Second Quarter Results

• Net income of $45.1 million, $1.19 per diluted common share

• Net interest margin (tax equivalent) of 3.55%

• Pre-provision return on average assets¹ of 1.73%

• Total loans² of $9.2 billion, a quarterly increase of $298.0 million, or 13% annualized

• Increased quarterly dividend 5% to $0.23 per common share for the third quarter

• Repurchased 349,383 shares at an average price of $45.65 per share

Jim Lally, President and Chief Executive Officer of Enterprise Financial Services Corp (Nasdaq: EFSC) (the “Company” or “EFSC”), said today upon the release of EFSC’s second quarter earnings, “Our execution propelled double-digit loan growth on an annualized basis, building on the strong foundation that was established in the first quarter. Loan growth was diversified across our business lines and reflects the strength of the targeted investments we have made. Our organic growth, coupled with our well-positioned balance sheet, accelerated operating revenue which resulted in a nearly 18% return on average tangible common equity³ for the quarter. I am proud of what we have accomplished so far this year, as it demonstrates the power of the franchise we have built and expanded upon in recent years.”

Highlights

Comparisons to the prior year are impacted by the acquisition of First Choice Bancorp (“First Choice” or “FCBP”) in the third quarter of 2021.

• Earnings - Net income in the second quarter 2022 was $45.1 million, a decrease of $2.5 million, compared to the linked quarter and an increase of $6.7 million from the prior year quarter. Earnings per share (“EPS”) was $1.19 per diluted common share for the second quarter 2022, compared to $1.23 per diluted common share for both the linked and prior year quarters, respectively.

• Pre-provision net revenue¹ (“PPNR”) - PPNR of $58.4 million in the second quarter 2022 increased $1.4 million and $10.9 million from the linked and prior year quarters, respectively. The increase from the linked quarter was primarily due to an increase in net interest income, partially offset by a decline in noninterest income and an increase in noninterest expense, as further discussed in the following sections. The increase from the prior year quarter was primarily due to the positive contribution from the First Choice acquisition and expansion in net interest income from organic loan and deposit growth.

• Net interest income and net interest margin (“NIM”) - Net interest income of $109.6 million for the second quarter 2022 increased $8.4 million and $27.9 million from the linked and prior year quarters, respectively. NIM was 3.55% for the second quarter 2022, compared to 3.28% and 3.46% for the linked quarter and prior year quarter, respectively. Net interest income and NIM benefited from organic loan growth, a reallocation of excess liquidity into the investment portfolio and an increase in market interest rates.

¹ Pre-provision return on average assets is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

² Excludes PPP loans, which totaled $49.2 million at June 30, 2022.

³ Return on average tangible common equity is a non-GAAP measure. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

• Noninterest income - Noninterest income of $14.2 million for the second quarter 2022 decreased $4.4 million and $2.0 million from the linked and prior year quarters, respectively. A decline in tax credit income from a seasonally strong first quarter and a decline in other income were the primary drivers of the linked quarter decrease. The decrease from the prior year quarter was primarily due to lower transactional income from private equity investments, a decrease in mortgage banking income and a decrease in gains on the sale of other real estate owned. These decreases were partially offset by deposit service charge income from the First Choice acquisition.

• Loans - Total loans increased $213.1 million from the linked quarter to $9.3 billion as of June 30, 2022. PPP loans declined $84.9 million to $49.2 million. Excluding PPP loans, loans grew $298.0 million, or 13%, on an annualized basis from the linked quarter. Loan growth in the quarter was well distributed across geographic markets and the specialty lending niches. Average loans totaled $9.1 billion for the quarter ended June 30, 2022, compared to $9.0 billion and $7.3 billion for the linked and prior year quarters, respectively.

• Asset quality - The allowance for credit losses to total loans was 1.52% at June 30, 2022, compared to 1.54% at March 31, 2022 and 1.77% at June 30, 2021. Nonperforming assets to total assets was 0.16% at June 30, 2022, compared to 0.17% and 0.44% at March 31, 2022 and June 30, 2021, respectively. A provision for credit losses of $0.7 million was recorded in the second quarter 2022 due to loan growth and changes in the macroeconomic forecasts, partially offset by an improvement in credit quality. Provision benefits of $4.1 million and $2.7 million were recorded in the linked and prior year quarters, respectively, primarily due to improvements in the macroeconomic forecasts.

