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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-33912
Enterprise Bancorp, Inc.
(Exact name of registrant as specified in its charter)
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Massachusetts | 04-3308902 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) | |
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222 Merrimack Street, | Lowell, | Massachusetts | 01852 |
(Address of principal executive offices) | (Zip code) |
(978) 459-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | | EBTC | | NASDAQ Stock Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition for "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer x
Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes x No
As of July 31, 2024, there were 12,424,254 shares of the issuer's common stock outstanding, par value $0.01 per share.
ENTERPRISE BANCORP, INC.
INDEX
ACRONYMS AND ABBREVIATIONS
The acronyms and abbreviations defined in the table below are provided to aid the reader when reviewing this Quarterly Report on Form 10-Q for the three months ended June 30, 2024:
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Acronym | | Description |
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ACL: | | Allowance for credit losses |
AOCI: | | Accumulated other comprehensive income |
ASC: | | Accounting Standards Codification |
ASU: | | Accounting Standards Update |
BTFP: | | Bank Term Funding Program |
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CD: | | Certificate of deposit |
CDE: | | Community Development Entities |
CECL: | | Current expected credit loss |
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CMO: | | Collateralized mortgage obligations |
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FASB: | | Financial Accounting Standards Board |
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FDIC: | | Federal Deposit Insurance Corporation |
FHLB: | | Federal Home Loan Bank of Boston |
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FRB: | | Federal Reserve Bank of Boston |
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GAAP: | | Generally Accepted Accounting Principles |
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MBS: | | Mortgage-backed securities |
Net interest margin: | | Tax-equivalent net interest margin |
NH BFA: | | New Hampshire Business Finance Authority |
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OREO: | | Other real estate owned |
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ROU: | | Right-of-use |
RPA: | | Risk participation agreement |
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SBA: | | Small Business Administration |
SEC: | | U.S. Securities and Exchange Commission |
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Treasury: | | U.S. Department of the Treasury |
U.S.: | | United States |
PART I-FINANCIAL INFORMATION
Item 1 -Financial Statements
ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(Unaudited)
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(Dollars in thousands, except per share data) | | June 30, 2024 | | December 31, 2023 |
Assets | | | | |
Cash and cash equivalents: | | | | |
Cash and due from banks | | $ | 48,352 | | | $ | 37,443 | |
Interest-earning deposits with banks | | 151,367 | | | 19,149 | |
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Total cash and cash equivalents | | 199,719 | | | 56,592 | |
Investments: | | | | |
Debt securities at fair value (amortized cost of $734,523 and $763,981, respectively) | | 628,314 | | | 661,113 | |
Equity securities at fair value | | 8,524 | | | 7,058 | |
Total investment securities at fair value | | 636,838 | | | 668,171 | |
Federal Home Loan Bank stock | | 2,482 | | | 2,402 | |
Loans held for sale | | — | | | 200 | |
Loans: | | | | |
Total loans | | 3,768,649 | | | 3,567,631 | |
Allowance for credit losses | | (61,999) | | | (58,995) | |
Net loans | | 3,706,650 | | | 3,508,636 | |
Premises and equipment, net | | 44,209 | | | 44,931 | |
Lease right-of-use asset | | 24,469 | | | 24,820 | |
Accrued interest receivable | | 20,343 | | | 19,233 | |
Deferred income taxes, net | | 48,619 | | | 49,166 | |
Bank-owned life insurance | | 66,381 | | | 65,455 | |
Prepaid income taxes | | 4,806 | | | 1,589 | |
Prepaid expenses and other assets | | 13,509 | | | 19,183 | |
Goodwill | | 5,656 | | | 5,656 | |
Total assets | | $ | 4,773,681 | | | $ | 4,466,034 | |
Liabilities and shareholders' Equity | | | | |
Liabilities | | | | |
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Deposits | | $ | 4,248,801 | | | $ | 3,977,521 | |
Borrowed funds | | 61,785 | | | 25,768 | |
Subordinated debt | | 59,657 | | | 59,498 | |
Lease liability | | 24,157 | | | 24,441 | |
Accrued expenses and other liabilities | | 30,546 | | | 45,011 | |
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Accrued interest payable | | 8,294 | | | 4,678 | |
Total liabilities | | 4,433,240 | | | 4,136,917 | |
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; 12,424,407 and 12,272,674 shares issued and outstanding, respectively | | 124 | | | 123 | |
Additional paid-in capital | | 109,137 | | | 107,377 | |
Retained earnings | | 313,486 | | | 301,380 | |
Accumulated other comprehensive loss | | (82,306) | | | (79,763) | |
Total shareholders' equity | | 340,441 | | | 329,117 | |
Total liabilities and shareholders' equity | | $ | 4,773,681 | | | $ | 4,466,034 | |
See the accompanying notes to the unaudited consolidated interim financial statements.
4
ENTERPRISE BANCORP, INC.
Consolidated Statements of Income
(Unaudited)
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| | Three months ended June 30, | | Six months ended June 30, |
(Dollars in thousands, except per share data) | | 2024 | | 2023 | | 2024 | | 2023 |
Interest and dividend income: | | | | | | | | |
Other interest-earning assets | | $ | 1,697 | | | $ | 1,917 | | | $ | 2,869 | | $ | 4,125 |
Investment securities | | 3,943 | | | 4,967 | | | 7,977 | | 10,040 |
Loans and loans held for sale | | 51,224 | | | 41,798 | | | 100,041 | | 81,354 |
Total interest and dividend income | | 56,864 | | 48,682 | | 110,887 | | 95,519 |
Interest expense: | | | | | | | | |
Deposits | | 19,172 | | | 9,692 | | | 36,444 | | 15,679 |
Borrowed funds | | 664 | | | 30 | | | 1,358 | | 42 |
Subordinated debt | | 867 | | | 867 | | | 1,734 | | 1,734 |
Total interest expense | | 20,703 | | | 10,589 | | | 39,536 | | | 17,455 | |
Net interest income | | 36,161 | | | 38,093 | | | 71,351 | | | 78,064 | |
Provision for credit losses | | 137 | | | 2,268 | | | 759 | | | 5,004 | |
Net interest income after provision for credit losses | | 36,024 | | | 35,825 | | | 70,592 | | | 73,060 | |
Non-interest income: | | | | | | | | |
Wealth management fees | | 1,970 | | | 1,673 | | | 3,820 | | 3,260 |
Deposit and interchange fees | | 2,284 | | | 2,295 | | | 4,353 | | 4,343 |
Income on bank-owned life insurance, net | | 503 | | | 316 | | | 961 | | 623 |
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Net losses on sales of debt securities | | — | | | (2,419) | | | — | | (2,419) |
Net gains on sales of loans | | 44 | | | 6 | | | 66 | | 20 |
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Net gains on equity securities | | 101 | | | 189 | | | 566 | | 173 |
Other income | | 726 | | | 759 | | | 1,357 | | 1,576 |
Total non-interest income | | 5,628 | | | 2,819 | | | 11,123 | | | 7,576 | |
Non-interest expense: | | | | | | | | |
Salaries and employee benefits | | 19,675 | | | 16,135 | | | 38,851 | | 34,656 |
Occupancy and equipment expenses | | 2,406 | | | 2,505 | | | 4,865 | | 5,006 |
Technology and telecommunications expenses | | 2,658 | | | 2,636 | | | 5,403 | | 5,311 |
Advertising and public relations expenses | | 674 | | | 804 | | | 1,417 | | 1,485 |
Audit, legal and other professional fees | | 711 | | | 782 | | | 1,445 | | 1,422 |
Deposit insurance premiums | | 862 | | | 615 | | | 1,721 | | 1,290 |
Supplies and postage expenses | | 240 | | | 247 | | | 477 | | 502 |
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Other operating expenses | | 1,803 | | | 1,899 | | | 3,758 | | 3,991 |
Total non-interest expense | | 29,029 | | | 25,623 | | | 57,937 | | | 53,663 | |
Income before income taxes | | 12,623 | | | 13,021 | | | 23,778 | | | 26,973 | |
Provision for income taxes | | 3,111 | | | 3,337 | | | 5,759 | | | 6,521 | |
Net income | | $ | 9,512 | | | $ | 9,684 | | | $ | 18,019 | | | $ | 20,452 | |
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Basic earnings per share | | $ | 0.77 | | | $ | 0.79 | | | $ | 1.46 | | | $ | 1.68 | |
Diluted earnings per share | | $ | 0.77 | | | $ | 0.79 | | | $ | 1.46 | | | $ | 1.67 | |
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Basic weighted average common shares outstanding | | 12,389,917 | | | 12,228,081 | | | 12,341,630 | | | 12,191,857 | |
Diluted weighted average common shares outstanding | | 12,394,463 | | | 12,244,863 | | | 12,349,573 | | | 12,218,735 | |
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See the accompanying notes to the unaudited consolidated interim financial statements.
5
ENTERPRISE BANCORP, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
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| | Three months ended June 30, | | Six months ended June 30, |
(Dollars in thousands) | | 2024 | | 2023 | | 2024 | | 2023 |
Net income | | $ | 9,512 | | | $ | 9,684 | | | $ | 18,019 | | | $ | 20,452 | |
Other comprehensive (loss) income, net of tax | | | | | | | | |
Net change in fair value of debt securities | | (432) | | | (11,634) | | | (2,543) | | | 8,614 | |
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Total other comprehensive (loss) income, net of tax | | (432) | | | (11,634) | | | (2,543) | | | 8,614 | |
Total comprehensive income (loss), net | | $ | 9,080 | | | $ | (1,950) | | | $ | 15,476 | | | $ | 29,066 | |
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See the accompanying notes to the unaudited consolidated interim financial statements.
6
ENTERPRISE BANCORP, INC.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
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| | Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders' Equity |
(Dollars in thousands, except per share data) | | Shares | | Amount |
Balance at March 31, 2024 | | 12,376,562 | | | $ | 124 | | | $ | 108,246 | | | $ | 306,943 | | | $ | (81,874) | | | $ | 333,439 | |
Net income | | | | | | | | 9,512 | | | | | 9,512 | |
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Other comprehensive loss, net | | | | | | | | | | (432) | | | (432) | |
Common stock dividend declared ($0.24 per share) | | | | | | | | (2,969) | | | | | (2,969) | |
Common stock issued under dividend reinvestment plan | | 16,500 | | | — | | | 408 | | | | | | | 408 | |
Common stock issued, other | | 574 | | | — | | | 15 | | | | | | | 15 | |
Stock-based compensation, net | | 32,557 | | | — | | | 514 | | | | | | | 514 | |
Net settlement for employee taxes on restricted stock and options | | (1,938) | | | — | | | (48) | | | | | | | (48) | |
Stock options exercised, net | | 152 | | | — | | | 2 | | | | | | | 2 | |
Balance at June 30, 2024 | | 12,424,407 | | | $ | 124 | | | $ | 109,137 | | | $ | 313,486 | | | $ | (82,306) | | | $ | 340,441 | |
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Balance at March 31, 2023 | | 12,222,717 | | | $ | 122 | | | $ | 104,621 | | | $ | 282,534 | | | $ | (75,959) | | | $ | 311,318 | |
Net income | | | | | | | | 9,684 | | | | | 9,684 | |
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Other comprehensive loss, net | | | | | | | | | | (11,634) | | | (11,634) | |
Common stock dividend declared ($0.23 per share) | | | | | | | | (2,809) | | | | | (2,809) | |
Common stock issued under dividend reinvestment plan | | 13,824 | | | — | | | 376 | | | | | | | 376 | |
Common stock issued, other | | 524 | | | — | | | 17 | | | | | | | 17 | |
Stock-based compensation, net | | 8,638 | | | — | | | 571 | | | | | | | 571 | |
Net settlement for employee taxes on restricted stock and options | | (1,650) | | | — | | | (47) | | | | | | | (47) | |
Stock options exercised, net | | 680 | | | — | | | 14 | | | | | | | 14 | |
Balance at June 30, 2023 | | 12,244,733 | | | $ | 122 | | | $ | 105,552 | | | $ | 289,409 | | | $ | (87,593) | | | $ | 307,490 | |
See the accompanying notes to the unaudited consolidated interim financial statements.
7
ENTERPRISE BANCORP, INC.
Consolidated Statements of Changes in Shareholders' Equity (continued)
(Unaudited)
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| | Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Stockholders' Equity |
(Dollars in thousands, except per share data) | | Shares | | Amount |
Balance at December 31, 2023 | | 12,272,674 | | | $ | 123 | | | $ | 107,377 | | | $ | 301,380 | | | $ | (79,763) | | | $ | 329,117 | |
Net income | | | | | | | | 18,019 | | | | | 18,019 | |
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Other comprehensive loss, net | | | | | | | | | | (2,543) | | | (2,543) | |
Common stock dividends declared ($0.48 per share) | | | | | | | | (5,913) | | | | | (5,913) | |
Common stock issued under dividend reinvestment plan | | 30,996 | | | — | | | 806 | | | | | | | 806 | |
Common stock issued, other | | 629 | | | — | | | 17 | | | | | | | 17 | |
Stock-based compensation, net | | 123,520 | | | 1 | | | 1,174 | | | | | | | 1,175 | |
Net settlement for employee taxes on restricted stock and options | | (10,893) | | | — | | | (331) | | | | | | | (331) | |
Stock options exercised, net | | 7,481 | | | — | | | 94 | | | | | | | 94 | |
Balance at June 30, 2024 | | 12,424,407 | | | $ | 124 | | | $ | 109,137 | | | $ | 313,486 | | | $ | (82,306) | | | $ | 340,441 | |
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Balance at December 31, 2022 | | 12,133,516 | | | $ | 121 | | | $ | 103,793 | | | $ | 274,560 | | | $ | (96,207) | | | $ | 282,267 | |
Net income | | | | | | | | 20,452 | | | | | 20,452 | |
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Other comprehensive income, net | | | | | | | | | | 8,614 | | | 8,614 | |
Common stock dividends declared ($0.46 per share) | | | | | | | | (5,603) | | | | | (5,603) | |
Common stock issued under dividend reinvestment plan | | 24,219 | | | — | | | 746 | | | | | | | 746 | |
Common stock issued, other | | 731 | | | — | | | 24 | | | | | | | 24 | |
Stock-based compensation, net | | 79,581 | | | 1 | | | 1,281 | | | | | | | 1,282 | |
Net settlement for employee taxes on restricted stock and options | | (7,604) | | | — | | | (395) | | | | | | | (395) | |
Stock options exercised, net | | 14,290 | | | — | | | 103 | | | | | | | 103 | |
Balance at June 30, 2023 | | 12,244,733 | | | $ | 122 | | | $ | 105,552 | | | $ | 289,409 | | | $ | (87,593) | | | $ | 307,490 | |
See the accompanying notes to the unaudited consolidated interim financial statements.
8
ENTERPRISE BANCORP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
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(Dollars in thousands) | | | 2024 | | 2023 |
Cash flows from operating activities: | | | | | |
Net income | | | $ | 18,019 | | | $ | 20,452 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Provision for credit losses | | | 759 | | | 5,004 | |
Depreciation and amortization | | | 2,922 | | | 3,280 | |
Stock-based compensation expense | | | 1,069 | | | 1,151 | |
Income on bank-owned life insurance, net | | | (961) | | | (623) | |
Net losses on sales of debt securities | | | — | | | 2,419 | |
Mortgage loans originated for sale | | | (2,872) | | | (1,188) | |
Proceeds from mortgage loans sold | | | 3,138 | | | 1,208 | |
Net gains on sales of loans | | | (66) | | | (20) | |
Net gains on equity securities | | | (566) | | | (173) | |
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Changes in: | | | | | |
Net decrease (increase) in other assets | | | 2,886 | | | (22,102) | |
Net decrease in other liabilities | | | (8,439) | | | (1,338) | |
Net cash provided by operating activities | | | 15,889 | | | 8,070 | |
Cash flows from investing activities: | | | | | |
Proceeds from sales of debt securities | | | — | | | 84,779 | |
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Proceeds from maturities, calls and pay-downs of debt securities | | | 29,058 | | | 32,428 | |
Net purchases of equity securities | | | (900) | | | (1,456) | |
Net purchases of FHLB capital stock | | | (80) | | | (61) | |
Net increase in loans | | | (201,010) | | | (165,251) | |
Additions to premises and equipment, net | | | (1,800) | | | (2,058) | |
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Net cash used in investing activities | | | (174,732) | | | (51,619) | |
Cash flows from financing activities: | | | | | |
Net increase in deposits | | | 271,280 | | | 39,792 | |
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Advancements from long-term borrowings | | | 38,572 | | | 463 | |
Repayments of long-term borrowings | | | (2,555) | | | (345) | |
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Cash dividends paid, net of dividend reinvestment plan | | | (5,107) | | | (4,857) | |
Proceeds from issuance of common stock | | | 17 | | | 24 | |
Net settlement for employee taxes on restricted stock and options | | | (331) | | | (395) | |
Net proceeds from stock option exercises | | | 94 | | | 103 | |
Net cash provided by financing activities | | | 301,970 | | | 34,785 | |
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Net increase (decrease) in cash and cash equivalents | | | 143,127 | | | (8,764) | |
Cash and cash equivalents at beginning of period | | | 56,592 | | | 267,589 | |
Cash and cash equivalents at end of period | | | $ | 199,719 | | | $ | 258,825 | |
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See the accompanying notes to the unaudited consolidated interim financial statements.
9
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| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
(1)Summary of Significant Accounting Policies
(a) Organization of the Company and Basis of Presentation
The accompanying unaudited consolidated interim financial statements and these notes should be read in conjunction with the December 31, 2023 audited consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K of Enterprise Bancorp, Inc. (the "Company," "Enterprise," "we," or "our") for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K") as filed with the SEC on March 8, 2024. The Company has not materially changed its significant accounting policies from those disclosed in its 2024 Annual Report on Form 10-K. See Item (b), "Recent Accounting Pronouncements," below in this Note 1.
The accompanying unaudited consolidated interim financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Enterprise Bank and Trust Company, commonly referred to as Enterprise Bank (the "Bank"). The Bank is a Massachusetts trust company and state chartered commercial bank organized in 1989. Substantially all of the Company's operations are conducted through the Bank and its subsidiaries. The services offered through the Bank and its subsidiaries are managed as one strategic unit and represent the Company's only reportable operating segment.
The accompanying unaudited consolidated interim financial statements, and notes thereto, in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (this "Form 10-Q"), have been prepared in accordance with U.S. GAAP for interim financial information and the SEC instructions for Quarterly Reports on Form 10-Q. In the opinion of management, the accompanying unaudited consolidated interim financial statements reflect all necessary adjustments, consisting of normal recurring accruals and elimination of intercompany balances, for a fair presentation. Interim results are not necessarily indicative of results to be expected for the entire year, or any future period.
(b) Recent Accounting Pronouncements
Accounting pronouncements not yet adopted by the Company
In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements — Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 — Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. ASU 2023-06 is not expected to have a material impact on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 is not expected to have a material impact on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This ASU requires public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income by the applicable statutory income tax rate). ASU 2023-09 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 is not expected to have a material impact on our consolidated financial statements.
(c) Subsequent Events
The Company has evaluated subsequent events and transactions from June 30, 2024 through the date this Form 10-Q was filed with the SEC for potential recognition or disclosure as required by GAAP and determined there were no material subsequent events requiring recognition or disclosure.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
(2) Investment Securities
Debt Securities
All of the Company's debt securities were classified as available-for-sale and carried at fair value as of the dates specified in the tables below. The amortized cost and fair values of debt securities at the dates specified are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
(Dollars in thousands) | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
Federal agency obligations | | $ | 5,001 | | | $ | — | | | $ | 13 | | | $ | 4,988 | |
U.S. Treasury securities | | 13,997 | | | — | | | 954 | | | 13,043 | |
Federal agency CMO | | 374,678 | | | — | | | 64,206 | | | 310,472 | |
Federal agency MBS | | 21,250 | | | — | | | 3,255 | | | 17,995 | |
Taxable municipal securities | | 262,073 | | | 24 | | | 35,659 | | | 226,438 | |
Tax-exempt municipal securities | | 42,098 | | | 2 | | | 646 | | | 41,454 | |
Corporate bonds | | 3,466 | | | — | | | 109 | | | 3,357 | |
Subordinated corporate bonds | | 11,960 | | | — | | | 1,393 | | | 10,567 | |
| | | | | | | | |
Total debt securities, at fair value | | $ | 734,523 | | | $ | 26 | | | $ | 106,235 | | | $ | 628,314 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
(Dollars in thousands) | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
Federal agency obligations | | $ | 5,006 | | | $ | — | | | $ | 28 | | | $ | 4,978 | |
U.S. Treasury securities | | 16,993 | | | — | | | 1,068 | | | 15,925 | |
Federal agency CMO | | 396,665 | | | 33 | | | 61,947 | | | 334,751 | |
Federal agency MBS | | 21,586 | | | 31 | | | 2,805 | | | 18,812 | |
Taxable municipal securities | | 262,168 | | | 34 | | | 35,225 | | | 226,977 | |
Tax-exempt municipal securities | | 45,548 | | | 156 | | | 285 | | | 45,419 | |
Corporate bonds | | 4,058 | | | — | | | 92 | | | 3,966 | |
Subordinated corporate bonds | | 11,957 | | | — | | | 1,672 | | | 10,285 | |
| | | | | | | | |
Total debt securities, at fair value | | $ | 763,981 | | | $ | 254 | | | $ | 103,122 | | | $ | 661,113 | |
| | | | | | | | |
| | | | | | | | |
Accrued interest receivable on available-for-sale debt securities, included in the "Accrued Interest Receivable" line item on the Company's Consolidated Balance Sheets, amounted to $3.0 million at June 30, 2024 and $3.1 million at December 31, 2023.
At June 30, 2024, management performed its quarterly analysis of all securities with unrealized losses and determined that the losses were attributable to significant increases in market interest rates. Management concluded that no ACL for available-for-sale securities was necessary as of June 30, 2024 and anticipates they will mature or be called at par value. The Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell each security before the recovery of its amortized cost basis.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
The following tables summarize the duration of unrealized losses for debt securities at June 30, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
| | Less than 12 months | | 12 months or longer | | Total |
(Dollars in thousands) | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | # of Holdings |
Federal agency obligations | | $ | — | | | $ | — | | | $ | 4,988 | | | $ | 13 | | | $ | 4,988 | | | $ | 13 | | | 1 | |
U.S. Treasury securities | | — | | | — | | | 13,043 | | | 954 | | | 13,043 | | | 954 | | | 3 | |
Federal agency CMO | | 13,194 | | | 209 | | | 297,278 | | | 63,997 | | | 310,472 | | | 64,206 | | | 86 | |
Federal agency MBS | | 1,640 | | | 16 | | | 16,355 | | | 3,239 | | | 17,995 | | | 3,255 | | | 11 | |
Taxable municipal securities | | 1,989 | | | 321 | | | 223,425 | | | 35,338 | | | 225,414 | | | 35,659 | | | 251 | |
Tax-exempt municipal securities | | 19,151 | | | 168 | | | 19,661 | | | 478 | | | 38,812 | | | 646 | | | 80 | |
Corporate bonds | | — | | | — | | | 3,357 | | | 109 | | | 3,357 | | | 109 | | | 15 | |
Subordinated corporate bonds | | — | | | — | | | 10,567 | | | 1,393 | | | 10,567 | | | 1,393 | | | 6 | |
Total | | $ | 35,974 | | | $ | 714 | | | $ | 588,674 | | | $ | 105,521 | | | $ | 624,648 | | | $ | 106,235 | | | 453 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Less than 12 months | | 12 months or longer | | Total |
(Dollars in thousands) | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | # of Holdings |
Federal agency obligations | | $ | 4,978 | | | $ | 28 | | | $ | — | | | $ | — | | | $ | 4,978 | | | $ | 28 | | | 1 | |
U.S. Treasury securities | | — | | | — | | | 15,925 | | | 1,068 | | | 15,925 | | | 1,068 | | | 4 |
Federal agency CMO | | 8,810 | | | 18 | | | 311,221 | | | 61,929 | | | 320,031 | | | 61,947 | | | 86 |
Federal agency MBS | | — | | | — | | | 17,114 | | | 2,805 | | | 17,114 | | | 2,805 | | | 10 | |
Taxable municipal securities | | 1,993 | | | 316 | | | 223,949 | | | 34,909 | | | 225,942 | | | 35,225 | | | 251 |
Tax-exempt municipal securities | | 11,890 | | | 55 | | | 10,519 | | | 230 | | | 22,409 | | | 285 | | | 53 | |
Corporate bonds | | — | | | — | | | 3,966 | | | 92 | | | 3,966 | | | 92 | | | 18 | |
Subordinated corporate bonds | | — | | | — | | | 10,285 | | | 1,672 | | | 10,285 | | | 1,672 | | | 6 | |
| | | | | | | | | | | | | | |
Total | | $ | 27,671 | | | $ | 417 | | | $ | 592,979 | | | $ | 102,705 | | | $ | 620,650 | | | $ | 103,122 | | | 429 | |
The contractual maturity distribution at June 30, 2024 of debt securities was as follows:
| | | | | | | | | | | | | | |
(Dollars in thousands) | | Amortized Cost | | Fair Value |
Due in one year or less | | $ | 25,452 | | | $ | 25,289 | |
Due after one, but within five years | | 94,887 | | | 89,174 | |
Due after five, but within ten years | | 239,770 | | | 205,832 | |
Due after ten years | | 374,414 | | | 308,019 | |
Total debt securities | | $ | 734,523 | | | $ | 628,314 | |
Scheduled contractual maturities shown above may not reflect the actual maturities of the investments. The actual MBS/CMO cash flows likely will be faster than presented above due to prepayments and amortization. Similarly, included in the table above are callable securities, comprised of municipal securities and corporate bonds, with a fair value of $131.5 million, which can be redeemed by the issuers prior to the maturity presented above. Management considers these factors when evaluating the interest-rate risk in the Company's asset-liability management program.
From time to time, the Company may pledge debt securities as collateral for deposit account balances of municipal customers, and for borrowing capacity with the FHLB and the FRB. The fair value of debt securities pledged as collateral for these purposes was $617.7 million and $650.8 million at June 30, 2024 and December 31, 2023, respectively.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
During the three and six months ended June 30, 2024, the Company had no sales of debt securities. Sales of debt securities for the three and six months ended June 30, 2023 are summarized as follows:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | |
(Dollars in thousands) | | | | Three months ended June 30, 2023 | | | | Six months ended June 30, 2023 |
Amortized cost of debt securities sold (1) | | | | $ | 87,198 | | | | | $ | 87,198 | |
Gross realized gains on sales | | | | — | | | | | — | |
Gross realized losses on sales | | | | (2,419) | | | | | (2,419) | |
Total proceeds from sales of debt securities | | | | $ | 84,779 | | | | | $ | 84,779 | |
________________________________________(1) Amortized cost of investments sold is determined on a specific identification basis and includes pending trades based on trade date, if applicable.
Equity Securities
At June 30, 2024 the Company held equity securities with a fair value of $8.5 million, which consisted of $5.3 million in management directed investments and $3.2 million in mutual funds held in conjunction with the Company's supplemental executive retirement and deferred compensation plan.
At December 31, 2023, the Company held equity securities with a fair value of $7.1 million, which consisted of $4.4 million in management directed investments and $2.7 million in mutual funds held in conjunction with the Company's supplemental executive retirement and deferred compensation plan.
Net gains and losses recognized on equity securities for the three and six months ended June 30, 2024 and June 30, 2023 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(Dollars in thousands) | | 2024 | | 2023 | | 2024 | | 2023 |
Net gains recognized during the period on equity securities | | $ | 101 | | | $ | 189 | | | $ | 566 | | | $ | 173 | |
Less: Net (losses) gains recognized on equity securities sold during the period | | — | | | (29) | | | 1 | | | (29) | |
Unrealized gains recognized during the reporting period on equity securities still held at the end of the period | | $ | 101 | | | $ | 218 | | | $ | 565 | | | $ | 202 | |
(3)Loans
Loan Portfolio Classifications
Major classifications of loans and their amortized cost as of the dates indicated were as follows:
| | | | | | | | | | | | | | |
(Dollars in thousands) | | June 30, 2024 | | December 31, 2023 |
Commercial real estate owner-occupied | | $ | 660,478 | | | $ | 619,302 | |
Commercial real estate non owner-occupied | | 1,544,386 | | | 1,445,435 | |
| | | | |
Commercial and industrial | | 426,976 | | | 430,749 | |
Commercial construction | | 622,094 | | | 585,113 | |
| | | | |
Total commercial loans | | 3,253,934 | | | 3,080,599 | |
| | | | |
Residential mortgages | | 413,323 | | | 393,142 | |
Home equity loans and lines | | 93,220 | | | 85,375 | |
Consumer | | 8,172 | | | 8,515 | |
Total retail loans | | 514,715 | | | 487,032 | |
| | | | |
| | | | |
| | | | |
| | | | |
Total loans | | 3,768,649 | | | 3,567,631 | |
| | | | |
ACL for loans | | (61,999) | | | (58,995) | |
Net loans | | $ | 3,706,650 | | | $ | 3,508,636 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
Net deferred loan origination fees, included in the amortized costs of loans reflected in the table above, amounted to $4.4 million at June 30, 2024 and $5.4 million at December 31, 2023.
Accrued interest receivable on loans amounted to $17.3 million and $16.1 million at June 30, 2024 and December 31, 2023, respectively, and was included in the "Accrued interest receivable" line item on the Company's Consolidated Balance Sheets.
Commercial loans originated by other banks in which the Company is a participating institution are carried at the pro-rata share of ownership and amounted to $148.1 million at June 30, 2024 and $126.6 million at December 31, 2023.
Loans serviced for others
The Company was servicing residential mortgage loans owned by investors amounting to $7.4 million and $7.7 million at June 30, 2024 and December 31, 2023, respectively. Additionally, the Company was servicing commercial loans originated by the Company and participated out to various other institutions amounting to $73.0 million and $69.8 million at June 30, 2024 and December 31, 2023, respectively.
Loans serving as collateral
Loans designated as qualified collateral and pledged to the FHLB for borrowing capacity as of the dates indicated are summarized below:
| | | | | | | | | | | | | | |
(Dollars in thousands) | | June 30, 2024 | | December 31, 2023 |
| | | | |
| | | | |
Commercial real estate | | $ | 444,578 | | | $ | 495,831 | |
Residential mortgages | | 386,818 | | | 369,062 | |
Home equity | | 35,789 | | | 35,540 | |
Total loans pledged to FHLB | | $ | 867,185 | | | $ | 900,433 | |
(4)ACL for Loans
There have been no material changes to the Company's ACL for loans methodology, underwriting practices, or credit risk management system used to estimate credit loss exposure as described in the 2023 Annual Report on Form 10-K.
See Note 4, "Credit Risk Management and ACL for Loans," to the Company's audited consolidated financial statements contained in the 2023 Annual Report on Form 10-K and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the subheading "Accounting Policies/Critical Accounting Estimates," of the Company's 2023 Annual Report on Form 10-K.
The credit risk management function of the Company evaluates a wide variety of factors, as early detection of credit issues is critical to minimizing credit losses. Accordingly, management regularly monitors internal credit quality indicators such as, the risk classification of loans, past due and non-accrual loans, individually evaluated loans, loan modifications, and the level of foreclosure activity, among other items. These credit quality indicators are outlined below.
