What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-02-19 · 371 added, 408 removed, 1344 unchanged (37% of the section changed)

1 unchanged sentence

Enterprise Financial Services Corp and Subsidiaries

Report of Independent Registered Public Accounting Firm 59

Report of Independent Registered Public Accounting Firm, PCAOB ID 34

Consolidated Balance Sheets at December 31, 2021 and 2020 64

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2022 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

Change in Accounting Principles

As discussed in Note 1 to the financial statements, on January 1, 2020, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326):

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We assessed the reasonableness of the Company’s qualitative methodology, tested key calculations utilized within the qualitative estimate and agreed underlying data within the calculation to source documents.

Acquisition of Seacoast Commerce Banc Holdings (“Seacoast”) —Refer to Note 2 to the financial statements

Acquisition of First Choice Bancorp (“FCB”) – Valuation of Loans – Refer to Note 2 to the financial statements

Critical Audit Matter Description

On November 12, 2020, the Company closed its acquisition of 100% of Seacoast and its wholly-owned subsidiary, Seacoast Commerce Bank.

On July 21, 2021, the Company closed its acquisition of 100% of First Choice Bancorp and its wholly-owned subsidiary, First Choice Bank.

The value of the transaction consideration was approximately $346 million.

The acquisition of Seacoast has been accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date.

Goodwill of $50 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of Seacoast into the Company.

The acquisition of FCB has been accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date.

Goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations into the Company.

Given that the fair value determination of net assets, specifically the credit assumptions related to the acquired loan balance, required management to make significant estimates and assumptions related to the associated credit risk, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

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• We tested the design and operating effectiveness of controls over the valuation of the acquired loans, including management’s controls over the determination of credit risk.

With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) the discounted cash flow valuation methodology and (2) credit risk assumption utilized in the calculations by:

Testing the source information underlying the determination of the credit risk assumptions and testing the mathematical accuracy of the calculation.

Developing independent estimates and comparing those to the credit risk assumptions selected by management.

• With the assistance of our fair value specialists, we obtained an understanding and evaluated the reasonableness of the Company’s valuation methodology and assumptions.

• We compared the accuracy of the Company’s fair value pricing to the pricing independently developed by our fair value specialists.

/s/ Deloitte & Touche LLP

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Measurement of Credit Losses on Financial Instruments” .

As described in Management’s Assessment on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Seacoast Commerce Banc Holdings (“SCBH”), which was acquired on November 12, 2020, and whose financial statements constitute 14% of total assets and 3% of net interest income of the consolidated financial statement amounts as of and for the year ended December 31, 2020.

Accordingly, our audit did not include the internal control over financial reporting at SCBH.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Securities available-for-sale 1,366,006 912,429

Securities held-to-maturity 487,610 181,166

Securities held-to-maturity, net 429,681 487,610

Loans held-for-sale 6,389 13,564

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Liabilities and Shareholders' equity

Noninterest-bearing deposit accounts $ 2,711,828 $ 1,327,348

Interest-bearing transaction accounts 1,768,497 1,367,444

Noninterest-bearing demand accounts $ 4,578,436 $ 2,711,828

Interest-bearing demand accounts 2,465,884 1,768,497

Money market accounts 2,890,976 2,327,066

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Other borrowings 353,863 301,081

Notes payable 30,000 34,286

Other liabilities 105,681 132,489

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5,000,000 shares authorized;

0 shares issued and outstanding — —

75,000 and 0 shares issued and outstanding, respectively ($1,000 per share liquidation preference) 71,988 —

Common stock, $0.01 par value;

45,000,000 shares authorized;

75,000,000 and 45,000,000 shares authorized;

39,799,615 and 33,190,306 shares issued, respectively 398 332

Treasury stock, at cost;

1,980,093 and 1,523,842 shares, respectively ( 73,528 ) ( 58,181 )

1,980,093 shares ( 73,528 ) ( 73,528 )

Additional paid in capital 1,018,799 697,839

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Interest income:

Interest and fees on loans $ 270,238 $ 269,406 $ 217,212

Interest on debt securities:

Loans $ 348,615 $ 270,238 $ 269,406

Debt securities:

Taxable 18,030 24,629 29,030

Nontaxable 13,814 8,397 3,515

Interest on interest-earning deposits 620 2,128 1,141

Interest-earning deposits 1,496 620 2,128

Dividends on equity securities 1,275 895 1,055

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FHLB advances 803 2,673 6,668

Notes payable and other borrowings 1,171 2,386 774

Other borrowings 605 1,171 2,386

Total interest expense 23,036 34,778 66,417

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Professional fees 4,289 3,940 3,683

Branch-closure expenses 3,441 — —

Merger-related expenses 22,082 4,174 17,969

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Reclassification adjustment for realized (gain) loss on the sale of available-for-sale debt securities — ( 317 ) 37

Reclassification of (gain) loss on held-to-maturity securities ( 1,910 ) ( 33 ) 3

Change in unrealized loss on cash flow hedges arising during the period ( 5,947 ) ( 2,262 ) —

Reclassification of gain on held-to-maturity securities ( 3,624 ) ( 1,910 ) ( 33 )

Change in unrealized gain (loss) on cash flow hedges arising during the period 1,161 ( 5,947 ) ( 2,262 )

Reclassification of loss on cash flow hedges 1,169 3,601 100

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Years ended December 31, 2021, 2020, and 2019

($ in thousands, except per share data) Common Stock Treasury Stock Additional paid in capital Retained earnings Accumulated

($ in thousands, except per share data) Preferred Stock Common Stock Treasury Stock Additional paid in capital Retained earnings Accumulated

comprehensive income (loss) Total

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Issuance under equity compensation plans, 137,271 shares, net — 2 — ( 214 ) — — ( 212 )

Shares issued in connection with acquisition of Trinity Capital Corporation, 3,990,822 shares 40 — 171,845 — — 171,885

Share-based compensation — — — 4,032 — — 4,032

Reclassification adjustments for change in accounting policies — — — 834 ( 834 ) —

Balance December 31, 2019 $ — $ 281 $ ( 58,181 ) $ 526,599 $ 380,737 $ 17,749 $ 867,185

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Issuance under equity compensation plans, 146,005 shares, net — 1 — 77 — — 78

Shares issued in connection with acquisition of Trinity Capital Corporation, 3,990,822 shares 40 — 171,845 — — 171,885

Shares issued in connection with acquisition of Seacoast Commerce Banc Holdings, 4,977,214 shares — 50 — 166,985 — — 167,035

Share-based compensation — — — 4,178 — — 4,178

Reclassification for the adoption of ASU 2016-13 (CECL) — — — ( 18,114 ) — ( 18,114 )

Balance December 31, 2020 $ — $ 332 $ ( 73,528 ) $ 697,839 $ 417,212 $ 37,120 $ 1,078,975

Net income $ — $ — $ — $ — $ 133,055 $ — $ 133,055

Other comprehensive income, net — — — — 19,371 19,371

Other comprehensive loss, net — — — — — ( 18,343 ) ( 18,343 )

Cash dividends paid on common shares, $0.75 per share — — — — ( 26,153 ) — ( 26,153 )

Repurchase of common shares — ( 15,347 ) — — — ( 15,347 )

Repurchase of common shares, 1,299,527 shares — ( 12 ) — ( 30,518 ) ( 30,059 ) — ( 60,589 )

Issuance under equity compensation plans, 131,564 shares, net — — — 2,549 ( 663 ) — 1,886

Shares issued in connection with acquisition of Seacoast Commerce Banc Holdings, 4,977,214 shares 50 — 166,985 — — 167,035

Shares issued in connection with acquisition of First Choice Bancorp, 7,777,272 shares, net (gross issuance 7,808,459 shares) — 78 — 342,912 ( 710 ) — 342,280

Preferred stock issuance, net of $3,012 issuance cost 71,988 — — — — — 71,988

Share-based compensation — — — 6,017 — — 6,017

Reclassification for the adoption of ASU 2016-13 (CECL) — — — ( 18,114 ) — ( 18,114 )

Balance December 31, 2021 $ 71,988 $ 398 $ ( 73,528 ) $ 1,018,799 $ 492,682 $ 18,777 $ 1,529,116

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Net amortization of debt securities 7,343 6,745 2,973

Net accretion of loan discount ( 1,140 ) ( 7,767 ) ( 10,494 )

Amortization of intangible assets 5,690 5,673 5,543

Gain on sale of investment securities

Amortization of servicing assets 2,311 37 —

Mortgage loans originated-for-sale ( 159,670 ) ( 223,094 ) ( 81,941 )

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Sale of state tax credits ( 2,220 ) ( 2,016 ) ( 2,549 )

Asset impairment 3,441 — —

Share-based compensation 6,017 4,178 4,032

Net accretion of loan discount ( 7,767 ) ( 10,494 ) ( 1,700 )

Changes in other assets and liabilities, net ( 17,262 ) 876 ( 12,975 )

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Acquisition cash purchase price, net of cash and cash equivalents acquired 212,642 62,114 ( 23,377 )

Net increase in loans ( 700,096 ) ( 284,235 ) ( 257,872 )

Net decrease (increase) in loans 138,455 ( 700,096 ) ( 284,235 )

Proceeds received from:

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Cash flows from financing activities:

Net increase (decrease) in noninterest-bearing deposit accounts 627,756 57,551 ( 23,189 )

Net increase in noninterest-bearing deposit accounts $ 869,203 $ 627,756 $ 57,551

Net increase in interest-bearing deposit accounts 648,778 505,604 44,300

Proceeds from the issuance of subordinated notes — 61,953 —

Payments for the redemption of subordinated notes ( 50,000 ) — —

Proceeds (repayments) from short-term FHLB advances, net ( 160,000 ) ( 172,300 ) 95,500

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Repayments of notes payable ( 7,143 ) ( 4,286 ) ( 8,714 )

Net increase (decrease) in other borrowings 40,195 9,436 ( 32,224 )

Net increase in other borrowings 59,925 40,195 9,436

Cash dividends paid on common stock ( 26,153 ) ( 19,795 ) ( 16,568 )

Repurchase of common stock ( 60,589 ) ( 15,347 ) ( 15,526 )

Payments for the issuance of equity instruments, net 78 ( 212 ) ( 2,576 )

Proceeds from issuance of preferred stock, net 71,988 — —

Other, net 516 78 ( 212 )

Net cash provided by financing activities 1,346,525 937,762 256,767

Net (decrease) increase in cash and cash equivalents 370,447 ( 29,296 ) 43,229

Net increase (decrease) in cash and cash equivalents 1,483,986 370,447 ( 29,296 )

Cash and cash equivalents, beginning of period 537,703 167,256 196,552

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Income taxes 56,845 7,514 13,582

Noncash transactions:

Noncash investing and financing transactions:

Transfer to other real estate owned in settlement of loans $ 3,227 $ 798 $ 8,148

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For purposes of reporting cash flows, the Company considers cash and due from banks, interest-bearing deposits and federal funds sold that mature within 90 days of the balance sheet date to be cash and cash equivalents.

At December 31, 2019, approximately $ 9.7 million of cash and due from banks represented required reserves on deposits maintained by the Company in accordance with Federal Reserve requirements.

There were no required reserves on December 31, 2020.

The balances at December 31, 2021 and 2020 were not subject to reserve requirements from the Federal Reserve.

Recent Accounting Pronouncements

On January 1, 2020, the Company adopted ASU 2016-13 “ Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” (ASU 2016-13) which replaces the incurred loss methodology with an expected loss methodology commonly referred to as the CECL methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.

It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments.

In addition, this standard made changes to the accounting for available-for-sale debt securities, including the requirement for credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities.

