EXHIBIT 99.1
For more information contact:
Jerry Mueller, Senior Vice President (314) 512-7251
Ann Marie Mayuga, AMM Communications (314) 485-9499
ENTERPRISE FINANCIAL REPORTS FIRST QUARTER 2016 RESULTS
Reported Highlights
• | Net income of $0.54 per diluted share, increased 4% over the linked quarter, and 17% compared to the first quarter of 2015 |
• | Portfolio loans grew 12% on an annualized basis in the quarter, and 16% from the prior year period |
• | 11% cash dividend increase to $0.10 per share in the second quarter of 2016 from $0.09 per share in the first quarter of 2016 |
• | FDIC loss share termination charge earned-back 100% |
Core Highlights1
• | Core net income of $0.47 per diluted share, decreased 4% from the linked quarter, and increased 34% compared to the prior year period |
• | Core net interest income increased 3% in the linked quarter, and 16% from the prior year period |
• | Core efficiency ratio of 57.4% for the first quarter |
St. Louis, April 28, 2016. Enterprise Financial Services Corp (NASDAQ: EFSC) (the “Company”) reported net income of $11.0 million for the quarter ended March 31, 2016, an increase of $0.3 million, or 3%, as compared to the linked fourth quarter. Net income per diluted share was $0.54 for the quarter ended March 31, 2016, an increase of $0.02 compared to $0.52 per diluted share for the linked fourth quarter. The increase from the linked quarter resulted from an increase in net interest income and lower noninterest expense, as the fourth quarter of 2015 included a pretax charge of $2.4 million from early termination of the Company's loss share agreements with the FDIC. First quarter 2016 net income increased 18% compared to $9.3 million for the prior year period, and diluted earnings per share increased 17% from $0.46 reported a year ago. The increase in net income over the prior year was largely due to an increase in net interest income from strong loan growth, and a decrease in provision for loan losses on portfolio loans from improved credit quality.
On a core basis1, the Company reported net income of $9.4 million, or $0.47 per diluted share, for the quarter ended March 31, 2016, compared to $10.1 million, or $0.49 per diluted share, in the linked fourth quarter. The decrease was due to lower noninterest income from seasonal fluctuations in state tax credit sales, partially offset by an increase in net interest income from strong loan growth and net interest margin expansion. First quarter 2016 core net income increased 32% from $7.1 million for the prior year period, and diluted core earnings per share grew 34% from $0.35 for the prior year period. The increase was primarily due to higher levels of net interest income from continued growth in earning asset balances, combined with noninterest expense controls.
The Company's Board of Directors approved an additional one cent per common share increase in the Company’s quarterly dividend to $0.10 per common share from $0.09 for the second quarter of 2016, payable on June 30, 2016 to shareholders of record as of June 15, 2016.
Peter Benoist, President and CEO, commented, “First quarter results reflected our continuing momentum at Enterprise, with reported earnings per share up 4% for the linked quarter, and 17% year over year. Profitability measures were consistent with our high performance objectives, exceeding a 120 basis point return on assets and a 12% return on equity. Notably, we earned back the entire FDIC loss share early termination charge during the quarter.”
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
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“While the general banking environment remains challenged, our core banking operations performed very well again in the first quarter,” said Benoist. “We increased portfolio loans at a 12% annual rate, continuing the strong loan growth achieved throughout last year. Our specialty lending businesses continued to expand at a brisk pace and exceeded $600 million in assets at quarter-end. Core net interest margin widened another four basis points in the quarter and was eight basis points higher than a year ago. Asset quality measures remained strong, and we recorded net loan recoveries again for the quarter.”
“Overall, this was another strong quarter across the board. It warranted our fifth consecutive quarterly dividend increase and marked a great start to the year,” added Benoist.
Net Interest Income
Net interest income in the first quarter increased $0.3 million from the linked fourth quarter, and $3.4 million from the prior year period due to strong growth in portfolio loan balances. The net interest margin, on a fully tax equivalent basis, was 3.87% for the first quarter, compared to 3.91% in the linked fourth quarter, and 3.92% in the first quarter of 2015.
The yield on Portfolio loans was 4.19% in the first quarter, an increase of three basis points from the linked fourth quarter, and four basis points higher than the prior year period. In the first quarter of 2016, the yield on Purchased credit impaired ("PCI") loans was 22.67%, as compared to 24.79% in the linked quarter, and 20.85% in the prior year period.
The cost of interest-bearing liabilities declined two basis points to 0.48% in the first quarter of 2016 from 0.50% in the linked fourth quarter, and was eight basis points lower than 0.56% in the first quarter of 2015, primarily from lower rates on time deposit balances and a more favorable funding mix.
Core net interest margin1, defined as the net interest margin (fully tax equivalent), including contractual interest on PCI loans but excluding the incremental accretion on these loans, was as follows:
For the Quarter ended | ||||||||||||||
($ in thousands) | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | |||||||||
Core net interest margin1 | 3.54 | % | 3.50 | % | 3.41 | % | 3.46 | % | 3.46 | % | ||||
Core net interest income1 | 29,594 | 28,667 | 27,087 | 26,277 | 25,587 | |||||||||
Core net interest income1 increased 16% compared to the prior year period due to strong portfolio loan growth and improvement in the cost of interest-bearing liabilities as discussed above. Core net interest income increased by $0.9 million to $29.6 million, and core net interest margin1 increased four basis points to 3.54%, when compared to the linked quarter. Core net interest margin expanded eight basis points from the prior year quarter, primarily due to loan growth improving the earning asset mix, lower funding costs, and the aforementioned increase in the yield on portfolio loans. The Company continues to manage its balance sheet to grow core net interest income and expects to maintain or improve core net interest margin over the coming quarters; however, pressure on funding costs and continued reductions in PCI loan balances could negate the expected trends in core net interest margin.
