Enterprise Bancorp, Inc. Announces Second Quarter Financial Results

Rhea-AI Summary

Enterprise Bancorp (NASDAQ: EBTC) reported net income of $8.2 million ($0.67 per diluted share) for Q2 2022, down 27% year-over-year compared to $11.1 million ($0.92 per diluted share). Loan growth surged by 16% year-over-year, with a 5% increase in Q2 alone, driven by strong demand. The non-performing loan ratio improved to 0.21%, down from 1.21% a year ago. However, the provision for credit losses increased significantly to $2.4 million from $39,000 in Q2 2021. The company declared a quarterly dividend of $0.205 per share, an increase of 11% over the prior year.

Positive

• 16% year-over-year loan growth.
• 5% loan increase in Q2 2022.
• Improvement in non-performing loan ratio to 0.21% from 1.21% year-over-year.
• 34% increase in pre-tax income, excluding credit losses and PPP income.
• Declaring a quarterly dividend of $0.205 per share, up 11% from the previous year.

Negative

• Net income decreased by 27% year-over-year.
• Provision for credit losses increased to $2.4 million from $39,000 year-over-year.
• Non-interest income declined by 13%, primarily due to lower gains on sale of loans.

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 19^th, 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, 2022				December 31, 2021				June 30, 2021
Assets
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, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Balance 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, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Commercial 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, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
Non-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 Balance			Interest(1)			Average Yield(1)			Average Balance			Interest(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 Balance			Interest(1)			Average Yield(1)			Average Balance			Interest(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, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Total 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, 2022				June 30, 2021				June 30, 2022				June 30, 2021
Adjusted 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, 2022				December 31, 2021
Shareholders' 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

FAQ

What was Enterprise Bancorp's net income for Q2 2022?

Enterprise Bancorp reported a net income of $8.2 million for Q2 2022.

How much did Enterprise Bancorp increase its dividend in 2022?

The quarterly dividend was increased to $0.205 per share, an 11% rise compared to the previous year.

What is the non-performing loan ratio for EBTC as of June 30, 2022?

The non-performing loan ratio improved to 0.21% as of June 30, 2022.

What is the year-over-year loan growth percentage for EBTC?

Enterprise Bancorp experienced a 16% year-over-year loan growth.

What was the provision for credit losses reported by EBTC for Q2 2022?

The provision for credit losses for Q2 2022 was $2.4 million.