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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
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☒ | | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2022.
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☐ | | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ______ to ______
Commission file number 001-15373
ENTERPRISE FINANCIAL SERVICES CORP
Incorporated in the State of Delaware
I.R.S. Employer Identification # 43-1706259
Address: 150 North Meramec
Clayton, MO 63105
Telephone: (314) 725-5500
___________________
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | | EFSC | | Nasdaq Global Select Market |
Depositary Shares, each representing a 1/40th interest in a share of 5.00% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A | | EFSCP | | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes ☐ No ☒
As of April 27, 2022, the Registrant had 37,241,812 shares of outstanding common stock, $0.01 par value per share.
This document is also available through our website at http://www.enterprisebank.com.
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION | |
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Item 1. Financial Statements | |
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Condensed Consolidated Balance Sheets (Unaudited) | |
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Condensed Consolidated Statements of Operations (Unaudited) | |
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Condensed Consolidated Statements of Comprehensive Income (Unaudited) | |
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Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) | |
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Condensed Consolidated Statements of Cash Flows (Unaudited) | |
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Notes to Condensed Consolidated Financial Statements (Unaudited) | |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk | |
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Item 4. Controls and Procedures | |
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PART II - OTHER INFORMATION | |
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Item 1. Legal Proceedings | |
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Item 1A. Risk Factors | |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |
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Item 3. Defaults Upon Senior Securities | |
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Item 4. Mine Safety Disclosures | |
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Item 5. Other Information | |
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Item 6. Exhibits | |
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Signatures | |
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| |
Glossary of Acronyms, Abbreviations and Entities
The acronyms and abbreviations identified below are used in various sections of this Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.
| | | | | | | | | | | | | | |
ACL | Allowance for Credit Losses | | FCBP | First Choice Bancorp |
ASU | Accounting Standards Update | | FHLB | Federal Home Loan Bank |
Bank | Enterprise Bank & Trust | | GAAP | Generally Accepted Accounting Principles (United States) |
C&I | Commercial and Industrial | | LIBOR | London Interbank Offered Rate |
CECL | Current Expected Credit Loss | | MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Company | Enterprise Financial Services Corp | | NIM | Net Interest Margin |
CRE | Commercial Real Estate | | PCD | Purchased Credit Deteriorated |
EFSC | Enterprise Financial Services Corp | | PPP | Paycheck Protection Program |
Enterprise | Enterprise Financial Services Corp | | SBA | Small Business Administration |
FASB | Financial Accounting Standards Board | | SEC | Securities and Exchange Commission |
FCB | First Choice Bank | | | |
PART 1 - ITEM 1 - FINANCIAL STATEMENTS
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| | | | | | | | | | | |
(in thousands, except share and per share data) | March 31, 2022 | | December 31, 2021 |
Assets | | | |
Cash and due from banks | $ | 252,706 | | | $ | 209,177 | |
Federal funds sold | 224 | | | 1,356 | |
Interest-earning deposits (including $135 and $14,595 pledged as collateral, respectively) | 1,728,390 | | | 1,811,156 | |
Total cash and cash equivalents | 1,981,320 | | | 2,021,689 | |
Interest-earning deposits greater than 90 days | 7,094 | | | 6,996 | |
