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Enterprise Financial Reports Second Quarter 2019 Results

ST. LOUIS--(BUSINESS WIRE)--

Second Quarter Highlights

  • Net income of $18.4 million, $0.68 per diluted share, or $0.981 excluding merger-related expenses
  • Net interest margin (tax equivalent) 3.86%, stable with the first quarter’s margin of 3.87%
  • Return on average assets (“ROAA”) of 1.05%
  • Loans increased $132 million, or 11% annualized
  • Merger-related expenses of $10.3 million, pretax, reduced diluted earnings per share and ROAA by $0.30 and 0.45%, respectively

Enterprise Financial Services Corp (EFSC) (the “Company” or “EFSC”) reported net income of $18.4 million for the quarter ended June 30, 2019, an increase of $2.3 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 $0.68 for the current quarter, compared to $0.67 and $0.95 for the linked and prior year quarters, respectively. Merger-related expenses from the Trinity Capital Corporation (“Trinity”) acquisition reduced net income by $10.3 million pretax ($8.0 million after tax), or $0.30 per diluted share in the current quarter. Net interest margin, on a tax equivalent basis, in the current quarter was 3.86%, compared to 3.87% in the linked quarter and 3.77% in the prior year quarter. Core net interest margin,1 on a tax equivalent basis, expanded slightly in the current quarter to 3.80%, as compared to 3.79% in the linked quarter and 3.75% in the prior year quarter.

ROAA, return on average common equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were 1.05%, 9.09%, and 12.92%, respectively in the second quarter of 2019. The impact of merger related expenses reduced ROAA, ROAE, and ROATCE by 0.45%, 3.93% and 5.60%, respectively. Excluding merger-related expenses, the adjusted ROAA, adjusted ROAE, and adjusted ROATCE were 1.50%, 13.02%, and 18.52%, respectively for the second quarter of 2019.1

The Company’s Board of Directors approved a quarterly dividend of $0.16 per common share, an increase from $0.15 for the prior quarter, payable on September 27, 2019 to shareholders of record as of September 13, 2019.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “The core fundamentals of our Company remain strong and are reflected in our financial results for the period. The second quarter results were highlighted by strong loan growth in our specialized lending and commercial real estate portfolios, and included the first full quarter of Trinity’s operations. We are excited to have successfully completed the primary system integration of Trinity in the second quarter and look forward to the continued revenue generation and cost saving opportunities from the transaction.”

Mr. Lally continued, “The realized growth in our net interest income combined with our operating leverage puts us in a solid position as we move forward. Although the interest rate environment has been challenging in recent months, we have managed our balance sheet to provide a stable margin over the last several quarters. I expect we will continue to deliver strong financial results based on the depth and strength of our relationship managers, our disciplined credit culture and our geographic diversification.”

1 Adjusted EPS, core net interest margin, ROATCE, adjusted ROAA, adjusted ROAE and adjusted ROATCE are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

Net Interest Income

The Company closed its acquisition of Trinity on March 8, 2019. The results of operations of Trinity are included in our consolidated results from this date forward and are excluded from preceding periods.

Net interest income for the second quarter increased $9.4 million to $61.7 million from $52.3 million in the linked quarter, and increased $14.7 million from the prior year period. The increase is primarily due to the inclusion of Trinity for the entire second quarter. Net interest margin, on a tax equivalent basis, was 3.86% for the second quarter, compared to 3.87% in the linked quarter, and 3.77% in the second quarter of 2018.

Quarterly core net interest income and core net interest margin noted in the table below exclude incremental accretion on non-core acquired loans, which were acquired from the FDIC and previously covered by loss share agreements.

 

For the Quarter ended

($ in thousands)

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

September 30,
2018

 

June 30,
2018

Net interest income

$

61,715

 

 

$

52,343

 

 

$

50,593

 

 

$

48,093

 

 

$

47,048

 

Less: Incremental accretion income

910

 

 

1,157

 

 

2,109

 

 

535

 

 

291

 

Core net interest income2

$

60,805

 

 

$

51,186

 

 

$

48,484

 

 

$

47,558

 

 

$

46,757

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (tax equivalent)

3.86

%

 

3.87

%

 

3.94

%

 

3.78

%

 

3.77

%

Core net interest margin,2 (tax equivalent)

3.80

%

 

3.79

%

 

3.77

%

 

3.74

%

 

3.75

%

2 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. Averages for the quarter ended March 31, 2019 only reflect the Trinity acquired balances effective as of March 8, 2019.

