Enterprise Financial Services Corporation · NASDAQ:EFSC
Enterprise Financial Services — Q4 2020 Earnings Presentation
43 slides from Enterprise Financial Services's earnings presentation, Feb 2, 2021
Slide 1: Fourth Quarter 2020 Investor Presentation
Enterprise Financial Services Corp Fourth Quarter 2020 Investor Presentation Exhibit 99.1
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. Such forward-looking statements may include projections b
Slide 3: Executive Leadership Team
Executive Leadership Team JAMES B. LALLY 53, President & Chief Executive Officer, EFSC Enterprise Tenure – 17 years KEENE S. TURNER 41, EVP, Chief Financial Officer, EFSC Enterprise Tenure – 7 years SCOTT R. GOODMAN 57, President, Enterprise Bank & Trust Enterprise Tenure – 17 years DOUGLAS N. BAUCH
Slide 4: Company Snapshot - EFSC
Company Snapshot - EFSC Total Assets $9.8 Billion Market Cap FOCUSED BUSINESS MODEL: Operates in St. LouisKansas City Phoenix $1.1 Billion • Attract Top Talent in Markets • Proven Ability to Grow Commercial & Industrial “C&I” Loans • Product Breadth ◦ Banking ◦ Trust & Wealth Management ◦ Treasury M
Slide 5: Differentiated Business Model: Built for Quality Earnings Growth
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 Client’s Needs Experienced Bankers and Advisors Targeted Audience Focused an
Slide 6: Customer Focus
Customer Focus Source: Greenwich Associates 71 NPS NET PROMOTER SCORE A measure of client satisfaction INDUSTRY AVERAGE: 54 6
Slide 7: Seacoast Overview - Closed November 12, 2020
Seacoast Overview - Closed November 12, 2020 Select Financial Metrics* Company Overview Branch Map ▪ Headquartered in San Diego, California, and recognized as a leading small business lender throughout much of the United States. ▪ Focused on highly scalable specialty lending and deposit niches. ➢ SB
Slide 8: Five Urban Markets
Five Urban Markets Loans 1, 4 $420MM $810MM $617MM $264MM $2.5B Deposits 1 $318MM $918MM $1.2B $238MM $3.7B Branches 2 7 6 5 19 Deposit Market Share 2, 3 26 th/0.22% 15th/1.45% 10th/2.91% 13th/0.93% 4th/4.49% Primary Competitors JPMorgan Chase Wells Fargo Bank of America UMB Commerce Bank of America
Slide 9: Focused Loan Growth Strategies
Focused Loan Growth Strategies Total Loans Specialty market segments represent 31% of total loans, offering competitive advantages, risk adjusted pricing and fee income opportunities. Tax Credit Programs $383 million in loans outstanding related to Federal, Historic, and Missouri Affordable Housing
Slide 10: History of Strong C&I Growth
History of Strong C&I Growth In Millions 15% 5-Y ear CAG R PPP* $613 Seacoast** $105 *Represents PPP loans originated by EFSC. **Includes $86 million of PPP loans. 10
Slide 11: Total Loan Trends
Total Loan Trends In Millions 36% T otal Lo an Gro wth PPP $819 PPP $808 PPP* $613 *Represents PPP loans originated by EFSC Seacoast $1,224 11
Slide 12: Drivers of Loan Growth - Year over Year
Portfolio Balance P er ce nt ag e G ro w th Q4 '19 - Q4 '20 $0.4B $0.8B $1.2B $1.6B $2.0B $2.4B $2.8B (25)% 0% 25% 50% 75% 100% Drivers of Loan Growth - Year over Year 32% 3% -5% 3% 5% -3% -2% 3% 64% 12
Slide 13: Loan Portfolio
Loan Portfolio CRE 31.0% Construction 6.6% Residential 4.4% Other 2.4% Sponsor Finance 5.5% LIPF 7.4% Tax Credit 5.3% SBA 12.4% PPP 9.7% C&I 15.3% Loans by Product Type Real Estate/ Rental/Leasing 23.5% Finance and Insurance 14.5% Manufacturing 8.4% Other Services 7.9% Accomodation/Food Service 7.9%
Slide 14: PPP Loans
➢ 1% coupon, 2.6% average yield, 3.47% YTD average yield ➢ 99% 2 year maturity; 1% 5 year maturity ➢ No PPP loans or servicing have been sold ➢ Forgiveness process started October 29, 2020 ➢ 2,066 PPP loans totaling $39.3 million are < $50,000; $1.6 million in fees ➢ $218.5 million has been forgiven
Slide 15: Loan Deferrals
Loan Deferrals Loan Deferrals by Loan Type Total Deferrals in 2020 Loans Moved out of Deferral Status Loans in Deferral Status at 12/31/20 Multiple Round Deferrals (Included in 12/31/20 balance) Commercial Real Estate $426,276 $400,154 $26,122 $8,327 Commercial and Industrial 140,815 125,107 15,708
