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Enterprise Bancorp, Inc. Announces Second Quarter Financial Results
Source: Nasdaq GlobeNewswire / 21 Jul 2022 15:05:26 America/Chicago
LOWELL, Mass., July 21, 2022 (GLOBE NEWSWIRE) -- Enterprise Bancorp, Inc. (NASDAQ: EBTC), parent of Enterprise Bank, announced net income for the three months ended June 30, 2022, of $8.2 million, or $0.67 per diluted common share, compared to $11.1 million, or $0.92 per diluted common share, for the three months ended June 30, 2021.
As previously announced on July 19, 2022, the Company declared a quarterly dividend of $0.205 per common share to be paid on September 1, 2022, to shareholders of record as of August 11, 2022.
Chief Executive Officer Jack Clancy commented, "Our second quarter 2022 operating results were very positive, highlighted by strong loan growth, a significant improvement in our non-performing loan ratio, and strong growth in pre-tax earnings after excluding the provision for credit losses and PPP income. As of June 30, 2022, total loans, excluding PPP loans, increased 16% versus a year ago. Loan growth was especially strong in the second quarter with an increase of 5% (19% annualized) at June 30, 2022, compared to March 31, 2022, resulting from high customer demand and strong business development efforts. The non-performing loan to total loan ratio, excluding PPP loans, decreased to 0.21% at June 30, 2022 from 0.86% at March 31, 2022 and 1.21% at June 30, 2021. The improvement in the second quarter of 2022 resulted primarily from two credits being returned to accrual status due to improved financial strength and consistent payment history. The relatively high provision for credit losses of $2.4 million for the second quarter of 2022 compared to $39 thousand in the second quarter of 2021 was attributable mainly to loan growth, and to a lesser extent, the worsening of forecasted economic conditions due to the rising interest rate environment and persistent high inflation levels, partially offset by improved credit quality. PPP income was $622 thousand in the quarter compared to $5.6 million in the prior year period. Our pre-tax income excluding the provision for credit losses and PPP income increased by 34% compared to the second quarter of 2021."
Executive Chairman & Founder George Duncan commented, "Other significant items during the second quarter of 2022 were the dividend declaration of $0.205 per share on July 19th, an increase of 11% over the prior year period, and the opening of our Londonderry, New Hampshire branch in May. The new branch is in a highly visible location and reflects our strategy of contiguous organic expansion into strong commercial markets. Mr. Duncan continued, "Our operating strategy also includes ongoing investment in our team members, a deep commitment to our communities and continuous strengthening of our digital security and capabilities, with the latter allowing us to enhance existing customer relationships, expand beyond our physical locations and improve operating efficiency."
Net Income
Net income for the three months ended June 30, 2022, amounted to $8.2 million, a decrease of $3.0 million, or 27%, compared to the prior year period. Pre-tax income for three months ended June 30, 2022, decreased by $4.2 million, or 28%, compared to the prior year period. For the three months ended June 30, 2022, the effective tax rate was 23.7%, compared to 25.0% for the three months ended June 30, 2021.
- The decrease in pre-tax income was attributable primarily to increases in the provision for credit losses of $2.4 million and non-interest expense of $1.7 million, partially offset by an increase in net interest income of $535 thousand.
- Tax expense for the three months ended June 30, 2022, benefited from a lower effective tax rate compared to the prior year period due to increases in tax-exempt and lower-taxed income at the Bank's security corporation subsidiaries.
Net Interest Income
Net interest income for the three months ended June 30, 2022, amounted to $35.8 million, an increase of $535 thousand, or 2%, compared to the three months ended June 30, 2021.
- The increase in net interest income was due largely to increases in loan income, excluding Paycheck Protections Program ("PPP") income (non-GAAP), of $3.5 million and investment security income of $1.4 million, and a decrease in deposit interest expense of $439 thousand, partially offset by a decrease in PPP income of $5.0 million.
- PPP income amounted to $622 thousand for three months ended June 30, 2022, compared to $5.6 million for the three months ended June 30, 2021. PPP loans outstanding amounted to $15.3 million at June 30, 2022, compared to $300.1 million at June 30, 2021, due to the continued forgiveness of PPP loans by the Small Business Administration (the "SBA") during the period.
Net Interest Margin
Tax equivalent net interest margin ("net interest margin" or "margin") was 3.45% for each of the three-month periods ended June 30, 2022 and June 30, 2021, respectively.