 

For the Quarter ended

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

($ 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*

$

5,095,181

 

 

$

68,830

 

 

5.42

%

 

$

4,511,387

 

 

$

59,973

 

 

5.39

%

 

$

4,224,016

 

 

$

52,774

 

 

5.01

%

Investments in debt and equity securities*

1,246,529

 

 

9,152

 

 

2.95

 

 

896,936

 

 

6,292

 

 

2.84

 

 

743,534

 

 

4,789

 

 

2.58

 

Short-term investments

111,291

 

 

703

 

 

2.53

 

 

102,166

 

 

447

 

 

1.77

 

 

56,057

 

 

231

 

 

1.65

 

Total earning assets

6,453,001

 

 

78,685

 

 

4.89

 

 

5,510,489

 

 

66,712

 

 

4.91

 

 

5,023,607

 

 

57,794

 

 

4.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets

604,604

 

 

 

 

 

 

445,597

 

 

 

 

 

 

391,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

7,057,605

 

 

 

 

 

 

$

5,956,086

 

 

 

 

 

 

$

5,415,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing transaction accounts

$

1,384,090

 

 

$

2,134

 

 

0.62

%

 

$

1,077,289

 

 

$

1,790

 

 

0.67

%

 

$

823,650

 

 

$

817

 

 

0.40

%

Money market accounts

1,576,333

 

 

6,996

 

 

1.78

 

 

1,521,878

 

 

6,515

 

 

1.74

 

 

1,494,194

 

 

4,445

 

 

1.19

 

Savings

562,503

 

 

231

 

 

0.16

 

 

299,731

 

 

183

 

 

0.25

 

 

208,662

 

 

147

 

 

0.28

 

Certificates of deposit

815,138

 

 

3,758

 

 

1.85

 

 

712,269

 

 

3,332

 

 

1.90

 

 

633,897

 

 

2,338

 

 

1.48

 

Total interest-bearing deposits

4,338,064

 

 

13,119

 

 

1.21

 

 

3,611,167

 

 

11,820

 

 

1.33

 

 

3,160,403

 

 

7,747

 

 

0.98

 

Subordinated debentures

141,059

 

 

1,958

 

 

5.57

 

 

124,154

 

 

1,648

 

 

5.38

 

 

118,124

 

 

1,454

 

 

4.94

 

FHLB advances

263,384

 

 

1,696

 

 

2.58

 

 

215,420

 

 

1,398

 

 

2.63

 

 

294,643

 

 

1,448

 

 

1.97

 

Other borrowed funds

204,375

 

 

713

 

 

1.40

 

 

202,197

 

 

408

 

 

0.82

 

 

167,661

 

 

182

 

 

0.44

 

Total interest-bearing liabilities

4,946,882

 

 

17,486

 

 

1.42

 

 

4,152,938

 

 

15,274

 

 

1.49

 

 

3,740,831

 

 

10,831

 

 

1.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

1,244,008

 

 

 

 

 

 

1,088,323

 

 

 

 

 

 

1,069,888

 

 

 

 

 

Other liabilities

53,609

 

 

 

 

 

 

52,371

 

 

 

 

 

 

35,877

 

 

 

 

 

Total liabilities

6,244,499

 

 

 

 

 

 

5,293,632

 

 

 

 

 

 

4,846,596

 

 

 

 

 

Shareholders' equity

813,106

 

 

 

 

 

 

662,454

 

 

 

 

 

 

568,555

 

 

 

 

 

Total liabilities and shareholders' equity

$

7,057,605

 

 

 

 

 

 

$

5,956,086

 

 

 

 

 

 

$

5,415,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core net interest income2

 

 

61,199

 

 

 

 

 

 

51,438

 

 

 

 

 

 

46,963

 

 

 

Core net interest margin2

 

