Enterprise Financial (NASDAQ: EFSC) Q1 2026 profit holds near $49M
Filing Impact
Filing Sentiment
Form Type
10-Q
Enterprise Financial Services Corp reported Q1 2026 net income of $49.4 million, slightly below the prior year, with diluted EPS of $1.30. Return on average assets was 1.16% and return on average common equity was 9.80%, indicating solid profitability.
Net interest income rose to $166.1 million, supported by higher loan and securities balances, and tax-equivalent net interest margin improved to 4.28%. Total loans were $11.69 billion and deposits were $14.52 billion, with noninterest-bearing deposits at 33% of total.
Credit quality remained manageable: the allowance for credit losses on loans was $142.1 million, or 1.21% of total loans, and nonperforming loans were $64.9 million, or 0.56% of loans. The company remained well capitalized, with book value per common share of $53.31 and tangible book value per share of $41.38.
Positive
- None.
Negative
- None.
Key Figures
Net income: $49.4M
Diluted EPS: $1.30
Net interest income: $166.1M
+5 more
8 metrics
Net income
$49.4M
Three months ended March 31, 2026
Diluted EPS
$1.30
Three months ended March 31, 2026
Net interest income
$166.1M
Three months ended March 31, 2026
Net interest margin
4.28%
Tax-equivalent NIM, Q1 2026
Total loans
$11.69B
Balance at March 31, 2026
Total deposits
$14.52B
Balance at March 31, 2026
ACL on loans
$142.1M (1.21%)
Allowance for credit losses on loans, March 31, 2026
Nonperforming loans
$64.9M (0.56%)
Nonperforming loans to total loans, March 31, 2026
Key Terms
Allowance for Credit Losses, Net interest margin, Nonperforming loans, Current Expected Credit Loss, +1 more
5 terms
Allowance for Credit Losses financial
"ACL | Allowance for Credit Losses | Federal Reserve"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
Net interest margin financial
"NIM (tax-equivalent) | 4.28 % | 4.26 % | 4.15 %"
Net interest margin measures how much a bank earns from lending and investing compared with what it pays for funding, expressed as a percentage of its interest-earning assets. Think of it like a grocery store’s markup: it shows the gap between buying cost and selling price per dollar of goods — here, the cost is interest paid and the sale is interest received. Investors watch it because a higher margin usually means a bank is more profitable and better at managing interest rate and credit conditions.
Nonperforming loans financial
"Nonperforming loans | 64,941 | 82,809 | 109,882"
Nonperforming loans are loans on which borrowers have stopped making the scheduled interest or principal payments for an extended period (commonly 90 days or more) or are otherwise in serious danger of default. Think of them as IOUs that aren’t being repaid: they tie up a lender’s money, reduce future interest income, and force the lender to hold extra reserves or take losses. For investors, a rising share of nonperforming loans signals weakening credit quality, higher potential losses, and greater risk to a bank’s profitability and capital.
Current Expected Credit Loss financial
"CECL | Current Expected Credit Loss | NM | Not meaningful"
An accounting approach that requires lenders and companies to estimate and record the credit losses they expect on loans and receivables now, using current conditions and reasonable forecasts rather than waiting for a default to occur. It matters to investors because it changes reported reserves and profits up front and gives an earlier, more forward-looking signal of credit quality—like packing an umbrella today because the forecast predicts rain, which affects a company’s cushion against bad loans.
Other Real Estate Owned financial
"OREO | Other Real Estate Owned CRE | Commercial Real Estate"
Assets a lender or financial firm holds after taking back real property through foreclosure or repossession because a borrower defaulted. Think of it like a store keeping returned items it didn’t sell — these properties are not earning interest, can be costly to maintain, and may be sold at a loss or profit, so they directly affect a lender’s balance sheet, cash flow and perceived credit risk for investors.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the quarterly period ended March 31, 2026 .
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the transition period from ______ to ______
Commission file number 001-15373
Incorporated in the State of Delaware
I.R.S. Employer Identification # 43-1706259
Address: 150 North Meramec
Telephone: (314 ) 725-5500
___________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes ☐ No ☒
As of April 29, 2026, the Registrant had 36,585,805 shares of outstanding common stock, $0.01 par value per share.
This document is also available through our website at http://www.enterprisebank.com.
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
TABLE OF CONTENTS
| Page | ||||||||
| PART I - FINANCIAL INFORMATION | ||||||||
| Item 1. Financial Statements | ||||||||
| Condensed Consolidated Balance Sheets (Unaudited) | 1 | |||||||
| Condensed Consolidated Statements of Income (Unaudited) | 2 | |||||||
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | 3 | |||||||
| Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) | 4 | |||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | 5 | |||||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 | |||||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 | |||||||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 51 | |||||||
| Item 4. Controls and Procedures | 52 | |||||||
| PART II - OTHER INFORMATION | ||||||||
| Item 1. Legal Proceedings | 53 | |||||||
| Item 1A. Risk Factors | 53 | |||||||
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 53 | |||||||
| Item 3. Defaults Upon Senior Securities | 53 | |||||||
| Item 4. Mine Safety Disclosures | 53 | |||||||
| Item 5. Other Information | 53 | |||||||
| Item 6. Exhibits | 54 | |||||||
| Signatures | 56 | |||||||
Glossary of Acronyms, Abbreviations and Entities
The acronyms and abbreviations identified below are used in various sections of this Form 10-Q, including the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements in Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 of this Form 10-Q.
| ACL | Allowance for Credit Losses | Federal Reserve | Board of Governors of the Federal Reserve System | |||||||||||
| ASU | Accounting Standards Update | FHLB | Federal Home Loan Bank | |||||||||||
| Bank | Enterprise Bank & Trust | GAAP | Generally Accepted Accounting Principles (United States) | |||||||||||
| C&I | Commercial and Industrial | GDP | Gross Domestic Product | |||||||||||
| CCB | Capital Conservation Buffer | NIM | Net Interest Margin | |||||||||||
| CECL | Current Expected Credit Loss | NM | Not meaningful | |||||||||||
| Company, Enterprise, We, Us or Our | Enterprise Financial Services Corp and Subsidiaries | OREO | Other Real Estate Owned | |||||||||||
| CRE | Commercial Real Estate | PPNR | Pre-Provision Net Revenue | |||||||||||
| EFSC | Enterprise Financial Services Corp | SBA | Small Business Administration | |||||||||||
| FASB | Financial Accounting Standards Board | SEC | Securities and Exchange Commission | |||||||||||
| FDIC | Federal Deposit Insurance Corporation | SOFR | Secured Overnight Financing Rate | |||||||||||
PART I - ITEM 1 - FINANCIAL STATEMENTS
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| ($ in thousands, except share data) | March 31, 2026 | December 31, 2025 | |||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Federal funds sold | |||||||||||
| Interest-earning deposits | |||||||||||
| Total cash and cash equivalents | |||||||||||
| Interest-earning deposits greater than 90 days | |||||||||||
| Securities available-for-sale | |||||||||||
| Securities held-to-maturity, net | |||||||||||
| Loans held-for-sale | |||||||||||
| Loans | |||||||||||
| ACL on loans | ( | ( | |||||||||
| Total loans, net | |||||||||||
| Other investments | |||||||||||
| Fixed assets, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Noninterest-bearing demand accounts | $ | $ | |||||||||
| Interest-bearing demand accounts | |||||||||||
| Money market accounts | |||||||||||
| Savings accounts | |||||||||||
| Certificates of deposit: | |||||||||||
| Brokered | |||||||||||
| Customer | |||||||||||
| Total deposits | |||||||||||
| Subordinated debentures and notes | |||||||||||
| Other borrowings | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | $ | $ | |||||||||
| Commitments and contingent liabilities (Note 5) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss, net | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
1
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
| Three months ended March 31, | |||||||||||||||||||||||
| ($ in thousands, except per share data) | 2026 | 2025 | |||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||
| Loans | $ | $ | |||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||
| Taxable | |||||||||||||||||||||||
| Nontaxable | |||||||||||||||||||||||
| Interest-earning deposits | |||||||||||||||||||||||
| Dividends on equity securities | |||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||
| Subordinated debentures and notes | |||||||||||||||||||||||
| FHLB advances | |||||||||||||||||||||||
| Other borrowings | |||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| Net interest income after provision for credit losses | |||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||
| Deposit service charges | |||||||||||||||||||||||
| Wealth management revenue | |||||||||||||||||||||||
| Card services revenue | |||||||||||||||||||||||
| Tax credit income (loss) | ( | ||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| Employee compensation and benefits | |||||||||||||||||||||||
| Deposit costs | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Data processing | |||||||||||||||||||||||
| Professional fees | |||||||||||||||||||||||
| Other expense | |||||||||||||||||||||||
| Total noninterest expense | |||||||||||||||||||||||
| Income before income tax expense | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Dividends on preferred stock | |||||||||||||||||||||||
| Net income available to common stockholders | $ | $ | |||||||||||||||||||||
| Earnings per common share | |||||||||||||||||||||||
| Basic | $ | $ | |||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
| Three months ended March 31, | |||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
Change in unrealized gain (loss) on available-for-sale securities | ( | ||||||||||||||||||||||
Reclassification of gain on the sale of available-for-sale securities | ( | ||||||||||||||||||||||
Reclassification of gain on held-to-maturity securities | ( | ( | |||||||||||||||||||||
Change in unrealized gain (loss) on cash flow hedges | ( | ||||||||||||||||||||||
Reclassification of (gain) loss on cash flow hedges | ( | ||||||||||||||||||||||
Total other comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||
| Total comprehensive income | $ | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
Three months ended March 31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2025 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends ($ | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | ( | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance under equity compensation plans, net | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2026 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends ($ | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | ( | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance under equity compensation plans, net | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Three months ended March 31, | |||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation | |||||||||||
Provision for credit losses | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Net amortization of discount/premiums on debt securities | |||||||||||
| Net amortization on loans | |||||||||||
| Amortization of intangible assets | |||||||||||
| Amortization of servicing assets | |||||||||||
| Mortgage loans originated-for-sale | ( | ( | |||||||||
| Proceeds from mortgage loans sold | |||||||||||
| Net loss (gain) on: | |||||||||||
| Investment securities | ( | ||||||||||
| SBA loans | ( | ( | |||||||||
| OREO | ( | ||||||||||
| State tax credits | ( | ( | |||||||||
| Stock-based compensation | |||||||||||
| Net change in other assets and liabilities | ( | ( | |||||||||
Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
Net (increase) decrease in loans | ( | ||||||||||
| Proceeds received from: | |||||||||||
| Branch acquisition, net | |||||||||||
| Sale of debt securities, available-for-sale | |||||||||||
| Paydown or maturity of debt securities, available-for-sale | |||||||||||
| Paydown or maturity of debt securities, held-to-maturity | |||||||||||
| Redemption of other investments | |||||||||||
| Sale of SBA loans | |||||||||||
| Sale of state tax credits held for sale | |||||||||||
| Sale of OREO | |||||||||||
| Settlement of bank-owned life insurance policies | |||||||||||
| Payments for the purchase of: | |||||||||||
| Available-for-sale debt securities | ( | ( | |||||||||
| Held-to-maturity debt securities | ( | ||||||||||
| Other investments | ( | ( | |||||||||
| Bank-owned life insurance | ( | ||||||||||
| State tax credits held for sale | ( | ||||||||||
| Fixed assets | ( | ( | |||||||||
Net cash provided by (used in) investing activities | ( | ||||||||||
5
| Three months ended March 31, | |||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||
| Cash flows from financing activities: | |||||||||||
Net decrease in noninterest-bearing demand accounts | ( | ( | |||||||||
Net increase (decrease) in interest-bearing demand accounts | ( | ||||||||||
Net increase in short term FHLB advances, net | |||||||||||
| Repayments of term loan | ( | ||||||||||
Net decrease in other borrowings | ( | ( | |||||||||
| Repurchase of common stock | ( | ( | |||||||||
| Cash dividends paid on common stock | ( | ( | |||||||||
| Cash dividends paid on preferred stock | ( | ( | |||||||||
| Other | ( | ( | |||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | $ | |||||||||
| Income taxes | |||||||||||
| Noncash investing and financing transactions: | |||||||||||
| Transfer to OREO in settlement of loans | |||||||||||
| Right-of-use assets obtained in exchange for lease obligations | |||||||||||
| Unsettled purchases of available-for-sale securities | |||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used by the Company in the preparation of the condensed consolidated financial statements are summarized below.
Business and Consolidation
Enterprise is a financial holding company that provides a full range of banking and wealth management services to individuals and corporate clients primarily located in Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico, and SBA loan and deposit productions offices throughout the country through its banking subsidiary, Enterprise Bank & Trust.
Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2026. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC.
Basis of Financial Statement Presentation
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated.
In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the statements of financial position, results of operations, and cash flow for the interim periods.
Recent Accounting Pronouncements
FASB ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 was issued in November 2024 to require public business entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The amendments in this update improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments may be adopted prospectively or retrospectively. The Company is evaluating the accounting and disclosure requirements of ASU 2024-03 and does not expect them to have a material effect on the Company’s consolidated financial statements.
7
FASB ASU 2025-09, Hedge Accounting Improvements. ASU 2025-09 was issued in November 2025 and is intended to better enable entities to achieve and maintain hedge accounting for highly effective economic hedges, while reducing the occurrence of missed forecasted transactions and unintuitive hedge designation events. ASU 2025-09 updated the following five areas in the hedge accounting model: 1) Similar risk assessment for cash flow hedges, 2) Hedging interest payments on choose-your-rate debt, 3) Cash flow hedges of nonfinancial forecasted transactions, 4) Net written options as hedging instruments, 5) Foreign currency-denominated debt designated as a hedging instrument and a hedged item. The amendments in this update are effective for annual and interim periods beginning after December 15, 2026, with early adoption permitted. The amendments should be applied on a prospective basis. The Company is evaluating the accounting and disclosure requirements of ASU 2025-09 and does not expect them to have a material effect on the Company’s consolidated financial statements.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method.
