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Enterprise Financial Reports Fourth Quarter 2015 and Year End Results

Reported Highlights

  • 2015 net income of $38.5 million, or $1.89 per diluted share
  • Fourth quarter net income of $10.7 million, or $0.52 per diluted share
  • Commercial and industrial ("C&I") loans grow 17% during 2015 and total portfolio loans grow 13%
  • Successfully completed early termination of all existing loss share agreements with the FDIC
  • 13% cash dividend increase to $0.09 per share in the first quarter of 2016 from $0.08 per share in the fourth quarter of 2015

Core Highlights1

  • 2015 core net income of $33.8 million, or $1.66 per diluted share, up 30% from 2014
  • Fourth quarter core net income of $0.49 per diluted share, increased 11% over the linked quarter, and 48% compared to the prior year quarter
  • Fourth quarter core net interest income of $28.7 million, up 23% annualized from the linked quarter, and 12% from the prior year quarter

ST. LOUIS, Jan. 28, 2016 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the “Company”) reported net income of $38.5 million for the year ended December 31, 2015, an increase of $11.3 million or 42% as compared to the prior year. Net income per diluted share was $1.89 for the year ended December 31, 2015, an increase of 40% compared to $1.35 per diluted share for the prior year. The Company recorded net income of $10.7 million for the quarter ended December 31, 2015, an increase of 79% compared to net income of $6.0 million for the prior year period. Net income per diluted share was $0.52 for the fourth quarter of 2015, an increase of 73% compared to $0.30 per diluted share for the fourth quarter of 2014. During the fourth quarter of 2015, the Company successfully completed early termination of all existing loss share agreements with the FDIC, resulting in a pretax charge of $2.4 million, or $0.07 per diluted share. Fourth quarter 2014 net income was impacted by a $2.9 million, or $0.09 per diluted share, penalty on the early payoff of $50 million of debt with the Federal Home Loan Bank of Des Moines ("FHLB") and $1.0 million, or $0.03 per diluted share, of facilities charges to dispose of office property.

On a core basis1, the Company reported net income of $33.8 million, or $1.66 per diluted share for the year ended December 31, 2015 compared to $26.0 million, or $1.29 per diluted share in 2014. The increase was due to an increase in net interest income from strong loan growth and reduced noninterest expenses. Core net earnings for the fourth quarter of 2015 were $10.1 million, or $0.49 per diluted share, compared to $6.7 million, or $0.33 per diluted share in the prior year period. The increase was primarily due to increases in net interest income and fee income, and lower provision for loan losses.

The Company's Board approved an additional one cent per common share increase in the Company's quarterly dividend to $0.09 per common share from $0.08 for the first quarter of 2016, payable on March 31, 2016 to shareholders of record as of March 15, 2016.

Peter Benoist, President and CEO, commented, “Strong loan growth coupled with core margin expansion resulted in a 48% year over year increase in fourth quarter core earnings. Our ability to grow loans at a robust rate, consistent with our guidance for the year, while preserving core net interest margin, generated continued gains in net interest income. That revenue growth, coupled with higher noninterest income and lower noninterest expenses, led to a 30% increase in core net income in 2015.”

“Adding in our continuing success in winding down loss share assets, Enterprise reported a 42% increase in net income and a 40% rise in EPS in 2015, resulting in record earnings for the year, ” noted Benoist. “The profitability measures we reported, including an ROAA of 1.14% and ROAE of 11.47%, are consistent with the standards of high performance that we’ve set for ourselves and establish a strong foundation going into 2016. Reflecting this, the board raised the dividend for the fourth consecutive quarter.”

“I’m extremely proud of everyone on the Enterprise team,” said Benoist. “Their commitment to our values and strategies continue to drive Enterprise's superior results and outstanding client loyalty.”

Net interest income

Net interest income in the fourth quarter increased $2.1 million from the linked third quarter, and $1.3 million from the prior year period due to strong growth in portfolio loan balances and lower interest expense from the payoff of higher cost debt in the prior year. The net interest margin, on a fully tax equivalent basis, was 3.91% for the fourth quarter of 2015, an increase of 14 basis points compared to 3.77% in the linked third quarter, and a decrease of 22 basis points from 4.13% in the fourth quarter of 2014.

