Enterprise Financial Reports Fourth Quarter and Full Year 2022 Results

Rhea-AI Summary

Enterprise Financial Services Corp (Nasdaq: EFSC) reported strong financial results for Q4 2022, with net income of $60.0 million (or $1.58 per diluted share), marking increases of 19% quarter-over-quarter and 18% year-over-year. The net interest margin improved to 4.66%, reflecting a 56 basis point increase. Total loans reached $9.7 billion, a quarterly increase of $382 million (16% annualized). Full-year net income was $203.0 million, with a return on average assets of 1.52%. The company declared a $0.25 quarterly dividend, up from $0.24.

Positive

• Net income up 19% QoQ to $60.0 million.
• EPS recorded at $1.58, a new company record.
• Net interest margin increased by 56 basis points to 4.66%.
• Total loans grew by $382 million (16% annualized) to $9.7 billion.
• Full-year 2022 net income of $203.0 million, up from $133.1 million in 2021.
• Quarterly dividend increased to $0.25 per share.

Negative

• Noninterest income decreased 13% YoY to $59.2 million.
• Total deposits declined by $228.4 million from the previous quarter.

Fourth Quarter Results

• Net income of $60.0 million, $1.58 per diluted common share
• Net interest margin of 4.66%, quarterly increase of 56 basis points
• Total loans of $9.7 billion, quarterly increase of $382 million, or 16% annualized
• Return on Average Assets (“ROAA”) of 1.83%
• Return on Average Tangible Common Equity (“ROATCE”)¹ of 22.62%
• Tangible common equity to tangible assets¹ of 8.43%
• Tangible book value per share¹ of $28.67, quarterly increase of 7.7%
• Increased quarterly dividend $0.01 to $0.25 per common share for the first quarter 2023

2022 Results

• Net income of $203.0 million, or $5.31 per diluted common share
• ROAA of 1.52%
• ROATCE¹ of 19.10%
• Repurchased 700,473 shares and increased annual dividend 20%

ST. LOUIS--(BUSINESS WIRE)-- Jim Lally, President and Chief Executive Officer of Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”), commented, “We finished 2022 with strong financial results in the fourth quarter and the full year. Our performance is a result of our commitment to building partnerships with our clients, the execution of our strategic initiatives and our diversified business platform. We reported earnings per share (“EPS”) of $1.58 for the fourth quarter and $5.31 for 2022, both of which are records for the Company. We also achieved loan growth of 16% and 8% for the fourth quarter, annualized, and full year, respectively. Our record earnings in the fourth quarter resulted in a 1.83% return on average assets and a 22.62% return on average tangible common equity.¹ For the full year, we had a 1.52% return on average assets and a 19.10% return on average tangible common equity.¹ As we look to 2023, we are excited for the opportunity to continue the strong momentum we built during 2022.”

1 Return on average tangible common equity, tangible common equity to tangible assets, and tangible book value per share are non-GAAP measures. Please refer to discussion and reconciliation of this measure in the accompanying financial tables.

Full-Year Highlights

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

For 2022, net income was $203.0 million, or $5.31 per diluted share, compared to $133.1 million, or $3.86 per diluted share, in 2021. Pre-provision net revenue (“PPNR”)² for 2022 was $258.8 million, compared to $207.5 million in 2021. Organic earning-asset growth and expansion of net interest margin due to the increase in market interest rates were the primary contributors to the PPNR increase in 2022. Additionally, 2022 included the first full year of operations from the FCBP acquisition.

The Company’s asset sensitive balance sheet benefited from the increase in market interest rates during 2022. Net interest margin (“NIM”) expanded to 3.89% in 2022, from 3.41% in 2021. The increase in NIM and average interest-earning asset growth of $1.7 billion resulted in total net interest income of $473.9 million in 2022, a 32% increase from $360.2 million in 2021.

Noninterest income was $59.2 million, a decrease of 13% from $67.7 million in 2021. While the increase in interest rates benefited net interest income, higher interest rates resulted in lower mortgage banking and tax credit income. The Company also became subject to the Durbin Amendment limitation on interchange income in 2022, which reduced card services revenue. Total noninterest expense was $274.2 million in 2022, a 12% increase from $245.9 million in 2021. However, the core efficiency ratio³ remained stable at 49.8% in 2022, compared to 49.5% in 2021.

Credit quality remained favorable, with nonperforming assets declining to 0.08% of total assets, from 0.23% at the end of 2021. Net charge-offs were 0.04% of average loans in 2022, compared to 0.14% in 2021. The improvements in credit quality resulted in the allowance for credit losses declining to 1.41% of total loans at the end of 2022, from 1.61% at the end of 2021. Excluding guaranteed portions of loans, which includes Paycheck Protection Program (“PPP”) loans, the allowance to loans ratio was 1.56% and 1.84% at the end of 2022 and 2021, respectively. The allowance for credit losses to nonperforming loans increased year-over-year as nonperforming loans declined $18.0 million, or 64%, from the prior year. A provision benefit of $0.6 million was recorded in 2022, compared to a provision expense of $13.4 million in 2021.

The Company maintained a strong liquidity position in 2022, with total deposits of $10.8 billion, a loan-to-deposit ratio of 89.9% and cash and investment securities of $2.6 billion. This compares to total deposits of $11.3 billion, a loan-to-deposit ratio of 79.5% and cash and investment securities of $3.9 billion in 2021. Total deposits include a significant non-interest bearing deposit portfolio that comprises 42.9% of total deposits at December 31, 2022.

Total shareholders’ equity was $1.5 billion at the end of both 2022 and 2021. Net income of $203.0 million was partially offset by a decline in the fair value of available for sale investment securities of $149.8 million from the increase in market interest rates. In addition, the Company returned $66.5 million to common shareholders through dividends of $33.6 million, or $0.90 per share, and share repurchases of $32.9 million in 2022.

