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Enterprise Financial Reports Third Quarter 2015 Results

Reported Highlights

  • Net income of $0.48 per diluted share, increased 12% over the linked quarter, and 17% compared to the third quarter of 2014
  • Portfolio loans grow 9% on an annualized basis in the quarter, and 13% from the prior year period
  • 14% cash dividend increase to $0.08 per share in the fourth quarter of 2015 from $0.07 per share in the third quarter of 2015


Core Highlights1

  • Core net income of $0.44 per diluted share, increased 16% over the linked quarter, and 19% compared to the prior year period
  • Core net interest income increased 3% in the quarter, and 9% from the prior year period
  • Core efficiency ratio of 58.6% for the quarter


ST. LOUIS, Oct. 22, 2015 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the “Company”) reported net income of $9.7 million for the quarter ended September 30, 2015, an increase of $1.0 million, or 11%, as compared to the linked second quarter. Net income per diluted share was $0.48 for the quarter ended September 30, 2015, an increase of 12% compared to $0.43 per diluted share for the linked second quarter due to an increase in net interest income and lower provision for loan losses on portfolio loans. Third quarter 2015 net income was 18% higher than the $8.2 million reported in the prior year period, and diluted earnings per share were 17% higher than the $0.41 reported a year ago. The increase in net income over the prior year was primarily due to an increase in net interest income from strong loan growth and a decrease in noninterest expenses from improved expense control initiatives.

On a core basis1, the Company reported net income of $8.9 million, or $0.44 per diluted share, for the quarter ended September 30, 2015, compared to $7.7 million, or $0.38 per diluted share, in the linked second quarter. The increase was due to an increase in net interest income from strong loan growth and a decrease in provision for loan loss from improved credit quality. Third quarter 2015 core net income increased 19% from $7.5 million for the prior year period, and diluted core earnings per share grew 19% from $0.37 for the prior year period. The increase was primarily due to increases in earning asset balances driving growth in core net interest income.

The Company's Board approved an additional one cent per common share increase in the Company’s quarterly dividend to $0.08 per common share from $0.07 for the fourth quarter of 2015, payable on December 31, 2015 to shareholders of record as of December 15, 2015.

Peter Benoist, President and Chief Executive Officer, commented, “Enterprise continued to deliver strong results in the third quarter, with reported net income rising 11%, producing a Return on average assets of 1.13% and Return on average tangible common equity of 12.65%.”

"We continue to execute on our operating strategies,” noted Benoist, “focusing on growing both portfolio loans and core deposits. We’re achieving loan growth through gaining market share and also leveraging our expertise in attractive niche segments within and beyond our geographic footprint. Similarly, we have experienced continued success in targeted market segments and specific niches for deposit growth. As a result, over the past twelve months we’ve increased portfolio loans by 13%, deposits by 12%, and net interest income by 9%. Our core net interest margin is equivalent to the prior year level and total operating expenses are 6% lower than a year ago.”

“With reported earnings up 18% from the prior year quarter and core earnings up 19%, coupled with very strong capital levels, the Board has authorized three dividend increases this year totaling 52%, demonstrating our confidence in the Company’s strategy and enhanced earnings profile,” said Benoist.

Net Interest Income

Net interest income in the third quarter increased $0.7 million from the linked second quarter and $2.6 million from the prior year period due primarily to lower interest expense from the payoff of higher cost debt in the prior year and an increase in portfolio loan balances. The net interest margin, on a fully tax equivalent basis, was 3.77% for the third quarter, compared to 3.85% in the linked second quarter, and 3.75% in the third quarter of 2014.

The yield on Portfolio loans was 4.16% in the third quarter, a one basis point decline from the linked second quarter and six basis points lower than the third quarter of 2014. In the third quarter of 2015, the yield on Purchase credit impaired ("PCI") loans was 19.41%, as compared to 18.33% in the linked quarter and 14.67% in the prior year period.

The cost of interest-bearing deposits declined two basis points to 0.50% in the third quarter of 2015 from the linked second quarter, and was eight basis points lower than the third quarter of 2014, primarily from lower rates on time deposit balances. The cost of interest-bearing liabilities declined one basis point as compared to the linked quarter to 0.53% and decreased 11 basis points from the third quarter of 2014. The improvement was primarily due to the prepayment of $50 million of FHLB borrowings in December 2014 and the aforementioned improvement in deposit costs.

