Management's discussion and analysis should be read in conjunction with the
Company's unaudited consolidated interim financial statements and notes thereto
contained in this Quarterly Report on Form 10-Q ("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, 2019 (the
"2019 Annual Report on Form 10-K").

               Special Note Regarding Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements concerning plans,
objectives, future events or performance and assumptions and other statements.
These statements are not statements of historical fact. 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.

Various statements contained in Item 2 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Item 3 - "Quantitative and
Qualitative Disclosures About Market Risk" of this Form 10-Q are forward-looking
statements, including, but not limited to statements related to management's
views on:

• the banking environment and the economy;

• the impact of the COVID-19 pandemic ("pandemic") and the Company's

participation in and execution of government programs related to the

pandemic;

• competition and market expansion opportunities;

• the interest-rate environment, credit risk and the level of future

non-performing assets and charge-offs;

• potential asset and deposit growth, future non-interest expenditures and

non-interest income growth;




• expansion strategy; and


• borrowing capacity.



The Company cautions readers that such forward-looking statements 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. 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. The following important factors, among others, could
cause the Company's results for subsequent periods to differ materially from
those expressed in any forward-looking statement made herein:

(i) failure of risk management controls and procedures;

(ii) adequacy of the allowance for loan losses;

(iii) risk specific to commercial loans and borrowers;

(iv) 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 loan losses;

(v) deterioration of securities markets 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;

(vi) changes in interest rates could negatively impact net interest income;

(vii) liquidity risks;

(viii) technology-related risk, including technological changes and technology

service interruptions or failure could adversely impact the Company's

operations and increase technology-related expenditures;

(ix) cybersecurity risk including security breaches and identity theft could

impact the Company's reputation, increase regulatory oversight and impact


     the financial results of the Company;


(x)  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;

(xi) our ability to retain and increase our aggregate assets under management;

(xii) our ability to enter new markets successfully and capitalize on growth

opportunities, including the receipt of required regulatory approvals;

(xiii) damage to our reputation in the markets we serve;

(xiv) exposure to legal claims and litigation;


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(xv) the inability to raise capital, on terms favorable to us, could cause us to

fall below regulatory minimum capital adequacy levels and consequently

restrict our business and operations;

(xvi) 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, could cause the Company to incur

additional costs and adversely affect the Company's business environment,

operations and financial results;

(xvii) future regulatory compliance costs, including any increase caused by new

regulations imposed by the government's current administration;

(xviii) 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

(xix) the risks and uncertainties described in the documents that the Company

files or furnishes to the SEC, including those discussed under Part II,

Item1A, "Risk Factors," of this Form 10-Q and Item 1A, "Risk Factors," of

the Company's 2019 Annual Report on Form 10-K, which could have a material

adverse effect on the Company's business, financial condition and results


      of operations.



Therefore, the Company cautions readers not to place undue reliance on any such forward-looking information and statements.


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                                    Overview

Executive Summary

Net income for the three months ended June 30, 2020 amounted to $7.3 million, or
$0.61 per diluted share, compared to $7.8 million, or $0.66 per diluted share,
for the three months ended June 30, 2019. Net income for the six months ended
June 30, 2020 amounted to $11.3 million, or $0.95 per diluted share, compared to
$16.5 million, or $1.39 per diluted share, for the six months ended June 30,
2019.

The net income results for the quarter and year-to-date June 30, 2020, compared
to the same respective 2019 periods, were impacted by the ongoing pandemic and
the Company's participation in the Small Business Administration ("SBA")
Paycheck Protection Program ("PPP"). The provision for loan losses increased as
the Company added general reserves to address economic weakness caused by the
pandemic and its impact on credit quality in the loan portfolio. The increase
over the prior year was larger in the first quarter. Net interest income
increased, in particular in the second quarter benefiting from first quarter
loan growth and from second quarter PPP loan income, partially offset by a lower
net interest margin since the comparable periods. Interest rates have declined
significantly since late 2019, including an extraordinary emergency federal
funds rate cut in mid-March 2020. Operating expenses increased for the quarter
and year-to-date ended June 30, 2020 compared to the prior year, due primarily
to the Company's strategic growth initiatives, and also from higher salary and
benefit costs related to the pandemic, including our team members' PPP loan
origination effort in the second quarter. These items are discussed in more
detail below and in the "Results of Operations."

Total assets, total loans, and customer deposits as of June 30, 2020 have
increased by 27%, 32%, and 26%, respectively, compared to June 30, 2019. Our
growth figures have been significantly impacted by both the outstanding PPP
loans and the pandemic in general. Excluding PPP loans, total loans have
increased by 11% compared to June 30, 2019. Deposit growth has been positively
and significantly impacted by the PPP, stimulus checks and the pandemic, as the
PPP loan monies were distributed into deposit accounts and many customers are
proactively building liquidity in response to the economic uncertainty caused by
the pandemic. We anticipate that as the majority of PPP loans are forgiven or
paid off, which we believe will occur principally over the next 12 months, and
as customers spend down their PPP loan funds, this will result in a reduction in
both loans and deposits.

Overall, the Company strategically operates with a long-term mindset that is
focused on organic growth and supporting such growth by continually investing in
our people, products, services, technology, digital transformation, and both new
and existing branches. Our 25th branch located in Lexington, Massachusetts
opened in the first quarter and our 26th branch located in North Andover,
Massachusetts is anticipated to open in late 2020 or early 2021.

COVID-19 Pandemic



The pandemic and its effects have impacted the Company's financial condition and
results of operations, as discussed in this Management Discussion & Analysis.
Management underscores that the pandemic may continue to impact the Company's
financial condition and results of operations in the coming quarters,
particularly due the economic uncertainty and its potential impact on interest
rates, organic growth opportunities and the quality of the loan portfolio.
However, the long-term impact of the pandemic on the Company cannot be
reasonably estimated at this time.

The Company activated its pandemic response team in January in response to the
emergence of the pandemic and has continued to adjust its operations as the
pandemic has evolved. For updated information on business and operating changes
impacting customers, please visit our website at www.Enterprisebanking.com.

Paycheck Protection Program



The PPP was established by the Coronavirus Aid, Relief, and Economic Security
Act (the "CARES Act") and implemented by the SBA with support from the
Department of the Treasury. The PPP is a federally-guaranteed, low-interest rate
loan program that is designed to provide a direct incentive for small businesses
to keep workers on the payroll. Businesses may use PPP loan funds to pay up to
eight weeks of payroll costs as well as to cover other eligible business
expenses. PPP loans may be partially or fully forgiven by the SBA if the funds
are used for eligible expenses during the relevant forgiveness period and the
borrower meets the employee retention criteria. The PPP loans will carry an
interest rate of 1% to be paid by either the SBA, in the event of forgiveness,
or by the borrower for the term of the loan, which may be either 2 or 5 years.
The PPP loans that the SBA approved on or after June 5, 2020 will have a
maturity date of 5 years. Payments for PPP loans are deferred until the SBA
issues a forgiveness decision or ten months after the end of the forgiveness
period if the borrower fails to apply for forgiveness.


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All PPP loans are fully guaranteed by the SBA and are included in total loans outstanding. As of June 30, 2020, the Company had funded 2,636 PPP loans totaling $505.6 million.



In addition to generating interest income, the SBA pays a lender's fees for
processing PPP loans. At June 30, 2020, the Company has recorded $17.0 million
in PPP-related SBA processing fees "PPP fees" and is accreting these fees into
interest income over the life of the applicable loans. If a PPP loan is forgiven
or paid off before maturity, the remaining deferred fee is realized into
interest-income at that time. During the quarter, the Company recognized $1.6
million in PPP fees.

Credit Quality

The Company determined its allowance for loan loss reserves using the incurred
loss methodology. The allowance for loan losses to total loan ratio was 1.33% at
June 30, 2020, compared to 1.31% at December 31, 2019 and 1.42% at June 30,
2019. Excluding PPP loans, which are fully guaranteed by the SBA, the allowance
for loan losses to total loan ratio was 1.58% at June 30, 2020.

Non-performing assets to total assets amounted to 0.53% at June 30, 2020,
compared to 0.46% at December 31, 2019 and 0.39% at June 30, 2019. Excluding PPP
loans, the non-performing assets to total assets ratio was 0.60% at June 30,
2020.

The long-term impact of the pandemic on the credit quality of our loan portfolio
cannot be reasonably estimated at this time. It will likely be influenced by a
variety of factors including the depth and duration of the economic contraction
and the extent of financial support and fiscal stimulus by the U.S. government.
We will continue to closely monitor the effect on credit quality across all
industry sectors in our diversified loan portfolio as the results unfold in
future quarters.

Management has been proactive with customers since the onset of the pandemic and
granted short term payment deferrals to those requesting financial assistance as
a result of the pandemic's impact. As of June 30, 2020, short term payment
deferrals were granted on 1,130 loans amounting to $594.8 million, or 22% of the
Company's loan portfolio, excluding PPP loans. Management is closely monitoring
loans on deferral and estimates that approximately 75% of these loans will
return to payment status after the initial three-month period has expired. The
remaining loans on deferral are expected to be given another three-month
deferral period. These loans continue to accrue interest in accordance with
their initial terms.

Financial Strength & Stability



The Bank is designated as "well capitalized" by the Federal Deposit Insurance
Corporation ("FDIC") and has collateralized lines of credit at both the Federal
Home Loan Bank ("FHLB") and the Federal Reserve Bank of Boston ("FRB"). We also
have access to the PPP Liquidity Facility ("PPPLF") established by the FRB. The
Company had no PPPLF borrowings outstanding or loans pledged to the PPPLF at
June 30, 2020. Any PPP loans pledged as collateral for the PPPLF would be
excluded from average assets used in the leverage ratio calculation. The $505.6
million in PPP loans are fully guaranteed by the SBA and have no impact on our
risk-based capital ratios.

On July 7, 2020, the Company also completed a private placement with
registration rights of $60.0 million in fixed-to-floating rate subordinated
notes. The notes, with an initial fixed rate of 5.25%, are due in 2030 and
redeemable at the option of the Company beginning on or after July 15, 2025.
After the July issuance, the par value of or total outstanding subordinated
notes amounted to $75.0 million. We anticipate the additional capital will
increase the Bank's total capital to risk-weighted assets ratio from 11.79% at
June 30, 2020 to 13.58% on a pro forma basis. For further information on the
Bank's capital ratios, refer to "Capital Resources" below.

Accounting Implications



In the first quarter of 2020, the Company elected under the CARES Act to delay
the adoption of CECL. The Company will be required to adopt CECL by December 31,
2020. We anticipate the adoption of CECL will result in a reduction to retained
earnings and may increase the provision for loan losses in the period of
adoption. See Note 1, Item (e), "Recent Accounting Pronouncements" to the
Company's unaudited consolidated interim financial statements in this Form 10-Q
for information regarding CECL.

The Company also suspended TDR accounting under the CARES Act beginning in the
first quarter of 2020 for certain loan modifications. This election primarily
impacts financial statement disclosure, for loans that have had a short-term
payment deferral since March 1, 2020 as long as those loans were current and
risk rated as "pass" as of February 29, 2020.


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Composition of Earnings

Throughout this Form 10-Q we have noted certain ratios or other measures of the
Company's performance as having been adjusted to remove the impact of PPP
loans. Such ratios and other measures are considered non-GAAP measures. See the
non-GAAP table below which provides a reconciliation of the non-GAAP measures to
the information presented under U.S. generally accepted accounting principles
("GAAP").

