Good day, and welcome to the Enterprise Financial Services Corp. Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Peter Benoist. Please go ahead.

Thank you, Kevin, and good afternoon, everyone. And welcome to the Enterprise Financial first quarter earnings call. I'd like to remind all listeners that during this call, we'll be making forward-looking statements. Actual results may differ materially from results contemplated in our forward-looking statements as a result of various important factors including those described in our 2013 Annual Report on Form 10-K and in subsequent filings with the SEC. Forward-looking statements speak only to as of today, Thursday, April 24, 2014, and the company undertakes no obligation to update them in light of new information or future events. I'd also like to remind you that you can find a copy of our first quarter press release, which includes reconciliations of non-GAAP financial measures referred to in this conference call, in the Investor Relations section of our website. I am joined today by Steve Marsh, Chairman and Chief Credit Officer of our bank; Scott Goodman, the President and CEO of our bank; and Keene Turner, our Chief Financial Officer. If you had a chance to review our release you saw that we reported $0.30 in fully diluted earnings per share for the quarter, characterized by solid loan growth, which as Scott will detail, emanated from all 3 of our markets and will somewhat back ended in the quarter has continued and bodes well for the second quarter. We had another strong quarter in terms of asset quality, with a 26% linked quarter decrease in nonperforming loans to 71 basis points of portfolio loans, and nonperforming assets declining to 81 basis points of total assets. Reserve coverage on nonperforming loans increased to a healthy 180%, and charge-offs for the quarter were a modest 8 basis points. On a linked quarter and year-over-year basis though, we did see declines in both net interest…

Thank you, Peter. In general, growth for the quarter was driven by continued success in C&I focused relationships, with some elevated emphasis on select commercial real estate opportunity, and aided by continued downward trend on commercial real estate payoffs. Growth in the C&I sector, includes success in expanding our initial lines of business, as well as traction on new relationship poll[ph] .Organic loan demand from existing clients remain modest and line usage also remains stagnant compared to last quarter. On a market level, we experienced a good growth in both the St. Louis and Arizona markets, offset by a slight decline in Kansas City. A majority of the St. Louis growth was attributable to new C&I originations, with some contributions from commercial real estate. We continue to see momentum around our niche lending areas, principally life insurance premium financed, up 10% on an annualized basis and enterprise value lending or EVL, which was up 30% annualized for the quarter. M&A seems to be driving a lot of activity, primarily within our EVL niche, but also in connection with portfolio center strategic acquisitions and succession planning. We also experienced some growth in commercial real estate, resulting from targeted calling on existing relationships. This commercial activity was complemented by decent growth in our consumer and residential portfolio product sets, as we began to get some traction on our cross-selling efforts. Following growth in Q4 of 2013, KC originations slip modestly in the current quarter. On a positive note, paydowns moderated as well. And origination activity trended up throughout the quarter. We're also getting traction on the expansion of our EVL niche to the Kansas City market. The positive trends resulted in net loan growth in the month of March, and the short-term pipelines, particularly strong in Kansas City, with a good mix…

Thanks, Scott, and good afternoon. As you heard from Peter. We reported $0.30 of earnings per diluted common share for the first quarter. First quarter results were solid and there were several highlights, which I believe, provide the momentum on which to build for the remainder of 2014. The first quarter marks the third consecutive quarter of mid-single digit annualized growth in our portfolio loans. At 7% or $37 million, we followed a fourth quarter loan growth of 5% or $27 million and 6% or $32 million for the third quarter of 2013. Asset quality continues to further improve, and annualized net charge-offs for the first quarter, or 8 basis points compared to 33 basis points for the fourth quarter. As a point of reference, net charge-offs for the year ended 2013 were 30 basis points. During the first quarter of 2014, nonperforming loans declined to 0.71% of total loans and nonperforming assets declined to 0.81% of total asset. The allowance for loan loss coverage of our nonperforming loans, increased to 180% at March 31. Finally, noninterest expense return to pre-fourth quarter levels at $21 million for the first quarter 2014. Net interest income on a core basis was $24.1 million and the resulting net interest margin was 3.44%. Both measures declined from the fourth quarter levels due primarily to $600,000 less on a fully tax equivalent basis of loan prepayment penalties on the linked quarter basis. The reduced level of prepayment income impacted net interest margin by 9 basis points. Additionally, exclusive of the impact of fluctuations of loan prepayments fees from the fourth quarter to the current quarter, net interest margin results met our expectations. Assuming at similar level of prepayments, net interest margins would have been relatively constant, as the reduced interest expense from the fourth quarter,…

