Market Overview

Enterprise Financial Reports Third Quarter 2017 Results

Share:

Reported Third Quarter Highlights

  • Net income of $0.69 per diluted share
  • Return on average assets of 1.27%
  • Portfolio loans grew 14% on an annualized basis
  • Efficiency ratio decreased to 50.75%
  • Repurchase of 429,955 shares at an average price of $38.69

Third Quarter Core Highlights1

  • Net income of $0.66 per diluted share
  • Return on average assets of 1.21%
  • Net interest margin remained stable at 3.75%
  • Efficiency ratio decreased to 51.64%

ST. LOUIS, Oct. 23, 2017 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the "Company") reported net income of $16.3 million for the quarter ended September 30, 2017,  an increase of $4.4 million, or 36%, and $4.5 million, or 38%, as compared to the linked second quarter and prior year quarter, respectively. Net income per diluted share was $0.69 for the quarter ended September 30, 2017, an increase of $0.19 and $0.10, compared to $0.50 and $0.59 per diluted share for the linked second quarter and prior year period, respectively. The linked quarter increase was primarily due to lower noninterest expense and provision costs.

On a core basis1, the Company reported net income of $15.5 million, or $0.66 per diluted share, for the quarter ended September 30, 2017, compared to $13.2 million, or $0.56 per diluted share, in the linked second quarter. Third quarter 2017 core net income1 increased 56% from $9.9 million for the prior year period, and diluted core earnings per share1 grew 35% from $0.49 for the prior year period. The diluted earnings per share1 increase of $0.17 from the prior year period was primarily due to higher levels of core net interest income from continued growth in earning asset balances combined with 21 basis points of core net interest margin1 expansion. The increase from the linked second quarter resulted primarily from achievement of synergies from the acquisition of Jefferson County Bancshares, Inc. ("JCB"),  as well as a reduction in the provision for loan losses.

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

Jim Lally, EFSC's President and Chief Executive Officer, commented, "The third quarter was highlighted by record earnings on both a total and core basis. With acquisition integration efforts largely complete, the quarter's results highlighted the strength of our core earnings power. Core revenue1 grew 3%, including growth in fee income, while core noninterest expenses1 declined 3%. Core return on average assets1 of 1.21% represented increases of 15 basis points and 17 basis points from the linked quarter and prior year."

Lally added, "Portfolio loan growth of 14%, on an annualized basis, was well diversified across our markets and lending platforms. Additionally, we took steps to manage our overall capital levels prudently, returning $17 million to shareholders through share repurchases while maintaining strong capital positions to support future growth. In addition, we continue to opportunistically hire in support of sustained growth."

Net Interest Income

Net interest income in the third quarter remained stable from the linked second quarter at $45.6 million, but increased $11.8 million from the prior year period due to two full quarters of impact from 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 3.88% for the third quarter, compared to 3.98% in the linked second quarter, and 3.80% in the third quarter of 2016. Net interest margin decreased primarily from a decrease in contributions from non-core acquired assets.

The yield on portfolio loans improved to 4.69% in the third quarter, an increase of six basis points from the linked second quarter, and 44 basis points from the prior year quarter.  The increase was primarily due to the effect of increasing interest rates on our existing loan portfolio and higher interest rates on newly originated loans. The cost of total deposits was limited to a five basis point increase in the linked quarter and a nine basis point increase from the prior year quarter. The cost of interest-bearing liabilities increased nine basis points to 0.78% in the third quarter of 2017 from 0.69% in the linked second quarter, and is 26 basis points higher than 0.52% in the third 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) September 30,
 2017
  June 30,
 2017
  March 31,
 2017
  December 31,
 2016
  September 30,
 2016
Core net interest income1 44,069     43,049     37,567     32,175     31,534  
Core net interest margin1 3.75 %   3.76 %   3.63 %   3.44 %   3.54 %

Core net interest income1 increased by $1.0 million to $44.1 million, or 2% compared to the linked quarter, and increased $12.5 million, or 40%, 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 decreased one basis point to 3.75% from the linked quarter. Core net interest margin1 expanded 21 basis points from the prior year quarter, primarily due to increased yield on portfolio loans out-pacing the increase to borrowing costs, as well as purchase accounting impacts from the JCB acquisition. 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 ("PCI") loans. Approximately $48 million of loans in JCB's portfolio are also accounted for as PCI 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)   Sept 30,
2017
      June 30,
 2017
      JCB       Legacy
Enterprise
      Consolidated       Dec 31,
 2016
      Sept 30,
2016
 
