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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
EXCHANGE ACT OF 1934--For the quarterly period ended September 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 November 1, 2000:
Common Stock, $.01 par value---9,063,052 shares outstanding
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
At September 30, 2000 and December 31, 1999 1
Consolidated Statements of Income
Three Months and Nine Months Ended September 30, 2000 and 1999 2
Consolidated Statements of Comprehensive Income
Three Months and Nine Months Ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows
Nine Months Ended September 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 10
Item 3. Quantitative and Qualitative Disclosures Regarding
Market Risk-There have been no material changes from
the December 31, 1999 Form 10-K
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
</TABLE>
<PAGE> 3
<TABLE>
PART I - ITEM 1
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
<CAPTION>
At September 30, At December 31,
Assets 2000 1999
---------------- ---------------
<S> <C> <C>
Cash and due from banks $ 24,318,046 $ 19,354,316
Federal funds sold 52,875,000 54,825,000
Interest-bearing deposits 14,465 469
Investments in debt and equity securities:
Trading, at fair value -- 910,000
Available for sale, at estimated fair value 59,852,027 42,155,542
Held to maturity, at amortized cost
(estimated fair value of $565,560 at September 30, 2000
and $721,851 at December 31, 1999) 567,973 679,806
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 62,682,550 45,675,698
------------ ------------
Loans held for sale 1,488,293 1,438,335
Loans, less unearned loan fees 534,513,314 480,891,481
Less allowance for loan losses 6,896,207 6,758,222
------------ ------------
Loans, net 527,617,107 474,133,259
------------ ------------
Other real estate owned 396,072 438,072
Office equipment and leasehold improvements 8,423,204 7,982,725
Accrued interest receivable 4,270,688 3,555,615
Investment in Enterprise Merchant Banc LLC 2,287,545 572,009
Investment in Enterprise Fund, L.P. 574,812 546,710
Goodwill 2,325,746 2,468,671
Prepaid expenses and other assets 3,418,661 4,152,610
------------ ------------
Total assets $690,692,189 $615,143,489
============ ============
Liabilities and Shareholders' Equity
Deposits:
Demand $ 86,212,309 $ 75,045,703
Interest-bearing transaction accounts 49,447,454 48,414,208
Money market accounts 274,889,246 218,135,867
Savings 7,298,151 7,631,671
Certificates of deposit:
$100,000 and over 88,418,408 68,224,042
Other 109,759,562 124,877,136
------------ ------------
Total deposits 616,025,130 542,328,627
Guaranteed preferred beneficial interests in
EBH subordinated debentures 11,000,000 11,000,000
Federal Home Loan Bank advances 9,978,867 11,116,830
Federal funds purchased -- 1,300,000
Accrued interest payable 1,934,144 1,292,155
Accounts payable and accrued expenses 626,152 1,062,281
------------ ------------
Total liabilities 639,564,293 568,099,893
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; authorized
20,000,000 shares; issued and outstanding
9,029,890 shares at September 30, 2000 and
8,936,930 shares at December 31, 1999 90,300 89,369
Surplus 35,234,942 34,744,120
Retained earnings 16,036,959 12,622,630
Accumulated other comprehensive loss (234,305) (412,523)
------------ ------------
Total shareholders' equity 51,127,896 47,043,596
------------ ------------
Total liabilities and shareholders' equity $690,692,189 $615,143,489
============ ============
----------------
See accompanying notes to consolidated financial statements.
</TABLE>
1
<PAGE>
<PAGE> 4
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $12,759,978 $ 9,936,728 $35,913,151 $26,942,506
Interest on debt securities:
Taxable 939,545 466,766 2,547,825 1,550,345
Nontaxable 8,798 12,072 27,232 35,374
Interest on federal funds sold 837,913 267,679 2,208,701 755,312
Interest on interest earning deposits 553 307 927 444
----------- ----------- ----------- -----------
Total interest income 14,546,787 10,683,552 40,697,836 29,283,981
----------- ----------- ----------- -----------
Interest expense:
Interest-bearing transaction accounts 202,314 212,735 614,915 607,330
Money market accounts 3,575,317 2,213,316 9,430,163 6,017,344
Savings 46,971 45,379 136,509 133,792
Certificates of deposit:
$100,000 and over 1,331,305 662,380 3,276,953 1,914,439
Other 1,700,427 1,271,128 5,255,369 3,625,150
Other borrowed funds 124,460 186,393 405,454 464,854
Guaranteed preferred beneficial interest in
EBH-subordinated debentures expense 264,244 -- 790,309 --
----------- ----------- ----------- -----------
Total interest expense 7,245,038 4,591,331 19,909,672 12,762,909
----------- ----------- ----------- -----------
Net interest income 7,301,749 6,092,221 20,788,164 16,521,072
