirement to be considered “Well Capitalized” Including Capital Conservation Buffer
Total capital to risk-weighted assets 13.4 % 13.7 % 10.0 % 10.5 %
Tier 1 capital to risk-weighted assets 12.3 % 12.5 % 8.0 % 8.5 %
Common equity tier 1 capital to risk-weighted assets 12.3 % 12.5 % 6.5 % 7.0 %
Leverage ratio (Tier 1 capital to average assets) 9.8 % 10.3 % 5.0 % 4.0 %
Total risk-based capital $ 1,278,031 $ 1,004,839
Tier 1 capital 1,172,421 913,169
Common equity tier 1 capital 1,172,368 913,116
ratios:

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 September 30, 2021, the estimated impact of adopting CECL would reduce the Common Equity Tier 1 Capital ratio by approximately 40 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.


	March 31, 2022						December 31, 2021
($ in thousands)	EFSC			Bank			EFSC			Bank			To Be Well-Capitalized		Minimum Ratio with CCB
Common Equity Tier 1 Capital to Risk Weighted Assets	11.0		%	12.2		%	11.3		%	12.5		%	6.5	%	7.0	%
Tier 1 Capital to Risk Weighted Assets	12.7		%	12.2		%	13.0		%	12.5		%	8.0	%	8.5	%
Total Capital to Risk Weighted Assets	14.4		%	13.3		%	14.7		%	13.5		%	10.0	%	10.5	%
Leverage Ratio (Tier 1 Capital to Average Assets)	9.6		%	9.2		%	9.7		%	9.3		%	5.0	%	4.0	%
Tangible common equity to tangible assets1	7.6		%				8.1		%
Common equity tier 1 capital	$	1,105,703		$	1,218,047		$	1,091,823		$	1,201,340
Tier 1 capital	1,271,342			1,218,098			1,257,462			1,201,391
Total risk-based capital	1,443,088			1,326,594			1,423,036			1,303,715

1 Not a required regulatory capital ratio

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

Use of Non-GAAP Financial Measures:

The Company’s accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as tangible common equity, PPNR, PPNR ROAA, financial metrics adjusted for PPP impact, core efficiency ratio, and the tangible common equity ratio, in this 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 tangible common equity, PPNR, PPNR ROAA, financial metrics adjusted for PPP impact, core efficiency ratio, and the tangible common equity ratio, collectively “core performance measures,” presented in this 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 certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as 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 attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the ~~non-GAAP~~non-

GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measures for the periods indicated.

Core Performance Measures

Three months ended Nine months ended
(in thousands) September 30,
2021 June 30,
2021 September 30,
2020 September 30,
2021 September 30,
2020
Net interest income $ 97,273 $ 81,738 $ 63,354 $ 258,134 $ 192,555
Less: Incremental accretion income — — 1,235 — 3,227
Core net interest income 97,273 81,738 62,119 258,134 189,328
Total noninterest income 17,619 16,204 12,629 45,113 35,997
Less: Gain on sale of investment securities — — 417 — 421
Less: Gain on sale of other real estate 335 549 — 884 —
Less: Other non-core income — — — 265
Core noninterest income 17,284 15,655 12,212 44,229 35,311
Total core revenue 114,557 97,393 74,331 302,363 224,639
Total noninterest expense 76,885 52,456 39,524 182,225 116,109
Less: Other expenses related to non-core acquired loans — — 25 — 49
Less: Merger-related expenses 14,671 1,949 1,563 19,762 1,563
Less: Branch-closure expenses 3,441 — 3,441 —
Core noninterest expense 58,773 50,507 37,936 159,022 114,497
Core efficiency ratio 51.30 % 51.86 % 51.04 % 52.59 % 50.97 %


	Three months ended
(in thousands)	March 31, 2022		December 31, 2021		March 31, 2021


Net interest income	101,165		102,060		79,123

Noninterest income	18,641		22,630		11,290



Less gain on sale of other real estate	19		—		—


Core noninterest income	18,622		22,630		11,290

Total core revenue	119,787		124,690		90,413



Noninterest expense	62,800		63,694		52,884




Less merger-related expenses	—		2,320		3,142



Core noninterest expense	62,800		61,374		49,742













Core efficiency ratio	52.43	%	49.22	%	55.02	%

Tangible Common Equity Ratio


(in thousands)	(in thousands)	September 30, 2021			December 31, 2020			(in thousands)	March 31, 2022			December 31, 2021
Total shareholders' equity		$	1,439,635		$	1,078,975
Less: Goodwill		365,415			260,567
Less: Intangible assets		23,777			23,084
Shareholders' equity								Shareholders' equity	$	1,473,177		$	1,529,116
Less preferred stock								Less preferred stock	71,988			71,988
Less goodwill								Less goodwill	365,164			365,164
Less intangible assets								Less intangible assets	20,855			22,286
Tangible common equity	Tangible common equity	$	1,050,443		$	795,324		Tangible common equity	$	1,015,170		$	1,069,678

