Filed by Enterprise Bancorp, Inc.
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Enterprise Bancorp, Inc.
SEC File No.: 001-33912
Date: January 28, 2025
LOWELL, Mass., Jan. 28, 2025 (GLOBE NEWSWIRE) -- Enterprise Bancorp, Inc. ("Enterprise") (NASDAQ: EBTC), parent of Enterprise Bank, announced its financial results for the three months ended December 31, 2024. Net income amounted to $10.7 million, or $0.86 per diluted common share, for the three months ended December 31, 2024, compared to $10.0 million, or $0.80 per diluted common share, for the three months ended September 30, 2024 and $7.9 million, or $0.64 per diluted common share, for the three months ended December 31, 2023.
On December 9, 2024, Enterprise and Enterprise Bank announced the signing of a definitive merger agreement with Independent Bank Corp. ("Independent") and its wholly owned subsidiary, Rockland Trust Company ("Rockland Trust"), pursuant to which Enterprise will merge with and into Independent and Enterprise Bank will merge into Rockland Trust. The proposed merger is expected to close in the second half of 2025, subject to customary closing conditions, including regulatory approvals and approval of Enterprise shareholders. No vote of Independent Bank Corp. shareholders is required.
Selected financial results at or for the quarter ended December 31, 2024, compared to September 30, 2024, were as follows:
- The returns on average assets and average equity were 0.89% and 11.82%, respectively.
- Tax-equivalent net interest margin (non-GAAP) ("net interest margin") was 3.29%, an increase of 7 basis points.
- Total loans amounted to $3.98 billion, an increase of 3.2%.
- Total deposits were relatively unchanged and amounted to $4.19 billion.
- Wealth assets under management and administration amounted to $1.54 billion, an increase of 1.4%.
Executive Chairman & Founder George Duncan stated, "The news of our anticipated merger with Rockland Trust has been well received by our shareholders, customers and communities. The planning of our integration with them is going well and the anticipated synergies and cultural alignment of our two banks are being confirmed."
Mr. Duncan added, "I congratulate Steve, and the whole team, for another very successful quarter and year. This was our third straight year of 12% loan growth, and I believe this is a testament to our relationship-based sales and service culture partnered with our strong commitment to community outreach and involvement."
Net Interest Income
Net interest income for the three months ended December 31, 2024, amounted to $38.5 million, an increase of $2.0 million, or 5%, compared to the three months ended December 31, 2023. The increase was due primarily to an increase in loan interest income of $7.8 million, partially offset by an increase in deposit interest expense of $3.7 million and a decrease in income on other interest-earning assets of $1.5 million.
The increase in interest income during the fourth quarter of 2024, compared to the prior year quarter, was due primarily to loan growth and higher loan yields, while the increase in interest expense during the period was attributed primarily to an increase in certificates of deposit balances and higher market rates on deposits.
Net Interest Margin
Net interest margin for the three months ended December 31, 2024, September 30, 2024 and December 31, 2023, amounted to 3.29%, 3.22% and 3.29%, respectively.
Three months ended - December 31, 2024, compared to December 31, 2023
Net interest margin was positively impacted by loan growth and an increase in loan yields, offset by increases in average funding liabilities and funding costs as well as a decrease in the average balance of other interest-earning assets.
The increase in interest-earning asset yields of 27 basis points was due primarily to loan repricing and originations at higher interest rates while the increase in funding costs of 29 basis points was driven by higher market rates and growth in certificate of deposit balances.
Three months ended - December 31, 2024, compared to September 30, 2024
The increase in net interest margin was due primarily to loan growth and a decrease in funding costs, partially offset by decreases in interest-earning asset yields and the average balance of other interest-earning assets.
The decreases in funding costs of 10 basis points and interest-earning asset yields of 3 basis points were driven primarily by the 100 basis point reduction in the federal funds rate from September 2024 through December 2024. In addition, the decrease in other interest-earning assets resulted mainly from funding loan growth during the period.
Provision for Credit Losses
The provision for credit losses for the three-month periods ended December 31, 2024 and December 31, 2023, are presented below:
| Three months ended | Increase / (Decrease) | |||||||||||
| (Dollars in thousands) | December 31, 2024 | December 31,
| ||||||||||
| Provision for credit losses on loans - collectively evaluated | $ | 1,939 | $ | 1,132 | $ | 807 | ||||||
| Provision for credit losses on loans - individually evaluated | (1,874 | ) | (27 | ) | (1,847 | ) | ||||||
| Provision for credit losses on loans | 65 | 1,105 | (1,040 | ) | ||||||||
| Provision for unfunded commitments | (171 | ) | 1,388 | (1,559 | ) | |||||||
| Provision for credit losses | $ | (106 | ) | $ | 2,493 | $ | (2,599 | ) | ||||
The decrease in reserves on individually evaluated loans was due primarily to two commercial relationships that experienced improvement in their collateral valuation during the period and the decrease in reserves for unfunded commitments resulted primarily by a decrease in off-balance sheet commitments that required a reserve.
