0001025835-19-000074.txt : 20190722 0001025835-19-000074.hdr.sgml : 20190722 20190722172158 ACCESSION NUMBER: 0001025835-19-000074 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20190722 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190722 DATE AS OF CHANGE: 20190722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERPRISE FINANCIAL SERVICES CORP CENTRAL INDEX KEY: 0001025835 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 431706259 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15373 FILM NUMBER: 19966405 BUSINESS ADDRESS: STREET 1: 150 NORTH MERAMEC STREET 2: 150 NORTH MERAMEC CITY: CLAYTON STATE: MO ZIP: 63105 BUSINESS PHONE: 3147255500 MAIL ADDRESS: STREET 1: 150 NORTH MERAMEC STREET 2: 150 NORTH MERAMEC CITY: CLAYTON STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: ENTERBANK HOLDINGS INC DATE OF NAME CHANGE: 19961024 8-K 1 a8kearningsrelease063019.htm 8-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) 
July 22, 2019
ENTERPRISE FINANCIAL SERVICES CORP
(Exact name of registrant as specified in its charter)
Delaware 
001-15373 
43-1706259 
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)

150 N. Meramec, St. Louis, Missouri
(Address of principal executive offices)
63105
(Zip Code)

Registrant's telephone number, including area code 
(314) 725-5500 
  
Not applicable 
(Former name or former address, if changed since last report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
EFSC
 
Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Item 2.02 Results of Operations and Financial Condition.

On July 22, 2019, Enterprise Financial Services Corp (the "Company" or "EFSC") issued a press release announcing financial information for the quarter ended June 30, 2019. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The press release and the information included in this Item 2.02 shall not be deemed “filed” with the Commission.

On July 23, 2019, at 2:30 p.m. Central time, the Company intends to hold a webcast to present information on its results of operations for the quarter ended June 30, 2019. The slide presentation which will accompany the webcast is furnished in this report, pursuant to this Item 2.02, as Exhibit 99.2, and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(a)     Not applicable.
(b)     Not applicable.
(c)     Not applicable.
(d)     Exhibits.

Exhibit     
Number    Description







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
 
 
ENTERPRISE FINANCIAL SERVICES CORP
 
 
 
 
 
Date:
July 22, 2019
 
By:
/s/ Troy R. Dumlao
 
 
 
 
Troy R. Dumlao
 
 
 
 
Senior Vice President and Chief Accounting Officer
 
 
 
 
 





EX-99.1 2 ex991financialstatementsan.htm EARNINGS RELEASE Exhibit


EXHIBIT 99.1
enterprisefinancialservices.jpg
ENTERPRISE FINANCIAL REPORTS SECOND QUARTER 2019 RESULTS

Second Quarter Highlights
Net income of $18.4 million, $0.68 per diluted share, or $0.981 excluding merger-related expenses
Net interest margin (tax equivalent) 3.86%, stable with the first quarter’s margin of 3.87%
Return on average assets (“ROAA”) of 1.05%
Loans increased $132 million, or 11% annualized
Merger-related expenses of $10.3 million, pretax, reduced diluted earnings per share and ROAA by $0.30 and 0.45%, respectively

St. Louis, Mo. July 22, 2019 – Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $18.4 million for the quarter ended June 30, 2019, an increase of $2.3 million compared to the linked first quarter (“linked quarter”) and a decrease of $3.8 million from the prior year quarter. Earnings per diluted share (“EPS”) was $0.68 for the current quarter, compared to $0.67 and $0.95 for the linked and prior year quarters, respectively. Merger-related expenses from the Trinity Capital Corporation (“Trinity”) acquisition reduced net income by $10.3 million pretax ($8.0 million after tax), or $0.30 per diluted share in the current quarter. Net interest margin, on a tax equivalent basis, in the current quarter was 3.86%, compared to 3.87% in the linked quarter and 3.77% in the prior year quarter. Core net interest margin,1 on a tax equivalent basis, expanded slightly in the current quarter to 3.80%, as compared to 3.79% in the linked quarter and 3.75% in the prior year quarter.

ROAA, return on average common equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were 1.05%, 9.09%, and 12.92%, respectively in the second quarter of 2019. The impact of merger-related expenses reduced ROAA, ROAE, and ROATCE by 0.45%, 3.93% and 5.60%, respectively. Excluding merger-related expenses, the adjusted ROAA, adjusted ROAE, and adjusted ROATCE were 1.50%, 13.02%, and 18.52%, respectively for the second quarter of 2019.1

The Company’s Board of Directors approved a quarterly dividend of $0.16 per common share, an increase from $0.15 for the prior quarter, payable on September 27, 2019 to shareholders of record as of September 13, 2019.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “The core fundamentals of our Company remain strong and are reflected in our financial results for the period. The second quarter results were highlighted by strong loan growth in our specialized lending and commercial real estate portfolios, and included the first full quarter of Trinity’s operations. We are excited to have successfully completed the primary system integration of Trinity in the second quarter and look forward to the continued revenue generation and cost saving opportunities from the transaction.”

Mr. Lally continued, “The realized growth in our net interest income combined with our operating leverage puts us in a solid position as we move forward. Although the interest rate environment has been challenging in recent months, we have managed our balance sheet to provide a stable margin over the last several quarters. I expect we will continue to deliver strong financial results based on the depth and strength of our relationship managers, our disciplined credit culture and our geographic diversification.”


1 Adjusted EPS, core net interest margin, ROATCE, adjusted ROAA, adjusted ROAE and adjusted ROATCE are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.





Net Interest Income
The Company closed its acquisition of Trinity on March 8, 2019. The results of operations of Trinity are included in our consolidated results from this date forward and are excluded from preceding periods. 

Net interest income for the second quarter increased $9.4 million to $61.7 million from $52.3 million in the linked quarter, and increased $14.7 million from the prior year period. The increase is primarily due to the inclusion of Trinity for the entire second quarter. Net interest margin, on a tax equivalent basis, was 3.86% for the second quarter, compared to 3.87% in the linked quarter, and 3.77% in the second quarter of 2018.

Quarterly core net interest income and core net interest margin noted in the table below exclude incremental accretion on non-core acquired loans, which were acquired from the FDIC and previously covered by loss share agreements.

 
For the Quarter ended
($ in thousands)
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Net interest income
$
61,715

 
$
52,343

 
$
50,593

 
$
48,093

 
$
47,048

Less: Incremental accretion income
910

 
1,157

 
2,109

 
535

 
291

Core net interest income2
$
60,805

 
$
51,186

 
$
48,484

 
$
47,558

 
$
46,757

 
 
 
 
 
 
 
 
 
 
Net interest margin (tax equivalent)
3.86
%
 
3.87
%
 
3.94
%
 
3.78
%
 
3.77
%
Core net interest margin,2 (tax equivalent)
3.80
%
 
3.79
%
 
3.77
%
 
3.74
%
 
3.75
%

2 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.



2



Average Balance Sheets
The following table presents, 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. Averages for the quarter ended March 31, 2019 only reflect the Trinity acquired balances effective as of March 8, 2019.
 
