EFSC - Earnings call transcript Q1 2022 | Enterprise Financial Services Corp

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Operator

Good day. And welcome to the EFSC Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jim Lally, President and CEO. Please go ahead.

Jim Lally

Cristina. you thank Well, and our morning, call. quarter welcome good first to earnings And appreciate time taking of listen I you to all in.

President Officer; Joining Turner, me Scott Operating our Keene Bank Goodman, and company's Chief Trust. this Financial and morning of Enterprise is & Chief

refer recent like I were why X-K make release I call The quarter. the Forward-Looking remind fourth quarter everyone accompanying from presentation this slide our expected furnished vary that website. XX-Q leaving presentation highlights Form X XX-K can we turn On to any and Before that our XXXX our continue would would Please financial on Please most the and first copy release slide XXXX. a on of we SEC to for actual presentation results to commented momentum the call, yesterday. and to morning. Statements begin, that earnings on we for reasons earnings forward-looking of and the X had be statements our found titled our may for

Our quarter showed true. be to of results first this XXXX the for

XXXX. For to million quarters, per of and we of X.XX% produced per than X.XX% or for share less the prior the diluted of $X.XX and the a that for posted linked $X.XX on respectively. share. This fourth This EFSC average assets quarter year earned diluted $XX level return compared performance $X.XX quarter just slightly the

quarter about both quarter robust quarter X%. typically PPP earned Net ability points with a and at ROAA disciplined of will annualized we the loans a and but yielding the provide opportunities pre-provision detriment detail fourth remain that EFSC credit likely to quarter. of am significant revenue On the where of Nonetheless, of posted and XXXX XXXX. company. peak through in X.X% we PPNR XX.X%. deposits. ROATCE I the and another million you on growth loans comment will more rate experienced solid to As an different. non-interest also for much a continued grew growth $XX Scott of a for no we respect the the of know performance has benefit the an for we of and was of improve additional we confident our to headwinds, growth about this progress remainder provided where of of deposit basis I our pricing saw The as quarter few basis level

five our channels with increasingly over the becoming diversified last are that company comfortable deposit years. We added generation have of to the we

combined we Just base an that grow M&A very organic the of quarters combination points. been in over last expected on while statistics and This sensitive ratio deposit lowering cost page. remained rate through is the as given quality diversified asset interest several next well-priced will this with to interest basis deposit base deposits to overall our base environment. improving Credit by XX% to and the year well rate XX total evidenced of solid have the DDA bode able our by our deposit both to growth overall XX%

recorded benefit we and diverse our do in XXXX. a build the quality improvement of resilient for quarter provision portfolio. in to hard incredibly first $X mentioned in not macroeconomic of past, worked million I've to the this and As have and more a forecasts, the Due granted take credit was

at to billion had remains to we TCE capital at X.X% strong a XX/XX/XX. assets ratio compared $X.X equity X.X% of XX/XX/XX, total Our of position total shareholders' and

deposit to cadence several worked at you that we to During back low-cost digits, includes quarters hard the confidence in increased and a base. flexible reliable repurchased growth generation of capabilities, begin capital return high-quality efficient establish. diversified quartile loan single Stepping the a portfolio high the see loan and shares we've quarter, our per looking top and solid the a This the quarterly dividend X% XXX,XXX and in profile, share. $X.XX to last multifaceted and consistency

will remainder where see of we focused X, on Moving the for remain XXXX. slide to you

at value focus we past, As we markets' and loan have net Like on with that businesses relationships. relationship truly allocations versus the through XXXX. the our garnering garner for quarter, can relationship this efforts their solution-oriented are progress that rely second we teams our we families focused such credit new to and new on tax growth We the diversified a new and our multiple keenly designed in business model any and goals deposit leveraging to markets on way businesses cost.

have this new as not you use real business. entered very when ourselves differentiate is of the excited true crowded markets especially we prolific to seeing opportunities program commercial the estate new tool. with a We already this that found to pipeline I'm to in using share our I'm or where added

housing affordable markets growth seeing in our new closings. record we existing should on business, in and As was build performance XXXX which in that it to of terms are our a relates year

our new progress and talent, significant talent. specialty along businesses teams new in invested in more attract current made expanding profile for bolstering with higher-growth have to in We've markets. We our heavily

more little complement four to existing came we introduce most a four Our will markets. are efforts operating and around have recent in provide us these in ground from seeing Scott In the hit The more Orange markets and team most recruiting detail the trends organizations County middle-market will his businesses. comments, the hires running. our different recent recent L.A. and

to throughout expand However the and California positive. and And Southwest. the progress signs profile to are early Southern excited I'm our continue

finance of high-performing with new the With and this has come practice able the to team group, organizations. professional out were XXXX, quarter bolstered gates out We've in of with a we also team. our adds in a each well expectations. different of focus shared already XXXX national Phoenix onboard high three fourth very coming Additionally, begin

will land office were new Texas. very build attractive his to this North in market. around of in Finally, XX-year a career and we commercial recently able announced the leader proven opening We a

our are and and call current these Scott? confident Goodman. to we're to growth. We level that, add over the Scott eager of associates will will expected these turn make new I to and investments now that With teams

