8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
April 15, 2008

ENTERPRISE FINANCIAL SERVICES
CORP
(Exact name of registrant as specified in its charter)

Delaware	001-15373	43-1706259
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

150 N. Meramec, St. Louis, Missouri
(Address of principal executive offices) 63105
(Zip Code)

Registrant’s telephone number, including area code 

(314) 725-5500 

Not applicable 

(Former name or former address, if changed since last report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4© under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 15, 2008, Registrant issued a press release announcing financial information for its first quarter ended March 31, 2008. The press release is attached hereto as Exhibit 99.1 and is furnished to, but not filed with, the Commission.

ITEM 9.01 Financial Statements and Exhibits

(c) Exhibits

Exhibit No.	Description
99.1	Press Release dated April 15, 2008

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Date:     April 15, 2008

ENTERPRISE FINANCIAL SERVICES CORP 

/s/ Kevin C. Eichner 

Kevin C. Eichner 

Chief Executive Officer 

INDEX TO EXHIBITS

Exhibit No.	Description
99.1	Press Release dated April 15, 2008*

*This exhibit is furnished to, but not filed with, the Commission by inclusion herein.

EX-99.1

Exhibit 99.1

For more information contact:
Kevin Eichner or Frank Sanfilippo (314) 725 5500
Melissa Sturges (816) 221 7500 or Ann Marie Mayuga (314) 469 4798

ENTERPRISE FINANCIAL REPORTS 13% INCREASE IN
FIRST QUARTER NET INCOME

• Fully diluted EPS at $0.28, up 8% from prior year first quarter
• Loans grow at 21% annualized rate – up $85 million since year end
• Nonperforming asset levels remain stable from year end at 0.83% of assets
• New Tax Credit initiative helps to drive 21% increase in Wealth Management segment revenues

St. Louis, April 15, 2008. Enterprise Financial Services Corp (NASDAQ: EFSC), the parent company of Enterprise Bank & Trust of St. Louis, MO, reported first quarter 2008 net income of $3.6 million, a 13% increase over the $3.2 million reported in the first quarter of 2007. Earnings per fully diluted share for the first quarter were $0.28, up $0.02, or 8%, from the prior year’s first quarter.

EFSC President and CEO Kevin Eichner commented, “This was another strong quarter for our Company. Organic banking growth was excellent, underscoring our belief that there is a flight to quality underway in our customer segments on both the deposit and loan sides of our business. Our people are performing at a very high level in this environment.”

Banking Line of Business

Net interest income increased $2.4 million, or 16%, in the first quarter of 2008 versus the same quarter in 2007. At quarter end, portfolio loans were up organically $85 million from year-end, or 21% annualized, and $234 million, or 16%, from one year ago. Compared to the first quarter of 2007, the absence of many of the conduit and other long-term, fixed rate competitors and a steeper yield curve have contributed to much greater net loan growth.

While we historically see seasonal runoff in deposits during the first quarter, deposits actually increased nearly $6 million from year-end 2007. Total deposits grew $145 million, or 10%, from the same period one year ago. The deposit mix for the first quarter was slightly less favorable as non-interest bearing deposits or DDA represented 14% of average deposits, but brokered deposits represented only 8% of total deposits at the end of the quarter.

The tax-equivalent net interest rate margin for the first quarter decreased 17 basis points from the fourth quarter of 2007 and 23 basis points from the first quarter of 2007 due primarily to sharply reduced short term rates following the Fed’s recent actions. The net interest spread has held constant with 2007 levels.

The Bank’s asset quality statistics met our expectations. The Company had net charge-offs during the quarter of $1.7 million (or 0.40% annualized). Eighty-seven percent of these net charge-offs relate to three credits that were previously classified and for which loss reserves had been specifically allocated. For the quarter, the provision for loan losses was $2.3 million versus $850,000 in the same quarter of 2007. The increase in the provision for loan losses was due to strong loan growth and adverse changes in risk ratings on various credits.