The yield on Portfolio loans was 4.16% in the fourth quarter, consistent with the linked third quarter, and three basis points lower than the fourth quarter of 2014. The yield on Purchased credit impaired ("PCI") loans was 24.79% in the fourth quarter, as compared to 19.41% in the linked quarter and 26.47% in the prior year period.

The cost of interest-bearing deposits was 0.48% in the fourth quarter of 2015, declining two basis points from the linked third quarter, and eight basis points lower than the fourth quarter of 2014, primarily from lower time deposit balances. The cost of interest-bearing liabilities was 0.50% in the quarter, declining three basis points from the linked quarter, and 13 basis points from the fourth 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 margin, 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 For the Year ended
($ in thousands)December 31,
2015
September 30,
2015
December 31,
2014
December 31,
2015
December 31,
2014
Core net interest margin13.50% 3.41% 3.45% 3.46% 3.42%
Core net interest income128,667 27,087 25,667 107,618 98,438

Core net interest income1 increased 23% on an annualized basis compared to the linked third quarter as our loan portfolio also grew 23% on an annualized basis, while our total cost of deposits declined three basis points. Core net interest margin increased nine basis points when compared to the linked quarter, largely due to fees on loans, redeployment of cash and shorter duration assets into the loan portfolio, and a continued decline in higher cost time deposit balances. Core net interest margin grew five basis points from the prior year quarter primarily due to strong portfolio loan growth, offset by lower balances of PCI loans. The Company continues to manage its balance sheet to grow core net interest income and expects to maintain or improve core net interest margin over the coming quarters; however, pressure on funding costs and continued reductions in PCI loan balances could negate the expected trends in core net interest margin.

Portfolio loans

Portfolio loans totaled $2.8 billion at December 31, 2015, increasing $149 million, or 23% annualized, compared to the linked quarter. On a year over year basis, portfolio loans increased $317 million, or 13%. The Company experienced strong loan growth during 2015 and expects to achieve a 10% or above portfolio loan growth rate for 2016.

Commercial and industrial ("C&I") loans increased $118.9 million during the fourth quarter of 2015 compared to the linked third quarter of 2015. C&I loans represented 54% of the Company's loan portfolio at December 31, 2015, compared to 52% at September 30, 2015. C&I loans increased $220 million, or 17%, since December 31, 2014. During 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 life insurance premium finance and enterprise value lending, 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 December 31, 2015, 62% of our portfolio loans had variable interest rates.

PCI loans and Other real estate from PCI loans

On December 7, 2015, the Company entered into an agreement with the FDIC to terminate all existing loss share agreements associated with the assets and assumption of liabilities acquired in four FDIC-assisted transactions from 2009 through 2011. Under the terms of the agreement, the FDIC made a net payment to the bank of $1.3 million. The agreement eliminated the FDIC clawback liability of $3.5 million and the FDIC loss share receivable of $7.2 million. Accordingly, a required expense of $2.4 million was recorded as part of noninterest expense in the fourth quarter of 2015, which the Company expects to earn back within the next 12 months. The normal activity of covered assets during the fourth quarter of 2015 prior to the date of the termination agreement was recorded in the applicable line items, and the Change in FDIC receivable of $0.6 million reflects this activity. The termination agreement does not change the Company's accounting for PCI loans, therefore, contractual and expected cash flows on PCI loans will continue to be remeasured on a periodic basis. Following the date of the termination agreement, the FDIC will not share in any remaining loan losses or expenses, nor recoveries, of prior losses.

PCI loans totaled $74.8 million at December 31, 2015, a decrease of $9.0 million, or 11%, from the linked third quarter, and $24.3 million, or 25% from the prior year, primarily as a result of principal paydowns and accelerated loan payoffs.