The following table presents a summary of per common share data and amounts for the periods indicated:
| Three months ended March 31, | |||||||||||||||||||||||
| (in thousands, except per share data) | 2026 | 2025 | |||||||||||||||||||||
| Net income available to common stockholders | $ | $ | |||||||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Additional dilutive common stock equivalents | |||||||||||||||||||||||
| Weighted average common diluted shares outstanding | |||||||||||||||||||||||
| Basic earnings per common share: | $ | $ | |||||||||||||||||||||
| Diluted earnings per common share: | |||||||||||||||||||||||
For the three months ended March 31, 2026 and 2025, common stock equivalents of approximately 141,000 and 259,000 , respectively, were excluded from the earnings per share calculations because their effect would have been anti-dilutive.
8
NOTE 3 - INVESTMENTS
The following tables present the amortized cost, gross unrealized gains and losses, ACL and fair value of securities available-for-sale and held-to-maturity as of the periods indicated:
March 31, 2026 | |||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| Available-for-sale securities: | |||||||||||||||||||||||
| Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | ( | $ | ||||||||||||||||||
| Obligations of states and political subdivisions | ( | ||||||||||||||||||||||
| Agency mortgage-backed securities | ( | ||||||||||||||||||||||
| U.S. Treasury bills | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | ( | $ | ||||||||||||||||||
| Held-to-maturity securities: | |||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | $ | $ | ( | $ | ||||||||||||||||||
| Agency mortgage-backed securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total securities held-to-maturity | $ | $ | $ | ( | $ | ||||||||||||||||||
| ACL | ( | ||||||||||||||||||||||
| Total securities held-to-maturity, net | $ | ||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| Available-for-sale securities: | |||||||||||||||||||||||
| Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | ( | $ | ||||||||||||||||||
| Obligations of states and political subdivisions | ( | ||||||||||||||||||||||
| Agency mortgage-backed securities | ( | ||||||||||||||||||||||
| U.S. Treasury Bills | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | ( | $ | ||||||||||||||||||
| Held-to-maturity securities: | |||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | $ | $ | ( | $ | ||||||||||||||||||
| Agency mortgage-backed securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total securities held-to-maturity | $ | $ | $ | ( | $ | ||||||||||||||||||
| ACL | ( | ||||||||||||||||||||||
| Total securities held-to-maturity, net | $ | ||||||||||||||||||||||
The balance of held-to-maturity securities in the “Amortized Cost” column in the tables above include a cumulative net unamortized, unrealized gain of $6.8 million and $7.6 million at March 31, 2026 and December 31, 2025, respectively. Such amounts are amortized over the remaining life of the securities.
9
At March 31, 2026 and December 31, 2025, there were no holdings of securities of any one issuer in an amount greater than 10 1.6 billion and $1.7 billion at March 31, 2026 and December 31, 2025, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract provisions, in addition to collateral securing borrowing bases with the FHLB and the Federal Reserve.
The amortized cost and estimated fair value of debt securities at March 31, 2026, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average life of the mortgage-backed securities is approximately five years .
| Available-for-sale | Held-to-maturity | ||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | |||||||||||||||||||
| Due in one year or less | $ | $ | $ | $ | |||||||||||||||||||
| Due after one year through five years | |||||||||||||||||||||||
| Due after five years through ten years | |||||||||||||||||||||||
| Due after ten years | |||||||||||||||||||||||
| Agency mortgage-backed securities | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
The following tables present a summary of available-for-sale investment securities in an unrealized loss position as of the periods indicated:
| March 31, 2026 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| ($ in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||
| Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | |||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities | |||||||||||||||||||||||||||||||||||
| U.S. Treasury bills | |||||||||||||||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| ($ in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||
| Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | |||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities | |||||||||||||||||||||||||||||||||||
| U.S. Treasury bills | |||||||||||||||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
10
The unrealized losses at both March 31, 2026 and December 31, 2025 were attributable primarily to changes in market interest rates after the securities were purchased. At each of March 31, 2026 and December 31, 2025, the Company did no
Accrued interest on held-to-maturity debt securities totaled $11.7 million and $12.3 million at March 31, 2026 and December 31, 2025, respectively, and is excluded from the estimate of expected credit losses. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts. The ACL on held-to-maturity securities was $0.2 million at March 31, 2026 and $0.1 million at December 31, 2025.
There were no sales of available-for-sale securities during the three months ended March 31, 2026. The Company sold $9.5 million of available-for-sale securities during the three months ended March 31, 2025 for a gain of $0.1 million.
Other Investments
At March 31, 2026 and December 31, 2025, other investments totaled $81.9 million and $80.9 million, respectively. As a member of the FHLB, the Bank is required to maintain a minimum investment in capital stock with the FHLB consisting of membership stock and activity-based stock. The FHLB capital stock of $10.0 million at March 31, 2026 and $9.4 million at December 31, 2025 is recorded at cost, which represents redemption value, and is included in “Other investments” in the Consolidated Balance Sheets. The remaining amounts in other investments primarily include investments in Small Business Investment Companies, Community Development Financial Institutions, private equity investments, and the Company’s investment in unconsolidated trusts used to issue trust preferred securities to third parties.
NOTE 4 - LOANS
The following table presents a summary of loans by category:
| ($ in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| C&I | $ | $ | |||||||||
| Real estate loans: | |||||||||||
| Commercial - investor owned | |||||||||||
| Commercial - owner occupied | |||||||||||
| Construction and land development | |||||||||||
| Residential | |||||||||||
| Total real estate loans | |||||||||||
| Consumer | |||||||||||
| Loans, before unearned loan fees | |||||||||||
| Unearned loan fees, net | ( | ( | |||||||||
| Loans, including unearned loan fees | $ | $ | |||||||||
The loan balance includes a net premium on acquired loans of $0.8 million and $0.2 million at March 31, 2026 and December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, loans and securities of $6.1 billion and $6.3 billion, respectively, were pledged to the FHLB and the Federal Reserve.
Accrued interest totaled $60.7 million and $58.3 million at March 31, 2026 and December 31, 2025, respectively, and was reported in “Other assets” on the Consolidated Balance Sheets.
The Company sold the guaranteed portion of SBA 7(a) loans of $25.4 million, resulting in a gain on sale of $1.4 million during the three months ended March 31, 2026. During the three months ended March 31, 2025, the Company sold the guaranteed portion of SBA 7(a) loans of $31.3 million, resulting in a gain on sale of $1.9 million.
11
The Company had $0.2
The following table presents a summary of the activity, by loan category, in the ACL on loans for the three months ended March 31, 2026 and 2025 as follows:
| ($ in thousands) | C&I | CRE - investor owned | CRE - owner occupied | Construction and land development | Residential real estate | Consumer | Total | ||||||||||||||||||||||||||||||||||
| ACL on loans: | |||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Provision (benefit) for credit losses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2026 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | C&I | CRE - investor owned | CRE - owner occupied | Construction and land development | Residential real estate | Consumer | Total | ||||||||||||||||||||||||||||||||||||||||
| ACL on loans: | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for credit losses | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate downside forecast. The Company weights these scenarios at 40 %, 30 %, and 30 %, respectively, which added approximately $8.8 million to the ACL on loans over the baseline model at March 31, 2026. The forecasts incorporate an expectation that the federal funds rate will continue to fall in 2026, and the broader macroeconomic risks to the loan portfolio from the conflict in Iran. The Company has also recognized various risks posed by loans in certain segments, including the commercial office sector, by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are market reactions to the Federal Reserve policy actions that could push the economy into a recession, persistently higher inflation (including the impact of tariffs), tightening in the credit markets, and weakness in the financial system.
In addition to the CECL methodology, the Company incorporates qualitative adjustments into the ACL on loans to capture credit risks inherent within the loan portfolio that are not captured in the discounted cash flow method model. Included in these risks are 1) changes in lending policies and procedures, 2) actual and expected changes in business and economic conditions, 3) changes in the nature and volume of the portfolio, 4) changes in lending management, 5) changes in volume and the severity of past due loans, 6) changes in the quality of the loan review system, 7) changes in the value of underlying collateral, 8) the existence and effect of concentrations of credit and 9) other factors such as the regulatory, legal and competitive environments and events such as natural disasters, pandemics and geopolitical matters. At March 31, 2026, the ACL on loans included a qualitative adjustment of approximately $39.9 million. Of this amount, approximately $21.4 million was allocated to sponsor finance loans due to their mostly unsecured nature.
12
The following tables present a summary of gross charge-offs by loan class and year of origination as of the periods indicated:
| Three months ended March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans Converted to Term Loans | Revolving Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| C&I | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land development | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total charge-offs by origination year | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total gross charge-offs by performing status | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total gross charge-offs | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Converted to Term Loans | Revolving Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| C&I | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial - investor owned | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial - owner occupied | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land development | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total charge-offs by origination year | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total gross charge-offs by performing status | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total gross charge-offs | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
13
The following tables present the recorded balance in nonperforming loans by category, excluding government guaranteed balances as of the dates indicated:
| March 31, 2026 | |||||||||||||||||||||||||||||
| ($ in thousands) | Nonaccrual | Loans over 90 days past due and still accruing interest | Total nonperforming loans | Nonaccrual loans with no allowance | |||||||||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Residential | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| ($ in thousands) | Nonaccrual | Loans over 90 days past due and still accruing interest | Total nonperforming loans | Nonaccrual loans with no allowance | |||||||||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Residential | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
The nonperforming loan balances at March 31, 2026 and December 31, 2025 exclude government guaranteed balances of $28.2 million and $28.9 million respectively. Interest income recognized on nonaccrual loans was immaterial during the three months ended March 31, 2026 and 2025.
14
The following tables present a summary of collateral-dependent nonperforming loans by class of loan as of the dates indicated:
| March 31, 2026 | |||||||||||||||||||||||
| Type of Collateral | |||||||||||||||||||||||
| ($ in thousands) | CRE | Residential Real Estate | Blanket Lien | Other | |||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||
| Residential | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Type of Collateral | |||||||||||||||||||||||
| ($ in thousands) | CRE | Residential Real Estate | Blanket Lien | Other | |||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||
| Residential | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The following tables present a summary of aging of the recorded balance in past due loans by class and category as of the dates indicated:
| March 31, 2026 | |||||||||||||||||||||||||||||
| ($ in thousands) | 30-89 Days Past Due | 90 or More Days Past Due | Total Past Due | Current | Total | ||||||||||||||||||||||||
| C&I | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Residential | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| Loans, before unearned loan fees | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Unearned loan fees, net | ( | ||||||||||||||||||||||||||||
| Total | $ | ||||||||||||||||||||||||||||
15
| December 31, 2025 | |||||||||||||||||||||||||||||
| ($ in thousands) | 30-89 Days Past Due | 90 or More Days Past Due | Total Past Due | Current | Total | ||||||||||||||||||||||||
| C&I | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Residential | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| Loans, before unearned loan fees | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Unearned loan fees, net | ( | ||||||||||||||||||||||||||||
| Total | $ | ||||||||||||||||||||||||||||
The ACL on loans incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the ACL on loans is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default and loss given default model to determine the ACL on loans.
An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL on loans because of the measurement methodologies used to estimate the allowance.
The most common concession the Company provides to borrowers experiencing financial difficulty is a term extension. In limited circumstances, the Company may modify loans by providing principal forgiveness or an interest rate reduction. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the ACL on loans. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the ACL on loans.
In some cases, the Company will modify a loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as an interest rate reduction or principal forgiveness, may be granted.
16
The following tables show the recorded balance at the end of the dates listed for loans modified to borrowers experiencing financial difficulty, disaggregated by loan class and type of concession granted:
| Three months ended | |||||||||||||||||||||||||||||||||||||||||||||||
| Term Extension | Payment Delay | Total | |||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | Percent of Total Loan Class | March 31, 2026 | Percent of Total Loan Class | March 31, 2026 | Percent of Total Loan Class | |||||||||||||||||||||||||||||||||||||||||
| C&I | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial - owner occupied | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||
| Construction and land development | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Three months ended | |||||||||||
| Term Extension | |||||||||||
| ($ in thousands) | March 31, 2025 | Percent of Total Loan Class | |||||||||
| C&I | $ | % | |||||||||
| Real estate: | |||||||||||
| Commercial - owner occupied | % | ||||||||||
| Residential | % | ||||||||||
| Total | $ | ||||||||||
The following tables summarize the financial impacts of loan modifications made to borrowers experiencing financial difficulty by class and modification type outstanding at the date indicated:
Three months ended March 31, 2026 | ||||||||
| ($ in thousands) | Financial Effect | |||||||
| Payment Delay | ||||||||
| C&I | Payments were delayed for a weighted average amount of $ | |||||||
| Term Extension | ||||||||
| C&I | Maturity dates were extended for a weighted average of | |||||||
| Real estate: | ||||||||
| Commercial - owner occupied | Maturity dates were extended for a weighted average of | |||||||
| Construction and land development | Maturity dates were extended for a weighted average of | |||||||
Three months ended March 31, 2025 | ||||||||
| Financial Effect | ||||||||
| Term Extension | ||||||||
| C&I | Maturity dates were extended for a weighted average of | |||||||
| Real estate: | ||||||||
| Commercial - owner occupied | Maturity dates were extended for a weighted average of | |||||||
| Residential | Maturity dates were extended for a weighted average of | |||||||
17
| March 31, 2026 | |||||||||||||||||||||||
| ($ in thousands) | Current | 30-89 Days Past Due | 90 or More Days Past Due | Total | |||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||
| Residential | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| March 31, 2025 | |||||||||||||||||||||||||||||
| ($ in thousands) | Current | 30-89 Days Past Due | 90 or More Days Past Due | Total | |||||||||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||||||||
| Residential | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
There were no loans that experienced a default during the three months ended March 31, 2026 or March 31, 2025, respectively, subsequent to being granted a modification in the preceding twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off.
