Enterprise Financial Reports Second Quarter 2022 Results

Jim Lally, President and Chief Executive Officer of Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”), said today upon the release of EFSC’s second quarter earnings, “Our execution propelled double-digit loan growth on an annualized basis, building on the strong foundation that was established in the first quarter. Loan growth was diversified across our business lines and reflects the strength of the targeted investments we have made. Our organic growth, coupled with our well-positioned balance sheet, accelerated operating revenue which resulted in a nearly 18% return on average tangible common equity³ for the quarter. I am proud of what we have accomplished so far this year, as it demonstrates the power of the franchise we have built and expanded upon in recent years.”

Highlights

Comparisons to the prior year are impacted by the acquisition of First Choice Bancorp (“First Choice” or “FCBP”) in the third quarter of 2021.

• Earnings - Net income in the second quarter 2022 was $45.1 million, a decrease of $2.5 million, compared to the linked quarter and an increase of $6.7 million from the prior year quarter. Earnings per share (“EPS”) was $1.19 per diluted common share for the second quarter 2022, compared to $1.23 per diluted common share for both the linked and prior year quarters, respectively.

• Pre-provision net revenue¹ (“PPNR”) - PPNR of $58.4 million in the second quarter 2022 increased $1.4 million and $10.9 million from the linked and prior year quarters, respectively. The increase from the linked quarter was primarily due to an increase in net interest income, partially offset by a decline in noninterest income and an increase in noninterest expense, as further discussed in the following sections. The increase from the prior year quarter was primarily due to the positive contribution from the First Choice acquisition and expansion in net interest income from organic loan and deposit growth.

• Net interest income and net interest margin (“NIM”) - Net interest income of $109.6 million for the second quarter 2022 increased $8.4 million and $27.9 million from the linked and prior year quarters, respectively. NIM was 3.55% for the second quarter 2022, compared to 3.28% and 3.46% for the linked quarter and prior year quarter, respectively. Net interest income and NIM benefited from organic loan growth, a reallocation of excess liquidity into the investment portfolio and an increase in market interest rates.

¹ Pre-provision return on average assets is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
² Excludes PPP loans, which totaled $49.2 million at June 30, 2022.
³ Return on average tangible common equity is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

• Noninterest income - Noninterest income of $14.2 million for the second quarter 2022 decreased $4.4 million and $2.0 million from the linked and prior year quarters, respectively. A decline in tax credit income from a seasonally strong first quarter and a decline in other income were the primary drivers of the linked quarter decrease. The decrease from the prior year quarter was primarily due to lower transactional income from private equity investments, a decrease in mortgage banking income and a decrease in gains on the sale of other real estate owned. These decreases were partially offset by deposit service charge income from the First Choice acquisition.

• Loans - Total loans increased $213.1 million from the linked quarter to $9.3 billion as of June 30, 2022. PPP loans declined $84.9 million to $49.2 million. Excluding PPP loans, loans grew $298.0 million, or 13%, on an annualized basis from the linked quarter. Loan growth in the quarter was well distributed across geographic markets and the specialty lending niches. Average loans totaled $9.1 billion for the quarter ended June 30, 2022, compared to $9.0 billion and $7.3 billion for the linked and prior year quarters, respectively.

• Asset quality - The allowance for credit losses to total loans was 1.52% at June 30, 2022, compared to 1.54% at March 31, 2022 and 1.77% at June 30, 2021. Nonperforming assets to total assets was 0.16% at June 30, 2022, compared to 0.17% and 0.44% at March 31, 2022 and June 30, 2021, respectively. A provision for credit losses of $0.7 million was recorded in the second quarter 2022 due to loan growth and changes in the macroeconomic forecasts, partially offset by an improvement in credit quality. Provision benefits of $4.1 million and $2.7 million were recorded in the linked and prior year quarters, respectively, primarily due to improvements in the macroeconomic forecasts.

• Deposits - Total deposits decreased $611.5 million from the linked quarter to $11.1 billion as of June 30, 2022. The decline in deposits was concentrated in interest-bearing demand and money market accounts that were not relationship-based and reflects a shift in our deposit mix aligned with our disciplined focus on relationship-based, lower-cost deposits. Average deposits totaled $11.5 billion for both quarters ended June 30, 2022 and March 31, 2022, compared to $8.6 billion for the prior year quarter. Noninterest-bearing deposit accounts represented 42.8% of total deposits, and the loan to deposit ratio was 83.6% at June 30, 2022.

• Capital - Total shareholders’ equity was $1.4 billion and the tangible common equity to tangible assets ratio⁴ was 7.8% at June 30, 2022, compared to 7.6% at March 31, 2022. Tangible common equity declined $24.4 million in the second quarter 2022, primarily due to a $49.2 million decrease in accumulated other comprehensive income driven mainly from a decrease in the fair value of the available-for-sale investment portfolio. The decrease in accumulated other comprehensive income was partially offset by the undistributed earnings in the second quarter 2022. Enterprise Bank & Trust remains “well-capitalized,” with a common equity tier 1 ratio of 12.0% and a total risk-based capital ratio of 13.1% as of June 30, 2022. The Company’s common equity tier 1 ratio and total risk-based capital ratio was 10.9% and 14.2%, respectively, at June 30, 2022.

The Company repurchased 349,383 shares totaling $15.9 million in the second quarter 2022 for an average price of $45.65 per share. The shares acquired in the second quarter 2022 complete the share repurchase plan authorized by the Board of Directors on April 29, 2021. On May 4, 2022, the Board of Directors approved a new plan that authorized the repurchase of up to 2,000,000 shares of common stock. No shares have been repurchased under the recently-approved plan. In June 2022, the Company retired 1,980,093 shares of treasury stock and returned them to authorized and unissued shares.

⁴ Tangible common equity to tangible assets ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

The Company’s Board of Directors approved a quarterly dividend of $0.23 per common share, payable on September 30, 2022 to shareholders of record as of September 15, 2022, an increase of $0.01, or 5%, compared to the second quarter 2022. The Board of Directors also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) June 15, 2022 to (but excluding) September 15, 2022. The dividend will be payable on September 15, 2022 to shareholders of record on August 31, 2022.

Net Interest Income

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.

