0001025835-20-000053.txt : 20200724 0001025835-20-000053.hdr.sgml : 20200724 20200724165954 ACCESSION NUMBER: 0001025835-20-000053 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 71 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200724 DATE AS OF CHANGE: 20200724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERPRISE FINANCIAL SERVICES CORP CENTRAL INDEX KEY: 0001025835 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 431706259 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15373 FILM NUMBER: 201047474 BUSINESS ADDRESS: STREET 1: 150 NORTH MERAMEC STREET 2: 150 NORTH MERAMEC CITY: CLAYTON STATE: MO ZIP: 63105 BUSINESS PHONE: 3147255500 MAIL ADDRESS: STREET 1: 150 NORTH MERAMEC STREET 2: 150 NORTH MERAMEC CITY: CLAYTON STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: ENTERBANK HOLDINGS INC DATE OF NAME CHANGE: 19961024 10-Q 1 efsc2020630-10q.htm 10-Q Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
 
FORM 10-Q
 
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2020.

 
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ______

Commission file number 001-15373

ENTERPRISE FINANCIAL SERVICES CORP

Incorporated in the State of Delaware
I.R.S. Employer Identification # 43-1706259
Address: 150 North Meramec
Clayton, MO 63105
Telephone: (314) 725-5500
___________________
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
EFSC
 
Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes   No
 
As of July 22, 2020, the Registrant had 26,206,044 shares of outstanding common stock, $0.01 par value per share.

This document is also available through our website at http://www.enterprisebank.com.
 






ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
Page
PART I - FINANCIAL INFORMATION
 
 
 
 
Item 1.  Financial Statements
 
 
 
Condensed Consolidated Balance Sheets (Unaudited)
 
 
Condensed Consolidated Statements of Operations (Unaudited)
 
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
 
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
 
 
Item 4. Controls and Procedures
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1.  Legal Proceedings
 
 
 
Item 1A.  Risk Factors
 
 
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3. Defaults Upon Senior Securities
 
 
 
Item 4. Mine Safety Disclosures
 
 
 
Item 5. Other Information
 
 
 
Item 6. Exhibits
 
 
Signatures
 
 
 
 




Glossary of Acronyms, Abbreviations and Entities

The acronyms and abbreviations identified below are used in various sections of this Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

ACL
Allowance for Credit Losses
 
FDIC
Federal Deposit Insurance Corporation
ACLL
Allowance for Credit Losses on Loans (excludes allowance for securities and allowance for unfunded commitments)
 
FHLB
Federal Home Loan Bank
ASC
Accounting Standards Codification
 
GAAP
Generally Accepted Accounting Principles (United States)
ASU
Accounting Standards Update
 
LIBOR
London Interbank Offered Rate
Bank
Enterprise Bank & Trust
 
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations
C&I
Commercial and Industrial
 
PCD
Purchased Credit Deteriorated
CECL
Current Expected Credit Loss
 
PCI
Purchased Credit Impaired
Company
Enterprise Financial Services Corp and Subsidiaries
 
PPP
Paycheck Protection Program
CRE
Commercial Real Estate
 
SBA
Small Business Administration
DCF
Discounted Cash Flow
 
SEC
Securities and Exchange Commission
EFSC
Enterprise Financial Services Corp
 
SOFR
Secured Overnight Financing Rate
Enterprise
Enterprise Financial Services Corp and Subsidiaries
 
Trinity
Trinity Capital Corporation
FASB
Financial Accounting Standards Board
 
 
 





PART 1 - ITEM 1 - FINANCIAL STATEMENTS
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
June 30, 2020
 
December 31, 2019
Assets
 
 
 
Cash and due from banks
$
100,804

 
$
74,769

Federal funds sold
2,381

 
3,060

Interest-earning deposits (including $47,085 and $15,285 pledged as collateral, respectively)
245,542

 
89,427

Total cash and cash equivalents
348,727

 
167,256

Interest-earning deposits greater than 90 days
6,907

 
3,730

Securities available-for-sale
998,104

 
1,135,317

Securities held-to-maturity, net
345,791

 
181,166

Loans held-for-sale
16,029

 
5,570

Loans
6,140,051

 
5,314,337

Less: Allowance for credit losses on loans
110,270

 
43,288

Total loans, net
6,029,781

 
5,271,049

Other investments
43,106

 
38,044

Fixed assets, net
58,231

 
60,013

Goodwill
210,344

 
210,344

Intangible assets, net
23,196

 
26,076

Other assets
277,285

 
235,226

Total assets
$
8,357,501

 
$
7,333,791

 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
Noninterest-bearing deposit accounts
$
1,965,868