Key items impacting margin for the three months ended June 30, 2022, compared to the prior year period included:
- Average interest-earning deposits with banks decreased $292.8 million while the yield increased 61 basis points. The decrease in average balance resulted primarily from the funding of growth in the Company's investment and core loan portfolios, partially offset by funds received from the forgiveness of PPP loans by the SBA. The increase in yield reflected higher market interest rates during the current period.
- Average investment securities increased $379.1 million, or 64%, while the tax-equivalent yield decreased 41 basis points. The increase in average balance resulted from investment security purchases in the second half of 2021 when market interest rates were lower than the current period.
- Average loans decreased $30.2 million, or 1%, and the yield decreased 16 basis points.
- Average PPP loans outstanding decreased $387.9 million, or 94%.
- Average core loans (non-GAAP) increased $357.7 million, or 14%, while the yield decreased 5 basis points.
- Average total deposits increased $58.2 million, or 2%, while the yield decreased 5 basis points.
- Adjusted net interest margin (non-GAAP), amounted to 3.55% and 3.71%, respectively.
- Adjusted net interest margin (non-GAAP) for the three months ended March 31, 2022, as disclosed in the prior quarter earnings release, amounted to 3.47%.
Provision for Credit Losses
The provision for credit losses for the three months ended June 30, 2022, amounted to $2.4 million, compared to $39 thousand for the three months ended June 30, 2021.
- The provision for the three months ended June 30, 2022, consisted of $2.2 million for loans outstanding and $214 thousand for reserves on unfunded commitments (included in other liabilities).
- Most of the provision during the period related to the Company's strong loan growth during the second quarter of 2022, and to a lesser extent, a deterioration in the economic forecast, offset by improved credit quality.
Non-Interest Income
Non-interest income for the three months ended June 30, 2022, amounted to $4.1 million, a decrease of $620 thousand, or 13%, compared to the three months ended June 30, 2021.
- The decrease in non-interest income over the respective periods resulted primarily from a decrease in gains on sales of loans of $490 thousand and a decline in equity investment fair values of $493 thousand (included in other income), partially offset by an increase in deposit and interchange fees of $349 thousand.
Non-Interest Expense
Non-interest expense for the three months ended June 30, 2022, amounted to $26.9 million, an increase of $1.7 million, or 7%, compared to the three months June 30, 2021.- The increase in non-interest expense over the respective periods resulted primarily from an increase in salaries and employee benefits of $1.3 million, or 8%. The increase in salaries and employee benefit expense included an increase of $596 thousand in performance-based accruals. Excluding this, the increases in non-interest expense and salaries and benefits expense amounted to $1.1 million, or 5% and $715 thousand, or 5% respectively, compared to the prior year period.
Credit Quality
The allowance for credit losses ("ACL") for loans amounted to $50.7 million, or 1.64% of total loans, at June 30, 2022, compared to $47.7 million, or 1.63% of total loans, at December 31, 2021. The ACL to total core loans ratio (non-GAAP) was 1.65% at June 30, 2022 compared to 1.67% at December 31, 2021. The reserve for unfunded commitments (included in other liabilities) amounted to $3.6 million at June 30, 2022, compared to $3.7 million at December 31, 2021. The Company continues to closely monitor credit quality as concerns regarding forecasted economic conditions worsen due to the rising interest rate environment and persistent high inflation levels.
Charge-offs and recoveries for the three months ended June 30, 2022, and June 30, 2021 were not significant.
Non-performing assets amounted to $6.3 million, or 0.14% of total assets, at June 30, 2022, compared to $26.6 million, or 0.60% of total assets, at December 31, 2021. The decrease in non-performing assets was due primarily to two commercial relationships, amounting to $17.9 million, which were upgraded and restored to accrual status during the second quarter of 2022, due to improved financial strength and consistent payment history.
Balance Sheet
Total assets amounted to $4.42 billion at June 30, 2022, compared to $4.45 billion at December 31, 2021, a decrease of $30.4 million, or 1%.
Total interest-earning deposits with banks amounted to $250.3 million at June 30, 2022, compared to $403.0 million at December 31, 2021, a decrease of $152.7 million, or 38%. The change in liquidity was related primarily to core loan growth (non-GAAP) during the six months ended June 30, 2022.
