Market Overview

Enterprise Financial Reports First Quarter 2018 Results

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Reported First Quarter Highlights

  • Net income of $20.9 million, or $0.90 per diluted share
  • Return on average assets of 1.59%
  • Portfolio loans grew $95 million, or 10% annualized
  • Core deposits grew $55 million, or 6% annualized

First Quarter Core Highlights1

  • Net income of $19.6 million, or $0.84 per diluted share
  • Return on average assets of 1.49%
  • Core net interest margin stable at 3.74%

Enterprise Financial Services Corp (NASDAQ:EFSC) (the "Company"
or "EFSC") reported net income of $20.9 million for the quarter ended
March 31, 2018, an increase of $13.4 million, and $8.5 million as
compared to the linked fourth quarter and prior year quarter,
respectively. Net income per diluted share was $0.90 for the quarter
ended March 31, 2018, an increase of 181% and 61%, compared to $0.32 and
$0.56 per diluted share for the linked fourth quarter and prior year
period, respectively.

The increase in net income and earnings per share compared to the linked
fourth quarter was primarily due to U.S. corporate income tax reform
which resulted in $12.1 million of related deferred tax asset
revaluation expense during the fourth quarter, as well as a lower
federal corporate income tax rate for the first quarter.

Year over year, net income and earnings per share both increased from
growth in the balance sheet related to the acquisition of Jefferson
County Bancshares, Inc., ("JCB") as well as organic loan and deposit
growth. The balance sheet growth combined with both net interest margin
expansion and growth of noninterest income resulted in a $10.1 million
increase in revenue. Revenue growth outpaced a $2.4 million increase in
noninterest expenses, improving the Company's efficiency ratio
to 52.3% for the quarter ended March 31, 2018, compared to 58.6% for the
prior year period.

On a core basis1, net income totaled $19.6 million, or $0.84
per diluted share, for the quarter ended March 31, 2018, compared to
$18.0 million, or $0.77 per diluted share, in the linked fourth quarter.
First quarter 2018 core net income1 increased 49% from $13.1
million for the prior year period, and diluted core earnings per share1
grew 42% from $0.59 for the prior year period. The diluted core earnings
per share1 increase of $0.25 from the prior year period was
primarily due to higher levels of core net interest income1 from
continued growth in earning asset balances combined with 11 basis points
of core net interest margin1 expansion, and a lower effective
income tax rate, which resulted from U.S. corporate income tax reform.

The Company's Board of Directors approved the Company's quarterly
dividend of $0.11 per common share, payable on June 29, 2018 to
shareholders of record as of June 15, 2018.

Jim Lally, EFSC's President and Chief Executive Officer, commented, "We
are tremendously pleased with our first quarter results. Continued
momentum, particularly in our C&I businesses, coupled with the expected
improvement in our effective tax rate drove another record earnings
quarter on both a core and consolidated basis. First quarter return on
average assets was 1.59%, a 49 basis point increase over last year while
our return on tangible equity approached 20%."

Lally added, "Turning to the balance sheet, portfolio loan growth of $95
million, including $63 million of C&I loans, in the first quarter was
seasonally a highlight. Additionally, core deposits increased by $55
million, or 6%, while our asset quality metrics remain extremely
favorable. These trends bode well for achieving our financial goals for
2018 and beyond."

Net Interest Income

Net interest income for the first quarter decreased to $46.2 million
from the linked fourth quarter of $47.4 million, but increased $7.5
million from the prior year period. Net interest margin, on a fully tax
equivalent basis, was 3.80% for the first quarter, compared to 3.93% in
the linked fourth quarter, and 3.73% in the first quarter of 2017.

Core net interest income1 expanded by $0.5 million during the
linked quarter due to an increase in average earning assets totaling
$123 million, driven by portfolio loan and deposit growth trends. The
earnings from asset growth combined with a relatively stable core net
interest margin1 increased core net interest income1 for
the quarter, despite two fewer days. Alternatively, declining balances
on non-core acquired assets1 decreased incremental accretion
income to $0.8 million from $2.5 million, which impacted the
consolidated net interest margin by 15 basis points.

