Second Quarter Results

Net income of $49.1 million, $1.29 per diluted common share
Net interest margin of 4.49%, quarterly decrease of 22 basis points
Net interest income of $140.7 million, quarterly increase of $1.2 million
Total loans of $10.5 billion, quarterly increase of $500.7 million
Total deposits of $11.6 billion, quarterly increase of $465.2 million
Tangible common equity to tangible assets¹ of 8.65%

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, "I am pleased with our strong financial performance in the second quarter and our associates continued commitment to our customers and communities. We had significant loan growth across our geographic regions and business lines, building on the momentum from the first quarter. This increase in average loans has helped accelerate interest income to mitigate the effect of rising deposit interest expense. We remain focused on executing our strategic initiatives, including a focus on customer engagement and onboarding to support deposit growth and operational efficiencies."

Highlights

Earnings - Net income in the second quarter 2023 was $49.1 million, a decrease of $6.6 million, compared to the linked quarter and an increase of $4.0 million from the prior year quarter. Earnings per share ("EPS") was $1.29 per diluted common share for the second quarter 2023, compared to $1.46 and $1.19 per diluted common share for the linked and prior year quarters, respectively.

Pre-provision net revenue² ("PPNR") - PPNR of $68.9 million in the second quarter 2023 decreased $6.0 million from the linked quarter and increased $10.5 million from the prior year quarter.

Net interest income and net interest margin ("NIM") - Net interest income of $140.7 million for the second quarter 2023 increased $1.2 million and $31.1 million from the linked and prior year quarters, respectively. NIM was 4.49% for the second quarter 2023, compared to 4.71% and 3.55% for the linked and prior year quarters, respectively. Net interest income and NIM benefited from higher average loan and investment balances combined with expanding yields on earning assets. NIM decreased 22 basis points from the linked quarter, primarily due to the increase in deposit interest expense.

Noninterest income - Noninterest income of $14.3 million for the second quarter 2023 decreased $2.6 million and increased $0.1 million from the linked quarter and the prior year quarter, respectively. The decline from the linked quarter was primarily due to decreases in tax credit income and in gains on the sale of investment securities and SBA loans.

Noninterest expense - Noninterest expense of $86.0 million for the second quarter 2023 increased $5.0 million and $20.5 million from the linked quarter and the prior year quarter, respectively. The increase from both the linked and prior year quarters was primarily due to an increase in variable deposit costs and operational losses. An increase in employee compensation also contributed to the increase from the prior year quarter.

Loans - Loans totaled $10.5 billion at June 30, 2023, an increase of $500.7 million, or 20.1% on an annualized basis, from the linked quarter and an increase of $1.2 billion from the prior year period. Average loans totaled $10.3 billion for the quarter ended June 30, 2023, compared to $9.8 billion and $9.1 billion for the linked and prior year quarters, respectively.

Asset quality - The allowance for credit losses to total loans was 1.34% at June 30, 2023, compared to 1.38% at March 31, 2023 and 1.52% at June 30, 2022. Nonperforming assets to total assets was 0.12% at June 30, 2023, compared to 0.09% and 0.16% at March 31, 2023 and June 30, 2022, respectively. The provision for credit losses of $6.3 million recorded in the second quarter 2023 was primarily related to loan growth, net charge-offs and a change in economic factors.

Deposits - Total deposits increased $465.2 million from the linked quarter to $11.6 billion as of June 30, 2023. Total estimated insured deposits, which includes collateralized deposits and accounts that qualify for pass through insurance, totaled $8.3 billion at June 30, 2023. Average deposits totaled $11.4 billion for the quarter ended June 30, 2023, compared to $10.9 billion and $11.5 billion for the linked and prior year quarters, respectively. At June 30, 2023, noninterest-bearing deposit accounts totaled $3.9 billion, or 33.4% of total deposits, and the loan to deposit ratio was 90.5%.

