Market Overview

Enterprise Financial Reports Second Quarter 2016 Results

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Reported Highlights

  • Record net income of $0.61 per diluted share, increased 13% over the linked quarter, and 42% compared to the second quarter of 2015
  • Portfolio loans grew 7% on an annualized basis, and 13% from the prior year period
  • Sixth consecutive quarterly cash dividend increase to $0.11 per share in the third quarter of 2016 from $0.10 per share in the second quarter of 2016

Core Highlights1

  • Core net income of $0.49 per diluted share, increased 4% from the linked quarter, and increased 29% compared to the prior year period
  • Core net interest income increased 2% in the linked quarter, and 15% from the prior year period
  • Core efficiency ratio of 56.3% for the quarter

ST. LOUIS, July 28, 2016 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ: EFSC) (the "Company") reported net income of $12.4 million for the quarter ended June 30, 2016, an increase of $1.3 million, or 12%, as compared to the linked first quarter.  Net income per diluted share was $0.61 for the quarter ended June 30, 2016, an increase of $0.07 compared to $0.54 per diluted share for the linked first quarter.  The increase from the linked quarter resulted from an increase in net interest income and higher noninterest income.  Second quarter 2016 net income increased 42% compared to $8.7 million for the prior year period, and diluted earnings per share increased 42% from $0.43 reported a year ago.  The increase in net income over the prior year was largely due to an increase in net interest income from strong loan growth, and a decrease in provision for loan losses on portfolio loans from improved credit quality.

On a core basis1, the Company reported net income of $9.9 million, or $0.49 per diluted share, for the quarter ended June 30, 2016, compared to $9.4 million, or $0.47 per diluted share, in the linked first quarter.  Second quarter 2016 core net income increased 29% from $7.7 million for the prior year period, and diluted core earnings per share grew 29% from $0.38 for the prior year period.  The increase for both periods was due to higher levels of net interest income from continued growth in earning asset balances, while the year over year results also benefited from lower provision for loan losses, partially offset by higher expenses to support revenue growth.  Core net income for the quarter excludes the impact of Purchased credit impaired ("PCI") loan balances in excess of the contractual interest, executive severance of $0.3 million incurred in the second quarter, and other non-core expenses of $0.3 million.  

The Company's Board of Directors approved an additional one cent per common share increase in the Company's quarterly dividend to $0.11 per common share from $0.10 for the third quarter of 2016, payable on September 30, 2016 to shareholders of record as of September 15, 2016.

Peter Benoist, President and CEO, commented, "We're pleased to report another strong quarter at Enterprise.  Second quarter reported earnings set a new record for the company, representing a 1.33% return on average assets and 14.91% return on average tangible common equity.  Core earnings continued to grow robustly, rising 29% over the prior year period."

"Portfolio loans grew 13% over the past twelve months and 7% annualized during the quarter," said Benoist. "Our guidance for loan growth remains at 10% or higher for the year.  Credit quality remained favorable, with both nonperforming loan and nonperforming asset ratios below 50 basis points."

"From a broader perspective, the earnings results for this quarter, like the quarters that preceded it, illustrate the transformation in Enterprise's core earnings power," noted Benoist.  "In each of the past four quarters, core return on assets has exceeded one percent.  Over the past eight quarters we've grown core net interest income 25% while holding noninterest expense increases to a modest 5%. This powerful operating leverage has driven our core earnings 58% higher, positioning Enterprise very well at mid-year with a strong balance sheet, growing earnings power, and a highly energized team."

Net Interest Income

Net interest income in the second quarter increased $1.4 million from the linked first quarter, and $4.5 million from the prior year period due to strong growth in portfolio loan balances and increases in net interest margin discussed below.  Net interest margin, on a fully tax equivalent basis, was 3.93% for the second quarter, compared to 3.87% in the linked first quarter, and 3.85% in the second quarter of 2015.

The yield on Portfolio loans improved to 4.20% in the second quarter, an increase of one basis point from the linked first quarter, and three basis points higher than the prior year period.  In the second quarter of 2016, the yield on PCI loans was 30.07%, as compared to 22.67% in the linked quarter, and 18.33% in the prior year period.

The cost of interest-bearing liabilities increased two basis points to 0.50% in the second quarter of 2016 from 0.48% in the linked first quarter, but it was four basis points lower than 0.54% in the second quarter of 2015.  The increase from the linked quarter was due to a shift in the composition of deposits.  The decrease from the prior year period was primarily from lower rates on time deposit balances and a more favorable funding mix.

