EFSC - Earnings call transcript Q1 2024 | Enterprise Financial Services Corp

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Operator

Thank you for standing by. My name is Kath, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enterprise Financial Services Corp First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Jim Lally, President and CEO. Please go ahead.

James Lally

good us and to this first earnings and much you our Kath, quarter joining for morning, call. you, morning, thank everyone, very XXXX Thank and welcome

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

we Please Slide results found today. a to on copy Statements actual and and were Form I refer X-K begin, titled recent on for everybody presentation XX-Q we presentation presentation of may Forward-Looking remind vary yesterday. our can website. XX-K would make accompanying most our to like be the The that X earnings from why of furnished call the any Before release on reasons and that and statements the release SEC forward-looking

sound quarter economic environment. interest rate represents first for higher The longer fundamentally amid and performance a

management Our to and business been all model, during environments. constructed perform associate base team has economic

However, our the in and, in margins from policy upcoming our stabilizing assist rate therefore, will interest further in year-end us the quarters. current profitability the pivot

business have Like diligently over the predictable business, market we during to high-quality investor to class and produce meetings have we several we and years, earnings. diversify on previous stated last do that any one earnings calls model our not depend such worked to or asset

we confident XXXX. for financial quarter continue better that I'm first performance perform Our can and at this has in of level strategy, to resulted remainder the or this focused

Slide scorecard begins on financial Our X.

expectations per first and we comments. representative much goals These an for on Keene ROAA diluted more provide earned of and of are our detail net income X.XX%. and XXXX. in and delivering bode adjusted For our a $XX.X produced X.XX% this of or we typical upon for his trends the $X.XX PPNR million will well quarter quarter, ROAA results of share,

count day when $XXX to flat at the million. linked interest considering income compared essentially was net just Our quarter under

over $XXX the of X we've value we deep-rooted we've remain last improves and earnings reflects interest been consistently client or hold the quarters, despite around able competitive million This back and shareholder to to high-quality at that through produce strength built conditions. Looking challenging the relationships. franchise this number positioned rate

current Our commensurate by resilience stable clients, priced, was net our income is direct but at our environment. defense result interest aided the to of amid and X.XX%. of needs interest margin stable rate of and the our the to priced interest deposit a originate appropriately ability our base net This well

would due in in our loan a thought moderated of specialty quarter in happen, businesses. we the largely growth As demand investor-owned to lending few lower CRE

lending. by on construction However, in C&I, his growth comments. growth led LIPF to for million and we provide to our growing and much more billion, year, will $XXX pace detail on mid-single the in remained loan deliver by loans markets $XX Scott businesses

did we deposits. full funding in XXXX, growth Like we to committed our client year's our with loan are

this as total at resulting with the increase our their flat brokered deposit use During buffered distributions. quarter, bonus linked compared $XX.X our the deposits billion. cash payments outflow business tax a seasonal CDs, we first typical experienced quarter for remaining to in We and clients slight in

XX% slightly DDA remained while to increased level in deposits. of ratio loan-to-deposit XX%, Our our excess total of

share strong, levels and of Our with was quarter at XX.XX%. equity return remained ratio on book Tangible positioned common an X%. of increase tangible X.XX% our $XX.XX, our growth. balance per remains well TA Capital of common TCE value annualized sheet adjusted planned to for average end and stable

capital. the quarter Given manage repurchases share common by of and dividend execution, in growth stock in the of to continued strength second per confidence the modest have earnings our our and XXXX excess increased of our begun $X.XX we

an provide of Last on charge-off areas discussing credit. to levels as update would like and quarter, XXXX, extraordinary Before focus uncharacteristic. characterized in our I I

declined flat, stabilized were Asset charge-offs quarter loan XX% classified to basis expected as as levels X in quality netted and in quarter. X out points NPAs the roughly

that mentioning amounts loan from during were charged the these off of the large charged been that down also now quarter fourth of this the XXXX. majority It's amounts X charged have were worth relationships Both off. quarter of residual in relationships fully

inclusive portfolio of we the our did is that no [indiscernible] in complete site visits Finally, sound internal of surprises review agricultural found and condition. portfolio,

this our validate findings, delivered weeks. engaged third next a We've have the in report and party to we'll few

reduced clients portfolio We see least this year-end. XX% of these likely debt between by some we'll and institutions, now are their at seeing $XXX and refinance other million with

