Market Overview

Enterprise Financial Reports Fourth Quarter and Full 2017 Year Results

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2017 Reported Highlights

  • Net income of $48.2 million, or $2.07 per diluted share
  • Deferred tax asset ("DTA") revaluation charge of $12.1 million, or $0.52 per diluted share
  • Portfolio loans grew 30%, 9% excluding acquired loans
  • Commercial and industrial ("C&I") loans grew 18%, 13% excluding acquired loans

2017 Core Highlights1

  • Net income of $59.9 million, or $2.58 per diluted share
  • Return on average assets of 1.20%
  • Net interest margin increased 21 basis points to 3.72%
  • Efficiency ratio improved to 52.93%

Reported Fourth Quarter Highlights

  • Net income of $7.5 million, or $0.32 per diluted share, reflects DTA revaluation
  • Portfolio loans grew 7%2 and C&I loans grew 12%2

Fourth Quarter Core Highlights1

  • Net income of $18.0 million, or $0.77 per diluted share
  • Return on average assets of 1.37%
  • Efficiency ratio improved to 50.24%

ST. LOUIS, Jan. 22, 2018 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the "Company" or "EFSC") reported net income of $48.2 million, or $2.07 per diluted share, for the year ended December 31, 2017. The net income year over year increased from earnings of the acquisition of Jefferson County Bancshares, Inc. ("JCB") and organic growth coupled with net interest margin expansion. However, reported earnings declined from $48.8 million, or $2.41 per diluted share, from the prior year due to the DTA revaluation charge of $12.1 million, within income tax expense, due to U.S. corporate income tax reform. Refer to the Income Tax section below for additional discussion on the DTA revaluation.

The Company recorded net income of $7.5 million, or $0.32 per diluted share, for the quarter ended December 31, 2017, compared to $16.3 million, or $0.69 per diluted share, for the linked quarter. As a result, earnings per share decreased 54% primarily from the aforementioned DTA revaluation. This decline was partially offset by seasonally strong sales of state tax credits in addition to continued earnings expansion due to organic growth.

On a core basis1, the Company reported net income of $59.9 million, or $2.58 per diluted share, for the year ended December 31, 2017, compared to $41.2 million, or $2.03 per diluted share in 2016. Core net income1 for the fourth quarter of 2017 was $18.0 million, or $0.77 per diluted share, compared to $15.5 million, or $0.66 per diluted share for the linked quarter. Core earnings per share1 and net income for both the fourth quarter and full year 2017 excluded negative impacts from DTA revaluation of $0.52 per share ($12.1 million). Full year 2017 also excluded merger-related expenses of $0.18 (or $4.5 million after tax), and income from non-core acquired loans of $0.20 per share ($5.4 million after tax).

The Company's Board of Directors approved the Company's quarterly dividend of $0.11 per common share, payable on March 30, 2018 to shareholders of record as of March 15, 2018.

Jim Lally, EFSC's President and Chief Executive Officer, commented, "The fourth quarter and full year 2017 were both highlighted by record earnings on a core basis. Continued execution of our strategy, coupled with seasonally strong tax credit revenues, drove a fourth quarter core return on assets of 1.37%, which was an improvement of 18 basis points year over year and 16 basis points sequentially. For the full year, portfolio loans grew 9%, core net interest margin expanded 21 basis points, and our core efficiency ratio improved 2% to 53%."

Lally added, "Our Company is positioned extremely well moving into 2018. Corporate tax reform will improve our earnings power, and we expect to earn back the deferred tax asset charge of $12 million within one year."

Net Interest Income

Net interest income for 2017 totaled $177.3 million, an increase of $41.8 million, or 31%, compared to $135.5 million for 2016. Core net interest income1 growth of $46.1 million was due to approximately 11 months of net interest income from the acquisition of JCB, organic growth in portfolio loan balances funded principally by core deposits1, and a 21 basis point expansion of core net interest margin1 discussed below. Additionally, non-core acquired assets1 contributed $7.7 million to net interest income during 2017, but continued declining balances in this portfolio led to a $4.3 million decline from 2016 levels. This trend mitigated the impact of the expansion in core net interest margin1, as reported net interest margin for 2017 expanded four basis points to 3.88%.

Net interest income for the fourth quarter increased to $47.4 million, or $1.8 million, from the third quarter of 2017. Core net interest income1 expanded by $0.8 million due to an increase in average earning assets of $114 million in the quarter, driven by the previously discussed portfolio loan and deposit growth trends. The earnings from asset growth outpaced a two basis point decline in core net interest margin1 to expand core net interest income1 for the fourth quarter. Additionally, incremental accretion income on non-core acquired assets1 increased to $2.5 million from $1.6 million, due to additional accelerations in the portfolio which increased net interest margin five basis points to 3.93%.

Core net interest margin1 excludes incremental accretion on non-core acquired loans. See the table below for a quarterly comparison.