Scott Goodman

and morning, Jim, everybody. you, Thank good

had on loan the in XXXX as basis quarter from and commercial recent well, slide on net mentioned, X. perform driven the general, growth for of large we're Jim growth business In estate key in net million activity real in XX% additional are or growth specialty As region the southwestern of outlined part slides represented Arizona. annualized X. PPP well $XXX loan with contributed was showing and with PPP the X the the segment gates Choice The X% portfolio acquisition out net continue loan areas a details TTM million of units loan with First the to of or number of increases. number by all of organic by $XXX nearly On the

remained competitive lean teams. nurtured returns in that in into more consistency with value portion growth environmental heard headwinds immune pricing talked revenue year, improved targets. did the of that the diversified spreads while business, provide business. market robust and we've the from see and Jim, line strong pressures philosophies Finance our our recent our our a with business both to the That longer-term the fundamental sales well our and partners to the we've proving said this loan dampen through you of our transparency pressures the our As able M&A we below activity over CRE investor disciplined benefit as in the deep push clients model. been our the fixed and years calls process we've growth and to Sponsor were other in in rate competitive relating being relationships In to with I've equity by maintaining private driven channels in And some of this past about book

This growth record any structure sponsors Sponsor of approach not signal result, a strategy our does quarter. as our As consistent. with Finance pricing in to remains targeted our the million to credit changes $XXX to posted

remains portfolio in based the net Although, growth strong may and of business. this seasonality the quarter-to-quarter the sales, vary production company timing activity on

life in premium as clients insurance payments well policies. on finance existing new mainly several seasonal premium growth Solid reflects as

number annual a with slide plans retention in The executing credit states. fundings recruit to related adds programs with have The production tax naturally across due non-SBA portfolio We're payoffs well-seasoned improved to local of well specialty to its loans new SBA As address competitive outlined with higher the affordable are the continuing portfolio the levels. to expansion growth that along multiple risen well aggregate In on sale continues as perform has markets. to lenders. and in business, quarterly momentum. funding growth markets pay-downs production steadily consistent Aggregate also boost housing new business and elevated proactively built pressures to originators on the solid as prior from trends premiums lending of somewhat the eight. remained QX

with perform leverage And to and positive and the the ultimately balances the and specialties, professional for veterinary Louis targeted In and declined in annualized or team addition new City healthy X% net average these C&I indicators up has a California, experts metal medical four-quarter St. QX balanced XX% experienced for foodservice, of existing borrowing whose small Louis year. to practices with additional a I usage industries, and payoffs. at QX over including producing have Mexico, CRE levels, of better After practice In its growth $XX during larger post nice the deals New XX.X% originations as through $XX growth also and growth $XXX loans and is quarter fabrication. the during This uptick continues the base portfolio or system a team cash capital we at activities various Arizona terms In liquidity of decline year-over-year of during City can to market. broadcasting off up aforementioned located in new continues been relationships, to group added of our result quarter. proven XX% year-over-year. in approximately though but million general, the the dental, southwest loans quarter the space. fiscal The a quarter. to of the on of to in slight St. in Vegas, that ability mix million the around needs supply composed in small adding remain million commitments. dedicated expect In obstacles. Fundamental of includes year-end, experienced which and and is million, the Larger slightly new region a grown lending low acquisition focuses working C&I off Kansas will the have yields. been in a were large obtaining to steady strong CRE Las development new sales start was includes we've and clients, in $XX logistics, which originations. past balances in way leveled a work origination total relationships suppressed that chain continued by line loan Kansas we've

reminder, grown Albuquerque. deposit successfully well The its heavy through of and market We've developed estate communities. primary which share Mexico a the low-cost Albuquerque, Los primarily Alamos real commercial New the primary to up value low-cost in while well-diversified predominant a Fe. this with as Santa relationships and New submarkets into balances is of we profile concentrated continues from commercial Fe as however, loan some maintaining makes deposit in be these As portfolio. three base entered was and LANB the nice book, Alamos Santa and Mexico acquisition driver Los

with a expected, factors during Albuquerque ability Arizona. here maximize similar of quickly as position & senior forward. the leadership made an COVID also promotion markets. while retention This going Trust as but Certainly team Our well the the was that to existing region and client has a quarter change Bank felt as we to this the leadership our our in developing that fit us to goals have Enterprise repositioning profile change was high under better performer necessary our the of strategy goal loans to economic achieve other these C&I of impacted related as in been

