EFSC 10-K & 10-Q changes, risk factors and insider trading

Adverse developments affecting the banking industry, and resulting media coverage, havecould eroded customerclient confidence in the banking system and could have a material effect on our operations and/or stock price.

Our SBA lending program is dependent upon the U.S. federal government. As an approved participant in the SBA Preferred Lender’s Program (a “Preferred Lender”), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the Preferred Lender status. If we lose our status as a Preferred Lender, we may lose some or all of our customersclients to lenders who are Preferred Lenders, and as a result we could experience a material adverse effect to our financial results. Any changes to the SBA program, including but not limited to, changes to the level of guarantee provided by the federal government on SBA loans, changes to program-specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress, may also have a material adverse effect on our business. In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could materially adversely affect our business, results of operations, and financial condition. When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customerclient defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the way the loan was originated, funded, or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency.

Our operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, rather than shareholders.stockholders. Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change, including as a result of changes in U.S. presidential administrations that have different regulatory agendas, and could result in an adverse impact on our results of operations.

Our allowance for credit lossesACL may not be adequate to cover actual loan losses.

We maintain an allowance for credit losses,ACL, which is a reserve established through a provision for credit losses charged to expense, that represents management’s estimate of probable losses within the existing loan portfolio. The allowance, in the judgment of management, is sufficient to reserve for estimated credit losses and risks inherent in the loan portfolio. We continue to monitor the adequacy of our loan credit allowance and may need to increase it if economic conditions or other factors deteriorate. In addition, bank regulatory agencies periodically review our allowance for credit lossesACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments that can differ somewhat from those of our own management. In addition, if charge-offs in future periods exceed the allowance for credit lossesACL (i.e., if the allowance for credit lossesACL is inadequate), we may need additional credit loss provisions to increase the allowance for loan losses. Additional provisions to increase the allowance for credit losses,ACL, should they become necessary, would result in a decrease in net income and a reduction in capital, and may have a material adverse effect on our financial condition and results of operations.

Our business plan calls for continued efforts to increase our assets invested in commercial loans. Our commercial loans include loans secured by real estate (commercial property, construction and land and multi-family residential property). Commercial loans generally involve a higher degree of credit risk than residential mortgage loans due, in part, to their larger average size and less marketable collateral. In addition, unlike residential mortgage loans, commercial loans generally depend on the cash flow of the borrower’s business to service the debt. Adverse economic conditions or other factors affecting our target markets may have a greater adverse effect on us than on other financial institutions that have a more diversified client base. Increases in non-performingnonperforming commercial loans could result in operating losses, impaired liquidity and erosion of our capital, and could have a material adverse effect on our financial condition and results of operations. Credit market tightening could adversely affect our commercial borrowers through declines in their business activities and adversely impact their overall liquidity through the diminished availability of other borrowing sources or otherwise.

The loans we make to our borrowers often bear interest at a variable interest rate. When market interest rates increase, the amount of revenue borrowers need to service their debt also increases. Some borrowers may be unable to make their debt service payments. As a result, an increase in market interest rates may increase the risk of loan default. An increase in non-performingnonperforming loans could result in a net loss of earnings from these loans, an increase in the provision for credit losses, and an increase in loan charge-offs, all of these factors could impact allowance, earnings and/or capital levels.

Our commercial and industrialC&I loans and sponsor finance loans are underwritten based primarily on cash flow, profitability and enterprise value of the client and are not fully covered by the value of tangible assets or collateral of the client. Consequently, if any of these transactions becomes non-performing,nonperforming, we could experience significant losses.

Cash flow lending involves lending money to a client based primarily on the expected cash flow, profitability and enterprise value of a client, with the value of any tangible assets as secondary protection. In some cases, these loans may have more leverage than traditional bank debt. In the case of our senior cash flow loans, we generally take a lien on substantially all of a client’s assets, but the value of those assets is typically substantially less than the amount of money we advance to the client under a cash flow transaction. In addition, some of our cash flow loans may be viewed as stretch loans, meaning they may be at leverage multiples that exceed traditional accepted bank lending standards for senior cash flow loans. Thus, if a cash flow transaction becomes non-performing,nonperforming, our primary recourse to recover some or all of the principal of our loan or other debt product would be to force the sale of all or part of the company as a going concern. Additionally, we may obtain equity ownership in a borrower as a means to recover some or all of the principal of our loan. The risks inherent in cash flow lending include, among other things:

