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Enterprise Financial Reports First Quarter 2016 Results

Reported Highlights

  • Net income of $0.54 per diluted share, increased 4% over the linked quarter, and 17% compared to the first quarter of 2015
  • Portfolio loans grew 12% on an annualized basis in the quarter, and 16% from the prior year period
  • 11% cash dividend increase to $0.10 per share in the second quarter of 2016 from $0.09 per share in the first quarter of 2016
  • FDIC loss share termination charge earned-back 100%

Core Highlights1

  • Core net income of $0.47 per diluted share, decreased 4% from the linked quarter, and increased 34% compared to the prior year period
  • Core net interest income increased 3% in the linked quarter, and 16% from the prior year period
  • Core efficiency ratio of 57.4% for the first quarter

ST. LOUIS, April 28, 2016 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the “Company”) reported net income of $11.0 million for the quarter ended March 31, 2016, an increase of $0.3 million, or 3%, as compared to the linked fourth quarter. Net income per diluted share was $0.54 for the quarter ended March 31, 2016, an increase of $0.02 compared to $0.52 per diluted share for the linked fourth quarter. The increase from the linked quarter resulted from an increase in net interest income and lower noninterest expense, as the fourth quarter of 2015 included a pretax charge of $2.4 million from early termination of the Company's loss share agreements with the FDIC. First quarter 2016 net income increased 18% compared to $9.3 million for the prior year period, and diluted earnings per share increased 17% from $0.46 reported a year ago. The increase in net income over the prior year was largely due to an increase in net interest income from strong loan growth, and a decrease in provision for loan losses on portfolio loans from improved credit quality.

On a core basis1, the Company reported net income of $9.4 million, or $0.47 per diluted share, for the quarter ended March 31, 2016, compared to $10.1 million, or $0.49 per diluted share, in the linked fourth quarter. The decrease was due to lower noninterest income from seasonal fluctuations in state tax credit sales, partially offset by an increase in net interest income from strong loan growth and net interest margin expansion. First quarter 2016 core net income increased 32% from $7.1 million for the prior year period, and diluted core earnings per share grew 34% from $0.35 for the prior year period. The increase was primarily due to higher levels of net interest income from continued growth in earning asset balances, combined with noninterest expense controls.

The Company's Board of Directors approved an additional one cent per common share increase in the Company’s quarterly dividend to $0.10 per common share from $0.09 for the second quarter of 2016, payable on June 30, 2016 to shareholders of record as of June 15, 2016.

Peter Benoist, President and CEO, commented, “First quarter results reflected our continuing momentum at Enterprise, with reported earnings per share up 4% for the linked quarter, and 17% year over year. Profitability measures were consistent with our high performance objectives, exceeding a 120 basis point return on assets and a 12% return on equity. Notably, we earned back the entire FDIC loss share early termination charge during the quarter.”

“While the general banking environment remains challenged, our core banking operations performed very well again in the first quarter,” said Benoist. “We increased portfolio loans at a 12% annual rate, continuing the strong loan growth achieved throughout last year. Our specialty lending businesses continued to expand at a brisk pace and exceeded $600 million in assets at quarter-end. Core net interest margin widened another four basis points in the quarter and was eight basis points higher than a year ago. Asset quality measures remained strong, and we recorded net loan recoveries again for the quarter.”

“Overall, this was another strong quarter across the board. It warranted our fifth consecutive quarterly dividend increase and marked a great start to the year,” added Benoist.

Net Interest Income

Net interest income in the first quarter increased $0.3 million from the linked fourth quarter, and $3.4 million from the prior year period due to strong growth in portfolio loan balances. The net interest margin, on a fully tax equivalent basis, was 3.87% for the first quarter, compared to 3.91% in the linked fourth quarter, and 3.92% in the first quarter of 2015.

The yield on Portfolio loans was 4.19% in the first quarter, an increase of three basis points from the linked fourth quarter, and four basis points higher than the prior year period. In the first quarter of 2016, the yield on Purchased credit impaired ("PCI") loans was 22.67%, as compared to 24.79% in the linked quarter, and 20.85% in the prior year period.