For the Quarter ended
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
($ in thousands)
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Average Yield/ Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, excluding incremental accretion*
$
5,095,181

 
$
68,830

 
5.42
%
 
$
4,511,387

 
$
59,973

 
5.39
%
 
$
4,224,016

 
$
52,774

 
5.01
%
Investments in debt and equity securities*
1,246,529

 
9,152

 
2.95

 
896,936

 
6,292

 
2.84

 
743,534

 
4,789

 
2.58

Short-term investments
111,291

 
703

 
2.53

 
102,166

 
447

 
1.77

 
56,057

 
231

 
1.65

Total earning assets
6,453,001

 
78,685

 
4.89

 
5,510,489

 
66,712

 
4.91

 
5,023,607

 
57,794

 
4.61

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets
604,604

 
 
 
 
 
445,597

 
 
 
 
 
391,544

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
7,057,605

 
 
 
 
 
$
5,956,086

 
 
 
 
 
$
5,415,151

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing transaction accounts
$
1,384,090

 
$
2,134

 
0.62
%
 
$
1,077,289

 
$
1,790

 
0.67
%
 
$
823,650

 
$
817

 
0.40
%
Money market accounts
1,576,333

 
6,996

 
1.78

 
1,521,878

 
6,515

 
1.74

 
1,494,194

 
4,445

 
1.19

Savings
562,503

 
231

 
0.16

 
299,731

 
183

 
0.25

 
208,662

 
147

 
0.28

Certificates of deposit
815,138

 
3,758

 
1.85

 
712,269

 
3,332

 
1.90

 
633,897

 
2,338

 
1.48

Total interest-bearing deposits
4,338,064

 
13,119

 
1.21

 
3,611,167

 
11,820

 
1.33

 
3,160,403

 
7,747

 
0.98

Subordinated debentures
141,059

 
1,958

 
5.57

 
124,154

 
1,648

 
5.38

 
118,124

 
1,454

 
4.94

FHLB advances
263,384

 
1,696

 
2.58

 
215,420

 
1,398

 
2.63

 
294,643

 
1,448

 
1.97

Other borrowed funds
204,375

 
713

 
1.40

 
202,197

 
408

 
0.82

 
167,661

 
182

 
0.44

Total interest-bearing liabilities
4,946,882

 
17,486

 
1.42

 
4,152,938

 
15,274

 
1.49

 
3,740,831

 
10,831

 
1.16

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
1,244,008

 
 
 
 
 
1,088,323

 
 
 
 
 
1,069,888

 
 
 
 
Other liabilities
53,609

 
 
 
 
 
52,371

 
 
 
 
 
35,877

 
 
 
 
Total liabilities
6,244,499

 
 
 
 
 
5,293,632

 
 
 
 
 
4,846,596

 
 
 
 
Shareholders' equity
813,106

 
 
 
 
 
662,454

 
 
 
 
 
568,555

 
 
 
 
Total liabilities and shareholders' equity
$
7,057,605

 
 
 
 
 
$
5,956,086

 
 
 
 
 
$
5,415,151

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core net interest income2
 
 
61,199

 
 
 
 
 
51,438

 
 
 
 
 
46,963

 
 
Core net interest margin2
 
 
 
 
3.80
%
 
 
 
 
 
3.79
%
 
 
 
 
 
3.75
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incremental accretion on non-core acquired loans
 
 
910

 
 
 
 
 
1,157

 
 
 
 
 
291

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net interest income
 
 
$
62,109

 
 
 
 
 
$
52,595

 
 
 
 
 
$
47,254

 
 
Net interest margin
 
 
 
 
3.86
%
 
 
 
 
 
3.87
%
 
 
 
 
 
3.77
%
* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.4 million for the three months ended June 30, 2019, $0.3 million for the three months ended March 31, 2019, and $0.2 million for the three months ended June 30, 2018.
2 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.


3




Net interest margin decreased one basis point from the linked quarter to 3.86% during the current quarter. Core net interest margin2 increased one basis point from the linked-quarter to 3.80% during the current quarter. Net interest margin and core net interest margin benefited from the impact of a full quarter of funding costs on Trinity deposits and was partially constrained from the increase in the average investment portfolio resulting from the Trinity acquisition. The yield on loans, excluding incremental accretion on non-core acquired loans, increased three basis points to 5.42% from 5.39%, while the yield on securities increased 11 basis points to 2.95% from 2.84%. The cost of interest-bearing deposits decreased 12 basis points from the linked quarter to 1.21% primarily due to the relatively lower cost of Trinity acquired deposits. The cost of total interest-bearing liabilities decreased seven basis points to 1.42% for the quarter ended June 30, 2019 from 1.49% for the linked quarter.

The Company manages its balance sheet to defend against pressures on core net interest margin, which could be negatively impacted by continued competition for deposits, a persistent flat yield curve, and potential downward movement in short-term rates.

Loans
The following table presents total loans for the most recent five quarters:
 
At the Quarter ended
 
 
 
March 31, 2019
 
 
($ in thousands)
June 30, 2019
 
Trinityb
 
Legacy EFSCb
 
Consolidated
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
C&I - general
$
1,103,908

 
$
65,122

 
$
1,063,633

 
$
1,128,755

 
$
995,491

 
$
969,898

 
$
992,311

CRE investor owned - general
1,235,596

 
304,615

 
878,856

 
1,183,471

 
862,423

 
846,322

 
841,587

CRE owner occupied - general
591,401

 
91,758

 
484,268

 
576,026

 
496,835

 
482,146

 
498,834

Enterprise value lendinga
445,981

 

 
439,500

 
439,500

 
465,992

 
442,439

 
442,877

Life insurance premium financinga
465,777

 

 
440,693

 
440,693

 
417,950

 
378,826

 
358,787

Residential real estate - general
409,200

 
137,487

 
295,069

 
432,556

 
304,671

 
314,315

 
326,790

Construction and land development - general
376,597

 
70,251

 
274,956

 
345,207

 
310,832

 
312,617

 
289,206

Tax creditsa
268,405

 

 
235,454

 
235,454

 
262,735

 
256,666

 
260,595

Agriculture
131,671

 

 
126,088

 
126,088

 
136,188

 
138,005

 
128,118

Consumer and other - general
120,961

 
12,835

 
96,492

 
109,327

 
96,884

 
126,196

 
136,656

Total Loans
$
5,149,497

 
$
682,068

 
$
4,335,009

 
$
5,017,077

 
$
4,350,001

 
$
4,267,430

 
$
4,275,761

 
 
 
 
 

 
 
 
 
 
 
 
 
Total loan yield
5.49
%
 
 
 

 
5.50
%
 
5.44
%
 
5.18
%
 
5.04
%
Total C&I loans to total loans
44
%
 
 
 
 
 
44
%
 
49
%
 
48
%
 
48
%
Variable interest rate loans to total loans
60
%
 
 
 
 
 
60
%
 
62
%
 
62
%
 
60
%
 
Certain prior period amounts have been reclassified among the categories to conform to the current period presentation

a Specialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans.
b Amounts reported are as of March 31, 2019 and are separately shown attributable to the Trinity loan portfolio and related operations acquired on March 8, 2019, and the Company’s pre-Trinity acquisition loan portfolio and related operations.

Loans totaled $5.1 billion at June 30, 2019, increasing $132 million, or 11% annualized, compared to the linked quarter. On a year-over-year basis, loans increased $874 million primarily due to the Trinity acquisition. We expect loan growth in 2019 to be a high single digit percentage, excluding Trinity acquired loans.

2 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.


4




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. C&I loan growth, coupled with fixed rate CRE lending, supports management’s efforts to maintain a flexible asset sensitive interest rate risk position.