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

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

Fourth Quarter Highlights

• Earnings - Net income in the fourth quarter 2022 was $60.0 million, an increase of $9.8 million compared to the linked quarter and an increase of $9.2 million from the prior year quarter. EPS was $1.58 per diluted common share for the fourth quarter 2022, compared to $1.32 and $1.33 per diluted common share for the linked and prior year quarters, respectively.
• PPNR - PPNR² of $78.6 million in the fourth quarter 2022 increased $13.7 million and $15.2 million from the linked and prior year quarters, respectively. The increase from both the linked and prior year quarters was primarily due to an increase in operating revenue, partially offset by an increase in noninterest expense.
• Net interest income and NIM - Net interest income of $138.8 million for the fourth quarter 2022 increased $14.5 million and $36.8 million from the linked and prior year quarters, respectively. NIM was 4.66% for the fourth quarter 2022, compared to 4.10% and 3.32% for the linked and prior year quarters, respectively. Net interest income and NIM benefited from higher average loan and investment balances and expanding yields on earning assets, partially offset by higher deposit costs and a decline in average interest-earning cash.
• Noninterest income - Noninterest income of $16.9 million for the fourth quarter 2022 increased $7.4 million from the linked quarter and declined $5.8 million from the prior year quarter. The increase from the linked quarter was primarily due to an increase in tax credit income and fees earned on community development investments. Tax credit income in the linked quarter was lower due to the impact from the increase in certain market interest rates on tax credit projects carried at fair value. The decrease in noninterest income from the prior year quarter was primarily due to lower fees from community development investments, tax credit income and card services revenue.
• Loans - Total loans increased $382.2 million from the linked quarter to $9.7 billion as of December 31, 2022. Loans grew 16.5%, on an annualized basis, from the linked quarter and 11.3% for the year when excluding PPP loan balances. Average loans totaled $9.4 billion for the fourth quarter 2022, compared to $9.2 billion and $9.0 billion for the linked and prior year quarters, respectively.
• Asset quality - The allowance for credit losses to loans was 1.41% at December 31, 2022, compared to 1.50% at September 30, 2022 and 1.61% at December 31, 2021. Nonperforming assets to total assets was 0.08% at December 31, 2022, compared to 0.14% and 0.23% at September 30, 2022 and December 31, 2021, respectively. A provision for credit losses of $2.1 million and $0.7 million was recorded in the fourth quarter 2022 and the linked quarter, respectively. A provision benefit of $3.7 million was recorded in the prior year quarter.
• Deposits - Total deposits decreased $228.4 million from $11.1 billion as of the linked quarter to $10.8 billion as of December 31, 2022. The Company has actively managed its deposit rates to remain competitive and to support deposit retention. This has been accomplished while maintaining a relatively low increase in deposit yields compared to the overall increase in market interest rates. The decline in deposits from the linked quarter and the end of the prior year was due primarily 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. Additionally, certain large deposit outflows experienced in the year were related to customer business transactions. Average deposits totaled $11.0 billion for the fourth quarter 2022, compared to $11.2 billion for both the linked and prior year quarters. At December 31, 2022, noninterest-bearing deposit accounts represented 42.9% of total deposits, and the loan to deposit ratio was 89.9%.
• Capital - Total shareholders’ equity was $1.5 billion and the tangible common equity to tangible assets ratio¹ was 8.4% at December 31, 2022, compared to 7.9% at September 30, 2022. Enterprise Bank & Trust remains “well-capitalized,” with a common equity tier 1 ratio of 12.1% and a total risk-based capital ratio of 13.1% as of December 31, 2022. The Company’s common equity tier 1 ratio and total risk-based capital ratio was 11.1% and 14.2%, respectively, at December 31, 2022.

The Company’s Board of Directors approved a quarterly dividend of $0.25 per common share, payable on March 31, 2023 to shareholders of record as of March 15, 2023, an increase of $0.01, or 4%, compared to the fourth 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) December 15, 2022 to (but excluding) March 15, 2023. The dividend will be payable on March 15, 2023 to shareholders of record on February 28, 2023.

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
	December 31, 2022									September 30, 2022									December 31, 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:
Loans1, 2	$	9,423,984		$	139,432		5.87	%		$	9,230,738		$	118,642		5.10	%		$	9,030,982		$	98,412		4.32	%
Securities2		2,204,211			16,191		2.91				2,202,255			14,717		2.65				1,753,159			10,146		2.30
Interest-earning deposits		367,100			3,097		3.35				765,258			4,190		2.17				1,589,008			590		0.15
Total interest-earning assets		11,995,295			158,720		5.25				12,198,251			137,549		4.47				12,373,149			109,148		3.50
Noninterest-earning assets		991,273									959,870									894,044
Total assets	$	12,986,568								$	13,158,121								$	13,267,193
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,242,268		$	4,136		0.73	%		$	2,200,619		$	1,707		0.31	%		$	2,383,059		$	491		0.08	%
Money market accounts		2,696,417			9,509		1.40				2,791,822			6,067		0.86				2,853,655			1,412		0.20
Savings accounts		775,488			100		0.05				828,747			69		0.03				776,695			64		0.03
Certificates of deposit		524,938			1,017		0.77				554,987			844		0.60				616,347			831		0.53
Total interest-bearing deposits		6,239,111			14,762		0.94				6,376,175			8,687		0.54				6,629,756			2,798		0.17
Subordinated debentures and notes		155,359			2,376		6.07				155,225			2,313		5.91				171,453			2,439		5.64
FHLB advances		8,864			104		4.65				25,543			103		1.60				50,000			199		1.58
Securities sold under agreements to repurchase		182,362			282		0.61				198,027			123		0.25				246,525			60		0.10
Other borrowings		26,993			378		5.56				19,984			179		3.55				24,270			85		1.39
Total interest-bearing liabilities		6,612,689			17,902		1.07				6,774,954			11,405		0.67				7,122,004			5,581		0.31
Noninterest-bearing liabilities:
Demand deposits		4,763,503									4,778,720									4,537,247
Other liabilities		119,784									109,943									112,546
Total liabilities		11,495,976									11,663,617									11,771,797
Shareholders' equity		1,490,592									1,494,504									1,495,396
Total liabilities and shareholders' equity	$	12,986,568								$	13,158,121								$	13,267,193
Total net interest income				$	140,818								$	126,144								$	103,567
Net interest margin							4.66	%								4.10	%								3.32	%
1 Average balances include nonaccrual loans. Interest income includes loan fees of $3.7 million, $3.6 million, and $6.3 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively.
2 Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $2.0 million, $1.9 million, and $1.5 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively.

Net interest income for the fourth quarter was $138.8 million, an increase of $14.5 million from the linked quarter and an increase of $36.8 million from the prior year period. Interest income increased during the quarter due to an increase in certain market interest rates combined with organic loan growth, driving the 11.7% increase in net interest income over the linked quarter. The effective federal funds rate for the fourth quarter 2022 was 3.65%, an increase of 145 basis points, compared to the linked quarter, and a 357 basis point increase over the prior year quarter. Average total loans increased $193.2 million, or 8.3% on an annualized basis, from the linked quarter. The increase in loan interest income was partially offset by higher interest expense on the deposit portfolio, which also reflects an increase in interest rates.

The earning asset yield was 5.25% in the fourth quarter 2022, an increase of 78 basis points compared to the linked quarter. The average loan yield was 5.87% in the fourth quarter 2022, an increase of 77 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 6.64%. Approximately 17% of the variable-rate loan portfolio reprices on the first day of each quarter and thus, interest income in the period did not benefit from the current quarter’s rate movement. These loans will reset early in the first quarter of 2023.

The average investment yield was 2.91%, an increase of 26 basis points from the linked quarter, while the average investment balance remained relatively stable. The investment yield increased due to the purchase of new investments at higher yields. Investments purchased in the fourth quarter 2022 had a tax equivalent average yield of 5.14%. The yield on interest earning cash deposits was 3.35%, an increase of 118 basis points from the linked quarter, while the average balance declined $398.2 million from the linked quarter to $367.1 million in the fourth quarter 2022.