Portfolio loans
Portfolio loans increased to $2.8 billion at March 31, 2016, increasing $82 million, or 12% on an annualized basis, when compared to the linked quarter. On a year over year basis, portfolio loans increased $397 million, or 16%. The Company continues to expect loan growth at or above 10% for 2016.
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
2
Commercial and industrial ("C&I") loans increased $61 million during the first quarter of 2016 compared to the linked fourth quarter. C&I loans represented 55% of the Company's loan portfolio at March 31, 2016, consistent with December 31, 2015 levels. C&I loans grew $286 million, or 23%, since March 31, 2015. During the quarter ended March 31, 2016, the Company also grew loans in all other major categories except Consumer and other.
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. The Company's specialized lending products, particularly enterprise value lending and life insurance premium finance, have contributed to the growth in the C&I category. C&I loan growth also supports management's efforts to maintain the Company's asset sensitive interest rate risk position. At March 31, 2016, 62% of our portfolio loans had variable interest rates, consistent with the linked quarter and prior year period.
The following table presents Portfolio loans with selected specialized lending detail for the most recent five quarters:
At the Quarter ended | |||||||||||||||||||
(in thousands) | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||
Enterprise value lending | $ | 359,862 | $ | 350,266 | $ | 283,205 | $ | 271,807 | $ | 229,362 | |||||||||
C&I - general | 759,330 | 732,186 | 689,274 | 685,793 | 663,879 | ||||||||||||||
Life insurance premium financing | 272,450 | 265,184 | 247,736 | 239,182 | 229,639 | ||||||||||||||
Tax credits | 153,338 | 136,691 | 145,207 | 132,521 | 136,485 | ||||||||||||||
CRE, Construction, and land development | 948,859 | 932,084 | 902,100 | 909,747 | 889,978 | ||||||||||||||
Residential | 202,255 | 196,498 | 188,985 | 185,587 | 180,253 | ||||||||||||||
Other | 136,522 | 137,828 | 145,649 | 117,918 | 105,963 | ||||||||||||||
Portfolio loans | $ | 2,832,616 | $ | 2,750,737 | $ | 2,602,156 | $ | 2,542,555 | $ | 2,435,559 | |||||||||
PCI loans
PCI loans totaled $63.5 million at March 31, 2016, a decrease of $11.3 million, or 15%, from the linked fourth quarter, and $31.3 million, or 33%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.
In the first quarter of 2016, $0.1 million reversal of provision for loan losses was recorded for certain loan pools. At March 31, 2016, the remaining accretable yield on the portfolio was estimated to be $21 million and the non-accretable difference was approximately $27 million.
In the fourth quarter of 2015, the Company incurred a $2.4 million charge to terminate all existing loss share agreements with the FDIC. As of March 31, 2016, the entire charge has been earned back through accretion from early repayment of PCI loans, loan recoveries, and provision reversal, all no longer shared with the FDIC.
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
3
Asset quality for Portfolio loans and Other real estate
The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:
For the Quarter ended | |||||||||||||||||||
(in thousands) | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||
Nonperforming loans | $ | 9,513 | $ | 9,100 | $ | 9,123 | $ | 17,498 | $ | 15,143 | |||||||||
Other real estate from originated loans | 2,813 | 3,218 | 1,575 | 1,933 | 2,024 | ||||||||||||||
Other real estate from PCI loans | 7,067 | 5,148 | — | — | — | ||||||||||||||
Nonperforming assets | $ | 19,393 | $ | 17,466 | $ | 10,698 | $ | 19,431 | $ | 17,167 | |||||||||
Nonperforming loans to portfolio loans | 0.34 | % | 0.33 | % | 0.35 | % | 0.69 | % | 0.62 | % | |||||||||
Nonperforming assets to total assets | 0.52 | % | 0.48 | % | 0.30 | % | 0.58 | % | 0.52 | % | |||||||||
Net charge-offs (recoveries) | $ | (99 | ) | $ | (647 | ) | $ | 113 | $ | 672 | $ | 1,478 | |||||||
Nonperforming loans increased 5% to $9.5 million at March 31, 2016, from $9.1 million at December 31, 2015, and decreased 37% from $15.1 million at March 31, 2015. During the quarter ended March 31, 2016, there were $2.9 million of additions to nonperforming loans, $2.2 million of other principal reductions, $0.3 million assets transferred to other real estate, and no assets transferred to performing. The additions to nonperforming loans consisted of two unrelated accounts. Despite the increase, Nonperforming loans were 0.34% of portfolio loans, and Nonperforming assets were 0.52% of total assets at March 31, 2016
The Company's allowance for loan losses was 1.21% of loans at March 31, 2016, representing 361% of nonperforming loans, as compared to 1.22% at December 31, 2015, representing 368% of nonperforming loans, and 1.24% at March 31, 2015, representing 200% of nonperforming loans. The increase in the ratio of allowance for loan losses to nonperforming loans from the prior year period is primarily due to the 37% decrease in nonperforming loans discussed previously.
Deposits
Total deposits at March 31, 2016 were $2.9 billion, an increase of $147.2 million, or 21% on an annualized basis, from December 31, 2015, and $257.1 million, or 10%, from March 31, 2015. The increase from the linked quarter was largely due to an increase in brokered certificates of deposit to fund significant loan growth in the quarter. Core deposits, defined as total deposits excluding time deposits, were $2.5 billion at March 31, 2016, an increase of $42 million, or 7% on an annualized basis, from the linked quarter, and $362 million, or 17%, when compared to the prior year period. The overall positive trends in deposits reflect enhanced deposit gathering efforts in both commercial and business banking.
Noninterest-bearing deposits increased $2.2 million compared to December 31, 2015, and increased $38.7 million compared to the quarter ended March 31, 2015. The composition of Noninterest-bearing deposits remained relatively stable at 25% of total deposits at March 31, 2016, compared to December 31, 2015 and March 31, 2015. The total cost of deposits declined two basis points to 0.34% compared to 0.36% at December 31, 2015, and declined six basis points since March 31, 2015.
Noninterest income
Deposit service charges for the first quarter of 2016 of $2.0 million remained stable when compared to the linked quarter, and grew 10% compared to the prior year quarter partially due to growth in customer relationships. Additionally, Wealth management revenues were consistent at $1.7 million when compared to the linked fourth quarter and the prior year period.
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
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Trust assets under management were $878 million at March 31, 2016, an increase of 1% when compared to December 31, 2015, and decreased $16 million, or 2% when compared to the prior year period. The increase from the linked quarter was primarily due to the addition of new clients, and the decrease from the prior year period was largely due to market decline.
Gains from state tax credit brokerage activities were $0.5 million for the first quarter of 2016, compared to $1.7 million for the linked fourth quarter, and $0.7 million in the first quarter of 2015. Sales of state tax credits can vary by quarter, but generally occur in the first and fourth quarters of the year depending on client demand and availability of the tax credits.
Other noninterest income of $1.7 million remained stable compared to the linked quarter, and increased 8% from the prior year period. The increase from the prior year period was due to slight increases in swap fee income, card fee income, and gains on sales of mortgages.
Noninterest expenses
Noninterest expenses were $20.8 million for the quarter ended March 31, 2016, compared to $22.9 million for the quarter ended December 31, 2015, and $20.0 million for the quarter ended March 31, 2015. Core noninterest expenses1, which exclude certain non-comparable items and expenses directly related to PCI assets, were $20.4 million for the quarter ended March 31, 2016, compared to $20.0 million for the linked quarter, and $19.1 million for the prior year period. The increase from the linked quarter and prior year period was largely due to an increase in Employee compensation and benefits from the addition of client service personnel to accommodate growth and a seasonal increase in payroll taxes.
The Company's Core efficiency ratio1 was 57.4% for the quarter ended March 31, 2016, compared to 56.1% for the linked quarter, and 60.7% for the prior year period, and reflects overall expense management, and revenue growth trends.
The Company anticipates total noninterest expenses to be between $19 million and $21 million per quarter for 2016.
Other Business Results
During the quarter ended March 31, 2016, the Company repurchased 160,100 common shares at $26.30 per share under its publicly announced plan. The plan allows for repurchase of up to two million common shares, representing approximately 10% of the Company's currently outstanding shares.
The total risk based capital ratio1 was 12.02% at March 31, 2016, compared to 11.85% at December 31, 2015, and 12.88% at March 31, 2015. The Company's Common equity tier 1 capital ratio1 was 9.20% at March 31, 2016, compared to 9.05% at December 31, 2015, and 9.78% at March 31, 2015. The tangible common equity ratio1 was 8.87% at March 31, 2016, versus 8.88% at December 31, 2015, and 9.01% at March 31, 2015.
The Company's capital management combined with asset growth has resulted in a stable tangible common equity ratio, despite continued earnings growth. Capital ratios for the current quarter are based on the Basel III regulatory capital framework as applied to the Company’s current businesses and operations, and are subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review and implementation guidance. The attached tables contain a reconciliation of these ratios to U.S. GAAP financial measures.
The Company's effective tax rate was 34.8% for the quarter ended March 31, 2016 compared to 33.8% for the quarter ended December 31, 2015, and 35.0% for the quarter ended March 31, 2015.
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
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Use of Non-GAAP Financial Measures1
The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as Core net income and net interest margin, and other Core performance measures, regulatory capital ratios, and the tangible common equity ratio, in this release that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.
The Company considers its Core performance measures presented in this earnings release and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of PCI loans and related income and expenses, the impact of certain non-comparable items, and the Company's operating performance on an ongoing basis. Core performance measures include contractual interest on PCI loans, but exclude incremental accretion on these loans. Core performance measures also exclude the Change in FDIC receivable, Gain or loss on sale of other real estate from PCI loans, and expenses directly related to PCI loans and other assets formerly covered under FDIC loss share agreements. Core performance measures also exclude certain other income and expense items the Company believes to be not indicative of or useful to measure the Company's operating performance on an ongoing basis. The attached tables contain a reconciliation of these Core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company's capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.
The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.
The Company will host a conference call and webcast at 2:30 p.m. Central time on Thursday, April 28, 2016. During the call, management will review the first quarter of 2016 results and related matters. This press release as well as a related slide presentation will be accessible on Enterprise Financial Services Corp's website at www.enterprisebank.com under “Investor Relations” beginning prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-800-533-7619 (Conference ID #1739499.) A recorded replay of the conference call will be available on the website beginning two hours after the call's completion. The telephone replay will be available at 1-866-375-1919 (replay passcode #1739499.) The replays will be available for approximately two weeks following the conference call.
