EX-99.1 2 ex991financialstatementsan.htm EARNINGS RELEASE Exhibit


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 SECOND QUARTER 2016 RESULTS

Reported Highlights
•
Record net income of $0.61 per diluted share, increased 13% over the linked quarter, and 42% compared to the second quarter of 2015
•
Portfolio loans grew 7% on an annualized basis, and 13% from the prior year period
•
Sixth consecutive quarterly cash dividend increase to $0.11 per share in the third quarter of 2016 from $0.10 per share in the second quarter of 2016

Core Highlights1 
•
Core net income of $0.49 per diluted share, increased 4% from the linked quarter, and increased 29% compared to the prior year period
•
Core net interest income increased 2% in the linked quarter, and 15% from the prior year period
•
Core efficiency ratio of 56.3% for the quarter

St. Louis, July 28, 2016. Enterprise Financial Services Corp (NASDAQ: EFSC) (the “Company”) reported net income of $12.4 million for the quarter ended June 30, 2016, an increase of $1.3 million, or 12%, as compared to the linked first quarter. Net income per diluted share was $0.61 for the quarter ended June 30, 2016, an increase of $0.07 compared to $0.54 per diluted share for the linked first quarter. The increase from the linked quarter resulted from an increase in net interest income and higher noninterest income. Second quarter 2016 net income increased 42% compared to $8.7 million for the prior year period, and diluted earnings per share increased 42% from $0.43 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 $9.9 million, or $0.49 per diluted share, for the quarter ended June 30, 2016, compared to $9.4 million, or $0.47 per diluted share, in the linked first quarter. Second quarter 2016 core net income increased 29% from $7.7 million for the prior year period, and diluted core earnings per share grew 29% from $0.38 for the prior year period. The increase for both periods was due to higher levels of net interest income from continued growth in earning asset balances, while the year over year results also benefited from lower provision for loan losses, partially offset by higher expenses to support revenue growth. Core net income for the quarter excludes the impact of Purchased credit impaired ("PCI") loan balances in excess of the contractual interest, executive severance of $0.3 million incurred in the second quarter, and other non-core expenses of $0.3 million.

The Company's Board of Directors approved an additional one cent per common share increase in the Company’s quarterly dividend to $0.11 per common share from $0.10 for the third quarter of 2016, payable on September 30, 2016 to shareholders of record as of September 15, 2016.

Peter Benoist, President and CEO, commented, “We’re pleased to report another strong quarter at Enterprise. Second quarter reported earnings set a new record for the company, representing a 1.33% return on average assets and 14.91% return on average tangible common equity. Core earnings continued to grow robustly, rising 29% over the prior year period.”

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


“Portfolio loans grew 13% over the past twelve months and 7% annualized during the quarter," said Benoist. “Our guidance for loan growth remains at 10% or higher for the year. Credit quality remained favorable, with both nonperforming loan and nonperforming asset ratios below 50 basis points.”
“From a broader perspective, the earnings results for this quarter, like the quarters that preceded it, illustrate the transformation in Enterprise’s core earnings power," noted Benoist. "In each of the past four quarters, core return on assets has exceeded one percent. Over the past eight quarters we’ve grown core net interest income 25% while holding noninterest expense increases to a modest 5%. This powerful operating leverage has driven our core earnings 58% higher, positioning Enterprise very well at mid-year with a strong balance sheet, growing earnings power, and a highly energized team.”
Net Interest Income

Net interest income in the second quarter increased $1.4 million from the linked first quarter, and $4.5 million from the prior year period due to strong growth in portfolio loan balances and increases in net interest margin discussed below. Net interest margin, on a fully tax equivalent basis, was 3.93% for the second quarter, compared to 3.87% in the linked first quarter, and 3.85% in the second quarter of 2015.

The yield on Portfolio loans improved to 4.20% in the second quarter, an increase of one basis point from the linked first quarter, and three basis points higher than the prior year period. In the second quarter of 2016, the yield on PCI loans was 30.07%, as compared to 22.67% in the linked quarter, and 18.33% in the prior year period.

The cost of interest-bearing liabilities increased two basis points to 0.50% in the second quarter of 2016 from 0.48% in the linked first quarter, but it was four basis points lower than 0.54% in the second quarter of 2015. The increase from the linked quarter was due to a shift in the composition of deposits. The decrease from the prior year period was 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)
June 30,
2016
 
March 31,
2016
 
December 31,
2015
 
September 30,
2015
 
June 30,
2015
Core net interest margin1
3.52
%
 
3.54
%
 
3.50
%
 
3.41
%
 
3.46
%
Core net interest income1
30,212

 
29,594

 
28,667

 
27,087

 
26,277


Core net interest income1 increased 15% compared to the prior year period due to strong portfolio loan growth and improvement in net interest margin. Core net interest income increased by $0.6 million to $30.2 million in the linked quarter, and Core net interest margin1 decreased two basis points to 3.52% primarily due to runoff of PCI loan balances. Core net interest margin expanded six 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 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 $2.9 billion at June 30, 2016, increasing $51 million, or 7% on an annualized basis, when compared to the linked quarter. On a year over year basis, portfolio loans increased $341 million, or 13%. The Company continues to expect loan growth at or above 10% for 2016.