Slide the for X future. shows where focused foreseeable we are

services like for funding sales continue in deposit future did deposits. loan sticking will focused to approach of capitalizing to we relationship-oriented on we our be community client with will accomplished be and all on our escrow growth trust by Just our and property businesses. This success third-party XXXX, management continued and associations,

shareholder we improve through our Additionally, strategy. to value of that confident execution continue I'm can the

Our produce amid are should all environment earnings focus expense that in. the markets improvement and consistently strong with management along economic business current with combined steadfast we lines, continued in rate credit, and

largely clients remain too. optimistic Our

credit from conversion For down to of the previous no for for be requiring most than whom lines increase to the cycles expenditures part, very companies lower results. as we to increase of good continue results [indiscernible] elongate, years slightly higher and will budgeting XXXX with flat XXXX production Cash for or levels operating sales. and sales use these come to capital produce partner companies to our spending be

is on in the that support cash of monthly The Supply show client debt a base. of [indiscernible] the impact improved, of our suppliers flow. my residual only opportunities improve this In economic chains service beginning prospects portion trades and been opinion, have has and impact to onshoring has corresponding rates worsened, the this. of will not the in absorbed higher

slight of on basis are interest largely to point short-term elevated and be XX of though for to rates even market mature the some in projects a our specialized is XX really in keeping opportunities impetus negligible. We these market clients the decrease for move now. reputation are seeing board the CRE in drawing but geographies of or will asset the I most rates to Our psychological projects classes, believe that enjoy next lending interest corresponding great decrease share and middle the these related level, businesses. businesses return many

As we confident our corresponding will than opportunities. that share such, to I am of get more continue fair

to areas reputation will similar markets of our opportunities we build Our these provide while markets. in continue newer and higher-growth levels

level a over With the what to compound a the we over that, call would will high like rate our foreseeable while that continue earn to grow This me tangible than to I blend peers is Goodman. Scott? future. and gives value at at higher predictable continuing confidence Scott to turn book

Scott Goodman

everyone. morning, Thank you, Jim, good and

turn growth Jim's growth just you'd of by balanced is roughly and with diversification, If breakdown business year-over-year. segments growth of C&I quarter illustrate sector over diverse list types major a X. shows the to on $XXX remainder the business. the the in to Loan the this throughout To represents XX% the within represents million of well X that other category, our our pushed across XX% us Slide like comments Slide billion general mark $XX of geographic past on year-over-year markets,

and prominently space new C&I real commercial while doing For continue owner-occupied rates, construction was categories. in most recognized and the client willing are businesses banking we and as well our estate markets, metro to actively well have quarter, success and attracting development relationships, growth existing as remain premium life operating the onboarding to growth. despite and generally higher loan support Within finance insurance

we renovation capital and origination clients the new related a quarter. up multifamily did for heavily of project And capital variety particularly such loans a investment forward, these in overall, slowed new an and has line construction slowed providing represents process X.X% quarter. balances to reacting in office here projects environment more more usage and roughly impacted few while retail. CRE the for by in businesses the increased and of Construction the increase have somewhat, working continue as rate and existing Borrowing activities revolving loan caution, sectors originate expansion requests with by higher move for with current facilities properties. Investor

origination policy advances the from specialized premium life banking strong solid finance uptick sectors, and existing seasonal premium growth new volumes with Within on loans. insurance posted a

in quarter. in credit were consistent paydown portfolio the as QX the on results from line generally originations with quarter, to loans XXXX due that project the slightly continue lower the tax recent credits. but to SBA seasonal with kept with did have we proceeds which moving loans of pace sale the typical during expectations quarters. lower see rates, stressed trend moved positively, rising Prepayments Tax the of

further guaranteed income However, liquidity period net through growth for generate to of will loans touch Keene in by on $XX his March, impacted the our million which decision was and sale comments. in of a the pool

patient in Payoffs Sponsor portfolio and finance move in more begun more equity by normalized posture companies toward consistent activity of pause to associated sponsors. sale this private a of continued with a for activity XXXX. a origination QX, with have following moderate level, to the most restrained

capital relationship X.X% also These year, annualized. for expect include did loans general Slide a to and structure, will million remain company. this supply originations heavier and the sector relationships. Regionally, across C&I Midwest regions of well-known on a as markets deeper commercial or in new it experience sponsor have do automotive construction to all top-tier City, civil our loans our primarily be related recapitalization and working with growth credit for which major will experienced a increases dealership long-standing markets of Louis as footprint approach St. we the originations we contractor, In X. Kansas rose usage. relates $XX While disciplined growth and focused Significant banking in equipment on new a line displayed portfolios,

year-over-year. in client with region $XX and a for relationships New well services an medical up new construction and a contractor new fabricator Southwest Vegas. owner-occupied in with the included facility a Arizona, is project XX% loan long-standing for conversion a Mexico quarter food client million [indiscernible] portfolio metal loans of in Las construction specialty Our rose as a as Larger