As of March 31, 2026 and December 31, 2025, the Company allocated an immaterial amount in specific reserves to loans that have been restructured.
18
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
•Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.
•Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
•Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
•Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.
•Grade 7 – Special Mention credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.
•Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.
•Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on non-accrual.
19
The recorded investment by risk category of the loans by class and year of origination is presented in the following tables as of the dates indicated:
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans Converted to Term Loans | Revolving Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total C&I | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| CRE-investor owned | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total CRE-investor owned | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| CRE-owner occupied | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total CRE-owner occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Construction real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Construction real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Consumer | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans classified by risk category | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans classified by performing status | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
20
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Converted to Term Loans | Revolving Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total C&I | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| CRE-investor owned | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total CRE-investor owned | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| CRE-owner occupied | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total CRE-owner occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Construction real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Construction real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Classified (8-9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Consumer | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans classified by risk category | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans classified by performing status | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
In the tables above, loan originations in 2026 and 2025 with a classification of “special mention” or “classified” primarily represent renewals or modifications initially underwritten and originated in prior years.
21
The following tables summarize the risk category of the loans by loan type as of the dates indicated:
| March 31, 2026 | |||||||||||||||||||||||
| ($ in thousands) | Pass (1-6) | Special Mention (7) | Classified (8-9) | Total | |||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||
| Residential | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Total loans classified by risk category | $ | $ | $ | $ | |||||||||||||||||||
| Total loans classified by performing status | |||||||||||||||||||||||
| $ | |||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| ($ in thousands) | Pass (1-6) | Special Mention (7) | Classified (8-9) | Total | |||||||||||||||||||
| C&I | $ | $ | $ | $ | |||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial - investor owned | |||||||||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||
| Residential | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Total loans classified by risk category | $ | $ | $ | $ | |||||||||||||||||||
| Total loans classified by performing status | |||||||||||||||||||||||
| $ | |||||||||||||||||||||||
In the risk category tables above, guaranteed loan balances are included with a classification of “pass” due to the nature of these loans.
For certain loans, the Company evaluates credit quality based on the aging status.
The following tables present the recorded balance of loans based on payment activity as of the dates indicated:
| March 31, 2026 | |||||||||||||||||
| ($ in thousands) | Performing | Non Performing | Total | ||||||||||||||
| C&I | $ | $ | $ | ||||||||||||||
| Real estate: | |||||||||||||||||
| Commercial - investor owned | |||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||
| Residential | |||||||||||||||||
| Consumer | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
22
| December 31, 2025 | |||||||||||||||||
| ($ in thousands) | Performing | Non Performing | Total | ||||||||||||||
| C&I | $ | $ | $ | ||||||||||||||
| Real estate: | |||||||||||||||||
| Commercial - investor owned | |||||||||||||||||
| Commercial - owner occupied | |||||||||||||||||
| Residential | |||||||||||||||||
| Consumer | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
NOTE 5 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company issues financial instruments in the normal course of its business of meeting the financing needs of its clients. These financial instruments include commitments to extend credit and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets.
The Company’s extent of involvement and maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is not more than the contractual amount of these instruments.
The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its Consolidated Balance Sheets.
The following table summarizes the contractual amounts of significant off-balance-sheet financial instruments as of the dates indicated:
| ($ in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Commitments to extend credit | $ | $ | |||||||||
| Letters of credit | |||||||||||
Off-Balance Sheet Credit Risk
Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments usually have fixed expiration dates or other termination clauses, may have significant usage restrictions, and may require payment of a fee. Of the total commitments to extend credit at March 31, 2026 and December 31, 2025, $111.6 million and $124.9 million, respectively, represent fixed rate loan commitments. Since certain of the commitments may expire without being drawn upon or may be revoked, the total commitment amounts do not necessarily represent future cash obligations. The Company evaluates each client’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate. Other liabilities includes an ACL on unadvanced commitments of $6.4 million and $6.0 million at March 31, 2026 and December 31, 2025, respectively.
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a client to a third party. These letters of credit are issued to support contractual obligations of the Company’s clients. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to clients. As of March 31, 2026, the approximate remaining terms of standby letters of credit range from one month to four years, three months .
23
Contingencies
The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Management believes there are no such proceedings pending or threatened against the Company or its subsidiaries which, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.
NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loans and borrowings. The Company does not enter into derivative financial instruments for trading purposes.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.
For hedges of the Company’s variable-rate loans, interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts and the Company making variable rate payments. The Company has executed cash flow hedges to reduce a portion of variability in cash flows on the Company’s prime based loan portfolio. Select terms of the hedges are as follows:
| ($ in thousands) | ||||||||||||||||||||
| Notional | Fixed Rate | Effective Date | Maturity Date | |||||||||||||||||
| $ | % | January 25, 2023 | February 1, 2027 | |||||||||||||||||
| $ | % | December 20, 2022 | January 1, 2028 | |||||||||||||||||
| $ | % | April 1, 2025 | April 1, 2030 | |||||||||||||||||
The Company executed a prime based interest rate collar in the fourth quarter of 2022 with a notional amount of $100.0 million. The collar includes a cap of 8.14 % and a floor of 5.25 %. The collar matures on October 1, 2029.
The Company also executed a 1-month SOFR based interest rate collar in the fourth quarter of 2024 with a notional amount of $50.0 million. The collar includes a cap of 4.21 % and a floor of 3.23 %. The collar matures on November 1, 2029. These transactions are commonly referred to as zero cost collars, which involves the Company selling an interest rate cap where payments will be made when the index exceeds the cap rate, and the purchase of a floor where payments will be received if the index falls below the floor.
At December 31, 2025, the Company had executed a series of cash flow hedges to fix the effective interest rate for payments due on $32.1 million of junior subordinated debentures to a weighted-average-fixed rate of 2.64 %. These hedges matured in the first quarter 2026.
24
The gain or loss on derivatives designated and qualified as cash flow hedges of interest rate risk are recorded in accumulated other comprehensive income and subsequently reclassified into interest income or expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income or expense as interest payments are paid on the Company’s variable-rate loans and debt. During the next twelve months, the Company estimates $0.1 million will be reclassified as a decrease to interest income.
Non-designated Hedges
Derivatives not designated as hedges are not considered speculative and result from a service the Company provides to certain clients. The Company executes interest rate swaps with commercial banking clients to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the client derivatives and the offsetting derivatives are recognized directly in earnings as a component of other noninterest income.
The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of the dates indicated:
| Notional Amount | Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | March 31, 2026 | December 31, 2025 | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Interest rate collars | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Derivative assets are reported in “Other assets” on the Consolidated Balance Sheets. Derivative liabilities are reported in “Other liabilities” on the Consolidated Balance Sheets.
25
The following tables present a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments subject to offsetting. The gross amounts of assets or liabilities can be reconciled to the tabular disclosure of fair value. The fair value table above provides the location of financial assets and liabilities presented on the Consolidated Balance Sheets.
As of March 31, 2026 | |||||||||||||||||||||||||||||||||||
| Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | Gross Amounts Recognized | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets presented in the Statement of Financial Position | Financial Instruments | Fair Value Collateral Posted | Net Amount | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Interest rate collars | |||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | |||||||||||||||||||||||||||||||||||
As of December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | Gross Amounts Recognized | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets presented in the Statement of Financial Position | Financial Instruments | Fair Value Collateral Posted | Net Amount | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Interest rate collar | |||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | |||||||||||||||||||||||||||||||||||
As of March 31, 2026, the fair value of counterparty derivatives in a net liability position, which includes accrued interest related to these agreements was $7.4 million. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and posts collateral related to derivatives in a net liability position. The Company has received cash collateral from counterparties on derivatives that were in a net asset position as noted in the tables above.
26
NOTE 7 - FAIR VALUE MEASUREMENTS
The following tables summarize financial instruments measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
| March 31, 2026 | |||||||||||||||||||||||
| ($ in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Securities available-for-sale | |||||||||||||||||||||||
| Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | |||||||||||||||||||
| Obligations of states and political subdivisions | |||||||||||||||||||||||
| Agency mortgage-backed securities | |||||||||||||||||||||||
| U.S. Treasury bills | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Total securities available-for-sale | |||||||||||||||||||||||
| Other investments | |||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Derivative financial instruments | $ | $ | $ | $ | |||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| ($ in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Securities available-for-sale | |||||||||||||||||||||||
| Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | |||||||||||||||||||
| Obligations of states and political subdivisions | |||||||||||||||||||||||
| Agency mortgage-backed securities | |||||||||||||||||||||||
| U.S. Treasury bills | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Total securities available-for-sale | |||||||||||||||||||||||
| Other investments | |||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Derivative financial instruments | $ | $ | $ | $ | |||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
27
From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets measured at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. The following tables present financial instruments and non-financial assets still held as of the reporting date measured at fair value on a non-recurring basis:
| March 31, 2026 | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||||||
| OREO | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||||||
| Individually-evaluated loans | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| OREO | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
The following table is a summary of the carrying amounts and fair values of the Company’s financial instruments as of the dates presented:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Carrying Amount | Estimated fair value | Level | Carrying Amount | Estimated fair value | Level | |||||||||||||||||||||||||||||||||||
| Balance sheet assets | |||||||||||||||||||||||||||||||||||||||||
| Securities held-to-maturity, net | $ | $ | Level 2 | $ | $ | Level 2 | |||||||||||||||||||||||||||||||||||
| Other investments | Level 2 | Level 2 | |||||||||||||||||||||||||||||||||||||||
| Loans held-for-sale | Level 2 | Level 2 | |||||||||||||||||||||||||||||||||||||||
| Loans, net | Level 3 | Level 3 | |||||||||||||||||||||||||||||||||||||||
| State tax credits, held-for-sale | Level 3 | Level 3 | |||||||||||||||||||||||||||||||||||||||
| Servicing asset | Level 2 | Level 2 | |||||||||||||||||||||||||||||||||||||||
| Balance sheet liabilities | |||||||||||||||||||||||||||||||||||||||||
| Certificates of deposit | $ | $ | Level 3 | $ | $ | Level 3 | |||||||||||||||||||||||||||||||||||
| Subordinated debentures and notes | Level 2 | Level 2 | |||||||||||||||||||||||||||||||||||||||
| Other borrowings | Level 2 | Level 2 | |||||||||||||||||||||||||||||||||||||||
For information regarding the methods and assumptions used to estimate the fair value of each class of financial instruments refer to Note 17 – Fair Value Measurements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC.
28
NOTE 8 - STOCKHOLDERS’ EQUITY
Stockholders’ Equity
Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in accumulated other comprehensive income (loss) after-tax by component:
| Three months ended | |||||||||||||||||||||||
| ($ in thousands) | Net Unrealized Loss on Available-for-Sale Securities | Unamortized Gain on Held-to-Maturity Securities | Net Unrealized Gain (Loss) on Cash Flow Hedges | Total | |||||||||||||||||||
Balance, December 31, 2025 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
| Net change | ( | ( | ( | ( | |||||||||||||||||||
Balance, March 31, 2026 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
Balance, December 31, 2024 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Net change | ( | ||||||||||||||||||||||
Balance, March 31, 2025 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
The following table presents the pre-tax and after-tax changes in the components of other comprehensive income (loss):
| Three months ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Pre-tax | Tax effect | After-tax | Pre-tax | Tax effect | After-tax | |||||||||||||||||||||||||||||
| Change in unrealized gain on available-for-sale securities | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
Reclassification of gain on sale of available-for-sale securities(a) | ( | ( | ( | ||||||||||||||||||||||||||||||||
Reclassification of gain on held-to-maturity securities(a) | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Change in unrealized gain (loss) on cash flow hedges | ( | ( | ( | ||||||||||||||||||||||||||||||||
Reclassification of loss on cash flow hedges(b) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total other comprehensive gain (loss) | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
(a)The pre-tax amount is reported in noninterest income/expense in the Consolidated Statements of Income. | |||||||||||||||||||||||||||||||||||
(b)The pre-tax amount is reported in interest income/expense in the Consolidated Statements of Income. | |||||||||||||||||||||||||||||||||||
29
NOTE 9 - SUPPLEMENTAL FINANCIAL INFORMATION
The following table presents other income and other expense components, including items that exceed one percent of the aggregate of total interest income and noninterest income in one or more of the periods indicated:
| Three months ended March 31, | |||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||||||||||||||
| Other income: | |||||||||||||||||||||||
| Bank-owned life insurance | $ | $ | |||||||||||||||||||||
| Community development fees | |||||||||||||||||||||||
| Gain on SBA loan sales | |||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Total other noninterest income | $ | $ | |||||||||||||||||||||
| Other expense: | |||||||||||||||||||||||
| Amortization of intangibles | $ | $ | |||||||||||||||||||||
| Banking expenses | |||||||||||||||||||||||
| FDIC and other insurance | |||||||||||||||||||||||
| Loan, legal expenses | |||||||||||||||||||||||
| Outside services | |||||||||||||||||||||||
| Other expenses | |||||||||||||||||||||||
| Total other noninterest expense | $ | $ | |||||||||||||||||||||
NOTE 10 - SEGMENT REPORTING
The Company has determined it has one
The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The operating results that are regularly reviewed by the CODM are the consolidated results of the Company. The CODM uses the consolidated results of the Company in deciding whether to reinvest profits into the segment or into other parts of the entity, such as for acquisitions or to pay dividends. The CODM assesses performance for the segment and decides how to allocate resources based on net income, reported on the income statement as consolidated net income. The CODM is provided with the consolidated financial statement package on a monthly basis.