Securities available-for-sale | 1,392,444 | | | 1,366,006 | |
Securities held-to-maturity, net | 541,039 | | | 429,681 | |
Loans held-for-sale | 4,270 | | | 6,389 | |
Loans | 9,056,073 | | | 9,017,642 | |
Allowance for credit losses on loans | (139,212) | | | (145,041) | |
Total loans, net | 8,916,861 | | | 8,872,601 | |
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| | | |
Other investments | 60,444 | | | 59,896 | |
Fixed assets, net | 46,900 | | | 47,915 | |
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Goodwill | 365,164 | | | 365,164 | |
Intangible assets, net | 20,855 | | | 22,286 | |
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Other assets | 370,378 | | | 338,735 | |
Total assets | $ | 13,706,769 | | | $ | 13,537,358 | |
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Liabilities and Shareholders' Equity | | | |
Noninterest-bearing deposit accounts | $ | 4,881,043 | | | $ | 4,578,436 | |
Interest-bearing transaction accounts | 2,547,482 | | | 2,465,884 | |
Money market accounts | 2,794,536 | | | 2,890,976 | |
Savings accounts | 883,599 | | | 800,210 | |
Certificates of deposit: | | | |
Brokered | 129,017 | | | 128,970 | |
Other | 468,458 | | | 479,323 | |
Total deposits | 11,704,135 | | | 11,343,799 | |
Subordinated debentures and notes | 155,031 | | | 154,899 | |
FHLB advances | 50,000 | | | 50,000 | |
Other borrowings | 228,846 | | | 353,863 | |
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Other liabilities | 95,580 | | | 105,681 | |
Total liabilities | $ | 12,233,592 | | | $ | 12,008,242 | |
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Commitments and contingent liabilities (Note 5) | | | |
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Shareholders' equity: | | | |
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 75,000 shares issued and outstanding | 71,988 | | | 71,988 | |
Common stock, $0.01 par value; 75,000,000 shares authorized; 39,496,569 and 39,799,615 shares issued, respectively | 395 | | | 398 | |
Treasury stock, at cost; 1,980,093 shares | (73,528) | | | (73,528) | |
Additional paid in capital | 1,010,446 | | | 1,018,799 | |
Retained earnings | 523,136 | | | 492,682 | |
Accumulated other comprehensive (loss) income | (59,260) | | | 18,777 | |
Total shareholders' equity | 1,473,177 | | | 1,529,116 | |
Total liabilities and shareholders' equity | $ | 13,706,769 | | | $ | 13,537,358 | |
The accompanying notes are an integral part of these consolidated financial statements.
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
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| Three months ended March 31, | | |
(in thousands, except per share data) | 2022 | | 2021 | | | | |
Interest income: | | | | | | | |
Loans | $ | 96,123 | | | $ | 76,973 | | | | | |
Debt securities: | | | | | | | |
Taxable | 5,351 | | | 4,540 | | | | | |
Nontaxable | 3,942 | | | 3,079 | | | | | |
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Interest-earning deposits | 817 | | | 189 | | | | | |
Dividends on equity securities | 348 | | | 179 | | | | | |
Total interest income | 106,581 | | | 84,960 | | | | | |
Interest expense: | | | | | | | |
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Deposits | 2,859 | | | 2,663 | | | | | |
Subordinated debentures and notes | 2,220 | | | 2,819 | | | | | |
FHLB advances | 195 | | | 195 | | | | | |
Other borrowings | 142 | | | 160 | | | | | |
Total interest expense | 5,416 | | | 5,837 | | | | | |
Net interest income | 101,165 | | | 79,123 | | | | | |
Provision (benefit) for credit losses | (4,068) | | | 46 | | | | | |
Net interest income after provision for credit losses | 105,233 | | | 79,077 | | | | | |
Noninterest income: | | | | | | | |
Deposit service charges | 4,163 | | | 3,084 | | | | | |
Wealth management revenue | 2,622 | | | 2,483 | | | | | |
Card services revenue | 3,040 | | | 2,496 | | | | | |
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Tax credit income (expense) | 2,608 | | | (1,041) | | | | | |
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Other income | 6,208 | | | 4,268 | | | | | |
Total noninterest income | 18,641 | | | 11,290 | | | | | |
Noninterest expense: | | | | | | | |
Employee compensation and benefits | 35,827 | | | 29,562 | | | | | |
Occupancy | 4,586 | | | 3,751 | | | | | |
Data processing | 3,260 | | | 2,890 | | | | | |
Professional fees | 1,177 | | | 988 | | | | | |
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Merger-related expenses | — | | | 3,142 | | | | | |
Other expense | 17,950 | | | 12,551 | | | | | |
