ENTERPRISE FINANCIAL SERVICES CORP

Previous wording

Our Company offers a broad range of business and personal banking services including wealth management services. Lending services include commercial and industrial, commercial real estate, real estate construction and development, residential real estate, specialty, and other loans. A wide variety of deposit products and a complete suite of treasury management and international trade services complement our lending capabilities. The Company’s results of operations are also affected by prevailing economic conditions, competition, government policies and other actions of regulatory agencies.

Current wording

Our Company offers a broad range of business and personal banking services including wealth management. Lending services include commercial and industrial, commercial real estate, real estate construction and development, residential real estate, specialty, and other loans. A wide variety of deposit products and a complete suite of treasury management and international trade services complement our lending capabilities. The Company’s results of operations are also affected by prevailing economic conditions, competition, government policies and other actions of regulatory agencies.

Previous wording

The Company’s financial condition, operating results and liquidity in 2023 continued to be impacted by the monetary policy actions enacted to address rising inflation. The Federal Reserve increased the target federal funds rate 100 basis points in 2023, following a 425 basis point increase in 2022. The Federal Reserve has continued to tighten their monetary policy by reducing Treasuries and agency mortgage-backed securities held on its balance sheet. This follows a period of highly expansionary fiscal support from the federal government during the start of the COVID-19 pandemic in 2020-2021.

Current wording

The Company’s financial condition, operating results and liquidity in 2024 continued to be impacted by monetary policy actions. The Federal Reserve decreased the target federal funds rate 100 basis points in the fourth quarter 2024, following a 100 basis point increase in 2023. The Federal Reserve has begun to loosen its monetary policy, but has indicated it will continue to reduce its balance sheet namely through a reduction in bond holdings. These actions represent the Federal Reserve’s response to an environment of high inflation and elevated interest rates following a period of highly expansionary fiscal support from the federal government during the COVID-19 pandemic in 2020-2021.

Previous wording

•The Company reported net income of $194.1 million, or $5.07 per diluted share for 2023, compared to $203.0 million, or $5.31 per diluted share for 2022. PPNR 1 for 2023 was $284.8 million, compared to $258.9 million in 2022. PPNR ROAA 1 for 2023 and 2022 was 2.06% and 1.94%, respectively. Organic earning-asset growth and expansion of net interest income due to the increase in market interest rates were the primary contributors to the PPNR increase in 2023. Offsetting the increase in PPNR was a $37.2 million increase in the provision for credit losses in 2023 compared to 2022.

Current wording

•The Company reported net income of $185.3 million, or $4.83 per diluted share for 2024, compared to $194.1 million, or $5.07 per diluted share for 2023. PPNR 1 for 2024 was $255.2 million, compared to $284.8 million in 2023. PPNR ROAA 1 for 2024 and 2023 was 1.72% and 2.06%, respectively. The decrease in PPNR 1 and PPNR ROAA 1 was primarily due to increases in employee compensation and benefits, deposit costs, and expenses incurred in connection with the core system conversion, partially offset by an increase in operating revenue. Offsetting the decrease in PPNR 1 and PPNR ROAA 1 was a $15.1 million decrease in the provision for credit losses in 2024 compared to 2023, due to an improvement in overall asset quality.

Previous wording

•Total noninterest expense was $348.2 million in 2023, a 27% increase from $274.2 million in 2022. The increase was primarily from higher customer servicing deposit costs due to higher deposit balances and an increase in earnings credit rates, and an increase in compensation from a larger associate base and annual merit increases. The Company’s core efficiency ratio 1 was 53.4% in 2023, compared to 49.8% for the prior year.

Current wording

•Noninterest income was $69.7 million, an increase of $1.0 million from $68.7 million in 2023. Noninterest expense was $385.0 million in 2024, an 11% increase from $348.2 million in 2023. The increase in noninterest expense was primarily from higher customer deposit servicing costs due to higher average balances and an increase in earnings credit rates, an increase in compensation due to the recruitment of new relationship bankers and annual merit increases, and expenses related to the core system conversion. The core efficiency ratio 1 was 58.4% in 2024, compared to 53.4% in 2023.

Previous wording

•The Company’s effective tax rate was 21.3% in 2023 compared to 21.7% in 2022.

