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What changed in ENTERPRISE FINANCIAL SERVICES CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ENTERPRISE FINANCIAL SERVICES CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+302 added−282 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-26)

Top changes in ENTERPRISE FINANCIAL SERVICES CORP's 2024 10-K

302 paragraphs added · 282 removed · 242 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

67 edited+33 added−4 removed84 unchanged
Biggest changeWhile there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation: our ability to efficiently integrate acquisitions into our operations, retain the customers of these businesses and grow the acquired operations; credit risk; changes in the appraised valuation of real estate securing impaired loans; our ability to recover our investment in loans; fluctuations in the fair value of collateral underlying loans; outcomes of litigation and other contingencies; exposure to general and local economic and market conditions, including risk of recession, high unemployment rates, higher inflation and its impacts (including U.S. federal government measures to address higher inflation), U.S. fiscal debt, budget and tax matters, and any slowdown in global economic growth; risks associated with rapid increases or decreases in prevailing interest rates; changes in business prospects that could impact goodwill estimates and assumptions; consolidation within the banking industry; competition from banks and other financial institutions; the ability to attract and retain relationship officers and other key personnel; burdens imposed by federal and state regulation; changes in legislative or regulatory requirements, as well as current, pending or future legislation or regulation that could have a negative effect on our revenue and business, including rules and regulations relating to bank products and financial services; changes in accounting policies and practices or accounting standards; natural disasters; terrorist activities, war and geopolitical matters (including the war in Israel and potential for a broader regional conflict and the war in Ukraine and the imposition of additional sanctions and export controls in connection therewith), or pandemics, or other health emergencies and their effects on economic and business environments in which we operate, including the related disruption to the financial market and other economic activity; and other risks discussed under the caption “Risk Factors” in Item 1A of this Annual Report on Form 10-K, all of which could cause actual results to differ from those set forth in the forward-looking statements.
Biggest changeWhile there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation: the Company’s ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses and grow the acquired operations, as well as credit risk, changes in the appraised valuation of real estate securing impaired loans, outcomes of litigation and other contingencies, exposure to general and local economic and market conditions, 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, our ability to attract and retain deposits and access to other sources of liquidity, consolidation in the banking industry, competition from banks and other financial institutions, the Company’s ability to attract and retain relationship officers and other key personnel, burdens imposed by federal and state regulation, changes in legislative or regulatory requirements, as well as current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including rules and regulations relating to bank products and financial services, changes in accounting policies and practices or accounting standards, natural disasters (such as wildfires and earthquakes), terrorist activities, war and geopolitical matters (including the war in Israel and potential for a broader regional conflict and the war in Ukraine and the imposition of additional sanctions and export controls in connection therewith), or pandemics, and their effects on economic and business environments in which we operate, including the related disruption to the financial market and other economic activity; and other risks discussed under the caption “Risk Factors” in Item 1A of this Annual Report on Form 10-K, all of which could cause actual results to differ from those set forth in the forward-looking statements.
The following table summarizes the prompt corrective action categories: Prompt Corrective Action Category Total Risk-Based Capital Tier 1 Risk-Based Capital Common Equity Tier 1 Risk-Based Capital Tier 1 Leverage Ratio Well-capitalized 10.0% 8.0% 6.5% 5.0% Adequately capitalized 8.0% 6.0% 4.5% 4.0% Undercapitalized Significantly undercapitalized Critically undercapitalized Tangible equity / Total assets ≤ 2.0% In addition to the minimum capital ratios noted in the table above, the Basel III Capital Rules require the maintenance of a CCB consisting of CET1 capital in an amount equal to 2.5% of risk weighted assets to avoid restrictions on the ability to make capital distributions and to pay certain discretionary bonus payments to executive officers.
The following table summarizes the prompt corrective action categories: Prompt Corrective Action Category Total Risk-Based Capital Tier 1 Risk-Based Capital Common Equity Tier 1 Risk-Based Capital Tier 1 Leverage Ratio Well-capitalized 10.0% 8.0% 6.5% 5.0% Adequately capitalized 8.0% 6.0% 4.5% 4.0% Undercapitalized Significantly undercapitalized Critically undercapitalized Tangible equity / Total assets ≤ 2.0% 7 In addition to the minimum capital ratios noted in the table above, the Basel III Capital Rules require the maintenance of a CCB consisting of CET1 capital in an amount equal to 2.5% of risk weighted assets to avoid restrictions on the ability to make capital distributions and to pay certain discretionary bonus payments to executive officers.
Our geographic markets are served by multiple large financial and bank holding companies with substantial capital resources and lending capacity. We face competition not only from other financial holding companies and commercial banks, but also from credit unions, investment managers, insurers, brokerage firms, financial technology companies, and other providers of financial services and products.
Our geographic markets are served by multiple large financial and bank holding companies with substantial capital resources and lending capacity. We face competition not only from other financial holding companies and commercial banks, but also from credit unions, investment managers, insurers, brokerage firms, private credit, financial technology companies, and other providers of financial services and products.
These programs include: • Career Acceleration Program - This trainee program introduces participants to the foundations of credit and commercial banking, while allowing participants to experience a wide range of assignments by rotating through the various product partners and operational areas of the Company.
These programs include: • Career Acceleration Program - This trainee program introduces participants to the foundations of credit and commercial banking, while allowing them to experience a wide range of assignments by rotating through the various product partners and operational areas of the Company.
Those activities include, among other activities, certain insurance, advisory and securities activities. Support of Bank Subsidiary: Under Federal Reserve policy, the Company is expected to act as a source of financial and managerial strength for the Bank and to commit resources to support the Bank.
Those activities include, among other activities, certain insurance, advisory and securities activities. Support of Bank Subsidiary: Under Federal Reserve policy, the Company is expected to act as a source of financial and managerial strength for the Bank and to commit capital and financial resources to support the Bank.
The Bank’s payment of dividends also could be affected or limited by other 8 factors, such as events or circumstances which would lead the FDIC to require that it maintain capital in excess of regulatory guidelines.
The Bank’s payment of dividends also could be affected or limited by other factors, such as events or circumstances which would lead the FDIC to require that it maintain capital in excess of regulatory guidelines.
Regulation W places limits and conditions on the amount of loans or extensions of credit to, investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates.
Regulation W places limits 9 and conditions on the amount of loans or extensions of credit to, investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates.
The adoption of a volunteer time-off policy and improvements to internal communication processes are examples of changes that have been made in response to survey results. Our efforts are being recognized. For the past six years, the Bank has been included in the “Best Banks to Work for” by American Banker magazine for our dedication to employee satisfaction.
The adoption of a volunteer time-off policy and improvements to internal communication processes are examples of changes that have been made in response to survey results. Our efforts are being recognized. For the past seven years, the Bank has been included in the “Best Banks to Work for” by American Banker magazine for our dedication to employee satisfaction.
The STIP target is defined as a percentage of base salary based on the associate’s grade level as determined by our Human Resources department. As of January 1, 2024, our minimum wage is $17 per hour. The current minimum wage was instituted to maintain a competitive total rewards package that attracts and retains top talent.
The STIP target is defined as a percentage of base salary based on the associate’s grade level as determined by our Human Resources department. As of January 1, 2025, our minimum wage is $17 per hour. The current minimum wage was instituted to maintain a competitive total rewards package that attracts and retains top talent.
We are a secured lender on affordable housing projects funded through the use of federal and state low income housing tax credits. In addition, we provide leveraged and other loans on projects funded through the U.S. Department of the Treasury Community Development Financial Institution (“ Treasury 2 CDFI”) New Markets Tax Credit (“NMTC”) Program.
We are a secured lender on affordable housing projects funded through the use of federal and state low income housing tax credits. In addition, we provide leveraged and other loans on projects 2 funded through the U.S. Department of the Treasury Community Development Financial Institution (“Treasury CDFI”) New Markets Tax Credit (“NMTC”) Program.
In addition to base salary, approximately 64% of associates are eligible to participate in the Company’s Short Term Incentive Plan (“STIP”) program. Our STIP program is designed to align compensation with an associate’s performance in a given year. The program sets a performance level of short-term incentive awards that an associate is eligible to earn.
In addition to base salary, approximately 67% of associates are eligible to participate in the Company’s Short Term Incentive Plan (“STIP”) program. Our STIP program is designed to align compensation with an associate’s performance in a given year. The program sets a performance level of short-term incentive awards that an associate is eligible to earn.
The regulatory and supervisory structure establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of depositors, the deposit insurance funds and the banking system as a whole, rather than for the protection of shareholders or creditors.
The regulatory and supervisory structure establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of depositors, the deposit insurance fund and the banking system as a whole, rather than for the protection of shareholders or creditors.
By focusing on this specific product type, we have developed an expertise that differentiates us based upon speed and reliability of execution. • Life Insurance Premium Finance . We specialize in financing whole life insurance premiums utilized in high net worth estate planning through relationships with boutique estate planners throughout the United States. • Sponsor Finance .
By focusing on this specific product type, we have developed an expertise that differentiates us based upon speed and reliability of execution. • Life Insurance Premium Finance . We specialize in financing whole life insurance premiums utilized in high net worth estate planning through relationships with boutique estate planners throughout the country. • Sponsor Finance .
We believe this strategy allows us to maximize organic growth opportunities, which we supplement and enhance through disciplined growth through acquisition. As described in greater detail below, the Company offers a broad range of business and personal banking services, including wealth management services provided through Enterprise Trust.
We believe this strategy allows us to maximize organic growth opportunities, which we supplement and enhance through disciplined growth through acquisition. As described in greater detail below, the Company offers a broad range of business and personal banking services, including wealth management services.
All website addresses given in this document are for information only and are not intended to be an active link or to incorporate any website information into this document. 12
All website addresses given in this document are for information only and are not intended to be an active link or to incorporate any website information into this document. 13
At December 31, 2023, the Company had $93.0 million of trust preferred securities that are grandfathered under this provision.
At December 31, 2024, the Company had $93.0 million of trust preferred securities that are grandfathered under this provision.
At December 31, 2023, we employed 1,172 regular full-time and 49 part-time associates. We also employ seasonal/temporary associates and occasionally hire independent contractors for specific projects that require a highly specialized skill set or to provide additional resources during peak times, as needed. Our performance measures and compensation determinations are designed to ensure the proper balance of risk and reward.
At December 31, 2024, we employed 1,218 regular full-time and 38 part-time associates. We also employ seasonal/temporary associates and occasionally hire independent contractors for specific projects that require a highly specialized skill set or to provide additional resources during peak times, as needed. Our performance measures and compensation determinations are designed to ensure the proper balance of risk and reward.
We have a team of experienced bankers in production offices across the country that originate loans through the SBA 7(a) program. These loans are primarily owner-occupied, commercial real estate loans secured by a first lien. These loans predominantly have a 75% portion guaranteed by the SBA.
These specialty niche activities focus on the following areas: • SBA 7(a) . We have a team of experienced bankers in production offices across the country that originate loans through the SBA 7(a) program. These loans are primarily owner-occupied, commercial real estate loans secured by a first lien. These loans predominantly have a 75% portion guaranteed by the SBA.
We value accountability because it is essential to our success, and we accept our responsibility to hold ourselves and others accountable for meeting shareholder commitments and achieving exceptional standards of performance. We also believe in supporting our associates to achieve a work/life balance. Attracting and Retaining Talent. Our goal is to offer careers to our associates; not just jobs.
We value accountability because it is essential to our success, and we accept our responsibility to hold ourselves and others accountable for meeting shareholder commitments and achieving exceptional standards of performance. We also believe in supporting our associates to prioritize their wellness. Attracting and Retaining Talent. Our goal is to offer careers to our associates; not just jobs.
Under this system, the FDIC has established five capital categories (“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized”) and is required to take various mandatory supervisory actions, and is authorized to take other discretionary actions with respect to banks in the three undercapitalized categories.
Under this system, the FDIC has established five capital categories (“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.") Federal and state bank regulators are authorized and required to take various mandatory supervisory and other discretionary actions with respect to banks in the three undercapitalized categories.
The determination for our minimum wage was made after extensive research, including reviewing the current market landscape both inside and outside of banking and financial services, and with feedback from leadership. Currently, 96% of our associates earn more than the minimum wage.
The determination for our minimum wage was made after extensive research, including reviewing the current market landscape both inside and outside of banking and financial services, and with feedback from leadership.
USA PATRIOT Act: The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) requires each financial institution to: (i) establish an anti-money laundering program; (ii) establish due diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts involving foreign individuals and certain foreign banks; and (iii) implement certain due diligence policies, procedures and controls with regard to correspondent accounts in the United States for, or on behalf of, a foreign bank that does not have a physical presence in any country.
USA PATRIOT Act: The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) further augments and strengthens the requirements set forth in the BSA and requires each financial institution to: (i) establish an anti-money laundering program; (ii) establish due diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts involving foreign individuals and certain foreign banks; (iii) implement certain due diligence policies, procedures and controls with regard to correspondent accounts in the United States for, or on behalf of, a foreign bank that does not have a physical presence in any country; and (iv) eliminates civil liability for persons who file suspicious activity reports.
Dividend Restrictions and Share Repurchases: From time to time the Company may engage in share repurchases. The Federal Reserve requires that bank and financial holding companies, where certain conditions are triggered, 5 provide prior notice to, consult with, and in certain circumstances seek the approval of, the Federal Reserve or reserve bank staff prior to implementing a share repurchase plan.
Dividend Restrictions and Share Repurchases: From time to time the Company may engage in share repurchases. The Federal Reserve requires that bank and financial holding companies, where certain conditions are triggered, provide prior notice to, consult with, and in certain circumstances seek the approval of, the Federal Reserve or reserve bank staff prior to purchasing or redeeming its equity securities.
Performance evaluations facilitate our ongoing assessment of associates’ skills and improvements as needed. We use annual talent reviews to identify high performing associates and future potential leaders, provide 10 insight into critical development needs and retention risks, and identify business-critical talent needs, including anticipated workforce planning challenges.
Performance evaluations facilitate our ongoing assessment of associates’ skills and improvements as needed. We use annual talent reviews to identify high-performing associates and future potential leaders, provide insight into critical development needs and retention risks, and identify business-critical talent needs, including anticipated workforce planning challenges. Additionally, we have established succession plans to ensure continuation of essential roles and operations.
In October 2022, the SEC adopted rules requiring securities exchanges, including Nasdaq, to adopt listing standards that require issuers to develop and implement a policy providing, under certain circumstances, for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers.
In October 2022, the SEC adopted rules requiring securities exchanges, including Nasdaq, to adopt listing standards that require issuers to develop and implement a policy providing, under certain circumstances, for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers. The rules, which were mandated as part of the Dodd-Frank Act became effective in January 2023.
The Dodd-Frank Act is a comprehensive legislative act that contains a set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets. The Dodd-Frank Act made extensive changes in the regulation of financial institutions and their holding companies.
The Dodd-Frank Act is a comprehensive legislative act that contains a set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets.
Human Capital Management We pride ourselves in creating an open, diverse, and transparent culture that celebrates teamwork and recognizes associates at all levels. We expect and encourage participation and collaboration, and understand that we need each other to be successful.
Human Capital Management We focus on creating an inclusive and transparent culture that celebrates teamwork and recognizes associates at all levels. We expect and encourage participation and collaboration, and understand we need each other to be successful.
Additionally, we have established succession plans to ensure continuation of critical roles and operations. We are committed to offering a competitive total compensation package that is consistent with our principles and aligned with the Company’s financial performance. We regularly compare compensation and benefits with peer companies and market data, making adjustments as needed to ensure our compensation stays competitive.
We are committed to offering a competitive total compensation package that is consistent with our principles and aligned with the Company’s financial performance. We regularly compare compensation and benefits with peer companies and market data, making adjustments to compensation as needed to ensure we remain competitive.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies concerning the establishment of deposit insurance assessment fees, classification of assets and establishment of adequate credit loss reserves for regulatory purposes. Various legislation is from time to time introduced in Congress and state legislatures where we operate.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies concerning the establishment of deposit insurance assessment fees, classification of assets and establishment of adequate credit loss reserves for regulatory purposes.
In 2023, we were ranked fifth among similar financial institutions with more than $10 billion in assets. Diversity, Equity & Inclusion . We believe diversity of thought and experiences results in better outcomes and empowers our associates to make more meaningful contributions within our company and communities.
In 2024, we were ranked fourth among similar financial institutions with more than $10 billion in assets. Belonging & Inclusion . We believe diversity of thought and experiences helps us build better teams and improve our client experience, results in better outcomes, and empowers our associates to make more meaningful contributions within our company and communities.
Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk- management control or governance processes, pose a risk to the organization’s safety and soundness, and the organization is not taking prompt and effective measures to correct the deficiencies.
Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk- management control or governance processes, pose a risk to the organization’s safety and soundness, and the organization is not taking prompt and effective measures to correct the deficiencies. 6 The scope and content of the U.S. banking regulators’ policies on executive compensation may continue to evolve in the near future.
The program offers financial rewards to associates who adopt healthy habits and participate in wellness education and health screens. Annual health screenings are provided to all associates enrolled in medical benefits at no charge. Associate Feedback . We conduct associate surveys to ensure we understand what is important to our associates, including their opinions on a variety of topics.
Our wellness program offers financial rewards to associates who adopt healthy habits and participate in wellness education and health screenings. Annual health screenings for associates and spouses/domestic partners enrolled in our medical plans are provided to all associates at no charge. Associate Feedback . We conduct associate surveys to ensure we understand what is important to our associates.
In addition, the fraud-prevention adjustment would increase from 1 cent to 1.3 cents. We will continue to monitor for final rulemaking and will evaluate the impact of any changes.
In addition, the fraud-prevention adjustment would increase from 1 cent to 1.3 cents. In January 2024, the Federal 11 Reserve announced it would extend the comment period from February 2024 to May 2024. We will continue to monitor for final rulemaking and will evaluate the impact of any changes.
The new rules, which were mandated as part of the Dodd-Frank Act became effective in January 2023. Pursuant to Nasdaq listing standards, the Company adopted a clawback policy that implemented the rules in the third quarter of 2023. 6 Bank Subsidiary The Bank is subject to extensive federal and state regulatory oversight.
