Enterprise Bancorp - 10-Q quarterly report FY2024 Q3

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Table of Contents

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 September 30, 2024

☐ 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 October 31, 2024, there were 12,429,190 shares of the issuer's common stock outstanding, par value $0.01 per share.

Table of Contents

ENTERPRISE BANCORP, INC.

INDEX


		Page Number
	Cover Page	1

	Index	2
	PART I - FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	4
	Consolidated Balance Sheets - September 30, 2024 and December 31, 2023	4
	Consolidated Statements of Income - Three and nine months ended September 30, 2024 and 2023	5
	Consolidated Statements of Comprehensive Income - Three and nine months ended September 30, 2024 and 2023	6
	Consolidated Statements of Changes in Shareholders' Equity - Three and nine months ended September 30, 2024 and 2023	7
	Consolidated Statements of Cash Flows - Nine months ended September 30, 2024 and 2023	9
	Notes to Unaudited Consolidated Interim Financial Statements	10
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4	Controls and Procedures	52

	PART II - OTHER INFORMATION
Item 1	Legal Proceedings	53
Item 1A	Risk Factors	53
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3	Defaults Upon Senior Securities	53
Item 4	Mine Safety Disclosures	53
Item 5	Other Information	53
Item 6	Exhibits	54
	Signature page	55

Table of Contents

ACRONYMS AND ABBREVIATIONS

The acronyms and abbreviations defined in the table below are provided to aid the reader when reviewing this Quarterly Report on Form 10-Q for the three months ended September 30, 2024:


Acronym						Description

ACL:						Allowance for credit losses
AOCI:						Accumulated other comprehensive income
ASC:						Accounting Standards Codification
ASU:						Accounting Standards Update
BTFP:						Bank Term Funding Program


CD:						Certificate of deposit

CECL:						Current expected credit loss





CMO:						Collateralized mortgage obligations








FASB:						Financial Accounting Standards Board

FDIC:						Federal Deposit Insurance Corporation
FHLB:						Federal Home Loan Bank of Boston



FRB:						Federal Reserve Bank of Boston

GAAP:						Generally Accepted Accounting Principles


MBS:						Mortgage-backed securities
Net interest margin:						Tax-equivalent net interest margin
NH BFA:						New Hampshire Business Finance Authority


OREO:						Other real estate owned


ROU:						Right-of-use
RPA:						Risk participation agreement

SBA:						Small Business Administration
SEC:						U.S. Securities and Exchange Commission


SOFR:						Secured Overnight Financing Rate

Treasury:						U.S. Department of the Treasury
U.S.:						United States

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)	September 30, 2024		December 31, 2023
Assets
Cash and cash equivalents:
Cash and due from banks	$	60,466	$	37,443
Interest-earning deposits with banks	28,166		19,149

Total cash and cash equivalents	88,632		56,592
Investments:
Debt securities at fair value (amortized cost of $703,311 and $763,981, respectively)	622,527		661,113
Equity securities at fair value	9,448		7,058
Total investment securities at fair value	631,975		668,171
Federal Home Loan Bank stock	2,482		2,402
Loans held for sale	1,229		200
Loans:
Total loans	3,858,940		3,567,631
Allowance for credit losses	(63,654)		(58,995)
Net loans	3,795,286		3,508,636
Premises and equipment, net	43,291		44,931
Lease right-of-use asset	24,291		24,820
Accrued interest receivable	20,529		19,233
Deferred income taxes, net	44,067		49,166
Bank-owned life insurance	66,899		65,455
Prepaid income taxes	4,645		1,589
Prepaid expenses and other assets	13,827		19,183
Goodwill	5,656		5,656
Total assets	$	4,742,809	$	4,466,034
Liabilities and shareholders' Equity
Liabilities



Deposits	$	4,189,461	$	3,977,521
Borrowed funds	59,949		25,768
Subordinated debt	59,736		59,498
Lease liability	24,010		24,441
Accrued expenses and other liabilities	32,116		45,011

Accrued interest payable	9,428		4,678
Total liabilities	4,374,700		4,136,917
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; 12,428,426 and 12,272,674 shares issued and outstanding, respectively	124		123
Additional paid-in capital	110,110		107,377
Retained earnings	320,497		301,380
Accumulated other comprehensive loss	(62,622)		(79,763)
Total shareholders' equity	368,109		329,117
Total liabilities and shareholders' equity	$	4,742,809	$	4,466,034

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

Table of Contents

ENTERPRISE BANCORP, INC.

Consolidated Statements of Income

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands, except per share data)	2024		2023		2024		2023
Interest and dividend income:
Other interest-earning assets	$	2,497	$	3,468	$	5,366	$	7,593
Investment securities	3,835		4,316		11,812		14,356
Loans and loans held for sale	53,809		44,501		153,850		125,855
Total interest and dividend income	60,141		52,285		171,028		147,804
Interest expense:
Deposits	20,581		12,889		57,025		28,568
Borrowed funds	674		28		2,032		70
Subordinated debt	866		866		2,600		2,600
Total interest expense	22,121		13,783		61,657		31,238
Net interest income	38,020		38,502		109,371		116,566
Provision for credit losses	1,332		1,752		2,091		6,756
Net interest income after provision for credit losses	36,688		36,750		107,280		109,810
Non-interest income:
Wealth management fees	2,025		1,673		5,845		4,933
Deposit and interchange fees	2,282		1,987		6,635		6,330
Income on bank-owned life insurance, net	518		327		1,479		950

Net losses on sales of debt securities	(2)		—		(2)		(2,419)
Net gains on sales of loans	57		14		123		34

Net gains (losses) on equity securities	604		(181)		1,170		(8)
Other income	656		666		2,013		2,242
Total non-interest income	6,140		4,486		17,263		12,062
Non-interest expense:
Salaries and employee benefits	20,097		19,159		58,948		53,815
Occupancy and equipment expenses	2,438		2,433		7,303		7,439
Technology and telecommunications expenses	2,618		2,626		8,021		7,937
Advertising and public relations expenses	559		592		1,976		2,077
Audit, legal and other professional fees	569		735		2,014		2,157
Deposit insurance premiums	900		654		2,621		1,944
Supplies and postage expenses	261		251		738		753

Other operating expenses	1,911		1,862		5,669		5,853
Total non-interest expense	29,353		28,312		87,290		81,975
Income before income taxes	13,475		12,924		37,253		39,897
Provision for income taxes	3,488		3,225		9,247		9,746
Net income	$	9,987	$	9,699	$	28,006	$	30,151

Basic earnings per share	$	0.80	$	0.79	$	2.26	$	2.47
Diluted earnings per share	$	0.80	$	0.79	$	2.26	$	2.46

Basic weighted average common shares outstanding	12,428,543		12,247,892		12,370,812		12,210,740
Diluted weighted average common shares outstanding	12,438,160		12,264,778		12,379,390		12,233,861

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

Table of Contents

ENTERPRISE BANCORP, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2024		2023		2024		2023
Net income	$	9,987	$	9,699	$	28,006	$	30,151
Other comprehensive income (loss), net of tax
Net change in fair value of debt securities	19,684		(15,573)		17,141		(6,959)

Total other comprehensive income (loss), net of tax	19,684		(15,573)		17,141		(6,959)
Total comprehensive income (loss), net	$	29,671	$	(5,874)	$	45,147	$	23,192

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

Table of Contents

ENTERPRISE BANCORP, INC.

Consolidated Statements of Changes in Shareholders' Equity

(Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
(Dollars in thousands, except per share data)	Shares	Amount
Balance at June 30, 2024	12,424,407	$	124	$	109,137	$	313,486	$	(82,306)	$	340,441
Net income						9,987				9,987

Other comprehensive income, net								19,684		19,684
Common stock dividend declared ($0.24 per share)						(2,976)				(2,976)
Common stock issued under dividend reinvestment plan	13,463	—		408						408
Common stock issued, other	339	—		10						10
Stock-based compensation, net	(8,762)	—		589						589
Net settlement for employee taxes on restricted stock and options	(1,623)	—		(52)						(52)
Stock options exercised, net	602	—		18						18
Balance at September 30, 2024	12,428,426	$	124	$	110,110	$	320,497	$	(62,622)	$	368,109

Balance at June 30, 2023	12,244,733	$	122	$	105,552	$	289,409	$	(87,593)	$	307,490
Net income						9,699				9,699

Other comprehensive loss, net								(15,573)		(15,573)
Common stock dividend declared ($0.23 per share)						(2,817)				(2,817)
Common stock issued under dividend reinvestment plan	12,926	1		377						378
Common stock issued, other	244	—		6						6
Stock-based compensation, net	(415)	—		542						542
Net settlement for employee taxes on restricted stock and options	(1,625)	—		(49)						(49)
Stock options exercised, net	1,101	—		23						23
Balance at September 30, 2023	12,256,964	$	123	$	106,451	$	296,291	$	(103,166)	$	299,699

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

Table of Contents

ENTERPRISE BANCORP, INC.

Consolidated Statements of Changes in Shareholders' Equity (continued)

(Unaudited)



	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(Dollars in thousands, except per share data)	Shares	Amount
Balance at December 31, 2023	12,272,674	$	123	$	107,377	$	301,380	$	(79,763)	$	329,117
Net income						28,006				28,006

Other comprehensive income, net								17,141		17,141
Common stock dividends declared ($0.72 per share)						(8,889)				(8,889)
Common stock issued under dividend reinvestment plan	44,459	—		1,214						1,214
Common stock issued, other	968	—		27						27
Stock-based compensation, net	114,758	1		1,763						1,764
Net settlement for employee taxes on restricted stock and options	(12,516)	—		(383)						(383)
Stock options exercised, net	8,083	—		112						112
Balance at September 30, 2024	12,428,426	$	124	$	110,110	$	320,497	$	(62,622)	$	368,109

Balance at December 31, 2022	12,133,516	$	121	$	103,793	$	274,560	$	(96,207)	$	282,267
Net income						30,151				30,151

Other comprehensive loss, net								(6,959)		(6,959)
Common stock dividends declared ($0.69 per share)						(8,420)				(8,420)
Common stock issued under dividend reinvestment plan	37,145	1		1,123						1,124
Common stock issued, other	975	—		30						30
Stock-based compensation, net	79,166	1		1,823						1,824
Net settlement for employee taxes on restricted stock and options	(9,229)	—		(444)						(444)
Stock options exercised, net	15,391	—		126						126
Balance at September 30, 2023	12,256,964	$	123	$	106,451	$	296,291	$	(103,166)	$	299,699

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

Table of Contents

ENTERPRISE BANCORP, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Nine months ended September 30,
(Dollars in thousands)	2024		2023
Cash flows from operating activities:
Net income	$	28,006	$	30,151
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	2,091		6,756
Depreciation and amortization	4,304		4,700
Stock-based compensation expense	1,691		1,735
Income on bank-owned life insurance, net	(1,479)		(950)
Net losses on sales of debt securities	2		2,419
Mortgage loans originated for sale	(9,673)		(2,047)
Proceeds from mortgage loans sold	8,767		2,081
Net gains on sales of loans	(123)		(34)
Net (gains) losses on equity securities	(1,170)		8



Changes in:
Net decrease (increase) in other assets	1,109		(6,785)
Net decrease in other liabilities	(5,097)		(734)
Net cash provided by operating activities	28,428		37,300
Cash flows from investing activities:
Proceeds from sales of debt securities	212		84,779

Proceeds from maturities, calls and pay-downs of debt securities	59,861		46,258
Net purchases of equity securities	(1,220)		(1,777)
Net purchases of FHLB capital stock	(80)		(60)
Net increase in loans	(291,294)		(223,586)
Additions to premises and equipment, net	(2,069)		(3,169)




Net cash used in investing activities	(234,590)		(97,555)
Cash flows from financing activities:
Net increase in deposits	211,940		24,597

Advancements from long-term borrowings	38,800		1,443
Repayments of long-term borrowings	(4,619)		(369)



Cash dividends paid, net of dividend reinvestment plan	(7,675)		(7,296)
Proceeds from issuance of common stock	27		30
Net settlement for employee taxes on restricted stock and options	(383)		(444)
Net proceeds from stock option exercises	112		126
Net cash provided by financing activities	238,202		18,087

Net increase (decrease) in cash and cash equivalents	32,040		(42,168)
Cash and cash equivalents at beginning of period	56,592		267,589
Cash and cash equivalents at end of period	$	88,632	$	225,421

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


Table of Contents			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, 2023 audited consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K of Enterprise Bancorp, Inc. (the "Company," "Enterprise," "we," or "our") for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K") as filed with the SEC on March 8, 2024. The Company has not materially changed its significant accounting policies from those disclosed in its 2024 Annual Report on Form 10-K. See Item (b), "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 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 September 30, 2024 (this "Form 10-Q"), have been prepared in accordance with U.S. 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. Interim results are not necessarily indicative of results to be expected for the entire year, or any future period.

(b) Recent Accounting Pronouncements

Accounting pronouncements not yet adopted by the Company

In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements — Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532, Disclosure Update and Simplification, that was issued in 2018. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. ASU 2023-06 is not expected to have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 is not expected to have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This ASU requires public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income by the applicable statutory income tax rate). ASU 2023-09 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 is not expected to have a material impact on our consolidated financial statements.

The Company has evaluated subsequent events and transactions from September 30, 2024 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:


	September 30, 2024
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Federal agency obligations	$	—	$	—	$	—	$	—
U.S. Treasury securities	6,998		—		642		6,356
Federal agency CMO	357,740		114		50,691		307,163
Federal agency MBS	20,544		53		2,377		18,220
Taxable municipal securities	262,058		111		25,816		236,353
Tax-exempt municipal securities	40,540		63		272		40,331
Corporate bonds	3,469		1		32		3,438
Subordinated corporate bonds	11,962		3		1,299		10,666

Total debt securities, at fair value	$	703,311	$	345	$	81,129	$	622,527


	December 31, 2023
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Federal agency obligations	$	5,006	$	—	$	28	$	4,978
U.S. Treasury securities	16,993		—		1,068		15,925
Federal agency CMO	396,665		33		61,947		334,751
Federal agency MBS	21,586		31		2,805		18,812
Taxable municipal securities	262,168		34		35,225		226,977
Tax-exempt municipal securities	45,548		156		285		45,419
Corporate bonds	4,058		—		92		3,966
Subordinated corporate bonds	11,957		—		1,672		10,285

Total debt securities, at fair value	$	763,981	$	254	$	103,122	$	661,113

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 $3.3 million at September 30, 2024 and $3.1 million at December 31, 2023.

At September 30, 2024, management performed its quarterly analysis of all securities with unrealized losses and determined that the losses were attributable to significant increases in market interest rates from March 2022 through July 2023.

Management concluded that no ACL for available-for-sale securities was necessary as of September 30, 2024 and anticipates they will mature or be called at par value. The Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell any such security before the recovery of its amortized cost basis.


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 September 30, 2024 and December 31, 2023:


	September 30, 2024
	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
Federal agency obligations	$	—	$	—	$	—	$	—	$	—	$	—	—
U.S. Treasury securities	—		—		6,356		642		6,356		642		1
Federal agency CMO	—		—		286,013		50,691		286,013		50,691		83
Federal agency MBS	—		—		16,517		2,377		16,517		2,377		10
Taxable municipal securities	1,675		141		231,367		25,675		233,042		25,816		249
Tax-exempt municipal securities	3,944		30		17,239		242		21,183		272		46
Corporate bonds	—		—		3,096		32		3,096		32		14
Subordinated corporate bonds	—		—		8,701		1,299		8,701		1,299		5
Total	$	5,619	$	171	$	569,289	$	80,958	$	574,908	$	81,129	408


	December 31, 2023
	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
Federal agency obligations	$	4,978	$	28	$	—	$	—	$	4,978	$	28	1
U.S. Treasury securities	—		—		15,925		1,068		15,925		1,068		4
Federal agency CMO	8,810		18		311,221		61,929		320,031		61,947		86
Federal agency MBS	—		—		17,114		2,805		17,114		2,805		10
Taxable municipal securities	1,993		316		223,949		34,909		225,942		35,225		251
Tax-exempt municipal securities	11,890		55		10,519		230		22,409		285		53
Corporate bonds	—		—		3,966		92		3,966		92		18
Subordinated corporate bonds	—		—		10,285		1,672		10,285		1,672		6

Total	$	27,671	$	417	$	592,979	$	102,705	$	620,650	$	103,122	429

The contractual maturity distribution at September 30, 2024 of debt securities was as follows:


(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	16,004	$	15,884
Due after one, but within five years	93,327		89,536
Due after five, but within ten years	231,203		206,591
Due after ten years	362,777		310,516
Total debt securities	$	703,311	$	622,527

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 $135.2 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 $611.9 million and $650.8 million at September 30, 2024 and December 31, 2023, respectively.


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

Sales of debt securities for the three and nine months ended September 30, 2024 and September 30, 2023 are summarized as follows:



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2024		2023		2024		2023
Amortized cost of debt securities sold (1)	$	214	$	—	$	214	$	87,198
Gross realized gains on sales	—		—		—		—
Gross realized losses on sales	(2)		—		(2)		(2,419)
Total proceeds from sales of debt securities	$	212	$	—	$	212	$	84,779

________________________________________

(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

At September 30, 2024, the Company held equity securities with a fair value of $9.4 million, which consisted of $6.1 million in management directed investments and $3.3 million in mutual funds held in conjunction with the Company's supplemental executive retirement and deferred compensation plan.

At December 31, 2023, the Company held equity securities with a fair value of $7.1 million, which consisted of $4.4 million in management directed investments and $2.7 million in mutual funds held in conjunction with the Company's supplemental executive retirement and deferred compensation plan.

Net gains and losses recognized on equity securities for the three and nine months ended September 30, 2024 and September 30, 2023 are summarized as follows:


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2024		2023		2024		2023
Net gains (losses) recognized during the period on equity securities	$	604	$	(181)	$	1,170	$	(8)
Less: Net losses recognized on equity securities sold during the period	(2)		—		(2)		(29)
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the end of the period	$	606	$	(181)	$	1,172	$	21


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

(3)Loans

Loan Portfolio Classifications

Major classifications of loans and their amortized cost as of the dates indicated were as follows:


(Dollars in thousands)	September 30, 2024		December 31, 2023
Commercial real estate owner-occupied	$	660,063	$	619,302
Commercial real estate non owner-occupied	1,579,827		1,445,435

Commercial and industrial	415,642		430,749
Commercial construction	674,434		585,113

Total commercial loans	3,329,966		3,080,599

Residential mortgages	424,030		393,142
Home equity loans and lines	95,982		85,375
Consumer	8,962		8,515
Total retail loans	528,974		487,032




Total loans	3,858,940		3,567,631

ACL for loans	(63,654)		(58,995)
Net loans	$	3,795,286	$	3,508,636

Net deferred loan origination fees, included in the amortized costs of loans reflected in the table above, amounted to $4.0 million at September 30, 2024 and $5.4 million at December 31, 2023.

Accrued interest receivable on loans amounted to $17.2 million and $16.1 million at September 30, 2024 and December 31, 2023, respectively, and was included in the "Accrued interest receivable" line item on the Company's Consolidated Balance Sheets.

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 $157.5 million at September 30, 2024 and $126.6 million at December 31, 2023.

Loans serviced for others

The Company was servicing residential mortgage loans owned by investors amounting to $7.3 million and $7.7 million at September 30, 2024 and December 31, 2023, respectively. Additionally, the Company was servicing commercial loans originated by the Company and participated out to various other institutions amounting to $76.1 million and $69.8 million at September 30, 2024 and December 31, 2023, respectively.

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)	September 30, 2024		December 31, 2023


Commercial real estate	$	439,288	$	495,831
Residential mortgages	395,424		369,062
Home equity	35,176		35,540
Total loans pledged to FHLB	$	869,888	$	900,433


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

(4)ACL for Loans

There have been no material changes to the Company's ACL for loans methodology, underwriting practices, or credit risk management system used to estimate credit loss exposure as described in the 2023 Annual Report on Form 10-K.

See Note 4, "Credit Risk Management and ACL for Loans," to the Company's audited consolidated financial statements contained in the 2023 Annual Report on Form 10-K and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the subheading "Accounting Policies/Critical Accounting Estimates," of the Company's 2023 Annual Report on Form 10-K.

The credit risk management function of the Company evaluates a wide variety of factors, as early detection of credit issues is critical to minimizing credit losses. Accordingly, management regularly monitors internal credit quality indicators such as, the risk classification of loans, past due and non-accrual loans, individually evaluated loans, loan modifications, and the level of foreclosure activity, among other items. These credit quality indicators are outlined below.

Risk ratings and adversely classified loans

The Company's loan risk rating system classifies loans depending on risk of loss characteristics. Adversely classified ratings for loans determined to be of weaker credit range from "special mention," for loans that may need additional monitoring, to the more severe adverse classifications of "substandard," "doubtful," and "loss" based on criteria established under banking regulations.


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

The following tables present the amortized cost basis of the Company's loan portfolio risk ratings within portfolio classifications, by origination date, or revolving status as of the dates indicated:


	Balance at September 30, 2024
	Term Loans by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial real estate owner-occupied
Pass	$	35,994	$	92,966	$	96,808	$	86,295	$	50,429	$	279,758	$	4,165	$	—	$	646,415
Special mention	—		81		—		—		—		6,807		—		—		6,888
Substandard	—		—		1,250		431		—		5,079		—		—		6,760


Total commercial real estate owner-occupied	35,994		93,047		98,058		86,726		50,429		291,644		4,165		—		660,063

Current period charge-offs	—		—		—		—		—		—		—		—		—

Commercial real estate non owner-occupied
Pass	114,663		143,443		296,611		290,827		155,955		535,979		23,679		353		1,561,510
Special mention	—		—		15,541		—		—		—		—		—		15,541
Substandard	—		—		227		752		456		1,341		—		—		2,776


Total commercial real estate non owner-occupied	114,663		143,443		312,379		291,579		156,411		537,320		23,679		353		1,579,827

Current period charge-offs	—		—		—		—		—		—		—		—		—











Commercial and industrial
Pass	55,028		64,558		41,121		35,810		19,393		53,362		139,539		1,033		409,844
Special mention	—		—		—		—		221		296		564		—		1,081
Substandard	—		—		3,248		194		—		478		623		174		4,717


Total commercial and industrial	55,028		64,558		44,369		36,004		19,614		54,136		140,726		1,207		415,642

Current period charge-offs	10		44		—		13		—		182		—		—		249

Commercial construction
Pass	88,238		251,268		144,463		107,559		10,391		19,475		37,976		291		659,661
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		14,773		—		—		—		—		—		14,773


Total commercial construction	88,238		251,268		159,236		107,559		10,391		19,475		37,976		291		674,434

Current period charge-offs	—		—		—		—		—		—		—		—		—




Residential mortgages
Pass	52,699		80,896		103,319		65,168		44,853		75,068		—		—		422,003
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		786		—		1,241		—		—		2,027

Total residential mortgages	52,699		80,896		103,319		65,954		44,853		76,309		—		—		424,030

Current period charge-offs	—		—		—		—		—		—		—		—		—

Home equity
Pass	356		457		787		513		436		2,204		89,749		1,219		95,721
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		62		150		49		261

Total home equity	356		457		787		513		436		2,266		89,899		1,268		95,982

Current period charge-offs	—		—		—		—		—		—		—		—		—

Consumer
Pass	3,285		2,197		1,316		1,068		529		567		—		—		8,962



Total consumer	3,285		2,197		1,316		1,068		529		567		—		—		8,962

Current period charge-offs	54		3		1		—		—		1		—		—		59

Total loans	$	350,263	$	635,866	$	719,464	$	589,403	$	282,663	$	981,717	$	296,445	$	3,119	$	3,858,940

Total current period charge-offs	$	64	$	47	$	1	$	13	$	—	$	183	$	—	$	—	$	308


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


	Balance at December 31, 2023
	Term Loans by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial real estate owner-occupied
Pass	$	82,500	$	83,366	$	88,178	$	52,891	$	51,379	$	242,518	$	2,169	$	—	$	603,001
Special mention	31		—		—		—		489		6,971		—		—		7,491
Substandard	—		1,311		270		—		—		7,229		—		—		8,810


Total commercial real estate	82,531		84,677		88,448		52,891		51,868		256,718		2,169		—		619,302

Current period charge-offs	—		—		—		—		—		—		—		—		—

Commercial real estate non owner-occupied
Pass	133,179		288,240		278,833		148,730		165,676		398,516		9,961		107		1,423,242
Special mention	—		15,782		—		—		—		2,977		—		—		18,759
Substandard	—		—		361		—		969		1,654		—		450		3,434


Total commercial real estate non owner-occupied	133,179		304,022		279,194		148,730		166,645		403,147		9,961		557		1,445,435

Current period charge-offs	—		—		—		—		—		—		—		—		—











Commercial and industrial
Pass	73,608		51,990		45,278		24,778		23,724		44,609		156,465		3,402		423,854
Special mention	—		—		—		70		215		201		2,227		223		2,936
Substandard	—		—		18		—		1		209		316		3,415		3,959


Total commercial and industrial	73,608		51,990		45,296		24,848		23,940		45,019		159,008		7,040		430,749

Current period charge-offs	15		248		—		—		67		266		—		—		596

Commercial construction
Pass	192,462		164,313		143,203		22,017		16,247		10,532		27,261		—		576,035
Special mention	—		7,905		—		—		1,173		—		—		—		9,078
Substandard	—		—		—		—		—		—		—		—		—


Total commercial construction	192,462		172,218		143,203		22,017		17,420		10,532		27,261		—		585,113

Current period charge-offs	—		—		—		—		—		—		—		—		—

Residential mortgages
Pass	82,848		107,222		69,979		46,674		19,205		65,311		—		—		391,239
Special mention	—		—		—		—		—		109		—		—		109
Substandard	—		—		236		—		1,055		503		—		—		1,794


Total residential mortgages	82,848		107,222		70,215		46,674		20,260		65,923		—		—		393,142

Current period charge-offs	—		—		—		—		—		—		—		—		—

Home equity
Pass	1,203		775		561		444		317		1,738		79,421		636		85,095
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		72		—		208		280


Total home equity	1,203		775		561		444		317		1,810		79,421		844		85,375

Current period charge-offs	—		—		—		—		—		—		—		—		—

Consumer
Pass	3,705		1,652		1,371		722		623		442		—		—		8,515




Total consumer	3,705		1,652		1,371		722		623		442		—		—		8,515

Current period charge-offs	35		—		—		—		—		1		—		—		36

Total loans	$	569,536	$	722,556	$	628,288	$	296,326	$	281,073	$	783,591	$	277,820	$	8,441	$	3,567,631

Total current period charge-offs	$	50	$	248	$	—	$	—	$	67	$	267	$	—	$	—	$	632

The total amortized cost basis of adversely classified loans amounted to $54.8 million, or 1.42% of total loans, at September 30, 2024, and $56.7 million, or 1.59% of total loans, at December 31, 2023.


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

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 September 30, 2024
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due Loans(1)		Current Loans(1)		Total Loans
Commercial real estate owner-occupied	$	287	$	253	$	186	$	726	$	659,337	$	660,063
Commercial real estate non owner-occupied	1,737		—		1,167		2,904		1,576,923		1,579,827

Commercial and industrial	408		617		3,283		4,308		411,334		415,642
Commercial construction	861		—		7,906		8,767		665,667		674,434

Residential mortgages	900		319		1,609		2,828		421,202		424,030
Home equity	79		—		150		229		95,753		95,982
Consumer	21		10		—		31		8,931		8,962
Total loans	$	4,293	$	1,199	$	14,301	$	19,793	$	3,839,147	$	3,858,940


	Balance at December 31, 2023
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due Loans(1)		Current Loans(1)		Total Loans
Commercial real estate owner-occupied	$	459	$	270	$	212	$	941	$	618,361	$	619,302
Commercial real estate non owner-occupied	722		504		1,122		2,348		1,443,087		1,445,435

Commercial and industrial	660		64		—		724		430,025		430,749
Commercial construction	—		—		—		—		585,113		585,113

Residential mortgages	1,265		—		1,277		2,542		390,600		393,142
Home equity	53		—		97		150		85,225		85,375
Consumer	25		2		—		27		8,488		8,515
Total loans	$	3,184	$	840	$	2,708	$	6,732	$	3,560,899	$	3,567,631

_______________________________________

(1)The loan balances in the tables above include loans designated as non-accrual according to their payment due status.

At September 30, 2024 and December 31, 2023, all loans past due 90 days or more were carried as non-accrual, however, not all non-accrual loans were 90 days or more past due in their payments. Loans that were less than 90 days past due where reasonable doubt existed as to the full and timely collection of interest or principal have also been designated as non-accrual, despite their payment due status.

The following tables present the amortized cost of non-accrual loans by portfolio classification as of the dates indicated:


	Balance at September 30, 2024
(Dollars in thousands)	Total Non-accrual Loans		Non-accrual Loans without a Specific Reserve		Non-accrual Loans with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	2,489	$	2,489	$	—	$	—
Commercial real estate non owner-occupied	2,776		1,836		940		200

Commercial and industrial	3,851		276		3,575		3,141
Commercial construction	14,773		—		14,773		4,765

Residential mortgages	1,796		1,796		—		—
Home equity	261		261		—		—
Consumer	—		—		—		—
Total loans	$	25,946	$	6,658	$	19,288	$	8,106


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


	Balance at December 31, 2023
(Dollars in thousands)	Total Non-accrual Loans		Non-accrual Loans without a Specific Reserve		Non-accrual Loans with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	2,683	$	2,683	$	—	$	—
Commercial real estate non owner-occupied	2,686		1,717		969		229

Commercial and industrial	4,262		736		3,526		2,658
Commercial construction	—		—		—		—

Residential mortgages	1,526		1,526		—		—
Home equity	257		257		—		—
Consumer	—		—		—		—
Total loans	$	11,414	$	6,919	$	4,495	$	2,887

The ratio of non-accrual loans to total loans amounted to 0.67% and 0.32% at September 30, 2024 and December 31, 2023, respectively. The increase in non-accrual loans from December 31, 2023 to September 30, 2024 was due primarily to two commercial construction loans that were deemed collateral dependent and added to non-accrual during the period.

At September 30, 2024 and December 31, 2023, additional funding commitments for non-accrual loans were immaterial.

Collateral dependent loans

The total recorded investment in collateral dependent loans amounted to $27.6 million at September 30, 2024 compared to $13.7 million at December 31, 2023. Total accruing collateral dependent loans amounted to $1.8 million while non-accrual collateral dependent loans amounted to $25.8 million as of September 30, 2024. As of December 31, 2023, total accruing collateral dependent loans amounted to $2.4 million, while non-accrual collateral dependent loans amounted to $11.3 million.

The following tables present the recorded investment in collateral dependent loans and the related specific allowance by portfolio allocation as of the dates indicated:


	Balance at September 30, 2024
(Dollars in thousands)	Unpaid Contractual Principal Balance		Total Recorded Investment in Collateral Dependent Loans		Recorded Investment without a Specific Reserve		Recorded Investment with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	4,335	$	3,790	$	3,790	$	—	$	—
Commercial real estate non owner-occupied	3,783		2,776		1,836		940		200

Commercial and industrial	5,182		3,931		485		3,446		3,013
Commercial construction	14,824		14,773		—		14,773		4,765

Residential mortgages	2,120		2,027		2,027		—		—
Home equity	296		261		261		—		—
Consumer	—		—		—		—		—
Total	$	30,540	$	27,558	$	8,399	$	19,159	$	7,978


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


	Balance at December 31, 2023
(Dollars in thousands)	Unpaid Contractual Principal Balance		Total Recorded Investment in Collateral Dependent Loans		Recorded Investment without a Specific Reserve		Recorded Investment with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	4,641	$	4,165	$	4,165	$	—	$	—
Commercial real estate non owner-occupied	4,062		2,983		2,015		968		229

Commercial and industrial	6,804		4,332		950		3,382		2,526
Commercial construction	—		—		—		—		—

Residential mortgages	2,117		1,902		1,902		—		—
Home equity	359		281		281		—		—
Consumer	—		—		—		—		—
Total	$	17,983	$	13,663	$	9,313	$	4,350	$	2,755

At September 30, 2024 and December 31, 2023, additional funding commitments for collateral dependent loans were immaterial.

Loan modifications to borrowers experiencing financial difficulty

The Company works with loan customers experiencing financial difficulty and may enter into loan modifications to the extent deemed to be necessary or appropriate while attempting to achieve the best mutual outcome given the individual financial circumstances and future prospects of the borrower. An assessment of whether a borrower is experiencing financial difficulty is made on the date of the modification. Modifications made for borrowers experiencing financial difficulty may be concessions in the form of principal forgiveness, interest rate reductions, payment deferrals of principal, interest or both, or term extensions, or some combination thereof. When a debt has been previously modified, the Company considers the cumulative effect of modifications made within the prior twelve-month period before the current modification, when determining whether or not a delay in payment resulting from the current modification is insignificant.

The following tables present the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty by type of concession granted during the periods indicated:



	Three months ended
	September 30, 2024		September 30, 2023
(Dollars in thousands)	Payment Deferrals			% of Loan Class Total		Payment Deferrals		% of Loan Class Total


Commercial and industrial	$	—		—	%	$	143	0.03	%
Commercial construction	7,906			1.17	%	—		—	%



Total	$	7,906		0.20	%	$	143	—	%



		Nine months ended
		September 30, 2024		September 30, 2023
(Dollars in thousands)	Payment Deferrals			% of Loan Class Total			Payment Deferrals			% of Loan Class Total
Commercial real estate owner-occupied		$	—		—	%		$	272		0.01	%

Commercial and industrial		—			—	%		177			0.04	%
Commercial construction		7,906			1.17	%		—			—	%
Residential mortgages		—			—	%		32			0.01	%


Total		$	7,906		0.20	%		$	481		0.01	%


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

The following tables present the financial effect of loan modifications made to borrowers experiencing financial difficulty during the periods indicated:

Three months ended

September 30, 2024

September 30, 2023

Weighted Average Payment Deferrals

Commercial and industrial

0.0 years

0.5 years

Commercial construction

0.5 years

0.0 years

Nine months ended

September 30, 2024

September 30, 2023

Weighted Average Payment Deferrals

Commercial real estate owner-occupied

0.0 years

0.5 years

Commercial and industrial

0.0 years

0.5 years

Commercial construction

0.5 years

0.0 years

Residential mortgages

0.0 years

0.5 years

The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance status of loans that were modified within the preceding twelve months to borrowers experiencing financial difficulty, as of periods indicated:


	Balance at September 30, 2024
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due
Commercial real estate owner-occupied	$	—	$	—	$	—	$	—	$	—
Commercial real estate non owner-occupied	—		—		—		—		—
Commercial and industrial	—		—		—		—		—
Commercial construction	—		—		—		7,906		7,906
Residential mortgages	—		—		—		—		—
Home equity	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	—	$	—	$	—	$	7,906	$	7,906


	Balance at September 30, 2023
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due
Commercial real estate owner-occupied	$	272	$	—	$	—	$	—	$	—
Commercial real estate non owner-occupied	—		—		—		—		—
Commercial and industrial	233		—		—		—		—
Commercial construction	—		—		—		—		—
Residential mortgages	175		—		—		—		—
Home equity	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	680	$	—	$	—	$	—	$	—

During each of the three and nine months ended September 30, 2024 and September 30, 2023, there were no subsequent defaults on loans that had been modified within the preceding twelve months for borrowers experiencing financial difficulty. At September 30, 2024 and September 30, 2023, additional funding commitments to borrowers experiencing financial difficulty who were party to a loan modification were immaterial.


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

ACL for loans and provision for credit loss activity

The following table presents changes in the provision for credit losses on loans and unfunded commitments during the periods indicated:


	Three months ended				Nine months ended
(Dollars in thousands)	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Provision for credit losses on loans - collectively evaluated	$	(663)	$	(1,518)	$	(476)	$	3,052
Provision for credit losses on loans - individually evaluated	2,311		2,512		5,120		2,303
Provision for credit losses on loans	1,648		994		4,644		5,355

Provision for unfunded commitments	(316)		758		(2,553)		1,401

Provision for credit losses	$	1,332	$	1,752	$	2,091	$	6,756

ACL for loans

The ACL for loans amounted to $63.7 million and $59.0 million at September 30, 2024 and December 31, 2023, respectively. The ACL for loans to total loans ratio was 1.65% at both September 30, 2024 and December 31, 2023.

The following tables present changes in the ACL for loans by portfolio classification, during the three-month periods indicated:


(Dollars in thousands)	Commercial Real Estate Owner-Occupied		Commercial Real Estate Non Owner-Occupied		Commercial and Industrial		Commercial Construction		Residential Mortgage		Home Equity		Consumer		Total
Beginning Balance at June 30, 2024	$	10,572	$	28,596	$	10,519	$	9,429	$	2,059	$	550	$	274	$	61,999
Provision for credit losses on loans	(467)		(507)		(943)		3,384		51		109		21		1,648
Recoveries	—		—		68		—		—		1		7		76
Less: Charge-offs	—		—		38		—		—		—		31		69
Ending Balance at September 30, 2024	$	10,105	$	28,089	$	9,606	$	12,813	$	2,110	$	660	$	271	$	63,654


(Dollars in thousands)	Commercial Real Estate Owner-Occupied		Commercial Real Estate Non Owner-Occupied		Commercial and Industrial		Commercial Construction		Residential Mortgage		Home Equity		Consumer		Total
Beginning Balance at June 30, 2023	$	11,178	$	28,399	$	9,104	$	4,718	$	2,453	$	698	$	349	$	56,899
Provision for credit losses on loans	(173)		(891)		2,068		594		(396)		(160)		(48)		994
Recoveries	—		—		87		—		—		3		7		97
Less: Charge-offs	—		—		80		—		—		—		5		85
Ending Balance at September 30, 2023	$	11,005	$	27,508	$	11,179	$	5,312	$	2,057	$	541	$	303	$	57,905

The following tables present changes in the ACL for loans by portfolio classification, during the nine-month periods indicated:



(Dollars in thousands)	Commercial Real Estate Owner-Occupied		Commercial Real Estate Non Owner-Occupied		Commercial and Industrial		Commercial Construction		Residential Mortgage		Home Equity		Consumer		Total
Beginning Balance at December 31, 2023	$	10,454	$	27,620	$	11,089	$	6,787	$	2,152	$	579	$	314	$	58,995
Provision for credit losses for loans	(349)		469		(1,535)		6,026		(42)		76		(1)		4,644
Recoveries	—		—		301		—		—		5		17		323
Less: Charge-offs	—		—		249		—		—		—		59		308
Ending Balance at September 30, 2024	$	10,105	$	28,089	$	9,606	$	12,813	$	2,110	$	660	$	271	$	63,654


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



(Dollars in thousands)	Commercial Real Estate Owner-Occupied		Commercial Real Estate Non Owner-Occupied		Commercial and Industrial		Commercial Construction		Residential Mortgage		Home Equity		Consumer		Total
Beginning Balance at December 31, 2022	$	10,304	$	26,260	$	8,896	$	3,961	$	2,255	$	633	$	331	$	52,640
Provision for credit losses for loans	701		1,248		2,368		1,351		(198)		(100)		(15)		5,355
Recoveries	—		—		298		—		—		8		13		319
Less: Charge-offs	—		—		383		—		—		—		26		409
Ending Balance at September 30, 2023	$	11,005	$	27,508	$	11,179	$	5,312	$	2,057	$	541	$	303	$	57,905

Reserve for unfunded commitments

The Company's reserve for unfunded commitments amounted to $4.6 million at September 30, 2024 and $7.1 million at December 31, 2023. Management believes that the Company's ACL for loans and reserve for unfunded commitments were adequate as of September 30, 2024.

Other real estate owned

The Company carried no OREO at September 30, 2024 and December 31, 2023.

At September 30, 2024 and December 31, 2023, the Company had $1.1 million and $1.2 million, respectively, in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions.

(5)Leases

As of September 30, 2024, the Company had 16 facilities contracted under various non-cancelable operating leases, most of which provide options to the Company to extend the lease periods and include periodic rent adjustments.

Lease expense for the three and nine months ended September 30, 2024 amounted to $409 thousand and $1.2 million, respectively, compared to $410 thousand and $1.2 million for the three and nine months ended September 30, 2023, respectively. Variable lease costs and short-term lease expenses included in lease expense during these periods were immaterial.

The weighted average remaining lease term for operating leases at September 30, 2024 and September 30, 2023 was 27.8 years and 28.6 years, respectively. The weighted average discount rate was 3.55% at both September 30, 2024 and September 30, 2023.

At September 30, 2024, the remaining undiscounted cash flows by year of these lease liabilities were as follows:


(Dollars in thousands)	Operating Leases
2024 (remaining three months)	$	384
2025	1,457
2026	1,468
2027	1,474
2028	1,477
Thereafter	31,723
Total lease payments	37,983
Less: Imputed interest	13,973
Total lease liability	$	24,010


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

(6)Deposits

Deposits are summarized as follows as of the periods indicated:


(Dollars in thousands)	September 30, 2024		December 31, 2023
Non-interest checking	$	1,064,424	$	1,061,009
Interest-bearing checking	682,050		697,632
Savings	279,824		294,865
Money market	1,488,437		1,402,939
CDs $250,000 or less	375,055		295,789
CDs greater than $250,000	299,671		225,287


Deposits	$	4,189,461	$	3,977,521

All of the Company's deposits outstanding at both September 30, 2024 and December 31, 2023 were customer deposits, and the Company had no brokered deposits at either September 30, 2024 or December 31, 2023. Customer deposits include reciprocal balances from checking, money market deposits and CDs received from participating banks in nationwide deposit networks due to our customers electing to participate in Company offered programs which allow for third-party enhanced FDIC deposit insurance. Under this enhanced deposit insurance program, the equivalent of the customers' original deposited funds comes back to the Company and are carried within the appropriate category under deposits. The Company's balances in these reciprocal products were $875.3 million and $835.0 million at September 30, 2024 and December 31, 2023, respectively.

(7)Borrowed Funds and Subordinated Debt

Borrowed funds at September 30, 2024 and December 31, 2023 are summarized, as follows:


	September 30, 2024				December 31, 2023
(Dollars in thousands)	Balance		Rate		Balance		Rate

Within 12 months	$	51,400	4.85	%	$	20,000	4.84	%
Between 1 and 5 years	270		—	%	270		—	%
Over 5 years	8,279		1.17	%	5,498		1.09	%
Total borrowed funds	$	59,949	4.32	%	$	25,768	3.99	%

The Company's borrowed funds at September 30, 2024 and December 31, 2023 were comprised of FRB advances through the BTFP and term advances related to specific lending projects funded under community development programs through the FHLB and NH BFA.

The Company also had outstanding subordinated debt (net of deferred issuance costs) of $59.7 million at September 30, 2024 and $59.5 million at December 31, 2023. The outstanding subordinated notes are due on July 15, 2030 and callable at the Company's option on or after July 15, 2025.


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

(8) Derivatives and Hedging Activities

For further information on the Company's derivatives and hedging activities, see Note 9, "Derivatives and Hedging," to the Company's audited consolidated financial statements contained in the 2023 Annual Report on Form 10-K.

The tables below present a summary of the Company's derivative financial instruments, notional amounts and fair values at the periods presented:


	September 30, 2024
(Dollars in thousands)	Asset Notional Amount		Asset Derivatives(1)(2)		Liability Notional Amount		Liability Derivatives(1)(2)
Derivatives designated as hedging instruments
Interest-rate contracts - pay fixed, receive floating	$	—	$	—	$	100,000	$	702
Total derivatives designated as hedging instruments	$	—	$	—	$	100,000	$	702

Derivatives not subject to hedge accounting
Interest-rate contracts - pay floating, receive fixed	$	—	$	—	$	7,329	$	481
Interest-rate contracts - pay fixed, receive floating	7,329		481		—		—
Risk participation agreements sold	—		—		46,533		55
Total derivatives not subject to hedge accounting	$	7,329	$	481	$	53,862	$	536


	December 31, 2023
(Dollars in thousands)	Asset Notional Amount		Asset Derivatives(1)(2)		Liability Notional Amount		Liability Derivatives(1)(2)




Derivatives designated as hedging instruments
Interest-rate contracts - pay fixed, receive floating	$	—	$	—	$	100,000	$	760
Total derivatives designated as hedging instruments	$	—	$	—	$	100,000	$	760

Derivatives not subject to hedge accounting
Interest-rate contracts - pay floating, receive fixed	$	—	$	—	$	7,524	$	630
Interest-rate contracts - pay fixed, receive floating	7,524		630		—		—
Risk participation agreements sold	—		—		46,910		65
Total derivatives not subject to hedge accounting	$	7,524	$	630	$	54,434	$	695

_________________________________________

(1) Accrued interest balances related to the Company's interest-rate swaps are not included in the fair values above and are immaterial.

(2) The assets and liabilities related to the pay fixed, receive floating interest-rate contracts are subject to a master netting agreement and are presented net in the Company's Consolidated Balance Sheet.

The Company had no derivatives designated as cash flow hedges at either September 30, 2024 or December 31, 2023.

Derivatives designated as hedging instruments

Fair value hedges

Derivatives designated as fair value hedges are utilized to mitigate the risk of adverse interest-rate fluctuations on specifically identified assets or liabilities. The Company's fair value hedges are used to manage its exposure to changes in the fair value of hedged items caused by changes in interest rates.

The Company had three interest rate swap agreements with a combined notional value of $100.0 million at September 30, 2024 and December 31, 2023. Each interest rate swap agreement was designated as a fair value hedge and involves the net settlement of receiving floating-rate payments from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.


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

The table below presents the carrying amount of hedged items and cumulative fair value hedging basis adjustments for the periods presented:


		September 30, 2024				December 31, 2023
(Dollars in thousands)	Balance Sheet Location of Hedged Item	Carrying Amount of Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets		Carrying Amount of Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Interest-rate contracts - loans	Loans	$	100,682	$	682	$	100,755	$	755

The table below presents the gains (losses) from interest rate derivatives accounted for as fair value hedges and the related hedged items during the periods indicated:


		Three months ended				Nine months ended
(Dollars in thousands)	Affected Income Statement Line Item	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Derivatives designated as fair value hedges:
Fair value adjustments on derivatives	Net interest income	$	(847)	$	134	$	58	$	393
Fair value adjustments on hedged instrument	Net interest income	854		(141)		(73)		(404)
Total		$	7	$	(7)	$	(15)	$	(11)

Derivatives not subject to hedge accounting

Interest-rate Contracts

Each back-to-back interest-rate swap consists of two interest-rate swaps (a customer swap and offsetting counterparty swap) and amounted to a total number of four interest-rate swaps outstanding at September 30, 2024 and December 31, 2023. As a result of this offsetting relationship, there were no net gains or losses recognized in income on back-to-back swaps during the nine months ended September 30, 2024 or September 30, 2023.

Interest-rate swaps with counterparties are subject to master netting agreements, while interest-rate swaps with customers are not. At September 30, 2024 and December 31, 2023, all back-to-back swaps with the counterparty were in asset positions, therefore there was no netting reflected in the Company's Consolidated Balance Sheets as of the respective dates.

Risk Participation Agreements

The Company enters into RPAs for which the Company has assumed credit risk for customers' performance under interest-rate swap agreements related to the customers' commercial loan and receives fee income commensurate with the risk assumed. The RPAs and the customers' loan are secured by the same collateral.

Credit-risk-related Contingent Features

By using derivative financial instruments, the Company exposes itself to counterparty credit risk. Credit risk is the risk of failure by the counterparty to perform under the terms of the derivative contract. The credit risk in derivative instruments is mitigated by entering into transactions with highly rated counterparties that management believes to be creditworthy. As of September 30, 2024, the Company had two active interest-rate swap institutional counterparties both of which had investment grade credit ratings.

The Company's interest-rate swaps with counterparties contain credit-risk-related contingent provisions. These provisions provide the counterparty with the right to terminate its derivative positions and require the Company to settle its obligations under the agreements if the Company defaults on certain of its indebtedness.

As of September 30, 2024 and December 31, 2023, the Company had credit risk exposure relating to interest-rate swaps with counterparties of $223 thousand and $492 thousand, respectively and cash posted by counterparties amounted to $120 thousand and $590 thousand at September 30, 2024 and December 31, 2023, respectively.


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

As of September 30, 2024 and December 31, 2023, cash collateral posted by the Company amounted to $760 thousand and $570 thousand, respectively.

As of September 30, 2024, the fair value of derivatives related to these agreements was at a net liability position of $457 thousand, which excludes any adjustment for nonperformance risk.

Other Derivative Related Activity

Interest-rate lock commitments related to the origination of mortgage loans that will be sold are considered derivative instruments. The commitments to sell loans are also considered derivative instruments. At September 30, 2024 and December 31, 2023, the estimated fair value of the Company's interest-rate lock commitments and commitments to sell these mortgage loans were deemed immaterial.

(9) Regulatory Capital Requirements

As of September 30, 2024 and December 31, 2023, the Company met the definition of "well-capitalized" under the applicable regulations of the Board of Governors of the Federal Reserve System and the Bank qualified as "well-capitalized" under the prompt corrective action regulations of the FDIC and the Basel III capital guidelines.

The Company's and the Bank's actual capital amounts and ratios are presented as of September 30, 2024 and December 31, 2023 in the tables below:


	Actual				Minimum Capital for Capital Adequacy Purposes(1)				Minimum Capital to be Well Capitalized(2)
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2024
The Company (consolidated)
Total Capital to risk-weighted assets	$	536,317	13.07	%	$	328,303	8.00	%	N/A		N/A
Tier 1 Capital to risk-weighted assets	425,075		10.36	%	246,227		6.00	%	N/A		N/A
Tier 1 Capital to average assets (or Leverage Ratio)	425,075		8.68	%	195,988		4.00	%	N/A		N/A
Common Equity Tier 1 Capital to risk-weighted assets	425,075		10.36	%	184,670		4.50	%	N/A		N/A

The Bank
Total Capital to risk-weighted assets	$	535,649	13.05	%	$	328,303	8.00	%	$	410,378	10.00	%
Tier 1 Capital to risk-weighted assets	484,143		11.80	%	246,227		6.00	%	328,303		8.00	%
Tier 1 Capital to average assets (or Leverage Ratio)	484,143		9.88	%	195,988		4.00	%	244,985		5.00	%
Common Equity Tier 1 Capital to risk-weighted assets	484,143		11.80	%	184,670		4.50	%	266,746		6.50	%


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


	Actual				Minimum Capital for Capital Adequacy Purposes(1)				Minimum Capital to be Well Capitalized(2)
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2023
The Company (consolidated)
Total Capital to risk-weighted assets	$	511,692	13.12	%	$	312,035	8.00	%	N/A		N/A
Tier 1 Capital to risk-weighted assets	403,224		10.34	%	234,026		6.00	%	N/A		N/A
Tier 1 Capital to average assets (or Leverage Ratio)	403,224		8.74	%	184,471		4.00	%	N/A		N/A
Common Equity Tier 1 Capital to risk-weighted assets	403,224		10.34	%	175,520		4.50	%	N/A		N/A

The Bank
Total Capital to risk-weighted assets	$	510,645	13.09	%	$	312,035	8.00	%	$	390,044	10.00	%
Tier 1 Capital to risk-weighted assets	461,675		11.84	%	234,026		6.00	%	312,035		8.00	%
Tier 1 Capital to average assets (or Leverage Ratio)	461,675		10.01	%	184,471		4.00	%	230,589		5.00	%
Common Equity Tier 1 Capital to risk-weighted assets	461,675		11.84	%	175,520		4.50	%	253,528		6.50	%

__________________________________________

(1)Before application of the capital conservation buffer of 2.50% as of September 30, 2024, and December 31, 2023. See discussion below.

(2)For the Bank to qualify as "well-capitalized," it must maintain at least the minimum ratios listed under the regulatory prompt corrective action framework. This framework does not apply to the Company.

The Company is subject to the Basel III capital ratio requirements which include a "capital conservation buffer" of 2.50% above the regulatory minimum risk-based capital adequacy requirements shown above. If a banking organization dips into its capital conservation buffer it may be restricted in its activities, including its ability to pay dividends and discretionary bonus payments to its executive officers. Both the Company's and the Bank's actual ratios, as outlined in the table above, exceeded the Basel III risk-based capital requirement with the capital conservation buffer as of September 30, 2024. At September 30, 2024, the capital conservation buffer amounted to $102.6 million for both the Company and the Bank.

(10)Comprehensive Income (Loss)

The following table presents a reconciliation of the changes in the components of other comprehensive income (loss) for the periods indicated, including the amount of income tax (expense) benefit allocated to each component of other comprehensive income (loss):



	Three months ended September 30, 2024						Three months ended September 30, 2023
(Dollars in thousands)	Pre-Tax		Tax Expense		After Tax Amount		Pre-Tax		Tax Benefit		After Tax Amount
Change in fair value of debt securities	$	25,423	$	(5,741)	$	19,682	$	(20,132)	$	4,559	$	(15,573)
Less: net security losses reclassified into non-interest income	(2)		—		(2)		—		—		—






Total other comprehensive loss, net	$	25,425	$	(5,741)	$	19,684	$	(20,132)	$	4,559	$	(15,573)


	Nine months ended September 30, 2024						Nine months ended September 30, 2023
(Dollars in thousands)	Pre-Tax		Tax Expense		After Tax Amount		Pre-Tax		Tax Benefit		After Tax Amount
Change in fair value of debt securities	$	22,082	$	(4,943)	$	17,139	$	(11,477)	$	2,633	$	(8,844)
Less: net security losses reclassified into non-interest income	(2)		—		(2)		(2,419)		534		(1,885)






Total other comprehensive (loss) income, net	$	22,084	$	(4,943)	$	17,141	$	(9,058)	$	2,099	$	(6,959)


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

Information on the Company's accumulated other comprehensive income (loss), net of tax, is comprised of the following components as of the periods indicated:



	Unrealized Losses on Debt Securities
(Dollars in thousands)	Three months ended September 30, 2024		Three months ended September 30, 2023
Accumulated other comprehensive loss - beginning balance	$	(82,306)		$	(87,593)
Total other comprehensive income (loss), net	19,684			(15,573)
Accumulated other comprehensive loss - ending balance	$	(62,622)		$	(103,166)


	Unrealized Losses on Debt Securities
(Dollars in thousands)	Nine months ended September 30, 2024		Nine months ended September 30, 2023
Accumulated other comprehensive loss - beginning balance	$	(79,763)		$	(96,207)
Total other comprehensive income (loss), net	17,141			(6,959)
Accumulated other comprehensive loss - ending balance	$	(62,622)		$	(103,166)

(11)Stock-Based Compensation

There have been no material changes to The Enterprise Bancorp, Inc. 2016 Stock Incentive Plan (the "2016 Plan") since December 31, 2023. As of September 30, 2024, 268,677 shares of Company common stock remained available for future grants under the 2016 Plan.

Total stock-based compensation expense was $622 thousand and $1.7 million for the three and nine months ended September 30, 2024, respectively, compared to $584 thousand and $1.7 million for the three and nine months ended September 30, 2023, respectively.

Stock Option Awards

The Company issued no stock options during the nine months ended September 30, 2024 and September 30, 2023. As of September 30, 2024, there were 13,350 unvested outstanding stock options that are expected to vest over the remaining weighted average vesting period of 1.2 years.

The Company recognized stock-based compensation expense related to stock option awards of $39 thousand and $107 thousand for the three and nine months ended September 30, 2024, respectively, compared to $40 thousand and $136 thousand for the three and nine months ended September 30, 2023, respectively.

Restricted Stock Awards

Restricted stock awards are granted at the market price of the Company's common stock on the date of the grant. Employee restricted stock awards generally vest over four years in equal portions beginning on or about the first anniversary date of the restricted stock award or are performance-based restricted stock awards that vest upon the Company achieving certain predefined performance objectives. Non-employee director restricted stock awards generally vest over two years in equal portions beginning on or about the first anniversary date of the restricted stock award.

The table below provides a summary of restricted stock awards granted during the periods indicated:


	Nine months ended September 30,
Restricted Stock Awards (number of underlying shares)	2024		2023
Two-year vesting	17,122		9,915
Four-year vesting	78,582		32,719
Performance-based vesting	26,338		31,270
Total restricted stock awards granted	122,042		73,904
Weighted average grant date fair value	$	24.68	$	32.04


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

Stock-based compensation expense recognized in association with stock awards, mainly restricted stock awards, amounted to $550 thousand and $1.4 million for the three and nine months ended September 30, 2024, respectively, compared to $502 thousand and $1.4 million for the three and nine months ended September 30, 2023, respectively.

Stock in Lieu of Directors' Fees

Non-employee members of the Company's Board of Directors (the "Board") may opt to receive newly issued shares of the Company's common stock in lieu of cash compensation for attendance at meetings of the Board and committees of the Board. Stock-based compensation expense related to these directors' fees amounted to $33 thousand and $145 thousand for the three and nine months ended September 30, 2024, respectively, compared to $42 thousand and $165 thousand for the three and nine months ended September 30, 2023, respectively.

(12)Earnings per Share

The table below presents the increase in average shares outstanding, using the treasury stock method, for the diluted earnings per share calculation for the periods indicated:


	Three months ended September 30,		Nine months ended September 30,
	2024	2023	2024	2023
Basic weighted average common shares outstanding	12,428,543	12,247,892	12,370,812	12,210,740
Dilutive shares	9,617	16,886	8,578	23,121
Diluted weighted average common shares outstanding	12,438,160	12,264,778	12,379,390	12,233,861

Stock options outstanding that were determined to be anti-dilutive, and therefore excluded from the calculation of dilutive shares, amounted to 79,177 and 101,793 for the three and nine months ended September 30, 2024, respectively, compared to 105,166 and 48,525 for the three and nine months ended September 30, 2023, respectively. These stock options, which were not dilutive, may potentially dilute earnings per share in the future.

Unvested participating restricted stock awards amounted to 179,451 shares and 130,039 shares as of September 30, 2024 and December 31, 2023, respectively.

(13)Fair Value Measurements

The FASB defines the fair value of an asset or liability to be the price which a seller would receive in an orderly transaction between market participants (an exit price) and also establishes a fair value hierarchy segregating fair value measurements using three levels of inputs: (Level 1) quoted market prices in active markets for identical assets or liabilities; (Level 2) significant other observable inputs, including quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs such as interest rates and yield curves, volatilities, prepayment speeds, credit risks and default rates which provide a reasonable basis for fair value determination or inputs derived principally from observed market data; and (Level 3) significant unobservable inputs for situations in which there is little, if any, market activity for the asset or liability. Unobservable inputs must reflect reasonable assumptions that market participants would use in pricing the asset or liability, which are developed based on the best information available under the circumstances.


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

The following tables summarize significant assets and liabilities carried at fair value and placement in the fair value hierarchy at the dates specified:


	September 30, 2024
			Fair Value Measurements Using:
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets measured on a recurring basis:
Debt securities	$	622,527	$	—	$	622,527	$	—
Equity securities	9,448		9,448		—		—
FHLB stock	2,482		—		2,482		—
Interest-rate swaps	481		—		481		—
Assets measured on a non-recurring basis:
Individually evaluated loans (collateral dependent)	11,181		—		—		11,181


Liabilities measured on a recurring basis:
Interest-rate swaps	$	1,183	$	—	$	1,183	$	—
RPAs sold	55		—		55		—


	December 31, 2023
			Fair Value Measurements Using:
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets measured on a recurring basis:
Debt securities	$	661,113	$	—	$	661,113	$	—
Equity securities	7,058		7,058		—		—
FHLB stock	2,402		—		2,402		—
Interest-rate swaps	630		—		630		—
Assets measured on a non-recurring basis:
Individually evaluated loans (collateral dependent)	1,595		—		—		1,595


Liabilities measured on a recurring basis:
Interest-rate swaps	$	1,390	$	—	$	1,390	$	—
RPAs sold	65		—		65		—

The Company utilizes third-party pricing vendors to provide valuations on its debt securities.

The Company's equity portfolio fair value is measured based on quoted market prices for the shares; therefore, these securities are categorized as Level 1 within the fair value hierarchy.

The Bank is required to purchase FHLB stock at par value in association with advances from the FHLB. The stock is issued, redeemed, repurchased and transferred by the FHLB only at their fixed par value. This stock is classified as a restricted investment and carried at FHLB par value which management believes approximates fair value; therefore, these securities are categorized as Level 2 measures.

The fair values of derivative assets and liabilities, which are comprised of back-to-back swaps, fair value hedges and risk participation agreements, represent a FASB Level 2 measurement and are based on settlement values adjusted for credit risks and observable market interest-rate curves. The Company utilizes third-party vendors to provide valuations on its derivative assets and liabilities. Refer also to Note 8, "Derivatives and Hedging Activities," this Form 10-Q, contained above, for additional information on the Company's interest-rate swaps.

For loans individually assessed and deemed to be collateral dependent management has estimated the value and the probable credit loss by comparing the loan's amortized cost against the expected realizable fair value of the collateral (appraised value, or internal analysis, less estimated cost to sell, adjusted as necessary for changes in relevant valuation factors subsequent to the measurement date). Certain inputs used in these assessments, and possible subsequent adjustments, are not always observable,


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

and therefore, collateral dependent loans carried at realizable fair value are categorized as Level 3 within the fair value hierarchy. A specific reserve is assigned to the collateral dependent loan for the amount of management's estimated probable credit loss. The specific reserve assigned to individually evaluated loans that are collateral dependent amounted to $8.0 million at September 30, 2024, compared to $2.8 million at December 31, 2023.

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company utilized Level 3 inputs (significant unobservable inputs for situations in which there is little, if any, market activity for the asset or liability) to determine fair value as of September 30, 2024 and December 31, 2023:

Fair Value

(Dollars in thousands)

September 30, 2024

December 31, 2023

Valuation Technique

Unobservable Input

Unobservable Input Value or Range

Assets measured on a non-recurring basis:

Individually evaluated loans (collateral dependent)

11,181

1,595

Appraisal of collateral

Appraisal adjustments(1)

15% - 75%

_______________________________

(1)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

Estimated Fair Values of Assets and Liabilities

In addition to disclosures regarding the measurement of assets and liabilities carried at fair value on the Company's Consolidated Balance Sheets, the Company is also required to disclose fair value information about financial instruments for which it is practicable to estimate that value, whether or not recognized on the Company's Consolidated Balance Sheets.

Financial instruments for which the fair value is disclosed but not recognized on the Company's Consolidated Balance Sheets are summarized below. The table includes the carrying value, estimated fair value and its placement in the fair value hierarchy as follows:


	September 30, 2024
					Fair Value Measurement
(Dollars in thousands)	Carrying Value		Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial assets:
Loans held for sale	$	1,229	$	1,227	$	—	$	1,227	$	—
Loans, net	3,795,286		3,682,641		—		—		3,682,641
Financial liabilities:
CDs	674,726		675,385		—		675,385		—

Borrowed funds	59,949		57,914		—		57,914		—
Subordinated debt	59,736		61,059		—		61,059		—


	December 31, 2023
					Fair Value Measurement
(Dollars in thousands)	Carrying Value		Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial assets:
Loans held for sale	$	200	$	201	$	—	$	201	$	—
Loans, net	3,508,636		3,353,968		—		—		3,353,968
Financial liabilities:
CDs	521,076		518,928		—		518,928		—

Borrowed funds	25,768		24,081		—		24,081		—
Subordinated debt	59,498		55,572		—		55,572		—

Excluded from the tables above are certain financial instruments with carrying values that approximated their fair value at the dates indicated, as they were short-term in nature or payable on demand. These include cash and cash equivalents, accrued interest and non-term deposit accounts. The respective carrying values of these instruments would all be classified within Level 1 in the fair value hierarchy.


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

Also excluded from these tables are the fair values of commitments for unused portions of lines of credit and commitments to originate loans that were short-term, at current market rates and estimated to have no significant change in fair value.

(14)Supplemental Cash Flow Information

The supplemental cash flow information for the nine months ended September 30, 2024 and September 30, 2023 is as follows:


	Nine months ended September 30,
(Dollars in thousands)	2024		2023
Supplemental financial data:
Cash paid for: interest	$	56,907	$	30,557
Cash paid for: income taxes	11,785		12,277
Cash paid for: lease liability	1,067		1,034

Table of Contents

Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's discussion and analysis should be read in conjunction with the Enterprise Bancorp, Inc. (the "Company," "Enterprise," "we," or "our") unaudited consolidated interim financial statements and notes thereto contained in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 (this "Form 10-Q"), and the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K"), as filed with the U.S. Securities and Exchange Commission (the "SEC") on March 8, 2024.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking statements. Forward-looking statements may be identified by reference to a future period or periods or by use of forward-looking terminology such as "will," "should," "could," "anticipates," "believes," "expects," "intends," "may," "plans," "pursue," "views" and similar terms or expressions. We caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•potential recession in the U.S. and our market areas;

•the impacts related to or resulting from bank failures and any uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto;

•increased competition for deposits and related changes in deposit customer behavior;

•failure of risk management controls and procedures;

•the adequacy of the allowance for credit losses;

•risk specific to commercial loans and borrowers;

•changes in the business cycle and downturns in the local, regional, or national economies, including changes in consumer spending and deterioration in the local real estate market, could negatively impact credit and/or asset quality and result in credit losses and increases in the Company's allowance for credit losses;

•declines in commercial real estate values and prices;

•the resurgence of elevated levels of inflation or inflationary pressures in the U.S. and our market areas, and its impact on market interest rates, the economy and credit quality;

•increases in unemployment rates in the U.S. and our market areas;

•deterioration of capital markets, which could adversely affect the value or credit quality of the Company's assets and the availability of funding sources necessary to meet the Company's liquidity needs;

•changes in market interest rates, whether due to the current elevated interest rate environment of future reductions in interest rates, could negatively impact the pricing of our loans and deposits and decrease our net interest income or net interest margin;

•increases in market interest rates could negatively impact bond market values and result in a lower net book value;

•our ability to successfully manage the current rising market interest-rate environment, our credit risk and the level of future non-performing assets and charge-offs;

•potential decreases or growth of assets, deposits, future non-interest expenditures and non-interest income;

•inability to maintain adequate liquidity;

•the inability to raise the necessary capital to fund our operations or to meet minimum regulatory capital levels would restrict our business and operations;

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•material decreases in the amount of deposits we hold, or a failure to grow our deposit base as necessary to help fund our growth and operations;

•our ability to keep pace with technological change or difficulties when implementing new technologies;

•technology-related risk, including technological changes and technology service interruptions or failure could adversely impact the Company's operations and increase technology-related expenditures;

•cybersecurity risk, including cyber incidents or other failures, disruptions or security breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks;

•increasing competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services could adversely affect the Company's competitive position within its market area and reduce demand for the Company's products and services;

•our ability to retain and increase our aggregate assets under management;

•our ability to enter new markets successfully and capitalize on growth opportunities, including the receipt of required regulatory approvals;

•damage to our reputation in the markets we serve;

•risks associated with fraudulent, negligent, or other acts by our customers, employees or vendors;

•exposure to legal claims and litigation;

•our ability to maintain an effective system of disclosure controls and procedures and internal control over financial reporting;

•inability to attract, hire and retain qualified management personnel;

•recent and future changes in laws and regulations that apply to the Company's business and operations, and any additional regulations, or repeals that may be forthcoming as a result thereof, which could cause the Company to incur additional costs and adversely affect the Company's business environment, operations and financial results;

•future regulatory compliance costs, including any increase caused by new regulations imposed by the government;

•our ability to navigate the uncertain impacts of quantitative tightening and current and future governmental monetary and fiscal policies, including the current and future policies of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board");

•changes in tariffs and trade barriers;

•uncertainty regarding U.S. fiscal debt, deficit and budget matters;

•severe weather, natural disasters, acts of war or terrorism, geopolitical instability or other external events;

•the impact of changes in U.S. presidential administrations of Congress;

•our ability to comply with supervisory actions by federal and state banking agencies;

•changes in the scope and cost of FDIC insurance and other coverage;

•changes in accounting and/or auditing standards, policies and practices, as may be adopted or established by the regulatory agencies, FASB, or the Public Company Accounting Oversight Board could negatively impact the Company's financial results; and

•systemic risks associated with the soundness of other financial institutions.

The Company cautions readers that the forward-looking statements in this Form 10-Q reflect numerous assumptions that management believes to be reasonable, but which are inherently uncertain and beyond the Company's control. Forward-looking statements involve a number of risks and uncertainties that could cause the Company's actual results to differ materially from those expressed in, or implied by, the forward-looking statement. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and readers should not place undue reliance on such forward-looking information and statements. Any forward-looking statements in this Form 10-Q are based on information available to the Company as of the date of this Form 10-Q, and the Company undertakes no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

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Risk Management Framework

Management utilizes a comprehensive enterprise risk management framework that enables a coordinated and structured approach for identifying, assessing and managing risks across the Company and provides reasonable assurance that management has the tools, programs, people and processes in place to support informed decision making, anticipate risks before they materialize and maintain the Company's risk profile consistent with its strategic planning, and applicable laws and regulations.

See Part I, Item 1, "Business," under the "Risk Management Framework," of the Company's 2023 Annual Report on Form 10-K, for additional information on the Company's key risk mitigation strategies, and Part I, Item 1A, "Risk Factors," and Item 1C, "Cybersecurity," of the Company's 2023 Annual Report on Form 10-K for numerous factors that could adversely affect the Company's future results of operations and financial condition, and its reputation and business model.

Accounting Policies/Critical Accounting Estimates

As discussed in the Company's 2023 Annual Report on Form 10-K and in this Form 10-Q, the most significant areas in which management applies critical assumptions and estimates are: the ACL for loans and available-for-sale securities, the reserve for unfunded commitments and the impairment review of goodwill.

The Company has not materially changed its significant accounting and reporting policies from those disclosed in the Company's 2023 Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 1, Item (b), "Recent Accounting Pronouncements," to the Company's unaudited consolidated interim financial statements in this Form 10-Q for information regarding recent accounting pronouncements.

Overview

Executive Summary

Net income for the three months ended September 30, 2024, amounted to $10.0 million, or $0.80 per diluted common share, compared to $9.7 million, or $0.79 per diluted common share, for the three months ended September 30, 2023. The increase in net income of $288 thousand was attributable primarily to an increase in non-interest income of $1.7 million, partially offset by an increase in non-interest expense of $1.0 million and a decrease in net interest income of $482 thousand.

Net income for the nine months ended September 30, 2024, amounted to $28.0 million, or $2.26 per diluted common share, compared to $30.2 million, or $2.46 per diluted common share, for the nine months ended September 30, 2023. The decrease in net income of $2.1 million was attributable primarily to a decrease in net interest income of $7.2 million and an increase in non-interest expense of $5.3 million, partially offset by a decrease in the provision for credit losses of $4.7 million and an increase in non-interest income of $5.2 million.

Total assets amounted to $4.74 billion at September 30, 2024, compared to $4.47 billion at December 31, 2023, an increase of $276.8 million, or 6%. The increase was due primarily to an increase in total loans of $291.3 million, or 8%, with growth primarily in commercial real estate and construction loans.

At September 30, 2024, the non-performing loan to total loan ratio amounted to 0.67% compared to 0.32% at December 31, 2023. The increase in non-performing loans resulted primarily from two individually evaluated commercial construction loans which were placed on non-accrual in 2024. The ACL for loans to total loans ratio was 1.65% at both September 30, 2024 and December 31, 2023.

Total deposits amounted to $4.19 billion at September 30, 2024, an increase of $211.9 million, or 5%, compared to December 31, 2023, due primarily to increases in money market and certificate of deposit balances of $85.5 million and $153.6 million, respectively.

Shareholders' equity increased $39.0 million, or 12%, during the nine months ended September 30, 2024, due primarily to an increase in retained earnings of $19.1 million and a decrease in the accumulated other comprehensive loss of $17.1 million.

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Selected Financial Data and Ratios

The following table sets forth selected financial data and ratios for the Company at or for the three-month periods indicated:


	At or for the three months ended
(Dollars in thousands, except per share data)	September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023
Balance Sheet Data
Total cash and cash equivalents	$	88,632		$	199,719		$	147,834		$	56,592		$	225,421
Total investment securities at fair value	631,975			636,838			652,026			668,171			678,932
Total loans	3,858,940			3,768,649			3,654,322			3,567,631			3,404,014
Allowance for credit losses	(63,654)			(61,999)			(60,741)			(58,995)			(57,905)
Total assets	4,742,809			4,773,681			4,624,015			4,466,034			4,482,374
Total deposits	4,189,461			4,248,801			4,106,119			3,977,521			4,060,403
Borrowed funds	59,949			61,785			63,246			25,768			4,290
Subordinated debt	59,736			59,657			59,577			59,498			59,419
Total shareholders' equity	368,109			340,441			333,439			329,117			299,699
Total liabilities and shareholders' equity	4,742,809			4,773,681			4,624,015			4,466,034			4,482,374

Wealth Management
Wealth assets under management	$	1,212,076		$	1,129,147		$	1,105,036		$	1,077,761		$	984,647
Wealth assets under administration	$	302,891		$	267,529		$	268,074		$	242,338		$	211,046

Shareholders' Equity Ratios
Book value per common share	$	29.62		$	27.40		$	26.94		$	26.82		$	24.45
Dividends paid per common share	$	0.24		$	0.24		$	0.24		$	0.23		$	0.23

Regulatory Capital Ratios
Total capital to risk-weighted assets	13.07		%	13.07		%	13.20		%	13.12		%	13.45		%
Tier 1 capital to risk-weighted assets(1)	10.36		%	10.34		%	10.43		%	10.34		%	10.61		%
Tier 1 capital to average assets	8.68		%	8.76		%	8.85		%	8.74		%	8.59		%


Credit Quality Data
Non-performing loans	$	25,946		$	17,731		$	18,527		$	11,414		$	11,656


Non-performing loans to total loans	0.67		%	0.47		%	0.51		%	0.32		%	0.34		%
Non-performing assets to total assets(2)	0.55		%	0.37		%	0.40		%	0.26		%	0.26		%
ACL for loans to total loans	1.65		%	1.65		%	1.66		%	1.65		%	1.70		%
Net (recoveries) charge-offs	$	(7)		$	(130)		$	122		$	15		$	(12)

Income Statement Data
Net interest income	$	38,020		$	36,161		$	35,190		$	36,518		$	38,502
Provision for credit losses	1,332			137			622			2,493			1,752
Total non-interest income	6,140			5,628			5,495			5,547			4,486
Total non-interest expense	29,353			29,029			28,908			28,224			28,312
Income before income taxes	13,475			12,623			11,155			11,348			12,924
Provision for income taxes	3,488			3,111			2,648			3,441			3,225
Net income	$	9,987		$	9,512		$	8,507		$	7,907		$	9,699

Income Statement Ratios
Diluted earnings per common share	$	0.80		$	0.77		$	0.69		$	0.64		$	0.79
Return on average total assets	0.82		%	0.82		%	0.75		%	0.69		%	0.85		%
Return on average shareholders' equity	11.20		%	11.55		%	10.47		%	10.21		%	12.53		%
Net interest margin (tax-equivalent)(3)	3.22		%	3.19		%	3.20		%	3.29		%	3.46		%

_______________________________________________________

(1)Ratio also represents common equity tier 1 capital to risk-weighted assets as of the periods presented.

(2)The Company had no OREO as of the periods presented, and therefore, non-performing loans were the only component of non-performing assets.

(3)Tax-equivalent net interest margin (non-GAAP) 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.

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Results of Operations for the three months ended September 30, 2024 compared to the three months ended September 30, 2023

Unless otherwise indicated, the reported results in this subsection are for the three months ended September 30, 2024, with references to the "prior year period" and "comparable period" being the three months ended September 30, 2023. Average yields are presented on an annualized tax-equivalent basis (non-GAAP).

Net Income

Net income for the three months ended September 30, 2024, amounted to $10.0 million, an increase of $288 thousand, or 3%, compared to the prior year period.

Net Interest Income

Net interest income amounted to $38.0 million, a decrease of $482 thousand, or 1%, compared to the prior year period. The decrease was due primarily to increases in deposit interest expense of $7.7 million and borrowings interest expense of $646 thousand and a decrease in income on other interest-earning assets of $971 thousand, partially offset by an increase in loan interest income of $9.3 million.

The increase in interest expense during the period was attributed primarily to an increase in the cost of funds and changes in deposit mix, while the increase in interest income during the period was due primarily to loan growth and higher market interest rates.

Net Interest Margin

Net interest margin was 3.22% for the three months ended September 30, 2024, compared to 3.46% for the prior year period.

Net interest margin compared to the prior year period was impacted by the following factors:

•Average other interest-earning assets decreased $79.0 million, or 30%, while the yield increased 20 basis points.

•Average investment securities decreased $88.3 million, or 11%, and the tax-equivalent yield decreased 1 basis point.

•Average total loans increased $441.0 million, or 13%, and the tax-equivalent yield increased 38 basis points.

•Average total deposits increased $187.3 million, or 5%, and the yield increased 67 basis points.

•Average borrowed funds increased $56.3 million, and the yield increased 208 basis points.

The decrease in net interest margin over the respective periods was due primarily to an increase in funding costs, partially offset by increases in loan and other interest-earning asset yields in addition to loan growth. Funding costs were impacted primarily by increases in market interest rates, increased competition for deposits and changes in deposit mix as depositors sought higher yielding money market and certificate of deposit products. Loan yields increased from loans originating and repricing at higher market rates.

Interest-rate risk is reviewed in detail in Item 3, "Quantitative and Qualitative Disclosures About Market Risk," below.

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Rate / Volume Analysis

The following table sets forth, on a tax-equivalent basis, the extent to which changes in interest rates and changes in the average balances of interest-earning assets and interest-bearing liabilities have affected interest income and expense during the three months ended September 30, 2024, compared to September 30, 2023. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) volume (change in average portfolio balance multiplied by prior period average rate); and (2) interest-rate (change in average interest-rate multiplied by prior period average balance). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on absolute value to the changes due to volume and the changes due to rate.


			Increase (decrease) due to
(Dollars in thousands)	Net Change		Volume		Rate
Interest income
Other interest-earning assets(1)	$	(971)	$	(1,096)	$	125
Investment securities (tax-equivalent)	(499)		(471)		(28)
Loans and loans held for sale (tax-equivalent)	9,312		5,999		3,313
Total interest-earning assets (tax-equivalent)	7,842		4,432		3,410
Interest expense
Interest checking, savings and money market	3,832		312		3,520
CDs	3,860		2,284		1,576

Borrowed funds	646		598		48
Subordinated debt	—		5		(5)
Total interest-bearing funding	8,338		3,199		5,139
Change in net interest income (tax-equivalent)	$	(496)	$	1,233	$	(1,729)

__________________________________________

(1)Income on other interest-earning assets includes interest on deposits and fed funds sold, and dividends on FHLB stock.

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The following table presents the Company's average balance sheet, net interest income and average rates for the three months ended September 30, 2024 and 2023:

AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS


	Three months ended September 30, 2024						Three months ended September 30, 2023
(Dollars in thousands)	Average Balance		Interest(1)		Average Yield(1)		Average Balance		Interest(1)		Average Yield(1)
Assets:
Other interest-earning assets(2)	$	181,465	$	2,497	5.48	%	$	260,475	$	3,468	5.28	%
Investment securities(3) (tax-equivalent)	731,815		3,945		2.16	%	820,156		4,444		2.17	%
Loans and loans held for sale(4) (tax-equivalent)	3,813,800		53,956		5.63	%	3,372,754		44,644		5.25	%
Total interest-earnings assets (tax-equivalent)	4,727,080		60,398		5.09	%	4,453,385		52,556		4.69	%
Other assets	104,284						82,190
Total assets	$	4,831,364					$	4,535,575

Liabilities and stockholders' equity:
Non-interest checking	$	1,069,130	$	—			$	1,186,243	$	—
Interest checking, savings and money market	2,574,439		13,017		2.01	%	2,491,229		9,185		1.47	%
CDs	651,614		7,564		4.62	%	430,376		3,704		3.41	%

Total deposits	4,295,183		20,581		1.91	%	4,107,848		12,889		1.24	%
Borrowed funds	61,232		674		4.38	%	4,938		28		2.30	%
Subordinated debt(5)	59,689		866		5.81	%	59,372		866		5.84	%
Total funding liabilities	4,416,104		22,121		1.99	%	4,172,158		13,783		1.31	%


Other liabilities	60,524						56,414
Total liabilities	4,476,628						4,228,572
Stockholders' equity	354,736						307,003
Total liabilities and stockholders' equity	$	4,831,364					$	4,535,575

Net interest-rate spread (tax-equivalent)					3.10	%					3.38	%
Net interest income (tax-equivalent)			38,277						38,773
Net interest margin (tax-equivalent)					3.22	%					3.46	%
Less tax-equivalent adjustment			257						271
Net interest income			$	38,020					$	38,502
Net interest margin					3.20	%					3.43	%

________________________________________

(1)Average yields and interest income are presented on a tax-equivalent basis, calculated using a U.S. federal income tax rate of 21% in both 2024 and 2023, based on tax-equivalent adjustments associated with tax exempt loans and investments interest income.

(2)Average other interest-earning assets include interest-earning deposits with banks, federal funds sold and FHLB stock.

(3)Average investments securities are presented at average amortized cost.

(4)Average loans and loans held for sale are presented at amortized cost and include non-accrual loans.

(5)The subordinated debt is net of average deferred debt issuance costs.

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Provision for Credit Losses

The provision for credit losses for each of the three-month periods ended September 30, 2024 and September 30, 2023 are presented below:


	Three months ended				Increase / (Decrease)
(Dollars in thousands)	September 30, 2024		September 30, 2023
Provision for credit losses on loans - collectively evaluated	$	(663)	$	(1,518)	$	855
Provision for credit losses on loans - individually evaluated	2,311		2,512		(201)
Provision for credit losses on loans	1,648		994		654

Provision for unfunded commitments	(316)		758		(1,074)

Provision for credit losses	$	1,332	$	1,752	$	(420)

The provision for credit losses for the three months ended September 30, 2024 was comprised of the following components:

•A negative provision on loans collectively evaluated of $663 thousand resulting from a decrease in qualitative factors, partially offset by loan growth during the period.

•A provision on individually evaluated loans of $2.3 million due primarily to the addition of one individually evaluated commercial relationship with specific reserves of $3.4 million, partially offset by a reduction of $1.2 million in specific reserves resulting from a commercial relationship that experienced improvement in its collateral valuation during the period.

•A negative provision of $316 thousand due to a decrease in off-balance sheet commitments during the period.

The increase in the provision for credit losses on loans of $654 thousand was driven by an increase in the provision for credit losses on loans collectively evaluated of $855 thousand which was due to primarily a reduction of qualitative factors in the current year period which were of lesser magnitude that those in the prior year period.

The decrease in the provision for unfunded commitments for the three months ended September 30, 2024 compared to the prior year period of $1.1 million was driven primarily by a decrease in off-balance sheet commitments during the period.

The ACL to total loans ratio was 1.65% at September 30, 2024 compared to 1.70% at September 30, 2023.

Non-Interest Income

Non-interest income for the three months ended September 30, 2024, amounted to $6.1 million, an increase of $1.7 million compared to the prior year period. The increase in non-interest income was due primarily to increases in gains on equity securities, wealth management fees and deposit and interchange fees.

Non-Interest Expense

Non-interest expense for the three months ended September 30, 2024, amounted to $29.4 million, an increase of $1.0 million, or 4%, compared to the prior year period. The increase in non-interest expense was due primarily to an increase in salaries and employee benefits expense.

Income Taxes

The effective tax rate for the three months ended September 30, 2024, was 25.9%, compared to 25.0% for the three months ended September 30, 2023.

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Results of Operations for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023

Unless otherwise indicated, the reported results in this subsection are for the nine months ended September 30, 2024, with references to the "prior year period," and "comparable period" being the nine months ended September 30, 2023. Average yields are presented on an annualized tax-equivalent basis (non-GAAP).

Net Income

Net income for the nine months ended September 30, 2024, amounted to $28.0 million, a decrease of $2.1 million, or 7%, compared to the prior year period.

Net Interest Income

Net interest income for the nine months ended September 30, 2024, amounted to $109.4 million, a decrease of $7.2 million, or 6%, compared to the prior year period. The decrease was due largely to an increase in deposit interest expense of $28.5 million and decreases in interest and dividend income on investments of $2.5 million and other interest-earning assets income of $2.2 million, partially offset by an increase in loan interest income of $28.0 million. The increase in interest expense during the period was attributed primarily to an increase in the cost of funds and changes in deposit mix, while the increase in loan interest income during the period was due primarily to loan growth and higher market interest rates.

Net Interest Margin

Net interest margin was 3.20% for the nine months ended September 30, 2024, compared to 3.59% for the prior year period.

Net interest margin compared to the prior year period was impacted by the following factors:

•Average other interest-earning assets decreased $74.6 million, or 36%, while the yield increased 54 basis points.

•Average investment securities decreased $142.7 million, or 16%, and the tax-equivalent yield decreased 6 basis points.

•Average total loans increased $429.2 million, or 13%, and the tax-equivalent yield increased 41 basis points.

•Average total deposits increased $122.6 million, or 3%, and the yield increased 89 basis points.

•Average borrowed funds increased $58.2 million, and the yield increased 213 basis points.

The decrease in net interest margin over the respective periods was due primarily to an increase in funding costs, partially offset by increases in loan yields in addition to loan growth. Funding costs were impacted primarily by elevated market interest rates, increased competition for deposits and changes in deposit mix as depositors sought higher yielding money market and certificate of deposit products. Loan yields increased from loans originating and repricing at higher market rates.

Interest-rate risk is reviewed in detail in Item 3, "Quantitative and Qualitative Disclosures About Market Risk," below.

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Rate / Volume Analysis

The following table sets forth, on a tax-equivalent basis, the extent to which changes in interest rates and changes in the average balances of interest-earning assets and interest-bearing liabilities have affected interest income and expense during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (i) volume (change in average portfolio balance multiplied by prior year average rate); and (ii) interest rate (change in average interest rate multiplied by prior year average balance). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on absolute value to the changes due to volume and the changes due to rate.


			Increase (decrease) due to
(Dollars in thousands)	Net Change		Volume		Rate
Interest income
Other interest-earning assets(1)	$	(2,227)	$	(2,989)	$	762
Investment securities (tax-equivalent)	(2,774)		(2,331)		(443)
Loans and loans held for sale (tax-equivalent)	28,029		17,273		10,756
Total interest-earning assets (tax-equivalent)	23,028		11,953		11,075

Interest expense
Interest checking, savings and money market	16,584		885		15,699
CDs	11,873		5,915		5,958

Borrowed funds	1,962		1,833		129
Subordinated debt	—		14		(14)
Total interest-bearing funding	30,419		8,647		21,772
Change in net interest income (tax-equivalent)	$	(7,391)	$	3,306	$	(10,697)

__________________________________________

(1)Income on other interest-earning assets includes interest on deposits with banks, federal funds sold, and dividends on FHLB stock.

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The following table presents the Company's average balance sheet, net interest income and average rates for the nine months ended September 30, 2024 and 2023:

AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS


	Nine months ended September 30, 2024						Nine months ended September 30, 2023
(Dollars in thousands)	Average Balance		Interest(1)		Average Yield(1)		Average Balance		Interest(1)		Average Yield(1)
Assets:
Other interest-earning assets(2)	$	130,663	$	5,366	5.49	%	$	205,276	$	7,593	4.95	%
Investment securities(3) (tax-equivalent)	748,714		12,159		2.17	%	891,405		14,933		2.23	%
Loans and loans held for sale(4) (tax-equivalent)	3,710,526		154,282		5.55	%	3,281,357		126,253		5.14	%
Total interest-earnings assets (tax-equivalent)	4,589,903		171,807		5.00	%	4,378,038		148,779		4.54	%
Other assets	97,714						87,210
Total assets	$	4,687,617					$	4,465,248

Liabilities and stockholders' equity:
Non-interest checking	$	1,058,022	$	—			$	1,250,672	$	—
Interest checking, savings and money market	2,507,845		36,754		1.96	%	2,406,120		20,170		1.13	%
CDs	600,869		20,271		4.51	%	387,382		8,398		2.90	%

Total deposits	4,166,736		57,025		1.83	%	4,044,174		28,568		0.94	%
Borrowed funds	62,453		2,032		4.35	%	4,253		70		2.22	%
Subordinated debt(5)	59,610		2,600		5.82	%	59,293		2,600		5.85	%
Total funding liabilities	4,288,799		61,657		1.92	%	4,107,720		31,238		1.02	%
Other liabilities	61,096						53,407
Total liabilities	4,349,895						4,161,127
Stockholders' equity	337,722						304,121
Total liabilities and stockholders' equity	$	4,687,617					$	4,465,248

Net interest-rate spread (tax-equivalent)					3.08	%					3.52	%
Net interest income (tax-equivalent)			110,150						117,541
Net interest margin (tax-equivalent)					3.20	%					3.59	%
Less tax-equivalent adjustment			779						975
Net interest income			$	109,371					$	116,566
Net interest margin					3.18	%					3.56	%

_______________________________________

(2)Average other interest-earning assets include interest-earning deposits with banks, federal funds sold and FHLB stock.

(3)Average investments securities are presented at average amortized cost.

(4)Average loans and loans held for sale are presented at amortized cost and include non-accrual loans.

(5)The subordinated debt is net of average deferred debt issuance costs.

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Provision for Credit Losses

The provision for credit losses for each of the nine-month periods ended September 30, 2024 and September 30, 2023 are presented below:


	Nine months ended				Increase / (Decrease)
(Dollars in thousands)	September 30, 2024		September 30, 2023
Provision for credit losses on loans - collectively evaluated	$	(476)	$	3,052	$	(3,528)
Provision for credit losses on loans - individually evaluated	5,120		2,303		2,817
Provision for credit losses on loans	4,644		5,355		(711)

Provision for unfunded commitments	(2,553)		1,401		(3,954)

Provision for credit losses	$	2,091	$	6,756	$	(4,665)

The provision for credit losses for the nine months ended September 30, 2024 was comprised of the following components:

•A negative provision on loans collectively evaluated of $476 thousand resulting from a decrease in qualitative factors, partially offset by loan growth during the period.

•A provision on individually evaluated loans of $5.1 million due primarily to the addition of two individually evaluated commercial relationships with cumulative reserves of $4.8 million at September 30, 2024.

•A negative provision of $2.6 million due to a decrease in off-balance sheet commitments during the period.

The decrease in the provision for credit losses on loans of $711 thousand was driven by a decrease in the provision for credit losses on loans collectively evaluated of $3.5 million which was due to primarily a reduction of qualitative factors, partially offset by an increase in the provision for credit losses on loans individually evaluated of $2.8 million due to the addition of two individually evaluated commercial relationships during the period, as noted above.

The decrease in the provision for unfunded commitments for the three months ended September 30, 2024 compared to the prior year period of $4.0 million was driven primarily by a decrease in off-balance sheet commitments during the period.

The ACL to total loans ratio was 1.65% at September 30, 2024 compared to 1.70% at September 30, 2023.

Non-Interest Income

Non-interest income for the nine months ended September 30, 2024, amounted to $17.3 million, an increase of $5.2 million, or 43%, compared to the prior year period. Non-interest income in the prior year period included losses on sales of debt securities of $2.4 million. Excluding this item, non-interest income for the nine months ended September 30, 2024 increased 19% due primarily to increases in net gains on equity securities, wealth management fees and income on bank-owned life insurance.

Non-Interest Expense

Non-interest expense for the nine months ended September 30, 2024, amounted to $87.3 million, an increase of $5.3 million, or 6%, compared to the prior year period. Non-interest expense in the prior year period was impacted by the receipt of $3.6 million in Employee Retention Credits which the Company recognized as a reduction to salary and benefits expense. Excluding this item, non-interest expense for the nine months ended September 30, 2024 increased 2%, compared to the prior year period.

Income Taxes

The effective tax rate for the nine months ended September 30, 2024 was 24.8% compared to 24.4% for the nine months ended September 30, 2023.

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Financial Condition at September 30, 2024 compared to December 31, 2023

Total assets amounted to $4.74 billion at September 30, 2024, compared to $4.47 billion at December 31, 2023, representing an increase of $276.8 million, or 6%.

Cash and cash equivalents

Cash and cash equivalents amounted to $88.6 million at September 30, 2024, compared to $56.6 million at December 31, 2023, representing an increase of $32.0 million. The increase was due primarily to increases in deposits and proceeds from borrowed funds, partially offset by loan growth. At September 30, 2024, cash and cash equivalents amounted to 2% of total assets compared to 1% at December 31, 2023.

Investments

At September 30, 2024, the fair value of the Company's investment securities portfolio amounted to $632.0 million, a decrease of $36.2 million, or 5%, since December 31, 2023. The decrease was attributable primarily to principal pay-downs, calls and maturities during the nine months ended September 30, 2024, the proceeds of which were used to fund loan growth, partially offset by a reduction in the portfolio’s unrealized loss. At September 30, 2024 and December 31, 2023, the investment securities portfolio at fair value represented 13% and 15% of total assets, respectively, and was comprised primarily of debt securities, classified as available-for-sale, with a small portion of the portfolio invested in equity securities.

During the nine months ended September 30, 2024, the Company had no purchases of debt securities, sales of $212 thousand and principal pay-downs, calls and maturities of $59.9 million.

Net unrealized losses on the Company's debt securities portfolio amounted to $80.8 million at September 30, 2024, compared to $102.9 million at December 31, 2023, a decrease of $22.1 million, or 21%, which resulted from lower term interest rates.

The mix of investment securities remained relatively unchanged at September 30, 2024 compared to December 31, 2023. The effective duration of the debt securities portfolio at September 30, 2024 was approximately 4.9 years compared to 5.1 years at December 31, 2023.

Loans

The Company specializes in lending to business entities, non-profit organizations, professional practices and individuals and manages its loan portfolio to avoid concentration by industry, relationship size and source of repayment to lessen its credit risk exposure. The Company's primary market area remains focused within Massachusetts and New Hampshire and its primary lending focus is on the development of high-quality, long-term commercial relationships achieved through active business development efforts, strong community involvement and focused marketing strategies.

As of September 30, 2024, total loans amounted to $3.86 billion, an increase of $291.3 million, or 8%, since December 31, 2023. At September 30, 2024 and December 31, 2023, total commercial loans amounted to 86% of total loans.

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The following table sets forth the loan balances by loan portfolio segment and the percentage of each segment to total loans as of the dates indicated:


	September 30, 2024				December 31, 2023
(Dollars in thousands)	Amount		Percent		Amount		Percent
Commercial real estate owner-occupied	$	660,063	17	%	$	619,302	17	%
Commercial real estate non owner-occupied	1,579,827		41	%	1,445,435		41	%

Commercial and industrial	415,642		11	%	430,749		12	%
Commercial construction	674,434		17	%	585,113		16	%

Total commercial loans	3,329,966		86	%	3,080,599		86	%
Residential mortgages	424,030		11	%	393,142		11	%
Home equity	95,982		3	%	85,375		3	%
Consumer	8,962		—	%	8,515		—	%
Total retail loans	528,974		14	%	487,032		14	%
Total loans	3,858,940		100	%	3,567,631		100	%
Allowance for credit losses	(63,654)				(58,995)
Net loans	$	3,795,286			$	3,508,636

As of or for the nine months ended September 30, 2024:

•Commercial real estate owner-occupied loans increased $40.8 million, or 7%.

•Commercial real estate non owner-occupied loans increased $134.4 million, or 9%.

•The composition of owner and non owner-occupied loans within the commercial real estate segment has remained relatively consistent compared to December 31, 2023. Commercial real estate loans collectively make up 58% of the total loan portfolio and were comprised of approximately 29% in owner-occupied loans and 71% in non owner-occupied loans. Growth since the prior period was primarily from continued customer demand and business development efforts.

◦Non owner-occupied commercial real estate loans were comprised of approximately 28% multi-family, 16% 1-4 family, 11% office, and 12% retail. All other categories fell below 10% of total non owner-occupied commercial real estate loans.

◦Non owner-occupied commercial real estate loans secured by office buildings amounted to 5% of total loans and were located mainly in suburban areas and were modest in physical size.

◦Non owner-occupied commercial real estate loans secured by retail amounted to 5% of total loans and consisted primarily of local strip-mall plazas and not large shopping centers or mall complexes.

•Commercial and industrial loans decreased $15.1 million, or 4%.

•Commercial construction loans increased $89.3 million, or 15%, due to continued growth driven primarily by residential development projects to meet the strong demand for housing in our market area, partially offset by pay downs, payoffs, and transfer of construction loans to the permanent commercial real estate segments.

◦The composition of the commercial construction segment has remained relatively consistent compared to December 31, 2023.

◦Commercial construction loans were comprised of approximately 28% multi-family, 18% residential condominiums, 13% land approved for development and 13% single residential lots. All other collateral categories each fell below 10% of total commercial construction loans.

At September 30, 2024, commercial loan balances participated out to various banks amounted to $76.1 million, compared to $69.8 million at December 31, 2023. These commercial loan balances participated out to other institutions are not carried as assets on the Company's financial statements. 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 $157.5 million and $126.6 million at September 30, 2024 and December 31, 2023, respectively.

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Asset Quality

The following table sets forth information regarding the Company's loan portfolio asset quality as of the dates indicated:


(Dollars in thousands)	September 30, 2024			December 31, 2023
Non-performing loan summary:
Commercial real estate owner-occupied	$	2,489		$	2,683
Commercial real estate non owner-occupied	2,776			2,686
Commercial and industrial	3,851			4,262
Commercial construction	14,773			—
Residential mortgages	1,796			1,526
Home equity	261			257
Consumer	—			—



Total non-performing loans	$	25,946		$	11,414





Total adversely classified loans	$	54,824		$	56,650

Total loans	$	3,858,940		$	3,567,631

Adversely classified loans to total loans	1.42		%	1.59		%
Loans 60-89 days past due and still accruing to total loans	0.02		%	—		%
Non-performing loans to total loans	0.67		%	0.32		%
Non-performing assets to total assets	0.55		%	0.26		%
Allowance for credit losses for loans	$	63,654		$	58,995
Allowance for credit losses for loans to non-performing loans	245.33		%	516.87		%
Allowance for credit losses for loans to total loans	1.65		%	1.65		%

Non-performing loans that were not adversely classified amounted to $27 thousand and $30 thousand at September 30, 2024 and December 31, 2023, respectively, and represented the guaranteed portion of SBA loans.

The increase in non-performing loans from December 31, 2023 to September 30, 2024 was attributable primarily to two individually evaluated commercial construction loans, which were placed on non-accrual in the first and third quarters of 2024.

•The commercial construction loan that was placed on non-accrual during the first quarter of 2024 was secured by a multi-family property, had an outstanding balance of $7.9 million and a specific reserve of $1.3 million at September 30, 2024. Due to the on-going construction and improvement in the valuation of the collateral property, specific reserves were decreased by $1.2 million during the three months ended September 30, 2024.

•The commercial construction loan that was placed on non-accrual during the third quarter of 2024 was a participation loan originated by another local institution secured by a lab and office space building. The loan had an outstanding balance of $6.9 million and a specific reserve of $3.4 million at September 30, 2024. The company had no other significant exposure to loans secured by lab space at September 30, 2024.

The Company had no OREO at September 30, 2024 and December 31, 2023, and therefore non-performing loans were the only component of non-performing assets.

ACL for Loans

The estimate of credit loss incorporates management judgements and assumptions including the estimated life of the loans, adjustments for current conditions and reasonable and supportable economic forecasts. Management periodically reviews and updates its assumptions based on changing circumstances.

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ACL for loans activity

The following table summarizes the activity in the ACL for loans for the periods indicated:


	Nine months ended September 30,
(Dollars in thousands)	2024			2023
Balance at beginning of year	$	58,995		$	52,640

Provision for credit losses for loans	4,644			5,355

Recoveries of charged-off loans:
Commercial real estate owner-occupied	—
Commercial real estate non owner-occupied	—

Commercial and industrial	301			298
Commercial construction	—			—
Residential mortgages	—			—
Home equity	5			8
Consumer	17			13
Total recovered	323			319

Charged-off loans:
Commercial real estate owner-occupied	—			—
Commercial real estate non owner-occupied	—			—

Commercial and industrial	249			383
Commercial construction	—			—
Residential mortgages	—			—
Home equity	—			—
Consumer	59			26
Total charged-off	308			409

Net loans (recovered) charged-off	(15)			90
Ending balance	$	63,654		$	57,905
Annualized net loans (recovered) charged-off to average loans outstanding	—		%	—		%

Reserve for unfunded commitments

The reserve for unfunded commitments is classified within "Other liabilities" on the Company's Consolidated Balance Sheets. The estimate of credit loss incorporates the same loss factors as on-balance sheet loans with added assumptions for both the likelihood and amount of funding over the estimated life of non-cancellable commitments.

The Company's reserve for unfunded commitments amounted to $4.6 million as of September 30, 2024 and $7.1 million at December 31, 2023. The decreases in the reserve for unfunded commitments resulted primarily from a decrease in the Company's off-balance sheet commercial construction commitments during the nine months ended September 30, 2024.

Based on the foregoing, management believes that the Company's ACL for loans and reserve for unfunded commitments is adequate as of September 30, 2024.

Deposits

As of September 30, 2024, total deposits amounted to $4.19 billion, an increase of $211.9 million, or 5%, since December 31, 2023. The increase was driven primarily by increases in money market account balances of $85.5 million, or 6%, and CD account balances of $153.6 million, or 29%, as customers sought higher yielding deposit products.

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The following table sets forth the deposit balances by certain categories and the percentage of each category to total deposits as of the dates indicated:


	September 30, 2024				December 31, 2023
(Dollars in thousands)	Amount		Percent		Amount		Percent


Checking	$	1,746,474	42	%	$	1,758,641	44	%


Money markets and savings	1,768,261		42	%	1,697,804		43	%
CDs	674,726		16	%	521,076		13	%


Deposits	$	4,189,461	100	%	$	3,977,521	100	%

Total customer deposits include reciprocal balances from checking, money market deposits and CDs received from participating banks in nationwide deposit networks as a result of our customers electing to participate in Company offered programs which allow for third-party enhanced FDIC deposit insurance. Under this enhanced FDIC deposit insurance program, the equivalent of the customers' original deposited funds are reciprocated back through the network to the Company and are carried within the appropriate category under deposits. The Company's balances in these reciprocal enhanced FDIC deposit insurance products were $875.3 million and $835.0 million, at September 30, 2024 and December 31, 2023, respectively. The increase in balance reflects primarily an increase in customer demand for enhanced FDIC deposit insurance products.

As of September 30, 2024, uninsured deposits amounted to 34% of total deposits. Additional capacity to utilize enhanced FDIC deposit insurance products noted in the preceding paragraph exceeds the Company's total deposits balance at September 30, 2024.

Borrowed Funds

The Company had borrowed funds outstanding of $59.9 million at September 30, 2024, compared to $25.8 million at December 31, 2023. Borrowed funds at September 30, 2024 were primarily comprised of advances from the FRB's BTFP totaling $51.4 million. The remaining balance consisted of term advances related to specific lending projects funded under community development programs through the FHLB and NH BFA.

See also "Liquidity," below, for additional information on borrowing capacity.

Shareholders' Equity

Total shareholders' equity amounted to $368.1 million at September 30, 2024, compared to $329.1 million at December 31, 2023, an increase of $39.0 million, or 12%. The increase was due primarily to an increase in retained earnings of $19.1 million, and a decrease in the accumulated other comprehensive loss of $17.1 million.

For the nine months ended September 30, 2024, the Company declared cash dividends of $8.9 million and shareholders utilized the dividend reinvestment portion of the Company's dividend reinvestment and direct stock purchase plan to purchase aggregate shares of the Company's common stock amounting to 44,459 shares totaling $1.2 million.

On October 15, 2024, the Company announced a quarterly dividend of $0.24 per share to be paid on December 2, 2024 to shareholders of record as of the close of business on November 11, 2024.

Derivatives and Hedging

Derivatives designated as hedging instruments

As of September 30, 2024 and December 31, 2023, the Company had three pay fixed, receive float, interest rate swap agreements with a cumulative notional value of $100.0 million, of which $50.0 million matures in June 2025 and the other $50.0 million matures in September of 2025. Under these interest rate swap agreements, the Company pays a weighted average fixed interest rate of 4.68% and receives SOFR. At September 30, 2024 At September 30, 2024 and December 31, 2023, the fair value of these interest rate swap agreements, which were carried on the Company's Consolidated Balance Sheets, represented liabilities of $702 thousand and $760 thousand, respectively.

Derivatives not subject to hedge accounting

The notional value of back-to-back interest-rate swaps with customers and counterparties amounted to $7.3 million at

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September 30, 2024 compared to $7.5 million at December 31, 2023. The fair value of assets and corresponding liabilities associated with these swaps and carried on the Company's Consolidated Balance Sheets was $481 thousand at September 30, 2024 compared to $630 thousand at December 31, 2023.

Risk Participation Agreements

The notional value of RPAs sold amounted to $46.5 million at both September 30, 2024 and December 31, 2023. The fair value of RPAs, carried on the Company's Consolidated Balance Sheets as a liability, was $55 thousand at September 30, 2024 compared to $65 thousand at December 31, 2023.

Liquidity

Liquidity is the ability to meet cash needs arising from, among other things, fluctuations in loans, investments, deposits and borrowings. Liquidity management is the coordination of activities so that cash needs are anticipated and met readily and efficiently. The Company's liquidity is maintained by projecting cash needs, balancing maturing assets with maturing liabilities, monitoring various liquidity ratios, monitoring deposit flows, maintaining cash flow within the investment portfolio, and maintaining wholesale funding resources.

At September 30, 2024, the Bank had the capacity to borrow additional funds from the FHLB and FRB of up to approximately $840.0 million and $300.0 million, respectively.

Management believes that the Company has adequate liquidity to meet its obligations. However, if general economic conditions, potential recession in the U.S. and our market areas, uncertainty in the banking industry, changes in interest rates, increased competition for deposits and related changes in deposit customers behavior, or other events, cause these sources of external funding to become restricted or are eliminated, the Company may not be able to raise adequate funds or may incur substantially higher funding costs or operating restrictions in order to raise the necessary funds to support the Company's operations and growth.

Capital Resources

The principal cash requirement of the Company is the payment of interest on subordinated debt and the payment of dividends on our common stock. The Company's Board of Directors may approve cash dividends on a quarterly basis after careful analysis and consideration of various factors, including our capital position, economic conditions, growth rates, earnings performance and projections as well as strategic initiatives and related regulatory capital requirements.

The Company's primary source of cash is dividends paid by the Bank, which are limited to the Bank's net income for the current year plus its retained net income for the prior two years.

The Company's total capital and tier 1 capital to risk-weighted assets amounted to 13.07% and 10.36%, respectively, at September 30, 2024, compared to 13.12% and 10.34%, respectively, at December 31, 2023. Tier 1 capital to average assets amounted to 8.68% at September 30, 2024, compared to 8.74% at December 31, 2023.

Wealth Management

Wealth assets under management and wealth assets under administration are not carried as assets on the Company's Consolidated Balance Sheets. The Company provides a wide range of wealth management and wealth services, including investment management, trust and trustee services, brokerage, annuities and 401(k) administration.

Wealth assets under management and wealth assets under administration amounted to $1.21 billion and $302.9 million, respectively, at September 30, 2024, representing increases of $134.3 million, or 12%, and $60.6 million, or 25%, respectively, compared to December 31, 2023. The increase in assets under management and administration resulted primarily from an increase in market values.

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Item 3 -Quantitative and Qualitative Disclosures About Market Risk

Interest Margin Sensitivity Analysis

Refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of the Company's 2023 Annual Report on Form 10-K for further information on the Company's net interest income and net interest margin sensitivity under different interest rate and yield curve scenarios as well as different asset and liability mix scenarios.

The tables below summarize the simulated results at September 30, 2024 and December 31, 2023 and compare the percentage change in net interest income for each interest rate scenario to the rates unchanged scenario. The results in the tables below assume a static balance sheet and the net interest income results are for a 24-month period. Table 1 assumes all interest rates are ramped evenly over 12 months. Table 2 differs from table 1 by simulating that interest rate changes for non-maturity deposits are ramped evenly over 24 months instead of 12 months.

Table 1 - Interest Rate Changes – All rates ramped over 12 months


	September 30, 2024		December 31, 2023


Scenarios	Percentage Change		Percentage Change
Rates rise 400 basis points	(14.08)	%	(11.71)	%
Rates rise 200 basis points	(6.79)	%	(5.71)	%

Rates unchanged	—	%	—	%
Rates decline 200 basis points	4.88	%	3.26	%

Table 2 - Interest Rate Changes – All rates ramped over 12 months,

except for non-maturity deposits which are ramped over 24 months


	September 30, 2024		December 31, 2023


Scenarios	Percentage Change		Percentage Change
Rates rise 400 basis points	(5.48)	%	(3.11)	%
Rates rise 200 basis points	(2.64)	%	(1.60)	%

Rates unchanged	—	%	—	%
Rates decline 200 basis points	0.92	%	(0.54)	%

The change in results at September 30, 2024 compared to December 31, 2023 were impacted primarily by an increase in interest bearing liabilities. Over the 24-month period, the net result was lower estimated net interest income in increased interest rate scenarios and higher estimated net interest income in decreased interest rate scenarios.

The results in the tables above are subject to various assumptions as reported in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of the Company's 2023 Annual Report on Form 10-K. Refer to heading "Results of Operations" contained within Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q for further discussion of margin.

Item 4 -Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures and internal controls designed to ensure that the information required to be disclosed in reports that it files or furnishes to the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

The Company carried out an evaluation as of the end of the period covered by this Form 10-Q under the supervision and with the participation of the Company's management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act

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Rule 13a-15(b). Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective as of September 30, 2024.

Changes in Internal Control over Financial Reporting

There have been no significant changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (i.e., the three months ended September 30, 2024) that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1 -Legal Proceedings

There are no material pending legal proceedings to which the Company or its subsidiaries are a party or to which any of its property is subject, other than ordinary routine litigation incidental to the business of the Company. Management does not believe resolution of any present litigation will have a material adverse effect on the business, consolidated financial condition or results of operations of the Company.

Item 1A -Risk Factors

Management believes that there have been no material changes in the Company's risk factors as reported in Part I, Item 1A, "Risk Factors," of the 2023 Annual Report on Form 10-K. The risks described in our 2023 Annual Report on Form 10-K and our subsequent quarterly reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2 -Unregistered Sales of Equity Securities and Use of Proceeds

The following table represents information with respect to repurchases of common stock made by the Company during the three months ended September 30, 2024:



	Total number of shares repurchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Announced	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July	6	$	23.98	—	—
August	—	—		—	—
September	1,617	31.96		—	—

________________________________

(1)Amounts include shares repurchased that were not part of a publicly announced repurchase plan or program. These shares were owned and tendered by employees as payment for taxes upon vesting of restricted stock (net settlement of shares).

Item 3 -Defaults upon Senior Securities

Not Applicable.

Item 4 -Mine Safety Disclosures

Not Applicable.

Item 5 -Other Information

During the three months ended September 30, 2024, none of the directors or officers of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.

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Item 6 -Exhibits

EXHIBIT INDEX

_____________

Exhibit No. Description

3.1.1 Amended and Restated Articles of Organization of the Company, as amended as of June 4, 2013 incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed June 10, 2013 (File No. 001-33912).

3.1.2 Articles of Amendment to the Restated Articles of Organization of the Company, as amended as of May 16, 2017 incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed May 18, 2017 (File No. 001-33912).

3.1.3 Articles of Amendment to the Amended and Restated Articles of Organization of the Company, as amended as of January 5, 2018, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed January 11, 2018 (File No. 001-33912).

3.2 Second Amended and Restated Bylaws of the Company, as amended as of January 19, 2021, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on January 22, 2021 (File No. 001-33912).

10.1 Amendment No. 1 to the Enterprise Bank Supplemental Executive Retirement and Deferred Compensation Plan 2024 Addendum, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 18, 2024 (File No. 001-33912).

31.1* Certification of Principal Executive Officer under Securities Exchange Act Rule 13a-14(a).

31.2* Certification of Principal Financial Officer under Securities Exchange Act Rule 13a-14(a).

32* Certification of Principal Executive Officer and Principal Financial Officer under 18 U.S.C. § 1350 Furnished Pursuant to Securities Exchange Act Rule 13a-14(b).

101* The following materials from Enterprise Bancorp, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 were formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023; (ii) Consolidated Statements of Income for the three and nine months ended September 30, 2024 and 2023; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023; (iv) Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2024 and 2023; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023; and (vi) Notes to Unaudited Consolidated Interim Financial Statements.

104* The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 has been formatted in Inline XBRL and contained in Exhibit 101.

____________________

*Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ENTERPRISE BANCORP, INC.

DATE:	November 5, 2024	By:	/s/ Joseph R. Lussier
			Joseph R. Lussier
			Executive Vice President, Treasurer
			and Chief Financial Officer

Enterprise Bancorp - 10-Q quarterly report FY2024 Q3

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