We participate in and have previously been an “Allocatee” of the New Markets Tax Credit Program of the U.S. Department of the Treasury Community Development Financial Institutions Fund.CDFI. Through this program, we provide our allocation to certain projects, which in turn for an equity investment from an investor in the project generate federal tax credits to those investors. This equity, coupled with any debt or equity from the project sponsor is in turn invested in a certified community development entity for a period of at least seven years. Community development entities must use this capital to make loans to, or other investments in, qualified businesses in low-income communities in accordance with New Markets Tax Credit Program criteria. Investors receive an overall tax credit equal to 39% of their qualified equity investment, credited at a rate of five percent in each of the first three years and six percent in each of the final four years. However, after the exhaustion of all cure periods and remedies, the entire credit is subject to recapture if the certified community development entity fails to maintain its certified status, or if substantially all of the equity investment proceeds associated with the tax credits we allocate are no longer continuously invested in a qualified business that meets the New Markets Tax Credit Program criteria, or if the equity investment is redeemed prior to the end of the minimum seven-year term. As part of these financing transactions, we as the parent to Enterprise Financial CDE, LLC, provide customary indemnities to the tax credit investors, which require us to indemnify and hold harmless the investors in the event a credit recapture event occurs, unless the recapture is a result of action or inaction of the investor. No assurance can be given that these counterparties will not call upon us to discharge these obligations in the circumstances under which they are owed. If this were to occur, the amount we may be required to pay a bank investor could be substantial and could have a materialan adverse effect on our results of operations and financial condition.

If we fail to comply with requirements of the federal New Markets Tax Credit program, the U.S. Department of the Treasury Community Development Financial Institutions FundCDFI could seek any remedies available under its Allocation Agreement with us, and we could suffer significant reputational harm and be subject to greater scrutiny from banking regulators.

Because we have been designated as an “Allocatee” under the New Markets Tax Credit Program, we are required to provide allocation fund qualifying projects under the New Markets Tax Credit Program, and we are responsible for monitoring those projects, ensuring their ongoing compliance with the requirements of the New Markets Tax Credit Program and satisfying the various recordkeeping and reporting requirements under the New Markets Tax Credit Program. If we default in our obligations under the New Markets Tax Credit Program, the U.S. Department of the Treasury may revoke our participation in any other CDFI Fund programs, reallocate the New Market Tax Credits that were originally allocated to us, and take any other remedial actions that it is empowered to take under the Allocation Agreement they have entered into with us with respect to the New Markets Tax Credit Program, with the full range of such remedies being unknown. If we were to default under the New Markets Tax Credit Program, we could suffer negative publicity in the communities in which we operate, and we could face greater scrutiny from federal and state bank regulators, especially with regard to our compliance with the CRA. These developments could have a materialan adverse impacteffect on our reputation, business, and financial condition.

The financial services sector is rapidly evolving due to technological innovations, with breakthroughs in areas like artificial intelligence, cloud computing, and other emerging technologies continuously producing new products and services to better serve their clients. In addition to better serving clients, the effective use of technology increases our efficiency and enables us to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our clients using innovative methods, processes and technology to provide products and services that will satisfy client demands for convenience as well as to add efficiencies in our operations as we continue to grow and expand our market areas. Many national vendors provide turn-key services to community banks, such as Internet banking and remote deposit capture, that allow smaller banks to compete with institutions that have substantially greater resources to invest in technological improvements. WeHowever, we may not be able, however,able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our clients.

The acquisition of other financial services companies or assetsassets, such as the Branch Acquisition we completed in 2025, present risks to us in addition to those presented by the nature of the business acquired. Our earnings, financial condition, and prospects after a merger or acquisition depend in part on our ability to successfully integrate the operations of the acquired company. We may be unable to integrate operations successfully or to achieve expected results or cost savings.

We are headquartered in Missouri, but have branch locations in the Kansas City, Phoenix, Tucson, Los Angeles, and San Diego metropolitan areas, as well as Northern New Mexico, Florida and Nevada. Over time, we may acquire or open locations in other parts of the United States as well. In the course of these expansion activities, we may encounter significant risks, including unfamiliarity with the characteristics and business dynamics of new markets, increased marketing and administrative expenses and operational difficulties arising from our efforts to attract business in new markets, manage operations in noncontiguous geographic markets, comply with local laws and regulations and effectively and consistently manage personnel and business outside of the State of Missouri. If we are unable to manage these risks, our operations may be materially and adversely affected.

•actions by institutional shareholdersstockholders;

The stock market and, in particular, the market for financial institution stocks, has historically experienced significant volatility. As a result, the market price of our common stock and depositary shares may be volatile. In addition, the trading volume in our common stock and depositary shares may fluctuate more than usual and cause significant price variations to occur. The trading price of the shares of our common stock and our depositary shares and the value of our other securities will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales of our equity or equity related securities, and other factors identified in this annual report and our other reports. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength or operating results. A significant decline in our stock or depositary share prices could result in substantial losses for individual shareholdersstockholders and could lead to costly and disruptive securities litigation.

We have outstanding preferred stock and subordinated debentures issued to statutory trust subsidiaries, which have issued and sold preferred securities in the Trusts to investors. These instruments prohibit the payment of dividends on our common stock in certain situations. See “Item 1. Business – Supervision and Regulation - Financial Holding Company - Dividend Restrictions and ShareStock Repurchases” for additional information.

