Market Overview

Enterprise Financial Reports Second Quarter 2017 Results

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Reported Second Quarter Highlights

  • Net income of $0.50 per diluted share
  • Return on average assets of 0.96%
  • Completed systems conversion of Jefferson County Bancshares, Inc. ("JCB")

Second Quarter Core Highlights1

  • Net income of $0.56 per diluted share
  • Return on average assets of 1.06%
  • Net interest margin expanded 13 basis points to 3.76%
  • Efficiency ratio decreased to 54.5%

ST. LOUIS, July 24, 2017 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the "Company") reported net income of $12.0 million for the quarter ended June 30, 2017, a decrease of $0.4 million, or 4% and 3%, as compared to the linked first quarter and prior year quarter, respectively.  Net income per diluted share was $0.50 for the quarter ended June 30, 2017, a decrease of $0.06 and $0.11, compared to $0.56 and $0.61 per diluted share for the linked first quarter and prior year period, respectively.  The decrease primarily resulted from merger related expenses from the acquisition of JCB along with an increase in provision for loan losses.

On a core basis1, the Company reported net income of $13.2 million, or $0.56 per diluted share, for the quarter ended June 30, 2017, compared to $13.1 million, or $0.59 per diluted share, in the linked first quarter.  Second quarter 2017 core net income increased 33% from $9.9 million for the prior year period, and diluted core earnings per share grew 14% from $0.49 for the prior year period.  The diluted earnings per share increase of $0.07 was primarily due to higher levels of core net interest income from continued growth in earning asset balances combined with 24 basis points of core net interest margin expansion. The earnings per share contribution from this growth was partially offset by a higher provision for portfolio loan losses. The Company recorded a provision for portfolio loan losses of $3.6 million in the second quarter, primarily resulting from a chargeoff on a single C&I relationship. Additionally, the acquisition of JCB contributed to the growth of both linked-quarter and year-over-year core net income.

The Company's Board of Directors approved the Company's quarterly dividend of $0.11 per common share, payable on September 29, 2017 to shareholders of record as of September 15, 2017.

Jim Lally, EFSC's President and Chief Executive Officer, commented, "The second quarter was highlighted by 42% growth in our core net interest income over the prior year, as well as core net interest margin expansion. Core return on average assets was 1.06% for the second quarter and stands at 1.11% for the first half of the year. Additionally, the successful conversion of Jefferson County Bancshares' systems during the quarter demonstrates the talent of our associates, and in my view, this has been an outstanding acquisition and integration."

Lally added, "We have seen continued growth from our Specialty Lending, Kansas City, and Arizona markets, and despite continued competitive pressures in St. Louis, we are comfortable with our ability to leverage our market position to achieve our stated growth objectives. Our performance year-to-date highlights both the importance of our diversified business model and also the strength we have built in our core earnings in recent years."

Net Interest Income

Net interest income in the second quarter increased $7.0 million from the linked first quarter, and $11.9 million from the prior year period due to a full quarter impact of the acquisition of JCB, strong growth in portfolio loan balances funded principally with core deposits and an increase in core net interest margin discussed below. Net interest margin, on a fully tax equivalent basis, was 3.98% for the second quarter, compared to 3.73% in the linked first quarter, and 3.93% in the second quarter of 2016. Net interest margin increased primarily from the impact of higher interest rates on our asset sensitive balance sheet.

The yield on Portfolio loans improved to 4.63% in the second quarter, an increase of 18 basis points from the linked first quarter, and 43 basis points from the prior year quarter.  The increase was primarily due to the effect of increasing interest rates on our variable rate loan portfolio. The cost of total deposits was limited to a two basis point increase in the linked quarter and a five basis point increase from the prior year quarter. The cost of interest-bearing liabilities increased four basis points to 0.69% in the second quarter of 2017 from 0.65% in the linked first quarter, and is 19 basis points higher than 0.50% in the second quarter of 2016. The increases were due to the issuance of $50 million of subordinated debt issued November 1, 2016, the acquisition of JCB, and the impact of rising interest rates on the Company's borrowed funds. 

Core net interest margin1, (fully tax equivalent), excludes incremental accretion on non-core acquired loans. See the table below for a quarterly comparison.

