enterprise_10q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

[X]		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2011.

[ ]		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______

		Commission file number 001-15373

ENTERPRISE FINANCIAL SERVICES CORP

Incorporated in the State of Delaware
I.R.S. Employer Identification # 43-1706259
Address: 150 North Meramec
Clayton, MO 63105
Telephone: (314) 725-5500
___________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files ). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller
		reporting company)

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act

Yes [ ] No [X]

As of May 6, 2011, the Registrant had 14,945,038 shares of outstanding common stock.

This document is also available through our website at http://www.enterprisebank.com.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)			1

Condensed Consolidated Statements of Operations (Unaudited)			2

Condensed Consolidated Statement of Shareholder’s Equity (Unaudited)			3

Condensed Consolidated Statements of Cash Flows (Unaudited)			4

Notes to Condensed Consolidated Financial Statements (Unaudited)			5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		37

Item 4.	Controls and Procedures		39

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		39

Item 1A.	Risk Factors		40

Item 6.	Exhibits		41

Signatures			42

Certifications			46

PART 1 – ITEM 1 – FINANCIAL STATEMENTS
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)

	March 31,			December 31,
(In thousands, except share and per share data)	2011			2010
Assets
Cash and due from banks (including $1,500 pledged as collateral)	$	18,542		$	23,413
Federal funds sold		1,464			3,153
Interest-bearing deposits		185,805			267,102
Total cash and cash equivalents		205,811			293,668
Interest-bearing deposits greater than 90 days		1,751			1,751
Securities available for sale		481,989			361,546
Mortgage loans held for sale		3,142			5,640
Portfolio loans not covered under FDIC loss share		1,761,034			1,766,351
Portfolio loans covered under FDIC loss share at fair value		191,447			126,711
Less: Allowance for loan losses		42,822			42,759
Portfolio loans, net		1,909,659			1,850,303
Other real estate not covered under FDIC loss share		28,443			25,373
Other real estate covered under FDIC loss share		22,862			10,835
Other investments, at cost		14,430			12,278
Fixed assets, net		20,035			20,499
Accrued interest receivable		7,839			7,464
State tax credits, held for sale, including $30,494 and $31,576
carried at fair value, respectively		59,928			61,148
FDIC loss share receivable		103,529			88,292
Goodwill		3,879			2,064
Intangibles, net		1,921			1,223
Other assets		60,098			63,756
Total assets	$	2,925,316		$	2,805,840

Liabilities and Shareholders' Equity
Deposits:
Demand deposits	$	448,012		$	366,086
Interest-bearing transaction accounts		198,152			204,687
Money market accounts		942,009			855,522
Savings		10,789			10,181
Certificates of deposit:
$100 and over		593,791			543,898
Other		237,677			317,347
Total deposits		2,430,430			2,297,721
Subordinated debentures		85,081			85,081
Federal Home Loan Bank advances		107,300			107,300
Other borrowings		97,898			119,333
Accrued interest payable		1,545			1,488
Other liabilities		12,047			11,569
Total liabilities		2,734,301			2,622,492

Shareholders' equity:
Preferred stock, $0.01 par value;
5,000,000 shares authorized;
35,000 shares issued and outstanding		32,707			32,519
Common stock, $0.01 par value;
30,000,000 shares authorized; 15,016,977 and
14,965,401 shares issued, respectively		150			150
Treasury stock, at cost; 76,000 shares		(1,743	)		(1,743	)
Additional paid in capital		134,664			133,673
Retained earnings		24,992			19,322
Accumulated other comprehensive income (loss)		245			(573	)
Total shareholders' equity		191,015			183,348
Total liabilities and shareholders' equity	$	2,925,316		$	2,805,840

See accompanying notes to condensed consolidated financial statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)

	Three months ended March 31,
(In thousands, except per share data)	2011		2010
Interest income:
Interest and fees on loans	$	31,661	$	25,244
Interest on debt securities:
Taxable		2,570		1,850
Nontaxable		110		10
Interest on federal funds sold		1		8
Interest on interest-bearing deposits		148		80
Dividends on equity securities		73		83
Total interest income		34,563		27,275
Interest expense:
Interest-bearing transaction accounts		189		219
Money market accounts		2,082		1,393
Savings		9		8
Certificates of deposit:
$100 and over		2,357		2,850
Other		1,053		1,785
Subordinated debentures		1,121		1,230
Federal Home Loan Bank advances		900		1,108
Notes payable and other borrowings		114		59
Total interest expense		7,825		8,652
Net interest income		26,738		18,623
Provision for loan losses		3,600		13,800
Net interest income after provision for loan losses		23,138		4,823
Noninterest income:
Wealth Management revenue		1,683		1,297
Service charges on deposit accounts		1,137		1,174
Other service charges and fee income		310		278
Gain (loss) on sale of other real estate		423		(12	)
Gain on state tax credits, net		155		518
Gain on sale of investment securities		174		557
Miscellaneous income		1,081		244
Total noninterest income		4,963		4,056
Noninterest expense:
Employee compensation and benefits		8,688		6,598
Occupancy		1,139		1,173
Furniture and equipment		354		370
Data processing		626		578
FDIC and other insurance		1,222		1,047
Loan legal and other real estate expense		2,436		1,272
Other		3,000		2,617
Total noninterest expense		17,465		13,655

Income (loss) before income tax expense (benefit)		10,636		(4,776	)
Income tax expense (benefit)		3,557		(1,762	)
Net income (loss)	$	7,079	$	(3,014	)

Net income (loss) available to common shareholders	$	6,453	$	(3,626	)

Earnings (loss) per common share
Basic	$	0.43	$	(0.25	)
Diluted		0.42		(0.25	)

See accompanying notes to condensed consolidated financial statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

														Accumulated
														other			Total
	Preferred		Common		Treasury			Additional paid			Retained			comprehensive			shareholders'
(in thousands, except per share data)			Stock					in capital			earnings			income (loss)			equity
Balance January 1, 2010	$	31,802	$	130	$	(1,743	)	$	117,000		$	15,790		$	933		$	163,912
Net loss		-		-		-			-			(3,014	)		-			(3,014	)
Change in fair value of available for sale securities, net of tax		-		-		-			-			-			577			577
Reclassification adjustment for realized gain
on sale of securities included in net income, net of tax		-		-		-			-			-			(356	)		(356	)
Reclassification of cash flow hedge, net of tax		-		-		-			-			-			(40	)		(40	)
Total comprehensive loss																		(2,833	)
Cash dividends paid on common shares, $0.0525 per share		-		-		-			-			(781	)		-			(781	)
Cash dividends paid on preferred stock		-		-		-			-			(437	)		-			(437	)
Preferred stock accretion of discount		174		-		-			-			(174	)		-			-
Issuance under equity compensation plans, net, 37,845 shares		-		-		-			258			-			-			258
Issuance under private stock offering 1,931,610 shares				19		-			14,883			-						14,902
Share-based compensation		-		-		-			473			-			-			473
Excess tax expense related to equity compensation plans		-		-		-			(260	)		-			-			(260	)
Balance March 31, 2010	$	31,976	$	149	$	(1,743	)	$	132,354		$	11,384		$	1,114		$	175,234

													Accumulated
													other			Total
	Preferred		Common		Treasury			Additional paid		Retained			comprehensive			shareholders'
(in thousands, except share and per share data)			Stock					in capital		earnings			income (loss)			equity
January 1, 2011	$	32,519	$	150	$	(1,743	)	$	133,673	$	19,322		$	(573	)	$	183,348
Net income		-		-		-			-		7,079			-			7,079
Change in fair value of available for sale securities, net of tax		-		-		-			-		-			958			958
Reclassification adjustment for realized gain
on sale of securities included in net income, net of tax		-		-		-			-		-			(112	)		(112	)
Reclassification of cash flow hedge, net of tax		-		-		-			-		-			(28	)		(28	)
Total comprehensive income																	7,897
Cash dividends paid on common shares, $0.0525 per share		-		-		-			-		(783	)		-			(783	)
Cash dividends paid on preferred stock		-		-		-			-		(438	)		-			(438	)
Preferred stock accretion of discount		188		-		-			-		(188	)		-			-
Issuance under equity compensation plans, net, 51,576 shares		-		-		-			611		-			-			611
Share-based compensation		-		-		-			374		-			-			374
Excess tax benefit related to equity compensation plans		-		-		-			6		-			-			6
Balance March 31, 2011	$	32,707	$	150	$	(1,743	)	$	134,664	$	24,992		$	245		$	191,015

See accompanying notes to condensed consolidated financial statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)

	Three months ended March 31,
(in thousands)	2011			2010
Cash flows from operating activities:
Net income (loss)	$	7,079		$	(3,014	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation		694			747
Provision for loan losses		3,600			13,800
Deferred income taxes		2,732			(5,616	)
Net amortization of debt securities		1,251			804
Amortization of intangible assets		135			112
Gain on sale of investment securities		(174	)		(557	)
Mortgage loans originated for sale		(14,897	)		(11,306	)
Proceeds from mortgage loans sold		17,360			13,989
(Gain) loss on sale of other real estate		(423	)		12
Gain on state tax credits, net		(155	)		(518	)
Excess tax (benefit) expense of share-based compensation		(6	)		260
Share-based compensation		374			649
Valuation adjustment on other real estate		442			574
Net accretion of loan discount and indemnification asset		(5,595	)		(381	)
Changes in:
Accrued interest receivable		(12	)		522
Accrued interest payable		18			148
Prepaid FDIC insurance		852			760
Other assets		(1,553	)		2,996
Other liabilities		26			840
Net cash provided by operating activities		11,748			14,821

Cash flows from investing activities:
Cash received from sale of Millennium Brokerage Group		-			4,000
Cash received from acquisition of Legacy Bank		8,926			-
Net decrease in loans		3,670			19,237
Net cash proceeds received from FDIC loss share receivable		11,785			-
Proceeds from the sale of debt and equity securities, available for sale		5,299			80,645
Proceeds from the maturity of debt and equity securities, available for sale		31,021			20,280
Proceeds from the sale of other investments		-			59
Proceeds from the redemption of other investments		78			1,359
Proceeds from the sale of state tax credits held for sale		1,527			2,661
Proceeds from the sale of other real estate		4,382			3,541
Recoveries of loans previously charged off		428			247
Payments for the purchase/origination of:
Available for sale debt and equity securities		(147,040	)		(85,535	)
Other investments		(261	)		(1,388	)
Bank owned life insurance		-			(20,000	)
State tax credits held for sale		-			(2,387	)
Fixed assets		(212	)		(98	)
Net cash (used in) provided by investing activities		(80,397	)		22,621

Cash flows from financing activities:
Net increase in noninterest-bearing deposit accounts		52,074			11,177
Net increase in interest-bearing deposit accounts		(32,987	)		(48,539	)
Repayments of Federal Home Loan Bank advances		(16,256	)		-
Net (decrease) increase in other borrowings		(21,435	)		21,099
Cash dividends paid on common stock		(783	)		(781	)
Excess tax benefit (expense) benefit of share-based compensation		6			(260	)
Cash dividends paid on preferred stock		(438	)		(437	)
Issuance of common stock		-			14,902
Proceeds from the issuance of equity instruments		611			-
Net cash used in financing activities		(19,208	)		(2,839	)
Net (decrease) increase in cash and cash equivalents		(87,857	)		34,603
Cash and cash equivalents, beginning of period		293,668			106,966
Cash and cash equivalents, end of period	$	205,811		$	141,569

Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest	$	7,767		$	8,801
Income taxes		696			(57	)
Noncash transactions:
Transfer to other real estate owned in settlement of loans	$	11,229		$	5,701
Sales of other real estate financed		442			5,685

See accompanying notes to condensed consolidated financial statements.

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used by Enterprise Financial Services Corp (the “Company” or “Enterprise”) in the preparation of the condensed consolidated financial statements are summarized below:

Basis of Financial Statement Presentation
Enterprise is a financial holding company that provides a full range of banking and wealth management services to individuals and corporate customers located in the St. Louis, Kansas City and Phoenix metropolitan markets through its banking subsidiary, Enterprise Bank & Trust (the “Bank”).

The condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and footnotes required by U.S. GAAP for annual financial statements. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

On January 7, 2011, the Bank entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (“FDIC”) and acquired certain assets and assumed certain liabilities of Legacy Bank, a full service community bank that was headquartered in Scottsdale, Arizona. For more information on this transaction, see Note 3 – Acquisitions and Divestitures in this report.

Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2011. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

NOTE 2—EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share data is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and the if-converted method for convertible securities related to the issuance of trust preferred securities. The following table presents a summary of per common share data and amounts for the periods indicated.

	Three months ended March 31,
(in thousands, except per share data)	2011			2010
Net income (loss) as reported	$	7,079		$	(3,014	)
Preferred stock dividend		(438	)		(437	)
Accretion of preferred stock discount		(188	)		(175	)
Net income (loss) available to common shareholders	$	6,453		$	(3,626	)

Impact of assumed conversions
Interest on 9% convertible trust preferred securities, net of income tax		371			-
Net income (loss) available to common shareholders and assumed conversions	$	6,824		$	(3,626	)

Weighted average common shares outstanding		14,920			14,418
Incremental shares from assumed conversions of
convertible trust preferred securities		1,439			-
Additional dilutive common stock equivalents		16			-
Diluted common shares outstanding		16,375			14,418

Basic earnings (loss) per common share	$	0.43		$	(0.25	)
Diluted earnings (loss) per common share:	$	0.42		$	(0.25	)

For the three months ended March 31, 2011 and 2010, there were 604,000 and 2.3 million of weighted average common stock equivalents excluded from the per share calculations because their effect was anti-dilutive. In addition, at March 31, 2011 and 2010, the Company had outstanding warrants to purchase 324,074 shares of common stock associated with the U.S. Treasury Capital Purchase Program which were excluded from the per common share calculation because their effect was also anti-dilutive.

NOTE 3—ACQUISITIONS AND DIVESTITURES

Acquisition of Legacy Bank

On January 7, 2011, the Bank entered into a purchase and assumption agreement with the FDIC and acquired certain assets and assumed certain liabilities of Legacy Bank (“Legacy”), a full service community bank that was headquartered in Scottsdale, Arizona. The acquisition consisted of tangible assets with estimated fair values of approximately $128.6 million and tangible liabilities with estimated fair values of approximately $130.4 million. The Bank acquired the assets at a discount of 7.6% and approximately $43.5 million of the deposits were assumed at a premium of 1%. The Bank also acquired approximately $55.6 million of discretionary and $13.6 million of non-discretionary trust assets.

As part of the acquisition, the Company provided the FDIC with a Value Appreciation Instrument (“VAI”) whereby 372,500 units were awarded to the FDIC at an exercise price of $10.63 per unit. The units were exercisable at any time from January 14, 2011 until January 6, 2012. The FDIC exercised the units on January 20, 2011 at a settlement price of $11.8444. A cash payment of $452,364 was made to the FDIC on January 21, 2011.

In connection with the acquisition, the Bank also entered into a loss share agreement whereby the FDIC will reimburse the Bank for 80% of all losses incurred on certain loans and other real estate covered under the agreement (“Covered Assets”). The loss share agreement is subject to the servicing procedures as specified in the agreement with the FDIC.

The reimbursable losses from the FDIC are based on the book value of the Covered Assets as determined by the FDIC as of the date of the acquisition. A majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. The expected reimbursements under the loss share agreement were recorded as a FDIC loss share receivable at their estimated fair value.

The loans and other real estate acquired are recorded at estimated fair value. As such, there was no allowance for credit losses established related to the acquired loans at January 7, 2011 and no carryover of the related allowance from Legacy. The loans are accounted for in accordance with guidance for certain loans acquired in a transfer, when the loans have evidence of credit deterioration and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges and an adjustment in accretable yield, which will have a positive impact on interest income.

The table below summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. These fair value estimates are considered preliminary, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.

(in thousands)	Amount
Cash and cash equivalents	$	8,926
Securities available for sale	$	9,569
Other investments		1,969
Portfolio loans		73,214
Other real estate		8,612
FDIC loss share receivable		24,963
Other assets		1,299
Total deposits		(113,620	)
Federal Home Loan Bank Advances		(16,256	)
Other liabilities		(491	)
Goodwill	$	(1,815	)

Management concluded that it is impracticable to present pro forma financial results due to the lack of documentation and objective information about significant estimates and management’s intent in prior periods.

