<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 [Fee Required]
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
Commission file number 333-14737
--------------------
ENTERBANK HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 43-1706259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
150 NORTH MERAMEC, CLAYTON, MO 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-725-5500
--------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of April 30, 1997:
Common Stock, par value $.01, 2,113,972 shares outstanding
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<PAGE> 2
<TABLE>
ENTERBANK HOLDINGS, INC.
1997 REPORT ON FORM 10-Q
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheet 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial Condition and Results
of Operations 5
Signatures 13
Exhibit Index 14
</TABLE>
<PAGE> 3
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
<CAPTION>
March 31, December 31,
Assets 1997 1996
------ ------------ -----------
<S> <C> <C>
Cash and due from banks $ 10,766,675 $ 9,261,035
Federal funds sold 33,325,000 23,250,000
Interest bearing deposits 21,709 --
Investments in debt and equity securities:
Available for sale, at estimated fair 21,338,386 14,005,797
Held to maturity, at amortized cost
(estimated fair value of $826,612 at March 31, 1997
and $1,239,498 at December 31, 1996) 830,461 1,240,183
------------ ------------
Total investments in debt and equity securities 22,168,847 15,245,980
------------ ------------
Loans, less unearned loan fees 148,202,655 134,133,092
Less allowance for loan losses 1,860,000 1,765,000
------------ ------------
Loans, net 146,342,655 132,368,092
------------ ------------
Other real estate owned 874,426 874,426
Office equipment and leasehold improvements 1,243,206 1,119,268
Accrued interest receivable 1,036,766 935,864
Investment in Enterprise Fund, L.P. 228,786 550,087
Prepaid expenses and other assets 1,791,621 979,361
------------ ------------
Total assets $217,799,691 $184,584,113
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Deposits:
Demand $ 29,416,647 $ 31,137,649
Interest-bearing transaction accounts 16,304,193 16,648,185
Money market accounts 73,863,555 54,637,747
Savings 1,213,842 1,030,346
Certificates of deposit:
$100,000 and over 28,163,841 24,067,363
Other 46,168,154 41,439,799
------------ ------------
Total deposits 195,130,232 168,961,089
Notes payable -- 300,000
Accounts payable and accrued expenses 658,320 565,131
------------ ------------
Total liabilities 195,788,552 169,826,220
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; authorized 3,000,000
shares; issued and outstanding 2,113,972 shares
at March 31, 1997 and 1,662,360 shares at
December 31, 1996 21,140 16,624
Surplus 16,447,958 9,595,956
Retained earnings 5,554,677 5,138,612
Net unrealized holding gains (losses) on
available-for-sale securities (12,636) 6,701
------------ ------------
Total shareholders' equity 22,011,139 14,757,893
------------ ------------
Total liabilities and shareholders' equity $217,799,691 $184,584,113
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
1
<PAGE> 4
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three months ended March 31, 1997 and 1996
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Interest income:
Interest and fees on loans $3,305,836 2,609,189
Interest on debt securities:
Taxable 241,231 198,641
Nontaxable 9,692 8,881
Interest on federal funds sold 309,059 89,205
Interest on certificates of deposit 135 --
---------- ---------
Total interest income 3,865,953 2,905,916
---------- ---------
Interest expense:
Interest-bearing transaction accounts 94,870 94,043
Money market accounts 749,452 451,205
Savings 7,796 7,413
Certificates of deposit:
$100,000 and over 350,747 381,643
Other 637,992 359,979
Federal funds purchased -- --
Notes payable 2,888 --
---------- ---------
Total interest expense 1,843,745 1,294,283
---------- ---------
Net interest income 2,022,208 1,611,633
Provision for loan losses 98,574 46,756
---------- ---------
Net interest income after
provision for loan losses 1,923,634 1,564,877
---------- ---------
Noninterest income:
Service charges on deposit accounts 35,340 32,055
Other service charges and fee income 79,771 211,751
Loss on investment in Enterprise Fund, L.P. (1,801) (3,814)
---------- ---------
Total noninterest income 113,310 239,992
---------- ---------
Noninterest expense:
Salaries 606,481 437,414
Payroll taxes and employee benefits 209,677 201,567
Occupancy 95,550 71,818
FDIC insurance 9,324 500
Data processing 61,179 49,976
Other 300,129 373,625
---------- ---------
Total noninterest expense 1,282,340 1,134,900
---------- ---------
Income before income tax expense 754,604 669,969
