Almost three months after spooking investors with plans to restate 2010 and most of 2011, Enterprise Financial Services in St. Louis might be working its way back into their good graces.
On Monday, the $3.4 billion-asset company reported 2011 earnings of $25.4 million, compared to $5.6 million a year earlier. At $1.34 per share, the earnings were on the high end of the guidance the company gave in late January when it said it had uncovered accounting errors related to the treatment of the loans of a failed bank it acquired. At the time, it said it expected to report 2011 earnings of $1.20 to $1.35 a share.
The performance was enough to send the stock of Enterprise Financial (EFSC) up almost 5% Monday, to $11.89. The company's stock was trading near $15 a share before the restatement announcement.
"The year-end earnings report eliminated some of the uncertainty. The market hates uncertainty," said Jerry Mueller, Enterprise's senior vice president of marketing said in an interview.
The company's 2010 restated earnings decreased 53% to $3.1 million, while the restated first nine months of 2011 fell 32% to $18.2 million. The accounting error stemmed from the accounting treatment of loans covered by loss-sharing arrangements with Federal Deposit Insurance Corp. Enterprise has acquired three failed banks in recent years.
"It wasn't as bad as some people were anticipating," said Daniel Cardenas, an analyst with Raymond James in Chicago. "There were not any hidden time bombs discovered."
As Enterprise was reworking its figures, several law firms had initiated class-action lawsuits and were seeking plaintiffs among Enterprise's shareholders to file claims. Cardenas described the potential of lawsuits as a "bit of an overhang."
While the firms have issued multiple press releases describing possible investigations into breaches of fiduciary duties, Mueller said the company is only aware of one case that has been filed.
"We haven't been served yet, so we haven't had a chance to review it," Mueller said.
Also on Monday, Enterprise reported fourth-quarter income of $7.2 million, up 45% from a year earlier. That increase was driven by an increase in interest income and a no provision for loan losses. The company also said that organic loans increased 2% in the quarter and 7% for the year, while commercial and industrial loans grew 29% year over year.
Enterprise plans to release its first quarter results on May 3.