Enterprise value
lending
$ 455,983     $ 433,766     $     $ 429,957     $ 429,957     $ 388,798     $ 394,923  
C&I - general 886,498     894,787     79,021     810,781     889,802     794,451     755,829  
Life insurance premium financing 330,957     317,848         312,335     312,335     305,779     298,845  
Tax credits 188,497     149,941         141,770     141,770     143,686     149,218  
CRE, construction, and land development 1,638,521     1,563,131     465,736     1,074,908     1,540,644     1,089,498     1,044,827  
Residential real estate 341,695     348,678     121,232     239,080     360,312     240,760     233,960  
Consumer and other 154,350     150,812     12,420     165,732     178,152     155,420     160,103  
Portfolio loans $ 3,996,501     $ 3,858,963     $ 678,409     $ 3,174,563     $ 3,852,972     $ 3,118,392     $ 3,037,705  
                           
Portfolio loan yield 4.69 %   4.63 %           4.45 %   4.24 %   4.25 %

Portfolio loans were $4.0 billion at September 30, 2017, increasing $138 million, or 14% annualized, when compared to the linked quarter. On a year over year basis, portfolio loans increased $959 million, of which $281 million, or 9%, was organic loan growth and $678 million was from the acquisition of JCB. The Company continues to expect portfolio loan growth, excluding the acquisition of JCB, at or above 10% for 2017. For 2018, the Company expects organic loan growth in dollars to be at least equivalent to 2017 levels. With continued organic growth and the impact of the JCB acquisition increasing portfolio loan balances, 2018 portfolio loan growth is expected to be approximately 7% - 9%.

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 $66 million during the third quarter of 2017 from the linked second quarter and represented 47% of the Company's loan portfolio at September 30, 2017.

Since September 30, 2016, C&I loans have grown organically by $184 million, or 12% to $1.9 billion. C&I loan growth supports management's efforts to maintain the Company's asset sensitive interest rate risk position. At September 30, 2017, and June 30, 2017,  57% of portfolio loans had variable interest rates, as compared to 64% at September 30, 2016. The change from 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 $34.2 million at September 30, 2017, a decrease of $1.7 million, or  5% from the linked second quarter, and $13.3 million, or 28%, from the prior year period, primarily as a result of principal payments and loan payoffs.

Non-core acquired loans contributed $1.0 million of net earnings in the third quarter of 2017, compared to $1.7 million in the linked second quarter. At September 30, 2017, the remaining accretable yield on the portfolio was estimated to be $10 million and the non-accretable difference was approximately $15 million. Accelerated cash flows and other incremental accretion from PCI loans was $1.6 million for the quarter ended September 30, 2017, $2.6 million for the linked quarter, and $2.3 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) September 30,
 2017
  June 30,
 2017
  March 31,
 2017
   December 31,
 2016
  September 30,
 2016
Nonperforming loans $ 8,985     $ 13,081     $ 13,847     $ 14,905     $ 19,942  
Other real estate 491     529     2,925     980     2,959  
Nonperforming assets $ 9,476     $ 13,610     $ 16,772     $ 15,885     $ 22,901  
Nonperforming loans to total loans a 0.23 %   0.34 %   0.36 %   0.48 %   0.66 %
Nonperforming assets to total assets 0.18 %   0.27 %   0.33 %   0.39 %   0.59 %
Allowance for portfolio loan losses to total loans a 0.97 %   0.96 %   1.03 %   1.20 %   1.23 %
Net charge-offs (recoveries) $ 803     $ 6,104     $ (56 )   $ 897     $ 1,038  

a Excludes loans accounted for as PCI loans

At September 30, 2017, nonperforming loans decreased to 0.23% of portfolio loans, and nonperforming assets declined to 0.18% of total assets.  Nonperforming loans decreased 31% to $9.0 million at September 30, 2017, from $13.1 million at June 30, 2017, and decreased 55% from $19.9 million at September 30, 2016. During the quarter, nonperforming loan activity included $4.8 million in paydowns.

The Company recorded provision for portfolio loan losses of $2.4 million compared to $3.6 million in the linked quarter and $3.0 million in the prior year period. The provision is reflective of the decline in net chargeoffs, growth in portfolio loan balances, and maintaining a prudent credit risk posture. The allowance for portfolio loan losses to portfolio loans was 0.97% at  September 30, 2017.