  For the Quarter ended
($ in thousands) June 30,
 2017
  March 31,
 2017
  December 31,
 2016
  September 30,
 2016
  June 30,
 2016
Core net interest income1     43,049      37,567     32,175     31,534       30,212  
Core net interest margin1 3.76 %   3.63 %   3.44 %   3.54 %   3.52 %
                             

Core net interest income1 increased by $5.5 million to $43.0 million, or 15% compared to the linked quarter, and increased $12.8 million, or 42%, compared to the prior year period due to strong portfolio loan growth funded by core deposits and from the acquisition of JCB.  Core net interest margin1 increased 13 basis points to 3.76% from the linked quarter primarily from the aforementioned increase in portfolio loan yield as well as controlled deposit costs.  Core net interest margin expanded 24 basis points from the prior year quarter, primarily due to loan growth improving the earning asset mix, combined with increased yield on portfolio loans out-pacing the increase to borrowing costs. Core net interest margin also increased modestly compared to both periods as a result of JCB purchase accounting adjustments. 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 could negate the expected trends in core net interest margin.

Portfolio Loans

Note: Non-core acquired loans were those acquired from the FDIC and were previously covered by shared-loss agreements. These loans continue to be accounted for as purchased credit impaired loans. Approximately $48 million of loans in JCB's portfolio are also accounted for as purchased credit impaired loans. However, all loans acquired from JCB are included in portfolio loans.

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

  At the Quarter ended
      March 31, 2017            
($ in thousands) June 30,
 2017
  JCB   Legacy
Enterprise
  Consolidated   Dec 31,
 2016
  Sept 30,
2016
  June 30,
 2016
Enterprise value lending $ 433,766     $     $ 429,957     $ 429,957     $ 388,798     $ 394,923     $ 353,915  
C&I - general 894,787     79,021     810,781     889,802     794,451     755,829     737,904  
Life insurance premium financing 317,848         312,335     312,335     305,779     298,845     295,643  
Tax credits 149,941         141,770     141,770     143,686     149,218     152,995  
CRE, construction, and land development   1,563,131     465,736     1,074,908     1,540,644     1,089,498     1,044,827     971,130  
Residential real estate 348,678     121,232     239,080     360,312     240,760     233,960     211,155  
Consumer and other 150,812     12,420     165,732     178,152     155,420     160,103     161,167  
Portfolio loans $  3,858,963     $  678,409     $  3,174,563     $  3,852,972     $  3,118,392     $  3,037,705     $  2,883,909  
                           
Portfolio loan yield 4.63 %           4.45 %   4.24 %   4.25 %   4.20 %
                                     

Portfolio loans were $3.9 billion at June 30, 2017, increasing $6 million when compared to the linked quarter. On a year over year basis, portfolio loans increased $975 million, of which $297 million was organic loan growth and $678 million was from the acquisition of JCB, principally in the CRE, construction, and land development, and residential real estate categories. The Company expects continued loan growth, excluding the acquisition of JCB, at or above 10% for 2017.

The Company continues to focus on originating high-quality Commercial and Industrial ("C&I") relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. C&I loans increased $22 million during the second quarter of 2017 from the linked first quarter and represented 47% of the Company's loan portfolio at June 30, 2017.

Since June 30, 2016, C&I loans have grown organically by $177 million, or 11%. C&I loan growth supports management's efforts to maintain the Company's asset sensitive interest rate risk position. At June 30, 2017, 57% of Portfolio loans had variable interest rates, as compared to 56% at March 31, 2017 and 64% at June 30, 2016. The change to prior year is due to the acquisition of JCB; however, the Company remains modestly asset sensitive to interest rate increases.

Non-Core Acquired Loans

Non-core acquired loans totaled $35.8 million at June 30, 2017, a decrease of $2.3 million, or 24% on an annualized basis, from the linked first quarter, and $20.7 million, or 37%, from the prior year period, primarily as a result of principal payments and loan payoffs.

Non-core acquired loans contributed $1.7 million of net earnings in the second quarter of 2017, compared to $0.7 million in the linked first quarter. At June 30, 2017, the remaining accretable yield on the portfolio was estimated to be $12 million and the non-accretable difference was approximately $16 million.  Accelerated cash flows and other incremental accretion from Purchase Credit Impaired ("PCI") loans was $2.6 million for the quarter ended June 30, 2017, $1.1 million for the linked quarter, and $3.6 million for the prior year quarter.  The Company estimates 2017 income from accelerated cash flows and other incremental accretion to be between $6 million and $8 million.

