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Enterprise Financial Reports First Quarter 2020 Results

April 20, 2020 4:02 PM

First Quarter Results

ST. LOUIS--(BUSINESS WIRE)-- Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $12.9 million for the first quarter 2020, a decrease of $16.2 million compared to the linked fourth quarter (“linked quarter”) and a decrease of $3.3 million from the prior year quarter. Earnings per diluted share (“EPS”) was $0.48 for the first quarter 2020, compared to $1.09 and $0.67 for the linked and prior year quarters, respectively. Net income and EPS in the current quarter declined from the linked quarter and prior year quarter primarily due to an increase in provision for credit losses, described in more detail below. Merger-related expenses also impacted the results in the prior year quarter.

In the first quarter of 2020, the Company adopted the new accounting standard, commonly referred to as CECL, to estimate credit losses. Due to current economic conditions, the provision for credit losses was $22.3 million for the first quarter 2020, compared to $1.3 million for the linked quarter and $1.5 million for the first quarter 2019. CECL requires economic forecasts to be factored into determining estimated losses. As a result, CECL will typically require a higher level of provision at the start of an economic downturn.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “Currently, we are faced with unprecedented and rapidly evolving global challenges presented by the COVID-19 pandemic. Our sympathy goes out to everyone who has been impacted, and we are thankful for all the healthcare workers and other essential business employees who continue to keep us safe. The pandemic and resulting social distancing measures across the country have had a profound impact on how business has been conducted across all industries. Considering these challenges, it has been extremely encouraging to see how our associates have risen to the task of working remotely while continuing to serve our customers. We are actively working with our customers to provide support for all their financial needs. Our associates worked around the clock to put an operational framework in place for the rollout of the SBA’s Paycheck Protection Program. I am proud to say that we have processed over 1,500 applications and have received approval from the SBA to fund more than $680 million of loans to our customers, providing much needed relief to over 67,000 employees within our communities.”

Lally continued, “Despite the challenges of the COVID-19 pandemic and the substantial decrease in short-term interest rates, we had a strong first quarter. We had record operating revenue of $76.8 million, an expanded net interest margin and a stable efficiency ratio. While our provision for credit losses increased under CECL, we believe our asset quality is strong, and our loan portfolio continues to grow. Our focus on continuous improvement, which has been a cornerstone of our strategic plan, has served us well in this environment. We have taken proactive and disciplined steps to ensure the safety of our employees and customers as well as to manage our financial performance. We believe our liquidity, strong balance sheet and capital levels will aid us in navigating these uncertain times and position us to continue to serve our customers and communities.”

Highlights

The Company closed its acquisition of Trinity Capital Corporation (“Trinity”) on March 8, 2019. The results of operations of Trinity are included in our results from this date forward, which may affect certain comparisons to the first quarter of 2019.

1 PTPP is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

Net Interest Income

Net interest income for the first quarter increased $1.8 million to $63.4 million from $61.6 million in the linked quarter, and increased $11.0 million from the prior year period. The increase from the linked quarter was primarily due to growth in the average loan portfolio while the increase from the prior year period was primarily due to the Trinity acquisition and organic growth. NIM, on a tax equivalent basis, was 3.79% for the first quarter, compared to 3.68% in the linked quarter, and 3.87% in the first quarter of 2019.

Core net interest income and core net interest margin noted in the table below exclude incremental accretion on non-core acquired loans.

Quarter ended

($ in thousands)

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Net interest income

$

63,368

$

61,613

$

63,046

$

61,715

$

52,343

Less: Incremental accretion income2

1,273

576

2,140

910

1,157

Core net interest income3

$

62,095

$

61,037

$

60,906

$

60,805

$

51,186

Net interest margin (tax equivalent)

3.79

%

3.68

%

3.81

%

3.86

%

3.87

%

Core net interest margin3 (tax equivalent)

3.71

3.64

3.69

3.80

3.79

2 Represents incremental accretion income on non-core acquired loans which were acquired from the FDIC and previously covered by shared-loss agreements.

3 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

Average Balance Sheets

The following table presents, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax-equivalent basis.

