Enterprise Financial Services Corp
2016 THIRD QUARTER EARNINGS RELEASE
Filed by Enterprise Financial Services Corp
Pursuant to Rule 425 of the Securities Act of 1933
and deemed filed pursuant to Rule 14a-6(b)
of the Securities Exchange Act of 1934
Subject Company: Jefferson County Bancshares, Inc.
Commission File No.: 001-15373
2
Some of the information in this report contains “forward-looking statements” within the meaning of and intended to be covered by the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified with use of terms such as “may,” “might,” “will, “should,”
“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “continue” and the negative of these terms and similar words, although some
forward-looking statements may be expressed differently. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives,
expectations or consequences of announced transactions (including the Company's announced pending merger with Jefferson County Bancshares, Inc.), and
statements about the future performance, operations products and services of the Company and its subsidiaries. Our ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. You should be aware that our actual results could differ materially from those contained in the forward-looking
statements due to a number of factors, including, but not limited to: our ability to efficiently integrate acquisitions into our operations, retain the customers of these
businesses and grow the acquired operations: credit risk; changes in the appraised valuation of real estate securing impaired loans; outcomes of litigation and other
contingencies; exposure to general and local economic conditions; risks associated with rapid increases or decreases in prevailing interest rates; consolidation
within the banking industry; competition from banks and other financial institutions; our ability to attract and retain relationship officers and other key personnel;
burdens imposed by federal and state regulation; changes in regulatory requirements; changes in accounting regulation or standards applicable to banks; and other
risks discussed under the caption “Risk Factors” of our most recently filed Form 10-K and in Part II, 1A of our most recently filed Form 10-Q, all of which could cause
the Company’s actual results to differ from those set forth in the forward-looking statements.
Readers are cautioned not to place undue reliance on our forward-looking statements, which reflect management’s analysis and expectations only as of the date of
such statements. Forward-looking statements speak only as of the date they are made, and the Company does not intend, and undertakes no obligation, to publicly
revise or update forward-looking statements after the date of this report, whether as a result of new information, future events or otherwise, except as required by
federal securities law. You should understand that it is not possible to predict or identify all risk factors. Readers should carefully review all disclosures we file from
time to time with the Securities and Exchange Commission which are available on our website at www.enterprisebank.com under "Investor Relations."
Additional Information About the Merger and Where to Find It
In connection with the proposed merger transaction, the Company will file with the Securities and Exchange Commission (the "SEC") a Registration Statement on
Form S-4 that will include a Proxy Statement of JCB, and a Prospectus of the Company, as well as other relevant documents concerning the proposed transaction.
Shareholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger when it becomes available and any other
relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information.
A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about the Company and JCB, may be obtained once filed at the SEC’s
website www.sec.gov. The Company and JCB and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies
from the shareholders of JCB in connection with the proposed merger. Information about the directors and executive officers of the Company is set forth in the
proxy statement for the Company’s 2016 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 16, 2016. Additional information
regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy
Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding
paragraph.
FORWARD-LOOKING STATEMENT
3
SUSTAIN CORE GROWTH TRENDS
CONTINUE INVESTMENT IN BANKING BUSINESS – SOLIDIFY
LOAN AND DEPOSIT GENERATION CAPABILITIES
ELEVATE FOCUS ON GROWTH IN WEALTH & OTHER FEE
BUSINESSES
2016 OBJECTIVES
4
CONTINUED GROWTH IN CORE EPS
DRIVE NET INTEREST INCOME GROWTH
IN DOLLARS WITH FAVORABLE LOAN
GROWTH TRENDS
DEFEND NET INTEREST MARGIN
MAINTAIN HIGH QUALITY CREDIT
PROFILE
ACHIEVE FURTHER IMPROVEMENT IN
OPERATING LEVERAGE