Provision for loan losses 214,914 531,146 763,356 908,691
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 7,086,835 5,561,075 20,024,808 15,612,381
----------- ----------- ----------- -----------
Noninterest income:
Service charges on deposit accounts 291,532 329,494 886,470 867,074
Financial advisory income 283,835 388,379 590,202 443,813
Realized gain on trading security -- -- 500 --
Other service charges and fee income 261,704 45,159 527,887 346,430
Gain on sale of mortgage loans 158,816 195,691 353,607 702,218
Income from investment in Enterprise
Merchant Banc LLC 55,813 21,630 79,648 21,630
Gain (loss) on investment in Enterprise
Fund, L.P. 326 (2,362) 28,102 449
----------- ----------- ----------- -----------
Total noninterest income 1,052,026 977,991 2,466,416 2,381,614
----------- ----------- ----------- -----------
Noninterest expense:
Salaries 2,818,623 2,379,944 7,848,513 6,507,897
Payroll taxes and employee benefits 625,193 496,845 1,731,222 1,394,181
Occupancy 384,791 351,967 1,143,939 1,005,200
Furniture and equipment 126,795 185,501 511,093 512,969
Data processing 344,853 149,836 699,164 465,815
Amortization of goodwill 47,642 47,632 142,924 142,925
Other 1,506,135 1,066,151 4,410,017 3,198,337
----------- ----------- ----------- -----------
Total noninterest expense 5,854,032 4,677,876 16,486,872 13,227,324
----------- ----------- ----------- -----------
Income before income tax expense 2,284,829 1,861,190 6,004,352 4,766,671
Income tax expense 862,400 692,126 2,298,164 1,759,665
----------- ----------- ----------- -----------
Income before cumulative effect of
a change in accounting principle $ 1,422,429 $1,169,064 $ 3,706,188 $ 3,007,006
=========== =========== =========== ===========
Cumulative effect on prior years of a change in
asset classification -- -- -- 121,491
----------- ----------- ----------- -----------
Net income $ 1,422,429 $1,169,064 $ 3,706,188 $ 3,128,497
=========== =========== =========== ===========
---------------
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<PAGE> 5
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited), continued
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Per share amounts
Basic earnings per share:
Income before cumulative effect of a
change in accounting principle $ 0.16 $ 0.13 $ 0.41 $ 0.34
Cumulative effect on prior years of a
change in asset classification $ -- $ -- $ -- $ 0.01
----------- ----------- ----------- -----------
Net income $ 0.16 $ 0.13 $ 0.41 $ 0.35
=========== =========== =========== ===========
Basic weighted average common shares
outstanding 8,989,253 8,964,784 8,966,252 8,956,685
Diluted earnings per share:
Income before cumulative effect of a
change in accounting principle $ 0.15 $ 0.12 $ 0.38 $ 0.32
Cumulative effect on prior years of a
change in asset classification $ -- $ -- $ -- $ 0.01
----------- ----------- ----------- -----------
Net income $ 0.15 $ 0.12 $ 0.38 $ 0.33
=========== =========== =========== ===========
Diluted weighted average common
shares outstanding 9,639,253 9,624,336 9,664,094 9,556,202
---------------
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<PAGE> 6
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 1,422,429 $ 1,169,064 $ 3,706,188 $ 3,128,497
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period (399,931) (17,433) 270,027 (385,033)
----------- ----------- ----------- -----------
Other comprehensive income (loss), before tax (399,931) (17,433) 270,027 (385,033)
Income tax benefit (expense) related to items of
other comprehensive income 135,976 5,927 (91,809) 130,911
----------- ----------- ----------- -----------
Other comprehensive income (loss), net of taxes (263,955) (11,506) 178,218 (254,122)
----------- ----------- ----------- -----------
Comprehensive income $ 1,158,474 $ 1,157,558 $ 3,884,406 $ 2,874,375
=========== =========== =========== ===========
---------------
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<PAGE> 7
<TABLE>
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
<CAPTION>
Nine months ended September 30,
2000 1999
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,706,188 $ 3,128,497
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of a change in accounting principle -- (121,491)
Depreciation and amortization 1,018,142 869,477
Provision for loan losses 763,356 908,691
Realized gain on sale of trading security (500) --
Net accretion of debt securities (201,246) (767,740)
Gain on investment in Enterprise Fund L.P. (28,102) (449)
Mortgage loans originated (29,391,565) (47,835,261)
Proceeds from mortgage loans sold 29,695,213 54,159,169
Gain on sale of mortgage loans (353,607) (702,218)
Increase in accrued interest receivable (715,073) (763,823)
Increase (decrease) in accrued interest payable 641,989 (290,819)
Other, net 309,818 1,185,036