Quarter ended

March 31, 2020

December 31, 2019

March 31, 2019

($ in thousands)

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Assets

Interest-earning assets:

Loans, excluding incremental accretion*

$

5,352,243

$

66,017

4.96

%

$

5,279,500

$

67,085

5.04

%

$

4,511,387

$

59,973

5.39

%

Debt and equity investments*

1,346,968

9,708

2.90

1,322,017

9,699

2.92

896,936

6,292

2.84

Short-term investments

92,248

300

1.31

102,989

406

1.56

102,166

447

1.77

Total earning assets

6,791,459

76,025

4.50

6,704,506

77,190

4.57

5,510,489

66,712

4.91

Noninterest-earning assets

572,146

617,990

445,597

Total assets

$

7,363,605

$

7,322,496

$

5,956,086

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing transaction accounts

$

1,375,154

$

1,338

0.39

%

$

1,325,363

$

1,620

0.48

%

$

1,077,289

$

1,790

0.67

%

Money market accounts

1,811,090

4,740

1.05

1,693,357

5,797

1.36

1,521,878

6,515

1.74

Savings

542,993

143

0.11

543,571

195

0.14

299,731

183

0.25

Certificates of deposit

793,213

3,667

1.86

846,253

4,096

1.92

712,269

3,332

1.90

Total interest-bearing deposits

4,522,450

9,888

0.88

4,408,544

11,708

1.05

3,611,167

11,820

1.33

Subordinated debentures

141,295

1,919

5.46

141,217

1,945

5.46

124,154

1,648

5.38

FHLB advances

220,453

895

1.63

291,057

1,371

1.87

215,420

1,398

2.63

Securities sold under agreements to repurchase

201,887

343

0.68

170,481

308

0.72

187,297

274

0.59

Other borrowings

34,270

275

3.23

36,220

293

3.21

14,900

134

3.65

Total interest-bearing liabilities

5,120,355

13,320

1.05

5,047,519

15,625

1.23

4,152,938

15,274

1.49

Noninterest-bearing liabilities:

Demand deposits

1,315,267

1,347,748

1,088,323

Other liabilities

62,948

67,555

52,371

Total liabilities

6,498,570

6,462,822

5,293,632

Shareholders' equity

865,035

859,674

662,454

Total liabilities and shareholders' equity

$

7,363,605

$

7,322,496

$

5,956,086

Core net interest income3

62,705

61,565

51,438

Core net interest margin3

3.71

%

3.64

%

3.79

%

Incremental accretion on non-core acquired loans

1,273

576

1,157

Total net interest income

$

63,978

$

62,141

$

52,595

Net interest margin

3.79

%

3.68

%

3.87

%

* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.6 million for the three months ended March 31, 2020, $0.5 million for the three months ended December 31, 2019, and $0.3 million for the three months ended March 31, 2019.

3 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

NIM increased 11 basis points from the linked quarter to 3.79% during the current quarter primarily due to an 18 basis point decrease in the cost of funds partially offset by lower loan yields. Significant reductions in interest rates, including one-month LIBOR, continue to impact the Company’s variable-rate loans. The Company responded to interest rate trends by reducing the cost of certain managed money market and interest-bearing transaction accounts. This effort improved the cost of money market accounts by 31 basis points compared to the linked quarter. Additionally, the Company entered into interest rate swap transactions to hedge its exposure to variability on a portion of the Company’s floating-rate debt.

The Company manages its balance sheet to defend against pressures on core net interest margin, which could be negatively impacted by continued competition for deposits, current interest rate conditions, and downward movement in short-term rates.

