Upgrade to SI Premium - Free Trial

Enterprise Financial Reports Second Quarter 2020 Results

July 20, 2020 4:02 PM

Second Quarter Results

ST. LOUIS, Mo.--(BUSINESS WIRE)-- Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $14.6 million for the second quarter 2020, an increase of $1.8 million compared to the linked first quarter (“linked quarter”) and a decrease of $3.8 million from the prior year quarter. Earnings per diluted share (“EPS”) was $0.56 for the second quarter 2020, compared to $0.48 and $0.68 for the linked and prior year quarters, respectively. Net income and EPS in the current quarter increased from the linked quarter primarily due to interest income on the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans and a reduction in provision for credit losses partially offset by a reduction in tax credit income. The decrease in net income and EPS from the prior year quarter was primarily due to an increase in provision for credit losses partially offset by merger-related expenses incurred in the prior year period.

The provision for credit losses was $19.6 million for the second quarter 2020, compared to $22.3 million for the linked quarter and $1.7 million for the prior year quarter. The decline in the underlying economic forecast used for estimating the allowance for credit losses was the primary driver of both the first and second quarter provision for credit losses. For the second quarter 2020, the forecast model reflected continued deterioration in unemployment, GDP, and the CRE index while extending the estimated recovery period.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “We are operating in a challenging environment and remain committed to the health and well-being of our employees and customers. We have diligently worked with our customers on PPP and loan structuring and continue to be a supportive financial partner for our customers and communities. As we continue to focus on the Company’s long-term success, we believe the strength of our pre-provision earnings creates a strong foundation for that success. We increased our reserve build through the allowance for credit losses and strengthened our overall capital position during the period while generating $0.56 of earnings per diluted share.”

Highlights

Quarter ended

($ in thousands, except per share data)

June 30, 2020

PPP loans outstanding, net of unearned fees

$

807,814

Average PPP loans outstanding, net

634,632

PPP average loan size

224

PPP interest and fee income

4,083

PPP unearned fees

22,414

PPP average yield

2.59

%

Financial Metrics:

As Reported

Excluding PPP*

EPS

$

0.56

$

0.44

ROAA

0.72

%

0.62

%

PTPP ROAA

1.87

%

1.81

%

Tangible common equity/tangible assets*

7.81

%

8.67

%

Leverage ratio

9.16

%

9.96

%

NIM (tax equivalent)

3.53

%

3.62

%

Allowance for credit losses on loans/loans

1.80

%

2.07

%

* Non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables. Calculations not adjusted for increase in average deposits or increase in deposit expense, as applicable.

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

Net Interest Income

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

June 30, 2020

March 31, 2020

June 30, 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*

$

6,032,076

$

63,869

4.26

%

$

5,352,243

$

66,017

4.96

%

$

5,095,181

$

68,830

5.42

%

Debt and equity investments*

1,361,853

9,220

2.72

1,346,968

9,708

2.90

1,246,529

9,152

2.93

Short-term investments

177,267

87

0.20

92,248

300

1.31

111,291

703

2.53

Total earning assets

7,571,196

73,176

3.89

6,791,459

76,025

4.50

6,453,001

78,685

4.89

Noninterest-earning assets

587,008

572,146

604,604

Total assets

$

8,158,204

$

7,363,605

$

7,057,605

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing transaction accounts

$

1,487,467

$

244

0.07

%

$

1,375,154

$

1,338

0.39

%

$

1,384,090

$

2,134

0.62

%

Money market accounts

1,941,874

995

0.21

1,811,090

4,740

1.05

1,576,333

6,996

1.78

Savings

590,104

45

0.03

542,993

143

0.11

562,503

231

0.16

Certificates of deposit

718,529

3,099

1.73

793,213

3,667

1.86

815,138

3,758

1.85

Total interest-bearing deposits

4,737,974

4,383

0.37

4,522,450

9,888

0.88

4,338,064

13,119

1.21

Subordinated debentures

169,311

2,316

5.50

141,295

1,919

5.46

141,059

1,958

5.57

FHLB advances

251,231

455

0.73

220,453

895

1.63

263,384

1,696

2.58

Securities sold under agreements to repurchase

192,117

57

0.12

201,887

343

0.68

164,037

338

0.83

Other borrowings

32,842

147

1.80

34,270

275

3.23

40,338

375

3.73

Total interest-bearing liabilities

5,383,475

7,358

0.55

5,120,355

13,320

1.05

4,946,882

17,486

1.42

Noninterest-bearing liabilities:

