Enterprise Financial Services’ third quarter saw strong revenue growth, driven by expansion in core lending and exceptional deposit inflows, particularly from specialty verticals and recently acquired branches. Management attributed these gains to disciplined pricing strategies and robust loan origination in Southwest and Midwest markets. CEO James Lally highlighted, “This was a continuation of our intentional strategy to lean into our diversified geography and national businesses that allows for our team to focus on the business that fits us the best.” However, increased provision for loan losses and noise from a recaptured solar tax credit added complexity to the results, with management expressing confidence in resolving these issues over the next few quarters.

Is now the time to buy EFSC? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Enterprise Financial Services’s Q3 Earnings Call

• Jeff Rulis (D.A. Davidson): Asked about the timeline for resolving nonperforming loans, including the life insurance and Southern California credits. Chief Banking Officer Douglas Bauche said timing is uncertain due to legal proceedings, but full recovery is expected on both.
• Jeff Rulis (D.A. Davidson): Inquired about exposure to private lenders in the loan portfolio. Bauche explained the $260–$270 million in private lender relationships are secured by first mortgages and closely monitored for risk.
• Jeff Rulis (D.A. Davidson): Sought clarity on margin outlook amid rate cuts. CFO Keene Turner expects the branch acquisition to offset rate pressures, projecting a stable margin near 4.20% for most of next year.
• Damon Del Monte (KBW): Questioned expense outlook post-branch deal. Turner guided for a 3.5% rise in full-year expenses, with integration and ongoing growth driving the increase.
• Nathan Race (Piper Sandler): Asked about capital deployment priorities and M&A appetite. CEO James Lally indicated a primary focus on organic growth, with buybacks and selective M&A considered if strategic fit aligns.

Catalysts in Upcoming Quarters

In the coming quarters, our team will monitor (1) the pace and success of branch integration and associated deposit growth, (2) resolution of nonperforming assets and asset quality normalization, and (3) continued loan origination momentum in key Southwest and Midwest markets. Progress in specialty deposit verticals and any changes in management’s approach to capital deployment will also be important factors to watch.

Enterprise Financial Services currently trades at $52.37, down from $54.92 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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