Asset Quality: 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,
 2017
  March 31,
 2017
  December 31,
 2016
  September 30,
 2016
  June 30,
 2016
Nonperforming loans $ 13,081     $ 13,847     $ 14,905     $ 19,942     $ 12,813  
Other real estate 529     2,925     980     2,959     4,901  
Nonperforming assets $   13,610     $   16,772     $ 15,885     $ 22,901     $   17,714  
Nonperforming loans to portfolio loans 0.34 %   0.36 %   0.48 %   0.66 %   0.44 %
Nonperforming assets to total assets 0.27 %   0.33 %   0.39 %   0.59 %   0.47 %
Allowance for portfolio loan losses to portfolio loans   0.96 %   1.03 %   1.20 %   1.23 %   1.23 %
Net charge-offs (recoveries) $ 6,104     $ (56 )   $ 897     $ 1,038     $ (409 )
                                       

At June 30, 2017, nonperforming loans were 0.34% of Portfolio loans, and nonperforming assets were 0.27% of total assets.  Nonperforming loans decreased 6% to $13.1 million at June 30, 2017, from $13.8 million at March 31, 2017, and increased 2% from $12.8 million at June 30, 2016. Other real estate balances decreased $2.4 million due to the sale of multiple properties. During the quarter ended June 30, 2017, non-performing loan activity included 14 new relationships representing $6.1 million, $0.3 million in advances, and $0.9 million of other principal reductions. Additionally, there was a $5.6 million charge off on a single relationship.

The Company recorded provision for portfolio loan losses of $3.6 million compared to $1.5 million in the linked quarter and $0.7 million in the prior year period.  The provision is reflective of the previously mentioned chargeoff and reserve increase on a single nonperforming relationship, growth in the portfolio, and maintaining a prudent credit risk posture. The allowance for portfolio loan losses to portfolio loans was 0.96% at  June 30, 2017, or 1.14% on a proforma basis excluding the acquisition of JCB.

Deposits
The following table presents deposits broken out by type:

  At the Quarter ended
      March 31, 2017    
($ in thousands) June 30,
 2017
  JCB   Legacy
Enterprise
  Consolidated   June 30,
 2016
Noninterest-bearing accounts 1,019,064     168,775     868,226     1,037,001     753,173  
Interest-bearing transaction accounts 803,104     96,207     748,568     844,775     628,505  
Money market and savings accounts 1,506,001     371,000     1,172,737     1,543,737     1,124,528  
Brokered certificates of deposit 133,606         145,436     145,436     166,507  
Other certificates of deposit 459,476     138,012     322,659     460,671     355,523  
Total deposit portfolio $ 3,921,251     $ 773,994     $ 3,257,626     $ 4,031,620     $ 3,028,236  
                   

Total deposits at June 30, 2017 were $3.9 billion, a decrease of $110 million, or 3% from March 31, 2017, and an increase of $0.9 billion, or 29%, from June 30, 2016.  Of the increase, $774 million is attributed to the acquisition of JCB. Core deposits, defined as total deposits excluding time deposits, were $3.3 billion at June 30, 2017, a decrease of $97.3 million, or 3% from the linked quarter, and an increase of $822 million, or 33%, when compared to the prior year period.  The overall positive trends from the prior year in deposits reflect continued progress across our business lines, expected seasonality, and the acquisition of JCB. The decrease in the current quarter was primarily due to several large clients deploying portions of their excess liquidity as well as seasonal declines across all regions.

Noninterest-bearing deposits decreased $18 million compared to March 31, 2017, and increased $266 million compared to June 30, 2016.  The composition of noninterest-bearing deposits remained relatively stable at 26% of total deposits at June 30, 2017, compared to March 31, 2017 and June 30, 2016.  The total cost of deposits expanded two basis points to 0.41% compared to 0.39% at March 31, 2017, and increased five basis points since June 30, 2016.

Noninterest Income

Total noninterest income was $7.9 million for the quarter ended June 30, 2017. Deposit service charges for the second quarter of 2017 of $2.8 million grew 12% when compared to the linked quarter, and grew 29% when compared to the prior year quarter, due primarily to the acquisition of JCB and growth in client base.  Wealth management revenues for the second quarter of 2017 of $2.1 million grew 12% when compared to the linked first quarter, and a 25% increase when compared to the prior year period, also due to the JCB acquisition and addition of new clients.

Trust assets under management were $1.3 billion at June 30, 2017, an increase of $50 million, or 4%, when compared to March 31, 2017, and an increase of $383 million, or 43%, when compared to the prior year period.  The increase from the linked quarter was primarily due to market appreciation and new customers.

Other noninterest income increased 27% to $3.0 million compared to the linked quarter, and increased 29% from the prior year period. The increase from the linked and prior year quarter was primarily due to fees earned from card products and swap fee income.

Noninterest Expenses

Noninterest expenses were $32.7 million for the quarter ended June 30, 2017, compared to $26.7 million for the quarter ended March 31, 2017, and $21.4 million for the quarter ended June 30, 2016. Noninterest expenses for the quarter included $4.5 million of merger related expenses compared to $1.7 million in the linked first quarter. Core noninterest expenses1 were $27.8 million for the quarter ended June 30, 2017, compared to $24.9 million for the linked quarter, and $20.4 million for the prior year period.  The increase from the linked quarter was primarily due to adding a full quarter of the expense base of JCB.