Liquidity - The Company's total available on- and off-balance-sheet liquidity was approximately $4.5 billion at June 30, 2023. On-balance-sheet liquidity consisted of cash of $322.0 million and unpledged investment securities with a fair value of $647.3 million at June 30, 2023. Off-balance-sheet liquidity consisted of $764.1 million available through the Federal Home Loan Bank, $2.6 billion through the Federal Reserve and $140.0 million through correspondent bank lines. The Company also has an unused $25.0 million revolving line of credit and maintains a shelf registration allowing for the issuance of various forms of equity and debt securities.

Capital - Total shareholders' equity was $1.6 billion and the tangible common equity to tangible assets ratio³ was 8.65% at June 30, 2023, compared to 8.81% at March 31, 2023. The tangible common equity to tangible assets ratio, adjusted for unrealized losses on held-to-maturity securities,³ was 8.25% at June 30, 2023 and 8.43% at March 31, 2023. Enterprise Bank & Trust remains "well-capitalized," with a common equity tier 1 ratio of 12.0% and a total risk-based capital ratio of 13.0% as of June 30, 2023. The Company's common equity tier 1 ratio and total risk-based capital ratio was 11.1% and 14.1%, respectively, at June 30, 2023.

The Company's Board of Directors approved a quarterly dividend of $0.25 per common share, payable on September 29, 2023 to shareholders of record as of September 15, 2023. 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, 2023 to (but excluding) September 15, 2023. The dividend will be payable on September 15, 2023 to holders of record of Series A Preferred Stock as of August 31, 2023.

Net Interest Income and NIM

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 average interest rates earned and paid, all on a tax-equivalent basis.

	Quarter ended
	June 30, 2023						March 31, 2023						June 30, 2022
($ in thousands)	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets
Interest-earning assets:
Loans^{1, 2}	$	10,284,873	$	170,314	6.64	%	$	9,795,045	$	152,762	6.33	%	$	9,109,131	$	102,328	4.51	%
Securities²		2,297,995		17,550	3.06			2,288,451		17,117	3.03			2,068,119		12,944	2.51
Interest-earning deposits		173,785		2,095	4.84			106,254		1,195	4.56			1,401,961		2,496	0.71
Total interest-earning assets		12,756,653		189,959	5.97			12,189,750		171,074	5.69			12,579,211		117,768	3.76

Noninterest-earning assets		915,332						941,445						949,263

Total assets	$	13,671,985					$	13,131,195					$	13,528,474

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	2,509,805	$	10,120	1.62	%	$	2,201,910	$	5,907	1.09	%	$	2,329,431	$	659	0.11	%
Money market accounts		2,920,079		20,499	2.82			2,826,836		15,471	2.22			2,767,595		2,270	0.33
Savings accounts		686,973		227	0.13			732,256		230	0.13			854,860		70	0.03
Certificates of deposit		1,219,500		10,526	3.46			670,521		3,053	1.85			591,091		851	0.58
Total interest-bearing deposits		7,336,357		41,372	2.26			6,431,523		24,661	1.56			6,542,977		3,850	0.24
Subordinated debentures and notes		155,632		2,431	6.27			155,497		2,409	6.28			155,092		2,257	5.84
FHLB advances		98,912		1,279	5.19			110,928		1,332	4.87			50,000		197	1.58
Securities sold under agreements to repurchase		162,606		704	1.74			215,604		749	1.41			202,537		41	0.08
Other borrowings		133,770		1,419	4.25			53,885		353	2.66			21,413		111	2.08
Total interest-bearing liabilities		7,887,277		47,205	2.40			6,967,437		29,504	1.72			6,972,019		6,456	0.37

Noninterest-bearing liabilities:
Demand deposits		4,051,456						4,481,966						4,987,455
Other liabilities		111,915						113,341						94,733
Total liabilities		12,050,648						11,562,744						12,054,207
Shareholders' equity		1,621,337						1,568,451						1,474,267
Total liabilities and shareholders' equity	$	13,671,985					$	13,131,195					$	13,528,474

Total net interest income			$	142,754					$	141,570					$	111,312
Net interest margin					4.49	%					4.71	%					3.55	%

¹ Average balances include nonaccrual loans. Interest income includes loan fees of $3.7 million, $3.7 million, and $4.2 million for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively.
² Non-taxable income is presented on a fully tax-equivalent basis using a 25.2% tax rate. The tax-equivalent adjustments were $2.1 million, $2.0 million, and $1.7 million for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively.

