Enterprise Financial Reports Fourth Quarter and Full Year 2019 Results

Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $92.7 million, or $3.55 per diluted share, for the year ended December 31, 2019, compared to $89.2 million, or $3.83 per diluted share for the prior year period. Merger-related expenses from the Trinity acquisition reduced net income by $18.0 million pretax ($14.0 million after tax), or $0.53 per diluted share.

The Company recorded net income of $29.1 million for both the third and fourth quarters of 2019, or earnings per share of $1.08 and $1.09, respectively. Seasonally strong sales of tax credits in the fourth quarter offset the decline in incremental accretion income from the linked third quarter (“linked quarter”).

Dividends paid in 2019 of $0.62 per share increased $0.15 per share, or 32%, compared to $0.47 per share in 2018. The Company’s Board of Directors approved the Company’s quarterly dividend of $0.18 per common share for the first quarter of 2020, an increase from $0.17 for the prior quarter, payable on March 31, 2020 to shareholders of record as of March 16, 2020.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “We are pleased with another solid quarter of financial performance to close 2019. We achieved strong growth in both loans and deposits during the fourth quarter. On an annualized basis, loans grew 7% and deposits grew 10%. Given the current interest rate environment, I am pleased that our business fundamentals continued to generate robust earnings with a 1.6% return on average assets and a 19% return on average tangible common equity¹.”

Lally added, “2019 was a pivotal year, as we expanded our geographic presence into New Mexico with the acquisition and integration of Trinity, organically grew the balance sheet with quality loan and deposit relationships and strategically managed our capital position to provide a high return to our shareholders. Our continued success reflects the resolve of our associates to serve the customers and communities within our market areas.”

The Company closed its acquisition of Trinity on March 8, 2019. The results of operations of Trinity are included in our consolidated results from this date forward and are excluded from preceding periods.

Net Interest Income

For 2019, net interest income totaled $238.7 million, an increase of $46.8 million, or 24%, compared to $191.9 million in the prior year. Net interest margin, on a fully tax equivalent basis, was 3.80% for 2019 compared to 3.82% for the prior year. The increase in net interest income was primarily due to the Trinity acquisition and organic growth.

Net interest income for the fourth quarter of 2019 totaled $61.6 million, a decrease of $1.4 million, from the linked quarter. Interest rates continued to decline during the fourth quarter. Portfolio loan growth, combined with the Company’s ability to modestly reprice deposits, helped to deliver a consistent level of core net interest income¹ of $61.0 million for both the third and fourth quarter. The impact of lower interest rates on loan yields was offset by an increase in average loans, a decrease in the cost of interest-bearing liabilities and growth in noninterest-bearing deposits that resulted in a reduction in wholesale borrowings.

Core net interest income and core net interest margin noted in the table below exclude incremental accretion on non-core acquired loans.

	Quarter ended												Year ended
($ in thousands)	December 31, 2019				September 30, 2019				December 31, 2018				December 31, 2019				December 31, 2018
Net interest income	$	61,613			$	63,046			$	50,593			$	238,717			$	191,905
Less: Incremental accretion income2	576				2,140				2,109				4,783				3,701
Core net interest income3	$	61,037			$	60,906			$	48,484			$	233,934			$	188,204
Net interest margin (fully tax equivalent)	3.68		%		3.81		%		3.94		%		3.80		%		3.82		%
Core net interest margin3 (fully tax equivalent)	3.64		%		3.69		%		3.77		%		3.73		%		3.75		%

2 Represents incremental accretion income on non-core acquired loans which were acquired from the FDIC and previously covered by shared-loss agreements.

3 Core net interest income and core net interest margin are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

Average Balance Sheet

The following tables present, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax equivalent basis.

