Market Overview

Enterprise Financial Reports Second Quarter 2015 Results

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Reported Highlights

  • Net income of $0.43 per diluted share, increased 19% compared to the prior year period
  • Portfolio loans grow 18% on an annualized basis in the quarter, and 13% from the prior year period
  • 17% cash dividend increase to $0.07 per share in the third quarter of 2015 from $0.06 per share in the second quarter of 2015

Core Highlights1

  • Core net income of $0.38 per diluted share, increased 9% over the linked quarter, and 23% compared to the second quarter of 2014
  • Core revenue increased 5% in the quarter, and 9% from the prior year period
  • Core efficiency ratio improved to 57.6%

ST. LOUIS, July 23, 2015 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ: EFSC) (the "Company") reported net income of $8.7 million for the quarter ended June 30, 2015, a decrease of $0.6 million, or 7%, as compared to the linked first quarter.  Net income per diluted share was $0.43 for the quarter ended June 30, 2015, a decrease of 7% compared to $0.46 per diluted share for the linked first quarter due to lower contractual interest on Purchase credit impaired ("PCI") loans and a decrease in reversal of provision for loan loss.  Second quarter 2015 net income was 22% higher than the $7.2 million reported in the prior year period, and diluted earnings per share were 19% higher than the $0.36 reported a year ago.  The increase in net income over the prior year was primarily due to an increase in net interest income from strong loan growth, a decrease in noninterest expenses from improved expense control initiatives, and a decline in provision reversal for PCI loans.

On a core basis1, the Company reported net income of $7.7 million, or $0.38 per diluted share, for the quarter ended June 30, 2015, compared to $7.1 million, or $0.35 per diluted share, in the linked first quarter.  The increase was due to an increase in net interest income from strong loan growth and increases in noninterest income.  Second quarter 2015 core net income increased 23% from $6.3 million for the prior year period, and diluted core earnings per share grew 23% from $0.31 for the prior year period.  The increase was primarily due to increases in earning asset balances driving growth in core net interest income combined with a reduction in noninterest expenses. 

The Company's Board approved an additional one cent per common share increase in the Company's quarterly dividend to $0.07 per common share from $0.06 for the third quarter of 2015, payable on September 30, 2015 to shareholders of record as of September 15, 2015.

Peter Benoist, President and CEO, commented, "Enterprise reported another solid quarter, with EPS up 19% over the prior year period and second quarter Return on average assets again exceeding one percent."

"On a core operating basis, results were strong across the board," said Benoist. "Core EPS increased 23% over last year's second quarter, driven by robust loan growth, stable margins and lower expenses.  Loan growth was a particular highlight, with core loans increasing at an 18% annual rate.  Year to date, core loans outstanding have increased 4%, or 9% annualized."

Benoist added, "We continued to successfully defend our core net interest margin, which held firm in the second quarter.  Our current core net interest margin is five basis points higher than a year ago.  Expenses remain well controlled within our forecasted range and, through the first half of the year, we've pushed our efficiency ratio down below 60%."

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

Net Interest Income

Net interest income in the second quarter increased $0.2 million from the linked first quarter and $0.5 million from the prior year period due to lower interest expense from the payoff of higher cost debt in the prior year and an increase in portfolio loan balances.  The net interest margin on a fully tax equivalent basis was 3.85% for the second quarter, compared to 3.92% in the linked first quarter, and 4.04% in the second quarter of 2014.

In the second quarter of 2015, the yield on PCI loans was 18.33%, as compared to 20.85% in the linked quarter and 20.84% in the prior year period.

The cost of interest-bearing deposits declined two basis points to 0.52% in the second quarter of 2015 from the linked first quarter, and was six basis points lower than the second quarter of 2014, primarily from lower rates on time deposit balances.  The cost of interest-bearing liabilities declined two basis points as compared to the linked quarter to 0.54% and 11 basis points from the second quarter of 2014.  The improvement was primarily due to the prepayment of $50 million of FHLB borrowings in December 2014 and the aforementioned improvement in deposit costs.