Enterprise Financial Services Corp operates commercial banking and wealth management businesses in metropolitan St. Louis, Kansas City, and Phoenix. The Company is primarily focused on serving the needs of privately held businesses, their owner families, executives and professionals.
# # #
Readers should note that in addition to the historical information contained herein, this press release contains forward-looking statements, including but not limited to statements about the Company's plans, expectations, and projections of future financial and operating results, which are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. We use the words "anticipate," “expect,” and “intend” and variations of such words and similar expressions in this communication to identify such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, credit
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
6
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, our 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 2015 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events unless required under the federal securities laws.
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
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ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
For the Quarter ended | |||||||||||||||||||
(in thousands, except per share data) | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||
EARNINGS SUMMARY | |||||||||||||||||||
Net interest income | $ | 32,428 | $ | 32,079 | $ | 30,006 | $ | 29,280 | $ | 29,045 | |||||||||
Provision for loan losses - portfolio loans | 833 | 543 | 599 | 2,150 | 1,580 | ||||||||||||||
Provision reversal for loan losses - purchased credit impaired loans | (73 | ) | (917 | ) | (227 | ) | — | (3,270 | ) | ||||||||||
Noninterest income | 6,005 | 6,557 | 4,729 | 5,806 | 3,583 | ||||||||||||||
Noninterest expense | 20,762 | 22,886 | 19,932 | 19,458 | 19,950 | ||||||||||||||
Income before income tax expense | 16,911 | 16,124 | 14,431 | 13,478 | 14,368 | ||||||||||||||
Income tax expense | 5,886 | 5,445 | 4,722 | 4,762 | 5,022 | ||||||||||||||
Net income | $ | 11,025 | $ | 10,679 | $ | 9,709 | $ | 8,716 | $ | 9,346 | |||||||||
Diluted earnings per share | $ | 0.54 | $ | 0.52 | $ | 0.48 | $ | 0.43 | $ | 0.46 | |||||||||
Return on average assets | 1.22 | % | 1.20 | % | 1.13 | % | 1.06 | % | 1.16 | % | |||||||||
Return on average common equity | 12.46 | % | 12.14 | % | 11.38 | % | 10.56 | % | 11.78 | % | |||||||||
Return on average tangible common equity | 13.74 | % | 13.43 | % | 12.65 | % | 11.77 | % | 13.19 | % | |||||||||
Net interest margin (fully tax equivalent) | 3.87 | % | 3.91 | % | 3.77 | % | 3.85 | % | 3.92 | % | |||||||||
Efficiency ratio | 54.02 | % | 59.23 | % | 57.38 | % | 55.46 | % | 61.14 | % | |||||||||
CORE PERFORMANCE SUMMARY1 | |||||||||||||||||||
Net interest income | $ | 29,594 | $ | 28,667 | $ | 27,087 | $ | 26,277 | $ | 25,587 | |||||||||
Provision for loan losses | 833 | 543 | 599 | 2,150 | 1,580 | ||||||||||||||
Noninterest income | 6,005 | 7,056 | 5,939 | 6,741 | 5,839 | ||||||||||||||
Noninterest expense | 20,435 | 20,027 | 19,347 | 19,030 | 19,068 | ||||||||||||||
Income before income tax expense | 14,331 | 15,153 | 13,080 | 11,838 | 10,778 | ||||||||||||||
Income tax expense | 4,897 | 5,073 | 4,204 | 4,134 | 3,647 | ||||||||||||||
Net income | $ | 9,434 | $ | 10,080 | $ | 8,876 | $ | 7,704 | $ | 7,131 | |||||||||
Diluted earnings per share | $ | 0.47 | $ | 0.49 | $ | 0.44 | $ | 0.38 | $ | 0.35 | |||||||||
Return on average assets | 1.04 | % | 1.13 | % | 1.03 | % | 0.93 | % | 0.88 | % | |||||||||
Return on average common equity | 10.66 | % | 11.46 | % | 10.41 | % | 9.34 | % | 8.99 | % | |||||||||
Return on average tangible common equity | 11.76 | % | 12.68 | % | 11.56 | % | 10.41 | % | 10.06 | % | |||||||||
Net interest margin (fully tax equivalent) | 3.54 | % | 3.50 | % | 3.41 | % | 3.46 | % | 3.46 | % | |||||||||
Efficiency ratio | 57.40 | % | 56.06 | % | 58.58 | % | 57.64 | % | 60.67 | % | |||||||||
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables. | |||||||||||||||||||
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ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended | |||||||||||||||||||
