Reported First Quarter Highlights
  • Net income of $0.56 per diluted share
  • Return on average assets of 1.10%
  • Completed acquisition of Jefferson County Bancshares, Inc. ("JCB")
  • Portfolio loans grew 7.2% organically on an annualized basis; while the acquisition of JCB added $675 million to loans

First Quarter Core Highlights 1
  • Core net income of $0.59 per diluted share
  • Core return on average assets of 1.17%
  • Core net interest income increased 17% in the linked quarter, and 27% from the prior year period

ST. LOUIS, April 24, 2017 (GLOBE NEWSWIRE) -- Enterprise Financial Services Corp (NASDAQ:EFSC) (the "Company") reported net income of $12.4 million for the quarter ended March 31, 2017, a decrease of $1.2 million, or 9%, as compared to the linked fourth quarter.  Net income per diluted share was $0.56 for the quarter ended March 31, 2017, a decrease of $0.11 compared to $0.67 per diluted share for the linked fourth quarter.  The decrease from the linked quarter primarily resulted from a $2.2 million lower ($0.11 per share) net contribution from non-core acquired assets. First quarter 2017 net income increased 12% from $11.0 million for the prior year period, and diluted earnings per share increased $0.02, or 4%, from $0.54 reported a year ago.  The increase in net income over the prior year was largely due to an increase in net interest income from core deposit-funded portfolio loan growth and growth in noninterest income. 

On a core basis 1, the Company reported net income of $13.1 million, or $0.59 per diluted share, for the quarter ended March 31, 2017, compared to $11.9 million, or $0.59 per diluted share, in the linked fourth quarter.  First quarter 2017 core net income increased 39% from $9.4 million for the prior year period, and diluted core earnings per share grew 26% from $0.47 for the prior year period.  The diluted earnings per share increase of $0.12 was primarily due to higher levels of core net interest income from continued growth in earning asset balances combined with nine basis points of core net interest margin expansion. The earnings per share contribution from this growth was partially offset by a higher provision for portfolio loan losses. Additionally, the acquisition of JCB added an estimated $0.01 of earnings per share, and contributed to the growth of both linked-quarter and year-over-year core net income, of $1.2 million and $3.7 million, respectively.

On February 10, 2017, the Company announced the completion of its acquisition of JCB which was merged with and into Enterprise, with Enterprise continuing as the surviving entity pursuant to the Agreement and Plan of Merger, dated as of October 10, 2016. Immediately following the merger, Eagle Bank and Trust Company of Missouri ("Eagle"), the wholly-owned subsidiary of JCB, merged with and into Enterprise Bank & Trust ("EB&T"), Enterprise's wholly-owned subsidiary bank, with EB&T continuing as the surviving entity. JCB added 13 traditional branches, approximately $675 million in loans, and $765 million in deposits. 

The Company's Board of Directors approved the Company's quarterly dividend of $0.11 per common share, payable on June 30, 2017 to shareholders of record as of June 15, 2017.

Peter Benoist, EFSC's Chief Executive Officer, commented, "Enterprise has kicked-off 2017 by posting solid first quarter results. We have continued to grow our earnings and further elevate returns. Core return on average assets was 1.17% and resulted in a 14% return on average tangible common equity to our shareholders."

Benoist added, "Organic growth was seasonally strong as portfolio loans grew 7%, while we closed on our acquisition of Jefferson County Bancshares, which added to the early momentum for 2017. The team has done tremendous work thus far, and remains focused on successful integration of customers and associates of JCB. Nonetheless, we look to achieve continued performance gains through additional organic growth and further operating leverage during the year, and I am confident that the Enterprise team is poised to deliver a successful 2017."

Net Interest Income

Net interest income in the first quarter increased $3.2 million from the linked fourth quarter, and $6.2 million from the prior year period due to strong growth in portfolio loan balances funded principally with core deposits, an increase in core net interest margin discussed below, and the acquisition of JCB.  Net interest margin, on a fully tax equivalent basis, was 3.73% for the first quarter, compared to 3.79% in the linked fourth quarter, and 3.87% in the first quarter of 2016. Net interest margin decreased primarily from lower contributions from non-core acquired loans.

The yield on Portfolio loans improved to 4.45% in the first quarter, an increase of 21 basis points from the linked fourth quarter, and 26 basis points from the prior year quarter.  The increase was primarily due to the effect of rising interest rates on our variable rate loan portfolio.  In the first quarter of 2017, the yield on PCI loans was 17.24%, compared to 37.07% in the linked quarter, and 22.67% in the prior year period, due to fewer accelerated payoffs in the quarter.