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,
2015
 March 31,
2015
 December 31,
2014
 September 30,
2014
 June 30,
2014
Core net interest margin13.46% 3.46% 3.45% 3.41% 3.41%
Core net interest income126,277  25,587  25,667  24,865  24,204 
          


Core net interest income1 increased 9% compared to the prior year period due to strong portfolio loan growth and managed decreases in the cost of interest-bearing liabilities as discussed above.  Core net interest income increased by $0.7 million to $26.3 million when compared to the linked first quarter, and core net interest margin remained stable at 3.46%.

Core net interest margin1 increased five basis points from the prior year quarter primarily due to the effect of the FHLB debt prepayment in December 2014 and loan growth improving our earning asset mix.  These factors mitigated continued pressure on portfolio loan yields and reductions in PCI loan balances, as those balances continue to run-off.  Pressure on loan yields and continued reductions in PCI loan balances could lead to a modest decline in core net interest margin in the second half of 2015.

Portfolio loans

Portfolio loans grew to $2.5 billion at June 30, 2015, increasing $107 million, or 18% on an annualized basis, when compared to the linked quarter.  On a year over year basis, portfolio loans increased $291 million, or 13%.  The Company continues to expect loan growth at or above 10% for 2015.

Commercial and industrial ("C&I") loans increased $69.9 million during the second quarter of 2015 compared to the linked first quarter.  C&I loans represented 53% of the Company's loan portfolio at June 30, 2015, relatively consistent with March 31, 2015.  C&I loans grew $200 million, or 18%, since June 30, 2014.  During the 12 months ended June 30, 2015, the Company also grew loans in all other major categories.

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.  Our specialized market segments, 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 our efforts to maintain the Company's asset sensitive interest rate risk position.  At June 30, 2015, 62% of our portfolio loans had variable interest rates.

PCI loans and other real estate covered under FDIC loss share agreements

PCI loans totaled $88 million at June 30, 2015, a decrease of $7.1 million, or 8%, from the linked first quarter, and $30.9 million, or 26%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.

Other real estate covered under FDIC loss share agreements at June 30, 2015 was $7.9 million, a 122% increase from $3.6 million at March 31, 2015.  The significant increase was mainly due to foreclosure on a property from one relationship.  During the second quarter of 2015, the Company sold $0.7 million of other real estate, resulting in a negligible net gain.

The Company remeasures contractual and expected cash flows on PCI loans on a periodic basis.  When the remeasurement process results in a decrease in expected cash flows due to an increase in expected credit losses, impairment is recorded through the provision for loan losses.  Similarly, when expected credit losses decrease in the remeasurement process, prior recorded impairment is reversed before the yield is increased prospectively.  Concurrently, the FDIC loss share receivable is adjusted to reflect anticipated future cash to be received from the FDIC.  In the second quarter of 2015, no provision or reversal of provision for loan losses was recorded for any loan pools.  Any provision or provision benefit would be partially offset through noninterest income by a change in the FDIC loss share receivable.

Actual cash collections in excess of expected cash flows that represent accelerated loan payoffs result in the recognition of income, but also generally result in a decrease in the FDIC loss share receivable. These cash flows are, by their nature, unpredictable and can vary significantly period to period.  Actual cash collections in excess of expected cash flows from loan payoffs and real estate sales in the second quarter resulted in accelerated discount income of $1.3 million, which was partially offset by a decrease in the FDIC loss share receivable.

The following table illustrates the financial contribution of PCI loans and other real estate covered under FDIC loss share agreements for the most recent five quarters:

 At the Quarter ended
(in thousands)  income/(expense)June 30,
2015
 March 31,
2015
 December 31,
2014
 September 30,
2014
 June 30,
2014
Contractual interest income$1,209  $1,539  $1,840  $1,701  $1,878 
Accelerated cash flows and other incremental accretion3,003  3,458  5,149  2,579  4,538 
Estimated funding cost(329) (317) (326) (314) (349)
Total net interest income3,883  4,680  6,663  3,966  6,067 
Provision reversal/(Provision) for loan losses  3,270  (126) 1,877  470 
Gain/(loss) on sale of other real estate10  (15) 195  (45) 164 
Change in FDIC loss share receivable(945) (2,264) (1,781) (2,374) (2,742)
Change in FDIC clawback liability(50) (412) (141) (1,028) (143)
Other expenses(378) (471) (541) (731) (832)
PCI assets income before income tax expense$2,520  $4,788  $4,269  $1,665  $2,984 
          


At June 30, 2015, the remaining accretable yield on the portfolio was estimated to be $26 million and the non-accretable difference was approximately $37 million.  Absent cash flow accelerations or pool impairment, the Company currently estimates average PCI loan balances to be approximately $80 million and income before tax expense on PCI assets will be approximately $9 million to $12 million in 2015, inclusive of the first and second quarters of 2015.

