Enterprise Bancorp (NASDAQ: EBTC) had an exciting, yet challenging, first quarter as the effects of the COVID-19 pandemic affected key segments of its core business. However, the holding company exited the quarter profitable, marking a 121 consecutive quarter of profitability. Growth in total loans and customer deposits affirmed the resilience of the company’s core business amidst a challenging business environment. Smart investors should add Enterprise Bancorp stock (NASDAQ: EBTC) to their watchlist.
Impressive Q1 Results For Enterprise Bancorp
Total loans in the quarter were up 13% to $2.68 billion, capping another impressive quarter. Customer deposits were also up by 7% to $2.91 billion. Net Interest Income was up 6% to $29.9 million due to interest-earning asset growth in loans.
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Amidst the growth, the holding company felt the full force of the COVID-19 pandemic took a toll on the client’s ability to finance their loans. Conversely, Enterprise Bancorp’s stock first-quarter earnings per share were down by 54% to $0.34 a share.
A decline in earnings per share can be attributed to, among other things, an increase in the provision of loan losses attributed to the coronavirus pandemic. The pandemic continues to affect the company’s revenue streams, which is seen as one of the reasons management refrained from issuing guidance for the full year.
However, management expects Enterprise Bancorp to remain profitable amidst the challenging business environment. Likewise, EPS should come in between $3.05 and $2.20 a share, in line with an EPS of $2.89 reported in 2019.
Enterprise Bancorp’s earnings per share have grown at an annual average of 10.8% over the past decade. In keeping up with the trend, management remains focused on achieving sustained long-term growth amidst the shocks triggered by the COVID-19 pandemic.
Conversely, Enterprise Bancorp has opened a new branch in Lexington as part of an effort to expand its footprint and targeting a much bigger customer base. Plans are also underway to open a new branch in North Andover as the small-cap bank looks to grow its customer base.
Dividend Offering For Enterprise Bancorp
Enterprise Bancorp has continued to outperform its peers as a small bank when it comes to returning value to shareholders. The holding company has grown its dividend for 26 consecutive years at a 5.8% annualized rate.
In the second quarter, the financial institution rewarded shareholders with a $0.175 quarterly dividend. The dividend offering was a $0.015 a share rate increase from its first-quarter dividend.
Enterprise Bancorp Stock Price Analysis
The stock has once again started bottoming out after coming under pressure in the first half of the year amidst the COVID-19 market crash. A 15% plus rally from one-year lows affirms renewed investor interest amidst improving underlying fundamentals.
The small-cap financial institution is currently trading at an average price to earnings ratio of 14.5 with its fair earnings multiple being 12.0. With the stock trading at a discount relative to its tremendous potential, a bounce back from current lows in the market looks likely. During the great recession, the stock fell by 3% as other companies went under.
On the other hand, its earnings jumped 37%, affirming outstanding management that has helped the company navigate challenging times with ease. Likewise, Enterprise Bancorp should navigate the COVID-19 pandemic and come out the other end resilient.
Bottom Line – Enterprise Bancorp Stock (NASDAQ: EBTC)
Enterprise remains in a solid financial position to continue operating as a small-cap bank. Impressive first quarter financial results amidst the COVID-19 shocks attest to the financial institution’s resilience in the sector.
The small-cap bank should bounce back to earnings growth ones the pandemic cools off, and the economy recovers. The opening of new stores as part of an expansion drive should allow the holding company to grow its earnings per share by about 9% over the next five years.