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

Thank you, Camille, and good afternoon, everyone. And thank you for taking the time to join us on our first quarter earnings call. I'm joined on the call by Scott Goodman, President of the Bank; and Keene Turner, our Chief Financial Officer. We have continued a webcast format for this earnings call, and refer you to our corporate website for a copy of the accompanying presentation, which will be the subject to this call. The presentation and earnings release were furnished on SEC From 8-K earlier today. Please refer to Slide number 1 of the presentation, titled forward-looking statement and our most recent 10-K and 10-Q for reasons why actual results may vary from any forward-looking statements we make today. Reported earnings for the quarter were strong at $0.46 per diluted share, a linked quarter and year-over-year increase of 53%, in part driven by continued positive results in the purchase credit impaired portfolio, which contributed $0.11 per share to overall earnings in the quarter. More importantly, core earnings per share were $0.35 per diluted share, a linked quarter increase of 6% and a year-over-year gain of 25%. Core performance is our focus, as we continue to drive increases in shareholder value by executing on our strategy, which is consistent with our focus and our results for 2014. On Slide 2, we outlined our goals this year, which will be: to drive quality loan growth; to grow core net interest income, to defend core net interest margins; to maintain high credit quality performance; and to improve operating leverage. While loan volume in the first quarter was stable, it's consistent with first quarter seasonal trends and prior years and year-over-year portfolio loan growth was 12%. Scott Goodman will give you much more detail on the core loan book, but suffice it to…

Thank you, Peter. Referring to Slide number 3, as Peter mentioned, loan balances were leveled from 2014 yearend. The activity behind these balances, however, indicates good origination volumes offset by some niche-related seasonality and transactional paydowns. The commercial real estate segment of our portfolio posted growth for the quarter, with the seasonality and paydowns mainly relating to the C&I category. As illustrated on Slide number 4, C&I was slightly down point-to-point on the heels of a very robust Q4, reflecting relatively slower organic activity by C&I businesses, combined with paydowns from asset sales and timing issues in the tax credit niche. Overall, origination activity was consistent with historical first quarter levels, and our annual C&I growth trend was solid at nearly 20%. Now, going to a bit more detail on some of this, as Slide number 5 examines the loan portfolio by segment for the quarter. Seasonality issues mainly impact our enterprise value lending and tax credit niches, with some additional modest impact in the life insurance premium finance book. As a reminder, enterprise value lending or EVL is our senior debt product structured to private equity relationships in the M&A space. It's common to see a quieter first quarter for M&A, following typical acceleration of deals at the prior yearend. Our activity with existing sponsors and the expansion of this niche in the other markets is tracking nicely. While competition for M&A transactions by PE sponsors is intense, our reputation for execution is earning us more opportunities, and is allowing us to leverage this reputation into new private equity firm relationships. In addition to St. Louis, Kansas City, Indianapolis and Minneapolis, we are now actively looking at new opportunities in Charlotte, Nashville, Cleveland, Denver and Dallas. In our fourth quarter call, I discussed some expected timing issues relating to…

Thank you, Scott. I will reiterate that we had another strong quarter, both on a reported and core basis, as the adjustments from $0.46 of diluted earnings per share to our core results are depicted on Slide 8 of the presentation. As Peter mentioned, loss share was strong in the first quarter, mostly as a result of recognition of improved credit performance on the remaining loans. The reported earnings provided strong returns to begin 2015. Return on average assets was 1.16% and return on tangible common equity exceeded 13%. Most importantly, though, we were successful in our continued trend for achieving growth of core earnings per share. Slide number 9 demonstrates the drivers for the changes in our core earnings per share in the first quarter compared to fourth. During the quarter we continue to build upon momentum from strong growth in 2014, delivering $0.35 of core earnings per share. The linked quarter core earnings trends are summarize as follow: net interest income dollars was essentially flat, despite two less days in the quarter; stable loan balances and net charge-off levels led to a lower provision for loan losses on portfolio loans and improved EPS by $0.01; seasonally lower fee income decreased EPS by $0.02; and improvement in operating expenses increased EPS by $0.03 per share. Core performance resulted in a return on average assets at almost 90 basis points, which is a marked improvement from less than 75 basis points for the first quarter of 2014. Additionally, return on average tangible common equity for the current quarter was above 10%, and again in my view a very solid start to 2015. Scott discussed portfolio loan and deposit trends during his comments, and despite the stable loan portfolio balances during the quarter, net interest income dollars continued the strong growth…

[Operator Instructions] And we do have our first question from Jeff Rulis with D.A. Davidson.

