Enterprise Financial Services Corporation

07/31/2026 | Press release | Distributed by Public on 07/31/2026 13:41

Quarterly Report for Quarter Ending June 30, 2026 (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 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."
Introduction
The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first six 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 June 30, 2026, compared to the linked first quarter of 2026 ("linked quarter") and the results of operations, liquidity and cash flows for the six months ended June 30, 2026 compared to the same period in 2025 ("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, 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.
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 $139.2 million at June 30, 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 $26.9 million. Conversely, the allowance would have increased $40.5 million using only the downside scenario.
Executive Summary
Below are highlights of the Company's financial performance for the periods indicated. Comparisons to prior year periods are affected by the acquisition of 12 branches in Arizona and Kansas in the fourth quarter 2025 (the "Branch Acquisition").
($ in thousands, except per share data) Three months ended Six months ended
June 30,
2026 		March 31,
2026 		June 30,
2025 		June 30,
2026 		June 30,
2025
EARNINGS
Total interest income $ 229,313 $ 225,091 $ 218,967 $ 454,404 $ 430,747
Total interest expense 60,597 58,944 66,205 119,541 130,469
Net interest income 168,716 166,147 152,762 334,863 300,278
Provision for credit losses 14,210 7,243 3,470 21,453 8,654
Net interest income after provision for credit losses 154,506 158,904 149,292 313,410 291,624
Total noninterest income 13,478 19,088 20,604 32,566 39,087
Total noninterest expense 115,739 115,137 105,702 230,876 205,485
Income before income tax expense 52,245 62,855 64,194 115,100 125,226
Income tax expense 11,318 13,493 12,810 24,811 23,881
Net income $ 40,927 $ 49,362 $ 51,384 $ 90,289 $ 101,345
Preferred dividends 937 938 937 1,875 1,875
Net income available to common stockholders $ 39,990 $ 48,424 $ 50,447 $ 88,414 $ 99,470
Basic earnings per common share $ 1.10 $ 1.31 $ 1.36 $ 2.41 $ 2.69
Diluted earnings per common share $ 1.09 $ 1.30 $ 1.36 $ 2.39 $ 2.67
Return on average assets 0.95 % 1.16 % 1.30 % 1.05 % 1.30 %
Adjusted return on average assets1
0.98 % 1.16 % 1.31 % 1.07 % 1.30 %
Return on average common equity 8.10 % 9.80 % 11.03 % 8.95 % 11.07 %
Adjusted return on average common equity1
8.37 % 9.84 % 11.12 % 9.10 % 11.10 %
Return on average tangible common equity1
10.39 % 12.53 % 13.84 % 11.46 % 13.93 %
Adjusted return on average tangible common equity1
10.73 % 12.59 % 13.96 % 11.66 % 13.97 %
NIM (tax-equivalent) 4.30 % 4.28 % 4.21 % 4.29 % 4.18 %
Efficiency ratio 63.5 % 62.2 % 61.0 % 62.8 % 60.5 %
Core efficiency ratio1
61.1 % 60.2 % 59.3 % 60.7 % 59.1 %
Common dividend payout ratio2
31.19 % 25.38 % 22.06 % 28.03 % 22.10 %
Book value per common share $ 54.30 $ 53.31 $ 50.09
Tangible book value per common share1
$ 42.30 $ 41.38 $ 40.02
Average common equity to average assets 11.44 % 11.58 % 11.56 %
Tangible common equity to tangible assets1
9.04 % 9.01 % 9.42 %
ASSET QUALITY
Net charge-offs (recoveries)
$ 13,555 $ 4,407 $ 630 $ 17,962 $ (429)
Nonperforming loans 76,144 64,941 105,807
Nonaccrual loans 75,958 60,558 56,752
Nonperforming assets 160,403 149,423 114,028
Classified assets 413,779 430,288 281,162
Total assets 17,399,009 17,227,828 16,076,299
Total loans 11,892,399 11,692,780 11,408,840
Classified assets to total assets 2.38 % 2.50 % 1.75 %
Nonperforming loans to total loans 0.64 % 0.56 % 0.93 %
Nonperforming assets to total assets 0.92 % 0.87 % 0.71 %
ACL on loans to total loans 1.17 % 1.21 % 1.27 %
Net charge-offs (recoveries) to average loans (annualized)
0.46 % 0.15 % 0.02 % 0.31 % (0.01) %
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.
Financial results and other notable items include:
•PPNR1 - PPNR of $68.2 million for the second quarter of 2026 and $138.6 million for the six months ended June 30, 2026 decreased $2.2 million from the linked quarter and increased $4.4 million from the prior year-to-date period. The decrease from the linked quarter was primarily due to a decrease in noninterest income. Compared to the prior year-to-date period, the increase was primarily due to higher net interest income from organic and acquired loan growth, continued investment in the securities portfolio and lower rates paid on interest-bearing liabilities, partially offset by a decline in asset yields due to lower short-term interest rates.
•Net interest income and NIM - Net interest income of $168.7 million for the second quarter of 2026 and $334.9 million for the six months ended June 30, 2026 increased $2.6 million and $34.6 million from the linked and prior year-to-date periods, respectively. Compared to the linked quarter, net interest income benefitted from higher loan and securities yields, as well as an additional day during the period. The increase from the prior year-to-date period was primarily due to higher interest-earning asset balances and lower rates paid on interest-bearing liabilities, partially offset by lower yields on loans. NIM was 4.30% for the second quarter 2026 and 4.29% for the six months ended June 30, 2026, compared to 4.28% and 4.18% for the linked and prior year-to-date periods, respectively.
