<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 - For the quarterly period ended June 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number: ___________
------------
ENTERBANK HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 43-1706259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
150 NORTH MERAMEC, CLAYTON, MO 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-725-5500
------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 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 August 14, 2000:
Common Stock, $.01 par value - - 8,970,800 shares outstanding
================================================================================
<PAGE> 2
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
At June 30, 2000 and December 31, 1999.................................1
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 2000 and 1999...............2
Consolidated Statements of Comprehensive Income
Three Months and Six Months Ended June 30, 2000 and 1999...............4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999................................5
Notes to Consolidated Financial Statements.............................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................9
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk ..20
PART II - OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Security Holders..............22
Item 6. Exhibits and Reports on Form 8-K.................................23
Signatures................................................................24
<PAGE> 3
PART I - ITEM 1
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
<TABLE>
<CAPTION>
At June 30, At December 31,
Assets 2000 1999
------ ------------ --------------
<S> <C> <C>
Cash and due from banks .................................... $ 23,509,408 $ 19,354,316
Federal funds sold ......................................... 39,950,000 54,825,000
Interest-earning deposits .................................. 23,390 469
Investments in debt and equity securities:
Trading, at fair value ................................ -- 910,000
Available for sale, at estimated fair value ........... 55,788,330 42,155,542
Held to maturity, at amortized cost ................... 525,109 679,806
Capital stock of the Federal Reserve Bank
and the Federal Home Loan Bank, at cost ............... 2,262,550 1,930,350
------------ ------------
Total investments in debt and equity securities .. 58,575,989 45,675,698
------------ ------------
Loans held for sale ........................................ 4,954,690 1,438,335
Loans, less unearned loan fees ............................. 518,614,637 480,891,481
Less allowance for loan losses ........................ 7,244,879 6,758,222
------------ ------------
Loans, net ....................................... 511,369,758 474,133,259
------------ ------------
Other real estate owned .................................... 396,072 438,072
Office equipment and leasehold improvements ................ 8,174,079 7,982,725
Accrued interest receivable ................................ 3,737,045 3,555,615
Investment in Enterprise Merchant Banc LLC ................. 2,162,282 572,009
Investment in Enterprise Fund, L.P. ........................ 574,486 546,710
Goodwill ................................................... 2,373,388 2,468,671
Prepaid expenses and other assets .......................... 4,263,391 4,152,610
------------ ------------
Total assets ................................ $660,063,978 $615,143,489
============ ============
Liabilities and Shareholders' Equity
Deposits:
Demand ................................................ $ 79,935,113 $ 75,045,703
Interest-bearing transaction accounts ................. 48,567,247 48,414,208
Money market accounts ................................. 259,167,627 218,135,867
Savings ............................................... 7,226,757 7,631,671
Certificates of deposit:
$100,000 and over ................................ 79,710,425 68,224,042
Other ............................................ 113,311,642 124,877,136
------------ ------------
Total deposits .............................. 587,918,811 542,328,627
Guaranteed preferred beneficial interest in
EBH-subordinated debentures .................... 11,000,000 11,000,000
Federal Home Loan Bank advances ............................ 10,016,677 11,116,830
Federal funds purchased .................................... -- 1,300,000
Accrued interest payable ................................... 1,422,449 1,292,155
Accounts payable and accrued expenses ...................... 405,704 1,062,281
------------ ------------
Total liabilities ........................... 610,763,641 568,099,893
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; authorized 20,000,000
shares; issued and outstanding 8,968,100 shares ....... 89,681 89,369
at June 30, 2000, 8,936,930 shares at December 31, 1999
Surplus ............................................... 34,900,269 34,744,120
Retained earnings ..................................... 14,727,314 12,622,630
Accumulated other comprehensive loss .................. (416,927) (412,523)
------------ ------------
Total shareholders' equity .................. 49,300,337 47,043,596
------------ ------------
Total liabilities and shareholders' equity .. $660,063,978 $615,143,489
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
1
<PAGE> 4
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ............. $ 12,087,774 $ 8,870,871 $ 23,153,173 $ 17,005,778
Interest on debt securities:
Taxable .......................... 877,914 500,677 1,608,280 1,083,579
Nontaxable ....................... 8,841 9,296 18,434 23,302
Interest on federal funds sold ......... 639,853 186,798 1,370,788 487,633
Interest on interest earning deposits... 222 -- 374 137
------------ ------------- ------------ ------------
Total interest income ....... 13,614,604 9,567,642 26,151,049 18,600,429
------------ ------------- ------------ ------------
Interest expense:
Interest-bearing transaction accounts .. 210,274 201,547 412,601 394,595
Money market accounts .................. 3,130,159 1,931,035 5,854,846 3,804,028
Savings ................................ 45,558 45,961 89,538 88,413
Certificates of deposit:
$100,000 and over ................ 981,884 625,389 1,945,648 1,252,059
Other ............................ 1,796,264 1,152,864 3,554,942 2,354,022
Other borrowed funds ................. 145,400 147,602 280,994 278,461
Guaranteed preferred beneficial
interest in EBH-subordinate
debentures expense ............... 260,192 -- 526,065 --
------------ ------------- ------------ ------------
Total interest expense ...... 6,569,731 4,104,398 12,664,634 8,171,578
------------ ------------- ------------ ------------
Net interest income ......... 7,044,873 5,463,244 13,486,415 10,428,851
Provision for loan losses ................. 328,006 202,545 548,442 377,545
------------ ------------- ------------ ------------
Net interest income after
provision for loan losses ... 6,716,867 5,260,699 12,937,973 10,051,306
------------ ------------- ------------ ------------
Noninterest income:
Service charges on deposit accounts ... 290,711 288,952 594,938 537,580
Financial advisory income ............. 209,059 42,272 306,367 55,434
Investment banking and consulting fees. 63,000 500 64,500 88,872
Gain on sale of trading security ...... -- -- 500 --
Other service charges and fee income .. 112,814 86,230 201,683 212,399
Gain on sale of mortgage loans ........ 114,024 171,102 194,791 506,527
Income (loss) from investment in
Enterprise Merchant Banc LLC ....... (6,277) -- 23,835 --
Gain (loss) on investment in
Enterprise Fund, L.P. .............. 9,761 (3,645) 27,776 2,811
------------ ------------- ------------ ------------
Total noninterest income ..... 793,092 585,411 1,414,390 1,403,623
------------ ------------- ------------ ------------
Noninterest expense:
Salaries .............................. 2,598,296 2,080,347 5,029,890 4,127,953
Payroll taxes and employee benefits ... 554,924 440,652 1,106,029 897,336
Occupancy ............................. 388,620 334,226 759,148 653,233
Furniture and equipment ............... 197,311 165,431 384,298 327,468
