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| 8-K - CURRENT REPORT - ENTERPRISE FINANCIAL SERVICES CORP | a2017-058kinvestorpresenta.htm |
ENTERPRISE FINANCIAL SERVICES CORP
FIRST QUARTER 2017 INVESTOR PRESENTATION
2
FORWARD-LOOKING STATEMENT
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
COMPANY SNAPSHOT - EFSC
FDIC Data
TOTAL ASSETS
$5.1
Billion
MARKET CAP
Billion
Concentrated on Private Businesses and Owner
Families
Relationship Driven
Attract Top Talent in Markets
Product Breadth
• Banking
• Trust & Wealth Management
• Treasury Management
Proven Ability to Grow Commercial & Industrial
“C&I” Loans
Strong Balance Sheet with Attractive Risk
Profile
FOCUSED BUSINESS MODEL:
Operates in
MSAs
St. Louis
Kansas City
Phoenix
$1.0
4
EXECUTIVE LEADERSHIP TEAM
James B. Lally, 49, President & Chief Executive Officer, EFSC
14
Keene S. Turner, 37, Executive Vice President & Chief Financial Officer, EFSC
3
Scott R. Goodman, 53, President, Enterprise Bank & Trust
14
Douglas N. Bauche, 47, Chief Credit Officer, Enterprise Bank & Trust
17
Mark G. Ponder, 46, Senior Vice President, Controller and CFO, Enterprise Bank & Trust
5
Name, Age, Title Years at Enterprise
5
DIFFERENTIATED BUSINESS MODEL: BUILT
FOR QUALITY EARNINGS GROWTH
Enterprise Bank
Financial & Estate Planning
Tax Credit Brokerage
Business & Succession Planning
Trust Administration
Enterprise Trust
Investment Management
Enterprise University
Treasury Management
Personal & Private Banking
Commercial & Business Banking
PRIVATE
BUSINESSES
& OWNER
FAMILIES
Mortgage Banking
Focused and Well-Defined Strategy Aimed at Business
Owners, Executives and Professionals
Targeted Array of Banking and Wealth Management
Services to Meet our Clients‟ Needs
Experienced Bankers and Advisors
6
Phoenix Kansas City St. Louis
Loans $236MM $614MM $2.2B
Deposits $113MM $733MM 3.2B
Branches 2 8 19
Deposit Market Share 1 38th/0.12% 15th/1.27% 4th/4.27%
Primary Competitors 1 JP Morgan Chase
Wells Fargo
Bank of America
UMB
Commerce
Bank of America
US Bancorp
Bank of America
Commerce
THREE URBAN MARKETS
Arizona
1 Source: 12/31/2016 FDIC data, SNL Financial
Missouri
Kansas
7
Tax Credit Programs. $142 Million in Loans Outstanding Related to Federal New Markets, Historic and Missouri
Affordable Housing Tax Credits. $183 Million in Federal & State New Markets Tax Credits Awarded To Date.
Enterprise Value Lending. $430 Million in M&A Related Loans Outstanding, Partnering with PE Firms
Life Insurance Premium Financing. $312 Million in Loans Outstanding Related to High Net Worth Estate
Planning
FOCUSED LOAN GROWTH STRATEGIES
3.7%
11.2%
8.1% Total Portfolio Loans
Specialized Market Segments Represent 23% of Total Portfolio Loans, Offering
Competitive Advantages, Risk Adjusted Pricing and Fee Income Opportunities.
Expectations for Future Growth
Include Continued Focus in these
Specialized Market Segments.
8
HISTORY OF STRONG C&I GROWTH
$763
$963
$1,042
$1,264
$1,484
$1,633
2011 2012 2013 2014 2015 2016
In millions
9
MARKETING & SALES FUNNEL
Awareness
Interest
Consideration
Intent
Evaluation
Purchase
NOW… …FUTURE
Marketing
Sales
Marketing
Sales
10
OPPORTUNITIES EXIST
CLIENT SATISFACTION DRIVERS
Client satisfaction
scores are industry
leading. We’re focused
on leveraging ways to
improve industry
understanding and
being a consultative
partner to clients.
1. Ease of doing business
2. Relationship Satisfaction
3. Understanding of your industry
4. Provides ideas and advice
KEY DRIVERS OF CLIENT SATISFACTION SCORE PEER
AVG.
95%
91%
78%
78%
83%
78%
64%
69%
Source: Greenwich Associates
11
ACQUISITION OF JEFFERSON COUNTY BANCSHARES, INC.
