Enterprise Financial Reports Second Quarter 2016 Results

Reported Highlights
  • Record net income of $0.61 per diluted share, increased 13% over the linked quarter, and 42% compared to the second quarter of 2015
  • Portfolio loans grew 7% on an annualized basis, and 13% from the prior year period
  • Sixth consecutive quarterly cash dividend increase to $0.11 per share in the third quarter of 2016 from $0.10 per share in the second quarter of 2016

Core Highlights 1
  • Core net income of $0.49 per diluted share, increased 4% from the linked quarter, and increased 29% compared to the prior year period
  • Core net interest income increased 2% in the linked quarter, and 15% from the prior year period
  • Core efficiency ratio of 56.3% for the quarter

ST. LOUIS, July 28, 2016 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the "Company") reported net income of $12.4 million for the quarter ended June 30, 2016, an increase of $1.3 million, or 12%, as compared to the linked first quarter.  Net income per diluted share was $0.61 for the quarter ended June 30, 2016, an increase of $0.07 compared to $0.54 per diluted share for the linked first quarter.  The increase from the linked quarter resulted from an increase in net interest income and higher noninterest income.  Second quarter 2016 net income increased 42% compared to $8.7 million for the prior year period, and diluted earnings per share increased 42% from $0.43 reported a year ago.  The increase in net income over the prior year was largely due to an increase in net interest income from strong loan growth, and a decrease in provision for loan losses on portfolio loans from improved credit quality.

On a core basis 1, the Company reported net income of $9.9 million, or $0.49 per diluted share, for the quarter ended June 30, 2016, compared to $9.4 million, or $0.47 per diluted share, in the linked first quarter.  Second quarter 2016 core net income increased 29% from $7.7 million for the prior year period, and diluted core earnings per share grew 29% from $0.38 for the prior year period.  The increase for both periods was due to higher levels of net interest income from continued growth in earning asset balances, while the year over year results also benefited from lower provision for loan losses, partially offset by higher expenses to support revenue growth.  Core net income for the quarter excludes the impact of Purchased credit impaired ("PCI") loan balances in excess of the contractual interest, executive severance of $0.3 million incurred in the second quarter, and other non-core expenses of $0.3 million.  

The Company's Board of Directors approved an additional one cent per common share increase in the Company's quarterly dividend to $0.11 per common share from $0.10 for the third quarter of 2016, payable on September 30, 2016 to shareholders of record as of September 15, 2016.

Peter Benoist, President and CEO, commented, "We're pleased to report another strong quarter at Enterprise.  Second quarter reported earnings set a new record for the company, representing a 1.33% return on average assets and 14.91% return on average tangible common equity.  Core earnings continued to grow robustly, rising 29% over the prior year period."

"Portfolio loans grew 13% over the past twelve months and 7% annualized during the quarter," said Benoist. "Our guidance for loan growth remains at 10% or higher for the year.  Credit quality remained favorable, with both nonperforming loan and nonperforming asset ratios below 50 basis points."

"From a broader perspective, the earnings results for this quarter, like the quarters that preceded it, illustrate the transformation in Enterprise's core earnings power," noted Benoist.  "In each of the past four quarters, core return on assets has exceeded one percent.  Over the past eight quarters we've grown core net interest income 25% while holding noninterest expense increases to a modest 5%. This powerful operating leverage has driven our core earnings 58% higher, positioning Enterprise very well at mid-year with a strong balance sheet, growing earnings power, and a highly energized team."

Net Interest Income

Net interest income in the second quarter increased $1.4 million from the linked first quarter, and $4.5 million from the prior year period due to strong growth in portfolio loan balances and increases in net interest margin discussed below.  Net interest margin, on a fully tax equivalent basis, was 3.93% for the second quarter, compared to 3.87% in the linked first quarter, and 3.85% in the second quarter of 2015.

The yield on Portfolio loans improved to 4.20% in the second quarter, an increase of one basis point from the linked first quarter, and three basis points higher than the prior year period.  In the second quarter of 2016, the yield on PCI loans was 30.07%, as compared to 22.67% in the linked quarter, and 18.33% in the prior year period.

The cost of interest-bearing liabilities increased two basis points to 0.50% in the second quarter of 2016 from 0.48% in the linked first quarter, but it was four basis points lower than 0.54% in the second quarter of 2015.  The increase from the linked quarter was due to a shift in the composition of deposits.  The decrease from the prior year period was primarily from lower rates on time deposit balances and a more favorable funding mix.