Data processing ....................... 187,409 162,125 354,311 315,979
Amortization of goodwill .............. 47,641 47,652 95,282 95,293
Other ................................. 1,460,488 1,133,096 2,903,882 2,132,186
------------ ------------ ------------ ------------
Total noninterest expense.... 5,434,689 4,363,529 10,632,840 8,549,448
------------ ------------ ------------ ------------
Income before income tax
expense...................... 2,075,270 1,482,581 3,719,523 2,905,481
Income tax expense ........................ 800,704 550,014 1,435,764 1,067,539
Income before cumulative
effect of a change in
accounting principle ........ $ 1,274,566 $ 932,567 $ 2,283,759 $ 1,837,942
============ ============ ============ ============
Cumulative effect on prior years of a
change in asset classification ........ -- 121,491 -- 121,491
------------ ------------- ------------ ------------
Net income .................. $ 1,274,566 $ 1,054,058 $ 2,283,759 $ 1,959,433
============ ============= ============ ============
</TABLE>
2
<PAGE> 5
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited) continued
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Per share amounts
Basic earnings per share:
Income before cumulative effect of
change in accounting
principle .................... $ 0.14 $ 0.11 $ 0.26 $ 0.21
Cumulative effect on prior years
of a change in asset
classification ............... -- 0.01 -- 0.01
------------ ------------- ------------ ------------
Net income .............. $ 0.14 $ 0.12 $ 0.26 $ 0.22
============ ============= ============ ============
Basic weighted average common
shares outstanding ...... 8,963,903 8,962,179 8,954,625 8,952,571
Diluted earnings per share:
Income before cumulative effect of
a change in accounting
principle .................... $ 0.13 $ 0.10 $ 0.24 $ 0.20
Cumulative effect on prior years of
a change in asset
classification ............... -- 0.01 -- 0.01
------------ ------------- ------------ ------------
Net income .............. $ 0.13 $ 0.11 $ 0.24 $ 0.21
============ ============= ============ ============
Diluted weighted average common
shares outstanding ........... 9,674,051 9,569,497 9,675,854 9,514,770
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income ................................... $ 1,274,566 $ 1,054,058 $ 2,283,759 $ 1,959,433
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period .......... 44,924 (304,138) (6,673) (367,600)
----------- ----------- ----------- -----------
Other comprehensive income (loss) before tax.. 44,924 (304,138) (6,673) (367,600)
Income tax (expense) benefit related to
items of other comprehensive income ...... (15,274) 103,407 2,269 124,984
----------- ----------- ----------- -----------
Other comprehensive income (loss), net of
taxes .................................... 29,650 (200,731) (4,404) (242,616)
----------- ----------- ----------- -----------
Comprehensive income ......................... $ 1,304,216 $ 853,327 $ 2,279,355 $ 1,716,817
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ..................................................... $ 2,283,759 $ 1,959,433
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle
net of tax ...................................... -- (121,491)
Depreciation and amortization ........................ 637,533 588,495
Provision for loan losses ............................ 548,442 377,545
Gain on sale of trading security ..................... (500) --
Net accretion of debt and equity securities .......... (94,265) (169,514)
Income on investment in Enterprise Fund, L.P. ........ (27,776) (2,811)
Income from investment in Enterprise Merchant Banc LLC (23,835) --
Mortgage loans originated ............................ (19,894,466) (34,724,575)
Proceeds from mortgage loans sold .................... 16,572,902 38,691,938
Gain on sale on mortgage loans ....................... (194,791) (506,527)
Increase in accrued interest receivable .............. (181,430) (384,844)
Increase in accrued interest payable ................. 130,294 124,219
Other, net ........................................... (753,089) (276,143)
------------ ------------
Net cash provided by (used in) operating
activities ................................ (997,222) 5,555,725
------------ ------------
Cash flows from investing activities:
Purchases of interest-bearing deposits ......................... (22,921) (7,084)
Purchases of available for sale debt securities ................ (18,629,830) (15,182,055)
Purchases of available for sale equity securities .............. (332,200) (424,100)
Proceeds from maturities of available for sale debt securities . 5,089,331 47,748,473
Proceeds from redemptions of available for sale equity
securities .............................................. -- 119,850
Proceeds from maturities & principal paydowns on
held to maturity debt securities ........................ 150,000 103,000
Proceeds from sale of trading security ......................... 910,500 --
Proceeds from sale of other real estate ........................ 30,000 --
Net increase in loans .......................................... (37,797,521) (71,698,535)
Recoveries of loans previously charged off ..................... 12,580 29,433
Purchases of office equipment and leasehold improvements ....... (733,604) (362,599)
Investment in Enterprise Merchant Banc LLC ..................... (1,566,438) --
------------ ------------
Net cash used in investing activities ........... (52,890,103) (39,673,617)
------------ ------------
Cash flows from financing activities:
Net increase in non-interest bearing deposit accounts .......... 4,889,410 7,536,356
Net increase in interest-bearing deposit accounts .............. 40,700,774 24,876,024
Increase in notes payable ...................................... -- 2,250,000
Decrease in federal funds purchased ............................ (1,300,000) --
Increase (decrease) in Federal Home Loan Bank advances ......... (1,100,153) 911,365
Cash dividends paid ............................................ (179,075) (142,765)
Proceeds from the issuance of common stock ..................... -- 72,500
Proceeds from the exercise of common stock warrants and
common stock options ....................................... 156,461 62,674
------------ ------------
Net cash provided by financing activities ....... 43,167,417 35,566,154
------------ ------------
Net increase (decrease) in cash and due from
banks ....................................... (10,719,908) 1,448,262
Cash and cash equivalents, beginning of period ...................... 74,179,316 49,628,047
------------ ------------
Cash and cash equivalents, end of period ............................ $ 63,459,408 $ 51,076,039
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .................................................. $ 12,534,340 $ 8,047,359
Income taxes .............................................. 1,786,000 845,000
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 8
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. They do not include all information and footnotes
required by generally accepted accounting principles for complete
consolidated financial statements. The accompanying consolidated financial
statements of Enterbank Holdings, Inc. and subsidiaries (the "Company" or
"Enterbank") are unaudited and should be read in conjunction with the
consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
In the opinion of management, all adjustments consisting of normal
recurring accruals considered necessary for a fair presentation of the
results of operations for the interim periods presented herein have been
included. Operating results for the three and six month periods ended June
30, 2000 are not necessarily indicative of the results that may be expected
for any other interim period or for the year ending December 31, 2000. The
consolidated financial statements include the accounts of Enterbank
Holdings, Inc. and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
Certain amounts in the consolidated financial statements for the year ended
December 31, 1999 have been reclassified to conform to the 2000
presentation. Such reclassifications had no effect on previously reported
consolidated net income or shareholders' equity.