Demand deposits

1,813,760

1,315,267

1,244,008

Other liabilities

92,806

62,948

53,609

Total liabilities

7,290,041

6,498,570

6,244,499

Shareholders' equity

868,163

865,035

813,106

Total liabilities and shareholders' equity

$

8,158,204

$

7,363,605

$

7,057,605

Core net interest income3

65,818

62,705

61,199

Core net interest margin3

3.50

%

3.71

%

3.80

%

Incremental accretion on non-core acquired loans

719

1,273

910

Total net interest income

$

66,537

$

63,978

$

62,109

Net interest margin

3.53

%

3.79

%

3.86

%

* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.7 million for the three months ended June 30, 2020, $0.6 million for the three months ended March 31, 2020, and $0.4 million for the three months ended June 30, 2019.

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

Net interest income for the second quarter increased $2.5 million to $65.8 million from $63.4 million in the linked quarter, and increased $4.1 million from the prior year period. The increase from the linked quarter was primarily due to PPP income. Lower loan yields from the decline in LIBOR and the cost of the new subordinated debt issuance were partially offset by effectively managing deposit rates. NIM, on a tax equivalent basis, was 3.53% for the second quarter, compared to 3.79% in the linked quarter, and 3.86% in the second quarter of 2019.

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

Quarter ended

($ in thousands)

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

Net interest income

$

65,833

$

63,368

$

61,613

$

63,046

$

61,715

Less: Incremental accretion income2

719

1,273

576

2,140

910

Core net interest income3

$

65,114

$

62,095

$

61,037

$

60,906

$

60,805

Net interest margin (tax equivalent)

3.53

%

3.79

%

3.68

%

3.81

%

3.86

%

Core net interest margin3 (tax equivalent)

3.50

%

3.71

%

3.64

%

3.69

%

3.80

%

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 NIM are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

NIM decreased 26 basis points from the linked quarter to 3.53% during the current quarter primarily due to a 61 basis point decrease in the earning asset yield that was partially offset by a 50 basis point decrease in the cost of funds. The decrease in the earning asset yield was primarily due to the decline in one-month LIBOR and the addition of PPP loans during the quarter at a significantly lower yield than the existing loan portfolio. 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 84 basis points compared to the linked quarter. In addition, the new subordinated debt issuance in the quarter reduced NIM by two basis points.

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

Loans

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

Quarter ended

($ in thousands)

June 30, 2020

March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

C&I - general

$

1,057,899

$

1,186,240

$

1,186,667

$

1,174,569

$

1,103,908

CRE investor owned - general

1,302,235

1,319,316

1,290,258

1,281,332

1,235,596

CRE owner occupied - general

599,800

584,491

582,579

566,219

591,401

SBA PPP loans

807,814

—

—

—

—

Enterprise value lendinga

382,828

440,764

428,896

417,521

445,981

Life insurance premium financinga

520,705

496,471

472,822

468,051

465,777

Residential real estate - general

326,697

346,461

366,261

386,174

409,200

Construction and land development - general

455,686

445,909

428,681

403,590

376,597

Tax creditsa

363,222

354,046

294,210

265,626

268,405

Agriculture

191,093

168,237

139,873

136,249

131,671

Other

132,072

115,582

124,090

128,683

120,961

Total Loans

$

6,140,051

$

5,457,517

$

5,314,337

$

5,228,014

$

5,149,497

Total loan yield

4.31

%

5.06

%

5.08

%

5.47

%

5.49

%

Total C&I loans to total loans

51

%

45

%

44

%

44

%

44

%

Variable interest rate loans to total loans

51

%

60

%

59

%

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 Other loans.

Loans totaled $6.1 billion at June 30, 2020, increasing $682.5 million, or 12.5%, compared to the linked quarter. Year-over-year, loans increased $990.6 million, or 19.2%. The increase in the quarter was primarily due to the $807.8 million of PPP loans. New loan originations (excluding PPP) and revolving line advances declined during the quarter, while loan paydowns accelerated to the highest quarterly level over the past year. The categories with the largest paydowns included C&I general, CRE investor-owned, enterprise value lending, along with residential real estate due to refinancing activity. Excluding PPP, the largest growth category was life insurance premium financing which has a historically low loss rate and is secured by the cash surrender value of related life insurance policies. Agriculture loans increased primarily due to one relationship for hog and pig farming, and other loans increased primarily due to loans to financial institutions as part of the Company’s correspondent business unit.

The Company has 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.