Deposits

The following table presents deposits broken out by type:


  At the Quarter ended
          March 31, 2017      
($ in thousands) Sept 30,
2017
  June 30,
 2017
  JCB   Legacy
Enterprise
  Consolidated   Dec 31,
 2016
  Sept 30,
2016
Noninterest-bearing accounts $ 1,047,910     $ 1,019,064     $ 168,775     $ 868,226     $ 1,037,001     $ 866,756     $ 762,155  
Interest-bearing transaction accounts 814,338     803,104     96,207     748,568     844,775     731,539     633,100  
Money market and savings accounts 1,579,767     1,506,001     371,000     1,172,737     1,543,737     1,161,907     1,241,725  
Brokered certificates of deposit 170,701     133,606         145,436     145,436     117,145     137,592  
Other certificates of deposit 446,495     459,476     138,012     322,659     460,671     356,014     350,253  
Total deposit portfolio $ 4,059,211     $ 3,921,251     $ 773,994     $ 3,257,626     $ 4,031,620     $ 3,233,361     $ 3,124,825  
 

Total deposits at September 30, 2017 were $4.1 billion, an increase of $138 million, or 4% from June 30, 2017, and an increase of $934 million, or 30%, from September 30, 2016. Core deposits, defined as total deposits excluding certificates of deposits, were $3.4 billion at September 30, 2017, an increase of $114 million, or 3% from the linked quarter, and an increase of $805 million, or 31%, when compared to the prior year period.  The overall positive trends in deposits reflect continued progress across our business lines, expected seasonality, and the acquisition of JCB.

Noninterest-bearing deposits increased $29 million compared to June 30, 2017, and increased $286 million compared to September 30, 2016.  The composition of noninterest-bearing deposits remained relatively stable at 26% of total deposits at September 30, 2017, and June 30, 2017, compared to 24% at September 30, 2016.  The total cost of deposits was limited to an increase of five basis points and totaled 0.46% compared to 0.41% at June 30, 2017. The cost of deposits increased nine basis points since September 30, 2016.

Noninterest Income

Total noninterest income was $8.4 million for the quarter ended September 30, 2017. Deposit service charges for the third quarter of 2017 of $2.8 million remained solid for the quarter, and grew 28% when compared to the prior year quarter, due primarily to the acquisition of JCB and growth in client base.

Wealth management revenues for the third quarter of 2017 of $2.1 million grew 22% when compared to the prior year period, due to the JCB acquisition and addition of new clients.Trust assets under management were $1.3 billion at September 30, 2017, an increase of $39 million, or 3%, when compared to June 30, 2017, and an increase of $389 million, or 42%, when compared to the prior year period. The increase from the linked quarter was primarily due to market appreciation and new customers.

Card services revenue increased 5% to $1.5 million compared to the linked quarter and increased $0.7 million, or  81% compared to the prior year period from the JCB acquisition and continued benefit from new and expanded use by customers of its in-house credit card, merchant and debit card products and services.

The Company expects continued growth in fee income of 5% - 7% for 2018.

Noninterest Expenses

Noninterest expenses were $27.4 million for the quarter ended September 30, 2017, compared to $32.7 million for the quarter ended June 30, 2017, and $20.8 million for the quarter ended September 30, 2016. Noninterest expenses for the quarter included $0.3 million of merger related expenses compared to $4.5 million in the linked second quarter. Core noninterest expenses1 were $27.1 million for the quarter ended September 30, 2017, compared to $27.8 million for the linked quarter, and $20.2 million for the prior year period. The decrease from the linked quarter was primarily due to the continued cost efficiencies obtained in the integration of JCB. The synergies realized from JCB were partially offset by $0.4 million of amortization of a new tax credit investment, which benefits our effective tax rate.

The Company's core efficiency ratio1 decreased to 51.6% for the quarter ended September 30, 2017, compared to 54.5% for the linked quarter, and 52.8% for the prior year period, and reflects continuing efforts to leverage its expense base and execution of the initiatives necessary to realize the expected cost savings from the JCB acquisition. The conversion of JCB's core systems was completed late in the second quarter of 2017. The Company expects to continue to invest in revenue producing associates and other infrastructure that supports additional growth. These investments are expected to result in expense growth, at a rate of 35% - 45% of projected revenue growth for 2018, resulting in modest improvement to the Company's efficiency ratio.

