Enterprise Financial Services Corporation · NASDAQ:EFSC
Enterprise Financial Services — Q2 2018 Earnings Presentation
37 slides from Enterprise Financial Services's earnings presentation, Jul 27, 2018
Slide 1: Enterprise Financial Services Corp Second Quarter 2018 Investor Presentation
Enterprise Financial Services Corp Second Quarter 2018 Investor Presentation
Slide 2: Forward-Looking Statements
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
Slide 3: Company Snapshot - EFSC
Company Snapshot - EFSC Total Assets FOCUSED BUSINESS MODEL: $ 5.5 Billion • Attract Top Talent in Markets • Proven Ability to Grow Market Cap Commercial & Industrial "C&I" $ Talent Loans 1.3 Billion • Product Breadth ◦ Banking Operates in ◦ Trust & Wealth Management ◦ Treasury Management Strength K
Slide 4: Executive Leadership Team
Executive Leadership Team Name, Age, Title Years at Enterprise James B. Lally, 50, President & Chief Executive Officer, EFSC 14 Keene S. Turner, 38, Executive Vice President & Chief Financial Officer, EFSC 4 Scott R. Goodman, 54, President, Enterprise Bank & Trust 15 Douglas N. Bauche, 48, Chief Cre
Slide 5: Differentiated Business Model: Built for Quality Earnings Growth
Differentiated Business Model: Built for Quality Earnings Growth Target Audience Tailored Solutions Expertise Focused and Well-Defined Targeted Array of Banking Experienced Bankers and StrategyFocused Aimed and at Well-Defined Business Targetedand Wealth Array Management of Banking Experienced Advis
Slide 6: Three Urban Markets
Three Urban Markets Arizona Kansas Loans $325MM $717MM $2.3B Deposits $222MM $701MM $3.3B Branches 2 7 19 Deposit Market Share 1 39th/0.12% 16th/1.29% 5th/4.23% JPMorgan Chase UMB US Bancorp Primary Competitors 1 Wells Fargo Commerce Bank of America Bank of America Bank of America Commerce 1 Source:
Slide 7: Focused Loan Growth Strategies
Focused Loan Growth Strategies 6.1% 10.4% Specialized Market Segments Represent 29% of Total Portfolio Loans, Offering Competitive Advantages, Risk Adjusted Pricing and Fee Income 8.4% Opportunities. 1.4% 3.0% Expectations for future growth includes continued focus in these specialized market segmen
Slide 8: History of Strong C&I Growth
History of Strong C&I Growth $2,038 $1,796 In Millions 16% 5-Year CAGR $1,540 $1,329 $1,135 $963 Q2 '13 Q2 '14 Q2 '15 Q2 '16 Q2 '17 Q2 '18 8
Slide 9: Buying Process
Buying Process Buyer’s Journey Identify Research Solution Select Exploration Strategy Products Need Sales Process
Slide 10: Customer Focus
Customer Focus Source: Greenwich Associates 10
Slide 11: Portfolio Loan Trends
Portfolio Loan Trends 10% Total Loan Growth In Millions $4,252 $4,162 $3,997 $4,067 $3,859 Q2' 17 Q3 '17 Q4' 17 Q1' 18 Q2' 18 11
Slide 12: Drivers of Loan Growth
Drivers of Loan Growth June 30, 2016 – June 30, 2017 June 30, 2017 – June 30, 2018 $975 Million $393 Million General Commercial & Industrial 6% Commercial/Construction RE Life Insurance Premium Finance Commercial/Construction RE 32% 2% 13% Enterprise Value Lending 8% Residential RE 2% General Commer
Slide 13: Attractive Deposit Mix
Attractive Deposit Mix Total Deposits DDA $4.2 Billion 25% • Significant DDA Composition • Stable Cost of Deposits Interest Bearing • Improving Core Funding Transaction Accts 18% In Millions 41% 27.0% 26.0% 25.8% 25.7% 24.7% 16% MMA & $4,281 $4,248 Savings $4,156 CD $4,059 $3,921 Cost of Deposits 0.