The cost of interest-bearing liabilities declined two basis points to 0.48% in the first quarter of 2016 from 0.50% in the linked fourth quarter, and was eight basis points lower than 0.56% in the first quarter of 2015, primarily from lower rates on time deposit balances and a more favorable funding mix.

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)March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Core net interest margin13.54% 3.50% 3.41% 3.46% 3.46%
Core net interest income129,594 28,667 27,087 26,277 25,587

Core net interest income1 increased 16% compared to the prior year period due to strong portfolio loan growth and improvement in the cost of interest-bearing liabilities as discussed above. Core net interest income increased by $0.9 million to $29.6 million, and core net interest margin1 increased four basis points to 3.54%, when compared to the linked quarter. Core net interest margin expanded eight basis points from the prior year quarter, primarily due to loan growth improving the earning asset mix, lower funding costs, and the aforementioned increase in the yield on portfolio 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 increased to $2.8 billion at March 31, 2016, increasing $82 million, or 12% on an annualized basis, when compared to the linked quarter. On a year over year basis, portfolio loans increased $397 million, or 16%. The Company continues to expect loan growth at or above 10% for 2016.

Commercial and industrial ("C&I") loans increased $61 million during the first quarter of 2016 compared to the linked fourth quarter. C&I loans represented 55% of the Company's loan portfolio at March 31, 2016, consistent with December 31, 2015 levels. C&I loans grew $286 million, or 23%, since March 31, 2015. During the quarter ended March 31, 2016, the Company also grew loans in all other major categories except Consumer and other.

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. The Company's specialized lending products, 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 management's efforts to maintain the Company's asset sensitive interest rate risk position. At March 31, 2016, 62% of our portfolio loans had variable interest rates, consistent with the linked quarter and prior year period.

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

At the Quarter ended
(in thousands)March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Enterprise value lending$359,862 $350,266 $283,205 $271,807 $229,362
C&I - general759,330 732,186 689,274 685,793 663,879
Life insurance premium financing272,450 265,184 247,736 239,182 229,639
Tax credits153,338 136,691 145,207 132,521 136,485
CRE, Construction, and land development948,859 932,084 902,100 909,747 889,978
Residential202,255 196,498 188,985 185,587 180,253
Other136,522 137,828 145,649 117,918 105,963
Portfolio loans$2,832,616 $2,750,737 $2,602,156 $2,542,555 $2,435,559

PCI loans

PCI loans totaled $63.5 million at March 31, 2016, a decrease of $11.3 million, or 15%, from the linked fourth quarter, and $31.3 million, or 33%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.

In the first quarter of 2016, $0.1 million reversal of provision for loan losses was recorded for certain loan pools. At March 31, 2016, the remaining accretable yield on the portfolio was estimated to be $21 million and the non-accretable difference was approximately $27 million.

In the fourth quarter of 2015, the Company incurred a $2.4 million charge to terminate all existing loss share agreements with the FDIC. As of March 31, 2016, the entire charge has been earned back through accretion from early repayment of PCI loans, loan recoveries, and provision reversal, all no longer shared with the FDIC.

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)March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Nonperforming loans$9,513 $9,100 $9,123 $17,498 $15,143
Other real estate from originated loans2,813 3,218 1,575 1,933 2,024
Other real estate from PCI loans7,067 5,148
Nonperforming assets$19,393 $17,466 $10,698 $19,431 $17,167
Nonperforming loans to portfolio loans0.34% 0.33% 0.35% 0.69% 0.62%
Nonperforming assets to total assets0.52% 0.48% 0.30% 0.58% 0.52%
Net charge-offs (recoveries)$(99) $(647) $113 $672 $1,478

Nonperforming loans increased 5% to $9.5 million at March 31, 2016, from $9.1 million at December 31, 2015, and decreased 37% from $15.1 million at March 31, 2015. During the quarter ended March 31, 2016, there were $2.9 million of additions to nonperforming loans, $2.2 million of other principal reductions, $0.3 million assets transferred to other real estate, and no assets transferred to performing. The additions to nonperforming loans consisted of two unrelated accounts. Despite the increase, Nonperforming loans were 0.34% of portfolio loans, and Nonperforming assets were 0.52% of total assets at March 31, 2016

The Company's allowance for loan losses was 1.21% of loans at March 31, 2016, representing 361% of nonperforming loans, as compared to 1.22% at December 31, 2015, representing 368% of nonperforming loans, and 1.24% at March 31, 2015, representing 200% 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 37% decrease in nonperforming loans discussed previously.