Our near but growth modest term, portfolio a loan is slow the runoff with well-balanced relationship-based to and expectation here over time. build potential steady

books We plans integration continue for loan Choice Southern and in commercial to California. execute legacy the First Seacoast our local Commerce

production I continue relationships, fix that pressure discussed were to our retain to the C&I We legacy experience I market. the support extending into see and of near bridge net growth and primary which on term, client loans. QX. set did last focused quarter, flip of on expansion base and in some residential we a process a bank and expectation from key lending the our would As expand steady the this shorter-duration book, QX, CRE objectives was portion pressure this In strategy talent deepen maintain to also

here, our longer-term up while getting However, the were Relative we declined the and positive. over in to California are traction the over quarterly are QX, by on by objectives XX% portfolio XX% originations same payoffs loan trends period. Southern

nicely, Our loan both legacy with clients, as and building been C&I including also has new opportunities pipeline expand as to relationships. CRE well exposure

front, talent also solid the progress. On we're making

relocation a to within with relationship team of market new the the Enterprise end also to County, we've addition commercial organization proven four leader and In senior the competitors. in several C&I-focused long-term L.A. Orange recruited managers from integrate

existing new for reduce Southern a these economic of our talent, California growth of expect opportunities to and help commercial leverage bankers the bit provide necessary our reach -- Texas, and adds attractiveness markets the Jim's in areas in solid in experience COIs experienced our well team the these and the the to profile growth support of to region. North into business as higher model on Phoenix, remarks expand networks environment experienced the bankers. a to these Expanding the metro which We the new challenging C&I into as

pricing from for saving and ending balances nine. Steady The by Finally, levels continued $XX.X were relationships and particularly deposit commercial escrow for up as QX key consumer accounts balances. as continue base. deposit continued lines. touching teams the to growth we're Total existing liquidity on also business accounts new quarter. QX In deposit $XXX our new prepared million accounts slide produced specialty Mexico client our to deposits in ongoing number community approach steady billion, of maintain New specialized a several onboarded existing to to within and associations in from driven and both well general, new relationships outpace third-party the closed new well also disciplined

rate not due a have experienced with relationship-focused for Fed significant approach. through rate and disciplined we but relationships, to moves balances closely we further of to now interest this For continue attrition our watch albeit

Now, I'd Turner to comments. Keene like over Keene? to turn call the further for

Keene Turner

and $XX quarter. to fewer and compared Scott the net PPP the is typically of income $X.XX deposit morning quarter earnings loan we comments expected benefited that where share offset and income and the the net days reported discussed Scott Non-interest good and year slide we $X.XX interest million My each the in Thanks, fourth in in helped earnings Yes. growth in the on XX experienced everyone. first begin of quarter. of The on per of quarter impact income in seasonal two the in the fourth decrease highest decline first quarter. the

We also the and management continued this $X.XX share earnings stock reduced our earnings by our And repurchases approximately share per added quarter preferred share paid period. in to capital on first declared per our lastly of quarter. dividend the $X.XX through and in that

reduction to strong earnings $XXX driven $X million repeatable days Despite income PPP-related net million in investment XX. with was in was higher slide a compared to growth, the decrease prior net quarter. The period. stable organic to primarily loan Turning margin. Net the interest along million the and in continue the by interest $XXX with income the portfolio we build fewer decline, sequential two interest income in

balances growth on X.XX%. Moving interest available basis Funding $XXX slide reduction stemming pace Net to to interest-bearing despite remained of basis by of expand a in average points interest as just we portfolio our take points rates higher. are XX. strong balances measured add were margin and net of a current margin two prior in basis Loan quarter on higher the from were first and will moving equivalent We excess PPP yields. that advantage at period and yields to to deploy stable mainly higher the net result costs the that deposits cost million now in total was cash a higher basis at investment to interest average the anticipate four This XX declined points. continued income tax quarter. cash and the deposit on both

based result that within additional increase on an sheet in to Our rates above income Nearly deployment point sensitive XX% basis in which net is floors high at level interest in priced largest The off investment with X% of impact rates X will The balance asset sensitivity an the composition. of of asset XX and are or floors with the additional those X/XX the basis margin loan asset meaningful. X% lift make and of and XX% have of we XX% of variable rate driver floor. the us remains on of floors points on to balance low more mitigate cash rate. currently those approximately our approximately up are portfolio basis, net interest to annual loans points is basis each XX% dollars XX yields interest interest floor. at The and expect XX helps continued increase sheet of are the

quality, On commercial factors, with Our remains less than reduced points of deposit deposit end basis for provision an and to loans liquidity, compared million our losses and in and charge-offs to X.XX% totaled basis rise benefit million or total through the or low-cost our is costs footprint have ample losses an improvement formally index. verticals, Net fourth deposit $XX macroeconomic versus notably allowance assets. tied to believe the transaction than accounts annualized assets of Slide estate on XX more greatly were due forecasted non-interest-bearing XX in we tightening metrics, credit million $XXX balances price generation basis X expanded first quarter. XX% to the The of specialty already the $X we as at Non-performing Slide unemployment strong ability to $XXX points a our index. With enhanced the showed prior total were points $X.X control strong allowance XX million the of quarter, improvement our credit compared year. in position. X.XX% we total million cycles. which portfolio continued or our depicts most asset credit real for quality rates XX rates