The following table presents information on loan modifications as of June 30, 2020:

($ in thousands)

Total Loan
Modifications

Percentage of
Modifications by
Category

Commercial and industrial

$

404,295

13

%

Commercial real estate

171,108

8

%

Construction real estate

88,369

18

%

Residential real estate

21,762

7

%

Other

134

—

%

Total loans

$

685,668

11

%

Asset Quality

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

Quarter ended

($ in thousands)

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

Nonperforming loans

$

41,473

$

37,204

$

26,425

$

15,569

$

19,842

Other real estate

4,874

5,072

6,344

8,498

10,531

Nonperforming assets

$

46,347

$

42,276

$

32,769

$

24,067

$

30,373

Nonperforming loans to total loans

0.68

%

0.68

%

0.50

%

0.30

%

0.39

%

Nonperforming assets to total assets

0.55

%

0.56

%

0.45

%

0.33

%

0.42

%

Allowance for loan losses to total loans

1.80

%

1.69

%

0.81

%

0.85

%

0.85

%

Net charge-offs

$

309

$

1,183

$

2,543

$

1,070

$

970

Nonperforming loans increased $4.3 million to $41.5 million at June 30, 2020 from $37.2 million at March 31, 2020 primarily due to one C&I relationship. In the second quarter 2020, the Company had net charge-offs of $0.3 million primarily driven by a charge-off of $3.0 million and a recovery of $2.7 million. Other real estate decreased during the second quarter 2020 due to write-downs and sales of $0.1 million each.

The Company recorded a provision for credit losses of $19.6 million for the second quarter 2020 compared to $22.3 million for the linked quarter and $1.7 million for the second quarter 2019, respectively. The provision for credit losses in the second quarter 2020 was primarily due to a continued worsening in economic forecasts of GDP and unemployment and does not reflect observed credit deterioration in the portfolio at the end of the quarter. 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)

June 30, 2020

March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

Noninterest-bearing accounts

$

1,965,868

$

1,354,571

$

1,327,348

$

1,295,450

$

1,181,577

Interest-bearing transaction accounts

1,508,535

1,389,603

1,367,444

1,307,855

1,392,586

Money market and savings accounts

2,566,011

2,479,828

2,249,784

2,201,052

2,162,605

Brokered certificates of deposit

85,414

170,667

215,758

209,754

213,138

Other certificates of deposit

573,752

595,237

610,689

610,269

609,432

Total deposit portfolio

$

6,699,580

$

5,989,906

$

5,771,023

$

5,624,380

$

5,559,338

Noninterest-bearing deposits to total deposits

29.3

%

22.6

%

23.0

%

23.0

%

21.3

%

Total deposits at June 30, 2020 were $6.7 billion, an increase of $709.7 million from March 31, 2020, and an increase of $1.1 billion from June 30, 2019.

Core deposits, defined as total deposits excluding certificates of deposits, were $6.0 billion at June 30, 2020, an increase of $816.4 million from the linked quarter. The increase in deposits has been influenced by the PPP, as many of the recipients have maintained increased deposit levels since receiving PPP funding. Noninterest-bearing deposits were $2.0 billion at June 30, 2020, an increase of $611.3 million compared to March 31, 2020, and an increase of $784.3 million compared to June 30, 2019. The total cost of deposits was 0.27% for the current quarter compared to 0.68% and 0.94% for the linked quarter and prior year quarter, respectively.

Noninterest Income

The following table presents a comparative summary of the major components of noninterest income for the periods indicated.

Linked quarter comparison

Prior year comparison

Quarter ended

Quarter ended

($ in thousands)

June 30, 2020

March 31, 2020

Increase (decrease)

June 30, 2019

Increase (decrease)

Service charges on deposit accounts

$

2,616

$

3,143

$

(527

)

(17

)%

$

3,366

$

(750

)

(22

)%

Wealth management revenue

2,326

2,501

(175

)

(7

)%

2,661

(335

)

(13

)%

Card services revenue

2,225

2,247

(22

)

(1

)%

2,461

(236

)

(10

)%

Tax credit income

(221

)

2,036

(2,257

)

(111

)%

572

(793

)

(139

)%

Miscellaneous income

3,014

3,481

(467

)

(13

)%

2,904

110

4

%

Total noninterest income

$

9,960

$

13,408

$

(3,448

)

(26

)%

$

11,964

$

(2,004

)

(17

)%

Total noninterest income for second quarter 2020 was $10.0 million, a decrease of $3.4 million from the linked quarter and $2.0 million from the second quarter 2019. The decrease from the linked quarter is primarily from lower tax credit income due to timing delays on projects. The increase in deposit balances has provided more earnings credits to business customers on analysis, resulting in lower service charge income compared to the linked and prior year quarters. Lower transaction volumes on credit and debit cards has impacted card services revenue in 2020.

