Enterprise Financial Services Corporation · NASDAQ:EFSC
Enterprise Financial Services — Q3 2016 Earnings Presentation
33 slides from Enterprise Financial Services's earnings presentation, Nov 15, 2016
Slide 1: Enterprise Financial Services Corp Third Quarter 2016 Investor Presentation
ENTERPRISE FINANCIAL SERVICES CORP THIRD QUARTER 2016 INVESTOR PRESENTATION
Slide 2: Forward-Looking Statement
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 us
Slide 3: Company Snapshot
3 COMPANY SNAPSHOT FDIC Data ENTERPRISE BANK $3.9 Billion IN TOTAL ASSETS ENTERPRISE TRUST Billion IN ASSETS UNDER ADMINISTRATION CONCENTRATED ON PRIVATE BUSINESSES AND OWNER FAMILIES RELATIONSHIP DRIVEN ATTRACT TOP TALENT IN MARKETS PRODUCT BREADTH • BANKING • TRUST & WEALTH MANAGEMENT • TREASURY M
Slide 4: Acquisition of Jefferson County Bancshares, Inc.
4 SOURCE: SNL FINANCIAL ACQUISITION OF JEFFERSON COUNTY BANCSHARES, INC. ANNOUNCED OCTOBER 11, 2016 CONSISTENT WITH M&A EXPANSION STRATEGY MERGER PARTNER WITH EXPERIENCED BANKERS AND PROFESSIONALS DISCIPLINED FINANCIAL TERMS WELL KNOWN MARKET EXTENSIVE DUE DILIGENCE ENHANCES EFSC’S FOOTPRI
Slide 5: Differentiated Business Model: Built for Quality Earnings Growth
5 DIFFERENTIATED BUSINESS MODEL: BUILT FOR QUALITY EARNINGS GROWTH 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 Enterprise Bank Financial &
Slide 6: Enterprise University: A Key Brand Differentiator
6 EU is a Continuing Series of More than 30 High-Impact Workshops for Business Owners DESIGNED TO HELP MANAGEMENT TEAMS GROW THEIR BUSINESSES EU IS OFFERED SEMI-ANNUALLY TO ENTERPRISE CLIENTS AND PROSPECTS ALIKE ENTERPRISE UNIVERSITY: A KEY BRAND DIFFERENTIATOR EU is Unique and Highly Valued; A Clea
Slide 7: Strong Track Record of Success in St. Louis
7 5th RANKED IN DEPOSIT SHARE1, LARGEST PUBLICLY HELD BANK BASED IN ST. LOUIS2 STRONG TRACK RECORD OF SUCCESS IN ST. LOUIS 1 June 30, 2016 FDIC data 2 Excludes Bank Unit of Stifel Nicolaus 3 Excludes specialized lending products $1.5 BILLION WEALTH MANAGEMENT BUSINESS $1.5 3 BILLION IN LOANS $1.6 BI
Slide 8: Kansas City Market
8 ENTERED MARKET IN 2000 $586 Million IN LOANS $693 Million IN DEPOSITS ADDITIONAL GROWTH OPPORTUNITIES STRONG FOOTPRINT IN DESIRABLE Johnson County SIMILARITY TO ST. LOUIS’ Stable and Diverse Economic Profile ENABLES SIMILAR MARKET STRATEGIES Kansas City
Slide 9: Additional Growth Opportunities: Phoenix
9 ADDITIONAL GROWTH OPPORTUNITIES Source: June 30, 2016 FDIC data, SNL Financial ESTABLISHED PRESENCE IN 2009 $218 Million IN LOANS $100 Million IN DEPOSITS Phoenix-Mesa-Scottsdale, AZ REBOUNDING ECONOMY WITH Strong Growth POTENTIAL. Twelfth Largest Metro AREA IN THE NATION HIGHLY CONCENTRATED BANKI
Slide 10: Consumer and Business Banking Initiatives Complement Primary Commercial Strategy
10 CONSUMER AND BUSINESS BANKING INITIATIVES COMPLEMENT PRIMARY COMMERCIAL STRATEGY HIGH Client Satisfaction PAVES WAY FOR ADD-ON PRODUCT SALES Expansion of Commercial Relationships ACCOUNTED FOR 30% OF TREASURY MANAGEMENT PRODUCT IMPLEMENTATIONS YTD Business Banking INCREMENTAL NEW NON INTEREST BEA