California, onboarded Western few year-over-year. lending relationships as and in a manufacturing related medical services new in to as quarter the of and paydowns our C&I private relationships finance of the specialty several revolving well a clients. our private successfully quarter by moderated new loans with lines smaller XX.X% finance Southern by lighting, loans this issues variety and rose timing lender was $XX to million In somewhat steel equipment Overall, region industries. stainless on of We larger growth

X. alternatives. in quarter roughly attributable on DDA were by the Moving on down Total to this Breaking to up $XXX million, deposit million remixing $XX [indiscernible] balances were or the noninterest-bearing Slide interest-bearing balances and down, accounts billion year-over-year. $X.X for deposits X%

savings client or to months. able $XXX X.X% yielding been also however, we've the grow lower aggregate, similar million successfully reasons. In by accounts past Our over declined for deposits XX

the shown by markets payments. been outflows slowed seasonal lending was growth verticals and distributions, Regionally, bonuses growth specialty but year-over-year, first to continued, between and quarter the on and activity balanced businesses, geographic typical as well other tax XX. similar quarter, Slide the For related deposit has fairly

on are For down up the and Louis less are grown highlighted for million outflows campaigns lines experience sales were and rose association California than directed businesses new were These increases balances business by we HOA million This our within XX. or the as outreach, $XXX in deposit of with million Property for most best deposits quarter, Slide non-specialty typically has have a XX.X%. client $XX heavily $XX quarter paid. The million and X%. the impacting as seasonal and regions the result our over relationships. year-over-year, markets. specific and competitors. Specialty accounts year-over-year up continue been of and customer and St. in basis, to targeting also detail Management On client business million the more or at seasonal combined to billed balances quarter, of X%, product the QX fund are geographic existing grew $XXX open assessments of relationships enhancements and $XXX expansion development in Community segment types focused

business slightly, with down are to action disbursements. deposit-focused we intact, are new planned these relationships account mainly continue relate and XXXX new balances and lines accounts escrow but relationships. key and larger expand class Overall, Third-party of to some

and Additional core account on activity shown is funding XX. detail mix Slide the on

toward across efforts Diversification accounts of and to funding. and consistent and and with activity remain of accounts by trend balance and account remains period, these comparing underlying aforementioned also emphasizing intentional new and The deposits slow, base as building the to new deposit pace continues closed retaining accounts exceeding XX% remixing prior all channels. favorably, The opened with our closed being diversified granular a of accounts, you to balances noninterest-bearing. the heard Jim, magnitude roughly focused we relationship-based channel total increases reflect core continues on when stable fairly from net

call the his to that, like I'd With comments. over Keene? Turner Keene for to turn

Keene Turner

morning, Scott, everyone. and good Thanks,

Turning included the income additional earnings in conversion of reported project. special million. net to $XX of the core quarter $X.XX Slide per of related an impact expenses assessment on and XX. We first share FDIC to Reported earnings our

items, higher charge-offs, nonperforming net declined loans each income loan and for Excluding that's accounting and linked year. day $X.XX EPS stabilized, $X these the were to growth income The improved compensation offset was partially losses expense share. and million higher quarter, mainly current provision from mix. Fee yields decrease to interest factors. expense adjustments marginally was seasonal servicing reflective purchase a Earning caused costs asset due enough as to changes mainly prior the seasonal quarter, the and amortization. income count in decreased growth increase in Noninterest to offset due fourth largely end in interest credit the from per benefits, in quarter, Net at due of increase higher costs. quarter, quarters in in have declined the a deposit funding from primarily credit the tax typically by qualitative premium deposit by and to of highest