Pursuant to Nasdaq listing standards, the Company adopted a clawback policy that implemented the rules in the third quarter of 2023. Bank Subsidiary The Bank is subject to extensive federal and state regulatory oversight.
In response to ever increasing needs for data/information security and functional efficiency, we continue to offer cash management systems that employ mobile technology and fraud detection/mitigation services. Enterprise Trust offers a wide range of fiduciary, investment management, and financial advisory services to facilitate providing these services.
Customized solutions and special product bundles are available to clients of all sizes. In response to ever increasing needs for data/information security and functional efficiency, we continue to offer cash management systems that employ mobile technology and fraud detection/mitigation services. We offer a wide range of fiduciary, investment management, and financial advisory services.
See “Liquidity and Capital Resources” in the MD&A for more information on our capital adequacy, and “Bank Subsidiary - Community Reinvestment Act” below for more information on the CRA. 4 Acquisitions: With certain limited exceptions, the BHCA requires every financial holding company or bank holding company to obtain the prior approval of the Federal Reserve before (i) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company.
With certain limited exceptions, the BHCA requires every financial holding company or bank holding company to obtain the prior approval of the Federal Reserve and possibly other government authorities before (i) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company.
The following is a summary description of the relevant laws, rules, and regulations governing banks and financial holding companies, including the Company. The description of, and references to, the statutes and regulations below are brief summaries and do not purport to be complete. The descriptions are qualified in their entirety by reference to the related statutes and regulations.
Accordingly, the Company is subject to both SEC and Nasdaq listing standards. The following is a summary description of the relevant laws, rules, and regulations governing banks and financial holding companies, including the Company. The description of, and references to, the statutes and regulations below are brief summaries and do not purport to be complete.
These guidelines include concentrations in certain types of CRE that may warrant greater supervisory scrutiny: total reported loans for construction, land development, and other land represent 100% or more of the institutions total capital; or total commercial real estate loans represent 300% or more of the institution’s total capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more in the prior 36 months. 9 Volcker Rule: On December 10, 2013, the federal regulators adopted final regulations to implement the proprietary trading and private fund prohibitions of the Volcker Rule under the Dodd-Frank Act.
These guidelines include concentrations in certain types of CRE that may warrant greater supervisory scrutiny: total reported loans for construction, land development, and other land represent 100% or more of the institutions total capital; or total commercial real estate loans represent 300% or more of the institution’s total capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more in the prior 36 months.
The Company’s common stock is listed on the Nasdaq Stock Market. The Company also has depositary shares, each representing a 1/40th interest in a share of the Company’s 5%, noncumulative perpetual preferred stock (“Series A Preferred Stock”), listed on the Nasdaq Stock Market. Accordingly, the Company is subject to both SEC and Nasdaq listing standards.
The Company has securities registered with the SEC under the Securities Exchange Act of 1934, as amended. The Company’s common stock is listed on the Nasdaq Stock Market. The Company also has depositary shares, each representing a 1/40th interest in a share of the Company’s 5%, noncumulative perpetual preferred stock (“Series A Preferred Stock”), listed on the Nasdaq Stock Market.
Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in the forward-looking statements and future results could differ materially from historical performance. Further, the ability to predict results or the actual effect of future plans or strategies is inherently uncertain.
Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in the forward-looking statements and future results could differ materially from historical performance. They are neither statements of historical fact nor guarantees or assurances of future performance.
The Bank is a Missouri trust company with banking powers and is subject to supervision and regulation by the Missouri Division of Finance. In addition, as a Federal Reserve non-member bank, the Bank is subject to supervision and regulation by the FDIC. The Company has securities registered with the SEC under the Securities Exchange Act of 1934, as amended.
The Bank is a Missouri trust company with banking powers and is subject to supervision and regulation by the Missouri Division of Finance. In addition, as a Federal Reserve non-member bank, the Bank is subject to supervision and regulation by the FDIC. The Company has more than $10 billion in assets and therefore is subject to examination by the CFPB.
Lending services include C&I, CRE, real estate construction and development, residential real estate, SBA, consumer and other loan products. A wide variety of deposit products, including property management and community associations along with a complete suite of treasury management and international trade services for operating businesses, complement our lending capabilities.
Lending services include C&I, CRE, real estate construction and development, residential real estate, SBA, consumer and other loan products. A wide variety of deposit products, along with a complete suite of treasury management and international trade services, complement our lending capabilities. Building long-term client relationships – Our growth strategy is first and foremost client relationship driven.
The scope and content of the U.S. banking regulators’ policies on executive compensation may continue to evolve in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect the Company’s ability to hire, retain, and motivate its key employees.
It cannot be determined at this time whether compliance with such policies will adversely affect the Company’s ability to hire, retain, and motivate its key employees.
The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit unfair, deceptive or abusive acts and practices.
Depository institutions with more than $10 billion in assets, such as the Bank, are subject to examination by the CFPB. 8 The CFPB has broad rule-making authority for a wide range of federal consumer protection laws that apply to all banks, including the authority to prohibit unfair, deceptive or abusive acts and practices.
We have begun the process of converting our primary operating system to a leading core solution, and plan to implement the new core in late 2024. Maintaining asset quality – We monitor asset quality through formal, ongoing, multiple-level reviews of loans in each market and specialized lending niche. These reviews are overseen by the Bank’s credit administration department.
In 2024, the Company successfully completed the conversion of its legacy core system into a new core banking platform. Maintaining asset quality – We monitor asset quality through formal, ongoing, multiple-level reviews of loans in each market and specialized lending niche. These reviews are overseen by the Bank’s credit administration department.
We also offer a wide array of benefits for our associates and their families including 401(k), paid time off, parental leave, medical, dental and vision benefits as well as life insurance and short-term disability for all full-time associates. Our wellness program is designed to help associates avoid illness while improving and maintaining their general health.
Currently, 100% of our associates earn more than the minimum wage. 12 We also offer a wide array of benefits for our associates and their families including 401(k), paid time off, parental leave, medical, dental and vision benefits as well as life insurance and short-term disability for all full-time associates.
An “undercapitalized” bank also is generally prohibited from increasing its average total assets, making acquisitions, establishing new branches, or engaging in any new line of business, except in accordance with an accepted capital restoration plan or with the approval of the 7 FDIC.
The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be “adequately capitalized.” An “undercapitalized” bank also is generally prohibited from increasing its average total assets, making acquisitions, establishing new branches, or engaging in any new line of business, except in accordance with an accepted capital restoration plan or with the approval of the FDIC.
Building long-term client relationships – Our growth strategy is first and foremost client relationship driven. We continuously seek to add clients who fit our target market of businesses, business owners, professionals, and associated relationships. Those relationships are maintained, cultivated, and expanded over time by experienced banking officers and other trained professionals.
We continuously seek to add clients who fit our target market of businesses, business owners, professionals, and associated relationships. Those relationships are maintained, cultivated, and expanded over time by experienced banking officers and other trained professionals. We fund loan growth primarily with core deposits from our business and professional clients in addition to consumers in our branch market areas.
The Dodd-Frank Act codified this longstanding policy by adopting a provision requiring, among other things, that bank holding companies serve as a source of strength for an subsidiary depository institution. Such financial and managerial support from the Company may be required at times when, without this legal requirement, the Company may not be inclined to provide it.
The Dodd-Frank Act codified this longstanding policy by adopting a provision requiring, among other things, that bank holding companies serve as a source of strength for an subsidiary depository institution.
Commercial Real Estate Lending: The Bank’s lending operations may be subject to enhanced scrutiny by federal banking regulators based on its concentration of commercial real estate loans.
The USA PATRIOT Act includes provisions providing the government with the power to investigate terrorism, including expanded government access to bank account records. Commercial Real Estate Lending: The Bank’s lending operations may be subject to enhanced scrutiny by federal banking regulators based on its concentration of commercial real estate loans.
Financial Holding Company As a financial holding company, the Company is subject to regulation and examination by the Federal Reserve, and is required to file periodic reports of its operations and such additional information as the Federal Reserve may require.
The Dodd-Frank Act made extensive changes in the regulation of financial institutions and their holding companies, including modifications made by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. 4 Financial Holding Company As a financial holding company, the Company is subject to regulation and examination by the Federal Reserve, and is required to file periodic reports of its operations and such additional information as the Federal Reserve may require.
Consumer Financial Protection Bureau: The Dodd-Frank Act centralized responsibility for consumer financial protection including implementing, examining and enforcing compliance with federal consumer financial laws with the CFPB. Depository institutions with more than $10 billion in assets, such as the Bank, are subject to examination by the CFPB.
Consumer Financial Protection Bureau: The Dodd-Frank Act centralized responsibility for consumer financial protection including implementing, examining and enforcing compliance with federal consumer financial laws with the CFPB.
Upon successful completion of the program, participants receive a small stipend and are guaranteed an interview with one of the program sponsors. • Business Resource Groups - These groups bring together associates with a shared identity, interest or goal to create community and opportunities for improvement and engagement. 11 We track the representation of women and underrepresented minorities because we believe that diversity helps us build more effective teams and improve our client experience, leading to greater success for the Company and our shareholders.
Upon successful completion of the program, participants receive a small stipend and are guaranteed an interview with one of the program sponsors. • Business Resource Groups - These groups, which are open to all associates, bring together associates with a shared identity, interest or goal to create community and opportunities for improvement and engagement.
Specialized lending and product niches – We have focused our lending activities in specialty markets where we believe our expertise and experience as a commercial lender provides advantages over other competitors. In addition, we have developed expertise in certain product niches. These specialty niche activities focus on the following areas: • SBA 7(a) .
This is supplemented by borrowing or other deposit sources, including advances from the FHLB and brokered certificates of deposits. Specialized lending and product niches – We have focused our lending activities in specialty markets where we believe our expertise and experience as a commercial lender provides advantages over other competitors. In addition, we have developed expertise in certain product niches.
The Dodd-Frank Act allows borrowers to raise certain defenses to foreclosure if they receive any loan other than a “qualified mortgage” as defined by the CFPB. Dividends by the Bank Subsidiary: Under Missouri law, the Bank may pay dividends to the Company only from a portion of its undivided profits and may not pay dividends if its capital is impaired.
The Dodd-Frank Act allows borrowers to raise certain defenses to foreclosure if they receive any loan other than a “qualified mortgage” as defined by the CFPB. Dividends by the Bank Subsidiary: The Bank is a legal entity that is separate and distinct from EFSC. Statutory and regulatory limitations apply to the Bank's payment of dividends to EFSC.
The final rule becomes effective on April 1, 2024, while most of the new requirements are applicable beginning January 1, 2026, and the remaining requirements are applicable January 1, 2027.
The final rule became effective on April 1, 2024, and most of the new requirements are applicable beginning January 1, 2026, and the remaining requirements are applicable January 1, 2027. Privacy and Cybersecurity Regulations: Our businesses are subject to numerous laws and regulations relating to the privacy of information regarding clients, employees and others.
Specialty deposits – In addition to commercial operating accounts for our C&I customers, we offer specialty deposit accounts to customers in certain industries with complex account needs. Our focus areas include community associations, property management, third party escrow, and trust services. These accounts are primarily demand accounts and have a low overall interest cost.
We lend to the partnership and receive interest income and fee income as projects close or credits are sold. Deposit verticals – In addition to commercial operating accounts for our C&I customers, we offer deposit vertical accounts to customers in certain industries with complex account needs. Our focus areas include community associations, property management, legal industry and escrow services.
Our formal Health & Safety (“HS”) Policy mandates all tasks be conducted in a safe and efficient manner and comply with all local, state and federal health and safety regulations, and special safety concerns. The HS Policy encompasses all facilities and operations and addresses on-site emergencies, injuries and illnesses, evacuation procedures, cell phone usage and general safety rules.
Focusing on a Safe and Healthy Workplace . We value our associates and are committed to providing a safe and healthy workplace. Our formal Health & Safety (“HS”) Policy mandates all tasks be conducted in a safe and efficient manner and comply with all local, state, and federal safety and health regulations, and addresses special safety concerns.
Additionally, our Business Continuity Plan is an important component in helping maintain the health and safety of our associates and clients.
Our HS Policy encompasses all facilities and operations and addresses on-site emergencies, injuries and illnesses, evacuation procedures, cell phone usage and general safety rules. Additionally, our Business Continuity Plan is an important component in helping maintain the health and safety of our associates and clients.
These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. The Bank has a satisfactory rating under CRA. Prior to 2023, the last significant interagency revision to the CRA regulations occurred in 1995.
These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. If the Bank fails to maintain at least a "satisfactory" rating under the CRA, it would be subject to restrictions on certain new activities and acquisitions.
Capital Adequacy: The Company is subject to capital requirements and standards established by the Federal Reserve (“Basel III Capital Rules”) that are applied on a consolidated basis. These requirements are substantially similar to those required of the Bank (summarized below).
Such financial and managerial support from the Company may be required at times when, without this legal requirement, the Company may not be inclined to provide it. 5 Capital Adequacy: The Company is subject to capital requirements and standards established by the Federal Reserve (“Basel III Capital Rules”) that are applied on a consolidated basis.
Customers in our specialty deposit products will typically receive an earnings credit rate that is used to offset the cost of maintaining the deposit accounts. Payments made by the Company through the application of the earnings credit is reflected as a component of non-interest expense in the Consolidated Statement of Income.
These accounts are primarily demand accounts and have a low overall interest cost. Customers in our deposit vertical products will typically receive an earnings credit that is used to offset the cost of maintaining the deposit accounts.
Fee income business – We offer a broad range of treasury management products and services that benefit businesses ranging from large national clients to local businesses. Customized solutions and special product bundles are available to clients of all sizes.
Payments made by the Company through the application of the earnings credit is reflected as a component of noninterest expense in the Consolidated Statement of Income. Fee income business – We offer a broad range of treasury management products and services that benefit businesses ranging from large national clients to local businesses.
In 2023, we were awarded a $60.0 million NMTC allocation from the Treasury CDFI. This was our sixth NMTC allocation and brings the total amount of these allocations to $303.0 million. We will continue to participate in the application process for future awards, as well as serve as a secured lender to other allocatees. • Tax Credit Brokerage .
In 2023 and 2024, we were awarded $60.0 million and $50.0 million, respectively, in NMTC allocations from the Treasury CDFI. These were our sixth and seventh NMTC allocations, respectively, and brings the total amount of these allocations to $353.0 million.
Also, the FDIC may treat an “undercapitalized” bank as being “significantly undercapitalized” if it determines that those actions are necessary to carry out the purpose of the law. All of the Bank’s capital ratios were at levels that qualify it to be “well-capitalized” for regulatory purposes as of December 31, 2023 (see “Item 8. Note 14 – Regulatory Capital”).
Also, the FDIC may treat an “undercapitalized” bank as being “significantly undercapitalized” if it determines that those actions are necessary to carry out the purpose of the law. The prompt corrective action regulations do not apply to bank holding companies, such as EFSC.
We have a minority ownership in a partnership that acquires, invests and sells, state low income housing tax credits. We lend the partnership money with 6 - 12 year terms and receive interest income and fee income as projects close or credits are sold.
We will continue to participate in the application process for future awards, as well as serve as a secured lender to other allocatees. • Tax Credit Brokerage . We have a minority ownership in a partnership that acquires, invests and sells, state low income housing tax credits.
Our diversity data is monitored by the Board. We have made progress in this area and continue to strive to further diversify our workforce and strengthen our culture of inclusion. Focusing on a Safe and Healthy Workplace . We value our associates and are committed to providing a safe and healthy workplace.
We have made progress in this area, but continue to strive to further diversify our workforce and deepen our culture of inclusion. Our Belonging & Inclusion Council is a management committee which provides information, ideas and insights from a variety of diverse perspectives to help us foster an inclusive environment for our associates and the communities we serve.
Removed
Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends, and statements about future performance, operations, products and services.
Added
Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “pro forma”, “pipeline” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made.
Removed
We fund loan growth primarily with core deposits from our business and professional clients in addition to consumers in our branch market areas. This is supplemented by borrowing or other deposit sources, including advances from the FHLB and brokered certificates of deposits.
Added
The descriptions are qualified in their entirety by reference to the related statutes and regulations.
Removed
Some of the changes brought about by the Dodd-Frank Act have been modified by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, signed into law on May 24, 2018.
Added
If federal or state regulatory authorities were to take the position that the Company has violated any law or commitment or engaged in any unsafe or unsound practice, formal or informal corrective or enforcement actions could be taken against the Company and institution-affiliated parties (such as directors, officers, and agents).
Removed
We continue to learn and grow, and our current initiatives reflect our ongoing efforts around a more diverse, inclusive and equitable workplace. Our Diversity, Equity & Inclusion Council is tasked with making recommendations to help us foster a diverse, equitable and inclusive environment for our associates and the communities we serve.
Added
These enforcement actions could include an imposition of civil monetary penalties and could directly affect not only the Company and institution-affiliated parties but also the Company’s counterparties, shareholders, and creditors and its commitments, arrangements, or other dealings. Various legislation is from time to time introduced in Congress and state legislatures where we operate.
Added
See “Liquidity and Capital Resources” in the MD&A for more information on our capital adequacy, and “Bank Subsidiary - Community Reinvestment Act” below for more information on the CRA.
Added
Acquisitions: Under amendments to the BHCA promulgated by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and the Dodd-Frank Act, the Company may acquire banks outside of its home State of Missouri, subject to specified limits and may establish new branches in other States to the same extent as banks chartered in those States.
Added
These requirements are substantially similar to those required of the Bank (summarized below).
Added
The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized bank guarantees the bank subsidiary’s compliance with the capital restoration plan up to a certain specified amount.
Added
However, the Federal Reserve is authorized to take appropriate action at the bank holding company level, based upon the undercapitalized status of the bank holding company's depository institution subsidiaries.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe Company may also find it difficult or impossible to sell these properties. We may be obligated to indemnify certain counterparties in financing transactions we enter into pursuant to the New Markets Tax Credit Program. We participate in and have previously been an “Allocatee” of the New Markets Tax Credit Program of the U.S.