 

 

 

3.80

%

 

 

 

 

 

3.79

%

 

 

 

 

 

3.75

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incremental accretion on non-core acquired loans

 

 

910

 

 

 

 

 

 

1,157

 

 

 

 

 

 

291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net interest income

 

 

$

62,109

 

 

 

 

 

 

$

52,595

 

 

 

 

 

 

$

47,254

 

 

 

Net interest margin

 

 

 

 

3.86

%

 

 

 

 

 

3.87

%

 

 

 

 

 

3.77

%

* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.4 million for the three months ended June 30, 2019, $0.3 million for the three months ended March 31, 2019, and $0.2 million for the three months ended June 30, 2018.

2 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.

Net interest margin decreased one basis point from the linked quarter to 3.86% during the current quarter. Core net interest margin2 increased one basis point from the linked-quarter to 3.80% during the current quarter. Net interest margin and core net interest margin benefited from the impact of a full quarter of funding costs on Trinity deposits and was partially constrained from the increase in the average investment portfolio resulting from the Trinity acquisition. The yield on loans, excluding incremental accretion on non-core acquired loans, increased three basis points to 5.42% from 5.39%, while the yield on securities increased 11 basis points to 2.95% from 2.84%. The cost of interest-bearing deposits decreased 12 basis points from the linked quarter to 1.21% primarily due to the relatively lower cost of Trinity acquired deposits. The cost of total interest-bearing liabilities decreased seven basis points to 1.42% for the quarter ended June 30, 2019 from 1.49% for the linked quarter.

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, a persistent flat yield curve, and potential downward movement in short-term rates.

Loans

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

 

At the Quarter ended

 

 

 

March 31, 2019

 

 

($ in thousands)

June 30, 2019

 

Trinityb

 

Legacy EFSCb

 

Consolidated

 

December 31, 2018

 

September 30, 2018

 

June 30, 2018

C&I - general

$

1,103,908

 

 

$

65,122

 

 

$

1,063,633

 

 

$

1,128,755

 

 

$

995,491

 

 

$

969,898

 

 

$

992,311

 

CRE investor owned - general

1,235,596

 

 

304,615

 

 

878,856

 

 

1,183,471

 

 

862,423

 

 

846,322

 

 

841,587

 

CRE owner occupied - general

591,401

 

 

91,758

 

 

484,268

 

 

576,026

 

 

496,835

 

 

482,146

 

 

498,834

 

Enterprise value lendinga

445,981

 

 

 

 

439,500

 

 

439,500

 

 

465,992

 

 

442,439

 

 

442,877

 

Life insurance premium financinga

465,777

 

 

 

 

440,693

 

 

440,693

 

 

417,950

 

 

378,826

 

 

358,787

 

Residential real estate - general

409,200

 

 

137,487

 

 

295,069

 

 

432,556

 

 

304,671

 

 

314,315

 

 

326,790

 

Construction and land development - general

376,597

 

 

70,251

 

 

274,956

 

 

345,207

 

 

310,832

 

 

312,617

 

 

289,206

 

Tax creditsa

268,405

 

 

 

 

235,454

 

 

235,454

 

 

262,735

 

 

256,666

 

 

260,595

 

Agriculture

131,671

 

 

 

 

126,088

 

 

126,088

 

 

136,188

 

 

138,005

 

 

128,118

 

Consumer and other - general

120,961

 

 

12,835

 

 

96,492

 

 

109,327

 

 

96,884

 

 

126,196

 

 

136,656

 

Total Loans

$

5,149,497

 

 

$

682,068

 

 

$

4,335,009

 

 

$

5,017,077

 

 

$

4,350,001

 

 

$

4,267,430

 

 

$

4,275,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loan yield

5.49

%

 

 

 

 

 

5.50

%

 

5.44

%

 

5.18

%

 

5.04

%

Total C&I loans to total loans

44

%

 

 

 

 

 

44

%

 

49

%

 

48

%

 

48

%

Variable interest rate loans to total loans

60

%

 

 

 

 

 

60

%

 

62

%

 

62

%

 

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.

b Amounts reported are as of March 31, 2019 and are separately shown attributable to the Trinity loan portfolio and related operations acquired on March 8, 2019, and the Company’s pre-Trinity acquisition loan portfolio and related operations.

