Enterprise Financial Services Corporation · NASDAQ:EFSC
Enterprise Financial Services — Q4 2022 Earnings Presentation
46 slides from Enterprise Financial Services's earnings presentation, Jan 31, 2023
Slide 1: Fourth Quarter 2022 Investor Presentation
Enterprise Financial Services Corp Fourth Quarter 2022 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: Company Highlights
Enterprise Financial Services Corp Guiding People to a Lifetime of Financial Success Company Highlights Vision To be a company where our associates are proud to work, that delivers ease of navigation to our customers and value to our investors, while helping our communities flourish. Target Market P
Slide 4: Key Metrics
Key Metrics Credit Profitability Balance Sheet Peer Banks $10-50B Median Top Quartile 2022 FY2021 Return on average tangible common equity(1) 19.10 % 18.29 % 15.48 % 16.96 % Net interest margin 3.89 % 3.41 % 2.98 % 3.18 % Efficiency ratio(2) 49.77 % 49.47 % 56.30 % 49.52 % Tangible common equity/tan
Slide 5: Executive Leadership Team
Executive Leadership Team JAMES B. LALLY 55, President & Chief Executive Officer, EFSC Enterprise Tenure – 19 years KEENE S. TURNER 43, EVP, Chief Financial Officer, EFSC Enterprise Tenure – 9 years SCOTT R. GOODMAN 59, President, Enterprise Bank & Trust Enterprise Tenure – 19 years DOUGLAS N. BAUCH
Slide 6: Company Snapshot - EFSC
Company Snapshot - EFSC Total Assets $13 Billion Market Cap* Operates in St. Louis Kansas City Phoenix $2.0 Billion • Proven Ability to Grow Commercial & Industrial “C&I” Loans • Product Breadth ◦ Commercial and Specialty Lending ◦ SBA ◦ Specialty Deposits ◦ Card Services ◦ Treasury Management • Rel
Slide 7: Differentiated Business Model
Differentiated Business Model: Provides Multiple Channels to Drive Growth and Earnings 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 Commun
Slide 8: Best-In-Class Technology Partnerships
Best-In-Class Technology Partnerships Client journey supported by a competitive digital product set. Customer surveys Salesforce integrated with core for 360 client view Client Portal Online Banking integrated with treasury products Integrations for APIs for HOA/PM Positive Pay (Check & ACH) TARGET
Slide 9: Diversified Revenue
Diversified Revenue (2022 financial data) Treasury Management $1.9B in Assets Under Management Card Services Tax Credit Services Mortgage Banking Community Development Other Services Midwest Southwest West Specialty Lending Net Interest Income Noninterest Income Midwest 35.8% Southwest 16.3% West 15
Slide 10: Regional and National Markets
Regional and National Markets 1 Source: 6/30/22 data for market rank and market share; S&P Global Market Intelligence. Loans* Deposits Specialty Midwest Southwest West MSA Branches Deposit Market Rank1 Deposit Market Share1 St. Louis, MO-IL 18 6 4.2% Kansas City, MO-KS 6 13 1.5% Phoenix-Mesa-Chandle
Slide 11: Focused Loan Growth Strategies
5.7% 6.5% 8.4% 13.5% Focused Loan Growth Strategies Total Loans Specialty market segments represent 34% of total loans, offering competitive advantages, risk adjusted pricing and fee income opportunities. Tax Credit Programs $560 million in loans outstanding related to Federal, Historic, and Afforda
Slide 12: Total Loan Trends
Total Loan Trends $4,350 $5,314 $7,225 $9,018 $9,737 94.8% 92.1% 90.5% 79.5% 89.9% Loans PPP Loans/Deposits In Millions PPP $272 PPP $699 PPP $7 12
Slide 13: Drivers of Loan Growth - Year over Year
Portfolio Balance Pe rc en ta ge G ro w th Drivers of Loan Growth - Year over Year 27% 59% 91% 4Q21 - 4Q22 Increase of $719 Million (2)% (7)% (37)% 23% 10% 17% CRE C&I SBA PPP LIPF Tax Credits Other RRE Sponsor Finance 10% 13
