UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, ~~2022.~~2023.


☐						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 April ~~27, 2022,~~26, 2023, the Registrant had ~~37,241,812~~37,312,368 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~~Income (Unaudited)						2

Condensed Consolidated Statements of Comprehensive Income (Unaudited)						3

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)						4

Condensed Consolidated Statements of Cash Flows (Unaudited)						5

Notes to Condensed Consolidated Financial Statements (Unaudited)						6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						27

Item 3. Quantitative and Qualitative Disclosures About Market Risk						46

Item 4. Controls and Procedures						48

PART II - OTHER INFORMATION

Item 1. Legal Proceedings						48

Item 1A. Risk Factors						48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						49

Item 3. Defaults Upon Senior Securities						49

Item 4. Mine Safety Disclosures						49

Item 5. Other Information						49

Item 6. Exhibits						49

Signatures						52

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~~FASB

~~First Choice Bancorp~~Financial Accounting Standards Board

ASU

Accounting Standards Update

FHLB

Federal Home Loan Bank

Bank

Enterprise Bank & Trust

GAAP

Generally Accepted Accounting Principles (United States)

C&I

Commercial and Industrial

LIBOR

London Interbank Offered Rate

CCB

Capital Conservation Buffer

NIM

Net Interest Margin

CDFI

Community Development Financial Institution

PPP

Paycheck Protection Program

CECL

Current Expected Credit Loss

~~MD&A~~SBA

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~Small Business Administration

Company

Enterprise Financial Services Corp

~~NIM~~SBIC

~~Net Interest Margin~~Small Business Investment Company

CRE

Commercial Real Estate

~~PCD~~SEC

~~Purchased Credit Deteriorated~~Securities and Exchange Commission

EFSC

Enterprise Financial Services Corp

~~PPP~~SOFR

~~Paycheck Protection Program~~Secured Overnight Financing Rate

Enterprise

Enterprise Financial Services Corp

~~SBA~~

~~Small Business Administration~~

~~FASB~~

~~Financial Accounting Standards Board~~

~~SEC~~

~~Securities and Exchange Commission~~

~~FCB~~

~~First Choice Bank~~

PART 1I - 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)	March 31, 2022		December 31, 2021		(in thousands, except share and per share data)	March 31, 2023		December 31, 2022
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	252,706	$	209,177	Cash and due from banks	$	210,813	$	229,580
Federal funds sold	Federal funds sold	224		1,356		Federal funds sold	2,749		1,753
Interest-earning deposits (including $135 and $14,595 pledged as collateral, respectively)		1,728,390		1,811,156
Interest-earning deposits						Interest-earning deposits	71,521		60,026
Total cash and cash equivalents	Total cash and cash equivalents	1,981,320		2,021,689		Total cash and cash equivalents	285,083		291,359
Interest-earning deposits greater than 90 days	Interest-earning deposits greater than 90 days	7,094		6,996		Interest-earning deposits greater than 90 days	6,971		8,029
Securities available-for-sale	Securities available-for-sale	1,392,444		1,366,006		Securities available-for-sale	1,555,109		1,535,807
Securities held-to-maturity, net	Securities held-to-maturity, net	541,039		429,681		Securities held-to-maturity, net	720,694		709,915
Loans held-for-sale	Loans held-for-sale	4,270		6,389		Loans held-for-sale	261		1,228
Loans	Loans	9,056,073		9,017,642		Loans	10,011,918		9,737,138
Allowance for credit losses on loans	Allowance for credit losses on loans	(139,212)		(145,041)		Allowance for credit losses on loans	(138,295)		(136,932)
Total loans, net	Total loans, net	8,916,861		8,872,601		Total loans, net	9,873,623		9,600,206

Other investments	Other investments	60,444		59,896		Other investments	62,943		63,790
Fixed assets, net	Fixed assets, net	46,900		47,915		Fixed assets, net	42,340		42,985

Goodwill	Goodwill	365,164		365,164		Goodwill	365,164		365,164
Intangible assets, net	Intangible assets, net	20,855		22,286		Intangible assets, net	15,680		16,919

Other assets	Other assets	370,378		338,735		Other assets	398,114		418,770
Total assets	Total assets	$	13,706,769	$	13,537,358	Total assets	$	13,325,982	$	13,054,172

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Noninterest-bearing deposit accounts		$	4,881,043	$	4,578,436
Interest-bearing transaction accounts		2,547,482		2,465,884
Noninterest-bearing demand accounts						Noninterest-bearing demand accounts	$	4,192,523	$	4,642,732
Interest-bearing demand accounts						Interest-bearing demand accounts	2,395,901		2,256,295
Money market accounts	Money market accounts	2,794,536		2,890,976		Money market accounts	2,959,868		2,655,159
Savings accounts	Savings accounts	883,599		800,210		Savings accounts	712,671		744,256
Certificates of deposit:	Certificates of deposit:					Certificates of deposit:
Brokered	Brokered	129,017		128,970		Brokered	369,505		118,968
Other	Other	468,458		479,323		Other	524,168		411,740
Total deposits	Total deposits	11,704,135		11,343,799		Total deposits	11,154,636		10,829,150
Subordinated debentures and notes	Subordinated debentures and notes	155,031		154,899		Subordinated debentures and notes	155,569		155,433
FHLB advances	FHLB advances	50,000		50,000		FHLB advances	100,000		100,000
Other borrowings	Other borrowings	228,846		353,863		Other borrowings	213,489		324,119

Other liabilities	Other liabilities	95,580		105,681		Other liabilities	109,468		123,207
Total liabilities	Total liabilities	$	12,233,592	$	12,008,242	Total liabilities	$	11,733,162	$	11,531,909

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

Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
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		395		398
Treasury stock, at cost; 1,980,093 shares		(73,528)		(73,528)
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 75,000 shares issued and outstanding ($1,000 per share liquidation preference)						Preferred stock, $0.01 par value; 5,000,000 shares authorized; 75,000 shares issued and outstanding ($1,000 per share liquidation preference)	71,988		71,988
Common stock, $0.01 par value; 75,000,000 shares authorized; 37,310,770 shares issued and outstanding and 37,253,292 shares issued, respectively						Common stock, $0.01 par value; 75,000,000 shares authorized; 37,310,770 shares issued and outstanding and 37,253,292 shares issued, respectively	373		373

Additional paid in capital	Additional paid in capital	1,010,446		1,018,799		Additional paid in capital	984,281		982,660
Retained earnings	Retained earnings	523,136		492,682		Retained earnings	642,153		597,574
Accumulated other comprehensive (loss) income		(59,260)		18,777
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(105,975)		(130,332)
Total shareholders' equity	Total shareholders' equity	1,473,177		1,529,116		Total shareholders' equity	1,592,820		1,522,263
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	13,706,769	$	13,537,358	Total liabilities and shareholders' equity	$	13,325,982	$	13,054,172

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

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Operations~~Income (Unaudited)


		Three months ended March 31,				Three months ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021			(in thousands, except per share data)	2023		2022
Interest income:	Interest income:						Interest income:
Loans	Loans	$	96,123	$	76,973		Loans	$	152,606	$	96,123
Debt securities:	Debt securities:						Debt securities:
Taxable	Taxable	5,351		4,540			Taxable	9,286		5,351
Nontaxable	Nontaxable	3,942		3,079			Nontaxable	5,597		3,942

Interest-earning deposits	Interest-earning deposits	817		189			Interest-earning deposits	1,195		817
Dividends on equity securities	Dividends on equity securities	348		179			Dividends on equity securities	349		348
Total interest income	Total interest income	106,581		84,960			Total interest income	169,033		106,581
Interest expense:	Interest expense:						Interest expense:

Deposits	Deposits	2,859		2,663			Deposits	24,661		2,859
Subordinated debentures and notes	Subordinated debentures and notes	2,220		2,819			Subordinated debentures and notes	2,409		2,220
FHLB advances	FHLB advances	195		195			FHLB advances	1,332		195
Other borrowings	Other borrowings	142		160			Other borrowings	1,102		142
Total interest expense	Total interest expense	5,416		5,837			Total interest expense	29,504		5,416
Net interest income	Net interest income	101,165		79,123			Net interest income	139,529		101,165
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(4,068)		46			Provision (benefit) for credit losses	4,183		(4,068)
Net interest income after provision for credit losses		105,233		79,077
Net interest income after provision (benefit) for credit losses							Net interest income after provision (benefit) for credit losses	135,346		105,233
Noninterest income:	Noninterest income:						Noninterest income:
Deposit service charges	Deposit service charges	4,163		3,084			Deposit service charges	4,128		4,163
Wealth management revenue	Wealth management revenue	2,622		2,483			Wealth management revenue	2,516		2,622
Card services revenue	Card services revenue	3,040		2,496			Card services revenue	2,338		3,040

Tax credit income (expense)		2,608		(1,041)
Tax credit income							Tax credit income	1,813		2,608

Other income	Other income	6,208		4,268			Other income	6,103		6,208
Total noninterest income	Total noninterest income	18,641		11,290			Total noninterest income	16,898		18,641
Noninterest expense:	Noninterest expense:						Noninterest expense:
Employee compensation and benefits	Employee compensation and benefits	35,827		29,562			Employee compensation and benefits	42,503		35,827
Occupancy	Occupancy	4,586		3,751			Occupancy	4,061		4,586
Data processing	Data processing	3,260		2,890			Data processing	3,710		3,260
Professional fees	Professional fees	1,177		988			Professional fees	1,631		1,177

Merger-related expenses		—		3,142

Other expense	Other expense	17,950		12,551			Other expense	29,078		17,950
Total noninterest expense	Total noninterest expense	62,800		52,884			Total noninterest expense	80,983		62,800

Income before income tax expense	Income before income tax expense	61,074		37,483			Income before income tax expense	71,261		61,074
Income tax expense	Income tax expense	13,381		7,557			Income tax expense	15,523		13,381
Net income	Net income	$	47,693	$	29,926		Net income	$	55,738	$	47,693
Dividends on preferred stock	Dividends on preferred stock	1,229		—			Dividends on preferred stock	938		1,229
Net income available to common shareholders	Net income available to common shareholders	$	46,464	$	29,926		Net income available to common shareholders	$	54,800	$	46,464

Earnings per common share	Earnings per common share						Earnings per common share
Basic	Basic	$	1.23	$	0.96		Basic	$	1.47	$	1.23
Diluted	Diluted	1.23		0.96			Diluted	1.46		1.23

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 March 31,				Three months ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022
Net income	Net income	$	47,693	$	29,926		Net income	$	55,738	$	47,693
Other comprehensive income (loss), after-tax:	Other comprehensive income (loss), after-tax:						Other comprehensive income (loss), after-tax:
Change in unrealized loss on available-for-sale debt securities		(79,353)		(10,920)

Change in unrealized gain (loss) on available-for-sale securities							Change in unrealized gain (loss) on available-for-sale securities	23,978		(79,353)
Reclassification adjustment for realized gain on sale of available-for-sale debt securities							Reclassification adjustment for realized gain on sale of available-for-sale debt securities	(285)		—
Reclassification of gain on held-to-maturity securities	Reclassification of gain on held-to-maturity securities	(704)		(1,149)			Reclassification of gain on held-to-maturity securities	(638)		(704)
Change in unrealized gain on cash flow hedges arising during the period		1,751		847
Change in unrealized gain on cash flow hedges							Change in unrealized gain on cash flow hedges	1,275		1,751
Reclassification of loss on cash flow hedges	Reclassification of loss on cash flow hedges	269		279			Reclassification of loss on cash flow hedges	27		269
Total other comprehensive loss, after-tax		(78,037)		(10,943)
Comprehensive (loss) income		$	(30,344)	$	18,983
Total other comprehensive income (loss), after-tax							Total other comprehensive income (loss), after-tax	24,357		(78,037)
Comprehensive income (loss)							Comprehensive income (loss)	$	80,095	$	(30,344)

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 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


Three months ended March 31, 2023
	Preferred Stock			Common Stock
(in thousands, except per share data)	Shares	Amount		Shares	Amount		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at December 31, 2022	75	$	71,988	37,253	$	373	$	982,660	$	597,574	$	(130,332)	$	1,522,263
Net income	—	—		—	—		—		55,738		—		55,738





Other comprehensive income	—	—		—	—		—		—		24,357		24,357

Common stock dividends ($0.25 per share)	—	—		—	—		—		(9,328)		—		(9,328)
Preferred stock dividends ($12.50 per share)	—	—		—	—		—		(938)		—		(938)

Issuance under equity compensation plans, net	—	—		58	—		(848)		(893)		—		(1,741)

Share-based compensation	—	—		—	—		2,469		—		—		2,469





Balance at March 31, 2023	75	$	71,988	37,311	$	373	$	984,281	$	642,153	$	(105,975)	$	1,592,820


Three months ended March 30, 2022
	Preferred Stock			Common Stock
(in thousands, except per share data)	Shares	Amount		Shares	Amount		Treasury Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at December 31, 2021	75	$	71,988	37,819	$	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 stock	—	—		(351)	(4)		—		(9,457)		(7,513)		—		(16,974)



Issuance under equity compensation plans, net	—	—		48	1		—		(582)		(582)		—		(1,163)

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



Balance at March 31, 2022	75	$	71,988	37,516	$	395	$	(73,528)	$	1,010,446	$	523,136	$	(59,260)	$	1,473,177

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

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


		Three months ended March 31,					Three months ended March 31,
(in thousands, except share data)	(in thousands, except share data)	2022		2021		(in thousands, except share data)	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	47,693	$	29,926	Net income	$	55,738	$	47,693
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	1,472		1,581		Depreciation	1,274		1,472
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(4,068)		46		Provision (benefit) for credit losses	4,183		(4,068)
Deferred income taxes	Deferred income taxes	5,248		3,834		Deferred income taxes	2,517		5,248
Net amortization of debt securities		1,625		1,937
Net amortization (accretion) on loan discount/premiums		429		(736)
Net amortization of discount/premiums on debt securities						Net amortization of discount/premiums on debt securities	1,070		1,625
Net amortization on loan discount/premiums						Net amortization on loan discount/premiums	1,606		429
Amortization of intangible assets	Amortization of intangible assets	1,429		1,415		Amortization of intangible assets	1,239		1,429
Amortization of servicing assets	Amortization of servicing assets	648		165		Amortization of servicing assets	493		648
Mortgage loans originated-for-sale	Mortgage loans originated-for-sale	(27,811)		(49,065)		Mortgage loans originated-for-sale	(2,918)		(27,811)
Proceeds from mortgage loans sold	Proceeds from mortgage loans sold	29,636		52,908		Proceeds from mortgage loans sold	3,884		29,636
Gain on:	Gain on:					Gain on:

Sale of investment securities						Sale of investment securities	(381)		—
Sale of SBA loans						Sale of SBA loans	(501)		—
Sale of other real estate	Sale of other real estate	(19)		(47)		Sale of other real estate	(90)		(19)

Sale of state tax credits	Sale of state tax credits	(9)		(326)		Sale of state tax credits	(91)		(9)

Share-based compensation	Share-based compensation	1,686		1,275		Share-based compensation	2,469		1,686

Changes in other assets and liabilities, net		(8,076)		(46,588)
Net change in other assets and liabilities						Net change in other assets and liabilities	(1,316)		(8,076)

Net cash provided by (used in) operating activities		49,883		(3,675)
Net cash provided by operating activities						Net cash provided by operating activities	69,176		49,883
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Net increase in loans	Net increase in loans	(39,536)		(69,907)		Net increase in loans	(285,158)		(39,536)

Proceeds received from:	Proceeds received from:					Proceeds received from:

Sale of debt securities, available-for-sale						Sale of debt securities, available-for-sale	28,741		—
Paydown or maturity of debt securities, available-for-sale	Paydown or maturity of debt securities, available-for-sale	63,506		69,953		Paydown or maturity of debt securities, available-for-sale	65,725		63,506
Paydown or maturity of debt securities, held-to-maturity	Paydown or maturity of debt securities, held-to-maturity	5,097		18,220		Paydown or maturity of debt securities, held-to-maturity	2,037		5,097
Redemption of other investments	Redemption of other investments	1,248		752		Redemption of other investments	41,109		1,248
Sale of SBA loans						Sale of SBA loans	9,502		—
Sale of state tax credits held for sale	Sale of state tax credits held for sale	261		1,632		Sale of state tax credits held for sale	504		261
Sale of other real estate	Sale of other real estate	1,419		450		Sale of other real estate	360		1,419
Sale of fixed assets						Sale of fixed assets	43		—
Settlement of bank-owned life insurance policies	Settlement of bank-owned life insurance policies	534		—		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	(313,875)		(118,791)		Available-for-sale debt securities	(86,737)		(313,875)
Held-to-maturity debt securities	Held-to-maturity debt securities	(1,120)		—		Held-to-maturity debt securities	(14,602)		(1,120)
Other investments	Other investments	(8,154)		(3,660)		Other investments	(39,123)		(8,154)

State tax credits held for sale	State tax credits held for sale	(7,212)		—		State tax credits held for sale	(21)		(7,212)
Fixed assets	Fixed assets	(457)		(489)		Fixed assets	(681)		(457)
Net cash used in investing activities	Net cash used in investing activities	(298,289)		(101,840)		Net cash used in investing activities	(278,301)		(298,289)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in noninterest-bearing deposit accounts		302,607		198,389
Net (decrease) increase in noninterest-bearing deposit accounts						Net (decrease) increase in noninterest-bearing deposit accounts	(450,209)		302,607
Net increase in interest-bearing deposit accounts	Net increase in interest-bearing deposit accounts	57,729		331,666		Net increase in interest-bearing deposit accounts	775,695		57,729

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

Net decrease in other borrowings	Net decrease in other borrowings	(123,589)		(68,835)		Net decrease in other borrowings	(109,201)		(123,589)

Repurchase of common stock	Repurchase of common stock	(16,974)		—		Repurchase of common stock	—		(16,974)
Cash dividends paid on common stock	Cash dividends paid on common stock	(7,915)		(5,627)		Cash dividends paid on common stock	(9,328)		(7,915)
Cash dividends paid on preferred stock	Cash dividends paid on preferred stock	(1,229)		—		Cash dividends paid on preferred stock	(938)		(1,229)
Other						Other	(1,741)		(1,163)

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

Net cash provided by financing activities	Net cash provided by financing activities	208,037		451,627		Net cash provided by financing activities	202,849		208,037
Net (decrease) increase in cash and cash equivalents		(40,369)		346,112
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(6,276)		(40,369)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	2,021,689		537,703		Cash and cash equivalents, beginning of period	291,359		2,021,689
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	1,981,320	$	883,815	Cash and cash equivalents, end of period	$	285,083	$	1,981,320
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	$	4,725	$	4,836	Interest	$	27,486	$	4,725
Income taxes	Income taxes	979		30,167		Income taxes	—		979
Noncash investing and financing transactions:	Noncash investing and financing transactions:					Noncash investing and financing transactions:
Transfer to other real estate owned in settlement of loans		$	—	$	1,236

Right-of-use assets obtained in exchange for lease obligations	Right-of-use assets obtained in exchange for lease obligations	4,178		—		Right-of-use assets obtained in exchange for lease obligations	564		4,178

Transfer of securities from available-for-sale to held-to-maturity	Transfer of securities from available-for-sale to held-to-maturity	116,927		—		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, Florida, Kansas, Missouri, Nevada, and New Mexico through its banking subsidiary, Enterprise Bank & Trust.

