EX-99.1 2 ex991financialstatementsan.htm EARNINGS RELEASE Exhibit


EXHIBIT 99.1
Filed by Enterprise Financial Services Corp
Pursuant to Rule 425 of the Securities Act of 1933
and deemed filed pursuant to Rule 14a-6(b)
of the Securities Exchange Act of 1934

Subject Company: Trinity Capital Corporation
Commission File No.: 001-15373

enterprisefinanciala08.jpg
ENTERPRISE FINANCIAL REPORTS FOURTH QUARTER AND FULL 2018 YEAR RESULTS

2018 Highlights
Net income of $89.2 million, or $3.83 per diluted share
Return on average assets of 1.64%
Announcement of definitive agreement to acquire Trinity Capital Corporation

Fourth Quarter Highlights
Net income of $23.5 million, or $1.02 per diluted share
Return on average assets of 1.69%
Repurchase of 299,510 shares at an average price of $41.89 per share

St. Louis, Mo. January 21, 2019. Enterprise Financial Services Corp (NASDAQ: EFSC) (the “Company” or “EFSC”) reported net income of $89.2 million, or $3.83 per diluted share, for the year ended December 31, 2018, an increase of $41.0 million, or 85%, compared to $48.2 million, or $2.07 per diluted share for the prior year period. Growth in net interest income, maintaining net interest margin, and fee income expansion drove the pre-tax earnings increase over the prior year. Additionally, the Company benefited from a reduction in income tax expense as a result of H.R.1, formerly known as “Tax Cuts and Jobs Act,” which was signed into law on December 22, 2017, as well as the Company’s tax planning initiatives. The Company also experienced a reduction in income tax expense due to the deferred tax asset revaluation charge of $12.1 million incurred in 2017 resulting from the Tax Cuts and Jobs Act.

The Company recorded net income of $23.5 million, or $1.02 per diluted share, for the quarter ended December 31, 2018, an increase of $1.0 million, or 4%, compared to $22.5 million, or $0.97 per diluted share, for the linked third quarter. An increase in net interest income driven by loan growth and a higher average loan yield, and seasonally strong sales of tax credits contributed to the increase over the linked quarter. Fourth quarter included $1.3 million pretax, or $0.04 per diluted share, of merger related expenses. Non-core acquired asset contribution was $3.2 million pretax, or $0.10 per diluted share.

On November 1, 2018, the Company and its wholly-owned subsidiary bank, Enterprise Bank & Trust, entered into a definitive agreement with Trinity Capital Corporation (“Trinity”) and its wholly-owned bank subsidiary, Los Alamos National Bank (“LANB”), pursuant to which the Company will acquire Trinity and LANB. Pursuant to the terms of the definitive agreement, upon consummation of the proposed transaction, Trinity shareholders will receive 0.1972 shares of EFSC common stock and $1.84 in cash for each share of Trinity common stock they hold. Headquartered in Los Alamos, New Mexico, LANB has approximately $1.3 billion in total assets and serves businesses and residents in Northern New Mexico and the Albuquerque metro area through its six full-service locations. The proposed transaction has been approved by the Federal Deposit Insurance Corporation, and remains subject to the approval of Trinity’s shareholders. The Company expects to consummate the proposed transaction in early 2019.






The Company’s Board of Directors approved the Company’s quarterly dividend of $0.14 per common share for the first quarter of 2019, an increase from $0.13 for the fourth quarter of 2018, payable on March 29, 2019 to shareholders of record as of March 15, 2019.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “2018 and fourth quarter net earnings are both record highs for our Company. Our C&I business model continues to perform well in the current interest rate environment. Our results are also bolstered by prudent growth, as well as our continued operating leverage and capital management activities.

Lally added, “We enter 2019 with earnings momentum, a strong balance sheet, and low levels of nonperforming assets; as well as the prospect of further, quality diversification of our business model with the pending acquisition of Trinity and LANB.”

Net Interest Income

Net interest income for the year ended December 31, 2018 totaled $191.9 million, an increase of $14.6 million, or 8%, compared to $177.3 million for the prior year. Net interest margin, on a fully tax equivalent basis, was 3.82% for 2018 compared to 3.88% for the prior year. Core net interest income1 growth of $18.6 million was due to organic growth in portfolio loan balances funded principally by core deposits, and a three basis point expansion of core net interest margin1 discussed below. Additionally, non-core acquired assets1 contributed $3.7 million to net interest income during 2018, but continued declining balances in this portfolio led to a $4.0 million decline in net interest income from 2017 levels.

Net interest income for the fourth quarter of 2018 totaled $50.6 million, an increase of $2.5 million, from the third quarter of 2018. Core net interest income1 expanded by $0.9 million due to an increase in average earning assets of $46 million in the quarter, driven by portfolio loan growth trends and a higher average loan yield. Additionally, incremental accretion income on non-core acquired assets1 increased to $2.1 million from $0.5 million, due primarily to a $1.6 million cash recovery.

Core net interest margin1 excludes incremental accretion on non-core acquired loans. See the table below for a quarterly and annual comparison.
 
For the Quarter ended
 
For the Year ended
($ in thousands)
December 31,
2018
 
September 30,
2018
 
December 31,
2017
 
December 31,
2018
 
December 31,
2017
Net interest income
$
50,593

 
$
48,093

 
$
47,404

 
$
191,905

 
$
177,304

Less: Incremental accretion income
$
2,109

 
$
535

 
$
2,503

 
$
3,701

 
$
7,718

Core net interest income1
$
48,484

 
$
47,558

 
$
44,901

 
$
188,204

 
$
169,586

 
 
 
 
 
 
 
 
 
 
Net interest margin (fully tax equivalent)
3.94
%
 
3.78
%
 
3.93
%
 
3.82
%
 
3.88
%
Core net interest margin1 (fully tax equivalent)
3.77
%
 
3.74
%
 
3.73
%
 
3.75
%
 
3.72
%




1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
2



Average Balance Sheet
The following tables present, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax equivalent basis.
 
