EBTC
$26.94
Enterprise Bancorp
$.79
3.02%
Earnings Details
Quarter September 2020
Thursday, October 22, 2020 5:10:00 PM
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Summary

Enterprise Bancorp (EBTC) Recent Earnings

Enterprise Bancorp (EBTC) reported Quarter September 2020 earnings of $0.87 per share on revenue of $41.1 million.. Revenue grew 5.4% on a year-over-year basis.

Results
Reported Earnings
$0.87
Earnings Whisper
-
Consensus Estimate
Reported Revenue
$41.1 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Enterprise Bancorp, Inc. Announces Third Quarter 2020 Financial Results

LOWELL, Mass., Oct. 22, 2020 (GLOBE NEWSWIRE) -- Enterprise Bancorp, Inc. (NASDAQ: EBTC), parent of Enterprise Bank, announced net income for the three months ended September 30, 2020 of $10.3 million, or $0.87 per diluted share, compared to $9.0 million, or $0.76 per diluted share, for the three months ended September 30, 2019. Net income for the nine months ended September 30, 2020 amounted to $21.6 million, or $1.81 per diluted share, compared to $25.5 million, or $2.15 per diluted share, for the nine months ended September 30, 2019.

As previously announced on October 20, 2020, the Company declared a quarterly dividend of $0.175 per share to be paid on December 1, 2020 to shareholders of record as of November 10, 2020.

Chief Executive Officer Jack Clancy commented, “Our third quarter results positively reflect our strong participation in the Paycheck Protection Program (“PPP”). In the second quarter we originated over 2,700 PPP loans for $508 million with a median loan size of $67 thousand. These loans contributed strongly to the 14% increase in net interest income in the third quarter compared to the prior year period. The PPP results were truly a bank-wide effort and we are gratified that we were able to support our customers during this time of financial uncertainty. We continue to work diligently to ensure that the PPP loan forgiveness process is an efficient and positive experience for our customers.”

Mr. Clancy added, “Our strong growth figures this year have been significantly impacted by both the outstanding PPP loans and the pandemic in general. Loan growth has been positively and substantially impacted by outstanding PPP loans. Deposit growth has also been positively and substantially impacted by the PPP, as the PPP loan monies that were distributed into deposit accounts. Additionally, deposit growth has been positively impacted by stimulus checks and by customers proactively building liquidity in response to the economic uncertainty caused by the pandemic. We anticipate that as the majority of PPP loans are forgiven or paid off, which we believe will occur principally over the next 12 months, and as customers spend down their PPP funds, we will experience a reduction in both loans and deposits.”

Mr. Clancy further commented, “In the fourth quarter we will be adopting the Financial Accounting Standards Board’s Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments, including the current expected credit losses methodology for estimating the allowance for credit losses (“CECL”). If adopted as of September 30, 2020, we estimate CECL would have increased our total allowance for loan losses, including the reserve for unfunded commitments, by $8.0 million to $11.0 million and would have increased our total allowance for loan losses to total loans ratio from 1.65% to a range of 1.95% to 2.06%, excluding PPP loans. CECL will be adopted with an effective retrospective implementation date of January 1, 2020. Included in the estimated total increase in the allowance for loan losses is approximately pre-tax $3.0 million that will be recorded through equity, net of taxes, as the CECL day one implementation adjustment and pre-tax $5.0 million to $8.0 million that will be recorded through earnings and applied retrospectively to the applicable March 31, June 30, and September 30 quarterly results.”

Founder and Chairman of the Board George Duncan commented, “While the near term economic outlook remains uncertain, we remain committed to our long-term focus of serving our customers, building relationships, investing in our future, cultivating our digital evolution, expanding geographically, and further developing our services and products. Regarding branch expansion, our Lexington branch which opened in March is exceeding our expectations despite the unusual operating environment and we are looking forward to opening our North Andover site early in 2021.”

On September 10, 2020, Enterprise Bank was recognized at the Boston Business Journal's Corporate Citizenship Summit as ranking 2nd for the highest average hours of community service and 48th among the largest corporate donors in Massachusetts. Mr. Duncan said, "I am personally very proud of this team accomplishment. Our commitment to the communities we serve is entrenched in our culture and reflects our deep sense of purpose as a genuine community bank."