 

Loans totaled $5.1 billion at June 30, 2019, increasing $132 million, or 11% annualized, compared to the linked quarter. On a year-over-year basis, loans increased $874 million primarily due to the Trinity acquisition. We expect loan growth in 2019 to be a high single digit percentage, excluding Trinity acquired loans.

2 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.

The Company continues to focus on originating high-quality C&I relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. C&I loan growth, coupled with fixed rate CRE lending, supports management’s efforts to maintain a flexible asset sensitive interest rate risk position.

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)

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

September 30,
2018

 

June 30,
2018

Nonperforming loans

$

19,842

 

 

$

9,607

 

 

$

16,745

 

 

$

17,044

 

 

$

14,801

 

Other real estate

10,531

 

 

6,804

 

 

469

 

 

408

 

 

454

 

Nonperforming assets

$

30,373

 

 

$

16,411

 

 

$

17,214

 

 

$

17,452

 

 

$

15,255

 

 

 

 

 

 

 

 

 

 

 

Nonperforming loans to total loans

0.39

%

 

0.19

%

 

0.38

%

 

0.40

%

 

0.35

%

Nonperforming assets to total assets

0.42

 

 

0.24

 

 

0.30

 

 

0.32

 

 

0.28

 

Allowance for loan losses to total loans

0.85

 

 

0.86

 

 

1.00

 

 

1.04

 

 

1.04

 

Net charge-offs

$

969

 

 

$

1,826

 

 

$

2,822

 

 

$

2,447

 

 

$

641

 

 

Nonperforming loans increased $10.2 million to $19.8 million at June 30, 2019 from $9.6 million at March 31, 2019 primarily due to two nonaccrual loans totaling $7.9 million and two loans 90 days past due and still accruing interest of $4.0 million. The addition of these nonperforming loans in the second quarter did not result in any additional provision for loan losses, as the credits are well secured and the Company expects a positive resolution in the coming quarters. These increases were offset by a $1.2 million charge-off on a nonperforming loan in the second quarter.

Other real estate increased during the quarter ended June 30, 2019 primarily due to the foreclosure of a $5.4 million commercial property that was a purchased credit impaired loan from our acquisition of Jefferson County Bancshares Inc., partially offset by sales of $2.2 million. The foreclosure of this property did not result in a write down of the asset.

The Company recorded a provision for loan losses of $1.7 million compared to $1.5 million for the linked quarter and $0.4 million for the prior year quarter, respectively. The provision is reflective of loan growth during the period. The decrease in the ratio of allowance for loan losses to total loans in 2019, from 1.00% at the end of 2018 to 0.85% in the current quarter, is primarily due to the acquisition of Trinity loans that were recorded at fair value and do not have a corresponding allowance for loan losses. In addition, the level of specific reserves in 2019 decreased due to two relationships that were charged off. The Company has recorded a credit mark on the Trinity loan portfolio of $24.4 million as of the acquisition date.

Deposits

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

 

At the Quarter ended

 

 

 

March 31, 2019

 

 

 

 

 

 

($ in thousands)

June 30, 2019

 

Trinitya

 

Legacy EFSCa

 

Consolidated

 

December 31, 2018

 

September 30, 2018

 

June 30, 2018

Noninterest-bearing accounts

$

1,181,577

 

 

$

169,344

 

 

$

1,017,164

 

 

$

1,186,508

 

 

$

1,100,718

 

 

$

1,062,126

 

 

$

1,050,969

 

Interest-bearing transaction accounts

1,392,586

 

 

401,257

 

 

988,569

 

 

1,389,826

 

 

1,037,684

 

 

743,351

 

 

754,819

 

Money market and savings accounts

2,162,605

 

 

390,192

 

 

1,765,839

 

 

2,156,031

 

 

1,765,154

 

 

1,730,762

 

 

1,768,793

 

Brokered certificates of deposit

213,138

 

 

 

 

180,788

 

 

180,788

 

 

198,981

 

 

202,323

 

 

224,192

 