             
  For the Quarter ended
      For the Year ended
 
    December 31,     September 30,   December 31,   December 31,   December 31,
($ in thousands)   2017     2017   2016   2017   2016
Core net interest income1 $ 44,901     $ 44,069     $ 32,175     $ 169,586     $ 123,515  
Core net interest margin1   3.73 %     3.75 %     3.44 %     3.72 %     3.51 %
                                       

Core net interest margin1 increased 21 basis points to 3.72% during 2017. This increase was primarily due to the impact of interest rate increases on the Company's asset sensitive balance sheet. Specifically, the yield on portfolio loans increased 41 basis points to 4.63% from 4.22% due to the effect of increasing interest rates on the existing variable-rate loan portfolio and higher rates on newly originated loans. The increased cost of total deposits was limited to eight basis points and was 0.44% for 2017. The cost of total interest-bearing liabilities increased 22 basis points to 0.74%, which included the impact of the issuance of $50 million of 4.75% subordinated debentures in November 2016.

Fourth quarter core net interest margin1 was 3.73%, a decrease of two basis points resulting from changes in the composition and timing of deposit and loan growth during the period. The yield on portfolio loans further improved to 4.71%, while the cost of total deposits increased four basis points to 0.50%. As a result, overall funding costs increased six basis points and the yield on interest earning assets improved nine basis points to 4.54%.

The Company continues to manage its balance sheet to grow core net income and expects to maintain core net interest margin1 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 $44 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)   Dec 31,
2017
      Sept 30,
2017
      June 30,
2017
      JCB       Legacy
Enterprise
      Consolidated       Dec 31,
2016
 
Enterprise value lending $ 407,644     $ 455,983     $ 433,766     $     $ 429,957     $ 429,957     $ 388,798  
C&I - general 911,790     886,498     894,787     79,021     810,781     889,802     794,451  
Life insurance premium financing 364,876     330,957     317,848         312,335     312,335     305,779  
Tax credits 234,835     188,497     149,941         141,770     141,770     143,686  
CRE, Construction, and land development 1,669,073     1,638,521     1,563,131     465,736     1,074,908     1,540,644     1,089,498  
Residential real estate 342,518     341,695     348,678     121,232     239,080     360,312     240,760  
Consumer and other 135,923     154,350     150,812     12,420     165,732     178,152     155,420  
Portfolio loans $ 4,066,659     $ 3,996,501     $ 3,858,963     $ 678,409     $ 3,174,563     $ 3,852,972     $ 3,118,392  
                                                                                   
Portfolio loan yield 4.71 %   4.69 %   4.63 %           4.45 %   4.24 %
Variable interest rate loans to portfolio loans 58 %   57 %   57 %           56 %   63 %
 

Portfolio loans totaled $4.1 billion at December 31, 2017, increasing $70 million, or 7% annualized, compared to the linked quarter. On a year over year basis, portfolio loans increased $948 million, or 30%. Of this increase, $270 million, or 9%, was organic loan growth and $678 million was from the acquisition of JCB.

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. C&I loans increased $286 million, or 18%, since December 31, 2016. Of this increase, $57.2 million occurred during the fourth quarter of 2017 due to seasonally strong growth in life insurance premium finance loans, which added $33.9 million, while general C&I loans increased $25.3 million from continued successful business development. This increase was mitigated by a decline in Enterprise Value Lending ("EVL") loans due to payoffs from merger and acquisition activity of underlying portfolio companies. Additionally, tax credit loans increased $46.3 million and commercial real estate relationships increased $30.6 million during the quarter, but these increases were mitigated by a $18.4 million decrease in consumer and other loans which experienced pay downs and softer originations.

2018 portfolio loan growth is expected to be approximately 7% - 9%.

Non-Core Acquired Loans

Non-core acquired loans totaled $30.4 million at December 31, 2017, a decrease of $3.8 million, or 11%, from the linked third quarter, and $9.4 million, or 24% from the prior year, primarily as a result of principal paydowns and accelerated loan payoffs. At December 31, 2017 the remaining accretable yield on the portfolio was estimated to be $10 million, and the non-accretable difference was approximately $13 million.

The Company estimates 2018 pre-tax income from accelerated cash flows and other incremental accretion to be between $3 million and $5 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) December 31,
 2017
  September 30,
 2017
  June 30,
 2017
  March 31,
 2017
  December 31,
 2016
Nonperforming loans $ 15,687     $ 8,985       $ 13,081       $ 13,847     $ 14,905
 
Other real estate from originated loans 740     491     529     2,925       980
 
Nonperforming assets $ 16,427     $ 9,476     $ 13,610     $ 16,772     $ 15,885
 
Nonperforming loans to portfolio loans 0.39 %   0.23 %   0.34 %   0.36 %   0.48 %
Nonperforming assets to total assets 0.31 %   0.18 %   0.27 %   0.33 %   0.39 %
Allowance for portfolio loan losses to portfolio loans 0.95 %   0.97 %   0.96 %   1.03 %   1.20 %
Net charge-offs (recoveries) $ 3,313     $ 803     $ 6,104     $ (56 )   $ 897
 
                                       

Nonperforming loans were $15.7 million at December 31, 2017, an increase of $6.7 million from $9.0 million at September 30, 2017, and an increase of $0.8 million, or 5%, from $14.9 million at December 31, 2016. During the quarter ended December 31, 2017, net additions to non performing loans consisted of $8.0 million primarily related to four relationships. While nonperforming loan balances increased year over year, the level of nonperforming loans to portfolio loans decreased nine basis points to 0.39% for the same period.