Deposits

Total deposits at March 31, 2016 were $2.9 billion, an increase of $147.2 million, or 21% on an annualized basis, from December 31, 2015, and $257.1 million, or 10%, from March 31, 2015. The increase from the linked quarter was largely due to an increase in brokered certificates of deposit to fund significant loan growth in the quarter. Core deposits, defined as total deposits excluding time deposits, were $2.5 billion at March 31, 2016, an increase of $42 million, or 7% on an annualized basis, from the linked quarter, and $362 million, or 17%, when compared to the prior year period. The overall positive trends in deposits reflect enhanced deposit gathering efforts in both commercial and business banking.

Noninterest-bearing deposits increased $2.2 million compared to December 31, 2015, and increased $38.7 million compared to the quarter ended March 31, 2015. The composition of Noninterest-bearing deposits remained relatively stable at 25% of total deposits at March 31, 2016, compared to December 31, 2015 and March 31, 2015. The total cost of deposits declined two basis points to 0.34% compared to 0.36% at December 31, 2015, and declined six basis points since March 31, 2015.

Noninterest income

Deposit service charges for the first quarter of 2016 of $2.0 million remained stable when compared to the linked quarter, and grew 10% compared to the prior year quarter partially due to growth in customer relationships. Additionally, Wealth management revenues were consistent at $1.7 million when compared to the linked fourth quarter and the prior year period.

Trust assets under management were $878 million at March 31, 2016, an increase of 1% when compared to December 31, 2015, and decreased $16 million, or 2% when compared to the prior year period. The increase from the linked quarter was primarily due to the addition of new clients, and the decrease from the prior year period was largely due to market decline.

Gains from state tax credit brokerage activities were $0.5 million for the first quarter of 2016, compared to $1.7 million for the linked fourth quarter, and $0.7 million in the first quarter of 2015. 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 remained stable compared to the linked quarter, and increased 8% from the prior year period. The increase from the prior year period was due to slight increases in swap fee income, card fee income, and gains on sales of mortgages.

Noninterest expenses

Noninterest expenses were $20.8 million for the quarter ended March 31, 2016, compared to $22.9 million for the quarter ended December 31, 2015, and $20.0 million for the quarter ended March 31, 2015. Core noninterest expenses1, which exclude certain non-comparable items and expenses directly related to PCI assets, were $20.4 million for the quarter ended March 31, 2016, compared to $20.0 million for the linked quarter, and $19.1 million for the prior year period. The increase from the linked quarter and prior year period was largely due to an increase in Employee compensation and benefits from the addition of client service personnel to accommodate growth and a seasonal increase in payroll taxes.

The Company's Core efficiency ratio1 was 57.4% for the quarter ended March 31, 2016, compared to 56.1% for the linked quarter, and 60.7% 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

During the quarter ended March 31, 2016, the Company repurchased 160,100 common shares at $26.30 per share under its publicly announced plan. The plan allows for repurchase of up to two million common shares, representing approximately 10% of the Company's currently outstanding shares.

The total risk based capital ratio1 was 12.02% at March 31, 2016, compared to 11.85% at December 31, 2015, and 12.88% at March 31, 2015. The Company's Common equity tier 1 capital ratio1 was 9.20% at March 31, 2016, compared to 9.05% at December 31, 2015, and 9.78% at March 31, 2015. The tangible common equity ratio1 was 8.87% at March 31, 2016, versus 8.88% at December 31, 2015, and 9.01% at March 31, 2015.