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,
2015
 March 31,
2015
 December 31,
2014
 September 30,
2014
 June 30,
2014
Nonperforming loans$17,498  $15,143  $22,244  $18,212  $19,287 
Other real estate not covered under FDIC loss share1,933  2,024  1,896  2,261  7,613 
Nonperforming assets$19,431  $17,167  $24,140  $20,473  $26,900 
Nonperforming loans to total loans0.69% 0.62% 0.91% 0.79% 0.86%
Nonperforming assets to total assets0.58% 0.52% 0.74% 0.64% 0.85%
Net charge-offs (recoveries)$672  $1,478  $582  $(311) $831 
          


Nonperforming loans increased 16% to $17.5 million at June 30, 2015, from $15.1 million at March 31, 2015, and decreased 9%  from $19.3 million at June 30, 2014.  During the quarter ended June 30, 2015, there were $2.7 million of charge-offs, $0.6 million of other principal reductions, no assets transferred to other real estate, $6.3 million of additions to nonperforming loans, and $0.6 million of assets transferred to performing.  The additions to nonperforming loans primarily consisted of three unrelated accounts.

The Company's allowance for loan losses was 1.25% of loans at June 30, 2015, representing 182% of nonperforming loans, as compared to 1.24% at March 31, 2015, representing 200% of nonperforming loans, and 1.26% at June 30, 2014, representing 147% of nonperforming loans.

Deposits

Total deposits at June 30, 2015 were $2.7 billion, an increase of $17 million, or 3% on an annualized basis, from March 31, 2015, and $226 million, or 9%, from June 30, 2014.  The positive trends in deposits reflect enhanced deposit gathering efforts in both commercial and business banking.

Noninterest-bearing deposits decreased $22.7 million compared to March 31, 2015 and decreased $17.0 million compared to the quarter ended June 30, 2014.  The composition of Noninterest-bearing deposits remained relatively stable at 24% of total deposits at June 30, 2015, from March 31, 2015, and declined compared to 27% of total deposits at June 30, 2014.  The total cost of deposits declined 4 basis points since June 30, 2014.

Noninterest income

Deposit service charges for the second quarter of 2015 of $2.0 million increased by 8% compared to the linked quarter, and grew 13% compared to the prior year quarter partially due to growth in deposit relationships.  Additionally, Wealth management revenues were relatively stable at $1.8 million compared to the linked first quarter and the prior year period.

Trust assets under management were $890 million at June 30, 2015, a decrease of $5 million, or 2% on an annualized basis, when compared to the linked period ended March 31, 2015, and were relatively stable when compared to the prior year period.  The decrease in Trust assets under management as compared to the linked quarter was partially due to market depreciation, offset by growth in new customers.

Trust assets under administration were $1.5 billion at June 30, 2015, stable when compared to the linked first quarter, and an increase of $14 million, or 1%, when compared to the prior year period ended June 30, 2014.

Gains from state tax credit brokerage activities, net of fair value market adjustments on tax credit assets and related interest rate hedges, were $0.1 million for the second quarter of 2015, compared to $0.7 million for the linked first quarter and $0.2 million in the second quarter of 2014.  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 of $2.9 million increased 89% from the linked quarter, and 66% from the prior year period due to allocation fees from tax credit projects, fees earned from recoveries, gains on sales of mortgages, and swap fee income.

Noninterest Expenses

Noninterest expenses were $19.5 million for the quarter ended June 30, 2015, compared to $20.0 million for the quarter ended March 31, 2015 and $20.4 million for the quarter ended June 30, 2014.  Core noninterest expenses1, which exclude certain non-comparable items and expenses directly related to PCI loans and assets covered under loss share agreements, decreased to $19.0 million for the quarter ended June 30, 2015, from $19.1 million for the linked quarter and $19.5 million for the prior year period.