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Nonperforming assets totaled $17.0 million, or 0.83%, of total assets versus 0.78% and 0.62% at December 31, 2007 and March 31, 2007, respectively. Nonperforming loans declined from $12.7 million, or 0.77%, of loans at year-end to $9.3 million, or 0.54%, of loans at March 31, 2008. Approximately $7.1 million, or 76%, of the nonperforming loans at March 31, 2008, and nearly all of the $7.7 million in Other Real Estate, relate to the soft residential housing markets in St. Louis and Kansas City. Excluding nonperforming loans, delinquency rates remained low during the quarter. The Company’s allowance for loan losses represented 1.29% of portfolio loans at March 31, 2008 which is consistent with the ratio at year-end 2007 (1.32%) and one year ago (1.29%).

Peter Benoist, EFSC’s CEO-elect and head of the company’s banking division said, “Our first quarter results represent a very solid start for the year. I am especially pleased by the robust growth in both loans and deposits and our ability to maintain our net interest spread during this period of sharply dropping short term rates. From an asset quality perspective, the majority of our portfolio exposure continues to be concentrated in the residential housing sector where excess unsold inventory and declining home values persist. This sector represents a small portion of our total portfolio, but our approach continues to be to manage those risks aggressively as we work through the current credit cycle.”

Increases in Service charges on deposit accounts and Other service charges and fee income for the quarter versus the same quarter in 2007 relate to the February 28, 2007 acquisition of Great American, growth in the existing client base for deposit products and related services, and a declining earnings credit rate on commercial accounts.

During the quarter, the Company sold its Liberty, Missouri branch for a pre-tax gain of $579,000 net of related expenses. This transaction, along with the previously announced plan to sell the Great American bank charter and its DeSoto, Kansas branch, is part of the Company’s plan to consolidate locations in the Kansas City market. The DeSoto sale is scheduled to be completed in the second quarter pending regulatory approvals.

Wealth Management Line of Business

For the first quarter of 2008, the Company reported $1.0 million of gains on the sale of certain state tax credits to its clients as part of its new fee initiative within our Wealth Management line of business. This compares to $759,000 of gains recorded in the fourth quarter of 2007 when this program was launched.

Effective January 1, 2008, the Company adopted FAS 157, “Fair Value Measurements” and FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. As a result, the Company recorded a cumulative effect adjustment to beginning retained earnings of ($365,000). As permitted by FAS 159, the Company has chosen to report its $27.0 million in state tax credit assets at fair value. Going forward, any new state tax credit streams purchased will be considered on a project by project basis for fair value treatment, depending on perceived levels of earnings volatility and available offsets on the liability side of the balance sheet. The Company is considering funding the existing asset class with a specific liability that would also be recorded at fair value to minimize the potential market risk volatility.

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In the first quarter, total Wealth Management revenue including the tax credit activity increased by 21% from $3.0 million in first quarter of 2007 to $3.6 million. Revenue declines in Trust Advisory and Millennium were more than offset by increases from Trust Fiduciary and the tax credits. Lower net client additions and reductions in asset values due to market performance drove lower revenue results in Trust Advisory, and higher producer payouts at Millennium adversely impacted its revenue totals. Millennium paid sales were $5.4 million in the first quarter vs. $5.1 million in the same quarter of 2007, an increase of 6%.

Overall, the Wealth Management segment earned $310,000 for the quarter ended March 31, 2008 versus $113,000 in the same quarter of 2007.

Other Business Results

For the quarter, the Company’s efficiency ratio improved from 67% in 2007 to 64% in 2008. Non-interest expenses were $13.8 million in the first quarter of 2008 versus $11.9 million in the same quarter of 2007, an increase of $2.0 million, or 17%. Significant variances from the prior year first quarter include $602,000 of incremental expenses related to the Great American Bank acquisition, a $379,000 increase in expenses associated with non performing assets, a $347,000 increase in variable compensation at Millennium due to the previously announced restructure, and a $256,000 increase in FDIC insurance premiums resulting from the FDIC’s newly implemented rate structure.

Eichner concluded, “Our Company continues to occupy a position as one of the premier growth companies in our industry. As I pass the leadership baton to Peter Benoist and the excellent team we have assembled at Enterprise, I am very pleased at the progress of our leadership transition and remain very optimistic as one of EFSC’s largest shareholders about this company’s long term potential. Peter and the Enterprise team will do a splendid job and I look forward to my ongoing involvement with him and our company for many years to come.”