The Company's capital management combined with asset growth has resulted in a stable tangible common equity ratio, despite continued earnings growth. 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 34.8% for the quarter ended March 31, 2016 compared to 33.8% for the quarter ended December 31, 2015, and 35.0% for the quarter ended March 31, 2015.

Use of Non-GAAP Financial Measures1

The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as Core net income and net interest margin, and other Core performance measures, regulatory capital ratios, and the tangible common equity ratio, in this release that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.

The Company considers its Core performance measures presented in this earnings release and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of 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 on sale of other real estate from PCI loans, and expenses directly related to 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 ratio provides useful information to investors about the Company's capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.

The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.

The Company will host a conference call and webcast at 2:30 p.m. Central time on Thursday, April 28, 2016. During the call, management will review the first quarter of 2016 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 1-800-533-7619 (Conference ID #1739499.) 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 1-866-375-1919 (replay passcode #1739499.) 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 "anticipate," “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 2015 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
(in thousands, except per share data)Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
EARNINGS SUMMARY
Net interest income$32,428 $32,079 $30,006 $29,280 $29,045
Provision for loan losses - portfolio loans833 543 599 2,150 1,580
Provision reversal for loan losses - purchased credit impaired loans(73) (917) (227) (3,270)
Noninterest income6,005 6,557 4,729 5,806 3,583
Noninterest expense20,762 22,886 19,932 19,458 19,950
Income before income tax expense16,911 16,124 14,431 13,478 14,368
Income tax expense5,886 5,445 4,722 4,762 5,022
Net income$11,025 $10,679 $9,709 $8,716 $9,346
Diluted earnings per share$0.54 $0.52 $0.48 $0.43 $0.46
Return on average assets1.22% 1.20% 1.13% 1.06% 1.16%
Return on average common equity12.46% 12.14% 11.38% 10.56% 11.78%
Return on average tangible common equity13.74% 13.43% 12.65% 11.77% 13.19%
Net interest margin (fully tax equivalent)3.87% 3.91% 3.77% 3.85% 3.92%
Efficiency ratio54.02% 59.23% 57.38% 55.46% 61.14%
CORE PERFORMANCE SUMMARY1
Net interest income$29,594 $28,667 $27,087 $26,277 $25,587
Provision for loan losses833 543 599 2,150 1,580
Noninterest income6,005 7,056 5,939 6,741 5,839
Noninterest expense20,435 20,027 19,347 19,030 19,068
Income before income tax expense14,331 15,153 13,080 11,838 10,778
Income tax expense4,897 5,073 4,204 4,134 3,647
Net income$9,434 $10,080 $8,876 $7,704 $7,131
Diluted earnings per share$0.47 $0.49 $0.44 $0.38 $0.35
Return on average assets1.04% 1.13% 1.03% 0.93% 0.88%
Return on average common equity10.66% 11.46% 10.41% 9.34% 8.99%
Return on average tangible common equity11.76% 12.68% 11.56% 10.41% 10.06%
Net interest margin (fully tax equivalent)3.54% 3.50% 3.41% 3.46% 3.46%
Efficiency ratio57.40% 56.06% 58.58% 57.64% 60.67%
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
(in thousands, except per share data)Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income$35,460 $35,096 $33,180 $32,352 $32,151
Total interest expense3,032 3,017 3,174 3,072 3,106
Net interest income32,428 32,079 30,006 29,280 29,045
Provision for portfolio loans833 543 599 2,150 1,580
Provision reversal for purchased credit impaired loans(73) (917) (227) (3,270)
Net interest income after provision for loan losses31,668 32,453 29,634 27,130 30,735
NONINTEREST INCOME
Deposit service charges2,043 2,025 2,044 1,998 1,856
Wealth management revenue1,662 1,716 1,773 1,778 1,740
State tax credit activity, net518 1,651 321 74 674
Gain on sale of other real estate122 81 32 9 20
Gain on sale of investment securities 23
Change in FDIC loss share receivable (580) (1,241) (945) (2,264)
Other income1,660 1,664 1,800 2,892 1,534
Total noninterest income6,005 6,557 4,729 5,806 3,583
NONINTEREST EXPENSE
Employee compensation and benefits12,647 11,833 11,475 11,274 11,513
Occupancy1,683 1,653 1,605 1,621 1,694
FDIC clawback 298 50 412
FDIC loss share termination 2,436
Other6,432 6,964 6,554 6,513 6,331
Total noninterest expense20,762 22,886 19,932 19,458 19,950
Income before income tax expense16,911 16,124 14,431 13,478 14,368
Income tax expense5,886 5,445 4,722 4,762 5,022
Net income$11,025 $10,679 $9,709 $8,716 $9,346
Basic earnings per share$0.55 $0.53 $0.49 $0.44 $0.47
Diluted earnings per share0.54 0.52 0.48 0.43 0.46