Anti-takeover provisions could negatively impact our shareholders.stockholders.

Provisions of Delaware law and of our certificate of incorporation, as amended, and bylaws, as well as various provisions of federal and Missouri state law applicable to bank and bank holding companies, could make it more difficult for a third party to acquire control of us or have the effect of discouraging a third party from attempting to acquire control of us. We are subject to Section 203 of the Delaware General Corporation Law, which would make it more difficult for another party to acquire us without the approval of our Board of Directors. Additionally, our certificate of incorporation, as amended, authorizes our Board of Directors to issue preferred stock which could be issued as a defensive measure in response to a takeover proposal. In the event of a proposed merger, tender offer or other attempt to gain control of the Company, our Board of Directors would have the ability to readily issue available shares of preferred stock as a method of discouraging, delaying or preventing a change in control of the Company. Such issuance could occur regardless of whether our shareholdersstockholders favorably view the merger, tender offer or other attempt to gain control of the Company. These and other provisions could make it more difficult for a third party to acquire us even if an acquisition might be in the best interests of our shareholders.stockholders. Although we havedid no present intention tonot issue any additional shares of our authorized preferred stock,stock in the current year, there can be no assurance that the Company will not do so in the future.

OurThe Company offers a broad range of business and personal banking services including wealth management. Lending services include commercialC&I, and industrial, commercial real estate,CRE, real estate construction and development, residential real estate, specialty, and otherconsumer 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.

The Company’s financial condition, operating results and liquidity in 20242025 continued to be impacted by monetary policy actions. The Federal Reserve decreased the target federal funds rate 10075 basis points in the fourth quarter 2024,2025, following a 100 basis point increasedecrease in 2023.2024. TheThis follows the period of 2022 to 2023 when 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 representincreased the Federal Reserve’s response to an environment of high inflation and elevated interest rates following a period of highly expansionary fiscal support from thetarget federal governmentfunds duringrate the525 COVID-19basis pandemic in 2020-2021.points.

2Common dividends2Dividends per common share divided by diluted earnings per common share.

•Noninterest incomeexpense was $69.7 million, an increase of $1.0 million from $68.7$429.8 million in 2023.2025, Noninteresta expense12% wasincrease from $385.0 million in 2024, an 11% increase from $348.2 million in 2023.2024. The increase in noninterest expense was primarily from higher customer deposit servicing costs due to higher average balances and an increase in earningsaverage creditdeposit rates,vertical balances, an increase in compensation due toan expanded associate base and the recruitmentonboarding of newthe relationshipassociates bankersfrom andthe annualfourth meritquarter increases,2025 andBranch Acquisition, along with other expenses related to the Branch Acquisition. The increase was partially offset by a $4.9 million decline in core systemconversion conversion.expenses due to the completion of the core implementation in the fourth quarter 2024. The core efficiency ratio1 was 58.4%59.3% in 2024,2025, compared to 53.4%58.4% in 2023.2024.

During 2024, we announcednoted the following significant transactionsdevelopments:

The following table presents, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax equivalenttax-equivalent basis. Average balances are presented on a daily average basis.

1Average balances include non-accrualnonaccrual loans. Interest income includes net loan fees of $9.6$7.0 million, $13.8$9.6 million, and $16.7$13.8 million for the years ended December 31, 2025, 2024, 2023, and 20222023 respectively. Loan fees in 2022 included Paycheck Protection Program fees of $4.1 million.

Net interest income (on a tax equivalenttax-equivalent basis) was $638.5 million for 2025, compared to $576.5 million for 2024, compared to $570.7 million for 2023, an increase of $5.9$61.9 million. The increase in net interest income in 20242025 was primarily due to a higher average yieldinterest-earning onasset interest earning assetsbalances and organica loan growth, which was partially offset by an increasedecrease in the average costrates paid on interest bearinginterest-bearing liabilities.

Overall, average interest-earning assets increased $995.0$1.3 million,billion, or 8%,9%, to $13.9$15.1 billion for the year ended December 31, 2024,2025. primarilyExcess dueliquidity toprovided success in growingthrough the depositBranch portfolio. The loan portfolio expanded and excess liquidityAcquisition was deployed into the investmentsecurities portfolio and other interest-earning assets. Volume growth of the balance sheet drove an increase in interest income on earning assets of $58.3$62.8 million, whilepartially higheroffset loanby anda securitiesdecrease yieldsof drove$22.1 interestmillion incomein yield on interest-earning assets up by $28.2 million in 20242025 compared to 2023.2024.

