Enterprise Financial Reports Third Quarter 2019 Results

Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $29.1 million for the quarter ended September 30, 2019, an increase of $10.6 million compared to the linked second quarter (“linked quarter”) and an increase of $6.6 million from the prior year quarter. Earnings per diluted share (“EPS”) were $1.08 for the current quarter, compared to $0.68 and $0.97 for the linked and prior year quarters, respectively. Merger-related expenses from the Trinity Capital Corporation (“Trinity”) acquisition reduced net income by $0.4 million pretax ($0.3 million after tax), or $0.01 per diluted share in the current quarter compared to $10.3 million pretax ($8.0 million after tax), or $0.30 per diluted share in the linked quarter. The increase in EPS for the current quarter, compared to the prior year quarter, was positively impacted by the Trinity acquisition. The year-over-year comparison of EPS is also impacted by a tax benefit recognized in the prior year quarter that did not occur in the current year period. Net interest margin, on a tax equivalent basis, in the current quarter was 3.81%, compared to 3.86% in the linked quarter and 3.78% in the prior year quarter.

The Company’s Board of Directors approved a quarterly dividend of $0.17 per common share, an increase from $0.16 for the prior quarter, payable on December 31, 2019 to shareholders of record as of December 16, 2019.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “I am pleased with our results in the third quarter of 2019. We generated balanced loan growth, expanded the deposit portfolio with a focus on non-interest bearing deposits and grew operating revenue. We have continued to deliver strong shareholder returns through solid earnings and by actively managing our capital position. In the third quarter we repurchased approximately $12 million of outstanding shares and approved an increased dividend of $0.17 for the fourth quarter. Our return on average tangible common equity¹ has increased to 19% due to our strong earnings profile and prudent capital management. Despite the challenging interest rate environment, we have increased net interest income through balance sheet growth which we believe leaves us well-positioned as we enter the fourth quarter.”

1 Return on average tangible common equity is a non-GAAP measure. 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 third quarter increased $1.3 million to $63.0 million from $61.7 million in the linked quarter, and increased $15.0 million from the prior year period. The increase from the linked quarter was primarily due to incremental accretion on non-core acquired loans while the increase from the prior year period was primarily due to the Trinity acquisition and organic growth. Net interest margin, on a tax equivalent basis, was 3.81% for the third quarter, compared to 3.86% in the linked quarter, and 3.78% in the third quarter of 2018.

Core net interest income and core net interest margin noted in the table below exclude incremental accretion on non-core acquired loans.

	Quarter ended
($ in thousands)	September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018				September 30, 2018
Net interest income	$	63,046			$	61,715			$	52,343			$	50,593			$	48,093
Less: Incremental accretion income2	2,140				910				1,157				2,109				535
Core net interest income3	$	60,906			$	60,805			$	51,186			$	48,484			$	47,558
Net interest margin (tax equivalent)	3.81		%		3.86		%		3.87		%		3.94		%		3.78		%
Core net interest margin3 (tax equivalent)	3.69				3.80				3.79				3.77				3.74

2 Represents incremental accretion income on non-core acquired loans which were acquired from the FDIC and previously covered by shared-loss agreements.

3 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.

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.

