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CST: 20/05/2019 20:37:07   

Enterprise Bancorp, Inc. Completes its 30th Year and Announces 2018 Net Income of $28.9 Million 

116 Days ago

LOWELL, Mass., Jan. 24, 2019 (GLOBE NEWSWIRE) -- Enterprise Bancorp, Inc. (the "Company" or "Enterprise") (NASDAQ: EBTC), parent of Enterprise Bank, announced net income for the year ended December 31, 2018 of $28.9 million, an increase of $9.5 million compared to the year ended December 31, 2017.  Diluted earnings per share were $2.46 for the year ended December 31, 2018, compared to $1.66 for the year ended December 31, 2017.  Net income for the three months ended December 31, 2018 amounted to $6.5 million, an increase of $3.8 million compared to the same three-month period in 2017.  Diluted earnings per share were $0.55 for the three months ended December 31, 2018, compared to $0.23 for the same three-month period in 2017.

As previously announced on January 15, 2019, the Company declared a quarterly dividend of $0.16 per share to be paid on March 4, 2019 to shareholders of record as of February 11, 2019.

Chief Executive Officer Jack Clancy commented, "The increase in our fourth quarter and full year 2018 earnings compared to 2017 is largely attributable to our continued growth and lower tax expense in 2018 due to the 2017 Tax Cuts and Jobs Act (the "2017 Tax Act").  Total assets and total loans both increased 5% and customer deposits have increased 9% compared to December 31, 2017.  The collective efforts and contributions of our dedicated Enterprise team, including active community involvement, relationship building, a customer-focused mindset, and ongoing enhancements to our leading-edge product and service offerings, continue to drive this growth.  We are proud to be recognized for the 7th consecutive year on the Boston Globe's Top Places to Work list among large-sized companies in Massachusetts, with our 2018 ranking at number 3.  Strategically, our focus is on our long-term success and our goal to be the best and most impactful independent community bank in America.  This includes adhering to our mission to serve a higher purpose and make a positive contribution to society.  To achieve this, our top priority has been and always will be ongoing investment in our greatest asset: our people.  We remain focused on organic growth and continually planning for and investing in our future with an emphasis on people, technology, digital transformation, branch investment, and adding new branch locations."

Founder and Chairman of the Board George Duncan commented, "Thirty years ago, on January 3, 1989, we opened the doors of Enterprise Bank with the simple goal of being a locally-owned commercial bank committed to the success of our customers, communities, shareholders and team members.  Together, we have achieved so much in so many ways.  We now have 24 branch locations, are close to exceeding both $3.0 billion in total assets and $4.0 billion in assets under management and have been profitable every quarter since 1990.  We have been a partner to all our communities and have contributed significantly in both financial and human capital.  Yet, there is still so much to achieve.  Today, as on day one, we remain steadfastly independent and completely and deeply committed to all our stakeholders and the communities in which we operate and I am very confident the next thirty years will be even more special than the first thirty years."

Results of Operations

Net interest income for the year ended December 31, 2018 amounted to $108.8 million, an increase of $11.3 million, or 12%, compared to the year ended December 31, 2017.  Net interest income for the three months ended December 31, 2018 amounted to $28.2 million, an increase of $2.2 million, or 8%, compared to the same period in 2017.  The increase in net interest income was due largely to loan growth.  Average loan balances (including loans held for sale) increased $173.0 million for the year ended December 31, 2018 and $107.8 million for the three months ended December 31, 2018, compared to the same 2017 respective period averages.  Tax equivalent net interest margin ("margin") was 3.97% for both the years ended December 31, 2018 and December 31, 2017.  Margin was 4.03% for the three months ended December 31, 2018, compared to 4.05% for the three months ended December 31, 2017.

For the years ended December 31, 2018 and December 31, 2017, the provision to the allowance for loan losses amounted to $2.3 million and $1.4 million, respectively.  During the three months ended December 31, 2018, there was a reduction to the allowance for loan losses of $400 thousand, compared to a reduction of $200 thousand during the three months ended December 31, 2017.

The primary factor in the increase in the year-to-date provision for loan losses compared to the prior year was an increase in the balance of the allowance for loan losses allocated to impaired and classified loans of $857 thousand for the year ended December 31, 2018, compared to a decrease of $1.4 million during the year ended December 31, 2017.  This increase in 2018 was primarily due to credit deterioration of several impaired and classified commercial relationships for which management determined additional provisions were necessary based on review of underlying collateral values, individual business circumstances, and credit metrics.  The allowance allocated to general reserves for non-classified loans was relatively flat at December 31, 2018 compared to December 31, 2017, as provisions necessary for loan growth were offset by generally improved economic metrics.

Also affecting the provision for loan losses for the year ended December 31, 2018 compared to the prior year were:

  • Net charge-offs of $1.3 million for the year ended December 31, 2018, compared to net recoveries of $143 thousand for the year ended December 31, 2017.
     
