<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
[ ] 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 Identification Number)
incorporation or organization)
150 NORTH MERAMEC, CLAYTON, MO 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-725-5500
--------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 (This is the first filing for the Company required
------- -----
by the Securities and Exchange Act of 1934)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K [X]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 15, 1997:
Common Stock, par value $.01, $26,832,360
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of March 15, 1997:
Common Stock, par value $.01, 2,113,972 shares outstanding
================================================================================
<PAGE> 2
ENTERBANK HOLDINGS, INC.
1996 ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Page
----
<S> <C>
Selected Financial Data 1
Business 2
Market for Common Stock 5
Description of Capital Stock 6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6
Supervision and Regulation 20
Management of the Company 22
Beneficial Ownership 26
Certain Transactions 27
Independent Auditors' Report 28
Consolidated Financial Statements 29
Signatures 50
Exhibit Index 51
</TABLE>
<PAGE> 3
<TABLE>
SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(Dollars and number of shares in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Interest income $ 12,554 $ 10,914 $ 7,374 $ 5,770 $ 5,297
Interest expense 5,569 4,887 2,570 2,083 2,355
Net interest income 6,985 6,027 4,804 3,687 2,942
Provision for possible loan losses 345 631 450 162 181
Net interest income after provision
for possible loan losses 6,640 5,396 4,354 3,525 2,761
Noninterest income 1,239 836 805 744 652
Noninterest expense 5,146 4,187 3,551 3,106 2,623
Income before income tax expense 2,733 2,045 1,608 1,163 790
Income tax expense 1,031 741 607 411 285
Net income 1,702 1,304 1,001 752 505
Net income per common share 0.98 0.79 0.62 0.48 0.33
Cash dividends per common share 0.08 0.07 0.06 0.05 --
Weighted average common shares and
common stock equivalents outstanding 1,731 1,650 1,601 1,555 1,530
BALANCE SHEET DATA
Cash and due from banks $ 9,261 $ 8,110 $ 5,930 $ 4,872 $ 2,650
Federal funds sold 23,250 16,230 11,300 10,125 9,450
Investments in debt securities:
Available for sale 14,006 16,065 15,740 2,999 --
Held to maturity 1,240 842 802 6,680 6,620
Total investments 15,246 16,907 16,542 9,679 6,620
Loans, less unearned loan fees 134,133 110,464 85,687 72,215 57,553
Allowance for loan losses 1,765 1,400 1,000 722 606
Total assets 184,584 153,706 122,212 99,266 79,398
Total deposits 168,961 141,140 104,799 89,113 69,612
Notes payable 300 -- -- -- --
Shareholders' equity 14,758 12,052 10,781 9,943 9,264
Book value per common share 8.88 8.24 7.38 6.81 6.35
Tangible book value per common share 8.84 8.19 7.38 6.81 6.34
SELECTED RATIOS
Return on average assets 1.12% 0.99% 0.96% 0.84% 0.66%
Return on average equity 12.73 11.13 9.71 7.83 5.62
Total capital to risk-adjusted assets 11.53 11.40 11.75 14.12 15.61
Net yield on average earning assets 8.90 9.00 7.78 7.14 7.63
Cost of interest-bearing liabilities 4.89 4.94 3.36 3.11 4.10
Net interest margin 4.96 4.98 5.07 4.57 4.24
Nonperforming loans as a percent of loans 0.12 0.10 0.00 0.78 0.91
Nonperforming assets as a percent of assets 0.56 0.64 1.45 2.08 2.58
Net loan charge offs (recoveries)
as a percent of average loans (0.02) 0.24 0.23 0.07 0.25
Allowance for possible loan losses as
a percent of net loans 1.32 1.27 1.17 1.00 1.05
Leverage ratio 7.96 7.81 8.89 10.02 11.66
</TABLE>
1
<PAGE> 4
BUSINESS
--------
Enterbank Holdings, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on December 30, 1994, and was formed for the sole
purpose of providing a holding company structure for the ownership of
Enterprise Bank, a Missouri banking corporation. The Company acquired
Enterprise Bank (the "Bank") through a tax-free exchange by Bank
shareholders in May 1995. The bank holding company ownership structure
gives the Bank a source of capital and financial strength and allows the
organization some flexibility in expanding the products and services offered
to clients.
The Bank began operations on May 9, 1988 as a newly formed and chartered
Missouri financial institution. Commercial banking services have been
provided to Bank customers from a single location in the City of Clayton, St.
Louis County, Missouri. During 1996, the Bank received regulatory approval
for two additional facilities located in St. Charles County and the City of
Sunset Hills. Currently operating from temporary locations, these new offices
in St. Charles and Sunset Hills are expected to be fully operational in their
new locations in June 1997 and August 1997, respectively.
The Company organized Enterprise Capital Resources, Inc. ("Capital
Resources") in 1995 as a wholly-owned subsidiary to provide merchant banking
services to closely-held businesses and their owners. Capital Resources
formed a wholly-owned subsidiary, Enterprise Capital Management, Inc.
("Capital Management"), which manages and acts as the general partner of The
Enterprise Fund, L.P., a licensed Small Business Investment Company ("SBIC")
under the regulations of the Small Business Administration, providing venture
capital to growing companies.
As used herein, unless the context indicates otherwise, the term "Company"
refers to Enterbank Holdings, Inc. Enterprise Bank is referred to herein as
the "Bank". Enterbank Holdings, Inc. and all of its subsidiaries are
referred collectively as the "Organization" .
The Company's executive offices are located at 150 North Meramec, Clayton,
Missouri 63105. The Company's telephone number is (314) 725-5500.
STRATEGY
The Company's strategy is to provide a complete range of financial services
designed to appeal to closely-held businesses and their owners and employees,
and to professional persons in the St. Louis metropolitan area, consisting of
the City of St. Louis, Missouri, the Missouri counties of St. Louis, St.
Charles, Jefferson, Franklin, Lincoln and Warren and the Illinois county of
St. Clair. The Company's goal is to grow its operations within its defined
market niche by being well-managed, well-capitalized, and disciplined in its
approach to managing and expanding its operations as growth opportunities
arise. The Company believes its goals for such growth can be accomplished
while providing attractive returns on Shareholders' equity. Operations
growth and return on Shareholders' equity are the financial measures the
Company considers most critical in measuring success.
The Company currently delivers a full range of commercial banking services to
the closely-held business market through the Bank, which was founded in 1988.
Merchant banking and venture capital services are conducted through Capital
Resources and Capital Management. The Company plans to continue to expand
the range of services it provides within its market niche while expanding the
base of customers to which it provides its current services.
THE BANK
The Bank offers a broad range of commercial and personal banking services to
its customers. Loans include commercial, commercial real estate, financial
and industrial development, real estate construction and development,
residential real estate and a small amount of consumer loans. Other services
include cash management services, safe-deposit boxes, and lock boxes.
The Company's primary source of funds has historically been customer
deposits. The Company offers a variety of accounts for depositors designed
to attract both short-term and long-term deposits. These accounts include
certificates of deposit, savings accounts, money market accounts, checking
and negotiable order to withdrawal accounts and individual retirement
accounts. Interest-bearing accounts earn interest at rates established by
management based on competitive market factors and management's desire to
increase or decrease certain types of maturities or deposits.
2
<PAGE> 5
Management believes the Bank is able to compete effectively in its market
because: the Company's officers and senior management maintain close working
relationships with their commercial customers and their businesses; the
Bank's management structure enables it to react more quickly to customer
requests for deposit services and loan requests than larger competitors; the
Bank's management and officers have significant experience in the communities
serviced by the Bank; the Company's focus on the closely-held business and
professional market; and industry consolidation has resulted in fewer
independent banks and fewer banks serving the Bank's target market niche.
Management believes the Bank is the only bank in its market area whose
primary strategy is to focus on closely-held businesses, and their owners and
employees.
The Bank's historical growth strategy has been both customer and asset
driven. The Bank continuously seeks to add customers that fit its target
market. This strategy has enabled the Bank to attract customers whose
borrowing needs have grown along with the Bank's increasing capacity to fund
loan requests. Additionally, the Bank has increased its loan portfolio based
on lending opportunities developed by calling officers, which meet the Bank's
underwriting standards. The Bank funds its loan growth by attracting
deposits from its business and professional customers and by attracting
wholesale deposits which are considered stable deposit sources and which are
priced at levels below the Bank's alternative cost of borrowing funds.
The Bank's operating strategy results in efficient operating ratios despite
its increasing investment in sales personnel whose goal is to expand the
number and depth of the Bank's customer relationships. The Bank can expand
its customer relationships and control operating costs by: operating a small
number of offices with a high per office asset base; emphasizing commercial
loans which tend to be larger in size than retail loans; employing an
experienced staff, all of whom are rewarded on the basis of performance and
customer service; improving data processing and operational systems to
increase productivity and control risk; leasing facilities so that capital
can be deployed more effectively to support growth in earning assets; and,
outsourcing services where possible.
The Bank has a strong orientation toward commercial banking, with a specific
focus on closely-held businesses, and their owners and employees, and
professionals located in its target service areas. The Bank stresses
personal service, flexibility in structuring loan and deposit relationships
to meet the customer's needs, and timely responsiveness to the needs of
customers. Senior management of the Bank makes it a practice to maintain
close working relationships and personal contact with commercial customers.
The Bank's Board of Directors is comprised primarily of business owners and
professionals who fit the target customer profile of the Bank. The Board of
Directors takes an active role in the Bank's business development activities
and the credit review process. Its input and understanding of the needs of
the Bank's current and target customers is considered to be a critical factor
in the Bank's past success and its plans for future growth.
The Bank has historically had a low turnover of relationship officers, and
its policy is to keep officers assigned to accounts for long periods of time.
This practice improves each officer's understanding of clients' businesses
and results in knowledgeable credit assessments and superior customer
service. Relationship officers are supported by credit analysts and other
support personnel who are familiar with each assigned customer, thus creating
a team approach to serving a customer's needs. A significant portion of the
Bank's new business results from referrals from existing customers.
The Bank's growth in loans and profitability has been due in large measure to
its strategy of targeting closely-held businesses, and to the business and
personal relationships and long experience of the Bank's management and
directors in the St. Louis community.
The Loan Committee of the Bank consists of all members of the Board of
Directors, who serve on a rotating basis. All loan requests are initially
reviewed by a committee of management officials, which includes among others,
the Presidents of all geographic Banking Units and the Chief Executive
Officer. This group has authority to approve loans where the aggregate loan
balance of all the borrower's loans (including loans to affiliated entities)
is less than $400,000. Loan requests where the borrower's aggregate loan
balance is above $400,000 are also reviewed and examined by the respective
Board Committee of the geographic Banking Unit. Loan requests where the
borrower's aggregate loan balance is above $1,500,000 require approval of the
Bank's full Board of Directors. Notwithstanding the required Board Committee
approvals where the aggregate loan balance is greater than $400,000, all such
loans are subsequently reported to the full Board of Directors for review and
comment.
MARKET AREAS AND APPROACH TO EXPANSION
The Company plans to expand its Bank operations using its current strategy
and delivering its services to new business markets through new facilities
located in areas of high growth for the Company's established market
3
<PAGE> 6
niche. Current expansion efforts include the establishment of banking facilities
in St. Charles County and Sunset Hills based on the high expectations of growth
for those markets and the high concentration of closely-held businesses and
professionals in those markets. As mentioned above, the Company believes that
local management and the involvement of a Board of Directors comprised of local
business persons and professionals are key ingredients for success. Management
believes that credit decisions, pricing matters, business development
strategies, etc. should be made locally by managers who have an equity stake in
the Company. See "Management." The Company plans to grow its St. Charles
County and Sunset Hills units upon such local involvement and presence. The
Company, as part of its expansion effort, plans to continue its strategies of
operating a small number of offices with a high per office asset base,
emphasizing commercial loans, and employing experienced staff who are rewarded
on the basis of performance and customer service.
The following is a list of the Bank's current and planned facilities:
<TABLE>
<CAPTION>
Operating Unit Address
- -------------- -------
<S> <C>
Current:
Enterprise Bank, Clayton 150 North Meramec, Clayton, Missouri 63105
Planned:
Enterprise Bank, St. Charles<F1> 300 St. Peters Center Blvd., St. Peters, Missouri 63376
Enterprise Bank, Sunset Hills<F2> 3890 South Lindbergh Blvd., Sunset Hills, Missouri 63127
<FN>
<F1> The St. Charles facility currently operates from a temporary facility
located on the site of its permanent location. The facility can make loans,
collect deposits, and offers substantially all of the products and services
that will be offered from the Bank's permanent facility. The targeted
opening date for the permanent facility is June of 1997.
<F2> The Sunset Hills facility has received approval from the Missouri
Commissioner of Finance and the FDIC. The permanent facility of the
Sunset Hills branch is expected to be open in August of 1997.
</TABLE>
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 $510,000 investment represents the purchase of 5,000 units.
Each unit consists of one share of common stock (purchased for $100) and one
warrant (purchased for $2) to purchase one additional share of common stock
for $102 per share. City Bancorp is the proposed holding company for a
proposed newly chartered Missouri state bank which will be located in
Springfield, Missouri. The proposed holding company, bank charter and
investment is subject to final regulatory approval. 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.
ENTERPRISE CAPITAL RESOURCES
Capital Resources, a wholly-owned subsidiary of the Company, was organized in
1995 to provide merchant banking services to closely-held businesses and
their owners as part of the Company's overall strategy to deliver financial
services to that market. Operations to date have consisted of the formation
of an SBIC which is managed by Capital Management a wholly-owned subsidiary
of Capital Resources, and, to a lesser extent, fee-based services related to
capital formation and company acquisition. Capital Management acts as the
general partner of The Enterprise Fund, a licensed SBIC formed in 1995 under
the regulations of the Small Business Administration ("SBA"). The
Enterprise Fund provides venture capital to growing companies in need of
additional capital which qualify under the SBA's definition of a small
business eligible for investment by an SBIC. The Enterprise Fund may also
participate in certain qualifying management buy-out situations involving
companies eligible for investment by an SBIC. The Enterprise Fund began its
operations in the fourth quarter of 1995. The Fund's committed capital is
approximately $10.4 million, of which $1 million was committed by the Company
as a limited partner. Capital Management collects annual management fees of
2% of committed capital, plus an incentive payment based upon the investment
results achieved over the ten year life of Enterprise Fund.
4
<PAGE> 7
INVESTMENTS
The Company's investment policy is designed: to enhance net income and return
on equity through prudent management of risk; to ensure liquidity for cash-flow
requirements; to help manage interest rate risk; to ensure collateral is
available for public deposits, advances and repurchase agreements; and to
manage asset diversification. The Company, through its Asset/Liability
Management Committee ("ALCO"), monitors investment activity and manages the
Company's liquidity by structuring the maturity dates of the Company's
investments to maintain necessary liquidity. However, the primary goal of
the Company's investment policy is to maintain an appropriate relationship
between assets and liabilities while maximizing interest rates spreads.
Accordingly, the ALCO monitors the sensitivity of its assets and liabilities
with respect to changes in interest rates and maturities and directs the
overall acquisition and allocation of funds.
FACILITIES
The Company's principal office is located at 150 N. Meramec, Clayton,
Missouri 63105. This facility is leased under an agreement that expires in
1999. The operating lease for the Company's principal facility has options
to renew the leases for additional periods with future rentals based upon
increases in the consumer price index. The lease provides that the Company
pay taxes, maintenance, insurance, and certain other operating expenses
generally applicable to the leased premises. Rent expense, net of income
from the sublet portions of premises, amounted to $241,434, $202,784 and
$200,125 in 1996, 1995, and 1994 respectively.
The future minimum rental commitments required under the operating lease for
150 N. Meramec are as follows:
1997 307,068
1998 307,068
1999 102,356
The Company has signed preliminary leases for the Sunset Hills and St.
Charles locations which are contingent upon completion of construction and
final determination of usable space. Both of these buildings are currently
under construction and are expected to be completed in mid 1997. The lease
payments begin upon completion of the buildings and leasehold improvements.
Annual rental expense for the Sunset Hills and St. Charles locations are
expected to approximate $176,000 and $172,000, respectively.
EMPLOYEES
At December 31, 1996, the Company had approximately 60 employees, which
included 6 part-time employees. None of the Company's employees are covered
by a collective bargaining agreement and management believes that its
relationship with its employees is good.
MARKET FOR COMMON STOCK
-----------------------
As of March 15, 1997, the Company had approximately 462 Common Stock
shareholders of record. The Common Stock has not been traded on an exchange
or in any established public trading market, although there have been a
limited number of private transactions in the shares that have been made
known to the Company. Based solely on the information made available to the
Company from a limited number of buyers and sellers, the Company believes the
selling prices for the Common Stock ranged, during 1995, from $11.50 to
$12.00 per share and, during 1996, from $13.00 per share to $13.75 per share.
There was a single transaction in 1996 between two Directors of the Company
at $15.00 per share involving additional consideration beyond the purchase of
the stock. There may have been other transactions at other prices not known
to the Company.
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.
Since the Company does not expect to list its stock on any exchange or seek
quotation of its stock on NASDAQ in the near future, no established public
trading market for the Common Stock is expected to develop for the
foreseeable future.
5
<PAGE> 8
DESCRIPTION OF CAPITAL STOCK
----------------------------
COMMON STOCK
The authorized capital stock of the Company consists of 3,000,000 shares of
Common Stock, par value $.01 per share (the "Common Stock"). Holders of
shares of the Common Stock are entitled to receive such dividends as may from
time to time be declared by the Board of Directors of the Company out of
funds legally available therefor. Holders of Common Stock are entitled to
one vote per share on all matters on which the holders of Common Stock are
entitled to vote and may cumulate their votes in any election of directors.
Holders of Common Stock have no preemptive, conversion, redemption or sinking
fund rights. In the event of a liquidation, dissolution or winding-up of the
Company, holders of Common Stock are entitled to share equally and ratably in
the assets of the Company, if any, remaining after the payment of all debts
and liabilities of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
INTRODUCTION
The following discussion and analysis is intended to review the significant
factors of the financial condition and results of operations of the Company
for the three-year period ended December 31, 1996. Reference should be made
to the accompanying consolidated financial statements and the selected
financial data presented elsewhere herein for an understanding of the
following review.
NET INCOME ANALYSIS
Net income for 1996 was $1,702,000 as compared to $1,304,000 for 1995 and
$1,001,000 for 1994. The increase in net income for 1996 as compared to 1995
was due primarily to an increase in non interest income and a lower provision
for loan losses. Noninterest income increased $404,000 in 1996 compared to
1995. Provision expense decreased $286,000 from $631,000 in 1995 to $345,000
in 1996. The increase in net income for 1995 as compared to 1994 was
primarily due to a $1,224,000 increase in net interest income, partially
offset by a $636,000 increase in noninterest expense.
