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Enterprise Bancorp, Inc. Announces Second Quarter 2018 Net Income of $7.6 Million

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LOWELL, Mass., July 19, 2018 (GLOBE NEWSWIRE) -- Enterprise Bancorp, Inc. (the "Company") (NASDAQ:EBTC), parent of Enterprise Bank, announced net income for the three months ended June 30, 2018 of $7.6 million, an increase of $2.0 million, or 35%, compared to the same three-month period in 2017.  Diluted earnings per share were $0.64 for the three months ended June 30, 2018, as compared to $0.48 for the same three-month period in 2017, an increase of 33%.  Net income for the six months ended June 30, 2018 amounted to $14.4 million, an increase of $3.2 million, or 29%, compared to the same six-month period in 2017.  Diluted earnings per share were $1.23 for the six months ended June 30, 2018, as compared to $0.96 for the same six-month period in 2017, an increase of 28%.

As previously announced on July 17, 2018, the Company declared a quarterly dividend of $0.145 per share to be paid on September 4, 2018 to shareholders of record as of August 13, 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 second quarter earnings as 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 10%, 9%, and 9%, respectively, as compared to June 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."

Mr. Clancy added, "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.  We are excited that the relocation of our Leominster, MA branch was completed in the second quarter.  This branch, along with our new Windham, NH branch and our recently relocated branch in Salem, NH, are in prime locations and will provide improved, state-of-the-art experiences in these communities to better serve our customers."

Founder and Chairman of the Board George Duncan commented, "This past quarter represents our 115th consecutive profitable quarter and while we are quite proud of this financial accomplishment - we are prouder still that it was achieved while holding true to our founding core values of excellence, integrity, teamwork, professionalism and community.  Unwavering adherence to these values, by each and every one of our team members, has allowed Enterprise Bank to grow and prosper through various economic cycles. As we continue to mark our 30th year in business, our pledge to hold these core values dear is as strong as ever."

Results of Operations

Net interest income for the three months ended June 30, 2018 amounted to $27.2 million, an increase of $3.7 million, or 16%, compared to the same period in 2017.  Net interest income for the six months ended June 30, 2018 amounted to $53.2 million, an increase of $6.9 million, or 15%, compared to the six months ended June 30, 2017. The increase in net interest income was due largely to loan growth.  Average loan balances (including loans held for sale) increased $196.4 million for the three months ended June 30, 2018, and $211.3 million for the six months ended June 30, 2018, compared to the same 2017 respective period averages.  Additionally, net interest margin ("margin") was 4.03% for the three months ended June 30, 2018 compared to 3.90% for the three months ended June 30, 2017.  Margin was 3.99% for the six months ended June 30, 2018, compared to 3.90% for the six months ended June 30, 2017.

For the three months ended June 30, 2018, the provision to the allowance for loan losses amounted to $300 thousand, compared to $280 thousand during the three months ended June 30, 2017.  For the six months ended June 30, 2018 and June 30, 2017, the provision to the allowance for loan losses amounted to $1.9 million and $405 thousand, respectively.

The primary factor in the increase in the year-to-date provision for loan losses compared to the prior year was a $1.6 million increase in the balance of the allowance for loan losses allocated to impaired and classified loans for the six months ended June 30, 2018, compared to a decrease of $745 thousand during the six months ended June 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 compared to the prior year was:

  • Net charge-offs of $18 thousand for the six months ended June 30, 2018, compared to net recoveries of $211 thousand for the six months ended June 30, 2017.
     
  • Total non-performing loans as a percentage of total loans amounted to 0.48% at June 30, 2018, compared to 0.63% at June 30, 2017.
     
  • The ratio of adversely classified loans (substandard, doubtful, loss) to total loans amounted to 1.54% at June 30, 2018, compared to 1.48% at June 30, 2017.
     
  • Loan growth for the six months ended June 30, 2018 was $28.7 million, compared to $91.7 million during the six months ended June 30, 2017.

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

Non-interest income for the three months ended June 30, 2018 amounted to $3.7 million, a decrease of $206 thousand, or 5%, compared to the same quarter in the prior year. Non-interest income for the six months ended June 30, 2018 amounted to $7.5 million, a decrease of $549 thousand, or 7%, compared to the six months ended June 30, 2017.  The decreases compared to the prior year periods were due primarily to decreases in net gains on sales of investment securities, partially offset by increases in investment advisory fees.

