* Fully diluted EPS at $0.28, up 8% from prior year first quarter * Loans grow at 21% annualized rate -- up $85 million since year end * Nonperforming asset levels remain stable from year end at 0.83% of assets * New Tax Credit initiative helps to drive 21% increase in Wealth Management segment revenues
ST. LOUIS, April 15, 2008 (PRIME NEWSWIRE) -- Enterprise Financial Services Corp (Nasdaq:EFSC), the parent company of Enterprise Bank & Trust of St. Louis, MO, reported first quarter 2008 net income of $3.6 million, a 13% increase over the $3.2 million reported in the first quarter of 2007. Earnings per fully diluted share for the first quarter were $0.28, up $0.02, or 8%, from the prior year's first quarter.
EFSC President and CEO Kevin Eichner commented, "This was another strong quarter for our Company. Organic banking growth was excellent, underscoring our belief that there is a flight to quality underway in our customer segments on both the deposit and loan sides of our business. Our people are performing at a very high level in this environment."
Banking Line of Business
Net interest income increased $2.4 million, or 16%, in the first quarter of 2008 versus the same quarter in 2007. At quarter end, portfolio loans were up organically $85 million from year-end, or 21% annualized, and $234 million, or 16%, from one year ago. Compared to the first quarter of 2007, the absence of many of the conduit and other long-term, fixed rate competitors and a steeper yield curve have contributed to much greater net loan growth.
While we historically see seasonal runoff in deposits during the first quarter, deposits actually increased nearly $6 million from year-end 2007. Total deposits grew $145 million, or 10%, from the same period one year ago. The deposit mix for the first quarter was slightly less favorable as non-interest bearing deposits or DDA represented 14% of average deposits, but brokered deposits represented only 8% of total deposits at the end of the quarter.
The tax-equivalent net interest rate margin for the first quarter decreased 17 basis points from the fourth quarter of 2007 and 23 basis points from the first quarter of 2007 due primarily to sharply reduced short term rates following the Fed's recent actions. The net interest spread has held constant with 2007 levels.
The Bank's asset quality statistics met our expectations. The Company had net charge-offs during the quarter of $1.7 million (or 0.40% annualized). Eighty-seven percent of these net charge-offs relate to three credits that were previously classified and for which loss reserves had been specifically allocated. For the quarter, the provision for loan losses was $2.3 million versus $850,000 in the same quarter of 2007. The increase in the provision for loan losses was due to strong loan growth and adverse changes in risk ratings on various credits.
Nonperforming assets totaled $17.0 million, or 0.83%, of total assets versus 0.78% and 0.62% at December 31, 2007 and March 31, 2007, respectively. Nonperforming loans declined from $12.7 million, or 0.77%, of loans at year-end to $9.3 million, or 0.54%, of loans at March 31, 2008. Approximately $7.1 million, or 76%, of the nonperforming loans at March 31, 2008, and nearly all of the $7.7 million in Other Real Estate, relate to the soft residential housing markets in St. Louis and Kansas City. Excluding nonperforming loans, delinquency rates remained low during the quarter. The Company's allowance for loan losses represented 1.29% of portfolio loans at March 31, 2008 which is consistent with the ratio at year-end 2007 (1.32%) and one year ago (1.29%).
Peter Benoist, EFSC's CEO-elect and head of the company's banking division said, "Our first quarter results represent a very solid start for the year. I am especially pleased by the robust growth in both loans and deposits and our ability to maintain our net interest spread during this period of sharply dropping short term rates. From an asset quality perspective, the majority of our portfolio exposure continues to be concentrated in the residential housing sector where excess unsold inventory and declining home values persist. This sector represents a small portion of our total portfolio, but our approach continues to be to manage those risks aggressively as we work through the current credit cycle."
Increases in Service charges on deposit accounts and Other service charges and fee income for the quarter versus the same quarter in 2007 relate to the February 28, 2007 acquisition of Great American, growth in the existing client base for deposit products and related services, and a declining earnings credit rate on commercial accounts.