Total noninterest expense | 62,800 | | | 52,884 | | | | | |
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Income before income tax expense | 61,074 | | | 37,483 | | | | | |
Income tax expense | 13,381 | | | 7,557 | | | | | |
Net income | $ | 47,693 | | | $ | 29,926 | | | | | |
Dividends on preferred stock | 1,229 | | | — | | | | | |
Net income available to common shareholders | $ | 46,464 | | | $ | 29,926 | | | | | |
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Earnings per common share | | | | | | | |
Basic | $ | 1.23 | | | $ | 0.96 | | | | | |
Diluted | 1.23 | | | 0.96 | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
(in thousands) | 2022 | | 2021 | | | | |
Net income | $ | 47,693 | | | $ | 29,926 | | | | | |
Other comprehensive income (loss), after-tax: | | | | | | | |
Change in unrealized loss on available-for-sale debt securities | (79,353) | | | (10,920) | | | | | |
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Reclassification of gain on held-to-maturity securities | (704) | | | (1,149) | | | | | |
Change in unrealized gain on cash flow hedges arising during the period | 1,751 | | | 847 | | | | | |
Reclassification of loss on cash flow hedges | 269 | | | 279 | | | | | |
Total other comprehensive loss, after-tax | (78,037) | | | (10,943) | | | | | |
Comprehensive (loss) income | $ | (30,344) | | | $ | 18,983 | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
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Three months ended March 31, 2022 | | | | | | | | | | | | | |
($ in thousands, except per share data) | Preferred Stock | | Common Stock | | Treasury Stock | | Additional paid in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Total shareholders’ equity |
Balance at December 31, 2021 | $ | 71,988 | | | $ | 398 | | | $ | (73,528) | | | $ | 1,018,799 | | | $ | 492,682 | | | $ | 18,777 | | | $ | 1,529,116 | |
Net income | — | | | — | | | — | | | — | | | 47,693 | | | — | | | 47,693 | |
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Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (78,037) | | | (78,037) | |
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Cash dividends paid on common shares, $0.21 per share | — | | | — | | | — | | | — | | | (7,915) | | | — | | | (7,915) | |
Cash dividends paid on preferred shares, $16.389 per share | | | — | | | — | | | — | | | (1,229) | | | — | | | (1,229) | |
Repurchase of common shares, 351,090 | — | | | (4) | | | — | | | (9,457) | | | (7,513) | | | — | | | (16,974) | |
Issuance under equity compensation plans, 48,044 shares, net | — | | | 1 | | | — | | | (582) | | | (582) | | | — | | | (1,163) | |
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Share-based compensation | — | | | — | | | — | | | 1,686 | | | — | | | — | | | 1,686 | |
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Balance at March 31, 2022 | $ | 71,988 | | | $ | 395 | | | $ | (73,528) | | | $ | 1,010,446 | | | $ | 523,136 | | | $ | (59,260) | | | $ | 1,473,177 | |
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Three months ended March 31, 2021 | | | | | | | | | | | | | |
($ in thousands, except per share data) | Preferred Stock | | Common Stock | | Treasury Stock | | Additional paid in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Total shareholders’ equity |
Balance at December 31, 2020 | $ | — | | | $ | 332 | | | $ | (73,528) | | | $ | 697,839 | | | $ | 417,212 | | | $ | 37,120 | | | $ | 1,078,975 | |
Net income | — | | | — | | | — | | | — | | | 29,926 | | | — | | | 29,926 | |
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Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (10,943) | | | (10,943) | |
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Cash dividends paid on common shares, $0.18 per share | — | | | — | | | — | | | — | | | (5,627) | | | — | | | (5,627) | |
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Issuance under equity compensation plans, 48,970 shares, net | — | | | — | | | — | | | (1,109) | | | — | | | — | | | (1,109) | |
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Share-based compensation | — | | | — | | | — | | | 1,275 | | | — | | | — | | | 1,275 | |
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Balance at March 31, 2021 | $ | — | | | $ | 332 | | | $ | (73,528) | | | $ | 698,005 | | | $ | 441,511 | | | $ | 26,177 | | | $ | 1,092,497 | |
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The accompanying notes are an integral part of these consolidated financial statements.