Slide 14: Loan Portfolio
Loan Portfolio Total $9.7 Billion CRE 34.4% Construction 5.5% Residential 3.9% Other 2.4% Sponsor Finance 6.5% LIPF 8.4% Tax Credit 5.7% SBA 13.5% PPP 0.1% C&I 19.6% Loans by Product Type Real Estate/ Rental/Leasing 26.0% Finance and Insurance 16.7% Accommodation/ Food Service 9.0% Manufacturing 7.1
Slide 15: Office Commercial Real Estate
Office Commercial Real Estate Total $443.1 Million Midwest 60.1% Southwest 26.7% West 12.0% Specialty 1.2% Office CRE Loans by Location Real Estate/ Rental/Leasing 90.8% Information 2.1% Professional Services 1.8% Retail Trade 1.0% Other Services 1.0%Other 3.3% Office CRE Loans by Industry Type Size
Slide 16: Loan Details - LTM
Loan Details - LTM 4Q22 4Q21 LTM Change C&I $ 1,905 $ 1,479 $ 426 CRE Investor Owned 2,176 1,955 221 CRE Owner Occupied 1,174 1,113 61 SBA loans* 1,312 1,241 71 Sponsor Finance* 635 508 127 Life Insurance Premium Finance* 817 653 164 Tax Credits* 560 487 73 Residential Real Estate 380 431 (51) Const
Slide 17: Loan Details - QTR
Loan Details - QTR 4Q22 3Q22 QTR Change C&I $ 1,905 $ 1,781 $ 124 CRE, Investor Owned 2,176 2,106 70 CRE, Owner Occupied 1,174 1,133 41 SBA loans* 1,312 1,269 43 Sponsor Finance* 635 650 (15) Life Insurance Premium Finance* 817 780 37 Tax Credits* 560 508 52 Residential Real Estate 380 382 (2) Const
Slide 18: Total Loans By Region
Total Loans By Region Specialty Lending $2,813 $3,241 $3,382 In Millions Midwest $2,939 $3,115 $3,214 Southwest $1,084 $1,161 $1,242 Note: Excludes PPP and Other loans. Certain prior period amounts have been reclassified among the categories to conform to the current period presentation. Region Comp
Slide 19: Deposit Details - LTM
Deposit Details - LTM 4Q22 4Q21 LTM Change Noninterest-bearing demand accounts $ 4,643 $ 4,579 $ 64 Interest-bearing demand accounts 2,256 2,466 (210) Money market accounts 2,655 2,891 (236) Savings accounts 744 800 (56) Certificates of deposit: Brokered 119 129 (10) Other 412 479 (67) Total deposit
Slide 20: Deposit Details - QTR
Deposit Details - QTR 4Q22 3Q22 QTR Change Noninterest-bearing demand accounts $ 4,643 $ 4,643 $ — Interest-bearing demand accounts 2,256 2,271 (15) Money market accounts 2,655 2,793 (138) Savings accounts 744 824 (80) Certificates of deposit: Brokered 119 129 (10) Other 412 398 14 Total deposits $
Slide 21: Total Deposits By Region
Total Deposits By Region Specialty Deposits $2,222 $2,422 $2,524 In Millions Midwest $5,525 $5,221 $4,940 Southwest $1,848 $1,827 $1,845 West $1,749 $1,588 $1,520 Note: Region Components: Midwest (St. Louis & Kansas City), Southwest (AZ, NM, Las Vegas, TX), West (Southern California) 21
Slide 22: Deposit Mix
$4,588 $5,771 $7,985 $11,344 $10,829 0.79% 0.92% 0.32% 0.11% 0.27% Deposit Mix CD Interest-Bearing Demand Accounts DDA MMA & Savings In Millions Total Deposits $10.8 Billion 24.0% 23.0% 34.0% 40.4% 42.9% 4Q22 22
Slide 23: Specialty Deposits
Specialty Deposits 39.5% 23.4% 14.9% 2.8% 19.4% Community Associations $998 million in deposit accounts specifically designed to serve the needs of community associations. Property Management $589 million in deposits. Specializing in the compliance of Property Management Trust Accounts. Third-Party
Slide 24: Core Funding Mix and Cost of Funds
63% 20% 9% 6% 8% 36% 22% 22% 9% 3% 6% 36% 24% 21% 9% 4% 51% 22% 22% Core Funding Mix Commercial Business Banking Consumer In Millions $2,939 28% $3,193 29% $1,194 12% $1,246 12% $3,690 36% $4,195 39% Cost of Funds1 Commercial Business Banking Consumer Specialty Brokered Nonmaturity Deposits 0.72% 0.