NET INTEREST INCOME
The largest component of the Company's net income is net interest income. The
Company's net interest income (expressed on a tax-equivalent basis) increased
by 16% to $7,026,000 during 1996 after an increase of 25% in 1995. The net
interest margin was 4.96% in 1996 as compared to 4.98% and 5.07% in 1995 and
1994, respectively.
Average loans as a percent of total assets increased from 71.84% to 79.14%
from 1995 to 1996. For the same period, the yield on average loans decreased
from 9.92% to 9.47%. This decrease in loan yield offset the margin benefits
obtained by increasing the loan to asset ratio during the same period.
The decrease in the net interest margin during 1995 primarily resulted from
the change in the mix of earning assets from higher yielding loans to lower
yielding securities and federal funds sold. The Company's average loan to
asset ratio decreased to 71.84% from 73.41% for 1995 and 1994, respectively.
The Company also increased its average yield on earning assets from 7.78% in
1994 to 9.00% in 1995. For the same periods, the average cost of
interest-bearing liabilities increased from 3.36% to 4.94%, primarily resulting
from a general rise in the interest rate environment. The Company's average
federal funds sold position increased from $8,603,000 in 1994 to $12,837,000 in
1995. This shift in asset mix further impacted the net interest margin.
During 1996, an increase in the average volume of earning assets caused an
increase in interest income of $2,172,000. Interest income decreased
$505,000 due to a decrease in rates on earning assets. Increases in the
average volume of interest-bearing demand deposits, savings and money market
accounts, time deposits and notes payable resulted in an increase in interest
expense of $812,000. Changes in interest rates on the average volume of
interest-bearing liabilities resulted in a decrease in interest expense of
$130,000. The net effect of the volume and rate changes associated with all
categories of interest-earning assets during 1996 as compared to 1995
increased interest income by $1,667,000 while the net effect of the volume
and rate changes associated with all categories of interest-bearing
liabilities increased interest expense by $682,000.
6
<PAGE> 9
During 1995, an increase in the average volume of earning assets caused an
increase in interest income of $2,146,000. Additionally, interest income
increased $1,398,000 due to an increase in rates on earning assets. Increases
in the average volume of interest-bearing demand deposits, savings and money
market accounts, time deposits and federal funds purchased resulted in an
increase in interest expense of $1,132,000. Changes in interest rates on the
average volume of interest-bearing liabilities resulted in an increase in
interest expense of $1,185,000. The net effect of the volume and rate
changes associated with all categories of interest-earning assets during 1995
as compared to 1994 increased interest income by $3,544,000 while the net
effect of the volume and rate changes associated with all categories of
interest-bearing liabilities increased interest expense by $2,317,000.
The following table presents, on a tax equivalent basis for the periods
indicated, certain information related to the Company's average balance sheet
items or accounts and its average yield on assets and average cost of
liabilities. Such yields are derived by dividing income or expense by the
average balance of the corresponding assets or liabilities. Average
balances have been derived from quarterly averages, which are indicative of
daily averages.
REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY
7
<PAGE> 10
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1996
------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
------- -------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans <F1> $120,849 79.14% $11,449 9.47%
Taxable investments in debt securities 12,300 8.05 693 5.63
Nontaxable investments in debt securities <F2> 860 0.56 57 6.63
Federal funds sold 7,526 4.93 396 5.26
Certificates of deposit -- -- 0 0.00
-------- ------ ------- ----
Total interest-earning assets 141,535 92.68 12,595 8.90
------- ====
Noninterest-earning assets:
Cash and due from banks 8,686 5.69
Office equipment and leasehold improvements 1,789 1.17
Prepaid expenses and other assets 2,215 1.45
Allowance for loan losses (1,520) (0.99)
-------- ------
Total Assets $152,706 100.00%
======== ======
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 13,180 8.63% $ 332 2.52%
Money market 44,710 29.28 2,007 4.49
Savings 1,105 0.72 33 2.99
Certificates of deposit 54,756 35.86 3,181 5.81
Notes payable 205 0.13 15 7.35
Federal funds purchased 18 0.01 1 5.56
-------- ------ ------- ----
Total interest-bearing liabilities 113,974 74.63 5,569 4.89
------- ====
Noninterest-bearing liabilities:
Demand deposits 24,427 16.00
Other liabilities 932 0.61
-------- ------
Total liabilities 139,333 91.24
Shareholders' equity 13,373 8.76
-------- ------
Total liabilities and shareholders' equity $152,706 100.00%
======== ======
Net interest income $ 7,026
=======
Net interest margin 4.96%
====
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1995
------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
------- -------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans <F1> $ 94,737 71.84% $ 9,394 9.92%
Taxable investments in debt securities 13,093 9.93 745 5.69
Nontaxable investments in debt securities <F2> 687 0.52 42 6.11
Federal funds sold 12,837 9.73 745 5.80
Certificates of deposit 63 0.05 2 3.17
-------- ------ ------- ----
Total interest-earning assets 121,417 92.07 10,928 9.00
------- ====
Noninterest-earning assets:
Cash and due from banks 7,856 5.96
Office equipment and leasehold improvements 766 0.58
Prepaid expenses and other assets 3,025 2.30
Allowance for loan losses (1,196) (0.91)
-------- ------
Total Assets $131,868 100.00%
======== ======
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 14,002 10.62% $ 352 2.51%
Money market 38,084 28.88 1,741 4.57
Savings 1,068 0.81 32 3.00
Certificates of deposit 45,669 34.63 2,760 6.04
Notes payable -- -- -- --
Federal funds purchased 41 0.03 2 4.88
-------- ------ ------- ----
Total interest-bearing liabilities 98,864 74.97 4,887 4.94
------- ====
Noninterest-bearing liabilities:
Demand deposits 20,532 15.57
Other liabilities 755 0.57
-------- ------
Total liabilities 120,151 91.11
Shareholders' equity 11,717 8.89
-------- ------
Total liabilities and shareholders' equity $131,868 100.00%
======== ======
Net interest income $ 6,041
=======
Net interest margin 4.98%
====
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1994
------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
------- -------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans <F1> $ 76,263 73.41% $ 6,612 8.67%
Taxable investments in debt securities 9,407 9.06 369 3.92
Nontaxable investments in debt securities <F2> 561 0.54 33 5.88
Federal funds sold 8,603 8.28 367 4.27
Certificates of deposit 98 0.09 3 3.06
-------- ------ ------- ----
Total interest-earning assets 94,932 91.38 7,384 7.78
------- ====
Noninterest-earning assets:
Cash and due from banks 6,430 6.19
Office equipment and leasehold improvements 629 0.61
Prepaid expenses and other assets 2,773 2.67
Allowance for loan losses (879) (0.85)
-------- ------
Total Assets $103,885 100.00%
======== ======
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing transaction accounts $14,226 13.69% $ 292 2.05%
Money market 33,548 32.29 1,053 3.14
Savings 1,275 1.23 33 2.59
Certificates of deposit 27,440 26.41 1,190 4.34
Notes payable -- -- -- --
Federal funds purchased 36 0.03 2 5.56
-------- ------ ------- ----
Total interest-bearing liabilities 76,525 73.65 2,570 3.36
------- ====
Noninterest-bearing liabilities:
Demand deposits 16,686 16.07
Other liabilities 369 0.36
-------- ------
Total liabilities 93,580 90.08
Shareholders' equity 10,305 9.92
-------- ------
Total liabilities and shareholders' equity $103,885 100.00%
======== ======
Net interest income $ 4,814
=======
Net interest margin 5.07%
====
<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 $474,000,
$385,000, and $293,000 for 1996, 1995, and 1994, respectively.
<F2> Non-taxable investment income is presented on a fully tax-equivalent
basis assuming a tax rate of 34%.
</TABLE>
8
<PAGE> 11
The following table sets forth, on a tax-equivalent basis for the
periods indicated, a summary of the changes in interest income and interest
expense resulting from changes in yield/rates and volume:
<TABLE>
<CAPTION>
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------ ------------------------------
Volume<F1> Rate<F2> Net Volume<F1> Rate<F2> Net
---------- -------- --- ---------- -------- ---
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans $2,490 $ (435) $2,055 $1,746 $1,036 $2,782
Taxable investments in debt securities (45) (7) (52) 175 201 376
Nontaxable investments in debt
securities <F3> 14 1 15 8 1 9
Federal funds sold (285) (64) (349) 218 160 378
Certificates of deposit (2) -- (2) (1) -- (1)
------ ------ ------ ------ ------ ------
Total interest-earning assets $2,172 (505) 1,667 2,146 1,398 3,544
------ ------ ------ ------ ------ ------
Interest paid on:
Interest-bearing transaction accounts $ (21) 1 (20) (5) 65 60
Money market 298 (32) 266 157 531 688
Savings 1 (0) 1 (6) 5 (1)
Certificates of deposit 520 (99) 421 986 584 1,570
Notes payable 15 -- 15 -- -- --
Federal funds purchased (1) -- (1) -- -- --
------ ------ ------ ------ ------ ------
Total interest-bearing liabilities 812 (130) 682 1,132 1,185 2,317
------ ------ ------ ------ ------ ------
Net interest income $1,360 $ (375) $ 985 $1,014 $ 213 $1,227
====== ====== ====== ====== ====== ======
<FN>
<F1> Change in volume multiplied by yield/rate of prior period.
<F2> Change in yield/rate multiplied by volume of prior period.
<F3> Nontaxable investments in debt securities are presented on a fully tax-
equivalent basis assuming a tax rate of 34%.
NOTE: The change in interest due to both rate and volume has been allocated
to rate and volume changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
</TABLE>
LOAN PORTFOLIO
Loans, as a group, are the largest asset and the primary source of interest
income for the Company. Diversification among different categories of loans
reduces the risks associated with any single type of loan. The following
table sets forth the composition of the Company's loan portfolio by type of
loans at the dates indicated:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- --------------------
Percent Percent Percent
Of Total Of Total Of Total
Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and industrial $ 43,876 32.71% $ 43,728 39.59% $30,001 35.01%
Real estate:
Commercial 24,946 18.60 25,507 23.09 22,333 26.06
Construction 23,362 17.42 11,634 10.53 10,186 11.89
Residential 37,449 27.92 24,537 22.21 21,483 25.07
Consumer and other 4,500 3.35 5,058 4.58 1,684 1.97
-------- ------ -------- ------ ------- ------
Total Loans $134,133 100.00% $110,464 100.00% $85,687 100.00%
======== ====== ======== ====== ======= ======
</TABLE>
The Company's subsidiary bank grants commercial, residential and consumer
loans primarily in the St. Louis metropolitan area. The Company has a
diversified loan portfolio, with no particular concentration of credit in
9
<PAGE> 12
any one economic sector; however, a substantial portion of the portfolio is
secured by real estate. As of December 31, 1996, $85,756,588 in loans, or
64% of the loan portfolio, involved real estate as part or all of the
collateral package. Of these loans, $32,642,702, or 38%, were personal and
business loans and loans on owner-occupied properties. Management views
these types of loans as having less risk than traditional real estate loans
because the primary source of repayment for the loans is not dependent upon
the cash flow or sale of the real estate securing the loans. When evaluating
the appropriateness of the allowance for loan losses, these loans are
evaluated based on commercial considerations such as the financial
condition, cash flow and income of the borrower as well as the value of all
collateral securing the loans, including the market value of any real estate
securing the loan.
The following table sets forth the interest rate sensitivity of the loan
portfolio at December 31, 1996:
<TABLE>
<CAPTION>
Loans Maturing or Repricing
-----------------------------------------------------
After One
In One Through After
Year or Less Five Years Five Years Total
------------ ---------- ---------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
FIXED RATE LOANS
- ----------------
Commercial and industrial $ 3,055 5,667 15 8,737
Real estate:
Commercial 3,917 10,907 198 15,022
Construction -- -- -- --
Residential 2,644 10,630 91 13,365
Consumer and other 392 688 7 1,087
-------- ------ --- -------
Total $ 10,008 27,892 311 38,211
======== ====== === =======
VARIABLE RATE LOANS
- -------------------
Commercial and industrial $ 35,139 -- -- 35,139
Real estate:
Commercial 9,924 -- -- 9,924
Construction 23,362 -- -- 23,362
Residential 24,084 -- -- 24,084
Consumer and other 3,413 -- -- 3,413
-------- ------ --- -------
Total $ 95,922 0 0 95,922
======== ====== === =======
TOTAL LOANS
- -----------
Commercial and industrial $ 38,194 5,667 15 43,876
Real estate:
Commercial 13,841 10,907 198 24,946
Construction 23,362 -- -- 23,362
Residential 26,728 10,630 91 37,449
Consumer and other 3,805 688 7 4,500
-------- ------ --- -------
Total $105,930 27,892 311 134,133
======== ====== === =======
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses charged to expense was $345,000, $631,000 and
$450,000 in 1996, 1995 and 1994, respectively. Although the Company has not
experienced significant loan losses with any one particular category or class
of loans, management remains cognizant of the credit risks associated with
the business and the Company's increase in loan volume. The Company has
charged-off a total of $434,000 in principal from January 1, 1994 through
December 31, 1996. Total recoveries for the same period are $51,000,
resulting in a three year net charge-off experience of $383,000, or 0.13% per
year of average loans for the same period.
10
<PAGE> 13
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.
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.
Continued quality of the loan portfolio and net recoveries of $20,000 allowed
the Company to decrease the provision for loan losses in 1996 from amounts
provided in 1995 while maintaining an adequate allowance for loan losses. The
allowance for loan losses increased $365,000 to $1,765,000 during 1996 to
account for loan growth of $24 million and continued asset quality. During
the same period, impaired loans decreased from $1,055,000 to $636,000 while
non performing loans increased from $107,000 to $161,000 and the allowance
for loan losses to non-performing loans decreased from 1,308% to 1,096%.
As of December 31, 1996 and 1995, the Company had eight and five impaired
loans in the amount of $636,000 and $1,055,000 respectively, all of which are
considered potential problem loans. Non-performing assets increased from
$988,000 as of December 31, 1995 to $1,035,000 as of December 31, 1996.
The following table sets forth information concerning the Company's
nonperforming assets as of the dates indicated:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accrual loans $ 131 $ 107 $ --
Loans past due 90 days or more
and still accruing interest 30 -- --
Restructured loans -- -- --
-------- -------- --------
Total nonperforming loans 161 107 --
Foreclosed property 874 881 1,776
-------- -------- --------
Total nonperforming assets $ 1,035 $ 988 $ 1,776
======== ======== ========
Total assets $184,584 $153,706 $122,212
Total loans 134,133 110,464 85,687
Total loans plus foreclosed property 135,007 111,345 87,463
Nonperforming loans to loans 0.12% 0.10% 0.00%
Nonperforming assets to loans plus
foreclosed property 0.77 0.89 2.03
Nonperforming assets to total assets 0.56 0.64 1.45
</TABLE>
11
<PAGE> 14
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>
December 31,
--------------------------------------
1996 1995 1994
-------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Allowance at beginning of period $ 1,400 $ 1,000 $ 722
-------- -------- -------
Loans charged off:
Commercial and industrial -- 19 45
Real estate:
Commercial -- 118 132
Construction -- -- --
Residential -- 106 --
Consumer and other -- -- 14
-------- -------- -------
Total loans charged off -- 243 191
-------- -------- -------
Recoveries of loans previously charged off
Commercial and industrial -- -- 18
Real estate:
Commercial 4 12 --
Construction -- -- --
Residential 15 -- --
Consumer and other 1 -- 1
-------- -------- -------
Total recoveries of loans previously charged off 20 12 19
-------- -------- -------
Net loans charged off (recovered) (20) 231 172
-------- -------- -------
Provisions charged to operations 345 631 450
-------- -------- -------
Allowance at end of period $ 1,765 $ 1,400 $ 1,000
======== ======== =======
Average loans 120,849 94,737 76,263
Total loans 134,133 110,464 85,687
Nonperforming loans 161 107 --
Net charge-offs (recoveries) to average loans (0.02)% 0.24% 0.23%
Allowance for loan losses to loans 1.32 1.27 1.17
Allowance for loan losses to nonperforming loans 1,096.27 1308.41 N/A
</TABLE>
12
<PAGE> 15
The following table sets forth the allocation of the allowance for loan
losses by loan category as an indication of the estimated risk of loss for
each loan type. The unallocated portion of the allowance is intended to
cover loss exposure related to potential problem loans for which no specific
allowance has been estimated and for the possible risks in the remainder of
the loan portfolio.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------
1996 1995 1994
---------------------- ---------------------- ----------------------
Percent of Percent of Percent of
Category to Category to Category to
Allowance Total Loans Allowance Total Loans Allowance Total Loans
--------- ----------- --------- ----------- --------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and industrial $ 423 32.71% $ 348 39.59% $ 247 35.01%
Real estate:
Commercial 253 18.60 264 23.09 218 26.06
Construction 413 17.42 93 10.53 69 11.89
Residential 381 27.92 510 22.21 350 25.07
Consumer and other 56 3.35 44 4.58 16 1.97
Not allocated 239 -- 140 -- 100 --
------ ------ ------ ------ ------ ------
Total $1,765 100.00% $1,400 100.00% $1,000 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
The above allocation by loan category does not mean that actual loan
charge-offs will be incurred in the categories indicated. The risk factors
considered in determining the above allocation are the same as those used
when determining the overall level of the allowance.
The Company's policy is to discontinue the accrual of interest on loans when
principal or interest is due and has remained unpaid for 90 days or more.
NONINTEREST INCOME
The following table depicts the annual changes in various noninterest income
categories:
<TABLE>
<CAPTION>
1995 versus 1996 1994 versus 1995
----------------------------------- ---------------------------------
% Change 1996 1995 % Change 1995 1994
-------- ---- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Capital Resources management fee 111% $ 208,100 98,675 100% $ 98,675 --
Service charges on deposit accounts (2) 129,414 131,640 (22) 131,640 168,018
Credit card merchant income 7 600,981 562,449 29 562,449 434,991
Gain on sale of credit card operation 100 320,000 -- -- -- --
Investment in the Enterprise
Fund L.P. 662 (62,690) (8,222) (100) (8,222) --
Other noninterest income (15) 43,987 51,729 (74) 51,729 202,254
--- ---------- ------- ---- -------- -------
Total noninterest income 48 $1,239,792 836,271 4 $836,271 805,264
=== ========== ======= ==== ======== =======
</TABLE>
Total noninterest income was $1,239,792 in 1996, representing a 48% increase
from 1995. The increase is primarily the result of a $109,425 increase in
the management fee earned by Capital Resources and a $320,000 gain on the
sale of the credit card operations.
Total noninterest income was $836,271 in 1995, representing a 4% increase
from 1994. Capital Resources management fees were $98,675, representing six
months of management fees from the Enterprise Fund. Service charges on
deposit accounts decreased by $36,378, or 22%, in 1995 due to a general
increase in interest rates and a subsequent increase in the earnings credit
offsetting the service charges on commercial checking accounts.