	Quarter ended
	June 30, 2022									March 31, 2022									June 30, 2021
($ 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*	$	9,109,131		$	102,328		4.51	%		$	9,005,875		$	96,301		4.34	%		$	7,306,471		$	79,162		4.35	%
Securities*		2,068,119			12,944		2.51				1,923,969			10,969		2.31				1,502,582			9,226		2.46
Interest-earning deposits		1,401,961			2,496		0.71				1,781,272			817		0.19				806,928			237		0.12
Total interest-earning assets		12,579,211			117,768		3.76				12,711,116			108,087		3.45				9,615,981			88,625		3.70
Noninterest-earning assets		949,263									902,887									665,363
Total assets	$	13,528,474								$	13,614,003								$	10,281,344
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,329,431		$	659		0.11	%		$	2,505,319		$	536		0.09	%		$	1,985,811		$	336		0.07	%
Money market accounts		2,767,595			2,270		0.33				2,872,302			1,460		0.21				2,344,871			988		0.17
Savings		854,860			70		0.03				817,431			66		0.03				718,193			52		0.03
Certificates of deposit		591,091			851		0.58				607,133			797		0.53				522,633			1,091		0.84
Total interest-bearing deposits		6,542,977			3,850		0.24				6,802,185			2,859		0.17				5,571,508			2,467		0.18
Subordinated debentures		155,092			2,257		5.84				154,959			2,220		5.81				203,849			2,847		5.60
FHLB advances		50,000			197		1.58				50,000			195		1.58				50,000			197		1.58
Securities sold under agreements to repurchase		202,536			41		0.08				262,252			60		0.09				209,062			58		0.11
Other borrowings		21,414			111		2.08				22,841			82		1.46				27,147			94		1.39
Total interest-bearing liabilities		6,972,019			6,456		0.37				7,292,237			5,416		0.30				6,061,566			5,663		0.37
Noninterest-bearing liabilities:
Demand deposits		4,987,455									4,692,027									3,008,703
Other liabilities		94,733									93,518									94,106
Total liabilities		12,054,207									12,077,782									9,164,375
Shareholders' equity		1,474,267									1,536,221									1,116,969
Total liabilities and shareholders' equity	$	13,528,474								$	13,614,003								$	10,281,344
Total net interest income				$	111,312								$	102,671								$	82,962
Net interest margin							3.55	%								3.28	%								3.46	%
* Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $1.7 million, $1.5 million, and $1.2 million for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively.

NIM, on a tax equivalent basis, was 3.55% in the second quarter 2022, an increase of 27 basis points from the linked quarter and an increase of nine basis points from the prior year quarter. The increase in NIM from the linked quarter was primarily due to higher yields on loans, investments and interest-earning deposits due to an increase in market interest rates, including a 125 basis point increase in the federal funds rate. The average loan yield was 4.51% in the second quarter 2022, an increase of 17 basis points from the linked quarter. The average loan yield increased due to the repricing of variable-rate loans and the origination of new loans at an average rate of 4.71% (as of June 30, 2022). Approximately 20% of the variable-rate loan portfolio reprices on the first day of each quarter and did not increase with the current quarter’s rate movement, but these loan rates will reset early in the third quarter. The average investment yield was 2.51%, an increase of 20 basis points from the linked quarter. The investment yield increased due to the purchase of new investments at higher yields due to the expansion of the investment portfolio and the reinvestment of cash flows. Investments purchased in the second quarter 2022 had a tax equivalent average yield of 2.99%.

The effective federal funds rate for the second quarter 2022 was 76 basis points, an increase of 64 basis points, compared to the linked quarter and a 69 basis point increase over the prior year quarter. Concurrently, the Company’s earning asset yield increased 31 basis points, while the interest-bearing liability yield increased seven basis points, compared to the linked quarter. The total cost of deposits, including noninterest-bearing demand accounts, increased three basis points during the second quarter 2022.

Net interest income for the second quarter was $109.6 million, an increase of $8.4 million from the linked quarter, and an increase of $27.9 million from the prior year period. The increase in net interest income from the linked quarter was primarily due to an increase in the earning asset yield due to an increase in interest rates that was further enhanced by a stronger earning asset mix. The Company continued to redeploy part of its excess liquidity into the investment portfolio during the second quarter, increasing investments $244.2 million, when excluding mark-to-market fluctuations. Net interest income was also impacted by a decline in PPP income, a decline in interest-earning deposit accounts and the related interest income, and an increase in interest expense.

Loans

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

	Quarter ended
													September 30, 2021
($ in thousands)	June 30, 2022				March 31, 2022				December 31, 2021				FCBPa			Legacy EFSCa			Consolidated				June 30, 2021
C&I	$	1,702,081			$	1,498,151			$	1,538,155			$	242,740		$	1,215,338		$	1,458,078			$	1,116,229
CRE investor owned		1,977,806				1,982,645				1,955,087				553,490			1,381,794			1,935,284				1,467,243
CRE owner occupied		1,118,895				1,138,106				1,112,463				301,929			861,307			1,163,236				789,220
SBA loans*		1,284,279				1,249,929				1,241,449				160,833			1,038,925			1,199,758				1,010,727
Sponsor finance*		647,180				641,476				508,469				—			454,431			454,431				463,744
Life insurance premium financing*		688,035				636,096				593,562				—			572,492			572,492				564,366
Tax credits*		550,662				518,020				486,881				—			462,168			462,168				423,258
SBA PPP loans		49,175				134,084				271,958				206,284			232,675			438,959				396,660
Residential real estate		391,867				410,173				430,985				226,321			293,538			519,859				302,007
Construction and land development		626,577				610,830				625,526				219,600			432,627			652,227				467,586
Other		232,619				236,563				253,107				32,547			227,544			260,091				225,227
Total loans	$	9,269,176			$	9,056,073			$	9,017,642			$	1,943,744		$	7,172,839		$	9,116,583			$	7,226,267
Total loan yield		4.51	%			4.34	%			4.32	%									4.32	%			4.35	%
Variable interest rate loans to total loans		64	%			63	%			63	%									63	%			60	%

*Specialty loan category

a Amounts reported are as of September 30, 2021 and are separately shown attributable to the FCBP loan portfolio acquired on July 21, 2021, and the Company’s pre-FCBP acquisition loan portfolio.

Loans totaled $9.3 billion at June 30, 2022, increasing $213.1 million, compared to the linked quarter. PPP loans declined $84.9 million in the second quarter 2022 to $49.2 million from continued loan forgiveness by the Small Business Administration (“SBA”). Excluding PPP loans, loans grew $298.0 million, or 13% on an annualized basis, from the linked quarter. The increase was driven by the specialty lending categories noted in the table above, increasing $124.6 million, as well as growth in nearly all geographic markets in the second quarter 2022. Average line utilization was approximately 44% for the quarter ended June 30, 2022, compared to 40% and 39% for the linked and prior year quarters, respectively. This trend added approximately $152 million to loans outstanding during the current quarter.

