Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”), today announced financial results for the second quarter of 2025. “Our second quarter results demonstrated expansion in net interest income and net interest margin, continuing the strong start to 2025,” said Jim Lally, President and Chief Executive Officer. “Loan growth spanned the portfolio and geographic regions and displayed the strength of our diversified business. We successfully scaled the balance sheet and deployed liquidity to drive a 1.30% ROAA and a 13.84% ROATCE. Notably, tangible book value per share has increased over 14% in the past year.”
Highlights
- Earnings – Net income in the second quarter 2025 was $51.4 million, an increase of $1.4 million and $5.9 million compared to the linked and prior year quarters, respectively. Earnings per diluted common share for the second quarter 2025 was $1.36, compared to $1.31 and $1.19 for the linked and prior year quarters, respectively. Adjusted diluted earnings per share1 was $1.37 in the second quarter 2025, compared to $1.31 and $1.21 in the linked and prior year quarters, respectively.
- Pre-provision net revenue (“PPNR”)1 – PPNR of $68.1 million in the second quarter 2025 increased $2.0 million and $4.9 million from the linked and prior year quarters, respectively. The increase from the linked and prior year quarters was primarily due to an increase in net interest income from organic loan growth, continued investment in the securities portfolio and proactive management of the cost of deposits, partially offset by an increase in noninterest expense.
- Net interest income and NIM – Net interest income of $152.8 million for the second quarter 2025 increased $5.2 million and $12.2 million from the linked and prior year quarters, respectively. Net interest income for the second quarter 2025 increased from the linked and prior year quarters primarily due to higher average loan and securities balances and yields, as well as lower short-term interest rates that decreased deposit interest expense. NIM was 4.21% for the second quarter 2025, compared to 4.15% and 4.19% for the linked and prior year quarters, respectively. The total cost of deposits of 1.82% for the second quarter 2025 decreased one basis point and 34 basis points from the linked and prior year quarters, respectively.
- Noninterest income – Noninterest income of $20.6 million for the second quarter 2025 increased $2.1 million and $5.1 million from the linked and prior year quarters, respectively. The increase in noninterest income from the linked and prior year quarters was primarily due to higher BOLI income and community development investment income. The Company also sold $24.4 million of SBA guaranteed loans during the quarter for a gain of $1.2 million.
- Noninterest expense – Noninterest expense of $105.7 million for the second quarter 2025 increased $5.9 million and $11.7 million from the linked and prior year quarters, respectively. The increase from the linked and prior year quarters was primarily driven by higher employee compensation, variable deposit costs and higher loan and legal expenses related to loan workouts and other real estate owned (“OREO”).
- Loans – Loans totaled $11.4 billion at June 30, 2025, an increase of $110.1 million, or 4% on an annualized basis, from the linked quarter, and $408.8 million from the prior year quarter. Average loans totaled $11.4 billion, compared to $11.2 billion and $11.0 billion for the linked and prior year quarters, respectively.
- Asset quality – The allowance for credit losses to total loans was 1.27% at June 30, 2025, March 31, 2025 and June 30, 2024. The provision for credit losses in the second quarter 2025 was $3.5 million, compared to $5.2 million and $4.8 million for the linked and prior year quarters, respectively. The ratio of nonperforming assets to total assets was 0.71% at June 30, 2025, compared to 0.72% and 0.33% at March 31, 2025 and June 30, 2024, respectively.
- Deposits – Deposits totaled $13.3 billion at June 30, 2025, an increase of $283.1 million and $1.0 billion from the linked and prior year quarters, respectively. Excluding brokered certificates of deposits, deposits increased $72.9 million and $777.4 million from the linked and prior year quarters, respectively. Average deposits were $13.2 billion, $13.1 billion and $12.3 billion for the current, linked and prior year quarters, respectively. At June 30, 2025, noninterest-bearing deposit accounts totaled $4.3 billion, or 32% of total deposits, and the loan to deposit ratio was 86%.
- Capital – Total stockholders’ equity was $1.9 billion and the tangible common equity to tangible assets ratio2 was 9.42% at June 30, 2025, compared to 9.30% at March 31, 2025. Enterprise Bank & Trust remains “well-capitalized,” with a common equity tier 1 ratio of 12.5% and a total risk-based capital ratio of 13.6% at June 30, 2025. The Company’s common equity tier 1 ratio and total risk-based capital ratio were 11.9% and 14.7%, respectively, at June 30, 2025.