NOTE 4—INVESTMENTS

The following table presents the amortized cost, gross unrealized gains and losses and fair value of securities available-for-sale:

	March 31, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
Available for sale securities:
Obligations of U.S. Government sponsored enterprises	$	40,645	$	14	$	(422	)	$	40,237
Obligations of states and political subdivisions		26,303		160		(695	)		25,768
Residential mortgage-backed securities		414,619		2,706		(1,341	)		415,984
	$	481,567	$	2,880	$	(2,458	)	$	481,989


	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
Available for sale securities:
Obligations of U.S. Government agencies	$	444	$	9	$	-		$	453
Obligations of U.S. Government sponsored enterprises		32,880		9		(770	)		32,119
Obligations of states and political subdivisions		18,486		45		(855	)		17,676
Residential mortgage-backed securities		310,636		2,656		(1,994	)		311,298
	$	362,446	$	2,719	$	(3,619	)	$	361,546

At March 31, 2011 and December 31, 2010, there were no holdings of securities of any one issuer in an amount greater than 10% of shareholders’ equity, other than the U.S. government agencies and sponsored enterprises. The residential mortgage-backed securities are all issued by U.S. government sponsored enterprises. Available for sale securities having a carrying value of $243.9 million and $249.6 million at March 31, 2011 and December 31, 2010, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract provisions.

The amortized cost and estimated fair value of debt securities classified as available for sale at March 31, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average life of the mortgage-backed securities is approximately 3.5 years.

	Amortized		Estimated
(in thousands)	Cost		Fair Value
Due in one year or less	$	8,624	$	8,636
Due after one year through five years		33,669		33,302
Due after five years through ten years		20,348		20,063
Due after ten years		4,307		4,004
Mortgage-backed securities		414,619		415,984
	$	481,567	$	481,989

The following table represents a summary of available-for-sale investment securities that had an unrealized loss:

	March 31, 2011
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
(in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Obligations of U.S. government sponsored enterprises	$	30,689	$	422	$	-	$	-	$	30,689	$	422
Obligations of the state and political subdivisions		12,820		267		2,972		428		15,792		695
Residential mortgage-backed securities		163,010		1,341		-		-		163,010		1,341
	$	206,519	$	2,030	$	2,972	$	428	$	209,491	$	2,458

	December 31, 2010
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
(in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Obligations of U.S. government sponsored enterprises	$	27,100	$	770	$	-	$	-	$	27,100	$	770
Obligations of the state and political subdivisions		11,329		420		2,965		435		14,294		855
Residential mortgage-backed securities		133,893		1,994		-		-		133,893		1,994
	$	172,322	$	3,184	$	2,965	$	435	$	175,287	$	3,619

The unrealized losses at both March 31, 2011 and December 31, 2010, were attributable to changes in market interest rates since the securities were purchased. Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. This analysis requires management to consider various factors, which include (1) the present value of the cash flows expected to be collected compared to the amortized cost of the security, (2) duration and magnitude of the decline in value, (3) the financial condition of the issuer or issuers, (4) structure of the security and (5) the intent to sell the security or whether it is more likely than not that the Company would be required to sell the security before its anticipated recovery in market value. At March 31, 2011, management performed its quarterly analysis of all securities with an unrealized loss and concluded no individual securities were other-than-temporarily impaired.

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

	Three months ended March 31,
(in thousands)	2011		2010
Gross gains realized	$	174	$	557
Gross losses realized		-		-
Proceeds from sales		5,299		80,645

NOTE 5—GOODWILL AND INTANGIBLE ASSETS

Goodwill is tested for impairment annually and more frequently if events or changes in circumstances indicate that the asset might be impaired.

Below is a summary of the goodwill in the Banking segment.

	Reporting Unit
	Banking
(in thousands)	Goodwill
Balance at January 1, 2011	$	2,064
Goodwill from purchase of Legacy Bank		1,815
Balance at March 31, 2011	$	3,879

The table below summarizes the changes to core deposit intangible asset balances in the Banking segment.

	Core Deposit
(in thousands)	Intangible
Balance at January 1, 2011	$	1,223
Intangibles from purchase of Legacy Bank		833
Amortization expense		(135	)
Balance at March 31, 2011	$	1,921

The following table reflects the expected amortization schedule for the core deposit intangibles.

	Core Deposit
Year	Intangible
2011	$	374
2012		432
2013		355
2014		278
2015		201
After 2015		281
	$	1,921

NOTE 6—PORTFOLIO LOANS

Below is a summary of loans by category at March 31, 2011 and December 31, 2010:

	March 31,
	2011
	Portfolio		Portfolio
	Loans not		Loans
	Covered		Covered
	under FDIC		under FDIC
(in thousands)	loss share		loss share		Total
Real Estate Loans:
Construction and land development	$	176,249	$	43,022	$	219,271
Farmland		8,379		894		9,273
1-4 Family residential		174,405		36,984		211,389
Multifamily residential		52,513		117		52,630
Other real estate loans		719,872		90,522		810,394
Total real estate loans	$	1,131,418	$	171,539	$	1,302,957
Commercial and industrial		612,970		18,590		631,560
Other		16,469		1,318		17,787
Portfolio Loans	$	1,760,857	$	191,447	$	1,952,304

Unearned loan costs, net		177		-		177
Portfolio loans, including unearned loan costs	$	1,761,034	$	191,447	$	1,952,481

	December 31,
	2010
	Portfolio		Portfolio
	Loans not		Loans
	Covered		Covered
	under FDIC		under FDIC
(in thousands)	loss share		loss share		Total
Real Estate Loans:
Construction and land development	$	190,285	$	32,748	$	223,033
Farmland		10,980		811		11,791
1-4 Family residential		189,484		10,201		199,685
Multifamily residential		53,111		129		53,240
Other real estate loans		712,177		72,280		784,457
Total real estate loans	$	1,156,037	$	116,169	$	1,272,206
Commercial and industrial		593,938		10,036		603,974
Other		16,308		506		16,814
Portfolio Loans	$	1,766,283	$	126,711	$	1,892,994

Unearned loan costs, net		68		-		68
Portfolio loans, including unearned loan costs	$	1,766,351	$	126,711	$	1,893,062

The Company grants commercial, residential, and consumer loans primarily in the St. Louis, Kansas City and Phoenix metropolitan areas. The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio is concentrated in and 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.

A summary of activity in the allowance for loan losses and the recorded investment in loans by portfolio class and category based on impairment method for the quarter ended March 31, 2011 is as follows:

				Commercial		Commercial												Portfolio
				Real Estate		Real Estate												loans covered
	Commercial			Owner		Non-Owner		Construction		Residential			Consumer					under FDIC
(in thousands)	& Industrial			Occupied		Occupied		Real Estate		Real Estate			& Other		Unallocated			loss share		Total
Allowance for Loan Losses:
Balance, beginning of year	$	12,727		$	5,060	$	5,629	$	8,407	$	5,485		$	93	$	5,358		$	-	$	42,759
Provision charged to expense		(62	)		691		1,524		2,964		(361	)		9		(1,165	)		-		3,600
Losses charged off		400			378		360		2,716		111			-		-			-		3,965
Recoveries		125			-		15		178		89			21		-			-		428
Balance, end of year	$	12,390		$	5,373	$	6,808	$	8,833	$	5,102		$	123	$	4,193		$	-	$	42,822

Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	3,417		$	348	$	1,899	$	3,672	$	2,045		$	-	$	-		$	-	$	11,381
Collectively evaluated for impairment		8,973			5,025		4,909		5,161		3,057			123		4,193			-		31,441
Loans acquired with deteriorated credit quality		-			-		-		-		-			-		-			-		-
Total	$	12,390		$	5,373	$	6,808	$	8,833	$	5,102		$	123	$	4,193		$	-	$	42,822

Loans - Ending Balance:
Individually evaluated for impairment	$	6,559		$	1,219	$	9,393	$	16,808	$	9,508		$	-	$	-		$	-	$	43,487
Collectively evaluated for impairment		606,411			323,861		446,291		159,441		164,897			16,646					7,665		1,725,212
Loans acquired with deteriorated credit quality		-			-		-		-		-			-		-			183,782		183,782
Total	$	612,970		$	325,080	$	455,684	$	176,249	$	174,405		$	16,646	$	-		$	191,447	$	1,952,481

A summary of loans individually evaluated for impairment by category as of March 31, 2011 is as follows:

	Unpaid		Recorded		Recorded
	Contractual		Investment		Investment		Total				Average
	Principal		With No		With		Recorded		Related		Recorded
(in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment
Commercial & Industrial	$	6,604	$	402	$	6,157	$	6,559	$	3,417	$	9,209
Real Estate:
Commercial - Owner Occupied		1,390		-		1,219		1,219		348		1,913
Commercial - Non-Owner Occupied		15,096		376		9,017		9,393		1,899		10,369
Construction		21,603		2,294		14,514		16,808		3,672		15,607
Residential		9,695		2,486		7,022		9,508		2,045		9,508
Consumer & Other		-		-		-		-		-		-
Total	$	54,388	$	5,558	$	37,929	$	43,487	$	11,381	$	46,606

There were no loans over 90 days past due and still accruing interest at March 31, 2011. If interest on impaired loans would have been accrued based upon the original contractual terms, such income would have been $703,000 for the quarter ended March 31, 2011. The cash amount collected and recognized as interest income on impaired loans was $130,000, for the quarter ended March 31, 2011. The amount recognized as interest income on impaired loans continuing to accrue interest was $150,000 for the quarter ended March 31, 2011. At March 31, 2011 there were $1.3 million of unadvanced commitments on impaired loans. Other Liabilities include approximately $268,000 for estimated losses attributable to the unadvanced commitments on impaired loans.

The recorded investment in impaired loans by category at March 31, 2011 is as follows:

(in thousands)	Non-accrual		Restructured		Total
Commercial & Industrial	$	6,559	$	-	$	6,559

Real Estate:
Commercial - Owner Occupied		1,219		-		1,219
Commercial - Non-Owner Occupied		4,609		4,784		9,393
Construction		16,211		597		16,808
Residential		5,184		4,324		9,508

Consumer & Other		-		-		-
Total	$	33,782	$	9,705	$	43,487

The aging of the recorded investment in past due loans by portfolio class and category at March 31, 2011 is shown below.

			90 or More
	30-89 Days		Days		Total
(in thousands)	Past Due		Past Due		Past Due		Current		Total
Portfolio loans not covered under FDIC loss share
Commercial & Industrial	$	530	$	4,630	$	5,160	$	607,810	$	612,970

Real Estate:
Commercial - Owner Occupied		-		1,219		1,219		323,861		325,080
Commercial - Non-Owner Occupied		2,901		2,815		5,716		449,968		455,684
Construction		216		7,210		7,426		168,823		176,249
Residential		422		4,645		5,067		169,338		174,405

Consumer & Other		-		-		-		16,646		16,646
Total	$	4,069	$	20,519	$	24,588	$	1,736,446	$	1,761,034

Portfolio loans covered under FDIC loss share
Commercial & Industrial	$	343	$	2,034	$	2,377	$	16,213	$	18,590

Real Estate:
Commercial - Owner Occupied		-		6,000		6,000		38,467		44,467
Commercial - Non-Owner Occupied		4,131		3,111		7,242		39,824		47,066
Construction		2,104		14,052		16,156		26,866		43,022
Residential		2,175		1,205		3,380		33,604		36,984

Consumer & Other		264		200		464		854		1,318
Total	$	9,017	$	26,602	$	35,619	$	155,828	$	191,447

Portfolio loans, total
Commercial & Industrial	$	873	$	6,664	$	7,537	$	624,023	$	631,560

Real Estate:
Commercial - Owner Occupied		-		7,219		7,219		362,328		369,547
Commercial - Non-Owner Occupied		7,032		5,926		12,958		489,792		502,750
Construction		2,320		21,262		23,582		195,689		219,271
Residential		2,597		5,850		8,447		202,942		211,389

Consumer & Other		264		200		464		17,500		17,964
Total	$	13,086	$	47,121	$	60,207	$	1,892,274	$	1,952,481

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Grades 1, 2, and 3 - These grades include 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 – This grade includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
Grade 5 – This grade includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
Grade 6 – This grade 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 company is starting to reverse a negative trend or condition, or have recently been upgraded from a 7, 8, or 9 rating.
Grade 7 – Watch credits are companies that have experienced financial setback of a nature that are not determined to be severe or influence ‘ongoing concern’ expectations. Borrowers within this category are expected to turnaround within a 12-month period of time. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.
Grade 8 – Substandard credits will include those companies that are 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. Borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on non-accrual.

The recorded investment by risk category of the loans by portfolio class and category at March 31, 2011, which is based upon the most recent analysis performed, is as follows:

			Commercial		Commercial
			Real Estate		Real Estate
	Commercial		Owner		Non-owner		Construction		Residential		Consumer
(in thousands)	& Industrial		Occupied		Occupied		Real Estate		Real Estate		& Other		Total
Portfolio loans not covered under FDIC loss share
Outstanding (1-3)	$	88,565	$	18,785	$	6,796	$	1,136	$	1,497	$	2,999	$	119,778
Above Average (4)		62,995		65,596		37,076		9,046		16,931		1,633		193,277
Average (5)		277,224		144,911		266,961		74,833		115,961		11,447		891,337
Below Average (6)		107,294		48,114		76,538		27,407		11,382		111		270,846
Watch List (7)		42,674		32,751		52,333		29,486		7,477		7		164,728
Substandard (8)		31,546		14,923		15,755		34,033		20,865		449		117,571
Doubtful (9)		2,672		-		225		308		292		-		3,497
Total	$	612,970	$	325,080	$	455,684	$	176,249	$	174,405	$	16,646	$	1,761,034

Portfolio loans covered under FDIC loss share
Outstanding (1-3)	$	-	$	-	$	-	$	-	$	-	$	83	$	83
Above Average (4)		1,315		2,628		-		78		5,494		56		9,571
Average (5)		8,796		15,989		17,571		15,964		21,860		878		81,058
Below Average (6)		5,802		8,038		8,203		1,640		1,718		44		25,445
Watch List (7)		54		3,288		8,260		346		1,477		-		13,425
Substandard (8)		2,623		14,524		10,620		16,849		5,918		257		50,791
Doubtful (9)		-		-		2,412		8,145		517		-		11,074
Total	$	18,590	$	44,467	$	47,066	$	43,022	$	36,984	$	1,318	$	191,447

Portfolio loans, total
Outstanding (1-3)	$	88,565	$	18,785	$	6,796	$	1,136	$	1,497	$	3,082	$	119,861
Above Average (4)		64,310		68,224		37,076		9,124		22,425		1,689		202,848
Average (5)		286,020		160,900		284,532		90,797		137,821		12,325		972,395
Below Average (6)		113,096		56,152		84,741		29,047		13,100		155		296,291
Watch List (7)		42,728		36,039		60,593		29,832		8,954		7		178,153
Substandard (8)		34,169		29,447		26,375		50,882		26,783		706		168,362
Doubtful (9)		2,672		-		2,637		8,453		809		-		14,571
Total	$	631,560	$	369,547	$	502,750	$	219,271	$	211,389	$	17,964	$	1,952,481

Portfolio loans covered under FDIC loss share

Purchased loans acquired in a business combination, including loans purchased in our FDIC-assisted transactions, are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. Purchased credit-impaired loans are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include factors such as past due and non-accrual status. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from non-accretable to accretable with a positive impact on interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

Changes in the accretable yield for purchased loans were as follows for the quarters ended March 31, 2011 and 2010:

	March 31,			March 31,
(in thousands)	2011			2010
Balance at beginning of period	$	46,460		$	3,708
Additions		10,875			-
Accretion		(3,956	)		(235	)
Balance at end of period	$	53,379		$	3,473

Outstanding balances on purchased loans from the FDIC were $293.0 million as of March 31, 2011 and $219.5 million at December 31, 2010, respectively. In the first quarter of 2011, the Bank received payments of $11.8 million for loss share claims under the terms of the FDIC loss share agreements.

Legacy acquisition

The following table presents information regarding the contractually required payments receivable, the cash flows expected to be collected, and the estimated fair value of the loans acquired in the Legacy acquisition, as of the closing date of the transaction:

	January 7, 2011
	Purchased
	Credit-Impaired
(In thousands)	Loans
Contractually required payments (principal and interest):	$	106,286
Cash flows expected to be collected (principal and interest):		84,089
Fair value of loans acquired:		73,214

These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments. The majority of the purchased credit-impaired loans were valued based on the liquidation value of the underlying collateral. There was no allowance for credit losses on purchased loans related to FDIC-assisted transactions at March 31, 2011.

The determination of the initial fair value of loans and other real estate acquired in the transaction and the initial fair value of the related FDIC loss share receivable involve a high degree of judgment and complexity. The carrying value of the acquired loans and other real estate and the FDIC indemnification asset reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition. However, the amount that the Bank realizes on these assets could differ materially from the carrying value reflected in these financial statements, based upon the timing and amount of collections on the acquired loans in future periods. To the extent the actual values realized for the acquired loans are different from the estimate, the FDIC loss share receivable will generally be affected in an offsetting manner due to the indemnification obligations of the FDIC, thus limiting the Bank’s loss exposure.

NOTE 7—COMMITMENTS AND CONTINGENCIES

The Company issues financial instruments with off balance sheet risk in the normal course of the business of meeting the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company’s extent of involvement and maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets. At March 31, 2011 there were $1.3 million of unadvanced commitments on impaired loans. Other liabilities include approximately $268,000 for estimated losses attributable to the unadvanced commitments on impaired loans.