The Company's Core efficiency ratio1 decreased to 54.5% for the quarter ended June 30, 2017, compared to 56.0% for the linked quarter, and 56.3% for the prior year period, and reflects continuing efforts to leverage its expense base. The conversion of JCB's core systems was completed late in the second quarter. As a result of eliminating the duplicate systems, the Company expects to achieve additional cost savings from the JCB transaction throughout 2017. The Company anticipates core expenses, which exclude merger related costs, to be between $25 and $28 million per quarter for the rest of 2017.

Income Taxes

The Company's effective tax rate was 31.7% for the quarter ended June 30, 2017 compared to 29.2% for the quarter ended March 31, 2017, and 35.3% for the quarter ended June 30, 2016. The increase in the quarter resulted primarily from lower excess tax benefits from equity compensation awards due to a new accounting standard adopted this year. Under the new accounting standard, such benefits are recorded discretely within income tax expense rather than directly to shareholders' equity.

Capital

The total risk based capital ratio1 was 12.83% at June 30, 2017, compared to 12.76% at March 31, 2017, and 12.16% at June 30, 2016.  The Company's Common equity tier 1 capital ratio1 was 9.33% at June 30, 2017, compared to 9.20% at March 31, 2017, and 9.38% at June 30, 2016.  The tangible common equity ratio1 was 8.56% at June 30, 2017, versus 8.28% at March 31, 2017, and 9.08% at June 30, 2016.

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.

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 non-core acquired 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 non-core acquired loans, but exclude incremental accretion on these loans.  Core performance measures also exclude the gain or loss on sale of other real estate from non-core acquired loans, and expenses directly related to non-core acquired 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, merger related expenses, facilities charges, 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 Tuesday, July 25, 2017.  During the call, management will review the second quarter of 2017 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 1-888-428-9505 (Conference ID #4746699.)  A recorded replay of the conference call will be available on the website two hours after the call's completion.  Visit http://bit.ly/EFSC2QEarnings 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.

Forward-looking Statements

Readers should note that, in addition to the historical information contained herein, this press release contains "forward-looking statements" within the meaning of, and intended to be covered by, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include, but are not limited to, statements about the Company's plans, expectations, and projections of future financial and operating results, as well as statements regarding the Company's plans, objectives, expectations or consequences of announced transactions. The Company uses words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "could," "continue," "anticipate," and "intend", and variations of such words and similar expressions, in this communication to identify such forward-looking statements.  Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements.  Factors that could cause or contribute to such differences include, but are not limited to, the Company's ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses and grow the acquired operations, as well as 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, the Company's 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 2016 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,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Jun 30,
 2016
  Jun 30,
 2017
  Jun 30,
 2016
EARNINGS SUMMARY                          
Net interest income $ 45,633     $ 38,642     $ 35,454     $ 33,830     $ 33,783     $ 84,275     $ 66,211  
Provision for portfolio loan losses 3,623     1,533     964     3,038     716     5,156     1,549  
Provision reversal for purchased credit impaired loan losses   (207 )   (148 )   (343 )   (1,194 )   (336 )   (355 )   (409 )
Noninterest income 7,934     6,976     9,029     6,976     7,049     14,910     13,054  
Noninterest expense 32,651     26,736     23,181     20,814     21,353     59,387     42,115  
Income before income tax expense 17,500     17,497     20,681     18,148     19,099     34,997     36,010  
Income tax expense 5,545     5,106     7,053     6,316     6,747     10,651     12,633  
Net income $ 11,955     $ 12,391     $ 13,628     $ 11,832     $ 12,352     $ 24,346     $ 23,377  
                           
Diluted earnings per share $ 0.50     $ 0.56     $ 0.67     $ 0.59     $ 0.61     $ 1.06     $ 1.16  
Return on average assets 0.96 %   1.10 %   1.36 %   1.23 %   1.33 %   1.02 %   1.27 %
Return on average common equity 8.78 %   10.65 %   14.04 %   12.46 %   13.57 %   9.64 %   13.02 %
Return on average tangible common equity 11.49 %   12.96 %   15.33 %   13.64 %   14.91 %   12.20 %   14.34 %
Net interest margin (fully tax equivalent) 3.98 %   3.73 %   3.79 %   3.80 %   3.93 %   3.86 %   3.90 %
Efficiency ratio 60.95 %   58.61 %   52.11 %   51.01 %   52.29 %   59.87 %   53.13 %
                           