ENHANCE DEPOSIT LEVELS TO
SUPPORT GROWTH
FINANCIAL SCORECARD
11%
16%
13 bps
31 bps NPLs/Loans
6%
11%
Q3 2016 Compared to Q3 2015
5
PORTFOLIO LOAN TRENDS
$2,602
$2,751
$2,833
$2,884
$3,038
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
In Millions
6
$1,365
$1,484
$1,545 $1,541
$1,599
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
COMMERCIAL & INDUSTRIAL LOAN TRENDS
In Millions
7
PORTFOLIO LOAN DETAILS
9/30/16 6/30/16
QTR
CHANGE
9/30/15
LTM
CHANGE
ENTERPRISE VALUE LENDING $ 395 $ 354 $ 41 $ 283 $ 112
C&I GENERAL 756 738 18 689 67
LIFE INSURANCE PREMIUM FINANCING 299 296 3 248 51
TAX CREDIT 149 153 (4) 145 4
COMMERCIAL REAL ESTATE 1,045 971 74 902 143
RESIDENTIAL 234 211 23 189 45
OTHER 160 161 (1) 146 14
PORTFOLIO LOANS $ 3,038 $ 2,884 $ 154 $ 2,602 $ 436
In Millions
8
PORTFOLIO LOANS BY BUSINESS UNIT
$1,341
$1,387
$1,484
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
9/30/2015 12/31/2015 9/30/2016
St. Louis
$541 $535 $586
0
200
400
600
800
1000
1200
1400
9/30/2015 12/31/2015 9/30/2016
$164 $190 $218
0
500
1000
1500
9/30/2015 12/31/2015 9/30/2016
Arizona
In Millions
Kansas City
$556
$639
$750
$-
$200
$400
$600
$800
$1,000
9/30/2015 12/31/2015 9/30/2016
Specialized Lending
9
DEPOSIT TRENDS
$2,814 $2,785
$2,932 $3,028
$3,125
24.6%
25.8%
24.5% 24.9% 24.4%
-30.0%
-5.0%
20.0%
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
Deposits DDA %
Last Twelve Months Growth Rate = 11%
10
CORE FEE INCOME*
$1.8 $1.7 $1.7 $1.6 $1.7
$2.0 $2.0 $2.0 $2.2 $2.2
$0.3
$1.7
$0.5 $0.2 $0.2
$1.8
$1.7
$1.8 $2.1
$2.7
$5.9
$7.1
$6.0 $6.1
$6.8
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
Wealth Management Deposit Service Charges State Tax Credits Other
$0.6 $0.6
$1.0
$0.4 $0.5
$0.3
$0.7
$0.8
$0.8
$0.2
$0.1
$0.2
$0.4
$1.8
$2.1
$2.7
Q3 15 Q2 16 Q3 16
Miscellaneous CDE Card Services Swap Fees Mortgage
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
Other Core Fee Income Detail Core Fee Income
11
EARNINGS PER SHARE
$0.59 < $0.11>
$0.01
$0.49
EPS Non-Core Acquired
Assets
Other Non-Core
Expenses
Core
EPS
In Millions
* A Non GAAP Measure, Refer to Appendix for Reconciliation
REPORTED VS. CORE EPS*
Q3 2016
12
EARNINGS PER SHARE TREND
$0.49
$0.04
< $0.07> $0.02 $0.01 $0.49
Q2 '16 Net Interest
Income
Portfolio Loan
Loss Provision
Non Interest
Income
Non Interest
Expense
Q3 '16
In Millions
CHANGES IN CORE EPS*
Note: * A Non GAAP Measure, Refer to Appendix for Reconciliation
13
CORE NET INTEREST INCOME TREND*
In Millions
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
$27.1
$28.7
$29.6
$30.2
$31.5
3.41% 3.50% 3.54% 3.52% 3.54%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
$18.0
$19.0
$20.0
$21.0
$22.0
$23.0
$24.0
$25.0
$26.0
$27.0
$28.0
$29.0
$30.0
$31.0
$32.0
Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Core Net Interest Income* FTE Net Interest Margin*
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CREDIT TRENDS FOR PORTFOLIO LOANS
2 bps
-10 bps
-1 bps
-6 bps
14 bps
Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Net Charge-offs (1)
(1) Portfolio loans only, excludes PCI (Purchased Credit Impaired) loans
Q3 2016 EFSC PEER(2)
NPA’S/ASSETS = 0.59% 0.62%
NPL’S/LOANS = 0.66% 0.69%
ALLL/NPL’S = 188% 164%
ALLL/LOANS = 1.23% 1.12%
(2) Peer data as of 6/30/2016 (source: SNL Financial)
In Millions
2015 NCO = 6 bps
$60
$149
$82
$51
$154
Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Portfolio Loan Growth
In Millions
Net Charge-offs (1)
2016 YTD NCO = 2 bps
$0.6 $0.5
$0.8 $0.7
$3.0
Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Provision for Portfolio Loans
15
OPERATING EXPENSES TREND*
In Millions
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
$6.2 $6.5 $6.1 $6.5 $6.4
$1.6 $1.7 $1.7 $1.6 $1.7
$11.5
$11.8 $12.6 $12.3 $12.1
58.6%
56.1% 57.4% 56.3%
52.8%
0
5
10
15
20
25
Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Other Occupancy Employee compensation and benefits Core Efficiency Ratio*
$20.4
$19.3
$20.0 $20.2 $20.4
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POSITIVE MOMENTUM IN CORE*
EARNINGS PER SHARE
$0.28
$0.31
$0.37
$0.33
$0.35
$0.38
$0.44
$0.49
$0.47
$0.49 $0.49
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Note: * A Non-GAAP Measure, Refer to Appendix for Reconciliation
75% Core EPS Growth from Q1 2014 to Q3 2016
Appendix
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USE OF NON-GAAP FINANCIAL MEASURES
The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States
(“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as
Core net interest margin and other Core performance measures, in this presentation that are considered “non-GAAP financial
measures.” Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial
position or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable
measure calculated and presented in accordance with GAAP.