In February, the Company announced that Benoist will succeed Eichner as EFSC’s CEO on May 1, 2008. Eichner will remain Vice Chairman of the Board and continue to chair the Trust Company Board. James Murphy, Chairman and CEO of Murphy Company and current Lead Director for Enterprise Financial, will become non-executive Chairman of the EFSC Board.

Enterprise Financial operates commercial banking and wealth management businesses mostly in metropolitan St. Louis and Kansas City, and a commercial loan production office in Phoenix, Arizona with an intent to open a state de novo bank charter in 2008. The Company is primarily focused on serving the needs of privately held businesses, their owner families, executives and professionals.

Please refer to the Consolidated Financial Summary attached for more details.

#                  #                  #

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Readers should note that in addition to the historical information contained herein, this press release contains forward-looking statements, which are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. Factors that could cause or contribute to such differences include, but are not limited to, burdens imposed by federal and state regulations of banks, credit risk, exposure to local and national economic conditions, risks associated with rapid increase or decrease in prevailing interest rates, effects of mergers and acquisitions, effects of critical accounting policies and judgments, legal and regulatory developments and competition from banks and other financial institutions, as well as other risk factors described in Enterprise Financial’s 2007 Annual Report on Form 10-K. 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.

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ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY
(unaudited)

(In thousands, except per share data)	For the Quarter Ended
	Mar 31,			Dec 31,			Sep 30,			Jun 30,			Mar 31,
INCOME STATEMENTS	2008			2007			2007			2007			2007
Total interest income	$	30,246		$	31,916		$	31,807		$	30,946		$	27,848
Total interest expense		14,109			15,713			16,002			15,821			13,929
Net interest income		16,137			16,203			15,805			15,125			13,919
Provision for loan losses		2,325			2,450			600			715			850
Net interest income after provision for loan losses		13,812			13,753			15,205			14,410			13,069
NONINTEREST INCOME
Wealth Management revenue		2,583			4,064			3,495			3,458			2,963
Deposit service charges		937			926			839			804			659
(Loss) gain on sale of other real estate		(9	)		(43	)		7			(8	)		(3	)
Gain on sale of securities		-			233			-			-			-
Gain on sale of tax credits		1,012			759			33			-			-
Gain on sale of branch		579			-			-			-			-
Other income		436			291			264			652			280
Total noninterest income		5,538			6,230			4,638			4,906			3,899
NONINTEREST EXPENSE
Salaries and benefits		8,340			7,583			7,523			7,141			7,308
Occupancy		1,083			1,003			995			1,025			878
Furniture and equipment		364			384			370			370			315
Other		4,045			4,113			3,314			3,834			3,360
Total noninterest expense		13,832			13,083			12,202			12,370			11,861
Minority interest in net income of consolidated subsidiary		-			-			-			157			(157	)
Income before income tax		5,518			6,900			7,641			7,103			4,950
Income taxes		1,955			1,994			2,642			2,588			1,792
Net income	$	3,563		$	4,906		$	4,999		$	4,515		$	3,158
Basic earnings per share	$	0.29		$	0.40		$	0.40		$	0.37		$	0.27
Diluted earnings per share	$	0.28		$	0.39		$	0.40		$	0.36		$	0.26
Return on average assets		0.73	%		1.04	%		1.11	%		1.03	%		0.80	%
Return on average equity		8.13	%		11.28	%		11.85	%		11.20	%		8.92	%
Efficiency ratio		63.82	%		58.32	%		59.69	%		61.75	%		66.57	%
Noninterest expense to average assets		2.82	%		2.77	%		2.72	%		2.83	%		3.00	%
YIELDS (fully tax equivalent)
Loans		6.93	%		7.65	%		7.96	%		7.98	%		7.94	%
Securities		4.84	%		4.87	%		4.67	%		4.50	%		4.31	%
Federal funds sold		3.32	%		4.23	%		5.53	%		5.49	%		5.51	%
Yield on earning assets		6.77	%		7.42	%		7.73	%		7.72	%		7.66	%
Interest-bearing deposits		3.46	%		4.10	%		4.44	%		4.47	%		4.42	%
Subordinated debt		6.71	%		7.24	%		7.20	%		7.19	%		7.21	%
Borrowed funds		3.82	%		4.54	%		5.00	%		5.04	%		4.99	%
Cost of paying liabilities		3.62	%		4.26	%		4.59	%		4.63	%		4.55	%
Net interest spread		3.15	%		3.16	%		3.14	%		3.09	%		3.11	%
Net interest rate margin		3.63	%		3.80	%		3.87	%		3.81	%		3.86	%