[Operator Instructions] And our first question will come from Jeffrey Rulis with D.A. Davidson.

TCE now above 8%, I guess is that prompted anymore M&A discussions internally or revisiting the dividends. I'd guess is that led to more aggressive sort of capital usage discussions?

Jeff, This is Peter. I think we communicated in prior calls, that on the M&A side, we are more intentional, we are having discussions. There's nothing active currently, but I'd say, we're putting more attention towards that given capital ratios and potential opportunities. We're looking in market. We're not looking out of market in that respect. But we continue to focus on that subject. In terms of the dividend, no. We've not really formally addressed the question of the dividend at this point.

And then maybe one for Keene on the noninterest expense that you guys mentioned kind of finding a base here. Does that suggest that we see modest growth from here, I mean the -- it sound like comp was up a bit in the first quarter, but add that $21 million base, I'd guess you have to see that.

I think, we're comfortable with the $20 million to $22 million level that we've guided you before. My comments were really aimed at making sure that, we're clear on the components on how that's shifted over the last several quarters.

Okay, and then maybe just one last one on the credit side. It seems like, you had some pretty good success reducing that NPA number. I guess the makeup of the remaining NPAs, is it more granular in that it would be more difficult to kind of show the same pace of cleanup or how do you see that group of NPAs in terms of size and ability to produce the numbers here?

So this is Steve Marsh. As we have talked about prior calls, we're a business oriented bank and so is kind of lumpy. I think, we're comfortable with the existing level. I wouldn't expect that we continue on the downward trend at the same rate that we've been going down.

We go next to Chris McGratty with KBW.

Peter, maybe I missed it on the growth, you talked about a lot of the growth in the quarter was at the end of the first quarter. Is that you suggests that we should see an acceleration in the rate of loan growth of the balance there?

Yes, I think we're implying that, Chris. It was back ended, Scott mentioned that, and I think, what was encouraging -- my comment, formally, they were seeing it in all 3 markets. And I think Scott also alluded to a particularly in the Kansas City market, where we're seeing some very good strength right now. So, yes, I think, we're encouraged by the trend and would expect it to continue.

Great. And a question on M&A, it seems like conversations are picking up. You guys do have some earnings pressure with the runoff portfolio, but you have built at C&I platform that I think a lot of banks would be interested in. Peter, just for a second, say with the bank is running it, how do you think about long-term outlook for the company in terms of independence?

Well, I think, we're running this obviously for the shareholder. And in that context, we're very aware of the fact that we are a public company and we're for sale everyday of the week, so in that respect both the management team and the board is very realistic about the environment. Having said that, we built this model because we think, it can perform over the longer term. I spend a lot of time on this calls talking by the strategy in the context of where we see the potential for outperformance and that's where we're working on as a management team. So I think in that respect our current view is, as long as we can continue to deliver from a shareholder perspective, that issue will take care of itself. If we can't do that then we maybe looking at other alternatives.

[Operator Instructions] We go next to Andrew Liesch with Sandler O'Neill and Partners.

So it looks like about 5 years ago at the end of this year, when the value capital deal took place. Are there any loans left with the loss sharing agreement on that right now?

We don't have, a -- there's very few. And I think, we are well reserved, well positioned for that. So that's really should be a nonevent for us.