Noninterest Expenses

Noninterest expenses were $37.9 million for the second quarter 2020, compared to $38.7 million for the linked quarter, and $49.1 million for the second quarter 2019. The decrease from the linked quarter is primarily due to decreased general operating costs and declines in seasonal payroll taxes. The decrease in noninterest expense from the second quarter 2019 was primarily due to merger-related expenses incurred in 2019.

For the second quarter 2020, the Company’s efficiency ratio was 50.0% compared to 50.4% and 66.6% for the linked quarter and prior year quarter, respectively. The Company’s core efficiency ratio4 was 50.7% for the quarter ended June 30, 2020, compared to 51.2% for the linked quarter and 53.3% for the prior year quarter.

4 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 20% for the quarter ended June 30, 2020, compared to 19% for the linked quarter and prior year quarter, respectively.

Capital

The following table presents various EFSC capital ratios:

Quarter ended

Percent

June 30, 2020

March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

Total risk-based capital to risk-weighted assets

14.40

%

12.85

%

12.90

%

12.72

%

12.62

%

Tier 1 capital to risk weighted assets

11.37

%

11.03

%

11.40

%

11.17

%

11.06

%

Common equity tier 1 capital to risk-weighted assets

9.91

%

9.58

%

9.90

%

9.64

%

9.51

%

Tangible common equity to tangible assets5

7.81

%

8.42

%

8.89

%

8.54

%

8.43

%

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

The Company’s strong earnings profile continues to build our capital position even with the elevated level of provision for credit losses in 2020. The growth in the balance sheet due to PPP did not negatively impact the Company’s regulatory capital ratios due to the SBA guarantee. The issuance of subordinated debt during the current quarter enhanced total risk-based capital. 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, financial metrics adjusted for PPP impact, 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, financial metrics adjusted for PPP impact, 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, July 21, 2020. During the call, management will review the second 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 1-866-248-8441 (Conference ID #9990905). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC2Q2020earnings 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 $8 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

Six Months ended

(in thousands, except per share data)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Jun 30,
2020

Jun 30,
2019

EARNINGS SUMMARY

Net interest income

$

65,833

$

63,368

$

61,613

$

63,046

$

61,715

$

129,201

$

114,058

Provision for credit losses

19,591

22,264

1,341

1,833

1,722

41,855

3,198

Noninterest income

9,960

13,408

14,418

13,564

11,964

23,368

21,194

Noninterest expense

37,912

38,673

38,354

38,239

49,054

76,585

88,892

Income before income tax expense

18,290

15,839

36,336

36,538

22,903

34,129

43,162

Income tax expense

3,656

2,971

7,246

7,469

4,479

6,627

8,582

Net income

$

14,634

$

12,868

$

29,090

$

29,069

$

18,424

$

27,502

$

34,580

Diluted earnings per share

$

0.56

$

0.48

$

1.09

$

1.08

$

0.68

$

1.04

$

1.36

Return on average assets

0.72

%

0.70

%

1.58

%

1.60

%

1.05

%

0.71

%

1.07

%

Return on average common equity

6.78

%

5.98

%

13.43

%

13.66

%

9.09

%

6.38

%

9.45

%

Return on average tangible common equity

9.28

%

8.22

%

18.54

%

19.08

%

12.92

%

8.76

%

12.93

%

Net interest margin (tax equivalent)

3.53

%

3.79

%

3.68

%

3.81

%

3.86

%

3.65

%

3.87

%

Core net interest margin (tax equivalent)1

3.50

%

3.71

%

3.64

%

3.69

%

3.80

%

3.60

%

3.80

%

Efficiency ratio

50.02

%

50.37

%

50.45

%

49.91

%

66.58

%

50.20

%

65.72

%

Core efficiency ratio1

50.66

%

51.21

%

50.73

%

51.73

%

53.30

%

50.94

%

53.65

%

Total assets

$

8,357,501

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

Total average assets

8,158,204

7,363,605

7,322,496

7,222,357

7,057,605

$

7,760,904

$

6,509,888

Total deposits

6,699,580

5,989,906

5,771,023

5,624,380

5,559,338

Total average deposits

6,551,734

5,837,717

5,756,292

5,597,343

5,582,072

6,194,726

5,143,219

Period end common shares outstanding

26,196

26,161

26,543

26,613

26,906

Dividends per common share

$

0.18

$

0.18

$

0.17

$

0.16

$

0.15

$

0.36

$

0.29

Tangible book value per common share

$

24.22

$

23.38

$

23.76

$

22.82

$

21.74

Tangible common equity to tangible assets1

7.81

%

8.42

%

8.89

%

8.54

%

8.43

%

Total risk-based capital to risk-weighted assets

14.40

%

12.85

%

12.90

%

12.72

%

12.62

%

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

Six Months ended

($ in thousands, except per share data)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Jun 30,
2020