During the quarter ended June 30, 2016, the Company grew loans in Commercial real estate, Residential real estate, and Consumer and other. However, Commercial and industrial ("C&I") loans decreased $5 million during the second

1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
2


quarter of 2016 compared to the linked first quarter and represented 53% of the Company's loan portfolio at June 30, 2016. Nonetheless, C&I loans remain the Company's primary focus resulting in growth of $211 million, or 16%, since June 30, 2015.

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 June 30, 2016, 64% of portfolio loans had variable interest rates, as compared to 62% for 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)
June 30,
2016
 
March 31,
2016
 
December 31,
2015
 
September 30,
2015
 
June 30,
2015
Enterprise value lending
$
353,915

 
$
359,862

 
$
350,266

 
$
283,205

 
$
271,807

C&I - general
737,904

 
759,330

 
732,186

 
689,274

 
685,793

Life insurance premium financing
295,643

 
272,450

 
265,184

 
247,736

 
239,182

Tax credits
152,995

 
153,338

 
136,691

 
145,207

 
132,521

CRE, Construction, and land development
971,130

 
948,859

 
932,084

 
902,100

 
909,747

Residential
211,155

 
202,255

 
196,498

 
188,985

 
185,587

Other
161,167

 
136,522

 
137,828

 
145,649

 
117,918

Portfolio loans
$
2,883,909

 
$
2,832,616

 
$
2,750,737

 
$
2,602,156

 
$
2,542,555

 
 
 
 
 
 
 
 
 
 

PCI loans

PCI loans totaled $56.5 million at June 30, 2016, a decrease of $6.9 million, or 44% on an annualized basis, from the linked first quarter, and $31.1 million, or 36%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.

PCI loans contributed $2.8 million of net earnings in the second quarter of 2016, compared to $1.6 million in the linked first quarter, and $1.0 million in the prior year period. At June 30, 2016, the remaining accretable yield on the portfolio was estimated to be $18 million and the non-accretable difference was approximately $23 million. Accelerated cash flows and other incremental accretion from PCI loans was $3.6 million for the quarter ended June 30, 2016, $2.8 million for the linked quarter, and $3.0 million for the prior year quarter. The Company estimates 2016 income from accelerated cash flows and other incremental accretion to be between $9 million and $11 million.

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)
June 30,
2016
 
March 31,
2016
 
December 31,
2015
 
September 30,
2015
 
June 30,
2015
Nonperforming loans
$
12,813

 
$
9,513

 
$
9,100

 
$
9,123

 
$
17,498

Other real estate from originated loans
2,741

 
2,813

 
3,218

 
1,575

 
1,933

Other real estate from PCI loans
2,160

 
7,067

 
5,148

 
—

 
—

Nonperforming assets
$
17,714

 
$
19,393

 
$
17,466

 
$
10,698

 
$
19,431

Nonperforming loans to portfolio loans
0.44
%
 
0.34
%
 
0.33
%
 
0.35
%
 
0.69
%
Nonperforming assets to total assets
0.47
%
 
0.52
%
 
0.48
%
 
0.30
%
 
0.58
%
Net charge-offs (recoveries)
$
(409
)
 
$
(99
)
 
$
(647
)
 
$
113

 
$
672


Nonperforming loans increased 35% to $12.8 million at June 30, 2016, from $9.5 million at March 31, 2016, and decreased 27% from $17.5 million at June 30, 2015. During the quarter ended June 30, 2016, there were $6.9 million of additions to nonperforming loans, $2.7 million of other principal reductions, and $0.9 million assets transferred to performing. The additions to nonperforming loans consisted of three unrelated accounts. Despite the increase, Nonperforming loans were 0.44% of portfolio loans, and Nonperforming assets were 0.47% of total assets at June 30, 2016.

The Company's allowance for loan losses was 1.23% of loans at June 30, 2016, representing 277% of nonperforming loans, as compared to 1.21% at March 31, 2016, representing 361% of nonperforming loans, and 1.25% at June 30, 2015, representing 182% of nonperforming loans.

