Enterprise Bank & Trust

Press Release

Enterprise Financial Reports Third Quarter 2018 Results

Company Release - 10/22/2018 4:31 PM ET

Reported Third Quarter Highlights

  • Net income of $22.5 million, or $0.97 per diluted share
  • Return on average assets of 1.63%
  • Repurchase of 71,007 shares at an average price of $53.26 per share

Third Quarter Core Highlights1

  • Net income of $20.0 million, or $0.86 per diluted share
  • Return on average assets of 1.45%
  • Core net interest margin stable at 3.74%

ST. LOUIS--(BUSINESS WIRE)-- Enterprise Financial Services Corp (NASDAQ: EFSC) (the “Company” or "EFSC") reported net income of $22.5 million for the quarter ended September 30, 2018, an increase of $0.3 million, and $6.2 million as compared to the linked second quarter and prior year quarter, respectively. Earnings per diluted share were $0.97 for the quarter ended September 30, 2018, an increase of 2% and 41%, compared to $0.95 and $0.69 per diluted share for the linked second quarter and prior year period, respectively.

The increase in net income and earnings per diluted share compared to the linked second quarter was primarily due to stable core earnings and a net tax benefit recognized upon finalization of the Company's 2017 tax returns.

Core Results1

On a core basis1, net income totaled $20.0 million, or $0.86 per diluted share, for each of the quarters ended September 30, 2018 and June 30, 2018. Third quarter 2018 diluted core earnings per share1 grew 30%, or $0.20 per diluted share, from $0.66 for the prior year period which continues to be driven by growth in net interest income mitigated by modest expense growth. The Company's income tax rate for the third quarter of 2018 was 18% compared to 32% in the prior year quarter due to the combination of 2017 federal income tax reform and the Company's tax planning initiatives.

The Company's Board of Directors approved a one cent per common share increase in the Company's quarterly dividend to $0.13 per common share from $0.12 for the fourth quarter of 2018, payable on December 28, 2018 to shareholders of record as of December 14, 2018.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “Third quarter results reflect another strong earnings per share quarter for our Company. Earnings per share for the third quarter were higher than one year ago by 41% and 30% on a total and core1 basis, respectively. Our profitability remains very strong with year to date return on average assets of 1.62%, a 51 basis point increase over the prior year period.”

Lally added, “Capital levels continue to build in line with our expectations, affording us the flexibility to increase the dividend and continue modest share repurchase activity. We are encouraged by the strength of our balance sheet as we look to enhance our performance in the fourth quarter and 2019.”

Net Interest Income

Net interest income for the third quarter increased to $48.1 million from the linked second quarter of $47.0 million, and increased $2.5 million from the prior year period. Net interest margin, on a fully tax equivalent basis, was 3.78% for the third quarter, compared to 3.77% in the linked second quarter, and 3.88% in the third quarter of 2017.

Core net interest income1 increased by $0.8 million in the third quarter of 2018 as compared to the linked quarter due to a $49 million increase in average earning assets during the current quarter driven by portfolio loan growth along with one extra calendar day in the quarter and a relatively stable core net interest margin1 of 3.74% as compared to 3.75% for the linked second quarter.

Core net interest margin1 excludes incremental accretion on non-core acquired loans. See the table below for a quarterly comparison of the Company's core net interest income1 and core net interest margin1.

     
  For the Quarter ended
($ in thousands)   September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
Core net interest income1 $ 47,558 $ 46,757 $ 45,405 $ 44,901 $ 44,069
Core net interest margin1, (fully tax equivalent)   3.74 %   3.75 %   3.74 %   3.73 %   3.75 %
 

The yield on portfolio loans increased 13 basis points to 5.12% for the current quarter as compared to the linked quarter of 4.99% and 43 basis points from the prior year period of 4.69% due to increasing interest rates on the existing variable-rate loan portfolio and higher rates on newly originated loans. The cost of total deposits also increased 13 basis points from the linked quarter and 40 basis points from the prior year period to 0.86% for the quarter ended September 30, 2018. The increase in the interest rate paid on deposits reflects market interest rate trends, as the Company continues to defend and attract new core deposit relationships. Additionally, the cost of total interest-bearing liabilities increased 18 basis points to 1.34% for the quarter ended September 30, 2018 from 1.16% for the linked quarter and increased 56 basis points from the prior year period of 0.78%.

The Company continues to manage its balance sheet to grow core net interest income1 and expects to maintain core net interest margin1 over the coming quarters as growth in loan yields balance rising deposit prices. However, pressure on funding costs could hinder the expected trends in core net interest margin1.

