ENTERPRISE FINANCIAL SERVICES CORP
For the period ended Jun 30, 2025. Filed Aug 1, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 1, 2025
EFSC$62.05-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-02.
0001025835-25-000074
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-01.
0001025835-25-000123
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 121 previous paragraphs and 125 current paragraphs.
80 unchanged; 35 reworded; 10 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 27 previous and 30 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
•Noninterest income -Noninterest income of $20.6 million for the second quarter of 2025 and $39.1 million for the six months ended June 30, 2025 increased $2.1 million and $11.4 million from the linked and prior year-to-date periods, respectively. The increase in noninterest income from the linked and prior year-to-date periods was primarily due to higher BOLI income and community development investment income. Compared to the prior year-to-date period, the increase was also due to a $5.1 million increase in tax credit income and a $1.6 million increase in gain on SBA loan sales.
Current report
•Noninterest expense -Noninterest expense of $105.7 million for the second quarter of 2025 and $205.5 million for the six months ended June 30, 2025 increased $5.9 million and $18.0 million from the linked and prior year-to-date periods, respectively. The increase from the linked and prior year-to-date periods was primarily driven by higher employee compensation, variable deposit costs and higher loan and legal expenses related to loan workouts and OREO.
Current report
Compared to the linked quarter, tax equivalent interest income increased $7.5 million primarily due to an increase of $117.4 million in average loan balances and a seven basis point increase in the average loan yield. The average securities balance increased $218.1 million and the yield increased 11 basis points due to new purchases and the reinvestment of cash flows from the runoff of lower yielding investments. The average interest rate of new loan originations in the second quarter of 2025 was 7.26%, an increase of 14 basis points from the linked quarter. Investment purchases in the second quarter of 2025 had a weighted average, tax equivalent yield of 5.30%.
Current report
Tax equivalent interest income increased $12.5 million over the prior year-to-date period primarily due to a $354.6 million increase in average loan balances, a $642.0 million increase in average securities balances, and a 50 basis point increase in yield on securities. These increases were partially offset by a 31 basis point decline in the loan yield to 6.60%, from 6.91% in the prior year-to-date period.
Current report
Compared to the linked quarter, interest expense increased $1.9 million primarily due to higher organic growth in deposits, an increase in wholesale borrowings and the higher rate incurred on subordinated debt for one month in the quarter. These increases were partially offset by a decline in the average balance of customer repurchase agreements. The total cost of deposits, including noninterest-bearing demand accounts, was 1.82% during the second quarter of 2025, compared to 1.83% in the linked quarter.
Current report
Interest expense decreased $10.6 million over the prior year-to-date period primarily due to a 43 basis point decline in the average cost of interest-bearing deposits and a 56 basis point decline in the average cost of money market accounts, partially offset by organic growth in the deposit portfolio. The total cost of deposits, including noninterest-bearing demand accounts, was 1.82% during the six months ended June 30, 2025, compared to 2.15% in the prior year-to-date period.
Current report
Total noninterest income for the second quarter of 2025 was $20.6 million, an increase of $2.1 million from the linked quarter primarily due to higher deposit service charges and other income. The increase in other income from the linked quarter was primarily driven by a $1.7 million increase in BOLI income, as well as a $0.7 million increase in community development investment income. The increase in BOLI income was primarily due to the purchase of additional policies in the first quarter 2025 and, to a lesser extent, the payout of a policy in the second quarter of 2025. Community development investment income is not a consistent source of income and fluctuates based on distributions from the underlying funds.
Current report
Total noninterest income for the six months ended June 30, 2025 was $39.1 million, an increase from the prior year-to-date period of $11.4 million. The increase was primarily due to a $5.1 million increase in tax credit income, which varies based on transaction volumes and fair value changes on credits carried at fair value, and a $5.9 million increase in other income. Other income increased compared to the prior year-to-date period primarily due to a $1.7 million increase in BOLI income and a $1.6 million increase in gain on SBA loan sales. On a periodic basis, the Company will opportunistically sell SBA guaranteed loans. The Company sold $55.7 million and $23.1 million of the guaranteed portion of SBA 7(a) loans during the six months ended June 30, 2025 and June 30, 2024, respectively. A gain on sale of $3.0 million and $1.4 million was recognized during the six months ended June 30, 2025 and June 30, 2024, respectively.
Current report
Total noninterest expense of $205.5 million for the first six months of 2025 increased $18.0 million from the prior year-to-date period primarily due to an increase in the associate base, merit increases throughout 2024 and 2025, and a $6.6 million increase in deposit costs due to higher earnings credit allowances and deposit vertical average balances.