Current wording

•The Company’s effective tax rate was 19.9% in 2024 compared to 21.3% in 2023.

Previous wording

•Dividends paid in 2022 of $0.90 per share increased $0.15 per share, or 20%, compared to $0.75 per share in 2021.

Current wording

•Dividends paid in 2024 of $1.06 per share increased $0.06 per share, or 6%, compared to $1.00 per share in 2023.

Previous wording

•The Company repurchased 700,473 of its common shares at a weighted-average share price of $47.00.

Current wording

•The Company repurchased 626,778 of its common shares at a weighted-average share price of $46.95.

Previous wording

•The process of converting to a leading core operating system was initiated. The conversion is expected to be completed in the fourth quarter of 2024.

Current wording

•The process of converting to a leading core operating system was initiated.

Previous wording

1 Non-GAAP measures. A reconciliation has been included in this MD&A section under the caption “Use of Non-GAAP Financial Measures.”

Current wording

1 PPNR, PPNR ROAA, and the core efficiency ratio are non-GAAP measures. A reconciliation has been included in this MD&A section under the caption “Use of Non-GAAP Financial Measures.”

Previous wording

1 Average balances include non-accrual loans. Interest income includes net loan fees of $13.8 million, $16.7 million, and $28.4 million for the years ended December 31, 2023, 2022, and 2021 respectively. Loan fees in 2022 and 2021 included PPP fees of $4.1 million and $21.7 million, respectively.

Current wording

1 Average balances include non-accrual loans. Interest income includes net loan fees of $9.6 million, $13.8 million, and $16.7 million for the years ended December 31, 2024, 2023, and 2022 respectively. Loan fees in 2022 included Paycheck Protection Program fees of $4.1 million.

Previous wording

2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $8.1 million, $7.0 million, and $5.1 million for the years ended December 31, 2023, 2022, and 2021 respectively.

Current wording

2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $8.4 million, $8.1 million, and $7.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Previous wording

Net interest income (on a tax equivalent basis) was $570.7 million for 2023, compared to $480.9 million for 2022, an increase of $89.8 million, or 19%. The increase in net interest income in 2023 was primarily due to a higher average yield on interest earning assets and organic loan growth. These increases were offset by an increase in the average cost paid on interest bearing liabilities.

Current wording

Net interest income (on a tax equivalent basis) was $576.5 million for 2024, compared to $570.7 million for 2023, an increase of $5.9 million. The increase in net interest income in 2024 was primarily due to a higher average yield on interest earning assets and organic loan growth, which was partially offset by an increase in the average cost paid on interest bearing liabilities.

Previous wording

Total tax equivalent interest income increased $250.9 million in 2023 primarily due to a $231.7 million increase in loan interest income. The increase was primarily due to the 6.67% loan yield in 2023, which increased 170 basis points, from 4.97% in 2022. In addition, average loan balances in 2023 increased to $10.3 billion, an increase of $1.1 billion over the average for 2022. Tax equivalent interest income on securities (taxable and non-taxable) in 2023 increased $16.3 million from 2022, primarily due to an $11.0 million increase in yield and a $5.3 million increase in average balances. Average securities represented 18% of earnings assets in 2023 and 17% in 2022.

Current wording

Total tax equivalent interest income increased $86.5 million in 2024 primarily due to a $67.0 million increase in loan interest income. The increase was primarily due to an increase in average loan balances of $665.8 million during the year. In addition, the loan yield increased 20 basis points from 6.67% in 2023 to 6.87% in 2024. Tax equivalent interest income on securities (taxable and non-taxable) in 2024 increased $14.0 million from 2023, primarily due to increases of $7.3 million in interest income on average balances and $6.7 million in yield. Average securities represented 18% of earnings assets in both 2024 and 2023.

Previous wording

Overall, average interest-earning assets increased $0.5 billion, or 4%, to $12.9 billion for the year ended December 31, 2023. The increase was due to organic growth in average earning assets in the loan portfolio and a deployment of excess liquidity into the investment portfolio. Volume growth of the balance sheet drove an increase in interest income on earning assets of $53.6 million, while the increase in interest rates drove interest income on interest-earnings assets up by $197.3 million in 2023 compared to 2022.