Paycheck Protection Program

The PPP was created by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and instituted by the Small Business Administration (“SBA”). The PPP allowed entities to apply for a 1.00% interest rate loan with payments generally deferred until the date the lender receives the applicable forgiveness amount from the SBA. The PPP loans may be partially or fully forgiven by the SBA if the entity meets certain conditions. For most PPP loans, the maturity term for any principal portion left unforgiven is 2 years from the funding date. For PPP loans that the SBA approved on or after June 5, 2020, the loan must have a maturity of at least 5 years. All PPP loans are fully guaranteed by the SBA and are included in total loans outstanding. As of September 30, 2020, the Company had 2,758 PPP loans outstanding totaling $508.2 million.

In addition to generating interest income, the SBA pays lender’s fees for processing PPP loans. As of September 30, 2020, the Company has recorded $17.2 million in PPP related SBA fees and is accreting these fees into interest income over the life of the applicable loans. If a PPP loan is forgiven or paid off before maturity, the remaining unearned fee is recognized into income at that time. Year-to-date through September 30, 2020, the Company has recognized $3.7 million in PPP related SBA fees through accretion. The majority of the remaining $13.5 million in fees are expected to be recognized as the PPP loans are forgiven over the next several quarters.

Results of Operations

Throughout this press release we have noted certain ratios or other measures of the Company’s performance as having been adjusted to remove the impact of PPP loans, which we expect to be short-term in nature. The table on page 9 provides a reconciliation of the non-GAAP measures to the information presented under U.S. generally accepted accounting principles (GAAP).

The net income results for the three and nine months ended September 30, 2020 compared to the prior year periods were positively impacted by growth in net interest income, offset by increases in the provision for loan losses and operating expenses. The increases in net interest income resulted mainly from loan growth, PPP income and lower funding costs. The provision for loan losses increased over the prior year periods as the Company added to general reserves to address the impact of COVID-19 on the Company's loan portfolio and from an increase in impaired loan reserves. Operating expenses increased primarily from the Company’s strategic growth initiatives.

Net interest income for the three months ended September 30, 2020 amounted to $33.5 million, an increase of $4.1 million, or 14%, compared to the three months ended September 30, 2019. Net interest income for the nine months ended September 30, 2020 amounted to $96.0 million, an increase of $9.7 million, or 11%, compared to the nine months ended September 30, 2019. The increase in net interest income was due largely to interest-earning asset growth, primarily in loans, partially offset by a decline in tax equivalent net interest margin (“net interest margin” or “margin”). Quarter-to-date net interest income included $1.3 million in PPP interest income plus $2.1 million in PPP related SBA fee accretion. Year-to-date net interest income included $2.2 million in PPP interest income plus $3.7 million in PPP related SBA fee accretion.

Average loan balances increased $724.0 million, or 30%, for the three months ended, and $537.3 million, or 22%, for the nine months ended September 30, 2020, compared to the same respective 2019 period averages. Excluding PPP loans, average loan balances increased $230.2 million, or 9%, for the three months ended September 30, 2020, and $249.3 million, or 10%, for the nine months ended September 30, 2020, compared to the same respective 2019 period averages.

Net interest margin was 3.46%, 3.59%, and 3.93% for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Net interest margin was 3.63% and 3.96% for the nine months ended September 30, 2020 and 2019, respectively. Excluding PPP loans, net interest margin for the three and nine months ended September 30, 2020 was 3.56% and 3.70%, respectively. The lower margin results in 2020 are reflective primarily of the significant decline in interest rates since the comparable periods resulting in interest-earning asset yields declining faster than the cost of funding. Net interest margin for the September 2020 quarter was also impacted by a significantly higher quarter-to-date average balance in lower-yielding short-term and overnight investments of $259.8 million compared to $106.3 million in the prior year period. Interest-earning asset yields have been impacted by a 175 basis-point decrease in the Federal Funds rate since September 30, 2019, with 150 basis-points of that total decline occurring in March 2020. Term interest rates have also fallen significantly over the respective periods and collectively these interest rate decreases have reduced yields on loan repricing, short-term and overnight investments and interest-earning asset growth. The Company funds these interest-earning assets principally through non-term customer deposits, which were less impacted by the interest rate declines.

For the three months ended September 30, 2020, the provision for loan losses amounted to $1.6 million, compared to $1.0 million for the three months ended September 30, 2019. The provision for the quarter ended September 30, 2020 consisted of $1.0 million in general reserve factor increases primarily related to economic weakness caused by the COVID-19 pandemic and its impact on credit quality in the loan portfolio, $845 thousand related to classified and impaired loans and a net reduction of $278 thousand related to changes in loan mix, among other factors.