For the year ended December 31, 2017, the Company recorded a provision for portfolio loan losses of $10.8 million, compared to $5.6 million for the prior year period, which reflects the reduction of recoveries in 2017 as compared to 2016. For the quarter ended December 31, 2017, the Company reported a provision for portfolio loan losses of $3.2 million, compared to $2.4 million in the linked quarter.  The Company believes the provision is reflective of growth in the portfolio and maintaining a prudent credit risk posture. The allowance for portfolio loan losses to portfolio loans was 0.95% at December 31, 2017.

Deposits

The following table presents deposits broken out by type:

                                                       
  At the Quarter Ended
                          March 31, 2017        
($ in thousands)   Dec 31,
2017
      Sept 30,
2017
      June 30,
2017
      JCB       Legacy
Enterprise
      Consolidated       Dec 31,
2016
 
Noninterest-bearing accounts $ 1,123,907     $ 1,047,910     $ 1,019,064     $ 168,775     $ 868,226     $ 1,037,001     $ 866,756  
Interest-bearing transaction accounts 915,653     814,338     803,104     96,207     748,568     844,775     731,539  
Money market and savings accounts 1,538,081     1,579,767     1,506,001     371,000     1,172,737     1,543,737     1,161,907  
Brokered certificates of deposit 115,306     170,701     133,606         145,436     145,436     117,145  
Other certificates of deposit 463,467     446,495     459,476     138,012     322,659     460,671     356,014  
Total deposit portfolio $ 4,156,414     $ 4,059,211     $ 3,921,251     $ 773,994     $ 3,257,626     $ 4,031,620     $ 3,233,361  
                           
                           

Total deposits at December 31, 2017 were $4.2 billion, an increase of $97.2 million, or 10% annualized, from September 30, 2017, and an increase of $923 million, or 29%, from December 31, 2016. Of this increase, $149 million, or 5%, was from organic growth, and $774 million, or 24%, was from the acquisition of JCB.

Core deposits, defined as total deposits excluding time deposits, were $3.6 billion at December 31, 2017, an increase of $136 million, or 16% on an annualized basis, from the linked quarter, and an increase of $817 million, or 30%, from the prior year period. The overall positive trends in deposits reflect continued progress across our regions, business lines, expected seasonality, and the acquisition of JCB.

Noninterest-bearing deposits increased $76.0 million compared to September 30, 2017, and increased $257 million compared to December 31, 2016. Noninterest-bearing deposits represented 27% of total deposits at December 31, 2017, compared to 26% at September 30, 2016, and 27% at December 31, 2016.

Noninterest Income

Total noninterest income for the year was $34.4 million, an increase of  $5.3 million, or 18% from 2016. This improvement was primarily due to higher income from deposit service charges, wealth management revenue, and card services from the acquisition of JCB, as well as growth in the client base. For the full year:

  • Deposit service charges increased $2.5 million or 28%
  • Income from card services increased $2.3 million or 74%
  • Wealth management revenue increased $1.4 million or 20%
  • Other income increased $1.1 million or 18%

This income growth was partially offset by lower gains on the sale of other real estate, which declined $1.7 million from 2016.

For the quarter ended December 31, 2017, total noninterest income was $11.1 million, an increase of $2.7 million, or 33%, from the linked quarter. Gains from state tax credit brokerage activities, net of fair value market adjustments, were $2.2 million for the fourth quarter of 2017, compared to $0.1 million for the linked third quarter. 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. A portion of state tax credit sales in the fourth quarter of 2017 were accelerated from the first quarter of 2018 due to the changes in federal income tax regulations. Additionally, the fourth quarter 2017 noninterest income increased $0.5 million due to customer swap fees compared to the linked quarter.

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

Noninterest Expenses

Noninterest expenses for the year were $115.1 million, an increase of $28.9 million, or 34% from 2016. Excluding non-comparable items, such as merger related expenses ($6.5 million), core noninterest expense1 totaled $108.0 million, an increase  of $25.7 million, or 31%.  The year over year increase primarily represents the additional operating and run-rate  expenses associated with the JCB acquisition, as well as continued investments in underlying business growth.

The Company's core efficiency ratio1 was 52.93% for 2017, compared to 54.70% for the prior year.  The improvement reflects continuing efforts to leverage the Company's expense base through revenue growth and completion of the initiatives necessary to realize the expected cost savings from the JCB acquisition.