Deposits

Total deposits at June 30, 2016 were $3.0 billion, an increase of $96.5 million, or 13% on an annualized basis, from March 31, 2016, and $336.7 million, or 13%, from June 30, 2015. Core deposits, defined as total deposits excluding time deposits, were $2.5 billion at June 30, 2016, an increase of $35 million, or 6% on an annualized basis, from the linked quarter, and $326 million, or 15%, 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 $33.5 million compared to March 31, 2016, and increased $94.9 million compared to the quarter ended June 30, 2015. The composition of Noninterest-bearing deposits remained stable at 25% of total deposits at June 30, 2016, compared to March 31, 2016 and June 30, 2015. The total cost of deposits increased two basis points to 0.36% compared to 0.34% at March 31, 2016, and declined three basis points since June 30, 2015.

Noninterest income

Deposit service charges for the second quarter of 2016 of $2.2 million grew 7% when compared to the linked quarter, and grew 10% when compared to the prior year quarter, due primarily to growth in customer relationships. Wealth management revenues were consistent at $1.6 million when compared to the linked first quarter, and decreased $0.1 million, when compared to the prior year period.

Trust assets under management were $897 million at June 30, 2016, an increase of $19.1 million, or 2%, when compared to March 31, 2016, and an increase of $7.7 million, or 1%, when compared to the prior year period. The increase from the linked quarter was largely due to growth in new clients.


1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
4


Gains from state tax credit brokerage activities were $0.2 million for the second quarter of 2016, compared to $0.5 million for the linked first quarter, and $0.1 million in the second 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 increased 42% to $2.4 million compared to the linked quarter, and decreased 18% from the prior year period. The increase from the linked quarter was primarily due to allocation fees from tax credit projects. The decrease from the prior year period was due to fees earned from certain recoveries, higher allocation fees from tax credit projects, and swap fee income received during the second quarter of 2015.

Noninterest expenses

Noninterest expenses were $21.4 million for the quarter ended June 30, 2016, compared to $20.8 million for the quarter ended March 31, 2016, and $19.5 million for the quarter ended June 30, 2015. The increase over the linked quarter was due to $0.3 million from executive severance, and $0.3 million other expense. Core noninterest expenses1, which exclude the two aforementioned non-core items and expenses directly related to PCI assets, were $20.4 million for the quarter ended June 30, 2016, compared to $20.4 million for the linked quarter, and $19.0 million for the prior year period. The increase from the prior year period was largely due to an increase in Employee compensation and benefits from the addition of client service personnel to facilitate growth.
 
The Company's Core efficiency ratio1 was 56.3% for the quarter ended June 30, 2016, compared to 57.4% for the linked quarter, and 57.6% for the prior year period, and reflects overall expense management, in light of enhanced revenue growth trends.

The Company anticipates total noninterest expenses to be between $19.5 million and $21.5 million per quarter for 2016.

Other Business Results

During the quarter ended June 30, 2016, the Company repurchased 18,918 common shares at $26.46 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 12.16% at June 30, 2016, compared to 12.02% at March 31, 2016, and 12.68% at June 30, 2015. The Company's Common equity tier 1 capital ratio1 was 9.38% at June 30, 2016, compared to 9.20% at March 31, 2016, and 9.66% at June 30, 2015. The tangible common equity ratio1 was 9.08% at June 30, 2016, versus 8.87% at March 31, 2016, and 8.94% at June 30, 2015.

The increase in the tangible common equity ratio is due to continued earnings growth, despite asset growth of over $50 million. 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 35.3% for the quarter ended June 30, 2016 compared to 34.8% for the quarter ended March 31, 2016, and 35.3% for the quarter ended June 30, 2015.


1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
5


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, such as executive separation costs and the gain or loss on sale of investment securities, the Company believes to be not indicative of or useful to measure the Company's operating performance on an ongoing basis. The attached tables contain a reconciliation of these Core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company's capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.
The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.

The Company will host a conference call and webcast at 2:30 p.m. Central time on Thursday, July 28, 2016. During the call, management will review the second quarter of 2016 results and related matters. This press release as well as a related slide presentation will be accessible on the Company's website at www.enterprisebank.com under “Investor Relations” beginning prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-888-428-9490 (Conference ID #4111739.) A recorded replay of the conference call will be available on the website two hours after the call's completion. Visit bit.ly/EFSCearnings and register to receive a dial in number, passcode, and pin number. The replay will be available for approximately two weeks following the conference call.

Enterprise Financial Services Corp operates commercial banking and wealth management businesses in metropolitan St. Louis, Kansas City, and Phoenix. The Company is primarily focused on serving the needs of privately held businesses, their owner families, executives and professionals.

