Enterprise Financial Services Corporation · NASDAQ:EFSC
Enterprise Financial Services — Q4 2019 Earnings Presentation
38 slides from Enterprise Financial Services's earnings presentation, Jan 28, 2020
Slide 1: Enterprise Financial Services Corp Fourth Quarter 2019 Investor Presentation
Exhibit 99.1 Enterprise Financial Services Corp Fourth Quarter 2019 Investor Presentation
Slide 2: Forward-Looking Statements
Forward-Looking Statements Some of the information in this report may contain “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, and by Section 27A of the Securities Act of 1933, as amen
Slide 3: Company Snapshot - EFSC
Company Snapshot - EFSC Total Assets FOCUSED BUSINESS MODEL: $ 7.3 Billion • Attract Top Talent in Markets • Proven Ability to Grow Market Cap Commercial & Industrial “C&I” Talent Loans $ Billion • Product Breadth 1.3 ◦ Banking Operates in ◦ Trust & Wealth Management ◦ Treasury Management Strength K
Slide 4: Executive Leadership Team
Executive Leadership Team JAMES B. LALLY KEENE S. TURNER SCOTT R. GOODMAN 52, President & Chief Executive 40, Executive Vice President 56, President, Officer, EFSC & Chief Financial Officer, EFSC Enterprise Bank & Trust Enterprise Tenure – 16 years Enterprise Tenure – 6 years Enterprise Tenure – 16
Slide 5: Differentiated Business Model: Built for Quality Earnings Growth
Differentiated Business Model: Built for Quality Earnings Growth FocusedTarget and Well-Defined Audience TargetedTailored Array Solutions of Banking ExperiencedExpertise Bankers and StrategyFocused Aimed and at Well-Defined Business Targetedand Wealth Array Management of Banking Experienced,Advisors
Slide 6: Four Urban Markets
Four Urban Markets Phoenix Kansas City New Mexico St. Louis Arizona Kansas Loans 1 $392MM $816MM 640MM $2.5B Deposits 1 $258MM $820MM $1.0B $3.5B Branches 2 7 6 19 Deposit Market 31st/0.17% 16th/1.29% 7th/3.23% 4th/4.59% Share 2, 3 JPMorgan Chase UMB Wells Fargo US Bancorp Primary Wells Fargo Commer
Slide 7: Focused Loan Growth Strategies
Focused Loan Growth Strategies 5.5% Specialized Market Segments Represent 27% of 8.1% Total Loans, Offering Competitive Advantages, Risk Adjusted Pricing and Fee Income Opportunities. 8.9% 1.7% Expectations for future growth includes continued 2.6% focus in these specialized market segments. Total L
Slide 8: History of Strong C&I Growth
History of Strong C&I Growth $2,361 In Millions 12% 5-Year CAGR $2,123 $1,922 $1,654 $1,525 $1,322 Q4 ‘14 Q4 ‘15 Q4 ‘16 Q4 ‘17 Q4 ‘18 Q4 ‘19 8
Slide 9: Customer Focus
Customer Focus Source: Greenwich Associates 9
Slide 10: Total Loan Trends
Total Loan Trends 22% Total Loan Growth* In Millions $5,314 $5,149 $5,228 $5,017 Trinity $4,350 $682 Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q4' 19 *Note: 6% Excluding Acquisition of Trinity, 7.5% legacy Enterprise 10
Slide 11: Drivers of Loan Growth
Drivers of Loan Growth $333 Million $939 Million $253 Million $964 Million 2% 1% 6% 8% 5% 13% 3% 9% 6% 5% 6% 15% 9% 11% 5% 1% 3% 5% 12% 12% 2% 58% 44% 68% 64% 13% 14% Q4 2015 - Q4 2016 Q4 2016 - Q4 2017 Q4 2017 - Q4 2018 Q4 2018 - Q4 2019 Acquisition General C&I Commercial/Construction RE Tax Credit
Slide 12: Enterprise Value Lending ("EVL")
Enterprise Value Lending (“EVL”) • Strategy is focused on proven sponsors licensed as a Small Business Investment Company or “SBIC”. • SBIC’s make up approximately 90% of the EVL portfolio as of December 31, 2019. • Cash-flow based senior debt financing for Private Equity Sponsors acquiring or recap
Slide 13: Enterprise Value Lending ("EVL")
Enterprise Value Lending (“EVL”) Total EVL Loans outstanding of $429 million or 8% of total loans as of December 31, 2019 $ In Millions Total # of Customers Average Manufacturing $ 150 41 $ 3.7 Wholesale Trade 64 12 5.3 Professional, Scientific, and Technical Services 49 11 4.5 Administrative, Suppo