Core net interest margin1, defined as the net interest margin (fully tax equivalent), including contractual interest on PCI loans but excluding the incremental accretion on these loans, was as follows:

  
 For the Quarter ended
($ in thousands)June 30,
 2016
 March 31,
 2016
 December 31,
 2015
 September 30,
 2015
 June 30,
 2015
Core net interest margin13.52% 3.54% 3.50% 3.41% 3.46%
Core net interest income130,212  29,594  28,667  27,087  26,277 
               

Core net interest income1 increased 15% compared to the prior year period due to strong portfolio loan growth and improvement in net interest margin.  Core net interest income increased by $0.6 million to $30.2 million in the linked quarter, and Core net interest margin1 decreased two basis points to 3.52% primarily due to runoff of PCI loan balances.  Core net interest margin expanded six basis points from the prior year quarter, primarily due to loan growth improving the earning asset mix, lower funding costs, and the aforementioned increase in the yield on portfolio loans.  The Company continues to manage its balance sheet to grow core net interest income and expects to maintain core net interest margin over the coming quarters; however, pressure on funding costs and continued reductions in PCI loan balances could negate the expected trends in core net interest margin.

Portfolio loans

Portfolio loans increased to $2.9 billion at June 30, 2016, increasing $51 million, or 7% on an annualized basis, when compared to the linked quarter.  On a year over year basis, portfolio loans increased $341 million, or 13%.  The Company continues to expect loan growth at or above 10% for 2016.

During the quarter ended June 30, 2016, the Company grew loans in Commercial real estate, Residential real estate, and Consumer and other.  However, Commercial and industrial ("C&I") loans decreased $5 million during the second quarter of 2016 compared to the linked first quarter and represented 53% of the Company's loan portfolio at June 30, 2016.  Nonetheless, C&I loans remain the Company's primary focus resulting in growth of $211 million, or 16%, since June 30, 2015.

The Company continues to focus on originating high-quality C&I relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products.  The Company's specialized lending products, particularly enterprise value lending and life insurance premium finance, have contributed to the growth in the C&I category.  C&I loan growth also supports management's efforts to maintain the Company's asset sensitive interest rate risk position.  At June 30, 2016, 64% of portfolio loans had variable interest rates, as compared to 62% for the linked quarter and prior year period.

The following table presents Portfolio loans with selected specialized lending detail for the most recent five quarters:

  
 At the Quarter ended
(in thousands)June 30,
 2016
 March 31,
 2016
 December 31,
 2015
 September 30,
 2015
 June 30,
 2015
Enterprise value lending$353,915  $359,862  $350,266  $283,205  $271,807 
C&I - general737,904  759,330  732,186  689,274  685,793 
Life insurance premium financing295,643  272,450  265,184  247,736  239,182 
Tax credits152,995  153,338  136,691  145,207  132,521 
CRE, Construction, and land development971,130  948,859  932,084  902,100  909,747 
Residential211,155  202,255  196,498  188,985  185,587 
Other161,167  136,522  137,828  145,649  117,918 
Portfolio loans$2,883,909  $2,832,616  $2,750,737  $2,602,156  $2,542,555 
          
          

PCI loans

PCI loans totaled $56.5 million at June 30, 2016, a decrease of $6.9 million, or 44% on an annualized basis, from the linked first quarter, and $31.1 million, or 36%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.

PCI loans contributed $2.8 million of net earnings in the second quarter of 2016, compared to $1.6 million in the linked first quarter, and $1.0 million in the prior year period.  At June 30, 2016, the remaining accretable yield on the portfolio was estimated to be $18 million and the non-accretable difference was approximately $23 million.  Accelerated cash flows and other incremental accretion from PCI loans was $3.6 million for the quarter ended June 30, 2016, $2.8 million for the linked quarter, and $3.0 million for the prior year quarter.  The Company estimates 2016 income from accelerated cash flows and other incremental accretion to be between $9 million and $11 million.