For the quarter ended December 31, 2017, noninterest expenses were $28.3 million, an increase of $0.9 million, or 3% from the linked quarter. Fourth quarter core expenses1 included $1.0 million of tax credit investment amortization, a $0.6 million increase over the linked third quarter. These investments have a corresponding and higher benefit in the Company's income tax expense line and were opportunistically executed as part of the Company's overall tax planning efforts. The fourth quarter's resulting core efficiency ratio was 50.24%, compared to 51.64% for the linked quarter.

The Company expects to continue to invest in revenue producing associates and other infrastructure that supports additional growth during 2018. 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

As a result of changes to U.S. corporate tax laws, a revaluation of the Company's DTA was completed, resulting in a $12.1 million charge to the fourth quarter and 2017 earnings. The effect of the charge on key performance measures is demonstrated in the table below:

         
    Full Year
2017 Effect

  Fourth Quarter
2017 Effect

Diluted Earnings Per Share   $(0.52 )   $(0.52 )
Effective Income Tax Rate   14.00 %   44.30 %
Return on Average Assets   (0.24 )%   (0.92 )%
Return on Average Common Tangible Equity   (2.92 )%   (11.25 )%
             

The resulting effective tax rate for the year and fourth quarter was 44.30% and 72.47%, respectively. The revaluation expense is considered a non-core item and is not included in the Company's core numbers.

The Company's core effective tax rate1 was 27.1% for the quarter ended December 31, 2017 compared to 32.2% for the quarter ended September 30, 2017. The improvement in the core effective tax rate1 for the quarter resulted primarily from the benefit of the aforementioned tax credit investment and other income tax planning initiatives. These decreases were partially offset by increased pre-tax earnings, which lessen the rate impact of permanent tax differences.

As a result of the new 21% corporate federal income tax rate, the Company expects its effective tax rate in 2018 to be approximately 17% - 19% with a 2% -3% lower rate in the first quarter expected due to the effect of vesting of employee stock awards.

Capital

The total risk based capital ratio1 was 12.24% at December 31, 2017, compared to 12.33% at September 30, 2017, and 13.48% at December 31, 2016. The Company's common equity tier 1 capital ratio1 was 8.91% at December 31, 2017, compared to 8.93% at September 30, 2017, and 9.52% at December 31, 2016. The tangible common equity ratio1 was 8.14% at December 31, 2017, versus 8.18% at September 30, 2017, and 8.76% at December 31, 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.

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, deferred tax asset revaluation, 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.

Conference Call and Webcast Information
The Company will host a conference call and webcast at 2:30 p.m. Central time on Tuesday, January 23, 2018. During the call, management will review the fourth quarter and full year 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 1-888-329-8893 (Conference ID #8848744). A recorded replay of the conference call will be available on the website two hours after the call's completion. Visit http://bit.ly/EFSC4QYE 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 release 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 (the "SEC"). 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 Year ended
($ in thousands, except per share data)   Dec 31,
 2017
      Sep 30,
 2017
      Jun 30,
 2017
      Mar 31,
 2017
      Dec 31,
 2016
      Dec 31,
 2017
      Dec 31,
 2016
 
EARNINGS SUMMARY                                                      
Net interest income $ 47,404     $ 45,625     $ 45,633     $ 38,642     $ 35,454     $ 177,304     $ 135,495  
Provision for portfolio loan losses   3,186       2,422       3,623       1,533       964       10,764       5,551  
Provision reversal for purchased credit impaired loan losses   (279 )           (207 )     (148 )     (343 )     (634 )     (1,946 )
Noninterest income   11,112       8,372       7,934       6,976       9,029       34,394       29,059  
Noninterest expense   28,260       27,404       32,651       26,736       23,181       115,051       86,110  
Income before income tax expense   27,349       24,171       17,500       17,497       20,681       86,517       74,839  
Income tax expense   19,820       7,856       5,545       5,106       7,053       38,327       26,002  
Net income $ 7,529     $ 16,315     $ 11,955     $ 12,391     $ 13,628     $ 48,190     $ 48,837  
                                                       
Diluted earnings per share $ 0.32     $ 0.69     $ 0.50     $ 0.56     $ 0.67     $ 2.07     $ 2.41  
Return on average assets   0.57 %     1.27 %     0.96 %     1.10 %     1.36 %     0.97 %     1.29 %
Return on average common equity   5.37 %     11.69 %     8.78 %     10.65 %     14.04 %     9.05 %     13.14 %
Return on average tangible common equity   6.99 %     15.23 %     11.49 %     12.96 %     15.33 %     11.63 %     14.42 %
Net interest margin (fully tax equivalent)   3.93 %     3.88 %     3.98 %     3.73 %     3.79 %     3.88 %     3.84 %
Efficiency ratio   48.29 %     50.75 %     60.95 %     58.61 %     52.11 %     54.35 %     52.33 %
                                                       