For the Quarter ended
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
($ in thousands)
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, excluding incremental accretion*
$
4,272,132

 
$
56,431

 
5.24
%
 
$
4,252,525

 
$
54,968

 
5.13
%
 
$
4,025,789

 
$
47,929

 
4.72
%
Investments in debt and equity securities*
769,461

 
5,291

 
2.73

 
755,129

 
5,154

 
2.71

 
708,481

 
4,505

 
2.52

Short-term investments
76,726

 
364

 
1.88

 
64,919

 
306

 
1.87

 
92,001

 
267

 
1.15

Total earning assets
5,118,319

 
62,086

 
4.81

 
5,072,573

 
60,428

 
4.73

 
4,826,271

 
52,701

 
4.33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets
400,421

 
 
 
 
 
398,931

 
 
 
 
 
399,912

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
5,518,740

 
 
 
 
 
$
5,471,504

 
 
 
 
 
$
5,226,183

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing transaction accounts
$
864,175

 
$
1,221

 
0.56
%
 
$
758,621

 
$
799

 
0.42
%
 
$
850,612

 
$
474

 
0.22
%
Money market accounts
1,541,832

 
6,140

 
1.58

 
1,523,822

 
5,423

 
1.41

 
1,327,914

 
2,867

 
0.86

Savings
206,503

 
168

 
0.32

 
208,057

 
157

 
0.30

 
202,269

 
127

 
0.25

Certificates of deposit
696,803

 
3,053

 
1.74

 
678,214

 
2,878

 
1.68

 
613,442

 
1,757

 
1.14

Total interest-bearing deposits
3,309,313

 
10,582

 
1.27

 
3,168,714

 
9,257

 
1.16

 
2,994,237

 
5,225

 
0.69

Subordinated debentures
118,146

 
1,493

 
5.01

 
118,134

 
1,483

 
4.98

 
118,098

 
1,327

 
4.46

FHLB advances
178,185

 
1,121

 
2.50

 
311,522

 
1,729

 
2.20

 
191,978

 
672

 
1.39

Other borrowed funds
152,422

 
213

 
0.55

 
160,151

 
195

 
0.48

 
201,740

 
161

 
0.32

Total interest-bearing liabilities
3,758,066

 
13,409

 
1.42

 
3,758,521

 
12,664

 
1.34

 
3,506,053

 
7,385

 
0.84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
1,125,321

 
 
 
 
 
1,086,809

 
 
 
 
 
1,121,140

 
 
 
 
Other liabilities
37,489

 
 
 
 
 
39,409

 
 
 
 
 
42,996

 
 
 
 
Total liabilities
4,920,876

 
 
 
 
 
4,884,739

 
 
 
 
 
4,670,189

 
 
 
 
Shareholders' equity
597,864

 
 
 
 
 
586,765

 
 
 
 
 
555,994

 
 
 
 
Total liabilities and shareholders' equity
$
5,518,740

 
 
 
 
 
$
5,471,504

 
 
 
 
 
$
5,226,183

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core net interest income1
 
 
48,677

 
 
 
 
 
47,764

 
 
 
 
 
45,316

 
 
Core net interest margin1
 
 
 
 
3.77
%
 
 
 
 
 
3.74
%
 
 
 
 
 
3.73
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incremental accretion on non-core acquired loans
 
 
2,109

 
 
 
 
 
535

 
 
 
 
 
2,503

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net interest income
 
 
$
50,786

 
 
 
 
 
$
48,299

 
 
 
 
 
$
47,819

 
 
Net interest margin
 
 
 
 
3.94
%
 
 
 
 
 
3.78
%
 
 
 
 
 
3.93
%
* Non-taxable income is presented on a fully tax-equivalent basis using a 24.7% and 38.0% tax rate in 2018 and 2017, respectively. The tax-equivalent adjustments were $0.2 million for the three months ended December 31, 2018, and September 30, 2018, respectively, and $0.4 million for the three months ended December 31, 2017.



1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
3




 
For the Year ended
 
December 31, 2018
 
December 31, 2017
($ in thousands)
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans, excluding incremental accretion*
$
4,222,359

 
$
213,980

 
5.07
%
 
$
3,850,879

 
$
178,749

 
4.64
%
Investments in debt and equity securities*
752,265

 
19,801

 
2.63

 
681,414

 
17,078

 
2.51

Short-term investments
66,771

 
1,141

 
1.71

 
79,377

 
804

 
1.01

Total earning assets
5,041,395

 
234,922

 
4.66

 
4,611,670

 
196,631

 
4.26

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets
395,568

 
 
 
 
 
368,559

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
5,436,963

 
 
 
 
 
$
4,980,229

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing transaction accounts
$
827,155

 
$
3,643

 
0.44
%
 
$
802,993

 
$
2,195

 
0.27
%
Money market accounts
1,488,238

 
19,361

 
1.30

 
1,286,796

 
8,708

 
0.68

Savings
206,286

 
597

 
0.29

 
189,516

 
459

 
0.24

Certificates of deposit
653,486

 
10,168

 
1.56

 
586,115

 
5,838

 
1.00

Total interest-bearing deposits
3,175,165

 
33,769

 
1.06

 
2,865,420

 
17,200

 
0.60

Subordinated debentures
118,129

 
5,798

 
4.91

 
116,707

 
5,095

 
4.37

FHLB advances
271,493

 
5,556

 
2.05

 
192,489

 
2,356

 
1.22

Other borrowed funds
171,736

 
774

 
0.45

 
221,766

 
584

 
0.26

Total interest-bearing liabilities
3,736,523

 
45,897

 
1.23

 
3,396,382

 
25,235

 
0.74

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
1,086,863

 
 
 
 
 
1,017,660

 
 
 
 
Other liabilities
36,617

 
 
 
 
 
33,881

 
 
 
 
Total liabilities
4,860,003

 
 
 
 
 
4,447,923

 
 
 
 
Shareholders’ equity
576,960

 
 
 
 
 
532,306

 
 
 
 
Total liabilities and shareholders’ equity
$
5,436,963

 
 
 
 
 
$
4,980,229

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core net interest income1
 
 
189,025

 
 
 
 
 
171,396

 
 
Core net interest margin1
 
 
 
 
3.75
%
 
 
 
 
 
3.72
%
 
 
 
 
 
 
 
 
 
 
 
 
Incremental accretion on non-core acquired loans
 
 
3,700

 
 
 
 
 
7,718

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net interest income
 
 
$
192,725

 
 
 
 
 
$
179,114

 
 
Net interest margin
 
 
 
 
3.82
%
 
 
 
 
 
3.88
%
* Non-taxable income is presented on a fully tax-equivalent basis using a 24.7% and 38.0% tax rate in 2018 and 2017, respectively. The tax-equivalent adjustments were $0.8 million, and $1.8 million for the years ended December 31, 2018, and 2017, respectively.