The interest-bearing liability yield was 1.07% in the fourth quarter 2022, an increase of 40 basis points compared to the linked quarter. The average cost of interest-bearing deposits was 0.94% in the fourth quarter 2022, an increase of 40 basis points over the linked quarter. The increase was primarily due to higher rates paid on money market accounts, which increased 54 basis points to 1.40% in the fourth quarter 2022, and interest bearing demand deposits that increased 42 basis points to 0.73% in the current quarter. The total cost of deposits, including noninterest-bearing demand accounts, was 53 basis points during the fourth quarter 2022.

NIM, on a tax equivalent basis, was 4.66% in the fourth quarter 2022, an increase of 56 basis points from the linked quarter and an increase of 134 basis points from the prior year quarter, as changing interest rates had a greater impact on assets with variable interest rates than on deposit costs. The pace of deposit rate increases has continued to lag the increase in loan rates, resulting in a positive impact on our NIM.

Loans

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

	Quarter ended
($ in thousands)	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
C&I	$	1,904,654			$	1,780,677			$	1,641,740			$	1,438,607			$	1,478,689
CRE investor owned		2,176,424				2,106,458				1,977,806				1,982,645				1,955,087
CRE owner occupied		1,174,094				1,133,467				1,118,895				1,138,106				1,112,463
SBA loans*		1,312,378				1,269,065				1,284,279				1,249,929				1,241,449
Sponsor finance*		635,061				650,102				647,180				641,476				508,469
Life insurance premium finance*		817,115				779,606				748,376				695,640				653,028
Tax credits*		559,605				507,681				550,662				518,020				486,881
SBA PPP loans		7,272				13,165				49,175				134,084				271,958
Residential real estate		379,924				381,634				391,867				410,173				430,985
Construction and land development		534,753				513,452				626,577				610,830				625,526
Other		235,858				219,680				232,619				236,563				253,107
Total loans	$	9,737,138			$	9,354,987			$	9,269,176			$	9,056,073			$	9,017,642
Total loan yield		5.87	%			5.10	%			4.51	%			4.34	%			4.32	%
Variable interest rate loans to total loans		63	%			63	%			64	%			63	%			63	%
Certain prior period amounts have been reclassified among the categories to conform to the current period presentation.
*Specialty loan category

Loans totaled $9.7 billion at December 31, 2022, increasing $382.2 million, compared to the linked quarter. Excluding PPP loans, loans grew $388.0 million, or 16.5% on an annualized basis, from the linked quarter. The increase was driven primarily by C&I and CRE loans with an increase of $124.0 million and $110.6 million, respectively. The specialty lending areas also increased, specifically in tax credits, SBA, and life insurance premium finance, partially offset by a small decline in sponsor finance. Average line utilization was approximately 41% for the quarter ended December 31, 2022, compared to 43% and 40% for the linked and prior year quarters, respectively.

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, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Nonperforming loans*	$	9,981			$	18,184			$	19,560			$	21,160			$	28,024
Other real estate		269				269				955				1,459				3,493
Nonperforming assets*	$	10,250			$	18,453			$	20,515			$	22,619			$	31,517
Nonperforming loans to total loans		0.10	%			0.19	%			0.21	%			0.23	%			0.31	%
Nonperforming assets to total assets		0.08	%			0.14	%			0.16	%			0.17	%			0.23	%
Allowance for credit losses to loans		1.41	%			1.50	%			1.52	%			1.54	%			1.61	%
Net charge-offs (recoveries)	$	2,075			$	478			$	(175	)		$	1,521			$	3,263
*Guaranteed balances excluded	$	6,708			$	6,532			$	6,063			$	3,954			$	6,481

Nonperforming assets declined $8.2 million during the fourth quarter 2022 and $21.3 million from the prior year quarter. Net charge-offs to average loans were nine basis points in the fourth quarter 2022, compared to two basis points in the linked quarter and 14 basis points in the prior year quarter. The Company recorded a provision for credit losses of $2.1 million in the fourth quarter 2022, compared to a provision for credit losses of $0.7 million in the linked quarter and a provision benefit of $3.7 million in the prior year quarter when economic forecasts were improving. The provision for credit losses in the fourth quarter primarily relates to growth in loans and unfunded commitments and a modest deterioration of economic forecasts, partially offset by an overall improvement in credit quality.

The allowance for credit losses to loans was 1.41% at December 31, 2022, a decrease of nine basis points from the linked quarter. The decline in nonperforming loans and a related decrease in specific loan reserves, along with a shift in the composition of the loan portfolio to categories with lower reserve levels, drove the decline in the ratio of allowance for credit losses to loans. This decline was partially offset by a modest decline in economic forecasts. Loan growth in the quarter was primarily in commercial real estate and C&I loans that generally have a lower reserve level. The ratio of allowance for credit losses to nonperforming loans increased in the current quarter as nonperforming loans declined $8.2 million and $18.0 million from the linked and prior year quarter, respectively.

Deposits

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

	Quarter ended
($ in thousands)	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Noninterest-bearing demand accounts	$	4,642,732			$	4,642,539			$	4,746,478			$	4,881,043			$	4,578,436
Interest-bearing demand accounts		2,256,295				2,270,898				2,197,957				2,547,482				2,465,884
Money market and savings accounts		3,399,415				3,617,249				3,562,982				3,678,135				3,691,186
Brokered certificates of deposit		118,968				129,039				129,064				129,017				128,970
Other certificates of deposit		411,740				397,869				456,137				468,458				479,323
Total deposit portfolio	$	10,829,150			$	11,057,594			$	11,092,618			$	11,704,135			$	11,343,799
Noninterest-bearing deposits to total deposits		42.9	%			42.0	%			42.8	%			41.7	%			40.4	%
Total cost of deposits		0.53	%			0.31	%			0.13	%			0.10	%			0.10	%

Total deposits at December 31, 2022 were $10.8 billion, a decrease of $228.4 million from September 30, 2022, and a decrease of $514.6 million from December 31, 2021. Deposits declined from the end of the prior year due primarily to the managed run-off of certain interest-rate sensitive, large balance accounts and reflects a shift in the deposit mix aligned with the Company’s disciplined focus on relationship-based, lower-cost deposits. These customers were single service customers and were not part of broader banking relationships.