Income tax expense 290,972 260,231
---------- ---------
Net income $ 463,632 409,738
========== =========
Earnings per share $ 0.23 0.24
Weighted average common shares and common stock
equivalents outstanding 2,010,179 1,674,263
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE> 5
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 1997 and 1996
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 463,631 $ 409,738
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 70,463 49,280
Provision for loan losses 98,574 46,756
Net accretion of debt securities (61,633) 8,108
Loss on investment in Enterprise Fund, L.P. 1,801 3,814
(Increase) decrease in accrued interest receivable (100,902) 69,609
(Increase) decrease in prepaid expenses and
other assets (812,262) (128,076)
Increase in accounts payable and accrued
expenses 103,153 263,811
------------ -----------
Net cash provided by operating activities (237,175) 723,040
------------ -----------
Cash flows from investing activities:
(Increase) decrease in federal funds sold (10,075,000) 11,230,000
(Increase) decrease in interest earning deposits (21,709) --
Purchases of available-for-sale debt securities (11,866,590) (989,794)
Purchases of available-for-sale equity securities (90,500) (94,200)
Proceeds from maturities of available-for-sale
debt securities 4,660,000 4,800,000
Proceeds from maturities and principal paydowns on
held-to-maturity debt securities 406,556 1,516
Net increase in loans (14,073,137) (813,686)
Purchases of office equipment and leasehold improvements (194,401) (104,916)
(Increase) decrease in Investment in Enterprise
Fund, L.P. 319,500 --
------------ -----------
Net cash used in investing activities (30,935,281) 14,028,920
------------ -----------
Cash flows from financing activities:
Net increase in demand and savings accounts 17,344,310 (9,837,438)
Net increase in certificates of deposit 8,824,833 (27,802)
Increase (decrease) in notes payable (300,000) --
Cash dividends paid (47,565) --
Proceeds from the issuance of common stock 6,856,518 --
------------ -----------
Net cash provided by financing activities 32,678,096 (9,865,240)
------------ -----------
Net increase in cash and due from banks 1,505,640 4,886,720
Cash and due from banks, beginning of period 9,261,035 8,109,804
------------ -----------
Cash and due from banks, end of period $ 10,766,675 $12,996,524
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,820,428 $ 1,333,888
Income taxes 259,322 151,759
Noncash transactions:
Transfers to other real estate owned in settlement
of loans -- 50,000
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 1997 and 1996
NOTE 1--BASIS OF PRESENTATION
The accompanying consolidated financial statements of Enterbank Holdings,
Inc. and subsidiaries (the Company) are unaudited and should be read in
conjunction with the consolidated financial statements contained in the 1996
annual report on Form 10-K. In the opinion of management, all adjustments,
consisting of normal recurring accruals considered necessary for a fair
presentation of the results of operations for the interim periods presented
herein, have been included. Operating results for the three month period
ended March 31, 1997 are not necessarily indicative of the results that may
be expected for any other interim period or for the year ending December 31,
1997.
NOTE 2--ORGANIZATION
On May 9, 1995, Enterbank Holdings, Inc. was formed as a bank holding
company. Enterbank Holdings, Inc. exchanged 1,463,400 shares of Enterbank
Holdings, Inc. for all 73,170 (100%) of outstanding shares of Enterprise Bank
in a twenty-for-one stock exchange. The merger represented a combination of
entities under common control and, accordingly, was accounted for in a manner
similar to a pooling of interest. Therefore, results of operations for
periods prior to May 9, 1995 reflect the results of operations for Enterprise
Bank.
Additionally, Enterprise Capital Resources, Inc. was formed as a small
business investment company in 1995 and, on May 11, 1995, Enterbank Holdings,
Inc. acquired 100% of the outstanding shares of Enterprise Capital Resources,
Inc.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
The Company provides a full range of banking services to individual and
corporate customers located within St. Louis, Missouri and the surrounding
communities through its subsidiary, Enterprise Bank (the Bank). The Company
is subject to competition from other financial and nonfinancial institutions
providing financial services in the markets served by the Company's
subsidiaries. Additionally, the Company and its subsidiaries are subject to
the regulations of certain federal and state agencies and undergo periodic
examinations by those regulatory agencies.