Slide 14: Attractive Deposit Mix
Attractive Deposit Mix Total Deposits DDA $5.8 Billion 23% • Significant DDA Composition • Stable Cost of Deposits Interest-Bearing Transaction 24% • Improving Core Funding Accounts 39% MMA & In Millions 14% Savings 24.0% 21.4% 21.3% 23.0% 23.0% $5,771 $5,537 $5,559 $5,624 CD Trinity $4,588 $1,094 C
Slide 15: Core Funding Mix
Q4 2019 Brokered deposits: $615 Core Funding Mix Q4 2018 Brokered deposits: $580 In Millions Commercial Business Banking Consumer $1,879 $2,004 $494 $771 $1,636 $2,381 47% 39% 12% 15% 41% 46% 5% 36% 4% 6% 11% 38% 18% 16% 11% 17% 26% 22% 20% 11% 21% 32% 17% 22% 54% 53% 41% 41% 32% 23% 6% Q4 2018 Q4 2
Slide 16: Financial Scorecard
Financial Scorecard Q4 2019 Compared to Q4 2018 7% Continued Growth in EPS 22% 13 bps 1% Drive Net Interest Defend Core Net Achieve Further Income Growth in Interest Margin1 Improvement in Core Dollars with Favorable Operating Leverage1 Loan Growth Trends 26% Enhance Deposit Levels to Support Growth
Slide 17: Earnings Per Share Trend - Q4 2019
Earnings Per Share Trend - Q4 2019 Changes in EPS $0.03 $0.01 $0.01 $0.01 $(0.01) $(0.04) $1.08 $1.09 Q3 ‘19 Incremental Loan Loss Noninterest Noninterest Merger-Related Change in Q4 ‘19 Accretion Provision Income Expense Expenses Shares/ETR 17
Slide 18: Net Interest Income Trend
Net Interest Income Trend In Millions 3.77% 3.79% 3.8% 3.69% 3.64% $61.7 $63.0 $61.6 $60.8 $60.9 $61.0 $50.6 $52.3 $51.2 $48.5 26% Core NII Growth Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Core Net Interest Income* Incremental Accretion On Non-core Acquired Assets FTE Core Net Interest Margin* Note: * A No
Slide 19: Credit Trends
Credit Trends Net Charge-offs Total Loan Growth (1) In Millions $132 $83 $79 $86 26 bps 19 bps 16 bps 8 bps 8 bps $(15) Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Provision for Loan Losses Q4 2019 EFSC Peer(2) In Millions NPAs/Assets = 0.45% 0.64% $2.1 $1.7 $1.8 $1.3 NPLs/
Slide 20: Current Expected Credit Losses ("CECL")
Current Expected Credit Losses ("CECL") • CECL models have been developed and tested, and validation is being finalized. • Based on preliminary results, management anticipates the pre-tax CECL impact to be an increase of 50-65% of the current allowance level. In addition, there will be an increase i
Slide 21: Noninterest Income Trend
Noninterest Income Trend In Millions Fee Income Other Fee Income Detail $14.4 $13.6 $1.2 $12.0 $3.4 $0.6 $4.0 $10.7 $4.0 $2.9 $2.3 $9.2 $2.7 $1 $0.2 $2.9 $2.3 $0.2 $2.7 $1.7 $0.4 $0.2 $2.4 $2.5 $2.4 $2.3 $0.2 $0.2 $0.4 $1.8 $1.8 $0.3 $0.4 $0.2 $1.7 $0.1 $0.3 $0.8 $3.4 $3.2 $3.3 $0.3 $0.2 $2.9 $2.9 $
Slide 22: Operating Expenses Trend
Operating Expenses Trend 54.1% 53.3% 51.7% 49.8% 50.7% $49.1 $10.3 In Millions $39.8 $38.2 $38.4 $7.3 $0.4 $30.7 $1.3 $20.7 $20.8 $20.4 $19.4 $16.6 $3.2 $3.2 $3.5 $2.4 $2.6 $14.9 $13.8 $14.5 $10.4 $10.5 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Other Occupancy Employee compensation and benefits Merger-rela
Slide 23: Positive Momentum in Earnings Per Share
Positive Momentum in Earnings Per Share $1.08 $1.09 $1.02 $0.97 $0.95 Five-Year CAGR 29% $0.90 $0.69 $0.67 $0.67 $0.68 $0.61 $0.59 $0.56 $0.54 $0.52 $0.50 $0.48 $0.46 $0.43 $0.32 $0.30 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 Q1 '18 Q2 '18 Q3 '18 Q4
Slide 24: Earnings Per Share Trend - 2019
Earnings Per Share Trend - 2019 Changes in EPS $0.17 $0.64 $0.02 $0.03 $(0.43) $(0.47) $(0.24) $3.83 $3.55 2018 Net Interest Incremental Loan Loss Noninterest Noninterest Merger-Related Change in 2019 Income Accretion Provision Income Expense Expense Shares/ETR 24
Slide 25: Five-Year Financial Highlights
Five-Year Financial Highlights In Thousands, except per share data 2019 2018 2017 2016 2015 Net Interest Income $238,717 $191,905 $177,304 $135,495 $120,410 Total Noninterest Income $49,176 $38,347 $34,394 $29,059 $20,675 Net Income $92,739 $89,217 $48,190 $48,837 $38,450 Earnings Per Share (diluted
