ACQUISITIONS

Acquisition of Jefferson County Bancshares, Inc.

On February 10, 2017, the Company closed its acquisition of 100% of Jefferson County Bancshares, Inc. ("JCB") and its wholly-owned subsidiary, Eagle Bank and Trust Company of Missouri. JCB operated 13 full service retail and commercial banking offices in the metropolitan St. Louis area and Perry County, Missouri.

JCB shareholders received, based on their election, cash consideration in an amount of $85.39 per share of JCB common stock or 2.75 shares of EFSC common stock per share of JCB common stock, subject to allocation and proration procedures. Aggregate consideration at closing was 3.3 million shares of EFSC common stock and $29.3 million cash paid to JCB shareholders and holders of JCB stock options. Based on EFSC’s closing stock price of $42.95 on February 10, 2017, the overall transaction had a value of $171.0 million, including JCB’s common stock and stock options. The Company also recognized $1.7 million and $1.4 million of merger related costs that were recorded in noninterest expense in the statement of operations for the three months ended March 31, 2017, and year ended December 31, 2016, respectively.

The acquisition of JCB has been accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The estimates of fair value are preliminary and subject to refinement as the Company completes its evaluation of the acquired assets and liabilities. Goodwill of $83.6 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of JCB into Enterprise. The goodwill is assigned as part of the Company's Banking reporting unit. None of the goodwill recognized is expected to be deductible for income tax purposes.

The following table presents the assets acquired and liabilities assumed of JCB as of February 10, 2017, and their preliminary estimated fair values:



(in thousands, except shares data)	As Recorded by JCB		Adjustments				As Recorded by EFSC
Assets acquired:
Cash and cash equivalents	$	35,454	$	—			$	35,454
Securities	148,670		—				148,670
Portfolio loans, net	685,905		(10,619		)	(a)	675,286
Other real estate owned	6,762		(5,082		)	(b)	1,680
Other investments	2,695		—				2,695
Fixed assets, net	21,780		(2,259		)	(c)	19,521
Accrued interest receivable	2,794		—				2,794
Goodwill	7,806		(7,806		)	(d)	—
Other intangible assets	25		10,028			(e)	10,053
Deferred tax assets	4,634		7,086			(f)	11,720
Other assets	19,159		—				19,159
Total assets acquired	$	935,684	$	(8,652	)		$	927,032

Liabilities assumed:
Deposits	$	764,668	$	629		(g)	$	765,297
Other borrowings	55,430		681			(h)	56,111
Trust preferred securities	12,887		(382		)	(i)	12,505
Accrued interest payable	653		—				653
Other liabilities	5,006		—				5,006
Total liabilities assumed	$	838,644	$	928			$	839,572

Net assets acquired	$	97,040	$	(9,580	)		$	87,460

Consideration paid:
Cash							$	29,283
Common stock							141,729
Total consideration paid							$	171,012

Goodwill							$	83,552


(a)	Fair value adjustments based on the Company’s evaluation of the acquired loan portfolio, write-off of net deferred loan costs, reclassification from other real estate owned, and elimination of the allowance for loan losses recorded by JCB. The fair value discount recorded to the loan portfolio is $24.2 million.


(b)	Fair value adjustment based on the Company’s evaluation of the acquired other real estate portfolio, and reclassification to portfolio loans.


(c)	Fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.


(d)	Eliminate JCB’s recorded goodwill.


(e)	Recording of the core deposit intangible asset on the acquired core deposit accounts. Amount to be amortized using a sum of years digits method over a 10 year useful life.


(f)	Adjustment for deferred taxes at the acquisition date.


(g)	Fair value adjustment to time deposits based on current interest rates.


(h)	Fair value adjustment to the FHLB advances based on current interest rates.


(i)	Fair value adjustment based on the Company's evaluation of the trust preferred securities.

The following table provides the unaudited pro forma information for the results of operations for the three months ended March 31, 2017 and 2016, as if the acquisition had occurred on January 1, 2016. The pro forma results combine the historical results of JCB with the Company’s Consolidated Statements of Income, adjusted for the impact of the application of the acquisition method of accounting including loan discount accretion, intangible assets amortization, and deposit and trust preferred securities premium accretion, net of taxes. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2016. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions. Only the acquisition related expenses that have been incurred as of March 31, 2017 are included in net income in the table below.



	Pro Forma
	Three months ended March 31,
(in thousands, except per share data)	2017		2016
Total revenues (net interest income plus noninterest income)	$	49,598	$	47,275
Net income	13,054		12,961
Diluted earnings per common share	0.55		0.55