Chief Executive Officer
- Enterprise has now recorded 134 consecutive profitable quarters and increased its shareholder dividend for 32 consecutive years.
- Our regulatory capital ratios as of quarter end all exceeded the regulatory levels necessary to be deemed "well-capitalized," which is the highest designation.
- Our liquidity position as of quarter end was strong, marked by our cash equivalents position, no wholesale funding, aside from
$3.2 million in borrowings related to pass through community programs, and unusedFederal Home Loan Bank andFederal Reserve Bank borrowing capacity of$1.1 billion . - Our credit quality and loan loss reserves remain strong. As of
March 31, 2023 , non-performing loans and the allowance for credit losses to total loans amounted to 0.23% and 1.70%, respectively. Additionally, we had$4.7 million in reserves for unfunded commitments."
Executive Chairman & Founder
Liquidity, Deposit Composition and Funding Capacity
All balances and ratios presented in this update section are at
- We had a favorable overnight and short-term investment balance of
$172.9 million , which was reported on the balance sheet as interest-earning deposits with banks. - Our loan to deposit ratio was 80%.
- We had no brokered deposits and only
$3.2 million in wholesale borrowings, which are related to our participation in specific pass-through community development programs under theFederal Home Loan Bank of Boston ("FHLB") and to a lesser extent theNew Hampshire Business Finance Authority . - Core deposits (which are total deposits excluding CDs over
$250 thousand ) amounted to 96% of total deposits. - Total checking account balances amounted to 47% of total deposits, including non-interest-bearing deposits, which were 31% of total deposits.
- We utilize enhanced
Federal Deposit Insurance Corporation ("FDIC") insured products and pledge investment securities as collateral as needed. Uninsured deposits, not collateralized, amounted to 36% of total deposits. We have significant additional capacity to further utilize enhancedFDIC insured products. - Our
FHLB andFederal Reserve Bank of Boston ("FRB") secured borrowing capacity amounted to$1.1 billion . InApril 2023 , we pledged additional collateral to the FHLB and intend to participate in the FRB’s Bank Term Funding Program. We anticipate these changes will increase our secured borrowing capacity to approximately$1.4 billion , exclusive of any borrowings outstanding. - We have several brokered deposit relationships (unsecured borrowings) which we estimate could provide an additional
$800.0 million in funding capacity.
Net Income
Net income for the three months ended
- The increase in net income during the period was due primarily to an increase in net interest income of
$5.9 million , partially offset by increases in the provision for credit losses of$2.2 million and non-interest expense of$2.3 million and a decrease in non-interest income of$838 thousand .
Net Interest Income
Net interest income for the three months ended
- The increase in net interest income during the period was due largely to increases in loan interest income of
$8 .9 million and other interest-earning asset income of$2 .0 million, partially offset by an increase in deposit interest expense of$5 .4 million.
Net Interest Margin
Three months ended –
Tax-equivalent net interest margin ("net interest margin") (non-GAAP) was 3.76% for the three months ended
Net interest margin compared to the prior year quarter was impacted by the following factors:
- Average interest-earning deposits with banks decreased
$185.1 million , or 49%, while the yield increased 430 basis points. The decrease in average balance resulted primarily from funding loan growth and the increase in yield reflected a significant increase in market interest rates over the last twelve months. - Average investment securities decreased
$9.3 million , or 1%, while the tax-equivalent yield increased 22 basis points. - Average loans increased
$289.6 million , or 10%, and the tax-equivalent yield increased 73 basis points. The increase in loan yields resulted primarily from increases in the prime lending rate of 475 basis points over the last twelve months, partially offset by a decrease in Paycheck Protection Program ("PPP") income of$1.5 million , due to the continued forgiveness of PPP loans, over the respective periods. - Average total deposits increased
$62.6 million , or 2%, and the yield increased 55 basis points from increases in market interest rates, a shift in deposit mix to higher-yielding products and competition from bank and non-bank alternatives. The yield increases occurred principally over the last six months.