Asset quality for Portfolio loans and Other real estate

The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:

  
 For the Quarter ended
(in thousands)June 30,
 2016
 March 31,
 2016
 December 31,
 2015
 September 30,
 2015
 June 30,
 2015
Nonperforming loans$12,813  $9,513  $9,100  $9,123  $17,498 
Other real estate from originated loans2,741  2,813  3,218  1,575  1,933 
Other real estate from PCI loans2,160  7,067  5,148     
Nonperforming assets$17,714  $19,393  $17,466  $10,698  $19,431 
Nonperforming loans to portfolio loans0.44% 0.34% 0.33% 0.35% 0.69%
Nonperforming assets to total assets0.47% 0.52% 0.48% 0.30% 0.58%
Net charge-offs (recoveries)$(409) $(99) $(647) $113  $672 
                    

Nonperforming loans increased 35% to $12.8 million at June 30, 2016, from $9.5 million at March 31, 2016, and decreased 27% from $17.5 million at June 30, 2015.  During the quarter ended June 30, 2016, there were $6.9 million of additions to nonperforming loans, $2.7 million of other principal reductions, and $0.9 million assets transferred to performing.  The additions to nonperforming loans consisted of three unrelated accounts.  Despite the increase, Nonperforming loans were 0.44% of portfolio loans, and Nonperforming assets were 0.47% of total assets at June 30, 2016.

The Company's allowance for loan losses was 1.23% of loans at June 30, 2016, representing 277% of nonperforming loans, as compared to 1.21% at March 31, 2016, representing 361% of nonperforming loans, and 1.25% at June 30, 2015, representing 182% of nonperforming loans.

Deposits

Total deposits at June 30, 2016 were $3.0 billion, an increase of $96.5 million, or 13% on an annualized basis, from March 31, 2016, and $336.7 million, or 13%, from June 30, 2015.  Core deposits, defined as total deposits excluding time deposits, were $2.5 billion at June 30, 2016, an increase of $35 million, or 6% on an annualized basis, from the linked quarter, and $326 million, or 15%, when compared to the prior year period.  The overall positive trends in deposits reflect enhanced deposit gathering efforts in both commercial and business banking.

Noninterest-bearing deposits increased $33.5 million compared to March 31, 2016, and increased $94.9 million compared to the quarter ended June 30, 2015.  The composition of Noninterest-bearing deposits remained stable at 25% of total deposits at June 30, 2016, compared to March 31, 2016 and June 30, 2015.  The total cost of deposits increased two basis points to 0.36% compared to 0.34% at March 31, 2016, and declined three basis points since June 30, 2015.

Noninterest income

Deposit service charges for the second quarter of 2016 of $2.2 million grew 7% when compared to the linked quarter, and grew 10% when compared to the prior year quarter, due primarily to growth in customer relationships.  Wealth management revenues were consistent at $1.6 million when compared to the linked first quarter, and decreased $0.1 million, when compared to the prior year period.

Trust assets under management were $897 million at June 30, 2016, an increase of $19.1 million, or 2%, when compared to March 31, 2016, and an increase of $7.7 million, or 1%, when compared to the prior year period.  The increase from the linked quarter was largely due to growth in new clients.

Gains from state tax credit brokerage activities were $0.2 million for the second quarter of 2016, compared to $0.5 million for the linked first quarter, and $0.1 million in the second quarter of 2015.  Sales of state tax credits can vary by quarter, but generally occur in the first and fourth quarters of the year depending on client demand and availability of the tax credits.

Other noninterest income increased 42% to $2.4 million compared to the linked quarter, and decreased 18% from the prior year period.  The increase from the linked quarter was primarily due to allocation fees from tax credit projects.  The decrease from the prior year period was due to fees earned from certain recoveries, higher allocation fees from tax credit projects, and swap fee income received during the second quarter of 2015.

Noninterest expenses

Noninterest expenses were $21.4 million for the quarter ended June 30, 2016, compared to $20.8 million for the quarter ended March 31, 2016, and $19.5 million for the quarter ended June 30, 2015.  The increase over the linked quarter was due to $0.3 million from executive severance, and $0.3 million other expense.  Core noninterest expenses1, which exclude the two aforementioned non-core items and expenses directly related to PCI assets, were $20.4 million for the quarter ended June 30, 2016, compared to $20.4 million for the linked quarter, and $19.0 million for the prior year period.  The increase from the prior year period was largely due to an increase in Employee compensation and benefits from the addition of client service personnel to facilitate growth.

The Company's Core efficiency ratio1 was 56.3% for the quarter ended June 30, 2016, compared to 57.4% for the linked quarter, and 57.6% for the prior year period, and reflects overall expense management, in light of enhanced revenue growth trends.   

The Company anticipates total noninterest expenses to be between $19.5 million and $21.5 million per quarter for 2016.

Other Business Results

During the quarter ended June 30, 2016, the Company repurchased 18,918 common shares at $26.46 per share under its publicly announced plan.  The plan allows for repurchase of up to two million common shares, representing approximately 10% of the Company's currently outstanding shares.

The total risk based capital ratio1 was 12.16% at June 30, 2016, compared to 12.02% at March 31, 2016, and 12.68% at June 30, 2015.  The Company's Common equity tier 1 capital ratio1 was 9.38% at June 30, 2016, compared to 9.20% at March 31, 2016, and 9.66% at June 30, 2015.  The tangible common equity ratio1 was 9.08% at June 30, 2016, versus 8.87% at March 31, 2016, and 8.94% at June 30, 2015.

The increase in the tangible common equity ratio is due to continued earnings growth, despite asset growth of over $50 million.  Capital ratios for the current quarter are based on the Basel III regulatory capital framework as applied to the Company's current businesses and operations, and are subject to, among other things, completion and filing of the Company's regulatory reports and ongoing regulatory review and implementation guidance.  The attached tables contain a reconciliation of these ratios to U.S. GAAP financial measures.

The Company's effective tax rate was 35.3% for the quarter ended June 30, 2016 compared to 34.8% for the quarter ended March 31, 2016, and 35.3% for the quarter ended June 30, 2015.

Use of Non-GAAP Financial Measures1

The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP") and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as Core net income and net interest margin, and other Core performance measures, regulatory capital ratios, and the tangible common equity ratio, in this release that are considered "non-GAAP financial measures." Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.

The Company considers its Core performance measures presented in this earnings release and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of PCI loans and related income and expenses, the impact of certain non-comparable items, and the Company's operating performance on an ongoing basis.  Core performance measures include contractual interest on PCI loans, but exclude incremental accretion on these loans.  Core performance measures also exclude the Change in FDIC receivable, Gain or loss on sale of other real estate from PCI loans, and expenses directly related to PCI loans and other assets formerly covered under FDIC loss share agreements.  Core performance measures also exclude certain other income and expense items, such as executive separation costs and the gain or loss on sale of investment securities, the Company believes to be not indicative of or useful to measure the Company's operating performance on an ongoing basis.  The attached tables contain a reconciliation of these Core performance measures to the GAAP measures.  The Company believes that the tangible common equity ratio provides useful information to investors about the Company's capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.

The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP.  In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.

The Company will host a conference call and webcast at 2:30 p.m. Central time on Thursday, July 28, 2016.  During the call, management will review the second quarter of 2016 results and related matters.  This press release as well as a related slide presentation will be accessible on the Company's website at www.enterprisebank.com under "Investor Relations" beginning prior to the scheduled broadcast of the conference call.  The call can be accessed via this same website page, or via telephone at 1-888-428-9490 (Conference ID #4111739.)  A recorded replay of the conference call will be available on the website two hours after the call's completion.  Visit bit.ly/EFSCearnings and register to receive a dial in number, passcode, and pin number.   The replay will be available for approximately two weeks following the conference call.

Enterprise Financial Services Corp operates commercial banking and wealth management businesses in metropolitan St. Louis, Kansas City, and Phoenix.  The Company is primarily focused on serving the needs of privately held businesses, their owner families, executives and professionals.

Readers should note that in addition to the historical information contained herein, this press release contains forward-looking statements, including but not limited to statements about the Company's plans, expectations, and projections of future financial and operating results, which are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements.  We use the words "anticipate," "expect," and "intend" and variations of such words and similar expressions in this communication to identify such forward-looking statements.  Factors that could cause or contribute to such differences include, but are 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 in 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 regulatory requirements, changes in accounting regulation or standards applicable to banks, as well as other risk factors described in the Company's 2015 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.  Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events unless required under the federal securities laws.

1 A non-GAAP measure.  Refer to discussion & reconciliation of these measures in the accompanying financial tables.

 
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
 
 For the Quarter ended For the Six Months ended
(in thousands, except per share data)Jun 30,
 2016
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Jun 30,
 2016
 Jun 30,
 2015
EARNINGS SUMMARY             
Net interest income$33,783  $32,428  $32,079  $30,006  $29,280  $66,211  $58,325 
Provision for loan losses - portfolio loans716  833  543  599  2,150  1,549  3,730 
Provision reversal for loan losses - purchased credit impaired loans(336) (73) (917) (227)   (409) (3,270)
Noninterest income7,049  6,005  6,557  4,729  5,806  13,054  9,389 
Noninterest expense21,353  20,762  22,886  19,932  19,458  42,115  39,408 
Income before income tax expense19,099  16,911  16,124  14,431  13,478  36,010  27,846 
Income tax expense6,747  5,886  5,445  4,722  4,762  12,633  9,784 
Net income$12,352  $11,025  $10,679  $9,709  $8,716  $23,377  $18,062 
              