quarter an first million yield FHLB by interest we follow mix. X.XX% grew of Turning note XX was cost net million of linked expected $XXX of quarter brokered $X.X million. interest-bearing increased average by first result in growth assets, declined of quarter details during the was was would XX. interest in mainly expense points investment on $X in unfavorable a the the the changes on rate first decline levels and loan expectations. earning basis compared rates. the that in Slide into to $X.X driven by cash $X.X on grew lower quarter. purchase to paid from balanced reducing partially fees. The flow the in million customer income $X.X which the repo the higher the as net Net to Interest I improvement Slide million in other with The due interest and XXXX decrease deposits, interest investment combined excluding increased from on for cash levels portfolio the X income net deposits. The as portfolio borrowed funding Loan XXXX, change XX. Interest our higher accretive the a income accounting, of a by remaining the first million time margin X.XX%, of basis million, portfolio with margin of nearly and balances a resulted $X.X quarter. was quarter is million was in income on and income, higher quarter on million funds Interest higher million on increase higher was as quarter unrealized first the for balances which a million reduced $X.X portfolio quarter offset higher margin overall balances change rates $X.X period within quarter. in the in points and X.XX%, brokered million a losses generally continues nearly investment the rates by on due $X.X from the line origination amortization More in to X.XX% purchase purchases yields linked to asset elevated linked the the reinvestment This funds quarter. with by earning Average negative in our the resulting loan to partially interest $X.X $X million which accounting seasonally expense CDs, Interest of benefit offset advances. grew as improved from portfolios. higher was and from was of yield average in funds $XX in a loan reduced decrease of Income quarter. in redeployed loan

unchanged. margin on remains outlook Our

for we per current points the higher basis move longer, at around will and couple remain funding of drift slightly on margin expect rates will next quarter overall see higher of over balance the sheet. to X existing that continue interest While levels, cost we quarters,

margin additional interest around X% cuts, we allow by of at in X basis quarter even add we overall. Without points albeit growth rate somewhat we $X loss, funds point cost million spreads When year-end. over with would should the quarters, initially funded of dollars do defend quarterly to interest to at see margin lower core X a level rate to net income begin us an anticipate million Asset deposits reasonable see equates to net income. $X.X next each reduction couple or the marginal Fed cuts, out somewhere of to

positively expectation order rates cut, while additional component Fed when be net more federal just indexed underlying rates resistant to will rates equates moving interest quarterly we in million Each interest rates as deposit noninterest will funds more $X the expense. remain of we approximately balances were be in deposit-related is rate. deposit of initially deliberate in income, trends that to expense half And the a points reductions funds Our were Fed than to basis as repricing more XX in to in competitive. With are funds impact increasing. would not

of that pretax points are income points to basis net, quarter. each million basis status of they of our included majority in the every that went charge-offs quarter. related previously are So single-digit charge-offs was Fed charge-off long that lost limited to of level, into loan earnings growth agricultural as expect loans time. Slide from from $X.X at $X.X for cuts quarter loans. rate replace funds quarter. fourth of to by million mid- that At nonperforming loan XX This a XX remaining balance for basis were will XX to the to the the we a decline estimate improving last quarter interest credit in high or XX stable $X disclosed. or Credit were The we shows as trends. million trends average Net points the

were $X.X XX adjusting builds credit X.XX% reflects loan loans of guaranteed points additional total for and loans. end December. the basis credit for million the assets allowance charge-offs, agricultural the for quarter economic office losses The assets and on impact growth, was reserve XX net CRE basis to XX at improvement allowance in Nonperforming presents qualitative of the when of first of portfolios. Slide and government points compared X.XX% provision The credit represents during losses. forecast losses for our or

Our that reserve toward than reflects in the environment. we weighted economic downside scenario this more forecast appropriate leans believe a is

On Slide $XX and income in seasonally strongest fourth primarily XX, million million from quarter decrease fee which the credit the first income of quarter the was tax $XX in item, fourth line quarter. a is of

quarter. In that Linked fair partially quarter XX the of [indiscernible] distributions, fees and loans. on million equity by in $XX points mitigated gain servicing impacted addition in seasonality, a value private related development, community which by carried to in sale are rate, credits increased SBA decreases to the at XX-year movements roughly were SOFR were basis

community from reminder, fluctuate equity period to will period. distributions development private a As and

