Enterprise Financial Reports Third Quarter 2019 Results

Company Release - 10/21/2019 4:15 PM ET

Third Quarter Highlights

  • Net income of $29.1 million, $1.08 per diluted share
  • Net interest margin (tax equivalent) of 3.81%
  • Return on average assets (“ROAA”) of 1.60%
  • Loans increased $78.5 million, or 6% annualized
  • Deposits increased $65.0 million, or 5% annualized
  • Repurchase of 302,756 shares at an average price of $39.03 per share

ST. LOUIS--(BUSINESS WIRE)-- Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $29.1 million for the quarter ended September 30, 2019, an increase of $10.6 million compared to the linked second quarter (“linked quarter”) and an increase of $6.6 million from the prior year quarter. Earnings per diluted share (“EPS”) were $1.08 for the current quarter, compared to $0.68 and $0.97 for the linked and prior year quarters, respectively. Merger-related expenses from the Trinity Capital Corporation (“Trinity”) acquisition reduced net income by $0.4 million pretax ($0.3 million after tax), or $0.01 per diluted share in the current quarter compared to $10.3 million pretax ($8.0 million after tax), or $0.30 per diluted share in the linked quarter. The increase in EPS for the current quarter, compared to the prior year quarter, was positively impacted by the Trinity acquisition. The year-over-year comparison of EPS is also impacted by a tax benefit recognized in the prior year quarter that did not occur in the current year period. Net interest margin, on a tax equivalent basis, in the current quarter was 3.81%, compared to 3.86% in the linked quarter and 3.78% in the prior year quarter.

The Company’s Board of Directors approved a quarterly dividend of $0.17 per common share, an increase from $0.16 for the prior quarter, payable on December 31, 2019 to shareholders of record as of December 16, 2019.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “I am pleased with our results in the third quarter of 2019. We generated balanced loan growth, expanded the deposit portfolio with a focus on non-interest bearing deposits and grew operating revenue. We have continued to deliver strong shareholder returns through solid earnings and by actively managing our capital position. In the third quarter we repurchased approximately $12 million of outstanding shares and approved an increased dividend of $0.17 for the fourth quarter. Our return on average tangible common equity1 has increased to 19% due to our strong earnings profile and prudent capital management. Despite the challenging interest rate environment, we have increased net interest income through balance sheet growth which we believe leaves us well-positioned as we enter the fourth quarter.”

1 Return on average tangible common equity is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

Net Interest Income

The Company closed its acquisition of Trinity on March 8, 2019. The results of operations of Trinity are included in our consolidated results from this date forward and are excluded from preceding periods.

Net interest income for the third quarter increased $1.3 million to $63.0 million from $61.7 million in the linked quarter, and increased $15.0 million from the prior year period. The increase from the linked quarter was primarily due to incremental accretion on non-core acquired loans while the increase from the prior year period was primarily due to the Trinity acquisition and organic growth. Net interest margin, on a tax equivalent basis, was 3.81% for the third quarter, compared to 3.86% in the linked quarter, and 3.78% in the third quarter of 2018.

Core net interest income and core net interest margin noted in the table below exclude incremental accretion on non-core acquired loans.

 

Quarter ended

($ in thousands)

September 30,
2019

 

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

September 30,
2018

Net interest income

$

63,046

 

 

$

61,715

 

 

$

52,343

 

 

$

50,593

 

 

$

48,093

 

Less: Incremental accretion income2

2,140

 

 

910

 

 

1,157

 

 

2,109

 

 

535

 

Core net interest income3

$

60,906

 

 

$

60,805

 

 

$

51,186

 

 

$

48,484

 

 

$

47,558

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (tax equivalent)

3.81

%

 

3.86

%

 

3.87

%

 

3.94

%

 

3.78

%

Core net interest margin3 (tax equivalent)

3.69

 

 

3.80

 

 

3.79

 

 

3.77

 

 

3.74

 

 

 

 

 

 

 

 

 

 

 

2 Represents incremental accretion income on non-core acquired loans which were acquired from the FDIC and previously covered by shared-loss agreements.

3 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

Average Balance Sheets

The following table presents, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax-equivalent basis.

 

Quarter ended

 

September 30, 2019

 

June 30, 2019

 

September 30, 2018

($ in thousands)

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Rate

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Rate

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding incremental accretion*

$

5,178,009

 

 

$

69,193

 

 

5.30

%

 

$

5,095,181

 

 

$

68,830

 

 

5.42

%

 

$

4,252,525

 

 

$

54,968

 

 

5.13

%

Debt and equity investments*

1,312,860

 

 

9,610

 

 

2.90

 

 

1,246,529

 

 

9,152

 

 

2.95

 

 

755,129

 

 

5,154

 

 

2.71

 

Short-term investments

113,214

 

 

572

 

 

2.00

 

 

111,291

 

 

703

 

 

2.53

 

 

64,919

 

 

306

 

 

1.87

 

Total earning assets

6,604,083

 

 

79,375

 

 

4.77

 

 

6,453,001

 

 

78,685

 

 

4.89

 

 

5,072,573

 

 

60,428

 

 

4.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets

618,274

 

 

 

 

 

 

604,604

 

 

 

 

 

 

398,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

7,222,357

 

 

 

 

 

 

$

7,057,605

 

 

 

 

 

 

$

5,471,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing transaction accounts

$

1,356,328

 

 

$

2,048

 

 

0.60

%

 

$

1,384,090

 

 

$

2,134

 

 

0.62

%

 

$

758,621

 

 

$

799

 

 

0.42

%

Money market accounts

1,639,603

 

 

6,959

 

 

1.68

 

 

1,