Excluding X.XX% March guaranteed of loans, at XX. was allowance the total loans

fees started heightened and While our chains the allowance On reduced of the in first on revenue with existing our as the earned debit consistent fourth revenue to was economy quarter supply credit the tax consideration. quarter the interest believe level that ongoing our out expectations. and levels. the Swap decline investments quarter, volumes result $X This reduced compared Slide million. Card rising led services from quarter decreased in compared community quarter development in income do declined, decline to high card included $X fourth seasonally XX, quarter rates fee first was first in warrant strong to customers quarter, reflects disruptions of to million. the we million $XX fee forecast and $XX quarter income that in for during strong core at was million continued system of a holiday by the first as charges service at primarily the fourth was a conversion. First Choice inflation, provided improved deposit rebounded risk The

While continue business this income tax will line our be in seasonal, continues. credit momentum to

around value. on the rates development at part quarter. consistent However, headwind impact not this in third item rising of inventory do due $XXX,XXX sources will community this to of quarter per quarterly, earned the line do latter its fair but continued face services impact the in are Card starting pressure expect income year. interest Durbin on investments contribution of Also, we fees the held

to XX. Slide Turning

lower fourth taxes in numerous payroll this by million no $X.X quarter. first were roughly million $XX.X $XX.X this total have which encouraged merger-related expenses higher primarily first $X.X with XXX(k) to expenses expense quarter, business The increase and seasonally included the was There XXXX the non-interest along expected quarter of begin was positive in as million to compared the the $XX.X quarter. merger-related Expenses year. driver which quarter is the trends at First million Core in than and operating for were $X fourth million of the we're million, expenses. performed higher match.

second our growth and a and both we have commercial associates strengthen Scott As allow do recruited and and our to These from discussed, specialty expect both but invest in will to the build continue first quarter. markets increase investments we sequential see our successfully production expense run new Jim in rate targets, to lines. in us our to the

upon in commercial build hires maintain us units current of loans rate over more banking growth allow and confidently that growth sustained a Specifically, to for will rate the period.

in net momentum as specialty drive as Additionally, trends will continued rate expenses. stronger interest than and servicing well has areas, planned deposit forecasted

trends longer As these by it XXXX. for reiterate, for to million will range current up million rate quarters will appears that interest net step we trends quarterly modestly will continued from roughly a -- quarter million $XX in stronger remaining importantly the in $XX but per trends, these offset result, margin to more term. the think $XX will run growth revenue a of we more these investments expect be trends allow than To

demonstrated are metrics Slide capital Our on XX.

tangible liquidity. than the It's the our in quarter assets and equity tangible protect decrease investment book capital end we fair our including decrease maturity tangible equity have regulatory the million We rising a tangible more note have a quarter to a share totaling strong earnings to and drove to other quarterly growth repurchased first further We portfolio while return we currently tangible shareholders that in was shares, transferred deposit we at returned to position solid over and decline approximately in year of loan to important earnings XXX,XXX equity. the The impact and over repurchases start book excess on quarter primarily $XX the or quarter trends, in million the million comprehensive $XX.XX common through to highlights excess linked X.X%. the investment to value are of on held Our of ratios X.X% does value call first the We joining XXXX we're rates. and early and pre-provision a common initiatives. assets drove the for and was remainder today on positioned capacity These not going limits. average questions. average for common deployment where well-capitalized impact the our This capital continued compares of a portfolio high-quality dividend. market the our income $XXX believe Thanks this return interest X.X%. to continue assets XX% year. from strategic for metrics our our a announced strong With another we and $XX.XX in return rates had rising was of and due We $XX per and to to to portfolio. XX% X.X% with credit to of open on and common execute dividends, to ratio X% available-for-sale the now line accumulated continue our on analyst increase of well due value

Operator

first from Rulis with D.A. Our question Instructions] [Operator Jeff Davidson.

Jeff Rulis

morning, Good all. Thanks.