Core net interest margin1, defined as the net interest margin (fully tax equivalent), including contractual interest on PCI loans but excluding the incremental accretion on these loans, was as follows:

For the Quarter ended
($ in thousands)September 30,
2015
June 30,
2015
March 31,
2015
December 31,
2014
September 30,
2014
Core net interest margin13.41% 3.46% 3.46% 3.45% 3.41%
Core net interest income127,087 26,277 25,587 25,667 24,865


Core net interest income1 increased 9% compared to the prior year period due to strong portfolio loan growth and managed decreases in the cost of interest-bearing liabilities as discussed above. Core net interest income increased by $0.8 million to $27.1 million, and core net interest margin1 declined five basis points to 3.41%, when compared to the linked second quarter. Approximately four basis points of the decline in Core net interest margin was due to a strong 18.0% annualized increase in deposit balances from our deposit gathering efforts and resultant increase in cash and shorter duration assets. Core net interest margin remained stable from the prior year quarter primarily due to the effect of the FHLB debt prepayment in December 2014 and loan growth improving our earning asset mix, offset by continued pressure on portfolio loan yields and reductions in PCI loan balances, as those balances continue to run-off. Pressure on loan yields and continued reductions in PCI loan balances could lead to a modest decline in core net interest margin in the remaining three months of 2015 and into 2016.

Portfolio loans

Portfolio loans increased to $2.6 billion at September 30, 2015, increasing $60 million, or 9% on an annualized basis, when compared to the linked quarter. On a year over year basis, portfolio loans increased $307 million, or 13%. The Company continues to expect loan growth at or above 10% for 2015.

Commercial and industrial ("C&I") loans increased $36.1 million during the third quarter of 2015 compared to the linked second quarter. C&I loans represented 53% of the Company's loan portfolio at September 30, 2015, relatively consistent with June 30, 2015. C&I loans grew $199 million, or 17%, since September 30, 2014. During the 12 months ended September 30, 2015, the Company also grew loans in all other major categories.

The Company continues to focus on originating high-quality C&I relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. Our specialized market segments, particularly enterprise value lending and life insurance premium finance, have contributed to the growth in the C&I category. C&I loan growth also supports our efforts to maintain the Company's asset sensitive interest rate risk position. At September 30, 2015, 62% of our portfolio loans had variable interest rates.

PCI loans and other real estate covered under FDIC loss share agreements

PCI loans totaled $83.7 million at September 30, 2015, a decrease of $3.9 million, or 4%, from the linked second quarter, and $30.1 million, or 26%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.

Other real estate covered under FDIC loss share agreements at September 30, 2015 was $6.8 million, a 14% decrease from $7.9 million at June 30, 2015. During the third quarter of 2015, the Company sold $1.7 million of other real estate, resulting in a negligible net gain.

The Company remeasures contractual and expected cash flows on PCI loans on a periodic basis. When the remeasurement process results in a decrease in expected cash flows due to an increase in expected credit losses, impairment is recorded through the provision for loan losses. Similarly, when expected credit losses decrease in the remeasurement process, prior recorded impairment is reversed before the yield is increased prospectively. Concurrently, the FDIC loss share receivable is adjusted to reflect anticipated future cash to be received from the FDIC. In the third quarter of 2015, $0.2 million reversal of provision for loan losses was recorded for certain loan pools. Any provision or reversal of provision would be partially offset through noninterest income by a change in the FDIC loss share receivable.

Actual cash collections in excess of expected cash flows that represent accelerated loan payoffs result in the recognition of income, but also generally result in a decrease in the FDIC loss share receivable. These cash flows are, by their nature, unpredictable and can vary significantly period to period. Actual cash collections in excess of expected cash flows from loan payoffs and real estate sales in the third quarter resulted in accelerated discount income of $1.6 million, which was partially offset by a decrease in the FDIC loss share receivable.