Non-Interest Income
Non-interest income for the three months ended December 31, 2024, amounted to $5.6 million, an increase of $69 thousand, or 1%, compared to the three months ended December 31, 2023. The increase was due primarily to increases in wealth management fees, income on bank-owned life insurance and other income, partially offset by a decrease in gains on equity securities.
Non-Interest Expense
Non-interest expense for the three months ended December 31, 2024, amounted to $29.8 million, an increase of $1.6 million, or 6%, compared to the three months ended December 31, 2023. The increase was due primarily to increases in salaries and employee benefits expense of $808 thousand and merger-related expenses of $1.1 million.
Income Taxes
The effective tax rate for the three months ended December 31, 2024, amounted to 25.4%, compared to 30.3% for the three months ended December 31, 2023. The decrease was due primarily to annual book to tax return adjustments in the prior year quarter.
Balance Sheet
Total assets amounted to $4.83 billion at December 31, 2024, compared to $4.47 billion at December 31, 2023, an increase of 8%.
Total investment securities at fair value amounted to $593.6 million at December 31, 2024, compared to $668.2 million at December 31, 2023. The decrease of 11% during the year ended December 31, 2024, was largely attributable to principal pay-downs, calls and maturities. In addition, unrealized losses on debt securities amounted to $101.8 million at December 31, 2024, compared to $102.9 million at December 31, 2023, a decrease of 1%.
Total loans amounted to $3.98 billion at December 31, 2024, compared to $3.57 billion at December 31, 2023. The increase of 12% during the year ended December 31, 2024, was due primarily to increases in commercial real estate and construction loans of $203.1 million and $94.9 million, respectively.
Total deposits amounted to $4.19 billion at December 31, 2024, compared to $3.98 billion at December 31, 2023. The increase of 5% during the year ended December 31, 2024, was due primarily to increases in money market and certificate of deposit balances of $51.5 million and $164.1 million, respectively.
Total borrowed funds amounted to $153.1 million at December 31, 2024, compared to $25.8 million at December 31, 2023. The increase of $127.4 million during the year ended December 31, 2024, the majority of which occurred at the end of December, resulted primarily from an increase in short-term advances used to support strong loan growth. Average borrowed funds during the fourth quarter of 2024 amounted to $37.8 million.
Total shareholders' equity amounted to $360.7 million at December 31, 2024, compared to $329.1 million at December 31, 2023. The increase of 10% during the year ended December 31, 2024, was due primarily to an increase in retained earnings of $26.9 million.
Credit Quality
Selected credit quality metrics at December 31, 2024, compared to December 31, 2023, were as follows:
- The allowance for credit losses ("ACL") for loans amounted to $63.5 million, or 1.59% of total loans, compared to $59.0 million, or 1.65% of total loans. The decrease in the ACL for loans to total loan ratio was due primarily to a decrease in reserves on individually evaluated loans and a decrease in qualitative factors within our ACL model.
- The reserve for unfunded commitments (included in other liabilities) amounted to $4.4 million, compared to $7.1 million. The decrease was driven primarily by a decrease in off-balance sheet commitments that required a reserve.
- Non-performing loans amounted to $26.7 million, or 0.67% of total loans, compared to $11.4 million, or 0.32% of total loans. The increase resulted primarily from two individually evaluated commercial construction loans which were placed on non-accrual.
Wealth Management
Wealth assets under management and administration, which are not carried as assets on the Company's consolidated balance sheets, amounted to $1.54 billion at December 31, 2024, an increase of $215.8 million, or 16%, compared to December 31, 2023, and resulted primarily from an increase in market values.
About Enterprise Bancorp, Inc.
Enterprise Bancorp, Inc. is a Massachusetts corporation that conducts substantially all its operations through Enterprise Bank and Trust Company, commonly referred to as Enterprise Bank, and has reported 141 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, as well as wealth management, and trust services. The Company's headquarters and Enterprise Bank's main office are located at 222 Merrimack Street in Lowell, Massachusetts. The Company's primary market area is the Northern Middlesex, Northern Essex, and Northern Worcester counties of Massachusetts and the Southern Hillsborough and Southern Rockingham counties in New Hampshire. Enterprise Bank has 27 full-service branches located in the Massachusetts communities of Acton, Andover, Billerica (2), Chelmsford (2), Dracut, Fitchburg, Lawrence, Leominster, Lexington, Lowell (2), Methuen, North Andover, Tewksbury (2), Tyngsborough and Westford and in the New Hampshire communities of Derry, Hudson, Londonderry, Nashua (2), Pelham, Salem and Windham.