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
At the Quarter ended
(in thousands)Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
BALANCE SHEETS
ASSETS
Cash and due from banks$56,251 $47,935 $46,775 $49,498 $56,420
Interest-earning deposits50,982 47,222 81,115 51,298 43,913
Debt and equity investments524,320 512,939 530,577 465,133 467,343
Loans held for sale6,409 6,598 4,275 5,446 7,843
Portfolio loans2,832,616 2,750,737 2,602,156 2,542,555 2,435,559
Less: Allowance for loan losses34,373 33,441 32,251 31,765 30,288
Portfolio loans, net2,798,243 2,717,296 2,569,905 2,510,790 2,405,271
Purchased credit impaired loans, net of the allowance for loan losses53,908 64,583 72,397 76,050 83,163
Total loans, net2,852,151 2,781,879 2,642,302 2,586,840 2,488,434
Other real estate19,880 8,366 1,575 1,933 2,024
Other real estate covered under FDIC loss share1 6,795 7,909 3,560
Fixed assets, net14,812 14,842 14,395 14,726 14,911
State tax credits, held for sale45,305 45,850 48,207 42,062 42,411
FDIC loss share receivable 8,619 10,332 11,644
Goodwill30,334 30,334 30,334 30,334 30,334
Intangible assets, net2,832 3,075 3,323 3,595 3,880
Other assets116,629 109,443 98,249 101,972 102,578
Total assets$3,709,905 $3,608,483 $3,516,541 $3,371,078 $3,275,295
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits$719,652 $717,460 $691,758 $658,258 $680,997
Interest-bearing deposits2,212,094 2,067,131 2,122,205 2,033,300 1,993,634
Total deposits2,931,746 2,784,591 2,813,963 2,691,558 2,674,631
Subordinated debentures56,807 56,807 56,807 56,807 56,807
Federal Home Loan Bank advances130,500 110,000 75,000 73,000 6,000
Other borrowings193,788 270,326 194,684 188,546 186,864
Other liabilities37,680 35,930 32,524 28,737 24,884
Total liabilities3,350,521 3,257,654 3,172,978 3,038,648 2,949,186
Shareholders' equity359,384 350,829 343,563 332,430 326,109
Total liabilities and shareholders' equity$3,709,905 $3,608,483 $3,516,541 $3,371,078 $3,275,295
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)Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
LOAN PORTFOLIO
Commercial and industrial$1,544,980 $1,484,327 $1,365,422 $1,329,303 $1,259,365
Commercial real estate773,535 771,023 750,001 759,893 751,944
Construction real estate175,324 161,061 152,099 149,854 138,034
Residential real estate202,255 196,498 188,985 185,587 180,253
Consumer and other136,522 137,828 145,649 117,918 105,963
Total portfolio loans2,832,616 2,750,737 2,602,156 2,542,555 2,435,559
Purchased credit impaired loans63,477 74,758 83,736 87,644 94,788
Total loans$2,896,093 $2,825,495 $2,685,892 $2,630,199 $2,530,347
DEPOSIT PORTFOLIO
Noninterest-bearing accounts$719,652 $717,460 $691,758 $658,258 $680,997
Interest-bearing transaction accounts589,635 564,420 529,052 507,889 494,228
Money market and savings accounts1,161,610 1,146,523 1,136,557 1,014,481 933,908
Brokered certificates of deposit157,939 39,573 86,147 124,170 157,276
Other certificates of deposit$302,910 $316,615 $370,449 $386,760 $408,222
Total deposit portfolio$2,931,746 $2,784,591 $2,813,963 $2,691,558 $2,674,631
AVERAGE BALANCES
Portfolio loans$2,777,456 $2,631,256 $2,540,948 $2,482,291 $2,425,962
Purchased credit impaired loans69,031 77,485 85,155 92,168 97,201
Loans held for sale4,563 5,495 4,255 6,605 3,560
Debt and equity investments514,687 521,679 475,180 463,808 461,781
Interest-earning assets3,413,792 3,304,827 3,201,181 3,096,294 3,047,815
Total assets3,641,308 3,528,423 3,416,716 3,310,578 3,268,369
Deposits2,811,209 2,832,313 2,788,245 2,667,640 2,590,961
Shareholders' equity355,980 348,908 338,368 330,999 321,772
Tangible common equity322,698 315,380 304,583 296,931 287,423
YIELDS (fully tax equivalent)
Portfolio loans4.19% 4.16% 4.16% 4.17% 4.15%
Purchased credit impaired loans22.67% 24.79% 19.41% 18.33% 20.85%
Total loans4.64% 4.75% 4.66% 4.68% 4.79%
Debt and equity investments2.34% 2.27% 2.23% 2.26% 2.35%
Interest-earning assets4.23% 4.27% 4.17% 4.24% 4.33%
Interest-bearing deposits0.46% 0.48% 0.50% 0.52% 0.54%
Total deposits0.34% 0.36% 0.39% 0.39% 0.40%
Subordinated debentures2.47% 2.26% 2.19% 2.18% 2.15%
Borrowed funds0.31% 0.24% 0.28% 0.29% 0.36%
Cost of paying liabilities0.48% 0.50% 0.53% 0.54% 0.56%
Net interest margin3.87% 3.91% 3.77% 3.85% 3.92%


ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter ended
(in thousands, except per share data)Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
ASSET QUALITY
Net charge-offs (recoveries)1$(99) $(647) $113 $672 $1,478
Nonperforming loans19,513 9,100 9,123 17,498 15,143
Classified assets73,194 67,761 62,679 61,722 63,001
Nonperforming loans to total loans10.34% 0.33% 0.35% 0.69% 0.62%
Nonperforming assets to total assets20.52% 0.48% 0.30% 0.58% 0.52%
Allowance for loan losses to total loans11.21% 1.22% 1.24% 1.25% 1.24%
Allowance for loan losses to nonperforming loans1361.3% 367.5% 353.5% 181.5% 200.0%
Net charge-offs (recoveries) to average loans (annualized)1(0.01)% (0.10)% 0.02% 0.11% 0.25%
WEALTH MANAGEMENT
Trust assets under management$878,236 $872,877 $848,515 $889,616 $894,456
Trust assets under administration1,470,974 1,477,917 1,436,372 1,514,140 1,517,171
MARKET DATA
Book value per common share$17.98 $17.53 $17.21 $16.67 $16.36
Tangible book value per common share$16.32 $15.86 $15.53 $14.96 $14.64
Market value per share$27.04 $28.35 $25.17 $22.77 $20.66
Period end common shares outstanding19,993 20,017 19,959 19,947 19,935
Average basic common shares20,004 20,007 19,995 19,978 19,934
Average diluted common shares20,233 20,386 20,261 20,168 20,157
CAPITAL
Total capital to risk-weighted assets12.02% 11.85% 12.55% 12.68% 12.88%
Tier 1 capital to risk-weighted assets10.77% 10.61% 11.30% 11.43% 11.62%
Common equity tier 1 capital to risk-weighted assets9.20% 9.05% 9.59% 9.66% 9.78%
Tangible common equity to tangible assets8.87% 8.88% 8.90% 8.94% 9.01%
1 Portfolio loans only
2 Excludes Other real estate covered under FDIC shared-loss arrangements, except for inclusion in total assets. Beginning with the quarter ended December 31, 2015, Other real estate covered by FDIC shared-loss arrangements is zero.


ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
For the Quarter ended
(in thousands)Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
CORE PERFORMANCE MEASURES
Net interest income$32,428 $32,079 $30,006 $29,280 $29,045
Less: Incremental accretion income2,834 3,412 2,919 3,003 3,458
Core net interest income29,594 28,667 27,087 26,277 25,587
Total noninterest income6,005 6,557 4,729 5,806 3,583
Less: Change in FDIC loss share receivable (580) (1,241) (945) (2,264)
Less (plus): Gain (loss) on sale of other real estate from PCI loans 81 31 10 (15)
Less: Gain on sale of investment securities 23
Core noninterest income6,005 7,056 5,939 6,741 5,839
Total core revenue35,599 35,723 33,026 33,018 31,426
Provision for portfolio loans833 543 599 2,150 1,580
Total noninterest expense20,762 22,886 19,932 19,458 19,950
Less: FDIC clawback 298 50 412
Less: FDIC loss share termination 2,436
Less: Other expenses related to PCI loans327 423 287 378 470
Core noninterest expense20,435 20,027 19,347 19,030 19,068
Core income before income tax expense14,331 15,153 13,080 11,838 10,778
Core income tax expense4,897 5,073 4,204 4,134 3,647
Core net income$9,434 $10,080 $8,876 $7,704 $7,131
Core diluted earnings per share$0.47 $0.49 $0.44 $0.38 $0.35
Core return on average assets1.04% 1.13% 1.03% 0.93% 0.88%
Core return on average common equity10.66% 11.46% 10.41% 9.34% 8.99%
Core return on average tangible common equity11.76% 12.68% 11.56% 10.41% 10.06%
Core efficiency ratio57.40% 56.06% 58.58% 57.64% 60.67%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN
Net interest income (fully tax equivalent)$32,887 $32,546 $30,437 $29,691 $29,467
Less: Incremental accretion income2,834 3,412 2,919 3,003 3,458
Core net interest income (fully tax equivalent)$30,053 $29,134 $27,518 $26,688 $26,009
Average earning assets$3,413,792 $3,304,827 $3,201,181 $3,096,294 $3,047,815
Reported net interest margin (fully tax equivalent)3.87% 3.91% 3.77% 3.85% 3.92%
Core net interest margin (fully tax equivalent)3.54% 3.50% 3.41% 3.46% 3.46%


At the Quarter ended
(in thousands)Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity$359,384 $350,829 $343,563 $332,430 $326,109
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets, net of deferred tax liabilities1,048 759 820 887 958
Less (Plus): Unrealized gains (losses)3,929 218 2,973 1,249 3,379
Plus: Qualifying trust preferred securities55,100 55,100 55,100 55,100 55,100
Plus: Other58 58 58 58 59
Total tier 1 capital379,231 374,676 364,594 355,118 346,597
Less: Qualifying trust preferred securities55,100 55,100 55,100 55,100 55,100
Less: Other35 23 23 23 23
Common equity tier 1 capital$324,096 $319,553 $309,471 $299,995 $291,474
Total risk-weighted assets$3,521,433 $3,530,521 $3,227,605 $3,106,041 $2,981,810
Common equity tier 1 capital to risk-weighted assets9.20% 9.05% 9.59% 9.66% 9.78%
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity$359,384 $350,829 $343,563 $332,430 $326,109
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets2,832 3,075 3,323 3,595 3,880
Tangible common equity$326,218 $317,420 $309,906 $298,501 $291,895
Total assets$3,709,905 $3,608,483 $3,516,541 $3,371,078 $3,275,295
Less: Goodwill30,334 30,334 30,334 30,334 30,334
Less: Intangible assets2,832 3,075 3,323 3,595 3,880
Tangible assets$3,676,739 $3,575,074 $3,482,884 $3,337,149 $3,241,081
Tangible common equity to tangible assets8.87% 8.88% 8.90% 8.94% 9.01%


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

Source: Enterprise Financial