The cost of total deposits was limited to a two basis point increase from the linked quarter and a five basis point increase from the prior year quarter. However, the cost of interest-bearing liabilities increased seven basis points to 0.65% in the first quarter of 2017 from 0.58% in the linked fourth quarter, and is 17 basis points higher than 0.48% in the first quarter of 2016. The increases were due to the issuance of $50 million of subordinated debt issued November 1, 2016, the acquisition of JCB, and the impact of rising interest rates on the Company's borrowed funds. 

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) March 31,  2017   December 31,  2016   September 30,  2016   June 30,  2016   March 31,  2016
Core net interest income 1 37,567     32,175     31,534     30,212     29,594  
Core net interest margin 1 3.63 %   3.44 %   3.54 %   3.52 %   3.54 %

Core net interest income 1 increased by $5.4 million to $37.6 million, 17% compared to the linked quarter, and $8.0 million, or 27%, compared to the prior year period due to strong portfolio loan growth funded by core deposits and from the acquisition of JCB.  Core net interest margin 1 increased 19 basis points to 3.63% in the linked quarter primarily from the aforementioned increase in portfolio loan yield as well as controlled deposit costs.  Core net interest margin expanded nine basis points from the prior year quarter, primarily due to loan growth improving the earning asset mix, combined with increased yield on portfolio loans out-pacing the increase to borrowing costs, previously discussed. Core net interest margin also increased modestly from JCB purchase accounting adjustments. 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 could negate the expected trends in core net interest margin.

Portfolio Loans

Note: Non-core acquired loans were those acquired from the FDIC and were previously covered by shared-loss agreements. These loans continue to be accounted for as purchased credit impaired loans. Approximately $50 million of loans in JCB's portfolio are also accounted for as purchased credit impaired loans. However, all loans acquired from JCB are included in portfolio loans.

The following table presents Portfolio loans with selected specialized lending detail for the most recent five quarters:
  At the Quarter ended
  March 31, 2017                
(in thousands) JCB   LegacyEnterprise   Consolidated   Dec 31,2016   Sept 30, 2016   Jun 30,2016   Mar 31,2016
Enterprise value lending $     $ 429,957     $ 429,957     $ 388,798     $ 394,923     $ 353,915     $ 359,862  
C&I - general 79,021     810,781     889,802     794,451     755,829     737,904     759,330  
Life insurance premium financing     312,335     312,335     305,779     298,845     295,643     272,450  
Tax credits     141,770     141,770     143,686     149,218     152,995     153,338  
CRE, Construction, and land development 465,736     1,074,908     1,540,644     1,089,498     1,044,827     971,130     948,859  
Residential real estate 121,232     239,080     360,312     240,760     233,960     211,155     202,255  
Consumer and other 12,420     165,732     178,152     155,420     160,103     161,167     136,522  
Portfolio loans $ 678,409     $ 3,174,563     $ 3,852,972     $ 3,118,392     $ 3,037,705     $ 2,883,909     $ 2,832,616  
                           
Portfolio loan yield         4.45 %   4.24 %   4.25 %   4.20 %   4.19 %
                                     

Portfolio loans increased to $3.9 billion at March 31, 2017, increasing $735 million when compared to the linked quarter. Excluding the acquisition of JCB, portfolio loans organically grew by $56.2 million, or 7% annualized, in the first quarter of 2017. On a year over year basis, portfolio loans increased $1.0 billion, of which $342 million was organic loan growth and $678 million was from the acquisition of JCB, principally in the CRE, Construction, and land development, and Residential Real Estate categories. The Company expects continued loan growth, excluding the acquisition of JCB, at or above 10% for 2017.

The Company continues to focus on originating high-quality Commercial and Industrial ("C&I") relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. C&I loans increased $141 million during the first quarter of 2017 from the linked fourth quarter and represented 46% of the Company's loan portfolio at March 31, 2017. JCB added $79 million in the current quarter, and the Company's specialized lending products, enterprise value lending, and life insurance premium finance also contributed to the growth.

Since March 31, 2016, C&I loans have grown organically by $150 million, or 9.7%. C&I loan growth supports management's efforts to maintain the Company's asset sensitive interest rate risk position. At March 31, 2017, 56% of portfolio loans had variable interest rates, as compared to 64% at December 31, 2016 and 62% at March 31, 2016. This change is due to the acquisition of JCB; however, the Company's asset sensitive interest rate risk position did not change materially as a result.

Non-Core Acquired Loans

Non-core acquired loans totaled $38.1 million at March 31, 2017, a decrease of $1.7 million, or 17% on an annualized basis, from the linked fourth quarter, and $25.4 million, or 40%, from the prior year period, primarily as a result of principal paydowns and accelerated loan payoffs.