(2) Merger between Enterbank Holdings, Inc. and Commercial Guaranty Bancshares,
Inc.
On June 23, 2000 the Company completed the merger transaction between
Commercial Guaranty Bancshares, Inc. ("CGB"), the bank holding company for
First Commercial Bank, N.A., headquartered in Overland Park, Kansas, and
Enterbank Holdings, Inc. The Company issued 1,794,264 shares of its common
stock in exchange for 100% of the outstanding common stock of CGB. The
merger was a tax-free reorganization for federal income tax purposes and
was accounted for as a pooling of interests; therefore, all recorded
amounts have been restated to reflect this acquisition.
Following are the total assets, net income, net interest income, basic and
diluted earnings per share for the Company and CGB prior to the
restatement:
<TABLE>
<CAPTION>
As of or for the
three months
ended March 31, 2000
--------------------
<S> <C>
Enterbank Holdings, Inc.
Total assets ................................... $500,354,950
Net income ..................................... 847,163
Net interest income
5,070,639
Basic earnings per share
0.12
Diluted earnings per share ..................... $
0.11
Commercial Guaranty Bancshares, Inc. .....................
Total assets ................................... $128,927,655
Net income ..................................... 162,030
Net interest income
1,370,903
Basic earnings per share
0.19
Diluted earnings per share ..................... $ 0.19
</TABLE>
6
<PAGE> 9
(3) Segment Disclosure
To help Enterbank more effectively manage the new geographic area in which
it operates, management has taken a new approach in evaluating the
individual banking units. Enterbank has taken a regional management
approach since the merger with CGB took place. All earlier periods have
been restated to reflect this change in management evaluation. Those
regions are evaluated separately on their individual performance, as well
as their contribution to Enterbank as a whole. The majority of the activity
for the Kansas City region occurs in First Commercial Bank, N.A., while the
majority of the activity for the St. Louis region occurs in Enterprise
Bank. These banks provide a full range of commercial banking services.
These services include, but are not limited to: loans, demand and interest
earning deposits, safe deposit boxes, lock boxes, and cash management
services. The St. Louis region includes Enterprise Financial Advisors,
which provides financial planning and trust services.
7
<PAGE> 10
Balance sheet information:
<TABLE>
<CAPTION>
At June 30, 2000
------------------------------------------
St. Louis Kansas City
Region Region Total
------------ ------------ ------------
<S> <C> <C> <C>
Investment securities $ 39,519,394 $ 19,056,595 $ 58,575,989
Loans, less unearned loan fees 518,614,637 415,626,184 102,988,453
Total assets 660,063,978 526,995,950 133,068,028
Deposits 587,918,811 472,831,388 115,087,423
Shareholder's equity $ 34,594,430 $ 14,705,907 $ 49,300,337
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1999
------------------------------------------
St. Louis Kansas City
Region Region Total
------------ ------------ ------------
<S> <C> <C> <C>
Investment securities $ 16,209,470 $ 16,597,455 $ 32,806,925
Loans, less unearned loan fees 426,510,021 338,633,956 87,876,065
Total assets 525,900,080 410,450,733 115,449,347
Deposits 465,615,450 369,334,273 96,281,177
Shareholder's equity $ 30,789,659 $ 15,225,157 $ 46,014,816
============ ============ ============
</TABLE>
Income statement information:
<TABLE>
<CAPTION>
Three months ended June 30, 2000
------------------------------------------
St. Louis Kansas City
Region Region Total
------------ ------------ ------------
<S> <C> <C> <C>
Interest income $ 10,943,567 $ 2,671,037 $ 13,614,604
Interest expens 5,380,030 1,189,701 6,569,731
------------- ------------ ------------
Net interest margin 5,563,537 1,481,336 7,044,873
Provision for loan losses 253,006 75,000 328,006
Noninterest income 521,802 271,290 793,092
Noninterest expenses 4,171,622 1,263,067 5,434,689
------------- ------------ ------------
Income before income tax expense 1,660,711 414,559 2,075,270
Income tax expense 644,131 156,573 800,704
------------- ------------ ------------
Net income $ 1,016,580 $ 257,986 $ 1,274,566
============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 2000
------------------------------------------
St. Louis Kansas City
Region Region Total
------------ ------------ ------------
<S> <C> <C> <C>
Interest income $ 21,010,302 $ 5,140,747 $ 26,151,049
Interest expense
10,376,126 2,288,508 12,664,634
------------ ------------ ------------
Net interest margin 10,634,176 2,852,239 13,486,415
Provision for loan losses 398,442 150,000 548,442
Noninterest income 959,623 454,767 1,414,390
Noninterest expenses 8,158,133 2,474,707 10,632,840
------------ ------------ ------------
Income before income tax expense 3,037,224 682,299 3,719,523
Income tax expense 1,173,481 262,283 1,435,764
------------ ------------ ------------
Net income $ 1,863,743 $ 420,016 $ 2,283,759
============ ============ ============
</TABLE>
8
<PAGE> 11
As demonstrated in the table, the St. Louis region accounts for 80% of
Enterbank's assets as of June 30, 2000 and contributes 80% and 82% of the income
to the Company for the three months and six months ended June 30, 2000,
respectively. Enterprise Bank was founded in May of 1988. The Kansas region was
acquired through the merger with CGB on June 23, 2000. CGB was founded in March
of 1995.