------------ -------------
Net cash provided by operating activities 5,444,613 9,769,069
------------ -------------
Cash flows from investing activities:
Net (increase) decrease in interest bearing deposits (13,996) 1,485
Purchases of available for sale debt securities (26,041,235) (24,083,631)
Purchases of available for sale equity securities (332,200) (424,100)
Purchases of held to maturity debt securities -- (100,000)
Proceeds from maturities and principal paydowns on
available for sale debt securities 7,881,860 52,889,771
Proceeds from maturities and principal paydowns on
held to maturity debt securities 150,000 103,000
Proceeds from redemption of available for sale equity securities -- 119,850
Proceeds from sale of available for sale debt securities 804,187 --
Proceeds from sale of trading security 910,500 --
Proceeds from sale of other real estate 30,000 --
Net increase in loans (54,302,209) (110,305,435)
Recoveries of loans previously charged off 55,006 66,232
Purchases of office equipment and leasehold improvements (1,315,696) (470,340)
Investment in Enterprise Merchant Banc LLC (1,715,536) (156,219)
Investment in Enterprise Fund, L.P. -- (129,989)
------------ -------------
Net cash used in investing activities (73,889,319) (82,489,376)
------------ -------------
Cash flows from financing activities:
Net increase in non-interest bearing deposit accounts 11,166,606 49,031,363
Net increase in interest-bearing deposit accounts 62,529,897 9,144,695
Decrease in federal funds purchased (1,300,000) --
(Decrease) increase in Federal Home Loan Bank advances (1,137,963) 879,166
Increase in notes payable -- 5,000,000
Cash dividends paid (291,857) (214,171)
Proceeds from the issuance of common stock -- 102,499
Proceeds from the exercise of common stock warrants and options 491,753 62,674
------------ -------------
Net cash provided by financing activities 71,458,436 64,006,226
------------ -------------
Net increase (decrease) in cash and due from banks 3,013,730 (8,714,081)
Cash and cash equivalents, beginning of period 74,179,316 49,628,047
------------ -------------
Cash and cash equivalents, end of period $ 77,193,046 $ 40,913,966
============ =============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 19,267,683 $ 12,541,718
Income taxes 2,297,000 1,482,330
============ =============
---------------
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<PAGE> 8
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) BASIS OF PRESENTATION
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 nine month period ended
September 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 as of March 31, 2000, which was the last quarter before
the merger:
<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>
<PAGE> 9
(3) SEGMENT DISCLOSURE
To help Enterbank more effectively manage the new geographic area in
which it operates, management 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. The regions
are evaluated separately on their individual performance, as well as
their contribution to Enterbank as a whole. The corporate, other
intercompany, and reclassifications segment include the holding company,
merchant banking activities and trust preferred securities activities.
Enterbank incurs general corporate expenses and owns Enterprise Bank,
First Commercial Bank, N.A. and Enterprise Merchant Banc Inc.
Enterprise Merchant Banc Inc. offers merchant banking and venture
capital services through its investment in Enterprise Merchant Banc LLC.
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. The Banks provide similar
products and services in two defined geographic areas. The products and
services offered include a broad range of commercial and personal
banking services, including certificates of deposit, individual
retirement and other time deposit accounts, checking and other demand
deposit accounts, interest checking accounts, savings accounts and money
market accounts. Loans include commercial, financial and agricultural,
real estate construction and development, commercial and residential
real estate, consumer and installment loans. Other financial services
include mortgage banking, debit and credit cards, automatic teller
machines, internet account access, safe deposit boxes, trust and private
banking services and cash management services. The revenues generated
by each business segment consist primarily of interest income, generated
from the loan and investment security portfolios, and service charges
and fees, generated from the deposit products and services. The
products and services are offered to customers primarily within their
respective geographic areas, with the exception of loan participations
executed between the subsidiary banks. The St. Louis region includes
Enterprise Financial Advisors, which provides financial planning and
trust services.