	Quarter ended
	September 30, 2019											June 30, 2019											September 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*	$	5,178,009			$	69,193			5.30	%		$	5,095,181			$	68,830			5.42	%		$	4,252,525			$	54,968			5.13	%
Debt and equity investments*	1,312,860				9,610				2.90			1,246,529				9,152				2.95			755,129				5,154				2.71
Short-term investments	113,214				572				2.00			111,291				703				2.53			64,919				306				1.87
Total earning assets	6,604,083				79,375				4.77			6,453,001				78,685				4.89			5,072,573				60,428				4.73
Noninterest-earning assets	618,274											604,604											398,931
Total assets	$	7,222,357										$	7,057,605										$	5,471,504
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	1,356,328			$	2,048			0.60	%		$	1,384,090			$	2,134			0.62	%		$	758,621			$	799			0.42	%
Money market accounts	1,639,603				6,959				1.68			1,576,333				6,996				1.78			1,523,822				5,423				1.41
Savings	548,109				232				0.17			562,503				231				0.16			208,057				157				0.30
Certificates of deposit	820,943				3,970				1.92			815,138				3,758				1.85			678,214				2,878				1.68
Total interest-bearing deposits	4,364,983				13,209				1.20			4,338,064				13,119				1.21			3,168,714				9,257				1.16
Subordinated debentures	141,136				1,956				5.50			141,059				1,958				5.57			118,134				1,483				4.98
FHLB advances	378,207				2,203				2.31			263,384				1,696				2.58			311,522				1,729				2.20
Other borrowed funds	193,055				664				1.36			204,375				713				1.40			160,151				195				0.48
Total interest-bearing liabilities	5,077,381				18,032				1.41			4,946,882				17,486				1.42			3,758,521				12,664				1.34
Noninterest-bearing liabilities:
Demand deposits	1,232,360											1,244,008											1,086,809
Other liabilities	68,642											53,609											39,409
Total liabilities	6,378,383											6,244,499											4,884,739
Shareholders' equity	843,974											813,106											586,765
Total liabilities and shareholders' equity	$	7,222,357										$	7,057,605										$	5,471,504
Core net interest income3					61,343											61,199											47,764
Core net interest margin3									3.69	%										3.80	%										3.74	%
Incremental accretion on non-core acquired loans					2,140											910											535
Total net interest income					$	63,483										$	62,109										$	48,299
Net interest margin									3.81	%										3.86	%										3.78	%
* 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 each of the three months ended September 30, 2019 and June 30, 2019, and $0.2 million for the three months ended September 30, 2018. 3 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.

Net interest margin decreased five basis points from the linked quarter to 3.81% during the current quarter primarily due to a 12 basis point decrease in yield on the loan portfolio. This is a result of the decline of both the one month LIBOR and Prime interest rates during the third quarter, which impacted the underlying interest rates of the Company’s loan portfolio, 60% of which is priced to variable interest rate indices. The interest rate trend is also indicative of the prices obtained on newly originated loans in the quarter, which carried a weighted average interest rate of 4.66%. In addition, the second quarter of 2019 included purchase accounting adjustments which added two basis points to the overall net interest margin, which did not reoccur during the third quarter of 2019. Finally, the overall mix of interest-earning assets also negatively impacted net interest margin due to a larger investment portfolio.

The Company responded to interest rate trends by reducing the cost of certain managed money market and interest-bearing transaction accounts. This effort improved the cost of money market accounts by 10 basis points over the linked quarter. Conversely, certificates of deposit retention was robust in the quarter, and carried a corresponding headwind to overall net interest margin, as did the overall mix of funding from the FHLB and other relatively higher cost sources.

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, current interest rate conditions, and downward movement in short-term rates.

Loans

The following table presents total loans for the most recent five quarters:

					Quarter ended
									March 31, 2019
($ in thousands)	September 30, 2019				June 30, 2019				Trinityb				Legacy EFSCb				Consolidated				December 31, 2018				September 30, 2018
C&I - general	$	1,174,569			$	1,103,908			$	65,122			$	1,063,633			$	1,128,755			$	995,491			$	969,898
CRE investor owned - general	1,281,332				1,235,596				304,615				878,856				1,183,471				862,423				846,322
CRE owner occupied - general	566,219				591,401				91,758				484,268				576,026				496,835				482,146
Enterprise value lendinga	417,521				445,981				—				439,500				439,500				465,992				442,439
Life insurance premium financinga	468,051				465,777				—				440,693				440,693				417,950				378,826
Residential real estate - general	386,174				409,200				137,487				295,069				432,556				304,671				314,315
Construction and land development - general	403,590				376,597				70,251				274,956				345,207				310,832				312,617
Tax creditsa	265,626				268,405				—				235,454				235,454				262,735				256,666
Agriculture	136,249				131,671				—				126,088				126,088				136,188				138,005
Consumer and other - general	128,683				120,961				12,835				96,492				109,327				96,884				126,196
Total Loans	$	5,228,014			$	5,149,497			$	682,068			$	4,335,009			$	5,017,077			$	4,350,001			$	4,267,430
Total loan yield	5.47		%		5.49		%										5.50		%		5.44		%		5.18		%
Total C&I loans to total loans	44		%		44		%										44		%		49		%		48		%
Variable interest rate loans to total loans	60		%		60		%										60		%		62		%		62		%
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 $5.2 billion at September 30, 2019, increasing $78.5 million, or 6% annualized, compared to the linked quarter. On a year-over-year basis, loans increased $960.6 million primarily due to the Trinity acquisition along with organic growth. We expect loan growth in 2019 to be a high single digit percentage, excluding Trinity acquired loans.