 
$
1,327,348

Interest-bearing transaction accounts
1,508,535

 
1,367,444

Money market accounts
1,962,916

 
1,713,615

Savings accounts
603,095

 
536,169

Certificates of deposit:
 
 
 
Brokered
85,414

 
215,758

Other
573,752

 
610,689

Total deposits
6,699,580

 
5,771,023

Subordinated debentures and notes
203,384

 
141,258

FHLB advances
250,000

 
222,406

Other borrowings
196,532

 
230,886

Notes payable
31,429

 
34,286

Other liabilities
108,613

 
66,747

Total liabilities
$
7,489,538

 
$
6,466,606

 
 
 
 
Commitments and contingent liabilities (Note 5)
 
 
 
 
 
 
 
Shareholders' equity:
 
 
 
Preferred stock, $0.01 par value;
5,000,000 shares authorized; 0 shares issued and outstanding

 

Common stock, $0.01 par value; 45,000,000 shares authorized; 28,176,087 and 28,067,087 shares issued, respectively
281

 
281

Treasury stock, at cost; 1,980,093 and 1,523,842 shares, respectively
(73,528
)
 
(58,181
)
Additional paid in capital
527,734

 
526,599

Retained earnings
380,667

 
380,737

Accumulated other comprehensive income
32,809

 
17,749

Total shareholders' equity
867,963

 
867,185

Total liabilities and shareholders' equity
$
8,357,501

 
$
7,333,791

The accompanying notes are an integral part of these consolidated financial statements.

1



ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands, except per share data)
2020
 
2019
 
2020
 
2019
Interest income:
 
 
 
 
 
 
 
Interest and fees on loans
$
64,478

 
$
69,628

 
$
131,647

 
$
130,653

Interest on debt securities:
 
 
 
 
 
 
 
Taxable
6,587

 
7,757

 
14,144

 
13,232

Nontaxable
1,812

 
861

 
3,301

 
1,308

Interest on interest-earning deposits
87

 
703

 
387

 
1,150

Dividends on equity securities
227

 
252

 
400

 
475

Total interest income
73,191

 
79,201


149,879


146,818

Interest expense:
 
 
 
 
 
 
 
Deposits
4,383

 
13,119

 
14,271

 
24,939

Subordinated debentures and notes
2,316

 
1,958

 
4,235

 
3,606

FHLB advances
455

 
1,696

 
1,350

 
3,094

Notes payable and other borrowings
204

 
713

 
822

 
1,121

Total interest expense
7,358

 
17,486


20,678


32,760

Net interest income
65,833

 
61,715

 
129,201

 
114,058

Provision for credit losses
19,591

 
1,722

 
41,855

 
3,198

Net interest income after provision for credit losses
46,242

 
59,993


87,346


110,860

Noninterest income:
 
 
 
 
 
 
 
Service charges on deposit accounts
2,616

 
3,366

 
5,759

 
6,301

Wealth management revenue
2,326

 
2,661

 
4,827

 
4,653

Card services revenue
2,225

 
2,461

 
4,472

 
4,251

Tax credit income
(221
)
 
572

 
1,815

 
730

Miscellaneous income
3,014

 
2,904

 
6,495

 
5,259

Total noninterest income
9,960

 
11,964


23,368


21,194

Noninterest expense:
 
 
 
 
 
 
 
Employee compensation and benefits
22,389

 
20,687

 
44,074

 
40,039

Occupancy
3,185

 
3,188

 
6,532

 
5,825

Data processing
2,144

 
2,458

 
4,226

 
4,364

Professional fees
1,287

 
1,037

 
2,149

 
1,783

Merger-related expenses

 
10,306

 

 
17,576

Other
8,907

 
11,378

 
19,604

 
19,305

Total noninterest expense
37,912

 
49,054


76,585


88,892

 
 
 
 
 
 
 
 
Income before income tax expense
18,290

 
22,903


34,129


43,162

Income tax expense
3,656

 
4,479

 
6,627

 
8,582

Net income
$
14,634

 
$
18,424


$
27,502


$
34,580

 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
Basic
$
0.56

 
$
0.69

 
$
1.04

 
$
1.36

Diluted
0.56

 
0.68

 
1.04

 
1.36

The accompanying notes are an integral part of these consolidated financial statements.

