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Enterprise Bancorp, Inc. Announces Third Quarter 2017 Net Income of $5.5 Million and Loan Growth of $88 Million

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LOWELL, Mass., Oct. 19, 2017 (GLOBE NEWSWIRE) -- Enterprise Bancorp, Inc. (the "Company") (NASDAQ:EBTC), parent of Enterprise Bank, announced net income for the three months ended September 30, 2017 of $5.5 million, an increase of $792 thousand, or 17%, compared to the same three-month period in 2016.  Diluted earnings per share were $0.47 for the three months ended September 30, 2017, an increase of 15%, compared to the same three-month period in 2016.  Net income for the nine months ended September 30, 2017 amounted to $16.7 million, an increase of $2.9 million, or 21%, compared to the nine months ended September 30, 2016.  Diluted earnings per share were $1.43 for the nine months ended September 30, 2017, an increase of 13%, compared to the nine months ended September 30, 2016.  Diluted earnings per share for the nine months ended September 30, 2017 include the full dilutive impact of the Company's equity offering issued on June 23, 2016.   

As previously announced on October 17, 2017, the Company declared a quarterly dividend of $0.135 per share to be paid on December 1, 2017 to shareholders of record as of November 10, 2017.  The 2017 dividend rate represents a 3.8% increase over the 2016 dividend rate.

Chief Executive Officer Jack Clancy commented, "We continued to successfully grow our franchise in the third quarter.  Total assets, loans, and customer deposits have increased 10%, 11%, and 3%, respectively, as compared to September 30, 2016. Our loan growth was particularly strong as loans grew $88 million, or 4%, during the quarter.  Customer deposits, whose growth trends and month end balances vary depending on market conditions, grew by 3% from a year ago and 20% from two years ago. Our 2017 earnings, compared to 2016, have been positively impacted by this growth.  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 state-of-the-art product and service offerings continue to drive this growth."

Mr. Clancy continued, "During the third quarter, we opened our 24th branch in Windham, NH and completed the relocation of our branch in Salem, NH to its new location.  We expect the relocation of our Leominster branch to be completed in early 2018.  The relocation of our branches in Salem, NH and Leominster, MA will provide improved and state-of-the-art branches in those communities to better serve our customers.  Strategically, our focus remains on organic growth and continually planning for and investing in our future."

Founder and Chairman of the Board George Duncan commented, "This quarter represents our 112th consecutive profitable quarter, which is certainly a significant milestone for any company.  Strategically expanding to adjacent markets and becoming deeply rooted in each community that we serve have been key ingredients to our success.  Our ability to attract and retain like-minded, talented individuals as Enterprise Bankers, who possess a passion and commitment for community, teamwork and customer service, remains a key component of our operating model.  We are extremely grateful to our customers and shareholders for their continued trust and support."

Results of Operations

Net interest income for the three months ended September 30, 2017 amounted to $25.1 million, an increase of $3.3 million, or 15%, compared to the same period in 2016.  Net interest income for the nine months ended September 30, 2017 amounted to $71.5 million, an increase of $7.3 million, or 11%, compared to the nine months ended September 30, 2016.  The increase in net interest income was due primarily to loan growth.  Average loan balances (including loans held for sale) increased $204.2 million and $201.6 million for the quarter and nine months ended September 30, 2017, respectively, compared to the 2016 respective period averages.  Net interest margin was 4.03% for the three months ended September 30, 2017 and 3.90% for the three months ended June 30, 2017, while net interest margin was 3.86% for the three months ended September 30, 2016.  Net interest margin was 3.95% for the nine months ended September 30, 2017, compared to 3.96% for the nine months ended September 30, 2016.

For the three months ended September 30, 2017 and September 30, 2016, the provision for loan losses amounted to $1.2 million and $1.4 million, respectively.  For the nine months ended September 30, 2017 and September 30, 2016, the provision for loan losses amounted to $1.6 million and $2.5 million, respectively.  The decrease in the provision for the nine months ended September 30, 2017 was due primarily to generally improved credit quality metrics and underlying collateral values, partially offset by increased loan growth compared to the prior year.

Contributing to the provision for loan losses were:

  • Total non-performing loans as a percentage of total loans (a measure of credit risk) amounted to 0.57% at September 30, 2017, compared to 0.50% at September 30, 2016.  Impacting the current period, among other changes, were new impaired/non-accrual status classifications of two larger commercial relationships totaling approximately $4.5 million, which, based on a review of their individual business circumstances, management determined that no reserves were necessary as of September 30, 2017.
     
  • The balance of the allowance for loan losses allocated to impaired and adversely classified loans decreased by $761 thousand for the nine months ended September 30, 2017, compared to an increase of $863 thousand during the nine months ended September 30, 2016.
     
