Enterprise Financial Services Corporation
10/31/2025 | Press release | Distributed by Public on 10/31/2025 13:45
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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 customers 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 the war in Israel and potential for a broader regional conflict and the war in Ukraine and the imposition of additional sanctions and export controls in connection therewith), or pandemics, and their effects on economic and business environments in which we operate, including the related disruption to the financial market and other economic activity; and other risks discussed under the caption "Risk Factors" under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2024, 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."
Introduction
The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first nine months of 2025 compared to the financial condition as of December 31, 2024. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the three months ended September 30, 2025, compared to the linked second quarter of 2025 ("linked quarter") and the results of operations, liquidity and cash flows for the nine months ended September 30, 2025 compared to the same period in 2024 ("prior year-to-date period"). 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-to-date period. 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, 2024.
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, 2024.
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.
Allowance for Credit Losses
The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to as the ACL. The 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 allowance for credit losses on loans was $148.9 million at September 30, 2025 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 $30.7 million. Conversely, the allowance would have increased $44.9 million using only the downside scenario.
Executive Summary
Below are highlights of the Company's financial performance for the periods indicated.
| ($ in thousands, except per share data) | Three months ended | Nine months ended | |||||||||||||||||||||||||||
|
September 30, 2025 |
June 30, 2025 |
September 30, 2024 |
September 30, 2025 |
September 30, 2024 |
|||||||||||||||||||||||||
| EARNINGS | |||||||||||||||||||||||||||||
| Total interest income | $ | 225,390 | $ | 218,967 | $ | 216,304 | $ | 656,137 | $ | 635,671 | |||||||||||||||||||
| Total interest expense | 67,104 | 66,205 | 72,835 | 197,573 | 213,945 | ||||||||||||||||||||||||
| Net interest income | 158,286 | 152,762 | 143,469 | 458,564 | 421,726 | ||||||||||||||||||||||||
| Provision for credit losses | 8,447 | 3,470 | 4,099 | 17,101 | 14,674 | ||||||||||||||||||||||||
| Net interest income after provision for credit losses | 149,839 | 149,292 | 139,370 | 441,463 | 407,052 | ||||||||||||||||||||||||
| Total noninterest income | 48,624 | 20,604 | 21,420 | 87,711 | 49,072 | ||||||||||||||||||||||||
| Total noninterest expense | 109,790 | 105,702 | 98,007 | 315,275 | 285,525 | ||||||||||||||||||||||||
| Income before income tax expense | 88,673 | 64,194 | 62,783 | 213,899 | 170,599 | ||||||||||||||||||||||||
| Income tax expense | 43,438 | 12,810 | 12,198 | 67,319 | 34,167 | ||||||||||||||||||||||||
| Net income | $ | 45,235 | $ | 51,384 | $ | 50,585 | $ | 146,580 | $ | 136,432 | |||||||||||||||||||
| Preferred dividends | 938 | 937 | 938 | 2,813 | 2,813 | ||||||||||||||||||||||||
| Net income available to common stockholders | $ | 44,297 | $ | 50,447 | $ | 49,647 | $ | 143,767 | $ | 133,619 | |||||||||||||||||||
| Basic earnings per common share | $ | 1.20 | $ | 1.36 | $ | 1.33 | $ | 3.89 | $ | 3.57 | |||||||||||||||||||
| Diluted earnings per common share | $ | 1.19 | $ | 1.36 | $ | 1.32 | $ | 3.86 | $ | 3.56 | |||||||||||||||||||
| Return on average assets | 1.11 | % | 1.30 | % | 1.36 | % | 1.23 | % | 1.24 | % | |||||||||||||||||||
|
Adjusted return on average assets1
|
1.12 | % | 1.31 | % | 1.32 | % | 1.24 | % | 1.24 | % | |||||||||||||||||||
| Return on average common equity | 9.29 | % | 11.03 | % | 11.40 | % | 10.45 | % | 10.55 | % | |||||||||||||||||||
|
Adjusted return on average common equity1
|
9.40 | % | 11.12 | % | 11.09 | % | 10.51 | % | 10.58 | % | |||||||||||||||||||
|
Return on average tangible common equity1
|
11.56 | % | 13.84 | % | 14.55 | % | 13.10 | % | 13.56 | % | |||||||||||||||||||
|
Adjusted return on average tangible common equity1
|
11.70 | % | 13.96 | % | 14.16 | % | 13.18 | % | 13.60 | % | |||||||||||||||||||
| Net interest margin (tax equivalent) | 4.23 | % | 4.21 | % | 4.17 | % | 4.20 | % | 4.17 | % | |||||||||||||||||||
| Efficiency ratio | 53.06 | % | 60.97 | % | 59.44 | % | 57.71 | % | 60.65 | % | |||||||||||||||||||
|
Core efficiency ratio1
|
60.98 | % | 59.32 | % | 58.42 | % | 59.71 | % | 58.89 | % | |||||||||||||||||||
|
Common dividend payout ratio2
|
26.05 | % | 22.06 | % | 20.45 | % | 23.32 | % | 21.91 | % | |||||||||||||||||||
| Book value per common share | $ | 51.62 | $ | 50.09 | $ | 47.33 | |||||||||||||||||||||||
|
Tangible book value per common share1
|
$ | 41.58 | $ | 40.02 | $ | 37.26 | |||||||||||||||||||||||
| Average common equity to average assets | 11.70 | % | 11.56 | % | 11.67 | % | |||||||||||||||||||||||
|
Tangible common equity to tangible assets1
|
9.60 | % | 9.42 | % | 9.50 | % | |||||||||||||||||||||||
| ASSET QUALITY | |||||||||||||||||||||||||||||
|
Net charge-offs
|
$ | 4,057 | $ | 630 | $ | 3,850 | $ | 3,628 | $ | 10,319 | |||||||||||||||||||
| Nonperforming loans | 127,878 | 105,807 | 28,376 | ||||||||||||||||||||||||||
| Nonaccrual loans | 78,831 | 56,752 | 28,149 | ||||||||||||||||||||||||||
| Classified assets | 352,792 | 281,162 | 179,883 | ||||||||||||||||||||||||||
| Total assets | 16,402,405 | 16,076,299 | 14,954,125 | ||||||||||||||||||||||||||
| Total loans | 11,583,109 | 11,408,840 | 11,079,892 | ||||||||||||||||||||||||||
| Classified assets to total assets | 2.15 | % | 1.75 | % | 1.20 | % | |||||||||||||||||||||||
| Nonperforming loans to total loans | 1.10 | % | 0.93 | % | 0.26 | % | |||||||||||||||||||||||
| Nonperforming assets to total assets | 0.83 | % | 0.71 | % | 0.22 | % | |||||||||||||||||||||||
| ACL on loans to total loans | 1.29 | % | 1.27 | % | 1.26 | % | |||||||||||||||||||||||
|
Net charge-offs to average loans (annualized)
|
0.14 | % | 0.02 | % | 0.14 | % | 0.04 | % | 0.13 | % | |||||||||||||||||||
|
1A non-GAAP measure. A reconciliation has been included in this section under the caption "Use of Non-GAAP Financial Measures."
|
|||||||||||||||||||||||||||||
|
2Dividends per common share divided by diluted earnings per common share.
|
|||||||||||||||||||||||||||||
Financial results and other notable items include:
•PPNR1- PPNR of $65.6 million for the third quarter of 2025 and $199.8 million for the nine months ended September 30, 2025 decreased $2.5 million from the linked quarter and increased $14.1 million from the prior year-to-date period. Excluding the anticipated insurance proceeds from the tax credit recapture included in noninterest income, the decrease from the linked quarter was primarily due to a decrease in noninterest income and an increase in noninterest expense, partially offset by higher net interest income from higher average balances in the loan and securities portfolios. Compared to the prior year-to-date period, the increase was primarily driven by higher net interest income that benefited from an increase in average interest-earning asset balances and lower rates paid on interest-bearing liabilities.
•Net interest income and NIM - Net interest income of $158.3 million for the third quarter of 2025 and $458.6 million for the nine months ended September 30, 2025 increased $5.5 million and $36.8 million from the linked and prior year-to-date periods, respectively. NIM was 4.23% for the third quarter of 2025 and 4.20% for the nine months ended September 30, 2025 compared to 4.21% and 4.17% for the linked and prior year-to-date periods, respectively. Compared to the linked and prior year-to-date periods, the increase in net interest income was primarily due to higher average loan and securities balances, as well as higher yields on the securities portfolio. Compared to the prior year-to-date period, net interest income also benefited from lower short-term interest rates that decreased deposit interest expense. Since September 2024, the Federal Reserve has reduced the federal funds target rate 125 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.