The Company considers its Core performance measures presented in this presentation as important measures of financial
performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the
impact of PCI loans and related income and expenses, the impact of nonrecurring items, and the Company's operating
performance on an ongoing basis. Core performance measures include contractual interest on PCI loans but exclude
incremental accretion on these loans. Core performance measures also exclude the Change in FDIC receivable, Gain or loss of
other real estate from PCI loans and expenses directly related to the PCI loans and other assets formerly covered under FDIC
loss share agreements. Core performance measures also exclude certain other income and expense items, such as executive
separation costs, merger related expenses, and gain/loss on sale of investment securities, the Company believes to be not
indicative of or useful to measure the Company's operating performance on an ongoing basis. The attached tables contain a
reconciliation of these Core performance measures to the GAAP measures.
The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and
ratios, provide meaningful supplemental information regarding the Company's performance and capital strength. The Company's
management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the
Company's operating results and related trends and when forecasting future periods. However, these non-GAAP measures and
ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP.
In the tables below, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial
measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the
financial measure for the periods indicated.
Peer group data consists of publicly traded banks with total assets from $1-$10 billion with commercial loans greater than 20%
and consumer loans less than 10%.
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RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30,
(in thousands) 2016 2016 2016 2015 2015 2016 2015
CORE PERFORMANCE MEASURES
Net interest income 33,830$ 33,783$ 32,428$ 32,079$ 30,006$ 100,041$ 88,331$
Less: Incremental accretion income 2,296 3,571 2,834 3,412 2,919 8,701 9,380
Core net interest income 31,534 30,212 29,594 28,667 27,087 91,340 78,951
Total noninterest income 6,976 7,049 6,005 6,557 4,729 20,030 14,118
Less: Change in FDIC loss share receivable - - - (580) (1,241) - (4,450)
Less: Gain (loss) on sale of other real estate from PCI loans (225) 705 - 81 31 480 26
Less: Gain on sale of investment securities 86 - - - - 86 23
Less: Other income from PCI assets 287 239 - - - 526 -
Core noninterest income 6,828 6,105 6,005 7,056 5,939 18,938 18,519
Total core revenue 38,362 36,317 35,599 35,723 33,026 110,278 97,470
Provision for portfolio loans 3,038 716 833 543 599 4,587 4,329
Total noninterest expense 20,814 21,353 20,762 22,886 19,932 62,929 59,340
Less: FDIC clawback - - - - 298 - 760
Less: FDIC loss share termination - - - 2,436 - - -
Less: Other expenses related to PCI loans 270 325 327 423 287 922 1,135
Less: Executive severance - 332 - - - 332 -
Less: Merger related expenses 302 - - - - 302 -
Less: Other non-core expenses - 250 - - - 250 -
Core noninterest expense 20,242 20,446 20,435 20,027 19,347 61,123 57,445
Core income before income tax expense 15,082 15,155 14,331 15,153 13,080 44,568 35,696
Core income tax expense 5,142 5,237 4,897 5,073 4,204 15,276 11,985
Core net income 9,940$ 9,918$ 9,434$ 10,080$ 8,876$ 29,292$ 23,711$
Core diluted earnings per share 0.49$ 0.49$ 0.47$ 0.49$ 0.44$ 1.45$ 1.17$
Core return on average assets 1.04% 1.07% 1.04% 1.13% 1.03% 1.05% 0.95%
Core return on average common equity 10.47% 10.89% 10.66% 11.46% 10.41% 10.67% 9.59%
Core return on average tangible common equity 11.46% 11.98% 11.76% 12.68% 11.56% 11.73% 10.70%
Core efficiency ratio 52.77% 56.30% 57.40% 56.06% 58.58% 55.43% 58.94%
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN
Net interest income (fully tax equivalent) 34,263$ 34,227$ 32,887$ 32,546$ 30,437$ 101,377$ 89,595$
Less: Incremental accretion income 2,296 3,571 2,834 3,412 2,919 8,701 9,380
Core net interest income (fully tax equivalent) 31,967$ 30,656$ 30,053$ 29,134$ 27,518$ 92,676$ 80,215$
Average earning assets 3,589,080$ 3,506,801$ 3,413,792$ 3,304,827$ 3,201,181$ 3,503,538$ 3,115,658$
Reported net interest margin (fully tax equivalent) 3.80% 3.93% 3.87% 3.91% 3.77% 3.87% 3.84%
Core net interest margin (fully tax equivalent) 3.54% 3.52% 3.54% 3.50% 3.41% 3.53% 3.44%
For the Quarter ended For the Nine Months ended
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Q & A
THIRD QUARTER 2016 EARNINGS WEBCAST