For the nine months ended September 30, 2020, the provision for loan losses amounted to $10.4 million, compared to $1.6 million for the nine months ended September 30, 2019. The provision for the nine months ended September 30, 2020 consisted of $6.3 million in general reserve factor increases primarily related to economic weakness caused by the COVID-19 pandemic and its impact on credit quality in the loan portfolio, $3.1 million related to classified and impaired loans and $1.0 million related to loan growth and changes in loan mix, among other factors.

Non-interest income for the three months ended September 30, 2020 amounted to $4.3 million, an increase of $175 thousand, or 4%, compared to the three months ended September 30, 2019. Quarter-to-date non-interest income increased in 2020 due primarily to increases to net gains on sales of securities and net gains on sales of loans, partially off-set by decreases in deposit and interchange fees. Non-interest income for the nine months ended September 30, 2020 amounted to $12.5 million, an increase of $507 thousand, or 4%, compared to the nine months ended September 30, 2019. Year-to-date non-interest income increased in 2020 due primarily to increases in net gains on sales of loans and wealth management fees, partially offset by a decrease in deposit and interchange fees. Year-to-date other miscellaneous income decreased mainly due to decreases in equity investment fair values, partially offset by derivative fee income.

Non-interest expense for the three months ended September 30, 2020, amounted to $22.8 million, an increase of $1.7 million, or 8%, compared to the three months ended September 30, 2019. Non-interest expense for the nine months ended September 30, 2020, amounted to $69.8 million, an increase of $6.1 million, or 10%, compared to the nine months ended September 30, 2019. Increases in non-interest expense in 2020 related primarily to the Company's strategic growth initiatives, particularly salaries and employee benefits, and to a lesser extent technology and telecommunications expenses. Additionally, FDIC deposit insurance premiums increased from primarily higher insurance charges caused by a decline in our Tier 1 leverage ratio resulting from PPP loans outstanding and also from the 2019 expense being positively impacted by a $376 thousand credit from the FDIC Deposit Insurance Fund.

Credit Quality

At September 30, 2020, the Company determined its allowance for loan losses using the incurred loss methodology. The allowance for loan losses to total loan ratio was 1.39% at September 30, 2020, compared to 1.31% at December 31, 2019 and 1.37% at September 30, 2019. Excluding PPP loans, which are fully guaranteed by the SBA, the allowance for loan losses to total loan ratio was 1.65% at September 30, 2020.

In the first quarter of 2020, the Company chose to delay its implementation of CECL, in accordance with the provisions of the CARES Act. Under the CARES Act, the Company will delay implementation of CECL until the earlier of (i) the date on which the national emergency concerning the COVID-19 pandemic terminates, or (ii) December 31, 2020.

While the Company has not yet adopted CECL, we estimate that under CECL, as of September 30, 2020, the combined allowance for credit losses, and the reserve for unfunded commitments, would have been between $52.0 million and $55.0 million, or 1.95% to 2.06% of total loans, excluding PPP loans. As previously noted, the Company will adopt CECL in the fourth quarter.

Non-performing assets to total assets amounted to 0.53% at September 30, 2020, compared to 0.46% at December 31, 2019 and 0.39% at September 30, 2019. Excluding PPP loans, the non-performing assets to total assets ratio was 0.61% at September 30, 2020.

As a result of the economic uncertainty created by the pandemic, the long-term impact on the credit quality of our loan portfolio cannot be reasonably estimated at this time. We will continue to closely monitor the effect on credit quality across all industry sectors in our diversified loan portfolio as the results unfold in future quarters.

Management has been proactive with customers since the onset of the pandemic and granted short-term payment deferrals to those requesting financial assistance. As of June 30, 2020, short-term payment deferrals due to the COVID-19 pandemic were granted on 1,130 loans amounting to $594.8 million, or 22% of the portfolio, excluding PPP loans. As of September 30, 2020, short-term payment deferrals due to the COVID-19 pandemic remained active on 178 loans, amounting to $104.1 million, or 4% of the portfolio, excluding PPP loans.

Key Financial Highlights

  • Total assets amounted to $4.06 billion at September 30, 2020, compared to $3.24 billion at December 31, 2019, an increase of $825.5 million, or 26%. Since June 30, 2020, total assets have increased $23.3 million, or 1%. Excluding PPP loans, total assets have increased $330.8 million, or 10%, since December 31, 2019 and $18.8 million, or 1%, since June 30, 2020.
     