CORE PERFORMANCE SUMMARY (NON-GAAP)1                                                      
Net interest income $ 44,901     $ 44,069     $ 43,049     $ 37,567     $ 32,175     $ 169,586     $ 123,515  
Provision for portfolio loan losses 3,186     2,422     3,623     1,533     964     10,764     5,551  
Noninterest income 11,118     8,350     7,934     6,976     7,849     34,378     26,787  
Noninterest expense 28,146     27,070     27,798     24,946     21,094     107,960     82,217  
Income before income tax expense 24,687     22,927     19,562     18,064     17,966     85,240     62,534  
Income tax expense 6,692     7,391     6,329     4,916     6,021     25,328     21,297  
Net income $ 17,995     $ 15,536     $ 13,233     $ 13,148     $ 11,945     $ 59,912     $ 41,237  
                           
Diluted earnings per share $ 0.77     $ 0.66     $ 0.56     $ 0.59     $ 0.59     $ 2.58     $ 2.03  
Return on average assets 1.37 %   1.21 %   1.06 %   1.17 %   1.19 %   1.20 %   1.09 %
Return on average common equity 12.84 %   11.13 %   9.72 %   11.29 %   12.31 %   11.26 %   11.10 %
Return on average tangible common equity 16.71 %   14.50 %   12.72 %   13.75 %   13.44 %   14.46 %   12.18 %
Net interest margin (fully tax equivalent) 3.73 %   3.75 %   3.76 %   3.63 %   3.44 %   3.72 %   3.51 %
Efficiency ratio 50.24 %   51.64 %   54.52 %   56.01 %   52.70 %   52.93 %   54.70 %
                           
1Refer 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 Year ended
($ in thousands, except per share data) Dec 31,
 2017
  Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Dec 31,
 2017
  Dec 31,
 2016
INCOME STATEMENTS                          
NET INTEREST INCOME                          
Total interest income $ 54,789     $ 52,468     $ 51,542     $ 43,740     $ 39,438     $ 202,539     $ 149,224  
Total interest expense 7,385     6,843     5,909     5,098     3,984     25,235     13,729  
Net interest income 47,404     45,625     45,633     38,642     35,454     177,304     135,495  
Provision for portfolio loan losses 3,186     2,422     3,623     1,533     964     10,764     5,551  
Provision reversal for purchased credit impaired loans (279 )       (207 )   (148 )   (343 )   (634 )   (1,946 )
Net interest income after provision for loan losses 44,497     43,203     42,217     37,257     34,833     167,174     131,890  
                           
NONINTEREST INCOME                          
Deposit service charges 2,897     2,820     2,816     2,510     2,184     11,043     8,615  
Wealth management revenue 2,153     2,062     2,054     1,833     1,729     8,102     6,729  
Card services revenue 1,545     1,459     1,392     1,037     894     5,433     3,130  
State tax credit activity, net 2,249     77     9     246     1,748     2,581     2,647  
Gain (loss) on sale of other real estate 76         17         1,235     93     1,837  
Gain on sale of investment securities     22                 22     86  
Other income 2,192     1,932     1,646     1,350     1,239     7,120     6,015  
Total noninterest income 11,112     8,372     7,934     6,976     9,029     34,394     29,059  
                           
NONINTEREST EXPENSE                          
Employee compensation and benefits 15,292     15,090     15,798     15,208     12,448     61,388     49,846  
Occupancy 2,429     2,434     2,265     1,929     1,892     9,057     6,889  
Merger related expenses     315     4,480     1,667     1,084     6,462     1,386  
Other 10,539     9,565     10,108     7,932     7,757     38,144     27,989  
Total noninterest expenses 28,260     27,404     32,651     26,736     23,181     115,051     86,110  
                           
Income before income tax expense 27,349     24,171     17,500     17,497     20,681     86,517     74,839  
Income tax expense 19,820     7,856     5,545     5,106     7,053     38,327     26,002  
Net income $ 7,529     $ 16,315     $ 11,955     $ 12,391     $ 13,628     $ 48,190     $ 48,837  
                           
Basic earnings per share $ 0.33     $ 0.70     $ 0.51     $ 0.57     $ 0.68     $ 2.10     $ 2.44  
Diluted earnings per share 0.32     0.69     0.50     0.56     0.67     2.07     2.41  
                                         


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                                       
  At the Quarter ended
($ in thousands)   Dec 31,
 2017
      Sep 30,
 2017
      Jun 30,
 2017
      Mar 31,
 2017
      Dec 31,
 2016
 
BALANCE SHEETS                                      
ASSETS                                      
Cash and due from banks $ 91,084     $ 76,777     $ 77,815     $ 73,387     $ 54,288  
Interest-earning deposits 64,884     108,976     41,419     138,309     145,494  
Debt and equity investments 741,792     708,725     727,975     697,143     556,100  
Loans held for sale 3,155     6,411     4,285     5,380     9,562  
                   