The contractual amounts of off-balance-sheet financial instruments as of March 31, 2011 and December 31, 2010 are as follows:

	March 31,		December 31,
(in thousands)	2011		2010
Commitments to extend credit	$	435,206	$	429,411
Standby letters of credit		42,706		42,113

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments usually have fixed expiration dates or other termination clauses and may require payment of a fee. Of the total commitments to extend credit at March 31, 2011 and December 31, 2010, approximately $59.1 million and $67.0 million, respectively, represent fixed rate loan commitments. Since certain of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These standby letters of credit are issued to support contractual obligations of the Company’s customers. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. The approximate remaining term of standby letters of credit range from 6 months to 5 years at March 31, 2011.

Contingencies
The Bank, along with other co-defendants has been named as a defendant in two lawsuits filed by persons alleging to be clients of the Bank’s Trust division who invested in promissory notes issued by Distinctive Properties (UK) Limited (“Distinctive Properties”), a company involved in the purchase and development of real estate in the United Kingdom. Plaintiffs allege that the promissory notes were part of a multi-million dollar Ponzi scheme. Plaintiffs allege to hold such promissory notes in accounts with the Trust division and that, among other things, the Bank was negligent, breached its fiduciary duties and breached its contracts. Plaintiffs also allege that the Bank violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Plaintiffs, in the aggregate, are seeking damages from defendants, including the Bank, of approximately $27.0 million as well as their costs and attorneys’ fees and trebled damages under RICO.

The Company is unable to estimate a reasonably possible loss for the cases described above because the proceedings are in early stages and there are significant factual issues to be determined and resolved. The Company denies Plaintiffs’ allegations and intends to vigorously defend the lawsuits.

NOTE 8—DERIVATIVE FINANCIAL INSTRUMENTS

The Company is a party to various derivative financial instruments that are used in the normal course of business to meet the needs of its clients and as part of its risk management activities. These instruments include interest rate swaps and option contracts. The Company does not enter into derivative financial instruments for trading or speculative purposes.

Interest rate swap contracts involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. The Company enters into interest rate swap contracts on behalf of its clients and also utilizes such contracts to reduce or eliminate the exposure to changes in the cash flows or fair value of hedged assets or liabilities due to changes in interest rates. Interest rate option contracts consist of caps and provide for the transfer or reduction of interest rate risk in exchange for a fee.

All derivative financial instruments, whether designated as hedges or not, are recorded on the consolidated balance sheet at fair value within Other assets or Other liabilities. The accounting for changes in the fair value of a derivative in the consolidated statement of operations depends on whether the contract has been designated as a hedge and qualifies for hedge accounting. At March 31, 2011, the Company did not have any derivatives designated as cash flow or fair value hedges.

Using derivative instruments means assuming counterparty credit risk. Counterparty credit risk relates to the loss the Company could incur if a counterparty were to default on a derivative contract. Notional amounts of derivative financial instruments do not represent credit risk, and are not recorded in the consolidated balance sheet. They are used merely to express the volume of this activity. The overall credit risk and exposure to individual counterparties is monitored. The Company does not anticipate nonperformance by any counterparties. The amount of counterparty credit exposure is the unrealized gains, if any, on such derivative contracts. At March 31, 2011, the Company had pledged cash of $1.5 million and accepted pledged securities of $2.2 million as collateral in connection with our interest rate swap agreements. At December 31, 2010, the Company had accepted cash of $530,000, pledged cash of $1.5 million, and accepted pledged securities of $2.2 million as collateral in connection with our interest rate swap agreements.

Risk Management Instruments. The Company enters into certain derivative contracts to economically hedge state tax credits and certain loans.

Economic hedge of state tax credits. In November 2008, the Company paid $2.1 million to enter into a series of interest rate caps in order to economically hedge changes in fair value of the State tax credits held for sale. In February 2010, the Company paid $751,000 for an additional series of interest rate caps. See Note 10—Fair Value Measurements for further discussion of the fair value of the state tax credits.
Economic hedge of prime based loans. Previously, the Company had two outstanding interest rate swap agreements whereby the Company paid a variable rate of interest equivalent to the prime rate and received a fixed rate of interest. The swaps were designed to hedge the cash flows associated with a portion of prime based loans and had been designated as cash flow hedges. However, in December 2008, due to a variable rate differential, the Company concluded the cash flow hedges would not be prospectively effective and the hedges were dedesignated. The swaps were terminated in February 2009. The unrealized gain prior to dedesignation was included in Accumulated other comprehensive income and is being amortized over the expected life of the related loans. At March 31, 2011, the amount remaining in Accumulated other comprehensive income is $75,300. For the three months ended March 31, 2011 and 2010, $44,000 and $62,000 was reclassified into Miscellaneous income, respectively. The Company expects to reclassify $118,000 of remaining derivative gains from Accumulated other comprehensive income to earnings over the next twelve months.

The table below summarizes the notional amounts and fair values of the derivative instruments used to manage risk.

					Asset Derivatives				Liability Derivatives
					(Other Assets)				(Other Liabilities)
	Notional Amount				Fair Value				Fair Value
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
(in thousands)	2011		2010		2011		2010		2011		2010
Non-designated hedging instruments
Interest rate cap contracts	$	99,300	$	314,300	$	495	$	528	$	-	$	-

The following table shows the location and amount of gains and losses related to derivatives used for risk management purposes that were recorded in the condensed consolidated statements of operations for the three months ended March 31, 2011 and 2010.

		Amount of Gain or (Loss)
	Location of Gain or (Loss)	Recognized in Operations on
	Recognized in Operations on	Derivative
(in thousands)	Derivative	2011			2010
Non-designated hedging instruments
Interest rate cap contracts	Gain on state tax credits, net	$	(33	)	$	(565	)
Interest rate swap contracts	Miscellaneous income	$	44		$	62

Client-Related Derivative Instruments. As an accommodation to certain customers, the Company enters into interest rate swaps to economically hedge changes in fair value of certain loans. The table below summarizes the notional amounts and fair values of the client-related derivative instruments.

					Asset Derivatives				Liability Derivatives
					(Other Assets)				(Other Liabilities)
	Notional Amount				Fair Value				Fair Value
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
(in thousands)	2011		2010		2011		2010		2011		2010
Non-designated hedging instruments
Interest rate swap contracts	$	108,680	$	109,012	$	1,077	$	1,514	$	2,032	$	2,607

Changes in the fair value of client-related derivative instruments are recognized currently in operations. The following table shows the location and amount of gains and losses recorded in the condensed consolidated statements of operations for the three months ended March 31, 2011 and 2010.

		Amount of Gain or (Loss)
	Location of Gain or (Loss)	Recognized in Operations on
	Recognized in Operations on	Derivative
(in thousands)	Derivative	2011			2010
Non-designated hedging instruments
Interest rate swap contracts	Interest and fees on loans	$	(150	)	$	(154	)

NOTE 9—COMPENSATION PLANS

The Company maintains a number of share-based incentive programs, which are discussed in more detail in Note 16 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. There were no stock options, stock-settled stock appreciation rights, or restricted stock units granted in the first three months of 2011. The share-based compensation expense was $545,000 and $649,000 for the three months ended March 31, 2011 and 2010, respectively.

Employee Stock Options and Stock-settled Stock Appreciation Rights (“SSAR”)
At March 31, 2011, there was $1.6 million of total unrecognized compensation costs related to SSAR’s which is expected to be recognized over a weighted average period of 2.5 years. Following is a summary of the employee stock option and SSAR activity for the first three months of 2011.

					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
			Exercise		Contractual	Intrinsic
(Dollars in thousands, except share data)	Shares		Price		Term	Value
Outstanding at January 1, 2011	902,932		$	15.71
Granted	-			-
Exercised	(15,200	)		11.73
Forfeited	(2,438	)		20.27
Outstanding at March 31, 2011	885,294		$	15.77	5.3 years	$	-
Exercisable at March 31, 2011	583,389		$	16.11	3.8 years	$	-
Vested and expected to vest at March 31, 2011	794,675		$	15.32	5.3 years	$	-

Restricted Stock Units (“RSU”)
At March 31, 2011, there was $689,000 of total unrecognized compensation costs related to the RSU’s, which is expected to be recognized over a weighted average period of 1.4 years. A summary of the Company's restricted stock unit activity for the first three months of 2011 is presented below.

			Weighted
			Average
			Grant Date
	Shares		Fair Value
Outstanding at January 1, 2011	36,173		$	22.14
Granted	-			-
Vested	(200	)		10.69
Forfeited	(286	)		22.36
Outstanding at March 31, 2011	35,687		$	22.20

Stock Plan for Non-Management Directors
Shares are issued twice a year and compensation expense is recorded as the shares are earned, therefore, there is no unrecognized compensation expense related to this plan. The Company recognized $167,000 and $143,000 of share-based compensation expense for the directors for the three months ended March 31, 2011 and 2010, respectively. Pursuant to this plan, the Company issued 13,900 and 15,491 shares in the first three months of 2011 and 2010, respectively.

Employee Stock Issuance
Restricted stock was granted to certain key employees as part of their compensation. The restricted stock may be in a form of a one-time award or in paid pro-rata installments. The stock is restricted for 2 years and upon issuance may be fully vested or vest over five years. The Company recognized $4,600 and $33,000 of share-based compensation related to these awards and issued 4,831 and 8,694 shares, for the three months ended March 31, 2011 and 2010, respectively.

In conjunction with the Company’s short-term incentive plan, the Company issued 14,329 and 13,660 restricted shares to certain key employees in the first three months ended March 31, 2011 and 2010, respectively. The compensation expense related to these shares was expensed in 2010 and 2009, respectively. For further information on the short-term incentive plan, refer to the Compensation Discussion and Analysis in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders.

Moneta Plan
As of December 31, 2006, the fair value of all Moneta options had been expensed. As a result, there have been no option-related expenses for Moneta in 2011 or 2010. Following is a summary of the Moneta stock option activity for the first three months of 2011.

					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
			Exercise		Contractual	Intrinsic
(Dollars in thousands, except share data)	Shares		Price		Term	Value
Outstanding at January 1, 2011	26,105		$	13.58
Granted	-			-
Exercised	(3,194	)		11.50
Forfeited	(8,792	)		15.50
Outstanding at March 31, 2011	14,119		$	12.87	1.7 years	$	17
Exercisable at March 31, 2011	14,119		$	12.87	1.7 years	$	17

NOTE 10—FAIR VALUE MEASUREMENTS

Below is a description of certain assets and liabilities measured at fair value.

The following table summarizes financial instruments measured at fair value on a recurring basis as of March 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

	March 31, 2011
		Quoted Prices in		Significant		Significant
		Active Markets		Other		Unobservable
		for Identical		Observable		Inputs		Total Fair
(in thousands)		Assets (Level 1)		Inputs (Level 2)		(Level 3)		Value
Assets
Securities available for sale
Obligations of U.S. Government sponsored enterprises		$	-	$	40,237	$	-	$	40,237
Obligations of states and political subdivisions			-		22,796		2,972		25,768
Residential mortgage-backed securities			-		415,984		-		415,984
Total securities available for sale		$	-	$	479,017	$	2,972	$	481,989
Portfolio loans			-		15,588		-		15,588
State tax credits held for sale			-		-		30,494		30,494
Derivative financial instruments			-		1,572		-		1,572
Total assets		$	-	$	496,177	$	33,467	$	529,643

Liabilities
Derivative financial instruments		$	-	$	2,032	$	-	$	2,032
Total liabilities		$	-	$	2,032	$	-	$	2,032

Securities available for sale. Securities classified as available for sale are reported at fair value utilizing Level 2 and Level 3 inputs. The Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions. Through March 31, 2011, Level 3 securities available for sale include three Auction Rate Securities and a municipal bond issued to a school district.

Portfolio Loans. Certain fixed rate portfolio loans are accounted for as trading instruments and reported at fair value. Fair value on these loans is determined using a third party valuation model with observable Level 2 market data inputs.
State tax credits held for sale. At March 31, 2011, of the $59.9 million of state tax credits held for sale on the condensed consolidated balance sheet, approximately $30.5 million were carried at fair value. The remaining $29.4 million of state tax credits were accounted for at cost.

The fair value of the state tax credits carried at fair value decreased by $164,000 in the first three months of 2011 compared to a $308,000 increase in the first three months of 2010. These fair value changes are included in Gain on State tax credits, net in the condensed consolidated statements of operations.

The Company is not aware of an active market that exists for the 10-year streams of state tax credit financial instruments. However, the Company’s principal market for these tax credits consists of state residents who buy these credits and from local and regional accounting firms who broker them. As such, the Company employed a discounted cash flow analysis (income approach) to determine the fair value.

The fair value measurement is calculated using an internal valuation model with observable market data including discounted cash flows based upon the terms and conditions of the tax credits. Assuming that the underlying project remains in compliance with the various federal and state rules governing the tax credit program, each project will generate about 10 years of tax credits. The inputs to the fair value calculation include: the amount of tax credits generated each year, the anticipated sale price of the tax credit, the timing of the sale and a discount rate. The discount rate is defined as the LIBOR swap curve at a point equal to the remaining life in years of credits plus a 205 basis point spread. With the exception of the discount rate, the other inputs to the fair value calculation are observable and readily available. The discount rate is considered a Level 3 input because it is an “unobservable input” and is based on the Company’s assumptions. Given the significance of this input to the fair value calculation, the state tax credit assets are reported as Level 3 assets.
Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains counterparty quotations to value its interest rate swaps and caps. In addition, the Company validates the counterparty quotations with third party valuation sources. Derivatives with negative fair values are included in Other liabilities in the consolidated balance sheets. Derivatives with positive fair value are included in Other assets in the consolidated balance sheets.

Level 3 financial instruments
The following table presents the changes in Level 3 financial instruments measured at fair value on a recurring basis as of March 31, 2011.

Purchases, sales, issuances and settlements, net. There were no purchases of Level 3 financial instruments during the quarter ended March 31, 2011. Sales of Level 3 instruments during the quarter ended March 31, 2011 consisted of $1.2 million in state tax credits held for sale.
Transfers in and/or out of Level 3. The transfer out of Level 3 is related to two newly issued mortgage-backed securities purchased in the fourth quarter of 2010 which were originally priced using Level 3 assumptions. In the first quarter of 2011, a third party pricing service became available.

	Three months ended March 31,
	2011			2010		2011			2010
	Securities			Securities
	available for			available for		State tax			State tax
	sale, at fair			sale, at fair		credits held for			credits held for
(in thousands)	value			value		sale			sale
Beginning balance	$	7,520		$	2,830	$	31,576		$	32,485
Total gains or (losses) (realized and unrealized):
Included in earnings		-			-		142			652
Included in other comprehensive income		7			4		-			-
Purchases, sales, issuances and settlements:
Purchases		-			100		-			-
Sales		-			-		(1,224	)		(1,377	)
Transfer in and/or out of Level 3		(4,555	)		-		-			-
Ending balance	$	2,972		$	2,934	$	30,494		$	31,760

Change in unrealized gains relating to
assets still held at the reporting date	$	7		$	4	$	(164	)	$	308

From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. The following table presents financial instruments and non-financial assets measured at fair value on a non-recurring basis as of March 31, 2011.

			(1)
			Quoted
			Prices in		(1)
			Active		Significant		(1)
			Markets for		Other		Significant		Total (losses)
			Identical		Observable		Unobservable		gains for the three
	(1)		Assets		Inputs		Inputs		months ended
(in thousands)	Total Fair Value		(Level 1)		(Level 2)		(Level 3)		March 31, 2011
Impaired loans	$	768	$	-	$	-	$	768	$	(3,966	)
Other real estate		3,898		-		-		3,898		(442	)
Total	$	4,666	$	-	$	-	$	4,666	$	(4,408	)

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

Impaired loans are reported at the fair value of the underlying collateral. Fair values for impaired loans are obtained from current appraisals by qualified licensed appraisers or independent valuation specialists. Other real estate owned is adjusted to fair value upon foreclosure of the underlying loan. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value less costs to sell. Fair value of other real estate is based upon the current appraised values of the properties as determined by qualified licensed appraisers and the Company’s judgment of other relevant market conditions. Certain state tax credits are reported at cost.

Following is a summary of the carrying amounts and fair values of the Company’s financial instruments on the consolidated balance sheets at March 31, 2011 and December 31, 2010.

	March 31, 2011				December 31, 2010
	Carrying		Estimated		Carrying		Estimated
(in thousands)	Amount		fair value		Amount		fair value
Balance sheet assets
Cash and due from banks	$	18,542	$	18,542	$	23,413	$	23,413
Federal funds sold		1,464		1,464		3,153		3,153
Interest-bearing deposits		187,556		187,556		268,853		268,853
Securities available for sale		481,989		481,989		361,546		361,546
Other investments, at cost		14,430		14,430		12,278		12,278
Loans held for sale		3,142		3,142		5,640		5,640
Derivative financial instruments		1,572		1,572		2,042		2,042
Portfolio loans, net		1,909,659		1,917,132		1,850,303		1,855,338
State tax credits, held for sale		59,928		59,928		61,148		61,148
Accrued interest receivable		7,839		7,839		7,464		7,464

Balance sheet liabilities
Deposits		2,430,430		2,433,738		2,297,721		2,301,387
Subordinated debentures		85,081		45,189		85,081		44,866
Federal Home Loan Bank advances		107,300		108,828		107,300		118,602
Other borrowings		97,898		97,905		119,333		119,366
Derivative financial instruments		2,032		2,032		2,607		2,607
Accrued interest payable		1,545		1,545		1,488		1,488

For information regarding the methods and assumptions used to estimate the fair value of each class of financial instruments for which it is practical to estimate such value, refer to Note 19 – Fair Value Measurements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

NOTE 11—SEGMENT REPORTING

The Company has two primary operating segments, Banking and Wealth Management, which are delineated by the products and services that each segment offers. The segments are evaluated separately on their individual performance, as well as their contribution to the Company as a whole.

The Banking operating segment consists of a full-service commercial bank, with locations in St. Louis, Kansas City, and Phoenix. The majority of the Company’s assets and income result from the Banking segment. All banking locations have the same product and service offerings, have similar types and classes of customers and utilize similar service delivery methods. Pricing guidelines and operating policies for products and services are the same across all regions.

The Wealth Management segment includes the Trust division of the Bank and the state tax credit brokerage activities. The Trust division provides estate planning, investment management, and retirement planning as well as consulting on management compensation, strategic planning and management succession issues. State tax credits are part of a fee initiative designed to augment the Company’s wealth management segment and banking lines of business.

The Corporate segment’s principal activities include the direct ownership of the Company’s banking subsidiary and the issuance of debt and equity. Its principal source of liquidity is dividends from its subsidiaries and stock option exercises.

The financial information for each business segment reflects that information which is specifically identifiable or which is allocated based on an internal allocation method. There were no material intersegment revenues among the three segments. Management periodically makes changes to methods of assigning costs and income to its business segments to better reflect operating results. When appropriate, these changes are reflected in prior year information presented below.

Following are the financial results for the Company’s operating segments.

				Wealth			Corporate and
(in thousands)	Banking			Management			Intercompany			Total
Balance Sheet Information	March 31, 2011
Portfolio loans	$	1,952,481		$	-		$	-		$	1,952,481
Goodwill		3,879			-			-			3,879
Intangibles, net		1,921			-			-			1,921
Deposits		2,444,549			-			(14,119	)		2,430,430
Borrowings		152,051			55,647			82,581			290,279
Total assets		2,854,503			60,522			10,291			2,925,316

	December 31, 2010
				Wealth			Corporate and
	Banking			Management			Intercompany			Total
Portfolio loans	$	1,893,062		$	-		$	-		$	1,893,062
Goodwill		2,064			-			-			2,064
Intangibles, net		1,223			-			-			1,223
Deposits		2,313,117			-			(15,396	)		2,297,721
Borrowings		172,431			56,702			82,581			311,714
Total assets		2,729,930			61,770			14,140			2,805,840

Income Statement Information	Three months ended March 31, 2011
Net interest income (expense)	$	28,086		$	(322	)	$	(1,026	)	$	26,738
Provision for loan losses		3,600			-			-			3,600
Noninterest income		3,077			1,838			48			4,963
Noninterest expense		14,480			1,846			1,139			17,465
Income (loss) before income tax expense (benefit)		13,083			(330	)		(2,117	)		10,636
Income tax expense (benefit)		4,375			(110	)		(708	)		3,557
Net income (loss)	$	8,708		$	(220	)	$	(1,409	)	$	7,079

	Three months ended March 31, 2010
Net interest income (expense)	$	20,053		$	(298	)	$	(1,132	)	$	18,623
Provision for loan losses		13,800			-			-			13,800
Noninterest income		2,207			1,816			33			4,056
Noninterest expense		10,869			1,670			1,116			13,655
Loss before income tax benefit		(2,409	)		(152	)		(2,215	)		(4,776	)
Income tax benefit		(890	)		(56	)		(816	)		(1,762	)
Net loss	$	(1,519	)	$	(96	)	$	(1,399	)	$	(3,014	)

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Some of the information in this report contains “forward-looking statements” within the meaning of and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified with use of terms such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “continue” and the negative of these terms and similar words, although some forward-looking statements are expressed differently. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including, but not limited to: credit risk; changes in the appraised valuation of real estate securing impaired loans; outcomes of litigation and other contingencies; exposure to general and local economic conditions; risks associated with rapid increases or decreases in prevailing interest rates; consolidation within the banking industry; competition from banks and other financial institutions; our ability to attract and retain relationship officers and other key personnel; burdens imposed by federal and state regulation; changes in accounting regulation or standards applicable to banks; and other risks discussed under the caption “Risk Factors” of our most recently filed Form 10-K and in Part II, 1A of this Form 10-Q, all of which could cause the Company’s actual results to differ from those set forth in the forward-looking statements.

Readers are cautioned not to place undue reliance on our forward-looking statements, which reflect management’s analysis and expectations only as of the date of such statements. Forward-looking statements speak only as of the date they are made, and the Company does not intend, and undertakes no obligation, to publicly revise or update forward-looking statements after the date of this report, whether as a result of new information, future events or otherwise, except as required by federal securities law. You should understand that it is not possible to predict or identify all risk factors. Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission which are available on our website at www.enterprisebank.com.

Introduction
The following discussion describes the significant changes to the financial condition of the Company that have occurred during the first three months of 2011 compared to the financial condition as of December 31, 2010. In addition, this discussion summarizes the significant factors affecting the condensed consolidated results of operations, liquidity and cash flows of the Company for the three months ended March 31, 2011, compared to the same period in 2010. This discussion should be read in conjunction with the accompanying consolidated financial statements included in this report and our Annual Report on Form 10-K for the year ended December 31, 2010.

Executive Summary
The Company reported net income of $7.1 million for the three months ended March 31, 2011, compared to a net loss of $3.0 million for the same period in 2010. After deducting dividends on preferred stock, the Company reported net income per fully diluted share of $0.42, compared to a net loss of $0.25 per fully diluted share for the prior year period.

On January 7, 2011, the Bank entered into a purchase and assumption agreement with the FDIC and acquired certain assets and assumed certain liabilities of Legacy Bank, a full service community bank that was headquartered in Scottsdale, Arizona. The acquisition consisted of assets with an estimated fair value of approximately $128.6 million and liabilities with an estimated fair value of approximately $130.4 million. In connection with the acquisition, the Bank also entered into a loss share agreement whereby the FDIC will reimburse the Bank for 80% of all losses incurred on certain loans and other real estate covered under the agreement. The Bank acquired the assets at a discount of 7.6% and approximately $43.5 million of the deposits were assumed at a premium of 1%. The two branches of Legacy opened as branches of the Bank. The Bank also acquired approximately $55.6 million of discretionary and $13.6 million of non-discretionary trust assets. See Note 3 – Acquisitions and Divestitures and Note 6 – Portfolio Loans for more information.

Our pre-tax, pre-provision income for the first quarter of 2011 was $14.1 million, compared to pre-tax, pre-provision income of $9.1 million, an increase of 56% from the first quarter of 2010. Pre-tax, pre-provision income, which is a non-GAAP (Accounting Principles Generally Accepted in the United States of America) financial measure, is presented because the Company believes adjusting its results to exclude loan loss provision expense, sales and fair value writedowns of other real estate, and sales of securities provides shareholders with a more comparable basis for evaluating period-to-period operating results. A schedule reconciling GAAP pre-tax income (loss) to pre-tax, pre-provision income is provided in the table below.

	For the Quarter Ended
	Mar 31,			Dec 31,			Sep 30,			Jun 30,			Mar 31,
(In thousands)	2011			2010			2010			2010			2010
Pre-tax income (loss)	$	10,636		$	8,347		$	7,233		$	537		$	(4,776	)
Sales and fair value writedowns of other real estate		19			2,683			1,606			678			586
Sale of securities		(174	)		(781	)		(124	)		(525	)		(557	)
Income (loss) before income tax		10,481			10,249			8,715			690			(4,747	)
Provision for loan losses		3,600			3,325			7,650			8,960			13,800
Pre-tax, pre-provision income	$	14,081		$	13,574		$	16,365		$	9,650		$	9,053

Below are highlights of our Banking and Wealth Management segments. For more information on our segments, see Note 11 –Segment Reporting.

Banking Segment

Loans - Portfolio loans totaled $2.0 billion at March 31, 2011, including $191 million of loans covered under FDIC loss share agreements. Since December 31, 2010, portfolio loans covered under FDIC loss share agreements increased $64.7 million, or 51%, as a result of the Legacy acquisition. Excluding the loans covered under loss share, total portfolio loans were essentially flat in the first quarter of 2011, although Commercial & Industrial loans increased $19.0 million, or 3%, during the quarter and represent almost one-third of the Company’s loan portfolio at March 31, 2011. The net increase in Commercial & Industrial loans was a result of strong new business activity rather than higher credit line utilization rates. The increase in Commercial & Industrial loans was offset by a decrease of $29.1 million in Construction and Residential Real Estate loans as the Company continued to reduce its exposure to these sectors. See Note 6 – Portfolio Loans for more information.
Deposits – Core deposits, which exclude brokered certificates of deposit and include reciprocal CDARS deposits, increased $132.7 million, or 6%, in the first quarter of 2011 compared to the fourth quarter of 2010. First quarter deposit growth included an $81.9 million increase in demand deposits, an $80.6 million increase in money market accounts and other interest-bearing deposit accounts, and a $55.9 million increase in non-CDARS certificates of deposit. Reciprocal CDARS certificates of deposits decreased by $85.7 million in the first quarter of 2011 to $74.8 million compared to $160.5 million at December 31, 2010 and $147.9 million at March 31, 2010. Approximately $36.6 million of the money market increase was the result of a new CDARS money market sweep product, of which approximately $32.0 million, or 88%, were transfers from CDARS certificates of deposit. The Legacy acquisition added $49.3 million of total deposits consisting of $15.6 million of demand deposits, $19.5 million of money market accounts and other interest-bearing deposit accounts, and $14.2 million of certificates of deposit.

At March 31, 2011, total deposits were $2.4 billion, an increase of $526.4 million, or 28%, from March 31, 2010. Total deposits increased $132.7 million, or 6%, from December 31, 2010. Our deposit mix continues to improve. Noninterest-bearing demand deposits were $448.0 million at March 31, 2011, an increase of 49% from March 31, 2010 and a 22% increase from December 31, 2010. Noninterest bearing demand deposits represented 18% of total deposits at March 31, 2011 compared to 16% of total deposits at December 31, 2010 and March 31, 2010.

Strong deposit growth was attributed to the company’s marketing and sales activities, as well as, the continuing cash accumulation trend among our commercial clients. The Company completed a successful deposit promotion in Arizona, generating more than $22.9 million in money market balances in the first quarter of 2011. In addition, approximately $12.0 million of the money market growth and $33.0 million of the certificate of deposit growth in the first quarter of 2011 was related to the Company’s Enterprise Advisory Services initiative, a proprietary deposit platform marketed to registered investment advisory firms.

Asset quality – Nonperforming loans were $43.5 million at March 31, 2011, a decrease of $12.3 million from the prior year period, and a decrease of $2.9 million from year end 2010. Nonperforming loans represented 2.23% of total loans at March 31, 2011 versus 2.45% of total loans at December 31, 2010 and 3.10% at March 31, 2010. Excluding non-accrual loans and portfolio loans covered under FDIC loss share agreements, portfolio loans that were 30-89 days delinquent at March 31, 2011 remained at very low levels, representing 0.12% of the portfolio compared to 0.13% at December 31, 2010.

Provision for loan losses was $3.6 million in the first quarter of 2011 compared to $3.3 million in the fourth quarter of 2010 and $13.8 million in the first quarter of 2010. The large provision for loan losses in the first quarter of 2010 was due to higher levels of loan risk rating downgrades. See Note 6 – Portfolio Loans above and Provision for Loan Losses and Nonperforming Assets in this section for more information.

Interest rate margin – The net interest rate margin was 4.19% for the first quarter of 2011, compared to 4.70% for the fourth quarter of 2010 and 3.47% in the first quarter of 2010. The net interest rate margin for the fourth quarter of 2010 was significantly impacted by the yield on the loans covered under FDIC loss share. See Net Interest Income in this section for more information.

Wealth Management Segment
Fee income from the Wealth Management segment, including results from state tax credit brokerage activity, totaled $1.8 million in the first quarter of 2011 consistent with the same quarter of 2010. See Noninterest Income in this section for more information.

Net Interest Income

Three months ended March 31, 2011 and 2010
Net interest income (on a tax-equivalent basis) was $27.0 million for the three months ended March 31, 2011 compared to $18.9 million for the same period of 2010, an increase of $8.1 million, or 43%. Total interest income increased $7.4 million and total interest expense decreased $827,000.

Average interest-earning assets increased $410.4 million, or 19%, to $2.6 billion for the quarter ended March 31, 2011 from $2.2 billion for the quarter ended March 31, 2010. Average loans increased $140.8 million, or 8%, to $2.0 billion at March 31, 2011 from $1.8 billion at March 31, 2010. Average investment securities increased $136.4 million, or 48%, to $423.1 million from the first quarter of 2010 as increased core deposits were deployed to offset weak loan demand. Average short-term investments, including cash balances at the Federal Reserve, increased $133.2 million to $231.2 million from $98.0 million in the same period of 2010. Interest income on earning assets increased $3.1 million due to higher volume and $4.2 million due to higher rates, for a net increase of $7.4 million versus the first quarter of 2010.

For the quarter ended March 31, 2011, average interest-bearing liabilities increased $404.8 million, or 22%, to $2.3 billion compared to $1.9 billion for the quarter ended March 31, 2010. The increase in average interest-bearing liabilities resulted from a $350.4 million increase in average interesting bearing core deposits, primarily consisting of $248.5 million increase in average money market accounts and a $101.0 million increase in average certificates of deposit, and a $44.8 million increase in borrowings. For the first quarter of 2011, interest expense on interest-bearing liabilities decreased $2.2 million due to declining rates partially offset by an increase of $1.4 million due to the impact of higher volumes, for a net decrease of $827,000 versus the first quarter of 2010.

The tax-equivalent net interest rate margin was 4.19% for the first quarter of 2011, compared to 4.70% for the fourth quarter of 2010 and 3.47% in the first quarter of 2010. The net interest rate margin for the fourth quarter of 2010 was significantly impacted by the yield on the loans covered under FDIC loss share. Loans covered under FDIC loss share yielded 29.7% in the fourth quarter of 2010 primarily due to cash flows on paid off covered loans that exceeded expectations. In the first quarter of 2011, the loans covered under FDIC loss share yielded 16.8%. Absent the FDIC loss share loans, the net interest rate margin was 3.34% for the first quarter of 2011 compared to 3.57% for the fourth quarter of 2010. The reduction in the net interest rate margin, excluding the effect of loans covered under FDIC loss share, was primarily due to the Company’s increasingly strong liquidity position.

The Company expects low to mid-single digit growth in portfolio loans not covered under FDIC loss share. The growth is expected to be primarily in the Commercial & Industrial loan category. Pipelines for new loan activity have been strengthening over the past several months.

Average Balance Sheet

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 equivalent basis.

	Three months ended March 31,
				2011							2010
				Interest		Average					Interest		Average
	Average			Income/		Yield/		Average			Income/		Yield/
(in thousands)	Balance			Expense		Rate		Balance			Expense		Rate
Assets
Interest-earning assets:
Taxable loans (1)	$	1,736,608		$	23,321	5.45	%	$	1,779,735		$	24,296	5.54	%
Tax-exempt loans (2)		35,153			681	7.86			28,817			632	8.89
Covered loans (3)		190,625			7,903	16.81			13,012			543	16.92
Total loans		1,962,386			31,905	6.59			1,821,564			25,471	5.67
Taxable investments in debt and equity securities		407,943			2,642	2.63			285,527			1,933	2.75
Non-taxable investments in debt and equity
securities (2)		15,174			172	4.60			1,173			16	5.53
Short-term investments		231,208			149	0.26			98,039			88	0.36
Total securities and short-term investments		654,325			2,963	1.84			384,739			2,037	2.15
Total interest-earning assets		2,616,711			34,868	5.40			2,206,303			27,508	5.06
Noninterest-earning assets:
Cash and due from banks		11,220							11,283
Other assets		311,912							163,912
Allowance for loan losses		(43,558	)						(44,711	)
Total assets	$	2,896,285						$	2,336,787

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	194,340		$	189	0.39	%	$	185,244		$	219	0.48	%
Money market accounts		896,185			2,082	0.94			647,676			1,393	0.87
Savings		10,751			9	0.34			9,373			8	0.35
Certificates of deposit		880,966			3,410	1.57			779,940			4,635	2.41
Total interest-bearing deposits		1,982,242			5,690	1.16			1,622,233			6,255	1.56
Subordinated debentures		85,081			1,121	5.34			85,081			1,230	5.86
Borrowed funds		217,858			1,014	1.89			173,028			1,167	2.74
Total interest-bearing liabilities		2,285,181			7,825	1.39			1,880,342			8,652	1.87
Noninterest bearing liabilities:
Demand deposits		408,766							273,702
Other liabilities		14,151							7,520
Total liabilities		2,708,098							2,161,564
Shareholders' equity		188,187							175,223
Total liabilities & shareholders' equity	$	2,896,285						$	2,336,787
Net interest income				$	27,043						$	18,856
Net interest spread						4.01	%						3.19	%
Net interest rate margin (4)						4.19							3.47

(1)		Average balances include non-accrual loans. The income on such loans is included in interest but is recognized only upon receipt. Loan fees, net of amortization of deferred loan origination fees and costs, included in interest income are approximately $146,000 and $624,000 for the quarters ended March 31, 2011 and 2010, respectively.
(2)		Non-taxable income is presented on a fully tax-equivalent basis using a 36% tax rate. The tax-equivalent adjustments were $305,000 and $233,000 for the quarters ended March 31, 2011 and 2010, respectively.
(3)		Covered loans are loans covered under FDIC loss share agreements and are recorded at fair value.
(4)		Net interest income divided by average total interest-earning assets.