  • Total loans amounted to $3.15 billion at September 30, 2020, compared to $2.57 billion at December 31, 2019, an increase of $585.4 million, or 23%. Since June 30, 2020, total loans have decreased $25.3 million, or 1%. Excluding PPP loans, total loans have increased $90.7 million, or 4%, since December 31, 2019 and decreased $29.9 million or 1% since June 30, 2020.
     
  • Customer deposits were $3.54 billion at September 30, 2020, compared to $2.79 billion at December 31, 2019, an increase of $748.3 million, or 27%. Since June 30, 2020, customer deposits have decreased $38.0 million, or 1%. Management believes the deposit growth since December 31, 2019 was due in large part to customers depositing funds received from PPP loan advances and stimulus checks, and generally maintaining higher liquidity in response to the pandemic.
     
  • Investment assets under management amounted to $925.4 million at September 30, 2020, compared to $916.6 million at December 31, 2019, an increase of $8.8 million, or 1%. Since June 30, 2020, investment assets under management have increased $45.2 million, or 5%, due primarily to asset growth from market appreciation.
     
  • Total capital to risk weighted assets ratio for the Company, on a consolidated basis, was 14.31% at September 30, 2020 compared to 11.80% and 11.88% at June 30, 2020 and December 31, 2019, respectively. The increase resulted primarily from the Company’s July 7, 2020 issuance of $60.0 million in fixed-to-floating rate subordinated notes (the “notes”) due 2030 and redeemable on or after July 15, 2025. The notes are classified as Tier 2 regulatory capital for the Company.
     
  • Total and Tier 1 capital to risk weighted asset ratios for Enterprise Bank were to 14.17% and 12.92%, respectively, at September 30, 2020 compared to 11.79% and 10.53%, respectively, at June 30, 2020 and to 11.87% and 10.65%, respectively, at December 31, 2019. The increase in the Bank's capital ratios was due primarily to the Company investing $53.0 million into the Bank from the Company’s issuance of the notes.

Enterprise Bancorp, Inc. is a Massachusetts corporation that conducts substantially all its operations through Enterprise Bank and Trust Company, commonly referred to as Enterprise Bank, and has reported 124 consecutive profitable quarters. Enterprise Bank is principally engaged in the business of attracting deposits from the general public and investing in commercial loans and investment securities. Through Enterprise Bank and its subsidiaries, the Company offers a range of commercial, residential and consumer loan products, deposit products and cash management services, electronic and digital banking options, and commercial insurance services, as well as wealth management, wealth services and trust services. The Company's headquarters and Enterprise Bank's main office are located at 222 Merrimack Street in Lowell, Massachusetts. The Company's primary market area is the Greater Merrimack Valley, Nashoba Valley, and North Central regions of Massachusetts and Southern New Hampshire (Southern Hillsborough and Rockingham counties). Enterprise Bank has 25 full-service branches located in the Massachusetts communities of Lowell (2), Acton, Andover, Billerica (2), Chelmsford (2), Dracut, Fitchburg, Lawrence, Leominster, Lexington, Methuen, Tewksbury (2), Tyngsborough and Westford and in the New Hampshire communities of Derry, Hudson, Nashua (2), Pelham, Salem and Windham. The Company is also in the process of establishing a branch office in North Andover, MA and anticipates that this location will open in early 2021.

This earnings release contains statements about future events that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by references to a future period or periods or by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "will," "should," "plan," and other similar terms or expressions. Forward-looking statements should not be relied on because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance, and achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed in, or implied by, the forward-looking statements. Factors that could cause such differences include, but are not limited to, general economic conditions, the impact of the COVID-19 pandemic, changes in interest rates, regulatory considerations, competition and market expansion opportunities, changes in non-interest expenditures or in the anticipated benefits of such expenditures, the receipt of required regulatory approvals, changes in tax laws, and current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic. Therefore, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized. For more information about these factors, please see our reports filed with or furnished to the U.S. Securities and Exchange Commission (the "SEC"), including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the SEC, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Any forward-looking statements contained in this earnings release are made as of the date hereof, and we undertake no duty, and specifically disclaim any duty, to update or revise any such statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(unaudited)