The following table illustrates the financial contribution of PCI loans and other real estate covered under FDIC loss share agreements for the most recent five quarters:

For the Quarter ended
(in thousands) income/(expense)September 30,
2015
June 30,
2015
March 31,
2015
December 31,
2014
September 30,
2014
Contractual interest income$1,248 $1,209 $1,539 $1,840 $1,701
Accelerated cash flows and other incremental accretion2,919 3,003 3,458 5,149 2,579
Estimated funding cost(293) (329) (317) (326) (314)
Total net interest income3,874 3,883 4,680 6,663 3,966
Provision reversal/(Provision) for loan losses227 3,270 (126) 1,877
Gain/(loss) on sale of other real estate31 10 (15) 195 (45)
Change in FDIC loss share receivable(1,241) (945) (2,264) (1,781) (2,374)
Change in FDIC clawback liability(298) (50) (412) (141) (1,028)
Other expenses(287) (378) (471) (541) (731)
PCI assets income before income tax expense$2,306 $2,520 $4,788 $4,269 $1,665


At September 30, 2015, the remaining accretable yield on the portfolio was estimated to be $26 million and the non-accretable difference was approximately $35 million. Absent further cash flow accelerations or pool impairment, the Company currently estimates average PCI loan balances to be approximately $80 million and income before tax expense on PCI assets will be approximately $11 million to $13 million in 2015, inclusive of the first nine months of 2015.

Asset quality for portfolio loans and other real estate

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,
2015
June 30,
2015
March 31,
2015
December 31,
2014
September 30,
2014
Nonperforming loans$9,123 $17,498 $15,143 $22,244 $18,212
Other real estate not covered under FDIC loss share1,575 1,933 2,024 1,896 2,261
Nonperforming assets$10,698 $19,431 $17,167 $24,140 $20,473
Nonperforming loans to total loans0.35% 0.69% 0.62% 0.91% 0.79%
Nonperforming assets to total assets0.30% 0.58% 0.52% 0.74% 0.64%
Net charge-offs (recoveries)$113 $672 $1,478 $582 $(311)


Nonperforming loans decreased 48% to $9.1 million at September 30, 2015, from $17.5 million at June 30, 2015, and decreased 50% from $18.2 million at September 30, 2014. During the quarter ended September 30, 2015, there were $0.8 million of charge-offs, $10.4 million of other principal reductions, no assets transferred to other real estate, $2.8 million of additions to nonperforming loans, and no assets transferred to performing. The additions to nonperforming loans consisted of six unrelated accounts. Other principal reductions of $10.4 million consist of $3.1 million of principal payments, and $7.3 million of proceeds from the sales of collateral.

The Company's allowance for loan losses was 1.24% of loans at September 30, 2015, representing 354% of nonperforming loans, as compared to 1.25% at June 30, 2015, representing 182% of nonperforming loans, and 1.25% at September 30, 2014, representing 158% of nonperforming loans. The increase in the ratio of allowance for loan losses to nonperforming loans is primarily due to the 48% decrease in nonperforming loans discussed previously.

Deposits

Total deposits at September 30, 2015 were $2.8 billion, an increase of $122 million, or 18% on an annualized basis, from June 30, 2015, and $304 million, or 12%, from September 30, 2014. The positive trends in deposits reflect enhanced deposit gathering efforts in both commercial and business banking.

Noninterest-bearing deposits increased $33.5 million compared to June 30, 2015 and decreased $4.0 million compared to the quarter ended September 30, 2014. The composition of Noninterest-bearing deposits remained relatively stable at 25% of total deposits at September 30, 2015, from June 30, 2015, and declined compared to 28% of total deposits at September 30, 2014. The total cost of deposits remained stable at 0.39% compared to June 30, 2015, and declined three basis points since September 30, 2014.

Noninterest income

Deposit service charges for the third quarter of 2015 of $2.0 million increased by 2% compared to the linked quarter, and grew 13% compared to the prior year quarter partially due to growth in deposit relationships. Additionally, Wealth management revenues were relatively stable at $1.8 million compared to the linked second quarter and the prior year period.

Trust assets under management were $849 million at September 30, 2015, a decrease of $41 million, or 5%, when compared to the linked period ended June 30, 2015, and were relatively stable when compared to the prior year period. The decrease in Trust assets under management as compared to the linked quarter was largely due to market depreciation, offset by growth in new customers.

Trust assets under administration were $1.3 billion at September 30, 2015, a decrease of $179 million, or 12%, when compared to the linked quarter, and a decrease of $128 million, or 9%, when compared to the prior year period ended September 30, 2014.

Gains from state tax credit brokerage activities, net of fair value market adjustments on tax credit assets and related interest rate hedges, were $0.3 million for the third quarter of 2015, compared to $0.1 million for the linked second quarter, and $0.2 million in the third quarter of 2014. Sales of state tax credits can vary by quarter, but generally occur in the first and fourth quarters of the year depending on client demand and availability of the tax credits.