Asset Quality

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

	Quarter ended
($ in thousands)	June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Nonperforming loans*	$	19,560			$	21,160			$	28,024			$	41,554			$	42,252
Other real estate		955				1,459				3,493				3,493				3,612
Nonperforming assets*	$	20,515			$	22,619			$	31,517			$	45,047			$	45,864
Nonperforming loans to total loans		0.21	%			0.23	%			0.31	%			0.46	%			0.58	%
Nonperforming assets to total assets		0.16	%			0.17	%			0.23	%			0.35	%			0.44	%
Allowance for credit losses to total loans		1.52	%			1.54	%			1.61	%			1.67	%			1.77	%
Net charge-offs (recoveries)	$	(175	)		$	1,521			$	3,263			$	1,850			$	869
*Guaranteed balances excluded	$	6,063			$	3,954			$	6,481			$	5,109			$	3,930

Nonperforming assets declined $2.1 million during the second quarter 2022 and $25.3 million from the prior year quarter. During the second quarter the Company experienced one basis point of net recoveries relative to average loans, compared to seven basis points of net charge-offs in the linked quarter and five basis points of net charge-offs in the prior year quarter. The Company recorded a provision for credit losses of $0.7 million for the second quarter 2022, compared to a benefit of $4.1 million for the linked quarter and a benefit of $2.7 million for the prior year quarter. Allowance for credit losses to total loans was 1.52% at June 30, 2022, a decrease of two basis points from the linked quarter. This trend was due to continued improvement in asset quality and net recovery activity, while loan growth and a decline in forecasted macroeconomic factors warranted additions to the allowance for credit losses.

Deposits

The following table presents deposits broken out by type for the most recent five quarters:

	Quarter ended
													September 30, 2021
($ in thousands)	June 30, 2022				March 31, 2022				December 31, 2021				FCBPa				Legacy EFSCa				Consolidated				June 30, 2021
Noninterest-bearing demand accounts	$	4,746,478			$	4,881,043			$	4,578,436			$	1,041,622			$	3,334,091			$	4,375,713			$	3,111,581
Interest-bearing demand accounts		2,197,957				2,547,482				2,465,884				317,301				1,936,338				2,253,639				2,013,129
Money market and savings accounts		3,562,982				3,678,135				3,691,186				370,179				3,201,073				3,571,252				3,000,460
Brokered certificates of deposit		129,064				129,017				128,970				78,714				50,209				128,923				50,209
Other certificates of deposit		456,137				468,458				479,323				51,832				446,416				498,248				464,125
Total deposit portfolio	$	11,092,618			$	11,704,135			$	11,343,799			$	1,859,648			$	8,968,127			$	10,827,775			$	8,639,504
Noninterest-bearing deposits to total deposits		42.8	%			41.7	%			40.4	%			56.0	%			37.2	%			40.4	%			36.0	%
aAmounts reported are as of September 30, 2021 and are shown separately attributable to the FCBP deposit portfolio acquired on July 21, 2021, and the Company’s pre-FCBP acquisition deposit portfolio.

Total deposits at June 30, 2022 were $11.1 billion, a decrease of $611.5 million from March 31, 2022, and an increase of $2.5 billion from June 30, 2021. Noninterest-bearing deposits declined $134.6 million from the linked quarter due primarily to managing out one large client in the deposit specialty portfolio that was partially mitigated by growth from other client activity. The $464.7 million decrease in interest-bearing demand and money market accounts from the linked quarter was primarily due to the managed run-off of certain interest-rate sensitive, large balance accounts and reflects a shift in our deposit mix aligned with our disciplined focus on relationship-based, lower-cost deposits. These customers were single service customers and were not part of broader banking relationships. The increase compared to the prior year is due to the First Choice acquisition coupled with organic growth.

The total cost of deposits was 0.13% for the current quarter, compared to 0.10% for the linked quarter and 0.12% for the prior year quarter.

Noninterest Income and Expense

The following tables present a comparative summary of the major components of noninterest income, other income, and noninterest expense for the periods indicated:

	Linked quarter comparison													Prior year comparison
	Quarter ended													Quarter ended
($ in thousands)	June 30, 2022			March 31, 2022			Increase (decrease)							June 30, 2021			Increase (decrease)
Deposit service charges	$	4,749		$	4,163		$	586			14	%		$	3,862		$	887			23	%
Wealth management revenue		2,533			2,622			(89	)		(3	) %			2,516			17			1	%
Card services revenue		3,514			3,040			474			16	%			2,975			539			18	%
Tax credit income		1,186			2,608			(1,422	)		(55	) %			1,370			(184	)		(13	) %
Other income		2,212			6,208			(3,996	)		(64	) %			5,481			(3,269	)		(60	) %
Total noninterest income	$	14,194		$	18,641		$	(4,447	)		(24	) %		$	16,204		$	(2,010	)		(12	) %

Total noninterest income for the second quarter 2022 was $14.2 million, a decrease of $4.4 million from the linked quarter and a decrease of $2.0 million from the prior year quarter. The decrease from the linked quarter was primarily due to decreases in tax credit and other income. Tax credit income is typically higher in the fourth and first quarter of each year and experiences a seasonal decline during the second and third quarter. Rising interest rates also reduced tax credit income due to the impact on tax credit projects carried at fair value.

	Linked quarter comparison													Prior year comparison
	Quarter ended													Quarter ended
($ in thousands)	June 30, 2022			March 31, 2022			Increase (decrease)							June 30, 2021			Increase (decrease)
BOLI	$	748		$	1,034		$	(286	)		(28	) %		$	728		$	20			3	%
Community development investments		193			2,166			(1,973	)		(91	) %			147			46			31	%
Mortgage banking		43			294			(251	)		(85	) %			773			(730	)		(94	) %
Private equity fund distribution		240			188			52			28	%			2,015			(1,775	)		(88	) %
Servicing fees		165			658			(493	)		(75	) %			476			(311	)		(65	) %
Swap fees		102			1,156			(1,054	)		(91	) %			21			81			386	%
Miscellaneous income		721			712			9			1	%			1,321			(600	)		(45	) %
Total other income	$	2,212		$	6,208		$	(3,996	)		(64	) %		$	5,481		$	(3,269	)		(60	) %

Other income in the linked quarter included $2.2 million of fees from community development investments and $1.2 million of swap income, compared to $0.3 million in the second quarter 2022 in these categories. The decrease from the prior year quarter was primarily due to a decline in transactional private equity distributions and a decline in mortgage banking revenue. These decreases were partially offset by First Choice noninterest income that contributed to the increase in deposit service charges on a year-over-year basis.