Portfolio Loans

The following table presents portfolio loans with selected specialized lending detail for the most recent five quarters:

     
  At the Quarter ended
($ in thousands)   September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
 

September 30,
2017

C&I - general $ 967,525 $ 990,153 $ 945,682 $ 936,588 $ 905,296
CRE investor owned - general 841,310 836,516 836,499 801,156 771,348
CRE owner occupied - general 480,106 493,589 471,417 468,151 467,154
Enterprise value lendinga 442,439 442,877 439,352 407,644 455,983
Life insurance premium financinga 378,826 358,787 365,377 364,876 330,957
Residential real estate - general 309,053 318,841 328,966 342,140 341,311
Construction and land development - general 309,879 286,482 293,938 294,123 300,697
Tax creditsa 256,666 260,595 244,088 234,835 188,498
Agriculturea 137,760 127,849 118,862 91,031 90,768
Consumer and other - general 126,194   136,647   117,901   126,115   144,489  
Portfolio loans $ 4,249,758   $ 4,252,336   $ 4,162,082   $ 4,066,659   $ 3,996,501  
 
Portfolio loan yield 5.12 % 4.99 % 4.87 % 4.71 % 4.69 %
Total C&I loans to portfolio loans 48 % 48 % 48 % 47 % 47 %
Variable interest rate loans to portfolio loans   62 %   60 %   59 %   58 %   57 %
 
Certain prior period amounts have been reclassified among the categories to conform to the current period presentation.
aSpecialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans.
 

Portfolio loans were $4.2 billion at September 30, 2018, decreasing $3 million, when compared to the linked quarter. On a year-over-year basis, portfolio loans increased $253 million, or 6%. We expect continued total portfolio loan growth in 2018 and 2019 to be a high single digit percentage.

The Company continues to focus on originating high-quality commercial and industrial ("C&I") relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. Total C&I loans represent 48% of the Company's loan portfolio as of the third quarter of 2018. C&I loan growth supports management's efforts to maintain the Company's asset sensitive interest rate risk position.

Non-Core Acquired Loans

Non-core acquired loans were those acquired from the FDIC and were previously covered by shared-loss agreements. These loans continue to be accounted for as purchased credit impaired ("PCI") loans. Non-core acquired loans totaled $17.7 million at September 30, 2018, a decrease of $5.8 million, or 25% from the linked second quarter, and $16.5 million, or 48%, from the prior year period, primarily as a result of principal payments and loan payoffs. At September 30, 2018, the remaining accretable yield on the portfolio was estimated to be $9 million and the non-accretable difference was approximately $10 million.

The Company estimates 2018 and 2019 pre-tax income from accelerated cash flows and other incremental accretion to be between $2 million and $3 million. Additionally, year-to-date pretax income from non-core acquired assets includes a $2.1 million provision for loan loss reversal as well as $1.0 million of other income from non-core acquired assets.

Asset Quality: The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:

     
  For the Quarter ended
($ in thousands)   September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
Nonperforming loans $ 17,044 $ 14,801 $ 15,582 $ 15,687 $ 8,985
Other real estate 408   454   455   498   491  
Nonperforming assets $ 17,452   $ 15,255   $ 16,037   $ 16,185   $ 9,476  
Nonperforming loans to total loans a 0.40 % 0.35 % 0.38 % 0.39 % 0.23 %
Nonperforming assets to total assets 0.32 % 0.28 % 0.30 % 0.31 % 0.18 %
Allowance for portfolio loan losses to total loans a 0.99 % 1.00 % 0.98 % 0.95 % 0.97 %
Net charge-offs (recoveries)   $ 2,447     $ 641     $ (226 )   $ 3,313     $ 803  

a Excludes loans accounted for as PCI loans

 

The Company recorded a provision for portfolio loan losses of $2.3 million compared to $2.4 million for the linked quarter and the prior year period, respectively. The provision for the third quarter is reflective of charge-offs in the period and what management believes to be a prudent credit risk posture.

Nonperforming loans increased during the quarter ended September 30, 2018 due to three isolated C&I credits.