The Company's earnings are largely dependent on its net interest income, which
is primarily the difference between interest earned on loans and investments and
the cost of funding (primarily deposits and borrowings). Net interest income
expressed as a percentage of average interest earning assets is referred to as
net interest margin ("margin"). Margin presented on a tax equivalent basis by
factoring in adjustments associated with interest income on tax exempt loans and
investments is referred to as tax equivalent net interest margin ("T/E margin").

Net interest income for the three months ended June 30, 2020 amounted to $32.5
million, an increase of $3.7 million, or 13%, compared to the three months ended
June 30, 2019. Net interest income for the six months ended June 30, 2020
amounted to $62.4 million, an increase of $5.6 million, or 10%, compared to the
six months ended June 30, 2019. The increase in net interest income was due
largely to interest-earning asset growth, primarily in loans, partially offset
by a decline in T/E margin. The Company recognized $948 thousand in PPP interest
income and $1.6 million in PPP fees, accreted to interest income, during the
second quarter.
Average loan balances increased $661.4 million, or 28%, for the three months
ended June 30, 2020 and $443.1 million, or 19%, for the six months ended
June 30, 2020, compared to the same respective 2019 period averages. Excluding
PPP loans, average loan balances increased $293.5 million, or 12%, and $259.1
million, or 11%, for the three and six months ended June 30, 2020, respectively,
compared to the same respective 2019 period averages.
T/E margin was 3.59%, 3.89%, and 3.96% for the three months ended June 30, 2020,
March 31, 2020, and June 30, 2019, respectively. T/E margin was 3.73% and 3.97%
for the six months ended June 30, 2020 and June 30, 2019, respectively.
Excluding PPP loans, T/E margin for the three and six months ended June 30, 2020
was 3.68% and 3.78%, respectively. The lower margin results primarily reflect
the significant decline in interest rates since the comparable periods resulting
in interest-earning asset yields declining faster than the cost of funding. T/E
margin for the June 2020 quarter was also impacted by higher balances in
lower-yielding short-term and overnight investments than the comparable periods.
Interest-earning asset yields have been impacted by a 225 basis point decrease
in the federal funds rate since June 30, 2019, with 150 basis points of that
total decline occurring in March 2020. Term interest rates have also fallen
significantly over the respective periods and collectively these interest rate
decreases have reduced yields on loans repricing, short-term and overnight
investments and interest-earning asset growth. The Company funds these
interest-earning assets principally through non-term customer deposits, which
were less impacted by interest rate declines.
The re-pricing frequency of the Company's assets and liabilities are not
identical and therefore subject the Company to the risk of adverse changes in
interest rates. This is often referred to as "interest-rate risk" and is
reviewed in more detail in Part I, Item 3, "Quantitative and Qualitative
Disclosures About Market Risk," of this Form 10-Q and in Item 7A, "Quantitative
and Qualitative Disclosures About Market Risk," of the Company's 2019 Annual
Report on Form 10-K.
For the three months ended June 30, 2020, the provision for loan losses amounted
to $2.7 million, compared to $955 thousand for the three months ended June 30,
2019. The provision for the quarter ended June 30, 2020 consisted of $1.9
million in general reserve factor increases related primarily to economic
weakness caused by the pandemic and its impact on credit quality in the loan
portfolio and $800 thousand related to classified and impaired loans.
For the six months ended June 30, 2020, the provision for loan losses amounted
to $8.8 million, compared to $555 thousand for the six months ended June 30,
2019. The provision for the six months ended June 30, 2020 consisted of $5.2
million in general reserve factor increases primarily related to economic
weakness caused by the pandemic and its impact on credit quality in the loan
portfolio, $2.3 million related to classified and impaired loans and $1.3
million related to loan growth and other factors.
The provisions for the 2019 periods were impacted by generally positive credit
metrics, partially offset by the impact of loan growth.
Non-interest income for the three months ended June 30, 2020 amounted to $4.0
million, a decrease of $30 thousand, or 1%, compared to the three months ended
June 30, 2019. Quarter-to-date non-interest income decreased in 2020 due
primarily to decreases in deposit and interchange fees as well as net gains on
sales of securities, partially offset by net gains on sales of loans.
Non-interest income for the six months ended June 30, 2020 amounted to $8.2
million, an increase of $332 thousand, or


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4%, compared to the six months ended June 30, 2019. Year-to-date non-interest
income increased in 2020 due primarily to increases in net gains on sales of
loans. Year-to-date other non-interest income decreased mainly due to decreases
in equity investment fair values, partially offset by derivative fee income.
Non-interest expense for the three months ended June 30, 2020, amounted to $24.3
million, an increase of $2.6 million, or 12%, compared to the three months ended
June 30, 2019. Non-interest expense for the six months ended June 30, 2020,
amounted to $47.0 million, an increase of $4.4 million, or 10%, compared to the
six months ended June 30, 2019. Increases in non-interest expense in 2020
related primarily to the Company's strategic growth initiatives, particularly
salaries and employee benefits, and to a lesser extent technology and
telecommunications expenses. Salaries and employee benefits expense also
included costs related to the PPP effort and the pandemic.
Sources and Uses of Funds

The Company's primary sources of funds are customer deposits, FHLB borrowings,
current earnings and proceeds from the sales, maturities and pay-downs on loans
and investment securities. The Company may also, from time to time, utilize
brokered deposits, overnight borrowings from correspondent banks and borrowings
from the FRB. Additionally, funding for the Company may be generated through
equity transactions, including the dividend reinvestment and direct stock
purchase plan or exercise of stock options, and occasionally the issuance of
debt securities or common stock. The Company's sources of funds are intended to
be used to conduct operations and to support growth, by funding loans and
investing in securities, to expand the branch network, and to pay dividends to
stockholders.

The investment portfolio is used primarily used to provide liquidity, manage the
Company's asset-liability position and to invest excess funds providing
additional sources of revenue. Total investments, a component of
interest-earning assets, amounted to $508.3 million at June 30, 2020, consistent
with December 31, 2019 balances, and comprised 13% and 16%, of total assets at
June 30, 2020 and December 31, 2019, respectively.

Enterprise's main asset strategy is to grow loans, the largest component of
interest-earning assets, with a focus on high quality commercial lending
relationships.  Total loans, comprising 79% of total assets at both June 30,
2020 and December 31, 2019, amounted to $3.18 billion at June 30, 2020, compared
to $2.57 billion at December 31, 2019, an increase of $610.7 million, or 24%,
due largely to PPP loan growth. Excluding PPP loans, total loans have increased
$120.5 million, or 5%, since December 31, 2019. Total commercial loans amounted
to $2.84 billion, or 89% of gross loans, at June 30, 2020, compared to 86% at
December 31, 2019. Excluding PPP loans, total commercial loans amounted to $2.33
billion, or 87% of gross loans, at June 30, 2020.

Management's preferred strategy for funding asset growth is to grow
relationship-based customer deposit balances, preferably comprised of
non-interest checking accounts, interest-bearing checking accounts and
traditional savings accounts.  Asset growth in excess of transactional deposits
is typically funded through non-transactional deposits (comprised of money
market accounts, commercial tiered rate or "investment savings" accounts and
term CDs) and wholesale funding (brokered deposits and borrowed funds).

At June 30, 2020, customer deposits (total deposits excluding brokered deposits)
amounted to $3.57 billion, or 89% of total assets, compared to $2.79 billion, or
86% of total assets, at December 31, 2019. Since December 31, 2019, customer
deposits increased $786.4 million, or 28%, primarily in checking accounts, and
to a lesser extent money markets. Management believes this deposit growth was
due in large part to PPP loan funds distributed to deposit accounts and
customers generally maintaining higher account balances in response to the
pandemic. See "Deposits" under "Financial Condition" contained in this Item 2 of
this Form 10-Q for a further breakdown of deposit growth.

Wholesale funding, which may be comprised of brokered deposits and FHLB
advances, amounted to $79.2 million at June 30, 2020, compared to $96.2 million
at December 31, 2019, a decrease of $17.0 million, or 18%. At June 30, 2020,
wholesale funding was comprised primarily of brokered deposits, while at
December 31, 2019, it was principally overnight FHLB advances. See "Borrowed
Funds," "Wholesale Funding," and "Derivatives and Hedging Activities" under
"Financial Condition" contained in this Item 2 of this Form 10-Q for additional
information on the Company's borrowings and wholesale funding strategies at
June 30, 2020.

On July 7, 2020, the Company also completed a private placement with registration rights of $60.0 million in fixed-to-floating rate subordinated notes. These notes, with an initial fixed rate of 5.25%, are due in 2030 and redeemable at the option of the Company beginning on or after July 15, 2025.






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Non-GAAP Measures



The accompanying unaudited consolidated interim financial statements have been
prepared in accordance with GAAP. Non-GAAP measures are intended to provide the
reader with additional supplemental perspectives on operating results,
performance trends, and financial condition. Non-GAAP financial measures are not
a substitute for GAAP measures; they should be read and used in conjunction with
the Company's GAAP financial information.
Certain non-GAAP measures provided in this Management Discussion and Analysis
exclude the outstanding balance of PPP loans that the Company began originating
in April 2020 and which are expected to be short-term in nature. The Company
normalized for this activity in order to provide a more meaningful comparison to
prior periods.
The following tables summarize the reconciliation of GAAP items to non-GAAP
items (1):
(Dollars in thousands)         June 30, 2020
Total loans (GAAP)            $    3,176,142
Adjustment: PPP loans               (505,557 )
Adjustment: Deferred PPP fees         15,398
Total loans (non-GAAP)        $    2,685,983

Total assets (GAAP)           $    4,037,229
Adjustment: PPP loans               (505,557 )
Adjustment: Deferred PPP fees         15,398
Total assets (non-GAAP)       $    3,547,070



                                                        Three months ended     Six months ended
(Dollars in thousands)                                    June 30, 2020          June 30, 2020
Total average loans (GAAP) (2)                         $        3,056,052     $       2,826,991
Adjustment: Average PPP loans                                    (376,727 )            (188,364 )
Adjustment: Average deferred PPP fees                               8,867                 4,433
Total average loans (non-GAAP) (2)                     $        2,688,192

$ 2,643,060



Net interest margin (tax equivalent) (GAAP)                          3.59 %                3.73 %
Adjustment: PPP effect (1)                                           0.09 %                0.05 %
Net interest margin (tax equivalent) (non-GAAP)                      3.68 %                3.78 %


__________________________________________


(1) PPP loan adjustments include an elimination of PPP loans, net of deferred
PPP fees, as well as interest income on PPP loans and related PPP fee accretion,
included in interest income. Month end and average balances were adjusted as
applicable.

(2) Total average loans include loans held for sale.

Culture and Organic Growth Strategy



Management's present priorities continue to be the safety and wellness of our
team members and customers and on managing through the pandemic and its economic
impact. Looking beyond the pandemic, management is focused on long-term
strategic growth initiatives, including investments in employee hiring and
training and development, fostering diversity and inclusion, cultivating strong
community relationships in all markets that we serve, loan growth funded by
customer deposits, technology and digital transformation, and branch evolution
and expansion.

The Company's business model is to provide a full range of diversified financial
products and services through a highly-trained team of knowledgeable banking
professionals, who have an in-depth understanding of our markets and a
commitment to open and honest communication with clients. Management believes
the Company has differentiated itself from the competition by building a strong
reputation within the local market as a customer-centric, community rooted, and
commercially focused community bank, offering robust product and service lines,
including commercial lending, cash management, wealth


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management and trust services and commercial insurance, delivered by a knowledgeable and dedicated team of community bankers through traditional in-person service and multiple digital delivery channels offering 24/7 remote banking capabilities.