Net interest income (on a tax equivalent basis) for the second quarter 2023 was $142.8 million, an increase of $1.2 million, compared to the linked quarter and an increase of $31.4 million from the prior year period. The increase from the linked and prior year quarters reflects the benefit of higher market interest rates on the Company's asset sensitive balance sheet combined with organic growth.

Interest income increased $18.9 million during the second quarter 2023 primarily due to an increase of $17.6 million in loan interest income from continued loan growth and higher loan yields. Interest on loans benefited from a 31 basis point increase in yield and a $489.8 million increase in average loans, compared to the linked quarter. The average interest rate of new loan originations in the second quarter 2023 was 7.60%.

Interest expense increased $17.7 million in the second quarter 2023 primarily due to a $16.7 million increase in deposit interest expense and a $1.0 million increase in interest expense on other borrowings. The increase in deposit interest expense reflects a shift in the deposit mix from demand deposits and interest-bearing demand deposits to money market accounts and certificates of deposit, as well as higher rates paid on deposits. The average cost of interest-bearing deposits was 2.26%, an increase of 70 basis points over the linked quarter. The increase was primarily due to higher rates paid on certificates of deposit and commercial money market accounts, which increased 161 basis points and 60 basis points, respectively, in addition to a higher average certificate of deposit balance. The total cost of deposits, including noninterest-bearing demand accounts, was 1.46% during the second quarter 2023, compared to 0.92% in the linked quarter. The increase in interest expense on other borrowings was primarily from higher average borrowings to increase on-balance-sheet liquidity primarily due to the uncertain impact of the federal government debt ceiling debate.

NIM, on a tax equivalent basis, was 4.49% in the second quarter 2023, a decrease of 22 basis points from the linked quarter and an increase of 94 basis points from the prior year quarter. For the month of June 2023, the loan portfolio yield was 6.74% and the cost of total deposits was 1.60%.

Investments

	Quarter ended
	June 30, 2023					March 31, 2023					June 30, 2022
($ in thousands)	Carrying Value		Net Unrealized Loss			Carrying Value		Net Unrealized Loss			Carrying Value		Net Unrealized Loss
Available-for-sale (AFS)	$	1,550,375	$	(179,857	)	$	1,555,109	$	(161,572	)	$	1,493,277	$	(165,135	)
Held-to-maturity (HTM)		723,959		(71,673	)		720,694		(65,013	)		617,767		(80,899	)
Total	$	2,274,334	$	(251,530	)	$	2,275,803	$	(226,585	)	$	2,111,044	$	(246,034	)

Investment securities totaled $2.3 billion at June 30, 2023, a decrease of $1.5 million from the linked quarter. The decrease was primarily due to an $18.3 million increase in the unrealized loss on available-for-sale securities due to a decline in longer-term rates in the quarter. The increase in the unrealized loss was partially offset by new investment purchases from the reinvestment of cash flows on the portfolio in the current quarter. Investment purchases in the second quarter 2023 had a weighted average, tax equivalent yield of 5.07%.

The average duration of the investment portfolio was 5.3 years at June 30, 2023. Due to the shorter average duration of the loan portfolio, of approximately 3 years, the Company leverages the investment portfolio to lengthen the overall duration of the balance sheet, primarily using high-quality municipal securities. The expected cash flow from pay downs, maturities and interest over the next 12 months is approximately $270 million. The tangible common equity to tangible assets ratio adjusted for unrealized losses on held-to-maturity securities⁴ was 8.25% at June 30, 2023, compared to 8.43% at March 31, 2023.

Loans

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

	Quarter ended
($ in thousands)	June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
C&I	$	2,029,370		$	2,005,539		$	1,904,654		$	1,780,677		$	1,641,740
CRE investor owned		2,290,701			2,239,932			2,176,424			2,106,458			1,977,806
CRE owner occupied		1,208,675			1,173,985			1,174,094			1,133,467			1,118,895
SBA loans*		1,327,667			1,315,732			1,312,378			1,269,065			1,284,279
Sponsor finance*		879,491			677,529			635,061			650,102			647,180
Life insurance premium financing*		912,274			859,910			817,115			779,606			748,376
Tax credits*		609,137			547,513			559,605			507,681			550,662
SBA PPP loans		5,173			5,438			7,272			13,165			49,175
Residential real estate		354,588			348,726			379,924			381,634			391,867
Construction and land development		599,375			590,509			534,753			513,452			626,577
Other		296,172			247,105			235,858			219,680			232,619
Total loans	$	10,512,623		$	10,011,918		$	9,737,138		$	9,354,987		$	9,269,176

Total loan yield		6.64	%		6.33	%		5.87	%		5.10	%		4.51	%
Variable interest rate loans to total loans		62	%		63	%		63	%		63	%		64	%

*Specialty loan category

Loans totaled $10.5 billion at June 30, 2023, increasing $500.7 million, compared to the linked quarter. The increase was broad based across geographic regions and lines of business, particularly within the sponsor finance specialty area. Average line utilization was approximately 45% for the second quarter 2023, compared to 42% and 44% for the linked and prior year quarters, respectively. The weighted average life of the loan portfolio is approximately 3 years at June 30, 2023.

Asset Quality

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

	Quarter ended
($ in thousands)	June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
Nonperforming loans*	$	16,112		$	11,972		$	9,981		$	18,184		$	19,560
Other		—			250			269			269			955
Nonperforming assets*	$	16,112		$	12,222		$	10,250		$	18,453		$	20,515

Nonperforming loans to total loans		0.15	%		0.12	%		0.10	%		0.19	%		0.21	%
Nonperforming assets to total assets		0.12	%		0.09	%		0.08	%		0.14	%		0.16	%
Allowance for credit losses to total loans		1.34	%		1.38	%		1.41	%		1.50	%		1.52	%
Net charge-offs (recoveries)	$	2,973		$	(264	)	$	2,075		$	478		$	(175	)

*Guaranteed balances excluded	$	6,666		$	6,835		$	6,708		$	6,532		$	6,063

Nonperforming assets increased $3.9 million during the second quarter 2023 and decreased $4.4 million from the prior year quarter. The increase from the linked quarter was primarily related to the addition of one credit relationship that was partially written down in the period. Annualized net charge-offs totaled 12 basis points of average loans in the second quarter 2023, compared to a net recovery of one basis point in the linked and prior year quarters.

The provision for credit losses totaled $6.3 million in the second quarter 2023, compared to $4.2 million and $0.7 million in the linked quarter and prior year quarter, respectively. The provision for credit losses in the second quarter 2023 was primarily related to loan growth, net charge-offs, and a change in forecasted economic factors. The provision in the linked quarter was primarily related to the impairment of an available-for-sale investment security of a failed bank and loan growth. The allowance for credit losses to total loans was 1.34% at June 30, 2023, compared to 1.38% and 1.52% in the linked and prior year quarters, respectively, and is reflective of the trend in credit quality.

Deposits

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

	Quarter ended
($ in thousands)	June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
Noninterest-bearing demand accounts	$	3,880,561		$	4,192,523		$	4,642,732		$	4,642,539		$	4,746,478
Interest-bearing demand accounts		2,629,339			2,395,901			2,256,295			2,270,898			2,197,957
Money market and savings accounts		3,577,856			3,672,539			3,399,415			3,617,249			3,562,982
Brokered certificates of deposit		893,808			369,505			118,968			129,039			129,064
Other certificates of deposit		638,296			524,168			411,740			397,869			456,137
Total deposit portfolio	$	11,619,860		$	11,154,636		$	10,829,150		$	11,057,594		$	11,092,618

Noninterest-bearing deposits to total deposits		33.4	%		37.6	%		42.9	%		42.0	%		42.8	%
Total costs of deposits		1.46	%		0.92	%		0.53	%		0.31	%		0.13	%