Non-core acquired loans contributed $0.7 million of net earnings in the first quarter of 2017, compared to $2.9 million in the linked fourth quarter. At March 31, 2017, the remaining accretable yield on the portfolio was estimated to be $13 million and the non-accretable difference was approximately $18 million.  Accelerated cash flows and other incremental accretion from PCI loans was $1.1 million for the quarter ended March 31, 2017, $3.3 million for the linked quarter, and $2.8 million for the prior year quarter.  The Company estimates 2017 income from accelerated cash flows and other incremental accretion to be between $5 million and $7 million.

Asset Quality: The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:

  For the Quarter ended
($ in thousands) March 31,  2017   December 31,  2016   September 30,  2016   June 30,  2016   March 31,  2016
Nonperforming loans $ 13,847     $ 14,905     $ 19,942     $ 12,813     $ 9,513  
Other real estate 2,925     980     2,959     4,901     9,880  
Nonperforming assets $ 16,772     $ 15,885     $ 22,901     $ 17,714     $ 19,393  
Nonperforming loans to portfolio loans 0.36 %   0.48 %   0.66 %   0.44 %   0.34 %
Nonperforming assets to total assets 0.33 %   0.39 %   0.59 %   0.47 %   0.52 %
Allowance for portfolio loan losses to portfolio loans 1.02 %   1.20 %   1.23 %   1.23 %   1.21 %
Net charge-offs (recoveries) $ (56 )   $ 897     $ 1,038     $ (409 )   $ (99 )

At March 31, 2017, nonperforming loans were 0.36% of portfolio loans, and nonperforming assets were 0.33% of total assets.  Nonperforming loans decreased 7% to $13.8 million at March 31, 2017, from $14.9 million at December 31, 2016, and increased 46% from $9.5 million at March 31, 2016. Other real estate balances increased $1.7 million from a property acquired with the JCB acquisition and $0.2 million from two commercial real estate properties from legacy EB&T. During the quarter ended March 31, 2017, non-performing loan activity included an additional $0.3 million added to nonperforming loans, $0.1 million of charge-offs, $0.9 million of other principal reductions, and $0.3 million in assets transferred to other real estate.

The Company recorded provision for portfolio loan losses of $1.5 million compared to $1.0 million in the linked quarter and $0.8 million in the prior year period.  The provision is reflective of growth in the portfolio, maintaining a prudent credit risk posture, as well as an increase in specific reserves on a single nonperforming relationship. Additionally, we experienced net recoveries of one basis point, annualized, during the quarter. The allowance for portfolio loan losses to portfolio loans was 1.02% at March 31, 2017, or 1.23% on a proforma basis excluding the acquisition JCB.

Deposits

The following table presents deposits broken out by type:
  At the Quarter ended
  March 31, 2017        
  JCB   LegacyEnterprise   Consolidated   December 31,  2016   March 31,  2016
Noninterest-bearing accounts 168,775     868,226     1,037,001     866,756     719,652  
Interest-bearing transaction accounts 96,207     748,568     844,775     731,539     589,635  
Money market and savings accounts 371,000     1,172,737     1,543,737     1,161,907     1,161,610  
Brokered certificates of deposit     145,436     145,436     117,145     157,939  
Other certificates of deposit 138,012     322,659     460,671     356,014     302,910  
Total deposit portfolio $ 773,994     $ 3,257,626     $ 4,031,620     $ 3,233,361     $ 2,931,746  
                   

Total deposits at March 31, 2017 were $4.0 billion, an increase of $798 million, or 25% from December 31, 2016, and $1.1 billion, or 38%, from March 31, 2016.  $774 million of the increase is attributed to the acquisition of JCB. Core deposits, defined as total deposits excluding time deposits, were $3.4 billion at March 31, 2017, an increase of $665 million, or 24% from the linked quarter, and $955 million, or 39%, when compared to the prior year period.  The overall positive trends in deposits reflect continued progress across our business lines, some seasonality, and the acquisition of JCB.

Noninterest-bearing deposits increased $170 million compared to December 31, 2016, and increased $317 million compared to the quarter ended March 31, 2016.  The composition of noninterest-bearing deposits remained relatively stable at 26% of total deposits at March 31, 2017, compared to December 31, 2016 and March 31, 2016.  The total cost of deposits increased two basis points to 0.39% compared to 0.37% at December 31, 2016, and grew five basis points since March 31, 2016.

Noninterest Income

Total noninterest income was $7.0 million for the quarter ended March 31, 2017, including $0.7 million contribution from the acquisition of JCB.