Slide XX. Turning to

as OREO annual related significant due cost be limits, estimates to grow quarter $X.X would quarter the we compared current and to fourth to as We expense was in balances planned. Other quarter noninterest quarter expense of and travel addition the to growth despite affecting tax item the of expenses expired merit expenses FDIC and and million insurance contributor $X.X Deposit of payroll First service to allowances decreased loan lower annual lower certain the a $XX unused higher of quarter quarter, growth growth a the special were million, combination expect deposit of assessment workout linked Included funds conversion-related the million the compared month's expenses this to in primarily as in to accrued updated PCO prudent worth benefits of deposit specialized increase due increase. entertainment off and to expect additional loss line linked overall core to continued a were million the $X to in in quarter. quarter. first average in expenses. Compensation of reset expenses. evidence controls fourth was compared an of

first attributable XX% the quarter, compared fee being The decline was primarily with efficiency quarter's decrease core XX.X% ratio to income. the the to linked for in

of core deposit expenses due We normalization sequentially service to expect [indiscernible]. expand to

XX. Our capital metrics Slide are shown on

common of quarter, year. the Our first was the up tangible the slightly end ratio of equity at from X% the end

continues fourth the profile Our increase quarter our $XX.XX manageable end. On over our basis share basis, X% strong earnings reduced AOCI impact value build payout per quarter. equity quarter the to offset the dividend to a capital book and AOCI. tangible per XX at increased tangible common of ratio in and by annualized and a increased points share, losses

current attractive $X.XX common With acquire repurchase a of quarterly plan to shares and earnings our of our put at place the previously we the our strength in per based capital company to have price on share addition announced the position, the in a value dividend. to that's increase

return return feel coming about The to in both growth us tangible continue was adjusted on common deposits, on on both had loans value We assets. average we believe year and quarters. our the value was equity book expectations. start and tangible grow line the and shareholder to and prospects we'll and good a with adjusted XX.X% an our first average generally for X.XX% of quarter in We solid

attention your appreciate analyst the open today, and line going I for questions. we're now to

Operator

question the line And your comes D.A. Instructions] of Jeff Rulis first from Davidson. with [Operator

Jeff Rulis

confirm on the mid-single-digit the I of portfolio? to growth Jim, that couple just guidance. ag growth loan mentioned out the A Does would front. runoff the that -- anticipated want of you questions loan include I think

James Lally

areas. Jeff. on growth in does, other Yes. It working We're with

Jeff Rulis

in And balance think that was I $XXX the million Okay. range.

you for Is $XXX got So runoff about a headwind. that... million

James Lally

right. That's

million $XXX off. would expect and now run We about between year-end,

Jeff Rulis

it. seen? utilization. to is could for may read in it. line I uptick timing that of kind any an maybe any that commonality Or into there have missed you've just that? Scott, seeing you what or in there Appreciate maybe And Is improvement

Scott Goodman

some cash we Jeff, quarter again, with the I think, Yes, use first of our see companies the think outflow. in I

also hiring I think the it see think the if capital, I I But said, of opportunistically optimistic them or it's business. about good investing they're you people their down some also to draw whether as on reflects, basically companies willing and can that they find business lines. just in think are working I

So X things. combination I a it's think those of

Jeff Rulis

the Do story sitting more any know higher do waiting. longer kind go been any that you for you has -- sidelines and longer for general look, I that say, are see there may this The could of -- is higher the with we while. get expectation reality with of the borrowers back playing getting Or kind and be into you to move projects? ready pool? take is a out longer, I'm for any that longer indication that, higher on is that

Scott Goodman

that's Yes, good a I observation. think

I'm a I particularly the think and And I I what of would now made. say may But It's were maybe for the think a seen of have decisions to stuff you move the year. But when a pipeline pace higher longer, think the with be for now been of those very to I expectations in what the activity by maybe see, bit a this [indiscernible]. has loan little quicker things some going for there wait because earlier just we've those start is when side I matter think see some I think rates on little been that encouraged move of time the overall. lower this it's that conclusion slowly.

Jeff Rulis

tax West there I was that have just the you bigger -- outflow? to reason? anything -- runoff I in on deposit more West activity bonus to And driver of Was or looks for a particular that any touch have a the it. you, Or there. and was Got it -- that like wanted while percentage a I Scott, greater specific do occurred out type

Scott Goodman

Yes.

similar, reasons I top-tier larger. there into clients also And out little that depositors are but I think dollar some borrowers. think our it, it's of a our if largest group were that and a of you amounts think are the the dial I

dividends with those most think I same still all other that are is function in distributions, to taxes, strong. of we've intact relationships, markets and just So the behavior be a for continue and seen the part, it

