<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934--For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-24131
------------
ENTERBANK HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 43-1706259
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
150 NORTH MERAMEC, CLAYTON, MO 63105
(Address of Principal Executive Offices) (Zip Code)
314-725-5500
(Registrant's Telephone Number, Including Area Code)
-----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of July 31, 1998:
Common Stock, $.01 par value----2,365,112 shares outstanding.
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<PAGE> 2
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet at
June 30, 1998 and December 31, 1997 1
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 1998 and 1997 2
Consolidated Statements of Comprehensive Income
Three Months and Six Months Ended June 30, 1998 and 1997 3
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk -
There have been no material changes from the information
provided in the December 31, 1997 Form 10-K
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Report on Form 8-K 18
Signatures 19
</TABLE>
<PAGE> 3
<TABLE>
PART I - ITEM 1
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Assets
Cash and due from banks $ 21,418,373 $ 13,897,054
Federal funds sold 27,950,000 32,825,000
Interest-bearing deposits 126,845 148,349
Investments in debt and equity securities:
Available for sale, at estimated fair value 11,013,250 12,514,721
Held to maturity, at amortized cost
(estimated fair value of $454,662 at June 30,
1998, $920,154 at December 31, 1997) 451,957 919,163
------------ ------------
Total investments in debt and equity securities 11,465,207 13,433,884
------------ ------------
Loans held for sale 3,730,769 1,324,244
Loans, less unearned loan fees 248,357,024 225,560,208
Less allowance for loan losses 3,000,000 2,510,000
------------ ------------
Loans, net 245,357,024 223,050,208
------------ ------------
Other real estate owned 830,398 806,072
Office equipment and leasehold improvements 2,629,461 2,328,699
Accrued interest receivable 1,571,648 1,448,343
Investment in Enterprise Fund, L.P. 425,608 225,683
Prepaid expenses and other assets 1,903,022 1,877,320
------------ ------------
Total assets $317,408,355 $291,364,856
============ ============
Liabilities and Shareholders' Equity
Deposits:
Demand $ 48,561,150 $ 46,052,686
Interest-bearing transaction accounts 21,467,016 22,519,772
Money market accounts 113,375,322 98,639,345
Savings 1,941,288 1,429,316
Certificates of deposit:
$100,000 and over 37,114,345 32,824,697
Other 66,387,554 62,834,818
------------ ------------
Total deposits 288,846,675 264,300,634
Accrued interest payable 590,374 549,059
Accounts payable and accrued expenses 358,033 448,371
------------ ------------
Total liabilities 289,795,082 265,298,064
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; authorized
3,000,000 shares; issued and outstanding
2,365,112 shares at June 30, 1998
2,298,412 shares at December 31, 1997 23,651 22,984
Surplus 19,217,143 18,879,210
Retained earnings 8,375,210 7,166,071
Accumulated other comprehensive
income (2,731) (1,473)
------------ ------------
Total shareholders' equity 27,613,273 26,066,792
------------ ------------
Total liabilities and shareholders' equity $317,408,355 $291,364,856
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
1
<PAGE> 4
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
<CAPTION>
Three months ended June 30, Six months ended June 30,
1998 1997 1998 1997
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $5,611,836 $3,863,377 $10,991,800 $7,169,213
Interest on debt securities:
Taxable 137,510 322,341 292,144 563,572
Nontaxable 5,396 7,848 12,549 17,540
Interest on federal funds sold 298,579 170,348 523,485 479,407
Interest on interest earning deposits 1,668 223 3,474 358
---------- ---------- ----------- ----------
Total interest income 6,054,989 4,364,137 11,823,452 8,230,090
---------- ---------- ----------- ----------
Interest expense:
Interest-bearing transaction accounts 125,611 95,251 249,509 190,121
Money market accounts 1,175,908 858,897 2,263,565 1,608,349
Savings 9,277 7,498 17,892 15,294
Certificates of deposit:
$100,000 and over 511,658 392,948 995,666 743,695
Other 970,948 626,572 1,911,651 1,264,564
Notes payable - - - 2,888
---------- ---------- ----------- ----------
Total interest expense 2,793,402 1,981,166 5,438,283 3,824,911
---------- ---------- ----------- ----------
Net interest income 3,261,587 2,382,971 6,385,169 4,405,179
Provision for loan losses 102,671 279,183 520,929 377,757
Net interest income after
provision for loan losses 3,158,916 2,103,788 5,864,240 4,027,422
---------- ---------- ----------- ----------
Noninterest income:
Service charges on deposit accounts 61,638 44,544 111,952 79,884
Other service charges and fee income 69,641 59,962 148,411 139,733
Gain on sale of mortgage loans 333,446 - 602,747 -
Gain (loss) on investment in
Enterprise Fund, L.P. 1,241 (2,212) (1,075) (4,013)
---------- ---------- ----------- ----------
Total noninterest income 465,966 102,294 862,035 215,604
---------- ---------- ----------- ----------
Noninterest expense:
Salaries 1,215,506 740,293 2,277,187 1,436,774
Payroll taxes and employee benefits 276,686 129,997 492,120 249,674