Deposits

The following table presents deposits broken out by type:

     
  At the Quarter ended
($ in thousands)   September 30,

2018

  June 30,

2018

  March 31,

2018

  December 31,
2017
  September 30,
2017
Noninterest-bearing accounts $ 1,062,126 $ 1,050,969 $ 1,101,705 $ 1,123,907 $ 1,047,910
Interest-bearing transaction accounts 743,351 754,819 875,880 915,653 814,338
Money market and savings accounts 1,730,762 1,768,793 1,655,488 1,538,081 1,579,767
Brokered certificates of deposit 202,323 224,192 201,082 115,306 170,701
Other certificates of deposit 471,914   449,139   447,222   463,467   446,495  
Total deposit portfolio $ 4,210,476   $ 4,247,912   $ 4,281,377   $ 4,156,414   $ 4,059,211  
 
Noninterest-bearing deposits to total deposits   25 %   25 %   26 %   27 %   26 %
 

Total deposits at September 30, 2018 were $4.2 billion, a decrease of $37 million, or 3% annualized, from June 30, 2018, but an increase of $151 million from September 30, 2017. Average deposit balances for the quarter ended September 30, 2018, increased $25 million from the linked quarter and $323 million compared to the prior year period resulting in higher interest expense on deposits for the current quarter.

Core deposits, defined as total deposits excluding certificates of deposits, were $3.5 billion at September 30, 2018, a decrease of $38 million, or 4% annualized, from the linked quarter, but an increase of $94 million from the prior year period. The Company continues to strengthen and diversify the funding base.

Noninterest-bearing deposits were $1.1 billion at September 30, 2018, an increase of $11 million compared to June 30, 2018, and an increase of $14 million compared to September 30, 2017. The total cost of deposits increased 13 basis points to 0.86% at September 30, 2018 compared to 0.73% at June 30, 2018, and also increased 40 basis points from 0.46% at September 30, 2017. The cost of deposits reflects interest rate conditions for existing clients as well as rates for new customer acquisition.

Noninterest Income

Total noninterest income for the quarter ended September 30, 2018 was $8.4 million, a decrease of $1.3 million, or 13% from the linked second quarter, and relatively stable with the prior year quarter. The decrease from the linked second quarter was driven by lower miscellaneous income items. Other income in the linked second quarter included a $0.6 million gain from the sale of an equity partnership.

Core noninterest income1 for the quarter ended September 30, 2018 was $8.4 million, a decrease of $0.6 million, or 7% from the linked second quarter, primarily due to lower income from interest rate swaps and other distributions. In addition, the linked second quarter included proceeds of $0.3 million from a bank-owned life insurance policy.

The Company expects growth in core fee income of a high single digit percentage for 2019 over 2018 levels.

Noninterest Expenses

Noninterest expenses were $29.9 million for the quarter ended September 30, 2018, compared to $29.2 million for the quarter ended June 30, 2018, and $27.4 million for the quarter ended September 30, 2017. The increase from the linked quarter was due to a non-recurring excise tax expense which was offset by lower income tax expenses discussed below. Noninterest expenses for the quarter ended September 30, 2017 included $0.3 million of merger related expenses.

Core noninterest expenses1 were $29.2 million for each of the quarters ended September 30, 2018 and June 30, 2018, compared to $27.1 million for the prior year period. Core expenses1 increased over the prior year period due to increases in employee compensation and benefits from investments in revenue producing personnel and $0.8 million of tax credit amortization.

The Company's core efficiency ratio1 was 52.2% for the quarter ended September 30, 2018, compared to 52.4% for the linked quarter and 51.6% for the prior year period. The decrease in the linked quarter is reflective of marginally higher income and holding noninterest expense steady.

The Company expects to continue to invest in revenue producing associates and other infrastructure that supports additional growth. These investments are expected to result in expense growth, at a rate of 35% - 45% of projected revenue growth for 2019, resulting in continued improvements to the Company's efficiency ratio.

Income Taxes

The Company's effective tax rate was 7% for the quarter ended September 30, 2018 compared to 18% for the quarter ended June 30, 2018, and 33% for the quarter ended September 30, 2017. During the current quarter, the Company finalized its 2017 corporate income tax returns. Tax planning activities associated with the excise tax discussed above, reduced income tax expense by $2.7 million.

The Company expects its effective tax rate for the remainder of 2018 and 2019 to be approximately 18% - 20%.

Capital

The following table presents various capital ratios:

     
  At the Quarter ended
Percent  

September 30,
2018

 

June 30,
2018

 

March 31,
2018

 

December 31,
2017

 

September 30,
2017

Total risk-based capital to risk-weighted assets 12.94 % 12.60 % 12.41 % 12.21 % 12.33 %
Common equity tier 1 capital to risk-weighted assets 9.66 % 9.32 % 9.07 % 8.88 % 8.93 %
Tangible common equity to tangible assets   8.54 %   8.30 %   8.13 %   8.14 %   8.18 %
 

In the third quarter of 2018, as part of its capital management efforts, the Company repurchased 71,007 shares of its common stock for $3.8 million pursuant to its publicly announced share repurchase program.

