Attached files
| file | filename |
|---|---|
| EX-99.1 - EARNINGS RELEASE - ENTERPRISE FINANCIAL SERVICES CORP | ex991financialstatementsan.htm |
| 8-K - 8-K - ENTERPRISE FINANCIAL SERVICES CORP | a8kearningsrelease123117.htm |
Enterprise Financial Services
Corp
2017 Fourth Quarter Earnings Webcast
2
Forward-Looking Statements
Some of the information in this report contains “forward-looking statements” within the meaning of and intended to be
covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
typically are identified with use of terms such as “may,” “might,” “will, “should,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “predict,” “potential,” “could,” “continue” and the negative of these terms and similar words, although some
forward-looking statements may be expressed differently. Forward-looking statements also include, but are not limited to,
statements regarding plans, objectives, expectations or consequences of announced transactions and statements about
the future performance, operations, products and services of the Company and its subsidiaries. Our ability to predict results
or the actual effect of future plans or strategies is inherently uncertain. You should be aware that our actual results could
differ materially from those anticipated by the forward-looking statements or historical performance due to a number of
factors, including, but not limited to: our ability to efficiently integrate acquisitions into our operations, retain the customers
of these businesses and grow the acquired operations; reputational risks; credit risk; changes in the appraised valuation
of real estate securing impaired loans; outcomes of litigation and other contingencies; exposure to general and local
economic conditions; risks associated with rapid increases or decreases in prevailing interest rates; consolidation within
the banking industry; competition from banks and other financial institutions; our ability to attract and retain relationship
officers and other key personnel; burdens imposed by federal and state regulation; changes in regulatory requirements;
changes in accounting regulation or standards applicable to banks; and other risks discussed under the caption “Risk
Factors” of our most recently filed Form 10-K and in Part II, 1A of our most recently filed Form 10-Q, all of which could
cause the Company’s actual results to differ from those set forth in the forward-looking statements.
Readers are cautioned not to place undue reliance on our forward-looking statements, which reflect management’s analysis
and expectations only as of the date of such statements. Forward-looking statements speak only as of the date they are
made, and the Company does not intend, and undertakes no obligation, to publicly revise or update forward-looking
statements after the date of this report, whether as a result of new information, future events or otherwise, except as required
by federal securities law. You should understand that it is not possible to predict or identify all risk factors. Readers should
carefully review all disclosures we file from time to time with the Securities and Exchange Commission (the “SEC”) which
are available on our website at www.enterprisebank.com under "Investor Relations."
3
2017 Focus
• Sustain Core Growth Trends
• Successfully Convert and Integrate Jefferson Countty
Bancshares ("JCB")
• Maintain Focus on Long-Term Strategic Development
4
Financial Scorecard
Continued Growth in Core EPS
• Drive Net Interest Income Growth in
Dollars with Favorable Loan Growth
Trends
• Defend Net Interest Margin
• Maintain High Quality Credit Profile
• Achieve Further Improvement in
Operating Leverage
Enhance Deposit Levels to Support
Growth
Q4 2017 Compared to Q4 2016
9 bps NPLs/Loans
31%
40%
29 bps
2.5%
29%
5
2018 Focus
• Achieve Organic Loan and Deposit Growth
• Maintain Focus on Long-Term Strategic Development
• Improve Overall Sales Culture Through a Refreshed Sales
Process and External Message
6
Q4' 16 Q1' 17 Q2' 17 Q3 '17 Q4' 17
$3,118
$3,859
$3,997 $4,067
$3,853
Portfolio Loan Trends
In Millions 9% T
otal Loan Growth
*
*Note: 30% including acquisition of JCB
JCB
$678
7
Commercial & Industrial Loan Trends
Q4'16 Q1'17 Q2'17 Q3 '17 Q4 '17
$1,633
$1,796
$1,862
$1,919
$1,774
In Millions 18% C&I Growt
h
JCB
$79
8
Portfolio Loan Details
Q4 ’17 Q3 ’17 QTRChange Q4 ‘16
LTM
Change
Enterprise Value Lending $ 408 $ 456 $ (48) $ 389 $ 19
C&I General 912 886 26 794 118
Life Insurance Premium
Financing 365 331 34 306 59
Tax Credit 235 189 46 144 91
Commercial Real Estate 1,669 1,639 30 1,089 580
