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Enterprise Bancorp, Inc. Announces Third Quarter 2018 Net Income of $8.0 Million

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LOWELL, Mass., Oct. 18, 2018 (GLOBE NEWSWIRE) -- Enterprise Bancorp, Inc. (the "Company" or "Enterprise") (EBTC), parent of Enterprise Bank, announced net income for the three months ended September 30, 2018 of $8.0 million, an increase of $2.5 million, or 45%, compared to the same three-month period in 2017. Diluted earnings per share were $0.68 for the three months ended September 30, 2018, compared to $0.47 for the same three-month period in 2017, an increase of 45%. Net income for the nine months ended September 30, 2018 amounted to $22.4 million, an increase of $5.7 million, or 34%, compared to the same nine-month period in 2017. Diluted earnings per share were $1.91 for the nine months ended September 30, 2018, compared to $1.43 for the same nine-month period in 2017, an increase of 34%.

As previously announced on October 16, 2018, the Company declared a quarterly dividend of $0.145 per share to be paid on December 3, 2018 to shareholders of record as of November 12, 2018. The 2018 dividend rate represents a 7.4% increase over the 2017 dividend rate.

Chief Executive Officer Jack Clancy commented, "The increase in our 2018 third quarter and year-to-date earnings compared to 2017 is largely attributable to our growth over the last twelve months and the positive impact of lower federal income tax rates in 2018 from the 2017 Tax Cuts and Jobs Act (the "2017 Tax Act"). Total assets, loans, and customer deposits have increased 6%, 5%, and 12%, respectively, compared to September 30, 2017. The collective efforts and contributions of our dedicated Enterprise team, including active community involvement, relationship building and a customer-focused mindset, and ongoing enhancements to our leading-edge product and service offerings, continue to drive this growth. Strategically, our focus remains on organic growth and continually planning for and investing in our future, as we continue to actively look for new branch locations."

Founder and Chairman of the Board George Duncan commented, "With the opening in August of our beautifully renovated Mortgage Center at 170 Merrimack Street in Lowell, MA, Enterprise Bank offers a convenient location for customers to meet with our mortgage team, as well as a new focal point of the Enterprise downtown Lowell campus. At Enterprise, we are deeply committed to our customers, and this latest expansion downtown is particularly exciting as we prepare to celebrate this coming January the 30th anniversary of the opening of our first office, located at 222 Merrimack Street."

Results of Operations

Net interest income for the three months ended September 30, 2018 amounted to $27.4 million, an increase of $2.3 million, or 9%, compared to the same period in 2017. Net interest income for the nine months ended September 30, 2018 amounted to $80.6 million, an increase of $9.1 million, or 13%, compared to the nine months ended September 30, 2017. The increase in net interest income was due largely to loan growth. Average loan balances (including loans held for sale) increased $163.0 million for the three months ended September 30, 2018, and $195.0 million for the nine months ended September 30, 2018, compared to the same 2017 respective period averages. Additionally, net interest margin ("margin") was 3.89% for the three months ended September 30, 2018, compared to 4.03% for the three months ended September 30, 2017. Margin was 3.95% for both the nine months ended September 30, 2018 and September 30, 2017.

For the three months ended September 30, 2018, the provision to the allowance for loan losses amounted to $750 thousand, compared to $1.2 million during the three months ended September 30, 2017. For the nine months ended September 30, 2018 and September 30, 2017, the provision to the allowance for loan losses amounted to $2.7 million and $1.6 million, respectively.

The primary factor in the increase in the year-to-date provision for loan losses compared to the prior year was a $1.4 million increase in the balance of the allowance for loan losses allocated to impaired and classified loans for the nine months ended September 30, 2018, compared to a decrease of $762 thousand during the nine months ended September 30, 2017. This increase in 2018 was primarily due to credit deterioration of impaired and classified commercial relationships for which management determined that the additional provisions were necessary based on a review of underlying collateral values, individual business circumstances, and credit metrics.

Also affecting the provision for loan losses compared to the prior year were:

  • Net charge-offs of $1.0 million for the nine months ended September 30, 2018, compared to net recoveries of $212 thousand for the nine months ended September 30, 2017.