	Quarter ended
	December 31, 2019											September 30, 2019											December 31, 2018
($ in thousands)	Average Balance				Interest Income/ Expense				Average Yield/ Rate			Average Balance				Interest Income/ Expense				Average Yield/ Rate			Average Balance				Interest Income/ Expense				Average Yield/ Rate
Assets
Interest-earning assets:
Loans, excluding incremental accretion*	$	5,279,500			$	67,085			5.04	%		$	5,178,009			$	69,193			5.30	%		$	4,272,132			$	56,431			5.24	%
Investments in debt and equity securities*	1,322,017				9,699				2.91			1,312,860				9,610				2.90			769,461				5,291				2.73
Short-term investments	102,989				406				1.56			113,214				572				2.00			76,726				364				1.88
Total earning assets	6,704,506				77,190				4.57			6,604,083				79,375				4.77			5,118,319				62,086				4.81
Noninterest-earning assets	617,990											618,274											400,421
Total assets	$	7,322,496										$	7,222,357										$	5,518,740
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	1,325,363			$	1,620			0.48	%		$	1,356,328			$	2,048			0.60	%		$	864,175			$	1,221			0.56	%
Money market accounts	1,693,357				5,797				1.36			1,639,603				6,959				1.68			1,541,832				6,140				1.58
Savings	543,571				195				0.14			548,109				232				0.17			206,503				168				0.32
Certificates of deposit	846,253				4,096				1.92			820,943				3,970				1.92			696,803				3,053				1.74
Total interest-bearing deposits	4,408,544				11,708				1.05			4,364,983				13,209				1.20			3,309,313				10,582				1.27
Subordinated debentures	141,217				1,945				5.46			141,136				1,956				5.50			118,146				1,493				5.01
FHLB advances	291,057				1,371				1.87			378,207				2,203				2.31			178,185				1,121				2.50
Securities sold under agreements to repurchase	170,481				308				0.72			155,238				327				0.84			151,031				205				0.54
Other borrowings	36,220				293				3.21			37,817				337				3.54			1,391				8				2.28
Total interest-bearing liabilities	5,047,519				15,625				1.23			5,077,381				18,032				1.41			3,758,066				13,409				1.42
Noninterest-bearing liabilities:
Demand deposits	1,347,748											1,232,360											1,125,321
Other liabilities	67,555											68,642											37,489
Total liabilities	6,462,822											6,378,383											4,920,876
Shareholders' equity	859,674											843,974											597,864
Total liabilities and shareholders' equity	$	7,322,496										$	7,222,357										$	5,518,740
Core net interest income1					61,565											61,343											48,677
Core net interest margin1									3.64	%										3.69	%										3.77	%
Incremental accretion on non-core acquired loans					576											2,140											2,109
Total net interest income					$	62,141										$	63,483										$	50,786
Net interest margin									3.68	%										3.81	%										3.94	%
* Non-taxable income is presented on a fully tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.5 million for the three months ended December 31, 2019, $0.4 million for the three months ended September 30, 2019, and $0.2 million for the three months ended December 31, 2018.

The core net interest margin¹ decreased five basis points to 3.64% during the fourth quarter 2019 primarily due to a 26-basis point decrease in loan yields. This is a result of the decline of both the one-month LIBOR and Prime interest rates during the fourth quarter, which impacted the underlying interest rates of the Company’s loan portfolio, 59% of which is priced to variable interest rate indices. In response, the Company was successful in lowering the cost of interest-bearing transaction accounts and money market accounts by 12 basis points and 32 basis points, respectively, in the fourth quarter to partially offset the decrease in margin from the lower loan yield. Additionally, seasonal growth in noninterest-bearing deposits in the fourth quarter reduced the use of higher-cost wholesale borrowings.

The Company manages its balance sheet in part to defend against pressures on core net interest margin, which could be negatively impacted by continued competition for deposits, current interest rate conditions, and downward movement in short-term rates.

Loans

The following table presents total loans for the most recent five quarters.

	Quarter ended
													March 31, 2019
($ in thousands)	Dec 31, 2019				Sept 30, 2019				June 30, 2019				Trinityb				Legacy EFSCb				Consolidated				Dec 31, 2018
C&I - general	$	1,186,667			$	1,174,569			$	1,103,908			$	65,122			$	1,063,633			$	1,128,755			$	995,491
CRE investor owned - general	1,290,258				1,281,332				1,235,596				304,615				878,856				1,183,471				862,423
CRE owner occupied - general	582,579				566,219				591,401				91,758				484,268				576,026				496,835
Enterprise value lendinga	428,896				417,521				445,981				—				439,500				439,500				465,992
Life insurance premium financinga	472,822				468,051				465,777				—				440,693				440,693				417,950
Residential real estate - general	366,261				386,174				409,200				137,487				295,069				432,556				304,671
Construction and land development - general	428,681				403,590				376,597				70,251				274,956				345,207				310,832
Tax creditsa	294,210				265,626				268,405				—				235,454				235,454				262,735
Agriculture	139,873				136,249				131,671				—				126,088				126,088				136,188
Consumer and other - general	124,090				128,683				120,961				12,835				96,492				109,327				96,884
Total Loans	$	5,314,337			$	5,228,014			$	5,149,497			$	682,068			$	4,335,009			$	5,017,077			$	4,350,001
Total loan yield	5.08		%		5.47		%		5.49		%										5.50		%		5.44		%
Total C&I loans to total loans	44		%		44		%		44		%										44		%		49		%
Variable interest rate loans to total loans	59		%		60		%		60		%										60		%		62		%
Certain prior period amounts have been reclassified among the categories to conform to the current period presentation
a Specialized categories may include a mix of C&I, CRE, Construction and land development, or Consumer and other loans.
b Amounts reported are as of March 31, 2019 and are separately shown attributable to the Trinity loan portfolio and related operations acquired on March 8, 2019, and the Company’s pre-Trinity acquisition loan portfolio and related operations.

Loans totaled $5.3 billion at December 31, 2019, increasing $86.3 million, or 7% annualized, compared to the linked quarter. In 2019, loans increased $964.3 million primarily due to the Trinity acquisition and organic growth, or 7% excluding loans attributed to New Mexico. We expect loan growth in 2020 to be 6-8%.