Core net interest margin1 increased three basis points to 3.75% during 2018. This increase was primarily due to the impact of interest rate increases on the Company's asset sensitive balance sheet. Specifically, the yield on loans, excluding incremental accretion on non-core acquired loans, increased 43 basis points to 5.07% from 4.64% due to the effect of

1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
4



increasing interest rates on the existing variable-rate loan portfolio and higher rates on newly originated loans. The cost of total deposits also increased 46 basis points from the prior year period to 1.06% for the year ended December 31, 2018. The increase in the interest rate paid on deposits reflects market interest rate trends, as the Company continues to defend existing and attract new core deposit relationships. Additionally, the cost of total interest-bearing liabilities increased 49 basis points to 1.23% for the year ended December 31, 2018 from 0.74% for the prior year period.

The Company continues to manage its balance sheet to grow net interest income and expects to maintain core net interest margin1 over the coming quarters; however, pressure on funding costs could negate the expected trends in core net interest margin1.

Portfolio Loans

The following table presents portfolio loans with selected specialized lending detail for the most recent five quarters.
 
At the Quarter ended
($ in thousands)
Dec 31, 2018
 
Sept 30, 2018
 
June 30,
2018
 
March 31,
2018
 
Dec 31, 2017
C&I - general
$
994,057

 
$
967,525

 
$
990,153

 
$
945,682

 
$
936,588

CRE investor owned - general
857,428

 
841,310

 
836,516

 
836,499

 
801,156

CRE owner occupied - general
494,630

 
480,106

 
493,589

 
471,417

 
468,151

Enterprise value lendinga
465,992

 
442,439

 
442,877

 
439,352

 
407,644

Life insurance premium financinga
417,950

 
378,826

 
358,787

 
365,377

 
364,876

Residential real estate - general
299,518

 
309,053

 
318,841

 
328,966

 
342,140

Construction and land development - general
308,086

 
309,879

 
286,482

 
293,938

 
294,123

Tax creditsa
262,735

 
256,666

 
260,595

 
244,088

 
234,835

Agriculture
135,849

 
137,760

 
127,849

 
118,862

 
91,031

Consumer and other - general
96,880

 
126,194

 
136,647

 
117,901

 
126,115

Portfolio loans
4,333,125

 
4,249,758

 
4,252,336

 
4,162,082

 
4,066,659

Non-core acquired
16,876

 
17,672

 
23,425

 
28,763

 
30,391

Total Loans
$
4,350,001

 
$
4,267,430

 
$
4,275,761

 
$
4,190,845

 
$
4,097,050

 
 
 
 
 
 
 
 
 
 
Portfolio loan yield
5.23
%
 
5.12
%
 
4.99
%
 
4.87
%
 
4.71
%
Total loan yield
5.44
%
 
5.18
%
 
5.04
%
 
4.96
%
 
4.97
%
Total C&I loans to total loans
49
%
 
48
%
 
48
%
 
48
%
 
47
%
Variable interest rate loans to total loans
62
%
 
62
%
 
60
%
 
59
%
 
58
%
 
aSpecialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans.

Portfolio loans totaled $4.3 billion at December 31, 2018, increasing $83 million, or 8% annualized, compared to the linked quarter. On a year-over-year basis, portfolio loans increased $266 million, or 7%. We expect continued loan growth in 2019 to be a high single digit percentage, exclusive of the impact of the pending acquisition of Trinity and LANB.

The Company continues to focus on originating high-quality commercial and industrial (“C&I”) relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. C&I loans increased $202 million, or 11%, since December 31, 2017, of which $88 million occurred during the fourth quarter of 2018. The increase in C&I loans for the quarter was due primarily to seasonally strong growth in life insurance premium finance loans, which added $39 million, while general C&I loans increased $27 million from continued successful business development. Additionally, within the C&I category, Enterprise Value Lending (“EVL”) loans grew $24 million, and tax credits increased $6 million.


1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
5



Non-core acquired loans were those acquired from the FDIC and were previously covered by shared-loss agreements. These loans continue to be accounted for as purchased credit impaired (“PCI”) loans. At December 31, 2018 the remaining accretable yield on non-core acquired assets was estimated to be $9 million, and the non-accretable difference was approximately $7 million.

Asset Quality

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,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Nonperforming loans
$
16,745

 
$
17,044

 
$
14,801

 
$
15,582

 
$
15,687

Other real estate
469

 
408

 
454

 
455

 
498

Nonperforming assets
$
17,214

 
$
17,452


$
15,255


$
16,037


$
16,185

 
 
 
 
 
 
 
 
 
 
Nonperforming loans to total loans
0.38
%
 
0.40
%
 
0.35
%
 
0.37
%
 
0.38
%
Nonperforming assets to total assets
0.30
%
 
0.32
%
 
0.28
%
 
0.30
%
 
0.31
%
Allowance for loan losses to total loans
1.00
%
 
1.04
%
 
1.04
%
 
1.07
%
 
1.04
%
Net charge-offs (recoveries)
$
2,822

 
$
2,447

 
$
641

 
$
(226
)
 
$
3,313

 

For the year ended December 31, 2018, the Company recorded a net provision for loan losses of $6.6 million, compared to $10.1 million for the prior year. The current year included a provision reversal on PCI loans of $3.2 million compared to a provision reversal of $0.6 million for the prior year. Net charge-offs to average loans totaled 0.14% for 2018 compared to 0.27% in 2017. For the quarter ended December 31, 2018, the Company reported a provision for loan losses of $2.1 million, compared to $2.3 million in the linked quarter. The current quarter included a provision reversal on PCI loans of $1.1 million compared to a provision reversal of $0.1 million for the linked quarter. The provision is reflective of charge-offs, continued improvement in cash flow expectations for the PCI portfolio, as well as growth in portfolio loans.