Risk ratings and adversely classified loans
The Company's loan risk rating system classifies loans depending on risk of loss characteristics. Adversely classified ratings for loans determined to be of weaker credit range from "special mention," for loans that may need additional monitoring, to the more severe adverse classifications of "substandard," "doubtful," and "loss" based on criteria established under banking regulations.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
The following tables present the amortized cost basis of the Company's loan portfolio risk ratings within portfolio classifications, by origination date, or revolving status as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at June 30, 2024 |
| | Term Loans by Origination Year | | | | | | |
(Dollars in thousands) | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Revolving Loans | | Revolving Loans Converted to Term | | Total |
Commercial real estate owner-occupied | | | | | | | | | | | | | | | | | | |
Pass | | $ | 28,029 | | | $ | 89,019 | | | $ | 97,318 | | | $ | 87,111 | | | $ | 51,142 | | | $ | 289,144 | | | $ | 4,772 | | | $ | — | | | $ | 646,535 | |
Special mention | | — | | | 31 | | | — | | | — | | | — | | | 7,009 | | | — | | | — | | | 7,040 | |
Substandard | | — | | | — | | | 1,273 | | | 433 | | | — | | | 5,197 | | | — | | | — | | | 6,903 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial real estate owner-occupied | | 28,029 | | | 89,050 | | | 98,591 | | | 87,544 | | | 51,142 | | | 301,350 | | | 4,772 | | | — | | | 660,478 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Commercial real estate non owner-occupied | | | | | | | | | | | | | | | | | | |
Pass | | 61,471 | | | 142,258 | | | 298,913 | | | 296,863 | | | 158,719 | | | 545,481 | | | 21,969 | | | — | | | 1,525,674 | |
Special mention | | — | | | — | | | 15,631 | | | — | | | — | | | 649 | | | — | | | — | | | 16,280 | |
Substandard | | — | | | — | | | — | | | 769 | | | — | | | 1,663 | | | — | | | — | | | 2,432 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial real estate non owner-occupied | | 61,471 | | | 142,258 | | | 314,544 | | | 297,632 | | | 158,719 | | | 547,793 | | | 21,969 | | | — | | | 1,544,386 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | |
Pass | | 39,119 | | | 68,173 | | | 47,024 | | | 38,592 | | | 20,631 | | | 57,364 | | | 148,091 | | | 1,198 | | | 420,192 | |
Special mention | | — | | | — | | | — | | | — | | | 239 | | | 376 | | | 2,233 | | | 18 | | | 2,866 | |
Substandard | | — | | | 34 | | | 3,250 | | | 12 | | | — | | | 153 | | | 468 | | | — | | | 3,917 | |
Doubtful | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | |
| | | | | | | | | | | | | | | | | | |
Total commercial and industrial | | 39,120 | | | 68,207 | | | 50,274 | | | 38,604 | | | 20,870 | | | 57,893 | | | 150,792 | | | 1,216 | | | 426,976 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | 10 | | | 10 | | | — | | | 13 | | | — | | | 178 | | | — | | | — | | | 211 | |
| | | | | | | | | | | | | | | | | | |
Commercial construction | | | | | | | | | | | | | | | | | | |
Pass | | 54,801 | | | 247,524 | | | 143,564 | | | 106,009 | | | 10,500 | | | 20,462 | | | 31,328 | | | — | | | 614,188 | |
| | | | | | | | | | | | | | | | | | |
Substandard | | — | | | — | | | 7,906 | | | — | | | — | | | — | | | — | | | — | | | 7,906 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial construction | | 54,801 | | | 247,524 | | | 151,470 | | | 106,009 | | | 10,500 | | | 20,462 | | | 31,328 | | | — | | | 622,094 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Residential mortgages | | | | | | | | | | | | | | | | | | |
Pass | | 31,315 | | | 83,436 | | | 104,931 | | | 67,119 | | | 45,691 | | | 79,243 | | | — | | | — | | | 411,735 | |
Special mention | | — | | | — | | | — | | | — | | | — | | | 106 | | | — | | | — | | | 106 | |
Substandard | | — | | | — | | | — | | | 233 | | | — | | | 1,249 | | | — | | | — | | | 1,482 | |
| | | | | | | | | | | | | | | | | | |
Total residential mortgages | | 31,315 | | | 83,436 | | | 104,931 | | | 67,352 | | | 45,691 | | | 80,598 | | | — | | | — | | | 413,323 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Home equity | | | | | | | | | | | | | | | | | | |
Pass | | 507 | | | 459 | | | 768 | | | 522 | | | 439 | | | 2,303 | | | 87,377 | | | 699 | | | 93,074 | |
Special mention | | — | | | — | | | — | | | — | | | — | | | 8 | | | — | | | 50 | | | 58 | |
Substandard | | — | | | — | | | 23 | | | — | | | — | | | 65 | | | — | | | — | | | 88 | |
| | | | | | | | | | | | | | | | | | |
Total home equity | | 507 | | | 459 | | | 791 | | | 522 | | | 439 | | | 2,376 | | | 87,377 | | | 749 | | | 93,220 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | | |
Pass | | 1,764 | | | 2,480 | | | 1,445 | | | 1,168 | | | 601 | | | 714 | | | — | | | — | | | 8,172 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total consumer | | 1,764 | | | 2,480 | | | 1,445 | | | 1,168 | | | 601 | | | 714 | | | — | | | — | | | 8,172 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | 25 | | | 3 | | | — | | | — | | | — | | | — | | | — | | | — | | | 28 | |
| | | | | | | | | | | | | | | | | | |
Total loans | | $ | 217,007 | | | $ | 633,414 | | | $ | 722,046 | | | $ | 598,831 | | | $ | 287,962 | | | $ | 1,011,186 | | | $ | 296,238 | | | $ | 1,965 | | | $ | 3,768,649 | |
| | | | | | | | | | | | | | | | | | |
Total current period charge-offs | | $ | 35 | | | $ | 13 | | | $ | — | | | $ | 13 | | | $ | — | | | $ | 178 | | | $ | — | | | $ | — | | | $ | 239 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at December 31, 2023 |
| | Term Loans by Origination Year | | | | | | |
(Dollars in thousands) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans | | Revolving Loans Converted to Term | | Total |
Commercial real estate owner-occupied | | | | | | | | | | | | | | | | | | |
Pass | | $ | 82,500 | | | $ | 83,366 | | | $ | 88,178 | | | $ | 52,891 | | | $ | 51,379 | | | $ | 242,518 | | | $ | 2,169 | | | $ | — | | | $ | 603,001 | |
Special mention | | 31 | | | — | | | — | | | — | | | 489 | | | 6,971 | | | — | | | — | | | 7,491 | |
Substandard | | — | | | 1,311 | | | 270 | | | — | | | — | | | 7,229 | | | — | | | — | | | 8,810 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial real estate | | 82,531 | | | 84,677 | | | 88,448 | | | 52,891 | | | 51,868 | | | 256,718 | | | 2,169 | | | — | | | 619,302 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs owner-occupied | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Commercial real estate non owner-occupied | | | | | | | | | | | | | | | | | | |
Pass | | 133,179 | | | 288,240 | | | 278,833 | | | 148,730 | | | 165,676 | | | 398,516 | | | 9,961 | | | 107 | | | 1,423,242 | |
Special mention | | — | | | 15,782 | | | — | | | — | | | — | | | 2,977 | | | — | | | — | | | 18,759 | |
Substandard | | — | | | — | | | 361 | | | — | | | 969 | | | 1,654 | | | — | | | 450 | | | 3,434 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial real estate non owner-occupied | | 133,179 | | | 304,022 | | | 279,194 | | | 148,730 | | | 166,645 | | | 403,147 | | | 9,961 | | | 557 | | | 1,445,435 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | |
Pass | | 73,608 | | | 51,990 | | | 45,278 | | | 24,778 | | | 23,724 | | | 44,609 | | | 156,465 | | | 3,402 | | | 423,854 | |
Special mention | | — | | | — | | | — | | | 70 | | | 215 | | | 201 | | | 2,227 | | | 223 | | | 2,936 | |
Substandard | | — | | | — | | | 18 | | | — | | | 1 | | | 209 | | | 316 | | | 3,415 | | | 3,959 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial and industrial | | 73,608 | | | 51,990 | | | 45,296 | | | 24,848 | | | 23,940 | | | 45,019 | | | 159,008 | | | 7,040 | | | 430,749 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | 15 | | | 248 | | | — | | | — | | | 67 | | | 266 | | | — | | | — | | | 596 | |
| | | | | | | | | | | | | | | | | | |
Commercial construction | | | | | | | | | | | | | | | | | | |
Pass | | 192,462 | | | 164,313 | | | 143,203 | | | 22,017 | | | 16,247 | | | 10,532 | | | 27,261 | | | — | | | 576,035 | |
Special mention | | — | | | 7,905 | | | — | | | — | | | 1,173 | | | — | | | — | | | — | | | 9,078 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial construction | | 192,462 | | | 172,218 | | | 143,203 | | | 22,017 | | | 17,420 | | | 10,532 | | | 27,261 | | | — | | | 585,113 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Residential mortgages | | | | | | | | | | | | | | | | | | |
Pass | | 82,848 | | | 107,222 | | | 69,979 | | | 46,674 | | | 19,205 | | | 65,311 | | | — | | | — | | | 391,239 | |
Special mention | | — | | | — | | | — | | | — | | | — | | | 109 | | | — | | | — | | | 109 | |
Substandard | | — | | | — | | | 236 | | | — | | | 1,055 | | | 503 | | | — | | | — | | | 1,794 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total residential mortgages | | 82,848 | | | 107,222 | | | 70,215 | | | 46,674 | | | 20,260 | | | 65,923 | | | — | | | — | | | 393,142 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Home equity | | | | | | | | | | | | | | | | | | |
Pass | | 1,203 | | | 775 | | | 561 | | | 444 | | | 317 | | | 1,738 | | | 79,421 | | | 636 | | | 85,095 | |
| | | | | | | | | | | | | | | | | | |
Substandard | | — | | | — | | | — | | | — | | | — | | | 72 | | | — | | | 208 | | | 280 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total home equity | | 1,203 | | | 775 | | | 561 | | | 444 | | | 317 | | | 1,810 | | | 79,421 | | | 844 | | | 85,375 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | | |
Pass | | 3,705 | | | 1,652 | | | 1,371 | | | 722 | | | 623 | | | 442 | | | — | | | — | | | 8,515 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total consumer | | 3,705 | | | 1,652 | | | 1,371 | | | 722 | | | 623 | | | 442 | | | — | | | — | | | 8,515 | |
| | | | | | | | | | | | | | | | | | |
Current period charge-offs | | 35 | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 36 | |
| | | | | | | | | | | | | | | | | | |
Total loans | | $ | 569,536 | | | $ | 722,556 | | | $ | 628,288 | | | $ | 296,326 | | | $ | 281,073 | | | $ | 783,591 | | | $ | 277,820 | | | $ | 8,441 | | | $ | 3,567,631 | |
| | | | | | | | | | | | | | | | | | |
Total current period charge-offs | | $ | 50 | | | $ | 248 | | | $ | — | | | $ | — | | | $ | 67 | | | $ | 267 | | | $ | — | | | $ | — | | | $ | 632 | |
The total amortized cost basis of adversely classified loans amounted to $49.1 million, or 1.30% of total loans, at June 30, 2024, and $56.7 million, or 1.59% of total loans, at December 31, 2023.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
Past due and non-accrual loans
The following tables present an age analysis of past due loans by portfolio classification as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at June 30, 2024 |
(Dollars in thousands) | | 30-59 Days Past Due | | 60-89 Days Past Due | | Past Due 90 Days or More | | Total Past Due Loans(1) | | Current Loans(1) | | Total Loans | |
Commercial real estate owner-occupied | | $ | 974 | | | $ | — | | | $ | 192 | | | $ | 1,166 | | | $ | 659,312 | | | $ | 660,478 | | |
Commercial real estate non owner-occupied | | 6,011 | | | 384 | | | 1,251 | | | 7,646 | | | 1,536,740 | | | 1,544,386 | | |
| | | | | | | | | | | | | |
Commercial and industrial | | 642 | | | 460 | | | 3,326 | | | 4,428 | | | 422,548 | | | 426,976 | | |
Commercial construction | | 1,853 | | | — | | | 7,906 | | | 9,759 | | | 612,335 | | | 622,094 | | |
| | | | | | | | | | | | | |
Residential mortgages | | 4,463 | | | — | | | 1,209 | | | 5,672 | | | 407,651 | | | 413,323 | | |
Home equity | | 48 | | | 50 | | | — | | | 98 | | | 93,122 | | | 93,220 | | |
Consumer | | 6 | | | — | | | — | | | 6 | | | 8,166 | | | 8,172 | | |
Total loans | | $ | 13,997 | | | $ | 894 | | | $ | 13,884 | | | $ | 28,775 | | | $ | 3,739,874 | | | $ | 3,768,649 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at December 31, 2023 |
(Dollars in thousands) | | 30-59 Days Past Due | | 60-89 Days Past Due | | Past Due 90 Days or More | | Total Past Due Loans(1) | | Current Loans(1) | | Total Loans | |
Commercial real estate owner-occupied | | $ | 459 | | | $ | 270 | | | $ | 212 | | | $ | 941 | | | $ | 618,361 | | | $ | 619,302 | | |
Commercial real estate non owner-occupied | | 722 | | | 504 | | | 1,122 | | | 2,348 | | | 1,443,087 | | | 1,445,435 | | |
| | | | | | | | | | | | | |
Commercial and industrial | | 660 | | | 64 | | | — | | | 724 | | | 430,025 | | | 430,749 | | |
Commercial construction | | — | | | — | | | — | | | — | | | 585,113 | | | 585,113 | | |
| | | | | | | | | | | | | |
Residential mortgages | | 1,265 | | | — | | | 1,277 | | | 2,542 | | | 390,600 | | | 393,142 | | |
Home equity | | 53 | | | — | | | 97 | | | 150 | | | 85,225 | | | 85,375 | | |
Consumer | | 25 | | | 2 | | | — | | | 27 | | | 8,488 | | | 8,515 | | |
Total loans | | $ | 3,184 | | | $ | 840 | | | $ | 2,708 | | | $ | 6,732 | | | $ | 3,560,899 | | | $ | 3,567,631 | | |
_______________________________________
(1)The loan balances in the tables above include loans designated as non-accrual according to their payment due status.
At June 30, 2024 and December 31, 2023, all loans past due 90 days or more were carried as non-accrual, however, not all non-accrual loans were 90 days or more past due in their payments. Loans that were less than 90 days past due where reasonable doubt existed as to the full and timely collection of interest or principal have also been designated as non-accrual, despite their payment due status.
The following tables present the amortized cost of non-accrual loans by portfolio classification as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at June 30, 2024 |
(Dollars in thousands) | | Total Non-accrual Loans | | Non-accrual Loans without a Specific Reserve | | Non-accrual Loans with a Specific Reserve | | Related Specific Reserve |
Commercial real estate owner-occupied | | $ | 2,376 | | | $ | 2,376 | | | $ | — | | | $ | — | |
Commercial real estate non owner-occupied | | 2,432 | | | 1,479 | | | 953 | | | 214 | |
| | | | | | | | |
Commercial and industrial | | 3,703 | | | 289 | | | 3,414 | | | 3,031 | |
Commercial construction | | 7,906 | | | — | | | 7,906 | | | 2,550 | |
| | | | | | | | |
Residential mortgages | | 1,249 | | | 1,249 | | | — | | | — | |
Home equity | | 65 | | | 65 | | | — | | | — | |
Consumer | | — | | | — | | | — | | | — | |
Total loans | | $ | 17,731 | | | $ | 5,458 | | | $ | 12,273 | | | $ | 5,795 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at December 31, 2023 | | | | | |
(Dollars in thousands) | | Total Non-accrual Loans | | Non-accrual Loans without a Specific Reserve | | Non-accrual Loans with a Specific Reserve | | Related Specific Reserve | | | | | |
Commercial real estate owner-occupied | | $ | 2,683 | | | $ | 2,683 | | | $ | — | | | $ | — | | | | | | |
Commercial real estate non owner-occupied | | 2,686 | | | 1,717 | | | 969 | | | 229 | | | | | | |
| | | | | | | | | | | | | |
Commercial and industrial | | 4,262 | | | 736 | | | 3,526 | | | 2,658 | | | | | | |
Commercial construction | | — | | | — | | | — | | | — | | | | | | |
| | | | | | | | | | | | | |
Residential mortgages | | 1,526 | | | 1,526 | | | — | | | — | | | | | | |
Home equity | | 257 | | | 257 | | | — | | | — | | | | | | |
Consumer | | — | | | — | | | — | | | — | | | | | | |
Total loans | | $ | 11,414 | | | $ | 6,919 | | | $ | 4,495 | | | $ | 2,887 | | | | | | |
The ratio of non-accrual loans to total loans amounted to 0.47% and 0.32% at June 30, 2024 and December 31, 2023, respectively. The increase in non-accrual loans from December 31, 2023 to June 30, 2024 was due primarily to one commercial construction loan that was deemed collateral dependent and added to non-accrual.
At June 30, 2024 and December 31, 2023, additional funding commitments for non-accrual loans were immaterial.
Collateral dependent loans
The total recorded investment in collateral dependent loans amounted to $19.5 million at June 30, 2024 compared to $13.7 million at December 31, 2023. Total accruing collateral dependent loans amounted to $1.9 million while non-accrual collateral dependent loans amounted to $17.6 million as of June 30, 2024. As of December 31, 2023, total accruing collateral dependent loans amounted to $2.4 million, while non-accrual collateral dependent loans amounted to $11.3 million.
The following tables present the recorded investment in collateral dependent loans and the related specific allowance by portfolio allocation as of the dates indicated:
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| | Balance at June 30, 2024 |
(Dollars in thousands) | | Unpaid Contractual Principal Balance | | Total Recorded Investment in Collateral Dependent Loans | | Recorded Investment without a Specific Reserve | | Recorded Investment with a Specific Reserve | | Related Specific Reserve |
Commercial real estate owner-occupied | | $ | 4,219 | | | $ | 3,706 | | | $ | 3,706 | | | $ | — | | | $ | — | |
Commercial real estate non owner-occupied | | 3,403 | | | 2,432 | | | 1,479 | | | 953 | | | 214 | |
| | | | | | | | | | |
Commercial and industrial | | 5,026 | | | 3,764 | | | 500 | | | 3,264 | | | 2,923 | |
Commercial construction | | 7,938 | | | 7,906 | | | — | | | 7,906 | | | 2,550 | |
| | | | | | | | | | |
Residential mortgages | | 1,676 | | | 1,587 | | | 1,587 | | | — | | | — | |
Home equity | | 120 | | | 88 | | | 88 | | | — | | | — | |
Consumer | | — | | | — | | | — | | | — | | | — | |
Total | | $ | 22,382 | | | $ | 19,483 | | | $ | 7,360 | | | $ | 12,123 | | | $ | 5,687 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at December 31, 2023 |
(Dollars in thousands) | | Unpaid Contractual Principal Balance | | Total Recorded Investment in Collateral Dependent Loans | | Recorded Investment without a Specific Reserve | | Recorded Investment with a Specific Reserve | | Related Specific Reserve |
Commercial real estate owner-occupied | | $ | 4,641 | | | $ | 4,165 | | | $ | 4,165 | | | $ | — | | | $ | — | |
Commercial real estate non owner-occupied | | 4,062 | | | 2,983 | | | 2,015 | | | 968 | | | 229 | |
| | | | | | | | | | |
Commercial and industrial | | 6,804 | | | 4,332 | | | 950 | | | 3,382 | | | 2,526 | |
Commercial construction | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | |
Residential mortgages | | 2,117 | | | 1,902 | | | 1,902 | | | — | | | — | |
Home equity | | 359 | | | 281 | | | 281 | | | — | | | — | |
Consumer | | — | | | — | | | — | | | — | | | — | |
Total | | $ | 17,983 | | | $ | 13,663 | | | $ | 9,313 | | | $ | 4,350 | | | $ | 2,755 | |
At June 30, 2024 and December 31, 2023, additional funding commitments for collateral dependent loans were immaterial.
Loan modifications to borrowers experiencing financial difficulty
The Company works with loan customers experiencing financial difficulty and may enter into loan modifications to the extent deemed to be necessary or appropriate while attempting to achieve the best mutual outcome given the individual financial circumstances and future prospects of the borrower. An assessment of whether a borrower is experiencing financial difficulty is made on the date of the modification. Modifications made for borrowers experiencing financial difficulty may be concessions in the form of principal forgiveness, interest rate reductions, payment deferrals of principal, interest or both, or term extensions, or some combination thereof. When a debt has been previously modified, the Company considers the cumulative effect of modifications made within the prior twelve-month period before the current modification, when determining whether or not a delay in payment resulting from the current modification is insignificant.
During the three and six months ended June 30, 2024, there were no loan modifications made to borrowers experiencing financial difficulty.
The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty by type of concession granted during the period indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | Three months ended |
| | | | | | June 30, 2023 |
(Dollars in thousands) | | | | Payment Deferrals | | | | | | | | | | % of Total Loan Class |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Residential mortgages | | | | | | $ | 33 | | | | | | | | | | | 0.01 | % |
Home equity loans and lines | | | | | | 421 | | | | | | | | | | | 0.57 | % |
| | | | | | | | | | | | | | | | |
Total | | | | | | $ | 454 | | | | | | | | | | | 0.01 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | Six months ended |
| | | | | | June 30, 2023 |
(Dollars in thousands) | | | | Payment Deferrals | | % of Total Loan Class | | | | | | | | |
Commercial real estate owner-occupied | | | | | | $ | 276 | | | 0.04 | % | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial and industrial | | | | | | 37 | | | 0.01 | % | | | | | | | | |
| | | | | | | | | | | | | | | | |
Residential mortgages | | | | | | 33 | | | 0.01 | % | | | | | | | | |
Home equity loans and lines | | | | | | 421 | | | 0.57 | % | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | | | | | $ | 767 | | | 0.02 | % | | | | | | | | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the period indicated: | | | | | | | | | | | | |
| | | | | | |
| | | | Three months ended | | |
| | | | June 30, 2023 | | |
| | | | Weighted Average Payment Deferrals | | |
| | | | | | |
Commercial and industrial | | | | 0.5 years | | |
| | | | | | |
Residential mortgages | | | | 0.5 years | | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | |
| | | | | |
| | | | Six months ended | |
| | | | June 30, 2023 |
| | | | Weighted Average Payment Deferrals | |
Commercial real estate owner-occupied | | | | 0.5 years | |
| | | | | |
Commercial and industrial | | | | 0.5 years | |
| | | | | |
Residential mortgages | | | | 0.5 years | |
Home equity loans and lines | | | | 0.5 years | |
| | | | | |
The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance status of loans that had been modified within the preceding twelve months for borrowers experiencing financial difficulty, at the period indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at June 30, 2024 |
(Dollars in thousands) | | Current | | 30-59 Days Past Due | | 60-89 Days Past Due | | Past Due 90 Days or More | | Total Past Due |
Commercial real estate owner-occupied | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Commercial real estate non owner-occupied | | — | | | — | | | — | | | — | | | — | |
Commercial and industrial | | — | | | — | | | — | | | 84 | | | 84 | |
Commercial construction | | — | | | — | | | — | | | — | | | — | |
Residential mortgages | | — | | | — | | | — | | | — | | | — | |
Home equity | | — | | | — | | | — | | | — | | | — | |
Consumer | | — | | | — | | | — | | | — | | | — | |
Total | | $ | — | | | $ | — | | | $ | — | | | $ | 84 | | | $ | 84 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at June 30, 2023 |
(Dollars in thousands) | | Current | | 30-59 Days Past Due | | 60-89 Days Past Due | | Past Due 90 Days or More | | Total Past Due |
Commercial real estate owner-occupied | | $ | 395 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Commercial real estate non owner-occupied | | — | | | — | | | — | | | — | | | — | |
Commercial and industrial | | 236 | | | — | | | — | | | — | | | — | |
Commercial construction | | — | | | — | | | — | | | — | | | — | |
Residential mortgages | | 33 | | | — | | | — | | | — | | | — | |
Home equity | | 421 | | | — | | | — | | | — | | | — | |
Consumer | | — | | | — | | | — | | | — | | | — | |
Total | | $ | 1,085 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
During the three and six months ended June 30, 2024 and June 30, 2023, there were no subsequent defaults on loans that had been modified within the preceding twelve months for borrowers experiencing financial difficulty. At June 30, 2024 and June 30, 2023, additional funding commitments to borrowers experiencing financial difficulty who were party to a loan modification were immaterial.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
ACL for loans and provision for credit loss activity
The following table presents changes in the provision for credit losses on loans and unfunded commitments during the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
(Dollars in thousands) | | June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Provision for credit losses on loans - collectively evaluated | | $ | (230) | | | $ | 2,210 | | | $ | 187 | | | $ | 4,570 | |
Provision for credit losses on loans - individually evaluated | | 1,358 | | | (167) | | | 2,809 | | | (209) | |
Provision for credit losses on loans | | 1,128 | | | 2,043 | | | 2,996 | | | 4,361 | |
| | | | | | | | |
Provision for unfunded commitments | | (991) | | | 225 | | | (2,237) | | | 643 | |
| | | | | | | | |
Provision for credit losses | | $ | 137 | | | $ | 2,268 | | | $ | 759 | | | $ | 5,004 | |
ACL for loans
The ACL for loans amounted to $62.0 million and $59.0 million at June 30, 2024 and December 31, 2023, respectively. The ACL for loans to total loans ratio was 1.65% at both June 30, 2024 and December 31, 2023.