Current report
A provision for credit losses of $3.5 million for the second quarter of 2025 and $8.7 million for the six months ended June 30, 2025, decreased $1.7 million and $1.9 million from the linked and prior year-to-date periods, respectively. The provision for credit losses in the second quarter of 2025 and six months ended June 30, 2025 was primarily related to loan growth and changes in the economic forecast that influences projected future losses in the allowance calculation.
Removed paragraphs (6)
Previous report
•Noninterest income -Noninterest income of $18.5 million for the first quarter 2025 decreased $2.1 million from the linked quarter and increased $6.3 million from the prior year quarters. The change in noninterest income from the linked and prior year quarters was primarily due to tax credit income, which is typically highest in the fourth quarter of each year. Tax credit income can also fluctuate due to changes in market interest rates that impact projects carried at fair value.
Previous report
•Noninterest expense -Noninterest expense of $99.8 million for the first quarter 2025 increased $0.3 million and $6.3 million from the linked and prior year quarters, respectively. The increase from the linked quarter was primarily driven by higher employee compensation due to the reset of payroll tax limits and paid time-off accruals, partially offset by a decline in core conversion costs. The increase from the prior year quarter was driven by higher employee compensation due to annual merit increases and an increase in deposit servicing costs due to growth in average deposit vertical balances.
Previous report
Total tax equivalent interest income decreased $3.4 million and increased $4.5 million from the linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to two fewer days in the current quarter and a 16 basis point decrease in average loan yield. This decrease was partially offset by a $140.7 million increase in average loan balances and a 24 basis point increase in yield on investment securities. The $4.5 million increase over the prior year quarter was primarily due to a $9.2 million increase in interest on securities and interest-earning cash, partially offset by a $4.7 million decrease in loan interest from reduced loan yields. In the first three months of 2025, loan yields decreased 30 basis points to 6.57%, compared to 6.87% in the prior year quarter. Average loans increased $312.9 million, or 3% over the prior year quarter. Average securities increased $530.3 million, or 22% over the prior year quarter.
Previous report
Interest expense decreased $4.7 million and $5.7 million from the linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to a 19 basis point decline in the average cost of interest bearing deposits, partially offset by an increase in interest expense on customer repurchase agreements as a result of higher average balances. The average cost of interest-bearing deposits was 2.77%, a decrease of 19 basis points compared to the linked quarter. Interest expense decreased $5.7 million over the prior year quarter, primarily due to lower short-term interest rates. The average cost of interest-bearing deposits decreased 37 basis points year-over-year. The total cost of deposits, including noninterest-bearing demand accounts, was 1.83% during the first quarter 2025, compared to 2.00% and 2.13% in the linked and prior year quarters, respectively.
Previous report
Total noninterest income for the first quarter 2025 was $18.5 million, a decrease of $2.1 million and an increase of $6.3 million from the linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to a seasonal decrease in the first quarter in tax credit income, partially offset by a gain on the sale of the guaranteed portion of SBA loans included in other income. The increase from the prior year quarter was primarily due to an increase in tax credit income as a result of decreased market interest rates that improved the fair value of certain tax credits. Tax credit income varies based on transaction volumes and fair value changes on credits carried at fair value.
Previous report
A provision for credit losses of $5.2 million was recognized for the first quarter 2025, compared to $6.8 million and $5.8 million in the linked and prior year quarters, respectively. The provision for credit losses in the first quarter 2025 was primarily related to changes in default assumptions and the economic forecast, updates to qualitative factors used in the allowance calculation and loan growth. Annualized net recoveries totaled 4 basis points of average loans in the first quarter 2025, compared to annualized net charge-offs of 26 basis points in the linked quarter and 22 basis points in the prior year quarter.