#     #    #

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-

1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.
6


looking statements. Factors that could cause or contribute to such differences include, but are not limited to, 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, 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.
7


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,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Jun 30,
2016
 
Jun 30,
2015
EARNINGS SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
33,783

 
$
32,428

 
$
32,079

 
$
30,006

 
$
29,280

 
$
66,211

 
$
58,325

Provision for loan losses - portfolio loans
716

 
833

 
543

 
599

 
2,150

 
1,549

 
3,730

Provision reversal for loan losses - purchased credit impaired loans
(336
)
 
(73
)
 
(917
)
 
(227
)
 
—

 
(409
)
 
(3,270
)
Noninterest income
7,049

 
6,005

 
6,557

 
4,729

 
5,806

 
13,054

 
9,389

Noninterest expense
21,353

 
20,762

 
22,886

 
19,932

 
19,458

 
42,115

 
39,408

Income before income tax expense
19,099


16,911


16,124


14,431


13,478


36,010

 
27,846

Income tax expense
6,747

 
5,886

 
5,445

 
4,722

 
4,762

 
12,633

 
9,784

Net income
$
12,352

 
$
11,025


$
10,679


$
9,709


$
8,716


$
23,377


$
18,062

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.61

 
$
0.54

 
$
0.52

 
$
0.48

 
$
0.43

 
$
1.16

 
$
0.90

Return on average assets
1.33
%
 
1.22
%
 
1.20
%
 
1.13
%
 
1.06
%
 
1.27
%
 
1.11
%
Return on average common equity
13.57
%
 
12.46
%
 
12.14
%
 
11.38
%
 
10.56
%
 
13.02
%
 
11.16
%
Return on average tangible common equity
14.91
%
 
13.74
%
 
13.43
%
 
12.65
%
 
11.77
%
 
14.34
%
 
12.47
%
Net interest margin (fully tax equivalent)
3.93
%
 
3.87
%
 
3.91
%
 
3.77
%
 
3.85
%
 
3.90
%
 
3.88
%
Efficiency ratio
52.29
%
 
54.02
%
 
59.23
%
 
57.38
%
 
55.46
%
 
53.13
%
 
58.20
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CORE PERFORMANCE SUMMARY (NON-GAAP)1
 
 
 
 
 
 
 
 
 
 
Net interest income
$
30,212

 
$
29,594

 
$
28,667

 
$
27,087

 
$
26,277

 
$
59,806

 
$
51,864

Provision for loan losses
716

 
833

 
543

 
599

 
2,150

 
1,549

 
3,730

Noninterest income
6,105

 
6,005

 
7,056

 
5,939

 
6,741

 
12,110

 
12,580

Noninterest expense
20,446

 
20,435

 
20,027

 
19,347

 
19,030

 
40,881

 
38,098

Income before income tax expense
15,155

 
14,331


15,153


13,080


11,838


29,486


22,616

Income tax expense
5,237

 
4,897

 
5,073

 
4,204

 
4,134

 
10,134

 
7,781

Net income
$
9,918

 
$
9,434


$
10,080


$
8,876


$
7,704


$
19,352


$
14,835

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.49

 
$
0.47

 
$
0.49

 
$
0.44

 
$
0.38

 
$
0.96

 
$
0.74

Return on average assets
1.07
%
 
1.04
%
 
1.13
%
 
1.03
%
 
0.93
%
 
1.06
%
 
0.91
%
Return on average common equity
10.89
%
 
10.66
%
 
11.46
%
 
10.41
%
 
9.34
%
 
10.78
%
 
9.17
%
Return on average tangible common equity
11.98
%
 
11.76
%
 
12.68
%
 
11.56
%
 
10.41
%
 
11.87
%
 
10.24
%
Net interest margin (fully tax equivalent)
3.52
%
 
3.54
%
 
3.50
%
 
3.41
%
 
3.46
%
 
3.53
%
 
3.46
%
Efficiency ratio
56.30
%
 
57.40
%
 
56.06
%
 
58.58
%
 
57.64
%
 
56.85
%
 
59.12
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.




8


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,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Jun 30,
2016
 
Jun 30,
2015
INCOME STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST INCOME
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest income
$
37,033

 
$
35,460

 
$
35,096

 
$
33,180

 
$
32,352

 
$
72,493

 
$
64,503

Total interest expense
3,250

 
3,032

 
3,017

 
3,174

 
3,072

 
6,282

 
6,178

Net interest income
33,783

 
32,428


32,079


30,006


29,280

 
66,211

 
58,325

Provision for portfolio loans
716

 
833

 
543

 
599

 
2,150

 
1,549

 
3,730

Provision reversal for purchased credit impaired loans
(336
)
 
(73
)
 
(917
)
 
(227
)
 
—

 
(409
)
 
(3,270
)
Net interest income after provision for loan losses
33,403

 
31,668


32,453


29,634


27,130

 
65,071

 
57,865

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NONINTEREST INCOME
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposit service charges
2,188