Core net interest margin 1, defined as the net interest margin (fully tax equivalent), including contractual interest on PCI loans but excluding the incremental accretion on these loans, was as follows:
   
  For the Quarter ended
($ in thousands) June 30,  2016   March 31,  2016   December 31,  2015   September 30,  2015   June 30,  2015
Core net interest margin 1 3.52 %   3.54 %   3.50 %   3.41 %   3.46 %
Core net interest income 1 30,212     29,594     28,667     27,087     26,277  
                             

Core net interest income 1 increased 15% compared to the prior year period due to strong portfolio loan growth and improvement in net interest margin.  Core net interest income increased by $0.6 million to $30.2 million in the linked quarter, and Core net interest margin 1 decreased two basis points to 3.52% primarily due to runoff of PCI loan balances.  Core net interest margin expanded six basis points from the prior year quarter, primarily due to loan growth improving the earning asset mix, lower funding costs, and the aforementioned increase in the yield on portfolio loans.  The Company continues to manage its balance sheet to grow core net interest income and expects to maintain core net interest margin over the coming quarters; however, pressure on funding costs and continued reductions in PCI loan balances could negate the expected trends in core net interest margin.

Portfolio loans

Portfolio loans increased to $2.9 billion at June 30, 2016, increasing $51 million, or 7% on an annualized basis, when compared to the linked quarter.  On a year over year basis, portfolio loans increased $341 million, or 13%.  The Company continues to expect loan growth at or above 10% for 2016.

During the quarter ended June 30, 2016, the Company grew loans in Commercial real estate, Residential real estate, and Consumer and other.  However, Commercial and industrial ("C&I") loans decreased $5 million during the second quarter of 2016 compared to the linked first quarter and represented 53% of the Company's loan portfolio at June 30, 2016.  Nonetheless, C&I loans remain the Company's primary focus resulting in growth of $211 million, or 16%, since June 30, 2015.

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.  The Company's specialized lending products, particularly enterprise value lending and life insurance premium finance, have contributed to the growth in the C&I category.  C&I loan growth also supports management's efforts to maintain the Company's asset sensitive interest rate risk position.  At June 30, 2016, 64% of portfolio loans had variable interest rates, as compared to 62% for the linked quarter and prior year period.

The following table presents Portfolio loans with selected specialized lending detail for the most recent five quarters:
   
  At the Quarter ended
(in thousands) June 30,  2016   March 31,  2016   December 31,  2015   September 30,  2015   June 30,  2015
Enterprise value lending $ 353,915     $ 359,862     $ 350,266     $ 283,205     $ 271,807  
C&I - general 737,904     759,330     732,186     689,274     685,793  
Life insurance premium financing 295,643     272,450     265,184     247,736     239,182  
Tax credits 152,995     153,338     136,691     145,207     132,521  
CRE, Construction, and land development 971,130     948,859     932,084     902,100     909,747  
Residential 211,155     202,255     196,498     188,985     185,587  
Other 161,167     136,522     137,828     145,649     117,918  
Portfolio loans $ 2,883,909     $ 2,832,616     $ 2,750,737     $ 2,602,156     $ 2,542,555  
                   
                   

PCI loans

PCI loans totaled $56.5 million at June 30, 2016, a decrease of $6.9 million, or 44% on an annualized basis, from the linked first quarter, and $31.1 million, or 36%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.

PCI loans contributed $2.8 million of net earnings in the second quarter of 2016, compared to $1.6 million in the linked first quarter, and $1.0 million in the prior year period.  At June 30, 2016, the remaining accretable yield on the portfolio was estimated to be $18 million and the non-accretable difference was approximately $23 million.  Accelerated cash flows and other incremental accretion from PCI loans was $3.6 million for the quarter ended June 30, 2016, $2.8 million for the linked quarter, and $3.0 million for the prior year quarter.  The Company estimates 2016 income from accelerated cash flows and other incremental accretion to be between $9 million and $11 million.

Asset quality for Portfolio loans and Other real estate

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,  2016   March 31,  2016   December 31,  2015   September 30,  2015   June 30,  2015
Nonperforming loans $ 12,813     $ 9,513     $ 9,100     $ 9,123     $ 17,498  
Other real estate from originated loans 2,741     2,813     3,218     1,575     1,933  
Other real estate from PCI loans 2,160     7,067     5,148          
Nonperforming assets $ 17,714     $ 19,393     $ 17,466     $ 10,698     $ 19,431  
Nonperforming loans to portfolio loans 0.44 %   0.34 %   0.33 %   0.35 %   0.69 %
Nonperforming assets to total assets 0.47 %   0.52 %   0.48 %   0.30 %   0.58 %
Net charge-offs (recoveries) $ (409 )   $ (99 )   $ (647 )   $ 113     $ 672  
                                       

Nonperforming loans increased 35% to $12.8 million at June 30, 2016, from $9.5 million at March 31, 2016, and decreased 27% from $17.5 million at June 30, 2015.  During the quarter ended June 30, 2016, there were $6.9 million of additions to nonperforming loans, $2.7 million of other principal reductions, and $0.9 million assets transferred to performing.  The additions to nonperforming loans consisted of three unrelated accounts.  Despite the increase, Nonperforming loans were 0.44% of portfolio loans, and Nonperforming assets were 0.47% of total assets at June 30, 2016.