The Company adopted this standard using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures.

Results for reporting periods beginning after January 1, 2020 are presented under the new standard while prior period amounts continue to be reported in accordance with

previously applicable GAAP.

The Company recorded an after-tax decrease to retained earnings of $18.1 million as of January 1, 2020 for the cumulative effect of adopting this standard.

The Company adopted this standard using the prospective transition approach for PCD assets that were previously classified as PCI assets.

Management did not reassess whether PCI assets met the criteria of PCD assets as of the date of the adoption.

The Company elected not to maintain PCI pools for certain loans which are now accounted for individually.

Thus they are now included in nonperforming and classified loans.

Management did not reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption.

The following table illustrates the impact of adoption:

($ in thousands) December 31, 2019 Impact of Adoption January 1, 2020

Loans $ 5,314,337 $ 7,091 $ 5,321,428

Allowance for credit losses on loans 43,288 28,387 71,675

Allowance for credit losses on held-to-maturity debt securities — 303 303

Deferred tax asset 14,851 5,898 20,749

Reserve for unfunded commitments 430 2,413 2,843

Shareholders’ Equity

Retained Earnings 380,737 ( 18,114 ) 362,623

On January 1, 2020, the Company adopted ASU 2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” .

The Company previously selected the option to adopt the removal or modification of disclosures during the second quarter of 2019.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are applied prospectively for only the most recent interim or annual period presented.

All other amendments are applied retrospectively to all periods presented upon their effective date.

The adoption of this update did not have a material effect on the Company's consolidated financial statements.

On January 1, 2020, the Company adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment , (ASU 2017-04).

ASU 2017-04 simplifies the quantitative measurement of goodwill by eliminating Step 2 from the goodwill impairment test which required entities to compute the implied fair value of goodwill.

Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The adoption of this update did not have a material effect on the Company's consolidated financial statements.

ASU 2021-01, Reference Rate Reform (Topic 848):

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The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do

not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The amendments in this update were effective immediately upon issuance and did not have a material effect on the Company's consolidated financial statements.

The expedients and exceptions provided by the amendments will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The amendments in this update were effective immediately upon issuance and did not have a material effect on the consolidated financial statements.

The Company has classified all investments in debt securities as available-for-sale or held-to-maturity.

Securities classified as available-for-sale are carried at fair value.

Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a net amount in a separate component of shareholders’ equity until realized.

Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a net amount in a separate component of

shareholders’ equity until realized.

All previous fair value adjustments included in the separate component of shareholders’ equity are reversed upon sale.

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When it is determined that a security will not be collected, the balance is written-off through the allowance.

In evaluating the need for an ACL, securities with similar risk characteristics are grouped and an estimate of expected cash flows is determined using historical loss experience, adjusted for current and reasonable and supportable forecasts of economic conditions.

In evaluating the need for an ACL, securities with similar risk characteristics are grouped and an estimate of expected cash flows is determined using loss experience, adjusted for current and reasonable and supportable forecasts of economic conditions.

For available-for-sale securities in a loss position, the Company evaluates whether the decline in fair value below amortized cost resulted from a credit loss or other factors.

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Upon receipt of an application for a real estate loan, the Company determines whether the loan will be sold into the secondary market or retained in the Company’s loan portfolio.

The interest rates on the loans sold are

locked with the buyer and the Company bears no interest rate risk related to these loans.

The interest rates on the loans sold are locked with the buyer and the Company bears no interest rate risk related to these loans.

Mortgage loans held-for-sale are carried at the lower of cost or fair value, which is determined on a specific identification method.

The Company does not retain servicing on these loans.

The Company also originates SBA7(a) loans that generally provides for a guarantee of 75% up to a maximum amount.

The Company also originates SBA7(a) loans that generally provide for a guarantee of 75% up to a maximum amount.

The guaranteed portion of the loan can be sold in an active secondary market.

For the year ended December 31, 2020, all SBA7(a) loans are considered held-for-investment;

For the years ended December 31, 2021 and 2020, all SBA7(a) loans are considered held-for-investment;

however, as the Company makes the determination to sell the loans, they will be moved into the held-for-sale category.

Sales of SBA guaranteed loans are executed on a servicing retained basis, and the Company retains the rights and obligations to service the loans.

At December 31, 2020, the Company was servicing $ 296 million in SBA loans and has recorded a related servicing asset of $ 5.7 million.

At December 31, 2021, the Company was servicing SBA loans that had been sold and has

recorded a related servicing asset of $ 6.7 million.

The servicing asset is accounted for under the amortization method and is evaluated for impairment.

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The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, to exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense.

Accrued interest receivable totaled $ 31.1 million at December 31, 2020 and was reported in Other Assets on the consolidated balance sheets.

Accrued interest receivable totaled $ 31.1 million and $ 30.6 million at December 31, 2020 and 2021, respectively, and were reported in Other Assets on the consolidated balance sheets.

Acquired Loans

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Disposals of loans, including sales of loans, paydowns, payments in full or foreclosures resulted in the removal or reduction of the loan from the loan pool.

Subsequent to the adoption of ASU 2016-16, acquired loans are separated into two categories based on the credit risk characteristics of the underlying borrowers as either purchased credit deteriorated (PCD), for loans which have experienced more than insignificant credit deterioration since origination, or loans with no credit deterioration (non-PCD).

Subsequent to the adoption of ASU 2016-13, acquired loans are separated into two categories based on the credit risk characteristics of the underlying borrowers as either PCD, for loans which have experienced more than insignificant credit deterioration since origination, or loans with no credit deterioration (non-PCD).

At the date of acquisition, an ACL on PCD loans is determined and added to the amortized cost basis of the individual loans.

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The ACL on PCD loans is recorded in the acquisition accounting and no provision for credit losses is recognized at the acquisition date.

Subsequent changes to the ACL are recorded through provision expense.

Subsequent changes

to the ACL are recorded through provision expense.

For non-PCD loans, an ACL is established immediately after the acquisition through a charge to the provision for credit losses.

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Previously accrued and uncollected interest on such loans is reversed.

Income is recorded only to the extent that a determination has been made that the principal balance of the loan is collectible and the interest payments are subsequently received in cash, or for a restructured loan, the borrower has made six consecutive contractual payments.

Income is recorded only to the extent a determination has been made that the principal balance of the loan is collectible and the interest payments are subsequently received in cash, or for a restructured loan, the borrower has made six consecutive contractual payments.

If collectibility of the principal is in doubt, payments received are applied to loan principal.

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However, the recoverability of these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans.

The fair value of the collateral securing these loans may fluctuate as market conditions change.

The fair value of the

collateral securing these loans may fluctuate as market conditions change.

Included within C&I are revolving loans supported by borrowing bases that fluctuate depending on the amount of underlying collateral.

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Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.

Construction and Land Development – The Company originates loans to finance construction projects including one- to four-family residences, multifamily residences, commercial office, and industrial projects.

Construction and Land Development – The Company originates loans to finance construction projects including 1-4 family residences, multifamily residences, commercial office, and industrial projects.

Construction loans are generally collateralized by first liens on the real estate and have floating interest rates.

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Residential loans with a second lien are inherently riskier due to the junior lien position.

Agricultural – Agricultural loans are generally secured with equipment, cattle, crops or other non-real property and at times the underlying real property.

Agricultural – Agricultural loans are generally secured with equipment, livestock, crops or other non-real property and at times the underlying real property.

Agricultural loans are primarily included as a component of CRE and C&I loans.

Consumer – The Company provides a broad range of consumer loans to customers, including personal lines of credit, credit cards and automobile loans.

Consumer – The Company provides a broad range of consumer loans to customers, including personal lines of credit, credit cards, recreational vehicles, yachts and automobile loans.

Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral.

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The DCF method incorporates assumptions for probability of default, loss given default, prepayments and curtailments over the contractual term of the loans.

In determining the probability of default, the Company utilized a regression analysis to determine certain economic factors that are relevant loss drivers in the portfolio segments based on historical or peer evaluations.

National unemployment is a loss driver used in nearly all portfolios, except Consumer.

The annual percentage change in gross domestic product is also used in C&I, Construction, Agricultural and Consumer portfolios.

The annual percentage change in a commercial real estate index, national house price index and the consumer price index are used in the CRE, Residential Real Estate and Consumer portfolios, respectively.

In determining the probability of default, the Company utilized regression analysis to determine certain economic factors that are relevant loss drivers in the portfolio segments based on historical or peer evaluations.

National unemployment is a loss driver used in nearly all portfolios, except Consumer and first lien Residential Real Estate.

The annual percentage change in gross domestic product is also used in C&I, Construction, Agricultural first lien Residential Real Estate, and Consumer portfolios.

The annual percentage change in a commercial real estate index, national house price index and national retail sales are used in the CRE, second lien Residential Real Estate and Consumer portfolios, respectively.

The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:

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Loans evaluated individually are not also included in the collective evaluation.

When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

When management determines foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Loan Charge-Offs

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Costs of maintaining and operating other real estate are expensed as incurred, and expenditures to complete or improve other real estate properties are capitalized if the expenditures are expected to be recovered upon ultimate sale of the property.

Buildings, leasehold improvements, furniture, fixtures, equipment, and capitalized software are stated at cost less accumulated depreciation.

Buildings, leasehold improvements, furniture, fixtures, and equipment are stated at cost less accumulated depreciation.

All categories are computed using the straight-line method over their respective estimated useful lives.

Furniture, fixtures and equipment is depreciated over three to ten years , buildings and leasehold improvements over ten to forty years , and capitalized software over three years based upon estimated lives or lease obligation periods.

Furniture, fixtures and equipment is depreciated over three to ten years and buildings and leasehold improvements over ten to forty years , based upon estimated lives or lease obligation periods.

State Tax Credits

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Goodwill and Other Intangible Assets

The Company tests goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the Company may not be able to recover the respective asset’s carrying amount.

The Company tests goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate the Company may not be able to recover the respective asset’s carrying amount.

The Company’s annual test for impairment was performed in the fourth quarter of December 31, 2021.

Such tests involve the use of estimates and assumptions.

Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.

Potential impairments to goodwill must first be identified by performing a qualitative assessment which evaluates relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

is less than its carrying amount.

If this test indicates it is more likely than not that goodwill has been impaired, then a quantitative impairment test is completed.

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That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.

Impairment of Long-Lived Assets

Long-lived assets, such as fixed assets and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Long-lived assets, such as fixed assets and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

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Derivative Financial Instruments and Hedging Activities

The Company uses derivative financial instruments to assist in the management of interest rate sensitivity and to modify the repricing, maturity and option characteristics of certain assets and liabilities.

The Company uses derivative financial instruments to assist in managing interest rate sensitivity and to modify the repricing, maturity and option characteristics of certain assets and liabilities.

In addition, the Company also offers an interest rate hedge program that includes interest rate swaps to assist its customers in managing their interest rate risk profile.

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The accounting for changes in fair value (gains or losses) of a hedged item is dependent on whether the related derivative is designated and qualifies for “hedge accounting.” The Company assigns derivatives to one of these categories at the purchase date:

cash flow hedge, fair value hedge, or non-designated derivatives.

cash flow hedge, fair value hedge, or non-designated hedges as part of a customer interest-rate swap product.

An assessment of the expected and ongoing hedge effectiveness of any derivative designated a fair value hedge or cash flow hedge is performed as required by the accounting standards.

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Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

We evaluate the need for deferred tax asset valuation allowances based on a more-likely-than-not standard.

The ability to realize deferred tax assets depends on the ability to generate sufficient positive taxable income within the carryback or carryforward periods provided for in the laws for each applicable taxing jurisdiction.