1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
6




Deposits

The following table presents deposits broken out by type for the most recent five quarters.
 
At the Quarter Ended
 
 
 
 
 
 
 
 
 
 
($ in thousands)
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
Noninterest-bearing accounts
$
1,100,718

 
$
1,062,126

 
$
1,050,969

 
$
1,101,705

 
$
1,123,907

Interest-bearing transaction accounts
1,037,684

 
743,351

 
754,819

 
875,880

 
915,653

Money market and savings accounts
1,765,154

 
1,730,762

 
1,768,793

 
1,655,488

 
1,538,081

Brokered certificates of deposit
198,981

 
202,323

 
224,192

 
201,082

 
115,306

Other certificates of deposit
485,448

 
471,914

 
449,139

 
447,222

 
463,467

Total deposit portfolio
$
4,587,985

 
$
4,210,476

 
$
4,247,912

 
$
4,281,377

 
$
4,156,414

Noninterest-bearing deposits to total deposits
24
%
 
25
%
 
25
%
 
26
%
 
27
%

Total deposits at December 31, 2018 were $4.6 billion, an increase of $378 million, or 36% annualized, from September 30, 2018, and an increase of $432 million, or 10%, from December 31, 2017.

Core deposits, defined as total deposits excluding time deposits, were $3.9 billion at December 31, 2018, an increase of $367 million, or 41% on an annualized basis, from the linked quarter, and an increase of $326 million, or 9%, from the prior year period. Along with normal seasonal deposit growth, the Company continues to strengthen and diversify the funding base across all regions.

Noninterest-bearing deposits increased $39 million compared to September 30, 2018, and decreased $23 million compared to December 31, 2017. The total cost of deposits increased nine basis points to 0.95% at December 31, 2018 compared to 0.86% at September 30, 2018, and also increased 45 basis points from 0.50% at December 31, 2017. The cost of deposits reflects interest rate conditions for existing clients as well as rates for new customers.

Noninterest Income

Total noninterest income for the year was $38.3 million, an increase of $4.0 million, or 11% from 2017. This improvement was primarily due to higher income from deposit service charges, card services, and other miscellaneous income from non-core acquired assets and the sale of an equity partnership.
For the full year:
Deposit service charges increased $0.7 million or 6%
Income from card services increased $1.3 million or 23%
Other income increased $1.7 million or 24%

For the quarter ended December 31, 2018, total noninterest income was $10.7 million, an increase of $2.3 million, or 27%, from the linked quarter. Gains from tax credit brokerage activities, net of fair value market adjustments, were $2.3 million for the fourth quarter of 2018, compared to $0.2 million for the linked third quarter. Sales of 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.

The Company expects growth in noninterest income of a high single digit percentage for 2019 over 2018 levels, exclusive of the impact of the pending acquisition of Trinity and LANB.


1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
7



Noninterest Expenses

Noninterest expenses for the year were $119.0 million, an increase of $4.0 million, or 3% from 2017. Increases in employee compensation and benefits and other miscellaneous expenses primarily consisting of tax credit investment amortization expense were partially offset by a reduction in merger related expenses. The Company’s efficiency ratio was 51.70% for 2018, compared to 54.35% for the prior year. The Company’s core efficiency ratio1 was 52.04% for 2018, compared to 52.93% for the prior year.

For the quarter ended December 31, 2018, noninterest expenses were $30.7 million, an increase of $0.8 million, or 3% from the linked quarter. Included in the fourth quarter expenses were merger related expenses totaling $1.3 million. The fourth quarter’s resulting efficiency ratio was 50.16%, compared to 52.96% for the linked quarter. The Company’s core efficiency ratio1 was 49.77% for the fourth quarter compared to 52.23% for the linked quarter. The decrease from the linked quarter is reflective of higher income, including seasonal tax credit activity, and holding noninterest expense steady.

The Company expects to continue to invest in revenue producing associates and other infrastructure that supports additional growth. These investments are expected to result in expense growth, at a rate of 35% - 45% of projected revenue growth for 2019, resulting in continued improvements to the Company’s efficiency ratio, exclusive of the impact of the pending acquisition of Trinity and LANB.

Income Taxes

The Company’s effective tax rate was 14.7% for the year ended December 31, 2018 compared to 44.3% for the prior year. The lower corporate federal tax rate for 2018 and other tax planning activities reduced income tax expense. Additionally, as a result of changes to U.S. corporate tax laws in 2017, a revaluation of the Company’s deferred tax assets resulted in a $12.1 million charge in the prior year period.

The Company expects its effective tax rate for 2019 to be approximately 18% - 20%.

Capital

 
At the Quarter ended
Percent
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
Total risk-based capital to risk-weighted assets
13.02
%
 
12.94
%
 
12.60
%
 
12.41
%
 
12.21
%
Common equity tier 1 capital to risk-weighted assets
9.79
%
 
9.66
%
 
9.32
%
 
9.07
%
 
8.88
%
Tangible common equity to tangible assets1
8.66
%
 
8.54
%
 
8.30
%
 
8.13
%
 
8.14
%

In the fourth quarter of 2018, as part of its capital management efforts, the Company repurchased 299,510 shares of its common stock for $12.5 million pursuant to its publicly announced share repurchase program.

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.

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 net interest margin, efficiency ratios, 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

1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
8



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. Commencing in the fourth quarter of 2018, due to declining balances in the non-core acquired loan portfolio, the Company determined to no longer report core earnings, which is a non-GAAP measure, on a full income statement presentation basis as the variance to the most directly comparable GAAP measure is now insignificant and to avoid any suggestion that such non-GAAP presentation exhibits prominence over the most directly comparable GAAP measure.

The Company considers its core net interest margin and core efficiency ratio, collectively “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 non-core acquired 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 non-core acquired loans, but exclude incremental accretion on these loans. Core performance measures also exclude the gain or loss on sale of other real estate from non-core acquired loans, and expenses directly related to non-core acquired loans and other assets formerly covered under FDIC loss share agreements. Core performance measures also exclude certain other income and expense items, such as executive separation costs, merger related expenses, facilities charges, deferred tax asset revaluation, and the gain or loss on sale of investment securities, 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.