The Company's allowance for loan losses was 1.23% of loans at June 30, 2016, representing 277% of nonperforming loans, as compared to 1.21% at March 31, 2016, representing 361% of nonperforming loans, and 1.25% at June 30, 2015, representing 182% of nonperforming loans.

Deposits

Total deposits at June 30, 2016 were $3.0 billion, an increase of $96.5 million, or 13% on an annualized basis, from March 31, 2016, and $336.7 million, or 13%, from June 30, 2015.  Core deposits, defined as total deposits excluding time deposits, were $2.5 billion at June 30, 2016, an increase of $35 million, or 6% on an annualized basis, from the linked quarter, and $326 million, or 15%, when compared to the prior year period.  The overall positive trends in deposits reflect enhanced deposit gathering efforts in both commercial and business banking.

Noninterest-bearing deposits increased $33.5 million compared to March 31, 2016, and increased $94.9 million compared to the quarter ended June 30, 2015.  The composition of Noninterest-bearing deposits remained stable at 25% of total deposits at June 30, 2016, compared to March 31, 2016 and June 30, 2015.  The total cost of deposits increased two basis points to 0.36% compared to 0.34% at March 31, 2016, and declined three basis points since June 30, 2015.

Noninterest income

Deposit service charges for the second quarter of 2016 of $2.2 million grew 7% when compared to the linked quarter, and grew 10% when compared to the prior year quarter, due primarily to growth in customer relationships.  Wealth management revenues were consistent at $1.6 million when compared to the linked first quarter, and decreased $0.1 million, when compared to the prior year period.

Trust assets under management were $897 million at June 30, 2016, an increase of $19.1 million, or 2%, when compared to March 31, 2016, and an increase of $7.7 million, or 1%, when compared to the prior year period.  The increase from the linked quarter was largely due to growth in new clients.

Gains from state tax credit brokerage activities were $0.2 million for the second quarter of 2016, compared to $0.5 million for the linked first quarter, and $0.1 million in the second quarter of 2015.  Sales of state tax credits can vary by quarter, but generally occur in the first and fourth quarters of the year depending on client demand and availability of the tax credits.

Other noninterest income increased 42% to $2.4 million compared to the linked quarter, and decreased 18% from the prior year period.  The increase from the linked quarter was primarily due to allocation fees from tax credit projects.  The decrease from the prior year period was due to fees earned from certain recoveries, higher allocation fees from tax credit projects, and swap fee income received during the second quarter of 2015.

Noninterest expenses

Noninterest expenses were $21.4 million for the quarter ended June 30, 2016, compared to $20.8 million for the quarter ended March 31, 2016, and $19.5 million for the quarter ended June 30, 2015.  The increase over the linked quarter was due to $0.3 million from executive severance, and $0.3 million other expense.  Core noninterest expenses 1, which exclude the two aforementioned non-core items and expenses directly related to PCI assets, were $20.4 million for the quarter ended June 30, 2016, compared to $20.4 million for the linked quarter, and $19.0 million for the prior year period.  The increase from the prior year period was largely due to an increase in Employee compensation and benefits from the addition of client service personnel to facilitate growth.

The Company's Core efficiency ratio 1 was 56.3% for the quarter ended June 30, 2016, compared to 57.4% for the linked quarter, and 57.6% for the prior year period, and reflects overall expense management, in light of enhanced revenue growth trends.   

The Company anticipates total noninterest expenses to be between $19.5 million and $21.5 million per quarter for 2016.

Other Business Results

During the quarter ended June 30, 2016, the Company repurchased 18,918 common shares at $26.46 per share under its publicly announced plan.  The plan allows for repurchase of up to two million common shares, representing approximately 10% of the Company's currently outstanding shares.

The total risk based capital ratio 1 was 12.16% at June 30, 2016, compared to 12.02% at March 31, 2016, and 12.68% at June 30, 2015.  The Company's Common equity tier 1 capital ratio 1 was 9.38% at June 30, 2016, compared to 9.20% at March 31, 2016, and 9.66% at June 30, 2015.  The tangible common equity ratio 1 was 9.08% at June 30, 2016, versus 8.87% at March 31, 2016, and 8.94% at June 30, 2015.

The increase in the tangible common equity ratio is due to continued earnings growth, despite asset growth of over $50 million.  Capital ratios for the current quarter are based on the Basel III regulatory capital framework as applied to the Company's current businesses and operations, and are subject to, among other things, completion and filing of the Company's regulatory reports and ongoing regulatory review and implementation guidance.  The attached tables contain a reconciliation of these ratios to U.S. GAAP financial measures.