(in thousands, except per share data) | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||
INCOME STATEMENTS | |||||||||||||||||||
NET INTEREST INCOME | |||||||||||||||||||
Total interest income | $ | 35,460 | $ | 35,096 | $ | 33,180 | $ | 32,352 | $ | 32,151 | |||||||||
Total interest expense | 3,032 | 3,017 | 3,174 | 3,072 | 3,106 | ||||||||||||||
Net interest income | 32,428 | 32,079 | 30,006 | 29,280 | 29,045 | ||||||||||||||
Provision for portfolio loans | 833 | 543 | 599 | 2,150 | 1,580 | ||||||||||||||
Provision reversal for purchased credit impaired loans | (73 | ) | (917 | ) | (227 | ) | — | (3,270 | ) | ||||||||||
Net interest income after provision for loan losses | 31,668 | 32,453 | 29,634 | 27,130 | 30,735 | ||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||
Deposit service charges | 2,043 | 2,025 | 2,044 | 1,998 | 1,856 | ||||||||||||||
Wealth management revenue | 1,662 | 1,716 | 1,773 | 1,778 | 1,740 | ||||||||||||||
State tax credit activity, net | 518 | 1,651 | 321 | 74 | 674 | ||||||||||||||
Gain on sale of other real estate | 122 | 81 | 32 | 9 | 20 | ||||||||||||||
Gain on sale of investment securities | — | — | — | — | 23 | ||||||||||||||
Change in FDIC loss share receivable | — | (580 | ) | (1,241 | ) | (945 | ) | (2,264 | ) | ||||||||||
Other income | 1,660 | 1,664 | 1,800 | 2,892 | 1,534 | ||||||||||||||
Total noninterest income | 6,005 | 6,557 | 4,729 | 5,806 | 3,583 | ||||||||||||||
NONINTEREST EXPENSE | |||||||||||||||||||
Employee compensation and benefits | 12,647 | 11,833 | 11,475 | 11,274 | 11,513 | ||||||||||||||
Occupancy | 1,683 | 1,653 | 1,605 | 1,621 | 1,694 | ||||||||||||||
FDIC clawback | — | — | 298 | 50 | 412 | ||||||||||||||
FDIC loss share termination | — | 2,436 | — | — | — | ||||||||||||||
Other | 6,432 | 6,964 | 6,554 | 6,513 | 6,331 | ||||||||||||||
Total noninterest expense | 20,762 | 22,886 | 19,932 | 19,458 | 19,950 | ||||||||||||||
Income before income tax expense | 16,911 | 16,124 | 14,431 | 13,478 | 14,368 | ||||||||||||||
Income tax expense | 5,886 | 5,445 | 4,722 | 4,762 | 5,022 | ||||||||||||||
Net income | $ | 11,025 | $ | 10,679 | $ | 9,709 | $ | 8,716 | $ | 9,346 | |||||||||
Basic earnings per share | $ | 0.55 | $ | 0.53 | $ | 0.49 | $ | 0.44 | $ | 0.47 | |||||||||
Diluted earnings per share | 0.54 | 0.52 | 0.48 | 0.43 | 0.46 | ||||||||||||||
9
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
At the Quarter ended | |||||||||||||||||||
(in thousands) | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||
BALANCE SHEETS | |||||||||||||||||||
ASSETS | |||||||||||||||||||
Cash and due from banks | $ | 56,251 | $ | 47,935 | $ | 46,775 | $ | 49,498 | $ | 56,420 | |||||||||
Interest-earning deposits | 50,982 | 47,222 | 81,115 | 51,298 | 43,913 | ||||||||||||||
Debt and equity investments | 524,320 | 512,939 | 530,577 | 465,133 | 467,343 | ||||||||||||||
Loans held for sale | 6,409 | 6,598 | 4,275 | 5,446 | 7,843 | ||||||||||||||
Portfolio loans | 2,832,616 | 2,750,737 | 2,602,156 | 2,542,555 | 2,435,559 | ||||||||||||||
Less: Allowance for loan losses | 34,373 | 33,441 | 32,251 | 31,765 | 30,288 | ||||||||||||||
Portfolio loans, net | 2,798,243 | 2,717,296 | 2,569,905 | 2,510,790 | 2,405,271 | ||||||||||||||
Purchased credit impaired loans, net of the allowance for loan losses | 53,908 | 64,583 | 72,397 | 76,050 | 83,163 | ||||||||||||||
Total loans, net | 2,852,151 | 2,781,879 | 2,642,302 | 2,586,840 | 2,488,434 | ||||||||||||||
Other real estate1 | 9,880 | 8,366 | 1,575 | 1,933 | 2,024 | ||||||||||||||
Other real estate covered under FDIC loss share1 | — | — | 6,795 | 7,909 | 3,560 | ||||||||||||||
Fixed assets, net | 14,812 | 14,842 | 14,395 | 14,726 | 14,911 | ||||||||||||||
State tax credits, held for sale | 45,305 | 45,850 | 48,207 | 42,062 | 42,411 | ||||||||||||||
FDIC loss share receivable | — | — | 8,619 | 10,332 | 11,644 | ||||||||||||||
Goodwill | 30,334 | 30,334 | 30,334 | 30,334 | 30,334 | ||||||||||||||
Intangible assets, net | 2,832 | 3,075 | 3,323 | 3,595 | 3,880 | ||||||||||||||
Other assets | 116,629 | 109,443 | 98,249 | 101,972 | 102,578 | ||||||||||||||
Total assets | $ | 3,709,905 | $ | 3,608,483 | $ | 3,516,541 | $ | 3,371,078 | $ | 3,275,295 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||