Non-interest expense for the quarter ended June 30, 2018 amounted to $20.8 million, an increase of $2.1 million, or 11%, compared to the same quarter in the prior year.  For the six months ended June 30, 2018, non-interest expense amounted to $40.3 million, an increase of $2.1 million, or 5%, compared to the six months ended June 30, 2017. Increases in expenses over the same periods in the prior year primarily related the Company's strategic growth and market initiatives, particularly salaries and benefits expense, occupancy and equipment expenses, other professional costs, and advertising and public relations, 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 June 30, 2018 amounted to $2.3 million, a decrease of $576 thousand, or 20%, compared to the same quarter in the prior year.  The provision for income taxes amounted to $4.2 million for the six months ended June 30, 2018, a decrease of $506 thousand, or 11%, compared to the six months ended June 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 ($235 thousand for the six months ended June 30, 2018, compared to $788 thousand for the six months ended June 30, 2017) and higher taxable income levels.

Key Financial Highlights

  • Total assets amounted to $2.93 billion at June 30, 2018, compared to $2.82 billion at December 31, 2017, an increase of $116.4 million, or 4%.  Since March 31, 2018, total assets have increased $99.0 million, or 3%.
     
  • Total loans amounted to $2.30 billion at June 30, 2018, compared to $2.27 billion at December 31, 2017, an increase of $28.7 million, or 1%.  Since March 31, 2018, total loans have increased $8.4 million, or 0.4%.
     
  • Customer deposits (total deposits excluding brokered deposits) were $2.48 billion at June 30, 2018, compared to $2.29 billion at December 31, 2017, an increase of $187.7 million, or 8%. Since March 31, 2018, customer deposits have increased $95.7 million, or 4%.
     
  • Investment assets under management amounted to $848.2 million at June 30, 2018, compared to $845.0 million at December 31, 2017, an increase of $3.2 million, or 0.4%.  Since March 31, 2018, investment assets under management have increased $1.3 million, or 0.2%.
     
  • Total assets under management amounted to $3.87 billion at June 30, 2018, compared to $3.75 billion at December 31, 2017, an increase of $123.0 million, or 3%.  Since March 31, 2018, total assets under management have increased $104.0 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, 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 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 (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.

ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(unaudited)

(Dollars in thousands)   June 30,
 2018
  December 31,
 2017
  June 30,
 2017
Assets            
Cash and cash equivalents:            
Cash and due from banks   $ 41,172     $ 40,310     $ 51,714  
Interest-earning deposits   97,161     14,496     24,049  
Total cash and cash equivalents   138,333     54,806     75,763  
Investment securities at fair value   422,174     405,206     388,005  
Federal Home Loan Bank stock   2,618     5,215     4,364  
Loans held for sale   657     208     856  
Loans, less allowance for loan losses of $34,797 at June 30, 2018,
$32,915 at December 31, 2017, and $31,958 at June 30, 2017
  2,263,798     2,236,989     2,082,442  
Premises and equipment, net   37,999     37,022     35,162  
Accrued interest receivable   10,955     10,614     9,157  
Deferred income taxes, net   13,223     10,751     14,924  
Bank-owned life insurance   29,804     29,466     29,118  
Prepaid income taxes   1,350     1,301     1,784  
Prepaid expenses and other assets   7,396     20,330     9,316  
Goodwill   5,656     5,656     5,656  
Total assets   $ 2,933,963     $ 2,817,564     $ 2,656,547  
Liabilities and Stockholders' Equity            
Liabilities            
Deposits:            
Customer deposits   $ 2,481,554     $ 2,293,872     $ 2,266,322  
Brokered deposits   178,800     147,490     87,460  
Total deposits   2,660,354     2,441,362     2,353,782  
Borrowed funds   501     89,000     44,255  
Subordinated debt   14,853     14,847     14,841  
Accrued expenses and other liabilities   19,901     40,067     15,794  
Accrued interest payable   777     478     218  
Total liabilities   2,696,386     2,585,754     2,428,890  
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; 11,696,204 shares issued and outstanding at June 30,
2018, 11,609,853 shares issued and outstanding at December 31,
2017, and 11,582,344 shares issued and outstanding at June 30,
2017
  117     116     116  
Additional paid-in capital   90,019     88,205     86,628  
Retained earnings   154,094     143,073     138,049  
Accumulated other comprehensive (loss) income   (6,653 )   416     2,864  
Total stockholders' equity   237,577     231,810     227,657  
Total liabilities and stockholders' equity   $ 2,933,963     $ 2,817,564     $ 2,656,547  
                         