Deposit service charges for the first quarter of 2017 of $2.5 million grew 15% when compared to the linked quarter, and grew 23% when compared to the prior year quarter, due primarily to the acquisition of JCB and growth in client base.  Wealth management revenues for the first quarter of 2017 of $1.8 million grew 6% when compared to the linked fourth quarter, and grew 10% when compared to the prior year period.

Trust assets under management were $1.3 billion at March 31, 2017, an increase of $200 million, or 19%, when compared to December 31, 2016, and an increase of $402 million, or 46%, when compared to the prior year period.  The increase from the linked quarter and the prior year quarter was primarily due to market appreciation, new customers, and the addition of $154 million of assets under management from JCB.

Gains from state tax credit brokerage activities were $0.2 million for the first quarter of 2017 and $1.7 million for the linked fourth quarter, and $0.5 million in the first quarter of 2016.  Sales of state tax credits can vary by quarter and the decline year over year is due to a revaluation of tax credits carried at fair value as a result of changes in interest rates.

Other noninterest income increased 12% to $2.4 million compared to the linked quarter, and increased 44% from the prior year period.  The increase from the linked and prior year quarter was primarily due to fees earned from certain recoveries, swap fee income, and management fees from our community development entity.

Noninterest Expenses

Noninterest expenses were $26.7 million for the quarter ended March 31, 2017, compared to $23.2 million for the quarter ended December 31, 2016, and $20.8 million for the quarter ended March 31, 2016. Noninterest expenses for the quarter included $1.7 million of merger related expenses compared to $1.1 million in the linked fourth quarter. Core noninterest expenses 1 were $24.9 million for the quarter ended March 31, 2017, compared to $21.1 million for the linked quarter, and $20.4 million for the prior year period.  The increase from the linked quarter was due to adding the expense base of JCB of $3.0 million and seasonally higher payroll taxes of $0.8 million. 

The Company's Core efficiency ratio 1 increased to 56.0% for the quarter ended March 31, 2017, compared to 52.7% for the linked quarter, and 57.4% for the prior year period, and reflects a seasonal decline in noninterest income as well as the acquisition of JCB. The Company expects to achieve additional cost savings from the JCB transaction throughout 2017 and expects to continue to leverage its expense base.

Income Taxes

The Company's effective tax rate was 29.2% for the quarter ended March 31, 2017 compared to 34.1% for the quarter ended December 31, 2016, and 34.8% for the quarter ended March 31, 2016. The decrease resulted primarily from recording $1.3 million in excess tax benefits from equity compensation awards.  Under a new accounting standard adopted this quarter, such benefits are recorded within income tax expense rather than directly to shareholders' equity.  Excluding the effect of this benefit, the effective tax rate for the first quarter of 2017 was  36.7%, which is reflective of certain non-deductible merger related expenses.

Capital

The total risk based capital ratio 1 was 12.76% at March 31, 2017, compared to 13.48% at December 31, 2016, and 12.02% at March 31, 2016.  The Company's Common equity tier 1 capital ratio 1 was 9.20% at March 31, 2017, compared to 9.52% at December 31, 2016, and 9.20% at March 31, 2016.  The tangible common equity ratio 1 was 8.28% at March 31, 2017, versus 8.76% at December 31, 2016, and 8.87% at March 31, 2016.

The decrease in the tangible common equity ratio as compared to the linked quarter is due primarily due to the JCB acquisition. 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.

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 non-core acquired 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 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 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, 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 Tuesday, April 25, 2017.  During the call, management will review the first quarter of 2017 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 1-800-344-6698 (Conference ID #5275736.)  A recorded replay of the conference call will be available on the website two hours after the call's completion.  Visit http://bit.ly/EFSC1Q2017 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.

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.  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," "anticipate," and "intend", and variations of such words and similar expressions, in this communication 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 into its operations, retain the customers of these businesses and grow the acquired operations, credit risk, changes in the appraised valuation of real estate securing impaired loans, outcomes of litigation and other contingencies, exposure to general and local economic conditions, risks associated with rapid increases or decreases in prevailing interest rates, consolidation in the banking industry, competition from banks and other financial institutions, the Company's ability to attract and retain relationship officers and other key personnel, burdens imposed by federal and state regulation, changes in regulatory requirements, changes in accounting regulation or standards applicable to banks, as well as other risk factors described in the Company's 2016 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
($ in thousands, except per share data) Mar 31,  2017   Dec 31,  2016   Sep 30,  2016   Jun 30,  2016   Mar 31,  2016
EARNINGS SUMMARY                  
Net interest income $ 38,642     $ 35,454     $ 33,830     $ 33,783     $ 32,428  
Provision for portfolio loan losses 1,533     964     3,038     716     833  
Provision reversal for purchased credit impaired loan losses (148 )   (343 )   (1,194 )   (336 )   (73 )
Noninterest income 6,976     9,029     6,976     7,049     6,005  
Noninterest expense 26,736     23,181     20,814     21,353     20,762  
Income before income tax expense 17,497     20,681     18,148     19,099     16,911  
Income tax expense 5,106     7,053     6,316     6,747     5,886  
Net income $ 12,391     $ 13,628     $ 11,832     $ 12,352     $ 11,025  
                   