Noninterest-bearing deposits | $ | 719,652 | $ | 717,460 | $ | 691,758 | $ | 658,258 | $ | 680,997 | |||||||||
Interest-bearing deposits | 2,212,094 | 2,067,131 | 2,122,205 | 2,033,300 | 1,993,634 | ||||||||||||||
Total deposits | 2,931,746 | 2,784,591 | 2,813,963 | 2,691,558 | 2,674,631 | ||||||||||||||
Subordinated debentures | 56,807 | 56,807 | 56,807 | 56,807 | 56,807 | ||||||||||||||
Federal Home Loan Bank advances | 130,500 | 110,000 | 75,000 | 73,000 | 6,000 | ||||||||||||||
Other borrowings | 193,788 | 270,326 | 194,684 | 188,546 | 186,864 | ||||||||||||||
Other liabilities | 37,680 | 35,930 | 32,524 | 28,737 | 24,884 | ||||||||||||||
Total liabilities | 3,350,521 | 3,257,654 | 3,172,978 | 3,038,648 | 2,949,186 | ||||||||||||||
Shareholders' equity | 359,384 | 350,829 | 343,563 | 332,430 | 326,109 | ||||||||||||||
Total liabilities and shareholders' equity | $ | 3,709,905 | $ | 3,608,483 | $ | 3,516,541 | $ | 3,371,078 | $ | 3,275,295 | |||||||||
1Due to termination of the Company's loss share agreements with the FDIC in the fourth quarter of 2015, Other real estate covered under FDIC loss share was reclassified to Other real estate. | |||||||||||||||||||
10
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended | |||||||||||||||||||
(in thousands) | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||
LOAN PORTFOLIO | |||||||||||||||||||
Commercial and industrial | $ | 1,544,980 | $ | 1,484,327 | $ | 1,365,422 | $ | 1,329,303 | $ | 1,259,365 | |||||||||
Commercial real estate | 773,535 | 771,023 | 750,001 | 759,893 | 751,944 | ||||||||||||||
Construction real estate | 175,324 | 161,061 | 152,099 | 149,854 | 138,034 | ||||||||||||||
Residential real estate | 202,255 | 196,498 | 188,985 | 185,587 | 180,253 | ||||||||||||||
Consumer and other | 136,522 | 137,828 | 145,649 | 117,918 | 105,963 | ||||||||||||||
Total portfolio loans | 2,832,616 | 2,750,737 | 2,602,156 | 2,542,555 | 2,435,559 | ||||||||||||||
Purchased credit impaired loans | 63,477 | 74,758 | 83,736 | 87,644 | 94,788 | ||||||||||||||
Total loans | $ | 2,896,093 | $ | 2,825,495 | $ | 2,685,892 | $ | 2,630,199 | $ | 2,530,347 | |||||||||
DEPOSIT PORTFOLIO | |||||||||||||||||||
Noninterest-bearing accounts | $ | 719,652 | $ | 717,460 | $ | 691,758 | $ | 658,258 | $ | 680,997 | |||||||||
Interest-bearing transaction accounts | 589,635 | 564,420 | 529,052 | 507,889 | 494,228 | ||||||||||||||
Money market and savings accounts | 1,161,610 | 1,146,523 | 1,136,557 | 1,014,481 | 933,908 | ||||||||||||||
Brokered certificates of deposit | 157,939 | 39,573 | 86,147 | 124,170 | 157,276 | ||||||||||||||
Other certificates of deposit | 302,910 | 316,615 | 370,449 | 386,760 | 408,222 | ||||||||||||||
Total deposit portfolio | $ | 2,931,746 | $ | 2,784,591 | $ | 2,813,963 | $ | 2,691,558 | $ | 2,674,631 | |||||||||
AVERAGE BALANCES | |||||||||||||||||||
Portfolio loans | $ | 2,777,456 | $ | 2,631,256 | $ | 2,540,948 | $ | 2,482,291 | $ | 2,425,962 | |||||||||
Purchased credit impaired loans | 69,031 | 77,485 | 85,155 | 92,168 | 97,201 | ||||||||||||||
Loans held for sale | 4,563 | 5,495 | 4,255 | 6,605 | 3,560 | ||||||||||||||
Debt and equity investments | 514,687 | 521,679 | 475,180 | 463,808 | 461,781 | ||||||||||||||
Interest-earning assets | 3,413,792 | 3,304,827 | 3,201,181 | 3,096,294 | 3,047,815 | ||||||||||||||
Total assets | 3,641,308 | 3,528,423 | 3,416,716 | 3,310,578 | 3,268,369 | ||||||||||||||
Deposits | 2,811,209 | 2,832,313 | 2,788,245 | 2,667,640 | 2,590,961 | ||||||||||||||
Shareholders' equity | 355,980 | 348,908 | 338,368 | 330,999 | 321,772 | ||||||||||||||
Tangible common equity | 322,698 | 315,380 | 304,583 | 296,931 | 287,423 | ||||||||||||||
YIELDS (fully tax equivalent) | |||||||||||||||||||
Portfolio loans | 4.19 | % | 4.16 | % | 4.16 | % | 4.17 | % | 4.15 | % | |||||||||
Purchased credit impaired loans | 22.67 | % | 24.79 | % | 19.41 | % | 18.33 | % | 20.85 | % | |||||||||
Total loans | 4.64 | % | 4.75 | % | 4.66 | % | 4.68 | % | 4.79 | % | |||||||||
Debt and equity investments | 2.34 | % | 2.27 | % | 2.23 | % | 2.26 | % | 2.35 | % | |||||||||
Interest-earning assets | 4.23 | % | 4.27 | % | 4.17 | % | 4.24 | % | 4.33 | % | |||||||||
Interest-bearing deposits | 0.46 | % | 0.48 | % | 0.50 | % | 0.52 | % | 0.54 | % | |||||||||