Rate/Volume
The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume.

	2011 compared to 2010
	Three months ended March 31,
	Increase (decrease) due to
(in thousands)	Volume(1)		Rate(2)			Net
Interest earned on:
Taxable loans	$	1,960	$	4,425		$	6,385
Tax-exempt loans (3)		129		(80	)		49
Taxable investments in debt
and equity securities		796		(87	)		709
Non-taxable investments in debt
and equity securities (3)		159		(3	)		156
Short-term investments		92		(31	)		61
Total interest-earning assets	$	3,136	$	4,224		$	7,360

Interest paid on:
Interest-bearing transaction accounts	$	11	$	(41	)	$	(30	)
Money market accounts		570		119			689
Savings		1		-			1
Certificates of deposit		543		(1,768	)		(1,225	)
Subordinated debentures		-		(109	)		(109	)
Borrowed funds		260		(413	)		(153	)
Total interest-bearing liabilities		1,385		(2,212	)		(827	)
Net interest income	$	1,751	$	6,436		$	8,187

(1)		Change in volume multiplied by yield/rate of prior period.
(2)		Change in yield/rate multiplied by volume of prior period.
(3)		Nontaxable income is presented on a fully-tax equivalent basis using a 36% tax rate.

NOTE: The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Provision and Allowance for Loan Losses

The provision for loan losses in the first quarter of 2011 was $3.6 million compared to $3.3 million in the fourth quarter of 2010 and $13.8 million in the first quarter of 2010. The large provision for loan losses in the first quarter of 2010 was due to higher levels of loan risk rating downgrades. The allowance for loan losses as a percentage of total loans was 2.19% at March 31, 2011 compared to 2.26% at December 31, 2010 and 2.45% at March 31, 2010. The allowance for loan losses represented 98% of nonperforming loans at March 31, 2011 compared to 79% at March 31, 2010 and 92% at December 31, 2010. Management believes that the allowance for loan losses is adequate to absorb inherent losses in the loan portfolio.

During the first quarter of 2011, the Company recorded net charge-offs of $3.5 million, or 0.73%, of average portfolio loans on an annualized basis, compared to $7.6 million, or 1.57%, for the fourth quarter of 2010 and $12.7 million, or 2.83%, for the first quarter of 2010. Approximately 72% of the charge-offs in the first quarter of 2011 were related to Construction Land Acquisition and Development loans, 21% were related to Commercial Real Estate loans and the remaining 7% were related to Commercial & Industrial loans.

The following table summarizes changes in the allowance for loan losses arising from loans charged off and recoveries on loans previously charged off, by loan category, and additions to the allowance charged to expense.

	Three months ended March 31,
(in thousands)	2011			2010
Allowance at beginning of period	$	42,759		$	42,995
Loans charged off:
Commercial and industrial		400			530
Real estate:
Commercial		738			7,285
Construction		2,716			4,701
Residential		111			355
Consumer and other		-			92
Total loans charged off		3,965			12,963
Recoveries of loans previously charged off:
Commercial and industrial		125			42
Real estate:
Commercial		15			167
Construction		178			2
Residential		89			36
Consumer and other		21			-
Total recoveries of loans		428			247
Net loan chargeoffs		3,537			12,716
Provision for loan losses		3,600			13,800

Allowance at end of period	$	42,822		$	44,079

Excludes loans covered under FDIC loss share agreements
Average loans	$	1,771,761		$	1,808,552
Total portfolio loans		1,761,034			1,786,097
Net chargeoffs to average loans		0.81	%		2.85	%
Allowance for loan losses to loans		2.43			2.47

Includes loans covered under FDIC loss share agreements
Average loans	$	1,962,386		$	1,821,564
Total portfolio loans		1,952,481			1,799,224
Net chargeoffs to average loans		0.73	%		2.83	%
Allowance for loan losses to loans		2.19			2.45

Nonperforming assets

The following table presents the categories of nonperforming assets and other ratios as of the dates indicated.

	March 31,			March 31,
(in thousands)	2011			2010
Non-accrual loans	$	33,782		$	53,190
Loans past due 90 days or more and still accruing interest		-			885
Restructured loans		9,705			1,710
Total nonperforming loans		43,487			55,785
Foreclosed property (1)		28,443			18,669
Other bank owned assets		600			936
Total nonperforming assets (1)	$	72,530		$	75,390

Excludes assets covered under FDIC loss share agreements
Total assets	$	2,925,316		$	2,361,405
Total portfolio loans		1,761,034			1,786,097
Total loans plus foreclosed property		1,790,077			1,805,702
Nonperforming loans to total loans		2.47	%		3.12	%
Nonperforming assets to total loans plus foreclosed property		4.05			4.18
Nonperforming assets to total assets (1)		2.48			3.19

Includes assets covered under FDIC loss share agreements
Total assets	$	2,925,316		$	2,361,405
Total portfolio loans		1,952,481			1,799,224
Total loans plus foreclosed property		2,004,386			1,821,108
Nonperforming loans to total loans		2.23	%		3.10	%
Nonperforming assets to total loans plus foreclosed property		4.76			4.26
Nonperforming assets to total assets		3.26			3.29

Allowance for loan losses to nonperforming loans		98.00	%		79.00	%

(1)

Excludes assets covered under FDIC loss share agreements, except for their inclusion in total assets

As 2011 progresses, the Company expects slight improvement in its ratio of nonperforming assets to total assets, excluding assets covered under FDIC loss share agreements.

Nonperforming loans

Nonperforming loans exclude credit-impaired loans that were acquired in the December 2009, July 2010, and January 2011 FDIC-assisted transactions. These purchased credit-impaired loans are accounted for on a pool basis, and the pools are considered to be performing. See Note 6 – Portfolio Loans for more information on these loans.

At March 31, 2011, nonperforming loans, including troubled debt restructurings of $9.7 million, were $43.5 million, or 2.23%, of total loans. This compares to $46.4 million, or 2.45% of total loans, at December 31, 2010 and $55.8 million, or 3.10% of total loans, at March 31, 2010. The nonperforming loans are comprised of approximately 43 relationships with the largest being a $5.8 million loan secured by commercial land in Kansas City. Five relationships comprise 53% of the nonperforming loans. Approximately 60% of the nonperforming loans were located in the Kansas City market and 40% were located in the St. Louis market. At March 31, 2011, there were no performing restructured loans that have been excluded from the nonperforming loan amounts.

Nonperforming loans based on Call Report codes were as follows:

(in thousands)	March 31, 2011		December 31, 2010
Construction, Real Estate/Land Acquisition and Development	$	16,808	$	9,934
Commercial Real Estate		10,612		12,959
Residential Real Estate		9,508		12,188
Commercial & Industrial		6,559		11,276
Consumer & Other		-		-
Total	$	43,487	$	46,357

The following table summarizes the changes in nonperforming loans by quarter.

	2011			2010
(in thousands)	1st Qtr			4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
Nonperforming loans beginning of period	$	46,357		$	51,955		$	46,550		$	55,785		$	38,540
Additions to nonaccrual loans		18,187			15,877			19,373			15,440			39,663
Additions to restructured loans		297			3,430			2,286			454			611
Chargeoffs		(3,966	)		(7,860	)		(7,023	)		(8,314	)		(12,963	)
Other principal reductions		(6,445	)		(7,288	)		(1,881	)		(4,580	)		(2,739	)
Moved to Other real estate		(7,014	)		(8,743	)		(7,122	)		(11,350	)		(5,564	)
Moved to Other bank owned assets		-			-			-			-			(955	)
Moved to performing		(3,929	)		(1,014	)		(228	)		-			(1,693	)
Loans past due 90 days or more and still accruing interest		-			-			-			(885	)		885
Nonperforming loans end of period	$	43,487		$	46,357		$	51,955		$	46,550		$	55,785

Of the $18.5 million in new nonperforming loans, five construction real estate loans representing three relationships comprised over $15.7 million, or 85% of the total. Of these, two relationships totaling $6.0 million were transferred to Other real estate during the quarter.

Other real estate

Other real estate was $51.3 million at March 31, 2011 compared to $36.2 million at December 31, 2010, and $20.9 million at March 31, 2010. Approximately $22.9 million, or 45% of the Other real estate, is covered by an FDIC loss share agreement. The following table summarizes the changes in Other real estate for the past five quarters.

	2011			2010
(in thousands)	1st Qtr			4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
Other real estate beginning of period	$	36,208		$	34,685		$	25,884		$	20,947		$	25,084
Additions and expenses capitalized
to prepare property for sale		7,014			8,743			7,122			11,350			5,564
Additions from FDIC assisted transactions		12,826			4,871			5,469			-			113
Writedowns in fair value		(703	)		(2,406	)		(1,750	)		(1,364	)		(574	)
Sales		(4,040	)		(9,685	)		(2,040	)		(5,049	)		(9,240	)
Other real estate end of period	$	51,305		$	36,208		$	34,685		$	25,884		$	20,947

At March 31, 2011, Other real estate was comprised of 21% residential lots, 21% completed homes, and 58% commercial real estate. Of the total Other real estate, 21%, or 27 properties, are located in the Kansas City region, 34%, or 19 properties, are located in the St. Louis region and 45%, or 48 properties, are located in the Arizona region related to the FDIC acquisitions.

The writedowns in fair value were recorded in Loan legal and other real estate expense based on current market activity shown in the appraisals. In addition, the Company realized a net gain of $423,000 on the sale of other real estate and recorded these gains as part of Noninterest income.

Noninterest Income
Noninterest income increased $907,000, or 22%, from the first quarter of 2010 compared to the first quarter of 2011. The increase is mainly due to increases in miscellaneous income related to the accretion on the indemnification asset on our Covered Assets.

Wealth Management revenue – For the three months ended March 31, 2011, Wealth Management revenue from the Trust division increased $386,000, or 30%, compared to the same period in 2010. Assets under administration were $1.6 billion at March 31, 2011, a 21% increase from March 31, 2010 due to market value increases and additional accounts from new and existing clients.
Sale of other real estate – For the quarter ended March 31, 2011, the Company sold $4.0 million of Other real estate for a gain of $423,000.
State tax credit brokerage activities – For the quarter ended March 31, 2011, the Company recorded a gain of $155,000 compared to a gain of $518,000 in the first quarter of 2010. Gains of $352,000 related to the sale of state tax credits to clients were partially offset by a negative fair value adjustment of $164,000 and a negative fair value adjustment of $33,000 on the interest rate caps used to economically hedge the tax credits. Tax credit sales in the first quarter of 2011 were lower than expected due to timing of customer purchases. See Note 7 – Derivatives Instruments and Hedging Activities above for more information on the interest rate caps. For more information on the fair value treatment of the state tax credits, see Note 10 – Fair Value Measurements.
Sale of investment securities – During the first three months of 2011, the Company purchased approximately $147.0 million in securities primarily in U.S. Government sponsored enterprises and Residential mortgage-backed securities. The Company sold approximately $5.3 million of securities realizing a gain of $174,000 on these sales.
Miscellaneous income – The increase from the first quarter of 2010 to the first quarter of 2011, is primarily due to an increase of $586,000 in accretion related to the indemnification assets on the Company’s Covered Assets.

Noninterest Expense
Noninterest expenses were $17.5 million in the first quarter of 2011, an increase of $3.8 million, or 28%, from the first quarter of 2010. The increase over the prior year period was comprised of $2.1 million in salaries and benefits primarily due to variable compensation accruals and staff additions to support our Arizona acquisition activity and $1.2 million in higher loan legal and other real estate expenses. The Company also incurred additional data processing costs related to new web-based customer relationship software and increases in FDIC insurance premiums due to the higher levels of deposits.

The Company’s efficiency ratio in the first quarter of 2011 was 55% compared to 60% in the first quarter of 2010, primarily due to the favorable impact of the FDIC assisted acquisitions.

Income Taxes
For the three months ended March 31, 2011, the Company’s income tax expense, which includes both federal and state taxes, was $3.6 million compared to a $1.8 million benefit for the same period in 2010. The combined federal and state effective income tax rates were 33.4% and (36.9%) for the three months ended March 31, 2011 and 2010, respectively.

The Company recognizes deferred tax assets only to the extent that they are expected to be used to reduce amounts that have been paid or will be paid to tax authorities. Management believes, based on all positive and negative evidence, that the deferred tax asset at March 31, 2011 is more likely-than-not-to be realized, and accordingly, no valuation allowance has been recorded.

Liquidity and Capital Resources

Liquidity management
The objective of liquidity management is to ensure we have the ability to generate sufficient cash or cash equivalents in a timely and cost-effective manner to meet our commitments as they become due. Typical demands on liquidity are run-off from demand deposits, maturing time deposits which are not renewed, and fundings under credit commitments to customers. Funds are available from a number of sources, such as from the core deposit base and from loans and securities repayments and maturities. Additionally, liquidity is provided from sales of the securities portfolio, fed fund lines with correspondent banks, the Federal Reserve and the FHLB, the ability to acquire large and brokered deposits and the ability to sell loan participations to other banks. These alternatives are an important part of our liquidity plan and provide flexibility and efficient execution of the asset-liability management strategy.

Our Asset-Liability Management Committee oversees our liquidity position, the parameters of which are approved by the Board of Directors. Our liquidity position is monitored monthly by producing a liquidity report, which measures the amount of liquid versus non-liquid assets and liabilities. Our liquidity management framework includes measurement of several key elements, such as the loan to deposit ratio, a liquidity ratio, and a dependency ratio. The Company’s liquidity framework also incorporates contingency planning to assess the nature and volatility of funding sources and to determine alternatives to these sources. While core deposits and loan and investment repayments are principal sources of liquidity, funding diversification is another key element of liquidity management and is achieved by strategically varying depositor types, terms, funding markets, and instruments.

Parent Company liquidity
The parent company’s liquidity is managed to provide the funds necessary to pay dividends to shareholders, service debt, invest in subsidiaries as necessary, and satisfy other operating requirements. The parent company’s primary funding sources to meet its liquidity requirements are dividends and payments from the Bank and proceeds from the issuance of equity (i.e. stock option exercises). Another source of funding for the parent company includes the issuance of subordinated debentures. Management believes our current level of cash at the holding company of approximately $14.1 million will be sufficient to meet all projected cash needs in 2011.

As of March 31, 2011, the Company had $82.6 million of outstanding subordinated debentures as part of nine Trust Preferred Securities Pools. These securities are classified as debt but are included in regulatory capital and the related interest expense is tax-deductible, which makes them a very attractive source of funding.

Bank liquidity
During the first quarter of 2011, we maintained a strong liquidity position by targeting core funding while reducing certain volatile deposit sources. Noninterest-bearing demand deposits grew $81.9 million, and money markets increased $86.5 million offset by decreases of $29.8 million in time deposits, including CDARS balances, and $6.5 million in interest bearing checking accounts.

The Bank has a variety of funding sources available to increase financial flexibility. In addition to amounts currently borrowed, at March 31, 2011, the Bank could borrow an additional $109.7 million from the FHLB of Des Moines under blanket loan pledges and has an additional $330.4 million from the Federal Reserve Bank under a pledged loan agreement. The Bank has unsecured federal funds lines with three correspondent banks totaling $35.0 million.

Of the $482.0 million of the securities available for sale at March 31, 2011, $243.9 million was pledged as collateral for deposits of public institutions, treasury, tax and loan notes, and other requirements. The remaining $238.1 million could be pledged or sold to enhance liquidity, if necessary.