	Linked quarter comparison													Prior year comparison
	Quarter ended													Quarter ended
($ in thousands)	June 30, 2022			March 31, 2022			Increase (decrease)							June 30, 2021			Increase (decrease)
Employee compensation and benefits	$	36,028		$	35,827		$	201			1	%		$	28,132		$	7,896			28	%
Occupancy		4,309			4,586			(277	)		(6	) %			3,529			780			22	%
Merger-related expenses		—			—			—			—	%			1,949			(1,949	)		(100	) %
Other expense		25,087			22,387			2,700			12	%			18,846			6,241			33	%
Total noninterest expense	$	65,424		$	62,800		$	2,624			4	%		$	52,456		$	12,968			25	%

Noninterest expense was $65.4 million for the second quarter 2022, compared to $62.8 million for the linked quarter, and $52.5 million for the prior year quarter. Employee compensation and benefits increased $0.2 million from the linked quarter, which included a $1.2 million increase in ongoing compensation expense that was offset by a $1.2 million decline in payroll taxes. The compensation trend in the linked quarter was primarily driven by performance-based incentive accruals. Other expense increased $2.7 million from the linked quarter primarily due to a $1.6 million increase in deposit costs and a $0.8 million increase in loan and legal expenses due to growth in the loan portfolio. The increase from the prior year quarter was primarily due to the First Choice acquisition, merit increases provided to employees throughout 2021 and 2022 and an increase in deposit costs due to higher average balances and interest-rate trends.

For the second quarter 2022, the Company’s efficiency ratio was 52.8%, compared to 52.4% and 53.6% for the linked quarter and prior year quarter, respectively. The Company’s core efficiency ratio⁵ was 52.8% for the quarter ended June 30, 2022, compared to 52.4% for the linked quarter and 51.9% for the prior year quarter.

⁵ Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

Income Taxes

The Company’s effective tax rate was 22% for both the quarter ended June 30 and March 31, 2022, compared to 20% for the prior year quarter. The Company’s effective tax rate has increased due to growth of pre-tax income and the further expansion and diversification of the Company’s geographic footprint which affected state tax apportionment.

Capital

The following table presents various EFSC capital ratios for the most recent five quarters:

	Quarter ended
Percent	June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
Total risk-based capital to risk-weighted assets	14.2	%		14.4	%		14.7	%		14.5	%		14.9	%
Tier 1 capital to risk weighted assets	12.5	%		12.7	%		13.0	%		12.2	%		12.3	%
Common equity tier 1 capital to risk-weighted assets	10.9	%		11.0	%		11.3	%		11.2	%		11.1	%
Tangible common equity to tangible assets	7.8	%		7.6	%		8.1	%		8.4	%		8.3	%
Leverage ratio	9.8	%		9.6	%		9.7	%		9.7	%		9.4	%

Total equity was $1.4 billion at June 30, 2022, a decrease of $25.8 million from the linked quarter. The decrease from the linked quarter was primarily due to a $49.2 million decline in accumulated other comprehensive income, $15.9 million in share repurchases, and $9.1 million in common and preferred dividends. These decreases were partially offset by current period net income of $45.1 million. The decline in accumulated other comprehensive income was due to a net fair value decline in the Company’s fixed-rate, available-for-sale investment portfolio from an increase in interest rates during the period. The Company’s tangible common book value per share was $26.63 at June 30, 2022, compared to $27.06 and $26.85 in the linked and prior year quarters, respectively.

The Company’s regulatory capital ratios continue to exceed the “well-capitalized” regulatory benchmark. 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 tangible common equity, PPNR, PPNR return on average assets (“PPNR ROAA”), financial metrics adjusted for PPP impact, core efficiency ratio, 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 tangible common equity, PPNR, PPNR ROAA, financial metrics adjusted for PPP impact, core efficiency ratio, 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 certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures 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 10:00 a.m. Central Time on Tuesday, July 26, 2022. During the call, management will review the second quarter 2022 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” prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-888-550-5279 (Conference ID #7004515). A recorded replay of the conference call will be available on the website approximately two hours after the call’s completion. Visit https://bit.ly/EFSC2Q2022 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 Financial Services Corp

Enterprise Financial Services Corp (Nasdaq: EFSC), with approximately $13.1 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 branch offices in Arizona, California, Kansas, Missouri, Nevada, and New Mexico, and SBA loan and deposit production offices throughout the country. 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 contains “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 are 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 First Choice acquisition and other acquisitions.

Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “pro forma” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in the forward-looking statements and future results could differ materially from historical performance. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation: the Company’s ability to efficiently integrate acquisitions, including the First Choice 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 and market conditions, high unemployment rates, higher inflation and its impacts, U.S. fiscal debt, budget and tax matters, and any slowdown in global economic growth, 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 legislative or regulatory requirements, as well as current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including rules and regulations relating to bank products and financial services, changes in accounting policies and practices or accounting standards, changes in the method of determining LIBOR and the phase out of LIBOR, natural disasters, terrorist activities, war and geopolitical matters (including the war in Ukraine and the imposition of additional sanctions and export controls in connection therewith), or pandemics, including the COVID-19 pandemic, and their effects on economic and business environments in which we operate, including the ongoing disruption to the financial market and other economic activity caused by the continuing COVID-19 pandemic, and those factors and risks referenced from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and the Company’s other filings with the SEC. The Company cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Company’s results.

For any forward-looking statements made in this press release or in any documents, EFSC claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Readers are cautioned not to place undue reliance on any forward-looking statements. Except to the extent required by applicable law or regulation, EFSC disclaims any obligation to revise or publicly release any revision or update to any of the forward-looking statements included herein to reflect events or circumstances that occur after the date on which such statements were made.