• Deposits - Total deposits decreased $611.5 million from the linked quarter to $11.1 billion as of June 30, 2022. The decline in deposits was concentrated in interest-bearing demand and money market accounts that were not relationship-based and reflects a shift in our deposit mix aligned with our disciplined focus on relationship-based, lower-cost deposits. Average deposits totaled $11.5 billion for both quarters ended June 30, 2022 and March 31, 2022, compared to $8.6 billion for the prior year quarter. Noninterest-bearing deposit accounts represented 42.8% of total deposits, and the loan to deposit ratio was 83.6% at June 30, 2022.

• Capital - Total shareholders’ equity was $1.4 billion and the tangible common equity to tangible assets ratio⁴ was 7.8% at June 30, 2022, compared to 7.6% at March 31, 2022. Tangible common equity declined $24.4 million in the second quarter 2022, primarily due to a $49.2 million decrease in accumulated other comprehensive income driven mainly from a decrease in the fair value of the available-for-sale investment portfolio. The decrease in accumulated other comprehensive income was partially offset by the undistributed earnings in the second quarter 2022. Enterprise Bank & Trust remains “well-capitalized,” with a common equity tier 1 ratio of 12.0% and a total risk-based capital ratio of 13.1% as of June 30, 2022. The Company’s common equity tier 1 ratio and total risk-based capital ratio was 10.9% and 14.2%, respectively, at June 30, 2022.

The Company repurchased 349,383 shares totaling $15.9 million in the second quarter 2022 for an average price of $45.65 per share. The shares acquired in the second quarter 2022 complete the share repurchase plan authorized by the Board of Directors on April 29, 2021. On May 4, 2022, the Board of Directors approved a new plan that authorized the repurchase of up to 2,000,000 shares of common stock. No shares have been repurchased under the recently-approved plan. In June 2022, the Company retired 1,980,093 shares of treasury stock and returned them to authorized and unissued shares.

⁴ Tangible common equity to tangible assets ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

The Company’s Board of Directors approved a quarterly dividend of $0.23 per common share, payable on September 30, 2022 to shareholders of record as of September 15, 2022, an increase of $0.01, or 5%, compared to the second quarter 2022. The Board of Directors 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, 2022 to (but excluding) September 15, 2022. The dividend will be payable on September 15, 2022 to shareholders of record on August 31, 2022.

Net Interest Income

Average Balance Sheets

The following table presents, for the periods indicated, certain information related to our average interest-earning assets and interest-bearing liabilities, as well as, the corresponding interest rates earned and paid, all on a tax-equivalent basis.

NIM, on a tax equivalent basis, was 3.55% in the second quarter 2022, an increase of 27 basis points from the linked quarter and an increase of nine basis points from the prior year quarter. The increase in NIM from the linked quarter was primarily due to higher yields on loans, investments and interest-earning deposits due to an increase in market interest rates, including a 125 basis point increase in the federal funds rate. The average loan yield was 4.51% in the second quarter 2022, an increase of 17 basis points from the linked quarter. The average loan yield increased due to the repricing of variable-rate loans and the origination of new loans at an average rate of 4.71% (as of June 30, 2022). Approximately 20% of the variable-rate loan portfolio reprices on the first day of each quarter and did not increase with the current quarter’s rate movement, but these loan rates will reset early in the third quarter. The average investment yield was 2.51%, an increase of 20 basis points from the linked quarter. The investment yield increased due to the purchase of new investments at higher yields due to the expansion of the investment portfolio and the reinvestment of cash flows. Investments purchased in the second quarter 2022 had a tax equivalent average yield of 2.99%.

The effective federal funds rate for the second quarter 2022 was 76 basis points, an increase of 64 basis points, compared to the linked quarter and a 69 basis point increase over the prior year quarter. Concurrently, the Company’s earning asset yield increased 31 basis points, while the interest-bearing liability yield increased seven basis points, compared to the linked quarter. The total cost of deposits, including noninterest-bearing demand accounts, increased three basis points during the second quarter 2022.

Net interest income for the second quarter was $109.6 million, an increase of $8.4 million from the linked quarter, and an increase of $27.9 million from the prior year period. The increase in net interest income from the linked quarter was primarily due to an increase in the earning asset yield due to an increase in interest rates that was further enhanced by a stronger earning asset mix. The Company continued to redeploy part of its excess liquidity into the investment portfolio during the second quarter, increasing investments $244.2 million, when excluding mark-to-market fluctuations. Net interest income was also impacted by a decline in PPP income, a decline in interest-earning deposit accounts and the related interest income, and an increase in interest expense.