Current wording

Overall, average interest-earning assets increased $995.0 million, or 8%, to $13.9 billion for the year ended December 31, 2024, primarily due to success in growing the deposit portfolio. The loan portfolio expanded and excess liquidity was deployed into the investment portfolio and other interest-earning assets. Volume growth of the balance sheet drove an increase in interest income on earning assets of $58.3 million, while higher loan and securities yields drove interest income on interest-earning assets up by $28.2 million in 2024 compared to 2023.

Previous wording

Total interest expense increased $161.1 million in 2023 primarily due to increased deposit interest expense. The increase in deposit interest expense reflects higher rates paid on deposits, as well as successful marketing efforts that increased average deposits. Remixing of the deposit portfolio from non-interest bearing and lower cost accounts into higher cost accounts contributed to the increase in deposit interest expense in 2023. Total average interest-bearing deposits increased to $7.5 billion, an increase of $981.7 million, or 15%, in 2023 over the average for 2022. Average noninterest bearing deposits declined $674.4 million, or 14%, in 2023 compared to the average for 2022. Average noninterest bearing deposits represented 36% of total average deposits in 2023, compared to 43% in 2022. Overall, average interest-bearing liabilities increased $1.0 billion, or 15% for the year ended December 31, 2023. The current mix of interest-bearing liabilities increased interest expense in 2023 by $12.3 million, while the increase in the average cost of interest bearing liabilities increased interest expense $148.9 million in 2023.

Current wording

Total interest expense increased $80.6 million in 2024 primarily due to increased deposit interest expense. The increase in deposit interest expense reflects higher rates paid on deposits, as well as successful marketing efforts that increased average deposits. Remixing of the deposit portfolio from noninterest-bearing and lower cost accounts into higher cost accounts contributed to the increase in deposit interest expense in 2024. Total average interest-bearing deposits increased to $8.5 billion, an increase of $996.3 million, or 13%, in 2024 over the average for 2023. Average noninterest-bearing deposits declined $88.8 million, or 2%, in 2024 compared to the average for 2023. Average noninterest-bearing deposits represented 31% of total average deposits in 2024, compared to 36% in 2023. Overall, average interest-bearing liabilities increased $934.9 million, or 12%, for the year ended December 31, 2024. The shift in volume from noninterest-bearing deposit accounts into higher cost deposit accounts increased interest expense in 2024 by $29.0 million, while the increase in the average cost of interest-bearing liabilities increased interest expense $51.6 million in 2024.

Previous wording

The tax-equivalent net interest margin was 4.43% for 2023, compared to 3.89% for 2022. The primary driver of the increase in net interest margin from 2022 to 2023 was an increase market interest rates. In 2023, the Federal Reserve increased interest rates three times. The federal funds target rate increased 100 basis points in 2023. The increase in short-term rates increased the yield on the Company’s variable-rate loan portfolio, as well as the yield earned on new loan production. As of December 31, 2023, variable-rate loans comprised approximately 61% of total loans. The increase in market interest rates also increased the cost on interest bearing liabilities. The earning asset yield increased 178 basis points to 6.00% in 2023, compared to 4.22% in 2022. Comparatively, the cost of interest bearing liabilities increased 195 basis points to 2.55%, from 0.60% in 2022.

Current wording

The tax-equivalent net interest margin was 4.16% for 2024, compared to 4.43% for 2023. The primary driver of the decrease in net interest margin from 2023 to 2024 was higher interest expense on the deposit portfolio. In 2023, the Federal Reserve increased interest rates three times for a total of 100 basis points. In the fourth quarter 2024, the Federal Reserve lowered the federal funds target rate by 100 basis points. As of December 31, 2024, variable-rate loans comprised approximately 60% of total loans. The earning-asset yield increased 20 basis points to 6.20% in 2024, compared to 6.00% in 2023. Comparatively, the cost of interest-bearing liabilities increased 65 basis points to 3.20%, from 2.55% in 2023.