7
<PAGE>
<PAGE> 10
The following are the financial results for each of the Company's operating
segments for the nine-month periods ended September 30, 2000 and 1999:
<TABLE>
Balance sheet information:
<CAPTION>
At September 30, 2000
----------------------------------------------------------------
Corporate,
other
Kansas City St. Louis intercompany,
Region Region reclassifications Total
------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Investment securities $ 18,614,420 $ 44,068,130 $ -- $ 62,682,550
Loans, less unearned loan fees 102,420,501 432,092,813 -- 534,513,314
Total assets 137,724,238 548,818,647 4,149,304 690,692,189
Deposits 119,414,877 498,192,992 (1,582,739) 616,025,130
Shareholders' equity $ 15,011,683 $ 41,364,274 $ (5,248,061) $ 51,127,896
============= ============= ============ =============
<CAPTION>
At December 31, 1999
----------------------------------------------------------------
Corporate,
other
Kansas City St. Louis intercompany,
Region Region reclassifications Total
------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Investment securities $ 20,449,079 $ 24,487,847 $ 738,772 $ 45,675,698
Loans, less unearned loan fees 95,389,722 385,101,759 -- 480,891,481
Total assets 126,787,125 484,779,269 3,577,095 615,143,489
Deposits 106,531,113 439,756,847 (3,959,333) 542,328,627
Shareholders' equity $ 14,279,912 $ 36,910,546 $ (4,146,862) $ 47,043,596
============= ============= ============ =============
Income Statement information:
<CAPTION>
Three months ended September 30, 2000
----------------------------------------------------------------
Corporate,
other
Kansas City St. Louis intercompany,
Region Region reclassifications Total
------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Interest income $ 2,784,737 $ 11,762,050 $ -- $ 14,546,787
Interest expense 1,281,261 5,698,557 265,220 7,245,038
------------- ------------- ------------ -------------
Net interest income 1,503,476 6,063,493 (265,220) 7,301,749
Provision for loan losses 55,000 159,914 -- 214,914
Noninterest income 192,928 633,348 225,750 1,052,026
Noninterest expenses 1,315,208 4,037,567 501,257 5,854,032
------------- ------------- ------------ -------------
Income before income tax expense (benefit) 326,196 2,499,360 (540,727) 2,284,829
Income tax expense (benefit) 122,472 943,043 (203,115) 862,400
------------- ------------- ------------ -------------
Net income (loss) $ 203,724 $ 1,556,317 $ (337,612) $ 1,422,429
============= ============= ============ =============
<CAPTION>
Nine months ended September 30, 2000
----------------------------------------------------------------
Corporate,
other
Kansas City St. Louis intercompany,
Region Region reclassifications Total
------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Interest income $ 7,925,484 $ 32,772,352 $ -- $ 40,697,836
Interest expense 3,569,769 15,548,618 791,285 19,909,672
------------- ------------- ------------ -------------
Net interest income 4,355,715 17,223,734 (791,285) 20,788,164
Provision for loan losses 205,000 558,356 -- 763,356
Noninterest income 647,695 1,534,264 284,457 2,466,416
Noninterest expenses 3,789,915 11,373,660 1,323,297 16,486,872
------------- ------------- ------------ -------------
Income before income tax expense (benefit) 1,008,495 6,825,982 (1,830,125) 6,004,352
Income tax expense (benefit) 384,755 2,555,938 (642,529) 2,298,164
------------- ------------- ------------ -------------
Net income (loss) $ 623,740 $ 4,270,044 $ (1,187,596) $ 3,706,188
============= ============= ============ =============
8
<PAGE>
<PAGE> 11
<CAPTION>
Three months ended September 30, 1999
----------------------------------------------------------------
Corporate,
other
Kansas City St. Louis intercompany,
Region Region reclassifications Total
------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Interest income $ 2,287,358 $ 8,396,194 $ -- $ 10,683,552
Interest expense 973,627 3,550,200 67,504 4,591,331
------------- ------------- ------------ -------------
Net interest income 1,313,731 4,845,994 (67,504) 6,092,221
Provision for loan losses 85,000 446,146 -- 531,146
Noninterest income 171,264 787,187 19,540 977,991
Noninterest expenses 1,153,254 3,221,367 303,255 4,677,876
------------- ------------- ------------ -------------
Income before income tax expense (benefit) 246,741 1,965,668 (351,219) 1,861,190
Income tax expense (benefit) 93,381 733,484 (134,739) 692,126
------------- ------------- ------------ -------------
Income before cumulative effect of a
change in accounting principle 153,360 1,232,184 (216,480) 1,169,064
------------- ------------- ------------ -------------
Cumulative effect on prior years of a
change in asset classification -- -- -- --
Net income (loss) $ 153,360 $ 1,232,184 $ (216,480) $ 1,169,064
============= ============= ============ =============
<CAPTION>
Nine months ended September 30, 1999
----------------------------------------------------------------
Corporate,
other
Kansas City St. Louis intercompany,
Region Region reclassifications Total
------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Interest income $ 6,510,638 $ 22,773,343 $ -- $ 29,283,981
Interest expense 2,755,169 9,956,377 51,363 12,762,909
------------- ------------- ------------ -------------
Net interest income 3,755,469 12,816,966 (51,363) 16,521,072
Provision for loan losses 225,000 683,691 -- 908,691
Noninterest income 596,173 1,671,859 113,582 2,381,614
Noninterest expenses 3,415,018 8,839,034 973,272 13,227,324
------------- ------------- ------------ -------------
Income before income tax expense (benefit) 711,624 4,966,100 (911,053) 4,766,671
Income tax expense (benefit) 290,493 1,826,680 (357,508) 1,759,665
------------- ------------- ------------ -------------
Income before cumulative effect of a
change in accounting principle 421,131 3,139,420 (553,545) 3,007,006
------------- ------------- ------------ -------------
Cumulative effect on prior years of a
change in asset classification -- 121,491 -- 121,491
------------- ------------- ------------ -------------
Net income (loss) $ 421,131 $ 3,260,911 $ (553,545) $ 3,128,497
============= ============= ============ =============
</TABLE>
9
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<PAGE> 12
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 our
business, as well as those facts 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 nine month periods ended September 30, 2000
compared to the three and nine month periods ended September 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.
