Sign in

You're signed outSign in or to get full access.

EF

ENTERPRISE FINANCIAL SERVICES CORP (EFSC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $1.28 on net income of $48.8M; NIM held at 4.13% (-4 bps q/q) as lower loan yields from Fed cuts were largely offset by active deposit repricing and strong core deposit growth .
  • Deposits surged $681M q/q to $13.15B (34.1% noninterest-bearing), while loans grew $141M q/q to $11.22B; loan-to-deposit ratio improved to 85.3% from 88.9% in Q3 .
  • Credit remained solid but with a modest uptick in nonperformers tied to two relationships; NPA ratio rose to 0.30% (from 0.22% in Q3), ACL/loans was 1.23% (1.34% ex-guaranteed) .
  • Dividend raised to $0.29 for Q1’25; management framed 2025 NIM “around 4.10%” post reset, with each 25 bps rate cut ≈ 5 bps NIM/$1.5–$2.0M NII impact and ~$1M offset in deposit-related expenses; expense run-rate guided to ~$97–$99M per quarter; loan growth targeted mid-single digits .
  • S&P Global consensus estimates were unavailable at request time; therefore, beat/miss vs Street cannot be assessed.

What Went Well and What Went Wrong

What Went Well

  • Deposit growth and mix: Core client deposits rose $681M q/q (ex-brokered +$678M), with noninterest-bearing reaching 34.1% and total cost of deposits down to 2.00% (2.18% in Q3) .
  • Margin defense and NII: Net interest income increased for the third straight quarter to $146.4M (+$2.9M q/q) as deposit repricing offset lower variable-rate loan yields; Q4 NIM 4.13% (down 4 bps q/q) .
  • Strategic commentary and capital returns: Dividend increased to $0.29; 206,529 shares repurchased in Q4; clear 2025 NIM/expense framework and reaffirmed capital targets (CET1 10%, Tier 1 12%, Total 14%) .

What Went Wrong

  • Noninterest income softness: Fell to $20.6M (-$0.8M q/q; -$4.8M y/y) due to the absence of a Q3 OREO gain and lower community development/PE distributions; tax credit income did increase sequentially .
  • Noninterest expense pressure: Up to $99.5M (+$1.5M q/q; +$6.9M y/y) driven by higher compensation/benefits (medical claims, variable incentives) and core conversion expense .
  • Credit metrics mixed: NPA/Assets rose to 0.30% (from 0.22% in Q3), tied to two relationships; annualized Q4 net charge-offs increased to 0.26% (from 0.14% in Q3) though still modest; ACL/loans edged down to 1.23% .

Financial Results

Income Statement Metrics

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Diluted EPS ($)$1.16 $1.19 $1.32 $1.28
Net Income ($MM)$44.5 $45.4 $50.6 $48.8
Net Interest Income ($MM)$140.7 $140.5 $143.5 $146.4
Noninterest Income ($MM)$25.5 $15.5 $21.4 $20.6
Net Interest Margin (%)4.23% 4.19% 4.17% 4.13%
Core Efficiency Ratio (%)53.06% 58.09% 58.42% 57.11%

Balance Sheet and Funding

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Loans EOP ($BN)$10.88 $11.00 $11.08 $11.22
Deposits EOP ($BN)$12.18 $12.28 $12.47 $13.15
NIB Deposits / Total32.5% 32.0% 31.6% 34.1%
Cost of Deposits (%)2.03% 2.16% 2.18% 2.00%
Loan/Deposit Ratio (%)89.4% (FY end) 89.6% 88.9% 85.3%

Credit KPIs

KPIQ4 2023Q3 2024Q4 2024
NPLs / Loans (%)0.40% 0.26% 0.38%
NPAs / Assets (%)0.34% 0.22% 0.30%
ACL / Loans (%)1.24% 1.26% 1.23%
ACL / Loans ex-Guaranteed (%)1.35% 1.38% 1.34%
Net Charge-offs / Avg Loans (annualized)1.06% 0.14% 0.26%
ROAA (%)1.23% 1.36% 1.27%
ROATCE (%)14.38% 14.55% 13.63%

Loan Portfolio Detail (EOP, $MM)

CategoryQ4 2023Q3 2024Q4 2024
C&I2,186 2,145 2,139
CRE – Investor2,292 2,347 2,405
CRE – Owner Occupied1,262 1,323 1,305
SBA (Specialty)1,282 1,273 1,298
Sponsor Finance (Specialty)872 819 783
Life Insurance Premium Finance (Specialty)956 1,030 1,114
Tax Credits (Specialty)735 724 760
Residential RE360 346 351
Construction & Land Dev671 797 794
Other269 276 271