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:

	Quarter ended
($ in thousands)	September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018				September 30, 2018
Nonperforming loans	$	15,569			$	19,842			$	9,607			$	16,745			$	17,044
Other real estate	8,498				10,531				6,804				469				408
Nonperforming assets	$	24,067			$	30,373			$	16,411			$	17,214			$	17,452
Nonperforming loans to total loans	0.30		%		0.39		%		0.19		%		0.38		%		0.40		%
Nonperforming assets to total assets	0.33				0.42				0.24				0.30				0.32
Allowance for loan losses to total loans	0.85				0.85				0.86				1.00				1.04
Net charge-offs	$	1,070			$	970			$	1,826			$	2,822			$	2,447

Nonperforming loans decreased $4.3 million to $15.6 million at September 30, 2019 from $19.8 million at June 30, 2019 primarily due to two loans totaling $4.0 million that were 90 days past due and still accruing interest at June 30, 2019 being current at September 30, 2019. The past-due status of these loans at June 30, 2019 was administrative in nature. Nonaccrual loan additions of $4.3 million in the current quarter primarily consisted of three relationships and were offset by paydowns of $3.1 million and charge-offs of $1.5 million. Other real estate decreased during the quarter ended September 30, 2019 primarily due to sales of three properties totaling $2.1 million.

The Company recorded a provision for loan losses of $1.8 million compared to $1.7 million for the linked quarter and $2.3 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 did 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 recorded a credit mark on the Trinity loan portfolio of $24.4 million as of the acquisition date.

Deposits

The following table presents deposits broken out by type for the most recent five quarters:

					Quarter ended
									March 31, 2019
($ in thousands)	September 30, 2019				June 30, 2019				Trinitya				Legacy EFSCa				Consolidated				December 31, 2018				September 30, 2018
Noninterest-bearing accounts	$	1,295,450			$	1,181,577			$	169,344			$	1,017,164			$	1,186,508			$	1,100,718			$	1,062,126
Interest-bearing transaction accounts	1,307,855				1,392,586				401,257				988,569				1,389,826				1,037,684				743,351
Money market and savings accounts	2,201,052				2,162,605				390,192				1,765,839				2,156,031				1,765,154				1,730,762
Brokered certificates of deposit	209,754				213,138				—				180,788				180,788				198,981				202,323
Other certificates of deposit	610,269				609,432				133,556				490,404				623,960				485,448				471,914
Total deposit portfolio	$	5,624,380			$	5,559,338			$	1,094,349			$	4,442,764			$	5,537,113			$	4,587,985			$	4,210,476
Noninterest-bearing deposits to total deposits	23.0		%		21.3		%		15.5		%		22.9		%		21.4		%		24.0		%		25.2		%
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 September 30, 2019 were $5.6 billion, an increase of $65.0 million from June 30, 2019, and an increase of $1.4 billion from September 30, 2018. The increase over the prior year period is primarily due to the Trinity acquisition.

Core deposits, defined as total deposits excluding certificates of deposits, were $4.8 billion at September 30, 2019, an increase of $67.6 million from the linked quarter. Noninterest-bearing deposits were $1.3 billion at September 30, 2019, an increase of $113.9 million compared to June 30, 2019, and an increase of $233.3 million compared to September 30, 2018. The total cost of deposits was 0.94% for the current and linked quarters and 0.86% in the prior year quarter.