Jun 30,
2019

INCOME STATEMENTS

NET INTEREST INCOME

Total interest income

$

73,191

$

76,688

$

77,238

$

81,078

$

79,201

$

149,879

$

146,818

Total interest expense

7,358

13,320

15,625

18,032

17,486

20,678

32,760

Net interest income

65,833

63,368

61,613

63,046

61,715

129,201

114,058

Provision for credit losses

19,591

22,264

1,341

1,833

1,722

41,855

3,198

Net interest income after provision for credit losses

46,242

41,104

60,272

61,213

59,993

87,346

110,860

NONINTEREST INCOME

Deposit service charges

2,616

3,143

3,254

3,246

3,366

5,759

6,301

Wealth management revenue

2,326

2,501

2,618

2,661

2,661

4,827

4,653

Card services revenue

2,225

2,247

2,409

2,494

2,461

4,472

4,251

Tax credit income

(221

)

2,036

3,425

1,238

572

1,815

730

Other income

3,014

3,481

2,712

3,925

2,904

6,495

5,259

Total noninterest income

9,960

13,408

14,418

13,564

11,964

23,368

21,194

NONINTEREST EXPENSE

Employee compensation and benefits

22,389

21,685

20,411

20,845

20,687

44,074

40,039

Occupancy

3,185

3,347

3,461

3,179

3,188

6,532

5,825

Merger-related expenses

—

—

—

393

10,306

—

17,576

Other

12,338

13,641

14,482

13,822

14,873

25,979

25,452

Total noninterest expense

37,912

38,673

38,354

38,239

49,054

76,585

88,892

Income before income tax expense

18,290

15,839

36,336

36,538

22,903

34,129

43,162

Income tax expense

3,656

2,971

7,246

7,469

4,479

6,627

8,582

Net income

$

14,634

$

12,868

$

29,090

$

29,069

$

18,424

$

27,502

$

34,580

Basic earnings per share

$

0.56

$

0.49

$

1.10

$

1.09

$

0.69

$

1.04

$

1.36

Diluted earnings per share

$

0.56

$

0.48

$

1.09

$

1.08

$

0.68

$

1.04

$

1.36

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

Quarter ended

($ in thousands)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

BALANCE SHEETS

ASSETS

Cash and due from banks

$

100,804

$

98,619

$

74,769

$

153,730

$

106,835

Interest-earning deposits

254,830

88,794

96,217

106,747

85,315

Debt and equity investments

1,387,001

1,382,149

1,354,527

1,354,986

1,328,767

Loans held for sale

16,029

8,430

5,570

6,281

1,437

Loans

6,140,051

5,457,517

5,314,337

5,228,014

5,149,497

Less: Allowance for loan losses

110,270

92,187

43,288

44,555

43,822

Total loans, net

6,029,781

5,365,330

5,271,049

5,183,459

5,105,675

Fixed assets, net

58,231

59,358

60,013

59,216

58,888

Goodwill

210,344

210,344

210,344

211,251

211,251

Intangible assets, net

23,196

24,585

26,076

27,626

29,201

Other assets

277,285

263,034

235,226

243,495

254,486

Total assets

$

8,357,501

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

LIABILITIES AND SHAREHOLDERS’ EQUITY

Noninterest-bearing deposits

$

1,965,868

$

1,354,571

$

1,327,348

$

1,295,450

$

1,181,577

Interest-bearing deposits

4,733,712

4,635,335

4,443,675

4,328,930

4,377,761

Total deposits

6,699,580

5,989,906

5,771,023

5,624,380

5,559,338

Subordinated debentures

203,384

141,336

141,258

141,179

141,100

FHLB advances

250,000

222,000

222,406

461,426

389,446

Other borrowings

227,961

205,918

265,172

199,634

198,104

Other liabilities

108,613

95,047

66,747

74,077

68,366

Total liabilities

7,489,538

6,654,207

6,466,606

6,500,696

6,356,354

Shareholders’ equity

867,963

846,436

867,185

846,095

825,501

Total liabilities and shareholders’ equity

$

8,357,501

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

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.