Total assets	Total assets	$	12,888,016		$	9,751,571		Total assets	$	13,706,769		$	13,537,358
Less: Goodwill		365,415			260,567
Less: Intangible assets, net		23,777			23,084
Less goodwill								Less goodwill	365,164			365,164
Less intangible assets, net								Less intangible assets, net	20,855			22,286
Tangible assets	Tangible assets	$	12,498,824		$	9,467,920		Tangible assets	$	13,320,750		$	13,149,908

Tangible common equity to tangible assets	Tangible common equity to tangible assets	8.40		%	8.40		%	Tangible common equity to tangible assets	7.62		%	8.13		%

Average Shareholders’ Equity and Average Tangible Common Equity


		For the three months ended						For the three months ended
(in thousands)	(in thousands)	September 30, 2021		June 30, 2021		September 30, 2020			(in thousands)	March 31, 2022		December 31, 2021		March 31, 2021
Average shareholder’s equity	Average shareholder’s equity	$	1,394,096	$	1,116,969	$	885,496		Average shareholder’s equity	$	1,536,221	$	1,495,396	$	1,096,481
Less: Average goodwill		342,622		260,567		210,344
Less: Average intangible assets, net		23,473		20,997		22,489
Less average preferred stock									Less average preferred stock	71,988		35,322		—
Less average goodwill									Less average goodwill	365,164		365,164		260,567
Less average intangible assets									Less average intangible assets	21,540		23,008		22,346
Average tangible common equity	Average tangible common equity	$	1,028,001	$	835,405	$	652,663		Average tangible common equity	$	1,077,529	$	1,071,902	$	813,568

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, ~~2020.~~2021.

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~~manage any impact from market interest rate ~~changes. In order~~changes according to our risk tolerances. The Company uses an earnings simulation model to measure earnings sensitivity to changing ~~rates, the Company uses an earnings simulation model.~~rates.

The Company determines the sensitivity of its short-term future earnings to a hypothetical plus or minus 100 to 300 basis point parallel rate shock through the use of simulation modeling. The simulation 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. The ~~Company uses an~~difference represents the Company’s earning ~~sensitivity model to track earnings~~ sensitivity to a positive or negative 100 basis points parallel rate shock.

The following table summarizes the expected impact of interest rate shocks on net interest ~~income:~~income at March 31, 2022:


Rate Shock1			Annual % change in net interest income
+ 300 bp			~~22.5%~~24.5%
+ 200 bp			~~13.8%~~15.8%
+ 100 bp			~~5.5%~~7.1%



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. In general, changes in interest rates are positively correlated with changes in net interest income.

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 ~~September 30, 2021,~~March 31, 2022, 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 September~~The FCA has announced that the most common USD LIBOR settings (overnight, 1-month. 3-month, 6-month and 12-month) will cease publication after June 30, ~~2021,~~2023. LIBOR is the most liquid and common interest rate index in the world and is commonly referenced in financial instruments. The Federal Reserve’s Alternative Reference Rates Committee has proposed that SOFR replace LIBOR. The Company expects to select a replacement index and provide customer notification in early 2023, prior to the cessation of the USD LIBOR settings. While a replacement index has not yet been selected, the Company ceased using LIBOR and ICE swap rates in new contracts and began issuing SOFR based loans in December 2021.

We have exposure to LIBOR in various financial contracts. Instruments that may be impacted include loans, securities, debt instruments and derivatives, among other financial contracts indexed to LIBOR. We also have loans that are indirectly linked to LIBOR through reference to the ICE swap rate. We have an internal working group composed of members from legal, credit, finance, operations, risk and audit to monitor developments, develop policies and procedures, assess the impact to the Company, consider relevant options and to determine an appropriate replacement index for affected contracts that expire after the expected discontinuation of LIBOR on June 30, 2023. We are actively working to amend and address impacted contracts to allow for a replacement index. However, amending certain contracts indexed to LIBOR may require consent from the counterparties which could be difficult and costly to obtain in certain circumstances. As of March 31, 2022, the Company’s financial contracts indexed to LIBOR included $2.3 billion in loans (including $597 million indirectly linked to LIBOR through reference to an ICE swap rate), $121 million in borrowings, and $905 million (notional) in derivatives.

In addition, LIBOR is used in the Company’s analysis of the fair value of tax credits and may be referenced in other financial contracts not included in the discussion above.

The Company had $5.7 billion in variable rate loans ~~including $3.2~~at March 31, 2022. Of these loans, $3.3 billion ~~based on LIBOR and $2.2 billion based on Prime. Approximately 76% of the LIBOR based loans are indexed to one-month LIBOR. Of the total variable rate loans, $3.0 billion had a~~have an interest rate floor and 42% of ~~which approximately $2.8 billion, or 94%,~~those loans were ~~currently priced~~ at the floor.

The Company maintains an available-for-sale investment securities portfolio that totaled $1.4 billion at March 31, 2022. This portfolio consists primarily of fixed-rate securities that are subject to changes in market value due to changes in interest rates. At March 31, 2022, the available-for-sale investment portfolio had a net unrealized loss of $99.3 million. The Company estimates that the net unrealized loss would increase 36% and 72% with a 50 basis point and 100 basis point increase in interest rates, respectively.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s Chief Executive Officer (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 ~~September 30, 2021.~~March 31, 2022. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, the CEO and CFO concluded the Company’s disclosure controls and procedures were effective as of ~~September 30, 2021~~March 31, 2022 to provide reasonable assurance of the achievement of the objectives described above.