CORE PERFORMANCE SUMMARY (NON-GAAP)1                    
Net interest income $ 43,049     $ 37,567     $ 32,175     $ 31,534     $ 30,212     $ 80,616     $ 59,806  
Provision for portfolio loan losses 3,623     1,533     964     3,038     716     5,156     1,549  
Noninterest income 7,934     6,976     7,849     6,828     6,105     14,910     12,110  
Noninterest expense 27,798     24,946     21,094     20,242     20,446     52,744     40,881  
Income before income tax expense 19,562     18,064     17,966     15,082     15,155     37,626     29,486  
Income tax expense 6,329     4,916     6,021     5,142     5,237     11,245     10,134  
Net income $ 13,233     $ 13,148     $ 11,945     $ 9,940     $ 9,918     $ 26,381     $ 19,352  
                           
Diluted earnings per share $ 0.56     $ 0.59     $ 0.59     $ 0.49     $ 0.49     $ 1.15     $ 0.96  
Return on average assets 1.06 %   1.17 %   1.19 %   1.04 %   1.07 %   1.11 %   1.06 %
Return on average common equity 9.72 %   11.29 %   12.31 %   10.47 %   10.89 %   10.44 %   10.78 %
Return on average tangible common equity 12.72 %   13.75 %   13.44 %   11.46 %   11.98 %   13.22 %   11.87 %
Net interest margin (fully tax equivalent) 3.76 %   3.63 %   3.44 %   3.54 %   3.52 %   3.70 %   3.53 %
Efficiency ratio 54.52 %   56.01 %   52.70 %   52.77 %   56.30 %   55.21 %   56.85 %
                           
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,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Jun 30,
 2016
  Jun 30,
 2017
  Jun 30,
 2016
INCOME STATEMENTS                          
NET INTEREST INCOME                          
Total interest income $ 51,542     $ 43,740     $ 39,438     $ 37,293     $ 37,033     $ 95,282     $ 72,493  
Total interest expense 5,909     5,098     3,984     3,463     3,250     11,007     6,282  
Net interest income 45,633     38,642     35,454     33,830     33,783     84,275     66,211  
Provision for portfolio loan losses 3,623     1,533     964     3,038     716     5,156     1,549  
Provision reversal for purchased credit impaired loans   (207 )   (148 )   (343 )   (1,194 )   (336 )   (355 )   (409 )
Net interest income after provision for loan losses 42,217     37,257     34,833     31,986     33,403     79,474     65,071  
                           
NONINTEREST INCOME                          
Deposit service charges 2,816     2,510     2,184     2,200     2,188     5,326     4,231  
Wealth management revenue 2,054     1,833     1,729     1,694     1,644     3,887     3,306  
State tax credit activity, net 9     246     1,748     228     153     255     671  
Gain (loss) on sale of other real estate 17         1,235     (226 )   706     17     828  
Gain on sale of investment securities             86              
Other income 3,038     2,387     2,133     2,994     2,358     5,425     4,018  
Total noninterest income 7,934     6,976     9,029     6,976     7,049     14,910     13,054  
                           
NONINTEREST EXPENSE                          
Employee compensation and benefits 15,798     15,208     12,448     12,091     12,660     31,656     25,307  
Occupancy 2,265     1,929     1,892     1,705     1,609     4,208     3,292  
Merger related expenses 4,480     1,667                 6,147      
Other 10,108     7,932     8,841     7,018     7,084     17,376     13,516  
Total noninterest expense 32,651     26,736     23,181     20,814     21,353     59,387     42,115  
                           
Income before income tax expense 17,500     17,497     20,681     18,148     19,099     34,997     36,010  
Income tax expense 5,545     5,106     7,053     6,316     6,747     10,651     12,633  
Net income $ 11,955     $ 12,391     $ 13,628     $ 11,832     $ 12,352     $ 24,346     $ 23,377  
                           
Basic earnings per share $ 0.51     $ 0.57     $ 0.68     $ 0.59     $ 0.62     $ 1.07     $ 1.17  
Diluted earnings per share 0.50     0.56     0.67     0.59     0.61     1.06     1.16  
                                         


 
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  At the Quarter ended
($ in thousands) Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Jun 30,
 2016
BALANCE SHEETS                  
ASSETS                  
Cash and due from banks $ 77,815     $ 73,387     $ 54,288     $ 56,789     $ 50,370  
Interest-earning deposits 41,419     138,309     145,494     63,690     60,926  
Debt and equity investments 727,975     697,143     556,100     540,429     538,431  
Loans held for sale 4,285     5,380     9,562     7,663     9,669  
                   
Portfolio loans 3,858,962     3,852,972     3,118,392     3,037,705     2,883,909  
Less:  Allowance for loan losses 36,673     39,148     37,565     37,498     35,498  
Portfolio loans, net 3,822,289     3,813,824     3,080,827     3,000,207     2,848,411  
Non-core acquired loans, net of the allowance for loan losses   30,682     32,615     33,925     41,016     47,978  
Total loans, net 3,852,971     3,846,439     3,114,752     3,041,223     2,896,389  
                   
Other real estate 529     2,925     980     2,959     4,901  
Fixed assets, net 33,987     34,291     14,910     14,498     14,512  
State tax credits, held for sale 35,247     35,431     38,071     44,180     44,918  
Goodwill 116,186     113,886     30,334     30,334     30,334  
Intangible assets, net 12,458     11,758     2,151     2,357     2,589  
Other assets 135,824     147,277     114,686     105,522     108,626  
Total assets $ 5,038,696     $ 5,106,226     $ 4,081,328     $ 3,909,644     $ 3,761,665  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Noninterest-bearing deposits $ 1,019,064     $ 1,037,001     $ 866,756     $ 762,155     $ 753,173  
Interest-bearing deposits 2,902,187     2,994,619     2,366,605     2,362,670     2,275,063  
Total deposits 3,921,251     4,031,620     3,233,361     3,124,825     3,028,236  
Subordinated debentures 118,080     118,067     105,540     56,807     56,807  
Federal Home Loan Bank advances 200,992     151,115         129,000     78,000  
Other borrowings 217,180     235,052     276,980     190,022     200,362  
Other liabilities 32,440     32,451     78,349     27,892     26,631  
Total liabilities 4,489,943     4,568,305     3,694,230     3,528,546     3,390,036  
Shareholders' equity 548,753     537,921     387,098     381,098     371,629  
Total liabilities and shareholders' equity $ 5,038,696     $ 5,106,226     $ 4,081,328     $ 3,909,644     $ 3,761,665  
                                       


 
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
($ in thousands) Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Jun 30,
 2016
LOAN PORTFOLIO                  
Commercial and industrial $ 1,796,342     $ 1,773,864     $ 1,632,714     $ 1,598,815     $ 1,540,457  
Commercial real estate 1,275,771     1,243,479     894,956     855,971     799,352  
Construction real estate 287,360     297,165     194,542     188,856     171,778  
Residential real estate 348,678     360,312     240,760     233,960     211,155  
Consumer and other 150,812     178,152     155,420     160,103     161,167  
Total portfolio loans 3,858,963     3,852,972     3,118,392     3,037,705     2,883,909  
Non-core acquired loans 35,807     38,092     39,769     47,449     56,529  
Total loans $ 3,894,770     $ 3,891,064     $ 3,158,161     $ 3,085,154     $ 2,940,438  
                   
DEPOSIT PORTFOLIO                  
Noninterest-bearing accounts $ 1,019,064     $ 1,037,001     $ 866,756     $ 762,155     $ 753,173  
Interest-bearing transaction accounts   803,104     844,775     731,539     633,100     628,505  
Money market and savings accounts 1,506,001     1,543,737     1,161,907     1,241,725     1,124,528  
Brokered certificates of deposit 133,606     145,436     117,145     137,592     166,507  
Other certificates of deposit 459,476     460,671     356,014     350,253     355,523  
Total deposit portfolio $ 3,921,251     $ 4,031,620     $ 3,233,361     $ 3,124,825     $ 3,028,236  
                   
AVERAGE BALANCES                  
Portfolio loans $ 3,839,266     $ 3,504,910     $ 3,067,124     $ 2,947,949     $ 2,868,430  
Non-core acquired loans 36,767     39,287     42,804     53,198     59,110  
Loans held for sale 4,994     6,547     6,273     10,224     6,102  
Debt and equity investments 667,781     637,226     527,601     527,516     528,120  
Interest-earning assets 4,641,198     4,259,198     3,767,272     3,589,080     3,506,801  
Total assets 5,017,213     4,573,588     3,993,132     3,814,918     3,734,192  
Deposits 3,909,600     3,568,759     3,242,561     3,069,156     2,931,888  
Shareholders' equity 546,282     472,077     386,147     377,861     366,132  
Tangible common equity 417,239     387,728     353,563     345,061     333,093  
                   
YIELDS (fully tax equivalent)                  
Portfolio loans 4.63 %   4.45 %   4.24 %   4.25 %   4.20 %
Non-core acquired loans 34.79 %   17.24 %   37.07 %   23.07 %   30.07 %
Total loans 4.92 %   4.59 %   4.69 %   4.58 %   4.72 %
Debt and equity investments 2.51 %   2.49 %   2.22 %   2.25 %   2.28 %
Interest-earning assets 4.49 %   4.21 %   4.21 %   4.18 %   4.30 %
Interest-bearing deposits 0.55 %   0.53 %   0.49 %   0.49 %   0.47 %
Total deposits 0.41 %   0.39 %   0.37 %   0.37 %   0.36 %
Subordinated debentures 4.37 %   4.19 %   3.64 %   2.59 %   2.56 %
Borrowed funds 0.64 %   0.49 %   0.27 %   0.32 %   0.35 %
Cost of paying liabilities 0.69 %   0.65 %   0.58 %   0.52 %   0.50 %
Net interest margin 3.98 %   3.73 %   3.79 %   3.80 %   3.93 %
                             


 
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
(in thousands, except % and per share data) Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Jun 30,
 2016
ASSET QUALITY                  
Net charge-offs (recoveries)1 $ 6,104     $ (56 )   $ 897     $ 1,038     $ (409 )
Nonperforming loans1 13,081     13,847     14,905     19,942     12,813  
Classified assets 93,795     86,879     93,452     101,545     87,532  
Nonperforming loans to total loans1 0.34 %   0.36 %   0.48 %   0.66 %   0.44 %
Nonperforming assets to total assets2 0.27 %   0.33 %   0.39 %   0.59 %   0.47 %
Allowance for loan losses to total loans1 0.96 %   1.03 %   1.20 %   1.23 %   1.23 %
Allowance for loan losses to nonperforming loans1 280.4 %   282.7 %   252.0 %   188.0 %   277.0 %
Net charge-offs (recoveries) to average loans (annualized)1   0.64 %   (0.01 )%   0.12 %   0.14 %   (0.06 )%
                   
WEALTH MANAGEMENT                  
Trust assets under management $ 1,279,836     $ 1,229,383     $ 1,033,577     $ 929,946     $ 897,322  
Trust assets under administration 2,024,958     1,875,424     1,652,471     1,535,033     1,490,389  
                   
MARKET DATA                  
Book value per common share $ 23.37     $ 22.95     $ 19.31     $ 19.07     $ 18.60  
Tangible book value per common share $ 18.01     $ 17.59     $ 17.69     $ 17.43     $ 16.95  
Market value per share $ 40.80     $ 42.40     $ 43.00     $ 31.25     $ 27.89  
Period end common shares outstanding 23,485     23,438     20,045     19,988     19,979  
Average basic common shares 23,475     21,928     20,009     19,997     20,003  
Average diluted common shares 23,732     22,309     20,309     20,224     20,216  
                   
CAPITAL                  
Total risk-based capital to risk-weighted assets 12.83 %   12.76 %   13.48 %   12.01 %   12.16 %
Tier 1 capital to risk-weighted assets 10.81 %   10.68 %   10.99 %   10.82 %   10.92 %
Common equity tier 1 capital to risk-weighted assets 9.33 %   9.20 %   9.52 %   9.33 %   9.38 %
Tangible common equity to tangible assets 8.56 %   8.28 %   8.76 %   8.99 %   9.08 %
                   
1 Excludes loans accounted for as Purchased credit impaired loans
2 Excludes non-core acquired loans and related assets, except for inclusion in total assets.
 


 
ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
  For the Quarter ended   For the Six Months ended
($ in thousands, except per share data) Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Jun 30,
 2016
  Jun 30,
 2017
  Jun 30,
 2016
CORE PERFORMANCE MEASURES        
Net interest income $ 45,633     $ 38,642     $ 35,454     $ 33,830     $ 33,783     $ 84,275     $ 66,211  
Less: Incremental accretion income 2,584     1,075     3,279     2,296     3,571     3,659     6,405  
Core net interest income 43,049     37,567     32,175     31,534     30,212     80,616     59,806  
                           
Total noninterest income 7,934     6,976     9,029     6,976     7,049     14,910     13,054  
Less: Gain (loss) on sale of other real estate from non-core acquired loans           1,085     (225 )   705         705  
Less: Other income from non-core acquired assets         95     287     239         239  
Less: Gain on sale of investment securities             86              
Core noninterest income 7,934     6,976     7,849     6,828     6,105     14,910     12,110  
                           
Total core revenue 50,983     44,543     40,024     38,362     36,317     95,526     71,916  
                           
Provision for portfolio loan losses 3,623     1,533     964     3,038     716     5,156     1,549  
                           
Total noninterest expense 32,651     26,736     23,181     20,814     21,353     59,387     42,115  
Less: Other expenses related to non-core acquired loans (16 )   123     172     270     325     107     652  
Less: Executive severance                 332         332  
Less: Facilities disposal 389         1,040             389      
Less: Merger related expenses 4,480     1,667     1,084     302         6,147      
Less: Other non-core expenses         (209 )       250         250  
Core noninterest expense 27,798     24,946     21,094     20,242     20,446     52,744     40,881  
                           
