Enterprise Financial Reports Third Quarter 2020 Results

Rhea-AI Summary

Enterprise Financial Services Corp (Nasdaq: EFSC) reported a net income of $18.0 million for Q3 2020, up $3.3 million from the previous quarter but down $11.1 million year-over-year. The earnings per share (EPS) rose to $0.68, compared to $0.56 in Q2 2020 and $1.08 in Q3 2019. Net interest income fell to $63.4 million, while noninterest income saw a rise to $12.6 million. Loans decreased slightly to $6.1 billion, with year-over-year growth of 17.2% driven by PPP loans. The company builds provisions for credit losses amid economic uncertainty.

Positive

• Net income increased $3.3 million compared to the linked quarter.
• Earnings per share rose to $0.68 from $0.56 in the previous quarter.
• Noninterest income grew 27% from the linked quarter to $12.6 million.
• Loans grew year-over-year by $898.3 million, or 17.2%, due to PPP loans.

Negative

• Net income decreased $11.1 million compared to the prior year quarter.
• Net interest income fell $2.5 million compared to the linked quarter.
• NIM decreased to 3.29%, down from 3.53% in the linked quarter.
• Total deposits decreased $23.4 million from the linked quarter.

ST. LOUIS--(BUSINESS WIRE)--Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”) reported net income of $18.0 million for the third quarter 2020, an increase of $3.3 million compared to the linked second quarter (“linked quarter”) and a decrease of $11.1 million from the prior year quarter. Earnings per diluted share (“EPS”) was $0.68 for the third quarter 2020, compared to $0.56 and $1.08 for the linked and prior year quarters, respectively. Net income and EPS in the current quarter increased from the linked quarter primarily due to a reduction in provision for credit losses and an increase in noninterest income. This increase was partially offset by $1.6 million of merger-related expenses. The decrease in net income and EPS from the prior year quarter was primarily due to an increase in provision for credit losses.

Jim Lally, EFSC’s President and Chief Executive Officer, commented, “Today we reported earnings of $0.68 per diluted share for the third quarter. These financial results reflect solid performance with pre-provision net revenue¹ of $38.0 million, or 1.81% of average assets. Given the ongoing economic uncertainty, we continued to build our allowance for credit losses, and our earnings profile allowed us to also build capital during the third quarter. As we move into the end of 2020, we remain well positioned to continue to support our customers, complete the acquisition of Seacoast and execute on our business plans.”

Highlights

• Earnings - Net income in the third quarter 2020 was $18.0 million, an increase of $3.3 million compared to the linked quarter and a decrease of $11.1 million from the prior year quarter. EPS was $0.68 per diluted share for the third quarter 2020, compared to $0.56 and $1.08 per diluted share for the linked and prior year quarters, respectively.

• Pre-provision net revenue¹ (“PPNR”) - PPNR (excluding merger-related expenses) of $38.0 million in the third quarter 2020 increased $0.1 million and decreased $0.7 million from the linked and prior year quarters, respectively.

1 PPNR is a nonGAAP 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 $63.4 million for the third quarter 2020 decreased $2.5 million and increased $0.3 million, from the linked quarter and prior year quarter, respectively. NIM was 3.29% for the third quarter 2020, compared to 3.53% and 3.81% for the linked quarter and prior year quarter, respectively.

• Noninterest income - Noninterest income of $12.6 million for the third quarter 2020 increased $2.7 million and decreased $0.9 million from the linked quarter and prior year quarter, respectively. The current quarter increase was driven by volume increases in deposit services, card services, mortgage banking and tax credit activity.

• Loans - Total loans declined $13.7 million, or 0.9% on an annualized basis, from the linked quarter to $6.1 billion as of September 30, 2020. Year-over-year, loans grew $898.3 million, or 17.2% on an annualized basis, from $5.2 billion as of September 30, 2019. Average loans totaled $6.1 billion for the quarter ended September 30, 2020 compared to $6.0 billion and $5.2 billion for the linked and prior year quarters, respectively. Paycheck Protection Program (“PPP”) loans primarily contributed to growth in the loan portfolio over the prior year quarter. As of September 30, 2020, loan modifications in a deferral status comprised 2% of the loan portfolio.

PPP details:

	Quarter ended
($ in thousands, except per share data)	September 30, 2020				June 30, 2020
PPP loans outstanding, net of unearned fees	$	819,100			$	807,814
Average PPP loans outstanding, net	813,244				634,632
PPP average loan size	216				224
PPP interest and fee income	5,226				4,083
PPP unearned fees	19,522				22,414
PPP average yield	2.56		%		2.59		%

	Quarter ended
	September 30, 2020								June 30, 2020
Financial Metrics:	As Reported				Excluding PPP*				As Reported				Excluding PPP*
EPS	$	0.68			$	0.53			$	0.56			$	0.44
ROAA	0.86		%		0.74		%		0.72		%		0.62		%
PPNR ROAA (excluding merger-related exp)	1.81		%		1.73		%		1.87		%		1.81		%
Tangible common equity/tangible assets*	7.99		%		8.89		%		7.81		%		8.67		%
Leverage ratio	9.2		%		10.2		%		9.2		%		10.0		%
NIM (tax equivalent)	3.29		%		3.37		%		3.53		%		3.62		%
Allowance for credit losses on loans/loans	2.01		%		2.32		%		1.80		%		2.07		%
* 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.

• Asset quality - The allowance for credit losses on loans to total loans increased to 2.01% at September 30, 2020 from 1.80% and 0.85% at June 30, 2020 and September 30, 2019, respectively. Nonperforming assets to total assets was 0.53% at September 30, 2020 compared to 0.55% and 0.33% at June 30, 2020 and September 30, 2019, respectively. Improving economic forecasts in the current quarter reduced the provision for credit losses compared to the first and second quarters of this year. This improvement was offset by an increase in qualitative reserves established for certain loan portfolios, including hospitality and loans that have received principal and interest deferrals.