Other noninterest income of $1.8 million decreased 38% from the linked quarter, and decreased 40% from the prior year period. The decrease from the linked quarter was due to a decline in allocation fees from tax credit projects and fees earned from recoveries. During the third quarter of 2014, the Company recorded a $0.9 million closing fee associated with the payoff of a Commercial real estate loan. The fee is excluded from core noninterest income. On a core basis, other noninterest income was relatively flat compared to the third quarter of 2014.

Noninterest Expenses

Noninterest expenses were $19.9 million for the quarter ended September 30, 2015, compared to $19.5 million for the quarter ended June 30, 2015, and $21.1 million for the quarter ended September 30, 2014. Core noninterest expenses1, which exclude certain non-comparable items and expenses directly related to PCI loans and assets covered under loss share agreements, were $19.3 million for the quarter ended September 30, 2015, compared to $19.0 million for the linked quarter and $19.3 million for the prior year period.

The Company's Core efficiency ratio1 was 58.6% for the quarter ended September 30, 2015, compared to 57.6% for the linked quarter, and 62.8% for the prior year period, and reflects lower legal expenses on problem loans, overall expense management and revenue growth trends.
The Company anticipates total noninterest expenses to be between $19 million and $21 million per quarter for the remainder of 2015 and throughout 2016.

Other Business Results

The total risk based capital ratio1 was 12.56% at September 30, 2015, compared to 12.68% at June 30, 2015, and 13.61% at September 30, 2014. The Company's Common equity tier 1 capital ratio1 was 9.60% at September 30, 2015, compared to 9.66% at June 30, 2015, and 10.29% at September 30, 2014. The tangible common equity ratio1 was 8.90% at September 30, 2015, versus 8.94% at June 30, 2015, and 8.63% at September 30, 2014.

The total risk based capital and Common equity tier 1 ratios declined from the prior year period mainly due to the impact of the new regulatory guidelines under Basel III. The decrease in the tangible common equity ratio as compared to the prior quarter was mainly due to asset growth out-pacing earnings, offset by an increase in the net unrealized gain on the investment portfolio. Capital ratios for the current quarter are based on the Company’s interpretations of 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.

The Company's effective tax rate was 32.7% for the quarter ended September 30, 2015 compared to 35.3% for the quarter ended June 30, 2015 and 34.9% for the quarter ended September 30, 2014. The decrease as compared to the prior quarter was mainly due to lower state income tax expense, including $0.3 million of state tax refunds related to prior years.

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 margin and other Core performance measures, tangible common equity ratio and Common equity tier 1 capital 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 PCI 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 PCI loans but exclude incremental accretion on these loans. Core performance measures also exclude the Change in FDIC receivable, Gain or loss of other real estate covered under FDIC loss share agreements and expenses directly related to the PCI loans and other assets covered under FDIC loss share agreements. Core performance measures also exclude certain other income and expense items 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 and the Common equity tier 1 capital ratios provide useful information to investors about the Company's capital strength even though they are considered to be non-GAAP financial measures and are 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 tables below, 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.

The Company will host a conference call and webcast at 2:30 p.m. Central time on Thursday, October 22, 2015. During the call, management will review the third quarter of 2015 results and related matters. This press release as well as a related slide presentation will be accessible on Enterprise Financial Services Corp'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 1-888-466-4462 (Conference ID #2112453.) A recorded replay of the conference call will be available on the website beginning two hours after the call's completion. The telephone replay will be available at 1-888-203-1112 (replay passcode #2112453.) The replays 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.