Diluted earnings per share $ 0.56     $ 0.67     $ 0.59     $ 0.61     $ 0.54  
Return on average assets 1.10 %   1.36 %   1.23 %   1.33 %   1.22 %
Return on average common equity 10.65 %   14.04 %   12.46 %   13.57 %   12.46 %
Return on average tangible common equity 12.96 %   15.33 %   13.64 %   14.91 %   13.74 %
Net interest margin (fully tax equivalent) 3.73 %   3.79 %   3.80 %   3.93 %   3.87 %
Efficiency ratio 58.61 %   52.11 %   51.01 %   52.29 %   54.02 %
                   
CORE PERFORMANCE SUMMARY (NON-GAAP) 1            
Net interest income $ 37,567     $ 32,175     $ 31,534     $ 30,212     $ 29,594  
Provision for portfolio loan losses 1,533     964     3,038     716     833  
Noninterest income 6,976     7,849     6,828     6,105     6,005  
Noninterest expense 24,946     21,094     20,242     20,446     20,435  
Income before income tax expense 18,064     17,966     15,082     15,155     14,331  
Income tax expense 4,916     6,021     5,142     5,237     4,897  
Net income $ 13,148     $ 11,945     $ 9,940     $ 9,918     $ 9,434  
                   
Diluted earnings per share $ 0.59     $ 0.59     $ 0.49     $ 0.49     $ 0.47  
Return on average assets 1.17 %   1.19 %   1.04 %   1.07 %   1.04 %
Return on average common equity 11.29 %   12.31 %   10.47 %   10.89 %   10.66 %
Return on average tangible common equity 13.75 %   13.44 %   11.46 %   11.98 %   11.76 %
Net interest margin (fully tax equivalent) 3.63 %   3.44 %   3.54 %   3.52 %   3.54 %
Efficiency ratio 56.01 %   52.70 %   52.77 %   56.30 %   57.40 %
                   
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
(in thousands, except per share data) Mar 31,  2017   Dec 31,  2016   Sep 30,  2016   Jun 30,  2016   Mar 31,  2016
INCOME STATEMENTS                  
NET INTEREST INCOME                  
Total interest income $ 43,740     $ 39,438     $ 37,293     $ 37,033     $ 35,460  
Total interest expense 5,098     3,984     3,463     3,250     3,032  
Net interest income 38,642     35,454     33,830     33,783     32,428  
Provision for portfolio loan losses 1,533     964     3,038     716     833  
Provision reversal for purchased credit impaired loans (148 )   (343 )   (1,194 )   (336 )   (73 )
Net interest income after provision for loan losses 37,257     34,833     31,986     33,403     31,668  
                   
NONINTEREST INCOME                  
Deposit service charges 2,510     2,184     2,200     2,188     2,043  
Wealth management revenue 1,833     1,729     1,694     1,644     1,662  
State tax credit activity, net 246     1,748     228     153     518  
Gain (loss) on sale of other real estate     1,235     (226 )   706     122  
Gain on sale of investment securities         86          
Other income 2,387     2,133     2,994     2,358     1,660  
Total noninterest income 6,976     9,029     6,976     7,049     6,005  
                   
NONINTEREST EXPENSE                  
Employee compensation and benefits 16,016     12,448     12,091     12,660     12,647  
Occupancy 1,929     1,892     1,705     1,609     1,683  
Other 8,791     8,841     7,018     7,084     6,432  
Total noninterest expense 26,736     23,181     20,814     21,353     20,762  
                   
Income before income tax expense 17,497     20,681     18,148     19,099     16,911  
Income tax expense 5,106     7,053     6,316     6,747     5,886  
Net income $ 12,391     $ 13,628     $ 11,832     $ 12,352     $ 11,025  
                   
Basic earnings per share $ 0.57     $ 0.68     $ 0.59     $ 0.62     $ 0.55  
Diluted earnings per share 0.56     0.67     0.59     0.61     0.54  

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  At the Quarter ended
(in thousands) Mar 31,  2017   Dec 31,  2016   Sep 30,  2016   Jun 30,  2016   Mar 31,  2016
BALANCE SHEETS                  
ASSETS                  
Cash and due from banks $ 73,387     $ 54,288     $ 56,789     $ 50,370     $ 56,251  
Interest-earning deposits 138,309     145,494     63,690     60,926     50,982  
Debt and equity investments 697,143     556,100     540,429     538,431     524,320  
Loans held for sale 5,380     9,562     7,663     9,669     6,409  
                   