Okay, and then just based on your comments on like the dividend, it sounds like, I would imagine you haven't discussed the share repurchases either. Is that correct?

That is correct.

Got you.

[Operator Instructions] We go next to Brian Martin with FIG Partners.

Peter, I guess maybe Steve, could you just talk about the strength you're seeing in Kansas City and is that tied to the market condition is getting better there? Or is it going to be people you hired and maybe just in that context, the C&I growth you guys have put up over the last year, you're looking at $110 million or so growth over the last 12 months. What part of that is coming from Kansas City versus coming from St. Louis?

Brian, this is Scott. I'll take that one. On Kansas City, I would say, we did add talent as we said, at the end of last year. And I wouldn't say, I can directly attribute the lift to specific new RMs, but we're spreading out the portfolio, as a result of and improved productivity and increased market activity for the team overall. And as I mentioned, the pipeline for Kansas City has really been building and I would say, a combination of both C&I and CRE. And that pipeline does include contributions from some of those new RMs. So I think, those things take time, but I think, we're seeing the activity build. I think as we look forward, EVL is a strategy that we've had a good success in the spreading over to Kansas City. We have dedicated folks up there, that are focused on that niche, that are focused on their own markets and their own sponsors. So the growth there has been good.

Okay, and then just with the growth over the last year. I mean, how much did you attribute to Kansas City versus kind of St. Louis?

I think on a waiting basis, more of the growth has been in St. Louis than in Kansas City, but as a reminder, last year, we spent a good portion of that year, recruiting and selling those open positions, shifting the management around. So I feel good about the way we're able to preserve the portfolio in Kansas City and now we're in a position for growth there.

Okay, all right. And then just maybe from a margin standpoint, just kind of the -- as rates begin to rise I guess because your -- the amount of variable rate loans versus fixed-rate loans, you guys have and just kind of how you're thinking that impact will affect the [indiscernible] rates tends to move higher?

Well, this is Keene. I mentioned in the comments, we're at 62% variable rate, we're very well positioned for rising interest rates. We have a fair degree of asset sensitivity, but we're cautious to be too assets sensitive given the kind of the give up in the short term. So we're trying to balance that but certainly we're positioned for rising rates and we feel good about where we are, and as I reiterated, I think, we feel good about our models as well. With an expectation that rates will rise at some point.

Okay. And the new loans you're putting out today, I mean, can the prepayments kind of affect this thing this quarter on the spending yield side. What are new loans coming on the books that typically today in?

Yes, Brian, I would say, it's obviously, extremely competitive. I think, we've been -- we've had a good a very effective holding of margin with the existing clients, and that particularly on loan relationships under that $1.5 million, $1 million threshold, which is a good portion of our portfolio. And I guess, you move up into a larger middle-market, large commercial real estate deals. We are seeing, for example, fixed rates in the 5-year range in the mid-3s, which is aggressive. I think, if you look at larger C&I deals and the middle-market, you're seeing maybe mid-2 to low 2 spreads over LIBOR on floating rate deals.

Okay. That's helpful. And then just on M&A perspective, how -- you kind of mention you're looking in market. As far as the capacity to -- how much capacity, do you guys see yourselves as having a -- I guess, a lift, what are the typical size wise, what you're looking at?

Yes, Brian, this is Peter. That's a little tough to answer. I think, in this respect, we've indicated I think in the past that as we focus on the topic, we're primarily interested in trying to find organizations that I'm going to say are complementary to us in terms of our business model, which narrows the field and limits the options quite a bit to some degree. And what falls out of that from a size perspective can vary, but generally would be certainly under $1 billion and I'd say over $250 million.

[Operator Instructions] And there are no further --

I was just going to say If that's -- if that's it for the Q&A, we just like to thank you, once again for your interest in EFSC and if you have any follow-up questions, please feel free to contact us individually, Keene, Benoist, Scott or Stephen. We thank you very much for joining the call.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation.