Attached files
| file | filename |
|---|---|
| 8-K - 8-K - ENTERPRISE FINANCIAL SERVICES CORP | a8kearningsrelease033118.htm |
| EX-99.1 - EARNINGS RELEASE - ENTERPRISE FINANCIAL SERVICES CORP | ex991financialstatementsan.htm |
Enterprise Financial Services
Corp
2018 First Quarter Earnings Webcast
2
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."
3
Financial Scorecard
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
Q1 2018 Compared to Q1 2017
2 bps NPLs/Loans
42%
21%
11 bps
2%
6%
4
2018 Focus
• Achieve Organic Loan and Deposit Growth
• Maintain Focus on Long-Term Strategic Development
• Improve Overall Sales Culture Through a Refreshed Sales
Process and External Message
5
Q1' 17 Q2' 17 Q3 '17 Q4' 17 Q1' 18
$3,853 $3,859
$3,997 $4,067
$4,162
Portfolio Loan Trends
In Millions
8% Total Loan Growt
h
6
Commercial & Industrial Loan Trends
Q1'17 Q2'17 Q3 '17 Q4 '17 Q1 '18
$1,774 $1,796
$1,862
$1,919
$1,982In Millions
12% C&I Growt
h
7
Portfolio Loan Details
Q1 ’18 Q4 ’17 QTRChange Q1 ‘17
LTM
Change
C&I - General $ 946 $ 937 $ 9 $ 910 $ 36
CRE, Investor Owned - General 837 801 36 757 80
CRE, Owner Occupied - General 471 468 3 424 47
Enterprise Value Lending1 439 408 31 430 9
Life Insurance Premium Financing1 365 365 — 312 53
Residential Real Estate - General 329 342 (13) 360 (31)
Construction and Land Development
- General 294 294 — 294 —
Tax Credits1 244 235 9 142 102
Agriculture1 119 91 28 56 63
Consumer & Other - General 118 126 (8) 168 (50)
Portfolio Loans $ 4,162 $ 4,067 $ 95 $ 3,853 $ 309
1Specialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans.
In Millions
8
Portfolio Loans By Business Unit
Specialized Lending
Q1 '17 Q4 '17 Q1 '18
$793 $856
$877
In Millions
St. Louis
Q1 '17 Q4 '17 Q1 '18
$2,210 $2,233 $2,298
Arizona
Q1 '17 Q4 '17 Q1 '18
$236 $291 $305
Kansas City
Q1 '17 Q4 '17 Q1 '18
$614 $687 $682
9
Last Twelve Months Growth Rate = 6%
In Millions
Deposit Trend
Deposits DDA %
Q1'17 Q2'17 Q3 '17 Q4 '17 Q1 '18
$4,032
$3,921
$4,059
$4,156
$4,281
25.7% 26.0% 25.8%
27.0%
25.7%
u
10
Earnings Per Share - Q1 2018
* A Non GAAP Measure, Refer to Appendix for Reconciliation
Reported vs. Core EPS*
$0.90
$(0.06)
$0.84
EPS Core EPSNon-Core
Acquired Assets
11
Earnings Per Share Trend - Q1 2018
Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
$0.77
$0.02
$0.04
$(0.08)
$(0.03)
$0.12
$0.84
Changes in Core EPS*
Q4 '17 Net Interest
Income
Portfolio Loan
Loss Provision
Noninterest
Income
Noninterest
Expense
Q1 '18Income Tax
Expense
12
Core Net Interest Income Trend*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
In Millions
Core Net Interest Income FTE Core Net Interest Margin
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18
$37.6
$43.0 $44.1
$44.9 $45.4
3.63%
3.76% 3.75% 3.73% 3.74%
21% Core NII Growt
h
13
Credit Trends for Portfolio Loans
Portfolio Loan Growth
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18
$56
$7
$138
$70
$95
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18
(1)
61
8
33
(2)
Q1 2018 EFSC Peer(3)
NPA’s/Assets = 0.30% 0.49%
NPL’s/Loans = 0.38% 0.62%
ALLL/NPL’s = 254.0% 145.2%
ALLL/Loans = 0.98% 0.99%
Net Charge-offs (1)
(2)
Provision for Portfolio Loans
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18
$1.5
$3.6
$2.4
$3.2
$1.9
In Millions
(1) Portfolio loans only, excludes non-core acquired loans; (2) Excludes acquisition of Jefferson County
Bancshares ("JCB"); (3) Peer median data as of 12/31/2017 (source: SNL Financial)
bps
bps
bps
bps
bps
In Millions
14
Core Fee Income*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
Other Core Fee Income DetailCore Fee Income
In Millions
Wealth Management Deposit Services Charge
Other State Tax Credits
Card Services
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18
$1.8 $2.0 $2.1 $2.2 $2.1
$2.5 $2.8 $2.8
$2.9 $2.9
$1.5
$1.7 $1.9
$2.3 $1.8$0.2
$0.1
$2.2
$0.2$1.0
$7.0 $1.4
$7.9
$1.5
$8.4
$1.5
$11.1
$1.5
$8.5
Miscellaneous Swap Fees CDE
Mortgage
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18
$0.8 $1.0
$1.5 $1.3 $1.5
$0.2
$0.4
$0.1 $0.6
$0.4
$0.2
$0.2
$0.2
$0.2
$0.1
$1.5 $0.1
$1.7 $0.1
$1.9
$0.2
$2.3
$0.1
$1.8
15
Operating Expenses Trend*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
In Millions
Other Occupancy
Employee compensation and benefits Core Efficiency Ratio*
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18
$7.8
$9.7 $9.6 $10.4 $10.2
$1.9
$2.3 $2.4 $2.4 $2.4
$15.2
$24.9
$15.8
$27.8
$15.1
$27.1
$15.3
$28.1
$16.5
$29.1
56.0% 54.5%
51.6% 50.2%
54.0%
16
Positive Momentum in Core Earnings Per Share*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
Q1 '14 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
$0.28
$0.31
$0.37
$0.33 $0.35
$0.38
$0.44
$0.49 $0.47 $0.49 $0.49
$0.59 $0.59
$0.56
$0.66
$0.77
$0.84
200% Core EPS Growth from Q1 2014 to Q1 2018
Four-Y
ear CAGR 32
%
Appendix
First Quarter 2018 Earnings Webcast
18
Effective Tax Rate Reconciliation
Q1 2018 2017 Q4 2017
Federal Tax Rate 21.00% 35.00% 35.00%
State Tax, Net of Federal Benefit 2.65% 1.94% 1.94%
Excess Tax Benefits (4.06)% (2.47)% (1.25)%
Tax Credit Investments (3.98)% (1.89)% (3.62)%
Other Tax Adjustments (0.31)% (2.28)% (3.90)%
Pre-DTA Effective Tax Rate 15.30% 30.30% 28.17%
Deferred Tax Asset Revaluation —% 14.00% 44.30%
Ending Effective Tax Rate 15.30% 44.30% 72.47%
19
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 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 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 and related income and expenses, the impact of non-comparable items, and the Company's operating
performance on an ongoing basis. Core performance measures include contractual interest on non-core acquired loans but exclude
incremental accretion on these loans. Core performance measures also exclude the gain or loss on sale of other real estate from
non-core acquired loans, and expenses directly related to the non-core acquired loans and other assets formerly covered under
FDIC loss share agreements. Core performance measures also exclude certain other income and expense items, such as executive
separation costs, merger related expenses, facilities charges, deferred tax asset revaluation due to U.S. corporate income tax reform,
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 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 median of publicly traded banks with total assets from $2-$10 billion with commercial loans greater than
20% and consumer loans less than 10%.
20
Reconciliation of Non-GAAP Financial Measures
For the Quarter ended
($ in thousands, except per share data)
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
CORE PERFORMANCE MEASURES
Net interest income $ 46,171 $ 47,404 $ 45,625 $ 45,633 $ 38,642
Less: Incremental accretion income 766 2,503 1,556 2,584 1,075
Core net interest income 45,405 44,901 44,069 43,049 37,567
Total noninterest income 9,542 11,112 8,372 7,934 6,976
Less: Gain (loss) on sale of other real estate from non-core acquired loans — (6) — — —
Less: Other income from non-core acquired assets 1,013 — — — —
Less: Gain on sale of investment securities 9 — 22 — —
Core noninterest income 8,520 11,118 8,350 7,934 6,976
Total core revenue 53,925 56,019 52,419 50,983 44,543
Provision for portfolio loan losses 1,871 3,186 2,422 3,623 1,533
Total noninterest expense 29,143 28,260 27,404 32,651 26,736
Less: Other expenses related to non-core acquired loans 14 114 19 (16) 123
Less: Facilities disposal — — — 389 —
Less: Merger related expenses — — 315 4,480 1,667
Core noninterest expense 29,129 28,146 27,070 27,798 24,946
Core income before income tax exp 22,925 24,687 22,927 19,562 18,064
Total income tax expense 3,778 19,820 7,856 5,545 5,106
Less: income tax expense from deferred tax asset revaluation1 — 12,117 — — —
Less: Other non-core income tax expense2 438 1,011 465 (784) 190
Core income tax expense 3,340 6,692 7,391 6,329 4,916
Core net income $ 19,585 $ 17,995 $ 15,536 $ 13,233 $ 13,148
Core diluted earnings per share $ 0.84 $ 0.77 $ 0.66 $ 0.56 $ 0.59
Core return on average assets 1.49% 1.37% 1.21% 1.06% 1.17%
Core return on average common equity 14.34% 12.84% 11.13% 9.72% 11.29%
Core return on average tangible common equity 18.64% 16.71% 14.50% 12.72% 13.75%
Core efficiency ratio 54.02% 50.24% 51.64% 54.52% 56.01%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
Net interest income $ 46,386 $ 47,824 $ 46,047 $ 46,096 $ 39,147
Less: Incremental accretion income 766 2,503 1,556 2,584 1,075
Core net interest income $ 45,620 $ 45,321 $ 44,491 $ 43,512 $ 38,072
Average earning assets $ 4,948,875 $ 4,826,271 $ 4,712,672 $ 4,641,198 $ 4,259,198
Reported net interest margin 3.80% 3.93% 3.88% 3.98% 3.73%
Core net interest margin 3.74% 3.73% 3.75% 3.76% 3.63%
1Deferred tax asset revaluation associated with U.S. corporate income tax reform.
2 Other non-core income tax expense calculated at 24.7% of non-core pretax income for 2018. For 2017, the calculation is 38.0% of non-core pretax income plus an
estimate of taxes payable related to non-deductible JCB acquisition costs.
Q & A
First Quarter 2018 Earnings Webcast