We consider the following possible sources of taxable income:

The need for deferred tax asset valuation allowances is based on a more-likely-than-not standard.

The ability to realize deferred tax assets depends on the ability to generate sufficient positive taxable

income within the carryback or carryforward periods provided for in the laws for each applicable taxing jurisdiction.

The following possible sources of taxable income are considered:

future reversal patterns of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences, taxable income in prior carryback years and the availability of qualified tax planning strategies.

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Stock-based compensation is recognized as an expense for stock options, restricted stock awards, performance stock units, and restricted stock units granted to employees, directors, and advisors in return for service.

Equity classified awards are measured at the grant date fair value using either an observable market value or a valuation methodology, and recognized over the requisite service period on a straight-line basis.

Equity classified awards are measured at the grant date fair value using either an observable market value or a valuation methodology, and are recognized over the requisite service period on a straight-line basis.

Forfeitures are recorded as they occur.

A description of the Company’s stock-based employee compensation plan is described in “Note 16 - Stockholders’ Equity and Compensation Plans.”

A description of the Company’s stock-based employee compensation plan is included in “Note 16 - Shareholders’ Equity and Compensation Plans.”

Acquisitions and Divestitures

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Any incremental direct costs incurred to transact the sale are allocated against the gain or loss on the sale.

These costs would include items like legal fees, title transfer fees, broker fees, etc.

These costs would include items such as legal fees, title transfer fees, broker fees, etc.

Any goodwill and intangible assets associated with the portion of the reporting unit to be disposed of is included in the carrying amount of the business in determining the gain or loss on the sale.

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The classification adjustment for unrealized loss/gain on sale of securities included in net income has been recorded through the gain on sale of investment securities line item, within noninterest income, in the Company’s Consolidated Statements of Operations.

Share Repurchases

The Company periodically adopts share repurchase plans that authorize open market repurchases of common stock.

Shares acquired through the repurchase plan are classified as treasury stock or the shares are immediately retired upon settlement, depending on plan authorization.

When shares are retired, the excess of repurchase price over par is allocated between additional paid in capital and retained earnings.

The amount allocated to additional paid in capital is limited to the pro rata portion of additional paid in capital at the time of repurchase.

Reclassifications

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The reclassifications had no effect on net income or shareholders’ equity.

NOTE 2 - ACQUISITIONS & DIVESTITURES

The acquisitions noted below have been accounted for as business combinations using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date.

NOTE 2 - ACQUISITIONS

The acquisition noted below has been accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date.

Goodwill arising from the acquisitions consist largely of the synergies and economies of scale expected from combining the operations into Enterprise.

None of the goodwill recognized is expected to be deductible for income tax purposes.

Acquisition of First Choice Bancorp

On July 21, 2021, the Company closed its acquisition of 100% of First Choice and its wholly-owned subsidiary, FCB, which operated eight full-service branches in California.

First Choice shareholders received 0.6603 shares of EFSC common stock for each First Choice common share and cash in lieu of any fractional shares.

In connection with the merger, Enterprise issued approximately 7.8 million shares of EFSC Common Stock valued at $ 44.01 per share, which was the closing price of Enterprise common stock on July 21, 2021.

The value of the transaction consideration was approximately $ 346 million, which includes approximately $ 2.1 million payable to holders of First Choice stock options.

For the year ended December 31, 2021, the Company recognized $ 18.8 million of merger-related costs recorded in noninterest expense in the statement of operations related to the First Choice acquisition.

The following tables present the assets acquired and liabilities assumed.

Additional adjustments may be recorded during the measurement period specified in ASC 805, Business Combinations, as additional information becomes known.

Acquisition of Seacoast Commerce Banc Holdings

On November 12, 2020, the Company closed its acquisition of 100% of Seacoast and its wholly-owned subsidiary, Seacoast Commerce Bank.

Seacoast operated five full-service retail and commercial banking offices in California and Nevada, as well as SBA loan production offices and deposit production offices in Arizona, California, Colorado, Illinois, Indiana, Massachusetts, Michigan, Nevada, Ohio, Oregon, Texas, Utah, and Washington.

Seacoast shareholders received 0.5061 shares of EFSC common stock for each Seacoast common share and cash in lieu of any fractional shares.

In connection with the merger, Enterprise issued approximately 5.0 million shares of EFSC Common Stock valued at $ 33.56 per share, which was the closing price of Enterprise common stock on November 12, 2020.

The value of the transaction consideration was approximately $ 169 million.

The Company recognized $ 4.2 million of merger-related costs recorded in noninterest expense in the statement of operations for the year ended December 31, 2020.

($ in thousands) As Recorded by Seacoast Adjustments As Recorded by EFSC

Assets acquired:

Cash and cash equivalents $ 63,744 $ — $ 63,744

Loans 1,160,602 29,839 (a) 1,190,441

Other investments 12,100 — 12,100

Fixed assets 925 ( 275 ) (b) 650

Accrued interest receivable 4,511 — 4,511

Goodwill 35,395 ( 35,395 ) (c) —

Intangible assets 1,513 1,168 (d) 2,681

Deferred tax assets 12,009 ( 8,687 ) (e) 3,322

Other assets 35,025 ( 437 ) (f) 34,588

Total assets acquired $ 1,325,824 $ ( 13,787 ) $ 1,312,037

Liabilities assumed:

Deposits $ 1,081,034 $ ( 28 ) (f) $ 1,081,006

PPPLF advances 86,096 — 86,096

Accrued interest payable 185 — 185

Other liabilities 25,211 1,097 (f) 26,308

Total liabilities assumed $ 1,192,526 $ 1,069 $ 1,193,595

Net assets acquired $ 133,298 $ ( 14,856 ) $ 118,442

Consideration paid:

Common stock 167,035

Total consideration paid $ 168,665

Goodwill $ 50,223

(a) Fair value adjustments based on the Company’s evaluation of the acquired loan portfolio, write-off of net deferred loan costs and elimination of the allowance for loan losses recorded by Seacoast.

(b) Fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.

(d) Eliminate acquired intangibles and record the core deposit intangible asset on the acquired core deposit accounts.

Amount to be amortized using a sum-of-years digits method over a useful life of 10 years.

(e) Adjustment for deferred taxes.

(f) Other miscellaneous fair value adjustments.

The following table provides the unaudited pro forma information for the results of operations for the twelve months ended December 31, 2020 and 2019, as if the acquisition had occurred on January 1, 2019.

The pro forma results combine the historical results of Seacoast with the Company’s Consolidated Statements of Income, adjusted for the impact of the application of the acquisition method of accounting including amortization and accretion of fair value adjustments.

The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2019.

No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions.

Only the acquisition-related expenses that have been incurred as of December 31, 2020 are included in net income in the table below.

Twelve months ended December 31,

($ in thousands, except per share data) 2020 2019

Total revenue (net interest income plus noninterest income) $ 381,914 $ 355,500

Net income 93,918 86,888

Diluted earnings per common share 3.00 2.79

Acquisition of Trinity Capital Corporation.

On March 8, 2019, the Company closed its acquisition of 100% of Trinity and its wholly-owned subsidiary, LANB.

Trinity operated six full-service retail and commercial banking offices in Los Alamos, Santa Fe, and Albuquerque, New Mexico.

Trinity shareholders received cash consideration of $ 1.84 per share of Trinity common stock and 0.1972 shares of EFSC common stock per share of Trinity common stock with cash in lieu of fractional shares.

Aggregate consideration at closing was approximately 4.0 million shares of EFSC common stock and $ 37.3 million cash paid to Trinity shareholders.

Based on EFSC’s closing stock price of $ 43.07 on March 7, 2019, the overall transaction had a value of $ 209.2 million.

The Company recognized $ 18.0 million and $ 1.3 million of merger-related costs recorded in noninterest expense in the statement of operations for the years ended December 31, 2019 and 2018, respectively.

The following table presents the assets acquired and liabilities assumed of Trinity as of March 8, 2019.

($ in thousands) As Recorded by Trinity Adjustments As Recorded by EFSC

The consideration exchanged, assets acquired and liabilities assumed of First Choice were recorded at estimated fair value on the date of acquisition.

Fair values are considered preliminary until final fair values are determined, or the measurement period has passed, which is no later than one year from the date of acquisition.

(in thousands) As Recorded by First Choice Adjustments As Recorded by EFSC

Assets acquired:

Cash and cash equivalents $ 214,794 $ — $ 214,794

Interest-earning deposits greater than 90 days 100 — 100

Securities 34,533 ( 44 ) (a) 34,489

Loans 1,937,635 5,508 (b) 1,943,143

Other real estate 5,284 ( 2,059 ) (c) 3,225

Other investments 6,673 — 6,673

Fixed assets 27,586 ( 300 ) (d) 27,286

Accrued interest receivable 3,997 — 3,997

Allowance ( 19,626 ) 12,620 (b) ( 7,006 )

Other investments 19,178 138 (c) 19,316

Fixed assets 1,869 ( 870 ) (c) 999

Accrued interest receivable 7,131 20 (c) 7,151

Goodwill 73,425 ( 73,425 ) (d) —

Intangible assets 4,517 375 (e) 4,892

Deferred tax assets 10,708 ( 2,386 ) (f) 8,322

Other assets 35,045 ( 1,484 ) (g) 33,561

Deferred tax assets 7,558 ( 1,943 ) (c) 5,615

Other assets 23,024 1,645 (c) 24,669

Total assets acquired $ 2,304,038 $ ( 55,976 ) $ 2,248,062

Liabilities assumed:

Deposits $ 1,081,151 $ 36 (g) $ 1,081,187

Subordinated debentures 26,806 ( 3,972 ) (g) 22,834

FHLB advances 6,800 171 (g) 6,971

Deposits $ 1,840,716 $ ( 287 ) (c) $ 1,840,429

FHLB advances 160,000 — 160,000

Accrued interest payable 124 — 124

Other liabilities 5,842 ( 827 ) (g) 5,015

Other liabilities 8,464 ( 2,160 ) (c) 6,304

Total liabilities assumed $ 2,009,304 $ ( 2,447 ) $ 2,006,857

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Consideration paid:

Cash $ 37,275

Common stock 1

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Goodwill $ 104,597

(a) Fair value adjustments of the securities portfolio.

(b) Fair value adjustments based on the Company’s evaluation of the acquired loan portfolio, write-off of net deferred loan costs and elimination of the allowance for loan losses recorded by Trinity.

(d) Fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.

(e) Record the core deposit intangible asset on the acquired core deposit accounts.

1 Common stock consideration was $ 342,280 , net of $ 1,370 for shares withheld on the settlement of share-based awards of FCBP employees.

(a) Fair value adjustments based on the Company’s evaluation of the acquired securities portfolio.

(b) Fair value adjustments based on the Company’s evaluation of the acquired loan portfolio, write-off of net deferred loan costs and elimination of the allowance for loan losses recorded by FCBP.

(d) Adjustment to eliminate goodwill.

(e) Eliminate acquired intangibles and record the core deposit intangible asset on the acquired core deposit accounts.

Amount to be amortized using a sum-of-years digits method over a useful life of 10 years.

(f) Adjustment for deferred taxes.

(g) Other miscellaneous fair value adjustments.

The following table provides the unaudited pro forma information for the results of operations for the twelve months ended December 31, 2021 and 2020, as if the acquisition had occurred on January 1, 2020.

The pro forma results combine the historical results of Trinity with the Company’s Consolidated Statements of Income, adjusted for the impact of the application of the acquisition method of accounting including loan discount accretion, intangible assets amortization, and deposit and trust preferred securities premium accretion, net of taxes.