A question on, Keene, I think you talked about on the core margin benefiting 5 basis points from the debt extinguishment. Maybe you could talk about just kind of core outlook, and I guess what that means kind of going forward all things considered.

I think we still expect there to be general headwinds and compression and core margin work harder this quarter to try to mitigate that to the extent possible. We have seen the yield on new loans stabilized somewhat. Peter mentioned, our discipline on both sides of the balance sheet, but we still have that headwind in particular in the contractual cash flows of the PCI loan book too. So any quarter we can keep it flat, we're pretty happy, but we generally expect it to be down over the course of the year.

Maybe we're talking about core.

Core.

And then maybe just an update on the interest rate sensitivity you guys talked about a little bit in the release, and the focus on C&I and variable rate, but I guess anything specific as to kind of your progress as to maybe less or more asset sensitive than you were a year ago or a quarter ago and just kind of where you'd intend to head?

Well, when we did the restructure on the liability side it made us slightly less asset sensitive. That was the reason we did it. Also when you take that and combine it with our significant loan growth, we did increase the base expectation to what our net interest income will be. So on a percentage basis, we are about the same as we were at yearend, and slightly less than we were in the second and third quarter of last year. But generally with rates stable or rates up slightly, we expect to earn a substantial of more money in both scenarios. So we're modestly asset sensitive and we like that given how short the balance sheet is.

Our next question is from Chris McGratty with KBW.

Keene, maybe a question for you, tough question, but I'll ask it any way. The spread between your reported and core margin has gone essentially from 150 basis points over the past couple of years. Given the outlook you talked about and expected contribution from PCI, can you talk about conversions and expectation for timing of kind of conversions between the two margins?

That is a really tough question. I would tell you, we really don't think about that given that we're really tremendously focused on what we're doing on the core and that PCI or the additional accretion tends to bounce around on top of that, depending on what happened with the actual loan, so that one is really tough to predict. Out two to three years that's going to be mitigated somewhat, but it's going to decline at a decelerating rate. I don't have a lot more color on it than that.

The other question kind of with the noise in the reporting numbers is kind of what's going through fee income line. Your other income is modest, but there is a couple of million dollar drag from kind of FDIC adjustments. Can you talk about given the structure of these contracts how we should be thinking about? I know you gave expense guidance, but the fee income is a little bit more challenging to kind of decide. So can you maybe shed a little bit of a light on kind of how we should be predicting fees income for the next couple of years?

I mean, I think the guidance we've given in the past on that is that there is $1 million to $2 million of amortization on about $11 million of FDIC receivable that is going to -- that we do on an accelerated basis, and so that's there, and going to decline over time. I think that number in the first was a $1.9 million if my memory serves me correctly. We'll pull that number out quickly for you. But that number should decline between a $1.9 million and zero overtime and the amount of that is really dictated by the amount of the FDIC receivable. We've been collecting that and that will go through I think the last -- or non-single family is third quarter of next year, which is the biggest piece of it, so that will be mitigating over time. It was $2.3 million in the quarter, my apologies.

There is some attention from some of your peers, the mid-cap peers about kind of terminating lost shares. Can you talk about the thought behind that? Is it applied to you guys and would you do it, because we've kind of heard it, just kind of the analyst community, that FDIC maybe a little bit more receptive to kind of plain ball?

Yes, it's certainly on our radar, and we're looking at it. Obviously, the economics vary either between getting out of all that, and so we take that into consideration when we work the FDIC on any of those things, but it's certainly something that we're aware of and is of interest to us, if we could execute it in terms that are benefit to us.

Our next question comes from Andrew Liesch with Sandler O'Neill.

Couple of credit related question. I'm just curious, if the charge-offs that you had this quarter, were they related to any of the new non-accruals that bounced overall non-performer higher last quarter.