 
2,043

 
2,025

 
2,044

 
1,998

 
4,231

 
3,854

Wealth management revenue
1,644

 
1,662

 
1,716

 
1,773

 
1,778

 
3,306

 
3,518

State tax credit activity, net
153

 
518

 
1,651

 
321

 
74

 
671

 
748

Gain on sale of other real estate
706

 
122

 
81

 
32

 
9

 
828

 
29

Gain on sale of investment securities
—

 
—

 
—

 
—

 
—

 
—

 
23

Change in FDIC loss share receivable
—

 
—

 
(580
)
 
(1,241
)
 
(945
)
 
—

 
(3,209
)
Other income
2,358

 
1,660

 
1,664

 
1,800

 
2,892

 
4,018

 
4,426

Total noninterest income
7,049

 
6,005


6,557


4,729


5,806

 
13,054

 
9,389

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NONINTEREST EXPENSE
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee compensation and benefits
12,660

 
12,647

 
11,833

 
11,475

 
11,274

 
25,307

 
22,787

Occupancy
1,609

 
1,683

 
1,653

 
1,605

 
1,621

 
3,292

 
3,315

FDIC clawback
—

 
—

 
—

 
298

 
50

 
—

 
462

FDIC loss share termination
—

 
—

 
2,436

 
—

 
—

 
—

 
—

Other
7,084

 
6,432

 
6,964

 
6,554

 
6,513

 
13,516

 
12,844

Total noninterest expense
21,353

 
20,762


22,886


19,932


19,458

 
42,115

 
39,408

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income tax expense
19,099

 
16,911


16,124


14,431


13,478

 
36,010

 
27,846

Income tax expense
6,747

 
5,886

 
5,445

 
4,722

 
4,762

 
12,633

 
9,784

Net income
$
12,352

 
$
11,025


$
10,679


$
9,709


$
8,716

 
$
23,377

 
$
18,062

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.62

 
$
0.55

 
$
0.53

 
$
0.49

 
$
0.44

 
$
1.17

 
$
0.91

Diluted earnings per share
0.61

 
0.54

 
0.52

 
0.48

 
0.43

 
1.16

 
0.90




9


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
    
 
At the Quarter ended
(in thousands)
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
BALANCE SHEETS
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
50,370

 
$
56,251

 
$
47,935

 
$
46,775

 
$
49,498

Interest-earning deposits
60,926

 
50,982

 
47,222

 
81,115

 
51,298

Debt and equity investments
538,431

 
524,320

 
512,939

 
530,577

 
465,133

Loans held for sale
9,669

 
6,409

 
6,598

 
4,275

 
5,446

 
 
 
 
 
 
 
 
 
 
Portfolio loans
2,883,909

 
2,832,616

 
2,750,737

 
2,602,156

 
2,542,555

   Less: Allowance for loan losses
35,498

 
34,373

 
33,441

 
32,251

 
31,765

Portfolio loans, net
2,848,411

 
2,798,243

 
2,717,296

 
2,569,905

 
2,510,790

Purchased credit impaired loans, net of the allowance for loan losses
47,978

 
53,908

 
64,583

 
72,397

 
76,050

Total loans, net
2,896,389

 
2,852,151

 
2,781,879

 
2,642,302

 
2,586,840

 
 
 
 
 
 
 
 
 
 
Other real estate1
4,901

 
9,880

 
8,366

 
1,575

 
1,933

Other real estate covered under FDIC loss share1
—

 
—

 
—

 
6,795

 
7,909

Fixed assets, net
14,512

 
14,812

 
14,842

 
14,395

 
14,726

State tax credits, held for sale
44,918

 
45,305

 
45,850

 
48,207

 
42,062

FDIC loss share receivable
—

 
—

 
—

 
8,619

 
10,332

Goodwill
30,334

 
30,334

 
30,334

 
30,334

 
30,334

Intangible assets, net
2,589

 
2,832

 
3,075

 
3,323

 
3,595

Other assets
108,626

 
116,629

 
109,443

 
98,249

 
101,972

Total assets
$
3,761,665

 
$
3,709,905

 
$
3,608,483

 
$
3,516,541

 
$
3,371,078

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
$
753,173

 
$
719,652

 
$
717,460

 
$
691,758

 
$
658,258

Interest-bearing deposits
2,275,063

 
2,212,094

 
2,067,131

 
2,122,205

 
2,033,300

Total deposits
3,028,236

 
2,931,746

 
2,784,591

 
2,813,963

 
2,691,558

Subordinated debentures
56,807

 
56,807

 
56,807

 
56,807

 
56,807

Federal Home Loan Bank advances
78,000

 
130,500

 
110,000

 
75,000

 
73,000

Other borrowings
200,362

 
193,788

 
270,326

 
194,684

 
188,546

Other liabilities
26,631

 
37,680

 
35,930

 
32,524

 
28,737

Total liabilities
3,390,036

 
3,350,521

 
3,257,654

 
3,172,978

 
3,038,648

Shareholders' equity
371,629

 
359,384

 
350,829

 
343,563

 
332,430

Total liabilities and shareholders' equity
$
3,761,665

 
$
3,709,905

 
$
3,608,483

 
$
3,516,541

 
$
3,371,078

 
 
