Enterprise Bancorp, Inc. Announces Third Quarter Financial Results

Mr. Duncan added, “On September 5^th, we were once again recognized at the Boston Business Journal’s Corporate Citizenship Summit for our significant contributions in employee volunteerism and corporate philanthropy. In particular, I am very proud that we ranked 2^nd in the Commonwealth of Massachusetts for the highest average of volunteer hours per employee.”

Net Interest Income
Net interest income for the three months ended September 30, 2024, amounted to $38.0 million, a decrease of $482 thousand, or 1%, compared to the three months ended September 30, 2023. The decrease was due primarily to increases in deposit interest expense of $7.7 million and borrowings interest expense of $646 thousand and a decrease in income on other interest-earning assets of $971 thousand, partially offset by an increase in loan interest income of $9.3 million.

The increase in interest expense during the period was attributed primarily to an increase in the cost of funds and changes in deposit mix, while the increase in interest income during the period was due primarily to loan growth and higher market interest rates.

Net Interest Margin
Net interest margin was 3.22% for the three months ended September 30, 2024, compared to 3.19% for the three months ended June 30, 2024 and 3.46% for the three months ended September 30, 2023.

Asset yields for the third quarter of 2024 were 5.09%, an increase of 8 basis points compared to the second quarter of 2024, due primarily to new loan originations, loans repricing and an increase in the average balance of other interest-earning assets, which resulted mainly from deposit inflows during the period. Average total loans increased $105.3 million, or 3%, and average other interest-earning assets increased $57.6 million, or 46%, compared to the second quarter of 2024.

The cost of funds for the third quarter of 2024 was 1.99%, an increase of 5 basis points compared to the second quarter of 2024. During the third quarter of 2024, average total deposits increased $128.8 million, or 3%, and the cost of deposits increased 6 basis points, compared to the second quarter of 2024. The increase in average total deposits was comprised of increases in average lower-cost checking account balances of $59.4 million, or 3%, which was driven primarily by a large seasonal deposit, and higher-cost savings, money market and certificate of deposit account balances of $69.4 million, or 3%.

Provision for Credit Losses
The provision for credit losses for the three-month periods ended September 30, 2024 and September 30, 2023 are presented below:

The increase in the provision for credit losses on loans of $654 thousand was due primarily to a net increase in reserves on individually evaluated loans. The increase in reserves on individually evaluated loans for the three months ended September 30, 2024 was driven by one individually evaluated commercial relationship which was downgraded, placed on non-accrual and assigned specific reserves of $3.4 million, partially offset by a reduction of $1.2 million in specific reserves resulting from a commercial relationship that experienced improvement in its collateral valuation during the period. The reduction in the provision for unfunded commitments of $1.1 million was driven primarily by a decrease in off-balance sheet commitments during the period.

Non-Interest Income
Non-interest income for the three months ended September 30, 2024, amounted to $6.1 million, an increase of $1.7 million compared to the three months ended September 30, 2023. The increase in non-interest income was due primarily to increases in gains on equity securities, wealth management fees and deposit and interchange fees.

Non-Interest Expense
Non-interest expense for the three months ended September 30, 2024, amounted to $29.4 million, an increase of $1.0 million, or 4%, compared to the three months ended September 30, 2023. The increase in non-interest expense was due primarily to an increase in salaries and employee benefits expense of $938 thousand, or 5%.

Balance Sheet
Total assets amounted to $4.74 billion at September 30, 2024, compared to $4.47 billion at December 31, 2023, an increase of 6%.

Total investment securities at fair value amounted to $632.0 million at September 30, 2024, compared to $668.2 million at December 31, 2023. The decrease of 5% during the nine months ended September 30, 2024 was largely attributable to principal pay-downs, calls and maturities. Unrealized losses on debt securities amounted to $80.8 million at September 30, 2024, compared to $102.9 million at December 31, 2023, a decrease of 21% that resulted from lower term interest rates.

Total loans amounted to $3.86 billion at September 30, 2024, compared to $3.57 billion at December 31, 2023. The increase of 8% during the nine months ended September 30, 2024 was due primarily to increases in commercial real estate and construction loans of $175.2 million and $89.3 million, respectively.

Total deposits amounted to $4.19 billion at September 30, 2024, compared to $3.98 billion at December 31, 2023. The increase of 5% during the nine months ended September 30, 2024 was due primarily to increases in money market and certificate of deposit balances of $85.5 million and $153.6 million, respectively.

Total borrowed funds amounted to $59.9 million at September 30, 2024, compared to $25.8 million at December 31, 2023. The increase during the nine months ended September 30, 2024 resulted from a term advance in the first quarter of 2024.

Total shareholders’ equity amounted to $368.1 million at September 30, 2024, compared to $329.1 million at December 31, 2023. The increase of 12% during the nine months ended September 30, 2024 was due primarily to an increase in retained earnings of $19.1 million and a decrease in the accumulated other comprehensive loss of $17.1 million.