Biggest changeWe could also be liable for pollution generated by a borrower’s operations if we take a role in managing those operations after a default. The Company may also find it difficult or impossible to sell these properties. We may be obligated to indemnify certain counterparties in financing transactions we enter into pursuant to the New Markets Tax Credit Program.
Moreover, we cannot give any assurance we will benefit from any market growth or favorable economic conditions in our primary market areas even if they do occur. We face potential risk from changes in governmental monetary policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the U.S. government and its agencies.
Moreover, we cannot give any assurance we will benefit from any market growth or favorable economic conditions in our primary market areas even if they do occur. We face potential risk from changes in governmental monetary and fiscal policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the U.S. government and its agencies.
In addition, if charge-offs in future periods exceed the allowance for loan losses (i.e., if the loan allowance is inadequate), we may need additional credit loss provisions to increase the allowance for loan losses.
In addition, if charge-offs in future periods exceed the allowance for credit losses (i.e., if the allowance for credit losses is inadequate), we may need additional credit loss provisions to increase the allowance for loan losses.
If real estate values would decline in our markets, our ability to recover on defaulted loans for which the primary reliance for repayment is on the real estate collateral by foreclosing and selling that real estate would then be diminished, and we would be more likely to suffer losses on defaulted loans.
If real estate values decline in our markets, our ability to recover on defaulted loans for which the primary reliance for repayment is on the real estate collateral by foreclosing and selling that real estate would then be diminished, and we would be more likely to suffer losses on defaulted loans.
These broad market fluctuations could make it more difficult for you to resell your common stock or depositary shares when you want and at prices you find attractive. 23 Our stock price and the price of our depositary shares can fluctuate significantly in response to a variety of factors including, among other things: • actual or anticipated quarterly fluctuations in our operating results and financial condition; • changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts; • reputation; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; • strategic actions by us or our competitors, such as acquisitions or restructurings; • actions by institutional shareholders; • fluctuations in the stock prices and operating results of our competitors; • general market conditions and, in particular, developments related to market conditions for the financial services industry; • proposed or adopted regulatory changes or developments; • anticipated or pending investigations, proceedings or litigation that involve or affect us; and/or • domestic and international economic factors unrelated to our performance.
These broad market fluctuations could make it more difficult for you to resell your common stock or depositary shares when you want and at prices you find attractive. 24 Our stock price and the price of our depositary shares can fluctuate significantly in response to a variety of factors including, among other things: • actual or anticipated quarterly fluctuations in our operating results and financial condition; • changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts; • reputation; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; • strategic actions by us or our competitors, such as acquisitions or restructurings; • actions by institutional shareholders; • fluctuations in the stock prices and operating results of our competitors; • general market conditions and, in particular, developments related to market conditions for the financial services industry; • proposed or adopted regulatory changes or developments; • anticipated or pending investigations, proceedings or litigation that involve or affect us; and/or • domestic and international economic factors unrelated to our performance.
The loss of any of our executive officers or other key employees, the failure to successfully transition key roles, or the inability to hire, train, retain, and manage qualified personnel, could have a material adverse effect on our business strategy, financial condition, results of operations and cash flows. 20 We face significant competition.
The loss of any of our executive officers or other key employees, the failure to successfully transition key roles, or the inability to hire, train, retain, and manage qualified personnel, could have a material adverse effect on our business strategy, financial condition, results of operations and cash flows. We face significant competition.
If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including any acquisition plans.
If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to 15 pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including any acquisition plans.
An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan and covered loan losses, and an increase in loan charge-offs, all of these factors could impact allowance, earnings and/or capital levels. Our loan portfolio includes loans secured by real estate, which could result in increased credit risk.
An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for credit losses, and an increase in loan charge-offs, all of these factors could impact allowance, earnings and/or capital levels. Our loan portfolio includes loans secured by real estate, which could result in increased credit risk.
As part of these financing transactions, we as the parent to Enterprise Financial CDE, LLC (“CDE”), provide customary indemnities to the tax credit investors, which require us to indemnify and hold harmless the investors in the event a credit recapture event occurs, unless the recapture is a result of action or inaction of the investor.
As part of these financing transactions, we as the parent to Enterprise Financial CDE, LLC, provide customary indemnities to the tax credit investors, which require us to indemnify and hold harmless the investors in the event a credit recapture event occurs, unless the recapture is a result of action or inaction of the investor.
Failure to maintain and implement adequate programs to combat money laundering 14 and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition, results of operations and future prospects.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition, results of operations and future prospects.
As an approved participant in the SBA Preferred Lender’s Program (a “Preferred Lender”), we enable our clients to obtain SBA loans without being 13 subject to the potentially lengthy SBA approval process necessary for lenders that are not Preferred Lenders.
As an approved participant in the SBA Preferred Lender’s Program (a “Preferred Lender”), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not Preferred Lenders.
In the case of our senior cash flow loans, we generally take a lien on substantially all of a client’s assets, but the value of those assets is typically substantially less than the amount of money we advance to the client under a cash flow transaction.
In the case of our senior cash flow loans, we generally take a lien on substantially all of a client’s assets, but the value of those assets is typically substantially less than the 18 amount of money we advance to the client under a cash flow transaction.
Thus, if a cash flow transaction becomes non-performing, our primary 17 recourse to recover some or all of the principal of our loan or other debt product would be to force the sale of all or part of the company as a going concern.
Thus, if a cash flow transaction becomes non-performing, our primary recourse to recover some or all of the principal of our loan or other debt product would be to force the sale of all or part of the company as a going concern.
If we are unable to manage these risks, our operations may be materially and adversely affected. 22 Technology and Cybersecurity Risks A failure in or breach, or the inability to recognize a potential breach of our operational or security systems, or those of our third party service providers, including as a result of cyber-attacks, may cause industry-wide operational disruptions that could materially affect our business, result in unintentional disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and adversely impact our earnings.
If we are unable to manage these risks, our operations may be materially and adversely affected. 23 Technology and Cybersecurity Risks A failure in or breach, or the inability to recognize a potential breach of our operational or security systems, or those of our third party service providers, including as a result of cyber-attacks, may cause industry-wide operational disruptions that could materially affect our business, result in unintentional disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and adversely impact our earnings.
Failure to perform in any of these areas could significantly weaken our competitive position, and could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations. Technology is continually changing and we must effectively implement new innovations in providing services to our customers.
Failure to perform in any of these areas could significantly weaken our competitive position, and could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations. Technology is continually changing and we must effectively implement new innovations in providing services to our clients.
We may not be able, however, to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Costs and levels of deposits are affected by competition that could increase our funding costs or liquidity risk. We rely on bank deposits to be a low cost and stable source of funding.
We may not be able, however, to effectively implement new technology-driven products and services or be successful in marketing these products and services to our clients. Costs and levels of deposits are affected by competition that could increase our funding costs or liquidity risk. We rely on bank deposits to be a low cost and stable source of funding.
Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans. Our SBA lending program is dependent upon the U.S. federal government.
Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans. 14 Our SBA lending program is dependent upon the U.S. federal government.
The regional economic conditions in areas where we conduct our business have an impact on the demand for our products and services as well as the ability of our clients to repay 16 loans, the value of the collateral securing loans, and the stability of our deposit funding sources.
The regional economic 17 conditions in areas where we conduct our business have an impact on the demand for our products and services as well as the ability of our clients to repay loans, the value of the collateral securing loans, and the stability of our deposit funding sources.
In the event the Bank was restricted from paying 24 dividends to us or making payments under the tax sharing agreement, we may not be able to service our debt, pay our other obligations or pay dividends on our common stock or preferred stock.
In the event the Bank was restricted from paying 25 dividends to us or making payments under the tax sharing agreement, we may not be able to service our debt, pay our other obligations or pay dividends on our common stock or preferred stock.
The process for determining whether impairment of a security is other-than-temporary often requires complex, subjective judgments about whether there has been significant deterioration in the financial condition of the issuer, whether management has the intent or ability to hold a security for a period of time sufficient to allow for any anticipated recovery in fair value, the future financial performance and liquidity of the issuer and any collateral underlying the security and other relevant factors.
The process for determining the impairment of a security often requires complex, subjective judgments about whether there has been significant deterioration in the financial condition of the issuer, whether management has the intent or ability to hold a security for a period of time sufficient to allow for any anticipated recovery in fair value, the future financial performance and liquidity of the issuer and any collateral underlying the security and other relevant factors.
We may be unable to integrate operations successfully or to achieve expected results or cost savings. 21 Acquiring other banks or businesses involves various risks commonly associated with acquisitions, including, among other things: • potential exposure to unknown or contingent liabilities of the target company; • exposure to potential asset quality issues of the target company; • difficulty and expense of integrating the operations and personnel of the target company; • potential disruption to our business; • potential diversion of our management’s time and attention; • the possible loss of key employees and clients of the target company; • difficulty in estimating the value of the target company; • payment of a premium over book and market values that may dilute our tangible book value and earnings per share in the short- and long-term; • inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits; and/or • potential changes in banking or tax laws or regulations that may affect the target company.
Acquiring other banks or businesses involves various risks commonly associated with acquisitions, including, among other things: • potential exposure to unknown or contingent liabilities of the target company; • exposure to potential asset quality issues of the target company; • difficulty and expense of integrating the operations and personnel of the target company; • potential disruption to our business; • potential diversion of our management’s time and attention; • the possible loss of key employees and clients of the target company; • difficulty in estimating the value of the target company; • payment of a premium over book and market values that may dilute our tangible book value and earnings per share in the short- and long-term; • inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits; and/or • potential changes in banking or tax laws or regulations that may affect the target company.
Our future success will depend, in part, upon our ability to address the needs of our customers using innovative methods, processes and technology to provide products and services that will satisfy customer demands for convenience as well as to add efficiencies in our operations as we continue to grow and expand our market areas.
Our future success will depend, in part, upon our ability to address the needs of our clients using innovative methods, processes and technology to provide products and services that will satisfy client demands for convenience as well as to add efficiencies in our operations as we continue to grow and expand our market areas.
If we do not manage our growth successfully, then our business, results of operations or financial condition may be adversely affected. 15 We may incur impairments to goodwill. As of December 31, 2023, we had $365 million recorded as goodwill. We evaluate our goodwill for impairment at least annually.
If we do not manage our growth successfully, then our business, results of operations or financial condition may be adversely affected. 16 We may incur impairments to goodwill. As of December 31, 2024, we had $365 million recorded as goodwill. We evaluate our goodwill for impairment at least annually.
A majority of our loans are to businesses and individuals in the St. Louis, Kansas City, Phoenix, Los Alamos, Albuquerque, Santa Fe, Los Angeles, San Diego, Dallas, and Las Vegas metropolitan areas. These loans are funded by deposits in the same metropolitan areas.
A majority of our loans are to businesses and individuals in the St. Louis, Kansas City, Phoenix, Los Alamos, Albuquerque, Santa Fe, Los Angeles, San Diego, Dallas, and Las Vegas metropolitan areas. These loans are funded by deposits in the same metropolitan areas, in addition to our national deposit verticals.
Although we have no present intention to issue any additional shares of our authorized preferred stock, there can be no assurance that the Company will not do so in the future. General Risk Factors Climate change may materially adversely affect our business and results of operations. Political and social attention to the issue of climate change has continued.
Although we have no present intention to issue any additional shares of our authorized preferred stock, there can be no assurance that the Company will not do so in the future. General Risk Factors Climate change may materially adversely affect our business and results of operations.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition. 26 ITEM 1B: UNRESOLVED STAFF COMMENTS None.
While the Department of the Treasury, the Federal Reserve, and the FDIC ensured that depositors of Silicon Valley Bank, Signature Bank and First Republic Bank had access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will continue to be successful in restoring customer confidence in regional banks and the banking system more broadly.
While the Department of the Treasury, the Federal Reserve, and the FDIC historically have ensured that depositors of failed banks had access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will continue to be successful in restoring customer confidence in regional banks and the banking system more broadly.
In connection with the high-profile bank failures of early 2023, 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.
The high-profile bank failures of early 2023 highlighted the uncertainty and concern around 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.
Our commercial loans include loans secured by real estate (commercial property, construction and land, 1-4 family residential property, and multi-family residential property). Commercial loans generally involve a higher degree of credit risk than residential mortgage loans due, in part, to their larger average size and less marketable collateral.
Our business plan calls for continued efforts to increase our assets invested in commercial loans. Our commercial loans include loans secured by real estate (commercial property, construction and land and multi-family residential property). Commercial loans generally involve a higher degree of credit risk than residential mortgage loans due, in part, to their larger average size and less marketable collateral.
Department of the Treasury Community Development Financial Institutions Fund. Through this program, we provide our allocation to certain projects, which in turn for an equity investment from an Investor in the project generate federal tax credits to those investors.
We participate in and have previously been an “Allocatee” of the New Markets Tax Credit Program of the U.S. Department of the Treasury Community Development Financial Institutions Fund. Through this program, we provide our allocation to certain projects, which in turn for an equity investment from an investor in the project generate federal tax credits to those investors.
As a result, some chose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which impacted our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations.
Nevertheless, risks remain that customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which impacted our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations.
Losses resulting from these disasters and severe weather events may make it more difficult for borrowers to timely repay their loans.
Severe weather events may cause operational disruptions and damage to both our properties and properties securing our loans. Losses resulting from these disasters and severe weather events may make it more difficult for borrowers to timely repay their loans.
In assessing the failures in 2023, the banking regulators noted that each of the failed banks had a high proportion of deposits that exceeded FDIC deposit insurance limits. These market developments have negatively impacted customer confidence in the safety and soundness of regional banks.
In assessing the failures in 2023, the banking regulators noted that each of the failed banks had a high proportion of deposits that exceeded FDIC deposit insurance limits. The industry has stabilized since these failures and the customer confidence in the safety and soundness of smaller regional banks has improved considerably.
These developments could have a material adverse impact on our reputation, business, financial condition, results of operations and liquidity. 19 Liquidity risk could impair our ability to fund operations and meet debt coverage obligations, and jeopardize our financial condition. Liquidity is essential to our business.
These developments could have a material adverse impact on our reputation, business, and financial condition. 20 Liquidity risk could impair our ability to fund operations and meet debt coverage obligations, and jeopardize our financial condition. Liquidity is essential to our business. We are a holding company and depend on our subsidiaries for liquidity needs, including debt coverage requirements.
When a borrower defaults on a loan secured by real property, we may purchase the property in foreclosure or accept a deed to the property surrendered by the borrower. We may also take over the management of commercial properties whose owners have defaulted on loans. We may also own and lease premises where branches and other facilities are located.
We are subject to environmental risks associated with owning real estate or collateral. When a borrower defaults on a loan secured by real property, we may purchase the property in foreclosure or accept a deed to the property surrendered by the borrower. We may also take over the management of commercial properties whose owners have defaulted on loans.
The existence of credit and market risk associated with our derivative instruments could adversely affect our net interest income and, therefore, could have a material adverse effect on our business, financial condition, results of operations and future prospects.
The existence of credit and market risk associated with our derivative instruments could adversely affect our net interest income and, therefore, could have a material adverse effect on our business, financial condition, results of operations and future prospects. 21 Competitive and Reputational Risks The loss of any of our executive officers or other key employees, or the inability to recruit highly skilled and other key employees, may adversely affect our operations.
We have expended, and may in the future expend, significant resources to implement technologies and various response and recovery plans and procedures as part of our information security program.
As risks associated with cybersecurity threats have and continue to evolve and become more sophisticated, including as a result of artificial intelligence, we have expended, and may in the future expend, significant resources to implement technologies and various response and recovery plans and procedures as part of our information security program.
Our core operating system conversion may result in business interruptions or other adverse developments. We plan to replace our core operating systems, including those for loans, deposits, financials and other ancillary systems (collectively referred to as “core system”). The conversion to the new core system is expected to be completed in 2024.
Our core operating system conversion may result in business interruptions or other adverse developments. On October 11, 2024, we replaced our core operating systems, including those for loans, deposits, financials and other ancillary systems (collectively referred to as “core system”). We use the core system to track client relationships and accounts and report financial information.
While we have lending, foreclosure and facilities guidelines intended to exclude properties with an unreasonable risk of contamination, hazardous substances could exist on some of the properties we may own, manage or occupy. We face the risk that environmental laws could force us to clean up the properties at our expense.
We may also own and lease premises where branches and other facilities are located. While we have lending, foreclosure and facilities guidelines intended to exclude properties with an unreasonable risk of contamination, hazardous substances could exist on some of the properties we may own, manage or occupy.
Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, rather than shareholders. Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change and could result in an adverse impact on our results of operations.
Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change, including as a result of changes in U.S. presidential administrations that have different regulatory agendas, and could result in an adverse impact on our results of operations.
In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time.
In addition, we may be required to fund additional amounts to complete 19 the project and may have to hold the property for an unspecified period of time. If any of these events occur, our financial condition, results of operations and cash flows could be materially and adversely affected.
Acquisition Risks We have engaged in and may continue to engage in expansion through acquisitions, and these acquisitions present a number of risks related both to the acquisition transactions and to the integration of the acquired businesses.
Higher funding costs could reduce our net interest margin and net interest income and could have a material adverse effect on our business, financial condition and results of operations. 22 Acquisition Risks We have engaged in and may continue to engage in expansion through acquisitions, and these acquisitions present a number of risks related both to the acquisition transactions and to the integration of the acquired businesses.
We use the core system to track client relationships and accounts and report financial information. The core system is integrated with various other applications that are used to service client requests by bank personnel or directly by clients (such as online and mobile banking).
The core system is integrated with various other applications that are used to service client requests by Bank personnel or directly by clients (such as online and mobile banking). Changing the core system subjects us to operational risks, including disruptions to technology systems, which may adversely impact our clients.
Our access to funding sources in amounts that are adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.
An inability to raise funds through deposits, borrowings, the sale of investment securities and other sources could have a substantial material adverse effect on our liquidity. Our access to funding sources in amounts that are adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.
The cost of cleaning up or paying damages and penalties associated with environmental problems could increase our operating expenses. It may cost more to clean a property than the property is worth. We could also be liable for pollution generated by a borrower’s operations if we take a role in managing those operations after a default.