Total investment securities at fair value amounted to $866.6 million at June 30, 2022, compared to $958.2 million at December 31, 2021, a decrease of $91.6 million, or 10%. The change resulted primarily from a decrease in the fair value of debt securities held in the Company's securities portfolio of $99.4 million during the period, resulting from significant increases in market interest rates during the first half of 2022.
Total loans amounted to $3.08 billion at June 30, 2022, compared to $2.92 billion at December 31, 2021, an increase of $164.2 million, or 6%. Core loans (non-GAAP) increased $220.4 million, or 8%, over the respective period, driven primarily by high customer demand and strong business development efforts. Included in the loan growth for the period was $50.2 million in retained residential mortgages.
Customer deposits amounted to $4.02 billion at June 30, 2022, compared to $3.98 billion at December 31, 2021, an increase of $36.6 million, or 1%.
Shareholders' Equity & Regulatory Capital
Total shareholders' equity amounted to $285.1 million at June 30, 2022, compared to $346.9 million at December 31, 2021, a decrease of $61.8 million, or 18%. The change was attributable primarily to a decrease in accumulated other comprehensive income ("AOCI") of $77.0 million since December 31, 2021, partially offset by an increase in retained earnings of $13.5 million over the same period. The change in AOCI resulted from a decrease in the fair value of debt securities held in the Company's securities portfolio, which is attributed to the significant increase in market interest rates during the period. The Company classifies all of its debt securities held in the Company's securities portfolio as available-for-sale and anticipates they will mature or be called at par value.
The Company's reported book value per common share and return on average shareholders' equity ratios were impacted by the change in AOCI as follows:
- Book value per common share was $23.53 at June 30, 2022, compared to $28.82 at December 31, 2021, a decrease of 18%. Excluding AOCI (non-GAAP), book value per common share was $29.51 at June 30, 2022 and $28.43 at December 31, 2021, an increase of 4%.
- Return on average shareholders' equity was 11.24% and 12.56% for the quarters June 30, 2022, and December 31, 2021, respectively. Return on average shareholders' equity, excluding AOCI (non-GAAP), was 9.09% and 12.69% for the quarters ended June 30, 2022, and December 31, 2021, respectively.
Total Capital and Tier 1 Capital to risk weighted assets, of which AOCI is not of component, amounted to 13.38% and 10.38%, respectively, at June 30, 2022 compared to 13.73% and 10.62%, respectively, at December 31, 2021. The decrease in each ratio was due primarily to strong loan growth over the respective period.
Tier 1 Capital to average assets, of which AOCI is not a component, amounted to 8.04% at June 30, 2022, compared to 7.56% at December 31, 2021. The increase was driven primarily by the increase in retained earnings noted above and to a lesser extent a reduction in average assets.
Wealth Management
Wealth assets under management and wealth assets under administration, which are not carried as assets on the Company's consolidated balance sheets, amounted to $849.5 million and $205.6 million, at June 30, 2022, respectively, representing decreases of $191.9 million, or 18%, and $52.2 million, or 20%, respectively, compared to December 31, 2021. The decreases in wealth assets under management and wealth assets under administration were attributable primarily to declines in market values during the six months ended June 30, 2022.
Non-GAAP Measures
Throughout this press release, certain measures have been adjusted to provide what management believes are more meaningful comparisons between periods. The items principally impacted and reported as non-GAAP were loans (PPP loans), liquidity (interest-earning deposits with banks), shareholders' equity (AOCI), and any related measures presented. We refer to any measure that excludes PPP loans as "core" and any measure that excludes PPP loans and interest-earning deposits with banks as "adjusted." The activity which resulted in the Company's use of non-GAAP measures consisted of: (1) the Company originated over $715 million in short-term PPP loans between April 2020 and May 2021; (2) forgiveness of PPP loans by the SBA began in November 2020 and continued through the current period, and approximately 98% of the principal balance of PPP loans originated by the Company has been forgiven by the SBA through June 30, 2022; (3) liquidity, carried as lower-yielding interest-earning deposits with banks, had increased significantly following the trends in customer deposits and PPP loan forgiveness over the past two years; and (4) the significant increase in market interest rates during the first half of 2022 has resulted in unrealized losses in the Company's available-for-sale debt securities portfolio of $93.5 million and an accumulated other comprehensive loss, included in shareholder's equity, of $72.4 million at June 30, 2022. The tables beginning on page 12 of this press release provide a reconciliation of the non-GAAP measures to the information presented under U.S. generally accepted accounting principles ("GAAP").
