Enterprise Financial(US:EFSC)2022-01-25 22:36Financial Data and Key Metrics Changes - The company reported net income of $51 million or $1.33 per diluted share for Q4 2021, showing improvement compared to previous quarters [5][6] - Return on average assets was 1.52% and pre-provision net revenue reached a record of $63 million, increasing by $7 million from Q3 [6][10] - The loan-to-deposit ratio improved to 80%, with total loans at $9 billion and total deposits at $11.3 billion [9][10] Business Line Data and Key Metrics Changes - Loans increased by 24.8% year-over-year, driven by the addition of the First Choice book and organic growth across core business lines [20] - Specialized lending units grew by 22% annualized, with significant contributions from sponsor finance and SBA teams [23][24] - Commercial real estate originations remained strong, although impacted by payoffs and pay-downs [26] Market Data and Key Metrics Changes - St. Louis had the largest C&I book, benefiting from improved line usage and new loan originations [27] - Arizona and Kansas City loan books also grew, with new commercial real estate opportunities being originated [28] - New Mexico's loan book saw a reduction mainly due to legacy transactions and a slower ramp-up of new originations [29] Company Strategy and Development Direction - The company focuses on diversifying revenue streams through geography and business types, with recent acquisitions enhancing its market presence [7][16] - A branch-light model is being utilized, with an average deposit of over $200 million per branch, aiding in managing inflationary trends [8] - The company aims to continue investing in talent and expanding its specialty businesses in higher growth markets [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued loan production momentum and strong performance in 2022, particularly in specialty finance [6][17] - Credit quality remains strong, with proactive measures taken to improve credit metrics [13][44] - The company anticipates a mid-single-digit growth rate for non-interest income in 2022, driven by tax credit business expansion [67] Other Important Information - The company completed the core systems integration of First Choice and made significant progress in cultural integration [15] - Non-interest expense for Q4 was $64 million, with expectations for 2022 expenses around $250 million [49][50] - The company redeemed $50 million of subordinated debentures and issued $75 million of preferred stock to optimize its capital structure [51][53] Q&A Session Summary Question: Loan growth and pay-downs expectations for 2022 - Management expects continued growth in specialty lines and a moderation in payoffs, particularly in commercial real estate [58][60] Question: Fee income and deposit service charges - Fee waivers are estimated at $300,000 to $500,000 per quarter, with expectations for recovery in Q1 [61][62] Question: Residential real estate and construction loans - The decline in the residential book is primarily due to fix-and-flip loans, with potential for further short-term pressure [68][70] Question: Strategic approach to participations - The company is centralizing its participation strategy to improve efficiency and develop relationships with larger companies [76][78] Question: Provision for credit losses outlook - Management anticipates continued strong asset quality, with potential for negative provisions if growth remains muted [80] Question: Tax rate expectations for 2022 - The tax rate is expected to increase to around 22% to 22.5% due to profitability and higher state rates [103]