The Company continues to focus on originating high-quality C&I relationships, as they typically have variable interest rates and allow for cross selling opportunities involving other banking products. C&I loan growth, coupled with fixed-rate CRE lending, supports management’s efforts to maintain a flexible asset sensitive interest rate risk position.

Asset Quality

The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters.

	Quarter ended
($ in thousands)	December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018
Nonperforming loans	$	26,425			$	15,569			$	19,842			$	9,607			$	16,745
Other real estate	6,344				8,498				10,531				6,804				469
Nonperforming assets	$	32,769			$	24,067			$	30,373			$	16,411			$	17,214
Nonperforming loans to total loans	0.50		%		0.30		%		0.39		%		0.19		%		0.38		%
Nonperforming assets to total assets	0.45				0.33				0.42				0.24				0.30
Allowance for loan losses to total loans	0.81				0.85				0.85				0.86				1.00
Net charge-offs	$	2,544			$	1,070			$	970			$	1,826			$	2,822

Nonperforming assets increased $8.7 million to $32.8 million at December 31, 2019 from $24.1 million at September 30, 2019. The increase was primarily from the addition of a $12.9 million nonaccrual loan, partially offset by a $2.2 million decrease in other nonaccrual loans and a $2.2 million decrease in other real estate. The addition of the $12.9 million nonaccrual loan did not significantly impact the provision for loan losses, as the reserve coverage on the loan had been primarily recorded in prior periods.

The Company recorded a provision for loan losses of $6.4 million in 2019, compared to $6.6 million in the prior year. In the fourth quarter 2019, the provision for loan losses was $1.3 million compared to $1.8 million in the linked quarter. Net charge-offs to average loans totaled 0.13% for both 2019 and 2018. The decrease in the ratio of allowance for loan losses to total loans to 0.81% at December 31, 2019, from 0.85% at September 30, 2019, was due to a 24% decrease in substandard loans and net charge-offs of $2.5 million.

Deposits

The following table presents total deposits for the most recent five quarters.

									Quarter ended
													March 31, 2019
($ in thousands)	December 31, 2019				September 30, 2019				June 30, 2019				Trinitya				Legacy EFSCa				Consolidated				December 31, 2018
Noninterest-bearing accounts	$	1,327,348			$	1,295,450			$	1,181,577			$	169,344			$	1,017,164			$	1,186,508			$	1,100,718
Interest-bearing transaction accounts	1,367,444				1,307,855				1,392,586				401,257				988,569				1,389,826				1,037,684
Money market and savings accounts	2,249,784				2,201,052				2,162,605				390,192				1,765,839				2,156,031				1,765,154
Brokered certificates of deposit	215,758				209,754				213,138				—				180,788				180,788				198,981
Other certificates of deposit	610,689				610,269				609,432				133,556				490,404				623,960				485,448
Total deposit portfolio	$	5,771,023			$	5,624,380			$	5,559,338			$	1,094,349			$	4,442,764			$	5,537,113			$	4,587,985
Noninterest-bearing deposits to total deposits	23.0		%		23.0		%		21.3		%		15.5		%		22.9		%		21.4		%		24.0		%
aAmounts reported are as of March 31, 2019 and are shown separately attributable to the Trinity deposit portfolio and related operations acquired on March 8, 2019, and the Company’s pre-Trinity acquisition deposit portfolio and related operations.

Total deposits at December 31, 2019 were $5.8 billion, an increase of $146.6 million from September 30, 2019, and an increase of $1.2 billion, or 26%, from December 31, 2018. The increase over the prior year period was primarily due to the Trinity acquisition.

Core deposits, defined as total deposits excluding time deposits, were $4.9 billion at December 31, 2019, an increase of $140.2 million, or 12% on an annualized basis, from the linked quarter, and an increase of $1.0 billion, or 27%, from the prior year period.

Noninterest-bearing deposits increased $31.9 million compared to September 30, 2019, and increased $226.6 million compared to December 31, 2018. The total cost of deposits was 0.81% for the fourth quarter, reflecting the deposit repricing discussed previously, compared to 0.94% in the linked quarter and 0.95% in the prior year quarter.

Noninterest Income

Total noninterest income for 2019 was $49.2 million, an increase of $10.8 million, or 28%, from 2018. This improvement was primarily due to the following:

For the full year:

• Deposit service charges increased $1.1 million or 9%
• Wealth management revenue increased $1.7 million or 21%
• Income from card services increased $2.5 million or 37%
• Tax credit income increased $2.6 million or 91%
• Other income increased $2.7 million, or 31%, due to swap fees, sublease income, and BOLI income

The bullet points above are inclusive of $7.9 million attributed to the acquisition of Trinity.