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 131 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, and commercial insurance services, 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," "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, general economic conditions, the impact of the ongoing COVID-19 pandemic and any current or future variants thereof, changes in market interest rates, the persistence of the inflationary environment in the United States and our market areas, regulatory considerations, competition and market expansion opportunities, changes in non-interest expenditures or in the anticipated benefits of such expenditures, the receipt of required regulatory approvals, changes in tax laws, and current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic and any current or future variants thereof. 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)(Dollars in thousands, except per share data) June 30,
2022December 31,
2021June 30,
2021Assets Cash and cash equivalents: Cash and due from banks $ 56,201 $ 33,572 $ 48,335 Interest-earning deposits with banks 250,259 403,004 690,909 Total cash and cash equivalents 306,460 436,576 739,244 Investments: Debt securities at fair value (amortized cost of $956,934, $950,523, and $611,827 respectively) 863,401 956,430 632,759 Equity securities at fair value 3,179 1,785 1,265 Total investment securities at fair value 866,580 958,215 634,024 Federal Home Loan Bank ("FHLB") stock 2,343 2,164 2,164 Loans held for sale — — 1,304 Loans: Total loans 3,084,915 2,920,684 2,954,189 Allowance for credit losses (50,703 ) (47,704 ) (50,041 ) Net loans 3,034,212 2,872,980 2,904,148 Premises and equipment, net 44,769 44,689 45,046 Lease right-of-use asset 24,738 24,295 20,550 Accrued interest receivable 14,260 13,354 14,042 Deferred income taxes, net 43,858 19,644 15,402 Bank-owned life insurance 63,544 62,954 31,631 Prepaid income taxes 2,003 279 1,716 Prepaid expenses and other assets 9,024 7,013 13,074 Goodwill 5,656 5,656 5,656 Total assets $ 4,417,447 $ 4,447,819 $ 4,428,001 Liabilities and Shareholders' Equity Liabilities Deposits: Customer deposits $ 4,016,814 $ 3,980,239 $ 3,889,619 Brokered deposits — — 75,014 Total deposits 4,016,814 3,980,239 3,964,633 Borrowed funds 2,954 5,479 8,620 Subordinated debt 59,039 58,979 58,919 Lease liability 24,156 23,627 19,726 Accrued expenses and other liabilities 27,829 31,063 35,086 Accrued interest payable 1,545 1,537 1,700 Total liabilities 4,132,337 4,100,924 4,088,684 Commitments and Contingencies Shareholders' 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; 12,115,924, 12,038,382, and 12,014,933 shares issued and outstanding, respectively 121 120 120 Additional paid-in capital 102,108 100,352 98,708 Retained earnings 255,259 241,761 225,529 Accumulated other comprehensive (loss) income (72,378 ) 4,662 14,960 Total shareholders' equity 285,110 346,895 339,317 Total liabilities and shareholders' equity $ 4,417,447 $ 4,447,819 $ 4,428,001 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) 2022 2021 2022 2021 Interest and dividend income: Loans and loans held for sale $ 32,148 $ 33,660 $ 62,843 $ 67,310 Investment securities 4,781 3,428 9,369 6,822 Other interest-earning assets 393 144 574 209 Total interest and dividend income 37,322 37,232 72,786 74,341 Interest expense: Deposits 671 1,110 1,271 2,433 Borrowed funds 13 18 26 26 Subordinated debt 817 818 1,635 1,860 Total interest expense 1,501 1,946 2,932 4,319 Net interest income 35,821 35,286 69,854 70,022 Provision for credit losses 2,409 39 2,939 719 Net interest income after provision for credit losses 33,412 35,247 66,915 69,303 Non-interest income: Wealth management fees 1,610 1,638 3,339 3,250 Deposit and interchange fees 2,000 1,651 3,802 3,257 Income on bank-owned life insurance, net 295 132 590 268 Net gains on sales of debt securities — — 1,062 128 Net gains on sales of loans — 490 22 618 Other income 227 841 912 1,530 Total non-interest income 4,132 4,752 9,727 9,051 Non-interest expense: Salaries and employee benefits 17,743 16,432 34,535 32,153 Occupancy and equipment expenses 2,364 2,416 4,779 4,797 Technology and telecommunications expenses 2,919 2,740 5,555 5,294 Advertising and public relations expenses 560 653 1,227 1,167 Audit, legal and other professional fees 675 577 1,385 1,144 Deposit insurance premiums 366 378 922 734 Supplies and postage expenses 224 178 444 405 Loss on extinguishment of subordinated debt — — — 713 Other operating expenses 2,002 1,782 3,763 3,433 Total non-interest expense 26,853 25,156 52,610 49,840 Income before income taxes 10,691 14,843 24,032 28,514 Provision for income taxes 2,530 3,704 5,584 7,023 Net income $ 8,161 $ 11,139 $ 18,448 $ 21,491 Basic earnings per common share $ 0.67 $ 0.93 $ 1.53 $ 1.79 Diluted earnings per common share $ 0.67 $ 0.92 $ 1.52 $ 1.79 Basic weighted average common shares outstanding 12,107,804 12,009,358 12,082,041 11,984,283 Diluted weighted average common shares outstanding 12,151,712 12,055,744 12,136,610 12,025,028 ENTERPRISE BANCORP, INC.
