Enterprise Financial Services Corp 10-Q for FY2020 Q1

Enterprise Financial Services Corp (EFSC)

10-Q 2020-05-06 For: 2020-03-31

Added on April 09, 2026

About this 10-Q

Enterprise Financial Services Corp filed this 10-Q on May 6, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net income: $12.87M; down 20.4% from net income of $16.16M a year earlier
Diluted EPS: $0.48; down 28.4% from $0.67 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	EFSC	Nasdaq Global Select Market



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



		Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)		1

Condensed Consolidated Statements of Operations (Unaudited)		2

Condensed Consolidated Statements of Comprehensive Income (Unaudited)		3

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)		4

Condensed Consolidated Statements of Cash Flows (Unaudited)		5

Notes to Condensed Consolidated Financial Statements (Unaudited)		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24

Item 3. Quantitative and Qualitative Disclosures About Market Risk		44

Item 4. Controls and Procedures		45

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		45

Item 1A. Risk Factors		45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		48

Item 3. Defaults Upon Senior Securities		48

Item 4. Mine Safety Disclosures		48

Item 5. Other Information		48

Item 6. Exhibits		49

Signatures		51



ACL	Allowance for Credit Losses	FASB	Financial Accounting Standards Board
ACLL	Allowance for Credit Losses on Loans (excludes allowance for securities and allowance for unfunded commitments)	FDIC	Federal Deposit Insurance Corporation
ASC	Accounting Standards Codification	FHLB	Federal Home Loan Bank
ASU	Accounting Standards Update	GAAP	Generally Accepted Accounting Principles (United States)
Bank	Enterprise Bank & Trust	LIBOR	London Interbank Offered Rate
C&I	Commercial and Industrial	MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
CECL	Current Expected Credit Loss	PCD	Purchased Credit Deteriorated
Company	Enterprise Financial Services Corp and Subsidiaries	PCI	Purchased Credit Impaired
CRE	Commercial Real Estate	PPP	Paycheck Protection Program
DCF	Discounted Cash Flow	SBA	Small Business Administration
EFSC	Enterprise Financial Services Corp	SEC	Securities and Exchange Commission
Enterprise	Enterprise Financial Services Corp and Subsidiaries	Trinity	Trinity Capital Corporation



(in thousands, except share and per share data)	March 31, 2020			December 31, 2019
Assets
Cash and due from banks	$	98,619		$	74,769
Federal funds sold	3,068			3,060
Interest-earning deposits (including $43,315 and $15,285 pledged as collateral, respectively)	81,996			89,427
Total cash and cash equivalents	183,683			167,256
Interest-earning deposits greater than 90 days	3,730			3,730
Securities available-for-sale	1,161,514			1,135,317
Securities held-to-maturity, net	178,932			181,166
Loans held-for-sale	8,430			5,570
Loans	5,457,517			5,314,337
Less: Allowance for credit losses on loans	92,187			43,288
Total loans, net	5,365,330			5,271,049
Other investments	41,703			38,044
Fixed assets, net	59,358			60,013
Goodwill	210,344			210,344
Intangible assets, net	24,585			26,076
Other assets	263,034			235,226
Total assets	$	7,500,643		$	7,333,791

Liabilities and Shareholders' Equity
Noninterest-bearing deposit accounts	$	1,354,571		$	1,327,348
Interest-bearing transaction accounts	1,389,603			1,367,444
Money market accounts	1,925,415			1,713,615
Savings accounts	554,413			536,169
Certificates of deposit:
Brokered	170,667			215,758
Other	595,237			610,689
Total deposits	5,989,906			5,771,023
Subordinated debentures and notes	141,336			141,258
FHLB advances	222,000			222,406
Other borrowings	173,061			230,886
Notes payable	32,857			34,286
Other liabilities	95,047			66,747
Total liabilities	$	6,654,207		$	6,466,606

Commitments and contingent liabilities (Note 5)

Shareholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding	—			—
Common stock, $0.01 par value; 45,000,000 shares authorized; 28,140,602 and 28,067,087 shares issued, respectively	281			281
Treasury stock, at cost; 1,980,093 and 1,523,842 shares, respectively	(73,528		)	(58,181		)
Additional paid in capital	525,838			526,599
Retained earnings	370,748			380,737
Accumulated other comprehensive income	23,097			17,749
Total shareholders' equity	846,436			867,185
Total liabilities and shareholders' equity	$	7,500,643		$	7,333,791



☒		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



☐		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



	Three months ended March 31,
(in thousands, except per share data)	2020		2019
Interest income:
Interest and fees on loans	$	67,169	$	61,025
Interest on debt securities:
Taxable	7,557		5,475
Nontaxable	1,489		447
Interest on interest-earning deposits	300		447
Dividends on equity securities	173		223
Total interest income	76,688		67,617
Interest expense:
Deposits	9,888		11,820
Subordinated debentures and notes	1,919		1,648
FHLB advances	895		1,398
Notes payable and other borrowings	618		408
Total interest expense	13,320		15,274
Net interest income	63,368		52,343
Provision for credit losses	22,264		1,476
Net interest income after provision for credit losses	41,104		50,867
Noninterest income:
Service charges on deposit accounts	3,143		2,935
Wealth management revenue	2,501		1,992
Card services revenue	2,247		1,790
Tax credit income	2,036		158
Miscellaneous income	3,481		2,355
Total noninterest income	13,408		9,230
Noninterest expense:
Employee compensation and benefits	21,685		19,352
Occupancy	3,347		2,637
Data processing	2,082		1,906
Professional fees	862		746
Merger-related expenses	—		7,270
Other	10,697		7,927
Total noninterest expense	38,673		39,838

Income before income tax expense	15,839		20,259
Income tax expense	2,971		4,103
Net income	$	12,868	$	16,156

Earnings per common share
Basic	$	0.49	$	0.68
Diluted	0.48		0.67



	Three months ended March 31,
(in thousands)	2020			2019
Net income	$	12,868		$	16,156
Other comprehensive income (loss), after-tax:
Change in unrealized gain on available-for-sale debt securities	10,564			11,502
Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities	(3		)	220
Reclassification of (gain) loss on held-to-maturity securities	(156		)	2
Change in unrealized loss on cash flow hedges arising during the period	(5,180		)	(952		)
Reclassification of loss on cash flow hedges	123			—
Total other comprehensive income, after-tax	5,348			10,772
Comprehensive income	$	18,216		$	26,928



(in thousands, except per share data)	Common Stock		Treasury Stock			Additional paid in capital			Retained earnings			Accumulated other comprehensive income (loss)			Total shareholders’ equity
Balance at December 31, 2019	$	281	$	(58,181	)	$	526,599		$	380,737		$	17,749		$	867,185
Net income	—		—			—			12,868			—			12,868
Other comprehensive income	—		—			—			—			5,348			5,348
Comprehensive income	—		—			—			12,868			5,348			18,216
Cash dividends paid on common shares, $0.18 per share	—		—			—			(4,743		)	—			(4,743		)
Repurchase of common shares	—		(15,347		)	—			—			—			(15,347		)
Issuance under equity compensation plans, 73,515 shares, net	—		—			(1,721		)	—			—			(1,721		)
Share-based compensation	—		—			960			—			—			960
Reclassification for the adoption of ASU 2016-13 (CECL)	—		—			—			(18,114		)	—			(18,114		)
Balance at March 31, 2020	$	281	$	(73,528	)	$	525,838		$	370,748		$	23,097		$	846,436

(in thousands, except per share data)	Common Stock		Treasury Stock			Additional paid in capital			Retained earnings			Accumulated other comprehensive income (loss)			Total shareholders’ equity
Balance at December 31, 2018	$	239	$	(42,655	)	$	350,936		$	304,566		$	(9,282	)	$	603,804
Net income	—		—			—			16,156			—			16,156
Other comprehensive income	—		—			—			—			10,772			10,772
Comprehensive income	—		—			—			16,156			10,772			26,928
Cash dividends paid on common shares, $0.14 per share	—		—			—			(3,763		)	—			(3,763		)
Issuance under equity compensation plans, 75,089 shares, net	1		—			(1,941		)	—			—			(1,940		)
Share-based compensation	—		—			921			—			—			921
Shares issued in connection with acquisition of Trinity Capital Corporation, 3,990,822 shares	40		—			171,845			—			—			171,885
Balance at March 31, 2019	$	280	$	(42,655	)	$	521,761		$	316,959		$	1,490		$	797,835