Slide 14: Core Funding Mix
Core Funding Mix In Millions Commercial Business Banking Consumer $1,701 $549 $1,432 46% 15% 39% 1% 2% 2% 3% 1% 3% 6% 10% 23% 41% 24% 48% 37% 17% 32% 18% 20% 12% Brokered deposits: $566 14
Slide 15: Financial Scorecard Q2 2018 Compared to Q2 2017
Financial Scorecard Q2 2018 Compared to Q2 2017 54% Continued Growth in Core EPS 9% 1 bps 2% Drive Net Interest Defend Net Interest Achieve Further Income Growth in Margin Improvement in Dollars with Favorable Operating Leverage Loan Growth Trends 8% Enhance Deposit Levels to Support Growth Core EPS
Slide 16: Earnings Per Share - Q2 2018 Reported vs. Core EPS
Earnings Per Share - Q2 2018 Reported vs. Core EPS* $(0.08) $(0.01) $0.95 $0.86 EPS Non-Core Other Core EPS Acquired Assets * A Non-GAAP Measure, Refer to Appendix for Reconciliation 16
Slide 17: Earnings Per Share Trend - Q2 2018
Earnings Per Share Trend - Q2 2018 Changes in Core EPS* $0.02 $0.05 $(0.02) $(0.03) $0.84 $0.86 Q1 '18 Net Interest Portfolio Loan Noninterest Income Tax Q2 '18 Income Loss Provision Income Expense Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation 17
Slide 18: Core Net Interest Income Trend
Core Net Interest Income Trend* In Millions 3.76% 3.75% 3.73% 3.74% 3.75% $46.8 $45.4 $44.1 $44.9 $43.0 9% Core NII Growth Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Core Net Interest Income FTE Core Net Interest Margin Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation 18
Slide 19: Credit Trends for Portfolio Loans
Credit Trends for Portfolio Loans Net Charge-offs (1) Portfolio Loan Growth 64 bps In Millions $138 $95 $90 33 bps $70 6 bps 8 bps (2) bps $7 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 In Millions Provisions for Portfolio Loans Q2 2018 EFSC Peer(2) $3.6 NPA’s/Assets = 0.28
Slide 20: Core Fee Income
Core Fee Income* In Millions Core Fee Income Other Core Fee Income Detail $11.1 $2.3 $1.5 $9.0 $0.2 $2.1 $8.5 $8.4 $1.9 $0.2 $0.1 $7.9 $2.2 $1.8 $0.2 $1.5 $1.7 $1.7 $0.1 $1.5 $0.2 $0.1 $1.4 $0.1 $0.1 $0.6 $0.2 $0.3 $0.1 $0.2 $0.2 $0.1 $2.3 $2.1 $1.7 $1.9 $1.8 $0.4 $2.9 $3.0 $2.8 $2.8 $2.9 $1.5 $1.5
Slide 21: Operating Expenses Trend
Operating Expenses Trend* In Millions 54.5% 54.0% 51.6% 52.4% 50.2% $29.1 $29.2 $27.8 $28.1 $27.1 $15.3 $16.5 $16.6 $15.8 $15.1 $2.4 $2.3 $2.4 $2.4 $2.3 $9.7 $9.6 $10.4 $10.2 $10.3 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Other Occupancy Employee compensation and benefits Core Efficiency Ratio* Note: * A
Slide 22: Positive Momentum in Core Earnings Per Share
Positive Momentum in Core Earnings Per Share* $0.86 $0.84 $0.77 Four-Year CAGR 29% $0.66 $0.59 $0.59 $0.56 $0.49 $0.49 $0.49 $0.47 $0.44 $0.37 $0.38 $0.35 $0.33 $0.31 Q2 '14 Q3 '14 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 '18 177% Core EPS
Slide 23: Five-Year Financial Highlights
Five-Year Financial Highlights In Thousands, except per share data 2018 YTD 2017 2016 2015 2014 Core Net Interest Income $92,162 $169,586 $123,515 $107,618 $98,438 Total Core Non-Interest Income $17,546 $34,378 $26,787 $25,575 $24,548 Core Net Income $39,629 $59,912 $41,237 $33,791 $26,043 Core Earn
Slide 24: Capital Levels Prudently Managed to Facilitate Growth and Returns
Capital Levels Prudently Managed to Facilitate Growth and Returns In Millions Core ROATCE* Capital Uses the Past 5 Years** 20.0% 18.43% $250 18.0% $200 $175 16.0% $142 $150 14.46% 14.0% $100 12.18% 12.0% 11.22% $34 $50 $25 9.77% 10.0% $0 h A e s t & as d ow M h en 8.0% r rc id G u iv ep D 2014 2015