Six Months ended

June 30, 2020

June 30, 2019

($ in thousands)

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Assets

Interest-earning assets:

Loans, excluding incremental accretion*

$

5,692,159

$

129,886

4.59

%

$

4,804,898

$

128,803

5.41

%

Debt and equity investments*

1,354,410

18,928

2.81

1,072,698

15,444

2.90

Short-term investments

134,758

387

0.58

106,752

1,150

2.17

Total earning assets

7,181,327

149,201

4.18

5,984,348

145,397

4.90

Noninterest-earning assets

579,577

525,540

Total assets

$

7,760,904

$

6,509,888

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing transaction accounts

$

1,431,311

$

1,581

0.22

%

$

1,231,537

$

3,924

0.64

%

Money market accounts

1,876,482

5,735

0.61

1,549,255

13,511

1.76

Savings

566,549

188

0.07

431,843

414

0.19

Certificates of deposit

755,871

6,767

1.80

763,988

7,090

1.87

Total interest-bearing deposits

4,630,213

14,271

0.62

3,976,623

24,939

1.26

Subordinated debentures

155,303

4,235

5.48

132,653

3,606

5.48

FHLB advances

235,842

1,350

1.15

239,535

3,094

2.60

Securities sold under agreements to repurchase

197,002

419

0.43

175,603

611

0.70

Other borrowed funds

33,556

403

2.42

27,689

510

3.71

Total interest-bearing liabilities

5,251,916

20,678

0.79

4,552,103

32,760

1.45

Noninterest-bearing liabilities:

Demand deposits

1,564,513

1,166,595

Other liabilities

77,876

52,994

Total liabilities

6,894,305

5,771,692

Shareholders' equity

866,599

738,196

Total liabilities and shareholders' equity

$

7,760,904

$

6,509,888

Core net interest income1

128,523

112,637

Core net interest margin1

3.60

%

3.80

%

Incremental accretion on non-core acquired loans

1,992

2,067

Total net interest income

$

130,515

$

114,704

Net interest margin

3.65

%

3.87

%

* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $1.3 million and $0.6 million for the six months ended June 30, 2020 and 2019, respectively.

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

Quarter ended

($ in thousands)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

LOAN PORTFOLIO

Commercial and industrial

$

3,143,197

$

2,469,013

$

2,361,157

$

2,303,495

$

2,265,480

Commercial real estate

2,048,444

2,048,357

1,997,321

1,967,888

1,940,958

Construction real estate

481,221

469,627

457,273

433,486

404,557

Residential real estate

326,992

346,758

366,261

386,173

409,200

Other

140,197

123,762

132,325

136,972

129,302

Total loans

$

6,140,051

$

5,457,517

$

5,314,337

$

5,228,014

$

5,149,497

DEPOSIT PORTFOLIO

Noninterest-bearing accounts

$

1,965,868

$

1,354,571

$

1,327,348

$

1,295,450

$

1,181,577

Interest-bearing transaction accounts

1,508,535

1,389,603

1,367,444

1,307,855

1,392,586

Money market and savings accounts

2,566,011

2,479,828

2,249,784

2,201,052

2,162,605

Brokered certificates of deposit

85,414

170,667

215,758

209,754

213,138

Other certificates of deposit

573,752

595,237

610,689

610,269

609,432

Total deposit portfolio

$

6,699,580

$

5,989,906

$

5,771,023

$

5,624,380

$

5,559,338

AVERAGE BALANCES

Total loans

$

6,032,077

$

5,352,243

$

5,279,500

$

5,178,009

$

5,095,181

Debt and equity investments

1,361,853

1,346,968

1,322,017

1,312,860

1,246,529

Interest-earning assets

7,571,196

6,791,459

6,704,506

6,604,083

6,453,001

Total assets

8,158,204

7,363,605

7,322,496

7,222,357

7,057,605

Deposits

6,551,734

5,837,717

5,756,292

5,597,343

5,582,072

Shareholders’ equity

868,163

865,035

859,674

843,974

813,106

Tangible common equity1

633,946

629,390

622,502

604,331

571,890

YIELDS (tax equivalent)

Total loans

4.31

%

5.06

%

5.08

%

5.47

%

5.49

%

Debt and equity investments

2.72

2.90

2.91

2.90

2.95

Interest-earning assets

3.93

4.58

4.60

4.90

4.95

Interest-bearing deposits

0.37

0.88

1.05

1.20

1.21

Total deposits

0.27

0.68

0.81

0.94

0.94

Subordinated debentures

5.50

5.46

5.46

5.50

5.57

FHLB advances and other borrowed funds

0.56

1.33

1.57

1.99

2.07

Interest-bearing liabilities

0.55

1.05

1.23

1.41

1.42

Net interest margin

3.53

3.79

3.68

3.81

3.86

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)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

