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EF

ENTERPRISE FINANCIAL SERVICES CORP (EFSC)·Q1 2025 Earnings Summary

Executive Summary

  • EFSC delivered solid Q1 with diluted EPS of $1.31, up QoQ and YoY; EPS beat S&P Global consensus by ~12% (vs $1.172*), while reported “revenue” (S&P definition) of $158.2M missed consensus ($162.8M*) due to mix and S&P methodology; NIM expanded 2 bps to 4.15% as deposit costs fell 17 bps to 1.83% . Values with * retrieved from S&P Global.
  • Asset quality headline: NPAs rose to 0.72% (from 0.30%) tied to Southern California CRE relationships in bankruptcy; management expects full repayment, no specific reserves recorded on these loans .
  • Strategic catalyst: announced acquisition of 12 branches (AZ/KC) with ~$740M deposits and ~$200M loans; targeted close by early Q4’25 and mid-to-high single digit EPS accretion in FY26; dividend raised to $0.30 for Q2’25 and continued buybacks signal capital deployment .
  • Outlook: management sees a ~5 bps NIM step-down in Q2’25 (sub debt effect) then “stable” margin even with 75 bps of cuts modeled; net interest income set to grow through 2025 aided by day count and pricing discipline .

What Went Well and What Went Wrong

  • What Went Well

    • Margin and NII resilience: NIM 4.15% (+2 bps QoQ) and NII $147.5M (+$1.1M QoQ) as deposit costs fell and pricing discipline held; CEO: “proactive management of the balance sheet and cost of deposits has led to expansion in both net interest income and NIM.” .
    • Capital deployment and shareholder returns: dividend increased to $0.30 for Q2’25; $10.6M buybacks in Q1 and strong ROATCE of 14.02% support continued capital returns .
    • Strategic expansion: announced purchase of 10 AZ and 2 KS branches (low-cost, commercially oriented deposits); CEO: “highly strategic fit… immediately leverages excess capital… attractive EPS accretion in 2026 and beyond.” .

  • What Went Wrong

    • Headline uptick in NPAs: NPAs/Assets rose to 0.72% driven by seven CRE/residential loans to two SoCal relationships in bankruptcy; management expects full collection (LTVs 39–79%) but optics weigh on credit narrative near-term .
    • Seasonal/FX of noninterest income: noninterest income down $2.1M QoQ to $18.5M on lower seasonal tax credit income (typical Q4 peak); offset by SBA gain on sale .
    • Slight efficiency drift: core efficiency ratio worsened to 58.8% (from 57.1%) on seasonal comp resets, partially offset by lower core conversion costs .

Financial Results

Results vs prior periods and vs estimates (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Diluted EPS ($)$1.32 $1.28 $1.31
EPS Consensus ($)*$1.138$1.1625$1.172
EPS vs Cons.*+$0.182 (beat)+$0.1175 (beat)+$0.138 (beat)
“Revenue” S&P ($M)*$157.538$154.149$158.205
Revenue Consensus ($M)*$158.309$160.440$162.828
Revenue vs Cons.*-$0.771 (miss)-$6.291 (miss)-$4.623 (miss)
Net Interest Income ($M)$143.469 $146.370 $147.516
Noninterest Income ($M)$21.420 $20.631 $18.483
Net Interest Margin (%)4.17% 4.13% 4.15%
ROAA (%)1.36% 1.27% 1.30%
ROATCE (%)14.55% 13.63% 14.02%
Provision for Credit Losses ($M)$4.099 $6.834 $5.184
Loans, End ($B)$11.080 $11.220 $11.299
Deposits, End ($B)$12.465 $13.146 $13.034
Cost of Deposits (%)2.18% 2.00% 1.83%

Values with * retrieved from S&P Global.

Segment/Portfolio mix (Loans, $MM)

CategoryQ1 2024Q4 2024Q1 2025
C&I2,263.8 2,139.0 2,198.8
CRE – investor2,281.0 2,405.4 2,487.4
CRE – owner1,279.9 1,305.0 1,292.2
SBA (specialty)1,274.8 1,298.0 1,283.1
Sponsor finance865.2 782.7 784.0
Life insurance premium finance1,003.6 1,114.3 1,149.1
Tax credits718.4 760.2 677.4
Residential RE354.6 350.6 357.6
Construction/Land726.7 794.2 801.0
Other260.5 270.8 268.2
Total Loans11,028.5 11,220.4 11,298.8

Key KPIs (oldest → newest)

KPIQ3 2024Q4 2024Q1 2025
Core Efficiency Ratio (%)58.42 57.11 58.77
ACL / Loans (%)1.26 1.23 1.27
NPLs / Loans (%)0.26 0.38 0.97
NPAs / Assets (%)0.22 0.30 0.72
Noninterest-bearing Deposits / Total (%)31.6 34.1 32.9
Loan Yield (TE, %)6.95 6.73 6.57
Cost of Deposits (%)2.18 2.00 1.83