	Three months ended March 31,
(in thousands, except share data)	2020			2019
Cash flows from operating activities:
Net income	$	12,868		$	16,156
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	1,524			1,162
Provision for credit losses	22,264			1,476
Deferred income taxes	(183		)	2,727
Net amortization of debt securities	1,054			407
Amortization of intangible assets	1,491			838
Mortgage loans originated-for-sale	(33,537		)	(4,087		)
Proceeds from mortgage loans sold	30,888			3,825
Loss (gain) on:
Sale of investment securities	(4		)	292
Valuation adjustments and sale of other real estate	52			(66		)
Sale of state tax credits	(124		)	(158		)
Share-based compensation	960			921
Net accretion of loan discount	(2,510		)	(596		)
Changes in other assets and liabilities, net	(2,181		)	(7,185		)
Net cash provided by operating activities	32,562			15,712
Cash flows from investing activities:
Acquisition cash purchase price, net of cash and cash equivalents acquired	—			(23,376		)
Net decrease (increase) in loans	(134,482		)	13,855
Proceeds received from:
Sale of debt securities, available-for-sale	207			259,420
Paydown or maturity of debt securities, available-for-sale	55,932			27,684
Paydown or maturity of debt securities, held-to-maturity	1,595			1,269
Redemption of other investments	24,310			11,744
Sale of state tax credits held for sale	1,186			2,381
Sale of other real estate	443			66
Payments for the purchase of:
Available-for-sale debt securities	(69,336		)	(221,711		)
Other investments	(28,809		)	(14,977		)
State tax credits held for sale	(3,780		)	(1,852		)
Fixed assets, net	(918		)	(1,268		)
Net cash (used in) provided by investing activities	(153,652		)	53,235
Cash flows from financing activities:
Net increase (decrease) in noninterest-bearing deposit accounts	27,223			(83,290		)
Net increase (decrease) in interest-bearing deposit accounts	191,659			(48,770		)
Repayments of FHLB advances, net	(300		)	105,025
Proceeds from notes payable	—			40,000
Repayments of notes payable	(1,429		)	(2,000		)
Net decrease in other borrowings	(57,825		)	(49,279		)
Cash dividends paid on common stock	(4,743		)	(3,763		)
Payments for the repurchase of common stock	(15,347		)	—
Payments for the issuance of equity instruments, net	(1,721		)	(1,940		)
Net cash provided by (used in) financing activities	137,517			(44,017		)
Net increase in cash and cash equivalents	16,427			24,930
Cash and cash equivalents, beginning of period	167,256			196,552
Cash and cash equivalents, end of period	$	183,683		$	221,482
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	13,026		$	14,020
Noncash transactions:
Transfer to other real estate owned in settlement of loans	$	—		$	1,372
Right-of-use assets obtained in exchange for lease obligations	200			—
Common shares issued in connection with acquisition	—			171,885




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

Liabilities:
Reserve for unfunded commitments	430		2,413			2,843

Shareholders’ Equity
Retained Earnings	380,737		(18,114		)	362,623



	March 31, 2020
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses			Fair Value
Available-for-sale securities:
Obligations of U.S. Government-sponsored enterprises	$	9,960	$	270	$	—		$	—		$	10,230
Obligations of states and political subdivisions	243,863		10,373		(205		)	—			254,031
Agency mortgage-backed securities	863,698		23,465		(496		)	—			886,667
U.S. Treasury bills	9,973		613		—			—			10,586
Total securities available for sale	$	1,127,494	$	34,721	$	(701	)	$	—		$	1,161,514
Held-to-maturity securities:
Obligations of states and political subdivisions	$	11,688	$	153	$	—		$	(1	)	$	11,840
Agency mortgage-backed securities	44,720		1,924		—			—			46,644
Corporate debt securities	122,827		162		(3,090		)	(302		)	119,597
Total securities held-to-maturity	$	179,235	$	2,239	$	(3,090	)	$	(303	)	$	178,081
Less: Allowance for credit losses	303
Total securities held-to-maturity, net	$	178,932



	Available for sale				Held to maturity
(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,018	$	2,054	$	—	$	—
Due after one year through five years	26,301		27,369		4,444		4,503
Due after five years through ten years	10,205		10,576		130,071		126,934
Due after ten years	225,272		234,848		—		—
Agency mortgage-backed securities	863,698		886,667		44,720		46,644
	$	1,127,494	$	1,161,514	$	179,235	$	178,081