  • Total non-performing loans as a percentage of total loans amounted to 0.49% at December 31, 2018, compared to 0.40% at December 31, 2017.
     
  • The ratio of adversely classified loans (substandard, doubtful, loss) to total loans amounted to 1.49% at December 31, 2018, compared to 1.16% at December 31, 2017.
     
  • Loan growth for the year ended December 31, 2018 was $117.6 million, compared to $247.2 million during the year ended December 31, 2017.

The allowance for loan losses to total loans ratio was 1.42% at December 31, 2018, compared to 1.45% at December 31, 2017.

Non-interest income for the year ended December 31, 2018 amounted to $12.0 million, a decrease of $3.7 million, or 24%, compared to the year ended December 31, 2017.  Non-interest income for the three months ended December 31, 2018 amounted to $742 thousand, a decrease of $3.4 million, or 82%, compared to the same quarter in the prior year.  Decreases in both quarterly and year-to-date non-interest income compared to the same prior year periods primarily resulted from a December 2018 partial restructure of the bond portfolio undertaken to improve future earnings by selling lower yielding bonds and reinvesting into slightly longer, higher yielding bonds.  The discretionary restructure resulted in realized losses of $2.9 million.

For the year ended December 31, 2018, non-interest expense amounted to $80.9 million, an increase of $4.7 million, or 6%, compared to the year ended December 31, 2017.  Non-interest expense for the quarter ended December 31, 2018 amounted to $20.6 million, an increase of $1.5 million, or 8%, compared to the same quarter in the prior year. Increases in both quarterly and year-to-date non-interest 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 expenses and occupancy and equipment expenses.  The year ended December 31, 2018 also included higher advertising and public relations expenses, which included the Company's Celebration of Excellence, a bi-annual community recognition event, in the second quarter of 2018.

The provision for income taxes amounted to $8.8 million for the year ended December 31, 2018, a decrease of $7.4 million, or 46%, compared to the year ended December 31, 2017.  The provision for income taxes for the quarter ended December 31, 2018 amounted to $2.2 million, a decrease of $6.3 million, or 74%, compared to the same quarter in the prior year.  Decreases in both the quarterly and year-to-date income tax provision compared to the same prior year periods were primarily due to a tax expense adjustment for the Bank's net deferred tax assets in 2017 of $4.8 million and the lower 2018 tax rate, both resulting from the 2017 Tax Act.  Partially offsetting these decreases were lower tax benefits from equity compensation deductions in the current year (which amounted to $302 thousand for the year ended December 31, 2018, compared to $922 thousand for the year ended December 31, 2017) and higher taxable income levels.

Key Financial Highlights

  • Total assets amounted to $2.96 billion at December 31, 2018, compared to $2.82 billion at December 31, 2017, an increase of $146.8 million, or 5%.  Since September 30, 2018, total assets have increased $73.8 million, or 3%.
     
  • Total loans amounted to $2.39 billion at December 31, 2018, compared to $2.27 billion at December 31, 2017, an increase of $117.6 million, or 5%.  Since September 30, 2018, total loans have increased $77.0 million, or 3%.
     
  • Customer deposits (total deposits excluding brokered deposits) were $2.51 billion at December 31, 2018, compared to $2.29 billion at December 31, 2017, an increase of $214.1 million, or 9%.  Since September 30, 2018, customer deposits have increased $20.1 million, or 1%.
     
  • Investment assets under management amounted to $800.8 million at December 31, 2018, compared to $845.0 million at December 31, 2017, a decrease of $44.2 million, or 5%.  Since September 30, 2018, investment assets under management have decreased $82.3 million, or 9%.  The decrease in investment assets under management was primarily due to fluctuations in the financial markets.
     
  • Total assets under management amounted to $3.85 billion at December 31, 2018, compared to $3.75 billion at December 31, 2017, an increase of $102.7 million, or 3%.  Since September 30, 2018, total assets under management have decreased $11.2 million, or 0.3%.

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, and has reported 117 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.

ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(unaudited)