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

   
For the Quarter ended
($ in thousands)     March 31,
2018
    December 31,
2017
    September 30,
2017
    June 30,
2017
    March 31,
2017
Core net interest income1 $ 45,405     $ 44,901     $ 44,069     $ 43,049     $ 37,567
Core net interest margin1, (fully tax equivalent)     3.74 %     3.73 %     3.75 %     3.76 %     3.63 %
 

Core net interest margin1 increased 11 basis points to 3.74%
from the prior year quarter, primarily due to the impact of interest
rate increases on the Company's asset sensitive balance sheet.
Specifically, the yield on portfolio loans increased 42 basis points to
4.87% from 4.45% due to increasing interest rates on the existing
variable-rate loan portfolio and higher rates on newly originated loans.
The cost of total deposits increased 22 basis points from the prior year
quarter and was 0.61% for the quarter ended March 31, 2018. The increase
in the interest rate paid on deposits reflects market interest rate
trends, as the Company continues to defend and attract new core deposit
relationships. Additionally, the cost of total interest-bearing
liabilities increased 34 basis points to 0.99% from 0.65% in the first
quarter of 2017.

The Company continues to manage its balance sheet to grow core net
interest income1 and expects to maintain core net interest
margin1 over the coming quarters; however, pressure on
funding costs could hinder the expected trends in core net interest
margin1.

Portfolio Loans

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

   
At the Quarter ended
($ in thousands)     March 31,
2018
    December 31,
2017
    September 30,

2017

    June 30,
2017
    March 31,
2017
C&I - general $ 945,682     $ 936,588     $ 905,296     $ 905,096 $ 909,947
CRE investor owned - general 836,499 801,156 771,348 746,705 757,471
CRE owner occupied - general 471,417 468,151 467,154 449,493 423,748
Enterprise value lendinga 439,352 407,644 455,983 433,766 429,958
Life insurance premium financinga 365,377 364,876 330,957 317,848 312,334
Residential real estate - general 328,966 342,140 341,311 348,288 359,915
Construction and land development - general 293,938 294,123 300,697 284,352 294,158
Tax creditsa 244,088 234,835 188,498 149,941 141,769
Agriculture loansa 118,862 91,031 90,768 82,571 55,626
Consumer and other - general 117,901       126,115       144,489   140,903   168,046  
Portfolio loans $ 4,162,082       $ 4,066,659       $ 3,996,501   $ 3,858,963   $ 3,852,972  
 
Portfolio loan yield 4.87 % 4.71 % 4.69 % 4.63 % 4.45 %
Total C&I loans to portfolio loans 48 % 47 % 47 % 47 % 46 %
Variable interest rate loans to portfolio loans     59 %     58 %     57 %     57 %     56 %
 
Certain prior period amounts have been reclassified among the
categories to conform to the current period presentation.
aSpecialized categories may include a mix of C&I, CRE,
Construction and land development, or Consumer and other loans.
 

Portfolio loans were $4.2 billion at March 31, 2018, increasing $95
million, or 10% annualized, when compared to the linked quarter. On a
year over year basis, portfolio loans increased $309 million. For 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 $63 million during the first
quarter of 2018 from the linked fourth quarter and represented 48% of
the Company's loan portfolio at March 31, 2018. C&I loan growth supports
management's efforts to maintain the Company's asset sensitive interest
rate risk position.

Non-Core Acquired Loans

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. Non-core
acquired loans totaled $28.8 million at March 31, 2018, a decrease of
$1.6 million, or 5% from the linked fourth quarter, and $9.3 million, or
24%, from the prior year period, primarily as a result of principal
payments and loan payoffs. At March 31, 2018, the remaining accretable
yield on the portfolio was estimated to be $9 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)     March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
Nonperforming loans $ 15,850 $ 15,687 $ 8,985 $ 13,081 $ 13,847
Other real estate 455   498   491   529   2,925  
Nonperforming assets $ 16,305   $ 16,185   $ 9,476   $ 13,610   $ 16,772  
Nonperforming loans to total loans a 0.38 % 0.39 % 0.23 % 0.34 % 0.36 %
Nonperforming assets to total assets 0.30 % 0.31 % 0.18 % 0.27 % 0.33 %
Allowance for portfolio loan losses to total loans a 0.98 % 0.95 % 0.97 % 0.96 % 1.03 %
Net charge-offs (recoveries)     $ (227 )   $ 3,313     $ 803     $ 6,104     $ (56 )

a Excludes loans accounted for as PCI loans

 

At March 31, 2018, nonperforming loans decreased to 0.38% of total
loans, excluding PCI loans, and nonperforming assets declined to 0.30%
of total assets. Nonperforming loan balances increased modestly to $15.9
million at March 31, 2018, from $15.7 million at December 31, 2017, and
$13.8 million at March 31, 2017.