Occupancy 225,049 98,785 425,082 194,335
Furniture and Equipment 92,159 49,917 176,873 100,501
FDIC insurance - - 14,965 9,324
Data processing 68,444 52,435 135,316 113,614
Other 616,588 283,082 1,059,537 532,627
---------- ---------- ----------- ----------
Total noninterest expense 2,494,432 1,354,509 4,581,080 2,636,849
---------- ---------- ----------- ----------
Income before income tax expense 1,130,450 851,573 2,145,195 1,606,177
Income tax expense 426,800 311,757 819,300 602,729
---------- ---------- ----------- ----------
Net income $ 703,650 $ 539,816 $ 1,325,895 $1,003,448
========== ========== =========== ==========
Basic earnings per share $0.30 $0.26 $0.57 $0.50
Diluted earnings per share $0.28 $0.24 $0.53 $0.47
Basic weighted average common shares and
common stock equivalents outstanding 2,365,112 2,113,972 2,334,939 2,001,693
Diluted weighted average common shares and
common stock equivalents outstanding 2,511,307 2,248,769 2,492,880 2,136,504
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE> 5
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(unaudited)
<CAPTION>
Three months ended June 30, Six months ended June 30,
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $703,650 $539,813 $1,325,895 $1,003,448
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising
during period (1,548) (25,326) (1,906) (3,974)
-------- -------- ---------- ----------
Other comprehensive income, before tax (1,548) (25,326) (1,906) (3,974)
Income tax benefit (expense) related to items of
other comprehensive income 526 8,611 648 1,351
-------- -------- ---------- ----------
Other comprehensive income, net of tax (1,022) (16,715) (1,258) (2,623)
-------- -------- ---------- ----------
Comprehensive income $702,628 $513,098 $1,324,637 $1,000,825
======== ======== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE> 6
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
<CAPTION>
Six months ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,325,895 $ 1,003,448
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 204,912 143,241
Provision for loan losses 520,929 377,757
Write-downs and losses on other real estate owned - (25,728)
Net accretion of debt and equity securities (42,009) (143,992)
Loss on investment in Enterprise Fund, L.P. 1,075 4,013
Mortgage loans originated (32,611,078) -
Proceeds from mortgage loans sold 30,204,553 -
Increase in accrued interest receivable (123,305) (305,645)
Increase in prepaid expenses and other assets (25,702) (946,979)
Increase (decrease) in accounts payable and accrued expenses (48,375) 147,874
------------ ------------
Net cash provided by operating activities (593,105) 253,989
------------ ------------
Cash flows from investing activities:
Purchases of interest-bearing deposits - (30,063)
Purchases of available-for-sale debt securities (10,132,006) (17,837,997)
Purchases of available-for-sale equity securities (320,000) (90,500)
Proceeds from maturities of available-for-sale debt securities 12,000,000 12,660,000
Proceeds from maturities and principal paydowns on
held-to-maturity debt securities 460,786 407,256
Proceeds from the maturity of interest-bearing deposits 21,504 -
Net increase in loans (22,925,526) (42,121,573)
Purchases of office equipment and leasehold improvements (508,196) (605,168)
Write-down of office equipment and leasehold improvements 2,522 -
Proceeds from sale of other real estate owned 73,455 -
(Investment in) contributions returned from Enterprise Fund, L.P. (201,000) 319,500
------------ ------------
Net cash used in investing activities (21,528,461) (47,298,545)
------------ ------------
Cash flows from financing activities:
Net increase in demand and savings accounts 16,703,657 36,990,282
Net increase in certificates of deposit 7,842,384 4,569,390
Decrease in notes payable - (300,000)
Cash dividends paid (116,756) (95,131)
Proceeds from the issuance of common stock - 6,856,518
Proceeds from the exercise of common stock options 338,600 -
------------ ------------
Net cash provided by financing activities 24,767,885 48,021,059
------------ ------------
Net increase in cash and due from banks 2,646,319 976,503
Cash and due from banks, beginning of period 46,722,054 32,511,035
------------ ------------
Cash and due from banks, end of period $ 49,368,373 $ 33,487,538
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,396,968 $ 3,831,439
Income taxes 1,191,066 705,258
============ ============
Noncash transactions:
Transfers to other real estate owned in settlement of loans 97,781 55,000
Loans made to facilitate the sale of other real estate owned - 149,082
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 7
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements of Enterbank
Holdings, Inc. and subsidiaries (the "Company") are unaudited and
should be read in conjunction with the consolidated financial
statements contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997. In the opinion of management, all
adjustments, consisting of normal recurring accruals considered
necessary for a fair presentation of the results of operations for the
interim periods presented herein, have been included. Operating
results for the six month period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for any
other interim period or for the year ending December 31, 1998.