Slide 25: Enterprise Financial Investment Highlights and Total Shareholder Return
Enterprise Financial • 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 3 Year 5 Year 258% 145% 130% 56% EFSC Index EFSC Index T
Slide 26: 2nd Quarter 2018 EFSC Appendix
2nd Quarter 2018 EFSC Investor Presentation Appendix
Slide 27: Earnings Per Share - Q2 2018 Year to Date Reported vs. Core EPS
Earnings Per Share - Q2 2018 Year to Date Reported vs. Core EPS* $(0.14) $(0.01) $1.85 $1.70 EPS Non-Core Other Core EPS Acquired Assets * A Non-GAAP Measure, Refer to Appendix for Reconciliation 27
Slide 28: Earnings Per Share Trend
Earnings Per Share Trend Changes in Core EPS* $0.08 $0.03 $0.25 $(0.17) $0.36 $1.70 $1.15 YTD Q2 '17 Net Interest Portfolio Loan Noninterest Noninterest Income Tax YTD Q2 '18 Income Loss Provision Income Expense Expense Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation 28
Slide 29: Acquisition of Jefferson County Bancshares, Inc. (JCB)
Acquisition of Jefferson County Bancshares, Inc. (JCB) Closed February 10, 2017 Snapshot • 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 five deposit market share in St. Louis MSA Achieve
Slide 30: Effective Tax Rate Reconciliation
Effective Tax Rate Reconciliation YTD 2018 2017 Q4 2017 Federal Tax Rate 21.00% 35.00% 35.00% State Tax, Net of Federal Benefit 2.63% 1.94% 1.94% Excess Tax Benefits (2.84)% (2.47)% (1.25)% Tax Credit Investments (3.71)% (1.89)% (3.62)% Other Tax Adjustments (0.31)% (2.28)% (3.90)% Pre-DTA Effective
Slide 31: Balance Sheet Positioned for Growth
Balance Sheet Positioned for Growth Modest Asset High-quality, 60% Floating Cash-flowing 8.30% Sensitivity 24.7% 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 3.4%)
Slide 32: Successful FDIC-Assisted Acquisition Strategy
Successful FDIC-Assisted Acquisition Strategy Significant Earnings Contribution (Pre-tax) Completed 4 Contributed $77 2,016 2017 2018 Q2 FDIC-Assisted Million in Net Transactions Earnings Since Since December $15,018 $8,106 $4,298 Acquisition 2009 Dollars in Thousands Significant Terminated all loss
Slide 33: Capital Management
Capital Management Tangible Common Equity/Tangible Assets • 2,000,000 Share Common Stock Repurchase Plan • ~ 10% of EFSC Outstanding Shares 8.88% 8.76% • No Specified End Date 8.69% 8.30% 7.78% 8.14% • Disciplined, Patient Approach Based on Market Conditions • Sufficient Capital to Support Growth Pl
Slide 34: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as core net interest
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures For the Quarter ended For the Six Months ended Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Jun 30, Jun 30, ($ in thousands, except per share data) 2018 2018 2017 2017 2017 2018 2017 CORE PERFORMANCE MEASURES Net interest income $ 47,048 $ 46,171 $ 47,404 $ 4
Slide 36: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures For the Year ended December 31, December 31, December 31, December 31, ($ in thousands, except per share data) 2017 2016 2015 2014 CORE PERFORMANCE MEASURES Net interest income $ 177,304 $ 135,495 $ 120,410 $ 117,368 Less: Incremental accretion income 7,
Slide 37: 2nd Quarter 2018 EFSC Q&A
2nd Quarter 2018 EFSC Investor Presentation Q&A
Enterprise Financial Services — Q2 2018 Earnings Presentation on 6ix