Jeff Rulis

on you one, last communicated now Great. like Are the also I buyback exclusive touched nimble you could you Or and that of bump off when you And the be the get X another? wanted here. those all dividend X%, feel as capital is increase well? one buyback just a But TCE the authorization? above do dividend pull the see, with side, to you little think

James Lally

Yes, Jim. that we regard the dividend do this Jeff, We've both. and both dribble announced be this this would say the certainly is relative I buyback. can in and we'll with to opportunistic hands increase

Jeff Rulis

at the on point, that anywhere radar? Jim, is And Okay. M&A, this

James Lally

Not really.

continue point time. I But make is to doesn't think relationships. were just we the just create where it given sense focused, this and stock we price today, at in

Operator

of question Andrew And your with Sandler. next the line Piper from Liesch comes

Andrew Liesch

quarter, X not points points, also had, in Keene, last necessarily items. margin, but basis near just on basis X maybe but of the at least the in onetime like this term, recurring I items, the hear you

maybe X.XX% X this you last So quarter's do think that [indiscernible]? points off basis

Keene Turner

second year Yes, Andrew, quarter margin with the similar is X%-ish by in I I the to more I rate probably about to that first cuts, think trends. do think XQ of when the going compression guess terms or end of the no XQ,

in up. The maybe worseness the X on I some seasonal with much of year. think last more and be, and term until And agricultural also, expect near particular the the quarter. that than more then part is loan we I fourth the expect to we growth similar continued pressure So as maybe half, we latter then the growth reason we year. see bit think see to expect in for little deposits. firming to a with we the I don't be us think expect headwind, And typically stronger would second

you think appreciate XQ little those optimistic total. less on in a bit than XQ those premium life, $XX weighted I a it's I fairly pieces lost, would we've got those roughly loans aren't me so maybe So still it pointing things where seem. And the significant out of make to million average of SBA because

margin and a around. and XQ, little think get robust move you can there there second So then a that XQ has to in been know growth some have job payoffs push don't quite that, bit a on that dollars. growth forecast fairly the in good quarterly prepayment and the of we bit cause dollars that half shining I are and some on a maybe on done But growth with but income that interest activity can that net basis. I activity reasonably some a around of we stable think light to

Andrew Liesch

then bonus of just That's right. really on expense the the have increase All it. accruals, how rate in fall run the seasonal there. payroll of And you quarter? second to expect taxes, -- much in helpful you Got did out that big pretty what the front,

Keene Turner

Yes.

a think normalized or essentially the the X.X a had The reversal deposit a of bit in I quarter the there's costs roughly trade in that expenses those little there. XX.X. of were think XX.X I here And of the rate. run in because off trade-off some

payroll of an if a some like the So of I $XX costs heavier uptick higher quarter, going then middle and are little the But sort balances. in be those of some that with little seasonal to bit run end items. think tax the snap think to with abatement being of it's we rate. And expect specialized the back a million the of in core to of additional a in deposit there'll we growth bit bit with expenses, more and second million the little related $XX expenses, for core

that's think the sequential the what to a terms X% is ECR range push XX in just of XX. increase of over going expense be running with we rate, accrual So that to controls into otherwise in

Andrew Liesch

core still around Helpful provide stages of financials conversion, that? update there. to And that's sort Great. it. Got any or any the on early then

Keene Turner

Yes. going out making make what well managed. say, we dollars in that related progress door would is I those sure guess Andrew, continue I that to expenses the for are

some and getting I but thought think well quarter $X coming that just some in million that still those there, dollars we be a occur. We're our the go where through let But getting work. spent information I is are you quarter, well know. of sure the is and of second it on to more terms up trickling heavy, that I have and likely more to first Monday quarter, maybe any I the money year also we'll have And third it things to quarter, in fourth is here, on of as they'd wake the million to when transition, through. depends going we $X P&L. to a But think are dollars, we get we're few think access and we more extent updates make those smooth planned, to what's

Operator

line DelMonte with your from next Damon And comes of question the KBW.