Slide 25: Earnings Per Share Trend - 4Q22
Earnings Per Share Trend - 4Q22 $1.32 $0.46 $(0.03) $(0.17) $1.58 Change in EPS 25
Slide 26: Earnings Per Share Trend - 2022
Earnings Per Share Trend - 2022 $3.86 $2.40 $(0.26) $0.58 $(1.23) $0.07 $(0.11) $5.31 Change in EPS *Includes impact of merger shares issued. 26
Slide 27: Net Interest Income Trend
Net Interest Income Trend In Millions $191.9 $238.7 $270.0 $360.2 $473.9 3.82% 3.80% 3.56% 3.41% 3.89% 1.83% 2.16% 0.36% 0.08% 1.68% Net Interest Income Net Interest Margin Avg Fed Funds Rate 2018 2019 2020 2021 2022 27
Slide 28: Credit Trends for Loans
Credit Trends for Loans 2018 2019 2020 2021 2022 NPLs/Loans 0.38% 0.50% 0.53% 0.31% 0.10 % NPAs/Assets 0.30% 0.45% 0.45% 0.23% 0.08 % ACL/NPLs 259.6% 163.8% 354.9% 517.6% 1371.9 % ACL/Loans* 1.00% 0.81% 2.31% 1.84% 1.56 % Provision expense (benefit) $ 6.6 $ 6.4 $ 65.4 $ 13.4 $ (0.6) NCO/Average loan
Slide 29: Allowance for Credit Losses for Loans
$140.5 $(1.5) $(2.1) $136.9 Allowance for Credit Losses for Loans In Millions • New loans and changes in composition of existing loans • Changes in risk ratings, past due status and reserves on individually evaluated loans • Changes in macroeconomic and qualitative factors 4Q22 Loans ACL ACL as a %
Slide 30: Noninterest Income Trend
Noninterest Income Trend In Millions $38.3 $49.2 $54.5 $67.7 $59.2 $8.2 $9.9 $9.7 $10.3 $10.0 $11.7 $12.8 $11.7 $15.4 $18.3 $6.7 $9.2 $9.5 $11.9 $11.6 $8.9 $11.9 $17.0 $22.1 $16.7 $2.8 $5.4 $6.6 $8.0 $2.6 16.7% 17.1% 16.8% 15.8% 11.1% 30
Slide 31: Operating Expenses Trend
Operating Expenses Trend In Millions $119.0 $165.5 $167.2 $245.9 $274.2 $42.2 $53.7 $57.2 $79.2 $109.6 $9.5 $12.5 $13.5 $16.3 $17.6 $66.0 $81.3 $92.3 $124.9 $147.0 $1.3 $18.0 $4.2 $22.1 $3.4 50.7% 50.1% 48.7% 49.7% 49.8% 31
Slide 32: Capital Strategy
Capital Strategy EFSC Capital Strategy: Low Cost - Highly Flexible High Capital Retention Rate Supporting Robust Asset Growth Maintain High Quality Capital Stack Maintain 8-9% TCE • Strong earnings profile • Sustainable dividend profile • Organic loan and deposit growth • High quality M&A to enhance
Slide 33: Capital: TBV and Common Dividends per Share
Capital TBV and Common Dividends per Share $20.95 $23.76 $25.48 $28.28 $28.67 $0.47 $0.62 $0.72 $0.75 $0.90 Return of Capital $30.2 $32.1 $35.1 $86.8 $66.5 $10.8 $16.6 $19.8 $26.2 $33.6$19.4 $15.5 $15.3 $60.6 $32.9 Common dividend payments Share repurchases In Millions 33
Slide 34: Regulatory Capital
Regulatory Capital 10.0% 14.0% 13.0% 12.9% 14.9% 14.7% 14.2% 6.5% 10.0% 9.8% 9.9% 10.9% 11.3% 11.1% 8.0% 12.6%13.0% 11.4% 12.1% 11.1% 12.0% *Preliminary regulatory capital ratios 34
Slide 35: Balance Sheet Positioned for Growth
63% Adjustable Rate Loans High-quality, Cash-flowing Securities Portfolio with Six- Year Average Duration 42.9% Non- Interest Bearing DDA to Total Deposits 8.43% Tangible Common Equity/ Tangible Assets* Balance Sheet Positioned for Growth *A Non-GAAP Measure, Refer to Appendix for Reconciliation. 35