Conference Call and Webcast Information
The Company will host a conference call and webcast at 2:30 p.m. Central time on Tuesday, January 22, 2019. During the call, management will review the fourth quarter and full year of 2018 results and related matters. This press release as well as a related slide presentation will be accessible on the Company’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 1-888-394-8218 (Conference ID #2572790). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC4Q2018earnings and register to receive a dial in number, passcode, and pin number. The replay 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.

Forward-looking Statements
Readers should note that, in addition to the historical information contained herein, this press release contains “forward-looking statements” within the meaning of, and intended to be covered by, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements about the Company’s plans, expectations, and projections of future financial and operating results, as well as statements regarding the Company’s plans, objectives, expectations or consequences of announced transactions. The Company uses words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”

1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
9



“potential,” “could,” “continue,” and “intend”, and variations of such words and similar expressions, in this release to identify such forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. Factors that could cause or contribute to such differences include, but are not limited to, the Company’s ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses and grow the acquired operations, as well as 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, the Company’s 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 2017 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission (the “SEC”). 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.

No Offer or Solicitation
This communication relates to a proposed merger and business combination transaction (the “Merger”) between the Company and Trinity. This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any new securities or a solicitation of any vote or approval, in any jurisdiction, pursuant to the Merger or otherwise, nor shall there be any sale, issuance, exchange or transfer of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.

Additional Information and Where to Find It
In connection with the proposed Merger, the Company has filed with the SEC on December 31, 2018 an amendment to the registration statement on Form S-4 (File No. 333-228751) that was originally filed on December 11, 2018 that includes a preliminary proxy statement/prospectus. The Company will also file other documents with the SEC regarding the Merger, including the definitive proxy statement/prospectus. The information in the preliminary proxy statement/prospectus is not complete and may be changed. The definitive proxy statement/prospectus will be sent to the shareholders of Trinity once the registration statement is declared effective by the SEC. This document is not a substitute for the registration statement and preliminary proxy statement/prospectus filed with the SEC, including any amendments or supplements thereto, or any other documents that the Company may file with the SEC or that the Company or Trinity may send to stockholders of the Company or shareholders of Trinity in connection with the Merger. INVESTORS AND SECURITY HOLDERS OF THE COMPANY AND TRINITY ARE URGED TO READ THE REGISTRATION STATEMENT, THE PRELIMINARY PROXY STATEMENT/PROSPECTUS, THE DEFINITIVE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND RELATED MATTERS. Investors and security holders are able to obtain free copies of the registration statement and the preliminary proxy statement/prospectus and all other documents filed or that will be filed with the SEC by the Company through the website maintained by the SEC at www.sec.gov.

Participants in Solicitation
The Company, Trinity and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Trinity’s common stock in connection with the proposed Merger. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2018 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 14, 2018 and as amended by supplements to the proxy statement filed with the SEC on March 14, 2018, March 30, 2018, and April 19, 2018. Information about the directors and executive officers of Trinity is set forth in the proxy statement for Trinity’s 2018 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on April 20, 2018. Additional information regarding the interest of those participants and other persons who may be deemed participants in the Merger may be obtained by reading the preliminary proxy statement/prospectus, the definitive proxy statement/prospectus when it becomes available, and other

1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
10



relevant documents filed with the SEC regarding the Merger when they become available. Free copies of these documents may be obtained as described above.

For more information contact:
Investor Relations: Keene Turner, Executive Vice President and CFO (314) 512-7233
Media: Karen Loiterstein, Senior Vice President (314) 512-7141


1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
11



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
 
For the Quarter ended/At
 
For the Year ended
($ in thousands, except per share data)
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
 
Dec 31,
2018
 
Dec 31,
2017
EARNINGS SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
50,593

 
$
48,093

 
$
47,048

 
$
46,171

 
$
47,404

 
$
191,905

 
$
177,304

Provision for loan losses
2,120

 
2,263

 
390

 
1,871

 
2,907

 
6,644

 
10,130

Noninterest income
10,702

 
8,410

 
9,693

 
9,542

 
11,112

 
38,347

 
34,394

Noninterest expense
30,747

 
29,922

 
29,219

 
29,143

 
28,260

 
119,031

 
115,051

Income before income tax expense
28,428

 
24,318

 
27,132

 
24,699

 
27,349

 
104,577

 
86,517

Income tax expense1
4,899

 
1,802

 
4,881

 
3,778

 
19,820

 
15,360

 
38,327

Net income1
$
23,529

 
$
22,516

 
$
22,251

 
$
20,921

 
$
7,529

 
$
89,217

 
$
48,190

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
1.02

 
$
0.97

 
$
0.95

 
$
0.90

 
$
0.32

 
$
3.83

 
$
2.07

Return on average assets
1.69
%
 
1.63
%
 
1.65
%
 
1.59
%
 
0.57
%
 
1.64
%
 
0.97
%
Return on average common equity
15.61

 
15.22

 
15.70

 
15.31

 
5.37

 
15.46

 
9.05

Return on average tangible common equity
19.79

 
19.42

 
20.23

 
19.92

 
6.99

 
19.83

 
11.63

Net interest margin (fully tax equivalent)
3.94

 
3.78

 
3.77

 
3.80

 
3.93

 
3.82

 
3.88

Core net interest margin (fully tax equivalent)2
3.77

 
3.74

 
3.75

 
3.74

 
3.73

 
3.75

 
3.72

Efficiency ratio
50.16

 
52.96

 
51.50

 
52.31

 
48.29

 
51.70

 
54.35

Core efficiency ratio2
49.77

 
52.23

 
52.36

 
54.02

 
50.24

 
52.04

 
52.93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
5,645,662

 
$
5,517,539

 
$
5,509,924

 
$
5,383,102

 
$
5,289,225

 
 
 
 
Total average assets
5,518,740

 
5,471,504

 
5,415,151

 
5,340,112

 
5,226,183

 
$
5,436,963

 
$
4,980,229

Total deposits
4,587,985

 
4,210,476

 
4,247,912

 
4,281,377

 
4,156,414

 
 
 
 
Total average deposits
4,434,634

 
4,255,523

 
4,230,291

 
4,124,326

 
4,115,377

 
4,262,028

 
3,883,080

Period end common shares outstanding
22,812

 
23,092

 
23,141

 
23,111

 
23,089

 
 
 
 
Dividends per common share
$
0.13

 
$
0.12

 
$
0.11

 
$
0.11

 
$
0.11

 
$
0.47

 
$
0.44

Tangible book value per common share
$
20.95

 
$
19.94

 
$
19.32

 
$
18.49

 
$
18.20

 
 
 
 
Tangible common equity to tangible assets2
8.66
%
 
8.54
%
 
8.30
%
 
8.13
%
 
8.14
%
 
 
 
 
Total risk-based capital to risk-weighted assets
13.02

 
12.94

 
12.60

 
12.41

 
12.21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Includes $12.1 million ($0.52) per diluted share) deferred tax asset revaluation charge for the quarter and year ended December 31, 2017 due to U.S. corporate income tax reform.
2Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.