• Deposits - Total deposits decreased $23.4 million, or 1.4% on an annualized basis, from the linked quarter to $6.7 billion as of September 30, 2020. Year-over-year, deposits grew $1.1 billion, or 18.7% on an annualized basis, from $5.6 billion as of September 30, 2019. Average deposits totaled $6.7 billion for the quarter ended September 30, 2020 compared to $6.6 billion and $5.6 billion for the linked and prior year quarters, respectively. Deposits attributable to PPP loan fundings primarily contributed to the growth in deposits over the prior year period. Noninterest deposit accounts represented 28.9% of total deposits at September 30, 2020, and the loan to deposit ratio was 91.8% at that date.

• Capital - Total shareholders’ equity was $882.3 million and the tangible common equity to tangible assets ratio was 7.99% at September 30, 2020, compared to 7.81% at June 30, 2020. The Bank’s regulatory capital ratios remain “well-capitalized,” with a common equity tier 1 ratio of 12.0% and a total risk-based capital ratio of 13.3% as of September 30, 2020. The Company’s common equity tier 1 ratio and total risk-based capital ratio was 10.2% and 14.6%, respectively, at September 30, 2020.
  
  The Company suspended its repurchase of shares through the share repurchase plan in March 2020. There are 95,907 shares available for repurchase under the existing authorization.
  
  The Company’s Board of Directors approved a quarterly dividend of $0.18 per common share, payable on December 31, 2020 to shareholders of record as of December 15, 2020.

• Liquidity - The Company maintains a high level of both on-balance-sheet and off-balance-sheet liquidity. At September 30, 2020, on-balance-sheet liquidity consisted of cash and unpledged investment securities of $1.0 billion. Off-balance-sheet liquidity totaled $1.5 billion through the Federal Home Loan Bank, Federal Reserve and correspondent bank lines. The Company also has an unused $25 million revolving line of credit and maintains a shelf registration allowing for the issuance of various forms of equity and debt securities. The $63.3 million subordinated debt issuance in the second quarter 2020 also has enhanced the holding company’s liquidity position.

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
	September 30, 2020											June 30, 2020											September 30, 2019
($ in thousands)	Average Balance				Interest Income/ Expense				Average Yield/ Rate			Average Balance				Interest Income/ Expense				Average Yield/ Rate			Average Balance				Interest Income/ Expense				Average Yield/ Rate
Assets
Interest-earning assets:
Loans, excluding incremental accretion*	$	6,112,715			$	61,516			4.00	%		$	6,032,076			$	63,869			4.26	%		$	5,178,009			$	69,193			5.30	%
Debt and equity investments*	1,361,515				8,761				2.56			1,361,853				9,220				2.72			1,312,860				9,610				2.90
Short-term investments	295,854				113				0.15			177,267				87				0.20			113,214				572				2.00
Total earning assets	7,770,084				70,390				3.60			7,571,196				73,176				3.89			6,604,083				79,375				4.77
Noninterest-earning assets	571,884											587,008											618,274
Total assets	$	8,341,968										$	8,158,204										$	7,222,357
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	1,529,097			$	255			0.07	%		$	1,487,467			$	244			0.07	%		$	1,356,328			$	2,048			0.60	%
Money market accounts	1,981,026				1,003				0.20			1,941,874				995				0.21			1,639,603				6,959				1.68
Savings	605,475				45				0.03			590,104				45				0.03			548,109				232				0.17
Certificates of deposit	630,076				2,409				1.52			718,529				3,099				1.73			820,943				3,970				1.92
Total interest-bearing deposits	4,745,674				3,712				0.31			4,737,974				4,383				0.37			4,364,983				13,209				1.20
Subordinated debentures	203,438				2,826				5.53			169,311				2,316				5.50			141,136				1,956				5.50
FHLB advances	250,000				720				1.15			251,231				455				0.73			378,207				2,203				2.31
Securities sold under agreements to repurchase	199,308				59				0.12			192,117				57				0.12			155,238				327				0.84
Other borrowings	31,413				116				1.47			32,842				147				1.80			37,817				337				3.54
Total interest-bearing liabilities	5,429,833				7,433				0.54			5,383,475				7,358				0.55			5,077,381				18,032				1.41
Noninterest-bearing liabilities:
Demand deposits	1,920,694											1,813,760											1,232,360
Other liabilities	105,945											92,806											68,642
Total liabilities	7,456,472											7,290,041											6,378,383
Shareholders' equity	885,496											868,163											843,974
Total liabilities and shareholders' equity	$	8,341,968										$	8,158,204										$	7,222,357
Core net interest income3					62,957											65,818											61,343
Core net interest margin3									3.22	%										3.50	%										3.69	%
Incremental accretion on non-core acquired loans					1,235											719											2,140
Total net interest income					$	64,192										$	66,537										$	63,483
Net interest margin									3.29	%										3.53	%										3.81	%
* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $0.8 million for the three months ended September 30, 2020, $0.7 million for the three months ended June 30, 2020, and $0.4 million for the three months ended September 30, 2019.
3 Core net interest income and core NIM are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

Net interest income for the third quarter decreased $2.5 million to $63.4 million from $65.8 million in the linked quarter, and increased $0.3 million from the prior year period. NIM, on a tax equivalent basis, was 3.29% for the third quarter, compared to 3.53% in the linked quarter, and 3.81% in the third quarter of 2019. The decrease from the linked quarter was primarily due to slightly lower rates on non-PPP loans plus the impact of the low yield on PPP loans. Additionally, loan yields for non-PPP loans declined in the linked quarter due to both LIBOR resets as well as lower rates on new loans and renewing loans which, combined, impacted yields by 20 basis points.

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

	Quarter ended
($ in thousands)	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Net interest income	$	63,354			$	65,833			$	63,368			$	61,613			$	63,046
Less: Incremental accretion income2	1,235				719				1,273				576				2,140
Core net interest income3	$	62,119			$	65,114			$	62,095			$	61,037			$	60,906
Net interest margin (tax equivalent)	3.29		%		3.53		%		3.79		%		3.68		%		3.81		%
Core net interest margin3 (tax equivalent)	3.22		%		3.50		%		3.71		%		3.64		%		3.69		%
2 Represents incremental accretion income on non-core acquired loans which were acquired from the FDIC and previously covered by shared-loss agreements. 3 Core net interest income and core NIM are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

NIM decreased 24 basis points from the linked quarter to 3.29% during the current quarter primarily due to a 29 basis point decrease in earning asset yields. The decrease in the earning asset yield was primarily due to a combination of higher average balances on PPP loans (two bps), lower average balances for non-PPP loans (six bps), and an increase in short-term investment balances (five bps), combined with reduced investment (two bps) and loan (14 bps) yields, each as compared to the linked quarter. The full-quarter impact of $63.3 million of subordinated debentures issued during the second quarter negatively impacted NIM by an additional two basis points.