The following table illustrates the financial contribution of PCI loans and Other real estate covered under FDIC loss share until the termination of the agreements in the fourth quarter of 2015:

For the Quarter ended For the Year ended
(in thousands) income/(expense)December 31,
2015
September 30,
2015
December 31,
2014
December 31,
2015
December 31,
2014
Contractual interest income$1,430 $1,248 $1,840 $5,426 $7,407
Accelerated cash flows and other incremental accretion3,412 2,919 5,149 12,792 18,930
Estimated funding cost(337) (293) (326) (1,276) (1,403)
Total net interest income4,505 3,874 6,663 16,942 24,934
Provision reversal/(Provision) for loan losses917 227 (126) 4,414 (1,083)
Gain on sale of other real estate81 31 195 107 445
FDIC loss share termination(2,436) (2,436)
Change in FDIC loss share receivable(580) (1,241) (1,781) (5,030) (9,307)
Change in FDIC clawback liability (298) (141) (760) (1,201)
Other expenses(423) (287) (541) (1,558) (2,926)
PCI assets income before income tax expense$2,064 $2,306 $4,269 $11,679 $10,862

In the fourth quarter of 2015, provision reversal of $0.9 million was recorded for certain loan pools due to lower estimated credit losses. At December 31, 2015 the remaining accretable yield on the portfolio was estimated to be $25 million and the non-accretable difference was approximately $27 million.

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)December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
December 31,
2014
Nonperforming loans$9,100 $9,123 $17,498 $15,143 $22,244
Other real estate from originated loans3,218 1,575 1,933 2,024 $1,896
Other real estate from PCI loans5,148
Nonperforming assets$17,466 $10,698 $19,431 $17,167 $24,140
Nonperforming loans to total loans0.33% 0.35% 0.69% 0.62% 0.91%
Nonperforming assets to total assets0.48% 0.30% 0.58% 0.52% 0.74%
Net charge-offs (recoveries)$(647) $113 $672 $1,478 $582

Nonperforming loans were $9.1 million at December 31, 2015 and September 30, 2015, and decreased 59% from $22.2 million at December 31, 2014. During the quarter ended December 31, 2015, there were $0.1 million of charge-offs, $1.0 million of other principal reductions, $1.6 million of assets transferred to other real estate, $0.2 million moved to performing loans, and $2.9 million of additions to nonperforming loans. The net additions to nonperforming loans were primarily related to four unrelated accounts.

The Company's allowance for loan losses was 1.22% of loans at December 31, 2015, representing 368% of nonperforming loans, as compared to 1.24% at September 30, 2015, representing 354% of nonperforming loans, and 1.24% at December 31, 2014, representing 136% of nonperforming loans. The increase in the ratio of allowance for loan losses to nonperforming loans from the prior year period is primarily due to the 59% decrease in nonperforming loans discussed previously.

Nonperforming assets as a percentage of total assets were 0.48% at December 31, 2015, compared to 0.30% at September 30, 2015 and 0.74% at December 31, 2014. The increase from the linked quarter primarily resulted from the reclassification of $5.1 million of other real estate previously covered under FDIC loss share agreements into Nonperforming assets. Excluding this reclassification, Nonperforming assets as a percentage of total assets were 0.34% at December 31, 2015. Other real estate totaled $8.4 million at December 31, 2015, an increase of $6.8 million from September 30, 2015. At December 31, 2014, other real estate totaled $1.9 million. During the fourth quarter of 2015, the Company sold $1.6 million of other real estate.

Deposits

Total deposits at December 31, 2015 were $2.8 billion, a decrease of $29.4 million, or 1%, from September 30, 2015, and an increase of $293.1 million, or 12%, from December 31, 2014. The increase in deposits over the year reflects the enhanced deposit gathering efforts in both commercial and business banking.

Noninterest-bearing deposits increased $25.7 million compared to September 30, 2015, and increased $74.5 million compared to December 31, 2014. The composition of Noninterest-bearing deposits remained stable at 26% of total deposits at December 31, 2015, compared to December 31, 2014, and contributed to the five basis points decline in the overall cost of deposits since December 31, 2014.

Noninterest income

Deposit service charges for the fourth quarter of 2015 of $2.0 million were relatively flat compared to the linked quarter, and grew 9% compared to the prior year quarter, due to new and expanded deposit customer relationships. Wealth management revenues were relatively stable at $1.7 million compared to the linked third quarter and the prior year period.