The Company’s Board of Directors (the “Board”) approved a quarterly dividend of $0.31 per share of common stock, payable on September 30, 2025 to stockholders of record as of September 15, 2025. The Board also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) June 15, 2025 to (but excluding) September 15, 2025. The dividend will be payable on September 15, 2025 to holders of record of Series A Preferred Stock as of August 29, 2025.
| ____________________ | ||||||||||||||||||
| 1 | ROATCE, tangible common equity to tangible assets, tangible book value per common share, adjusted diluted earnings per share and PPNR are non-GAAP measures. Please refer to discussion and reconciliation of these measures in the accompanying financial tables. | |||||||||||||||||
| 2 | Tangible common equity to tangible assets ratio is a non-GAAP measure. Please refer to discussion and reconciliation of this measure in the accompanying financial tables. | |||||||||||||||||
Net Interest Income and NIM
Average Balance Sheets
The following table presents, for the periods indicated, certain information related to the average interest-earning assets and interest-bearing liabilities, as well as the corresponding average interest rates earned and paid, all on a tax-equivalent basis.
| Quarter ended | ||||||||||||||||||||||||||
| June 30, 2025 | March 31, 2025 | June 30, 2024 | ||||||||||||||||||||||||
| ($ in thousands) | AverageBalance | InterestIncome/Expense | AverageYield/Rate | AverageBalance | InterestIncome/Expense | AverageYield/Rate | AverageBalance | InterestIncome/Expense | AverageYield/Rate | |||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||
| Loans1, 2 | $ | 11,358,209 | $ | 188,007 | 6.64 | % | $ | 11,240,806 | $ | 182,039 | 6.57 | % | $ | 10,962,488 | $ | 189,346 | 6.95 | % | ||||||||
| Securities2 | 3,149,010 | 30,330 | 3.86 | 2,930,912 | 27,092 | 3.75 | 2,396,519 | 19,956 | 3.35 | |||||||||||||||||
| Interest-earning deposits | 315,738 | 3,368 | 4.28 | 479,136 | 5,124 | 4.34 | 325,452 | 4,389 | 5.42 | |||||||||||||||||
| Total interest-earning assets | 14,822,957 | 221,705 | 6.00 | 14,650,854 | 214,255 | 5.93 | 13,684,459 | 213,691 | 6.28 | |||||||||||||||||
| Noninterest-earning assets | 1,036,764 | 992,145 | 961,922 | |||||||||||||||||||||||
| Total assets | $ | 15,859,721 | $ | 15,642,999 | $ | 14,646,381 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 3,225,611 | $ | 17,152 | 2.13 | % | $ | 3,167,428 | $ | 17,056 | 2.18 | % | $ | 2,950,827 | $ | 18,801 | 2.56 | % | ||||||||
| Money market accounts | 3,660,053 | 28,437 | 3.12 | 3,601,535 | 28,505 | 3.21 | 3,434,712 | 31,926 | 3.74 | |||||||||||||||||
| Savings accounts | 532,754 | 183 | 0.14 | 534,512 | 189 | 0.14 | 573,115 | 335 | 0.24 | |||||||||||||||||
| Certificates of deposit | 1,486,522 | 14,207 | 3.83 | 1,374,693 | 13,516 | 3.99 | 1,412,263 | 15,312 | 4.36 | |||||||||||||||||
| Total interest-bearing deposits | 8,904,940 | 59,979 | 2.70 | 8,678,168 | 59,266 | 2.77 | 8,370,917 | 66,374 | 3.19 | |||||||||||||||||
| Subordinated debentures and notes | 156,753 | 2,737 | 7.00 | 156,615 | 2,562 | 6.63 | 156,188 | 2,684 | 6.91 | |||||||||||||||||
| FHLB advances | 156,868 | 1,801 | 4.61 | 25,300 | 287 | 4.60 | 40,308 | 561 | 5.60 | |||||||||||||||||
| Securities sold under agreements to repurchase | 209,493 | 1,592 | 3.05 | 263,608 | 2,017 | 3.10 | 158,969 | 1,401 | 3.54 | |||||||||||||||||
| Other borrowings | 36,208 | 96 | 1.06 | 39,535 | 132 | 1.35 | 36,203 | 95 | 1.06 | |||||||||||||||||
| Total interest-bearing liabilities | 9,464,262 | 66,205 | 2.81 | 9,163,226 | 64,264 | 2.84 | 8,762,585 | 71,115 | 3.26 | |||||||||||||||||
| Noninterest-bearing liabilities: | ||||||||||||||||||||||||||
| Demand deposits | 4,340,301 | 4,463,388 | 3,973,336 | |||||||||||||||||||||||