 
 
 
 
 
 
 
 
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)
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
LOAN PORTFOLIO
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,540,457

 
$
1,544,980

 
$
1,484,327

 
$
1,365,422

 
$
1,329,303

Commercial real estate
799,352

 
773,535

 
771,023

 
750,001

 
759,893

Construction real estate
171,778

 
175,324

 
161,061

 
152,099

 
149,854

Residential real estate
211,155

 
202,255

 
196,498

 
188,985

 
185,587

Consumer and other
161,167

 
136,522

 
137,828

 
145,649

 
117,918

Total portfolio loans
2,883,909

 
2,832,616

 
2,750,737

 
2,602,156

 
2,542,555

Purchased credit impaired loans
56,529

 
63,477

 
74,758

 
83,736

 
87,644

Total loans
$
2,940,438

 
$
2,896,093


$
2,825,495


$
2,685,892


$
2,630,199

 
 
 
 
 
 
 
 
 
 
DEPOSIT PORTFOLIO
 
 
 
 
 
 
 
 
 
Noninterest-bearing accounts
$
753,173

 
$
719,652

 
$
717,460

 
$
691,758

 
$
658,258

Interest-bearing transaction accounts
628,505

 
589,635

 
564,420

 
529,052

 
507,889

Money market and savings accounts
1,124,528

 
1,161,610

 
1,146,523

 
1,136,557

 
1,014,481

Brokered certificates of deposit
166,507

 
157,939

 
39,573

 
86,147

 
124,170

Other certificates of deposit
355,523

 
302,910

 
316,615

 
370,449

 
386,760

Total deposit portfolio
$
3,028,236

 
$
2,931,746


$
2,784,591


$
2,813,963


$
2,691,558

 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCES
 
 
 
 
 
 
 
 
 
Portfolio loans
$
2,868,430

 
$
2,777,456

 
$
2,631,256

 
$
2,540,948

 
$
2,482,291

Purchased credit impaired loans
59,110

 
69,031

 
77,485

 
85,155

 
92,168

Loans held for sale
6,102

 
4,563

 
5,495

 
4,255

 
6,605

Debt and equity investments
528,120

 
514,687

 
521,679

 
475,180

 
463,808

Interest-earning assets
3,506,801

 
3,413,792

 
3,304,827

 
3,201,181

 
3,096,294

Total assets
3,734,192

 
3,641,308

 
3,528,423

 
3,416,716

 
3,310,578

Deposits
2,931,888

 
2,811,209

 
2,832,313

 
2,788,245

 
2,667,640

Shareholders' equity
366,132

 
355,980

 
348,908

 
338,368

 
330,999

Tangible common equity
333,093

 
322,698

 
315,380

 
304,583

 
296,931

 
 
 
 
 
 
 
 
 
 
YIELDS (fully tax equivalent)
 
 
 
 
 
 
 
 
 
Portfolio loans
4.20
%
 
4.19
%
 
4.16
%
 
4.16
%
 
4.17
%
Purchased credit impaired loans
30.07
%
 
22.67
%
 
24.79
%
 
19.41
%
 
18.33
%
Total loans
4.72
%
 
4.64
%
 
4.75
%
 
4.66
%
 
4.68
%
Debt and equity investments
2.28
%
 
2.34
%
 
2.27
%
 
2.23
%
 
2.26
%
Interest-earning assets
4.30
%
 
4.23
%
 
4.27
%
 
4.17
%
 
4.24
%
Interest-bearing deposits
0.47
%
 
0.46
%
 
0.48
%
 
0.50
%
 
0.52
%
Total deposits
0.36
%
 
0.34
%
 
0.36
%
 
0.39
%
 
0.39
%
Subordinated debentures
2.56
%
 
2.47
%
 
2.26
%
 
2.19
%
 
2.18
%
Borrowed funds
0.35
%
 
0.31
%
 
0.24
%
 
0.28
%
 
0.29
%
Cost of paying liabilities
0.50
%
 
0.48
%
 
0.50
%
 
0.53
%
 
0.54
%
Net interest margin
3.93
%
 
3.87
%
 
3.91
%
 
3.77
%
 
3.85
%


11


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
(in thousands, except per share data)
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
ASSET QUALITY
 
 
 
 
 
 
 
 
 
Net charge-offs (recoveries)1
$
(409
)
 
$
(99
)
 
$
(647
)
 
$
113

 
$
672

Nonperforming loans1
12,813

 
9,513

 
9,100

 
9,123

 
17,498

Classified assets
87,532

 
73,194

 
67,761

 
62,679

 
61,722

Nonperforming loans to total loans1
0.44
 %
 
0.34
 %
 
0.33
 %
 
0.35
%
 
0.69
%
Nonperforming assets to total assets2
0.47
 %
 
0.52
 %
 
0.48
 %
 
0.30
%
 
0.58
%
Allowance for loan losses to total loans1
1.23
 %
 
1.21
 %
 
1.22
 %
 
1.24
%
 
1.25
%
Allowance for loan losses to nonperforming loans1
277.0
 %
 
361.3
 %
 
367.5
 %
 
353.5
%
 
181.5
%
Net charge-offs (recoveries) to average loans (annualized)1
(0.06
)%
 
(0.01
)%
 
(0.10
)%
 
0.02
%
 
0.11
%
 
 
 
 
 
 
 
 
 
 
WEALTH MANAGEMENT
 
 
 
 
 
 
 
 
 
Trust assets under management
$
897,322

 
$
878,236

 
$
872,877

 
$
848,515

 
$
889,616

Trust assets under administration
1,490,389

 
1,470,974

 
1,477,917

 
1,436,372

 
1,514,140

 
 
 
 
 
 
 
 
 
 
MARKET DATA
 
 
 
 
 
 
 
 
 
Book value per common share
$
18.60

 
$
17.98

 
$
17.53

 
$
17.21

 
$
16.67

Tangible book value per common share
$
16.95

 
$
16.32

 
$
15.86

 
$
15.53

 
$
14.96

Market value per share
$
27.89

 
$
27.04

 
$
28.35

 
$
25.17

 
$
22.77

Period end common shares outstanding
19,979

 
19,993

 
20,017

 
19,959

 
19,947

Average basic common shares
20,003

 
20,004

 
20,007

 
19,995

 
19,978

Average diluted common shares
20,216

 
20,233

 
20,386

 
20,261

 
20,168

 
 
 
 
 
 
 
 
 
 
CAPITAL
 
 
 
 
 
 
 
 
 
Total capital to risk-weighted assets
12.16
 %
 
12.02
 %
 
11.85
 %
 
12.55
%
 
12.68
%
Tier 1 capital to risk-weighted assets
10.92
 %
 
10.77
 %
 
10.61
 %
 
11.30
%
 
11.43
%
Common equity tier 1 capital to risk-weighted assets
9.38
 %
 
9.20
 %
 
9.05
 %
 
9.59
%
 
9.66
%
Tangible common equity to tangible assets
9.08
 %
 
8.87
 %
 
8.88
 %
 
8.90
%
 
8.94
%
 
 
 
 
 
 
 
 
 
 
1 Portfolio loans only
2 Excludes Other real estate covered under FDIC loss share agreements, except for inclusion in total assets. Beginning with the quarter ended December 31, 2015, Other real estate covered by FDIC loss share agreements is zero due to termination of the agreements.


12


ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
 
For the Quarter ended
 
For the Six Months ended
(in thousands)
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Jun 30,
2016
 
Jun 30,
2015
CORE PERFORMANCE MEASURES
 
 
 
 
Net interest income
$
33,783

 
$
32,428

 
$
32,079

 
$
30,006

 
$
29,280

 
$
66,211

 
$
58,325

Less: Incremental accretion income
3,571

 
2,834

 
3,412

 
2,919

 
3,003

 
6,405

 
6,461

Core net interest income
30,212

 
29,594


28,667


27,087


26,277


59,806


51,864

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total noninterest income
7,049

 
6,005

 
6,557

 
4,729

 
5,806

 
13,054

 
9,389

Less: Change in FDIC loss share receivable
—

 
—

 
(580
)
 
(1,241
)
 
(945
)
 
—

 
(3,209
)
Less (plus): Gain (loss) on sale of other real estate from PCI loans
705

 
—

 
81

 
31

 
10

 
705

 
(5
)
Less: Gain on sale of investment securities
—

 
—

 
—

 
—

 
—

 
—

 
23

Less: Other income from PCI assets
239

 
—

 
—

 
—

 
—

 
239

 
—

Core noninterest income
6,105

 
6,005


7,056


5,939


6,741


12,110


12,580

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total core revenue
36,317

 
35,599


35,723


33,026


33,018


71,916


64,444

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for portfolio loans
716

 
833

 
543

 
599

 
2,150

 
1,549

 
3,730

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total noninterest expense
21,353

 
20,762

 
22,886

 
19,932

 
19,458

 
42,115

 
39,408

Less: FDIC clawback
—

 
—

 
—

 
298

 
50

 
—

 
462

Less: FDIC loss share termination
—

 
—

 
2,436

 
—

 
—

 
—

 
—

Less: Other expenses related to PCI loans
325

 
327

 
423

 
287

 
378

 
652

 
848

Less: Executive severance
332

 
—

 
—

 
—

 
—

 
332

 
—

Less: Other non-core expense
250

 
—

 
—

 
—

 
—

 
250

 
—

Core noninterest expense
20,446

 
20,435


20,027


19,347


19,030


40,881


38,098

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core income before income tax expense
15,155

