SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Securities Exchange Act of 1934 (Amendment No. )
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Enterprise Financial Services
Corp
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(Name of Registrant as
Specified In Its Charter)
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March 2010
TO: Our Shareholders and
Friends
The year 2009 was a
tumultuous and challenging year for all banks, including
Enterprise.
As the financial markets
deteriorated in the latter half of 2008, we shifted our emphasis to bolstering
our balance sheet strength in anticipation of a significant downturn in the
economy. Our objectives, as the near-collapse in the financial markets brought
about the most severe recession in a generation, were to bolster our capital
position, strengthen balance sheet liquidity, substantially increase reserves
for possible credit losses and manage credit risk while maintaining our core
pre-provision earnings level.
At the same time, we
knew that it was never more important to provide the best possible service to
our clients during this difficult and uncertain time.
In the past fourteen
months we have added $75 million in regulatory capital in the form of trust
preferred securities, preferred stock through the Treasury’s Capital Purchase
Program and common stock. As Congress and bank regulatory agencies contemplate
various regulatory reforms for the industry, a common theme in all of the
debates is increased capital standards. At year-end, the Company’s Tier One
capital ratio was 10.67% and total capital was at 13.32%. Including our recent
$15 million common equity raise, those ratios increased to 11.65% and 14.05%,
respectively, on a pro-forma basis. We believe we have positioned the Company to
exceed not only the current “well-capitalized” guidelines, but the anticipated
new regulatory capital guidelines as well.
We have also
substantially improved the Company’s liquidity position. Total core deposits
increased $328 million, or 23% in 2009, while we reduced our wholesale funding
dependency by $179 million, or 53%. The bank’s investment portfolio increased by
$187 million during the year and we continue to structure our portfolio with
medium-term, high-grade securities to prepare for increasing interest
rates.
These actions all
position the Company well for the eventual upturn in the economy.
The majority of our
operating earnings in 2009 were utilized to materially increase reserves for
possible loan losses. We addressed credit issues aggressively through collateral
write-downs or recognizing losses, particularly in the residential construction
and commercial real estate segments of the loan portfolio. At year end 2009, the
Company’s reserves to loans and reserves to non-performing loans stood at 2.35%
and 112%, respectively. These ratios are substantially higher than the 2.08% and
73% median levels reported by our operating peer group of eleven banks with
similar business models across the country. Correspondingly, the Company’s net
charge-off ratio of 1.42% for the full year 2009 compares favorably with the
1.72% median ratio reported by this operating peer group.
The first quarter
non-cash goodwill impairment charge of $45.4 million was a significant factor
behind the Company’s reported net loss of $3.92 per fully diluted share. In
spite of the difficult operating environment in 2009, we increased our pre-tax,
pre-provision operating earnings through the year with the exception of the
fourth quarter, when the negative effect of the hedging treatment on our low
income housing tax credit assets caused a slight decline.
| 150 North Meramec n Clayton, Missouri 63105 n 1-800-396-8141 |
Our Wealth Management
business experienced significant changes in 2009 as we continue to strengthen
its capabilities. In addition to hiring Brendan Freeman in March from Bank of
America/U.S. Trust to head our advisory group, we have added three senior level
advisors, a senior investment officer and a new head of operations. These
additions to staff, coupled with a significant investment in new client
interaction software and systems, will allow us to deliver a higher and more
responsive level of service to our clients. In fact, a recent survey of our
existing Wealth Management clients completed in December reported an overall
client satisfaction rating of 8.5 on a 10-point scale.
In order to focus more
intentionally on our primary banking and wealth management lines of business, we
completed the sale of Millennium Brokerage Group, our wholesale life insurance
brokerage company, to a management-led buyout group. We determined that, in
order for MBG to return to the higher margin and profitability levels
experienced in prior years, a significant capital investment would be necessary
to materially grow the business through acquisition.
We elected to allocate
capital to our expansion into the Arizona market though the FDIC-assisted
acquisition of Valley Capital Bank in Phoenix in December. Jack Barry, our
Market President, is uniquely qualified to build a successful Arizona banking
franchise for Enterprise over the next several years. His Arizona market
experience, coupled with his familiarity with Enterprise’s business model and
senior management team, position us well for long-term success.
Looking to 2010 and
beyond, we are not myopic about the challenges that are ahead, but we are very
optimistic about our ability to meet them. While we believe the economic
recovery will be slow and “half-hearted” at times, there will be tremendous
opportunities for us to expand our market share in all three of our major
markets and in both lines of business.
The investment community
is gravitating toward companies that are positioned well to take advantage of
the current banking environment. These are companies that have strong balance
sheets, an excellent core deposit base and strong liquidity, better than average
credit quality and the proven ability to deliver outstanding service. Enterprise
is just such a company.
As we emerge from this
credit cycle, we believe we are well-positioned to become the financial partner
of choice for privately held businesses and their owner families. Our business
model - which integrates commercial banking and wealth management services,
delivered by first class bankers and advisors - has proven successful over our
twenty-two year history. We don’t see anyone better equipped to capture share in
our chosen markets.
We want to take this
opportunity to thank you, our shareholders, and our clients for the faith and
confidence that you have placed in Enterprise. We assure you that we will
continue to strive every day to exceed your expectations from both a client
service as well as an investment perspective.
Sincerely,
| /s/ Peter F. Benoist | /s/ James J. Murphy, Jr. |
| Peter Benoist | James Murphy |
| President & CEO | Chairman |
| Enterprise Financial Services Corp | Enterprise Financial Services Corp |
| 150 North Meramec n Clayton, Missouri 63105 n 1-800-396-8141 |
|
A SPECIAL NOTE TO SHAREHOLDERS
|
Again this year, we are
eliminating the expense of printing a traditional annual report and proxy
statement. Proxy materials will be available online, with paper copies available
upon request. You will receive a notice with details on where to find the
materials and how you can vote your shares.
Beginning this year, even if your shares are
held by a broker, you must vote your shares yourself in order to
be counted. Please watch for our notice in the
mail and be sure to vote.
|
IMPORTANT INFORMATION
|
This communication may
be deemed to be solicitation material in respect of the Enterprise Financial
Services Corp (the “Company”) 2010 annual meeting of shareholders. The Company
will file a definitive proxy statement for the annual meeting with the U.S.
Securities and Exchange Commission (“SEC”).
SHAREHOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT WHEN IT
IS AVAILABLE, BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors and security holders may obtain the
proxy statement and other relevant documents free of charge at the SEC’s
website, http://www.sec.gov, or by directing a request to Jerry Mueller,
Enterprise Financial Services Corp, 150 North Meramec, Clayton, Missouri 63105,
telephone: (314) 725-5500.
The Company and its
directors and executive officers may be deemed to be participants in the
solicitation of proxies of the Company's shareholders in connection with the
annual meeting. Information regarding the interests of these directors and
executive officers in the solicitation will be included in the proxy statement
filed by the Company in connection with the annual meeting.
| 150 North Meramec n Clayton, Missouri 63105 n 1-800-396-8141 |