Enterprise Financial Services Corp Q1 FY2025 earnings call

• Jim Lally started by noting 2025's exciting start, acquisition of 12 branches from First Interstate Bank. - Scott Goodman discussed loan production, various loan categories performance, deposit growth in different regions. - Keene Turner talked about earnings per share, net interest income management, credit trends, non-interest income, non-interest expense, capital metrics, and the strategic branch acquisition. - Jim Lally announced Scott Goodman's transition and Doug Bauche's promotion and Kevin Handley's succession as Chief Credit Officer.

For the quarter, earned $1.31 per diluted share. Net interest income and margin expanded. Loan growth was 3% or $78 million, but muted by SBA loan sale and tax credit business sales. Diversified deposit base stable with DDA at 33%, cost of deposits at 1.83%. Capital levels strong with tangible common equity to tangible assets ratio at 9.30%. Non-interest income was strong but declined from previous quarter. Provision for credit losses decreased. Loan production had healthy activity in various categories like C&I, working capital, CRE, specialty lending businesses. Deposits had seasonal decline offset by national deposit verticals growth.

• Expect margin to potentially step down slightly in the quarter but to be stable in a five - quarter look with 75 basis points of fed funds cuts factored in. - Net interest income dollars grows quarterly. - Anticipate EPS accretion in 2026 and beyond from the branch acquisition. - Loan growth expected to be mid - single - digit with focus on balance sheet growth and attracting new relationships.

• Increase in NPAs related to loans linked through common ownership in Southern California market. - Uncertainty regarding the impact of tariffs and interest rates on private equity activity affecting loan balances and sponsor finance. - Potential erosion of economic conditions affecting the allowance for credit losses.

Q: Any of the terms of the branch deal that you're willing to disclose? Was this cash?

A: Keene Turner said it's an assumption, bringing on roughly net $450 million of cash, expecting the deal pro forma comes on at a similar to slightly improved margin.

Q: Just kind of sticking with the theme of the deal here. Just curious if you kind of model out some of the book value dilution that's going to come, how quickly you can earn that back?

A: Keene Turner said relative risk reward, some depends on how quickly they lend it out, assumptions are conservative.

Q: Hey, good morning, guys. Hope everybody's doing well today. Just a question on the margin and the outlook.

A: Keene Turner said margin is likely to trend lower but stable in a five - quarter look.

Q: Good morning, everyone. Keene, you mentioned that a little bit of pressure on the NIM here in the second quarter, but then thereafter, even with 75 basis points of rate cuts, did you say NIM still stable in that environment?

A: Keene Turner said generally, they've had good success in repricing deposits and feel good about stable margin.

Q: Hey, good morning, guys. Keene, it sounds like just fair to say given your -- the outlook on margin just even into next year we're kind of thinking about things where rates are maybe a couple cuts here and the margin still well above 4% in terms of -- even longer term than kind of the near term comments you've made. Is that -- does that seem fair based on the positioning of the balance sheet and kind of your rate outlook today?

A: Keene Turner said that is accurate.

Q: Hey, good morning, guys. Keene, I don't know, maybe I'm not sure who said it, but as far as building the reserve this quarter, that's just uncertainty with regard to the tariffs. I mean, it certainly wasn't the credits you talked about this quarter. But just trying to understand what was driving the reserve build this quarter and thinking about that.

A: Keene Turner said tariffs happened in the second quarter and they were more conservative in the overall reserve level.