The Company's Core efficiency ratio1 was 57.6% for the quarter ended June 30, 2015, compared to 60.7% for the linked quarter, and 64.5% for the prior year period, and reflects lower legal expenses on problem loans, overall expense management and revenue growth trends. 

The Company anticipates total noninterest expenses to be between $19 million and $21 million per quarter for 2015.

Other Business Results

The total risk based capital ratio1 was 12.69% at June 30, 2015, compared to 12.88% at March 31, 2015, and 13.63% at June 30, 2014.  The Company's Common equity tier 1 capital ratio1 was 9.66% at June 30, 2015, compared to 9.78% at March 31, 2015, and 10.25% at June 30, 2014.  The tangible common equity ratio1 was 8.94% at June 30, 2015, versus 9.01% at March 31, 2015, and 8.49% at June 30, 2014. 

The total risk based capital and Common equity tier 1 ratios declined from the prior year period mainly due to the impact of the new regulatory guidelines under Basel III.  The decrease in the tangible common equity ratio as compared to the prior quarter was mainly due to asset growth out-pacing earnings and a decrease in the net unrealized gain on the investment portfolio.  Capital ratios for the current quarter are based on the Company's interpretations of 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, 2015 compared to 35.0% for the quarter ended March 31, 2015 and 33.9% for the quarter ended June 30, 2014.

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 margin and other Core performance measures, tangible common equity ratio and Common equity tier 1 capital 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 nonrecurring 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 of other real estate covered under FDIC loss share agreements and expenses directly related to the PCI loans and other assets covered under FDIC loss share agreements.  Core performance measures also exclude certain other income and expense items 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 and the Common equity tier 1 capital ratios provide useful information to investors about  the Company's capital strength even though they are considered to be non-GAAP financial measures and are 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 tables below, 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 23, 2015.  During the call, management will review the second quarter of 2015 results and related matters.  This press release as well as a related slide presentation will be accessible on Enterprise Financial Services Corp'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 1-877-876-9176 (Conference ID #7827106.)  A recorded replay of the conference call will be available on the website beginning two hours after the call's completion.  The telephone replay will be available at 1-888-203-1112 (replay passcode #7827106.)  The replays 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 "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 2014 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.


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,
 2015
 Mar 31,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2014
 Jun 30,
 2015
 Jun 30,
 2014
EARNINGS SUMMARY             
Net interest income$29,280  $29,045  $30,816  $27,444  $28,742  $58,325  $59,108 
Provision for loan losses - portfolio loans2,150  1,580  1,968  66  1,348  3,730  2,375 
Provision (provision reversal) for loan losses - purchase credit impaired loans  (3,270) 126  (1,877) (470) (3,270) 2,834 
Noninterest income5,806  3,583  4,852  4,452  3,405  9,389  7,327 
Noninterest expense19,458  19,950  24,795  21,121  20,445  39,408  41,547 
Income before income tax expense13,478  14,368  8,779  12,586  10,824  27,846  19,679 
Income tax expense4,762  5,022  2,812  4,388  3,664  9,784  6,671 
Net income$8,716  $9,346  $5,967  $8,198  $7,160  $18,062  $13,008 
              
Diluted earnings per share$0.43  $0.46  $0.30  $0.41  $0.36  $0.90  $0.66 
Return on average assets1.06% 1.16% 0.73% 1.02% 0.92% 1.11% 0.84%
Return on average common equity10.56% 11.78% 7.50% 10.62% 9.65% 11.16% 8.97%
Return on average tangible common equity11.77% 13.19% 8.43% 11.98% 10.95% 12.47% 10.21%
Net interest margin (fully tax equivalent)3.85% 3.92% 4.13% 3.75% 4.04% 3.88% 4.21%
Efficiency ratio55.46% 61.14% 69.52% 66.22% 63.60% 58.20% 62.54%
              
CORE PERFORMANCE SUMMARY1          
Net interest income$26,277  $25,587  $25,667  $24,865  $24,204  $51,864  $47,906 
Provision for loan losses2,150  1,580  1,968  66  1,348  3,730  2,375 
Noninterest income6,741  5,839  6,438  5,926  5,983  12,580  12,184 
Noninterest expense19,030  19,068  20,170  19,347  19,468  38,098  39,852 
Income before income tax expense11,838  10,778  9,967  11,378  9,371  22,616  17,863 
Income tax expense4,134  3,647  3,264  3,926  3,108  7,781  5,975 
Net income$7,704  $7,131  $6,703  $7,452  $6,263  $14,835  $11,888 
              
