Enterprise Financial(US:EFSC)2025-05-02 20:20PART I Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2025, detailing financial position, performance, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $15.68 billion as of March 31, 2025, driven by securities and loans, while total deposits saw a slight decrease Balance Sheet Comparison ($'000) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total cash and cash equivalents | $481,670 | $764,170 | | Total loans, net | $11,155,819 | $11,082,405 | | Total assets | $15,676,594 | $15,596,431 | | Total deposits | $13,034,230 | $13,146,492 | | Total liabilities | $13,808,521 | $13,772,429 | | Total stockholders' equity | $1,868,073 | $1,824,002 | Condensed Consolidated Statements of Income Net income for Q1 2025 increased to $50.0 million, a 23.7% rise year-over-year, with diluted EPS reaching $1.31 Income Statement Comparison ($'000) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net interest income | $147,516 | $137,728 | | Provision for credit losses | $5,184 | $5,756 | | Total noninterest income | $18,483 | $12,158 | | Total noninterest expense | $99,783 | $93,501 | | Net income | $49,961 | $40,401 | | Diluted EPS | $1.31 | $1.05 | Condensed Consolidated Statements of Comprehensive Income Total comprehensive income for Q1 2025 was $65.3 million, a positive turnaround from a prior-year loss, primarily due to unrealized gains on available-for-sale securities Comprehensive Income ($'000) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $49,961 | $40,401 | | Other comprehensive income (loss), net of tax | $15,327 | $(14,376) | | Total comprehensive income | $65,288 | $26,025 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $1.87 billion by March 31, 2025, driven by net income and other comprehensive income, partially offset by repurchases and dividends - Key changes in stockholders' equity for Q1 2025 include: +$49.96 million from net income, +$15.3 million from other comprehensive income, -$10.7 million from common stock dividends, and -$10.6 million from common stock repurchases19 Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $282.5 million in Q1 2025, with cash provided by operations offset by significant cash used in investing activities Cash Flow Summary ($'000) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $40,022 | $29,889 | | Net cash used in investing activities | $(365,743) | $(180,502) | | Net cash provided by financing activities | $43,221 | $87,004 | | Net decrease in cash and cash equivalents | $(282,500) | $(63,609) | Notes to Condensed Consolidated Financial Statements The notes detail investment and loan portfolios, credit quality, including a significant increase in nonperforming loans, and disclose a planned 12-branch acquisition - Nonperforming loans increased significantly to $109.9 million at March 31, 2025, from $42.7 million at December 31, 2024. The increase is largely attributed to two borrowing relationships that filed for bankruptcy, though the company expects to collect the full balance as the loans are well-secured and guaranteed50142 - The company uses interest rate swaps and collars to manage interest rate risk. As of March 31, 2025, it had derivatives with a notional value of $432.1 million designated as cash flow hedges84 - The company agreed to acquire 12 branches from First Interstate Bank, with approximately $740 million in deposits and $200 million in loans, with an expected closing in Q4 202597 Key Financial Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Assets | $15.68 billion | $14.61 billion | | Total Liabilities | $13.81 billion | $12.82 billion | | Total Stockholders' Equity | $1.87 billion | $1.73 billion | | Net Income | $50.0 million | $40.4 million | | Diluted EPS | $1.31 | $1.05 | - Subsequent Event: On April 28, 2025, the Bank entered into an agreement to acquire twelve branches from First Interstate Bank, which includes approximately $740 million in deposits and $200 million in loans. The transaction is expected to close in the early fourth quarter of 202597 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion analyzes Q1 2025 financial performance, highlighting a stable 4.15% net interest margin, $1.31 diluted EPS, and robust liquidity and capital Performance Highlights Q1 2025 | Metric | Value | | :--- | :--- | | Diluted EPS | $1.31 | | Return on average assets | 1.30% | | Net interest margin (tax equivalent) | 4.15% | | Nonperforming assets to total assets | 0.72% | | Tangible book value per common share | $38.54 | - The increase in nonperforming loans to $109.9 million was primarily related to seven loans across two relationships