Readers should note that in addition to the historical information contained herein, this press release contains forward-looking statements, including but not limited to statements about the Company's plans, expectations and projections of future financial and operating results, which are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. We use the words “expect” and “intend” and variations of such words and similar expressions in this communication to identify such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, 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, our 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 2014 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 & 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,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Sep 30,
2014
Sep 30,
2015
Sep 30,
2014
EARNINGS SUMMARY
Net interest income$30,006 $29,280 $29,045 $30,816 $27,444 $88,331 $86,552
Provision for loan losses - portfolio loans599 2,150 1,580 1,968 66 4,329 2,441
Provision (provision reversal) for loan losses - purchase credit impaired loans(227) (3,270) 126 (1,877) (3,497) 957
Noninterest income4,729 5,806 3,583 4,852 4,452 14,118 11,779
Noninterest expense19,932 19,458 19,950 24,795 21,121 59,340 62,668
Income before income tax expense14,431 13,478 14,368 8,779 12,586 42,277 32,265
Income tax expense4,722 4,762 5,022 2,812 4,388 14,506 11,059
Net income$9,709 $8,716 $9,346 $5,967 $8,198 $27,771 $21,206
Diluted earnings per share$0.48 $0.43 $0.46 $0.30 $0.41 $1.37 $1.07
Return on average assets1.13% 1.06% 1.16% 0.73% 1.02% 1.11% 0.91%
Return on average common equity11.38% 10.56% 11.78% 7.50% 10.62% 11.24% 9.54%
Return on average tangible common equity12.65% 11.77% 13.19% 8.43% 11.98% 12.53% 10.83%
Net interest margin (fully tax equivalent)3.77% 3.85% 3.92% 4.13% 3.75% 3.84% 4.05%
Efficiency ratio57.38% 55.46% 61.14% 69.52% 66.22% 57.92% 63.73%
CORE PERFORMANCE SUMMARY1
Net interest income$27,087 $26,277 $25,587 $25,667 $24,865 $78,951 $72,771
Provision for loan losses599 2,150 1,580 1,968 66 4,329 2,441
Noninterest income5,939 6,741 5,839 6,438 5,926 18,519 18,110
Noninterest expense19,347 19,030 19,068 20,170 19,347 57,445 59,199
Income before income tax expense13,080 11,838 10,778 9,967 11,378 35,696 29,241
Income tax expense4,204 4,134 3,647 3,264 3,926 11,985 9,901
Net income$8,876 $7,704 $7,131 $6,703 $7,452 $23,711 $19,340
Diluted earnings per share$0.44 $0.38 $0.35 $0.33 $0.37 $1.17 $0.97
Return on average assets1.03% 0.93% 0.88% 0.82% 0.93% 0.95% 0.83%
Return on average common equity10.41% 9.34% 8.99% 8.43% 9.65% 9.59% 8.70%
Return on average tangible common equity11.56% 10.41% 10.06% 9.47% 10.89% 10.70% 9.88%
Net interest margin (fully tax equivalent)3.41% 3.46% 3.46% 3.45% 3.41% 3.44% 3.42%
Efficiency ratio58.58% 57.64% 60.67% 62.83% 62.83% 58.94% 65.14%
1 A non-GAAP measure. Refer to discussion & reconciliation of these measures in the accompanying financial tables.


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,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Sep 30,
2014
Sep 30,
2015
Sep 30,
2014
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income$33,180 $32,352 $32,151 $34,385 $31,036 $97,683 $97,369
Total interest expense3,174 3,072 3,106 3,569 3,592 9,352 10,817
Net interest income30,006 29,280 29,045 30,816 27,444 88,331 86,552
Provision for portfolio loans599 2,150 1,580 1,968 66 4,329 2,441
Provision (provision reversal) for purchase credit impaired loans(227) (3,270) 126 (1,877) (3,497) 957
Net interest income after provision for loan losses29,634 27,130 30,735 28,722 29,255 87,499 83,154
NONINTEREST INCOME
Wealth management revenue1,773 1,778 1,740 1,751 1,754 5,291 5,191
Deposit service charges2,044 1,998 1,856 1,864 1,812 5,898 5,317
Gain on sale of other real estate32 9 20 17 114 61 1,514
State tax credit activity, net321 74 674 1,392 156 1,069 860
Gain on sale of investment securities 23 23
Change in FDIC loss share receivable(1,241) (945) (2,264) (1,781) (2,374) (4,450) (7,526)
Other income1,800 2,892 1,534 1,609 2,990 6,226 6,423
Total noninterest income4,729 5,806 3,583 4,852 4,452 14,118 11,779
NONINTEREST EXPENSE
Employee compensation and benefits11,475 11,274 11,513 11,350 11,913 34,262 35,882
Occupancy1,605 1,621 1,694 1,528 1,683 4,920 4,998
FDIC clawback298 50 412 141 1,028 760 1,060
FHLB prepayment penalty 2,936
Facilities disposal charge 1,004
Other6,554 6,513 6,331 7,836 6,497 19,398 20,728
Total noninterest expense19,932 19,458 19,950 24,795 21,121 59,340 62,668
Income before income tax expense14,431 13,478 14,368 8,779 12,586 42,277 32,265
Income tax expense4,722 4,762 5,022 2,812 4,388 14,506 11,059
Net income$9,709 $8,716 $9,346 $5,967 $8,198 $27,771 $21,206
Basic earnings per share$0.49 $0.44 $0.47 $0.30 $0.41 $1.39 $1.07
Diluted earnings per share0.48 0.43 0.46 0.30 0.41 1.37 1.07