Forward-Looking Statements
This earnings release contains statements about future events that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by references to a future period or periods or by the use of the words "believe," "expect," "anticipate," "intend," "upcoming," "estimate," "assume," "will," "should," "could," "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, (i) disruption from the proposed merger with Independent; (ii) the risk that the proposed merger with Independent may not be completed in a timely manner or at all; (iii) the occurrence of any event, change, or other circumstances that could give rise to the termination of the proposed merger with Independent, including under circumstances that would require Enterprise to pay a termination fee; (iv) the failure to obtain necessary shareholder or regulatory approvals for the proposed merger with Independent; (v) the ability to successfully integrate the combined business; (vi) the possibility that the amount of the costs, fees, expenses, and charges related to the proposed merger with Independent may be greater than anticipated, including as a result of unexpected or unknown factors, events, or liabilities; (vii) the failure of the conditions to the proposed merger with Independent to be satisfied; (viii) reputational risk and the reaction of the parties' customers to the proposed merger with Independent; (xi) the risk of potential litigation or regulatory action related to the proposed merger with Independent; (x) the impact on us and our customers of a decline in general economic conditions and any regulatory responses thereto; (xi) potential recession in the United States and our market areas; (xii) the impacts related to or resulting from uncertainty in the banking industry as a whole; (xiii) increased competition for deposits and related changes in deposit customer behavior; (xiv) the impact of changes in market interest rates, whether due to a continuation of the elevated interest rate environment or further reductions in interest rates and a resulting decline in net interest income; (xv) the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas; (xvi) the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System; (xvii) increases in unemployment rates in the United States and our market areas; (xviii) declines in commercial real estate values and prices; (xix) uncertainty regarding United States fiscal debt, deficit and budget matters; (xx) cyber incidents or other failures, disruptions or 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; (xxi) severe weather, natural disasters, acts of war or terrorism, geopolitical instability or other external events, including as a result of changes in U.S. presidential administrations or Congress, including potential changes in U.S. and international trade policies and the resulting impact on the Company and its customers; (xxii) competition and market expansion opportunities; (xxiii) changes in non-interest expenditures or in the anticipated benefits of such expenditures; (xxiv) changes in tax laws; (xxv) the risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learnings; (xxvi) potential increased costs related to the impacts of climate change; and (xxvii) current or future litigation, regulatory examinations or other legal and/or regulatory actions. Therefore, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized and readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release. For more information about these factors, please see our reports filed with or furnished to the U.S. Securities and Exchange Commission (the "SEC"), including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the SEC, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Any forward-looking statements contained in this earnings release are made as of the date hereof, and we undertake no duty, and specifically disclaim any duty, to update or revise any such statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
| ENTERPRISE BANCORP, INC. | ||||||||
| Consolidated Balance Sheets | ||||||||
| (unaudited) | ||||||||
| (Dollars in thousands, except per share data) | December 31,2024 | December 31,2023 | ||||||
| Assets | ||||||||
| Cash and cash equivalents: | ||||||||
| Cash and due from banks | $ | 42,689 | $ | 37,443 | ||||
| Interest-earning deposits with banks | 41,152 | 19,149 | ||||||
| Total cash and cash equivalents | 83,841 | 56,592 | ||||||
| Investments: | ||||||||
| Debt securities at fair value (amortized cost of $685,766 and $763,981, respectively) | 583,930 | 661,113 | ||||||
| Equity securities at fair value | 9,665 | 7,058 | ||||||
| Total investment securities at fair value | 593,595 | 668,171 | ||||||
| Federal Home Loan Bank stock | 7,093 | 2,402 | ||||||
| Loans held for sale | 520 | 200 | ||||||
| Loans: | ||||||||
| Total loans | 3,982,898 | 3,567,631 | ||||||
| Allowance for credit losses | (63,498 | ) | (58,995 | ) | ||||
| Net loans | 3,919,400 | 3,508,636 | ||||||
| Premises and equipment, net | 42,444 | 44,931 | ||||||
| Lease right-of-use asset | 24,126 | 24,820 | ||||||
| Accrued interest receivable | 20,553 | 19,233 | ||||||
| Deferred income taxes, net | 49,096 | 49,166 | ||||||
| Bank-owned life insurance | 67,421 | 65,455 | ||||||
| Prepaid income taxes | 2,583 | 1,589 | ||||||
| Prepaid expenses and other assets | 11,398 | 19,183 | ||||||
| Goodwill | 5,656 | 5,656 | ||||||
| Total assets | $ | 4,827,726 | $ | 4,466,034 | ||||
| Liabilities and Shareholders'Equity | ||||||||
| Liabilities | ||||||||
| Deposits | $ | 4,187,698 | $ | 3,977,521 | ||||
| Borrowed funds | 153,136 | 25,768 | ||||||
| Subordinated debt | 59,815 | 59,498 | ||||||
| Lease liability | 23,849 | 24,441 | ||||||
| Accrued expenses and other liabilities | 33,425 | 45,011 | ||||||
| Accrued interest payable | 9,055 | 4,678 | ||||||
| Total liabilities | 4,466,978 | 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; 12,447,308 and 12,272,674 shares issued and outstanding, respectively. | 124 | 123 | ||||||
| Additional paid-in capital | 111,295 | 107,377 | ||||||
| Retained earnings | 328,243 | 301,380 | ||||||
| Accumulated other comprehensive loss | (78,914 | ) | (79,763 | ) | ||||
| Total shareholders' equity | 360,748 | 329,117 | ||||||
| Total liabilities and shareholders' equity | $ |
| ||||||