During the quarter, the Company sold its Liberty, Missouri branch for a pre-tax gain of $579,000 net of related expenses. This transaction, along with the previously announced plan to sell the Great American bank charter and its DeSoto, Kansas branch, is part of the Company's plan to consolidate locations in the Kansas City market. The DeSoto sale is scheduled to be completed in the second quarter pending regulatory approvals.
Wealth Management Line of Business
For the first quarter of 2008, the Company reported $1.0 million of gains on the sale of certain state tax credits to its clients as part of its new fee initiative within our Wealth Management line of business. This compares to $759,000 of gains recorded in the fourth quarter of 2007 when this program was launched.
Effective January 1, 2008, the Company adopted FAS 157, "Fair Value Measurements" and FAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities". As a result, the Company recorded a cumulative effect adjustment to beginning retained earnings of ($365,000). As permitted by FAS 159, the Company has chosen to report its $27.0 million in state tax credit assets at fair value. Going forward, any new state tax credit streams purchased will be considered on a project by project basis for fair value treatment, depending on perceived levels of earnings volatility and available offsets on the liability side of the balance sheet. The Company is considering funding the existing asset class with a specific liability that would also be recorded at fair value to minimize the potential market risk volatility.
In the first quarter, total Wealth Management revenue including the tax credit activity increased by 21% from $3.0 million in first quarter of 2007 to $3.6 million. Revenue declines in Trust Advisory and Millennium were more than offset by increases from Trust Fiduciary and the tax credits. Lower net client additions and reductions in asset values due to market performance drove lower revenue results in Trust Advisory, and higher producer payouts at Millennium adversely impacted its revenue totals. Millennium paid sales were $5.4 million in the first quarter vs. $5.1 million in the same quarter of 2007, an increase of 6%.
Overall, the Wealth Management segment earned $310,000 for the quarter ended March 31, 2008 versus $113,000 in the same quarter of 2007.
Other Business Results
For the quarter, the Company's efficiency ratio improved from 67% in 2007 to 64% in 2008. Non-interest expenses were $13.8 million in the first quarter of 2008 versus $11.9 million in the same quarter of 2007, an increase of $2.0 million, or 17%. Significant variances from the prior year first quarter include $602,000 of incremental expenses related to the Great American Bank acquisition, a $379,000 increase in expenses associated with non performing assets, a $347,000 increase in variable compensation at Millennium due to the previously announced restructure, and a $256,000 increase in FDIC insurance premiums resulting from the FDIC's newly implemented rate structure.
Eichner concluded, "Our Company continues to occupy a position as one of the premier growth companies in our industry. As I pass the leadership baton to Peter Benoist and the excellent team we have assembled at Enterprise, I am very pleased at the progress of our leadership transition and remain very optimistic as one of EFSC's largest shareholders about this company's long term potential. Peter and the Enterprise team will do a splendid job and I look forward to my ongoing involvement with him and our company for many years to come."
In February, the Company announced that Benoist will succeed Eichner as EFSC's CEO on May 1, 2008. Eichner will remain Vice Chairman of the Board and continue to chair the Trust Company Board. James Murphy, Chairman and CEO of Murphy Company and current Lead Director for Enterprise Financial, will become non-executive Chairman of the EFSC Board.
Enterprise Financial operates commercial banking and wealth management businesses mostly in metropolitan St. Louis and Kansas City, and a commercial loan production office in Phoenix, Arizona with an intent to open a state de novo bank charter in 2008. The Company is primarily focused on serving the needs of privately held businesses, their owner families, executives and professionals.
Please refer to the Consolidated Financial Summary attached for more details.
Readers should note that in addition to the historical information contained herein, this press release contains forward-looking statements, which are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. Factors that could cause or contribute to such differences include, but are not limited to, burdens imposed by federal and state regulations of banks, credit risk, exposure to local and national economic conditions, risks associated with rapid increase or decrease in prevailing interest rates, effects of mergers and acquisitions, effects of critical accounting policies and judgments, legal and regulatory developments and competition from banks and other financial institutions, as well as other risk factors described in Enterprise Financial's 2007 Annual Report on Form 10-K. Forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events.
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY
(unaudited)
(In thousands, except per
share data) For the Quarter Ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
INCOME STATEMENTS 2008 2007 2007 2007 2007
------- ------- ------- ------- -------
Total interest income $30,246 $31,916 $31,807 $30,946 $27,848
Total interest expense 14,109 15,713 16,002 15,821 13,929
------- ------- ------- ------- -------
Net interest income 16,137 16,203 15,805 15,125 13,919
Provision for loan losses 2,325 2,450 600 715 850
------- ------- ------- ------- -------
Net interest income after
provision for loan
losses 13,812 13,753 15,205 14,410 13,069
NONINTEREST INCOME
Wealth Management revenue 2,583 4,064 3,495 3,458 2,963
Deposit service charges 937 926 839 804 659
(Loss) gain on sale of
other real estate (9) (43) 7 (8) (3)
Gain on sale of securities -- 233 -- -- --
Gain on sale of tax
credits 1,012 759 33 -- --
Gain on sale of branch 579 -- -- -- --
Other income 436 291 264 652 280
------- ------- ------- ------- -------
Total noninterest income 5,538 6,230 4,638 4,906 3,899
NONINTEREST EXPENSE
Salaries and benefits 8,340 7,583 7,523 7,141 7,308
Occupancy 1,083 1,003 995 1,025 878
Furniture and equipment 364 384 370 370 315
Other 4,045 4,113 3,314 3,834 3,360
------- ------- ------- ------- -------
Total noninterest
expense 13,832 13,083 12,202 12,370 11,861
Minority interest in net
income of consolidated
subsidiary -- -- -- 157 (157)
------- ------- ------- ------- -------
Income before income tax 5,518 6,900 7,641 7,103 4,950
Income taxes 1,955 1,994 2,642 2,588 1,792
------- ------- ------- ------- -------
Net income $ 3,563 $ 4,906 $ 4,999 $ 4,515 $ 3,158
======= ======= ======= ======= =======
Basic earnings per share $ 0.29 $ 0.40 $ 0.40 $ 0.37 $ 0.27
Diluted earnings per
share $ 0.28 $ 0.39 $ 0.40 $ 0.36 $ 0.26
Return on average assets 0.73% 1.04% 1.11% 1.03% 0.80%
Return on average equity 8.13% 11.28% 11.85% 11.20% 8.92%
Efficiency ratio 63.82% 58.32% 59.69% 61.75% 66.57%
Noninterest expense to
average assets 2.82% 2.77% 2.72% 2.83% 3.00%
YIELDS (fully tax
equivalent)
Loans 6.93% 7.65% 7.96% 7.98% 7.94%
Securities 4.84% 4.87% 4.67% 4.50% 4.31%
Federal funds sold 3.32% 4.23% 5.53% 5.49% 5.51%
Yield on earning assets 6.77% 7.42% 7.73% 7.72% 7.66%
Interest-bearing deposits 3.46% 4.10% 4.44% 4.47% 4.42%
Subordinated debt 6.71% 7.24% 7.20% 7.19% 7.21%
Borrowed funds 3.82% 4.54% 5.00% 5.04% 4.99%
Cost of paying
liabilities 3.62% 4.26% 4.59% 4.63% 4.55%
Net interest spread 3.15% 3.16% 3.14% 3.09% 3.11%
Net interest rate margin 3.63% 3.80% 3.87% 3.81% 3.86%
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (cont.)