	March 31, 2020
	Less than 12 months				12 months or more				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of states and political subdivisions	$	10,475	$	205	$	—	$	—	$	10,475	$	205
Agency mortgage-backed securities	82,614		415		5,198		81		87,812		496
	$	93,089	$	620	$	5,198	$	81	$	98,287	$	701


The following table represents a summary of investment securities that had an unrealized loss:

	December 31, 2019
	Less than 12 months				12 months or more				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of states and political subdivisions	56,327		363		—		—		56,327		363
Agency mortgage-backed securities	131,693		756		41,491		435		173,184		1,191
Corporate debt securities	67,964		200		—		—		67,964		200
	$	255,984	$	1,319	$	41,491	$	435	$	297,475	$	1,754



(in thousands)	March 31, 2020			December 31, 2019
Commercial and industrial	$	2,469,013		2,361,157
Real estate:
Commercial - investor owned	1,327,814			1,299,884
Commercial - owner occupied	720,543			697,437
Construction and land development	469,627			457,273
Residential	346,758			366,261
Total real estate loans	2,864,742			2,820,855
Consumer and other	126,212			134,941
Loans, before unearned loan fees	5,459,967			5,316,953
Unearned loan fees, net	(2,450		)	(2,616		)
Loans, including unearned loan fees	$	5,457,517		$	5,314,337



(in thousands)	Commercial and industrial			CRE - investor owned			CRE - owner occupied			Construction and land development			Residential real estate			Consumer and other			Total
Allowance for credit losses on loans:
Balance at December 31, 2019	$	27,455		$	5,935		$	4,873		$	2,611		$	1,280		$	1,134		$	43,288
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 at January 1, 2020	$	33,949		$	16,656		$	7,414		$	7,577		$	3,349		$	1,050		$	69,995
Provision for credit losses	11,591			3,224			1,994			2,309			2,011			566			21,695
Charge-offs	(63		)	(2		)	—			(31		)	(122		)	(86		)	(304		)
Recoveries	504			14			69			40			157			17			801
Balance at March 31, 2020	$	45,981		$	19,892		$	9,477		$	9,895		$	5,395		$	1,547		$	92,187



	March 31, 2020
(in thousands)	Nonaccrual		Restructured, accruing		Loans over 90 days past due and still accruing interest		Total nonperforming loans		Nonaccrual loans with no allowance
Commercial and industrial	$	22,729	$	3,731	$	71	$	26,531	$	17,915
Real estate:
Commercial - investor owned	4,115		—		—		4,115		2,576
Commercial - owner occupied	2,110		—		—		2,110		1,114
Construction and land development	214		—		—		214		214
Residential	4,075		79		—		4,154		3,086
Consumer and other	25		—		55		80		—
Total	$	33,268	$	3,810	$	126	$	37,204	$	24,905



	March 31, 2020
(in thousands, except for number of loans)	Number of loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial and industrial	1	$	3,731	$	3,731
Real estate:
Residential	2	155		155
Total	3	$	3,886	$	3,886



	Type of Collateral
(in thousands)	Commercial Real Estate		Residential Real Estate		Blanket Lien
Commercial and industrial	$	13,051	$	—	$	5,910
Real estate:
Commercial - investor owned	4,115		—		—
Commercial - owner occupied	1,521		—		—
Construction and land development	—		214		—
Residential	—		3,927		—
Total	$	18,687	$	4,141	$	5,910



	March 31, 2020
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	24,898	$	9,491	$	34,389	$	2,434,624	$	2,469,013
Real estate:
Commercial - investor owned	1,996		3,438		5,434		1,322,380		1,327,814
Commercial - owner occupied	3,870		1,182		5,052		715,491		720,543
Construction and land development	95		—		95		469,532		469,627
Residential	5,124		1,482		6,606		340,152		346,758
Consumer and other	459		75		534		123,228		123,762
Total	$	36,442	$	15,668	$	52,110	$	5,405,407	$	5,457,517


•	Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.


•	Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.


•	Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.


•	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.


•	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. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support.


•	Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.


•	Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual.