ASSET QUALITY

Net charge-offs

$

309

$

1,183

$

2,543

$

1,070

$

970

Nonperforming loans

41,473

37,204

26,425

15,569

19,842

Classified assets

96,678

104,754

85,897

93,984

91,715

Nonperforming loans to total loans

0.68

%

0.68

%

0.50

%

0.30

%

0.39

%

Nonperforming assets to total assets

0.55

%

0.56

%

0.45

%

0.33

%

0.42

%

Allowance for loan losses to total loans

1.80

%

1.69

%

0.81

%

0.85

%

0.85

%

Allowance for loan losses to nonperforming loans

265.9

%

247.8

%

163.8

%

286.2

%

220.9

%

Net charge-offs to average loans (annualized)

0.02

%

0.09

%

0.19

%

0.08

%

0.08

%

WEALTH MANAGEMENT

Trust assets under management

$

1,602,358

$

1,445,521

$

1,671,082

$

1,583,260

$

1,627,050

Trust assets under administration

2,455,111

2,139,673

2,524,478

2,404,950

2,428,551

MARKET DATA

Book value per common share

$

33.13

$

32.36

$

32.67

$

31.79

$

30.68

Tangible book value per common share1

$

24.22

$

23.38

$

23.76

$

22.82

$

21.74

Market value per share

$

31.12

$

27.91

$

48.21

$

40.75

$

41.60

Period end common shares outstanding

26,196

26,161

26,543

26,613

26,906

Average basic common shares

26,180

26,473

26,540

26,778

26,887

Average diluted common shares

26,195

26,539

26,668

26,868

26,940

CAPITAL

Total risk-based capital to risk-weighted assets

14.40

%

12.85

%

12.90

%

12.72

%

12.62

%

Tier 1 capital to risk-weighted assets

11.37

%

11.03

%

11.40

%

11.17

%

11.06

%

Common equity tier 1 capital to risk-weighted assets

9.91

%

9.58

%

9.90

%

9.64

%

9.51

%

Tangible common equity to tangible assets1

7.81

%

8.42

%

8.89

%

8.54

%

8.43

%

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

Six Months ended

($ in thousands)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Jun 30,
2020

Jun 30,
2019

CORE PERFORMANCE MEASURES

Net interest income

$

65,833

$

63,368

$

61,613

$

63,046

$

61,715

$

129,201

$

114,058

Less: Incremental accretion income

719

1,273

576

2,140

910

1,992

2,067

Core net interest income

65,114

62,095

61,037

60,906

60,805

127,209

111,991

Total noninterest income

9,960

13,408

14,418

13,564

11,964

23,368

21,194

Less: Other income from non-core acquired assets

—

—

4

1,001

2

—

367

Less: Gain on sale of investment securities

—

4

(94

)