The Company's effective tax rate was 35.3% for the quarter ended June 30, 2016 compared to 34.8% for the quarter ended March 31, 2016, and 35.3% for the quarter ended June 30, 2015.

Use of Non-GAAP Financial Measures 1

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 and net interest margin, and other Core performance measures, regulatory capital ratios, and the tangible common equity ratio, in this release that are considered "non-GAAP financial measures." Generally, a non-GAAP financial measure is a 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 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 PCI loans and related income and expenses, the impact of certain non-comparable items, and the Company's operating performance on an ongoing basis.  Core performance measures include contractual interest on PCI loans, but exclude incremental accretion on these loans.  Core performance measures also exclude the Change in FDIC receivable, Gain or loss on sale of other real estate from PCI loans, and expenses directly related to PCI 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 and the gain or loss on sale of investment securities, the Company believes to be not indicative of or useful to measure the Company's operating performance on an ongoing basis.  The attached tables contain a reconciliation of these Core performance measures to the GAAP measures.  The Company believes that the tangible common equity ratio provides useful information to investors about the Company's capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.

The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP.  In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.

The Company will host a conference call and webcast at 2:30 p.m. Central time on Thursday, July 28, 2016.  During the call, management will review the second quarter of 2016 results and related matters.  This press release as well as a related slide presentation will be accessible on the Company's website at www.enterprisebank.com under "Investor Relations" beginning prior to the scheduled broadcast of the conference call.  The call can be accessed via this same website page, or via telephone at 1-888-428-9490 (Conference ID #4111739.)  A recorded replay of the conference call will be available on the website two hours after the call's completion.  Visit bit.ly/EFSCearnings and register to receive a dial in number, passcode, and pin number.   The replay will be available for approximately two weeks following the conference call.

Enterprise Financial Services Corp operates commercial banking and wealth management businesses in metropolitan St. Louis, Kansas City, and Phoenix.  The Company is primarily focused on serving the needs of privately held businesses, their owner families, executives and professionals.

Readers should note that in addition to the historical information contained herein, this press release contains forward-looking statements, including but not limited to statements about the Company's plans, expectations, and projections of future financial and operating results, which are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements.  We use the words "anticipate," "expect," and "intend" and variations of such words and similar expressions in this communication to identify such forward-looking statements.  Factors that could cause or contribute to such differences include, but are 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 in 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, as well as other risk factors described in the Company's 2015 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.  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.

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

 
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,  2016   Mar 31,  2016   Dec 31,  2015   Sep 30,  2015   Jun 30,  2015   Jun 30,  2016   Jun 30,  2015
EARNINGS SUMMARY                          
Net interest income $ 33,783     $ 32,428     $ 32,079     $ 30,006     $ 29,280     $ 66,211     $ 58,325  
Provision for loan losses - portfolio loans 716     833     543     599     2,150     1,549     3,730  
Provision reversal for loan losses - purchased credit impaired loans (336 )   (73 )   (917 )   (227 )       (409 )   (3,270 )
Noninterest income 7,049     6,005     6,557     4,729     5,806     13,054     9,389  
Noninterest expense 21,353     20,762     22,886     19,932     19,458     42,115     39,408  
Income before income tax expense 19,099     16,911     16,124     14,431     13,478     36,010     27,846  
Income tax expense 6,747     5,886     5,445     4,722     4,762     12,633     9,784  
Net income $ 12,352     $ 11,025     $ 10,679     $ 9,709     $ 8,716     $ 23,377     $ 18,062  
                           
Diluted earnings per share $ 0.61     $ 0.54     $ 0.52     $ 0.48     $ 0.43     $ 1.16     $ 0.90  
Return on average assets 1.33 %   1.22 %   1.20 %   1.13 %   1.06 %   1.27 %   1.11 %
Return on average common equity 13.57 %   12.46 %   12.14 %   11.38 %   10.56 %   13.02 %   11.16 %
Return on average tangible common equity 14.91 %   13.74 %   13.43 %   12.65 %   11.77 %   14.34 %   12.47 %
Net interest margin (fully tax equivalent) 3.93 %   3.87 %   3.91 %   3.77 %   3.85 %   3.90 %   3.88 %
Efficiency ratio 52.29 %   54.02 %   59.23 %   57.38 %   55.46 %   53.13 %   58.20 %
                                                       