Other certificates of deposit

609,432

 

 

133,556

 

 

490,404

 

 

623,960

 

 

485,448

 

 

471,914

 

 

449,139

 

Total deposit portfolio

$

5,559,338

 

 

$

1,094,349

 

 

$

4,442,764

 

 

$

5,537,113

 

 

$

4,587,985

 

 

$

4,210,476

 

 

$

4,247,912

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits to total deposits

21

%

 

15

%

 

23

%

 

21

%

 

24

%

 

25

%

 

25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a Amounts reported are as of March 31, 2019 and are shown separately attributable to the Trinity deposit portfolio and related operations acquired on March 8, 2019, and the Company’s pre-Trinity acquisition deposit portfolio and related operations.

 

Total deposits at June 30, 2019 were $5.6 billion, an increase of $22 million from March 31, 2019, and an increase of $1.3 billion from June 30, 2018, primarily due to the Trinity acquisition.

Core deposits, defined as total deposits excluding certificates of deposits, were $4.7 billion at June 30, 2019, an increase of $4 million from the linked quarter. Noninterest-bearing deposits were $1.2 billion at June 30, 2019, a decrease of $5 million compared to March 31, 2019, and an increase of $131 million compared to June 30, 2018. The total cost of deposits decreased eight basis points to 0.94% for the current quarter compared to 1.02% and 0.73% in the linked and prior year quarters, respectively. The decrease in the cost of deposits is primarily from the addition of Trinity’s relatively lower-cost deposit portfolio.

Noninterest Income

Total noninterest income for the quarter ended June 30, 2019 was $12.0 million, an increase of $2.7 million, or 30% from the linked quarter, and an increase of $2.3 million, or 23% from the prior year quarter. The increase from the linked quarter was driven by contributions from Trinity of $2.3 million, primarily related to wealth management and card services revenue of $0.8 million and $0.5 million, respectively. In addition, activity in tax credit services increased income $0.4 million and $0.5 million over the linked and prior year quarters, respectively.

The Company expects growth in noninterest income of a high single digit percentage for 2019 over 2018 levels, exclusive of the impact of the Trinity acquisition.

Noninterest Expenses

Noninterest expenses were $49.1 million for the quarter ended June 30, 2019, compared to $39.8 million for the quarter ended March 31, 2019, and $29.2 million for the quarter ended June 30, 2018. The increase from the linked quarter and prior year period was primarily due to merger-related expenses and a full quarter of operating expenses following the acquisition of Trinity. Merger-related expenses in the quarter increased $3.0 million and $10.3 million over the linked and prior year periods, respectively. With the completion of the integration of Trinity’s core system in the second quarter, the Company anticipates that it will continue to realize cost-savings in its noninterest expense run-rate during the third and fourth quarter of 2019. The Company expects its noninterest expense to range between $37 million and $39 million during each of these periods.

The Company’s core efficiency ratio3 was 53.3% for the quarter ended June 30, 2019, compared to 54.1% for the linked quarter and 52.4% for the prior year period, and reflects a full quarter of increased revenue as well as an increase in operating expenses associated with the acquisition of Trinity.

3 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, 2019 compared to 20% and 18% for the linked quarter and prior year quarter, respectively. Merger-related tax items in the current quarter increased income tax expense $0.2 million.

The Company expects its effective tax rate for the full year of 2019 to be approximately 18% - 20%. The low end of the range assumes tax planning strategies are executed to achieve that result.

Capital

The following table presents various EFSC capital ratios:

 

At the Quarter ended

Percent

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

September 30,
2018

 

June 30,
2018

Total risk-based capital to risk-weighted assets

12.62

%

 

12.86

%

 

13.02

%

 

12.94

%

 

12.60

%

Tier 1 capital to risk weighted assets

11.06

 

 

11.25

 

 

11.14

 

 

11.03

 

 

10.68

 

Common equity tier 1 capital to risk-weighted assets

9.51

 

 

9.64

 

 

9.79

 

 

9.66

 

 

9.32

 

Tangible common equity to tangible assets1

8.43

 

 

8.35

 

 

8.66

 

 

8.54

 

 

8.30

 

 

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.