Noninterest Income

Total noninterest income for the quarter ended September 30, 2019 was $13.6 million, an increase of $1.6 million, or 13% from the linked quarter, and an increase of $5.2 million, or 61% from the prior year quarter. Loan workout efforts resulted in $1.0 million of income during the third quarter, and was reported in other non-interest income. Tax credit income of $1.2 million in the current quarter increased $0.7 million and $1.0 million over the linked and prior year quarters, respectively. A gain on the sale of investment securities of $0.3 million was recognized in the third quarter of 2019. The increase from the prior year quarter was also driven by contributions from Trinity of $2.4 million.

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 $38.2 million for the quarter ended September 30, 2019, compared to $49.1 million for the quarter ended June 30, 2019, and $29.9 million for the quarter ended September 30, 2018. The decrease from the linked quarter was primarily due to a decline in merger-related expenses following the acquisition of Trinity. Merger-related expenses in the quarter decreased $9.9 million from the linked quarter. The Company expects its noninterest expense to range between $37 million and $39 million during the fourth quarter.

The Company’s core efficiency ratio⁴ was 51.7% for the quarter ended September 30, 2019, compared to 53.3% for the linked quarter and 52.2% for the prior year period, and reflects continued growth in net interest income and noninterest income, along with continued improvement in core noninterest expense over the linked quarter.

4 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 September 30, 2019 compared to 20% and 7% for the linked quarter and prior year quarter, respectively. The low rate for the prior year quarter resulted from a non-recurring reduction of income tax expense of $2.7 million from a tax planning election.

The Company expects its effective tax rate for the full year of 2019 to be approximately 20%.

Capital

The following table presents various EFSC capital ratios:

	Quarter ended
Percent	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
Total risk-based capital to risk-weighted assets	12.72	%		12.62	%		12.86	%		13.02	%		12.94	%
Tier 1 capital to risk weighted assets	11.17			11.06			11.25			11.14			11.03
Common equity tier 1 capital to risk-weighted assets	9.64			9.51			9.64			9.79			9.66
Tangible common equity to tangible assets5	8.54			8.43			8.35			8.66			8.54
5 Tangible common equity to tangible assets is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

Capital ratios for the current quarter are subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review.