30
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Statements
This Quarterly Report on Form 10-Q contains information and statements that are considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company, and include, without limitation, statements about the Company’s plans, strategies, goals, objectives, expectations, or consequences of statements about the future performance, operations, products and services of the Company and its subsidiaries, as well as statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, products and services, stockholder value creation and the impact of acquisitions. Forward-looking statements are typically identified with the use of terms such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “continue,” “intend,” and the negative and other variations of these terms and similar words and expressions, although some forward-looking statements may be expressed differently. Forward-looking statements are inherently subject to risks and uncertainties and our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. You should be aware that our actual results could differ materially from those contained in the forward-looking statements.
While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation: the Company’s ability to efficiently integrate acquisitions into its operations, retain the clients of these businesses and grow the acquired operations, the Company’s ability to collect insurance proceeds from claims made related to tax recapture events, 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), impacts of trade and tariff policies, U.S. fiscal debt, budget and tax matters (including the effect of a prolonged U.S. federal government shutdown), 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 in Israel, Iran and 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” under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, and other reports filed with the SEC, all of which could cause the Company’s actual results to differ from those set forth in the forward-looking statements. The Company cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Company’s results.
Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s analysis and expectations only as of the date of such statements. Forward-looking statements speak only as of the date they are made, and the Company does not intend, and undertakes no obligation, to publicly revise or update forward-looking statements after the date of this report, whether as a result of new information, future events or otherwise, except as required by federal securities law. You should understand that it is not possible to predict or identify all risk factors. Readers should carefully review all disclosures we file from time to time with the SEC which are available on the Company’s website at www.enterprisebank.com under “Investor Relations.”
31
Introduction
The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first three months of 2026 compared to the financial condition as of December 31, 2025. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the three months ended March 31, 2026, compared to the linked fourth quarter of 2025 (“linked quarter”) and the results of operations, liquidity and cash flows for the three months ended March 31, 2026 compared to the same period in 2025 (“prior year quarter”). In light of the nature of the Company’s business, the Company’s management believes that the comparison to the linked quarter is the most relevant to understand the financial results from management’s perspective. For purposes of the Quarterly Report on Form 10-Q, the Company is presenting a comparison to the corresponding prior year quarter. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Critical Accounting Policies and Estimates
The Company’s critical accounting policies are considered important to the understanding of the Company’s financial condition and results of operations. These accounting policies require management’s most difficult, subjective and complex judgments about matters that are inherently uncertain. Because these estimates and judgments are based on current circumstances, they may change over time or prove to be inaccurate based on actual experience. If different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of a materially different financial condition and/or results of operations could reasonably be expected.
A full description of our critical accounting policies and the impact and any associated risks related to those policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
The Company has prepared all of the consolidated financial information in this report in accordance with GAAP. The Company makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Such estimates include the valuation of loans, goodwill, intangible assets, and other long-lived assets, along with assumptions used in the calculation of income taxes, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using loss experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statement in future periods. There can be no assurances that actual results will not differ from those estimates.
32
ACL
The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to as the ACL. The ACL is a valuation account to adjust the cost basis to the amount expected to be collected, based on management’s experience, current conditions, and reasonable and supportable forecasts. For purposes of determining the allowance for funded and unfunded loans, the portfolios are segregated into pools that share similar risk characteristics that are then further segregated by credit grades. Loans that do not share similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. The Company estimates the amount of the allowance based on loan loss experience, adjusted for current and forecasted economic conditions, including unemployment, changes in GDP, and commercial and residential real estate prices. The Company’s forecast of economic conditions uses internal and external information and considers a weighted average of a baseline, upside, and downside scenarios. Because economic conditions can change and are difficult to predict, the anticipated amount of estimated loan defaults and losses, and therefore the adequacy of the allowance, could change significantly and have a direct impact on the Company’s credit costs. The Company’s ACL on loans was $142.1 million at March 31, 2026 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 $24.6 million. Conversely, the allowance would have increased $36.4 million using only the downside scenario.
33
Executive Summary
Below are highlights of the Company’s financial performance for the periods indicated.
| ($ in thousands, except per share data) | Three months ended | ||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||||||||||||
| EARNINGS | |||||||||||||||||||||||||||||
| Total interest income | $ | 225,091 | $ | 232,273 | $ | 211,780 | |||||||||||||||||||||||
| Total interest expense | 58,944 | 64,099 | 64,264 | ||||||||||||||||||||||||||
| Net interest income | 166,147 | 168,174 | 147,516 | ||||||||||||||||||||||||||
| Provision for credit losses | 7,243 | 9,236 | 5,184 | ||||||||||||||||||||||||||
| Net interest income after provision for credit losses | 158,904 | 158,938 | 142,332 | ||||||||||||||||||||||||||
| Total noninterest income | 19,088 | 25,412 | 18,483 | ||||||||||||||||||||||||||
| Total noninterest expense | 115,137 | 114,532 | 99,783 | ||||||||||||||||||||||||||
| Income before income tax expense | 62,855 | 69,818 | 61,032 | ||||||||||||||||||||||||||
| Income tax expense | 13,493 | 15,024 | 11,071 | ||||||||||||||||||||||||||
| Net income | $ | 49,362 | $ | 54,794 | $ | 49,961 | |||||||||||||||||||||||
| Preferred dividends | 938 | 937 | 938 | ||||||||||||||||||||||||||
| Net income available to common stockholders | $ | 48,424 | $ | 53,857 | $ | 49,023 | |||||||||||||||||||||||
| Basic earnings per common share | $ | 1.31 | $ | 1.46 | $ | 1.33 | |||||||||||||||||||||||
| Diluted earnings per common share | $ | 1.30 | $ | 1.45 | $ | 1.31 | |||||||||||||||||||||||
| Return on average assets | 1.16 | % | 1.27 | % | 1.30 | % | |||||||||||||||||||||||
Adjusted return on average assets1 | 1.16 | % | 1.19 | % | 1.29 | % | |||||||||||||||||||||||
| Return on average common equity | 9.80 | % | 10.95 | % | 11.10 | % | |||||||||||||||||||||||
Adjusted return on average common equity1 | 9.84 | % | 10.28 | % | 11.08 | % | |||||||||||||||||||||||
Return on average tangible common equity1 | 12.53 | % | 14.02 | % | 14.02 | % | |||||||||||||||||||||||
Adjusted return on average tangible common equity1 | 12.59 | % | 13.15 | % | 13.99 | % | |||||||||||||||||||||||
| NIM (tax-equivalent) | 4.28 | % | 4.26 | % | 4.15 | % | |||||||||||||||||||||||
| Efficiency ratio | 62.2 | % | 59.2 | % | 60.1 | % | |||||||||||||||||||||||
Core efficiency ratio1 | 60.2 | % | 58.3 | % | 58.8 | % | |||||||||||||||||||||||
Common dividend payout ratio2 | 25.38 | % | 22.07 | % | 22.14 | % | |||||||||||||||||||||||
| Book value per common share | $ | 53.31 | $ | 53.22 | $ | 48.64 | |||||||||||||||||||||||
Tangible book value per common share1 | $ | 41.38 | $ | 41.37 | $ | 38.54 | |||||||||||||||||||||||
| Average common equity to average assets | 11.58 | % | 11.41 | % | 11.45 | % | |||||||||||||||||||||||
Tangible common equity to tangible assets1 | 9.01 | % | 9.07 | % | 9.30 | % | |||||||||||||||||||||||
| ASSET QUALITY | |||||||||||||||||||||||||||||
Net charge-offs (recoveries) | $ | 4,407 | $ | 20,674 | $ | (1,059) | |||||||||||||||||||||||
| Nonperforming loans | 64,941 | 82,809 | 109,882 | ||||||||||||||||||||||||||
| Nonaccrual loans | 60,558 | 81,180 | 61,080 | ||||||||||||||||||||||||||
| Nonperforming assets | 149,423 | 164,353 | 113,153 | ||||||||||||||||||||||||||
| Classified assets | 430,288 | 410,485 | 264,460 | ||||||||||||||||||||||||||
| Total assets | 17,227,828 | 17,300,884 | 15,676,594 | ||||||||||||||||||||||||||
| Total loans | 11,692,780 | 11,800,338 | 11,298,763 | ||||||||||||||||||||||||||
| Classified assets to total assets | 2.50 | % | 2.37 | % | 1.69 | % | |||||||||||||||||||||||
| Nonperforming loans to total loans | 0.56 | % | 0.70 | % | 0.97 | % | |||||||||||||||||||||||
| Nonperforming assets to total assets | 0.87 | % | 0.95 | % | 0.72 | % | |||||||||||||||||||||||
| ACL on loans to total loans | 1.21 | % | 1.19 | % | 1.27 | % | |||||||||||||||||||||||
Net charge-offs (recoveries) to average loans (annualized) | 0.15 | % | 0.70 | % | (0.04) | % | |||||||||||||||||||||||
1 A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.” | |||||||||||||||||||||||||||||
2 Dividends per common share divided by diluted earnings per common share. | |||||||||||||||||||||||||||||
34
Financial results and other notable items include:
•PPNR1 - PPNR of $70.4 million for the first quarter of 2026 decreased $4.4 million from the linked quarter and increased $4.3 million from the prior year quarter. The decrease from the linked quarter was primarily due to a decrease in net interest income due to a lower day count and noninterest income, specifically tax credit income that is typically highest in the fourth quarter of each year, and an increase in noninterest expense, primarily due to the reset of payroll tax limits and paid time-off accruals. The increase compared to the prior year quarter was primarily due to higher net interest income from organic and acquired loan growth, continued investment in the securities portfolio and proactive management of the cost of deposits, partially offset by a decline in asset yields due to lower short-term interest rates.
•Net interest income and NIM - Net interest income of $166.1 million for the first quarter of 2026 decreased $2.0 million and increased $18.6 million from the linked and prior year quarters, respectively. Net interest income during the current quarter was impacted by lower short-term interest rates that decreased asset yields and fewer days in the period, partially offset by a favorable decrease on rates paid on interest-bearing liabilities. Compared to the prior year quarter, net interest income also benefitted from higher average loan and investment securities balances, and higher yields on the investment portfolio. NIM was 4.28% for the first quarter 2026, compared to 4.26% and 4.15% for the linked and prior year quarters, respectively.
•Noninterest income - Noninterest income of $19.1 million for the first quarter of 2026 decreased $6.3 million and increased $0.6 million from the linked and prior year quarters, respectively. The decrease in noninterest income from the linked quarter was primarily due to a gain on OREO in the linked quarter that did not reoccur and tax credit income, which is typically highest in the fourth quarter of each year, partially offset by a gain on the guaranteed portion of SBA loans sold during the current quarter. The Company opportunistically sold $25.4 million of SBA guaranteed loans during the first quarter 2026 for a gain of $1.4 million.
•Noninterest expense - Noninterest expense of $115.1 million for the first quarter of 2026 increased $0.6 million and $15.4 million from the linked and prior year quarters, respectively. The increase from the prior year quarter was primarily driven by higher employee compensation cost, variable deposit costs and loan and legal expenses related to loan workouts and OREO.
Balance sheet highlights:
•Loans – Total loans decreased $107.6 million, or 1%, to $11.7 billion at March 31, 2026, compared to $11.8 billion at December 31, 2025. Average loans totaled $11.8 billion for the three months ended March 31, 2026 compared to $11.2 billion for the three months ended March 31, 2025.
•Deposits – Total deposits decreased $84.9 million, to $14.5 billion at March 31, 2026 from $14.6 billion at December 31, 2025. Average deposits totaled $14.6 billion for the three months ended March 31, 2026 compared to $13.1 billion for the three months ended March 31, 2025. Noninterest-bearing deposit accounts represented 33% of total deposits and the loan to deposit ratio was 81% at March 31, 2026 and December 31, 2025, respectively.
1 PPNR is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
35
•Asset quality – The ACL on loans to total loans was 1.21% at March 31, 2026, compared to 1.19% at December 31, 2025. The ratio of nonperforming assets to total assets was 0.87% at March 31, 2026 compared to 0.95% at December 31, 2025. A provision for credit losses of $7.2 million was recorded in the first quarter of 2026. This compares to $9.2 million and $5.2 million in the linked and prior year quarters, respectively.
•Stockholders’ equity – Total stockholders’ equity was $2.0 billion at March 31, 2026 and December 31, 2025, respectively, and the tangible common equity to tangible assets ratio2 was 9.01% at March 31, 2026 compared to 9.07% at December 31, 2025. The Company and the Bank’s regulatory capital ratios exceeded the “well-capitalized” levels at March 31, 2026.
The Company’s Board of Directors (the “Board”) approved a quarterly dividend of $0.34 per common share, payable on June 30, 2026 to stockholders of record as of June 15, 2026. The Board also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) March 15, 2026 to (but excluding) June 15, 2026. The dividend will be payable on June 15, 2026 to stockholders of record of Series A Preferred Stock as of May 29, 2026.