Reworded paragraphs (35)
Previous wording
The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first three months of 2025 compared to the financial condition as of December 31, 2024. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the three months ended March 31, 2025, compared to the linked fourth quarter of 2024 (“linked quarter”) and the results of operations, liquidity and cash flows for the three months ended March 31, 2025 compared to the same period in 2024 (“prior year quarter”). In light of the nature of the Company’s business, the Company’s management believes that the comparison to the linked quarter is the most relevant to understand the financial results from management’s perspective. For purposes of the Quarterly Report on Form 10-Q, the Company is presenting a comparison to the corresponding prior year quarter. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Current wording
The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first six months of 2025 compared to the financial condition as of December 31, 2024. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the three months ended June 30, 2025, compared to the linked first quarter of 2025 (“linked quarter”) and the results of operations, liquidity and cash flows for the six months ended June 30, 2025 compared to the same period in 2024 (“prior year-to-date period”). In light of the nature of the Company’s business, the Company’s management believes that the comparison to the linked quarter is the most relevant to understand the financial results from management’s perspective. For purposes of the Quarterly Report on Form 10-Q, the Company is presenting a comparison to the corresponding prior year-to-date period. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Previous wording
The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to as the ACL. The ACL is a valuation account to adjust the cost basis to the amount expected to be collected, based on management’s experience, current conditions, and reasonable and supportable forecasts. For purposes of determining the allowance for funded and unfunded loans, the portfolios are segregated into pools that share similar risk characteristics that are then further segregated by credit grades. Loans that do not share similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. The Company estimates the amount of the allowance based on loan loss experience, adjusted for current and forecasted economic conditions, including unemployment, changes in GDP, and commercial and residential real estate prices. The Company’s forecast of economic conditions uses internal and external information and considers a weighted average of a baseline, upside, and downside scenarios. Because economic conditions can change and are difficult to predict, the anticipated amount of estimated loan defaults and losses, and therefore the adequacy of the allowance, could change significantly and have a direct impact on the Company’s credit costs. The Company’s allowance for credit losses on loans was $142.9 million at March 31, 2025 based on the weighting of the different economic scenarios. As a hypothetical example, if the Company had only used the upside scenario, the allowance would have decreased $30.4 million. Conversely, the allowance would have increased $49.8 million using only the downside scenario.
Current wording
The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to as the ACL. The ACL is a valuation account to adjust the cost basis to the amount expected to be collected, based on management’s experience, current conditions, and reasonable and supportable forecasts. For purposes of determining the allowance for funded and unfunded loans, the portfolios are segregated into pools that share similar risk characteristics that are then further segregated by credit grades. Loans that do not share similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. The Company estimates the amount of the allowance based on loan loss experience, adjusted for current and forecasted economic conditions, including unemployment, changes in GDP, and commercial and residential real estate prices. The Company’s forecast of economic conditions uses internal and external information and considers a weighted average of a baseline, upside, and downside scenarios. Because economic conditions can change and are difficult to predict, the anticipated amount of estimated loan defaults and losses, and therefore the adequacy of the allowance, could change significantly and have a direct impact on the Company’s credit costs. The Company’s allowance for credit losses on loans was $145.1 million at June 30, 2025 based on the weighting of the different economic scenarios. As a hypothetical example, if the Company had only used the upside scenario, the allowance would have decreased $28.2 million. Conversely, the allowance would have increased $43.0 million using only the downside scenario.
Previous wording
•PPNR 1 - PPNR of $66.1 million for the first quarter 2025 decreased $3.4 million from the linked quarter PPNR of $69.4 million and increased $8.7 million from the prior year quarter PPNR of $57.4 million. The decrease from the linked quarter was primarily due to a decrease in noninterest income, specifically tax credit income that is typically highest in the fourth quarter of each year and an increase in noninterest expense, primarily due to the reset of payroll tax limits and paid time-off accruals. The increase compared to the prior year quarter was primarily due to higher net interest income from organic loan growth, continued investment in the securities portfolio and proactive management of the cost of deposits, partially offset by a decline in asset yields due to lower short-term interest rates.
Current wording
•PPNR 1 - PPNR of $68.1 million for the second quarter of 2025 and $134.2 million for the six months ended June 30, 2025 increased $2.0 million and $13.6 million from the linked and prior year-to-date periods, respectively. The increase from the linked and prior year-to-date periods was primarily due to an increase in net interest income from organic loan growth, continued investment in the securities portfolio and proactive management of the cost of deposits, partially offset by an increase in noninterest expense.
Previous wording
•Net interest income and NIM -Net interest income of $147.5 million for the first quarter 2025 increased $1.1 million and $9.8 million from the linked and prior year quarters, respectively. NIM was 4.15% for the first quarter 2025, compared to 4.13% for both the linked and prior year quarters, respectively. Compared to the linked and prior year quarters, the increase in net interest income was primarily due to higher average loan and other interest-earning asset balances, as well as lower short-term interest rates that decreased interest expense. Since September 2024, the Federal Reserve has reduced the federal funds target rate 100 basis points. In response, the Company adjusted deposit pricing to partially mitigate the impact on income from the repricing of variable rate loans.
Current wording
•Net interest income and NIM -Net interest income of $152.8 million for the second quarter of 2025 and $300.3 million for the six months ended June 30, 2025 increased $5.2 million and $22.0 million from the linked and prior year-to-date periods, respectively. NIM was 4.21% for the second quarter of 2025 and 4.18% for the six months ended June 30, 2025 compared to 4.15% and 4.16% for the linked and prior year-to-date periods, respectively. Compared to the linked and prior year-to-date periods, the increase in net interest income was primarily due to higher average loan and securities balances, as well as higher yields on the securities portfolio. Compared to the prior year-to-date period, net interest income also benefited from lower short-term interest rates that decreased deposit interest expense. Since September 2024, the Federal Reserve has reduced the federal funds target rate 100 basis points. In response, the Company has proactively adjusted deposit pricing to partially mitigate the impact on income from the repricing of variable rate loans.
Previous wording
•Loans – Total loans increased $78.4 million, or 3% on an annualized basis, to $11.3 billion at March 31, 2025, compared to $11.2 billion at December 31, 2024. Average loans totaled $11.2 billion for the three months ended March 31, 2025 compared to $11.1 billion for the three months ended December 31, 2024.
Current wording
•Loans – Total loans increased $188.5 million, or 2%, to $11.4 billion at June 30, 2025, compared to $11.2 billion at December 31, 2024. Average loans totaled $11.3 billion for the six months ended June 30, 2025 compared to $10.9 billion for the six months ended June 30, 2024.
Previous wording
•Deposits – Total deposits decreased $112.3 million, to $13.0 billion at March 31, 2025 from $13.1 billion at December 31, 2024. Average deposits totaled $13.1 billion for the quarter ended March 31, 2025 compared to $13.0 billion for the linked quarter. Noninterest-bearing deposit accounts represented 33% of total deposits and the loan to deposit ratio was 87% at March 31, 2025, compared to 34% and 85%, respectively, at December 31, 2024.
Current wording
•Deposits – Total deposits increased $170.9 million, to $13.3 billion at June 30, 2025 from $13.1 billion at December 31, 2024. Average deposits totaled $13.2 billion for the six months ended June 30, 2025 compared to $12.3 billion for the prior year-to-date period. Noninterest-bearing deposit accounts represented 32% of total deposits and the loan to deposit ratio was 86% at June 30, 2025, compared to 34% and 85%, respectively, at December 31, 2024.
Previous wording
•Asset quality – The allowance for credit losses on loans to total loans was 1.27% at March 31, 2025, compared to 1.23% at December 31, 2024. The ratio of nonperforming assets to total assets was 0.72% at March 31, 2025 compared to 0.30% at December 31, 2024. A provision for credit losses of $5.2 million was recorded in the first quarter of 2025 compared to $6.8 million and $5.8 million in the linked and prior year quarters, respectively.
Current wording
•Asset quality – The allowance for credit losses on loans to total loans was 1.27% at June 30, 2025, compared to 1.23% at December 31, 2024. The ratio of nonperforming assets to total assets was 0.71% at June 30, 2025 compared to 0.30% at December 31, 2024. A provision for credit losses of $3.5 million and $8.7 million was recorded in the second quarter of 2025 and the six months ended June 30, 2025, respectively. This compares to $5.2 million and $10.6 million in the linked and prior year-to-date periods, respectively.
Previous wording
•Stockholders’ equity – Total stockholders’ equity was $1.9 billion at March 31, 2025, compared to $1.8 billion at December 31, 2024, and the tangible common equity to tangible assets ratio 2 was 9.30% at March 31, 2025 compared to 9.05% at December 31, 2024. The Company and the Bank’s regulatory capital ratios exceeded the “well-capitalized” levels at March 31, 2025.
Current wording
•Stockholders’ equity – Total stockholders’ equity was $1.9 billion at June 30, 2025, compared to $1.8 billion at December 31, 2024, and the tangible common equity to tangible assets ratio 2 was 9.42% at June 30, 2025 compared to 9.05% at December 31, 2024. The Company and the Bank’s regulatory capital ratios exceeded the “well-capitalized” levels at June 30, 2025.
Previous wording
The Company’s Board of Directors approved a quarterly dividend of $0.30 per share of common stock, payable on June 30, 2025 to stockholders of record as of June 16, 2025. The Board of Directors also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) March 15, 2025 to (but excluding) June 15, 2025. The dividend will be payable on June 15, 2025 and will be paid on June 16, 2025 to holders of record of Series A Preferred Stock as of May 30, 2025.
Current wording
The Company’s Board of Directors approved a quarterly dividend of $0.31 per share of common stock, payable on September 30, 2025 to stockholders of record as of September 15, 2025. The Board also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) June 15, 2025 to (but excluding) September 15, 2025. The dividend will be payable on September 15, 2025 to holders of record of Series A Preferred Stock as of August 29, 2025.
Previous wording
•Branch acquisition - On April 28, 2025, the Bank entered into a purchase and assumption agreement with First Interstate Bank to purchase 10 Arizona branches and two Kansas branches, including certain deposits and loans, and the owned real estate and fixed and other assets associated with the branches. The acquisition is subject to regulatory approvals and other customary closing conditions and is expected to be completed by early fourth quarter of 2025.
Current wording
•Pending Branch Acquisition – On April 28, 2025, the Company announced its pending acquisition with First Interstate pursuant to which the Bank will acquire twelve branches from First Interstate, including certain deposits and loans, and the owned real estate and fixed and other assets associated with the Branches. The purchase and assumption agreement provides for the transfer by First Interstate to the Bank of the facilities and other associated assets of the Branches, approximately $705 million in deposits, and certain, mostly commercially-oriented loans with outstanding balances of approximately $300 million as of June 30, 2025. The balance of loans and deposits is subject to change until the date of acquisition. The transaction, which is expected to close in the fourth quarter of 2025, will expand the Company’s presence in Arizona and Kansas.
Previous wording
Net interest income on a tax equivalent basis was $150.0 million for the quarter ended March 31, 2025, an increase of $1.3 million and $10.2 million from the linked and prior year quarters, respectively. The increase from the linked and prior year quarters reflects organic loan growth and continued investment in the securities portfolio, partially offset by a decline in asset yields due to lower short-term interest rates. The cost of interest bearing deposits has also declined due to lower short-term rates, partially offset by an increase in deposit balances. The effective federal funds rate for the current quarter was 4.33%, a decrease of 33 basis points and 100 basis points from the linked and prior year quarters, respectively. In response to the decline in short-term rates, the Company adjusted deposit pricing to partially mitigate the impact on income from the repricing of variable rate loans.
Current wording
Net interest income on a tax equivalent basis of $155.5 million for the quarter ended June 30, 2025 and $305.5 million for the six months ended June 30, 2025, increased $5.5 million and increased $23.1 million from the linked and prior year-to-date periods, respectively. The increase from the linked and prior year-to-date periods reflects organic loan growth and continued investment in the securities portfolio, partially offset by an increase in wholesale borrowings (FHLB advances and brokered certificates of deposits). Net interest income for the current quarter also benefited by one additional day compared to the linked quarter. On June 1, 2025, $63.3 million of subordinated debt converted from a fixed 5.75% rate to a floating rate of three-month term SOFR plus a spread of 5.66%, resulting in higher rates incurred for one month. The subordinated debt has a quarterly call feature. The cost of interest-bearing deposits has declined due to lower short-term rates, partially offset by an increase in deposit balances. Since September 2024, the Federal Reserve has reduced the federal funds target rate 100 basis points. In response, the Company has proactively adjusted deposit pricing to partially mitigate the impact on income from the repricing of variable rate loans.
Previous wording
NIM, on a tax equivalent basis, was 4.15% in the first quarter 2025, an increase of 2 basis points from the linked and prior year quarters, respectively.
Current wording
NIM, on a tax equivalent basis, was 4.21% in the second quarter of 2025 and 4.18% for the first six months of 2025, an increase of six basis points and two basis points from the linked and prior year-to-date periods, respectively.
Previous wording
Noninterest expense was $99.8 million for the first quarter 2025, an increase of $0.3 million from $99.5 million in the linked quarter and an increase of $6.3 million from $93.5 million in the prior year quarter. Employee compensation and benefits increased $0.6 million from the linked quarter primarily due to the first quarter reset of payroll taxes and paid time-off accruals, along with annual merit increases that became effective March 1, 2025. Deposit costs relate to certain deposit accounts that receive an earnings credit allowance for expenses related to the maintenance of the deposit accounts. These expenses are impacted by interest rates and average balances. Deposit costs increased $0.9 million from the linked quarter primarily due to an increase of $255.3 million in average deposit vertical balances from the linked quarter. The increase of $6.3 million from the prior year quarter was primarily due to annual merit increases, long-term, performance based incentives and deposit costs that increased due to higher average balances.
Current wording
Noninterest expense was $105.7 million for the second quarter of 2025, an increase of $5.9 million from $99.8 million in the linked quarter. Employee compensation and benefits increased $2.0 million from the linked quarter primarily due to a full quarter of merit increases that were effective on March 1, 2025, an increase in variable compensation and the number of working days in the quarter. Deposit costs relate to certain businesses in the deposit verticals that receive an earnings credit allowance for deposit related expenses that are impacted by interest rates and average balances. Deposit costs increased $0.9 million from the linked quarter primarily due to an increase of $62.1 million in average deposit vertical balances from the linked quarter. Acquisition costs relate to the previously announced branch acquisition that is expected to close in the fourth quarter 2025. Loan and legal expenses, included in other expense, increased $1.1 million during the quarter due to loan workouts and the foreclosure of certain properties related to nonperforming loans.
Previous wording
The Company’s effective tax rate was 18.1% for the first quarter 2025. This compares to the linked and prior year quarter effective tax rate of 19.5% and 20.2%, respectively. The decreases from the linked and prior year quarter effective tax rates were driven by tax credit opportunities the Company has deployed as part of its tax planning strategy. In addition, the effective tax rate for the first quarter 2025 was further reduced due to the tax impact associated with vesting of stock-based awards.
Current wording
The Company’s effective tax rate was 20.0% for the second quarter of 2025 and 19.1% for the six months ended June 30, 2025. This compares to the linked quarter and prior year-to-date effective tax rate of 18.1% and 20.4%, respectively. The Company continues to leverage tax credit opportunities as part of its overall tax planning strategy that contributes to a lower effective tax rate.
Previous wording
Total assets were $15.7 billion at March 31, 2025, an increase of $80.2 million from December 31, 2024 primarily due to a $78.4 million increase in loans and a $233.1 million increase in investment securities, partially offset by a $282.5 million decrease in cash and cash equivalents. Total liabilities of $13.8 billion increased $36.1 million from December 31, 2024 primarily due to a $205.0 million increase in FHLB advances, partially offset by a $112.3 million decrease in deposits.
Current wording
Total assets were $16.1 billion at June 30, 2025, an increase of $479.9 million from December 31, 2024 primarily due to a $504.5 million increase in investment securities and a $188.5 million increase in loans, partially offset by a $272.7 million decrease in cash and cash equivalents. Total liabilities of $14.2 billion increased $381.0 million from December 31, 2024 primarily due to a $294.0 million increase in FHLB advances and a $170.9 million increase in deposits.
Previous wording
At March 31, 2025, investment securities were $3.0 billion or 19% of total assets compared to $2.8 billion or 18% of total assets at December 31, 2024. The portfolio is comprised of both available-for-sale and held-to-maturity securities.
Current wording
At June 30, 2025, investment securities were $3.3 billion or 21% of total assets compared to $2.8 billion or 18% of total assets at December 31, 2024. The portfolio is comprised of both available-for-sale and held-to-maturity securities.
Previous wording
Investment purchases in the first quarter 2025 had a weighted average, tax equivalent yield of 5.20%. The average duration of the investment portfolio was 5.2 years at March 31, 2025. The Company leverages the investment portfolio to lengthen the overall duration of the balance sheet, primarily using high-quality municipal securities. The expected cash flow from pay downs, maturities and interest over the next 12 months is approximately $500.9 million.
Current wording
Investment purchases in the second quarter of 2025 had a weighted average, tax equivalent yield of 5.30%. The average duration of the investment portfolio was 5.1 years at June 30, 2025. The Company leverages the investment portfolio to lengthen the overall duration of the balance sheet, primarily using high-quality municipal securities. The expected cash flow from pay downs, maturities and interest over the next 12 months is approximately $547.5 million.
Previous wording
Loans totaled $11.3 billion at March 31, 2025 compared to $11.2 billion at December 31, 2024. The increase was primarily due to an increase in C&I loans of $13.0 million and an increase of $71.5 million in CRE loans, partially offset by a decrease of $10.4 million in construction loans. Average revolving line draw utilization was 42% for the first quarter 2025, compared to 43% for the year ended December 31, 2024.
Current wording
Loans totaled $11.4 billion at June 30, 2025 compared to $11.2 billion at December 31, 2024. The increase was primarily due to an increase in C&I loans of $153.6 million and an increase of $99.3 million in CRE loans, partially offset by a decrease of $46.6 million in construction loans. Average revolving line draw utilization was 46% for the second quarter of 2025, compared to 43% for the year ended December 31, 2024.
Previous wording
SBA loans are also generated on a national basis, and primarily consist of loans collateralized by first lien, owner-occupied real estate properties. These loans predominantly have a 75% guarantee from the SBA. The Company may sell the guaranteed portion of the loan and retain servicing rights, and in the first quarter 2025, the guaranteed portion of SBA loans totaling $31.3 million were sold.
Current wording
SBA loans are also generated on a national basis, and primarily consist of loans collateralized by first lien, owner-occupied real estate properties. These loans predominantly have a 75% guarantee from the SBA. The Company may sell the guaranteed portion of the loan and retain servicing rights, and in the three and six months ended June 30, 2025, the guaranteed portion of SBA loans totaling $24.4 million and $55.7 million, respectively, were sold.
