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Second Quarter 2020 Net Income of $7.3 Million Announced

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 quarter ended June 30, 2020 compared to the prior year quarter were impacted by the PPP and the pandemic. The provision for loan losses increased as the Company added to general reserves to address the impact of COVID-19 on the economy and the Company's loan portfolio. Net interest income increased mainly from loan growth and PPP related income, while operating expenses increased from the Company’s strategic growth initiatives and higher salary and benefit costs related to the PPP effort and the pandemic.

Net interest income for the three months ended June 30, 2020 amounted to $32.5 million, an increase of $3.7 million, or 13%, compared to the three months ended June 30, 2019. Net interest income for the six months ended June 30, 2020 amounted to $62.4 million, an increase of $5.6 million, or 10%, compared to the six months ended June 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”). The Company recognized $948 thousand in PPP interest income and $1.6 million in PPP related SBA fees, accreted to interest income, during the quarter.

皇冠体育appAverage loan balances increased $661.4 million, or 28%, for the three months ended June 30, 2020 and $443.1 million, or 19%, for the six months ended June 30, 2020, compared to the same respective 2019 period averages. Excluding PPP loans, average loan balances increased $293.5 million, or 12%, and $259.1 million, or 11%, for the three and six months ended June 30, 2020, compared to the same respective 2019 period averages.

皇冠体育appNet interest margin was 3.59%, 3.89%, and 3.96% for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively. Net interest margin was 3.73% and 3.97% for the six months ended June 30, 2020 and June 30, 2019, respectively. Excluding PPP loans, net interest margin for the three and six months ended June 30, 2020 was 3.68% and 3.78%, respectively. The lower margin results primarily reflect 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 June 2020 quarter was also impacted by higher balances in lower-yielding short-term and overnight investments than the comparable periods. Interest-earning asset yields have been impacted by a 225 basis point decrease in the Federal Funds rate since June 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 interest rate declines.

For the three months ended June 30, 2020, the provision for loan losses amounted to $2.7 million, compared to $955 thousand for the three months ended June 30, 2019. The provision for the quarter ended June 30, 2020 consisted of $1.9 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 and $800 thousand related to classified and impaired loans.

皇冠体育appFor the six months ended June 30, 2020, the provision for loan losses amounted to $8.8 million, compared to $555 thousand for the six months ended June 30, 2019. The provision for the six months ended June 30, 2020 consisted of $5.2 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, $2.3 million related to classified and impaired loans and $1.3 million related to loan growth and other factors.

The provisions for the 2019 periods were impacted by generally positive credit metrics, partially offset by the impact of loan growth.

Non-interest income for the three months ended June 30, 2020 amounted to $4.0 million, a decrease of $30 thousand, or 1%, compared to the three months ended June 30, 2019. Quarter-to-date non-interest income decreased in 2020 due primarily to decreases in deposit and interchange fees as well as net gains on sales of securities, partially offset by net gains on sales of loans. Non-interest income for the six months ended June 30, 2020 amounted to $8.2 million, an increase of $332 thousand, or 4%, compared to the six months ended June 30, 2019. Year-to-date non-interest income increased in 2020 due primarily to increases in net gains on sales of loans. 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 June 30, 2020, amounted to $24.3 million, an increase of $2.6 million, or 12%, compared to the three months ended June 30, 2019. Non-interest expense for the six months ended June 30, 2020, amounted to $47.0 million, an increase of $4.4 million, or 10%, compared to the six months ended June 30, 2019. Increases in non-interest expense in 2020 related primarily to the Company's strategic growth initiatives, particularly salaries and employee benefits, which also included costs related to the PPP effort and the pandemic, and to a lesser extent technology and telecommunications expenses.

Credit Quality

The Company determined its allowance for loan loss reserves using the incurred loss methodology. The allowance for loan losses to total loan ratio was 1.33% at June 30, 2020, compared to 1.31% at December 31, 2019 and 1.42% at June 30, 2019. Excluding PPP loans, which are fully guaranteed by the SBA, the allowance for loan losses to total loan ratio was 1.58% at June 30, 2020.

Non-performing assets to total assets amounted to 0.53% at June 30, 2020, compared to 0.46% at December 31, 2019 and 0.39% at June 30, 2019. Excluding PPP loans, the non-performing assets to total assets ratio was 0.60% at June 30, 2020.

The long-term impact of the pandemic on the credit quality of our loan portfolio cannot be reasonably estimated at this time. It will likely be influenced by a variety of factors including the depth and duration of the economic contraction and the extent of financial support and fiscal stimulus by the U.S. government. 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 COVID-19 pandemic and granted short term payment deferrals to those requesting financial assistance. As of June 30, 2020, short term payment deferrals were granted on 1,130 loans amounting to $594.8 million, or 22% of the portfolio, excluding PPP loans. Management is closely monitoring loans on deferral and estimates that approximately 75% of these loans will return to payment status after the initial three-month period has expired. The remaining loans on deferral are expected to be given another three-month deferral period. These loans continue to accrue interest in accordance with their initial terms.

Key Financial Highlights

  • Total assets amounted to $4.04 billion at June 30, 2020, compared to $3.24 billion at December 31, 2019, an increase of $802.2 million, or 25%. Since March 31, 2020, total assets have increased $670.1 million, or 20%. Excluding PPP loans, total assets have increased $312.0 million, or 10%, since December 31, 2019 and $179.9 million, or 5%, since March 31, 2020.
  • Total loans amounted to $3.18 billion at June 30, 2020, compared to $2.57 billion at December 31, 2019, an increase of $610.7 million, or 24%. Since March 31, 2020, total loans have increased $492.2 million, or 18%. Excluding PPP loans, total loans have increased $120.5 million, or 5%, since December 31, 2019 and $2.1 million since March 31, 2020.
  • Customer deposits were $3.57 billion at June 30, 2020, compared to $2.79 billion at December 31, 2019, an increase of $786.4 million, or 28%. Since March 31, 2020, customer deposits have increased $660.3 million, or 23%. Management believes this deposit growth was due in large part to customers depositing funds received from PPP loan advances and generally maintaining higher liquidity in response to the pandemic.
  • Investment assets under management amounted to $880.2 million at June 30, 2020, compared to $916.6 million at December 31, 2019, a decrease of $36.4 million, or 4%. Since March 31, 2020, investment assets under management have increased $87.0 million, or 11%, primarily due to asset growth from market appreciation.
  • Total assets under management amounted to $5.01 billion at June 30, 2020, compared to $4.25 billion at December 31, 2019, an increase of $763.7 million, or 18%. Since March 31, 2020, total assets under management have increased $753.7 million, or 18%. Excluding PPP loans, total assets under management have increased $273.5 million, or 6%, since December 31, 2019 and $263.6 million, or 6%, since March 31, 2020.

皇冠体育appEnterprise Bancorp, Inc. is a Massachusetts corporation that conducts substantially all of its operations through Enterprise Bank and Trust Company, commonly referred to as Enterprise Bank, and has reported 123 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 late 2020 or 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 Report 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.

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