(unaudited)
(In thousands)
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
BALANCE SHEETS 2008 2007 2007 2007 2007
---------- ---------- ---------- ---------- ----------
ASSETS
Cash and due
from banks $ 64,108 $ 76,265 $ 47,593 $ 45,081 $ 41,846
Federal funds
sold 954 75,665 2,585 2,059 6,992
Interest-
bearing
deposits 6,435 1,719 1,100 1,021 1,144
Debt and equity
investments 116,810 83,333 122,204 111,617 119,056
Loans held for
sale 3,422 3,420 1,117 3,840 4,650
Portfolio loans 1,726,455 1,641,432 1,558,885 1,500,512 1,492,460
Less allowance
for loan
losses 22,249 21,593 19,754 19,703 19,220
---------- ---------- ---------- ---------- ----------
Net loans 1,704,206 1,619,839 1,539,131 1,480,809 1,473,240
---------- ---------- ---------- ---------- ----------
Other real
estate 7,736 2,963 857 441 1,064
Premises and
equipment, net 24,775 22,223 22,487 22,801 22,777
Goodwill 58,331 57,177 55,661 54,841 55,284
Core deposit
intangible 2,887 3,330 3,511 3,693 3,886
Other
amortizing
intangibles 2,512 2,723 2,952 3,180 3,408
Other assets 55,702 50,461 29,061 23,929 23,276
---------- ---------- ---------- ---------- ----------
Total assets $2,047,878 $1,999,118 $1,828,259 $1,753,312 $1,756,623
========== ========== ========== ========== ==========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Noninterest-
bearing
deposits $ 232,121 $ 278,313 $ 212,903 $ 215,771 $ 214,965
Interest-
bearing
deposits 1,358,588 1,306,699 1,233,532 1,212,353 1,231,139
---------- ---------- ---------- ---------- ----------
Total
deposits 1,590,709 1,585,012 1,446,435 1,428,124 1,446,104
Subordinated
debentures 56,807 56,807 56,807 56,807 56,807
FHLB advances 154,405 152,901 131,746 88,192 75,387
Federal funds
purchased -- -- -- -- --
Other
borrowings 53,508 16,680 10,613 7,593 12,786
Other
liabilities 14,212 14,569 13,415 9,527 6,837
---------- ---------- ---------- ---------- ----------
Total
liabilities 1,869,641 1,825,969 1,659,016 1,590,243 1,597,921
Shareholders'
equity 178,237 173,149 169,243 163,069 158,702
---------- ---------- ---------- ---------- ----------
Total
liabilities
and
shareholders'
equity $2,047,878 $1,999,118 $1,828,259 $1,753,312 $1,756,623
========== ========== ========== ========== ==========
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (cont.)
(unaudited)
(In thousands,
except per
share data) For the Quarter Ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
---------- ---------- ---------- ---------- ----------
EARNINGS
SUMMARY
Net interest
income $ 16,137 $ 16,203 $ 15,805 $ 15,125 $ 13,919
Provision for
loan losses 2,325 2,450 600 715 850
Wealth
Management
revenue 2,583 4,064 3,495 3,458 2,963
Noninterest
income 2,955 2,166 1,143 1,448 936
Noninterest
expense 13,832 13,083 12,202 12,370 11,861
Minority
interest in
net income of
consolidated
subsidiary -- -- -- 157 (157)
Income before
income tax 5,518 6,900 7,641 7,103 4,950
Net income 3,563 4,906 4,999 4,515 3,158
Diluted
earnings per
share $ 0.28 $ 0.39 $ 0.40 $ 0.36 $ 0.26
Return on
average equity 8.13% 11.28% 11.85% 11.20% 8.92%
Net interest
rate margin
(fully tax
equivalized) 3.63% 3.80% 3.87% 3.81% 3.86%
Efficiency
ratio 63.82% 58.32% 59.69% 61.75% 66.57%
MARKET DATA
Book value per
share $ 14.27 $ 13.96 $ 13.66 $ 13.20 $ 12.86
Tangible book
value per
share $ 9.17 $ 8.86 $ 8.65 $ 8.20 $ 8.03
Market value
per share $ 25.00 $ 23.81 $ 24.34 $ 24.86 $ 28.00
Period end
common shares
outstanding 12,487 12,406 12,388 12,354 12,340
Average basic
common shares 12,441 12,387 12,380 12,346 11,835
Average diluted
common shares 12,675 12,676 12,652 12,692 12,198
ASSET QUALITY
Net charge-
offs $ 1,668 $ 611 $ 549 $ 232 $ 628
Nonperforming
loans $ 9,307 $ 12,720 $ 8,542 $ 12,661 $ 9,855
Nonperforming
loans to
total loans 0.54% 0.77% 0.55% 0.84% 0.66%
Nonperforming
assets to
total assets 0.83% 0.78% 0.51% 0.75% 0.62%
Allowance for
loan losses
to total loans 1.29% 1.32% 1.27% 1.31% 1.29%
Net charge-offs
to average
loans
(annualized) 0.40% 0.15% 0.14% 0.06% 0.19%
CAPITAL
Average equity
to average
assets 8.92% 9.21% 9.40% 9.22% 8.96%
Tier 1 capital
to
risk-weighted
assets 9.15% 9.32% 9.85% 9.82% 9.50%
Total capital
to
risk-weighted
assets 10.36% 10.54% 11.05% 11.09% 10.85%
Tangible equity
to tangible
assets 5.77% 5.68% 6.07% 5.99% 5.67%
AVERAGE
BALANCES
Portfolio
loans $1,687,316 $1,583,325 $1,526,259 $1,492,573 $1,365,340
Earning assets 1,810,384 1,719,825 1,645,697 1,622,139 1,487,193
Total assets 1,974,590 1,873,915 1,780,239 1,754,297 1,601,266
Deposits 1,530,158 1,511,476 1,453,497 1,426,002 1,327,177
Shareholders'
equity 176,170 172,563 167,310 161,663 143,514
LOAN PORTFOLIO
Commercial and
industrial $ 487,289 $ 476,184 $ 416,715 $ 391,237 $ 379,147
Commercial real
estate 735,087 690,868 703,772 681,735 671,709
Construction
real estate 285,966 266,111 252,476 247,722 251,184
Residential
real estate 189,549 170,510 155,489 149,182 157,473
Consumer and
other 28,564 37,759 30,433 30,636 32,947
---------- ---------- ---------- ---------- ----------
Total loan
portfolio $1,726,455 $1,641,432 $1,558,885 $1,500,512 $1,492,460
DEPOSIT
PORTFOLIO
Noninterest-
bearing
accounts $ 232,121 $ 278,313 $ 212,903 $ 215,771 $ 214,965
Interest-
bearing
transaction
accounts 136,009 131,141 120,069 128,808 123,848
Money market
and savings
accounts 724,725 682,920 596,226 552,678 582,231
Certificates
of deposit 497,854 492,638 517,237 530,867 525,060
---------- ---------- ---------- ---------- ----------
Total
deposit
portfolio $1,590,709 $1,585,012 $1,446,435 $1,428,124 $1,446,104
ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (cont.)
(unaudited)
(In thousands) For the Quarter Ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
---------- ---------- ---------- ---------- ----------
YIELDS (fully
tax
equivalent)
Loans 6.93% 7.65% 7.96% 7.98% 7.94%
Securities 4.84% 4.87% 4.67% 4.50% 4.31%
Federal funds
sold 3.32% 4.23% 5.53% 5.49% 5.51%
Yield on
earning assets 6.77% 7.42% 7.73% 7.72% 7.66%
Interest-
bearing
deposits 3.46% 4.10% 4.44% 4.47% 4.42%
Borrowed funds 3.82% 4.54% 5.00% 5.04% 4.99%
Subordinated
debt 6.71% 7.24% 7.20% 7.19% 7.21%
Cost of paying
liabilities 3.62% 4.26% 4.59% 4.63% 4.55%
Net interest
spread 3.15% 3.16% 3.14% 3.09% 3.11%
Net interest
rate margin 3.63% 3.80% 3.87% 3.81% 3.86%
WEALTH
MANAGEMENT
Trust Assets
under
management $1,046,390 $1,098,110 $1,106,214 $1,111,042 $1,047,700
Trust Assets
under
administration 1,633,195 1,696,303 1,734,761 1,742,426 1,659,573