Keene Turner

Jeff. Good morning,

Jeff Rulis

the guidance on appreciate I Question expenses. there. the

Just to cost been captured saves confirm deals the wanted this on point? have at the that completely

Keene Turner

Yes Jeff.

on the planned it as cost in team transition the Rick to of so front from Choice Bartram as retirement more and from heard in on we we and say actually so that from probably side, would shape. rate First the some Seacoast saves, have had like a that good and feel see Dave end we But you And year fact as redeployment at final the the and run concluded from we're net merger. We there Visser Scott the I forward. SBA move a of a we

in there. shape So, we're good

to on a so it's from rate out clean think I speak. run here

Jeff Rulis

Trying and is specialty funding funding more for to And to a is this typical much your of or sense specialty speaking What side to the the not translate difference? it. then moving a funding sources. versus betas a traditional maybe broadly Got betas get would the little versus how view -- the there's traditional group what that or the would detail. what perhaps you

Keene Turner

help deposit the we will So, balance more will cycle help we've guidance betas static transactions overall on on and more piece the control specialty that was that drive with costs control the it gave I mean the on Jeff beta than that some we've sheet, modeled interest-bearing or the I doubled favorably. and specifically, noninterest also accounts had in then done. in I think impact New we've We I And which will margin last essentially XX%. And with in us that the that savings particularly interest-bearing around accounts help Mexico the think think that the further composition in the down. of DDA addition same deposit

teams is roughly then we there we our was And steps around to there. to out million $X other expenses. we're of moving So, XXXX we're And a and in think million the to think that's what essentially guidance from in that's that run big our an the players look beta signaling That's businesses. think overall on that the through balances. from seeing those function XX% that's modeling perspective of for And the on our expense In expense. conservative growth markets. those in you first balances. of And if component at fairly tolerance But a is and what of quarter on specialty In rate some that's from up running there XX% of some $X.X in about impact going then forward. that terms of terms rates to prior on around quarter. rising research second be to interest million the it's $XX we it

that than in little conservative the So to past. in a better be been think we've manage well-positioned feel X% for our a points And I guidance basis to that to there. again is And X% I bit going we're to degree. think we XX

Jeff Rulis

if betas? I type growth you of hear that versus diverted that -- kind I expense correct? I'm sort if correct So did wrong Keene that impact to it's of, Is the of actually -- here the an specialty me the on betas traditional operating margin

Keene Turner

Yes, that's generally correct.

fees betas. in component that but reflecting comments about that on expenses for accounts, DDA it's paying I've a deposit overall my money it. we're drawing DDA of into it's is And certain and I But interest-bearing there then within funding component high some and we're lumped talked terms those So as is and what also that market the really pass-through.

I And and I the so and expenses driving really reflects the that higher and the also side. that income those part expense those sensitivity gave of non-interest on guide what's dollars is gave slightly

Jeff Rulis

Thank you. last one. Maybe Perfect. it. Got

to pace this the quarter. buyback heading back Just the

If you I the match that, Jim buyback. any guess any I the you round other could of on discussions of I And the just you be comment as if guess, authorization. you'd M&A well? appetite with almost kind that that end the on there appetite could out at

Jim Lally

buyback Keene the Sure. touch you on first? to want

Keene Turner

out with year M&A say down issuance plan. layer anticipate that is capital to TCE the perspective. about trends levels. and or in I capital comment little at The Yes, given be the the time Jeff, planning and going only from available-for-sale your the TCE there But in of the close on preferred a necessary below of this higher authorization. with we're gaps mindful to we X would management say the is confidence our we use we're bit impact we'll share continuing I'd of gives portfolio slightly end working fairly weakness. we roll so fill our XXXX X% trend us come more the where the have that caveat posture level levels of if to growth accurate to a rates to to market of extra run Tier similar end that from and of just market assumption repurchase outsized We're the forward would of we're frame that sort existing And dividend barring through and capital remains that continuing

very much in same posture of capital terms and our the pivoted. management we haven't So remains

Jim Lally

on way That's in a know able we needs comment multiple teams in focused perspective whole and possibly and being And to did a Jeff, I'll have partners relative look we're talent of that nature at look as process one it's M&A. you onboarding bit as we specialties. From on it. at a fill new We think and little certain possible things it in nature. to just that and things about We to bank of where ways. and markets

Jeff Rulis

you. Thank

Operator

And we'll Sandler. question next Liesch Piper from Andrew with our take

Andrew Liesch

everyone. morning, Good Hi.

Keene Turner

Good morning.