Diluted earnings per share$0.38  $0.35  $0.33  $0.37  $0.31  $0.74  $0.60 
Return on average assets0.93% 0.88% 0.82% 0.93% 0.80% 0.91% 0.77%
Return on average common equity9.34% 8.99% 8.43% 9.65% 8.44% 9.17% 8.20%
Return on average tangible common equity10.41% 10.06% 9.47% 10.89% 9.57% 10.24% 9.33%
Net interest margin (fully tax equivalent)3.46% 3.46% 3.45% 3.41% 3.41% 3.46% 3.42%
Efficiency ratio57.64% 60.67% 62.83% 62.83% 64.49% 59.12% 66.32%
              
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) (continued)
    
 For the Quarter ended For the Six Months ended
(in thousands, except per share data)Jun 30,
 2015
 Mar 31,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2014
 Jun 30,
 2015
 Jun 30,
 2014
INCOME STATEMENTS             
NET INTEREST INCOME             
Total interest income$32,352  $32,151  $34,385  $31,036  $32,309  $64,503  $66,333 
Total interest expense3,072  3,106  3,569  3,592  3,567  6,178  7,225 
Net interest income29,280  29,045  30,816  27,444  28,742  58,325  59,108 
Provision for portfolio loans2,150  1,580  1,968  66  1,348  3,730  2,375 
Provision (provision reversal) for purchase credit impaired loans  (3,270) 126  (1,877) (470) (3,270) 2,834 
Net interest income after provision for loan losses27,130  30,735  28,722  29,255  27,864  57,865  53,899 
              
NONINTEREST INCOME             
Wealth management revenue1,778  1,740  1,751  1,754  1,715  3,518  3,437 
Deposit service charges1,998  1,856  1,864  1,812  1,767  3,854  3,505 
Gain on sale of other real estate9  20  17  114  717  29  1,400 
State tax credit activity, net74  674  1,392  156  207  748  704 
Gain on sale of investment securities  23        23   
Change in FDIC loss share receivable(945) (2,264) (1,781) (2,374) (2,742) (3,209) (5,152)
Other income2,892  1,534  1,609  2,990  1,741  4,426  3,433 
Total noninterest income5,806  3,583  4,852  4,452  3,405  9,389  7,327 
              
NONINTEREST EXPENSE             
Employee compensation and benefits11,274  11,513  11,350  11,913  11,853  22,787  23,969 
Occupancy1,621  1,694  1,528  1,683  1,675  3,315  3,315 
FDIC clawback50  412  141  1,028  143  462  32 
FHLB prepayment penalty    2,936         
Facilities disposal charge    1,004         
Other6,513  6,331  7,836  6,497  6,774  12,844  14,231 
Total noninterest expense19,458  19,950  24,795  21,121  20,445  39,408  41,547 
              
Income before income tax expense13,478  14,368  8,779  12,586  10,824  27,846  19,679 
Income tax expense4,762  5,022  2,812  4,388  3,664  9,784  6,671 
Net income$8,716  $9,346  $5,967  $8,198  $7,160  $18,062  $13,008 
              
Basic earnings per share$0.44  $0.47  $0.30  $0.41  $0.36  $0.91  $0.66 
Diluted earnings per share0.43  0.46  0.30  0.41  0.36  0.90  0.66 
              


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
  
 At the Quarter ended
(in thousands)Jun 30,
 2015
 Mar 31,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2014
BALANCE SHEETS         
          
ASSETS         
Cash and due from banks$49,498  $56,420  $42,903  $54,113  $32,993 
Interest-earning deposits51,298  43,913  63,093  74,999  94,736 
Debt and equity investments465,133  467,343  463,168  471,875  464,159 
Loans held for sale5,446  7,843  4,033  4,899  5,375 
          