Total deposits | 0.34 | % | 0.36 | % | 0.39 | % | 0.39 | % | 0.40 | % | |||||||||
Subordinated debentures | 2.47 | % | 2.26 | % | 2.19 | % | 2.18 | % | 2.15 | % | |||||||||
Borrowed funds | 0.31 | % | 0.24 | % | 0.28 | % | 0.29 | % | 0.36 | % | |||||||||
Cost of paying liabilities | 0.48 | % | 0.50 | % | 0.53 | % | 0.54 | % | 0.56 | % | |||||||||
Net interest margin | 3.87 | % | 3.91 | % | 3.77 | % | 3.85 | % | 3.92 | % | |||||||||
11
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended | |||||||||||||||||||
(in thousands, except per share data) | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||
ASSET QUALITY | |||||||||||||||||||
Net charge-offs (recoveries)1 | $ | (99 | ) | $ | (647 | ) | $ | 113 | $ | 672 | $ | 1,478 | |||||||
Nonperforming loans1 | 9,513 | 9,100 | 9,123 | 17,498 | 15,143 | ||||||||||||||
Classified assets | 73,194 | 67,761 | 62,679 | 61,722 | 63,001 | ||||||||||||||
Nonperforming loans to total loans1 | 0.34 | % | 0.33 | % | 0.35 | % | 0.69 | % | 0.62 | % | |||||||||
Nonperforming assets to total assets2 | 0.52 | % | 0.48 | % | 0.30 | % | 0.58 | % | 0.52 | % | |||||||||
Allowance for loan losses to total loans1 | 1.21 | % | 1.22 | % | 1.24 | % | 1.25 | % | 1.24 | % | |||||||||
Allowance for loan losses to nonperforming loans1 | 361.3 | % | 367.5 | % | 353.5 | % | 181.5 | % | 200.0 | % | |||||||||
Net charge-offs (recoveries) to average loans (annualized)1 | (0.01 | )% | (0.10 | )% | 0.02 | % | 0.11 | % | 0.25 | % | |||||||||
WEALTH MANAGEMENT | |||||||||||||||||||
Trust assets under management | $ | 878,236 | $ | 872,877 | $ | 848,515 | $ | 889,616 | $ | 894,456 | |||||||||
Trust assets under administration | 1,470,974 | 1,477,917 | 1,436,372 | 1,514,140 | 1,517,171 | ||||||||||||||
MARKET DATA | |||||||||||||||||||
Book value per common share | $ | 17.98 | $ | 17.53 | $ | 17.21 | $ | 16.67 | $ | 16.36 | |||||||||
Tangible book value per common share | $ | 16.32 | $ | 15.86 | $ | 15.53 | $ | 14.96 | $ | 14.64 | |||||||||
Market value per share | $ | 27.04 | $ | 28.35 | $ | 25.17 | $ | 22.77 | $ | 20.66 | |||||||||
Period end common shares outstanding | 19,993 | 20,017 | 19,959 | 19,947 | 19,935 | ||||||||||||||
Average basic common shares | 20,004 | 20,007 | 19,995 | 19,978 | 19,934 | ||||||||||||||
Average diluted common shares | 20,233 | 20,386 | 20,261 | 20,168 | 20,157 | ||||||||||||||
CAPITAL | |||||||||||||||||||
Total capital to risk-weighted assets | 12.02 | % | 11.85 | % | 12.55 | % | 12.68 | % | 12.88 | % | |||||||||
Tier 1 capital to risk-weighted assets | 10.77 | % | 10.61 | % | 11.30 | % | 11.43 | % | 11.62 | % | |||||||||
Common equity tier 1 capital to risk-weighted assets | 9.20 | % | 9.05 | % | 9.59 | % | 9.66 | % | 9.78 | % | |||||||||
Tangible common equity to tangible assets | 8.87 | % | 8.88 | % | 8.90 | % | 8.94 | % | 9.01 | % | |||||||||
1 Portfolio loans only | |||||||||||||||||||
2 Excludes Other real estate covered under FDIC shared-loss arrangements, except for inclusion in total assets. Beginning with the quarter ended December 31, 2015, Other real estate covered by FDIC shared-loss arrangements is zero. | |||||||||||||||||||
12
ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
For the Quarter ended | |||||||||||||||||||
(in thousands) | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||
CORE PERFORMANCE MEASURES | |||||||||||||||||||
Net interest income | $ | 32,428 | $ | 32,079 | $ | 30,006 | $ | 29,280 | $ | 29,045 | |||||||||
Less: Incremental accretion income | 2,834 | 3,412 | 2,919 | 3,003 | 3,458 | ||||||||||||||
Core net interest income | 29,594 | 28,667 | 27,087 | 26,277 | 25,587 | ||||||||||||||
Total noninterest income | 6,005 | 6,557 | 4,729 | 5,806 | 3,583 | ||||||||||||||
Less: Change in FDIC loss share receivable | — | (580 | ) | (1,241 | ) | (945 | ) | (2,264 | ) | ||||||||||
Less (plus): Gain (loss) on sale of other real estate from PCI loans | — | 81 | 31 | 10 | (15 | ) | |||||||||||||
Less: Gain on sale of investment securities | — | — | — | — | 23 | ||||||||||||||
Core noninterest income | 6,005 | 7,056 | 5,939 | 6,741 | 5,839 | ||||||||||||||
Total core revenue | 35,599 | 35,723 | 33,026 | 33,018 | 31,426 | ||||||||||||||
Provision for portfolio loans | 833 | 543 | 599 | 2,150 | 1,580 | ||||||||||||||