Total deposits at June 30, 2023 were $11.6 billion, an increase of $465.2 million and $527.2 million from the linked quarter and prior year quarter, respectively. The increase from the linked quarter includes $524.3 million in brokered certificates of deposit that are a stable funding source to support loan growth. This strategy helped preserve wholesale borrowing capacity and liquidity measures. The mix of the deposit portfolio continued the shift from noninterest bearing demand deposits to higher yielding categories that began in the first quarter 2023. Competitive pricing pressures and the Federal Reserve's monetary policy actions have continued to pressure industry-wide deposit flows. Reciprocal deposits, which are placed through third party programs to provide FDIC insurance on larger deposit relationships, totaled $926.6 million at June 30, 2023, compared to $486.7 million at March 31, 2023.

Total estimated insured deposits, which includes collateralized deposits, reciprocal accounts and accounts that qualify for pass-through insurance, totaled $8.3 billion, or 72% of total deposits, at the end of June 30, 2023, compared to $7.7 billion, or 69% of total deposits, in the linked quarter.

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, 2023		March 31, 2023		Increase (decrease)					June 30, 2022		Increase (decrease)
Deposit service charges		3,910		4,128	$	(218	)	(5	)%		4,749	$	(839	)	(18	)%
Wealth management revenue		2,472		2,516		(44	)	(2	)%		2,533		(61	)	(2	)%
Card services revenue		2,464		2,338		126		5	%		3,514		(1,050	)	(30	)%
Tax credit income		368		1,813		(1,445	)	(80	)%		1,186		(818	)	(69	)%
Other income		5,076		6,103		(1,027	)	(17	)%		2,212		2,864		129	%
Total noninterest income	$	14,290	$	16,898	$	(2,608	)	(15	)%	$	14,194	$	96		1	%

Total noninterest income was $14.3 million for the current quarter, a decrease of $2.6 million from the linked quarter and stable with the prior year quarter. The $2.6 million decrease from the linked quarter was primarily due to decreases in tax credit income and other income. Tax credit income is typically highest in the fourth quarter of each year and will vary in other periods based on transaction volumes and fair value changes on credits carried at fair value. The decrease in other income was primarily due to gains on the sale of investment securities and SBA loans in the linked quarter that did not reoccur in the second quarter 2023.

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, 2023		March 31, 2023		Increase (decrease)					June 30, 2022		Increase (decrease)
BOLI	$	797	$	791	$	6		1	%	$	748	$	49	7	%
Community development investments		2,077		595		1,482		249	%		193		1,884	976	%
Private equity fund distribution		371		1,749		(1,378	)	(79	)%		240		131	55	%
Servicing fees		407		512		(105	)	(21	)%		165		242	147	%
Swap fees		173		250		(77	)	(31	)%		102		71	70	%
Miscellaneous income		1,251		2,206		(955	)	(43	)%		764		487	64	%
Total other income	$	5,076	$	6,103	$	(1,027	)	(17	)%	$	2,212	$	2,864	129	%

Community development and private equity distributions included in other income are not consistent sources of income and fluctuate based on distributions from the underlying funds. Servicing fee income may also fluctuate based on prepayment experience and changes to the discount rate used in the valuation of the servicing rights. Swap fee income is generated from customer hedging activities and varies based on customer transaction volume. The decrease in miscellaneous income from the linked quarter was primarily due to the gains on the sale of SBA loans and investment securities that were recognized in the linked 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, 2023		March 31, 2023		Increase (decrease)					June 30, 2022		Increase (decrease)
Employee compensation and benefits	$	41,641	$	42,503	$	(862	)	(2	)%	$	36,028	$	5,613		16	%
Occupancy		3,954		4,061		(107	)	(3	)%		4,309		(355	)	(8	)%
Deposit costs		16,980		12,720		4,260		33	%		5,905		11,075		188	%
Other expense		23,381		21,699		1,682		8	%		19,182		4,199		22	%
Total noninterest expense	$	85,956	$	80,983	$	4,973		6	%	$	65,424	$	20,532		31	%