•Noninterest income - Noninterest income of $48.6 million for the third quarter of 2025 and $87.7 million for the nine months ended September 30, 2025 increased $28.0 million and $38.6 million from the linked and prior year-to-date periods, respectively. The increase in noninterest income from the linked and prior year-to-date periods was primarily due to the $32.1 million of anticipated insurance proceeds from the pending claim related to the tax credit recapture event during the quarter. Compared to the prior year-to-date period, the increase was also due to a $1.6 million increase in tax credit income, a $2.7 million increase in BOLI income, and a $2.8 million increase in gain on SBA loan sales.
•Noninterest expense - Noninterest expense of $109.8 million for the third quarter of 2025 and $315.3 million for the nine months ended September 30, 2025 increased $4.1 million and $29.8 million from the linked and prior year-to-date periods, respectively. The increase from the linked and prior year-to-date periods was primarily driven by variable deposit costs and higher loan and legal expenses related to loan workouts and OREO. Compared to the prior year-to-date period, the increase was also due to a $12.9 million increase in employee compensation.
Balance sheet highlights:
•Loans- Total loans increased $362.8 million, or 3%, to $11.6 billion at September 30, 2025, compared to $11.2 billion at December 31, 2024. Average loans totaled $11.4 billion for the nine months ended September 30, 2025 compared to $11.0 billion for the nine months ended September 30, 2024.
•Deposits- Total deposits increased $421.4 million, to $13.6 billion at September 30, 2025 from $13.1 billion at December 31, 2024. Average deposits totaled $13.3 billion for the nine months ended September 30, 2025 compared to $12.4 billion for the prior year-to-date period. Noninterest-bearing deposit accounts represented 32% of total deposits and the loan to deposit ratio was 85% at September 30, 2025, compared to 34% and 85%, respectively, at December 31, 2024.
1PPNR is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
•Asset quality- The allowance for credit losses on loans to total loans was 1.29% at September 30, 2025, compared to 1.23% at December 31, 2024. The ratio of nonperforming assets to total assets was 0.83% at September 30, 2025 compared to 0.30% at December 31, 2024. A provision for credit losses of $8.4 million and $17.1 million was recorded in the third quarter of 2025 and the nine months ended September 30, 2025, respectively. This compares to $3.5 million and $14.7 million in the linked and prior year-to-date periods, respectively. During the third quarter 2025, a $12 million life insurance premium loan with adequate collateralization migrated into nonperforming assets. This relationship, along with a Southern California relationship discussed in the Nonperforming Assets section below, represents approximately 60% of nonperforming assets at September 30, 2025. The Company has a high certainty of collection for both of these relationships.
•Stockholders' equity - Total stockholders' equity was $2.0 billion at September 30, 2025, compared to $1.8 billion at December 31, 2024, and the tangible common equity to tangible assets ratio2was 9.60% at September 30, 2025 compared to 9.05% at December 31, 2024. The Company and the Bank's regulatory capital ratios exceeded the "well-capitalized" levels at September 30, 2025.
The Company's Board of Directors approved a quarterly dividend of $0.32 per share of common stock, payable on December 31, 2025 to stockholders of record as of December 15, 2025. The Board also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) September 15, 2025 to (but excluding) December 15, 2025. The dividend will be payable on December 15, 2025 to holders of record of Series A Preferred Stock as of November 28, 2025.
2Tangible common equity to tangible assets ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin
Average Balance Sheet
The following tables present, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as the corresponding interest rates earned and paid, all on a tax equivalent basis.
| Three months ended September 30, | Three months ended June 30, | Three months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ 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
|
$ | 11,454,183 | $ | 191,589 | 6.64 | % | $ | 11,358,209 | $ | 188,007 | 6.64 | % | $ | 10,971,575 | $ | 191,638 | 6.95 | % | |||||||||||||||||||||||||||||||||||
| Taxable securities | 2,100,748 | 21,705 | 4.10 | 1,971,025 | 19,940 | 4.06 | 1,512,338 | 13,530 | 3.56 | ||||||||||||||||||||||||||||||||||||||||||||
|
Non-taxable securities2
|
1,252,557 | 11,503 | 3.64 | 1,177,985 | 10,390 | 3.54 | 990,786 | 7,874 | 3.16 | ||||||||||||||||||||||||||||||||||||||||||||
| Total securities | 3,353,305 | 33,208 | 3.93 | 3,149,010 | 30,330 | 3.86 | 2,503,124 | 21,404 | 3.40 | ||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits | 328,392 | 3,638 | 4.40 | 315,738 | 3,368 | 4.28 | 402,932 | 5,348 | 5.28 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 15,135,880 | 228,435 | 5.99 | 14,822,957 | 221,705 | 6.00 | 13,877,631 | 218,390 | 6.26 | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 1,042,208 | 1,036,764 | 971,824 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 16,178,088 | $ | 15,859,721 | $ | 14,849,455 | |||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 3,298,022 | $ | 17,488 | 2.10 | % | $ | 3,225,611 | $ | 17,152 | 2.13 | % | $ | 3,018,309 | $ | 20,002 | 2.64 | % | |||||||||||||||||||||||||||||||||||
| Money market accounts | 3,706,891 | 28,734 | 3.08 | 3,660,053 | 28,437 | 3.12 | 3,551,492 | 33,493 | 3.75 | ||||||||||||||||||||||||||||||||||||||||||||
| Savings accounts | 532,015 | 183 | 0.14 | 532,754 | 183 | 0.14 | 561,466 | 345 | 0.24 | ||||||||||||||||||||||||||||||||||||||||||||
| Certificates of deposit | 1,609,346 | 15,210 | 3.75 | 1,486,522 | 14,207 | 3.83 | 1,368,339 | 14,928 | 4.34 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 9,146,274 | 61,615 | 2.67 | 8,904,940 | 59,979 | 2.70 | 8,499,606 | 68,768 | 3.22 | ||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debentures and notes | 136,895 | 2,683 | 7.78 | 156,753 | 2,737 | 7.00 | 156,329 | 2,695 | 6.86 | ||||||||||||||||||||||||||||||||||||||||||||
| FHLB advances | 106,130 | 1,207 | 4.51 | 156,868 | 1,801 | 4.61 | 4,565 | 59 | 5.14 | ||||||||||||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 159,039 | 1,155 | 2.88 | 209,493 | 1,592 | 3.05 | 140,255 | 1,217 | 3.45 | ||||||||||||||||||||||||||||||||||||||||||||
| Other borrowings | 56,164 | 444 | 3.14 | 36,208 | 96 | 1.06 | 36,226 | 96 | 1.05 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 9,604,502 | 67,104 | 2.77 | 9,464,262 | 66,205 | 2.81 | 8,836,981 | 72,835 | 3.28 | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand deposits | 4,458,028 | 4,340,301 | 4,046,480 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 151,432 | 149,069 | 161,625 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | 14,213,962 | 13,953,632 | 13,045,086 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 1,964,126 | 1,906,089 | 1,804,369 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities & stockholders' equity | $ | 16,178,088 | $ | 15,859,721 | $ | 14,849,455 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 161,331 | $ | 155,500 | $ | 145,555 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest spread | 3.22 | % | 3.19 | % | 2.98 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 4.23 | % | 4.21 | % | 4.17 | % | |||||||||||||||||||||||||||||||||||||||||||||||
|
1Average balances include nonaccrual loans. Interest income includes net loan fees of $1.9 million, $1.8 million, and $2.6 million for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
|
2Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $3.0 million, $2.7 million, and $2.1 million for each of the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine months ended | |||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) |
Average Balance |
Interest Income/ Expense |
Average Yield/ Rate |
Average Balance |
Interest Income/ Expense |
Average Yield/ Rate | |||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
|
Loans1, 2
|
$ | 11,351,848 | $ | 561,635 | 6.61 | % | $ | 10,954,063 | $ | 567,687 | 6.92 | % | |||||||||||||||||||||||
| Taxable securities | 1,964,496 | 59,270 | 4.03 | 1,451,317 | 37,601 | 3.46 | |||||||||||||||||||||||||||||
|
Non-taxable securities2
|
1,181,460 | 31,360 | 3.55 | 982,342 | 23,250 | 3.16 | |||||||||||||||||||||||||||||
| Total securities | 3,145,956 | 90,630 | 3.85 | 2,433,659 | 60,851 | 3.34 | |||||||||||||||||||||||||||||
| Interest-earning deposits | 373,870 | 12,130 | 4.34 | 332,409 | 13,306 | 5.35 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 14,871,674 | 664,395 | 5.97 | 13,720,131 | 641,844 | 6.25 | |||||||||||||||||||||||||||||
| Noninterest-earning assets | 1,023,889 | 964,458 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 15,895,563 | $ | 14,684,589 | |||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 3,230,832 | $ | 51,697 | 2.14 | % | $ | 2,964,667 | $ | 57,415 | 2.59 | % | |||||||||||||||||||||||
| Money market accounts | 3,656,546 | 85,675 | 3.13 | 3,462,993 | 96,777 | 3.73 | |||||||||||||||||||||||||||||
| Savings accounts | 533,084 | 555 | 0.14 | 573,853 | 983 | 0.23 | |||||||||||||||||||||||||||||
| Certificates of deposit | 1,491,047 | 42,933 | 3.85 | 1,374,176 | 44,441 | 4.32 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 8,911,509 | 180,860 | 2.71 | 8,375,689 | 199,616 | 3.18 | |||||||||||||||||||||||||||||
| Subordinated debentures and notes | 150,015 | 7,982 | 7.11 | 156,188 | 7,863 | 6.72 | |||||||||||||||||||||||||||||
| FHLB advances | 96,396 | 3,295 | 4.57 | 39,427 | 1,649 | 5.59 | |||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 211,429 | 4,764 | 3.01 | 167,939 | 4,422 | 3.52 | |||||||||||||||||||||||||||||
| Other borrowings | 42,932 | 672 | 2.09 | 38,381 | 395 | 1.37 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 9,412,281 | 197,573 | 2.81 | 8,777,624 | 213,945 | 3.26 | |||||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Demand deposits | 4,420,552 | 3,982,015 | |||||||||||||||||||||||||||||||||
| Other liabilities | 151,199 | 161,033 | |||||||||||||||||||||||||||||||||
| Total liabilities | 13,984,032 | 12,920,672 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 1,911,531 | 1,763,917 | |||||||||||||||||||||||||||||||||
| Total liabilities & stockholders' equity | $ | 15,895,563 | $ | 14,684,589 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 466,822 | $ | 427,899 | |||||||||||||||||||||||||||||||
| Net interest spread | 3.16 | % | 2.99 | % | |||||||||||||||||||||||||||||||
| Net interest margin | 4.20 | % | 4.17 | % | |||||||||||||||||||||||||||||||
|
1Average balances include nonaccrual loans. Interest income includes net loan fees of $5.3 million and $7.2 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.
|
|||||||||||||||||||||||||||||||||||
|
2Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $8.3 million and $6.2 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.
|
|||||||||||||||||||||||||||||||||||
Rate/Volume
The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume.
|
Three months ended September 30, 2025
|
Nine months ended September 30, 2025
|
||||||||||||||||||||||||||||||||||
| compared to | compared to | ||||||||||||||||||||||||||||||||||
|
Three months ended June 30, 2025
|
Nine months ended September 30, 2024
|
||||||||||||||||||||||||||||||||||
| Increase (decrease) due to | Increase (decrease) due to | ||||||||||||||||||||||||||||||||||
| ($ in thousands) |
Volume1
|
Rate2
|
Net |
Volume1
|
Rate2
|
Net | |||||||||||||||||||||||||||||
| Interest earned on: | |||||||||||||||||||||||||||||||||||
| Loans | $ | 3,423 | $ | 159 | $ | 3,582 | $ | 20,036 | $ | (26,088) | $ | (6,052) | |||||||||||||||||||||||
| Taxable securities | 1,528 | 237 | 1,765 | 14,758 | 6,911 | 21,669 | |||||||||||||||||||||||||||||
|
Non-taxable securities3
|
756 | 357 | 1,113 | 5,055 | 3,055 | 8,110 | |||||||||||||||||||||||||||||
| Interest-earning deposits | 161 | 109 | 270 | 1,529 | (2,705) | (1,176) | |||||||||||||||||||||||||||||
| Total interest-earning assets | $ | 5,868 | $ | 862 | $ | 6,730 | $ | 41,378 | $ | (18,827) | $ | 22,551 | |||||||||||||||||||||||
| Interest paid on: | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 503 | $ | (167) | $ | 336 | $ | 4,827 | $ | (10,545) | (5,718) | ||||||||||||||||||||||||
| Money market accounts | 517 | (220) | 297 | 5,157 | (16,259) | (11,102) | |||||||||||||||||||||||||||||
| Savings accounts | - | - | - | (66) | (362) | (428) | |||||||||||||||||||||||||||||
| Certificates of deposit | 1,290 | (287) | 1,003 | 3,578 | (5,086) | (1,508) | |||||||||||||||||||||||||||||
| Subordinated debentures and notes | (355) | 301 | (54) | (321) | 440 | 119 | |||||||||||||||||||||||||||||
| FHLB advances | (559) | (35) | (594) | 1,994 | (348) | 1,646 | |||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | (356) | (81) | (437) | 1,036 | (694) | 342 | |||||||||||||||||||||||||||||
| Other borrowed funds | 77 | 271 | 348 | 51 | 226 | 277 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,117 | (218) | 899 | 16,256 | (32,628) | (16,372) | |||||||||||||||||||||||||||||
| Net interest income | $ | 4,751 | $ | 1,080 | $ | 5,831 | $ | 25,122 | $ | 13,801 | 38,923 | ||||||||||||||||||||||||
1Change in volume multiplied by yield/rate of prior period.
2Change in yield/rate multiplied by volume of prior period.
3Nontaxable 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 $161.3 million for the quarter ended September 30, 2025 and $466.8 million for the nine months ended September 30, 2025, increased $5.8 million and $38.9 million from the linked and prior year-to-date periods, respectively. The increase from the linked quarter reflects organic loan growth and continued investment in the securities portfolio, partially offset by an increase in average balances of interest-bearing liabilities. Net interest income for the current quarter also benefited by one additional day compared to the linked quarter. On September 2, 2025, the Company called $63.3 million of subordinated debt at a floating rate of three-month Term SOFR plus a spread of 5.66% that was replaced by a $63.3 million single advance term loan. The term loan is payable in quarterly installments on March 31, June 30, September 30 and December 31 with a final installment due on the five year anniversary of the initial advance date. The interest rate on the term loan is one-month Term SOFR plus 2.50%. The cost of interest-bearing deposits has declined due to lower short-term rates, partially offset by an increase in average deposit balances. Since September 2024, the Federal Reserve has reduced the federal funds target rate 125 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.
Compared to the linked quarter, tax equivalent interest income increased $6.7 million primarily due to an increase of $96.0 million in average loan balances, an increase of $204.3 million in average securities balances, and a seven basis point increase in yield on securities due to new purchases and the reinvestment of cash flows from the runoff of lower yielding investments. The average interest rate of new loan originations in the third quarter of 2025 was 6.98%, a decrease of 28 basis points from the linked quarter. Investment purchases in the third quarter of 2025 had a weighted average, tax equivalent yield of 4.99%.
Tax equivalent interest income increased $22.6 million over the prior year-to-date period primarily due to a $397.8 million increase in average loan balances, a $712.3 million increase in average securities balances, and a 51 basis point increase in yield on securities. These increases were partially offset by a 31 basis point decline in the loan yield to 6.61%, from 6.92% in the prior year-to-date period.
Compared to the linked quarter, interest expense increased $0.9 million primarily due to organic growth in the average balance of interest-bearing deposits, an increase in wholesale borrowings and the higher rate incurred on subordinated debt for two months in the quarter. These increases were partially offset by a decline in the average balance of customer repurchase agreements and a reduction in the cost of interest-bearing deposits due to the Federal Reserve's reduction in the target federal funds rate. The total cost of deposits, including noninterest-bearing demand accounts, was 1.80% during the third quarter 2025, compared to 1.82% in the linked quarter.
Interest expense decreased $16.4 million compared to the prior year-to-date period primarily due to a 47 basis point decline in the average cost of interest-bearing deposits, including a 60 basis point decline in the average cost of money market accounts, partially offset by organic growth in the deposit portfolio. The total cost of deposits, including noninterest-bearing demand accounts, was 1.81% during the nine months ended September 30, 2025, compared to 2.16% in the prior year-to-date period.
NIM, on a tax equivalent basis, was 4.23% in the third quarter of 2025 and 4.20% for the first nine months of 2025, an increase of two basis points and three basis points from the linked and prior year-to-date periods, respectively.
Noninterest Income
The following table presents a comparative summary of the major components of noninterest income for the periods indicated.
| Linked quarter comparison | Prior year comparison | ||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended | Nine months ended | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) |
September 30, 2025 |
June 30, 2025 | Increase (decrease) |
September 30, 2025 |
September 30, 2024 | Increase (decrease) | |||||||||||||||||||||||||||||||||||||||||
| Deposit service charges | $ | 4,935 | $ | 4,940 | $ | (5) | - | % | $ | 14,295 | $ | 13,614 | $ | 681 | 5 | % | |||||||||||||||||||||||||||||||
| Wealth management revenue | 2,571 | 2,584 | (13) | (1) | % | 7,814 | 7,733 | 81 | 1 | % | |||||||||||||||||||||||||||||||||||||
| Card services revenue | 2,535 | 2,444 | 91 | 4 | % | 7,374 | 7,482 | (108) | (1) | % | |||||||||||||||||||||||||||||||||||||
| Tax credit income (loss) | (300) | 2,207 | (2,507) | (114) | % | 4,517 | 2,936 | 1,581 | 54 | % | |||||||||||||||||||||||||||||||||||||
| Insurance recoveries | 32,112 | - | 32,112 | - | % | 32,112 | - | 32,112 | - | % | |||||||||||||||||||||||||||||||||||||
| Other income | 6,771 | 8,429 | (1,658) | (20) | % | 21,599 | 17,307 | 4,292 | 25 | % | |||||||||||||||||||||||||||||||||||||
| Total noninterest income | $ | 48,624 | $ | 20,604 | $ | 28,020 | 136 | % | $ | 87,711 | $ | 49,072 | $ | 38,639 | 79 | % | |||||||||||||||||||||||||||||||
Total noninterest income for the third quarter of 2025 was $48.6 million, an increase of $28.0 million from the linked quarter primarily driven by the $32.1 million in accrued insurance proceeds that are anticipated to be received as a result of the recaptured tax credits during the current quarter, partially offset by lower tax credit income and other income. Tax credit income is typically highest in the fourth quarter of each year and will vary in other periods based on transaction volumes and fair value changes on credits carried at fair value. The decrease in other income was primarily due to a decrease of $0.5 million in BOLI income, as well as a $1.1 million decrease in community development investment income. During the linked quarter, the Company received the payout of a BOLI policy that did not recur in the third quarter 2025. Community development investment income is not a consistent source of income and fluctuates based on distributions from the underlying funds.
Total noninterest income for the nine months ended September 30, 2025 was $87.7 million, an increase from the prior year-to-date period of $38.6 million. The increase was primarily driven by the $32.1 million in accrued insurance proceeds that are anticipated to be received as a result of the recaptured tax credits during the current quarter, an increase of $1.6 million in tax credit income, which varies based on transaction volumes and fair value changes on credits carried at fair value, and a $4.3 million increase in other income. Other income increased compared to the prior year-to-date period primarily due to a $2.7 million increase in BOLI income and a $2.8 million increase in gain on SBA loan sales. On a periodic basis, the Company will opportunistically sell SBA guaranteed loans. The Company sold $78.0 million and $23.1 million of the guaranteed portion of SBA 7(a) loans during the nine months ended September 30, 2025 and September 30, 2024, respectively. A gain on sale of $4.2 million and $1.4 million was recognized during the nine months ended September 30, 2025 and September 30, 2024, respectively.
Noninterest Expense
The following table presents a comparative summary of the major components of noninterest expense for the periods indicated.
| Linked quarter comparison | Prior year comparison | ||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended | Nine months ended | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | September 30, 2025 | June 30, 2025 | Increase (decrease) | September 30, 2025 | September 30, 2024 |
Increase (decrease) |
|||||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | $ | 49,640 | $ | 50,164 | $ | (524) | (1) | % | $ | 148,012 | $ | 135,145 | $ | 12,867 | 10 | % | |||||||||||||||||||||||||||||||
| Deposit costs | 27,172 | 24,765 | 2,407 | 10 | % | 75,760 | 65,764 | 9,996 | 15 | % | |||||||||||||||||||||||||||||||||||||
| Occupancy | 4,895 | 5,065 | (170) | (3) | % | 14,390 | 12,895 | 1,495 | 12 | % | |||||||||||||||||||||||||||||||||||||
| Data processing | 5,022 | 4,713 | 309 | 7 | % | 14,544 | 15,226 | (682) | (4) | % | |||||||||||||||||||||||||||||||||||||
| Professional fees | 2,620 | 2,029 | 591 | 29 | % | 6,377 | 4,328 | 2,049 | 47 | % | |||||||||||||||||||||||||||||||||||||
| Other expense | 20,441 | 18,966 | 1,475 | 8 | % | 56,192 | 52,167 | 4,025 | 8 | % | |||||||||||||||||||||||||||||||||||||
| Total noninterest expense | $ | 109,790 | $ | 105,702 | $ | 4,088 | 4 | % | $ | 315,275 | $ | 285,525 | $ | 29,750 | 10 | % | |||||||||||||||||||||||||||||||
| Efficiency ratio | 53.1 | % | 61.0 | % | (8) | % | 57.7 | % | 60.6 | % | (3) | % | |||||||||||||||||||||||||||||||||||
| Core efficiency ratio3 | 61.0 | % | 59.3 | % | 2 | % | 59.7 | % | 58.9 | % | 1 | % | |||||||||||||||||||||||||||||||||||
3Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
Noninterest expense was $109.8 million for the third quarter of 2025, an increase of $4.1 million from $105.7 million in the linked quarter. Deposit costs relate to certain businesses in the deposit verticals that receive an earnings credit allowance for deposit related expenses that are impacted by interest rates and average balances. Deposit costs increased $2.4 million from the linked quarter primarily due to an increase of $146.0 million in average deposit vertical balances from the linked quarter. Acquisition costs of $0.6 million during the quarter relate to the previously announced branch acquisition that closed on October 10, 2025.
Total noninterest expense of $315.3 million for the first nine months of 2025 increased $29.8 million from the prior year-to-date period primarily due to an increase of $12.9 million in employee compensation related to the associate base and merit increases throughout 2024 and 2025, a $10.0 million increase in deposit costs due to higher earnings credit allowances and deposit vertical average balances, and an increase of $1.1 million in acquisition costs related to the previously announced branch acquisition. These increases were partially offset by a decline in core conversion expenses due to the completion of the core implementation in the fourth quarter 2024 and the FDIC special assessment that did not recur in the current period.
Income Taxes
The Company's effective tax rate was 49.0% for the third quarter of 2025 and 31.5% for the nine months ended September 30, 2025. This compares to 20.0% for the linked quarter and prior year-to-date period, respectively. Included in the tax expense during the current quarter is $24.1 million in transferrable tax credits that were recaptured as discussed above and approximately $8.0 million of incremental tax liability attributable to the anticipated insurance proceeds from the insured recaptured credits. Excluding these items, the adjusted effective tax rate4was 20.0% and 19.4% for the three and nine months ended September 30, 2025, respectively.
Summary Balance Sheet
| ($ in thousands) |
September 30, 2025 |
December 31, 2024 |
Increase (decrease) | ||||||||||||||||||||
| Cash and cash equivalents | $ | 471,955 | $ | 764,170 | $ | (292,215) | (38) | % | |||||||||||||||
| Securities | 3,433,340 | 2,791,205 | 642,135 | 23 | % | ||||||||||||||||||
| Loans | 11,583,109 | 11,220,355 | 362,754 | 3 | % | ||||||||||||||||||
| Assets | 16,402,405 | 15,596,431 | 805,974 | 5 | % | ||||||||||||||||||
| Deposits | 13,567,912 | 13,146,492 | 421,420 | 3 | % | ||||||||||||||||||
| Liabilities | 14,420,073 | 13,772,429 | 647,644 | 5 | % | ||||||||||||||||||
| Stockholders' equity | 1,982,332 | 1,824,002 | 158,330 | 9 | % | ||||||||||||||||||
Total assets were $16.4 billion at September 30, 2025, an increase of $806.0 million from December 31, 2024 primarily due to a $642.1 million increase in investment securities and a $362.8 million increase in loans, partially offset by a $292.2 million decrease in cash and cash equivalents. Total liabilities of $14.4 billion increased $647.6 million from December 31, 2024 primarily due to a $327.0 million increase in FHLB advances and a $421.4 million increase in deposits.
Investment Securities
At September 30, 2025, investment securities were $3.4 billion or 21% of total assets compared to $2.8 billion or 18% of total assets at December 31, 2024. The portfolio is comprised of both available-for-sale and held-to-maturity securities.
4 Adjusted effective tax rate is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
The table below sets forth the carrying value of investment securities, excluding the allowance for credit losses:
|
September 30, 2025 |
December 31, 2024 |
||||||||||||||||||||||
| ($ in thousands) | Amount | % | Amount | % | |||||||||||||||||||
| Obligations of U.S. Government sponsored enterprises | $ | 244,506 | 7.1 | % | $ | 276,040 | 9.9 | % | |||||||||||||||
| Obligations of states and political subdivisions | 1,450,575 | 42.3 | % | 1,168,256 | 41.9 | % | |||||||||||||||||
| Agency mortgage-backed securities | 1,489,389 | 43.4 | % | 1,075,306 | 38.5 | % | |||||||||||||||||
| U.S. Treasury Bills | 114,041 | 3.3 | % | 128,893 | 4.6 | % | |||||||||||||||||
| Corporate debt securities | 134,999 | 3.9 | % | 142,967 | 5.1 | % | |||||||||||||||||
| Total | $ | 3,433,510 | 100.0 | % | $ | 2,791,462 | 100.0 | % | |||||||||||||||
| Net Unrealized Losses | |||||||||||
| ($ in thousands) |
September 30, 2025 |
December 31, 2024 |
|||||||||
| Available-for-sale securities | $ | (102,269) | $ | (163,212) | |||||||
| Held-to-maturity securities | (49,656) | (70,321) | |||||||||
| Total | $ | (151,925) | $ | (233,533) | |||||||
Investment purchases in the third quarter of 2025 had a weighted average, tax equivalent yield of 4.99%. The average duration of the investment portfolio was 5.2 years at September 30, 2025. 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 $591.7 million.
Loans by Type
The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a large part of the portfolio, including the C&I category, is secured by real estate. The ability of the Company's borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.
The following table sets forth the composition of the loan portfolio by type of loans:
| ($ in thousands) |
September 30, 2025 |
December 31, 2024 |
Increase (decrease) | ||||||||||||||||||||
| Commercial and industrial | $ | 4,943,561 | $ | 4,716,689 | $ | 226,872 | 5 | % | |||||||||||||||
| Commercial real estate - investor owned | 2,822,608 | 2,606,964 | 215,644 | 8 | % | ||||||||||||||||||
| Commercial real estate - owner occupied | 2,356,041 | 2,367,823 | (11,782) | - | % | ||||||||||||||||||
| Construction and land development | 858,146 | 891,059 | (32,913) | (4) | % | ||||||||||||||||||
| Residential real estate | 365,010 | 359,263 | 5,747 | 2 | % | ||||||||||||||||||
| Other | 237,743 | 278,557 | (40,814) | (15) | % | ||||||||||||||||||
| Total loans | $ | 11,583,109 | $ | 11,220,355 | $ | 362,754 | 3 | % | |||||||||||||||
Loans totaled $11.6 billion at September 30, 2025 compared to $11.2 billion at December 31, 2024. The increase was primarily due to an increase in C&I loans of $226.9 million and an increase of $203.9 million in CRE loans. Average revolving line draw utilization was 45% for the third quarter of 2025, compared to 43% for the year ended December 31, 2024.
The following table sets forth additional information on certain categories of loans that are included in total loans above at the periods indicated:
| ($ in thousands) |
September 30, 2025 |
December 31, 2024 |
Increase (decrease) | ||||||||||||||||||||
| SBA Loans | $ | 1,257,817 | $ | 1,298,007 | $ | (40,190) | (3) | % | |||||||||||||||
| Sponsor finance | 774,142 | 782,722 | (8,580) | (1) | % | ||||||||||||||||||
| Life insurance premium financing | 1,151,700 | 1,114,299 | 37,401 | 3 | % | ||||||||||||||||||
| Tax credits | 780,767 | 760,229 | 20,538 | 3 | % | ||||||||||||||||||
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.
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 and nine months ended September 30, 2025, the guaranteed portion of SBA loans totaling $22.2 million and $78.0 million, respectively, were sold.
Provision and Allowance for Credit Losses
The following table presents the components of the provision for credit losses:
| Quarter ended | Nine months ended | ||||||||||||||||||||||
| ($ in thousands) |
September 30, 2025 |
June 30, 2025 |
September 30, 2025 |
September 30, 2024 |
|||||||||||||||||||
|
Provision for credit losses on loans
|
$ | 7,778 | $ | 2,819 | $ | 14,532 | $ | 15,326 | |||||||||||||||
|
Provision (benefit) for off-balance sheet commitments
|
(184) | 253 | 283 | (951) | |||||||||||||||||||
|
Benefit for held-to-maturity securities
|
(125) | - | (87) | (532) | |||||||||||||||||||
|
Charge-off of accrued interest
|
978 | 398 | 2,373 | 831 | |||||||||||||||||||
|
Provision for credit losses
|
$ | 8,447 | $ | 3,470 | $ | 17,101 | $ | 14,674 | |||||||||||||||
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 $8.4 million for the third quarter of 2025 and $17.1 million for the nine months ended September 30, 2025, increased $5.0 million and $2.4 million from the linked and prior year-to-date periods, respectively. The provision for credit losses in the third quarter of 2025 and nine months ended September 30, 2025 was primarily related to net charge-offs, the increase in nonperforming loans, loan growth and changes in the economic forecast that influences projected future losses in the allowance calculation.
The following table summarizes the allocation of the ACL on loans:
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||
| ($ in thousands) | Allowance | Percent of loans in each category to total loans | Allowance | Percent of loans in each category to total loans | |||||||||||||||||||
| Commercial and industrial | $ | 71,503 | 42.7 | % | $ | 63,231 | 42.1 | % | |||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial | 51,715 | 44.6 | % | 54,617 | 44.3 | % | |||||||||||||||||
| Construction and land development | 13,441 | 7.4 | % | 9,837 | 8.0 | % | |||||||||||||||||
| Residential | 8,624 | 3.2 | % | 6,534 | 3.2 | % | |||||||||||||||||
| Other | 3,571 | 2.1 | % | 3,731 | 2.4 | % | |||||||||||||||||
| Total | $ | 148,854 | 100.0 | % | $ | 137,950 | 100.0 | % | |||||||||||||||
The ACL on loans was 1.29% of total loans at September 30, 2025, compared to 1.23% of loans at December 31, 2024. Excluding guaranteed loans, the ACL on loans to total loans was 1.40%5at September 30, 2025, compared to 1.34% at December 31, 2024.
The following table is a summary of net charge-offs (recoveries) to average loans for the periods indicated:
| Quarter ended | |||||||||||||||||||||||||||||||||||
| September 30, 2025 | June 30, 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)
|
|||||||||||||||||||||||||||||
| Commercial and industrial | $ | 4,111 | $ | 4,879,039 | 0.33 | % | $ | (446) | $ | 4,789,234 | (0.04) | % | |||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||||||
| Commercial | (359) | 5,084,683 | (0.03) | % | 564 | 5,052,978 | 0.04 | % | |||||||||||||||||||||||||||
| Construction and land development | (19) | 852,830 | (0.01) | % | 141 | 857,735 | 0.07 | % | |||||||||||||||||||||||||||
| Residential | 63 | 366,074 | 0.07 | % | 234 | 365,784 | 0.26 | % | |||||||||||||||||||||||||||
| Other | 261 | 270,673 | 0.38 | % | 137 | 291,958 | 0.19 | % | |||||||||||||||||||||||||||
| Total | $ | 4,057 | $ | 11,453,299 | 0.14 | % | $ | 630 | $ | 11,357,689 | 0.02 | % | |||||||||||||||||||||||
(1) Excludes loans held for sale.
(2)Annualized.