The cost of interest-bearing liabilities was relatively unchanged from the linked quarter. The Company responded to interest rate trends earlier in the year by reducing the cost of certain managed money market and interest-bearing transaction accounts. Increases in the cost of borrowings were offset by lower balances and rates on brokered and other time deposits.

Loans

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

	Quarter ended
($ in thousands)	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
C&I	$	1,080,860			$	1,057,899			$	1,186,240			$	1,186,667			$	1,174,569
CRE investor owned	1,284,351				1,302,235				1,319,316				1,290,258				1,281,332
CRE owner occupied	583,430				599,800				584,491				582,579				566,219
SBA PPP loans	819,100				807,814				—				—				—
Enterprise value lendinga	367,337				382,828				440,764				428,896				417,521
Life insurance premium financinga	517,559				520,705				496,471				472,822				468,051
Residential real estate	321,482				326,697				346,461				366,261				386,174
Construction and land development	450,225				455,686				445,909				428,681				403,590
Tax creditsa	368,908				363,222				354,046				294,210				265,626
Agriculture	190,969				191,093				168,237				139,873				136,249
Other	142,086				132,072				115,582				124,090				128,683
Total Loans	$	6,126,307			$	6,140,051			$	5,457,517			$	5,314,337			$	5,228,014
Total loan yield	4.08		%		4.31		%		5.06		%		5.08		%		5.47		%
Total C&I loans to total loansb	51		%		51		%		45		%		44		%		44		%
Variable interest rate loans to total loansb	50		%		51		%		60		%		59		%		60		%
Certain prior period amounts have been reclassified among the categories to conform to the current period presentation
a Specialized categories may include a mix of C&I, CRE, construction and land development, or other loans.
bRatios include the impact of PPP.

Loans totaled $6.1 billion at September 30, 2020, decreasing $13.7 million, or 0.9% on an annualized basis, compared to the linked quarter. Year-over-year, loans increased $898.3 million, or 17.2% on an annualized basis. The year-over-year increase was primarily due to PPP loans. The largest growth categories, excluding PPP, compared to the linked quarter were C&I, other, and tax credits. New loan originations, excluding PPP, and revolving line advances increased during the quarter from the linked quarter, offset by accelerated loan paydowns. Line draw utilization continues to decline. At September 30, 2020 utilization was 40.1% compared to 40.3% and 49.5% at June 30, 2020 and March 31, 2020, respectively.

The Company has implemented several loan programs to assist its customers impacted by the COVID-19 pandemic. These programs include consumer and business deferral programs and expanded small business lines of credit.

The following table presents loan modifications currently in a deferral status at the periods presented:

	Quarter ended
($ in thousands)	September 30, 2020				June 30, 2020
Commercial real estate	$	48,081			$	404,295
Commercial and industrial	46,041				171,108
Construction real estate	44,243				88,369
Residential real estate	974				21,762
Other	12				134
Total loan modifications	$	139,351			$	685,668
Percentage of total loans	2		%		11		%

Asset Quality

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

	Quarter ended
($ in thousands)	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Nonperforming loans	$	39,623			$	41,473			$	37,204			$	26,425			$	15,569
Other real estate	4,835				4,874				5,072				6,344				8,498
Nonperforming assets	$	44,458			$	46,347			$	42,276			$	32,769			$	24,067
Nonperforming loans to total loans	0.65		%		0.68		%		0.68		%		0.50		%		0.30		%
Nonperforming assets to total assets	0.53		%		0.55		%		0.56		%		0.45		%		0.33		%
Allowance for loan losses to total loans	2.01		%		1.80		%		1.69		%		0.81		%		0.85		%
Net charge-offs	$	1,027			$	309			$	1,183			$	2,544			$	1,070

Nonperforming loans decreased $1.9 million to $39.6 million at September 30, 2020 from $41.5 million at June 30, 2020. Activity during the current quarter primarily included additions of $10.5 million, paydowns of $9.7 million, and charge-offs of $2.6 million. The addition of $10.5 million during the quarter was primarily from one $8.7 million hotel loan that went on nonaccrual. Other real estate decreased slightly during the third quarter 2020 due to write-downs and sales of $0.3 million offset by one addition of $0.3 million.

The Company recorded a provision for credit losses of $14.1 million for the third quarter 2020 compared to $19.6 million for the linked quarter and $1.8 million for the prior year quarter. The provision for credit losses in the third quarter 2020 was primarily due an increase in individual reserves and qualitative reserves for certain higher-risk loan portfolios. To the extent that the Company does not recognize charge-offs and economic forecasts improve in future periods, the Company could recognize a reversal of provision for credit losses. Conversely, if economic conditions and the Company’s forecast continue to worsen, the Company could recognize elevated levels of provision for credit losses.

Deposits

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

	Quarter ended
($ in thousands)	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Noninterest-bearing accounts	$	1,929,540			$	1,965,868			$	1,354,571			$	1,327,348			$	1,295,450
Interest-bearing transaction accounts	1,499,756				1,508,535				1,389,603				1,367,444				1,307,855
Money market and savings accounts	2,634,885				2,566,011				2,479,828				2,249,784				2,201,052
Brokered certificates of deposit	65,209				85,414				170,667				215,758				209,754
Other certificates of deposit	546,836				573,752				595,237				610,689				610,269
Total deposit portfolio	$	6,676,226			$	6,699,580			$	5,989,906			$	5,771,023			$	5,624,380
Noninterest-bearing deposits to total deposits	28.9		%		29.3		%		22.6		%		23.0		%		23.0		%

Total deposits at September 30, 2020 were $6.7 billion, a decrease of $23.4 million from June 30, 2020, and an increase of $1.1 billion from September 30, 2019.