	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)	$	274,021	$	623,511	$	328,712	$	188,489	$	53,064	$	126,446	$	2,557	$	660,675	$	2,257,475
Watch (7)	780		17,643		5,258		11,986		23,454		524		506		66,449		126,600
Classified (8-9)	649		20,887		8,438		3,881		5,253		3,581		431		26,687		69,807
Total Commercial and industrial	$	275,450	$	662,041	$	342,408	$	204,356	$	81,771	$	130,551	$	3,494	$	753,811	$	2,453,882

Commercial real estate-investor owned
Pass (1-6)	$	114,369	$	356,099	$	229,830	$	154,406	$	173,623	$	204,948	$	1,745	$	52,875	$	1,287,895
Watch (7)	113		10,395		1,305		400		12,614		1,623		—		—		26,450
Classified (8-9)	—		978		8,043		445		246		3,757		—		—		13,469
Total Commercial real estate-investor owned	$	114,482	$	367,472	$	239,178	$	155,251	$	186,483	$	210,328	$	1,745	$	52,875	$	1,327,814

Commercial real estate-owner occupied
Pass (1-6)	$	50,382	$	226,562	$	99,918	$	89,750	$	58,499	$	96,149	$	2,797	$	44,271	$	668,328
Watch (7)	2,775		8,802		370		9,904		8,641		5,313		—		5,900		41,705
Classified (8-9)	—		1,131		5,212		—		—		4,167		—		—		10,510
Total Commercial real estate-owner occupied	$	53,157	$	236,495	$	105,500	$	99,654	$	67,140	$	105,629	$	2,797	$	50,171	$	720,543

Construction real estate
Pass (1-6)	$	23,035	$	184,561	$	123,931	$	63,034	$	28,407	$	14,672	$	—	$	17,410	$	455,050
Watch (7)	966		11,448		1,262		69		—		563		—		—		14,308
Classified (8-9)	—		226		—		—		—		43		—		—		269
Total Construction real estate	$	24,001	$	196,235	$	125,193	$	63,103	$	28,407	$	15,278	$	—	$	17,410	$	469,627

Residential real estate
Pass (1-6)	$	12,356	$	37,811	$	23,381	$	24,306	$	38,082	$	132,715	$	245	$	65,660	$	334,556
Watch (7)	1		1,045		875		—		4		2,683		—		1,093		5,701
Classified (8-9)	—		1,715		767		13		131		2,882		—		49		5,557
Total residential real estate	$	12,357	$	40,571	$	25,023	$	24,319	$	38,217	$	138,280	$	245	$	66,802	$	345,814

Consumer and other
Pass (1-6)	$	1,257	$	26,478	$	20,911	$	1,735	$	5,535	$	35,940	$	—	$	29,311	$	121,167
Watch (7)	—		2		—		—		—		1		—		1		4
Classified (8-9)	—		2		4		6		—		24		10		24		70
Total consumer and other	$	1,257	$	26,482	$	20,915	$	1,741	$	5,535	$	35,965	$	10	$	29,336	$	121,241



	March 31, 2020
(in thousands)	Performing		Non Performing		Total
Commercial and industrial	$	15,060	$	71	$	15,131
Real estate:
Residential	944		—		944
Consumer and other	2,465		56		2,521
Total	$	18,469	$	127	$	18,596



	Derivative Assets										Derivative Liabilities
	March 31, 2020					December 31, 2019					March 31, 2020			December 31, 2019
(in thousands)	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives Designated as Hedging Instruments
Interest rate swap	$	261,962	Other Assets	$	—	$	61,962	Other Assets	$	—	Other Liabilities	$	9,587	Other Liabilities	$	2,872
Total				$	—				$	—		$	9,587		$	2,872

Derivatives not Designated as Hedging Instruments
Interest rate swap	$	842,899	Other Assets	$	33,697	$	749,819	Other Assets	$	11,055	Other Liabilities	$	33,732	Other Liabilities	$	11,875
Total				$	33,697				$	11,055		$	33,732		$	11,875



As of March 31, 2020
							Gross Amounts Not Offset in the Statement of Financial Position
(in thousands)	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
Assets:
Interest rate swap	$	33,697	$	—	$	33,697	$	13	$	—	$	33,683

Liabilities:
Interest rate swap	$	43,319	$	—	$	43,319	$	13	$	42,746	$	560
Securities sold under agreements to repurchase	173,061		—		173,061		—		173,061		—