Trust assets under management were $872.9 million at December 31, 2015, an increase of $24.4 million, or 3%, when compared to the linked period ended September 30, 2015, and an increase of $7.5 million when compared to the prior year. The increase in Trust assets under management as compared to the linked quarter ended September 30, 2015 was primarily due to market appreciation.

Trust assets under administration were $1.5 billion at December 31, 2015, an increase of $41.5 million, or 3%, when compared to the linked quarter, and remained stable when compared to the year ended December 31, 2014.

Gains from state tax credit brokerage activities, net of fair value market adjustments on tax credit assets, were $1.7 million for the fourth quarter of 2015, compared to $0.3 million for the linked third quarter, and $1.4 million in the fourth 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 $1.7 million decreased 8% from the linked quarter, and increased 3% from the prior year period. The decrease from the linked quarter was due to a decline in allocation fees from tax credit projects. On a core basis, other noninterest income was relatively stable compared to the fourth quarter of 2014.

Noninterest expense

Noninterest expenses were $22.9 million for the quarter ended December 31, 2015, compared to $19.9 million for the quarter ended September 30, 2015 and $24.8 million for the quarter ended December 31, 2014. Noninterest expenses for the fourth quarter of 2015 included a charge of $2.4 million for the aforementioned FDIC loss share agreement termination. Core noninterest expenses1, which exclude certain non-comparable expenses and expenses directly related to PCI loans and assets, were $20.0 million for the quarter ended December 31, 2015, compared to $19.3 million for the linked quarter, and $20.2 million for the prior year period.

The Company's Core efficiency ratio1 was 56.1% for the quarter ended December 31, 2015, compared to 58.6% for the linked quarter, and 62.8% for the prior year period, and reflects overall expense management and revenue growth trends.

The Company anticipates total noninterest expenses to be between $19 million and $21 million per quarter for 2016.

Other business results

The total risk based capital ratio1 was 12.02% at December 31, 2015, compared to 12.29% at September 30, 2015, and 13.40% at December 31, 2014. The Company's Common equity tier 1 capital ratio1 was 9.18% at December 31, 2015 compared to 9.37% at September 30, 2015 and 10.15% at December 31, 2014. The tangible common equity ratio1 was 8.88% at December 31, 2015, versus 8.90% at September 30, 2015, and 8.69% at December 31, 2014.

The total risk based capital and Common equity tier 1 capital ratios decreased from the linked quarter due to loan growth and the termination of loss share agreements with the FDIC, and decreased from the prior year period primarily due to the impact of the new regulatory guidelines under Basel III. The slight decrease in the tangible common equity ratio as compared to the linked quarter was due to a reduction in unrealized gains in the investment portfolio. 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.

The Company's effective tax rate was 33.8% for the quarter ended December 31, 2015, compared to 32.7% for the quarter ended September 30, 2015, and 32.0% for the prior year period. The Company's effective tax rate for the years ended December 31, 2015 and 2014 was 34.2% and 33.8%, respectively.