Three months ended –
Net interest margin was 3.76% for the three months ended
Net interest margin compared to the prior quarter was impacted primarily by the following factors:
- Average interest-earning deposits with banks decreased
$161.8 million , or 45%, while the yield increased 79 basis points. The decrease in average balance resulted from funding loan growth and a decrease in average total deposits while the increase in yield reflected the increase in market interest rates during the period. - Average loans increased
$82.5 million , or 3%, and the tax-equivalent yield increased 20 basis points. The increase in loan yields resulted primarily from increases in the prime lending rate during the period. - Average total deposits decreased
$106.2 million , or 3%, while the yield increased 32 basis points. The decrease in average balance resulted primarily from first quarter seasonality and customers seeking higher-yielding alternatives. The increase in yield resulted from increases in market interest rates, a shift in deposit mix to higher-yielding products and competition from bank and non-bank alternatives during the period.
Non-Interest Income
Non-interest income for the three months ended
- Non-interest income in the prior year period included net gains on sales of debt securities of
$1.1 million . Excluding this item, non-interest income increased $223 thousand, or 5%. - The change resulted primarily from increases in deposit and interchange fees of $246 thousand and swap fee income of $313 thousand, partially offset by a decrease in insurance commission income of $147 thousand. The latter two items were recorded in other income.
Non-Interest Expense
Non-interest expense for the three months ended
Provision for Credit Losses & Credit Quality
The increases in the provision for credit losses, allowance for credit losses ("ACL") for loans and reserve for unfunded commitments, as noted below, resulted primarily from a forecasted increase in the probability and severity of a recession in our allowance model, and to a lesser extent, growth in the Company's loan portfolio and off-balance sheet commitments.
The provision for credit losses for the three months ended
The ACL for loans amounted to
The reserve for unfunded commitments (included in other liabilities) amounted to
Non-performing loans amounted to
Net recoveries for the three months ended
Balance Sheet
Total assets amounted to
Total interest-earning deposits with banks, which consists of overnight and short-term investments, amounted to
Total investment securities at fair value amounted to
Total loans amounted to
Customer deposits amounted to
Deposit portfolio segmentation at
- Checking accounts represented 47% of total deposits, compared to 51%.
- Savings and money market accounts represented 44% of total deposits, compared to 42%.
- Certificates of deposits accounts represented 9% of total deposits, compared to 7%.
Total shareholders' equity amounted to
Total capital and tier 1 capital to risk weighted assets, of which AOCL is not a component, amounted to 13.55% and 10.64%, respectively, at
Wealth Management
Wealth assets under management and wealth assets under administration, which are not carried as assets on the Company's consolidated balance sheets, amounted to
About
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," "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, general economic conditions, potential recession in the
ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(unaudited)
(Dollars in thousands, except per share data) | 2023 | 2022 | ||||||
Assets | ||||||||
Cash and cash equivalents: | ||||||||
Cash and due from banks | $ | 42,843 | $ | 36,901 | ||||
Interest-earning deposits with banks | 172,850 | 230,688 | ||||||
Total cash and cash equivalents | 215,693 | 267,589 | ||||||
Investments: | ||||||||
Debt securities at fair value (amortized cost of | 825,520 | 816,102 | ||||||
Equity securities at fair value | 5,375 | 4,269 | ||||||
Total investment securities at fair value | 830,895 | 820,371 | ||||||
2,343 | 2,343 | |||||||
Loans held for sale | 362 | — | ||||||
Loans: | ||||||||
Total loans | 3,230,156 | 3,180,518 | ||||||
Allowance for credit losses | (55,002 | ) | (52,640 | ) | ||||
Net loans | 3,175,154 | 3,127,878 | ||||||
Premises and equipment, net | 43,821 | 44,228 | ||||||
Lease right-of-use asset | 24,751 | 24,923 | ||||||
Accrued interest receivable | 18,540 | 17,117 | ||||||
Deferred income taxes, net | 44,432 | 51,981 | ||||||
Bank-owned life insurance | 64,463 | 64,156 | ||||||
Prepaid income taxes | 3,636 | 683 | ||||||
Prepaid expenses and other assets | 12,150 | 11,408 | ||||||
5,656 | 5,656 | |||||||
Total assets | $ | 4,441,896 | $ | 4,438,333 | ||||
Liabilities and Shareholders' Equity | ||||||||
Liabilities | ||||||||
Deposits | $ | 4,016,156 | $ | 4,035,806 | ||||
Borrowed funds | 3,199 | 3,216 | ||||||
Subordinated debt | 59,261 | 59,182 | ||||||
Lease liability | 24,285 | 24,415 | ||||||
Accrued expenses and other liabilities | 25,737 | 31,442 | ||||||
Accrued interest payable | 1,940 | 2,005 | ||||||
Total liabilities | 4,130,578 | 4,156,066 | ||||||
Commitments and Contingencies | ||||||||
Shareholders' Equity | ||||||||
Preferred stock, | — | — | ||||||
Common stock, | 122 | 121 | ||||||
Additional paid-in capital | 104,621 | 103,793 | ||||||
Retained earnings | 282,534 | 274,560 | ||||||
Accumulated other comprehensive loss | (75,959 | ) | (96,207 | ) | ||||
Total shareholders' equity | 311,318 | 282,267 | ||||||
Total liabilities and shareholders' equity | $ | 4,441,896 | $ | 4,438,333 |
ENTERPRISE BANCORP, INC.