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 shared-loss 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 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, October 22, 2019. During the call, management will review the third 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 1-800-367-2403 (Conference ID #8577165). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC3Q2019earnings 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 EFSC, 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 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 policies and practices or accounting standards, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model, which will change how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption on January 1, 2020, uncertainty regarding the future of LIBOR, 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.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited)
	Quarter ended																				Nine Months ended
(in thousands, except per share data)	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018				Sep 30, 2019				Sep 30, 2018
EARNINGS SUMMARY
Net interest income	$	63,046			$	61,715			$	52,343			$	50,593			$	48,093			$	177,104			$	141,312
Provision for loan losses		1,833				1,722				1,476				2,120				2,263				5,031				4,524
Noninterest income		13,564				11,964				9,230				10,702				8,410				34,758				27,645
Noninterest expense		38,239				49,054				39,838				30,747				29,922				127,131				88,284
Income before income tax expense		36,538				22,903				20,259				28,428				24,318				79,700				76,149
Income tax expense		7,469				4,479				4,103				4,899				1,802				16,051				10,461
Net income	$	29,069			$	18,424			$	16,156			$	23,529			$	22,516			$	63,649			$	65,688
Diluted earnings per share	$	1.08			$	0.68			$	0.67			$	1.02			$	0.97			$	2.45			$	2.81
Return on average assets		1.60	%			1.05	%			1.10	%			1.69	%			1.63	%			1.26	%			1.62	%
Return on average common equity		13.66				9.09				9.89				15.61				15.22				11.00				15.41
Return on average tangible common equity1		19.08				12.92				12.93				19.79				19.42				15.16				19.85
Net interest margin (tax equivalent)		3.81				3.86				3.87				3.94				3.78				3.85				3.78
Core net interest margin (tax equivalent)1		3.69				3.80				3.79				3.77				3.74				3.76				3.74
Efficiency ratio		49.91				66.58				64.70				50.16				52.96				60.01				52.25
Core efficiency ratio1		51.73				53.30				54.06				49.77				52.23				52.96				52.86
Total assets	$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662			$	5,517,539
Total average assets		7,222,357				7,057,605				5,956,086				5,518,740				5,471,504			$	6,509,888			$	5,409,404
Total deposits		5,624,380				5,559,338				5,537,113				4,587,985				4,210,476
Total average deposits		5,597,343				5,582,072				4,699,490				4,434,634				4,255,523				5,143,219				4,203,861
Period end common shares outstanding		26,613				26,906				26,878				22,812				23,092
Dividends per common share	$	0.16			$	0.15			$	0.14			$	0.13			$	0.12			$	0.45			$	0.34
Tangible book value per common share1	$	22.82			$	21.74			$	20.80			$	20.95			$	19.94
Tangible common equity to tangible assets1		8.54	%			8.43	%			8.35	%			8.66	%			8.54	%
Total risk-based capital to risk-weighted assets		12.72				12.62				12.86				13.02				12.94
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended																				Nine Months ended
($ in thousands, except per share data)	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018				Sep 30, 2019				Sep 30, 2018
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income	$	81,078			$	79,201			$	67,617			$	64,002			$	60,757			$	227,896			$	173,800
Total interest expense	18,032				17,486				15,274				13,409				12,664				50,792				32,488
Net interest income	63,046				61,715				52,343				50,593				48,093				177,104				141,312
Provision for loan losses	1,833				1,722				1,476				2,120				2,263				5,031				4,524
Net interest income after provision for loan losses	61,213				59,993				50,867				48,473				45,830				172,073				136,788
NONINTEREST INCOME
Deposit service charges	3,246				3,366				2,935				2,894				2,997				9,547				8,855
Wealth management revenue	2,661				2,661				1,992				1,974				2,012				7,314				6,267
Card services revenue	2,494				2,461				1,790				1,760				1,760				6,745				4,926
Tax credit income	1,238				572				158				2,312				192				1,968				508
Gain on sale of investment securities	337				—				—				—				—				337				9
Other income	3,588				2,904				2,355				1,762				1,449				8,847				7,080
Total noninterest income	13,564				11,964				9,230				10,702				8,410				34,758				27,645
NONINTEREST EXPENSE
Employee compensation and benefits	20,845				20,687				19,352				16,669				16,297				60,884				49,370
Occupancy	3,179				3,188				2,637				2,408				2,394				9,004				7,142
Merger-related expenses	393				10,306				7,270				1,271				—				17,969				—
Other	13,822				14,873				10,579				10,399				11,231				39,274				31,772
Total noninterest expense	38,239				49,054				39,838				30,747				29,922				127,131				88,284
Income before income tax expense	36,538				22,903				20,259				28,428				24,318				79,700				76,149
Income tax expense	7,469				4,479				4,103				4,899				1,802				16,051				10,461
Net income	$	29,069			$	18,424			$	16,156			$	23,529			$	22,516			$	63,649			$	65,688
Basic earnings per share	$	1.09			$	0.69			$	0.68			$	1.02			$	0.97			$	2.46			$	2.84
Diluted earnings per share	1.08				0.68				0.67				1.02				0.97				2.45				2.81

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
BALANCE SHEETS
ASSETS
Cash and due from banks	$	153,730			$	106,835			$	85,578			$	91,511			$	78,119
Interest-earning deposits	106,747				85,315				139,389				108,226				81,351
Debt and equity investments	1,354,986				1,328,767				1,198,413				813,702				775,344
Loans held for sale	6,281				1,437				654				392				738
Loans	5,228,014				5,149,497				5,017,077				4,350,001				4,267,430
Less: Allowance for loan losses	44,555				43,822				43,095				43,476				44,186
Total loans, net	5,183,459				5,105,675				4,973,982				4,306,525				4,223,244
Fixed assets, net	59,216				58,888				60,301				32,109				32,354
Goodwill	211,251				211,251				207,632				117,345				117,345
Intangible assets, net	27,626				29,201				31,048				8,553				9,148
Other assets	243,495				254,486				235,760				167,299				199,896
Total assets	$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662			$	5,517,539
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,295,450			$	1,181,577			$	1,186,508			$	1,100,718			$	1,062,126
Interest-bearing deposits	4,328,930				4,377,761				4,350,605				3,487,267				3,148,350
Total deposits	5,624,380				5,559,338				5,537,113				4,587,985				4,210,476
Subordinated debentures	141,179				141,100				140,668				118,156				118,144
FHLB advances	461,426				389,446				180,466				70,000				401,000
Other borrowings	199,634				198,104				212,171				223,450				161,795
Other liabilities	74,077				68,366				64,504				42,267				39,287
Total liabilities	6,500,696				6,356,354				6,134,922				5,041,858				4,930,702
Shareholders’ equity	846,095				825,501				797,835				603,804				586,837
Total liabilities and shareholders’ equity	$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662			$	5,517,539

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.