Portfolio loans 4,066,659     3,996,501     3,858,962     3,852,972     3,118,392  
Less:  Allowance for portfolio loan losses 38,166     38,292     36,673     39,148     37,565  
Portfolio loans, net 4,028,493     3,958,209     3,822,289     3,813,824     3,080,827  
Non-core acquired loans, net of the allowance for loan losses 25,980     29,258     30,682     32,615     33,925  
Total loans, net 4,054,473     3,987,467     3,852,971     3,846,439     3,114,752  
                   
Other real estate 498     491     529     2,925     980  
Fixed assets, net 32,618     32,803     33,987     34,291     14,910  
State tax credits, held for sale 43,468     35,291     35,247     35,431     38,071  
Goodwill 117,345     117,345     116,186     113,886     30,334  
Intangible assets, net 11,056     11,745     12,458     11,758     2,151  
Other assets 128,852     145,457     135,824     147,277     114,686  
Total assets $ 5,289,225     $ 5,231,488     $ 5,038,696     $ 5,106,226     $ 4,081,328  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                
Noninterest-bearing deposits $ 1,123,907     $ 1,047,910     $ 1,019,064     $ 1,037,001     $ 866,756  
Interest-bearing deposits 3,032,507     3,011,301     2,902,187     2,994,619     2,366,605  
Total deposits 4,156,414     4,059,211     3,921,251     4,031,620     3,233,361  
Subordinated debentures 118,105     118,093     118,080     118,067     105,540  
Federal Home Loan Bank advances 172,743     248,868     200,992     151,115      
Other borrowings 253,674     209,104     217,180     235,052     276,980  
Other liabilities 39,716     49,876     32,440     32,451     78,349  
Total liabilities 4,740,652     4,685,152     4,489,943     4,568,305     3,694,230  
Shareholders' equity 548,573     546,336     548,753     537,921     387,098  
Total liabilities and shareholders' equity $ 5,289,225     $ 5,231,488     $ 5,038,696     $ 5,106,226     $ 4,081,328  
                   


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                                       
  For the Quarter ended
($ in thousands)   Dec 31,
 2017
      Sep 30,
 2017
      Jun 30,
 2017
      Mar 31,
 2017
      Dec 31,
 2016
 
LOAN PORTFOLIO                                      
Commercial and industrial $ 1,919,145     $ 1,861,935     $ 1,796,342     $ 1,773,864     $ 1,632,714  
Commercial real estate 1,363,605     1,332,111     1,275,771     1,243,479     894,956  
Construction real estate 305,468     306,410     287,360     297,165     194,542  
Residential real estate 342,518     341,695     348,678     360,312     240,760  
Consumer and other 135,923     154,350     150,812     178,152     155,420  
Total portfolio loans 4,066,659     3,996,501     3,858,963     3,852,972     3,118,392  
Non-core acquired loans 30,391     34,157     35,807     38,092     39,769  
Total loans $ 4,097,050     $ 4,030,658     $ 3,894,770     $ 3,891,064     $ 3,158,161  
                   
DEPOSIT PORTFOLIO                  
Noninterest-bearing accounts $ 1,123,907     $ 1,047,910     $ 1,019,064     $ 1,037,001     $ 866,756  
Interest-bearing transaction accounts 915,653     814,338     803,104     844,775     731,539  
Money market and savings accounts 1,538,081     1,579,767     1,506,001     1,543,737     1,161,907  
Brokered certificates of deposit 115,306     170,701     133,606     145,436     117,145  
Other certificates of deposit 463,467     446,495     459,476     460,671     356,014  
Total deposit portfolio $ 4,156,414     $ 4,059,211     $ 3,921,251     $ 4,031,620     $ 3,233,361  
                   
AVERAGE BALANCES                  
Portfolio loans $ 3,990,233     $ 3,899,493     $ 3,839,266     $ 3,504,910     $ 3,067,124  
Non-core acquired loans 31,957     35,120     36,767     39,287     42,804  
Loans held for sale 3,599     5,144     4,994     6,547     6,273  
Debt and equity investments 708,481     711,056     667,781     637,226     527,601  
Interest-earning assets 4,826,271     4,712,672     4,641,198     4,259,198     3,767,272  
Total assets 5,226,183     5,095,494     5,017,213     4,573,588     3,993,132  
Deposits 4,115,377     3,932,038     3,909,600     3,568,759     3,242,561  
Shareholders' equity 555,994     553,713     546,282     472,077     386,147  
Tangible common equity 427,258     425,056     417,239     387,728     353,563  
                   
YIELDS (fully tax equivalent)                  
Portfolio loans 4.71 %   4.69 %   4.63 %   4.45 %   4.24 %
Non-core acquired loans 37.53 %   23.82 %   34.79 %   17.24 %   37.07 %
Total loans 4.97 %   4.86 %   4.92 %   4.59 %   4.69 %
Debt and equity investments 2.52 %   2.49 %   2.51 %   2.49 %   2.22 %
Interest-earning assets 4.54 %   4.45 %   4.49 %   4.21 %   4.21 %
Interest-bearing deposits 0.69 %   0.62 %   0.55 %   0.53 %   0.49 %
Total deposits 0.50 %   0.46 %   0.41 %   0.39 %   0.37 %
Subordinated debentures 4.46 %   4.42 %   4.37 %   4.19 %   3.64 %
Borrowed funds 0.84 %   0.85 %   0.64 %   0.49 %   0.27 %
Cost of paying liabilities 0.84 %   0.78 %   0.69 %   0.65 %   0.58 %
Net interest margin 3.93 %   3.88 %   3.98 %   3.73 %   3.79 %
                             