(JCB) CLOSED FEBRUARY 10, 2017
Consistent with M&A Expansion Strategy
Enhanced EFSC‟s footprint in the St. Louis MSA,
while building total balance sheet size to
$5 billion in assets
Top four deposit market share in the St. Louis
MSA
Expanded branch presence
~$4 billion of deposits
Strengthens & diversifies core deposit gathering capabilities
Approximately $60 million in deposits per branch
St. Louis
MSA
EFSC (16 BRANCHES TOTAL,
6 BRANCHES IN ST. LOUIS MSA)
JEFFERSON (18 BRANCHES TOTAL,
17 BRANCHES IN ST. LOUIS MSA)
12
DRIVERS OF LOAN GROWTH
Enterprise Value Lending
7%
Life Insurance Premium
Finance
4%
General Commercial &
Industrial
4%
Commercial/
Construction RE
12%
Residential RE
4%
Consumer & Other
3%
JCB Acquisition
66%
Enterprise Value Lending Life Insurance Premium Finance
General Commercial & Industrial Commercial/Construction RE
Residential RE Consumer & Other
JCB Acquisition
$1.02 BILLION
Mar 31, 2016 – Mar 31, 2017
13
PORTFOLIO LOAN TRENDS
$2,833
$2,884
$3,038
$3,118
$3,853
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17
In Millions
*Note: 12% excluding acquisition of JCB
JCB $678
14
26%
38%
15%
21%
ATTRACTIVE DEPOSIT MIX
CD
Interest Bearing
Transaction Accts
DDA
MMA &
Savings
MAR 31, 2017
$4.0B
Significant DDA Composition
Stable Cost of Deposits
Improving Core Funding
71% of Core Deposits are Commercial
Customers
Cost of Deposits 0.38%
38% Deposit Growth*
Q1 2016 – Q1 2017
In Millions
* 11% with JCB
$2,932
$3,028 $3,125 $3,233
$4,032
24.5% 24.9% 24.4% 26.8% 25.7%
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17
Deposits JCB DDA %
JCB $774
15
Continued Growth in Core EPS
Drive Net Interest Income Growth in
Dollars with Favorable Loan Growth
Trends
Defend Net Interest Margin
Maintain High Quality Credit Profile
Achieve Further Improvement in
Operating Leverage
Enhance Deposit Levels to Support
Growth
FINANCIAL SCORECARD
26%
27%
9 bps
2 bps NPLs/Loans
1%
38%
Q1 2017 Compared to Q1 2016
16
EARNINGS PER SHARE TREND
$0.59
$0.03 < $0.02>
< $0.05>
< $0.03> $0.01
$0.06 $0.59
Q4 '16 Net Interest
Income
Portfolio
Loan Loss
Provision
Non Interest
Income
Non Interest
Expense
JCB
Acquisition
Income Tax
Item
Q1 '17
Changes in Core EPS*
Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
17
CORE NET INTEREST INCOME TREND*
In Millions
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
$29.6 $30.2
$31.5 $32.2
$37.6
3.54% 3.52% 3.54% 3.44%
3.63%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
$19.0
$20.0
$21.0
$22.0
$23.0
$24.0
$25.0
$26.0
$27.0
$28.0
$29.0
$30.0
$31.0
$32.0
$33.0
$34.0
$35.0
$36.0
$37.0
$38.0
$39.0
$40.0
$41.0
$42.0
$43.0
$44.0
$45.0
$46.0
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17
Core Net Interest Income* FTE Net Interest Margin*
18
CREDIT TRENDS FOR PORTFOLIO LOANS
-1 bps
-6 bps
14 bps
12 bps
-1 bps
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17
Net Charge-offs (1)
Q1 2017 EFSC PEER(2)
NPA’S/ASSETS = 0.33% 0.66%
NPL’S/LOANS = 0.36% 0.77%
ALLL/NPL’S = 283% 112%
ALLL/LOANS (4) = 1.02% 1.04%
(1) Portfolio loans only, excludes non-core acquired loans
(2) Peer data as of 12/31/2016 (source: SNL Financial)
(3) Excludes JCB
(4)1.65% including JCB Credit Mark
In Millions
$82
$51
$154
$80
$56
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17
Portfolio Loan Growth (3)
In Millions
Net Charge-offs (1)
2016 NCO = 5 bps
$0.8 $0.7
$3.0
$1.0
$1.5
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17
Provision for Portfolio Loans
19
OPERATING EXPENSES TREND*
In Millions
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
$6.1 $6.5 $6.4 $7.0 $7.0
$1.7 $1.6 $1.7
$1.7 $1.9
$12.6 $12.3 $12.1
$12.4
$16.0
57.4% 56.3%
52.8% 52.7%
56.0%
-2
3
8
13
18
23
28
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17