The Company recorded a provision for portfolio loan losses of $1.9
million compared to $3.2 million in the linked quarter and $1.5 million
in the prior year period. The provision for the first quarter 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 0.98% at March 31, 2018.

Deposits

The following table presents deposits broken out by type:

   
At the Quarter ended
($ in thousands)     March 31,

2018

  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
Noninterest-bearing accounts $ 1,101,705 $ 1,123,907   $ 1,047,910   $ 1,019,064   $ 1,037,001
Interest-bearing transaction accounts 875,880 915,653 814,338 803,104 844,775
Money market and savings accounts 1,655,488 1,538,081 1,579,767 1,506,001 1,543,737
Brokered certificates of deposit 201,082 115,306 170,701 133,606 145,436
Other certificates of deposit 447,222     463,467     446,495     459,476     460,671  
Total deposit portfolio $ 4,281,377   $ 4,156,414   $ 4,059,211   $ 3,921,251   $ 4,031,620  
 
Noninterest-bearing deposits to total deposits     26 %   27 %   26 %   26 %   26 %
 

Total deposits at March 31, 2018 were $4.3 billion, an increase of $125
million, or 12% annualized, from December 31, 2017, and an increase of
$250 million from March 31, 2017.

Core deposits, defined as total deposits excluding certificates of
deposits, were $3.6 billion at March 31, 2018, an increase of $55
million, or 6% annualized, from the linked quarter, and an increase of
$208 million when compared to the prior year period. The overall
positive trends in deposits reflect continued progress across our
business lines, offset by normal seasonal reductions with some of our
corporate clients.

Noninterest-bearing deposits decreased $22 million compared to
December 31, 2017, but increased $65 million compared to March 31, 2017.
The total cost of deposits increased 11 basis points and totaled 0.61%
compared to 0.50% at December 31, 2017, and also increased 22 basis
points since March 31, 2017. As previously indicated, the cost of
deposits reflects interest rate conditions for existing clients as well
as rates for new customer acquisition.

Noninterest Income

Total noninterest income for the quarter ended March 31, 2018 was $9.5
million, a seasonal decrease of $1.6 million, or 14% from the linked
fourth quarter, but an increase of $2.6 million, or 37%, from the prior
year quarter. The sequential change was driven by decreased activity in
state tax credits partially offset by other income from non-core
acquired assets of $1.0 million. The improvement over the prior year
quarter was 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, and the aforementioned income from
non-core acquired assets.

Core noninterest income1 for the quarter ended March 31, 2018
was $8.5 million, a decrease of $2.6 million, or 23% from the linked
fourth quarter, primarily due to reduced state tax credit activity and
lower income from the sale of derivative products. 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. The Company expects growth in fee income of 5% - 7% for
2018 over 2017 levels.

Noninterest Expenses

Noninterest expenses were $29.1 million for the quarter ended March 31,
2018, compared to $28.3 million for the quarter ended December 31, 2017,
and $26.7 million for the quarter ended March 31, 2017. Noninterest
expenses for the quarter ended March 31, 2017 included $1.7 million of
merger related expenses. Core noninterest expenses1 were
$29.1 million for the quarter ended March 31, 2018, compared to $28.1
million for the linked quarter, and $24.9 million for the prior year
period. The increase from the linked quarter was due to seasonally
higher payroll taxes. Core expenses1 increased over the prior
year period due to the JCB acquisition, tax credit amortization, and
increases in Employee compensation and benefits from investments in
revenue producing personnel.

The Company's core efficiency ratio1 was 54.0% for the
quarter ended March 31, 2018, compared to 50.2% for the linked quarter
and 56.0% for the prior year period. The increase in the linked quarter
is reflective of seasonal increases in payroll taxes combined with a
seasonal decrease in revenue from state tax credit sales.

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 continued
improvements to the Company's efficiency ratio.