Total assets in the St. Louis region and the Kansas region grew by 28% and 15%
respectively, during the twelve months ended June 30, 2000. Assets of the
combined entity grew by 26% during that same period.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Readers should note that in addition to the historical information contained
herein, this Form 10-Q contains forward looking statements which are inherently
subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated by such statements. Factors that could cause
or contribute to such differences include, but are not limited to: the effect
that changes in interest rates and cost of funds have on earnings and assets,
the level of loan defaults and delinquencies, the ability to successfully grow
and realize profits from commercial banking operations and strategic non-banking
lines of business, concentrations of loans in two geographic areas, the ability
to retain key personnel, the degree and nature of competition, and changes in
government regulation of business, as well as those factors discussed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
INTRODUCTION
The discussion summarizes the significant factors affecting the consolidated
financial condition, results of operations, liquidity and cash flows of the
Company for the three and six month periods ended June 30, 2000 compared to the
three and six month periods ended June 30, 1999 and the year ended December 31,
1999. This discussion should be read in conjunction with the consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1999.
FINANCIAL CONDITION
Total assets at June 30, 2000 were $660 million, an increase of $45 million, or
7%, over total assets of $615 million at December 31, 1999. Loans and leases,
net of unearned loan fees, were $519 million, an increase of $38 million, or 8%,
over total loans and leases of $481 million at December 31, 1999. The increase
in loans is in part attributed to the Company's investment in additional
business development officers. Federal funds sold and investment securities were
$99 million, a decrease of $2 million, from total federal funds sold and
investment securities of $101 million at December 31, 1999. The decrease
resulted from the shift in earning assets from short-term investments to loans
during the first six months of 2000.
Total deposits at June 30, 2000 were $588 million, an increase of $46 million,
or 8% over total deposits of $542 million at December 31, 1999. The increase in
deposits is primarily attributed to the addition of several business development
officers.
Total shareholders' equity at June 30, 2000 was $49.3 million, an increase of
$2.3 million over total shareholders' equity of $47 million at December 31,
1999. The increase in equity is due to net income of $2.3 million for the six
months ended June 30, 2000, and the exercise of incentive stock options by
employees, less dividends paid to shareholders.
9
<PAGE> 12
RESULTS OF OPERATIONS -- THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Net income was $1,274,566 for the three month period ended June 30, 2000, an
increase of 21% over net income of $1,054,058 for the same period in 1999. Basic
earnings per share for the three month periods ended June 30, 2000 and 1999 was
$0.14 and $0.12, respectively. Diluted earnings per share for the three month
periods ended June 30, 2000 and 1999 were $0.13 and $0.11, respectively.
NET INTEREST INCOME
Net interest income (on a tax equivalent basis) was $7.1 million, or 4.64% of
average interest-earning assets, for the three months ended June 30, 2000,
compared to $5.5 million, or 4.76% of average interest-earning assets, for the
same period in 1999. The $1,595,000, or 29%, increase in net interest income for
the three months ended June 30, 2000 resulted primarily from a $151 million
increase in average interest-earning assets to $613 million, from $463 million
during the same period in 1999. The increase in interest-earning assets is
attributable to the continued calling efforts of the Company's relationship
officers and sustained economic growth in the local markets served by the
Company. The yield on average interest-earning assets increased to 8.95% for the
three month period ended June 30, 2000 compared to 8.32% for the three month
period ended June 30, 1999. The increase in asset yield was primarily due to a
1.25% increase in the prime rate since July of 1999 and a general increase in
average yields on loans and investment securities. The increase in asset yield
was also attributed to a change in the mix of assets from noninterest-earning
assets to interest-earning assets. Interest-earning assets increased to 94.96%
of total assets for the three months ended June 30, 2000 from 93.24% for the
same period in 1999. The increase in net interest income was offset by a $131
million increase in average interest-bearing liabilities to $517 million for the
three months ended June 30, 2000 from $386 million during the same period in
1999. The yield on interest-bearing liabilities increased to 5.11% for the three
months ended June 30, 2000 compared to 4.27% for the same period in 1999. This
increase is primarily attributed to the above mentioned increases in the prime
rate and the addition of $11 million in a guaranteed preferred beneficial
interest in EBH-subordinated debentures. The increase in the interest paid on
interest-bearing liabilities was also attributed to a change in the mix of
liabilities from lower cost liabilities, such as interest-bearing transaction
accounts and savings accounts to higher cost liabilities, such as money market
accounts and certificates of deposit. Total interest-bearing liabilities
increased to 80.04% of total average assets for the three months ended June 30,
2000 from 77.78% for the same period in 1999. This increase is attributed to the
above mentioned guaranteed preferred beneficial interest in EBH-subordinated
debentures and an increase in money market accounts and certificates of deposit.