Core income before income tax expense 19,562     18,064     17,966     15,082     15,155     37,626     29,486  
Core income tax expense1 6,329     4,916     6,021     5,142     5,237     11,245     10,134  
Core net income $ 13,233     $ 13,148     $ 11,945     $ 9,940     $ 9,918     $ 26,381     $ 19,352  
                           
Core diluted earnings per share $ 0.56     $ 0.59     $ 0.59     $ 0.49     $ 0.49     $ 1.15     $ 0.96  
Core return on average assets 1.06 %   1.17 %   1.19 %   1.04 %   1.07 %   1.11 %   1.06 %
Core return on average common equity 9.72 %   11.29 %   12.31 %   10.47 %   10.89 %   10.44 %   10.78 %
Core return on average tangible common equity 12.72 %   13.75 %   13.44 %   11.46 %   11.98 %   13.22 %   11.87 %
Core efficiency ratio 54.52 %   56.01 %   52.70 %   52.77 %   56.30 %   55.21 %   56.85 %
                           
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
Net interest income $ 46,096     $ 39,147     $ 35,884     $ 34,263     $ 34,227     $ 85,243     $ 67,114  
Less: Incremental accretion income 2,584     1,075     3,279     2,296     3,571     3,659     6,405  
Core net interest income $ 43,512     $ 38,072     $ 32,605     $ 31,967     $ 30,656     $ 81,584     $ 60,709  
                           
Average earning assets $ 4,641,198     $ 4,259,198     $ 3,767,272     $ 3,589,080     $ 3,506,801     $ 4,451,253     $ 3,460,296  
Reported net interest margin 3.98 %   3.73 %   3.79 %   3.80 %   3.93 %   3.86 %   3.90 %
Core net interest margin 3.76 %   3.63 %   3.44 %   3.54 %   3.52 %   3.70 %   3.53 %
                           
1Non-core income tax expense calculated at 38% of non-core pretax income plus an estimate of taxes payable related to non-deductible JCB acquisition costs.
 


  At the Quarter ended
($ in thousands) Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Jun 30,
 2016
REGULATORY CAPITAL TO RISK-WEIGHTED ASSETS                                        
Shareholders' equity $ 548,753     $ 537,921     $ 387,098     $ 381,098     $ 371,629  
Less: Goodwill 116,186     113,886     30,334     30,334     30,334  
Less: Intangible assets, net of deferred tax liabilities   6,179     5,832     800     873     958  
Less: Unrealized gains (losses) 329     (1,174 )   (1,741 )   4,668     5,517  
Plus: Other 12     12     24     24     23  
Common equity tier 1 capital 426,071     419,389     357,729     345,247     334,843  
Plus: Qualifying trust preferred securities 67,600     67,600     55,100     55,100     55,100  
Plus: Other 48     48     36     35     35  
Tier 1 capital 493,719     487,037     412,865     400,382     389,978  
Plus: Tier 2 capital 91,874     94,700     93,484     44,006     44,124  
Total risk-based capital $ 585,593     $ 581,737     $ 506,349     $ 444,388     $ 434,102  
                   
Total risk-weighted assets $ 4,565,832     $ 4,557,860     $ 3,757,161     $ 3,699,757     $ 3,570,437  
                   
Common equity tier 1 capital to risk-weighted assets 9.33 %   9.20 %   9.52 %   9.33 %   9.38 %
Tier 1 capital to risk-weighted assets 10.81 %   10.69 %   10.99 %   10.82 %   10.92 %
Total risk-based capital to risk-weighted assets 12.83 %   12.76 %   13.48 %   12.01 %   12.16 %
                   
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity $ 548,753     $ 537,921     $ 387,098     $ 381,098     $ 371,629  
Less: Goodwill 116,186     113,886     30,334     30,334     30,334  
Less: Intangible assets 12,458     11,758     2,151     2,357     2,589  
Tangible common equity $ 420,109     $ 412,277     $ 354,613     $ 348,407     $ 338,706  
                   
Total assets $ 5,038,696     $ 5,106,226     $ 4,081,328     $ 3,909,644     $ 3,761,665  
Less: Goodwill 116,186     113,886     30,334     30,334     30,334  
Less: Intangible assets 12,458     11,758     2,151     2,357     2,589  
Tangible assets $ 4,910,052     $ 4,980,582     $ 4,048,843     $ 3,876,953     $ 3,728,742  
                   
Tangible common equity to tangible assets 8.56 %   8.28 %   8.76 %   8.99 %   9.08 %

 

For more information contact:
Investor Relations: Keene Turner, Executive Vice President and CFO (314) 512-7233
Media: Karen Loiterstein, Senior Vice President (314) 512-7141

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