Company Quick10K Filing
Enterprise Bancorp
Price30.39 EPS3
Shares12 P/E11
MCap360 P/FCF27
Net Debt-82 EBIT64
TEV278 TEV/EBIT4
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-10
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-03-13
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-13
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-08
10-K 2016-12-31 Filed 2017-03-14
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-13
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-14
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-15
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-15
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-12
8-K 2020-05-05
8-K 2020-05-05
8-K 2020-04-27
8-K 2020-04-20
8-K 2020-03-20
8-K 2020-01-23
8-K 2020-01-21
8-K 2019-10-17
8-K 2019-10-15
8-K 2019-07-18
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8-K 2019-06-18
8-K 2019-05-10
8-K 2019-04-18
8-K 2019-04-16
8-K 2019-03-22
8-K 2019-01-24
8-K 2019-01-15
8-K 2018-12-11
8-K 2018-10-22
8-K 2018-10-18
8-K 2018-10-16
8-K 2018-07-19
8-K 2018-07-17
8-K 2018-05-01
8-K 2018-04-19
8-K 2018-04-17
8-K 2018-03-23
8-K 2018-01-25
8-K 2018-01-16
8-K 2018-01-05

EBTC 10Q Quarterly Report

Part I - Financial Information
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 - Defaults Upon Senior Securities
Item 4 - Mine Safety Disclosures
Item 5 - Other Information
Item 6 - Exhibits
EX-31.1 ebtc33120-ex311.htm
EX-31.2 ebtc33120-ex312.htm
EX-32 ebtc33120-ex32.htm

Enterprise Bancorp Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

10-Q 1 ebtc33120-10q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
Form 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

Commission File Number:  001-33912
 Enterprise Bancorp, Inc.
(Exact name of registrant as specified in its charter)
 
Massachusetts
04-3308902
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
 
222 Merrimack Street, Lowell, Massachusetts
01852
(Address of principal executive offices)
(Zip code)
 (978) 459-9000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value per share
 
EBTC
 
NASDAQ Stock Market
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     x Yes o No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      x Yes o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition for "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer o
 
Accelerated filer x
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes x No

As of May 5, 2020, there were 11,897,132 shares of the issuer's common stock outstanding, par value $0.01 per share.





ENTERPRISE BANCORP, INC.
INDEX

 
 
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



2


PART I-FINANCIAL INFORMATION

Item 1 -
Financial Statements
ENTERPRISE BANCORP, INC.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
 
March 31,
2020
 
December 31,
2019
Assets
 
 

 
 

Cash and cash equivalents:
 
 

 
 

Cash and due from banks
 
$
32,833

 
$
39,927

Interest-earning deposits
 
42,024

 
23,867

Total cash and cash equivalents
 
74,857

 
63,794

Investments:
 
 
 
 
Debt securities at fair value
 
505,671

 
504,788

Equity securities at fair value
 
588

 
467

Total investment securities at fair value
 
506,259

 
505,255

Federal Home Loan Bank ("FHLB") stock
 
5,624

 
4,484

Loans held for sale
 
476

 
601

Loans, less allowance for loan losses of $39,764 at March 31, 2020 and $33,614 at December 31, 2019
 
2,644,163

 
2,531,845

Premises and equipment, net
 
46,734

 
45,419

Lease right-of-use asset
 
18,893

 
19,048

Accrued interest receivable
 
12,977

 
12,295

Deferred income taxes, net
 
9,045

 
8,732

Bank-owned life insurance
 
30,929

 
30,776

Prepaid income taxes
 
1,005

 
572

Prepaid expenses and other assets
 
10,535

 
6,572

Goodwill
 
5,656

 
5,656

Total assets
 
$
3,367,153

 
$
3,235,049

Liabilities and Stockholders' Equity
 
 

 
 

Liabilities
 
 

 
 

Deposits
 
$
2,912,850

 
$
2,786,730

Borrowed funds
 
84,169

 
96,173

Subordinated debt
 
14,876

 
14,872

Lease liability
 
17,968

 
18,104

Accrued expenses and other liabilities
 
31,756

 
21,683

Accrued interest payable
 
897

 
846

Total liabilities
 
3,062,516

 
2,938,408

Commitments and Contingencies
 


 


Stockholders' 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; 11,897,322 shares issued and outstanding at March 31, 2020 and 11,825,331 shares issued and outstanding at December 31, 2019
 
119

 
118

Additional paid-in capital
 
94,920

 
94,170

Retained earnings
 
193,791

 
191,843

Accumulated other comprehensive income
 
15,807

 
10,510

Total stockholders' equity
 
304,637

 
296,641

Total liabilities and stockholders' equity
 
$
3,367,153

 
$
3,235,049


See the accompanying notes to the unaudited consolidated interim financial statements.

3



ENTERPRISE BANCORP, INC.
Consolidated Statements of Income
(Unaudited)
 
 
Three months ended March 31,
(Dollars in thousands, except per share data)
 
2020
 
2019
Interest and dividend income:
 
 
 
 
Loans and loans held for sale
 
$
31,298

 
$
29,616

Investment securities
 
3,484

 
3,222

Other interest-earning assets
 
165

 
459

Total interest and dividend income
 
34,947

 
33,297

Interest expense:
 
 
 
 
Deposits
 
4,405

 
4,706

Borrowed funds
 
415

 
279

Subordinated debt
 
231

 
228

Total interest expense
 
5,051

 
5,213

Net interest income
 
29,896

 
28,084

Provision for loan losses
 
6,147

 
(400
)
Net interest income after provision for loan losses
 
23,749

 
28,484

Non-interest income:
 
 
 
 
Wealth management fees
 
1,440

 
1,299

Deposit and interchange fees
 
1,691

 
1,564

Income on bank-owned life insurance, net
 
153

 
162

Net gains (losses) on sales of debt securities
 
100

 
(1
)
Net gains on sales of loans
 
147

 
36

Other income
 
667

 
776

Total non-interest income
 
4,198

 
3,836

Non-interest expense:
 
 
 