10
<PAGE> 13
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, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------------------------------------
2000 1999
------------------------------------------- ------------------------------------------
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 (1) $ 513,600 79.51% $ 12,123 9.49% $ 409,609 82.57% $ 8,893 8.71%
Taxable investments in debt
securities 57,409 8.89 878 6.15 35,935 7.24 501 5.59
Non-taxable investments in
debt securities (2) 679 0.11 13 7.93 879 0.18 12 5.66
Federal funds sold 41,676 6.45 640 6.17 16,124 3.25 187 4.65
Interest-earning deposits 22 -- -- 4.03 10 -- -- 1.71
--------- ------ --------- ------ --------- ------ --------- ------
Total interest-earning assets 613,386 94.96 13,654 8.95 462,557 93.24 9,593 8.32
Non interest-earning assets:
Cash and due from banks 19,195 2.97 20,662 4.17
Office equipment and
leasehold improvements 8,168 1.26 7,988 1.61
Minority interest in EMB LLC 845 0.13
Prepaid expenses and other
assets 11,460 1.78 9,523 1.92
Allowance for possible loan
losses (7,105) (1.10) (4,643) (0.94)
--------- ------ --------- ------
Total assets $ 645,949 100.00% $ 496,087 100.00%
========= ====== ========= ======
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction
accounts $ 49,304 7.63% $ 211 1.72% $ 45,444 9.16% $ 202 1.78%
Money market accounts 246,831 38.21 3,130 5.10 183,203 36.93 1,931 4.23
Savings 7,097 1.10 46 2.58 7,122 1.44 46 2.58
Certificates of deposit 191,654 29.67 2,778 5.83 138,115 27.84 1,778 5.16
Borrowed funds 11,145 1.73 145 5.25 11,956 2.41 147 4.93
Guaranteed preferred beneficial
interest In EBH-subordinated
debentures 11,000 1.70 260 9.51 -- -- -- --
--------- ------ --------- ------ --------- ------ --------- ------
Total interest-bearing liabilities 517,031 80.04 6,570 5.11 385,840 77.78 4,104 4.27
Noninterest-bearing liabilities:
Demand deposits 77,595 12.01 62,983 12.70
Other liabilities 2,102 0.33 1,468 0.29
Total liabilities 596,728 92.38 450,291 90.77
Shareholders' equity 49,221 7.62 45,796 9.23
--------- ------ --------- ------
Total liabilities and
shareholders' equity $ 645,949 100.00% $ 496,087 100.00%
========= ====== ========= ======
Net interest income $ 7,084 $ 5,489
========= =========
Net interest margin 4.64% 4.76%
====== ======
</TABLE>
(1) Average balances includeThe income on such loans is included in interest
but is recognized only upon receipt. 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 $313,000 and
$312,000, for 2000 and 1999, respectively.
(2) Non-taxable investment income is presented on a fully tax-equivalent basis
assuming a tax rate of 34%.
11
<PAGE> 14
RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Net income was $2,283,759 for the six month period ended June 30, 2000, an
increase of 17% over net income of $1,959,433 for the same period in 1999. Basic
earnings per share for the six month periods ended June 30, 2000 and 1999 were
$0.26 and $0.22, respectively. Diluted earnings per share for the six month
periods ended June 30, 2000 and 1999 were $0.24 and $0.21, respectively.
NET INTEREST INCOME
Net interest income, presented on a tax equivalent basis, was $13.5 million, or
4.52% of average interest-earning assets, for the six months ended June 30,
2000, compared to $10.5 million, or 4.66% of average interest-earning assets,
for the same period in 1999. The $3.0 million, or 29% increase, in net interest
income for the six months ended June 30, 1999 resulted primarily from a $147
million increase in average interest-earning assets to $600 million, from $454
million during the same period in 1999. The increase in interest-earning assets
is attributable to the continued calling efforts of the Company's relationship
officers and sustained economic growth in the local markets served by the
Company. The yield on average interest-earning assets increased to 8.76% for the
six month period ended June 30, 2000 compared to 8.29% for the six month period
ended June 30, 2000. The increase in asset yield was primarily due to 1.25%
increase in the prime rate, as well as, a change in the mix of assets from
noninterest-earning assets to interest-earning assets. Interest-earning assets
increased to 94.92% of total assets for the six months ended June 30, 2000 from
92.62% for the same period in 1999. The increase in net interest income was
offset by a $127 million increase in average interest-bearing liabilities to
$508 million for the six months ended June 30, 2000 from $381 million during the
same period in 1999. The yield on interest-bearing liabilities increased to
5.02% for the six months ended June 30, 2000 compared to 4.33% for the same
period in 1999. This increase is primarily attributed to the above mentioned
increases in the prime rate and the addition of $11 million in a guaranteed
preferred beneficial interest in EBH-subordinated debentures in 1999. The
increase in the interest paid on interest-bearing liabilities was also
attributed to a change in the mix of liabilities. Total interest-bearing
liabilities increased to 80.28% of total average assets for the six months ended
June 30, 2000 from 77.68% for the same period in 1999. This increase is
attributed to the above mentioned guaranteed preferred beneficial interest in
EBH-subordinated debentures and an increase in money market accounts and
certificates of deposit.
12
<PAGE> 15
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, 2000 and 1999:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------------------------------------ --------------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate
------- ------ ------- ---- ------- ------ ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS (Dollars in Thousands)
Interest-earning assets:
Loans (1) $ 500,108 79.05% $ 23,160 9.31% $ 392,956 80.17% $ 17,052 8.75%
Taxable investments in debt
securities 52,697 8.33 1,608 6.14 38,972 7.95 1,084 5.61
Non-taxable investments in debt
securities (2) 735 0.12 28 7.64 919 0.19 31 6.80
Federal funds sold 46,935 7.42 1,371 5.87 21,117 4.31 488 4.66
Interest-earning deposits 18 -- -- 4.13 13 -- -- 3.27
--------- ----- -------- --------- ----- ---------
Total interest-earning assets 600,493 94.92 26,167 8.76 453,977 92.62 18,655 8.29
Noninterest-earning assets:
Cash and due from banks 19,216 3.04 23,314 4.76
Office equipment and leasehold
improvements 8,163 1.29 8,023 1.64
Prepaid expenses and other assets 11,609 1.84 9,382 1.91
Allowance for possible loan losses (6,871) (1.09) (4,570) (0.93)
--------- ------ --------- ------
Total assets $ 632,610 100.00% $ 490,126 100.00%
========= ====== ========= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing transaction
accounts $48,245 7.63% $ 412 1.72% $ 44,303 9.04% $ 395 1.80%
Money market accounts 237,789 37.59 5,855 4.95 180,049 36.74 3,804 4.26
Savings 6,960 1.10 90 2.59 6,890 1.41 89 2.60
Certificates of deposit 192,981 30.51 5,501 5.73 138,380 28.23 3,606 5.25
Borrowed funds 10,858 1.72 281 5.20 11,101 2.26 278 5.05
Guaranteed preferred beneficial
interests
In EBH-subordinated debentures 11,000 1.73 526 9.62 -- -- -- --
Total interest-bearing liabilities 507,833 80.28 12,665 5.02 380,723 77.68 8,172 4.33
Noninterest-bearing liabilities:
Demand deposits 74,354 11.75 62,355 12.72
Other liabilities 1,691 0.27 1,706 0.35
--------- ------ --------- ------
Total liabilities 583,878 92.30 444,784 90.75
Shareholders' equity 48,732 7.70 45,342 9.25
--------- ------ --------- ------
Total liabilities and
shareholders' equity $ 632,610 100.00% $ 490,126 100.00%
========= ====== ========= ======
Net interest income $ 13,502 $ 10,483
======== =========
Net interest margin 4.52% 4.66%
==== ====
</TABLE>
(1) 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 $604,000 and $589,000 for
2000 and 1999, respectively.