Loans

The following table presents total loans for the most recent five quarters:

Quarter ended

($ in thousands)

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

C&I - general

$

1,186,240

$

1,186,667

$

1,174,569

$

1,103,908

$

1,128,755

CRE investor owned - general

1,319,316

1,290,258

1,281,332

1,235,596

1,183,471

CRE owner occupied - general

584,491

582,579

566,219

591,401

576,026

Enterprise value lendinga

440,764

428,896

417,521

445,981

439,500

Life insurance premium financinga

496,471

472,822

468,051

465,777

440,693

Residential real estate - general

346,461

366,261

386,174

409,200

432,556

Construction and land development - general

445,909

428,681

403,590

376,597

345,207

Tax creditsa

354,046

294,210

265,626

268,405

235,454

Agriculture

168,237

139,873

136,249

131,671

126,088

Consumer and other - general

115,582

124,090

128,683

120,961

109,327

Total Loans

$

5,457,517

$

5,314,337

$

5,228,014

$

5,149,497

$

5,017,077

Total loan yield

5.06

%

5.08

%

5.47

%

5.49

%

5.50

%

Total C&I loans to total loans

45

%

44

%

44

%

44

%

44

%

Variable interest rate loans to total loans

60

%

59

%

60

%

60

%

60

%

Certain prior period amounts have been reclassified among the categories to conform to the current period presentation

a Specialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans.

Loans totaled $5.5 billion at March 31, 2020, increasing $143.2 million, or 10.8% annualized, compared to the linked quarter. Year-over-year, loans increased $440.4 million, or 8.8%.

In the first quarter 2020, the Company implemented several loan programs to assist its customers impacted by the COVID-19 pandemic. These programs include consumer and business deferral programs and expanded small business lines of credit. In April 2020, the Company began offering loans through the SBA’s Paycheck Protection Program that was part of the CARES Act passed by Congress.

Asset Quality

On January 1, 2020, the Company adopted the new accounting standard, commonly referred to as CECL, to estimate credit losses. Prior to the adoption of CECL, purchased credit impaired (PCI) loans were accounted for in performing pools of loans and were not individually identified as nonaccrual or classified. Under the CECL accounting model, the Company elected not to maintain PCI pools for certain loans which are now accounted for individually. Thus they are now included in nonperforming and classified loans. PCI loans are referred to as purchased credit deteriorated (PCD) under CECL.

The adoption of CECL impacted certain financial metrics as noted in the following table:

($ in thousands)

Allowance for
Loan Losses

Reserve for
Unfunded
Commitments

Nonperforming
Loans

Classified
Assets

Balance, 12/31/2019

$

43,288

$

430

$

26,425

$

85,897

CECL adoption4

28,387

2,413

8,462

25,819

PCD loans immediately charged-off5

(1,680

)

—

(1,680

)

(1,680

)

Balance, 1/1/2020

69,995

2,843

33,207

110,036

Provision for credit losses

21,695

849

—

—

Net recoveries

497

—

—

—

Net increase (decrease)

—

—

3,997

(5,282

)

Balance, 3/31/2020

$

92,187

$

3,692

$

37,204

$

104,754

4 Loan balances at March 31, 2020

5 Under the Company’s credit policy, nonaccrual loans less than $100,000 are immediately charged-off.

The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:

Quarter ended

($ in thousands)

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Nonperforming loans

$

37,204

$

26,425

$

15,569

$

19,842

$

9,607

Other real estate

5,072

6,344

8,498

10,531

6,804

Nonperforming assets

$

42,276

$

32,769

$

24,067

$

30,373

$

16,411

Nonperforming loans to total loans

0.68

%

0.50

%

0.30

%

0.39

%

0.19

%

Nonperforming assets to total assets

0.56

0.45

0.33

0.42

0.24

Allowance for loan losses to total loans

1.69

0.81

0.85

0.85

0.86

Net charge-offs

$

1,183

$

2,544

$

1,070

$

970

$

1,826

Nonperforming loans increased $10.8 million to $37.2 million at March 31, 2020 from $26.4 million at December 31, 2019 primarily due to the adoption of CECL that added $6.8 million in PCD loans that were previously accounted for in an accruing pool of loans. In the first quarter 2020, the Company had net charge-offs of $1.2 million, primarily due to the administrative charge-off of nonaccrual loans less than $100,000 under the Company’s credit policy. Other real estate decreased during the first quarter 2020 due to write-downs of $0.8 million and sales of $0.5 million.