For the quarter ended December 31, 2019, total noninterest income was $14.4 million, an increase of $0.9 million, or 6%, from the linked quarter. Noninterest income in the linked quarter included $1.3 million of gains on investment sales and loan workout income that did not reoccur in the fourth quarter. Tax credit income was seasonally strong at $3.4 million for the fourth quarter 2019, compared to $1.2 million in the linked third quarter, due primarily to state tax credit sales.

Noninterest Expenses

Noninterest expense for 2019 was $165.5 million, an increase of $46.5 million, or 39%, from 2018. The acquisition of Trinity contributed $24.5 million of the current year increase. In addition, merger-related expenses were $18.0 million in 2019. The Company’s efficiency ratio was 57.5% in 2019, compared to 51.7% for the prior year. The increase in 2019 was primarily due to merger-related expenses incurred for the Trinity acquisition. The Company’s core efficiency ratio¹ was 52.4% in 2019, compared to 52.0% for the prior year.

For the fourth quarter 2019, noninterest expense was $38.4 million, an increase of $0.1 million from the linked quarter. Included in the fourth quarter were other real estate owned valuation adjustments of $0.8 million that were partially offset by a decrease in other expenses. The fourth quarter efficiency ratio was 50.4% compared to 50.0% in the linked quarter. The Company’s core efficiency ratio¹ was 50.7% for the fourth quarter compared to 51.7% for the linked quarter. The decrease in the core efficiency ratio from the linked quarter is reflective of higher operating revenue, including seasonal tax credit income, and holding noninterest expense steady.

Income Taxes

The Company’s effective tax rate was 20.1% in 2019 compared to 14.7% for the prior year. The lower rate for the prior year resulted from a non-recurring reduction of income tax expense of $2.7 million from a tax planning election.

The effective tax rate was 19.9% for the fourth quarter of 2019, compared to 20.4% for the linked quarter. The Company expects its effective tax rate for 2020 to be approximately 20-21%.

Capital

The following table presents various EFSC capital ratios:

	Quarter ended
Percent	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Total risk-based capital to risk-weighted assets	12.89	%		12.72	%		12.62	%		12.86	%		13.02	%
Tier 1 capital to risk weighted assets	11.38			11.17			11.06			11.25			11.14
Common equity tier 1 capital to risk-weighted assets	9.88			9.64			9.51			9.64			9.79
Tangible common equity to tangible assets1	8.89			8.54			8.43			8.35			8.66

Capital ratios for the current quarter are subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review.

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, core net interest income, core net interest margin, tangible common equity, core efficiency ratios, ROATCE, adjusted ROAA, adjusted ROAE, and adjusted ROATCE, and the tangible common equity ratio, in this release that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.

The Company considers its adjusted EPS, core net interest income, core net interest margin, core efficiency ratio, adjusted ROAA, adjusted ROAE, ROATCE, adjusted ROATCE, and the tangible common equity ratio, collectively “core performance measures,” presented in this earnings release and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of non-core acquired loans, which were acquired from the FDIC and previously covered by loss share agreements, and the related income and expenses, the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures include contractual interest on non-core acquired loans, but exclude incremental accretion on these loans. Core performance measures also exclude expenses directly related to non-core acquired loans. Core performance measures also exclude certain other income and expense items, such as merger related expenses, facilities charges, and the gain or loss on sale of investment securities, the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.

The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company’s performance and capital strength. The Company’s management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company’s operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measures for the periods indicated.

Conference Call and Webcast Information

The Company will host a conference call and webcast at 2:30 p.m. Central Time on Tuesday, January 21, 2020. During the call, management will review the fourth quarter and full year of 2019 results and related matters. This press release as well as a related slide presentation will be accessible on the Company’s website at www.enterprisebank.com under “Investor Relations” beginning prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-800-367-2403 (Conference ID #9295717). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC4Q2019earnings and register to receive a dial in number, passcode, and pin number. The replay will be available for approximately two weeks following the conference call.

About Enterprise

Enterprise Financial Services Corp (Nasdaq: EFSC), with approximately $7 billion in assets, is a financial holding company headquartered in Clayton, Missouri. Enterprise Bank & Trust, a Missouri state-chartered trust company with banking powers and a wholly-owned subsidiary of EFSC, operates 34 branch offices in Arizona, Kansas, Missouri and New Mexico. Enterprise Bank & Trust offers a range of business and personal banking services and wealth management services. Enterprise Trust, a division of Enterprise Bank & Trust, provides financial planning, estate planning, investment management and trust services to businesses, individuals, institutions, retirement plans and non-profit organizations. Additional information is available at www.enterprisebank.com.

Enterprise Financial Services Corp’s common stock is traded on the Nasdaq Stock Market under the symbol “EFSC.” Please visit our website at www.enterprisebank.com to see our regularly posted material information.

Forward-looking Statements

Readers should note that, in addition to the historical information contained herein, this press release 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 based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, shareholder value creation and the impact of the acquisition of Trinity and its wholly-owned subsidiary, Los Alamos National Bank, and other acquisitions.