  • The Company recorded net recoveries of $212 thousand for the nine months ended September 30, 2017, compared to net recoveries of $78 thousand for the nine months ended September 30, 2016.
     
  • Loan growth for the nine months ended September 30, 2017 was $179.6 million, compared to $125.9 million during the nine months ended September 30, 2016. 

The allowance for loan losses to total loans ratio was 1.51% at September 30, 2017, 1.55% at December 31, 2016 and 1.59% at September 30, 2016.

Non-interest income for the three months ended September 30, 2017 amounted to $3.4 million, a decrease of $504 thousand, or 13%, compared to the same quarter last year.  Non-interest income for the nine months ended September 30, 2017 amounted to $11.5 million, an increase of $781 thousand, or 7%, compared to the nine months ended September 30, 2016.  The decrease in the quarter was primarily due to net losses of $284 thousand on sales of securities compared to net gains on sales of securities of $546 thousand in the comparable prior year quarter. Additionally, loan sale income decreased, while deposit and interchange fees and investment advisory fees increased in the current quarter compared to the same period in 2016. Year-to-date increases in non-interest income over the prior year-to-date period were due primarily to increases in deposits and interchange fees and investment advisory fees, partially offset by decreases in net gains from the sale of investment securities. 

Non-interest expense for the quarter ended September 30, 2017 amounted to $18.8 million, an increase of $1.4 million, or 8%, compared to the same quarter in the prior year.  For the nine months ended September 30, 2017, non-interest expense amounted to $57.0 million, an increase of $5.2 million, or 10%, over the nine months ended September 30, 2016.  Increases in expenses over the same periods in the prior year primarily related to the Company's strategic growth and market expansion initiatives, mainly increases in salaries and benefits expenses.

In the first quarter of 2017, the Company adopted a new accounting standard, ASU No. 2016-09 "Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting," which among other aspects relates to the tax treatment of equity compensation.  Since the adoption of this standard, the provision for income taxes has decreased, increasing earnings by approximately $832 thousand for the nine months ended September 30, 2017.

Key Financial Highlights

  • Total assets amounted to $2.73 billion at September 30, 2017, compared to $2.53 billion at December 31, 2016, an increase of $199.2 million, or 8%.  Since June 30, 2017, total assets have increased $68.9 million, or 3%.
     
  • Total loans amounted to $2.20 billion at September 30, 2017, compared to $2.02 billion at December 31, 2016, an increase of $179.6 million, or 9%.  Since June 30, 2017, total loans have increased $88.0 million, or 4%.
     
  • Customer deposits (total deposits excluding brokered deposits) were $2.22 billion at September 30, 2017, compared to $2.21 billion at December 31, 2016, an increase of $10.6 million.  Since June 30, 2017, customer deposits have decreased $46.1 million.  Brokered deposits were $82.5 million at September 30, 2017, $87.5 million at June 30, 2017 and $59.4 million at December 31, 2016.
     
  • Investment assets under management amounted to $800.5 million at September 30, 2017, compared to $725.3 million at December 31, 2016, an increase of $75.2 million, or 10%.  Since June 30, 2017, investment assets under management have increased $19.4 million, or 2%.
     
  • Total assets under management amounted to $3.61 billion at September 30, 2017, compared to $3.33 billion at December 31, 2016, an increase of $280.1 million, or 8%.  Since June 30, 2017, total assets under management have increased $91.8 million, or 3%. 

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.  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, as well as investment advisory and wealth management, trust, and insurance services.  The Company's headquarters and the 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.  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, changes in tax laws, competition, and the receipt of required regulatory approvals.  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.


ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(unaudited)
 
(Dollars in thousands)   September 30,
 2017
  December 31,
 2016
  September 30,
 2016
Assets            
Cash and cash equivalents:            
Cash and due from banks   $ 35,920     $ 33,047     $ 34,337  
Interest-earning deposits   14,771     17,428     27,823  
Total cash and cash equivalents   50,691     50,475     62,160  
Investment securities at fair value   385,942     374,790     349,064  
Federal Home Loan Bank stock   7,225     2,094     1,884  
Loans held for sale   876     1,569     2,171  
Loans, less allowance for loan losses of $33,184 at September   
  30, 2017, $31,342 at December 31, 2016, and $31,589
  at September 30, 2016
  2,169,189     1,991,387     1,954,265  
Premises and equipment, net   36,260     33,540     33,861  
Accrued interest receivable   10,088     8,792     8,467  
Deferred income taxes, net   15,889     17,020     13,405  
Bank-owned life insurance   29,292     28,765     28,582  
Prepaid income taxes   906     1,344     57  
Prepaid expenses and other assets   13,458     10,837     11,277  
Goodwill   5,656     5,656     5,656  
Total assets   $ 2,725,472     $ 2,526,269     $ 2,470,849  
Liabilities and Stockholders' Equity            
Liabilities            
Deposits   $ 2,302,673     $ 2,268,921     $ 2,221,609  
Borrowed funds   149,255     10,671     671  
Subordinated debt   14,844     14,834     14,831  
Accrued expenses and other liabilities   26,540     16,794     17,504  
Accrued interest payable   273     263     194  
Total liabilities   2,493,585     2,311,483     2,254,809  
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; 11,599,266 shares issued and outstanding at
  September 30, 2017, 11,475,742 shares issued and
  outstanding at December 31, 2016, and 11,448,502 shares
  issued and outstanding at September 30, 2016
  116     115     114  
Additional paid-in capital   87,492     85,421     83,394  
Retained earnings   141,992     130,008     126,543  
Accumulated other comprehensive income (loss)   2,287     (758 )   5,989  
Total stockholders' equity   231,887     214,786     216,040  
Total liabilities and stockholders' equity   $ 2,725,472     $ 2,526,269     $ 2,470,849  