The pro forma results combine the historical results of FCBP with the Company’s Consolidated Statements of Income, adjusted for the impact of the application of the acquisition method of accounting including amortization and accretion of fair value adjustments.

No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or

asset dispositions.

assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions.

Only the acquisition-related expenses that have been incurred as of December 31, 2021 are included in net income in the table below.

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(in thousands, except per share data) 2021 2020

Total revenue (net interest income plus noninterest income) $ 296,677 $ 286,076

Total revenues (net interest income plus noninterest income) $ 488,280 $ 420,487

Net income 188,416 67,275

Diluted earnings per common share 4.86 1.94

For the year ended December 31, 2021, total revenue and pre-tax net income from FCBP of $ 40.5 million and $ 25.9 million (excluding the provision for credit losses of $ 25.4 million on the acquired loan portfolio and unfunded loan commitments) were included in the Company’s consolidated results.

NOTE 3 - EARNINGS PER SHARE

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($ in thousands, except per share data) 2021 2020 2019

Net income $ 74,384 $ 92,739 $ 89,217

Net income available to common shareholders $ 133,055 $ 74,384 $ 92,739

Weighted average common shares outstanding 34,436 26,954 26,045

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Basic earnings per common share $ 3.86 $ 2.76 $ 3.56

$ 2.76 $ 3.56 $ 3.86

Diluted earnings per common share $ 3.86 $ 2.76 $ 3.55

$ 2.76 $ 3.55 $ 3.83

For 2021, 2020 and 2019, common stock equivalents of approximately 158,000 , 156,000 and 21,000 , respectively, were excluded from the earnings per share calculation because their effect would have been anti-dilutive.

For 2018, the amount was immaterial.

NOTE 4 - INVESTMENTS

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Agency mortgage-backed securities 506,703 20,190 ( 321 ) 526,572

Corporate debt securities 14,750 248 — 14,998

Treasury Bills 10,980 486 — 11,466

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Total securities held-to-maturity $ 488,059 $ 13,960 $ ( 496 ) $ 501,523

During 2020 and 2019, the Company transferred securities with a book value of $ 331.0 million and $ 116.3 million and fair value of $ 352.6 million and $ 123.2 million, respectively, from available-for-sale to held-to-maturity.

Allowance for credit losses ( 449 )

Total securities held-to-maturity, net $ 487,610

During 2020, the Company transferred securities with a book value of $ 331.0 million and fair value of $ 352.6 million from available-for-sale to held-to-maturity.

The Company believes the held-to-maturity category is more consistent with the Company’s intent for these securities.

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The unamortized portion of the unrealized holding gain at the time of transfer is retained in accumulated other comprehensive income and in the carrying value of held-to-maturity securities.

Accordingly, the balance of held-to-maturity securities in the “Amortized cost”

column in the table above includes a net unamortized unrealized gain of $ 25.6 million and $ 6.6 million at December 31, 2020 and 2019, respectively.

Accordingly, the

balance of held-to-maturity securities in the “Amortized cost” column in the table above includes a net unamortized unrealized gain of $ 21.0 million and $ 25.6 million at December 31, 2021 and 2020, respectively.

Such amounts are amortized over the remaining life of the securities.

In January 2022, the Company transferred securities with a book value of $116.7 million from available-for-sale to held-to-maturity.

At December 31, 2021, and 2020, there were no holdings of securities of any one issuer in an amount greater than 10 % of shareholders’ equity, other than the U.S.

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Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The weighted average life of the agency mortgage-backed securities is approximately 3 years.

Available-for-sale Held-to-maturity

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$ 1,358,960 $ 1,366,006 $ 430,295 $ 434,672

There were 30 available-for-sale securities and 73 available-for-sale and held-to-maturity securities in an unrealized loss position as of December 31, 2020 and December 31, 2019, respectively, included in the following tables:

There were approximately 290 available-for-sale securities and 30 available-for-sale securities in an unrealized loss position as of December 31, 2021 and December 31, 2020, respectively, included in the following tables:

December 31, 2021

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Agency mortgage-backed securities 259,047 3,685 6,467 184 265,514 3,869

Treasury Bills 60,961 21 — — 60,961 21

$ 725,830 $ 7,842 $ 13,117 $ 359 $ 738,947 $ 8,201

The following table presents a summary of available-for-sale and held-to-maturity investment securities in an unrealized loss position:

December 31, 2020

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($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

Obligations of U.S.

Government-sponsored enterprises $ 4,997 $ 3 $ — $ — $ 4,997 $ 3

Obligations of states and political subdivisions 4,079 33 — — 4,079 33

Agency mortgage-backed securities 65,986 321 — — 65,986 321

Corporate debt securities 67,964 200 — — 67,964 200

$ 75,062 $ 357 $ — $ — $ 75,062 $ 357

The unrealized losses at both December 31, 2021, and 2020, were primarily attributable to changes in market interest rates since the securities were purchased.

At December 31, 2020, the Company had not recorded an ACL on

available-for-sale securities.

At December 31, 2019, the Company had not recognized an other-than-temporary impairment.

Accrued interest receivable on held-to-maturity debt securities totaled $ 3.6 million at December 31, 2020 and is excluded from the estimate of expected credit losses.

At both December 31, 2021 and 2020, the Company had not recorded an ACL on available-for-sale securities.

Accrued interest receivable on held-to-maturity debt securities totaled $ 3.4 million and $ 3.6 million at December 31, 2021 and 2020, respectively, and is excluded from the estimate of expected credit losses.

The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts.

At December 31, 2020, the ACL on held-to-maturity securities was $ 0.4 million .

The gross gains and losses realized from sales of available-for-sale investment securities were as follows:

At December 31, 2021 and 2020, the ACL on held-to-maturity securities was $ 0.6 million and $ 0.4 million, respectively.

The proceeds, gross gains and losses realized from sales of available-for-sale investment securities were as follows:

($ in thousands) 2021 2020 2019

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Loans, including unearned loan fees $ 9,017,642 $ 7,224,935

*Includes $90.3 million of loans previously reported as PCI.

PPP loans totaled $ 276.2 million at December 31, 2021, or $ 272.0 million net of unearned fees of $ 4.2 million.

The loan balance includes a net premium on acquired loans of $ 16.1 million at December 31, 2020, and a net discount of $ 36.0 million at December 31, 2019.

At December 31, 2020 loans of $ 2.5 billion were pledged to FHLB and the Federal Reserve Bank.

Following is a summary of activity for the years ended December 31, 2020 and 2019 of loans to executive officers and directors, or to entities in which such individuals had beneficial interests as a shareholder, officer, or director.

PPP loans totaled $ 709.9 million at December 31, 2020, or $ 698.6 million net of unearned fees of $ 11.3 million.

The loan balance includes a net premium on acquired loans of $ 11.9 million and $ 16.1 million at December 31, 2021 and 2020, respectively.

At December 31, 2021 loans of $ 2.5 billion were pledged to the FHLB and the Federal Reserve.

Loans to executive officers and directors, or to entities in which such individuals had beneficial interests as a shareholder, officer, or director totaled $ 5.7 million for each year ended December 31, 2021 and 2020.

Such loans were made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers and did not involve more than the normal risk of collectibility.

($ in thousands) December 31, 2020 December 31, 2019

Balance at beginning of year $ 5,475 $ 17,169

New loans and advances 2,013 1,376

Payments and other reductions ( 1,771 ) ( 13,070 )

Balance at end of year $ 5,717 $ 5,475

A summary of the activity, by loan category, in the allowance for loan losses for 2018 and 2019, excluding the allowance on PCI loans, and the ACL on loans for 2020 is as follows:

A summary of the activity, by loan category, in the allowance for loan losses for 2019, excluding the allowance on PCI loans, and the ACL on loans for 2020 and 2021 is as follows:

($ in thousands) Commercial and industrial CRE - investor owned CRE - owner occupied Construction and land development Residential real estate Other Total

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Allowance for loan losses:

Balance at December 31, 2019 $ 27,296 $ 5,935 $ 4,873 $ 2,472 $ 1,280 $ 711 $ 42,567

PCI allowance at December 31, 2019 159 — — 139 — 423 721

CECL adoption 6,494 10,726 2,598 5,183 3,470 ( 84 ) 28,387

PCD loans immediately charged off — ( 5 ) ( 57 ) ( 217 ) ( 1,401 ) — ( 1,680 )

Balance, beginning of year $ 33,949 $ 16,656 $ 7,414 $ 7,577 $ 3,349 $ 1,050 $ 69,995

Provision for loan losses 28,373 11,037 7,845 13,438 674 2,012 63,379

Initial allowance on acquired PCD loans 23 2,026 1,427 45 3 — 3,524

Charge-offs ( 5,381 ) ( 498 ) ( 30 ) ( 31 ) ( 408 ) ( 391 ) ( 6,739 )

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Allowance for credit losses:

Balance at December 31, 2019 $ 27,296 $ 5,935 $ 4,873 $ 2,472 $ 1,280 $ 711 $ 42,567

PCI allowance at December 31, 2019 159 — — 139 — 423 721

CECL adoption 6,494 10,726 2,598 5,183 3,470 ( 84 ) 28,387

PCD loans immediately charged off — ( 5 ) ( 57 ) ( 217 ) ( 1,401 ) — ( 1,680 )

Balance, beginning of year $ 58,812 $ 32,062 $ 17,012 $ 21,413 $ 4,585 $ 2,787 $ 136,671

Provision for loan losses 28,373 11,037 7,845 13,438 674 2,012 63,379

Provision (benefit) for loan losses 14,361 568 ( 550 ) ( 7,365 ) 3,900 2,079 12,993

Initial allowance on acquired PCD loans 1,077 3,651 1,504 37 — 737 7,006

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Balance, end of year $ 63,825 $ 35,877 $ 17,560 $ 14,536 $ 7,927 $ 5,316 $ 145,041

The ACL on sponsor finance loans, which is included in the categories above, represented $ 19.0 million as of December 31, 2020.

The ACL on sponsor finance loans, which is included in the categories above, represented $ 18.2 million and $ 19.0 million as of December 31, 2021 and 2020, respectively.

On January 1, 2020, the Company adopted the CECL methodology which added $ 28.4 million to the ACL on loans.

Upon adoption, $ 1.7 million of nonaccrual PCD loans with individual outstanding balances of less than $ 100,000 were immediately charged-off.

Under the CECL method, the Company recorded $ 63.4 million in provision for credit losses on loans in the twelve months ended December 31, 2020, compared to $ 6.7 million in provision for loan losses in the prior year period (excluding the allowance release on PCI loans), under the incurred loss method.

The increase in the provision for credit losses in 2020 was primarily due to a change in economic forecasts from the end of 2019 due to the COVID-19 pandemic.

Under the CECL method, the Company recorded $ 13.0 million and $ 63.4 million in provision for credit losses on loans for the years ended December 31, 2021 and 2020, respectively.

An additional provision for credit losses of $ 0.4 million and $ 2.0 million was recorded in 2021 and 2020, respectively, for HTM securities, unfunded commitments and the recapture of accrued interest on nonaccrual loans.

In 2019, a $ 6.7 million provision for loan losses (excluding the allowance release on PCI loans) was recorded under the incurred loss method.

Acquisition-related provision expense of $ 25.4 million and $ 8.6 million in 2021 and 2020, respectively, was included in the provision for credit losses.

This expense, commonly referred to as the “CECL double-count”, is recognized when a loan portfolio is acquired.

The CECL methodology incorporates various economic scenarios.

The Company utilizes three forecasts in the model, Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast.