The following tables present changes in the ACL for loans by portfolio classification, during the three-month periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Commercial Real Estate Owner-Occupied | | Commercial Real Estate Non Owner-Occupied | | | | Commercial and Industrial | | Commercial Construction | | Residential Mortgage | | Home Equity | | Consumer | | Total |
Beginning Balance at March 31, 2024 | | $ | 10,479 | | | $ | 28,821 | | | | | $ | 10,333 | | | $ | 8,216 | | | $ | 2,072 | | | $ | 535 | | | $ | 285 | | | $ | 60,741 | |
Provision for credit losses on loans | | 93 | | | (225) | | | | | 47 | | | 1,213 | | | (13) | | | 13 | | | — | | | 1,128 | |
Recoveries | | — | | | — | | | | | 165 | | | — | | | — | | | 2 | | | 8 | | | 175 | |
Less: Charge-offs | | — | | | — | | | | | 26 | | | — | | | — | | | — | | | 19 | | | 45 | |
Ending Balance at June 30, 2024 | | $ | 10,572 | | | $ | 28,596 | | | | | $ | 10,519 | | | $ | 9,429 | | | $ | 2,059 | | | $ | 550 | | | $ | 274 | | | $ | 61,999 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Commercial Real Estate Owner-Occupied | | Commercial Real Estate Non Owner-Occupied | | | | Commercial and Industrial | | Commercial Construction | | Residential Mortgage | | Home Equity | | Consumer | | Total |
Beginning Balance at March 31, 2023 | | $ | 10,694 | | | $ | 27,031 | | | | | $ | 9,378 | | | $ | 4,453 | | | $ | 2,378 | | | $ | 712 | | | $ | 356 | | | $ | 55,002 | |
Provision for credit losses on loans | | 485 | | | 1,367 | | | | | (138) | | | 265 | | | 75 | | | (16) | | | 5 | | | 2,043 | |
Recoveries | | — | | | — | | | | | 84 | | | — | | | — | | | 2 | | | 3 | | | 89 | |
Less: Charge-offs | | — | | | — | | | | | 220 | | | — | | | — | | | — | | | 15 | | | 235 | |
Ending Balance at June 30, 2023 | | $ | 11,179 | | | $ | 28,398 | | | | | $ | 9,104 | | | $ | 4,718 | | | $ | 2,453 | | | $ | 698 | | | $ | 349 | | | $ | 56,899 | |
| | | | | | | | | | | | | | | | | | |
The following tables present changes in the ACL for loans by portfolio classification, during the six-month periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Commercial Real Estate Owner-Occupied | | Commercial Real Estate Non Owner-Occupied | | | | Commercial and Industrial | | Commercial Construction | | Residential Mortgage | | Home Equity | | Consumer | | Total |
Beginning Balance at December 31, 2023 | $ | 10,454 | | | $ | 27,620 | | | | | $ | 11,089 | | | $ | 6,787 | | | $ | 2,152 | | | $ | 579 | | | $ | 314 | | | $ | 58,995 | |
Provision for credit losses for loans | 118 | | | 976 | | | | | (592) | | | 2,642 | | | (93) | | | (33) | | | (22) | | | 2,996 | |
Recoveries | — | | | — | | | | | 233 | | | — | | | — | | | 4 | | | 10 | | | 247 | |
Less: Charge-offs | — | | | — | | | | | 211 | | | — | | | — | | | — | | | 28 | | | 239 | |
Ending Balance at June 30, 2024 | $ | 10,572 | | | $ | 28,596 | | | | | $ | 10,519 | | | $ | 9,429 | | | $ | 2,059 | | | $ | 550 | | | $ | 274 | | | $ | 61,999 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Commercial Real Estate Owner-Occupied | | Commercial Real Estate Non Owner-Occupied | | | | Commercial and Industrial | | Commercial Construction | | Residential Mortgage | | Home Equity | | Consumer | | Total |
Beginning Balance at December 31, 2022 | | $ | 10,304 | | | $ | 26,260 | | | | | $ | 8,896 | | | $ | 3,961 | | | $ | 2,255 | | | $ | 633 | | | $ | 331 | | | $ | 52,640 | |
Provision for credit losses for loans | | 875 | | | 2,138 | | | | | 300 | | | 757 | | | 198 | | | 60 | | | 33 | | | 4,361 | |
Recoveries | | — | | | — | | | | | 211 | | | — | | | — | | | 5 | | | 6 | | | 222 | |
Less: Charge-offs | | — | | | — | | | | | 303 | | | — | | | — | | | — | | | 21 | | | 324 | |
Ending Balance at June 30, 2023 | | $ | 11,179 | | | $ | 28,398 | | | | | $ | 9,104 | | | $ | 4,718 | | | $ | 2,453 | | | $ | 698 | | | $ | 349 | | | $ | 56,899 | |
Reserve for unfunded commitments
The Company's reserve for unfunded commitments amounted to $4.9 million at June 30, 2024 and $7.1 million at December 31, 2023. Management believes that the Company's ACL for loans and reserve for unfunded commitments were adequate as of June 30, 2024.
Other real estate owned
The Company carried no OREO at June 30, 2024 and December 31, 2023.
At June 30, 2024 and December 31, 2023, the Company had $1.1 million and $1.2 million, respectively, in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions.
(5)Leases
As of June 30, 2024, the Company had 16 facilities contracted under various non-cancelable operating leases, most of which provide options to the Company to extend the lease periods and include periodic rent adjustments.
Lease expense for the three and six months ended June 30, 2024 amounted to $413 thousand and $836 thousand, respectively, compared to $397 thousand and $801 thousand for the three and six months ended June 30, 2023, respectively. Variable lease costs and short-term lease expenses included in lease expense during these periods were immaterial.
The weighted average remaining lease term for operating leases at June 30, 2024 and June 30, 2023 was 28.0 years and 29.0 years, respectively. The weighted average discount rate was 3.55% at June 30, 2024 and 3.51% at June 30, 2023.
At June 30, 2024, the remaining undiscounted cash flows by year of these lease liabilities were as follows:
| | | | | | | | |
(Dollars in thousands) | | Operating Leases |
2024 (six remaining months) | | $ | 742 | |
2025 | | 1,457 | |
2026 | | 1,468 | |
2027 | | 1,474 | |
2028 | | 1,477 | |
Thereafter | | 31,723 | |
Total lease payments | | 38,341 | |
Less: Imputed interest | | 14,184 | |
Total lease liability | | $ | 24,157 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
(6)Deposits
Deposits are summarized as follows as of the periods indicated:
| | | | | | | | | | | | | | |
(Dollars in thousands) | | June 30, 2024 | | December 31, 2023 |
Non-interest checking | | $ | 1,050,876 | | | $ | 1,070,104 | |
Interest-bearing checking | | 788,822 | | | 697,632 | |
Savings | | 285,461 | | | 285,770 | |
Money market | | 1,504,551 | | | 1,402,939 | |
CDs $250,000 or less | | 358,149 | | | 295,789 | |
CDs greater than $250,000 | | 260,942 | | | 225,287 | |
| | | | |
| | | | |
Deposits | | $ | 4,248,801 | | | $ | 3,977,521 | |
All of the Company's deposits outstanding at both June 30, 2024 and December 31, 2023 were customer deposits, and the Company had no brokered deposits at either June 30, 2024 or December 31, 2023. Customer deposits include reciprocal balances from checking, money market deposits and CDs received from participating banks in nationwide deposit networks due to our customers electing to participate in Company offered programs which allow for third-party enhanced FDIC deposit insurance. Under this enhanced deposit insurance program, the equivalent of the customers' original deposited funds comes back to the Company and are carried within the appropriate category under deposits. The Company's balances in these reciprocal products were $933.1 million and $835.0 million at June 30, 2024 and December 31, 2023, respectively.
(7)Borrowed Funds and Subordinated Debt
Borrowed funds at June 30, 2024 and December 31, 2023 are summarized, as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
(Dollars in thousands) | | Balance | | Rate | | Balance | | Rate |
| | | | | | | | |
Within 12 months | | $ | 53,400 | | | 4.85 | % | | $ | 20,000 | | | 4.84 | % |
Between 1 and 5 years | | 270 | | | — | % | | 270 | | | — | % |
Over 5 years | | 8,115 | | | 1.05 | % | | 5,498 | | | 1.09 | % |
Total borrowed funds | | $ | 61,785 | | | 4.33 | % | | $ | 25,768 | | | 3.99 | % |
The Company's borrowed funds at June 30, 2024 and December 31, 2023 were comprised of FRB advances through the BTFP and term advances related to specific lending projects funded under community development programs through the FHLB and NH BFA.
The Company also had outstanding subordinated debt (net of deferred issuance costs) of $59.7 million at June 30, 2024 and $59.5 million at December 31, 2023. The outstanding subordinated notes are due on July 15, 2030 and callable at the Company's option on or after July 15, 2025.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
(8) Derivatives and Hedging Activities
For further information on the Company's derivatives and hedging activities, see Note 9, "Derivatives and Hedging," to the Company's audited consolidated financial statements contained in the 2023 Annual Report on Form 10-K.
The tables below present a summary of the Company's derivative financial instruments, notional amounts and fair values at the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
(Dollars in thousands) | | Asset Notional Amount | | Asset Derivatives(1)(2) | | Liability Notional Amount | | Liability Derivatives(1)(2) |
Derivatives designated as hedging instruments | | | | | | | | |
Interest-rate contracts - pay fixed, receive floating | | $ | 100,000 | | | $ | 145 | | | $ | — | | | $ | — | |
Total derivatives designated as hedging instruments | | $ | 100,000 | | | $ | 145 | | | $ | — | | | $ | — | |
| | | | | | | | |
Derivatives not subject to hedge accounting | | | | | | | | |
Interest-rate contracts - pay floating, receive fixed | | $ | — | | | $ | — | | | $ | 7,394 | | | $ | 757 | |
Interest-rate contracts - pay fixed, receive floating | | 7,394 | | | 757 | | | — | | | — | |
Risk participation agreements sold | | — | | | — | | | 46,910 | | | 37 | |
Total derivatives not subject to hedge accounting | | $ | 7,394 | | | $ | 757 | | | $ | 54,304 | | | $ | 794 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
(Dollars in thousands) | | Asset Notional Amount | | Asset Derivatives(1)(2) | | Liability Notional Amount | | Liability Derivatives(1)(2) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | |
Interest-rate contracts - pay fixed, receive floating | | $ | — | | | $ | — | | | $ | 100,000 | | | $ | 760 | |
Total derivatives designated as hedging instruments | | $ | — | | | $ | — | | | $ | 100,000 | | | $ | 760 | |
| | | | | | | | |
Derivatives not subject to hedge accounting | | | | | | | | |
Interest-rate contracts - pay floating, receive fixed | | $ | — | | | $ | — | | | $ | 7,524 | | | $ | 630 | |
Interest-rate contracts - pay fixed, receive floating | | 7,524 | | | 630 | | | — | | | — | |
Risk participation agreements sold | | — | | | — | | | 46,910 | | | 65 | |
Total derivatives not subject to hedge accounting | | $ | 7,524 | | | $ | 630 | | | $ | 54,434 | | | $ | 695 | |
_________________________________________(1) Accrued interest balances related to the Company's interest-rate swaps are not included in the fair values above and are immaterial.
(2) The assets and liabilities related to the pay fixed, receive floating interest-rate contracts are subject to a master netting agreement and are presented net in the Company's Consolidated Balance Sheet.
The Company had no derivatives designated as cash flow hedges at either June 30, 2024 or December 31, 2023.
Derivatives designated as hedging instruments
Fair value hedges
Derivatives designated as fair value hedges are utilized to mitigate the risk of adverse interest-rate fluctuations on specifically identified assets or liabilities. The Company's fair value hedges are used to manage its exposure to changes in the fair value of hedged items caused by changes in interest rates.
The Company had three interest rate swap agreements with a combined notional value of $100.0 million at June 30, 2024 and December 31, 2023. Each interest rate swap agreement was designated as a fair value hedge and involves the net settlement of receiving floating-rate payments from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
The table below presents the carrying amount of hedged items and cumulative fair value hedging basis adjustments for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | June 30, 2024 | | December 31, 2023 | | |
(Dollars in thousands) | | Balance Sheet Location of Hedged Item | | Carrying Amount of Hedged Assets | | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets | | Carrying Amount of Hedged Assets | | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets | | |
Interest-rate contracts - loans | | Loans | | $ | 99,828 | | | $ | (172) | | | $ | 100,755 | | | $ | 755 | | | |
The table below presents the gains (losses) from interest rate derivatives accounted for as fair value hedges and the related hedged items during the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended | | Six months ended |
(Dollars in thousands) | | Affected Income Statement Line Item | | June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Derivatives designated as fair value hedges: | | | | | | | | | | |
Fair value adjustments on derivatives | | Net interest income | | $ | 123 | | | $ | 260 | | | $ | 904 | | | $ | 260 | |
Fair value adjustments on hedged instrument | | Net interest income | | (131) | | | (264) | | | (927) | | | (264) | |
Total | | | | $ | (8) | | | $ | (4) | | | $ | (23) | | | $ | (4) | |
Derivatives not subject to hedge accounting
Interest-rate Contracts
Each back-to-back interest-rate swap consists of two interest-rate swaps (a customer swap and offsetting counterparty swap) and amounted to a total number of four interest-rate swaps outstanding at June 30, 2024 and December 31, 2023. As a result of this offsetting relationship, there were no net gains or losses recognized in income on back-to-back swaps during the six months ended June 30, 2024 or June 30, 2023.
Interest-rate swaps with counterparties are subject to master netting agreements, while interest-rate swaps with customers are not. At June 30, 2024 and December 31, 2023, all back-to-back swaps with the counterparty were in asset positions, therefore there was no netting reflected in the Company's Consolidated Balance Sheets as of the respective dates. Risk Participation Agreements
The Company enters into RPAs for which the Company has assumed credit risk for customers' performance under interest-rate swap agreements related to the customers' commercial loan and receives fee income commensurate with the risk assumed. The RPAs and the customers' loan are secured by the same collateral.
Credit Risk
As of June 30, 2024, the Company had two active interest-rate swap institutional counterparties both of which had investment grade credit ratings. When the Company has credit risk exposure, collateral is posted by counterparties. Collateral posted by counterparties is restricted and not considered an asset of the Company, therefore, it is not carried on the Company's Consolidated Balance Sheets. If the Company posts collateral, the restricted cash is carried on the Company's Consolidated Balance Sheets.
The Company has minimum collateral posting thresholds with its derivative counterparties and, as of June 30, 2024, the Company had $902 thousand in credit risk exposure relating to interest-rate swaps with counterparties and the cash collateral posted by counterparties amounted to $1.1 million. At December 31, 2023, the Company had no credit risk exposure relating to interest-rate swaps with counterparties and cash collateral posted by the Company amounted to $570 thousand while cash collateral posted by counterparties amounted to $590 thousand.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
Credit-risk-related Contingent Features
There have been no material changes to the credit-risk-related contingent provisions contained within the Company's interest-rate swaps with counterparties since December 31, 2023. As of June 30, 2024, the fair value of derivatives related to these agreements was at a net asset position of $902 thousand, which excludes any adjustment for nonperformance risk. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and as of June 30, 2024, has not posted collateral related to these agreements.
Other Derivative Related Activity
Interest-rate lock commitments related to the origination of mortgage loans that will be sold are considered derivative instruments. The commitments to sell loans are also considered derivative instruments. At June 30, 2024 and December 31, 2023, the estimated fair value of the Company's interest-rate lock commitments and commitments to sell these mortgage loans were deemed immaterial.
(9) Regulatory Capital Requirements
As of June 30, 2024 and December 31, 2023, the Company met the definition of "well-capitalized" under the applicable regulations of the Board of Governors of the Federal Reserve System and the Bank qualified as "well-capitalized" under the prompt corrective action regulations of the FDIC and the Basel III capital guidelines.