Selected Consolidated Financial Data and Ratios
(unaudited)At or for the three months ended (Dollars in thousands, except per share data) June 30,
2022March 31,
2022December 31,
2021September 30,
2021June 30,
2021Balance Sheet Data Total cash and cash equivalents $ 306,460 $ 429,687 $ 436,576 $ 644,377 $ 739,244 Total investment securities at fair value 866,580 910,013 958,215 819,222 634,024 Total loans 3,084,915 2,962,721 2,920,684 2,848,110 2,954,189 Allowance for credit losses (50,703 ) (48,424 ) (47,704 ) (47,262 ) (50,041 ) Total assets 4,417,447 4,454,474 4,447,819 4,451,432 4,428,001 Total deposits 4,016,814 4,034,500 3,980,239 3,970,936 3,964,633 Subordinated debt 59,039 59,009 58,979 58,949 58,919 Total shareholders' equity 285,110 310,539 346,895 346,540 339,317 Total liabilities and shareholders' equity 4,417,447 4,454,474 4,447,819 4,451,432 4,428,001 Wealth Management Wealth assets under management $ 849,536 $ 961,491 $ 1,041,409 $ 966,180 $ 966,393 Wealth assets under administration $ 205,646 $ 243,247 $ 257,867 $ 235,002 $ 236,547 Shareholders' Equity Ratios Book value per common share $ 23.53 $ 25.66 $ 28.82 $ 28.81 $ 28.24 Dividends paid per common share $ 0.410 $ 0.205 $ 0.740 $ 0.555 $ 0.370 Regulatory Capital Ratios Total capital to risk weighted assets 13.38 % 13.72 % 13.73 % 14.16 % 14.46 % Tier 1 capital to risk weighted assets(1) 10.38 % 10.65 % 10.62 % 10.94 % 11.15 % Tier 1 capital to average assets 8.04 % 7.83 % 7.56 % 7.42 % 7.44 % Credit Quality Data Non-performing loans $ 6,321 $ 25,173 $ 26,581 $ 27,835 $ 32,061 Other real estate owned — — — 2,400 2,400 Non-performing assets $ 6,321 $ 25,173 $ 26,581 $ 30,235 $ 34,461 Non-performing loans to total loans 0.20 % 0.85 % 0.91 % 0.98 % 1.09 % Non-performing assets to total assets 0.14 % 0.57 % 0.60 % 0.68 % 0.78 % ACL for loans to total loans 1.64 % 1.63 % 1.63 % 1.66 % 1.69 % ACL for loans to total core loans (non-GAAP)(2) 1.65 % 1.65 % 1.67 % 1.75 % 1.89 % Income Statement Data Net interest income $ 35,821 $ 34,033 $ 35,655 $ 35,879 $ 35,286 Provision for credit losses 2,409 530 1,023 28 39 Total non-interest income 4,132 5,595 5,977 3,079 4,752 Total non-interest expense 26,853 25,757 26,526 25,769 25,156 Income before income taxes 10,691 13,341 14,083 13,161 14,843 Provision for income taxes 2,530 3,054 3,235 3,329 3,704 Net income $ 8,161 $ 10,287 $ 10,848 $ 9,832 $ 11,139 Income Statement Ratios Diluted earnings per common share $ 0.67 $ 0.85 $ 0.90 $ 0.81 $ 0.92 Return on average total assets 0.76 % 0.95 % 0.97 % 0.88 % 1.04 % Return on average shareholders' equity 11.24 % 12.56 % 12.56 % 11.30 % 13.39 % Net interest margin (tax-equivalent)(3) 3.45 % 3.28 % 3.34 % 3.39 % 3.45 % (1) Ratio also represents common equity tier 1 capital to risk weighted assets as of the periods presented.