(2) Non-taxable investment income is presented on a fully tax-equivalent basis
assuming a tax rate of 34%.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $328,000 and $548,000 for the three month and
six month periods ended June 30, 2000, respectively, compared to $203,000 and
$378,000 for the same periods in 1999. The Company's asset quality remained
strong with net charge offs of $61,000 for the six months ended June 30, 2000
compared to net charge offs of $87,000 for the same period in 1999. Loan growth
remained strong during the first six months of 2000. The Company increased its
allowance for loan losses for the six months ended June 30, 2000 by charging
$548,000 to the provision for loan losses. The increase in provision for loan
losses during the first six months of 2000 as compared to the same period in
1999 was due to an increase in loans outstanding and an increase of $527,000 in
nonperforming loans.
13
<PAGE> 16
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 the
provision:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
--------- ---------
(Dollars in Thousands)
<S> <C> <C>
Allowance at beginning of year $ 6,758 $ 4,430
--------- ---------
Loans charged off:
Commercial and industrial 64 84
Real estate:
Commercial -- --
Construction -- --
Residential -- --
Consumer and other 10 32
--------- ---------
Total loans charged off 74 116
--------- ---------
Recoveries of loans previously charged off:
Commercial and industrial 4 3
Real estate:
Commercial 3 --
Construction -- --
Residential 1 4
Consumer and other 5 22
--------- ---------
Total recoveries of loans previously charged off 13 29
--------- ---------
Net loans charged off 61 87
--------- ---------
Provisions charged to operations 548 378
--------- ---------
Allowance at end of period $ 7,245 $ 4,721
========= =========
Average loans $ 500,108 $ 392,956
Ending total loans $ 518,615 $ 426,510
Ending nonperforming loans $ 2,101 $ 1,574
Net charge offs to average loans 0.01% 0.02%
Allowance for loan losses to total loans 1.40% 1.11%
</TABLE>
14
<PAGE> 17
The Company's credit management policy and procedures focus on identifying,
measuring, and controlling credit exposure. These procedures employ a
lender-initiated system of rating credits, which is ratified in the loan
approval process and subsequently tested in internal loan reviews, external
audits, and regulatory bank examinations. The system requires rating all loans
at the time they are made.
Adversely rated credits, including loans requiring close monitoring which would
not normally be considered criticized credits by regulators, are included on a
monthly loan watch list. Loans may be added to the watch list for reasons which
are temporary and correctable, such as the absence of current financial
statements of the borrower or a deficiency in loan documentation. Other loans
are added whenever any adverse circumstance is detected which might affect the
borrower's ability to meet the terms of the loan. This could be initiated by the
delinquency of a scheduled loan payment, a deterioration in the borrower's
financial condition identified in a review of periodic financial statements, a
decrease in the value of the collateral securing the loan, or a change in the
economic environment in which the borrower operates. Loans on the watch list
require detailed loan status reports prepared by the responsible officer every
four months, which are then discussed in formal meetings with the loan review
and loan administration staffs. Downgrades of loan risk ratings may be initiated
by the responsible loan officer at any time. However, upgrades of risk ratings
may only be made with the concurrence of the loan review and credit
administration staffs generally at the time of the formal watch list review
meetings.
Each month, loan administration provides management with a detailed list of
loans on the watch list and summaries of the entire loan portfolio categorized
by risk rating. These are coupled with an analysis of changes in the risk
profiles of the portfolios, changes in past due and non-performing loans and
changes in watch list and classified loans over time. In this manner, the
overall increases or decreases in the levels of risk in the portfolios are
monitored continually. Factors are applied to the loan portfolios for each
category of loan risk to determine acceptable levels of allowance for possible
loan losses. These factors are derived primarily from the actual loss experience
and from published national surveys of norms in the industry. The calculated
allowances required for the portfolios are then compared to the actual allowance
balances to determine the provisions necessary to maintain the allowances at
appropriate levels. In addition, management exercises judgment in its analysis
of determining the overall level of the allowance for loan losses. In its
analysis, management considers the change in the portfolio, including growth and
composition, and the economic conditions of the region in which the Company
operates. Based on this quantitative and qualitative analysis, the allowance for
loan losses is adjusted. Such adjustments are reflected in the consolidated
statements of income.
The Company does not engage in foreign lending. The Company does not have a
material amount of interest-bearing assets which would have been included in
non-accrual, past due, or restructured loans if such assets were loans.
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
possible 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 offs during
an extended period of rapid loan growth, management remains cognizant that
historical loan loss and non-performing asset experience may not be indicative
of future results. Were the experience to deteriorate, and additional provisions
for loan losses required, future operational 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,
all of which impact the credit risk associated with the Company's loan
portfolio. Currently, the Company has over $1 million in the allowance for loan
losses for specific non-accrual loans. The Kansas region is currently
implementing a credit management policy and loan review procedure consistent
with the St. Louis region.