•Noninterest income - Noninterest income of $13.5 million for the second quarter of 2026 and $32.6 million for the six months ended June 30, 2026 decreased $5.6 million and $6.5 million from the linked and prior year-to-date periods, respectively. The decrease in noninterest income from the linked and prior year-to-date periods was primarily due to a net loss on sales of investment securities and a decrease in tax credit income. During the quarter, the Company executed balance sheet transactions to optimize future earnings. This included the sale of investment securities with a tax-equivalent yield of 3.13% and the reinvestment of the proceeds into new securities with a tax-equivalent yield of 5.20%. The Company also sold Visa Class B-1 common stock along with a parcel of land.
•Noninterest expense - Noninterest expense of $115.7 million for the second quarter of 2026 and $230.9 million for the six months ended June 30, 2026 increased $0.6 million and $25.4 million from the linked and prior year-to-date periods, respectively. The increase from the prior year-to-date period was primarily driven by higher employee compensation cost and headcount from the Branch Acquisition, variable deposit costs, and loan and legal expenses related to loan workouts and OREO.
Balance sheet highlights:
•Loans - Total loans increased $92.1 million, or 1%, to $11.9 billion at June 30, 2026, compared to $11.8 billion at December 31, 2025. Average loans totaled $11.8 billion for the six months ended June 30, 2026 compared to $11.3 billion for the six months ended June 30, 2025.
•Deposits - Total deposits decreased $106.8 million, to $14.5 billion at June 30, 2026 from $14.6 billion at December 31, 2025. Average deposits totaled $14.6 billion for the six months ended June 30, 2026 compared to $13.2 billion for the six months ended June 30, 2025. Noninterest-bearing deposit accounts represented 34% of total deposits and the loan to deposit ratio was 82% at June 30, 2026, compared to 33% and 81%, respectively, at December 31, 2025.
•Subordinated notes - In the second quarter 2026, the Company issued $175.0 million of 6.25% fixed-to-floating rate subordinated notes due in 2036 for general corporate purposes and to bolster capital. The notes are callable starting in July 2031 and are included in tier 2 capital.
1 PPNR is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
•Asset quality - The ACL on loans to total loans was 1.17% at June 30, 2026, compared to 1.19% at December 31, 2025. The ratio of nonperforming assets to total assets was 0.92% at June 30, 2026 compared to 0.95% at December 31, 2025. A provision for credit losses of $14.2 million was recorded in the second quarter of 2026 and $21.5 million for the six months ended June 30, 2026. This compares to $7.2 million and $8.7 million in the linked and prior year-to-date periods, respectively.
•Stockholders' equity - Total stockholders' equity was $2.0 billion at June 30, 2026 and December 31, 2025, respectively, and the tangible common equity to tangible assets ratio2 was 9.04% at June 30, 2026 compared to 9.07% at December 31, 2025. The Company and the Bank's regulatory capital ratios exceeded the "well-capitalized" levels at June 30, 2026.
On July 20, 2026, the Company's Board of Directors (the "Board") approved the repurchase of up to 2,000,000 additional shares of the Company's common stock, which are in addition to the 249,400 shares available for repurchase under the Company's stock repurchase plan announced in May 2022 for 2,000,000 shares of common stock.
The Board approved a quarterly dividend of $0.35 per common share, payable on September 30, 2026 to stockholders of record as of September 15, 2026. The Board also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) June 15, 2026 to (but excluding) September 15, 2026. The dividend will be payable on September 15, 2026 to stockholders of record of Series A Preferred Stock as of August 31, 2026.
2 Tangible common equity to tangible assets ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
RESULTS OF OPERATIONS
Net Interest Income and NIM
Average Balance Sheet
The following tables present, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as the corresponding interest rates earned and paid, all on a tax-equivalent basis.
Three months ended June 30, Three months ended March 31, Three months ended June 30,
2026 2026 2025
($ 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
$ 11,775,879 $ 188,819 6.43 % $ 11,777,727 $ 185,380 6.38 % $ 11,358,209 $ 188,007 6.64 %
Taxable securities 2,539,301 27,898 4.41 2,481,169 26,108 4.27 1,971,025 19,940 4.06
Non-taxable securities2
1,294,693 12,317 3.82 1,301,675 12,390 3.86 1,177,985 10,390 3.54
Total securities 3,833,994 40,215 4.21 3,782,844 38,498 4.13 3,149,010 30,330 3.86
Interest-earning deposits 431,044 3,697 3.44 504,541 4,533 3.64 315,738 3,368 4.28
Total interest-earning assets 16,040,917 232,731 5.82 16,065,112 228,411 5.77 14,822,957 221,705 6.00
Noninterest-earning assets 1,266,799 1,245,991 1,036,764
Total assets $ 17,307,716 $ 17,311,103 $ 15,859,721
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts $ 3,438,895 $ 15,149 1.77 % $ 3,453,650 $ 14,940 1.75 % $ 3,225,611 $ 17,152 2.13 %
Money market accounts 4,009,504 25,788 2.58 3,952,475 25,198 2.59 3,660,053 28,437 3.12
Savings accounts 546,880 164 0.12 538,597 152 0.11 532,754 183 0.14
Certificates of deposit 1,698,565 14,569 3.44 1,665,977 14,459 3.52 1,486,522 14,207 3.83
Total interest-bearing deposits 9,693,844 55,670 2.30 9,610,699 54,749 2.31 8,904,940 59,979 2.70
Subordinated debentures and notes 120,277 2,061 6.87 93,725 1,522 6.59 156,753 2,737 7.00
FHLB advances 88,011 861 3.92 5,756 56 3.95 156,868 1,801 4.61
Securities sold under agreements to repurchase 200,060 1,162 2.33 270,057 1,614 2.42 209,493 1,592 3.05
Other borrowings 84,609 843 4.00 94,910 1,003 4.29 36,208 96 1.06
Total interest-bearing liabilities 10,186,801 60,597 2.39 10,075,147 58,944 2.37 9,464,262 66,205 2.81
Noninterest-bearing liabilities:
Demand deposits 4,914,670 4,998,734 4,340,301
Other liabilities 154,012 160,718 149,069
Total liabilities 15,255,483 15,234,599 13,953,632
Stockholders' equity 2,052,233 2,076,504 1,906,089
Total liabilities & stockholders' equity $ 17,307,716 $ 17,311,103 $ 15,859,721
Net interest income $ 172,134 $ 169,467 $ 155,500
Net interest spread 3.43 % 3.40 % 3.19 %
NIM 4.30 % 4.28 % 4.21 %
1 Average balances include nonaccrual loans. Interest income includes net loan fees of $1.5 million, $1.4 million, and $1.8 million for the three months ended June 30, 2026, March 31, 2026, and June 30, 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 $3.4 million, $3.3 million, and $2.7 million for each of the three months ended June 30, 2026, March 31, 2026, and June 30, 2025, respectively.