Other Occupancy Employee compensation and benefits Core Efficiency Ratio*
$20.4
$21.1 $20.2 $20.4
$24.9
20
POSITIVE MOMENTUM IN CORE*
EARNINGS PER SHARE
$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
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
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
111% Core EPS Growth from Q1 2014 to Q1 2017
21
THREE-YEAR FINANCIAL HIGHLIGHTS
Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
Total Core Non-Interest Income $26,787 $25,575
Core Net Income $41,237 $33,791
Core Earnings Per Share (diluted) $2.03 $1.66
Core Return on Average Equity 11.10% 10.08%
Core Return on Average Assets 1.09%
Total Assets $4,081,328
1.00%
$3,608,483
Core Net Interest Income $123,515 $107,618
$24,548
$26,043
$1.29
8.63%
0.82%
$3,277,003
$98,438
22
First Quarter 2017 Dividend of
$0.11 Per Common Share
2,000,000 Share Common Stock
Repurchase Plan
~ 10% of EFSC Outstanding Shares
No Specified End Date
Disciplined, Patient Approach Based
on Market Conditions
Sufficient Capital to Support
Growth Plans
CAPITAL LEVELS PRUDENTLY MANAGED TO
FACILITATE GROWTH AND RETURNS
6.02%
7.78%
8.69% 8.88% 8.76% 8.28%
TANGIBLE COMMON EQUITY/TANGIBLE ASSETS
23
Highly Focused, Proven Business Model
Strong Track Record of Commercial Loan Growth
Differentiated Competitive Lending Expertise
Enhanced Core Funding Capabilities
Increased Returns and Enhanced Shareholder Value
118%
63%
EFSC Index
3-Year Total Shareholder Return
Note: Index = SNL U.S. Bank $1B - $5B, as of 12/31/2016
Source: SNL
ENTERPRISE FINANCIAL
24
APPENDIX
1Q 2017 EFSC INVESTOR PRESENTATION
25
BALANCE SHEET POSITIONED FOR GROWTH
Modest Asset
Sensitivity
(200 BPS
Rate Shock
Increases NII
By 4.3%)
56% Floating
Rate Loans,
with Three-Year
Average
Duration
High-quality,
Cash-flowing
Securities
Portfolio with
Four-Year
Average
Duration
26%
Non-Interest
Bearing DDA to
Total Deposits
8.3%
Tangible
Common
Equity/Tangible
Assets
26
SIGNIFICANT EARNINGS CONTRIBUTION (PRE-TAX)
SUCCESSFUL FDIC-ASSISTED ACQUISITION
STRATEGY
Terminated all loss share agreements with the
FDIC in December 2015
Early termination charge from Q4 2015 earned
back 100% in Q1 2016
2015 2016 Q1 „17
$7,529 $15,018 $1,102
Dollars in Thousands
Accretable yield estimate as of 12/31/2016
Completed 4
FDIC-Assisted
Transactions
Since December
2009
Contributed $67
Million in Net
Earnings Since
Acquisition
$64 Million of
Remaining
Contractual Cash
Flows with $33
Million Carrying
Value
Significant
Contribution to
Future Earnings
with Estimated
Future Accretable
Yield of $13
Million
27
EARNINGS PER SHARE
$0.56 <$0.03>
$0.06 $0.59
EPS Non-Core Acquired
Assets
Merger Related
Expenses
Core
EPS
* A Non GAAP Measure, Refer to Appendix for Reconciliation
Reported vs. Core EPS*
Q1 2017
28
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 nonrecurring 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 Gain or loss 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, and gain/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 $1-$10 billion with commercial loans greater
than 20% and consumer loans less than 10%.
29
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in thousands, except per share data) 2017 2016 2016 2016 2016
CORE PERFORMANCE MEASURES
Net interest income 38,642$ 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: Merger related expenses 1,667 1,084 302 - -
Less: Facilities disposal - 1,040 - - -
Less: Other expenses related to non-core acquired loans 123 172 270 325 327
Less: Executive severance - - - 332 -
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 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%
For the Quarter ended
30
Q&A
1Q 2017 EFSC INVESTOR PRESENTATION