Income Taxes

The Company's effective tax rate was 32.5% for the quarter ended September 30, 2017 compared to 31.7% for the quarter ended June 30, 2017, and 34.8% for the quarter ended September 30, 2016. The increase in the quarter resulted primarily from increased pre-tax earnings, which lessen the rate impact of permanent tax differences, and lower excess tax benefits from equity compensation awards due to a new accounting standard adopted this year. These increases were partially offset by the benefit of the aforementioned tax credit investment and other income tax planning initiatives.

Capital

The total risk based capital ratio1 was 12.33% at September 30, 2017, compared to 12.84% at June 30, 2017, and 12.01% at September 30, 2016. The Company's Common equity tier 1 capital ratio1 was 8.93% at September 30, 2017, compared to 9.34% at June 30, 2017, and 9.33% at September 30, 2016. The tangible common equity ratio1 was 8.18% at September 30, 2017, versus 8.56% at June 30, 2017, and 8.99% at September 30, 2016. In the third quarter of 2017, as part of its capital management efforts, the Company repurchased 429,955 shares of its common stock for $16.6 million pursuant to its publicly announced program. The repurchase of these shares is the primary reason for the decline in capital ratios this quarter.

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.

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

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, October 24, 2017.  During the call, management will review the third 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 1-877-830-2636 (Conference ID #6750100.)  A recorded replay of the conference call will be available on the website two hours after the call's completion.  Visit http://bit.ly/EFSC3QEarnings 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," 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.


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
 
  For the Quarter ended   For the Nine Months ended
($ in thousands, except per share data) Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Sep 30,
 2017
  Sep 30,
 2016
EARNINGS SUMMARY                          
Net interest income $ 45,625     $ 45,633     $ 38,642     $ 35,454     $ 33,830     $ 129,900     $ 100,041  
Provision for portfolio loan losses 2,422     3,623     1,533     964     3,038     7,578     4,587  
Provision reversal for purchased credit impaired loan losses     (207 )   (148 )   (343 )   (1,194 )   (355 )   (1,603 )
Noninterest income 8,372     7,934     6,976     9,029     6,976     23,282     20,030  
Noninterest expense 27,404     32,651     26,736     23,181     20,814     86,791     62,929  
Income before income tax expense 24,171     17,500     17,497     20,681     18,148     59,168     54,158  
Income tax expense 7,856     5,545     5,106     7,053     6,316     18,507     18,949  
Net income $ 16,315     $ 11,955     $ 12,391     $ 13,628     $ 11,832     $ 40,661     $ 35,209  
                           
Diluted earnings per share $ 0.69     $ 0.50     $ 0.56     $ 0.67     $ 0.59     $ 1.75     $ 1.74  
Return on average assets 1.27 %   0.96 %   1.10 %   1.36 %   1.23 %   1.11 %   1.26 %
Return on average common equity 11.69 %   8.78 %   10.65 %   14.04 %   12.46 %   10.37 %   12.83 %
Return on average tangible common equity 15.23 %   11.49 %   12.96 %   15.33 %   13.64 %   13.25 %   14.10 %
Net interest margin (fully tax equivalent) 3.88 %   3.98 %   3.73 %   3.79 %   3.80 %   3.87 %   3.87 %
Efficiency ratio 50.75 %   60.95 %   58.61 %   52.11 %   51.01 %   56.66 %   52.41 %
                           


CORE PERFORMANCE SUMMARY (NON-GAAP)1                    
Net interest income $ 44,069     $ 43,049     $ 37,567     $ 32,175     $ 31,534     $ 124,685     $ 91,340  
Provision for portfolio loan losses 2,422     3,623     1,533     964     3,038     7,578     4,587  
Noninterest income 8,350     7,934     6,976     7,849     6,828     23,260     18,938  
Noninterest expense 27,070     27,798     24,946     21,094     20,242     79,814     61,123  
Income before income tax expense 22,927     19,562     18,064     17,966     15,082     60,553     44,568  
Income tax expense 7,391     6,329     4,916     6,021     5,142     18,636     15,276  
Net income $ 15,536     $ 13,233     $ 13,148     $ 11,945     $ 9,940     $ 41,917     $ 29,292  
                           