As of December 31, 2019
							Gross Amounts Not Offset in the Statement of Financial Position
(in thousands)	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
Assets:
Interest rate swap	$	11,055	$	—	$	11,055	$	56	$	—	$	10,999

Liabilities:
Interest rate swap	$	14,747	$	—	$	14,747	$	56	$	14,573	$	118
Securities sold under agreements to repurchase	230,886		—		230,886		—		230,886		—



	March 31, 2020
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets
Securities available for sale
Obligations of U.S. Government-sponsored enterprises	$	—	$	10,230	$	—	$	10,230
Obligations of states and political subdivisions	—		254,031		—		254,031
Agency mortgage-backed securities	—		886,667		—		886,667
U.S. Treasury bills	—		10,586		—		10,586
Total securities available for sale	—		1,161,514		—		1,161,514
Derivatives	—		33,697		—		33,697
Total assets	$	—	$	1,195,211	$	—	$	1,195,211

Liabilities
Derivatives	$	—	$	43,319	$	—	$	43,319
Total liabilities	$	—	$	43,319	$	—	$	43,319




	(1)		(1)		(1)		(1)
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	288	$	—	$	—	$	288
Other real estate	3,902		—		—		3,902
Total	$	4,190	$	—	$	—	$	4,190

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



(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities			Unamortized Gain (Loss) on Held-to-Maturity Securities			Net Unrealized Loss on Cash Flow Hedges			Total
Balance, December 31, 2019	$	14,977		$	4,934		$	(2,162	)	$	17,749
Net change	10,561			(156		)	(5,057		)	5,348
Balance, March 31, 2020	$	25,538		$	4,778		$	(7,219	)	$	23,097

(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities			Unamortized Gain (Loss) on Held-to-Maturity Securities			Net Unrealized Loss on Cash Flow Hedges			Total
Balance, December 31, 2018	$	(9,047	)	$	(235	)	$	—		$	(9,282	)
Net change	11,722			2			(952		)	10,772
Balance, March 31, 2019	$	2,675		$	(233	)	$	(952	)	$	1,490



(in thousands, except per share data)	At or for the three months ended
(in thousands, except per share data)	March 31, 2020			March 31, 2019
EARNINGS
Total interest income	$	76,688		$	67,617
Total interest expense	13,320			15,274
Net interest income	63,368			52,343
Provision for credit losses	22,264			1,476
Net interest income after provision for credit losses	41,104			50,867
Total noninterest income	13,408			9,230
Total noninterest expense	38,673			39,838
Income before income tax expense	15,839			20,259
Income tax expense	2,971			4,103
Net income	$	12,868		$	16,156

Basic earnings per share	$	0.49		$	0.68
Diluted earnings per share	0.48			0.67

Return on average assets	0.70		%	1.10		%
Return on average common equity	5.98			9.89
Return on average tangible common equity¹	8.22			12.93
Net interest margin (tax equivalent)	3.79			3.87
Core net interest margin¹	3.71			3.79
Efficiency ratio	50.37			64.70
Core efficiency ratio¹	51.21			54.06
Book value per common share	$	32.36		$	29.68
Tangible book value per common share¹	23.38			20.80

ASSET QUALITY
Net charge-offs	$	1,183		$	1,826
Nonperforming loans	37,204			9,607
Classified assets	104,754			79,750
Nonperforming loans to total loans	0.68		%	0.19		%
Nonperforming assets to total assets	0.56			0.24
ACLL to total loans	1.69			0.86
Net charge-offs to average loans (annualized)	0.09			0.16

(1) A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.”


•	Net interest income for the first quarter 2020 increased $11.0 million to $63.4 million over the prior year period. The acquisition of Trinity along with organic loan growth and an expanded investment portfolio supported the increase in net interest income over the prior year period. A decrease in earning-asset yields was offset by a corresponding decrease in interest-bearing yields.


•	Noninterest income for the first quarter 2020 increased $4.2 million compared to the prior year period due to contributions from Trinity in wealth management and card services revenue. Tax credit income, swap fees and a claim on bank-owned life insurance also contributed to the year-over-year increase.


•	Noninterest expense for the first quarter 2020 decreased $1.2 million compared to the prior year period. The decrease is primarily due to a reduction in merger-related expenses, offset by the ongoing operating expenses from the Trinity acquisition, including planned cost savings from the transaction.