12



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,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
 
Dec 31,
2018
 
Dec 31,
2017
INCOME STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST INCOME
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest income
$
64,002

 
$
60,757

 
$
57,879

 
$
55,164

 
$
54,789

 
$
237,802

 
$
202,539

Total interest expense
13,409

 
12,664

 
10,831

 
8,993

 
7,385

 
45,897

 
25,235

Net interest income
50,593

 
48,093

 
47,048

 
46,171

 
47,404

 
191,905

 
177,304

Provision for loan losses
2,120

 
2,263

 
390

 
1,871

 
2,907

 
6,644

 
10,130

Net interest income after provision for loan losses
48,473

 
45,830

 
46,658

 
44,300

 
44,497

 
185,261

 
167,174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NONINTEREST INCOME
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposit service charges
2,894

 
2,997

 
3,007

 
2,851

 
2,897

 
11,749

 
11,043

Wealth management revenue
1,974

 
2,012

 
2,141

 
2,114

 
2,153

 
8,241

 
8,102

Card services revenue
1,760

 
1,760

 
1,650

 
1,516

 
1,545

 
6,686

 
5,433

Tax credit activity, net
2,312

 
192

 
64

 
252

 
2,249

 
2,820

 
2,581

Gain (loss) on sale of other real estate

 
13

 

 

 
76

 
13

 
93

Gain on sale of investment securities

 

 

 
9

 

 
9

 
22

Other income
1,762

 
1,436

 
2,831

 
2,800

 
2,192

 
8,829

 
7,120

Total noninterest income
10,702

 
8,410


9,693


9,542


11,112


38,347


34,394

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NONINTEREST EXPENSE
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee compensation and benefits
16,669

 
16,297

 
16,582

 
16,491

 
15,292

 
66,039

 
61,388

Occupancy
2,408

 
2,394

 
2,342

 
2,406

 
2,429

 
9,550

 
9,057

Merger related expenses
1,271

 

 

 

 

 
1,271

 
6,462

Other
10,399

 
11,231

 
10,295

 
10,246

 
10,539

 
42,171

 
38,144

Total noninterest expenses
30,747

 
29,922

 
29,219

 
29,143

 
28,260

 
119,031

 
115,051

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income tax expense
28,428

 
24,318

 
27,132

 
24,699

 
27,349

 
104,577

 
86,517

Income tax expense
4,899

 
1,802

 
4,881

 
3,778

 
19,820

 
15,360

 
38,327

Net income
$
23,529

 
$
22,516

 
$
22,251

 
$
20,921

 
$
7,529

 
$
89,217

 
$
48,190

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
1.02

 
$
0.97

 
$
0.96

 
$
0.91

 
$
0.33

 
$
3.86

 
$
2.10

Diluted earnings per share
1.02

 
0.97

 
0.95

 
0.90

 
0.32

 
3.83

 
2.07




13



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
    
 
At the Quarter ended
($ in thousands)
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
BALANCE SHEETS
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
91,511

 
$
78,119

 
$
91,851

 
$
81,604

 
$
91,084

Interest-earning deposits
108,226

 
81,351

 
87,586

 
63,897

 
64,884

Debt and equity investments
813,702

 
775,344

 
756,203

 
752,114

 
741,792

Loans held for sale
392

 
738

 
1,388

 
1,748

 
3,155

Loans
4,350,001


4,267,430

 
4,275,761

 
4,190,845

 
4,097,050

Less: Allowance for loan losses
43,476

 
44,186

 
44,370

 
44,650

 
42,577

Total loans, net
4,306,525

 
4,223,244

 
4,231,391

 
4,146,195

 
4,054,473

Other real estate
469

 
408

 
454

 
455

 
498

Fixed assets, net
32,109

 
32,354

 
32,814

 
32,127

 
32,618

Tax credits, held for sale
37,587

 
45,625

 
46,481

 
42,364

 
43,468

Goodwill
117,345

 
117,345

 
117,345

 
117,345

 
117,345

Intangible assets, net
8,553

 
9,148

 
9,768

 
10,399

 
11,056

Other assets
129,243

 
153,863

 
134,643

 
134,854

 
128,852

Total assets
$
5,645,662

 
$
5,517,539

 
$
5,509,924

 
$
5,383,102

 
$
5,289,225

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
$
1,100,718

 
$
1,062,126

 
$
1,050,969

 
$
1,101,705

 
$
1,123,907

Interest-bearing deposits
3,487,267

 
3,148,350

 
3,196,943

 
3,179,672

 
3,032,507

Total deposits
4,587,985

 
4,210,476

 
4,247,912

 
4,281,377

 
4,156,414

Subordinated debentures
118,156

 
118,144

 
118,131

 
118,118

 
118,105

Federal Home Loan Bank advances
70,000

 
401,000

 
361,534

 
224,624

 
172,743

Other borrowings
223,450

 
161,795

 
167,216

 
166,589

 
253,674

Other liabilities
42,267

 
39,287

 
41,047

 
37,379

 
39,716

Total liabilities
5,041,858

 
4,930,702

 
4,935,840

 
4,828,087

 
4,740,652

Shareholders’ equity
603,804

 
586,837

 
574,084

 
555,015

 
548,573

Total liabilities and shareholders’ equity
$
5,645,662


$
5,517,539


$
5,509,924


$
5,383,102

 
$
5,289,225

 
 
 
 
 
 
 
 
 
 




14



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
($ in thousands)
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
LOAN PORTFOLIO
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,121,446