Previous wording

Noninterest income increased $9.6 million, or 16%, in 2023 compared to 2022. This increase was primarily due to a $6.6 million increase in tax credit income and a $6.2 million increase in miscellaneous income. Tax credit income increased due to higher activity and a decline in longer term interest rates that positively impacted tax credits carried at fair value. Miscellaneous income increased due to private equity and community development income and gains on the sale of SBA loans. Private equity and community development income are not consistent sources of income and fluctuate based on distributions and earnings from the underlying funds. In 2023, $42.1 million of SBA loans were sold and a gain of $2.0 million was recognized. No SBA loans were sold in 2022.

Current wording

Noninterest income increased $1.0 million, or 1%, in 2024 compared to 2023. This increase was primarily due to a $1.8 million increase in service charges on deposit accounts, partially offset by a $0.9 million decrease in other income. Other income decreased primarily due to lower private equity and community development income ($3.1 million) and gains on the sale of SBA loans ($0.6 million), offset by an increase in gains on sale of other real estate owned ($2.9 million). Private equity and community development income are not consistent sources of income and fluctuate based on distributions and earnings from the underlying funds. In 2024, the Company sold the guaranteed portion of SBA 7(a) loans of $23.1 million for a gain of $1.4 million, compared to $42.1 million and $2.0 million, respectively, in 2023.

Previous wording

Noninterest expense increased $74.0 million, or 27%, in 2023 compared to 2022. The increase was attributed primarily to a $41.2 million increase in deposit costs, a $17.5 million increase in compensation and benefits, and a $16.0 million increase in other expenses. For certain deposit accounts in the Company’s specialized deposit portfolio, clients receive an earnings credit rate on average collected balances that may be used to offset expenses associated with the client’s activities for managing the accounts. These costs are reflected in noninterest expense as Deposit costs. The increase in deposit costs in 2023 is due to organic growth in specialized deposits and an increase in market interest rates that increased the earnings credit rate and related expenses for those accounts. The Company maintained approximately $2.6 billion and $2.0 billion of average specialty deposits, resulting in an average specialty deposit cost of 2.75% and 1.41% for 2023 and 2022, respectively.

Current wording

Noninterest expense increased $36.9 million, or 11%, in 2024 compared to 2023. The increase was attributed primarily to an increase in compensation and benefits due to annual merit increases and the recruitment of new relationship bankers, a $16.4 million increase in deposit costs, and a $4.5 million increase in data processing primarily related to the core system conversion. The total cost of the core conversion in noninterest expense was $4.9 million in 2024. For certain deposit accounts in the Company’s deposit verticals, clients receive an earnings credit on average collected balances that may be used to offset expenses associated with the client’s activities for managing the accounts. These costs are reflected in noninterest expense as Deposit costs. The increase in deposit costs in 2024 is due to organic growth in the deposit verticals and an increase in market interest rates that increased the earnings credit rate and related expenses for those accounts. Average balances in the deposit verticals were approximately $3.1 billion and $2.6 billion, resulting in an average deposit vertical cost of 2.82% and 2.75% for 2024 and 2023, respectively.

Previous wording

The Company’s blended federal and state tax rate was approximately 24.8% in 2023 and 25.2% in 2022. The effective tax rate, which is adjusted for permanent differences, such as tax exempt income, was 21.3% in 2023 compared to 21.7% in 2022. In conjunction with the completion of the 2022 tax returns in the fourth quarter of 2023, the effective tax rate decreased due to a lower state tax apportionment. See “Item 8. Note 16 – Income Taxes” for additional information.

Current wording

The Company’s blended federal and state tax rate was approximately 24.8% in 2024 and 2023. The effective tax rate, which is adjusted for permanent differences, such as tax exempt income and tax credits, was 19.9% in 2024 compared to 21.3% in 2023. The effective tax rate decrease was driven by tax credit opportunities the Company has deployed as part of its tax planning strategy. See “Item 8. Note 16 – Income Taxes” for additional information.

Previous wording

The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio, including the C&I category, is secured by real estate. The ability of the Company’s borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.

Current wording

The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector other than those noted in the table of loans by NAICS code below; however, a substantial portion of the portfolio, including the C&I category, is secured by real estate. The ability of the Company’s borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.