Andrew Liesch

loans what the new sense added relative and what the around commentary the portfolio being obviously I to -- Can us are appreciate guess a moving you I higher. average? and quarter margin give last on versus rates yield

Keene Turner

Yes.

growth it us senior quarter where rates debt drive in was always is. Andrew particular financing for so up on slightly. helped that Growth just this depends So the in

the So going be than are end to be we're finance to modestly SBA then at premium at just are other Those loan some similarly quarter. of that. X.XX% rates higher and going the that; total credit-immune of yield and disciplines below more the

we're being So is made in a growth of we're I our can quoting or function that coming. how terms but hasn't of that, Scott changed think loan rates. it's comment disciplined Jim this appetite spread And and comment, where they

interest the flat growth on moving versus curve bit, so, a we've a little index better a generally And feel and in its terms rate. is what in rate of pricing spreads cut because the we like been over quoting

maintain So rate we're still to our that trying loans keep variable composition. spreads high and in variable

and try above remain below premiums say, in hopefully many growth helpful. discipline. not there. certain safe the quarter is our reflective intact. credit too for pricing of to areas direct the generally to We I give think continued away the really And that's So, characteristics secrets But

Jim Lally

estate capture market right? opportunities We different certain longer-term bit that back financing certainly And term different of the a us. some better to we there it well a know tied and and of had rate circle they'll that opportunities of you wanted circle there's commodity for that we'll just feel but for related what demand those yield markets. transactional project, a to name maybe chose it's maybe that back the as all not it'll especially there at and to we out real for a we longer Andrew is fixed do,

Andrew Liesch

Got it.

kind in have decline the loans of what pace maybe So and in St. that's slower may in guess, I growth Kansas of I'm driven Louis City? that other reading through any just than quarter

Jim Lally

in Well, Go Scott. sections certain right. ahead,

Scott Goodman

say, headwinds. Louis going to factor just St. was more I of the a is think C&I I

higher Although, growth say a CRE. for markets we from just probably Jim markets said, opportunities I as CRE in the back away would larger in did impact all

liquidity St. on balance sheets maybe on C&I the think seeing I Kansas headwinds of some our still borrowers. Louis, extent City that's a of the lesser the to sitting

I more the think that there. headwind was

Andrew Liesch

it. taking back. the I'll questions. step got for Okay, Thanks

Scott Goodman

Thank Andrew. you,

Operator

our [Operator KBW. DelMonte question from Instructions] with Damon We'll next take

Damon DelMonte

doing morning today. well guys. Good Hope Hey. everybody's

you reserves, kind loan of you and last have do kind given the or you like you've of the releases feel just right-sized think guys about feel release regarding First provision, the do question outlook or there when like quarters credit normalized the couple to capacity we of reserve? additional of loss

Jim Lally

Scott, do about talk to credit? you want

Keene Turner

topic Damon, it of moving and I terms what because in reducing the think our been it's the appropriately posture there is of shifts quickly. from uncertainty fairly in we that slow remains feel like is coverage we've quarter-to-quarter been

we CECL look we CECL appropriate. So, forward basically allowance its of and X.X% on level adopted at now based loans. think When were the we is right

we've so appropriately is economic of the probably these bit we And factors view weighting probably that got all initial sit terms weren't we been conservative on Our in little adoption a quality here prevalent of with today. levels. as that more said, high continues upswing from for already they credit to of be But to improvement years. speak, haven't number the because in a that

And move down, the And based had like that feel a appropriate as recognize have the we on so, depending growth But I or generally, allowance. probably a will in function if we credits are would of have behavior X/XX originate sat was that there's of movement that at there I CECL quarter. material first way what on continued we we there would might call, where either driving be some reserve. heavier in there not as work to think we of come it or the forward asset moving some either classes

Damon DelMonte

okay. it, Got

probably we to -- here upcoming it's should some fair the start expect So modest then quarters? provisioning in to

Keene Turner

Yeah.

provision. that a in around. got insurance we've and by light category Life finance declination allowance higher or carrying I fairly in else going SBA some we that are areas equal in being drive offset probably shifting reserves for to another credits premium asset growth some movement is example, stronger some said, all a would cause see that it's shifts bit just classes, Like I reserve. reserve, in carries think unless little mixing

in full So, just disclosure there.

Damon DelMonte

Got it, quarter of during bit talk some growth characteristics okay. finance pretty the Sponsor’s more you That's this the in little helpful. outsized? And and then, quarter? it resulted that could you just growth kind just bit about little was a talk But that of the about can a

Scott Goodman

I Damon. that. cover can Sure,

pretty As now deep time I a business relationships. we've some long been said, we've in this and built

were where generated because program of to the We I PPP of think sponsors. a the lot those sponsors, those going large even goodwill just a back majority, help of with able we to many are under SBIC SBA. formed

just activity they're the -- I deploying robust M&A have capital. seeing and at weren't we if funds -- you're so, And the of so now. in are raised list we're of the new well, lot And funds think sponsors top these we a these as

just a I in function longevity of things it's So, a together coming the lot of our business. think

reaping sponsor a pricing. in ebb so of active our and We And right have We're cycles while with it. our advantage disciplined We're we're business with can been with we've changing and an now. underwriting we've credit flow just that it. base benefits taking and It and of being seen the we're for parameters. the not and

and quality of take good about to what just it continue to we've while advantage added the we're feel I exists. that So, opportunity of going