2




ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
2020
 
2019
 
2020
 
2019
Net income
$
14,634

 
$
18,424

 
$
27,502

 
$
34,580

Other comprehensive income (loss), after-tax:
 
 
 
 
 
 
 
Change in unrealized gain on available-for-sale debt securities
10,984

 
12,842

 
21,548

 
24,344

Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities

 

 
(3
)
 
220

Reclassification of (gain) loss on held-to-maturity securities
(329
)
 
3

 
(485
)
 
5

Change in unrealized loss on cash flow hedges arising during the period
(1,177
)
 
(1,265
)
 
(6,357
)
 
(2,217
)
Reclassification of loss on cash flow hedges
234

 
4

 
357

 
4

Total other comprehensive income, after-tax
9,712

 
11,584

 
15,060

 
22,356

Comprehensive income
$
24,346

 
$
30,008

 
$
42,562

 
$
56,936


The accompanying notes are an integral part of these consolidated financial statements.


3



ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
Three and six months ended June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except per share data)
Common Stock
 
Treasury Stock
 
Additional paid in capital
 
Retained earnings
 
Accumulated
other
comprehensive income (loss)
 
Total
shareholders’ equity
Balance at March 31, 2020
$
281

 
$
(73,528
)
 
$
525,838

 
$
370,748

 
$
23,097

 
$
846,436

Net income

 

 

 
14,634

 

 
14,634

Other comprehensive income

 

 

 

 
9,712

 
9,712

Comprehensive income

 

 

 
14,634

 
9,712

 
24,346

Cash dividends paid on common shares, $0.18 per share

 

 

 
(4,715
)
 

 
(4,715
)
Issuance under equity compensation plans, 35,485 shares, net

 

 
827

 

 

 
827

Share-based compensation

 

 
1,069

 

 

 
1,069

Balance at June 30, 2020
$
281

 
$
(73,528
)
 
$
527,734

 
$
380,667

 
$
32,809

 
$
867,963

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019
$
281

 
$
(58,181
)
 
$
526,599

 
$
380,737

 
$
17,749

 
$
867,185

Net income

 

 

 
27,502

 

 
27,502

Other comprehensive income

 

 

 

 
15,060

 
15,060

Total comprehensive income

 

 

 
27,502

 
15,060

 
42,562

Cash dividends paid on common shares, $0.36 per share

 

 

 
(9,458
)
 

 
(9,458
)
Repurchase of common shares

 
(15,347
)
 

 

 

 
(15,347
)
Issuance under equity compensation plans, 109,000 shares, net

 

 
(894
)
 

 

 
(894
)
Share-based compensation

 

 
2,029

 

 

 
2,029

Reclassification for the adoption of ASU 2016-13 (CECL)

 

 

 
(18,114
)
 

 
(18,114
)
Balance at June 30, 2020
$
281

 
$
(73,528
)
 
$
527,734

 
$
380,667

 
$
32,809

 
$
867,963

 
 
 
 
 
 
 
 
 
 
 
 
Three and six months ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except per share data)
Common Stock
 
Treasury Stock
 
Additional paid in capital
 
Retained earnings
 
Accumulated
other
comprehensive income (loss)
 
Total
shareholders’ equity
Balance at March 31, 2019
$
280

 
$
(42,655
)
 
$
521,761

 
$
316,959

 
$
1,490

 
$
797,835

Net income

 

 

 
18,424

 

 
18,424

Other comprehensive income

 

 

 

 
11,584

 
11,584

Comprehensive income

 

 

 
18,424

 
11,584

 
30,008

Cash dividends paid on common shares, $0.15 per share

 

 

 
(4,035
)
 

 
(4,035
)
Issuance under equity compensation plans, 28,341 shares, net

 

 
707

 

 

 
707

Share-based compensation

 

 
986

 

 

 
986

Balance at June 30, 2019
$
280

 
$
(42,655
)
 
$
523,454

 
$
331,348

 
$
13,074

 
$
825,501

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
$
239

 
$
(42,655
)
 
$
350,936

 
$
304,566

 
$
(9,282
)
 
$
603,804

Net income

 

 

 
34,580

 

 
34,580

Other comprehensive income

 

 

 

 
22,356

 
22,356

Total comprehensive income

 

 

 
34,580

 
22,356

 
56,936

Cash dividends paid on common shares, $0.29 per share

 

 

 
(7,798
)
 

 
(7,798
)
Issuance under equity compensation plans, 103,430 shares, net
1

 

 
(1,234
)
 

 

 
(1,233
)
Share-based compensation

 

 
1,907

 

 

 
1,907

Shares issued in connection with acquisition of Trinity Capital Corporation, 3,990,822 shares
40

 

 
171,845

 

 

 
171,885

Balance at June 30, 2019
$
280

 
$
(42,655
)
 
$
523,454

 
$
331,348

 
$
13,074

 
$
825,501

The accompanying notes are an integral part of these consolidated financial statements.