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| | | | | | | | | | | |
| Three months ended March 31, |
(in thousands, except share data) | 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net income | $ | 47,693 | | | $ | 29,926 | |
Adjustments to reconcile net income to net cash provided by operating activities | | | |
Depreciation | 1,472 | | | 1,581 | |
Provision (benefit) for credit losses | (4,068) | | | 46 | |
Deferred income taxes | 5,248 | | | 3,834 | |
Net amortization of debt securities | 1,625 | | | 1,937 | |
Net amortization (accretion) on loan discount/premiums | 429 | | | (736) | |
Amortization of intangible assets | 1,429 | | | 1,415 | |
Amortization of servicing assets | 648 | | | 165 | |
Mortgage loans originated-for-sale | (27,811) | | | (49,065) | |
Proceeds from mortgage loans sold | 29,636 | | | 52,908 | |
Gain on: | | | |
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Sale of other real estate | (19) | | | (47) | |
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Sale of state tax credits | (9) | | | (326) | |
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Share-based compensation | 1,686 | | | 1,275 | |
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Changes in other assets and liabilities, net | (8,076) | | | (46,588) | |
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Net cash provided by (used in) operating activities | 49,883 | | | (3,675) | |
Cash flows from investing activities: | | | |
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Net increase in loans | (39,536) | | | (69,907) | |
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Proceeds received from: | | | |
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Paydown or maturity of debt securities, available-for-sale | 63,506 | | | 69,953 | |
Paydown or maturity of debt securities, held-to-maturity | 5,097 | | | 18,220 | |
Redemption of other investments | 1,248 | | | 752 | |
Sale of state tax credits held for sale | 261 | | | 1,632 | |
Sale of other real estate | 1,419 | | | 450 | |
Settlement of bank-owned life insurance policies | 534 | | | — | |
Payments for the purchase of: | | | |
Available-for-sale debt securities | (313,875) | | | (118,791) | |
Held-to-maturity debt securities | (1,120) | | | — | |
Other investments | (8,154) | | | (3,660) | |
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State tax credits held for sale | (7,212) | | | — | |
Fixed assets | (457) | | | (489) | |
Net cash used in investing activities | (298,289) | | | (101,840) | |
Cash flows from financing activities: | | | |
Net increase in noninterest-bearing deposit accounts | 302,607 | | | 198,389 | |
Net increase in interest-bearing deposit accounts | 57,729 | | | 331,666 | |
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Repayments of notes payable | (1,429) | | | (2,857) | |
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Net decrease in other borrowings | (123,589) | | | (68,835) | |
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Repurchase of common stock | (16,974) | | | — | |
Cash dividends paid on common stock | (7,915) | | | (5,627) | |
Cash dividends paid on preferred stock | (1,229) | | | — | |
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Taxes paid in net settlement of equity awards | (1,163) | | | (1,109) | |
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Net cash provided by financing activities | 208,037 | | | 451,627 | |
Net (decrease) increase in cash and cash equivalents | (40,369) | | | 346,112 | |
Cash and cash equivalents, beginning of period | 2,021,689 | | | 537,703 | |
Cash and cash equivalents, end of period | $ | 1,981,320 | | | $ | 883,815 | |
Supplemental disclosures of cash flow information: | | | |
Cash paid during the period for: | | | |
Interest | $ | 4,725 | | | $ | 4,836 | |
Income taxes | 979 | | | 30,167 | |
Noncash investing and financing transactions: | | | |
Transfer to other real estate owned in settlement of loans | $ | — | | | $ | 1,236 | |
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Right-of-use assets obtained in exchange for lease obligations | 4,178 | | | — | |
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Transfer of securities from available-for-sale to held-to-maturity | 116,927 | | | — | |
The accompanying notes are an integral part of these consolidated financial statements.
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used by Enterprise Financial Services Corp (the “Company,” “EFSC,” or “Enterprise”) in the preparation of the condensed consolidated financial statements are summarized below:
Business and Consolidation
Enterprise is a financial holding company that provides a full range of banking and wealth management services to individuals and corporate customers primarily located in Arizona, California, Kansas, Missouri, Nevada, and New Mexico through its banking subsidiary, Enterprise Bank & Trust.
Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.
Basis of Financial Statement Presentation
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated.
In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the statements of financial position, results of operations, and cash flow for the interim periods.
Recent Accounting Pronouncements
FASB ASU 2021-01, Reference Rate Reform (Topic 848): Scope (ASU 2021-01). ASU 2021-01 was issued in January 2021 and provided optional expedients and exceptions in ASC 848 to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update were effective immediately upon issuance and did not have a material effect on the consolidated financial statements.
FASB ASU 2022-02, Financial Instruments–Credit Losses (Topic 326); Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 was issued in March 2022 and eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amendments in this update will
be effective for fiscal years beginning after December 15, 2022 for entities that have adopted the amendments in ASU 2016-13, Financial Instruments–Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. The Company is evaluating the additional disclosure requirements and does not expect them to have a material effect on the consolidated financial statements.