5ACL 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.
| Nine months ended | |||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Net Charge-offs |
Average Loans(1)
|
Net Charge-offs
/Average Loans(2)
|
Net Charge-offs (Recoveries) |
Average Loans(1)
|
Net Charge-offs (Recoveries)/Average Loans(2)
|
|||||||||||||||||||||||||||||
| Commercial and industrial | $ | 2,757 | $ | 4,801,342 | 0.08 | % | $ | 3,972 | $ | 4,660,167 | 0.11 | % | |||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||||||
| Commercial | 194 | 5,033,284 | 0.01 | % | 2,934 | 4,795,545 | 0.08 | % | |||||||||||||||||||||||||||
| Construction and land development | 109 | 864,820 | 0.02 | % | 3,173 | 837,578 | 0.51 | % | |||||||||||||||||||||||||||
| Residential | 143 | 363,817 | 0.05 | % | (248) | 360,480 | (0.09) | % | |||||||||||||||||||||||||||
| Other | 425 | 287,883 | 0.20 | % | 488 | 299,424 | 0.22 | % | |||||||||||||||||||||||||||
| Total | $ | 3,628 | $ | 11,351,146 | 0.04 | % | $ | 10,319 | $ | 10,953,194 | 0.13 | % | |||||||||||||||||||||||
|
(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) | September 30, 2025 | December 31, 2024 | |||||||||
| Nonaccrual loans | $ | 78,831 | $ | 42,667 | |||||||
| Loans past due 90 days or more and still accruing interest | 49,047 | 20 | |||||||||
| Total nonperforming loans | 127,878 | 42,687 | |||||||||
| Other real estate | 7,821 | 3,955 | |||||||||
| Total nonperforming assets | $ | 135,699 | $ | 46,642 | |||||||
| Total assets | $ | 16,402,405 | $ | 15,596,431 | |||||||
| Total loans | 11,583,109 | 11,220,355 | |||||||||
| Total ACL on loans | 148,854 | 137,950 | |||||||||
| ACL on loans to nonaccrual loans | 189 | % | 323 | % | |||||||
| ACL on loans to nonperforming loans | 116 | % | 323 | % | |||||||
| ACL on loans to total loans | 1.29 | % | 1.23 | % | |||||||
| Nonaccrual loans to total loans | 0.68 | % | 0.38 | % | |||||||
| Nonperforming loans to total loans | 1.10 | % | 0.38 | % | |||||||
| Nonperforming assets to total assets | 0.83 | % | 0.30 | % | |||||||
Nonperforming loans based on loan type were as follows:
| ($ in thousands) | September 30, 2025 | December 31, 2024 | |||||||||
| Commercial and industrial | $ | 29,712 | $ | 15,821 | |||||||
| Commercial real estate | 89,098 | 25,096 | |||||||||
| Construction and land development | 386 | 1,503 | |||||||||
| Residential real estate | 8,648 | 258 | |||||||||
| Other | 34 | 9 | |||||||||
| Total | $ | 127,878 | $ | 42,687 | |||||||
The following table summarizes the changes in nonperforming loans:
| Nine months ended | |||||
| ($ in thousands) | September 30, 2025 | ||||
| Nonperforming loans, beginning of period | $ | 42,687 | |||
| Additions to nonperforming loans | 119,652 | ||||
| Charge-offs | (10,037) | ||||
| Principal payments | (15,517) | ||||
| Moved to other real estate | (8,405) | ||||
| Moved to performing | (502) | ||||
| Nonperforming loans, end of period | $ | 127,878 | |||
Nonperforming loans at September 30, 2025 increased $85.2 million, or 200%, when compared to December 31, 2024. The increase in nonperforming assets during the nine months ended September 30, 2025 was primarily related to seven commercial real estate loans totaling $68.4 million to special purpose entities (each an "SPE Borrower") affiliated with two commercial banking relationships in Southern California that share some common ownership. Litigation resulting from a business dispute between the owners of the entities resulted in all of the SPE Borrowers filing bankruptcy in the first quarter of 2025, which was subsequently dismissed. The SPE Borrowers were again placed in bankruptcy in October 2025. In August 2025, the Bank commenced foreclosure proceedings with respect to the real property collateral owned by each SPE Borrower. As a result of the Bank's senior secured first lien collateral position with respect to the real property owned by the SPE Borrowers, the Company expects to collect the full balance of these loans. These commercial real estate investor-owned loans and residential real estate loans are well-secured by real estate properties with up-to-date appraisals. Loan-to-value ratios for the individual properties range from 39% to 79% based on recent appraisals performed. Furthermore, all seven loans include substantial personal guarantees, and $48.6 million of the $68.4 million relationship remains on accrual despite being 90+ days past due. A summary of the relationship is as follows:
| At | |||||||||||
| September 30, 2025 | |||||||||||
| ($ in thousands) | Amount | Loan-to-value % | |||||||||
| Commercial real estate - investor owned: | |||||||||||
| Multifamily | $ | 19,811 | 75.3 | % | |||||||
| Mixed use | 43,078 | 69.3 | % | ||||||||
| Total commercial real estate - investor owned | 62,889 | ||||||||||
| Residential real estate: | |||||||||||
| Duplex | $ | 1,668 | 37.9 | % | |||||||
| Condominiums | 3,857 | 64.3 | % | ||||||||
| Total residential real estate | 5,525 | ||||||||||
| Total relationship | $ | 68,414 | |||||||||
Other real estate
The following table summarizes the changes in other real estate:
| Nine months ended | |||||
| ($ in thousands) | September 30, 2025 | ||||
| Other real estate, beginning of period | $ | 3,955 | |||
| Additions | 7,821 | ||||
| Sales | (3,955) | ||||
| Other real estate, end of period | $ | 7,821 | |||
Deposits
The following table shows the breakdown of deposits by type:
| ($ in thousands) | September 30, 2025 | December 31, 2024 | Increase (decrease) | ||||||||||||||||||||
| Noninterest-bearing demand accounts | $ | 4,386,513 | $ | 4,484,072 | $ | (97,559) | (2) | % | |||||||||||||||
| Interest-bearing demand accounts | 3,301,621 | 3,175,292 | 126,329 | 4 | % | ||||||||||||||||||
| Money market accounts | 3,702,896 | 3,564,063 | 138,833 | 4 | % | ||||||||||||||||||
| Savings accounts | 525,709 | 553,461 | (27,752) | (5) | % | ||||||||||||||||||
| Certificates of deposit: | |||||||||||||||||||||||
| Brokered | 762,499 | 484,588 | 277,911 | 57 | % | ||||||||||||||||||
| Customer | 888,674 | 885,016 | 3,658 | - | % | ||||||||||||||||||
| Total deposits | $ | 13,567,912 | $ | 13,146,492 | $ | 421,420 | 3 | % | |||||||||||||||
| Noninterest-bearing deposits / total deposits | 32 | % | 34 | % | |||||||||||||||||||
The following table shows the average balance and average rate of the Company's deposits by type:
| Quarter ended | |||||||||||||||||||||||||||||||||||
| September 30, 2025 | June 30, 2025 | September 30, 2024 | |||||||||||||||||||||||||||||||||
| ($ in thousands) | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | |||||||||||||||||||||||||||||
| Noninterest-bearing deposit accounts | $ | 4,458,028 | - | % | $ | 4,340,301 | - | % | $ | 4,046,480 | - | % | |||||||||||||||||||||||
| Interest-bearing demand accounts | 3,298,022 | 2.10 | 3,225,611 | 2.13 | 3,018,309 | 2.64 | |||||||||||||||||||||||||||||
| Money market accounts | 3,706,891 | 3.08 | 3,660,053 | 3.12 | 3,551,492 | 3.75 | |||||||||||||||||||||||||||||
| Savings accounts | 532,015 | 0.14 | 532,754 | 0.14 | 561,466 | 0.24 | |||||||||||||||||||||||||||||
| Certificates of deposit | 1,609,346 | 3.75 | 1,486,522 | 3.83 | 1,368,339 | 4.34 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | $ | 9,146,274 | 2.67 | $ | 8,904,940 | 2.70 | $ | 8,499,606 | 3.22 | ||||||||||||||||||||||||||
| Total average deposits | $ | 13,604,302 | 1.80 | $ | 13,245,241 | 1.82 | $ | 12,546,086 | 2.18 | ||||||||||||||||||||||||||
| Nine months ended | |||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||||||||||||||
| ($ in thousands) | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | |||||||||||||||||||
| Noninterest-bearing deposit accounts | $ | 4,420,552 | - | % | $ | 3,982,015 | - | % | |||||||||||||||
| Interest-bearing demand accounts | 3,230,832 | 2.14 | 2,964,667 | 2.59 | |||||||||||||||||||
| Money market accounts | 3,656,546 | 3.13 | 3,462,993 | 3.73 | |||||||||||||||||||
| Savings accounts | 533,084 | 0.14 | 573,853 | 0.23 | |||||||||||||||||||
| Certificates of deposit | 1,491,047 | 3.85 | 1,374,176 | 4.32 | |||||||||||||||||||
| Total interest-bearing deposits | $ | 8,911,509 | 2.71 | $ | 8,375,689 | 3.18 | |||||||||||||||||
| Total average deposits | $ | 13,332,061 | 1.81 | $ | 12,357,704 | 2.16 | |||||||||||||||||
Total deposits excluding brokered certificates of deposits were $12.8 billion at September 30, 2025, an increase of $143.5 million from December 31, 2024. Brokered certificates of deposit at September 30, 2025 increased $277.9 million from December 31, 2024 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 $3.8 billion at September 30, 2025 from $3.4 billion at December 31, 2024 due to continued success at generating organic deposit growth.
