Attached files
| file | filename |
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| 8-K - 8-K - ENTERPRISE FINANCIAL SERVICES CORP | a8kearningsreleasedoc33115.htm |
| EX-99.1 - EARNINGS RELEASE - ENTERPRISE FINANCIAL SERVICES CORP | ex991financialstatementsan.htm |
Enterprise Financial Services Corp 2015 First Quarter Earnings Release ACCEL ERAT ING QUAL IT Y GROWT H
Some of the information in this report contains “forward-looking statements” within the meaning of and are 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 are expressed differently. 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 contained in the forward-looking statements due to a number of factors, including, but not limited to: credit risk; changes in the appraised valuation of real estate securing impaired loans; outcomes of litigation and other contingencies; exposure to general and local economic conditions; risks associated with rapid increases or decreases in prevailing interest rates; consolidation 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 which are available on our website at www.enterprisebank.com. Forward-Looking Statement 1
Grow Core EPS Drive Quality Loan Growth Enhance Core Net Interest Income Defend Core Net Interest Margin Maintain High Credit Quality Metrics Improve Operating Leverage 2015 Objectives: – Building on 2014 2
Portfolio Loan Trends $2,174 $2,251 $2,294 $2,434 $2,436 3/31/2014 6/30/2014 9/30/2014 12/31/2014 3/31/2015 In Millions 3
$1,060 $1,135 $1,172 $1,270 $1,265 3/31/2014 6/30/2014 9/30/2014 12/31/2014 3/31/2015 Commercial & Industrial Loan Trends In Millions 4
Portfolio Loan Trends 5 3/31/15 12/31/14 Change Enterprise Value Lending $ 204 $ 202 $ 2 C&I General 710 717 (7) Life Insurance Premium Financing 230 221 9 Tax Credit 122 130 (8) Commercial/CRE 920 915 5 Residential 180 185 (5) Other 70 64 6 Portfolio Loans $ 2,436 $ 2,434 $ 2 In Millions
Portfolio Loans By Region $1,723 $574 $139 St. Louis Kansas City Arizona 03/31/2015 $1,712 $583 $139 St. Louis Kansas City Arizona 12/31/2014 In Millions In Millions 6
Deposit Trends 7 $2,452 $2,465 $2,510 $2,492 $2,675 25.0% 27.4% 27.7% 25.8% 25.5% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Deposits DDA %
8 Earnings Per Share $22,387 $0.46 <$0.11> $0.35 EPS Non-Core Covered Assets Core EPS In Millions * A Non GAAP Measure, Refer to Appendix for Reconciliation (1) FDIC Loss Sharing Agreements Reported vs. Core EPS* Q1 2015 (1)
9 Earnings Per Share Trend $0.33 $0.01 < $0.02> $0.03 $0.35 Q4 '14 Portfolio Loan Loss Provision Non-Interest Income Operating Expenses Q1 '15 In Millions Changes in Core EPS* * A Non GAAP Measure, Refer to Appendix for Reconciliation
Net Interest Income Driving Core Revenue Growth* In Millions Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation $23.7 $24.2 $24.9 $25.7 $25.6 3.44% 3.41% 3.41% 3.45% 3.46% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 $11.0 $12.0 $13.0 $14.0 $15.0 $16.0 $17.0 $18.0 $19.0 $20.0 $21.0 $22.0 $23.0 $24.0 $25.0 $26.0 $27.0 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Core Net Interest Income* FTE Net Interest Margin* 10
Credit Trends for Portfolio Loans 8 bps 15 bps -5 bps 10 bps 25 bps Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 0 Net Charge-offs (1) 2014 NCO = 7 bps (1) Portfolio loans only, excludes PCI loans $36.7 $77.1 $43.8 $139.1 $1.6 0 50 100 150 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Portfolio Loan Growth $1.0 $1.3 $0.1 $2.0 $1.6 $- $0.6 $1.2 $1.8 $2.4 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Provision for Portfolio Loans Q1 2015 EFSC Peer(2) NPA’s/Assets = 0.52% 0.91% NPL’s/Loans = 0.62% 1.03% ALLL/NPL’s = 200% 122% ALLL/Loans = 1.24% 1.28% (2) Peer data as of 12/31/2014 (source: SNL Financial) In Millions In Millions 11
Managed Operating Expenses* Improving Efficiency In Millions Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation $20.4 $19.5 $19.3 $20.2 $19.1 68.2% 64.5% 62.8% 62.8% 60.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 0 6 12 18 24 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Operating Expenses* Core Efficiency Ratio* 12