All 1999 amounts have been restated to reflect the CGB acquisition.
FINANCIAL CONDITION
Total assets at September 30, 2000 were $691 million, an increase of $76
million, or 12%, over total assets of $615 million at December 31, 1999.
Loans and leases, net of unearned loan fees, were $535 million, an increase
of $54 million, or 11%, over total loans and leases of $481 million at
December 31, 1999. The increase in loans and leases is in part attributable
to the Company's investment in additional business development officers.
Federal funds sold and investment securities were $116 million, an increase
of $15 million, or 15%, from total federal funds sold and investment
securities of $101 million at December 31, 1999.
Total deposits at September 30, 2000 were $616 million, an increase of $74
million or 14% 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 September 30, 2000 was $51 million, an increase
of $4 million over total shareholders' equity of $47 million at December 31,
1999. The increase in equity is due to net income of $3.7 million for the
nine months ended September 30, 2000, and the exercise of incentive stock
options by employees, less dividends paid to shareholders.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Net income was $1,422,000 for the three month period ended September 30,
2000, an increase of 22% over net income of $1,169,000 for the same period in
fiscal 1999. Basic earnings per share for the three-month periods ended
September 30, 2000 and 1999 were $0.16 and $0.13, respectively. Diluted
earnings per share for the three-month periods ended September 30, 2000 and
1999 were $0.15 and $0.12, respectively.
10
<PAGE>
<PAGE> 13
NET INTEREST INCOME
Net interest income (on a tax-equivalent basis) was $7.3 million, or 4.58% of
average interest-earning assets, for the three months ended September 30,
2000, compared to $6.1 million, or 4.83% of average interest-earning assets,
for the same period in 1999. The $1.2 million, or 20% increase in net
interest income for the three months ended September 30, 2000 resulted
primarily from a $134 million increase in average interest-earning assets to
$637 million, from $503 million during the same period in 1999. The increase
in average 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 9.10% for the three month period ended
September 30, 2000 compared to 8.47% for the three month period ended
September 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. Average interest-earning assets increased to
94.98% of total assets for the three months ended September 30, 2000 from
93.86% for the same period in 1999. The increase in net interest income was
offset by a $117 million increase in average interest-bearing liabilities to
$536 million for the three months ended September 30, 2000 from $419 million
during the same period in 1999. The yield on interest-bearing liabilities
increased to 5.38% for the three months ended September 30, 2000 compared to
4.34% 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 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 demand deposit and interest-bearing transaction accounts, to higher
cost liabilities, such as money market accounts, certificates of deposit, and
guaranteed preferred beneficial interests in EBH-subordinated debentures.
Total average interest-bearing liabilities increased to 79.87% of total
average assets for the three months ended September 30, 2000 from 78.20% for
the same period in 1999.
11
<PAGE>
<PAGE> 14
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 September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended September 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
-------- -------- -------- ------- -------- -------- -------- -------
Assets (Dollars in Thousands)
------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans<F1> $526,618 78.46% $12,786 9.66% $448,060 83.57% $ 9,968 8.83%
Taxable investments in
debt securities 58,933 8.78 940 6.34 32,772 6.11 467 5.65
Non-taxable investments in
debt securities<F2> 676 0.10 13 7.85 949 0.18 16 6.71
Federal funds sold 51,203 7.63 838 6.51 21,403 3.99 268 4.97
Interest earning deposits 36 0.01 1 6.06 31 0.01 0 3.93
-------- ------ ------- -------- ------ -------
Total interest-earning assets 637,466 94.98 14,578 9.10 503,215 93.86 10,719 8.47
Non interest-earning assets:
Cash and due from banks 20,093 2.99 19,685 3.67
Office equipment and
leasehold improvements 8,205 1.22 8,171 1.52
Investment in EMB LLC 1,755 0.26 -- --
Prepaid expenses and other assets 10,784 1.61 9,904 1.85
Allowance for loan losses (7,089) (1.06) (4,829) (0.90)
-------- ------ -------- ------
Total assets $671,214 100.00% $536,146 100.00%
======== ====== ======== ======
Liabilities and Shareholders' Equity
------------------------------------
Interest-bearing liabilities:
Interest-bearing transaction
accounts $ 47,589 7.09% $ 202 1.69% $ 44,314 8.26% $ 213 1.91%
Money market 262,718 39.14 3,575 5.41 205,111 38.26 2,213 4.28
Savings 7,251 1.08 47 2.58 6,965 1.30 45 2.56
Certificates of deposit 197,546 29.43 3,032 6.11 149,039 27.80 1,934 5.15
Borrowed funds 10,003 1.49 125 4.95 13,815 2.58 186 5.36
Guaranteed preferred beneficial
interests in EBH-subordinated
debentures 11,000 1.64 264 9.56 -- -- -- --
-------- ------ ------- -------- ------ -------
Total interest-bearing liabilities 536,107 79.87 7,245 5.38 419,244 78.20 4,591 4.34
Noninterest-bearing liabilities:
Demand deposits 81,658 12.17 68,125 12.71
Other liabilities 2,973 0.44 1,994 0.36
-------- ------ -------- ------
Total liabilities 620,738 92.48 489,363 91.27
Shareholders' equity 50,476 7.52 46,783 8.73
-------- ------ -------- ------
Total liabilities and
shareholders' equity $671,214 100.00% $536,146 100.00%
======== ====== ======== ======
Net interest income $ 7,333 $ 6,128
======= =======
Net interest margin 4.58% 4.83%
<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 $217,000 and
$302,000, for 2000 and 1999, respectively.