Total interest expense increaseddecreased $80.6$21.3 million in 20242025 primarily due to increaseddecreased depositrates interestpaid expense.on interest-bearing liabilities. The increasedecrease in deposit interest expense reflects higherlower rates paid on deposits, aspartially welloffset asby successful marketing efforts and acquired deposits in connection with the Branch Acquisition 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.balances. Total average interest-bearing deposits increased to $8.5$9.1 billion, an increase of $996.3$643.8 million, or 13%,8%, in 20242025 over the average for 2023.2024. Average noninterest-bearing deposits declinedincreased $88.8$483.4 million, or 2%,12%, in 20242025 compared to the average for 2023.2024. Average noninterest-bearing deposits represented 31%33% of total average deposits in 2024,2025, compared to 36%32% in 2023.2024. Overall, average interest-bearing liabilities increased $934.9$722.9 million, or 12%,8%, for the year ended December 31, 2024.2025 as compared to the prior year end. The shiftincrease in volumethe fromaverage noninterest-bearingbalance depositof accountsinterest-bearing into higher cost deposit accountsliabilities increased interest expense in 20242025 by $29.0$23.4 million, whilewhich was partially offset by the increasedecrease in the average cost of interest-bearing liabilities increasedthat decreased interest expense $51.6$44.7 million in 2024.2025.

The tax-equivalent net interest margin was 4.16%4.21% for 2024,2025, compared to 4.43%4.16% for 2023.2024. The primary driver of the decreaseincrease in net interest margin from 20232024 to 20242025 was higherlower interest expense on the deposit portfolio. InSince 2023, the Federal Reserve increased interest rates three times for a total of 100 basis points. In the fourth quarterSeptember 2024, the Federal Reserve loweredhas reduced the federal funds target rate by 100175 basis points. As of December 31, 2024,2025, variable-rate loans comprised approximately 60% of total loans. The earning-asset yield increaseddecreased 2026 basis points to 6.20%5.94% in 2024,2025, compared to 6.00%6.20% in 2023.2024. Comparatively, the cost of interest-bearing liabilities increaseddecreased 6547 basis points to 3.20%,2.73%, from 2.55%3.20% in 2023.2024.

Noninterest income increased $1.0$43.4 million, or 1%,62%, in 20242025 compared to 2023.2024. ThisThe increase in noninterest income was primarily due to $32.1 million of anticipated insurance proceeds from a $1.8third quarter 2025 pending claim related to a recapture event with respect to a solar tax credit that the Company purchased and applied to prior taxable periods. Excluding this item, noninterest income increased primarily due to an $11.5 million increase in service charges on deposit accounts, partially offset by a $0.9 million decrease in other income. Other income decreasedincreased primarily due to lowerhigher private equity and community developmentBOLI income ($3.1$3.7 million), andan increase in gains on the sale of SBA loans ($0.6$2.8 million), offset byand an increase in gainsnet gain on sale of other real estate ownedOREO ($2.9$3.2 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 2024,2025, the Company sold the guaranteed portion of SBA 7(a) loans of $23.1$78.2 million for a gain of $1.4$4.2 million, compared to $42.1$23.1 million and $2.0$1.4 million, respectively, in 2023.2024.

Noninterest expense increased $36.9$44.8 million, or 11%,12%, in 20242025 compared to 2023.2024. The increase was attributed primarily to an increase in compensation and benefits due to annual merit increasesincreases, an expanded associate base, the onboarding of the associates from the Branch Acquisition, 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.bankers. The total cost of the coreBranch conversionAcquisition in noninterest expense was $4.9$3.7 million in 2024.2025. The increase from 2024 was also primarily due to a $14.6 million increase in deposit costs due to an increase in average deposit vertical balances. For certain deposit accounts in the Company’s deposit verticals, clients receive an earnings credit allowance 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 Depositdeposit 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$3.8 billion and $2.6$3.1 billion, resulting in an average deposit vertical cost of 2.82%2.75% and 2.75%2.82% for 20242025 and 2023,2024, respectively.

The table below represents the summary balance sheet shown as a percentage of account class (total assets, total liabilities or total shareholders’stockholders’ equity), as applicable:

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. Included in total loans at December 31, 2025 are $292.0 million of loans from the Branch Acquisition.

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. C&I also represents loans to state and political subdivisions, loans to nondepository financial institutions, and loans to purchase, or are fully secured by, investment securities.

•Our commercial real estateCRE 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 estateCRE 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.

OtherConsumer loans represent loans to individuals, loans to state and political subdivisions, loans to nondepository financial institutions, and loans to purchase or are fully secured by investment securities.individuals. Credit risk is managed by thoroughly reviewing the creditworthiness of the borrowers prior to origination and thereafter.

The following table presents a breakdown of commercial C& industrialI loans by size at the periods indicated:

The following table presents a breakdown of commercial real estateCRE loans (investor owned and owner occupied) by size at the periods indicated:

The Company had $513.7$574.8 million and $482.0$513.7 million of investor owned office real estate loans as of December 31, 20242025 and 2023,2024, respectively. The Company also had $322.5$399.0 million and $271.8$322.5 million of multifamily commercial real estateCRE loans as of December 31, 20242025 and 2023,2024, respectively.