Forward-looking statements include, but are not limited to, statements about the Company’s plans, expectations, and projections of future financial and operating results, as well as statements regarding the Company’s plans, objectives, expectations or consequences of announced transactions. The Company uses words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “continue,” and “intend”, and variations of such words and similar expressions, in this release to identify such forward-looking statements. Forward-looking statements 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, the Company’s ability to efficiently integrate acquisitions, including the Trinity acquisition, into its operations, retain the customers of these businesses and grow the acquired operations, as well as credit risk, changes in the appraised valuation of real estate securing impaired loans, outcomes of litigation and other contingencies, exposure to general and local economic conditions, risks associated with rapid increases or decreases in prevailing interest rates, consolidation in the banking industry, competition from banks and other financial institutions, the Company’s ability to attract and retain relationship officers and other key personnel, burdens imposed by federal and state regulation, changes in regulatory requirements, changes in accounting policies and practices or accounting standards, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model, which will change how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption on January 1, 2020, uncertainty regarding the future of LIBOR, as well as other risk factors described in the Company’s 2018 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission (the “SEC”). 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 unless required under the federal securities laws.

1 A non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited)
	Quarter ended																				Year ended
($ in thousands, except per share data)	Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
EARNINGS SUMMARY
Net interest income	$	61,613			$	63,046			$	61,715			$	52,343			$	50,593			$	238,717			$	191,905
Provision for loan losses	1,341				1,833				1,722				1,476				2,120				6,372				6,644
Noninterest income	14,418				13,564				11,964				9,230				10,702				49,176				38,347
Noninterest expense	38,354				38,239				49,054				39,838				30,747				165,485				119,031
Income before income tax expense	36,336				36,538				22,903				20,259				28,428				116,036				104,577
Income tax expense	7,246				7,469				4,479				4,103				4,899				23,297				15,360
Net income	$	29,090			$	29,069			$	18,424			$	16,156			$	23,529			$	92,739			$	89,217
Diluted earnings per share	$	1.09			$	1.08			$	0.68			$	0.67			$	1.02			$	3.55			$	3.83
Return on average assets	1.58		%		1.60		%		1.05		%		1.10		%		1.69		%		1.35		%		1.64		%
Return on average common equity	13.43				13.66				9.09				9.89				15.61				11.66				15.46
Return on average tangible common equity	18.54				19.08				12.92				12.93				19.79				16.08				19.83
Net interest margin (fully tax equivalent)	3.68				3.81				3.86				3.87				3.94				3.80				3.82
Core net interest margin (fully tax equivalent)1	3.64				3.69				3.80				3.79				3.77				3.73				3.75
Efficiency ratio	50.45				49.91				66.58				64.70				50.16				57.48				51.70
Core efficiency ratio1	50.73				51.73				53.30				54.06				49.77				52.36				52.04
Total assets	$	7,333,791			$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662
Total average assets	7,322,496				7,222,357				7,057,605				5,956,086				5,518,740				$	6,894,291			$	5,436,963
Total deposits	5,771,023				5,624,380				5,559,338				5,537,113				4,587,985
Total average deposits	5,756,292				5,597,343				5,582,072				4,699,490				4,434,634				5,412,211				4,262,028
Period end common shares outstanding	26,543				26,613				26,906				26,878				22,812
Dividends per common share	$	0.17			$	0.16			$	0.15			$	0.14			$	0.13			$	0.62			$	0.47
Tangible book value per common share	$	23.76			$	22.82			$	21.74			$	20.80			$	20.95
Tangible common equity to tangible assets1	8.89		%		8.54		%		8.43		%		8.35		%		8.66		%
Total risk-based capital to risk-weighted assets	12.89				12.72				12.62				12.86				13.02
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended																				Year ended
($ in thousands, except per share data)	Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income	$	77,238			$	81,078			$	79,201			$	67,617			$	64,002			$	305,134			$	237,802
Total interest expense	15,625				18,032				17,486				15,274				13,409				66,417				45,897
Net interest income	61,613				63,046				61,715				52,343				50,593				238,717				191,905
Provision for loan losses	1,341				1,833				1,722				1,476				2,120				6,372				6,644
Net interest income after provision for loan losses	60,272				61,213				59,993				50,867				48,473				232,345				185,261
NONINTEREST INCOME
Deposit service charges	3,254				3,246				3,366				2,935				2,894				12,801				11,749
Wealth management revenue	2,618				2,661				2,661				1,992				1,974				9,932				8,241
Card services revenue	2,409				2,494				2,461				1,790				1,760				9,154				6,686
Tax credit income	3,425				1,238				572				158				2,312				5,393				2,820
Gain (loss) on sale of investment securities	(94		)		337				—				—				—				243				9
Other income	2,806				3,588				2,904				2,355				1,762				11,653				8,842
Total noninterest income	14,418				13,564				11,964				9,230				10,702				49,176				38,347
NONINTEREST EXPENSE
Employee compensation and benefits	20,411				20,845				20,687				19,352				16,669				81,295				66,039
Occupancy	3,461				3,179				3,188				2,637				2,408				12,465				9,550
Merger related expenses	—				393				10,306				7,270				1,271				17,969				1,271
Other	14,482				13,822				14,873				10,579				10,399				53,756				42,171
Total noninterest expenses	38,354				38,239				49,054				39,838				30,747				165,485				119,031
Income before income tax expense	36,336				36,538				22,903				20,259				28,428				116,036				104,577
Income tax expense	7,246				7,469				4,479				4,103				4,899				23,297				15,360
Net income	$	29,090			$	29,069			$	18,424			$	16,156			$	23,529			$	92,739			$	89,217
Basic earnings per share	$	1.10			$	1.09			$	0.69			$	0.68			$	1.02			$	3.56			$	3.86
Diluted earnings per share	1.09				1.08				0.68				0.67				1.02				3.55				3.83