<F2> Non taxable investment income is presented on a fully tax-equivalent
basis assuming a tax rate of 34%.
</TABLE>
12
<PAGE>
<PAGE> 15
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Net income was $3,706,000 for the nine month period ended September 30, 2000,
an increase of 18% over net income of $3,128,000 for the same period in
fiscal 1999. Basic earnings per share for the nine-month periods ended
September 30, 2000 and 1999 were $0.41 and $0.35, respectively. Diluted
earnings per share for the nine-month periods ended September 30, 2000 and
1999 were $0.38 and $0.33, respectively.
NET INTEREST INCOME
Net interest income, presented on a tax-equivalent basis, was $20.9 million,
or 4.55% of average interest-earning assets, for the nine months ended
September 30, 2000 compared to $16.6 million, or 4.72% of average
interest-earning assets for the same period in 1999. The $4.3 million, or
26% increase, in net interest income for the nine months ended September 30,
2000 resulted primarily from a $142 million increase in average
interest-earning assets to $613 million, from $471 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 8.89% for the nine
month period ended September 30, 2000 compared to 8.35% for the nine month
period ended September 30, 1999. The increase in asset yield was primarily
due to 1.25% increase in the prime rate since July of 1999. Interest-earning
assets increased to 94.75% of total assets for the nine months ended
September 30, 2000 from 93.05% for the same period in 1999.
The increase in net interest income was offset by a $123 million increase in
average interest-bearing liabilities to $517 million for the nine months
ended September 30, 2000 from $394 million during the same period in 1999.
The yield on interest-bearing liabilities increased to 5.15% for the nine
months ended September 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 interests 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 79.90% of total average assets for the nine months ended
September 30, 2000 from 77.86% for the same period in 1999. This increase is
primarily attributed to the above mentioned guaranteed preferred beneficial
interests in EBH-subordinated debentures and an increase in money market
accounts and certificates of deposit.
13
<PAGE>
<PAGE> 16
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
nine month periods ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Nine Months Ended September 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<F1> $509,009 78.69% $36,010 9.45% $411,532 81.39% $27,021 8.78%
Taxable investments in
debt securities 54,793 8.47 2,548 6.21 36,876 7.29 1,550 5.62
Non-taxable investments in
debt securities<F2> 712 0.11 41 7.67 930 0.18 47 6.76
Federal funds sold 48,368 7.48 2,209 6.10 21,205 4.19 755 4.76
Interest earning deposits 24 -- 1 5.57 20 -- -- 2.97
-------- ------ ------- -------- ------ -------
Total interest-earning assets 612,906 94.75 40,809 8.89 470,563 93.05 29,373 8.35
Non interest-earning assets:
Cash and due from banks 19,511 3.02 22,090 4.37
Office equipment and
leasehold improvements 8,197 1.27 8,072 1.60
Investment in EMB LLC 968 0.15 -- --
Prepaid expenses and other assets 11,879 1.83 9,559 1.89
Allowance for loan losses (6,612) (1.02) (4,657) (0.91)
-------- ------ -------- ------
Total assets $646,849 100.00% $505,627 100.00%
======== ====== ======== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Interest-bearing liabilities:
Interest-bearing transaction
accounts $ 47,525 7.35% $ 615 1.73% $ 44,307 8.76% $ 607 1.83%
Money market 246,159 38.06 9,430 5.12 188,489 37.28 6,017 4.27
Savings 7,058 1.09 137 2.59 6,916 1.37 134 2.59
Certificates of deposit 194,514 30.07 8,532 5.86 141,964 28.08 5,540 5.22
Borrowed funds 10,571 1.63 405 5.12 12,008 2.37 465 5.18
Guaranteed preferred beneficial
interests in EBH-subordinated
debentures 11,000 1.70 790 9.59 -- -- -- --
-------- ------ ------- -------- ------ -------
Total interest-bearing liabilities 516,827 79.90 19,910 5.15 393,684 77.86 12,763 4.33
Noninterest-bearing liabilities:
Demand deposits 76,655 11.85 64,315 12.72
Other liabilities 4,054 0.63 1,805 0.36
-------- ------ -------- ------
Total liabilities 597,536 92.38 459,804 90.94
Shareholders' equity 49,313 7.62 45,823 9.06
Total liabilities and
shareholders' equity $646,849 100.00% $505,627 100.00%
======== ====== ======== ======
Net interest income $20,899 $16,610
======= =======
Net interest margin 4.55% 4.72%
<FN>
----------
<F1> Average balances include nonaccrual loans. The income on such loans
is included in interest but is recognized only upon receipt.