NOTE 3--STOCK OFFERING
On February 14, 1997, the Company completed a stock offering of 451,612
shares of Common Stock. These shares were offered to the public at $15.50
per share. The offering allowed for the sale of a minimum of 193,548 shares,
or $3,000,000, and a maximum of 451,612 shares, or $7,000,000 in Common
Stock. The maximum number of shares was sold at $15.50 per share.
4
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL COMMENTS
CHANGES IN MANAGEMENT
Effective April 15, 1997 Joseph D. Garea resigned as Chief Financial Officer
of the Company and James C. Wagner, formerly the Principal Accounting
Officer, was appointed Chief Financial officer of the Company. Mr. Garea
remains on the Company's board of directors but is no longer a full time
employee of the Company. Mr. Wagner has been employed by the Company (and
its subsidiary bank) since May 1988.
FINANCIAL CONDITION
Total assets at March 31, 1997 were $218 million, an increase of $33 million,
or 18%, over total assets of $185 million at December 31, 1996. Loans and
leases were $148 million, an increase of $14 million, or 10%, over total
loans and leases of $134 million at December 31, 1996. Federal funds sold
and investment securities were $55 million, an increase of $17 million, or
45%, over total federal funds sold and investment securities of $38 million
at December 31, 1996.
Total deposits at March 31, 1997 were $195 million, an increase of $26
million, or 15%, over total deposits of $169 million at December 31, 1996.
Deposit growth occurred primarily in money market accounts and certificates
of deposit. Total money market accounts at March 31, 1997 were $74 million,
an increase of $19 million, or 35%, over total money market accounts of $55
million at December 31, 1997. Total certificates of deposit at March 31,
1997 were $74 million, an increase of $8 million, or 12%, over total
certificates of deposit of $66 million at December 31, 1996.
Total shareholders' equity increased $7.3 million primarily due to retained
earnings of $416,000 for the three months ended March 31, 1997 and net
proceeds of $6.9 million from the sale of common stock.
On March 19, 1997, the Board of Directors of the Company approved an
investment of $510,000 in City Bancorp, a proposed Missouri bank holding
company. The investment is held in escrow pending regulatory approval of the
proposed holding company, bank charter and investment. The funds held in
escrow are included in prepaid expenses and other assets, representing
$510,000 of the $810,000 increase in prepaid expenses and other assets from
December 31, 1996. City Bancorp is the proposed holding company for a
proposed newly chartered Missouri state bank which will be located in
Springfield, Missouri. The Company believes this investment will provide an
opportunity to participate in the growing Springfield market by affiliating
with an organization with a philosophy similar to its own. The management of
City Bancorp consists of individuals with whom Company's management has
worked with in the past and has a good reputation in the banking industry.
RESULTS OF OPERATIONS
Net income was $464,000 for the three months ended March 31, 1997, an
increase of 13% over net income of $410,000 for the same period in 1996.
Earnings per share was $0.23 and $0.24 for the three months ended March 31,
1997 and 1996, respectively. The $0.01 decrease in earnings per share
primarily resulted from an increase in weighted average common stock
equivalents outstanding of 335,916 from March 31, 1996 to March 31, 1997.
Weighted average common stock equivalents increased primarily from the
issuance of 198,960 shares of Common Stock upon the exercise of outstanding
warrants in August 1996 and the issuance of 451,612 shares of common stock on
February 14, 1997 in the Company's common stock offering.
5
<PAGE> 8
NET INTEREST INCOME
Net interest income (presented on a tax equivalent basis) was $2.03 million
or 4.48% of average earning assets (net interest margin), for the three
months ended March 31, 1997 compared to $1.62 million, or 4.93% of average
earning asset, for the same period in 1996. The $410,000, or 25%, increase
in net interest income resulted primarily from an increase of $51.6 million
in average earning assets to $183.6 million at March 31, 1997 from $132.0
million at March 31, 1996, offset by a lower average earning asset yield and
higher cost of deposits.
The yield on average earnings assets decreased from 8.87% for the three
months ended March 31, 1996 to 8.55% for the same period in 1997. The
decrease is primarily the result of two factors:
1. A decrease in the average yield on loans and taxable investment
securities due to a general decrease in interest rates.
2. A change in the mix of earning assets from higher yielding assets,
such as loans, to lower yielding assets, such as investment
securities and federal funds sold. For the three months ended
March 31, 1997, loans averaged 72.22% of total assets compared to
77.22% of total assets for the same period in 1996.
The yield on interest bearing deposits increased from 4.87% for the three
months ended March 31, 1996 to 5.02% for the same period in 1997. The
increase is primarily the result of two factors:
1. An increase in the cost of money market accounts due to modifications
in the rate structure for money market accounts. At the end of
1996, the Company changed the money market accounts offered to
customers to pay accounts with collected balances over $300,000 a
higher rate. This raised the average cost of money market
accounts from 4.45% for the three months ended March 31, 1996 to
4.72% for the same period in 1997.
2. A change in the mix of interest bearing liabilities from lower cost
deposits, such as interest bearing transaction accounts and
savings accounts, to higher cost deposits such as money market
accounts and certificates of deposit. For the three months ended
March 31, 1997, money market and certificates of deposit accounts
averaged 67.86% of average assets compare to 63.75% for the same
period in 1996.
6
<PAGE> 9
The following table sets forth, on a tax-equivalent basis, certain
information relating to the Company's average balance sheet, and reflects the
average yield earned on interest-earning assets, the average cost of
interest-bearing liabilities and the resulting net interest income for the
three month periods ended March 31:
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------------------------------------------------------
1997 1996
----------------------------------------- ---------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate
------- -------- -------- ------- ------- -------- -------- -------
Assets (Dollars in Thousands)
- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans<F1> $141,411 72.22% $3,308 9.49% $110,374 77.22% $2,612 9.52%
Taxable investments in debt
securities 17,487 8.93 241 5.59 13,979 9.78 199 5.73
Non-taxable investments in
debt securities 858 0.44 14 6.62 791 0.55 12 6.10
Federal funds sold 23,800 12.16 309 5.27 6,859 4.80 89 5.22
Interest earning deposits 23 0.01 -- 2.38 -- -- -- --
-------- ------ ------ ----- -------- ------ ------ ----
Total interest-earning assets 183,579 93.76 3,872 8.55 132,003 92.35 2,912 8.87
------ ===== ------ ====
Non-interest-earning assets:
Cash and due from banks 9,536 4.87 8,681 6.07
Equipment and leasehold improvements 1,187 0.61 811 0.57
Prepaid expenses and other assets 3,311 1.69 2,887 2.02
Allowance for possible loan losses (1,822) (0.93) (1,439) (1.01)
-------- ------ -------- ------
Total assets $195,791 100.00% $142,943 100.00%
======== ====== ======== ======
Liabilities and shareholders' equity
- ------------------------------------
Interest-bearing liabilities:
Interest-bearing transaction
accounts 14,815 7.57% $ 95 2.60% $ 14,846 10.39% $ 94 2.55%
Money market 64,415 32.90 749 4.72 40,721 28.49 451 4.45
Savings 1,132 0.58 8 2.87 996 0.70 7 2.83
Certificates of deposit 68,456 34.96 989 5.86 50,408 35.26 742 5.92
Notes payable 100 0.05 3 12.17 -- -- -- --
Federal funds purchased -- -- -- -- -- -- -- --
-------- ------ ------ ----- -------- ------ ------ ----
Total interest-bearing liabilities 148,919 76.06 1,844 5.02 106,971 74.84 1,294 4.87
------ ===== ------ ====
Noninterest-bearing liabilities
Demand deposits 27,156 13.87 22,459 15.71
Other liabilities 4 -- 1,187 0.83
-------- ------ -------- ------
Total liabilities 176,079 89.93 130,617 91.38
Shareholders' equity 19,712 10.07 12,326 8.62
-------- ------ -------- ------
Total liabilities and shareholders'
equity $195,791 100.00% $142,943 100.00%
======== ====== ======== ======
Net interest income $2,028 $1,618
====== ======
Net interest margin 4.48% 4.93%
===== ====
<FN>
- -------------------------
<F1> Average balances include non-accrual loans. The income on such loans is
included in interest but is recognized only upon receipt. Loan fees
included in interest income are approximately $135,000 and $113,000
for the three months ended March 31, 1997 and 1996, respectively.
<F2> Non-taxable investment income is presented on a fully tax-equivalent
basis assuming a tax a tax rate of 34%.
</TABLE>
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses was $99,000 compared to $47,000 for
the three months ended March 31, 1997 and 1996, respectively. The increase
in provision reflects an increase in net loan charge-offs of $4,000 from net
loan recoveries of $3,000 for the three months ended March 31, 1997 and 1996,
respectively, and loan growth during the same period.
7
<PAGE> 10
The following table summarizes changes in the allowance for loan losses
arising from loans charged-off and recoveries on loans previously
charged-off, by loan category, and additions to the allowance that have been
charged to expense:
<TABLE>
<CAPTION>
March 31,
---------------------
1997 1996
--------- --------
(Dollars in Thousands)
<S> <C> <C>
Allowance at beginning of period $ 1,765 $ 1,400
--------- --------
Loans charged off:
Commercial and industrial 24 --
Real estate:
Commercial -- --
Construction -- --
Residential -- --
Consumer and other -- --
--------- --------
Total loans charged off 24 --
--------- --------
Recoveries of loans previously charged off:
Commercial and industrial 18 --
Real estate:
Commercial -- 3
Construction -- --
Residential 2 --
Consumer and other -- --
--------- --------
Total recoveries of loans previously charged off 20 3
--------- --------
Net loans charged off (recovered) 4 (3)
--------- --------
Provisions charged to operations 99 47
--------- --------
Allowance at end of period $ 1,860 $ 1,450
========= ========
Average loans 141,411 110,374
Total loans 148,203 111,231
Nonperforming loans 100 392
Net charge-offs (recoveries) to average loans 0.00% (0.00)%
Allowance for possible loan losses to loans 1.26 1.30
Allowance for possible loan losses to non- 1,860.00 369.90
performing loans
</TABLE>
The allowance for loan losses is maintained at a level considered adequate to
provide for potential losses. The provision for loan losses is based on a
periodic analysis which considers, among other factors, current economic
conditions, loan portfolio composition, past loan loss experience,
independent appraisals, loan collateral and payment experience. In addition
to the allowance for estimated losses on identified problem loans, an overall
unallocated allowance is established to provide for unidentified credit
losses inherent in the portfolio. As adjustments to the allowance for loan
losses become necessary, they are reflected in the results of operations in
the periods in which they become known.
Management believes the allowance for loan losses is adequate to absorb
losses in the loan portfolio. While management uses available information to
recognize loan losses, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the allowance for loan losses. Such agencies may require the Company
to increase the allowance for loan losses based on their judgments and
interpretations about information available to them at the time of their
examinations.
8
<PAGE> 11
While the Company has benefited from very low historical net charge-off
experience during an extended period of rapid loan growth, management remains
cognizant that historical loan loss and nonperforming asset experience may
not be indicative of future results. If the experience were to deteriorate
and additional provisions for loan losses were required, future operating
results would be negatively impacted. Both management and the Board of
Directors continually monitor changes in asset quality, market conditions,
concentration of credit and other factors which impact the credit risk
associated with the Company's loan portfolio.
The following table sets forth information concerning the Company's
nonperforming assets as of the dates indicated:
<TABLE>
<CAPTION>
March 31, December
1997 1996
--------- --------
(Dollars in Thousands)
<S> <C> <C>
Non-accrual loans $ 100 131
Loans past due 90 days or more
and still accruing interest -- 30
Restructured loans -- --
-------- -------
Total nonperforming loans 100 161
Foreclosed property 874 874
-------- -------
Total non-performing assets $ 974 1,035
======== =======
Total assets $217,800 184,584
Total loans 148,203 134,133
Total loans plus foreclosed property 149,077 135,007
Nonperforming loans to loans 0.07% 0.12%
Nonperforming assets to loans plus
foreclosed property 0.65 0.77
Nonperforming assets to total assets 0.45 0.56
</TABLE>
NONINTEREST INCOME
Noninterest income was $113,000 and $240,000 for the three months ended March
31, 1997 and 1996, respectively. The $127,000 decrease is primarily
attributed to merchant credit card income. The company sold its merchant
credit card portfolio in November 1996. Merchant credit card income was $0
and $147,000 for the three months ended March 31, 1997 and 1996 respectively.