Operating results for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, ~~2022.~~2023. 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, ~~2021,~~2022, 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, ~~2021.~~2022.

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

On January 1, 2023, the Company adopted ASU 2022-02, 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 charge-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The adoption of this update did not have a material effect on the Company’s consolidated financial statements.

FASB ASU 2021-01, Reference Rate Reform (Topic 848): Scope (ASU 2021-01).. ASU 2021-01 was issued in January 2021 and ~~provided~~provides optional expedients and exceptions 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 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~~where 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 have a material effect on the consolidated financial ~~statements.~~

~~FASB ASU 2022-02,~~ ~~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 ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amendments in this update will

statements. In December 2022, ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset date of Topic 848 was issued, which extends the sunset date from December 31, 2022 to December 31, 2024.

FASB ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.ASU 2022-03 was issued in June 2022 to (1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) amend a related illustrative example, and (3) introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this update are effective for fiscal years beginning after December 15, ~~2022 for entities that have adopted the amendments in ASU 2016-13,~~ ~~Financial Instruments–Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments~~.2023, and interim periods within those fiscal years. The Company ~~is evaluating~~has evaluated the ~~additional~~accounting and disclosure requirements of ASU 2022-03 and does not expect them to have a material effect on the consolidated financial statements.

~~Acquisitions~~FASB ASU 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 was issued in March 2023 to allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits and ~~Divestitures~~

~~Acquisitions and business combinations~~other income tax benefits. If certain conditions are ~~accounted~~met, a reporting entity may elect to account for its tax equity investments by using the ~~acquisition~~proportional amortization method ~~of accounting. The assets and liabilities~~regardless of the ~~acquired entities~~program from which it receives income tax credits, instead of only low-income-housing tax credit (“LIHTC”) structures. This amendment also eliminates certain LIHTC-specific guidance aligning the accounting with other equity investments in tax credit structures. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is evaluating the accounting and disclosure requirements of ASU 2023-02 and does not expect them to have ~~been recorded at their estimated fair values at~~a material effect on the ~~date of acquisition. Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets.~~

The purchase price allocation process requires an estimation of the fair values of the assets acquired and the liabilities assumed. When a business combination agreement provides for an adjustment to the cost of 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 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.

~~The results of operations of the acquired business are 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.

statements.

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 2 - EARNINGS PER SHARE

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

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


		Three months ended March 31,				Three months ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021			(in thousands, except per share data)	2023		2022
Net income available to common shareholders	Net income available to common shareholders	$	46,464	$	29,926		Net income available to common shareholders	$	54,800	$	46,464

Weighted average common shares outstanding	Weighted average common shares outstanding	37,788		31,247			Weighted average common shares outstanding	37,305		37,788

Additional dilutive common stock equivalents	Additional dilutive common stock equivalents	70		59			Additional dilutive common stock equivalents	182		70
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	37,858		31,306			Weighted average diluted common shares outstanding	37,487		37,858

Basic earnings per common share:	Basic earnings per common share:	$	1.23	$	0.96		Basic earnings per common share:	$	1.47	$	1.23
Diluted earnings per common share:	Diluted earnings per common share:	1.23		0.96			Diluted earnings per common share:	1.46		1.23

For the three months ended March 31, 2023 and 2022, common stock equivalents of approximately 311,000 and 276,000, respectively, were excluded from the earnings per share calculations because their effect would have been anti-dilutive. ~~Comparatively, there were 222,000 common stock equivalents excluded in the prior year period.~~

NOTE 3 - INVESTMENTS

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


		March 31, 2022						March 31, 2023
(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	$	247,906	$	—	$	(12,322)		$	235,584	Obligations of U.S. Government-sponsored enterprises	$	289,560	$	95	$	(23,950)	$	265,705
Obligations of states and political subdivisions	Obligations of states and political subdivisions	508,912		61		(59,615)			449,358		Obligations of states and political subdivisions	503,883		53		(73,243)		430,693
Agency mortgage-backed securities	Agency mortgage-backed securities	607,080		1,034		(27,918)			580,196		Agency mortgage-backed securities	710,642		557		(60,748)		650,451
U.S. Treasury bills	U.S. Treasury bills	116,100		77		(596)			115,581		U.S. Treasury bills	203,596		22		(3,515)		200,103
Corporate debt securities	Corporate debt securities	11,750		91		(116)			11,725		Corporate debt securities	9,000		—		(843)		8,157
Total securities available for sale	Total securities available for sale	$	1,491,748	$	1,263	$	(100,567)		$	1,392,444	Total securities available for sale	$	1,716,681	$	727	$	(162,299)	$	1,555,109
Held-to-maturity securities:	Held-to-maturity securities:										Held-to-maturity securities:

Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	352,799	$	10	$	(40,625)		$	312,184	Obligations of states and political subdivisions	$	541,345	$	5,133	$	(54,232)	$	492,246
Agency mortgage-backed securities	Agency mortgage-backed securities	63,281		—		(2,970)			60,311		Agency mortgage-backed securities	55,897		—		(5,566)		50,331
Corporate debt securities	Corporate debt securities	125,517		123		(4,793)			120,847		Corporate debt securities	124,324		176		(10,524)		113,976
Total securities held-to-maturity	Total securities held-to-maturity	$	541,597	$	133	$	(48,388)		$	493,342	Total securities held-to-maturity	$	721,566	$	5,309	$	(70,322)	$	656,553
Allowance for credit losses	Allowance for credit losses	(558)									Allowance for credit losses	(872)
Total securities held-to-maturity, net	Total securities held-to-maturity, net	$	541,039								Total securities held-to-maturity, net	$	720,694


		December 31, 2021									December 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	$	175,409	$	3	$	(1,901)	$	173,511	Obligations of U.S. Government-sponsored enterprises	$	266,090	$	—	$	(28,305)	$	237,785
Obligations of states and political subdivisions	Obligations of states and political subdivisions	571,587		5,907		(2,410)		575,084		Obligations of states and political subdivisions	507,842		27		(90,425)		417,444
Agency mortgage-backed securities	Agency mortgage-backed securities	509,243		8,485		(3,869)		513,859		Agency mortgage-backed securities	727,931		453		(68,980)		659,404
U.S. Treasury Bills	U.S. Treasury Bills	90,971		220		(21)		91,170		U.S. Treasury Bills	213,441		1		(4,908)		208,534
Corporate debt securities	Corporate debt securities	11,750		632		—		12,382		Corporate debt securities	13,750		—		(1,110)		12,640
Total securities available for sale	Total securities available for sale	$	1,358,960	$	15,247	$	(8,201)	$	1,366,006	Total securities available for sale	$	1,729,054	$	481	$	(193,728)	$	1,535,807
Held-to-maturity securities:	Held-to-maturity securities:									Held-to-maturity securities:

Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	236,379	$	1,794	$	(730)	$	237,443	Obligations of states and political subdivisions	$	529,012	$	2,321	$	(65,347)	$	465,986
Agency mortgage-backed securities	Agency mortgage-backed securities	68,105		940		(666)		68,379		Agency mortgage-backed securities	57,018		—		(6,416)		50,602
Corporate debt securities	Corporate debt securities	125,811		3,039		—		128,850		Corporate debt securities	124,620		163		(12,854)		111,929
Total securities held to maturity	Total securities held to maturity	$	430,295	$	5,773	$	(1,396)	$	434,672	Total securities held to maturity	$	710,650	$	2,484	$	(84,617)	$	628,517
Allowance for credit losses	Allowance for credit losses	(614)								Allowance for credit losses	(735)
Total securities held-to-maturity, net	Total securities held-to-maturity, net	$	429,681							Total securities held-to-maturity, net	$	709,915

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”~~Cost” column in the table above includes a cumulative net unamortized unrealized gain of ~~$20.3~~$16.8 million and ~~$21.0~~$17.6 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Such amounts are amortized over the remaining life of the securities.

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 ~~$581.4 million~~$1.8 billion and ~~$752.7~~$734.5 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract ~~provisions.~~provisions, in addition to collateral securing borrowing bases with the FHLB and the Federal Reserve.

The amortized cost and estimated fair value of debt securities at March 31, ~~2022,~~2023, 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 56 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	$	91,716	$	91,680	$	888	$	891	Due in one year or less	$	97,485	$	97,369	$	720	$	720
Due after one year through five years	Due after one year through five years	245,541		234,843		18,315		17,994		Due after one year through five years	370,543		347,074		50,396		47,082
Due after five years through ten years	Due after five years through ten years	54,940		52,433		150,791		144,456		Due after five years through ten years	70,480		64,238		187,914		177,985
Due after ten years	Due after ten years	492,471		433,292		308,322		269,690		Due after ten years	467,531		395,977		426,639		380,435
Agency mortgage-backed securities	Agency mortgage-backed securities	607,080		580,196		63,281		60,311		Agency mortgage-backed securities	710,642		650,451		55,897		50,331

		$	1,491,748	$	1,392,444	$	541,597	$	493,342		$	1,716,681	$	1,555,109	$	721,566	$	656,553

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


		March 31, 2022													March 31, 2023
		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	$	208,467	$	11,431	$	11,109	$	891	$	219,576	$	12,322	Obligations of U.S. Government-sponsored enterprises	$	31,351	$	671	$	224,294	$	23,279	$	255,645	$	23,950
Obligations of states and political subdivisions	Obligations of states and political subdivisions	425,420		55,979		17,224		3,636		442,644		59,615		Obligations of states and political subdivisions	1,954		165		424,582		73,078		426,536		73,243
Agency mortgage-backed securities	Agency mortgage-backed securities	405,833		22,383		47,576		5,535		453,409		27,918		Agency mortgage-backed securities	198,052		6,861		407,782		53,887		605,834		60,748
U.S. Treasury bills	U.S. Treasury bills	105,513		596		—		—		105,513		596		U.S. Treasury bills	150,570		2,153		23,795		1,362		174,365		3,515
Corporate debt securities	Corporate debt securities	9,634		116		—		—		9,634		116		Corporate debt securities	3,664		336		4,243		507		7,907		843
		$	1,154,867	$	90,505	$	75,909	$	10,062	$	1,230,776	$	100,567		$	385,591	$	10,186	$	1,084,696	$	152,113	$	1,470,287	$	162,299

		December 31, 2021													December 31, 2022
		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	$	163,634	$	1,775	$	4,874	$	126	$	168,508	$	1,901	Obligations of U.S. Government-sponsored enterprises	$	73,738	$	6,249	$	163,047	$	22,056	$	236,785	$	28,305
Obligations of states and political subdivisions	Obligations of states and political subdivisions	242,188		2,361		1,776		49		243,964		2,410		Obligations of states and political subdivisions	103,179		13,501		311,634		76,924		414,813		90,425
Agency mortgage-backed securities	Agency mortgage-backed securities	259,047		3,685		6,467		184		265,514		3,869		Agency mortgage-backed securities	334,431		20,038		281,321		48,942		615,752		68,980
U.S. Treasury bills	U.S. Treasury bills	60,961		21		—		—		60,961		21		U.S. Treasury bills	198,688		4,908		—		—		198,688		4,908
Corporate debt securities														Corporate debt securities	12,640		1,110		—		—		12,640		1,110
															$	722,676	$	45,806	$	756,002	$	147,922	$	1,478,678	$	193,728
		$	725,830	$	7,842	$	13,117	$	359	$	738,947	$	8,201

The unrealized losses at both March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were attributable primarily ~~attributable~~ to changes in market interest rates after the securities were purchased. In March 2023, the Company established an allowance for credit losses on available-for-sale investment securities through a provision for credit losses of $4.8 million and subsequently charged-off $4.8 million. The charge-off related to the impairment of a debt security from a bank that

failed in 2023. At each of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~not~~no allowance recorded ~~an ACL~~ on available-for-sale securities.

Accrued interest receivable on held-to-maturity debt securities totaled ~~$4.1~~$6.6 million and ~~$3.4~~$5.8 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and is excluded from the estimate of expected credit losses. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts. The ACL on held-to-maturity securities was ~~$0.6~~$0.9 million at March 31, ~~2022~~2023 and $0.7 million at December 31, ~~2021.~~2022.

The Company sold $28.4 million of available-for-sale securities in January 2023 for a gain of $0.4 million. There were no sales of available-for-sale investment securities during the three months ended March 31, ~~2022 or 2021.~~2022.

Other Investments

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, other investments totaled ~~$60.4~~$62.9 million and ~~$59.9~~$63.8 million, respectively. As a member of the FHLB system administered by the Federal Housing Finance Agency, the Bank is required to maintain a minimum investment in capital stock with the FHLB consisting of membership stock and activity-based stock. The FHLB capital stock of ~~$12.0 million and $12.1~~$14.0 million at both March 31, ~~2022~~2023 and December 31, ~~2021, respectively,~~2022 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 trust preferred securities to third parties.

NOTE 4 - LOANS

The following table presents a summary of loans by category:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Commercial and industrial	Commercial and industrial	$	3,400,574	$	3,396,590	Commercial and industrial	$	4,032,189	$	3,859,964
Real estate:	Real estate:					Real estate:
Commercial - investor owned	Commercial - investor owned	2,184,126		2,141,143		Commercial - investor owned	2,418,079		2,357,820
Commercial - owner occupied	Commercial - owner occupied	2,094,012		2,035,785		Commercial - owner occupied	2,281,223		2,270,551
Construction and land development	Construction and land development	702,630		734,073		Construction and land development	663,264		611,565
Residential	Residential	432,639		454,052		Residential	364,059		395,537
Total real estate loans	Total real estate loans	5,413,407		5,365,053		Total real estate loans	5,726,625		5,635,473
Other	Other	250,433		265,137		Other	260,001		248,990
Loans, before unearned loan fees	Loans, before unearned loan fees	9,064,414		9,026,780		Loans, before unearned loan fees	10,018,815		9,744,427
Unearned loan fees, net	Unearned loan fees, net	(8,341)		(9,138)		Unearned loan fees, net	(6,897)		(7,289)
Loans, including unearned loan fees	Loans, including unearned loan fees	$	9,056,073	$	9,017,642	Loans, including unearned loan fees	$	10,011,918	$	9,737,138

~~PPP loans totaled $136.0 million at March 31, 2022, or $134.1 million net of deferred fees of $1.9 million.~~ The loan balance at March 31, 2023 and December 31, 2022, includes a net premium on acquired loans of ~~$11.5 million.~~$10.3 million and $11.9 million, respectively. At March 31, 2023 and December 31, 2022, loans of ~~$2.9~~$3.4 billion ~~were pledged to FHLB~~ and ~~the Federal Reserve Bank.~~

PPP loans totaled $276.2 million at December 31, 2021, or $272.0 million net of deferred fees of $4.2 million. The loan balance includes a net premium on acquired loans of $11.9 million at December 31, 2021. At December 31, 2021 loans of $2.5$2.8 billion, respectively, were pledged to FHLB and the Federal Reserve Bank.

Accrued interest receivable totaled ~~$29.6~~$44.7 million and ~~$30.6~~$48.1 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and was reported in ~~Other Assets~~“Other Assets” on the consolidated balance sheets.

SBA 7(a) guaranteed loans sold during the three months ended March 31, 2023 totaled $8.8 million, resulting in a gain on sale of $0.5 million. There were no SBA loan sales during the same period in 2022.

A summary of the activity in the ACL on loans by category for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 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		$	63,825	$	35,877	$	17,560	$	14,536	$	7,927	$	5,316	$	145,041
Provision for credit losses		(1,481)		121		(582)		(1,574)		(456)		(336)		(4,308)
Balance at December 31, 2022																Balance at December 31, 2022	$	53,835	$	36,191	$	22,752	$	11,444	$	7,928	$	4,782	$	136,932
Provision (benefit) for credit losses																Provision (benefit) for credit losses	5,083		222		(440)		(2,578)		(1,151)		(37)		1,099
Charge-offs	Charge-offs	(2,159)		—		(180)		—		(887)		(86)		(3,312)		Charge-offs	(707)		(170)		—		(9)		(102)		(192)		(1,180)
Recoveries	Recoveries	790		196		240		21		525		19		1,791		Recoveries	938		23		16		32		322		113		1,444
Balance at March 31, 2022		$	60,975	$	36,194	$	17,038	$	12,983	$	7,109	$	4,913	$	139,212
Balance at March 31, 2023																Balance at March 31, 2023	$	59,149	$	36,266	$	22,328	$	8,889	$	6,997	$	4,666	$	138,295


(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, 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
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 (benefit) for credit losses																Provision (benefit) for credit losses	(1,481)		121		(582)		(1,574)		(456)		(336)		(4,308)
Charge-offs	Charge-offs	(3,739)		(2,372)		(28)		—		(271)		(64)		(6,474)		Charge-offs	(2,159)		—		(180)		—		(887)		(86)		(3,312)
Recoveries	Recoveries	327		34		9		235		143		79		827		Recoveries	790		196		240		21		525		19		1,791
Balance at March 31, 2021		$	55,941	$	33,105	$	20,219	$	14,557	$	4,305	$	3,400	$	131,527
Balance at March 31, 2022																Balance at March 31, 2022	$	60,975	$	36,194	$	17,038	$	12,983	$	7,109	$	4,913	$	139,212

The ACL on sponsor finance loans, which is included in the categories above, represented ~~$19.1~~$21.0 million and ~~$18.2~~$16.1 million, respectively, as of March 31, ~~2022~~2023 and December ~~30, 2021.~~31, 2022.

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 40%, 30%, and 30%, respectively, which added approximately ~~$14.7~~$14.2 million to the ACL over the baseline ~~model.~~model at March 31, 2023. These forecasts incorporate an expectation that ~~government stimulus will decline,~~ the Federal Reserve will ~~wind down~~continue quantitative ~~easing~~tightening and ~~continue raising~~raise the federal funds rate ~~that the pandemic will begin~~ to ~~slowly recede,~~5.00% to 5.25% in 2023 and that the ~~Russia-Ukraine military conflict will have~~recent bank failures are not an indication of a ~~limited disruption on~~broader problem in the ~~economy.~~industry. The Company has also recognized ~~the risk~~various risks posed by loans ~~that have received multiple deferrals of principal and interest payments,~~in certain segments, including the hospitality ~~sector,~~and commercial office sectors, by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are ~~additional shutdowns~~market reactions to the Federal Reserve policy actions that could push the economy into a recession, persistently higher inflation, tightening in the credit markets, and ~~self-quarantines from another significant wave of COVID, continued or worsening supply-chain disruptions, labor shortages and declines~~further weakness in ~~job growth, or a tightening of~~the financial ~~market conditions.~~system.

In addition to the CECL methodology, the Company incorporates qualitative adjustments into the ACL on loans to capture credit risks inherent within the loan portfolio that are not captured in the 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 the portfolio, 4) changes in lending management, 5) changes in volume and the severity of past due loans, 6) changes in the quality of the loan review system, 7) changes in the value of underlying collateral, 8) the existence and effect of concentrations of credit and 9) other factors such as the regulatory, legal and competitive environments and events such as natural disasters and pandemics. At March 31, ~~2022,~~2023, the ACL on loans included a qualitative adjustment of approximately ~~$41.0~~$43.2 million. Of this amount, approximately ~~$7.0~~$13.8 million was allocated to ~~Sponsor Finance~~sponsor finance loans due to their unsecured nature.

The current-period gross charge-offs by loan class and year of origination is presented in the following table:


	March 31, 2023
	Term Loans by Origination Year
(in thousands)	2022		2021		Prior		Revolving Loans		Total
Commercial and industrial	$	1	$	—	$	—	$	570	$	571
Real estate:
Commercial - investor owned	—		170		—		—		170

Construction and land development	—		—		9		—		9
Residential	—		—		102		—		102
Other	—		—		3		—		3
Total current-period gross charge-offs by risk rating	$	1	$	170	$	114	$	570	$	855
Total current-period gross charge-offs by performing status									325
Total current-period gross charge-offs									$	1,180

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


		March 31, 2022											March 31, 2023
(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		Loans over 90 days past due and still accruing interest		Total nonperforming loans		Nonaccrual loans with no allowance
Commercial and industrial	Commercial and industrial	$	13,721	$	2,663	$	13	$	16,397	$	1,699	Commercial and industrial	$	5,252	$	73	$	5,325	$	1,002
Real estate:	Real estate:											Real estate:
Commercial - investor owned	Commercial - investor owned	1,565		—		—		1,565		1,364		Commercial - investor owned	3,887		—		3,887		—
Commercial - owner occupied	Commercial - owner occupied	2,075		—		—		2,075		1,786		Commercial - owner occupied	1,547		—		1,547		—
Construction and land development												Construction and land development	1,201		—		1,201		1,201

Residential		1,027		75		—		1,102		1,027
Other	Other	10		—		11		21		—		Other	—		12		12		—
Total	Total	$	18,398	$	2,738	$	24	$	21,160	$	5,876	Total	$	11,887	$	85	$	11,972	$	2,203��


		December 31, 2021											December 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	$	17,052	$	2,783	$	1,703	$	21,538	$	5,685	Commercial and industrial	$	4,373	$	—	$	70	$	4,443	$	1,047
Real estate:	Real estate:											Real estate:
Commercial - investor owned	Commercial - investor owned	1,575		—		—		1,575		168		Commercial - investor owned	3,023		—		—		3,023		—
Commercial - owner occupied	Commercial - owner occupied	2,839		—		—		2,839		2,550		Commercial - owner occupied	1,177		—		—		1,177		—

Construction and land development												Construction and land development	1,192		—		—		1,192		1,192
Residential	Residential	1,971		76		1		2,048		1,348		Residential	—		73		—		73		—
Other	Other	12		—		12		24		—		Other	1		—		72		73		—
Total	Total	$	23,449	$	2,859	$	1,716	$	28,024	$	9,751	Total	$	9,766	$	73	$	142	$	9,981	$	2,239

The ~~total~~ nonperforming loan balances at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 exclude government guaranteed balances of ~~$4.0~~$6.8 million and ~~$6.5~~$6.7 million, respectively.

No material interest income was recognized on nonaccrual loans during the three months ended March 31, ~~2022~~2023 or ~~2021.~~2022.

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

March 31, 2022
Type of Collateral
(in thousands) Commercial Real Estate Residential Real Estate Blanket Lien
Commercial and industrial $ 4,271 $ 79 $ 5,064
Real estate:
Commercial - investor owned 165 1,200 —
Commercial - owner occupied 2,049 26 —
Residential — 1,102 —
Other — — —
Total $ 6,485 $ 2,407 $ 5,064


		December 31, 2021						March 31, 2023
		Type of Collateral						Type of Collateral
(in thousands)	(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien			(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien
Commercial and industrial	Commercial and industrial	$	4,271	$	209	$	9,312		Commercial and industrial	$	—	$	950	$	1,002
Real estate:	Real estate:								Real estate:
Commercial - investor owned	Commercial - investor owned	169		1,200		—			Commercial - investor owned	2,177		773		—
Commercial - owner occupied	Commercial - owner occupied	2,807		32		—			Commercial - owner occupied	1,547		—		—
Construction and land development									Construction and land development			1,201
Residential									Residential	—		—		—

Residential		—		2,048		—
Other		—		—		—
Total	Total	$	7,247	$	3,489	$	9,312		Total	$	3,724	$	2,924	$	1,002


	December 31, 2022
	Type of Collateral
(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien
Commercial and industrial	$	—	$	—	$	1,047
Real estate:
Commercial - investor owned	2,238		785		—
Commercial - owner occupied	1,177		—		—
Construction and land development	—		1,192		—
Residential	—		73		—

Total	$	3,415	$	2,050	$	1,047

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


	March 31, 2023
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	3,244	$	1,894	$	5,138	$	4,027,051	$	4,032,189
Real estate:
Commercial - investor owned	2,086		1,098		3,184		2,414,895		2,418,079
Commercial - owner occupied	2,780		4,084		6,864		2,274,359		2,281,223
Construction and land development	396		—		396		662,868		663,264
Residential	2,414		—		2,414		361,645		364,059
Other	151		12		163		259,838		260,001
Loans, before unearned loan fees	$	11,071	$	7,088	$	18,159	$	10,000,656	$	10,018,815
Unearned loan fees, net									(6,897)
Total									$	10,011,918


	December 31, 2022
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	555	$	2,373	$	2,928	$	3,857,036	$	3,859,964
Real estate:
Commercial - investor owned	—		1,135		1,135		2,356,685		2,357,820
Commercial - owner occupied	8,628		164		8,792		2,261,759		2,270,551
Construction and land development	9		1,192		1,201		610,364		611,565
Residential	1,227		—		1,227		394,310		395,537
Other	18		72		90		248,900		248,990
Loans, before unearned loan fees	$	10,437	$	4,936	$	15,373	$	9,729,054	$	9,744,427
Unearned loan fees, net									(7,289)
Total									$	9,737,138

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

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

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

In some cases, the Company will modify a loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as an interest rate reduction or principal forgiveness, may be granted.

The following table shows loans modified to borrowers experiencing financial difficulty, disaggregated by loan class and type of concession granted:












	Term Extension
(in thousands)	March 31, 2023		% of Total Class of Financing Receivable
Commercial and industrial	$	22,818	0.57	%
Real estate:


Construction and land development	1,201		0.18	%

Total	$	24,019

The term extensions were for 2-12 months, and all loans were current under the modified terms.

There were no loans restructured during the three months ended March 31, 2022, ~~or 2021.~~and no troubled debt restructurings subsequently defaulted during the three months ended March 31, 2022.

~~No troubled debt restructurings subsequently defaulted during the three months ended March 31, 2022 or 2021.~~

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

March 31, 2022
(in thousands) 30-89 Days
Past Due 90 or More
Days
Past Due Total
Past Due Current Total
Commercial and industrial $ 3,086 $ 5,204 $ 8,290 $ 3,390,433 $ 3,398,723
Real estate:
Commercial - investor owned 1,461 1,565 3,026 2,181,100 2,184,126
Commercial - owner occupied 4,692 1,698 6,390 2,087,622 2,094,012
Construction and land development 2,680 — 2,680 699,950 702,630
Residential 3,534 454 3,988 428,651 432,639
Other 35 10 45 243,898 243,943
Total $ 15,488 $ 8,931 $ 24,419 $ 9,031,654 $ 9,056,073

December 31, 2021
(in thousands) 30-89 Days
Past Due 90 or More
Days
Past Due Total
Past Due Current Total
Commercial and industrial $ 24,447 $ 14,158 $ 38,605 $ 3,353,770 $ 3,392,375
Real estate:
Commercial - investor owned 3,880 — 3,880 2,137,263 2,141,143
Commercial - owner occupied 10,070 289 10,359 2,025,426 2,035,785
Construction and land development 24 — 24 734,049 734,073
Residential 3,181 1,305 4,486 449,566 454,052
Other 37 11 48 260,166 260,214
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~~and 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~~Special Mention credits are borrowers that ~~have~~ experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support.

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

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

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


		March 31, 2022																			March 31, 2023
		Term Loans by Origination Year																			Term Loans by Origination Year
(in thousands)	(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Converted to Term Loans		Revolving Loans		Total		(in thousands)	2023		2022		2021		2020		2019		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)	$	424,229	$	1,011,220	$	404,515	$	268,244	$	85,451	$	174,346	$	1,500	$	812,823	$	3,182,328	Pass (1-6)	$	446,623	$	1,294,156	$	487,289	$	296,880	$	163,807	$	107,963	$	9,928	$	1,003,625	$	3,810,271
Watch (7)		20,941		28,450		16,364		2,060		9,312		10,728		—		78,321		166,176
Special Mention (7)																				Special Mention (7)	11,145		21,894		17,320		13,862		477		11,766		—		68,846		145,310
Classified (8-9)	Classified (8-9)	6,231		7,950		2,144		3,840		1,585		3,416		—		10,383		35,549		Classified (8-9)	5,570		10,929		5,569		1,497		23		452		175		27,903		52,118
Total Commercial and industrial	Total Commercial and industrial	$	451,401	$	1,047,620	$	423,023	$	274,144	$	96,348	$	188,490	$	1,500	$	901,527	$	3,384,053	Total Commercial and industrial	$	463,338	$	1,326,979	$	510,178	$	312,239	$	164,307	$	120,181	$	10,103	$	1,100,374	$	4,007,699

Commercial real estate-investor owned	Commercial real estate-investor owned																			Commercial real estate-investor owned
Pass (1-6)	Pass (1-6)	$	200,862	$	617,625	$	429,282	$	321,521	$	149,180	$	303,994	$	2,047	$	47,800	$	2,072,311	Pass (1-6)	$	133,638	$	649,170	$	571,133	$	385,909	$	217,109	$	293,114	$	1,701	$	60,720	$	2,312,494
Watch (7)		937		20,600		31,411		18,304		79		27,153		—		2,062		100,546
Special Mention (7)																				Special Mention (7)	—		26,002		5,241		23,260		10,952		12,909		—		—		78,364
Classified (8-9)	Classified (8-9)	—		1,268		3,306		829		798		5,010		—		50		11,261		Classified (8-9)	—		1,809		—		462		639		5,845		49		—		8,804
Total Commercial real estate-investor owned	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	Total Commercial real estate-investor owned	$	133,638	$	676,981	$	576,374	$	409,631	$	228,700	$	311,868	$	1,750	$	60,720	$	2,399,662

Commercial real estate-owner occupied	Commercial real estate-owner occupied																			Commercial real estate-owner occupied
Pass (1-6)	Pass (1-6)	$	159,921	$	599,394	$	408,931	$	261,247	$	144,644	$	341,211	$	438	$	49,568	$	1,965,354	Pass (1-6)	$	113,180	$	520,215	$	527,516	$	348,955	$	205,503	$	371,027	$	—	$	57,489	$	2,143,885
Watch (7)		1,800		10,888		16,575		3,925		13,188		18,550		—		390		65,316
Special Mention (7)																				Special Mention (7)	9,608		5,946		4,862		19,644		4,459		13,660		4,962		300		63,441
Classified (8-9)	Classified (8-9)	423		892		1,808		9,883		16,051		12,082		—		95		41,234		Classified (8-9)	—		—		2,214		5,025		9,412		27,511		—		595		44,757
Total Commercial real estate-owner occupied	Total Commercial real estate-owner occupied	$	162,144	$	611,174	$	427,314	$	275,055	$	173,883	$	371,843	$	438	$	50,053	$	2,071,904	Total Commercial real estate-owner occupied	$	122,788	$	526,161	$	534,592	$	373,624	$	219,374	$	412,198	$	4,962	$	58,384	$	2,252,083

Construction real estate	Construction real estate																			Construction real estate
Pass (1-6)	Pass (1-6)	$	83,014	$	321,327	$	189,864	$	35,507	$	23,155	$	14,797	$	—	$	4,079	$	671,743	Pass (1-6)	$	106,759	$	288,291	$	198,719	$	51,005	$	2,931	$	10,045	$	—	$	1,637	$	659,387
Watch (7)		408		20,751		3,183		60		1,190		2,283		—		—		27,875
Special Mention (7)																				Special Mention (7)	—		1,284		—		146		145		217		—		—		1,792
Classified (8-9)	Classified (8-9)	—		—		—		12		416		19		—		—		447		Classified (8-9)	1,201		396		—		—		13		475		—		—		2,085
Total Construction real estate	Total Construction real estate	$	83,422	$	342,078	$	193,047	$	35,579	$	24,761	$	17,099	$	—	$	4,079	$	700,065	Total Construction real estate	$	107,960	$	289,971	$	198,719	$	51,151	$	3,089	$	10,737	$	—	$	1,637	$	663,264

Residential real estate	Residential real estate																			Residential real estate
Pass (1-6)	Pass (1-6)	$	13,065	$	100,396	$	64,873	$	20,400	$	13,256	$	113,869	$	5,356	$	93,591	$	424,806	Pass (1-6)	$	9,606	$	50,504	$	54,407	$	37,471	$	20,438	$	94,722	$	774	$	91,520	$	359,442
Watch (7)		36		2,123		1		166		441		1,379		—		137		4,283
Special Mention (7)																				Special Mention (7)	—		329		—		—		77		1,119		—		—		1,525
Classified (8-9)	Classified (8-9)	126		423		—		57		743		1,863		—		5		3,217		Classified (8-9)	—		119		72		—		51		2,039		—		75		2,356
Total residential real estate	Total residential real estate	$	13,227	$	102,942	$	64,874	$	20,623	$	14,440	$	117,111	$	5,356	$	93,733	$	432,306	Total residential real estate	$	9,606	$	50,952	$	54,479	$	37,471	$	20,566	$	97,880	$	774	$	91,595	$	363,323

Other	Other																			Other
Pass (1-6)	Pass (1-6)	$	1,551	$	101,746	$	66,095	$	21,453	$	22,437	$	14,845	$	—	$	7,521	$	235,648	Pass (1-6)	$	960	$	60,165	$	85,417	$	55,789	$	9,973	$	26,899	$	—	$	6,833	$	246,036
Watch (7)		—		—		—		—		3		2,391		—		5		2,399
Special Mention (7)																				Special Mention (7)	—		—		—		—		—		—		—		—		—
Classified (8-9)	Classified (8-9)	—		—		—		8		9		14		1		—		32		Classified (8-9)	—		—		—		—		2		12		—		—		14
Total Other	Total Other	$	1,551	$	101,746	$	66,095	$	21,461	$	22,449	$	17,250	$	1	$	7,526	$	238,079	Total Other	$	960	$	60,165	$	85,417	$	55,789	$	9,975	$	26,911	$	—	$	6,833	$	246,050

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 risk category	$	838,290	$	2,931,209	$	1,959,759	$	1,239,905	$	646,011	$	979,775	$	17,589	$	1,319,543	$	9,932,081
Total loans classified by performing status	Total loans classified by performing status																	45,548		Total loans classified by performing status																	79,837
Total loans	Total loans																	$	9,056,073	Total loans																	$	10,011,918

1617


		December 31, 2021																			December 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)	$	1,180,601	$	477,374	$	317,869	$	132,851	$	116,738	$	82,846	$	11,648	$	854,102	$	3,174,029	Pass (1-6)	$	1,403,381	$	635,275	$	332,740	$	172,127	$	62,729	$	66,152	$	8,388	$	964,592	$	3,645,384
Watch (7)		35,005		17,502		9,404		9,880		12,217		10,979		4,037		53,595		152,619
Special Mention (7)																				Special Mention (7)	37,048		10,836		13,858		423		7,995		4,102		—		72,944		147,206
Classified (8-9)	Classified (8-9)	14,917		3,530		3,840		1,689		2,988		813		787		10,996		39,560		Classified (8-9)	16,176		4,457		1,627		24		166		183		—		21,349		43,982
Total Commercial and industrial	Total Commercial and industrial	$	1,230,523	$	498,406	$	331,113	$	144,420	$	131,943	$	94,638	$	16,472	$	918,693	$	3,366,208	Total Commercial and industrial	$	1,456,605	$	650,568	$	348,225	$	172,574	$	70,890	$	70,437	$	8,388	$	1,058,885	$	3,836,572

Commercial real estate-investor owned	Commercial real estate-investor owned																			Commercial real estate-investor owned
Pass (1-6)	Pass (1-6)	$	651,740	$	476,946	$	346,245	$	146,107	$	112,043	$	217,808	$	3,625	$	68,236	$	2,022,750	Pass (1-6)	$	667,107	$	584,644	$	392,402	$	240,033	$	115,530	$	202,661	$	1,457	$	53,051	$	2,256,885
Watch (7)		16,871		35,908		32,755		1,003		502		17,478		300		2,062		106,879
Special Mention (7)																				Special Mention (7)	18,844		5,751		23,502		11,605		—		13,063		—		—		72,765
Classified (8-9)	Classified (8-9)	1,376		3,135		835		817		1,159		4,141		—		50		11,513		Classified (8-9)	1,823		—		465		953		193		6,092		49		—		9,575
Total Commercial real estate-investor owned	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	Total Commercial real estate-investor owned	$	687,774	$	590,395	$	416,369	$	252,591	$	115,723	$	221,816	$	1,506	$	53,051	$	2,339,225

