ENTERPRISE BANCORP INC /MA/ [EBTC] Filings

10-Q 1 ebtc-20220331.htm 10-Q ebtc-20220331

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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, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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 ☐ Accelerated filer x

Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes x No

As of April 29, 2022, there were 12,103,946 shares of the issuer's common stock outstanding, par value $0.01 per share.

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ENTERPRISE BANCORP, INC.

INDEX


		Page Number
	Cover Page	1

	Index	2
	PART I - FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	3
	Consolidated Balance Sheets - March 31 , 202 2 and December 31, 202 1	3
	Consolidated Statements of Income - Three months ended March 31 , 202 2 and 202 1	4
	Consolidated Statements of Comprehensive Income - Three months ended March 31 , 202 2 and 20 21	5
	Consolidated Statements of Changes in S hareholder s' Equity - Three months ended March 31 , 202 2 and 202 1	6
	Consolidated Statements of Cash Flows - Three months ended March 3 1, 2022 and 202 1	7
	Notes to Unaudited Consolidated Interim Financial Statements	8
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4	Controls and Procedures	48

	PART II - OTHER INFORMATION

Item 1	Legal Proceedings	49
Item 1A	Risk Factors	49
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3	Defaults Upon Senior Securities	49
Item 4	Mine Safety Disclosures	49
Item 5	Other Information	49
Item 6	Exhibits	50
	Signature page	51

Table of Contents

PART I-FINANCIAL INFORMATION

Item 1 -Financial Statements

ENTERPRISE BANCORP, INC.

Consolidated Balance Sheets

(Unaudited)


(Dollars in thousands, except per share data)	March 31, 2022		December 31, 2021
Assets
Cash and cash equivalents:
Cash and due from banks	$	45,233	$	33,572
Interest-earning deposits with banks	384,454		403,004

Total cash and cash equivalents	429,687		436,576
Investments:
Debt securities at fair value (amortized cost of $959,181 and $950,523, respectively)	907,052		956,430
Equity securities at fair value	2,961		1,785
Total investment securities at fair value	910,013		958,215
Federal Home Loan Bank ("FHLB") stock	2,048		2,164

Loans:
Total loans	2,962,721		2,920,684
Allowance for credit losses	(48,424)		(47,704)
Net loans	2,914,297		2,872,980
Premises and equipment, net	45,130		44,689
Lease right-of-use asset	24,915		24,295
Accrued interest receivable	14,272		13,354
Deferred income taxes, net	32,999		19,644
Bank-owned life insurance	63,249		62,954
Prepaid income taxes	2,018		279
Prepaid expenses and other assets	10,190		7,013
Goodwill	5,656		5,656
Total assets	$	4,454,474	$	4,447,819
Liabilities and shareholders' Equity
Liabilities



Deposits	$	4,034,500	$	3,980,239
Borrowed funds	2,974		5,479
Subordinated debt	59,009		58,979
Lease liability	24,301		23,627
Accrued expenses and other liabilities	22,405		31,063

Accrued interest payable	746		1,537
Total liabilities	4,143,935		4,100,924
Commitments and Contingencies
Shareholders' Equity
Preferred stock, $0.01 par value per share; 1,000,000 shares authorized; no shares issued	—		—
Common stock, $0.01 par value per share; 40,000,000 shares authorized; 12,103,188 and 12,038,382 shares issued and outstanding, respectively	121		120
Additional paid-in capital	101,139		100,352
Retained earnings	249,579		241,761
Accumulated other comprehensive (loss) income	(40,300)		4,662
Total shareholders' equity	310,539		346,895
Total liabilities and shareholders' equity	$	4,454,474	$	4,447,819

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

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ENTERPRISE BANCORP, INC.

Consolidated Statements of Income

(Unaudited)


	Three months ended March 31,
(Dollars in thousands, except per share data)		2022		2021
Interest and dividend income:
Loans and loans held for sale		$	30,695	$	33,650
Investment securities		4,588		3,394
Other interest-earning assets		181		65
Total interest and dividend income		35,464		37,109
Interest expense:
Deposits		600		1,323
Borrowed funds		13		8
Subordinated debt		818		1,042
Total interest expense		1,431		2,373
Net interest income		34,033		34,736
Provision for credit losses		530		680
Net interest income after provision for credit losses		33,503		34,056
Non-interest income:
Wealth management fees		1,729		1,612
Deposit and interchange fees		1,802		1,606
Income on bank-owned life insurance, net		295		136

Net gains on sales of debt securities		1,062		128
Net gains on sales of loans		22		128

Other income		685		689
Total non-interest income		5,595		4,299
Non-interest expense:
Salaries and employee benefits		16,792		15,721
Occupancy and equipment expenses		2,415		2,381
Technology and telecommunications expenses		2,636		2,554
Advertising and public relations expenses		667		514
Audit, legal and other professional fees		710		567
Deposit insurance premiums		556		356
Supplies and postage expenses		220		227
Loss on extinguishment of subordinated debt		—		713
Other operating expenses		1,761		1,651
Total non-interest expense		25,757		24,684
Income before income taxes		13,341		13,671
Provision for income taxes		3,054		3,319
Net income		$	10,287	$	10,352

Basic earnings per share		$	0.85	$	0.87
Diluted earnings per share		$	0.85	$	0.86

Basic weighted average common shares outstanding		12,055,991		11,959,469
Diluted weighted average common shares outstanding		12,119,836		11,994,437

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

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ENTERPRISE BANCORP, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three months ended March 31,
(Dollars in thousands)		2022		2021
Net income		$	10,287	$	10,352
Other comprehensive loss, net of tax
Net change in fair value of debt securities		(44,962)		(8,721)
Net change in fair value of cash flow hedges		—		583
Total other comprehensive loss, net of tax		(44,962)		(8,138)
Total comprehensive (loss) income, net		$	(34,675)	$	2,214

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

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ENTERPRISE BANCORP, INC.

Consolidated Statement of Changes in Shareholders' Equity

(Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income		Total Shareholders' Equity
(Dollars in thousands, except per share data)	Shares	Amount
Balance at December 31, 2021	12,038,382	$	120	$	100,352	$	241,761	$	4,662	$	346,895
Net income						10,287				10,287

Other comprehensive loss, net								(44,962)		(44,962)
Common stock dividend declared ($0.205 per share)						(2,469)				(2,469)
Common stock issued under dividend reinvestment plan	8,915	—		346						346
Common stock issued, other	241	—		10						10
Stock-based compensation, net	59,949	1		659						660
Net settlement for employee taxes on restricted stock and options	(7,728)	—		(286)						(286)
Stock options exercised, net	3,429	—		58						58
Balance at March 31, 2022	12,103,188	$	121	$	101,139	$	249,579	$	(40,300)	$	310,539

Balance at December 31, 2020	11,937,795	$	119	$	97,137	$	214,977	$	22,193	$	334,426
Net income						10,352				10,352
Cumulative effect adjustment for ("CECL") adoption						(6,510)				(6,510)
Other comprehensive loss, net								(8,138)		(8,138)
Common stock dividend declared ($0.185 per share)						(2,209)				(2,209)
Common stock issued under dividend reinvestment plan	10,241	—		313						313
Common stock issued, other	251	—		7						7
Stock-based compensation, net	64,725	1		670						671
Net settlement for employee taxes on restricted stock and options	(5,157)	—		(159)						(159)
Stock options exercised, net	143	—		2						2
Balance at March 31, 2021	12,007,998	$	120	$	97,970	$	216,610	$	14,055	$	328,755

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

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ENTERPRISE BANCORP, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Three months ended March 31,
(Dollars in thousands)	2022		2021
Cash flows from operating activities:
Net income	$	10,287	$	10,352
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for credit losses	530		680
Depreciation and amortization	1,733		1,890
Stock-based compensation expense	478		451
Income on bank-owned life insurance, net	(295)		(136)
Net gains on sales of debt securities	(1,062)		(128)
Mortgage loans originated for sale	(819)		(12,009)
Proceeds from mortgage loans sold	841		4,963
Net gains on sales of loans	(22)		(128)
Net losses (gains) on equity securities	66		(84)



Changes in:
Net (increase) decrease in other assets	(6,123)		3,284
Net decrease in other liabilities	(8,879)		(4,352)
Net cash (used in) provided by operating activities	(3,265)		4,783
Cash flows from investing activities:
Proceeds from sales of debt securities	32,715		3,059
Purchase of debt securities	(66,833)		(55,567)
Proceeds from maturities, calls and pay-downs of debt securities	26,067		22,049
Net purchases of equity securities	(1,243)		(367)
Net sales (purchases) of FHLB capital stock	116		(105)
Net increase in loans	(42,142)		(37,336)
Additions to premises and equipment, net	(1,719)		(804)




Net cash used in investing activities	(53,039)		(69,071)
Cash flows from financing activities:
Net increase in deposits	54,261		264,898
Net (decrease) increase in borrowed funds	(2,505)		3,857
Repayment of subordinated debt	—		(15,600)
Loss on extinguishment of subordinated debt	—		713

Cash dividends paid, net of dividend reinvestment plan	(2,123)		(1,896)
Proceeds from issuance of common stock	10		7
Net settlement for employee taxes on restricted stock and options	(286)		(159)
Net proceeds from stock option exercises	58		2
Net cash provided by financing activities	49,415		251,822

Net (decrease) increase in cash and cash equivalents	(6,889)		187,534
Cash and cash equivalents at beginning of period	436,576		253,782
Cash and cash equivalents at end of period	$	429,687	$	441,316

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

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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, 2021 audited consolidated financial statements and notes thereto contained in the 2021 Annual Report on Form 10-K of Enterprise Bancorp, Inc. (the "Company," "Enterprise," "we," or "our") as filed with the Securities and Exchange Commission (the "SEC") on March 10, 2022 (the "2021 Annual Report on Form 10-K"). The Company has not materially changed its significant accounting policies from those disclosed in its 2021 Annual Report on Form 10-K. See Item (c), "Recent Accounting Pronouncements," below in this Note 1.

The accompanying unaudited consolidated interim financial statements of the Company 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, and 239 Littleton Road, LLC, organized in 2021 in the State of Massachusetts for the purpose of maintaining and disposing of real estate acquired through the Bank's lending functions. 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 investment activities that the Bank itself would be allowed to conduct under applicable laws. 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 accompanying unaudited consolidated interim financial statements, and notes thereto, in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 (this "Form 10-Q"), have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the SEC instructions for Quarterly Reports on Form 10-Q. In the opinion of management, the accompanying unaudited consolidated interim financial statements reflect all necessary adjustments, consisting of normal recurring accruals and elimination of intercompany balances, for a fair presentation. Certain previous years' amounts in the unaudited 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.

(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 2021 Annual Report on Form 10-K, the most significant areas in which management applies critical assumptions and estimates are: the estimates of the allowance for credit losses ("ACL") for loans and available for sale securities, the reserve for unfunded commitments, 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 2021 Annual Report on Form 10-K for accounting policies related to these significant estimates.


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

Accounting pronouncements not yet adopted by the Company

In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. This ASU clarifies the guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-12 Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and addresses feedback from stakeholders regarding its application. For entities that have adopted ASU 2017-12, ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2017-12. The Company expects that this ASU will not have a material impact to the consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the current expected credit loss ("CECL") methodology for estimating allowances for credit losses and enhances the disclosure requirements for loan restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross charge-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities that have adopted ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,, such as the Company, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2016-13. The Company is in the process of assessing the impact of this ASU on the consolidated financial statements.

Accounting pronouncements adopted by the Company

In August 2021, the FASB issued ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946). This ASU incorporates recent SEC rule changes into the FASB Codification, including SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. The rules reduce the required reporting periods to align them with the relevant financial statement periods required by SEC rules and requires certain statistical disclosures for annual periods, and interim disclosures if a material change in the information, or trend, has occurred. The amendments in this update are effective upon addition to the FASB Codification and apply to fiscal years ending on or after December 15, 2021. However, voluntary early compliance is permitted upon the effective date, provided that the rules are applied in their entirety. The amended disclosures did not have a material impact on the consolidated financial statements.

(d) Subsequent Events

The Company has evaluated subsequent events and transactions from March 31, 2022, through the date this Form 10-Q was filed with the SEC for potential recognition or disclosure as required by GAAP and determined there were no material subsequent events requiring recognition or disclosure.


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

(2)Investment Securities

Debt Securities

All of the Company's debt securities were classified as available-for-sale and carried at fair value as of the dates specified in the tables below. The amortized cost and fair values of debt securities at the dates specified are summarized as follows:


	March 31, 2022
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

U.S. treasury securities	$	65,840	$	—	$	2,983	$	62,857
Residential federal agency MBS(1)	442,233		137		30,877		411,493
Commercial federal agency MBS(1)	67,943		478		603		67,818
Taxable municipal securities	279,183		765		20,062		259,886
Tax-exempt municipal securities	86,718		1,395		143		87,970
Corporate bonds	7,264		122		8		7,378
Subordinated corporate bonds	10,000		—		350		9,650

Total debt securities, at fair value	$	959,181	$	2,897	$	55,026	$	907,052


	December 31, 2021
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

U.S. treasury securities	$	62,850	$	—	$	684	$	62,166
Residential federal agency MBS(1)	412,902		2,406		9,113		406,195
Commercial federal agency MBS(1)	99,681		3,783		52		103,412
Taxable municipal securities	272,507		5,607		2,264		275,850
Tax-exempt municipal securities	87,024		5,648		—		92,672
Corporate bonds	8,559		441		—		9,000
Subordinated corporate bonds	7,000		135		—		7,135

Total debt securities, at fair value	$	950,523	$	18,020	$	12,113	$	956,430

__________________________________________

(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.

As of the dates reflected in the tables above, the majority of investments in the residential and commercial federal agency mortgage back securities ("MBS") categories were collateralized mortgage obligations ("CMOs") issued by U.S. government agencies. The remaining MBS investments totaled $23.0 million and $22.9 million at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022, management performed its quarterly analysis of all securities with unrealized losses and determined that all were attributable to significant increases in market interest rates. Management concluded that no ACL for available-for-sale securities was considered necessary as of March 31, 2022.

Accrued interest receivable on available-for-sale debt securities, included in the "Accrued Interest Receivable” line item on the Company’s Consolidated Balance Sheets, amounted to $4.1 million and $3.2 million at March 31, 2022 and December 31, 2021, respectively.


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

The following tables summarize the duration of unrealized losses for debt securities at March 31, 2022 and December 31, 2021:


	March 31, 2022
	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

U.S. treasury securities	$	62,857	$	2,983	$	—		$	—	$	62,857	$	2,983	10
Residential federal agency MBS	308,437		21,907		75,993			8,970		384,430		30,877		78
Commercial federal agency MBS	17,560		603		—			—		17,560		603		5
Taxable municipal securities	214,772		19,245		6,152			817		220,924		20,062		219
Tax-exempt municipal securities	7,975		143		—			—		7,975		143		12
Corporate bonds	745		8		—			—		745		8		3
Subordinated corporate bonds	9,650		350		—		350000	—		9,650		350		5
Total	$	621,996	$	45,239	$	82,145		$	9,787	$	704,141	$	55,026	332


	December 31, 2021
	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

U.S. treasury securities	$	62,166	$	684	$	—	$	—	$	62,166	$	684	9
Residential federal agency MBS	272,863		6,992		51,281		2,121		324,144		9,113		44
Commercial federal agency MBS	4,897		52		—		—		4,897		52		1
Taxable municipal securities	117,388		2,023		6,727		241		124,115		2,264		118



Total	$	457,314	$	9,751	$	58,008	$	2,362	$	515,322	$	12,113	172

The contractual maturity distribution at March 31, 2022 of debt securities was as follows:


(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	13,518	$	13,580
Due after one, but within five years	164,893		163,441
Due after five, but within ten years	276,771		261,097
Due after ten years	503,999		468,934
Total debt securities	$	959,181	$	907,052

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 $169.3 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 Federal Reserve Bank of Boston ("FRB"). The fair value of debt securities pledged as collateral for these purposes was $895.9 million and $949.3 million at March 31, 2022 and December 31, 2021, respectively.


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

Sales of debt securities for the three months ended March 31, 2022 and March 31, 2021 are summarized as follows:


	Three months ended March 31,
(Dollars in thousands)		2022		2021
Amortized cost of debt securities sold (1)		$	31,653	$	2,931
Gross realized gains on sales		1,062		128
Gross realized losses on sales		—		—
Total proceeds from sales of debt securities		$	32,715	$	3,059

_________________________________________

(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 $3.0 million at March 31, 2022 and $1.8 million at December 31, 2021. At March 31, 2022, the equity portfolio consisted primarily of investments in index funds and common stock of individual entities in the financial services industry held to support operations and mutual funds held in conjunction with the Company's supplemental executive retirement and deferred compensation plan.

Gains and losses on equity securities for the three months ended March 31, 2022 and March 31, 2021 are summarized as follows:


	Three months ended March 31,
(Dollars in thousands)		2022		2021
Net (losses) gains recognized during the period on equity securities		$	(66)	$	84
Less: Net gains (losses) recognized on equity securities sold during the period		—		—
Unrealized (losses) gains recognized during the reporting period on equity securities still held at the end of the period (included in other income)		$	(66)	$	84


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

(3)Loans

Loan Portfolio Classifications

Major classifications of loans at the dates indicated were as follows:


(Dollars in thousands)	March 31, 2022		December 31, 2021
Commercial real estate	$	1,779,691	$	1,680,792
Commercial and industrial	408,341		412,070
Commercial construction	375,709		410,443
SBA Paycheck Protection Program ("PPP")	32,153		71,502
Total commercial loans	2,595,894		2,574,807

Residential mortgages	280,507		256,940
Home equity loans and lines	78,557		80,467
Consumer	7,763		8,470
Total retail loans	366,827		345,877




Total loans	2,962,721		2,920,684

ACL for loans	(48,424)		(47,704)
Net loans	$	2,914,297