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
Certain amounts in the consolidated financial statements for the year
end December 31, 1997 have been reclassified to conform to the 1998
presentation. Such reclassifications had no effect on previously
reported consolidated net income or shareholders' equity.
(2) CHANGE IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
This statement requires presentation of the components of comprehensive
earnings, including the changes in equity from non-owner sources such
as unrealized gains on securities. The company did not sell any
investments in debt and equity securities during the six months ended
June 30, 1998 and 1997.
The Company's comprehensive earnings adjustments for the six month
period ending June 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998
----------------------------------------------
Before-Tax Tax Net-of-Tax
Amount Benefit Amount
---------- ------- ----------
<S> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains arising
during period $ (1,906) 648 (1,258)
---------- ------- ----------
Other comprehensive income $ (1,906) 648 (1,258)
========== ======= ==========
<CAPTION>
1997
----------------------------------------------
Before-Tax Tax Net-of-Tax
Amount Benefit Amount
---------- ------- ----------
<S> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains arising
during period $ (3,974) 1,351 (2,623)
---------- ------- ----------
Other comprehensive income $ (3,974) 1,351 (2,623)
========== ======= ==========
</TABLE>
5
<PAGE> 8
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per
Share". SFAS No. 128 requires the reporting of basic and diluted earnings
per share. Basic earnings per share data is calculated by dividing net
income, after deducting dividends on preferred stock, by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share gives effect to the increase in the average shares outstanding which
would have resulted from the exercise of dilutive stock options and warrants.
In accordance with the requirements of SFAS No. 128, basic and diluted
earnings per share have been restated for the six months ended June 30, 1997.
<Remainder of this page intentionally left blank>
6
<PAGE> 9
PART I ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets at June 30, 1998 were $317 million, an increase of $26 million
or 9%, over total assets of $291 million at December 31, 1997. Loans and
leases, net of unearned loan fees were $248 million, an increase of $22
million, or 10% over total loans and leases of $226 million at December 31,
1997. Federal funds sold and investment securities were $39 million, a
decrease of $7 million, or 15%, from total federal funds sold and investment
securities of $46 million at December 31, 1997. The decrease resulted from
the shift in earnings assets from short-term investments into loans during
the first six months of 1998.
Total deposits at June 30, 1998 were $289 million, an increase of $25 million
or 9%, over total deposits of $264 million at December 31, 1997.
Total shareholders' equity increased $1.5 million. The increase in equity
is due to an increase in retained earnings of $1.2 million for the six months
ended June 30, 1998, and the exercise of incentive stock options by some
employees for $339,000.
RESULTS OF OPERATIONS
Net income was $1,326,000 for the six month period ended June 30, 1998, an
increase of 32% over net income of $1,003,000 for the same period in 1997.
Net income for the three month period ended June 30, 1998 was $704,000, and
increase of 30% over net income of $540,000 for the same period in 1997.
Basic earnings per share for the six months ended June 30, 1998 and 1997 was
$0.57 and $0.50, respectively. Diluted earnings per share for the six months
ended June 30, 1998 and 1997 was $0.53 and $0.47, respectively. Earnings per
share did not increase in line with the increase in net income due to the
increase in weighted average common stock equivalents outstanding from June
30, 1997 to June 30, 1998. Weighted average common stock equivalents
increased primarily from the issuance of 451,612 and 130,940 shares of common
stock on February 14, 1997 and October 31, 1997, respectively, in two common
stock offerings.
NET INTEREST INCOME
Net interest income (presented on a tax equivalent basis) was $3.3 million,
or 4.76% of average earnings assets, for the three months ended June 30,
1998, compared to $2.4 million, or 4.75% of average earning assets, for the
same period in 1997. The $900,000, or 38% increase, in net interest income
resulted primarily from an increase in average earning assets and their
yields offset by an increase in average interest-bearing liabilities.
Average interest earning assets increased $76 million to $276 million for the
three months ended June 30, 1998, from $200 million during the same period in
1997. The yield on average interest earning assets increased from 8.75% for
the three months ended June 30, 1997 to 8.82% for the same period in 1998.
The increase in asset yield was primarily due to a change in mix of earning
assets from lower yielding investment securities and federal funds sold to
higher yielding loans, offset by a decrease in the yield of these interest
earning assets.
Average interest-bearing liabilities increased $65 million to $225 million
for the three months ended June 30, 1998, from $160 million during the same
period in 1997. This increase was offset by a slight decrease in the yield
on interest-bearing liabilities to 4.97% for the three months ended June 30,
1998 from 5.02% for the same period in 1997.