Income Taxes

The Company's effective tax rate was 15.3% for the quarter ended
March 31, 2018 compared to 72.5% for the quarter ended December 31,
2017, and 29.2% for the quarter ended March 31, 2017. The linked quarter
income tax expense included a $12.1 million deferred tax asset
revaluation charge associated with the U.S. corporate income tax reform
which increased the effective tax rate by 44.3% for the fourth quarter
of 2017. Additional improvements for the first quarter of 2018 resulted
from the new 21% corporate federal tax rate as well as benefits
recognized from the vesting of employee stock awards.

The Company expects its effective tax rate for the remainder of 2018 to
be approximately 18% - 20%, which is expected to result in a full year
effective tax rate of 17% - 19%.

Capital

The total risk based capital ratio1 was 12.41% at March 31,
2018, compared to 12.21% at December 31, 2017, and 12.76% at March 31,
2017. The Company's common equity tier 1 capital ratio1 was
9.07% at March 31, 2018, compared to 8.88% at December 31, 2017, and
9.20% at March 31, 2017. The tangible common equity ratio1
was 8.13% at March 31, 2018, versus 8.14% at December 31, 2017, and
8.28% at March 31, 2017. In the first quarter of 2018, as part of its
capital management efforts, the Company repurchased 64,915 shares of its
common stock for $3.1 million pursuant to its publicly announced
program. The change in tangible common equity ratio was also affected by
a decrease in fair value of the securities portfolio.

Capital ratios for the current quarter are based on the Basel III
regulatory capital framework as applied to the Company's current
businesses and operations, and are subject to, among other things,
completion and filing of the Company's regulatory reports and ongoing
regulatory review and implementation guidance. The attached tables
contain a reconciliation of these ratios to U.S. GAAP financial measures.

Use of Non-GAAP Financial Measures1

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

The Company considers its core performance measures presented in this
earnings release and the included tables as important measures of
financial performance, even though they are non-GAAP measures, as they
provide supplemental information by which to evaluate the impact of
non-core acquired loans and related income and expenses, the impact of
certain non-comparable items, and the Company's operating performance on
an ongoing basis. Core performance measures include contractual interest
on non-core acquired loans, but exclude incremental accretion on these
loans. Core performance measures also exclude the gain or loss on sale
of other real estate from non-core acquired loans, and expenses directly
related to non-core acquired loans and other assets formerly covered
under FDIC loss share agreements. Core performance measures also exclude
certain other income and expense items, such as executive separation
costs, merger related expenses, facilities charges, 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, April 24, 2018. During the call, management will review
the first quarter of 2018 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 1-800-239-9838 (Conference ID #6595619.) A
recorded replay of the conference call will be available on the website
two hours after the call's completion. Visit http://bit.ly/EFSC1Q2018Earnings
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 2017 Annual Report on Form 10-K and
other reports filed with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date they are made, and
the Company undertakes no obligation to update them in light of new
information or future events unless required under the federal
securities laws.

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

 

 

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited)

 
For the Quarter ended
($ in thousands, except per share data) Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
  Jun 30,
2017
  Mar 31,
2017
EARNINGS SUMMARY
Net interest income $ 46,171 $ 47,404 $ 45,625 $ 45,633 $ 38,642
Provision for portfolio loan losses 1,871 3,186 2,422 3,623 1,533
Provision reversal for purchased credit impaired loan losses (279 ) (207 ) (148 )
Noninterest income 9,542 11,112 8,372 7,934 6,976
Noninterest expense 29,143   28,260   27,404   32,651   26,736  
Income before income tax expense 24,699 27,349 24,171 17,500 17,497
Income tax expense1 3,778   19,820   7,856   5,545   5,106  
Net income1 $ 20,921   $ 7,529   $ 16,315   $ 11,955   $ 12,391  
 
Diluted earnings per share $ 0.90 $ 0.32 $ 0.69 $ 0.50 $ 0.56
Return on average assets 1.59 % 0.57 % 1.27 % 0.96 % 1.10 %
Return on average common equity 15.31 % 5.37 % 11.69 % 8.78 % 10.65 %
Return on average tangible common equity 19.92 % 6.99 % 15.23 % 11.49 % 12.96 %
Net interest margin (fully tax equivalent) 3.80 % 3.93 % 3.88 % 3.98 % 3.73 %
Efficiency ratio 52.31 % 48.29 % 50.75 % 60.95 % 58.61 %
 