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.

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 core 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 non-core acquired 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 non-core acquired loans, but exclude incremental accretion on these loans. Core performance measures also exclude the gain or loss on sale of other real estate from non-core acquired loans, and expenses directly related to non-core acquired 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, merger related expenses, facilities charges, deferred tax asset revaluation, 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.

Conference Call and Webcast Information

The Company will host a conference call and webcast at 2:30 p.m. Central time on Tuesday, October 23, 2018. During the call, management will review the third quarter of 2018 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 1-877-260-1479 (Conference ID #5159617). A recorded replay of the conference call will be available on the website two hours after the call's completion. Visit http://bit.ly/EFSC3Q2018earnings 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.

Forward-looking Statements

Readers should note that, in addition to the historical information contained herein, this press release contains "forward-looking statements" within the meaning of, and intended to be covered by, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements about the Company's plans, expectations, and projections of future financial and operating results, as well as statements regarding the Company's plans, objectives, expectations or consequences of announced transactions. The Company uses words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "could," "continue," and "intend," and variations of such words and similar expressions, in this communication to identify such forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. Factors that could cause or contribute to such differences include, but are not limited to, the Company's ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses and grow the acquired operations, as well as credit risk, changes in the appraised valuation of real estate securing impaired loans, outcomes of litigation and other contingencies, exposure to general and local economic conditions, risks associated with rapid increases or decreases in prevailing interest rates, consolidation in the banking industry, competition from banks and other financial institutions, the Company's ability to attract and retain relationship officers and other key personnel, burdens imposed by federal and state regulation, changes in regulatory requirements, changes in accounting regulation or standards applicable to banks, as well as other risk factors described in the Company's 2017 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 and reconciliation of these measures in the accompanying financial tables.

   
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
 
For the Quarter ended For the Nine Months ended
($ in thousands, except per share data)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
Sep 30,
2018
  Sep 30,
2017
EARNINGS SUMMARY
Net interest income $ 48,093 $ 47,048 $ 46,171 $ 47,404 $ 45,625 $ 141,312 $ 129,900
Provision for portfolio loan losses 2,332 2,385 1,871 3,186 2,422 6,588 7,578
Provision reversal for purchased credit impaired loan losses (69 ) (1,995 ) (279 ) (2,064 ) (355 )
Noninterest income 8,410 9,693 9,542 11,112 8,372 27,645 23,282
Noninterest expense 29,922   29,219   29,143   28,260   27,404   88,284   86,791  
Income before income tax expense 24,318 27,132 24,699 27,349 24,171 76,149 59,168
Income tax expense1 1,802   4,881   3,778   19,820   7,856   10,461   18,507  
Net income1 $ 22,516   $ 22,251   $ 20,921   $ 7,529   $ 16,315   $ 65,688   $ 40,661  
 
Diluted earnings per share $ 0.97 $ 0.95 $ 0.90 $ 0.32 $ 0.69 $ 2.81 $ 1.75
Return on average assets 1.63 % 1.65 % 1.59 % 0.57 % 1.27 % 1.62 % 1.11 %
Return on average common equity 15.22 % 15.70 % 15.31 % 5.37 % 11.69 % 15.41 % 10.37 %
Return on average tangible common equity 19.42 % 20.23 % 19.92 % 6.99 % 15.23 % 19.85 % 13.25 %
Net interest margin (fully tax equivalent) 3.78 % 3.77 % 3.80 % 3.93 % 3.88 % 3.78 % 3.87 %
Efficiency ratio 52.96 % 51.50 % 52.31 % 48.29 % 50.75 % 52.25 % 56.66 %
 
CORE PERFORMANCE SUMMARY (NON-GAAP)2
Net interest income $ 47,558 $ 46,757 $ 45,405 $ 44,901 $ 44,069 $ 139,720 $ 124,685
Provision for portfolio loan losses 2,332 2,385 1,871 3,186 2,422 6,588 7,578
Noninterest income 8,403 9,026 8,520 11,118 8,350 25,949 23,260
Noninterest expense 29,228   29,209   29,129   28,146   27,070   87,566   79,814  
Income before income tax expense 24,401 24,189 22,925 24,687 22,927 71,515 60,553
Income tax expense 4,372   4,145   3,340   6,692   7,391   11,857   18,636  
Net income $ 20,029   $ 20,044   $ 19,585   $ 17,995   $ 15,536   $ 59,658   $ 41,917  
 