7
<PAGE> 10
The following table sets forth, on a tax-equivalent basis, certain
information relating to the Company's average balance sheet and reflects the
average yield earned on interest-earning assets, the average cost of
interest-bearing liabilities and the resulting net interest income for the
three month periods ended June 30, 1997 and 1998:
<TABLE>
<CAPTION>
Three months ended June 30,
------------------------------------------------------------------------------------
1998 1997
---------------------------------------- ----------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate
------- -------- -------- ------- -------- -------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans <F1> $242,352 81.96% $5,623 9.31% $164,116 76.64% $3,867 9.45%
Taxable investments in
debt securities 10,038 3.39 138 5.51 22,719 10.61 323 5.70
Non-taxable investments
in debt securities <F2> 486 0.16 8 6.61 829 0.39 12 5.81
Federal funds sold 23,056 7.80 299 5.20 12,609 5.89 170 5.41
Interest earning deposits 119 0.04 2 6.74 30 0.01 - -
-------- ------ ------ ------ -------- ------ ------ ------
Total interest-earning
assets 276,051 93.36 6,070 8.82 200,303 93.54 4,372 8.75
Non-interest-earning assets:
Cash and due from banks 15,606 5.28 10,443 4.88
Office equipment and leasehold
Improvements 2,454 0.83 1,349 0.63
Prepaid expenses and other
assets 4,571 1.55 4,000 1.87
Allowance for possible
loan losses (2,986) (1.01) (1,955) (0.91)
-------- ------ -------- ------
Total assets $295,696 100.00% $214,140 100.00%
======== ====== ======== ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing
transaction accounts $ 20,273 6.86% $ 126 2.49% $ 15,905 7.43% $ 114 2.87%
Money market 101,989 34.49 1,176 4.62 72,778 33.99 859 4.73
Savings 1,509 0.51 9 2.39 1,214 0.57 7 2.31
Certificates of deposit 101,726 34.40 1,483 5.85 69,824 32.61 1,020 5.86
-------- ------ ------ ------ -------- ------ ------ ------
Total interest-bearing
liabilities 225,496 76.26 2,794 4.97 159,721 74.60 2,000 5.02
Noninterest-bearing liabilities:
Demand deposits 41,834 14.15 31,317 14.62
Other liabilities 1,048 0.35 746 0.35
-------- ------ -------- ------
Total liabilities 268,378 90.76 191,784 89.57
Shareholders' equity 27,319 9.24 22,356 10.44
-------- ------ -------- ------
Total liabilities and
shareholders' equity $295,696 100.00% $214,140 100.00%
======== ====== ======== ======
Net interest income $3,276 $2,372
====== ======
Net interest margin 4.76% 4.75%
====== ======
<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 $154,000 and $170,000, for
1998 and 1997, respectively.
<F2> Non-taxable investment income is presented on a fully tax-equivalent
basis assuming a tax rate of 34%.
</TABLE>
8
<PAGE> 11
Net interest income (presented on a tax equivalent basis) was $6.4 million,
or 4.80% of average earnings assets, for the six months ended June 30, 1998,
compared to $4.4 million, or 4.62% of average earning assets, for the same
period in 1997. The $2 million, or 45% increase, in net interest income
resulted primarily from an increase in interest earning assets offset by an
increase in interest-bearing liabilities.
Average earning assets increased $78 million to $270 million for the six
months ended June 30, 1998, from $192 million during the same period in 1997.
The increase in the earning assets is attributable to the continued calling
efforts of the Company's relationship officers and sustained economic growth
in the local market served by the Company. The yield on average earnings
assets increased from 8.66% for six months ended June 30, 1997 to 8.87% for
the same period in 1998. The increase in asset yield was primarily due to a
change in mix of earning assets from lower yielding investment securities and
federal funds sold to higher yielding loans partially offset by a decrease in
yields on loans.
Average interest bearing liabilities increased $66 million to $220 million
for the three months ended June 30, 1998, from $154 million during the same
period in 1997. The yield on interest bearing liabilities remained
relatively constant for the six month period ending June 30, 1998 and 1997 at
4.99% and 5.02% respectively.