We face the risk that environmental laws could force us to clean up the properties at our expense. The cost of cleaning up or paying damages and penalties associated with environmental problems could increase our operating expenses. It may cost more to clean a property than the property is worth.
However, there can be no assurance that any such adverse developments will not occur or, if they do occur, that they will be timely and adequately remediated.
We have documented plans, policies and procedures designed to prevent or limit the risks of a failure during and after the conversion of our core system. However, there can be no assurance that any such adverse developments will not occur or, if they do occur, that they will be timely and adequately remediated.
Competitive and Reputational Risks The loss of any of our executive officers or other key employees, or the inability to recruit highly skilled and other key employees, may adversely affect our operations. We believe our growth and continued success will depend in large part on our executive team and other key employees.
We believe our growth and continued success will depend in large part on our executive team and other key employees.
We cannot predict the nature or impact of future changes in monetary and fiscal policies. 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 our operations and/or stock price.
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 our operations and/or stock price. The high-profile bank failures in the first quarter of 2023 generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.
The financial services industry is undergoing rapid technological changes with frequent innovations in technology-driven products and services. In addition to better serving customers, the effective use of technology increases our efficiency and enables us to reduce costs.
The financial services sector is rapidly evolving due to technological innovations, with breakthroughs in areas like artificial intelligence, cloud computing, and other emerging technologies continuously producing new products and services to better serve their clients. In addition to better serving clients, the effective use of technology increases our efficiency and enables us to reduce costs.
Consequently, a decline in local economic conditions may adversely affect our earnings. There are material risks involved in commercial lending that could adversely affect our business. Our business plan calls for continued efforts to increase our assets invested in commercial loans.
Consequently, a decline in local economic conditions may adversely affect our earnings. The proportion of our deposit account balances that exceed FDIC insurance limits may also expose the Company to enhanced liquidity risk in times of financial distress. There are material risks involved in commercial lending that could adversely affect our business.
Further, paying higher interest rates to maintain or replace these deposits could adversely affect our net interest margin and results of operations. By engaging in derivative transactions, we are exposed to additional credit and market risk in our banking business.
Further, paying higher interest rates to maintain or replace these deposits could adversely affect our net interest margin and results of operations. In 2024, the FDIC issued a proposed rule that would revise the FDIC’s regulations governing the classification and treatment of brokered deposits.
With the increased importance and focus on climate change, we are making efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk governance framework. Nonetheless, 25 the risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.
The risks associated with climate change, and the legislative and regulatory responses, are evolving, making them difficult to assess due to limited data and other uncertainties.
Removed
In the first quarter of 2023, high-profile bank failures involving Silicon Valley Bank, Signature Bank and First Republic Bank generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.
Added
Trade policy, including tariffs and potential trade wars, may affect our clients and the communities in which we operate in unpredictable ways, which could negatively affect our result of operations or cash flows. We cannot predict the nature or impact of future changes in monetary and fiscal policies.
Removed
If any of these events occur, our financial condition, results of operations and cash flows could be materially and adversely affected. 18 We are subject to environmental risks associated with owning real estate or collateral.
Added
Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, rather than shareholders.
Removed
We are a holding company and depend on our subsidiaries for liquidity needs, including debt coverage requirements. An inability to raise funds through deposits, borrowings, the sale of investment securities and other sources could have a substantial material adverse effect on our liquidity.
Added
If the proposed rule is finalized as proposed, the Company may be required to classify certain deposits as brokered deposits. Among other changes, this may increase deposit insurance assessments and impact liquidity metrics. By engaging in derivative transactions, we are exposed to additional credit and market risk in our banking business.
Removed
Higher funding costs could reduce our net interest margin and net interest income and could have a material adverse effect on our business, financial condition and results of operations.
Added
We may be unable to integrate operations successfully or to achieve expected results or cost savings.
Removed
Changing the core system will subject us to operational risks during and after the conversion, including disruptions to its technology systems, which may adversely impact our clients. We have documented plans, policies and procedures designed to prevent or limit the risks of a failure during or after the conversion of our core system.
Removed
Federal and state legislatures and regulatory agencies continue to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
Removed
As a financial institution, it is unclear how future government regulations and shifts in business trends resulting from increased concern about climate change will affect our operations; however, natural or man-made disasters and severe weather events may cause operational disruptions and damage to both our properties and properties securing our loans.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Chief Administrative Officer has a bachelor’s degree and an MBA degree. He is also an active, licensed CPA in the state of Missouri. Prior to his appointment as Chief Administrative Officer, he served at Enterprise in senior finance roles within the Company, including Senior Vice President and Controller, and Chief Financial Officer of Enterprise Bank & Trust.
Biggest changeThe Chief Administrative Officer is a licensed CPA in the state of Missouri. Prior to his appointment as Chief Administrative Officer, he served at Enterprise in senior finance roles within the Company, including Senior Vice President and Controller, and Chief Financial Officer of Enterprise Bank & Trust.
Further, management involved in the cybersecurity process possess the necessary skills and expertise to adequately manage and enforce our IS policies, procedures and guidelines. 26 While all vendors are subject to our vendor management due diligence process, those with access to our data and data centers are subject to more rigorous initial and more frequent ongoing due diligence.
Further, management involved in the cybersecurity process possess the necessary skills and expertise to adequately manage and enforce our IS policies, procedures and guidelines. While all vendors are subject to our vendor management due diligence process, those with access to our data and data centers are subject to more rigorous initial and more frequent ongoing due diligence.
Annually, all associates participate in mandatory training on data privacy provisions and policies, including information security and its importance with respect to client and associate privacy. All associates (including both full-time and part-time associates) are required to participate in monthly firmwide phishing tests. 27
Annually, all associates participate in mandatory training on data privacy provisions and policies, including information security and its importance with respect to client and associate privacy. All associates (including both full-time and part-time associates) are required to participate in monthly firmwide phishing tests.
Additionally, the CISO is a member of this committee, as well as the Risk Oversight and ESG Management Committees, and advises these committees on risks and opportunities related to information security, including data privacy.
Additionally, the CISO is a member of this committee, as well as the Risk Oversight and Sustainability Committees, and advises these committees on risks and opportunities related to information security, including data privacy.
The CISO has over 20 years of experience in cybersecurity and has a bachelor's, master's, and Juris Doctorate law degrees. He is a licensed attorney in both Missouri and Illinois. He currently holds multiple professional security certifications that include ISC2 Certified Information System Security Professional and Certified Cloud Security Professional, ISACA Certified Information Security Manager and EC-Council Certified Ethical Hacker.
The CISO has over 20 years of experience in cybersecurity and is a licensed attorney in both Missouri and Illinois. He currently holds multiple professional security certifications that include ISC2 Certified Information System Security Professional and Certified Cloud Security Professional, ISACA Certified Information Security Manager and EC-Council Certified Ethical Hacker.
For further discussion about these risks, see “Item 1A- Risk Factors - Technology and Cybersecurity Risks.” Risk Management and Strategy As part of the ongoing maintenance and development of our IS Program, we assess the various risks associated with the unauthorized access or loss of client information and the quality of security controls as prescribed by the Federal Financial Institutions Examinations Council and the National Institute of Standards and Technology Cybersecurity Framework.
Risk Factors - Technology and Cybersecurity Risks.” Risk Management and Strategy As part of the ongoing maintenance and development of our IS Program, we assess the various risks associated with the unauthorized access or loss of client information and the quality of security controls as prescribed by the Federal Financial Institutions Examinations Council and the National Institute of Standards and Technology Cybersecurity Framework.
Although such risks have not materially affected us, we have experienced, and may continue to experience, cyber incidents during our normal course of business.
Although such risks have not materially affected us, we have experienced, and may continue to experience, cyber incidents during our normal 27 course of business. For further discussion about these risks, see “Item 1A.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2: PROPERTIES Our executive offices are located at 150 North Meramec Avenue, Clayton, Missouri, 63105. As of December 31, 2023, we utilized banking locations and administrative offices throughout our market areas of Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico.
Biggest changeITEM 2: PROPERTIES Our executive offices are located at 150 North Meramec Avenue, Clayton, Missouri, 63105. As of December 31, 2024, we utilized banking locations and administrative offices throughout our market areas of Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeManagement believes there are no such legal proceedings pending or threatened against the Company or its subsidiaries in the ordinary course of business, directly, indirectly, or in the aggregate that, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.
Biggest changeManagement believes there are no such legal proceedings pending or threatened against the Company in the ordinary course of 28 business, directly, indirectly, or in the aggregate that, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company.
For more information on our legal proceedings, see “Item 8. Note 13 – Litigation and Other Contingencies” in this report. ITEM 4: MINE SAFETY DISCLOSURES Not applicable. PART II
For more information on our legal proceedings, see “Item 8. Note 13 – Litigation and Other Contingencies” in this Annual Report on Form 10-K. ITEM 4: MINE SAFETY DISCLOSURES Not applicable. PART II
ITEM 3: LEGAL PROCEEDINGS The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses.
ITEM 3: LEGAL PROCEEDINGS The Company is, from time to time, a party to various legal proceedings arising out of its businesses.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 28 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. Reserved 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 57 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 29 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Reserved 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graph The following graph compares the cumulative total shareholder return on the Company’s common stock from December 31, 2018 through December 31, 2023. The graph compares the Company’s common stock with the Nasdaq Composite Index (U.S. companies) and the S&P Regional Banks Select Industry Index.
Biggest changeThe repurchases may be made from time to time in the open market or through privately negotiated transactions. 29 Stock Performance Graph The following graph compares the cumulative total shareholder return on the Company’s common stock from December 31, 2019 through December 31, 2024.
As a result, no assurance can be given that dividends will be paid in the future with respect to our common stock. Recent Sales of Unregistered Securities and Use of Proceeds None. 28 Issuer Purchases of Equity Securities None.
As a result, no assurance can be given that dividends will be paid in the future with respect to our common stock. Recent Sales of Unregistered Securities and Use of Proceeds None.
Dividends The Company paid quarterly cash dividends on common shares in each of 2023, 2022 and 2021 and anticipates continuing to pay comparable dividends. Total dividends paid per common share were $1.00 in 2023, $0.90 in 2022 and $0.75 in 2021.
Dividends The Company paid quarterly cash dividends on common shares in each of 2024, 2023 and 2022 and anticipates continuing to pay comparable dividends. Total dividends paid per common share were $1.06 in 2024, $1.00 in 2023 and $0.90 in 2022.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Our Common Stock The Company’s common stock trades on the Nasdaq Global Select Market under the symbol “EFSC.” As of February 21, 2024, the Company had 1,670 registered shareholders of common stock.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Our Common Stock The Company’s common stock trades on the Nasdaq Global Select Market under the symbol “EFSC.” As of February 26, 2025, the Company had 1,523 registered shareholders of common stock.
There is no assurance the Company’s common stock performance will continue in the future with the same or similar results as shown in the graph.
The investment is measured as of each subsequent fiscal year end. There is no assurance the Company’s common stock performance will continue in the future with the same or similar results as shown in the graph.
The graph assumes an investment of $100.00 in the Company’s common stock and each index at the respective closing price on December 31, 2018 and reinvestment of all quarterly dividends. The investment is measured as of each subsequent fiscal year end.
The graph compares the Company’s common stock with the Nasdaq Composite Index (U.S. companies) and the S&P Regional Banks Select Industry Index. The graph assumes an investment of $100.00 in the Company’s common stock and each index at the respective closing price on December 31, 2019 and reinvestment of all quarterly dividends.
Period Ending December 31, Index 2018 2019 2020 2021 2022 2023 Enterprise Financial Services Corp $ 100.00 $ 129.98 $ 96.41 $ 131.97 $ 139.92 $ 130.59 Nasdaq Composite Index $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 S&P Regional Banks Select Industry Index $ 100.00 $ 127.64 $ 118.58 $ 165.90 $ 141.42 $ 130.91 *Source: S&P Global Market Intelligence.
Period Ending December 31, Index 2019 2020 2021 2022 2023 2024 Enterprise Financial Services Corp $ 100.00 $ 74.17 $ 101.53 $ 107.65 $ 100.47 $ 129.91 Nasdaq Composite Index $ 100.00 $ 144.92 $ 177.06 $ 119.45 $ 172.77 $ 223.87 S&P Regional Banks Select Industry Index $ 100.00 $ 92.90 $ 129.98 $ 110.80 $ 102.56 $ 122.17 *Source: S&P Global Market Intelligence.
Added
Issuer Purchases of Equity Securities Period Total number of shares purchased Weighted-average price paid per share Total number of shares purchased as part of publicly announced plans or programs (a) Maximum number of shares that may yet be purchased under the plans or programs (a) October 1, 2024 through October 31, 2024 77,256 $ 50.59 77,256 1,502,495 November 1, 2024 through November 30, 2024 32,000 52.64 32,000 1,470,495 December 1, 2024 through December 31, 2024 97,273 57.17 97,273 1,373,222 Total 206,529 $ 54.01 206,529 (a) In May 2022, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated. 55 Reconciliations of Non-GAAP Financial Measures Core Efficiency Ratio For the Years ended December 31, ($ in thousands) 2023 2022 2021 Net interest income (GAAP) $ 562,592 $ 473,903 $ 360,194 Tax-equivalent adjustment 8,079 7,042 5,151 Net interest income - FTE (non-GAAP) 570,671 480,945 365,345 Noninterest income (GAAP) 68,725 59,162 67,743 Less gain on sale of investment securities 601 — — Less gain (loss) on sale of other real estate owned 187 (93) 884 Core revenue (non-GAAP) $ 638,608 $ 540,200 $ 432,204 Noninterest expense (GAAP) $ 348,186 $ 274,216 $ 245,919 Less amortization on intangibles 4,601 5,367 5,691 Less branch closure expenses — — 3,441 Less merger-related expenses — — 22,082 Less FDIC special assessment 2,412 — — Core noninterest expense (non-GAAP) $ 341,173 $ 268,849 $ 214,705 Core efficiency ratio (non-GAAP) 53.42 % 49.77 % 49.68 % Tangible Common Equity, Tangible Book Value per Share, and Tangible Common Equity Ratio Period ended December 31, ($ and shares in thousands, except per share data) 2023 2022 2021 Shareholders' equity (GAAP) $ 1,716,068 $ 1,522,263 $ 1,529,116 Less preferred stock 71,988 71,988 71,988 Less goodwill 365,164 365,164 365,164 Less intangible assets 12,318 16,919 22,286 Tangible common equity (non-GAAP) $ 1,266,598 $ 1,068,192 $ 1,069,678 Common shares outstanding 37,416 37,253 37,820 Tangible book value per share (non-GAAP) $ 33.85 $ 28.67 $ 28.28 Total assets (GAAP) $ 14,518,590 $ 13,054,172 $ 13,537,358 Less goodwill 365,164 365,164 365,164 Less intangible assets 12,318 16,919 22,286 Tangible assets (non-GAAP) $ 14,141,108 $ 12,672,089 $ 13,149,908 Tangible common equity to tangible assets (non-GAAP) 8.96 % 8.43 % 8.13 % 56 Return on Average Tangible Common Equity (ROATCE) For the Years ended December 31, ($ in thousands) 2023 2022 2021 Average shareholder’s equity (GAAP) $ 1,623,121 $ 1,498,759 $ 1,277,153 Less average preferred stock 71,988 71,988 8,903 Less average goodwill 365,164 365,164 307,614 Less average intangible assets 14,531 19,516 22,460 Average tangible common equity (non-GAAP) $ 1,171,438 $ 1,042,091 $ 938,176 Net income available to common shareholders (GAAP) $ 190,309 $ 199,002 $ 133,055 FDIC special assessment (after tax) 1,814 — — Net income available to common shareholders adjusted (non-GAAP) $ 192,123 $ 199,002 $ 133,055 Return on average tangible common equity adjusted for FDIC assessment (non-GAAP) 16.40 % 19.10 % 14.18 % Return on average common equity (GAAP) 12.27 % 13.95 % 10.49 % Return on average common equity adjusted for FDIC assessment (non-GAAP) 12.39 % 13.95 % 10.49 % Pre-Provision Net Revenue (PPNR) and Pre-Provision Net Revenue Return on Average Assets (PPNR ROAA) For the Years ended December 31, ($ in thousands) 2023 2022 2021 Net interest income $ 562,592 $ 473,903 $ 360,194 Noninterest income 68,725 59,162 67,743 FDIC special assessment 2,412 — — Less gain on sale of investment securities 601 — — Less gain (loss) on sale of other real estate owned 187 (93) 884 Less noninterest expense 348,186 274,216 245,919 PPNR (non-GAAP) $ 284,755 $ 258,942 $ 181,134 Average assets $ 13,805,236 $ 13,319,624 $ 11,467,310 PPNR ROAA (non-GAAP) 2.06 % 1.94 % 1.58 % Return on Average Assets (ROAA) For the Years ended December 31, ($ in thousands) 2023 2022 2021 Net income (GAAP) $ 194,059 $ 203,043 $ 133,055 FDIC special assessment (after tax) 1,814 — — Net income adjusted (non-GAAP) 195,873 203,043 133,055 Average assets $ 13,805,236 $ 13,319,624 $ 11,467,310 ROAA (GAAP) 1.41 % 1.52 % 1.16 % ROAA adjusted for FDIC special assessment (non-GAAP) 1.42 % 1.52 % 1.16 %
Biggest changeThe Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated. 56 Reconciliations of Non-GAAP Financial Measures Pre-Provision Net Revenue (PPNR) and Pre-Provision Net Revenue Return on Average Assets (PPNR ROAA) For the years ended December 31, ($ in thousands) 2024 2023 2022 Net interest income $ 568,096 $ 562,592 $ 473,903 Noninterest income 69,703 68,725 59,162 FDIC special assessment 625 2,412 — Core conversion expense 4,868 — — Less gain on sale of investment securities — 601 — Less gain (loss) on sale of other real estate owned 3,089 187 (93) Less noninterest expense 385,047 348,186 274,216 PPNR (non-GAAP) $ 255,156 $ 284,755 $ 258,942 Average assets $ 14,841,690 $ 13,805,236 $ 13,319,624 PPNR ROAA (non-GAAP) 1.72 % 2.06 % 1.94 % Tangible Common Equity, Tangible Book Value per Share, and Tangible Common Equity Ratio At December 31, ($ and shares in thousands, except per share data) 2024 2023 2022 Shareholders' equity (GAAP) $ 1,824,002 $ 1,716,068 $ 1,522,263 Less preferred stock 71,988 71,988 71,988 Less goodwill 365,164 365,164 365,164 Less intangible assets 8,484 12,318 16,919 Tangible common equity (non-GAAP) $ 1,378,366 $ 1,266,598 $ 1,068,192 Common shares outstanding 36,988 37,416 37,253 Tangible book value per share (non-GAAP) $ 37.27 $ 33.85 $ 28.67 Total assets (GAAP) $ 15,596,431 $ 14,518,590 $ 13,054,172 Less goodwill 365,164 365,164 365,164 Less intangible assets 8,484 12,318 16,919 Tangible assets (non-GAAP) $ 15,222,783 $ 14,141,108 $ 12,672,089 Tangible common equity to tangible assets (non-GAAP) 9.05 % 8.96 % 8.43 % 57 Return on Average Tangible Common Equity (ROATCE) and Return on Average Assets (ROAA) At or for the years ended December 31, ($ in thousands) 2024 2023 2022 Average shareholder’s equity (GAAP) $ 1,784,175 $ 1,623,121 $ 1,498,759 Less average preferred stock 71,988 71,988 71,988 Less average goodwill 365,164 365,164 365,164 Less average intangible assets 10,329 14,531 19,516 Average tangible common equity (non-GAAP) $ 1,336,694 $ 1,171,438 $ 1,042,091 Net income (GAAP) $ 185,266 $ 194,059 $ 203,043 FDIC special assessment (after tax) 470 1,814 — Core conversion expense (after tax) 3,661 — — Less gain on sale of investment securities (after tax) — 452 — Less net gain (loss) on sale of other real estate owned (after tax) 2,323 141 (70) Net income adjusted (non-GAAP) $ 187,074 $ 195,280 $ 203,113 Less preferred stock dividends 3,750 3,750 4,041 Net income available to common shareholders adjusted (non-GAAP) $ 183,324 $ 191,530 $ 199,072 Return on average common equity (non-GAAP) 10.60 % 12.27 % 13.95 % Adjusted return on average common equity (non-GAAP) 10.71 % 12.35 % 13.95 % ROATCE (non-GAAP) 13.58 % 16.25 % 19.10 % Adjusted ROATCE (non-GAAP) 13.71 % 16.35 % 19.10 % Average assets $ 14,841,690 $ 13,805,236 $ 13,319,624 Return on average assets (GAAP) 1.25 % 1.41 % 1.52 % Adjusted return on average assets (non-GAAP) 1.26 % 1.41 % 1.52 % Core Efficiency Ratio For the years ended December 31, ($ in thousands) 2024 2023 2022 Net interest income (GAAP) $ 568,096 $ 562,592 $ 473,903 Tax-equivalent adjustment 8,445 8,079 7,042 Net interest income - FTE (non-GAAP) 576,541 570,671 480,945 Noninterest income (GAAP) 69,703 68,725 59,162 Less gain on sale of investment securities — 601 — Less gain (loss) on sale of other real estate owned 3,089 187 (93) Core revenue (non-GAAP) $ 643,155 $ 638,608 $ 540,200 Noninterest expense (GAAP) $ 385,047 $ 348,186 $ 274,216 Less amortization on intangibles 3,834 4,601 5,367 Less core conversion expense 4,868 — — Less FDIC special assessment 625 2,412 — Core noninterest expense (non-GAAP) $ 375,720 $ 341,173 $ 268,849 Core efficiency ratio (non-GAAP) 58.42 % 53.42 % 49.77 % 58
This portfolio also includes tax credit brokerage 42 through 10-year streams of state tax credits from affordable housing development funds. The tax credits are sold to clients and other individuals for tax planning purposes. SBA loans are originated under the SBA 7(a) program and are primarily owner-occupied, commercial real estate loans secured by a 1st lien.