Damon Del Monte

I that? the that appreciate rate the question understand, movement that tax first move impact the much the on does how rates? I income reported -- So Of in impact Can line, Keene. this loss with the on credit was quarter,

Keene Turner

maybe essentially little are that XX million was but a impact. is that it's SOFR It's and bit, Yes. all Damon, offset basis points rate-related credits -- up there some $X XX%. roughly

-- So what driven that of the movement negative by in terms largely it's was. rate the

Damon Del Monte

Okay.

bottom -- line the I material million impossible in a such think you do to is rates it you But if just -- variable is million gauge the level? any to to there you quarter, big go second Or swings. that a the like you move back there here $X $X that? in with So absent mean, do to any -- it's

Keene Turner

No, at to negative we overcome going think, here I I be expect overall, we the on the quarter, in activity. least do rate. And to that second there's think think some

as still a year $XX much. rates the So as like million us for too for hurt don't plus XXXX long

still there the business activity some quarter. the just think a tough larger and in the It's swings I those to outrun that bit So fundamentals good. of little of are

Damon Del Monte

it. Got

Okay. goes, over the a quarter. think provision like couple we about How here should of of provision credits $XXX up you the as cleaned at the kind million, far level the this reserves then quarters? as And upcoming

Keene Turner

And Yes. negatives with longer economic rate some into that data. But to extra necessarily there. that the economic We end economic of think that data. the need to put I portfolio assumptions is unchanged. the with going going be will some say the mean some we we put probably that happen won't optimistic tough We're forecast underlying net-net, maybe the it's that my away, ag expectation that. will what's

negative bit that. works how of on of just we're in the downward depend revisions how terms much on weigh the out, much a weighted some just more will toward And how model it the little

sufficient favor credit I without next end. But conservative the we of that to to move degradation little really particularly I think we're the I got and the there is bit reserves, quarter our going bit. here some that in investors to level, or material more to secure a want think growth, little a our opportunity about think goal provision in feel for is we've and on be continue everyone maybe

Damon Del Monte

it. Got

would at lastly, at And flat yield, to still? Or was you if think by earning expansion just surprised asset it expect then Are look Okay. be that? the quarter-over-quarter. I X.XX% you average there some you

Keene Turner

weighed accounting hair. just a purchase the on think I that

loan we're we I will we're new don't of proportion really originations be balances, think reinvestment the remixing us, I cash still look that out, is was us. going in helping And are cash helping of I that terms have So think -- balances. negative the fundamentally, as expect that to similar

the So loan earn favorable. of more long positively generally I in things of kind against those But the operate. amortization upcoming some yield terms those will quarter in here things expect But us. be and in had those think yield some are of to premium would we trending of variables fundamentals going as yield few line and and factors I remain or of investment as a

feel materially on forecast, that mean guided really rate of cetera. pieces margin despite affect XQ, missed a I the were run weren't off the that that terms little fundamental et recurring we how So XQ, I in we we things like for

Operator

Brian from line Martin question next Janney. comes of your with And the

Brian Martin

just one just maybe margin. on the Keene,

of when get number that lower we this about depending some appreciate based that [indiscernible] rates, I see commentary commentary on maybe guess target do lower X% about get rate thinking then is some cuts, your the Just on we outlook, just I bit later -- [indiscernible]? the of threshold those If you're the cuts. rate kind year, impact and if then or we if

Keene Turner

think starting some to we seeing if I south head we're start of X%. Brian, Yes, cuts, I mean, I think

early mid the that impact but it get when impact in If third you second of quarter. more And of year 'XX. the it, I'm end the sorry, really by call much of some on how you'll one, they occur, depending quarter to then to fourth will first -- quarter have start quarter, you get

rate I margin. when think X yes, start X I at we cuts, But of X% look or heading on just south

Brian Martin

Yes.

guess, XX fixed fixed number, then I just you that a are we you rate mean, not there of guys Okay. the there meaningful price number next I far the is a it? about repricing of that And loans as terms for over [indiscernible], Or think in be have? remind year? Understood. what terms the as -- balance assets as -- is Or in that -- me, months, however big the might what of

Keene Turner

next I months. a get average the you loan loan at $XXX X mean mean then decent amount. fixed I of I fairly XX the proportion, about look repricing the if it's SBA mean, $XXX life weighted of think years. you portfolio X sort And to rate in is the of million million, you

little stuff that here origination think headwind. with some a more and yield that's significant had fundamental. We part the of in repriced new was I So of maybe it's bit first think, that bit and a quarter in of credit good the the it's terms helpful, a indicated, of I tax little a I loan

good. fundings as half So well. first ex But origination quite wasn't yield forward, that, the moving occur as seasonality those in

overall continuing optimistic yields. to improve fixed loan we're about origination think repricing and I rate improving yields just

Brian Martin

of on guess, an new Is it mentioned of much as X.X the I Yes. origination -- if far yields to In how get the of in idea is what that million the over that? million yield what range? the Or kind at next are? is $XXX as months, kind versus XX what I that $XXX coming mean, think off it's pickup you you pickup,

Keene Turner

roughly when I we've mean we're just on depending X.X% loans basis points sort on that, and rate up on originated. been XXX probably was Yes. originating picking of fixed it

drive it's overall origination trade that a pricing X.X% or then rates. decent fairly So closer is to helps rate X%, and that variable up

Brian Martin

Got you.