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 Tier 1 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 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 from PCI loans, and expenses directly related to the PCI loans and other assets formerly 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 Tier 1 common equity 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, January 28, 2016. During the call, management will review the fourth 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 1-800-533-7954 (Conference ID #112511.) 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 #112511.) 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 Year ended
(in thousands, except per share data)Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Dec 31,
2015
Dec 31,
2014
EARNINGS SUMMARY
Net interest income$32,079 $30,006 $29,280 $29,045 $30,816 $120,410 $117,368
Provision for loan losses - portfolio loans543 599 2,150 1,580 1,968 4,872 4,409
Provision (provision reversal) for loan losses - purchased credit impaired loans(917) (227) (3,270) 126 (4,414) 1,083
Noninterest income6,557 4,729 5,806 3,583 4,852 20,675 16,631
Noninterest expense22,886 19,932 19,458 19,950 24,795 82,226 87,463
Income before income tax expense16,124 14,431 13,478 14,368 8,779 58,401 41,044
Income tax expense5,445 4,722 4,762 5,022 2,812 19,951 13,871
Net income$10,679 $9,709 $8,716 $9,346 $5,967 $38,450 $27,173
Diluted earnings per share$0.52 $0.48 $0.43 $0.46 $0.30 $1.89 $1.35
Return on average assets1.20% 1.13% 1.06% 1.16% 0.73% 1.14% 0.86%
Return on average common equity12.14% 11.38% 10.56% 11.78% 7.50% 11.47% 9.01%
Return on average tangible common equity13.43% 12.65% 11.77% 13.19% 8.43% 12.77% 10.19%
Net interest margin (fully tax equivalent)3.91% 3.77% 3.85% 3.92% 4.13% 3.86% 4.07%
Efficiency ratio59.23% 57.38% 55.46% 61.14% 69.52% 58.28% 65.27%
CORE PERFORMANCE SUMMARY1
Net interest income$28,667 $27,087 $26,277 $25,587 $25,667 $107,618 $98,438
Provision for loan losses543 599 2,150 1,580 1,968 4,872 4,409
Noninterest income7,056 5,939 6,741 5,839 6,438 25,575 24,548
Noninterest expense20,027 19,347 19,030 19,068 20,170 77,472 79,369
Income before income tax expense15,153 13,080 11,838 10,778 9,967 50,849 39,208
Income tax expense5,073 4,204 4,134 3,647 3,264 17,058 13,165
Net income$10,080 $8,876 $7,704 $7,131 $6,703 $33,791 $26,043
Diluted earnings per share$0.49 $0.44 $0.38 $0.35 $0.33 $1.66 $1.29
Return on average assets1.13% 1.03% 0.93% 0.88% 0.82% 1.00% 0.82%
Return on average common equity11.46% 10.41% 9.34% 8.99% 8.43% 10.08% 8.63%
Return on average tangible common equity12.68% 11.56% 10.41% 10.06% 9.47% 11.22% 9.77%
Net interest margin (fully tax equivalent)3.50% 3.41% 3.46% 3.46% 3.45% 3.46% 3.42%
Efficiency ratio56.06% 58.58% 57.64% 60.67% 62.83% 58.17% 64.53%
1Non-GAAP measures. 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 Year ended
(in thousands, except per share data)Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Dec 31,
2015
Dec 31,
2014
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income$35,096 $33,180 $32,352 $32,151 $34,385 $132,779 $131,754
Total interest expense3,017 3,174 3,072 3,106 3,569 12,369 14,386
Net interest income32,079 30,006 29,280 29,045 30,816 120,410 117,368
Provision for portfolio loans543 599 2,150 1,580 1,968 4,872 4,409
Provision (provision reversal) for purchased credit impaired loans(917) (227) (3,270) 126 (4,414) 1,083
Net interest income after provision for loan losses32,453 29,634 27,130 30,735 28,722 119,952 111,876
NONINTEREST INCOME
Wealth management revenue1,716 1,773 1,778 1,740 1,751 7,007 6,942
Deposit service charges2,025 2,044 1,998 1,856 1,864 7,923 7,181
Gain on sale of other real estate81 32 9 20 17 142 1,531
State tax credit activity, net1,651 321 74 674 1,392 2,720 2,252
Gain on sale of investment securities 23 23
Change in FDIC loss share receivable(580) (1,241) (945) (2,264) (1,781) (5,030) (9,307)
Other income1,664 1,800 2,892 1,534 1,609 7,890 8,032
Total noninterest income6,557 4,729 5,806 3,583 4,852 20,675 16,631
NONINTEREST EXPENSE
Employee compensation and benefits11,833 11,475 11,274 11,513 11,350 46,095 47,232
Occupancy1,653 1,605 1,621 1,694 1,528 6,573 6,526
FDIC clawback 298 50 412 141 760 1,201
FDIC loss share termination2,436 2,436
FHLB prepayment penalty 2,936 2,936
Facilities disposal charge 1,004 1,004
Other6,964 6,554 6,513 6,331 7,836 26,362 28,564
Total noninterest expenses22,886 19,932 19,458 19,950 24,795 82,226 87,463
Income before income tax expense16,124 14,431 13,478 14,368 8,779 58,401 41,044
Income tax expense5,445 4,722 4,762 5,022 2,812 19,951 13,871
Net income$10,679 $9,709 $8,716 $9,346 $5,967 $38,450 $27,173
Basic earnings per share$0.53 $0.49 $0.44 $0.47 $0.30 $1.92 $1.38
Diluted earnings per share$0.52 $0.48 $0.43 $0.46 $0.30 $1.89 $1.35