  • Total non-performing loans as a percentage of total loans amounted to 0.50% at September 30, 2018, compared to 0.57% at September 30, 2017.

  • The ratio of adversely classified loans (substandard, doubtful, loss) to total loans amounted to 1.54% at September 30, 2018, compared to 1.32% at September 30, 2017.

  • Loan growth for the nine months ended September 30, 2018 was $40.6 million, compared to $179.6 million during the nine months ended September 30, 2017.

The allowance for loan losses to total loans ratio was 1.49% at September 30, 2018, 1.45% at December 31, 2017, and 1.51% at September 30, 2017.

Non-interest income for the three months ended September 30, 2018 amounted to $3.7 million, an increase of $280 thousand, or 8%, compared to the same quarter in the prior year. Non-interest income for the nine months ended September 30, 2018 amounted to $11.2 million, a decrease of $269 thousand, or 2%, compared to the nine months ended September 30, 2017. The changes in both the quarter and year-to-date periods were primarily due to gains or losses on investment security sales in the prior periods. In the 2018 year-to-date period, the Company benefited from increases in investment advisory fees.

Non-interest expense for the quarter ended September 30, 2018 amounted to $20.0 million, an increase of $1.1 million, or 6%, compared to the same quarter in the prior year. For the nine months ended September 30, 2018, non-interest expense amounted to $60.2 million, an increase of $3.2 million, or 6%, compared to the nine months ended September 30, 2017. Increases in expenses over the same periods in the prior year primarily related to the Company's strategic growth and market initiatives, particularly salaries and employee benefits expense, occupancy and equipment expenses, and other professional costs. The 2018 year-to-date period also included higher advertising and public relations expenses, which included the Company's Celebration of Excellence, a community recognition event, in the second quarter of 2018.

The provision for income taxes for the quarter ended September 30, 2018 amounted to $2.4 million, a decrease of $585 thousand, or 19%, compared to the same quarter in the prior year. The provision for income taxes amounted to $6.6 million for the nine months ended September 30, 2018, a decrease of $1.1 million, or 14%, compared to the nine months ended September 30, 2017. Decreases in the income tax provision were primarily due to the positive impact of the 2017 Tax Act, partially offset by lower tax benefits from equity compensation deductions in the current year (which amounted to $274 thousand for the nine months ended September 30, 2018, compared to $832 thousand for the nine months ended September 30, 2017) and higher taxable income levels.

Key Financial Highlights

  • Total assets amounted to $2.89 billion at September 30, 2018, compared to $2.82 billion at December 31, 2017, an increase of $73.0 million, or 3%. Since June 30, 2018, total assets have decreased $43.4 million, or 1%, due primarily to a decrease in cash and cash equivalents mainly from the maturity of brokered CDs.

  • Total loans amounted to $2.31 billion at September 30, 2018, compared to $2.27 billion at December 31, 2017, an increase of $40.6 million, or 2%. Since June 30, 2018, total loans have increased $11.9 million, or 1%.

  • Customer deposits (total deposits excluding brokered deposits) were $2.49 billion at September 30, 2018, compared to $2.29 billion at December 31, 2017, an increase of $194.0 million, or 8%. Since June 30, 2018, customer deposits have increased $6.3 million, or 0.3%.

  • Investment assets under management amounted to $883.0 million at September 30, 2018, compared to $845.0 million at December 31, 2017, an increase of $38.1 million, or 5%. Since June 30, 2018, investment assets under management have increased $34.9 million, or 4%.

  • Total assets under management amounted to $3.87 billion at September 30, 2018, compared to $3.75 billion at December 31, 2017, an increase of $114.0 million, or 3%. Since June 30, 2018, total assets under management have decreased $9.0 million, or 0.2%.

Enterprise Bancorp, Inc. is a Massachusetts corporation that conducts substantially all of its operations through Enterprise Bank and Trust Company, commonly referred to as Enterprise Bank, and has reported 116 consecutive profitable quarters. The Company is principally engaged in the business of attracting deposits from the general public and investing in commercial loans and investment securities. Through Enterprise Bank and its subsidiaries, the Company offers a range of commercial, residential and consumer loan products, deposit products and cash management services, electronic banking options, and insurance services. The Company also provides a range of investment advisory, wealth management and trust services delivered via two channels, Enterprise Wealth Management and Enterprise Wealth Services. The Company’s headquarters and Enterprise Bank’s main office are located at 222 Merrimack Street in Lowell, Massachusetts. The Company’s primary market area is the Greater Merrimack Valley and North Central regions of Massachusetts and Southern New Hampshire (Southern Hillsborough and Rockingham counties). Enterprise Bank has 24 full-service branches located in the Massachusetts communities of Lowell, Acton, Andover, Billerica, Chelmsford, Dracut, Fitchburg, Lawrence, Leominster, Methuen, Tewksbury, Tyngsborough and Westford and in the New Hampshire communities of Derry, Hudson, Nashua, Pelham, Salem and Windham.

This earnings release contains statements about future events that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by references to a future period or periods or by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "will," "should," "plan," and other similar terms or expressions. Forward-looking statements should not be relied on because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance, and achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to, general economic conditions, changes in interest rates, regulatory considerations, competition, the receipt of required regulatory approvals, and changes in tax laws including, among other risks, potential future tax rate changes, and the risk that costs associated with the 2017 Tax Act and changes to the deferred tax assets and liabilities may be greater than expected. For more information about these factors, please see our reports filed with or furnished to the Securities and Exchange Commission (the "SEC"), including our most recent Annual Report on Form 10-K on file with the SEC, including the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations.” Any forward-looking statements contained in this earnings release are made as of the date hereof, and we undertake no duty, and specifically disclaim any duty, to update or revise any such statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Contact Info: James A. Marcotte, Executive Vice President, Chief Financial Officer and Treasurer (978) 656-5614


ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(unaudited)

(Dollars in thousands)

September 30,
2018

December 31,
2017

September 30,
2017

Assets

Cash and cash equivalents:

Cash and due from banks

$

29,453

$

40,310

$

35,920

Interest-earning deposits

35,672

14,496

14,771

Total cash and cash equivalents

65,125

54,806

50,691

Investment securities at fair value

434,280

405,206

385,942

Federal Home Loan Bank stock

2,593

5,215

7,225

Loans held for sale

618

208

876

Loans, less allowance for loan losses of $34,534 at September 30, 2018, $32,915 at December 31, 2017, and $33,184 at September 30, 2017

2,275,958

2,236,989

2,169,189

Premises and equipment, net

37,649

37,022

36,260

Accrued interest receivable

11,701

10,614

10,088

Deferred income taxes, net

14,040

10,751

15,889

Bank-owned life insurance

29,971

29,466

29,292

Prepaid income taxes

1,017

1,301

906

Prepaid expenses and other assets

11,996

20,330

13,458

Goodwill

5,656

5,656

5,656

Total assets

$

2,890,604

$

2,817,564

$

2,725,472

Liabilities and Stockholders’ Equity

Liabilities

Deposits:

Customer deposits

$

2,487,873

$

2,293,872

$

2,220,181

Brokered deposits

123,839

147,490

82,492

Total deposits

2,611,712

2,441,362

2,302,673

Borrowed funds

497

89,000

149,255

Subordinated debt

14,857

14,847

14,844

Accrued expenses and other liabilities

20,238

40,067

26,540

Accrued interest payable

1,315

478

273

Total liabilities

2,648,619

2,585,754

2,493,585

Commitments and Contingencies

Stockholders’ Equity

Preferred stock, $0.01 par value per share; 1,000,000 shares authorized; no shares issued

Common stock, $0.01 par value per share; 40,000,000 shares authorized; 11,703,874 shares issued and outstanding at September 30, 2018, 11,609,853 shares issued and outstanding at December 31, 2017, and 11,599,266 shares issued and outstanding at September 30, 2017

117

116

116

Additional paid-in capital

90,725

88,205

87,492

Retained earnings

160,380

143,073

141,992

Accumulated other comprehensive (loss) income

(9,237

)