Loan fees included in interest income are approximately $820,000 and
$891,000, for 2000 and 1999, respectively.
<F2> Non taxable investment income is presented on a fully tax-equivalent
basis assuming a tax rate of 34%.
</TABLE>
14
<PAGE>
<PAGE> 17
PROVISION FOR LOAN LOSSES
The provision for loan losses was $215,000 and $763,000 for the three month
and nine month periods ended September 30, 2000, respectively, compared to
$531,000 and $909,000 for the same periods in 1999. The decrease in
provision for loan losses during the three month period ended September 30,
2000 as compared to the three month period ended September 30,1999 is due to
a decrease in loan growth during 2000 as compared to 1999. The Company
experienced a $22 million decrease in loan growth for the three months ended
September 30, 2000 as compared to the same period in 1999. During the three
month period ended September 30, 2000 the Company experienced loan growth of
$16 million as compared to $38 million in growth for the same period ended
September 30, 1999.
The decrease in provision for loan losses for the nine month period ended
September 30, 2000 as compared to the nine month period ended September 30,
1999 is due to a decrease of $56 million in loan growth between the periods.
The Company experienced $54 million in loan growth during the nine months
ended September 30, 2000 as compared to $110 million in loan growth during
the same period in 1999. The Company's asset quality remained strong with net
charge offs of $625,000 for the nine months ended September 30, 2000 compared
to net charge offs of $164,000 for the same period in 1999. The Company
charged off one $500,000 commercial loan in September of 2000, which
accounted for a substantial portion of the year to date net charge offs in
2000.
15
<PAGE>
<PAGE> 18
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>
Nine Months Ended
-----------------------
2000 1999
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Allowance at beginning of year $ 6,758 $ 4,430
Loans charged off:
Commercial and industrial 630 84
Real estate:
Commercial 36 15
Construction -- --
Residential -- --
Consumer and other 14 131
-------- --------
Total loans charged off 680 230
-------- --------
Recoveries of loans previously charged off:
Commercial and industrial 44 --
Real estate:
Commercial 5 26
Construction -- 11
Residential 1 5
Consumer and other 5 24
-------- --------
Total recoveries of loans previously charged off 55 66
-------- --------
Net loans charged off 625 164
-------- --------
Provisions charged to operations 763 909
-------- --------
Allowance at end of period $ 6,896 $ 5,175
======== ========
Average loans $509,009 $411,532
Total loans $534,513 $465,003
Nonperforming loans $ 1,984 $2,119
Net charge-offs to average loans 0.12% 0.04%
Allowance for loan losses to loans 1.29% 1.11%
</TABLE>
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 and
regulatory bank examinations. The system requires rating all commercial
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.
16
<PAGE>
<PAGE> 19
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 recent
changes in the risk profiles of the portfolio, changes in past due and non
performing loans and changes in watch list and classified loans. In this
manner, the overall increases or decreases in the levels of risk in the
portfolio are monitored continually. Factors are applied to the loan
portfolio for each category of loan risk to determine acceptable levels of
allowance for loan losses. These factors are derived primarily from the
actual loss experience and from published national surveys of norms in the
industry. The calculated allowance required for the portfolio is then
compared to the actual allowance balance to determine the provision necessary
to maintain the allowance at an appropriate level. 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
nonaccrual, past due or restructured loans if such assets were loans.
Management believes the allowance for loan losses is adequate to absorb
probable 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-offs
during an extended period of rapid loan growth, management remains cognizant
that historical loan losses and nonperforming asset experience may not be
indicative of future results. Were the experience to deteriorate, and
additional provisions for loan losses were required, future operational
results would be negatively impacted. Both management and the Board of
Directors continually monitor changes in asset quality, market conditions,
concentrations 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 nonaccrual
loans. The Kansas region is currently implementing a credit management policy
and loan review procedure consistent with the St. Louis region.
