<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 0-24694
ENTERPRISE FEDERAL BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 31-1396726
- ------------------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7810 Tylersville Square Drive
West Chester, Ohio 45069
- ------------------------------------------- ---------------------------
(Address or principal executive office) (Zip Code)
</TABLE>
(513) 755-4600
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), 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 issuer's
classes of common stock, as of the latest practicable date: As of August 1,
1996, there were issued and outstanding 2,069,328 shares of the Registrant's
Common Stock, par value $.01 per share.
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ENTERPRISE FEDERAL BANCORP, INC. AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information Page
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<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition 1
(as of June 30, 1996, (unaudited) and September 30, 1995)
Consolidated Statements of Earnings for the three and nine months 2
ended June 30, 1996 (unaudited) and June 30, 1995 (unaudited).
Consolidated Statements of Cash Flows for the nine months 3
ended June 30, 1996 (unaudited) and June 30, 1995 (unaudited).
Notes to unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7
Operations
Part II. Other Information
- -------- -----------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Securities Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
i
<PAGE> 3
Enterprise Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30, 1996 September 30, 1995
------------------- ---------------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 610 $ 588
Federal Funds sold 5,000 9,000
Interest-bearing deposits in other
financial institutions 869 1,082
------------------- ---------------------
Cash and cash equivalents 6,479 10,670
Mortgage-backed securities available for sale
at market 61,007 72,022
Loans receivable - net 139,614 110,830
Office premises and equipment-at depreciated cost 3,465 2,054
Federal Home Loan Bank stock - at cost 2,067 1,545
Accrued interest receivable on loans 311 83
Accrued interest receivable on mortgage-backed
securities 335 417
Accrued interest receivable on investments and
interest-bearing deposits 44 2
Goodwill and other intangible assets 58 80
Prepaid expenses and other assets 496 220
Prepaid Federal income taxes --- 15
------------------- ---------------------
Total assets $ 213,876 $ 197,938
=================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 139,993 $127,687
Advances from Federal Home Loan Bank 40,000 30,000
Advances by borrowers for taxes and insurance 102 190
Accrued interest payable 397 376
Other liabilities 1,546 825
Deferred Federal income taxes 172 386
Accrued Federal income taxes 72 ---
------------------- ---------------------
Total liabilities $ 182,282 $ 159,464
Commitments --- ---
Preferred stock, no par value, 1,000,000 shares
authorized, none issued and outstanding --- ---
Common stock, $.01 par value, 4,000,000 shares
2,268,596 outstanding at September 30, 1995 23 23
Additional paid-in capital 22,223 28,633
Less 194,268 shares of treasury stock - at cost (3,058) (1,413)
Less shares acquired by employee stock benefit plans (3,275) (3,452)
Unrealized gain on securities designated as available
for sale --- 388
Retained earnings - restricted 15,681 14,295
------------------- ---------------------
Total stockholders' equity 31,594 38,474
------------------- ---------------------
Total liabilities and stockholders' equity $ 213,876 $ 197,938
=================== =====================
</TABLE>
1
<PAGE> 4
Enterprise Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
------------------------- ---------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Loans $3,035 $2,129 $7,968 $6,254
Mortgage-backed securities 900 874 3,079 1,914
Investment securities --- 39 --- 93
Interest-bearing deposits and other 111 108 500 584
------ ------ ------ ------
Total interest income 4,046 3,150 11,547 8,845
Interest expense:
Deposits 1,735 1,504 5,128 4,209
Borrowings 606 202 1,791 243
------ ------ ------ ------
Total interest expense 2,341 1,706 6,919 4,452
Net interest income 1,705 1,444 4,628 4,393
Provision for losses on loans 30 --- 60 ---
------ ------ ------ ------
Net interest income after provision for losses on loans 1,675 1,444 4,568 4,393
Other operating income:
Gain on sale of securities 52 228 883 338
Gain on sale of real estate acquired through foreclosure --- 39 --- 39
Other operating 26 28 81 69
------ ------ ------ ------
Total other operating income 78 295 964 446
------ ------ ------ ------
Operating expenses:
Employee compensation and benefits 687 505 1,929 1,464
Occupancy and equipment 68 71 228 201
Fedeal deposit insurance premiums 77 69 219 205
Franchise taxes 114 124 347 278
Data processing 33 22 101 88
Amortization of goodwill 7 8 23 24
Other operating 155 103 366 346
------ ------ ------ ------
Total general, administrative and other expense 1,141 902 3,213 2,606
------ ------ ------ ------
Earnings before income taxes 612 837 2,319 2,233
Federal income taxes 211 281 824 761
------ ------ ------ ------
Net earnings $401 $556 $1,495 $1,472
====== ====== ====== ======
Earnings per share $.21 $.27 $.76 N/A
====== ====== ====== ======
</TABLE>
2
<PAGE> 5
Enterprise Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
-------------------------------------
1996 1995
----------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 1,495 $ 1,472
Adjustments to reconcile net earning
to net cash provided by (used in)
operating activities:
Amortization of discounts and
premiums on loans, investments and
mortgage-backed securities - net 64 51
Amortization of deferred loan origination fees (170) (101)
Depreciation and amortization 87 83
Provision for losses on loans 60 ---
Federal Home Loan Bank Stock dividends (103) (50)
Gains on sales of securities and real estate (883) (377)
Increase (decrease) in cash due to change in:
Accrued interest receivable (188) (224)
Prepaid expenses and other assets (276) 194
Accrued interest payable 21 177
Other liabilities 913 46
Federal income taxes
Current 72 78
Deferred (199) 158
----------- ----------------
Net cash provided by operating activities 893 1,507
Cash flows provided by (used in) investing
activities:
Purchase of investment securities --- (7,447)
Sale of investment securities --- 8,447
Purchase of mortgage-backed securities (44,562) (61,215)
Sale of mortgage-backed securities 52,294 9,722
Principal repayments of mortgage-backed securities 3,714 7,649
Loan principal repayments 19,151 9,924
Loan disbursements (47,825) (16,099)
Purchase of office premises and equipment (1,475) (190)
Proceeds from sale of real estate acquired through
foreclosures --- 125
Purchase of Federal Home Loan Bank Stock (419) (457)
----------- ----------------
Net cash used in investing activities (19,122) (49,541)
----------- ----------------
Net cash used in operating and investing
activities (subtotal carried forward) $ (18,229) $ (48,034)
----------- ----------------
</TABLE>
3
<PAGE> 6
Enterprise Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
-----------------------------
1996 1995
----------- ---------
<S> <C> <C>
Net cash used in operating and investing
activities (subtotal carried forward) $ (18,229) $ (48,034)
Cash flows provided by (used in) financing
activities:
Net increase (decrease) in deposit accounts 12,306 (33,625)
Advances from FHLB 10,000 30,000
Advances by borrowers for taxes and insurance (88) (97)
Stock - net proceeds of stock issuance --- 25,910
Capital Distribution (6,535) ---
Purchase of Treasury shares (1,645) ---
----------- ----------
Net cash provided by financing activities 14,038 22,188
----------- ----------
Net decrease in cash and cash equivalents (4,191) (25,846)
Cash and cash equivalents at beginning of period 10,670 36,465
----------- ----------
Cash and equivalents at end of period $ 6,479 $ 10,619
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 751 $ 664
=========== ==========
Interest on deposits and borrowings $ 6,898 $ 4,275
=========== ==========
Supplemental disclosure of noncash investing
activities:
Transfers from loans to real estate acquired
through foreclosures --- $125
=========== ==========
</TABLE>
4
<PAGE> 7
ENTERPRISE FEDERAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Note 1 - Basis of Presentation
Enterprise Federal Bancorp, Inc. (the "Corporation") was
incorporated under Ohio law in April 1994 by Enterprise Federal
Savings and Loan Association (the "Association") in connection
with the conversion of the Association from a federally chartered
mutual savings and loan association to a federally chartered stock
savings bank, to be known as Enterprise Federal Savings Bank (the
"Savings Bank"), the issuance of the Association's stock to the
Corporation and the offer and sale of the Corporation's common
stock by the Corporation (the "Conversion"). Upon consummation of
the Conversion on October 14, 1994, the Corporation became the
unitary holding company for the Savings Bank. The financial
statements for the periods prior to October 14, 1994 presented
herein are those of Enterprise Federal Savings and Loan
Association prior to the Conversion.
The accompanying unaudited consolidated financial statements of
the Corporation have been prepared in accordance with instructions
to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. However,
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the
interim periods.
The results of operations for the nine months ended June 30, 1996
are not necessarily indicative of the results to be expected for
the year ending September 30, 1996. The unaudited consolidated
financial statements and notes hereto should be read in
conjunction with the audited financial statements and notes
thereto for the year ending September 30, 1995, contained in the
Corporation's 1995 Annual Report.
Note 2 - Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Corporation and the Savings Bank. All significant
intercompany items have been eliminated.
5
<PAGE> 8
Note 3 - Earnings Per Share
Earnings per share for the three and nine months ended June 30,
1996 were calculated assuming 1,909,524 and 1,967,105 shares were
issued and outstanding during the periods. Earnings per share for
the three months ended June 30, 1995 were calculated assuming
2,059,259 shares were issued and outstanding during the period.
Earnings per share for the nine month period ended June, 1995 is
not applicable, as the Conversion was not completed until October
14, 1994.
Note 4 - Effects of Recent Accounting Pronouncements
In May 1993, the Financial Accounting Standards Board ("FASB")
adopted Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity
Securities," affecting the accounting for investments in all debt
and equity securities, which are to be classified in one of three
categories for fiscal years beginning after December 15, 1993.
Securities that an institution has the positive intent and ability
to hold to maturity are to be reported at amortized cost.
Securities that are bought and held principally for the purpose of
selling them in the near term are to be classified as trading
securities and reported at fair value, with unrealized gains and
losses included in earnings. Other securities are to be
classified as securities available for sale and reported at fair
value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity. The
Corporation adopted SFAS No. 115 in fiscal 1995. At June 30,
1996, stockholders' equity includes no unrealized gains or losses
on securities designated as available for sale, net of related tax
effects.
6
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Corporation's assets totaled $213.9 million at June 30, 1996
compared to $197.9 million at September 30, 1995. This $16.0 million or 8.1%
increase was primarily due to a $28.8 million or 26.0% increase in loans
receivable, net. Total liabilities amounted to $182.3 million at March 31,
1996 compared to $159.5 million at September 30, 1995. This increase was
primarily due to a $12.3 million or 9.6% increase in deposits and a $10.0
million or 33% increase in advances from the Federal Home Loan Bank. The
increase in loans receivable was funded with repayments and sales proceeds from
the Corporation's mortgage-backed securities portfolio, increased deposit
inflow and borrowings. Total stockholders' equity decreased $6.9 million or
17.9% to $31.6 million at June 30, 1996 compared to $38.5 million at September
30, 1995. The decrease in stockholders' equity was due primarily to the
payment of a $3.00 per share distribution on November 3, 1995 to stockholders
of record on October 25, 1995 and the purchase of $1.7 million of Treasury
Stock. The distribution amounted to approximately $6.5 million in the
aggregate and is primarily reflected as a reduction in additional paid-in
capital. Such reduction was partially offset by net income of $1.5 million
during the nine months ended June 30, 1996.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
NET INCOME. The Corporation's net income amounted to $401,000 for the
three months ended June 30, 1996 compared to $556,000 for the comparable period
in 1995. The $155,000 or 27.9% decrease was due primarily to reduced other
operating income and an increase in total operating expenses which were
partially offset by an increase in net interest income.