CORE PERFORMANCE SUMMARY (NON-GAAP) 1                                                      
Net interest income $ 30,212     $ 29,594     $ 28,667     $ 27,087     $ 26,277     $ 59,806     $ 51,864  
Provision for loan losses 716     833     543     599     2,150     1,549     3,730  
Noninterest income 6,105     6,005     7,056     5,939     6,741     12,110     12,580  
Noninterest expense 20,446     20,435     20,027     19,347     19,030     40,881     38,098  
Income before income tax expense 15,155     14,331     15,153     13,080     11,838     29,486     22,616  
Income tax expense 5,237     4,897     5,073     4,204     4,134     10,134     7,781  
Net income $ 9,918     $ 9,434     $ 10,080     $ 8,876     $ 7,704     $ 19,352     $ 14,835  
                                                       
Diluted earnings per share $ 0.49     $ 0.47     $ 0.49     $ 0.44     $ 0.38     $ 0.96     $ 0.74  
Return on average assets 1.07 %   1.04 %   1.13 %   1.03 %   0.93 %   1.06 %   0.91 %
Return on average common equity 10.89 %   10.66 %   11.46 %   10.41 %   9.34 %   10.78 %   9.17 %
Return on average tangible common equity 11.98 %   11.76 %   12.68 %   11.56 %   10.41 %   11.87 %   10.24 %
Net interest margin (fully tax equivalent) 3.52 %   3.54 %   3.50 %   3.41 %   3.46 %   3.53 %   3.46 %
Efficiency ratio 56.30 %   57.40 %   56.06 %   58.58 %   57.64 %   56.85 %   59.12 %
                           
1 Refer 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)
 
  For the Quarter ended   For the Six Months ended
(in thousands, except per share data) Jun 30,  2016   Mar 31,  2016   Dec 31,  2015   Sep 30,  2015   Jun 30,  2015   Jun 30,  2016   Jun 30,  2015
INCOME STATEMENTS                          
NET INTEREST INCOME                          
Total interest income $ 37,033     $ 35,460     $ 35,096     $ 33,180     $ 32,352     $ 72,493     $ 64,503  
Total interest expense 3,250     3,032     3,017     3,174     3,072     6,282     6,178  
Net interest income 33,783     32,428     32,079     30,006     29,280     66,211     58,325  
Provision for portfolio loans 716     833     543     599     2,150     1,549     3,730  
Provision reversal for purchased credit impaired loans (336 )   (73 )   (917 )   (227 )       (409 )   (3,270 )
Net interest income after provision for loan losses 33,403     31,668     32,453     29,634     27,130     65,071     57,865  
                           
NONINTEREST INCOME                          
Deposit service charges 2,188     2,043     2,025     2,044     1,998     4,231     3,854  
Wealth management revenue 1,644     1,662     1,716     1,773     1,778     3,306     3,518  
State tax credit activity, net 153     518     1,651     321     74     671     748  
Gain on sale of other real estate 706     122     81     32     9     828     29  
Gain on sale of investment securities                         23  
Change in FDIC loss share receivable         (580 )   (1,241 )   (945 )       (3,209 )
Other income 2,358     1,660     1,664     1,800     2,892     4,018     4,426  
Total noninterest income 7,049     6,005     6,557     4,729     5,806     13,054     9,389  
                           
NONINTEREST EXPENSE                          
Employee compensation and benefits 12,660     12,647     11,833     11,475     11,274     25,307     22,787  
Occupancy 1,609     1,683     1,653     1,605     1,621     3,292     3,315  
FDIC clawback             298     50         462  
FDIC loss share termination         2,436                  
Other 7,084     6,432     6,964     6,554     6,513     13,516     12,844  
Total noninterest expense 21,353     20,762     22,886     19,932     19,458     42,115     39,408  
                           
Income before income tax expense 19,099     16,911     16,124     14,431     13,478     36,010     27,846  
Income tax expense 6,747     5,886     5,445     4,722     4,762     12,633     9,784  
Net income $ 12,352     $ 11,025     $ 10,679     $ 9,709     $ 8,716     $ 23,377     $ 18,062  
                           
Basic earnings per share $ 0.62     $ 0.55     $ 0.53     $ 0.49     $ 0.44     $ 1.17     $ 0.91  
Diluted earnings per share 0.61     0.54     0.52     0.48     0.43     1.16     0.90  

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  At the Quarter ended
(in thousands) Jun 30,  2016   Mar 31,  2016   Dec 31,  2015   Sep 30,  2015   Jun 30,  2015
BALANCE SHEETS                  
ASSETS                  
Cash and due from banks $ 50,370     $ 56,251     $ 47,935     $ 46,775     $ 49,498  
Interest-earning deposits 60,926     50,982     47,222     81,115     51,298  
Debt and equity investments 538,431     524,320     512,939     530,577     465,133  
Loans held for sale 9,669     6,409     6,598     4,275     5,446  
                   