Loans

The following table presents total loans for the most recent five quarters:

Loans totaled $9.3 billion at June 30, 2022, increasing $213.1 million, compared to the linked quarter. PPP loans declined $84.9 million in the second quarter 2022 to $49.2 million from continued loan forgiveness by the Small Business Administration (“SBA”). Excluding PPP loans, loans grew $298.0 million, or 13% on an annualized basis, from the linked quarter. The increase was driven by the specialty lending categories noted in the table above, increasing $124.6 million, as well as growth in nearly all geographic markets in the second quarter 2022. Average line utilization was approximately 44% for the quarter ended June 30, 2022, compared to 40% and 39% for the linked and prior year quarters, respectively. This trend added approximately $152 million to loans outstanding during the current quarter.

Asset Quality

The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:

Nonperforming assets declined $2.1 million during the second quarter 2022 and $25.3 million from the prior year quarter. During the second quarter the Company experienced one basis point of net recoveries relative to average loans, compared to seven basis points of net charge-offs in the linked quarter and five basis points of net charge-offs in the prior year quarter. The Company recorded a provision for credit losses of $0.7 million for the second quarter 2022, compared to a benefit of $4.1 million for the linked quarter and a benefit of $2.7 million for the prior year quarter. Allowance for credit losses to total loans was 1.52% at June 30, 2022, a decrease of two basis points from the linked quarter. This trend was due to continued improvement in asset quality and net recovery activity, while loan growth and a decline in forecasted macroeconomic factors warranted additions to the allowance for credit losses.

Deposits

The following table presents deposits broken out by type for the most recent five quarters:

Total deposits at June 30, 2022 were $11.1 billion, a decrease of $611.5 million from March 31, 2022, and an increase of $2.5 billion from June 30, 2021. Noninterest-bearing deposits declined $134.6 million from the linked quarter due primarily to managing out one large client in the deposit specialty portfolio that was partially mitigated by growth from other client activity. The $464.7 million decrease in interest-bearing demand and money market accounts from the linked quarter was primarily due to the managed run-off of certain interest-rate sensitive, large balance accounts and reflects a shift in our deposit mix aligned with our disciplined focus on relationship-based, lower-cost deposits. These customers were single service customers and were not part of broader banking relationships. The increase compared to the prior year is due to the First Choice acquisition coupled with organic growth.

The total cost of deposits was 0.13% for the current quarter, compared to 0.10% for the linked quarter and 0.12% for the prior year quarter.

Noninterest Income and Expense

The following tables present a comparative summary of the major components of noninterest income, other income, and noninterest expense for the periods indicated:

Total noninterest income for the second quarter 2022 was $14.2 million, a decrease of $4.4 million from the linked quarter and a decrease of $2.0 million from the prior year quarter. The decrease from the linked quarter was primarily due to decreases in tax credit and other income. Tax credit income is typically higher in the fourth and first quarter of each year and experiences a seasonal decline during the second and third quarter. Rising interest rates also reduced tax credit income due to the impact on tax credit projects carried at fair value.

Other income in the linked quarter included $2.2 million of fees from community development investments and $1.2 million of swap income, compared to $0.3 million in the second quarter 2022 in these categories. The decrease from the prior year quarter was primarily due to a decline in transactional private equity distributions and a decline in mortgage banking revenue. These decreases were partially offset by First Choice noninterest income that contributed to the increase in deposit service charges on a year-over-year basis.

Noninterest expense was $65.4 million for the second quarter 2022, compared to $62.8 million for the linked quarter, and $52.5 million for the prior year quarter. Employee compensation and benefits increased $0.2 million from the linked quarter, which included a $1.2 million increase in ongoing compensation expense that was offset by a $1.2 million decline in payroll taxes. The compensation trend in the linked quarter was primarily driven by performance-based incentive accruals. Other expense increased $2.7 million from the linked quarter primarily due to a $1.6 million increase in deposit costs and a $0.8 million increase in loan and legal expenses due to growth in the loan portfolio. The increase from the prior year quarter was primarily due to the First Choice acquisition, merit increases provided to employees throughout 2021 and 2022 and an increase in deposit costs due to higher average balances and interest-rate trends.