Noninterest income from other sources increased $20,000 for the three months
ended March 31, 1997 compared to the same period in 1996, primarily from
service charges and other fees related to the increased growth in deposit
accounts.
NONINTEREST EXPENSE
Noninterest expense was $1,282,000 and $1,135,000 for the three months ended
March 31, 1997 and 1996, respectively. The $147,000 increase is primarily
due to increases of $177,000 in salaries and benefits expense, $24,000 in
occupancy expense and $9,000 in FDIC insurance expense offset by a reduction
of $121,000 in expense related to the previously mentioned merchant credit
card operation. Increases in salaries and benefits and occupancy expense are
primarily due to the personnel and temporary facilities for the St. Charles
county banking facility.
9
<PAGE> 12
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is provided by the Company's earning assets, including short-term
investments in federal funds sold, maturities in the loan portfolio,
maturities in the investment portfolio, amortization of term loans, and by
the Company's deposit inflows, proceeds from borrowings, and retained
earnings.
Since inception, the Company has experienced rapid loan and deposit growth
primarily due to an aggressive direct calling effort and sustained economic
growth in the local market served by the Company. Management has pursued
privately held businesses who desire a close working relationship with a
locally-managed, full service bank. Due to the relationship developed with
these customers, management views deposits from this source as a stable
deposit base. Additionally, the Company belongs to a national network of
time depositors (primarily credit unions) who place time deposits with the
Company, typically in increments of $99,000. The Company has used this
source of deposits for four years and considers it to be a stable source of
deposits that allows the Company to acquire funds at a cost below its
alternative cost of funds. There were $36.5 million and $31.2 million of
deposits from the national network with the Company at March 31, 1997 and
December 31, 1996, respectively.
The following table sets forth the amount and maturity of certificates of
deposit that had balances of more than $100,000 at March 31, 1997:
<TABLE>
<CAPTION>
Remaining Maturity Amount
---------------------------------- --------
(Dollars in Thousands)
<S> <C>
Three months or less $11,877
Over three through six months 4,641
Over six through twelve months 10,924
Over twelve months 722
-------
$28,164
=======
</TABLE>
The asset/liability management process, which involves management of the
components of the balance sheet to allow assets and liabilities to reprice at
approximately the same time, is an ever-changing process essential to
minimizing the effect of interest rate fluctuations on net interest income.
CAPITAL ADEQUACY
In April 1996, the Company obtained a $1,000,000 unsecured line of credit.
The line of credit was a one year interest only note accruing interest at the
prime rate. The outstanding principal balance on the loan as of December 31,
1996 was $300,000 which was repaid during the three month period ended March
31, 1997 from the proceeds of the Common Stock offering. The line of credit
was not renewed at the maturity date in April 1997 at the request of the
Company.
Risk-based capital guidelines for financial institutions were adopted by
regulatory authorities effective January 1, 1991. These guidelines were
designed to relate regulatory capital requirements to the risk profile of the
specific institutions and to provide for uniform requirements among the
various regulators. Currently, the risk-based capital guidelines require the
Company to meet a minimum total capital ratio of 8.0% of which at least 4.0%
must consist of Tier 1 capital. Tier 1 capital generally consists of
(a) common Shareholders' equity (excluding the unrealized market value
adjustments on the available-for-sale securities), (b) qualifying perpetual
preferred stock and related surplus subject to certain limitations specified
by the FDIC, and (c) minority interests in the equity accounts of
consolidated subsidiaries less goodwill and any other intangible assets and
investments in subsidiaries that the FDIC determines should be deducted from
Tier 1 capital. The FDIC also requires a minimum leverage ratio of 3.0%,
defined as the ratio of Tier 1 capital less purchased mortgage servicing
rights to total assets, for banking organizations deemed the strongest and
most highly rated by banking regulators. A higher minimum leverage ratio is
required of less highly rated banking organizations.