Acquisitions and Divestitures
Acquisitions and business combinations are accounted for using the acquisition method of accounting. The assets and liabilities of the acquired entities have been recorded at their estimated fair values at the date of acquisition. Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets.
The purchase price allocation process requires an estimation of the fair values of the assets acquired and the liabilities assumed. When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the Company includes an estimate of the acquisition-date fair value as part of the cost of the combination. To determine the fair values, the Company relies on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Fair values are considered preliminary until final fair values are determined, or the measurement period has passed, which is no later than one year from the date of acquisition.
The results of operations of the acquired business are included in the Company’s consolidated financial statements from the date of acquisition. Merger-related expenses include costs directly related to merger or acquisition activity and include legal and professional fees, system consolidation and conversion costs, and compensation costs such as severance and retention incentives for employees impacted by acquisition activity. The Company accounts for merger-related expenses in the periods in which the costs are incurred and the services are received.
For divestitures, the Company measures an asset (disposal group) classified as held-for-sale at the lower of its carrying value at the date the asset is initially classified as held-for-sale or its fair value less costs to sell. The Company reports the results of operations of an entity or group of components that either has been disposed of or held-for-sale as discontinued operations only if the disposal of that component represents a strategic shift that has or will have a major effect on an entity’s operations and financial results.
Any incremental direct costs incurred to transact the sale are allocated against the gain or loss on the sale. These costs typically include items such as legal fees, title transfer fees, broker fees, etc. Any goodwill and intangible assets associated with the portion of the reporting unit to be disposed of is included in the carrying amount of the business in determining the gain or loss on the sale.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per common share data is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method.
The following table presents a summary of per common share data and amounts for the periods indicated.
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| Three months ended March 31, | | |
(in thousands, except per share data) | 2022 | | 2021 | | | | |
Net income available to common shareholders | $ | 46,464 | | | $ | 29,926 | | | | | |
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Weighted average common shares outstanding | 37,788 | | | 31,247 | | | | | |
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Additional dilutive common stock equivalents | 70 | | | 59 | | | | | |
Weighted average diluted common shares outstanding | 37,858 | | | 31,306 | | | | | |
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Basic earnings per common share: | $ | 1.23 | | | $ | 0.96 | | | | | |
Diluted earnings per common share: | 1.23 | | | 0.96 | | | | | |
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For the three months ended March 31, 2022 common stock equivalents of approximately 276,000 were excluded from the earnings per share calculations because their effect would have been anti-dilutive. Comparatively, there were 222,000 common stock equivalents excluded in the prior year period.
NOTE 3 - INVESTMENTS
The following tables present the amortized cost, gross unrealized gains and losses, allowance for credit losses and fair value of securities available for sale and held to maturity:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
(in thousands) | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | | | Fair Value |
Available-for-sale securities: | | | | | | | | | |
Obligations of U.S. Government-sponsored enterprises | $ | 247,906 | | | $ | — | | | $ | (12,322) | | | | | $ | 235,584 | |
Obligations of states and political subdivisions | 508,912 | | | 61 | | | (59,615) | | | | | 449,358 | |
Agency mortgage-backed securities | 607,080 | | | 1,034 | | | (27,918) | | | | | 580,196 | |
U.S. Treasury bills | 116,100 | | | 77 | | | (596) | | | | | 115,581 | |
Corporate debt securities | 11,750 | | | 91 | | | (116) | | | | | 11,725 | |
Total securities available for sale | $ | 1,491,748 | | | $ | 1,263 | | | $ | (100,567) | | | | | $ | 1,392,444 | |
Held-to-maturity securities: | | | | | | | | | |