Consolidated Statements of Income
(unaudited)
Three months ended | ||||||
(Dollars in thousands, except per share data) | 2023 | 2022 | ||||
Interest and dividend income: | ||||||
Loans and loans held for sale | $ | 39,556 | $ | 30,695 | ||
Investment securities | 5,073 | 4,588 | ||||
Other interest-earning assets | 2,208 | 181 | ||||
Total interest and dividend income | 46,837 | 35,464 | ||||
Interest expense: | ||||||
Deposits | 5,987 | 600 | ||||
Borrowed funds | 12 | 13 | ||||
Subordinated debt | 867 | 818 | ||||
Total interest expense | 6,866 | 1,431 | ||||
Net interest income | 39,971 | 34,033 | ||||
Provision for credit losses | 2,736 | 530 | ||||
Net interest income after provision for credit losses | 37,235 | 33,503 | ||||
Non-interest income: | ||||||
Wealth management fees | 1,587 | 1,729 | ||||
Deposit and interchange fees | 2,048 | 1,802 | ||||
Income on bank-owned life insurance, net | 307 | 295 | ||||
Net gains on sales of debt securities | — | 1,062 | ||||
Net gains on sales of loans | 14 | 22 | ||||
Loss on equity securities | (16) | (67) | ||||
Other income | 817 | 752 | ||||
Total non-interest income | 4,757 | 5,595 | ||||
Non-interest expense: | ||||||
Salaries and employee benefits | 18,521 | 16,792 | ||||
Occupancy and equipment expenses | 2,501 | 2,415 | ||||
Technology and telecommunications expenses | 2,675 | 2,636 | ||||
Advertising and public relations expenses | 681 | 667 | ||||
Audit, legal and other professional fees | 640 | 710 | ||||
Deposit insurance premiums | 675 | 556 | ||||
Supplies and postage expenses | 255 | 220 | ||||
Other operating expenses | 2,092 | 1,761 | ||||
Total non-interest expense | 28,040 | 25,757 | ||||
Income before income taxes | 13,952 | 13,341 | ||||
Provision for income taxes | 3,184 | 3,054 | ||||
Net income | $ | 10,768 | $ | 10,287 | ||
Basic earnings per common share | $ | 0.89 | $ | 0.85 | ||
Diluted earnings per common share | $ | 0.88 | $ | 0.85 | ||
Basic weighted average common shares outstanding | 12,155,320 | 12,055,991 | ||||
Diluted weighted average common shares outstanding | 12,193,756 | 12,119,836 |
ENTERPRISE BANCORP, INC.
Selected Consolidated Financial Data and Ratios
(unaudited)
At or for the three months ended | ||||||||||||||||||||
(Dollars in thousands, except per share data) | 2023 | 2022 | 2022 | 2022 | 2022 | |||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
Total cash and cash equivalents | $ | 215,693 | $ | 267,589 | $ | 413,688 | $ | 306,460 | $ | 429,687 | ||||||||||
Total investment securities at fair value | 830,895 | 820,371 | 831,030 | 866,580 | 910,013 | |||||||||||||||
Total loans | 3,230,156 | 3,180,518 | 3,109,369 | 3,084,915 | 2,962,721 | |||||||||||||||
Allowance for credit losses | (55,002 | ) | (52,640 | ) | (51,211 | ) | (50,703 | ) | (48,424 | ) | ||||||||||
Total assets | 4,441,896 | 4,438,333 | 4,529,820 | 4,417,447 | 4,454,474 | |||||||||||||||
Total deposits | 4,016,156 | 4,035,806 | 4,138,038 | 4,016,814 | 4,034,500 | |||||||||||||||
Subordinated debt | 59,261 | 59,182 | 59,102 | 59,039 | 59,009 | |||||||||||||||
Total shareholders' equity | 311,318 | 282,267 | 272,193 | 285,110 | 310,539 | |||||||||||||||
Total liabilities and shareholders' equity | 4,441,896 | 4,438,333 | 4,529,820 | 4,417,447 | 4,454,474 | |||||||||||||||
Wealth Management | ||||||||||||||||||||
Wealth assets under management | $ | 930,714 | $ | 891,451 | $ | 835,661 | $ | 849,536 | $ | 961,491 | ||||||||||
Wealth assets under administration | $ | 206,569 | $ | 198,586 | $ | 185,977 | $ | 205,646 | $ | 243,247 | ||||||||||
Shareholders' Equity Ratios | ||||||||||||||||||||
Book value per common share | $ | 25.47 | $ | 23.26 | $ | 22.44 | $ | 23.53 | $ | 25.66 | ||||||||||
Dividends paid per common share | $ | 0.230 | $ | 0.205 | $ | 0.205 | $ | 0.205 | $ | 0.205 | ||||||||||
Regulatory Capital Ratios | ||||||||||||||||||||
Total capital to risk weighted assets | 13.55 | % | 13.49 | % | 13.49 | % | 13.38 | % | 13.72 | % | ||||||||||
Tier 1 capital to risk weighted assets(1) | 10.64 | % | 10.56 | % | 10.52 | % | 10.38 | % | 10.65 | % | ||||||||||
Tier 1 capital to average assets | 8.47 | % | 8.10 | % | 7.89 | % | 8.03 | % | 7.83 | % | ||||||||||
Credit Quality Data | ||||||||||||||||||||
Non-performing loans | $ | 7,532 | $ | 6,122 | $ | 5,717 | $ | 6,321 | $ | 25,173 | ||||||||||
Non-performing loans to total loans | 0.23 | % | 0.19 | % | 0.18 | % | 0.20 | % | 0.85 | % | ||||||||||
Non-performing assets to total assets | 0.17 | % | 0.14 | % | 0.13 | % | 0.14 | % | 0.57 | % | ||||||||||
ACL for loans to total loans | 1.70 | % | 1.66 | % | 1.65 | % | 1.64 | % | 1.63 | % | ||||||||||
Income Statement Data | ||||||||||||||||||||
Net interest income | $ | 39,971 | $ | 42,165 | $ | 39,779 | $ | 35,821 | $ | 34,033 | ||||||||||
Provision for credit losses | 2,736 | 1,861 | 1,000 | 2,409 | 530 | |||||||||||||||
Total non-interest income | 4,757 | 4,210 | 4,525 | 4,132 | 5,595 | |||||||||||||||
Total non-interest expense | 28,040 | 28,167 | 27,537 | 26,853 | 25,757 | |||||||||||||||
Income before income taxes | 13,952 | 16,347 | 15,767 | 10,691 | 13,341 | |||||||||||||||
Provision for income taxes | 3,184 | 4,041 | 3,805 | 2,530 | 3,054 | |||||||||||||||
Net income | $ | 10,768 | $ | 12,306 | $ | 11,962 | $ | 8,161 | $ | 10,287 | ||||||||||
Income Statement Ratios | ||||||||||||||||||||
Diluted earnings per common share | $ | 0.88 | $ | 1.01 | $ | 0.98 | $ | 0.67 | $ | 0.85 | ||||||||||
Return on average total assets | 0.99 | % | 1.08 | % | 1.05 | % | 0.76 | % | 0.95 | % | ||||||||||
Return on average shareholders' equity | 14.67 | % | 18.08 | % | 16.47 | % | 11.24 | % | 12.56 | % | ||||||||||
Net interest margin (tax-equivalent)(2) | 3.76 | % | 3.81 | % | 3.61 | % | 3.45 | % | 3.28 | % |
- Ratio also represents common equity tier 1 capital to risk weighted assets as of the periods presented.