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)	December 31, 2022			September 30, 2022				Increase (decrease)							December 31, 2021			Increase (decrease)
Deposit service charges		4,463			4,951			$	(488	)		(10	) %		$	3,962		$	501			13	%
Wealth management revenue		2,423			2,432				(9	)		—	%			2,687			(264	)		(10	) %
Card services revenue		2,345			2,652				(307	)		(12	) %			3,223			(878	)		(27	) %
Tax credit income (loss)		2,389			(3,625	)			6,014			166	%			4,374			(1,985	)		(45	) %
Other income		5,253			3,044				2,209			73	%			8,384			(3,131	)		(37	) %
Total noninterest income	$	16,873		$	9,454			$	7,419			78	%		$	22,630		$	(5,757	)		(25	) %

Total noninterest income for the fourth quarter 2022 was $16.9 million, an increase of $7.4 million from the linked quarter and a decrease of $5.8 million from the prior year quarter. The increase from the linked quarter was primarily due to an increase in tax credit income and fees earned on community development investments (included in Other income). Tax credit income in the current quarter was higher as market interest rates did not negatively impact tax credits held at fair value and tax credit sales reflected seasonal activity. Conversely, an increase in certain interest rates in the third quarter 2022 increased the discount rate used in the fair value of these projects, resulting in a lower fair value. The decrease in noninterest income from the prior year quarter was primarily due to lower fees from community development investments, lower tax credit income, and lower card services revenue. The Durbin Amendment limits the amount of interchange income the Company can earn on debit card transactions. This limitation went into effect for the Company in the third quarter 2022 and reduced card services revenue.

	Linked quarter comparison													Prior year comparison
	Quarter ended													Quarter ended
($ in thousands)	December 31, 2022			September 30, 2022			Increase (decrease)							December 31, 2021			Increase (decrease)
BOLI	$	773		$	769		$	4			1	%		$	746		$	27			4	%
Community development investments		2,775			170			2,605			1,532	%			4,966			(2,191	)		(44	) %
Mortgage banking		—			45			(45	)		(100	) %			507			(507	)		(100	) %
Private equity fund distribution		433			64			369			577	%			573			(140	)		(24	) %
Servicing fees		181			655			(474	)		(72	) %			269			(88	)		(33	) %
Swap fees		189			166			23			14	%			108			81			75	%
Miscellaneous income		902			1,175			(273	)		(23	) %			1,215			(313	)		(26	) %
Total other income	$	5,253		$	3,044		$	2,209			73	%		$	8,384		$	(3,131	)		(37	) %

Community development and private equity distributions included in other income are not consistent sources of income and fluctuate based on distributions from the underlying funds. Servicing fee income is primarily earned from servicing SBA loans and may fluctuate based on prepayment experience and changes to the discount rate used in the valuation of the servicing rights. Mortgage banking revenue has declined since the prior year quarter due to higher interest rates, which have reduced sales volume.

	Linked quarter comparison													Prior year comparison
	Quarter ended													Quarter ended
($ in thousands)	December 31, 2022			September 30, 2022			Increase (decrease)							December 31, 2021			Increase (decrease)
Employee compensation and benefits	$	38,175		$	36,999		$	1,176			3	%		$	33,488		$	4,687			14	%
Occupancy		4,248			4,497			(249	)		(6	) %			4,510			(262	)		(6	) %
Deposit costs		13,256			7,661			5,595			73	%			4,745			8,511			179	%
Merger-related expenses		—			—			—			—	%			2,320			(2,320	)		(100	) %
Other expense		21,470			19,686			1,784			9	%			18,631			2,839			15	%
Total noninterest expense	$	77,149		$	68,843		$	8,306			12	%		$	63,694		$	13,455			21	%

Noninterest expense was $77.1 million for the fourth quarter 2022, compared to $68.8 million for the linked quarter, and $63.7 million for the prior year quarter. Employee compensation and benefits increased $1.2 million from the linked quarter primarily due to higher performance-based incentive accruals, resulting from fourth quarter growth and continued overall improvement in the Company’s financial performance. Deposit costs increased $5.6 million and $8.5 million from the linked and prior year quarters, respectively, primarily due to variable deposit costs in certain of the Company’s specialized deposit businesses that are impacted by higher interest rates, as well as increasing average balances. The increase in noninterest expense of $13.5 million from the prior year quarter was primarily due to an $8.5 million increase in deposit costs that are higher due to growth in specialized deposits and the increase in market interest rates; a $4.7 million increase in employee compensation from merit increases throughout 2021 and 2022 and growth in the associate base; and generally higher operating expenses due to an expanded business platform (e.g. first full year for First Choice). These increases were partially offset by a reduction of $2.3 million in merger costs from the First Choice acquisition recognized in the prior year quarter.

For the fourth quarter 2022, the Company’s efficiency ratio was 49.6%, compared to 51.5% and 51.1% for the linked quarter and prior year quarter, respectively. The Company’s core efficiency ratio³ was 48.1% for the quarter ended December 31, 2022, compared to 49.8% for the linked quarter and 47.5% for the prior year quarter.

3 Core efficiency ratio is a non-GAAP measure. Please 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 December 31, 2022 and September 30, 2022, compared to 21% for the prior year quarter.

Capital

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

	Quarter ended
Percent	December 31, 2022*				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Shareholders’ equity	$	1,522,263			$	1,446,218			$	1,447,412			$	1,473,177			$	1,529,116
Total risk-based capital to risk-weighted assets		14.2	%			14.2	%			14.2	%			14.4	%			14.7	%
Tier 1 capital to risk weighted assets		12.6	%			12.6	%			12.5	%			12.7	%			13.0	%
Common equity tier 1 capital to risk-weighted assets		11.1	%			11.0	%			10.9	%			11.0	%			11.3	%
Tangible common equity to tangible assets		8.4	%			7.9	%			7.8	%			7.6	%			8.1	%
Leverage ratio		10.9	%			10.4	%			9.8	%			9.6	%			9.7	%
*Capital ratios for the current quarter are preliminary and subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review.

Total equity was $1.5 billion at December 31, 2022, an increase of $76.0 million from the linked quarter. The increase from the linked quarter was primarily due to the current quarter’s net income of $60.0 million and a $22.9 million increase in accumulated other comprehensive income. The increase in accumulated other comprehensive income was due to a net fair value increase in the Company’s fixed-rate, available-for-sale investment portfolio from changes in market interest rates during the period, partially offsetting the unrealized losses recognized earlier in 2022. Offsetting these increases were $9.9 million in common and preferred dividends. The Company’s tangible common book value per share increased 7.7% in the current quarter to $28.67 at December 31, 2022, compared to $26.62 and $28.28 in the linked and prior year quarters, respectively. The Company’s regulatory capital ratios continue to exceed the “well-capitalized” regulatory benchmark.