2 Tangible common equity to tangible assets ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
36
RESULTS OF OPERATIONS
Net Interest Income and NIM
Average Balance Sheet
The following tables present, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as the corresponding interest rates earned and paid, all on a tax equivalent basis.
| Three months ended March 31, | Three months ended December 31, | Three months ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ 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: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans1, 2 | $ | 11,777,727 | $ | 185,380 | 6.38 | % | $ | 11,794,459 | $ | 193,587 | 6.51 | % | $ | 11,240,806 | $ | 182,039 | 6.57 | % | |||||||||||||||||||||||||||||||||||
| Taxable securities | 2,481,169 | 26,108 | 4.27 | 2,331,562 | 24,464 | 4.16 | 1,818,615 | 17,625 | 3.93 | ||||||||||||||||||||||||||||||||||||||||||||
Non-taxable securities2 | 1,301,675 | 12,390 | 3.86 | 1,292,403 | 12,263 | 3.76 | 1,112,297 | 9,467 | 3.45 | ||||||||||||||||||||||||||||||||||||||||||||
| Total securities | 3,782,844 | 38,498 | 4.13 | 3,623,965 | 36,727 | 4.02 | 2,930,912 | 27,092 | 3.75 | ||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits | 504,541 | 4,533 | 3.64 | 552,843 | 5,436 | 3.90 | 479,136 | 5,124 | 4.34 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 16,065,112 | 228,411 | 5.77 | 15,971,267 | 235,750 | 5.86 | 14,650,854 | 214,255 | 5.93 | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 1,245,991 | 1,128,162 | 992,145 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 17,311,103 | $ | 17,099,429 | $ | 15,642,999 | |||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 3,453,650 | $ | 14,940 | 1.75 | % | $ | 3,550,349 | $ | 17,236 | 1.93 | % | $ | 3,167,428 | $ | 17,056 | 2.18 | % | |||||||||||||||||||||||||||||||||||
| Money market accounts | 3,952,475 | 25,198 | 2.59 | 3,948,405 | 27,611 | 2.77 | 3,601,535 | 28,505 | 3.21 | ||||||||||||||||||||||||||||||||||||||||||||
| Savings accounts | 538,597 | 152 | 0.11 | 540,764 | 168 | 0.12 | 534,512 | 189 | 0.14 | ||||||||||||||||||||||||||||||||||||||||||||
| Certificates of deposit | 1,665,977 | 14,459 | 3.52 | 1,659,905 | 15,223 | 3.64 | 1,374,693 | 13,516 | 3.99 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 9,610,699 | 54,749 | 2.31 | 9,699,423 | 60,238 | 2.46 | 8,678,168 | 59,266 | 2.77 | ||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debentures and notes | 93,725 | 1,522 | 6.59 | 93,654 | 1,561 | 6.61 | 156,615 | 2,562 | 6.63 | ||||||||||||||||||||||||||||||||||||||||||||
| FHLB advances | 5,756 | 56 | 3.95 | 11,620 | 127 | 4.34 | 25,300 | 287 | 4.60 | ||||||||||||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 270,057 | 1,614 | 2.42 | 170,058 | 1,065 | 2.48 | 263,608 | 2,017 | 3.10 | ||||||||||||||||||||||||||||||||||||||||||||
| Other borrowings | 94,910 | 1,003 | 4.29 | 97,196 | 1,108 | 4.52 | 39,535 | 132 | 1.35 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 10,075,147 | 58,944 | 2.37 | 10,071,951 | 64,099 | 2.52 | 9,163,226 | 64,264 | 2.84 | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand deposits | 4,998,734 | 4,837,958 | 4,463,388 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 160,718 | 167,048 | 153,113 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | 15,234,599 | 15,076,957 | 13,779,727 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | 2,076,504 | 2,022,472 | 1,863,272 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities & stockholders’ equity | $ | 17,311,103 | $ | 17,099,429 | $ | 15,642,999 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 169,467 | $ | 171,651 | $ | 149,991 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest spread | 3.40 | % | 3.34 | % | 3.09 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| NIM | 4.28 | % | 4.26 | % | 4.15 | % | |||||||||||||||||||||||||||||||||||||||||||||||
1 Average balances include nonaccrual loans. Interest income includes net loan fees of $1.4 million, $1.7 million, and $1.6 million for the three months ended March 31, 2026, December 31, 2025, and March 31, 2025, respectively. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $3.3 million, $3.5 million, and $2.5 million for each of the three months ended March 31, 2026, December 31, 2025, and March 31, 2025, respectively. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
37
Rate/Volume
The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume.
Three months ended March 31, 2026 | Three months ended March 31, 2026 | ||||||||||||||||||||||||||||||||||
| compared to | compared to | ||||||||||||||||||||||||||||||||||
Three months ended December 31, 2025 | Three months ended March 31, 2025 | ||||||||||||||||||||||||||||||||||
| Increase (decrease) due to | Increase (decrease) due to | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Volume1 | Rate2 | Net | Volume1 | Rate2 | Net | |||||||||||||||||||||||||||||
| Interest earned on: | |||||||||||||||||||||||||||||||||||
| Loans | $ | (557) | $ | (7,650) | $ | (8,207) | $ | 8,559 | $ | (5,218) | $ | 3,341 | |||||||||||||||||||||||
| Taxable securities | 1,181 | 463 | 1,644 | 6,867 | 1,616 | 8,483 | |||||||||||||||||||||||||||||
Non-taxable securities3 | 28 | 99 | 127 | 1,724 | 1,199 | 2,923 | |||||||||||||||||||||||||||||
| Interest-earning deposits | (514) | (389) | (903) | 261 | (852) | (591) | |||||||||||||||||||||||||||||
| Total interest-earning assets | $ | 138 | $ | (7,477) | $ | (7,339) | $ | 17,411 | $ | (3,255) | $ | 14,156 | |||||||||||||||||||||||
| Interest paid on: | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | (537) | $ | (1,759) | $ | (2,296) | $ | 1,446 | $ | (3,562) | (2,116) | ||||||||||||||||||||||||
| Money market accounts | 17 | (2,430) | (2,413) | 2,597 | (5,904) | (3,307) | |||||||||||||||||||||||||||||
| Savings accounts | (1) | (15) | (16) | 1 | (38) | (37) | |||||||||||||||||||||||||||||
| Certificates of deposit | 21 | (785) | (764) | 2,648 | (1,705) | 943 | |||||||||||||||||||||||||||||
| Subordinated debentures and notes | (4) | (35) | (39) | (1,021) | (19) | (1,040) | |||||||||||||||||||||||||||||
| FHLB advances | (60) | (11) | (71) | (195) | (36) | (231) | |||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 576 | (27) | 549 | 48 | (451) | (403) | |||||||||||||||||||||||||||||
| Other borrowed funds | (33) | (72) | (105) | 342 | 529 | 871 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | (21) | (5,134) | (5,155) | 5,866 | (11,186) | (5,320) | |||||||||||||||||||||||||||||
| Net interest income | $ | 159 | $ | (2,343) | $ | (2,184) | $ | 11,545 | $ | 7,931 | 19,476 | ||||||||||||||||||||||||
1 Change in volume multiplied by yield/rate of prior period.
2 Change in yield/rate multiplied by volume of prior period.
3 Nontaxable income is presented on a tax equivalent basis.
NOTE: The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each.
Net interest income on a tax equivalent basis of $169.5 million for the quarter ended March 31, 2026 decreased $2.2 million and increased $19.5 million from the linked and prior year quarters, respectively. The change from the linked and prior year quarters was related to the impact of lower short-term interest rates on loan yields and the cost of interest-bearing liabilities, in addition to growth in both interest-earning assets and interest-bearing liabilities. Net interest income also declined from the linked quarter due to two fewer days in the current quarter. Since September 2024, the Federal Reserve has reduced the federal funds target rate 175 basis points. In response, the Company has proactively adjusted deposit pricing to partially mitigate the impact on income from the repricing of variable rate loans.
Tax equivalent interest income decreased $7.3 million and increased $14.2 million from the linked and prior year quarters, respectively. Compared to the linked quarter, loan yields decreased 13 basis points and there were two fewer days in the period, partially offset by a $158.9 million increase in average investment securities balances and an 11 basis point increase in yield on securities. Compared to the prior year quarter, interest-earning assets increased $1.4 billion, including a $536.9 million increase in average loan balances and an $851.9 million increase in average securities balances, and the yield on securities increased 38 basis points. These increases were partially offset by a 19 basis point decline in the loan yield to 6.38%, from 6.57% in the prior year quarter.
38
Interest expense decreased $5.2 million and $5.3 million from the linked and prior year quarters, respectively, primarily due to a reduction in the cost of interest-bearing deposits due to decreased interest paid on interest-bearing deposits. The total cost of deposits, including noninterest-bearing demand accounts, was 1.52% during the three months ended March 31, 2026, compared to 1.64% and 1.83% in the linked and prior year quarters, respectively.
NIM, on a tax equivalent basis, was 4.28% in the first quarter of 2026, an increase of two basis points and 13 basis points from the linked and prior year quarters, respectively.
Noninterest Income
The following table presents a comparative summary of the major components of noninterest income for the periods indicated.
| Linked quarter comparison | Prior year quarter comparison | ||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended | Quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | Increase (decrease) | March 31, 2025 | Increase (decrease) | ||||||||||||||||||||||||||||||||||||||||||
| Deposit service charges | $ | 5,256 | $ | 5,081 | $ | 175 | 3 | % | $ | 4,420 | $ | 836 | 19 | % | |||||||||||||||||||||||||||||||||
| Wealth management revenue | 2,712 | 2,642 | 70 | 3 | % | 2,659 | 53 | 2 | % | ||||||||||||||||||||||||||||||||||||||
| Card services revenue | 2,535 | 2,621 | (86) | (3) | % | 2,395 | 140 | 6 | % | ||||||||||||||||||||||||||||||||||||||
Tax credit income (loss) | (179) | 3,180 | (3,359) | (106) | % | 2,610 | (2,789) | (107) | % | ||||||||||||||||||||||||||||||||||||||
| Other income | 8,764 | 11,888 | (3,124) | (26) | % | 6,399 | 2,365 | 37 | % | ||||||||||||||||||||||||||||||||||||||
| Total noninterest income | $ | 19,088 | $ | 25,412 | $ | (6,324) | (25) | % | $ | 18,483 | $ | 605 | 3 | % | |||||||||||||||||||||||||||||||||
Total noninterest income for the first quarter of 2026 was $19.1 million, a decrease of $6.3 million and an increase of $0.6 million from the linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to a seasonal decrease in tax credit income and a gain on OREO in the linked quarter that did not reoccur, partially offset by higher private equity fund distributions and a gain on the sale of the guaranteed portion of SBA loans included in other income. Compared to the prior year quarter, tax credit income decreased $2.8 million, partially offset by higher BOLI income and private equity fund distributions. Tax credit income varies based on transaction volumes and fair value changes on credits carried at fair value. Private equity fund distributions are not a consistent source of income and fluctuate based on distributions from the underlying funds.
Noninterest Expense
The following table presents a comparative summary of the major components of noninterest expense for the periods indicated.
| Linked quarter comparison | Prior year comparison | ||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended | Three months ended | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | Increase (decrease) | March 31, 2025 | Increase (decrease) | ||||||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | $ | 55,759 | $ | 50,654 | $ | 5,105 | 10 | % | $ | 48,208 | $ | 7,551 | 16 | % | |||||||||||||||||||||||||||||||||
| Deposit costs | 25,996 | 27,471 | (1,475) | (5) | % | 23,823 | 2,173 | 9 | % | ||||||||||||||||||||||||||||||||||||||
| Occupancy | 5,902 | 5,764 | 138 | 2 | % | 4,430 | 1,472 | 33 | % | ||||||||||||||||||||||||||||||||||||||
| Data processing | 5,644 | 5,695 | (51) | (1) | % | 4,809 | 835 | 17 | % | ||||||||||||||||||||||||||||||||||||||
| Professional fees | 1,571 | 3,228 | (1,657) | (51) | % | 1,728 | (157) | (9) | % | ||||||||||||||||||||||||||||||||||||||
| Other expense | 20,265 | 21,720 | (1,455) | (7) | % | 16,785 | 3,480 | 21 | % | ||||||||||||||||||||||||||||||||||||||
| Total noninterest expense | $ | 115,137 | $ | 114,532 | $ | 605 | 1 | % | $ | 99,783 | $ | 15,354 | 15 | % | |||||||||||||||||||||||||||||||||
| Efficiency ratio | 62.2 | % | 59.2 | % | 3 | % | 60.1 | % | 2 | % | |||||||||||||||||||||||||||||||||||||
| Core efficiency ratio3 | 60.2 | % | 58.3 | % | 2 | % | 58.8 | % | 1 | % | |||||||||||||||||||||||||||||||||||||
3 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
39
Noninterest expense increased $0.6 million and $15.4 million from the linked and prior year quarters, respectively. Employee compensation and benefits increased $5.6 million from the linked quarter primarily due to the first quarter reset of payroll taxes and paid time-off accruals, along with annual merit increases that became effective March 1, 2026. Deposit costs relate to certain businesses in the deposit verticals that receive an earnings credit allowance for deposit-related services provided to us. These earnings credit allowances are impacted by, among other things, interest rates and average balances. Deposit costs decreased $1.5 million from the linked quarter primarily due to the expiration of certain allowances that were not used. The decline in acquisition costs from the linked quarter is due to the completion of the Branch Acquisition that closed in the fourth quarter 2025.
The increase in noninterest expense from the prior year quarter was primarily due to an increase in the associate base as a result of the Branch Acquisition, merit increases throughout 2025 and 2026, an increase of $2.2 million in deposit costs due to higher earnings credit allowances and deposit vertical average balances, and an increase of $1.8 million in loan and legal expenses due to loan workouts and the foreclosure of certain properties.
Income Taxes
The effective tax rate for the current and linked quarters was 21.5%, respectively, compared to 18.1% in the prior year quarter. The increase in the effective tax rate from the prior year quarter was due to an increase in state taxes from apportionment factors and a decrease in tax credit investments.