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
At the Quarter ended
(in thousands)Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
BALANCE SHEETS
ASSETS
Cash and due from banks$47,935 $46,775 $49,498 $56,420 $42,903
Interest-earning deposits47,222 81,115 51,298 43,913 63,093
Debt and equity investments512,939 530,577 465,133 467,343 463,168
Loans held for sale6,598 4,275 5,446 7,843 4,033
Portfolio loans2,750,737 2,602,156 2,542,555 2,435,559 2,433,916
Less: Allowance for loan losses33,441 32,251 31,765 30,288 30,185
Portfolio loans, net2,717,296 2,569,905 2,510,790 2,405,271 2,403,731
Purchased credit impaired loans, net of the allowance for loan losses64,583 72,397 76,050 83,163 83,693
Total loans, net2,781,879 2,642,302 2,586,840 2,488,434 2,487,424
Other real estate18,366 1,575 1,933 2,024 1,896
Other real estate covered under FDIC loss share1 6,795 7,909 3,560 5,944
Fixed assets, net14,842 14,395 14,726 14,911 14,753
State tax credits, held for sale45,850 48,207 42,062 42,411 38,309
FDIC loss share receivable 8,619 10,332 11,644 15,866
Goodwill30,334 30,334 30,334 30,334 30,334
Intangible assets, net3,075 3,323 3,595 3,880 4,164
Other assets109,443 98,249 101,972 102,578 105,116
Total assets$3,608,483 $3,516,541 $3,371,078 $3,275,295 $3,277,003
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits$717,460 $691,758 $658,258 $680,997 $642,930
Interest-bearing deposits2,067,131 2,122,205 2,033,300 1,993,634 1,848,580
Total deposits2,784,591 2,813,963 2,691,558 2,674,631 2,491,510
Subordinated debentures56,807 56,807 56,807 56,807 56,807
Federal Home Loan Bank advances110,000 75,000 73,000 6,000 144,000
Other borrowings270,326 194,684 188,546 186,864 239,883
Other liabilities35,930 32,524 28,737 24,884 28,562
Total liabilities3,257,654 3,172,978 3,038,648 2,949,186 2,960,762
Shareholders' equity350,829 343,563 332,430 326,109 316,241
Total liabilities and shareholders' equity$3,608,483 $3,516,541 $3,371,078 $3,275,295 $3,277,003
1Due to termination of the Company's loss share agreements with the FDIC in the fourth quarter of 2015, Other real estate covered under FDIC loss share was reclassified to Other real estate.


