Mon. Jan 20th, 2020

EFSC: Enterprise Financial Services Corp (Nasdaq: EFSC)

33 min read

Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) declared net income of $29.10M for the quarter finished September 30, 2k19, a boost of $10.60M contrast to the linked 2nd-quarter (“linked quarter”) and a boost of $6.60M from the previous year quarter. Earnings for each diluted share (“EPS”) were $1.080 for the current quarter, contrast to $0.680 and $0.970 for the linked and prior year quarters, respectively. Merger-related costs from the Trinity Capital Corporation (“Trinity”) acquisition reduced net income by $0.40M pretax ($0.30M after-tax), or $0.010 for each diluted share in the current quarter contrast to $10.30M pretax ($8.00M after-tax), or $0.300 for each diluted share in the linked quarter. The incline in EPS for the current quarter, in contrast to the previous year quarter, was positively influenced by the Trinity acquisition. The year-over-year comparison of EPS is also influenced by a tax benefit recognized in the prior-year quarter that did not occur in the current year duration. Net interest margin, on a tax-equivalent basis, in the current quarter was 3.810 percent, contrast to 3.860 percent in the linked quarter and 3.780 percent in the previous year quarter.

The Company’s Board of Directors approved a quarterly dividend of $0.170 for each common share, a boost from $0.160 for the previous quarter, payable on December 31, 2k19 to shareholders of record as of December 16, 2k19.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “I am happy with our results in the 3rd-quarter of 2k19. We generated balanced loan growth, expanded the deposit portfolio with a focus on non-interest bearing deposits and grew operating revenue. We have continued to deliver strong shareholder returns through solid earnings and by actively managing our capital position. In the 3rd-quarter we repurchased about $12.00M of outstanding shares and approved a raised dividend of $0.170 for the 4th-quarter. Our return on average tangible common equity1 has raised to 19.00 percent because of our strong earnings profile and prudent capital administration. Despite the challenging interest rate environment, we have raised net interest income through balance sheet growth which we believe leaves us well-positioned as we enter the 4th-quarter.”

Net Interest Income

The Company closed its acquisition of Trinity on March 8, 2k19. The results of operations of Trinity are included in our merged results from this date forward and are excluded from preceding durations.

Net interest income for the 3rd-quarter raised $1.30M to $63.00M from $61.70M in the linked quarter, and raised $15.00M from the previous year duration. The incline from the linked quarter was mainly because of incremental accretion on non-core attained loans while the incline from the prior-year duration was mainly because of the Trinity acquisition and organic growth. Net interest margin, on a tax-equivalent basis, was 3.810 percent for the 3rd-quarter, contrast to 3.860 percent in the linked quarter, and 3.780 percent in the 3rd-quarter of 2k18.

Net interest margin reduced 5.0 basis points from the linked quarter to 3.810 percent during the current quarter mainly because of a 12.0 basis point decline in the yield on the loan portfolio. This is a result of the decline of both the one month LIBOR and Prime interest rates during the 3rd-quarter, which influenced the underlying interest rates of the Company’s loan portfolio, 60.00 percent of which is priced to variable interest rate indices. The interest rate trend is also indicative of the prices obtained on newly originated loans in the quarter, which carried a weighted average interest rate of 4.660 percent. In addition, the 2nd-quarter of 2k19 included purchase accounting adjustments which added two basis points to the overall net interest margin, which did not reoccur during the 3rd-quarter of 2k19.

Nonperforming loans reduced $4.30M to $15.60M at September 30, 2k19 from $19.80M on June 30, 2k19 mainly because of two loans totaling $4.00M that were 90 days past due and still accruing interest at June 30, 2k19 being current at September 30, 2k19. The past-due status of these loans at June 30, 2k19 was administrative in nature. Nonaccrual loan additions of $4.30M in the current quarter mainly consisted of three relationships and were offset by pay downs of $3.10M and charge-offs of $1.50M. Other real estate reduced during the quarter finished September 30, 2k19 mainly because of sales of three properties totaling $2.10M.

The Company recorded a provision for loan losses of $1.80M contrast to $1.70M for the linked quarter and $2.30M for the prior-year quarter, respectively. The provision is reflective of loan growth during the duration. The decline in the ratio of allowance for loan losses to total loans in 2k19, from 1.00 percent at the end of 2k18 to 0.850 percent in the current quarter, is mainly because of the acquisition of Trinity loans that were recorded at fair value and did not have a corresponding allowance for loan losses. In addition, the level of specific reserves in 2k19 reduced because of two relationships that were charged off. The Company recorded a credit mark on the Trinity loan portfolio of $24.40M as of the acquisition date.


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