Okay. how in credit I a moment. appreciate for jump just And to about it.

down in quarter. Just touch on it the the a like they classifieds, were looks

in Just trending how they're criticized here kind or of any special commentary on loans, of just quarter? mention kind the just the

Douglas Bauche

Doug. it's Brian, Yes,

quarter. You're right. Classifieds loans were flat, but flat in were criticized also the

the represent first X% as combination stabilized in we criticized returned expected, kind total the about really, of a classifieds So to here and level loans just of quarter. more just really

Brian Martin

you. Got

does here? about Can on on the maybe -- impact thinking then more but the you And that the just the Okay. -- talk provision, impact of incremental on maybe trying you're maybe credit. about longer, about being could one reserve thinking for just you that just just I higher kind cautious commentary that how about that? that that, the have to just up bit. credit Is a more take more guess your understand

Keene Turner

qualitative some comments, bit Yes. say our our source I a guess contemplate think of just is would and what they'll at we're in factors. data quarter, my -- reflected Moody's we that we And I get we use I as the then little the that in probably think it's there, the to fact the it that of in trying information.

information information So what a for little the short-term probably better, degrades longer-term I the higher think rates in looks happening with model the is seen we've but bit. longer,

the we're don't transition a see lean on I as way affecting one on think positioned will that rely our that we'll Q the know factor we underlying to forecast to how other boat sort or I from else. much or so position be the a same data. data, take in and And with it unless own everyone of we but do the deal

Brian Martin

Yes.

And for on the quarter. guys the then Okay. me recognize some -- in one the last gains just was you SBA

the then kind how your the coming volatile, line, And guess, thinking kind quarters? of terms just of think here of in Just how credit tax wondering maybe absent that somewhat income the commentary in maybe that? about that -- about I being about of kind fee you're we

Keene Turner

growth of deposit say opportunities. on and I'll really function it's loan Yes. a SBA gains,

think of areas. Jim, Scott you a in we've from and I variety heard demand strong got

the And SBA bank. [indiscernible] that so portfolio typically nice material a for funding bring provides the don't customers to

extent keep good think the to the see you'll So when that origination that we have we'll and yields selling think us least at additional originate good look loan and quarters that it. sufficient somewhere evaluating then SBA drives in make trade or ability one a least at our at a it's and XQ an continue else, activity in trade we I to to upcoming then I

the million. And of $X sheet we part the comment us get of should sort that my million level much. going The saw we fair negative in remainder rates to a loss in $XX I line of credit I pressure do we and is year rated. can think under occur expect the fourth that of to net-net million help think think can management a also then pricing. second that or will some of of around also just us it's was And item against expect from most it's $X last mitigate think of I balance had tool I moving quarter. we [indiscernible] in it of deposit here the the that And be it quarter the total get the But we some through value. So year, with use the tax for activity business too

Brian Martin

asking the Yes. And impact. Okay. kind guess I more about was of just the I

some ex to here were income as SBA, up continue on more gains forward? If you about of bit more how a thinking fee tax relative to quarter ex fee going on offset you that areas an some to tax think little go maybe have if income fee outlook less pick or you other versus income credit, about more kind forward? last maybe we the gains. whatnot it just If Or just Does is boost being credit? your you

Keene Turner

gain. the being be equity, CDE, contribute episodic private think [indiscernible] Yes. benefit otherwise, along all expect in things year, and But last included I with similarly mean those I we we think equal, SBA had some to of I else unfortunately games.

overall So the expectations. our your additive to to SBA be would question,

Operator

this remarks. to Instructions] conference will there [Operator at for now Lally the time. are no I And closing questions turn Jim back

James Lally

us forward day. Have our a you thank and joining the you, the speaking interest morning for again of and this all we end second look for quarter. Thank great Okay. you your certainly at to company, and in to

Operator

concludes today's for joining. you that all gentlemen, and Thank Ladies call.

You now disconnect. may

Enterprise Financial Services (EFSC) 23 Apr 242024 Q1 Earnings call transcript