| Other liabilities | 149,069 | 153,113 | 162,220 | |||||||||||||||||||||||
| Total liabilities | 13,953,632 | 13,779,727 | 12,898,141 | |||||||||||||||||||||||
| Stockholders’ equity | 1,906,089 | 1,863,272 | 1,748,240 | |||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 15,859,721 | $ | 15,642,999 | $ | 14,646,381 | ||||||||||||||||||||
| Total net interest income | $ | 155,500 | $ | 149,991 | $ | 142,576 | ||||||||||||||||||||
| Net interest margin | 4.21 | % | 4.15 | % | 4.19 | % | ||||||||||||||||||||
| 1 Average balances include nonaccrual loans. Interest income includes net loan fees of $1.8 million, $1.6 million, and $2.2 million for each of the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. | ||||||||||||||||||||||||||
| 2 Non-taxable income is presented on a fully tax-equivalent basis using a tax rate of approximately 25%. The tax-equivalent adjustments were $2.7 million, $2.5 million, and $2.1 million for each of the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. | ||||||||||||||||||||||||||
Net interest income of $152.8 million for the second quarter 2025 increased $5.2 million and $12.2 million from the linked and prior year quarters, respectively. Net interest income on a tax equivalent basis was $155.5 million, $150.0 million and $142.6 million for the current, linked and prior year quarters, respectively. The increase from the linked and prior year quarters reflects organic loan growth and continued investment in the securities portfolio, partially offset by an increase in wholesale borrowings (FHLB advances and brokered certificates of deposits). Net interest income for the current quarter also benefited by one additional day compared to the linked quarter. On June 1, 2025, $63.3 million of subordinated debt converted from a fixed 5.75% rate to a floating rate of three-month term SOFR plus a spread of 5.66%, resulting in a higher rate incurred for one month. The subordinated debt also became callable on each quarterly interest payment date. The cost of interest-bearing deposits has declined due to lower short-term rates, partially offset by an increase in deposit balances. Since September 2024, the Federal Reserve has reduced the federal funds target rate 100 basis points. In response, the Company has proactively adjusted deposit pricing to partially mitigate the impact on income from the repricing of variable rate loans.
Interest income for the second quarter 2025 increased $7.2 million primarily due to an increase of $117.4 million in average loan balances and a seven basis point increase in the average loan yield. The average securities balance increased $218.1 million and the yield increased 11 basis points due to new purchases and the reinvestment of cash flows from the runoff of lower yielding investments. The average interest rate of new loan originations in the second quarter 2025 was 7.26%, an increase of 14 basis points from the linked quarter. Investment purchases in the second quarter 2025 had a weighted average, tax equivalent yield of 5.30%.
Interest expense in the second quarter 2025 increased $1.9 million primarily due to higher organic growth in deposits, an increase in wholesale borrowings and the higher rate incurred on subordinated debt for one month in the quarter. These increases were partially offset by a decline in the average balance of customer repurchase agreements. The total cost of deposits, including noninterest-bearing demand accounts, was 1.82% during the second quarter 2025, compared to 1.83% in the linked quarter.
NIM, on a tax equivalent basis, was 4.21% in the second quarter 2025, an increase of six basis points and two basis points from the linked and prior year quarters, respectively. For the month of June 2025, the loan portfolio yield was 6.64% and the cost of total deposits was 1.81%.