10
<PAGE> 13
The following table summarizes the Company's risk-based capital and leverage
ratios at the dates indicated:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1997:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $23,833,147 15.05% $12,670,549 8.00% $15,838,186 10.00%
Enterprise Bank $19,651,000 12.00% $13,102,240 8.00% $16,377,800 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $21,973,147 13.87% $ 6,335,274 4.00% $ 9,502,911 6.00%
Enterprise Bank $17,791,000 10.86% $ 6,551,120 4.00% $ 9,826,680 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $21,973,147 11.22% $ 7,831,640 4.00% $ 9,789,550 5.00%
Enterprise Bank $17,791,000 9.12% $ 7,806,360 4.00% $ 9,757,950 5.00%
As of December 31, 1996:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $16,461,861 11.53% $11,424,028 8.00% $14,280,035 10.00%
Enterprise Bank $15,979,917 11.28% $11,334,400 8.00% $14,168,000 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $14,696,861 10.29% $ 5,712,014 4.00% $ 8,568,021 6.00%
Enterprise Bank $14,214,917 10.03% $ 5,667,200 4.00% $ 8,500,800 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $14,696,861 9.62% $ 6,108,240 4.00% $ 7,635,300 5.00%
Enterprise Bank $14,214,917 9.35% $ 6,085,960 4.00% $ 7,607,450 5.00%
</TABLE>
Primary capital, a measure of capital adequacy, includes equity capital,
allowance for possible loan losses, and debt considered equity for regulatory
capital purposes. Tangible primary capital represents primary capital
reduced by total intangible assets included in the balance sheet. At March
31, 1997, the Company's primary capital was $23.9 million compared to $16.5
million at December 31, 1996. The Company's primary capital to asset ratio
on a consolidated basis was 10.96% and 8.95% at March 31, 1997 and December
31, 1996, respectively. The Company's tangible primary capital was $23.8
million and $16.5 million at March 31, 1997 and December 31, 1996,
respectively.
IMPLEMENTATION OF NEW ACCOUNTING PRONOUNCEMENTS
During October 1995, the FASB issued SFAS 123, Accounting for Stock-Based
Compensation (SFAS 123). SFAS 123 encourages companies to adopt a new
accounting method in 1996 based on the estimated fair value of stock options.
The implementation of SFAS 123 did not have a material effect on the
Company's financial position or results of operations as no options were
granted in 1995 or 1996.
During February 1997, the FASB issued SFAS 128, Earnings per Share (SFAS
128). SFAS 128 establishes standards for computing and presenting earnings
per share (EPS) and applies to entities with publicly held common stock or
potential common stock. SFAS 128 supersedes Opinion 15 and AICPA Accounting
Interpretations 1-102 of Opinion 15 making EPS calculations comparable to
international EPS standards.
SFAS 128 replaces the presentation of primary EPS with a presentation of
basic EPS and replaces fully diluted EPS with diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS is computed similarly to fully diluted EPS pursuant
to Opinion 15.
11
<PAGE> 14
SFAS 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is
not permitted. After adoption, all prior-period EPS data presented shall be
restated to conform with Statement 128. Most of the Company's outstanding
options are fully vested and therefore, most of the dilution from outstanding
options is already included in the current EPS calculation. The
implementation of SFAS to calculate current EPS is not expected to have a
material impact on EPS presentation.
During February 1997, the FASB issued SFAS 129, Disclosure of Information
about Capital Structure (SFAS 129). SFAS 129 continues the previous
requirements to disclose certain information about an entity's capital
structure found in APB Opinions No. 10, Omnibus Opinion-1966, and No. 15,
Earnings per Share, and FASB Statement No. 47, Disclosure of Long-Term
Obligations, for entities that were subject to the requirements of those
standards.
SFAS 129 is effective for financial statements for periods ending after
December 15, 1997. It contains no change in disclosure requirements for
entities that were previously subject to the requirements of Opinions 10 and
15 and Statement 47. The implementation of SFAS 129 is not expected to have
a material impact on the Company's financial position or results of
operations.
EFFECT OF INFLATION
Persistent high rates of inflation can have a significant effect on the
reported financial condition and results of operations of all industries.
However, the asset and liability structure of commercial banks is
substantially different from that of an industrial company in that virtually
all assets and liabilities of commercial banks are monetary in nature.
Accordingly, changes in interest rates may have a significant impact on a
commercial bank's performance. Interest rates do not necessarily move in the
same direction or in the same magnitude as the prices of goods and services.
Inflation does have an impact on the growth of total assets in the banking
industry, often resulting in a need to increase equity capital at higher than
normal rates to maintain an appropriate equity-to-assets ratio.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Act of 1934, the
undersigned Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Clayton, State
of Missouri, on the 9th day of May, 1997.