Changes to Internal Controls

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

PART II - OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Management believes there are no such legal proceedings pending or threatened against the Company or its subsidiaries, 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, ~~2020.~~2021. There have been no material changes to the risk factors described in such Annual Report on Form 10-K.

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


Period	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	Period	Total number of shares purchased (a)	Weighted-average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
July 1, 2021 through July 31, 2021		145,926	45.79		145,926	1,602,437
August 1, 2021 through August 31, 2021		205,137	45.69		205,137	1,397,300
September 1, 2021 through September 30, 2021		119,349	43.43		119,349	1,277,951
January 1, 2022 through January 31, 2022							January 1, 2022 through January 31, 2022	—	—		—	700,473
February 1, 2022 through February 28, 2022							February 1, 2022 through February 28, 2022	42,964	48.03		42,964	657,509
March 1, 2022 through March 31, 2022							March 1, 2022 through March 31, 2022	308,126	48.39		308,126	349,383
Total	Total	470,412	$	45.15	470,412	1,277,951	Total	351,090	$	48.35	351,090	349,383

(a) In April 2021, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock. The repurchases may be made from time to time in the open market or through privately negotiated transactions.	(a) In April 2021, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock. The repurchases may be made from time to time in the open market or through privately negotiated transactions.						(a) In April 2021, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock. The repurchases may be made from time to time in the open market or through privately negotiated transactions.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

None.

ITEM 6: EXHIBITS

Exhibit No. Description

2.1 Agreement and Plan of Merger, dated 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)).

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

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

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

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

~~3.7~~3.10 ~~Amendment to the~~ Certificate of ~~Incorporation~~Elimination of ~~Registrant~~Registrant’s Certificate of Designation, Preferences, and Rights of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, dated November 9, 2021 (incorporated herein by reference to Exhibit 3.1 to ~~the Registrant's Quarterly~~Registrant’s Current Report on Form ~~10-Q for the period ending June 30, 2014~~8-K filed on November 9, 2021 (File No. 001-15373)).

~~3.8~~3.11 ~~Amendment to the~~ Certificate of ~~Incorporation~~Designation of Registrant of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, dated November 16, 2021 (incorporated herein by reference to Exhibit ~~3.8~~3.1 to Registrant’s ~~Quarterly~~Current Report on Form ~~10-Q~~8-K filed on ~~July 26, 2019~~November 17, 2021 (File No. 001-15373)).

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

~~3.10~~3.12 Amended and Restated Bylaws of Registrant (incorporated herein by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed on June 12, 2015 (File No. 001-15373)).

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

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

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

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

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

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

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase Document.

104 The cover page of Enterprise Financial Services Corp’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, formatted in Inline XBRL (contained in Exhibit 101).

* Filed herewith

5450

** 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.

5551

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri, on the day of ~~November 4, 2021.~~April 29, 2022.


			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

5652


(in thousands)	As Recorded by First Choice		Adjustments			As Recorded by EFSC
Assets acquired:
Cash and cash equivalents	$	214,794	$	—		$	214,794

Securities	34,533		(44)		(a)	34,489
Loans	1,937,635		5,508		(b)	1,943,143

Allowance	(19,626)		12,620		(b)	(7,006)
Other investments	19,178		138		(c)	19,316
Fixed assets	1,869		(820)		(c)	1,049
Accrued interest receivable	7,131		(242)		(c)	6,889
Goodwill	73,425		(73,425)		(d)	—
Intangible assets	4,517		375		(e)	4,892
Deferred tax assets	7,558		(2,440)		(c)	5,118
Other assets	23,024		2,103		(c)	25,127
Total assets acquired	$	2,304,038	$	(56,227)		$	2,247,811

Liabilities assumed:
Deposits	$	1,840,716	$	(287)	(c)	$	1,840,429

FHLB advances	160,000		—			160,000
Accrued interest payable	124		—			124
Other liabilities	8,464		(2,160)		(c)	6,304
Total liabilities assumed	$	2,009,304	$	(2,447)		$	2,006,857

Net assets acquired	$	294,734	$	(53,780)		$	240,954

Consideration paid:
Cash						$	2,152
Common stock1						343,650
Total consideration paid						$	345,802

Goodwill						$	104,848


	September 30, 2020
(in thousands, except for number of loans)		Number of loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial and industrial		2	$	3,716	$	3,716
Real estate:



Residential		1	217		217

Total		3	$	3,933	$	3,933


Year	Core Deposit Intangible (in thousands)
2021	$	1,491
2022	5,367
2023	4,601
2024	3,834
2025	3,068
After 2025	5,416
	$	23,777


	Employee Stock Options	Weighted Average Life	Weighted Average Exercise Price
Options Outstanding, December 31, 2020	—
Options granted	118,604		$	43.80
Options forfeited	(4,597)
Options Outstanding, September 30, 2021	114,007	9.5