Portfolio loans 3,852,972     3,118,392     3,037,705     2,883,909     2,832,616  
Less:  Allowance for loan losses 39,148     37,565     37,498     35,498     34,373  
Portfolio loans, net 3,813,824     3,080,827     3,000,207     2,848,411     2,798,243  
Non-core acquired loans, net of the allowance for loan losses 32,615     33,925     41,016     47,978     53,908  
Total loans, net 3,846,439     3,114,752     3,041,223     2,896,389     2,852,151  
                   
Other real estate 2,925     980     2,959     4,901     9,880  
Fixed assets, net 34,291     14,910     14,498     14,512     14,812  
State tax credits, held for sale 35,431     38,071     44,180     44,918     45,305  
Goodwill 113,886     30,334     30,334     30,334     30,334  
Intangible assets, net 11,758     2,151     2,357     2,589     2,832  
Other assets 147,277     114,686     105,522     108,626     116,629  
Total assets $ 5,106,226     $ 4,081,328     $ 3,909,644     $ 3,761,665     $ 3,709,905  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Noninterest-bearing deposits $ 1,037,001     $ 866,756     $ 762,155     $ 753,173     $ 719,652  
Interest-bearing deposits 2,994,619     2,366,605     2,362,670     2,275,063     2,212,094  
Total deposits 4,031,620     3,233,361     3,124,825     3,028,236     2,931,746  
Subordinated debentures 118,067     105,540     56,807     56,807     56,807  
Federal Home Loan Bank advances 151,115         129,000     78,000     130,500  
Other borrowings 235,052     276,980     190,022     200,362     193,788  
Other liabilities 32,451     78,349     27,892     26,631     37,680  
Total liabilities 4,568,305     3,694,230     3,528,546     3,390,036     3,350,521  
Shareholders' equity 537,921     387,098     381,098     371,629     359,384  
Total liabilities and shareholders' equity $ 5,106,226     $ 4,081,328     $ 3,909,644     $ 3,761,665     $ 3,709,905  

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
($ in thousands) Mar 31,  2017   Dec 31,  2016   Sep 30,  2016   Jun 30,  2016   Mar 31,  2016
LOAN PORTFOLIO                  
Commercial and industrial $ 1,773,864     $ 1,632,714     $ 1,598,815     $ 1,540,457     $ 1,544,980  
Commercial real estate 1,243,479     894,956     855,971     799,352     773,535  
Construction real estate 297,165     194,542     188,856     171,778     175,324  
Residential real estate 360,312     240,760     233,960     211,155     202,255  
Consumer and other 178,152     155,420     160,103     161,167     136,522  
Total portfolio loans 3,852,972     3,118,392     3,037,705     2,883,909     2,832,616  
Non-core acquired loans 38,092     39,769     47,449     56,529     63,477  
Total loans $ 3,891,064     $ 3,158,161     $ 3,085,154     $ 2,940,438     $ 2,896,093  
                   
DEPOSIT PORTFOLIO                  
Noninterest-bearing accounts $ 1,037,001     $ 866,756     $ 762,155     $ 753,173     $ 719,652  
Interest-bearing transaction accounts 844,775     731,539     633,100     628,505     589,635  
Money market and savings accounts 1,543,737     1,161,907     1,241,725     1,124,528     1,161,610  
Brokered certificates of deposit 145,436     117,145     137,592     166,507     157,939  
Other certificates of deposit 460,671     356,014     350,253     355,523     302,910  
Total deposit portfolio $ 4,031,620     $ 3,233,361     $ 3,124,825     $ 3,028,236     $ 2,931,746  
                   
AVERAGE BALANCES                  
Portfolio loans $ 3,504,910     $ 3,067,124     $ 2,947,949     $ 2,868,430     $ 2,777,456  
Non-core acquired loans 39,287     42,804     53,198     59,110     69,031  
Loans held for sale 6,547     6,273     10,224     6,102     4,563  
Debt and equity investments 637,226     527,601     527,516     528,120     514,687  
Interest-earning assets 4,259,198     3,767,272     3,589,080     3,506,801     3,413,792  
Total assets 4,573,588     3,993,132     3,814,918     3,734,192     3,641,308  
Deposits 3,568,759     3,242,561     3,069,156     2,931,888     2,811,209  
Shareholders' equity 472,077     386,147     377,861     366,132     355,980  
Tangible common equity 387,728     353,563     345,061     333,093     322,698  
                   