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
At the Quarter ended
(in thousands)Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Sep 30,
2014
BALANCE SHEETS
ASSETS
Cash and due from banks$46,775 $49,498 $56,420 $42,903 $54,113
Interest-earning deposits81,115 51,298 43,913 63,093 74,999
Debt and equity investments530,577 465,133 467,343 463,168 471,875
Loans held for sale4,275 5,446 7,843 4,033 4,899
Portfolio loans2,602,156 2,542,555 2,435,559 2,433,916 2,294,905
Less: Allowance for loan losses32,251 31,765 30,288 30,185 28,800
Portfolio loans, net2,569,905 2,510,790 2,405,271 2,403,731 2,266,105
Purchase credit impaired loans, net of the allowance for loan losses72,397 76,050 83,163 83,693 98,318
Total loans, net2,642,302 2,586,840 2,488,434 2,487,424 2,364,423
Other real estate not covered under FDIC loss share1,575 1,933 2,024 1,896 2,261
Other real estate covered under FDIC loss share6,795 7,909 3,560 5,944 8,826
Fixed assets, net14,395 14,726 14,911 14,753 18,054
State tax credits held for sale48,207 42,062 42,411 38,309 45,631
FDIC loss share receivable8,619 10,332 11,644 15,866 22,039
Goodwill30,334 30,334 30,334 30,334 30,334
Intangible assets, net3,323 3,595 3,880 4,164 4,453
Other assets98,249 101,972 102,578 105,116 107,683
Total assets$3,516,541 $3,371,078 $3,275,295 $3,277,003 $3,209,590
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits$691,758 $658,258 $680,997 $642,930 $695,804
Interest-bearing deposits2,122,205 2,033,300 1,993,634 1,848,580 1,813,960
Total deposits2,813,963 2,691,558 2,674,631 2,491,510 2,509,764
Subordinated debentures56,807 56,807 56,807 56,807 56,807
Federal Home Loan Bank advances75,000 73,000 6,000 144,000 120,000
Other borrowings194,684 188,546 186,864 239,883 187,122
Other liabilities32,524 28,737 24,884 28,562 27,143
Total liabilities3,172,978 3,038,648 2,949,186 2,960,762 2,900,836
Shareholders' equity343,563 332,430 326,109 316,241 308,754
Total liabilities and shareholders' equity$3,516,541 $3,371,078 $3,275,295 $3,277,003 $3,209,590