This portfolio also includes tax credit brokerage through 10-year streams of state tax credits from affordable housing development funds. The tax credits are sold to clients and other individuals for tax planning purposes. SBA loans are originated under the SBA 7(a) program and are primarily owner-occupied, commercial real estate loans secured by a 1st lien.
Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. There can be no assurances that actual results will not differ from those estimates. Allowance for Credit Losses The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to the ACL.
Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. There can be no assurances that actual results will not differ from those estimates. Allowance for Credit Losses The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to as the ACL.
The Company also records reversals of interest on nonaccrual loans and interest recoveries directly through the provision of credit losses. CECL requires economic forecasts to be factored into determining estimated losses. As a result, CECL is designed to typically require a higher level of provision at the start of an economic downturn.
The Company also records reversals of interest on nonaccrual loans and interest recoveries directly through the provision of credit losses. The CECL methodology requires economic forecasts to be factored into determining estimated losses. As a result, CECL is designed to typically require a higher level of provision at the start of an economic downturn.
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. In 2023, the holding company maintained a revolving line of credit for an aggregate amount up to $25 million, all of which was available at December 31, 2023.
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. In 2024, the holding company maintained a revolving line of credit for an aggregate amount up to $25 million, all of which was available at December 31, 2024.
To be categorized as “well-capitalized”, banks must maintain minimum total risk-based (10%), tier 1 risk-based (8%), common equity tier 1 risk-based (6.5%), and tier 1 leverage ratios (5%). As of December 31, 2023, and December 31, 2022, the Company and the Bank met all capital adequacy requirements to which they are subject.
To be categorized as “well-capitalized”, banks must maintain minimum total risk-based (10%), tier 1 risk-based (8%), common equity tier 1 risk-based (6.5%), and tier 1 leverage ratios (5%). As of December 31, 2024, and December 31, 2023, the Company and the Bank met all capital adequacy requirements to which they are subject.
The impact and any associated risks related to our critical accounting policies on our 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 53 discussion on the application of these and other accounting policies, see “Item 8.
The impact and any associated risks related to our critical accounting policies on our 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 54 discussion on the application of these and other accounting policies, see “Item 8.
Note 1 – Summary of Significant Accounting Policies – Recent Accounting Pronouncements” for information on recent accounting pronouncements and their impact, if any, on our consolidated financial statements. 54 Use of Non-GAAP Financial Measures The Company’s accounting and reporting policies conform to U.S. GAAP and the prevailing practices in the banking industry.
Note 1 – Summary of Significant Accounting Policies – Recent Accounting Pronouncements” for information on recent accounting pronouncements and their impact, if any, on our consolidated financial statements. 55 Use of Non-GAAP Financial Measures The Company’s accounting and reporting policies conform to U.S. GAAP and the prevailing practices in the banking industry.
The following table summarizes contractual maturity and tax-equivalent yields on the investment portfolio at December 31, 2023: Within 1 year 1 to 5 years 5 to 10 years Over 10 years Total ($ in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Obligations of U.S.
The following table summarizes contractual maturity and tax-equivalent yields on the investment portfolio at December 31, 2024: Within 1 year 1 to 5 years 5 to 10 years Over 10 years Total ($ in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Obligations of U.S.
The portfolio is comprised of both available-for-sale and held-to-maturity securities. 46 The table below sets forth the carrying value of investment securities, excluding the allowance for credit losses: December 31, 2023 2022 ($ in thousands) Amount % Amount % Obligations of U.S.
The portfolio is comprised of both available-for-sale and held-to-maturity securities. The table below sets forth the carrying value of investment securities, excluding the allowance for credit losses: December 31, 2024 2023 ($ in thousands) Amount % Amount % Obligations of U.S.
The increase in 2023 was primarily due to organic growth in money market and interest-bearing demand accounts. 48 The following table sets forth the maturities of estimated uninsured certificates of deposit as of December 31, 2023. Uninsured deposits are amounts estimated to exceed the FDIC deposit insurance limit and are not subject to any federal or state insurance program.
The increase in 2024 was primarily due to organic growth in money market and interest-bearing demand accounts. 49 The following table sets forth the maturities of estimated uninsured certificates of deposit as of December 31, 2024. Uninsured deposits are amounts estimated to exceed the FDIC deposit insurance limit and are not subject to any federal or state insurance program.
Core performance measures exclude certain other income and expense items, such as the FDIC special assessment, 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.
Core performance measures exclude certain other income and expense items, such as core conversion expenses, FDIC special assessment, merger-related expenses, facilities charges, and the gain or loss on sale of other real estate owned and investment securities, that the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis.
A detailed discussion comparing 2022 and 2021 results is incorporated herein by reference to Item 7 of the Company’s 2022 Annual Report on Form 10-K filed on February 24, 2023. Executive Summary Our Company offers a broad range of business and personal banking services including wealth management services.
A detailed discussion comparing 2023 and 2022 results is incorporated herein by reference to Item 7 of the Company’s 2023 Annual Report on Form 10-K filed on February 26, 2024. Executive Summary Our Company offers a broad range of business and personal banking services including wealth management.
This difference represents the Company’s earnings sensitivity to a positive or negative parallel rate shock. 52 The following table summarizes the projected impact of interest rate shocks on net interest income: Rate Shock Annual % change in net interest income At December 31, 2023 2022 + 300 bp 9.8% 11.1% + 200 bp 6.6% 7.5% + 100 bp 3.3% 3.8% - 100 bp (3.5)% (4.1)% - 200 bp (7.3)% (9.0)% - 300 bp (11.2)% (15.1)% In addition to the rate shocks shown in the table above, the Company models net interest income under various dynamic interest rate scenarios.
This difference represents the Company’s earnings sensitivity to a positive or negative parallel rate shock. 53 The following table summarizes the projected impact of interest rate shocks on net interest income: Annual % change in net interest income At December 31, Rate Shock 2024 2023 + 300 bp 7.9% 9.8% + 200 bp 5.4% 6.6% + 100 bp 2.7% 3.3% - 100 bp (3.0)% (3.5)% - 200 bp (6.0)% (7.3)% - 300 bp (8.5)% (11.2)% In addition to the rate shocks shown in the table above, the Company models net interest income under various dynamic interest rate scenarios.
The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations. The Company continues to focus on originating high-quality C&I loan relationships as they typically have variable interest rates and allow for cross selling opportunities involving other banking products.
The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations. The Company continues to focus on originating high-quality C&I loan relationships as they allow for cross selling opportunities involving other banking products.
These techniques measure the sensitivity of future earnings due to changing interest rate environments. Guidelines established by the Bank’s Asset/Liability Management Committee and approved by the Bank’s Board of Directors are used to monitor exposure of earnings at risk.
The Company uses financial modeling techniques to measure interest rate risk. These techniques measure the sensitivity of future earnings due to changing interest rate environments. Guidelines established by the Bank’s Asset/Liability Management Committee and approved by the Bank’s Board of Directors are used to monitor exposure of earnings at risk.
The Company had no debt securities classified as trading at December 31, 2023, or 2022.
The Company had no debt securities classified as trading at December 31, 2024, or 2023.
The majority of variable loans are based on the prime rate or SOFR. At December 31, 2023, $4.2 billion or 64% of variable rate loans were subject to an interest rate floor. Most variable rate loan originations have one-to three-year maturities. Management monitors this mix as part of its interest rate risk management.
The majority of variable loans are based on the prime rate or SOFR. At December 31, 2024, $4.6 billion or 68% of variable rate loans were subject to an interest rate floor. Most variable rate loan originations have one-to three-year maturities. Management monitors this mix as part of its interest rate risk management.
Additionally, liquidity is provided from lines of credit with the FHLB, the Federal Reserve, and correspondent banks; the ability to acquire large and brokered deposits; sales of the securities portfolio; and the ability to sell loan participations to other banks.
Liquidity is provided from lines of credit with the FHLB, the Federal Reserve, and correspondent banks; the ability to acquire large and brokered deposits; sales of the securities portfolio; and the ability to sell loan participations to other banks and loans on the secondary market.
The increase in deposit interest expense reflects higher rates paid on deposits, as well as successful marketing efforts that 34 increased average deposits. Remixing of the deposit portfolio from non-interest bearing and lower cost accounts into higher cost accounts contributed to the increase in deposit interest expense in 2023.
The increase in deposit interest expense reflects higher rates paid on deposits, as well as successful marketing efforts that 35 increased average deposits. Remixing of the deposit portfolio from noninterest-bearing and lower cost accounts into higher cost accounts contributed to the increase in deposit interest expense in 2024.
The Company’s results of operations are also affected by prevailing economic conditions, competition, government policies and other actions of regulatory agencies. The Company’s financial condition, operating results and liquidity in 2023 continued to be impacted by the monetary policy actions enacted to address rising inflation.
The Company’s results of operations are also affected by prevailing economic conditions, competition, government policies and other actions of regulatory agencies. The Company’s financial condition, operating results and liquidity in 2024 continued to be impacted by monetary policy actions.
The increase in deposit costs in 2023 is due to organic growth in specialized deposits and an increase in market interest rates that increased the earnings credit rate and related expenses for those accounts.
The increase in deposit costs in 2024 is due to organic growth in the deposit verticals and an increase in market interest rates that increased the earnings credit rate and related expenses for those accounts.
At December 31, 2023, the Company had derivative contracts to manage interest rate 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 derivatives on floating rate debt. Derivative financial instruments are discussed in “Item 8.
At December 31, 2024, the Company had derivative contracts to manage interest rate risk, including $400.0 million in notional value on derivatives to hedge the cash flows on floating rate loans and $32.1 million in notional value on derivatives on floating rate debt. Derivative financial instruments are discussed in “Item 8.
Cash and interest-bearing deposits with other banks totaled $433.0 million at December 31, 2023, compared to $291.4 million at December 31, 2022. The increase in cash balances during 2023 is due to deposit growth exceeding loan growth.
Cash and interest-bearing deposits with other banks totaled $764.2 million at December 31, 2024, compared to $433.0 million at December 31, 2023. The increase in cash balances during 2024 is due to deposit growth exceeding loan growth.
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) was $570.7 million for 2023, compared to $480.9 million for 2022, an increase of $89.8 million, or 19%.
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) was $576.5 million for 2024, compared to $570.7 million for 2023, an increase of $5.9 million.
Interest income includes net loan fees of $13.8 million, $16.7 million, and $28.4 million for the years ended December 31, 2023, 2022, and 2021 respectively. Loan fees in 2022 and 2021 included PPP fees of $4.1 million and $21.7 million, respectively. 2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%.
Interest income includes net loan fees of $9.6 million, $13.8 million, and $16.7 million for the years ended December 31, 2024, 2023, and 2022 respectively. Loan fees in 2022 included Paycheck Protection Program fees of $4.1 million. 2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%.
The increase in net interest income in 2023 was primarily due to a higher average yield on interest earning assets and organic loan growth. These increases were offset by an increase in the average cost paid on interest bearing liabilities.
The increase in net interest income in 2024 was primarily due to a higher average yield on interest earning assets and organic loan growth, which was partially offset by an increase in the average cost paid on interest bearing liabilities.
See “Interest Rate Risk” of this MD&A section. 43 Provision and Allowance for Credit Losses The following table presents the components of the provision for credit losses for the periods indicated: December 31, ($ in thousands) 2023 2022 Provision (benefit) for credit losses on loans $ 35,883 $ (4,210) Provision for available-for-sale securities 4,281 — Provision (benefit) for off-balance sheet commitments (5,450) 4,462 Provision for held-to-maturity securities 50 121 Charge-offs (recoveries) of accrued interest 1,841 (984) Provision (benefit) for credit losses $ 36,605 $ (611) 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.
See “Interest Rate Risk” of this MD&A section for additional information. 44 Provision and Allowance for Credit Losses The following table presents the components of the provision for credit losses for the periods indicated: December 31, ($ in thousands) 2024 2023 Provision for credit losses on loans $ 20,629 $ 35,883 Provision for available-for-sale securities — 4,281 Benefit for off-balance sheet commitments (586) (5,450) Provision / (Benefit) for held-to-maturity securities (528) 50 Charge-offs of accrued interest 1,993 1,841 Provision for credit losses $ 21,508 $ 36,605 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.
These loans are principally underwritten based on the cash flow coverage of the property, the Company’s loan to value guidelines, and generally require either the limited or full guaranty of principal sponsors of the credit.
These loans are principally underwritten based on the cash flow coverage of the property, the Company’s loan to value guidelines, and generally require either the limited or full guaranty of principal sponsors of the credit. The Company also maintains standards for amortization and maturity terms.
Securities totaled $2.4 billion at December 31, 2023, and included $1.6 billion pledged as collateral for deposits of public institutions, treasury, loan notes, and other requirements. The remaining $808.7 million could be pledged or sold to enhance liquidity, if necessary.
Securities totaled $2.8 billion at December 31, 2024, and included $1.5 billion 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.
The Company’s allowance for credit losses on loans was $134.8 million at December 31, 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 $27.5 million. Conversely, the allowance would have increased $43.9 million using only the downside scenario.
The Company’s allowance for credit losses on loans was $138.0 million at December 31, 2024 based on the weighting of the different economic scenarios. As a hypothetical example, if the Company had only used the upside scenario, the allowance would have decreased $27.7 million. Conversely, the allowance would have increased $47.4 million using only the downside scenario.
Estimated uninsured deposits at December 31, 2023 include $0.5 million of balances that are collateralized or secured with third party insurance. Shareholders’ equity Shareholders’ equity totaled $1.7 billion at December 31, 2023, an increase of $193.8 million, or 12.7%, from December 31, 2022.
Estimated uninsured deposits include $0.5 billion of balances that are collateralized or secured with third party insurance at December 31, 2024 and 2023, respectively. Shareholders’ equity Shareholders’ equity totaled $1.8 billion at December 31, 2024, an increase of $107.9 million, or 6%, from December 31, 2023.
Note 6 – Derivative Financial Instruments.” The FCA has announced that the most common USD LIBOR settings (overnight, 1-month. 3-month, 6-month and 12-month) will cease publication after September 30, 2024. LIBOR was the most liquid and common interest rate index in the world and was commonly referenced in financial instruments.