Core deposits, defined as total deposits excluding certificates of deposits, were $6.1 billion at September 30, 2020, an increase of $23.8 million from the linked quarter. Money market and savings accounts increased $68.9 million as compared to the linked quarter while all other accounts declined. Noninterest-bearing deposits were $1.9 billion at September 30, 2020, a decrease of $36.3 million compared to June 30, 2020, and an increase of $634.1 million compared to September 30, 2019. Certificates of deposit decreased $47.1 million from the linked quarter and $208.0 million from the prior year quarter. The total cost of deposits was 0.22% for the current quarter compared to 0.27% and 0.94% for the linked quarter and prior year quarter, respectively.

Noninterest Income

The following table presents a comparative summary of the major components of noninterest income for the periods indicated:

	Linked quarter comparison															Prior year comparison
	Quarter ended															Quarter ended
($ in thousands)	September 30, 2020				June 30, 2020				Increase (decrease)							September 30, 2019				Increase (decrease)
Service charges on deposit accounts	$	2,798			$	2,616			$	182			7	%		$	3,246			$	(448	)		(14	)%
Wealth management revenue	2,456				2,326				130				6	%		2,661				(205		)		(8	)%
Card services revenue	2,498				2,225				273				12	%		2,494				4				—	%
Tax credit income	748				(221		)		969				438	%		1,238				(490		)		(40	)%
Miscellaneous income	4,129				3,014				1,115				37	%		3,925				204				5	%
Total noninterest income	$	12,629			$	9,960			$	2,669			27	%		$	13,564			$	(935	)		(7	)%

Total noninterest income for third quarter 2020 was $12.6 million, an increase of $2.7 million from the linked quarter and a decrease of $0.9 million from the prior year quarter. The increase from the linked quarter was primarily due to improved transaction volumes for deposit service charges and card services, increased tax credit income and continued growth in mortgage revenue.

Noninterest Expenses

Noninterest expense was $39.5 million for the third quarter 2020, compared to $37.9 million for the linked quarter, and $38.2 million for the third quarter 2019. The increase from the linked quarter and prior year quarter was primarily due to merger-related expenses of $1.6 million.

For the third quarter 2020, the Company’s efficiency ratio was 52.0% compared to 50.0% and 49.9% for the linked quarter and prior year quarter, respectively. The Company’s core efficiency ratio⁴ was 51.0% for the quarter ended September 30, 2020, compared to 50.7% for the linked quarter and 51.7% for the prior year quarter.

4 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 20% for each of the quarters ended September 30, 2020, the linked quarter and prior year quarter.

Capital

The following table presents various EFSC capital ratios:

	Quarter ended
Percent	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Total risk-based capital to risk-weighted assets	14.6	%		14.4	%		12.9	%		12.9	%		12.7	%
Tier 1 capital to risk weighted assets	11.6	%		11.4	%		11.0	%		11.4	%		11.2	%
Common equity tier 1 capital to risk-weighted assets	10.2	%		9.9	%		9.6	%		9.9	%		9.6	%
Tangible common equity to tangible assets5	8.0	%		7.8	%		8.4	%		8.9	%		8.5	%
5 Tangible common equity to tangible assets is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

The Company’s strong earnings profile continues to build total capital even with the elevated level of provision for credit losses in 2020. The growth in the balance sheet due to PPP did not negatively impact the Company’s regulatory capital ratios due to the SBA guarantee. The issuance of subordinated debt during the second quarter of 2020 enhanced total risk-based capital. 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 core net interest income, core net interest margin, tangible common equity, core efficiency ratios, ROATCE, PPNR, financial metrics adjusted for PPP impact, 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 core net interest income, core net interest margin, core efficiency ratio, ROATCE, PPNR, financial metrics adjusted for PPP impact, and the tangible common equity ratio, collectively “core performance measures,” presented in this earnings release and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of non-core acquired loans, which were acquired from the FDIC and previously covered by shared-loss agreements, and the related income and expenses, the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures include contractual interest on non-core acquired loans, but exclude incremental accretion on these loans. Core performance measures also exclude expenses directly related to non-core acquired loans. Core performance measures also exclude certain other income and expense items, such as merger related expenses, facilities charges, and the gain or loss on sale of investment securities, the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.

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

Conference Call and Webcast Information

The Company will host a conference call and webcast at 10:00 a.m. Central Time on Tuesday, October 20, 2020. During the call, management will review the third quarter of 2020 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 1-800-353-6461 (Conference ID #6978860). A recorded replay of the conference call will be available on the website two hours after the call’s completion. Visit http://bit.ly/EFSC3Q2020earnings and register to receive a dial in number, passcode, and pin number. The replay will be available for approximately two weeks following the conference call.

About Enterprise

Enterprise Financial Services Corp (Nasdaq: EFSC), with approximately $8 billion in assets, is a financial holding company headquartered in Clayton, Missouri. Enterprise Bank & Trust, a Missouri state-chartered trust company with banking powers and a wholly-owned subsidiary of EFSC, operates 34 branch offices in Arizona, Kansas, Missouri and New Mexico. Enterprise Bank & Trust offers a range of business and personal banking services and wealth management services. Enterprise Trust, a division of Enterprise Bank & Trust, provides financial planning, estate planning, investment management and trust services to businesses, individuals, institutions, retirement plans and non-profit organizations. Additional information is available at www.enterprisebank.com.

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

On August 20, 2020, the Company and its wholly-owned subsidiary bank, Enterprise Bank & Trust, entered into a definitive agreement with Seacoast Commerce Banc Holdings (“Seacoast”) and its wholly-owned bank subsidiary, Seacoast Commerce Bank (“Seacoast Bank”), pursuant to which the Company will acquire Seacoast and Seacoast Bank. Pursuant to the terms of the definitive agreement, upon consummation of the proposed transaction, Seacoast shareholders will receive 0.5061 shares of EFSC common stock for each share of Seacoast common stock they hold. Headquartered in San Diego, California, Seacoast had approximately $1.3 billion in total assets, $1.1 billion in loans, and $1.0 billion in deposits as of June 30, 2020 and operates four full-service banking offices in San Diego, California and one in Las Vegas, Nevada. In addition, Seacoast has 20 loan production offices and six deposit production offices across the country. As of June 30, 2020, Seacoast Bank was ranked as the 8th largest Small Business Administration lender in the nation and has a history of both strong revenue and earnings growth in recent years. The proposed transaction has been approved by the Federal Reserve and FDIC, and remains subject to the approval of Seacoast’s shareholders. The Company expects to consummate the proposed transaction in the fourth quarter of 2020.