The Company's and the Bank's actual capital amounts and ratios are presented as of June 30, 2024 and December 31, 2023 in the tables below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Actual | | Minimum Capital for Capital Adequacy Purposes(1) | | Minimum Capital to be Well Capitalized(2) |
(Dollars in thousands) | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
As of June 30, 2024 | | | | | | | | | | | | |
The Company (consolidated) | | | | | | | | | | | | |
Total Capital to risk-weighted assets | | $ | 527,383 | | | 13.07 | % | | $ | 322,764 | | | 8.00 | % | | N/A | | N/A |
Tier 1 Capital to risk-weighted assets | | 417,091 | | | 10.34 | % | | 242,073 | | | 6.00 | % | | N/A | | N/A |
Tier 1 Capital to average assets (or Leverage Ratio) | | 417,091 | | | 8.76 | % | | 190,509 | | | 4.00 | % | | N/A | | N/A |
Common Equity Tier 1 Capital to risk-weighted assets | | 417,091 | | | 10.34 | % | | 181,555 | | | 4.50 | % | | N/A | | N/A |
| | | | | | | | | | | | |
The Bank | | | | | | | | | | | | |
Total Capital to risk-weighted assets | | $ | 524,138 | | | 12.99 | % | | $ | 322,764 | | | 8.00 | % | | $ | 403,455 | | | 10.00 | % |
Tier 1 Capital to risk-weighted assets | | 473,503 | | | 11.74 | % | | 242,073 | | | 6.00 | % | | 322,764 | | | 8.00 | % |
Tier 1 Capital to average assets (or Leverage Ratio) | | 473,503 | | | 9.94 | % | | 190,509 | | | 4.00 | % | | 238,136 | | | 5.00 | % |
Common Equity Tier 1 Capital to risk-weighted assets | | 473,503 | | | 11.74 | % | | 181,555 | | | 4.50 | % | | 262,246 | | | 6.50 | % |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Actual | | Minimum Capital for Capital Adequacy Purposes(1) | | Minimum Capital to be Well Capitalized(2) |
(Dollars in thousands) | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
As of December 31, 2023 | | | | | | | | | | | | |
The Company (consolidated) | | | | | | | | | | | | |
Total Capital to risk-weighted assets | | $ | 511,692 | | | 13.12 | % | | $ | 312,035 | | | 8.00 | % | | N/A | | N/A |
Tier 1 Capital to risk-weighted assets | | 403,224 | | | 10.34 | % | | 234,026 | | | 6.00 | % | | N/A | | N/A |
Tier 1 Capital to average assets (or Leverage Ratio) | | 403,224 | | | 8.74 | % | | 184,471 | | | 4.00 | % | | N/A | | N/A |
Common Equity Tier 1 Capital to risk-weighted assets | | 403,224 | | | 10.34 | % | | 175,520 | | | 4.50 | % | | N/A | | N/A |
| | | | | | | | | | | | |
The Bank | | | | | | | | | | | | |
Total Capital to risk-weighted assets | | $ | 510,645 | | | 13.09 | % | | $ | 312,035 | | | 8.00 | % | | $ | 390,044 | | | 10.00 | % |
Tier 1 Capital to risk-weighted assets | | 461,675 | | | 11.84 | % | | 234,026 | | | 6.00 | % | | 312,035 | | | 8.00 | % |
Tier 1 Capital to average assets (or Leverage Ratio) | | 461,675 | | | 10.01 | % | | 184,471 | | | 4.00 | % | | 230,589 | | | 5.00 | % |
Common Equity Tier 1 Capital to risk-weighted assets | | 461,675 | | | 11.84 | % | | 175,520 | | | 4.50 | % | | 253,528 | | | 6.50 | % |
__________________________________________(1)Before application of the capital conservation buffer of 2.50% as of June 30, 2024, and December 31, 2023. See discussion below.
(2)For the Bank to qualify as "well-capitalized," it must maintain at least the minimum ratios listed under the regulatory prompt corrective action framework. This framework does not apply to the Company.
The Company is subject to the Basel III capital ratio requirements which include a "capital conservation buffer" of 2.50% above the regulatory minimum risk-based capital adequacy requirements shown above. If a banking organization dips into its capital conservation buffer it may be restricted in its activities, including its ability to pay dividends and discretionary bonus payments to its executive officers. Both the Company's and the Bank's actual ratios, as outlined in the table above, exceeded the Basel III risk-based capital requirement with the capital conservation buffer as of June 30, 2024. At June 30, 2024, the capital conservation buffer amounted to $100.9 million for both the Company and the Bank.
(10)Comprehensive Income (Loss)
The following table presents a reconciliation of the changes in the components of other comprehensive income (loss) for the dates indicated, including the amount of income tax (expense) benefit allocated to each component of other comprehensive income (loss):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three months ended June 30, 2024 | | Three months ended June 30, 2023 |
(Dollars in thousands) | | Pre-Tax | | Tax Benefit | | After Tax Amount | | Pre-Tax | | Tax Benefit | | After Tax Amount |
Change in fair value of debt securities | | $ | (572) | | | $ | 140 | | | $ | (432) | | | $ | (17,505) | | | $ | 3,986 | | | $ | (13,519) | |
Less: net security losses reclassified into non-interest income | | — | | | — | | | — | | | (2,419) | | | 534 | | | (1,885) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total other comprehensive loss, net | | $ | (572) | | | $ | 140 | | | $ | (432) | | | $ | (15,086) | | | $ | 3,452 | | | $ | (11,634) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2024 | | Six months ended June 30, 2023 |
(Dollars in thousands) | | Pre-Tax | | Tax Benefit | | After Tax Amount | | Pre-Tax | | Tax Benefit (Expense) | | After Tax Amount |
Change in fair value of debt securities | | $ | (3,341) | | | $ | 798 | | | $ | (2,543) | | | $ | 8,655 | | | $ | (1,926) | | | $ | 6,729 | |
Less: net security losses reclassified into non-interest income | | — | | | — | | | — | | | (2,419) | | | 534 | | | (1,885) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total other comprehensive (loss) income, net | | $ | (3,341) | | | $ | 798 | | | $ | (2,543) | | | $ | 11,074 | | | $ | (2,460) | | | $ | 8,614 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
Information on the Company's accumulated other comprehensive income (loss), net of tax, is comprised of the following components as of the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three months ended June 30, 2024 | | Three months ended June 30, 2023 |
(Dollars in thousands) | | Unrealized Losses on Debt Securities | | | | | | Unrealized Losses on Debt Securities | | | | |
Accumulated other comprehensive loss - beginning balance | | $ | (81,874) | | | | | | | $ | (75,959) | | | | | |
Total other comprehensive loss, net | | (432) | | | | | | | (11,634) | | | | | |
Accumulated other comprehensive loss - ending balance | | $ | (82,306) | | | | | | | $ | (87,593) | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2024 | | Six months ended June 30, 2023 |
(Dollars in thousands) | | Unrealized Losses on Debt Securities | | | | | | Unrealized Losses on Debt Securities | | | | |
Accumulated other comprehensive loss - beginning balance | | $ | (79,763) | | | | | | | $ | (96,207) | | | | | |
Total other comprehensive (loss) income, net | | (2,543) | | | | | | | 8,614 | | | | | |
Accumulated other comprehensive loss - ending balance | | $ | (82,306) | | | | | | | $ | (87,593) | | | | | |
| | | | | | | | | | | | |
(11)Stock-Based Compensation
There have been no material changes to The Enterprise Bancorp, Inc. 2016 Stock Incentive Plan (the "2016 Plan") since December 31, 2023. As of June 30, 2024, 258,144 shares of Company common stock remained available for future grants under the 2016 Plan.
Total stock-based compensation expense was $566 thousand and $1.1 million for the three and six months ended June 30, 2024, respectively, compared to $629 thousand and $1.2 million for the three and six months ended June 30, 2023, respectively.
Stock Option Awards
The Company issued no stock options during the six months ended June 30, 2024 and June 30, 2023. As of June 30, 2024, there were 15,424 non-vested outstanding stock options that are expected to vest over the remaining weighted average vesting period of 1.4 years. The Company recognized stock-based compensation expense related to stock option awards of $27 thousand and $68 thousand for the three and six months ended June 30, 2024, respectively, compared to $46 thousand and $96 thousand for the three and six months ended June 30, 2023, respectively.
Restricted Stock Awards
Restricted stock awards are granted at the market price of the Company's common stock on the date of the grant. Employee restricted stock awards generally vest over four years in equal portions beginning on or about the first anniversary date of the restricted stock award or are performance-based restricted stock awards that vest upon the Company achieving certain predefined performance objectives. Non-employee director restricted stock awards generally vest over two years in equal portions beginning on or about the first anniversary date of the restricted stock award.
The table below provides a summary of restricted stock awards granted during the periods indicated:
| | | | | | | | | | | | | | |
| | Six months ended June 30, |
Restricted Stock Awards (number of underlying shares) | | 2024 | | 2023 |
Two-year vesting | | 17,122 | | | 9,915 | |
Four-year vesting | | 78,582 | | | 32,719 | |
Performance-based vesting | | 26,338 | | | 31,270 | |
Total restricted stock awards granted | | 122,042 | | | 73,904 | |
Weighted average grant date fair value | | $ | 24.68 | | | $ | 32.04 | |
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
Stock-based compensation expense recognized in association with stock awards, mainly restricted stock awards, amounted to $487 thousand and $889 thousand for the three and six months ended June 30, 2024, respectively, compared to $525 thousand and $932 thousand for the three and six months ended June 30, 2023, respectively.
Stock in Lieu of Directors' Fees
Non-employee members of the Company's Board of Directors (the "Board") may opt to receive newly issued shares of the Company's common stock in lieu of cash compensation for attendance at meetings of the Board and committees of the Board. Stock-based compensation expense related to these directors' fees amounted to $52 thousand and $112 thousand for the three and six months ended June 30, 2024, respectively, compared to $58 thousand and $123 thousand for the three and six months ended June 30, 2023, respectively.
(12)Earnings per Share
The table below presents the increase in average shares outstanding, using the treasury stock method, for the diluted earnings per share calculation for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Basic weighted average common shares outstanding | | 12,389,917 | | | 12,228,081 | | | 12,341,630 | | | 12,191,857 | |
Dilutive shares | | 4,546 | | | 16,782 | | | 7,943 | | | 26,878 | |
Diluted weighted average common shares outstanding | | 12,394,463 | | | 12,244,863 | | | 12,349,573 | | | 12,218,735 | |
Stock options outstanding that were determined to be anti-dilutive and therefore excluded from the calculation of dilutive shares amounted to 103,303 and 102,869 for the three and six months ended June 30, 2024, respectively, compared to 105,719 and 48,373 for the three and six months ended June 30, 2023, respectively. These stock options, which were not dilutive, may potentially dilute earnings per share in the future.
Unvested participating restricted stock awards amounted to 193,884 shares and 130,039 shares as of June 30, 2024 and December 31, 2023, respectively.
(13)Fair Value Measurements
The FASB defines the fair value of an asset or liability to be the price which a seller would receive in an orderly transaction between market participants (an exit price) and also establishes a fair value hierarchy segregating fair value measurements using three levels of inputs: (Level 1) quoted market prices in active markets for identical assets or liabilities; (Level 2) significant other observable inputs, including quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs such as interest rates and yield curves, volatilities, prepayment speeds, credit risks and default rates which provide a reasonable basis for fair value determination or inputs derived principally from observed market data; and (Level 3) significant unobservable inputs for situations in which there is little, if any, market activity for the asset or liability. Unobservable inputs must reflect reasonable assumptions that market participants would use in pricing the asset or liability, which are developed based on the best information available under the circumstances.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
The following tables summarize significant assets and liabilities carried at fair value and placement in the fair value hierarchy at the dates specified:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
| | | | Fair Value Measurements Using: |
(Dollars in thousands) | | Fair Value | | (Level 1) | | (Level 2) | | (Level 3) |
Assets measured on a recurring basis: | | | | | | | | |
Debt securities | | $ | 628,314 | | | $ | — | | | $ | 628,314 | | | $ | — | |
Equity securities | | 8,524 | | | 8,524 | | | — | | | — | |
FHLB stock | | 2,482 | | | — | | | 2,482 | | | — | |
Interest-rate swaps | | 902 | | | — | | | 902 | | | — | |
Assets measured on a non-recurring basis: | | | | | | | | |
Individually evaluated loans (collateral dependent) | | 6,436 | | | — | | | — | | | 6,436 | |
| | | | | | | | |
| | | | | | | | |
Liabilities measured on a recurring basis: | | | | | | | | |
Interest-rate swaps | | $ | 757 | | | $ | — | | | $ | 757 | | | $ | — | |
RPAs sold | | 37 | | | — | | | 37 | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | | | Fair Value Measurements Using: |
(Dollars in thousands) | | Fair Value | | (Level 1) | | (Level 2) | | (Level 3) |
Assets measured on a recurring basis: | | | | | | | | |
Debt securities | | $ | 661,113 | | | $ | — | | | $ | 661,113 | | | $ | — | |
Equity securities | | 7,058 | | | 7,058 | | | — | | | — | |
FHLB stock | | 2,402 | | | — | | | 2,402 | | | — | |
Interest-rate swaps | | 630 | | | — | | | 630 | | | — | |
Assets measured on a non-recurring basis: | | | | | | | | |
Individually evaluated loans (collateral dependent) | | 1,595 | | | — | | | — | | | 1,595 | |
| | | | | | | | |
| | | | | | | | |
Liabilities measured on a recurring basis: | | | | | | | | |
Interest-rate swaps | | $ | 1,390 | | $ | — | | | $ | 1,390 | | | $ | — | |
RPAs sold | | 65 | | — | | | 65 | | | — | |
The Company utilizes third-party pricing vendors to provide valuations on its debt securities.
The Company's equity portfolio fair value is measured based on quoted market prices for the shares; therefore, these securities are categorized as Level 1 within the fair value hierarchy.
The Bank is required to purchase FHLB stock at par value in association with advances from the FHLB. The stock is issued, redeemed, repurchased and transferred by the FHLB only at their fixed par value. This stock is classified as a restricted investment and carried at FHLB par value which management believes approximates fair value; therefore, these securities are categorized as Level 2 measures.
The fair values of derivative assets and liabilities, which are comprised of back-to-back swaps, fair value hedges and risk participation agreements, represent a FASB Level 2 measurement and are based on settlement values adjusted for credit risks and observable market interest-rate curves. The Company utilizes third-party vendors to provide valuations on its derivative assets and liabilities. Refer also to Note 8, "Derivatives and Hedging Activities," this Form 10-Q, contained above, for additional information on the Company's interest-rate swaps.
For loans individually assessed and deemed to be collateral dependent management has estimated the value and the probable credit loss by comparing the loan's amortized cost against the expected realizable fair value of the collateral (appraised value, or internal analysis, less estimated cost to sell, adjusted as necessary for changes in relevant valuation factors subsequent to the measurement date). Certain inputs used in these assessments, and possible subsequent adjustments, are not always observable,
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
and therefore, collateral dependent loans carried at realizable fair value are categorized as Level 3 within the fair value hierarchy. A specific reserve is assigned to the collateral dependent loan for the amount of management's estimated probable credit loss. The specific reserve assigned to individually evaluated loans that are collateral dependent amounted to $5.7 million at June 30, 2024, compared to $2.8 million at December 31, 2023.
The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company utilized Level 3 inputs (significant unobservable inputs for situations in which there is little, if any, market activity for the asset or liability) to determine fair value as of June 30, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | | | | | |
(Dollars in thousands) | | June 30, 2024 | | December 31, 2023 | | Valuation Technique | | Unobservable Input | | Unobservable Input Value or Range |
Assets measured on a non-recurring basis: | | | | | | | | |
Individually evaluated loans (collateral dependent) | | $ | 6,436 | | | $ | 1,595 | | | Appraisal of collateral | | Appraisal adjustments(1) | | 15% - 75% |
| | | | | | | | | | |
_______________________________
(1)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.
Estimated Fair Values of Assets and Liabilities
In addition to disclosures regarding the measurement of assets and liabilities carried at fair value on the Company's Consolidated Balance Sheets, the Company is also required to disclose fair value information about financial instruments for which it is practicable to estimate that value, whether or not recognized on the Company's Consolidated Balance Sheets.
Financial instruments for which the fair value is disclosed but not recognized on the Company's Consolidated Balance Sheets are summarized below. The table includes the carrying value, estimated fair value and its placement in the fair value hierarchy as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
| | | | | | Fair Value Measurement |
(Dollars in thousands) | | Carrying Value | | Fair Value | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs |
Financial assets: | | | | | | | | | | |
| | | | | | | | | | |
Loans, net | | $ | 3,706,650 | | | $ | 3,533,202 | | | $ | — | | | $ | — | | | $ | 3,533,202 | |
Financial liabilities: | | | | | | | | | | |
CDs | | 619,091 | | | 617,307 | | | — | | | 617,307 | | | — | |
| | | | | | | | | | |
Borrowed funds | | 61,785 | | | 59,297 | | | — | | | 59,297 | | | — | |
Subordinated debt | | 59,657 | | | 60,685 | | | — | | | 60,685 | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | | | Fair Value Measurement |
(Dollars in thousands) | | Carrying Value | | Fair Value | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs |
Financial assets: | | | | | | | | | | |
Loans held for sale | | $ | 200 | | | $ | 201 | | | $ | — | | | $ | 201 | | | $ | — | |
Loans, net | | 3,508,636 | | | 3,353,968 | | | — | | | — | | | 3,353,968 | |
Financial liabilities: | | | | | | | | | | |
CDs | | 521,076 | | | 518,928 | | | — | | | 518,928 | | | — | |
| | | | | | | | | | |
Borrowed funds | | 25,768 | | | 24,081 | | | — | | | 24,081 | | | — | |
Subordinated debt | | 59,498 | | | 55,572 | | | — | | | 55,572 | | | — | |
Excluded from the tables above are certain financial instruments with carrying values that approximated their fair value at the dates indicated, as they were short-term in nature or payable on demand. These include cash and cash equivalents, accrued interest and non-term deposit accounts. The respective carrying values of these instruments would all be classified within Level 1 in the fair value hierarchy.
| | | | | | | | |
| ENTERPRISE BANCORP, INC. Notes to the Unaudited Consolidated Interim Financial Statements | |
Also excluded from these tables are the fair values of commitments for unused portions of lines of credit and commitments to originate loans that were short-term, at current market rates and estimated to have no significant change in fair value.
(14)Supplemental Cash Flow Information
The supplemental cash flow information for the six months ended June 30, 2024 and June 30, 2023 is as follows:
| | | | | | | | | | | | | | |
| | Six months ended June 30, |
(Dollars in thousands) | | 2024 | | 2023 |
Supplemental financial data: | | | | |
Cash paid for: interest | | $ | 35,920 | | | $ | 16,187 | |
Cash paid for: income taxes | | 7,390 | | | 7,786 | |
Cash paid for: lease liability | | 709 | | | 686 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
.
Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's discussion and analysis should be read in conjunction with the Enterprise Bancorp, Inc. (the "Company," "Enterprise," "we," or "our") unaudited consolidated interim financial statements and notes thereto contained in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (this "Form 10-Q"), and the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K"), as filed with the U.S. Securities and Exchange Commission (the "SEC") on March 8, 2024.
Special Note Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking statements. Forward-looking statements may be identified by reference to a future period or periods or by use of forward-looking terminology such as "will," "should," "could," "anticipates," "believes," "expects," "intends," "may," "plans," "pursue," "views" and similar terms or expressions. We caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:
•potential recession in the United States and our market areas;
•the impacts related to or resulting from bank failures and any continuation of 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;
•failure of risk management controls and procedures;
•the adequacy of the allowance for credit losses;
•risk specific to commercial loans and borrowers;
•changes in the business cycle and downturns in the local, regional, or national economies, including changes in consumer spending and deterioration in the local real estate market, could negatively impact credit and/or asset quality and result in credit losses and increases in the Company's allowance for credit losses;
•declines in commercial real estate values and prices;
•the persistence of the current inflationary pressures, or the resurgence of elevated levels of inflation, in the United States and our market areas, and its impact on market interest rates, the economy and credit quality;
•increases in unemployment rates in the United States and our market areas;
•deterioration of capital markets, which could adversely affect the value or credit quality of the Company's assets and the availability of funding sources necessary to meet the Company's liquidity needs;
•changes in market interest rates could negatively impact the pricing of our loans and deposits and decrease our net interest income or net interest margin;
•increases in market interest rates could negatively impact bond market values and result in a lower net book value;
•our ability to successfully manage the current rising market interest-rate environment, our credit risk and the level of future non-performing assets and charge-offs;
•potential decreases or growth of assets, deposits, future non-interest expenditures and non-interest income;
•inability to maintain adequate liquidity;
•the inability to raise the necessary capital to fund our operations or to meet minimum regulatory capital levels would restrict our business and operations;
•material decreases in the amount of deposits we hold, or a failure to grow our deposit base as necessary to help fund our growth and operations;
•our ability to keep pace with technological change or difficulties when implementing new technologies;
•technology-related risk, including technological changes and technology service interruptions or failure could adversely impact the Company's operations and increase technology-related expenditures;
•cybersecurity risk, including cyber incidents or other failures, disruptions or security 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;
•increasing competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services could adversely affect the Company's competitive position within its market area and reduce demand for the Company's products and services;
•our ability to retain and increase our aggregate assets under management;
•our ability to enter new markets successfully and capitalize on growth opportunities, including the receipt of required regulatory approvals;
•damage to our reputation in the markets we serve;
•risks associated with fraudulent, negligent, or other acts by our customers, employees or vendors;
•exposure to legal claims and litigation;
•our ability to maintain an effective system of disclosure controls and procedures and internal control over financial reporting;
•inability to attract, hire and retain qualified management personnel;
•recent and future changes in laws and regulations that apply to the Company's business and operations, and any additional regulations, or repeals that may be forthcoming as a result thereof, which could cause the Company to incur additional costs and adversely affect the Company's business environment, operations and financial results;
•future regulatory compliance costs, including any increase caused by new regulations imposed by the government;
•our ability to navigate the uncertain impacts of quantitative tightening and current and future governmental monetary and fiscal policies, including the current and future policies of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board");
•changes in tariffs and trade barriers;
•uncertainty regarding United States fiscal debt and budget matters;
•severe weather, natural disasters, acts of war or terrorism, geopolitical instability or other external events;
•our ability to comply with supervisory actions by federal and state banking agencies;
•changes in the scope and cost of FDIC insurance and other coverage;
•changes in accounting and/or auditing standards, policies and practices, as may be adopted or established by the regulatory agencies, FASB, or the Public Company Accounting Oversight Board could negatively impact the Company's financial results; and
•systemic risks associated with the soundness of other financial institutions.
The Company cautions readers that the forward-looking statements in this Form 10-Q reflect numerous assumptions that management believes to be reasonable, but which are inherently uncertain and beyond the Company's control. Forward-looking statements involve a number of risks and uncertainties that could cause the Company's actual results to differ materially from those expressed in, or implied by, the forward-looking statement. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and readers should not place undue reliance on such forward-looking information and statements. Any forward-looking statements in this Form 10-Q are based on information available to the Company as of the date of this Form 10-Q, and the Company undertakes no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Overview
Executive Summary
The Company operates with a long-term outlook, focused on organic growth supported by continually investing in our people, products, services, technology and branches.
Key Financial Highlights
Key financial results at or for the quarter ended June 30, 2024 compared to March 31, 2024 were as follows:
•The returns on average assets and average equity were 0.82% and 11.55%, respectively.
•Net interest margin (non-GAAP) was 3.19%, a decrease of 1 basis point.
•Net interest income increased 2.8%.
•Total loans and total deposits increased 3.1% and 3.5%, respectively.
•Wealth assets under management and administration amounted to $1.40 billion, an increase of 1.7%.
Net income for the three months ended June 30, 2024, amounted to $9.5 million, or $0.77 per diluted common share, compared to $9.7 million, or $0.79 per diluted common share, for the three months ended June 30, 2023. The decrease in net income of $172 thousand was attributable primarily to a decrease in net interest income of $1.9 million and an increase in non-interest expense of $3.4 million, partially offset by a decrease in the provision for credit losses of $2.1 million and an increase in non-interest income of $2.8 million.
Net income for the six months ended June 30, 2024, amounted to $18.0 million, or $1.46 per diluted common share, compared to $20.5 million, or $1.67 per diluted common share, for the six months ended June 30, 2023. The decrease in net income of $2.4 million was attributable primarily to a decrease in net interest income of $6.7 million and an increase in non-interest expense of $4.3 million, partially offset by a decrease in the provision for credit losses of $4.2 million and an increase in non-interest income of $3.5 million.
Total assets amounted to $4.77 billion at June 30, 2024, compared to $4.47 billion at December 31, 2023, an increase of $307.6 million, or 7%. The increase was due primarily to an increase in total loans of $201.0 million, or 6%, with growth primarily in commercial real estate loans. In addition, there was an increase in interest-earning deposits with banks of $132.2 million due primarily to deposit growth and, to a lesser extent, investment cash flows and an increase in borrowed funds during the six months ended June 30, 2024.
Credit quality remained well-managed at June 30, 2024 with the non-performing loan to total loan ratio amounting to 0.47% compared to 0.32% at December 31, 2023. The increase in non-performing loans resulted primarily from one individually evaluated commercial construction loan which was placed on non-accrual in the first quarter of 2024. The ACL for loans to total loans ratio was 1.65% at both June 30, 2024 and December 31, 2023.
Total deposits amounted to $4.25 billion at June 30, 2024, an increase of $271.3 million, or 7%, compared to December 31, 2023, due primarily to increases in money market and certificate of deposit balances of $101.6 million and $98.0 million, respectively.
Shareholders' equity increased $11.3 million, or 3%, during the six months ended June 30, 2024, due primarily to an increase in retained earnings of $12.1 million, partially offset by an increase in the accumulated other comprehensive loss of $2.5 million.
Selected Financial Data and Ratios
The following table sets forth selected financial data and ratios for the Company at or for the three-month periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At or for the three months ended |
(Dollars in thousands, except per share data) | | June 30, 2024 | | March 31, 2024 | | December 31, 2023 | | September 30, 2023 | | June 30, 2023 |
Balance Sheet Data | | | | | | | | | | |
Total cash and cash equivalents | | $ | 199,719 | | $ | 147,834 | | $ | 56,592 | | $ | 225,421 | | $ | 258,825 |
Total investment securities at fair value | | 636,838 | | 652,026 | | 668,171 | | 678,932 | | 712,851 |
Total loans | | 3,768,649 | | 3,654,322 | | 3,567,631 | | 3,404,014 | | 3,345,667 |
Allowance for credit losses | | (61,999) | | (60,741) | | (58,995) | | (57,905) | | (56,899) |
Total assets | | 4,773,681 | | 4,624,015 | | 4,466,034 | | 4,482,374 | | 4,502,344 |
Total deposits | | 4,248,801 | | 4,106,119 | | 3,977,521 | | 4,060,403 | | 4,075,598 |
Borrowed funds | | 61,785 | | 63,246 | | 25,768 | | 4,290 | | 3,334 |
Subordinated debt | | 59,657 | | 59,577 | | 59,498 | | 59,419 | | 59,340 |
Total shareholders' equity | | 340,441 | | 333,439 | | 329,117 | | 299,699 | | 307,490 |
Total liabilities and shareholders' equity | | 4,773,681 | | 4,624,015 | | 4,466,034 | | 4,482,374 | | 4,502,344 |
| | | | | | | | | | |
Wealth Management | | | | | | | | | | |
Wealth assets under management | | $ | 1,129,147 | | $ | 1,105,036 | | $ | 1,077,761 | | $ | 984,647 | | $ | 1,009,386 |
Wealth assets under administration | | $ | 267,529 | | $ | 268,074 | | $ | 242,338 | | $ | 211,046 | | $ | 214,116 |
| | | | | | | | | | |
Shareholders' Equity Ratios | | | | | | | | | | |
Book value per common share | | $ | 27.40 | | $ | 26.94 | | $ | 26.82 | | $ | 24.45 | | $ | 25.11 |
Dividends paid per common share | | $ | 0.24 | | $ | 0.24 | | $ | 0.23 | | $ | 0.23 | | $ | 0.23 |
| | | | | | | | | | |
Regulatory Capital Ratios | | | | | | | | | | |
Total capital to risk-weighted assets | | 13.07 | % | | 13.20 | % | | 13.12 | % | | 13.45 | % | | 13.37 | % |
Tier 1 capital to risk-weighted assets(1) | | 10.34 | % | | 10.43 | % | | 10.34 | % | | 10.61 | % | | 10.52 | % |
Tier 1 capital to average assets | | 8.76 | % | | 8.85 | % | | 8.74 | % | | 8.59 | % | | 8.62 | % |
| | | | | | | | | | |
| | | | | | | | | | |
Credit Quality Data | | | | | | | | | | |
Non-performing loans | | $ | 17,731 | | $ | 18,527 | | $ | 11,414 | | $ | 11,656 | | $ | 7,647 |
| | | | | | | | | | |
| | | | | | | | | | |
Non-performing loans to total loans | | 0.47 | % | | 0.51 | % | | 0.32 | % | | 0.34 | % | | 0.23 | % |
Non-performing assets to total assets(2) | | 0.37 | % | | 0.40 | % | | 0.26 | % | | 0.26 | % | | 0.17 | % |
ACL for loans to total loans | | 1.65 | % | | 1.66 | % | | 1.65 | % | | 1.70 | % | | 1.70 | % |
Net (recoveries) charge-offs | | $ | (130) | | $ | 122 | | $ | 15 | | $ | (12) | | $ | 146 |
| | | | | | | | | | |
Income Statement Data | | | | | | | | | | |
Net interest income | | $ | 36,161 | | $ | 35,190 | | $ | 36,518 | | $ | 38,502 | | $ | 38,093 |
Provision for credit losses | | 137 | | 622 | | 2,493 | | 1,752 | | 2,268 |
Total non-interest income | | 5,628 | | 5,495 | | 5,547 | | 4,486 | | 2,819 |
Total non-interest expense | | 29,029 | | 28,908 | | 28,224 | | 28,312 | | 25,623 |
Income before income taxes | | 12,623 | | 11,155 | | 11,348 | | 12,924 | | 13,021 |
Provision for income taxes | | 3,111 | | 2,648 | | 3,441 | | 3,225 | | 3,337 |
Net income | | $ | 9,512 | | $ | 8,507 | | $ | 7,907 | | $ | 9,699 | | $ | 9,684 |
| | | | | | | | | | |
Income Statement Ratios | | | | | | | | | | |
Diluted earnings per common share | | $ | 0.77 | | $ | 0.69 | | $ | 0.64 | | $ | 0.79 | | $ | 0.79 |
Return on average total assets | | 0.82 | % | | 0.75 | % | | 0.69 | % | | 0.85 | % | | 0.88 | % |
Return on average shareholders' equity | | 11.55 | % | | 10.47 | % | | 10.21 | % | | 12.53 | % | | 12.63 | % |
Net interest margin (tax-equivalent)(3) | | 3.19 | % | | 3.20 | % | | 3.29 | % | | 3.46 | % | | 3.55 | % |
_______________________________________________________
(1)Ratio also represents common equity tier 1 capital to risk-weighted assets as of the periods presented.
(2)The Company had no OREO as of the periods presented, and therefore, non-performing loans were the only component of non-performing assets.
(3)Tax-equivalent net interest margin (non-GAAP) 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.
Risk Management Framework
Management utilizes a comprehensive enterprise risk management framework that enables a coordinated and structured approach for identifying, assessing and managing risks across the Company and provides reasonable assurance that management has the tools, programs, people and processes in place to support informed decision making, anticipate risks before they materialize and maintain the Company's risk profile consistent with its strategic planning, and applicable laws and regulations.
See Part I, Item 1, "Business," under the "Risk Management Framework," of the Company's 2023 Annual Report on Form 10-K, for additional information on the Company's key risk mitigation strategies, and Part I, Item 1A, "Risk Factors," and Item 1C, "Cybersecurity," sections of the Company's 2023 Annual Report on Form 10-K for numerous factors that could adversely affect the Company's future results of operations and financial condition, and its reputation and business model.
Accounting Policies/Critical Accounting Estimates
As discussed in the Company's 2023 Annual Report on Form 10-K and in this Form 10-Q, the most significant areas in which management applies critical assumptions and estimates are: the ACL for loans and available-for-sale securities, the reserve for unfunded commitments and the impairment review of goodwill.
The Company has not materially changed its significant accounting and reporting policies from those disclosed in the Company's 2023 Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Note 1, Item (b), "Recent Accounting Pronouncements," to the Company's unaudited consolidated interim financial statements in this Form 10-Q for information regarding recent accounting pronouncements.
Results of Operations for the three months ended June 30, 2024 compared to the three months ended June 30, 2023
Unless otherwise indicated, the reported results are for the three months ended June 30, 2024, with references to the "prior year period" and "comparable period" being the three months ended June 30, 2023. Average yields are presented on an annualized tax-equivalent basis (non-GAAP).
Net Income
Net income for the three months ended June 30, 2024, amounted to $9.5 million, a decrease of $172 thousand, or 2%.
Net Interest Income
Net interest income amounted to $36.2 million, a decrease of $1.9 million, or 5%. The decrease was due primarily to an increase in deposit interest expense of $9.5 million and a decrease in interest and dividend income on investments of $1.0 million, partially offset by an increase in loan interest income of $9.4 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 3.19% for the three months ended June 30, 2024, compared to 3.55%.
Net interest margin compared to the prior year quarter was impacted by the following factors:
•Average other interest-earning assets decreased $32.0 million, or 21%, while the yield increased 58 basis points.
•Average investment securities decreased $167.1 million, or 18%, and the tax-equivalent yield decreased 10 basis points.
•Average total loans increased $439.9 million, or 13%, and the tax-equivalent yield increased 43 basis points.
•Average total deposits increased $152.7 million, and the yield increased 88 basis points.
•Average borrowed funds increased $57.9 million, and the yield increased 169 basis points.
The decrease in net interest margin over the respective periods was due primarily to an increase in funding costs, partially offset by increases in loan and other interest-earning asset yields in addition to loan growth. Funding costs were impacted primarily by elevated market interest rates, increased competition for deposits and changes in deposit mix as depositors sought higher yielding money market and certificate of deposit products. Loan yields increased from loans originating and repricing at higher market rates.
Interest-rate risk is reviewed in detail in Item 3, "Quantitative and Qualitative Disclosures About Market Risk," below.
Rate / Volume Analysis
The following table sets forth, on a tax-equivalent basis, the extent to which changes in interest rates and changes in the average balances of interest-earning assets and interest-bearing liabilities have affected interest income and expense during the three months ended June 30, 2024, compared to June 30, 2023. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) volume (change in average portfolio balance multiplied by prior period average rate); and (2) interest-rate (change in average interest-rate multiplied by prior period average balance). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on absolute value to the changes due to volume and the changes due to rate.
| | | | | | | | | | | | | | | | | | | | |
| | | | Increase (decrease) due to |
(Dollars in thousands) | | Net Change | | Volume | | Rate |
Interest income | | | | | | |
Other interest-earning assets(1) | | $ | (220) | | | $ | (426) | | | $ | 206 | |
Investment securities (tax-equivalent) | | (1,132) | | | (912) | | | (220) | |
Loans and loans held for sale (tax-equivalent) | | 9,436 | | | 5,813 | | | 3,623 | |
Total interest-earning assets (tax-equivalent) | | 8,084 | | | 4,475 | | | 3,609 | |
Interest expense | | | | | | |
Interest checking, savings and money market | | 5,501 | | | 490 | | | 5,011 | |
CDs | | 3,979 | | | 1,894 | | | 2,085 | |
| | | | | | |
Borrowed funds | | 634 | | | 603 | | | 31 | |
Subordinated debt | | — | | | 5 | | | (5) | |
Total interest-bearing funding | | 10,114 | | | 2,992 | | | 7,122 | |
Change in net interest income (tax-equivalent) | | $ | (2,030) | | | $ | 1,483 | | | $ | (3,513) | |
__________________________________________
(1)Income on other interest-earning assets includes interest on deposits and fed funds sold, and dividends on FHLB stock.
The following table presents the Company's average balance sheet, net interest income and average rates for the three months ended June 30, 2024 and 2023:
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, 2024 | | Three months ended June 30, 2023 |
(Dollars in thousands) | | Average Balance | | Interest(1) | | Average Yield(1) | | Average Balance | | Interest(1) | | Average Yield(1) |
Assets: | | | | | | | | | | | | |
Other interest-earning assets(2) | | $ | 123,887 | | | $ | 1,697 | | | 5.51 | % | | $ | 155,934 | | | $ | 1,917 | | | 4.93 | % |
Investment securities(3) (tax-equivalent) | | 750,822 | | | 4,057 | | | 2.16 | % | | 917,965 | | | 5,189 | | | 2.26 | % |
Loans and loans held for sale(4) (tax-equivalent) | | 3,708,485 | | | 51,366 | | | 5.57 | % | | 3,268,586 | | | 41,930 | | | 5.14 | % |
Total interest-earnings assets (tax-equivalent) | | 4,583,194 | | | 57,120 | | | 5.01 | % | | 4,342,485 | | | 49,036 | | | 4.53 | % |
Other assets | | 96,991 | | | | | | | 92,909 | | | | | |
Total assets | | $ | 4,680,185 | | | | | | | $ | 4,435,394 | | | | | |
| | | | | | | | | | | | |
Liabilities and stockholders' equity: | | | | | | | | | | | | |
Non-interest checking | | $ | 1,054,932 | | | $ | — | | | | | $ | 1,269,339 | | | $ | — | | | |
Interest checking, savings and money market | | 2,510,155 | | | 12,381 | | | 1.98 | % | | 2,351,011 | | | 6,880 | | | 1.17 | % |
CDs | | 601,339 | | | 6,791 | | | 4.54 | % | | 393,387 | | | 2,812 | | | 2.87 | % |
| | | | | | | | | | | | |
Total deposits | | 4,166,426 | | | 19,172 | | | 1.85 | % | | 4,013,737 | | | 9,692 | | | 0.97 | % |
Borrowed funds | | 62,513 | | | 664 | | | 4.27 | % | | 4,595 | | | 30 | | | 2.58 | % |
Subordinated debt(5) | | 59,609 | | | 867 | | | 5.82 | % | | 59,293 | | | 867 | | | 5.85 | % |
Total funding liabilities | | 4,288,548 | | | 20,703 | | | 1.94 | % | | 4,077,625 | | | 10,589 | | | 1.04 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Other liabilities | | 60,270 | | | | | | | 50,113 | | | | | |
Total liabilities | | 4,348,818 | | | | | | | 4,127,738 | | | | | |
Stockholders' equity | | 331,367 | | | | | | | 307,656 | | | | | |
Total liabilities and stockholders' equity | | $ | 4,680,185 | | | | | | | $ | 4,435,394 | | | | | |
| | | | | | | | | | | | |
Net interest-rate spread (tax-equivalent) | | | | | | 3.07 | % | | | | | | 3.49 | % |
Net interest income (tax-equivalent) | | | | 36,417 | | | | | | | 38,447 | | | |
Net interest margin (tax-equivalent) | | | | | | 3.19 | % | | | | | | 3.55 | % |
Less tax-equivalent adjustment | | | | 256 | | | | | | | 354 | | | |
Net interest income | | | | $ | 36,161 | | | | | | | $ | 38,093 | | | |
Net interest margin | | | | | | 3.17 | % | | | | | | 3.52 | % |
________________________________________
(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 2024 and 2023, 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 FHLB stock.
(3)Average investments securities are presented at average amortized cost.
(4)Average loans and loans held for sale are presented at amortized cost and include non-accrual loans.
(5)The subordinated debt is net of average deferred debt issuance costs.
Provision for Credit Losses
The provision for credit losses for the three-month periods ended June 30, 2024 and June 30, 2023 are presented below:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Increase / (Decrease) | | |
(Dollars in thousands) | | June 30, 2024 | | June 30, 2023 | | | | |
Provision for credit losses on loans - collectively evaluated | | $ | (230) | | | $ | 2,210 | | | $ | (2,440) | | | | | |
Provision for credit losses on loans - individually evaluated | | 1,358 | | | (167) | | | 1,525 | | | | | |
Provision for credit losses on loans | | 1,128 | | | 2,043 | | | (915) | | | | | |
| | | | | | | | | | |
Provision for unfunded commitments | | (991) | | | 225 | | | (1,216) | | | | | |
| | | | | | | | | | |
Provision for credit losses | | $ | 137 | | | $ | 2,268 | | | $ | (2,131) | | | | | |
The decrease in the provision for credit losses on loans of $915 thousand was due primarily to the impact of a reduction in recession risk within our ACL model, partially offset by an increase in reserves on individually evaluated loans. The decrease in the provision for unfunded commitments of $1.2 million was driven primarily by a reduction in off-balance sheet commitments during the period.
The ACL to total loans ratio was 1.65% at June 30, 2024 compared to 1.70% at June 30, 2023.
Non-Interest Income
Non-interest income for the three months ended June 30, 2024, amounted to $5.6 million, an increase of $2.8 million. Non-interest income in the prior year period included losses on sales of debt securities of $2.4 million. Excluding this item, non-interest income for the three months ended June 30, 2024 increased 7% due primarily to increases in wealth management fees and income on bank-owned life insurance.
Non-Interest Expense
Non-interest expense for the three months ended June 30, 2024, amounted to $29.0 million, an increase of $3.4 million, or 13%. Non-interest expense in the prior year period was impacted by the receipt of $3.4 million in Employee Retention Credits which the Company recognized as a reduction to salary and benefits expense. Excluding this item, non-interest expense for the three months ended June 30, 2024 decreased $25 thousand.
Income Taxes
The effective tax rate for the three months ended June 30, 2024, was 24.6%, compared to 25.6% for the three months ended June 30, 2023.
Results of Operations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023
Unless otherwise indicated, the reported results are for the six months ended June 30, 2024, with references to the "prior year period," and "comparable period" being the six months ended June 30, 2023. Average yields are presented on an annualized tax-equivalent basis (non-GAAP).
Net Income
Net income for the six months ended June 30, 2024, amounted to $18.0 million, a decrease of $2.4 million, or 12%.
Net Interest Income
Net interest income for the six months ended June 30, 2024, amounted to $71.4 million, a decrease of $6.7 million, or 9%. The decrease was due largely to an increase in deposit interest expense of $20.8 million and a decrease in interest and dividend income on investments of $2.1 million, partially offset by an increase in loan interest income of $18.7 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 3.19% for the six months ended June 30, 2024, compared to 3.65%.
Net interest margin compared to the prior year period was impacted by the following factors:
•Average other interest-earning assets decreased $72.2 million, or 41%, while the yield increased 81 basis points.
•Average investment securities decreased $170.4 million, or 18%, and the tax-equivalent yield decreased 9 basis points.
•Average total loans increased $423.4 million, or 13%, and the tax-equivalent yield increased 43 basis points.
•Average total deposits increased $90.0 million, or 2%, and the yield increased 100 basis points.
•Average borrowed funds increased $59.2 million, and the yield increased 216 basis points.
The decrease in net interest margin over the respective periods was due primarily to an increase in funding costs, partially offset by increases in loan yields in addition to loan growth. Funding costs were impacted primarily by elevated market interest rates, increased competition for deposits and changes in deposit mix as depositors sought higher yielding money market and certificate of deposit products. Loan yields increased from loans originating and repricing at higher market rates.
Interest-rate risk is reviewed in detail in Item 3, "Quantitative and Qualitative Disclosures About Market Risk," below.
Rate / Volume Analysis
The following table sets forth, on a tax-equivalent basis, the extent to which changes in interest rates and changes in the average balances of interest-earning assets and interest-bearing liabilities have affected interest income and expense during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (i) volume (change in average portfolio balance multiplied by prior year average rate); and (ii) interest rate (change in average interest rate multiplied by prior year average balance). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on absolute value to the changes due to volume and the changes due to rate.
| | | | | | | | | | | | | | | | | | | | | |
| | | | Increase (decrease) due to | |
(Dollars in thousands) | | Net Change | | Volume | | Rate | |
Interest income | | | | | | | |
Other interest-earning assets(1) | | $ | (1,256) | | | $ | (1,885) | | | $ | 629 | | |
Investment securities (tax-equivalent) | | (2,275) | | | (1,871) | | | (404) | | |
Loans and loans held for sale (tax-equivalent) | | 18,717 | | | 11,202 | | | 7,515 | | |
Total interest-earning assets (tax-equivalent) | | 15,186 | | | 7,446 | | | 7,740 | | |
| | | | | | | |
Interest expense | | | | | | | |
Interest checking, savings and money market | | 12,752 | | | 544 | | | 12,208 | | |
CDs | | 8,013 | | | 3,569 | | | 4,444 | | |
| | | | | | | |
Borrowed funds | | 1,316 | | | 1,235 | | | 81 | | |
Subordinated debt | | — | | | 9 | | | (9) | | |
Total interest-bearing funding | | 22,081 | | | 5,357 | | | 16,724 | | |
Change in net interest income (tax-equivalent) | | $ | (6,895) | | | $ | 2,089 | | | $ | (8,984) | | |
__________________________________________
(1)Income on other interest-earning assets includes interest on deposits with banks, federal funds sold, and dividends on FHLB stock.
The following table presents the Company's average balance sheet, net interest income and average rates for the six months ended June 30, 2024 and 2023:
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2024 | | Six months ended June 30, 2023 |
(Dollars in thousands) | | Average Balance | | Interest(1) | | Average Yield(1) | | Average Balance | | | Interest(1) | | | Average Yield(1) |
Assets: | | | | | | | | | | | | | | |
Other interest-earning assets(2) | | $ | 104,982 | | | $ | 2,869 | | | 5.50 | % | | $ | 177,219 | | | | $ | 4,125 | | | | 4.69 | % |
Investment securities(3) (tax-equivalent) | | 757,257 | | | 8,214 | | | 2.17 | % | | 927,620 | | | | 10,489 | | | | 2.26 | % |
Loans and loans held for sale(4) (tax-equivalent) | | 3,658,321 | | | 100,326 | | | 5.51 | % | | 3,234,901 | | | | 81,609 | | | | 5.08 | % |
Total interest-earnings assets (tax-equivalent) | | 4,520,560 | | | 111,409 | | | 4.95 | % | | 4,339,740 | | | | 96,223 | | | | 4.47 | % |
Other assets | | 94,393 | | | | | | | 89,762 | | | | | | | |
Total assets | | $ | 4,614,953 | | | | | | | $ | 4,429,502 | | | | | | | |
| | | | | | | | | | | | | | |
Liabilities and stockholders' equity: | | | | | | | | | | | | | | |
Non-interest checking | | $ | 1,062,038 | | | $ | — | | | | | $ | 1,293,303 | | | | $ | — | | | | |
Interest checking, savings and money market | | 2,464,551 | | | 23,737 | | | 1.94 | % | | 2,352,978 | | | | 10,985 | | | | 0.94 | % |
CDs | | 575,218 | | | 12,707 | | | 4.44 | % | | 365,529 | | | | 4,694 | | | | 2.59 | % |
| | | | | | | | | | | | | | |
Total deposits | | 4,101,807 | | | 36,444 | | | 1.79 | % | | 4,011,810 | | | | 15,679 | | | | 0.79 | % |
Borrowed funds | | 63,070 | | | 1,358 | | | 4.33 | % | | 3,904 | | | | 42 | | | | 2.17 | % |
Subordinated debt(5) | | 59,570 | | | 1,734 | | | 5.82 | % | | 59,253 | | | | 1,734 | | | | 5.85 | % |
Total funding liabilities | | 4,224,447 | | | 39,536 | | | 1.88 | % | | 4,074,967 | | | | 17,455 | | | | 0.86 | % |
Other liabilities | | 61,385 | | | | | | | 51,880 | | | | | | | |
Total liabilities | | 4,285,832 | | | | | | | 4,126,847 | | | | | | | |
Stockholders' equity | | 329,121 | | | | | | | 302,655 | | | | | | | |
Total liabilities and stockholders' equity | | $ | 4,614,953 | | | | | | | $ | 4,429,502 | | | | | | | |
| | | | | | | | | | | | | | |
Net interest-rate spread (tax-equivalent) | | | | | | 3.07 | % | | | | | | | | 3.61 | % |
Net interest income (tax-equivalent) | | | | 71,873 | | | | | | | | 78,768 | | | | |
Net interest margin (tax-equivalent) | | | | | | 3.19 | % | | | | | | | | 3.65 | % |
Less tax-equivalent adjustment | | | | 522 | | | | | | | | 704 | | | | |
Net interest income | | | | $ | 71,351 | | | | | | | | $ | 78,064 | | | | |
Net interest margin | | | | | | 3.17 | % | | | | | | | | 3.62 | % |
_______________________________________
(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 2024 and 2023, 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 FHLB stock.
(3)Average investments securities are presented at average amortized cost.
(4)Average loans and loans held for sale are presented at amortized cost and include non-accrual loans.
(5)The subordinated debt is net of average deferred debt issuance costs.
Provision for Credit Losses
The provision for credit losses for the six-month periods ended June 30, 2024 and June 30, 2023 are presented below:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended | | Increase / (Decrease) | | |
(Dollars in thousands) | | June 30, 2024 | | June 30, 2023 | | | | |
Provision for credit losses on loans - collectively evaluated | | $ | 187 | | | $ | 4,570 | | | $ | (4,383) | | | | | |
Provision for credit losses on loans - individually evaluated | | 2,809 | | | (209) | | | 3,018 | | | | | |
Provision for credit losses on loans | | 2,996 | | | 4,361 | | | (1,365) | | | | | |
| | | | | | | | | | |
Provision for unfunded commitments | | (2,237) | | | 643 | | | (2,880) | | | | | |
| | | | | | | | | | |
Provision for credit losses | | $ | 759 | | | $ | 5,004 | | | $ | (4,245) | | | | | |
The decrease in the provision for credit losses on loans of $1.4 million was due primarily to the impact of a reduction in recession risk within our ACL model, partially offset by an increase in reserves on individually evaluated loans. The decrease in the provision for unfunded commitment of $2.9 million was driven primarily by a reduction in off-balance sheet commitments during the period.
The ACL to total loans ratio was 1.65% at June 30, 2024 compared to 1.70% at June 30, 2023.
Non-Interest Income
Non-interest income for the six months ended June 30, 2024, amounted to $11.1 million, an increase of $3.5 million, or 47%. Non-interest income in the prior year period included losses on sales of debt securities of $2.4 million. Excluding this item, non-interest income for the six months ended June 30, 2024 increased 11% due primarily to increases in net gains on equity securities, wealth management fees and income on bank-owned life insurance.
Non-Interest Expense
Non-interest expense for the six months ended June 30, 2024, amounted to $57.9 million, an increase of $4.3 million, or 8%. Non-interest expense in the prior year period was impacted by the receipt of $3.6 million in Employee Retention Credits which the Company recognized as a reduction to salary and benefits expense. Excluding this item, non-interest expense for the six months ended June 30, 2024 increased 1%.
Income Taxes
The effective tax rate was 24.2% for both of the six-month periods ended June 30, 2024 and June 30, 2023.
Financial Condition at June 30, 2024 compared to December 31, 2023
Total assets amounted to $4.77 billion at June 30, 2024, compared to $4.47 billion at December 31, 2023, representing an increase of $307.6 million, or 7%.
Cash and cash equivalents
Cash and cash equivalents amounted to $199.7 million at June 30, 2024, compared to $56.6 million at December 31, 2023, representing an increase of $143.1 million. The increase was due primarily to increases in deposits and proceeds from borrowed funds, partially offset by loan growth. At June 30, 2024, cash and cash equivalents amounted to 4% of total assets compared to 1% at December 31, 2023.
Investments
At June 30, 2024, the fair value of the Company's investment securities portfolio amounted to $636.8 million, a decrease of $31.3 million, or 5% since December 31, 2023. The investment securities portfolio at fair value represented 13% and 15% of total assets at June 30, 2024 and December 31, 2023, respectively. The decrease was attributable primarily to principal pay downs, calls and maturities during the six months ended June 30, 2024, the proceeds of which were used to fund loan growth. As of June 30, 2024 and December 31, 2023, the Company's investment securities portfolio was comprised primarily of debt securities, classified as available-for-sale, with a small portion of the portfolio invested in equity securities.
During the six months ended June 30, 2024, the Company had no purchases or sales of debt securities and had principal pay-downs, calls and maturities totaling $29.1 million.
Net unrealized losses on the Company's debt securities portfolio amounted to $106.2 million at June 30, 2024, compared to $102.9 million at December 31, 2023.
The mix of investment securities remained relatively unchanged at June 30, 2024 compared to December 31, 2023. The effective duration of the debt securities portfolio at June 30, 2024 was approximately 4.9 years compared to 5.1 years at December 31, 2023.
Loans
The Company specializes in lending to business entities, non-profit organizations, professional practices and individuals and manages its loan portfolio to avoid concentration by industry, relationship size and source of repayment to lessen its credit risk exposure. The Company's primary market area remains focused within Massachusetts and New Hampshire and its primary lending focus is on the development of high-quality, long-term commercial relationships achieved through active business development efforts, strong community involvement and focused marketing strategies.
As of June 30, 2024, total loans amounted to $3.77 billion, an increase of $201.0 million, or 6%. At June 30, 2024 and December 31, 2023, total commercial loans amounted to 86% of total loans.
The following table sets forth the loan balances by loan portfolio segment and the percentage of each segment to total loans as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 | | |
(Dollars in thousands) | | Amount | | Percent | | Amount | | Percent | | | | |
Commercial real estate owner-occupied | | $ | 660,478 | | | 18 | % | | $ | 619,302 | | | 17 | % | | | | |
Commercial real estate non owner-occupied | | 1,544,386 | | | 41 | % | | 1,445,435 | | | 41 | % | | | | |
| | | | | | | | | | | | |
Commercial and industrial | | 426,976 | | | 11 | % | | 430,749 | | | 12 | % | | | | |
Commercial construction | | 622,094 | | | 16 | % | | 585,113 | | | 16 | % | | | | |
| | | | | | | | | | | | |
Total commercial loans | | 3,253,934 | | | 86 | % | | 3,080,599 | | | 86 | % | | | | |
Residential mortgages | | 413,323 | | | 11 | % | | 393,142 | | | 11 | % | | | | |
Home equity | | 93,220 | | | 3 | % | | 85,375 | | | 3 | % | | | | |
Consumer | | 8,172 | | | — | % | | 8,515 | | | — | % | | | | |
Total retail loans | | 514,715 | | | 14 | % | | 487,032 | | | 14 | % | | | | |
Total loans | | 3,768,649 | | | 100 | % | | 3,567,631 | | | 100 | % | | | | |
Allowance for credit losses | | (61,999) | | | | | (58,995) | | | | | | | |
Net loans | | $ | 3,706,650 | | | | | $ | 3,508,636 | | | | | | | |
As of or for the six months ended June 30, 2024:
•Commercial real estate owner-occupied loans increased $41.2 million, or 7%.
•Commercial real estate non owner-occupied loans increased $99.0 million, or 7%.