(2) See non-GAAP measures table below for PPP-adjusted balances referred to as core.
(3) 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)(Dollars in thousands) June 30,
2022March 31,
2022December 31,
2021September 30,
2021June 30,
2021Commercial real estate $ 1,865,198 $ 1,779,691 $ 1,680,792 $ 1,556,240 $ 1,541,397 Commercial and industrial 422,006 408,341 412,070 401,718 404,432 Commercial construction 385,752 375,709 410,443 412,332 383,807 SBA PPP 15,288 32,153 71,502 148,240 300,083 Total commercial loans 2,688,244 2,595,894 2,574,807 2,518,530 2,629,719 Residential mortgages 307,131 280,507 256,940 239,960 233,580 Home equity loans and lines 81,648 78,557 80,467 81,217 82,336 Consumer 7,892 7,763 8,470 8,403 8,554 Total retail loans 396,671 366,827 345,877 329,580 324,470 Total loans 3,084,915 2,962,721 2,920,684 2,848,110 2,954,189 ACL for loans (50,703 ) (48,424 ) (47,704 ) (47,262 ) (50,041 ) Net loans $ 3,034,212 $ 2,914,297 $ 2,872,980 $ 2,800,848 $ 2,904,148 Major classifications of loans at the dates indicated were as follows:
(Dollars in thousands) June 30,
2022March 31,
2022December 31,
2021September 30,
2021June 30,
2021Non-interest checking $ 1,457,220 $ 1,444,047 $ 1,364,258 $ 1,404,353 $ 1,373,353 Interest-bearing checking 712,898 718,107 743,587 713,991 694,508 Savings 334,728 334,923 310,244 294,143 303,663 Money market 1,293,453 1,337,670 1,355,701 1,344,116 1,293,733 CDs $250,000 or less 144,084 149,309 154,403 160,810 163,821 CDs greater than $250,000 74,431 50,444 52,046 53,523 60,541 Total customer deposits 4,016,814 4,034,500 3,980,239 3,970,936 3,889,619 Brokered deposits — — — — 75,014 Deposits $ 4,016,814 $ 4,034,500 $ 3,980,239 $ 3,970,936 $ 3,964,633 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 three months ended June 30, 2022 and 2021:
Three months ended June 30, 2022 Three months ended June 30, 2021 (Dollars in thousands) Average
BalanceInterest(1) Average
Yield(1)Average
BalanceInterest(1) Average
Yield(1)Assets: Loans and loans held for sale(2) (tax equivalent) $ 3,020,113 $ 32,259 4.28 % $ 3,050,289 $ 33,786 4.44 % Investment securities(3) (tax equivalent) 969,563 5,012 2.07 % 590,488 3,661 2.48 % Other interest-earning assets(4) 214,167 393 0.74 % 506,803 144 0.11 % Total interest-earnings assets (tax equivalent) 4,203,843 37,664 3.59 % 4,147,580 37,591 3.63 % Other assets 115,413 157,297 Total assets $ 4,319,256 $ 4,304,877 Liabilities and stockholders' equity: Interest checking, savings and money market $ 2,296,268 456 0.08 % $ 2,234,017 381 0.07 % CDs 198,766 215 0.43 % 230,028 470 0.82 % Brokered deposits — — — % 75,001 259 1.39 % Borrowed funds 2,961 13 1.73 % 8,625 18 0.83 % Subordinated debt(5) 59,021 817 5.54 % 58,901 818 5.55 % Total interest-bearing funding 2,557,016 1,501 0.24 % 2,606,572 1,946 0.30 % Non-interest checking 1,424,132 — 1,321,903 — — Total deposits, borrowed funds and subordinated debt 3,981,148 1,501 0.15 % 3,928,475 1,946 0.20 % Other liabilities 46,945 42,816 Total liabilities 4,028,093 3,971,291 Stockholders' equity 291,163 333,586 Total liabilities and stockholders' equity $ 4,319,256 $ 4,304,877 Net interest-rate spread (tax equivalent) 3.35 % 3.33 % Net interest income (tax equivalent) 36,163 35,645 Net interest margin (tax equivalent) 3.45 % 3.45 % Less tax equivalent adjustment 342 359 Net interest income $ 35,821 $ 35,286 Net interest margin 3.42 % 3.41 % (1) Average yields and interest income are presented on a tax equivalent basis, calculated using a U.S. federal income tax rate of 21% in both 2022 and 2021, based on tax equivalent adjustments associated with tax exempt loans and investments interest income.