Portfolio loans 2,883,909     2,832,616     2,750,737     2,602,156     2,542,555  
Less:  Allowance for loan losses 35,498     34,373     33,441     32,251     31,765  
Portfolio loans, net 2,848,411     2,798,243     2,717,296     2,569,905     2,510,790  
Purchased credit impaired loans, net of the allowance for loan losses 47,978     53,908     64,583     72,397     76,050  
Total loans, net 2,896,389     2,852,151     2,781,879     2,642,302     2,586,840  
                   
Other real estate 1 4,901     9,880     8,366     1,575     1,933  
Other real estate covered under FDIC loss share 1             6,795     7,909  
Fixed assets, net 14,512     14,812     14,842     14,395     14,726  
State tax credits, held for sale 44,918     45,305     45,850     48,207     42,062  
FDIC loss share receivable             8,619     10,332  
Goodwill 30,334     30,334     30,334     30,334     30,334  
Intangible assets, net 2,589     2,832     3,075     3,323     3,595  
Other assets 108,626     116,629     109,443     98,249     101,972  
Total assets $ 3,761,665     $ 3,709,905     $ 3,608,483     $ 3,516,541     $ 3,371,078  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Noninterest-bearing deposits $ 753,173     $ 719,652     $ 717,460     $ 691,758     $ 658,258  
Interest-bearing deposits 2,275,063     2,212,094     2,067,131     2,122,205     2,033,300  
Total deposits 3,028,236     2,931,746     2,784,591     2,813,963     2,691,558  
Subordinated debentures 56,807     56,807     56,807     56,807     56,807  
Federal Home Loan Bank advances 78,000     130,500     110,000     75,000     73,000  
Other borrowings 200,362     193,788     270,326     194,684     188,546  
Other liabilities 26,631     37,680     35,930     32,524     28,737  
Total liabilities 3,390,036     3,350,521     3,257,654     3,172,978     3,038,648  
Shareholders' equity 371,629     359,384     350,829     343,563     332,430  
Total liabilities and shareholders' equity $ 3,761,665     $ 3,709,905     $ 3,608,483     $ 3,516,541     $ 3,371,078  
                   
1Due to termination of the Company's loss share agreements with the FDIC in the fourth quarter of 2015, Other real estate covered under FDIC loss share was reclassified to Other real estate.

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
(in thousands) Jun 30,  2016   Mar 31,  2016   Dec 31,  2015   Sep 30,  2015   Jun 30,  2015
LOAN PORTFOLIO                  
Commercial and industrial $ 1,540,457     $ 1,544,980     $ 1,484,327     $ 1,365,422     $ 1,329,303  
Commercial real estate 799,352     773,535     771,023     750,001     759,893  
Construction real estate 171,778     175,324     161,061     152,099     149,854  
Residential real estate 211,155     202,255     196,498     188,985     185,587  
Consumer and other 161,167     136,522     137,828     145,649     117,918  
Total portfolio loans 2,883,909     2,832,616     2,750,737     2,602,156     2,542,555  
Purchased credit impaired loans 56,529     63,477     74,758     83,736     87,644  
Total loans $ 2,940,438     $ 2,896,093     $ 2,825,495     $ 2,685,892     $ 2,630,199  
                   
DEPOSIT PORTFOLIO                  
Noninterest-bearing accounts $ 753,173     $ 719,652     $ 717,460     $ 691,758     $ 658,258  
Interest-bearing transaction accounts 628,505     589,635     564,420     529,052     507,889  
Money market and savings accounts 1,124,528     1,161,610     1,146,523     1,136,557     1,014,481  
Brokered certificates of deposit 166,507     157,939     39,573     86,147     124,170  
Other certificates of deposit 355,523     302,910     316,615     370,449     386,760  
Total deposit portfolio $ 3,028,236     $ 2,931,746     $ 2,784,591     $ 2,813,963     $ 2,691,558  
                   
AVERAGE BALANCES                  
Portfolio loans $ 2,868,430     $ 2,777,456     $ 2,631,256     $ 2,540,948     $ 2,482,291  
Purchased credit impaired loans 59,110     69,031     77,485     85,155     92,168  
Loans held for sale 6,102     4,563     5,495     4,255     6,605  
Debt and equity investments 528,120     514,687     521,679     475,180     463,808  
Interest-earning assets 3,506,801     3,413,792     3,304,827     3,201,181     3,096,294  
Total assets 3,734,192     3,641,308     3,528,423     3,416,716     3,310,578  
Deposits 2,931,888     2,811,209     2,832,313     2,788,245     2,667,640  
Shareholders' equity 366,132     355,980     348,908     338,368     330,999  
Tangible common equity 333,093     322,698     315,380     304,583     296,931  
                   