YIELDS (fully tax equivalent)                  
Portfolio loans 4.45 %   4.24 %   4.25 %   4.20 %   4.19 %
Non-core acquired loans 17.24 %   37.07 %   23.07 %   30.07 %   22.67 %
Total loans 4.59 %   4.69 %   4.58 %   4.72 %   4.64 %
Debt and equity investments 2.49 %   2.22 %   2.25 %   2.28 %   2.34 %
Interest-earning assets 4.21 %   4.21 %   4.18 %   4.30 %   4.23 %
Interest-bearing deposits 0.53 %   0.49 %   0.49 %   0.47 %   0.46 %
Total deposits 0.39 %   0.37 %   0.37 %   0.36 %   0.34 %
Subordinated debentures 4.19 %   3.64 %   2.59 %   2.56 %   2.47 %
Borrowed funds 0.49 %   0.27 %   0.32 %   0.35 %   0.31 %
Cost of paying liabilities 0.65 %   0.58 %   0.52 %   0.50 %   0.48 %
Net interest margin 3.73 %   3.79 %   3.80 %   3.93 %   3.87 %

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
 
  For the Quarter ended
(in thousands, except % and per share data) Mar 31,  2017   Dec 31,  2016   Sep 30,  2016   Jun 30,  2016   Mar 31,  2016
ASSET QUALITY                  
Net charge-offs (recoveries) 1 $ (56 )   $ 897     $ 1,038     $ (409 )   $ (99 )
Nonperforming loans 1 13,847     14,905     19,942     12,813     9,513  
Classified assets 86,879     93,452     101,545     87,532     73,194  
Nonperforming loans to total loans 1 0.36 %   0.48 %   0.66 %   0.44 %   0.34 %
Nonperforming assets to total assets 2 0.33 %   0.39 %   0.59 %   0.47 %   0.52 %
Allowance for loan losses to total loans 1 1.02 %   1.20 %   1.23 %   1.23 %   1.21 %
Allowance for loan losses to nonperforming loans 1 282.7 %   252.0 %   188.0 %   277.0 %   361.3 %
Net charge-offs (recoveries) to average loans (annualized) 1 (0.01 )%   0.12 %   0.14 %   (0.06 )%   (0.01 )%
                   
WEALTH MANAGEMENT                  
Trust assets under management $ 1,279,889     $ 1,079,833     $ 929,946     $ 897,322     $ 878,236  
Trust assets under administration 1,875,424     1,652,471     1,535,033     1,490,389     1,470,974  
                   
MARKET DATA                  
Book value per common share $ 22.95     $ 19.31     $ 19.07     $ 18.60     $ 17.98  
Tangible book value per common share $ 17.59     $ 17.69     $ 17.43     $ 16.95     $ 16.32  
Market value per share $ 42.40     $ 43.00     $ 31.25     $ 27.89     $ 27.04  
Period end common shares outstanding 23,438     20,045     19,988     19,979     19,993  
Average basic common shares 21,928     20,009     19,997     20,003     20,004  
Average diluted common shares 22,309     20,309     20,224     20,216     20,233  
                   
CAPITAL                  
Total risk-based capital to risk-weighted assets 12.76 %   13.48 %   12.01 %   12.16 %   12.02 %
Tier 1 capital to risk-weighted assets 10.68 %   10.99 %   10.82 %   10.92 %   10.77 %
Common equity tier 1 capital to risk-weighted assets 9.20 %   9.52 %   9.33 %   9.38 %   9.20 %
Tangible common equity to tangible assets 8.28 %   8.76 %   8.99 %   9.08 %   8.87 %
                   
1 Excludes loans accounted for as Purchased credit impaired loans
2 Excludes non-core acquired loans and related assets, except for inclusion in total assets.

ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
  For the Quarter ended
($ in thousands, except per share data) Mar 31,  2017   Dec 31,  2016   Sep 30,  2016   Jun 30,  2016   Mar 31,  2016
CORE PERFORMANCE MEASURES                                      
Net interest income $ 38,642     $ 35,454     $ 33,830     $ 33,783     $ 32,428  
Less: Incremental accretion income 1,075     3,279     2,296     3,571     2,834  
Core net interest income 37,567     32,175     31,534     30,212     29,594  
                   
Total noninterest income 6,976     9,029     6,976     7,049     6,005  
Less: Gain (loss) on sale of other real estate from non-core acquired loans     1,085     (225 )   705      
Less: Other income from non-core acquired assets     95     287     239      
Less: Gain on sale of investment securities         86          
Core noninterest income 6,976     7,849     6,828     6,105     6,005  
                   