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, ROATCE, financial metrics adjusted for PPP impact, core efficiency ratio, the tangible common equity ratio, and tangible book value per share, 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, ROATCE, financial metrics adjusted for PPP impact, core efficiency ratio, the tangible common equity ratio, and tangible book value per share, 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, that 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, January 24, 2023. During the call, management will review the fourth 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/EFSC4Q2022 to register. 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,” “opportunity,” “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 (including U.S. federal government measures to address higher inflation), 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																				Year ended
(in thousands, except per share data)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
EARNINGS SUMMARY
Net interest income	$	138,835			$	124,290			$	109,613			$	101,165			$	102,060			$	473,903			$	360,194
Provision (benefit) for credit losses		2,123				676				658				(4,068	)			(3,660	)			(611	)			13,385
Noninterest income		16,873				9,454				14,194				18,641				22,630				59,162				67,743
Noninterest expense		77,149				68,843				65,424				62,800				63,694				274,216				245,919
Income before income tax expense		76,436				64,225				57,725				61,074				64,656				259,460				168,633
Income tax expense		16,435				14,025				12,576				13,381				13,845				56,417				35,578
Net income		60,001				50,200				45,149				47,693				50,811				203,043				133,055
Preferred stock dividends		937				937				938				1,229				—			$	4,041			$	—
Net income available to common shareholders	$	59,064			$	49,263			$	44,211			$	46,464			$	50,811			$	199,002			$	133,055
Diluted earnings per common share	$	1.58			$	1.32			$	1.19			$	1.23			$	1.33			$	5.31			$	3.86
Return on average assets		1.83	%			1.51	%			1.34	%			1.42	%			1.52	%			1.52	%			1.16	%
Return on average common equity		16.52	%			13.74	%			12.65	%			12.87	%			13.81	%			13.95	%			10.49	%
ROATCE1		22.62	%			18.82	%			17.44	%			17.49	%			18.81	%			19.10	%			14.18	%
Net interest margin (tax equivalent)		4.66	%			4.10	%			3.55	%			3.28	%			3.32	%			3.89	%			3.41	%
Efficiency ratio		49.55	%			51.47	%			52.84	%			52.42	%			51.08	%			51.44	%			57.47	%
Core efficiency ratio1		48.10	%			49.81	%			51.11	%			50.58	%			47.45	%			49.79	%			49.47	%
Loans	$	9,737,138			$	9,354,987			$	9,269,176			$	9,056,073			$	9,017,642
Average loans	$	9,423,984			$	9,230,738			$	9,109,131			$	9,005,875			$	9,030,982			$	9,193,682			$	8,055,873
Assets	$	13,054,172			$	12,994,787			$	13,084,506			$	13,706,769			$	13,537,358
Average assets	$	12,986,568			$	13,158,121			$	13,528,474			$	13,614,003			$	13,267,193			$	13,319,624			$	11,467,310
Deposits	$	10,829,150			$	11,057,594			$	11,092,618			$	11,704,135			$	11,343,799
Average deposits	$	11,002,614			$	11,154,895			$	11,530,432			$	11,494,212			$	11,167,003			$	11,293,806			$	9,573,056
Period end common shares outstanding		37,253				37,223				37,206				37,516				37,820
Dividends per common share	$	0.24			$	0.23			$	0.22			$	0.21			$	0.20			$	0.90			$	0.75
Tangible book value per common share1	$	28.67			$	26.62			$	26.63			$	27.06			$	28.28
Tangible common equity to tangible assets1		8.43	%			7.86	%			7.80	%			7.62	%			8.13	%
Total risk-based capital to risk-weighted assets		14.2	%			14.2	%			14.2	%			14.4	%			14.7	%
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, 2022			Sep 30, 2022				Jun 30, 2022			Mar 31, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
INCOME STATEMENTS
NET INTEREST INCOME
Interest income	$	156,737		$	135,695			$	116,069		$	106,581			$	107,641			$	515,082			$	383,230
Interest expense		17,902			11,405				6,456			5,416				5,581				41,179				23,036
Net interest income		138,835			124,290				109,613			101,165				102,060				473,903				360,194
Provision (benefit) for credit losses		2,123			676				658			(4,068	)			(3,660	)			(611	)			13,385
Net interest income after provision (benefit) for credit losses		136,712			123,614				108,955			105,233				105,720				474,514				346,809
NONINTEREST INCOME
Deposit service charges		4,463			4,951				4,749			4,163				3,962				18,326				15,428
Wealth management revenue		2,423			2,432				2,533			2,622				2,687				10,010				10,259
Card services revenue		2,345			2,652				3,514			3,040				3,223				11,551				11,880
Tax credit income (loss)		2,389			(3,625	)			1,186			2,608				4,374				2,558				8,028
Other income		5,253			3,044				2,212			6,208				8,384				16,717				22,148
Total noninterest income		16,873			9,454				14,194			18,641				22,630				59,162				67,743
NONINTEREST EXPENSE
Employee compensation and benefits		38,175			36,999				36,028			35,827				33,488				147,029				124,904
Occupancy		4,248			4,497				4,309			4,586				4,510				17,640				16,286
Branch closure expenses		—			—				—			—				—				—				3,441
Merger-related expenses		—			—				—			—				2,320				—				22,082
Other expense		34,726			27,347				25,087			22,387				23,376				109,547				79,206
Total noninterest expense		77,149			68,843				65,424			62,800				63,694				274,216				245,919
Income before income tax expense		76,436			64,225				57,725			61,074				64,656				259,460				168,633
Income tax expense		16,435			14,025				12,576			13,381				13,845				56,417				35,578
Net income	$	60,001		$	50,200			$	45,149		$	47,693			$	50,811			$	203,043			$	133,055
Preferred stock dividends		937			937				938			1,229				—				4,041				—
Net income available to common shareholders	$	59,064		$	49,263			$	44,211		$	46,464			$	50,811			$	199,002			$	133,055
Basic earnings per common share	$	1.59		$	1.32			$	1.19		$	1.23			$	1.33			$	5.32			$	3.86
Diluted earnings per common share	$	1.58		$	1.32			$	1.19		$	1.23			$	1.33			$	5.31			$	3.86

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021
BALANCE SHEETS
ASSETS
Cash and due from banks	$	229,580			$	264,078			$	271,763			$	252,706			$	209,177
Interest-earning deposits		69,808				489,825				680,343				1,735,708				1,819,508
Debt and equity investments		2,309,512				2,171,942				2,172,318				1,993,927				1,855,583
Loans held for sale		1,228				785				4,615				4,270				6,389
Loans		9,737,138				9,354,987				9,269,176				9,056,073				9,017,642
Allowance for credit losses		(136,932	)			(140,572	)			(140,546	)			(139,212	)			(145,041	)
Total loans, net		9,600,206				9,214,415				9,128,630				8,916,861				8,872,601
Fixed assets, net		42,985				43,882				46,028				46,900				47,915
Goodwill		365,164				365,164				365,164				365,164				365,164
Intangible assets, net		16,919				18,217				19,528				20,855				22,286
Other assets		418,770				426,479				396,117				370,378				338,735
Total assets	$	13,054,172			$	12,994,787			$	13,084,506			$	13,706,769			$	13,537,358
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	4,642,732			$	4,642,539			$	4,746,478			$	4,881,043			$	4,578,436
Interest-bearing deposits		6,186,418				6,415,055				6,346,140				6,823,092				6,765,363
Total deposits		10,829,150				11,057,594				11,092,618				11,704,135				11,343,799
Subordinated debentures and notes		155,433				155,298				155,164				155,031				154,899
FHLB advances		100,000				—				50,000				50,000				50,000
Other borrowings		324,119				197,422				226,695				228,846				353,863
Other liabilities		123,207				138,255				112,617				95,580				105,681
Total liabilities		11,531,909				11,548,569				11,637,094				12,233,592				12,008,242
Shareholders’ equity:
Preferred stock		71,988				71,988				71,988				71,988				71,988
Common stock		373				372				372				395				398
Treasury stock		—				—				—				(73,528	)			(73,528	)
Additional paid-in capital		982,660				979,543				976,684				1,010,446				1,018,799
Retained earnings		597,574				547,506				506,849				523,136				492,682
Accumulated other comprehensive (loss) income		(130,332	)			(153,191	)			(108,481	)			(59,260	)			18,777
Total shareholders’ equity		1,522,263				1,446,218				1,447,412				1,473,177				1,529,116
Total liabilities and shareholders’ equity	$	13,054,172			$	12,994,787			$	13,084,506			$	13,706,769			$	13,537,358

	Year ended
	December 31, 2022									December 31, 2021
($ in thousands)	Average Balance			Interest Income/ Expense			Average Yield/ Rate			Average Balance			Interest Income/ Expense			Average Yield/ Rate
Assets
Interest-earning assets:
Loans1, 2	$	9,193,682		$	456,703		4.97	%		$	8,055,873		$	349,112		4.33	%
Securities2		2,100,687			54,822		2.61				1,567,993			37,773		2.41
Interest-earning deposits		1,074,165			10,599		0.99				1,084,853			1,496		0.14
Total interest-earning assets		12,368,534			522,124		4.22				10,708,719			388,381		3.63
Noninterest-earning assets		951,090									758,591
Total assets	$	13,319,624								$	11,467,310
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,318,363		$	7,038		0.30	%		$	2,122,752		$	1,614		0.08	%
Money market accounts		2,781,579			19,306		0.69				2,557,836			4,669		0.18
Savings accounts		819,043			305		0.04				724,768			225		0.03
Certificates of deposit		569,272			3,509		0.62				570,496			4,160		0.73
Total interest-bearing deposits		6,488,257			30,158		0.46				5,975,852			10,668		0.18
Subordinated debentures and notes		155,160			9,166		5.91				195,686			10,960		5.60
FHLB advances		33,467			599		1.79				59,945			803		1.34
Securities sold under agreements to repurchase		211,039			487		0.23				225,895			235		0.10
Other borrowings		22,812			769		3.37				26,427			370		1.40
Total interest-bearing liabilities		6,910,735			41,179		0.60				6,483,805			23,036		0.36
Noninterest-bearing liabilities:
Demand deposits		4,805,549									3,597,204
Other liabilities		104,581									109,148
Total liabilities		11,820,865									10,190,157
Shareholders' equity		1,498,759									1,277,153
Total liabilities and shareholders' equity	$	13,319,624								$	11,467,310
Total net interest income				$	480,945								$	365,345
Net interest margin							3.89	%								3.41	%
1 Average balances include nonaccrual loans. Interest income includes loan fees of $16.7 million and $28.4 million for the years ended December 31, 2022 and December 31, 2021, respectively. Loan fees in 2022 and 2021 included PPP fees of $4.1 million and $21.7 million, respectively.
2 Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $7.0 million and $5.1 million for the years ended December 31, 2022 and December 31, 2021, respectively.

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021
LOAN PORTFOLIO
Commercial and industrial	$	3,859,882			$	3,709,893			$	3,596,701			$	3,398,723			$	3,392,375
Commercial real estate		4,628,371				4,438,647				4,294,375				4,278,138				4,176,928
Construction real estate		611,565				583,649				724,163				702,630				734,073
Residential real estate		395,537				397,450				413,727				432,639				454,052
Other		241,783				225,348				240,210				243,943				260,214
Total loans	$	9,737,138			$	9,354,987			$	9,269,176			$	9,056,073			$	9,017,642
DEPOSIT PORTFOLIO
Noninterest-bearing demand accounts	$	4,642,732			$	4,642,539			$	4,746,478			$	4,881,043			$	4,578,436
Interest-bearing demand accounts		2,256,295				2,270,898				2,197,957				2,547,482				2,465,884
Money market and savings accounts		3,399,415				3,617,249				3,562,982				3,678,135				3,691,186
Brokered certificates of deposit		118,968				129,039				129,064				129,017				128,970
Other certificates of deposit		411,740				397,869				456,137				468,458				479,323
Total deposits	$	10,829,150			$	11,057,594			$	11,092,618			$	11,704,135			$	11,343,799
AVERAGE BALANCES
Loans	$	9,423,984			$	9,230,738			$	9,109,131			$	9,005,875			$	9,030,982
Securities		2,204,211				2,202,255				2,068,119				1,923,969				1,753,159
Interest-earning assets		11,995,295				12,198,251				12,579,211				12,711,116				12,373,149
Assets		12,986,568				13,158,121				13,528,474				13,614,003				13,267,193
Deposits		11,002,614				11,154,895				11,530,432				11,494,212				11,167,003
Shareholders’ equity		1,490,592				1,494,504				1,474,267				1,536,221				1,495,396
Tangible common equity1		1,035,896				1,038,495				1,016,940				1,077,529				1,071,902
YIELDS (tax equivalent)
Loans		5.87	%			5.10	%			4.51	%			4.34	%			4.32	%
Securities		2.91				2.65				2.51				2.31				2.30
Interest-earning assets		5.25				4.47				3.76				3.45				3.50
Interest-bearing deposits		0.94				0.54				0.24				0.17				0.17
Deposits		0.53				0.31				0.13				0.10				0.10
Subordinated debentures		6.07				5.91				5.84				5.81				5.64
FHLB advances and other borrowed funds		1.39				0.66				0.51				0.41				0.43
Interest-bearing liabilities		1.07				0.67				0.37				0.30				0.31
Net interest margin		4.66				4.10				3.55				3.28				3.32
1 Refer 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)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021
PPP loans outstanding, net of deferred fees	$	7,272			$	13,165			$	49,175			$	134,084			$	271,958
Average PPP loans outstanding, net		11,546				26,113				89,152				194,382				365,295
PPP interest and fee income recognized		81				471				1,557				2,858				4,864
PPP deferred fees remaining		82				119				524				1,851				4,215
PPP average yield		2.78	%			7.16	%			7.01	%			5.96	%			5.28	%

	Quarter ended
	Sep 30, 2022								Jun 30, 2022								Mar 31, 2022								Dec 31, 2021
Financial Metrics:	As Reported				Excluding PPP*				As Reported				Excluding PPP*				As Reported				Excluding PPP*				As Reported				Excluding PPP*
EPS	$	1.32			$	1.31			$	1.19			$	1.15			$	1.23			$	1.17			$	1.33			$	1.23
ROAA		1.51	%			1.51	%			1.34	%			1.31	%			1.42	%			1.38	%			1.52	%			1.45	%
PPNR ROAA*		1.96	%			1.95	%			1.73	%			1.70	%			1.70	%			1.64	%			1.89	%			1.80	%
Tangible common equity/tangible assets*		7.86	%			7.86	%			7.80	%			7.83	%			7.62	%			7.70	%			8.13	%			8.31	%
Leverage ratio		10.4	%			10.4	%			9.8	%			9.8	%			9.6	%			9.7	%			9.7	%			10.0	%
NIM		4.10	%			4.10	%			3.55	%			3.52	%			3.28	%			3.23	%			3.32	%			3.26	%
* Non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.
Table only includes periods where PPP impacted reported results. Calculations not adjusted for increase in average deposits or increase in deposit expense, as applicable.