Portfolio loans2,542,555  2,435,559  2,433,916  2,294,905  2,251,102 
 Less:  Allowance for loan losses31,765  30,288  30,185  28,800  28,422 
Portfolio loans, net2,510,790  2,405,271  2,403,731  2,266,105  2,222,680 
Purchase credit impaired loans, net of the allowance for loan losses76,050  83,163  83,693  98,318  100,965 
Total loans, net2,586,840  2,488,434  2,487,424  2,364,423  2,323,645 
          
Other real estate not covered under FDIC loss share1,933  2,024  1,896  2,261  7,613 
Other real estate covered under FDIC loss share7,909  3,560  5,944  8,826  12,821 
Fixed assets, net14,726  14,911  14,753  18,054  17,930 
State tax credits held for sale42,062  42,411  38,309  45,631  45,529 
FDIC loss share receivable10,332  11,644  15,866  22,039  25,508 
Goodwill30,334  30,334  30,334  30,334  30,334 
Intangible assets, net3,595  3,880  4,164  4,453  4,767 
Other assets101,972  102,578  105,116  107,683  110,031 
Total assets$3,371,078  $3,275,295  $3,277,003  $3,209,590  $3,175,441 
          
LIABILITIES AND SHAREHOLDERS' EQUITY         
Noninterest-bearing deposits$658,258  $680,997  $642,930  $695,804  $675,301 
Interest-bearing deposits2,033,300  1,993,634  1,848,580  1,813,960  1,790,149 
Total deposits2,691,558  2,674,631  2,491,510  2,509,764  2,465,450 
Subordinated debentures56,807  56,807  56,807  56,807  56,807 
Federal Home Loan Bank advances73,000  6,000  144,000  120,000  153,600 
Other borrowings188,546  186,864  239,883  187,122  172,243 
Other liabilities28,737  24,884  28,562  27,143  25,777 
Total liabilities3,038,648  2,949,186  2,960,762  2,900,836  2,873,877 
Shareholders' equity332,430  326,109  316,241  308,754  301,564 
Total liabilities and shareholders' equity$3,371,078  $3,275,295  $3,277,003  $3,209,590  $3,175,441 


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
  
 For the Quarter ended
(in thousands)Jun 30,
 2015
 Mar 31,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2014
LOAN PORTFOLIO         
Commercial and industrial$1,335,008  $1,265,104  $1,270,259  $1,172,015  $1,135,069 
Commercial real estate789,141  781,483  770,529  758,515  755,471 
Construction real estate150,740  138,924  144,773  123,888  137,043 
Residential real estate185,587  180,253  185,252  187,594  173,964 
Consumer and other82,079  69,795  63,103  52,893  49,555 
Total portfolio loans2,542,555  2,435,559  2,433,916  2,294,905  2,251,102 
Purchase credit impaired loans87,644  94,788  99,103  113,862  118,504 
Total loans$2,630,199  $2,530,347  $2,533,019  $2,408,767  $2,369,606 
          
DEPOSIT PORTFOLIO         
Noninterest-bearing accounts$658,258  $680,997  $642,930  $695,804  $675,301 
Interest-bearing transaction accounts507,889  494,228  508,941  438,205  235,142 
Money market and savings accounts1,014,481  933,908  834,287  817,361  956,887 
Certificates of deposit510,930  565,498  505,352  558,394  598,120 
Total deposit portfolio$2,691,558  $2,674,631  $2,491,510  $2,509,764  $2,465,450 
          
AVERAGE BALANCES         
Portfolio loans$2,482,291  $2,425,962  $2,368,475  $2,280,377  $2,225,670 
Purchase credit impaired loans92,168  97,201  104,732  115,709  123,476 
Loans held for sale6,605  3,560  3,703  5,400  3,735 
Interest-earning assets3,096,294  3,047,815  2,998,467  2,943,070  2,895,982 
Total assets3,310,578  3,268,369  3,234,485  3,180,359  3,126,511 
Deposits2,667,640  2,590,961  2,501,098  2,437,444  2,411,217 
Shareholders' equity330,999  321,772  315,557  306,307  297,615 
Tangible common equity296,931  287,423  280,920  271,370  262,358 
          