<Remainder of this page intentionally left blank>
9
<PAGE> 12
The following table sets forth, on a tax-equivalent basis, certain
information relating to the Company's average balance sheet and reflects the
average yield earned on interest-earning assets, the average cost of
interest-bearing liabilities and the resulting net interest income for the
six month periods ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------------------------------------------------------------
1998 1997
---------------------------------------- ----------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate
------- -------- -------- ------- -------- -------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans <F1> $238,841 82.76% $11,018 9.30% $152,826 74.56% $7,175 9.47%
Taxable investments in debt
securities 10,398 3.60 292 5.66 20,096 9.80 564 5.66
Non-taxable investments in debt
securities 572 0.20 19 6.70 865 0.42 27 6.29
Federal funds sold 19,725 6.83 523 5.35 18,174 8.87 479 5.31
Interest earning deposits 123 0.04 3 4.90 26 0.01 - -
-------- ------ ------- ------ -------- ------ ------ ------
Total interest-earning assets 269,658 93.43 11,855 8.87 191,987 93.66 8,245 8.66
Non-interest-earning assets:
Cash and due from banks 14,992 5.19 9,992 4.87
Office Equipment & leasehold
improvements 2,396 0.83 1,269 0.62
Prepaid expenses and other
assets 4,421 1.53 3,635 1.77
Allowance for possible loan
losses (2,861) (0.99) (1,889) (0.92)
-------- ------ -------- ------
Total assets $288,606 100.00% 204,994 100.00%
======== ====== ======== ======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities:
Interest-bearing transaction
accounts $ 20,080 6.96% $ 250 2.51% $ 15,363 7.49% $ 209 2.74%
Money market 98,000 33.96 2,264 4.66 68,620 33.47 1,608 4.73
Savings 1,461 0.51 18 2.48 1,172 0.57 15 2.58
Certificates of deposit 100,106 34.69 2,908 5.86 69,101 33.72 2,009 5.86
Notes payable - - - - 50 0.02 3 12.10
-------- ------ ------- ------ -------- ------ ------ ------
Total interest-bearing
liabilities 219,647 76.12 5,440 4.99 154,306 75.27 3,844 5.02
Noninterest-bearing
liabilities:
Demand deposits 41,025 14.21 29,335 14.31
Other liabilities 1,029 0.36 343 0.17
-------- ------ -------- ------
Total liabilities 261,701 90.68 183,984 89.75
Shareholders' equity 26,905 9.32 21,010 10.25
-------- ------ -------- ------
Total Liabilities &
shareholders' Equity $288,606 100.00% $204,994 100.00%
======== ====== ======== ======
Net interest income $ 6,415 $4,401
======= ======
Net interest margin 4.80% 4.62%
====== ======
<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 $302,000 and $305,000, for
1998 and 1997, respectively.
<F2> Non-taxable investment income is presented on a fully tax-equivalent
basis assuming a tax rate of 34%.
</TABLE>
10
<PAGE> 13
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses was $103,000 and $521,000 for the
three months and six months ended June 30, 1998, respectively, compared to
$279,000 and $378,000 for the same periods in 1997. The decrease in
provision for the three month periods reflects a decrease in net loans
charged off to $18,000 from $49,000 for three months ended June 30, 1998 and
1997, respectively. The Company increased the loan loss reserve during the
first six months of 1998 to reflect the continued growth in the loan
portfolio.
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>
Six months ended June 30,
-----------------------------------
1998 1997
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Allowance at beginning of period $ 2,510 $ 1,765
Loans charged off:
Commercial and industrial 30 24
Real estate:
Commercial 19 45
Construction - 11
Residential - -
Consumer and other - -
-------- --------
Total loans charged off 49 80
-------- --------
Recoveries of loans previously charged off:
Commercial and industrial 18 20
Real estate:
Commercial - 7
Construction - -
Residential - -
Consumer and other - -
-------- --------
Total recoveries of loans previously charged off: 18 27
-------- --------
Net loans charged off 31 53
-------- --------
Provisions charged to operations 521 378
-------- --------
Allowance at end of period $ 3,000 $ 2,090
======== ========
Average loans $238,841 $152,826
Total loans $248,357 $176,296
Nonperforming loans $ 8 $ 595
Net charge-offs to average loans 0.03% 0.03%
Allowance for possible loan losses 1.21% 1.19%
Allowance for possible loan losses to
non-performing loans 37,500% 351%
</TABLE>
11
<PAGE> 14
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 for loan losses is established to provide for
unidentified credit losses inherent in the portfolio. As increases to the
allowance 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.
The following table sets forth information concerning the Company's
nonperforming assets as of the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(Dollars in Thousands)
<S> <C> <C>
Non-accrual loans $ 8 $ 50
Loans past due 90 days or more
and still accruing interest - -
Restructured loans - -
-------- --------
Total nonperforming loans 8 50
Foreclosed property 830 806
-------- --------
Total non-performing assets $ 838 $ 856
======== ========
Total assets $317,408 $291,365
Total loans $248,357 $225,560
Total loans plus foreclosed property $249,187 $226,366
Nonperforming loans to loans -% 0.02%
Nonperforming assets to loans plus
foreclosed property 0.34% 0.38%
Nonperforming assets to total assets 0.26% 0.29%
</TABLE>
12
<PAGE> 15
NONINTEREST INCOME
Noninterest income was $466,000 and $862,000 for the three month and six
month periods ended June 30, 1998, respectively, compared to $102,000 and
$216,000 for the same periods in 1997. The increase is primarily attributed
to the gain on sale of mortgage loans. The Company began offering mortgage
loan products during the third quarter of 1997. The gain on sale of mortgage
loans was $333,000 and $603,000 for the three and six month periods ended
June 30, 1998, respectively, compared to $0 for the three and six month
periods ended June 30, 1997. Noninterest income from other sources consists
primarily of service charges and other fees related to deposit accounts and
increased in line with the growth of deposits.