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended
(in thousands)Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
LOAN PORTFOLIO1
Commercial and industrial$1,484,327 $1,365,422 $1,329,303 $1,259,365 $1,264,487
Commercial real estate771,023 750,001 759,893 751,944 740,754
Construction real estate161,061 152,099 149,854 138,034 143,878
Residential real estate196,498 188,985 185,587 180,253 185,252
Consumer and other137,828 145,649 117,918 105,963 99,545
Total portfolio loans2,750,737 2,602,156 2,542,555 2,435,559 2,433,916
Purchased credit impaired loans74,758 83,736 87,644 94,788 99,103
Total loans$2,825,495 $2,685,892 $2,630,199 $2,530,347 $2,533,019
DEPOSIT PORTFOLIO
Noninterest-bearing accounts$717,460 $691,758 $658,258 $680,997 $642,930
Interest-bearing transaction accounts564,420 529,052 507,889 494,228 508,941
Money market and savings accounts1,146,523 1,136,557 1,014,481 933,908 834,287
Certificates of deposit356,188 456,596 510,930 565,498 505,352
Total deposit portfolio$2,784,591 $2,813,963 $2,691,558 $2,674,631 $2,491,510
AVERAGE BALANCES
Portfolio loans$2,631,256 $2,540,948 $2,482,291 $2,425,962 $2,368,475
Purchased credit impaired loans77,485 85,155 92,168 97,201 104,732
Loans held for sale5,495 4,255 6,605 3,560 3,703
Interest earning assets3,304,827 3,201,181 3,096,294 3,047,815 2,998,467
Total assets3,528,423 3,416,716 3,310,578 3,268,369 3,234,485
Deposits2,832,313 2,788,245 2,667,640 2,590,961 2,501,098
Shareholders' equity348,908 338,368 330,999 321,772 315,557
Tangible common equity315,380 304,583 296,931 287,423 280,920
YIELDS (fully tax equivalent)
Portfolio loans4.16% 4.16% 4.17% 4.15% 4.19%
Purchased credit impaired loans24.79% 19.41% 18.33% 20.85% 26.47%
Total loans4.75% 4.66% 4.68% 4.79% 5.13%
Securities2.27% 2.23% 2.26% 2.35% 2.29%
Interest-earning assets4.27% 4.17% 4.24% 4.33% 4.60%
Interest-bearing deposits0.48% 0.50% 0.52% 0.54% 0.56%
Total deposits0.36% 0.39% 0.39% 0.40% 0.41%
Subordinated debentures2.26% 2.19% 2.18% 2.15% 2.14%
Borrowed funds0.24% 0.28% 0.29% 0.36% 0.77%
Cost of paying liabilities0.50% 0.53% 0.54% 0.56% 0.63%
Net interest margin3.91% 3.77% 3.85% 3.92% 4.13%
1Certain prior period balances have been reclassified to reflect changes in internal organizational structure and certain Call Report reclassifications.


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended
(in thousands, except per share data)Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
ASSET QUALITY
Net charge-offs (recoveries)1$(647) $113 $672 $1,478 $582
Nonperforming loans19,100 9,123 17,498 15,143 22,244
Classified assets67,761 62,679 61,722 63,001 77,898
Nonperforming loans to total loans10.33% 0.35% 0.69% 0.62% 0.91%
Nonperforming assets to total assets20.48% 0.30% 0.58% 0.52% 0.74%
Allowance for loan losses to total loans11.22% 1.24% 1.25% 1.24% 1.24%
Allowance for loan losses to nonperforming loans1367.5% 353.5% 181.5% 200.0% 135.7%
Net charge-offs (recoveries) to average loans (annualized)1(0.10)% 0.02% 0.11% 0.25% 0.10%
WEALTH MANAGEMENT
Trust assets under management$872,877 $848,515 $889,616 $894,456 $865,414
Trust assets under administration1,477,917 1,436,372 1,514,140 1,517,171 1,478,864
MARKET DATA
Book value per common share$17.53 $17.21 $16.67 $16.36 $15.94
Tangible book value per common share$15.86 $15.53 $14.96 $14.64 $14.20
Market value per share$28.35 $25.17 $22.77 $20.66 $19.73
Period end common shares outstanding20,017 19,959 19,947 19,935 19,838
Average basic common shares20,007 19,995 19,978 19,934 19,858
Average diluted common shares20,386 20,261 20,168 20,157 20,140
CAPITAL
Total capital to risk-weighted assets312.02% 12.29% 12.43% 12.59% 13.40%
Tier 1 capital to risk-weighted assets310.77% 11.04% 11.18% 11.34% 12.14%
Common equity tier 1 capital to risk-weighted assets39.18% 9.37% 9.44% 9.54% 10.15%
Tangible common equity to tangible assets8.88% 8.90% 8.94% 9.01% 8.69%
1Portfolio loans only
2Excludes ORE covered by FDIC shared-loss arrangements, except for inclusion in total assets. Beginning with the quarter ended December 31, 2015, ORE covered by FDIC shared-loss arrangements is zero.
3Beginning 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 Year ended
(in thousands)Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
Dec 31,
2015
Dec 31,
2014
CORE PERFORMANCE MEASURES
Net interest income$32,079 $30,006 $29,280 $29,045 $30,816 $120,410 $117,368
Less: Incremental accretion income3,412 2,919 3,003 3,458 5,149 12,792 18,930
Core net interest income28,667 27,087 26,277 25,587 25,667 107,618 98,438
Total noninterest income6,557 4,729 5,806 3,583 4,852 20,675 16,631
Less: Change in FDIC loss share receivable(580) (1,241) (945) (2,264) (1,781) (5,030) (9,307)
Less (plus): Gain (loss) on sale of other real estate from PCI loans81 31 10 (15) 195 107 445
Less: Gain on sale of investment securities 23 23
Less: Closing fee 945
Core noninterest income7,056 5,939 6,741 5,839 6,438 25,575 24,548
Total core revenue35,723 33,026 33,018 31,426 32,105 133,193 122,986
Provision for portfolio loans543 599 2,150 1,580 1,968 4,872 4,409
Total noninterest expense22,886 19,932 19,458 19,950 24,795 82,226 87,463
Less: FDIC clawback 298 50 412 141 760 1,201
Less: FDIC loss share termination2,436 2,436
Less: Other loss share expenses423 287 378 470 544 1,558 2,953
Less: FHLB prepayment penalty 2,936 2,936
Less: Facilities disposal charge 1,004 1,004
Core noninterest expense20,027 19,347 19,030 19,068 20,170 77,472 79,369
Core income before income tax expense15,153 13,080 11,838 10,778 9,967 50,849 39,208
Core income tax expense5,073 4,204 4,134 3,647 3,264 17,058 13,165
Core net income$10,080 $8,876 $7,704 $7,131 $6,703 $33,791 $26,043
Core diluted earnings per share$0.49 $0.44 $0.38 $0.35 $0.33 $1.66 $1.29
Core return on average assets1.13% 1.03% 0.93% 0.88% 0.82% 1.00% 0.82%
Core return on average common equity11.46% 10.41% 9.34% 8.99% 8.43% 10.08% 8.63%
Core return on average tangible common equity12.68% 11.56% 10.41% 10.06% 9.47% 11.22% 9.77%
Core efficiency ratio56.06% 58.58% 57.64% 60.67% 62.83% 58.17% 64.53%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN
Net interest income (fully tax equivalent)$32,546 $30,437 $29,691 $29,467 $31,223 $122,141 $119,002
Less: Incremental accretion income3,412 2,919 3,003 3,458 5,149 12,792 18,930
Core net interest income (fully tax equivalent)$29,134 $27,518 $26,688 $26,009 $26,074 $109,349 $100,072
Average earning assets$3,304,827 $3,201,181 $3,096,294 $3,047,815 $2,998,467 $3,163,339 $2,921,978
Reported net interest margin (fully tax equivalent)3.91% 3.77% 3.85% 3.92% 4.13% 3.86% 4.07%
Core net interest margin (fully tax equivalent)3.50% 3.41% 3.46% 3.46% 3.45% 3.46% 3.42%