Total noninterest expense | 20,762 | 22,886 | 19,932 | 19,458 | 19,950 | ||||||||||||||
Less: FDIC clawback | — | — | 298 | 50 | 412 | ||||||||||||||
Less: FDIC loss share termination | — | 2,436 | — | — | — | ||||||||||||||
Less: Other expenses related to PCI loans | 327 | 423 | 287 | 378 | 470 | ||||||||||||||
Core noninterest expense | 20,435 | 20,027 | 19,347 | 19,030 | 19,068 | ||||||||||||||
Core income before income tax expense | 14,331 | 15,153 | 13,080 | 11,838 | 10,778 | ||||||||||||||
Core income tax expense | 4,897 | 5,073 | 4,204 | 4,134 | 3,647 | ||||||||||||||
Core net income | $ | 9,434 | $ | 10,080 | $ | 8,876 | $ | 7,704 | $ | 7,131 | |||||||||
Core diluted earnings per share | $ | 0.47 | $ | 0.49 | $ | 0.44 | $ | 0.38 | $ | 0.35 | |||||||||
Core return on average assets | 1.04 | % | 1.13 | % | 1.03 | % | 0.93 | % | 0.88 | % | |||||||||
Core return on average common equity | 10.66 | % | 11.46 | % | 10.41 | % | 9.34 | % | 8.99 | % | |||||||||
Core return on average tangible common equity | 11.76 | % | 12.68 | % | 11.56 | % | 10.41 | % | 10.06 | % | |||||||||
Core efficiency ratio | 57.40 | % | 56.06 | % | 58.58 | % | 57.64 | % | 60.67 | % | |||||||||
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN | |||||||||||||||||||
Net interest income (fully tax equivalent) | $ | 32,887 | $ | 32,546 | $ | 30,437 | $ | 29,691 | $ | 29,467 | |||||||||
Less: Incremental accretion income | 2,834 | 3,412 | 2,919 | 3,003 | 3,458 | ||||||||||||||
Core net interest income (fully tax equivalent) | $ | 30,053 | $ | 29,134 | $ | 27,518 | $ | 26,688 | $ | 26,009 | |||||||||
Average earning assets | $ | 3,413,792 | $ | 3,304,827 | $ | 3,201,181 | $ | 3,096,294 | $ | 3,047,815 | |||||||||
Reported net interest margin (fully tax equivalent) | 3.87 | % | 3.91 | % | 3.77 | % | 3.85 | % | 3.92 | % | |||||||||
Core net interest margin (fully tax equivalent) | 3.54 | % | 3.50 | % | 3.41 | % | 3.46 | % | 3.46 | % | |||||||||
13
At the Quarter ended | |||||||||||||||||||
(in thousands) | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | ||||||||||||||
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS | |||||||||||||||||||
Shareholders' equity | $ | 359,384 | $ | 350,829 | $ | 343,563 | $ | 332,430 | $ | 326,109 | |||||||||
Less: Goodwill | 30,334 | 30,334 | 30,334 | 30,334 | 30,334 | ||||||||||||||
Less: Intangible assets, net of deferred tax liabilities | 1,048 | 759 | 820 | 887 | 958 | ||||||||||||||
Less (Plus): Unrealized gains (losses) | 3,929 | 218 | 2,973 | 1,249 | 3,379 | ||||||||||||||
Plus: Qualifying trust preferred securities | 55,100 | 55,100 | 55,100 | 55,100 | 55,100 | ||||||||||||||
Plus: Other | 58 | 58 | 58 | 58 | 59 | ||||||||||||||
Total tier 1 capital | 379,231 | 374,676 | 364,594 | 355,118 | 346,597 | ||||||||||||||
Less: Qualifying trust preferred securities | 55,100 | 55,100 | 55,100 | 55,100 | 55,100 | ||||||||||||||
Less: Other | 35 | 23 | 23 | 23 | 23 | ||||||||||||||
Common equity tier 1 capital | $ | 324,096 | $ | 319,553 | $ | 309,471 | $ | 299,995 | $ | 291,474 | |||||||||
Total risk-weighted assets | $ | 3,521,433 | $ | 3,530,521 | $ | 3,227,605 | $ | 3,106,041 | $ | 2,981,810 | |||||||||
Common equity tier 1 capital to risk-weighted assets | 9.20 | % | 9.05 | % | 9.59 | % | 9.66 | % | 9.78 | % | |||||||||
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS | |||||||||||||||||||
Shareholders' equity | $ | 359,384 | $ | 350,829 | $ | 343,563 | $ | 332,430 | $ | 326,109 | |||||||||
Less: Goodwill | 30,334 | 30,334 | 30,334 | 30,334 | 30,334 | ||||||||||||||
Less: Intangible assets | 2,832 | 3,075 | 3,323 | 3,595 | 3,880 | ||||||||||||||
Tangible common equity | $ | 326,218 | $ | 317,420 | $ | 309,906 | $ | 298,501 | $ | 291,895 | |||||||||
Total assets | $ | 3,709,905 | $ | 3,608,483 | $ | 3,516,541 | $ | 3,371,078 | $ | 3,275,295 | |||||||||
Less: Goodwill | 30,334 | 30,334 | 30,334 | 30,334 | 30,334 | ||||||||||||||
Less: Intangible assets | 2,832 | 3,075 | 3,323 | 3,595 | 3,880 | ||||||||||||||
Tangible assets | $ | 3,676,739 | $ | 3,575,074 | $ | 3,482,884 | $ | 3,337,149 | $ | 3,241,081 | |||||||||
Tangible common equity to tangible assets | 8.87 | % | 8.88 | % | 8.90 | % | 8.94 | % | 9.01 | % | |||||||||
14