CORE PERFORMANCE SUMMARY (NON-GAAP)2
Net interest income $ 45,405 $ 44,901 $ 44,069 $ 43,049 $ 37,567
Provision for portfolio loan losses 1,871 3,186 2,422 3,623 1,533
Noninterest income 8,520 11,118 8,350 7,934 6,976
Noninterest expense 29,129   28,146   27,070   27,798   24,946  
Income before income tax expense 22,925 24,687 22,927 19,562 18,064
Income tax expense 3,340   6,692   7,391   6,329   4,916  
Net income $ 19,585   $ 17,995   $ 15,536   $ 13,233   $ 13,148  
 
Diluted earnings per share $ 0.84 $ 0.77 $ 0.66 $ 0.56 $ 0.59
Return on average assets 1.49 % 1.37 % 1.21 % 1.06 % 1.17 %
Return on average common equity 14.34 % 12.84 % 11.13 % 9.72 % 11.29 %
Return on average tangible common equity 18.64 % 16.71 % 14.50 % 12.72 % 13.75 %
Net interest margin (fully tax equivalent) 3.74 % 3.73 % 3.75 % 3.76 % 3.63 %
Efficiency ratio 54.02 % 50.24 % 51.64 % 54.52 % 56.01 %
 
1 Includes $12.1 million ($0.52 per share) deferred tax
asset revaluation charge for the quarter ended December 31, 2017 due
to U.S. corporate income tax reform.
2 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
($ in thousands, except per share data)     Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
 

Jun 30,
2017

  Mar 31,
2017
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income $ 55,164 $ 54,789 $ 52,468 $ 51,542 $ 43,740
Total interest expense 8,993   7,385   6,843   5,909   5,098  
Net interest income 46,171 47,404 45,625 45,633 38,642
Provision for portfolio loan losses 1,871 3,186 2,422 3,623 1,533
Provision reversal for purchased credit impaired loan losses   (279 )   (207 ) (148 )
Net interest income after provision for loan losses 44,300 44,497 43,203 42,217 37,257
 
NONINTEREST INCOME
Deposit service charges 2,851 2,897 2,820 2,816 2,510
Wealth management revenue 2,114 2,153 2,062 2,054 1,833
Card services revenue 1,516 1,545 1,459 1,392 1,037
State tax credit activity, net 252 2,249 77 9 246
Gain on sale of other real estate 76 17
Gain on sale of investment securities 9 22
Other income 2,800   2,192   1,932   1,646   1,350  
Total noninterest income 9,542 11,112 8,372 7,934 6,976
 
NONINTEREST EXPENSE
Employee compensation and benefits 16,491 15,292 15,090 15,798 15,208
Occupancy 2,406 2,429 2,434 2,265 1,929
Merger related expenses 315 4,480 1,667
Other 10,246   10,539   9,565   10,108   7,932  
Total noninterest expense 29,143 28,260 27,404 32,651 26,736
 
Income before income tax expense 24,699 27,349 24,171 17,500 17,497
Income tax expense 3,778   19,820   7,856   5,545   5,106  
Net income $ 20,921   $ 7,529   $ 16,315   $ 11,955   $ 12,391  
 
Basic earnings per share $ 0.91 $ 0.33 $ 0.70 $ 0.51 $ 0.57
Diluted earnings per share 0.90 0.32 0.69 0.50 0.56
   

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

 
At the Quarter ended
($ in thousands)     Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
  Jun 30,
2017
  Mar 31,
2017
BALANCE SHEETS
ASSETS
Cash and due from banks $ 81,604 $ 91,084 $ 76,777 $ 77,815 $ 73,387
Interest-earning deposits 63,897 64,884 108,976 41,419 138,309
Debt and equity investments 752,114 741,792 708,725 727,975 697,143
Loans held for sale 1,748 3,155 6,411 4,285 5,380
 
Portfolio loans 4,162,082 4,066,659 3,996,501 3,858,962 3,852,972
Less: Allowance for loan losses 40,263   38,166   38,292   36,673   39,148
Portfolio loans, net 4,121,819 4,028,493 3,958,209 3,822,289 3,813,824
Non-core acquired loans, net of the allowance for loan losses 24,376   25,980   29,258   30,682   32,615
Total loans, net 4,146,195   4,054,473   3,987,467   3,852,971   3,846,439
 