Financial Statements and Supplementary Data – Note 6 – Derivative Financial Instruments.” The FCA ceased publishing the most common USD LIBOR settings (overnight, 1-month. 3-month, 6-month and 12-month) after September 30, 2024. LIBOR was the most liquid and common interest rate index in the world and was commonly referenced in financial instruments.
The line of credit has a one-year term that was renewed in February 2024 for an additional one-year term, and the interest rate was amended to one-month Term SOFR plus 185 basis points and the annual unused commitment fee was increased to 0.40%. The proceeds can be used for general corporate purposes.
The line of credit had a one-year term that matured in February 2025, the interest rate was one-month Term SOFR plus 185 basis points, and an annual unused commitment fee of 0.40% was assessed. The proceeds could be used for general corporate purposes.
Available on- and off-balance sheet liquidity sources include the following items: ($ in thousands) December 31, 2023 Federal Reserve Bank borrowing capacity $ 2,533,405 FHLB borrowing capacity 1,029,921 Unpledged securities 808,709 Federal funds lines (6 correspondent banks) 120,000 Cash and interest-bearing deposits 433,029 Holding Company line of credit 25,000 Total $ 4,950,064 The Company also has a portfolio of SBA guaranteed loans, a portion of which could be sold in the secondary market to generate earnings and liquidity.
Available on- and off-balance sheet liquidity sources include the following items: ($ in thousands) December 31, 2024 Federal Reserve Bank borrowing capacity $ 2,751,533 FHLB borrowing capacity 1,304,235 Unpledged securities 1,325,619 Federal funds lines (7 correspondent banks) 140,000 Cash and interest-bearing deposits 764,170 Holding Company line of credit 25,000 Total $ 6,310,557 The Company also has a portfolio of SBA guaranteed loans, a portion of which could be sold in the secondary market to generate earnings and liquidity.
The following table summarizes the allocation of the ACL on loans: December 31, ($ in thousands) 2023 2022 Balance at End of Period Applicable to: Amount Percent of loans in each category to total loans Amount Percent of loans in each category to total loans Commercial and industrial $ 58,886 42.9 % $ 53,835 39.6 % Real estate: Commercial 54,685 44.1 % 58,943 47.5 % Construction and land development 10,198 7.0 % 11,444 6.3 % Residential 6,142 3.4 % 7,928 4.1 % Other 4,860 2.6 % 4,782 2.5 % Total allowance $ 134,771 100.0 % $ 136,932 100.0 % The allowance for credit losses was 1.24% of total loans at December 31, 2023, compared to 1.41%, and 1.61%, at December 31, 2022 and 2021, respectively.
The following table summarizes the allocation of the ACL on loans: December 31, ($ in thousands) 2024 2023 Balance at End of Period Applicable to: Amount Percent of loans in each category to total loans Amount Percent of loans in each category to total loans Commercial and industrial $ 63,231 42.1 % $ 58,886 42.9 % Real estate: Commercial 54,617 44.3 % 54,685 44.1 % Construction and land development 9,837 8.0 % 10,198 7.0 % Residential 6,534 3.2 % 6,142 3.4 % Other 3,731 2.4 % 4,860 2.6 % Total allowance $ 137,950 100.0 % $ 134,771 100.0 % The allowance for credit losses was 1.23% of total loans at December 31, 2024, compared to 1.24%, and 1.41%, at December 31, 2023 and 2022, respectively.
A reconciliation has been included in this MD&A section under the caption “Use of Non-GAAP Financial Measures.” 31 The Company noted the following trends during 2023: • The Company reported net income of $194.1 million, or $5.07 per diluted share for 2023, compared to $203.0 million, or $5.31 per diluted share for 2022.
A reconciliation has been included in this MD&A section under the caption “Use of Non-GAAP Financial Measures.” 2 Common dividends per share divided by diluted earnings per share. 32 The Company noted the following trends during 2024: • The Company reported net income of $185.3 million, or $4.83 per diluted share for 2024, compared to $194.1 million, or $5.07 per diluted share for 2023.
For certain deposit accounts in the Company’s specialized deposit portfolio, clients receive an earnings credit rate on average collected balances that may be used to offset expenses associated with the client’s activities for managing the accounts. These costs are reflected in noninterest expense as Deposit costs.
The total cost of the core conversion in noninterest expense was $4.9 million in 2024. For certain deposit accounts in the Company’s deposit verticals, clients receive an earnings credit on average collected balances that may be used to offset expenses associated with the client’s activities for managing the accounts. These costs are reflected in noninterest expense as Deposit costs.
($ in thousands, except per share data) Year ended December 31, 2023 2022 2021 EARNINGS Total interest income $ 764,919 $ 515,082 $ 383,230 Total interest expense 202,327 41,179 23,036 Net interest income 562,592 473,903 360,194 Provision (benefit) for credit losses 36,605 (611) 13,385 Net interest income after provision (benefit) for credit losses 525,987 474,514 346,809 Total noninterest income 68,725 59,162 67,743 Total noninterest expense 348,186 274,216 245,919 Income before income tax expense 246,526 259,460 168,633 Income tax expense 52,467 56,417 35,578 Net income $ 194,059 $ 203,043 $ 133,055 Preferred dividends 3,750 4,041 — Net income available to common shareholders $ 190,309 $ 199,002 $ 133,055 Basic earnings per share $ 5.09 $ 5.32 $ 3.86 Diluted earnings per share $ 5.07 $ 5.31 $ 3.86 Return on average assets 1 1.42 % 1.52 % 1.16 % Return on average common equity 1 12.39 % 13.95 % 10.49 % Return on average tangible common equity 1 16.40 % 19.10 % 14.18 % Net interest margin (fully tax equivalent) 4.43 % 3.89 % 3.41 % Efficiency ratio 55.15 % 51.44 % 57.47 % Core efficiency ratio 1 53.42 % 49.77 % 49.68 % Common dividend payout ratio 19.64 % 16.89 % 19.66 % Book value per common share $ 43.94 $ 38.93 $ 38.53 Tangible book value per common share 1 $ 33.85 $ 28.67 $ 28.28 Average common equity to average assets 11.76 % 11.25 % 11.14 % Tangible common equity to tangible assets 1 8.96 % 8.43 % 8.13 % At or for the year ended December 31, 2023 2022 2021 ASSET QUALITY Net charge-offs $ 38,044 $ 3,899 $ 11,629 Nonperforming loans 43,728 9,981 28,024 Nonaccrual loans 43,181 9,766 23,449 Classified assets 185,389 99,122 100,797 Total assets 14,518,590 13,054,172 13,537,358 Total loans 10,884,118 9,737,138 9,017,642 Classified assets to total assets 1.28 % 0.76 % 0.74 % Nonperforming loans to total loans 0.40 % 0.10 % 0.31 % Nonperforming assets to total assets 0.34 % 0.08 % 0.23 % ACL on loans to total loans 1.24 % 1.41 % 1.61 % Net charge-offs to average loans 0.37 % 0.04 % 0.14 % 1 Non-GAAP measures.
($ in thousands, except per share data) At or for the year ended December 31, 2024 2023 2022 EARNINGS Total interest income $ 851,051 $ 764,919 $ 515,082 Total interest expense 282,955 202,327 41,179 Net interest income 568,096 562,592 473,903 Provision (benefit) for credit losses 21,508 36,605 (611) Net interest income after provision (benefit) for credit losses 546,588 525,987 474,514 Total noninterest income 69,703 68,725 59,162 Total noninterest expense 385,047 348,186 274,216 Income before income tax expense 231,244 246,526 259,460 Income tax expense 45,978 52,467 56,417 Net income $ 185,266 $ 194,059 $ 203,043 Preferred dividends 3,750 3,750 4,041 Net income available to common shareholders $ 181,516 $ 190,309 $ 199,002 Basic earnings per share $ 4.86 $ 5.09 $ 5.32 Diluted earnings per share $ 4.83 $ 5.07 $ 5.31 Return on average assets 1.25 % 1.41 % 1.52 % Adjusted return on average assets 1 1.26 % 1.41 % 1.52 % Return on average common equity 10.60 % 12.27 % 13.95 % Adjusted return on average common equity 1 10.71 % 12.35 % 13.95 % Return on average tangible common equity 1 13.58 % 16.25 % 19.10 % Adjusted return on average tangible common equity 1 13.71 % 16.35 % 19.10 % Net interest margin (fully tax equivalent) 4.16 % 4.43 % 3.89 % Efficiency ratio 60.37 % 55.15 % 51.44 % Core efficiency ratio 1 58.42 % 53.42 % 49.77 % Common dividend payout ratio 2 21.95 % 19.72 % 16.95 % Book value per common share $ 47.37 $ 43.94 $ 38.93 Tangible book value per common share 1 $ 37.27 $ 33.85 $ 28.67 Average common equity to average assets 11.54 % 11.24 % 10.71 % Tangible common equity to tangible assets 1 9.05 % 8.96 % 8.43 % ASSET QUALITY Net charge-offs $ 17,450 $ 38,044 $ 3,899 Nonperforming loans 42,687 43,728 9,981 Nonaccrual loans 42,667 43,181 9,766 Classified assets 193,838 185,389 99,122 Total assets 15,596,431 14,518,590 13,054,172 Total loans 11,220,355 10,884,118 9,737,138 Classified assets to total assets 1.24 % 1.28 % 0.76 % Nonperforming loans to total loans 0.38 % 0.40 % 0.10 % Nonperforming assets to total assets 0.30 % 0.34 % 0.08 % ACL on loans to total loans 1.23 % 1.24 % 1.41 % Net charge-offs to average loans 0.16 % 0.37 % 0.04 % 1 Non-GAAP measures.
At December 31, 2023, $447.0 million of these loans include the use of interest reserves and follow standard 38 underwriting guidelines.
At December 31, 2024, $334.2 million of these loans include the use of interest reserves and follow standard underwriting guidelines.
The increase in market interest rates in 2022-2023 increased the competitive environment for deposits, as depositors 49 have more alternatives to bank deposit accounts. While client deposit balances declined in the first half of 2023, successful marketing efforts increased total deposits in the last half of the year. Investment securities are another important tool to the Company’s liquidity objectives.
The 50 increase in market interest rates in 2022 - 2023 increased the competitive environment for deposits, as depositors had more alternatives to bank deposit accounts. Successful marketing efforts increased total deposits in 2024. Investment securities are another important tool to the Company’s liquidity objectives.
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.
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.
Treasury Bills 181,701 7.7 % 208,534 9.3 % Corporate debt securities 130,994 5.5 % 137,260 6.1 % Total $ 2,369,492 100.0 % $ 2,246,457 100.0 % The allowance for credit losses on held-to-maturity debt securities was $0.8 million and $0.7 million at December 31, 2023 and 2022, respectively.
Treasury Bills 128,893 4.6 % 181,701 7.7 % Corporate debt securities 142,967 5.1 % 130,994 5.5 % Total $ 2,791,462 100.0 % $ 2,369,492 100.0 % The allowance for credit losses on held-to-maturity debt securities was $0.3 million and $0.8 million at December 31, 2024 and 2023, respectively.
Other real estate The following table summarizes the changes in other real estate: Year ended December 31, ($ in thousands) 2023 2022 Other real estate, beginning of period $ 269 $ 3,493 Additions 5,736 — Writedowns in value — (268) Sales (269) (2,956) Other real estate, end of period $ 5,736 $ 269 Investments At December 31, 2023, our portfolio of investment securities was $2.4 billion, or 16%, of total assets, compared to $2.2 billion, or 17%, of total assets as of December 31, 2022.
Other real estate The following table summarizes the changes in other real estate: Year ended December 31, ($ in thousands) 2024 2023 Other real estate, beginning of period $ 5,736 $ 269 Additions 6,559 5,736 Changes in valuation allowance (156) — Sales (8,184) (269) Other real estate, end of period $ 3,955 $ 5,736 47 Investments At December 31, 2024, our portfolio of investment securities was $2.8 billion, or 18% of total assets, compared to $2.4 billion, or 16% of total assets as of December 31, 2023.
Noninterest Income The following table presents a comparative summary of the major components of noninterest income for each of the years in the three-year period ended December 31, 2023: Year ended December 31, Change from ($ in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Service charges on deposit accounts $ 16,559 $ 18,326 $ 15,428 $ (1,767) $ 2,898 Wealth management revenue 10,030 10,010 10,259 20 (249) Card services revenue 10,028 11,551 11,880 (1,523) (329) Tax credit income 9,196 2,558 8,028 6,638 (5,470) Miscellaneous income 22,912 16,717 22,148 6,195 (5,431) Total noninterest income $ 68,725 $ 59,162 $ 67,743 $ 9,563 $ (8,581) Noninterest income increased $9.6 million, or 16%, in 2023 compared to 2022.
Noninterest Income The following table presents a comparative summary of the major components of noninterest income for each of the years in the three-year period ended December 31, 2024: Year ended December 31, Change from ($ in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Service charges on deposit accounts $ 18,344 $ 16,559 $ 18,326 $ 1,785 $ (1,767) Wealth management revenue 10,452 10,030 10,010 422 20 Card services revenue 9,966 10,028 11,551 (62) (1,523) Tax credit income 8,954 9,196 2,558 (242) 6,638 Other income 21,987 22,912 16,717 (925) 6,195 Total noninterest income $ 69,703 $ 68,725 $ 59,162 $ 978 $ 9,563 Noninterest income increased $1.0 million, or 1%, in 2024 compared to 2023.
The Company has $3.0 billion in unused commitments to extend credit as of December 31, 2023. While this commitment level would exhaust the majority the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.
While this commitment level would exhaust the majority the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.
The following table shows the average balance and average rate of the Company’s deposits by type: Years ended December 31, 2023 2022 2021 ($ in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Average Balance Average Rate Paid Noninterest-bearing deposit accounts $ 4,131,163 — % $ 4,805,549 — % $ 3,597,204 — % Interest-bearing demand accounts 2,559,238 1.84 % 2,318,363 0.30 % 2,122,752 0.08 % Money market accounts 3,043,794 3.05 % 2,781,579 0.69 % 2,557,836 0.18 % Savings accounts 668,368 0.15 % 819,043 0.04 % 724,768 0.03 % Certificates of deposit: Brokered 557,761 4.44 % 128,120 1.08 % 66,265 1.66 % Customer 640,790 2.81 % 441,152 0.48 % 504,231 0.61 % Total interest-bearing deposits $ 7,469,951 2.46 % $ 6,488,257 0.46 % $ 5,975,852 0.18 % Total average deposits $ 11,601,114 1.58 % $ 11,293,806 0.27 % $ 9,573,056 0.11 % Average total deposits were $11.6 billion for the year ended December 31, 2023, an increase of $307.3 million, or 3%, from December 31, 2022.
The following table shows the average balance and average rate of the Company’s deposits by type: Years ended December 31, 2024 2023 2022 ($ in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Average Balance Average Rate Paid Noninterest-bearing deposit accounts $ 4,042,368 — % $ 4,131,163 — % $ 4,805,549 — % Interest-bearing demand accounts 3,033,616 2.54 % 2,559,238 1.84 % 2,318,363 0.30 % Money market accounts 3,494,497 3.65 % 3,043,794 3.05 % 2,781,579 0.69 % Savings accounts 567,147 0.22 % 668,368 0.15 % 819,043 0.04 % Certificates of deposit: Brokered 519,279 4.73 % 557,761 4.44 % 128,120 1.08 % Customer 851,730 4.01 % 640,790 2.81 % 441,152 0.48 % Total interest-bearing deposits $ 8,466,269 3.13 % $ 7,469,951 2.46 % $ 6,488,257 0.46 % Total average deposits $ 12,508,637 2.12 % $ 11,601,114 1.58 % $ 11,293,806 0.27 % Average total deposits were $12.5 billion for the year ended December 31, 2024, an increase of $907.5 million, or 8%, from December 31, 2023.
FINANCIAL CONDITION Summary Balance Sheet ($ in thousands) December 31, % Increase (Decrease) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Total cash and cash equivalents $ 433,029 $ 291,359 $ 2,021,689 48.62 % (85.59) % Securities 2,368,707 2,245,722 1,795,687 5.48 % 25.06 % Total loans 10,884,118 9,737,138 9,017,642 11.78 % 7.98 % Total assets 14,518,590 13,054,172 13,537,358 11.22 % (3.57) % Deposits 12,176,371 10,829,150 11,343,799 12.44 % (4.54) % Total liabilities 12,802,522 11,531,909 12,008,242 11.02 % (3.97) % Total shareholders’ equity 1,716,068 1,522,263 1,529,116 12.73 % (0.45) % The table below represents the summary balance sheet shown as a percentage of account class (total assets, total liabilities or total shareholders’ equity), as applicable: December 31, 2023 2022 2021 Total cash and cash equivalents 2.98 % 2.23 % 14.93 % Securities 16.31 % 17.20 % 13.26 % Total loans 74.97 % 74.59 % 66.61 % Total assets 100.00 % 100.00 % 100.00 % Deposits 95.11 % 93.91 % 94.47 % Total liabilities 100.00 % 100.00 % 100.00 % Total shareholders’ equity 100.00 % 100.00 % 100.00 % Assets Loans by Type The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio, including the C&I category, is secured by real estate.
FINANCIAL CONDITION Summary Balance Sheet ($ in thousands) December 31, % Increase (Decrease) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Cash and cash equivalents $ 764,170 $ 433,029 $ 291,359 76.47 % 48.62 % Securities 2,791,205 2,368,707 2,245,722 17.84 % 5.48 % Loans 11,220,355 10,884,118 9,737,138 3.09 % 11.78 % Assets 15,596,431 14,518,590 13,054,172 7.42 % 11.22 % Deposits 13,146,492 12,176,371 10,829,150 7.97 % 12.44 % Liabilities 13,772,429 12,802,522 11,531,909 7.58 % 11.02 % Shareholders’ equity 1,824,002 1,716,068 1,522,263 6.29 % 12.73 % 37 The table below represents the summary balance sheet shown as a percentage of account class (total assets, total liabilities or total shareholders’ equity), as applicable: December 31, 2024 2023 2022 Cash and cash equivalents to total assets 4.90 % 2.98 % 2.23 % Securities to total assets 17.90 % 16.31 % 17.20 % Loans to total assets 71.94 % 74.97 % 74.59 % Deposits to total liabilities 95.46 % 95.11 % 93.91 % Assets Loans by Type The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector other than those noted in the table of loans by NAICS code below; however, a substantial portion of the portfolio, including the C&I category, is secured by real estate.