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
	Quarter ended																				Six months ended
(in thousands, except per share data)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Jun 30, 2022				Jun 30, 2021
EARNINGS SUMMARY
Net interest income	$	109,613			$	101,165			$	102,060			$	97,273			$	81,738			$	210,778			$	160,861
Provision (benefit) for credit losses		658				(4,068	)			(3,660	)			19,668				(2,669	)			(3,410	)			(2,623	)
Noninterest income		14,194				18,641				22,630				17,619				16,204				32,835				27,494
Noninterest expense		65,424				62,800				63,694				76,885				52,456				128,224				105,340
Income before income tax expense		57,725				61,074				64,656				18,339				48,155				118,799				85,638
Income tax expense		12,576				13,381				13,845				4,426				9,750				25,957				17,307
Net income		45,149				47,693				50,811				13,913				38,405				92,842				68,331
Preferred stock dividends		938				1,229				—				—				—				2,167				—
Net income available to common shareholders	$	44,211			$	46,464			$	50,811			$	13,913			$	38,405			$	90,675			$	68,331
Diluted earnings per common share	$	1.19			$	1.23			$	1.33			$	0.38			$	1.23			$	2.41			$	2.18
Return on average assets		1.34	%			1.42	%			1.52	%			0.45	%			1.50	%			1.38	%			1.36	%
Return on average common equity		12.65	%			12.87	%			13.81	%			3.96	%			13.79	%			12.76	%			12.45	%
Return on average tangible common equity1		17.44	%			17.49	%			18.81	%			5.37	%			18.44	%			17.46	%			16.71	%
Net interest margin (tax equivalent)		3.55	%			3.28	%			3.32	%			3.40	%			3.46	%			3.41	%			3.48	%
Efficiency ratio		52.84	%			52.42	%			51.08	%			66.92	%			53.56	%			52.63	%			55.93	%
Core efficiency ratio1		52.81	%			52.43	%			49.22	%			51.30	%			51.86	%			52.62	%			53.38	%
Loans	$	9,269,176			$	9,056,073			$	9,017,642			$	9,116,583			$	7,226,267
Average loans	$	9,109,131			$	9,005,875			$	9,030,982			$	8,666,353			$	7,306,471			$	9,057,788			$	7,249,938
Assets	$	13,084,506			$	13,706,769			$	13,537,358			$	12,888,016			$	10,346,993
Average assets	$	13,528,474			$	13,614,003			$	13,267,193			$	12,334,558			$	10,281,344			$	13,571,002			$	10,111,641
Deposits	$	11,092,618			$	11,704,135			$	11,343,799			$	10,827,775			$	8,639,504
Average deposits	$	11,530,432			$	11,494,212			$	11,167,003			$	10,297,153			$	8,580,211			$	11,512,422			$	8,394,825
Period end common shares outstanding		37,206				37,516				37,820				38,372				31,185
Dividends per common share	$	0.22			$	0.21			$	0.20			$	0.19			$	0.18			$	0.43			$	0.36
Tangible book value per common share	$	26.63			$	27.06			$	28.28			$	27.38			$	26.85
Tangible common equity to tangible assets1		7.80	%			7.62	%			8.13	%			8.40	%			8.32	%
Total risk-based capital to risk-weighted assets		14.2	%			14.4	%			14.7	%			14.5	%			14.9	%
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																		Six months ended
($ in thousands, except per share data)	Jun 30, 2022			Mar 31, 2022				Dec 31, 2021				Sep 30, 2021			Jun 30, 2021				Jun 30, 2022				Jun 30, 2021
INCOME STATEMENTS
NET INTEREST INCOME
Interest income	$	116,069		$	106,581			$	107,641			$	103,228		$	87,401			$	222,650			$	172,361
Interest expense		6,456			5,416				5,581				5,955			5,663				11,872				11,500
Net interest income		109,613			101,165				102,060				97,273			81,738				210,778				160,861
Provision (benefit) for credit losses		658			(4,068	)			(3,660	)			19,668			(2,669	)			(3,410	)			(2,623	)
Net interest income after provision for credit losses		108,955			105,233				105,720				77,605			84,407				214,188				163,484
NONINTEREST INCOME
Deposit service charges		4,749			4,163				3,962				4,520			3,862				8,912				6,946
Wealth management revenue		2,533			2,622				2,687				2,573			2,516				5,155				4,999
Card services revenue		3,514			3,040				3,223				3,186			2,975				6,554				5,471
Tax credit income		1,186			2,608				4,374				3,325			1,370				3,794				329
Other income		2,212			6,208				8,384				4,015			5,481				8,420				9,749
Total noninterest income		14,194			18,641				22,630				17,619			16,204				32,835				27,494
NONINTEREST EXPENSE
Employee compensation and benefits		36,028			35,827				33,488				33,722			28,132				71,855				57,694
Occupancy		4,309			4,586				4,510				4,496			3,529				8,895				7,280
Branch closure expenses		—			—				—				3,441			—				—				—
Merger-related expenses		—			—				2,320				14,671			1,949				—				5,091
Other expense		25,087			22,387				23,376				20,555			18,846				47,474				35,275
Total noninterest expense		65,424			62,800				63,694				76,885			52,456				128,224				105,340
Income before income tax expense		57,725			61,074				64,656				18,339			48,155				118,799				85,638
Income tax expense		12,576			13,381				13,845				4,426			9,750				25,957				17,307
Net income	$	45,149		$	47,693			$	50,811			$	13,913		$	38,405			$	92,842			$	68,331
Preferred stock dividends		938			1,229				—				—			—				2,167				—
Net income available to common shareholders	$	44,211		$	46,464			$	50,811			$	13,913		$	38,405			$	90,675			$	68,331
Basic earnings per common share	$	1.19		$	1.23			$	1.33			$	0.38		$	1.23			$	2.42			$	2.19
Diluted earnings per common share	$	1.19		$	1.23			$	1.33			$	0.38		$	1.23			$	2.41			$	2.18

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021
BALANCE SHEETS
ASSETS
Cash and due from banks	$	271,763			$	252,706			$	209,177			$	179,826			$	126,789
Interest-earning deposits		680,343				1,735,708				1,819,508				1,216,470				889,960
Debt and equity investments		2,172,318				1,993,927				1,855,583				1,717,442				1,585,847
Loans held for sale		4,615				4,270				6,389				5,068				5,763
Loans		9,269,176				9,056,073				9,017,642				9,116,583				7,226,267
Allowance for credit losses		(140,546	)			(139,212	)			(145,041	)			(152,096	)			(128,185	)
Total loans, net		9,128,630				8,916,861				8,872,601				8,964,487				7,098,082
Fixed assets, net		46,028				46,900				47,915				48,697				50,972
Goodwill		365,164				365,164				365,164				365,415				260,567
Intangible assets, net		19,528				20,855				22,286				23,777				20,358
Other assets		396,117				370,378				338,735				366,834				308,655
Total assets	$	13,084,506			$	13,706,769			$	13,537,358			$	12,888,016			$	10,346,993
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	4,746,478			$	4,881,043			$	4,578,436			$	4,375,713			$	3,111,581
Interest-bearing deposits		6,346,140				6,823,092				6,765,363				6,452,062				5,527,923
Total deposits		11,092,618				11,704,135				11,343,799				10,827,775				8,639,504
Subordinated debentures		155,164				155,031				154,899				204,103				203,940
FHLB advances		50,000				50,000				50,000				50,000				50,000
Other borrowings		226,695				228,846				353,863				243,770				234,509
Other liabilities		112,617				95,580				105,681				122,733				100,739
Total liabilities		11,637,094				12,233,592				12,008,242				11,448,381				9,228,692
Shareholders’ equity:
Preferred stock		71,988				71,988				71,988				—				—
Common stock		372				395				398				404				330
Treasury stock		—				(73,528	)			(73,528	)			(73,528	)			(73,528	)
Additional paid-in capital		976,684				1,010,446				1,018,799				1,031,146				688,945
Retained earnings		506,849				523,136				492,682				461,711				474,282
Accumulated other comprehensive income (loss)		(108,481	)			(59,260	)			18,777				19,902				28,272
Total shareholders’ equity		1,447,412				1,473,177				1,529,116				1,439,635				1,118,301
Total liabilities and shareholders’ equity	$	13,084,506			$	13,706,769			$	13,537,358			$	12,888,016			$	10,346,993