Diluted earnings per share$0.61  $0.54  $0.52  $0.48  $0.43  $1.16  $0.90 
Return on average assets1.33% 1.22% 1.20% 1.13% 1.06% 1.27% 1.11%
Return on average common equity13.57% 12.46% 12.14% 11.38% 10.56% 13.02% 11.16%
Return on average tangible common equity14.91% 13.74% 13.43% 12.65% 11.77% 14.34% 12.47%
Net interest margin (fully tax equivalent)3.93% 3.87% 3.91% 3.77% 3.85% 3.90% 3.88%
Efficiency ratio52.29% 54.02% 59.23% 57.38% 55.46% 53.13% 58.20%
                            
CORE PERFORMANCE SUMMARY (NON-GAAP)1                           
Net interest income$30,212  $29,594  $28,667  $27,087  $26,277  $59,806  $51,864 
Provision for loan losses716  833  543  599  2,150  1,549  3,730 
Noninterest income6,105  6,005  7,056  5,939  6,741  12,110  12,580 
Noninterest expense20,446  20,435  20,027  19,347  19,030  40,881  38,098 
Income before income tax expense15,155  14,331  15,153  13,080  11,838  29,486  22,616 
Income tax expense5,237  4,897  5,073  4,204  4,134  10,134  7,781 
Net income$9,918  $9,434  $10,080  $8,876  $7,704  $19,352  $14,835 
                            
Diluted earnings per share$0.49  $0.47  $0.49  $0.44  $0.38  $0.96  $0.74 
Return on average assets1.07% 1.04% 1.13% 1.03% 0.93% 1.06% 0.91%
Return on average common equity10.89% 10.66% 11.46% 10.41% 9.34% 10.78% 9.17%
Return on average tangible common equity11.98% 11.76% 12.68% 11.56% 10.41% 11.87% 10.24%
Net interest margin (fully tax equivalent)3.52% 3.54% 3.50% 3.41% 3.46% 3.53% 3.46%
Efficiency ratio56.30% 57.40% 56.06% 58.58% 57.64% 56.85% 59.12%
              
1 Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
 For the Quarter ended For the Six Months ended
(in thousands, except per share data)Jun 30,
 2016
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Jun 30,
 2016
 Jun 30,
 2015
INCOME STATEMENTS             
NET INTEREST INCOME             
Total interest income$37,033  $35,460  $35,096  $33,180  $32,352  $72,493  $64,503 
Total interest expense3,250  3,032  3,017  3,174  3,072  6,282  6,178 
Net interest income33,783  32,428  32,079  30,006  29,280  66,211  58,325 
Provision for portfolio loans716  833  543  599  2,150  1,549  3,730 
Provision reversal for purchased credit impaired loans(336) (73) (917) (227)   (409) (3,270)
Net interest income after provision for loan losses33,403  31,668  32,453  29,634  27,130  65,071  57,865 
              
NONINTEREST INCOME             
Deposit service charges2,188  2,043  2,025  2,044  1,998  4,231  3,854 
Wealth management revenue1,644  1,662  1,716  1,773  1,778  3,306  3,518 
State tax credit activity, net153  518  1,651  321  74  671  748 
Gain on sale of other real estate706  122  81  32  9  828  29 
Gain on sale of investment securities            23 
Change in FDIC loss share receivable    (580) (1,241) (945)   (3,209)
Other income2,358  1,660  1,664  1,800  2,892  4,018  4,426 
Total noninterest income7,049  6,005  6,557  4,729  5,806  13,054  9,389 
              
NONINTEREST EXPENSE             
Employee compensation and benefits12,660  12,647  11,833  11,475  11,274  25,307  22,787 
Occupancy1,609  1,683  1,653  1,605  1,621  3,292  3,315 
FDIC clawback      298  50    462 
FDIC loss share termination    2,436         
Other7,084  6,432  6,964  6,554  6,513  13,516  12,844 
Total noninterest expense21,353  20,762  22,886  19,932  19,458  42,115  39,408 
              
Income before income tax expense19,099  16,911  16,124  14,431  13,478  36,010  27,846 
Income tax expense6,747  5,886  5,445  4,722  4,762  12,633  9,784 
Net income$12,352  $11,025  $10,679  $9,709  $8,716  $23,377  $18,062 
              