The following table presents a breakdown of otherconsumer loans by size at the periods indicated:

The following table presents a breakdown of total loans by MSA, excluding specialty and otherconsumer loans, at the periods indicated:

SBA loans are originated under the SBA 7(a) program and are primarily owner-occupied, commercial real estateCRE loans secured by a 1st lien. These loans predominantly have a 75% portion guaranteed by the SBA.

The majority of variable rate loans are based on the prime rate or SOFR. At December 31, 2024,2025, $4.6$4.8 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 andat $350.0 million atboth December 31, 20242025 and 2023, respectively.2024. See “Interest Rate Risk” of this MD&A section for additional information.

Provision and Allowance for Credit LossesACL

The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the ACL on loans at a level consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date. The Company also records reversals of interest on nonaccrual loans and interest recoveries directly through the provision of credit losses.

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 decreaseincrease 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 year2025 was primarily due to loan growth, net charge-offs and the increase in nonperforming loans. The higher provision for credit losses in 20232024 was also includedprimarily due to loan growth, net charge-offs and the impact of the impairment of an available-for-sale investment security, related to a subordinated debt securityincrease in anonperforming publicly-traded bank that failed in the first quarter of 2023.loans.

The allowanceACL foron credit lossesloans was 1.23%1.19% of total loans at December 31, 2024,2025, compared to 1.24%,1.23%, and 1.41%,1.24%, at December 31, 20232024 and 2022,2023, respectively. The decrease in the allowance to total loans ratio in 20242025 compared to 20232024 was primarily due to a shift in the mix of the loan portfolio to categories with lower reserve requirements,an improvement in the economic forecastforecast, a reduction in qualitative reserves, and net loan charge-offs of $17.5$24.3 million. The Company adopted a new accounting standard in the current quarter that resulted in the $3.3 million credit mark on the acquired loan portfolio from the Branch Acquisition being added directly to the ACL in purchase accounting and no provision for credit losses was recognized on the acquired loans.

See “Critical Accounting Policies and Estimates” of this MD&A section for more information on the allowance for credit lossesACL methodology.

See “Item 8. Note 1 – Summary of Significant Accounting Policies” for more information on nonaccrual loans and other real estate.OREO. The following table presents the categories of nonperforming assets and other ratios, excluding government guaranteed portions, as of the dates indicated.

The following table summarizes the changes in other real estateOREO:

The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first threesix months of 2026 compared to the financial condition as of December 31, 2025. In addition, this discussion summarizes the significant factors affecting the results of operations of the Company for the three months ended MarchJune 31,30, 2026, compared to the linked fourthfirst quarter of 20252026 (“linked quarter”) and the results of operations, liquidity and cash flows for the threesix months ended MarchJune 31,30, 2026 compared to the same period in 2025 (“prior yearyear-to-date quarterperiod”). 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 yearyear-to-date quarter.period. This discussion should be read in conjunction with the accompanying condensed consolidated financial statements included in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

The Company maintains separate allowances for funded loans, unfunded loans, and held-to-maturity securities, collectively referred to as the ACL. The ACL is a valuation account to adjust the cost basis to the amount expected to be collected, based on management’s experience, current conditions, and reasonable and supportable forecasts. For purposes of determining the allowance for funded and unfunded loans, the portfolios are segregated into pools that share similar risk characteristics that are then further segregated by credit grades. Loans that do not share similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. The Company estimates the amount of the allowance based on loan loss experience, adjusted for current and forecasted economic conditions, including unemployment, changes in GDP, and commercial and residential real estate prices. The Company’s forecast of economic conditions uses internal and external information and considers a weighted average of a baseline, upside, and downside scenarios. Because economic conditions can change and are difficult to predict, the anticipated amount of estimated loan defaults and losses, and therefore the adequacy of the allowance, could change significantly and have a direct impact on the Company’s credit costs. The Company’s ACL on loans was $142.1$139.2 million at MarchJune 31,30, 2026 based on the weighting of the different economic scenarios. As a hypothetical example, if the Company had only used the upside scenario, the allowance would have decreased $24.6$26.9 million. Conversely, the allowance would have increased $36.4$40.5 million using only the downside scenario.

Below are highlights of the Company’s financial performance for the periods indicated. Comparisons to prior year periods are affected by the acquisition of 12 branches in Arizona and Kansas in the fourth quarter 2025 (the “Branch Acquisition”).

•PPNR1 - PPNR of $70.4$68.2 million for the firstsecond quarter of 2026 and $138.6 million for the six months ended June 30, 2026 decreased $4.4$2.2 million from the linked quarter and increased $4.3$4.4 million from the prior yearyear-to-date quarter.period. The decrease from the linked quarter was primarily due to a decrease in net interest income due to a lower day count and noninterest income,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 comparedCompared to the prior yearyear-to-date quarterperiod, the increase was primarily due to higher net interest income from organic and acquired loan growth, continued investment in the securities portfolio and proactivelower managementrates ofpaid theon costinterest-bearing of deposits,liabilities, partially offset by a decline in asset yields due to lower short-term interest rates.