13
<PAGE> 16
NONINTEREST EXPENSE
The following table depicts the annual changes in various noninterest expense
categories:
<TABLE>
<CAPTION>
1995 versus 1996 1994 versus 1995
------------------------------------ -------------------------------------
% Change 1996 1995 % Change 1995 1994
-------- ---- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits 40% $2,865,640 2,042,960 35% $2,042,960 1,514,073
Occupancy 21 333,795 275,179 2 275,179 269,259
FDIC insurance premiums (98) 2,000 114,944 (41) 114,944 194,231
Data processing 18 247,696 209,267 17 209,267 179,066
Credit card merchant expense (3) 441,991 455,718 42 455,718 321,217
Other noninterest expense 15 1,255,212 1,088,655 1 1,088,655 1,072,903
-------- ---------- --------- ------- ---------- ---------
Total noninterest expense 23 $5,146,334 4,186,723 18 $4,186,723 3,550,749
======== ========== ========= ======= ========== =========
</TABLE>
Noninterest expense increased $959,611, or 23%, from 1995 to 1996 primarily
due to increases in salaries and benefits and occupancy expense. These
increases are primarily attributed to additional staff needed for the two
planned facilities in St. Charles and Sunset Hills. Increases in data
processing and other operating expenses are due to the general growth
experienced by the Company during 1996. FDIC insurance premiums decreased
98% during the same period.
Noninterest expense increased 18% in 1995 compared to 1994 due primarily to
an increase of 35% in salary and benefits expense offset by a decrease in the
FDIC insurance premiums.
On August 8, 1995, the FDIC voted to reduce the deposit insurance premiums
paid by most members of the Bank Insurance Fund (BIF) and to keep existing
assessment rates intact for members of the Savings Association Insurance Fund
(SAIF). The Company's banking subsidiary is a member of the BIF. Under the
reduced assessment rate schedule for the BIF, the best rated institutions
will pay an annual rate of four cents per $100.00 of assessable deposits,
down from the previous rate of 23 cents per $100.00. The SAIF members will
continue to pay the 23 cents per $100.00 of assessable deposits. The
reduction in the assessment rate schedule became effective June 1, 1995. In
addition, as a result of the continued improvement in the capitalization of
the FDIC's BIF, the assessment rate schedule for the best rated BIF members
was further reduced to the statutory annual minimum payment of $2,000,
effective January 1, 1996.
In response to concerns that the insurance premium disparity between the BIF
and the SAIF could have a negative effect on SAIF insured institutions and
the SAIF, legislation was enacted by Congress to, among other things,
eliminate the deposit insurance premium disparity by merging the BIF and SAIF
into a new Deposit Insurance Fund on January 1, 1999. This legislation is
not expected to have a significant effect on the Company.
INCOME TAXES
Income tax expense was $1,031,344 for 1996, $741,091 for 1995 and $606,756
for 1994. The effective tax rate was 38%, 36%, 38% for the years ended
December 31, 1996, 1995, and 1994, respectively.
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, and amortization of term loans, and
by the Company's deposit inflows, proceeds from borrowings, and retained
earnings.
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.
14
<PAGE> 17
The following table reflects the Company's GAP analysis (rate sensitive
assets minus rate sensitive liabilities) as of December 31, 1996:
<TABLE>
<CAPTION>
Over Over
3 Months 1 Year
3 Months Through 12 Through After
or Less Months 5 Years 5 Years Total
-------- ---------- ------- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt and equity securities $ 5,506 5,916 3,780 44 15,246
Loans 100,319 5,611 27,892 311 134,133
Federal funds sold 23,250 -- -- -- 23,250
-------- ------- ------ ------ -------
Total interest-sensitive assets $129,075 11,527 31,672 355 172,629
-------- ------- ------ ------ -------
Liabilities:
Interest-bearing transaction accounts $ 16,648 -- -- -- 16,648
Savings and money market accounts 55,668 -- -- -- 55,668
Certificates of deposit 12,309 48,960 4,238 -- 65,507
Note payable 300 -- -- -- 300
-------- ------- ------ ------ -------
Total interest-sensitive liabilities $ 84,925 48,960 4,238 -- 138,123
-------- ------- ------ ------ -------
Interest-sensitivity GAP
GAP by period $ 44,150 (37,433) 27,434 355 34,506
-------- ------- ------ ------ =======
Cumulative GAP $ 44,150 6,717 34,151 34,506
======== ======= ====== ======
Ratio of interest-sensitive assets to
interest-sensitive liabilities:
Periodic 1.52 0.24 7.47 -- 1.25
=======
Cumulative GAP 1.52 1.05 1.25 1.25
======== ======= ====== ======
</TABLE>
As indicated in the preceding table, the Company was asset sensitive on a
cumulative basis in the near term (three months or less) at December 31, 1996
based on contractual maturities. In this regard, a decrease in the general
level of interest rates would generally have a negative effect on the
Company's net interest income as the repricing of the larger volume of
interest sensitive assets would create a larger reduction in interest revenue
as compared to the reduction in interest expense created by the repricing of
the smaller volume of interest sensitive liabilities. The Company's revenue
was also slightly asset sensitive on a one year basis.
15
<PAGE> 18
The following table summarizes certain trends in the Company's balance sheet
during the three-year period ended December 31, 1996:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1995 1994
------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Total assets $184,584 $153,706 $122,212
Earning assets 172,629 143,601 113,627
Deposits 168,961 141,140 104,799
Loans to deposits 79.39% 78.27% 81.76%
Loans to total assets 72.67 71.87 70.11
Investment securities to total assets 8.26 11.00 13.54
---------------------------------------------------------------------------------
Loans $134,150 110,496 85,718
Unearned loan fees (17) (32) (31)
-------- -------- --------
Net loans $134,133 110,464 85,687
======== ======== ========
Investment securities -AFS $ 14,006 16,065 15,740
Investment securities -HTM 1,240 842 802
-------- -------- --------
Total investments $ 15,246 16,907 16,542
======== ======== ========
Investment securities -AFS $ 14,006 16,065 15,740
Investment securities -HTM 1,240 842 802
Fed funds sold 23,250 16,230 11,300
Interest-bearing deposits -- -- 98
Loans 134,150 110,496 85,718
Unearned loan fees (17) (32) (31)
-------- -------- --------
Total earning assets $172,629 143,601 113,627
======== ======== ========
</TABLE>
The ratio of earning assets to total assets remained relatively constant at
93% over the three years ending December 31, 1996. Earning assets increased
$29,028,000 and $29,974,000, or 20% and 26% for the years ended December 31,
1996 and 1995, respectively. Total assets increased $30,878,000 and
$31,494,000 or 20% and 26% during the same periods.
The following table shows, for the periods indicated, the average annual
amount and the average rate paid by type of deposit:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- ----------------------------- ------------------------
(Dollars in Thousands)
Average Interest Average Interest Average Interest
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
demand deposits $ 24,427 -- --% $ 20,532 -- --% $16,686 -- --%
Interest-bearing
transaction accounts 13,180 332 2.52 14,002 352 2.51 14,226 292 2.05
Money market accounts 44,710 2,007 4.49 38,084 1,741 4.57 33,548 1,053 3.14
Savings accounts 1,105 33 2.99 1,068 32 3.00 1,275 33 2.59
Certificates of deposit 54,756 3,181 5.81 45,669 2,760 6.04 27,440 1,190 4.34
-------- ----- ---- -------- ----- ---- ------- ----- ----
$138,178 5,553 4.02% $119,355 4,885 4.09% $93,175 2,568 2.76%
======== ===== ==== ======== ===== ==== ======= ===== ====
</TABLE>
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. Additionally, the Company belongs to a
national network of time depositors (primarily credit unions) who
16
<PAGE> 19
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 $31,152,124 and $16,488,000
of deposits from the national network with the Company as of December 31,
1996 and 1995, respectively.
The following table sets forth the amount and maturity of certificates of
deposit that had balances of more than $100,000 at December 31, 1996.
<TABLE>
<CAPTION>
Remaining Maturity Amount
------------------------------ ------
(Dollars in Thousands)
<S> <C>
Three months or less $ 8,897
Over three through six months 5,994
Over six through twelve months 8,156
Over twelve months 1,020
-------
$24,067
=======
</TABLE>
The table below sets forth the carrying value of investment securities held
by the Company at the dates indicated:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- -------------------
Percent Percent Percent
Of Total Of Total Of Total
Amount Securities Amount Securities Amount Securities
------ ---------- ------ ---------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $13,850 90.84% $15,698 92.85% $15,740 95.15%
Municipal Bonds 891 5.85 792 4.68 746 4.51
Mortgage-backed securities 44 0.29 50 0.30 56 0.34
Federal Home Loan Bank Stock 461 3.02 367 2.17 -- --
------- ------ ------- ------ ------- ------
$15,246 100.00% $16,907 100.00% $16,542 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 115 for which the cumulative effect was
recorded on the consolidated balance sheet on that date. On January 1, 1994,
debt securities with an amortized cost of $280,553 were classified as
"held-to-maturity" securities; debt securities with an amortized cost of
$9,398,256 were classified as "available-for-sale" securities; a market
valuation account was established for the available-for-sale securities of
$44,207 to adjust the recorded balance of such securities at January 1, 1994 to
their fair value on that date; a deferred tax asset of $15,030 was recorded for
the tax effect of the market valuation account; and the net decrease resulting
from the market valuation adjustment at January 1, 1994 was recorded as a
separate component of shareholders' equity.
As of December 31, 1995, debt securities with an amortized cost of $841,732
were classified as held-to-maturity securities, debt and equity securities
with an amortized cost of $16,102,111 were classified as available-for-sale
securities, the market valuation account for the available-for-sale
securities was adjusted to $36,910 to decrease the recorded balance of such
securities at December 31, 1995 to fair value on that date. The change in
the market valuation account and related components resulted from
reinvestment of maturing investments at higher market rates in 1995.
As of December 31, 1996, debt securities with an amortized cost of $1,240,183
were classified as held-to-maturity securities; debt and equity securities
with an amortized cost of $13,995,643 were classified as available-for-sale
securities; the market valuation account for the available-for-sale
securities was adjusted to approximately $10,154 to increase the recorded
balance of such securities at December 31, 1996 to fair value on that date.
17
<PAGE> 20
The following table summarizes maturity and yield information on the
investment portfolio at December 31, 1996:
<TABLE>
<CAPTION>
Carrying
Value Yield <F1>
-------- ----------
(Dollars in Thousands)
<S> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies
0 to 1 year $10,861 5.50%
1 to 5 years 2,989 5.80
5 to 10 years -- --
No stated maturity -- --
-------
Total $13,850 5.57%
======= ====
Municipal Bonds
0 to 1 year $ 100 4.54%
1 to 5 years 791 6.57
5 to 10 years -- --
No stated maturity -- --
-------
Total $ 891 6.34%
======= ====
Mortgage-backed securities
0 to 1 year $ -- --%
1 to 5 years -- --
5 to 10 years -- --
No stated maturity 44 6.54
-------
Total $ 44 6.54%
======= ====
Federal Home Loan Bank Stock
0 to 1 year $ -- --%
1 to 5 years -- --
5 to 10 years -- --
No stated maturity 461 6.73
-------
Total $ 461 6.73%
======= ====
Total
0 to 1 year $10,961 5.50%
1 to 5 years 3,780 5.96
5 to 10 years -- --
No stated maturity 505 6.71
-------
Total $15,246 5.65%
======= ====
<FN>
<F1> Weighted average tax-equivalent yield
</TABLE>
CAPITAL ADEQUACY
The Company's Shareholders' equity was $14,757,893 at December 31, 1996. This
represented an increase of 22.5% over Shareholders' equity at December 31,
1995. The $2,705,746 increase in Shareholders' equity was the result of
$1,701,952 in earnings for 1996, a $31,062 increase in the unrealized holding
loss on investment securities available-for-sale (adjusted for taxes), a
$1,094,280 increase from the exercise of outstanding warrants for common
stock, and dividends of $121,548 paid to Shareholders during 1996.
Subsequent to year end, the Company raised an additional $6,999,986, prior to
deduction of offering expenses, with the sale of 451,612 shares of Common
Stock at $15.50 per share. The offering closed on February 14, 1997.
18
<PAGE> 21
In April 1996, the Company obtained a $1,000,000 unsecured line of credit.
The line of credit is 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 subsequent to year end.
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.
The following table summarizes the Company's risk-based capital and leverage
ratios at the dates indicated:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Tier I Capital 10.29% 10.21% 10.76%
Total Risk Based Capital 11.53 11.40 11.75
Leverage Ratio 7.96 7.81 8.89
Tangible Capital to Assets 8.91 8.72 9.71
</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
December 31, 1996, the Company's primary capital was $16,515,992 compared to
$13,476,508 and $11,869,178 at December 31, 1995 and 1994, respectively. The
Company's primary capital to asset ratio on a consolidated basis was 8.95%,
8.77%, and 9.71% at December 31, 1996, 1995, and 1994, respectively. The
Company's tangible primary capital was $16,461,861, $13,407,369 and
$11,869,178 at December 31, 1996, 1995, and 1994, 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.
In June 1995, the FASB issued SFAS 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities. SFAS 125
established accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities.
The standards established by SFAS 125 are based on consistent applications of
a financial-components approach that focuses on control. Under that
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered and
derecognizes liabilities when extinguished. SFAS 125 provides consistent
standards for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
The Company does not believe the implementation of SFAS 125 will have a
material effect on its consolidated financial position or results of
operation.
19
<PAGE> 22
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.
SUPERVISION AND REGULATION
--------------------------
The Company and the Bank are subject to state and federal banking laws and
regulations which impose specific requirements or restrictions on and provide
for general regulatory oversight with respect to virtually all aspects of
operations. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following summary
describes statutory or regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any
change in applicable laws or regulations may have a material effect on the
business and prospects of the Company. Compliance with the numerous
regulations and policies promulgated by the regulatory authorities is a
difficult and ever-changing atmosphere in which to operate. The Company and
the Bank commit substantial resources in order to comply with these statutes,
regulations and policies. The Company is unable to predict the nature or the
extent of the effect on its business and earnings that fiscal or monetary
policies, economic control, or new federal or state legislation may have in
the future.
FEDERAL BANK HOLDING COMPANY REGULATION
The Company is a bank holding company within the meaning of the Bank Holding
Company Act of 1956 (the "BHCA"). Under the BHCA, the Company is subject to
periodic examination by the Federal Reserve and is required to file periodic
reports of its operations and such additional information as the Federal
Reserve may require. The Company's and the Bank's activities are limited to
banking, managing or controlling banks, furnishing services to or performing
services for its subsidiaries, or engaging in any other activity that the
Federal Reserve determines to be closely related to banking.
Investments, Control and Activities. With certain limited exceptions, the
BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (I) acquiring substantially all the assets of any
bank, (ii) acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or control more
than 5% of the voting shares of such bank (unless it already owns or controls
the majority of such shares), or (iii) merging or consolidating with another
bank holding company. Recent federal legislation permits bank holding
companies to acquire control of banks throughout the United States.
In addition, and subject to certain exceptions, the BHCA and the Change in
Bank Control Act, together with regulations thereunder, require Federal
Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. Control is conclusively presumed to
exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Under Federal Reserve regulations
applicable to the Company, control will be rebuttably presumed to exist if a
person acquires at least 10% of the outstanding shares of any class of voting
securities once the Company registers the Common Stock under the Securities
and Exchange Act of 1934. The regulations provide a procedure for challenge
of the rebuttable control presumption.
Under the BHCA, the Company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting shares of
any company engaged in, nonbanking activities, unless the Federal Reserve, by
order or regulation, has found those activities to be so closely related to
banking or managing or controlling banks as to be a related activity. Some
of the activities that the Federal Reserve has determined by regulation to be
proper incidents to the business of banking include investment in and
management of Small Business Investment Companies, making or servicing loans
and certain types of leases, engaging in certain insurance and brokerage
activities, performing data processing services, acting in certain
circumstances as a fiduciary or investment or financial advisor, owning
savings associations, and making investments in limited projects designed
primarily to promote community welfare.
20
<PAGE> 23
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
policy, the Company is expected to act as a source of financial strength to
the Bank and to commit resources to support the Bank in circumstances in
which the Company might not otherwise do so. Under the BHCA, the Federal
Reserve may require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary
of a bank) upon the Federal Reserve's determination that such activity or
control constitutes a serious risk to the financial soundness or stability of
any subsidiary depository institution of the bank holding company. Further,
federal bank regulatory authorities have additional discretion to require a
bank holding company to divest itself of any bank or nonbank subsidiary if
the agency determines that divestiture may aid the depository institution's
financial condition.
BANK REGULATION
General. The Company is the holding company for a single state bank. The
Bank is not a member of the Federal Reserve system. The Missouri Division of
Finance and the FDIC are primary regulators for the Bank. These regulatory
authorities regulate or monitor all areas of the Bank's operations, including
security devices and procedures, adequacy of capitalization and loss
reserves, loans, investments, borrowings, deposits, mergers, issuances of
securities, payment of dividends, interest rates payable on deposits,
interest rates or fees chargeable on loans, establishment of branches,
corporate reorganizations, maintenance of books and records, and adequacy of
staff training to carry on safe lending and deposit gathering practices. The
Bank must maintain certain capital ratios and is subject to limitations on
aggregate investments in real estate, bank premises, and furniture and
fixtures.
All insured institutions must undergo regular on-site examinations by their
appropriate banking agency. The cost of examinations of insured depository
institutions and any affiliates may be assessed by the appropriate agency
against each institution or affiliate as it deems necessary or appropriate.
Insured institutions are required to submit annual and quarterly reports to
the FDIC and the appropriate agency and the state supervisor.
Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on
the amount of loans or extensions of credit to, or investments in, or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. In
addition, most of these loans and certain other transactions must be secured
in prescribed amounts. The Bank is also subject to the provisions of Section
23B of the Federal Reserve Act that, among other things, prohibit an
institution from engaging in certain transactions with certain affiliates
unless the transactions are on terms substantially the same, or at least as
favorable to such institution or its subsidiaries, as those prevailing at the
time for comparable transactions with non-affiliated companies. The Bank is
subject to certain restrictions on extensions of credit to executive
officers, directors, certain principal shareholders, and their related
interests. Such extensions of credit (i) must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with third parties and (ii) must not
involve more than the normal risk of repayment or present other unfavorable
features.
Community Reinvestment Act. The Community Reinvestment Act ("CRA") requires
that, in connection with examinations of financial institutions within its
jurisdiction, the FDIC shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities,
including low and moderate income neighborhoods, consistent with the safe and
sound operation of those institutions. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or
facility. The Company has a satisfactory rating under CRA.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain
federal laws concerning interest rates. The Bank's loan operations are also
subject to certain federal laws applicable to credit transactions, such as
the federal Truth-In-Lending Act governing disclosures of credit terms to
consumer borrowers, the Home Mortgage Disclosure Act of 1975 requiring
financial institutions to provide information to enable the public and public
officials to determine whether a financial institution is fulfilling its
obligation to help meet the housing needs of the community it serves, the
Equal Credit Opportunity Act prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending credit, the Fair Credit
Reporting Act of 1978 governing the use and provision of information to
credit reporting agencies, the Fair Debt Collection Act governing the manner
in which consumer debts may be collected by collection agencies, and the
rules and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws. The deposit operations of
the Banks also are subject to the Right to Financial Privacy Act, which
imposes a duty to maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas of
financial records, and the Electronic Funds Transfer Act and Regulation E
issued by the Federal Reserve Board to implement that act, which governs
21
<PAGE> 24
automatic deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller machines and
other electronic banking services.
Deposit Insurance. The deposits of the Bank are currently insured by the
FDIC to a maximum of $100,000 per depositor, subject to certain aggregation
rules. The FDIC establishes rates for the payment of premiums by federally
insured banks for deposit insurance. An insurance fund (BIF) is maintained
for commercial banks, with insurance premiums from the industry used to
offset losses from insurance payouts when banks and thrifts fail. The FDIC
has adopted a risk-based deposit insurance premium system for all insured
depository institutions, including the Bank, which requires premiums from a
depository institution based upon its capital levels and risk profile, as
determined by its primary federal regulator on a semiannual basis.
DIVIDENDS
The principal source of the Company's cash revenues comes from dividends
received from the Bank. The amount of dividends that may be paid by the Bank
to the Company depends on the Bank's earnings and capital position and is
limited by federal and state law, regulations, and policies.
CAPITAL REGULATIONS
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, account for off-balance-sheet
exposure, and minimize disincentives for holding liquid assets. The
resulting capital ratios represent qualifying capital as a percentage of
total risk-weighted assets and off-balance-sheet items. The guidelines are
minimums, and the federal regulators have noted that banks and bank holding
companies contemplating significant expansion programs should not allow
expansion to diminish their capital ratios and should maintain ratios well in
excess of the minimums. The current guidelines require all bank holding
companies and federally-regulated banks to maintain a minimum risk-based
total capital ratio, a portion of which must be Tier 1 capital. Tier 1
capital includes common shareholders' equity, qualifying perpetual preferred
stock, and minority interests in equity accounts of consolidated
subsidiaries, but excludes goodwill and most other intangibles and excludes
the allowance for loan and lease losses. Tier 2 capital includes the excess
of any preferred stock not included in Tier 1 capital, mandatory convertible
securities, hybrid capital instruments, subordinated debt and intermediate
term-preferred stock, and general reserves for loan and lease losses up to
1.25% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance-sheet
items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight will apply. These
computations result in the total risk-weighted assets. Most loans are
assigned to the 100% risk category, except for first mortgage loans fully
secured by residential property and, under certain circumstances, residential
construction loans, both of which carry a 50% rating. Most investment
securities are assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% rating, and direct obligations of or
obligations guaranteed by the United States Treasury or United States
Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is Tier 1 capital as a percentage of average total assets less
intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity
capital base.
MANAGEMENT
----------
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
PRESENT POSITION(S) PRINCIPAL OCCUPATION
NAME AND AGE WITH THE COMPANY DURING PAST 5 YEARS
- ------------ ---------------- -------------------
<S> <C> <C>
Fred H. Eller, 52 President and Chief Executive President, Chief Executive Officer and Director of the Company
Officer, Director (since 1995); Chairman of the Board of the Bank (since 1996);
Chief Executive Officer and Director of the Bank ( since 1988)
22
<PAGE> 25
Ronald E. Henges, 64 Chairman of the Board, Director Chief Executive Officer, Creve Coeur Camera (multi-store
retailer of camera and video equipment); President and Chief
Executive Officer of Henges Associates, Inc. (manufacturer
and installer of prefabricated wall systems) 1991-1995;
Chairman of the Board of the Company (since 1995); Chairman
of the Board of the Bank, 1988-1996
Kevin C. Eichner, 46 Vice Chairman of the Board, President, The Financial Collaborative, Inc. (a management
Director consulting firm); Vice Chairman of the Board of the Company
(since 1995); Vice Chairman of the Board of the Bank,
1991-1996
Joseph D. Garea, 42 Chief Financial Officer, Chief Financial Officer and Director of the Company (since
Director, President Enterprise 1996); President, Enterprise Capital Management, Inc. (since
Capital Management and 1995); President, Enterprise Capital Resources, Inc. (since
Enterprise Capital Resources 1995); Senior Vice President, United Postal Savings,
1991-1994
Paul R. Cahn, 71 Director President, Elan Polo Imports, Inc. (importer of women's and
children's casual shoes); Director of the Company (since 1996);
Director of the Bank, 1991-1993 and 1995-1996
Birch M. Mullins, 53 Director President, Baur Properties (developer of commercial real estate
properties); Director of the Company (since 1996); Director of
the Bank, 1991-1996
Robert E. Saur, 54 Director President, Conrad Properties (developer of commercial and
residential real estate properties); Director of the Company
(since 1995); Director of the Bank, 1991-1996
Henry D. Warshaw, 43 Director Principal, Moneta Group (provides financial planning products
and services to individuals); Director of the Company (since
1996); Director of the Bank, 1991-1996; Chairman of Clayton
Banking Unit (since 1996)
23
<PAGE> 26
James L. Wilhite, 63 Director President, Stange Corporation (manufacturer of marketing and
incentive items); Director of the Company (since 1996); Director
of the Bank (since 1996); Chairman of the St. Charles Banking
Unit (since 1996)
James A. Williams, 44 Director President, Sunset Transportation (trucking brokerage and
consulting firm); Director of the Company (since 1996);
Director of the Bank (since 1996); Chairman of the Sunset
Hills Banking Unit (since 1996)
David J. Mishler, 38 President, Clayton Unit, President of the Clayton Unit of the Bank and Director (since
Executive Officer 1996); Vice PResident of the Bank 1991-1996.
James E. Graser, 37 President, Sunset Hills Unit, President of the Sunset Hills Unit of the Bank and Director
Executive Officer (since 1996); Vice President of the Bank 1991-1996.
Richard C. Leuck, 39 President, St. Charles Unit, President of the St. Charles Unit of the Bank and Director
Executive Officer (since 1996); President and CHief Executive Officer of
Duchesne Bank 1994-1996; Senior Lending Officer of Duchesne
Bank 1991-1994.
</TABLE>
All Directors of the Company are elected at the annual meeting of
Shareholders and serve until their successors are duly elected and qualified
or until their earlier resignation or removal.
The Company has no standing committees. The Bank's standing committees are
the audit and the compensation committee and the Bank's entire Board of
Directors performs the functions of these Committees.
24
<PAGE> 27
COMPENSATION OF EXECUTIVE OFFICERS AND OTHERS
The following table shows the compensation paid by the Company or the Bank,
to the Company's Chief Executive Officer and each of the other executive
officers of the Company or the Bank who earned more than $100,000 per year in
compensation for any of the years ended December 31, 1996, 1995 and 1994:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name and Current Position Annual Compensation
Other
Compen-
Year Salary Bonus sation <F1>
------ ---------- --------- ------------
<S> <C> <C> <C> <C>
Fred H. Eller 1996 $ 165,000 $ 50,000 $ 10,084
President and Chief Executive Officer 1995 165,000 64,000 6,950
of the Company, Chairman and Chief 1994 150,000 23,500 3,640
Executive Officer of the Company
Joseph D. Garea 1996 $ 125,000 $ 500 $ 5,024
Chief Financial Officer and Director 1995 100,000 5,000 0
of the Company, President, Enterprise 1994 8,333 0 0
Capital Resources Inc., President
Enterprise Capital Management, Inc.
David J. Mishler 1996 $ 117,000 $ 35,000 $ 7,107
President, Clayton Banking Unit 1995 109,000 25,000 4,181
Director of the Bank 1994 91,666 15,000 3,431
James E. Graser 1996 $ 77,000 $ 22,000 $ 4,858
President, Sunset Hills Banking Unit 1995 77,000 24,500 3,277
Director of the Bank 1994 68,500 13,000 2,751
Richard C. Leuck 1996 $ 63,750 $ 20,000 $ 674
President, St. Charles Banking Unit 1995 0 0 0
Director of the Bank 1994 0 0 0
<FN>
<F1> Includes employer matching contribution pursuant to the Company's
401(k) program and life insurance premiums paid by the Company.
</TABLE>
STOCK OPTION PLANS
In 1988 and 1992, the Bank established two Incentive Stock Option Plans
pursuant to which certain officers and employees of the Bank received the
right to purchase shares of Bank capital stock. Substantially all of the
options available under the two initial stock option plans have been granted.
Upon formation of the Company and in conjunction with the Company's plan to
acquire all of the outstanding common stock of the Bank, the options to
purchase Bank capital stock were exchanged for options to purchase an
aggregate of 213,000 shares of Company Common Stock.
As a result of those options issued under the 1988 stock option plan, options
to purchase 142,000 shares of Common Stock at a price of $5.00 to $7.00 per
share are outstanding, all of which are currently exercisable ("1988
Options"). In addition, options to purchase 71,000 shares of Common Stock
are currently outstanding, representing those originally issued under the
1992 stock option plan ("1992 Options"). Of the 1992 Options, options to
purchase 69,000 shares carry a purchase price of $7.00 per share, of which
51,200 were exercisable as of December 31, 1996, and options to purchase
2,000 shares carry a purchase price of $9.25 per share, of which 800 were
exercisable as of December 31, 1996. All of the 1988 Options will expire
between May 9, 1998 and December 1, 2002, if not exercised. The
25
<PAGE> 28
expiration dates for the 1992 Options are December 1, 2002 for those with a
purchase price of $7.00 per share, and June 15, 2004 for those with a
purchase price of $9.25 per share.
In 1996, the Company adopted by shareholder vote a Third Incentive Stock
Option Plan ("ISO Plan III"), which sets aside up to 200,000 shares of
Company Common Stock to grant options to certain Key Employees of the Company
or any of its subsidiaries. There are limitations as to the number of
options which may be granted to any individual and additional restrictions
for options which may be granted to any individual who is also a ten percent
shareholder. The Company believes strongly in motivating its Key Employees
by encouraging ownership in the organization. To date, none of the options
available under ISO Plan III have been granted. The purchase price for any
options granted under ISO Plan III will be determined based upon the market
value of the Common Stock at the time such options are granted.
DIRECTORS' COMPENSATION
Non-employee directors of the Company and the Bank receive directors' fees of
$200 for each Board of Directors meeting and $50 for each committee meeting
they attend.
BENEFICIAL OWNERSHIP OF SECURITIES
----------------------------------
The following table provides information concerning those persons known by
the Company to be the beneficial owners of 5% or more of its outstanding
common stock, each director and executive officer, and all directors and
executive officers of the Company as a group as of March 15, 1997. For
purposes of the table, a person is deemed to be a beneficial owner of the
subject shares if the person has or shares the power to vote or dispose of
them.
<TABLE>
<CAPTION>
Beneficial Owner Number of Shares % Ownership <F1><F2>
- -------------------------------------------- ---------------- --------------------
<S> <C> <C>
Fred H. Eller <F3><F5><F6> 91,260 3.95%
Ronald E. Henges <F3><F8> 137,14 5.94%
Kevin C. Eichner <F3> 75,19 3.26%
Joseph D. Garea <F7> 5,226 <F*>
Paul R. Cahn <F4> 67,467 2.92%
Birch M. Mullins 17,850 <F*>
Robert E. Saur 39,000 1.69%
Henry D. Warshaw <F9> 17,260 <F*>
James A. Williams 4,840 <F*>
James L. Wilhite 8,721 <F*>
David J. Mishler <F3><F11><F6> 36,304 1.57%
James E. Graser <F3><F10><F6> 13,000 <F*>
Richard C. Leuck 6,591 <F*>
All Directors and Executive Officers as
a Group <F6> 519,852 22.52%
<FN>
<F*> Less than 1%
<F1> Percentages are calculated based on 2,307,972 shares which represents
2,113,972 shares outstanding as of December 31, 1996, plus Options
outstanding and exercisable as of December 31, 1996 or within 60 days
thereafter totaling 194,000 shares
26
<PAGE> 29
<F2> Unless otherwise indicated, the named person has sole voting and
dispositive power for all shares shown.
<F3> Assumes the exercise of Options outstanding and exercisable as of
December 31, 1996 or within 60 days thereafter, including those
beneficially owned by the named person, as follows: Mr. Eichner,
28,000 shares; Mr. Eller, 52,000 shares; Mr. Henges, 28,000 shares;
Mr. Graser, 8,000 shares; Mr. Mishler, 21,000 shares; all directors
and executive officers as a group, 137,000 shares.
<F4> Excludes 23,980 held by two adult children of Mr. Cahn. Includes 5,000
shares held in trust for the benefit of Mr. Cahn's spouse, to which
Mr. Cahn has voting power; 1,000 shares held in trust for the benefit
of Mr. Cahn, to which Mr. Cahn has voting power; and 61,447 shares
held of record by Cahn Family Partnership, L.P., to which Mr. Cahn has
voting power.
<F5> Includes 39,240 shares held jointly by Mr. Eller and his spouse.
<F6> Excludes all of the 13,960 shares held of record by EBSP Partnership in
which each of Mr. Eller, Mr. Graser and Mr. Mishler hold a 1/7
partnership interest, but for which none of the named persons holds
voting power. Excludes all of the 13,820 shares held of record by
EBSP II Partnership in which each of Mr. Eller, Mr. Graser and Mr.
Mishler hold a 1/7 partnership interest, but for which none of the
named persons holds voting power.
<F7> Includes 5,226 shares held in trust for the benefit of Mr. Garea, to
which Mr. Garea has voting power.
<F8> Excludes 18,110 shares held by and/or for the benefit of adult children
of Mr. Henges. Includes 54,270 shares held of record by MICALA
Partnership Ltd., to which Mr. Henges has voting power; 22,285 shares
held in an Individual Retirement Account for the benefit of Mr.
Henges, to which Mr. Henges has voting power; 3,285 shares held in an
Individual Retirement Account for the benefit of the spouse of Mr.
Henges, to which Mr. Henges has voting power; 3,600 shares held in
trust for six minor grandchildren of Mr. Henges, of which the spouse
of Mr. Henges is trustee, and to which Mr. Henges has voting power;
and 25,680 shares held in six separate trusts, each for the benefit of
one of the grandchildren of Mr. Henges, to which Mr. Henges has voting
power. The address of Mr. Henges of 13398 Conway Road, St. Louis,
Missouri 63141.
<F9> Includes 8,580 shares held in an Individual Retirement Account for the
benefit of Mr. Warshaw, to which Mr. Warshaw has voting power; and
8,660 shares held in an Individual Retirement Account for the benefit
of the spouse of Mr. Warshaw, to which Mr. Warshaw has voting power.
<F10> Includes 4,999 shares held jointly by Mr. Graser and his spouse.
<F11> Includes 12,672 shares held jointly by Mr. Mishler and his spouse; and
2,631 shares held in an Individual Retirement Account for the benefit
of Mr. Mishler, to which Mr. Mishler has voting power.
</TABLE>
CERTAIN TRANSACTIONS
--------------------
The Company and the Bank have and expect to continue to have banking and
other transactions in the ordinary course of business with directors and
executive officers of the Company and their affiliates, including members of
their families or corporations, partnerships or other organizations in which
such directors or executive officers have a controlling interest, on
substantially the same terms (including price, or interest rates and
collateral) as those prevailing at the time for comparable transactions with
unrelated parties. Such transactions are not expected to involve more than
the normal risk of collectibility nor present other unfavorable features to
the Company and the Bank. The Bank is subject to limits on the aggregate
amount it can lend to the Bank's and the Company's directors and officers as
a group. This limit is currently equal to two times the applicable entity's
unimpaired capital and surplus. Loans to individual directors and officers
must also comply with the Bank's lending policies and statutory lending
limits, and directors with a personal interest in any loan application are
excluded from the consideration of such loan application.
The Company's Clayton banking facility is leased from a limited partnership
in which Fred H. Eller, the Company's Chief Executive Officer, is a limited
partner and Robert E. Saur, a director of the Company, is a general partner.
Rent expense, net of income from the sublet portions of the premises,
amounted to $241,434 in 1996.
27
<PAGE> 30
Independent Auditors' Report
----------------------------
The Board of Directors and Shareholders
Enterbank Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Enterbank
Holdings, Inc. and subsidiaries (the Company) as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Enterbank
Holdings, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick
January 24, 1997, except as to note 18,
which is as of March 19, 1997
28
<PAGE> 31
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
<CAPTION>
Assets 1996 1995
------ ------------ ------------
<S> <C> <C>
Cash and due from banks $ 9,261,035 $ 8,109,804
Federal funds sold 23,250,000 16,230,000
Investments in debt and equity securities:
Available for sale, at estimated fair value 14,005,797 16,065,201
Held to maturity, at amortized cost
(estimated fair value of $1,239,498 in 1996 and
$840,566 in 1995) 1,240,183 841,732
------------ ------------
Total investments in debt and equity securities 15,245,980 16,906,933
------------ ------------
Loans, less unearned loan fees 134,133,092 110,463,751
Less allowance for loan losses 1,765,000 1,400,000
------------ ------------
Loans, net 132,368,092 109,063,751
------------ ------------
Other real estate owned 874,426 881,072
Office equipment and leasehold improvements 1,119,268 795,377
Accrued interest receivable 935,864 981,042
Investment in Enterprise Fund, L.P. 550,087 92,278
Prepaid expenses and other assets 979,361 645,810
------------ ------------
Total assets $ 184,584,113 $ 153,706,067
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Deposits:
Demand $ 31,137,649 $ 25,432,639
Interest-bearing transaction accounts 16,648,185 21,662,697
Money market accounts 54,637,747 42,993,844
Savings 1,030,346 1,169,242
Certificates of deposit:
$100,000 and over 24,067,363 23,285,939
Other 41,439,799 26,595,703
------------ ------------
Total deposits 168,961,089 141,140,064
Notes payable 300,000 --
Accounts payable and accrued expenses 565,131 513,856
------------ ------------
Total liabilities 169,826,220 141,653,920
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; authorized 3,000,000 shares;
issued and outstanding 1,662,360 shares in 1996 and
1,463,400 shares in 1995 16,624 14,634
Surplus 9,595,956 8,503,666
Retained earnings 5,138,612 3,558,208
Net unrealized holding gains (losses) on
available-for-sale securities 6,701 (24,361)
------------ ------------
Total shareholders' equity 14,757,893 12,052,147
------------ ------------
Total liabilities and shareholders' equity $ 184,584,113 $ 153,706,067
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
29
<PAGE> 32
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 11,426,260 $ 9,393,945 $ 6,612,560
Interest on debt securities:
Taxable 692,742 744,956 369,228
Nontaxable 38,914 27,427 21,624
Interest on federal funds sold 396,244 745,044 366,743
Interest on certificates of deposit -- 2,464 3,663
------------ ------------ ------------
Total interest income 12,554,160 10,913,836 7,373,818
------------ ------------ ------------
Interest expense:
Interest-bearing transaction accounts 331,943 351,998 291,801
Money market accounts 2,006,578 1,740,701 1,053,459
Savings 33,122 31,958 32,936
Certificates of deposit:
$100,000 and over 1,346,428 1,246,703 568,376
Other 1,834,540 1,513,251 621,537
Federal funds purchased 1,027 2,681 2,325
Notes payable 15,274 -- --
------------ ------------ ------------
Total interest expense 5,568,912 4,887,292 2,570,434
------------ ------------ ------------
Net interest income 6,985,248 6,026,544 4,803,384
Provision for loan losses 345,410 630,734 449,962
------------ ------------ ------------
Net interest income after
provision for loan losses 6,639,838 5,395,810 4,353,422
------------ ------------ ------------
Noninterest income:
Service charges on deposit accounts 129,414 131,640 168,018
Other service charges and fee income 853,068 712,853 624,346
Data processing fees -- -- 12,900
Gain on sale of credit card operation 320,000 -- --
Loss on investment in Enterprise Fund, L.P. (62,690) (8,222) --
------------ ------------ ------------
Total noninterest income 1,239,792 836,271 805,264
------------ ------------ ------------
Noninterest expense:
Salaries 2,400,165 1,710,740 1,231,596
Payroll taxes and employee benefits 465,475 332,220 282,477
Occupancy 333,795 275,179 269,259
FDIC insurance 2,000 114,944 194,231
Data processing 247,696 209,267 179,066
Other 1,697,203 1,544,373 1,394,120
------------ ------------ ------------
Total noninterest expense 5,146,334 4,186,723 3,550,749
------------ ------------ ------------
Income before income tax expense 2,733,296 2,045,358 1,607,937
Income tax expense 1,031,344 741,091 606,756
------------ ------------ ------------
Net income $ 1,701,952 $ 1,304,267 $ 1,001,181
============ ============ ============
Earnings per share $ .98 .79 .62
Weighted average common shares and common stock
equivalents outstanding 1,731,203 1,650,451 1,601,312
See accompanying notes to consolidated financial statements.
</TABLE>
30
<PAGE> 33
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
Net
unrealized
holding
gains
(losses) on Total
available- share-
Common Stock Retained for-sale holders'
Shares Amount Surplus earnings securities equity
---------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 1,460,000 $ 14,600 $ 8,485,400 $ 1,442,906 $ -- $ 9,942,906
Cumulative effect of
change in accounting
for debt securities,
net of tax effect -- -- -- -- (29,177) (29,177)
Net income -- -- -- 1,001,181 -- 1,001,181
Dividends declared
($.06 per share) -- -- -- (87,709) -- (87,709)
Stock options exercised 2,400 24 12,776 -- -- 12,800
Change in net unrealized
holding gains (losses) on
available-for-sale securities,
net of tax effect -- -- -- -- (59,088) (59,088)
---------- -------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 1,462,400 14,624 8,498,176 2,356,378 (88,265) 10,780,913
Net income -- -- -- 1,304,267 -- 1,304,267
Dividends declared -- -- -- (102,437) -- (102,437)
($.07 per share)
Stock warrants exercised 1,000 10 5,490 -- -- 5,500
Change in net unrealized
holding gains (losses) on
available-for-sale securities,
net of tax effect -- -- -- -- 63,904 63,904
---------- -------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 1,463,400 14,634 8,503,666 3,558,208 (24,361) 12,052,147
Net income -- -- -- 1,701,952 -- 1,701,952
Dividends declared
($.08 per share) -- -- -- (121,548) -- (121,548)
Stock warrants exercised 198,960 1,990 1,092,290 -- -- 1,094,280
Change in net unrealized
holding gains (losses) on
available-for-sale securities,
net of tax effect -- -- -- -- 31,062 31,062
---------- -------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 1,662,360 $ 16,624 $ 9,595,956 $ 5,138,612 $ 6,701 $14,757,893
========== ======== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
31
<PAGE> 34
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,701,952 $ 1,304,267 $ 1,001,181
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 225,328 177,454 147,346
Provision for loan losses 345,410 630,734 449,962
Write-downs and losses on other real estate owned, net 6,646 152,982 138,757
Net accretion of debt securities (6,357) (149,398) (70,037)
Loss on investment in Enterprise Fund, L.P. 62,690 8,222 --
(Increase) decrease in accrued interest receivable 45,178 (380,400) (211,592)
(Increase) decrease in prepaid expenses and other assets (333,550) (106,635) (183,612)
Increase in accounts payable and accrued
expenses 35,271 425,670 31,393
----------- ----------- -----------
Net cash provided by operating activities 2,082,568 2,062,896 1,303,398
----------- ----------- -----------
Cash flows from investing activities:
Increase in federal funds sold (7,020,000) (4,930,000) (1,175,000)
Purchases of available-for-sale debt securities (8,922,967) (20,877,229) (10,994,009)
Purchases of available-for-sale equity securities (94,200) (366,800) --
Purchases of held-to-maturity debt securities (414,733) (255,367) (538,811)
Proceeds from maturities of available-for-sale debt securities 11,140,000 21,200,000 4,588,662
Proceeds from maturities and principal paydowns on
held-to-maturity debt securities 6,276 180,799 17,155
Proceeds from maturity of certificates of deposit -- 98,000 --
Net increase in loans (23,649,751) (24,557,838) (14,127,248)
Capitalized expenses on other real estate owned -- -- (50,673)
Proceeds from sale of other real estate owned -- 292,417 115,244
Purchases of office equipment and leasehold improvements (549,219) (288,503) (194,835)
Investment in Enterprise Fund, L.P. (520,500) (100,500) --
----------- ----------- -----------
Net cash used in investing activities (30,025,094) (29,605,021) (22,359,515)
----------- ----------- -----------
Cash flows from financing activities:
Net increase in demand and savings accounts 12,195,505 22,161,043 4,076,677
Net increase in certificates of deposit 15,625,520 14,180,109 11,608,748
Net increase (decrease) in federal funds purchased -- (6,500,000) 6,500,000
Increase in notes payable 300,000 -- --
Cash dividends paid (121,548) (124,373) (84,023)
Proceeds from the exercise of stock warrants 1,094,280 5,500 --
Proceeds from the exercise of common stock options -- -- 12,800
----------- ----------- -----------
Net cash provided by financing activities 29,093,757 29,722,279 22,114,202
----------- ----------- -----------
Net increase in cash and due from banks 1,151,231 2,180,154 1,058,085
Cash and due from banks, beginning of year 8,109,804 5,929,650 4,871,565
----------- ----------- -----------
Cash and due from banks, end of year $ 9,261,035 $ 8,109,804 $ 5,929,650
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,546,601 $ 4,759,095 $ 2,501,376
Income taxes 1,144,759 779,900 706,480
Noncash transactions:
Transfers to other real estate owned in settlement of loans 50,000 -- 483,382
Loans made to facilitate the sale of other real estate owned 70,000 449,895 --
Transfer of held-for-sale securities to
available-for-sale debt securities -- -- 2,998,817
Transfer of held-to-maturity debt securities to
available-for-sale debt securities -- -- 6,399,439
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
32
<PAGE> 35
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1--ORGANIZATION
On May 9, 1995, Enterbank Holdings, Inc. (the Company) 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.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The more significant accounting policies used by the Company in the
preparation of the consolidated financial statements are summarized below:
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements of the Company and its subsidiaries
have been prepared in conformity with generally accepted accounting
principles and conform to predominant practices within the banking industry.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions which significantly affect the reported
amounts in the consolidated financial statements. Estimates which are
particularly susceptible to change in a short period of time include the
determination of the allowance for loan losses and the valuation of real
estate acquired in connection with foreclosures or in satisfaction of amounts
due from borrowers on loans. Actual amounts could differ from those
estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company;
its banking subsidiary, Enterprise Bank (100% owned) and its merchant banking
company, Enterprise Capital Resources, Inc. (100% owned). All significant
intercompany accounts and transactions have been eliminated.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Company currently classifies investments in debt and equity securities as
follows:
Trading - includes securities which the Company has bought and held
principally for the purpose of selling them in the near term. The
Company has not held any trading securities.
Held-to-maturity - includes debt securities which the Company has
the positive intent and ability to hold until maturity.
Available-for-sale - includes debt and marketable equity securities
not classified as held-to-maturity or trading (i.e., investments
which the Company has no present plans to sell but may be sold in
the future under different circumstances).
33
<PAGE> 36
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Debt securities classified as held to maturity are carried at amortized cost,
adjusted for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses for held-to-maturity securities are
excluded from earnings and shareholders' equity. Debt and equity securities
classified as available for sale are carried at estimated fair value.
Unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported as a net amount in a separate component
of shareholders' equity until realized. All previous fair value adjustments
included in the separate component of shareholders' equity are reversed upon
sale.
Transfers of securities between categories are recorded at fair value at the
date of transfer. Unrealized holding gains or losses associated with
transfers of securities from the held-to-maturity category to the
available-for-sale category are recorded as a separate component of
shareholders' equity.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary results in a charge
to earnings and the establishment of a new cost basis for the security.
For securities in the held-to-maturity and available-for-sale categories,
premiums and discounts are amortized or accreted over the lives of the
respective securities as an adjustment to yield using the interest method.
Dividend and interest income is recognized when earned. Realized gains and
losses for securities classified as available-for-sale and held-to-maturity
are included in earnings and are derived using the specific-identification
method for determining the cost of securities sold.
INTEREST AND FEES ON LOANS
Interest income on loans is accrued and credited to income based on the
principal amount outstanding. The recognition of interest income is
discontinued when a loan becomes 90 days past due or a significant
deterioration in the borrower's credit has occurred which, in management's
opinion, negatively impacts the collectibility of the loan. Subsequent
interest payments received on such loans are applied to principal if any
doubt exists as to the collectibility of such principal; otherwise, such
receipts are recorded as interest income. Loans are returned to accrual
status when management believes full collectibility of principal and interest
is expected.
The Company defers the recognition of loan origination fees, net of the cost
associated with originating such loans. Deferred loan fees are accreted into
income over the contractual life of the loan using the straight-line method,
which approximates the interest method.
LOANS AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions charged to expense
and is available to absorb charge-offs, net of recoveries. Management
utilizes a systematic, documented approach in determining the appropriate
level of the allowance for loan losses. Management's approach, which
provides for general and specific allowances, is based on current economic
conditions, past losses, collection experience, risk characteristics of the
portfolio, assessments of collateral values by obtaining independent
appraisals for significant properties, and such other factors which, in
management's judgment, deserve current recognition in estimating loan losses.
Management believes the allowance for loan losses is adequate to absorb
possible losses in the loan portfolio. While management uses available
information to recognize losses on loans, future additions to the allowance
may be necessary based on changes in economic conditions and other factors.
In addition, various regulatory agencies, as an integral part of the
examination process, periodically review the Bank's loan portfolio. Such
agencies may require the Bank to add to the allowance for loan losses based
on their judgments and interpretations of information available to them at
the time of their examinations.
Effective January 1, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures (SFAS 118). SFAS
114 defines the recognition criteria for loan impairment and the measurement
methods for certain
34
<PAGE> 37
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
impaired loans and loans whose terms have been modified in troubled-debt
restructurings. Impairment of a loan is measured by discounting the total
expected future cash flows at the loan's effective rate of interest as
stated in the original loan agreement or at the fair value of the collateral
for a collateral-dependent loan. SFAS 114 requires a creditor to measure
impairment based on the fair value of the collateral when the creditor
determines foreclosure is probable. SFAS 118 allows the creditor to use
existing methods for recognizing interest income on impaired loans. The
Company has elected to continue to use its existing nonaccrual methods for
recognizing interest income on impaired loans. The adoption of SFAS 114 and
SFAS 118 resulted in no prospective adjustment to the provision for loan
losses.
OTHER REAL ESTATE OWNED
Other real estate owned represents property acquired through foreclosure or
deeded to the Company's subsidiary bank in lieu of foreclosure on loans on
which the borrowers have defaulted as to the payment of principal and
interest. Other real estate owned is recorded on an individual asset basis
at the lower of (1) current fair value minus estimated selling costs or (2)
fair value at the time of the acquisition (cost). Subsequent reductions in
fair value is expensed or recorded in a valuation reserve account through a
provision against income. Subsequent increases in the fair value are
recorded through a reversal of the valuation reserve, but not below zero.
Gains and losses resulting from the sale of other real estate owned are
credited or charged to current period earnings. Costs of maintaining and
operating other real estate owned are expensed as incurred, and expenditures
to complete or improve other real estate owned properties are capitalized if
the expenditures are expected to be recovered upon ultimate sale of the
property.
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Office equipment and leasehold improvements are stated at cost less
accumulated depreciation and amortization computed using the straight-line
method over their respective estimated useful lives. Bank equipment is
depreciated over three to ten years and leasehold improvements over ten to 30
years.
INCOME TAXES
The Company and its subsidiaries file consolidated federal income tax
returns. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.
EARNINGS PER SHARE
Earnings per share is calculated by dividing net income by the weighted
average number of common shares and common stock equivalents outstanding
using the treasury stock method. Common stock equivalents consist of stock
options and warrants to purchase common stock, neither of which have a
material impact on the calculation of fully diluted earnings per share.
CASH FLOW INFORMATION
For purposes of reporting cash flows, the Company considers cash and due from
banks to be cash and cash equivalents.
RECLASSIFICATION
Certain reclassifications have been made to the prior year amounts to conform
to the present year presentation.
35
<PAGE> 38
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
STOCK OPTIONS
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
NOTE 3--REGULATORY RESTRICTIONS
The Company's subsidiary bank is subject to regulations by regulatory
authorities which require the maintenance of minimum capital standards which
may affect the amount of dividends the Company's subsidiary bank can pay.
At December 31, 1996 and 1995, approximately $1,174,000 and $1,083,000,
respectively, of cash and due from banks represented required reserves on
deposits maintained by the Bank in accordance with Federal Reserve Bank
requirements.
NOTE 4--INVESTMENTS IN DEBT AND EQUITY SECURITIES
A summary of the amortized cost and estimated fair value of debt and equity
securities classified as available for sale at December 31, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
1996
--------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations
and agencies $ 13,534,643 $ 10,449 $ 295 $ 13,544,797
Federal Home Loan Bank stock 461,000 -- -- 461,000
----------- ---------- ---------- -----------
$ 13,995,643 $ 10,449 $ 295 $ 14,005,797
=========== ========== ========== ===========
<CAPTION>
1995
--------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations
and agencies $ 15,735,311 $ 13,360 $ 50,270 $ 15,698,401
Federal Home Loan Bank stock 366,800 -- -- 366,800
----------- ---------- ---------- -----------
$ 16,102,111 $ 13,360 $ 50,270 $ 16,065,201
=========== ========== ========== ===========
</TABLE>
The amortized cost and estimated fair value of debt and equity securities
classified as available for sale at December 31, 1996, by contractual
maturity, are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 10,549,538 $ 10,556,047
Due after one year through five years 2,985,105 2,988,750
Due after five years through ten years -- --
Securities with no stated maturity 461,000 461,000
----------- -----------
$ 13,995,643 $ 14,005,797
=========== ===========
</TABLE>
36
<PAGE> 39
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
A summary of the amortized cost and estimated fair value of debt and equity
securities classified as held to maturity at December 31, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
1996
--------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations
and agencies $ 305,583 $ 655 $ -- $ 306,238
Mortgage-backed securities 43,857 -- 164 43,693
Municipal Bonds 890,743 1,652 2,828 889,567
----------- ---------- ---------- -----------
$ 1,240,183 $ 2,307 $ 2,992 $ 1,239,498
=========== ========== ========== ===========
<CAPTION>
1995
--------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities 50,133 627 -- 50,760
Municipal Bonds 791,599 2,433 4,226 789,806
----------- ---------- ---------- -----------
$ 841,732 $ 3,060 $ 4,226 $ 840,566
=========== ========== ========== ===========
</TABLE>
The amortized cost and estimated fair value of debt and equity securities
classified as held to maturity at December 31, 1996, by contractual maturity,
are shown below. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 405,582 $ 405,916
Due after one year through five years 572,047 572,242
Due after five years through ten years 218,697 217,647
Mortgage-backed securities 43,857 43,693
----------- -----------
$ 1,240,183 $ 1,239,498
=========== ===========
</TABLE>
There were no sales of investments in debt securities in 1996, 1995 or 1994.
Debt securities having a carrying value of $10,933,728 and $8,955,282 at
December 31, 1996 and 1995, respectively, were pledged as collateral to
secure public deposits and for other purposes as required by law.
As a member of the Federal Home Loan Bank system administered by the Federal
Housing Finance Board, the Bank is required to maintain an investment in the
capital stock of the Federal Home Loan Bank of Des Moines (FHLB) in an amount
equal to the greater of 1% of the aggregate outstanding balance of loans
secured by dwelling units at the beginning of each year or .3% of the total
assets of Enterprise Bank. The FHLB stock is recorded at cost which
represents redemption value.
37
<PAGE> 40
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 5--LOANS
A summary of loans by category at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Commercial and industrial loans $ 43,875,936 $ 43,727,848
Loans secured by real estate 85,756,588 61,679,002
Other 4,517,501 5,089,353
------------ ------------
134,150,025 110,496,203
Less deferred loan fees 16,933 32,452
------------ ------------
$ 134,133,092 $ 110,463,751
============ ============
</TABLE>
The breakdown of loans secured by real estate at December 31, 1996 and 1995
is as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Business and personal loans $ 26,508,877 $ 17,358,778
Income-producing properties 29,898,499 24,933,943
Owner-occupied properties 6,133,825 6,173,812
Real estate development properties 23,215,387 13,212,469
------------ ------------
$ 85,756,588 $ 61,679,002
============ ============
</TABLE>
The Company's subsidiary bank grants commercial, residential, and consumer
loans throughout its service area, which consists primarily of the immediate
area in which the Bank is located. The Company has a diversified loan
portfolio, with no particular concentration of credit in any one economic
sector; however, a substantial portion of the portfolio is concentrated in
and secured by real estate. The ability of the Company's borrowers to honor
their contractual obligations is dependent upon the local economy and its
effect on the real estate market.
In connection with the investment in FHLB Stock, the Bank has obtained a $2
million line of credit from the FHLB. As collateral for the line, the Bank
has entered into a blanket agreement which pledges first mortgage loans with
principal balances aggregating 150% of outstanding advances. No advances on
the line were made during 1996 and 1995.
Following is a summary of activity for the year ended December 31, 1996 of
loans to executive officers and directors or to entities in which such
individuals had beneficial interest as Shareholders, officers, or directors.
Such loans were made in the normal course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other customers and did not involve
more than the normal risk of collectibility.
38
<PAGE> 41
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
<TABLE>
<S> <C>
Balance, December 31, 1995 $ 6,367,059
New loans 3,696,357
Payments and other reductions (1,730,072)
-------------
Balance, December 31, 1996 $ 8,333,344
=============
</TABLE>
A summary of activity in the allowance for loan losses for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year $ 1,400,000 $ 1,000,000 $ 722,000
Provisions charged to operations 345,410 630,734 449,962
Loans charged off -- (242,734) (190,879)
Recoveries of loans previously
charged off 19,590 12,000 18,917
---------- ---------- ----------
Balance at end of year $ 1,765,000 $ 1,400,000 $ 1,000,000
========== ========== ==========
</TABLE>
A summary of impaired loans, which include nonaccrual loans, at December 31,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Nonaccrual loans $ 130,704 $ 106,504
Impaired loans continuing to
accrue interest 505,669 948,510
---------- ----------
Total impaired loans $ 636,373 $ 1,055,014
========== ==========
Allowance for losses on
impaired loans $ 82,616 $ 166,045
Impaired loans with no related
allowance for loan losses -- --
Average balance of impaired
loans during the year $ 636,563 $ 1,252,362
========== ==========
</TABLE>
If interest on nonaccrual loans, including amounts computed on principal
balances charged off on such loans, had been accrued, such income would have
been $15,147 and $3,119 for the years ended December 31, 1996 and 1995,
respectively. The amount recognized as interest income on nonaccrual loans
was $2,005 for 1996. No interest income on nonaccrual loans was recognized
during 1995. The Company had no loans on nonaccrual at December 31, 1994.
The amount recognized as interest income on other impaired loans continuing
to accrue interest was $44,616 and $90,251 for the years ended December 31,
1996 and 1995, respectively.
NOTE 6--OTHER REAL ESTATE OWNED
A summary of activity in the valuation allowance for other real estate owned
for the years ended December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year $ 20,000 $ 75,000 $ --
Provisions charged to operations -- 152,982 75,000
Charge-offs and reversals -- (207,982) --
---------- ---------- ----------
Balance at end of year $ 20,000 $ 20,000 $ 75,000
========== ========== ==========
</TABLE>
39
<PAGE> 42
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 7--OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS
A summary of office equipment and leasehold improvements at December 31, 1996
and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Data processing equipment $ 692,204 $ 536,037
Furniture, fixtures and equipment 1,116,772 733,505
Leasehold improvements 507,106 497,321
Automobile 26,426 26,426
------------ ------------
$ 2,342,508 $ 1,793,289
Less accumulated depreciation
and amortization 1,223,240 997,912
------------ ------------
Office equipment and leasehold improvements, net $ 1,119,268 $ 795,377
============ ============
</TABLE>
Depreciation and amortization of office equipment and leasehold improvements
included in occupancy expense amounted to $225,328 in 1996, $177,454 in 1995
and $147,346 in 1994.
The Company's banking facility is leased under an agreement that expires in
1999. The Company has options to renew the lease for three additional
five-year periods with future rentals to be agreed upon. This lease
provides that the Company pay taxes, maintenance, insurance, and certain
other operating expenses applicable to the leased premises. Two portions of
the premises are sublet and the proceeds are used to reduce the Company's
occupancy expenses. Rent expense amounted to $319,002, $285,178, and
$240,905 in 1996, 1995 and 1994, respectively, and sublease rental income
amounted to $77,568 in 1996, $82,394 in 1995, and $40,780 in 1994. The
Company leases its operating facilities from a partnership in which a
director and an officer have an ownership interest. The future minimum
rental commitments required under the lease are as follows:
<TABLE>
<CAPTION>
Year Amount
------ ----------
<S> <C>
1997 $ 307,068
1998 307,068
1999 102,356
==========
</TABLE>
Total minimum future rental payments in 1997 will be reduced by $27,768 of
sublease rentals to be received in the future under one noncancellable
sublease expiring on October 31, 1997.
The Company has signed preliminary leases for the Sunset Hills and St.
Charles locations. Both of these buildings are currently under construction
and are expected to be completed in mid 1997. The lease payments begin upon
completion of the buildings and leasehold improvements. Annual rental
expense for the Sunset Hills and St. Charles locations are expected to
approximate $176,000 and $172,000, respectively. The Company is financing a
portion of the construction cost of the Sunset Hills and St. Charles
buildings. These loans contain substantially the same terms offered on
similar loans by the Company.
NOTE 8--INVESTMENT IN ENTERPRISE FUND, L. P.
The Company and its subsidiaries have a combined 10% interest in a limited
liability merchant banking partnership, The Enterprise Fund L.P., for which a
subsidiary of the Company serves as the general partner. The Company
invested $100,500 in the partnership in 1996 and 1995. The Company has an
additional $804,000 in future capital commitments. This investment, which is
accounted for using the equity method of accounting, had a carrying value of
$550,087 and $92,278 at December 31, 1996 and 1995, respectively.
40
<PAGE> 43
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 9--MATURITY OF TIME DEPOSITS
Following is a summary of time deposit maturities at December 31, 1996:
<TABLE>
<CAPTION>
Deposits
Less than Other
Maturity Period $100,000 Deposits Total
--------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Less than 1 year $ 23,047,587 38,222,543 61,270,130
Greater than 1 year and less than 2 years 886,046 3,012,590 3,898,636
Greater than 2 years and less than 3 years 133,730 187,535 321,265
Greater than 3 years and less than 4 years -- 1,803 1,803
Greater than 4 years and less than 5 years -- 15,328 15,328
Over 5 years -- -- --
------------ ----------- -----------
$ 24,067,363 41,439,799 65,507,162
============ =========== ===========
</TABLE>
NOTE 10--NOTE PAYABLE
On April 23, 1996, the Company obtained a $1,000,000 unsecured line of credit
from an unaffiliated bank. The line of credit bears interest at the
unaffiliated bank's prime rate, requires monthly interest only payments and
matures on April 23, 1997.
For the year ended December 31, 1996, the average balance and maximum
month-end balance of the note payable were $205,000 and $300,000,
respectively. The average rate paid on the note payable was 8.25% in 1996.
The Company had no notes payable outstanding during 1995 or 1994.
NOTE 11--INCOME TAXES
The components of income tax expense (benefit) for the years ended
December 31, 1996, 1995, and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal $ 1,021,847 $ 711,751 $ 572,540
State 153,811 84,086 90,622
Deferred (144,314) (54,746) (56,406)
---------- ---------- ----------
$ 1,031,344 $ 741,091 $ 606,756
========== ========== ==========
</TABLE>
A reconciliation of expected income tax expense, computed by applying the
statutory federal income tax rate of 34% in 1996, 1995 and 1994, to income
before income taxes and the amounts reflected in the consolidated statements
of income is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Income tax expense at statutory rate $ 929,320 $ 695,422 $ 546,699
Increase (reduction) in income taxes
resulting from:
Tax-exempt income (23,570) (24,660) (12,989)
State and local income tax expense 101,515 55,497 59,810
Other, net 24,079 14,832 13,236
---------- ---------- ----------
Total tax expense $ 1,031,344 $ 741,091 $ 606,756
========== ========== ==========
</TABLE>
A net deferred income tax asset of $466,014 and $337,701 is included in
prepaid expenses and other assets in the consolidated balance sheets at
December 31, 1996 and 1995, respectively. The tax effect of
41
<PAGE> 44
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
temporary differences that gave rise to significant portions of the deferred
tax assets and deferred tax liabilities at December 31, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 541,530 $ 412,140
Other real estate owned 7,492 7,493
Unrealized losses on securities
available for sale -- 12,549
Other 11,706 11,493
------------ ------------
Total deferred tax assets 560,728 443,675
Deferred tax liabilities:
Deferred loan fees 51,381 68,244
Office equipment and leasehold
improvements 39,881 37,730
Unrealized gains on securities
available for sale 3,452 --
------------ ------------
Total deferred tax liabilities 94,714 105,974
------------ ------------
Net deferred tax asset $ 466,014 $ 337,701
============ ============
</TABLE>
A valuation allowance would be provided on deferred tax assets when it is
more likely than not that some portion of the assets will not be realized.
The Company has not established a valuation allowance as of December 31,
1996, due to management's belief that all criteria for recognition have been
met, including the existence of a history of taxes paid sufficient to support
the realization of the deferred tax assets.
NOTE 12--REGULATORY MATTERS
The Bank is subject various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory--and possible additional discretionary--actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1996,
that the Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the FDIC dated
February 28, 1997, categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based and Tier I leverage ratios as set forth in the table. There are
no conditions or events since that notification that management believes have
changed the institution's category.
42
<PAGE> 45
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
The Bank's actual capital amounts and ratios are also presented in the table.
<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 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%
As of December 31, 1995:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 13,407,369 11.40% $ 9,405,760 8.00% $ 11,757,200 10.00%
Enterprise Bank $ 13,273,400 11.50% $ 9,232,960 8.00% $ 11,541,200 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 12,007,369 10.21% $ 4,702,880 4.00% $ 7,054,320 6.00%
Enterprise Bank $ 11,873,400 10.29% $ 4,616,480 4.00% $ 6,924,720 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $ 12,007,369 9.11% $ 5,274,720 4.00% $ 6,593,400 5.00%
Enterprise Bank $ 11,873,400 9.03% $ 5,257,322 4.00% $ 6,571,652 5.00%
</TABLE>
NOTE 13--SHAREHOLDERS' EQUITY
On August 15, 1996, warrants to purchase 9,948 shares of Enterprise Bank
common stock were exercised for $1,094,280. On September 30, 1996, the
Company issued 198,960 shares of its Common Stock to holders of common stock
of the Bank incidental to a plan of reorganization for the purpose of making
the Company the sole owner of Bank capital stock.
NOTE 14--COMPENSATION PLANS
INCENTIVE STOCK OPTION PLAN
In 1988 and 1992, the Bank established two Incentive Stock Option Plans
pursuant to which certain officers and employees of the Bank received the
right to purchase shares of Bank capital stock. Substantially all of the
options available under the two initial stock option plans have been granted.
Upon formation of the Company and in conjunction with the Company's plan to
acquire all of the outstanding capital stock of the Bank, the options to
purchase Bank capital stock were exchanged for options to purchase an
aggregate of 213,000 shares of Company Common Stock.
As a result of those options issued under the 1988 stock option plan, options
to purchase 142,000 shares of Common Stock at a price of $5.00 to $7.00 per
share are outstanding, all of which are currently exercisable ("1988
Options"). In addition, options to purchase 71,000 shares of Common Stock
are currently outstanding, representing those originally issued under the
1992 stock option plan ("1992
43
<PAGE> 46
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Options"). Of the 1992 Options, options to purchase 69,000 shares carry a
purchase price of $7.00 per share, of which 51,200 were exercisable as of
December 31, 1996, and options to purchase 2,000 shares carry a purchase
price of $9.25 per share, of which 800 were exercisable as of December 31,
1996. All of the 1988 Options will expire between May 9, 1998 and December
1, 2002, if not exercised. The expiration dates for the 1992 Options are
December 1, 2002 for those with a purchase price of $7.00 per share, and
June 15, 2004 for those with a purchase price of $9.25 per share.
In 1996, the Company adopted by shareholder vote a Third Incentive Stock
Option Plan ("ISO Plan III"), which sets aside up to 200,000 shares of
Company common stock to grant options to certain key employees of the Company
or any of its subsidiaries. To date, none of the options available under ISO
Plan III have been granted. The purchase price for any options granted under
ISO Plan III will be determined based upon the market value of the common
stock at the time such options are granted.
At December 31, 1996, 1,600 shares forfeited by participants were available
for future issuance under the plan.
Following is a summary of the various plan transactions:
<TABLE>
<CAPTION>
Number Price
of shares per share Total
----------- ------------ -----------
<S> <C> <C> <C>
December 31, 1993 210,000 $ 5.00 - 7.00 $ 1,222,000
Granted 7,000 7.00 - 9.25 53,500
Exercised 2,400 5.00 - 7.00 (12,800)
Forfeited 1,600 7.00 (11,200)
----------- ------------ -----------
December 31, 1994 213,000 $ 5.00 - 9.25 $ 1,251,500
Granted -- -- --
Forfeited -- -- --
----------- ------------ -----------
December 31, 1995 213,000 5.00 - 9.25 1,251,500
Granted -- -- --
Forfeited -- -- --
----------- ------------ -----------
December 31, 1996 213,000 $ 5.00 - 9.25 $ 1,251,500
=========== ============ ===========
</TABLE>
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 Company did not adopt the new accounting method but has complied with the
expanded disclosure requirements of FASB 123. 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 and 1996.
Effective January 1, 1993, the Company adopted a 401(k) thrift plan which
covers substantially all full-time employees over the age of 21. The amount
charged to expense for contributions to the plan was $66,000 for 1996 and
$30,000 for both 1995 and 1994.
NOTE 15--LITIGATION
Various legal claims have arisen during the normal course of business which,
in the opinion of management, after discussion with legal counsel, will not
result in any material liability.
44
<PAGE> 47
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 16--DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The Bank issues financial instruments with off-balance-sheet risk in the
normal course of the business of meeting the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These instruments may involve, to varying
degrees, elements of credit and interest-rate risk in excess of the amounts
recognized in the consolidated balance sheets.
The Company's extent of involvement and potential exposure to credit loss in
the event of nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit is represented
by the contractual amount of these instruments. The Bank uses the same
credit policies in making commitments and conditional obligations as it does
for financial instruments included on its balance sheets.
The contractual amount of off-balance-sheet financial instruments as of
December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Commitments to extend credit $ 71,106,687 51,501,823
Standby letters of credit 3,656,598 3,114,206
============ ============
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Of the total commitments to extend
credit at December 31, 1996, approximately $6,233,000 represents fixed rate
loan commitments. Since certain of the commitments may expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Bank upon extension of credit, is based on management's credit
evaluation of the borrower. Collateral held varies, but may include accounts
receivable, inventory, premises and equipment, and real estate.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. These standby
letters of credit are primarily issued to support contractual obligations of
Bank customers. The credit risk involved in issuing letters of credit is
essentially the same as the risk involved in extending loans to customers.
At December 31, 1995, the Company adopted the provisions of SFAS 107,
Disclosures About Fair Value of Financial Instruments. SFAS 107 extends
existing fair value disclosure for some financial instruments by requiring
disclosure of the fair value of such financial instruments, both assets and
liabilities recognized and not recognized in the consolidated balance sheets.
45
<PAGE> 48
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Following is a summary of the carrying amounts and fair values of the
Company's financial instruments on the consolidated balance sheets at
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount fair value Amount fair value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance sheet assets:
Cash and due from banks $ 9,261,035 $ 9,261,035 $ 8,109,804 $ 8,109,804
Federal funds sold 23,250,000 23,250,000 16,230,000 16,230,000
Investments in debt and equity
securities 15,245,980 15,245,295 16,906,933 16,905,767
Loans, net 132,368,092 132,955,773 109,063,751 110,714,776
Accrued interest receivable 935,864 935,864 981,042 981,042
============= ============= ============= =============
Balance sheet liabilities:
Deposits $ 168,961,089 $ 169,156,884 $ 141,140,064 $ 141,444,569
Notes payable 300,000 300,000 -- --
Accrued interest payable 309,510 309,510 287,199 287,199
============= ============= ============= =============
</TABLE>
46
<PAGE> 49
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practical to estimate
such value:
CASH AND OTHER SHORT-TERM INSTRUMENTS
For cash and due from banks, federal funds sold and accrued interest
receivable (payable), the carrying amount is a reasonable estimate of fair
value, as such instruments reprice in a short time period.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Fair values are based on quoted market prices or dealer quotes.
LOANS
The fair value of adjustable-rate loans approximates cost. The fair value of
fixed-rate loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
DEPOSITS
The fair value of demand deposits, interest-bearing transaction accounts,
money market accounts and savings deposits is the amount payable on demand at
the reporting date. The fair value of fixed-maturity certificates of deposit
is estimated using the rates currently offered for deposits of similar
remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit and standby letters of credit
are estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements, the
likelihood of the counterparties drawing on such financial instruments, and
the present credit worthiness of such counterparties. The Company believes
such commitments have been made on terms which are competitive in the markets
in which it operates; however, no premium or discount is offered thereon and
accordingly, the Company has not assigned a value to such instruments for
purposes of this disclosure.
LIMITATIONS - Fair value estimates are made at a specific point in time,
based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire holdings
of a particular financial instrument. Because no market exists for a
significant portion of the Company's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment, and therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair value estimates are based on existing on and off-balance-sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in many of the
estimates.
47
<PAGE> 50
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 17--PARENT COMPANY ONLY FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Balance Sheets
December 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Assets
------
Cash $ 87,946 $ 26,466
Investment in Enterprise Bank 14,221,619 11,849,039
Investment in Enterprise Capital Resources 477,398 101,195
Investment in Enterprise Fund, L.P. 116,489 82,612
Other assets 148,440 13,000
------------ ------------
Total assets $ 15,051,892 $ 12,072,312
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Accounts payable and other liabilities $ (6,001) $ 20,165
Notes payable 300,000 --
Shareholders' equity 14,757,893 12,052,147
------------ ------------
Total liabilities and shareholders' equity $ 15,051,892 $ 12,072,312
============ ============
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Income
Years Ended
December 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Income:
Dividends from subsidiaries $ 600,000 $ 300,000
------------ ------------
Expenses:
Loss on investment in Enterprise Fund, L.P. 56,123 7,388
Other expenses 202,849 27,460
------------ ------------
Total expenses 258,972 34,848
------------ ------------
Income before tax benefit and equity in
undistributed earnings of subsidiaries 341,028 265,152
Income tax benefit 97,484 13,590
------------ ------------
Income before equity in undistributed earnings 438,512 278,742
of subsidiaries
Equity in undistributed earnings of subsidiaries 1,263,440 1,025,525
------------ ------------
Net income $ 1,701,952 $ 1,304,267
============ ============
</TABLE>
48
<PAGE> 51
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Condensed Statements of Cash Flow
Years Ended
December 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 1,701,952 $ 1,304,267
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income of subsidiaries (1,863,440) (1,325,525)
Dividends from subsidiaries 600,000 300,000
Other, net (105,484) 14,553
------------ ------------
Net cash provided by operating
activities 333,028 293,295
Cash flows from investing activities:
Capital contributions to subsidiaries (360,000) (100,000)
Investment in Enterprise Fund L.P. (90,000) (90,000)
------------ ------------
Net cash used in investing activities (450,000) (190,000)
Cash flows from financing activities:
Payment of stock dividends (121,548) (76,829)
Increase in notes payable 300,000 --
------------ ------------
Net cash provided by (used in) financing
activities 178,452 (76,829)
Net increase in cash and cash
equivalents 61,480 --
Cash and cash equivalents, beginning of year 26,466 26,466
------------ ------------
Cash and cash equivalents, end of year $ 87,946 $ 26,466
============ ============
</TABLE>
NOTE 18--SUBSEQUENT EVENTS
STOCK OFFERING
On February 14, 1997, the Company completed a stock offering of 451,612
shares of Common Stock at $15.50 per share for a total proceeds of $6,999,986
prior to deduction of offering expenses.
INVESTMENT IN CITY BANCORP
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 $510,000 investment represents the purchase of 5,000 units.
Each unit consists of one share of common stock (purchased for $100) and one
warrant (purchased for $2) to purchase one additional share of common stock
for $102 per share. City Bancorp is the proposed holding company for a
proposed newly chartered Missouri state bank which will be located in
Springfield, Missouri. The proposed holding company, bank charter and
investment is subject to final regulatory approval.
49
<PAGE> 52
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 19th day of March, 1997
ENTERBANK HOLDINGS, INC.
By: /s/ Fred H. Eller
-------------------
Fred H. Eller
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/Fred H. Eller Chief Executive Officer and March 15, 1997
- ---------------------------------- Director --------------------
Fred H. Eller
Principal Executive Officer
/s/Joseph D. Garea Chief Financial Officer, March 26, 1997
- ---------------------------------- Treasurer and Director --------------------
Joseph D. Garea
Principal Financial Officer
/s/James C. Wagner Vice President and Controller March 26, 1997
- ---------------------------------- --------------------
James C. Wagner
Principal Accounting Officer
/s/Ronald E. Henges Director March 19, 1997
- ---------------------------------- --------------------
Ronald E. Henges
/s/Kevin C. Eichner Director March 19, 1997
- ---------------------------------- --------------------
Kevin C. Eichner
/s/Robert E. Saur Director March 19, 1997
- ---------------------------------- --------------------
Robert E. Saur
/s/Henry D. Warshaw Director March 19, 1997
- ---------------------------------- --------------------
Henry D. Warshaw
/s/James L. Wilhite Director March 19, 1997
- ---------------------------------- --------------------
James L. Wilhite
/s/James A. Williams Director March 19, 1997
- ---------------------------------- --------------------
James A. Williams
/s/Paul R. Cahn Director March 19, 1997
- ---------------------------------- --------------------
Paul R. Cahn
/s/Birch M. Mullins Director March 19, 1997
- ---------------------------------- --------------------
Birch M. Mullins
</TABLE>
50
<PAGE> 53
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number
- -------
<C> <S>
11 Statement re: computation of per share earnings
13 1996 Annual report
99 Proxy Materials for 1997 annual meeting
</TABLE>
51
<PAGE> 1
<TABLE>
<CAPTION>
Fully Diluted
EPS Number EPS Number Fully Diluted
of Shares of Shares Net Income EPS EPS
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ending 1996 1,731,203 1,740,410 1,701,951 0.98 0.98
YEAR ENDING 1996 Average Shares Warrants
Average Shares Outstanding 1,538,418 1,538,418 31-Dec-95 31-Dec-95
Warrants 123,967 123,967 to to
Options - 1 vested 122,000 122,000 15-Aug-96 15-Aug-96
Options - 2 vested 71,200 71,200 228 228
Options - 2 vested 800 800
Gross Shares 1,856,385 1,856,385 15-Aug-96 15-Aug-96
Shares repurchased 125,182 115,975 to to
Shares for EPS Calculation 1,731,203 1,740,410 31-Dec-96 31-Dec-96
Warrants 5.50 5.50 138 138
Options - 1 vested 5.00 5.00 1,538,418 123,967
Options - 2 vested 7.00 7.00
Options - 2 vested 9.25 9.25
Warrants 681,819 681,819
Options - 1 vested 610,000 610,00
Options - 2 vested 498,400 498,400
Options - 2 vested 7,400 7,400
Dollars for repurchase 1,797,619 1,797,619
Price 14.36 15.50
</TABLE>
<PAGE> 1
THE ENTERPRISE PHILOSOPHY
Enterprise Banking was founded in 1988 on three very powerful principles
which have served our customers and shareholders extremely well. These
principles continue to drive Enterprise every day.
First, we concentrate on one primary market - closely-held businesses. No
business can "be all things to all people," and this is especially true for
banks. This focus gives us the ability to stand apart from our competition
on the one thing that really separates Enterprise from anyone else - our
total service commitment!
Second, business banking requires highly talented people in lending, customer
service, operations - everywhere the Bank touches the customer. We hire the
best and expect exceptional performance. They make the real difference for
our customers.
Third, a bank in today's turbulent markets must be well capitalized and
capable of responding quickly to changing market conditions. Enterprise
maintains a capital-to-asset ratio in excess of average banks.
Using this philosophy, Enterprise has achieved a record of outstanding growth
in assets and earnings. We expect to continue this philosophy and
performance in the future.
<PAGE> 2
Year End Assets
1992 79,398,000
1993 99,266,000
1994 122,212,000 [GRAPH]
1995 153,706,000
1996 184,584,000
Net Income
1992 505,000
1993 752,000
1994 1,001,000 [GRAPH]
1995 1,304,000
1996 1,702,000
Earnings per Share
1992 0.33
1993 0.48
1994 0.62 [GRAPH]
1995 0.79
1996 0.98
<PAGE> 3
<TABLE>
SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(Dollars and number of shares in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Interest income $ 12,554 $ 10,914 $ 7,374 $ 5,770 $ 5,297
Interest expense 5,569 4,887 2,570 2,083 2,355
Net interest income 6,985 6,027 4,804 3,687 2,942
Provision for possible loan losses 345 631 450 162 181
Net interest income after provision
for possible loan losses 6,640 5,396 4,354 3,525 2,761
Noninterest income 1,239 836 805 744 652
Noninterest expense 5,146 4,187 3,551 3,106 2,623
Income before income tax expense 2,733 2,045 1,608 1,163 790
Income tax expense 1,031 741 607 411 285
Net income 1,702 1,304 1,001 752 505
Net income per common share 0.98 0.79 0.62 0.48 0.33
Cash dividends per common share 0.08 0.07 0.06 0.05 --
Weighted average common shares and
common stock equivalents outstanding 1,731 1,650 1,601 1,555 1,530
BALANCE SHEET DATA
Cash and due from banks $ 9,261 $ 8,110 $ 5,930 $ 4,872 $ 2,650
Federal funds sold 23,250 16,230 11,300 10,125 9,450
Investments in debt securities:
Available for sale 14,006 16,065 15,740 2,999 --
Held to maturity 1,240 842 802 6,680 6,620
Total investments 15,246 16,907 16,542 9,679 6,620
Loans, less unearned loan fees 134,133 110,464 85,687 72,215 57,553
Allowance for loan losses 1,765 1,400 1,000 722 606
Total assets 184,584 153,706 122,212 99,266 79,398
Total deposits 168,961 141,140 104,799 89,113 69,612
Notes payable 300 -- -- -- --
Shareholders' equity 14,758 12,052 10,781 9,943 9,264
Book value per common share 8.88 8.24 7.38 6.81 6.35
Tangible book value per common share 8.84 8.19 7.38 6.81 6.34
SELECTED RATIOS
Return on average assets 1.12% 0.99% 0.96% 0.84% 0.66%
Return on average equity 12.73 11.13 9.71 7.83 5.62
Total capital to risk-adjusted assets 11.53 11.40 11.75 14.12 15.61
Net yield on average earning assets 8.90 9.00 7.78 7.14 7.63
Cost of interest-bearing liabilities 4.89 4.94 3.36 3.11 4.10
Net interest margin 4.96 4.98 5.07 4.57 4.24
Nonperforming loans as a percent of loans 0.12 0.10 0.00 0.78 0.91
Nonperforming assets as a percent of assets 0.56 0.64 1.45 2.08 2.58
Net loan charge offs (recoveries)
as a percent of average loans (0.02) 0.24 0.23 0.07 0.25
Allowance for possible loan losses as
a percent of net loans 1.32 1.27 1.17 1.00 1.05
</TABLE>
<PAGE> 4
March 25, 1997
Dear Valued Shareholder:
The banking industry experienced a year of great challenge and change in
1996. Record earnings and continued improvements in asset quality created an
environment of rising stock prices as the investment community began to value
financial institutions using criteria more traditionally applied to
commercial companies. As the year progressed, a wave of consolidation
activity and concerns over consumer credit risks captured the banking
headlines and many seemed to forget that attending to basic fundamentals is
what allowed banks to again become attractive to investors. St. Louis was
a microcosm of these national trends. Buyout fever reigned supreme and
incited investor activity. Those banks not for sale created marketing
campaigns to promote themselves as the bank which could make decisions
locally. We appreciate others advertising our core principle.
At Enterprise, 1996 was also a year of great challenge and change. We focused
our efforts on continuing the strategy of providing financial products and
services to our target market of closely held businesses and their owners
and employees. We operate within this market by being well-capitalized and
disciplined in our approach to managing and expanding our operations as
growth opportunities arise. We believe our commitment to this customer niche
will allow us to continue our record of strong growth and high asset quality
while others in the financial services community may be distracted by the
need to digest acquisitions and the resulting fallout of customers or key
personnel. Our dedication to the very highest level of customer service is
unsurpassed.
Operating results for 1996 produced net income of $1.7 million, an increase
of 30% over net income for 1995. Net income per common share also increased
to $.98 for 1996, an increase of 24% over 1995. The increase in earnings
was attributable primarily to the overall growth in the company's assets
throughout 1996 and the impact of continued improvement in asset quality. At
December 31, 1996, the company had total assets of $185 million, an increase
of 20% over the previous year.
The company's growth in assets was fueled by strong loan demand from both new
and existing customers and the impact of adding additional calling officers
throughout the year. Outstanding loans totaled $134 million at December 31,
1996, an increase of 21% over the previous year.
The company continued its focus on maintaining overall asset quality and
improved its ratio of nonperforming assets to total assets as of December
31, 1996, to the lowest level the company has achieved in the last five
years.
As we have throughout our history, we continue to invest in people and
resources to build the framework necessary to support future growth. We
believe we have the best team of dedicated employees in our industry and our
success is due in large part to their efforts. In 1996, we began a variety
of efforts designed to allow us to continue the pattern of growth we have
experienced in past years.
Foremost in our expansion plan was the effort to increase the company's
capital base by raising $7 million of additional capital through the sale of
common stock. The stock offering, which was
<PAGE> 5
completed in the first quarter of 1997, was significantly oversubscribed by
potential shareholders. We believe this indicates a strong demand for
ownership of financial services companies with defined market niches, and, in
particular, for Enterbank Holdings. This stock offering was also significant in
that the company is now considered publicly held and has in excess of 460
shareholders.
As part of our expansion effort, Enterprise Bank is establishing new
facilities which will open in St. Charles County and in the Sunset Hills
area of St. Louis County. As part of our commitment to identify and meet the
needs of closely held businesses in our target market areas, we are using an
"enfranchisement model" in which each of these facilities has its own local
president and board of directors made up of members of the local business
community. These are people who could have started their own banks, but
chose instead to affiliate this with us. Each of these banking units will
operate with the same local entrepreneurial spirit and decision-making capacity
that our particular types of customers demand to meet their business and
personal needs. Currently operating from temporary locations, our new offices
in St. Charles and Sunset Hills are expected to be fully operational in their
new locations next June and August, respectively.
The combination of guidance and business referrals we receive from our
directors has been a powerful force supporting our ability to meet the
needs of our target market. As listed at the end of this report, we have 46
directors, each with a vast array of experience in numerous closely held
businesses. This network of business leaders and professionals is a critical
factor in our past success and our plans for future growth. We thank them
again for their contributions to our success over this past year.
Outside of our core banking business, we continued our efforts to establish
our merchant banking business as a source of growth and acquisition capital
for closely held businesses and their owners. Our wholly-owned subsidiary,
Enterprise Capital Management, Inc. acts as the general partner for the
Enterprise Fund, L.P., a licensed Small Business Investment Company. Through
January 1997, we made investments in four companies involved in the
manufacturing, distribution and media industries. We have high hopes for
this business in the longer term.
We continue to evaluate each area of our businesses to determine whether
products and services are desired by our customers and whether each remains a
source of operations growth and profits sufficient to command the capital
and management attention necessary for success. As an example of this review,
we exited the business of processing merchant credit card payments.
Merchant processing is an area of rapidly declining margins combined with
industry-wide consolidation as processors attempt to offset price declines
with the efficiencies gained through larger processing portfolios. Recently,
companies attempting such consolidations have paid large premiums for solidly
performing portfolios such as ours. Originally intended as a service for our
business customers, we concluded that our customers could experience better
pricing and we could sell our portfolio at a significant gain by exiting the
business.
We expect the financial services industry to face an environment of
considerable change and increased competition in the coming year. At
Enterprise, we will continue to focus on our defined market niche. We believe
this strategy to be the best way to combat such competition
<PAGE> 6
and to more efficiently succeed in the constantly changing financial services
environment. We will continue to invest in personnel and resources, including
a new data processing system in 1997, necessary for us to provide superior
financial products and services to our customers, and to create the growth
that will continue to increase shareholder value.
We appreciate the continued support from our shareholders, customers,
employees and suppliers, and look forward to continued growth in 1997 as we
seek to take advantage of the many opportunities afforded in this challenging
and rewarding industry.
Ronald E. Henges
Chairman of the Board
Kevin C. Eichner
Vice-chairman of the Board
Fred H. Eller
President and Chief Executive Officer
<PAGE> 7
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
<CAPTION>
Assets 1996 1995
------ ------------ ------------
<S> <C> <C>
Cash and due from banks $ 9,261,035 $ 8,109,804
Federal funds sold 23,250,000 16,230,000
Investments in debt and equity securities:
Available for sale, at estimated fair value 14,005,797 16,065,201
Held to maturity, at amortized cost
(estimated fair value of $1,239,498 in 1996 and
$840,566 in 1995) 1,240,183 841,732
------------ ------------
Total investments in debt and equity securities 15,245,980 16,906,933
------------ ------------
Loans, less unearned loan fees 134,133,092 110,463,751
Less allowance for loan losses 1,765,000 1,400,000
------------ ------------
Loans, net 132,368,092 109,063,751
------------ ------------
Other real estate owned 874,426 881,072
Office equipment and leasehold improvements 1,119,268 795,377
Accrued interest receivable 935,864 981,042
Investment in Enterprise Fund, L.P. 550,087 92,278
Prepaid expenses and other assets 979,361 645,810
------------ ------------
Total assets $ 184,584,113 $ 153,706,067
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Deposits:
Demand $ 31,137,649 $ 25,432,639
Interest-bearing transaction accounts 16,648,185 21,662,697
Money market accounts 54,637,747 42,993,844
Savings 1,030,346 1,169,242
Certificates of deposit:
$100,000 and over 24,067,363 23,285,939
Other 41,439,799 26,595,703
------------ ------------
Total deposits 168,961,089 141,140,064
Notes payable 300,000 --
Accounts payable and accrued expenses 565,131 513,856
------------ ------------
Total liabilities 169,826,220 141,653,920
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; authorized 3,000,000 shares;
issued and outstanding 1,662,360 shares in 1996 and
1,463,400 shares in 1995 16,624 14,634
Surplus 9,595,956 8,503,666
Retained earnings 5,138,612 3,558,208
Net unrealized holding gains (losses) on
available-for-sale securities 6,701 (24,361)
------------ ------------
Total shareholders' equity 14,757,893 12,052,147
------------ ------------
Total liabilities and shareholders' equity $ 184,584,113 $ 153,706,067
============ ============
</TABLE>
<PAGE> 8
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Interest income: $ 11,426,260 $ 9,393,945 $ 6,612,560
Interest and fees on loans
Interest on debt securities: 692,742 744,956 369,228
Taxable 38,914 27,427 21,624
Nontaxable 396,244 745,044 366,743
Interest on federal funds sold -- 2,464 3,663
----------- ----------- ----------
Interest on certificates of deposit 12,554,160 10,913,836 7,373,818
----------- ----------- ----------
Total interest income
Interest expense:
Interest-bearing transaction accounts 331,943 351,998 291,801
Money market accounts 2,006,578 1,740,701 1,053,459
Savings 33,122 31,958 32,936
Certificates of deposit:
$100,000 and over 1,346,428 1,246,703 568,376
Other 1,834,540 1,513,251 621,537
Federal funds purchased 1,027 2,681 2,325
Notes payable 15,274 -- --
----------- ----------- ----------
Total interest expense 5,568,912 4,887,292 2,570,434
----------- ----------- ----------
Net interest income 6,985,248 6,026,544 4,803,384
Provision for loan losses 345,410 630,734 449,962
----------- ----------- ----------
Net interest income after
provision for loan losses 6,639,838 5,395,810 4,353,422
----------- ----------- ----------
Noninterest income:
Service charges on deposit accounts 129,414 131,640 168,018
Other service charges and fee income 853,068 712,853 624,346
Data processing fees -- -- 12,900
Gain on sale of credit card operation 320,000 -- --
Loss on investment in Enterprise Fund, L.P. (62,690) (8,222) --
----------- ----------- ----------
Total noninterest income 1,239,792 836,271 805,264
----------- ----------- ----------
Noninterest expense:
Salaries 2,400,165 1,710,740 1,231,596
Payroll taxes and employee benefits 465,475 332,220 282,477
Occupancy 333,795 275,179 269,259
FDIC insurance 2,000 114,944 194,231
Data processing 247,696 209,267 179,066
Other 1,697,203 1,544,373 1,394,120
----------- ----------- ----------
Total noninterest expense 5,146,334 4,186,723 3,550,749
----------- ----------- ----------
Income before income tax expense 2,733,296 2,045,358 1,607,937
Income tax expense 1,031,344 741,091 606,756
----------- ----------- ----------
Net income $ 1,701,952 $ 1,304,267 $ 1,001,181
=========== =========== ==========
Earnings per share $ .98 $ .79 $ .62
Weighted average common shares and common stock
equivalents outstanding
1,731,203 1,650,451 1,601,312
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
ENTERBANK HOLDINGS, INC.
BOARD OF DIRECTORS
<C> <C> <C> <C>
PAUL R. CAHN KEVIN C. EICHNER FRED H. ELLER JOSEPH D. GAREA
Elan Polo International The Financial Enterbank Holdings, Inc. Enterbank Holdings, Inc.
Imports, Inc. Collaborative, Inc.
RONALD E. HENGES BIRCH M. MULLINS ROBERT E. SAUR HENRY D. WARSHAW
Enterbank Holdings, Baur Properties Conrad Properties Moneta Group, Inc.
Inc. Corp.
JAMES L. WILHITE JAMES A. WILLIAMS
Stange Company Sunset Transportation
<CAPTION>
ENTERPRISE BANK - CLAYTON
BOARD OF DIRECTORS
<C> <C> <C> <C>
DAVID A. BAYER<F*> MARK S. CARLIE FRED H. ELLER ROBERT L. GARLICH<F*>
DBX Corporation Stone Carlie & Company Enterbank Holdings, Garlich Printing Company
Inc.