To provide customers a deposit product with enhanced FDIC insurance, the Company participates in several programs through third parties that provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Total reciprocal deposits were $1.4 billion and $1.3 billion at September 30, 2025 and December 31, 2024, respectively. The Company considers reciprocal accounts as customer-related deposits due to the customer relationship that generated the transaction.
The total cost of deposits was 1.80% for the current quarter and 1.81% for the nine months ended September 30, 2025, respectively, compared to 1.82% and 2.16% for the linked and prior year-to-date periods, respectively.
Stockholders' Equity
Stockholders' equity totaled $2.0 billion at September 30, 2025, an increase of $158.3 million from December 31, 2024. Significant activity during the first nine months of 2025 was as follows:
•Increase from net income of $146.6 million,
•Increase in fair value of securities and cash flow hedges of $48.7 million,
•Decrease from dividends paid on common and preferred stock of $36.1 million, and
•Decrease from common stock repurchases of $10.6 million.
Liquidity and Capital Resources
Liquidity
The objective of liquidity management is to ensure we have the ability to generate sufficient cash or cash equivalents in a timely and cost-effective manner to meet our commitments as they become due. Typical demands on liquidity are changes in deposit levels, maturing time deposits which are not renewed, and fundings under credit commitments to customers. Funds are available from a number of sources, such as the core deposit base and loan and security repayments and maturities.
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 $472.0 million at September 30, 2025, compared to $764.2 million at December 31, 2024. Investment securities are another important tool in liquidity planning. Securities totaled $3.4 billion and $2.8 billion at September 30, 2025 and December 31, 2024, respectively, and included $1.6 billion and $1.5 billion at September 30, 2025 and December 31, 2024, respectively, pledged as collateral for deposits of public institutions, loan notes and other requirements. The unpledged portion of the securities portfolio could be pledged or sold to enhance liquidity, if necessary.
Available on- and off-balance sheet liquidity sources include the following items:
| ($ in thousands) | September 30, 2025 | ||||
| Federal Reserve borrowing capacity | $ | 3,280,890 | |||
| FHLB borrowing capacity | 1,037,746 | ||||
| Unpledged securities | 1,832,319 | ||||
| Federal funds lines (8 correspondent banks) | 160,000 | ||||
| Cash and interest-bearing deposits | 471,955 | ||||
| Holding Company line of credit | 25,000 | ||||
| Total | $ | 6,807,910 | |||
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 $78.0 million and $23.1 million were sold during the nine months ended September 30, 2025 and 2024, respectively.
Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at September 30, 2025, the Company could borrow an additional $1.0 billion from the FHLB of Des Moines under blanket loan pledges and has additional real estate loans that could be pledged. The Company also has $3.3 billion available from the Federal Reserve under a pledged loan agreement. The Company also has unsecured federal funds lines with eight correspondent banks totaling $160.0 million.
In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company's various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company's liquidity. The Company has $3.0 billion in unused commitments to extend credit as of September 30, 2025. 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 September 30, 2025. The line of credit was renewed in the second quarter of 2025 and was effective as of February 22, 2025. The line of credit has a one-year term and 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.
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 September 30, 2025, and December 31, 2024, 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:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| ($ in thousands) | EFSC | Bank | EFSC | Bank | To Be Well-Capitalized |
Minimum Ratio with CCB |
||||||||||||||||||||
| Common Equity Tier 1 Capital to Risk Weighted Assets | 12.0 | % | 12.4 | % | 11.8 | % | 12.4 | % | 6.5 | % | 7.0 | % | ||||||||||||||
| Tier 1 Capital to Risk Weighted Assets | 13.3 | % | 12.4 | % | 13.1 | % | 12.4 | % | 8.0 | % | 8.5 | % | ||||||||||||||
| Total Capital to Risk Weighted Assets | 14.4 | % | 13.6 | % | 14.6 | % | 13.4 | % | 10.0 | % | 10.5 | % | ||||||||||||||
| Leverage Ratio (Tier 1 Capital to Average Assets) | 11.1 | % | 10.4 | % | 11.1 | % | 10.5 | % | 5.0 | % | N/A | |||||||||||||||
|
Tangible common equity to tangible assets1
|
9.60 | % | 9.05 | % | ||||||||||||||||||||||
|
1 Not a required regulatory capital ratio.
|
||||||||||||||||||||||||||
The Company believes the tangible common equity ratio is an important measure of capital strength, even though it is considered a non-GAAP measure. A reconciliation has been included in this section under the caption "Use of Non-GAAP Financial Measures."
Use of Non-GAAP Financial Measures:
The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP") and the prevailing practices in the banking industry. However, the Company provides 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, adjusted effective tax rate 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.
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, adjusted effective tax rate 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, core conversion expenses, acquisition costs, accrued insurance proceeds anticipated to be received as a result of recaptured tax credits, the gain or loss on the sale of other real estate owned, and the gain or loss on sale of investment securities, that the Company believes to be not indicative of or useful to measure the Company's operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company's capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.
The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP 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 | Nine months ended | ||||||||||||||||||||||||||||
| ($ in thousands) |
September 30, 2025 |
June 30, 2025 |
September 30, 2024 |
September 30, 2025 |
September 30, 2024 |
||||||||||||||||||||||||
| Net interest income (GAAP) | $ | 158,286 | $ | 152,762 | $ | 143,469 | $ | 458,564 | $ | 421,726 | |||||||||||||||||||
| Tax-equivalent adjustment | 3,045 | 2,738 | 2,086 | 8,258 | 6,173 | ||||||||||||||||||||||||
| Net interest income - FTE (non-GAAP) | $ | 161,331 | $ | 155,500 | $ | 145,555 | $ | 466,822 | $ | 427,899 | |||||||||||||||||||
| Noninterest income (GAAP) | 48,624 | 20,604 | 21,420 | 87,711 | 49,072 | ||||||||||||||||||||||||
|
Less insurance recoveries1
|
32,112 | - | - | 32,112 | - | ||||||||||||||||||||||||
| Less gain on sale of investment securities | - | - | - | 106 | - | ||||||||||||||||||||||||
|
Less net gain on sales of other real estate owned
|
7 | 56 | 3,159 | 86 | 3,157 | ||||||||||||||||||||||||
| Core revenue (non-GAAP) | $ | 177,836 | $ | 176,048 | $ | 163,816 | $ | 522,229 | $ | 473,814 | |||||||||||||||||||
| Noninterest expense (GAAP) | $ | 109,790 | $ | 105,702 | $ | 98,007 | $ | 315,275 | $ | 285,525 | |||||||||||||||||||
| Less FDIC special assessment | - | - | - | - | 625 | ||||||||||||||||||||||||
| Less core conversion expense | - | - | 1,375 | - | 2,975 | ||||||||||||||||||||||||
| Less amortization on intangibles | 736 | 753 | 927 | 2,344 | 2,918 | ||||||||||||||||||||||||
| Less acquisition costs | 609 | 518 | - | 1,127 | - | ||||||||||||||||||||||||
| Core noninterest expense (non-GAAP) | $ | 108,445 | $ | 104,431 | $ | 95,705 | $ | 311,804 | $ | 279,007 | |||||||||||||||||||
| Core efficiency ratio (non-GAAP) | 60.98 | % | 59.32 | % | 58.42 | % | 59.71 | % | 58.89 | % | |||||||||||||||||||
|
1 Represents anticipated proceeds from a pending insurance claim related to a third quarter 2025 solar tax credit recapture event.