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                                       
  For the Quarter ended
(in thousands, except per share data)   Dec 31,
 2017
      Sep 30,
 2017
      Jun 30,
 2017
      Mar 31,
 2017
      Dec 31,
 2016
 
ASSET QUALITY                                      
Net charge-offs (recoveries)1 $ 3,313     $ 803     $ 6,104     $ (56 )   $ 897  
Nonperforming loans1 15,687     8,985     13,081     13,847     14,905  
Classified assets 73,239     80,757     93,795     86,879     93,452  
Nonperforming loans to total loans1 0.39 %   0.23 %   0.34 %   0.36 %   0.48 %
Nonperforming assets to total assets2 0.31 %   0.18 %   0.27 %   0.33 %   0.39 %
Allowance for loan losses to total loans1 0.95 %   0.97 %   0.96 %   1.03 %   1.20 %
Allowance for loan losses to nonperforming loans1 243.3 %   426.2 %   280.4 %   282.7 %   252.0 %
Net charge-offs (recoveries) to average loans (annualized)1 0.33 %   0.08 %   0.64 %   (0.01 )%   0.12 %
                   
WEALTH MANAGEMENT                  
Trust assets under management $ 1,330,227     $ 1,319,123     $ 1,279,836     $ 1,229,383     $ 1,033,577  
Trust assets under administration 2,169,946     2,102,800     2,024,958     1,875,424     1,652,471  
                   
MARKET DATA                  
Book value per common share $ 23.76     $ 23.69     $ 23.37     $ 22.95     $ 19.31  
Tangible book value per common share $ 18.20     $ 18.09     $ 17.89     $ 17.59     $ 17.69  
Market value per share $ 45.15     $ 42.35     $ 40.80     $ 42.40     $ 43.00  
Period end common shares outstanding 23,089     23,063     23,485     23,438     20,045  
Average basic common shares 23,069     23,324     23,475     21,928     20,009  
Average diluted common shares 23,342     23,574     23,732     22,309     20,309  
                   
CAPITAL                  
Total risk-based capital to risk-weighted assets 12.24 %   12.33 %   12.84 %   12.76 %   13.48 %
Tier 1 capital to risk-weighted assets 10.31 %   10.36 %   10.82 %   10.68 %   10.99 %
Common equity tier 1 capital to risk-weighted assets 8.91 %   8.93 %   9.34 %   9.20 %   9.52 %
Tangible common equity to tangible assets 8.14 %   8.18 %   8.56 %   8.28 %   8.76 %
                   
1Excludes loans accounted for as PCI loans.                  
2Excludes PCI loans and related assets, except for inclusion in total assets.                  
                   


ENTERPRISE FINANCIAL SERVICES CORP 
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES 
                                                       
  For the Quarter ended    For the Year ended 
($ in thousands, except per share data)   Dec 31,
 2017 
      Sep 30,
 2017 
      Jun 30,
 2017 
      Mar 31,
 2017 
      Dec 31,
 2016 
      Dec 31,
 2017 
      Dec 31,
 2016 
 
CORE PERFORMANCE MEASURES                                                      
Net interest income $ 47,404     $ 45,625     $ 45,633     $ 38,642     $ 35,454     $ 177,304     $ 135,495  
Less: Incremental accretion income 2,503     1,556     2,584     1,075     3,279     7,718     11,980  
Core net interest income 44,901     44,069     43,049     37,567     32,175     169,586     123,515  
                           
Total noninterest income 11,112     8,372     7,934     6,976     9,029     34,394     29,059  
Less: Gain (loss) on sale of other real estate from non-core acquired loans (6 )               1,085     (6 )   1,565  
Less: Other income from non-core acquired assets                 95         621  
Less: Gain on sale of investment securities     22                 22     86  
Core noninterest income 11,118     8,350     7,934     6,976     7,849     34,378     26,787  
                           
Total core revenue 56,019     52,419     50,983     44,543     40,024     203,964     150,302  
                           
Provision for portfolio loan losses 3,186     2,422     3,623     1,533     964     10,764     5,551  
                           
Total noninterest expense 28,260     27,404     32,651     26,736     23,181     115,051     86,110  
Less: Other expenses related to non-core acquired loans 114     19     (16 )   123     172     240     1,094  
Less: Executive severance                         332  
Less: Facilities disposal         389         1,040     389     1,040  
Less: Merger related expenses     315     4,480     1,667     1,084     6,462     1,386  
Less: Other non-core expenses                 (209 )       41  
Core noninterest expense 28,146     27,070     27,798     24,946     21,094     107,960     82,217  
                           
Core income before income tax expense 24,687     22,927     19,562     18,064     17,966     85,240     62,534  
Total income tax expense 19,820     7,856     5,545     5,106     7,053     38,327     26,002  
Less: income tax expense from deferred tax asset revaluation 12,117                     12,117      
Less: Other non-core income tax expense1 1,011     465     (784 )   190     1,032     882     4,705  
Core income tax expense 6,692     7,391     6,329     4,916     6,021     25,328     21,297  
                           
Core net income $ 17,995     $ 15,536     $ 13,233     $ 13,148     $ 11,945     $ 59,912     $ 41,237  
                           
Core diluted earnings per share $ 0.77     $ 0.66     $ 0.56     $ 0.59     $ 0.59     $ 2.58     $ 2.03  
Core return on average assets 1.37 %   1.21 %   1.06 %   1.17 %   1.19 %   1.20 %   1.09 %
Core return on average common equity 12.84 %   11.13 %   9.72 %   11.29 %   12.31 %   11.26 %   11.10 %
Core return on average tangible common equity 16.71 %   14.50 %   12.72 %   13.75 %   13.44 %   14.46 %   12.18 %
Core efficiency ratio 50.24 %   51.64 %   54.52 %   56.01 %   52.70 %   52.93 %   54.70 %
                           
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)        
Net interest income $ 47,824     $ 46,047     $ 46,096     $ 39,147     $ 35,884     $ 179,114     $ 137,261  
Less: Incremental accretion income 2,503     1,556     2,584     1,075     3,279     7,718     11,980  
Core net interest income $ 45,321     $ 44,491     $ 43,512     $ 38,072     $ 32,605     $ 171,396     $ 125,281  
                           
Average earning assets $ 4,826,271     $ 4,712,672     $ 4,641,198     $ 4,259,198     $ 3,767,272     $ 4,611,671     $ 3,570,186  
Reported net interest margin 3.93 %   3.88 %   3.98 %   3.73 %   3.79 %   3.88 %   3.84 %
Core net interest margin 3.73 %   3.75 %   3.76 %   3.63 %   3.44 %   3.72 %   3.51 %
                           
1Other non-core income tax expense calculated at 38% of non-core pre-tax income plus an estimate of taxes payable related to non-deductible JCB acquisition costs.
                           


  At the Quarter ended
($ in thousands)   Dec 31,
 2017
      Sep 30,
 2017
      Jun 30,
 2017
      Mar 31,
 2017
      Dec 31,
 2016
 
REGULATORY CAPITAL TO RISK-WEIGHTED ASSETS                                      
Shareholders' equity $ 548,573     $ 546,336     $ 548,753     $ 537,921     $ 387,098  
Less: Goodwill 117,345     117,345     116,186     113,886     30,334  
Less: Intangible assets, net of deferred tax liabilities 5,484     5,825     6,179     5,832     800  
Less: Unrealized gains (losses) (3,818 )   (489 )   329     (1,174 )   (1,741 )
Plus: Other 12     12     12     12     24  
Common equity tier 1 capital 429,574     423,667     426,071     419,389     357,729  
Plus: Qualifying trust preferred securities 67,600     67,600     67,600     67,600     55,100  
Plus: Other 48     48     48     48     36  
Tier 1 capital 497,222     491,315     493,719     487,037     412,865  
Plus: Tier 2 capital 93,002     93,616     91,874     94,700     93,484  
Total risk-based capital $ 590,224     $ 584,931     $ 585,593     $ 581,737     $ 506,349  
                   
Total risk-weighted assets $ 4,823,776     $ 4,743,393     $ 4,562,322     $ 4,557,860     $ 3,757,161  
                   
Common equity tier 1 capital to risk-weighted assets 8.91 %   8.93 %   9.34 %   9.20 %   9.52 %
Tier 1 capital to risk-weighted assets 10.31 %   10.36 %   10.82 %   10.69 %   10.99 %
Total risk-based capital to risk-weighted assets 12.24 %   12.33 %   12.84 %   12.76 %   13.48 %
                   
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity $ 548,573     $ 546,336     $ 548,753     $ 537,921     $ 387,098  
Less: Goodwill 117,345     117,345     116,186     113,886     30,334  
Less: Intangible assets 11,056     11,745     12,458     11,758     2,151  
Tangible common equity $ 420,172     $ 417,246     $ 420,109     $ 412,277     $ 354,613  
                   
Total assets $ 5,289,225     $ 5,231,488     $ 5,038,696     $ 5,106,226     $ 4,081,328  
Less: Goodwill 117,345     117,345     116,186     113,886     30,334  
Less: Intangible assets 11,056     11,745     12,458     11,758     2,151  
Tangible assets $ 5,160,824     $ 5,102,398     $ 4,910,052     $ 4,980,582     $ 4,048,843  
                   
Tangible common equity to tangible assets 8.14 %   8.18 %   8.56 %   8.28 %   8.76 %

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