Commercial real estate-owner occupied	Commercial real estate-owner occupied																			Commercial real estate-owner occupied
Pass (1-6)	Pass (1-6)	$	604,975	$	423,263	$	278,830	$	164,210	$	140,515	$	235,973	$	250	$	48,349	$	1,896,365	Pass (1-6)	$	539,610	$	555,690	$	362,150	$	232,335	$	123,095	$	270,613	$	—	$	57,308	$	2,140,801
Watch (7)		12,825		13,585		4,301		16,774		10,274		15,764		—		300		73,823
Special Mention (7)																				Special Mention (7)	11,164		3,801		16,856		4,455		13,043		9,009		—		800		59,128
Classified (8-9)	Classified (8-9)	2,048		556		9,181		17,016		6,432		6,959		—		—		42,192		Classified (8-9)	—		1,572		3,483		8,910		15,873		11,387		—		—		41,225
Total Commercial real estate-owner occupied	Total Commercial real estate-owner occupied	$	619,848	$	437,404	$	292,312	$	198,000	$	157,221	$	258,696	$	250	$	48,649	$	2,012,380	Total Commercial real estate-owner occupied	$	550,774	$	561,063	$	382,489	$	245,700	$	152,011	$	291,009	$	—	$	58,108	$	2,241,154

Construction real estate	Construction real estate																			Construction real estate
Pass (1-6)	Pass (1-6)	$	310,140	$	229,396	$	70,531	$	35,936	$	14,860	$	7,180	$	568	$	2,992	$	671,603	Pass (1-6)	$	290,146	$	232,998	$	53,129	$	2,909	$	2,061	$	8,480	$	—	$	1,769	$	591,492
Watch (7)		28,947		15,348		60		1,199		11,068		2,330		—		—		58,952
Special Mention (7)																				Special Mention (7)	17,331		—		681		146		111		106		—		—		18,375
Classified (8-9)	Classified (8-9)	—		—		387		419		—		22		—		—		828		Classified (8-9)	1,192		—		—		14		471		21		—		—		1,698
Total Construction real estate	Total Construction real estate	$	339,087	$	244,744	$	70,978	$	37,554	$	25,928	$	9,532	$	568	$	2,992	$	731,383	Total Construction real estate	$	308,669	$	232,998	$	53,810	$	3,069	$	2,643	$	8,607	$	—	$	1,769	$	611,565

Residential real estate	Residential real estate																			Residential real estate
Pass (1-6)	Pass (1-6)	$	116,352	$	66,481	$	21,356	$	14,841	$	24,778	$	103,840	$	9,980	$	87,146	$	444,774	Pass (1-6)	$	63,317	$	60,910	$	48,796	$	20,943	$	11,259	$	88,795	$	579	$	96,304	$	390,903
Watch (7)		2,425		2		622		1,157		248		1,305		—		79		5,838
Special Mention (7)																				Special Mention (7)	331		—		—		79		352		781		—		—		1,543
Classified (8-9)	Classified (8-9)	414		169		554		—		12		2,024		—		—		3,173		Classified (8-9)	121		73		—		53		1,102		994		—		5		2,348
Total residential real estate	Total residential real estate	$	119,191	$	66,652	$	22,532	$	15,998	$	25,038	$	107,169	$	9,980	$	87,225	$	453,785	Total residential real estate	$	63,769	$	60,983	$	48,796	$	21,075	$	12,713	$	90,570	$	579	$	96,309	$	394,794

Other	Other																			Other
Pass (1-6)	Pass (1-6)	$	108,209	$	68,806	$	22,684	$	23,145	$	6,924	$	13,832	$	1,500	$	9,166	$	254,266	Pass (1-6)	$	38,753	$	88,613	$	56,252	$	10,556	$	20,508	$	10,796	$	—	$	9,536	$	235,014
Watch (7)		—		—		—		4		—		2,440		—		1		2,445
Special Mention (7)																				Special Mention (7)	—		—		—		—		—		—		—		—		—
Classified (8-9)	Classified (8-9)	—		—		10		10		—		16		—		2		38		Classified (8-9)	—		—		—		4		3		11		3		4		25
Total Other	Total Other	$	108,209	$	68,806	$	22,694	$	23,159	$	6,924	$	16,288	$	1,500	$	9,169	$	256,749	Total Other	$	38,753	$	88,613	$	56,252	$	10,560	$	20,511	$	10,807	$	3	$	9,540	$	235,039

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 risk category	$	3,106,344	$	2,184,620	$	1,305,941	$	705,569	$	374,491	$	693,246	$	10,476	$	1,277,662	$	9,658,349
Total loans classified by performing status	Total loans classified by performing status																	55,995		Total loans classified by performing status																	78,789
Total loans	Total loans																	$	9,017,642	Total loans																	$	9,737,138

1718

In the tables above, loan originations in ~~2022~~2023 and ~~2021~~2022 with a classification of ~~watch~~“special mention” or ~~classified~~“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~~present the recorded investment on loans based on payment activity as of the ~~periods~~dates indicated:

March 31, 2022
(in thousands) Performing Non Performing Total
Commercial and industrial $ 14,657 $ 13 $ 14,670
Real estate:
Commercial - investor owned 8 — 8
Commercial - owner occupied 22,108 — 22,108
Construction and land development 2,565 — 2,565
Residential 333 — 333
Other 5,853 11 5,864
Total $ 45,524 $ 24 $ 45,548


		December 31, 2021							March 31, 2023
(in thousands)	(in thousands)	Performing		Non Performing		Total		(in thousands)	Performing		Non Performing		Total
Commercial and industrial	Commercial and industrial	$	26,166	$	1	$	26,167	Commercial and industrial	$	24,417	$	73	$	24,490
Real estate:	Real estate:							Real estate:
Commercial - investor owned	Commercial - investor owned	1		—		1		Commercial - investor owned	18,417		—		18,417
Commercial - owner occupied	Commercial - owner occupied	23,405		—		23,405		Commercial - owner occupied	29,140		—		29,140
Construction and land development		2,690		—		2,690

Residential	Residential	267		—		267		Residential	736		—		736
Other	Other	3,453		12		3,465		Other	7,042		12		7,054
Total	Total	$	55,982	$	13	$	55,995	Total	$	79,752	$	85	$	79,837


	December 31, 2022
(in thousands)	Performing		Non Performing		Total
Commercial and industrial	$	23,240	$	70	$	23,310
Real estate:
Commercial - investor owned	18,595		—		18,595
Commercial - owner occupied	29,397		—		29,397

Residential	743		—		743
Other	6,672		72		6,744
Total	$	78,647	$	142	$	78,789

NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company issues financial instruments with off balance sheet risk in the normal course of ~~the business of meeting the financing needs of its customers.~~business. 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)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Commitments to extend credit	Commitments to extend credit	$	2,710,183	$	2,481,173	Commitments to extend credit	$	3,053,927	$	3,113,966
Letters of credit	Letters of credit	78,568		77,314		Letters of credit	94,361		68,544

Off-Balance Sheet Credit Risk

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments usually have fixed expiration dates or other termination clauses, may have significant usage restrictions, and may require payment of a fee. Of the total commitments to extend credit at March 31, ~~2022,~~2023 and December 31, ~~2021,~~2022, approximately ~~$244.2~~$249.7 million and ~~$238.7~~$246.5 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 ~~$8.4~~$10.2 million and ~~$7.6~~$12.1 million for estimated losses attributable to the unadvanced commitments at March 31, ~~2022,~~2023 and December 31, ~~2021,~~2022, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance or payment of a customer to a third party. These standby letters of credit are issued to support contractual obligations of the Company’s customers. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. As of March 31, ~~2022,~~2023, the approximate remaining terms of standby letters of credit range from 1 month to 1110 years.

Contingencies

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

NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

The Company is exposed to certain ~~risk~~risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s 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.

For hedges of the Company’s variable-rate loans, interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts and the Company making variable rate payments. In the fourth quarter 2022, the Company executed a cash flow hedge to reduce a portion of variability in cash flows on the Company’s prime based loan portfolio. The interest rate swap has a notional value of $100.0 million, that effectively fixes the interest rate at 6.63% for the notional amount and has a maturity date of January 1, 2028. In January 2023, the Company entered

into another hedge on the prime based loan portfolio with a notional value of $50.0 million, that effectively fixes the interest rate at 6.56% for the notional amount and has a maturity date of February 1, 2027.

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

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 ofof 2.62%.

Select terms of the hedges are as follows:


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

The gain or loss on derivatives designated and qualified as cash flow hedges of interest rate risk are recorded in accumulated other comprehensive income and subsequently reclassified into interest income or expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income or expense as interest payments are paid on the Company’s variable-rate loans and debt. During the next twelve months, the Company estimates an additional ~~$0.5~~$1.8 million will be reclassified as ~~an increase~~a decrease to interest income and $1.3 million will be reclassified as a decrease to interest expense.

Non-designated Hedges

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

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


		Notional Amount				Derivative Assets				Derivative Liabilities					Notional Amount				Derivative Assets				Derivative Liabilities
(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
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	$	—	$	—	$	212	$	2,911	Interest rate swap	$	211,962	$	161,962	$	2,455	$	2,348	$	86	$	921

Interest rate collar														Interest rate collar	100,000		100,000		751		—		—		48
Total														Total					$	3,206	$	2,348	$	86	$	969

Derivatives not Designated as Hedging Instruments:	Derivatives not Designated as Hedging Instruments:													Derivatives not Designated as Hedging Instruments:
Interest rate swap	Interest rate swap	$	922,532	$	918,698	$	7,771	$	12,869	$	7,778	$	12,883	Interest rate swap	$	705,097	$	687,902	$	16,769	$	20,610	$	16,772	$	20,612

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 March 31, 2022
As of March 31, 2023														As of March 31, 2023
																					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 Received/ Pledged		Net Amount
Assets:														Assets:
Interest rate swap														Interest rate swap	$	19,224	$	—	$	19,224	$	(1,290)	$	17,934	$	—
Interest rate collar														Interest rate collar	751		—		751		—		—		751

Liabilities:														Liabilities:
Interest rate swap														Interest rate swap	$	16,858	$	—	$	16,858	$	(1,290)	$	—	$	15,568
Securities sold under agreements to repurchase														Securities sold under agreements to repurchase	161,573		—		161,573		—		161,573		—

As of December 31, 2022														As of December 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 Received/ Pledged		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	$	7,771	$	—	$	7,771	$	1,796	$	4,150	$	1,825	Interest rate swap	$	22,958	$	—	$	22,958	$	—	$	9,010	$	13,948

Liabilities:	Liabilities:													Liabilities:
Interest rate swap	Interest rate swap	$	7,990	$	—	$	7,990	$	1,796	$	75	$	6,119	Interest rate swap	$	21,533	$	—	$	21,533	$	—	$	—	$	21,533
Interest rate collar														Interest rate collar	48		—		48		—		—		48
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	207,417		—		207,417		—		207,417		—		Securities sold under agreements to repurchase	270,773		—		270,773		—		270,773		—

As of December 31, 2021
								Gross Amounts Not Offset in the Statement of Financial Position
(in thousands)		Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments		Fair Value Collateral Received/ Pledged		Net Amount
Assets:
Interest rate swap		$	12,869	$	—	$	12,869	$	1,033	$	—	$	11,836

Liabilities:
Interest rate swap		$	15,794	$	—	$	15,794	$	1,033	$	14,031	$	730
Securities sold under agreements to repurchase		331,006		—		331,006		—		331,006		—

2122

As of March 31, ~~2022,~~2023, the fair value of derivatives in a net liability position was ~~$5.9~~$16.1 million, which includes accrued interest but excludes any adjustment for nonperformance risk. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and ~~has posted~~posts collateral ~~of $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 7 - FAIR VALUE MEASUREMENTS

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


		March 31, 2022									March 31, 2023
(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	$	—	$	235,584	$	—	$	235,584	Obligations of U.S. Government-sponsored enterprises	$	—	$	265,705	$	—	$	265,705
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		449,358		—		449,358		Obligations of states and political subdivisions	—		430,693		—		430,693
Agency mortgage-backed securities	Agency mortgage-backed securities	—		580,196		—		580,196		Agency mortgage-backed securities	—		650,451		—		650,451
U.S. Treasury bills	U.S. Treasury bills	—		115,581		—		115,581		U.S. Treasury bills	—		200,103		—		200,103
Corporate debt securities	Corporate debt securities	—		11,725		—		11,725		Corporate debt securities	—		8,157		—		8,157
Total securities available for sale	Total securities available for sale	—		1,392,444		—		1,392,444		Total securities available for sale	—		1,555,109		—		1,555,109

Other investments	Other investments	—		2,843		—		2,843		Other investments	—		2,770		—		2,770

Derivatives	Derivatives	—		7,771		—		7,771		Derivatives	—		19,975		—		19,975
Total assets	Total assets	$	—	$	1,403,058	$	—	$	1,403,058	Total assets	$	—	$	1,577,854	$	—	$	1,577,854

Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	—	$	7,990	$	—	$	7,990	Derivatives	$	—	$	16,858	$	—	$	16,858
Total liabilities	Total liabilities	$	—	$	7,990	$	—	$	7,990	Total liabilities	$	—	$	16,858	$	—	$	16,858


		December 31, 2021									December 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	$	—	$	173,511	$	—	$	173,511	Obligations of U.S. Government-sponsored enterprises	$	—	$	237,785	$	—	$	237,785
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		575,084		—		575,084		Obligations of states and political subdivisions	—		417,444		—		417,444
Residential mortgage-backed securities	Residential mortgage-backed securities	—		513,859		—		513,859		Residential mortgage-backed securities	—		659,404		—		659,404
U.S. Treasury bills										U.S. Treasury bills	—		208,534		—		208,534
Corporate debt securities	Corporate debt securities	—		12,382		—		12,382		Corporate debt securities	—		12,640		—		12,640
U.S. Treasury bills		—		91,170		—		91,170
Total securities available-for-sale	Total securities available-for-sale	—		1,366,006		—		1,366,006		Total securities available-for-sale	—		1,535,807		—		1,535,807

Other investments	Other investments	—		3,012		—		3,012		Other investments	—		2,667		—		2,667

Derivative financial instruments	Derivative financial instruments	—		12,869		—		12,869		Derivative financial instruments	—		22,958		—		22,958
Total assets	Total assets	$	—	$	1,381,887	$	—	$	1,381,887	Total assets	$	—	$	1,561,432	$	—	$	1,561,432

Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	—	$	15,794	$	—	$	15,794	Derivatives	$	—	$	21,581	$	—	$	21,581
Total liabilities	Total liabilities	$	—	$	15,794	$	—	$	15,794	Total liabilities	$	—	$	21,581	$	—	$	21,581

2223

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.

March 31, 2022
(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 $ 3,591 $ — $ — $ 3,591
Other real estate 674 — — 674
Loan servicing asset 3,005 — 3,005 —
Total $ 7,270 $ — $ 3,005 $ 4,265

March 31, 2023

(in thousands)

Total Fair Value

Quoted Prices in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Loan servicing asset

1,004

—

1,004

—

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


	December 31, 2022
(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)

Other real estate	269		—		—		269
Loan servicing asset	1,027				1,027		—
Total	$	1,296	$	—	$	1,027	$	269

~~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:


		March 31, 2022					December 31, 2021						March 31, 2023					December 31, 2022
(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	$	541,039	$	493,342	Level 2	$	429,681	$	434,672	Level 2	Securities held-to-maturity, net	$	720,694	$	656,553	Level 2	$	709,915	$	628,517	Level 2
Other investments	Other investments	57,601		57,601		Level 2	56,884		56,884		Level 2	Other investments	60,173		60,173		Level 2	61,123		61,123		Level 2
Loans held for sale	Loans held for sale	4,270		4,270		Level 2	6,389		6,389		Level 2	Loans held for sale	261		261		Level 2	1,228		1,228		Level 2

Loans, net	Loans, net	8,916,861		8,908,849		Level 3	8,872,601		8,869,891		Level 3	Loans, net	9,873,623		$	9,587,197	Level 3	9,600,206		9,328,844		Level 3
State tax credits, held for sale	State tax credits, held for sale	34,954		34,212		Level 3	27,994		30,686		Level 3	State tax credits, held for sale	27,308		28,933		Level 3	27,700		28,880		Level 3

Servicing asset	Servicing asset	6,066		6,066		Level 2	6,714		6,714		Level 2	Servicing asset	3,343		4,342		Level 2	3,648		3,905		Level 2

Balance sheet liabilities	Balance sheet liabilities											Balance sheet liabilities
Certificates of deposit	Certificates of deposit	$	597,475	$	587,009	Level 3	$	608,293	$	606,177	Level 3	Certificates of deposit	$	893,673	$	877,954	Level 3	$	530,708	$	512,229	Level 3
Subordinated debentures and notes	Subordinated debentures and notes	155,031		155,408		Level 2	154,899		155,972		Level 2	Subordinated debentures and notes	155,569		150,559		Level 2	155,433		152,679		Level 2
FHLB advances	FHLB advances	50,000		48,627		Level 2	50,000		51,527		Level 2	FHLB advances	100,000		100,000		Level 2	100,000		100,004		Level 2
Other borrowings and notes payable		228,846		228,846		Level 2	353,863		353,863		Level 2
Other borrowings												Other borrowings	213,489		213,489		Level 2	324,119		324,119		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, ~~2021,~~2022, as filed with the SEC.