ENTERPRISE FINANCIAL SERVICES CORP
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
(in thousands, except per share data)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021
ASSET QUALITY
Net charge-offs (recoveries)	$	2,075			$	478			$	(175	)		$	1,521			$	3,263
Nonperforming loans		9,981				18,184				19,560				21,160				28,024
Classified assets		99,122				98,078				96,801				93,199				100,797
Nonperforming loans to total loans		0.10	%			0.19	%			0.21	%			0.23	%			0.31	%
Nonperforming assets to total assets		0.08	%			0.14	%			0.16	%			0.17	%			0.23	%
Allowance for credit losses to loans		1.41	%			1.50	%			1.52	%			1.54	%			1.61	%
Allowance for credit losses to loans, excluding guaranteed loans		1.56	%			1.67	%			1.69	%			1.73	%			1.84	%
Allowance for credit losses to nonperforming loans		1,371.9	%			773.1	%			718.5	%			657.9	%			517.6	%
Net charge-offs (recoveries) to average loans -annualized		0.09	%			0.02	%			(0.01	) %			0.07	%			0.14	%
WEALTH MANAGEMENT
Trust assets under management	$	1,885,394			$	1,691,230			$	1,757,228			$	1,943,428			$	2,083,543
SHARE DATA
Book value per common share	$	38.93			$	36.92			$	36.97			$	37.35			$	38.53
Tangible book value per common share1	$	28.67			$	26.62			$	26.63			$	27.06			$	28.28
Market value per share	$	48.96			$	44.04			$	41.50			$	47.31			$	47.09
Period end common shares outstanding		37,253				37,223				37,206				37,516				37,820
Average basic common shares		37,257				37,241				37,243				37,788				38,228
Average diluted common shares		37,415				37,348				37,282				37,858				38,311
CAPITAL2
Total risk-based capital to risk-weighted assets		14.2	%			14.2	%			14.2	%			14.4	%			14.7	%
Tier 1 capital to risk-weighted assets		12.6	%			12.6	%			12.5	%			12.7	%			13.0	%
Common equity tier 1 capital to risk-weighted assets		11.1	%			11.0	%			10.9	%			11.0	%			11.3	%
Tangible common equity to tangible assets1		8.4	%			7.9	%			7.8	%			7.6	%			8.1	%
1 Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.
2 Capital ratios for the current quarter are preliminary and subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review.

ENTERPRISE FINANCIAL SERVICES CORP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
	Quarter ended																				Year ended
($ in thousands)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
CORE EFFICIENCY RATIO*
Net interest income (GAAP)	$	138,835			$	124,290			$	109,613			$	101,165			$	102,060			$	473,903			$	360,194
Tax equivalent adjustment		1,983				1,854				1,699				1,506				1,507				7,042				5,151
Net interest income - FTE (non-GAAP)		140,818				126,144				111,312				102,671				103,567				480,945				365,345
Noninterest income		16,873				9,454				14,194				18,641				22,630				59,162				67,743
Less gain (loss) on sale of other real estate owned		—				(22	)			(90	)			19				—				(93	)			884
Total core revenue (non-GAAP)		157,691				135,576				125,416				121,331				126,197				540,014				433,972
Noninterest expense (GAAP)		77,149				68,843				65,424				62,800				63,694				274,216				245,919
Less amortization of intangibles		1,299				1,310				1,328				1,430				1,491				5,367				5,691
Less branch closure expenses		—				—				—				—				—				—				3,441
Less merger-related expenses		—				—				—				—				2,320				—				22,082
Core noninterest expense (non-GAAP)		75,850				67,533				64,096				61,370				59,883				268,849				214,705
Core efficiency ratio (non-GAAP)		48.10	%			49.81	%			51.11	%			50.58	%			47.45	%			49.79	%			49.47	%
*In the fourth quarter 2022, the core efficiency calculation was modified to include tax equivalent income and exclude amortization of intangibles. The prior period calculations have been adjusted to conform to the current period presentation.

	Quarter ended
($ in thousands, except per share data)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021
TANGIBLE BOOK VALUE PER SHARE AND TANGIBLE COMMON EQUITY RATIO
Shareholders’ equity	$	1,522,263			$	1,446,218			$	1,447,412			$	1,473,177			$	1,529,116
Less preferred stock		71,988				71,988				71,988				71,988				71,988
Less goodwill		365,164				365,164				365,164				365,164				365,164
Less intangible assets		16,919				18,217				19,528				20,855				22,286
Tangible common equity	$	1,068,192			$	990,849			$	990,732			$	1,015,170			$	1,069,678
Period end shares outstanding		37,253				37,223				37,206				37,516				37,820
Tangible book value per share	$	28.67			$	26.62			$	26.63			$	27.06			$	28.28
Total assets	$	13,054,172			$	12,994,787			$	13,084,506			$	13,706,769			$	13,537,358
Less goodwill		365,164				365,164				365,164				365,164				365,164
Less intangible assets		16,919				18,217				19,528				20,855				22,286
Tangible assets	$	12,672,089			$	12,611,406			$	12,699,814			$	13,320,750			$	13,149,908
Tangible common equity to tangible assets		8.43	%			7.86	%			7.80	%			7.62	%			8.13	%

	Quarter Ended																				Year ended
($ in thousands)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (ROATCE)
Average shareholder’s equity	$	1,490,592			$	1,494,504			$	1,474,267			$	1,536,221			$	1,495,396			$	1,498,759			$	1,277,153
Less average preferred stock		71,988				71,988				71,988				71,988				35,322				71,988				8,903
Less average goodwill		365,164				365,164				365,164				365,164				365,164				365,164				307,614
Less average intangible assets		17,544				18,857				20,175				21,540				23,008				19,516				22,460
Average tangible common equity	$	1,035,896			$	1,038,495			$	1,016,940			$	1,077,529			$	1,071,902			$	1,042,091			$	938,176
Net income available to common shareholders	$	59,064			$	49,263			$	44,211			$	46,464			$	50,811			$	199,002			$	133,055
ROATCE		22.62	%			18.82	%			17.44	%			17.49	%			18.81	%			19.10	%			14.18	%