The Bank belongs to the Certificate of Deposit Account Registry Service, or CDARS, which allows us to provide our customers with access to additional levels of FDIC insurance coverage. The Company considers the reciprocal deposits placed through the CDARS program as core funding and does not report the balances as brokered sources in its internal or external financial reports. As of March 31, 2011, the Bank had $74.8 million of reciprocal CDARS certificates of deposits outstanding. During the first quarter of 2011, the Bank began offering reciprocal money market accounts and had $36.6 million outstanding at March 31, 2011. In addition to the reciprocal deposits available through CDARS, we also have access to the “one-way buy” program, which allows us to bid on the excess deposits of other CDARS member banks. The Company will report any outstanding “one-way buy” funds as brokered funds in its internal and external financial reports. At March 31, 2011, we had no outstanding “one-way buy” deposits.

Finally, because the Bank is “well-capitalized”, it has the ability to sell certificates of deposit through various national or regional brokerage firms, if needed. At March 31, 2011, brokered certificate of deposit balances were $156.7 million, flat with December 31, 2010. At March 31, 2010, the Bank had $132.0 million of brokered certificates of deposit outstanding. Brokered certificates of deposit represented 6.4% of total deposits at March 31, 2011, 6.8% of total deposits at December 31, 2010 and 6.9% of total deposits at March 31, 2010.

Over the normal course of business, the Bank enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through the Bank’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 Bank has $435.2 million in unused loan commitments as of March 31, 2011. While this commitment level would be difficult to fund given the Company’s current liquidity resources, the nature of these commitments is such that the likelihood of funding them is low.

Capital Resources
In January 2010, the Company issued $15.0 million in stock through a private offering and separately registered these shares with the SEC in March 2010. The proceeds of the offering were injected into the Bank to improve its capital position.

From time to time we may choose to issue equity or debt securities to raise capital. A variety of factors, including financial market conditions, may influence the timing of any such issuance. To allow us to timely respond to opportunities to raise capital, the Company filed a shelf registration statement on Form S-3 which became effective on July 1, 2009. Under Rule 415 of the Securities Act of 1933, the Company has until July 1, 2012 to issue securities pursuant to this registration statement.

Proceeds from any additional offerings would be used for capital expenditures, repayment or refinancing of indebtedness or other securities from time to time, working capital, to make acquisitions, for general corporate purposes, or for the redemption of all or part of the preferred stock held by the U.S. Treasury as a result the Company’s participation in the Capital Purchase Program.

The Company and the Bank are subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and its bank affiliate must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The banking affiliate’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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 and 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 (6%) and Tier 1 leverage ratios (5%). Management believes, as of March 31, 2011 and December 31, 2010, that the Company and the Bank met all capital adequacy requirements to which they are subject.

The Company continues to exceed regulatory standards and met the definition of “well-capitalized” (the highest category) at March 31, 2011 and December 31, 2010.

The following table summarizes the Company’s risk-based capital and leverage ratios at the dates indicated:

	March 31,			December 31,
(Dollars in thousands)	2011			2010
Tier 1 capital to risk weighted assets		12.16	%		11.97	%
Total capital to risk weighted assets		14.34	%		14.30	%
Tier 1 common equity to risk weighted assets		7.51	%		7.37	%
Leverage ratio (Tier 1 capital to average assets)		8.60	%		9.15	%
Tangible common equity to tangible assets		5.22	%		5.26	%
Tier 1 capital	$	248,721		$	241,829
Total risk-based capital	$	293,416		$	288,754

The Company believes the tangible common equity and Tier 1 common equity ratios are important financial measures of capital strength even though they are considered to be non-GAAP measures. The tables below contain reconciliations of these ratios to U.S. GAAP.

Tangible common equity ratio

	March 31,			December 31,
(In thousands)	2011			2010
Shareholders' equity	$	191,015		$	183,348
Less: Preferred stock		(32,707	)		(32,519	)
Less: Goodwill		(3,879	)		(2,064	)
Less: Intangible assets		(1,921	)		(1,223	)
Tangible common equity	$	152,508		$	147,542

Total assets	$	2,925,316		$	2,805,840
Less: Goodwill		(3,879	)		(2,064	)
Less: Intangible assets		(1,921	)		(1,223	)
Tangible assets	$	2,919,516		$	2,802,553

Tangible common equity to tangible assets		5.22	%		5.26	%

Tier 1 common equity ratio

	March 31,			December 31,
(In thousands)	2011			2010
Shareholders' equity	$	191,015		$	183,348
Less: Goodwill		(3,879	)		(2,064	)
Less: Intangible assets		(1,921	)		(1,223	)
Less: Unrealized gains; Plus: Unrealized Losses		(244	)		573
Plus: Qualifying trust preferred securities		62,398			60,448
Other		1,352			747
Tier 1 capital	$	248,721		$	241,829
Less: Preferred stock		(32,707	)		(32,519	)
Less: Qualifying trust preferred securities		(62,398	)		(60,448	)
Tier 1 common equity	$	153,616		$	148,862

Total risk weighted assets determined in accordance with
prescribed regulatory requirements	$	2,045,886		$	2,019,885

Tier 1 common equity to risk weighted assets		7.51	%		7.37	%

Critical Accounting Policies
The impact and any associated risks related to the Company’s critical accounting policies on business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

New Accounting Standards
FASB ASU 2010-06, “Improving Disclosures about Fair Value Measurements” On January 1, 2011, the Company adopted new authoritative guidance under this ASU, which requires detailed Level 3 roll forward disclosure. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” On January 1, 2011, the Company adopted new authoritative guidance under this ASU which requires disclosures about activity that occurs during a reporting period. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2010-29, “Business Combinations (Topic 805)—Disclosure of Supplementary Pro Forma Information for Business Combinations” On January 1, 2011, the Company adopted new authoritative guidance under this ASU which provides clarification regarding the acquisition date that should be used for reporting the pro forma financial information disclosures required by Topic 805 when comparative financial statements are presented. ASU 2010-29 also requires entities to provide a description of the nature and amount of material, nonrecurring pro forma adjustments that are directly attributable to the business combination. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2011-01, “Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20” In January 2011, the FASB issued ASU 2011-01, which temporarily delays the effective date of the disclosures about troubled debt restructurings in ASU 2010-20. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The Company believes this ASU will not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2011-02, “Receivables (Topic 310) - A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring” In April 2011, the FASB issued ASU 2011-02, which provides clarification on whether a restructuring constitutes a troubled debt restricting and also clarifies the guidance on a creditor’s evaluation of whether it has granted a concession to the debtor and if the debtor is experiencing financial difficulties. The Company believes this ASU will not have a material impact on the Company’s consolidated financial statements.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures set forth in this item are qualified by the section captioned “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995” included in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and other cautionary statements set forth elsewhere in this report.

Market risk arises from exposure to changes in interest rates and other relevant market rate or price risk. The Company faces market risk in the form of interest rate risk through transactions other than trading activities. Market risk from these activities, in the form of interest rate risk, is measured and managed through a number of methods. The Company uses financial modeling techniques to measure interest rate risk. These techniques measure the sensitivity of future earnings due to changing interest rate environments. Guidelines established by the Bank’s Asset/Liability Management Committee and approved by the Bank’s Board of Directors are used to monitor exposure of earnings at risk. General interest rate movements are used to develop sensitivity as the Company feels it has no primary exposure to a specific point on the yield curve. These limits are based on the Company’s exposure to a 100 basis points and 200 basis points immediate and sustained parallel rate move, either upward or downward. In today’s low interest rate environment, the Company also monitors its exposure to immediate and sustained parallel rate increases of 300 basis points and 400 basis points.

Interest rate simulations for March 31, 2011 demonstrate that a rising rate environment will have a positive impact on net interest income.

The following table represents the Company’s estimated interest rate sensitivity and periodic and cumulative gap positions calculated as of March 31, 2011.

													Beyond
													5 years
													or no stated
(in thousands)	Year 1			Year 2			Year 3		Year 4		Year 5		maturity			Total
Interest-Earning Assets
Securities available for sale	$	100,902		$	94,376		$	71,192	$	51,310	$	44,630	$	119,579		$	481,989
Other investments		-			-			-		-		-		14,430			14,430
Interest-bearing deposits		187,556			-			-		-		-		-			187,556
Federal funds sold		1,464			-			-		-		-		-			1,464
Portfolio loans (1)		1,233,317			280,284			278,358		52,149		70,475		37,898			1,952,481
Loans held for sale		3,142			-			-		-		-		-			3,142
Total interest-earning assets	$	1,526,381		$	374,660		$	349,550	$	103,459	$	115,105	$	171,907		$	2,641,062

Interest-Bearing Liabilities
Savings, NOW and Money market deposits	$	1,150,950		$	-		$	-	$	-	$	-	$	-		$	1,150,950
Certificates of deposit		533,150			90,807			106,587		7,363		94,106		(545	)		831,468
Subordinated debentures		56,807			-			28,274		-		-		-			85,081
Other borrowings		118,198			7,000			-		-		10,000		70,000			205,198
Total interest-bearing liabilities	$	1,859,105		$	97,807		$	134,861	$	7,363	$	104,106	$	69,455		$	2,272,697

Interest-sensitivity GAP
GAP by period	$	(332,724	)	$	276,853		$	214,689	$	96,096	$	10,999	$	102,452		$	368,365
Cumulative GAP	$	(332,724	)	$	(55,871	)	$	158,818	$	254,914	$	265,913	$	368,365		$	368,365
Ratio of interest-earning assets to
interest-bearing liabilities
Periodic		0.82			3.83			2.59		14.05		1.11		2.48			1.16
Cumulative GAP as of March 31, 2011		0.82			0.97			1.08		1.12		1.12		1.16			1.16

(1) Adjusted for the impact of the interest rate swaps.

ITEM 4: CONTROLS AND PROCEDURES

As of March 31, 2011, under the supervision and with the participation of the Company’s Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2011, to ensure that information required to be disclosed in the Company’s periodic SEC filings is processed, recorded, summarized and reported when required. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There were no changes during the period covered by this Quarterly Report on Form 10-Q in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, those controls.

PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The following information supplements the discussion in Part I, Item 3 “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010:

As discussed in further detail below, the Bank, along with other co-defendants, including a former President and Chief Executive Officer of the Bank’s trust division (the “Former Trust President”), has been named as a defendant in two lawsuits filed by clients, or purported clients, of the Bank’s trust division who invested in promissory notes issued by Distinctive Properties (UK) Limited (“Distinctive Properties”), a company involved in the purchase and development of real estate in the United Kingdom.

Phil Rosemann, et. al. v. Martin Sigillito, Enterprise Bank & Trust, et. al., Case No. 4:10-CV-1165-LRR (pending in the United States District Court for the Eastern District of Missouri). On March 30, 2011, Enterprise Bank was named as a defendant in an existing lawsuit brought by approximately 78 plaintiffs against 38 other defendants, including the Former Trust President and 20 “john doe” defendants. The lawsuit concerns investments the plaintiffs allegedly made in certain promissory notes issued by Distinctive Properties (the “Distinctive Notes”), which plaintiffs allege were part of a multi-million dollar Ponzi scheme. Plaintiffs allege to have IRA custodial accounts at Enterprise Bank which hold the Distinctive Notes. Plaintiffs assert, among other things, that the Bank was negligent, breached its fiduciary duties and breached its contracts by allowing the Distinctive Notes to be renewed, improperly disbursing funds and allowing interest payments to be credited to the accounts without receipt of such payments. Plaintiffs also assert that the Bank, and certain other defendants including the Former Trust President, violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and conspired to violate RICO in connection with the sale of the Distinctive Notes to the plaintiffs. Plaintiffs are seeking in excess of $26,000,000 in damages from defendants, including the Bank, related to these claims as well as their costs and attorneys’ fees and trebled damages under RICO.

BJD, LLC and Barbara Dunning v. Enterprise Bank & Trust, et. al., Case No. 11SL-CC01331 (pending in the Circuit Court of the County of St. Louis, State of Missouri). On April 4, 2011, Barbara Dunning and an affiliated entity, BJD, LLC (“BJD”), filed a lawsuit against four defendants including the Bank and the Former Trust President relating to BJD’s investment in the Distinctive Notes. Plaintiffs allege that the Bank, and the other defendants, including the Former Trust President, breached their fiduciary duties and were negligent in allowing BJD to invest in the Distinctive Notes because the loan program was allegedly never funded and the assets of the borrower did not exist or were overvalued. Plaintiffs are seeking $811,875 in damages, 9% interest, punitive damages, attorneys’ fees and costs.

The Company is unable to estimate a reasonably possible loss for the cases described above because the proceedings are in early stages and there are significant factual issues to be determined and resolved. The Company denies Plaintiffs’ allegations and intends to vigorously defend the lawsuits.

ITEM 1A: RISK FACTORS

Please see the cautionary language regarding forward-looking statements in the introduction to Item 2 of Part I of this Report on Form 10-Q and Part I — Item 1A of our Report on Form 10-K for the fiscal year ended December 31, 2010, for information regarding risk factors. Other than the additional risk factors mentioned below, there are no material changes from the risk factors set forth in such Annual Report on Form 10-K.

We face potential risks from litigation brought against the Company and the Bank. We are from time to time involved in various lawsuits and legal proceedings. As discussed in “Legal Proceedings” in Part II, Item 1 of this Form 10-Q, the Bank, along with other co-defendants, including a former President and Chief Executive Officer of the Bank’s trust division, has been named as a defendant in two lawsuits filed by clients, or purported clients, of the Bank’s trust division who invested in promissory notes issued by Distinctive Properties (UK) Limited, a company involved in the purchase and development of real estate in the United Kingdom. In one of the lawsuits, the plaintiffs allege that the investments in the notes were part of a multi-million dollar Ponzi scheme. While we cannot with certainty determine the potential outcome of this or any other pending or threatened litigation against the Company or the Bank, litigation-related costs and any legal liability as a result of an adverse determination with respect to one or more of these legal proceedings could have a material adverse effect on our business, cash flows, financial position and results of operations and could cause us significant reputational harm, including without limitation as a result of negative publicity the Company may face even if it prevails in such legal proceedings, which could adversely affect our business prospects.

Recently enacted financial reform legislation and rules promulgated thereunder may adversely affect us. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), was signed into law by President Obama on July 21, 2010. The Dodd-Frank Act represents a comprehensive overhaul of the financial services industry within the United States, establishes the new federal Bureau of Consumer Financial Protection (the “BCFP”), and will require the BCFP and other federal agencies to implement many new rules.

Among the many requirements in the Dodd-Frank Act for new banking regulations is a requirement for new capital regulations to be adopted within 18 months. These regulations must be at least as stringent as, and may call for higher levels of capital than, current regulations. Generally, trust preferred securities will no longer be eligible as Tier 1 capital, but the Company’s currently outstanding trust preferred securities will be grandfathered and its currently outstanding TARP preferred securities will continue to qualify as Tier 1 capital.

Certain provisions of the Dodd-Frank Act are expected to have a near term impact on us. For example, one year after the date of its enactment, the Dodd-Frank Act eliminates the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest bearing checking accounts. Depending on competitive responses, this significant change to existing law could have an adverse impact on our interest expense. The Dodd-Frank Act also permanently increases the general limit on deposit insurance for banks to $250,000 and provides that non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2012.

The Dodd-Frank Act requires publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called "golden parachute" payments, and authorizes the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a company's proxy materials. The legislation also directs the federal banking regulators to issue rules prohibiting incentive compensation that encourages inappropriate risks.

The BCFP will have broad powers to promulgate and enforce new consumer protection regulations under the Dodd-Frank Act that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive acts and practices.”

The Dodd-Frank Act and the resulting regulations will likely affect the Company’s business and operations in other ways which are difficult to predict at this time. However, compliance with these new laws and regulations will result in additional costs, which may adversely impact the Company’s results of operations, financial condition or liquidity, any of which may impact the market price of the Company’s common stock.

ITEM 6: EXHIBITS

Exhibit
Number		Description
		Registrant hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of holders of each issue of long-term debt of Registrant and its consolidated subsidiaries.

*10.1		Purchase and Assumption Agreement dated January 7, 2011, by and between Enterprise Bank & Trust and the Federal Deposit Insurance Corporation as Receiver for Legacy Bank

*12.1		Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends

*31.1		Chief Executive Officer’s Certification required by Rule 13(a)-14(a).

*31.2		Chief Financial Officer’s Certification required by Rule 13(a)-14(a).

**32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002.

**32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

** Furnished herewith. Notwithstanding any incorporation of this Quarterly Statement on Form 10-Q in any other filing by the Registrant, Exhibits furnished herewith and designated with two (**) shall not be deemed incorporated by reference to any other filing unless specifically otherwise set forth herein or therein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri on the day of May 9, 2011.

	ENTERPRISE FINANCIAL SERVICES CORP

	By:	/s/ Peter F. Benoist
	Peter F. Benoist
	Chief Executive Officer

	By:	/s/ Frank H. Sanfilippo
	Frank H. Sanfilippo
	Chief Financial Officer

(f) United States Treasury tax and loan note option accounts, if any;

(g) liabilities for any acceptance or commercial letter of credit provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(h) liabilities for any "standby letters of credit" as defined in 12 C.F.R. Section 337.2(a) issued on the behalf of any Obligor of a Loan acquired hereunder by the Assuming Institution, but excluding any other standby letters of credit;

(i) duties and obligations assumed pursuant to this Agreement including without limitation those relating to the Failed Bank's Records, credit card business, debit card business, stored value and gift card business, overdraft protection plans, safe deposit business, safekeeping business, or trust business, if any; and

(j) liabilities, if any, for Commitments;

(k) liabilities, if any, for amounts owed to any Subsidiary of the Failed Bank acquired under Section 3.1;

(l) liabilities, if any, with respect to Qualified Financial Contracts;

(m) liabilities, if any, under any contract pursuant to which mortgage servicing is provided to the Failed Bank by others; and

(n) all asset-related offensive litigation liabilities and all asset-related defensive litigation liabilities, but only to the extent such liabilities relate to assets subject to a shared-loss agreement, and provided that all other defensive litigation and any class actions with respect to credit card business are retained by the Receiver.

2.2 Interest on Deposit Liabilities. The Assuming Institution agrees that, from and after Bank Closing, it will accrue and pay interest on Deposit liabilities assumed pursuant to Section 2.1 at a rate(s) it shall determine; provided, that for non-transaction Deposit liabilities such rate(s) shall not be less than the lowest rate offered by the Assuming Institution to its depositors for non-transaction deposit accounts. The Assuming Institution shall permit each depositor to withdraw, without penalty for early withdrawal, all or any portion of such depositor's Deposit, whether or not the Assuming Institution elects to pay interest in accordance with any deposit agreement formerly existing between the Failed Bank and such depositor; and further provided, that if such Deposit has been pledged to secure an obligation of the depositor or other party, any withdrawal thereof shall be subject to the terms of the agreement governing such pledge. The Assuming Institution shall give notice to such depositors as provided in Section 5.3 of the rate(s) of interest which it has determined to pay and of such withdrawal rights.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

2.3 Unclaimed Deposits. Fifteen (15) months following the Bank Closing Date, the Assuming Institution will provide the Receiver a listing of all deposit accounts, including the type of account, not claimed by the depositor. The Receiver will review the list and authorize the Assuming Institution to act on behalf of the Receiver to send a “Final Legal Notice” in a form substantially similar to Exhibit 2.3A to the owner(s) of the unclaimed deposits reminding them of the need to claim or arrange to continue their account(s) with the Assuming Institution. The Assuming Institution will send the “Final Legal Notice” to the depositors within thirty (30) days following notification of the Receiver’s authorization. The Assuming Institution will prepare an Affidavit of Mailing and will forward the Affidavit of Mailing to the Receiver after mailing out the “Final Legal Notice” in a form substantially similar to Exhibit 2.3B to the owner(s) of unclaimed deposit accounts.

If, within eighteen (18) months after Bank Closing, any depositor of the Failed Bank does not claim or arrange to continue such depositor’s Deposit assumed pursuant to Section 2.1 at the Assuming Institution, the Assuming Institution shall, within fifteen (15) Business Days after the end of such eighteen (18) month period, (i) refund to the Receiver the full amount of each such deposit (without reduction for service charges), (ii) provide to the Receiver a schedule of all such refunded Deposits in such form as may be prescribed by the Receiver, and (iii) assign, transfer, convey, and deliver to the Receiver, all right, title, and interest of the Assuming Institution in and to the Records previously transferred to the Assuming Institution and other records generated or maintained by the Assuming Institution pertaining to such Deposits. During such eighteen (18) month period, at the request of the Receiver, the Assuming Institution promptly shall provide to the Receiver schedules of unclaimed deposits in such form as may be prescribed by the Receiver.

2.4 Employee Plans. Except as provided in Section 4.12, the Assuming Institution shall have no liabilities, obligations or responsibilities under the Failed Bank's health care, bonus, vacation, pension, profit sharing, deferred compensation, 401K or stock purchase plans or similar plans, if any, unless the Receiver and the Assuming Institution agree otherwise subsequent to the date of this Agreement.

ARTICLE III
PURCHASE OF ASSETS

3.1 Assets Purchased by Assuming Institution. With the exception of certain assets expressly excluded in Sections 3.5 and 3.6, the Assuming Institution hereby purchases from the Receiver, and the Receiver hereby sells, assigns, transfers, conveys, and delivers to the Assuming Institution, all right, title, and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing. Assets are purchased hereunder by the Assuming Institution subject to all liabilities for indebtedness collateralized by Liens affecting such Assets to the extent provided in Section 2.1.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

3.2 Asset Purchase Price.

(a) All Assets and assets of the Failed Bank subject to an option to purchase by the Assuming Institution shall be purchased for the amount, or the amount resulting from the method specified for determining the amount, as specified on Schedule 3.2, except as otherwise may be provided herein. Any Asset, asset of the Failed Bank subject to an option to purchase or other asset purchased for which no purchase price is specified on Schedule 3.2 or otherwise herein shall be purchased at its Book Value. Loans or other assets charged off the Accounting Records of the Failed Bank before the Bid Valuation Date shall be purchased at a price of zero.

(b) The purchase price for securities (other than the capital stock of any Acquired Subsidiary, Shared-Loss Securities, and FHLB stock) purchased under Section 3.1 by the Assuming Institution shall be the market value thereof as of Bank Closing, which market value shall be (i) the market price for each such security quoted at the close of the trading day effective on Bank Closing as published electronically by Bloomberg, L.P., or alternatively, at the discretion of the Receiver, IDC/Financial Times (FT) Interactive Data; (ii) provided, that if such market price is not available for any such security, the Assuming Institution will submit a bid for each such security within three days of notification/bid request by the Receiver (unless a different time period is agreed to by the Assuming Institution and the Receiver) and the Receiver, in its sole discretion will accept or reject each such bid; and (iii) further provided in the absence of an acceptable bid from the Assuming Institution, each such security shall not pass to the Assuming Institution and shall be deemed to be an excluded asset hereunder.

(c) Qualified Financial Contracts shall be purchased at market value determined in accordance with the terms of Exhibit 3.2(c). Any costs associated with such valuation shall be shared equally by the Receiver and the Assuming Institution.

3.3 Manner of Conveyance; Limited Warranty; Nonrecourse; Etc. THE CONVEYANCE OF ALL ASSETS, INCLUDING REAL AND PERSONAL PROPERTY INTERESTS, PURCHASED BY THE ASSUMING INSTITUTION UNDER THIS AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER'S DEED OR RECEIVER'S BILL OF SALE, "AS IS", "WHERE IS", WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, ENFORCEABILITY, COLLECTIBILITY, DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), OR ANY OTHER MATTERS.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

3.4 Puts of Assets to the Receiver.

(a) Puts Within 30 Days After Bank Closing. During the thirty (30)-day period following Bank Closing and only during such period (which thirty (30)-day period may be extended in writing in the sole absolute discretion of the Receiver for any Loan), in accordance with this Section 3.4, the Assuming Institution shall be entitled to require the Receiver to purchase any Deposit Secured Loan transferred to the Assuming Institution pursuant to Section 3.1 which is not fully secured by Assumed Deposits or deposits at other insured depository institutions due to either insufficient Assumed Deposit or deposit collateral or deficient documentation regarding such collateral; provided with regard to any Deposit Secured Loan secured by an Assumed Deposit, no such purchase may be required until any Deposit setoff determination, whether voluntary or involuntary, has been made; and, at the end of the thirty (30)-day period following Bank Closing and at that time only, in accordance with this Section 3.4, the Assuming Institution shall be entitled to require the Receiver to purchase any remaining overdraft transferred to the Assuming Institution pursuant to 3.1 which both was made after the Bid Valuation Date and was not made pursuant to an overdraft protection plan or similar extension of credit.

Notwithstanding the foregoing, the Assuming Institution shall not have the right to require the Receiver to purchase any Loan if (i) the Obligor with respect to such Loan is an Acquired Subsidiary, or (ii) the Assuming Institution has:

	(A)		made any advance in accordance with the terms of a Commitment or otherwise with respect to such Loan;

	(B)		taken any action that increased the amount of a Related Liability with respect to such Loan over the amount of such liability immediately prior to the time of such action;

	(C)		created or permitted to be created any Lien on such Loan which secures indebtedness for money borrowed or which constitutes a conditional sales agreement, capital lease or other title retention agreement;

	(D)		entered into, agreed to make, grant or permit, or made, granted or permitted any modification or amendment to, any waiver or extension with respect to, or any renewal, refinancing or refunding of, such Loan or related Credit Documents or collateral, including, without limitation, any act or omission which diminished such collateral; or

	(E)		sold, assigned or transferred all or a portion of such Loan to a third party (whether with or without recourse).

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

The Assuming Institution shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Asset, as provided in Section 12.4.

(b) Puts Prior to the Settlement Date. During the period from the Bank Closing Date to and including the Business Day immediately preceding the Settlement Date, the Assuming Institution shall be entitled to require the Receiver to purchase any Asset which the Assuming Institution can establish is evidenced by forged or stolen instruments as of the Bank Closing Date; provided, that, the Assuming Institution shall not have the right to require the Receiver to purchase any such Asset with respect to which the Assuming Institution has taken any action referred to in Section 3.4(a)(ii) with respect to such Asset. The Assuming Institution shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Asset, as provided in Section 12.4.

(c) Notices to the Receiver. In the event that the Assuming Institution elects to require the Receiver to purchase one or more Assets, the Assuming Institution shall deliver to the Receiver a notice (a "Put Notice") which shall include:

	(i)		a list of all Assets that the Assuming Institution requires the Receiver to purchase;

	(ii)		a list of all Related Liabilities with respect to the Assets identified pursuant to (i) above; and

	(iii)		a statement of the estimated Repurchase Price of each Asset identified pursuant to (i) above as of the applicable Put Date.

Such notice shall be in the form prescribed by the Receiver or such other form to which the Receiver shall consent. As provided in Section 9.6, the Assuming Institution shall deliver to the Receiver such documents, Credit Files and such additional information relating to the subject matter of the Put Notice as the Receiver may request and shall provide to the Receiver full access to all other relevant books and records.

(d) Purchase by Receiver. The Receiver shall purchase Assets that are specified in the Put Notice and shall assume Related Liabilities with respect to such Assets, and the transfer of such Assets and Related Liabilities shall be effective as of a date determined by the Receiver which date shall not be later than thirty (30) days after receipt by the Receiver of the Put Notice (the "Put Date").

(e) Purchase Price and Payment Date. Each Asset purchased by the Receiver pursuant to this Section 3.4 shall be purchased at a price equal to the Repurchase Price of such Asset less the Related Liability Amount applicable to such Asset, in each case determined as of the applicable Put Date. If the difference between such Repurchase Price and such Related Liability Amount is positive, then the Receiver shall pay to the Assuming Institution the amount of such difference; if the difference between such amounts is negative, then the Assuming Institution shall pay to the Receiver the amount of such difference. The Assuming Institution or the Receiver, as the case may be, shall pay the purchase price determined pursuant to this Section 3.4(d) not later than the twentieth (20th) Business Day following the applicable Put Date, together with interest on such amount at the Settlement Interest Rate for the period from and including such Put Date to and including the day preceding the date upon which payment is made.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

(f) Servicing. The Assuming Institution shall administer and manage any Asset subject to purchase by the Receiver in accordance with usual and prudent banking standards and business practices until such time as such Asset is purchased by the Receiver.

(g) Reversals. In the event that the Receiver purchases an Asset (and assumes the Related Liability) that it is not required to purchase pursuant to this Section 3.4, the Assuming Institution shall repurchase such Asset (and assume such Related Liability) from the Receiver at a price computed so as to achieve the same economic result as would apply if the Receiver had never purchased such Asset pursuant to this Section 3.4.

3.5 Assets Not Purchased by Assuming Institution. The Assuming Institution does not purchase, acquire or assume, or (except as otherwise expressly provided in this Agreement) obtain an option to purchase, acquire or assume under this Agreement:

(a) any financial institution bonds, banker's blanket bonds, or public liability, fire, extended coverage insurance policy, bank owned life insurance or any other insurance policy of the Failed Bank, or premium refund, unearned premium derived from cancellation, or any proceeds payable with respect to any of the foregoing;

(b) any interest, right, action, claim, or judgment against (i) any officer, director, employee, accountant, attorney, or any other Person employed or retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to Bank Closing arising out of any act or omission of such Person in such capacity, (ii) any underwriter of financial institution bonds, banker's blanket bonds or any other insurance policy of the Failed Bank, (iii) any shareholder or holding company of the Failed Bank, or (iv) any other Person whose action or inaction may be related to any loss (exclusive of any loss resulting from such Person's failure to pay on a Loan made by the Failed Bank) incurred by the Failed Bank; provided, that for the purposes hereof, the acts, omissions or other events giving rise to any such claim shall have occurred on or before Bank Closing, regardless of when any such claim is discovered and regardless of whether any such claim is made with respect to a financial institution bond, banker's blanket bond, or any other insurance policy of the Failed Bank in force as of Bank Closing;

(d) legal or equitable interests in tax receivables of the Failed Bank, if any, including any claims arising as a result of the Failed Bank having entered into any agreement or otherwise being joined with another Person with respect to the filing of tax returns or the payment of taxes;

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

(e) amounts reflected on the Accounting Records of the Failed Bank as of Bank Closing as a general or specific loss reserve or contingency account, if any;

(f) leased or owned Bank Premises and leased or owned Furniture and Equipment and Fixtures and Data Processing Equipment located on leased or owned Bank Premises, if any; provided, that the Assuming Institution does obtain an option under Section 4.6, Section 4.7 or Section 4.8, as the case may be, with respect thereto;

(g) owned Bank Premises which the Receiver, in its discretion, determines may contain environmentally hazardous substances;

(h) any "goodwill," as such term is defined in the instructions to the report of condition prepared by banks examined by the Corporation in accordance with 12 C.F.R. Section 304.3, and other intangibles (other than intellectual property);

(i) any criminal restitution or forfeiture orders issued in favor of the Failed Bank;

(j) reserved;

(k) assets essential to the Receiver in accordance with Section 3.6;

(l) the securities listed on the attached Schedule 3.5(l);

(m) reserved;

(n) prepaid accounts associated with any contract or agreement that the Assuming Institution either does not directly assume pursuant to the terms of this Agreement nor has an option to assume under Section 4.8;

(o) except with respect to any Federal Home Loan Bank, any contract pursuant to which the Failed Bank provides mortgage servicing for others; and

(p) loans described on Schedule 3.5(p).

3.6 Retention or Repurchase of Assets Essential to Receiver.

(a) The Receiver may refuse to sell to the Assuming Institution, or the Assuming Institution agrees, at the request of the Receiver set forth in a written notice to the Assuming Institution, to assign, transfer, convey, and deliver to the Receiver all of the Assuming Institution's right, title and interest in and to, any Asset or asset essential to the Receiver as determined by the Receiver in its discretion (together with all Credit Documents evidencing or pertaining thereto), which may include any Asset or asset that the Receiver determines to be:

(i)

made to an officer, director, or other Person engaging in the affairs of the Failed Bank, its Subsidiaries or Affiliates or any related entities of any of the foregoing;

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

	(ii)		the subject of any investigation relating to any claim with respect to any item described in Section 3.5(a) or (b), or the subject of, or potentially the subject of, any legal proceedings;

	(iii)		made to a Person who is an Obligor on a loan owned by the Receiver or the Corporation in its corporate capacity or its capacity as receiver of any institution;

	(iv)		secured by collateral which also secures any asset owned by the Receiver; or

	(v)		related to any asset of the Failed Bank not purchased by the Assuming Institution under this Article III or any liability of the Failed Bank not assumed by the Assuming Institution under Article II.

(b) Each such Asset or asset purchased by the Receiver shall be purchased at a price equal to the Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Asset or asset, in each case determined as of the date of the notice provided by the Receiver pursuant to Section 3.6(a). The Receiver shall pay the Assuming Institution not later than the twentieth (20th) Business Day following receipt of related Credit Documents and Credit Files together with interest on such amount at the Settlement Interest Rate for the period from and including the date of receipt of such documents to and including the day preceding the day on which payment is made. The Assuming Institution agrees to administer and manage each such Asset or asset in accordance with usual and prudent banking standards and business practices until each such Asset or asset is purchased by the Receiver. All transfers with respect to Asset or assets under this Section 3.6 shall be made as provided in Section 9.6. The Assuming Institution shall transfer all such Asset or assets and Related Liabilities to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Asset or asset, as provided in Section 12.4.

3.7 Receiver’s Offer to Sell Withheld Loans. For the period of 30 days commencing the day after the Bank Closing Date, the Receiver may sell, in its sole discretion, and the Assuming Institution, may purchase, in its sole discretion, at Book Value as of the Bank Closing Date, any Loans initially withheld from sale to the Assuming Institution pursuant to Sections 3.5 or 3.6 of this Agreement. Except for the sales price, Loans sold under this section will be treated as if initially sold under Section 3.1 of this Agreement, and will be subject to all relevant terms of this Agreement as similarly situated Loans sold and transferred pursuant to this Agreement, provided that, no Loan shall be a Shared Loss Loan pursuant to the Shared Loss Agreements as defined in Section 4.15 hereof if it does not meet the definition of Shared Loss Loan in the applicable Shared Loss Agreement. Payment for Loans sold under this section will be handled through the Settlement process.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

ARTICLE IV
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS

The Assuming Institution agrees with the Receiver and the Corporation as follows:

4.1 Continuation of Banking Business. For the period commencing the first banking Business Day after Bank Closing and ending no earlier than the first anniversary of Bank Closing, the Assuming Institution will provide full service banking in the trade area of the Failed Bank. Thereafter, the Assuming Institution may cease providing such banking services in the trade area of the Failed Bank, provided the Assuming Institution has received all necessary regulatory approvals. At the option of the Assuming Institution, such banking services may be provided at any or all of the Bank Premises, or at other premises within such trade area. The trade area shall be determined by the Receiver. For the avoidance of doubt, the foregoing shall not restrict the Assuming Institution from opening, closing or selling branches upon receipt of the necessary regulatory approvals, if the Assuming Institution or its successors continue to provide banking services in the trade area. Assuming Institution will pay to the Receiver, upon the sale of a branch or branches within the year following the date of this agreement, fifty percent (50%) of any franchise premium in excess of the franchise premium paid by the Assuming Institution with respect to such branch or branches.

4.2 Agreement with Respect to Credit Card Business. The Assuming Institution agrees to honor and perform, from and after Bank Closing, all duties and obligations with respect to the Failed Bank's credit card business (including issuer or merchant acquirer) debit card business, stored value and gift card business, and/or processing related to credit cards, if any, and assumes all outstanding extensions of credit or balances with respect to these lines of business.

4.3 Agreement with Respect to Safe Deposit Business. The Assuming Institution assumes and agrees to discharge, from and after Bank Closing, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank and to maintain all of the necessary facilities for the use of such boxes by the renters thereof during the period for which such boxes have been rented and the rent therefore paid to the Failed Bank, subject to the provisions of the rental agreements between the Failed Bank and the respective renters of such boxes; provided, that the Assuming Institution may relocate the Safe Deposit Boxes of the Failed Bank to any office of the Assuming Institution located in the trade area of the Failed Bank. The Safe Deposit Boxes shall be located and maintained in the trade area of the Failed Bank for a minimum of one year from Bank Closing. The trade area shall be determined by the Receiver. Fees related to the safe deposit business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Institution.

4.4 Agreement with Respect to Safekeeping Business. The Receiver transfers, conveys and delivers to the Assuming Institution and the Assuming Institution accepts all securities and other items, if any, held by the Failed Bank in safekeeping for its customers as of Bank Closing. The Assuming Institution assumes and agrees to honor and discharge, from and after Bank Closing, the duties and obligations of the Failed Bank with respect to such securities and items held in safekeeping. The Assuming Institution shall be entitled to all rights and benefits heretofore accrued or hereafter accruing with respect thereto. The Assuming Institution shall provide to the Receiver written verification of all assets held by the Failed Bank for safekeeping within sixty (60) days after Bank Closing. The assets held for safekeeping by the Failed Bank shall be held and maintained by the Assuming Institution in the trade area of the Failed Bank for a minimum of one year from Bank Closing. At the option of the Assuming Institution, the safekeeping business may be provided at any or all of the Bank Premises, or at other premises within such trade area. The trade area shall be determined by the Receiver. Fees related to the safekeeping business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Institution.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

4.5 Agreement with Respect to Trust Business.

(a) The Assuming Institution shall, without further transfer, substitution, act or deed, to the full extent permitted by law, succeed to the rights, obligations, properties, assets, investments, deposits, agreements, and trusts of the Failed Bank under trusts, executorships, administrations, guardianships, and agencies, and other fiduciary or representative capacities, all to the same extent as though the Assuming Institution had assumed the same from the Failed Bank prior to Bank Closing; provided, that any liability based on the misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business is not assumed hereunder.

(b) The Assuming Institution shall, to the full extent permitted by law, succeed to, and be entitled to take and execute, the appointment to all executorships, trusteeships, guardianships and other fiduciary or representative capacities to which the Failed Bank is or may be named in wills, whenever probated, or to which the Failed Bank is or may be named or appointed by any other instrument.

(c) In the event additional proceedings of any kind are necessary to accomplish the transfer of such trust business, the Assuming Institution agrees that, at its own expense, it will take whatever action is necessary to accomplish such transfer. The Receiver agrees to use reasonable efforts to assist the Assuming Institution in accomplishing such transfer.

(d) The Assuming Institution shall provide to the Receiver written verification of the assets held in connection with the Failed Bank's trust business within sixty (60) days after Bank Closing.

4.6 Agreement with Respect to Bank Premises.

(a) Option to Purchase. Subject to Section 3.5, the Receiver hereby grants to the Assuming Institution an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to purchase any or all owned Bank Premises, including all Fixtures, Furniture and Equipment located on the Bank Premises. The Assuming Institution shall give written notice to the Receiver within the option period of its election to purchase or not to purchase any of the owned Bank Premises. Any purchase of such premises shall be effective as of the date of Bank Closing and such purchase shall be consummated as soon as practicable thereafter, and in no event later than the Settlement Date. If the Assuming Institution gives notice of its election not to purchase one or more of the owned Bank Premises within seven (7) days of Bank Closing, then, not withstanding any other provision of this Agreement to the contrary, the Assuming Institution shall not be liable for any of the costs or fees associated with appraisals for such Bank Premises and associated Fixtures, Furniture and Equipment.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

(b) Option to Lease. The Receiver hereby grants to the Assuming Institution an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to cause the Receiver to assign to the Assuming Institution any or all leases for leased Bank Premises, if any, which have been continuously occupied by the Assuming Institution from Bank Closing to the date it elects to accept an assignment of the leases with respect thereto to the extent such leases can be assigned; provided, that the exercise of this option with respect to any lease must be as to all premises or other property subject to the lease. If an assignment cannot be made of any such leases, the Receiver may, in its discretion, enter into subleases with the Assuming Institution containing the same terms and conditions provided under such existing leases for such leased Bank Premises or other property. The Assuming Institution shall give notice to the Receiver within the option period of its election to accept or not to accept an assignment of any or all leases (or enter into subleases or new leases in lieu thereof). The Assuming Institution agrees to assume all leases assigned (or enter into subleases or new leases in lieu thereof) pursuant to this Section 4.6. If the Assuming Institution gives notice of its election not to accept an assignment of a lease for one or more of the leased Bank Premises within seven (7) days of Bank Closing, then, not withstanding any other provision of this Agreement to the contrary, the Assuming Institution shall not be liable for any of the costs or fees associated with appraisals for the Fixtures, Furniture and Equipment located on such leased Bank Premises.

(c) Facilitation. The Receiver agrees to facilitate the assumption, assignment or sublease of leases or the negotiation of new leases by the Assuming Institution; provided, that neither the Receiver nor the Corporation shall be obligated to engage in litigation, make payments to the Assuming Institution or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation or commit to any other obligations to third parties.

(d) Occupancy. The Assuming Institution shall give the Receiver fifteen (15) days prior written notice of its intention to vacate prior to vacating any leased Bank Premises with respect to which the Assuming Institution has not exercised the option provided in Section 4.6(b). Any such notice shall be deemed to terminate the Assuming Institution's option with respect to such leased Bank Premises.

(e) Occupancy Costs.

(i) The Assuming Institution agrees to pay to the Receiver, or to appropriate third parties at the direction of the Receiver, during and for the period of any occupancy by it of (x) owned Bank Premises the market rental value, as determined by the appraiser selected in accordance with the definition of Fair Market Value, and all operating costs, and (y) leased Bank Premises, all operating costs with respect thereto and to comply with all relevant terms of applicable leases entered into by the Failed Bank, including without limitation the timely payment of all rent. Operating costs include, without limitation all taxes, fees, charges, utilities, insurance and assessments, to the extent not included in the rental value or rent. If the Assuming Institution elects to purchase any owned Bank Premises in accordance with Section 4.6(a), the amount of any rent paid (and taxes paid to the Receiver which have not been paid to the taxing authority and for which the Assuming Institution assumes liability) by the Assuming Institution with respect thereto shall be applied as an offset against the purchase price thereof.

Module 1 – Whole Bank w/ Loss Share – P&A		Legacy Bank
Version 2.11B		Scottsdale, Arizona
October 8, 2010

ARTICLE I		DEFINITIONS	2

ARTICLE II		ASSUMPTION OF LIABILITIES	9

	2.1	Liabilities Assumed by Assuming Institution	9
	2.2	Interest on Deposit Liabilities	10
	2.3	Unclaimed Deposits	11
	2.4	Employee Plans	11

ARTICLE III		PURCHASE OF ASSETS	11

	3.1	Assets Purchased by Assuming Institution	11
	3.2	Asset Purchase Price	12
	3.3	Manner of Conveyance; Limited Warranty; Nonrecourse; Etc.	12
	3.4	Puts of Assets to the Receiver	13
	3.5	Assets Not Purchased by Assuming Institution	15
	3.6	Retention or Repurchase of Assets Essential to Receiver	16
	3.7	Receiver’s Offer to Sell Withheld Loans	17

ARTICLE IV		ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS	18

	4.1	Continuation of Banking Business	18
	4.2	Agreement with Respect to Credit Card Business	18
	4.3	Agreement with Respect to Safe Deposit Business	18
	4.4	Agreement with Respect to Safekeeping Business	18
	4.5	Agreement with Respect to Trust Business	19
	4.6	Agreement with Respect to Bank Premises	19
	4.7	Agreement with Respect to Data Processing Equipment and Leases	23
	4.8	Agreement with Respect to Certain Existing Agreements	24
	4.9	Informational Tax Reporting	25
	4.10	Insurance	25
	4.11	Office Space for Receiver and Corporation	25
	4.12	Agreement with Respect to Continuation of Group Health Plan Coverage for Former Employees	26
	4.13	Agreement with Respect to Interim Asset Servicing	27
	4.14	Reserved	27
	4.15	Agreement with Respect to Loss Sharing	27

ARTICLE V		DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK	27

	5.1	Payment of Checks, Drafts and Orders	27
	5.2	Certain Agreements Related to Deposits	28
	5.3	Notice to Depositors	28

ARTICLE VI		RECORDS	28

	6.1	Transfer of Records	28
	6.2	Delivery of Assigned Records	28
	6.3	Preservation of Records	29
	6.4	Access to Records; Copies	29

ARTICLE VII		BID; INITIAL PAYMENT	29

ARTICLE VIII		ADJUSTMENTS	30

	8.1	Pro Forma Statement	30
	8.2	Correction of Errors and Omissions; Other Liabilities	30
	8.3	Payments	31
	8.4	Interest	31
	8.5	Subsequent Adjustments	31

ARTICLE IX		CONTINUING COOPERATION	31

	9.1	General Matters	31
	9.2	Additional Title Documents	31
	9.3	Claims and Suits	32
	9.4	Payment of Deposits	32
	9.5	Withheld Payments	32
	9.6	Proceedings with Respect to Certain Assets and Liabilities	33
	9.7	Information	33

ARTICLE X		CONDITION PRECEDENT	33

ARTICLE XI		REPRESENTATIONS AND WARRANTIES OF THE ASSUMING INSTITUTION	34

ARTICLE XII		INDEMNIFICATION	35

	12.1	Indemnification of Indemnitees	35
	12.2	Conditions Precedent to Indemnification	38
	12.3	No Additional Warranty	39
	12.4	Indemnification of Receiver and Corporation	39
	12.5	Obligations Supplemental	40
	12.6	Criminal Claims	40
	12.7	Limited Guaranty of the Corporation	40
	12.8	Subrogation	40

ARTICLE XIII		MISCELLANEOUS	41

	13.1	Entire Agreement	41
	13.2	Headings	41
	13.3	Counterparts	41
	13.4	Governing Law	41
	13.5	Successors	41
	13.6	Modification; Assignment	41
	13.7	Notice	41
	13.8	Manner of Payment	42
	13.9	Costs, Fees and Expenses	43
	13.10	Waiver	43
	13.11	Severability	43
	13.12	Term of Agreement	43
	13.13	Survival of Covenants, Etc.	43

SCHEDULES

	2.1(a)	Excluded Deposit Liability Accounts
	3.2	Purchase Price of Assets or assets
	3.5(l)	Excluded Securities
	3.5(p)	Excluded Loans
	4.15A	Single Family Shared-Loss Loans
	4.15B	Commercial Shared-Loss Loans
	4.15C	Shared-Loss Securities
	4.15D	Shared-Loss Subsidiaries
	6.3	Data Retention Catalog
	7	Calculation of Deposit Premium

EXHIBITS

	2.3A	Final Notice Letter
	2.3B	Affidavit of Mailing
	3.2(c)	Valuation of Certain Qualified Financial Contracts
	4.13	Interim Asset Servicing Arrangement
	4.15A	Single Family Shared-Loss Agreement
	4.15B	Commercial Shared-Loss Agreement

Attention:	Frank H. Sanfilippo,
	Executive Vice President and Chief Financial Officer

with a copy to:	Deborah N. Barstow,
	Senior Vice President and Controller

In addition, with respect to notices under Article 4.6:
cc:	Federal Deposit Insurance Corporation, Receiver of Legacy Bank
	1601 Bryan Street, Suite 1700
	Dallas, TX 75201
	Attention: Resolutions and Closings Manager, ORE Department

In addition, with respect to notice under Article XII:
cc:	Federal Deposit Insurance Corporation, Receiver of Legacy Bank
	40 Pacifica
	Irvine, CA 92618
	Attention: Managing Counsel

FEDERAL DEPOSIT INSURANCE CORPORATION,
RECEIVER OF LEGACY BANK,
SCOTTSDALE, ARIZONA


BY:	/s/ Christina Sarrade
NAME:	Christina Sarrade
TITLE:	Receiver-in-Charge

ENTERPRISE BANK & TRUST

BY:	/s/ John G. Barry
NAME:	John G. Barry
TITLE:	Executive Vice President

	Three months
	ended			Years ended December 31,
($ in thousands)	March 31, 2011			2010			2009 (2)			2008			2007			2006
Earnings (1):
Income (loss) before income taxes	$	10,810		$	13,328		$	(48,366	)	$	11,899		$	24,277		$	21,107
Add: Fixed charges from below		8,764			35,479			51,396			60,454			69,243			47,308
Earnings including interest expense on deposits (a)	$	19,574		$	48,807		$	3,030		$	72,353		$	93,520		$	68,415

Less: interest expense on deposits		(5,689	)		(22,867	)		(30,202	)		(39,921	)		(52,864	)		(37,832	)
Earnings excluding interest expense on deposits (b)	$	13,885		$	25,940		$	(27,173	)	$	32,433		$	40,656		$	30,583

Fixed charges (1):
Interest on deposits	$	5,689		$	22,867		$	30,202		$	39,921		$	52,864		$	37,832
Interest on borrowings		2,135			9,544			18,642			20,418			16,378			9,476
TARP preferred stock dividends (pre-tax)		941			3,068			2,551			116			-			-
Fixed charges including interest on deposits (c)	$	8,764		$	35,479		$	51,396		$	60,454		$	69,243		$	47,308

Less: interest expense on deposits		(5,689	)		(22,867	)		(30,202	)		(39,921	)		(52,864	)		(37,832	)
Fixed charges excluding interest expense on deposits (d)	$	3,075		$	12,612		$	21,193		$	20,534		$	16,378		$	9,476

Ratio of earnings to combined fixed charges
Excluding interest on deposits (b/d) (3)		4.52x			2.06x			-1.28x			1.58x			2.48x			3.23x
Including interest on deposits (a/c)		2.23x			1.38x			0.06x			1.20x			1.35x			1.45x

Ratio of earnings to combined fixed charges and
preferred dividends:
Excluding interest on deposits (b/d) (3)		6.06x			2.40x			-1.59x			1.58x			2.48x			3.23x
Including interest on deposits (a/c)		2.38x			1.41x			0.01x			1.20x			1.35x			1.45x

(1)		As defined in Item 503(d) of Regulation S-K.

(2)		Due to the Company's $46.7 million loss (including $45.4 million of goodwill impairment charges) for the year ended December 31, 2009, the ratio coverage was less than 1:1. The Company would have had to generate additional earnings of $48.4 million to achieve a coverage ratio of 1:1.

(3)		The ratio of earnings to fixed charges and preferred dividends, excluding interest on deposits, is being provided as an additional measure to provide comparability to the ratios disclosed by all other issuers of debt securities.

By: /s/ Peter F. Benoist	Date: May 9, 2011
Peter F. Benoist
Chief Executive Officer