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)
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Nonperforming loans
$
19,842

 
$
9,607

 
$
16,745

 
$
17,044

 
$
14,801

Other real estate
10,531

 
6,804

 
469

 
408

 
454

Nonperforming assets
$
30,373

 
$
16,411

 
$
17,214

 
$
17,452

 
$
15,255

 
 
 
 
 
 
 
 
 
 
Nonperforming loans to total loans
0.39
%
 
0.19
%
 
0.38
%
 
0.40
%
 
0.35
%
Nonperforming assets to total assets
0.42

 
0.24

 
0.30

 
0.32

 
0.28

Allowance for loan losses to total loans
0.85

 
0.86

 
1.00

 
1.04

 
1.04

Net charge-offs
$
969

 
$
1,826

 
$
2,822

 
$
2,447

 
$
641


Nonperforming loans increased $10.2 million to $19.8 million at June 30, 2019 from $9.6 million at March 31, 2019 primarily due to two nonaccrual loans totaling $7.9 million and two loans 90 days past due and still accruing interest of $4.0 million. The addition of these nonperforming loans in the second quarter did not result in any additional provision for loan losses, as the credits are well secured and the Company expects a positive resolution in the coming quarters. These increases were offset by a $1.2 million charge-off on a nonperforming loan in the second quarter.

Other real estate increased during the quarter ended June 30, 2019 primarily due to the foreclosure of a $5.4 million commercial property that was a purchased credit impaired loan from our acquisition of Jefferson County Bancshares Inc., partially offset by sales of $2.2 million. The foreclosure of this property did not result in a write down of the asset.

The Company recorded a provision for loan losses of $1.7 million compared to $1.5 million for the linked quarter and $0.4 million for the prior year quarter, respectively. The provision is reflective of loan growth during the period. The decrease in the ratio of allowance for loan losses to total loans in 2019, from 1.00% at the end of 2018 to 0.85% in the current quarter, is primarily due to the acquisition of Trinity loans that were recorded at fair value and do not have a corresponding allowance for loan losses. In addition, the level of specific reserves in 2019 decreased due to two relationships that were charged off. The Company has recorded a credit mark on the Trinity loan portfolio of $24.4 million as of the acquisition date.
 



5



Deposits
The following table presents deposits broken out by type for the most recent five quarters:
 
At the Quarter ended
 
 
 
March 31, 2019
 
 
 
 
 
 
($ in thousands)
June 30, 2019
 
Trinitya
 
Legacy EFSCa
 
Consolidated
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
Noninterest-bearing accounts
$
1,181,577

 
$
169,344

 
$
1,017,164

 
$
1,186,508

 
$
1,100,718

 
$
1,062,126

 
$
1,050,969

Interest-bearing transaction accounts
1,392,586

 
401,257

 
988,569

 
1,389,826

 
1,037,684

 
743,351

 
754,819

Money market and savings accounts
2,162,605

 
390,192

 
1,765,839

 
2,156,031

 
1,765,154

 
1,730,762

 
1,768,793

Brokered certificates of deposit
213,138

 

 
180,788

 
180,788

 
198,981

 
202,323

 
224,192

Other certificates of deposit
609,432

 
133,556

 
490,404

 
623,960

 
485,448

 
471,914

 
449,139

Total deposit portfolio
$
5,559,338

 
$
1,094,349

 
$
4,442,764

 
$
5,537,113

 
$
4,587,985

 
$
4,210,476

 
$
4,247,912

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits to total deposits
21
%
 
15
%
 
23
%
 
21
%
 
24
%
 
25
%
 
25
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
aAmounts reported are as of March 31, 2019 and are shown separately attributable to the Trinity deposit portfolio and related operations acquired on March 8, 2019, and the Company’s pre-Trinity acquisition deposit portfolio and related operations.

Total deposits at June 30, 2019 were $5.6 billion, an increase of $22 million from March 31, 2019, and an increase of $1.3 billion from June 30, 2018, primarily due to the Trinity acquisition.

Core deposits, defined as total deposits excluding certificates of deposits, were $4.7 billion at June 30, 2019, an increase of $4 million from the linked quarter. Noninterest-bearing deposits were $1.2 billion at June 30, 2019, a decrease of $5 million compared to March 31, 2019, and an increase of $131 million compared to June 30, 2018. The total cost of deposits decreased eight basis points to 0.94% for the current quarter compared to 1.02% and 0.73% in the linked and prior year quarters, respectively. The decrease in the cost of deposits is primarily from the addition of Trinity’s relatively lower-cost deposit portfolio.

Noninterest Income
Total noninterest income for the quarter ended June 30, 2019 was $12.0 million, an increase of $2.7 million, or 30% from the linked quarter, and an increase of $2.3 million, or 23% from the prior year quarter. The increase from the linked quarter was driven by contributions from Trinity of $2.3 million, primarily related to wealth management and card services revenue of $0.8 million and $0.5 million, respectively. In addition, activity in tax credit services increased income $0.4 million and $0.5 million over the linked and prior year quarters, respectively.

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

Noninterest Expenses
Noninterest expenses were $49.1 million for the quarter ended June 30, 2019, compared to $39.8 million for the quarter ended March 31, 2019, and $29.2 million for the quarter ended June 30, 2018. The increase from the linked quarter and prior year period was primarily due to merger-related expenses and a full quarter of operating expenses following the acquisition of Trinity. Merger-related expenses in the quarter increased $3.0 million and $10.3 million over the linked and prior year periods, respectively. With the completion of the integration of Trinity’s core system in the second quarter, the Company anticipates that it will continue to realize cost-savings in its noninterest expense run-rate during the third and fourth quarter of 2019. The Company expects its noninterest expense to range between $37 million and $39 million during each of these periods.



6



The Company’s core efficiency ratio3 was 53.3% for the quarter ended June 30, 2019, compared to 54.1% for the linked quarter and 52.4% for the prior year period, and reflects a full quarter of increased revenue as well as an increase in operating expenses associated with the acquisition of Trinity.
3 Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

Income Taxes
The Company’s effective tax rate was 20% for the quarter ended June 30, 2019 compared to 20% and 18% for the linked quarter and prior year quarter, respectively. Merger-related tax items in the current quarter increased income tax expense $0.2 million.

The Company expects its effective tax rate for the full year of 2019 to be approximately 18% - 20%. The low end of the range assumes tax planning strategies are executed to achieve that result.

Capital
The following table presents various EFSC capital ratios:
 
At the Quarter ended
Percent
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
Total risk-based capital to risk-weighted assets
12.62
%
 
12.86
%
 
13.02
%
 
12.94
%
 
12.60
%
Tier 1 capital to risk weighted assets
11.06

 
11.25

 
11.14

 
11.03

 
10.68

Common equity tier 1 capital to risk-weighted assets
9.51

 
9.64

 
9.79

 
9.66

 
9.32

Tangible common equity to tangible assets1
8.43

 
8.35

 
8.66

 
8.54

 
8.30


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.

Use of Non-GAAP Financial Measures
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 adjusted EPS, core net interest income, core net interest margin, tangible common equity, core efficiency ratios, ROATCE, adjusted ROAA, adjusted ROAE, and adjusted ROATCE, 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 adjusted EPS, core net interest income, core net interest margin, core efficiency ratio, adjusted ROAA, adjusted ROAE, ROATCE, adjusted ROATCE, and the tangible common equity 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, which were acquired from the FDIC and previously covered by loss share agreements, and the 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 expenses directly related to non-core acquired loans. Core performance measures also exclude certain other income and expense items, such as merger related expenses, facilities charges, 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


7



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 measures 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, July 23, 2019. During the call, management will review the second quarter of 2019 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” prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-877-260-1479 (Conference ID #1823032). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC2Q2019earnings 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.