 
$
2,033,278

 
$
2,038,400

 
$
1,982,086

 
$
1,919,145

Commercial real estate
1,474,582

 
1,443,088

 
1,445,981

 
1,413,897

 
1,363,605

Construction real estate
331,899

 
329,288

 
302,514

 
309,227

 
305,468

Residential real estate
299,873

 
309,414

 
319,208

 
329,337

 
342,518

Consumer and other
105,325

 
134,690

 
146,233

 
127,535

 
135,923

Total portfolio loans
4,333,125

 
4,249,758

 
4,252,336

 
4,162,082

 
4,066,659

Non-core acquired loans
16,876

 
17,672

 
23,425

 
28,763

 
30,391

Total loans
$
4,350,001

 
$
4,267,430


$
4,275,761


$
4,190,845


$
4,097,050

 
 
 
 
 
 
 
 
 
 
DEPOSIT PORTFOLIO
 
 
 
 
 
 
 
 
 
Noninterest-bearing accounts
$
1,100,718

 
$
1,062,126

 
$
1,050,969

 
$
1,101,705

 
$
1,123,907

Interest-bearing transaction accounts
1,037,684

 
743,351

 
754,819

 
875,880

 
915,653

Money market and savings accounts
1,765,154

 
1,730,762

 
1,768,793

 
1,655,488

 
1,538,081

Brokered certificates of deposit
198,981

 
202,323

 
224,192

 
201,082

 
115,306

Other certificates of deposit
485,448

 
471,914

 
449,139

 
447,222

 
463,467

Total deposit portfolio
$
4,587,985

 
$
4,210,476


$
4,247,912


$
4,281,377


$
4,156,414

 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCES
 
 
 
 
 
 
 
 
 
Portfolio loans
$
4,254,180

 
$
4,230,089

 
$
4,196,875

 
$
4,108,400

 
$
3,990,233

Non-core acquired loans
17,396

 
21,891

 
26,179

 
29,125

 
31,957

Loans held for sale
556

 
544

 
962

 
1,445

 
3,599

Debt and equity investments
769,461

 
755,129

 
743,534

 
740,587

 
708,481

Interest-earning assets
5,118,319

 
5,072,573

 
5,023,607

 
4,948,875

 
4,826,271

Total assets
5,518,740

 
5,471,504

 
5,415,151

 
5,340,112

 
5,226,183

Deposits
4,434,634

 
4,255,523

 
4,230,291

 
4,124,326

 
4,115,377

Shareholders’ equity
597,864

 
586,765

 
568,555

 
554,066

 
555,994

Tangible common equity
471,678

 
459,975

 
441,136

 
426,006

 
427,258

 
 
 
 
 
 
 
 
 
 
YIELDS (fully tax equivalent)
 
 
 
 
 
 
 
 
 
Portfolio loans
5.23
%
 
5.12
%
 
4.99
%
 
4.87
%
 
4.71
%
Non-core acquired loans
55.99

 
16.93

 
12.37

 
16.60

 
37.53

Total loans
5.44

 
5.18

 
5.04

 
4.96

 
4.97

Debt and equity investments
2.73

 
2.71

 
2.58

 
2.50

 
2.52

Interest-earning assets
4.98

 
4.77

 
4.64

 
4.54

 
4.54

Interest-bearing deposits
1.27

 
1.16

 
0.98

 
0.82

 
0.69

Total deposits
0.95

 
0.86

 
0.73

 
0.61

 
0.50

Subordinated debentures
5.01

 
4.98

 
4.94

 
4.70

 
4.46

Borrowed funds
1.60

 
1.62

 
1.41

 
1.15

 
0.84

Cost of paying liabilities
1.42

 
1.34

 
1.16

 
0.99

 
0.84

Net interest margin
3.94

 
3.78

 
3.77

 
3.80

 
3.93



15



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
(in thousands, except per share data)
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
ASSET QUALITY
 
 
 
 
 
 
 
 
 
Net charge-offs (recoveries)
$
2,822

 
$
2,447

 
$
641

 
$
(226
)
 
$
3,313

Nonperforming loans
16,745

 
17,044

 
14,801

 
15,582

 
15,687

Classified assets
70,126

 
73,704

 
74,001

 
77,195

 
73,239

Nonperforming loans to total loans
0.38
%
 
0.40
%
 
0.35
%
 
0.37
 %
 
0.38
%
Nonperforming assets to total assets
0.30

 
0.32

 
0.28

 
0.30

 
0.31

Allowance for loan losses to total loans
1.00

 
1.04

 
1.04

 
1.07

 
1.04

Allowance for loan losses to nonperforming loans
259.6

 
259.3

 
299.8

 
281.7

 
271.4

Net charge-offs (recoveries) to average loans (annualized)
0.26

 
0.23

 
0.06

 
(0.02
)
 
0.33

 
 
 
 
 
 
 
 
 
 
WEALTH MANAGEMENT
 
 
 
 
 
 
 
 
 
Trust assets under management
$
1,119,329

 
$
1,174,798

 
$
1,337,030

 
$
1,319,259

 
$
1,330,227

Trust assets under administration
1,811,512

 
1,984,859

 
2,165,870

 
2,151,697

 
2,169,946

 
 
 
 
 
 
 
 
 
 
MARKET DATA
 
 
 
 
 
 
 
 
 
Book value per common share
$
26.47

 
$
25.41

 
$
24.81

 
$
24.02

 
$
23.76

Tangible book value per common share
20.95

 
19.94

 
19.32

 
18.49

 
18.20

Market value per share
37.63

 
53.05

 
53.95

 
46.90

 
45.15

Period end common shares outstanding
22,812

 
23,092

 
23,141

 
23,111

 
23,089

Average basic common shares
23,014

 
23,148

 
23,124

 
23,115

 
23,069

Average diluted common shares
23,170

 
23,329

 
23,318

 
23,287

 
23,342

 
 
 
 
 
 
 
 
 
 
CAPITAL
 
 
 
 
 
 
 
 
 
Total risk-based capital to risk-weighted assets
13.02
%
 
12.94
%
 
12.60
%
 
12.41
 %
 
12.21
%
Tier 1 capital to risk-weighted assets
11.14

 
11.03

 
10.68

 
10.46

 
10.29

Common equity tier 1 capital to risk-weighted assets
9.79

 
9.66

 
9.32

 
9.07

 
8.88

Tangible common equity to tangible assets1
8.66

 
8.54

 
8.30

 
8.13

 
8.14

 
 
 
 
 
 
 
 
 
 
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.