Six months ended
June 30, 2026 June 30, 2025
($ in thousands) Average
Balance 		Interest
Income/
Expense 		Average Yield/ Rate Average
Balance 		Interest
Income/
Expense 		Average Yield/ Rate
Assets
Interest-earning assets:
Loans1, 2
$ 11,776,799 $ 374,199 6.41 % $ 11,299,832 $ 370,046 6.60 %
Taxable securities 2,510,396 54,006 4.34 1,895,241 37,565 4.00
Non-taxable securities2
1,298,164 24,707 3.84 1,145,322 19,857 3.50
Total securities 3,808,560 78,713 4.17 3,040,563 57,422 3.81
Interest-earning deposits 467,589 8,230 3.55 396,986 8,492 4.31
Total interest-earning assets 16,052,948 461,142 5.79 14,737,381 435,960 5.97
Noninterest-earning assets 1,256,452 1,014,578
Total assets $ 17,309,400 $ 15,751,959
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts $ 3,446,232 $ 30,089 1.76 % $ 3,196,680 $ 34,209 2.16 %
Money market accounts 3,981,147 50,986 2.58 3,630,955 56,941 3.16
Savings accounts 542,762 316 0.12 533,629 372 0.14
Certificates of deposit 1,682,361 29,028 3.48 1,430,917 27,723 3.91
Total interest-bearing deposits 9,652,502 110,419 2.31 8,792,181 119,245 2.74
Subordinated debentures and notes 107,074 3,583 6.75 156,684 5,299 6.82
FHLB advances 47,110 917 3.93 91,448 2,088 4.60
Securities sold under agreements to repurchase 234,866 2,776 2.38 238,058 3,609 3.06
Other borrowings 89,731 1,846 4.15 36,205 228 1.27
Total interest-bearing liabilities 10,131,283 119,541 2.38 9,314,576 130,469 2.82
Noninterest-bearing liabilities:
Demand deposits 4,956,803 4,401,504
Other liabilities 157,013 151,080
Total liabilities 15,245,099 13,867,160
Stockholders' equity 2,064,301 1,884,799
Total liabilities & stockholders' equity $ 17,309,400 $ 15,751,959
Net interest income $ 341,601 $ 305,491
Net interest spread 3.41 % 3.15 %
NIM 4.29 % 4.18 %
1 Average balances include nonaccrual loans. Interest income includes net loan fees of $2.9 million and $3.4 million for the six months ended June 30, 2026 and June 30, 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 $6.7 million and $5.2 million for the six months ended June 30, 2026 and June 30, 2025, respectively.
Rate/Volume
The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume.
Three months ended June 30, 2026
Six months ended June 30, 2026
compared to compared to
Three months ended March 31, 2026
Six months ended June 30, 2025
Increase (decrease) due to Increase (decrease) due to
($ in thousands)
Volume1
Rate2
Net
Volume1
Rate2
Net
Interest earned on:
Loans $ 413 $ 3,026 $ 3,439 $ 15,322 $ (11,169) $ 4,153
Taxable securities 748 1,042 1,790 13,017 3,424 16,441
Non-taxable securities3
(23) (50) (73) 2,799 2,051 4,850
Interest-earning deposits (604) (232) (836) 1,376 (1,638) (262)
Total interest-earning assets $ 534 $ 3,786 $ 4,320 $ 32,514 $ (7,332) $ 25,182
Interest paid on:
Interest-bearing demand accounts $ (2) $ 211 $ 209 $ 2,524 $ (6,644) (4,120)
Money market accounts 621 (31) 590 5,145 (11,100) (5,955)
Savings accounts 3 9 12 6 (62) (56)
Certificates of deposit 358 (248) 110 4,543 (3,238) 1,305
Subordinated debentures and notes 467 72 539 (1,661) (55) (1,716)
FHLB advances 805 - 805 (898) (273) (1,171)
Securities sold under agreements to repurchase (393) (59) (452) (48) (785) (833)
Other borrowed funds (99) (61) (160) 639 979 1,618
Total interest-bearing liabilities 1,760 (107) 1,653 10,250 (21,178) (10,928)
Net interest income $ (1,226) $ 3,893 $ 2,667 $ 22,264 $ 13,846 36,110
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 $172.1 million for the quarter ended June 30, 2026 and $341.6 million for the six months ended June 30, 2026 increased $2.7 million and $36.1 million from the linked and prior year-to-date periods, respectively. The increase from the linked quarter reflects higher loan and securities yields, and the current quarter benefitted by one additional day compared to the linked quarter. These increases were partially offset by an increase in the average balance of interest-bearing liabilities, primarily wholesale funding sources including subordinated notes and FHLB advances. The increase from the prior year-to-date period was primarily related to growth in interest-earning assets and lower short-term interest rates on the cost of interest-bearing liabilities, partially offset by lower loan yields.
