Enterprise Financial Services Corporation

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Good morning, and thank you all very much for joining us for our 2025 second quarter earnings call. Joining me this morning is King Turner, EFSC's Chief Financial Officer and Chief Operating Officer, Scott Goodman, President of Enterprise Bank and Trust, and Doug Bauke, Chief Credit Officer of Enterprise Bank and Trust. Before we begin, I would like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website, presentation and earnings release were furnished on SEC 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 today. Our second quarter performance is a continuation of our multi-year trend of very strong consistent results. This is a product of a very intentional strategy that leans into our diversified business model that capitalizes on a number of higher growth markets complemented by several high-performing national loan and depository businesses. Our relationship approach with a C&I bias allows us to capitalize on a greater share of additional opportunities, and the tenure of these relationships somewhat mutes the payoff headwinds that a much higher CRE-focused portfolio presents. Establishing a cadence of consistency at a top quartile level of performance has been our focus. and this was once again achieved in the second quarter. For the quarter, we earned $1.36 per diluted share compared to $1.31 in the linked quarter and $1.19 in the second quarter of 2024. This level of performance produced an adjusted return on assets of 1.31% and a pre-provisioned ROAA of 1.72%. Needless to say, we're very pleased with these results. Net interest income and net interest margin both saw expansion in the quarter. Net interest income came in $5.2 million better than the previous quarter, and net interest margin expanded by six basis points to 4.21%. This was the fifth consecutive quarter that we saw net interest income growth. This reflects pricing discipline on both sides of the balance sheet combined with a client-centric relationship-oriented approach. Some of the uncertainties that our current economic times present reminds our clients who operate companies, develop projects, or seek sound financial advice that a few extra basis points are well worth the consistent, reliable approach that our teams provide. On an annualized basis, loan growth in the quarter was 4%, or $110 million, with contributions coming from just about all areas of our company. Our diversified model emphasizes finding the best growth as opposed to any growth. You will notice that all of our geographic markets showed loan growth in the quarter, despite the fact that we decided to exchange a little bit of loan volume to preserve our robust net interest margin. We were able to originate loans in the quarter at a yield of 7.26%, an improvement of 14 basis points from the previous quarter. Because of our confidence to continue to produce loans at a mid-single-digit growth rate for the remainder of 2025, we decided to sell approximately $25 million of SBA loans in the quarter, which contributed $1.2 million in fee income. Further SBA loan sales will be evaluated on a quarterly basis, depending on production and pending loan pipelines. Deposits were stable to slightly higher in the quarter, growing $73 million net of broker deposits. Year over year, we have seen our core deposit base grow by almost $800 million, while keeping our percentage of DDA to total deposits north of 30% and our total loan to deposit ratio at 86%. Our deposit base continues to be a differentiator for us, and with approximately $700 million of very well-priced deposits coming from the closing of our branch purchase later this year, we find ourselves in a very strong liquidity position to capitalize on the growth opportunities that I believe the second half of 2025 and 2026 will provide for our company. Our well-positioned balance sheet continues to be a strength for our company. Capital levels at quarter end remain stable and strong, with our tangible common equity to tangible assets ratio of 9.42%. Despite having a TCE level above 9%, we still delivered a 13.96% return on tangible common equity for the second quarter. Our strong return profile aided continued expansion of tangible book value per common share to $40.02. an annualized quarterly increase of 15%. Given the strength of our earnings and our confidence in our continued execution, we increased the dividend by one cent per share for the third quarter of 2025 to 31 cents per share. Our asset quality statistics remain stable when compared to the linked quarter, as non-performing assets to total assets and to total loans decreased slightly. It should be noted that net charge-offs in the quarter were negligible and aided by a nearly $3 million recovery on a loan that had been charged off several years ago. When I look at the back half of 2025, our company will remain focused on achieving our loan and deposit goals, balancing quality and pricing amid our relationship orientation. Furthermore, we look forward to closing on our branch acquisition from First Interstate Bank and welcoming our new clients and associates to our platform. Before I hand the call over to Scott, I would like to share with you what we are hearing from our clients, and how we will use this information to continue to execute at a very high level. First and foremost, the large majority of our clients continue to perform well. Sales and profits are in line with 2024, and demand and backlogs generally show that the remainder of 2025 and the first part of 2026 should continue to be solid. Although there continues to be some slight hesitancy to move major projects or acquisitions forward, The passing of the one big beautiful bill checks a very important box that should spur more economic activity. Additionally, when there is further clarity with respect to U.S. trade policy, especially with a few key trading partners and some downward movement in short-term interest rates, we believe that there is enough pent-up demand that should loan growth exceed what we have experienced in the first half of 2025. We are prepared to continue to guide our clients through these times while taking advantage of the disruption caused by the pickup in M&A that continues to play out in our markets. The combination of our business model, an improved economy, and ongoing disruption from M&A should make for a very strong financial performance for our company for several quarters and years to come. With that, I would like to hand the call over to Scott Goodman. Scott.