- 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 BANCORP, INC.
Consolidated Loan and Deposit Data
(unaudited)
Major classifications of loans at the dates indicated were as follows:
(Dollars in thousands) | 2023 | 2022 | 2022 | 2022 | 2022 | |||||||||||||||
Commercial real estate | $ | 1,929,544 | $ | 1,921,410 | $ | 1,886,365 | $ | 1,865,198 | $ | 1,779,691 | ||||||||||
Commercial and industrial | 423,864 | 414,490 | 413,347 | 422,006 | 408,341 | |||||||||||||||
Commercial construction | 456,735 | 424,049 | 396,027 | 385,752 | 375,709 | |||||||||||||||
SBA PPP | — | — | 2,725 | 15,288 | 32,153 | |||||||||||||||
Total commercial loans | 2,810,143 | 2,759,949 | 2,698,464 | 2,688,244 | 2,595,894 | |||||||||||||||
Residential mortgages | 335,834 | 332,632 | 321,663 | 307,131 | 280,507 | |||||||||||||||
Home equity loans and lines | 75,809 | 79,807 | 80,882 | 81,648 | 78,557 | |||||||||||||||
Consumer | 8,370 | 8,130 | 8,360 | 7,892 | 7,763 | |||||||||||||||
Total retail loans | 420,013 | 420,569 | 410,905 | 396,671 | 366,827 | |||||||||||||||
Total loans | 3,230,156 | 3,180,518 | 3,109,369 | 3,084,915 | 2,962,721 | |||||||||||||||
ACL for loans | (55,002 | ) | (52,640 | ) | (51,211 | ) | (50,703 | ) | (48,424 | ) | ||||||||||
Net loans | $ | 3,175,154 | $ | 3,127,878 | $ | 3,058,158 | $ | 3,034,212 | $ | 2,914,297 |
Deposits are summarized as follows as of the periods indicated:
(Dollars in thousands) | 2023 | 2022 | 2022 | 2022 | 2022 | ||||||||||
Non-interest checking | $ | 1,247,253 | $ | 1,361,588 | $ | 1,441,104 | $ | 1,457,220 | $ | 1,444,047 | |||||
Interest-bearing checking | 641,194 | 678,715 | 719,474 | 712,898 | 718,107 | ||||||||||
Savings | 297,790 | 326,666 | 351,665 | 334,728 | 334,923 | ||||||||||
Money market | 1,454,858 | 1,381,645 | 1,395,756 | 1,293,453 | 1,337,670 | ||||||||||
CDs | 222,116 | 187,758 | 163,520 | 144,084 | 149,309 | ||||||||||
CDs greater than | 152,945 | 99,434 | 66,519 | 74,431 | 50,444 | ||||||||||
Deposits | $ | 4,016,156 | $ | 4,035,806 | $ | 4,138,038 | $ | 4,016,814 | $ | 4,034,500 |
ENTERPRISE BANCORP, INC.
Consolidated Average Balance Sheets and Yields (tax-equivalent basis)
(unaudited)
The following table presents the Company's average balance sheets, net interest income and average rates for the periods indicated:
Three months ended | Three months ended | Three months ended | |||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest(1) | Average Yield(1) | Average Balance | Interest(1) | Average Yield(1) | Average Balance | Interest(1) | Average Yield(1) | ||||||||||||||||||
Assets: | |||||||||||||||||||||||||||
Loans and loans held for sale(2) (tax-equivalent) | $ | 3,200,842 | $ | 39,679 | 5.02 | % | $ | 3,118,304 | $ | 37,895 | 4.82 | % | $ | 2,911,282 | $ | 30,806 | 4.29 | % | |||||||||
Investment securities(3) (tax-equivalent) | 937,382 | 5,300 | 2.26 | % | 952,975 | 5,099 | 2.14 | % | 946,732 | 4,820 | 2.04 | % | |||||||||||||||
Other interest-earning assets(4) | 198,741 | 2,208 | 4.51 | % | 360,557 | 3,372 | 3.71 | % | 383,588 | 181 | 0.19 | % | |||||||||||||||
Total interest-earnings assets (tax-equivalent) | 4,336,965 | 47,187 | 4.40 | % | 4,431,836 | 46,366 | 4.16 | % | 4,241,602 | 35,807 | 3.41 | % | |||||||||||||||
Other assets | 86,580 | 71,289 | 154,167 | ||||||||||||||||||||||||
Total assets | $ | 4,423,545 | $ | 4,503,125 | $ | 4,395,769 | |||||||||||||||||||||
Liabilities and stockholders' equity: | |||||||||||||||||||||||||||
Interest checking, savings and money market | $ | 2,354,967 | 4,105 | 0.71 | % | $ | 2,413,646 | 2,211 | 0.36 | % | $ | 2,371,320 | 378 | 0.06 | % | ||||||||||||
CDs | 337,361 | 1,882 | 2.26 | % | 260,265 | 769 | 1.17 | % | 202,702 | 222 | 0.44 | % | |||||||||||||||
Borrowed funds | 3,206 | 12 | 1.57 | % | 2,999 | 13 | 1.69 | % | 4,263 | 13 | 1.27 | % | |||||||||||||||
Subordinated debt(5) | 59,213 | 867 | 5.85 | % | 59,132 | 867 | 5.86 | % | 58,991 | 818 | 5.54 | % | |||||||||||||||
Total interest-bearing funding | 2,754,747 | 6,866 | 1.01 | % | 2,736,042 | 3,860 | 0.56 | % | 2,637,276 | 1,431 | 0.22 | % | |||||||||||||||
Non-interest checking | 1,317,534 | — | 1,442,108 | — | 1,373,267 | — | |||||||||||||||||||||
Total deposits, borrowed funds and subordinated debt | 4,072,281 | 6,866 | 0.68 | % | 4,178,150 | 3,860 | 0.37 | % | 4,010,543 | 1,431 | 0.14 | % | |||||||||||||||
Other liabilities | 53,665 | 54,922 | 53,192 | ||||||||||||||||||||||||
Total liabilities | 4,125,946 | 4,233,072 | 4,063,735 | ||||||||||||||||||||||||
Stockholders' equity | 297,599 | 270,053 | 332,034 | ||||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 4,423,545 | $ | 4,503,125 | $ | 4,395,769 | |||||||||||||||||||||
Net interest-rate spread (tax-equivalent) | 3.39 | % | 3.60 | % | 3.19 | % | |||||||||||||||||||||
Net interest income (tax-equivalent) | 40,321 | 42,506 | 34,376 | ||||||||||||||||||||||||
Net interest margin (tax-equivalent) | 3.76 | % | 3.81 | % | 3.28 | % | |||||||||||||||||||||
Less tax-equivalent adjustment | 350 | 341 | 343 | ||||||||||||||||||||||||
Net interest income | $ | 39,971 | $ | 42,165 | $ | 34,033 | |||||||||||||||||||||
Net interest margin | 3.73 | % | 3.78 | % | 3.25 | % |
- Average yields and interest income are presented on a tax-equivalent basis, calculated using a
U.S. federal income tax rate of 21% for each period presented, based on tax-equivalent adjustments associated with tax-exempt loans and investments interest income. - Average loans and loans held for sale include non-accrual loans and are net of average deferred loan fees.
- Average investments are presented at average amortized cost.
- Average other interest-earning assets include interest-earning deposits with banks, federal funds sold and FHLB stock.
- Subordinated debt is net of average deferred debt issuance costs.
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