(Dollars in thousands)   December 31,
 2018
  December 31,
 2017
Assets        
Cash and cash equivalents:        
Cash and due from banks   $ 43,865     $ 40,310  
Interest-earning deposits   19,255     14,496  
Total cash and cash equivalents   63,120     54,806  
Investment securities at fair value   432,921     405,206  
Federal Home Loan Bank stock   5,357     5,215  
Loans held for sale   701     208  
Loans, less allowance for loan losses of $33,849 at December 31, 2018, and $32,915 at December 31, 2017   2,353,657     2,236,989  
Premises and equipment, net   37,588     37,022  
Accrued interest receivable   11,462     10,614  
Deferred income taxes, net   11,747     10,751  
Bank-owned life insurance   30,138     29,466  
Prepaid income taxes   732     1,301  
Prepaid expenses and other assets   11,279     20,330  
Goodwill   5,656     5,656  
Total assets   $ 2,964,358     $ 2,817,564  
Liabilities and Stockholders' Equity        
Liabilities        
Deposits:        
Customer deposits   $ 2,507,999     $ 2,293,872  
Brokered deposits   56,783     147,490  
Total deposits   2,564,782     2,441,362  
Borrowed funds   100,492     89,000  
Subordinated debt   14,860     14,847  
Accrued expenses and other liabilities   27,948     40,067  
Accrued interest payable   979     478  
Total liabilities   2,709,061     2,585,754  
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; 11,708,218 shares issued and outstanding at December 31, 2018, and 11,609,853 shares issued and outstanding at December 31, 2017   117     116  
Additional paid-in capital   91,281     88,205  
Retained earnings   165,183     143,073  
Accumulated other comprehensive (loss) income   (1,284 )   416  
Total stockholders' equity   255,297     231,810  
Total liabilities and stockholders' equity   $ 2,964,358     $ 2,817,564  


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

  Three months ended   Year ended
  December 31,   December 31,
(Dollars in thousands, except per share data) 2018   2017   2018   2017
Interest and dividend income:              
Loans and loans held for sale $ 29,304     $ 26,015     $ 111,090     $ 96,559  
Investment securities 2,893     2,144     10,728     8,045  
Other interest-earning assets 267     126     1,085     428  
Total interest and dividend income 32,464     28,285     122,903     105,032  
Interest expense:              
Deposits 3,990     1,878     12,760     5,995  
Borrowed funds 51     168     383     590  
Subordinated debt 233     233     925     925  
Total interest expense 4,274     2,279     14,068     7,510  
Net interest income 28,190     26,006     108,835     97,522  
Provision for loan losses (400 )   (200 )   2,250     1,430  
Net interest income after provision for loan losses 28,590     26,206     106,585     96,092  
Non-interest income:              
Investment advisory fees 1,410     1,346     5,624     5,149  
Deposit and interchange fees 1,626     1,622     6,234     6,011  
Income on bank-owned life insurance, net 167     174     672     701  
Net (losses) gains on sales of investment securities (2,917 )   231     (2,950 )   716  
Gains on sales of loans 81     101     260     460  
Other income 375     683     2,150     2,637  
Total non-interest income 742     4,157     11,990     15,674  
Non-interest expense:              
Salaries and employee benefits 12,912     11,718     51,257     48,379  
Occupancy and equipment expenses 2,222     2,083     8,526     7,960  
Technology and telecommunications expenses 1,622     1,583     6,382     6,372  
Advertising and public relations expenses 949     842     3,367     2,855  
Audit, legal and other professional fees 364     507     1,725     1,565  
Deposit insurance premiums 433     405     1,697     1,535  
Supplies and postage expenses 255     273     989     999  
Other operating expenses 1,891     1,727     6,935     6,480  
Total non-interest expense 20,648     19,138     80,878     76,145  
Income before income taxes 8,684     11,225     37,697     35,621  
Provision for income taxes 2,184     8,505     8,816     16,228  
Net income $ 6,500     $ 2,720     $ 28,881     $ 19,393  
               
Basic earnings per share $ 0.56     $ 0.23     $ 2.47     $ 1.68  
Diluted earnings per share $ 0.55     $ 0.23     $ 2.46     $ 1.66  
               
Basic weighted average common shares outstanding 11,703,337     11,602,188     11,679,520     11,568,430  
Diluted weighted average common shares outstanding 11,763,444     11,685,151     11,750,462     11,651,763  


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

    At or for the
year ended

  At or for the
year ended
(Dollars in thousands, except per share data)   December 31, 2018   December 31, 2017
         
BALANCE SHEET AND OTHER DATA        
Total assets   $ 2,964,358     $ 2,817,564  
Loans serviced for others   89,232     89,059  
Investment assets under management   800,751     844,977  
Total assets under management   $ 3,854,341     $ 3,751,600  
         
Book value per share   $ 21.80     $ 19.97  
Dividends paid per common share   $ 0.58     $ 0.54  
Total capital to risk weighted assets   11.77 %   11.21 %
Tier 1 capital to risk weighted assets   9.93 %   9.34 %
Tier 1 capital to average assets   8.56 %   8.22 %
Common equity tier 1 capital to risk weighted assets   9.93 %   9.34 %
Allowance for loan losses to total loans   1.42 %   1.45 %
Non-performing assets   $ 11,784     $ 9,032  
Non-performing assets to total assets   0.40 %   0.32 %
         
INCOME STATEMENT DATA        
Return on average total assets   1.00 %   0.73 %
Return on average stockholders' equity   12.15 %   8.58 %
Net interest margin (tax equivalent)   3.97 %   3.97 %

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

 

 

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