Enterprise Financial Services ((EFSC)) has held its Q1 earnings call. Read on for the main highlights of the call.
Enterprise Financial Services Corp’s recent earnings call painted a picture of robust financial health, underscored by record earnings and strategic growth initiatives. Despite challenges such as increased non-performing assets and seasonal declines in deposits and loan paydowns, the overall sentiment remained positive. The company’s achievements and strategic positioning were highlighted as key strengths, contributing to a generally optimistic outlook.
Record Earnings and Revenue Growth
Enterprise Financial Services reported a notable increase in earnings per share, reaching $1.31, up from $1.28 in the previous quarter and $1.05 in the first quarter of 2024. This growth was supported by an increase in net interest income by $1.1 million, despite the quarter being shorter, showcasing the company’s ability to generate revenue efficiently.
Strategic Acquisition of First Interstate Bank Branches
A significant highlight of the earnings call was the strategic acquisition of 12 branches from First Interstate Bank, including 10 in Arizona. This acquisition adds approximately $740 million in deposits and $200 million in commercial loans, bolstering Enterprise Financial’s presence in attractive markets and supporting its strategic growth objectives.
Improvement in Deposit Costs
The company successfully reduced its overall cost of deposits to 1.83%, a decrease of 17 basis points during the quarter. This improvement reflects effective management of deposit costs, contributing to the company’s financial efficiency.
Strong Loan Origination
Enterprise Financial Services experienced a nearly 40% increase in loan originations compared to the first quarter of the previous year. The growth was particularly strong in commercial and industrial (C&I) and commercial real estate loans, indicating a healthy demand for these financial products.
Stable and Strong Capital Position
The company’s capital position remains robust, with a tangible common equity to tangible assets ratio stable at 9.30%. Additionally, the return on tangible common equity was reported at 14% for the first quarter, underscoring the company’s strong financial foundation.
Increase in Non-Performing Assets
Non-performing assets rose to 72 basis points of total assets from 30 basis points, primarily due to loans linked to a business dispute in Southern California. This increase highlights a challenge that the company will need to address moving forward.
Seasonal Loan Paydowns
Loan growth was tempered by the sale of $30 million in SBA loans and a seasonal decline of $75 million in tax credit business loans. These seasonal factors contributed to muted loan growth during the quarter.
Seasonal Decline in Deposits
The company experienced a decrease in client balances by $303 million due to typical seasonal outflows. However, this was partially offset by growth in national deposit verticals, indicating resilience in the company’s deposit strategy.
Forward-Looking Guidance
Looking ahead, Enterprise Financial Services Corp anticipates continued strong financial performance. The company expects the strategic acquisition of First Interstate Bank branches to enhance earnings per share in 2026, aligning with its growth strategy. Additionally, the company reported a $0.01 increase in the quarterly dividend to $0.30 per share and repurchased $11 million in common shares, reflecting confidence in its financial outlook.
In summary, Enterprise Financial Services Corp’s earnings call conveyed a positive sentiment, driven by record earnings, strategic acquisitions, and effective cost management. Despite challenges such as increased non-performing assets and seasonal fluctuations, the company’s strong financial performance and strategic positioning provide a solid foundation for future growth.