Slide 11: History of Strong C&I Growth
11 HISTORY OF STRONG C&I GROWTH $763 $963 $1,042 $1,264 $1,484 $1,599 2011 2012 2013 2014 2015 Q3 '16 In millions
Slide 12: Specialized Lending Segments
12 Tax Credit Programs. $149 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. $395 MILLION IN M&A RELATED LOANS OUTSTANDING, PARTNERING
Slide 13: Drivers of Loan Growth
13 DRIVERS OF LOAN GROWTH Enterprise Value Lending 25.7% Life Insurance Premium Finance 11.7% General Commercial & Industrial 15.3% Commercial/ Construction RE 32.8% Residential RE 10.3% Consumer & Other 3.3% Tax Credits 0.9% ENTERPRISE VALUE LENDING LIFE INSURANCE PREMIUM FINANCE GENERAL COMMERCIAL
Slide 14: Portfolio Loan Trends
14 PORTFOLIO LOAN TRENDS $2,602 $2,751 $2,833 $2,884 $3,038 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 In Millions
Slide 15: Attractive Deposit Mix
15 24% 40% 16% 20% 0 ATTRACTIVE DEPOSIT MIX CD Interest Bearing Transaction Accts DDA MMA & Savings SEPT 30, 2016 $3,125MM Significant DDA COMPOSITION Declining COST OF DEPOSITS IMPROVING Core Funding 80% OF Core Deposits ARE COMMERCIAL CUSTOMERS $2,814 $2,785 $2,932 $3,028 $3,125 24.6% 25.8% 24.5%
Slide 16: Financial Scorecard
16 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 11% 16% 1
Slide 17: Reported vs. Core EPS
17 EARNINGS PER SHARE $1.74 < $0.32> $0.03 $1.45 EPS Non-Core Acquired Assets Other Non-Core Expenses Core EPS * A Non GAAP Measure, Refer to Appendix for Reconciliation REPORTED VS. CORE EPS* Q3 2016 YTD
Slide 18: Positive Momentum in Core Earnings Per Share
18 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 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation 75% Core EPS Growth from Q1 2014 to Q3 2016
Slide 19: Earnings Per Share Trend
19 EARNINGS PER SHARE TREND $1.17 $0.40 < $0.01> $0.01 < $0.12> $1.45 Q3 '15 YTD Net Interest Income Portfolio Loan Loss Provision Non Interest Income Non Interest Expense Q3 '16 YTD CHANGES IN CORE EPS* Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
Slide 20: Net Interest Income Driving Core Revenue Growth
20 NET INTEREST INCOME DRIVING CORE REVENUE GROWTH* In Millions Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation $27.1 $28.7 $29.6 $30.2 $31.5 3.41% 3.50% 3.54% 3.52% 3.54% $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 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '1
Slide 21: Credit Trends for Portfolio Loans
21 CREDIT TRENDS FOR PORTFOLIO LOANS 2 bps -10 bps -1 bps -6 bps 14 bps Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Net Charge-offs (1) (1) Portfolio loans only, excludes PCI (Purchased Credit Impaired) loans Q2 2016 EFSC PEER(2) NPA’S/ASSETS = 0.59% 0.62% NPL’S/LOANS = 0.66% 0.69% ALLL/NPL’S = 188% 164% ALL
Slide 22: Managed Operating Expenses Improving Efficiency