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018
BALANCE SHEETS
ASSETS
Cash and due from banks	$	74,769			$	153,730			$	106,835			$	85,578			$	91,511
Interest-earning deposits	96,217				106,747				85,315				139,389				108,226
Debt and equity investments	1,354,527				1,354,986				1,328,767				1,198,413				813,702
Loans held for sale	5,570				6,281				1,437				654				392
Loans	5,314,337				5,228,014				5,149,497				5,017,077				4,350,001
Less: Allowance for loan losses	43,288				44,555				43,822				43,095				43,476
Total loans, net	5,271,049				5,183,459				5,105,675				4,973,982				4,306,525
Fixed assets, net	60,013				59,216				58,888				60,301				32,109
Goodwill	210,344				211,251				211,251				207,632				117,345
Intangible assets, net	26,076				27,626				29,201				31,048				8,553
Other assets	235,226				243,495				254,486				235,760				167,299
Total assets	$	7,333,791			$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,327,348			$	1,295,450			$	1,181,577			$	1,186,508			$	1,100,718
Interest-bearing deposits	4,443,675				4,328,930				4,377,761				4,350,605				3,487,267
Total deposits	5,771,023				5,624,380				5,559,338				5,537,113				4,587,985
Subordinated debentures	141,258				141,179				141,100				140,668				118,156
FHLB advances	222,406				461,426				389,446				180,466				70,000
Other borrowings	265,172				199,634				198,104				212,171				223,450
Other liabilities	66,747				74,077				68,366				64,504				42,267
Total liabilities	6,466,606				6,500,696				6,356,354				6,134,922				5,041,858
Shareholders’ equity	867,185				846,095				825,501				797,835				603,804
Total liabilities and shareholders’ equity	$	7,333,791			$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662

Average Balance Sheets

The following table presents, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax equivalent basis.