where the borrowing entities filed for bankruptcy due to a partner dispute. The company expects full collection due to strong collateral and guarantees142 - The company announced an agreement to purchase 10 branches in Arizona and two in Kansas from First Interstate Bank, which is expected to close in Q4 2025110 Results of Operations Net interest income (tax-equivalent) for Q1 2025 was $150.0 million with a 4.15% net interest margin, while noninterest income and expense both increased year-over-year Net Interest Margin Analysis | Period | Net Interest Income (Tax-Eq) | Net Interest Margin | | :--- | :--- | :--- | | Q1 2025 | $150.0 million | 4.15% | | Q4 2024 | $148.6 million | 4.13% | | Q1 2024 | $139.8 million | 4.13% | - Noninterest income increased by $6.3 million compared to the prior year quarter, primarily due to a $4.8 million increase in tax credit income, which benefited from decreased market interest rates improving fair values122 - Noninterest expense increased by $6.3 million from the prior year quarter, mainly due to a $2.9 million increase in employee compensation (merit increases) and a $3.5 million increase in deposit costs (higher average balances)124 Financial Condition Total assets reached $15.7 billion at quarter-end, with loans growing to $11.3 billion and deposits decreasing, while nonperforming assets surged to 0.72% of total assets Loan Portfolio Composition ($'000) | Loan Type | March 31, 2025 | % of Total | | :--- | :--- | :--- | | Commercial and industrial | $4,729,707 | 41.9% | | Commercial real estate - investor owned | $2,673,991 | 23.7% | | Commercial real estate - owner occupied | $2,372,302 | 21.0% | | Construction and land development | $880,708 | 7.8% | | Total Loans | $11,298,763 | 100.0% | Asset Quality Ratios | Ratio | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Nonperforming loans to total loans | 0.97% | 0.38% | | Nonperforming assets to total assets | 0.72% | 0.30% | | ACL on loans to total loans | 1.27% | 1.23% | Liquidity and Capital Resources The company maintains robust liquidity with $6.2 billion in available sources and strong capital, with all regulatory capital ratios significantly exceeding 'well-capitalized' minimums - Total available liquidity sources are $6.2 billion, including $2.9 billion from the Federal Reserve, $1.1 billion from the FHLB, and $1.6 billion in unpledged securities151154 Regulatory Capital Ratios | Ratio | March 31, 2025 | Well-Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 11.8% | 6.5% | | Tier 1 Capital | 13.1% | 8.0% | | Total Capital | 14.7% | 10.0% | | Leverage Ratio | 11.0% | 5.0% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk, projecting a 3.1% increase in net interest income from a +100 bp rate shock and a 2.5% decrease from a -100 bp shock Net Interest Income Sensitivity Analysis | Rate Shock | Annual % change in net interest income | | :--- | :--- | | +300 bp | 8.9% | | +100 bp | 3.1% | | -100 bp | (2.5)% | | -300 bp | (8.1)% | - The company had $6.8 billion in variable rate loans at March 31, 2025, with $4.7 billion having an interest rate floor174 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025178 - No material changes to internal controls over financial reporting occurred during the first quarter of 2025179 PART II Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, none of which are expected to have a material adverse effect on its financial condition or operations - Management asserts that there are no pending or threatened legal proceedings that would materially impact the company's business, financial condition, or cash flows181 Item 1A. Risk Factors No material changes to the company's risk factors have occurred since those disclosed in its 2024 Annual Report on Form 10-K - No material changes to the risk factors described in the 2024 Annual Report on Form 10-K have occurred183 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 191,739 common shares at $55.28 per share, with 1,181,483 shares remaining authorized for future repurchase Share Repurchases - Q1 2025 | Period | Total Shares Purchased | Weighted-Average Price Paid | | :--- | :--- | :--- | | January 2025 | 101,739 | $55.24 | | February 2025 | 0 | N/A | | March 2025 | 90,000 | $55.34 | | Total Q1 | 191,739 | $55.28 | Other Items (Defaults, Disclosures, Other Information, Exhibits) This section confirms no defaults on senior securities, no Rule 10b5-1 trading plan changes by officers/directors, and lists filed exhibits - Item 3: No defaults upon senior securities were reported186 - Item 5: No officer or director adopted or terminated a Rule 10b5-1 trading arrangement during the quarter190