16



ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
 
For the Quarter ended
 
For the Year ended
($ in thousands, except per share data)
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
 
Dec 31,
2018
 
Dec 31,
2017
CORE PERFORMANCE MEASURES
 
 
 
 
Net interest income
$
50,593

 
$
48,093

 
$
47,048

 
$
46,171

 
$
47,404

 
$
191,905

 
$
177,304

Less: Incremental accretion income
2,109

 
535

 
291

 
766

 
2,503

 
3,701

 
7,718

Core net interest income
48,484

 
47,558

 
46,757

 
45,405

 
44,901

 
188,204

 
169,586

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total noninterest income
10,702

 
8,410

 
9,693

 
9,542

 
11,112

 
38,347

 
34,394

Less: Other income from non-core acquired assets
10

 
7

 
18

 
1,013

 
(6
)
 
1,048

 
(6
)
Less: Gain on sale of investment securities

 

 

 
9

 

 
9

 
22

Less: Other non-core income
26

 

 
649

 

 

 
675

 

Core noninterest income
10,666

 
8,403

1

9,026

2

8,520

3

11,118

4

36,615

5

34,378

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total core revenue
59,150

 
55,961

 
55,783

 
53,925

 
56,019

 
224,819

 
203,964

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total noninterest expense
30,747

 
29,922

 
29,219

 
29,143

 
28,260

 
119,031

 
115,051

Less: Other expenses related to non-core acquired loans
40

 
12

 
(229
)
 
14

 
114

 
(163
)
 
240

Less: Facilities disposal

 

 
239

 

 

 
239

 
389

Less: Merger related expenses
1,271

 

 

 

 

 
1,271

 
6,462

Less: Non-recurring excise tax

 
682

 

 

 

 
682

 

Core noninterest expense
29,436

 
29,228

 
29,209


29,129


28,146


117,002


107,960

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core efficiency ratio
49.77
%
 
52.23
%
 
52.36
%
 
54.02
%
 
50.24
%
 
52.04
%
 
52.93
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
 
 
 
 
Net interest income
$
50,786

 
$
48,299

 
$
47,254

 
$
46,386

 
$
47,824

 
$
192,725

 
$
179,114

Less: Incremental accretion income
2,109

 
535

 
291

 
766

 
2,503

 
3,701

 
7,718

Core net interest income
$
48,677

 
$
47,764

 
$
46,963

 
$
45,620

 
$
45,321

 
$
189,024

 
$
171,396

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average earning assets
$
5,118,319

 
$
5,072,573

 
$
5,023,607

 
$
4,948,875

 
$
4,826,271

 
$
5,041,395

 
$
4,611,671

Reported net interest margin
3.94
%
 
3.78
%
 
3.77
%
 
3.80
%
 
3.93
%
 
3.82
%
 
3.88
%
Core net interest margin
3.77

 
3.74

 
3.75

 
3.74

 
3.73

 
3.75

 
3.72




17



 
At the Quarter ended
($ in thousands)
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
REGULATORY CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders’ equity
$
603,804

 
$
586,837

 
$
574,084

 
$
555,015

 
$
548,573

Less: Goodwill
117,345

 
117,345

 
117,345

 
117,345

 
117,345

Less: Intangible assets, net of deferred tax liabilities
6,440

 
6,888

 
7,355

 
7,831

 
6,661

Less: Unrealized gains (losses)
(9,282
)
 
(16,627
)
 
(12,580
)
 
(11,563
)
 
(3,818
)
Plus: Other

 

 

 

 
12

Common equity tier 1 capital
489,301

 
479,231

 
461,964

 
441,402

 
428,397

Plus: Qualifying trust preferred securities
67,600

 
67,600

 
67,600

 
67,600

 
67,600

Plus: Other
57

 
60

 
60

 
60

 
48

Tier 1 capital
556,958

 
546,891

 
529,624

 
509,062

 
496,045

Plus: Tier 2 capital
93,901

 
94,611

 
94,795

 
95,075

 
93,002

Total risk-based capital
$
650,859

 
$
641,502

 
$
624,419

 
$
604,137

 
$
589,047

 
 
 
 
 
 
 
 
 
 
Total risk-weighted assets
$
4,999,363

 
$
4,958,999

 
$
4,956,820

 
$
4,867,491

 
$
4,822,695

 
 
 
 
 
 
 
 
 
 
Common equity tier 1 capital to risk-weighted assets
9.79
%
 
9.66
%
 
9.32
%
 
9.07
%
 
8.88
%
Tier 1 capital to risk-weighted assets
11.14

 
11.03

 
10.68

 
10.46

 
10.29

Total risk-based capital to risk-weighted assets
13.02

 
12.94

 
12.60

 
12.41

 
12.21

 
 
 
 
 
 
 
 
 
 
SHAREHOLDERS’ EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders’ equity
$
603,804

 
$
586,837

 
$
574,084

 
$
555,015

 
$
548,573

Less: Goodwill
117,345

 
117,345

 
117,345

 
117,345

 
117,345

Less: Intangible assets
8,553

 
9,148

 
9,768

 
10,399

 
11,056

Tangible common equity
$
477,906

 
$
460,344


$
446,971


$
427,271


$
420,172

 
 
 
 
 
 
 
 
 
 
Total assets
$
5,645,662

 
$
5,517,539

 
$
5,509,924

 
$
5,383,102

 
$
5,289,225

Less: Goodwill
117,345

 
117,345

 
117,345

 
117,345

 
117,345

Less: Intangible assets
8,553

 
9,148

 
9,768

 
10,399

 
11,056

Tangible assets
$
5,519,764

 
$
5,391,046

 
$
5,382,811

 
$
5,255,358

 
$
5,160,824

 
 
 
 
 
 
 
 
 
 
Tangible common equity to tangible assets
8.66
%
 
8.54
%
 
8.30
%
 
8.13
%
 
8.14
%



18