Summary Balance Sheet
| ($ in thousands) | March 31, 2026 | December 31, 2025 | Increase (decrease) | ||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 634,469 | $ | 681,902 | $ | (47,433) | (7) | % | |||||||||||||||||||||||||||||||||
| Securities | 3,829,162 | 3,729,992 | 99,170 | 3 | % | ||||||||||||||||||||||||||||||||||||
| Loans | 11,692,780 | 11,800,338 | (107,558) | (1) | % | ||||||||||||||||||||||||||||||||||||
| Assets | 17,227,828 | 17,300,884 | (73,056) | — | % | ||||||||||||||||||||||||||||||||||||
| Deposits | 14,524,397 | 14,609,342 | (84,945) | (1) | % | ||||||||||||||||||||||||||||||||||||
| Liabilities | 15,205,624 | 15,261,498 | (55,874) | — | % | ||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | 2,022,204 | 2,039,386 | (17,182) | (1) | % | ||||||||||||||||||||||||||||||||||||
Total assets were $17.2 billion at March 31, 2026, a decrease of $73.1 million from December 31, 2025 primarily due to a $107.6 million decrease in loans and a $47.4 million decrease in cash and cash equivalents, partially offset by a $99.2 million increase in investment securities. Total liabilities of $15.2 billion decreased $55.9 million from December 31, 2025 primarily due to an $84.9 million decrease in deposits.
Investment Securities
At March 31, 2026, investment securities were $3.8 billion compared to $3.7 billion at December 31, 2025, or 22% of total assets for both periods. The portfolio is comprised of both available-for-sale and held-to-maturity securities.
The table below sets forth the carrying value of investment securities, excluding the ACL:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | % | Amount | % | |||||||||||||||||||||||||||||||
| Obligations of U.S. Government sponsored enterprises | $ | 158,346 | 4.1 | % | $ | 182,572 | 4.9 | % | |||||||||||||||||||||||||||
| Obligations of states and political subdivisions | 1,483,600 | 38.8 | % | 1,492,904 | 40.0 | % | |||||||||||||||||||||||||||||
| Agency mortgage-backed securities | 1,905,834 | 49.8 | % | 1,753,150 | 47.0 | % | |||||||||||||||||||||||||||||
| U.S. Treasury Bills | 151,240 | 3.9 | % | 170,984 | 4.6 | % | |||||||||||||||||||||||||||||
| Corporate debt securities | 130,344 | 3.4 | % | 130,527 | 3.5 | % | |||||||||||||||||||||||||||||
| Total | $ | 3,829,364 | 100.0 | % | $ | 3,730,137 | 100.0 | % | |||||||||||||||||||||||||||
40
| Net Unrealized Losses | |||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | |||||||||||||||
| Available-for-sale securities | $ | (116,745) | $ | (83,258) | |||||||||||||
| Held-to-maturity securities | (52,176) | (35,288) | |||||||||||||||
| Total | $ | (168,921) | $ | (118,546) | |||||||||||||
Investment purchases in the first quarter of 2026 had a weighted average, tax equivalent yield of 4.51%. The average duration of the investment portfolio was 5.0 years at March 31, 2026. The Company leverages the investment portfolio to lengthen the overall duration of the balance sheet, primarily using high-quality municipal securities. The expected cash flow from pay downs, maturities and interest over the next 12 months is approximately $703.9 million.
Loans by Type
The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a large part of the portfolio, including the C&I category, is secured by real estate. The ability of the Company’s borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.
The following table sets forth the composition of the loan portfolio by type of loans:
| ($ in thousands) | March 31, 2026 | December 31, 2025 | Increase (decrease) | ||||||||||||||||||||||||||||||||||||||
| C&I | $ | 5,168,533 | $ | 5,231,616 | $ | (63,083) | (1) | % | |||||||||||||||||||||||||||||||||
| CRE - investor owned | 2,958,720 | 2,984,858 | (26,138) | (1) | % | ||||||||||||||||||||||||||||||||||||
| CRE - owner occupied | 2,495,246 | 2,468,963 | 26,283 | 1 | % | ||||||||||||||||||||||||||||||||||||
| Construction and land development | 667,703 | 687,584 | (19,881) | (3) | % | ||||||||||||||||||||||||||||||||||||
| Residential real estate | 346,181 | 367,682 | (21,501) | (6) | % | ||||||||||||||||||||||||||||||||||||
| Consumer | 56,397 | 59,635 | (3,238) | (5) | % | ||||||||||||||||||||||||||||||||||||
| Total loans | $ | 11,692,780 | $ | 11,800,338 | $ | (107,558) | (1) | % | |||||||||||||||||||||||||||||||||
Loans totaled $11.7 billion at March 31, 2026 compared to $11.8 billion at December 31, 2025. Loan sales of $25.4 million mitigated growth in the SBA category during the current quarter. Average revolving line draw utilization was 45% for the first quarter of 2026, compared to 44% for the year ended December 31, 2025.
The following table sets forth additional information on certain categories of loans that are included in total loans above at the periods indicated:
| ($ in thousands) | March 31, 2026 | December 31, 2025 | Increase (decrease) | ||||||||||||||||||||||||||||||||||||||
| SBA Loans | $ | 1,230,455 | $ | 1,262,456 | $ | (32,001) | (3) | % | |||||||||||||||||||||||||||||||||
| Sponsor finance | 661,946 | 694,905 | (32,959) | (5) | % | ||||||||||||||||||||||||||||||||||||
| Life insurance premium financing | 1,208,098 | 1,187,128 | 20,970 | 2 | % | ||||||||||||||||||||||||||||||||||||
| Tax credits | 702,080 | 802,818 | (100,738) | (13) | % | ||||||||||||||||||||||||||||||||||||
Sponsor finance, life insurance premium financing, and tax credits lending consist primarily of C&I loans. Sponsor finance and life insurance premium financing loans are sourced through relationships developed with private equity funds and estate planning firms and are not bound geographically by our markets. These loan products offer opportunities to expand and diversify geographically by entering new markets. The Company continues to focus on originating high-quality C&I relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. Life insurance premium financing and tax credits are typically lower risk products due to the high collateral value securing the loans.
41
SBA loans are also generated on a national basis, and primarily consist of loans collateralized by first lien, owner-occupied real estate properties. These loans predominantly have a 75% guarantee from the SBA. The Company may sell the guaranteed portion of the loan and retain servicing rights, and in the three months ended March 31, 2026, the guaranteed portion of SBA loans totaling $25.4 million were sold.
Provision and ACL
The following table presents the components of the provision for credit losses:
| Quarter ended | |||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||
Provision for credit losses on loans | $ | 6,449 | $ | 8,544 | $ | 3,935 | |||||||||||||||||
Provision (benefit) for off-balance sheet commitments | 416 | (383) | 214 | ||||||||||||||||||||
Provision (benefit) for held-to-maturity securities | 57 | (25) | 38 | ||||||||||||||||||||
Charge-off of accrued interest | 321 | 1,100 | 997 | ||||||||||||||||||||
Provision for credit losses | $ | 7,243 | $ | 9,236 | $ | 5,184 | |||||||||||||||||
The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the ACL on loans at a level consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date. The Company also records reversals of interest on nonaccrual loans and interest recoveries directly through the provision of credit losses.
A provision for credit losses of $7.2 million was recognized for the first quarter of 2026, a decrease of $2.0 million and an increase of $2.1 million from the linked and prior year quarters, respectively. The provision for credit losses in the first quarter of 2026 was primarily related to the net charge-offs and qualitative adjustments to recognize the broader macroeconomic risks to the loan portfolio from the conflict in Iran.
The following table summarizes the allocation of the ACL on loans:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Allowance | Percent of loans in each category to total loans | Allowance | Percent of loans in each category to total loans | |||||||||||||||||||||||||||||||
| C&I | $ | 73,110 | 44.2 | % | $ | 68,345 | 44.4 | % | |||||||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||||||
| Commercial | 49,256 | 46.6 | % | 50,783 | 46.2 | % | |||||||||||||||||||||||||||||
| Construction and land development | 10,602 | 5.7 | % | 11,016 | 5.8 | % | |||||||||||||||||||||||||||||
| Residential | 7,423 | 3.0 | % | 8,023 | 3.1 | % | |||||||||||||||||||||||||||||
| Consumer | 1,673 | 0.5 | % | 1,855 | 0.5 | % | |||||||||||||||||||||||||||||
| Total | $ | 142,064 | 100.0 | % | $ | 140,022 | 100.0 | % | |||||||||||||||||||||||||||
The ACL on loans was 1.21% of total loans at March 31, 2026, compared to 1.19% of loans at December 31, 2025. Excluding guaranteed loans, the ACL on loans to total loans was 1.32%4 at March 31, 2026, compared to 1.29% at December 31, 2025.
4 ACL on loans to total loans adjusted for guaranteed loans is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
42
The following table is a summary of net charge-offs (recoveries) to average loans for the periods indicated:
| Quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Net Charge-offs (Recoveries) | Average Loans(1) | Net Charge-offs (Recoveries)/Average Loans(2) | Net Charge-offs (Recoveries) | Average Loans(1) | Net Charge-offs (Recoveries)/Average Loans(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C&I | $ | 3,508 | $ | 5,266,240 | 0.27 | % | $ | 12,614 | $ | 5,183,763 | 0.97 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | (64) | 5,431,826 | — | % | 4,836 | 5,378,463 | 0.36 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land development | 1,028 | 664,550 | 0.63 | % | 3,131 | 802,035 | 1.55 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | 5 | 356,167 | 0.01 | % | (213) | 370,214 | (0.23) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | (70) | 58,509 | (0.49) | % | 306 | 59,040 | 2.06 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 4,407 | $ | 11,777,292 | 0.15 | % | $ | 20,674 | $ | 11,793,515 | 0.70 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Excludes loans held for sale.
(2)Annualized.
To the extent the Company does not recognize charge-offs and economic forecasts improve in future periods, the Company could recognize provision reversals. Conversely, if economic conditions and the Company’s forecast worsen and charge-offs increase, the Company could recognize elevated levels of provision for credit losses. The provision is also reflective of charge-offs (recoveries) in the period.
Nonperforming assets
The following table presents the categories of nonperforming assets and other ratios, excluding government guaranteed portions, as of the dates indicated:
| ($ in thousands) | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||
| Nonaccrual loans | $ | 60,558 | $ | 81,180 | |||||||||||||||||||
| Loans past due 90 days or more and still accruing interest | 4,383 | 1,629 | |||||||||||||||||||||
| Total nonperforming loans | 64,941 | 82,809 | |||||||||||||||||||||
| OREO | 84,482 | 81,544 | |||||||||||||||||||||
| Total nonperforming assets | $ | 149,423 | $ | 164,353 | |||||||||||||||||||
| Total assets | $ | 17,227,828 | $ | 17,300,884 | |||||||||||||||||||
| Total loans | 11,692,780 | 11,800,338 | |||||||||||||||||||||
| Total ACL on loans | 142,064 | 140,022 | |||||||||||||||||||||
| ACL on loans to nonaccrual loans | 235 | % | 172 | % | |||||||||||||||||||
| ACL on loans to nonperforming loans | 219 | % | 169 | % | |||||||||||||||||||
| ACL on loans to total loans | 1.21 | % | 1.19 | % | |||||||||||||||||||
| Nonaccrual loans to total loans | 0.52 | % | 0.69 | % | |||||||||||||||||||
| Nonperforming loans to total loans | 0.56 | % | 0.70 | % | |||||||||||||||||||
| Nonperforming assets to total assets | 0.87 | % | 0.95 | % | |||||||||||||||||||
43
Nonperforming loans based on loan type were as follows:
| ($ in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| C&I | $ | 18,257 | $ | 27,979 | |||||||
| CRE | 42,177 | 46,326 | |||||||||
| Construction and land development | 1,505 | 155 | |||||||||
| Residential real estate | 2,976 | 8,340 | |||||||||
| Consumer | 26 | 9 | |||||||||
| Total | $ | 64,941 | $ | 82,809 | |||||||
The following table summarizes the changes in nonperforming loans:
| Three months ended | |||||
| ($ in thousands) | March 31, 2026 | ||||
| Nonperforming loans, beginning of period | $ | 82,809 | |||
| Additions to nonperforming loans | 16,283 | ||||
| Charge-offs | (5,217) | ||||
| Principal payments | (21,140) | ||||
| Moved to OREO | (7,794) | ||||
| Nonperforming loans, end of period | $ | 64,941 | |||
Nonperforming loans at March 31, 2026 decreased $17.9 million, or 22%, when compared to December 31, 2025. The decrease in nonperforming assets during the three months ended March 31, 2026 was primarily related to two loans totaling $17.5 million that went on nonaccrual in the second half of 2025 and were subsequently paid off in the first quarter 2026.
OREO
The following table summarizes the changes in OREO:
| Three months ended | |||||
| ($ in thousands) | March 31, 2026 | ||||
| OREO, beginning of period | $ | 81,544 | |||
| Additions | 7,794 | ||||
| Change in valuation allowance | (33) | ||||
| Sales | (4,823) | ||||
| OREO, end of period | $ | 84,482 | |||
Four properties in OREO at March 31, 2026 with a carrying value of $46 million are currently under contract to sell.