The Company utilizes three forecasts in the model;

Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast.

The Company weights these scenarios at 40%, 30%, and 30%, respectively, which added approximately $ 17.5 million to the ACL over the baseline model.

These forecasts incorporate an accommodative monetary policy and the current impact of government stimulus.

These forecasts incorporate an expectation that government stimulus will decline, the Federal Reserve will wind down quantitative easing and begin raising the federal funds rate, and that the

pandemic will begin to slowly recede.

The Company has also recognized the risk posed by loans that have received multiple deferrals of principal and interest payments, including the hospitality sector, by allocating additional reserves to those segments.

Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if another significant wave of COVID hits, small-business bankruptcies occur at higher levels, or unemployment increases.

Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines from another significant wave of COVID, continued or worsening supply-chain issues, labor supply and job growth worsens, or financial market conditions tighten.

In addition to the CECL methodology, the Company incorporates qualitative adjustments into the ACL on loans to capture credit risks inherent within the loan portfolio that are not captured in the DCF model.

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At December 31, 2021, the ACL on loans included a qualitative adjustment of approximately $ 39.1 million.

Of this amount, approximately $ 11.1 million was allocated to Sponsor Finance loans due to their unsecured nature and the increased risk associated with payment deferrals in that portfolio.

Of this amount, approximately $ 8.6 million was allocated to Sponsor Finance loans due to their unsecured nature.

The recorded investment in nonperforming loans by category at December 31, 2021 and 2020 is as follows:

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Total $ 34,818 $ 3,559 $ 130 $ 38,507 $ 18,246

The following table presents the amortized cost basis of collateral-dependent nonperforming loans by class of loan at December 31, 2020:

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

December 31, 2021

Type of Collateral

(in thousands) Commercial Real Estate Residential Real Estate Blanket Lien

Commercial and industrial $ 4,271 $ 209 $ 9,312

Commercial - investor owned 169 1,200 —

Commercial - owner occupied 2,807 32 —

Residential — 2,048 —

Total $ 7,247 $ 3,489 $ 9,312

December 31, 2020

Type of Collateral

(in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Other

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Commercial and industrial — $ — $ — 3 $ 7,447 $ 7,447

Commercial - owner occupied — — — 1 188 188

Residential 1 221 221 3 372 372

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($ in thousands, except for number of loans) Number of Loans Recorded Balance

Commercial and industrial 2 $ 352

Total 2 $ 352

Residential 1 148

There were no restructured loans that subsequently defaulted during the year ended December 31, 2020.

In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days.

In response to the COVID-19 pandemic, the Company implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days.

Deferrals under the CARES Act or interagency guidance are not included above as troubled debt restructurings.

As of December 31, 2020, $ 687.8 million in loans have participated in the programs, including $ 340.0 million in loans deferring full principal and interest payments and $ 347.8 million in loans deferring principal only.

As of December 31, 2020, $ 63.0 million loans remain in a deferral status.

Interest of $ 4.1 million has been deferred and will be collected upon final maturity.

As of December 31, 2021, substantially all of these loans have returned to a current payment status.

The aging of the recorded investment in past due loans by class and category at December 31, 2021 and 2020 is shown below:

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• Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future.

Alternatively, this rating category may also include circumstances

where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.

Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.

• Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations.

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All doubtful rated credits will be on non-accrual.

The recorded investment by risk category of the loans by class at December 31, 2020, which is based upon the most recent analysis performed is as follows:

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

December 31, 2021

Term Loans by Origination Year

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Total Other $ 108,209 $ 68,806 $ 22,694 $ 23,159 $ 6,924 $ 16,288 $ 1,500 $ 9,169 $ 256,749

In the table above, loan originations in 2020 and 2019 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years.

Total loans classified by risk category $ 3,086,845 $ 1,832,001 $ 1,119,464 $ 567,058 $ 460,758 $ 725,750 $ 32,695 $ 1,137,076 $ 8,961,647

Total loans classified by performing status 55,995

Total loans $ 9,017,642

December 31, 2020

Term Loans by Origination Year

(in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Converted to Term Loans Revolving Loans Total

Commercial and industrial

Pass (1-6) $ 1,402,276 $ 454,729 $ 262,258 $ 132,832 $ 25,057 $ 58,315 $ 14,118 $ 527,170 $ 2,876,755

Watch (7) 44,922 15,369 9,585 7,509 19,613 110 — 60,448 157,556

Classified (8-9) 6,602 9,219 3,115 3,964 4,490 1,080 1,281 22,432 52,183

Total Commercial and industrial $ 1,453,800 $ 479,317 $ 274,958 $ 144,305 $ 49,160 $ 59,505 $ 15,399 $ 610,050 $ 3,086,494

Commercial real estate-investor owned

Pass (1-6) $ 481,867 $ 338,843 $ 189,305 $ 131,718 $ 138,288 $ 161,439 $ 6,509 $ 32,058 $ 1,480,027

Watch (7) 32,308 19,722 6,656 — 9,647 17,370 — — 85,703

Classified (8-9) — 5,278 8,716 5,830 1,245 2,620 — — 23,689

Total Commercial real estate-investor owned $ 514,175 $ 363,843 $ 204,677 $ 137,548 $ 149,180 $ 181,429 $ 6,509 $ 32,058 $ 1,589,419

Commercial real estate-owner occupied

Pass (1-6) $ 419,142 $ 287,001 $ 215,181 $ 179,382 $ 104,470 $ 167,456 $ 2,672 $ 45,323 $ 1,420,627

Watch (7) 13,657 5,257 3,113 6,198 4,338 8,460 1,776 941 43,740

Classified (8-9) 2,420 7,427 5,822 6,140 1,309 10,860 — 63 34,041

Total Commercial real estate-owner occupied $ 435,219 $ 299,685 $ 224,116 $ 191,720 $ 110,117 $ 186,776 $ 4,448 $ 46,327 $ 1,498,408

Construction real estate

Pass (1-6) $ 223,069 $ 156,360 $ 45,460 $ 18,579 $ 11,539 $ 9,144 $ — $ 28,880 $ 493,031

Watch (7) 2,544 86 34,179 11,632 — 2,499 — — 50,940

Classified (8-9) 56 2,124 503 1 — 31 — — 2,715

Total Construction real estate $ 225,669 $ 158,570 $ 80,142 $ 30,212 $ 11,539 $ 11,674 $ — $ 28,880 $ 546,686

Residential real estate

Pass (1-6) $ 57,059 $ 27,907 $ 17,718 $ 17,138 $ 27,443 $ 92,657 $ 1,172 $ 66,902 $ 307,996

Watch (7) 210 840 526 — 514 1,603 287 511 4,491

Classified (8-9) 571 733 121 14 898 3,181 — 253 5,771

Total residential real estate $ 57,840 $ 29,480 $ 18,365 $ 17,152 $ 28,855 $ 97,441 $ 1,459 $ 67,666 $ 318,258

Pass (1-6) $ 43,526 $ 28,195 $ 30,074 $ 9,646 $ 5,641 $ 17,027 $ — $ 40,779 $ 174,888

Watch (7) — 1 8 — — 2,637 — 1 2,647

Classified (8-9) — 18 19 13 — 17 8 4 79

Total Other $ 43,526 $ 28,214 $ 30,101 $ 9,659 $ 5,641 $ 19,681 $ 8 $ 40,784 $ 177,614

Total loans classified by risk category $ 2,730,229 $ 1,359,109 $ 832,359 $ 530,596 $ 354,492 $ 556,506 $ 27,823 $ 825,765 $ 7,216,879

Total loans classified by performing status 8,056

Total loans $ 7,224,935

In the tables above, loan originations in 2021 and 2020 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years.

For certain loans, primarily credit cards, the Company evaluates credit quality based on the aging status.

The following table presents the recorded investment on loans based on payment activity:

The following tables present the recorded investment on loans based on aging status:

December 31, 2021

1 unchanged sentence

Commercial and industrial $ 26,166 $ 1 $ 26,167

Commercial - investor owned 1 — 1

Commercial - owner occupied 23,405 — 23,405

Construction and land development 2,690 — 2,690

Residential 267 — 267

1 unchanged sentence

Total $ 55,982 $ 13 $ 55,995

The recorded investment by risk category of the loans by class and category at December 31, 2019 is as follows:

December 31, 2020

($ in thousands) Pass (1-6) Watch (7) Classified (8 & 9) Total*

(in thousands) Performing Non Performing Total

Commercial and industrial $ 2,502 $ — $ 2,502

Commercial - investor owned 1,242,569 17,572 2,840 1,262,981

Commercial - owner occupied 643,276 28,773 6,473 678,522

Construction and land development 437,134 12,140 106 449,380

Residential 921 — 921

1 unchanged sentence

Total $ 8,035 $ 21 $ 8,056

*Excludes $90.3 million of loans previously accounted for as PCI

The Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination.

The carrying amount of those loans is as follows:

($ in thousands) At November 12, 2020

($ in thousands) At July 21, 2021

Par value of acquired loans $ 180,440

Allowance for credit losses ( 7,006 )

Non-credit premium 928

Non-credit discount ( 6,428 )

Purchase price of acquired loans $ 167,006

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The Company has banking and limited-service facilities, datacenters, and certain equipment lea sed under agreements.

Most of the leases expire between 2021 and 2025 and include one or more renewal options of up to 5 years.

Most of the leases expire between 2022 and 2027 and include one or more renewal options for up to 5 years.

One lease expires in 2031.

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Total lease cost $ 5,710 $ 3,408

Payments on operating leases included in the measurement of lease liabilities during each of the twelve months ended December 31, 2020 and 2019 totaled $ 3.3 million.

Payments on operating leases included in the measurement of lease liabilities during the twelve months ended December 31, 2021 and 2020 totaled $ 5.2 million and $ 3.3 million, respectively.

Right-of-use assets obtained in exchange for lease obligations totaled $ 5.7 million and $ 1.6 million during the twelve months ended December 31, 2021 and 2020, respectively.

The additions in 2020 were primarily from the Seacoast acquisition.

Supplemental balance sheet information related to leases was as follows:

The additions in 2021 and 2020 were primarily from the First Choice acquisition and Seacoast acquisition, respectively.

In 2021, an impairment of $ 1.1 million was recognized on right-of-use assets concurrent with the announced closure of certain leased locations.

For further discussion see “Note 8 - Fixed Assets.”

Supplemental balance sheet information related to leases is as follows:

($ in thousands) December 31, 2021 December 31, 2020

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Weighted average discount rate 2.0 % 2.5 %

Maturities of operating lease liabilities were as follows:

Maturities of operating lease liabilities are as follows:

($ in thousands)

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$ 13,506 2.64 % March 17, 2026

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings.

For derivatives designated and qualified as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are paid on the Company’s variable-rate debt.

During the next twelve months, the Company estimates that an additional $ 1.5 million will be reclassified as an increase to interest expense.

During the next twelve months, the Company estimates an additional $ 1.3 million will be reclassified as an increase to interest expense.

Concurrently with the repayment of $ 200 million of variable-rate FHLB advances in the fourth quarter of 2020, the Company terminated two interest rate swaps with a notional value of $ 200.0 million.

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Derivatives designated as hedging instruments

Interest rate swap $ 61,962 $ 61,962 $ — $ — $ 5,987 $ 2,872

Interest rate swaps $ 61,962 $ 61,962 $ — $ — $ 2,911 $ 5,987

Derivatives not designated as hedging instruments

Interest rate swap $ 1,026,016 $ 749,819 $ 28,703 $ 11,055 $ 28,980 $ 11,875

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are subject to offsetting as of December 31, 2020 and December 31, 2019.