Basic earnings per share$0.62  $0.55  $0.53  $0.49  $0.44  $1.17  $0.91 
Diluted earnings per share0.61  0.54  0.52  0.48  0.43  1.16  0.90 



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
 At the Quarter ended
(in thousands)Jun 30,
 2016
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
BALANCE SHEETS         
ASSETS         
Cash and due from banks$50,370  $56,251  $47,935  $46,775  $49,498 
Interest-earning deposits60,926  50,982  47,222  81,115  51,298 
Debt and equity investments538,431  524,320  512,939  530,577  465,133 
Loans held for sale9,669  6,409  6,598  4,275  5,446 
          
Portfolio loans2,883,909  2,832,616  2,750,737  2,602,156  2,542,555 
Less:  Allowance for loan losses35,498  34,373  33,441  32,251  31,765 
Portfolio loans, net2,848,411  2,798,243  2,717,296  2,569,905  2,510,790 
Purchased credit impaired loans, net of the allowance for loan losses47,978  53,908  64,583  72,397  76,050 
Total loans, net2,896,389  2,852,151  2,781,879  2,642,302  2,586,840 
          
Other real estate14,901  9,880  8,366  1,575  1,933 
Other real estate covered under FDIC loss share1      6,795  7,909 
Fixed assets, net14,512  14,812  14,842  14,395  14,726 
State tax credits, held for sale44,918  45,305  45,850  48,207  42,062 
FDIC loss share receivable      8,619  10,332 
Goodwill30,334  30,334  30,334  30,334  30,334 
Intangible assets, net2,589  2,832  3,075  3,323  3,595 
Other assets108,626  116,629  109,443  98,249  101,972 
Total assets$3,761,665  $3,709,905  $3,608,483  $3,516,541  $3,371,078 
          
LIABILITIES AND SHAREHOLDERS' EQUITY         
Noninterest-bearing deposits$753,173  $719,652  $717,460  $691,758  $658,258 
Interest-bearing deposits2,275,063  2,212,094  2,067,131  2,122,205  2,033,300 
Total deposits3,028,236  2,931,746  2,784,591  2,813,963  2,691,558 
Subordinated debentures56,807  56,807  56,807  56,807  56,807 
Federal Home Loan Bank advances78,000  130,500  110,000  75,000  73,000 
Other borrowings200,362  193,788  270,326  194,684  188,546 
Other liabilities26,631  37,680  35,930  32,524  28,737 
Total liabilities3,390,036  3,350,521  3,257,654  3,172,978  3,038,648 
Shareholders' equity371,629  359,384  350,829  343,563  332,430 
Total liabilities and shareholders' equity$3,761,665  $3,709,905  $3,608,483  $3,516,541  $3,371,078 
          
1Due to termination of the Company's loss share agreements with the FDIC in the fourth quarter of 2015, Other real estate covered under FDIC loss share was reclassified to Other real estate.



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
 For the Quarter ended
(in thousands)Jun 30,
 2016
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
LOAN PORTFOLIO         
Commercial and industrial$1,540,457  $1,544,980  $1,484,327  $1,365,422  $1,329,303 
Commercial real estate799,352  773,535  771,023  750,001  759,893 
Construction real estate171,778  175,324  161,061  152,099  149,854 
Residential real estate211,155  202,255  196,498  188,985  185,587 
Consumer and other161,167  136,522  137,828  145,649  117,918 
Total portfolio loans2,883,909  2,832,616  2,750,737  2,602,156  2,542,555 
Purchased credit impaired loans56,529  63,477  74,758  83,736  87,644 
Total loans$2,940,438  $2,896,093  $2,825,495  $2,685,892  $2,630,199 
          
DEPOSIT PORTFOLIO         
Noninterest-bearing accounts$753,173  $719,652  $717,460  $691,758  $658,258 
Interest-bearing transaction accounts628,505  589,635  564,420  529,052  507,889 
Money market and savings accounts1,124,528  1,161,610  1,146,523  1,136,557  1,014,481 
Brokered certificates of deposit166,507  157,939  39,573  86,147  124,170 
Other certificates of deposit355,523  302,910  316,615  370,449  386,760 
Total deposit portfolio$3,028,236  $2,931,746  $2,784,591  $2,813,963  $2,691,558 
          