NOTE 8 - SHAREHOLDERS’ EQUITY

Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

The following ~~tables~~table 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 (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 Securities		Unamortized Gain (Loss) on Held-to-Maturity Securities		Net Unrealized Gain (Loss) on Cash Flow Hedges		Total
Balance, December 31, 2022										Balance, December 31, 2022	$	(144,549)	$	13,185	$	1,032	$	(130,332)
Net change										Net change	$	23,693	$	(638)	$	1,302	$	24,357

Balance, March 31, 2023										Balance, March 31, 2023	$	(120,856)	$	12,547	$	2,334	$	(105,975)

Balance, December 31, 2021	Balance, December 31, 2021	$	5,271	$	15,684	$	(2,178)	$	18,777	Balance, December 31, 2021	$	5,271	$	15,684	$	(2,178)	$	18,777
Net change	Net change	$	(79,353)	$	(704)	$	2,020	$	(78,037)	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	$	—	$	—	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, March 31, 2022	$	(74,279)	$	15,177	$	(158)	$	(59,260)

Three months ended
(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		$	22,320	$	19,308	$	(4,508)	$	37,120
Net change		$	(10,920)	$	(1,149)	$	1,126	$	(10,943)
Balance, March 31, 2021		$	11,400	$	18,159	$	(3,382)	$	26,177

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


		Three months ended March 31,													Three months ended March 31,
		2022						2021							2023						2022
(in thousands)	(in thousands)	Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax		(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)

Change in unrealized gain (loss) on available-for-sale securities														Change in unrealized gain (loss) on available-for-sale securities	$	32,056	$	8,078	$	23,978	$	(106,087)	$	(26,734)	$	(79,353)
Reclassification of gain on sale of available-for-sale securities(a)														Reclassification of gain on sale of available-for-sale securities(a)	(381)		(96)		(285)		—		—		—
Reclassification of gain on held-to-maturity securities(b)	Reclassification of gain on held-to-maturity securities(b)	(941)		(237)		(704)		(1,530)		(381)		(1,149)		Reclassification of gain on held-to-maturity securities(b)	(852)		(214)		(638)		(941)		(237)		(704)
Change in unrealized loss on cash flow hedges arising during the period		2,341		590		1,751		1,128		281		847
Change in unrealized gain on cash flow hedges														Change in unrealized gain on cash flow hedges	1,705		430		1,275		2,341		590		1,751
Reclassification of loss on cash flow hedges(b)	Reclassification of loss on cash flow hedges(b)	359		90		269		372		93		279		Reclassification of loss on cash flow hedges(b)	36		9		27		359		90		269
Total other comprehensive loss		$	(104,328)	$	(26,291)	$	(78,037)	$	(14,571)	$	(3,628)	$	(10,943)
Total other comprehensive income (loss)														Total other comprehensive income (loss)	$	32,564	$	8,207	$	24,357	$	(104,328)	$	(26,291)	$	(78,037)

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

~~(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~~

NOTE 9 - SUPPLEMENTAL FINANCIAL INFORMATION

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


		Quarter ended March 31,				Three months ended March 31,
($ in thousands)		2022		2021
(in thousands)							(in thousands)	2023		2022
Other income:	Other income:						Other income:
Bank-owned life insurance							Bank-owned life insurance	$	791	$	1,034

Community development fees	Community development fees	$	2,166	$	172		Community development fees	595		2,166
Gain on sale of mortgages		294		1,191

Other income	Other income	3,748		2,905			Other income	4,717		3,008
Total other noninterest income	Total other noninterest income	$	6,208	$	4,268		Total other noninterest income	$	6,103	$	6,208

Other expense:	Other expense:						Other expense:
Amortization expense		$	1,430	$	1,415
Amortization of intangibles							Amortization of intangibles	$	1,239	$	1,430
Banking expense	Banking expense	1,501		1,194			Banking expense	1,848		1,501
Deposit costs	Deposit costs	4,260		2,342			Deposit costs	12,720		4,260
FDIC and other insurance	FDIC and other insurance	1,855		963			FDIC and other insurance	2,572		1,855
Loan, legal expenses	Loan, legal expenses	1,733		1,583			Loan, legal expenses	1,904		1,733

Outside services	Outside services	1,262		1,237			Outside services	1,545		1,262
Other expense	Other expense	5,909		3,817			Other expense	7,250		5,909
Total other noninterest expense	Total other noninterest expense	$	17,950	$	12,551		Total other noninterest expense	$	29,078	$	17,950

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 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.

~~The COVID-19 pandemic~~While there is ~~continuing to adversely affect us, our customers, counterparties, employees,~~no assurance that any list of risks and 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,uncertainties 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. Otherrisk factors is complete, important factors that could cause ~~or contribute~~actual results to ~~such differences~~differ materially from those in the forward-looking statements include ~~but are not limited to:~~the following, without limitation: our ability to efficiently integrate acquisitions ~~including the 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;~~and market conditions, including risk of recession, high unemployment rates, higher inflation and its impacts (including U.S. federal government measures to address higher inflation), U.S. fiscal debt, budget and tax matters, and any slowdown in global economic growth; risks associated with rapid increases or decreases in prevailing interest rates; changes in business prospects that could impact goodwill estimates and assumptions; consolidation within the banking industry; competition from banks and other financial institutions; the ability to attract and retain relationship officers and other key personnel; burdens imposed by federal and state regulation; changes in legislative or regulatory ~~requirements;~~requirements, as well as current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including rules and regulations relating to bank products and financial services; changes in accounting policies and practices or accounting standards; changes in the method of determining LIBOR and the phase-out of LIBOR; natural disasters; terrorist activities, war and geopolitical matters (including the war in ~~Ukraine) or terrorist activities,~~Ukraine and the imposition of additional sanctions and export controls in connection therewith), or pandemics, including the COVID-19 pandemic, and their effects on economic and business environments in which we operate, including the ongoing disruption to the financial market and other economic activity caused by the COVID-19 pandemic; and other risks discussed under the caption “Risk Factors” under Part 1,I, Item 1A of our ~~2021~~2022 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. The Company cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Company’s results.

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

Introduction

The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first three months of ~~2022~~2023 compared to the financial condition as of December 31, ~~2021.~~2022. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the threemonths ended March 31, ~~2022,~~2023, compared to the linked fourth quarter (“linked quarter”) in ~~2021~~2022 and the results of operations, liquidity and cash flows for the three months ended March 31, ~~2022~~2023 compared to the same period in ~~2021.~~2022 (“prior year quarter”). 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 ~~2021.~~2022. 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, ~~2021.~~2022.

Critical Accounting Policies and Estimates

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

A full description of our critical accounting policies and the impact and any associated risks related to those policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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. 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~~and are then further segregated by credit grades. Loans that do not share similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. The Company estimates the amount of the allowance based on loan loss experience, adjusted for current and forecasted economic conditions, including unemployment, changes in GDP, and commercial and residential real estate prices. The Company’s forecast of economic conditions uses internal and external information

and considers a weighted average of a baseline, upside, and downside scenarios. Because economic conditions can change and are difficult to predict, the anticipated amount of estimated loan defaults and losses, and therefore the adequacy of the allowance, could change significantly and have a direct impact on the Company’s credit costs. The Company’s allowance for credit losses on loans was ~~$139.2~~$138.3 million at March 31, ~~2022~~2023 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 ~~$4.2~~$24.2 million. Conversely, the allowance would have increased ~~$48.4~~$43.2 million using only the downside scenario.

Executive Summary

~~The Company closed its acquisition of FCBP on July 21, 2021. The results of operations of FCBP are included in our results from this date forward.~~

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

(in thousands, except per share data) Three months ended
March 31,
2022 December 31,
2021 March 31,
2021
EARNINGS
Total interest income $ 106,581 $ 107,641 $ 84,960
Total interest expense 5,416 5,581 5,837
Net interest income 101,165 102,060 79,123
Provision (benefit) for credit losses (4,068) (3,660) 46
Net interest income after provision for credit losses 105,233 105,720 79,077
Total noninterest income 18,641 22,630 11,290
Total noninterest expense 62,800 63,694 52,884
Income before income tax expense 61,074 64,656 37,483
Income tax expense 13,381 13,845 7,557
Net income $ 47,693 $ 50,811 $ 29,926
Preferred stock dividends 1,229 — —
Net income available to common shareholders $ 46,464 $ 50,811 $ 29,926
Basic earnings per share $ 1.23 $ 1.33 $ 0.96
Diluted earnings per share $ 1.23 $ 1.33 $ 0.96
Return on average assets 1.42 % 1.52 % 1.22 %
Return on average common equity 12.87 % 13.81 % 11.07 %
Return on average tangible common equity1
17.49 % 18.81 % 14.92 %
Net interest margin (tax equivalent) 3.28 % 3.32 % 3.50 %
Efficiency ratio 52.42 % 51.08 % 58.49 %
Core efficiency ratio1
52.43 % 49.22 % 55.02 %
Book value per common share $ 37.35 $ 38.53 $ 34.95
Tangible book value per common share1
$ 27.06 $ 28.28 $ 25.92
ASSET QUALITY
Net charge-offs $ 1,521 $ 3,263 $ 5,647
Nonperforming loans 21,160 28,024 36,659
Classified assets 93,199 100,797 114,713
Nonperforming loans to total loans 0.23 % 0.31 % 0.50 %
Nonperforming assets to total assets 0.17 % 0.23 % 0.42 %
ACL on loans to total loans 1.54 % 1.61 % 1.80 %
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.”


(in thousands, except per share data)	Three months ended
	March 31, 2023			December 31, 2022			March 31, 2022
EARNINGS
Total interest income	$	169,033		$	156,737		$	106,581
Total interest expense	29,504			17,902			5,416
Net interest income	139,529			138,835			101,165
Provision (benefit) for credit losses	4,183			2,123			(4,068)
Net interest income after provision (benefit) for credit losses	135,346			136,712			105,233
Total noninterest income	16,898			16,873			18,641
Total noninterest expense	80,983			77,149			62,800
Income before income tax expense	71,261			76,436			61,074
Income tax expense	15,523			16,435			13,381
Net income	$	55,738		$	60,001		$	47,693
Preferred stock dividends	938			937			1,229
Net income available to common shareholders	$	54,800		$	59,064		$	46,464

Basic earnings per share	$	1.47		$	1.59		$	1.23
Diluted earnings per share	$	1.46		$	1.58		$	1.23

Return on average assets	1.72		%	1.83		%	1.42		%
Return on average common equity	14.85		%	16.52		%	12.87		%
Return on average tangible common equity1	19.93		%	22.62		%	17.49		%
Net interest margin (tax equivalent)	4.71		%	4.66		%	3.28		%

Efficiency ratio	51.77		%	49.55		%	52.42		%
Core efficiency ratio1	50.47		%	48.10		%	50.60		%
Book value per common share	$	40.76		$	38.93		$	37.35
Tangible book value per common share1	$	30.55		$	28.67		$	27.06

ASSET QUALITY
Net charge-offs (recoveries)	$	(264)		$	2,075		$	1,521
Nonperforming loans	11,972			9,981			21,160
Classified assets	110,384			99,122			93,199
Nonperforming loans to total loans	0.12		%	0.10		%	0.23		%
Nonperforming assets to total assets	0.09		%	0.08		%	0.17		%
ACL on loans to total loans	1.38		%	1.41		%	1.54		%
Net charge-offs (recoveries) to average loans (annualized)	(0.01)		%	0.09		%	0.07		%

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

Financial results and other notable items include:

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

Quarter ended
(in thousands) March 31, 2022 December 31, 2021
PPP loans outstanding, net of deferred fees $ 134,084 $ 271,958
Average PPP loans outstanding, net 194,382 365,295
PPP interest and fee income recognized 2,858 4,864
PPP deferred fees remaining 1,851 4,215
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 PPP loan balances.

•~~Pre-provision net revenue~~PPNR1 ~~(“PPNR”)~~ of ~~$57.0~~$75.0 million in the first quarter ~~2022~~2023 decreased ~~$6.3~~$3.6 million from the linked quarter PPNR of ~~$63.3~~$78.6 million and increased ~~$16.3~~$18.0 million from ~~$40.7~~$57.0 million in the prior year ~~quarter.~~period. The decrease from the linked quarter was primarily due to a ~~decline~~seasonal increase in ~~PPP loan income as the PPP loan portfolio winds down and lower~~ noninterest ~~income that typically declines from a peak~~expense, partially offset by an increase in ~~the fourth quarter.~~net interest income. The increase ~~from~~compared to the prior year quarter was primarily due to ~~the acquisition of FCBP~~an increase in ~~the third quarter 2021,~~net interest income, partially offset by ~~a decline~~an increase in ~~PPP income.~~noninterest expense.

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

•Net interest income of ~~$101.2~~$139.5 million for the first quarter ~~2022 decreased $0.9~~2023 increased $0.7 million and $38.4 million from the linked ~~quarter, primarily due to a decline in PPP income. Net interest margin (“NIM”)~~and prior year quarters, respectively. The NIM was ~~3.28%~~4.71% for the first quarter ~~2022,~~2023, compared to ~~3.32%~~4.66% and 3.28% for the linked ~~quarter.~~and prior year quarters, respectively. Net interest income ~~for the first quarter 2022 increased $22.0 million~~and NIM benefited from ~~the prior year quarter. This was due primarily to the acquisition of FCBP, organic growth in the~~higher average loan ~~portfolio,~~ and ~~an expanded~~ investment ~~portfolio,~~balances and expanding yields on earning assets, partially offset by higher deposit costs and a decline in ~~PPP income.~~average interest-earning cash.

•Noninterest income of ~~$18.6~~$16.9 million for the first quarter ~~2022 decreased $4.0 million from~~2023 was stable compared to the linked quarter and ~~increased $7.4~~decreased $1.7 million from the prior year quarter. AThe 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 primarily due ~~primarily~~ to ~~an increase~~a decrease in ~~noninterest~~customer swap fee income, ~~from~~card services revenue and tax credit income. Lower transaction volumes led to the ~~FCBP acquisition~~decrease in customer swap fee income and ~~higher~~ tax credit income, ~~due to a low volume quarter in~~and the ~~prior year.~~Durbin Amendment cap on debit card income has limited card services revenue since July 1, 2022.

Balance sheet highlights:

•Loans – Total loans increased ~~$38.4~~$274.8 million, or 11.4%, to ~~$9.1~~$10.0 billion at March 31, ~~2022,~~2023, compared to ~~$9.0~~$9.7 billion at December 31, 2021. PPP loans declined $137.9 million. Excluding PPP, loans grew $176.3 million, or 8%, on an annualized basis from December 31, 2021. Loan growth was primarily attributed to the specialty lending niches.2022. Average loans totaled ~~$9.0~~$9.8 billion for the quarter ended March 31, ~~2022~~2023 compared to ~~$9.0~~$9.4 billion ~~for~~in the fourth quarter ~~2021.~~2022.

•Deposits – Total deposits increased ~~$360.3~~$325.5 million, to ~~$11.7~~$11.2 billion at March 31, ~~2022~~2023 from ~~$11.3~~$10.8 billion at December 31, ~~2021. The specialty deposit groups have had continued success in generating deposit growth, increasing~~2022. Total estimated insured deposits, ~~by $273.7 million in the first quarter 2022~~which includes collateralized deposits, reciprocal deposits and accounts that qualify for pass through insurance, totaled $7.7 billion at March 31, 2023, compared to $4.9 billion at December ~~31, 2021.~~31,2022. Average deposits totaled ~~$11.5~~$10.9 billion for the quarter ended March 31, ~~2022~~2023, compared to ~~$11.2~~$11.0 billion for the fourth quarter ~~2021.~~2022. Noninterest deposit accounts represented ~~41.7%~~37.6% of total deposits and the loan to deposit ratio was ~~77.4%~~89.8% at March 31, ~~2022.~~2023.

•Asset quality – The allowance for credit losses on loans to total loans was ~~1.54%~~1.38% at March 31, ~~2022,~~2023, compared to ~~1.61%~~1.41% at December 31, ~~2021.~~2022. Nonperforming assets to total assets was ~~0.17%~~0.09% at March 31, ~~2022~~2023 compared to ~~0.23%~~0.08% at December 31, ~~2021. Due to the improvement in~~2022. A provision for credit ~~quality and macroeconomic forecasts, a provision benefit~~losses of ~~$4.1~~$4.2 million was recorded in the first quarter ~~2022,~~of 2023, compared to $2.1 million in the linked quarter and a provision benefit of ~~$3.7~~$4.1 million in the ~~fourth quarter 2021. Loan growth and the~~comparable prior year period. The provision ~~benefit~~for credit losses of $4.2 million recorded in the first quarter ~~2022 contributed~~2023 was primarily related to the ~~decline~~credit impairment of an investment security in subordinated debt of a failed bank and loan growth, partially offset by a decrease in the ~~ratio of allowance~~reserve for ~~credit losses to total loans.~~unfunded commitments.

•Shareholders’ equity – Total shareholders’ equity was ~~$1.47~~$1.59 billion at March 31, ~~2022,~~2023, compared to ~~$1.53~~$1.52 billion at December 31, ~~2021,~~2022, and the tangible common equity to tangible assets ratio2 was ~~7.62%~~8.8% at March 31, ~~2022~~2023 compared to ~~8.13%~~8.4% at December 31, 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.2022. The Company and the Bank’s regulatory capital ratios exceeded the “well-capitalized” level at March 31, ~~2022.~~2023.

The Company repurchased 351,090 shares totaling $17.0 million in the first quarter 2022 for an average price of $48.35 per share. The Company has 349,383 shares available for repurchase under its common stock repurchase authorization.

The Company’s Board of Directors ~~unanimously~~ approved a quarterly dividend of ~~$0.22~~$0.25 per common share, payable on June 30, ~~2022~~2023 to shareholders of record as of June 15, ~~2022, an increase of $0.01, or 5.0%, compared to the first quarter 2022.~~2023. 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~~2023 to (but excluding) June 15, ~~2022.~~2023. The dividend will be payable on June 15, ~~2022~~2023 to shareholders of record on May 31, ~~2022.~~2023.

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.

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Average Balance Sheet

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


		Three months ended March 31,						Three months ended December 31,						Three months ended March 31,							Three months ended March 31,						Three months ended December 31,						Three months ended March 31,
		2022						2021						2021							2023						2022						2022
(in thousands)	(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		(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:

Total loans1.2		9,005,875		96,301		4.34	%	9,030,982		98,412		4.32	%	7,192,776		77,073		4.35	%
Total loans1, 2																				Total loans1, 2	$	9,795,045	$	152,762	6.33	%	$	9,423,984	$	139,432	5.87	%	$	9,005,875	$	96,301	4.34	%
Taxable securities	Taxable securities	1,151,743		5,699		2.01		1,021,007		5,070		1.97		849,123		4,719		2.25		Taxable securities	1,322,978		9,635		2.95		1,256,470		8,980		2.84		1,151,743		5,699		2.01
Non-taxable securities2	Non-taxable securities2	772,226		5,270		2.77		732,152		5,076		2.75		568,182		4,099		2.93		Non-taxable securities2	965,473		7,482		3.14		947,741		7,211		3.03		772,226		5,270		2.77
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		Total securities	2,288,451		17,117		3.03		2,204,211		16,191		2.91		1,923,969		10,969		2.31
Interest-earning deposits	Interest-earning deposits	1,781,272		817		0.19		1,589,008		590		0.15		679,659		189		0.11		Interest-earning deposits	106,254		1,195		4.56		367,100		3,097		3.35		1,781,272		817		0.19
Total interest-earning assets	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		Total interest-earning assets	12,189,750		171,074		5.69		11,995,295		158,720		5.25		12,711,116		108,087		3.45
Noninterest-earning assets	Noninterest-earning assets	902,887						894,044						650,312						Noninterest-earning assets	941,445						991,273						902,887

Total assets	Total assets	$	13,614,003					$	13,267,193					$	9,940,052					Total assets	$	13,131,195					$	12,986,568					$	13,614,003

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		$	2,505,319	$	536	0.09	%	$	2,383,059	$	491	0.08	%	$	1,887,059	$	328	0.07	%
Interest-bearing demand accounts																				Interest-bearing demand accounts	$	2,201,910	$	5,907	1.09	%	$	2,242,268	$	4,136	0.73	%	$	2,505,319	$	536	0.09	%
Money market accounts	Money market accounts	2,872,302		1,460		0.21		2,853,655		1,412		0.20		2,350,592		975		0.17		Money market accounts	2,826,836		15,471		2.22		2,696,417		9,509		1.40		2,872,302		1,460		0.21
Savings	Savings	817,431		66		0.03		776,695		64		0.03		654,662		48		0.03		Savings	732,256		230		0.13		775,488		100		0.05		817,431		66		0.03
Certificates of deposit	Certificates of deposit	607,133		797		0.53		616,347		831		0.53		537,166		1,312		0.99		Certificates of deposit	670,521		3,053		1.85		524,938		1,017		0.77		607,133		797		0.53
Total interest-bearing deposits	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		Total interest-bearing deposits	6,431,523		24,661		1.56		6,239,111		14,762		0.94		6,802,185		2,859		0.17
Subordinated debentures	Subordinated debentures	154,959		2,220		5.81		171,453		2,439		5.64		203,694		2,819		5.61		Subordinated debentures	155,497		2,409		6.28		155,359		2,376		6.07		154,959		2,220		5.81
FHLB advances	FHLB advances	50,000		195		1.58		50,000		199		1.58		50,000		195		1.58		FHLB advances	110,928		1,332		4.87		8,864		104		4.65		50,000		195		1.58
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	262,252		60		0.09		246,525		60		0.10		231,527		60		0.11		Securities sold under agreements to repurchase	215,604		749		1.41		182,362		282		0.61		262,252		60		0.09
Other borrowed funds	Other borrowed funds	22,841		82		1.46		24,270		85		1.39		28,650		100		1.42		Other borrowed funds	53,885		353		2.66		26,993		378		5.56		22,841		82		1.46
Total interest-bearing liabilities	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		Total interest-bearing liabilities	6,967,437		29,504		1.72		6,612,689		17,902		1.07		7,292,237		5,416		0.30
Noninterest bearing liabilities:	Noninterest bearing liabilities:																			Noninterest bearing liabilities:
Demand deposits	Demand deposits	4,692,027						4,537,247						2,777,900						Demand deposits	4,481,966						4,763,503						4,692,027
Other liabilities	Other liabilities	93,518						112,546						122,321						Other liabilities	113,341						119,784						93,518
Total liabilities	Total liabilities	12,077,782						11,771,797						8,843,571						Total liabilities	11,562,744						11,495,976						12,077,782
Shareholders' equity	Shareholders' equity	1,536,221						1,495,396						1,096,481						Shareholders' equity	1,568,451						1,490,592						1,536,221
Total liabilities & shareholders' equity	Total liabilities & shareholders' equity	$	13,614,003					$	13,267,193					$	9,940,052					Total liabilities & shareholders' equity	$	13,131,195					$	12,986,568					$	13,614,003
Net interest income	Net interest income			$	102,671					$	103,567					$	80,243			Net interest income			$	141,570					$	140,818					$	102,671
Net interest spread	Net interest spread					3.15	%					3.19	%					3.36	%	Net interest spread					3.97	%					4.18	%					3.15	%
Net interest margin	Net interest margin					3.28	%					3.32	%					3.50	%	Net interest margin					4.71	%					4.66	%					3.28	%

1 Average balances include nonaccrual loans. Interest income includes loan fees of $3.7 million, $3.7 million, and $5.2 million for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively.																				1 Average balances include nonaccrual loans. Interest income includes loan fees of $3.7 million, $3.7 million, and $5.2 million for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively.
2 Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $2.0 million, $2.0 million, and $1.5 million for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively.																				2 Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $2.0 million, $2.0 million, and $1.5 million for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively.

1 Average balances include nonaccrual loans. Interest income includes loan fees of $5.2 million, $6.3 million, and $8.1 million for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

2 Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $1.5 million, $1.4 million, and $1.1 million for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

Rate/Volume

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


		Quarter ended March 31, 2022						Quarter ended March 31, 2022						Three months ended March 31, 2023				Three months ended March 31, 2023
		compared to						compared to						compared to				compared to
		Quarter ended December 31, 2021						Quarter ended March 31, 2021						Three months ended December 31, 2022				Three months ended March 31, 2022
		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:

Loans(3)	Loans(3)	(1,124)		(987)		(2,111)		19,244		(16)		19,228			Loans(3)	$	4,538	$	8,792	$	13,330	9,112		47,349		56,461
Taxable securities	Taxable securities	542		86		628		1,527		(547)		980			Taxable securities	378		277		655		950		2,986		3,936
Non-taxable securities(3)	Non-taxable securities(3)	172		23		195		1,405		(234)		1,171			Non-taxable securities(3)	87		183		270		1,441		770		2,211
Interest-earning deposits	Interest-earning deposits	71		156		227		434		194		628			Interest-earning deposits	(2,713)		812		(1,901)		(1,493)		1,872		379
Total interest-earning assets	Total interest-earning assets	$	(339)	$	(722)	$	(1,061)	$	22,610	$	(603)	$	22,007		Total interest-earning assets	$	2,290	$	10,064	$	12,354	$	10,010	$	52,977	$	62,987

Interest paid on:	Interest paid on:														Interest paid on:
Interest-bearing transaction accounts		$	13	$	32	$	45	$	111	$	97	$	208
Interest-bearing demand accounts															Interest-bearing demand accounts	$	(78)	$	1,849	$	1,771	$	(75)	$	5,446	$	5,371
Money market accounts	Money market accounts	5		43		48		236		249		485			Money market accounts	454		5,507		5,961		(24)		14,035		14,011
Savings	Savings	2		—		2		18		—		18			Savings	(6)		137		131		(7)		171		164
Certificates of deposit	Certificates of deposit	(34)		—		(34)		154		(669)		(515)			Certificates of deposit	336		1,700		2,036		91		2,165		2,256
Subordinated debentures	Subordinated debentures	(276)		57		(219)		(696)		97		(599)			Subordinated debentures	1		32		33		8		181		189
FHLB advances	FHLB advances	(2)		(2)		(4)		—		—		—			FHLB advances	1,223		5		1,228		419		718		1,137
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	4		(5)		(1)		6		13		19			Securities sold under agreements to repurchase	57		410		467		(12)		701		689
Other borrowings	Other borrowings	(6)		3		(3)		(22)		(15)		(37)			Other borrowings	237		(262)		(25)		169		102		271
Total interest-bearing liabilities	Total interest-bearing liabilities	(294)		128		(166)		(193)		(228)		(421)			Total interest-bearing liabilities	2,224		9,378		11,602		569		23,519		24,088
Net interest income	Net interest income	$	(45)	$	(850)	$	(895)	$	22,803	$	(375)	$	22,428		Net interest income	$	66	$	686	$	752	$	9,441	$	29,458	$	38,899

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

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

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

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

Net interest income (on a tax equivalent basis) of $141.6 million for the ~~three months~~quarter ended March 31, ~~2022 decreased $0.9~~2023 increased $0.8 million, ~~over the linked quarter. The decrease in net interest income~~ from the linked quarter was primarily due to 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 redemption of $50.0 million of subordinated debentures in the fourth quarter 2021. Total PPP income in the current quarter was $2.9 million, compared to $4.9$140.8 million in the linked quarter. The Federal Open Markets Committee increased the target federal funds rate by 25 basis points in the first quarter of 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~~$38.9 million, ~~primarily due to the FCBP acquisition, organic loan growth, and an expanded investment portfolio. These increases were offset by a $5.6~~from $102.7 million ~~decline~~ in ~~PPP income.~~

~~NIM was 3.28% for~~ the first quarter ~~2022, compared to 3.32% and 3.50% in~~2022. The increase from the linked and prior year quarters reflects the benefit of higher market interest rates on the Company’s asset sensitive balance sheet combined with organic growth. The effective federal funds rate for the first quarter ~~respectively. NIM decreased four~~2023 was 4.52%, an increase of 87 basis points, ~~from~~compared to the linked quarter, ~~primarily~~and a 440 basis point increase over the prior year quarter.

Compared to the linked quarter, interest income increased $12.4 million due to higher interest earned on a ~~five~~larger loan base resulting in a $13.3 million sequential expansion. This increase was partially offset by a $1.9 million decrease in interest on cash balances. Interest on loans benefited from a 46 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 level of cash related to payoffs of PPP loans and deposit growth and an increase in ~~investment securities. Average interest-bearing cash accounts totaled $1.8 billion~~yield and a $371.1 million increase in average loans compared to the linked quarter. The average interest rate of new loan originations in the first quarter ~~2022,~~2023 was 6.53%. The yield on interest-earning cash deposits increased 121 basis points in the quarter but was offset by a $260.8 million decrease in the average balance which reduced interest income in the first quarter 2023.

Compared to the prior year quarter, the increase in interest income of $63.0 million was also primarily due to higher interest earned on a larger loan base, partially offset by a decline in interest earned on cash balances. The prior year quarter included $2.9 million of interest and fee income on loans from the Paycheck Protection Program that was mostly wound down in the fourth quarter 2022.

Compared to the linked quarter, interest expense increased $11.6 million primarily due to a $9.9 million increase in deposit interest expense and a $1.2 million increase in interest expense on FHLB borrowings. The increase in interest expense reflects a shift in the deposit mix from demand deposits and interest-bearing demand deposits to money market accounts and certificates of deposit, as well as higher rates paid on deposits and an increased use of FHLB borrowings. This deposit shift principally occurred during March following turmoil in the banking markets. The interest-bearing liability rate was 1.72% an increase of 65 basis points compared to ~~$1.6 billion in~~ the linked quarter. The average cost of interest-bearing ~~liabilities declined one~~deposits was 1.56%, an increase of 62 basis points ~~from~~over the linked ~~quarter,~~quarter. The increase was primarily due to ~~the redemption of $50.0 million of subordinated debentures~~higher rates paid on commercial money market accounts, which increased 82 basis points to 2.22% in the ~~fourth quarter 2021.~~current quarter.

Compared to the prior year quarter, interest expense increased $24.1 million primarily due to an increase in the cost of interest bearing liabilities. The cost of interest bearing deposits increased 139 basis points year-over-year, while the cost of total interest bearing liabilities increased 142 basis points during the same period.

The total cost of deposits, including noninterest-bearing demand accounts, was 0.92% during the first quarter 2023, compared to 0.53% and 0.10% in the linked and prior year quarters, respectively.

NIM, on a tax equivalent basis, was compressed by growth in deposit portfolio that expanded available liquidity in both cash and investment balances. This expanded liquidity shifted the composition of earning assets to these lower yielding categories (cash and investments), as loans represented 77% of average earnings assets4.71% in the first quarter ~~2021, compared to 71% in~~2023, an increase of five basis points from the linked quarter and an increase of 143 basis points from the prior year quarter. Since the first quarter ~~2022.~~2022, NIM has expanded four consecutive quarters.

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								Quarter ended							Quarter ended								Quarter ended
(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)				March 31, 2021		Increase (decrease)				(in thousands)	March 31, 2023		December 31, 2022		Increase (decrease)				March 31, 2022		Increase (decrease)
Deposit service charges	Deposit service charges	$	4,163	$	3,962	$	201	5	%	$	3,084	$	1,079	35	%	Deposit service charges	$	4,128	$	4,463	$	(335)	(8)	%	$	4,163	$	(35)	(1)	%
Wealth management revenue	Wealth management revenue	2,622		2,687		(65)		(2)	%	2,483		139		6	%	Wealth management revenue	2,516		2,423		93		4	%	2,622		(106)		(4)	%
Card services revenue	Card services revenue	3,040		3,223		(183)		(6)	%	2,496		544		22	%	Card services revenue	2,338		2,345		(7)		—	%	3,040		(702)		(23)	%
Tax credit income (expense)		2,608		4,374		(1,766)		(40)	%	(1,041)		3,649		351	%
Tax credit income																Tax credit income	1,813		2,389		(576)		(24)	%	2,608		(795)		(30)	%

Other income	Other income	6,208		8,384		(2,176)		(26)	%	4,268		1,940		45	%	Other income	6,103		5,253		850		16	%	6,208		(105)		(2)	%

Total noninterest income	Total noninterest income	$	18,641	$	22,630	$	(3,989)	(18)	%	$	11,290	$	7,351	65	%	Total noninterest income	$	16,898	$	16,873	$	25	—	%	$	18,641	$	(1,743)	(9)	%

Total noninterest income for the first quarter ~~2022~~2023 was ~~$18.6~~$16.9 million, ~~a decrease of $4.0 million from~~stable with the linked quarter and ~~an increase~~a decrease of ~~$7.4~~$1.7 million from the prior year quarter. ~~The linked~~Noninterest income in the first quarter 2023 included an increase in other income and wealth management revenue that was offsets by a decrease ~~was due primarily to a decline~~ in ~~miscellaneous income~~deposit service charges and tax credit income. ~~Miscellaneous~~Other income increased primarily due to a gain on the sale of SBA loans and a gain on the sale of investment securities. In the first quarter 2023, SBA loans totaling $8.8 million were sold and $28.4 million of lower-yielding investment securities were sold in January 2023 at a gain and the proceeds were reinvested at a higher yield. Other income in the current and linked quarters also included $2.3 million and $3.2 million, respectively, of income from community development investments and private equity income. Income from these investments will vary among periods. Deposit service charges declined in the first quarter 2023 as the earnings credit rate used by customers to offset treasury management fees increased. Tax credit income is typically highest in the fourth quarter ~~2021~~when transaction volumes peak.

The decrease from the prior year quarter was primarily due to decreases in tax credit income and card services revenue. Lower transaction volumes led to the decrease in tax credit income while the Durbin Amendment cap on

debit card income has limited card services revenue since July 1, 2022. Other income in the prior year quarter included ~~$5.0~~$1.2 million of swap fee income, ~~on community development investments,~~ compared to ~~$2.2~~$0.3 million in the first quarter ~~2022. Income~~2023. Swap fee income is generated from ~~community development investments is not a consistent source~~customer hedging activities and ~~will vary among periods. Offsetting the decline from community development investments~~was higher 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~~when market rates started 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 also contributed $1.3 million to the overall noninterest income increase in the first quarter 2022 compared to the prior year period, primarily in deposit service charges.increase.

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											Quarter ended										Quarter ended											Quarter ended
(in thousands)	(in thousands)	March 31, 2022			December 31, 2021			Increase (decrease)					March 31, 2021			Increase (decrease)						(in thousands)	March 31, 2023			December 31, 2022			Increase (decrease)						March 31, 2022			Increase (decrease)
Employee compensation and benefits	Employee compensation and benefits	$	35,827		$	33,488		$	2,339		7	%	$	29,562		$	6,265			21	%	Employee compensation and benefits	$	42,503		$	38,175		$	4,328		11	%		$	35,827		$	6,676		19	%
Occupancy	Occupancy	4,586			4,510			76			2	%	3,751			835				22	%	Occupancy	4,061			4,248			(187)			(4)	%		4,586			(525)			(11)	%
Data processing	Data processing	3,260			3,174			86			3	%	2,890			370				13	%	Data processing	3,710			3,599			111			3	%		3,260			450			14	%
Professional fees	Professional fees	1,177			1,100			77			7	%	988			189				19	%	Professional fees	1,631			2,763			(1,132)			(41)	%		1,177			454			39	%
Deposit costs																						Deposit costs	12,720			13,256			(536)			(4)	%		4,260			8,460			199	%

Merger-related expenses		—			2,320			(2,320)			(100)	%	3,142			(3,142)				(100)	%

Other expense	Other expense	17,950			19,102			(1,152)			(6)	%	12,551			5,399				43	%	Other expense	16,358			15,108			1,250			8	%		13,690			2,668			19	%
Total noninterest expense	Total noninterest expense	$	62,800		$	63,694		$	(894)		(1)	%	$	52,884		$	9,916			19	%	Total noninterest expense	$	80,983		$	77,149		$	3,834		5	%		$	62,800		$	18,183		29	%

Efficiency ratio	Efficiency ratio	52.42		%	51.08		%	1.34		%			58.49		%	(6.07)		%				Efficiency ratio	51.77		%	49.55		%	2.22		%				52.42		%	(0.65)		%
Core efficiency ratio1	Core efficiency ratio1	52.43		%	49.22		%	3.21		%			55.02		%	(2.59)		%				Core efficiency ratio1	50.47		%	48.10		%	2.37		%				50.60		%	(0.13)		%

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

Noninterest expense was ~~$62.8~~$81.0 million for the first quarter ~~2022, compared to $63.7~~2023, an increase of $3.8 million ~~for the linked quarter and $52.9~~from $77.1 million in the ~~prior year~~linked quarter. ~~The decrease~~Employee compensation and benefits increased $4.3 million from the linked quarter ~~was~~primarily due ~~primarily~~ to a ~~decline~~$3.4 million increase in ~~merger expenses~~employer payroll taxes and ~~other expenses, offset by~~401(k) matches that are seasonally higher in the first quarter each year, and a $3.3 million increase in salaries due to annual merit increases that became effective on March 1, 2023 and an increase in ~~employee~~the associate base. These increases were partially offset by a $3.8 million decline in variable compensation ~~and benefits. Merger expenses~~that is typically higher in the fourth quarter each year. Deposit costs declined slightly from 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 ~~lower operational losses and the loss on the redemption of debt~~higher year-end settlements that ~~was recognized~~occurred in the linked quarter. ~~The $2.3 million increase in employee compensation and benefits was primarily from seasonally~~Deposit costs relate to certain specialized deposit businesses that are impacted by higher ~~payroll taxes and the partial quarter impact of merit increases that went into effect on March 1, 2022.~~interest rates as well as increasing average balances.

~~Compared to~~The increase in noninterest expense of $18.2 million from the prior year quarter ~~the $9.9 million increase~~ was primarily ~~due to the FCBP acquisition that added $6.8 million in noninterest expense,~~ an increase in ~~employee compensation and benefits from~~the

associate base, merit increases throughout 2022 and 2023, and an increase in ~~2021, and higher~~variable 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 Commerce Banc Holdings in the fourth quarter 2020.

Income Taxes

The Company’s effective tax rate was ~~21.9 %~~21.8% for the first quarter ~~2022, compared to 21.4% in~~2023, relatively stable with the linked ~~quarter~~ and ~~20.2% in the~~ prior year ~~quarter. The~~quarters effective tax ~~rate was relatively stable in the first quarter 2022 compared to the linked quarter. The increase from the prior year quarter was primarily due to the Company’s expanded geographic footprint~~rates of 21.5% and ~~the related state tax apportionment.~~21.9%. respectively.

Summary Balance Sheet


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)				(in thousands)	March 31, 2023		December 31, 2022		Increase (decrease)
Total cash and cash equivalents	Total cash and cash equivalents	$	1,981,320	$	2,021,689	$	(40,369)	(2)	%			Total cash and cash equivalents	$	285,083	$	291,359	$	(6,276)	(2)	%
Securities		1,933,483		1,795,687		137,796		8	%
Loans (excluding PPP)		8,921,989		8,745,684		176,305		2	%
PPP loans, net		134,084		271,958		(137,874)		(51)	%
Securities, net												Securities, net	2,275,803		2,245,722		30,081		1	%
Total loans												Total loans	10,011,918		9,737,138		274,780		3	%
Total assets	Total assets	13,706,769		13,537,358		169,411		1	%			Total assets	13,325,982		13,054,172		271,810		2	%
Deposits	Deposits	11,704,135		11,343,799		360,336		3	%			Deposits	11,154,636		10,829,150		325,486		3	%
Total liabilities	Total liabilities	12,233,592		12,008,242		225,350		2	%			Total liabilities	11,733,162		11,531,909		201,253		2	%
Total shareholders’ equity	Total shareholders’ equity	1,473,177		1,529,116		(55,939)		(4)	%			Total shareholders’ equity	1,592,820		1,522,263		70,557		5	%

~~Assets~~Total assets were $13.3 billion at March 31, 2023, an increase of $271.8 million from December 31, 2022. Cash and cash equivalents were relatively stable, while loan production increased the loan portfolio and an improvement in the unrealized loss on available for sale investments increased the value of the securities portfolio. Total liabilities of $11.7 billion, increased $201.3 million from December 31, 2022. A $325.5 million increase in deposits, partially offset by a $107.8 million decrease in securities sold under agreements to repurchase, was the primary driver of the increase in total liabilities.

Investments

At March 31, 2023, investment securities were $2.3 billion, or 17%, of total assets, which is comparable to the Company’s historical percentage dating back to 2019. At December 31, 2022, investment securities were $2.2 billion, or 17%, of total assets.

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


	March 31, 2023				December 31, 2022
($ in thousands)	Amount		%		Amount		%
Obligations of U.S. Government sponsored enterprises	$	265,705	11.7	%	$	237,785	10.6	%
Obligations of states and political subdivisions	972,038		42.7	%	946,456		42.1	%
Agency mortgage-backed securities	706,348		31.0	%	716,422		31.9	%
U.S. Treasury Bills	200,103		8.8	%	208,534		9.3	%
Corporate debt securities	132,481		5.8	%	137,260		6.1	%


Total	$	2,276,675	100.0	%	$	2,246,457	100.0	%


Net Unrealized Losses
($ in thousands)	March 31, 2023		December 31, 2022
Available-for-sale securities	$	(161,572)	$	(193,247)
Held-to-maturity securities	(65,013)		(82,133)
Total	$	(226,585)	$	(275,380)

Investment securities increased $30.1 million from the linked quarter, primarily due to a $31.7 million decrease in the unrealized loss on available-for-sale securities. Investment purchases in the quarter had a weighted average, tax equivalent yield of 4.79%. In January 2023, $28.4 million of available-for-sale investment securities with a tax equivalent yield of 4.0% were sold at a net gain of $0.4 million and were reinvested in securities with a 4.5% yield.

The average duration of the investment portfolio was 5.5 years at March 31, 2023. Due to the shorter duration of the loan portfolio of approximately 3 years, the Company leverages the investment portfolio to lengthen the overall

duration of the balance sheet, primarily using high-quality municipal securities. The expected cash flow from pay downs, maturities and interest over the next 12 months is approximately $262 million.

Loans by Type

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

The following table ~~summarizes~~sets forth the composition of the ~~Company’s~~ loan ~~portfolio:~~portfolio by type of loans


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)				(in thousands)	March 31, 2023		December 31, 2022		Increase (decrease)
Commercial and industrial	Commercial and industrial	$	3,398,723	$	3,392,375	$	6,348	—	%			Commercial and industrial	$	4,032,189	$	3,859,882	$	172,307	4	%
Commercial real estate - investor owned	Commercial real estate - investor owned	2,184,126		2,141,143		42,983		2	%			Commercial real estate - investor owned	2,418,079		2,357,820		60,259		3	%
Commercial real estate - owner occupied	Commercial real estate - owner occupied	2,094,012		2,035,785		58,227		3	%			Commercial real estate - owner occupied	2,281,223		2,270,551		10,672		—	%
Construction and land development	Construction and land development	702,630		734,073		(31,443)		(4)	%			Construction and land development	663,264		611,565		51,699		8	%
Residential real estate	Residential real estate	432,639		454,052		(21,413)		(5)	%			Residential real estate	364,059		395,537		(31,478)		(8)	%
Other	Other	243,943		260,214		(16,271)		(6)	%			Other	253,104		241,783		11,321		5	%
Loans held for investment		$	9,056,073	$	9,017,642	$	38,431	—	%
Total Loans												Total Loans	$	10,011,918	$	9,737,138	$	274,780	3	%

The following table ~~illustrates the change in loans:~~provides additional information on select specialty lending detail:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		Increase (decrease)				(in thousands)	March 31, 2023		December 31, 2022		Increase (decrease)
C&I	C&I	$	1,498,151	$	1,538,155	$	(40,004)	(3)	%			C&I	$	2,005,539	$	1,904,654	$	100,885	5	%
CRE investor owned	CRE investor owned	1,982,645		1,955,087		27,558		1	%			CRE investor owned	2,239,932		2,176,424		63,508		3	%
CRE owner occupied	CRE owner occupied	1,138,106		1,112,463		25,643		2	%			CRE owner occupied	1,173,985		1,174,094		(109)		—	%
SBA Loans*	SBA Loans*	1,249,929		1,241,449		8,480		1	%			SBA Loans*	1,315,732		1,312,378		3,354		—	%
Sponsor finance*	Sponsor finance*	641,476		508,469		133,007		26	%			Sponsor finance*	677,529		635,061		42,468		7	%
Life insurance premium financing*	Life insurance premium financing*	636,096		593,562		42,534		7	%			Life insurance premium financing*	859,910		817,115		42,795		5	%
Tax credits*	Tax credits*	518,020		486,881		31,139		6	%			Tax credits*	547,513		559,605		(12,092)		(2)	%
SBA PPP loans	SBA PPP loans	134,084		271,958		(137,874)		(51)	%			SBA PPP loans	5,438		7,272		(1,834)		(25)	%
Residential real estate	Residential real estate	410,173		430,985		(20,812)		(5)	%			Residential real estate	348,726		379,924		(31,198)		(8)	%
Construction and land development	Construction and land development	610,830		625,526		(14,696)		(2)	%			Construction and land development	590,509		534,753		55,756		10	%
Other	Other	236,563		253,107		(16,544)		(7)	%			Other	247,105		235,858		11,247		5	%
Total loans	Total loans	$	9,056,073	$	9,017,642	$	38,431	—	%			Total loans	$	10,011,918	$	9,737,138	$	274,780	3	%

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

Loans totaled ~~$9.1~~$10.0 billion at March 31, ~~2022~~2023 compared to ~~$9.0~~$9.7 billion at December 31, ~~2021. PPP~~2022. The increase was driven primarily by C&I, CRE investor owned, construction and specialty loans. The increase in specialty loans ~~declined $137.9 million as PPP forgiveness by the SBA continued. All specialty loan categories increased~~was primarily in the ~~first quarter 2022, particularly~~ sponsor finance ~~loans.~~and life insurance areas and each of the Company’s geographic regions increased loans during the quarter. Average line draw utilization was ~~39.9%~~42.4% for ~~both~~ the first quarter ~~2022 and~~of 2023, compared to 41.8% for the ~~linked quarter.~~full year of 2022.

Specialty lending products, ~~especially~~including 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 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~~The Company may sell the guaranteed portion of the loan and retain servicing ~~rights.~~rights, and in the first quarter 2023, SBA loans totaling $8.8 million were sold.

Provision and Allowance for Credit Losses

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

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)


	Quarter ended
(in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Provision (benefit) for credit losses on loans	$	1,099	$	(1,565)	$	(4,308)

Provision for available-for-sale securities	4,826		—		—
Provision (benefit) for off-balance sheet commitments	(1,914)		3,609		725
Provision (benefit) for held-to-maturity securities	137		46		(56)
Charge-offs (recoveries) of accrued interest	35		33		(429)
Provision (benefit) for credit losses	$	4,183	$	2,123	$	(4,068)

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. A provision for credit losses on both available-for-sale and held-to-maturity investment securities is recognized in certain circumstances. The Company also records reversals of interest on nonaccrual loans and interest recoveries directly through the provision of credit losses.

A provision ~~benefit~~for credit losses of ~~$4.1~~$4.2 million was recognized for the first quarter ~~2022,~~2023, compared to $2.1 million in the linked quarter and a provision benefit of ~~$3.7~~$4.1 million ~~for~~in the ~~linked~~prior year quarter. The ~~Company’s strong asset quality metrics and strengthening customer credit risk profiles, along with an improvement~~provision in the ~~economic forecast used to calculate the allowance, particularly the commercial real estate index and unemployment, led~~first quarter 2023 was primarily related to the impairment of an available-for-sale investment security and loan growth, partially offset by a decrease in the reserve on unfunded commitments. The provision ~~benefit~~for credit losses on the available-for-sale investment security was related to a subordinated debt security in ~~both~~a publicly-traded bank that failed in the ~~current and linked quarters.~~first quarter of 2023.

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


		March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
(in thousands)	(in thousands)	Allowance		Percent of loans in each category to total loans		Allowance		Percent of loans in each category to total loans			(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	Commercial and industrial	$	60,975	37.5	%	$	63,825	37.6	%		Commercial and industrial	$	59,149	40.3	%	$	53,835	39.6	%
Real estate:	Real estate:										Real estate:
Commercial	Commercial	53,232		47.2	%	53,437		46.3	%		Commercial	58,594		46.9	%	58,943		47.5	%
Construction and land development	Construction and land development	12,983		7.8	%	14,536		8.1	%		Construction and land development	8,889		6.6	%	11,444		6.3	%
Residential	Residential	7,109		4.8	%	7,927		5.1	%		Residential	6,997		3.7	%	7,928		4.1	%
Other	Other	4,913		2.7	%	5,316		2.9	%		Other	4,666		2.5	%	4,782		2.5	%
Total	Total	$139,212		100.0	%	$145,041		100.0	%		Total	$138,295		100.0	%	$136,932		100.0	%

The ACL on loans was ~~1.54%~~1.38% of loans at March 31, ~~2022,~~2023, compared to ~~1.61%~~1.41% of loans at December 31, ~~2021.~~2022. Loan growth, ~~net charge-offs~~changes in economic metrics, and ~~the provision benefit~~a continued positive trend in ~~the first quarter 2022 drove the decrease in the ACL to total loans ratio.~~asset quality. Excluding guaranteed loans, the ACL to total loans was ~~1.73%~~1.53% at March 31, ~~2022,~~2023, compared to ~~1.84%~~1.56% at December 31, ~~2021.~~2022.

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


		Quarter ended												Quarter ended
		March 31, 2022						December 31, 2021							March 31, 2023						December 31, 2022
($ 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
(in thousands)																(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	Commercial and industrial	$	1,369	$	3,389,243	0.16	%	$	3,885	$	3,270,854	0.48	%			Commercial and industrial	$	(231)	$	3,873,175		(0.02)	%	$	1,929	$	3,739,843	0.20	%
Real estate:	Real estate:															Real estate:
Commercial	Commercial	(256)		4,202,934		(0.02)	%	(451)		4,009,356		(0.05)	%			Commercial	131		4,631,183			0.01	%	(62)		4,457,612		(0.01)	%
Construction and land development	Construction and land development	(21)		738,329		(0.01)	%	(16)		758,927		(0.01)	%			Construction and land development	(23)		678,493			(0.01)	%	(8)		632,766		(0.01)	%
Residential	Residential	362		415,786		0.35	%	(179)		442,914		(0.16)	%			Residential	(220)		353,104			(0.25)	%	203		365,576		0.22	%
Other	Other	67		256,033		0.11	%	24		543,396		0.02	%			Other	79		258,670			0.12	%	13		227,276		0.02	%
Total	Total	$	1,521	$	9,002,325	0.07	%	$	3,263	$	9,025,447	0.15	%			Total	$	(264)	$	9,794,625		(0.01)	%	$	2,075	$	9,423,073	0.09	%

(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 and charge-offs increase, the Company could recognize elevated levels of provision for credit losses. The provision is also reflective of charge-offs (recoveries) in the period.

Nonperforming assets

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


(in thousands)	(in thousands)	March 31, 2022			December 31, 2021			(in thousands)	March 31, 2023			December 31, 2022
Nonaccrual loans	Nonaccrual loans	$	18,398		$	23,449		Nonaccrual loans	$	11,887		$	9,766
Loans past due 90 days or more and still accruing interest	Loans past due 90 days or more and still accruing interest	24			1,716			Loans past due 90 days or more and still accruing interest	85			142
Troubled debt restructurings	Troubled debt restructurings	2,738			2,859			Troubled debt restructurings	—			73
Total nonperforming loans	Total nonperforming loans	21,160			28,024			Total nonperforming loans	11,972			9,981
Other real estate		1,459			3,493
Other								Other	250			269

Total nonperforming assets	Total nonperforming assets	$	22,619		$	31,517		Total nonperforming assets	$	12,222		$	10,250

Total assets	Total assets	$	13,706,769		$	13,537,358		Total assets	$	13,325,982		$	13,054,172
Total loans	Total loans	9,056,073			9,017,642			Total loans	10,011,918			9,737,138

Total allowance for credit losses	Total allowance for credit losses	139,212			145,041			Total allowance for credit losses	138,295			136,932

ACL to nonaccrual loans	ACL to nonaccrual loans	757		%	619		%	ACL to nonaccrual loans	1,163		%	1,402		%
ACL to nonperforming loans	ACL to nonperforming loans	658		%	518		%	ACL to nonperforming loans	1,155		%	1,372		%
ACL to total loans	ACL to total loans	1.54		%	1.61		%	ACL to total loans	1.38		%	1.41		%
Nonaccrual loans to total loans	Nonaccrual loans to total loans	0.20		%	0.26		%	Nonaccrual loans to total loans	0.12		%	0.10		%
Nonperforming loans to total loans	Nonperforming loans to total loans	0.23		%	0.31		%	Nonperforming loans to total loans	0.12		%	0.10		%

Nonperforming assets to total assets	Nonperforming assets to total assets	0.17		%	0.23		%	Nonperforming assets to total assets	0.09		%	0.08		%

Nonperforming loans based on loan type were as follows:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Commercial and industrial	Commercial and industrial	$	16,397	$	21,538	Commercial and industrial	$	5,325	$	4,443
Commercial real estate	Commercial real estate	3,640		4,414		Commercial real estate	5,434		4,200

Construction and land development						Construction and land development	1,201		1,192
Residential real estate	Residential real estate	1,102		2,048		Residential real estate	—		73
Other	Other	21		24		Other	12		73
Total	Total	$	21,160	$	28,024	Total	$	11,972	$	9,981

The following table summarizes the changes in nonperforming loans:

Three months ended

(in thousands)

March 31, ~~2022~~2023

Nonperforming loans, beginning of period

~~28,024~~9,981

Additions ~~to nonaccrual loans~~

~~917~~6,137

Charge-offs

~~(3,312)~~(1,180)

Principal payments

~~(4,469)~~(2,966)

Nonperforming loans, end of period

~~21,160~~11,972

Deposits


(in thousands)	(in thousands)	March 31, 2022			December 31, 2021			Increase (decrease)				(in thousands)	March 31, 2023			December 31, 2022			Increase (decrease)
Noninterest-bearing deposit accounts		$	4,881,043		$	4,578,436		$	302,607	7	%
Interest-bearing transaction accounts		2,547,482			2,465,884			81,598		3	%
Noninterest-bearing demand accounts												Noninterest-bearing demand accounts	$	4,192,523		$	4,642,732		$	(450,209)	(10)	%
Interest-bearing demand accounts												Interest-bearing demand accounts	2,395,901			2,256,295			139,606		6	%
Money market accounts	Money market accounts	2,794,536			2,890,976			(96,440)		(3)	%	Money market accounts	2,959,868			2,655,159			304,709		11	%
Savings accounts	Savings accounts	883,599			800,210			83,389		10	%	Savings accounts	712,671			744,256			(31,585)		(4)	%
Certificates of deposit:	Certificates of deposit:											Certificates of deposit:
Brokered	Brokered	129,017			128,970			47		—	%	Brokered	369,505			118,968			250,537		211	%
Other	Other	468,458			479,323			(10,865)		(2)	%	Other	524,168			411,740			112,428		27	%
Total deposits	Total deposits	$	11,704,135		$	11,343,799		$	360,336	3	%	Total deposits	$	11,154,636		$	10,829,150		$	325,486	3	%

Demand deposits / total deposits	Demand deposits / total deposits	42		%	40		%					Demand deposits / total deposits	38		%	43		%

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


		Three months ended													Three months ended
		March 31, 2022				December 31, 2021				March 31, 2021					March 31, 2023				December 31, 2022				March 31, 2022
($ in thousands)		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
(in thousands)														(in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing deposit accounts	Noninterest-bearing deposit accounts	$	4,692,027	—	%	$	4,537,247	—	%	$	2,777,900	—	%	Noninterest-bearing deposit accounts	$	4,481,966	—	%	$	4,763,503	—	%	$	4,692,027	—	%

Interest-bearing demand accounts	Interest-bearing demand accounts	2,505,319		0.09	%	2,383,059		0.08	%	1,887,059		0.07	%	Interest-bearing demand accounts	2,201,910		1.09		2,242,268		0.73		2,505,319		0.09
Money market accounts	Money market accounts	2,872,302		0.21		2,853,655		0.20		2,350,592		0.17		Money market accounts	2,826,836		2.22		2,696,417		1.40		2,872,302		0.21
Savings accounts	Savings accounts	817,431		0.03		776,695		0.03		654,662		0.03		Savings accounts	732,256		0.13		775,488		0.05		817,431		0.03
Certificates of deposit	Certificates of deposit	607,133		0.53		616,347		0.53		537,166		0.99		Certificates of deposit	670,521		1.85		524,938		0.77		607,133		0.53
Total interest-bearing deposits	Total interest-bearing deposits	$	6,802,185	0.17		$	6,629,756	0.17		$	5,429,479	0.20		Total interest-bearing deposits	$	6,431,523	1.56		$	6,239,111	0.94		$	6,802,185	0.17

Total average deposits	Total average deposits	$	11,494,212	0.10		$	11,167,003	0.10		$	8,207,379	0.13		Total average deposits	$	10,913,489	0.92		$	11,002,614	0.53		$	11,494,212	0.10

~~Core~~

Total deposits ~~defined as total deposits~~ excluding brokered certificates of deposits, were ~~$11.1~~$10.8 billion at March 31, ~~2022,~~2023, an increase of ~~$371.2~~$74.9 million from December 31, 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. As rates increase, deposit balances may decline or the composition2022. The mix of the deposit portfolio ~~may shift~~shifted from noninterest-bearing demand deposits to ~~higher-yielding deposit products, such as money market accounts or~~higher yielding categories in the current quarter due to the competitive rate environment. Brokered certificates of ~~deposit.~~

deposit increased $250.5 million, to $369.5 million at March 31, 2023. Brokered certificates of deposit were used for term liquidity purposes in place of FHLB borrowings in the first quarter 2023. 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 ~~$2.5~~$2.8 billion at March 31, ~~2022~~2023 and ~~$2.2~~$2.5 billion at December 31, ~~2021.~~2022.