•Net interest income and NIM - Net interest income of $166.1$168.7 million for the firstsecond quarter of 2026 decreasedand $2.0$334.9 million for the six months ended June 30, 2026 increased $2.6 million and increased $18.6$34.6 million from the linked and prior yearyear-to-date quarters,periods, respectively. NetCompared to the linked quarter, net interest income benefitted from higher loan and securities yields, as well as an additional day during the currentperiod. quarterThe increase from the prior year-to-date period was impactedprimarily bydue lowerto short-termhigher interest rates that decreasedinterest-earning asset yieldsbalances and fewer days in the period, partially offset by a favorable decrease onlower rates paid on interest-bearing liabilities.liabilities, Comparedpartially tooffset theby prior year quarter, net interest income also benefitted from higher average loan and investment securities balances, and higherlower yields on the investment portfolio.loans. NIM was 4.28%4.30% for the firstsecond quarter 2026 and 4.29% for the six months ended June 30, 2026, compared to 4.26%4.28% and 4.15%4.18% for the linked and prior yearyear-to-date quarters,periods, respectively.

•Noninterest expense - Noninterest expense of $115.1$115.7 million for the firstsecond quarter of 2026 and $230.9 million for the six months ended June 30, 2026 increased $0.6 million and $15.4$25.4 million from the linked and prior yearyear-to-date quarters,periods, respectively. The increase from the prior yearyear-to-date quarterperiod was primarily driven by higher employee compensation cost,cost and headcount from the Branch Acquisition, variable deposit costscosts, and loan and legal expenses related to loan workouts and OREO.

•Loans – Total loans decreasedincreased $107.6$92.1 million, or 1%, to $11.7$11.9 billion at MarchJune 31,30, 2026, compared to $11.8 billion at December 31, 2025. Average loans totaled $11.8 billion for the threesix months ended MarchJune 31,30, 2026 compared to $11.2$11.3 billion for the threesix months ended MarchJune 31,30, 2025.

•Deposits – Total deposits decreased $84.9$106.8 million, to $14.5 billion at MarchJune 31,30, 2026 from $14.6 billion at December 31, 2025. Average deposits totaled $14.6 billion for the threesix months ended MarchJune 31,30, 2026 compared to $13.1$13.2 billion for the threesix months ended MarchJune 31,30, 2025. Noninterest-bearing deposit accounts represented 33%34% of total deposits and the loan to deposit ratio was 81%82% at MarchJune 31,30, 20262026, compared to 33% and 81%, respectively, at December 31, 2025, respectively.2025.

•Asset quality – The ACL on loans to total loans was 1.21%1.17% at MarchJune 31,30, 2026, compared to 1.19% at December 31, 2025. The ratio of nonperforming assets to total assets was 0.87%0.92% at MarchJune 31,30, 2026 compared to 0.95% at December 31, 2025. A provision for credit losses of $7.2$14.2 million was recorded in the firstsecond quarter of 2026 and $21.5 million for the six months ended June 30, 2026. This compares to $9.2$7.2 million and $5.2$8.7 million in the linked and prior yearyear-to-date quarters,periods, respectively.

•Stockholders’ equity – Total stockholders’ equity was $2.0 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively, and the tangible common equity to tangible assets ratio2 was 9.01%9.04% at MarchJune 31,30, 2026 compared to 9.07% at December 31, 2025. The Company and the Bank’s regulatory capital ratios exceeded the “well-capitalized” levels at MarchJune 31,30, 2026.

The Company’s Board of Directors (the “Board”) approved a quarterly dividend of $0.34$0.35 per common share, payable on JuneSeptember 30, 2026 to stockholders of record as of JuneSeptember 15, 2026. The Board also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) MarchJune 15, 2026 to (but excluding) JuneSeptember 15, 2026. The dividend will be payable on JuneSeptember 15, 2026 to stockholders of record of Series A Preferred Stock as of MayAugust 29,31, 2026.

The following tables present, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as the corresponding interest rates earned and paid, all on a tax equivalenttax-equivalent basis.

3 Nontaxable income is presented on a tax equivalenttax-equivalent basis.

Tax equivalentTax-equivalent interest income decreasedincreased $7.3$4.3 million and increased $14.2$25.2 million from the linked and prior yearyear-to-date quarters,periods, respectively. Compared to the linked quarter, loaninterest yieldsincome decreasedincreased 13primarily due to a five and eight basis pointspoint increase in yield on loans and theresecurities, wererespectively, two fewer days in the period, partially offset byand a $158.9$51.2 million increase in average investment securities balances and an 11 basis point increase in yield on securities.balances. Compared to the prior yearyear-to-date quarter,period, interest-earning assets increased $1.4$1.3 billion, including a $536.9$477.0 million increase in average loan balances and an $851.9$768.0 million increase in average securities balances, and the yield on securities increased 3836 basis points. These increases were partially offset by a 19 basis point decline in the loan yield to 6.38%,6.41%, from 6.57%6.60% in the prior yearyear-to-date quarter.period. The Company sold approximately $180 million of investment securities with a tax-equivalent yield of 3.13% and reinvested the proceeds into new securities with a tax-equivalent yield of 5.20%. This transaction improved the overall tax-equivalent yield on securities by 200 basis points and will increase net interest income by $3.5 million annually.

