Executive Summary

EFSC posted diluted EPS of $1.36 and adjusted EPS of $1.37, with NIM expanding 6 bps to 4.21% and net interest income rising to $152.8M; loans and deposits grew to $11.41B and $13.32B, respectively .
Results beat S&P Global consensus: EPS $1.37 vs $1.21 estimate (+$0.16) and revenue $167.69M vs $165.99M estimate (+$1.70M). The company also beat Q1 estimates; see Estimates Context below.*
Asset quality remained stable: ACL/loans 1.27%, NPAs/assets 0.71% (linked quarter 0.72%), with provision down to $3.5M; nonperforming balances tied to two Southern California CRE relationships remain well-secured, with bankruptcy stay relief recently granted .
Dividend increased to $0.31/share for Q3 2025, and management guided for relatively stable NIM and net interest income dollar growth over the next four quarters; mid-single-digit EPS accretion expected from the Q4 branch acquisition, and sub debt is expected to be called in the next call period .
Trading catalysts: continued NIM stability despite rate path uncertainty, execution on branch acquisition integration, resolution of SoCal nonperformers, and incremental SBA loan sale gains supporting fee income .

What Went Well and What Went Wrong

What Went Well

NIM and net interest income expansion: NIM up to 4.21% (+6 bps q/q), net interest income $152.8M (+$5.2M q/q), driven by higher loan/securities balances and yields, and deposit repricing discipline .
Diversified loan and deposit growth: Loans +$110.1M q/q (annualized 4%), deposits +$283.1M q/q (+$72.9M ex-brokered CDs), with noninterest-bearing deposits at 32.5% and L/D ratio ~86% .
Fee income tailwinds: Noninterest income $20.6M (+$2.1M q/q), supported by BOLI income increases and community development investment income; $24.4M SBA loans sold for $1.2M gain .
Management confidence and discipline: “Our second quarter results demonstrated expansion in net interest income and net interest margin, continuing the strong start to 2025” — Jim Lally, CEO .

What Went Wrong

Higher operating expenses: Noninterest expense rose to $105.7M (+$5.9M q/q), driven by compensation, deposit vertical costs, and loan/legal expenses related to workouts/OREO .
Elevated NPAs vs prior year: NPAs/assets 0.71% vs 0.33% prior year, largely from two SoCal CRE relationships in bankruptcy; though management expects full collection, legal/workout costs increased .
Near-term NIM headwinds to manage: CFO flagged potential minor margin pressure from larger securities portfolio funded by brokered CDs and a temporary step-up in sub debt cost upon floating-rate reset, albeit with overall stability outlook maintained .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Diluted EPS ($)	$1.19	$1.31	$1.36
Adjusted Diluted EPS ($)	$1.21	$1.31	$1.37
Net Interest Income ($M)	$140.53	$147.52	$152.76
Noninterest Income ($M)	$15.49	$18.48	$20.60
Provision for Credit Losses ($M)	$4.82	$5.18	$3.47
Net Interest Margin (%)	4.19	4.15	4.21
ROAA (%)	1.25	1.30	1.30
ROATCE (%)	13.77	14.02	13.84
Loans ($B)	$11.00	$11.30	$11.41
Deposits ($B)	$12.28	$13.03	$13.32
Cost of Deposits (%)	2.16	1.83	1.82
NPL / Loans (%)	0.36	0.97	0.93
NPAs / Assets (%)	0.33	0.72	0.71
ACL / Loans (%)	1.27	1.27	1.27

Segment loan breakdown ($M):

Category	Q2 2024	Q1 2025	Q2 2025
C&I	2,107.10	2,198.80	2,316.61
CRE Investor Owned	2,308.93	2,487.38	2,547.86
CRE Owner Occupied	1,313.74	1,292.16	1,281.57
SBA Loans*	1,269.15	1,283.07	1,249.23
Sponsor Finance*	865.88	784.02	771.28
Life Insurance Premium Financing*	996.15	1,149.12	1,155.62
Tax Credits*	738.25	677.43	708.40
Residential Real Estate	339.89	357.62	356.72
Construction & Land Dev.	791.78	800.99	773.12
Other	269.14	268.19	248.43
Total Loans	11,000.01	11,298.76	11,408.84
*Specialty loan category.

KPIs:

KPI	Q2 2024	Q1 2025	Q2 2025
Tangible Book Value/Share ($)	35.02	38.54	40.02
TCE / TA (%)	9.18	9.30	9.42
CET1 (%)	11.7	11.8	11.9
Core Efficiency Ratio (%)	58.09	58.77	59.32

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
NIM outlook	2H25	Stable-to-slightly up absent rate cuts	“Relatively stable moving forward”; minor near-term pressure from securities/brokered CDs and sub debt float reset	Maintained (clarified near-term dynamics)
Net Interest Income dollars	Next 4 quarters	Implicit growth with discipline	Expect growth in NII dollars for foreseeable four quarters on existing balance sheet	Maintained/confirmed
Loan growth	2H25	3–4% annualized pace in 1H25	Expect 5–7% in back half on pent-up demand and clarity on tax/trade policy	Raised
EPS accretion from branch deal	First full year post-close	N/A	Mid single-digit accretion expected; slightly better margin than legacy	New
Capital actions (sub debt)	Q3 2025	Fixed 5.75% converted to float in June 2025	Anticipate calling sub debt in the second call period (affects Q3)	New
Dividend	Q3 2025	$0.30/share Q2	Increased to $0.31/share	Raised