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 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 Seacoast acquisition and other acquisitions.

Forward-looking statements include, but are not limited to, statements about the Company’s plans, expectations, and projections of future financial and operating results, as well as statements regarding the Company’s plans, objectives, expectations or consequences of announced transactions. The Company uses words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “continue,” and “intend”, and variations of such words and similar expressions, in this release to identify such forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause or contribute to such differences include, but are not limited to, the Company’s ability to efficiently integrate acquisitions, including the Seacoast acquisition, into its operations, retain the customers of these businesses and grow the acquired operations, as well as credit risk, changes in the appraised valuation of real estate securing impaired loans, outcomes of litigation and other contingencies, exposure to general and local economic conditions, risks associated with rapid increases or decreases in prevailing interest rates, consolidation in the banking industry, competition from banks and other financial institutions, the Company’s ability to attract and retain relationship officers and other key personnel, burdens imposed by federal and state regulation, changes in regulatory requirements, changes in accounting policies and practices or accounting standards, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model, which changed how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption on January 1, 2020, uncertainty regarding the future of LIBOR, natural disasters, war or terrorist activities, or pandemics, or the outbreak of COVID-19 or similar outbreaks, and their effects on economic and business environments in which we operate, as well as other risk factors described in the Company’s 2019 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission (the “SEC”). Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events unless required under the federal securities laws.

Notice to Seacoast Shareholders

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

In connection with EFSC’s proposed acquisition of Seacoast, EFSC filed a registration statement on Form S-4 (File No. 333-248758) (the “Registration Statement”) with the SEC. The Registration Statement includes a preliminary proxy statement of Seacoast and a preliminary prospectus of EFSC, which are jointly referred to as the proxy statement/prospectus, as well as other relevant documents concerning the proposed transaction. The Registration Statement was declared effective by the SEC on September 28, 2020.

SHAREHOLDERS OF SEACOAST ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE ACQUISITION AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC OR INCORPORATED BY REFERENCE INTO THE PROXY STATEMENT/PROSPECTUS, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION AND RELATED MATTERS.

The final proxy statement/prospectus was mailed to Seacoast’s shareholders of recorded as of the close of business on September 24, 2020. Investors and security holders will be able to obtain the Registration Statement, the proxy statement/prospectus, and any other documents EFSC has filed with the SEC, free of charge at the SEC’s website, www.sec.gov. In addition, documents filed with the SEC by EFSC are available free of charge by (1) accessing EFSC’s website at www.enterprisebank.com under the “Investor Relations” link, (2) writing EFSC at 150 North Meramec, Clayton, Missouri 63105, Attention: Investor Relations, or (3) writing Seacoast at 11939 Rancho Bernardo Road, Suite 200, San Diego, CA 92128, Attention: Chief Financial Officer.

Participants in Solicitation

EFSC and Seacoast and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Seacoast in connection with the proposed merger. Information about the directors and executive officers of EFSC is set forth in the proxy statement for EFSC’s 2020 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 25, 2020 and as amended by supplements to the proxy statement filed with the SEC on March 25, 2020 and April 15, 2020. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed acquisition. Free copies of this document may be obtained as described in the preceding paragraph.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited)
	Quarter ended																				Nine Months ended
(in thousands, except per share data)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 30, 2019
EARNINGS SUMMARY
Net interest income	$	63,354			$	65,833			$	63,368			$	61,613			$	63,046			$	192,555			$	177,104
Provision for credit losses	14,080				19,591				22,264				1,341				1,833				55,935				5,031
Noninterest income	12,629				9,960				13,408				14,418				13,564				35,997				34,758
Noninterest expense	39,524				37,912				38,673				38,354				38,239				116,109				127,131
Income before income tax expense	22,379				18,290				15,839				36,336				36,538				56,508				79,700
Income tax expense	4,428				3,656				2,971				7,246				7,469				11,055				16,051
Net income	$	17,951			$	14,634			$	12,868			$	29,090			$	29,069			$	45,453			$	63,649
Diluted earnings per share	$	0.68			$	0.56			$	0.48			$	1.09			$	1.08			$	1.73			$	2.45
Return on average assets	0.86		%		0.72		%		0.70		%		1.58		%		1.60		%		0.76		%		1.26		%
Return on average common equity	8.06		%		6.78		%		5.98		%		13.43		%		13.66		%		6.96		%		11.00		%
Return on average tangible common equity	10.94		%		9.28		%		8.22		%		18.54		%		19.08		%		9.51		%		15.16		%
Net interest margin (tax equivalent)	3.29		%		3.53		%		3.79		%		3.68		%		3.81		%		3.52		%		3.85		%
Core net interest margin (tax equivalent)1	3.22		%		3.50		%		3.71		%		3.64		%		3.69		%		3.47		%		3.76		%
Efficiency ratio	52.02		%		50.02		%		50.37		%		50.45		%		49.91		%		50.80		%		60.01		%
Core efficiency ratio1	51.04		%		50.66		%		51.21		%		50.73		%		51.73		%		50.97		%		52.96		%
Total assets	$	8,367,976			$	8,357,501			$	7,500,643			$	7,333,791			$	7,346,791
Total average assets	8,341,968				8,158,204				7,363,605				7,322,496				7,222,357				$	7,956,006			$	6,749,988
Total deposits	6,676,226				6,699,580				5,989,906				5,771,023				5,624,380
Total average deposits	6,666,368				6,551,734				5,837,717				5,756,292				5,597,343				6,353,087				5,296,257
Period end common shares outstanding	26,210				26,196				26,161				26,543				26,613
Dividends per common share	$	0.18			$	0.18			$	0.18			$	0.17			$	0.16			$	0.54			$	0.45
Tangible book value per common share	$	24.80			$	24.22			$	23.38			$	23.76			$	22.82
Tangible common equity to tangible assets1	7.99		%		7.81		%		8.42		%		8.89		%		8.54		%
Total risk-based capital to risk-weighted assets	14.6		%		14.4		%		12.8		%		12.9		%		12.7		%
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																				Nine Months ended
($ in thousands, except per share data)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 30, 2019
INCOME STATEMENTS
NET INTEREST INCOME
Total interest income	$	70,787			$	73,191			$	76,688			$	77,238			$	81,078			$	220,666			$	227,896
Total interest expense	7,433				7,358				13,320				15,625				18,032				28,111				50,792
Net interest income	63,354				65,833				63,368				61,613				63,046				192,555				177,104
Provision for credit losses	14,080				19,591				22,264				1,341				1,833				55,935				5,031
Net interest income after provision for credit losses	49,274				46,242				41,104				60,272				61,213				136,620				172,073
NONINTEREST INCOME
Deposit service charges	2,798				2,616				3,143				3,254				3,246				8,557				9,547
Wealth management revenue	2,456				2,326				2,501				2,618				2,661				7,283				7,314
Card services revenue	2,498				2,225				2,247				2,409				2,494				6,970				6,745
Tax credit income	748				(221)				2,036				3,425				1,238				2,563				1,968
Other income	4,129				3,014				3,481				2,712				3,925				10,624				9,184
Total noninterest income	12,629				9,960				13,408				14,418				13,564				35,997				34,758
NONINTEREST EXPENSE
Employee compensation and benefits	22,040				22,389				21,685				20,411				20,845				66,114				60,884
Occupancy	3,408				3,185				3,347				3,461				3,179				9,940				9,004
Merger-related expenses	1,563				—				—				—				393				1,563				17,969
Other	12,513				12,338				13,641				14,482				13,822				38,492				39,274
Total noninterest expense	39,524				37,912				38,673				38,354				38,239				116,109				127,131
Income before income tax expense	22,379				18,290				15,839				36,336				36,538				56,508				79,700
Income tax expense	4,428				3,656				2,971				7,246				7,469				11,055				16,051
Net income	$	17,951			$	14,634			$	12,868			$	29,090			$	29,069			$	45,453			$	63,649
Basic earnings per share	$	0.68			$	0.56			$	0.49			$	1.10			$	1.09			$	1.73			$	2.46
Diluted earnings per share	$	0.68			$	0.56			$	0.48			$	1.09			$	1.08			$	1.73			$	2.45

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
BALANCE SHEETS
ASSETS
Cash and due from banks	$	98,816			$	100,804			$	98,619			$	74,769			$	153,730
Interest-earning deposits	301,773				254,830				88,794				96,217				106,747
Debt and equity investments	1,375,931				1,387,001				1,382,149				1,354,527				1,354,986
Loans held for sale	14,032				16,029				8,430				5,570				6,281
Loans	6,126,307				6,140,051				5,457,517				5,314,337				5,228,014
Less: Allowance for loan losses	123,270				110,270				92,187				43,288				44,555
Total loans, net	6,003,037				6,029,781				5,365,330				5,271,049				5,183,459
Fixed assets, net	56,807				58,231				59,358				60,013				59,216
Goodwill	210,344				210,344				210,344				210,344				211,251
Intangible assets, net	21,820				23,196				24,585				26,076				27,626
Other assets	285,416				277,285				263,034				235,226				243,495
Total assets	$	8,367,976			$	8,357,501			$	7,500,643			$	7,333,791			$	7,346,791
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,929,540			$	1,965,868			$	1,354,571			$	1,327,348			$	1,295,450
Interest-bearing deposits	4,746,686				4,733,712				4,635,335				4,443,675				4,328,930
Total deposits	6,676,226				6,699,580				5,989,906				5,771,023				5,624,380
Subordinated debentures	203,510				203,384				141,336				141,258				141,179
FHLB advances	250,000				250,000				222,000				222,406				461,426
Other borrowings	239,038				227,961				205,918				265,172				199,634
Other liabilities	116,935				108,613				95,047				66,747				74,077
Total liabilities	7,485,709				7,489,538				6,654,207				6,466,606				6,500,696
Shareholders’ equity	882,267				867,963				846,436				867,185				846,095
Total liabilities and shareholders’ equity	$	8,367,976			$	8,357,501			$	7,500,643			$	7,333,791			$	7,346,791

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.