Tax-equivalent interest income increased $4.3 million and $25.2 million from the linked and prior year-to-date periods, respectively. Compared to the linked quarter, interest income increased primarily due to a five and eight basis point increase in yield on loans and securities, respectively, and a $51.2 million increase in average investment securities balances. Compared to the prior year-to-date period, interest-earning assets increased $1.3 billion, including a $477.0 million increase in average loan balances and an $768.0 million increase in average securities balances, and the yield on securities increased 36 basis points. These increases were partially offset by a 19 basis point decline in the loan yield to 6.41%, from 6.60% in the prior year-to-date period. The Company sold approximately $180 million of investment securities with a tax-equivalent yield of 3.13% and reinvested the proceeds into new securities with a tax-equivalent yield of 5.20%. This transaction improved the overall tax-equivalent yield on securities by 200 basis points and will increase net interest income by $3.5 million annually.
Interest expense increased $1.7 million and decreased $10.9 million from the linked and prior year-to-date periods, respectively. Compared to the linked quarter, the increase was primarily due to higher average subordinated debt and other borrowed funds balances. Compared to the prior year-to-date period, the decrease was primarily due to a 44 basis point decline in the cost of interest-bearing liabilities, including a 58 basis point decrease in the average cost of money market accounts, partially offset by a $816.7 million increase in average interest-bearing liabilities balances. The total cost of deposits, including noninterest-bearing demand accounts, was 1.53% and 1.52% during the three and six months ended June 30, 2026, respectively, compared to 1.52% and 1.82% in the linked and prior year-to-date periods, respectively.
NIM, on a tax-equivalent basis, was 4.30% in the second quarter of 2026 and 4.29% for the six months ended June 30, 2026, an increase of two basis points and 11 basis points from the linked and prior year-to-date periods, respectively.
Noninterest Income
The following table presents a comparative summary of the major components of noninterest income for the periods indicated.
Linked quarter comparison Prior year comparison
Quarter ended Six months ended
($ in thousands) June 30,
2026 		March 31, 2026 Increase (decrease) June 30,
2026 		June 30, 2025 Increase (decrease)
Deposit service charges $ 5,477 $ 5,256 $ 221 4 % $ 10,733 $ 9,360 $ 1,373 15 %
Wealth management revenue 2,804 2,712 92 3 % 5,516 5,243 273 5 %
Card services revenue 2,545 2,535 10 - % 5,080 4,839 241 5 %
Tax credit income (loss)
(1,733) (179) (1,554) (868) % (1,912) 4,817 (6,729) (140) %
Other income 4,385 8,764 (4,379) (50) % 13,149 14,828 (1,679) (11) %
Total noninterest income $ 13,478 $ 19,088 $ (5,610) (29) % $ 32,566 $ 39,087 $ (6,521) (17) %
Total noninterest income for the second quarter of 2026 was $13.5 million and $32.6 million for the six months ended June 30, 2026, a decrease of $5.6 million and $6.5 million from the linked and prior year-to-date periods, respectively. The decrease from the linked and prior year-to-date periods was primarily due to lower tax credit income and a $2.1 million net loss on sales of investment securities, partially offset by a $0.7 million gain on sales of fixed assets. The decrease from the linked quarter was also due to a gain on the sale of guaranteed SBA loans that did not reoccur in the current quarter. 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. Changes in the interest rate environment had a negative impact on tax credit projects carried at fair value. During the period, the Company sold investment securities with a tax-equivalent yield of 3.13% and reinvested the proceeds into securities with a tax-equivalent yield of approximately 5.20%. A pre-tax loss of approximately $6 million on the sale of these securities was partially offset by a pre-tax gain of approximately $4.4 million from the sales of Visa Class B-1 common stock and a piece of land.
Noninterest Expense
The following table presents a comparative summary of the major components of noninterest expense for the periods indicated.
Linked quarter comparison Prior year comparison
Quarter ended Six months ended
($ in thousands) June 30, 2026 March 31, 2026 Increase (decrease) June 30, 2026 June 30, 2025 Increase
(decrease)
Employee compensation and benefits $ 53,114 $ 55,759 $ (2,645) (5) % $ 108,873 $ 98,372 $ 10,501 11 %
Deposit costs 27,832 25,996 1,836 7 % 53,828 48,588 5,240 11 %
Occupancy 5,909 5,902 7 - % 11,811 9,495 2,316 24 %
Data processing 5,999 5,644 355 6 % 11,643 9,522 2,121 22 %
Professional fees 1,965 1,571 394 25 % 3,536 3,757 (221) (6) %
Other expense 20,920 20,265 655 3 % 41,185 35,751 5,434 15 %
Total noninterest expense $ 115,739 $ 115,137 $ 602 1 % $ 230,876 $ 205,485 $ 25,391 12 %
Efficiency ratio 63.5 % 62.2 % 1 % 62.8 % 60.5 % 2 %
Core efficiency ratio3 61.1 % 60.2 % 1 % 60.7 % 59.1 % 2 %
Noninterest expense increased $0.6 million and $25.4 million from the linked and prior year-to-date periods, respectively. Employee compensation and benefits decreased $2.6 million from the linked quarter primarily due to employer payroll taxes and certain other benefits that are seasonally higher in the first quarter each year and accrued paid time off benefits that fluctuate based on usage. 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 increased $1.8 million from the linked quarter primarily due to the expiration of certain unused allowances that reduced expense in the first quarter.