Interest expense decreasedincreased $5.2$1.7 million and $5.3decreased $10.9 million from the linked and prior yearyear-to-date quarters,periods, respectively,respectively. Compared to the linked quarter, the increase was primarily due to higher average subordinated debt and other borrowed funds balances. Compared to the prior year-to-date period, the decrease was primarily due to a reduction44 basis point decline in the cost of interest-bearing depositsliabilities, dueincluding toa decreased58 interestbasis paidpoint ondecrease in the average cost of money market accounts, partially offset by a $816.7 million increase in average interest-bearing deposits.liabilities balances. The total cost of deposits, including noninterest-bearing demand accounts, was 1.53% and 1.52% during the three and six months ended MarchJune 31,30, 2026, respectively, compared to 1.64%1.52% and 1.83%1.82% in the linked and prior yearyear-to-date quarters,periods, respectively.

NIM, on a tax equivalenttax-equivalent basis, was 4.28%4.30% in the firstsecond quarter of 2026 and 4.29% for the six months ended June 30, 2026, an increase of two basis points and 1311 basis points from the linked and prior yearyear-to-date quarters,periods, respectively.

Total assets were $17.2$17.4 billion at MarchJune 31,30, 2026, aan decreaseincrease of $73.1$98.1 million from December 31, 2025 primarily due to a $107.6$102.2 million decreaseand $92.1 million increase in loanssecurities and loans respectively, partially offset by a $47.4$129.8 million decrease in cash and cash equivalents, partially offset by a $99.2 million increase in investment securities.equivalents. Total liabilities of $15.2$15.4 billion decreasedincreased $55.9$96.7 million from December 31, 2025 primarily due to anthe $84.9issuance of $175 million of subordinated notes, partially offset by a $106.8 million decrease in deposits.

At MarchJune 31,30, 2026, investment securities were $3.8 billion compared to $3.7 billion at December 31, 2025, or 22% of total assets for both periods. The portfolio is comprised of both available-for-sale and held-to-maturity securities.

Investment purchases in the firstsecond quarter of 2026 had a weighted average, tax equivalenttax-equivalent yield of 4.51%.5.03%. The average duration of the investment portfolio was 5.0 years at MarchJune 31,30, 2026. The Company leverages the investment portfolio to lengthen the overall duration of the balance sheet, primarily using high-quality municipal securities. The expected cash flow from pay downs, maturities and interest over the next 12 months is approximately $703.9$645.8 million.

Loans totaled $11.7$11.9 billion at MarchJune 31,30, 2026 compared to $11.8 billion at December 31, 2025. Loan sales of $25.4 million mitigated growth in the SBA category during the current quarter. Average revolving line draw utilization was 45%47% for the firstsecond quarter of 2026, compared to 44% for the year ended December 31, 2025.

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 threesix months ended MarchJune 31,30, 2026, the guaranteed portion of SBA loans totaling $25.4 million were sold.

A provision for credit losses of $7.2$14.2 million was recognized for the firstsecond quarter of 2026,2026 aand decrease of $2.0$21.5 million andfor the six months ended June 30, 2026, an increase of $2.1$7.0 million and $12.8 million from the linked and prior yearyear-to-date quarters,periods, respectively. The provision for credit losses in the firstsecond quarter of2026 and six months ended June 30, 2026 was primarily related to thenet charge-offs. Most of these losses came from two accounts: an $8.3 million C&I relationship in Texas and a $5.2 million Sponsor Finance relationship. Annualized net charge-offs andtotaled qualitative46 adjustmentsbasis points of average loans in the current quarter, compared to recognize15 basis points in the broaderlinked macroeconomicquarter risksand totwo basis points of average loans in the loanprior portfolioyear from the conflict in Iran.quarter.

The ACL on loans was 1.21%1.17% of total loans at MarchJune 31,30, 2026, compared to 1.19% of loans at December 31, 2025. Excluding guaranteed loans, the ACL on loans to total loans was 1.32%41.27%4 at MarchJune 31,30, 2026, compared to 1.29% at December 31, 2025.