 
Salaries and employee benefits
 
14,819

 
13,481

Occupancy and equipment expenses
 
2,176

 
2,212

Technology and telecommunications expenses
 
2,188

 
1,726

Advertising and public relations expenses
 
645

 
705

Audit, legal and other professional fees
 
605

 
423

Deposit insurance premiums
 
404

 
351

Supplies and postage expenses
 
247

 
224

Other operating expenses
 
1,595

 
1,728

Total non-interest expense
 
22,679

 
20,850

Income before income taxes
 
5,268

 
11,470

Provision for income taxes
 
1,251

 
2,774

Net income
 
$
4,017

 
$
8,696

 
 
 
 
 
Basic earnings per share
 
$
0.34

 
$
0.74

Diluted earnings per share
 
$
0.34

 
$
0.74

 
 
 
 
 
Basic weighted average common shares outstanding
 
11,841,392

 
11,730,482

Diluted weighted average common shares outstanding
 
11,877,031

 
11,783,405

 


See the accompanying notes to the unaudited consolidated interim financial statements.

4






ENTERPRISE BANCORP, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)

 
 
 
Three months ended March 31,
(Dollars in thousands)
 
2020
 
2019
Net income
 
$
4,017

 
$
8,696

Other comprehensive income, net of tax
 
 
 
 
Net change in fair value of debt securities
 
7,360

 
3,134

Net change in fair value of cash flow hedges
 
(2,063
)
 

Total other comprehensive income, net of tax
 
5,297

 
3,134

Total comprehensive income, net
 
$
9,314

 
$
11,830




See the accompanying notes to the unaudited consolidated interim financial statements.

5


ENTERPRISE BANCORP, INC.
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)

 
 
Common Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive Income/(Loss)
 
Total
Stockholders'
Equity
(Dollars in thousands, except per share data)
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2018
 
11,708,218

 
$
117

 
$
91,281

 
$
165,183

 
$
(1,284
)
 
$
255,297

Net income
 
 
 
 
 
 
 
8,696

 
 
 
8,696

Other comprehensive income, net
 
 
 
 
 
 
 
 
 
3,134

 
3,134

Common stock dividend declared ($0.16 per share)
 
 
 
 
 
 
 
(1,875
)
 
 
 
(1,875
)
Common stock issued under dividend reinvestment plan
 
9,341

 

 
298

 
 
 
 
 
298

Common stock issued, other
 
264

 

 
8

 
 
 
 
 
8

Stock-based compensation
 
62,523

 
1

 
598

 
 
 
 
 
599

Net settlement for employee taxes on restricted stock and options
 
(2,741
)
 

 
(240
)
 
 
 
 
 
(240
)
Stock options exercised, net
 
20,509

 

 
144

 
 
 
 
 
144

Balance at March 31, 2019
 
11,798,114

 
$
118

 
$
92,089

 
$
172,004

 
$
1,850

 
$
266,061

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019
 
11,825,331

 
$
118

 
$
94,170

 
$
191,843

 
$
10,510

 
$
296,641

Net income
 
 
 
 
 
 
 
4,017

 
 
 
4,017

Other comprehensive income, net
 
 
 
 
 
 
 
 
 
5,297

 
5,297

Common stock dividend declared ($0.175 per share)
 
 
 
 
 
 
 
(2,069
)
 
 
 
(2,069
)
Common stock issued under dividend reinvestment plan
 
11,050

 

 
303

 
 
 
 
 
303

Common stock issued, other
 
473

 

 
7

 
 
 
 
 
7

Stock-based compensation
 
66,057

 
1

 
606

 
 
 
 
 
607

Net settlement for employee taxes on restricted stock and options
 
(6,329
)
 

 
(182
)
 
 
 
 
 
(182
)
Stock options exercised, net
 
740

 

 
16

 
 
 
 
 
16

Balance at March 31, 2020
 
11,897,322

 
$
119

 
$
94,920

 
$
193,791

 
$
15,807

 
$
304,637



 
 
 
 
 
 
 
 
 
 
 
 
 
 

See the accompanying notes to the unaudited consolidated interim financial statements.

6


ENTERPRISE BANCORP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three months ended March 31,
(Dollars in thousands)
 
2020
 
2019
Cash flows from operating activities:
 
 
 
 
Net income
 
$
4,017

 
$
8,696

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Provision for loan losses
 
6,147

 
(400
)
Depreciation and amortization
 
1,609

 
1,476

Stock-based compensation expense
 
426

 
426

Income on bank-owned life insurance, net
 
(153
)
 
(162
)
Net (gains) losses on sales of debt securities
 
(100
)
 
1

Mortgage loans originated for sale
 
(7,957
)
 
(1,443
)
Proceeds from mortgage loans sold
 
8,229

 
1,848

Net gains on sales of loans
 
(147
)
 
(36
)
Net losses (gains) on equity securities
 
198

 
(186
)
Changes in:
 
 
 
 
Increase in other assets
 
(3,758
)
 
(902
)
   Increase (decrease) in other liabilities
 
5,328

 
(3,355
)
Net cash provided by operating activities
 
13,839

 
5,963

Cash flows from investing activities:
 
 
 
 
Proceeds from sales of debt securities
 
2,627

 
3,648

Purchase of debt securities
 
(6,350
)
 
(38,788
)
Proceeds from maturities, calls and pay-downs of debt securities
 
11,283

 
7,228

Net purchases of equity securities
 
(319
)
 
(415
)
Net (purchases) proceeds from the sales of FHLB capital stock
 
(1,140
)
 
3,866

Net (increase) decrease in loans
 
(118,465
)
 
2,894

Additions to premises and equipment, net
 
(2,603
)
 
(1,969
)
Net cash used in investing activities
 
(114,967
)
 
(23,536
)
Cash flows from financing activities:
 
 
 
 
Net increase in deposits
 
126,120

 
191,384

Net decrease in borrowed funds
 
(12,004
)
 
(100,004
)
Cash dividends paid, net of DRP
 
(1,766
)
 
(1,577
)
Proceeds from issuance of common stock
 
7

 
8

Net settlement for employee taxes on restricted stock and options
 
(182
)
 
(240
)
Net proceeds from stock option exercises
 
16

 
144

Net cash provided by financing activities
 
112,191

 
89,715

 
 
 
 
 
Net increase in cash and cash equivalents
 
11,063

 
72,142

Cash and cash equivalents at beginning of period
 
63,794

 
63,120

Cash and cash equivalents at end of period
 
$
74,857

 
$
135,262

 


See accompanying notes to the unaudited consolidated interim financial statements.

