Enterprise Bancorp, Inc. (EBTC) Bundle
Understanding Enterprise Bancorp, Inc. (EBTC) Revenue Streams
Understanding Enterprise Bancorp, Inc.’s Revenue Streams
The primary revenue sources for the company are derived from net interest income and non-interest income. Below is a detailed breakdown of these revenue streams.
Breakdown of Primary Revenue Sources
- Net Interest Income: For the three months ended September 30, 2024, net interest income amounted to $38.0 million, a decrease of 1% compared to $38.5 million for the same period in 2023.
- Non-Interest Income: Non-interest income for the same period was $6.1 million, which represents an increase of 29% from $4.5 million in September 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows significant trends:
| Period | Net Interest Income | Non-Interest Income | Total Revenue |
|---|---|---|---|
| Q3 2024 | $38.0 million | $6.1 million | $44.1 million |
| Q3 2023 | $38.5 million | $4.5 million | $43.0 million |
| Growth Rate | -1.3% | 29% | 2.6% |
Contribution of Different Business Segments to Overall Revenue
The contribution of different segments to total revenue highlights the diversification of income sources:
- Commercial Loans: Total loans as of September 30, 2024, were $3.86 billion, contributing significantly to interest income.
- Wealth Management: Wealth assets under management reached $1.51 billion, contributing to the non-interest income through fees.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- The increase in non-interest income was primarily driven by gains on equity securities, wealth management fees, and deposit fees.
- The decrease in net interest income was attributed to higher deposit interest expenses, which rose to $20.6 million in Q3 2024 from $12.9 million in Q3 2023.
Summary of Revenue Performance
Overall, the company’s revenue performance in 2024 indicates a stable but slightly declining net interest income, while non-interest income has shown robust growth.
A Deep Dive into Enterprise Bancorp, Inc. (EBTC) Profitability
Profitability Metrics
Gross Profit Margin: As of Q3 2024, the gross profit margin stands at 80.23%, reflecting a stable performance compared to previous quarters.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 30.00%, consistent with the margin reported in Q2 2024.
Net Profit Margin: The net profit margin was recorded at 21.00% for the third quarter of 2024, indicating a slight increase from 20.00% in the previous quarter.
| Metric | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 |
|---|---|---|---|---|---|
| Gross Profit Margin | 80.23% | 79.50% | 79.00% | 78.75% | 78.00% |
| Operating Profit Margin | 30.00% | 30.00% | 28.00% | 26.50% | 26.00% |
| Net Profit Margin | 21.00% | 20.00% | 18.00% | 17.50% | 18.50% |
Over the past year, the profitability metrics have shown a positive trend, with net profit increasing from $9.7 million in Q3 2023 to $10.0 million in Q3 2024. This represents an annual growth rate of approximately 3.09% in net income.
In comparison with industry averages, the net profit margin of 21.00% exceeds the industry average of 18.50% for similar-sized banks. The operating profit margin also surpasses the industry benchmark of 25.00%.
Operational efficiency is illustrated by the decrease in non-interest expenses, which amounted to $29.4 million for Q3 2024, up only 4% from $28.3 million in Q3 2023, indicating effective cost management strategies.
Additionally, the net interest margin for the third quarter of 2024 was 3.22%, reflecting an increase from 3.19% in Q2 2024, which has been attributed to a favorable loan mix and improved asset yields.
Return on Average Assets (ROAA): The return on average assets for Q3 2024 was 0.82%, steady from Q2 2024, while the return on average equity (ROAE) was 11.20%, showcasing effective use of equity capital.
| Ratio | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 |
|---|---|---|---|---|---|
| Return on Average Assets (ROAA) | 0.82% | 0.82% | 0.75% | 0.69% | 0.85% |
| Return on Average Equity (ROAE) | 11.20% | 11.55% | 10.47% | 10.21% | 12.53% |
Debt vs. Equity: How Enterprise Bancorp, Inc. (EBTC) Finances Its Growth
Debt vs. Equity: How Enterprise Bancorp, Inc. Finances Its Growth
Debt Levels
Total borrowed funds amounted to $59.9 million as of September 30, 2024, compared to $25.8 million at December 31, 2023. This reflects an increase primarily due to a term advance in the first quarter of 2024. Total liabilities reached $4.37 billion as of September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio is calculated as total liabilities divided by total shareholders' equity. As of September 30, 2024, total shareholders' equity was $368.1 million, resulting in a debt-to-equity ratio of approximately 11.87 (calculated as $4.37 billion / $368.1 million). This ratio is significantly higher than the industry average of approximately 8.5, indicating a more leveraged position.
Recent Debt Issuances and Credit Ratings
In 2024, the company issued subordinated debt totaling $59.7 million as of September 30, 2024. The credit rating remains stable, reflecting a conservative approach to debt management.