	Quarter ended																				Year ended
($ in thousands)	Dec 31, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Dec 31, 2022				Dec 31, 2021
CALCULATION OF PRE-PROVISION NET REVENUE
Net interest income	$	138,835			$	124,290			$	109,613			$	101,165			$	102,060			$	473,903			$	360,194
Noninterest income		16,873				9,454				14,194				18,641				22,630				59,162				67,743
Less noninterest expense		77,149				68,843				65,424				62,800				63,694				274,216				245,919
Branch closure expenses		—				—				—				—				—				—				3,441
Merger-related expenses		—				—				—								2,320				—				22,082
PPNR	$	78,559			$	64,901			$	58,383			$	57,006			$	63,316			$	258,849			$	207,541
Average assets	$	12,986,568			$	13,158,121			$	13,528,474			$	13,614,003			$	13,267,193			$	13,319,624			$	11,467,310
ROAA - GAAP net income		1.83	%			1.51	%			1.34	%			1.42	%			1.52	%			1.52	%			1.16	%
PPNR ROAA		2.40	%			1.96	%			1.73	%			1.70	%			1.89	%			1.94	%			1.81	%

	Quarter Ended
($ in thousands, except per share data)	Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021
IMPACT OF PAYCHECK PROTECTION PROGRAM*
Net income (GAAP)	$	50,200			$	45,149			$	47,693			$	50,811
PPP interest and fee income		(471	)			(1,557	)			(2,858	)			(4,864	)
Related tax effect		119				392				720				1,226
Adjusted net income (non-GAAP)	$	49,848			$	43,984			$	45,555			$	47,173
Preferred stock dividends		937				938				1,229				—
Adjusted net income available to common shareholders (non-GAAP)	$	48,911			$	43,046			$	44,326			$	47,173
Average diluted common shares		37,348				37,282				37,858				38,311
EPS (GAAP) net income available to common shareholders	$	1.32			$	1.19			$	1.23			$	1.33
EPS - Adjusted net income available to common shareholders	$	1.31			$	1.15			$	1.17			$	1.23
Average Assets (GAAP)	$	13,158,121			$	13,528,474			$	13,614,003			$	13,267,193
Average PPP loans, net		(26,113	)			(89,152	)			(194,382	)			(365,295	)
Adjusted average assets (non-GAAP)	$	13,132,008			$	13,439,322			$	13,419,621			$	12,901,898
ROAA (GAAP) net income		1.51	%			1.34	%			1.42	%			1.52	%
ROAA - Adjusted net income, adjusted average assets		1.51	%			1.31	%			1.38	%			1.45	%
PPNR (non-GAAP) (see reconciliation above)	$	64,901			$	58,383			$	57,006			$	63,316
PPP interest and fee income		(471	)			(1,557	)			(2,858	)			(4,864	)
Adjusted PPNR (non-GAAP)	$	64,430			$	56,826			$	54,148			$	58,452
PPNR ROAA		1.96	%			1.73	%			1.70	%			1.89	%
PPNR ROAA - adjusted PPNR, adjusted average assets		1.95	%			1.70	%			1.64	%			1.80	%
Tangible assets (non-GAAP) (see reconciliation above)	$	12,611,406			$	12,699,814			$	13,320,750			$	13,149,908
PPP loans outstanding, net		(13,165	)			(49,175	)			(134,084	)			(271,958	)
Adjusted tangible assets (non-GAAP)	$	12,598,241			$	12,650,639			$	13,186,666			$	12,877,950
Tangible common equity (non-GAAP) (see reconciliation above)	$	990,849			$	990,732			$	1,015,170			$	1,069,678
Tangible common equity to tangible assets		7.86	%			7.80	%			7.62	%			8.13	%
Tangible common equity to tangible assets - adjusted tangible assets		7.86	%			7.83	%			7.70	%			8.31	%
Average assets for leverage ratio	$	12,918,632			$	13,265,790			$	13,273,520			$	12,915,944
Average PPP loans, net		(26,113	)			(89,152	)			(194,382	)			(365,295	)
Adjusted average assets for leverage ratio (non-GAAP)	$	12,892,519			$	13,176,638			$	13,079,138			$	12,550,649
Tier 1 capital	$	1,340,252			$	1,295,791			$	1,271,342			$	1,257,462
Leverage ratio		10.4	%			9.8	%			9.6	%			9.7	%
Leverage ratio - adjusted average assets for leverage ratio		10.4	%			9.8	%			9.7	%			10.0	%
Net interest income - tax equivalent	$	126,144			$	111,312			$	102,671			$	103,567
PPP interest and fee income		(471	)			(1,557	)			(2,858	)			(4,864	)
Adjusted net interest income - tax equivalent	$	125,673			$	109,755			$	99,813			$	98,703
Average earning assets (GAAP)	$	12,198,251			$	12,579,211			$	12,711,116			$	12,373,149
Average PPP loans, net		(26,113	)			(89,152	)			(194,382	)			(365,295	)
Adjusted average earning assets (non-GAAP)	$	12,172,138			$	12,490,059			$	12,516,734			$	12,007,854
Net interest margin - tax equivalent		4.10	%			3.55	%			3.28	%			3.32	%
Net interest margin - tax equivalent - adjusted net interest income, adjusted average earning assets		4.10	%			3.52	%			3.23	%			3.26	%
Loans (GAAP)	$	9,354,987			$	9,269,176			$	9,056,073			$	9,017,642
PPP and other guaranteed loans, net		(924,605	)			(967,396	)			(1,023,509	)			(1,151,895	)
Adjusted loans (non-GAAP)	$	8,430,382			$	8,301,780			$	8,032,564			$	7,865,747
Allowance for credit losses	$	140,572			$	140,546			$	139,212			$	145,041
Allowance for credit losses/loans (GAAP)		1.50	%			1.52	%			1.54	%			1.61	%
Allowance for credit losses/loans - adjusted loans		1.67	%			1.69	%			1.73	%			1.84	%
*Table only includes periods where PPP impacted reported results. Calculations not adjusted for increase in average deposits or increase in deposit expense, as applicable.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230123005718/en/

Investor Relations: Keene Turner, Executive Vice President and CFO (314) 512-7233

Media: Steve Richardson, Senior Vice President (314) 995-5695

Source: Enterprise Financial Services Corp

FAQ

What were Enterprise Financial Services Corp's Q4 2022 net income results?

The net income for Q4 2022 was $60.0 million, or $1.58 per diluted share.

How much did total loans increase in Q4 2022 for EFSC?

Total loans increased by $382 million, or 16% annualized, reaching $9.7 billion.

What is the dividend declared by EFSC for Q1 2023?

Enterprise Financial Services Corp declared a quarterly dividend of $0.25 per common share.

What was the net interest margin for EFSC in Q4 2022?

The net interest margin improved to 4.66% in Q4 2022.

What was the annual net income for EFSC in 2022?

The annual net income for 2022 was $203.0 million, or $5.31 per diluted share.