•The composition of owner and non-owner occupied loans within the commercial real estate segment has remained relatively consistent compared to December 31, 2023. Commercial real estate loans collectively make up 59% of the total loan portfolio and were comprised of approximately 30% in owner occupied loans and 70% in non-owner occupied loans. Growth since the prior period was primarily from continued customer demand and business development efforts.
◦Non-owner occupied commercial real estate loans were comprised of approximately 28% multi-family, 16% 1-4 family, 12% office, 11% retail and 10% in industrial warehouse. All other categories fell below 10% of total non-owner occupied commercial real estate loans.
◦Non-owner occupied commercial real estate loans secured by office buildings amounted to 5% of total loans and were located mainly in suburban areas and were modest in physical size.
◦Non-owner occupied commercial real estate loans secured by retail amounted to 5% of total loans and consisted primarily of local strip-mall plazas and not large shopping centers or mall complexes.
•Commercial and industrial loans decreased $3.8 million, or 1%.
•Commercial construction loans increased $37.0 million, or 6%, due to continued growth driven primarily by residential development projects to meet the strong demand in our market area, partially offset by the transfer of construction loans to the permanent commercial real estate segment.
◦The composition of the commercial construction segment has remained relatively consistent compared to December 31, 2023.
◦Commercial construction loans were comprised of approximately 26% multi-family, 19% residential condominiums, 14% land approved for development and 13% single residential lots. All other collateral categories fell below 10% of total commercial construction loans.
At June 30, 2024, commercial loan balances participated out to various banks amounted to $73.0 million, compared to $69.8 million at December 31, 2023. These commercial loan balances participated out to other institutions are not carried as assets on the Company's financial statements. Commercial loans originated by other banks in which the Company is a participating institution are carried at the pro-rata share of ownership and amounted to $148.1 million and $126.6 million at June 30, 2024 and December 31, 2023, respectively.
Asset Quality
The following table sets forth information regarding the Company's loan portfolio asset quality as of the dates indicated:
| | | | | | | | | | | | | | | | |
(Dollars in thousands) | | June 30, 2024 | | December 31, 2023 | | |
Non-performing loan summary: | | | | | | |
Commercial real estate owner-occupied | | $ | 2,376 | | $ | 2,683 | | |
Commercial real estate non owner-occupied | | 2,432 | | 2,686 | | |
Commercial and industrial | | 3,703 | | 4,262 | | |
Commercial construction | | 7,906 | | — | | |
Residential mortgages | | 1,249 | | 1,526 | | |
Home equity | | 65 | | 257 | | |
Consumer | | — | | — | | |
| | | | | | |
| | | | | | |
| | | | | | |
Total non-performing loans | | $ | 17,731 | | $ | 11,414 | | |
| | | | | | |
| | | | | | |
| | | | | | |
Performing adversely classified loans | | $ | 31,417 | | $ | 45,266 | | |
| | | | | | |
Total adversely classified loans | | $ | 49,079 | | $ | 56,650 | | |
| | | | | | |
Total loans | | $ | 3,768,649 | | $ | 3,567,631 | | |
| | | | | | |
Loans 60-89 days past due and still accruing to total loans | | 0.02 | % | | — | % | | |
Non-performing loans to total loans | | 0.47 | % | | 0.32 | % | | |
Non-performing assets to total assets | | 0.37 | % | | 0.26 | % | | |
Allowance for credit losses for loans | | $ | 61,999 | | $ | 58,995 | | |
Allowance for credit losses for loans to non-performing loans | | 349.66 | % | | 516.87 | % | | |
Allowance for credit losses for loans to total loans | | 1.65 | % | | 1.65 | % | | |
| | | | | | |
| | | | | | |
Non-performing loans that were not adversely classified amounted to $69 thousand and $30 thousand at June 30, 2024 and December 31, 2023, respectively, and represented the guaranteed portion of SBA loans.
The increase in non-performing loans from December 31, 2023 to June 30, 2024 was attributable primarily to one individually evaluated commercial construction relationship, which was downgraded and placed on non-accrual in the first quarter of 2024, and had an outstanding balance of $7.9 million and a specific reserve of $2.6 million at June 30, 2024. The project, which was approximately 50% completed by the original borrower, is expected to be completed over the next 6-12 months by an existing partner taking over as lead.
Total adversely classified loans decreased $7.6 million during the six months ended June 30, 2024 and amounted to $49.1 million, or 1.30%, of total loans at June 30, 2024, compared to $56.7 million, or 1.59% of total loans, at December 31, 2023. The decrease in classified loans was due primarily to credit upgrades and, to a lesser extent, payoffs and pay downs during the period.
The Company had no OREO at June 30, 2024 and December 31, 2023, and therefore non-performing loans were the only component of non-performing assets.
ACL for Loans
There have been no material changes to the Company's ACL for loans methodology, underwriting practices, or credit risk management system used to estimate credit loss exposure as described in the 2023 Annual Report on Form 10-K.
The estimate of credit loss incorporates management judgements and assumptions including the estimated life of the loans, adjustments for current conditions and reasonable and supportable economic forecasts. Management periodically reviews and updates its assumptions based on changing circumstances.
ACL for loans activity
The following table summarizes the activity in the ACL for loans for the periods indicated:
| | | | | | | | | | | | | | |
| | Six months ended June 30, |
(Dollars in thousands) | | 2024 | | 2023 |
Balance at beginning of year | | $ | 58,995 | | $ | 52,640 |
| | | | |
Provision for credit losses for loans | | 2,996 | | 4,361 |
| | | | |
Recoveries of charged-off loans: | | | | |
Commercial real estate owner-occupied | | — | | — |
Commercial real estate non owner-occupied | | — | | — |
| | | | |
Commercial and industrial | | 233 | | 211 |
Commercial construction | | — | | — |
Residential mortgages | | — | | — |
Home equity | | 4 | | 5 |
Consumer | | 10 | | 6 |
Total recovered | | 247 | | 222 |
| | | | |
Charged-off loans: | | | | |
Commercial real estate owner-occupied | | — | | — |
Commercial real estate non owner-occupied | | — | | — |
| | | | |
Commercial and industrial | | 211 | | 303 |
Commercial construction | | — | | — |
Residential mortgages | | — | | — |
Home equity | | — | | — |
Consumer | | 28 | | 21 |
Total charged-off | | 239 | | 324 |
| | | | |
Net loans (recovered) charged-off | | (8) | | 102 |
Ending balance | | $ | 61,999 | | $ | 56,899 |
Annualized net loans (recovered) charged-off to average loans outstanding | | — | % | | 0.01 | % |
Reserve for unfunded commitments
The reserve for unfunded commitments is classified within "Other liabilities" on the Company's Consolidated Balance Sheets. The estimate of credit loss incorporates the same loss factors as on-balance sheet loans with added assumptions for both the likelihood and amount of funding over the estimated life of non-cancellable commitments.
The Company's reserve for unfunded commitments amounted to $4.9 million as of June 30, 2024 and $7.1 million at December 31, 2023. The provision for unfunded commitments for the six months ended June 30, 2024 amounted to a benefit of $2.2 million compared to a provision of $643 thousand for the six months ended June 30, 2023. The decreases in the reserve and provision for unfunded commitments resulted primarily from a decrease in the Company's off-balance sheet commercial construction commitments during the six months ended June 30, 2024.
Based on the foregoing, management believes that the Company's ACL for loans and reserve for unfunded commitments is adequate as of June 30, 2024.
Deposits
As of June 30, 2024, total deposits amounted to $4.25 billion, an increase of $271.3 million, or 7%. The increase was driven primarily by increases in money market account balances of $101.6 million, or 7%, and CD account balances of $98.0 million, or 19%, as customers sought higher yielding deposit products.
The following table sets forth the deposit balances by certain categories and the percentage of each category to total deposits as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 | | |
(Dollars in thousands) | | Amount | | Percent | | Amount | | Percent | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Checking | | $ | 1,839,698 | | | 44 | % | | $ | 1,767,736 | | | 45 | % | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Money markets and savings | | 1,790,012 | | | 41 | % | | 1,688,709 | | | 42 | % | | | | |
CDs | | 619,091 | | | 15 | % | | 521,076 | | | 13 | % | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Deposits | | $ | 4,248,801 | | | 100 | % | | $ | 3,977,521 | | | 100 | % | | | | |
Total customer deposits include reciprocal balances from checking, money market deposits and CDs received from participating banks in nationwide deposit networks as a result of our customers electing to participate in Company offered programs which allow for third-party enhanced FDIC insurance. Under this enhanced deposit insurance program, the equivalent of the customers' original deposited funds are reciprocated back through the network to the Company and are carried within the appropriate category under deposits. The Company's balances in these reciprocal enhanced insurance products were $933.1 million and $835.0 million, at June 30, 2024 and December 31, 2023, respectively. The increase in balance reflects primarily an increase in customer demand for enhanced insurance products.
As of June 30, 2024, uninsured deposits amounted to 34% of total deposits. Additional capacity to utilize enhanced FDIC insured products noted in the preceding paragraph exceeds the Company's total deposits balance at June 30, 2024.
Borrowed Funds
The Company had borrowed funds outstanding of $61.8 million at June 30, 2024, compared to $25.8 million at December 31, 2023. Borrowings at June 30, 2024 were primarily comprised of $53.4 million in advances from the FRB's BTFP. The remaining balance consisted of term advances related to specific lending projects funded under community development programs through the FHLB and NH BFA.
See also "Liquidity," below, for additional information on borrowing capacity.
Subordinated Debt
The Company had outstanding subordinated debt, net of deferred issuance costs, of $59.7 million at June 30, 2024, compared to $59.5 million at December 31, 2023.
See also Note 7, "Borrowed Funds and Subordinated Debt," to the Company's unaudited consolidated interim financial statements contained in Item 1 in this Form 10-Q, above, for further information regarding the Company's subordinated debt.
Shareholders' Equity
Total shareholders' equity amounted to $340.4 million at June 30, 2024, compared to $329.1 million at December 31, 2023, an increase of $11.3 million, or 3%. The increase was due primarily to an increase in retained earnings of $12.1 million, partially offset by an increase in the accumulated other comprehensive loss of $2.5 million.
For the six months ended June 30, 2024, the Company declared cash dividends of $3.0 million and shareholders utilized the dividend reinvestment portion of the Company's dividend reinvestment and direct stock purchase plan to purchase aggregate shares of the Company's common stock amounting to 16,500 shares totaling $408 thousand.
On July 16, 2024, the Company announced a quarterly dividend of $0.24 per share to be paid on September 3, 2024 to shareholders of record as of the close of business on August 13, 2024.
Derivatives and Hedging
Derivatives designated as hedging instruments
As of June 30, 2024, the Company had three pay fixed, receive float, interest rate swap agreements each of which have a 2-year term. Under these interest rate swap agreements, the Company pays a weighted average fixed interest rate of 4.68% and receives the Secured Overnight Financing Rate. The notional value of interest rate swap agreements designated as fair value hedges amounted to $100.0 million at June 30, 2024 and December 31, 2023. The fair value of these interest rate swap agreements, carried on the Company's Consolidated Balance Sheets as an asset, was $145 thousand at June 30, 2024, compared to a liability of $760 thousand at December 31, 2023.
Derivatives not subject to hedge accounting
The notional value of back-to-back interest-rate swaps with customers and counterparties amounted to $7.4 million at June 30, 2024 compared to $7.5 million at December 31, 2023. The fair value of assets and corresponding liabilities associated with these swaps and carried on the Company's Consolidated Balance Sheets was $757 thousand at June 30, 2024 compared to $630 thousand at December 31, 2023.
Risk Participation Agreements
The notional value of RPAs sold amounted to $46.9 million at both June 30, 2024 and December 31, 2023. The fair value of RPAs, carried on the Company's Consolidated Balance Sheets as a liability, was $37 thousand at June 30, 2024 and $65 thousand at December 31, 2023.
Liquidity
Liquidity is the ability to meet cash needs arising from, among other things, fluctuations in loans, investments, deposits and borrowings. Liquidity management is the coordination of activities so that cash needs are anticipated and met readily and efficiently. The Company's liquidity is maintained by projecting cash needs, balancing maturing assets with maturing liabilities, monitoring various liquidity ratios, monitoring deposit flows, maintaining cash flow within the investment portfolio, and maintaining wholesale funding resources.
At June 30, 2024, the Bank had the capacity to borrow additional funds from the FHLB and FRB of up to approximately $850.0 million and $300.0 million, respectively.
Management believes that the Company has adequate liquidity to meet its obligations. However, if general economic conditions, potential recession in the United States and our market areas, continuation of recent uncertainty in the banking industry, changes in market interest rates, the persistence of the current inflationary environment in the United States and our
market areas, increased competition for deposits and related changes in deposit customer behavior, or other events, cause these sources of external funding to become restricted or are eliminated, the Company may not be able to raise adequate funds or may incur substantially higher funding costs or operating restrictions in order to raise the necessary funds to support the Company's operations and growth.
Capital Resources
The principal cash requirement of the Company is the payment of interest on subordinated debt and the payment of dividends on our common stock. The Company's Board of Directors may approve cash dividends on a quarterly basis after careful analysis and consideration of various factors, including our capital position, economic conditions, growth rates, earnings performance and projections as well as strategic initiatives and related regulatory capital requirements.
The Company's primary source of cash is dividends paid by the Bank, which are limited to the Bank's net income for the current year plus its retained net income for the prior two years.
The Company's total capital and tier 1 capital to risk-weighted assets amounted to 13.07% and 10.34%, respectively, at June 30, 2024, compared to 13.12% and 10.34%, respectively, at December 31, 2023. Tier 1 capital to average assets amounted to 8.76% at June 30, 2024, compared to 8.74% at December 31, 2023.
Wealth Management
Wealth assets under management and wealth assets under administration are not carried as assets on the Company's Consolidated Balance Sheets. The Company provides a wide range of wealth management and wealth services, including investment management, brokerage, annuities, trust, and 401(k) administration.
Wealth assets under management and wealth assets under administration amounted to $1.13 billion and $267.5 million, respectively, at June 30, 2024, representing increases of $51.4 million, or 5%, and $25.2 million, or 10%, respectively, compared to December 31, 2023. The increase in assets under management and administration resulted primarily from an increase in market values.
Item 3 -Quantitative and Qualitative Disclosures About Market Risk
Interest Margin Sensitivity Analysis
Refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of the Company's 2023 Annual Report on Form 10-K for further information on the Company's net interest income and net interest margin sensitivity under different interest rate and yield curve scenarios as well as different asset and liability mix scenarios.
The table below summarizes the results at June 30, 2024 and December 31, 2023 and compares the percent change in net interest income to the rates unchanged scenario, assuming a static balance sheet for a 24-month period with interest rates ramped over 24 months for non-maturity deposits and 12 months for all other interest-earning assets and interest-bearing liabilities.
•In the 200 and 400 basis point increasing interest rate scenarios, the percent decrease in net interest income was slightly higher compared to the results at December 31, 2023 due primarily to a shift in deposit composition from non-interest-bearing account balances into interest-bearing account balances that have a higher level of interest rate sensitivity.
•In the 200 basis point decreasing interest rate scenario, net interest income was projected to remain relatively unchanged in the first 24 months compared to a decrease at December 31, 2023 primarily due to a shift in deposit composition from non-interest-bearing account balances into interest-bearing account balances that have a higher level of interest rate sensitivity, which allowed for a higher level of rate declines in the 200 basis point declining rate scenario, and improved net interest income sensitivity results.
| | | | | | | | | | | | | | |
(Dollars in thousands, except for percentage data) | | June 30, 2024 | | December 31, 2023 |
| | | | |
| | | | |
Changes in interest rates | | Percentage Change | | Percentage Change |
Rates rise 400 basis points | | (3.35) | % | | (3.11) | % |
Rates rise 200 basis points | | (1.82) | % | | (1.60) | % |
Rates unchanged | | — | % | | — | % |
Rates decline 200 basis points | | (0.05) | % | | (0.54) | % |
The results in the table above are subject to various assumptions as reported in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of the Company's 2023 Annual Report on Form 10-K. Refer to heading "Results of Operations" contained within Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q for further discussion of margin.
Item 4 -Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures and internal controls designed to ensure that the information required to be disclosed in reports that it files or furnishes to the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
The Company carried out an evaluation as of the end of the period covered by this Form 10-Q under the supervision and with the participation of the Company's management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective as of June 30, 2024.
Changes in Internal Control over Financial Reporting
There have been no significant changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (i.e., the three months ended June 30, 2024) that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1 -Legal Proceedings
There are no material pending legal proceedings to which the Company or its subsidiaries are a party or to which any of its property is subject, other than ordinary routine litigation incidental to the business of the Company. Management does not believe resolution of any present litigation will have a material adverse effect on the business, consolidated financial condition or results of operations of the Company.
Item 1A -Risk Factors
Management believes that there have been no material changes in the Company's risk factors as reported in Part I, Item 1A, "Risk Factors," of the 2023 Annual Report on Form 10-K. The risks described in our 2023 Annual Report on Form 10-K and our subsequent quarterly reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2 -Unregistered Sales of Equity Securities and Use of Proceeds
The following table represents information with respect to repurchases of common stock made by the Company during the three months ended June 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Total number of shares repurchased(1) | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Announced | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
April | | 1,938 | | $ | 24.43 | | | — | | — |
May | | — | | — | | | — | | — |
June | | — | | — | | | — | | — |
________________________________(1)Amounts include shares repurchased that were not part of a publicly announced repurchase plan or program. These shares were owned and tendered by employees as payment for taxes upon vesting of restricted stock (net settlement of shares).
Item 3 -Defaults upon Senior Securities
Not Applicable.
Item 4 -Mine Safety Disclosures
Not Applicable.
Item 5 -Other Information
During the three months ended June 30, 2024, none of the directors or officers of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.
Item 6 -Exhibits
EXHIBIT INDEX
_____________
Exhibit No. Description
101* The following materials from Enterprise Bancorp, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 were formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023; (ii) Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023; (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023; (iv) Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2024 and 2023; (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023; and (vi) Notes to Unaudited Consolidated Interim Financial Statements.
104* The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 has been formatted in Inline XBRL and contained in Exhibit 101.
____________________
*Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | ENTERPRISE BANCORP, INC. |
| | | |
DATE: | August 6, 2024 | By: | /s/ Joseph R. Lussier |
| | | Joseph R. Lussier |
| | | Executive Vice President, Treasurer |
| | | and Chief Financial Officer |
| | | |