Nonperforming loans at MarchJune 31,30, 2026 decreased $17.9$6.7 million, or 22%,8%, when compared to December 31, 2025. The decrease in nonperforming assets during the threesix months ended MarchJune 31,30, 2026 was primarily related to charge-offs and two loans totaling $17.5 million that went on nonaccrual in the second half of 2025 and were subsequently paid off in the first quarter 2026. The decrease in nonperforming loans was partially offset by additions to nonperforming loans, including a $16.0 million CRE relationship and a $5.8 million C&I relationship that went on nonaccrual during the period.

Total deposits were $14.5 billion at MarchJune 31,30, 2026, a decrease of $84.9$106.8 million from December 31, 2025. Brokered certificates of deposit at MarchJune 31,30, 2026 increased $2.8$14.4 million from December 31, 2025 and continue to be used as a stable funding source. The Company has deposit verticals focusing on property management, community associations, and escrow industries. These deposits increased to $4.0$4.1 billion at MarchJune 31,30, 2026 from $3.8 billion at December 31, 2025 due to continued success at generating organic deposit growth.

To provide clients a deposit product with enhanced FDIC insurance, the Company participates in several programs through third parties that provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Total reciprocal deposits were $1.3$1.2 billion and $1.4 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively. The Company considers reciprocal accounts as client-related deposits due to the client relationship that generated the transaction. At MarchJune 31,30, 2026, estimated uninsured deposits totaled $4.5 billion, or 31% of total deposits, compared to $4.6 billion, or 32% of total deposits, at December 31, 2025.

The total cost of deposits was 1.52%1.53% for the current quarter and 1.52% for the six months ended June 30, 2026, compared to 1.64%1.52% and 1.83%1.82% for the linked and prior yearyear-to-date quarters,periods, respectively.

Stockholders’ equity totaled $2.0 billion at MarchJune 31,30, 2026, aan decreaseincrease of $17.2$1.5 million from December 31, 2025. Significant activity during the first threesix months of 2026 was as follows:

Liquidity from assets is available primarily from cash balances and the investment portfolio. Cash and interest-bearing deposits with other banks totaled $634.5$552.1 million at MarchJune 31,30, 2026, compared to $681.9 million at December 31, 2025. Investment securities are another important tool in liquidity planning. Securities totaled $3.8 billion and $3.7 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively, and included $1.6 billion and $1.7 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively, pledged as collateral for deposits of public institutions, loan notes and other requirements. The unpledged portion of the securities portfolio could be pledged or sold to enhance liquidity, if necessary.

The Company also has a portfolio of SBA guaranteed loans, a portion of which could be sold in the secondary market to generate earnings and liquidity. The guaranteed portion of SBA loans totaling $25.4 million and $31.3$55.7 million were sold during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Liability liquidity funding sources are available to increase financial flexibility. In addition to amounts borrowed at MarchJune 31,30, 2026, the Company could borrow an additional $1.5$1.2 billion from the FHLB of Des Moines under blanket loan pledges and has additional real estate loans that could be pledged. The Company also has $3.1$3.0 billion available from the Federal Reserve under a pledged loan agreement. The Company also has unsecured federal funds lines with eight correspondent banks totaling $135.0 million as of MarchJune 31,30, 2026.

In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The Company has $3.2 billion in unused commitments to extend credit as of MarchJune 31,30, 2026. While this commitment level would exhaust the majority of the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.

At the holding company level, our primary funding sources are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises, stock offerings) and debt instruments. The main use of this liquidity is to provide the funds necessary to pay dividends to stockholders, service debt, invest in subsidiaries as necessary, repurchase common stock and satisfy other operating requirements. The holding company maintains a revolving line of credit for an aggregate amount $25 million, all of which was available at MarchJune 31,30, 2026. The line of credit was renewed in the first quarter of 2026, has a one-year term, has an interest rate of one-month Term SOFR plus 185 basis points, and the annual unused commitment fee is 0.40%. The proceeds can be used for general corporate purposes.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total, Tier 1, and common equity tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. To be categorized as “well capitalized”, banks must maintain minimum total risk-based (10%), Tier 1 risk-based (8%), common equity tier 1 risk-based (6.5%), and Tier 1 leverage ratios (5%). In addition, the Company must maintain an additional CCB above the regulatory minimum ratio requirements. The CCB is designed to insulate banks from periods of stress and impose constraints on dividends, stock repurchases and discretionary bonus payments when capital levels fall below prescribed levels. As of MarchJune 31,30, 2026, and December 31, 2025, the Company and the Bank met all capital adequacy requirements to which they are subject and exceeded the amounts required to be “well capitalized”.

The Company considers its tangible common equity, adjusted ROAA, adjusted return on average common equity, ROATCE, adjusted ROATCE, ACL on loans to total loans adjusted for guaranteed loans, core efficiency ratio, PPNR, tangible book value per common share, return on average common equity and tangible common equity to tangible assets ratio, collectively “core performance measures,” presented in this report and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as the FDIC special assessment, acquisition costs, the net gain or loss on sales of fixed assets, the net gain or loss on OREO, and the net gain or loss on salesales 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.