	Nine Months ended
	September 30, 2020											September 30, 2019
($ in thousands)	Average Balance				Interest Income/ Expense				Average Yield/ Rate			Average Balance				Interest Income/ Expense				Average Yield/ Rate
Assets
Interest-earning assets:
Loans, excluding incremental accretion*	$	5,833,368			$	191,403			4.38	%		$	4,930,635			$	197,996			5.37	%
Debt and equity investments*	1,356,796				27,688				2.73			1,153,632				25,055				2.90
Short-term investments	188,849				500				0.35			108,930				1,722				2.11
Total earning assets	7,379,013				219,591				3.98			6,193,197				224,773				4.85
Noninterest-earning assets	576,993											556,791
Total assets	$	7,956,006										$	6,749,988
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	1,464,144			$	1,836			0.17	%		$	1,273,591			$	5,972			0.63	%
Money market accounts	1,911,584				6,738				0.47			1,579,702				20,470				1.73
Savings	579,619				233				0.05			471,024				646				0.18
Certificates of deposit	713,633				9,176				1.72			783,182				11,060				1.89
Total interest-bearing deposits	4,668,980				17,983				0.51			4,107,499				38,148				1.24
Subordinated debentures	171,465				7,061				5.50			135,512				5,562				5.49
FHLB advances	240,596				2,070				1.15			286,267				5,297				2.47
Securities sold under agreements to repurchase	197,776				479				0.32			168,740				939				0.74
Other borrowed funds	32,836				518				2.11			31,102				846				3.64
Total interest-bearing liabilities	5,311,653				28,111				0.71			4,729,120				50,792				1.44
Noninterest-bearing liabilities:
Demand deposits	1,684,107											1,188,758
Other liabilities	87,302											58,267
Total liabilities	7,083,062											5,976,145
Shareholders' equity	872,944											773,843
Total liabilities and shareholders' equity	$	7,956,006										$	6,749,988
Core net interest income1					191,480											173,981
Core net interest margin1									3.47	%										3.76	%
Incremental accretion on non-core acquired loans					3,227											4,207
Total net interest income					$	194,707										$	178,188
Net interest margin									3.52	%										3.85	%
* Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate. The tax-equivalent adjustments were $2.2 million and $1.1 million for the nine months ended September 30, 2020 and 2019, respectively.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
($ in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
LOAN PORTFOLIO
Commercial and industrial	$	3,152,394			$	3,143,197			$	2,469,013			$	2,361,157			$	2,303,495
Commercial real estate	2,027,886				2,048,444				2,048,357				1,997,321				1,967,888
Construction real estate	474,727				481,221				469,627				457,273				433,486
Residential real estate	321,792				326,992				346,758				366,261				386,173
Other	149,508				140,197				123,762				132,325				136,972
Total loans	$	6,126,307			$	6,140,051			$	5,457,517			$	5,314,337			$	5,228,014
DEPOSIT PORTFOLIO
Noninterest-bearing accounts	$	1,929,540			$	1,965,868			$	1,354,571			$	1,327,348			$	1,295,450
Interest-bearing transaction accounts	1,499,756				1,508,535				1,389,603				1,367,444				1,307,855
Money market and savings accounts	2,634,885				2,566,011				2,479,828				2,249,784				2,201,052
Brokered certificates of deposit	65,209				85,414				170,667				215,758				209,754
Other certificates of deposit	546,836				573,752				595,237				610,689				610,269
Total deposit portfolio	$	6,676,226			$	6,699,580			$	5,989,906			$	5,771,023			$	5,624,380
AVERAGE BALANCES
Total loans	$	6,112,715			$	6,032,076			$	5,352,243			$	5,279,500			$	5,178,009
Debt and equity investments	1,361,515				1,361,853				1,346,968				1,322,017				1,312,860
Interest-earning assets	7,770,084				7,571,196				6,791,459				6,704,506				6,604,083
Total assets	8,341,968				8,158,204				7,363,605				7,322,496				7,222,357
Deposits	6,666,368				6,551,734				5,837,717				5,756,292				5,597,343
Shareholders’ equity	885,496				868,163				865,035				859,674				843,974
Tangible common equity1	652,663				633,946				629,390				622,502				604,331
YIELDS (tax equivalent)
Total loans	4.08		%		4.31		%		5.06		%		5.08		%		5.47		%
Debt and equity investments	2.56				2.72				2.90				2.91				2.90
Interest-earning assets	3.67				3.93				4.58				4.60				4.90
Interest-bearing deposits	0.31				0.37				0.88				1.05				1.20
Total deposits	0.22				0.27				0.68				0.81				0.94
Subordinated debentures	5.53				5.50				5.46				5.46				5.50
FHLB advances and other borrowed funds	0.74				0.56				1.33				1.57				1.99
Interest-bearing liabilities	0.54				0.55				1.05				1.23				1.41
Net interest margin	3.29				3.53				3.79				3.68				3.81
1Refer to Reconciliations of Non-GAAP Financial Measures table for a reconciliation of these measures to GAAP.

ENTERPRISE FINANCIAL SERVICES CORP CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	Quarter ended
(in thousands, except per share data)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
ASSET QUALITY
Net charge-offs	$	1,027			$	309			$	1,183			$	2,544			$	1,070
Nonperforming loans	39,623				41,473				37,204				26,425				15,569
Classified assets	84,710				96,678				104,754				85,897				93,984
Nonperforming loans to total loans	0.65		%		0.68		%		0.68		%		0.50		%		0.30		%
Nonperforming assets to total assets	0.53		%		0.55		%		0.56		%		0.45		%		0.33		%
Allowance for loan losses to total loans	2.01		%		1.80		%		1.69		%		0.81		%		0.85		%
Allowance for loan losses to nonperforming loans	311.1		%		265.9		%		247.8		%		163.8		%		286.2		%
Net charge-offs to average loans (annualized)	0.07		%		0.02		%		0.09		%		0.19		%		0.08		%
WEALTH MANAGEMENT
Trust assets under management	$	1,641,980			$	1,602,358			$	1,445,521			$	1,671,082			$	1,583,260
Trust assets under administration	2,433,026				2,455,111				2,139,673				2,524,478				2,404,950
MARKET DATA
Book value per common share	$	33.66			$	33.13			$	32.36			$	32.67			$	31.79
Tangible book value per common share1	$	24.80			$	24.22			$	23.38			$	23.76			$	22.82
Market value per share	$	27.27			$	31.12			$	27.91			$	48.21			$	40.75
Period end common shares outstanding	26,210				26,196				26,161				26,543				26,613
Average basic common shares	26,217				26,180				26,473				26,540				26,778
Average diluted common shares	26,228				26,195				26,539				26,668				26,868
CAPITAL
Total risk-based capital to risk-weighted assets	14.6		%		14.4		%		12.9		%		12.9		%		12.7		%
Tier 1 capital to risk-weighted assets	11.6		%		11.4		%		11.0		%		11.4		%		11.2		%
Common equity tier 1 capital to risk-weighted assets	10.2		%		9.9		%		9.6		%		9.9		%		9.6		%
Tangible common equity to tangible assets1	8.0		%		7.8		%		8.4		%		8.9		%		8.5		%
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																				Nine Months ended
($ in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 30, 2019
CORE PERFORMANCE MEASURES
Net interest income	$	63,354			$	65,833			$	63,368			$	61,613			$	63,046			$	192,555			$	177,104
Less: Incremental accretion income	1,235				719				1,273				576				2,140				3,227				4,207
Core net interest income	62,119				65,114				62,095				61,037				60,906				189,328				172,897
Total noninterest income	12,629				9,960				13,408				14,418				13,564				35,997				34,758
Less: Other income from non-core acquired assets	—				—				—				4				1,001				—				1,368
Less: Gain on sale of investment securities	417				—				4				(94)				337				421				337
Less: Other non-core income	—				265				—				—				—				265				266
Core noninterest income	12,212				9,695				13,404				14,508				12,226				35,311				32,787
Total core revenue	74,331				74,809				75,499				75,545				73,132				224,639				205,684
Total noninterest expense	39,524				37,912				38,673				38,354				38,239				116,109				127,131
Less: Other expenses related to non-core acquired loans	25				12				12				33				18				49				224
Less: Merger-related expenses	1,563				—				—				—				393				1,563				17,969
Core noninterest expense	37,936				37,900				38,661				38,321				37,828				114,497				108,938
Core efficiency ratio	51.04		%		50.66		%		51.21		%		50.73		%		51.73		%		50.97		%		52.96		%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN (TAX EQUIVALENT)
Net interest income	$	64,192			$	66,537			$	63,978			$	62,141			$	63,483			$	194,707			$	178,188
Less: Incremental accretion income	1,235				719				1,273				576				2,140				3,227				4,207
Core net interest income	$	62,957			$	65,818			$	62,705			$	61,565			$	61,343			$	191,480			$	173,981
Average earning assets	$	7,770,084			$	7,571,196			$	6,791,459			$	6,704,506			$	6,604,083			$	7,379,012			$	6,193,197
Reported net interest margin	3.29		%		3.53		%		3.79		%		3.68		%		3.81		%		3.52		%		3.85		%
Core net interest margin	3.22		%		3.50		%		3.71		%		3.64		%		3.69		%		3.47		%		3.76		%