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ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (cont.)
(unaudited)

(In thousands)
	Mar 31,		Dec 31,		Sep 30,		Jun 30,		Mar 31,
BALANCE SHEETS	2008		2007		2007		2007		2007
ASSETS
Cash and due from banks	$	64,108	$	76,265	$	47,593	$	45,081	$	41,846
Federal funds sold		954		75,665		2,585		2,059		6,992
Interest-bearing deposits		6,435		1,719		1,100		1,021		1,144
Debt and equity investments		116,810		83,333		122,204		111,617		119,056
Loans held for sale		3,422		3,420		1,117		3,840		4,650
Portfolio loans		1,726,455		1,641,432		1,558,885		1,500,512		1,492,460
Less allowance for loan losses		22,249		21,593		19,754		19,703		19,220
Net loans		1,704,206		1,619,839		1,539,131		1,480,809		1,473,240
Other real estate		7,736		2,963		857		441		1,064
Premises and equipment, net		24,775		22,223		22,487		22,801		22,777
Goodwill		58,331		57,177		55,661		54,841		55,284
Core deposit intangible		2,887		3,330		3,511		3,693		3,886
Other amortizing intangibles		2,512		2,723		2,952		3,180		3,408
Other assets		55,702		50,461		29,061		23,929		23,276
Total assets	$	2,047,878	$	1,999,118	$	1,828,259	$	1,753,312	$	1,756,623
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits	$	232,121	$	278,313	$	212,903	$	215,771	$	214,965
Interest-bearing deposits		1,358,588		1,306,699		1,233,532		1,212,353		1,231,139
Total deposits		1,590,709		1,585,012		1,446,435		1,428,124		1,446,104
Subordinated debentures		56,807		56,807		56,807		56,807		56,807
FHLB advances		154,405		152,901		131,746		88,192		75,387
Other borrowings		53,508		16,680		10,613		7,593		12,786
Other liabilities		14,212		14,569		13,415		9,527		6,837
Total liabilities		1,869,641		1,825,969		1,659,016		1,590,243		1,597,921
Shareholders' equity		178,237		173,149		169,243		163,069		158,702
Total liabilities and shareholders' equity	$	2,047,878	$	1,999,118	$	1,828,259	$	1,753,312	$	1,756,623

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ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (cont.)
(unaudited)