Slide 16: Credit Trends for Loans
Credit Trends for Loans In Millions bps bps bps bps bps Q4 '20 Q4 '19 NPAs/Assets = 0.45% 0.45% NPLs/Loans = 0.53% 0.50% ALLL/NPLs = 354.9% 163.8% ALLL/Loans** = 2.31% 0.81% In Millions *Excludes acquisition of Seacoast for Q4 ‘20 **Excludes guaranteed loans for Q4 ‘20 Net Charge-offs (Recoveries) L
Slide 17: Change in Allowance for Credit Losses for Loans
Change in Allowance for Credit Losses for Loans In Thousands $123,270 $136,371 • New loans and changes in composition of existing loans • Changes in risk ratings, past due status and reserves on individually evaluated loans • Charge-offs and recoveries • Change in macro- economic and qualitative fac
Slide 18: Attractive Deposit Mix
34% 37% 7% 22% Attractive Deposit Mix CD Interest-Bearing Transaction Accounts DDA MMA & Savings • Significant DDA Composition • Stable, Low Cost Deposit Portfolio • Improving Core Funding 38% Deposit Growth, 20% excluding acquisition of Seacoast Q4 ‘19 – Q4 ‘20 In Millions Total Deposits $8.0 Billi
Slide 19: Specialty Deposits
Specialty Deposits Community Associations $368 million in deposit accounts specifically designed to serve the needs of community associations. Property Management $325 million in deposits. Specializing in the compliance on Property Management Trust Accounts. 1031 Exchange $18 million in deposits. Pa
Slide 20: Core Funding Mix
53% 26% 11% 6% 33% 27% 20% 13% 4% 32% 22% 20% 18% 5% 41% 21% 36% Core Funding Mix Commercial Business Banking Consumer Q4 2020 Brokered deposits: $445 Q4 2019 Brokered deposits: $615 In Millions $2,743 36% $2,381 46% $1,016 13% $771 15% $2,959 39% $2,004 39% Cost of Funds1 Commercial Business Bankin
Slide 21: Earnings Per Share Trend - Q4 2020
Earnings Per Share Trend - Q4 2020 Changes in EPS $0.68 $1.00 Q3 '20 Q4 '20Net Interest Income Noninterest Income PPP Acceleration Provision for Credit Losses Merger-Related Expense Change in Shares Noninterest Expense Change in Effective Tax Rate Seacoast Day 2 Swap Termination 21
Slide 22: Net Interest Income Trend
Net Interest Income Trend In Millions 26% NII Gro wth PPP Acceleration $5.2 Seacoast $8.0 22
Slide 23: Noninterest Income Trend
Noninterest Income Trend Other Fee Income DetailFee Income In Millions 23
Slide 24: Operating Expenses Trend
Operating Expenses Trend Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation In Millions 24
Slide 25: Adjusted Operating Leverage Trend
Adjusted Operating Leverage Trend YoY Adjusted Operating Revenue Growth YoY Adjusted Noninterest Expense Growth Adjusted Operating Leverage Q1 ‘17 Q2 ‘17 Q3 ‘17 Q4 ‘17 Q1 ‘18 Q2 ‘18 Q3 ‘18 Q4 ‘18 Q1 ‘19 Q2 ‘19 Q3 ‘19 Q4 ‘19 Q1 ‘20 Q2 ‘20 Q3 ‘20 Q4 ‘20 25
Slide 26: Capital
Capital *A Non-GAAP Measure, Refer to Appendix for Reconciliation. Excludes PPP loans for Q2, Q3, and Q4 2020 Holding Company liquidity position continues to support our strategic capital planning initiatives, including debt service and our dividend program. 8.0% 11.4% 11.0% 11.4% 11.8% 12.1% TBV an
Slide 27: Appendix
Appendix 4th Quarter 2020 EFSC Investor Presentation
Slide 28: Financial Highlights - Q4 '20
Financial Highlights - Q4 '20 *A Non-GAAP Measure, Refer to Appendix for Reconciliation. Capital • Tangible Common Equity/Tangible Assets - 8.40%; Adjusted for PPP* 9.07% • Quarterly dividend of $0.18 per share • Net Income $28.9 million; Earnings per Share $1.00 • PPNR* $47.5 million • ROAA 1.26%;
Slide 29: Consolidated Appropriations Act, 2021 (CAA)
Consolidated Appropriations Act, 2021 (CAA) Select Actions Impacting the Company and Its Customers • Extended the ability of banks to modify loans of borrowers impacted by COVID-19 without classifying the loan as a “troubled debt restructuring” from December 30, 2020 to January 1, 2022 PPP Update •
Slide 30: Earnings Per Share Trend
Earnings Per Share Trend Note: Q4 2020, Q3 2020, Q3 2019, Q2 2019, Q1 2019, Q4 2018, Q1 2017, Q2 2017, and Q4 2016 include merger related charges. Q1 2020, Q2 2020, Q3 2020, and Q4 2020 include the impact of an increase in provision for credit losses due to the adoption of CECL. Q4 2017 includes the