For the second quarter 2022, the Company’s efficiency ratio was 52.8%, compared to 52.4% and 53.6% for the linked quarter and prior year quarter, respectively. The Company’s core efficiency ratio⁵ was 52.8% for the quarter ended June 30, 2022, compared to 52.4% for the linked quarter and 51.9% for the prior year quarter.

⁵ Core efficiency ratio is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

Income Taxes

The Company’s effective tax rate was 22% for both the quarter ended June 30 and March 31, 2022, compared to 20% for the prior year quarter. The Company’s effective tax rate has increased due to growth of pre-tax income and the further expansion and diversification of the Company’s geographic footprint which affected state tax apportionment.

Capital

The following table presents various EFSC capital ratios for the most recent five quarters:

Total equity was $1.4 billion at June 30, 2022, a decrease of $25.8 million from the linked quarter. The decrease from the linked quarter was primarily due to a $49.2 million decline in accumulated other comprehensive income, $15.9 million in share repurchases, and $9.1 million in common and preferred dividends. These decreases were partially offset by current period net income of $45.1 million. The decline in accumulated other comprehensive income was due to a net fair value decline in the Company’s fixed-rate, available-for-sale investment portfolio from an increase in interest rates during the period. The Company’s tangible common book value per share was $26.63 at June 30, 2022, compared to $27.06 and $26.85 in the linked and prior year quarters, 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, PPNR return on average assets (“PPNR ROAA”), financial metrics adjusted for PPP impact, core efficiency ratio, and the tangible common equity ratio, 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, PPNR ROAA, financial metrics adjusted for PPP impact, core efficiency ratio, and the tangible common equity ratio, 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 merger-related expenses, facilities charges, and the gain or loss on sale of investment securities, 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 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 26, 2022. During the call, management will review the second quarter 2022 results and related matters. This press release as well as a related slide presentation will be accessible on the Company’s website at www.enterprisebank.com under “Investor Relations” prior to the scheduled broadcast of the conference call. The call can be accessed via this same website page, or via telephone at 1-888-550-5279 (Conference ID #7004515). A recorded replay of the conference call will be available on the website approximately two hours after the call’s completion. Visit https://bit.ly/EFSC2Q2022 and register to receive a dial in number, passcode, and pin number. The replay will be available for approximately two weeks following the conference call.

About Enterprise Financial Services Corp

Enterprise Financial Services Corp (Nasdaq: EFSC), with approximately $13.1 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, 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.

Forward-looking Statements

Readers should note that, in addition to the historical information contained herein, this press release contains “forward-looking statements” within the meaning of, and intended to be covered by, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, shareholder value creation and the impact of the First Choice acquisition and other acquisitions.

Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “pro forma” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in the forward-looking statements and future results could differ materially from historical performance. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation: the Company’s ability to efficiently integrate acquisitions, including the First Choice acquisition, into its operations, retain the customers of these businesses and grow the acquired operations, as well as credit risk, changes in the appraised valuation of real estate securing impaired loans, outcomes of litigation and other contingencies, exposure to general and local economic and market conditions, high unemployment rates, higher inflation and its impacts, U.S. fiscal debt, budget and tax matters, and any slowdown in global economic growth, risks associated with rapid increases or decreases in prevailing interest rates, consolidation in the banking industry, competition from banks and other financial institutions, the Company’s ability to attract and retain relationship officers and other key personnel, burdens imposed by federal and state regulation, changes in legislative or regulatory requirements, as well as current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including rules and regulations relating to bank products and financial services, changes in accounting policies and practices or accounting standards, changes in the method of determining LIBOR and the phase out of LIBOR, natural disasters, terrorist activities, war and geopolitical matters (including the war in Ukraine and the imposition of additional sanctions and export controls in connection therewith), or pandemics, including the COVID-19 pandemic, and their effects on economic and business environments in which we operate, including the ongoing disruption to the financial market and other economic activity caused by the continuing COVID-19 pandemic, and those factors and risks referenced from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and the Company’s other filings with the SEC. The Company cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Company’s results.

For any forward-looking statements made in this press release or in any documents, EFSC claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Readers are cautioned not to place undue reliance on any forward-looking statements. Except to the extent required by applicable law or regulation, EFSC disclaims any obligation to revise or publicly release any revision or update to any of the forward-looking statements included herein to reflect events or circumstances that occur after the date on which such statements were made.