Total core revenue 44,543     40,024     38,362     36,317     35,599  
                   
Provision for portfolio loan losses 1,533     964     3,038     716     833  
                   
Total noninterest expense 26,736     23,181     20,814     21,353     20,762  
Less: Other expenses related to non-core acquired loans 123     172     270     325     327  
Less: Executive severance             332      
Less: Facilities disposal     1,040              
Less: Merger related expenses 1,667     1,084     302          
Less: Other non-core expenses     (209 )       250      
Core noninterest expense 24,946     21,094     20,242     20,446     20,435  
                   
Core income before income tax expense 18,064     17,966     15,082     15,155     14,331  
Core income tax expense 1 4,916     6,021     5,142     5,237     4,897  
Core net income $ 13,148     $ 11,945     $ 9,940     $ 9,918     $ 9,434  
                   
Core diluted earnings per share $ 0.59     $ 0.59     $ 0.49     $ 0.49     $ 0.47  
Core return on average assets 1.17 %   1.19 %   1.04 %   1.07 %   1.04 %
Core return on average common equity 11.29 %   12.31 %   10.47 %   10.89 %   10.66 %
Core return on average tangible common equity 13.75 %   13.44 %   11.46 %   11.98 %   11.76 %
Core efficiency ratio 56.01 %   52.70 %   52.77 %   56.30 %   57.40 %
                   
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
Net interest income $ 39,147     $ 35,884     $ 34,263     $ 34,227     $ 32,887  
Less: Incremental accretion income 1,075     3,279     2,296     3,571     2,834  
Core net interest income $ 38,072     $ 32,605     $ 31,967     $ 30,656     $ 30,053  
                   
Average earning assets $ 4,259,198     $ 3,767,272     $ 3,589,080     $ 3,506,801     $ 3,413,792  
Reported net interest margin 3.73 %   3.79 %   3.80 %   3.93 %   3.87 %
Core net interest margin 3.63 %   3.44 %   3.54 %   3.52 %   3.54 %
                   
1Non-core income tax expense calculated at 38% of non-core pretax income plus an estimate of taxes payable related to non-deductible JCB acquisition costs.

  At the Quarter ended
($ in thousands) Mar 31,  2017   Dec 31,  2016   Sep 30,  2016   Jun 30,  2016   Mar 31,  2016
REGULATORY CAPITAL TO RISK-WEIGHTED ASSETS                                
Shareholders' equity $ 537,921     $ 387,098     $ 381,098     $ 371,629     $ 359,384  
Less: Goodwill 113,886     30,334     30,334     30,334     30,334  
Less: Intangible assets, net of deferred tax liabilities 5,832     800     873     958     1,048  
Less: Unrealized gains (losses) (1,174 )   (1,741 )   4,668     5,517     3,929  
Plus: Other 12     24     24     23     23  
Common equity tier 1 capital 419,389     357,729     345,247     334,843     324,096  
Plus: Qualifying trust preferred securities 67,600     55,100     55,100     55,100     55,100  
Plus: Other 48     36     35     35     35  
Tier 1 capital 487,037     412,865     400,382     389,978     379,231  
Plus: Tier 2 capital 94,700     93,484     44,006     44,124     44,017  
Total risk-based capital $ 581,737     $ 506,349     $ 444,388     $ 434,102     $ 423,248  
                   
Total risk-weighted assets $ 4,558,738     $ 3,756,960     $ 3,699,757     $ 3,570,437     $ 3,521,433  
                   
Common equity tier 1 capital to risk-weighted assets 9.20 %   9.52 %   9.33 %   9.38 %   9.20 %
Tier 1 capital to risk-weighted assets 10.68 %   10.99 %   10.82 %   10.92 %   10.77 %
Total risk-based capital to risk-weighted assets 12.76 %   13.48 %   12.01 %   12.16 %   12.02 %
                   
SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders' equity $ 537,921     $ 387,098     $ 381,098     $ 371,629     $ 359,384  
Less: Goodwill 113,886     30,334     30,334     30,334     30,334  
Less: Intangible assets 11,758     2,151     2,357     2,589     2,832  
Tangible common equity $ 412,277     $ 354,613     $ 348,407     $ 338,706     $ 326,218  
                   
Total assets $ 5,106,226     $ 4,081,328     $ 3,909,644     $ 3,761,665     $ 3,709,905  
Less: Goodwill 113,886     30,334     30,334     30,334     30,334  
Less: Intangible assets 11,758     2,151     2,357     2,589     2,832  
Tangible assets $ 4,980,582     $ 4,048,843     $ 3,876,953     $ 3,728,742     $ 3,676,739  
                   
Tangible common equity to tangible assets 8.28 %   8.76 %   8.99 %   9.08 %   8.87 %

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

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