Residential Real Estate 342 342 — 241 101
Consumer & Other 136 154 (18) 155 (19)
Portfolio Loans $ 4,067 $ 3,997 $ 70 $ 3,118 $ 949
In Millions
9
Portfolio Loans By Business Unit
Specialized Lending
Q4 '16 Q3 '17 Q4 '17
$745
$860 $856
In Millions
St. Louis
Q4 '16 Q3 '17 Q4 '17
$1,556
$2,225 $2,262
Arizona
Q4 '16 Q3 '17 Q4 '17
$226 $277 $291
Kansas City
Q4 '16 Q3 '17 Q4 '17
$591 $635 $658
10
Last Twelve Months Growth Rate = 29%, 5% Excluding Acquisition of JCB
In Millions
Deposit Trend
Deposits JCB DDA %
Q4'16 Q1'17 Q2'17 Q3 '17 Q4 '17
$3,233
$3,921
$4,059
$4,156
$4,032
26.8%
25.7% 26.0% 25.8%
27.0%
$774
u
11
Earnings Per Share - Full Year
* A Non GAAP Measure, Refer to Appendix for Reconciliation
Reported vs. Core EPS*
$2.07
$0.52
$(0.20) $0.18
$0.01
$2.58
EPS Merger Related
Expenses
Core EPSDTA Revaluation Non-Core
Acquired Assets
Other
12
Earnings Per Share Trend - Full Year
Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
$2.03
$0.78
$(0.12) $0.10
$(0.38)
$0.17
$2.58
Changes in Core EPS*
Q4 '16 Net Interest
Income
Portfolio Loan
Loss Provision
Noninterest
Income
Noninterest
Expense
Q4 '17Income Tax
Expense
13
Earnings Per Share Trend - Q4 2017
Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
$0.66
$0.04
$(0.02)
$0.08 $(0.04)
$0.05
$0.77
Changes in Core EPS*
Q3 '17 Net Interest
Income
Portfolio Loan
Loss Provision
Noninterest
Income
Noninterest
Expense
Q4 '17Income Tax
Expense
14
Core Net Interest Income Trend*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
In Millions
Core Net Interest Income FTE Core Net Interest Margin
Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
$32.2
$37.6
$43.0 $44.1
$44.9
3.44%
3.63%
3.76% 3.75% 3.73%
40% Core NII Growt
h
15
Credit Trends for Portfolio Loans
Portfolio Loan Growth
Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
$80
$56
$7
$138
$70
Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
12
(1)
64
8
33
Q4 2017 EFSC Peer(3)
NPA’s/Assets = 0.31% 0.66%
NPL’s/Loans = 0.39% 0.79%
ALLL/NPL’s = 243.3% 120.2%
ALLL/Loans = 0.95% 1.05%
In Millions
Net Charge-offs (1)
2017 YTD NCO = 26 bps
(2)
Provisions for Portfolio Loans
Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
$1.0 $1.5
$3.6
$2.4
$3.2
In Millions
(1) Portfolio loans only, excludes non-core acquired loans; (2) Excludes JCB;
(3) Peer median data as of 9/30/2017 (source: SNL Financial)
bps
bps
bps
bps
bps
16
Core Fee Income*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
Other Core Fee Income DetailCore Fee Income
In Millions
Wealth Management Deposit Services Charge
Other State Tax Credits
Card Services
Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
$1.7 $1.8 $2.0 $2.1 $2.2
$2.2 $2.5
$2.8 $2.8 $2.9
$1.3
$1.5
$1.7 $1.9
$2.3$1.7 $0.2
$0.1
$2.2
$0.9
$7.8
$1.0
$7.0 $1.4
$7.9
$1.5
$8.4
$1.5
$11.1
Miscellaneous Swap Fees CDE
Mortgage
Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
$1.0 $0.8 $1.0
$1.5 $1.3
$0.2
$0.4
$0.1 $0.6
$0.2 $0.4
$0.2
$0.2
$0.2
$0.1
$1.3 $0.1
$1.5 $0.1
$1.7 $0.1
$1.9
$0.2
$2.3
17
Operating Expenses Trend*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
In Millions
Other Occupancy
Employee compensation and benefits Core Efficiency Ratio*
Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
$7.0 $7.8
$9.7 $9.6 $10.4
$1.7 $1.9
$2.3 $2.4 $2.4
$12.4
$21.1
$15.2
$24.9
$15.8
$27.8
$15.1
$27.1
$15.3
$28.1
52.7%
56.0% 54.5%
51.6% 50.2%
18
Effective Tax Rate Reconciliation
2017 Q4 2017 Q3 2017
Federal Tax Rate 35.00% 35.00% 35.00%
State Tax, Net of Federal Benefit 1.94% 1.94% 1.97%
Excess Tax Benefits (2.47)% (1.25)% (0.01)%
Tax Credit Investments (1.89)% (3.62)% (2.69)%
Other Tax Adjustments (2.28)% (3.90)% (1.77)%
Pre-DTA Effective Tax Rate 30.30% 28.17% 32.50%
Deferred Tax Asset Revaluation 14.00% 44.30% —%
Ending Effective Tax Rate 44.30% 72.47% 32.50%
19
Positive Momentum in Core Earnings Per Share*
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
$0.33 $0.35
$0.38
$0.44
$0.49 $0.47 $0.49 $0.49
$0.59 $0.59
$0.56
$0.66
$0.77
133% Core EPS Growth from Q4 2014 to Q4 2017
Three-
Year CAGR 33
%
Appendix
Fourth Quarter 2017 Earnings Webcast
21
Earnings Per Share - Q4 2017
* A Non GAAP Measure, Refer to Appendix for Reconciliation
Reported vs. Core EPS*
$0.32
$0.52
$(0.07)
$0.77
EPS Non-Core
Acquired Assets
Core EPSDTA Revaluation
22
Use of Non-GAAP Financial Measures
The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”)
and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as core net
interest margin and other core performance measures, in this presentation that are considered “non-GAAP financial measures.”
Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position, or cash
flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and
presented in accordance with GAAP.
The Company considers its core performance measures presented in this presentation as important measures of financial
performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact
of non-core acquired loans and related income and expenses, the impact of non-comparable items, and the Company's operating
performance on an ongoing basis. Core performance measures include contractual interest on non-core acquired loans but exclude
incremental accretion on these loans. Core performance measures also exclude the gain or loss on sale of other real estate from
non-core acquired loans, and expenses directly related to the non-core acquired loans and other assets formerly covered under
FDIC loss share agreements. Core performance measures also exclude certain other income and expense items, such as executive
separation costs, merger related expenses, facilities charges, deferred tax asset revaluation, and the gain or loss on sale of investment
securities, the Company believes to be not indicative of or useful to measure the Company's operating performance on an ongoing
basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures.
The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and
ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's
management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the
Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and
ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In
the tables below, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures
and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure
for the periods indicated.
Peer group data consists of median of publicly traded banks with total assets from $1-$10 billion with commercial loans greater than
20% and consumer loans less than 10%.
23
Reconciliation of Non-GAAP Financial Measures
For the Quarter ended
($ in thousands, except per share data)
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
CORE PERFORMANCE MEASURES
Net interest income $ 47,404 $ 45,625 $ 45,633 $ 38,642 $ 35,454
Less: Incremental accretion income 2,503 1,556 2,584 1,075 3,279
Core net interest income 44,901 44,069 43,049 37,567 32,175
Total noninterest income 11,112 8,372 7,934 6,976 9,029
Less: Gain (loss) on sale of other real estate from non-core acquired loans (6) — — — 1,085
Less: Other income from non-core acquired assets — — — — 95
Less: Gain on sale of investment securities — 22 — — —
Core noninterest income 11,118 8,350 7,934 6,976 7,849
Total core revenue 56,019 52,419 50,983 44,543 40,024
Provision for portfolio loan losses 3,186 2,422 3,623 1,533 964
Total noninterest expense 28,260 27,404 32,651 26,736 23,181
Less: Other expenses related to non-core acquired loans 114 19 (16) 123 172
Less: Facilities disposal — — 389 — 1,040
Less: Merger related expenses — 315 4,480 1,667 1,084
Less: Other non-core expenses — — — — (209)
Core noninterest expense 28,146 27,070 27,798 24,946 21,094
Core income before income tax exp 24,687 22,927 19,562 18,064 17,966
Total income tax expense 19,820 7,856 5,545 5,106 7,053
Less: income tax expense from deferred tax asset revaluation 12,117 — — — —
Less: Other non-core income tax expense1 1,011 465 (784) 190 1,032
Core income tax expense 6,692 7,391 6,329 4,916 6,021
Core net income $ 17,995 $ 15,536 $ 13,233 $ 13,148 $ 11,945
Core diluted earnings per share $ 0.77 $ 0.66 $ 0.56 $ 0.59 $ 0.59
Core return on average assets 1.37% 1.21% 1.06% 1.17% 1.19%
Core return on average common equity 12.84% 11.13% 9.72% 11.29% 12.31%
Core return on average tangible common equity 16.71% 14.50% 12.72% 13.75% 13.44%
Core efficiency ratio 50.24% 51.64% 54.52% 56.01% 52.70%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
Net interest income $ 47,824 $ 46,047 $ 46,096 $ 39,147 $ 35,884
Less: Incremental accretion income 2,503 1,556 2,584 1,075 3,279
Core net interest income $ 45,321 $ 44,491 $ 43,512 $ 38,072 $ 32,605
Average earning assets $ 4,826,271 $ 4,712,672 $ 4,641,198 $ 4,259,198 $ 3,767,272
Reported net interest margin 3.93% 3.88% 3.98% 3.73% 3.79%
Core net interest margin 3.73% 3.75% 3.76% 3.63% 3.44%
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.
Q & A
Fourth Quarter 2017 Earnings Webcast