YIELDS (fully tax equivalent)         
Portfolio loans4.17% 4.15% 4.19% 4.22% 4.23%
Purchase credit impaired loans18.33% 20.85% 26.47% 14.67% 20.84%
Total loans4.68% 4.79% 5.13% 4.73% 5.11%
Securities2.26% 2.35% 2.29% 2.31% 2.32%
Interest-earning assets4.24% 4.33% 4.60% 4.24% 4.53%
Interest-bearing deposits0.52% 0.54% 0.56% 0.58% 0.58%
Total deposits0.39% 0.40% 0.41% 0.42% 0.43%
Subordinated debentures2.18% 2.15% 2.14% 2.14% 2.14%
Borrowed funds0.29% 0.36% 0.77% 0.76% 0.77%
Cost of paying liabilities0.54% 0.56% 0.63% 0.64% 0.65%
Net interest margin3.85% 3.92% 4.13% 3.75% 4.04%


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
  
 For the Quarter ended
(in thousands, except per share data)Jun 30,
 2015
 Mar 31,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2014
ASSET QUALITY1         
Net charge-offs (recoveries)$672  $1,478  $582  $(311) $831 
Nonperforming loans17,498  15,143  22,244  18,212  19,287 
Classified assets61,722  63,001  77,898  81,382  85,445 
Nonperforming loans to total loans0.69% 0.62% 0.91% 0.79% 0.86%
Nonperforming assets to total assets20.58% 0.52% 0.74% 0.64% 0.85%
Allowance for loan losses to total loans1.25% 1.24% 1.24% 1.25% 1.26%
Allowance for loan losses to nonperforming loans181.5% 200.0% 135.7% 158.1% 147.4%
Net charge-offs (recoveries) to average loans (annualized)0.11% 0.25% 0.10% (0.05)% 0.15%
          
WEALTH MANAGEMENT         
Trust assets under management$889,616  $894,456  $865,414  $857,071  $890,430 
Trust assets under administration1,514,140  1,517,171  1,478,864  1,462,830  1,500,033 
          
MARKET DATA         
Book value per common share$16.67  $16.36  $15.94  $15.61  $15.26 
Tangible book value per common share$14.96  $14.64  $14.20  $13.85  $13.48 
Market value per share$22.77  $20.66  $19.73  $16.72  $18.06 
Period end common shares outstanding19,947  19,935  19,838  19,785  19,765 
Average basic common shares19,978  19,934  19,858  19,838  19,824 
Average diluted common shares20,168  20,157  20,140  19,980  19,963 
          
CAPITAL         
Total capital to risk-weighted assets312.69% 12.88% 13.40% 13.61% 13.63%
Tier 1 capital to risk-weighted assets311.43% 11.62% 12.14% 12.35% 12.38%
Common equity tier 1 capital to risk-weighted assets39.66% 9.78% 10.15% 10.29% 10.25%
Tangible common equity to tangible assets8.94% 9.01% 8.69% 8.63% 8.49%
          
          
1 Portfolio loans only
2 Excludes Other real estate covered under FDIC loss share, except for inclusion in total assets.
3 Beginning with the quarter ended March 31, 2015, the implementation of revised regulatory capital guidelines under Basel III has resulted in differences in these items when compared to prior periods.


ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
    
 For the Quarter ended For the Six Months ended
(in thousands)Jun 30,
 2015
 Mar 31,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2014
 Jun 30,
 2015
 Jun 30,
 2014
CORE PERFORMANCE MEASURES    
Net interest income$29,280  $29,045  $30,816  $27,444  $28,742  $58,325  $59,108 
Less: Incremental accretion income3,003  3,458  5,149  2,579  4,538  6,461  11,202 
Core net interest income26,277  25,587  25,667  24,865  24,204  51,864  47,906 
              
Total noninterest income5,806  3,583  4,852  4,452  3,405  9,389  7,327 
Less: Change in FDIC loss share receivable(945) (2,264) (1,781) (2,374) (2,742) (3,209) (5,152)
Less (plus): Gain (loss) on sale of other real estate covered under FDIC loss share10  (15) 195  (45) 164  (5) 295 
Less: Gain on sale of investment securities  23        23   
Less: Closing fee      945       
Core noninterest income6,741  5,839  6,438  5,926  5,983  12,580  12,184 
              
Total core revenue33,018  31,426  32,105  30,791  30,187  64,444  60,090 
              
Provision for portfolio loans2,150  1,580  1,968  66  1,348  3,730  2,375 
              
Total noninterest expense19,458  19,950  24,795  21,121  20,445  39,408  41,547 
Less: FDIC clawback50  412  141  1,028  143  462  32 
Less: Other loss share expenses378  470  544  746  834  848  1,663 
Less: FHLB prepayment penalty    2,936         
Less: Facilities disposal charge    1,004         
Core noninterest expense19,030  19,068  20,170  19,347  19,468  38,098  39,852 
              
Core income before income tax expense11,838  10,778  9,967  11,378  9,371  22,616  17,863 
Core income tax expense4,134  3,647  3,264  3,926  3,108  7,781  5,975 
Core net income$7,704  $7,131  $6,703  $7,452  $6,263  $14,835  $11,888 
              
Core diluted earnings per share$0.38  $0.35  $0.33  $0.37  $0.31  $0.74  $0.60 
Core return on average assets0.93% 0.88% 0.82% 0.93% 0.80% 0.91% 0.77%
Core return on average common equity9.34% 8.99% 8.43% 9.65% 8.44% 9.17% 8.20%
Core return on average tangible common equity10.41% 10.06% 9.47% 10.89% 9.57% 10.24% 9.33%
Core efficiency ratio57.64% 60.67% 62.83% 62.83% 64.49% 59.12% 66.32%
              
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN    
Net interest income (fully tax equivalent)$29,691  $29,467  $31,223  $27,843  $29,133  $59,158  $59,936 
Less: Incremental accretion income3,003  3,458  5,149  2,579  4,538  6,461  11,202 
Core net interest income (fully tax equivalent)$26,688  $26,009  $26,074  $25,264  $24,595  $52,697  $48,734 
              
Average earning assets$3,096,294  $3,047,815  $2,998,467  $2,943,070  $2,895,982  $3,072,188  $2,872,380 
Reported net interest margin (fully tax equivalent)3.85% 3.92% 4.13% 3.75% 4.04% 3.88% 4.21%
Core net interest margin (fully tax equivalent)3.46% 3.46% 3.45% 3.41% 3.41% 3.46% 3.42%
              


 At the Quarter ended
(in thousands)Jun 30,
 2015
 Mar 31,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2014
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity$332,430  $326,109  $316,241  $308,754  $301,564 
Less: Goodwill30,334  30,334  30,334  30,334  30,334 
               
Less: Intangible assets, net of deferred tax liabilities1887  958  4,164  4,453  4,767 
Less (Plus): Unrealized gains (losses)1,249  3,379  1,681  (233) 579 
Plus: Qualifying trust preferred securities55,100  55,100  55,100  55,100  55,100 
Plus: Other58  59  58  56  56 
Total tier 1 capital355,118  346,597  335,220  329,356  321,040 
Less: Qualifying trust preferred securities55,100  55,100  55,100  55,100  55,100 
Less: Other123  23       
Common equity tier 1 capital$299,995  $291,474  $280,120  $274,256  $265,940 
          
Total risk-weighted assets$3,105,967  $2,981,810  $2,760,729  $2,666,221  $2,594,016 
          
Common equity tier 1 capital to risk-weighted assets9.66% 9.78% 10.15% 10.29% 10.25%
          
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity$332,430  $326,109  $316,241  $308,754  $301,564 
Less: Goodwill30,334  30,334  30,334  30,334  30,334 
Less: Intangible assets3,595  3,880  4,164  4,453  4,767 
Tangible common equity$298,501  $291,895  $281,743  $273,967  $266,463 
          
Total assets$3,371,078  $3,275,295  $3,277,003  $3,209,590  $3,175,441 
Less: Goodwill30,334  30,334  30,334  30,334  30,334 
Less: Intangible assets3,595  3,880  4,164  4,453  4,767 
Tangible assets$3,337,149  $3,241,081  $3,242,505  $3,174,803  $3,140,340 
          
Tangible common equity to tangible assets8.94% 9.01% 8.69% 8.63% 8.49%
          
1 Beginning with the quarter ended March 31, 2015, the implementation of revised regulatory capital guidelines under Basel III has resulted in differences in these items when compared to prior periods.
          

 

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

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