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Obligations of states and political subdivisions | $ | 352,799 | | | $ | 10 | | | $ | (40,625) | | | | | $ | 312,184 | |
Agency mortgage-backed securities | 63,281 | | | — | | | (2,970) | | | | | 60,311 | |
Corporate debt securities | 125,517 | | | 123 | | | (4,793) | | | | | 120,847 | |
Total securities held-to-maturity | $ | 541,597 | | | $ | 133 | | | $ | (48,388) | | | | | $ | 493,342 | |
Allowance for credit losses | (558) | | | | | | | | | |
Total securities held-to-maturity, net | $ | 541,039 | | | | | | | | | |
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| December 31, 2021 |
(in thousands) | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Available-for-sale securities: | | | | | | | |
Obligations of U.S. Government-sponsored enterprises | $ | 175,409 | | | $ | 3 | | | $ | (1,901) | | | $ | 173,511 | |
Obligations of states and political subdivisions | 571,587 | | | 5,907 | | | (2,410) | | | 575,084 | |
Agency mortgage-backed securities | 509,243 | | | 8,485 | | | (3,869) | | | 513,859 | |
U.S. Treasury Bills | 90,971 | | | 220 | | | (21) | | | 91,170 | |
Corporate debt securities | 11,750 | | | 632 | | | — | | | 12,382 | |
Total securities available for sale | $ | 1,358,960 | | | $ | 15,247 | | | $ | (8,201) | | | $ | 1,366,006 | |
Held-to-maturity securities: | | | | | | | |
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Obligations of states and political subdivisions | $ | 236,379 | | | $ | 1,794 | | | $ | (730) | | | $ | 237,443 | |
Agency mortgage-backed securities | 68,105 | | | 940 | | | (666) | | | 68,379 | |
Corporate debt securities | 125,811 | | | 3,039 | | | — | | | 128,850 | |
Total securities held to maturity | $ | 430,295 | | | $ | 5,773 | | | $ | (1,396) | | | $ | 434,672 | |
Allowance for credit losses | (614) | | | | | | | |
Total securities held-to-maturity, net | $ | 429,681 | | | | | | | |
During the three months ended March 31, 2022, the Company transferred $116.9 million of securities from available-for-sale to held-to-maturity. The Company believes the held-to-maturity category is consistent with the Company’s intent for these securities. The transfer of securities was made at fair value at the time of transfer. The unamortized portion of the unrealized holding gain at the time of transfer is retained in accumulated other comprehensive income and in the carrying value of held-to-maturity securities. The balance of held-to-maturity securities in the “Amortized cost” column in the table above includes a cumulative net unamortized unrealized gain of $20.3 million and $21.0 million at March 31, 2022 and December 31, 2021, respectively. Such amounts are amortized over the remaining life of the securities.
At March 31, 2022 and December 31, 2021, there were no holdings of securities of any one issuer in an amount greater than 10% of shareholders’ equity, other than U.S. Government agencies and sponsored enterprises. The agency mortgage-backed securities are all issued by U.S. Government agencies and sponsored enterprises. Securities having a fair value of $581.4 million and $752.7 million at March 31, 2022 and December 31, 2021, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract provisions.
The amortized cost and estimated fair value of debt securities at March 31, 2022, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average life of the mortgage-backed securities is approximately 5 years.
| | | | | | | | | | | | | | | | | | | | | | | |
| Available for sale | | Held to maturity |
(in thousands) | Amortized Cost | | Estimated Fair Value | | Amortized Cost | | Estimated Fair Value |
Due in one year or less | $ | 91,716 | | | $ | 91,680 | | | $ | 888 | | | $ | 891 | |
Due after one year through five years | 245,541 | | | 234,843 | | | 18,315 | | | 17,994 | |
Due after five years through ten years | 54,940 | | | 52,433 | | | 150,791 | | | 144,456 | |
Due after ten years | 492,471 | | | 433,292 | | | 308,322 | | | 269,690 | |
Agency mortgage-backed securities | 607,080 | | | 580,196 | | | 63,281 | | | 60,311 | |
| | | | | | | |
| $ | 1,491,748 | | | $ | 1,392,444 | | | $ | 541,597 | | | $ | 493,342 | |
The following tables presents a summary of available-for-sale investment securities in an unrealized loss position:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
Less than 12 months | | 12 months or more | | Total |
(in thousands) | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
Obligations of U.S. Government-sponsored enterprises | $ | 208,467 | | | $ | 11,431 | | | $ | 11,109 | | | $ | 891 | | | $ | 219,576 | | | $ | 12,322 | |
Obligations of states and political subdivisions | 425,420 | | | 55,979 | | | 17,224 | | | 3,636 | | | 442,644 | | | 59,615 | |
Agency mortgage-backed securities | 405,833 | | | 22,383 | | | 47,576 | | | |