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per common shareQ2 2025$0.29 (Q1’25 level) $0.30 approvedRaised
Net interest marginQ2 2025 and FY25Not provided~5 bps sequential step-down in Q2; then stable even with 75 bps cuts modeledNew/clarified
Net interest income trajectoryFY2025Not providedNII dollars to grow quarterly through 2025 (day count, pricing)New/clarified
Branch acquisition closeEarly Q4 2025N/AClose/convert by early Q4’25New
Branch deal EPS impactFY2026N/AMid-to-high single digit EPS accretionNew
Pro forma TCE (post-branch deal)Late 2025~9.05% as of Q4’24 baseline ~8.5% pro forma, depends on buybacksLower (planned)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
NIM/Deposit pricingFocus on deposit generation; NIM 4.17% (Q3); 4.13% (Q4) with deposit cost declines NIM 4.15%; deposit costs 1.83%; expect ~5 bps step-down Q2 then stable with 75 bps cutsImproving discipline; stable outlook
Asset qualityNPAs 0.22% (Q3) rising to 0.30% (Q4) NPAs 0.72%; SoCal CRE disputes; management expects full collectionTemporary spike; management confident
Deposit verticalsGrowth aided NII; costs tied to ECR Verticals up $134M QoQ; continue to provide low-cost and diversified fundingPositive structural funding
Capital & buybacks206.5K shares repurchased Q4; TCE 9.05% 191.7K shares at $55.28; TCE 9.30%; maintain modest buyback appetiteOngoing balanced deployment
M&A/ExpansionNo branch deals priorAnnounced 12-branch purchase (AZ/KS), ~$740M deposits, ~$200M loans; close early Q4’25Strategic expansion catalyst
Macro/tariffsTariffs referenced in Q3 commentaryReserve build reflects cautious qualitative view; watch macro/tariff turbulenceConservative posture

Management Commentary

  • “2025 is off to an exciting start… we earned $1.31 per diluted share… I would characterize our performance in the quarter as strong and consistent.” — Jim Lally, CEO .
  • “This purchase is a highly strategic fit… will also produce attractive EPS accretion in 2026 and beyond. We anticipate closing and converting by the early fourth quarter of this year.” — Jim Lally on branch acquisition .
  • “We expect margin to potentially step down maybe 5 basis points sequentially in the quarter… and absent transition… margin is stable… and net interest income dollars grows quarterly.” — Keene Turner, CFO/COO .
  • On NPAs: “I anticipate that we'll receive full repayment of these loans… I remain highly confident in Enterprise's risk management process.” — Jim Lally . “Properties are occupied, attractive market; recent appraisals support recovery.” — Doug Bauche .

Q&A Highlights

  • Capital and buybacks: Pro forma capital “right at our targets”; modestly offensive buybacks remain possible alongside the branch transaction .
  • Credit detail: No dairy exposure assumed in AZ branch assets; selectivity in acquired loan book .
  • Book value earn-back from deal: closer to ~3-year M&A earn-back versus ~5-year repurchases; dependent on loan growth/retention .
  • Loan growth: Focus on mid-single-digit balance sheet growth in 2025; timing may skew to 2026 depending on macro .
  • Margin path: ~5 bps NIM decline in Q2’25 (sub debt), then stable even with 75 bps of Fed cuts; NII growth aided by day count and pricing .
  • Pro forma TCE: ~8.5% after branch close, allowing continued share count management .
  • Expenses: Seasonal comp reset in Q1; deposit vertical costs grow with balances; transaction-related costs ahead but modest .

Estimates Context

Consensus (S&P Global) vs Actuals (oldest → newest)

PeriodEPS Actual ($)EPS Cons. ($)*Delta“Revenue” Actual ($M)*Revenue Cons. ($M)*Delta
Q3 20241.29 1.138+0.152 (beat)157.538158.309-0.771 (miss)
Q4 20241.32 1.1625+0.1575 (beat)154.149160.440-6.291 (miss)
Q1 20251.31 1.172+0.138 (beat)158.205162.828-4.623 (miss)

Values with * retrieved from S&P Global.

Implications: The market may focus on recurring EPS beats driven by deposit cost management and balance sheet mix, while S&P “revenue” construct continues to run modest below consensus—likely a function of methodology vs internal NII/noninterest lines.

Key Takeaways for Investors

  • Sustainable core profitability: EPS beat with NIM expansion and falling deposit costs; management guides to stable margin after a small Q2 dip and NII growth through 2025, supporting EPS durability .
  • Credit optics but contained risk: NPAs spike tied to litigation-driven SoCal CRE relationships with low LTVs and strong guarantees; no specific reserves; resolution is a catalyst if collections materialize as expected .
  • Strategic deposit growth: Deposit verticals and upcoming AZ/KS branches add low-cost, commercially oriented deposits that should improve funding mix and optionality into 2026 .
  • Capital deployment: Dividend raised to $0.30 and ongoing buybacks reflect balanced capital strategy; pro forma TCE ~8.5% after deal still allows flexibility .
  • Trading setup: Near-term narrative hinges on (1) confirmation of NIM stability post-Q2 and (2) visible progress on SoCal credit resolutions; branch deal milestones into Q4 may be stock catalysts .
  • Efficiency focus: Core efficiency at 58.8% reflects seasonal comp; structural drivers (verticals, core conversion complete) provide room to re-tighten as noninterest income normalizes .
  • Loan mix evolution: Growth in C&I, investor CRE, and life premium finance continues; SBA gains provide offset to seasonal tax credit volatility .

Notes and sources:

  • Q1 2025 press release and 8-K (financials, KPIs, acquisition): .
  • Q1 2025 earnings call transcript (strategy, outlook, Q&A): .
  • Prior quarters for trend: Q4 2024 8-K and tables ; Q3 2024 8-K and tables .
  • Values with * retrieved from S&P Global.