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

  Three months ended   Six months ended
  June 30,   June 30,
(Dollars in thousands, except per share data) 2018   2017   2018   2017
Interest and dividend income:              
Loans and loans held for sale $ 27,527     $ 23,281     $ 53,677     $ 45,652  
Investment securities 2,606     1,964     5,093     3,884  
Other interest-earning assets 187     93     321     166  
Total interest and dividend income 30,320     25,338     59,091     49,702  
Interest expense:              
Deposits 2,837     1,380     5,073     2,608  
Borrowed funds 34     192     326     253  
Subordinated debt 231     231     459     459  
Total interest expense 3,102     1,803     5,858     3,320  
Net interest income 27,218     23,535     53,233     46,382  
Provision for loan losses 300     280     1,900     405  
Net interest income after provision for loan losses 26,918     23,255     51,333     45,977  
Non-interest income:              
Investment advisory fees 1,418     1,267     2,826     2,492  
Deposit and interchange fees 1,567     1,522     3,056     2,862  
Income on bank-owned life insurance, net 170     177     338     353  
Net gains on sales of investment securities     229     1     769  
Gains on sales of loans 48     138     132     271  
Other income 530     606     1,171     1,326  
Total non-interest income 3,733     3,939     7,524     8,073  
Non-interest expense:              
Salaries and employee benefits 13,267     11,792     25,375     24,484  
Occupancy and equipment expenses 2,037     1,945     4,194     3,884  
Technology and telecommunications expenses 1,639     1,606     3,192     3,188  
Advertising and public relations expenses 1,112     797     1,832     1,416  
Audit, legal and other professional fees 419     314     926     677  
Deposit insurance premiums 346     376     846     759  
Supplies and postage expenses 266     245     498     478  
Other operating expenses 1,722     1,679     3,392     3,288  
Total non-interest expense 20,808     18,754     40,255     38,174  
Income before income taxes 9,843     8,440     18,602     15,876  
Provision for income taxes 2,269     2,845     4,203     4,709  
Net income $ 7,574     $ 5,595     $ 14,399     $ 11,167  
               
Basic earnings per share $ 0.65     $ 0.48     $ 1.24     $ 0.97  
Diluted earnings per share $ 0.64     $ 0.48     $ 1.23     $ 0.96  
               
Basic weighted average common shares outstanding 11,687,182     11,572,430     11,658,046     11,540,796  
Diluted weighted average common shares outstanding 11,764,411     11,652,689     11,733,391     11,625,712  
                       

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

    At or for the
six months ended
  At or for the
year ended
  At or for the
six months ended
(Dollars in thousands, except per share data)   June 30, 2018   December 31, 2017   June 30, 2017
             
BALANCE SHEET AND OTHER DATA            
Total assets   $ 2,933,963     $ 2,817,564     $ 2,656,547  
Loans serviced for others   92,465     89,059     83,268  
Investment assets under management   848,181     844,977     781,052  
Total assets under management   $ 3,874,609     $ 3,751,600     $ 3,520,867  
             
Book value per share   $ 20.31     $ 19.97     $ 19.66  
Dividends paid per common share   $ 0.29     $ 0.54     $ 0.27  
Total capital to risk weighted assets   11.66 %   11.21 %   11.76 %
Tier 1 capital to risk weighted assets   9.80 %   9.34 %   9.80 %
Tier 1 capital to average assets   8.35 %   8.22 %   8.40 %
Common equity tier 1 capital to risk weighted assets   9.80 %   9.34 %   9.80 %
Allowance for loan losses to total loans   1.51 %   1.45 %   1.51 %
Non-performing assets   $ 11,076     $ 9,032     $ 13,276  
Non-performing assets to total assets   0.38 %   0.32 %   0.50 %
             
INCOME STATEMENT DATA (annualized)            
Return on average total assets   1.02 %   0.73 %   0.87 %
Return on average stockholders' equity   12.51 %   8.58 %   10.22 %
Net interest margin (tax equivalent)   3.99 %   3.97 %   3.90 %
                   


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

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