To provide customers a deposit product with enhanced FDIC insurance, the Company participates in several programs through third parties that provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Total reciprocal deposits were $486.7 million at March 31, 2023, compared to $205.8 million at December 31, 2022. The Company considers reciprocal accounts as customer-related deposits due to the customer relationship that generated the transaction.

At March 31, 2023, estimated uninsured deposits totaled $3.4 billion, compared to $5.9 billion at December 31, 2022. The decrease in estimated uninsured deposits was the result of an increase in reciprocal deposits and accounts that qualify for pass-through insurance.

As rates increase, deposit balances may decline or the composition of the deposit portfolio may continue to shift to higher-yielding deposit products, such as money market accounts or certificates of deposit. The total cost of deposits was ~~0.10%~~0.92% for ~~both~~ the current ~~and~~quarter, compared to 0.53% for the linked quarter.

Shareholders’ Equity

Shareholders’ equity totaled ~~$1.5~~$1.6 billion at March 31, ~~2022, a decrease~~2023, an increase of ~~$55.9~~$70.6 million from December 31, ~~2021.~~2022. Significant activity during the first threemonths of ~~2022~~2023 was as follows:

•increase from net income of ~~$47.7~~$55.7 million,

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

•~~decrease from shares repurchased of $17.0~~$24.4 million, and

•decrease from dividends paid on common and preferred ~~shares~~stock of ~~$9.1~~$10.3 million.

Liquidity and Capital Resources

Liquidity

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

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

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

investment repayments are principal sources of liquidity, funding diversification is another key element of liquidity management and is achieved by strategically varying depositor types, terms, funding markets, and instruments.

Liquidity from assets is available primarily from cash balances and the investment portfolio. Cash and interest-bearing deposits with other banks ~~which~~ totaled ~~$2.0 billion~~$285.1 million at ~~both~~ March 31, ~~2022~~2023 and $291.4 million at December 31, ~~2021. The low~~2022. Recent increases in short term interest ~~rate environment, coupled with an uncertain outlook~~rates, a tightening of monetary policy by the Federal Reserve and ~~government stimulus, such as~~recent bank failures has led to competitive pricing pressures and a reduction of deposits in the ~~PPP, has increased~~industry. To enhance liquidity, ~~within~~ the ~~banking industry, including~~Company reduced its reinvestment of investment portfolio cash flows during the ~~Company. Investment~~three months ended March 31, 2023 compared to prior quarters. However, investment securities are ~~another~~an important tool to the Company’s

liquidity objectives. Securities totaled $1.9 billion at March 31, 2022, and included $581 million pledged as collateral for deposits of public institutions, treasury, loan notes, and other requirements. The remaining $1.3 billion could be pledged or sold to enhance liquidity, if necessary.

~~Liability~~Available on- and off-balance sheet liquidity ~~funding~~ sources ~~are available to increase financial flexibility. In addition to amounts borrowed, at March 31, 2022,~~include the Company could borrow an additional $870 million from the FHLB of Des Moines under blanket loan pledges, and has an additional $1.2 billion available from the Federal Reserve Bank under a pledged loan agreement. following items:


(in thousands)	March 31, 2023
Federal Reserve Bank borrowing capacity	$	2,668,163
FHLB borrowing capacity	824,053
Unpledged securities	449,440
Federal funds lines (7 correspondent banks)	140,000
Cash and interest-bearing deposits	285,083
Holding Company line of credit	25,000
Total	$	4,391,739

The Company also has ~~unsecured federal funds lines with six correspondent banks totaling $90 million.~~a portfolio of SBA guaranteed loans, a portion of which could be sold in the secondary market to generate earnings and liquidity.

In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The Company has ~~$2.8~~$3.1 billion in unused commitments to extend credit as of March 31, ~~2022. While this commitment level would exhaust the majority the Company’s current liquidity resources,~~2023. However, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.

At the holding company level, the primary funding sources are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises, stock offerings) and debt instruments. The main use of this liquidity is to provide the funds necessary to pay dividends to shareholders, service debt, invest in subsidiaries as necessary, 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 iswas available at March 31, ~~2022.~~2023. The line of credit has a one-year term and was renewed in February ~~2022~~2023 for an additional one-year term. The proceeds can be used for general corporate purposes.

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

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

Through the normal course of operations, the Company has entered into certain contractual obligations and other commitments. Such obligations relate to funding 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

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 the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total, Tier 1, and common equity tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. To be categorized as “well capitalized”, banks must maintain minimum total risk-based (10%), Tier 1 risk-based (8%), common equity tier 1 risk-based (6.5%), and Tier 1 leverage ratios (5%). In addition, the Company must maintain an additional CCB above the regulatory minimum ratio requirements. The CCB is designed to insulate banks from periods of stress and impose constraints on dividends, share repurchases and discretionary bonus payments when capital levels fall below prescribed levels. As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, the Company and the Bank met all capital adequacy requirements to which they are subject and exceeded the amounts required to be “well capitalized”.

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


		March 31, 2022						December 31, 2021											March 31, 2023				December 31, 2022
($ in thousands)		EFSC			Bank			EFSC			Bank			To Be Well-Capitalized		Minimum Ratio with CCB
(in thousands)																		(in thousands)	EFSC		Bank		EFSC		Bank		To Be Well-Capitalized		Minimum Ratio with CCB
Common Equity Tier 1 Capital to Risk Weighted Assets	Common Equity Tier 1 Capital to Risk Weighted Assets	11.0		%	12.2		%	11.3		%	12.5		%	6.5	%	7.0	%	Common Equity Tier 1 Capital to Risk Weighted Assets	11.2	%	12.0	%	11.1	%	12.1	%	6.5	%	7.0	%
Tier 1 Capital to Risk Weighted Assets	Tier 1 Capital to Risk Weighted Assets	12.7		%	12.2		%	13.0		%	12.5		%	8.0	%	8.5	%	Tier 1 Capital to Risk Weighted Assets	12.6	%	12.0	%	12.6	%	12.1	%	8.0	%	8.5	%
Total Capital to Risk Weighted Assets	Total Capital to Risk Weighted Assets	14.4		%	13.3		%	14.7		%	13.5		%	10.0	%	10.5	%	Total Capital to Risk Weighted Assets	14.3	%	13.1	%	14.2	%	13.1	%	10.0	%	10.5	%
Leverage Ratio (Tier 1 Capital to Average Assets)	Leverage Ratio (Tier 1 Capital to Average Assets)	9.6		%	9.2		%	9.7		%	9.3		%	5.0	%	4.0	%	Leverage Ratio (Tier 1 Capital to Average Assets)	11.1	%	10.6	%	10.9	%	10.5	%	5.0	%	N/A
Tangible common equity to tangible assets1	Tangible common equity to tangible assets1	7.6		%				8.1		%								Tangible common equity to tangible assets1	8.8	%			8.4	%
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

1 Not a required regulatory capital ratio.																		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~~report that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.

The Company considers its tangible common equity, 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~~report and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as merger-related expenses, facilities charges, and the gain or loss on sale of investment securities, that the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.

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

~~GAAP~~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
(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 %


	Three months ended
(in thousands)	March 31, 2023			December 31, 2022			March 31, 2022
Net interest income (GAAP)	$	139,529		$	138,835		$	101,165
Tax-equivalent adjustment	2,041			1,983			1,506
Net interest income - FTE (non-GAAP)	$	141,570		$	140,818		$	102,671
Noninterest income (GAAP)	16,898			16,873			18,641
Less gain on sale of investment securities	381			—			—
Less gain on sale of other real estate owned	90			—			19
Core revenue (non-GAAP)	$	157,997		$	157,691		$	121,293

Noninterest expense (GAAP)	$	80,983		$	77,149		$	62,800
Less amortization on intangibles	1,239			1,299			1,430


Core noninterest expense (non-GAAP)	$	79,744		$	75,850		$	61,370

Core efficiency ratio (non-GAAP)	50.47		%	48.10		%	50.60		%

Tangible Common Equity Ratio


(in thousands)	(in thousands)	March 31, 2022			December 31, 2021			(in thousands)	March 31, 2023			December 31, 2022
Shareholders' equity		$	1,473,177		$	1,529,116
Shareholders' equity (GAAP)								Shareholders' equity (GAAP)	$	1,592,820		$	1,522,263
Less preferred stock	Less preferred stock	71,988			71,988			Less preferred stock	71,988			71,988
Less goodwill	Less goodwill	365,164			365,164			Less goodwill	365,164			365,164
Less intangible assets	Less intangible assets	20,855			22,286			Less intangible assets	15,680			16,919
Tangible common equity		$	1,015,170		$	1,069,678
Tangible common equity (non-GAAP)								Tangible common equity (non-GAAP)	$	1,139,988		$	1,068,192

Total assets		$	13,706,769		$	13,537,358
Common shares outstanding								Common shares outstanding	37,311			37,253
Tangible book value per share (non-GAAP)								Tangible book value per share (non-GAAP)	$	30.55		$	28.67

Total assets (GAAP)								Total assets (GAAP)	$	13,325,982		$	13,054,172
Less goodwill	Less goodwill	365,164			365,164			Less goodwill	365,164			365,164
Less intangible assets, net	Less intangible assets, net	20,855			22,286			Less intangible assets, net	15,680			16,919
Tangible assets		$	13,320,750		$	13,149,908
Tangible assets (non-GAAP)								Tangible assets (non-GAAP)	$	12,945,138		$	12,672,089

Tangible common equity to tangible assets		7.62		%	8.13		%
Tangible common equity to tangible assets (non-GAAP)								Tangible common equity to tangible assets (non-GAAP)	8.81		%	8.43		%

Average Shareholders’ Equity and Average Tangible Common Equity


		For the three months ended						For the three months ended
(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		March 31, 2021			(in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Average shareholder’s equity		$	1,536,221	$	1,495,396	$	1,096,481
Average shareholder’s equity (GAAP)									Average shareholder’s equity (GAAP)	$	1,568,451	$	1,490,592	$	1,536,221
Less average preferred stock	Less average preferred stock	71,988		35,322		—			Less average preferred stock	71,988		71,988		71,988
Less average goodwill	Less average goodwill	365,164		365,164		260,567			Less average goodwill	365,164		365,164		365,164
Less average intangible assets	Less average intangible assets	21,540		23,008		22,346			Less average intangible assets	16,247		17,544		21,540
Average tangible common equity		$	1,077,529	$	1,071,902	$	813,568
Average tangible common equity (non-GAAP)									Average tangible common equity (non-GAAP)	$	1,115,052	$	1,035,896	$	1,077,529

PPNR

~~Critical Accounting Policies~~


	Quarter ended
(in thousands)	Mar 31, 2023		Dec 31, 2022		Mar 31, 2022
CALCULATION OF PRE-PROVISION NET REVENUE (PPNR)
Net interest income	$	139,529	$	138,835	$	101,165
Noninterest income	16,898		16,873		18,641
Less gain on sale of investment securities	381		—		—
Less gain on sale of other real estate owned	90		—		19
Less noninterest expense	80,983		77,149		62,800


PPNR (non-GAAP)	$	74,973	$	78,559	$	56,987

~~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, 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~~cautionary language regarding forward-looking statements in the ~~Private Securities Litigation Reform Act of 1995” included in~~introduction to Item 2 – ~~Management’s Discussion and Analysis~~ of ~~Financial Condition and Results of Operations~~Part I of this ~~report~~Quarterly Report on Form 10-Q and other cautionary statements set forth elsewhere in this report.

Interest Rate Risk

Our interest rate risk management practices are aimed at optimizing net interest income, while guarding against deterioration that could be caused by certain interest rate scenarios. Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. We attempt to maintain interest-earning assets, comprised primarily of both loans and investments, and interest-bearing liabilities, comprised primarily of deposits, maturing or repricing in similar time horizons in order to manage any impact from market interest rate changes according to our risk tolerances. The Company uses ~~an earnings~~a simulation model to measure ~~earnings~~the sensitivity to changing ~~rates.~~rates on earnings and economic value of equity (“EVE”). EVE is a longer term measure of interest rate risk and is based on the discounted cash flow or market value of each asset and liability category on the balance sheet.

The Company determines the sensitivity of its short-term future earnings and EVE 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 and EVE based on a hypothetical change in interest rates. The resulting net interest income for the next 12-month period and the EVE is compared to the ~~net interest income amount~~baseline amounts calculated using flat rates. The difference represents the Company’s ~~earning~~ 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 and EVE at March 31, ~~2022:~~2023:


~~Rate Shock~~1			Annual % change in net interest income
~~+ 300 bp~~			~~24.5%~~
~~+ 200 bp~~			~~15.8%~~
~~+ 100 bp~~			~~7.1%~~



1 ~~Due to the current levels of interest rates, the downward shock scenarios are not shown.~~


Rate Shock	Annual % change in net interest income	Percentage change in economic value of equity
+ 300 bp	9.8%	6.6%
+ 200 bp	6.6%	4.7%
+ 100 bp	3.3%	2.5%
- 100 bp	(3.5)%	(3.9)%
- 200 bp	(7.8)%	(9.3)%
- 300 bp	(12.4)%	(16.8)%

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

The Company occasionally uses interest rate derivative instruments as an asset/liability management tool to hedge mismatches in interest rate exposure indicated by the net interest income simulation described above. They are used to modify the Company’s exposures to interest rate fluctuations and provide more stable spreads between loan yields and the rate on their funding sources. At March 31, ~~2022,~~2023, the Company had ~~$62.0 million in~~ derivative

contracts ~~used~~ to manage interest rate ~~risk.~~risk, including $250.0 million in notional value on derivatives to hedge the cash flows on floating rate loans and $62.0 million in notional value on derivative on floating rate debt. Derivative financial instruments are also discussed in “Item 1. Note 6 – Derivative Financial Instruments.”

The FCA has announced that the most common USD LIBOR settings (overnight, 1-month. 3-month, 6-month and 12-month) will cease publication after September 30, 2024. However, LIBOR rates published after June 30, ~~2023.~~2023 will be based on a “synthetic” methodology. 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 toWith the cessation of LIBOR, the ~~USD LIBOR settings. While a~~Company has selected term SOFR as the replacement index ~~has not yet been selected,~~for the majority of its variable rate loans and began providing customer notifications in early 2023. The Company ceased using LIBOR and ICE swap rates in new contracts and began issuing SOFR based loans in December 2021.

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~~from the replacement index for affected contracts that expire after the expected discontinuation of representative LIBOR on June 30, 2023. ~~We are actively working to amend and address impacted contracts to allow for a replacement index. However, amending~~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,~~2023, the Company’s financial contracts indexed to LIBOR included ~~$2.3 billion~~$375.8 million in loans, ~~(including $597 million indirectly linked to LIBOR through reference to an ICE swap rate), $121~~$74.9 million in borrowings, and ~~$905~~$546.2 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~~$6.3 billion in variable rate loans at March 31, ~~2022.~~2023. Of these loans, ~~$3.3~~$3.7 billion have an interest rate floor and ~~42%~~nearly all of those loans were at or above the floor. $375.8 million in variable rate loans are indexed to LIBOR, $3.0 billion are indexed to the prime rate, $2.2 billion are indexed to SOFR, and $726.8 million are indexed to other rates.

~~The Company maintains an~~At March 31, 2023, the Company’s available-for-sale and held-to-maturity investment securities ~~portfolio that~~ totaled ~~$1.4~~$1.6 billion ~~at March 31, 2022. This portfolio~~and $720.7 million, respectively. These portfolios consists primarily of fixed-rate securities that are subject to changes in market value due to changes in interest rates. At March 31, ~~2022,~~2023, net unrealized losses were $161.6 million and $65.0 million on the available-for-sale and held-to-maturity 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,portfolios, respectively.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15, as of March 31, ~~2022.~~2023. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, the CEO and CFO concluded the Company’s disclosure controls and procedures were effective as of March 31, ~~2022~~2023 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 Quarterly Report on Form 10-Q, and Part I, Item 1A of our Report on Form 10-K for the fiscal year ended December 31, ~~2021. There have been no material changes to~~2022, which is supplemented by the additional risk ~~factors described in such Annual Report on Form 10-K.~~factor set forth below.

Adverse developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system and could have a material effect on the Company’s operations and/or stock price.

48The recent high-profile bank failures involving Silicon Valley Bank and Signature Bank have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks. These market developments have negatively impacted customer confidence in the safety and soundness of regional banks. As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations. In connection with high-profile bank failures, uncertainty and concern has been, and may be in the future, compounded by advances in technology that increase the speed at which deposits can be moved, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly. In addition, the banking operating environment and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could adversely impact the trading prices of our common stock and potentially our results of operations. For more information on the Company's liquidity position, please see the “Deposits” and “Liquidity and Capital Resources” sections of Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.

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

Period Total number of shares purchased (a) Weighted-average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs
January 1, 2022 through January 31, 2022 — — — 700,473
February 1, 2022 through February 28, 2022 42,964 48.03 42,964 657,509
March 1, 2022 through March 31, 2022 308,126 48.39 308,126 349,383
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.
None.

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)).

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

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

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

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

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

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

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

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

*31.1 Chief Executive ~~Officer��s~~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 March 31, ~~2022,~~2023, formatted in Inline XBRL (contained in Exhibit 101).

* Filed herewith

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri, on the day of April ~~29, 2022.~~28, 2023.


			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


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



Period	Total number of shares purchased (a)	Weighted-average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
January 1, 2022 through January 31, 2022	—	—		—	700,473
February 1, 2022 through February 28, 2022	42,964	48.03		42,964	657,509
March 1, 2022 through March 31, 2022	308,126	48.39		308,126	349,383
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.