44
Deposits
The following table shows the breakdown of deposits by type:
| ($ in thousands) | March 31, 2026 | December 31, 2025 | Increase (decrease) | ||||||||||||||||||||
| Noninterest-bearing demand accounts | $ | 4,828,375 | $ | 4,874,115 | $ | (45,740) | (1) | % | |||||||||||||||
| Interest-bearing demand accounts | 3,395,680 | 3,537,334 | (141,654) | (4) | % | ||||||||||||||||||
| Money market accounts | 4,058,748 | 3,991,110 | 67,638 | 2 | % | ||||||||||||||||||
| Savings accounts | 551,914 | 537,400 | 14,514 | 3 | % | ||||||||||||||||||
| Certificates of deposit: | |||||||||||||||||||||||
| Brokered | 724,788 | 721,977 | 2,811 | — | % | ||||||||||||||||||
| Customer | 964,892 | 947,406 | 17,486 | 2 | % | ||||||||||||||||||
| Total deposits | $ | 14,524,397 | $ | 14,609,342 | $ | (84,945) | (1) | % | |||||||||||||||
| Noninterest-bearing deposits / total deposits | 33 | % | 33 | % | |||||||||||||||||||
The following table shows the average balance and average rate of the Company’s deposits by type:
| Quarter ended | |||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||||||||||||||||||
| ($ in thousands) | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | |||||||||||||||||||||||||||||
| Noninterest-bearing deposit accounts | $ | 4,998,734 | — | % | $ | 4,837,958 | — | % | $ | 4,463,388 | — | % | |||||||||||||||||||||||
| Interest-bearing demand accounts | 3,453,650 | 1.75 | 3,550,349 | 1.93 | 3,167,428 | 2.18 | |||||||||||||||||||||||||||||
| Money market accounts | 3,952,475 | 2.59 | 3,948,405 | 2.77 | 3,601,535 | 3.21 | |||||||||||||||||||||||||||||
| Savings accounts | 538,597 | 0.11 | 540,764 | 0.12 | 534,512 | 0.14 | |||||||||||||||||||||||||||||
| Certificates of deposit | 1,665,977 | 3.52 | 1,659,905 | 3.64 | 1,374,693 | 3.99 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | $ | 9,610,699 | 2.31 | $ | 9,699,423 | 2.46 | $ | 8,678,168 | 2.77 | ||||||||||||||||||||||||||
| Total average deposits | $ | 14,609,433 | 1.52 | $ | 14,537,381 | 1.64 | $ | 13,141,556 | 1.83 | ||||||||||||||||||||||||||
Total deposits were $14.5 billion at March 31, 2026, a decrease of $84.9 million from December 31, 2025. Brokered certificates of deposit at March 31, 2026 increased $2.8 million from December 31, 2025 and continue to be used as a stable funding source. The Company has deposit verticals focusing on property management, community associations, and escrow industries. These deposits increased to $4.0 billion at March 31, 2026 from $3.8 billion at December 31, 2025 due to continued success at generating organic deposit growth.
To provide clients a deposit product with enhanced FDIC insurance, the Company participates in several programs through third parties that provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Total reciprocal deposits were $1.3 billion and $1.4 billion at March 31, 2026 and December 31, 2025, respectively. The Company considers reciprocal accounts as client-related deposits due to the client relationship that generated the transaction. At March 31, 2026, estimated uninsured deposits totaled $4.5 billion, or 31% of total deposits, compared to $4.6 billion, or 32% of total deposits, at December 31, 2025.
The total cost of deposits was 1.52% for the current quarter compared to 1.64% and 1.83% for the linked and prior year quarters, respectively.
45
Stockholders’ Equity
Stockholders’ equity totaled $2.0 billion at March 31, 2026, a decrease of $17.2 million from December 31, 2025. Significant activity during the first three months of 2026 was as follows:
•Increase from net income of $49.4 million,
•Decrease in fair value of securities and cash flow hedges of $27.0 million,
•Decrease from dividends paid on common and preferred stock of $13.1 million, and
•Decrease from common stock repurchases of $27.3 million.
Liquidity and Capital Resources
Liquidity
The objective of liquidity management is to ensure we have the ability to generate sufficient cash or cash equivalents in a timely and cost-effective manner to meet our commitments as they become due. Typical demands on liquidity are changes in deposit levels, maturing time deposits which are not renewed, and fundings under credit commitments to clients. Funds are available from a number of sources, such as the core deposit base and loan and security repayments and maturities.
Liquidity is provided from lines of credit with the FHLB, the Federal Reserve, and correspondent banks; the ability to acquire large and brokered deposits, sales of the securities portfolio, and the ability to sell loans or loan participations to other banks. These alternatives are an important part of our liquidity plan and provide flexibility and efficient execution of the asset-liability management strategy.
The Company’s Asset-Liability Management Committee oversees our liquidity position, the parameters of which are approved by the Bank’s Board of Directors. Our liquidity position is monitored daily. Our liquidity management framework includes measurement of several key elements, such as the loan to deposit ratio, a liquidity ratio, and a dependency ratio. The Company’s liquidity framework also incorporates contingency planning to assess the nature and volatility of funding sources and to determine alternatives to these sources. While core deposits and loan and investment repayments are principal sources of liquidity, funding diversification is another key element of liquidity management and is achieved by strategically varying depositor types, terms, funding markets, and instruments.
Liquidity from assets is available primarily from cash balances and the investment portfolio. Cash and interest-bearing deposits with other banks totaled $634.5 million at March 31, 2026, compared to $681.9 million at December 31, 2025. Investment securities are another important tool in liquidity planning. Securities totaled $3.8 billion and $3.7 billion at March 31, 2026 and December 31, 2025, respectively, and included $1.6 billion and $1.7 billion at March 31, 2026 and December 31, 2025, respectively, pledged as collateral for deposits of public institutions, loan notes and other requirements. The unpledged portion of the securities portfolio could be pledged or sold to enhance liquidity, if necessary.
Available on- and off-balance sheet liquidity sources include the following items:
| ($ in thousands) | March 31, 2026 | ||||
| Federal Reserve borrowing capacity | $ | 3,076,120 | |||
| FHLB borrowing capacity | 1,466,209 | ||||
| Unpledged securities | 2,189,371 | ||||
Federal funds lines (eight correspondent banks) | 135,000 | ||||
| Cash and interest-bearing deposits | 634,469 | ||||
| Holding Company line of credit | 25,000 | ||||
| Total | $ | 7,526,169 | |||
46
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 guaranteed portion of SBA loans totaling $25.4 million and $31.3 million were sold during the three months ended March 31, 2026 and 2025, respectively.
Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at March 31, 2026, the Company could borrow an additional $1.5 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 $3.1 billion available from the Federal Reserve under a pledged loan agreement. The Company also has unsecured federal funds lines with eight correspondent banks totaling $135.0 million as of March 31, 2026.
In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The Company has $3.2 billion in unused commitments to extend credit as of March 31, 2026. While this commitment level would exhaust the majority of the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.
At the holding company level, our primary funding sources are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises, stock offerings) and debt instruments. The main use of this liquidity is to provide the funds necessary to pay dividends to stockholders, service debt, invest in subsidiaries as necessary, repurchase common stock and satisfy other operating requirements. The holding company maintains a revolving line of credit for an aggregate amount $25 million, all of which was available at March 31, 2026. The line of credit was renewed in the first quarter of 2026, has a one-year term, has an interest rate of one-month Term SOFR plus 185 basis points, and the annual unused commitment fee is 0.40%. The proceeds can be used for general corporate purposes.
Strong capital ratios, credit quality and core earnings are essential to retaining cost-effective access to the wholesale funding markets. Deterioration in any of these factors could have a negative impact on the Company’s ability to access these funding sources and, as a result, these factors are monitored on an ongoing basis as part of the liquidity management process. The Bank is subject to regulations and, among other things, may be limited in its ability to pay dividends or transfer funds to the parent company. Accordingly, consolidated cash flows as presented in the consolidated statements of cash flows may not represent cash immediately available for the payment of cash dividends to the Company’s stockholders or for other cash needs.
Through the normal course of operations, the Company has entered into certain contractual obligations and other commitments. Such obligations relate to funding operations through deposits or debt issuances, as well as leases for premises and equipment. As a financial services provider, the Company routinely enters into commitments to extend credit. While contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Company. The Company also enters into derivative contracts under which the Company either receives cash from or pays cash to counterparties depending on changes in interest rates. Derivative contracts are carried at fair value on the consolidated balance sheet with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of these contracts changes daily as market interest rates change.
47
Capital Resources
The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and its bank affiliate must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The banking affiliate’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total, Tier 1, and common equity tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. To be categorized as “well capitalized”, banks must maintain minimum total risk-based (10%), Tier 1 risk-based (8%), common equity tier 1 risk-based (6.5%), and Tier 1 leverage ratios (5%). In addition, the Company must maintain an additional CCB above the regulatory minimum ratio requirements. The CCB is designed to insulate banks from periods of stress and impose constraints on dividends, stock repurchases and discretionary bonus payments when capital levels fall below prescribed levels. As of March 31, 2026, and December 31, 2025, the Company and the Bank met all capital adequacy requirements to which they are subject and exceeded the amounts required to be “well capitalized”.
The following table summarizes the Company’s various capital ratios:
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| ($ in thousands) | EFSC | Bank | EFSC | Bank | To Be Well-Capitalized | Minimum Ratio with CCB | ||||||||||||||||||||
| Common Equity Tier 1 Capital to Risk Weighted Assets | 11.7 | % | 12.1 | % | 11.6 | % | 11.9 | % | 6.5 | % | 7.0 | % | ||||||||||||||
| Tier 1 Capital to Risk Weighted Assets | 12.9 | % | 12.1 | % | 12.8 | % | 11.9 | % | 8.0 | % | 8.5 | % | ||||||||||||||
| Total Capital to Risk Weighted Assets | 13.9 | % | 13.2 | % | 13.9 | % | 13.0 | % | 10.0 | % | 10.5 | % | ||||||||||||||
| Leverage Ratio (Tier 1 Capital to Average Assets) | 10.4 | % | 9.8 | % | 10.5 | % | 9.7 | % | 5.0 | % | N/A | |||||||||||||||
Tangible common equity to tangible assets1 | 9.01 | % | 9.07 | % | ||||||||||||||||||||||
1 Not a required regulatory capital ratio. | ||||||||||||||||||||||||||
The Company believes the tangible common equity ratio is an important measure of capital strength, even though it is considered a non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.”
Use of Non-GAAP Financial Measures:
The Company’s accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, the Company provides additional financial measures, such as tangible common equity, adjusted ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, tangible book value per common share, return on average common equity and tangible common equity to tangible assets ratio, in this report that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.
48
The Company considers its tangible common equity, adjusted ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, tangible book value per common share, return on average common equity and tangible common equity to tangible assets ratio, collectively “core performance measures,” presented in this report and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as the FDIC special assessment, acquisition costs, the net gain or loss on OREO, and the net gain or loss on sale of investment securities, that the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.
The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company’s performance and capital strength. The Company’s management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company’s operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measures for the periods indicated.