The Company's banking professionals are dedicated to upholding the Company's
core values, including significant and active involvement in many charitable and
civic organizations, and community development programs throughout our service
area. This long-held commitment to community not only contributes to the welfare
of the communities we serve, it also helps to fuel the local economy, creating
new businesses and jobs, and has led to a strong referral network with local
businesses, non-profit organizations and community leaders.

As we face the current period of unprecedented and unpredictable economic
uncertainty, management is committed to utilizing its disciplined and reliable
credit management approach, which has served to provide consistent quality asset
growth over varying economic cycles during the Company's history. The Company's
loan growth initiatives are executed through strong business development and
referral efforts, by a seasoned lending team possessing a broad breadth of
business acumen and lending experience, supported by a highly qualified and
experienced commercial credit review function.

The Company has an ongoing commitment to use scalable technology and
digitization to continually improve the customer experience and internal
efficiencies and productivity. As part of the Company's multi-year digital
evolution strategy, new technology-driven products, services, delivery channels,
and process automation are continually introduced. These investments proved
invaluable in keeping our business operating efficiently and effectively for our
customers as social distancing and non-essential business shut down orders were
issued in early March by local and state government authorities.

Branch evolution includes enhancing our highly-personalized customer
interactions, updating technology and delivery methods, and ongoing facility
improvements and renovations. New and renovated branches exhibit a modern,
open-concept lobby with advanced technology. These branches are supported by our
"Universal Bankers," who are crossed-trained to fully serve customer needs, and
have on-site commercial lenders.
The Company also continually looks to develop new branch locations within, and
to complement, our existing footprint. In March 2020, Enterprise opened its new
Lexington, Massachusetts location. Additionally, the Company is also in the
process of establishing a branch office in North Andover, Massachusetts and
anticipates that this location will open in late 2020 or early 2021. The opening
is subject to postponement until health concerns and social distancing
requirements in Massachusetts begin to normalize.
While management recognizes that such investments increase expenses in the short
term, Enterprise believes that such initiatives are a critical investment in the
long-term growth and earnings potential of the Company and will help the Company
to capitalize on current opportunities in the marketplace for community banks
such as Enterprise. However, lower than expected returns on these investments,
such as slower than anticipated loan and deposit growth in new branches, a delay
in the time line for such initiatives due to the current pandemic, or other
reasons, and/or lower than expected adoption rates or income generated from new
technology or initiatives, could decrease anticipated revenues and net income on
such investments in the future.
                              Financial Condition

Total assets increased $802.2 million, or 25%, since December 31, 2019 to $4.04
billion at June 30, 2020.  Excluding PPP loans, total assets have increased
$312.0 million, or 10%, since December 31, 2019. The balance sheet composition
and changes since December 31, 2019 are discussed below.

Cash and cash equivalents



Cash and cash equivalents may be comprised of cash on hand and cash items due
from banks, interest-earning deposits (deposit accounts, excess reserve cash
balances, money markets, and money market mutual funds accounts) and federal
funds sold ("fed funds"). Cash and cash equivalents increased $191.0 million
since December 31, 2019. At June 30, 2020, cash and cash equivalents amounted to
6% of total assets, compared to 2% of total assets at December 31, 2019. While
balances in cash and cash equivalents will fluctuate due primarily to the timing
of net cash flows from deposits, borrowings, loans and investments, and the
immediate liquidity needs of the Company, management believes customers are
generally maintaining higher liquidity in response to the pandemic and have
increased cash balances since December 31, 2019.

Investments

At June 30, 2020, the fair value of the investment portfolio amounted to $508.3 million, an increase of $3.1 million, or 1%


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since December 31, 2019 balance. The investment portfolio represented 13% and
16% of total assets at June 30, 2020 and December 31, 2019, respectively. As of
June 30, 2020, and December 31, 2019, the investment portfolio was comprised
primarily of debt securities, with a small portion of the portfolio invested in
equity securities.

See also Note 2, "Investment Securities," and Note 14, "Fair Value
Measurements," to the Company's unaudited consolidated interim financial
statements contained in Item 1 in this Form 10-Q above for further information
regarding the Company's unrealized gains and losses on debt securities,
including information about investments in an unrealized loss position for which
impairment has or has not been recognized, and investments pledged as
collateral, as well as the Company's fair value measurements for investments.

Debt Securities



The following table summarizes the fair value of debt securities at the dates
indicated:
                                           June 30,               December 31,               June 30,
                                             2020                     2019                     2019
(Dollars in thousands)                Amount      Percent      Amount      Percent      Amount      Percent
Federal agency obligations(1)       $   1,001        0.2 %   $   1,004        0.2 %   $   1,005        0.2 %
Residential federal agency MBS(1)     186,102       36.7 %     192,658       38.2 %     172,738       37.1 %
Commercial federal agency MBS(1)      117,465       23.1 %     114,635       22.7 %     117,011       25.1 %
Municipal securities taxable           91,929       18.1 %      81,687       16.2 %      59,749       12.8 %
Municipal securities tax exempt        96,933       19.1 %     100,038       19.8 %     100,108       21.5 %
Corporate bonds                        13,790        2.7 %      14,311        2.8 %      14,383        3.1 %
CDs(2)                                    454        0.1 %         455        0.1 %         950        0.2 %
Total debt securities               $ 507,674      100.0 %   $ 504,788      100.0 %   $ 465,944      100.0 %

__________________________________________

(1) These categories may include investments issued or guaranteed by

government sponsored enterprises such as Fannie Mae ("FNMA"), Freddie Mac

("FHLMC"), Federal Farm Credit Bank ("FFCB"), or one of several Federal


       Home Loan Banks, as well as, investments guaranteed by Ginnie Mae
       ("GNMA"), a wholly-owned government entity.


(2)    CDs represent term deposits issued by banks that are subject to FDIC
       insurance and purchased on the open market.



As of the dates reflected in the tables above, the majority of investments in
the residential and commercial federal agency MBS categories were collateralized
mortgage obligations ("CMOs") issued by U.S. agencies. The remaining MBS
investments totaled $23.0 million, $23.5 million, and $23.7 million at June 30,
2020 December 31, 2019 and June 30, 2019, respectively.

During the six months ended June 30, 2020, the Company purchased $15.7 million
in debt securities. The Company had principal pay downs, calls and maturities
totaling $27.3 million during the six months ended June 30, 2020.

During the six months ended June 30, 2020, management sold debt securities with
an amortized cost of approximately $2.5 million realizing net gains on sales of
$100 thousand.

Net unrealized gains on the debt securities portfolio amounted to $31.2 million
at June 30, 2020, compared to net unrealized gains of $13.5 million at
December 31, 2019 and net unrealized gains of $12.7 million at June 30, 2019.
The Company attributes the large increase in net unrealized gains as compared to
December 31, 2019 to significant decreases in market yields.

Unrealized gains or losses on debt securities are carried on the Consolidated
Balance Sheet and will be recognized in the Consolidated Statements of Income if
the investments are sold. Should an investment be deemed OTTI, the Company is
required to write-down the fair value of the investment.  See Note 1, "Summary
of Significant Accounting Policies," under Item (e), "Investments," to the
Company's audited consolidated financial statements contained in the Company's
2019 Annual Report on Form 10-K for additional information on accounting for
OTTI. For more information about the Company's assessment for OTTI, see Note 2,
"Investment Securities," to the Company's audited consolidated financial
statements contained in the Company's 2019 Annual Report on Form 10-K.


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Equity Securities

The Company held equity securities with a fair value of $654 thousand at
June 30, 2020, $467 thousand at December 31, 2019, and $2.4 million at June 30,
2019. During the six months ended June 30, 2020, the Company recorded net losses
on equity securities in the Consolidated Statements of Income of $132 thousand,
compared to net gains of $263 thousand for the six months ended June 30, 2019,
due in both periods primarily to fair market value adjustments stemming from
fluctuations in market prices of securities held. The amount recognized related
to equity securities in "Other income" is dependent primarily on the amount of
dollars invested in equities and the magnitude of changes in equity market
values.

Federal Home Loan Bank Stock



The Bank is required to purchase stock of the FHLB at par value in association
with advances from the FHLB; this stock is classified as a restricted investment
and carried at cost, which management believes approximates fair value.  The
Company's investment in FHLB stock was $2.0 million at June 30, 2020, $4.5
million at December 31, 2019 and $1.6 million at June 30, 2019.

See Note 1, "Summary of Significant Accounting Policies," under the section
"Restricted Cash and Investments," in Item (c), "Accounting Policies," to the
Company's unaudited consolidated interim financial statements contained in Item
1 above for further information regarding the Company's investment in FHLB
stock.

Loans



Total loans represented 79% of total assets at June 30, 2020 and December 31,
2019. Total loans increased $610.7 million, or 24%, compared to December 31,
2019, and increased $762.0 million, or 32%, since June 30, 2019. The mix of
loans within the portfolio remained relatively unchanged with commercial loans
amounting to approximately 89% of gross loans (87% excluding PPP loans) at
June 30, 2020. PPP loan production, which began in April 2020, accounted for
$505.6 million in growth through June 30, 2020.

The following table sets forth the loan balances by certain loan categories at the dates indicated and the percentage of each category to gross loans:


                                  June 30, 2020              December 31, 2019              June 30, 2019

(Dollars in thousands) Amount Percent Amount Percent Amount Percent Commercial real estate $ 1,471,586 46.1 % $ 1,394,179

         54.3 %   $ 1,294,509         53.6 %
Commercial and industrial       454,455         14.2 %       501,227         19.5 %       514,402         21.3 %
Commercial construction         404,008         12.7 %       317,477         12.4 %       264,484         10.9 %
SBA PPP loans                   505,557         15.8 %             -            - %             -            - %
Total commercial loans        2,835,606         88.8 %     2,212,883         86.2 %     2,073,395         85.8 %
Residential mortgages           261,786          8.2 %       247,373          9.6 %       235,392          9.7 %
Home equity                      88,157          2.7 %        98,252          3.8 %        97,994          4.1 %
Consumer                          9,174          0.3 %        10,054          0.4 %        10,208          0.4 %
Total retail loans              359,117         11.2 %       355,679         13.8 %       343,594         14.2 %

Gross loans                   3,194,723        100.0 %     2,568,562        100.0 %     2,416,989        100.0 %
Deferred fees, net               (3,183 )                     (3,103 )                     (2,887 )
Deferred PPP fees               (15,398 )                          -                            -
Total loans                   3,176,142                    2,565,459                    2,414,102
Allowance for loan losses       (42,324 )                    (33,614 )                    (34,351 )
Net loans                   $ 3,133,818                  $ 2,531,845                  $ 2,379,751



As of June 30, 2020, commercial real estate loans increased $77.4 million, or
6%, compared to December 31, 2019, and increased $177.1 million, or 14%,
compared to June 30, 2019. Commercial real estate loans are typically secured by
a variety of owner-use and non-owner occupied (investor) commercial and
industrial property types including one-to-four and multi-


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family apartment buildings, office, industrial or mixed-use facilities, strip
shopping centers or other commercial properties and are generally guaranteed by
the principals of the borrower.