(Dollars in thousands, except per share data) September 30,
2020
 December 31,
2019
 September 30,
2019
Assets      
Cash and cash equivalents:      
Cash and due from banks $43,660    $39,927    $52,927   
Interest-earning deposits 264,704    23,867    29,482   
Total cash and cash equivalents 308,364    63,794    82,409   
Investments:      
Debt securities at fair value 497,480    504,788    482,106   
Equity securities at fair value 651    467    1,433   
Total investment securities at fair value 498,131    505,255    483,539   
Federal Home Loan Bank stock 1,905    4,484    2,024   
Loans held for sale 5,311    601    3,297   
Loans:      
Total loans 3,150,815    2,565,459    2,472,130   
Allowance for loan losses (43,835)  (33,614)  (33,935) 
Net Loans 3,106,980    2,531,845    2,438,195   
Premises and equipment, net 47,145    45,419    43,519   
Lease right-of-use asset 18,580    19,048    19,184   
Accrued interest receivable 16,466    12,295    12,356   
Deferred income taxes, net 8,064    8,732    8,139   
Bank-owned life insurance 31,222    30,776    30,620   
Prepaid income taxes 3,388    572    1,729   
Prepaid expenses and other assets 9,335    6,572    8,057   
Goodwill 5,656    5,656    5,656   
Total assets $4,060,547    $3,235,049    $3,138,724   
Liabilities and Stockholders' Equity      
Liabilities      
Deposits:      
Customer deposits $3,535,065    $2,786,730    $2,784,393   
Brokered deposits 74,995    —    —   
Total deposits 3,610,060    2,786,730    2,784,393   
Borrowed funds 1,679    96,173    4,177   
Subordinated debt 73,725    14,872    14,869   
Lease liability 17,690    18,104    18,250   
Accrued expenses and other liabilities 30,342    21,683    25,433   
Accrued interest payable 1,271    846    920   
Total liabilities 3,734,767    2,938,408    2,848,042   
Commitments and Contingencies      
Stockholders' 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;
11,926,198 shares issued and outstanding at September 30, 2020;
11,825,331 shares issued and outstanding at December 31, 2019; and
11,816,071 shares issued and outstanding at September 30, 2019
 119    118    118   
Additional paid-in capital 96,402    94,170    93,459   
Retained earnings 207,206    191,843    184,994   
Accumulated other comprehensive income 22,053    10,510    12,111   
Total stockholders' equity 325,780    296,641    290,682   
Total liabilities and stockholders' equity $4,060,547    $3,235,049    $3,138,724   

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

 Three months ended Nine months ended
 September 30, September 30,
(Dollars in thousands, except per share data)2020 2019 2020 2019
Interest and dividend income:       
Loans and loans held for sale$33,481   $30,938   $97,472   $90,973  
Investment securities3,225   3,278   10,093   9,785  
Other interest-earning assets71   632   315   1,688  
Total interest and dividend income36,777   34,848   107,880   102,446  
Interest expense:       
Deposits2,231   5,158   9,856   15,156  
Borrowed funds  36   603   315  
Subordinated debt1,007   233   1,468   692  
Total interest expense3,246   5,427   11,927   16,163  
Net interest income33,531   29,421   95,953   86,283  
Provision for loan losses1,575   1,025   10,397   1,580  
Net interest income after provision for loan losses31,956   28,396   85,556   84,703  
Non-interest income:       
Wealth management fees1,469   1,407   4,255   4,077  
Deposit and interchange fees1,607   1,790   4,804   5,041  
Income on bank-owned life insurance, net143   158   446   482  
Net gains on sales of debt securities127   —   227   146  
Net gains on sales of loans329   139   814   244  
Other income649   655   1,986   2,035  
Total non-interest income4,324   4,149   12,532   12,025  
Non-interest expense:       
Salaries and employee benefits15,031   14,382   46,267   41,982  
Occupancy and equipment expenses2,099   2,034   6,357   6,342  
Technology and telecommunications expenses2,316   1,863   6,815   5,290  
Advertising and public relations expenses372   430   1,506   1,927  
Audit, legal and other professional fees498   528   1,715   1,389  
Deposit insurance premiums749   16   1,690   733  
Supplies and postage expenses202   232   675   718  
Other operating expenses1,502   1,613   4,752   5,320  
Total non-interest expense22,769   21,098   69,777   63,701  
Income before income taxes13,511   11,447   28,311   33,027  
Provision for income taxes3,185   2,445   6,712   7,566  
Net income$10,326   $9,002   $21,599   $25,461  
        