	Year ended
	December 31, 2019											December 31, 2018
($ in thousands)	Average Balance				Interest Income/ Expense				Average Yield/ Rate			Average Balance				Interest Income/ Expense				Average Yield/ Rate
Assets
Interest-earning assets:
Loans, excluding incremental accretion*	$	5,018,568			$	265,081			5.28	%		$	4,222,359			$	213,980			5.07	%
Investments in debt and equity securities*	1,196,074				34,753				2.91			752,265				19,801				2.63
Short-term investments	107,433				2,128				1.98			66,771				1,141				1.71
Total earning assets	6,322,075				301,962				4.78			5,041,395				234,922				4.66
Noninterest-earning assets	572,216											395,568
Total assets	$	6,894,291										$	5,436,963
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	1,286,641			$	7,592			0.59	%		$	827,155			$	3,643			0.44	%
Money market accounts	1,608,349				26,267				1.63			1,488,238				19,361				1.30
Savings	489,310				841				0.17			206,286				597				0.29
Certificates of deposit	799,079				15,156				1.90			653,486				10,168				1.56
Total interest-bearing deposits	4,183,379				49,856				1.19			3,175,165				33,769				1.06
Subordinated debentures	136,950				7,507				5.48			118,129				5,798				4.91
FHLB advances	287,474				6,668				2.32			271,493				5,556				2.05
Securities sold under agreements to repurchase	169,179				1,246				0.74			170,963				755				0.44
Other borrowings	32,392				1,140				3.52			773				19				2.46
Total interest-bearing liabilities	4,809,374				66,417				1.38			3,736,523				45,897				1.23
Noninterest-bearing liabilities:
Demand deposits	1,228,832											1,086,863
Other liabilities	60,608											36,617
Total liabilities	6,098,814											4,860,003
Shareholders’ equity	795,477											576,960
Total liabilities and shareholders’ equity	$	6,894,291										$	5,436,963
Core net interest income1					235,545											189,025
Core net interest margin1									3.73	%										3.75	%
Incremental accretion on non-core acquired loans					4,783											3,700
Total net interest income					$	240,328										$	192,725
Net interest margin									3.80	%										3.82	%
* Non-taxable income is presented on a fully tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $1.6 million, and $0.8 million for the years ended December 31, 2019, and 2018, respectively.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018
LOAN PORTFOLIO
Commercial and industrial	$	2,361,157			$	2,303,495			$	2,265,480			$	2,227,050			$	2,123,167
Commercial real estate	1,997,321				1,967,888				1,940,958				1,870,040				1,481,834
Construction real estate	457,273				433,486				404,557				369,365				334,645
Residential real estate	366,261				386,173				409,200				432,902				305,026
Consumer and other	132,325				136,972				129,302				117,720				105,329
Total loans	$	5,314,337			$	5,228,014			$	5,149,497			$	5,017,077			$	4,350,001
DEPOSIT PORTFOLIO
Noninterest-bearing accounts	$	1,327,348			$	1,295,450			$	1,181,577			$	1,186,508			$	1,100,718
Interest-bearing transaction accounts	1,367,444				1,307,855				1,392,586				1,389,826				1,037,684
Money market and savings accounts	2,249,784				2,201,052				2,162,605				2,156,031				1,765,154
Brokered certificates of deposit	215,758				209,754				213,138				180,788				198,981
Other certificates of deposit	610,689				610,269				609,432				623,960				485,448
Total deposit portfolio	$	5,771,023			$	5,624,380			$	5,559,338			$	5,537,113			$	4,587,985
AVERAGE BALANCES
Total loans	$	5,279,500			$	5,178,009			$	5,095,181			$	4,511,387			$	4,272,132
Debt and equity investments	1,322,017				1,312,860				1,246,529				896,936				769,461
Interest-earning assets	6,704,506				6,604,083				6,453,001				5,510,489				5,118,319
Total assets	7,322,496				7,222,357				7,057,605				5,956,086				5,518,740
Deposits	5,756,292				5,597,343				5,582,072				4,699,490				4,434,634
Shareholders’ equity	859,674				843,974				813,106				662,454				597,864
Tangible common equity1	622,502				604,331				571,890				506,560				471,678
YIELDS (fully tax equivalent)
Total loans	5.08		%		5.47		%		5.49		%		5.50		%		5.44		%
Debt and equity investments	2.91				2.90				2.95				2.84				2.73
Interest-earning assets	4.60				4.90				4.95				4.99				4.98
Interest-bearing deposits	1.05				1.20				1.21				1.33				1.27
Total deposits	0.81				0.94				0.94				1.02				0.95
Subordinated debentures	5.46				5.50				5.57				5.38				5.01
FHLB advances and other borrowed funds	1.57				1.99				2.07				1.75				1.60
Interest-bearing liabilities	1.23				1.41				1.42				1.49				1.42
Net interest margin	3.68				3.81				3.86				3.87				3.94
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
(in thousands, except per share data)	Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018
ASSET QUALITY
Net charge-offs	$	2,544			$	1,070			$	970			$	1,826			$	2,822
Nonperforming loans	26,425				15,569				19,842				9,607				16,745
Classified assets	85,897				93,984				91,715				79,750				70,126
Nonperforming loans to total loans	0.50		%		0.30		%		0.39		%		0.19		%		0.38		%
Nonperforming assets to total assets	0.45				0.33				0.42				0.24				0.30
Allowance for loan losses to total loans	0.81				0.85				0.85				0.86				1.00
Allowance for loan losses to nonperforming loans	163.8				286.2				220.9				448.6				259.6
Net charge-offs to average loans (annualized)	0.19				0.08				0.08				0.16				0.26
WEALTH MANAGEMENT
Trust assets under management	$	1,671,082			$	1,583,260			$	1,627,050			$	1,587,627			$	1,119,329
Trust assets under administration	2,524,478				2,404,950				2,428,551				2,405,673				1,811,512
MARKET DATA
Book value per common share	$	32.67			$	31.79			$	30.68			$	29.68			$	26.47
Tangible book value per common share1	23.76				22.82				21.74				20.80				20.95
Market value per share	48.21				40.75				41.60				40.77				37.63
Period end common shares outstanding	26,543				26,613				26,906				26,878				22,812
Average basic common shares	26,540				26,778				26,887				23,927				23,014
Average diluted common shares	26,668				26,868				26,940				24,083				23,170
CAPITAL
Total risk-based capital to risk-weighted assets	12.89		%		12.72		%		12.62		%		12.86		%		13.02		%
Tier 1 capital to risk-weighted assets	11.38				11.17				11.06				11.25				11.14
Common equity tier 1 capital to risk-weighted assets	9.88				9.64				9.51				9.64				9.79
Tangible common equity to tangible assets1	8.89				8.54				8.43				8.35				8.66
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
	Quarter ended																								Year ended
($ in thousands, except per share data)	Dec 31, 2019				Sep 30, 2019					Jun 30, 2019					Mar 31, 2019					Dec 31, 2018					Dec 31, 2019					Dec 31, 2018
CORE PERFORMANCE MEASURES
Net interest income	$	61,613			$	63,046				$	61,715				$	52,343				$	50,593				$	238,717				$	191,905
Less: Incremental accretion income	576				2,140					910					1,157					2,109					4,783					3,701
Core net interest income	61,037				60,906					60,805					51,186					48,484					233,934					188,204
Total noninterest income	14,418				13,564					11,964					9,230					10,702					49,176					38,347
Less: Other income from non-core acquired assets	4				1,001					2					365					10					1,372					1,048
Less: Gain (loss) on sale of investment securities	(94		)		337					—					—					—					243					9
Less: Other non-core income	—				—					266					—					26					266					675
Core noninterest income	14,508				12,226					11,696					8,865					10,666					47,295					36,615
Total core revenue	75,545				73,132					72,501					60,051					59,150					281,229					224,819
Total noninterest expense	38,354				38,239					49,054					39,838					30,747					165,485					119,031
Less: Other expenses related to non-core acquired loans	33				18					103					103					40					257					(163		)
Less: Facilities disposal	—				—					—					—					—					—					239
Less: Merger related expenses	—				393					10,306					7,270					1,271					17,969					1,271
Less: Non-recurring excise tax	—				—					—					—					—					—					682
Core noninterest expense	38,321				37,828					38,645					32,465					29,436					147,259					117,002
Core efficiency ratio	50.73		%		51.73		%			53.30		%			54.06		%			49.77		%			52.36		%			52.04		%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (FULLY TAX EQUIVALENT)
Net interest income	$	62,141			$	63,483				$	62,109				$	52,595				$	50,786				$	240,328				$	192,725
Less: Incremental accretion income	576				2,140					910					1,157					2,109					4,783					3,701
Core net interest income	$	61,565			$	61,343				$	61,199				$	51,438				$	48,677				$	235,545				$	189,024
Average earning assets	$	6,704,506			$	6,604,083				$	6,453,005				$	5,510,489				$	5,118,319				$	6,322,075				$	5,041,395
Reported net interest margin	3.68		%		3.81		%			3.86		%			3.87		%			3.94		%			3.80		%			3.82		%
Core net interest margin	3.64				3.69					3.80					3.79					3.77					3.73					3.75