 
14,331

 
15,153

 
13,080

 
11,838

 
29,486

 
22,616

Core income tax expense
5,237

 
4,897

 
5,073

 
4,204

 
4,134

 
10,134

 
7,781

Core net income
$
9,918

 
$
9,434


$
10,080


$
8,876


$
7,704


$
19,352


$
14,835

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core diluted earnings per share
$
0.49

 
$
0.47

 
$
0.49

 
$
0.44

 
$
0.38

 
$
0.96

 
$
0.74

Core return on average assets
1.07
%
 
1.04
%
 
1.13
%
 
1.03
%
 
0.93
%
 
1.06
%
 
0.91
%
Core return on average common equity
10.89
%
 
10.66
%
 
11.46
%
 
10.41
%
 
9.34
%
 
10.78
%
 
9.17
%
Core return on average tangible common equity
11.98
%
 
11.76
%
 
12.68
%
 
11.56
%
 
10.41
%
 
11.87
%
 
10.24
%
Core efficiency ratio
56.30
%
 
57.40
%
 
56.06
%
 
58.58
%
 
57.64
%
 
56.85
%
 
59.12
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
 
 
 
 
Net interest income
$
34,227

 
$
32,887

 
$
32,546

 
$
30,437

 
$
29,691

 
$
67,114

 
$
59,158

Less: Incremental accretion income
3,571

 
2,834

 
3,412

 
2,919

 
3,003

 
6,405

 
6,461

Core net interest income
$
30,656

 
$
30,053


$
29,134


$
27,518


$
26,688


$
60,709


$
52,697

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average earning assets
$
3,506,801

 
$
3,413,792

 
$
3,304,827

 
$
3,201,181

 
$
3,096,294

 
$
3,460,296

 
$
3,072,188

Reported net interest margin
3.93
%
 
3.87
%
 
3.91
%
 
3.77
%
 
3.85
%
 
3.90
%
 
3.88
%
Core net interest margin
3.52
%
 
3.54
%
 
3.50
%
 
3.41
%
 
3.46
%
 
3.53
%
 
3.46
%



13


 
At the Quarter ended
(in thousands)
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity
$
371,629

 
$
359,384

 
$
350,829

 
$
343,563

 
$
332,430

Less: Goodwill
30,334

 
30,334

 
30,334

 
30,334

 
30,334

Less: Intangible assets, net of deferred tax liabilities
958

 
1,048

 
759

 
820

 
887

Less: Unrealized gains
5,517

 
3,929

 
218

 
2,973

 
1,249

Plus: Qualifying trust preferred securities
55,100

 
55,100

 
55,100

 
55,100

 
55,100

Plus: Other
58

 
58

 
58

 
58

 
58

Total tier 1 capital
389,978

 
379,231

 
374,676

 
364,594

 
355,118

Less: Qualifying trust preferred securities
55,100

 
55,100

 
55,100

 
55,100

 
55,100

Less: Other
35

 
35

 
23

 
23

 
23

Common equity tier 1 capital
$
334,843

 
$
324,096

 
$
319,553

 
$
309,471

 
$
299,995

 
 
 
 
 
 
 
 
 
 
Total risk-weighted assets
$
3,570,437

 
$
3,521,433

 
$
3,530,521

 
$
3,227,605

 
$
3,106,041

 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital to risk-weighted assets
9.38
%
 
9.20
%
 
9.05
%
 
9.59
%
 
9.66
%
 
 
 
 
 
 
 
 
 
 
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity
$
371,629

 
$
359,384

 
$
350,829

 
$
343,563

 
$
332,430

Less: Goodwill
30,334

 
30,334

 
30,334

 
30,334

 
30,334

Less: Intangible assets
2,589

 
2,832

 
3,075

 
3,323

 
3,595

Tangible common equity
$
338,706

 
$
326,218

 
$
317,420

 
$
309,906

 
$
298,501

 
 
 
 
 
 
 
 
 
 
Total assets
$
3,761,665

 
$
3,709,905

 
$
3,608,483

 
$
3,516,541

 
$
3,371,078

Less: Goodwill
30,334

 
30,334

 
30,334

 
30,334

 
30,334

Less: Intangible assets
2,589

 
2,832

 
3,075

 
3,323

 
3,595

Tangible assets
$
3,728,742

 
$
3,676,739

 
$
3,575,074

 
$
3,482,884

 
$
3,337,149

 
 
 
 
 
 
 
 
 
 
Tangible common equity to tangible assets
9.08
%
 
8.87
%

8.88
%

8.90
%

8.94
%



14