There was maybe one midsized that bounced, but the rest of it really related to prior issues, ones that had been in our radar and work through.

And then it also look there were five unrelated accounts, about just under $10 million that were added to non-accrual this quarter, then again that the three for about $13 million last quarter. Is that like normal amount that comes in every quarter or has it ticked up a little bit lately?

Yes, I would say, there is nothing trend-wise that concerns us. There is nothing abnormal there. Overall, we really like the trends. I think I tried to point out some of the things that we really look at risk rating migration, but the ones that were added, there is really no trends, nothing that's concerning lot of smaller diverse kinds of businesses.

I'll just add to that. From a gross charge-off perspective, gross charge-offs in the quarter were not meaningfully from the fourth quarter. We just didn't have quite the recovery experience we did in some of the previous periods, that tends to be a little bit lumpy as well, so just if that gives you any additional perspectives.

And then what is the dollar allowance that is currently held against the purchase credit impaired loans.

$11 million.

Our next question is from Brian Martin with FIG Partners.

Can you maybe just spend more time this quarter talking about the capital build and just kind of the thoughts on that? Can you just give us some color as to how you guys are thinking about that, and kind of maybe the appropriate level you should be caring and maybe kind of how to reconcile that over time, what the thoughts are in priority terms?

I would say that we don't necessarily have a target level. I think we look at it in terms of where our opportunities are and where our growth is. I think the other thing that we consider is how quickly it's building. And I think, yes, you've seen us become more intentional about our capital management efforts, and that means that we're thinking more carefully about how quickly we're going to allow it to build. I would also say, too, we didn't see a lot of balance sheet growth in the quarter. We don't expect that trend to continue. Obviously, we're planning for some growth. So it won't build on a percentage basis quite as quickly in upcoming quarters, if we perform as we expect to on the growth.

As far as M&A discussions, any change from kind of previous quarters or is it just kind of unchanged as part of the activity level?

I would say the activity level continues to be about the same. I would say, our appetite continues to be about the same. We've outlined our financial priorities. And certainly any deal that are on a long-term basis really help us accelerate those, we would look at it very carefully. But given last year our ability to grow and what we expect from ourselves this year, we also have to be careful that better transaction wouldn't derail that. So we look at it in both ways, and right now obviously there is nothing we can tell you about.

And then just the deposit initiative strengthened in this quarter. And I guess the impact on the cost of funds, I mean, I guess with the debt repayment we didn't really see much. But I guess going forward, if you continue that effort, any positive debts that just continue to trending gradually higher on the on the funding cost?

Well, actually, if you look at what our expectations are I think for funding cost that we see in the short-term, following any changes in interest rate, I think we'd expect that would blend down just slightly.

And then you talked about the efficiency ratio and kind of improving the operating leverage going forward. I guess, maybe kind of how are you guys thinking about the efficiency, there's kind of a level you can get that to. And then is it more revenue driven or is it more on the expense side that you think can kind of get to the level?

I would say we're not necessarily solving for a specific number. I'd say we're encouraged by the fact that we have improved it 7% from just a year ago. But going forward it's going to be more on the revenue side then on the expense side.

And the sub-60, 58 type of level, is that achievable or is that -- it sounded like that was kind of a case with expected continued improvement from where you're at today.

I think my comments were we expect to continue to grow core revenue, and we expect expenses to be right around where they are. So that would indicate that we expect it to be able to drive it down slowly, but I don't think we can make a 7% jump in another year. But we're certainly staying focused on, and it's a lot of hard work to get it where it's been and to keep that trend going.

It looks like we have no further questions. So I'll turn the call back over to our speakers for any closing comments. End of Q&A

Just a brief comment. I'd say, as Keene mentioned, we think we're off to a good start this year. We really are pleased with the continuation of the progress we're making. Our focus obviously for the balance of the year is going to continue to hone in on core execution. You'll hear it from every banker in the country. It's a tough banking environment. There is no exception here. But we feel very good about the progress we are making and we'd expect it to continue. So with that, I'd just like to thank you again for your interest in Enterprise, and for joining us today. And if there are any follow-up questions, please don't hesitate to call anyone of us. Thank you very much.

And once again, that does conclude today's call. And we appreciate your participation.