Diluted earnings per share $ 0.66     $ 0.56     $ 0.59     $ 0.59     $ 0.49     $ 1.81     $ 1.45  
Return on average assets 1.21 %   1.06 %   1.17 %   1.19 %   1.04 %   1.14 %   1.05 %
Return on average common equity 11.13 %   9.72 %   11.29 %   12.31 %   10.47 %   10.69 %   10.67 %
Return on average tangible common equity 14.50 %   12.72 %   13.75 %   13.44 %   11.46 %   13.66 %   11.73 %
Net interest margin (fully tax equivalent) 3.75 %   3.76 %   3.63 %   3.44 %   3.54 %   3.71 %   3.53 %
Efficiency ratio 51.64 %   54.52 %   56.01 %   52.70 %   52.77 %   53.95 %   55.43 %
                           
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 Nine Months ended
($ in thousands, except per share data) Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
    Dec 31,
 2016
  Sep 30,
 2016
   Sep 30,
 2017
  Sep 30,
 2016
INCOME STATEMENTS                                                       
NET INTEREST INCOME                                                      
Total interest income $ 52,468     $ 51,542     $ 43,740     $ 39,438     $ 37,293     $ 147,750     $ 109,786  
Total interest expense 6,843     5,909     5,098     3,984     3,463     17,850     9,745  
Net interest income 45,625     45,633     38,642     35,454     33,830     129,900     100,041  
Provision for portfolio loan losses 2,422     3,623     1,533     964     3,038     7,578     4,587  
Provision reversal for purchased credit impaired loans     (207 )   (148 )   (343 )   (1,194 )   (355 )   (1,603 )
Net interest income after provision for loan losses 43,203     42,217     37,257     34,833     31,986     122,677     97,057  
                           
NONINTEREST INCOME                          
Deposit service charges 2,820     2,816     2,510     2,184     2,200     8,146     6,431  
Wealth management revenue 2,062     2,054     1,833     1,729     1,694     5,949     5,000  
Card services revenue 1,459     1,392     1,037     894     804     3,888     2,236  
State tax credit activity, net 77     9     246     1,748     228     332     899  
Gain (loss) on sale of other real estate     17         1,235     (226 )   17     602  
Gain on sale of investment securities 22                 86     22     86  
Other income 1,932     1,646     1,350     1,239     2,190     4,928     4,776  
Total noninterest income 8,372     7,934     6,976     9,029     6,976     23,282     20,030  
                           
NONINTEREST EXPENSE                          
Employee compensation and benefits 15,090     15,798     15,208     12,448     12,091     46,096     37,398  
Occupancy 2,434     2,265     1,929     1,892     1,705     6,628     4,997  
Merger related expenses 315     4,480     1,667     1,084     302     6,462     302  
Other 9,565     10,108     7,932     7,757     6,716     27,605     20,232  
Total noninterest expense 27,404     32,651     26,736     23,181     20,814     86,791     62,929  
                           
Income before income tax expense 24,171     17,500     17,497     20,681     18,148     59,168     54,158  
Income tax expense 7,856     5,545     5,106     7,053     6,316     18,507     18,949  
Net income $ 16,315     $ 11,955     $ 12,391     $ 13,628     $ 11,832     $ 40,661     $ 35,209  
                           
Basic earnings per share $ 0.70     $ 0.51     $ 0.57     $ 0.68     $ 0.59     $ 1.77     $ 1.76  
Diluted earnings per share 0.69     0.50     0.56     0.67     0.59     1.75     1.74  


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  At the Quarter ended
($ in thousands) Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
BALANCE SHEETS                                      
ASSETS                                      
Cash and due from banks $ 76,777     $ 77,815     $ 73,387     $ 54,288     $ 56,789  
Interest-earning deposits 108,976     41,419     138,309     145,494     63,690  
Debt and equity investments 708,725     727,975     697,143     556,100     540,429  
Loans held for sale 6,411     4,285     5,380     9,562     7,663  
                   
Portfolio loans 3,996,501     3,858,962     3,852,972     3,118,392     3,037,705  
  Less:  Allowance for loan losses 38,292     36,673     39,148     37,565     37,498  
Portfolio loans, net 3,958,209     3,822,289     3,813,824     3,080,827     3,000,207  
Non-core acquired loans, net of the allowance for loan losses 29,258     30,682     32,615     33,925     41,016  
Total loans, net 3,987,467     3,852,971     3,846,439     3,114,752     3,041,223  
                   