Other real estate 455 498 491 529 2,925
Fixed assets, net 32,127 32,618 32,803 33,987 34,291
State tax credits, held for sale 42,364 43,468 35,291 35,247 35,431
Goodwill 117,345 117,345 117,345 116,186 113,886
Intangible assets, net 10,399 11,056 11,745 12,458 11,758
Other assets 134,854   128,852   145,457   135,824   147,277
Total assets $ 5,383,102   $ 5,289,225   $ 5,231,488   $ 5,038,696   $ 5,106,226
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $ 1,101,705 $ 1,123,907 $ 1,047,910 $ 1,019,064 $ 1,037,001
Interest-bearing deposits 3,179,672   3,032,507   3,011,301   2,902,187   2,994,619
Total deposits 4,281,377 4,156,414 4,059,211 3,921,251 4,031,620
Subordinated debentures 118,118 118,105 118,093 118,080 118,067
Federal Home Loan Bank advances 224,624 172,743 248,868 200,992 151,115
Other borrowings 166,589 253,674 209,104 217,180 235,052
Other liabilities 37,379   39,716   49,876   32,440   32,451
Total liabilities 4,828,087 4,740,652 4,685,152 4,489,943 4,568,305
Shareholders' equity 555,015   548,573   546,336   548,753   537,921
Total liabilities and shareholders' equity $ 5,383,102   $ 5,289,225   $ 5,231,488   $ 5,038,696   $ 5,106,226
   

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

 
For the Quarter ended
($ in thousands)     Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
  Jun 30,
2017
  Mar 31,
2017
LOAN PORTFOLIO
Commercial and industrial $ 1,982,086 $ 1,919,145 $ 1,861,935 $ 1,796,342 $ 1,773,864
Commercial real estate 1,413,897 1,363,605 1,332,111 1,275,771 1,243,479
Construction real estate 309,227 305,468 306,410 287,360 297,165
Residential real estate 329,337 342,518 341,695 348,678 360,312
Consumer and other 127,535   135,923   154,350   150,812   178,152  
Total portfolio loans 4,162,082 4,066,659 3,996,501 3,858,963 3,852,972
Non-core acquired loans 28,763   30,391   34,157   35,807   38,092  
Total loans $ 4,190,845   $ 4,097,050   $ 4,030,658   $ 3,894,770   $ 3,891,064  
 
DEPOSIT PORTFOLIO
Noninterest-bearing accounts $ 1,101,705 $ 1,123,907 $ 1,047,910 $ 1,019,064 $ 1,037,001
Interest-bearing transaction accounts 875,880 915,653 814,338 803,104 844,775
Money market and savings accounts 1,655,488 1,538,081 1,579,767 1,506,001 1,543,737
Brokered certificates of deposit 201,082 115,306 170,701 133,606 145,436
Other certificates of deposit 447,222   463,467   446,495   459,476   460,671  
Total deposit portfolio $ 4,281,377   $ 4,156,414   $ 4,059,211   $ 3,921,251   $ 4,031,620  
 
AVERAGE BALANCES
Portfolio loans $ 4,108,400 $ 3,990,233 $ 3,899,493 $ 3,839,266 $ 3,504,910
Non-core acquired loans 29,125 31,957 35,120 36,767 39,287
Loans held for sale 1,445 3,599 5,144 4,994 6,547
Debt and equity investments 740,587 708,481 711,056 667,781 637,226
Interest-earning assets 4,948,875 4,826,271 4,712,672 4,641,198 4,259,198
Total assets 5,340,112 5,226,183 5,095,494 5,017,213 4,573,588
Deposits 4,124,326 4,115,377 3,932,038 3,909,600 3,568,759
Shareholders' equity 554,066 555,994 553,713 546,282 472,077
Tangible common equity 426,006 427,258 425,056 417,239 387,728
 