	Nine Months ended
	September 30, 2019											September 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*	$	4,930,635			$	197,996			5.37	%		$	4,205,585			$	157,548			5.01	%
Debt and equity investments*	1,153,632				25,055				2.90			746,470				14,510				2.60
Short-term investments	108,930				1,722				2.11			63,416				777				1.64
Total earning assets	6,193,197				224,773				4.85			5,015,471				172,835				4.61
Noninterest-earning assets	556,791											393,933
Total assets	$	6,749,988										$	5,409,404
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	1,273,591			$	5,972			0.63	%		$	814,679			$	2,422			0.40	%
Money market accounts	1,579,702				20,470				1.73			1,470,177				13,221				1.20
Savings	471,024				646				0.18			206,213				429				0.28
Certificates of deposit	783,182				11,060				1.89			638,889				7,115				1.49
Total interest-bearing deposits	4,107,499				38,148				1.24			3,129,958				23,187				0.99
Subordinated debentures	135,512				5,562				5.49			118,123				4,305				4.87
FHLB advances	286,267				5,297				2.47			302,937				4,435				1.96
Other borrowed funds	199,842				1,785				1.19			178,245				561				0.42
Total interest-bearing liabilities	4,729,120				50,792				1.44			3,729,263				32,488				1.16
Noninterest-bearing liabilities:
Demand deposits	1,188,758											1,073,903
Other liabilities	58,267											36,323
Total liabilities	5,976,145											4,839,489
Shareholders' equity	773,843											569,915
Total liabilities and shareholders' equity	$	6,749,988										$	5,409,404
Core net interest income1					173,981											140,347
Core net interest margin1									3.76	%										3.74	%
Incremental accretion on non-core acquired loans					4,207											1,592
Total net interest income					$	178,188										$	141,939
Net interest margin									3.85	%										3.78	%
* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $1.1 million and $0.6 million for the nine months ended September 30, 2019 and 2018, respectively. 1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
LOAN PORTFOLIO
Commercial and industrial	$	2,303,495			$	2,265,480			$	2,227,050			$	2,123,167			$	2,035,852
Commercial real estate	1,967,888				1,940,958				1,870,040				1,481,834				1,450,184
Construction real estate	433,486				404,557				369,365				334,645				332,026
Residential real estate	386,173				409,200				432,902				305,026				314,676
Consumer and other	136,972				129,302				117,720				105,329				134,692
Total loans	$	5,228,014			$	5,149,497			$	5,017,077			$	4,350,001			$	4,267,430
DEPOSIT PORTFOLIO
Noninterest-bearing accounts	$	1,295,450			$	1,181,577			$	1,186,508			$	1,100,718			$	1,062,126
Interest-bearing transaction accounts	1,307,855				1,392,586				1,389,826				1,037,684				743,351
Money market and savings accounts	2,201,052				2,162,605				2,156,031				1,765,154				1,730,762
Brokered certificates of deposit	209,754				213,138				180,788				198,981				202,323
Other certificates of deposit	610,269				609,432				623,960				485,448				471,914
Total deposit portfolio	$	5,624,380			$	5,559,338			$	5,537,113			$	4,587,985			$	4,210,476
AVERAGE BALANCES
Total loans	$	5,178,009			$	5,095,181			$	4,511,387			$	4,272,132			$	4,252,524
Debt and equity investments	1,312,860				1,246,529				896,936				769,461				755,129
Interest-earning assets	6,604,083				6,453,001				5,510,489				5,118,319				5,072,573
Total assets	7,222,357				7,057,605				5,956,086				5,518,740				5,471,504
Deposits	5,597,343				5,582,072				4,699,490				4,434,634				4,255,523
Shareholders’ equity	843,974				813,106				662,454				597,864				586,765
Tangible common equity1	604,331				571,890				506,560				471,678				459,975
YIELDS (tax equivalent)
Total loans	5.47		%		5.49		%		5.50		%		5.44		%		5.18		%
Debt and equity investments	2.90				2.95				2.84				2.73				2.71
Interest-earning assets	4.90				4.95				4.99				4.98				4.77
Interest-bearing deposits	1.20				1.21				1.33				1.27				1.16
Total deposits	0.94				0.94				1.02				0.95				0.86
Subordinated debentures	5.50				5.57				5.38				5.01				4.98
FHLB advances and other borrowed funds	1.99				2.07				1.75				1.60				1.62
Interest-bearing liabilities	1.41				1.42				1.49				1.42				1.34
Net interest margin	3.81				3.86				3.87				3.94				3.78
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
(in thousands, except %, per share data and shares)	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
ASSET QUALITY
Net charge-offs	$	1,070			$	970			$	1,826			$	2,822			$	2,447
Nonperforming loans	15,569				19,842				9,607				16,745				17,044
Classified assets	93,984				91,715				79,750				70,126				73,704
Nonperforming loans to total loans	0.30		%		0.39		%		0.19		%		0.38		%		0.40		%
Nonperforming assets to total assets	0.33				0.42				0.24				0.30				0.32
Allowance for loan losses to total loans	0.85				0.85				0.86				1.00				1.04
Allowance for loan losses to nonperforming loans	286.2				220.9				448.6				259.6				259.3
Net charge-offs to average loans (annualized)	0.08				0.08				0.16				0.26				0.23
WEALTH MANAGEMENT
Trust assets under management	$	1,583,260			$	1,627,050			$	1,587,627			$	1,119,329			$	1,174,798
Trust assets under administration	2,404,950				2,428,551				2,405,673				1,811,512				1,984,859
MARKET DATA
Book value per common share	$	31.79			$	30.68			$	29.68			$	26.47			$	25.41
Tangible book value per common share1	22.82				21.74				20.80				20.95				19.94
Market value per share	40.75				41.60				40.77				37.63				53.05
Period end common shares outstanding	26,613				26,906				26,878				22,812				23,092
Average basic common shares	26,778				26,887				23,927				23,014				23,148
Average diluted common shares	26,868				26,940				24,083				23,170				23,329
CAPITAL
Total risk-based capital to risk-weighted assets	12.72		%		12.62		%		12.86		%		13.02		%		12.94		%
Tier 1 capital to risk-weighted assets	11.17				11.06				11.25				11.14				11.03
Common equity tier 1 capital to risk-weighted assets	9.64				9.51				9.64				9.79				9.66
Tangible common equity to tangible assets1	8.54				8.43				8.35				8.66				8.54
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
	Quarter ended																				Nine Months ended
($ in thousands)	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018				Sep 30, 2019				Sep 30, 2018
CORE PERFORMANCE MEASURES
Net interest income	$	63,046			$	61,715			$	52,343			$	50,593			$	48,093			$	177,104			$	141,312
Less: Incremental accretion income	2,140				910				1,157				2,109				535				4,207				1,592
Core net interest income	60,906				60,805				51,186				48,484				47,558				172,897				139,720
Total noninterest income	13,564				11,964				9,230				10,702				8,410				34,758				27,645
Less: Other income from non-core acquired assets	1,001				2				365				10				7				1,368				1,038
Less: Gain on sale of investment securities	337				—				—				—				—				337				9
Less: Other non-core income	—				266				—				26				—				266				649
Core noninterest income	12,226				11,696				8,865				10,666				8,403				32,787				25,949
Total core revenue	73,132				72,501				60,051				59,150				55,961				205,684				165,669
Total noninterest expense	38,239				49,054				39,838				30,747				29,922				127,131				88,284
Less: Other expenses related to non-core acquired loans	18				103				103				40				12				224				(203		)
Less: Facilities disposal	—				—				—				—				—				—				239
Less: Merger related expenses	393				10,306				7,270				1,271				—				17,969				—
Less: Non-recurring excise tax	—				—				—				—				682				—				682
Core noninterest expense	37,828				38,645				32,465				29,436				29,228				108,938				87,566
Core efficiency ratio	51.73		%		53.30		%		54.06		%		49.77		%		52.23		%		52.96		%		52.86		%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (TAX EQUIVALENT)
Net interest income	$	63,483			$	62,109			$	52,595			$	50,786			$	48,299			$	178,187			$	141,939
Less: Incremental accretion income	2,140				910				1,157				2,109				535				4,207				1,592
Core net interest income	$	61,343			$	61,199			$	51,438			$	48,677			$	47,764			$	173,980			$	140,347
Average earning assets	$	6,604,083			$	6,453,005			$	5,510,489			$	5,118,319			$	5,072,573			$	6,193,197			$	5,015,471
Reported net interest margin	3.81		%		3.86		%		3.87		%		3.94		%		3.78		%		3.85		%		3.78		%
Core net interest margin	3.69				3.80				3.79				3.77				3.74				3.76				3.74