22 MANAGED OPERATING EXPENSES* IMPROVING EFFICIENCY In Millions Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation $6.2 $6.5 $6.1 $6.5 $6.4 $1.6 $1.7 $1.7 $1.6 $1.7 $11.5 $11.8 $12.6 $12.3 $12.1 58.6% 56.1% 57.4% 56.3% 52.8% -40.0% -15.0% 10.0% 35.0% 60.0% 0 5 10 15 20 25 Q3 '15 Q4 '15
Slide 23: Operating Expense Look-Back
23 OPERATING EXPENSE* LOOK-BACK In Millions Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation $5.7 $6.4 $1.7 $1.7 $11.9 $12.1 62.8% 52.8% Q3 '14 Q3 '16 Other Occupancy Employee compensation and benefits Core Efficiency Ratio* $19.3 $20.2
Slide 24: Fourth Quarter 2016 Dividend and Share Repurchase Plan
24 FOURTH QUARTER 2016 DIVIDEND OF $0.11 PER COMMON SHARE 2,000,000 SHARE COMMON STOCK REPURCHASE PLAN INSTITUTED ~ 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
Slide 25: Highly Focused, Proven Business Model
25 HIGHLY FOCUSED, Proven BUSINESS MODEL STRONG TRACK RECORD OF Commercial Loan Growth DIFFERENTIATED COMPETITIVE Lending Expertise Replicating ST. LOUIS MODEL IN Kansas City AND Phoenix DEMONSTRATED PROGRESS TOWARD INCREASED RETURNS AND Enhancing Shareholder Value 95% 42% EFSC Index 3-Year Total Sh
Slide 26: Appendix 3Q 2016
26 APPENDIX 3Q 2016 INVESTOR PRESENTATION
Slide 27: Balance Sheet Positioned for Growth
27 BALANCE SHEET POSITIONED FOR GROWTH Modest Asset Sensitivity (200 BPS RATE SHOCK INCREASES NII BY 5.5%) 64% FLOATING RATE LOANS, WITH THREE-YEAR AVERAGE DURATION High-quality, Cash-flowing SECURITIES PORTFOLIO WITH THREE YEAR AVERAGE DURATION 24% DDA TO TOTAL DEPOSITS 9.0% Tangible Common Equity/
Slide 28: Significant Earnings Contribution (Pre-Tax)
28 SIGNIFICANT EARNINGS CONTRIBUTION (PRE-TAX) Significant CONTRIBUTION TO FUTURE EARNINGS WITH ESTIMATED FUTURE ACCRETABLE YIELD OF $16 Million SUCCESSFUL FDIC-ASSISTED ACQUISITION STRATEGY TERMINATED ALL LOSS SHARE AGREEMENTS WITH THE FDIC IN DECEMBER 2015 2014 2015 2016 YTD $4,856 $7,529 $10,388
Slide 29: Reported vs. Core EPS Q3 2016
29 EARNINGS PER SHARE $0.59 < $0.11> $0.01 $0.49 EPS Non-Core Acquired Assets Other Non-Core Expenses Core EPS * A Non GAAP Measure, Refer to Appendix for Reconciliation REPORTED VS. CORE EPS* Q3 2016
Slide 30: Earnings Per Share Trend
30 EARNINGS PER SHARE TREND $0.49 $0.04 < $0.07> $0.02 $0.01 $0.49 Q3 '16 Net Interest Income Portfolio Loan Loss Provision Non Interest Income Non Interest Expense Q3 '16 CHANGES IN CORE EPS* Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
Slide 31: Use of Non-GAAP Financial Measures
31 USE OF NON-GAAP FINANCIAL MEASURES The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as Core net inter
Slide 32: Reconciliation of Non-GAAP Financial Measures
32 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, (in thousands) 2016 2016 2016 2015 2015 2016 2015 CORE PERFORMANCE MEASURES Net interest income 33,830$ 33,783$ 32,428$ 32,079$ 30,006$ 100,041$ 88,331$ Less: Incremental accretion income 2,296 3
Slide 33: Q&A 3Q 2016
33 Q&A 3Q 2016 INVESTOR PRESENTATION
Enterprise Financial Services — Q3 2016 Earnings Presentation on 6ix