The Company faces market risk in the form of interest rate risk through transactions other than trading activities. Market risk from these activities, in the form of interest rate risk, is measured and managed through a number of methods. The Company uses financial modeling techniques to measure interest rate risk.
Risk Management Market risk arises from exposure to changes in interest rates and other relevant market rate or price risk. The Company faces market risk in the form of interest rate risk through transactions other than trading activities. Market risk from these activities, in the form of interest rate risk, is measured and managed through a number of methods.
The Company had $6.6 billion in variable rate loans as of December 31, 2023. Of these loans, $4.2 billion have an interest rate floor and nearly all of those loans were at or above the floor.
The Company had $6.7 billion in variable rate loans as of December 31, 2024. Of these loans, $4.6 billion have an interest rate floor and nearly all of those loans were at or above the floor. Variable rate loans include $2.7 billion indexed to the prime rate, $3.2 billion are indexed to SOFR, and $807.4 million indexed to other rates.
The ability of the Company’s borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market. 37 The following table sets forth the composition of the loan portfolio by type of loans: December 31, ($ in thousands) 2023 2022 Commercial and industrial $ 4,672,559 $ 3,859,882 Commercial real estate - investor owned 2,451,953 2,357,820 Commercial real estate - owner occupied 2,351,618 2,270,551 Construction and land development 760,425 611,565 Residential real estate 372,188 395,537 Other 275,375 241,783 Total loans $ 10,884,118 $ 9,737,138 December 31, 2023 2022 Commercial and industrial 42.9 % 39.6 % Commercial real estate - investor owned 22.5 % 24.2 % Commercial real estate - owner occupied 21.6 % 23.3 % Construction and land development 7.1 % 6.3 % Residential real estate 3.4 % 4.1 % Other 2.5 % 2.5 % Total loans 100.0 % 100.0 % C&I loans are made based on the borrower’s ability to generate cash flows for repayment from income sources, general credit strength, experience, and character, even though such loans may also be secured by real estate or other assets.
The following table sets forth the composition of the loan portfolio by type of loans: December 31, ($ in thousands) 2024 2023 Commercial and industrial $ 4,716,689 $ 4,672,559 Commercial real estate - investor owned 2,606,964 2,451,953 Commercial real estate - owner occupied 2,367,823 2,351,618 Construction and land development 891,059 760,425 Residential real estate 359,263 372,188 Other 278,557 275,375 Total loans $ 11,220,355 $ 10,884,118 December 31, 2024 2023 Commercial and industrial 42.0 % 42.9 % Commercial real estate - investor owned 23.2 % 22.5 % Commercial real estate - owner occupied 21.1 % 21.6 % Construction and land development 8.0 % 7.1 % Residential real estate 3.2 % 3.4 % Other 2.5 % 2.5 % Total loans 100.0 % 100.0 % C&I loans are made based on the borrower’s ability to generate cash flows for repayment from income sources, general credit strength, experience, and character, even though such loans may also be secured by real estate or other assets.
Year ended December 31, 2023 2022 2021 ($ in thousands) Average Balance Interest Income/Expense Average Yield/ Rate Average Balance Interest Income/Expense Average Yield/ Rate Average Balance Interest Income/Expense Average Yield/ Rate Assets Interest-earning assets: Loans 1, 2 $ 10,324,951 $ 688,439 6.67 % $ 9,193,682 $ 456,703 4.97 % $ 8,055,873 $ 349,112 4.33 % Taxable securities 1,320,664 40,920 3.10 1,228,514 29,638 2.41 908,189 19,305 2.13 Non-taxable securities 2 970,888 30,209 3.11 872,173 25,184 2.89 659,804 18,468 2.80 Total securities 2,291,552 71,129 3.10 2,100,687 54,822 2.61 1,567,993 37,773 2.41 Interest-earning deposits 260,214 13,430 5.16 1,074,165 10,599 0.99 1,084,853 1,496 0.14 Total interest-earning assets 12,876,717 772,998 6.00 12,368,534 522,124 4.22 10,708,719 388,381 3.63 Noninterest-earning assets 928,519 951,090 758,591 Total assets $ 13,805,236 $ 13,319,624 $ 11,467,310 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand accounts $ 2,559,238 $ 46,976 1.84 % $ 2,318,363 $ 7,038 0.30 % $ 2,122,752 $ 1,614 0.08 % Money market accounts 3,043,794 92,976 3.05 2,781,579 19,306 0.69 2,557,836 4,669 0.18 Savings accounts 668,368 975 0.15 819,043 305 0.04 724,768 225 0.03 Certificates of deposit 1,198,551 42,796 3.57 569,272 3,509 0.62 570,496 4,160 0.73 Total interest-bearing deposits 7,469,951 183,723 2.46 6,488,257 30,158 0.46 5,975,852 10,668 0.18 Subordinated debentures and notes 155,702 9,781 6.28 155,160 9,166 5.91 195,686 10,960 5.60 FHLB advances 54,615 2,752 5.04 33,467 599 1.79 59,945 803 1.34 Securities sold under agreements to repurchase 168,745 3,647 2.16 211,039 506 0.24 225,894 235 0.10 Other borrowings 71,738 2,424 3.38 22,812 750 3.29 26,428 370 1.40 Total interest-bearing liabilities 7,920,751 202,327 2.55 6,910,735 41,179 0.60 6,483,805 23,036 0.36 Noninterest bearing liabilities: Demand deposits 4,131,163 4,805,549 3,597,204 Other liabilities 130,201 104,581 109,148 Total liabilities 12,182,115 11,820,865 10,190,157 Shareholders' equity 1,623,121 1,498,759 1,277,153 Total liabilities & shareholders' equity $ 13,805,236 $ 13,319,624 $ 11,467,310 Net interest income $ 570,671 $ 480,945 $ 365,345 Net interest spread 3.45 % 3.62 % 3.27 % Net interest margin (tax equivalent) 4.43 % 3.89 % 3.41 % 1 Average balances include non-accrual loans.
Year ended December 31, 2024 2023 2022 ($ in thousands) Average Balance Interest Income/Expense Average Yield/ Rate Average Balance Interest Income/Expense Average Yield/ Rate Average Balance Interest Income/Expense Average Yield/ Rate Assets Interest-earning assets: Loans 1, 2 $ 10,990,774 $ 755,448 6.87 % $ 10,324,951 $ 688,439 6.67 % $ 9,193,682 $ 456,703 4.97 % Taxable securities 1,512,132 53,167 3.52 1,320,664 40,920 3.10 1,228,514 29,638 2.41 Non-taxable securities 2 1,000,558 31,963 3.19 970,888 30,209 3.11 872,173 25,184 2.89 Total securities 2,512,690 85,130 3.39 2,291,552 71,129 3.10 2,100,687 54,822 2.61 Interest-earning deposits 368,221 18,918 5.14 260,214 13,430 5.16 1,074,165 10,599 0.99 Total interest-earning assets 13,871,685 859,496 6.20 12,876,717 772,998 6.00 12,368,534 522,124 4.22 Noninterest-earning assets 970,005 928,519 951,090 Total assets $ 14,841,690 $ 13,805,236 $ 13,319,624 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand accounts $ 3,033,616 $ 76,932 2.54 % $ 2,559,238 $ 46,976 1.84 % $ 2,318,363 $ 7,038 0.30 % Money market accounts 3,494,497 127,651 3.65 3,043,794 92,976 3.05 2,781,579 19,306 0.69 Savings accounts 567,147 1,261 0.22 668,368 975 0.15 819,043 305 0.04 Certificates of deposit 1,371,009 58,764 4.29 1,198,551 42,796 3.57 569,272 3,509 0.62 Total interest-bearing deposits 8,466,269 264,608 3.13 7,469,951 183,723 2.46 6,488,257 30,158 0.46 Subordinated debentures and notes 156,260 10,497 6.72 155,702 9,781 6.28 155,160 9,166 5.91 FHLB advances 30,363 1,691 5.57 54,615 2,752 5.04 33,467 599 1.79 Securities sold under agreements to repurchase 164,959 5,667 3.44 168,745 3,647 2.16 211,039 506 0.24 Other borrowings 37,833 492 1.30 71,738 2,424 3.38 22,812 750 3.29 Total interest-bearing liabilities 8,855,684 282,955 3.20 7,920,751 202,327 2.55 6,910,735 41,179 0.60 Noninterest-bearing liabilities: Demand deposits 4,042,368 4,131,163 4,805,549 Other liabilities 159,463 130,201 104,581 Total liabilities 13,057,515 12,182,115 11,820,865 Shareholders' equity 1,784,175 1,623,121 1,498,759 Total liabilities & shareholders' equity $ 14,841,690 $ 13,805,236 $ 13,319,624 Net interest income $ 576,541 $ 570,671 $ 480,945 Net interest spread 3.00 % 3.45 % 3.62 % Net interest margin (tax equivalent) 4.16 % 4.43 % 3.89 % 1 Average balances include non-accrual loans.
As interest rates increase, the amount available for reimbursement also increases, resulting in an increase to noninterest expense. Conversely, a decrease in interest rates would reduce the amount available for reimbursement and decrease noninterest expense. Critical Accounting Policies and Estimates The following accounting policies are considered most critical to the understanding of the Company’s financial condition and results of operations.
Conversely, a decrease in interest rates would reduce the amount available for reimbursement and decrease noninterest expense. Critical Accounting Policies and Estimates The following accounting policies are considered most critical to the understanding of the Company’s financial condition and results of operations. These critical accounting policies require management’s most difficult, subjective and complex judgments about matters that are inherently uncertain.
December 31, ($ in thousands) 2023 2022 Non-accrual loans $ 43,181 $ 9,766 Loans past due 90 days or more and still accruing interest 547 142 Restructured loans — 73 Total nonperforming loans 43,728 9,981 Other real estate 5,736 269 Total nonperforming assets $ 49,464 $ 10,250 Total assets $ 14,518,590 $ 13,054,172 Total loans 10,884,118 9,737,138 Total allowance for credit losses 134,771 136,932 ACL to nonaccrual loans 312 % 1,402 % ACL to nonperforming loans 308 % 1,372 % ACL to total loans 1.24 % 1.41 % Nonaccrual loans to total loans 0.40 % 0.10 % Nonperforming loans to total loans 0.40 % 0.10 % Nonperforming assets to total assets 0.34 % 0.08 % 45 Nonperforming loans based on loan type were as follows: ($ in thousands) December 31, 2023 Number of loans December 31, 2022 Number of loans Commercial and industrial $ 7,756 18 % 15 $ 4,443 44 % 14 Commercial real estate 33,739 77 % 27 4,200 42 % 10 Construction and land development 1,269 3 % 3 1,192 12 % 2 Residential real estate 959 2 % 1 73 1 % 1 Other 5 — % 2 73 1 % 2 Total $ 43,728 100 % 48 $ 9,981 100 % 29 The following table summarizes the changes in nonperforming loans: Year ended December 31, ($ in thousands) 2023 2022 Nonperforming loans, beginning of period $ 9,981 $ 28,024 Additions to nonaccrual loans 109,766 8,904 Charge-offs (43,215) (9,393) Principal payments (25,871) (17,554) Moved to other real estate and repossessed assets (6,933) — Nonperforming loans, end of period $ 43,728 $ 9,981 Nonperforming loans at December 31, 2023 increased $33.7 million, or 338%, when compared to December 31, 2022.
December 31, ($ in thousands) 2024 2023 Non-accrual loans $ 42,667 $ 43,181 Loans past due 90 days or more and still accruing interest 20 547 Total nonperforming loans 42,687 43,728 Other real estate 3,955 5,736 Total nonperforming assets $ 46,642 $ 49,464 Total assets $ 15,596,431 $ 14,518,590 Total loans 11,220,355 10,884,118 Total allowance for credit losses 137,950 134,771 ACL to nonaccrual loans 323 % 312 % ACL to nonperforming loans 323 % 308 % ACL to total loans 1.23 % 1.24 % Nonaccrual loans to total loans 0.38 % 0.40 % Nonperforming loans to total loans 0.38 % 0.40 % Nonperforming assets to total assets 0.30 % 0.34 % 46 Nonperforming loans based on loan type were as follows: ($ in thousands) December 31, 2024 Number of loans December 31, 2023 Number of loans Commercial and industrial $ 15,821 37 % 23 $ 7,756 18 % 15 Commercial real estate 25,096 59 % 33 33,739 77 % 27 Construction and land development 1,503 3 % 2 1,269 3 % 3 Residential real estate 258 1 % 1 959 2 % 1 Other 9 NM 4 5 — % 2 Total $ 42,687 100 % 63 $ 43,728 100 % 48 The following table summarizes the changes in nonperforming loans: Year ended December 31, ($ in thousands) 2024 2023 Nonperforming loans, beginning of period $ 43,728 $ 9,981 Additions to nonaccrual loans 55,747 109,766 Charge-offs (21,874) (43,215) Principal payments (29,000) (25,871) Moved to other real estate (5,914) (6,933) Nonperforming loans, end of period $ 42,687 $ 43,728 Nonperforming loans at December 31, 2024 decreased $1.0 million, or 2%, when compared to December 31, 2023.
Volume growth of the balance sheet drove an increase in interest income on earning assets of $53.6 million, while the increase in interest rates drove interest income on interest-earnings assets up by $197.3 million in 2023 compared to 2022. Total interest expense increased $161.1 million in 2023 primarily due to increased deposit interest expense.
Volume growth of the balance sheet drove an increase in interest income on earning assets of $58.3 million, while higher loan and securities yields drove interest income on interest-earning assets up by $28.2 million in 2024 compared to 2023. Total interest expense increased $80.6 million in 2024 primarily due to increased deposit interest expense.
Government sponsored enterprises $ 296,446 12.5 % $ 237,785 10.6 % Obligations of states and political subdivisions 1,007,870 42.5 % 946,456 42.1 % Agency mortgage-backed securities 752,481 31.8 % 716,422 31.9 % U.S.
Government sponsored enterprises $ 276,040 9.9 % $ 296,446 12.5 % Obligations of states and political subdivisions 1,168,256 41.9 % 1,007,870 42.5 % Agency mortgage-backed securities 1,075,306 38.5 % 752,481 31.8 % U.S.
The tax-equivalent adjustments were $8.1 million, $7.0 million, and $5.1 million for the years ended December 31, 2023, 2022, and 2021 respectively. 33 Rate/Volume The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume. 2023 compared to 2022 2022 compared to 2021 Increase (decrease) due to Increase (decrease) due to ($ in thousands) Volume 1 Rate 2 Net Volume 1 Rate 2 Net Interest earned on: Loans $ 61,460 $ 170,276 $ 231,736 $ 52,238 $ 55,353 $ 107,591 Taxable securities 2,355 8,927 11,282 7,474 2,859 10,333 Non-taxable securities 3 2,981 2,045 5,026 6,115 601 6,716 Interest-earning deposits (13,192) 16,023 2,831 (15) 9,118 9,103 Total interest-earning assets 53,604 197,271 250,875 65,812 67,931 133,743 Interest paid on: Interest-bearing demand accounts $ 805 $ 39,133 $ 39,938 $ 162 $ 5,262 $ 5,424 Money market accounts 1,987 71,683 73,670 443 14,194 14,637 Savings (66) 736 670 31 49 80 Certificates of deposit 7,363 31,924 39,287 (9) (642) (651) Subordinated debentures and notes 32 583 615 (2,368) 574 (1,794) FHLB advances 555 1,599 2,154 (423) 219 (204) Securities sold under agreements to repurchase (126) 3,268 3,142 (16) 287 271 Other borrowed funds 1,729 (56) 1,673 (57) 437 380 Total interest-bearing liabilities 12,279 148,870 161,149 (2,237) 20,380 18,143 Net interest income $ 41,325 $ 48,401 $ 89,726 $ 68,049 $ 47,551 $ 115,600 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 fully tax equivalent basis using a tax rate of approximately 25%.
The tax-equivalent adjustments were $8.4 million, $8.1 million, and $7.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. 34 Rate/Volume The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume. 2024 compared to 2023 2023 compared to 2022 Increase (decrease) due to Increase (decrease) due to ($ in thousands) Volume 1 Rate 2 Net Volume 1 Rate 2 Net Interest earned on: Loans $ 45,473 $ 21,536 $ 67,009 $ 61,460 $ 170,276 $ 231,736 Taxable securities 6,347 5,900 12,247 2,355 8,927 11,282 Non-taxable securities 3 936 818 1,754 2,981 2,045 5,026 Interest-earning deposits 5,549 (61) 5,488 (13,192) 16,023 2,831 Total interest-earning assets 58,305 28,193 86,498 53,604 197,271 250,875 Interest paid on: Interest-bearing demand accounts $ 9,794 $ 20,162 $ 29,956 $ 805 $ 39,133 $ 39,938 Money market accounts 14,928 19,747 34,675 1,987 71,683 73,670 Savings (165) 451 286 (66) 736 670 Certificates of deposit 6,674 9,294 15,968 7,363 31,924 39,287 Subordinated debentures and notes 35 681 716 32 583 615 FHLB advances (1,326) 265 (1,061) 555 1,599 2,154 Securities sold under agreements to repurchase (84) 2,104 2,020 (126) 3,268 3,142 Other borrowed funds (839) (1,093) (1,932) 1,729 (56) 1,673 Total interest-bearing liabilities 29,017 51,611 80,628 12,279 148,870 161,149 Net interest income $ 29,288 $ (23,418) $ 5,870 $ 41,325 $ 48,401 $ 89,726 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 fully tax equivalent basis using a tax rate of approximately 25%.