About Enterprise
Enterprise Financial Services Corp (Nasdaq: EFSC), with approximately $7 billion in assets, is a financial holding company headquartered in Clayton, Missouri. Enterprise Bank & Trust, a Missouri state-chartered trust company with banking powers and a wholly-owned subsidiary of Enterprise, operates 34 branch offices in Arizona, Kansas, Missouri and New Mexico. Enterprise Bank & Trust offers a range of business and personal banking services and wealth management services. Enterprise Trust, a division of Enterprise Bank & Trust, provides financial planning, estate planning, investment management and trust services to businesses, individuals, institutions, retirement plans and non-profit organizations. Additional information is available at www.enterprisebank.com.

Enterprise Financial Services Corp’s common stock is traded on the Nasdaq Stock Market under the symbol “EFSC.” Please visit our website at www.enterprisebank.com to see our regularly posted material information.

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. Such forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, shareholder value creation and the impact of the acquisition of Trinity and its wholly-owned subsidiary, Los Alamos National Bank, and other acquisitions.

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,” “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, including the


8



Trinity acquisition, 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 2018 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.

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


9



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
 
For the Quarter ended
 
For the Six Months ended
($ in thousands, except per share data)
Jun 30,
2019
 
Mar 31,
2019
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Jun 30,
2019
 
Jun 30,
2018
EARNINGS SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
61,715

 
$
52,343

 
$
50,593

 
$
48,093

 
$
47,048

 
$
114,058

 
$
93,219

Provision for loan losses
1,722

 
1,476

 
2,120

 
2,263

 
390

 
3,198

 
2,261

Noninterest income
11,964

 
9,230

 
10,702

 
8,410

 
9,693

 
21,194

 
19,235

Noninterest expense
49,054

 
39,838

 
30,747

 
29,922

 
29,219

 
88,892

 
58,362

Income before income tax expense
22,903


20,259


28,428


24,318


27,132


43,162

 
51,831

Income tax expense
4,479

 
4,103

 
4,899

 
1,802

 
4,881

 
8,582

 
8,659

Net income
$
18,424

 
$
16,156


$
23,529


$
22,516


$
22,251


$
34,580


$
43,172

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.68

 
$
0.67

 
$
1.02

 
$
0.97

 
$
0.95

 
$
1.36

 
$
1.85

Return on average assets
1.05
%
 
1.10
%
 
1.69
%
 
1.63
%
 
1.65
%
 
1.07
%
 
1.62
%
Return on average common equity
9.09

 
9.89

 
15.61

 
15.22

 
15.70

 
9.45
%
 
15.51
%
Return on average tangible common equity1
12.92

 
12.93

 
19.79

 
19.42

 
20.23

 
12.93
%
 
20.08
%
Net interest margin (tax equivalent)
3.86

 
3.87

 
3.94

 
3.78

 
3.77

 
3.87
%
 
3.79
%
Core net interest margin (tax equivalent)1
3.80

 
3.79

 
3.77

 
3.74

 
3.75

 
3.80
%
 
3.74
%
Efficiency ratio
66.58

 
64.70

 
50.16

 
52.96

 
51.50

 
65.72
%
 
51.90
%
Core efficiency ratio1
53.30

 
54.06

 
49.77

 
52.23

 
52.36

 
53.65
%
 
53.18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
7,181,855

 
$
6,932,757

 
$
5,645,662

 
$
5,517,539

 
$
5,509,924

 
 
 
 
Total average assets
7,057,605

 
5,956,086

 
5,518,740

 
5,471,504

 
5,415,151

 
6,509,888

 
5,377,839

Total deposits
5,559,338

 
5,537,113

 
4,587,985

 
4,210,476

 
4,247,912

 
 
 
 
Total average deposits
5,582,072

 
4,699,490

 
4,434,634

 
4,255,523

 
4,230,291

 
5,143,219

 
4,177,601

Period end common shares outstanding
26,906

 
26,878

 
22,812

 
23,092

 
23,141

 
 
 
 
Dividends per common share
$
0.15

 
$
0.14

 
$
0.13

 
$
0.12

 
$
0.11

 
0.29

 
0.22

Tangible book value per common share1
$
21.74

 
$
20.80

 
$
20.95

 
$
19.94

 
$
19.32

 
 
 
 
Tangible common equity to tangible assets1
8.43
%
 
8.35
%
 
8.66
%
 
8.54
%
 
8.30
%
 
 
 
 
Total risk-based capital to risk-weighted assets
12.62

 
12.86

 
13.02

 
12.94

 
12.60

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




10



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
 
For the Six Months ended
($ in thousands, except per share data)
Jun 30,
2019
 
Mar 31,
2019
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Jun 30,
2019
 
Jun 30,
2018
INCOME STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST INCOME
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest income
$
79,201

 
$
67,617

 
$
64,002

 
$
60,757

 
$
57,879

 
$
146,818

 
$
113,043

Total interest expense
17,486

 
15,274

 
13,409

 
12,664

 
10,831

 
32,760

 
19,824

Net interest income
61,715

 
52,343


50,593


48,093


47,048

 
114,058

 
93,219

Provision for loan losses
1,722

 
1,476

 
2,120

 
2,263

 
390

 
3,198

 
2,261

Net interest income after provision for loan losses
59,993

 
50,867


48,473


45,830


46,658

 
110,860

 
90,958

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NONINTEREST INCOME
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposit service charges
3,366

 
2,935

 
2,894

 
2,997

 
3,007

 
6,301

 
5,858

Wealth management revenue
2,661

 
1,992

 
1,974

 
2,012

 
2,141

 
4,653

 
4,255

Card services revenue
2,461

 
1,790

 
1,760

 
1,760

 
1,650

 
4,251

 
3,166

Tax credit income, net
572

 
158

 
2,312

 
192

 
64

 
730

 
316

Gain (loss) on sale of other real estate
(18
)
 
66

 

 
13

 

 
48

 

Other income
2,922

 
2,289

 
1,762

 
1,436

 
2,831

 
5,211

 
5,640

Total noninterest income
11,964

 
9,230


10,702


8,410


9,693

 
21,194

 
19,235

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NONINTEREST EXPENSE
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee compensation and benefits
20,687

 
19,352

 
16,669

 
16,297

 
16,582

 
40,039

 
33,073

Occupancy
3,188

 
2,637

 
2,408

 
2,394

 
2,342

 
5,825

 
4,748

Merger-related expenses
10,306

 
7,270

 
1,271

 

 

 
17,576

 

Other
14,873

 
10,579

 
10,399

 
11,231

 
10,295

 
25,452

 
20,541

Total noninterest expense
49,054

 
39,838


30,747


29,922


29,219

 
88,892

 
58,362

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income tax expense
22,903

 
20,259


28,428


24,318


27,132

 
43,162

 
51,831

Income tax expense
4,479

 
4,103

 
4,899

 
1,802

 
4,881

 
8,582

 
8,659

Net income
$
18,424

 
$
16,156


$
23,529


$
22,516


$
22,251

 
$
34,580

 
$
43,172

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.69

 
$
0.68

 
$
1.02

 
$
0.97

 
$
0.96

 
$
1.36

 
$
1.87

Diluted earnings per share
0.68

 
0.67

 
1.02

 
0.97

 
0.95

 
1.36

 
1.85




11



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
    
 
At the Quarter ended
($ in thousands)
Jun 30,
2019
 
Mar 31,
2019
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
BALANCE SHEETS
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
106,835