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) 2017   2016   2017   2016
Interest and dividend income:              
Loans and loans held for sale $ 24,892     $ 21,466     $ 70,544     $ 63,379  
Investment securities 2,017     1,629     5,901     4,720  
Other interest-earning assets 136     96     302     189  
Total interest and dividend income 27,045     23,191     76,747     68,288  
Interest expense:              
Deposits 1,509     1,138     4,117     3,325  
Borrowed funds 169     2     422     79  
Subordinated debt 233     234     692     695  
Total interest expense 1,911     1,374     5,231     4,099  
Net interest income 25,134     21,817     71,516     64,189  
Provision for loan losses 1,225     1,386     1,630     2,503  
Net interest income after provision for loan losses      23,909     20,431     69,886     61,686  
Non-interest income:              
Investment advisory fees 1,311     1,162     3,803     3,593  
Deposit and interchange fees 1,527     1,272     4,389     3,790  
Income on bank-owned life insurance, net 174     182     527     564  
Net gains (losses) on sales of investment securities (284 )   546     485     611  
Gains on sales of loans 88     198     359     392  
Other income 628     588     1,954     1,786  
Total non-interest income 3,444     3,948     11,517     10,736  
Non-interest expense:              
Salaries and employee benefits 12,177     10,948     36,661     32,458  
Occupancy and equipment expenses 1,993     1,859     5,877     5,453  
Technology and telecommunications expenses 1,601     1,577     4,789     4,548  
Advertising and public relations expenses 597     591     2,013     2,087  
Audit, legal and other professional fees 381     409     1,058     1,241  
Deposit insurance premiums 371     347     1,130     997  
Supplies and postage expenses 248     241     726     728  
Other operating expenses 1,465     1,442     4,753     4,313  
Total non-interest expense 18,833     17,414     57,007     51,825  
Income before income taxes 8,520     6,965     24,396     20,597  
Provision for income taxes 3,014     2,251     7,723     6,799  
Net income $ 5,506     $ 4,714     $ 16,673     $ 13,798  
               
Basic earnings per share $ 0.48     $ 0.41     $ 1.44     $ 1.28  
Diluted earnings per share $ 0.47     $ 0.41     $ 1.43     $ 1.27  
               
Basic weighted average common shares outstanding 11,589,039     11,430,134     11,557,054     10,801,278  
Diluted weighted average common shares outstanding 11,669,159     11,498,990     11,640,373     10,869,405  


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,
2017
  December 31,
2016
  September 30,
2016
 
               
BALANCE SHEET AND OTHER DATA              
Total assets   $ 2,725,472     $ 2,526,269     $ 2,470,849    
Loans serviced for others   86,738     80,996     80,836    
Investment assets under management   800,499     725,338     709,781    
Total assets under management   $ 3,612,709     $ 3,332,603     $ 3,261,466    
               
Book value per share   $ 19.99     $ 18.72     $ 18.87    
Dividends paid per common share   $ 0.405     $ 0.520     $ 0.390    
Total capital to risk weighted assets   11.57 %   11.79 %   11.74 %  
Tier 1 capital to risk weighted assets   9.65 %   9.80 %   9.74 %  
Tier 1 capital to average assets   8.40 %   8.34 %   8.41 %  
Common equity tier 1 capital to risk weighted assets    9.65 %   9.80 %   9.74 %  
Allowance for loan losses to total loans   1.51 %   1.55 %   1.59 %  
Non-performing assets   $ 12,489     $ 9,485     $ 9,888    
Non-performing assets to total assets   0.46 %   0.38 %   0.40 %  
               
INCOME STATEMENT DATA (annualized)              
Return on average total assets   0.85 %   0.78 %   0.79 %  
Return on average stockholders' equity   9.97 %   9.33 %   9.39 %  
Net interest margin (tax equivalent)   3.95 %   3.94 %   3.96 %  

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

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