Other real estate 491     529     2,925     980     2,959  
Fixed assets, net 32,803     33,987     34,291     14,910     14,498  
State tax credits, held for sale 35,291     35,247     35,431     38,071     44,180  
Goodwill 117,345     116,186     113,886     30,334     30,334  
Intangible assets, net 11,745     12,458     11,758     2,151     2,357  
Other assets 145,457     135,824     147,277     114,686     105,522  
Total assets $ 5,231,488     $ 5,038,696     $ 5,106,226     $ 4,081,328     $ 3,909,644  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Noninterest-bearing deposits $ 1,047,910     $ 1,019,064     $ 1,037,001     $ 866,756     $ 762,155  
Interest-bearing deposits 3,011,301     2,902,187     2,994,619     2,366,605     2,362,670  
Total deposits 4,059,211     3,921,251     4,031,620     3,233,361     3,124,825  
Subordinated debentures 118,093     118,080     118,067     105,540     56,807  
Federal Home Loan Bank advances 248,868     200,992     151,115         129,000  
Other borrowings 209,104     217,180     235,052     276,980     190,022  
Other liabilities 49,876     32,440     32,451     78,349     27,892  
Total liabilities 4,685,152     4,489,943     4,568,305     3,694,230     3,528,546  
Shareholders' equity 546,336     548,753     537,921     387,098     381,098  
Total liabilities and shareholders' equity $ 5,231,488     $ 5,038,696     $ 5,106,226     $ 4,081,328     $ 3,909,644  


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
($ in thousands) Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
LOAN PORTFOLIO                                       
Commercial and industrial $ 1,861,935     $ 1,796,342     $ 1,773,864     $ 1,632,714     $ 1,598,815  
Commercial real estate 1,332,111     1,275,771     1,243,479     894,956     855,971  
Construction real estate 306,410     287,360     297,165     194,542     188,856  
Residential real estate 341,695     348,678     360,312     240,760     233,960  
Consumer and other 154,350     150,812     178,152     155,420     160,103  
Total portfolio loans 3,996,501     3,858,963     3,852,972     3,118,392     3,037,705  
Non-core acquired loans 34,157     35,807     38,092     39,769     47,449  
Total loans $ 4,030,658     $ 3,894,770     $ 3,891,064     $ 3,158,161     $ 3,085,154  
                   
DEPOSIT PORTFOLIO                  
Noninterest-bearing accounts $ 1,047,910     $ 1,019,064     $ 1,037,001     $ 866,756     $ 762,155  
Interest-bearing transaction accounts 814,338     803,104     844,775     731,539     633,100  
Money market and savings accounts 1,579,767     1,506,001     1,543,737     1,161,907     1,241,725  
Brokered certificates of deposit 170,701     133,606     145,436     117,145     137,592  
Other certificates of deposit 446,495     459,476     460,671     356,014     350,253  
Total deposit portfolio $ 4,059,211     $ 3,921,251     $ 4,031,620     $ 3,233,361     $ 3,124,825  
                   
AVERAGE BALANCES                  
Portfolio loans $ 3,899,493     $ 3,839,266     $ 3,504,910     $ 3,067,124     $ 2,947,949  
Non-core acquired loans 35,120     36,767     39,287     42,804     53,198  
Loans held for sale 5,144     4,994     6,547     6,273     10,224  
Debt and equity investments 711,056     667,781     637,226     527,601     527,516  
Interest-earning assets 4,712,672     4,641,198     4,259,198     3,767,272     3,589,080  
Total assets 5,095,494     5,017,213     4,573,588     3,993,132     3,814,918  
Deposits 3,932,038     3,909,600     3,568,759     3,242,561     3,069,156  
Shareholders' equity 553,713     546,282     472,077     386,147     377,861  
Tangible common equity 425,056     417,239     387,728     353,563     345,061  
                   
YIELDS (fully tax equivalent)                  
Portfolio loans 4.69 %   4.63 %   4.45 %   4.24 %   4.25 %
Non-core acquired loans 23.82 %   34.79 %   17.24 %   37.07 %   23.07 %
Total loans 4.86 %   4.92 %   4.59 %   4.69 %   4.58 %
Debt and equity investments 2.49 %   2.51 %   2.49 %   2.22 %   2.25 %
Interest-earning assets 4.45 %   4.49 %   4.21 %   4.21 %   4.18 %
Interest-bearing deposits 0.62 %   0.55 %   0.53 %   0.49 %   0.49 %
Total deposits 0.46 %   0.41 %   0.39 %   0.37 %   0.37 %
Subordinated debentures 4.42 %   4.37 %   4.19 %   3.64 %   2.59 %
Borrowed funds 0.85 %   0.64 %   0.49 %   0.27 %   0.32 %
Cost of paying liabilities 0.78 %   0.69 %   0.65 %   0.58 %   0.52 %
Net interest margin 3.88 %   3.98 %   3.73 %   3.79 %   3.80 %