The Company recorded a provision for credit losses of $22.3 million for the first quarter 2020 compared to $1.3 million for the linked quarter and $1.5 million for the first quarter 2019, respectively. The increase in the provision for credit losses in the first quarter 2020 was primarily due to a change in economic forecasts, which worsened significantly in March due to the COVID-19 pandemic, the resulting slow-down of business activity and rise in unemployment. To the extent that the Company does not recognize charge-offs and economic forecasts improve in future periods, the Company could recognize a reversal of provision for credit losses. Conversely, if economic conditions and the Company’s forecast continue to worsen, the Company could recognize elevated levels of provision for credit losses.

Deposits

The following table presents deposits broken out by type for the most recent five quarters:

Quarter ended

($ in thousands)

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Noninterest-bearing accounts

$

1,354,571

$

1,327,348

$

1,295,450

$

1,181,577

$

1,186,508

Interest-bearing transaction accounts

1,389,603

1,367,444

1,307,855

1,392,586

1,389,826

Money market and savings accounts

2,479,828

2,249,784

2,201,052

2,162,605

2,156,031

Brokered certificates of deposit

170,667

215,758

209,754

213,138

180,788

Other certificates of deposit

595,237

610,689

610,269

609,432

623,960

Total deposit portfolio

$

5,989,906

$

5,771,023

$

5,624,380

$

5,559,338

$

5,537,113

Noninterest-bearing deposits to total deposits

22.6

%

23.0

%

23.0

%

21.3

%

21.4

%

Total deposits at March 31, 2020 were $6.0 billion, an increase of $218.9 million from December 31, 2019, and an increase of $452.8 million from March 31, 2019.

Core deposits, defined as total deposits excluding certificates of deposits, were $5.2 billion at March 31, 2020, an increase of $279.4 million from the linked quarter. Noninterest-bearing deposits were $1.4 billion at March 31, 2020, an increase of $27.2 million compared to December 31, 2019, and an increase of $168.1 million compared to March 31, 2019. The total cost of deposits was 0.68% for the current quarter compared to 0.81% and 1.02% for the linked quarter and prior year quarter, respectively.

Noninterest Income

Total noninterest income for first quarter 2020 was $13.4 million, a decrease of $1.0 million from the linked quarter, and an increase of $4.2 million from the first quarter 2019. The decrease from the linked quarter is from lower tax credit income that typically peaks in the fourth quarter of the year. Income from the Company’s customer swap program continued to expand, totaling $1.1 million in the first quarter 2020, compared to $0.8 million in the linked quarter and $0.2 million in the first quarter 2019. The Company also recognized $0.7 million from a bank-owned life insurance claim in the first quarter 2020. The increase from the prior year quarter was driven by contributions from a full quarter of Trinity’s operations in 2020.

Noninterest Expenses

Noninterest expenses were $38.7 million for the first quarter 2020, compared to $38.4 million for the linked quarter, and $39.8 million for the first quarter 2019. The increase from the linked quarter is primarily due to merit increases and the reset of annual payroll tax limits, offset by a decrease in variable compensation. In the first quarter 2020, variable compensation accruals were decreased commensurate with the decrease in profitability. The decrease in noninterest expense from the first quarter 2019 was primarily due to a decline in merger-related expenses following the acquisition of Trinity, offset by a full quarter of Trinity’s operating expense in 2020.

The Company’s core efficiency ratio6 was 51.2% for the quarter ended March 31, 2020, compared to 50.7% for the linked quarter and 54.1% for the prior year period.

6 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

Income Taxes

The Company’s effective tax rate was 19% for the quarter ended March 31, 2020 compared to 20% for the linked quarter and prior year quarter, respectively.

Capital

The following table presents various EFSC capital ratios:

Quarter ended

Percent

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Total risk-based capital to risk-weighted assets

12.85

%

12.90

%

12.72

%

12.62

%

12.86

%

Tier 1 capital to risk weighted assets

11.03

11.40

11.17

11.06

11.25

Common equity tier 1 capital to risk-weighted assets

9.58

9.90

9.64

9.51

9.64

Tangible common equity to tangible assets7

8.42

8.89

8.54

8.43

8.35

7 Tangible common equity to tangible assets is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

Capital ratios for the current quarter are subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review.

Use of Non-GAAP Financial Measures

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 interest income, core net interest margin, tangible common equity, core efficiency ratios, ROATCE, PTPP, 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 net interest income, core net interest margin, core efficiency ratio, ROATCE, PTPP, and the tangible common equity ratio, collectively “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, which were acquired from the FDIC and previously covered by shared-loss agreements, and the 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 expenses directly related to non-core acquired loans. Core performance measures also exclude certain other income and expense items, such as 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 measures for the periods indicated.

Conference Call and Webcast Information

The Company will host a conference call and webcast at 10:00 a.m. Central Time on Tuesday, April 21, 2020. During the call, management will review the first quarter of 2020 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” prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-800-458-4148 (Conference ID #2361796). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC1Q2020earnings 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.

About Enterprise

Enterprise Financial Services Corp (Nasdaq: EFSC), with approximately $7 billion in assets, is a financial holding company headquartered in Clayton, Missouri. Enterprise Bank & Trust, a Missouri state-chartered trust company with banking powers and a wholly-owned subsidiary of EFSC, operates 34 branch offices in Arizona, Kansas, Missouri and New Mexico. Enterprise Bank & Trust offers a range of business and personal banking services and wealth management services. Enterprise Trust, a division of Enterprise Bank & Trust, provides financial planning, estate planning, investment management and trust services to businesses, individuals, institutions, retirement plans and non-profit organizations. Additional information is available at www.enterprisebank.com.

Enterprise Financial Services Corp’s common stock is traded on the Nasdaq Stock Market under the symbol “EFSC.” Please visit our website at www.enterprisebank.com to see our regularly posted material information.

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. Such forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, shareholder value creation and the impact of acquisitions.

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. The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other 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 policies and practices or accounting standards, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model, which changed how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption on January 1, 2020, uncertainty regarding the future of LIBOR, natural disasters, war or terrorist activities, or pandemics, or the outbreak of COVID-19 or similar outbreaks, and their effects on economic and business environments in which we operate, as well as other risk factors described in the Company’s 2019 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)

Quarter ended

(in thousands, except per share data)

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

EARNINGS SUMMARY

Net interest income

$

63,368

$

61,613

$

63,046

$

61,715

$

52,343

Provision for credit losses

22,264

1,341

1,833

1,722

1,476

Noninterest income

13,408

14,418

13,564

11,964

9,230

Noninterest expense

38,673

38,354

38,239

49,054

39,838

Income before income tax expense

15,839

36,336

36,538

22,903

20,259

Income tax expense

2,971

7,246

7,469

4,479

4,103

Net income

$

12,868

$

29,090

$

29,069

$

18,424

$

16,156

Diluted earnings per share

$

0.48

$

1.09

$

1.08

$

0.68

$

0.67

Return on average assets

0.70

%

1.58

%

1.60

%

1.05

%

1.10

%

Return on average common equity

5.98

13.43

13.66

9.09

9.89

Return on average tangible common equity

8.22

18.54

19.08

12.92

12.93

Net interest margin (tax equivalent)

3.79

3.68

3.81

3.86

3.87

Core net interest margin (tax equivalent)1

3.71

3.64

3.69

3.80

3.79

Efficiency ratio

50.37

50.45

49.91

66.58

64.70

Core efficiency ratio1

51.21

50.73

51.73

53.30

54.06

Total assets

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

$

6,932,757

Total average assets

7,363,605

7,322,496

7,222,357

7,057,605

5,956,086

Total deposits

5,989,906

5,771,023

5,624,380

5,559,338

5,537,113

Total average deposits

5,837,717

5,756,292

5,597,343

5,582,072

4,699,490

Period end common shares outstanding

26,161

26,543

26,613

26,906

26,878

Dividends per common share

$

0.18

$

0.17

$

0.16

$

0.15

$

0.14

Tangible book value per common share

$

23.38

$

23.76

$

22.82

$

21.74

$

20.80

Tangible common equity to tangible assets1

8.42

%

8.89

%

8.54

%

8.43

%

8.35

%

Total risk-based capital to risk-weighted assets

12.85

12.90

12.72

12.62

12.86

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)

Quarter ended

($ in thousands, except per share data)

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

INCOME STATEMENTS

NET INTEREST INCOME

Total interest income

$

76,688

$

77,238

$

81,078

$

79,201

$

67,617

Total interest expense

13,320

15,625

18,032

17,486

15,274

Net interest income

63,368

61,613

63,046

61,715

52,343

Provision for credit losses

22,264

1,341

1,833

1,722

1,476

Net interest income after provision for credit losses

41,104

60,272

61,213

59,993

50,867

NONINTEREST INCOME

Deposit service charges

3,143

3,254

3,246

3,366

2,935

Wealth management revenue

2,501

2,618

2,661

2,661

1,992

Card services revenue

2,247

2,409

2,494

2,461

1,790

Tax credit income

2,036

3,425

1,238

572

158

Gain (loss) on sale of investment securities

4

(94

)

337

—

—

Other income

3,477

2,806

3,588

2,904

2,355

Total noninterest income

13,408

14,418

13,564

11,964

9,230

NONINTEREST EXPENSE

Employee compensation and benefits

21,685

20,411

20,845

20,687

19,352

Occupancy

3,347

3,461

3,179

3,188

2,637

Merger-related expenses

—

—

393

10,306

7,270

Other

13,641

14,482

13,822

14,873

10,579

Total noninterest expense

38,673

38,354

38,239

49,054

39,838

Income before income tax expense

15,839

36,336

36,538

22,903

20,259

Income tax expense

2,971

7,246

7,469

4,479

4,103

Net income

$

12,868

$

29,090

$

29,069

$

18,424

$

16,156

Basic earnings per share

$

0.49

$

1.10

$

1.09

$

0.69

$

0.68

Diluted earnings per share

0.48

1.09

1.08

0.68

0.67

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

Quarter ended

($ in thousands)

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

BALANCE SHEETS

ASSETS

Cash and due from banks

$

98,619

$

74,769

$

153,730

$

106,835

$

85,578

Interest-earning deposits

88,794

96,217

106,747

85,315

139,389

Debt and equity investments

1,382,149

1,354,527

1,354,986

1,328,767

1,198,413

Loans held for sale

8,430

5,570

6,281

1,437

654

Loans

5,457,517

5,314,337

5,228,014

5,149,497

5,017,077

Less: Allowance for loan losses

92,187

43,288

44,555

43,822

43,095

Total loans, net

5,365,330

5,271,049

5,183,459

5,105,675

4,973,982

Fixed assets, net

59,358

60,013

59,216

58,888

60,301

Goodwill

210,344

210,344

211,251

211,251

207,632

Intangible assets, net

24,585

26,076

27,626

29,201

31,048

Other assets

263,034

235,226

243,495

254,486

235,760

Total assets

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

$

6,932,757

LIABILITIES AND SHAREHOLDERS’ EQUITY

Noninterest-bearing deposits

$

1,354,571

$

1,327,348

$

1,295,450

$

1,181,577

$

1,186,508

Interest-bearing deposits

4,635,335

4,443,675

4,328,930

4,377,761

4,350,605

Total deposits

5,989,906

5,771,023

5,624,380

5,559,338

5,537,113

Subordinated debentures

141,336

141,258

141,179

141,100

140,668

FHLB advances

222,000

222,406

461,426

389,446

180,466

Other borrowings

205,918

265,172

199,634

198,104

212,171

Other liabilities

95,047

66,747

74,077

68,366

64,504

Total liabilities

6,654,207

6,466,606

6,500,696

6,356,354

6,134,922

Shareholders’ equity

846,436

867,185

846,095

825,501

797,835

Total liabilities and shareholders’ equity

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

$

6,932,757

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

Quarter Ended

($ in thousands)

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

LOAN PORTFOLIO

Commercial and industrial

$

2,469,013

$

2,361,157

$

2,303,495

$

2,265,480

$

2,227,050

Commercial real estate

2,048,357

1,997,321

1,967,888

1,940,958

1,870,040

Construction real estate

469,627

457,273

433,486

404,557

369,365

Residential real estate

346,758

366,261

386,173

409,200

432,902

Consumer and other

123,762

132,325

136,972

129,302

117,720

Total loans

$

5,457,517

$

5,314,337

$

5,228,014

$

5,149,497

$

5,017,077

DEPOSIT PORTFOLIO

Noninterest-bearing accounts

$

1,354,571

$

1,327,348

$

1,295,450

$

1,181,577

$

1,186,508

Interest-bearing transaction accounts

1,389,603

1,367,444

1,307,855

1,392,586

1,389,826

Money market and savings accounts

2,479,828

2,249,784

2,201,052

2,162,605

2,156,031

Brokered certificates of deposit

170,667

215,758

209,754

213,138

180,788

Other certificates of deposit

595,237

610,689

610,269

609,432

623,960

Total deposit portfolio

$

5,989,906

$

5,771,023

$

5,624,380

$

5,559,338

$

5,537,113

AVERAGE BALANCES

Total loans

$

5,352,243

$

5,279,500

$

5,178,009

$

5,095,181

$

4,511,387

Debt and equity investments

1,346,968

1,322,017

1,312,860

1,246,529

896,936

Interest-earning assets

6,791,459

6,704,506

6,604,083

6,453,001

5,510,489

Total assets

7,363,605

7,322,496

7,222,357

7,057,605

5,956,086

Deposits

5,837,717

5,756,292

5,597,343

5,582,072

4,699,490

Shareholders’ equity

865,035

859,674

843,974

813,106

662,454

Tangible common equity1

629,390

622,502

604,331

571,890

506,560

YIELDS (tax equivalent)

Total loans

5.06

%

5.08

%

5.47

%

5.49

%

5.50

%

Debt and equity investments

2.90

2.91

2.90

2.95

2.84

Interest-earning assets

4.58

4.60

4.90

4.95

4.99

Interest-bearing deposits

0.88

1.05

1.20

1.21

1.33

Total deposits

0.68

0.81

0.94

0.94

1.02

Subordinated debentures

5.46

5.46

5.50

5.57

5.38

FHLB advances and other borrowed funds

1.33

1.57

1.99

2.07

1.75

Interest-bearing liabilities

1.05

1.23

1.41

1.42

1.49

Net interest margin

3.79

3.68

3.81

3.86

3.87

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)

Quarter ended

(in thousands, except per share data)

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

ASSET QUALITY

Net charge-offs

$

1,183

$

2,544

$

1,070

$

970

$

1,826

Nonperforming loans

37,204

26,425

15,569

19,842

9,607

Classified assets

104,754

85,897

93,984

91,715

79,750

Nonperforming loans to total loans

0.68

%

0.50

%

0.30

%

0.39

%

0.19

%

Nonperforming assets to total assets

0.56

0.45

0.33

0.42

0.24

Allowance for loan losses to total loans

1.69

0.81

0.85

0.85

0.86

Allowance for loan losses to nonperforming loans

247.8

163.8

286.2

220.9

448.6

Net charge-offs to average loans (annualized)

0.09

0.19

0.08

0.08

0.16

WEALTH MANAGEMENT

Trust assets under management

$

1,445,521

$

1,671,082

$

1,583,260

$

1,627,050

$

1,587,627

Trust assets under administration

2,139,673

2,524,478

2,404,950

2,428,551

2,405,673

MARKET DATA

Book value per common share

$

32.36

$

32.67

$

31.79

$

30.68

$

29.68

Tangible book value per common share1

23.38

23.76

22.82

21.74

20.80

Market value per share

27.91

48.21

40.75

41.60

40.77

Period end common shares outstanding

26,161

26,543

26,613

26,906

26,878

Average basic common shares

26,473

26,540

26,778

26,887

23,927

Average diluted common shares

26,539

26,668

26,868

26,940

24,083

CAPITAL

Total risk-based capital to risk-weighted assets

12.85

%

12.90

%

12.72

%

12.62

%

12.86

%

Tier 1 capital to risk-weighted assets

11.03

11.40

11.17

11.06

11.25

Common equity tier 1 capital to risk-weighted assets

9.58

9.90

9.64

9.51

9.64

Tangible common equity to tangible assets1

8.42

8.89

8.54

8.43

8.35

1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Quarter ended

($ in thousands)

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

CORE PERFORMANCE MEASURES

Net interest income

$

63,368

$

61,613

$

63,046

$

61,715

$

52,343

Less: Incremental accretion income

1,273

576

2,140

910

1,157

Core net interest income

62,095

61,037

60,906

60,805

51,186

Total noninterest income

13,408

14,418

13,564

11,964

9,230

Less: Other income from non-core acquired assets

—

4

1,001

2

365

Less: Gain on sale of investment securities

4

(94

)

337

—

—

Less: Other non-core income

—

—

—

266

—

Core noninterest income

13,404

14,508

12,226

11,696

8,865

Total core revenue

75,499

75,545

73,132

72,501

60,051

Total noninterest expense

38,673

38,354

38,239

49,054

39,838

Less: Other expenses related to non-core acquired loans

12

33

18

103

103

Less: Merger-related expenses

—

—

393

10,306

7,270

Core noninterest expense

38,661

38,321

37,828

38,645

32,465

Core efficiency ratio

51.21

%

50.73

%

51.73

%

53.30

%

54.06

%

NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (TAX EQUIVALENT)

Net interest income

$

63,978

$

62,141

$

63,483

$

62,109

$

52,595

Less: Incremental accretion income

1,273

576

2,140

910

1,157

Core net interest income

$

62,705

$

61,565

$

61,343

$

61,199

$

51,438

Average earning assets

$

6,791,459

$

6,704,506

$

6,604,083

$

6,453,005

$

5,510,489

Reported net interest margin

3.79

%

3.68

%

3.81

%

3.86

%

3.87

%

Core net interest margin

3.71

3.64

3.69

3.80

3.79

Quarter ended

($ in thousands)

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

SHAREHOLDERS’ EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS

Shareholders’ equity

$

846,436

$

867,185

$

846,095

$

825,501

$

797,835

Less: Goodwill

210,344

210,344

211,251

211,251

207,632

Less: Intangible assets

24,585

26,076

27,626

29,201

31,048

Tangible common equity

$

611,507

$

630,765

$

607,218

$

585,049

$

559,155

Total assets

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

$

6,932,757

Less: Goodwill

210,344

210,344

211,251

211,251

207,632

Less: Intangible assets

24,585

26,076

27,626

29,201

31,048

Tangible assets

$

7,265,714

$

7,097,371

$

7,107,914

$

6,941,403

$

6,694,077

Tangible common equity to tangible assets

8.42

%

8.89

%

8.54

%

8.43

%

8.35

%

Quarter ended

($ in thousands)

Mar 31,
2020

Dec 31,
2019

Mar 31,
2019

AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE COMMON EQUITY

Average shareholder’s equity

$

865,035

$

859,674

$

662,454

Less average goodwill

210,344

210,344

141,422

Less average intangible assets

25,301

26,828

14,472

Average tangible common equity

$

629,390

$

622,502

$

506,560

Quarter Ended

($ in thousands)

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

CALCULATION OF PRE-TAX, PRE-PROVISION INCOME

Net interest income

$

63,368

$

61,613

$

63,046

$

61,715

$

52,343

Noninterest income

13,408

14,418

13,564

11,964

9,230

Noninterest expense

38,673

38,354

38,239

49,054

39,838

PTPP income

38,103

37,677

38,371

24,625

21,735

Provision for credit losses

22,264

1,341

1,833

1,722

1,476

Income before income tax expense

15,839

36,336

36,538

22,903

20,259

Income tax expense

2,971

7,246

7,469

4,479

4,103

Net income

$

12,868

$

29,090

$

29,069

$

18,424

$

16,156

Investor Relations: Keene Turner, Executive Vice President and CFO (314) 512-7233

Media: Karen Loiterstein, Senior Vice President (314) 512-7141

Source: Enterprise Financial Services Corp

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