Previous wording
Nonperforming loans at March 31, 2025 increased $67.2 million, or 157%, when compared to December 31, 2024. The increase in nonperforming assets in the current quarter was primarily related to seven commercial real estate loans to two commercial banking relationships in Southern California that share common managing general partners. Six loans totaling $41.7 million are personally guaranteed by one individual, and the seventh loan totaling $26.7 million is guaranteed by a separate party. Litigation resulting from a business dispute between the general/managing partner and certain limited partners has resulted in all seven of the borrowing entities filing bankruptcy, and the Company expects to collect the full balance of these loans. These commercial real estate investor-owned loans and residential real estate loans are well-secured by real estate properties with up-to-date appraisals. Loan-to-value ratios for the individual properties range from 39% to 79% based on current March 2025 valuations. Furthermore, all seven loans include substantial personal guarantees, and $48.6 million of the $68.4 million relationship remains on accrual despite being 90+ days past due. A summary of the relationship is as follows:
Current wording
Nonperforming loans at June 30, 2025 increased $63.1 million, or 148%, when compared to December 31, 2024. The increase in nonperforming assets during the six months ended June 30, 2025 was primarily related to seven commercial real estate loans to two commercial banking relationships in Southern California that share common managing general partners. Six loans totaling $41.7 million are personally guaranteed by one individual, and the seventh loan totaling $26.7 million is guaranteed by a separate party. Litigation resulting from a business dispute between the general/managing partner and certain limited partners has resulted in all seven of the borrowing entities filing bankruptcy, and the Company expects to collect the full balance of these loans. These commercial real estate investor-owned loans and residential real estate loans are well-secured by real estate properties with up-to-date appraisals. Loan-to-value ratios for the individual properties range from 39% to 79% based on March 2025 appraisals performed. Furthermore, all seven loans include substantial personal guarantees, and $48.6 million of the $68.4 million relationship remains on accrual despite being 90+ days past due. A summary of the relationship is as follows:
Previous wording
Total deposits excluding brokered certificates of deposits were $12.5 billion at March 31, 2025, a decrease of $169.8 million from December 31, 2024. The decrease from the linked quarter was primarily in noninterest bearing commercial deposits that typically decline in the first part of the year due to tax and bonus distributions. The Company has deposit verticals focusing on property management, community associations, and escrow industries. These deposits increased to $3.5 billion at March 31, 2025 from $3.4 billion at December 31, 2024 due to continued success at generating organic deposit growth.
Current wording
Total deposits excluding brokered certificates of deposits were $12.6 billion at June 30, 2025, a decrease of $97.0 million from December 31, 2024. Brokered certificates of deposit at June 30, 2025 increased $267.8 million from December 31, 2024 and continue to be used as a stable funding source. The Company has deposit verticals focusing on property management, community associations, and escrow industries. These deposits increased to $3.6 billion at June 30, 2025 from $3.4 billion at December 31, 2024 due to continued success at generating organic deposit growth.
Previous wording
To provide customers a deposit product with enhanced FDIC insurance, the Company participates in several programs through third parties that provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Total reciprocal deposits were $1.3 billion at both March 31, 2025 and December 31, 2024. The Company considers reciprocal accounts as customer-related deposits due to the customer relationship that generated the transaction.
Current wording
To provide customers a deposit product with enhanced FDIC insurance, the Company participates in several programs through third parties that provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Total reciprocal deposits were $1.4 billion and $1.3 billion at June 30, 2025 and December 31, 2024, respectively. The Company considers reciprocal accounts as customer-related deposits due to the customer relationship that generated the transaction.
Previous wording
The total cost of deposits was 1.83% for the current quarter, compared to 2.00% and 2.13% for the linked and prior year quarters, respectively.
Current wording
The total cost of deposits was 1.82% for the current quarter and six months ended June 30, 2025, respectively, compared to 1.83% and 2.15% for the linked and prior year-to-date periods, respectively.
Previous wording
Stockholders’ equity totaled $1.9 billion at March 31, 2025, an increase of $44.1 million from December 31, 2024. Significant activity during the first three months of 2025 was as follows:
Current wording
Stockholders’ equity totaled $1.9 billion at June 30, 2025, an increase of $98.9 million from December 31, 2024. Significant activity during the first six months of 2025 was as follows:
Previous wording
•Increase from net income of $50.0 million,
Current wording
•Increase from net income of $101.3 million,
Previous wording
•Increase in fair value of securities and cash flow hedges of $15.3 million,
Current wording
•Increase in fair value of securities and cash flow hedges of $27.7 million,
Previous wording
•Decrease from dividends paid on common and preferred stock of $11.3 million, and
Current wording
•Decrease from dividends paid on common and preferred stock of $23.7 million, and
Previous wording
Liquidity from assets is available primarily from cash balances and the investment portfolio. Cash and interest-bearing deposits with other banks totaled $481.7 million at March 31, 2025, compared to $764.2 million at December 31, 2024. Investment securities are another important tool in liquidity planning. Securities totaled $3.0 billion and $2.8 billion at March 31, 2025 and December 31, 2024, respectively, and included $1.5 billion at both March 31, 2025 and December 31, 2024, respectively, pledged as collateral for deposits of public institutions, loan notes and other requirements. The unpledged portion of the securities portfolio could be pledged or sold to enhance liquidity, if necessary.