	Quarter ended
($ in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
SHAREHOLDERS’ EQUITY TO TANGIBLE COMMON EQUITY AND TOTAL ASSETS TO TANGIBLE ASSETS
Shareholders’ equity	$	882,267			$	867,963			$	846,436			$	867,185			$	846,095
Less: Goodwill	210,344				210,344				210,344				210,344				211,251
Less: Intangible assets	21,820				23,196				24,585				26,076				27,626
Tangible common equity	$	650,103			$	634,423			$	611,507			$	630,765			$	607,218
Total assets	$	8,367,976			$	8,357,501			$	7,500,643			$	7,333,791			$	7,346,791
Less: Goodwill	210,344				210,344				210,344				210,344				211,251
Less: Intangible assets	21,820				23,196				24,585				26,076				27,626
Tangible assets	$	8,135,812			$	8,123,961			$	7,265,714			$	7,097,371			$	7,107,914
Tangible common equity to tangible assets	7.99		%		7.81		%		8.42		%		8.89		%		8.54		%

	Quarter Ended
($ in thousands)	Sep 30, 2020				Jun 30, 2020				Sep 30, 2019
AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE COMMON EQUITY
Average shareholder’s equity	$	885,496			$	868,163			$	843,974
Less average goodwill	210,344				210,344				211,251
Less average intangible assets	22,489				23,873				28,392
Average tangible common equity	$	652,663			$	633,946			$	604,331

	Quarter Ended
($ in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
CALCULATION OF PRE-PROVISION NET REVENUE
Net interest income	$	63,354			$	65,833			$	63,368			$	61,613			$	63,046
Noninterest income	12,629				9,960				13,408				14,418				13,564
Less: Noninterest expense	39,524				37,912				38,673				38,354				38,239
Merger-related expenses	1,563				—				—				—				393
PPNR (excluding merger-related expenses)	$	38,022			$	37,881			$	38,103			$	37,677			$	38,764

	Quarter Ended				Quarter Ended
($ in thousands, except per share data)	Sep 30, 2020				Jun 30, 2020
IMPACT OF PAYCHECK PROTECTION PROGRAM
Net income - GAAP	$	17,951			$	14,634
PPP interest and fee income	(5,226		)		(4,083		)
Related tax effect	1,291				1,009
Adjusted net income - Non-GAAP	$	14,016			$	11,560
Average diluted common shares	26,228				26,195
EPS - GAAP net income	$	0.68			$	0.56
EPS - Adjusted net income	$	0.53			$	0.44
Average assets - GAAP	$	8,341,968			$	8,158,204
Average PPP loans, net	(813,244		)		(634,632		)
Adjusted average assets - Non-GAAP	$	7,528,724			$	7,523,572
ROAA - GAAP net income	0.86		%		0.72		%
ROAA - Adjusted net income, adjusted average assets	0.74		%		0.62		%
PPNR (excluding merger-related expenses) - Non-GAAP (see reconciliation above)	$	38,022			$	37,881
PPP interest and fees	(5,226		)		(4,083		)
Adjusted PPNR (excluding merger-related expenses) - Non-GAAP	$	32,796			$	33,798
PPNR ROAA (excluding merger-related expenses) - PPNR (excluding merger-related expenses)	1.81		%		1.87		%
PPNR ROAA (excluding merger-related expenses) - adjusted PPNR (excluding merger-related expenses), adjusted average assets	1.73		%		1.81		%
Tangible assets - Non-GAAP (see reconciliation above)	$	8,135,812			$	8,123,961
PPP loans outstanding, net	(819,100		)		(807,814		)
Adjusted tangible assets - Non-GAAP	$	7,316,712			$	7,316,147
Tangible common equity Non - GAAP (see reconciliation above)	$	650,103			$	634,423
Tangible common equity to tangible assets	7.99		%		7.81		%
Tangible common equity to tangible assets - adjusted tangible assets	8.89		%		8.67		%
Average assets for leverage ratio	$	8,115,020			$	7,928,286
Average PPP loans, net	(813,244		)		(634,632		)
Adjusted average assets for leverage ratio - Non-GAAP	$	7,301,776			$	7,293,654
Tier 1 capital	$	745,397			$	726,574
Leverage ratio	9.2		%		9.2		%
Leverage ratio - adjusted average assets for leverage ratio	10.2		%		10.0		%
Net interest income - tax equivalent	$	64,192			$	66,537
PPP interest and fees	(5,226		)		(4,083		)
Adjusted net interest income - tax equivalent	$	58,966			$	62,454
Average earning assets -GAAP	$	7,770,084			$	7,571,196
Average PPP loans, net	(813,244		)		(634,632		)
Adjusted average earning assets - Non-GAAP	$	6,956,840			$	6,936,564
Net interest margin - tax equivalent	3.29		%		3.53		%
Net interest margin - tax equivalent - adjusted net interest income, adjusted average earning assets	3.37		%		3.62		%
Loans - GAAP	$	6,126,307			$	6,140,051
PPP loans outstanding, net	(819,100		)		(807,814		)
Adjusted loans - Non-GAAP	$	5,307,207			$	5,332,237
Allowance for credit losses on loans	$	123,270			$	110,270
Allowance for credit losses on loans/loans - GAAP	2.01		%		1.80		%
Allowance for credit losses on loans/loans - adjusted loans	2.32		%		2.07		%