YIELDS (fully tax equivalent)
Portfolio loans 4.87 % 4.71 % 4.69 % 4.63 % 4.45 %
Non-core acquired loans 16.60 % 37.53 % 23.82 % 34.79 % 17.24 %
Total loans 4.96 % 4.97 % 4.86 % 4.92 % 4.59 %
Debt and equity investments 2.50 % 2.52 % 2.49 % 2.51 % 2.49 %
Interest-earning assets 4.54 % 4.54 % 4.45 % 4.49 % 4.21 %
Interest-bearing deposits 0.82 % 0.69 % 0.62 % 0.55 % 0.53 %
Total deposits 0.61 % 0.50 % 0.46 % 0.41 % 0.39 %
Subordinated debentures 4.70 % 4.46 % 4.42 % 4.37 % 4.19 %
Borrowed funds 1.15 % 0.84 % 0.85 % 0.64 % 0.49 %
Cost of paying liabilities 0.99 % 0.84 % 0.78 % 0.69 % 0.65 %
Net interest margin 3.80 % 3.93 % 3.88 % 3.98 % 3.73 %
   

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

 
For the Quarter ended
(in thousands, except % and per share data)     Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
  Jun 30,
2017
  Mar 31,
2017
ASSET QUALITY
Net charge-offs (recoveries)1 $ (227 ) $ 3,313 $ 803 $ 6,104 $ (56 )
Nonperforming loans1 15,850 15,687 8,985 13,081 13,847
Classified assets 77,195 73,239 80,757 93,795 86,879
Nonperforming loans to total loans1 0.38 % 0.39 % 0.23 % 0.34 % 0.36 %
Nonperforming assets to total assets2 0.30 % 0.31 % 0.18 % 0.27 % 0.33 %
Allowance for loan losses to total loans1 0.98 % 0.95 % 0.97 % 0.96 % 1.03 %
Allowance for loan losses to nonperforming loans1 254.0 % 243.3 % 426.2 % 280.4 % 282.7 %
Net charge-offs (recoveries) to average loans (annualized)1 (0.02 )% 0.33 % 0.08 % 0.64 % (0.01 )%
 
WEALTH MANAGEMENT
Trust assets under management $ 1,319,259 $ 1,330,227 $ 1,319,123 $ 1,279,836 $ 1,229,383
Trust assets under administration 2,151,697 2,169,946 2,102,800 2,024,958 1,875,424
 
MARKET DATA
Book value per common share $ 24.02 $ 23.76 $ 23.69 $ 23.37 $ 22.95
Tangible book value per common share $ 18.49 $ 18.20 $ 18.09 $ 17.89 $ 17.59
Market value per share $ 46.90 $ 45.15 $ 42.35 $ 40.80 $ 42.40
Period end common shares outstanding 23,111 23,089 23,063 23,485 23,438
Average basic common shares 23,115 23,069 23,324 23,475 21,928
Average diluted common shares 23,287 23,342 23,574 23,732 22,309
 
CAPITAL
Total risk-based capital to risk-weighted assets 12.41 % 12.21 % 12.33 % 12.84 % 12.76 %
Tier 1 capital to risk-weighted assets 10.46 % 10.29 % 10.36 % 10.82 % 10.69 %
Common equity tier 1 capital to risk-weighted assets 9.07 % 8.88 % 8.93 % 9.34 % 9.20 %
Tangible common equity to tangible assets 8.13 % 8.14 % 8.18 % 8.56 % 8.28 %
 
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
($ in thousands, except per share data)     Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
  Jun 30,
2017
 

Mar 31,
2017

CORE PERFORMANCE MEASURES
Net interest income $ 46,171 $ 47,404 $ 45,625 $ 45,633 $ 38,642
Less: Incremental accretion income 766   2,503   1,556   2,584   1,075  
Core net interest income 45,405 44,901 44,069 43,049 37,567
 
Total noninterest income 9,542 11,112 8,372 7,934 6,976
Less: Loss on sale of other real estate from non-core acquired loans (6 )
Less: Other income from non-core acquired assets 1,013
Less: Gain on sale of investment securities 9     22      
Core noninterest income 8,520 11,118 8,350 7,934 6,976
         
Total core revenue 53,925   56,019   52,419   50,983   44,543  
 
Provision for portfolio loan losses 1,871 3,186 2,422 3,623 1,533
 
Total noninterest expense 29,143 28,260 27,404 32,651 26,736
Less: Other expenses related to non-core acquired loans 14 114 19 (16 ) 123
Less: Facilities disposal 389
Less: Merger related expenses     315   4,480   1,667  
Core noninterest expense 29,129 28,146 27,070 27,798 24,946
 