As of June 30, 2020, commercial and industrial loan balances decreased by $46.8
million, or 9%, compared to December 31, 2019 and decreased $59.9 million, or
12%, compared to June 30, 2019. The decrease reflects a decline in line
utilization on revolving lines as business customers made use of alternative
government sponsored funding sources and declines in business activity in
response to the pandemic, as well as general paydowns, maturities and reduction
in originations. These loans include seasonal and formula-based revolving lines
of credit, working capital loans, equipment financing, and term loans. Also
included in commercial and industrial loans are loans partially guaranteed by
the SBA under various long-established programs (see below regarding the SBA PPP
loan portfolio). Commercial and industrial credits may be unsecured loans and
lines to financially strong borrowers, loans secured in whole or in part by real
estate unrelated to the principal purpose of the loan or secured by inventories,
equipment, or receivables, and are generally guaranteed by the principals of the
borrower.

Commercial construction loans increased by $86.5 million, or 27%, since
December 31, 2019, and increased $139.5 million, or 53%, compared to June 30,
2019. Commercial construction loans include the development of residential
housing and condominium projects, the development of commercial and industrial
use property and loans for the purchase and improvement of raw land. These loans
are secured in whole or in part by underlying real estate collateral and are
generally guaranteed by the principals of the borrowers. In many cases, these
loans move into the permanent commercial real estate portfolio when the
construction phase is completed. The increases since December 31, 2019 and
June 30, 2019 were due primarily to active local construction markets fueled by
strong demand for residential and multi-family housing and increased commercial
development activity.

As previously noted in the "Overview" of this "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the PPP was
established by the CARES Act and implemented by the SBA. The PPP began in early
April and the deadline for submission of PPP loan applications is currently
August 8, 2020. PPP loans may be partially or fully forgiven by the SBA if
certain criteria are met. The PPP loans will carry an interest rate of 1% to be
paid by either the SBA, in the event of forgiveness, or by the borrower for the
term of the loan, which may be either 2 or 5 years. Payments for PPP loans are
deferred until the SBA issues a forgiveness decision or ten months after the end
of the forgiveness period if the borrower fails to apply for forgiveness.

Total retail loan balances increased by $3.4 million, or 1%, since December 31, 2019, and increased $15.5 million, or 5%, since June 30, 2019. Residential secured one-to-four family mortgage loans continue to make up the largest portion of the retail segment.



At June 30, 2020, commercial loan balances participated out to various banks
amounted to $78.0 million, compared to $80.2 million at December 31, 2019, and
$70.0 million at June 30, 2019. These 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 $102.5 million, $104.3 million and $69.0 million at June 30, 2020,
December 31, 2019, and June 30, 2019, respectively. In each case, the
participating bank funds a percentage of the loan commitment and takes on the
related pro-rata risk. The rights and obligations of each participating bank are
divided proportionately among the participating banks in an amount equal to
their share of ownership and with equal priority among all banks. Each
participation is governed by individual participation agreements executed by the
lead bank and the participant at loan origination. Participating loans with
other institutions provide banks the opportunity to retain customer
relationships and reduce credit risk exposure among each participating bank,
while providing customers with larger credit vehicles than the individual bank
might be willing or able to offer independently.

See Note 3, "Loans," to the Company's unaudited consolidated interim financial
statements contained in Item 1 of this Form
10-Q for information on loans serviced for others and loans pledged as
collateral.

Credit Risk



Inherent in the lending process is the risk of loss due to customer non-payment,
or "credit risk." The Company's commercial lending focus may entail significant
additional credit risks compared to long-term financing on existing,
owner-occupied residential real estate. The Company seeks to lessen its credit
risk exposure by managing its loan portfolio to avoid concentration by industry,
relationship size, and source of repayment, and through sound underwriting
practices and the credit risk management function; however, management
recognizes that loan losses will occur and that the amount of these losses will
fluctuate depending on the risk characteristics of the loan portfolio and
economic conditions.



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Non-performing assets are comprised of non-accrual loans and OREO. The
designation of a loan or other asset as non-performing does not necessarily
indicate that loan principal and interest will ultimately be uncollectible.
However, management recognizes the greater risk characteristics of these assets
and therefore considers the potential risk of loss on assets included in this
category in evaluating the adequacy of the allowance for loan losses.  The level
of delinquent and non-performing assets is largely a function of economic
conditions and the overall banking environment and the individual business
circumstances of borrowers.  Despite prudent loan underwriting, adverse changes
within the Company's market area, or deterioration in local, regional or
national economic conditions, could negatively impact the Company's level of
non-performing assets in the future.

Section 4013 of the CARES Act provides financial institutions the option to
suspend TDR accounting under GAAP in certain circumstances, during the period
beginning March 1, 2020, and ending on the earlier of (i) December 31, 2020, or
(ii) the date that is 60 days after the date on which the national emergency
concerning the pandemic declared under the National Emergencies Act terminates.
The Company has elected to suspend TDR accounting, which impacts primarily
financial statement disclosure, for loans that have had a short-term payment
deferral related to the pandemic, as long as those loans were current and risk
rated as "pass" as of February 29, 2020.

Management has been proactive with customers since the onset of the pandemic and
granted short term payment deferrals to those requesting financial assistance.
As of June 30, 2020, short term payment deferrals were granted on 1,130 loans
amounting to $594.8 million, or 22% of the Company's loan portfolio, excluding
PPP loans. Management is closely monitoring loans on deferral and estimates that
approximately 75% of these loans will return to payment status after the initial
three-month period has expired. The remaining loans on deferral are expected to
be given another three-month deferral period. These loans continue to accrue
interest in accordance with their initial terms.

The following table provides information on loans with short-term payment deferrals as of June 30, 2020, by loan segment.


                                                                                                     Deferred
                                                                                       Average        balance
                                     Gross loan      Segment % of     Deferred        deferred       to gross
(Dollars in thousands)                 balance       Gross loans      balance          balance       loans(1)
Commercial real estate             $   1,471,586        46.1 %      $  420,466     $         754        15.6 %
Commercial and industrial                454,455        14.2 %            94,862             196         3.5 %
Commercial construction                  404,008        12.7 %          55,306             1,975         2.1 %
SBA PPP loans                            505,557        15.8 %               -                 -           - %
Residential mortgages                    261,786         8.2 %            21,701             482         0.8 %
Home equity                               88,157         2.7 %             2,468             224         0.1 %
Consumer                                   9,174         0.3 %                43              14           - %
Total                              $   3,194,723       100.0 %      $  594,846     $         526        22.1 %


(1) Gross loans excluding PPP loans



Approximately 84% of the loan balances with short-term payment deferrals,
included in commercial real estate, commercial construction, residential
mortgages and home equity loans in the table above, are secured primarily by
real estate. Commercial and industrial loans with short-term payment deferrals
are not secured primarily by real estate, but consist generally of smaller
balances. At June 30, 2020, the average loan size for commercial and industrial
loans with a short-term payment deferral was $196 thousand.

Based on management's review of the loan portfolio and underlying credits, the
industries the Company considers generally to be most At-Risk from the impact of
the pandemic are: retail trade, non-owner occupied - retail property,
restaurants and hotels, and fitness centers. Collectively, these industries
amounted to 13% of total gross loans (excluding PPP loans) at June 30, 2020, and
comprised 28% of the total deferred balance.


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The following table provides information on balances as of June 30, 2020 for industries considered At-Risk.



                                                                                              Deferred
                                                             Industry           Total        balance to
                                          Industry gross     to gross         deferred         total
(Dollars in thousands)                     loan balance      loans(1)          balance        industry
Retail trade                              $    114,332          4.3 %       $    26,295           23 %
Non-owner occupied - retail leasing              105,562        3.9 %              40,156         38 %
Restaurants                                       67,418        2.5 %              46,696         69 %
Hotels                                            34,624        1.3 %              24,601         71 %
Fitness centers                                   33,441        1.2 %              28,215         84 %
  Total                                   $    355,377         13.2 %       $   165,963

(1) Gross loans excluding PPP loans



Of these At-Risk industries, hotels, restaurants, and fitness centers are
experiencing the largest deferrals as a percentage of industry balance with a
combined 73% of the total industry balance on deferral. However, in total these
three industries amount to only 5% of total gross loans (excluding PPP loans)
and 17% of the total deferred balance. Management is closely monitoring all
deferrals and notes that the loans are generally secured by real estate, usually
have personal guarantees and typically are managed by experienced operators. The
Company will continue to closely monitor the effect on credit quality across all
industry sectors in our diversified loan portfolio as the results of the
pandemic unfold in future quarters. The credit quality of our loans could be
further impacted and additional provisions may be necessary.




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Asset Quality



The following table sets forth information regarding non-performing assets, TDR
loans and delinquent loans 60-89 days past due as to interest or principal, held
by the Company at the dates indicated:
(Dollars in thousands)                            June 30, 2020      December 31, 2019     June 30, 2019
Non-accrual loan summary:
Commercial real estate                           $        8,789     $           8,280     $        6,602
Commercial and industrial                                 5,549                 3,285              4,049
Commercial construction                                   5,801                 1,735                123
SBA PPP loans                                                 -                     -                  -
Residential                                                 473                   411                745
Home equity                                                 705                 1,040                432
Consumer                                                     18                    20                 27
Total non-accrual loans                                  21,335                14,771             11,978
OREO                                                          -                     -                255
Total non-performing assets                      $       21,335     $          14,771     $       12,233
Total loans                                      $    3,176,142     $       2,565,459     $    2,414,102
Accruing TDR loans not included above            $       12,182     $          17,103     $       19,091
Delinquent loans 60-89 days past due and still
accruing                                         $        2,036     $           7,776     $        1,000
Loans 60-89 days past due and still accruing
to total loans                                             0.06 %                0.30 %             0.04 %
Adversely classified loans to total loans                  1.29 %                1.45 %             1.42 %
Non-performing loans to total loans                        0.67 %                0.58 %             0.50 %
Non-performing assets to total assets                      0.53 %                0.46 %             0.39 %
Allowance for loan losses                        $       42,324     $          33,614     $       34,351
Allowance for loan losses to non-performing
loans                                                    198.38 %              227.57 %           286.78 %
Allowance for loan losses to total loans                   1.33 %                1.31 %             1.42 %



The provision for loan losses for the quarter ended June 30, 2020 included an
allocation of $1.9 million in general reserve factor increases related primarily
to economic weakness caused by the pandemic and its impact on credit quality in
the loan portfolio. The provision for the second quarter of 2020 is discussed
further under the heading "Results of Operations." Excluding the PPP loans,
which are fully guaranteed by the SBA, the allowance for loan losses to total
loan ratio was 1.58% at June 30, 2020.

The majority of non-accrual loans were also carried as adversely classified
during the periods. At June 30, 2020 and December 31, 2019, the Company had
adversely classified loans (loans carrying "substandard," "doubtful" or "loss"
classifications) amounting to $41.0 million and $37.1 million, respectively.
Total adversely classified loans amounted to 1.29% of total loans at June 30,
2020, compared to 1.45% at December 31, 2019.

Adversely classified loans that were performing but possessed potential
weaknesses and, as a result, could ultimately become non-performing loans
amounted to $19.8 million at June 30, 2020 and $22.4 million at December 31,
2019. The remaining balances of adversely classified loans were non-accrual
loans, amounting to $21.3 million at June 30, 2020 and $14.7 million at
December 31, 2019. Non-accrual loans that were not adversely classified amounted
to $58 thousand and $84 thousand at June 30, 2020 and December 31, 2019,
respectively, and primarily represented the guaranteed portions of
non-performing SBA loans.

The increase in non-performing loans since at June 30, 2020, was due primarily
to commercial relationships which reached non-accrual status and were credit
downgraded due to their unique individual circumstances. These individual
downgrades are not considered an indication of general credit weakness in the
entire commercial portfolio and consisted of one commercial and industrial loan
(in the amount of $2.3 million) and three unrelated commercial construction
loans (amounting to $4.6 million in the aggregate); three of these relationships
were also newly added to "Impaired" status during the period. Management
continues to closely monitor these relationships and the underlying business
fundamentals on ongoing construction projects and


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is in regular communication with the related entity's management teams. These efforts will allow us to quantify our exposure and apply the results to determine a reasonable provision for loan losses.



Total impaired loans amounted to $33.5 million and $31.9 million at June 30,
2020 and December 31, 2019, respectively.  Total accruing impaired loans
amounted to $12.2 million and $17.1 million at June 30, 2020 and December 31,
2019, respectively, while non-accrual impaired loans amounted to $21.3 million
and $14.8 million as of June 30, 2020 and December 31, 2019, respectively.

In management's opinion, the majority of impaired loan balances at June 30, 2020
and December 31, 2019 were supported by expected future cash flows or, for those
collateral dependent loans, the net realizable value of the underlying
collateral. Based on management's assessment at June 30, 2020, impaired loans
totaling $27.0 million required no specific reserves and impaired loans totaling
$6.5 million required specific reserve allocations of $3.9 million.  At
December 31, 2019, impaired loans totaling $29.5 million required no specific
reserves and impaired loans totaling $2.4 million required specific reserve
allocations of $1.0 million.  The increase in specific reserves since
December 31, 2019 was due primarily to the credit downgrade of two commercial
relationships, for which management determined that the additional provisions
were necessary based on a review of underlying collateral values, individual
business circumstances, and credit metrics. Management closely monitors all
impaired relationships for the individual business circumstances, and underlying
collateral or credit deterioration to determine if additional reserves are
necessary.

Total TDR loans included in the impaired loan amounts above as of June 30, 2020
and December 31, 2019 were $19.3 million and $21.1 million, respectively. TDR
loans on accrual status amounted to $12.2 million and $17.1 million at June 30,
2020 and December 31, 2019, respectively. TDR loans included in non-performing
loans amounted to $7.1 million at June 30, 2020 and $4.0 million at December 31,
2019.  The Company continues to work with customers and enters into loan
modifications (which may or may not be TDRs) to the extent deemed to be
necessary or appropriate while attempting to achieve the best mutual outcome
given the individual financial circumstances and prospects of the borrower.

Allowance for Loan Losses



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

The allowance for loan losses is an estimate of probable credit loss inherent in
the loan portfolio as of the specified balance sheet dates. On a quarterly
basis, management prepares an estimate of the allowance necessary to cover
estimated probable credit losses.  The Company maintains the allowance at a
level that it deems adequate to absorb all reasonably anticipated probable
losses from specifically known and other probable credit risks associated with
the portfolio. The Company maintains a robust credit risk management culture and
may adjust policies, procedures and practices as circumstances warrant.

There have been no material changes to the Company's underwriting practices,
credit risk management system, or to the allowance assessment methodology used
to estimate loan loss exposure but due to the economic uncertainty from the
pandemic, management has strengthened risk management over new originations and
existing credits.  See Note 4, "Allowance for Loan Losses," to the Company's
audited consolidated financial statements contained the 2019 Annual Report on
Form 10-K.

Management continues to closely monitor the necessary allowance levels,
including specific reserves. The allowance for loan losses to total loans ratio
was 1.33% at June 30, 2020, 1.31% at December 31, 2019, and 1.42% at June 30,
2019. Excluding PPP loans, which are fully guaranteed by the SBA, the allowance
for loan losses to total loan ratio was 1.58% at June 30, 2020. This increase at
June 30, 2020 compared to prior periods resulted from increases in general
reserve factors, related primarily to economic weakness caused by the pandemic
and its impact on credit quality in the loan portfolio, and to additional
reserves related to classified and impaired loans, and to loan growth and other
factors.
Based on the foregoing, as well as management's judgment as to the existing
credit risks inherent in the loan portfolio, as discussed above under the
headings "Credit Risk" and "Asset Quality," management believes that the
Company's allowance for loan losses is adequate to absorb probable losses from
specifically known and other probable credit risks associated with the portfolio
as of June 30, 2020.


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The following table summarizes the activity in the allowance for loan losses for
the periods indicated:
                                                                    Six Months Ended June 30,
(Dollars in thousands)                                               2020               2019
Balance at beginning of year                                    $     33,614       $     33,849

Provision for loan losses                                              8,822                555
 Recoveries on charged-off loans:
Commercial real estate                                                     -                  -
Commercial and industrial                                                174                456
Commercial construction                                                    -                  -
SBA PPP loans                                                              -                  -
Residential mortgages                                                      -                  -
Home equity                                                                6                  5
Consumer                                                                  25                 13
Total recovered                                                          205                474
 Charged-off loans
Commercial real estate                                                     -                  -
Commercial and industrial                                                299                459
Commercial construction                                                    -                  -
SBA PPP loans                                                              -                  -
Residential mortgages                                                      -                  -
Home equity                                                                -                  -
Consumer                                                                  18                 68
Total charged-off                                                        317                527

Net loans charged-off                                                    112                 53
Ending balance                                                  $    

42,324 $ 34,351 Annualized net loans charged-off to average loans outstanding 0.01 %

                - %



See Note 4, "Allowance for Loan Losses," to the Company's unaudited consolidated
interim financial statements, contained in Item 1 in this Form 10-Q, for further
information regarding the allowance for loan losses and credit quality.

Other real estate owned ("OREO")



The Company had no OREO at June 30, 2020 or December 31, 2019, and the OREO
carrying value at June 30, 2019 was $255 thousand. There were no OREO additions
during the six months ended June 30, 2020 and one addition during the six months
ended June 30, 2019. There were no sales or subsequent write downs of OREO
during the six months ended June 30, 2020 or 2019.



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Deposits

Total deposits as a percentage of total assets were 90% at June 30, 2020 and 86% at December 31, 2019.

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


                                    June 30, 2020              December 31, 2019              June 30, 2019
(Dollars in thousands)           Amount        Percent        Amount        Percent        Amount        Percent
Non-interest checking         $ 1,282,535         35.2 %   $   794,583         28.5 %   $   822,455         29.1 %
Interest-bearing checking         540,735         14.8 %       467,988         16.8 %       496,828         17.6 %
Total checking                  1,823,270         50.0 %     1,262,571         45.3 %     1,319,283         46.7 %

Savings                           243,647          6.7 %       203,236          7.3 %       209,477          7.3 %
Money markets                   1,228,847         33.7 %     1,009,972         36.2 %     1,006,526         35.6 %
Total savings/money markets     1,472,494         40.4 %     1,213,208         43.5 %     1,216,003         42.9 %

CDs                               277,347          7.6 %       310,951         11.2 %       294,862         10.4 %
Total customer deposits         3,573,111         98.0 %     2,786,730        100.0 %     2,830,148        100.0 %

Brokered deposits (1)              74,997          2.0 %             -            - %             -            - %
Total deposits                $ 3,648,108        100.0 %   $ 2,786,730        100.0 %   $ 2,830,148        100.0 %

__________________________________________

(1) Brokered CDs $250,000 and under.





As of June 30, 2020, customer deposits increased $786.4 million, or 28%, since
December 31, 2019, and $743.0 million, or 26%, since June 30, 2019. Since
December 31, 2019, the largest growth occurred in checking accounts and to a
lesser extent money markets. Deposit growth has been positively and
significantly impacted by the PPP, stimulus checks and the ongoing pandemic as
the PPP loan monies were distributed into deposit accounts and many customers
are proactively building liquidity in response to the economic uncertainty
caused by the pandemic. We anticipate that as customers spend down their PPP
loan funds, this will result in a reduction in deposits.

The Company offers its customers the ability to enhance FDIC insurance coverage
by electing to participate a portion of their deposit balance into nationwide
deposit networks. The Company's total customer deposits reflect the equal and
reciprocal deposits received from other banks' customers participating in the
programs. Essentially, the equivalent of the original customers' deposited funds
comes back to the Company and are carried within the appropriate category under
total customer deposits. The Company's balances in these reciprocal products
were $520.0 million, $419.7 million and $412.0 million at June 30, 2020,
December 31, 2019 and June 30, 2019, respectively. Savings account are not
eligible for this program.

Management may, from time-to-time, utilize brokered deposits as cost effective
wholesale funding sources to support continued loan growth. Brokered deposits
may be comprised of non-reciprocal insured overnight or selected term funding
gathered from nationwide bank networks or term deposits from large money center
banks; however, at June 30, 2020 the Company's $75.0 million in brokered
deposits were comprised only of short-term brokered CDs. These brokered CDs are
used in conjunction with cash flow hedge interest-rate swaps. See also
"Wholesale Funding" below.

Borrowed Funds



The Company had borrowed funds outstanding, all of which are FHLB advances, of
$4.2 million, $96.2 million, and $484 thousand at June 30, 2020, December 31,
2019, and June 30, 2019, respectively. FHLB borrowings at June 30, 2020 are
related to specific lending projects under the FHLB's community development
program. At December 31, 2019, borrowed funds, consisted primarily of overnight
advances, with the remaining balance related to the specific lending projects
noted above.

At June 30, 2020, the Bank had the capacity to borrow additional funds from the
FHLB of up to approximately $575.0 million and the capacity to borrow from the
FRB Discount Window of approximately $180.0 million.



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In April 2020, the Company established access to the PPPLF, which provides
funding secured by PPP pledged loans. Advances issued under the PPPLF are
non-recourse. The amount and term of an advance matches the amount and remaining
term of the PPP loans pledged. Due to deposit growth in large part from
customers depositing funds received from PPP loan advances and generally
maintaining higher liquidity in response to the pandemic, the Company did not
have any borrowings outstanding under the PPPLF at June 30, 2020. The Bank had
the capacity to borrow approximately $505.6 million under the PPPLF at June 30,
2020.

Wholesale Funding

Wholesale funding includes brokered deposits and borrowed funds as discussed
above. Since December 31, 2019, wholesale funding has decreased $17.0 million,
or 18%.

The following table sets forth the breakout of wholesale funding by composition
at the dates indicated and the percentage of each category to total wholesale
funding:
                            June 30, 2020          December 31, 2019         June 30, 2019
(Dollars in thousands)    Amount     Percent       Amount      Percent     Amount    Percent
Brokered deposits        $ 74,997      94.7 %   $         -         - %   $     -         - %
Borrowed funds              4,165       5.3 %        96,173     100.0 %       484     100.0 %
Wholesale funding        $ 79,162     100.0 %   $    96,173     100.0 %   $   484     100.0 %


The Company has the flexibility to use either brokered deposits or FHLB borrowings in conjunction with interest-rate swaps and in the second quarter, the Company shifted from FHLB borrowings to brokered CDs.

See "Liquidity," below, for additional information.

Subordinated Debt



The Company had outstanding subordinated debt of $14.9 million (net of deferred
issuance costs) at June 30, 2020, December 31, 2019 and June 30, 2019, which
consisted of $15.0 million in aggregate principal amount of Fixed-to-Floating
Rate Subordinated Notes issued in January 2015, in a private placement to an
accredited investor.

On July 7, 2020, the Company completed a private placement with registration
rights of $60.0 million in fixed-to-floating rate subordinated notes. These
notes, with an initial fixed rate of 5.25%, are due in 2030 and redeemable at
the option of the Company beginning on or after July 15, 2025.

See also Note 7, "Borrowed Funds and Subordinated Debt," to the Company's
unaudited consolidated interim financial statements contained in Item 1 above in
this Form 10-Q, for further information regarding the Company's subordinated
debt.

Derivatives and Hedging

During the first quarter of 2020, the Company entered into three pay fixed,
receive float interest rate swaps to hedge the variable cash flows associated
with the Company's short-term wholesale funding to add stability to interest
expense and to manage its exposure to interest rate movements. The combined
notional value of these swaps, maturing in three to five years, was $75.0
million at June 30, 2020 and the fair value carried as a liability on the
Company's Consolidated Balance Sheet was $3.3 million.

The Company also has a "Back-to-Back Swap" program whereby the Bank enters into
an interest-rate swaps with qualified commercial banking customers and
simultaneously enters into equal and opposite interest-rate swaps with a swap
counterparty. The customer interest-rate swap agreement allows commercial
banking customers to convert a floating-rate loan payment to a fixed-rate
payment. The notional value of interest-rate swaps with customers increased to
$38.9 million at June 30, 2020 from $22.8 million at December 31, 2019. The fair
value of assets and corresponding liabilities associated with these swaps and
carried on the Company's Consolidated Balance Sheets was $3.0 million at
June 30, 2020 compared to $625 thousand at December 31, 2019.

For further information on the Company's derivatives and hedging activities see
Note 8, "Derivatives and Hedging Activities," to the Company's unaudited
consolidated interim financial statements contained in Item 1 above in this Form
10-Q.




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                                   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 policies are set and
monitored by the Company's Board of Directors ("the Board"). The duties and
responsibilities related to asset-liability management matters are also covered
by the Board. The Company's asset-liability objectives are to engage in sound
balance sheet management strategies, maintain liquidity, provide and enhance
access to a diverse and stable source of funds, provide competitively priced and
attractive products to customers and conduct funding at a low-cost relative to
current market conditions. Funds gathered are used to support current
commitments, to fund earning asset growth, and to take advantage of selected
leverage opportunities.

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 June 30, 2020, the Company's wholesale funding sources included primarily
borrowing capacity at the FHLB and brokered deposits. In addition, the Company
maintains uncommitted overnight fed fund purchase arrangements with
correspondent banks, has access to the FRB Discount Window and has access to the
PPPLF, which provides funding secured by PPP pledged loans.

Management believes that the Company has adequate liquidity to meet its
obligations. However, if general economic conditions, the pandemic, 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.

The Company has in the past also increased capital and liquidity by offering for
sale shares of the Company's common stock and through the issuance of
subordinated debt. On July 7, 2020, the Company completed a private placement
with registration rights of $60.0 million in fixed-to-floating rate subordinated
notes. See "Capital Resources," below for information on the Company's capital
planning.

                               Capital Resources

Capital Raised and Capital Adequacy Requirements



Capital planning by the Company and the Bank considers current needs and
anticipated future growth. Ongoing sources of capital include the retention of
earnings, less dividends paid, proceeds from the exercise of employee stock
options and proceeds from purchases of shares pursuant to the Company's dividend
reinvestment plan and direct stock purchase plan (together, the "DRSPP").
Additional sources of capital for the Company and the Bank have been proceeds
from the issuance of the Company's common stock and subordinated debt. The
Company believes its current capital is adequate to support ongoing operations.

The Company is subject to the regulatory capital framework known as the "Basel
III Rules." As of June 30, 2020, the Company and the Bank met all capital
adequacy requirements to which they were subject under Basel III. As of June 30,
2020, the Company met the definition of "well-capitalized" under the applicable
Federal Reserve Board regulations and the Bank qualified as "well capitalized"
under the prompt corrective action regulations of Basel III and the FDIC.


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The Company's and the Bank's actual capital amounts and ratios as of June 30, 2020 are presented in the tables below:


                                                                        Minimum Capital                 Minimum Capital
                                                                      for Capital Adequacy                   To Be
                                                Actual                    Purposes(1)                 Well Capitalized(2)
(Dollars in thousands)                    Amount       Ratio            Amount           Ratio         Amount          Ratio
             The Company
Total Capital (to risk weighted
assets)                                 $ 340,060      11.80 %   $     230,532           8.00 %          N/A            N/A
Tier 1 Capital (to risk weighted
assets)                                 $ 289,083      10.03 %   $     172,899           6.00 %          N/A            N/A
Tier 1 Capital (to average assets) or
Leverage ratio                          $ 289,083       7.57 %   $     152,762           4.00 %          N/A            N/A
Common equity tier 1 capital (to risk
weighted assets)                        $ 289,083      10.03 %   $     129,674           4.50 %          N/A            N/A

              The Bank
Total Capital (to risk weighted
assets)                                 $ 339,673      11.79 %   $     230,532           8.00 %   $    288,165         10.00 %
Tier 1 Capital (to risk weighted
assets)                                 $ 303,575      10.53 %   $     172,899           6.00 %   $    230,532          8.00 %
Tier 1 Capital (to average assets) or
Leverage ratio                          $ 303,575       7.95 %   $     152,762           4.00 %   $    190,953          5.00 %
Common equity tier 1 capital (to risk
weighted assets)                        $ 303,575      10.53 %   $     129,674           4.50 %   $    187,307          6.50 %


_________________________________________


(1) Before application of the capital conservation buffer of 2.50%, 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 Basel III capital ratio requirements 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
June 30, 2020.

The Basel III minimum capital ratio requirements as applicable to the Company and the Bank at June 30, 2020 are summarized in the table below:


                                                                             Basel III
                                                Basel III     Basel III      "Adequate"
                                               Minimum for    Additional     Ratio with
                                                 Capital       Capital        Capital
                                                Adequacy     Conservation   Conservation
                                                Purposes        Buffer         Buffer
Total Capital (to risk weighted assets)           8.00%         2.50%       

10.50%

Tier 1 Capital (to risk weighted assets) 6.00% 2.50%

8.50%


Tier 1 Capital (to average assets) or
Leverage ratio                                    4.00%           -%        

4.00%


Common equity tier 1 capital (to risk
weighted assets)                                  4.50%         2.50%          7.00%



In response to the pandemic, in April 2020, the Company participated in both the
PPP loan program and the PPPLF borrowing program. PPP loans are fully guaranteed
by the SBA and have no impact on our risk-based capital ratios. PPP loans
pledged as collateral for the PPPLF are excluded from the average assets used in
the leverage ratio calculation. There are no PPP loans pledged as collateral for
the PPPLF as of June 30, 2020.

In March 2020, the federal regulatory banking agencies issued an interagency
interim final rule that allows banking institutions that implement CECL during
2020 to delay for two years the estimated impact of CECL on regulatory capital,
followed by a three-year transition period. The Company is currently assessing
its options at this time, and will make its election when it adopts CECL. Upon
adoption of CECL, the Company estimates a reduction to retained earnings in the
range of $1.0 to $3.0 million, net of tax, with an effective date of January 1,
2020.

On July 7, 2020, the Company completed a private placement with registration
rights of $60.0 million in fixed-to-floating rate subordinated notes due 2030
and redeemable at the option of the Company on or after July 15, 2025.
Enterprise Bank's pro


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forma capital ratios provided below reflect an anticipated $53.0 million capital
investment from the Company related to the July 2020 subordinated debt issuance:


                                                        Actual     Pro forma
                                                       June 30,     June 30,
                  Enterprise Bank                        2020         2020
Total capital to risk weighted assets                    11.79 %      13.58 %
Tier 1 capital to risk weighted assets                   10.53 %      12.33 %
Tier 1 capital to average assets                          7.95 %       9.21 %

Common equity tier 1 capital to risk weighted assets 10.53 % 12.33 %





DRSPP and Dividends

The Company's DRSPP enables stockholders, at their discretion, to elect to
reinvest cash dividends paid on their shares of the Company's common stock by
purchasing additional shares of common stock from the Company at a purchase
price equal to fair market value.  Under the DRSPP, stockholders and new
investors also have the opportunity to purchase shares of the Company's common
stock without brokerage fees, subject to monthly minimums and maximums.

For the six months ended June 30, 2020, the Company declared $4.2 million in
cash dividends. Stockholders utilized the dividend reinvestment portion of the
DRSPP to purchase an aggregate of 24,831 shares of the Company's common stock,
totaling $608 thousand. The direct purchase component of the DRSPP was used by
stockholders to purchase 1,424 shares of the Company's common stock, totaling
$34 thousand, during the six months ended June 30, 2020.

On July 21, 2020, the Company announced a quarterly dividend of $0.175 per share to be paid on September 1, 2020 to stockholders of record as of August 11, 2020.



For further information about the Company's capital, see Note 9 and Note 11,
both titled "Stockholders' Equity," to the Company's unaudited consolidated
interim financial statements contained in Item 1 of this Form 10-Q and to the
Company's audited consolidated financial statements contained in the Company's
2019 Annual Report on Form 10-K, respectively.

                            Assets Under Management

Total assets under management include total assets, loans serviced for others
and investment assets under management. Loans serviced for others and investment
assets under management are not carried as assets on the Company's Consolidated
Balance Sheet, and as such, total assets under management is not a financial
measurement recognized under GAAP, however management believes its disclosure
provides information useful in understanding the trends in total assets under
management.

The Company provides a wide range of wealth management and wealth services, including brokerage, trust, and investment management. Also included in the investment assets under management total are customers' commercial sweep arrangements that are invested in third-party money market mutual funds.



As of June 30, 2020, investment assets under management, which are reflected at
fair market value, decreased $36.4 million, or 4%, since December 31, 2019, and
since June 30, 2019, balances have increased $23.0 million, or 3%. The decreases
in investment assets under management since December 31, 2019 were driven
primarily by the volatile financial markets stemming from the pandemic.
Since March 31, 2020, investment assets under management have increased $87.0
million, or 11%, due primarily to asset growth from market appreciation.

As of June 30, 2020, total assets under management increased $763.7 million, or 18% since December 31, 2019 and $899.9 million, or 22% since June 30, 2019. Excluding PPP loans, total assets under management have increased $273.5 million, or 6%, since December 31, 2019 and $263.6 million, or 6%, since March 31, 2020.


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The following table sets forth the value of assets under management and its components at the dates indicated:


                                       June 30,      December 31,       June 30,
(Dollars in thousands)                   2020            2019             2019
Total assets                         $ 4,037,229    $    3,235,049    $ 3,167,518
Loans serviced for others                 93,823            95,905         86,677
Investment assets under management       880,211           916,623        857,187
Total assets under management        $ 5,011,263    $    4,247,577    $ 4,111,382




                             Results of Operations
     Three Months Ended June 30, 2020 vs. Three Months Ended June 30, 2019

Unless otherwise indicated, the reported results are for the three months ended
June 30, 2020 with the "same period," the "comparable period," and "prior
period" being the three months ended June 30, 2019. Average yields are presented
on an annualized tax equivalent basis.

The Company's net income for the second quarter of 2020 amounted to $7.3 million, compared to $7.8 million for the same period in 2019. Diluted earnings per share were $0.61 and $0.66 for the three months ended June 30, 2020 and June 30, 2019, respectively.



The net income results for the quarter ended June 30, 2020 compared to the prior
year quarter results were impacted by PPP loan originations and the pandemic.
The provision for loan losses increased as the Company added to general reserves
to address the impact of the pandemic on the economy and the Company's loan
portfolio. Net interest income increased mainly from loan growth and PPP loan
related income, partially offset by a lower spread principally due to lower
market interest rates. Operating expenses increased for the quarter ended June
30, 2020 compared to the prior period, due primarily to the Company's strategic
growth initiatives, and also from higher salary and benefit costs related to the
pandemic, including our team members' PPP loan origination effort in the second
quarter.

Net Interest Income and Margin



The Company's net interest income for the quarter ended June 30, 2020 amounted
to $32.5 million, compared to $28.8 million for the quarter ended June 30, 2019,
an increase of $3.7 million, or 13%.  The Company's margin was 3.55% for three
months ended June 30, 2020, compared to 3.91% for the quarter ended June 30,
2019. Margin was 3.84% for the quarter ended March 31, 2020.

Tax equivalent net interest income for the three months ended June 30, 2020 was
$32.9 million compared to $29.2 million for the three months ended June 30,
2019, an increase of $3.7 million, or 13%. T/E margin was 3.59%, 3.89%, and
3.96% for the three months ended June 30, 2020, March 31, 2020, and June 30,
2019, respectively. Excluding PPP loans, T/E margin for the three months ended
June 30, 2020 was 3.68%.

The increase in net interest income was due largely to interest-earning asset
growth, primarily in loans, partially offset by a decline in T/E margin. The
Company recognized $948 thousand in PPP interest income and $1.6 million in PPP
fees, accreted to interest income, during the second quarter.

The lower margin results primarily reflect the significant decline in interest
rates since the comparable periods noted above resulting in interest-earning
asset yields declining faster than the cost of funding. Interest-earning asset
yields have been impacted by a 225 basis-point decrease in the federal funds
rate ("fed funds") since June 30, 2019, with 150 basis points of that total
decline occurring in March 2020. Term interest rates have also fallen
significantly over the respective periods noted above and collectively these
interest rate decreases have reduced yields on loans repricing, short-term and
overnight investments and interest-earning asset growth. Margin for the June
2020 quarter was also impacted by higher balances in lower-yielding short-term
and overnight investments than the comparable periods. The Company funds these
interest-earning assets principally through non-term customer deposits, which
were less impacted by interest rate declines.



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Interest and Dividend Income



For the second quarter of 2020, total interest and dividend income amounted to
$36.2 million, an increase of $1.9 million, or 5%, compared to the prior period.
The increase resulted primarily from an increase of $661.4 million, or 28%, in
average balances of loans and loans held for sale, partially offset by lower
yields on interest-earning assets. Average T/E loan yields have declined 80
basis points and other interest-earning asset yields have decreased 221 basis
points compared to the prior period. See the "Net Interest Income and Margin"
discussion above for further information on the decrease in interest rates.

Interest Expense



For the three months ended June 30, 2020, total interest expense amounted to
$3.6 million, a decrease of $1.9 million, or 34%, compared to the same period in
2019, due primarily to decreases in the deposit rates, mainly checking, saving
and money markets. The average cost of checking, saving and money markets
decreased 53 basis points and the average cost of CDs decreased 16 basis points.

Deposit growth in the June 30, 2020 quarter has been positively and
significantly impacted by the PPP loan funds, stimulus checks and the ongoing
pandemic as the PPP loan monies were distributed into deposit accounts and many
customers are proactively building liquidity in response to the economic
uncertainty caused by the pandemic.

Non-interest-bearing checking accounts are an important component of the
Company's core funding strategy. For the three months ended June 30, 2020, the
average balance of non-interest-bearing checking accounts increased $386.5
million, or 50%, as compared to the same period in 2019, and represented 34% and
28% of total average deposit balances for the three months ended June 30, 2020
and June 30, 2019, respectively.

Interest rate risk is reviewed in detail under the heading 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 June 30, 2020 compared to the
three months ended June 30, 2019. 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
                                                     Net
(Dollars in thousands)                              Change          Volume              Rate
Interest Income
Loans and loans held for sale (tax-equivalent)   $    2,265     $      7,707       $      (5,442 )
Investment securities (tax-equivalent)                   66              149                 (83 )
Other interest-earning assets (1)                      (518 )            201                (719 )
Total interest-earning assets (tax-equivalent)        1,813            8,057              (6,244 )
Interest Expense
Interest checking, savings and money market          (1,991 )            483              (2,474 )
Certificates of deposit                                (137 )            (19 )              (118 )
Brokered CDs                                             56               85                 (29 )
Borrowed funds                                          180                -                 180
Subordinated debt                                        (1 )              -                  (1 )
Total interest-bearing funding                       (1,893 )            549              (2,442 )

Change in net interest income (tax-equivalent) $ 3,706 $ 7,508 $ (3,802 )

__________________________________________

(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 June 30, 2020 and 2019:


                 AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
                                       Three months ended June 30, 2020                  Three months ended June 30, 2019
                                     Average                           Average         Average                           Average
(Dollars in thousands)               Balance          Interest(1)     Yield(1)         Balance          Interest(1)     Yield(1)
Assets:
Loans and loans held for sale
(2) (tax equivalent)            $     3,056,052     $      32,822        4.32 %   $     2,394,688     $      30,557        5.12 %
Investments (3) (tax
equivalent)                             477,117             3,613        3.03 %           458,316             3,547        3.10 %
Other interest-earning assets
(4)                                     148,408                79        0.21 %            98,994               597        2.42 %
Total interest-earning assets
(tax equivalent)                      3,681,577            36,514        3.99 %         2,951,998            34,701        4.71 %
Other assets                            160,077                                           133,269
Total assets                    $     3,841,654                                   $     3,085,267

Liabilities and stockholders'
equity:
Interest checking, savings
and money market                $     1,920,764             1,750        0.37 %   $     1,675,636             3,741        0.90 %
Certificates of deposit                 291,003             1,335        1.84 %           294,756             1,472        2.00 %
Brokered CDs                             40,382               135        1.33 %            16,735                79        1.89 %
Borrowed funds                           59,786               180        1.21 %               485                 -           - %
Subordinated debt (5)                    14,877               230        6.24 %            14,864               231        6.22 %
Total interest-bearing
funding                               2,326,812             3,630        0.63 %         2,002,476             5,523        1.11 %

Net interest-rate spread (tax
equivalent)                                                              3.36 %                                            3.60 %

Non-interest checking                 1,164,058                 -                         777,564                 -
Total deposits, borrowed
funds and subordinated debt           3,490,870             3,630        0.42 %         2,780,040             5,523        0.80 %
Other liabilities                        39,965                                            33,645
Total liabilities                     3,530,835                                         2,813,685

Stockholders' equity                    310,819                                           271,582
Total liabilities and
stockholders' equity            $     3,841,654                                   $     3,085,267

Net interest income (tax
equivalent)                                                32,884                                            29,178
Net interest margin (tax
equivalent)                                                              3.59 %                                            3.96 %
Less tax equivalent
adjustment                                                    358                                               400
Net interest income                                 $      32,526                                     $      28,778
Net interest margin                                                      3.55 %                                            3.91 %

__________________________________________

(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 2020

and 2019, based on tax equivalent adjustments associated with tax exempt


       loans and investments interest income.


(2)    Average loans and loans held for sale include non-accrual loans and are
       net of average deferred loan fees.

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

(4) Average other interest-earning assets include interest-earning deposits,

fed funds sold and FHLB stock.

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


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Provision for Loan Loss



The provision for loan losses under the incurred loss model amounted to $2.7
million for the three months ended June 30, 2020, an increase of $1.7 million,
compared to the prior period. The provision for the quarter ended June 30, 2020
consisted of $1.9 million in general reserve factor increases related primarily
to economic weakness caused by the pandemic and its impact on credit quality in
the loan portfolio, and $800 thousand related to classified and impaired loans.

The provision for loan losses is a significant factor in the Company's operating
results. For further discussion regarding the provision for loan losses and
management's assessment of the adequacy of the allowance for loan losses see
"Credit Risk," "Asset Quality," and "Allowance for Loan Losses" under "Financial
Condition" in this Item 2 above, and "Credit Risk," "Asset Quality," and
"Allowance for Loan Losses" in the Financial Condition section of Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's 2019 Annual Report on Form 10-K.

Non-Interest Income



Non-interest income for the three months ended June 30, 2020 amounted to $4.0
million, a decrease of $30 thousand, or 1%, as compared to the same period in
2019. The primary components of the quarter over quarter change are as follows:

• Deposit and interchange fees decreased primarily due to lower deposit


       account activity combined with higher balances in customer accounts and
       less consumer spending resulting in lower interchange activity.



•      Net gains on sales of debt securities decreased as the Company did not
       have any sales in the second quarter of 2020.


• Net gains on loan sales increased due primarily to higher volume of loans


       originated for sale.



Non-Interest Expense

Non-interest expense for the three months ended June 30, 2020 amounted to $24.3
million, an increase of $2.6 million, or 12%, compared to the prior period. The
primary components of the quarter over quarter change are as follows:

• Salaries and benefits increased due primarily to the Company's strategic

growth initiatives. There were also several pandemic associated expense

items in the quarter including discretionary awards to recognize team


       contributions including the successful PPP loan effort, among others.



•      Technology and telecommunications increased due primarily to higher

infrastructure costs and expenses associated with the Company's multi-year

digital evolution strategy to enhance operating efficiency and customer


       experience.


• Advertising and public relations costs decreased as the Company's business


       development costs were less due to the pandemic and the focus on PPP loan
       originations.



•      Audit, legal and other professional fees increased primarily in other
       professional fees, which includes, among other things, consulting and

professional expenses associated with the Company's digital evolution


       strategy.



•      Deposit insurance premiums increased due primarily to increased FDIC
       assessment factors and asset growth.


• Other operating expenses decreased due primarily to the pandemic resulting


       in lower employee-related expenses such as training, dues and
       entertainment, and travel.


Income Taxes

The effective tax rate for the three months ended June 30, 2020 was 23.9%, compared to 23.2% for the three months ended June 30, 2019.


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                             Results of Operations
       Six Months Ended June 30, 2020 vs. Six Months Ended June 30, 2019

Unless otherwise indicated, the reported results are for the six months ended
June 30, 2020 with the "same period," the "comparable period," "prior year," and
"prior period" being the six months ended June 30, 2019. Average yields are
presented on an annualized tax equivalent basis.

Net Income



The Company's net income for the six months ended June 30, 2020 amounted to
$11.3 million, compared to $16.5 million for the same period in 2019. Diluted
earnings per share were $0.95 for the six months ended June 30, 2020, compared
to $1.39 for the six months ended June 30, 2019.

Net income results for the six months ended June 30, 2020 compared to the same
period in the prior year were impacted by the PPP and the pandemic. The
provision for loan losses increased, primarily in the first quarter, as the
Company added to general reserves to address the impact of the pandemic on the
economy and the Company's loan portfolio. Net interest income increased mainly
from loan growth and PPP-related income in the second quarter, partially offset
by a lower spread principally due to lower market interest rates. Operating
expenses increased for the six months ended June 30, 2020 compared to the prior
year, due primarily to the Company's strategic growth initiatives, and also from
higher salary and benefit costs related to the pandemic, including our team
members' PPP loan origination effort in the second quarter.

Net Interest Income and Margin



The Company's net interest income for the six months ended June 30, 2020
amounted to $62.4 million, compared to $56.9 million for the six months ended
June 30, 2019, an increase of $5.6 million, or 10%. The Company's margin was
3.68% for the six months ended June 30, 2020 and was 3.91% for the six months
ended June 30, 2019.

Tax equivalent net interest income for the six months ended June 30, 2020 was
$63.1 million compared to $57.7 million for the six months ended June 30, 2019,
an increase of $5.5 million, or 9%. T/E margin was 3.73% and 3.97% for the six
months ended June 30, 2020 and 2019, respectively. Excluding PPP loans, T/E
margin for the six months ended June 30, 2020 was 3.78%.

The increase in net interest income over the comparable period was due largely
to interest-earning asset growth, primarily in loans, partially offset by a
decrease in margin. As previously noted, the Company recognized $948 thousand in
PPP interest income and $1.6 million in PPP fees, accreted to interest income,
during the second quarter.

As with the second quarter, the lower margin results primarily reflect the
significant decline in interest rates since the comparable period resulting in
interest-earning asset yields declining faster than the cost of funding.
Interest-earning asset yields have been impacted by a 225 basis point decrease
in the fed funds rate since June 30, 2019, with 150 basis points of that total
decline occurring in March 2020. Term interest rates have also fallen
significantly over the respective period and collectively these interest rate
decreases have reduced yields on loans repricing, short-term and overnight
investments and interest-earning asset growth. The Company funds these
interest-earning assets principally through non-term customer deposits, which
were less impacted by interest rate declines.

Interest and Dividend Income



Total interest and dividend income amounted to $71.1 million for the six months
ended June 30, 2020, an increase of $3.5 million, or 5%, compared to the prior
period. The increase was attributed primarily to a $443.1 million, or 19%,
increase in the average balances of loans and loans held for sale, partially
offset by lower yields on interest-earning assets. Average tax equivalent loan
yields have declined 53 basis points and the yield on other interest earning
assets has decreased 197 basis points. See the "Net Interest Income and Margin"
discussion above for further information on the decrease in yields.

Interest Expense



For the six months ended June 30, 2020, total interest expense amounted to $8.7
million, a decrease of $2.1 million, or 19%, over the same period in 2019 due
primarily to decreases in the cost of funding, partially offset by increases in
average balances of checking, saving and money market accounts. The average cost
of funding, including the impact of non-interest deposit accounts balances,
decreased 25 basis points. The average balance of checking, savings and money
market accounts increased $191.6 million, or 12%, and the average balance of
borrowed funds increased $57.1 million.


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Deposit growth for the six months ended June 30, 2020, primarily in the second
quarter, has been positively and significantly impacted by the PPP loan funds,
stimulus checks and the ongoing pandemic as the PPP loan monies were distributed
into deposit accounts and many customers are proactively building liquidity in
response to the economic uncertainty caused by the pandemic.

Non-interest deposit accounts are an important component of the Company's core
funding strategy. For the six months ended June 30, 2020, the average balance of
non-interest checking accounts increased $218.6 million, or 29%, as compared to
the same period in 2019. This non-interest-bearing funding source represented
32% and 28% of total average deposit balances for the six months ended June 30,
2020 and June 30, 2019, respectively.

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

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 six months ended June 30, 2020, compared to the
six months ended June 30, 2019.  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
                                                     Net
(Dollars in thousands)                              Change           Volume              Rate
Interest Income
Loans and loans held for sale (tax equivalent)   $    3,934     $      10,832       $      (6,898 )
Investment securities (tax equivalent)                  289               427                (138 )
Other interest-earning assets (1)                      (812 )             102                (914 )
Total interest-earning assets (tax equivalent)        3,411            11,361              (7,950 )

Interest Expense
Interest checking, savings and money market          (2,228 )             743              (2,971 )
CDs                                                      11                41                 (30 )
Brokered CDs                                           (156 )             (85 )               (71 )
Borrowed funds                                          316               478                (162 )
Subordinated debt                                         2                 1                   1
Total interest-bearing funding                       (2,055 )           1,178              (3,233 )

Change in net interest income (tax equivalent) $ 5,466 $ 10,183 $ (4,717 )

_________________________________

(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 six months ended June 30, 2020 and 2019:


                 AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS

                                         Six months ended June 30, 2020                 Six months ended June 30, 2019
                                       Average                        Average         Average                        Average
(Dollars in thousands)                 Balance         Interest(1)   Yield(1)         Balance         Interest(1)   Yield(1)
Assets:
Loans and loans held for
sale(2) (tax equivalent)          $      2,826,991   $      64,248      4.57 %   $      2,383,928   $      60,314      5.10 %
Investment securities(3) (tax
equivalent)                                482,820           7,329      3.04 %            454,885           7,040      3.10 %
Other interest-earning
assets(4)                                   94,678             244      0.52 %             85,629           1,056      2.49 %
Total interest-earnings assets
(tax equivalent)                         3,404,489          71,821      4.24 %          2,924,442          68,410      4.71 %
Other assets                               154,501                                        129,291
Total assets                      $      3,558,990                               $      3,053,733

Liabilities and stockholders'
equity:
Interest checking, savings and
money market                      $      1,815,978           4,650      0.51 %   $      1,624,366           6,878      0.85 %
CDs                                        299,392           2,840      1.91 %            294,939           2,829      1.93 %
Brokered CDs                                20,191             135      1.33 %             31,188             291      1.88 %
Borrowed funds                              78,489             595      1.52 %             21,361             279      2.64 %
Subordinated debt(5)                        14,875             461      6.24 %             14,863             459      6.23 %
Total interest-bearing funding           2,228,925           8,681      

0.78 % 1,986,717 10,736 1.09 %



Net interest-rate spread (tax
equivalent)                                                             3.46 %                                         3.62 %

Non-interest checking                      983,326               -                        764,718               -
Total deposits, borrowed funds
and subordinated debt                    3,212,251           8,681      0.54 %          2,751,435          10,736      0.79 %
Other liabilities                           40,098                                         36,673
Total liabilities                        3,252,349                                      2,788,108

Stockholders' equity                       306,641                                        265,625
Total liabilities and
stockholders' equity              $      3,558,990                               $      3,053,733

Net interest income (tax
equivalent)                                                 63,140                                         57,674
Net interest margin (tax
equivalent)                                                             3.73 %                                         3.97 %
Less tax equivalent adjustment                                 718                                            812
Net interest income                                  $      62,422                                  $      56,862
Net interest margin                                                     3.68 %                                         3.91 %

_______________________________

(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 2020

and 2019, based on tax equivalent adjustments associated with tax exempt


       loans and investments interest income.


(2)    Average loans and loans held for sale include non-accrual loans and are
       net of average deferred loan fees.

(3) Average investment balances are presented at average amortized cost.

(4) Average other interest-earning assets includes interest-earning deposits,

fed funds sold, and FHLB stock.

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








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Provision for Loan Loss



The provision for loan losses under the incurred loss model amounted to amounted
to $8.8 million for the six months ended June 30, 2020, an increase of $8.3
million, compared to the same period in 2019. The provision for the six months
ended June 30, 2020 consisted of $5.2 million in general reserve factor
increases related primarily to economic weakness caused by the pandemic and its
impact on credit quality in the loan portfolio, $2.3 million related to
classified and impaired loans and $1.3 million related to loan growth and other
factors.

The provision for loan losses is a significant factor in the Company's operating
results. For further discussion regarding the provision for loan losses and
management's assessment of the adequacy of the allowance for loan losses see
"Credit Risk," "Asset Quality," and "Allowance for Loan Losses" under "Financial
Condition" in this Item 2, above, and "Credit Risk," "Asset Quality," and
"Allowance for Loan Losses" in the "Financial Condition" section of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 2019 Annual Report on Form 10-K.

Non-Interest Income

Non-interest income for the six months ended June 30, 2020 amounted to $8.2 million, an increase of $332 thousand, or 4%, compared to the six months ended June 30, 2019. The primary components of the increase are as follows:



•      Net gains on loan sales increased due primarily to a higher volume of
       loans originated for sale, particularly in the second quarter of this
       year.


• Other non-interest income decreased slightly mainly due to decreases in

equity investment fair values, partially offset by derivative fee income

in the first quarter of this year.

Non-Interest Expense



Non-interest expense for the six months ended June 30, 2020 amounted to $47.0
million, an increase of $4.4 million, or 10%, compared to the same period in
2019. The significant changes in non-interest expense are as follows:

• Salaries and benefits increased due primarily to the Company's strategic

growth initiatives. There were also several pandemic associated expense

items in the quarter including discretionary awards to recognize team


       contributions including the successful PPP loan effort, among others.



•      Technology and telecommunications increased due primarily to higher

infrastructure costs and expenses associated with the Company's multi-year

digital evolution strategy to enhance operating efficiency and customer


       experience.


• Advertising and public relations costs decreased primarily in the second


       quarter as the Company's business development costs were less due to the
       pandemic and the focus on PPP loan originations.


• Audit, legal and other professional fees increased primarily in other

professional fees, which includes, among other things, consulting and

professional expenses associated with the Company's digital evolution


       strategy.


• Deposit insurance premiums increased primarily in the second quarter due


       mainly to increased FDIC assessment factors and asset growth.


• Other operating expenses decreased largely in the second quarter of 2020

due primarily to the pandemic resulting in lower employee-related expenses

such as training, dues and entertainment, and travel.

Income Taxes

The effective tax rate was 23.8% and 23.7% for the six months ended June 30, 2020 and June 30, 2019, respectively.











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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.

These risks, and the decisions related thereto, include, but are not limited to:
credit risk, market and interest rate risk, legal and regulatory compliance
risk, reputational risk, strategic risk, capital risk, compensation risk,
liquidity management, information technology and cybersecurity risk, internal
controls over financial reporting, physical security, loss and fraud prevention,
policy reviews, vendor management (direct and indirect vendors) and contract
management, business continuity and succession planning, short and long-term
capital projects and facility planning, and corporate governance. See Part I,
Item 1, "Business," under the "Risk Management Framework," section of the
Company's 2019 Annual Report on Form 10-K for additional information on the
Company's key risk mitigation strategies.

This Form 10-Q discusses certain key risks facing the Company and the Bank, including the following: • Credit risk management is reviewed in detail in this Item 2 under the


       heading "Credit Risk," above.


• Liquidity management is the coordination of activities so that cash needs

are anticipated and met, readily and efficiently. Liquidity management is


       reviewed in this Item 2 under the heading "Liquidity, " above.


•      Capital adequacy risk and regulatory requirements are reviewed in this
       Item 2, under the heading "Capital Resources" above.


•      Interest-rate risk is reviewed under Part I, Item 3, "Quantitative and
       Qualitative Disclosures About Market Risk," below.


In addition, certain heightened risks associated with the ongoing pandemic are outlined in Part II, Item 1A, "Risk Factors," in this Form 10-Q, below.



In January 2020, management activated our pandemic response team in light of the
ongoing pandemic and have utilized established business continuity protocols
since that time to provide uninterrupted service to our customers and
communities. The pandemic response team quickly coordinated resources and
responses across the Bank in order to (i) provide for the safety of our team
members, customers, and business partners, (ii) maintain sound business
operations, and (iii) minimize the risks identified above. Team leaders are in
constant communication and continually strategize and implement coordinated
efforts to mitigate the risk identified above, among others. We have modified
our protocols and procedures as circumstances have evolved and we will continue
to monitor the impact of the pandemic on many fronts as the pandemic continues
longer than originally expected, and as activities shift towards reopening of
local economies and business activity.

In addition to the risks outlined in this Form 10-Q, numerous other factors that
could adversely affect the Company's future results of operations and financial
condition, and its reputation and business model, are addressed in Part I, Item
1A, "Risk Factors," of the Company's 2019 Annual Report on Form 10-K.

               Accounting Policies/Critical Accounting Estimates

As discussed in the Company's 2019 Annual Report on Form 10-K, the three most
significant areas in which management applies critical assumptions and estimates
that are particularly susceptible to change relate to the determination of the
allowance for loan losses, impairment review of investment securities and the
impairment review of goodwill.  The Company has not materially changed its
significant accounting and reporting policies from those disclosed in its 2019
Annual Report on Form 10-K.

                        Recent Accounting Pronouncements

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


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