Debt Financing vs. Equity Funding
The company primarily relies on core deposits for funding, amounting to $4.19 billion as of September 30, 2024. This represents a slight decrease of 1.4% compared to the previous quarter. The increase in total loans to $3.86 billion indicates that the company is effectively utilizing its debt to finance growth.
| Metric | Value |
|---|---|
| Total Borrowed Funds | $59.9 million |
| Total Liabilities | $4.37 billion |
| Total Shareholders' Equity | $368.1 million |
| Debt-to-Equity Ratio | 11.87 |
| Total Loans | $3.86 billion |
| Total Deposits | $4.19 billion |
This comprehensive debt and equity analysis highlights how the company balances its financing strategies to support growth while maintaining a significant level of debt relative to equity. The focus remains on leveraging core deposits and prudent debt management as part of its long-term strategic approach.
Assessing Enterprise Bancorp, Inc. (EBTC) Liquidity
Assessing Enterprise Bancorp, Inc. (EBTC) Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $88,632,000 | $4,189,461,000 | 0.0212 |
Quick Ratio: The quick ratio is determined by excluding inventory from current assets. Given the nature of banking, inventory is not applicable. Therefore, the quick ratio remains similar to the current ratio:
| Liquid Assets | Current Liabilities | Quick Ratio |
|---|---|---|
| $88,632,000 | $4,189,461,000 | 0.0212 |
Analysis of Working Capital Trends
Total working capital as of September 30, 2024:
| Total Assets | Total Liabilities | Working Capital |
|---|---|---|
| $4,742,809,000 | $4,374,700,000 | $368,109,000 |
Working Capital Trend: The working capital increased from $329,117,000 at December 31, 2023, reflecting a growth of 12% over the nine months ending September 30, 2024.
Cash Flow Statements Overview
Operating Cash Flow: For the three months ended September 30, 2024, net cash from operating activities was:
| Operating Cash Flow |
|---|
| $36,688,000 |
Investing Cash Flow: The investing cash flow for the same period was:
| Investing Cash Flow |
|---|
| ($3,500,000) |
Financing Cash Flow: The financing cash flow for the three months ended September 30, 2024 was:
| Financing Cash Flow |
|---|
| ($7,000,000) |
Potential Liquidity Concerns or Strengths
Liquidity Strengths:
- Total deposits as of September 30, 2024, amounted to $4,189,461,000, an increase of 5% since December 31, 2023.
- Total borrowed funds stood at $59,949,000, indicating a conservative approach to leverage, only 1.3% of total assets.
Liquidity Concerns:
- Current and quick ratios below 0.0212 suggest potential liquidity challenges in meeting short-term liabilities.
- Non-performing loans increased to $25,946,000, representing 0.67% of total loans, compared to 0.32% as of December 31, 2023.
Is Enterprise Bancorp, Inc. (EBTC) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Enterprise Bancorp, Inc. (EBTC) includes key financial ratios that provide insights into whether the company is overvalued or undervalued. The primary metrics considered are the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and Enterprise Value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The diluted earnings per share for the third quarter of 2024 was $0.80, compared to $0.79 for the same quarter in 2023. The current stock price is approximately $30.00. This results in a P/E ratio of:
- P/E Ratio = Stock Price / Earnings per Share = $30.00 / $0.80 = 37.5
Price-to-Book (P/B) Ratio
The book value per common share as of September 30, 2024, was $29.62. With a stock price of $30.00, the P/B ratio is calculated as follows:
- P/B Ratio = Stock Price / Book Value per Share = $30.00 / $29.62 = 1.01
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we first need the enterprise value and EBITDA. The enterprise value can be estimated as:
- Enterprise Value = Market Capitalization + Total Debt - Cash and Cash Equivalents
- Market Capitalization = Stock Price x Shares Outstanding = $30.00 x 12,428,426 = $372.85 million
- Total Debt = Borrowed Funds = $59.9 million
- Cash and Cash Equivalents = $88.63 million
- Enterprise Value = $372.85 million + $59.9 million - $88.63 million = $344.12 million
The EBITDA for the last twelve months is calculated as follows:
- Net Income = $28.01 million
- Add: Provision for Income Taxes = $9.25 million
- Add: Non-Interest Expenses = $87.29 million
- EBITDA = $28.01 million + $9.25 million + $87.29 million = $124.55 million
Therefore, the EV/EBITDA ratio is:
- EV/EBITDA = Enterprise Value / EBITDA = $344.12 million / $124.55 million = 2.76
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
| Date | Stock Price |
|---|---|
| October 2023 | $28.50 |
| January 2024 | $29.75 |
| April 2024 | $30.25 |
| July 2024 | $29.00 |
| September 2024 | $30.00 |
Dividend Yield and Payout Ratios
The dividend paid per common share for the third quarter of 2024 was $0.24. Given the current stock price of $30.00, the dividend yield is:
- Dividend Yield = Dividend per Share / Stock Price = $0.24 / $30.00 = 0.008 or 0.8%
The payout ratio is calculated as:
- Payout Ratio = Dividends / Net Income = $0.24 / $0.80 = 30%
Analyst Consensus on Stock Valuation
As of October 2024, the consensus among analysts regarding the stock valuation is as follows:
| Analyst Rating | Number of Analysts |
|---|---|
| Buy | 5 |
| Hold | 3 |
| Sell | 1 |
The company shows a balanced outlook with most analysts rating it as a "Buy," indicating potential for growth relative to its current valuation metrics.
Key Risks Facing Enterprise Bancorp, Inc. (EBTC)
Key Risks Facing Enterprise Bancorp, Inc. (EBTC)
Enterprise Bancorp, Inc. faces various internal and external risks that could impact its financial health. Key risk factors include:
- Industry Competition: The banking sector is highly competitive, with numerous local and national banks vying for market share. This competition can affect pricing strategies and margins.
- Regulatory Changes: Changes in banking regulations can impact operations and profitability. Compliance costs can rise significantly, and non-compliance can lead to penalties.
- Market Conditions: Economic downturns can lead to increased loan defaults, affecting overall financial performance. Fluctuations in interest rates can also impact net interest margins.
Operational Risks
Operational risks are significant for the institution, particularly in terms of technology and human resources. The reliance on technology for transactions and customer service exposes the company to cybersecurity threats and operational failures.
Financial Risks
Recent earnings reports highlight several financial risks:
- Net Interest Income: For the three months ended September 30, 2024, net interest income was $38.0 million, down by $482 thousand, or 1%, compared to the same period in 2023.
- Net Interest Margin: The net interest margin was 3.22% for the third quarter of 2024, down from 3.46% in the same quarter of 2023.
- Provision for Credit Losses: The provision for credit losses was $1.332 million for Q3 2024, compared to $1.752 million in Q3 2023.
Strategic Risks
Strategic risks stem from the company’s growth initiatives and market positioning. The strategy of geographic expansion and customer acquisition may involve significant investments that could impact short-term profitability.
| Financial Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Interest Income | $38.0 million | $38.5 million | -1% |
| Net Interest Margin | 3.22% | 3.46% | -24 basis points |
| Provision for Credit Losses | $1.332 million | $1.752 million | -24% |
| Total Loans | $3.86 billion | $3.57 billion | +8% |
| Total Deposits | $4.19 billion | $3.98 billion | +5% |
To mitigate these risks, the company has implemented several strategies:
- Strengthening Compliance: Enhancing compliance measures to adapt to regulatory changes.
- Technology Investments: Investing in cybersecurity to protect against operational risks.
- Loan Portfolio Management: Actively managing the loan portfolio to reduce credit risks.
As of September 30, 2024, the allowance for credit losses (ACL) for loans amounted to $63.7 million, representing 1.65% of total loans. Non-performing loans increased to $25.9 million, or 0.67% of total loans.
Future Growth Prospects for Enterprise Bancorp, Inc. (EBTC)
Future Growth Prospects for Enterprise Bancorp, Inc.
Key Growth Drivers
- Product Innovations: The company continues to enhance its offerings in wealth management and digital banking solutions.
- Market Expansions: The expansion into new geographic markets, particularly in Massachusetts and New Hampshire, is a significant growth strategy.
- Acquisitions: While no recent acquisitions have been reported, the potential for strategic acquisitions remains a focus for future growth.
Future Revenue Growth Projections
Revenue growth is projected at approximately 5-8% annually over the next three years, driven primarily by loan growth and increases in non-interest income.
Earnings Estimates
For 2024, earnings estimates are projected at $0.80 per diluted common share, with expectations of growth reaching $0.90 by 2025.
Strategic Initiatives
- Investment in Technology: Continued investment in technology to improve operational efficiency and customer experience.
- Community Engagement: Ongoing commitment to community outreach and corporate philanthropy enhances brand loyalty and customer acquisition.
- Employee Development: Focus on training and development to enhance service delivery and operational performance.
Competitive Advantages
- Strong Balance Sheet: Total assets of $4.74 billion as of September 30, 2024, indicating a solid financial foundation for growth.
- High-Quality Loan Portfolio: Total loans amounting to $3.86 billion with a diversified mix of commercial and retail loans.
- Core Deposit Funding: Total deposits of $4.19 billion, with a focus on core deposits that provide stable funding.
Financial Highlights
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Income | $10.0 million | $9.5 million | $9.7 million |
| Return on Average Assets | 0.82% | 0.82% | 0.75% |
| Return on Average Equity | 11.20% | 11.55% | 12.53% |
| Net Interest Margin | 3.22% | 3.19% | 3.46% |
| Total Assets | $4.74 billion | $4.77 billion | $4.48 billion |
| Total Deposits | $4.19 billion | $4.25 billion | $4.06 billion |
| Total Loans | $3.86 billion | $3.77 billion | $3.40 billion |
| Wealth Assets Under Management | $1.51 billion | $1.40 billion | $1.30 billion |
Conclusion: The company's strategic initiatives, strong financial metrics, and competitive advantages position it well for future growth opportunities.
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Article updated on 8 Nov 2024
Resources:
- Enterprise Bancorp, Inc. (EBTC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Enterprise Bancorp, Inc. (EBTC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Enterprise Bancorp, Inc. (EBTC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.