Core Efficiency Ratio
| Quarter ended | |||||||||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||
| Net interest income (GAAP) | $ | 166,147 | $ | 168,174 | $ | 147,516 | |||||||||||||||||||||||
| Tax-equivalent adjustment | 3,320 | 3,477 | 2,475 | ||||||||||||||||||||||||||
| Net interest income - FTE (non-GAAP) | $ | 169,467 | $ | 171,651 | $ | 149,991 | |||||||||||||||||||||||
| Noninterest income (GAAP) | 19,088 | 25,412 | 18,483 | ||||||||||||||||||||||||||
Less net gain (loss) on sale of investment securities | — | (57) | 106 | ||||||||||||||||||||||||||
Less net gain (loss) on OREO | (295) | 6,169 | 23 | ||||||||||||||||||||||||||
| Core revenue (non-GAAP) | $ | 188,850 | $ | 190,951 | $ | 168,345 | |||||||||||||||||||||||
| Noninterest expense (GAAP) | $ | 115,137 | $ | 114,532 | $ | 99,783 | |||||||||||||||||||||||
| Less FDIC special assessment | — | (652) | — | ||||||||||||||||||||||||||
| Less amortization on intangibles | 1,400 | 1,380 | 855 | ||||||||||||||||||||||||||
| Less acquisition costs | — | 2,548 | — | ||||||||||||||||||||||||||
| Core noninterest expense (non-GAAP) | $ | 113,737 | $ | 111,256 | $ | 98,928 | |||||||||||||||||||||||
| Core efficiency ratio (non-GAAP) | 60.2 | % | 58.3 | % | 58.8 | % | |||||||||||||||||||||||
49
Tangible Common Equity, Tangible Book Value per Common Share, and Tangible Common Equity to Tangible Assets Ratio
| At | |||||||||||||||||||||||
| (in thousands, except per share data) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||
| Stockholders’ equity (GAAP) | $ | 2,022,204 | $ | 2,039,386 | $ | 1,868,073 | |||||||||||||||||
| Less preferred stock | 71,988 | 71,988 | 71,988 | ||||||||||||||||||||
| Less goodwill | 416,968 | 416,968 | 365,164 | ||||||||||||||||||||
| Less intangible assets | 19,525 | 21,175 | 7,628 | ||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 1,513,723 | $ | 1,529,255 | $ | 1,423,293 | |||||||||||||||||
| Common stock outstanding | 36,581 | 36,965 | 36,928 | ||||||||||||||||||||
| Tangible book value per common share (non-GAAP) | $ | 41.38 | $ | 41.37 | $ | 38.54 | |||||||||||||||||
| Total assets (GAAP) | $ | 17,227,828 | $ | 17,300,884 | $ | 15,676,594 | |||||||||||||||||
| Less goodwill | 416,968 | 416,968 | 365,164 | ||||||||||||||||||||
| Less intangible assets | 19,525 | 21,175 | 7,628 | ||||||||||||||||||||
| Tangible assets (non-GAAP) | $ | 16,791,335 | $ | 16,862,741 | $ | 15,303,802 | |||||||||||||||||
| Tangible common equity to tangible assets (non-GAAP) | 9.01 | % | 9.07 | % | 9.30 | % | |||||||||||||||||
ACL on Loans to Total Loans Adjusted for Guaranteed Loans
| At | |||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||
| Total loans (GAAP) | $ | 11,692,780 | $ | 11,800,338 | $ | 11,298,763 | |||||||||||
| Less: Guaranteed loans, net | 935,409 | 960,132 | 942,651 | ||||||||||||||
| Total adjusted loans (non-GAAP) | $ | 10,757,371 | $ | 10,840,206 | $ | 10,356,112 | |||||||||||
| ACL on loans | $ | 142,064 | $ | 140,022 | $ | 142,944 | |||||||||||
| ACL on loans to total loans | 1.21 | % | 1.19 | % | 1.27 | % | |||||||||||
| ACL on loans to total adjusted loans | 1.32 | % | 1.29 | % | 1.38 | % | |||||||||||
Pre-Provision Net Revenue (PPNR)
| Quarter ended | |||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Net interest income (GAAP) | $ | 166,147 | $ | 168,174 | $ | 147,516 | |||||||||||||||||||||||||||||||||||
| Noninterest income (GAAP) | 19,088 | 25,412 | 18,483 | ||||||||||||||||||||||||||||||||||||||
| FDIC special assessment | — | (652) | — | ||||||||||||||||||||||||||||||||||||||
| Acquisition costs | — | 2,548 | — | ||||||||||||||||||||||||||||||||||||||
Less net gain (loss) on sale of investment securities | — | (57) | 106 | ||||||||||||||||||||||||||||||||||||||
Less net gain (loss) on OREO | (295) | 6,169 | 23 | ||||||||||||||||||||||||||||||||||||||
| Less noninterest expense (GAAP) | 115,137 | 114,532 | 99,783 | ||||||||||||||||||||||||||||||||||||||
| PPNR (non-GAAP) | $ | 70,393 | $ | 74,838 | $ | 66,087 | |||||||||||||||||||||||||||||||||||
50
Adjusted Return on Average Common Equity, Return on Average Tangible Common Equity (ROATCE) and Adjusted Return on Average Assets (ROAA)
| Quarter ended | |||||||||||||||||||||||||||||
| ($ in thousands) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||
| Average stockholder’s equity (GAAP) | $ | 2,076,504 | $ | 2,022,472 | $ | 1,863,272 | |||||||||||||||||||||||
| Less average preferred stock | 71,988 | 71,988 | 71,988 | ||||||||||||||||||||||||||
| Less average goodwill | 416,968 | 414,858 | 365,164 | ||||||||||||||||||||||||||
| Less average intangible assets | 20,419 | 11,173 | 8,026 | ||||||||||||||||||||||||||
| Average tangible common equity (non-GAAP) | $ | 1,567,129 | $ | 1,524,453 | $ | 1,418,094 | |||||||||||||||||||||||
| Net income (GAAP) | $ | 49,362 | $ | 54,794 | $ | 49,961 | |||||||||||||||||||||||
| FDIC special assessment (after tax) | — | (488) | — | ||||||||||||||||||||||||||
| Acquisition costs (after tax) | — | 1,742 | — | ||||||||||||||||||||||||||
Less net gain (loss) on sale of investment securities (after tax) | — | (43) | 80 | ||||||||||||||||||||||||||
Less net gain (loss) on OREO (after tax) | (221) | 4,621 | 17 | ||||||||||||||||||||||||||
| Net income adjusted (non-GAAP) | $ | 49,583 | $ | 51,470 | $ | 49,864 | |||||||||||||||||||||||
| Less preferred stock dividends | 938 | 937 | 938 | ||||||||||||||||||||||||||
| Net income available to common stockholders adjusted (non-GAAP) | $ | 48,645 | $ | 50,533 | $ | 48,926 | |||||||||||||||||||||||
| Return on average common equity (GAAP) | 9.80 | % | 10.95 | % | 11.10 | % | |||||||||||||||||||||||
| Adjusted return on average common equity (non-GAAP) | 9.84 | % | 10.28 | % | 11.08 | % | |||||||||||||||||||||||
| ROATCE (non-GAAP) | 12.53 | % | 14.02 | % | 14.02 | % | |||||||||||||||||||||||
| Adjusted ROATCE (non-GAAP) | 12.59 | % | 13.15 | % | 13.99 | % | |||||||||||||||||||||||
| Average assets | $ | 17,311,103 | $ | 17,099,429 | $ | 15,642,999 | |||||||||||||||||||||||
| Return on average assets (GAAP) | 1.16 | % | 1.27 | % | 1.30 | % | |||||||||||||||||||||||
| Adjusted return on average assets (non-GAAP) | 1.16 | % | 1.19 | % | 1.29 | % | |||||||||||||||||||||||
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disclosures set forth in this item are qualified by the cautionary language regarding forward-looking statements in the introduction to Item 2 of Part I of this Quarterly Report on Form 10-Q and other cautionary statements set forth elsewhere in this report.
Interest Rate Risk
Our interest rate risk management practices are aimed at optimizing net interest income, while guarding against deterioration that could be caused by certain interest rate scenarios. Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. We attempt to maintain interest-earning assets, comprised primarily of both loans and investments, and interest-bearing liabilities, comprised primarily of deposits, maturing or repricing in similar time horizons in order to manage any impact from market interest rate changes according to our risk tolerances. The Company uses a simulation model to measure the sensitivity to changing rates on earnings.
The Company determines the sensitivity of its short-term future earnings to a hypothetical plus or minus 100 to 300 basis point parallel rate shock through the use of simulation modeling. The simulation includes the modeling of the balance sheet as an ongoing entity. Future business assumptions involving administered rate products, prepayments for future rate-sensitive balances, and the reinvestment of maturing assets and liabilities are included. These items are then modeled to project net interest income based on a hypothetical change in interest rates. The resulting net interest income for the next 12-month period is compared to the baseline amounts calculated using flat rates. The difference represents the Company’s sensitivity to a positive or negative 100 basis points parallel rate shock.
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The following table summarizes the expected impact of interest rate shocks on net interest income at March 31, 2026:
| Rate Shock | Annual % change in net interest income | |||||||
| + 300 bp | 10.2% | |||||||
| + 200 bp | 7.0% | |||||||
| + 100 bp | 3.6% | |||||||
| - 100 bp | (3.5)% | |||||||
| - 200 bp | (6.7)% | |||||||
| - 300 bp | (9.5)% | |||||||
The Company occasionally uses interest rate derivative instruments as an asset/liability management tool to hedge mismatches in interest rate exposure indicated by the net interest income simulation described above. They are used to modify the Company’s exposures to interest rate fluctuations and provide more stable spreads between loan yields and the rate on their funding sources. At March 31, 2026, 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. Derivative financial instruments are also discussed in “Item 1. Note 6 – Derivative Financial Instruments.”
The Company had $7.3 billion in variable rate loans at March 31, 2026. Of these loans, $4.9 billion have an interest rate floor and nearly all of those loans were at or above the floor. Variable rate loans include $2.9 billion indexed to the prime rate, $3.6 billion indexed to SOFR, and $862.0 million indexed to other rates.
At March 31, 2026, the Company’s available-for-sale and held-to-maturity investment securities totaled $2.8 billion and $1.1 billion, respectively. These portfolios consist primarily of fixed-rate securities that are subject to changes in market value due to changes in interest rates. At March 31, 2026, net unrealized losses were $116.7 million and $52.2 million on the available-for-sale and held-to-maturity investment portfolios, respectively.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15, as of March 31, 2026. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on that evaluation, the CEO and CFO concluded the Company’s disclosure controls and procedures were effective as of March 31, 2026 to provide reasonable assurance of the achievement of the objectives described above.
Changes to Internal Controls
There were no changes during the period covered by this Quarterly Report on Form 10-Q in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, those controls.
PART II - OTHER INFORMATION
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ITEM 1: LEGAL PROCEEDINGS
The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Management believes there are no such legal proceedings pending or threatened against the Company or its subsidiaries in the ordinary course of business, directly, indirectly, or in the aggregate that, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.
ITEM 1A: RISK FACTORS
For information regarding risk factors affecting the Company, please see the cautionary language regarding forward-looking statements in the introduction to Item 2 of Part I of this Quarterly Report on Form 10-Q, and Part I, Item 1A of our Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no material changes to the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
| 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) | |||||||||||||||||||
| January 1, 2026 through January 31, 2026 | — | $ | — | — | 1,114,483 | ||||||||||||||||||
| February 1, 2026 through February 28, 2026 | 183,000 | 60.34 | 183,000 | 931,483 | |||||||||||||||||||
| March 1, 2026 through March 31, 2026 | 300,000 | 53.57 | 300,000 | 631,483 | |||||||||||||||||||
| Total | 483,000 | $ | 56.13 | 483,000 | 631,483 | ||||||||||||||||||
| (a) In May 2022, the Company’s Board of Directors authorized the repurchase of up to two million shares of the Company’s common stock. The repurchases may be made from time to time in the open market or through privately negotiated transactions. | |||||||||||||||||||||||
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5: OTHER INFORMATION
During the quarter ended March 31, 2026, no officer or director of the company adopted terminated
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ITEM 6: EXHIBITS
Exhibit No. Description
3.1 Certificate of Incorporation of Registrant, (incorporated herein by reference to Exhibit 3.1 of Registrant's Registration Statement on Form S-1 filed on December 16, 1996 (File No. 333-14737)).
3.2 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 4.2 to Registrant's Registration Statement on Form S-8 filed on July 1, 1999 (File No. 333-82087)).
3.3 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1999 filed on November 12, 1999 (File No. 001-15373)).
3.4 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 99.2 to Registrant's Current Report on Form 8-K filed on April 30, 2002 (File No. 001-15373)).
3.5 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Appendix A to Registrant's Definitive Proxy Statement on Schedule 14A filed on November 20, 2008 (File No. 001-15373)).
3.6 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2014 filed on July 29, 2014 (File No. 001-15373)).
3.7 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Exhibit 3.8 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 filed on July 26, 2019 (File No. 001-15373)).
3.8 Amendment to the Certificate of Incorporation of Registrant (incorporated herein by reference to Appendix C to Registrant’s Registration Statement on Form S-4/A filed on June 2, 2021 (File No. 333-256265)).
3.9 Certificate of Designations of Registrant for Fixed Rate Cumulative Perpetual Preferred Stock, Series A, dated December 17, 2008 (incorporated herein by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed on December 23, 2008 (File No. 001-15373)).
3.10 Certificate of Elimination of Registrant’s Certificate of Designation, Preferences, and Rights of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, dated November 9, 2021 (incorporated herein by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on November 9, 2021 (File No. 001-15373)).
3.11 Certificate of Designation of Registrant of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, dated November 16, 2021 (incorporated herein by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on November 17, 2021 (File No. 001-15373)).
3.12 Amended and Restated Bylaws of Registrant (incorporated herein by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed on June 12, 2015 (File No. 001-15373)).
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4.1 Long-term borrowing instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company undertakes to furnish copies of such instruments to the Securities and Exchange Commission upon request.
*31.1 Chief Executive Officer’s Certification required by Rule 13(a)-14(a).
*31.2 Chief Financial Officer’s Certification required by Rule 13(a)-14(a).
**32.1 Chief Executive Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002.
**32.2 Chief Financial Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase Document.
104 The cover page of Enterprise Financial Services Corp’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in Inline XBRL (contained in Exhibit 101).
* Filed herewith
** Furnished herewith. Notwithstanding any incorporation of this Quarterly Statement on Form 10-Q in any other filing by the Registrant, Exhibits furnished herewith and designated with two (**) shall not be deemed incorporated by reference to any other filing unless specifically otherwise set forth herein or therein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri, on the day of May 1, 2026.
| ENTERPRISE FINANCIAL SERVICES CORP | |||||||||||
| By: | /s/ James B. Lally | ||||||||||
| James B. Lally | |||||||||||
| Chief Executive Officer | |||||||||||
| By: | /s/ Keene S. Turner | ||||||||||
| Keene S. Turner | |||||||||||
| Chief Financial and Operating Officer | |||||||||||
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FAQ
How did Enterprise Financial Services Corp (EFSC) perform in Q1 2026?
Enterprise Financial reported Q1 2026 net income of $49.4 million and diluted EPS of $1.30. Profitability metrics were solid, with return on average assets at 1.16% and return on average common equity at 9.80%, reflecting stable core performance.
What were EFSC’s key revenue drivers and net interest margin in Q1 2026?
Net interest income reached $166.1 million in Q1 2026, up from the prior year. Growth in average loans and securities, along with higher investment yields, supported results. Tax-equivalent net interest margin improved to 4.28%, compared with 4.15% in the prior-year quarter.
How strong were Enterprise Financial’s credit quality metrics in Q1 2026?
Credit quality remained controlled, with the allowance for credit losses on loans at $142.1 million, or 1.21% of total loans. Nonperforming loans totaled $64.9 million, representing 0.56% of loans, while nonperforming assets were 0.87% of total assets.
What was EFSC’s loan and deposit position at March 31, 2026?
At March 31, 2026, total loans were $11.69 billion and total deposits were $14.52 billion. Noninterest-bearing deposits made up 33% of deposits, and the loan-to-deposit ratio was 81%, indicating a balanced funding and lending profile.
How well capitalized is Enterprise Financial Services Corp?
Stockholders’ equity totaled about $2.0 billion at March 31, 2026. Book value per common share was $53.31, while tangible book value per common share was $41.38. Regulatory capital ratios for the company and bank exceeded well-capitalized thresholds.
What dividends did EFSC declare for common and preferred shareholders?
The board approved a quarterly common dividend of $0.34 per share, payable June 30, 2026 to holders of record June 15, 2026. It also declared a dividend of $12.50 per Series A preferred share (or $0.3125 per depositary share), payable June 15, 2026.