 
$
85,578

 
$
91,511

 
$
78,119

 
$
91,851

Interest-earning deposits
85,315

 
139,389

 
108,226

 
81,351

 
87,586

Debt and equity investments
1,328,767

 
1,198,413

 
813,702

 
775,344

 
756,203

Loans held for sale
1,437

 
654

 
392

 
738

 
1,388

 
 
 
 
 
 
 
 
 
 
Loans
5,149,497

 
5,017,077

 
4,350,001

 
4,267,430

 
4,275,761

   Less: Allowance for loan losses
43,822

 
43,095

 
43,476

 
44,186

 
44,370

Total loans, net
5,105,675

 
4,973,982

 
4,306,525

 
4,223,244

 
4,231,391

 
 
 
 
 
 
 
 
 
 
Other real estate
10,531

 
6,804

 
469

 
408

 
454

Fixed assets, net
58,888

 
60,301

 
32,109

 
32,354

 
32,814

Tax credits, held for sale
37,294

 
37,215

 
37,587

 
45,625

 
46,481

Goodwill
211,251

 
207,632

 
117,345

 
117,345

 
117,345

Intangible assets, net
29,201

 
31,048

 
8,553

 
9,148

 
9,768

Other assets
206,661

 
191,741

 
129,243

 
153,863

 
134,643

Total assets
$
7,181,855

 
$
6,932,757

 
$
5,645,662

 
$
5,517,539

 
$
5,509,924

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
$
1,181,577

 
$
1,186,508

 
$
1,100,718

 
$
1,062,126

 
$
1,050,969

Interest-bearing deposits
4,377,761

 
4,350,605

 
3,487,267

 
3,148,350

 
3,196,943

Total deposits
5,559,338

 
5,537,113

 
4,587,985

 
4,210,476

 
4,247,912

Subordinated debentures
141,100

 
140,668

 
118,156

 
118,144

 
118,131

FHLB advances
389,446

 
180,466

 
70,000

 
401,000

 
361,534

Other borrowings
198,104

 
212,171

 
223,450

 
161,795

 
167,216

Other liabilities
68,366

 
64,504

 
42,267

 
39,287

 
41,047

Total liabilities
6,356,354

 
6,134,922

 
5,041,858

 
4,930,702

 
4,935,840

Shareholders’ equity
825,501

 
797,835

 
603,804

 
586,837

 
574,084

Total liabilities and shareholders’ equity
$
7,181,855

 
$
6,932,757

 
$
5,645,662

 
$
5,517,539

 
$
5,509,924




12



Average Balance Sheets
The following table presents, 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 Six Months ended
 
June 30, 2019
 
June 30, 2018
($ 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*
$
4,804,898

 
$
128,803

 
5.41
%
 
$
4,181,728

 
$
102,580

 
4.95
%
Investments in debt and equity securities*
1,072,698

 
15,444

 
2.90

 
742,068

 
9,356

 
2.54

Short-term investments
106,752

 
1,150

 
2.17

 
62,651

 
471

 
1.52

Total earning assets
5,984,348

 
145,397

 
4.90

 
4,986,447

 
112,407

 
4.55

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets
525,540

 
 
 
 
 
391,392

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
6,509,888

 
 
 
 
 
$
5,377,839

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing transaction accounts
$
1,231,537

 
$
3,924

 
0.64
%
 
$
843,172

 
$
1,623

 
0.39
%
Money market accounts
1,549,255

 
13,511

 
1.76

 
1,442,910

 
7,798

 
1.09

Savings
431,843

 
414

 
0.19

 
205,276

 
272

 
0.27

Certificates of deposit
763,988

 
7,090

 
1.87

 
618,900

 
4,237

 
1.38

Total interest-bearing deposits
3,976,623

 
24,939

 
1.26

 
3,110,258

 
13,930

 
0.90

Subordinated debentures
132,653

 
3,606

 
5.48

 
118,117

 
2,822

 
4.82

FHLB advances
239,535

 
3,094

 
2.60

 
298,573

 
2,706

 
1.83

Other borrowed funds
203,292

 
1,121

 
1.11

 
187,442

 
366

 
0.39

Total interest-bearing liabilities
4,552,103

 
32,760

 
1.45

 
3,714,390

 
19,824

 
1.08

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
1,166,595

 
 
 
 
 
1,067,343

 
 
 
 
Other liabilities
52,994

 
 
 
 
 
34,755

 
 
 
 
Total liabilities
5,771,692

 
 
 
 
 
4,816,488

 
 
 
 
Shareholders' equity
738,196

 
 
 
 
 
561,351

 
 
 
 
Total liabilities and shareholders' equity
$
6,509,888

 
 
 
 
 
$
5,377,839

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core net interest income1
 
 
112,637

 
 
 
 
 
92,583

 
 
Core net interest margin1
 
 
 
 
3.80
%
 
 
 
 
 
3.74
%
 
 
 
 
 
 
 
 
 
 
 
 
Incremental accretion on non-core acquired loans
 
 
2,067

 
 
 
 
 
1,057

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net interest income
 
 
$
114,704

 
 
 
 
 
$
93,640

 
 
Net interest margin
 
 
 
 
3.87
%
 
 
 
 
 
3.79
%
* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.6 million and $0.4 million for the six months ended June 30, 2019 and 2018, respectively.
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.




13



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
($ in thousands)
Jun 30,
2019
 
Mar 31,
2019
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
LOAN PORTFOLIO
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,265,480

 
$
2,227,050

 
$
2,123,167

 
$
2,035,852

 
$
2,040,751

Commercial real estate
1,940,958

 
1,870,040

 
1,481,834

 
1,450,184

 
1,456,373

Construction real estate
404,557

 
369,365

 
334,645

 
332,026

 
305,238

Residential real estate
409,200

 
432,902

 
305,026

 
314,676

 
327,157

Consumer and other
129,302

 
117,720

 
105,329

 
134,692

 
146,242

Total loans
$
5,149,497

 
$
5,017,077


$
4,350,001


$
4,267,430


$
4,275,761

 
 
 
 
 
 
 
 
 
 
DEPOSIT PORTFOLIO
 
 
 
 
 
 
 
 
 
Noninterest-bearing accounts
$
1,181,577

 
$
1,186,508

 
$
1,100,718

 
$
1,062,126

 
$
1,050,969

Interest-bearing transaction accounts
1,392,586

 
1,389,826

 
1,037,684

 
743,351

 
754,819

Money market and savings accounts
2,162,605

 
2,156,031

 
1,765,154

 
1,730,762

 
1,768,793

Brokered certificates of deposit
213,138

 
180,788

 
198,981

 
202,323

 
224,192

Other certificates of deposit
609,432

 
623,960

 
485,448

 
471,914

 
449,139

Total deposit portfolio
$
5,559,338

 
$
5,537,113


$
4,587,985


$
4,210,476


$
4,247,912

 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCES
 
 
 
 
 
 
 
 
 
Total loans
$
5,095,181

 
$
4,511,387

 
$
4,272,132

 
$
4,252,524

 
$
4,224,016

Debt and equity investments
1,246,529

 
896,936

 
769,461

 
755,129

 
743,534

Interest-earning assets
6,453,001

 
5,510,489

 
5,118,319

 
5,072,573

 
5,023,607

Total assets
7,057,605

 
5,956,086

 
5,518,740

 
5,471,504

 
5,415,151

Deposits
5,582,072

 
4,699,490

 
4,434,634

 
4,255,523

 
4,230,291

Shareholders’ equity
813,106

 
662,454

 
597,864

 
586,765

 
568,555

Tangible common equity1
571,890

 
506,560

 
471,678

 
459,975

 
441,136

 
 
 
 
 
 
 
 
 
 
YIELDS (tax equivalent)
 
 
 
 
 
 
 
 
 
Total loans
5.49
%
 
5.50
%
 
5.44
%
 
5.18
%
 
5.04
%
Debt and equity investments
2.95

 
2.84

 
2.73

 
2.71

 
2.58

Interest-earning assets
4.95

 
4.99

 
4.98

 
4.77

 
4.64

Interest-bearing deposits
1.21

 
1.33

 
1.27

 
1.16

 
0.98

Total deposits
0.94

 
1.02

 
0.95

 
0.86

 
0.73

Subordinated debentures
5.57

 
5.38

 
5.01

 
4.98

 
4.94

Borrowed funds
2.07

 
1.75

 
1.60

 
1.62

 
1.41

Interest-bearing liabilities
1.42

 
1.49

 
1.42

 
1.34

 
1.16

Net interest margin
3.86

 
3.87

 
3.94

 
3.78

 
3.77



14



ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
For the Quarter ended
(in thousands, except % and per share data)
Jun 30,
2019
 
Mar 31,
2019
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
ASSET QUALITY
 
 
 
 
 
 
 
 
 
Net charge-offs
$
969

 
$
1,826

 
$
2,822

 
$
2,447

 
$
641

Nonperforming loans
19,842

 
9,607

 
16,745

 
17,044

 
14,801

Classified assets
91,715

 
79,750

 
70,126

 
73,704

 
74,001

Nonperforming loans to total loans
0.39
%
 
0.19
%
 
0.38
%
 
0.40
%
 
0.35
%
Nonperforming assets to total assets
0.42

 
0.24

 
0.30

 
0.32

 
0.28

Allowance for loan losses to total loans
0.85

 
0.86

 
1.00

 
1.04

 
1.04

Allowance for loan losses to nonperforming loans
220.9

 
448.6

 
259.6

 
259.3

 
299.8

Net charge-offs to average loans (annualized)
0.08

 
0.16

 
0.26

 
0.23

 
0.06

 
 
 
 
 
 
 
 
 
 
WEALTH MANAGEMENT
 
 
 
 
 
 
 
 
 
Trust assets under management
$
1,627,050

 
$
1,587,627

 
$
1,119,329

 
$
1,174,798

 
$
1,337,030

Trust assets under administration
2,428,551

 
2,405,673

 
1,811,512

 
1,984,859

 
2,165,870

 
 
 
 
 
 
 
 
 
 
MARKET DATA
 
 
 
 
 
 
 
 
 
Book value per common share
$
30.68

 
$
29.68

 
$
26.47

 
$
25.41

 
$
24.81

Tangible book value per common share1
21.74

 
20.80

 
20.95

 
19.94

 
19.32

Market value per share
41.60

 
40.77

 
37.63

 
53.05

 
53.95

Period end common shares outstanding
26,906

 
26,878

 
22,812

 
23,092

 
23,141

Average basic common shares
26,887

 
23,927

 
23,014

 
23,148

 
23,124

Average diluted common shares
26,940

 
24,083

 
23,170

 
23,329

 
23,318

 
 
 
 
 
 
 
 
 
 
CAPITAL
 
 
 
 
 
 
 
 
 
Total risk-based capital to risk-weighted assets
12.62
%
 
12.86
%
 
13.02
%
 
12.94
%
 
12.60
%
Tier 1 capital to risk-weighted assets
11.06

 
11.25

 
11.14

 
11.03

 
10.68

Common equity tier 1 capital to risk-weighted assets
9.51

 
9.64

 
9.79

 
9.66

 
9.32

Tangible common equity to tangible assets1
8.43

 
8.35

 
8.66

 
8.54

 
8.30

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


15



ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
For the Quarter ended
 
For the Six Months ended
($ in thousands, except per share data)
Jun 30,
2019
 
Mar 31,
2019
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Jun 30,
2019
 
Jun 30,
2018
CORE PERFORMANCE MEASURES
 
 
 
 
Net interest income
$
61,715

 
$
52,343

 
$
50,593

 
$
48,093

 
$
47,048

 
$
114,058

 
$
93,219

Less: Incremental accretion income
910

 
1,157

 
2,109

 
535

 
291

 
2,067

 
1,057

Core net interest income
60,805

 
51,186

 
48,484

 
47,558

 
46,757

 
111,991

 
92,162

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total noninterest income
11,964

 
9,230

 
10,702

 
8,410

 
9,693

 
21,194

 
19,235

Less: Other income from non-core acquired assets
2

 
365

 
10

 
7

 
18

 
367

 
1,031

Less: Gain on sale of investment securities

 

 

 

 

 

 
9

Less: Other non-core income
266

 

 
26

 

 
649

 
266

 
649

Core noninterest income
11,696

 
8,865

 
10,666

 
8,403

 
9,026

 
20,561

 
17,546

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total core revenue
72,501

 
60,051

 
59,150

 
55,961

 
55,783

 
132,552

 
109,708

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total noninterest expense
49,054

 
39,838

 
30,747

 
29,922

 
29,219

 
88,892

 
58,362

Less: Other expenses related to non-core acquired loans
103

 
103

 
40

 
12

 
(229
)
 
206

 
(215
)
Less: Facilities disposal

 

 

 

 
239

 

 
239

Less: Merger related expenses
10,306

 
7,270

 
1,271

 

 

 
17,576

 

Less: Non-recurring excise tax

 

 

 
682

 

 

 

Core noninterest expense
38,645

 
32,465


29,436


29,228


29,209


71,110


58,338

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core efficiency ratio
53.30
%
 
54.06
%
 
49.77
%
 
52.23
%
 
52.36
%
 
53.65
%
 
53.18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (TAX EQUIVALENT)
Net interest income
$
62,109

 
$
52,595

 
$
50,786

 
$
48,299

 
$
47,254

 
$
114,704

 
$
93,640

Less: Incremental accretion income
910

 
1,157

 
2,109

 
535

 
291

 
2,067

 
1,057

Core net interest income
$
61,199

 
$
51,438

 
$
48,677

 
$
47,764

 
$
46,963

 
$
112,637

 
$
92,583

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average earning assets
$
6,453,005

 
$
5,510,489

 
$
5,118,319

 
$
5,072,573

 
$
5,023,607

 
$
5,984,351

 
$
4,986,447

Reported net interest margin
3.86
%
 
3.87
%
 
3.94
%
 
3.78
%
 
3.77
%
 
3.87
%
 
3.79
%
Core net interest margin
3.80

 
3.79

 
3.77

 
3.74

 
3.75

 
3.80

 
3.74




16



 
At the Quarter ended
($ in thousands)
Jun 30,
2019
 
Mar 31,
2019
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
SHAREHOLDERS’ EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders’ equity
$
825,501

 
$
797,835

 
$
603,804

 
$
586,837

 
$
574,084

Less: Goodwill
211,251

 
207,632

 
117,345

 
117,345

 
117,345

Less: Intangible assets
29,201

 
31,048

 
8,553

 
9,148

 
9,768

Tangible common equity
$
585,049

 
$
559,155

 
$
477,906

 
$
460,344

 
$
446,971

 
 
 
 
 
 
 
 
 
 
Total assets
$
7,181,855

 
$
6,932,757

 
$
5,645,662

 
$
5,517,539

 
$
5,509,924

Less: Goodwill
211,251

 
207,632

 
117,345

 
117,345

 
117,345

Less: Intangible assets
29,201

 
31,048

 
8,553

 
9,148

 
9,768

Tangible assets
$
6,941,403

 
$
6,694,077

 
$
5,519,764

 
$
5,391,046

 
$
5,382,811

 
 
 
 
 
 
 
 
 
 
Tangible common equity to tangible assets
8.43
%
 
8.35
%

8.66
%

8.54
%

8.30
%

 
For the Quarter ended

($ in thousands, except per share data)
Jun 30,
2019
 
Mar 31,
2019
 
Jun 30,
2018
AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE COMMON EQUITY
Average shareholder’s equity
$
813,106

 
$
662,454

 
$
568,555

Less average goodwill
211,251

 
141,422

 
117,345

Less average intangible assets
29,965

 
14,472

 
10,074

Average tangible common equity
571,890

 
506,560

 
441,136

 
 
 
 
 
 

 
For the Quarter ended

($ in thousands, except per share data)
Jun 30,
2019
 
Mar 31,
2019
 
Jun 30,
2018
IMPACT OF MERGER-RELATED EXPENSES
 
 
 
 
 
Net income - GAAP
$
18,424

 
$
16,156

 
$
22,251

Merger related expenses
10,306

 
7,270

 

Related tax effect
(2,331
)
 
(1,535
)
 

Adjusted net income - Non-GAAP
$
26,399

 
$
21,891

 
$
22,251

 
 
 
 
 
 
Average diluted common shares
$
26,940

 
$
24,083

 
$
23,318

EPS - GAAP net income
0.68

 
0.67

 
0.95

EPS - Adjusted net income
0.98

 
0.91

 
0.95

 
 
 
 
 
 
Average assets
$
7,057,605

 
$
5,956,086

 
$
5,415,151

ROAA - GAAP net income
1.05
%
 
1.10
%
 
1.65
%
ROAA - Adjusted net income
1.50

 
1.49

 
1.65

 
 
 
 
 
 
Average shareholder’s equity
$
813,106

 
$
662,454

 
$
568,555

ROAE - GAAP net income
9.09
%
 
9.89
%
 
15.70
%
ROAE - Adjusted net income
13.02

 
13.40

 
15.70

 
 
 
 
 
 
Average tangible common equity
$
571,890

 
$
506,560

 
$
441,136

ROATCE - GAAP net income
12.92
%
 
12.93
%
 
20.23
%
ROATCE - Adjusted net income
18.52

 
17.53

 
20.23




17
EX-99.2 3 q22019efscearningsreleas.htm WEBCAST SLIDES q22019efscearningsreleas
Exhibit 99.2 Enterprise Financial Services Corp 2019 Second Quarter Earnings Webcast


 
Forward-Looking Statements Some of the information in this report 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 typically are identified with use of terms such as “may,” “might,” “will, “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “continue” and the negative of these terms and similar words, although some forward-looking statements may be expressed differently. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions and statements about the future performance, operations, products and services of the Company and its subsidiaries. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. You should be aware that our actual results could differ materially from those anticipated by the forward-looking statements or historical performance due to a number of factors, including, but not limited to: our ability to efficiently integrate acquisitions into our operations, retain the customers of these businesses and grow the acquired operations; reputational risks; 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 within 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; and other risks discussed under the caption “Risk Factors” of our most recently filed Form 10-K and in Part II, 1A of our most recently filed Form 10-Q, all of which could cause the Company’s actual results to differ from those set forth in the forward-looking statements. Readers are cautioned not to place undue reliance on our forward-looking statements, which reflect management’s analysis and expectations only as of the date of such statements. Forward-looking statements speak only as of the date they are made, and the Company does not intend, and undertakes no obligation, to publicly revise or update forward-looking statements after the date of this report, whether as a result of new information, future events or otherwise, except as required by federal securities law. You should understand that it is not possible to predict or identify all risk factors. Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission (the “SEC”) which are available on our website at www.enterprisebank.com under "Investor Relations." 2


 
Financial Scorecard Q2 2019 Compared to Q2 2018 Continued Growth in EPS 28% • Drive Net Interest Income Growth in 31% Dollars with Favorable Loan Growth Trends • Defend Core Net Interest Margin1 5 bps • Maintain High Quality Credit Profile 4 bps NPLs/Loans • Achieve Further Improvement in Core Operating Leverage1 1% Enhance Deposit Levels to Support Growth 31% 1A Non GAAP Measure, Refer to Appendix for Reconciliation 3


 
2019 Focus • Closing and Integration of the Trinity Acquisition • Achieve Organic Loan and Deposit Goals • Continued Incremental Improvement of Our Sales and Operational Processes 4


 
Total Loan Trends 20% Total Loan Growth* $5,149 $5,017 In Millions Trinity $4,350 $682 $4,276 $4,267 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 *Note: 4% Excluding Acquisition of Trinity 5


 
Commercial & Industrial Loan Trends 11% C&I Growth* In Millions $2,265 $2,227 Trinity $2,123 $65 $2,041 $2,036 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 *Note: 8% Excluding Acquisition of Trinity 6


 
Loan Details Q2 ’19 Q1 ’19 QTR Trinity Q2 ’18 LTM In Millions Change Change C&I - General $ 1,104 $ 1,129 $ (25) $ 65 $ 992 $ 112 CRE, Investor Owned - General 1,235 1,183 52 305 842 393 CRE, Owner Occupied - General 591 576 15 92 498 93 Enterprise Value Lending1 446 440 6 — 443 3 Life Insurance Premium Financing1 466 441 25 — 359 107 Residential Real Estate - General 409 433 (24) 137 327 82 Construction and Land Development 377 345 32 70 289 88 - General Tax Credits1 268 235 33 — 261 7 Agriculture1 132 126 6 — 128 4 Consumer & Other - General 121 109 12 13 137 (16) Total Loans $ 5,149 $ 5,017 $ 132 $ 682 $ 4,276 $ 873 1Specialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans. 7


 
Total Loans By Business Unit In Millions Specialized Lending St. Louis Kansas City $2,335 $2,273 $2,339 $979 $991 $875 $719 $730 $783 Q2 '18 Q1 '19 Q2 '19 Q2 '18 Q1 '19 Q2 '19 Q2 '18 Q1 '19 Q2 '19 Arizona New Mexico* $682 $678 $347 $353 $358 Q2 '18 Q1 '19 Q2 '19 Q2 '18 Q1 '19 Q2 '19 * Acquisition of Trinity completed on March 8, 2019. 8


 
Deposit Trend 24.7% 25.2% 24.0% 21.4% 21.3% In Millions $5,537 $5,559 Trinity $1,094 $4,588 $4,248 $4,210 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Deposits Trinity DDA % u Last Twelve Months Growth Rate = 31%, 5% Excluding Acquisition of Trinity 9