Interest rate swaps $ 918,698 $ 1,026,016 $ 12,869 $ 28,703 $ 12,883 $ 28,980

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments subject to offsetting as of December 31, 2021 and December 31, 2020.

The gross amounts of assets or liabilities can be reconciled to the tabular disclosure of fair value.

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Gross Amounts Recognized Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets presented in the Statement of Financial Position Financial Instruments Fair Value Collateral Posted Net Amount

Interest rate swap $ 28,703 $ — $ 28,703 $ 2 $ — $ 28,701

Interest rate swap $ 34,967 $ — $ 34,967 $ 2 $ 34,903 $ 62

Interest rate swaps $ 12,869 $ — $ 12,869 $ 1,033 $ — $ 11,836

Interest rate swaps $ 15,794 $ — $ 15,794 $ 1,033 $ 14,031 $ 730

Securities sold under agreements to repurchase 331,006 — 331,006 — 331,006 —

3 unchanged sentences

Interest rate swap $ 11,055 $ — $ 11,055 $ 56 $ — $ 10,999

Interest rate swap $ 14,747 $ — $ 14,747 $ 56 $ 14,573 $ 118

Interest rate swaps $ 28,703 $ — $ 28,703 $ 2 $ — $ 28,701

Interest rate swaps $ 34,967 $ — $ 34,967 $ 2 $ 34,903 $ 62

Securities sold under agreements to repurchase 271,081 — 271,081 — 271,081 —

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Furniture, fixtures and equipment 18,821 17,933

Capitalized software 1,373 1,373

83,682 84,329

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Depreciation and amortization of fixed assets included in noninterest expense amounted to $ 6.1 million, $ 6.2 million, and $ 5.7 million in 2021, 2020, and 2019, respectively.

In 2021 the Company commenced the process to close three branch locations in California related to the First Choice acquisition.

A lease and fixed asset impairment charge of $ 0.4 million was recognized and reported in merger-related expenses.

Additionally, the Company also commenced the process to close two branches in St.

Louis and consolidate the operations and customers of these branches with other nearby locations.

An impairment charge of $ 3.4 million on these branches was recognized in 2021 for buildings, leases and fixed assets.

NOTE 9 - GOODWILL AND INTANGIBLE ASSETS

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Core deposit intangible, net, end of year $ 22,286 $ 23,084

Amortization expense on the core deposit intangibles was $ 5.7 million, $ 5.5 million, and $ 2.5 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Amortization expense on the core deposit intangibles was $ 5.7 million for the each of the years ended December 31, 2021 and 2020, and $ 5.5 million for the year ended December 31, 2019.

The core deposit intangibles are being amortized over a 10 -year period.

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Certificates of deposit balances over the FDIC insurance limit of $250,000 were $ 93.7 million as of December 31, 2021.

Following is a summary of activity for the year ended December 31, 2020, for deposit accounts of executive officers and directors, or to entities in which such individuals had beneficial interests as a shareholder, officer, or director.

($ in thousands) December 31, 2020

Balance at beginning of year $ 9,763

Deposits 2,441

Withdrawals ( 4,961 )

Balance at end of year $ 7,243

The Company is a participant in the Promontory Interfinancial Network, a network that offers deposit placement services such as CDARS and ICS, which offer products that qualify large deposits for FDIC insurance.

At December 31, 2021, deposit accounts of executive officers and directors, or to entities in which such individuals had beneficial interests as a shareholder, officer, or director totaled $ 5.7 million.

The Company is a participant in the Promontory Interfinancial Network, a network that offers deposit placement services such as CDARS and ICS, which offers products that qualify large deposits for FDIC insurance.

At December 31, 2021, the Company had $ 22.0 million of CDARS deposits and $ 118.2 million of ICS deposits.

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On November 1, 2016, the Company issued $ 50 million of fixed-to-floating rate subordinated notes.

The notes initially bear a fixed annual interest rate of 4.75%, with interest payable semiannually in arrears on May 1 and November 1 of each year, commencing May 1, 2017.

Commencing November 1, 2021, the interest rate on the notes resets quarterly to the three-month LIBOR rate plus a spread of 338.7 basis points, payable quarterly in arrears.

On or after November 1, 2021, the Company will have the option to redeem the notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the subordinated notes to be redeemed plus accrued interest, subject to applicable regulatory approval.

The Company’s obligation to make payments of principal and interest on the notes is subordinate and junior in right of payment to all of its senior debt.

Current regulatory guidance allows for this subordinated debt to be treated as tier 2 regulatory capital for the first five years of its term, subject to certain limitations, and then phased out of tier 2 capital pro rata over the next five years.

The notes initially bore a fixed annual interest rate of 4.75%, with interest payable semiannually in arrears on May 1 and November 1 of each year, commencing May 1, 2017.

On November 1, 2021, the Company redeemed the $50.0 million of subordinated debentures at par.

A loss of $0.7 million on the redemption was recognized for the write-off of unamortized debt issuance costs.

On May 21, 2020, EFSC issued $ 63.3 million of 5.75% fixed-to-floating rate subordinated notes due in 2030 in a public offering (the “2030 Notes”).

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Bank National Association, as trustee, and subsequent First Supplemental Indenture)), plus 566.0 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing on September 1, 2025.

Notwithstanding the foregoing, in the event that the benchmark rate is less than zero, then the benchmark rate shall be deemed to be zero.

Notwithstanding the foregoing, in event that the benchmark rate is less than zero, then the benchmark rate shall be deemed to be zero.

The Company’s obligation to make payments of principal and interest on the notes is subordinate and junior in right of payment to all of its senior debt.

NOTE 12 - FEDERAL HOME LOAN BANK ADVANCES

FHLB advances are collateralized by 1-4 family residential real estate loans, business loans, and certain commercial real estate loans.

At December 31, 2020 and 2019, the carrying value of the loans pledged to the FHLB of Des Moines was $ 1.4 billion and $ 1.6 billion, respectively.

At December 31, 2021 and 2020, the carrying value of the loans pledged to the FHLB of Des Moines was $ 1.4 billion at both periods.

The secured line of credit had availability of approximately $ 708.6 million at December 31, 2021.

1 unchanged sentence

($ in thousands) Term Outstanding Balance Weighted Rate Outstanding Balance Weighted Rate

Non-amortizing fixed advance Less than 1 year $ — — % $ 170,000 1.73 %

Non-amortizing fixed advance Greater than 1 year $ 50,000 1.56 % $ 50,000 1.56 %

Total FHLB advances $ 50,000 1.56 % $ 222,406 1.70 %

In August 2019, the Company entered into agreements totaling $ 50 million for convertible advances with a weighted average rate of 1.56 % that mature in 2024 and are currently puttable by the FHLB.

At December 31, 2021, the Company used $ 60.0 million of collateral value to secure confirming letters of credit for public unit deposits and industrial development bonds.

NOTE 13 - OTHER BORROWINGS AND NOTES PAYABLE

NOTE 13 - OTHER BORROWINGS

Securities Sold Under Agreement to Repurchase

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However, the Company is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price.

The Company manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.

The Company manages this risk by maintaining an unpledged securities

portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.

A summary of securities sold under agreements to repurchase is as follows:

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Federal Reserve PPPLF

The Company acquired $ 86.1 million of Federal Reserve PPPLF funds from the Seacoast acquisition which were subsequently paid off in November 2020.

The Company acquired $ 86.1 million of Federal Reserve PPPLF funds from the Seacoast acquisition which were paid off in November 2020.

Revolving Credit Line

1 unchanged sentence

The Revolving Agreement has a one-year term, maturing on February 22, 2022.

It is in process of renewal and allows for borrowings up to $ 25 million.

It allows for borrowings up to $ 25 million.

The interest rate is the one-month LIBOR plus 125 basis points.

1 unchanged sentence

The Revolving Agreement is subject to ongoing compliance with a number of customary affirmative and negative covenants as well as specified financial covenants.

A summary of the amounts drawn on the Revolving Agreement is as follows:

($ in thousands) 2019

Outstanding balance $ —

Average balance during the year 323

Maximum balance outstanding at any month-end 2,000

Weighted average interest rate during the year 4.61 %

Average interest rate at December 31 —

The revolving credit line was not accessed in 2020.

In February 2019, the Company entered into a five year, $ 40.0 million unsecured term loan agreement (the “Term Loan”) with another bank with the proceeds primarily used to fund the company’s cash portion of the acquisition of Trinity.

The interest rate is the one-month LIBOR plus 125 basis points.

In February 2022, the Revolving Agreement was renewed for a one-year term and the interest rate was amended to one-month Term SOFR plus 136 basis points.

The revolving credit line was not accessed in 2021 or 2020.

The interest rate is one-month LIBOR plus 125 basis points.

In February 2022, the interest rate on the Term Loan was amended to one-month Term SOFR plus 136 basis points.

A summary of the Term Loan is as follows:

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The CCB is designed to insulate banks from periods of stress and impose constraints on dividends, share repurchases and discretionary bonus payments when capital levels fall below prescribed levels.

The capital ratios are presented in the table below:

The capital ratios are presented in the following table:

December 31, 2021 December 31, 2020

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Common Stock Repurchase Plan

In May 2015, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock.

In April 2021, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock.

The repurchases may be made in open market or privately negotiated transactions and the stock repurchase program will remain in effect until fully utilized or until modified, superseded or terminated.

1 unchanged sentence

Preferred Stock

The Company has 5,000,000 shares of authorized preferred stock with a par value of $ 0.01 .

The Company has 5,000,000 shares of authorized preferred stock with a par value of $ 0.01 with 75,000 shares issued and outstanding at the end of 2021.

The Board of Directors has the right to set for each series of preferred stock, subject to the laws of the State of Delaware, the dividend rate, conversion and redemption terms, voting rights and liquidation preferences, among others.

At December 31, 2020 and 2019 there were no shares of preferred stock outstanding.

In the fourth quarter 2021, the Company issued and sold 3,000,000 depositary shares, each representing 1/40th interest in a share of the Company’s 5% Noncumulative, Perpetual Preferred Stock, Series A (“Series A Preferred Stock”), totaling $ 72.0 million, net of issuance costs.

The depositary shares trade under the ticker “EFSCP”.

The Series A Preferred Stock may be redeemed at the Company’s option, subject to prior regulatory approval, in whole or in part on any dividend payment date on or after December 15, 2026 or within 90 days following a regulatory capital event, as defined in the offering documents.

If any Series A Preferred Stock are redeemed, a proportionate number of depositary shares will also be redeemed.

Dividends, when and if declared by the board of directors, are payable, quarterly in arrears, on March 15, June 15, September 15 and December 15 of each year.

If dividends on the Series A Preferred stock have not been declared or paid in six quarterly periods, whether or not consecutive, the number of directors on the board will automatically be increased by two and the holders of the Series A preferred stock will be entitled to vote for the additional directors.

The Company’s ability to pay dividends to its shareholders is generally dependent upon the payment of dividends by the Bank to the parent company.

1 unchanged sentence

Dividends on the Company’s capital stock are prohibited under the terms of the junior subordinated debenture agreements, see “Note 11 - Subordinated Debentures,” if the Company is in continuous default on its payment obligations to the capital trusts, has elected to defer interest payments on the debentures or extends the interest payment period.

At December 31, 2020, the Company was not in default on any of the junior subordinated debenture issuances.

Furthermore, unless dividends on all outstanding shares of the Series A Preferred Stock for the most recently completed dividend period have been paid or declared, dividends on, and repurchases of, common stock is prohibited.

At December 31, 2021, the Company was not in default on any of the junior subordinated debenture issuances or preferred stock.

Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Net change 29,226 ( 33 ) ( 2,162 ) 27,031

Adjustment for change in accounting policies ( 792 ) ( 42 ) — ( 834 )

Transfer from available-for-sale to held-to-maturity ( 5,202 ) 5,202 — —

Balance, December 31, 2019 $ 14,977 $ 4,934 $ ( 2,162 ) $ 17,749

3 unchanged sentences

Net change ( 17,049 ) ( 3,624 ) 2,330 ( 18,343 )

Transfer from available-for-sale to held-to-maturity ( 16,284 ) 16,284 — —

Balance, December 31, 2021 $ 5,271 $ 15,684 $ ( 2,178 ) $ 18,777

4 unchanged sentences

Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities(a) — — — ( 421 ) ( 104 ) ( 317 ) 49 12 37

Reclassification of (gain) loss on held-to-maturity securities(b) ( 2,537 ) ( 627 ) ( 1,910 ) ( 44 ) ( 11 ) ( 33 ) 4 1 3

Change in unrealized loss on cash flow hedges arising during the period(b) ( 7,898 ) ( 1,951 ) ( 5,947 ) ( 3,004 ) ( 742 ) ( 2,262 ) — — —

Reclassification of gain on held-to-maturity securities(b) ( 4,672 ) ( 1,048 ) ( 3,624 ) ( 2,537 ) ( 627 ) ( 1,910 ) ( 44 ) ( 11 ) ( 33 )

Change in unrealized gain (loss) on cash flow hedges arising during the period(b) 1,533 372 1,161 ( 7,898 ) ( 1,951 ) ( 5,947 ) ( 3,004 ) ( 742 ) ( 2,262 )

Reclassification of loss on cash flow hedges(b) 1,543 374 1,169 4,782 1,181 3,601 133 33 100

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The Company has adopted share-based compensation plans to reward and provide long-term incentive for directors and key employees of the Company including its subsidiaries.

These plans provide for the granting of stock, stock options, stock-settled stock appreciation rights (“SSARs”), and restricted stock units (“RSUs”), and may contain performance terms as designated by the Company’s Board of Directors upon the recommendation of the Compensation Committee of the Board.

These plans provide for the granting of stock, stock options, stock-settled stock appreciation rights, and restricted stock units (“RSUs”), and may contain performance terms for key employees as designated by the Company’s Board of Directors upon the recommendation of the Compensation Committee of the Board.

The Company uses authorized and unissued shares to satisfy share award exercises.

The total excess income tax benefit for share-based compensation arrangements was $ 0.2 million , $ 0.5 million, and $ 1.6 million for the years ended December 31, 2020, 2019, and 2018, respectively.

The total excess income tax benefit (expense) for share-based compensation arrangements was $( 0.1 ) million, $ 0.2 million, and $ 0.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.

At December 31, 2021, there was $ 8.2 million of total unrecognized compensation cost related to unvested share-based compensation awards.

The cost is expected to be recognized over a weighted-average period of 2 years.

The cost is expected to be recognized over a weighted-average term of 2 years.

The following table summarizes share-based compensation expense:

2 unchanged sentences

Restricted stock units 3,109 2,613 1,969

Stock options 396 — —

Employee stock purchase plan 735 468 364

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The amount of the awards is determined at the end of the three-year vesting and performance period.

In January 2021, the Company awarded 23,251 shares to employees upon completion of the 2018-2020 performance cycle.

In January 2020, the Company awarded 62,649 shares to employees upon completion of the 2017-2019 performance cycle.

In January 2019, the Company awarded 99,308 shares to employees upon completion of the 2016-2018 performance cycle.

The fair value of performance units vesting in 2021, 2020, and 2019 were $ 0.9 million, $ 2.8 million, and $ 4.6 million, respectively.

Information related to the outstanding grants at December 31, 2021 is shown below:

($ in thousands) 2019 - 2021 Cycle 2020 - 2022 Cycle

($ in thousands) 2019 - 2021 Cycle 2020 - 2022 Cycle 2021 - 2023 Cycle

Shares issuable at target 19,576 24,674 40,372

2 unchanged sentences

Weighted average grant date fair value $ 47.46 $ 38.09 $ 47.16

Maximum Shares Issuable

Outstanding at December 31, 2020 125,176

Granted 84,628

Vested (issued 23,251 shares) ( 31,452 )

Forfeited ( 9,108 )

Outstanding at December 31, 2021 169,244

Restricted Stock Units

The Company awards nonvested stock, in the form of RSUs to employees.

RSUs generally are subject to continued employment and generally vest ratably over two to five years.

Shares issued to the Bank’s directors for compensation are not subject to vesting requirements.

RSUs generally are subject to continued employment and generally vest ratably over three to five years.

Vesting is accelerated upon a change in control or the employee meeting certain retirement criteria.

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Total fair value at vesting date $ 2,855 $ 1,702 $ 1,067

Total unrecognized compensation cost for nonvested stock units 3,899 3,417 2,175

Unrecognized compensation cost 4,622 3,899 3,417

Expected years to recognize unearned compensation 1.9 years 1.9 years 1.9 years

Weighted average grant date fair value $ 44.01 $ 39.63 $ 45.00

A summary of the status of the Company’s RSU awards as of December 31, 2021 and changes during the year then ended is presented below.

5 unchanged sentences

Outstanding at December 31, 2021 181,657 $ 42.71

Employee Stock Options and Stock-settled Stock Appreciation Rights

In determining compensation cost for stock options and SSARs, the Black-Scholes option-pricing model is used to estimate the fair value on date of grant.

There were no grants of employee stock options or SSARs during the years ended December 31, 2020, 2019, or 2018.

Stock Options

In determining compensation cost for stock options, the Black-Scholes option-pricing model is used to estimate the fair value on date of grant.

The model utilizes several assumptions in its calculations.

The risk-free rate for periods within the contractual life of the option is based on the U.S.

Treasury yield in effect at the time of the grant.

The expected term of options granted is based on the option's vesting schedule and expected exercise patterns and represent the period of time that options granted are expected to be outstanding.

The expected volatility is based on the historical volatility of the Company's stock and expected term of the option.

The dividend yield is determined by annualizing the dividend rate as a percentage of the Company's stock price.

The following weighted average assumptions were used for grants issued during the year ended December 31, 2021.

Weighted Average

Risk Free Interest Rate 1.06 %

Expected Dividend Yield 1.65 %

Expected Volatility 33.92 %

Expected Term (years) 6.2

Stock options have been granted to key employees with exercise prices equal to the market price of the Company’s common stock at the date of grant and 10 -year contractual terms.

Stock options have a vesting schedule of three to five years .

The SSARs are subject to continued employment, have a 10 -year contractual term and vest ratably over five years .

Neither stock options nor SSARs carry voting or dividend rights until exercised .

At December 31, 2020, there was no remaining unrecognized compensation expense related to stock options and SSARs and all outstanding awards are vested.

Various information related to the stock options and SSARs is shown below.

($ in thousands) 2020 2019 2018

Intrinsic value of option/SSAR exercises on date of exercise $ 597 $ 407 $ 2,469

Following is a summary of the SSAR activity for 2020.

Following is a summary of stock option activity for 2021.

($ in thousands, except per share data) Shares Weighted

Exercise Price

Exercise Price Weighted

Contractual Term

Outstanding at December 31, 2020 — $ —

Exercised ( 28,300 ) 10.14

Outstanding at December 31, 2020 — N/A

Granted 118,604 43.80 9.2 years

Forfeited ( 5,677 ) 43.81

Outstanding at December 31, 2021 112,927 $ 43.80 9.2 years

Exercisable at December 31, 2021 460 $ 43.81 9.2 years

Employee Stock Purchase Plan

The Company adopted an Employee Stock Purchase Plan (“ESPP”) in 2018 to provide its eligible employees with an opportunity to purchase common stock through accumulated contributions.

The ESPP provides for shares to be

purchased at 85 % of the lesser of the stock price at the enrollment date or the exercise date.

The Company’s Employee Stock Purchase Plan (“ESPP”) provides its eligible employees with an opportunity to purchase common stock through accumulated payroll contributions.

The ESPP provides for shares to be purchased at 85 % of the lesser of the stock price at the enrollment date or the exercise date.

The maximum number of shares of common stock available for sale under the ESPP is 750,000 .

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Shares granted 12,998 15,901 11,382

Weighted average fair value $ 30.28 $ 41.63 $ 50.74

Weighted average grant date fair value $ 46.05 $ 30.28 $ 41.63

The Company has a 401(k) savings plan which covers substantially all full-time employees over the age of 21 and matches 100% of the first 6% of employee contributions.

1 unchanged sentence

Deferred Compensation Plan

The Company’s Deferred Compensation Plan permits certain executives to participate and defer up to 25 % of their base salary and/or up to 100 % of their eligible bonus for a plan year.

The Company’s Nonqualified Deferred Compensation Plan permits certain executives to participate and defer up to 25 % of their base salary and/or up to 100 % of their eligible bonus for a plan year.

Participants make an irrevocable election when they elect to participate for a plan year to receive the vested account balance following their retirement date, or at a future date not less than five years after the beginning of the plan year.

At December 31, 2020, the Company had assets and liabilities of $ 3.6 million and $ 4.9 million, respectively, related to the Deferred Compensation Plan.

At December 31, 2021, the Company had a liability of $ 5.0 million related to the Deferred Compensation Plan.

NOTE 17 - INCOME TAXES

The components of income tax expense for the years ended December 31, are as follows:

The components of income tax expense (benefit) for the years ended December 31, are as follows:

Year ended December 31,

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Non-deductible expenses 1,090 637 749

Tax benefit (expense) of LIHTC investments, net ( 444 ) ( 278 ) ( 50 )

Tax benefit of low-income housing tax credit ("LIHTC") investments, net ( 132 ) ( 444 ) ( 278 )

Excess tax benefits 146 ( 175 ) ( 526 )

Federal tax credits ( 1,136 ) ( 1,327 ) ( 913 )

Subsidiary dividend timing election — — ( 2,728 )

Non-taxable donation to charitable foundation ( 263 ) — ( 420 )

1 unchanged sentence

Total income tax expense $ 35,578 $ 17,563 $ 23,297

The net amount recognized as a component of tax expense for tax credits, other tax benefits, and amortization from low-income housing tax credit (“LIHTC”) investments recognized per the table above was $ 0.4 million for the year ended December 31, 2020.

The net amount recognized as a component of tax expense for tax credits, other tax benefits, and amortization from LIHTC investments recognized per the table above was $ 0.1 million for the year ended December 31, 2021.

The net amount recognized as a benefit component of income tax expense per the table above was $ 0.4 million for the year ended December 31, 2020, and $ 0.3 million for the year ended December 31, 2019.

7 unchanged sentences

Allowance for loan losses $ 36,550 $ 34,031

Acquired loans — 9,722

Loans held-for-sale 6,971 8,058

17 unchanged sentences

Tax credit carryforwards originated in years 2010-2015 and will expire in the years between 2030-2035.

Capital losses originated in 2015, 2016, & 2018 and will expire in the years betwee n 2021-2023.

A valuation allowance is provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized.

In 2019, as part of the Trinity Capital Corporation acquisition, the company acquired net operating loss, tax credit, and capital loss deferred tax assets.

The company determined that it was more likely than not that some of the assets would not be realized.

As such, the company recorded a $ 2.9 million valuation allowance as of December 31, 2020 and 2019.

The Company and its subsidiaries file income tax returns in the federal jurisdiction and in twenty-nine states.

The company determined it was more likely than not that some of the assets would not be realized.