Slide 36: Appendix
Appendix Fourth Quarter 2022 EFSC Investor Presentation
Slide 37: Financial Highlights - 4Q22
Financial Highlights - 4Q22* Capital • Tangible Common Equity/Tangible Assets** 8.43%, compared to 7.86% • Tangible Book Value Per Share** $28.67, compared to $26.62 • CET1 Ratio 11.1%, compared to 11.0% • Quarterly common stock dividend increased $0.01 to $0.25 per share in first quarter 2023 • Qua
Slide 38: Financial Highlights, continued - 4Q22
Financial Highlights, continued - 4Q22* *Comparisons noted below are to the linked quarter unless otherwise noted. Loans & Deposits • Loans $9.7 billion, up $382.2 million • Loan/Deposit Ratio 90% • Deposits $10.8 billion, down $228.4 million • Noninterest-bearing Deposits/Total Deposits 43% Asset Q
Slide 39: Financial Highlights - 2022
Financial Highlights - 2022* Capital • Tangible Common Equity/Tangible Assets** 8.43%, compared to 8.13% • Tangible Book Value Per Share** $28.67, compared to $28.28 • Common stock dividend increased to $0.90 per share, compared to $0.75 per share • Repurchased 700,473 shares at average price of $47
Slide 40: ESG Highlights
■ Selected in 2021 by the Community Development Financial Institutions Fund (CDFI Fund) of the U.S. Department of the Treasury to receive a $60 million allocation of New Markets Tax Credits. ■ In 2021 we invested over $1.6 billion in programs designed to promote small business and community developm
Slide 41: 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 tangible common e
Slide 42: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Quarter ended Year ended (in thousands) December 31, 2022 September 30, 2022 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019 Average shareholder’s equity $ 1,490,592 $ 1,494,504 $ 1,498,759 $ 1,277,153 $ 902,875 $ 795,477 Less ave
Slide 43: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Period end (in thousands, except per share data) December 31, 2022 September 30, 2022 December 31, 2021 December 31, 2020 December 31, 2019 Shareholders' equity $ 1,522,263 $ 1,446,218 $ 1,529,116 $ 1,078,975 $ 867,185 Less preferred stock 71,988 71,988
Slide 44: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Year ended (in thousands) December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019 December 31, 2018 Net interest income (GAAP) $ 473,903 $ 360,194 $ 270,001 $ 238,717 $ 191,905 Tax-equivalent adjustment 7,042 5,151 3,190 1,611 820 Less in
Slide 45: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Quarter ended Year ended (in thousands) December 31, 2022 September 30, 2022 December 31, 2022 December 31, 2021 Net interest income $ 138,835 $ 124,290 $ 473,903 $ 360,194 Noninterest income 16,873 9,454 59,162 67,743 Less noninterest expense 77,149 68,
Slide 46: Q&A Fourth Quarter 2022
Q&A Fourth Quarter 2022 EFSC Investor Presentation For more information contact Keene Turner, Executive Vice President and CFO (314) 512-7233
Enterprise Financial Services — Q4 2022 Earnings Presentation on 6ix