	Six months ended
	June 30, 2022									June 30, 2021
($ in thousands)	Average Balance			Interest Income/ Expense			Average Yield/ Rate			Average Balance			Interest Income/ Expense			Average Yield/ Rate
Assets
Interest-earning assets:
Loans*	$	9,057,788		$	198,629		4.42	%		$	7,249,938		$	156,234		4.35	%
Securities*		1,996,442			23,913		2.42				1,460,179			18,044		2.49
Interest-earning deposits		1,590,569			3,313		0.42				743,645			426		0.12
Total interest-earning assets		12,644,799			225,855		3.60				9,453,762			174,704		3.73
Noninterest-earning assets		926,203									657,879
Total assets	$	13,571,002								$	10,111,641
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,416,889		$	1,194		0.10	%		$	1,936,707		$	664		0.07	%
Money market accounts		2,819,659			3,730		0.27				2,347,716			1,963		0.17
Savings		836,249			137		0.03				686,603			100		0.03
Certificates of deposit		599,067			1,648		0.55				529,860			2,403		0.91
Total interest-bearing deposits		6,671,864			6,709		0.20				5,500,886			5,130		0.19
Subordinated debentures		155,026			4,477		5.82				203,772			5,666		5.61
FHLB advances		50,000			392		1.58				50,000			392		1.58
Securities sold under agreements to repurchase		232,229			101		0.09				220,233			118		0.11
Other borrowings		22,123			193		1.76				27,894			194		1.40
Total interest-bearing liabilities		7,131,242			11,872		0.34				6,002,785			11,500		0.39
Noninterest-bearing liabilities:
Demand deposits		4,840,558									2,893,939
Other liabilities		94,129									108,135
Total liabilities		12,065,929									9,004,859
Shareholders' equity		1,505,073									1,106,782
Total liabilities and shareholders' equity	$	13,571,002								$	10,111,641
Total net interest income				$	213,983								$	163,204
Net interest margin							3.41	%								3.48	%
* Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $3.2 million and $2.3 million for the six months ended June 30, 2022 and 2021, respectively.

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021
LOAN PORTFOLIO
Commercial and industrial	$	3,596,701			$	3,398,723			$	3,392,375			$	3,379,171			$	2,930,805
Commercial real estate		4,294,375				4,278,138				4,176,928				4,179,712				3,200,748
Construction real estate		724,163				702,630				734,073				747,758				556,776
Residential real estate		413,727				432,639				454,052				542,690				305,497
Other		240,210				243,943				260,214				267,252				232,441
Total loans	$	9,269,176			$	9,056,073			$	9,017,642			$	9,116,583			$	7,226,267
DEPOSIT PORTFOLIO
Noninterest-bearing demand accounts	$	4,746,478			$	4,881,043			$	4,578,436			$	4,375,713			$	3,111,581
Interest-bearing demand accounts		2,197,957				2,547,482				2,465,884				2,253,639				2,013,129
Money market and savings accounts		3,562,982				3,678,135				3,691,186				3,571,252				3,000,460
Brokered certificates of deposit		129,064				129,017				128,970				128,923				50,209
Other certificates of deposit		456,137				468,458				479,323				498,248				464,125
Total deposits	$	11,092,618			$	11,704,135			$	11,343,799			$	10,827,775			$	8,639,504
AVERAGE BALANCES
Loans	$	9,109,131			$	9,005,875			$	9,030,982			$	8,666,353			$	7,306,471
Debt and equity investments		2,068,119				1,923,969				1,753,159				1,594,938				1,502,582
Interest-earning assets		12,579,211				12,711,116				12,373,149				11,513,279				9,615,981
Assets		13,528,474				13,614,003				13,267,193				12,334,558				10,281,344
Deposits		11,530,432				11,494,212				11,167,003				10,297,153				8,580,211
Shareholders’ equity		1,474,267				1,536,221				1,495,396				1,394,096				1,116,969
Tangible common equity1		1,016,940				1,077,529				1,071,902				1,028,001				835,405
YIELDS (tax equivalent)
Loans		4.51	%			4.34	%			4.32	%			4.32	%			4.35	%
Debt and equity investments		2.51				2.31				2.30				2.38				2.46
Interest-earning assets		3.76				3.45				3.50				3.60				3.70
Interest-bearing deposits		0.24				0.17				0.17				0.17				0.18
Deposits		0.13				0.10				0.10				0.11				0.12
Subordinated debentures		5.84				5.81				5.64				5.55				5.60
FHLB advances and other borrowed funds		0.51				0.41				0.43				0.43				0.49
Interest-bearing liabilities		0.37				0.30				0.31				0.35				0.37
Net interest margin		3.55				3.28				3.32				3.40				3.46
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

PPP details:

	Quarter ended
($ in thousands, except per share data)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021
PPP loans outstanding, net of deferred fees	$	49,175			$	134,084			$	271,958			$	438,959			$	396,660
Average PPP loans outstanding, net		89,152				194,382				365,295				489,104				664,375
PPP interest and fee income recognized		1,557				2,858				4,864				6,048				7,940
PPP deferred fees remaining		524				1,851				4,215				7,428				12,243
PPP average yield		7.01	%			5.96	%			5.28	%			4.91	%			4.79	%

