Enterprise Financial Reports First Quarter 2021 Results

Rhea-AI Summary

Enterprise Financial Services Corp (Nasdaq: EFSC) reported a net income of $29.9 million for Q1 2021, an increase of $1.0 million from the previous quarter and $17.1 million year-over-year. Earnings per share (EPS) was $0.96, down from $1.00 in the linked quarter but up from $0.48 in the prior year. The decrease in the provision for credit losses contributed to the positive results. The firm also announced the acquisition of First Choice, enhancing its asset base to $3.8 billion. Total loans increased by 33.6% year-over-year, aided by PPP and Seacoast loans.

Positive

• Net income rose by $17.1 million YoY.
• Total loans grew by 33.6% year-over-year, primarily due to the acquisition of Seacoast.
• The acquisition of First Choice expands EFSC's asset base to $3.8 billion.

Negative

• EPS decreased from $1.00 in the linked quarter to $0.96.
• Net interest margin (NIM) declined from 3.66% to 3.50% compared to the linked quarter.
• Noninterest income dropped by $7.2 million from the linked quarter.

Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $29.9 million for the first quarter 2021, an increase of $1.0 million compared to the linked fourth quarter (“linked quarter”) and an increase of $17.1 million from the prior year quarter. Earnings per diluted share (“EPS”) was $0.96 for the first quarter 2021, compared to $1.00 and $0.48 for the linked and prior year quarters, respectively.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, ‘Today we announced the acquisition of First Choice headquartered in Cerritos, California. This transaction strengthens our California presence with a pro forma asset base of $3.8 billion. I am excited about how this adds to our expected growth prospects and diversification of our business, particularly in close proximity to the successful first quarter core systems integration for Seacoast. We are off to a solid start in 2021, with earnings of $0.96 per share and continued execution on the Paycheck Protection Program (“PPP”) for the benefit of our customers. In addition, we issued our inaugural Environmental, Social and Governance report during March. I am pleased that we have taken the first step in reporting our ESG efforts and demonstrating the importance of our ESG objectives in meeting our mission.”

Highlights

• Earnings - Net income in the first quarter 2021 was $29.9 million, an increase of $1.0 million compared to the linked quarter and an increase of $17.1 million from the prior year quarter. EPS was $0.96 per diluted share for the first quarter 2021, compared to $1.00 and $0.48 per diluted share for the linked and prior year quarters, respectively. Merger-related expenses from the Seacoast transaction reduced net income $2.4 million, or $0.07 per share. The increase in net income and EPS from the prior year quarter was primarily due to a decrease of $22.2 million in the provision for credit losses.

• Pre-provision net revenue¹ (“PPNR”) - PPNR of $40.7 million in the first quarter 2021 decreased $6.8 million and increased $2.6 million from the linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to a decline in tax credit revenue and PPP fees. The increase from the prior year quarter was primarily from the Seacoast acquisition that was completed in the fourth quarter and income from PPP that started in the second quarter of 2020.

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

• Net interest income and net interest margin (“NIM”) - Net interest income of $79.1 million for the first quarter 2021 increased $1.7 million and $15.8 million from the linked quarter and prior year quarter, respectively. NIM was 3.50% for the first quarter 2021, compared to 3.66% and 3.79% for the linked quarter and prior year quarter, respectively.

• Noninterest income - Noninterest income of $11.3 million for the first quarter 2021 decreased $7.2 million and $2.1 million from the linked quarter and prior year quarter, respectively. The decrease was primarily due to a decline in tax credit activity caused by delays in projects, which declined $5.1 million from the linked quarter and $3.1 million from the prior year quarter.

• Loans - Total loans increased $63.8 million, or 3.6% on an annualized basis, from the linked quarter to $7.3 billion as of March 31, 2021. Year-over-year, loans grew $1.8 billion, or 33.6% from $5.5 billion as of March 31, 2020, primarily due to Seacoast loans of $1.2 billion upon acquisition and PPP loans of $737.7 million. Average loans totaled $7.2 billion for the quarter ended March 31, 2021 compared to $6.8 billion and $5.4 billion for the linked and prior year quarters, respectively.

PPP details:

	Quarter ended
($ in thousands, except per share data)	March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
PPP loans outstanding, net of deferred fees	$	737,660			$	698,645			$	819,100			$	807,814
Average PPP loans outstanding, net	692,161				806,697				813,244				634,632
PPP average loan size	220				187				216				224
PPP interest and fee income	8,475				10,261				5,226				4,083
PPP deferred fees	16,676				11,304				19,522				22,414
PPP average yield	4.97		%		5.06		%		2.56		%		2.59		%

	Quarter ended
	March 31, 2021								December 31, 2020								September 30, 2020								June 30, 2020
Financial Metrics:	As Reported				Excluding PPP*				As Reported				Excluding PPP*				As Reported				Excluding PPP*				As Reported				Excluding PPP*
EPS	$	0.96			$	0.75			$	1.00			$	0.73			$	0.68			$	0.53			$	0.56			$	0.44
ROAA	1.22		%		1.03		%		1.26		%		1.01		%		0.86		%		0.74		%		0.72		%		0.62		%
PPNR ROAA	1.66		%		1.41		%		2.07		%		1.78		%		1.81		%		1.73		%		1.87		%		1.81		%
Tangible common equity/tangible assets*	8.18		%		8.84		%		8.40		%		9.07		%		7.99		%		8.89		%		7.81		%		8.67		%
Leverage ratio	9.5		%		10.2		%		10.0		%		11.0		%		9.2		%		10.2		%

FAQ

What were the earnings results for EFSC in Q1 2021?

EFSC reported net income of $29.9 million and EPS of $0.96 for Q1 2021.

How did EFSC's loan portfolio perform in the first quarter of 2021?

Total loans increased by 3.6% from the linked quarter and 33.6% year-over-year.

What impact did the acquisition of First Choice have on EFSC?

The acquisition strengthened EFSC's asset base to $3.8 billion and enhanced its presence in California.

How did EFSC's net interest margin change in Q1 2021?

Net interest margin decreased to 3.50% in Q1 2021, down from 3.66% in the linked quarter.

What factors contributed to the changes in EFSC's income?

The increase in net income was primarily due to a decrease in the provision for credit losses.