Earnings Call Themes & Trends

Topic	Q4 2024 (prior year end)	Q1 2025 (Q-1)	Q2 2025 (current)	Trend
Margin outlook	NIM 4.13%; deposit repricing mitigated variable loan repricing	NIM 4.15%; stability after rate cuts	NIM 4.21%; near-term minor pressure, overall stability; NII growth expected	Improving/stable
Deposit verticals	$3.39B; cost ~2.72%	$3.52B; cost ~2.68%	$3.59B; cost ~2.71%	Growing; low-cost funding
Loan growth	+$140.5M q/q; broad-based	+$78.4M q/q; C&I strength	+$110.1M q/q; C&I, investor CRE; originations yield 7.26%	Reaccelerating
SBA loan sales	Gains variable; fourth quarter tax credit gain offset	$1.9M gain on SBA sales	$1.2M gain; opportunistic sales to support fee income and balance sheet	Ongoing tactical use
Southern CA nonperformers	NPAs rose; two relationships monitored	Bankruptcy filings; expect full collection; LTVs strong	Relief from stay granted; expect to enforce rights and remedies	Progress toward resolution
Branch acquisition	Announced 12 branches; deposits ~$740M	Expected close early Q4 2025	EPS accretive; better margin; leverages excess capital	Execution phase

Management Commentary

“Our second quarter results demonstrated expansion in net interest income and net interest margin, continuing the strong start to 2025.” — Jim Lally, President & CEO .
“We believe our balance sheet is well positioned for the current rate environment and expect net interest margin to be relatively stable moving forward.” — Keene Turner, CFO .
“We are prepared to continue to guide our clients through these times… The combination of our business model, an improved economy and ongoing disruption from M&A should make for a very strong financial performance.” — Jim Lally .
“We do anticipate calling the sub debt in the second call period here… we’re comfortable running with a little bit higher TCE or CET1 as we evaluate options to modify the capital stack.” — Keene Turner .

Q&A Highlights

Fee income run-rate: Expect recurring ~$1M BOLI per quarter; SBA sales likely continue; community development/private equity distributions lumpy; tax credit JV neutral in Q3 with seasonal strength in Q4 .
Expense trajectory: Compensation higher from merit increases, incentives, new hires; deposit costs step up ~$1.1–1.5M sequentially as verticals grow; legal/workout expenses remain elevated near term .
Margin path: Slight dip possible tied to securities/brokered CDs and floating sub debt; absent rate cuts, NIM stable to up; with cuts, a few bps pressure per cut with lag in deposit repricing .
Loan growth outlook: Pipelines strong; expect acceleration to 5–7% in H2 on clarity around tax and trade policy; maintain pricing discipline .
Capital priorities: Branch acquisition leverages ~100 bps of capital; plan to call sub debt; dividend policy under ongoing evaluation .

Estimates Context

Metric (S&P Global)	Q2 2025 Estimate	Q2 2025 Actual	Surprise
Primary EPS Consensus Mean ($)	1.2075	1.37	+$0.1625
Revenue Consensus Mean ($M)	165.99	167.69	+$1.70

Metric (S&P Global)	Q1 2025 Estimate	Q1 2025 Actual	Surprise
Primary EPS Consensus Mean ($)	1.172	1.31	+$0.138
Revenue Consensus Mean ($M)	162.83	158.21	-$4.62

Values retrieved from S&P Global.*
Notes: EFSC reported GAAP diluted EPS $1.36 and adjusted $1.37 in Q2; S&P actual for EPS reflects primary EPS (adjusted). EFSC “Revenue” here reflects total operating revenue per S&P; company-reported net interest income and noninterest income are shown in Financial Results .

Key Takeaways for Investors

EFSC delivered a clean EPS and revenue beat with NIM expansion and strong core NII; the balance sheet is positioned for stable margins even without further rate cuts .
Deposits continue to grow with low-cost verticals supporting funding; deposit costs edged down to 1.82% and should benefit if rates drift lower, albeit with some lag .
Asset quality is stable; SoCal nonperformers remain the key watch item, but management has secured bankruptcy stay relief and expects full collection; legal/workout costs may persist near term .
Operating leverage is a focus: expenses are elevated from growth initiatives and deposit verticals; monitor core efficiency ratio (59.3%) trajectory and expense normalization post-branch close .
Tactical SBA loan sales provide incremental fee income and balance sheet flexibility; expect continued opportunistic gains in Q3/Q4 .
Capital deployment: dividend raised to $0.31; sub debt call expected; branch acquisition EPS accretion mid-single digits offers upside to 2026 run-rate if integration executes as planned .
Near-term trade: NIM stability and EPS resilience support the bull case; risks include rate-cut beta on deposits, legal costs, and integration execution. Watch Q3 margin print and updates on SoCal recoveries .

ENTERPRISE FINANCIAL SERVICES CORP (EFSC)·Q2 2025 Earnings Summary