Slide 31: Five-Year Financial Highlights
Five-Year Financial Highlights Noninterest Income Net Income Earnings Per Share (diluted) Return on Average Tangible Common Equity(1) Return on Average Assets Total Assets Net Interest Income $38 $89 $3.83 19.83% 1.64% $5,646 $192 2018 $49 $93 $3.55 16.08% 1.35% $7,334 $239 2019 $55 $74 $2.76 11.23%
Slide 32: Modest Asset Sensitivity
Modest Asset Sensitivity (200 BPS Rate Shock Increases NII By 6.2%) 57% Floating Rate Loans, with Three-Year Average Duration High-quality, Cash-flowing Securities Portfolio with Five-Year Average Duration 34.0% Non- Interest Bearing DDA to Total Deposits 9.07% Tangible Common Equity/Tangible Assets
Slide 33: Sponsor Finance Loans
Manufacturing 27.8% Wholesale Trade 16.9% Professional Technical 12.6% Construction 8.8% Admin/Support /Waste Mgmt 8.2% Other 25.7% Southeast 21.3% West 10.2% Northeast 19.2% Southwest 16.8% Midwest 32.5% Total $396 Million ➢ Internally reviewed 100% of the portfolio to identify businesses most at r
Slide 34: Hospitality Loans
Hospitality Loans Size Number of Loans Balance Average Balance > $10 Million 7 $95.8 $13.7 $5-10 Million 23 148.3 6.4 $2-5 Million 53 177.8 3.4 < $2 Million 460 211.6 0.5 Total 543 $633.5 $1.2 Hospitality Loans by Size $ In Millions Commercial Real Estate 41.0% C&I 9.5% Construction 11.9% Sponsor Fi
Slide 35: Energy-Related Loans
Total $149 Million ➢ Majority of committed exposure has personal recourse ➢ Diversified with distribution, wholesaling, rail transportation, pipe coating and convenience stores with gas pumps. ➢ Enterprise does not have loans to oil or gas producers. Energy Loans by Size $ In Millions C&I 56.3% Cons
Slide 36: Loans Secured by Marketable Securities
Total $602 Million ➢ Portfolio loans secured by liquid/marketable assets and within loan to value margins ➢ LIPF Portfolio ➢ The life insurance policies financed have an earnings floor of 0%, and therefore cannot lose value. Enterprise does not finance variable policies that may lose value. Size Num
Slide 37: Retail Commercial Real Estate Loans
Total $358 Million ➢ Majority of committed exposure has personal recourse ➢ No large shopping mall exposure ➢ Average LTV of approximately 65% Size Number of Loans Balance Average Balance > $10 Million 6 $78.6 $13.1 $5-10 Million 9 56.8 6.3 $2-5 Million 42 124.1 3.0 < $2 Million 148 98.3 0.7 Total 2
Slide 38: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures The Company’s accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as adjusted EPS, cor
Slide 39: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures For the Quarter ended For the Twelve Months Ended ($ in thousands, except per share data) Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019 CORE PERFORMANCE MEASURES Net interest income $ 77,446 $ 63,354 $ 65,833
Slide 40: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures (in thousands) December 31, 2020 December 31, 2019 December 31, 2018 December 31, 2017 December 31, 2016 December 31, 2015 Total shareholders' equity $ 1,078,975 $ 867,185 $ 603,804 $ 548,573 $ 387,098 $ 350,829 Less: Goodwill 260,567 210,344 117,345 117
Slide 41: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Quarter Ended (in thousands) December 31, 2020 September 30, 2020 June 30, 2020 Tangible assets - Non-GAAP (see reconciliation above) $ 9,467,920 $ 8,135,812 $ 8,123,961 PPP loans outstanding, net (698,645) (819,100) (807,814) Adjusted tangible assets -
Slide 42: Impact of Merger-Related and Tax Items
For the Year Ended (in thousands, except per share data) December 31, 2020 December 31, 2019 December 31, 2018 December 31, 2017 December 31, 2016 IMPACT OF MERGER-RELATED AND TAX ITEMS Net income - GAAP $ 74,384 $ 92,739 $ 89,217 $ 48,190 $ 48,837 Merger related expense 4,174 17,969 1,271 6,462 1,3
Slide 43: Q&A 4th Quarter 2020
Q&A 4th Quarter 2020 EFSC Investor Presentation For more information contact Keene Turner, Executive Vice President and CFO (314) 512-7233
Enterprise Financial Services — Q4 2020 Earnings Presentation on 6ix