	Quarter ended
	Jun 30, 2022								Mar 31, 2022								Dec 31, 2021								Sep 30, 2021								Jun 30, 2021
Financial Metrics:	As Reported				Excluding PPP*				As Reported				Excluding PPP*				As Reported				Excluding PPP*				As Reported				Excluding PPP*				As Reported				Excluding PPP*
EPS	$	1.19			$	1.15			$	1.23			$	1.17			$	1.33			$	1.23			$	0.38			$	0.25			$	1.23			$	1.04
ROAA		1.34	%			1.31	%			1.42	%			1.38	%			1.52	%			1.45	%			0.45	%			0.31	%			1.50	%			1.35	%
PPNR ROAA*		1.73	%			1.70	%			1.70	%			1.64	%			1.89	%			1.80	%			1.81	%			1.68	%			1.85	%			1.65	%
Tangible common equity/tangible assets*		7.80	%			7.83	%			7.62	%			7.70	%			8.13	%			8.31	%			8.40	%			8.71	%			8.32	%			8.66	%
Leverage ratio		9.8	%			9.8	%			9.6	%			9.7	%			9.7	%			10.0	%			9.7	%			10.2	%			9.4	%			10.0	%
NIM		3.55	%			3.52	%			3.28	%			3.23	%			3.32	%			3.26	%			3.40	%			3.33	%			3.46	%			3.36	%
Allowance for credit losses/loans		1.52	%			1.69	%			1.54	%			1.73	%			1.61	%			1.84	%			1.67	%			1.94	%			1.77	%			2.09	%
* Non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables. Calculations not adjusted for increase in average deposits or increase in deposit expense, as applicable. The ratio of allowance for credit losses to loans excludes all guaranteed loans, including PPP loans.

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
(in thousands, except per share data)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021
ASSET QUALITY
Net charge-offs (recoveries)	$	(175	)		$	1,521			$	3,263			$	1,850			$	869
Nonperforming loans		19,560				21,160				28,024				41,554				42,252
Classified assets		96,801				93,199				100,797				104,220				100,063
Nonperforming loans to total loans		0.21	%			0.23	%			0.31	%			0.46	%			0.58	%
Nonperforming assets to total assets		0.16	%			0.17	%			0.23	%			0.35	%			0.44	%
Allowance for credit losses to total loans		1.52	%			1.54	%			1.61	%			1.67	%			1.77	%
Allowance for credit losses to nonperforming loans		718.5	%			657.9	%			517.6	%			366.0	%			303.4	%
Net charge-offs (recoveries) to average loans -annualized		(0.01	) %			0.07	%			0.14	%			0.08	%			0.05	%
WEALTH MANAGEMENT
Trust assets under management	$	1,757,228			$	1,943,428			$	2,083,543			$	2,017,178			$	1,945,293
Trust assets under administration		2,184,019				2,400,679				2,556,266				2,486,152				2,487,545
MARKET DATA
Book value per common share	$	36.97			$	37.35			$	38.53			$	37.52			$	35.86
Tangible book value per common share1	$	26.63			$	27.06			$	28.28			$	27.38			$	26.85
Market value per share	$	41.50			$	47.31			$	47.09			$	45.28			$	46.39
Period end common shares outstanding		37,206				37,516				37,820				38,372				31,185
Average basic common shares		37,243				37,788				38,228				36,878				31,265
Average diluted common shares		37,282				37,858				38,311				36,946				31,312
CAPITAL
Total risk-based capital to risk-weighted assets		14.2	%			14.4	%			14.7	%			14.5	%			14.9	%
Tier 1 capital to risk-weighted assets		12.5	%			12.7	%			13.0	%			12.2	%			12.3	%
Common equity tier 1 capital to risk-weighted assets		10.9	%			11.0	%			11.3	%			11.2	%			11.1	%
Tangible common equity to tangible assets1		7.8	%			7.6	%			8.1	%			8.4	%			8.3	%
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
	Quarter ended																				Six months ended
($ in thousands)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Jun 30, 2022				Jun 30, 2021
CORE PERFORMANCE MEASURES
Net interest income	$	109,613			$	101,165			$	102,060			$	97,273			$	81,738			$	210,778			$	160,861
Noninterest income		14,194				18,641				22,630				17,619				16,204				32,835				27,494
Less gain (loss) on sale of other real estate owned		(90	)			19				—				335				549				(71	)			549
Core noninterest income		14,284				18,622				22,630				17,284				15,655				32,906				26,945
Total core revenue		123,897				119,787				124,690				114,557				97,393				243,684				187,806
Noninterest expense		65,424				62,800				63,694				76,885				52,456				128,224				105,340
Less branch closure expenses		—				—				—				3,441				—				—				—
Less merger-related expenses		—				—				2,320				14,671				1,949				—				5,091
Core noninterest expense		65,424				62,800				61,374				58,773				50,507				128,224				100,249
Core efficiency ratio		52.81	%			52.43	%			49.22	%			51.30	%			51.86	%			52.62	%			53.38	%

	Quarter ended
($ in thousands)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021
SHAREHOLDERS’ EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders’ equity	$	1,447,412			$	1,473,177			$	1,529,116			$	1,439,635			$	1,118,301
Less preferred stock		71,988				71,988				71,988				—				—
Less goodwill		365,164				365,164				365,164				365,415				260,567
Less intangible assets		19,528				20,855				22,286				23,777				20,358
Tangible common equity	$	990,732			$	1,015,170			$	1,069,678			$	1,050,443			$	837,376
Total assets	$	13,084,506			$	13,706,769			$	13,537,358			$	12,888,016			$	10,346,993
Less goodwill		365,164				365,164				365,164				365,415				260,567
Less intangible assets		19,528				20,855				22,286				23,777				20,358
Tangible assets	$	12,699,814			$	13,320,750			$	13,149,908			$	12,498,824			$	10,066,068
Tangible common equity to tangible assets		7.80	%			7.62	%			8.13	%			8.40	%			8.32	%

	Quarter Ended
($ in thousands)	Jun 30, 2022				Mar 31, 2022				Jun 30, 2021
AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE COMMON EQUITY
Average shareholder’s equity	$	1,474,267			$	1,536,221			$	1,116,969
Less average preferred stock		71,988				71,988				—
Less average goodwill		365,164				365,164				260,567
Less average intangible assets		20,175				21,540				20,997
Average tangible common equity	$	1,016,940			$	1,077,529			$	835,405
Net income available to common shareholders	$	44,211			$	46,464			$	38,405
Return on average tangible common equity		17.44	%			17.49	%			18.44	%