Notes: Q4’24 loan growth was driven primarily by Specialty (+$109M) and CRE (+$41M); average line utilization ~42% (vs 44% in Q3) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin2025 framework—“Relatively stable… around 4.10%” after SBA reset; each 25 bps rate change ≈ ~5 bps NIM and ~$1.5–$2.0M NII per quarter; deposit-related expenses decline by ~$1M per 25 bps cut New explicit framework
Noninterest Expense2025—Roughly level to modestly growing; ~“$97–$99M per quarter” run-rate New explicit range
Loan Growth2025—Mid-single-digit (with potential upside if headwinds abate) Directional, maintained focus
DividendQ1 2025$0.28 in Q4 2024$0.29 (raised $0.01) Raised
Capital TargetsOngoingCET1/Tier1/Total at 10%/12%/14%Reaffirmed targets (current CET1 11.8%; Total RBC 14.6%) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Interest rate sensitivity & NIMQ2 NIM rose to 4.19% (+6 bps); Q3 NIM 4.17% (-2 bps); deposit costs edged up; Fed cut late Q3 NIM 4.13% (-4 bps q/q); active rate management and volume/mix offset lower loan yields (Fed reductions) Stable-to-slightly lower, defended
Deposits & verticalsQ2 deposits +$29M; Q3 +$183M; strong core growth; NIB ~32% Q4 deposits +$681M; NIB 34.1%; total cost down to 2.00% Strengthening growth, lower costs
Credit qualityQ3 NPAs down to 0.22%; ACL/loans 1.26% NPAs 0.30% (two relationships); ACL/loans 1.23% (1.34% ex-guaranteed) Mixed but within normalizing range
Loan growth & pipelineQ2 loans -$28.5M; Q3 +$79.9M; specialty and CRE contributions Q4 +$140.5M; specialty +$108.8M, CRE +$41.1M; average utilization ~42% Accelerating
Capital & buybacks/M&ATBV/share up; repurchases; no near-term M&A priority TBV/share $37.27; 206.5K shares repurchased; M&A not a priority in 2025 Ongoing return, organic focus

Management Commentary

  • “Our diversified business model drove an expansion in net interest income while defending net interest margin, which was essentially flat… and remained above 4%.” – CEO Jim Lally .
  • “Deposit growth… increased by $677 million… cost and composition… improved… quarterly cost of deposits declined to 2.00%, and… DDA… increased to over 34%.” – CEO Jim Lally .
  • “Loans originated in the fourth quarter had an average interest rate of 7.10%… Yields remain favorable for new purchases… average tax equivalent yield on [investment] purchases… 5.10%.” – CFO Keene Turner .
  • “Each 25 basis point change in rates equates to approximately 5 basis points of margin, or $1.5 million to $2 million of net interest income per quarter… deposit-related noninterest expense… with each 25-point cut [declining] approximately $1 million.” – CFO Keene Turner .

Q&A Highlights

  • Margin outlook and rate sensitivity: Management expects NIM “around 4.10%” post SBA reset; believes margin can be “4-plus” even with a couple of cuts, absent adverse curve/mix shifts .
  • Expense trajectory post core conversion: Noninterest expense guided roughly level to modest growth; ~“$97–$99M per quarter” in 2025, with seasonal factors and deposit-cost offsets from rate cuts .
  • NIB deposits durability: Seasonal dip possible in Q1, but model targets low-30% NIB structurally via full-relationship banking .
  • Credit specifics: Q4 uptick in NPAs tied to two relationships (medical management/consulting and a small owner-occupied CRE loan); outlook remains “strong and stable” with reserve coverage viewed as robust .
  • Capital/M&A: Long-term capital targets reaffirmed (10%/12%/14%); share repurchases continue opportunistically; M&A not a priority in 2025 given strong organic pipeline .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was not retrievable at request time due to an S&P Global daily request limit. As a result, we cannot determine beat/miss vs consensus for EPS and revenue at this time.
  • Actuals reported: EPS $1.28; Net interest income $146.4M; Noninterest income $20.6M; NIM 4.13% .

Key Takeaways for Investors

  • Core deposit strength is a differentiator: +$681M q/q with higher NIB mix (34.1%) and lower total deposit cost (2.00%), supporting NIM resilience and funding capacity .
  • Margin defense credible: Clear 2025 framework (“~4.10%” post reset) and quantified rate sensitivities, plus deposit expense offsets, should stabilize NIM and NII through potential Fed cuts .
  • Loan growth re-accelerating: Q4 growth led by Specialty and CRE; mid-single-digit 2025 growth targeted without loosening underwriting or pricing discipline .
  • Credit normalizing within guardrails: Modest NPA increase on two names; reserve coverage and diversification provide cushion; annualized NCOs remain manageable .
  • Expense run-rate defined: ~$97–$99M/quarter offers visibility; core conversion spend fades while deposit-related costs can move down with rates .
  • Capital return continues: Dividend raised to $0.29 and repurchases ongoing; TBV/share up 10% y/y to $37.27; capital ratios remain well-capitalized .
  • Narrative catalyst: Sustained core deposit momentum and NIM stability amid rate cuts, plus visible expense run-rate, are near-term drivers; medium term, geographic and vertical diversification (and well-managed office CRE book) support durable ROE/ROATCE .

Appendix: Additional Context and Drivers

  • Why NIM dipped slightly: Fed’s 100 bps of cuts through late 2024 reduced variable loan yields; EFSC actively lowered deposit rates and shifted mix to defend spread; investment portfolio yield contribution rose .
  • Why noninterest income fell q/q: Absence of Q3 OREO gains and lower community development/PE distributions; tax credit income seasonally stronger in Q4 but below prior year .
  • Why expenses rose: Higher compensation/benefits (medical claims, incentives) and core conversion cost; partially offset by lower deposit servicing costs as earnings credit rates were reduced .
  • Liquidity and investments: $6.3B total on/off-balance sheet liquidity; investment securities $2.79B (+$153M q/q), new purchases at 5.10% TE yield .