15
<PAGE> 18
The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ----------
(Dollars in Thousands)
<S> <C> <C>
Non-accrual loans $ 2,008 $ 2,485
Loans past due 90 days or more
and still accruing interest 93 74
Restructured loans -- --
---------- ----------
Total nonperforming loans 2,101 2,559
Foreclosed property 396 438
---------- ----------
Total non-performing assets $ 2,497 $ 2,997
========== ==========
Total assets $ 660,064 $ 615,143
Total loans, less unearned loan fees $ 518,615 $ 480,891
Total loans plus foreclosed property $ 519,011 $ 481,329
Nonperforming loans to loans 0.41% 0.53%
Nonperforming assets to loans plus
foreclosed property 0.48% 0.62%
Nonperforming assets to total assets 0.38% 0.49%
</TABLE>
NONINTEREST INCOME
Noninterest income was $793,000 and $1,414,000 for the three month and six month
periods ended June 30, 2000 respectively, compared to $585,000 and $1,404,000
for the same periods in 1999. The increase is primarily attributed to financial
advisory income and investment banking and consulting fees. Financial advisory
income was $209,000 and $306,000 for the three month and six month periods ended
June 30, 2000, respectively, as compared to $42,000 and 55,000 for the same
periods in 1999. The Company began offering financial advisory and trust
services in October 1998 and started generating fees in the second quarter of
1999. Investment banking and consulting fees were $63,000 and $64,500 for the
three month and six month periods ended June 30, 2000, respectively, as compared
to $500 and $89,000 for the same perods in 1999. The Kansas City region provides
investment banking services to corporations, non affiliated financial
institutions, and high net worth individuals. The fees are a result of closing
investment banking transactions. The above mentioned increases were offset by a
$57,000 and $312,000 decrease in the gain on the sale of mortgage loans for the
three month and six month periods ended June 30, 2000, respectively, compared to
the same periods in 1999. This decrease is due to rising interest rates during
the last six months of 1999 and the first six months of 2000. Over half of the
gain on sale of mortgage loans for the three and six month periods ended June
30, 1999 was due to refinancing of mortgages. Mortgage loan refinancings have
dramatically decreased with the rise in interest rates.
16
<PAGE> 19
NONINTEREST EXPENSE
Noninterest expense was $5.4 million and $10.6 million for the three month and
six month periods ended June 30, 2000, respectively, compared to $4.4 million
and $8.5 million for the same periods in 1999. The increase is primarily due to
increases in salaries, payroll taxes and employee benefits, occupancy expense,
and furniture and equipment expense and other operating expenses. Increases in
salaries, payroll taxes and employee benefits, occupancy expense, furniture and
equipment expenses are primarily due to: 1) increased activity and growth in
financial advisory operations started during 1998, 2) the investment in several
additional new business development officers, and 3) normal increases associated
with growth. Other noninterest expenses were $1,460,488 and $2,903,882 for the
three month and six month periods ended June 30, 1999, respectively, an increase
of $327,392, or 29%, and $771,696 or 36% over the three month and six month
periods ended June 30, 2000. The Company recently implemented an Internet
banking business and check imaging system for enhanced customer service. Both
programs increased noninterest expenses for the three and six month periods
ended June 30, 2000. During the six month period ended June 30, 2000, the
Company expensed approximately $450,000 in legal, accounting, travel and other
costs related to the merger completed in June 2000. The remaining increase is
attributed to normal operating expenses associated with growth.
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 markets served
by the Company. Management has pursued privately held businesses that desire a
close working relationship with a locally managed, full service bank. Due to the
relationships developed with these customers, management views deposits from
this source as a stable deposit base. Additionally, the Company belongs to a
national network of time depositors (primarily credit unions) who place time
deposits with the Company, typically in increments of $99,000. The Company has
used this source of deposits for over five 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 $36 million and $45 million of deposits
from the national network with the Company at June 30, 2000 and December 31,
1999, respectively.
The following table sets forth the amount and maturity of certificates of
deposit that had balances of more than $100,000 at June 30, 2000:
<TABLE>
<CAPTION>
Remaining Maturity Amount
------------------ -------------
(Dollars in Thousands)
<S> <C>
Three months or less $ 26,577
Over three through six months 41,643
Over six through twelve months 7,919
Over twelve months 3,571
-------------
$ 79,710
=============
</TABLE>
The asset/liability management process, which involves management of the
components of the balance sheet to allow assets and liabilities to reprice at
approximately the same time, is an ever-changing process essential to minimizing
the effect of interest rate fluctuations on net interest income.
17
<PAGE> 20
In March 2000, the Company obtained a $2,500,000 unsecured line of credit from
Jefferson Bank and Trust. The line of credit matures on March 31, 2001 and is an
interest only note accruing interest at a variable rate of prime minus 0.50%.
There were no amounts outstanding under the line of credit at June 30, 2000.
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, (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 ratio 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.
18
<PAGE> 21
The following table summarizes the Company's risk-based capital and leverage
ratios at the dates indicated:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
------------- ----- -------------- ---- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
At June 30, 2000:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 64,826,559 11.77% $ 44,047,568 8.00% $ 55,059,460 10.00%
Enterprise Bank $ 44,430,375 10.08% $ 35,267,121 8.00% $ 44,083,901 10.00%
First Commercial Bank, N.A. $ 13,049,186 12.17% $ 8,580,240 8.00% $ 10,725,300 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 58,343,876 10.60% $ 22,023,784 4.00% $ 33,035,676 6.00%
Enterprise Bank $ 39,794,381 9.03% $ 17,633,560 4.00% $ 26,450,341 6.00%
First Commercial Bank, N.A. $ 11,761,830 10.97% $ 4,290,120 4.00% $ 6,435,180 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $ 58,343,876 9.22% $ 18,978,294 3.00% $ 31,630,490 5.00%
Enterprise Bank $ 39,794,381 7.95% $ 15,017,760 3.00% $ 25,029,600 5.00%
First Commercial Bank, N.A. $ 11,761,830 9.12% $ 3,869,481 3.00% $ 6,449,135 5.00%
At December 31, 1999:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 61,998,592 12.35% $ 40,168,392 8.00% $ 50,210,490 10.00%
Enterprise Bank $ 41,215,654 10.22% $ 32,253,615 8.00% $ 40,317,018 10.00%
First Commercial Bank, N.A. $ 12,433,484 13.00% $ 7,651,692 8.00% $ 9,564,615 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 55,987,448 11.15% $ 20,084,196 4.00% $ 30,126,294 6.00%
Enterprise Bank $ 36,980,654 9.17% $ 16,126,807 4.00% $ 24,190,211 6.00%
First Commercial Bank, N.A. $ 11,237,842 11.75% $ 3,825,846 4.00% $ 5,738,769 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $ 55,987,448 10.62% $ 15,817,650 3.00% $ 26,362,750 5.00%
Enterprise Bank $ 36,980,654 9.09% $ 12,201,701 3.00% $ 20,336,168 5.00%
First Commercial Bank, N.A. $ 11,237,842 9.54% $ 3,534,322 3.00% $ 5,890,536 5.00%
</TABLE>
19
<PAGE> 22
EFFECT OF INFLATION
Changes in interest rates may have a significant impact on a commercial bank's
performance because virtually all assets and liabilities of commercial banks are
monetary in nature. 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 asset ratio.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
The Company's exposure to market risk is reviewed on a regular basis by the
Asset/Liability Committee. Interest rate risk is the potential of economic
losses due to future interest rate changes. These economic losses can be
reflected as a loss of future net interest income and/or a loss of current fair
market values. The objective is to measure the effect on net interest income and
to adjust the balance sheet to minimize the interest risk while at the same time
maximizing income. Management realizes certain risks are inherent and that the
goal is to identify and minimize those risks. Tools used by management include
the standard GAP report subject to different rate shock scenarios. At June 30,
2000, the rate shock scenario models indicated that annual net interest income
would change by less than 5% should rates rise or fall within 200 basis points
from their current level over a one year period. The Bank has no market risk
sensitive instruments held for trading purposes.