Credit Quality
Selected credit quality metrics at September 30, 2024, compared to December 31, 2023, were as follows:

• The ACL for loans amounted to $63.7 million, or 1.65% of total loans, compared to $59.0 million, or 1.65% of total loans.

• The reserve for unfunded commitments (included in other liabilities) amounted to $4.6 million, compared to $7.1 million.

• Non-performing loans amounted to $25.9 million, or 0.67% of total loans, compared to $11.4 million, or 0.32% of total loans. The increase in non-performing loans during the nine months ended September 30, 2024 resulted primarily from two individually evaluated commercial construction loans which were placed on non-accrual.
  

Net recoveries amounted to $7 thousand for the three months ended September 30, 2024, compared to $12 thousand for the three months ended September 30, 2023.

Wealth Management
Wealth assets under management and administration, which are not carried as assets on the Company’s consolidated balance sheets, amounted to $1.51 billion at September 30, 2024, an increase of $194.9 million, or 15%, compared to December 31, 2023, and resulted primarily from an increase in market values.

About Enterprise Bancorp, Inc.
Enterprise Bancorp, Inc. is a Massachusetts corporation that conducts substantially all its operations through Enterprise Bank and Trust Company, commonly referred to as Enterprise Bank, and has reported 140 consecutive profitable quarters. Enterprise Bank 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 and digital banking options, as well as wealth management, and trust 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 Northern Middlesex, Northern Essex, and Northern Worcester counties of Massachusetts and the Southern Hillsborough and Southern Rockingham counties in New Hampshire. Enterprise Bank has 27 full-service branches located in the Massachusetts communities of Acton, Andover, Billerica (2), Chelmsford (2), Dracut, Fitchburg, Lawrence, Leominster, Lexington, Lowell (2), Methuen, North Andover, Tewksbury (2), Tyngsborough and Westford and in the New Hampshire communities of Derry, Hudson, Londonderry, Nashua (2), Pelham, Salem and Windham.

Forward-Looking Statements
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,” “could,” “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 in, or implied by, the forward-looking statements. Factors that could cause such differences include, but are not limited to, the impact on us and our customers of a decline in general economic conditions and any regulatory responses thereto; potential recession in the United States and our market areas; the impacts related to or resulting from bank failures and any uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto; increased competition for deposits and related changes in deposit customer behavior; the impact of changes in market interest rates, whether due to the current elevated interest rate environment or future reductions in interest rates and a resulting decline in net interest income; the resurgence of elevated levels of inflation or inflationary pressures in our market areas and the United States; the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System; increases in unemployment rates in the United States and our market areas; declines in commercial real estate values and prices; uncertainty regarding United States fiscal debt, deficit and budget matters; cyber incidents or other failures, disruptions or breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks; severe weather, natural disasters, acts of war or terrorism, geopolitical instability or other external events, including as a result of changes in U.S. presidential administrations or Congress; competition and market expansion opportunities; changes in non-interest expenditures or in the anticipated benefits of such expenditures; changes in tax laws; the risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learnings; potential increased regulatory requirements and costs related to the transition and physical impacts of climate change; and current or future litigation, regulatory examinations or other legal and/or regulatory actions. Therefore, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized and readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release. For more information about these factors, please see our reports filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”), including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q 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)

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

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

(1)   Ratio also represents common equity tier 1 capital to risk weighted assets as of the periods presented.
(2)   Tax-equivalent net interest margin is net interest income adjusted for the tax-equivalent effect associated with tax-exempt loan and investment income, expressed as a percentage of average interest-earning assets.

ENTERPRISE BANCORP, INC.
Consolidated Loan and Deposit Data
(unaudited)

Major classifications of loans at the dates indicated were as follows:

Deposits are summarized as follows as of the periods indicated:

ENTERPRISE BANCORP, INC.
Consolidated Average Balance Sheets and Yields (tax-equivalent basis)
(unaudited)

The following table presents the Company’s average balance sheets, net interest income and average rates for the periods indicated:

(1)   Average yields and interest income are presented on a tax-equivalent basis, calculated using a U.S. federal income tax rate of 21% for each period presented, based on tax-equivalent adjustments associated with tax-exempt loans and investments interest income.
(2)   Average other interest-earning assets include interest-earning deposits with banks, federal funds sold and Federal Home Loan Bank stock
(3)   Average investment securities are presented at average amortized cost.
(4)   Average loans and loans held for sale are presented at average amortized cost and include non-accrual loans.
(5)   Subordinated debt is net of average deferred debt issuance costs.

Contact Info:        Joseph R. Lussier, Executive Vice President, Chief Financial Officer and Treasurer (978) 656-5578