As such, the company has a valuation allowance recorded of $ 2.8 million and $ 2.9 million as of December 31, 2021 and 2020, respectively.

The Company and its subsidiaries file income tax returns in the federal jurisdiction and in thirty states.

The Company is no longer subject to federal, state or local income tax audits by tax authorities for years before 2017, with the exception of 2016 being an open year by one state taxing authority.

2 unchanged sentences

As of December 31, 2020 and 2019, the total amount of the net unrecognized tax benefits that would impact the effective tax rate, if recognized, was $ 3.1 million and $ 1.1 million, respectively.

The Company believes it is reasonably possible that the gross amount of unrecognized benefits will be reduced by approximately $ 0.3 million as a result of a lapse of statute of limitations in the next 12 months.

The Company believes it is reasonably possible the gross amount of unrecognized benefits will be reduced by approximately $ 0.4 million as a result of a lapse of statute of limitations in the next 12 months.

The Company is under audit by the state of Missouri, and while the Company has concluded it has adequately provided for uncertain tax positions, the outcome of such audits are always uncertain and could result in additional tax expense, though immaterial.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense and classifies such interest and penalties in the liability for unrecognized tax benefits.

The amount accrued for interest and penalties was $ 0.9 million as of December 31, 2020, and was not significant for 2019 and 2018.

The amount accrued for interest and penalties was $ 0.5 million as of December 31, 2021, $ 0.9 million for 2020 and was not significant for 2019.

The activity in the gross liability for unrecognized tax benefits was as follows:

3 unchanged sentences

Additions for tax positions of prior years 436 1,556 62

Settlements for tax positions of prior years ( 1,289 ) — —

Settlements or lapse of statute of limitations ( 170 ) ( 291 ) ( 267 )

14 unchanged sentences

State tax credits 18,118 24,473

Low-income housing tax credits — 704

Limited partnership commitments 21,553 23,400

There was an insignificant amount of unadvanced commitments on impaired loans at December 31, 2021 and December 31, 2020.

Other liabilities include approximately $ 5.7 million for estimated losses attributable to unadvanced commitments at December 31, 2020.

Other liabilities include approximately $ 7.6 million for an allowance for credit losses attributable to unadvanced commitments at December 31, 2021.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

10 unchanged sentences

The approximate remaining term of letters of credit range from 1 month to 11 years at December 31, 2021.

The Company also has off-balance sheet commitments for purchases of state tax credits, low-income housing tax credits, and commitments for various capital raises for SBICs .

The Company also has off-balance sheet commitments for purchases of state tax credits and commitments for various capital raises for SBICs .

NOTE 19 - FAIR VALUE MEASUREMENTS

25 unchanged sentences

Total securities available-for-sale — 1,366,006 — 1,366,006

Other investments — 3,012 — 3,012

Derivative financial instruments — 12,869 — 12,869

15 unchanged sentences

Residential mortgage-backed securities — 526,572 — 526,572

Corporate debt securities — 14,998 — 14,998

Treasury Bills — 11,466 — 11,466

Total securities available-for-sale — 912,429 — 912,429

Other investments — — — —

Derivative financial instruments — 28,703 — 28,703

3 unchanged sentences

• Securities available-for-sale .

Securities classified as available-for-sale are reported at fair value utilizing Level 2 and Level 3 inputs.

Securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs.

Fair values for Level 2 securities are based upon dealer quotes, market spreads, the U.S.

5 unchanged sentences

In addition, the Company validates the counterparty quotations with third-party valuation sources.

Derivatives with negative fair values are

included in Other liabilities in the consolidated balance sheets.

Derivatives with negative fair values are included in Other liabilities in the consolidated balance sheets.

Derivatives with positive fair value are included in Other assets in the consolidated balance sheets.

Changes in the fair value of client-related derivative instruments are recognized through net income.

For the years ended December 31, 2020 and 2019, the gains and losses offset each other due to the Company’s hedging of the client swaps with other bank counterparties.

For the years ended December 31, 2021 and 2020, the gains and losses substantially offset each other due to the Company’s hedging of the client swaps with other bank counterparties.

Fair value on a non-recurring basis

2 unchanged sentences

• Impaired loans .

Impaired loans are included as Portfolio loans on the Company’s consolidated balance sheets with amounts specifically reserved for credit impairment in the Allowance for loan losses.

On a quarterly basis, fair value adjustments are recorded on impaired loans to account for (1) partial write-downs that are based on the current appraised or market-quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value.

On a quarterly basis, fair value adjustments are recorded as necessary on impaired loans to account for (1) partial write-downs based on the current appraised or market-quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value.

In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable.

5 unchanged sentences

These are considered Level 3 inputs.

• Loan servicing asset .

The loan servicing asset is included in Other assets on the Company’s consolidated balance sheets and assessed for impairment on a quarterly basis.

Market-based cash flow modeling and discounting models specific to the SBA industry are provided by a third-party valuation service and are considered Level 2 inputs.

The following table presents financial instruments and non-financial assets measured at fair value on a non-recurring basis as of December 31, 2021 and 2020.

8 unchanged sentences

Other real estate 632 — — 632 29

Loan servicing asset 3,146 $ 3,146 $ — $ 156

Total $ 10,184 $ — $ 3,146 $ 7,038 $ 3,685

7 unchanged sentences

Impaired loans $ 1,247 $ — $ — $ 1,247 $ 4,486

Other real estate 3,600 — — 3,600 1,000

Total $ 4,847 $ — $ — $ 4,847 $ 5,486

(1) The amounts represent balances measured at fair value during the period and still held as of the reporting date.

Impaired loans are reported at the fair value of the underlying collateral.

Fair values for impaired loans are obtained from current appraisals by qualified licensed appraisers or independent valuation specialists.

Other real estate owned is adjusted to fair value upon foreclosure of the underlying loan.

Subsequently, foreclosed assets are carried

at the lower of carrying value or fair value less costs to sell.

Fair value of other real estate is based upon the current appraised values of the properties as determined by qualified licensed appraisers and the Company’s judgment of other relevant market conditions.

Carrying amount and fair value at December 31, 2021 and 2020

10 unchanged sentences

State tax credits, held-for-sale 27,994 30,686 Level 3 36,853 39,925 Level 3

Servicing asset 6,714 6,714 Level 2 5,721 5,721 Level 2

Balance sheet liabilities

8 unchanged sentences

Management evaluates its estimates and assumptions on an ongoing basis using 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.

Decreasing real estate values, illiquid credit markets, volatile equity markets, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions.

Such estimates and assumptions are adjusted when facts and circumstances dictate.

Changing real estate values, illiquid credit markets, volatile equity markets, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions.

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.

Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

In addition, these estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Fair value estimates are based on existing on-balance and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Fair value estimates are based on existing on-balance and off-balance-sheet financial instruments without attempting to estimate the value of

anticipated future business and the value of assets and liabilities that are not considered financial instruments.

In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.

20 unchanged sentences

Total income 100,600 38,883 62,163

Interest expense-subordinated debentures and notes 9,885 7,507 5,798

Interest expense-notes payable 705 1,182 62

Interest expense 11,406 10,590 8,689

Other expenses 11,037 6,946 6,936

4 unchanged sentences

Equity in undistributed earnings of subsidiaries 51,188 49,589 42,723

Net income and comprehensive income $ 74,384 $ 92,739 $ 89,217

Net income $ 133,055 $ 74,384 $ 92,739

Condensed Statements of Cash Flows

10 unchanged sentences

Cash flows from investing activities:

Cash paid for acquisitions, net of cash acquired ( 1,243 ) ( 36,015 ) —

Proceeds (cash paid) for acquisitions, net of cash acquired 2,346 ( 1,243 ) ( 36,015 )

Purchases of other investments ( 2,204 ) ( 1,166 ) ( 2,634 )

Proceeds from distributions on other investments 2,656 765 1,271

Net cash used in investing activities ( 1,644 ) ( 37,378 ) ( 818 )

Net cash provided by (used in) investing activities 2,798 ( 1,644 ) ( 37,378 )

Cash flows from financing activities:

Proceeds from issuance of subordinated notes — 61,953 —

Payments for the redemption of subordinated notes ( 50,000 ) — —

Proceeds from notes payable — — 1,000

4 unchanged sentences

Payments for the repurchase of common stock ( 60,589 ) ( 15,347 ) ( 15,526 )

Payments for the issuance of equity instruments, net 78 ( 212 ) ( 2,576 )

Proceeds from issuance of preferred stock 71,988 — —

Other 516 78 ( 212 )

Net cash provided by (used in) financing activities ( 71,381 ) 22,603 ( 21 )

Net increase (decrease) in cash and cash equivalents 53,520 15,586 ( 3,608 )

Net increase in cash and cash equivalents 19,285 53,520 15,586

Cash and cash equivalents, beginning of year 75,475 21,955 6,369

3 unchanged sentences

Common shares issued in connection with acquisitions $ 343,650 $ 167,035 $ 171,885

NOTE 21 - QUARTERLY CONDENSED FINANCIAL INFORMATION (Unaudited)

The following table presents unaudited quarterly financial information for the periods indicated:

($ in thousands, except per share data) 4th

Interest income $ 84,113 $ 70,787 $ 73,191 $ 76,688

Interest expense 6,667 7,433 7,358 13,320

Net interest income 77,446 63,354 65,833 63,368

Provision for credit losses 9,463 14,080 19,591 22,264

Net interest income after provision for loan losses 67,983 49,274 46,242 41,104

Noninterest income 18,506 12,629 9,960 13,408

Noninterest expense 51,050 39,524 37,912 38,673

Income before income tax expense 35,439 22,379 18,290 15,839

Income tax expense 6,508 4,428 3,656 2,971

Net income $ 28,931 $ 17,951 $ 14,634 $ 12,868

Earnings per common share:

Basic $ 1.00 $ 0.68 $ 0.56 $ 0.49

Diluted 1.00 0.68 0.56 0.48

($ in thousands, except per share data) 4th

Interest income $ 77,238 $ 81,078 $ 79,201 $ 67,617

Interest expense 15,625 18,032 17,486 15,274

Net interest income 61,613 63,046 61,715 52,343

Provision for credit losses 1,341 1,833 1,722 1,476

Net interest income after provision for loan losses 60,272 61,213 59,993 50,867

Noninterest income 14,418 13,564 11,964 9,230

Noninterest expense 38,354 38,239 49,054 39,838

Income before income tax expense 36,336 36,538 22,903 20,259

Income tax expense 7,246 7,469 4,479 4,103

Net income $ 29,090 $ 29,069 $ 18,424 $ 16,156

Earnings per common share:

Basic $ 1.10 $ 1.09 $ 0.69 $ 0.68

Diluted 1.09 1.08 0.68 0.67

NOTE 21 - SUPPLEMENTAL FINANCIAL INFORMATION

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

Year ended December 31,

($ in thousands) 2021 2020 2019

Miscellaneous income:

Community development fees $ 5,491 $ 3,353 $ 889

Other miscellaneous income 16,657 13,609 11,007

Total miscellaneous income $ 22,148 $ 16,962 $ 11,896

Other expense:

Amortization expense $ 5,691 $ 5,673 $ 5,543

Banking expenses 6,123 4,921 5,258

Customer analysis expense 12,104 1,246 —

FDIC and other insurance 5,789 3,897 2,380

Loan, legal expenses 7,130 4,003 3,526

Meals and entertainment 1,253 742 3,670

Outside services 4,992 4,961 4,335

Other expenses 19,593 18,807 17,119

Total other noninterest expenses $ 62,675 $ 44,250 $ 41,831

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data