At the Quarter ended
(in thousands)Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Dec 31,
2014
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity$350,829 $343,563 $332,430 $326,109 $316,241
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets, net of deferred tax liabilities1759 820 887 958 4,164
Less (Plus): Unrealized gains (losses)218 2,973 1,249 3,379 1,681
Plus: Qualifying trust preferred securities55,100 55,100 55,100 55,100 55,100
Plus: Other58 58 58 59 58
Total tier 1 capital$374,676 $364,594 $355,118 $346,597 $335,220
Less: Qualifying trust preferred securities55,100 55,100 55,100 55,100 55,100
Less: Other123 23 23 23
Common equity tier 1 capital$319,553 $309,471 $299,995 $291,474 $280,120
Total risk-weighted assets$3,479,760 $3,301,671 $3,176,587 $3,055,652 $2,760,729
Common equity tier 1 capital to risk-weighted assets9.18% 9.37% 9.44% 9.54% 10.15%
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity$350,829 $343,563 $332,430 $326,109 $316,241
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets3,075 3,323 3,595 3,880 4,164
Tangible common equity$317,420 $309,906 $298,501 $291,895 $281,743
Total assets$3,608,483 $3,516,541 $3,371,078 $3,275,295 $3,277,003
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets3,075 3,323 3,595 3,880 4,164
Tangible assets$3,575,074 $3,482,884 $3,337,149 $3,241,081 $3,242,505
Tangible common equity to tangible assets8.88% 8.90% 8.94% 9.01% 8.69%
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