Slide 26: Capital Levels Prudently Managed to Facilitate Growth and Returns
Capital Levels Prudently Managed to Facilitate Growth and Returns In Millions ROATCE* Capital Uses the Past 5 Years** 22.0% $350 $314 20.0% $300 19.59% 19.83% $250 $224 18.0% 18.51% $200 16.0% 14.67% 16.08% $150 15.52% 14.0% 12.77% 14.42% $100 $56 $51 12.0% 11.63% $50 10.0% $0 h A e s 2015 2016 2017
Slide 27: Capital Maintenance
Capital Maintenance Tangible Common Equity/Tangible Assets* • 2,000,000 Share Common Stock Repurchase Plan 8.88% 8.89% 8.69% 8.76% 8.14% 8.66% • 552,158 Remaining Shares Under Authorization • No Specified End Date • Disciplined, Patient Approach Based on 2014 2015 2016 2017 2018 2019 Market Conditio
Slide 28: Enterprise Financial Services Corp
Enterprise Financial Services Corp • 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 • Strong Capital Provides Flexibility 3 Ye
Slide 29: 4th Quarter 2019 EFSC Appendix
4th Quarter 2019 EFSC Investor Presentation Appendix
Slide 30: Strategic Combination with Trinity Capital Corporation
Strategic Combination with Trinity Capital Corporation (“Trinity”) Closed March 8, 2019, Converted May 28, 2019 Trinity Overview ▪ Headquartered in Los Alamos, New Mexico, Trinity was founded in 1963 by local investors to provide full-service banking to the community that developed around the Los Al
Slide 31: Effective Tax Rate Reconciliation
Effective Tax Rate Reconciliation 2019 2018 Federal Tax Rate 21.00% 21.00% State Tax, Net of Federal Benefit 2.32% 2.32% Excess Tax Benefits (0.45)% (1.56)% Tax Credit Investments (1.05)% (4.66)% Merger Expenses 0.22% —% Other Tax Adjustments (1.96)% 0.23% Pre-DTA Effective Tax Rate 20.08% 17.33% Im
Slide 32: Balance Sheet Positioned for Growth
Balance Sheet Positioned for Growth Modest Asset High-quality, 59% Floating Cash-flowing 8.89% Sensitivity 23.0% Rate Loans, Securities Tangible (200 BPS Non-Interest with Two-Year Portfolio with Common Rate Shock Bearing DDA to Average Four-Year Equity/Tangible Increases NII Total Deposits By 4.4%)
Slide 33: Successful FDIC-Assisted Acquisition Strategy
Successful FDIC-Assisted Acquisition Strategy Significant Earnings Contribution (Pre-tax) Completed 4 Contributed $86 2017 2018 2019 FDIC-Assisted Million in Net Transactions Earnings Since $8,106 $8,079 $6,239 Since December Acquisition 2009 Dollars in Thousands Terminated all loss share agreements
Slide 34: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures The Company’s accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as adjusted EPS, cor
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures For the Quarter ended For the Year ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Dec 31, Dec 31, ($ in thousands, except per share data) 2019 2019 2019 2019 2018 2019 2018 CORE PERFORMANCE MEASURES Net interest income $ 61,613 $ 63,046 $ 61,715 $ 52,343
Slide 36: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Tangible Common Equity Ratio December 31, December 31, December 31, December 31, December 31, December 31, (in thousands) 2019 2018 2017 2016 2015 2014 Total shareholders' equity $ 867,185 $ 603,804 $ 548,573 $ 387,098 $ 350,829 $ 316,241 Less: Goodwill
Slide 37: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Impact of Merger-Related and Tax Items For the Year ended December 31, December 31, December 31, December 31, December 31, (in thousands, except per share data) 2019 2018 2017 2016 2015 IMPACT OF MERGER-RELATED AND TAX ITEMS Net income - GAAP $ 92,739 $
Slide 38: 4th Quarter 2019 EFSC Q&A
4th Quarter 2019 EFSC Investor Presentation Q&A For more information contact Keene Turner, Executive Vice President and CFO (314) 512-7233
Enterprise Financial Services — Q4 2019 Earnings Presentation on 6ix