Enterprise Financial Reports Fourth Quarter and Full Year 2019 Results

Company Release - 1/20/2020 4:08 PM ET

2019 Highlights

  • Net income of $92.7 million, or $3.55 per diluted share
  • Return on average assets of 1.35%
  • Acquisition and integration of Trinity Capital Corporation (“Trinity”)
  • Repurchase of 396,737 shares at an average price of $39.13 per share

Fourth Quarter Highlights

  • Net income of $29.1 million, or $1.09 per diluted share
  • Return on average assets of 1.58%
  • Loans increased $86.3 million, or 7% annualized
  • Deposits increased $146.6 million, or 10% annualized

 

ST. LOUIS--(BUSINESS WIRE)-- Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $92.7 million, or $3.55 per diluted share, for the year ended December 31, 2019, compared to $89.2 million, or $3.83 per diluted share for the prior year period. Merger-related expenses from the Trinity acquisition reduced net income by $18.0 million pretax ($14.0 million after tax), or $0.53 per diluted share.

The Company recorded net income of $29.1 million for both the third and fourth quarters of 2019, or earnings per share of $1.08 and $1.09, respectively. Seasonally strong sales of tax credits in the fourth quarter offset the decline in incremental accretion income from the linked third quarter (“linked quarter”).

Dividends paid in 2019 of $0.62 per share increased $0.15 per share, or 32%, compared to $0.47 per share in 2018. The Company’s Board of Directors approved the Company’s quarterly dividend of $0.18 per common share for the first quarter of 2020, an increase from $0.17 for the prior quarter, payable on March 31, 2020 to shareholders of record as of March 16, 2020.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “We are pleased with another solid quarter of financial performance to close 2019. We achieved strong growth in both loans and deposits during the fourth quarter. On an annualized basis, loans grew 7% and deposits grew 10%. Given the current interest rate environment, I am pleased that our business fundamentals continued to generate robust earnings with a 1.6% return on average assets and a 19% return on average tangible common equity1.”

Lally added, “2019 was a pivotal year, as we expanded our geographic presence into New Mexico with the acquisition and integration of Trinity, organically grew the balance sheet with quality loan and deposit relationships and strategically managed our capital position to provide a high return to our shareholders. Our continued success reflects the resolve of our associates to serve the customers and communities within our market areas.”

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 2019, net interest income totaled $238.7 million, an increase of $46.8 million, or 24%, compared to $191.9 million in the prior year. Net interest margin, on a fully tax equivalent basis, was 3.80% for 2019 compared to 3.82% for the prior year. The increase in net interest income was primarily due to the Trinity acquisition and organic growth.

Net interest income for the fourth quarter of 2019 totaled $61.6 million, a decrease of $1.4 million, from the linked quarter. Interest rates continued to decline during the fourth quarter. Portfolio loan growth, combined with the Company’s ability to modestly reprice deposits, helped to deliver a consistent level of core net interest income1 of $61.0 million for both the third and fourth quarter. The impact of lower interest rates on loan yields was offset by an increase in average loans, a decrease in the cost of interest-bearing liabilities and growth in noninterest-bearing deposits that resulted in a reduction in wholesale borrowings.

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

 

Quarter ended

 

Year ended

($ in thousands)

December 31,
2019

 

September 30,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

Net interest income

$

61,613

 

 

$

63,046

 

 

$

50,593

 

 

$

238,717

 

 

$

191,905

 

Less: Incremental accretion income2

576

 

 

2,140

 

 

2,109

 

 

4,783

 

 

3,701

 

Core net interest income3

$

61,037

 

 

$

60,906

 

 

$

48,484

 

 

$

233,934

 

 

$

188,204

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (fully tax equivalent)

3.68

%

 

3.81

%

 

3.94

%

 

3.80

%

 

3.82

%

Core net interest margin3 (fully tax equivalent)

3.64

%

 

3.69

%

 

3.77

%

 

3.73

%

 

3.75

%

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 Sheet

The following tables present, 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

 

December 31, 2019

 

September 30, 2019

 

December 31, 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*

$

5,279,500

 

 

$

67,085

 

 

5.04

%

 

$

5,178,009

 

 

$

69,193

 

 

5.30

%

 

$

4,272,132

 

 

$

56,431

 

 

5.24

%

Investments in debt and equity securities*

1,322,017

 

 

9,699

 

 

2.91

 

 

1,312,860

 

 

9,610

 

 

2.90

 

 

769,461

 

 

5,291

 

 

2.73

 

Short-term investments

102,989

 

 

406

 

 

1.56

 

 

113,214

 

 

572

 

 

2.00

 

 

76,726

 

 

364

 

 

1.88

 

Total earning assets

6,704,506

 

 

77,190

 

 

4.57

 

 

6,604,083

 

 

79,375

 

 

4.77

 

 

5,118,319

 

 

62,086

 

 

4.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets

617,990

 

 

 

 

 

 

618,274

 

 

 

 

 

 

400,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

7,322,496

 

 

 

 

 

 

$

7,222,357

 

 

 

 

 

 

$

5,518,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing transaction accounts

$

1,325,363

 

 

$

1,620

 

 

0.48

%

 

$

1,356,328

 

 

$

2,048

 

 

0.60

%

 

$

864,175

 

 

$

1,221

 

 

0.56

%

Money market accounts

1,693,357

 

 

5,797

 

 

1.36

 

 

1,639,603

 

 

6,959

 

 

1.68

 

 

1,541,832

 

 

6,140

 

 

1.58

 

Savings

543,571

 

 

195

 

 

0.14

 

 

548,109

 

 

232

 

 

0.17

 

 

206,503

 

 

168

 

 

0.32

 

Certificates of deposit

846,253

 

 

4,096

 

 

1.92

 

 

820,943

 

 

3,970

 

 

1.92

 

 

696,803

 

 

3,053

 

 

1.74

 

Total interest-bearing deposits

4,408,544

 

 

11,708

 

 

1.05

 

 

4,364,983

 

 

13,209

 

 

1.20

 

 

3,309,313

 

 

10,582

 

 

1.27

 

Subordinated debentures

141,217

 

 

1,945

 

 

5.46

 

 

141,136

 

 

1,956

 

 

5.50

 

 

118,146

 

 

1,493

 

 

5.01

 

FHLB advances

291,057

 

 

1,371

 

 

1.87

 

 

378,207

 

 

2,203

 

 

2.31

 

 

178,185

 

 

1,121

 

 

2.50

 

Securities sold under agreements to repurchase

170,481

 

 

308

 

 

0.72

 

 

155,238

 

 

327

 

 

0.84

 

 

151,031

 

 

205

 

 

0.54

 

Other borrowings

36,220

 

 

293

 

 

3.21

 

 

37,817

 

 

337

 

 

3.54

 

 

1,391

 

 

8

 

 

2.28

 

Total interest-bearing liabilities

5,047,519

 

 

<