Damon DelMonte

to quarters. some kind the forward have next going and given on quarter's just lastly, you That's Thank kind results? influenced looking Thank guess of just not may of can outlook may of a of then this non-interest over you. for Got commentary the Just okay. your bit I items Keene, maybe income just that it, three expect you. or a projection the revisit helpful. And

Keene Turner

I we've down. I Durbin don't think think got impact Yeah. nailed --

expectations little downward. I about for or the a XXXX, think we would adjusted upward our haven't talked say, equity. I private we in bit total really

which think I tax quarters different, it's to in occur are going in the credit. particularly

value to and is see due a in that having expected quarters and with activity the if evaluation. what up might and there third that pretty segment of the for But, it could was performance for lighter achieve that and for slows third than And out feel a second of to we and the line we that upcoming we'll bit, first the couple be see in So tax quarter, possible negatives we if we the handily still re-measurement item. quarter the little able the expect like targets that even with lower. more meet and fourth rates guide the have quarter, credits we so year

Damon DelMonte

Okay, great. you very Thank much.

Keene Turner

welcome. You’re

Operator

Martin [Operator Instructions] from our question we'll take with Janney next And Montgomery. Brian

Brian Martin

morning, good Hey, everyone.

Keene Turner

Brian. morning, Good

Brian Martin

Just the last a to follow-up question.

us the what initial guidance, remind for you guide credit tax the that the was? Just Can year Keene.

Keene Turner

think it I million. $XX around was

which But around sure expecting that, million XXXX. I Let me we're total is XX-ish just my think notes. make $XX percent up from in that's for accurate in

Brian Martin

Okay.

guess, guys with guess, just I growth, you kind XX% it are think outlook of then, thinking okay. for, outlook your about rate your I you about So And just about increases the it, here? of you think kind rate as how

Keene Turner

to Yeah. way after don't P&L, the in going likely speak we how affect Brian, near prepared we that's I from thought the we're prepared thinking think a more in much we than XXXX is does near-term our terms forecast out to lot what of affects and know hikes. because an we that's XX preparing than that, what a But that's the affects so from those for we're guidance think heck earnings and I term. probably point here about it It I XXXX perspective. think manage to our there, basis is guidance most which and them expense the it price deposits about gather pretty revisions. of that

Brian Martin

okay. as I kind first I guess, maybe do beta maybe the Keene, you, beta, thought And you the through you the a then betas – that the on versus just near progress was as said the the what missed of XX total, how think heard about what's Got the how just here? progresses? the earlier increases XXX on going I total second XX of I in – you for maybe think first about but maybe deposit immediate you the Can the kind I gave think guys to it part XXX? on here expenses. how But said a guess, give that far flow just as but the time you you last any term I were – was or number you but

Keene Turner

piece. interest-bearing just on beta the XX% I gave The was Yeah.

it's within XX pretty hike first we're there. that much – don't think point clear expect in that we basis movement and we're I

on out. So our view here is from

in as sensitive deposits more move and initially would we we I rates obviously, expect more expect, slowly react terms think up. would rate of what then become to

embedded floors. off also we I get net the the fact in and commentary our margin think interest income that, is

And of variety so think I there's offsetting factors. a

So increases get. for the I aggressive does rate how the to going going on to we that it's get than sensitivity. to be I do it's betas side closer And for – But then asset do us track paid not the but with – on it's we rate do are think the the more we'll expect early and we then think – thereafter, XX% that be lower.

have with the betas the right not the amount asset hot I deploy. the yet gave because sensitivity because I is profitability try guide towards margin beta knew determinant net opportunities we income again, people what So topic the It's but that of of to investment that's fairly that a and interest for expansion also us now, going is have we we single to to be. really portfolio cash always

have we're think pickup and look I'll X% quarters that belt. to for for basis and that's a points. us our think under we say consistent those factors we in that earnings until gives annual X% we is And at confidence we XX again what all couple that, foreseeable a more every So speak future

Brian Martin

I efficiency does an about point talk just outlook? Keene. support Keene sounds guess your growth doesn't appreciate the – of I But kind it that's just just that of who loan you're I maybe the does it. comments Scott, I of going you. your guess benefit. guess for existing – hires Got outlined you just kind don't helpful, for it. know No, the get sound it kind to all – your from – about, like just to Maybe guys just maybe And like change here. standpoint growth takes Is and I that that

result ratio efficiency of much the kind talent change So as a here? see shouldn't you've added that of the

Jim Lally

Brian, this is Jim.