17
<PAGE>
<PAGE> 20
The following table sets forth information concerning the Company's
nonperforming assets as of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Nonaccrual loans $ 1,984 $ 2,485
Loans past due 90 days or more
and still accruing interest -- 74
Restructured loans -- --
-------- --------
Total nonperforming loans 1,984 2,559
Foreclosed property 396 396
-------- --------
Total nonperforming assets $ 2,380 2,955
======== ========
Total assets $690,692 $615,143
Total loans $534,513 $480,891
Total loans plus foreclosed property $534,909 $481,287
Nonperforming loans to loans 0.37% 0.53%
Nonperforming assets to loans plus
foreclosed property 0.44% 0.61%
Nonperforming assets to total assets 0.34% 0.48%
</TABLE>
NONINTEREST INCOME
Noninterest income was $1,052,000 and $2,466,000 for the three month and nine
month periods ended September 30, 2000, respectively, compared to $978,000
and $2,382,000 for the same periods in 1999. The increase is primarily
attributed to financial advisory income and other service charges and fee
income. Financial advisory income was $284,000 and $590,000 for the three
month and nine month periods ended September 30, 2000, respectively, as
compared to $388,000 and $444,000 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. Other service charges
and fee income was $262,000 and $528,000 for the three month and nine month
periods ended September 30, 2000, respectively, as compared to $45,000 and
$346,000 for the same periods in 1999. This increase is primarily
attributable to a $175,000 merchant banking fee the Company received in
September of 2000. The Company increased its merchant banking activity
during 2000. This is reflected in increased income from a minority interest
in EMB LLC and the increase in the gain on investment in Enterprise Fund,
L.P. The above mentioned increases were offset by a $37,000 and $349,000
decrease in the gain on sale of mortgage loans for the three month and nine
month periods ended September 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 nine months of 2000. Over half of the
gain on sale of mortgage loans for the three and nine month periods ended
September 30, 1999 was due to refinancing of mortgages. The demand for
mortgage loan refinancing dramatically decreased with the rise in interest
rates.
NONINTEREST EXPENSE
Noninterest expense was $5,854,000 and $16,487,000 for the three month and
nine month periods ended September 30, 2000, respectively, compared to
$4,678,000 and $13,227,000 million for the same periods in 1999. The
increase is primarily due to increases in salaries, payroll taxes and
employee benefits, occupancy expense, and data processing
18
<PAGE>
<PAGE> 21
expenses. Increases in salaries, payroll taxes and employee benefits,
occupancy expense, and data processing 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 in the St. Louis region and key management in the Kansas region, and
3) normal increases associated with growth. The Company recently implemented
an Internet banking business and check imaging system for enhanced customer
service. Both programs increased noninterest expense for the three and nine
month periods ended September 30, 2000. Other noninterest expenses were
$1,506,000 and $4,410,000 for the three month and nine month periods ended
September 30, 2000, respectively, an increase of $439,984 or 41% and
$1,211,680 or 38% over the three month and nine month periods ended September
30, 1999, respectively. During the nine month period ended September 30,
2000, the Company expensed approximately $500,000 in legal, accounting, travel
and other costs related to the merger. 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 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 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) which places 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 $37
million and $45 million of deposits from the national network with the
Company at September 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 September 30, 2000:
<TABLE>
<CAPTION>
Remaining Maturity Amount
------------------------------- -------
(Dollars in Thousands)
<S> <C>
Three months or less $37,721
Over three through six months 10,220
Over six through twelve months 32,905
Over twelve months 7,572
-------
$88,418
=======
</TABLE>
The asset/liability management process, which involves management of the
components of the balance sheet to allow assets and liabilities to reprice at
approximately the same time, is an ever-changing process essential to
minimizing the effect of interest rate fluctuations on net interest income.
CAPITAL ADEQUACY
In 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
September 30, 2000.
19
<PAGE>
<PAGE> 22
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 average 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 loan losses, and debt
considered equity for regulatory capital purposes.
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 September 30, 2000:
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 66,717,871 11.75% $ 45,428,624 8.00% $ 56,785,780 10.00%
Enterprise Bank $ 46,140,698 10.10% $ 36,560,730 8.00% $ 45,700,913 10.00%
First Commercial Bank, N.A. $ 12,851,153 12.12% $ 8,484,164 8.00% $ 10,605,205 10.00%
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 60,036,455 10.57% $ 22,714,312 4.00% $ 34,071,468 6.00%
Enterprise Bank $ 41,350,698 9.05% $ 18,280,365 4.00% $ 27,420,548 6.00%
First Commercial Bank, N.A $ 11,570,897 10.91% $ 4,242,082 4.00% $ 6,363,123 6.00%
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $ 60,036,455 9.28% $ 19,405,472 3.00% $ 32,342,453 5.00%
Enterprise Bank $ 41,350,698 8.09% $ 15,338,477 3.00% $ 25,564,129 5.00%
First Commercial Bank, N.A. $ 11,570,897 8.81% $ 3,941,429 3.00% $ 6,569,048 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>
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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-assets ratio.
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ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a). Exhibits.
Exhibit
Number Description
------- -----------
11.1 Statement regarding computation of
per share earnings.
27.1 Financial Data Schedule. (EDGAR only)
(b). During the three months ended September 30, 2000, there were no
reports filed by the Registrant on Form 8-K.
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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 13th day of November, 2000.
ENTERBANK HOLDINGS, INC.
By: _________________________________
Fred H. Eller
Chief Executive Officer
By: _________________________________
James C. Wagner
Chief Financial Officer
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