Investments
| At | ||||||||||||||||||||
| June 30, 2025 | March 31, 2025 | June 30, 2024 | ||||||||||||||||||
| ($ in thousands) | CarryingValue | NetUnrealizedLoss | CarryingValue | NetUnrealizedLoss | CarryingValue | NetUnrealizedLoss | ||||||||||||||
| Available-for-sale (AFS) | $ | 2,204,511 | $ | (131,094 | ) | $ | 1,990,068 | $ | (146,184 | ) | $ | 1,615,930 | $ | (172,734 | ) | |||||
| Held-to-maturity (HTM) | 1,091,238 | (75,144 | ) | 1,034,282 | (74,228 | ) | 772,648 | (69,442 | ) | |||||||||||
| Total | $ | 3,295,749 | $ | (206,238 | ) | $ | 3,024,350 | $ | (220,412 | ) | $ | 2,388,578 | $ | (242,176 | ) | |||||
Investment securities totaled $3.3 billion at June 30, 2025, an increase of $271.4 million from the linked quarter. The tangible common equity to tangible assets ratio adjusted for unrealized losses on HTM securities3 was 9.06% at June 30, 2025, compared to 8.94% at March 31, 2025.
| ____________________ | ||||||||||||||||||
| 3 | The tangible common equity to tangible assets ratio adjusted for unrealized losses on held-to-maturity securities is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables. | |||||||||||||||||
Loans
The following table presents total loans for the most recent five quarters:
| At | |||||||||||||||||||
| ($ in thousands) | June 30,2025 | March 31,2025 | December 31,2024 | September 30,2024 | June 30,2024 | ||||||||||||||
| C&I | $ | 2,316,609 | $ | 2,198,802 | $ | 2,139,032 | $ | 2,145,286 | $ | 2,107,097 | |||||||||
| CRE investor owned | 2,547,859 | 2,487,375 | 2,405,356 | 2,346,575 | 2,308,926 | ||||||||||||||
| CRE owner occupied | 1,281,572 | 1,292,162 | 1,305,025 | 1,322,714 | 1,313,742 | ||||||||||||||
| SBA loans* | 1,249,225 | 1,283,067 | 1,298,007 | 1,272,679 | 1,269,145 | ||||||||||||||
| Sponsor finance* | 771,280 | 784,017 | 782,722 | 819,079 | 865,883 | ||||||||||||||
| Life insurance premium financing* | 1,155,623 | 1,149,119 | 1,114,299 | 1,030,273 | 996,154 | ||||||||||||||
| Tax credits* | 708,401 | 677,434 | 760,229 | 724,441 | 738,249 | ||||||||||||||
| Residential real estate | 356,722 | 357,615 | 350,640 | 346,460 | 339,889 | ||||||||||||||
| Construction and land development | 773,122 | 800,985 | 794,240 | 796,586 | 791,780 | ||||||||||||||
| Other | 248,427 | 268,187 | 270,805 | 275,799 | 269,142 | ||||||||||||||
| Total loans | $ | 11,408,840 | $ | 11,298,763 | $ | 11,220,355 | $ | 11,079,892 | $ | 11,000,007 | |||||||||
| Quarterly loan yield | 6.64 | % | 6.57 | % | 6.73 | % | 6.95 | % | 6.95 | % | |||||||||
| Loans by rate type (to total loans): | |||||||||||||||||||
| Fixed | 40 | % | 39 | % | 40 | % | 39 | % | 39 | % | |||||||||
| Variable: | 60 | % | 61 | % | 60 | % | 61 | % | 61 | % | |||||||||
| SOFR | 29 | % | 29 | % | 28 | % | 28 | % | 28 | % | |||||||||
| Prime | 24 | % | 24 | % | 24 | % | 25 | % | 25 | % | |||||||||
| Other | 7 | % | 8 | % | 8 | % | 8 | % | 8 | % | |||||||||
| Variable rate loans to total loans, adjusted for interest rate hedges | 56 | % | 56 | % | 55 | % | 57 | % | 57 | % | |||||||||
| *Specialty loan category | |||||||||||||||||||
Loans totaled $11.4 billion at June 30, 2025, an increase of $110.1 million compared to the linked quarter. Loan production in the quarter outpaced repayment activity with loan volume of $875.5 million compared to repayment and sale activity of $765.4 million. Loan originations and advances were strongest in the C&I portfolio in the current quarter. Loan sales of $24.4 million mitigated growth in the SBA category during the current quarter. Average line utilization was approximately 46% for the current and prior year quarters, respectively, compared to 42% for the linked quarter.