Diluted earnings per share $ 0.86 $ 0.86 $ 0.84 $ 0.77 $ 0.66 $ 2.56 $ 1.81
Return on average assets 1.45 % 1.48 % 1.49 % 1.37 % 1.21 % 1.47 % 1.14 %
Return on average common equity 13.54 % 14.14 % 14.34 % 12.84 % 11.13 % 14.00 % 10.69 %
Return on average tangible common equity 17.28 % 18.22 % 18.64 % 16.71 % 14.50 % 18.03 % 13.66 %
Net interest margin (fully tax equivalent) 3.74 % 3.75 % 3.74 % 3.73 % 3.75 % 3.74 % 3.71 %
Efficiency ratio 52.23 % 52.36 % 54.02 % 50.24 % 51.64 % 52.86 % 53.95 %
 
1 Includes $12.1 million ($0.52 per diluted share) deferred tax asset revaluation charge for the quarter ended December 31, 2017 due to U.S. corporate income tax reform.
2 Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.
 
   
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended For the Nine Months ended
($ in thousands, except per share data)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
Sep 30,
2018
  Sep 30,
2017
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income $ 60,757 $ 57,879 $ 55,164 $ 54,789 $ 52,468 $ 173,800 $ 147,750
Total interest expense 12,664   10,831   8,993   7,385   6,843   32,488   17,850  
Net interest income 48,093 47,048 46,171 47,404 45,625 141,312 129,900
Provision for portfolio loan losses 2,332 2,385 1,871 3,186 2,422 6,588 7,578
Provision reversal for purchased credit impaired loan losses (69 ) (1,995 )   (279 )   (2,064 ) (355 )
Net interest income after provision for loan losses 45,830 46,658 44,300 44,497 43,203 136,788 122,677
 
NONINTEREST INCOME
Deposit service charges 2,997 3,007 2,851 2,897 2,820 8,855 8,146
Wealth management revenue 2,012 2,141 2,114 2,153 2,062 6,267 5,949
Card services revenue 1,760 1,650 1,516 1,545 1,459 4,926 3,888
State tax credit activity, net 192 64 252 2,249 77 508 332
Gain on sale of other real estate 13 76 13 17
Gain on sale of investment securities 9 22 9 22
Other income 1,436   2,831   2,800   2,192   1,932   7,067   4,928  
Total noninterest income 8,410 9,693 9,542 11,112 8,372 27,645 23,282
 
NONINTEREST EXPENSE
Employee compensation and benefits 16,297 16,582 16,491 15,292 15,090 49,370 46,096
Occupancy 2,394 2,342 2,406 2,429 2,434 7,142 6,628
Merger related expenses 315 6,462
Other 11,231   10,295   10,246   10,539   9,565   31,772   27,605  
Total noninterest expense 29,922 29,219 29,143 28,260 27,404 88,284 86,791
 
Income before income tax expense 24,318 27,132 24,699 27,349 24,171 76,149 59,168
Income tax expense 1,802   4,881   3,778   19,820   7,856   10,461   18,507  
Net income $ 22,516   $ 22,251   $ 20,921   $ 7,529   $ 16,315   $ 65,688   $ 40,661  
 
Basic earnings per share $ 0.97 $ 0.96 $ 0.91 $ 0.33 $ 0.70 $ 2.84 $ 1.77
Diluted earnings per share 0.97 0.95 0.90 0.32 0.69 2.81 1.75
 
 
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
At the Quarter ended
($ in thousands)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
BALANCE SHEETS
ASSETS
Cash and due from banks $ 78,119 $ 91,851 $ 81,604 $ 91,084 $ 76,777
Interest-earning deposits 81,351 87,586 63,897 64,884 108,976
Debt and equity investments 775,344 756,203 752,114 741,792 708,725
Loans held for sale 738 1,388 1,748 3,155 6,411
 
Portfolio loans 4,249,758 4,252,336 4,162,082 4,066,659 3,996,501
Less: Allowance for loan losses 41,892   42,007   40,263   38,166   38,292
Portfolio loans, net 4,207,866 4,210,329 4,121,819 4,028,493 3,958,209
Non-core acquired loans, net of the allowance for loan losses 15,378   21,062   24,376   25,980   29,258
Total loans, net 4,223,244   4,231,391   4,146,195   4,054,473   3,987,467
 
Other real estate 408 454 455 498 491
Fixed assets, net 32,354 32,814 32,127 32,618 32,803
State tax credits, held for sale 45,625 46,481 42,364 43,468 35,291
Goodwill 117,345 117,345 117,345 117,345 117,345
Intangible assets, net 9,148 9,768 10,399 11,056 11,745
Other assets 153,863   134,643   134,854   128,852   145,457
Total assets $ 5,517,539   $ 5,509,924   $ 5,383,102   $ 5,289,225   $ 5,231,488
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $ 1,062,126 $ 1,050,969 $ 1,101,705 $ 1,123,907 $ 1,047,910
Interest-bearing deposits 3,148,350   3,196,943   3,179,672   3,032,507   3,011,301
Total deposits 4,210,476 4,247,912 4,281,377 4,156,414 4,059,211
Subordinated debentures 118,144 118,131 118,118 118,105 118,093
Federal Home Loan Bank advances 401,000 361,534 224,624 172,743 248,868
Other borrowings 161,795 167,216 166,589 253,674 209,104
Other liabilities 39,287   41,047   37,379   39,716   49,876
Total liabilities 4,930,702 4,935,840 4,828,087 4,740,652 4,685,152
Shareholders' equity 586,837   574,084   555,015   548,573   546,336
Total liabilities and shareholders' equity $ 5,517,539   $ 5,509,924   $ 5,383,102   $ 5,289,225   $ 5,231,488
 
 
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
($ in thousands)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
LOAN PORTFOLIO
Commercial and industrial $ 2,033,278 $ 2,038,400 $ 1,982,086 $ 1,919,145 $ 1,861,935
Commercial real estate 1,443,088 1,445,981 1,413,897 1,363,605 1,332,111
Construction real estate 329,288 302,514 309,227 305,468 306,410
Residential real estate 309,414 319,208 329,337 342,518 341,695
Consumer and other 134,690   146,233   127,535   135,923   154,350  
Total portfolio loans 4,249,758 4,252,336 4,162,082 4,066,659 3,996,501
Non-core acquired loans 17,672   23,425   28,763   30,391   34,157  
Total loans $ 4,267,430   $ 4,275,761   $ 4,190,845   $ 4,097,050   $ 4,030,658  
 
DEPOSIT PORTFOLIO
Noninterest-bearing accounts $ 1,062,126 $ 1,050,969 $ 1,101,705 $ 1,123,907 $ 1,047,910
Interest-bearing transaction accounts 743,351 754,819 875,880 915,653 814,338
Money market and savings accounts 1,730,762 1,768,793 1,655,488 1,538,081 1,579,767
Brokered certificates of deposit 202,323 224,192 201,082 115,306 170,701
Other certificates of deposit 471,914   449,139   447,222   463,467   446,495  
Total deposit portfolio $ 4,210,476   $ 4,247,912   $ 4,281,377   $ 4,156,414   $ 4,059,211  
 
AVERAGE BALANCES
Portfolio loans $ 4,230,089 $ 4,196,875 $ 4,108,400 $ 3,990,233 $ 3,899,493
Non-core acquired loans 21,891 26,179 29,125 31,957 35,120
Loans held for sale 544 962 1,445 3,599 5,144
Debt and equity investments 755,129 743,534 740,587 708,481 711,056
Interest-earning assets 5,072,573 5,023,607 4,948,875 4,826,271 4,712,672
Total assets 5,471,504 5,415,151 5,340,112 5,226,183 5,095,494
Deposits 4,255,523 4,230,291 4,124,326 4,115,377 3,932,038
Shareholders' equity 586,765 568,555 554,066 555,994 553,713
Tangible common equity 459,975 441,136 426,006 427,258 425,056
 
YIELDS (fully tax equivalent)
Portfolio loans 5.12 % 4.99 % 4.87 % 4.71 % 4.69 %
Non-core acquired loans 16.93 % 12.37 % 16.60 % 37.53 % 23.82 %
Total loans 5.18 % 5.04 % 4.96 % 4.97 % 4.86 %
Debt and equity investments 2.71 % 2.58 % 2.50 % 2.52 % 2.49 %
Interest-earning assets 4.77 % 4.64 % 4.54 % 4.54 % 4.45 %
Interest-bearing deposits 1.16 % 0.98 % 0.82 % 0.69 % 0.62 %
Total deposits 0.86 % 0.73 % 0.61 % 0.50 % 0.46 %
Subordinated debentures 4.98 % 4.94 % 4.70 % 4.46 % 4.42 %
Borrowed funds 1.62 % 1.41 % 1.15 % 0.84 % 0.85 %
Cost of paying liabilities 1.34 % 1.16 % 0.99 % 0.84 % 0.78 %
Net interest margin 3.78 % 3.77 % 3.80 % 3.93 % 3.88 %
 