NET INTEREST INCOME. Net interest income before provision for loan
losses increased $261,000 or 18.1% to $1.7 million for the three months ended
June 30, 1996 compared to the same period in 1995. Net interest income is
determined by the Corporation's interest rate spread (i.e., the difference
between the yields earned on its interest-earning assets and the rates paid on
its interest-bearing liabilities) and the relative amounts of interest-earning
assets and interest-bearing liabilities. The increase in net interest income
was due to the increase in the ratio of interest-earning assets to
interest-bearing liabilities. The increase in interest-earning assets was
primarily due to the investment of net proceeds from the Conversion and the
leveraging of the Corporation's capital.
7
<PAGE> 10
INTEREST INCOME. Interest income amounted to $4.0 million for the
three months ended June 30, 1996 compared to $3.2 million for the same period
in 1995. The increase of $896,000 or 28.4% was primarily due to an increase in
interest income on loans of $906,000 or 42.3% to $3.0 million for the 1996
period compared to the 1995 period. Such increase was primarily due to an
increase in the average balance of such assets due to increased loan
originations.
INTEREST EXPENSE. Interest expense increased $635,000 or 37.2% to
$2.3 million for the three months ended June 30, 1996 compared to the same
period in 1995 as a result of an increase in interest expense on both deposits
and borrowed money. Interest expense on deposits increased $231,000 or 15.4%
due to an increase in the average balance of and rates paid on deposits.
Interest expense on borrowed money increased $404,000 primarily due to an
increase in the average balance of such liabilities.
PROVISION FOR LOSSES ON LOANS. The provision for loan losses was
increased $30,000 due to the significant increase in loan originations.
OTHER OPERATING INCOME. Other operating income amounted to $78,000
and $295,000 during the three months ended June 30, 1996 and 1995 respectively.
The $217,000 decrease during the 1996 period was primarily due to decreased
gains on sales of securities.
OPERATING EXPENSES. Operating expenses increased $239,000 or 26.5% to
$1,141,000 for the three months ended June 30, 1996 compared to $902,000 for
the three months ended June 30, 1995. Such increase was primarily due to an
$182,000 or 36.0% increase in employee compensation and benefits. The increase
in employee compensation and benefits was due to increased pension plan expense
and expenses of the Employee Stock Ownership Plan and Management Recognition
Plan adopted in connection with the Conversion.
FEDERAL INCOME TAXES. Federal income taxes amounted to $211,000 and
$281,000 for the three months ended June 30, 1996 and 1995, respectively,
resulting in effective tax rates of 34.5% and 33.6% respectively.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
NET INCOME. The Corporation's net income amounted to $1.5 million for
the nine months ended June 30, 1996 compared to $1.47 million for the
comparable period in fiscal 1995. The $23,000 or 1.6% increase was due
primarily to an increase in net interest income and other operating income
which was partially offset by increased operating expenses.
NET INTEREST INCOME. Net interest income before provision for loan
losses increased $235,000 or 5.3% for the nine months ended June 30, 1996
compared to the same period in fiscal 1995. The increase in net interest income
was due to an increase in
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<PAGE> 11
the ratio of interest-earning assets to interest-bearing liabilities. The
increase in interest-earning assets was primarily due to the investment of net
proceeds from the Conversion and the leveraging of the Corporation's capital.
INTEREST INCOME. Interest income amounted to $11.5 million for the
nine months ended June 30, 1996 compared to $8.8 million for the same period in
fiscal 1995. The increase of $2.7 million or 30.7% was primarily due to an
increase in interest income on loans of $1.7 million or 27.4% to $6.3 million
for the fiscal 1996 period compared to the fiscal 1995 period. Such increase
was primarily due to an increase in the average balance of such assets due to
increased loan demand. In addition, interest income on mortgage-backed
securities increased $1.2 million or 60.9% during the fiscal 1996 period. The
increase in interest income of such assets primarily resulted from an increase
in the average balance of mortgage-backed securities due to the investment of a
portion of the net proceeds from the Conversion in such assets as well as the
use of borrowings to fund purchases of such assets.