Asset Quality
The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:
| At | |||||||||||||||||||
| ($ in thousands) | June 30,2025 | March 31,2025 | December 31,2024 | September 30,2024 | June 30,2024 | ||||||||||||||
| Nonperforming loans* | $ | 105,807 | $ | 109,882 | $ | 42,687 | $ | 28,376 | $ | 39,384 | |||||||||
| Other1 | 8,221 | 3,271 | 3,955 | 4,516 | 8,746 | ||||||||||||||
| Nonperforming assets* | $ | 114,028 | $ | 113,153 | $ | 46,642 | $ | 32,892 | $ | 48,130 | |||||||||
| Nonperforming loans to total loans | 0.93 | % | 0.97 | % | 0.38 | % | 0.26 | % | 0.36 | % | |||||||||
| Nonperforming assets to total assets | 0.71 | % | 0.72 | % | 0.30 | % | 0.22 | % | 0.33 | % | |||||||||
| Allowance for credit losses | $ | 145,133 | $ | 142,944 | $ | 137,950 | $ | 139,778 | $ | 139,464 | |||||||||
| Allowance for credit losses to total loans | 1.27 | % | 1.27 | % | 1.23 | % | 1.26 | % | 1.27 | % | |||||||||
| Allowance for credit losses to nonperforming loans* | 137.2 | % | 130.1 | % | 323.2 | % | 492.6 | % | 354.1 | % | |||||||||
| Quarterly net charge-offs (recoveries) | $ | 630 | $ | (1,059 | ) | $ | 7,131 | $ | 3,850 | $ | 605 | ||||||||
| *Guaranteed balances excluded | $ | 26,536 | $ | 22,607 | $ | 21,974 | $ | 11,899 | $ | 12,933 | |||||||||
| 1OREO and repossessed assets | |||||||||||||||||||
Nonperforming assets increased $0.9 million and $65.9 million from the linked and prior year quarters, respectively. During the quarter, certain nonperforming loans migrated to OREO and repossessed assets. The OREO balance at June 30, 2025 includes four properties, one of which has an SBA guarantee of $3.0 million. The increase in nonperforming assets from the prior year quarter is primarily related to seven commercial real estate loans totaling $68.4 million to two commercial banking relationships in Southern California that share common managing general partners. Litigation resulting from a business dispute between the general/managing partner and certain limited partners resulted in all seven of the borrowing entities filing bankruptcy in the first quarter of 2025. The Company expects to collect the full balance of these loans.
The provision for credit losses totaled $3.5 million in the second quarter 2025, compared to $5.2 million and $4.8 million in the linked and prior year quarters, respectively. The provision for credit losses in the second quarter 2025 was primarily related to loan growth and changes in the economic forecast that influences projected future losses in the allowance calculation. The provision for credit losses in the second quarter 2025 benefited from $3.2 million in recoveries. Annualized net charge-offs totaled two basis points of average loans in the current and prior year quarters, compared to annualized net recoveries of four basis points in the linked quarter.
Deposits
The following table presents deposits broken out by type for the most recent five quarters:
| At | |||||||||||||||||||
| ($ in thousands) | June 30,2025 | March 31,2025 | December 31,2024 | September 30,2024 | June 30,2024 | ||||||||||||||
| Noninterest-bearing demand accounts | $ | 4,322,332 | $ | 4,285,061 | $ | 4,484,072 | $ | 3,934,245 | $ | 3,928,308 | |||||||||
| Interest-bearing demand accounts | 3,184,670 | 3,193,903 | 3,175,292 | 3,048,981 | 2,951,899 | ||||||||||||||
| Money market and savings accounts | 4,209,032 | 4,167,375 | 4,117,524 | 4,121,543 | 4,039,626 | ||||||||||||||
| Brokered certificates of deposit | 752,422 | 542,172 | 484,588 | 480,934 | 494,870 | ||||||||||||||
| Other certificates of deposit | 848,903 | 845,719 | 885,016 | 879,619 | 867,680 | ||||||||||||||
| Total deposit portfolio | $ | 13,317,359 | $ | 13,034,230 | $ | 13,146,492 | $ | 12,465,322 | $ | 12,282,383 | |||||||||
| Noninterest-bearing deposits to total deposits | 32.5 | % | 32.9 | % | 34.1 | % | 31.6 | % | 32.0 | % | |||||||||
| Quarterly cost of deposits | 1.82 | % | 1.83 | % | 2.00 | % | 2.18 | % | 2.16 | % | |||||||||
Total deposits at June 30, 2025 were $13.3 billion, an increase of $283.1 million and $1.0 billion from the linked and prior year quarters, respectively. Excluding brokered certificates of deposits, total deposits increased $72.9 million and $777.4 million from the linked and prior year quarters, respectively. Reciprocal deposits, which are placed through third party programs to provide FDIC insurance on larger deposit relationships, totaled $1.4 billion at June 30, 2025, compared to $1.3 billion at March 31, 2025.
Noninterest Income
The following table presents a comparative summary of the major components of noninterest income for the periods indicated:
| Linked quarter comparison | Prior year comparison | |||||||||||||||||||||
| Quarter ended | Quarter ended | |||||||||||||||||||||
| ($ in thousands) | June 30,2025 | March 31,2025 | Increase (decrease) | June 30,2024 | Increase (decrease) | |||||||||||||||||
| Deposit service charges | $ | 4,940 | $ | 4,420 | $ | 520 | 12 | % | $ | 4,542 | $ | 398 | 9 | % | ||||||||
| Wealth management revenue | 2,584 | 2,659 | (75 | ) | (3 | )% | 2,590 | (6 | ) | — | % | |||||||||||
| Card services revenue | 2,444 | 2,395 | 49 | 2 | % | 2,497 | (53 | ) | (2 | )% | ||||||||||||
| Tax credit income | 2,207 | 2,610 | (403 | ) | (15 | )% | 1,874 | 333 | 18 | % | ||||||||||||
| Other income | 8,429 | 6,399 | 2,030 | 32 | % | 3,991 | 4,438 | 111 | % | |||||||||||||
| Total noninterest income | $ | 20,604 | $ | 18,483 | $ | 2,121 | 11 | % | $ | 15,494 | $ | 5,110 | 33 | % | ||||||||
Total noninterest income was $20.6 million for the second quarter 2025, an increase of $2.1 million and $5.1 million from the linked and prior year quarters, respectively. The increase from the linked and prior year quarters was primarily due to higher deposit service charges and other income, which is discussed further below.
The following table presents a comparative summary of the major components of other income for the periods indicated:
| Linked quarter comparison | Prior year comparison | ||||||||||||||||||||||
| Quarter ended | Quarter ended | ||||||||||||||||||||||
| ($ in thousands) | June 30,2025 | March 31,2025 | Increase (decrease) | June 30,2024 | Increase (decrease) | ||||||||||||||||||
| BOLI | $ | 2,561 | $ | 871 | $ | 1,690 | 194 | % | $ | 855 | $ | 1,706 | 200 | % | |||||||||
| Community development investments | 1,426 | 707 | 719 | 102 | % | 381 | 1,045 | 274 | % | ||||||||||||||
| Gain on SBA loan sales | 1,153 | 1,895 | (742 | ) | (39 | )% | — | 1,153 | — | % | |||||||||||||
| Gain on sales of other real estate owned | 56 | 23 | 33 | 143 | % | — | 56 | 100 | % | ||||||||||||||
| Private equity fund distributions | 502 | 653 | (151 | ) | (23 | )% | 411 | 91 | 22 | % | |||||||||||||
| Servicing fees | 485 | 555 | (70 | ) | (13 | )% | 594 | (109 | ) | (18 | )% | ||||||||||||
| Swap fees | 86 | (2 | ) | 88 | (4,400 | )% | 217 | (131 | ) | (60 | )% | ||||||||||||
| Miscellaneous income | 2,160 | 1,697 | 463 | 27 | % | 1,533 | 627 | 41 | % | ||||||||||||||
| Total other income | $ | 8,429 | $ | 6,399 | $ | 2,030 | 32 | % | $ | 3,991 | $ | 4,438 | 111 | % | |||||||||
The increase in other income from the linked and prior year quarters was primarily driven by an increase in BOLI income, as well as community development investment income. The increase in BOLI income was primarily due to the purchase of additional policies in the first quarter 2025 and, to a lesser extent, the payout of a policy in the second quarter of 2025. Community development investment income is not a consistent source of income and fluctuates based on distributions from the underlying funds. On a periodic basis, the Company will opportunistically sell SBA guaranteed loans. Loan sales were executed in the current and linked quarters, while no loans were sold in the prior year quarter.
Noninterest Expense
The following table presents a comparative summary of the major components of noninterest expense for the periods indicated:
| Linked quarter comparison | Prior year comparison | ||||||||||||||||||||
| Quarter ended | Quarter ended | ||||||||||||||||||||
| ($ in thousands) | June 30,2025 | March 31,2025 | Increase (decrease) | June 30,2024 | Increase (decrease) | ||||||||||||||||
| Employee compensation and benefits | $ | 50,164 | $ | 48,208 | $ | 1,956 | 4 | % | $ | 44,524 | $ | 5,640 | 13 | % | |||||||
| Deposit costs | 24,765 | 23,823 | 942 | 4 | % | 21,706 | 3,059 | 14 | % | ||||||||||||
| Occupancy | 5,065 | 4,430 | 635 | 14 | % | 4,197 | 868 | 21 | % | ||||||||||||
| Core conversion expense | — | — | — | 100 | % | 1,250 | (1,250 | ) | (100 | )% | |||||||||||
| Acquisition costs | 518 | — | 518 | 100 | % | — | 518 | 100 | % | ||||||||||||
| Other expense | 25,190 | 23,322 | 1,868 | 8 | % | 22,340 | 2,850 | 13 | % | ||||||||||||
| Total noninterest expense | $ | 105,702 | $ | 99,783 | $ | 5,919 | 6 | % | $ | 94,017 | $ | 11,685 | 12 | % | |||||||
Employee compensation and benefits increased $2.0 million from the linked quarter primarily due to a full quarter of merit increases that were effective on March 1, 2025, an increase in variable compensation and the number of working days in the quarter. Deposit costs relate to certain businesses in the deposit verticals that receive an earnings credit allowance for deposit related expenses that are impacted by interest rates and average balances. Deposit costs increased $0.9 million from the linked quarter primarily due to an increase of $62.1 million in average deposit vertical balances from the linked quarter. Acquisition costs relate to the previously announced branch acquisition that is expected to close in the fourth quarter 2025. Loan and legal expenses, included in other expense, increased $1.1 million during the quarter due to loan workouts and the foreclosure of certain properties related to nonperforming loans.
The increase in noninterest expense of $11.7 million from the prior year quarter was primarily due to an increase in the associate base, merit increases throughout 2024 and 2025, and an increase in deposit costs due to higher earnings credit allowances and deposit vertical average balances, partially offset by a decline in core conversion expenses due to the completion of the core implementation in the fourth quarter 2024. For the second quarter 2025, the core efficiency ratio4 was 59.3%, compared to 58.8% for the linked quarter and 58.1% for the prior year quarter.
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| 4 | Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables. | |||||||||||||||||
Income Taxes
The effective tax rate was 20.0%, compared to 18.1% and 20.5% in the linked and prior year quarters, respectively. The Company continues to leverage tax credit opportunities as part of its overall tax planning strategy that contributes to a lower effective tax rate.
Capital
The following table presents total equity and various capital ratios for the most recent five quarters:
| At | |||||||||||||||||||
| ($ in thousands) | June 30,2025* | March 31,2025 | December 31,2024 | September 30,2024 | June 30,2024 | ||||||||||||||
| Stockholders’ equity | $ | 1,922,899 | $ | 1,868,073 | $ | 1,824,002 | $ | 1,832,011 | $ | 1,755,273 | |||||||||
| Total risk-based capital to risk-weighted assets | 14.7 | % | 14.7 | % | 14.6 | % | 14.8 | % | 14.6 | % | |||||||||
| Tier 1 capital to risk weighted assets | 13.2 | % | 13.1 | % | 13.1 | % | 13.2 | % | 13.0 | % | |||||||||
| Common equity tier 1 capital to risk-weighted assets | 11.9 | % | 11.8 | % | 11.8 | % | 11.9 | % | 11.7 | % | |||||||||
| Leverage ratio | 11.1 | % | 11.0 | % | 11.1 | % | 11.2 | % | 11.1 | % | |||||||||
| Tangible common equity to tangible assets | 9.42 | % | 9.30 | % | 9.05 | % | 9.50 | % | 9.18 | % | |||||||||
| *Capital ratios for the current quarter are preliminary and subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review. | |||||||||||||||||||
Total equity was $1.9 billion at June 30, 2025, an increase of $54.8 million from the linked quarter. Tangible book value per common share was $40.02 at June 30, 2025, compared to $38.54 and $35.02 at March 31, 2025 and June 30, 2024, respectively.
The Company’s regulatory capital ratios continue to exceed the “well-capitalized” regulatory benchmark. Capital ratios for the current quarter are subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review.
Use of Non-GAAP Financial Measures
The Company’s accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as tangible common equity, PPNR, ROATCE, core efficiency ratio, the tangible common equity to tangible assets ratio, tangible common equity to tangible assets ratio adjusted for unrealized losses on held-to-maturity securities, tangible book value per common share, return on average common equity, allowance for credit losses to total loans excluding guaranteed loans, adjusted ROAA and adjusted diluted earnings per share, in this release that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.
The Company considers its tangible common equity, PPNR, ROATCE, core efficiency ratio, the tangible common equity to tangible assets ratio, tangible common equity to tangible assets ratio adjusted for unrealized losses on held-to-maturity securities, tangible book value per common share, return on average common equity, allowance for credit losses to total loans excluding guaranteed loans, adjusted ROAA and adjusted diluted earnings per share, collectively “core performance measures,” presented in this earnings release and the included tables as important measures of financial performance, even though they are non-GAAP measures, as they provide supplemental information by which to evaluate the impact of certain non-comparable items, and the Company’s operating performance on an ongoing basis. Core performance measures exclude certain other income and expense items, such as the FDIC special assessment, core conversion expenses, acquisition costs, and the gain or loss on sale of other real estate owned and investment securities, that the Company believes to be not indicative of or useful to measure the Company’s operating performance on an ongoing basis. The attached tables contain a reconciliation of these core performance measures to the GAAP measures. The Company believes that the tangible common equity to tangible assets ratio provides useful information to investors about the Company’s capital strength even though it is considered to be a non-GAAP financial measure and is not part of the regulatory capital requirements to which the Company is subject.
The Company believes these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding the Company’s performance and capital strength. The Company’s management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing the Company’s operating results and related trends and when forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the attached tables, the Company has provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measures for the periods indicated.
Conference Call and Webcast Information
The Company will host a conference call and webcast at 10:00 a.m. Central Time on Tuesday, July 29, 2025. During the call, management will review the second quarter 2025 results and related matters. This press release as well as a related slide presentation will be accessible via the “Investor Relations” page of the Company’s website, https://investor.enterprisebank.com/events-and-presentations, prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-800-715-9871. After connecting, you may say the name of the conference or enter the Conference ID 87261. We encourage participants to pre-register for the conference call using the following link: https://bit.ly/EFSC2Q2025EarningsCallRegistration. Callers who pre-register will be given a conference passcode and unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time. A recorded replay of the conference call will be available on the website after the call’s completion. The replay will be available for at least two weeks following the conference call.
About Enterprise Financial Services Corp
Enterprise Financial Services Corp (Nasdaq: EFSC), with approximately $16.1 billion in assets, is a financial holding company headquartered in Clayton, Missouri. Enterprise Bank & Trust, a Missouri state-chartered trust company with banking powers and a wholly-owned subsidiary of EFSC, operates branch offices in Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico, and SBA loan and deposit production offices throughout the country. Enterprise Bank & Trust offers a range of business and personal banking services and wealth management services. Enterprise Trust, a division of Enterprise Bank & Trust, provides financial planning, estate planning, investment management and trust services to businesses, individuals, institutions, retirement plans and non-profit organizations. Additional information is available at www.enterprisebank.com.
Enterprise Financial Services Corp’s common stock is traded on the Nasdaq Stock Market under the symbol “EFSC.” Please visit our website at www.enterprisebank.com to see our regularly posted material information.
