Enterprise Financial Services Corp. (NASDAQ:EFSC) Q3 2020 Earnings Conference Call - Final Transcript
Oct 20, 2020 • 11:00 am ET
Good day and welcome to the EFSC Earnings Conference Call. [Operator Instructions]
At this time, I would like to turn the conference over to Jim Lally, President and CEO. Please go ahead.
James B. Lally
Thank you, Ryan, and thank you all very much for joining us this morning, and welcome to our 2020 third quarter earnings call. Joining me this morning is Keene Turner, EFSC's Chief Financial and Chief Operating Officer; Scott Goodman, President of Enterprise Bank & Trust; and Doug Bauche, our Company's Chief Credit Officer.
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. The presentation and earnings release were furnished on SEC Form 8-K yesterday. Please refer to slide 2 of the presentation titled forward-looking statements and our most recent 10-K and 10-Q for reasons why actual results may vary from any forward-looking statements. That we make today.
Overall, the third quarter represented another solid quarter for our Company. On a fully diluted basis, EFSC earned $0.68 per share and reported a net income for the quarter of $18 million. On a pre-tax pre-provision basis, net income was $38 million, yielding a pre-tax, pre-provision [Phonetic] ROAA of 1.81%, which is relatively consistent with what we reported in the second quarter. These strong earnings allowed us to continue to build our capital position, even with the elevated provision for credit losses. at 9/30, the ratio of tangible common equity to tangible assets stood at 7.99%, and when adjusted for PPP, this increased to 8.89%.
Keene, will get into the details around margin and our rationale for the provision expense, but I just wanted to comment that we are preparing the Company for a prolonged, low and flat interest rate environment, scale and maximizing our returns, our investment in people and technology will be key.
Furthermore, we believe that we are still in the early stages of this current credit cycle, and we will use our strong earnings profile to appropriately build our allowance for credit losses in light of this. This does not mean that growth is not a focus for us, because it is, means that more than ever we have to be consistent in our credit process in order to take advantage of others who will not be.
We ended the quarter with three primary focuses. First, we wanted to continue working diligently on the loan portfolio to ensure that we're focused on the high risk industries and customers, to mitigate the impact of further deterioration, while identifying other potential issues on specific credits not within these industries. As you will hear from Doug and evidenced by our asset quality statistics, we feel very good about the current state of the portfolio. Secondly, we wanted to attend to the needs of our clients who are thriving, and make sure that they have all the tools and capital to maximize the opportunities that lay ahead of them. This included working closely with