4



ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Six months ended June 30,
(in thousands, except share data)
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
27,502

 
$
34,580

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation
3,048

 
2,743

Provision for credit losses
41,855

 
3,198

Deferred income taxes
(4,937
)
 
3,813

Net amortization of debt securities
2,756

 
1,189

Amortization of intangible assets
2,880

 
2,418

Mortgage loans originated-for-sale
(94,536
)
 
(11,645
)
Proceeds from mortgage loans sold
84,799

 
10,629

Loss (gain) on:
 
 
 
Sale of investment securities
(4
)
 
292

Sale of other real estate
5

 
(48
)
Sale of state tax credits
(211
)
 
(107
)
Share-based compensation
2,029

 
1,907

Net accretion of loan discount
(4,049
)
 
(4,702
)
Changes in other assets and liabilities, net
(2,277
)
 
(23,700
)
Net cash provided by operating activities
58,860

 
20,567

Cash flows from investing activities:
 
 
 
Acquisition cash purchase price, net of cash and cash equivalents acquired

 
(23,377
)
Net increase in loans
(815,437
)
 
(121,115
)
Proceeds received from:
 
 
 
Sale of debt securities, available-for-sale
207

 
263,298

Paydown or maturity of debt securities, available-for-sale
140,218

 
58,229

Paydown or maturity of debt securities, held-to-maturity
8,711

 
2,864

Redemption of other investments
25,978

 
31,138

Sale of state tax credits held for sale
1,924

 
2,252

Sale of other real estate
609

 
2,281

Settlement of bank-owned life insurance policies
974

 

Payments for the purchase of:
 
 
 
Available-for-sale debt securities
(152,082
)
 
(363,900
)
Other investments
(38,527
)
 
(43,589
)
State tax credits held for sale
(3,730
)
 
(1,852
)
Fixed assets, net
(1,532
)
 
(2,236
)
Net cash used in investing activities
(832,687
)
 
(196,007
)
Cash flows from financing activities:
 
 
 
Net increase (decrease) in noninterest-bearing deposit accounts
638,520

 
(88,219
)
Net increase (decrease) in interest-bearing deposit accounts
290,036

 
(21,615
)
Proceeds from FHLB advances, net
27,700

 
312,500

Proceeds from notes payable

 
40,000

Repayments of notes payable
(2,857
)
 
(4,857
)
Proceeds from issuance of subordinated debentures, net
61,953

 

Net decrease in other borrowings
(34,355
)
 
(60,490
)
Cash dividends paid on common stock
(9,458
)
 
(7,798
)
Payments for the repurchase of common stock
(15,347
)
 

Payments for the issuance of equity instruments, net
(894
)
 
(1,233
)
Net cash provided by financing activities
955,298

 
168,288

Net increase (decrease) in cash and cash equivalents
181,471

 
(7,152
)
Cash and cash equivalents, beginning of period
167,256

 
196,552

Cash and cash equivalents, end of period
$
348,727

 
$
189,400

Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
20,574

 
$
32,036

Income taxes
30

 
11,915

Noncash transactions:
 
 
 
Transfer to other real estate owned in settlement of loans
$

 
$
7,783

Sales of other real estate financed
48

 

Right-of-use assets obtained in exchange for lease obligations
200

 

Common shares issued in connection with acquisition

 
171,885

Transfer of securities from available for sale to held to maturity
163,592

 


The accompanying notes are an integral part of these consolidated financial statements.

5



ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used by Enterprise Financial Services Corp (the “Company,” “EFSC,” or “Enterprise”) in the preparation of the condensed consolidated financial statements are summarized below:

Business and Consolidation

Enterprise is a financial holding company that provides a full range of banking and wealth management services to individuals and corporate customers located in the Arizona, Kansas, Missouri, and New Mexico markets through its banking subsidiary, Enterprise Bank & Trust.

Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC.

Basis of Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated.

In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the statements of financial position, results of operations, and cash flow for the interim periods.

Recently Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology commonly referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. In addition, this standard made changes to the accounting for available-for-sale debt securities, including the requirement for credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities.
The Company adopted this standard using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under the new standard while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded an after-tax decrease to retained earnings of $18.1 million as of January 1, 2020 for the cumulative effect of adopting this standard.
The Company adopted this standard using the prospective transition approach for PCD assets that were previously classified as PCI assets. Management did not reassess whether PCI assets met the criteria of PCD assets as of the date of the adoption.

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The Company elected not to maintain PCI pools for certain loans which are now accounted for individually. Thus they are now included in nonperforming and classified loans. Management did not reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption.

The following table illustrates the impact of adoption:
 
 
 
 
 
 
($ in thousands)
December 31, 2019
 
Impact of Adoption
 
January 1, 2020

Assets: