Enterprise Financial Services Corporation

Good day, and welcome to the EFSC Earnings Call. At this time, I would like to turn the call over to President and CEO, Mr. Jim Lally. Please go ahead.

Thank you, Victoria, and good morning, and welcome to our second quarter earnings call. I appreciate all of you taking time to listen in, and joining me this morning is King Turner, our company's Chief Financial Officer and Chief Operating Officer, and Scott Goodman, President of Enterprise Bank & Trust. Before we begin, I would like to remind everyone on the call that a copy of the release and accompanying presentation can be found on our website and were furnished on SCC form 8K 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. Please turn to slide three for the financial highlights of the second quarter. The second quarter was an outstanding quarter for our company, reflected in our record earnings of $1.23 per diluted share. This compared favorably to 96 cents and 56 cents for the linked and prior year's quarter, respectively. This level of earnings produced a return on average tangible common equity of 18.4%. During the quarter, we experienced solid organic loan and deposit growth. loans that have PPP pay downs grew 278 million or 17% on an annualized basis from the linked quarter. More importantly though, this growth came from several different markets and specialized businesses. Scott will provide much more details around this, but I wanted to comment that our focus will be to continue to invest in our higher growth markets in the Southwest and Southern California. An example of this is the recent team lift out to open a commercial banking office in Las Vegas, Nevada. This will be complemented by growth from our more mature Midwestern regions at a slightly higher than local GDP and the consistent high performance of our sponsor finance, tax credit, and LIPF teams. I would be remiss if I did not mention the continued stellar performance of our SBA team who have performed at a very high level since we announced the Seacoast transaction just about a year ago. execution, and matching the needs of the markets with the features of the 7A program have led to this success. Deposits, too, saw a nice increase compared to the linked quarter, increasing by $124 million, mainly driven by continued activity in our specialty deposit business. Not only are we pleased to resume a growth posture during this second quarter, but we continue to maintain both price and credit discipline amid the growth. On that note, our credit statistics remain stellar. Compared to a year ago, we saw improvement in just about every asset quality category. These improvements are reflective of the modest allowance released during the second quarter. Keene will provide much more detail around this in his comments. The strength of these operating fundamentals supported an increase of our dividend by approximately 6% and the repurchase of $12 million of stock during the quarter. In addition to all of this, I'm happy to report that we closed on the acquisition of First Choice Bancorp last week, less than three months after our announcement. As we discussed during our first quarter call, we are extremely excited about this expansion in the Southern California market, and we'll discuss our progress there in future calls. Turning to slide four, you will see that the systems and cultural integration of First Choice is a key area of focus for us for the remainder of the year. Our focus also includes loan and deposit growth, the leveraging of our PPP opportunities, and executing on the workforce opportunities to further improve our business. I would now like to turn the call over to Scott Goodman, who will provide much more detail on our growth and the performance within our markets and specialized businesses. Scott?

Thank you, Jim, and good morning, everybody. If you turn to slide number five, as you heard from Jim, We posted solid organic loan growth of $278 million and a quarter or 17% annualized net of the activity on Triple P. Overall, this reflects successful execution of a growing pipeline that had been building steadily this fiscal year across numerous different business units and specialty channels. This detail is further broken out on slides number six and seven. overall our business owner clients are generally optimistic and actively positioning their companies for growth and while some headwinds still exist in fully translating this activity to loan growth in all areas our business model is now allowing us to lean into geographies and specialty lines that are benefiting from improved economic activity following a prolonged period of successive quarterly declines in balances on lines of credit average usage on these lines leveled out in Q2. With PPP forgiveness well underway and the COVID related obstacles diminishing, businesses are more actively utilizing their buildup of cash reserves for working capital and investment purposes. And this behavior should eventually move us closer to a more normalized loan demand in the general CNI book. Our specialty business lines of SBA lending and sponsored finance exceedingly well in the quarters. The SBA business continued the momentum it had carried through from last year, up $70 million in the quarter, and on an annualized growth pace of over 25% year-to-date. The favorable programs and increased awareness of the benefits of SBA loans are creating more activity from referral sources and better opportunities with business owners. Sponsor finance activity is extremely robust. deal flow already outpacing that of the full year of 2020. Capital inflows to the private equity markets, elevated purchase multiples, and a growing number of willing sellers are creating higher volumes of senior loan requests from our sponsor network. Consistent relationship-based approach with our sponsor base has positioned us well to be the bank of choice for many of these deals and resulting in 70 million of growth in this business during the quarter. Both tax credit lending and life insurance premium finance also continue to post steady growth and performance as these businesses have proven to be somewhat immune to the COVID and economically induced obstacles that impact some of the other areas. Affordable housing programs in particular continue to be well received across both sides of the political aisle and are either being expanded or implemented in many states. From a geographic standpoint, Our Midwestern markets of St. Louis and Kansas City have the largest general CNI client bases and have been the most impacted by the aforementioned headwinds. In both markets, we continued to retain high-valued clients, growing net new relationships, and seeing increased CRE activity. Both markets also showed improved trajectories in the quarter and are well-positioned to grow near-term revenue. We continue to successfully reposition the New Mexico loan portfolio through selective retention and growth of profitable commercial real estate relationships, while also nurturing a highly valued base of low-cost deposits there. We are also beginning to phase in our proven CNI brand to better target the small and mid-sized private operating businesses in the New Mexico submarkets. Turning to Arizona. Arizona posted another quarter of strong loan activity in Q2 and has now grown over 25% year-over-year. New business includes a mix of CNI, CRE acquisition, refi, and development. Some examples include multifamily, neighborhood retail, and self-storage on the commercial real estate side, as well as relationships with an architectural service company and a local franchise operators. We believe that strong regional economies such as Phoenix, Las Vegas, and Southern California provide long-term solid and consistent opportunities for organic loan growth. Moving to the funding side, total deposits were up 124 million for the quarter. The increase is attributable to steady net new relationship development. We're consistently opening more accounts than we're closing. as well as growth in the deposit specialty segments, which are outlined on slide number eight. As a reminder, these specialties were mostly acquired through the Seacoast merger and have continued to perform at a high level since integration. These businesses, which include community and homeowners association, commercial property management, and third-party escrow, also have a higher component of non-interest-bearing accounts, which have helped push our mix in this category to 36%. of the total deposit base. Now I'd like to hand the call over to Keane Turner for his comments. Keane?