ENTERBANK HOLDINGS, INC.
By: /s/ Fred H. Eller
------------------------------
Fred H. Eller
Chief Executive Officer
By: /s/ James C. Wagner
------------------------------
James C. Wagner
Chief Financial Officer
13
<PAGE> 16
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<C> <S>
11 Statement re: computation of per share earnings
27 Financial data schedule of the Company for the period ended March 31, 1997 (EDGAR only)
</TABLE>
The Company filed no current reports on Form 8-K during the three months
ended March 31, 1997.
14
<PAGE> 1
<TABLE>
EXHIBIT 11
<CAPTION>
Fully Diluted
EPS Number EPS Number Fully Diluted
of Shares of Shares Net Income EPS EPS
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Three months ended 3/96 1,674,263 1,678,046 $409,738 $0.24 $0.24
Three months ended 3/97 2,010,179 2,010,179 $463,632 $0.23 $0.23
Fully
THREE MONTHS ENDED 3/96 Average Diluted
-------------------------------
Average Shares Outstanding 1,463,400 1,463,400
Warrants 199,000 199,000
Options - 1 vested 122,000 122,000
Options - 2 vested 53,400 53,400
Options - 2 vested 400 400
Gross Shares 1,838,200 1,838,200
Shares repurchased 163,937 160,154
Shares for EPS Calculation 1,674,263 1,678,046
Warrants $5.50 $5.50
Options - 1 vested $5.00 $5.00
Options - 2 vested $7.00 $7.00
Options - 2 vested $9.25 $9.25
Warrants $1,094,500 $1,094,500
Options - 1 vested $610,000 $610,000
Options - 2 vested $373,800 $373,800
Options - 2 vested $3,700 $3,700
Dollars for repurchase $2,082,000 $2,082,000
Price $12.70 $13.00
Fully
THREE MONTHS ENDED 3/97 Average Diluted
-------------------------------
Average Shares Outstanding 1,888,166 1,888,166
Warrants 0 0
Options - 1 vested 122,000 122,000
Options - 2 vested 71,200 71,200
Options - 2 vested 800 800
Gross Shares 2,082,166 2,082,166
Shares repurchased 71,987 71,987
Shares for EPS Calculation 2,010,179 2,010,179
Warrants $5.50 $5.50
Options - 1 vested $5.00 $5.00
Options - 2 vested $7.00 $7.00
Options - 2 vested $9.25 $9.25
Warrants $0 $0
Options - 1 vested $610,000 $610,000
Options - 2 vested $498,400 $498,400
Options - 2 vested $7,400 $7,400
Dollars for repurchase $1,115,800 $1,115,800
Price $15.50 $15.50
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,766,675
<INT-BEARING-DEPOSITS> 21,709
<FED-FUNDS-SOLD> 33,325,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,338,386
<INVESTMENTS-CARRYING> 830,461
<INVESTMENTS-MARKET> 826,612
<LOANS> 148,202,655
<ALLOWANCE> 1,860,000
<TOTAL-ASSETS> 217,799,691
<DEPOSITS> 195,130,232
<SHORT-TERM> 0
<LIABILITIES-OTHER> 658,320
<LONG-TERM> 0
0
0
<COMMON> 21,140
<OTHER-SE> 21,989,999
<TOTAL-LIABILITIES-AND-EQUITY> 217,799,691
<INTEREST-LOAN> 3,305,836
<INTEREST-INVEST> 250,923
<INTEREST-OTHER> 309,194
<INTEREST-TOTAL> 3,865,953
<INTEREST-DEPOSIT> 1,840,857
<INTEREST-EXPENSE> 1,843,745
<INTEREST-INCOME-NET> 2,022,208
<LOAN-LOSSES> 98,574
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,282,340
<INCOME-PRETAX> 754,604
<INCOME-PRE-EXTRAORDINARY> 754,604
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 463,632
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
<YIELD-ACTUAL> 8.55
<LOANS-NON> 100,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 302,447
<ALLOWANCE-OPEN> 1,765,000
<CHARGE-OFFS> 24,000
<RECOVERIES> 20,000
<ALLOWANCE-CLOSE> 1,860,000
<ALLOWANCE-DOMESTIC> 1,595,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 265,000
</TABLE>