Current wording
Liquidity from assets is available primarily from cash balances and the investment portfolio. Cash and interest-bearing deposits with other banks totaled $491.5 million at June 30, 2025, compared to $764.2 million at December 31, 2024. Investment securities are another important tool in liquidity planning. Securities totaled $3.3 billion and $2.8 billion at June 30, 2025 and December 31, 2024, respectively, and included $1.7 billion and $1.5 billion at June 30, 2025 and December 31, 2024, respectively, pledged as collateral for deposits of public institutions, loan notes and other requirements. The unpledged portion of the securities portfolio could be pledged or sold to enhance liquidity, if necessary.
Previous wording
The Company also has a portfolio of SBA guaranteed loans, a portion of which could be sold in the secondary market to generate earnings and liquidity. The guaranteed portion of SBA loans totaling $31.3 million and $23.1 million were sold during the three months ended March 31, 2025 and 2024, respectively.
Current wording
The Company also has a portfolio of SBA guaranteed loans, a portion of which could be sold in the secondary market to generate earnings and liquidity. The guaranteed portion of SBA loans totaling $55.7 million and $23.1 million were sold during the six months ended June 30, 2025 and 2024, respectively.
Previous wording
Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at March 31, 2025, the Company could borrow an additional $1.1 billion from the FHLB of Des Moines under blanket loan pledges and has additional real estate loans that could be pledged. The Company also has $2.9 billion available from the Federal Reserve under a pledged loan agreement. The Company also has unsecured federal funds lines with seven correspondent banks totaling $140 million.
Current wording
Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at June 30, 2025, the Company could borrow an additional $1.1 billion from the FHLB of Des Moines under blanket loan pledges and has additional real estate loans that could be pledged. The Company also has $3.2 billion available from the Federal Reserve under a pledged loan agreement. The Company also has unsecured federal funds lines with eight correspondent banks totaling $160.0 million.
Previous wording
In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The Company has $3.0 billion in unused commitments to extend credit as of March 31, 2025. While this commitment level would exhaust the majority of the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.
Current wording
In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The Company has $2.9 billion in unused commitments to extend credit as of June 30, 2025. While this commitment level would exhaust the majority of the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.
Previous wording
At the holding company level, our primary funding sources are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises, stock offerings) and debt instruments. The main use of this liquidity is to provide the funds necessary to pay dividends to stockholders, service debt, invest in subsidiaries as necessary, repurchase common stock and satisfy other operating requirements. In February 2025, EFSC’s revolving line of credit for an aggregate amount $25 million matured, of which the Company anticipates renewing in the second quarter of 2025.
Current wording
At the holding company level, our primary funding sources are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises, stock offerings) and debt instruments. The main use of this liquidity is to provide the funds necessary to pay dividends to stockholders, service debt, invest in subsidiaries as necessary, repurchase common stock and satisfy other operating requirements. The holding company maintains a revolving line of credit for an aggregate amount $25 million, all of which was available at June 30, 2025. The line of credit was renewed in the second quarter of 2025 and was effective as of February 22, 2025. The line of credit has a one-year term and the proceeds can be used for general corporate purposes.
Previous wording
The Company’s accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides additional financial measures, such as tangible common equity, ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, tangible book value per common share, return on average common equity and the tangible common equity ratio, in this report that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.
Current wording
The Company’s accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides additional financial measures, such as tangible common equity, adjusted ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, tangible book value per common share, return on average common equity and the tangible common equity to tangible assets ratio, in this report that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.
Previous wording
The Company considers its tangible common equity, ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, tangible book value per common share, return on average common equity and the tangible common equity ratio, collectively “core performance measures,” presented in this report and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as the FDIC special assessment, core conversion expenses, merger-related expenses, facilities charges, the gain or loss on the sale of other real estate owned, and the gain or loss on sale of investment securities, that the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.
Current wording
The Company considers its tangible common equity, adjusted ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, tangible book value per common share, return on average common equity and the tangible common equity to tangible assets ratio, collectively “core performance measures,” presented in this report and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as the FDIC special assessment, core conversion expenses, acquisition costs, the gain or loss on the sale of other real estate owned, and the gain or loss on sale of investment securities, that the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.
Previous wording
Tangible Common Equity, Tangible Book Value per Common Share, and Tangible Common Equity Ratio
Current wording
Tangible Common Equity, Tangible Book Value per Common Share, and Tangible Common Equity to Tangible Assets Ratio