(2) Average loans and loans held for sale include non-accrual loans and are net of average deferred loan fees.
(3) Average investments are presented at average amortized cost.
(4) Average other interest-earning assets include interest-earning deposits with banks, federal funds sold and FHLB stock.
(5) The subordinated debt is net of average deferred debt issuance costs.
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 six months ended June 30, 2022 and 2021:
Six months ended June 30, 2022 Six months ended June 30, 2021 (Dollars in thousands) Average
BalanceInterest(1) Average
Yield(1)Average
BalanceInterest(1) Average
Yield(1)Assets: Loans and loans held for sale(2) (tax equivalent) $ 2,965,998 $ 63,064 4.29 % $ 3,058,424 $ 67,562 4.45 % Investment securities(3) (tax equivalent) 958,211 9,833 2.05 % 583,172 7,287 2.50 % Other interest-earning assets(4) 298,409 574 0.39 % 394,888 209 0.11 % Total interest-earnings assets (tax equivalent) 4,222,618 73,471 3.50 % 4,036,484 75,058 3.75 % Other assets 134,683 157,943 Total assets $ 4,357,301 $ 4,194,427 Liabilities and stockholders' equity: Interest checking, savings and money market $ 2,333,587 835 0.07 % $ 2,166,805 851 0.08 % CDs 200,723 436 0.44 % 235,089 1,069 0.92 % Brokered deposits — — — % 75,000 513 1.38 % Borrowed funds 3,608 26 1.46 % 7,302 26 0.72 % Subordinated debt(5) 59,006 1,635 5.54 % 66,206 1,860 5.62 % Total interest-bearing funding 2,596,924 2,932 0.23 % 2,550,402 4,319 0.34 % Non-interest checking 1,398,840 — 1,268,133 — Total deposits, borrowed funds and subordinated debt 3,995,764 2,932 0.15 % 3,818,535 4,319 0.23 % Other liabilities 50,051 44,812 Total liabilities 4,045,815 3,863,347 Stockholders' equity 311,486 331,080 Total liabilities and stockholders' equity $ 4,357,301 $ 4,194,427 Net interest-rate spread (tax equivalent) 3.27 % 3.41 % Net interest income (tax equivalent) 70,539 70,739 Net interest margin (tax equivalent) 3.36 % 3.53 % Less tax equivalent adjustment 685 717 Net interest income $ 69,854 $ 70,022 Net interest margin 3.33 % 3.49 % (1) Average yields and interest income are presented on a tax equivalent basis, calculated using a U.S. federal income tax rate of 21% in both 2022 and 2021, based on tax equivalent adjustments associated with tax exempt loans and investments interest income.
(2) Average loans and loans held for sale include non-accrual loans and are net of average deferred loan fees.
(3) Average investments are presented at average amortized cost.
(4) Average other interest-earning assets include interest-earning deposits with banks, federal funds sold and FHLB stock.
(5) The subordinated debt is net of average deferred debt issuance costs.
ENTERPRISE BANCORP, INC.