Positive Momentum in Core* Earnings Per Share $0.28 $0.31 $0.37 $0.33 $0.35 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation 13 25% Core EPS Growth from Q1 2014 to Q1 2015
Continued Growth in Core EPS Drive Net Interest Income Growth in Dollars with Favorable Loan Growth Trends Defend Net Interest Margin Maintain High Quality Credit Profile Achieve Further Improvement in Operating Leverage Enhance Deposit Levels to Support Growth Financial Priorities 14 Trend From Prior Year 25% 8% 2 bps 0.09% NPLs/Loans 7% 9%
Appendix
Use of Non-GAAP Financial Measures 16 The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as Core net income margin and other Core performance measures, 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 performance measures presented in 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 PCI loans and related income and expenses, the impact of nonrecurring items, and the Company's operating performance on an ongoing basis. Core performance measures include contractual interest on PCI loans but exclude incremental accretion on these loans. Core performance measures also exclude the Change in FDIC receivable, Gain or loss of other real estate covered under FDIC loss share agreements and expenses directly related to the PCI loans and other assets covered under FDIC loss share agreements. Core performance measures also exclude certain other income and expense items the Company believes to be not indicative of or useful to measure the Company's operating performance on an ongoing basis. The attached tables contain a reconciliation of these Core performance measures to the GAAP measures. The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the tables below, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated. Peer group data consists of banks with total assets from $1-$10 billion with commercial loans greater than 20% and consumer loans less than 20%.
Reconciliation of Non-GAAP Financial Measures 17 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, (in thousands) 2015 2014 2014 2014 2014 CORE PERFORMANCE MEASURES Net interest income 29,045$ 30,816$ 27,444$ 28,742$ 30,366$ Less: Incremental accretion income 3,458 5,149 2,579 4,538 6,664 Core net interest income 25,587 25,667 24,865 24,204 23,702 Total noninterest income 3,583 4,852 4,452 3,405 3,922 Less: Change in FDIC loss share receivable (2,264) (1,781) (2,374) (2,742) (2,410) Less: Gain on sale of other real estate covered under FDIC loss share (15) 195 (45) 164 131 Less: Gain on sale of investment securities 23 — — — — Less: Closing fee — — 945 — — Core noninterest income 5,839 6,438 5,926 5,983 6,201 Total core revenue 31,426 32,105 30,791 30,187 29,903 Provision for portfolio loans 1,580 1,968 66 1,348 1,027 Total noninterest expense 19,950 24,795 21,121 20,445 21,102 Less: FDIC clawback 412 141 1,028 143 (111) Less: Other loss share expenses 470 544 746 834 829 Less: FHLB prepayment penalty — 2,936 — — — Less: Facilities disposal charge — 1,004 — — — Core noninterest expense 19,068 20,170 19,347 19,468 20,384 Core income before income tax expense 10,778 9,967 11,378 9,371 8,492 Core income tax expense 3,647 3,264 3,926 3,108 2,867 Core net income 7,131$ 6,703$ 7,452$ 6,263$ 5,625$ Core earnings per share $0.35 $0.33 $0.37 $0.31 $0.28 Core efficiency ratio 60.67% 62.83% 62.83% 64.49% 68.17% Core return on average assets 0.88% 0.82% 0.93% 0.80% 0.74% Core return on average common equity 8.99% 8.43% 9.65% 8.44% 7.94% NET INTEREST MARGIN TO CORE NET INTEREST MARGIN Net interest income (fully tax equivalent) 29,467$ 31,223$ 27,843$ 29,133$ 30,803$ Less: Incremental accretion income 3,458 5,149 2,579 4,538 6,664 Core net interest income (fully tax equivalent) 26,009$ 26,074$ 25,264$ 24,595$ 24,139$ Average earning assets 3,047,815$ 2,998,467$ 2,943,070$ 2,895,982$ 2,848,514$ Reported net interest margin (fully tax equivalent) 3.92% 4.13% 3.75% 4.04% 4.39% Core net interest margin (fully tax equivalent) 3.46% 3.45% 3.41% 3.41% 3.44% For the Quarter ended