The increase in noninterest expense from the prior year-to-date period 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 $5.2 million in deposit costs due to higher earnings credit allowances and deposit vertical average balances, and an increase of $2.5 million in loan and legal expenses due to loan workouts and the foreclosure of certain properties.
Income Taxes
The Company's effective tax rate was 21.7% for the second quarter of 2026 and 21.6% for the six months ended June 30, 2026. This compares to the linked and prior year-to-date effective tax rate of 21.5% and 19.1%. The increase in the effective tax rate from the prior year-to-date period was due to an increase in state taxes from apportionment factors and a decrease in tax credit investments.
Summary Balance Sheet
($ in thousands) June 30, 2026 December 31, 2025 Increase (decrease)
Cash and cash equivalents $ 552,061 $ 681,902 $ (129,841) (19) %
Securities 3,832,202 3,729,992 102,210 3 %
Loans 11,892,399 11,800,338 92,061 1 %
Assets 17,399,009 17,300,884 98,125 1 %
Deposits 14,502,551 14,609,342 (106,791) (1) %
Liabilities 15,358,163 15,261,498 96,665 1 %
Stockholders' equity 2,040,846 2,039,386 1,460 - %
3 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
Total assets were $17.4 billion at June 30, 2026, an increase of $98.1 million from December 31, 2025 primarily due to a $102.2 million and $92.1 million increase in securities and loans respectively, partially offset by a $129.8 million decrease in cash and cash equivalents. Total liabilities of $15.4 billion increased $96.7 million from December 31, 2025 primarily due to the issuance of $175 million of subordinated notes, partially offset by a $106.8 million decrease in deposits.
Investment Securities
At June 30, 2026, investment securities were $3.8 billion compared to $3.7 billion at December 31, 2025, or 22% of total assets for both periods. The portfolio is comprised of both available-for-sale and held-to-maturity securities.
The table below sets forth the carrying value of investment securities, excluding the ACL:
June 30, 2026 December 31, 2025
($ in thousands) Amount % Amount %
Obligations of U.S. Government sponsored enterprises $ 119,868 3.1 % $ 182,572 4.9 %
Obligations of states and political subdivisions 1,473,028 38.5 % 1,492,904 40.0 %
Agency mortgage-backed securities 1,998,294 52.1 % 1,753,150 47.0 %
U.S. Treasury Bills 111,058 2.9 % 170,984 4.6 %
Corporate debt securities 130,107 3.4 % 130,527 3.5 %
Total $ 3,832,355 100.0 % $ 3,730,137 100.0 %
Net Unrealized Losses
($ in thousands) June 30, 2026 December 31, 2025
Available-for-sale securities $ (101,080) $ (83,258)
Held-to-maturity securities (38,163) (35,288)
Total $ (139,243) $ (118,546)
Investment purchases in the second quarter of 2026 had a weighted average, tax-equivalent yield of 5.03%. The average duration of the investment portfolio was 5.0 years at June 30, 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 $645.8 million.
Loans by Type
The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a large part of the portfolio, including the C&I category, is secured by real estate. The ability of the Company's borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.
The following table sets forth the composition of the loan portfolio by type of loans:
($ in thousands) June 30, 2026 December 31, 2025 Increase (decrease)
C&I $ 5,257,840 $ 5,231,616 $ 26,224 1 %
CRE - investor owned 3,104,350 2,984,858 119,492 4 %
CRE - owner occupied 2,452,506 2,468,963 (16,457) (1) %
Construction and land development 663,480 687,584 (24,104) (4) %
Residential real estate 361,346 367,682 (6,336) (2) %
Consumer 52,877 59,635 (6,758) (11) %
Total loans $ 11,892,399 $ 11,800,338 $ 92,061 1 %
Loans totaled $11.9 billion at June 30, 2026 compared to $11.8 billion at December 31, 2025. Average revolving line draw utilization was 47% for the second quarter of 2026, compared to 44% for the year ended December 31, 2025.
The following table sets forth additional information on certain categories of loans that are included in total loans above at the periods indicated:
($ in thousands) June 30, 2026 December 31, 2025 Increase (decrease)
SBA Loans $ 1,237,294 $ 1,262,456 $ (25,162) (2) %
Sponsor finance 708,449 694,905 13,544 2 %
Life insurance premium financing 1,250,250 1,187,128 63,122 5 %
Tax credits 725,452 802,818 (77,366) (10) %
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 six months ended June 30, 2026, the guaranteed portion of SBA loans totaling $25.4 million were sold.
Provision and ACL
The following table presents the components of the provision for credit losses:
Quarter ended Six months ended
($ in thousands) June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Provision for credit losses on loans
$ 10,729 $ 6,449 $ 17,178 $ 6,754
Provision for off-balance sheet commitments
2,100 416 2,516 467
Provision (benefit) for held-to-maturity securities
(49) 57 8 38
Charge-off of accrued interest
1,430 321 1,751 1,395
Provision for credit losses
$ 14,210 $ 7,243 $ 21,453 $ 8,654
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 $14.2 million was recognized for the second quarter of 2026 and $21.5 million for the six months ended June 30, 2026, an increase of $7.0 million and $12.8 million from the linked and prior year-to-date periods, respectively. The provision for credit losses in the second quarter 2026 and six months ended June 30, 2026 was primarily related to net charge-offs. Most of these losses came from two accounts: an $8.3 million C&I relationship in Texas and a $5.2 million Sponsor Finance relationship. Annualized net charge-offs totaled 46 basis points of average loans in the current quarter, compared to 15 basis points in the linked quarter and two basis points of average loans in the prior year quarter.
The following table summarizes the allocation of the ACL on loans:
June 30, 2026 December 31, 2025
($ in thousands) Allowance Percent of loans in each category to total loans Allowance Percent of loans in each category to total loans
C&I $ 77,035 44.3 % $ 68,345 44.4 %
Real estate:
Commercial 42,072 46.7 % 50,783 46.2 %
Construction and land development 11,703 5.6 % 11,016 5.8 %
Residential 6,971 3.0 % 8,023 3.1 %
Consumer 1,457 0.4 % 1,855 0.5 %
Total $ 139,238 100.0 % $ 140,022 100.0 %
The ACL on loans was 1.17% of total loans at June 30, 2026, compared to 1.19% of loans at December 31, 2025. Excluding guaranteed loans, the ACL on loans to total loans was 1.27%4 at June 30, 2026, compared to 1.29% at December 31, 2025.
The following table is a summary of net charge-offs (recoveries) to average loans for the periods indicated:
Quarter ended
June 30, 2026 March 31, 2026
($ 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 $ 12,625 $ 5,234,280 0.97 % $ 3,508 $ 5,266,240 0.27 %
Real estate:
Commercial 395 5,487,631 0.03 % (64) 5,431,826 - %
Construction and land development 782 645,330 0.49 % 1,028 664,550 0.63 %
Residential (352) 352,624 (0.40) % 5 356,167 0.01 %
Consumer 105 55,160 0.76 % (70) 58,509 (0.49) %
Total $ 13,555 $ 11,775,025 0.46 % $ 4,407 $ 11,777,292 0.15 %
(1) Excludes loans held for sale.
(2)Annualized.
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.
Six months ended
June 30, 2026 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)
C&I $ 16,133 $ 5,250,172 0.62 % $ (1,354) $ 4,761,849 (0.06) %
Real estate:
Commercial 331 5,459,883 0.01 % 553 5,007,159 0.02 %
Construction and land development 1,810 654,887 0.56 % 128 870,914 0.03 %
Residential (347) 354,386 (0.20) % 80 362,670 0.04 %
Consumer 35 56,825 0.12 % 164 296,631 0.11 %
Total $ 17,962 $ 11,776,153 0.31 % $ (429) $ 11,299,223 (0.01) %
(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) June 30, 2026 December 31, 2025
Nonaccrual loans $ 75,958 $ 81,180
Loans past due 90 days or more and still accruing interest 186 1,629
Total nonperforming loans 76,144 82,809
OREO 84,259 81,544
Total nonperforming assets $ 160,403 $ 164,353
Total assets $ 17,399,009 $ 17,300,884
Total loans 11,892,399 11,800,338
Total ACL on loans 139,238 140,022
ACL on loans to nonaccrual loans 183 % 172 %
ACL on loans to nonperforming loans 183 % 169 %
ACL on loans to total loans 1.17 % 1.19 %
Nonaccrual loans to total loans 0.64 % 0.69 %
Nonperforming loans to total loans 0.64 % 0.70 %
Nonperforming assets to total assets 0.92 % 0.95 %
Nonperforming loans based on loan type were as follows:
($ in thousands) June 30, 2026 December 31, 2025
C&I $ 20,081 $ 27,979
CRE 51,277 46,326
Construction and land development 384 155
Residential real estate 4,401 8,340
Consumer 1 9
Total $ 76,144 $ 82,809
The following table summarizes the changes in nonperforming loans:
Six months ended
($ in thousands) June 30, 2026
Nonperforming loans, beginning of period $ 82,809
Additions to nonperforming loans 64,315
Charge-offs (21,015)
Principal payments (34,571)
Moved to OREO (15,394)
Nonperforming loans, end of period $ 76,144
Nonperforming loans at June 30, 2026 decreased $6.7 million, or 8%, when compared to December 31, 2025. The decrease in nonperforming assets during the six months ended June 30, 2026 was primarily related to charge-offs and 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. The decrease in nonperforming loans was partially offset by additions to nonperforming loans, including a $16.0 million CRE relationship and a $5.8 million C&I relationship that went on nonaccrual during the period.
OREO
The following table summarizes the changes in OREO:
Six months ended
($ in thousands) June 30, 2026
OREO, beginning of period $ 81,544
Additions 16,779
Change in valuation allowance (299)
Sales (13,765)
OREO, end of period $ 84,259
Deposits
The following table shows the breakdown of deposits by type:
($ in thousands) June 30, 2026 December 31, 2025 Increase (decrease)
Noninterest-bearing demand accounts $ 4,910,235 $ 4,874,115 $ 36,120 1 %
Interest-bearing demand accounts 3,406,505 3,537,334 (130,829) (4) %
Money market accounts 3,944,742 3,991,110 (46,368) (1) %
Savings accounts 537,269 537,400 (131) - %
Certificates of deposit:
Brokered 736,377 721,977 14,400 2 %
Customer 967,423 947,406 20,017 2 %
Total deposits $ 14,502,551 $ 14,609,342 $ (106,791) (1) %
Noninterest-bearing deposits / total deposits 34 % 33 %
The following table shows the average balance and average rate of the Company's deposits by type:
Quarter ended
June 30, 2026 March 31, 2026 June 30, 2025
($ in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Average Balance Average Rate Paid
Noninterest-bearing deposit accounts $ 4,914,670 - % $ 4,998,734 - % $ 4,340,301 - %
Interest-bearing demand accounts 3,438,895 1.77 3,453,650 1.75 3,225,611 2.13
Money market accounts 4,009,504 2.58 3,952,475 2.59 3,660,053 3.12
Savings accounts 546,880 0.12 538,597 0.11 532,754 0.14
Certificates of deposit 1,698,565 3.44 1,665,977 3.52 1,486,522 3.83
Total interest-bearing deposits $ 9,693,844 2.30 $ 9,610,699 2.31 $ 8,904,940 2.70
Total average deposits $ 14,608,514 1.53 $ 14,609,433 1.52 $ 13,245,241 1.82
Six months ended
June 30, 2026 June 30, 2025
($ in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid
Noninterest-bearing deposit accounts $ 4,956,803 - % $ 4,401,504 - %
Interest-bearing demand accounts 3,446,232 1.76 3,196,680 2.16
Money market accounts 3,981,147 2.58 3,630,955 3.16
Savings accounts 542,762 0.12 533,629 0.14
Certificates of deposit 1,682,361 3.48 1,430,917 3.91
Total interest-bearing deposits $ 9,652,502 2.31 $ 8,792,181 2.74
Total average deposits $ 14,609,305 1.52 $ 13,193,685 1.82
Total deposits were $14.5 billion at June 30, 2026, a decrease of $106.8 million from December 31, 2025. Brokered certificates of deposit at June 30, 2026 increased $14.4 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 $4.1 billion at June 30, 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 $1.2 billion and $1.4 billion at June 30, 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 June 30, 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 1.53% for the current quarter and 1.52% for the six months ended June 30, 2026, compared to 1.52% and 1.82% for the linked and prior year-to-date periods, respectively.
Stockholders' Equity
Stockholders' equity totaled $2.0 billion at June 30, 2026, an increase of $1.5 million from December 31, 2025. Significant activity during the first six months of 2026 was as follows:
•Increase from net income of $90.3 million,
•Decrease in fair value of securities and cash flow hedges of $19.1 million,
•Decrease from dividends paid on common and preferred stock of $26.4 million, and
•Decrease from common stock repurchases of $50.3 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 $552.1 million at June 30, 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 June 30, 2026 and December 31, 2025, respectively, and included $1.6 billion and $1.7 billion at June 30, 2026 and December 31, 2025, respectively, pledged as collateral for deposits of public institutions, loan notes and other requirements. The unpledged portion of the securities portfolio could be pledged or sold to enhance liquidity, if necessary.
Available on- and off-balance sheet liquidity sources include the following items:
($ in thousands) June 30, 2026
Federal Reserve borrowing capacity $ 3,002,745
FHLB borrowing capacity 1,218,661
Unpledged securities 2,256,694
Federal funds lines (eight correspondent banks)
135,000
Cash and interest-bearing deposits 552,061
Holding Company line of credit 25,000
Total $ 7,190,161
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 $55.7 million were sold during the six months ended June 30, 2026 and 2025, respectively.
Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at June 30, 2026, the Company could borrow an additional $1.2 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 $3.0 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 June 30, 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 June 30, 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 June 30, 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.
The Company has an effective automatic shelf registration statement on Form S-3 allowing for the issuance of various forms of equity and debt securities. The Company's ability to offer securities pursuant to the registration statement depends on market conditions and the Company's continuing eligibility to use the Form S-3 under rules of the SEC.
On June 17, 2026, the Company issued $175.0 million aggregate principal amount of 6.25% fixed-to-floating rate subordinated notes with a maturity date of July 1, 2036, which initially bear an annual interest rate of 6.25%, with interest payable semiannually. Beginning July 1, 2031, the interest rate resets quarterly to the three-month term SOFR rate plus a spread of 232 basis points, payable quarterly.
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 June 30, 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:
June 30, 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 11.5 % 12.1 % 11.6 % 11.9 % 6.5 % 7.0 %
Tier 1 Capital to Risk Weighted Assets 12.7 % 12.1 % 12.8 % 11.9 % 8.0 % 8.5 %
Total Capital to Risk Weighted Assets 15.0 % 13.1 % 13.9 % 13.0 % 10.0 % 10.5 %
Leverage Ratio (Tier 1 Capital to Average Assets) 10.4 % 9.9 % 10.5 % 9.7 % 5.0 % N/A
Tangible common equity to tangible assets1
9.04 % 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.
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 acquisition costs, the net gain or loss on sales of fixed assets, the net gain or loss on OREO, and the net gain or loss on sales 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 Six months ended
($ in thousands) June 30,
2026 		March 31,
2026 		June 30,
2025 		June 30,
2026 		June 30,
2025
Net interest income (GAAP) $ 168,716 $ 166,147 $ 152,762 $ 334,863 $ 300,278
Tax-equivalent adjustment 3,418 3,320 2,738 6,738 5,213
Net interest income - FTE (non-GAAP) $ 172,134 $ 169,467 $ 155,500 $ 341,601 $ 305,491
Noninterest income (GAAP) 13,478 19,088 20,604 32,566 39,087
Less gain on sales of fixed assets 687 - - 687 -
Less net gain (loss) on sales of investment securities
(2,146) - - (2,146) 106
Less net gain (loss) on OREO
(302) (295) 56 (597) 79
Core revenue (non-GAAP) $ 187,373 $ 188,850 $ 176,048 $ 376,223 $ 344,393
Noninterest expense (GAAP) $ 115,739 $ 115,137 $ 105,702 $ 230,876 $ 205,485
Less amortization on intangibles 1,297 1,400 753 2,697 1,608
Less acquisition costs - - 518 - 518
Core noninterest expense (non-GAAP) $ 114,442 $ 113,737 $ 104,431 $ 228,179 $ 203,359
Core efficiency ratio (non-GAAP) 61.1 % 60.2 % 59.3 % 60.7 % 59.1 %
Tangible Common Equity, Tangible Book Value per Common Share, and Tangible Common Equity to Tangible Assets Ratio
At
(in thousands, except per share data) June 30, 2026 March 31, 2026 June 30, 2025
Stockholders' equity (GAAP) $ 2,040,846 $ 2,022,204 $ 1,922,899
Less preferred stock 71,988 71,988 71,988
Less goodwill 416,968 416,968 365,164
Less intangible assets 18,228 19,525 6,876
Tangible common equity (non-GAAP) $ 1,533,662 $ 1,513,723 $ 1,478,871
Common stock outstanding 36,258 36,581 36,950
Tangible book value per common share (non-GAAP) $ 42.30 $ 41.38 $ 40.02
Total assets (GAAP) $ 17,399,009 $ 17,227,828 $ 16,076,299
Less goodwill 416,968 416,968 365,164
Less intangible assets 18,228 19,525 6,876
Tangible assets (non-GAAP) $ 16,963,813 $ 16,791,335 $ 15,704,259
Tangible common equity to tangible assets (non-GAAP) 9.04 % 9.01 % 9.42 %
ACL on Loans to Total Loans Adjusted for Guaranteed Loans
At
($ in thousands) June 30, 2026 March 31, 2026 June 30, 2025
Total loans (GAAP) $ 11,892,399 $ 11,692,780 $ 11,408,840
Less guaranteed loans, net 939,255 935,409 913,118
Total adjusted loans (non-GAAP) $ 10,953,144 $ 10,757,371 $ 10,495,722
ACL on loans $ 139,238 $ 142,064 $ 145,133
ACL on loans to total loans 1.17 % 1.21 % 1.27 %
ACL on loans to total adjusted loans 1.27 % 1.32 % 1.38 %
Pre-Provision Net Revenue (PPNR)
Quarter ended Six months ended
($ in thousands) June 30,
2026 		March 31,
2026 		June 30,
2025 		June 30,
2026 		June 30,
2025
Net interest income (GAAP) $ 168,716 $ 166,147 $ 152,762 $ 334,863 $ 300,278
Noninterest income (GAAP) 13,478 19,088 20,604 32,566 39,087
Acquisition costs - - 518 - 518
Less gain on sales of fixed assets 687 - - 687 -
Less net gain (loss) on sales of investment securities
(2,146) - - (2,146) 106
Less net gain (loss) on OREO
(302) (295) 56 (597) 79
Less noninterest expense (GAAP) 115,739 115,137 105,702 230,876 205,485
PPNR (non-GAAP) $ 68,216 $ 70,393 $ 68,126 $ 138,609 $ 134,213
Adjusted Return on Average Common Equity, Return on Average Tangible Common Equity (ROATCE) and Adjusted Return on Average Assets (ROAA)
Quarter ended Six months ended
($ in thousands) June 30,
2026 		March 31, 2026 June 30,
2025 		June 30,
2026 		June 30,
2025
Average stockholder's equity (GAAP) $ 2,052,233 $ 2,076,504 $ 1,906,089 $ 2,064,301 $ 1,884,799
Less average preferred stock 71,988 71,988 71,988 71,988 71,988
Less average goodwill 416,968 416,968 365,164 416,968 365,164
Less average intangible assets 18,860 20,419 7,237 19,635 7,629
Average tangible common equity (non-GAAP) $ 1,544,417 $ 1,567,129 $ 1,461,700 $ 1,555,710 $ 1,440,018
Net income (GAAP) $ 40,927 $ 49,362 $ 51,384 $ 90,289 $ 101,345
Acquisition costs (after tax) - - 462 - 462
Less gain on sales of fixed assets (after tax) 515 - - 515 -
Less net gain (loss) on sales of investment securities (after tax)
(1,607) - - (1,607) 80
Less net gain (loss) on OREO (after tax)
(226) (221) 42 (447) 59
Net income adjusted (non-GAAP) $ 42,245 $ 49,583 $ 51,804 $ 91,828 $ 101,668
Less preferred stock dividends 937 938 937 1,875 1,875
Net income available to common stockholders adjusted (non-GAAP) $ 41,308 $ 48,645 $ 50,867 $ 89,953 $ 99,793
Return on average common equity (GAAP) 8.10 % 9.80 % 11.03 % 8.95 % 11.07 %
Adjusted return on average common equity (non-GAAP) 8.37 % 9.84 % 11.12 % 9.10 % 11.10 %
ROATCE (non-GAAP) 10.39 % 12.53 % 13.84 % 11.46 % 13.93 %
Adjusted ROATCE (non-GAAP) 10.73 % 12.59 % 13.96 % 11.66 % 13.97 %
Average assets $ 17,307,716 $ 17,311,103 $ 15,859,721 $ 17,309,400 $ 15,751,959
Return on average assets (GAAP) 0.95 % 1.16 % 1.30 % 1.05 % 1.30 %
Adjusted return on average assets (non-GAAP) 0.98 % 1.16 % 1.31 % 1.07 % 1.30 %
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