high into the given that talking expectation. that you will think tell singles you, be us in mid to higher growth, the from markets, about of about to tackle XXXX rate growth So making would quarters doubles investments low terms would where I to high right? me expectation being in our Let run take one. further we're these singles

Brian Martin

be just that's just Okay. like there the with additional just there change expect much side, for get going as Perfect. helpful. to growth – shouldn't that's you efficiency And seems it's the on? on And to it paid put

Keene Turner

go from Brian, $X if XX talking about to revenue. XX, Yeah. you think Look of you're I million

the quarter, for From generally balance we're right. sheet first a midstream improves XX drive and any environment, on in earning I fully do coverage continued perspective, here think performed move is efficiency optical back the expense low basis that think ready give hike that quarter, lumpy growth but didn't well, point you really I about. just third we've in is the this the second is going of and our impacting is with some or get that, through ratio. and then from have to that the quarter. the to generally, count P&L second efficiency alone hike that, see talked for quarter we that but core here, happy bit rate to that doesn't I tax first first that and already you point from think but your gains some mean it But bouncy or I trends up a credit little doesn't will

Brian Martin

you. Got Yeah.

on a quarter. questions the taking you appreciate nice I me. for it That's Okay. and congrats

Keene Turner

Brian. Thanks, appreciate We it.

Operator

with Scattergood. we'll Daniel And next our Cardenas question Boenning from & take

Daniel Cardenas

Good morning, gentlemen.

Jim Lally

morning, Daniel. good Hey,

Daniel Cardenas

the questions portfolio here. of as the the portfolio? securities to growth we available-for-sale think the the in a What's duration going be in is portfolio on that held-to-maturity quick portfolio? or primarily And securities Just about then couple

Keene Turner

is bit actually so years. investing The Dan X.X it's over last this portfolio X, been the Keene. long. Hey, and extended heavily little We've pretty in munis has a

but we securities is duration the those bulk did So years, north of of in six held-to-maturity. the put

back on and five it think under. discussion the complexion part sounds on again, we please the we're it's duration three as munis portfolio. buying in optically sit today of duration remind what what asset your and what long, but as based here was. portfolio we're an today, So on of the years, class balance is sheet then And the portfolio. working the of overall as the that duration an so buying with on I we're decision But And shortening well there me terms AFS the second is under loan question

Daniel Cardenas

future done Just portion? securities be of in the the held-to-maturity to is of terms portfolio, available-for-sale in of kind expansion that going the primarily or

Keene Turner

perspective. the will make about same. and would around about And as backs of the to and continue will of We'll probably for or say a then two-thirds or And obvious held-to-maturity generally purchase portfolio bullets is reasons agency the municipal one-third be going purchases. that's put we available-for-sale composition be purchases, less go I that to that in mortgage more from new them.

expect of the in down we the that the help up So of overall reinvestment drive and and some I more think portfolio of of what expect curve rates. AFS in we that's duration will particular coming end with the generally short and being cooperative terms

Daniel Cardenas

Okay. Good. And then it. quick just question credit quality Thanks. right. All Got front. one the on

very are are the there kind and rate pressures, cause metrics hikes portfolio but concern of three rates strong, you two, that Your given loan of any backdrop just from portions now? your of maybe inflationary raising

Scott Goodman

this of Dan, address can that. I kind Scott. is

chain originations at prices inventory need C&I along credit. able that incorporate our they've really C&I the would credit demand structures. far strong renewals, underwriting of sensitizing scarcity And the But the But say looking say liquidity Those along, costs while analysis rise, Commodity kind a in into right up. them on of able prices, is a and are on watching going keep think cash access specialty rising I maintain We've we've been rates these they see a have. aren't portfolio leisure, we're think got Ag to side, now. they policies life to a bit impacts a input value of insurance a into will I able we've increased practice our side, the be supply luxury. keeping the are premium costs the our to that certainly travel, lean but the generally, our rates pass on then think on consumer may been question quite as on to that. in. particular discretionary now, some so to trying we're probably would deals that I goods. up, maybe general if or pace? I the pass higher the impacting as and for and been eye I another for obviously finance than slow don't earlier issues, I impact other of think businesses the to see or that's business

that the ones are on I probably think forefront now. the those

Daniel Cardenas

Okay. Great. quarter. Good All it right. guys. for me. you. Thanks That's Thank

Operator

As at any back additional are the questions no further this I'll remarks. or time, for closing there call turn

Jim Lally

the Thank company joining the want to That's week I for and it you really morning. questions your you, our great this the and quarter. wish and this of thank Thanks for in the remainder of the for best for Cristina. us us interest you remainder today.

Thanks. later. you to talk we'll So

Operator

your for call. you participation. today's Thank Difficulty] [Technical

You may disconnect. now

Enterprise Financial Services (EFSC) 26 Apr 222022 Q1 Earnings call transcript