Non-GAAP Financial Measures and Reconciliations
(unaudited)NON-GAAP MEASURES
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with GAAP. However, certain financial measures we present are supplemental measures that are not required by or are not presented in accordance with GAAP. These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. In addition, the non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies; therefore these measures may not be comparable to other similarly titled measures as presented by other companies.The following tables summarize the reconciliation of GAAP to non-GAAP measures related to the impact of PPP loans on total loans and loan interest income:
(Dollars in thousands) June 30,
2022March 31,
2022December 31,
2021September 30,
2021June 30,
2021Total Core Loans Total loans $ 3,084,915 $ 2,962,721 $ 2,920,684 $ 2,848,110 $ 2,954,189 Adjustment: PPP loans (15,758 ) (33,182 ) (73,885 ) (153,552 ) (309,710 ) Adjustment: Deferred PPP fees 470 1,029 2,383 5,312 9,627 Total core loans (non-GAAP) $ 3,069,627 $ 2,930,568 $ 2,849,182 $ 2,699,870 $ 2,654,106 Three months ended Six months ended June 30, June 30, (Dollars in thousands) 2022 2021 2022 2021 Loan Income Excluding PPP Income Loan income $ 32,148 $ 33,660 $ 62,843 $ 67,310 Adjustment: PPP income (622 ) (5,584 ) (2,100 ) (11,597 ) Loan income excluding PPP income (non-GAAP) $ 31,526 $ 28,076 $ 60,743 $ 55,713 Net Interest Income Excluding PPP Income Net interest income $ 35,821 $ 35,286 $ 69,854 $ 70,022 Adjustment: PPP income (622 ) (5,584 ) (2,100 ) (11,597 ) Net interest income excluding PPP income (non-GAAP) $ 35,199 $ 29,702 $ 67,754 $ 58,425 ENTERPRISE BANCORP, INC.
Non-GAAP Financial Measures and Reconciliations (continued)
(unaudited)The following tables summarize the reconciliation of GAAP to non-GAAP measures related to the impact of PPP loans and interest-earning deposits with banks on net interest margin:
Three months ended Six months ended (Dollars in thousands) June 30,
2022June 30,
2021June 30,
2022June 30,
2021Adjusted Average Interest-Earning Assets Total average interest-earning assets $ 4,203,843 $ 4,147,580 $ 4,222,618 $ 4,036,484 Adjustment: Average PPP loans, net (23,997 ) (411,867 ) (36,394 ) (432,227 ) Adjustment: Average interest-earning deposits with banks (211,844 ) (504,649 ) (296,212 ) (392,844 ) Total adjusted average interest-earning assets (non-GAAP) $ 3,968,002 $ 3,231,064 $ 3,890,012 $ 3,211,413 Adjusted Net Interest Income Net interest income (tax equivalent) $ 36,163 $ 35,645 $ 70,539 $ 70,739 Adjustment: PPP income (622 ) (5,584 ) (2,100 ) (11,597 ) Adjustment: Interest on interest-earning deposits with banks (380 ) (136 ) (552 ) (204 ) Adjusted net interest income (tax equivalent) (non-GAAP) $ 35,161 $ 29,925 $ 67,887 $ 58,938 Adjusted Net Interest Margin Net interest margin (tax equivalent) 3.45 % 3.45 % 3.36 % 3.53 % Adjustment: PPP effect(1) (0.04) % (0.22) % (0.07) % (0.22) % Adjustment: Interest-earning deposits with banks effect(2) 0.14 % 0.48 % 0.22 % 0.39 % Adjusted net interest margin (tax equivalent) (non-GAAP) 3.55 % 3.71 % 3.51 % 3.70 % (1) PPP loan adjustments include an elimination of average PPP loans, net of deferred SBA fees, as well as interest income on PPP loans and related SBA fee accretion, included in net interest income.
(2) Interest-earning deposit adjustments include an elimination of average interest-earning deposits with banks, as well as interest income on interest-earning deposits with banks, included in net interest income.
The following tables summarize the reconciliation of GAAP to non-GAAP measures related to the impact of AOCI on the Company's reported book value per common share and return on average shareholders' equity:
At or for the three months ended (Dollars in thousands, except per share data) June 30,
2022December 31,
2021Shareholders' Equity Total shareholders' equity (as reported) $ 285,110 $ 346,895 Less: accumulated other comprehensive (loss) income (72,378 ) 4,662 Shareholders' equity excluding AOCI (non-GAAP) $ 357,488 $ 342,233 Book Value Per Common Share Book value per common share (as reported) $ 23.53 $ 28.82 Book value per common share excluding AOCI (non-GAAP) $ 29.51 $ 28.43 Average Shareholders' Equity Total average shareholders' equity (as reported) $ 291,163 $ 342,635 Less: average accumulated other comprehensive (loss) income (69,125 ) 3,585 Average shareholders' equity excluding AOCI (non-GAAP) $ 360,288 $ 339,050 Return on Average Shareholders' Equity Return on average shareholders' equity (as reported) 11.24 % 12.56 % Return on average shareholders' equity excluding AOCI (non-GAAP) 9.09 % 12.69 % Contact Info: Joseph R. Lussier, Executive Vice President, Chief Financial Officer and Treasurer (978) 656-5578