AVERAGE BALANCES         
Portfolio loans$2,868,430  $2,777,456  $2,631,256  $2,540,948  $2,482,291 
Purchased credit impaired loans59,110  69,031  77,485  85,155  92,168 
Loans held for sale6,102  4,563  5,495  4,255  6,605 
Debt and equity investments528,120  514,687  521,679  475,180  463,808 
Interest-earning assets3,506,801  3,413,792  3,304,827  3,201,181  3,096,294 
Total assets3,734,192  3,641,308  3,528,423  3,416,716  3,310,578 
Deposits2,931,888  2,811,209  2,832,313  2,788,245  2,667,640 
Shareholders' equity366,132  355,980  348,908  338,368  330,999 
Tangible common equity333,093  322,698  315,380  304,583  296,931 
          
YIELDS (fully tax equivalent)         
Portfolio loans4.20% 4.19% 4.16% 4.16% 4.17%
Purchased credit impaired loans30.07% 22.67% 24.79% 19.41% 18.33%
Total loans4.72% 4.64% 4.75% 4.66% 4.68%
Debt and equity investments2.28% 2.34% 2.27% 2.23% 2.26%
Interest-earning assets4.30% 4.23% 4.27% 4.17% 4.24%
Interest-bearing deposits0.47% 0.46% 0.48% 0.50% 0.52%
Total deposits0.36% 0.34% 0.36% 0.39% 0.39%
Subordinated debentures2.56% 2.47% 2.26% 2.19% 2.18%
Borrowed funds0.35% 0.31% 0.24% 0.28% 0.29%
Cost of paying liabilities0.50% 0.48% 0.50% 0.53% 0.54%
Net interest margin3.93% 3.87% 3.91% 3.77% 3.85%



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
 For the Quarter ended
(in thousands, except per share data)Jun 30,
 2016
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
ASSET QUALITY         
Net charge-offs (recoveries)1$(409) $(99) $(647) $113  $672 
Nonperforming loans112,813  9,513  9,100  9,123  17,498 
Classified assets87,532  73,194  67,761  62,679  61,722 
Nonperforming loans to total loans10.44% 0.34% 0.33% 0.35% 0.69%
Nonperforming assets to total assets20.47% 0.52% 0.48% 0.30% 0.58%
Allowance for loan losses to total loans11.23% 1.21% 1.22% 1.24% 1.25%
Allowance for loan losses to nonperforming loans1277.0% 361.3% 367.5% 353.5% 181.5%
Net charge-offs (recoveries) to average loans (annualized)1(0.06)% (0.01)% (0.10)% 0.02% 0.11%
          
WEALTH MANAGEMENT         
Trust assets under management$897,322  $878,236  $872,877  $848,515  $889,616 
Trust assets under administration1,490,389  1,470,974  1,477,917  1,436,372  1,514,140 
          
MARKET DATA         
Book value per common share$18.60  $17.98  $17.53  $17.21  $16.67 
Tangible book value per common share$16.95  $16.32  $15.86  $15.53  $14.96 
Market value per share$27.89  $27.04  $28.35  $25.17  $22.77 
Period end common shares outstanding19,979  19,993  20,017  19,959  19,947 
Average basic common shares20,003  20,004  20,007  19,995  19,978 
Average diluted common shares20,216  20,233  20,386  20,261  20,168 
          
CAPITAL         
Total capital to risk-weighted assets12.16% 12.02% 11.85% 12.55% 12.68%
Tier 1 capital to risk-weighted assets10.92% 10.77% 10.61% 11.30% 11.43%
Common equity tier 1 capital to risk-weighted assets9.38% 9.20% 9.05% 9.59% 9.66%
Tangible common equity to tangible assets9.08% 8.87% 8.88% 8.90% 8.94%
          
1 Portfolio loans only
2 Excludes Other real estate covered under FDIC loss share agreements, except for inclusion in total assets.  Beginning with the quarter ended December 31, 2015, Other real estate covered by FDIC loss share agreements is zero due to termination of the agreements.



ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
 
 For the Quarter ended For the Six Months ended
(in thousands)Jun 30,
 2016
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Jun 30,
 2016
 Jun 30,
 2015
CORE PERFORMANCE MEASURES    
Net interest income$33,783  $32,428  $32,079  $30,006  $29,280  $66,211  $58,325 
Less: Incremental accretion income3,571  2,834  3,412  2,919  3,003  6,405  6,461 
Core net interest income30,212  29,594  28,667  27,087  26,277  59,806  51,864 
              
Total noninterest income7,049  6,005  6,557  4,729  5,806  13,054  9,389 
Less: Change in FDIC loss share receivable    (580) (1,241) (945)   (3,209)
Less (plus): Gain (loss) on sale of other real estate from PCI loans705    81  31  10  705  (5)
Less: Gain on sale of investment securities            23 
Less: Other income from PCI assets239          239   
Core noninterest income6,105  6,005  7,056  5,939  6,741  12,110  12,580 
              
Total core revenue36,317  35,599  35,723  33,026  33,018  71,916  64,444 
              
Provision for portfolio loans716  833  543  599  2,150  1,549  3,730 
              
Total noninterest expense21,353  20,762  22,886  19,932  19,458  42,115  39,408 
Less: FDIC clawback      298  50    462 
Less: FDIC loss share termination    2,436         
Less: Other expenses related to PCI loans325  327  423  287  378  652  848 
Less: Executive severance332          332   
Less: Other non-core expense250          250   
Core noninterest expense20,446  20,435  20,027  19,347  19,030  40,881  38,098 
              
Core income before income tax expense15,155  14,331  15,153  13,080  11,838  29,486  22,616 
Core income tax expense5,237  4,897  5,073  4,204  4,134  10,134  7,781 
Core net income$9,918  $9,434  $10,080  $8,876  $7,704  $19,352  $14,835 
              
Core diluted earnings per share$0.49  $0.47  $0.49  $0.44  $0.38  $0.96  $0.74 
Core return on average assets1.07% 1.04% 1.13% 1.03% 0.93% 1.06% 0.91%
Core return on average common equity10.89% 10.66% 11.46% 10.41% 9.34% 10.78% 9.17%
Core return on average tangible common equity11.98% 11.76% 12.68% 11.56% 10.41% 11.87% 10.24%
Core efficiency ratio56.30% 57.40% 56.06% 58.58% 57.64% 56.85% 59.12%
              
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)    
Net interest income$34,227  $32,887  $32,546  $30,437  $29,691  $67,114  $59,158 
Less: Incremental accretion income3,571  2,834  3,412  2,919  3,003  6,405  6,461 
Core net interest income$30,656  $30,053  $29,134  $27,518  $26,688  $60,709  $52,697 
              
Average earning assets$3,506,801  $3,413,792  $3,304,827  $3,201,181  $3,096,294  $3,460,296  $3,072,188 
Reported net interest margin3.93% 3.87% 3.91% 3.77% 3.85% 3.90% 3.88%
Core net interest margin3.52% 3.54% 3.50% 3.41% 3.46% 3.53% 3.46%



 At the Quarter ended
(in thousands)Jun 30,
 2016
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity$371,629  $359,384  $350,829  $343,563  $332,430 
Less: Goodwill30,334  30,334  30,334  30,334  30,334 
Less: Intangible assets, net of deferred tax liabilities958  1,048  759  820  887 
Less: Unrealized gains5,517  3,929  218  2,973  1,249 
Plus: Qualifying trust preferred securities55,100  55,100  55,100  55,100  55,100 
Plus: Other58  58  58  58  58 
Total tier 1 capital389,978  379,231  374,676  364,594  355,118 
Less: Qualifying trust preferred securities55,100  55,100  55,100  55,100  55,100 
Less: Other35  35  23  23  23 
Common equity tier 1 capital$334,843  $324,096  $319,553  $309,471  $299,995 
          
Total risk-weighted assets$3,570,437  $3,521,433  $3,530,521  $3,227,605  $3,106,041 
          
Common equity tier 1 capital to risk-weighted assets9.38% 9.20% 9.05% 9.59% 9.66%
          
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity$371,629  $359,384  $350,829  $343,563  $332,430 
Less: Goodwill30,334  30,334  30,334  30,334  30,334 
Less: Intangible assets2,589  2,832  3,075  3,323  3,595 
Tangible common equity$338,706  $326,218  $317,420  $309,906  $298,501 
          
Total assets$3,761,665  $3,709,905  $3,608,483  $3,516,541  $3,371,078 
Less: Goodwill30,334  30,334  30,334  30,334  30,334 
Less: Intangible assets2,589  2,832  3,075  3,323  3,595 
Tangible assets$3,728,742  $3,676,739  $3,575,074  $3,482,884  $3,337,149 
          
Tangible common equity to tangible assets9.08% 8.87% 8.88% 8.90% 8.94%

 

For more information contact: Jerry Mueller, Senior Vice President (314) 512-7251 Ann Marie Mayuga, AMM Communications (314) 485-9499

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