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 adjusted EPS, core net interest income, core net interest margin, tangible common equity, core efficiency ratios, ROATCE, adjusted ROAA, adjusted ROAE, and adjusted ROATCE, 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 adjusted EPS, core net interest income, core net interest margin, core efficiency ratio, adjusted ROAA, adjusted ROAE, ROATCE, adjusted ROATCE, 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 loss share 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 2:30 p.m. Central time on Tuesday, July 23, 2019. During the call, management will review the second quarter of 2019 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 1-877-260-1479 (Conference ID #1823032). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC2Q2019earnings 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 (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 Enterprise, 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 the acquisition of Trinity and its wholly-owned subsidiary, Los Alamos National Bank, and other 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. Factors that could cause or contribute to such differences include, but are not limited to, the Company’s ability to efficiently integrate acquisitions, including the Trinity acquisition, 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 2018 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission (the “SEC”). Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events unless required under the federal securities laws.

 
 
 

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)

 

For the Quarter ended

 

For the Six Months ended

($ in thousands, except per share data)

Jun 30,
2019

 

Mar 31,
2019

 

Dec 31,
2018

 

Sep 30,
2018

 

Jun 30,
2018

 

Jun 30,
2019

 

Jun 30,
2018

EARNINGS SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$

61,715

 

 

$

52,343

 

 

$

50,593

 

 

$

48,093

 

 

$

47,048

 

 

$

114,058

 

 

$

93,219

 

Provision for loan losses

1,722

 

 

1,476

 

 

2,120

 

 

2,263

 

 

390

 

 

3,198

 

 

2,261

 

Noninterest income

11,964

 

 

9,230

 

 

10,702

 

 

8,410

 

 

9,693

 

 

21,194

 

 

19,235

 

Noninterest expense

49,054

 

 

39,838

 

 

30,747

 

 

29,922

 

 

29,219

 

 

88,892

 

 

58,362

 

Income before income tax expense

22,903

 

 

20,259

 

 

28,428

 

 

24,318

 

 

27,132

 

 

43,162

 

 

51,831

 

Income tax expense

4,479

 

 

4,103

 

 

4,899

 

 

1,802

 

 

4,881

 

 

8,582

 

 

8,659

 

Net income

$

18,424

 

 

$

16,156

 

 

$

23,529

 

 

$

22,516

 

 

$

22,251

 

 

$

34,580

 

 

$

43,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

$

0.68

 

 

$

0.67

 

 

$

1.02

 

 

$

0.97

 

 

$

0.95

 

 

$

1.36

 

 

$

1.85

 

Return on average assets

1.05

%

 

1.10

%

 

1.69

%

 

1.63

%

 

1.65

%

 

1.07

%

 

1.62

%

Return on average common equity

9.09

 

 

9.89

 

 

15.61

 

 

15.22

 

 

15.70

 

 

9.45

%

 

15.51

%

Return on average tangible common equity1

12.92

 

 

12.93

 

 

19.79

 

 

19.42

 

 

20.23

 

 

12.93

%

 

20.08

%

Net interest margin (tax equivalent)

3.86

 

 

3.87

 

 

3.94

 

 

3.78

 

 

3.77

 

 

3.87

%

 

3.79

%

Core net interest margin (tax equivalent)1

3.80

 

 

3.79

 

 

3.77

 

 

3.74

 

 

3.75

 

 

3.80

%

 

3.74

%

Efficiency ratio

66.58

 

 

64.70

 

 

50.16

 

 

52.96

 

 

51.50

 

 

65.72

%

 

51.90

%

Core efficiency ratio1

53.30

 

 

54.06

 

 

49.77

 

 

52.23

 

 

52.36

 

 

53.65

%

 

53.18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

7,181,855

 

 

$

6,932,757

 

 

$

5,645,662

 

 

$

5,517,539

 

 

$

5,509,924

 

 

 

 

 

Total average assets

7,057,605

 

 

5,956,086

 

 

5,518,740

 

 

5,471,504

 

 

5,415,151

 

 

6,509,888

 

 

5,377,839

 

Total deposits

5,559,338

 

 

5,537,113

 

 

4,587,985

 

 

4,210,476

 

 

4,247,912

 

 

 

 

 

Total average deposits

5,582,072

 

 

4,699,490

 

 

4,434,634

 

 

4,255,523

 

 

4,230,291

 

 

5,143,219

 

 

4,177,601

 

Period end common shares outstanding

26,906

 

 

26,878

 

 

22,812

 

 

23,092

 

 

23,141

 

 

 

 

 

Dividends per common share

$

0.15

 

 

$

0.14

 

 

$

0.13

 

 

$

0.12

 

 

$

0.11

 

 

0.29

 

 

0.22

 

Tangible book value per common share1

$

21.74

 

 

$

20.80

 

 

$

20.95

 

 

$

19.94

 

 

$

19.32

 

 

 

 

 

Tangible common equity to tangible assets1

8.43

%

 

8.35

%

 

8.66

%

 

8.54

%

 

8.30

%

 

 

 

 

Total risk-based capital to risk-weighted assets

12.62

 

 

12.86

 

 

13.02

 

 

12.94

 

 

12.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

...
 
 
 

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

 

For the Quarter ended

 

For the Six Months ended

($ in thousands, except per share data)

Jun 30,
2019

 

Mar 31,
2019

 

Dec 31,
2018

 

Sep 30,
2018

 

Jun 30,
2018

 

Jun 30,
2019

 

Jun 30,
2018

INCOME STATEMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Total interest income

$

79,201

 

 

$

67,617

 

 

$

64,002

 

 

$

60,757

 

 

$

57,879

 

 

$

146,818

 

 

$

113,043

 

Total interest expense

17,486

 

 

15,274

 

 

13,409

 

 

12,664

 

 

10,831

 

 

32,760

 

 

19,824

 

Net interest income

61,715

 

 

52,343

 

 

50,593

 

 

48,093

 

 

47,048

 

 

114,058

 

 

93,219

 

Provision for loan losses

1,722

 

 

1,476

 

 

2,120

 

 

2,263

 

 

390

 

 

3,198

 

 

2,261

 

Net interest income after provision for loan losses

59,993

 

 

50,867

 

 

48,473

 

 

45,830

 

 

46,658

 

 

110,860

 

 

90,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposit service charges

3,366

 

 

2,935

 

 

2,894

 

 

2,997

 

 

3,007

 

 

6,301

 

 

5,858

 

Wealth management revenue

2,661

 

 

1,992

 

 

1,974

 

 

2,012

 

 

2,141

 

 

4,653

 

 

4,255

 

Card services revenue

2,461

 

 

1,790

 

 

1,760

 

 

1,760

 

 

1,650

 

 

4,251

 

 

3,166

 

Tax credit income, net

572

 

 

158

 

 

2,312

 

 

192

 

 

64

 

 

730

 

 

316

 

Gain (loss) on sale of other real estate

(18

)

 

66

 

 

 

 

13

 

 

 

 

48

 

 

 

Other income

2,922

 

 

2,289

 

 

1,762

 

 

1,436

 

 

2,831

 

 

5,211

 

 

5,640

 

Total noninterest income

11,964

 

 

9,230

 

 

10,702

 

 

8,410

 

 

9,693

 

 

21,194

 

 

19,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

20,687

 

 

19,352

 

 

16,669

 

 

16,297

 

 

16,582

 

 

40,039

 

 

33,073

 

Occupancy

3,188

 

 

2,637

 

 

2,408

 

 

2,394

 

 

2,342

 

 

5,825

 

 

4,748

 

Merger-related expenses

10,306

 

 

7,270

 

 

1,271

 

 

 

 

 

 

17,576

 

 

 

Other

14,873

 

 

10,579

 

 

10,399

 

 

11,231

 

 

10,295

 

 

25,452

 

 

20,541

 

Total noninterest expense

49,054

 

 

39,838

 

 

30,747

 

 

29,922

 

 

29,219

 

 

88,892

 

 

58,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

22,903

 

 

20,259

 

 

28,428

 

 

24,318

 

 

27,132

 

 

43,162

 

 

51,831

 

Income tax expense

4,479

 

 

4,103

 

 

4,899