Enterprise Bancorp(EBTC) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited consolidated interim financial statements present the company's financial position, results of operations, and cash flows for Q1 2025 Consolidated Balance Sheets Total assets reached $4.90 billion, driven by loan growth, while liabilities increased due to deposits, and equity rose from reduced comprehensive loss Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total cash and cash equivalents | $86,737 | $83,841 | | Net loans | $3,985,600 | $3,919,400 | | Total assets | $4,900,489 | $4,827,726 | | Liabilities & Equity | | | | Total deposits | $4,300,643 | $4,187,698 | | Borrowed funds | $94,493 | $153,136 | | Total liabilities | $4,515,134 | $4,466,978 | | Total shareholders' equity | $385,355 | $360,748 | Consolidated Statements of Income Net income increased 22.7% to $10.4 million in Q1 2025, driven by a 10% rise in net interest income and higher diluted EPS Q1 Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net interest income | $38,690 | $35,190 | | Provision for credit losses | $331 | $622 | | Total non-interest income | $5,188 | $5,495 | | Total non-interest expense | $29,949 | $28,908 | | Net income | $10,435 | $8,507 | | Diluted earnings per share | $0.84 | $0.69 | Consolidated Statements of Comprehensive Income Total comprehensive income significantly increased to $27.4 million in Q1 2025, driven by a positive change in debt securities fair value - Other comprehensive income, driven by the net change in fair value of debt securities, was a positive $17.0 million in Q1 2025, compared to a loss of $2.1 million in Q1 2024[15] Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity grew to $385.4 million, primarily from net income and other comprehensive income, partially offset by dividends - Key changes in shareholders' equity for Q1 2025 include net income of $10.4 million, other comprehensive income of $17.0 million, and dividends declared of $3.1 million[18] Consolidated Statements of Cash Flows Net cash provided by operating activities was $5.4 million, with investing activities using $53.3 million and financing providing $50.8 million Q1 2025 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,395 | $2,177 | | Net cash used in investing activities | ($53,279) | ($74,276) | | Net cash provided by financing activities | $50,780 | $163,341 | | Net increase in cash and cash equivalents | $2,896 | $91,242 | Notes to Unaudited Consolidated Interim Financial Statements Notes detail accounting policies, investment securities, loan portfolio, credit loss allowance, deposits, borrowings, derivatives, and capital adequacy - The company has not materially changed its significant accounting policies from those disclosed in its 2024 Annual Report on Form 10-K[22] - The company's debt securities portfolio, classified as available-for-sale, had a fair value of $594.7 million with unrealized losses of $80.1 million at March 31, 2025, primarily due to higher market interest rates. Management concluded no allowance for credit losses was necessary[27][28] - Total loans increased to $4.05 billion at March 31, 2025, from $3.98 billion at year-end 2024, with commercial loans comprising 86% of the portfolio[36] - The Allowance for Credit Losses (ACL) for loans was $64.0 million, or 1.58% of total loans, at March 31, 2025, compared to $63.5 million, or 1.59% of total loans, at December 31, 2024[61] - The company and its bank subsidiary met all 'well-capitalized' requirements under regulatory frameworks as of March 31, 2025, with a consolidated Total Capital to risk-weighted assets ratio of 13.06%[89][90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial performance, highlighting increased net income, loan growth, stable credit quality, and strong capital - The company signed a merger agreement with Independent Bank Corp. on December 9, 2024, which is expected to close in the second half of 2025, pending regulatory approvals[129] Q1 2025 vs Q1 2024 Performance | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $10.4M | $8.5M | | Diluted EPS | $0.84 | $0.69 | | Net Interest Income | $38.7M | $35.2M | | Net Interest Margin | 3.32% | 3.20% | - Total assets grew by $72.8 million (2%) during Q1 2025 to $4.90 billion, primarily due to a $66.7 million increase in total loans[132] - The non-performing loan to total loan ratio was 0.70% at March 31, 2025, a slight increase from 0.67% at year-end 2024. The ACL to total loans ratio was 1.58%[136] Results of Operations Q1 2025 net income rose 23% to $10.4 million, driven by increased net interest income and margin expansion, despite higher non-interest expenses - Net interest margin increased to 3.32% in Q1 2025 from 3.20% in Q1 2024, aided by loan growth and a 5 basis point favorable impact from the sale of non-performing loans[142][143] - The provision for credit losses decreased by $291 thousand year-over-year, mainly due to a $2.0 million decrease in provisions for individually evaluated loans, which offset increases in provisions for collectively evaluated loans and unfunded commitments[156][165] - Non-interest income decreased by $307 thousand, primarily due to a $766 thousand decrease in gains on equity securities[158] - Non-interest expense increased by $1.0 million (4%), driven by a $760 thousand rise in salaries/benefits and $290 thousand in merger-related expenses[159] Financial Condition Total assets reached $4.90 billion, driven by loan growth and increased deposits, while asset quality remained stable and equity rose Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2025 | % of Total | | :--- | :--- | :--- | | Commercial real estate non owner-occupied | $1,629,394 | 40% | | Commercial real estate owner-occupied | $708,645 | 18% | | Commercial construction | $664,936 | 16% | | Commercial and industrial | $483,165 | 12% | | Residential & Consumer | $563,502 | 14% | | Total Loans | $4,049,642 | 100% | - Non-performing loans increased slightly to $28.5 million (0.70% of total loans) at March 31, 2025, from $26.7 million (0.67% of total loans) at year-end 2024[171] - Total deposits increased by 3% to $4.30 billion, driven by a $150.0 million increase in brokered deposits, while total customer deposits decreased by $37.0 million[133][181] - Shareholders' equity increased by $24.6 million (7%) in Q1 2025, primarily due to a $17.0 million decrease in accumulated other comprehensive loss from declining market interest rates[184] Liquidity and Capital Resources The company maintains strong liquidity with significant borrowing capacity and robust capital ratios well above regulatory minimums - At March 31, 2025, the Bank had available borrowing capacity of approximately $785.0 million from the FHLB and $255.0 million from the FRB[193] Key Capital Ratios | Ratio | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total capital to risk-weighted assets | 13.06% | 13.06% | | Tier 1 capital to risk-weighted assets | 10.39% | 10.38% | | Tier 1 capital to average assets | 8.98% | 8.94% | Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest rate sensitivity analysis shows net interest income changes of -6.89% for a 200 bps rate rise and +5.05% for a 200 bps decline Interest Rate Sensitivity Analysis (12-month ramp) | Scenario | % Change in Net Interest Income (Mar 31, 2025) | | :--- | :--- | | Rates rise 400 bps | (14.19)% | | Rates rise 200 bps | (6.89)% | | Rates unchanged | 0.00% | | Rates decline 200 bps | 5.05% | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no significant changes in internal control - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[212] - No significant changes to internal control over financial reporting occurred during the first quarter of 2025[214] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any material pending legal proceedings, with current litigation not expected to have a material adverse effect - There are no material pending legal proceedings against the Company, only ordinary routine litigation incidental to business[216] Item 1A. Risk Factors No material changes have occurred in the company's risk factors since the 2024 Annual Report on Form 10-K - No material changes have occurred in the Company's risk factors since the 2024 Annual Report on Form 10-K[217] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 11,243 common shares in Q1 2025, primarily from employees for tax payments on vested restricted stock - In Q1 2025, the company repurchased 11,243 shares. These were tendered by employees for tax payments on vested restricted stock and were not part of a public buyback program[218] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including officer certifications and Inline XBRL formatted financial statements - Exhibits filed include officer certifications (31.1, 31.2, 32) and financial data in Inline XBRL format (101, 104)[223]