Previous wording

The Company continues to focus on originating high-quality C&I loan relationships as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. C&I loan growth also supports our efforts to maintain the Company’s asset-sensitive interest rate risk position. Additionally, our specialized products, especially sponsor finance, life insurance premium financing, and tax credit lending, consist of primarily C&I loans, and have contributed significantly to the Company’s C&I loan growth. These loans are sourced through relationships developed with wealth and estate planning firms, private equity funds and tax credit specialists and are not bound geographically to our markets. As a result, these specialized loan products offer opportunities to expand and diversify our overall geographic concentration by entering into new markets.

Current wording

The Company continues to focus on originating high-quality C&I loan relationships as they allow for cross selling opportunities involving other banking products. Our specialized products, especially sponsor finance, life insurance premium financing, and tax credit lending, consist of primarily C&I loans, and have contributed significantly to the Company’s C&I loan growth. These loans are sourced through relationships developed with wealth and estate planning firms, private equity funds and tax credit specialists and are not bound geographically to our markets. As a result, these specialized loan products offer opportunities to expand and diversify our overall geographic concentration by entering into new markets.

Previous wording

•Our commercial real estate loans, including investor-owned and owner-occupied categories, primarily represent commercial property loans on which the primary source of repayment is income from the property. These loans are principally underwritten based on the cash flow coverage of the property, the Company’s loan to value guidelines, and generally require either the limited or full guaranty of principal sponsors of the credit. Commercial real estate loans also represent owner-occupied C&I loans for which the primary source of repayment is dependent on sources other than the underlying collateral.

Current wording

•Our commercial real estate loans, including investor-owned and owner-occupied categories, primarily represent commercial property loans on which the primary source of repayment is income from the property for investor-owned and the operating business for owner-occupied. These loans are principally underwritten based on the cash flow coverage of the property, the Company’s loan to value guidelines, and generally require either the limited or full guaranty of principal sponsors of the credit. The Company also maintains standards for amortization and maturity terms. Commercial real estate loans also represent owner-occupied C&I loans for which the primary source of repayment is dependent on sources other than the underlying collateral. In an effort to mitigate credit risk, the Company routinely reviews its loan portfolio for various concentrations. Annually, management prepares an assessment of credit risk in the various loan portfolios, with a significant portion of the commercial loan portfolio subject to review. These reviews consider the Company’s collateral position as well as exposure to a given industry sector. The Company performs site visits as part of the underwriting process, in addition to stress tests for vacancy, rental and interest rates on certain property types. The Company believes that the loan portfolio is sufficiently diversified to provide protection from deterioration in any particular industry, geography or devaluation of a specific collateral type.

Previous wording

•Construction and land development loans relating primarily to residential and commercial properties, represent financing secured by real estate under development for eventual sale or undeveloped ground. At December 31, 2023, $447.0 million of these loans include the use of interest reserves and follow standard underwriting guidelines. Construction projects are monitored by the loan officer and a centralized independent loan disbursement function.

Current wording

•Construction and land development loans relating primarily to residential and commercial properties, represent financing secured by real estate under development for eventual sale or undeveloped ground. At December 31, 2024, $334.2 million of these loans include the use of interest reserves and follow standard underwriting guidelines. Construction projects are monitored by the loan officer and a centralized independent loan disbursement function.

Previous wording

At December 31, 2023 and 2022, the Company had an agricultural loan portfolio of $229.7 million and $200.1 million, respectively. The Company has announced its intent to wind down this portfolio over time as the loans mature or pay down. The Company does not intend to enter into new agricultural loans.

Current wording

At December 31, 2024 and 2023, the Company had an agricultural loan portfolio of $121.8 million and $229.7 million, respectively. The Company continues to wind down this portfolio over time as the loans mature or pay down. The Company does not intend to enter into new agricultural loans.

Previous wording

The Company had $482.0 million and $443.1 million of investor owned office real estate loans as of December 31, 2023 and 2022, respectively.

Current wording

The Company had $513.7 million and $482.0 million of investor owned office real estate loans as of December 31, 2024 and 2023, respectively. The Company also had $322.5 million and $271.8 million of multifamily commercial real estate loans as of December 31, 2024 and 2023, respectively.

Previous wording

Loan guarantees, primarily on SBA 7(a) loans, totaled $932.1 million and $960.3 million at December 31, 2023 and 2022, respectively.

Current wording

Loan guarantees, primarily on SBA 7(a) loans, totaled $947.7 million and $932.1 million at December 31, 2024 and 2023, respectively.

Previous wording

The majority of variable loans are based on the prime rate or SOFR. At December 31, 2023, $4.2 billion or 64% of variable rate loans were subject to an interest rate floor. Most variable rate loan originations have one-to three-year maturities. Management monitors this mix as part of its interest rate risk management. See “Interest Rate Risk” of this MD&A section.

Current wording

The majority of variable loans are based on the prime rate or SOFR. At December 31, 2024, $4.6 billion or 68% of variable rate loans were subject to an interest rate floor. Most variable rate loan originations have one-to three-year maturities. Management monitors this mix as part of its interest rate risk management. The Company has also entered into interest rate hedges to reduce the cash flow impact of changes in interest rates on the variable rate loan portfolio. These hedges, which include interest rate swaps and collars, had a notional amount of $400.0 million and $350.0 million at December 31, 2024 and 2023, respectively. See “Interest Rate Risk” of this MD&A section for additional information.

Previous wording

CECL requires economic forecasts to be factored into determining estimated losses. As a result, CECL is designed to typically require a higher level of provision at the start of an economic downturn. The increase in the provision for credit losses in 2023 was primarily due to loan growth, net charge-offs and the increase in nonperforming loans. The provision for credit losses in 2023 also included the impact of the impairment of an available-for-sale investment security. The available-for-sale investment impairment was related to a subordinated debt security in a publicly-traded bank that failed in the first quarter of 2023. The provision benefit in the prior year-to-date period, was primarily due to an improvement in economic factors and the recovery of accrued interest on nonperforming loans.

Current wording

The CECL methodology requires economic forecasts to be factored into determining estimated losses. As a result, CECL is designed to typically require a higher level of provision at the start of an economic downturn. The decrease in the provision for credit losses in 2024 was primarily due to improved credit quality, including a reduction in net charge-offs. The higher provision for credit losses in the prior year was primarily due to loan growth, net charge-offs and the increase in nonperforming loans. The provision for credit losses in 2023 also included the impact of the impairment of an available-for-sale investment security, related to a subordinated debt security in a publicly-traded bank that failed in the first quarter of 2023.

Previous wording

The allowance for credit losses was 1.24% of total loans at December 31, 2023, compared to 1.41%, and 1.61%, at December 31, 2022 and 2021, respectively. The decline in the allowance to total loans ratio in 2023 compared to 2022 was primarily due to a shift in the mix of the loan portfolio to categories with lower reserve requirements, improvement in the economic forecast and net loan charge-offs of $38.0 million.

Current wording

The allowance for credit losses was 1.23% of total loans at December 31, 2024, compared to 1.24%, and 1.41%, at December 31, 2023 and 2022, respectively. The decrease in the allowance to total loans ratio in 2024 compared to 2023 was primarily due to a shift in the mix of the loan portfolio to categories with lower reserve requirements, improvement in the economic forecast and net loan charge-offs of $17.5 million.

Previous wording

Nonperforming loans at December 31, 2023 increased $33.7 million, or 338%, when compared to December 31, 2022. The increase in nonperforming loans during 2023 was primarily from additions to nonaccrual loans of $109.8 million, offset by principal payments of $25.9 million and charge-offs of $43.2 million. The charge-offs of nonperforming loans were primarily in C&I and commercial real estate (investor owned), representing 84% and 11% of gross charge-offs in 2023, respectively.

Current wording

Nonperforming loans at December 31, 2024 decreased $1.0 million, or 2%, when compared to December 31, 2023. The decrease in nonperforming loans during 2024 was primarily from principal payments of $29.0 million and charge-offs of $21.9 million, partially offset by additions to nonaccrual loans of $55.7 million.

Previous wording

At December 31, 2023, our portfolio of investment securities was $2.4 billion, or 16%, of total assets, compared to $2.2 billion, or 17%, of total assets as of December 31, 2022. The portfolio is comprised of both available-for-sale and held-to-maturity securities.

Current wording

At December 31, 2024, our portfolio of investment securities was $2.8 billion, or 18% of total assets, compared to $2.4 billion, or 16% of total assets as of December 31, 2023. The portfolio is comprised of both available-for-sale and held-to-maturity securities.

Previous wording

The allowance for credit losses on held-to-maturity debt securities was $0.8 million and $0.7 million at December 31, 2023 and 2022, respectively. The Company had no debt securities classified as trading at December 31, 2023, or 2022.

Current wording

The allowance for credit losses on held-to-maturity debt securities was $0.3 million and $0.8 million at December 31, 2024 and 2023, respectively. The Company had no debt securities classified as trading at December 31, 2024, or 2023.

Previous wording

Brokered certificates of deposit increased $363.8 million, to $482.8 million at December 31, 2023. Brokered certificates of deposit are used for term liquidity purposes in place of FHLB borrowings. The brokered certificates of deposit balance has a weighted average cost of 4.73% and a weighted average remaining term of 7 months at December 31, 2023. The Company has a specialty deposit portfolio focusing primarily on property management, community associations, and escrow companies. These deposits totaled $2.8 billion and $2.1 billion at the end of 2023 and 2022, respectively.

Current wording

Total deposits increased $970.1 million, primarily due to client deposit growth. Brokered certificates of deposit increased $1.8 million, to $484.6 million at December 31, 2024. Brokered certificates of deposit are used for term liquidity purposes in place of FHLB borrowings. The brokered certificates of deposit balance has a weighted average cost of 4.50% and a weighted average remaining term of 9 months at December 31, 2024. The Company has a deposit vertical portfolio focusing primarily on property management, community associations, and legal industry and escrow services. These deposits totaled $3.4 billion and $2.8 billion at the end of 2024 and 2023, respectively.

Previous wording

Average total deposits were $11.6 billion for the year ended December 31, 2023, an increase of $307.3 million, or 3%, from December 31, 2022. The increase in 2023 was primarily due to organic growth in money market and interest-bearing demand accounts.

Current wording

Average total deposits were $12.5 billion for the year ended December 31, 2024, an increase of $907.5 million, or 8%, from December 31, 2023. The increase in 2024 was primarily due to organic growth in money market and interest-bearing demand accounts.

Previous wording

As of December 31, 2023, estimated uninsured deposits totaled $4.3 billion, including $234.6 million of certificates of deposit. At December 31, 2022 estimated uninsured deposits totaled $5.9 billion. Estimated uninsured deposits at December 31, 2023 include $0.5 million of balances that are collateralized or secured with third party insurance.

Current wording

As of December 31, 2024, estimated uninsured deposits totaled $4.5 billion, including $268.2 million of certificates of deposit. At December 31, 2023 estimated uninsured deposits totaled $4.3 billion. Estimated uninsured deposits include $0.5 billion of balances that are collateralized or secured with third party insurance at December 31, 2024 and 2023, respectively.

Previous wording

Shareholders’ equity totaled $1.7 billion at December 31, 2023, an increase of $193.8 million, or 12.7%, from December 31, 2022.

Current wording

Shareholders’ equity totaled $1.8 billion at December 31, 2024, an increase of $107.9 million, or 6%, from December 31, 2023.

Previous wording

•Increase from net income of $194.1 million;

Current wording

•Increase from net income of $185.3 million;

Previous wording

•Net increase in fair value of available-for-sale securities and cash flow hedges of $29.3 million;

Current wording

•Net decrease in fair value of available-for-sale securities and cash flow hedges of $15.7 million;

Previous wording

•Decrease from dividends paid on common stock of $37.4 million and preferred stock of $3.8 million, respectively

Current wording

•Decrease from dividends paid on common stock of $39.6 million and preferred stock of $3.8 million

Previous wording

Additionally, liquidity is provided from lines of credit with the FHLB, the Federal Reserve, and correspondent banks; the ability to acquire large and brokered deposits; sales of the securities portfolio; and the ability to sell loan participations to other banks. These alternatives are an important part of our liquidity plan and provide flexibility and efficient execution of the asset-liability management strategy.

Current wording

Liquidity is provided from lines of credit with the FHLB, the Federal Reserve, and correspondent banks; the ability to acquire large and brokered deposits; sales of the securities portfolio; and the ability to sell loan participations to other banks and loans on the secondary market. These alternatives are an important part of our liquidity plan and provide flexibility and efficient execution of the asset-liability management strategy.