Enterprise Financial Services Corporation

Good day and welcome to the EFSC earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jim Lally. Please go ahead, sir.

Scott, thank you and good morning. I welcome everyone to our call. I appreciate all of you taking time to listen in. Joining me this morning is Keen Turner, our company's Chief Financial Officer and Chief Operating Officer, Scott Goodman, President of Enterprise Bank and Trust, and Doug Bauke, Chief Credit Officer. Yesterday, we issued a press release announcing the acquisition of First Choice Bank Corp. On the call today, we will briefly comment on our first quarter earnings and then discuss the acquisition announcement. Before we begin, I would like to remind everyone on the call that a copy of the releases and accompanying presentations can be found on our website and were furnished on SEC forms 8Ks yesterday. Please refer to slide two of the presentation titled Forward Looking Statements. and our most recent 10K and 10Q for reasons why actual results may vary from any forward-looking statements that we make this morning. The first quarter of 2021 was a very solid quarter for our company. From an earnings perspective, we made $30 million, or 96 cents per share. This compares favorably to both the linked quarter and the first quarter of 2020, where we earned $1.48 per share, respectively. From a return perspective, we earned 1.22% on average assets and 1.66% on PPNR ROAA. During the quarter, we successfully completed the core systems conversion for Seacoast, and we are well on our way to achieving the resulting operating leverage as we sit here today. Other highlights for the quarter include the issuance of our inaugural environmental, social, and governance report. and the continued execution of the Triple P program for the benefit of our customers. This success continues to create some headwinds relative to organic growth in our commercial markets. Scott will touch on some of this in his comments. In addition to all of this, last evening we announced the merger of First Choice Bancorp into EFSC, creating a $12.7 billion commercial bank. The opportunity to pursue this transaction developed quickly because of the strong cultural fit between the two organizations and alignment of business goals. We feel that First Choice is the perfect partner for us if we can continue our Southwest expansion due to their pure play commercial banking heritage, strong earnings profile, and depth of knowledge of Southern California business communities. Peter Hoy, Its chairman and his management team have built a first-class organization and an incredible and diverse team that will flourish on the combined platform. We share similar core values and commitments to our stakeholders. Both companies have been recognized as the best place to work in recent years. The combination of our two cultures will produce a strong company where we will continue our focus on local decision-making, access to senior leaders, and our high-touch service models. We are pleased that Peter and First Choice were open to an opportunity to grow with a like-minded, successful company that shares its focus, values, and commitment to clients, associates, and communities. This is the perfect size company for us to acquire as we cross the $10 billion threshold. He will run through many of the financial details of this transaction, but I have to say that I'm extremely excited about our future as we add another very strong catalyst for our continued earnings and balance sheet growth while our economy continues to steadily recover, is on the verge of what I believe and what we believe is a period of sustained expansion. I would now like to hand the call over to Scott Goodman, who will provide some color on the performance of our various business lines during the first quarter. Scott?

Thank you, Jim, and good morning, everybody. You'll see total loans that are outlined on slide seven. grew by $64 million in the first quarter. This modest level of loan growth really reflects some continued headwinds for the regional portfolios due to the excessive liquidity within the financial system and a cautious approach to new capital spending by businesses. We did participate in round two of the PPP program with over $300 million of new originations and resulting in a net increase of $39 million of PPP outstandings at the quarter end. We continue to see businesses using Triple P funds and reserve cash buildup to further reduce revolving lines of credit, construction loans, and other short-term borrowings. In other cases, clients are choosing to use cash for CapEx and project financing rather than borrow. However, I will say we are experiencing stronger performance in several other sectors of our loan portfolio, including investor CRE, SBA lending, life insurance premium finance, and affordable housing. The diversity and balance that we've intentionally developed within our business model are enabling us to lean into these specialty areas that are insulated from the liquidity headwinds or, like SBA lending, have benefited from the current economic uncertainty and stimulus programs. Within the business units that are outlined on slide eight, St. Louis and Kansas City represent our largest concentrations of general C&I operating businesses, and they have been most heavily impacted by the aforementioned pressures. That said, we continue to onboard new relationships in these markets, and we see momentum in the production of new loan commitments in both markets. In St. Louis, for example, we've seen increased originations in each of the last two consecutive quarters. Arizona continues its strong performance with 15% year-over-year growth and reflecting one of the fastest growing economies in the country. Commercial real estate market remains active to support the growing infrastructure and demand for industrial and commercial users. The San Diego data that you see on this slide represents the general commercial banking portfolio portion of the Legacy Seacoast book. and it's made up mainly of investor and owner-occupied CRE loans. Similar to Phoenix, the Southern California economy shows a higher level of growth, and we're excited to add the talent of the First Choice team and the dynamics of this market to our successful client-focused growth model. Turning now to slide number nine, we have also integrated the specialty deposit verticals of the legacy Seacoast operation into our specialized banking unit, now representing a combined $1.3 billion in deposits. These specialties provide an attractive, low-cost, sticky, and continually expanding portion of our funding base, representing nearly 15% of total deposits. With elevated technological and operational capabilities on a combined basis, we've already seen new opportunities and accelerated growth in these business lines. Lastly, I'd like to highlight the continued strength of our loan portfolio. Asset quality remains solid with reductions in non-performing loans and classifieds from prior quarter. Non-performing loans are modest at 50 basis points and the allowance represents strong coverage at 1.8% of the total loan portfolio. A majority of the charge off dollars for this quarter are concentrated in two loans, One is a hotel loan in St. Louis, which was acquired through an acquisition and which has been mentioned previously by us in prior quarters. And the other is a partial charge relating to a modest seven-figure loan to a retail service business, which has also been in our watch and workout process in prior quarters and with the remaining balance fully reserved. Now, at this point, I'd like to hand it over to Keane for his comments. Keane?