 
Earnings Per Share Trend - Q2 2019 Changes in EPS $0.09 $0.32 $(0.01) $(0.01) $(0.21) $(0.10) $(0.07) $0.67 $0.68 Q1 '19 Net Interest Incremental Loan Loss Noninterest Noninterest Merger-Related Change in Q2 '19 Income Accretion Provision Income Expense Expenses Shares/ ETR 10


 
Earnings Per Share Trend - 2019 Year to Date Changes in EPS $0.04 $0.07 $0.71 $(0.03) $(0.46) $(0.63) $(0.19) $1.85 $1.36 2018 Net Interest Incremental Loan Loss Noninterest Noninterest Merger-Related Change in 2019 Income Accretion Provision Income Expense Expense Shares/ETR 11


 
Net Interest Income Trend 3.75% 3.74% 3.77% 3.79% 3.80% In Millions $61.7 $60.8 $52.3 $50.6 $47.0 $48.1 $51.2 $48.5 $46.8 $47.6 30% Core NII Growth Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Core Net Interest Income* Incremental Accretion On Non-core Acquired Assets FTE Core Net Interest Margin* Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation 12


 
Credit Trends for Loans Net Charge-offs Total Loan Growth (1) In Millions $132 26 bps $85 $83 23 bps 16 bps 8 bps 6 bps $(9) $(15) Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Net Provision for Loans Q2 2019 EFSC Peer(2) In Millions $2.3 NPAs/Assets = 0.42% 0.63% $2.1 $1.7 $1.5 NPLs/Loans = 0.39% 0.75% ALLL/NPLs = 220.9% 112.5% $0.4 ALLL/Loans = 0.85% 0.97% Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 (1) Excludes Trinity (2) Peer median data as of 3/31/19 (source: S&P Global Market Intelligence) 13


 
Noninterest Income Trend In Millions Fee Income Other Fee Income Detail $2.9 $12.0 $2.8 $0.6 $0.1 $10.7 $0.1 $0.4 $0.2 $9.7 $2.3 $0.2 $9.2 $2.9 $0.1 $2.3 $0.3 $0.3 $8.4 $0.2 $0.4 $2.8 $0.2 $0.1 $2.3 $2.4 $1.7 $1.4 $1.7 $0.3 $1.4 $0.3 $0.2 $1.7 $1.8 $1.8 $1.8 $0.2 $0.4 $2.1 $0.2 $3.4 $1.9 $3.0 $3.0 $2.9 $2.9 $1.4 $1.0 $1.0 $2.7 $2.1 $2.0 $2.0 $2.0 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Wealth Management Deposit Services Charge Miscellaneous Swap Fees Card Services Other CDE Mortgage Tax Credit Income Non-core Acquired 14


 
Operating Expenses Trend 54.1% 52.4% 52.2% 53.3% 49.8% In Millions $49.1 $10.3 $39.8 $7.3 $30.7 $29.2 $29.9 $0.7 $1.3 $20.7 $19.4 $16.6 $16.3 $16.6 $3.2 $2.3 $2.4 $2.4 $2.6 $14.9 $10.3 $10.5 $10.4 $10.5 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Other Occupancy Employee compensation and benefits Merger-related expenses/other non-core expenses Core efficiency ratio* Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation 15


 
Effective Tax Rate Reconciliation YTD 2019 2018 Federal Tax Rate 21.00% 21.00% State Tax, Net of Federal Benefit 2.16% 2.32% Excess Tax Benefits (1.09)% (1.56)% Tax Credit Investments (2.16)% (4.66)% Merger Expenses 1.10% —% Other Tax Adjustments (1.13)% 0.23% Pre-DTA Effective Tax Rate 19.88% 17.33% Impact of Tax Law Changes —% (2.64)% Ending Effective Tax Rate 19.88% 14.69% 16


 
Positive Momentum in Earnings Per Share $1.02 $0.97 $0.95 $0.90 Five-Year CAGR 14% $0.69 $0.67 $0.67 $0.68 $0.61 $0.59 $0.56 $0.54 $0.52 $0.50 $0.48 $0.46 $0.43 $0.41 $0.36 $0.32 $0.30 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 89% EPS Growth from Q2 2014 to Q2 2019 Note: Q1 2017, Q2 2017, Q1 2019, and Q2 2019 included merger related charges. Q4 2017 included the impact of deferred tax asset charges due to tax reform. 17


 
Second Quarter 2019 Earnings Webcast Appendix


 
Use of Non-GAAP Financial Measures 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 interest income, and core net interest margin, in this presentation 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 net interest income, and core net interest margin, collectively “core performance measures,” included in this presentation 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, which were acquired from the FDIC and previously covered by loss share agreements, and the 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 expenses directly related to non-core acquired loans. Core performance measures also exclude certain other income and expense items, such as merger-related expenses, facilities charges, 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 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 table, 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 measures for the periods indicated. Peer group data consists of the median of publicly traded banks with total assets from $2-$10 billion with commercial loans greater than 20% and consumer loans less than 10%. 19


 
Reconciliation of Non-GAAP Financial Measures For the Quarter ended For the Six Months ended Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Jun 30, Jun 30, ($ in thousands) 2019 2019 2018 2018 2018 2019 2018 CORE PERFORMANCE MEASURES Net interest income $ 61,715 $ 52,343 $ 50,593 $ 48,093 $ 47,048 $ 114,058 $ 93,219 Less: Incremental accretion income 910 1,157 2,109 535 291 2,067 1,057 Core net interest income 60,805 51,186 48,484 47,558 46,757 111,991 92,162 Total noninterest income 11,964 9,230 10,702 8,410 9,693 21,194 19,235 Less: Other income from non-core acquired assets 2 365 10 7 18 367 1,031 Less: Gain on sale of investment securities — — — — — — 9 Less: Other non-core income 266 — 26 — 649 266 649 Core noninterest income 11,696 8,865 10,666 8,403 9,026 20,561 17,546 Total core revenue 72,501 60,051 59,150 55,961 55,783 132,552 109,708 Total noninterest expense 49,054 39,838 30,747 29,922 29,219 88,892 58,362 Less: Other expenses related to non- core acquired loans 103 103 40 12 (229) 206 (215) Less: Facilities disposal — — — — 239 — 239 Less: Merger related expenses 10,306 7,270 1,271 — — 17,576 — Less: Non-recurring excise tax — — — 682 — — — Core noninterest expense 38,645 32,465 29,436 29,228 29,209 71,110 58,338 Core efficiency ratio 53.30% 54.06% 49.77% 52.23% 52.36% 53.65% 53.18% NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (TAX EQUIVALENT) Net interest income $ 62,109 $ 52,595 $ 50,786 $ 48,299 $ 47,254 $ 114,704 $ 93,640 Less: Incremental accretion income 910 1,157 2,109 535 291 2,067 1,057 Core net interest income $ 61,199 $ 51,438 $ 48,677 $ 47,764 $ 46,963 $ 112,637 $ 92,583 Average earning assets $ 6,453,005 $ 5,510,489 $ 5,118,319 $ 5,072,573 $ 5,023,607 $ 5,984,351 $ 4,986,447 Reported net interest margin 3.86% 3.87% 3.94% 3.78% 3.77% 3.87% 3.79% Core net interest margin 3.80 3.79 3.77 3.74 3.75 3.80 3.74 20


 
Second Quarter 2019 Earnings Webcast Q & A


 
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