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
(in thousands, except % and per share data) Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
ASSET QUALITY                                      
Net charge-offs (recoveries)1 $ 803     $ 6,104     $ (56 )   $ 897     $ 1,038  
Nonperforming loans1 8,985     13,081     13,847     14,905     19,942  
Classified assets 80,757     93,795     86,879     93,452     101,545  
Nonperforming loans to total loans1 0.23 %   0.34 %   0.36 %   0.48 %   0.66 %
Nonperforming assets to total assets2 0.18 %   0.27 %   0.33 %   0.39 %   0.59 %
Allowance for loan losses to total loans1 0.97 %   0.96 %   1.03 %   1.20 %   1.23 %
Allowance for loan losses to nonperforming loans1 426.2 %   280.4 %   282.7 %   252.0 %   188.0 %
Net charge-offs (recoveries) to average loans (annualized)1 0.08 %   0.64 %   (0.01 )%   0.12 %   0.14 %
                   
WEALTH MANAGEMENT                  
Trust assets under management $ 1,319,123     $ 1,279,836     $ 1,229,383     $ 1,033,577     $ 929,946  
Trust assets under administration 2,102,800     2,024,958     1,875,424     1,652,471     1,535,033  
                   
MARKET DATA                  
Book value per common share $ 23.69     $ 23.37     $ 22.95     $ 19.31     $ 19.07  
Tangible book value per common share $ 18.09     $ 17.89     $ 17.59     $ 17.69     $ 17.43  
Market value per share $ 42.35     $ 40.80     $ 42.40     $ 43.00     $ 31.25  
Period end common shares outstanding 23,063     23,485     23,438     20,045     19,988  
Average basic common shares 23,324     23,475     21,928     20,009     19,997  
Average diluted common shares 23,574     23,732     22,309     20,309     20,224  
                   
CAPITAL                  
Total risk-based capital to risk-weighted assets 12.33 %   12.84 %   12.76 %   13.48 %   12.01 %
Tier 1 capital to risk-weighted assets 10.36 %   10.82 %   10.68 %   10.99 %   10.82 %
Common equity tier 1 capital to risk-weighted assets 8.93 %   9.34 %   9.20 %   9.52 %   9.33 %
Tangible common equity to tangible assets 8.18 %   8.56 %   8.28 %   8.76 %   8.99 %
                   
1 Excludes loans accounted for as PCI loans.            
2 Excludes PCI 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 Nine Months ended
($ in thousands, except per share data) Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  Sep 30,
 2017
  Sep 30,
 2016
CORE PERFORMANCE MEASURES                                                      
Net interest income $ 45,625     $ 45,633     $ 38,642     $ 35,454     $ 33,830     $ 129,900     $ 100,041  
Less: Incremental accretion income 1,556     2,584     1,075     3,279     2,296     5,215     8,701  
Core net interest income 44,069     43,049     37,567     32,175     31,534     124,685     91,340  
                           
Total noninterest income 8,372     7,934     6,976     9,029     6,976     23,282     20,030  
Less: Gain (loss) on sale of other real estate from non-core acquired loans             1,085     (225 )       480  
Less: Other income from non-core acquired assets             95     287         526  
Less: Gain on sale of investment securities 22                 86     22     86  
Core noninterest income 8,350     7,934     6,976     7,849     6,828     23,260     18,938  
                           
Total core revenue 52,419     50,983     44,543     40,024     38,362     147,945     110,278  
                           
Provision for portfolio loan losses 2,422     3,623     1,533     964     3,038     7,578     4,587  
                           
Total noninterest expense 27,404     32,651     26,736     23,181     20,814     86,791     62,929  
Less: Other expenses related to non-core acquired loans 19     (16 )   123     172     270     126     922  
Less: Executive severance                         332  
Less: Facilities disposal     389         1,040         389      
Less: Merger related expenses 315     4,480     1,667     1,084     302     6,462     302  
Less: Other non-core expenses             (209 )           250  
Core noninterest expense 27,070     27,798     24,946     21,094     20,242     79,814     61,123  
                           
Core income before income tax expense 22,927     19,562     18,064     17,966     15,082     60,553     44,568  
Core income tax expense1 7,391     6,329     4,916     6,021     5,142     18,636     15,276  
Core net income $ 15,536     $ 13,233     $ 13,148     $ 11,945     $ 9,940     $ 41,917     $ 29,292  
                           
Core diluted earnings per share $ 0.66     $ 0.56     $ 0.59     $ 0.59     $ 0.49     $ 1.81     $ 1.45  
Core return on average assets 1.21 %   1.06 %   1.17 %   1.19 %   1.04 %   1.14 %   1.05 %
Core return on average common equity 11.13 %   9.72 %   11.29 %   12.31 %   10.47 %   10.69 %   10.67 %
Core return on average tangible common equity 14.50 %   12.72 %   13.75 %   13.44 %   11.46 %   13.66 %   11.73 %
Core efficiency ratio 51.64 %   54.52 %   56.01 %   52.70 %   52.77 %   53.95 %   55.43 %
                           
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)        
Net interest income $ 46,047     $ 46,096     $ 39,147     $ 35,884     $ 34,263     $ 131,290     $ 101,377  
Less: Incremental accretion income 1,556     2,584     1,075     3,279     2,296     5,215     8,701  
Core net interest income $ 44,491     $ 43,512     $ 38,072     $ 32,605     $ 31,967     $ 126,075     $ 92,676  
                           
Average earning assets $ 4,712,672     $ 4,641,198     $ 4,259,198     $ 3,767,272     $ 3,589,080     $ 4,539,350     $ 3,503,538  
Reported net interest margin 3.88 %   3.98 %   3.73 %   3.79 %   3.80 %   3.87 %   3.87 %
Core net interest margin 3.75 %   3.76 %   3.63 %   3.44 %   3.54 %   3.71 %   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) Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
REGULATORY CAPITAL TO RISK-WEIGHTED ASSETS                                      
Shareholders' equity $ 546,336     $ 548,753     $ 537,921     $ 387,098     $ 381,098  
Less: Goodwill 117,345     116,186     113,886     30,334     30,334  
Less: Intangible assets, net of deferred tax liabilities 5,825     6,179     5,832     800     873  
Less: Unrealized gains (losses) (489 )   329     (1,174 )   (1,741 )   4,668  
Plus: Other 12     12     12     24     24  
Common equity tier 1 capital 423,667     426,071     419,389     357,729     345,247  
Plus: Qualifying trust preferred securities 67,600     67,600     67,600     55,100     55,100  
Plus: Other 48     48     48     36     35  
Tier 1 capital 491,315     493,719     487,037     412,865     400,382  
Plus: Tier 2 capital 93,616     91,874     94,700     93,484     44,006  
Total risk-based capital $ 584,931     $ 585,593     $ 581,737     $ 506,349     $ 444,388  
                   
Total risk-weighted assets $ 4,743,779     $ 4,562,322     $ 4,557,860     $ 3,757,161     $ 3,699,757  
                   
Common equity tier 1 capital to risk-weighted assets 8.93 %   9.34 %   9.20 %   9.52 %   9.33 %
Tier 1 capital to risk-weighted assets 10.36 %   10.82 %   10.69 %   10.99 %   10.82 %
Total risk-based capital to risk-weighted assets 12.33 %   12.84 %   12.76 %   13.48 %   12.01 %
                   
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity $ 546,336     $ 548,753     $ 537,921     $ 387,098     $ 381,098  
Less: Goodwill 117,345     116,186     113,886     30,334     30,334  
Less: Intangible assets 11,745     12,458     11,758     2,151     2,357  
Tangible common equity $ 417,246     $ 420,109     $ 412,277     $ 354,613     $ 348,407  
                   
Total assets $ 5,231,488     $ 5,038,696     $ 5,106,226     $ 4,081,328     $ 3,909,644  
Less: Goodwill 117,345     116,186     113,886     30,334     30,334  
Less: Intangible assets 11,745     12,458     11,758     2,151     2,357  
Tangible assets $ 5,102,398     $ 4,910,052     $ 4,980,582     $ 4,048,843     $ 3,876,953  
                   
Tangible common equity to tangible assets 8.18 %   8.56 %   8.28 %   8.76 %   8.99 %

 

Primary Logo

View Comments and Join the Discussion!