337

—

4

—

Less: Other non-core income

265

—

—

—

266

265

266

Core noninterest income

9,695

13,404

14,508

12,226

11,696

23,099

20,561

Total core revenue

74,809

75,499

75,545

73,132

72,501

150,308

132,552

Total noninterest expense

37,912

38,673

38,354

38,239

49,054

76,585

88,892

Less: Other expenses related to non-core acquired loans

12

12

33

18

103

24

206

Less: Merger-related expenses

—

—

—

393

10,306

—

17,576

Core noninterest expense

37,900

38,661

38,321

37,828

38,645

76,561

71,110

Core efficiency ratio

50.66

%

51.21

%

50.73

%

51.73

%

53.30

%

50.94

%

53.65

%

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

Net interest income

$

66,537

$

63,978

$

62,141

$

63,483

$

62,109

$

130,515

$

114,704

Less: Incremental accretion income

719

1,273

576

2,140

910

1,992

2,067

Core net interest income

$

65,818

$

62,705

$

61,565

$

61,343

$

61,199

$

128,523

$

112,637

Average earning assets

$

7,571,196

$

6,791,459

$

6,704,506

$

6,604,083

$

6,453,001

$

7,181,328

$

5,984,348

Reported net interest margin

3.53

%

3.79

%

3.68

%

3.81

%

3.86

%

3.65

%

3.87

%

Core net interest margin

3.50

%

3.71

%

3.64

%

3.69

%

3.80

%

3.60

%

3.80

%

Quarter ended

($ in thousands)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

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

Shareholders’ equity

$

867,963

$

846,436

$

867,185

$

846,095

$

825,501

Less: Goodwill

210,344

210,344

210,344

211,251

211,251

Less: Intangible assets

23,196

24,585

26,076

27,626

29,201

Tangible common equity

$

634,423

$

611,507

$

630,765

$

607,218

$

585,049

Total assets

$

8,357,501

$

7,500,643

$

7,333,791

$

7,346,791

$

7,181,855

Less: Goodwill

210,344

210,344

210,344

211,251

211,251

Less: Intangible assets

23,196

24,585

26,076

27,626

29,201

Tangible assets

$

8,123,961

$

7,265,714

$

7,097,371

$

7,107,914

$

6,941,403

Tangible common equity to tangible assets

7.81

%

8.42

%

8.89

%

8.54

%

8.43

%

Quarter ended

($ in thousands)

Jun 30,
2020

Mar 31,
2020

Jun 30,
2019

AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE COMMON EQUITY

Average shareholder’s equity

$

868,163

$

865,035

$

813,106

Less average goodwill

210,344

210,344

211,251

Less average intangible assets

23,873

25,301

29,965

Average tangible common equity

$

633,946

$

629,390

$

571,890

Quarter Ended

($ in thousands)

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

CALCULATION OF PRE-TAX, PRE-PROVISION INCOME

Net interest income

$

65,833

$

63,368

$

61,613

$

63,046

$

61,715

Noninterest income

9,960

13,408

14,418

13,564

11,964

Noninterest expense

37,912

38,673

38,354

38,239

49,054

PTPP income

37,881

38,103

37,677

38,371

24,625

Provision for credit losses

19,591

22,264

1,341

1,833

1,722

Income before income tax expense

18,290

15,839

36,336

36,538

22,903

Income tax expense

3,656

2,971

7,246

7,469

4,479

Net income

$

14,634

$

12,868

$

29,090

$

29,069

$

18,424

Quarter Ended

($ in thousands, except per share data)

Jun 30,
2020

IMPACT OF PAYCHECK PROTECTION PROGRAM

Net income - GAAP

$

14,634

PPP interest and fee income

(4,083

)

Related tax effect

1,009

Adjusted net income - Non-GAAP

$

11,560

Average diluted common shares

26,195

EPS - GAAP net income

$

0.56

EPS - Adjusted net income

$

0.44

Average assets - GAAP

$

8,158,204

Average PPP loans, net

(634,632

)

Adjusted average assets - Non-GAAP

$

7,523,572

ROAA - GAAP net income

0.72

%

ROAA - Adjusted net income, adjusted average assets

0.62

%

PTPP Income - Non-GAAP (see reconciliation above)

$

37,881

PPP interest and fees

(4,083

)

Adjusted PTPP income - Non-GAAP

$

33,798

PTPP ROAA - PTPP income

1.87

%

PTPP ROAA - adjusted PTPP income, adjusted average assets

1.81

%

Tangible assets - Non-GAAP (see reconciliation above)

$

8,123,961

PPP loans outstanding, net

(807,814

)

Adjusted tangible assets - Non-GAAP

$

7,316,147

Tangible common equity Non - GAAP (see reconciliation above)

$

634,423

Tangible common equity to tangible assets

7.81

%

Tangible common equity to tangible assets - adjusted tangible assets

8.67

%

Average assets for leverage ratio

$

7,928,286

Average PPP loans, net

(634,632

)

Adjusted average assets for leverage ratio - Non-GAAP

$

7,293,654

Tier 1 capital

$

726,574

Leverage ratio

9.16

%

Leverage ratio - adjusted average assets for leverage ratio

9.96

%

Net interest income - tax equivalent

$

66,537

PPP interest and fees

(4,083

)

Adjusted net interest income - tax equivalent

$

62,454

Average earning assets - GAAP

$

7,571,196

Average PPP loans, net

(634,632

)

Adjusted average earning assets - Non-GAAP

$

6,936,564

Net interest margin - tax equivalent

3.53

%

Net interest margin - tax equivalent - adjusted net interest income, adjusted average earning assets

3.62

%

Loans - GAAP

$

6,140,051

PPP loans outstanding, net

(807,814

)

Adjusted loans - Non-GAAP

$

5,332,237

Allowance for credit losses on loans

$

110,270

Allowance for credit losses on loans/loans - GAAP

1.80

%

Allowance for credit losses on loans/loans - adjusted loans

2.07

%

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

Categories

Business Wire Press Releases

Next Articles