	Quarter ended																				Six months ended
($ in thousands)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Jun 30, 2022				Jun 30, 2021
CALCULATION OF PRE-PROVISION NET REVENUE
Net interest income	$	109,613			$	101,165			$	102,060			$	97,273			$	81,738			$	210,778			$	160,861
Noninterest income		14,194				18,641				22,630				17,619				16,204				32,835				27,494
Less noninterest expense		65,424				62,800				63,694				76,885				52,456				128,224				105,340
Branch closure expenses		—				—				—				3,441				—				—				—
Merger-related expenses		—				—				2,320				14,671				1,949				—				5,091
PPNR	$	58,383			$	57,006			$	63,316			$	56,119			$	47,435			$	115,389			$	88,106
Average assets	$	13,528,474			$	13,614,003			$	13,267,193			$	12,334,558			$	10,281,344			$	13,571,002			$	10,111,641
ROAA - GAAP net income		1.34	%			1.42	%			1.52	%			0.45	%			1.50	%			1.38	%			1.36	%
PPNR ROAA - PPNR		1.73	%			1.70	%			1.89	%			1.81	%			1.85	%			1.71	%			1.76	%

	Quarter Ended
($ in thousands, except per share data)	Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021
IMPACT OF PAYCHECK PROTECTION PROGRAM
Net income - GAAP	$	45,149			$	47,693			$	50,811			$	13,913			$	38,405
PPP interest and fee income		(1,557	)			(2,858	)			(4,864	)			(6,048	)			(7,940	)
Related tax effect		392				720				1,226				1,506				1,977
Adjusted net income - Non-GAAP	$	43,984			$	45,555			$	47,173			$	9,371			$	32,442
Preferred stock dividends		938				1,229				—				—				—
Adjusted net income available to common shareholders- Non-GAAP	$	43,046			$	44,326			$	47,173			$	9,371			$	32,442
Average diluted common shares		37,282				37,858				38,311				36,946				31,312
EPS - GAAP net income available to common shareholders	$	1.19			$	1.23			$	1.33			$	0.38			$	1.23
EPS - Adjusted net income available to common shareholders	$	1.15			$	1.17			$	1.23			$	0.25			$	1.04
Average Assets - GAAP	$	13,528,474			$	13,614,003			$	13,267,193			$	12,334,558			$	10,281,344
Average PPP loans, net		(89,152	)			(194,382	)			(365,295	)			(489,104	)			(664,375	)
Adjusted average assets - Non-GAAP	$	13,439,322			$	13,419,621			$	12,901,898			$	11,845,454			$	9,616,969
ROAA - GAAP net income		1.34	%			1.42	%			1.52	%			0.45	%			1.50	%
ROAA - Adjusted net income, adjusted average assets		1.31	%			1.38	%			1.45	%			0.31	%			1.35	%
PPNR - Non-GAAP (see reconciliation above)	$	58,383			$	57,006			$	63,316			$	56,119			$	47,435
PPP interest and fee income		(1,557	)			(2,858	)			(4,864	)			(6,048	)			(7,940	)
Adjusted PPNR - Non-GAAP	$	56,826			$	54,148			$	58,452			$	50,071			$	39,495
PPNR ROAA - PPNR		1.73	%			1.70	%			1.89	%			1.81	%			1.85	%
PPNR ROAA - adjusted PPNR, adjusted average assets		1.70	%			1.64	%			1.80	%			1.68	%			1.65	%
Tangible assets - Non-GAAP (see reconciliation above)	$	12,699,814			$	13,320,750			$	13,149,908			$	12,498,824			$	10,066,068
PPP loans outstanding, net		(49,175	)			(134,084	)			(271,958	)			(438,959	)			(396,660	)
Adjusted tangible assets - Non-GAAP	$	12,650,639			$	13,186,666			$	12,877,950			$	12,059,865			$	9,669,408
Tangible common equity Non-GAAP (see reconciliation above)	$	990,732			$	1,015,170			$	1,069,678			$	1,050,443			$	837,376
Tangible common equity to tangible assets		7.80	%			7.62	%			8.13	%			8.40	%			8.32	%
Tangible common equity to tangible assets - adjusted tangible assets		7.83	%			7.70	%			8.31	%			8.71	%			8.66	%
Average assets for leverage ratio	$	13,265,790			$	13,273,520			$	12,915,944			$	11,972,171			$	10,021,240
Average PPP loans, net		(89,152	)			(194,382	)			(365,295	)			(489,104	)			(664,375	)
Adjusted average assets for leverage ratio - Non-GAAP	$	13,176,638			$	13,079,138			$	12,550,649			$	11,483,067			$	9,356,865
Tier 1 capital	$	1,295,791			$	1,271,342			$	1,257,462			$	1,166,529			$	937,840
Leverage ratio		9.8	%			9.6	%			9.7	%			9.7	%			9.4	%
Leverage ratio - adjusted average assets for leverage ratio		9.8	%			9.7	%			10.0	%			10.2	%			10.0	%
Net interest income - tax equivalent	$	111,312			$	102,671			$	103,567			$	98,573			$	82,962
PPP interest and fee income		(1,557	)			(2,858	)			(4,864	)			(6,048	)			(7,940	)
Adjusted net interest income - tax equivalent	$	109,755			$	99,813			$	98,703			$	92,525			$	75,022
Average earning assets - GAAP	$	12,579,211			$	12,711,116			$	12,373,149			$	11,513,279			$	9,615,981
Average PPP loans, net		(89,152	)			(194,382	)			(365,295	)			(489,104	)			(664,375	)
Adjusted average earning assets - Non-GAAP	$	12,490,059			$	12,516,734			$	12,007,854			$	11,024,175			$	8,951,606
Net interest margin - tax equivalent		3.55	%			3.28	%			3.32	%			3.40	%			3.46	%
Net interest margin - tax equivalent - adjusted net interest income, adjusted average earning assets		3.52	%			3.23	%			3.26	%			3.33	%			3.36	%
Loans - GAAP	$	9,269,176			$	9,056,073			$	9,017,642			$	9,116,583			$	7,226,267
PPP and other guaranteed loans, net		(967,396	)			(1,023,509	)			(1,151,895	)			(1,277,452	)			(1,106,414	)
Adjusted loans - Non-GAAP	$	8,301,780			$	8,032,564			$	7,865,747			$	7,839,131			$	6,119,853
Allowance for credit losses	$	140,546			$	139,212			$	145,041			$	152,096			$	128,185
Allowance for credit losses/loans - GAAP		1.52	%			1.54	%			1.61	%			1.67	%			1.77	%
Allowance for credit losses/loans - adjusted loans		1.69	%			1.73	%			1.84	%			1.94	%			2.09	%

 

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