|
|||||||||||||||||||||||||||||
Tangible Common Equity, Tangible Book Value per Common Share, and Tangible Common Equity to Tangible Assets Ratio
| At | |||||||||||||||||
| (in thousands, except per share data) | September 30, 2025 |
June 30, 2025 |
September 30, 2024 | ||||||||||||||
| Stockholders' equity (GAAP) | $ | 1,982,332 | $ | 1,922,899 | $ | 1,832,011 | |||||||||||
| Less preferred stock | 71,988 | 71,988 | 71,988 | ||||||||||||||
| Less goodwill | 365,164 | 365,164 | 365,164 | ||||||||||||||
| Less intangible assets | 6,140 | 6,876 | 9,400 | ||||||||||||||
| Tangible common equity (non-GAAP) | $ | 1,539,040 | $ | 1,478,871 | $ | 1,385,459 | |||||||||||
| Common stock outstanding | 37,011 | 36,950 | 37,184 | ||||||||||||||
| Tangible book value per common share (non-GAAP) | $ | 41.58 | $ | 40.02 | $ | 37.26 | |||||||||||
| Total assets (GAAP) | $ | 16,402,405 | $ | 16,076,299 | $ | 14,954,125 | |||||||||||
| Less goodwill | 365,164 | 365,164 | 365,164 | ||||||||||||||
| Less intangible assets | 6,140 | 6,876 | 9,400 | ||||||||||||||
| Tangible assets (non-GAAP) | $ | 16,031,101 | $ | 15,704,259 | $ | 14,579,561 | |||||||||||
| Tangible common equity to tangible assets (non-GAAP) | 9.60 | % | 9.42 | % | 9.50 | % | |||||||||||
ACL on Loans to Total Loans Adjusted for Guaranteed Loans
| At | |||||||||||||||||
| ($ in thousands) |
September 30, 2025 |
June 30, 2025 |
September 30, 2024 |
||||||||||||||
| Total loans (GAAP) | $ | 11,583,109 | $ | 11,408,840 | $ | 11,079,892 | |||||||||||
| Less: Guaranteed loans, net | 922,168 | 913,118 | 928,272 | ||||||||||||||
| Total adjusted loans (non-GAAP) | $ | 10,660,941 | $ | 10,495,722 | $ | 10,151,620 | |||||||||||
| ACL on loans | $ | 148,854 | $ | 145,133 | $ | 139,778 | |||||||||||
| ACL on loans to total loans | 1.29 | % | 1.27 | % | 1.26 | % | |||||||||||
| ACL on loans to total adjusted loans | 1.40 | % | 1.38 | % | 1.38 | % | |||||||||||
Pre-Provision Net Revenue (PPNR)
| Quarter ended | Nine months ended | ||||||||||||||||||||||||||||
| ($ in thousands) |
September 30, 2025 |
June 30, 2025 |
September 30, 2024 |
September 30, 2025 |
September 30, 2024 |
||||||||||||||||||||||||
| Net interest income | $ | 158,286 | $ | 152,762 | $ | 143,469 | $ | 458,564 | $ | 421,726 | |||||||||||||||||||
| Noninterest income | 48,624 | 20,604 | 21,420 | 87,711 | 49,072 | ||||||||||||||||||||||||
| FDIC special assessment | - | - | - | - | 625 | ||||||||||||||||||||||||
| Core conversion expense | - | - | 1,375 | - | 2,975 | ||||||||||||||||||||||||
| Acquisition costs | 609 | 518 | - | 1,127 | - | ||||||||||||||||||||||||
| Less gain on sale of investment securities | - | - | - | 106 | - | ||||||||||||||||||||||||
|
Less net gain on sales of other real estate owned
|
7 | 56 | 3,159 | 86 | 3,157 | ||||||||||||||||||||||||
| Less insurance recoveries | 32,112 | - | - | 32,112 | - | ||||||||||||||||||||||||
| Less noninterest expense | 109,790 | 105,702 | 98,007 | 315,275 | 285,525 | ||||||||||||||||||||||||
| PPNR (non-GAAP) | $ | 65,610 | $ | 68,126 | $ | 65,098 | $ | 199,823 | $ | 185,716 | |||||||||||||||||||
Adjusted Effective Tax Rate
| Quarter ended | Nine months ended | ||||||||||||||||||||||
| ($ in thousands) |
September 30 2025 |
June 30 2025 |
September 30 2025 |
September 30 2024 |
|||||||||||||||||||
| Income before income tax expense (GAAP) | $ | 88,673 | $ | 64,194 | $ | 213,899 | $ | 170,599 | |||||||||||||||
| Less insurance recoveries | 32,112 | - | 32,112 | - | |||||||||||||||||||
| Adjusted income before income tax expense (non-GAAP) | $ | 56,561 | $ | 64,194 | $ | 181,787 | $ | 170,599 | |||||||||||||||
| Income tax expense (GAAP) | $ | 43,438 | $ | 12,810 | $ | 67,319 | $ | 34,167 | |||||||||||||||
|
Less tax credit recapture and tax applied to insurance recoveries1
|
32,112 | - | 32,112 | - | |||||||||||||||||||
| Adjusted income tax expense (non-GAAP) | $ | 11,326 | $ | 12,810 | $ | 35,207 | $ | 34,167 | |||||||||||||||
| Effective tax rate (GAAP) | 49.0 | % | 20.0 | % | 31.5 | % | 20.0 | % | |||||||||||||||
| Adjusted effective tax rate (non-GAAP) | 20.0 | % | 20.0 | % | 19.4 | % | 20.0 | % | |||||||||||||||
|
1 Represents recapture of $24.1 million solar tax credit and approximately $8.0 million of estimated tax liability related to anticipated proceeds from pending insurance claim related to the recapture event.
|
|||||||||||||||||||||||
Return on Average Common Equity, Return on Average Tangible Common Equity (ROATCE) and Return on Average Assets (ROAA)
| Quarter ended | Nine months ended | ||||||||||||||||||||||||||||
| ($ in thousands) |
September 30, 2025 |
June 30, 2025 |
September 30, 2024 |
September 30, 2025 |
September 30, 2024 |
||||||||||||||||||||||||
| Average stockholder's equity (GAAP) | $ | 1,964,126 | $ | 1,906,089 | $ | 1,804,369 | $ | 1,911,531 | $ | 1,763,917 | |||||||||||||||||||
| Less average preferred stock | 71,988 | 71,988 | 71,988 | 71,988 | 71,988 | ||||||||||||||||||||||||
| Less average goodwill | 365,164 | 365,164 | 365,164 | 365,164 | 365,164 | ||||||||||||||||||||||||
| Less average intangible assets | 6,498 | 7,237 | 9,855 | 7,248 | 10,799 | ||||||||||||||||||||||||
| Average tangible common equity (non-GAAP) | $ | 1,520,476 | $ | 1,461,700 | $ | 1,357,362 | $ | 1,467,131 | $ | 1,315,966 | |||||||||||||||||||
| Net income (GAAP) | $ | 45,235 | $ | 51,384 | $ | 50,585 | $ | 146,580 | $ | 136,432 | |||||||||||||||||||
| FDIC special assessment (after tax) | - | - | - | - | 470 | ||||||||||||||||||||||||
| Core conversion expense (after tax) | - | - | 1,034 | - | 2,237 | ||||||||||||||||||||||||
| Acquisition costs (after tax) | 549 | 462 | - | 1,011 | - | ||||||||||||||||||||||||
| Less gain on sale of investment securities (after tax) | - | - | - | 80 | - | ||||||||||||||||||||||||
|
Less net gain on sales of other real estate owned (after tax)
|
5 | 42 | 2,375 | 64 | 2,374 | ||||||||||||||||||||||||
| Net income adjusted (non-GAAP) | $ | 45,779 | $ | 51,804 | $ | 49,244 | $ | 147,447 | $ | 136,765 | |||||||||||||||||||
| Less preferred stock dividends | 938 | 937 | 938 | 2,813 | 2,813 | ||||||||||||||||||||||||
| Net income available to common stockholders adjusted (non-GAAP) | $ | 44,841 | $ | 50,867 | $ | 48,306 | $ | 144,634 | $ | 133,952 | |||||||||||||||||||
| Return on average common equity (GAAP) | 9.29 | % | 11.03 | % | 11.40 | % | 10.45 | % | 10.55 | % | |||||||||||||||||||
| Adjusted return on average common equity (non-GAAP) | 9.40 | % | 11.12 | % | 11.09 | % | 10.51 | % | 10.58 | % | |||||||||||||||||||
| ROATCE (non-GAAP) | 11.56 | % | 13.84 | % | 14.55 | % | 13.10 | % | 13.56 | % | |||||||||||||||||||
| Adjusted ROATCE (non-GAAP) | 11.70 | % | 13.96 | % | 14.16 | % | 13.18 | % | 13.60 | % | |||||||||||||||||||
| Average assets | $ | 16,178,088 | $ | 15,859,721 | $ | 14,849,455 | $ | 15,895,563 | $ | 14,684,589 | |||||||||||||||||||
| Return on average assets (GAAP) | 1.11 | % | 1.30 | % | 1.36 | % | 1.23 | % | 1.24 | % | |||||||||||||||||||
| Adjusted return on average assets (non-GAAP) | 1.12 | % | 1.31 | % | 1.32 | % | 1.24 | % | 1.24 | % | |||||||||||||||||||
Enterprise Financial Services Corporation published this content on October 31, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 31, 2025 at 19:45 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]