Core income before income tax expense 22,925 24,687 22,927 19,562 18,064
 
Total income tax expense 3,778 19,820 7,856 5,545 5,106
Less: income tax expense from deferred tax asset revaluation1 12,117
Less: Other non-core income tax expense2 438   1,011   465   (784 ) 190  
Core income tax expense 3,340 6,692 7,391 6,329 4,916
         
Core net income $ 19,585   $ 17,995   $ 15,536   $ 13,233   $ 13,148  
 
Core diluted earnings per share $ 0.84 $ 0.77 $ 0.66 $ 0.56 $ 0.59
Core return on average assets 1.49 % 1.37 % 1.21 % 1.06 % 1.17 %
Core return on average common equity 14.34 % 12.84 % 11.13 % 9.72 % 11.29 %
Core return on average tangible common equity 18.64 % 16.71 % 14.50 % 12.72 % 13.75 %
Core efficiency ratio 54.02 % 50.24 % 51.64 % 54.52 % 56.01 %
 
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX
EQUIVALENT)
Net interest income $ 46,386 $ 47,824 $ 46,047 $ 46,096 $ 39,147
Less: Incremental accretion income 766   2,503   1,556   2,584   1,075  
Core net interest income $ 45,620   $ 45,321   $ 44,491   $ 43,512   $ 38,072  
 
Average earning assets $ 4,948,875 $ 4,826,271 $ 4,712,672 $ 4,641,198 $ 4,259,198
Reported net interest margin 3.80 % 3.93 % 3.88 % 3.98 % 3.73 %
Core net interest margin 3.74 % 3.73 % 3.75 % 3.76 % 3.63 %
 
1 Deferred tax asset revaluation associated with U.S.
corporate income tax reform.
2 Other non-core income tax expense calculated at 24.7%
of non-core pretax income for 2018. For 2017, the calculation is
38.0% of non-core pretax income plus an estimate of taxes payable
related to non-deductible JCB acquisition costs.
    At the Quarter ended
($ in thousands)     Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
  Jun 30,
2017
  Mar 31,
2017
REGULATORY CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity $ 555,015 $ 548,573 $ 546,336 $ 548,753 $ 537,921
Less: Goodwill 117,345 117,345 117,345 116,186 113,886
Less: Intangible assets, net of deferred tax liabilities 7,831 6,661 5,825 6,179 5,832
Less: Unrealized gains (losses) (11,563 ) (3,818 ) (489 ) 329 (1,174 )
Plus: Other 12   12   12   12   12  
Common equity tier 1 capital 441,414 428,397 423,667 426,071 419,389
Plus: Qualifying trust preferred securities 67,600 67,600 67,600 67,600 67,600
Plus: Other 48   48   48   48   48  
Tier 1 capital 509,062 496,045 491,315 493,719 487,037
Plus: Tier 2 capital 95,075   93,002   93,616   91,874   94,700  
Total risk-based capital $ 604,137   $ 589,047   $ 584,931   $ 585,593   $ 581,737  
 
Total risk-weighted assets $ 4,867,491 $ 4,822,695 $ 4,743,393 $ 4,562,322 $ 4,557,860
 
Common equity tier 1 capital to risk-weighted assets 9.07 % 8.88 % 8.93 % 9.34 % 9.20 %
Tier 1 capital to risk-weighted assets 10.46 % 10.29 % 10.36 % 10.82 % 10.69 %
Total risk-based capital to risk-weighted assets 12.41 % 12.21 % 12.33 % 12.84 % 12.76 %
 
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS
TO TANGIBLE ASSETS
Shareholders' equity $ 555,015 $ 548,573 $ 546,336 $ 548,753 $ 537,921
Less: Goodwill 117,345 117,345 117,345 116,186 113,886
Less: Intangible assets 10,399   11,056   11,745   12,458   11,758  
Tangible common equity $ 427,271   $ 420,172   $ 417,246   $ 420,109   $ 412,277  
 
Total assets $ 5,383,102 $ 5,289,225 $ 5,231,488 $ 5,038,696 $ 5,106,226
Less: Goodwill 117,345 117,345 117,345 116,186 113,886
Less: Intangible assets 10,399   11,056   11,745   12,458   11,758  
Tangible assets $ 5,255,358   $ 5,160,824   $ 5,102,398   $ 4,910,052   $ 4,980,582  
 
Tangible common equity to tangible assets 8.13 % 8.14 % 8.18 % 8.56 % 8.28 %

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