Thank you, Jim, and good morning, everyone. As Jim mentioned, loans for the quarter grew by $110 million, which is broken down on slide five. The largest portion of this increase came from CNI loan types, further complemented by increases in investor-owned commercial real estate and the tax credit business. Year over year, loans have grown $409 million, or roughly 4%, with balanced contributions from CNI, investor CREs, and continued steady growth of the life insurance premium finance book. In general, client discussions and sales activity related to loan opportunities is solid, albeit with a slower pace of conversion due to some of the hesitancy Jim described. That said, loan production is steady and trending well, with new loan originations up 23% from the same quarter last year and 26% from the prior quarter. Portion of the growth in investor CRE category and likewise the reduction in construction and land development loans represents the successful completion of various commercial projects. The flow of larger new construction projects has slowed somewhat with ongoing economic uncertainty, but we are seeing opportunities to retain the term debt on completed projects as well as refinance some real estate debt coming out of the secondary market structures. We also saw a slight uptick in usage on revolving lines of credit during the quarter, with average balances over 3% higher than Q1. While some of this may relate to companies building inventories to front-run potential tariff increases, usage is trending up month over month, with outstanding balances running closer to historical averages. Within the specialty lending business lines, SBA production was stable with the prior quarter, and in line with seasonal expectations. The net decline in balances primarily relates to our decision to generate fee income from the sale of $25 million of loans in this quarter. Application activity is solid, particularly around industrial property types and refinance requests. Sponsor finance balances were down slightly in Q2, reflecting fewer originations of new loans this quarter, as private equity sponsors are more cautious around companies that could be more materially impacted by tariffs or trade restrictions. We too are taking a fewer but better approach to this segment of our business, spending time with proven sponsors and staying particularly disciplined on structure and pricing. Life insurance premium finance balances were basically flat in a seasonally soft quarter for this business, but are up 160 million or 16% year over year. This business continues to perform well and grow at a steady clip, being a bit more insulated from general economic factors. Tax credit balances were up $30 million, reflecting continued fundings related to affordable housing projects in process. Moving to the geographic markets shown on slide six, we posted growth across the footprint in all major regions. Within the Midwestern markets of St. Louis and Kansas City, Some of the lists came from higher balances on lines of credit, given their higher mix of C&I clients, as well as several new commercial real estate loans with established developers for the acquisition and refinance of industrial and multifamily projects. Within the Southwest region, growth highlights for the quarter included a number of new relationships, including a large masonry contractor in Arizona, as well as a major industrial utilities firm, and a well-known commercial real estate investor in Dallas. We were also able to onboard the lift out of an experienced commercial team from a competitor in the mid-cities area of Texas, which is a growing region between Dallas and Fort Worth. This team focuses on small to mid-sized C&I businesses and will provide a nice complement to our existing team in the Dallas market. In our western region of Southern California, Growth is coming mainly from numerous new relationships originated by the talent we've recruited onto our platform over the past 24 months. Larger new relationships this quarter include several new private lender firms, a specialty machine shop, an IT services company, and a veteran-focused not-for-profit. Turning to deposits, which are detailed on slide 7, excluding the addition of $210 million of brokered CDs, Client deposits grew by 73 million in the quarter and are up 778 million or roughly 7% year over year. Within the geographic markets shown on slide eight, we're posting growth on a year over year basis across the footprint in all regions. Growth has mainly been a function of our holistic approach to new business development, which supports and incentivizes our bankers to hunt for full banking relationships rather than transactional lending or high-cost idle cash balances. Additionally, we've been proactive to monitor and communicate frequently with our existing clients, enabling us to retain or expand these balances while also adjusting our cost of funds to protect margins. Our specialty deposit verticals also continue to grow, up $63 million for the quarter and $552 million or 18% year-over-year. These are broken out in more detail on slide 9, which provides an overview of the mixed by line of business. A majority of these deposits reside within the community association and property management verticals, both of which show solid quarterly growth trends. Legal industry and escrow is a bit more lumpy, but continues to be a material source of low-cost, non-interest-bearing deposits. These businesses provide a diverse, growing, and low-cost source of funding, complements our geographic base. Furthermore, this enables our market-based teams to stay focused on their relationship strategy and remain disciplined and consistent in their approach to pricing. This mix is broken out on slide 10. Our client deposit base remains steady and well-balanced across the primary banking channels. Commercial balances are stable, comprised of 32% DDA, with accounts generally anchored by lending relationships and treasury management services. Business banking and consumer channels both posted deposit growth for the quarter, while also lowering the overall average cost of funds for these accounts. Now, I'll turn the call over to Keen Turner for his comments.