7







ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 
(1)
Summary of Significant Accounting Policies

(a) Organization of the Company and Basis of Presentation

The accompanying unaudited consolidated interim financial statements and these notes should be read in conjunction with the December 31, 2019 audited consolidated financial statements and notes thereto contained in the 2019 Annual Report on Form 10-K of Enterprise Bancorp, Inc. as filed with the Securities and Exchange Commission (the "SEC") on March 10, 2020 (the "2019 Annual Report on Form 10-K"). The Company has not materially changed its significant accounting policies from those disclosed in its 2019 Annual Report on Form 10-K, other than to elect options for the temporary deferral of certain accounting guidance as allowed under the recently enacted Coronavirus Aid, Relief, and Economic Security ("CARES") Act as discussed under Item (c) "Accounting Policies," below in this Note 1. See also Item (e) "Recent Accounting Pronouncements," under the subheading "Accounting pronouncements adopted by the Company," below in this Note 1.

The accompanying unaudited consolidated interim financial statements of Enterprise Bancorp, Inc. (the "Company," "Enterprise," "we," or "our"), a Massachusetts corporation, include the accounts of the Company and its wholly owned subsidiary, Enterprise Bank and Trust Company, commonly referred to as Enterprise Bank ("the Bank").  The Bank is a Massachusetts trust company and state chartered commercial bank organized in 1989. Substantially all of the Company's operations are conducted through the Bank and its subsidiaries.

The Bank's subsidiaries include Enterprise Insurance Services, LLC and Enterprise Wealth Services, LLC, both organized under the laws of the State of Delaware, to engage in insurance sales activities and offer non-deposit investment products and services, respectively.  In addition, the Bank has the following subsidiaries that are incorporated in the Commonwealth of Massachusetts and classified as security corporations in accordance with applicable Massachusetts General Laws: Enterprise Security Corporation; Enterprise Security Corporation II; and Enterprise Security Corporation III.  The security corporations, which hold various types of qualifying securities, are limited to conducting securities investment activities that the Bank itself would be allowed to conduct under applicable laws.

The Company's headquarters and the Bank's main office are located at 222 Merrimack Street in Lowell, Massachusetts. At March 31, 2020, the Company had 25 full-service branch banking offices serving the Greater Merrimack Valley, Nashoba Valley and North Central regions of Massachusetts and Southern New Hampshire (Southern Hillsborough and Rockingham counties). The Company is also scheduled to open a branch in North Andover, Massachusetts in the second half of 2020. Through the 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.  The Company also provides a range of wealth management, wealth services and trust services delivered via two channels, Enterprise Wealth Management and Enterprise Wealth Services. The services offered through the Bank and its subsidiaries are managed as one strategic unit and represent the Company's only reportable operating segment.

The Federal Deposit Insurance Corporation (the "FDIC") and the Massachusetts Division of Banks (the "Division") have regulatory authority over the Bank.  The Bank is also subject to certain regulatory requirements of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and, with respect to its New Hampshire branch operations, the New Hampshire Banking Department.  The business and operations of the Company are subject to the regulatory oversight of the Federal Reserve Board.  The Division also retains supervisory jurisdiction over the Company.

The accompanying unaudited consolidated interim financial statements and notes thereto have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions for SEC Form 10-Q through the rules and interpretive releases of the SEC under federal securities law. In the opinion of management, the accompanying unaudited consolidated interim financial statements reflect all necessary adjustments consisting of normal recurring accruals for a fair presentation.  All significant intercompany balances and transactions have been eliminated in the accompanying unaudited consolidated interim financial statements. Certain previous years' amounts in the audited consolidated financial statements, and notes thereto, have been reclassified to conform to the current year's presentation. Interim results are not necessarily indicative of results to be expected for the entire year, or any future period.



8

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

(b) Uses of Estimates

In preparing the unaudited consolidated interim financial statements in conformity with GAAP, management is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized.  These assumptions and estimates affect the reported values of assets and liabilities as of the balance sheet dates and income and expenses for the period then ended.  As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates should the assumptions and estimates used be incorrect or change over time due to changes in circumstances.  Changes in those estimates resulting from continuing changes in the economic environment and other factors will be reflected in the consolidated financial statements and results of operations in future periods.

As discussed in the Company's 2019 Annual Report on Form 10-K, the three most significant areas in which management applies critical assumptions and estimates are: the estimates of the allowance for loan losses, impairment review of investment securities, and the impairment review of goodwill.  Refer to Note 1, "Summary of Significant Accounting Policies," to the Company's audited consolidated financial statements included in the Company's 2019 Annual Report on Form 10-K for accounting policies related to these significant estimates.

(c) Accounting Policies

Restricted Cash and Investments

When the Company has pledged cash as collateral in relation to certain derivatives, the cash is carried as restricted cash within "Interest-earning deposits" on the Company's Consolidated Balance Sheet. See Note 8, "Derivatives and Hedging Activities," to the Company's unaudited consolidated interim financial statements below in Quarterly Report on this Form 10-Q ("this Form 10-Q") for more information about the Company's collateral related to its derivatives.

The Bank is also typically required by the Federal Reserve Bank of Boston ("FRB") to maintain in reserves certain amounts of vault cash and/or deposits with the FRB, however, in response to the COVID-19 pandemic, this requirement has been eliminated until further notice.

As a member of the FHLB, the Company is required to purchase certain levels of FHLB capital stock at par value in association with outstanding advances from the FHLB.  This stock represents the only restricted investment held by the Company and is carried at cost, which management believes approximates fair value. Based on management's periodic review for other-than-temporary impairment ("OTTI"), the Company has not recorded any OTTI charges on this investment to date.

Other Accounting Policies

The CARES Act allows certain financial institutions the option to defer the adoption of the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-13 (Measurement of Credit Losses on Financial Instruments), including the current expected credit loss ("CECL") methodology for estimating allowances for credit losses, during the period beginning on March 27, 2020 until the earlier of (1) the date on which the national emergency concerning the COVID-19 pandemic declared under the National Emergencies Act terminates; or (2) December 31, 2020. The Company has elected to defer the adoption of CECL. See Item (e) "Recent Accounting Pronouncements," under the subheading "Accounting pronouncements not yet adopted by the Company," below in this Note 1 for additional information on CECL.

In addition, Section 4013 of the CARES Act provides the option for financial institutions to suspend troubled debt restructuring ("TDR") accounting under GAAP in certain circumstances, during the period beginning March 1, 2020 and ending on the (1) earlier of December 31, 2020; or (2) the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared under the National Emergencies Act terminates. The Company is suspending TDR accounting, which primarily impacts financial statement disclosure, for loans that have had a short-term payment deferral since March 1, 2020, as long as those loans were current and risk rated as “pass” prior to the onset of the COVID-19 pandemic.    

(d) Subsequent Events

The Company has evaluated subsequent events and transactions from March 31, 2020 through the date this Form 10-Q was filed with the SEC for potential recognition or disclosure as required by GAAP and determined that outside of the items noted below, there were no material subsequent events requiring recognition or disclosure.


9

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 


From April 3, 2020 through May 4, 2020, covering the period that funding was approved for the Paycheck Protection Program (the “PPP”) though the most recently obtainable date, the Company had submitted and received approval from the U.S. Small Business Administration ("SBA") for approximately 2,400 PPP applications for approximately $500.0 million in PPP loans with the median approved loan size being $74 thousand. The PPP program is administered by the SBA and created under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

In April 2020, the Company established access to the FRB's PPP Liquidity Facility ("PPPLF"), which provides funding secured by PPP pledged loans at a borrowing rate of 0.35%. Advances issued under the PPPLF are non-recourse. The amount and term of an advance matches the amount and remaining term of the PPP loans pledged, which is a maximum of two years from the loan origination date. PPP loans are fully guaranteed by the SBA and have no impact on our risk-based capital ratios. PPP loans pledged as collateral for the PPPLF are excluded from the average assets used in the leverage ratio calculation. As of May 7th, the Company borrowed $43.7 million under the PPPLF.

As noted above, under Item (c) "Accounting Policies," section 4013 of the CARES Act provides financial institutions the option to suspend TDR accounting under GAAP in certain circumstances and the Company has elected that option. The Company has worked proactively with customers experiencing financial challenges from the COVID-19 pandemic.
The Company had granted short-term payment deferrals related to COVID-19 on 1,135 loans through April 30, 2020, the latest date information was obtainable. As of March 31, 2020, these loans had an outstanding balance as of $596.0 million, or 22.2% of the total loan portfolio. All loans remain accruing.

(e) Recent Accounting Pronouncements

The tables below summarize recent accounting pronouncements issued by the FASB that were either recently adopted by the Company or have not yet been adopted. For pronouncements not yet adopted, the effective date listed below is in line with the required adoption date for public business entities, such as the Company, though certain accounting pronouncements may permit early adoption. For more detailed information regarding these pronouncements, refer to the FASB's ASUs.

Accounting pronouncements adopted by the Company
 
 
 
Standard/Adoption Date
Description
Effect on Financial Statements or Other Significant Matters
ASU No. 2018-13, Fair Value Measurement
(ASU Topic 820)-Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement

January 1, 2020

The amendments in this ASU modify the disclosure requirements primarily related to level 3 fair value measurements of the fair value hierarchy.

The adoption of ASU No. 2018-13 in January 2020 did not have a material impact on the Company's consolidated financial statements and results of operations because this ASU primarily relates to disclosure requirements and the dollar amounts of related assets held by the Company are immaterial.

ASU No.2018-15, Intangibles-Goodwill and Other- Internal-Use Software
(ASU Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

January 1, 2020

The major provision in the amendments in this ASU require an entity to capitalize certain implementation costs incurred in a hosting arrangement that is a service contract in accordance with current GAAP for internal-use software and expense these costs over the term of the hosting arrangement. Additionally, these capitalized implementation costs are required to be reviewed for impairment in accordance with current GAAP for internal-use software. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

The adoption of ASU No. 2018-15 in January 2020 did not have a material impact on the Company's consolidated financial statements and results of operations.



10

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

Accounting pronouncements not yet adopted by the Company
 
 
 
Standard/Anticipated Adoption Date
Description
Effect on Financial Statements or Other Significant Matters
ASU No. 2016-13, Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments

The earlier of (1) the date on which the national emergency concerning the COVID-19 pandemic declared by the National Emergencies Act terminates; or (2) December 31, 2020.
The amendments in this ASU require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss and generally recognition of the full amount of credit losses was delayed until the loss was probable of occurring. The amendments in this ASU eliminate the probable initial recognition threshold in current GAAP and, instead, reflect an entity's current estimate of all expected credit losses ("CECL"). The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the report amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The Statement of Income reflects the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

Credit losses on available-for-sale debt securities should be measured in a manner similar to current GAAP. However, the amendments in this ASU require that credit losses be presented as an allowance rather than as a write-down. Unlike current GAAP, the ASU provides for reversals of credit losses in future period net income in situations where the estimate of loss declines.

Based on current regulatory guidance, as of the adoption date an entity will apply the amendments in this ASU through a cumulative-effect adjustment to retained earnings as of January 1, 2020 (that is, a modified-retrospective approach).
The Company was originally required to adopt this standard effective January 1, 2020, however, in accordance with the CARES Act, the Company elected to defer the adoption of this standard. Upon adoption, the Company estimates a reduction to retained earnings in the range of $1.0 to $5.0 million, net of tax. The Company continues to monitor regulatory guidance related to the deferment.
In March 2020, the regulatory banking agencies issued an interim final rule that allows banking institutions that implement CECL during 2020 to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period. The Company is currently assessing its options at this time and will make its election when the Company adopts CECL.
 
The foregoing observations are subject to change as management completes its analysis and adopts the standard later this year.


ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General
(ASU Subtopic 715-20) - Disclosure Framework- Changes to the Disclosure Requirements for Defined Benefit Plans

January 1, 2021

The amendments in this ASU modify the disclosure requirements on defined benefit plans including requiring disclosures about significant gains and losses related to changes in the benefit obligation.
The adoption of ASU No. 2018-14 will not have a material impact on the Company's consolidated financial statements and results of operations because this ASU primarily relates to disclosure requirements and the balances of the benefit plans impacted by this ASU are immaterial to the Company.

 
 
 


11

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

Accounting pronouncements not yet adopted by the Company-continued
 
 
 
Standard/Anticipated Adoption Date
Description
Effect on Financial Statements or Other Significant Matters
ASU No. 2020-04. Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting

 January 1, 2022

The amendments in the provision are effective for a limited period and mainly address accounting and reporting challenges due to the transition from LIBOR on existing contracts. The optional expedients may be applied to loans, borrowings, leases and derivatives. The standard 1) simplifies the accounting analyses for contract modifications and 2) simplifies the hedge effectiveness assessment and allows hedging relationships impacted by the LIBOR transition to continue.
The Company is assessing the impact of this standard but does not expect that it will have a material impact on the Company's consolidated financial statements, or results of operations.

(2) Investment Securities
 
As of March 31, 2020, and December 31, 2019, the investment portfolio was primarily comprised of debt securities, with a small portion of the portfolio invested in equity securities.

See also the section "Restricted Cash and Investments," under Item (c), "Accounting Policies," contained in Note 1, "Summary of Significant Accounting Policies," above in this Form 10-Q, for further information regarding the Company's investment in FHLB Stock. See Note 14, "Fair Value Measurements," to the Company's unaudited consolidated interim financial statements of this Form 10-Q, contained below, for further information regarding the Company's fair value measurements for investment securities.

Debt Securities

The amortized cost and fair values of debt securities at the dates specified are summarized as follows:
 
 
March 31, 2020
(Dollars in thousands)
 
Amortized
cost
 
Unrealized
gains
 
Unrealized
losses
 
Fair Value
Federal agency obligations(1)
 
$
1,000

 
$
6

 
$

 
$
1,006

Residential federal agency MBS(1)
 
181,399

 
7,361

 
47

 
188,713

Commercial federal agency MBS(1)
 
110,441

 
6,372

 

 
116,813

Taxable municipal securities
 
84,034

 
4,077

 
237

 
87,874

Tax-exempt municipal securities
 
91,554

 
4,991

 
1

 
96,544

Corporate bonds
 
13,817


467


19


14,265

Certificate of deposits(2) ("CDs")
 
454

 
2

 

 
456

Total debt securities, at fair value
 
$
482,699

 
$
23,276

 
$
304

 
$
505,671




12

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

 
 
December 31, 2019
(Dollars in thousands)
 
Amortized
cost
 
Unrealized
gains
 
Unrealized
losses
 
Fair Value
Federal agency obligations(1)
 
$
999

 
$
5

 
$

 
$
1,004

Residential federal agency MBS(1)
 
190,392

 
2,599

 
333

 
192,658

Commercial federal agency MBS(1)
 
111,182

 
3,453

 

 
114,635

Taxable municipal securities
 
79,095

 
2,726

 
134

 
81,687

Tax-exempt municipal securities
 
95,342

 
4,696

 

 
100,038

Corporate bonds
 
13,826

 
485

 

 
14,311

CDs(2)
 
454

 
1

 

 
455

Total debt securities, at fair value
 
$
491,290

 
$
13,965

 
$
467

 
$
504,788

__________________________________________
(1)
These categories may include investments issued or guaranteed by government sponsored enterprises such as Fannie Mae ("FNMA"), Freddie Mac ("FHLMC"), Federal Farm Credit Bank ("FFCB"), or one of several Federal Home Loan Banks, as well as, investments guaranteed by Ginnie Mae ("GNMA"), a wholly-owned government entity. 
(2)
CDs represent term deposits issued by banks that are subject to FDIC insurance and purchased on the open market.

As of the dates reflected in the tables above, the majority of residential and commercial federal agency MBS categories were collateralized mortgage obligations ("CMOs") issued by U.S. agencies. The remaining MBS investments totaled $23.7 million and $23.5 million at March 31, 2020 and December 31, 2019, respectively.

As of the dates reflected in the tables above, all of the Company's debt securities were classified as available-for-sale and carried at fair value.

Net unrealized appreciation and depreciation on debt securities available-for-sale, net of applicable income taxes, are reflected as a component of accumulated other comprehensive income (loss). The net unrealized gain or loss in the Company's debt security portfolio fluctuates as market interest rates rise and fall.  Due to the fixed rate nature of this portfolio, as market rates fall, the value of the portfolio rises, and as market rates rise, the value of the portfolio declines.  The unrealized gains or losses on debt securities will also decline as the securities approach maturity. Unrealized losses on debt securities that are deemed OTTI are generally charged to earnings, as described further in Note 1, "Summary of Significant Accounting Policies," under Item (e), "Investments," to the Company's audited consolidated financial statements contained in the Company's 2019 Annual Report on Form 10-K. Gains or losses will be recognized in the Consolidated Statement of Income if the securities are sold.

The following tables summarize debt securities with unrealized losses, due to the fair values having declined below the amortized costs of the individual investments, by the duration of their continuous unrealized loss positions at March 31, 2020 and December 31, 2019
 
 
March 31, 2020
 
 
Less than 12 months
 
12 months or longer
 
Total
(Dollars in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
# of holdings
Residential federal agency MBS
 
$
9,392

 
$
47

 
$

 
$

 
$
9,392

 
$
47

 
3

Taxable municipal securities
 
6,804

 
237

 

 

 
6,804

 
237

 
7

Tax-exempt municipal securities
 
582

 
1

 

 

 
582

 
1

 
1

Corporate bonds
 
2,304

 
19

 

 

 
2,304

 
19

 
17

Total temporarily impaired debt securities
 
$
19,082

 
$
304

 
$

 
$

 
$
19,082

 
$
304

 
28




13

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

 
 
December 31, 2019
 
 
Less than 12 months
 
12 months or longer
 
Total
(Dollars in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
# of holdings
Residential federal agency MBS
 
$
36,464

 
$
263

 
$
5,060

 
$
70

 
$
41,524

 
$
333

 
11

Taxable municipal securities
 
16,826

 
134

 

 

 
16,826

 
134

 
15

Total temporarily impaired debt securities
 
$
53,290

 
$
397

 
$
5,060

 
$
70

 
$
58,350

 
$
467

 
26


During the three months ended March 31, 2020 and 2019, the Company did not record any OTTI on its investments in debt securities and at March 31, 2020, management did not consider any debt securities to have OTTI. Management regularly reviews the portfolio for debt securities with unrealized losses that are other-than-temporarily impaired. There have been no material changes to the Company's process for assessing investments for OTTI as reported in the Company's 2019 Annual Report on Form 10-K. For more information about the Company's assessment for OTTI, see Note 2, "Investment Securities," to the Company's audited consolidated financial statements contained in the Company's 2019 Annual Report on Form 10-K.

The contractual maturity distribution at March 31, 2020 of debt securities was as follows:
    
(Dollars in thousands)
 
Amortized Cost
 
Fair Value
Due in one year or less
 
$
11,425

 
$
11,478

Due after one, but within five years
 
85,244

 
89,501

Due after five, but within ten years
 
165,531

 
174,885

Due after ten years
 
220,499

 
229,807

 Total debt securities
 
$
482,699

 
$
505,671


Scheduled contractual maturities shown above may not reflect the actual maturities of the investments. The actual MBS/CMO cash flows likely will be faster than presented above due to prepayments and amortization. Similarly, included in the table above are callable securities, comprised of municipal securities and corporate bonds, with a fair value of $89.8 million, which can be redeemed by the issuers prior to the maturity presented above.  Management considers these factors when evaluating the interest-rate risk in the Company's asset-liability management program.

From time to time, the Company may pledge debt securities as collateral for deposit account balances of municipal customers, and for borrowing capacity with the FHLB and the FRB.  The fair value of debt securities pledged as collateral for these purposes was $503.3 million at March 31, 2020.

Sales of debt securities for the three months ended March 31, 2020 and March 31, 2019 are summarized as follows:     
 
 
Three months ended March 31,
(Dollars in thousands)
 
2020
 
2019
Amortized cost of debt securities sold (1)
 
$
2,527

 
$
1,793

Gross realized gains on sales
 
100

 
2

Gross realized losses on sales
 

 
(3
)
Total proceeds from sales of debt securities
 
$
2,627

 
$
1,792

_________________________________________
(1)Amortized cost of investments sold is determined on a specific identification basis and includes pending trades based on trade date, if applicable.

Equity Securities
 
The Company held equity securities with a fair value of $588 thousand at March 31, 2020 and $467 thousand at December 31, 2019. At March 31, 2020, the equity portfolio consisted primarily of investments in common stock of individual entities in the financial services industry and mutual funds held in conjunction with the Company's supplemental executive retirement and deferred compensation plan.



14

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

Equity securities are accounted for under ASC Topic 321, "Investments-Equity Securities," and are recorded on the Company's consolidated balance sheet at fair value with changes in fair value recognized in the Company's consolidated income statement as a component of "Other Income." There were no sales of equity securities in either the three months ended March 31, 2020 or March 31, 2019. For the three months ended March 31, 2020, the Company recorded net losses of $198 thousand compared with net gains of $186 thousand for the three months ended March 31, 2019 to adjust the carrying value in each period to fair value. The amount recognized related to equity securities in "Other income" is dependent on the amount of dollars invested in equities, the magnitude of changes in equity market values, and the amount of gains or losses realized through equity sales.

(3)
Loans

The Company manages its loan portfolio to avoid concentration by industry, relationship size and source of repayment to lessen its credit risk exposure. For additional information on the Company's lending products, see the heading "Lending Products" under Item 1, "Business," contained in the Company's 2019 Annual Report on Form 10-K.

Loan Portfolio Classifications

Major classifications of loans at the dates indicated were as follows:
(Dollars in thousands)
 
March 31,
2020
 
December 31,
2019
Commercial real estate
 
$
1,442,150

 
$
1,394,179

Commercial and industrial
 
537,790

 
501,227

Commercial construction
 
345,683

 
317,477

Total commercial loans
 
2,325,623

 
2,212,883

 
 
 
 
 
Residential mortgages
 
254,188

 
247,373

Home equity
 
97,223

 
98,252

Consumer
 
10,194

 
10,054

Total retail loans
 
361,605

 
355,679

 
 
 
 
 
Gross loans
 
2,687,228

 
2,568,562

Deferred loan origination fees, net
 
(3,301
)
 
(3,103
)
Total loans
 
2,683,927

 
2,565,459

Allowance for loan losses
 
(39,764
)
 
(33,614
)
Net loans
 
$
2,644,163

 
$
2,531,845

 
Commercial loans originated by other banks in which the Company is a participating institution are carried at the pro-rata share of ownership and amounted to $101.0 million at March 31, 2020 and $104.3 million at December 31, 2019. See also "Loans serviced for others" below for information related to commercial loans participated out to various other institutions.
 
Loans serviced for others
 
At March 31, 2020 and December 31, 2019, the Company was servicing residential mortgage loans owned by investors amounting to $15.0 million and $15.7 million, respectively.  Additionally, the Company was servicing commercial loans originated by the Company and participated out to various other institutions amounting to $82.2 million and $80.2 million at March 31, 2020 and December 31, 2019, respectively.
 


15

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

Loans serving as collateral
 
Loans designated as qualified collateral and pledged to the FHLB for borrowing capacity as of the dates indicated are summarized below:
(Dollars in thousands)
 
March 31,
2020
 
December 31,
2019
Commercial real estate
 
$
227,585

 
$
246,865

Residential mortgages
 
240,305

 
231,028

Home equity
 
7,639

 
7,676

Total loans pledged to FHLB
 
$
475,529

 
$
485,569


See also Note 4, "Allowance for Loan Losses," to the Company's unaudited consolidated interim financial statements of this Form 10-Q, contained below, for information on the Company's credit risk management, non-accrual, impaired and troubled debt restructured loans and the allowance for loan losses. See Note 8, "Derivatives and Hedging Activities," to the Company's unaudited consolidated interim financial statements of this Form 10-Q, contained below, for information regarding interest-rate swap agreements related to certain commercial loans, and see Note 14, "Fair Value Measurements," to the Company's unaudited consolidated interim financial statements of this Form 10-Q, contained below, for further information regarding the Company's fair value measurements for loans.

(4) Allowance for Loan Losses
 
Allowance for probable loan losses methodology

On a quarterly basis, management prepares an estimate of the allowance necessary to cover estimated probable credit losses.  The Company uses a systematic methodology to measure the amount of estimated loan loss exposure inherent in the portfolio for purposes of establishing a sufficient allowance for loan losses.  The methodology makes use of specific reserves for loans individually evaluated and deemed impaired, and general reserves for larger pools of homogeneous loans, which are collectively evaluated relying on a combination of qualitative and quantitative factors that may affect credit quality of the pool.

There have been no material changes to the Company's underwriting practices, credit risk management system, or to the allowance assessment methodology used to estimate loan loss exposure as reported in Note 4, "Allowance for Loan Losses," to the Company's audited consolidated financial statements contained in the Company's 2019 Annual Report on Form 10-K.

As previously noted above, the Company has elected to defer the adoption of CECL, as allowed under the CARES Act, until the earlier of: (1) the date on which the national emergency concerning the COVID-19 pandemic declared under the National Emergencies Act terminates; or (2) December 31, 2020. The information that follows is presented under the incurred loss model.

The balances of loans as of March 31, 2020 by portfolio classification and evaluation method are summarized as follows: 
(Dollars in thousands)
 
Loans individually
evaluated for
impairment
 
Loans collectively
evaluated for
impairment
 
Gross Loans
Commercial real estate
 
$
14,166

 
$
1,427,984

 
$
1,442,150

Commercial and industrial
 
6,901

 
530,889

 
537,790

Commercial construction
 
5,304

 
340,379

 
345,683

Residential mortgages
 
1,206

 
252,982

 
254,188

Home equity
 
394

 
96,829

 
97,223

Consumer
 
38

 
10,156

 
10,194

Total gross loans
 
$
28,009

 
$
2,659,219

 
$
2,687,228




16

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

The balances of loans as of December 31, 2019 by portfolio classification and evaluation method are summarized as follows:
(Dollars in thousands)
 
Loans individually
evaluated for
impairment
 
Loans collectively
evaluated for
impairment
 
Gross Loans
Commercial real estate
 
$
17,515

 
$
1,376,664

 
$
1,394,179

Commercial and industrial
 
9,332

 
491,895

 
501,227

Commercial construction
 
3,347

 
314,130

 
317,477

Residential mortgages
 
1,229

 
246,144

 
247,373

Home equity
 
411

 
97,841

 
98,252

Consumer
 
44

 
10,010

 
10,054

Total gross loans
 
$
31,878

 
$
2,536,684

 
$
2,568,562


Credit quality indicators

Early detection of credit issues is critical to minimize credit losses. Accordingly, management regularly monitors internal credit quality indicators such as, among others, the risk classification of adversely classified loans, past due and non-accrual loans, impaired and restructured loans, and the level of foreclosure activity. These credit quality indicators are discussed below.

Adversely classified loans

The Company's loan risk rating system classifies loans depending on risk of loss characteristics. The classifications range from "substantially risk free" for the highest quality loans and loans that are secured by cash collateral, through a satisfactory range of "minimal," "moderate," "better than average," and "average" risk, to the regulatory problem-asset classifications of "criticized," for loans that may need additional monitoring, and the more severe adverse classifications of "substandard," "doubtful," and "loss" based on criteria established under banking regulations. Loans which are evaluated to be of weaker credit quality are placed on the "watch credit list" and reviewed on a more frequent basis by management.
 
Adversely classified loans may be accruing or in non-accrual status and may be additionally designated as impaired or restructured, or some combination thereof. 
 
The following tables present the Company's credit risk profile for each portfolio classification by internally assigned adverse risk rating category as of the periods indicated:
 
 
March 31, 2020
 
 
Adversely Classified
 
Not Adversely
 
 
(Dollars in thousands)
 
Substandard
 
Doubtful
 
Loss
 
Classified
 
Gross Loans
Commercial real estate
 
$
13,273

 
$

 
$

 
$
1,428,877

 
$
1,442,150

Commercial and industrial
 
8,550

 
2,352

 

 
526,888

 
537,790

Commercial construction
 
5,809

 

 

 
339,874

 
345,683

Residential mortgages
 
1,799

 

 

 
252,389

 
254,188

Home equity
 
565

 

 

 
96,658

 
97,223

Consumer
 
65

 
1

 

 
10,128

 
10,194

Total gross loans
 
$
30,061

 
$
2,353

 
$

 
$
2,654,814

 
$
2,687,228




17

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

 
 
December 31, 2019
 
 
Adversely Classified
 
Not Adversely
 
 
(Dollars in thousands)
 
Substandard
 
Doubtful
 
Loss
 
Classified
 
Gross Loans
Commercial real estate
 
$
16,664

 
$

 
$

 
$
1,377,515

 
$
1,394,179

Commercial and industrial
 
10,900

 
2,370

 

 
487,957

 
501,227

Commercial construction
 
4,836

 

 

 
312,641

 
317,477

Residential mortgages
 
1,825

 

 

 
245,548

 
247,373

Home equity
 
455

 

 

 
97,797

 
98,252

Consumer
 
69

 
3

 

 
9,982

 
10,054

Total gross loans
 
$
34,749

 
$
2,373

 
$

 
$
2,531,440

 
$
2,568,562


Total adversely classified loans amounted to 1.21% of total loans at March 31, 2020, compared to 1.45% at December 31, 2019.

Past due and non-accrual loans

 The following tables present an age analysis of past due loans by portfolio classification as of the dates indicated:
 
 
Balance at March 31, 2020
(Dollars in thousands)
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Past Due 90 days or more
 
Total Past
Due Loans
 
Current Loans
 
Gross
Loans
 
Non-accrual Loans
Commercial real estate
 
$
8,687

 
$
265

 
$
3,886

 
$
12,838

 
$
1,429,312

 
$
1,442,150

 
$
8,605

Commercial and industrial
 
1,042

 
722

 
579

 
2,343

 
535,447

 
537,790

 
2,942

Commercial construction
 
2,591

 
720

 
2,831

 
6,142

 
339,541

 
345,683

 
2,831

Residential mortgages
 
1,346

 

 
301

 
1,647

 
252,541

 
254,188

 
394

Home equity
 
270

 

 
167

 
437

 
96,786

 
97,223

 
1,014

Consumer
 
34

 
7

 

 
41

 
10,153

 
10,194

 
15

Total gross loans
 
$
13,970

 
$
1,714

 
$
7,764

 
$
23,448

 
$
2,663,780

 
$
2,687,228

 
$
15,801

 
 
Balance at December 31, 2019
(Dollars in thousands)
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Past Due 90 days or more
 
Total Past
Due Loans
 
Current Loans
 
Gross Loans
 
Non-accrual Loans
Commercial real estate
 
$
1,469

 
$
3,914

 
$
4,158

 
$
9,541

 
$
1,384,638

 
$
1,394,179

 
$
8,280

Commercial and industrial
 
576

 
1,034

 
265

 
1,875

 
499,352

 
501,227

 
3,285

Commercial construction
 
576

 
3,325

 
1,735

 
5,636

 
311,841

 
317,477

 
1,735

Residential mortgages
 
700

 
283

 
623

 
1,606

 
245,767

 
247,373

 
411

Home equity
 
645

 

 
169

 
814

 
97,438

 
98,252

 
1,040

Consumer
 
12

 

 
6

 
18

 
10,036

 
10,054

 
20

Total gross loans
 
$
3,978

 
$
8,556

 
$
6,956

 
$
19,490

 
$
2,549,072

 
$
2,568,562

 
$
14,771


At March 31, 2020 and December 31, 2019, all loans past due 90 days or more were carried as non-accrual, in addition to those loans that were less than 90 days past due where reasonable doubt existed as to the full and timely collection of interest or principal that have also been designated as non-accrual, despite their payment due status shown in the tables above.

Non-accrual loans that were not adversely classified amounted to $59 thousand at March 31, 2020 and $84 thousand at December 31, 2019. These balances primarily represented the guaranteed portions of non-performing SBA loans. The majority of the non-accrual loan balances were also carried as impaired loans during the periods noted and are discussed further below.



18

ENTERPRISE BANCORP, INC.
Notes to the Unaudited Consolidated Interim Financial Statements
 

The ratio of non-accrual loans to total loans amounted to 0.59% at March 31, 2020 and 0.58% and at December 31, 2019.

At March 31, 2020, additional funding commitments for non-accrual loans were not material. 

Impaired loans
 
Impaired loans are individually significant loans for which management considers it probable that not all amounts due (principal and interest) will be collected in accordance with the original contractual terms. Impaired loans include loans that have been modified in a troubled debt restructuring ("TDR"), see "Troubled Debt Restructurings" below. Impaired loans are individually evaluated and exclude large groups of smaller-balance homogeneous loans, such as residential mortgage loans and consumer loans, which are collectively evaluated for impairment, and loans that are measured at fair value, unless the loan is amended in a TDR. 

The carrying value of impaired loans amounted to $28.0 million and $31.9 million at March 31, 2020 and December 31, 2019, respectively.  Total accruing impaired loans amounted to $12.2 million and $17.1 million at March 31, 2020 and December 31, 2019, respectively, while non-accrual impaired loans amounted to $15.8 million and $14.8 million as of March 31, 2020 and December 31, 2019, respectively.
 
The following tables set forth the recorded investment in impaired loans and the related specific allowance allocated by portfolio classification as of the dates indicated:
 
 
Balance at March 31, 2020
(Dollars in thousands)
 
Unpaid
contractual
principal
balance
 
Total recorded
investment in
impaired loans
 
Recorded
investment
with no
allowance
 
Recorded
investment
with
allowance
 
Related specific
allowance
Commercial real estate
 
$
15,257

 
$
14,166

 
$
13,783

 
$
383

 
$
29

Commercial and industrial
 
9,015

 
6,901

 
5,264

 
1,637

 
908

Commercial construction
 
5,330

 
5,304

 
2,796

 
2,508

 
1,473

Residential mortgages
 
1,317

 
1,206

 
1,206

 

 

Home equity
 
575

 
394

 
394

 

 

Consumer
 
39

 
38

 

 
38

 
38

Total
 
$
31,533

 
$
28,009

 
$
23,443

 
$
4,566

 
$
2,448

 
 
Balance at December 31, 2019
(Dollars in thousands)
 
Unpaid
contractual
principal 
balance
 
Total recorded
investment in
impaired loans
 
Recorded
investment
with no
allowance
 
Recorded
investment
with
allowance
 
Related specific
allowance
Commercial real estate
 
$
18,537

 
$
17,515

 
$
17,129

 
$
386

 
$
31

Commercial and industrial
 
11,455

 
9,332

 
7,405

 
1,927

 
974

Commercial construction
 
3,359

 
3,347

 
3,347

 

 

Residential mortgages
 
1,331

 
1,229

 
1,229

 

 

Home equity
 
607

 
411

 
411

 

 

Consumer
 
44

 
44

 

 
44

 
44