This follows a period of highly expansionary fiscal support from the federal government during the start of the COVID-19 pandemic in 2020-2021. 30 Financial Performance Highlights Below are highlights of our financial performance for the years ended December 31, 2023, 2022 and 2021.
These actions represent the Federal Reserve’s response to an environment of high inflation and elevated interest rates following a period of highly expansionary fiscal support from the federal government during the COVID-19 pandemic in 2020-2021. 31 Financial Performance Highlights Below are highlights of our financial performance for the years ended December 31, 2024, 2023 and 2022.
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.
Such obligations relate to funding operations through deposits or debt issuances, as well as leases for premises and equipment. As a financial services provider, the Company routinely enters into commitments to extend credit. While contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit may expire without being drawn upon.
At December 31, 2023 and 2022, the Company had an agricultural loan portfolio of $229.7 million and $200.1 million, respectively. The Company has announced its intent to wind down this portfolio over time as the loans mature or pay down.
At December 31, 2024 and 2023, the Company had an agricultural loan portfolio of $121.8 million and $229.7 million, respectively. The Company continues to wind down this portfolio over time as the loans mature or pay down. The Company does not intend to enter into new agricultural loans.
In the event 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.
Because these estimates and judgments are based on current circumstances, they may change over time or prove to be inaccurate based on experience. In the event different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of a materially different financial condition and/or results of operations could reasonably be expected.
The 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.
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.
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 also has unsecured federal funds lines with seven correspondent banks totaling $140 million. In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes.
The decline in the allowance to total loans ratio in 2023 compared to 2022 was primarily due to a shift in the mix of the loan portfolio to categories with lower reserve requirements, improvement in the economic forecast and net loan charge-offs of $38.0 million. 44 The following table is a summary of net charge-offs (recoveries) to average loans for the periods indicated: December 31, 2023 2022 ($ 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 Commercial and industrial $ 33,257 $ 4,247,091 0.78 % $ 3,869 $ 3,555,483 0.11 % Real estate: Commercial 4,446 4,712,037 0.09 % (593) 4,323,757 (0.01) % Construction and land development (54) 712,578 (0.01) % (53) 689,048 (0.01) % Residential (323) 362,641 (0.09) % 539 382,485 0.14 % Other 718 290,054 0.25 % 137 240,816 0.06 % Total 38,044 10,324,401 0.37 % 3,899 9,191,589 0.04 % (1) Excludes loans held for sale.
The decrease in the allowance to total loans ratio in 2024 compared to 2023 was primarily due to a shift in the mix of the loan portfolio to categories with lower reserve requirements, improvement in the economic forecast and net loan charge-offs of $17.5 million. 45 The following table is a summary of net charge-offs (recoveries) to average loans for the periods indicated: December 31, 2024 2023 ($ 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 $ 10,425 $ 5,602,957 0.19 % $ 33,257 $ 4,247,091 0.78 % Real estate: Commercial 3,510 3,934,764 0.09 % 4,446 4,712,037 0.09 % Construction and land development 3,125 792,854 0.39 % (54) 712,578 (0.01) % Residential (264) 352,754 (0.07) % (323) 362,641 (0.09) % Other 654 306,583 0.21 % 718 290,054 0.25 % Total $ 17,450 $ 10,989,912 0.16 % $ 38,044 $ 10,324,401 0.37 % (1) Excludes loans held for sale.
The following table presents a breakdown of loans by NAICS code at the periods indicated: December 31, 2023 2022 ($ in thousands) Outstanding Balance % Outstanding Balance % Accommodation and Food Services $ 975,357 9 % $ 880,870 9 % Administrative and Support and Waste Management and Remediation Services 215,733 2 % 200,586 2 % Agriculture, Forestry, Fishing and Hunting 1 229,719 2 % 200,144 2 % Arts, Entertainment, and Recreation 125,487 1 % 105,851 1 % Construction 692,403 6 % 555,343 6 % Educational Services 54,044 1 % 51,083 — % Finance and Insurance 2,005,183 18 % 1,622,712 17 % Health Care and Social Assistance 551,979 5 % 455,839 5 % Information 97,052 1 % 100,004 1 % Management of Companies and Enterprises 88,079 1 % 78,548 1 % Manufacturing 704,750 7 % 694,483 7 % Mining, Quarrying, and Oil and Gas Extraction 32,024 — % 8,106 — % Other Services (except Public Administration) 588,449 5 % 536,112 6 % Professional, Scientific, and Technical Services 326,176 3 % 304,027 3 % Public Administration 13,774 — % 9,111 — % Real Estate and Rental and Leasing 2,766,754 25 % 2,534,275 26 % Retail Trade 513,763 5 % 517,659 5 % Transportation and Warehousing 284,706 3 % 257,384 3 % Utilities 15,853 — % 34,079 — % Wholesale Trade 535,666 5 % 491,218 5 % Other 67,167 1 % 99,704 1 % Total Loans $ 10,884,118 100 % $ 9,737,138 100 % 1 Includes $95.0 million and $94.0 million in animal production at December 31, 2023, and 2022, respectively and $113.8 million and $95.6 million in crop production at December 31, 2023, and 2022, respectively.
Credit risk is managed by thoroughly reviewing the creditworthiness of the borrowers prior to origination and thereafter. 39 The following table presents a breakdown of loans by NAICS code at the periods indicated: December 31, 2024 2023 ($ in thousands) Outstanding Balance % Outstanding Balance % Accommodation and Food Services $ 1,052,105 9 % $ 975,357 9 % Administrative and Support and Waste Management and Remediation Services 207,003 2 % 215,733 2 % Agriculture, Forestry, Fishing and Hunting 1 141,339 1 % 229,719 2 % Arts, Entertainment, and Recreation 139,256 1 % 125,487 1 % Construction 584,421 5 % 692,403 6 % Educational Services 49,942 NM 54,044 1 % Finance and Insurance 2,252,420 20 % 2,005,183 18 % Health Care and Social Assistance 612,767 5 % 551,979 5 % Information 68,839 1 % 97,052 1 % Management of Companies and Enterprises 91,890 1 % 88,079 1 % Manufacturing 750,480 7 % 704,750 7 % Mining, Quarrying, and Oil and Gas Extraction 5,494 NM 32,024 NM Other Services (except Public Administration) 556,325 5 % 588,449 5 % Professional, Scientific, and Technical Services 311,160 3 % 326,176 3 % Public Administration 11,889 NM 13,774 NM Real Estate and Rental and Leasing 2,904,153 26 % 2,766,754 25 % Retail Trade 561,932 5 % 513,763 5 % Transportation and Warehousing 286,906 3 % 284,706 3 % Utilities 7,139 NM 15,853 NM Wholesale Trade 517,761 5 % 535,666 5 % Other 107,134 1 % 67,167 1 % Total Loans $ 11,220,355 100 % $ 10,884,118 100 % 1 Includes $54.2 million and $95.0 million in animal production at December 31, 2024, and 2023, respectively and $69.4 million and $113.8 million in crop production at December 31, 2024, and 2023, respectively.
Total average interest-bearing deposits increased to $7.5 billion, an increase of $981.7 million, or 15%, in 2023 over the average for 2022. Average noninterest bearing deposits declined $674.4 million, or 14%, in 2023 compared to the average for 2022. Average noninterest bearing deposits represented 36% of total average deposits in 2023, compared to 43% in 2022.
Total average interest-bearing deposits increased to $8.5 billion, an increase of $996.3 million, or 13%, in 2024 over the average for 2023. Average noninterest-bearing deposits declined $88.8 million, or 2%, in 2024 compared to the average for 2023. Average noninterest-bearing deposits represented 31% of total average deposits in 2024, compared to 36% in 2023.
Real estate loans place an emphasis on the estimated cash flows from the operation of the property and/or the underlying collateral value. • Our commercial real estate loans, including investor-owned and owner-occupied categories, primarily represent commercial property loans on which the primary source of repayment is income from the property.
As a result, these specialized loan products offer opportunities to expand and diversify our overall geographic concentration by entering into new markets. 38 Real estate loans place an emphasis on the estimated cash flows from the operation of the property and/or the underlying collateral value. • Our commercial real estate loans, including investor-owned and owner-occupied categories, primarily represent commercial property loans on which the primary source of repayment is income from the property for investor-owned and the operating business for owner-occupied.
The tax-equivalent net interest margin was 4.43% for 2023, compared to 3.89% for 2022. The primary driver of the increase in net interest margin from 2022 to 2023 was an increase market interest rates. In 2023, the Federal Reserve increased interest rates three times. The federal funds target rate increased 100 basis points in 2023.
The tax-equivalent net interest margin was 4.16% for 2024, compared to 4.43% for 2023. The primary driver of the decrease in net interest margin from 2023 to 2024 was higher interest expense on the deposit portfolio. In 2023, the Federal Reserve increased interest rates three times for a total of 100 basis points.
The tangible common equity to tangible assets ratio is considered a non-GAAP measure. The tables included in this MD&A section under the caption “Use of Non-GAAP Financial Measures” reconcile these ratios to U.S. GAAP. Risk Management Market risk arises from exposure to changes in interest rates and other relevant market rate or price risk.
The Company believes the tangible common equity and regulatory capital ratios are important measures of capital strength. The tangible common equity to tangible assets ratio is considered a non-GAAP measure. The tables included in this MD&A section under the caption “Use of Non-GAAP Financial Measures” reconcile these ratios to U.S. GAAP.
The increase was primarily from higher customer servicing deposit costs due to higher deposit balances and an increase in earnings credit rates, and an increase in compensation from a larger associate base and annual merit increases.
The increase in noninterest expense was primarily from higher customer deposit servicing costs due to higher average balances and an increase in earnings credit rates, an increase in compensation due to the recruitment of new relationship bankers and annual merit increases, and expenses related to the core system conversion.
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.
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.
SBA loans totaling $42.1 million were sold during 2023. Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at December 31, 2023, the Company could borrow an additional $1.0 billion from the FHLB of Des Moines under blanket loan pledges and has additional real estate loans that could be pledged.
In addition to amounts borrowed at December 31, 2024, the Company could borrow an additional $1.3 billion from the FHLB of Des Moines under blanket loan pledges and has additional real estate loans that could be pledged. The Company also has $2.8 billion available from the Federal Reserve Bank under a pledged loan agreement.
Note 14 – Regulatory Capital” for a summary of our risk-based capital and leverage ratios. 51 The following table summarizes the Company’s capital ratios: December 31, 2023 December 31, 2022 ($ in thousands) EFSC Bank EFSC Bank To Be Well-Capitalized Minimum Ratio with CCB Common Equity Tier 1 Capital to Risk Weighted Assets 11.3 % 12.2 % 11.1 % 12.1 % 6.5 % 7.0 % Tier 1 Capital to Risk Weighted Assets 12.7 % 12.2 % 12.6 % 12.1 % 8.0 % 8.5 % Total Capital to Risk Weighted Assets 14.2 % 13.2 % 14.2 % 13.1 % 10.0 % 10.5 % Leverage Ratio (Tier 1 Capital to Average Assets) 11.0 % 10.6 % 10.9 % 10.5 % 5.0 % N/A Tangible common equity to tangible assets 1 8.96 % 8.43 % Common equity tier 1 capital $ 1,387,802 $ 1,493,105 $ 1,228,786 $ 1,333,978 Tier 1 capital 1,553,448 1,493,163 1,394,426 1,334,030 Total risk-based capital 1,732,501 1,608,966 1,568,332 1,444,685 1 Not a required regulatory capital ratio The Company believes the tangible common equity and regulatory capital ratios are important measures of capital strength.
The following table summarizes the Company’s capital ratios: December 31, 2024 December 31, 2023 ($ in thousands) EFSC Bank EFSC Bank To Be Well-Capitalized Minimum Ratio with CCB Common Equity Tier 1 Capital to Risk Weighted Assets 11.8 % 12.4 % 11.3 % 12.2 % 6.5 % 7.0 % Tier 1 Capital to Risk Weighted Assets 13.1 % 12.4 % 12.7 % 12.2 % 8.0 % 8.5 % Total Capital to Risk Weighted Assets 14.6 % 13.4 % 14.2 % 13.2 % 10.0 % 10.5 % Leverage Ratio (Tier 1 Capital to Average Assets) 11.1 % 10.5 % 11.0 % 10.6 % 5.0 % N/A Tangible common equity to tangible assets 1 9.05 % 8.96 % Common equity tier 1 capital $ 1,505,162 $ 1,578,293 $ 1,387,802 $ 1,493,105 Tier 1 capital 1,670,810 1,578,353 1,553,448 1,493,163 Total risk-based capital 1,864,334 1,708,626 1,732,501 1,608,966 1 Not a required regulatory capital ratio 52 Total regulatory capital includes $63.3 million of subordinated debentures that were issued in 2020 at a fixed rate of 5.75%.
($ in thousands) Total Three months or less $ 118,125 Over three through six months 48,185 Over six through twelve months 48,786 Over twelve months 19,507 Total $ 234,603 As of December 31, 2023, estimated uninsured deposits totaled $4.3 billion, including $234.6 million of certificates of deposit. At December 31, 2022 estimated uninsured deposits totaled $5.9 billion.
($ in thousands) Total Three months or less $ 142,678 Over three through six months 52,082 Over six through twelve months 51,355 Over twelve months 22,102 Total $ 268,217 As of December 31, 2024, estimated uninsured deposits totaled $4.5 billion, including $268.2 million of certificates of deposit. At December 31, 2023 estimated uninsured deposits totaled $4.3 billion.
This limitation went into effect for the Company at the beginning of the third quarter of 2022 and was the primary driver of the reduction in debit card revenue. 35 Noninterest Expense The following table presents a comparative summary of the components of noninterest expense: Year ended December 31, Change from ($ in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Employee compensation and benefits $ 164,566 $ 147,029 $ 124,904 $ 17,537 $ 22,125 Deposit costs 72,293 31,082 14,211 41,211 16,871 Occupancy 16,526 17,640 16,286 (1,114) 1,354 Data processing 15,196 13,513 12,242 1,683 1,271 Professional fees 5,719 7,079 4,289 (1,360) 2,790 Branch-closure expenses — — 3,441 — (3,441) Merger-related expenses — — 22,082 — (22,082) Other expenses 73,886 57,873 48,464 16,013 9,409 Total noninterest expense $ 348,186 $ 274,216 $ 245,919 $ 73,970 $ 28,297 Efficiency ratio 55.15 % 51.44 % 57.47 % 3.71 % (6.03) % Core efficiency ratio 1 53.42 % 49.77 % 49.68 % 3.65 % 0.09 % 1 A non-GAAP measure.
In 2024, the Company sold the guaranteed portion of SBA 7(a) loans of $23.1 million for a gain of $1.4 million, compared to $42.1 million and $2.0 million, respectively, in 2023. 36 Noninterest Expense The following table presents a comparative summary of the components of noninterest expense: Year ended December 31, Change from ($ in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Employee compensation and benefits $ 182,713 $ 164,566 $ 147,029 $ 18,147 $ 17,537 Deposit costs 88,645 72,293 31,082 16,352 41,211 Occupancy 17,231 16,526 17,640 705 (1,114) Data processing 19,671 15,196 13,513 4,475 1,683 Professional fees 6,257 5,719 7,079 538 (1,360) Other expenses 70,530 73,886 57,873 (3,356) 16,013 Total noninterest expense $ 385,047 $ 348,186 $ 274,216 $ 36,861 $ 73,970 Efficiency ratio 60.37 % 55.15 % 51.44 % 5.22 % 3.71 % Core efficiency ratio 1 58.42 % 53.42 % 49.77 % 5.00 % 3.65 % 1 A non-GAAP measure.
Overall, average interest-bearing liabilities increased $1.0 billion, or 15% for the year ended December 31, 2023. The current mix of interest-bearing liabilities increased interest expense in 2023 by $12.3 million, while the increase in the average cost of interest bearing liabilities increased interest expense $148.9 million in 2023.
Overall, average interest-bearing liabilities increased $934.9 million, or 12%, for the year ended December 31, 2024. The shift in volume from noninterest-bearing deposit accounts into higher cost deposit accounts increased interest expense in 2024 by $29.0 million, while the increase in the average cost of interest-bearing liabilities increased interest expense $51.6 million in 2024.
The Bank met the definition of “well-capitalized” at each of December 31, 2023 and 2022. Refer to “Item 8.
The Bank met the definition of “well-capitalized” at each of December 31, 2024 and 2023. Refer to “Item 8. Note 14 – Regulatory Capital” for a summary of our risk-based capital and leverage ratios.
A reconciliation has been included in this MD&A section under the caption “Use of Non-GAAP Financial Measures.” Noninterest expense increased $74.0 million, or 27%, in 2023 compared to 2022. The increase was attributed primarily to a $41.2 million increase in deposit costs, a $17.5 million increase in compensation and benefits, and a $16.0 million increase in other expenses.
A reconciliation has been included in this MD&A section under the caption “Use of Non-GAAP Financial Measures.” Noninterest expense increased $36.9 million, or 11%, in 2024 compared to 2023.
Brokered certificates of deposit are used for term liquidity purposes in place of FHLB borrowings. The brokered certificates of deposit balance has a weighted average cost of 4.73% and a weighted average remaining term of 7 months at December 31, 2023. The Company has a specialty deposit portfolio focusing primarily on property management, community associations, and escrow companies.
Brokered certificates of deposit increased $1.8 million, to $484.6 million at December 31, 2024. Brokered certificates of deposit are used for term liquidity purposes in place of FHLB borrowings. The brokered certificates of deposit balance has a weighted average cost of 4.50% and a weighted average remaining term of 9 months at December 31, 2024.
Variable rate loans include $2.8 billion indexed to the prime rate, $2.7 billion are indexed to SOFR, $294.8 million indexed to LIBOR, and $813.3 million indexed to other rates. Changes in interest rates will also have an effect on noninterest expense. Certain deposit accounts receive an earnings credit that provides a reimbursement for costs clients incur on the accounts.
Changes in interest rates will also have an effect on noninterest expense. Certain deposit accounts receive an earnings credit that provides a reimbursement for costs clients incur on the accounts. As interest rates increase, the amount available for reimbursement also increases, resulting in an increase to noninterest expense.

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