20
<PAGE> 23
The following tables present the scheduled maturity of market risk sensitive
instruments at June 30, 2000:
<TABLE>
<CAPTION>
Beyond 5
Years or No
Stated
Year 1 Year 2 Year 3 Year 4 Year 5 Maturity Total
---------- ------ ------ ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Securities $ 31,193 14,258 5,054 1,377 220 6,474 $ 58,576
Interest-bearing
deposits 23 -- -- -- -- -- 23
Federal funds sold 39,950 -- -- -- -- -- 39,950
Loans 340,992 53,961 49,674 46,074 18,444 14,424 523,569
---------- ------ ------ ------ ------ ------ ----------
Total $ 412,158 68,219 54,728 47,451 18,664 20,898 $ 622,118
========== ====== ====== ===== ===== ====== ==========
LIABILITIES
Savings, NOW, money
market deposits $ 314,962 -- -- -- -- -- $ 314,962
CD's 164,557 13,327 12,250 1,513 1,249 126 193,022
Guaranteed preferred
beneficial interest
in EBH-subordinated
debentures -- -- -- -- -- 11,000 11,000
Borrowed funds 10 5,022 36 4,000 50 899 10,017
---------- ------ ------ ------ ------ ------ ----------
Total $ 479,529 18,349 12,286 5,513 1,299 12,025 $ 529,001
========== ====== ====== ===== ===== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Average
Interest
Rate for
Six Months
Carrying Ended June Estimated
Value 30, 2000 Fair Value
--------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Securities $ 58,576 6.16% $ 59,381
Interest-earning
deposits 23 4.13 23
Federal funds sold 39,950 5.87 39,950
Loans 523,569 9.31% 535,860
--------- ---------
Total $ 622,118 $ 635,214
========= =========
LIABILITIES
Savings, NOW, money
market deposits $ 314,962 4.41% $ 314,962
CD's 193,022 5.73 193,679
Guaranteed
preferred
beneficial interest
in EBH-subordinated
debentures 11,000 9.62 12,209
Borrowed funds 10,017 5.20% 10,095
--------- ---------
Total $ 529,001 $ 530,945
========= =========
</TABLE>
21
<PAGE> 24
PART II - ITEM 4:
SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
ANNUAL MEETING OF SHAREHOLDERS: The annual meeting of shareholders of Enterbank
was held on April 19, 2000. 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. There was no
solicitation in opposition to management's recommendation to ratify the
selection of KPMG LLP as the Company's independent auditors. There were no other
matters other than those stated above, and the results of the votes are as
follows:
PROPOSAL NO. 1: ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
Director For Against Abstain
-------- --- ------- -------
<S> <C> <C> <C>
Fred H. Eller 5,146,368 0 3,750
Ronald E. Henges 5,138,243 0 3,750
Kevin C. Eichner 5,146,368 0 3,750
Randall D. Humphreys 5,069,550 0 3,750
Paul R. Cahn 5,146,368 0 3,750
William B. Moskoff 5,111,398 0 3,750
Birch M. Mullins 5,146,368 0 3,750
Robert E. Saur 5,146,368 0 3,750
Paul L. Vogel 5,146,368 0 3,750
Henry D. Warshaw 5,146,368 0 3,750
James L. Wilhite 5,146,368 0 3,750
James A. Williams 5,146,368 0 3,750
Ted C. Wetterau 5,065,162 0 3,750
</TABLE>
PROPOSAL NO. 2: INDEPENDENT PUBLIC ACCOUNTANTS
<TABLE>
<CAPTION>
Accountants For Against Abstain
----------- --- ------- -------
<S> <C> <C> <C>
KPMG LLP 5,066,039 0 68,608
</TABLE>
SPECIAL MEETING OF SHAREHOLDERS: Notice of the special meeting of shareholders
of Enterbank Holdings, Inc. ("the Company") was held on June 20, 2000 for the
sole purpose of voting on the principal terms of the Agreement and Plan of
Merger between Enterbank Holdings, Inc. and Commercial Guaranty Bancshares, Inc.
dated January 5, 2000. Proxies were solicited pursuant to Regulation 14A of the
Securities and Exchange Act of 1934. There was no solicitation in opposition to
management's suggestion to approve the aforementioned Agreement and Plan of
Merger. There were no other matters other than those stated above, and the
results of the votes are as follows:
PROPOSAL NO. 1: AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
4,841,943 0 9,700
</TABLE>
22
<PAGE> 25
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a). Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
11.1 (1) Statement regarding computation of per share earnings
27.1 (1) Financial Data Schedule (EDGAR only)
</TABLE>
(b). During the three months ended June 30, 2000, the Registrant filed one
Current Report on Form 8-K, dated June 28, 2000, in which the Registrant
announced the closing and completion of the merger between Enterbank
Holdings, Inc. and Commercial Guaranty Bancshares, Inc.
----------
(1) Filed herewith.
23
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
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 2000.
ENTERBANK HOLDINGS, INC.
By: /s/ Fred H. Eller
---------------------------------
Fred H. Eller
Chief Executive Officer
By: /s/ James C. Wagner
---------------------------------
James C. Wagner
Chief Financial Officer
24