INTEREST EXPENSE. Interest expense increased $2.5 million or 55.4%
to $6.9 million for the nine months ended June 30, 1996 compared to the same
period in fiscal 1995 as a result of an increase in interest expense on both
deposits and borrowed money. Interest expense on deposits increased $919,000
or 21.8% due to an increase in the average balance of and rates paid on
deposits. Interest expense on borrowed money increased $1.5 million primarily
due to an increase in the average balance of such liabilities.
PROVISION FOR LOSSES ON LOANS. The provision for loan losses was
increased $60,000 due to the significant increase in loan originations.
OTHER OPERATING INCOME. Other operating income amounted to $964,000
and $446,000 during the nine months ended June 30, 1996 and 1995, respectively.
The $518,000 increase during the fiscal 1996 period was primarily due to
increased gains on sales of securities.
OPERATING EXPENSES. Operating expenses increased $607,000 or 23.3% to
$3.2 million for the nine months ended June 30, 1996 compared to $2.6 million
for the nine months ended June 30, 1996. Such increase was primarily due to a
$465,000 or 31.8% increase in employee compensation and benefits. The increase
in employee compensation and benefits was due to increased pension plan expense
and expenses of the Employee Stock Ownership Plan and Management Recognition
Plan adopted in connection with the Conversion.
FEDERAL INCOME TAXES. Federal income taxes amounted to $824,000 and
$761,000 for the nine months ended June 30, 1996 and 1995, respectively,
resulting in effective tax rates of 35.5% and 34.1% respectively.
9
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's primary sources of funds are deposits, repayments,
prepayments and maturities of outstanding loans and mortgage-backed securities
and funds provided from operations. While scheduled loan and mortgage-backed
securities repayments are relatively predictable sources of funds, deposit
flows and loan prepayments are greatly influenced by the movement of interest
rates in general, economic conditions and competition. The Corporation manages
the pricing of its deposits to maintain a deposit balance deemed appropriate
and desirable. In addition, the Corporation invests excess funds in FHLB
overnight deposits and other short-term interest-earning assets which provide
liquidity to meet lending requirements. As an additional source of funds, the
Corporation has borrowed funds from the FHLB of Cincinnati and has access to
the Federal Reserve Bank discount window. At June 30, 1996, the Corporation
had $40.0 million of FHLB advances outstanding.
Liquidity management is both a daily and long term function. Excess
liquidity is generally invested in short-term investments such as FHLB of
Cincinnati overnight deposits. On a longer-term basis, the Corporation
maintains a strategy of investing in various mortgage-backed securities and
lending products. During the nine month periods ended June 30, 1996 and 1995,
the Corporation used its sources of funds primarily to meet its ongoing
commitments to pay maturing savings certificates and savings withdrawals, fund
loan commitments and maintain its portfolio of mortgage-backed securities. At
June 30, 1996, the total approved loan commitments outstanding amounted to $6.2
million. At the same time, the Corporation had $5.3 million of commitments
under unused lines and letters of credit and the unadvanced portion of
construction loans approximated $5.8 million. Certificates of deposit scheduled
to mature in one year or less at June 30, 1996 totaled $42.3 million.
Management of the Corporation believes that the Corporation has adequate
resources, including principal prepayments and repayments of loans and
mortgage-backed securities, to fund all of its commitments to the extent
required. In addition, although the Corporation has extended commitments to
fund loans or lines and letters of credit, historically, the Corporation has
not been required to fund all of its outstanding commitments. Management
believes that a significant portion of maturing deposits will remain with the
Corporation.
The Savings Bank is required by the Office of Thrift Supervision
("OTS") to maintain average daily balances of liquid assets and short-term
liquid assets (as defined) in amounts equal to 5% and 1% respectively, of net
withdrawal deposits and borrowings payable in one year or less to assure its
ability to meet demand for withdrawals and repayments of short-term borrowings.
The liquidity requirements may vary from time to time at the direction of the
OTS depending upon economic conditions and deposit flows. The Savings Bank
generally maintains a liquidity ratio of between 5% and 10% of its net
withdrawable deposits and borrowings payable in one year or less. The Savings
Bank's average monthly liquidity ratio and short-term liquid assets ratio for
June 1996 was 5.99%. As of June 30, 1996, the Savings Bank's regulatory capital
substantially exceeded all regulatory capital requirements with tangible, core
and risk-based capital
10
<PAGE> 13
ratios of 13.1%, 13.1%, and 26.9% respectively, compared to regulatory
requirements of 1.5%, 3.0% and 8.0% respectively.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements of the Corporation and related
notes represented herein have been prepared in accordance with generally
accepted accounting principles which require the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of financial institutions are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to a
larger extent than interest rates. In the current interest rate environment,
liquidity and the maturity structure of the Corporation's assets and
liabilities are critical to the maintenance of acceptable performance levels.
RECAPITALIZATION OF SAIF AND RELATED LEGISLATIVE PROPOSALS
The deposits of the Savings Bank are currently insured by the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation ("FDIC"). Both the SAIF and the Bank Insurance Fund ("BIF"), the
federal deposit insurance fund that covers commercial bank deposits, are
required by law to attain and thereafter maintain a reserve ratio of 1.25% of
insured deposits. The BIF has achieved a fully funded status in contrast to
the SAIF and the FDIC recently reduced the average deposit insurance premium
paid by BIF-insured commercial banks to a level substantially below the average
premium paid by SAIF-insured institutions.
In late 1995, the FDIC approved a final rule regarding deposit
insurance premiums which, effective with the semiannual premium assessment on
January 1, 1996, reduced deposit insurance premiums for BIF member institutions
to zero (subject to an annual minimum of $2,000) for institutions in the lowest
risk category. Deposit insurance premiums for SAIF members were maintained at
their existing levels (23 basis points for institutions in the lowest risk
category). Accordingly, in the absence of further legislative action, until the
SAIF attains a reserve ratio of 1.25% of insured deposits, SAIF members such as
the Savings Bank will be competitively disadvantaged as compared to commercial
banks due to this premium differential. It is anticipated that, under present
conditions, it will be at least several years before the SAIF reaches a reserve
ratio of 1.25% of insured deposits.
The U.S. House of Representatives and Senate had actively considered
legislation which would have eliminated the premium differential between
SAIF-insured institutions
11
<PAGE> 14
and BIF-insured institutions by recapitalizing the SAIF's reserves to the
required ratio. The legislation had been, for some time, included as part of a
fiscal 1996 federal budget bill, but was eliminated prior to the bill being
enacted on April 26, 1996. In light of the legislation's elimination and the
uncertainty of the legislative process generally, management cannot predict
whether legislation reducing SAIF premiums and/or imposing a special one-time
assessment will be adopted, or, if adopted, the amount of the assessment, if
any, that would be imposed on the Savings Bank.
12
<PAGE> 15
ENTERPRISE FEDERAL BANCORP, INC. AND SUBSIDIARY
PART II
Item 1. Legal Proceedings
Neither the Corporation nor the Savings Bank is involved in any
pending legal proceedings other than non-material legal proceedings
occurring in the ordinary course of business.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not required.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
13
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENTERPRISE FEDERAL BANCORP, INC.
Date: August 13, 1996 By: /s/Otto L. Keeton
------------------------------------
Otto L. Keeton
President & Chief Executive Officer
Date: August 13, 1996 By: /s/Thomas J. Noe
------------------------------------
Thomas J. Noe
Vice President and Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 610
<INT-BEARING-DEPOSITS> 869
<FED-FUNDS-SOLD> 5000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 61007
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 139231
<ALLOWANCE> 383
<TOTAL-ASSETS> 213876
<DEPOSITS> 139993
<SHORT-TERM> 10000
<LIABILITIES-OTHER> 2289
<LONG-TERM> 30000
0
0
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</TABLE>