NONINTEREST EXPENSE
Noninterest expense was $2.5 and $4.6 million for the three month and six
month periods ended June 30, 1998, respectively, compared to $1.4 million and
$2.6 million for the same periods in 1997. Some noninterest expenses are
primarily attributable to: 1) a new merchant bank office in Kansas City
opened in March, 1998; 2) new banking facilities opened during 1997 in St.
Peters and Sunset Hills; and 3) expenses related to the origination and sale
of mortgage loans. The following table depicts changes in noninterest
expenses in the above mentioned operations:
<TABLE>
<CAPTION>
3 months ended June 30, 6 months ended June 30,
1998 versus 1997 1998 versus 1997
----------------------------------- -----------------------------------
% Change 1998 1997 $ Change 1998 1997
-------- ---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Merchant Banking division 235.44% $ 144,757 43,155 136.16% $ 244,079 103,354
St. Peters and Sunset Hills Banking Units 149.30 964,832 387,012 155.93 1,780,619 695,751
Mortgage Operations N/A 199,522 - N/A 364,130 -
Other Operations 28.23 1,185,321 924,342 19.29 2,192,252 1,837,744
------ ---------- --------- ------ ---------- ---------
Total noninterest income 84.16% $2,494,432 1,354,509 73.73% $4,581,080 2,636,849
====== ========== ========= ====== ========== =========
</TABLE>
The increases are primarily due to increases in salaries and benefits
expense, occupancy and equipment expense and other operating expenses related
to the above mentioned operations. Noninterest expenses attributable to
other operations increased 28% and 19% for the three month and six month
periods ended June 30, 1998, respectively, as compared to the same periods in
1997 and is due to normal increases related to growth.
YEAR 2000
In 1997, the Company organized a formal program to address the implications
of Year 2000 issues. The Company completed the assessment, analysis and
planning phases and is in the implementation phase of the project. Testing
of the systems will be conducted throughout 1998. The company expects
expenditures related to Year 2000 issues to be approximately $50,000. A
portion of this expense is related to regulatory compliance, not new
equipment or programming expense. This expense is an estimate based on
current regulatory requirements and may change as these requirements change.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is provided by the Company's earning assets, including short-term
investments in federal funds sold, maturities in the loan portfolio,
maturities in the investment portfolio, amortization of term loans, deposit
inflows, proceeds from borrowings, and retained earnings.
Since inception, the Company has experienced rapid loan and deposit growth
primarily due to the aggressive direct calling efforts of the Company's
relationship officers and sustained economic growth in the local market
served by the Company. Management has pursued privately held businesses who
desire a close working relationship with a locally-managed, full service
bank. Due to the relationship developed with these customers, management
views
13
<PAGE> 16
deposits from this source as a stable deposit base. Additionally, the Company
belongs to a national network of time depositors (primarily credit unions) who
place time deposits with the Company, typically in increments of $99,000. The
Company has used this source of deposits for over four years and considers it
to be a stable source of deposits enabling the Company to acquire funds at a
cost below its alternative cost of funds. There were $31 million of deposits
from the national network with the Company at June 30, 1998 and December 31,
1997.
The following table sets forth the amount and maturity of certificates of
deposit that had balances of more than $100,000 at June 30, 1998:
<TABLE>
<CAPTION>
Remaining Maturity Amount
-------------------------------------- -------
(Dollars in thousands)
<S> <C>
Three months or less $13,583
Over three through six months 10,571
Over six through twelve months 10,459
Over twelve months 2,501
-------
$37,114
=======
The asset/liability management process, which involves management of the
components of the balance sheet to allow assets and liabilities to reprice at
approximately the same time, is an ever-changing process essential to
minimizing the effect of interest rate fluctuations on net interest income.
CAPITAL ADEQUACY
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 institution 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 (d) goodwill, (e) mortgage servicing rights
within certain limits, and (f) 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 ration is required of less
highly rated banking organizations. Total capital, a measure of capital
adequacy, includes Tier 1 capital, allowance for possible loan losses, and
debt considered equity for regulatory capital purposes.
<Remainder of this page intentionally left blank>
14
<PAGE> 17
The following table summarizes the Company's risk-based capital and leverage
ratios at the dates indicated:
</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 June 30, 1998:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $30,583,887 11.80% $20,727,701 8.00% $25,909,627 10.00%
Enterprise Bank $28,609,191 11.09% $20,644,927 8.00% $25,806,159 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $27,583,887 10.65% $10,363,851 4.00% $15,545,776 6.00%
Enterprise Bank $25,609,191 9.92% $10,322,464 4.00% $15,483,695 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $27,583,887 9.56% $11,544,248 4.00% $14,430,310 5.00%
Enterprise Bank $25,609,191 8.91% $11,502,945 4.00% $14,378,682 5.00%
As of December 31, 1997:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $28,538,743 12.28% $18,591,401 8.00% $23,239,251 10.00%
Enterprise Bank $25,915,000 11.19% $18,525,813 8.00% $23,157,266 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $26,028,743 11.20% $9,295,700 4.00% $13,943,551 6.00%
Enterprise Bank $23,405,000 10.11% $9,262,906 4.00% $13,894,359 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $26,028,743 11.42% $9,116,560 4.00% $11,395,700 5.00%
Enterprise Bank $23,405,000 10.30% $9,085,351 4.00% $11,356,689 5.00%
</TABLE>
IMPLEMENTATION OF NEW ACCOUNTING PRONOUNCEMENTS
SFAS 130, Reporting Comprehensive Income, was issued in June, 1997.
Comprehensive income is defined as net income plus certain items that are
recorded directly to shareholders' equity, such as unrealized gains and
losses on available-for-sale securities. Components of the Company's
comprehensive income are reported in a financial statement that is displayed
with the same prominence as other financial statements starting in the first
quarter of 1998. The reporting requirements of SFAS 130 did not have a
material impact on the Company's financial condition or results of
operations.
SFAS 131, Disclosures about Segments of an Enterprise and Related
Information, is effective for financial statements for periods beginning
after December 15, 1997, but interim period reporting is not required in
1998. An operating segment is defined under FAS 131 as a component of an
enterprise that engages in business activities that generate revenue and
expense for which operating results are reviewed by the chief operating
decision maker in the determination of resource allocation and performance.
The Company is currently evaluating the impact of SFAS 131 on future
financial statement disclosures.
SFAS 133, Accounting for Derivative Instruments and Hedging Activities, is
effective for all fiscal years beginning after June 15, 1999. Earlier
application is encouraged but should not be applied retroactively to
financial
15
<PAGE> 18
statements of prior periods. SFAS 133 establishes standards for derivative
instruments embedded in other contracts, and for hedging activities. It
requires an entity to recognize all derivatives as either assets or liabilities
in the balance sheet and measure those instruments at fair value. The Company
is currently evaluating the requirements and impact of SFAS 133.
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.
<Remainder of this page intentionally left blank>
16
<PAGE> 19
Part II ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Enterbank Holdings, Inc. was held on
April 28, 1998. Proxies were solicited pursuant to Regulation 14A of the
Securities Exchange Act of 1934. There was no solicitation in opposition to
management's nominees for Directors and all nominees were elected. In
addition, there was no solicitation in opposition to management's nominees to
approve KPMG Peat Marwick, LLP as the Company's independent accountants.
There were no matters other than the election of directors and independent
accountants voted upon at the meeting, the results of which were as follows:
<TABLE>
<CAPTION>
Directors For Against Abstain
--------- --- ------- -------
<S> <C> <C> <C>
Ronald E. Henges 1,808,581 0 0
Kevin C. Eichner 1,808,581 0 0
Randall D. Humphreys 1,808,581 0 0
Paul R. Cahn 1,808,581 0 0
Birch M. Mullins 1,808,581 0 0
Robert E. Saur 1,808,581 0 0
Henry D. Warshaw 1,807,866 0 715
James A. Wilhite 1,808,581 0 0
James A. Williams 1,808,581 0 0
Ted C. Wetterau 1,807,481 0 1,100
<CAPTION>
Auditors For Against Abstain
-------- --- ------- -------
<S> <C> <C> <C>
KPMG Peat Marwick, LLP 1,786,951 5,150 18,330
</TABLE>
17
<PAGE> 20
Part II ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a). The exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
11 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
(b). The Company filed no current reports on Form 8-K during the six months
ended June 30, 1998.
18
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the 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
14th day of August, 1998.
ENTERBANK HOLDINGS, INC.
/s/ Fred H. Eller
By: ---------------------------------
Fred H. Eller
Chief Executive Officer
/s/ James C. Wagner
By: ---------------------------------
James C. Wagner
Chief Financial Officer
19
<PAGE> 1
<TABLE>
EXHIBIT 11
----------
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Basic Diluted
EPS number EPS number Net Basic Diluted
of shares of shares Income EPS EPS
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 months ended June 30, 1997 2,113,972 2,248,769 539,816 0.26 0.24
3 months ended June 30, 1998 2,365,112 2,511,307 703,650 0.30 0.28
<CAPTION>
3 MONTHS ENDED JUNE 30, 1997 Basic Diluted
--------- ---------
<S> <C> <C> <C>
Average Shares Outstanding 2,113,972 2,113,972
Options - Plan 1 142,000
Average Option Price 5.28
Total Exercise Cost 749,760
Shares Repurchased 46,860
Net Shares from Option - Plan 1 95,140
Options - Plan 2 74,560
Average Option Price 7.49
Total Exercise Cost 558,454
Shares Repurchased 34,903
Net Shares from Option - Plan 2 39,657
Options - Plan 3 189,297
Average Option Price 16.00
Total Exercise Cost 3,028,752
Shares Repurchased 189,297
Net Shares from Option - Plan 3 0
--------- ---------
Gross Shares 2,113,972 2,248,769
Price 16.00
<CAPTION>
3 MONTHS ENDED JUNE 30, 1998 Basic Diluted
--------- ---------
<S> <C> <C> <C>
Average Shares Outstanding 2,365,112 2,365,112
Options - Plan 1 23,000
Average Option Price 5.85
Total Exercise Cost 134,550
Shares Repurchased 4,870
Net Shares from Option - Plan 1 18,130
Options - Plan 2 73,400
Average Option Price 7.64
Total Exercise Cost 560,776
Shares Repurchased 20,296
Net Shares from Option - Plan 2 53,104
Options - Plan 3 180,100
Average Option Price 16.13
Total Exercise Cost 2,905,013
Shares Repurchased 105,140
Net Shares from Option - Plan 3 74,960
--------- ---------
Gross Shares 2,365,112 2,511,307
Price 27.63
20
<PAGE> 2
<CAPTION>
EXHIBIT 11 (CONTINUED)
----------------------
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Basic Diluted
EPS number EPS number Net Basic Diluted
of shares of shares Income EPS EPS
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6 months ended June 30, 1997 2,001,693 2,136,504 1,003,448 0.50 0.47
6 months ended June 30, 1998 2,334,939 2,492,880 1,325,895 0.57 0.53
<CAPTION>
6 MONTHS ENDED JUNE 30, 1997 Basic Diluted
--------- ---------
<S> <C> <C> <C>
Average Shares Outstanding 2,001,693 2,001,693
Options - Plan 1 142,000
Average Option Price 5.28
Total Exercise Cost 749,760
Shares Repurchased 46,860
Net Shares from Option - Plan 1 95,140
Options - Plan 2 72,790
Average Option Price 7.28
Total Exercise Cost 529,911
Shares Repurchased 33,119
Net Shares from Option - Plan 2 39,671
Options - Plan 3 95,171
Average Option Price 16.00
Total Exercise Cost 1,522,736
Shares Repurchased 95,171
Net Shares from Option - Plan 3 0
--------- ---------
Gross Shares 2,001,693 2,136,504
Price 16.00
<CAPTION>
6 MONTHS ENDED JUNE 30, 1998 Basic Diluted
--------- ---------
<S> <C> <C> <C>
Average Shares Outstanding 2,334,939 2,334,939
Options - Plan 1 52,895
Average Option Price 6.74
Total Exercise Cost 356,512
Shares Repurchased 13,940
Net Shares from Option - Plan 1 38,955
Options - Plan 2 73,643
Average Option Price 7.64
Total Exercise Cost 562,633
Shares Repurchased 22,000
Net Shares from Option - Plan 2 51,643
Options - Plan 3 182,365
Average Option Price 16.13
Total Exercise Cost 2,941,547
Shares Repurchased 115,021
Net Shares from Option - Plan 3 67,344
--------- ---------
Gross Shares 2,334,939 2,492,880
Price 25.57
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 21,418,373
<INT-BEARING-DEPOSITS> 126,845
<FED-FUNDS-SOLD> 27,950,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,013,250
<INVESTMENTS-CARRYING> 451,957
<INVESTMENTS-MARKET> 454,662
<LOANS> 248,357,024
<ALLOWANCE> 3,000,000
<TOTAL-ASSETS> 317,408,355
<DEPOSITS> 288,846,675
<SHORT-TERM> 0
<LIABILITIES-OTHER> 948,407
<LONG-TERM> 0
0
0
<COMMON> 23,651
<OTHER-SE> 27,589,622
<TOTAL-LIABILITIES-AND-EQUITY> 317,408,355
<INTEREST-LOAN> 10,991,800
<INTEREST-INVEST> 304,693
<INTEREST-OTHER> 526,959
<INTEREST-TOTAL> 11,823,452
<INTEREST-DEPOSIT> 5,438,283
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 6,385,169
<LOAN-LOSSES> 520,929
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,581,080
<INCOME-PRETAX> 2,145,195
<INCOME-PRE-EXTRAORDINARY> 2,145,195
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,325,895
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 8.87
<LOANS-NON> 8,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 607,894
<ALLOWANCE-OPEN> 2,510,000
<CHARGE-OFFS> 48,853
<RECOVERIES> 17,924
<ALLOWANCE-CLOSE> 3,000,000
<ALLOWANCE-DOMESTIC> 2,550,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 450,000
</TABLE>