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended
(in thousands)Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Sep 30,
2014
LOAN PORTFOLIO
Commercial and industrial$1,371,095 $1,335,008 $1,265,104 $1,270,259 $1,172,015
Commercial real estate778,268 789,141 781,483 770,529 758,515
Construction real estate152,979 150,740 138,924 144,773 123,888
Residential real estate188,985 185,587 180,253 185,252 187,594
Consumer and other110,829 82,079 69,795 63,103 52,893
Total portfolio loans2,602,156 2,542,555 2,435,559 2,433,916 2,294,905
Purchase credit impaired loans83,736 87,644 94,788 99,103 113,862
Total loans$2,685,892 $2,630,199 $2,530,347 $2,533,019 $2,408,767
DEPOSIT PORTFOLIO
Noninterest-bearing accounts$691,758 $658,258 $680,997 $642,930 $695,804
Interest-bearing transaction accounts529,052 507,889 494,228 508,941 438,205
Money market and savings accounts1,136,557 1,014,481 933,908 834,287 817,361
Certificates of deposit456,596 510,930 565,498 505,352 558,394
Total deposit portfolio$2,813,963 $2,691,558 $2,674,631 $2,491,510 $2,509,764
AVERAGE BALANCES
Portfolio loans$2,540,948 $2,482,291 $2,425,962 $2,368,475 $2,280,377
Purchase credit impaired loans85,155 92,168 97,201 104,732 115,709
Loans held for sale4,255 6,605 3,560 3,703 5,400
Interest-earning assets3,201,181 3,096,294 3,047,815 2,998,467 2,943,070
Total assets3,416,716 3,310,578 3,268,369 3,234,485 3,180,359
Deposits2,788,245 2,667,640 2,590,961 2,501,098 2,437,444
Shareholders' equity338,368 330,999 321,772 315,557 306,307
Tangible common equity304,583 296,931 287,423 280,920 271,370
YIELDS (fully tax equivalent)
Portfolio loans4.16% 4.17% 4.15% 4.19% 4.22%
Purchase credit impaired loans19.41% 18.33% 20.85% 26.47% 14.67%
Total loans4.66% 4.68% 4.79% 5.13% 4.73%
Securities2.23% 2.26% 2.35% 2.29% 2.31%
Interest-earning assets4.17% 4.24% 4.33% 4.60% 4.24%
Interest-bearing deposits0.50% 0.52% 0.54% 0.56% 0.58%
Total deposits0.39% 0.39% 0.40% 0.41% 0.42%
Subordinated debentures2.19% 2.18% 2.15% 2.14% 2.14%
Borrowed funds0.28% 0.29% 0.36% 0.77% 0.76%
Cost of paying liabilities0.53% 0.54% 0.56% 0.63% 0.64%
Net interest margin3.77% 3.85% 3.92% 4.13% 3.75%


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended
(in thousands, except per share data)Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Sep 30,
2014
ASSET QUALITY1
Net charge-offs (recoveries)$113 $672 $1,478 $582 $(311)
Nonperforming loans9,123 17,498 15,143 22,244 18,212
Classified assets62,679 61,722 63,001 77,898 81,382
Nonperforming loans to total loans0.35% 0.69% 0.62% 0.91% 0.79%
Nonperforming assets to total assets20.30% 0.58% 0.52% 0.74% 0.64%
Allowance for loan losses to total loans1.24% 1.25% 1.24% 1.24% 1.25%
Allowance for loan losses to nonperforming loans353.5% 181.5% 200.0% 135.7% 158.1%
Net charge-offs (recoveries) to average loans (annualized)0.02% 0.11% 0.25% 0.10% (0.05)%
WEALTH MANAGEMENT
Trust assets under management$848,515 $889,616 $894,456 $865,414 $857,071
Trust assets under administration1,334,894 1,514,140 1,517,171 1,478,864 1,462,830
MARKET DATA
Book value per common share$17.21 $16.67 $16.36 $15.94 $15.61
Tangible book value per common share$15.53 $14.96 $14.64 $14.20 $13.85
Market value per share$25.17 $22.77 $20.66 $19.73 $16.72
Period end common shares outstanding19,959 19,947 19,935 19,838 19,785
Average basic common shares19,995 19,978 19,934 19,858 19,838
Average diluted common shares20,261 20,168 20,157 20,140 19,980
CAPITAL
Total capital to risk-weighted assets312.56% 12.68% 12.88% 13.40% 13.61%
Tier 1 capital to risk-weighted assets311.31% 11.43% 11.62% 12.14% 12.35%
Common equity tier 1 capital to risk-weighted assets39.60% 9.66% 9.78% 10.15% 10.29%
Tangible common equity to tangible assets8.90% 8.94% 9.01% 8.69% 8.63%
1 Portfolio loans only
2 Excludes Other real estate covered under FDIC loss share, except for inclusion in total assets.
3 Beginning with the quarter ended March 31, 2015, the implementation of revised regulatory capital guidelines under Basel III has resulted in differences in these items when compared to prior periods.


ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
For the Quarter ended For the Nine Months ended
(in thousands)Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Sep 30,
2014
Sep 30,
2015
Sep 30,
2014
CORE PERFORMANCE MEASURES
Net interest income$30,006 $29,280 $29,045 $30,816 $27,444 $88,331 $86,552
Less: Incremental accretion income2,919 3,003 3,458 5,149 2,579 9,380 13,781
Core net interest income27,087 26,277 25,587 25,667 24,865 78,951 72,771
Total noninterest income4,729 5,806 3,583 4,852 4,452 14,118 11,779
Less: Change in FDIC loss share receivable(1,241) (945) (2,264) (1,781) (2,374) (4,450) (7,526)
Less (plus): Gain (loss) on sale of other real estate covered under FDIC loss share31 10 (15) 195 (45) 26 250
Less: Gain on sale of investment securities 23 23
Less: Closing fee 945 945
Core noninterest income5,939 6,741 5,839 6,438 5,926 18,519 18,110
Total core revenue33,026 33,018 31,426 32,105 30,791 97,470 90,881
Provision for portfolio loans599 2,150 1,580 1,968 66 4,329 2,441
Total noninterest expense19,932 19,458 19,950 24,795 21,121 59,340 62,668
Less: FDIC clawback298 50 412 141 1,028 760 1,060
Less: Other loss share expenses287 378 470 544 746 1,135 2,409
Less: FHLB prepayment penalty 2,936
Less: Facilities disposal charge 1,004
Core noninterest expense19,347 19,030 19,068 20,170 19,347 57,445 59,199
Core income before income tax expense13,080 11,838 10,778 9,967 11,378 35,696 29,241
Core income tax expense4,204 4,134 3,647 3,264 3,926 11,985 9,901
Core net income$8,876 $7,704 $7,131 $6,703 $7,452 $23,711 $19,340
Core diluted earnings per share$0.44 $0.38 $0.35 $0.33 $0.37 $1.17 $0.97
Core return on average assets1.03% 0.93% 0.88% 0.82% 0.93% 0.95% 0.83%
Core return on average common equity10.41% 9.34% 8.99% 8.43% 9.65% 9.59% 8.70%
Core return on average tangible common equity11.56% 10.41% 10.06% 9.47% 10.89% 10.70% 9.88%
Core efficiency ratio58.58% 57.64% 60.67% 62.83% 62.83% 58.94% 65.14%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN
Net interest income (fully tax equivalent)$30,437 $29,691 $29,467 $31,223 $27,843 $89,595 $87,779
Less: Incremental accretion income2,919 3,003 3,458 5,149 2,579 9,380 13,781
Core net interest income (fully tax equivalent)$27,518 $26,688 $26,009 $26,074 $25,264 $80,215 $73,998
Average earning assets$3,201,181 $3,096,294 $3,047,815 $2,998,467 $2,943,070 $3,115,658 $2,896,202
Reported net interest margin (fully tax equivalent)3.77% 3.85% 3.92% 4.13% 3.75% 3.84% 4.05%
Core net interest margin (fully tax equivalent)3.41% 3.46% 3.46% 3.45% 3.41% 3.44% 3.42%


At the Quarter ended
(in thousands)Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Sep 30,
2014
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity$343,563 $332,430 $326,109 $316,241 $308,754
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets, net of deferred tax liabilities1820 887 958 4,164 4,453
Less (Plus): Unrealized gains (losses)2,973 1,249 3,379 1,681 (233)
Plus: Qualifying trust preferred securities55,100 55,100 55,100 55,100 55,100
Plus: Other58 58 59 58 56
Total tier 1 capital364,594 355,118 346,597 335,220 329,356
Less: Qualifying trust preferred securities55,100 55,100 55,100 55,100 55,100
Less: Other123 23 23
Common equity tier 1 capital$309,471 $299,995 $291,474 $280,120 $274,256
Total risk-weighted assets$3,224,046 $3,106,041 $2,981,810 $2,760,729 $2,666,221
Common equity tier 1 capital to risk-weighted assets9.60% 9.66% 9.78% 10.15% 10.29%
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity$343,563 $332,430 $326,109 $316,241 $308,754
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets3,323 3,595 3,880 4,164 4,453
Tangible common equity$309,906 $298,501 $291,895 $281,743 $273,967
Total assets$3,516,541 $3,371,078 $3,275,295 $3,277,003 $3,209,590
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets3,323 3,595 3,880 4,164 4,453
Tangible assets$3,482,884 $3,337,149 $3,241,081 $3,242,505 $3,174,803
Tangible common equity to tangible assets8.90% 8.94% 9.01% 8.69% 8.63%
1 Beginning with the quarter ended March 31, 2015, the implementation of revised regulatory capital guidelines under Basel III has resulted in differences in these items when compared to prior periods.


For more information contact: Jerry Mueller, Senior Vice President (314) 512-7251 Ann Marie Mayuga, AMM Communications (314) 485-9499

Source: Enterprise Financial