(In thousands, except per share data)	For the Quarter Ended
	Mar 31,			Dec 31,			Sep 30,			Jun 30,			Mar 31,
	2008			2007			2007			2007			2007
EARNINGS SUMMARY
Net interest income	$	16,137		$	16,203		$	15,805		$	15,125		$	13,919
Provision for loan losses		2,325			2,450			600			715			850
Wealth Management revenue		2,583			4,064			3,495			3,458			2,963
Noninterest income		2,955			2,166			1,143			1,448			936
Noninterest expense		13,832			13,083			12,202			12,370			11,861
Minority interest in net income of consolidated subsidiary		-			-			-			157			(157	)
Income before income tax		5,518			6,900			7,641			7,103			4,950
Net income		3,563			4,906			4,999			4,515			3,158
Diluted earnings per share	$	0.28		$	0.39		$	0.40		$	0.36		$	0.26
Return on average equity		8.13	%		11.28	%		11.85	%		11.20	%		8.92	%
Net interest rate margin (fully tax equivalized)		3.63	%		3.80	%		3.87	%		3.81	%		3.86	%
Efficiency ratio		63.82	%		58.32	%		59.69	%		61.75	%		66.57	%
MARKET DATA
Book value per share	$	14.27		$	13.96		$	13.66		$	13.20		$	12.86
Tangible book value per share	$	9.17		$	8.86		$	8.65		$	8.20		$	8.03
Market value per share	$	25.00		$	23.81		$	24.34		$	24.86		$	28.00
Period end common shares outstanding		12,487			12,406			12,388			12,354			12,340
Average basic common shares		12,441			12,387			12,380			12,346			11,835
Average diluted common shares		12,675			12,676			12,652			12,692			12,198
ASSET QUALITY
Net charge-offs	$	1,668		$	611		$	549		$	232		$	628
Nonperforming loans	$	9,307		$	12,720		$	8,542		$	12,661		$	9,855
Nonperforming loans to total loans		0.54	%		0.77	%		0.55	%		0.84	%		0.66	%
Nonperforming assets to total assets		0.83	%		0.78	%		0.51	%		0.75	%		0.62	%
Allowance for loan losses to total loans		1.29	%		1.32	%		1.27	%		1.31	%		1.29	%
Net charge-offs to average loans (annualized)		0.40	%		0.15	%		0.14	%		0.06	%		0.19	%
CAPITAL
Average equity to average assets		8.92	%		9.21	%		9.40	%		9.22	%		8.96	%
Tier 1 capital to risk-weighted assets		9.15	%		9.32	%		9.85	%		9.82	%		9.50	%
Total capital to risk-weighted assets		10.36	%		10.54	%		11.05	%		11.09	%		10.85	%
Tangible equity to tangible assets		5.77	%		5.68	%		6.07	%		5.99	%		5.67	%
AVERAGE BALANCES
Portfolio loans	$	1,687,316		$	1,583,325		$	1,526,259		$	1,492,573		$	1,365,340
Earning assets		1,810,384			1,719,825			1,645,697			1,622,139			1,487,193
Total assets		1,974,590			1,873,915			1,780,239			1,754,297			1,601,266
Deposits		1,530,158			1,511,476			1,453,497			1,426,002			1,327,177
Shareholders' equity		176,170			172,563			167,310			161,663			143,514
LOAN PORTFOLIO
Commercial and industrial	$	487,289		$	476,184		$	416,715		$	391,237		$	379,147
Commercial real estate		735,087			690,868			703,772			681,735			671,709
Construction real estate		285,966			266,111			252,476			247,722			251,184
Residential real estate		189,549			170,510			155,489			149,182			157,473
Consumer and other		28,564			37,759			30,433			30,636			32,947
Total loan portfolio	$	1,726,455		$	1,641,432		$	1,558,885		$	1,500,512		$	1,492,460
DEPOSIT PORTFOLIO
Noninterest-bearing accounts	$	232,121		$	278,313		$	212,903		$	215,771		$	214,965
Interest-bearing transaction accounts		136,009			131,141			120,069			128,808			123,848
Money market and savings accounts		724,725			682,920			596,226			552,678			582,231
Certificates of deposit		497,854			492,638			517,237			530,867			525,060
Total deposit portfolio	$	1,590,709		$	1,585,012		$	1,446,435		$	1,428,124		$	1,446,104

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ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (cont.)
(unaudited)

(In thousands)	For the Quarter Ended
	Mar 31,			Dec 31,			Sep 30,			Jun 30,			Mar 31,
	2008			2007			2007			2007			2007
YIELDS (fully tax equivalent)
Loans		6.93	%		7.65	%		7.96	%		7.98	%		7.94	%
Securities		4.84	%		4.87	%		4.67	%		4.50	%		4.31	%
Federal funds sold		3.32	%		4.23	%		5.53	%		5.49	%		5.51	%
Yield on earning assets		6.77	%		7.42	%		7.73	%		7.72	%		7.66	%
Interest-bearing deposits		3.46	%		4.10	%		4.44	%		4.47	%		4.42	%
Borrowed funds		3.82	%		4.54	%		5.00	%		5.04	%		4.99	%
Subordinated debt		6.71	%		7.24	%		7.20	%		7.19	%		7.21	%
Cost of paying liabilities		3.62	%		4.26	%		4.59	%		4.63	%		4.55	%
Net interest spread		3.15	%		3.16	%		3.14	%		3.09	%		3.11	%
Net interest rate margin		3.63	%		3.80	%		3.87	%		3.81	%		3.86	%
WEALTH MANAGEMENT
Trust Assets under management	$	1,046,390		$	1,098,110		$	1,106,214		$	1,111,042		$	1,047,700
Trust Assets under administration		1,633,195			1,696,303			1,734,761			1,742,426			1,659,573

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