YIELDS (fully tax equivalent)                  
Portfolio loans 4.20 %   4.19 %   4.16 %   4.16 %   4.17 %
Purchased credit impaired loans 30.07 %   22.67 %   24.79 %   19.41 %   18.33 %
Total loans 4.72 %   4.64 %   4.75 %   4.66 %   4.68 %
Debt and equity investments 2.28 %   2.34 %   2.27 %   2.23 %   2.26 %
Interest-earning assets 4.30 %   4.23 %   4.27 %   4.17 %   4.24 %
Interest-bearing deposits 0.47 %   0.46 %   0.48 %   0.50 %   0.52 %
Total deposits 0.36 %   0.34 %   0.36 %   0.39 %   0.39 %
Subordinated debentures 2.56 %   2.47 %   2.26 %   2.19 %   2.18 %
Borrowed funds 0.35 %   0.31 %   0.24 %   0.28 %   0.29 %
Cost of paying liabilities 0.50 %   0.48 %   0.50 %   0.53 %   0.54 %
Net interest margin 3.93 %   3.87 %   3.91 %   3.77 %   3.85 %

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
(in thousands, except per share data) Jun 30,  2016   Mar 31,  2016   Dec 31,  2015   Sep 30,  2015   Jun 30,  2015
ASSET QUALITY                  
Net charge-offs (recoveries) 1 $ (409 )   $ (99 )   $ (647 )   $ 113     $ 672  
Nonperforming loans 1 12,813     9,513     9,100     9,123     17,498  
Classified assets 87,532     73,194     67,761     62,679     61,722  
Nonperforming loans to total loans 1 0.44 %   0.34 %   0.33 %   0.35 %   0.69 %
Nonperforming assets to total assets 2 0.47 %   0.52 %   0.48 %   0.30 %   0.58 %
Allowance for loan losses to total loans 1 1.23 %   1.21 %   1.22 %   1.24 %   1.25 %
Allowance for loan losses to nonperforming loans 1 277.0 %   361.3 %   367.5 %   353.5 %   181.5 %
Net charge-offs (recoveries) to average loans (annualized) 1 (0.06 )%   (0.01 )%   (0.10 )%   0.02 %   0.11 %
                   
WEALTH MANAGEMENT                  
Trust assets under management $ 897,322     $ 878,236     $ 872,877     $ 848,515     $ 889,616  
Trust assets under administration 1,490,389     1,470,974     1,477,917     1,436,372     1,514,140  
                   
MARKET DATA                  
Book value per common share $ 18.60     $ 17.98     $ 17.53     $ 17.21     $ 16.67  
Tangible book value per common share $ 16.95     $ 16.32     $ 15.86     $ 15.53     $ 14.96  
Market value per share $ 27.89     $ 27.04     $ 28.35     $ 25.17     $ 22.77  
Period end common shares outstanding 19,979     19,993     20,017     19,959     19,947  
Average basic common shares 20,003     20,004     20,007     19,995     19,978  
Average diluted common shares 20,216     20,233     20,386     20,261     20,168  
                   
CAPITAL                  
Total capital to risk-weighted assets 12.16 %   12.02 %   11.85 %   12.55 %   12.68 %
Tier 1 capital to risk-weighted assets 10.92 %   10.77 %   10.61 %   11.30 %   11.43 %
Common equity tier 1 capital to risk-weighted assets 9.38 %   9.20 %   9.05 %   9.59 %   9.66 %
Tangible common equity to tangible assets 9.08 %   8.87 %   8.88 %   8.90 %   8.94 %
                   
1 Portfolio loans only
2 Excludes Other real estate covered under FDIC loss share agreements, except for inclusion in total assets.  Beginning with the quarter ended December 31, 2015, Other real estate covered by FDIC loss share agreements is zero due to termination of the agreements.

ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
 
  For the Quarter ended   For the Six Months ended
(in thousands) Jun 30,  2016   Mar 31,  2016   Dec 31,  2015   Sep 30,  2015   Jun 30,  2015   Jun 30,  2016   Jun 30,  2015
CORE PERFORMANCE MEASURES        
Net interest income $ 33,783     $ 32,428     $ 32,079     $ 30,006     $ 29,280     $ 66,211     $ 58,325  
Less: Incremental accretion income 3,571     2,834     3,412     2,919     3,003     6,405     6,461  
Core net interest income 30,212     29,594     28,667     27,087     26,277     59,806     51,864  
                           
Total noninterest income 7,049     6,005     6,557     4,729     5,806     13,054     9,389  
Less: Change in FDIC loss share receivable         (580 )   (1,241 )   (945 )       (3,209 )
Less (plus): Gain (loss) on sale of other real estate from PCI loans 705         81     31     10     705     (5 )
Less: Gain on sale of investment securities                         23  
Less: Other income from PCI assets 239                     239      
Core noninterest income 6,105     6,005     7,056     5,939     6,741     12,110     12,580  
                           
Total core revenue 36,317     35,599     35,723     33,026     33,018     71,916     64,444  
                           