	Quarter ended
($ in thousands)	Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018
SHAREHOLDERS’ EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders’ equity	$	867,185			$	846,095			$	825,501			$	797,835			$	603,804
Less: Goodwill	210,344				211,251				211,251				207,632				117,345
Less: Intangible assets	26,076				27,626				29,201				31,048				8,553
Tangible common equity	$	630,765			$	607,218			$	585,049			$	559,155			$	477,906
Total assets	$	7,333,791			$	7,346,791			$	7,181,855			$	6,932,757			$	5,645,662
Less: Goodwill	210,344				211,251				211,251				207,632				117,345
Less: Intangible assets	26,076				27,626				29,201				31,048				8,553
Tangible assets	$	7,097,371			$	7,107,914			$	6,941,403			$	6,694,077			$	5,519,764
Tangible common equity to tangible assets	8.89		%		8.54		%		8.43		%		8.35		%		8.66		%

	Quarter ended
($ in thousands)	Dec 31, 2019				Sep 30, 2019				Dec 31, 2018
AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE COMMON EQUITY
Average shareholder’s equity	$	859,674			$	843,974			$	597,864
Less average goodwill	210,344				211,251				117,345
Less average intangible assets	26,828				28,392				8,841
Average tangible common equity	$	622,502			$	604,331			$	471,678

	Quarter ended												Year ended
(in thousands, except per share data)	Dec 31, 2019				Sep 30, 2019				Dec 31, 2018				Dec 31, 2019
IMPACT OF MERGER-RELATED EXPENSES
Net income - GAAP	$	29,090			$	29,069			$	23,529			$	92,739
Merger related expenses	—				393				1,271				17,969
Related tax effect	—				(97		)		(207		)		(3,963		)
Adjusted net income - Non-GAAP	$	29,090			$	29,365			$	24,593			$	106,745
Average diluted common shares	26,668				26,868				23,170				26,159
EPS - GAAP net income	$	1.09			$	1.08			$	1.02			$	3.55
EPS - Adjusted net income	1.09				1.09				1.06				4.08
Average assets	$	7,322,496			$	7,222,357			$	5,518,740			$	6,894,291
ROAA - GAAP net income	1.58		%		1.60		%		1.69		%		1.35		%
ROAA - Adjusted net income	1.58				1.61				1.77				1.55
Average shareholder’s equity	$	859,674			$	843,974			$	597,864			$	795,477
ROAE - GAAP net income	13.42		%		13.66		%		15.61		%		11.66		%
ROAE - Adjusted net income	13.42				13.80				16.32				13.42
Average tangible common equity	$	622,502			$	604,331			$	471,678			$	576,716
ROATCE - GAAP net income	18.54		%		19.08		%		19.79		%		16.08		%
ROATCE - Adjusted net income	18.54				19.28				20.69				18.51

 

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