	Quarter ended
($ in thousands)	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
SHAREHOLDERS’ EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders’ equity	$	846,095			$	825,501			$	797,835			$	603,804			$	586,837
Less: Goodwill	211,251				211,251				207,632				117,345				117,345
Less: Intangible assets	27,626				29,201				31,048				8,553				9,148
Tangible common equity	$	607,218			$	585,049			$	559,155			$	477,906			$	460,344
Total assets	$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662			$	5,517,539
Less: Goodwill	211,251				211,251				207,632				117,345				117,345
Less: Intangible assets	27,626				29,201				31,048				8,553				9,148
Tangible assets	$	7,107,914			$	6,941,403			$	6,694,077			$	5,519,764			$	5,391,046
Tangible common equity to tangible assets	8.54		%		8.43		%		8.35		%		8.66		%		8.54		%

	Quarter ended
($ in thousands)	Sep 30, 2019				Jun 30, 2019				Sep 30, 2018
AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE COMMON EQUITY
Average shareholder’s equity	$	843,974			$	813,106			$	586,765
Less average goodwill	211,251				211,251				117,345
Less average intangible assets	28,392				29,965				9,445
Average tangible common equity	$	604,331			$	571,890			$	459,975

	Quarter ended
(in thousands, except per share data)	Sep 30, 2019				Jun 30, 2019				Sep 30, 2018
IMPACT OF MERGER-RELATED EXPENSES
Net income - GAAP	$	29,069			$	18,424			$	22,516
Merger related expenses	393				10,306				—
Related tax effect	(97		)		(2,331		)		—
Adjusted net income - Non-GAAP	$	29,365			$	26,399			$	22,516
Average diluted common shares	26,868				26,940				23,329
EPS - GAAP net income	$	1.08			$	0.68			$	0.97
EPS - Adjusted net income	1.09				0.98				0.97
Average assets	$	7,222,357			$	7,057,605			$	5,471,504
ROAA - GAAP net income	1.60		%		1.05		%		1.63		%
ROAA - Adjusted net income	1.61				1.50				1.63
Average shareholder’s equity	$	843,974			$	813,106			$	586,765
ROAE - GAAP net income	13.66		%		9.09		%		15.22		%
ROAE - Adjusted net income	13.80				13.02				15.22
Average tangible common equity	$	604,331			$	571,890			$	459,975
ROATCE - GAAP net income	19.08		%		12.92		%		19.42		%
ROATCE - Adjusted net income	19.28				18.52				19.42

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191021005809/en/

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