Basic earnings per share$0.87   $0.76   $1.82   $2.16  
Diluted earnings per share$0.87   $0.76   $1.81   $2.15  
        
Basic weighted average common shares outstanding11,916,486   11,808,603   11,886,811   11,779,629  
Diluted weighted average common shares outstanding11,927,043   11,843,497   11,908,716   11,820,388  

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

  At or for the
nine months ended
 At or for the
year ended
 At or for the
nine months ended
(Dollars in thousands, except per share data) September 30,
2020
 December 31,
2019
 September 30,
2019
       
BALANCE SHEET AND OTHER DATA      
Total assets $4,060,547   $3,235,049   $3,138,724  
Loans serviced for others 90,499   95,905   93,672  
Investment assets under management 925,379   916,623   875,049  
Total assets under management $5,076,425   $4,247,577   $4,107,445  
       
Book value per share $27.32   $25.09   $24.60  
Dividends paid per common share $0.53   $0.64   $0.48  
Total capital to risk weighted assets 14.31 % 11.88 % 12.04 %
Tier 1 capital to risk weighted assets 10.47 % 10.13 % 10.23 %
Tier 1 capital to average assets 7.39 % 8.86 % 8.68 %
Common equity tier 1 capital to risk weighted assets 10.47 % 10.13 % 10.23 %
Allowance for loan losses to total loans 1.39 % 1.31 % 1.37 %
Non-performing assets $21,641   $14,771   $12,183  
Non-performing assets to total assets 0.53 % 0.46 % 0.39 %
       
INCOME STATEMENT DATA (annualized)      
Return on average total assets 0.77 % 1.10 % 1.10 %
Return on average stockholders' equity 9.25 % 12.31 % 12.49 %
Net interest margin (tax equivalent)(1) 3.63 % 3.95 % 3.96 %

(1)     Tax equivalent net interest margin is net interest income adjusted for the tax equivalent effect associated with tax exempt loan and investment income, expressed as a percentage of average interest earning assets.

Enterprise Bank's capital ratios as of the periods indicated:

  September 30,
2020(2)
 December 31,
2019
 September 30,
2019
Total capital to risk weighted assets 14.17 % 11.87 % 12.03 %
Tier 1 capital to risk weighted assets 12.92 % 10.65 % 10.78 %
Tier 1 capital to average assets 9.12 % 9.31 % 9.14 %
Common equity tier 1 capital to risk weighted assets 12.92 % 10.65 % 10.78 %

(2)     Increased capital ratios reflect the investment of $53.0 million from the Company to the Bank resulting from the Company's issuance of $60.0 million of fixed-to-floating rate subordinated notes due 2030 and redeemable on or after July 15, 2025.

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

NON-GAAP MEASURES

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with GAAP. Non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information.

Certain non-GAAP measures provided in this press release exclude the outstanding balance of PPP loans that the Company began originating in April 2020, and which are expected to be short-term in nature. The Company normalized for this activity in order to provide a more meaningful comparison to prior periods.

The following tables summarize the reconciliation of GAAP items to non-GAAP items (1):

(Dollars in thousands)September 30,
2020
Total loans (GAAP)$3,150,814   
Adjustment: PPP loans(508,196) 
Adjustment: Unearned PPP fees13,495   
Total loans, excluding PPP (non-GAAP)$2,656,113   
  
Total assets (GAAP)$4,060,547   
Adjustment: PPP loans(508,196) 
Adjustment: Unearned PPP fees13,495   
Total assets (non-GAAP)$3,565,846   


  Three months ended Nine months ended
(Dollars in thousands) September 30,
2020
 September 30,
2020
Total average loans (GAAP)(2) $3,168,787    $2,941,755   
Adjustment: Average PPP loans (508,311)  (295,791) 
Adjustment: Average unearned PPP fees 14,528    7,823   
Total average loans (non-GAAP)(2) $2,675,004    $2,653,787   
     
Net interest margin (tax equivalent) (GAAP) 3.46  % 3.63  %
Adjustment: PPP effect 0.10  % 0.07  %
Net interest margin (tax equivalent) (non-GAAP) 3.56  % 3.70  %

(1) PPP loan adjustments include an elimination of PPP loans, net of unearned SBA fees, as well as interest income on PPP loans and related SBA fee accretion, included in interest income. Month end and average balances were adjusted as applicable.

(2) Total average loans include loans held for sale.

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


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Source: Enterprise Bancorp Inc