 
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
(in thousands, except % and per share data)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
ASSET QUALITY
Net charge-offs (recoveries)1 $ 2,447 $ 641 $ (226 ) $ 3,313 $ 803
Nonperforming loans1 17,044 14,801 15,582 15,687 8,985
Classified assets 73,704 74,001 77,195 73,239 80,757
Nonperforming loans to total loans1 0.40 % 0.35 % 0.38 % 0.39 % 0.23 %
Nonperforming assets to total assets2 0.32 % 0.28 % 0.30 % 0.31 % 0.18 %
Allowance for loan losses to total loans1 0.99 % 1.00 % 0.98 % 0.95 % 0.97 %
Allowance for loan losses to nonperforming loans1 245.8 % 283.8 % 258.4 % 243.3 % 426.2 %
Net charge-offs (recoveries) to average loans (annualized)1 0.23 % 0.06 % (0.02 )% 0.33 % 0.08 %
 
WEALTH MANAGEMENT
Trust assets under management $ 1,174,798 $ 1,337,030 $ 1,319,259 $ 1,330,227 $ 1,319,123
Trust assets under administration 1,984,859 2,165,870 2,151,697 2,169,946 2,102,800
 
MARKET DATA
Book value per common share $ 25.41 $ 24.81 $ 24.02 $ 23.76 $ 23.69
Tangible book value per common share $ 19.94 $ 19.32 $ 18.49 $ 18.20 $ 18.09
Market value per share $ 53.05 $ 53.95 $ 46.90 $ 45.15 $ 42.35
Period end common shares outstanding 23,092 23,141 23,111 23,089 23,063
Average basic common shares 23,148 23,124 23,115 23,069 23,324
Average diluted common shares 23,329 23,318 23,287 23,342 23,574
 
CAPITAL
Total risk-based capital to risk-weighted assets 12.94 % 12.60 % 12.41 % 12.21 % 12.33 %
Tier 1 capital to risk-weighted assets 11.03 % 10.68 % 10.46 % 10.29 % 10.36 %
Common equity tier 1 capital to risk-weighted assets 9.66 % 9.32 % 9.07 % 8.88 % 8.93 %
Tangible common equity to tangible assets 8.54 % 8.30 % 8.13 % 8.14 % 8.18 %
 
1 Excludes loans accounted for as PCI loans.
2 Excludes PCI loans and related assets, except for inclusion in total assets.
 
   
ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
For the Quarter ended For the Nine Months ended
($ in thousands, except per share data)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
Sep 30,
2018
  Sep 30,
2017
CORE PERFORMANCE MEASURES
Net interest income $ 48,093 $ 47,048 $ 46,171 $ 47,404 $ 45,625 $ 141,312 $ 129,900
Less: Incremental accretion income 535   291   766   2,503   1,556   1,592   5,215  
Core net interest income 47,558 46,757 45,405 44,901 44,069 139,720 124,685
 
Total noninterest income 8,410 9,693 9,542 11,112 8,372 27,645 23,282
Less: Other income from non-core acquired assets 7 18 1,013 (6 ) 1,038
Less: Gain on sale of investment securities 9 22 9 22
Less: Other non-core income   649         649    
Core noninterest income 8,403 9,026 8,520 11,118 8,350 25,949 23,260
             
Total core revenue 55,961   55,783   53,925   56,019   52,419   165,669   147,945  
 
Provision for portfolio loan losses 2,332 2,385 1,871 3,186 2,422 6,588 7,578
 
Total noninterest expense 29,922 29,219 29,143 28,260 27,404 88,284 86,791
Less: Other expenses related to non-core acquired loans 12 (229 ) 14 114 19 (203 ) 126
Less: Facilities disposal 239 239 389
Less: Merger related expenses 315 6,462
Less: Non-recurring excise tax3 682           682    
Core noninterest expense 29,228 29,209 29,129 28,146 27,070 87,566 79,814
 
Core income before income tax expense 24,401 24,189 22,925 24,687 22,927 71,515 60,553
 
Total income tax expense 1,802 4,881 3,778 19,820 7,856 10,461 18,507
Less: income tax expense from deferred tax asset revaluation1 12,117
Less: Other non-core income tax expense (benefit)2, 3 (2,570 ) 736   438   1,011   465   (1,396 ) (129 )
Core income tax expense 4,372 4,145 3,340 6,692 7,391 11,857 18,636
             
Core net income $ 20,029   $ 20,044   $ 19,585   $ 17,995   $ 15,536   $ 59,658   $ 41,917  
 
Core diluted earnings per share $ 0.86 $ 0.86 $ 0.84 $ 0.77 $ 0.66 $ 2.56 $ 1.81
Core return on average assets 1.45 % 1.48 % 1.49 % 1.37 % 1.21 % 1.47 % 1.14 %
Core return on average common equity 13.54 % 14.14 % 14.34 % 12.84 % 11.13 % 14.00 % 10.69 %
Core return on average tangible common equity 17.28 % 18.22 % 18.64 % 16.71 % 14.50 % 18.03 % 13.66 %
Core efficiency ratio 52.23 % 52.36 % 54.02 % 50.24 % 51.64 % 52.86 % 53.95 %
 
1 Deferred tax asset revaluation associated with U.S. corporate income tax reform.
2 Other non-core income tax expense calculated at 24.7% of non-core pretax income for 2018. For 2017, the calculation is 38.0% of non-core pretax income plus an estimate of taxes payable related to non-deductible JCB acquisition costs.
3 Income tax for the quarter ended September 30, 2018, includes a $2.7 million income tax planning benefit, associated with the excise tax expense, recognized upon finalization of the Company's 2017 tax returns.
 
   
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
  For the Quarter ended For the Nine Months ended
($ in thousands)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
Sep 30,
2018
Sep 30,
2017
Net interest income $ 48,299 $ 47,254 $ 46,386 $ 47,824 $ 46,047 $ 141,939 $ 131,290
Less: Incremental accretion income 535   291   766   2,503   1,556   1,592   5,215  
Core net interest income $ 47,764   $ 46,963   $ 45,620   $ 45,321   $ 44,491   $ 140,347   $ 126,075  
 
Average earning assets $ 5,072,573 $ 5,023,607 $ 4,948,875 $ 4,826,271 $ 4,712,672 $ 5,015,471 $ 4,539,350
Reported net interest margin 3.78 % 3.77 % 3.80 % 3.93 % 3.88 % 3.78 % 3.87 %
Core net interest margin 3.74 % 3.75 % 3.74 % 3.73 % 3.75 % 3.74 % 3.71 %
 
 
At the Quarter ended
($ in thousands)   Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
REGULATORY CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity $ 586,837 $ 574,084 $ 555,015 $ 548,573 $ 546,336
Less: Goodwill 117,345 117,345 117,345 117,345 117,345
Less: Intangible assets, net of deferred tax liabilities 6,888 7,355 7,831 6,661 5,825
Less: Unrealized gains (losses) (16,627 ) (12,580 ) (11,563 ) (3,818 ) (489 )
Plus: Other       12   12  
Common equity tier 1 capital 479,231 461,964 441,402 428,397 423,667
Plus: Qualifying trust preferred securities 67,600 67,600 67,600 67,600 67,600
Plus: Other 60   60   60   48   48  
Tier 1 capital 546,891 529,624 509,062 496,045 491,315
Plus: Tier 2 capital 94,611   94,795   95,075   93,002   93,616  
Total risk-based capital $ 641,502   $ 624,419   $ 604,137   $ 589,047   $ 584,931  
 
Total risk-weighted assets $ 4,958,999 $ 4,956,820 $ 4,867,491 $ 4,822,695 $ 4,743,393
 
Common equity tier 1 capital to risk-weighted assets 9.66 % 9.32 % 9.07 % 8.88 % 8.93 %
Tier 1 capital to risk-weighted assets 11.03 % 10.68 % 10.46 % 10.29 % 10.36 %
Total risk-based capital to risk-weighted assets 12.94 % 12.60 % 12.41 % 12.21 % 12.33 %
 
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity $ 586,837 $ 574,084 $ 555,015 $ 548,573 $ 546,336
Less: Goodwill 117,345 117,345 117,345 117,345 117,345
Less: Intangible assets 9,148   9,768   10,399   11,056   11,745  
Tangible common equity $ 460,344   $ 446,971   $ 427,271   $ 420,172   $ 417,246  
 
Total assets $ 5,517,539 $ 5,509,924 $ 5,383,102 $ 5,289,225 $ 5,231,488
Less: Goodwill 117,345 117,345 117,345 117,345 117,345
Less: Intangible assets 9,148   9,768   10,399   11,056   11,745  
Tangible assets $ 5,391,046   $ 5,382,811   $ 5,255,358   $ 5,160,824   $ 5,102,398  
 
Tangible common equity to tangible assets 8.54 % 8.30 % 8.13 % 8.14 % 8.18 %

Enterprise Financial Services Corp
Investor Relations:
Keene Turner, 314-512-7233
Executive Vice President and CFO
or
Media:
Karen Loiterstein, 314-512-7141
Senior Vice President

Source: Enterprise Financial Services Corp