416

2,287

Total stockholders’ equity

241,985

231,810

231,887

Total liabilities and stockholders’ equity

$

2,890,604

$

2,817,564

$

2,725,472

ENTERPRISE BANCORP, INC.
Consolidated Statements of Income
(unaudited)

Three months ended

Nine months ended

September 30,

September 30,

(Dollars in thousands, except per share data)

2018

2017

2018

2017

Interest and dividend income:

Loans and loans held for sale

$

28,109

$

24,892

$

81,786

$

70,544

Investment securities

2,742

2,017

7,835

5,901

Other interest-earning assets

497

136

818

302

Total interest and dividend income

31,348

27,045

90,439

76,747

Interest expense:

Deposits

3,697

1,509

8,770

4,117

Borrowed funds

6

169

332

422

Subordinated debt

233

233

692

692

Total interest expense

3,936

1,911

9,794

5,231

Net interest income

27,412

25,134

80,645

71,516

Provision for loan losses

750

1,225

2,650

1,630

Net interest income after provision for loan losses

26,662

23,909

77,995

69,886

Non-interest income:

Investment advisory fees

1,388

1,311

4,214

3,803

Deposit and interchange fees

1,552

1,527

4,608

4,389

Income on bank-owned life insurance, net

167

174

505

527

Net (losses) gains on sales of investment securities

(34

)

(284

)

(33

)

485

Gains on sales of loans

47

88

179

359

Other income

604

628

1,775

1,954

Total non-interest income

3,724

3,444

11,248

11,517

Non-interest expense:

Salaries and employee benefits

12,970

12,177

38,345

36,661

Occupancy and equipment expenses

2,110

1,993

6,304

5,877

Technology and telecommunications expenses

1,568

1,601

4,760

4,789

Advertising and public relations expenses

586

597

2,418

2,013

Audit, legal and other professional fees

435

381

1,361

1,058

Deposit insurance premiums

418

371

1,264

1,130

Supplies and postage expenses

236

248

734

726

Other operating expenses

1,652

1,465

5,044

4,753

Total non-interest expense

19,975

18,833

60,230

57,007

Income before income taxes

10,411

8,520

29,013

24,396

Provision for income taxes

2,429

3,014

6,632

7,723

Net income

$

7,982

$

5,506

$

22,381

$

16,673

Basic earnings per share

$

0.68

$

0.48

$

1.92

$

1.44

Diluted earnings per share

$

0.68

$

0.47

$

1.91

$

1.43

Basic weighted average common shares outstanding

11,697,951

11,589,039

11,671,494

11,557,054

Diluted weighted average common shares outstanding

11,770,719

11,669,159

11,745,935

11,640,373

ENTERPRISE BANCORP, INC.
Selected Consolidated Financial Data and Ratios
(unaudited)

At or for the
nine months ended

At or for the
year ended

At or for the
nine months ended

(Dollars in thousands, except per share data)

September 30, 2018

December 31, 2017

September 30, 2017

BALANCE SHEET AND OTHER DATA

Total assets

$

2,890,604

$

2,817,564

$

2,725,472

Loans serviced for others

91,931

89,059

86,738

Investment assets under management

883,032

844,977

800,499

Total assets under management

$

3,865,567

$

3,751,600

$

3,612,709

Book value per share

$

20.68

$

19.97

$

19.99

Dividends paid per common share

$

0.435

$

0.540

$

0.405

Total capital to risk weighted assets

11.98

%

11.21

%

11.57

%

Tier 1 capital to risk weighted assets

10.12

%

9.34

%

9.65

%

Tier 1 capital to average assets

8.34

%

8.22

%

8.40

%

Common equity tier 1 capital to risk weighted assets

10.12

%

9.34

%

9.65

%

Allowance for loan losses to total loans

1.49

%

1.45

%

1.51

%

Non-performing assets

$

11,621

$

9,032

$

12.489

Non-performing assets to total assets

0.40

%

0.32

%

0.46

%

INCOME STATEMENT DATA (annualized)

Return on average total assets

1.04

%

0.73

%

0.85

%

Return on average stockholders’ equity

12.74

%

8.58

%

9.97

%

Net interest margin (tax equivalent)

3.95

%

3.97

%

3.95

%