Employee compensation and benefits decreased $0.9 million from the linked quarter due to a $2.8 million decrease in benefits, primarily employer payroll taxes and 401(k) expense that are seasonally higher in the first quarter each year. The decrease in benefits was partially offset by a $1.9 million increase in salaries and variable compensation due to a full quarter of merit increases that became effective on March 1, 2023, and an expanded associate base. Deposit costs relate to certain specialized deposit businesses that are impacted by higher interest rates as well as increasing average balances. Deposit costs increased $4.3 million from the linked quarter primarily due to higher average balances and an increase in expenses related to the earnings credit earned on these accounts. The linked quarter deposit costs were also lower due to the expiration of certain earnings credits that were forfeited. Other expense increased $1.7 million from the linked quarter, primarily related to a $1.5 million increase in operational losses.

The increase in noninterest expense of $20.5 million from the prior year quarter was primarily an increase in the associate base, merit increases throughout 2022 and 2023, and an increase in variable deposit costs.

For the second quarter 2023, the Company's core efficiency ratio⁵ was 54.0%, compared to 50.5% for the linked quarter and 51.0% for the prior year quarter.

Income Taxes

The Company's effective tax rate was 22% for each of the current, linked and prior year quarters.

Capital

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

	Quarter ended
($ in thousands)	June 30, 2023*			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
Shareholders' equity	$	1,618,233		$	1,592,820		$	1,522,263		$	1,446,218		$	1,447,412
Total risk-based capital to risk-weighted assets		14.1	%		14.3	%		14.2	%		14.2	%		14.2	%
Tier 1 capital to risk weighted assets		12.5	%		12.6	%		12.6	%		12.6	%		12.5	%
Common equity tier 1 capital to risk-weighted assets		11.1	%		11.2	%		11.1	%		11.0	%		10.9	%
Leverage ratio		11.0	%		11.1	%		10.9	%		10.4	%		9.8	%
Tangible common equity to tangible assets		8.65	%		8.81	%		8.43	%		7.86	%		7.80	%

*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 $1.6 billion at June 30, 2023, an increase of $25.4 million from the linked quarter. The increase was primarily due to current period net income of $49.1 million. This increase was partially offset by a $17.5 million decrease in accumulated other comprehensive income, primarily due to a net fair value decrease in the Company's fixed-rate, available-for-sale investment portfolio, and common and preferred stock dividends of $10.3 million. The Company's tangible common book value per share was $31.23 at June 30, 2023, compared to $30.55 and $26.63 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.

________________________________

¹Tangible common equity to tangible assets and return on tangible common equity are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

² Pre-provision net revenue is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.

³ Tangible common equity to tangible assets ratio and the tangible common equity to tangible assets ratio adjusted for unrealized losses on held-to-maturity securities are non-GAAP measures. Refer to discussion and reconciliation of these measures in the accompanying financial tables.

⁴ 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 these measures in the accompanying financial tables.

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

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, PPNR return on average assets ("PPNR ROAA"), core efficiency ratio, the tangible common equity ratio, and tangible book value per common 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, PPNR ROAA, core efficiency ratio, the tangible common equity ratio, and tangible book value per common 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 merger-related expenses, facilities charges, and the gain or loss on sale of 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 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 25, 2023. During the call, management will review the second quarter 2023 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/EFSC2Q2023earnings to register. 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 $13.9 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.

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, liquidity, yields and returns, loan diversification and credit management, shareholder value creation and the impact of 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 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 (including U.S. federal government measures to address higher inflation), 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, our ability to attract and retain deposits and access to other sources of liquidity, 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, 2022, 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.

ENTERPRISE FINANCIAL SERVICES CORP

CONSOLIDATED FINANCIAL SUMMARY (unaudited)

Quarter ended

Six months ended

(in thousands, except per share data)

Jun 30,

2023

Mar 31,

2023

Dec 31,

2022

Sep 30,

2022

Jun 30,

2022

Jun 30,

2023

Jun 30,

2022

EARNINGS SUMMARY

Net interest income

140,692

139,529