Provision for portfolio loans 716     833     543     599     2,150     1,549     3,730  
                           
Total noninterest expense 21,353     20,762     22,886     19,932     19,458     42,115     39,408  
Less: FDIC clawback             298     50         462  
Less: FDIC loss share termination         2,436                  
Less: Other expenses related to PCI loans 325     327     423     287     378     652     848  
Less: Executive severance 332                     332      
Less: Other non-core expense 250                     250      
Core noninterest expense 20,446     20,435     20,027     19,347     19,030     40,881     38,098  
                           
Core income before income tax expense 15,155     14,331     15,153     13,080     11,838     29,486     22,616  
Core income tax expense 5,237     4,897     5,073     4,204     4,134     10,134     7,781  
Core net income $ 9,918     $ 9,434     $ 10,080     $ 8,876     $ 7,704     $ 19,352     $ 14,835  
                           
Core diluted earnings per share $ 0.49     $ 0.47     $ 0.49     $ 0.44     $ 0.38     $ 0.96     $ 0.74  
Core return on average assets 1.07 %   1.04 %   1.13 %   1.03 %   0.93 %   1.06 %   0.91 %
Core return on average common equity 10.89 %   10.66 %   11.46 %   10.41 %   9.34 %   10.78 %   9.17 %
Core return on average tangible common equity 11.98 %   11.76 %   12.68 %   11.56 %   10.41 %   11.87 %   10.24 %
Core efficiency ratio 56.30 %   57.40 %   56.06 %   58.58 %   57.64 %   56.85 %   59.12 %
                           
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)        
Net interest income $ 34,227     $ 32,887     $ 32,546     $ 30,437     $ 29,691     $ 67,114     $ 59,158  
Less: Incremental accretion income 3,571     2,834     3,412     2,919     3,003     6,405     6,461  
Core net interest income $ 30,656     $ 30,053     $ 29,134     $ 27,518     $ 26,688     $ 60,709     $ 52,697  
                           
Average earning assets $ 3,506,801     $ 3,413,792     $ 3,304,827     $ 3,201,181     $ 3,096,294     $ 3,460,296     $ 3,072,188  
Reported net interest margin 3.93 %   3.87 %   3.91 %   3.77 %   3.85 %   3.90 %   3.88 %
Core net interest margin 3.52 %   3.54 %   3.50 %   3.41 %   3.46 %   3.53 %   3.46 %

  At the Quarter ended
(in thousands) Jun 30,  2016   Mar 31,  2016   Dec 31,  2015   Sep 30,  2015   Jun 30,  2015
COMMON EQUITY TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Shareholders' equity $ 371,629     $ 359,384     $ 350,829     $ 343,563     $ 332,430  
Less: Goodwill 30,334     30,334     30,334     30,334     30,334  
Less: Intangible assets, net of deferred tax liabilities 958     1,048     759     820     887  
Less: Unrealized gains 5,517     3,929     218     2,973     1,249  
Plus: Qualifying trust preferred securities 55,100     55,100     55,100     55,100     55,100  
Plus: Other 58     58     58     58     58  
Total tier 1 capital 389,978     379,231     374,676     364,594     355,118  
Less: Qualifying trust preferred securities 55,100     55,100     55,100     55,100     55,100  
Less: Other 35     35     23     23     23  
Common equity tier 1 capital $ 334,843     $ 324,096     $ 319,553     $ 309,471     $ 299,995  
                   
Total risk-weighted assets $ 3,570,437     $ 3,521,433     $ 3,530,521     $ 3,227,605     $ 3,106,041  
                   
Common equity tier 1 capital to risk-weighted assets 9.38 %   9.20 %   9.05 %   9.59 %   9.66 %
                   
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity $ 371,629     $ 359,384     $ 350,829     $ 343,563     $ 332,430  
Less: Goodwill 30,334     30,334     30,334     30,334     30,334  
Less: Intangible assets 2,589     2,832     3,075     3,323     3,595  
Tangible common equity $ 338,706     $ 326,218     $ 317,420     $ 309,906     $ 298,501  
                   
Total assets $ 3,761,665     $ 3,709,905     $ 3,608,483     $ 3,516,541     $ 3,371,078  
Less: Goodwill 30,334     30,334     30,334     30,334     30,334  
Less: Intangible assets 2,589     2,832     3,075     3,323     3,595  
Tangible assets $ 3,728,742     $ 3,676,739     $ 3,575,074     $ 3,482,884     $ 3,337,149  
                   
Tangible common equity to tangible assets 9.08 %   8.87 %   8.88 %   8.90 %   8.94 %

 
For more information contact:Jerry Mueller, Senior Vice President (314) 512-7251Ann Marie Mayuga, AMM Communications (314) 485-9499

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