JEFFREY W. GLIK ROBERT F. GORMAN<F*> WILLIAM M. MCCORMICK, ORVILLE J. MIDDENDORF
Glik's Retired - formerly with JR. Middendorf Meat Co.
United Postal Savings Capital Communications
Corp.
DAVID J. MISHLER DAVID L. PAYNE ROBERT E. SAUR EDWARD A. SCHULTZ
Enterprise Bank Payne Electric, Inc. Conrad Properties Code Consultants
Corp.
GLENN JOHNSON MENLO F. SMITH<F*> JAMES L. STEWART HENRY D. WARSHAW
SHEFFIELD<F*> Sunmark Capital Stewart Properties, Moneta Group, Inc.
DMC, Inc. Inc.
<CAPTION>
ENTERPRISE BANK - SUNSET HILLS
BOARD OF DIRECTORS
<C> <C> <C> <C>
JOSEPH E. BARRY R. BRUCE EARLS FRED H. ELLER JAMES E. GRASER
Barry Sales, Ltd. Marlo Coil Enterbank Holdings, Enterprise Bank
Inc.
ROBERT M. KAISER ROBERT F. O'LOUGHLIN ROBERT H. PECHA NANCY R. SIWAK
Kaiser Electric, Inc. Lodging Hospitality Mgmt. Fleming Printing Co. Private Investor
Co.
JAMES A. WILLIAMS THOMAS F. VOGEL<F*> GEORGE W. VONHOFFMANN,
Sunset Transportation Thomas F. Vogel JR. <F*>
Insurance Agency GVH, Inc.
<FN>
<F*>Advisory Directors
<PAGE> 10
<CAPTION>
ENTERPRISE BANK - ST. CHARLES
BOARD OF DIRECTORS
<C> <C> <C> <C>
RUDY D. BECK<F*> DALE C. BROWN<F*> CHARLES W. BENNETT ERNEST W. DEMPSEY
Beck, Tiemeyer & Zerr, Botz Deal Company C. Bennett Building Pio's Restaurant
P.C. Supply
FRED H. ELLER JOHN J. GLOSS RICHARD E. HILL<F*> THOMAS M. HOWELL<F*>
Enterprise Bank Barnes St. Peters Hill Partnership Howell & Sons Excavating
Hospital Architect
JOHN L. KASTNER RICHARD C. LEUCK PATRICIA E. RODEHEAVER WILLIAM C. VEHIGE
Client Services, Enterprise Bank Custom Design Telephone Tax & Accounting Services
Inc. Systems
JAMES L. WILHITE
Stange Company
<CAPTION>
ENTERPRISE CAPITAL MANAGEMENT, INC.
BOARD OF DIRECTORS
<C> <C> <C> <C>
PAUL R. CAHN JOHN M. EGGEMEYER III JOSEPH D. GAREA LEONARD M. RUBENSTEIN
Elan Polo International Castle Creek Capital Enterprise Capital General American Life
Imports, Inc. Management, Inc. Insurance
EDWARD SOULE<F*> TED WETTERAU
Retired - formerly Wetterau and Associates
with Edward Jones
<FN>
<F*>Advisory Directors
</TABLE>
- ------------------------------------------------------------------------------
ANNUAL MEETING
The annual meeting of Enterbank Holdings, Inc. shareholders will be held at
4:00 p.m. on Tuesday, May 6, 1997, at Maryville University, Monsanto
Auditorium, 13550 Conway Road, St. Louis, Missouri.
10-K REPORT AVAILABLE
A copy of Enterbank Holdings, Inc. 1996 Annual Report on Form 10-K to the
Securities and Exchange Commission accompanies this Summary Annual Report.
It is also available on request to the Company.
CORPORATE HEADQUARTERS
Enterbank Holdings, Inc.
P.O. Box 16020
150 North Meramec
Clayton, Missouri 63105
(314) 725-5500
LEGAL COUNSEL
Polsinelli, White, Vardeman & Shalton, P.C.
100 S. Fourth Street, Suite 1110
St. Louis, Missouri 63102
(314) 231-1950
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1010 Market Street
St. Louis, Missouri 63101
(314) 444-1400
<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
Enterbank Holdings, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ENTERBANK HOLDINGS, INC.
150 N. MERAMEC
CLAYTON, MISSOURI 63105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1997
To the Shareholders of Enterbank Holdings, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Enterbank
Holdings, Inc. (the "Company") will be held at Maryville University, Monsanto
Auditorium, 13550 Conway Road, St. Louis, Missouri 63141, on Tuesday, May 6,
1997, at 4:00 p.m., for the following purposes:
1. To elect ten (10) directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected and
have qualified.
2. To ratify the selection of KPMG Peat Marwick LLP as auditors for
the year ending December 31, 1997.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 1, 1997, as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
By Order of the Board of Directors
Joseph D. Garea, Secretary
Clayton, Missouri
April 7, 1997
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE
AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU
EXPECT TO ATTEND IN PERSON. SHAREHOLDERS WHO ATTEND THE MEETING
MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY DESIRE.
<PAGE> 3
ENTERBANK HOLDINGS, INC.
150 N. MERAMEC
CLAYTON, MISSOURI 63105
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Enterbank Holdings,
Inc. (the "Company") in connection with the solicitation of proxies by the
Board of Directors of the Company to be voted at the Annual Meeting of
Shareholders to be held on May 6, 1997, at Maryville University, Monsanto
Auditorium, 13550 Conway Road, St. Louis, Missouri 63141, or any adjournment
or postponement thereof. The cost of this solicitation will be borne by the
Company. In addition to solicitation by mail, officers, directors and
employees of the Company may solicit proxies by telephone, telegraph, or in
person. The Company may also request banks and brokers to solicit their
customers who have a beneficial interest in the Company's Common Stock
registered in the names of nominees and will reimburse such banks and brokers
for their reasonable out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by written notice to
the Secretary, by receipt of a proxy properly signed and dated subsequent to
an earlier proxy, or by revocation of a written proxy by request in person at
the Annual Meeting; but if not so revoked, the share represented by such
proxy will be voted. The mailing of this proxy statement to shareholders of
the Company commenced on or about April 7, 1997. The Company's corporate
offices are located at 150 N. Meramec, Clayton, Missouri 63105 and its
telephone number is (314) 725-5500.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board of Directors has nominated for election the ten (10) persons named
below. All of the nominees are currently members of the Board of Directors.
All of the nominees were elected by the shareholders. It is intended that
proxies solicited will be voted for such nominees. The Board of Directors
believes that each nominee named below will be able to serve, but should any
nominee be unable to serve as a director, the persons named in the proxies
have advised that they will vote for the election of such substitute nominee
as the Board of Directors may propose.
The biographical information is furnished with respect to each member of the
Board of Directors of the Company, some of whom also serve as directors
and/or officers of one or more of the Company's subsidiaries Enterprise Bank
("Bank"), Enterprise Capital Management, Inc., and Enterprise Capital
Resources, Inc. There are no family relationships between or among any
directors or executive officers of the Company.
<TABLE>
<CAPTION>
PRESENT POSITION(S) PRINCIPAL OCCUPATION
NAME AND AGE WITH THE COMPANY DURING PAST 5 YEARS
- ------------ ---------------- -------------------
<S> <C> <C>
Fred H. Eller, 52 President and Chief Executive President, Chief Executive Officer and Director of the Company
Officer, Director (since 1995); Chairman of the Board of the Bank (since 1996);
Chief Executive Officer and Director of the Bank ( since 1988)
<PAGE> 4
Ronald E. Henges, 64 Chairman of the Board, Director Chief Executive Officer, Creve Coeur Camera (multi-store
retailer of camera and video equipment); President and Chief
Executive Officer of Henges Associates, Inc. (manufacturer
and installer of prefabricated wall systems) 1991-1995;
Chairman of the Board of the Company (since 1995); Chairman
of the Board of the Bank, 1988-1996
Kevin C. Eichner, 46 Vice Chairman of the Board, President, The Financial Collaborative, Inc. (a management
Director consulting firm); Vice Chairman of the Board of the Company
(since 1995); Vice Chairman of the Board of the Bank,
1991-1996
Joseph D. Garea, 42 Chief Financial Officer, Chief Financial Officer and Director of the Company (since
Director, President Enterprise 1996); President, Enterprise Capital Management, Inc. (since
Capital Management and 1995); President, Enterprise Capital Resources, Inc. (since
Enterprise Capital Resources 1995); Senior Vice President, United Postal Savings,
1991-1994
Paul R. Cahn, 71 Director President, Elan Polo Imports, Inc. (importer of women's and
children's casual shoes); Director of the Company (since 1996);
Director of the Bank, 1991-1993 and 1995-1996
Birch M. Mullins, 53 Director President, Baur Properties (developer of commercial real estate
properties); Director of the Company (since 1996); Director of
the Bank, 1991-1996
Robert E. Saur, 54 Director President, Conrad Properties (developer of commercial and
residential real estate properties); Director of the Company
(since 1995); Director of the Bank, 1991-1996
<PAGE> 5
Henry D. Warshaw, 43 Director Principal, Moneta Group (provides financial planning products
and services to individuals); Director of the Company (since
1996); Director of the Bank, 1991-1996; Chairman of Clayton
Banking Unit (since 1996)
James L. Wilhite, 63 Director President, Stange Corporation (manufacturer of marketing and
incentive items); Director of the Company (since 1996); Director
of the Bank (since 1996); Chairman of the St. Charles Banking
Unit (since 1996)
James A. Williams, 44 Director President, Sunset Transportation (trucking brokerage and
consulting firm); Director of the Company (since 1996);
Director of the Bank (since 1996); Chairman of the Sunset
Hills Banking Unit (since 1996)
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE INDIVIDUALS LISTED
FOR ELECTION AS DIRECTORS OF THE COMPANY.
INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
The Company engaged KPMG Peat Marwick LLP to audit the financial statements
for the years ended December 31, 1994, 1995 and 1996. Representatives of KPMG
Peat Marwick LLP are expected to be present at the Annual Meeting of
Shareholders, and they will have an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
The Company has selected KPMG Peat Marwick LLP to be the independent public
accountants for calendar year 1997 and recommends that the appointment of the
auditors be ratified by the Shareholders. Although Shareholder approval is
not required, it is the policy of the Board of Directors to request, whenever
possible, Shareholder ratification of the appointment or reappointment of
independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE SHAREHOLDER RATIFICATION OF
KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANT.
RECORD DATE AND VOTING SECURITIES
Only holders of Common Stock of record at the close of business on April 1,
1997, are entitled to notice and to vote at the meeting. On that date the
Company had outstanding and entitled to be voted 2,113,972 shares of Common
Stock, par value $.01 share (the "Common Stock"). The presence in person or
by proxy of the holders of a majority of the shares of Common Stock entitled
to vote at the Annual Meeting of Shareholders constitutes
<PAGE> 6
a quorum for the transaction of business. The shares represented by the
enclosed proxy will be voted if the proxy is properly signed and received prior
to the meeting.
Each holder of Common Stock is entitled to one vote for each share of Common
Stock held with respect to each matter to be voted upon; provided, however,
that cumulative voting shall be available for the election of directors.
Under cumulative voting, each shareholder is entitled to a cast a number of
votes equal to the number of shares held by such shareholder multiplied by
the total number of directors to be elected. These votes may be divided
among all nominees equally or may be voted for one or more of the nominees,
either in equal or unequal amounts, as the shareholder may elect. In the
event the votes for certain director nominees are withheld, these votes for
all director nominees has the effect of abstaining from voting for any
director nominees. If no instructions are given, the shares will be voted
equally for the election of all directors.
The following is a list persons who beneficially owned more than 5% of the
outstanding Common Stock of the Company, and the ownership of the executive
officers and directors, and all directors and executive officers as a group
at the close of business on April 1, 1997, according to record-ownership
listings as of that date:
<TABLE>
<CAPTION>
Beneficial Owner Number of Shares % Ownership <F1><F2>
- ---------------- ---------------- --------------------
<S> <C> <C>
Fred H. Eller <F3><F5><F6> 91,260 3.95%
Ronald E. Henges <F3><F8> 137,140 5.94%
Kevin C. Eichner <F3> 75,193 3.26%
Joseph D. Garea <F7> 5,226 <F*>
Paul R. Cahn <F4> 67,467 2.92%
Birch M. Mullins 17,850 <F*>
Robert E. Saur 39,000 1.69%
Henry D. Warshaw <F9> 17,260 <F*>
James A. Williams 4,840 <F*>
James L. Wilhite 8,721 <F*>
David J. Mishler <F3><F11><F6> 36,304 1.57%
James E. Graser <F3><F10><F6> 13,000 <F*>
Richard C. Leuck 6,591 <F*>
All Directors and Executive Officers as
a Group <F6> 519,852 22.52%
<FN>
<F*> Less than 1%
<F1> Percentages are calculated based on 2,307,972 shares which represents
2,113,972 shares outstanding as of December 31, 1996, plus Options
outstanding and exercisable as of December 31, 1996 or within 60 days
thereafter totaling 194,000 shares
<F2> Unless otherwise indicated, the named person has sole voting and
dispositive power for all shares shown.
<F3> Assumes the exercise of Options outstanding and exercisable as of
December 31, 1996 or within 60 days thereafter, including those beneficially
owned by the named person, as follows: Mr. Eichner, 28,000 shares; Mr. Eller,
52,000 shares; Mr. Henges, 28,000 shares; Mr. Graser, 8,000 shares; Mr.
Mishler, 21,000 shares; all directors and executive officers as a group,
137,000 shares.
<F4> Excludes 23,980 held by two adult children of Mr. Cahn. Includes 5,000
shares held in trust for the benefit of Mr. Cahn's spouse, to which Mr. Cahn
has voting power; 1,000 shares held in trust for the benefit of Mr. Cahn, to
which Mr. Cahn has voting power; and 61,447 shares held of record by Cahn
Family Partnership, L.P., to which Mr. Cahn has voting power.
<F5> Includes 39,240 shares held jointly by Mr. Eller and his spouse.
<PAGE> 7
<F6> Excludes all of the 13,960 shares held of record by EBSP Partnership in
which each of Mr. Eller, Mr. Graser and Mr. Mishler hold a 1/7 partnership
interest, but for which none of the named persons holds voting power.
Excludes all of the 13,820 shares held of record by EBSP II Partnership in
which each of Mr. Eller, Mr. Graser and Mr. Mishler hold a 1/7 partnership
interest, but for which none of the named persons holds voting power.
<F7> Includes 5,226 shares held in trust for the benefit of Mr. Garea, to
which Mr. Garea has voting power.
<F8> Excludes 18,110 shares held by and/or for the benefit of adult children
of Mr. Henges. Includes 54,270 shares held of record by MICALA Partnership
Ltd., to which Mr. Henges has voting power; 22,285 shares held in an
Individual Retirement Account for the benefit of Mr. Henges, to which Mr.
Henges has voting power; 3,285 shares held in an Individual Retirement
Account for the benefit of the spouse of Mr. Henges, to which Mr. Henges has
voting power; 3,600 shares held in trust for six minor grandchildren of Mr.
Henges, of which the spouse of Mr. Henges is trustee, and to which Mr. Henges
has voting power; and 25,680 shares held in six separate trusts, each for the
benefit of one of the grandchildren of Mr. Henges, to which Mr. Henges has
voting power. The address of Mr. Henges of 13398 Conway Road, St. Louis,
Missouri 63141.
<F9> Includes 8,580 shares held in an Individual Retirement Account for the
benefit of Mr. Warshaw, to which Mr. Warshaw has voting power; and 8,660
shares held in an Individual Retirement Account for the benefit of the spouse
of Mr. Warshaw, to which Mr. Warshaw has voting power.
<F10> Includes 4,999 shares held jointly by Mr. Graser and his spouse.
<F11> Includes 12,672 shares held jointly by Mr. Mishler and his spouse; and
2,631 shares held in an Individual Retirement Account for the benefit of Mr.
Mishler, to which Mr. Mishler has voting power.
</TABLE>
OTHER MATTERS
Management knows of no other matters that will be presented at the meeting.
If any other matter arises at the meeting, it is intended that the shares
represented by the proxies in the accompanying form will be voted in
accordance with the judgement of the persons named in the proxy.
The Annual Report of the Company for the calendar year 1996 is enclosed.
A copy of Form 10-K, the Annual Report filed by the Company with the
Securities and Exchanged Commission, is enclosed.
By Order of the Board of Directors
Joseph D. Garea, Secretary
<PAGE> 8
ENTERBANK HOLDINGS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 1997
The undersigned hereby appoints Ronald E. Henges, Kevin C. Eichner and Fred
H. Eller, and each of them, with or without the others, proxies, with full
power of substitution to vote as designated below, all shares of stock of
Enterbank Holdings, Inc. (the "Company") that the undersigned signatory
hereof would be entitled to vote if personally present at the Annual Meeting
of Stockholders of the Company to be held at Maryville University, Monsanto
Auditorium, 13550 Conway Road, St. Louis, Missouri 63141, on Tuesday, May 6,
1997 at 4:00 p.m. and adjournment or postponement thereof, all in accordance
with and as more fully described in the Notice and accompanying Proxy
Statement for such meeting, receipt of which is hereby acknowledged.
1. Election of Directors
Election of ten directors to hold office until the next Annual Meeting
of Stockholders or until their successors shall have been duly elected and
qualified.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(Except as marked to the For all nominees listed
contrary below). below.
-------Fred H. Eller -------Ronald E Henges -------Kevin C. Eichner
-------Joseph D. Garea -------Paul. R. Cahn -------Birch M. Mullins
-------Robert E. Saur -------Henry D. Warshaw -------James A. Wilhite
-------James A. Williams
INSTRUCTIONS: You may vote for all directors by marking where indicated
above "FOR all nominees listed below", withhold your vote until
the meeting by marking where indicated above "WITHHOLD
AUTHORITY to vote" or vote for individual director(s) by
marking next to each name the number of votes to be cast for
that person.
2. Ratification and Approval of KPMG Peat Marwick LLP as auditors for the
year ending December 31, 1997.
/ / For / / Against / / Abstain
3. In their discretion, upon any other business which may properly come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR
PROPOSAL 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please date, sign and return this Proxy card by mail, postage prepaid.
Dated: ---------------------------, 1997
SIGN HERE -----------------------------------
-----------------------------------
(Please sign exactly as name appears on the label for this mailing. When
stock is registered jointly, all owners must sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
If a corporation, please sign if full corporate name by the President or
other authorized officer. If a partnership, please sign in partnership name
by an authorized person.)
I--------Plan-------Do not plan to attend the annual meeting. -------Number
attending. WHETHER OR NOT YOU PLAN ON ATTENDING THE ANNUAL MEETING, PLEASE
COMPLETE AND RETURN THIS PROXY.
