<PAGE>
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 March 31, 1998
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)
Ohio 31-1396726
- --------------------------------- -----------------
(State or other jurisdiction (I.R.S. Employer
of incorporationor organization) Identification
Number)
7810 Tylersville Square Drive
West Chester, Ohio 45069
- -------------------------------------- -----------
(Address or principal executive (Zip Code)
office)
(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 May 1, 1998, there were
issued and outstanding 2,210,996 shares of the Registrant's Common Stock, par
value $.01 per share.
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except share data)
(unaudited)
ENTERPRISE FEDERAL BANCORP, INC. AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information Page
- ----------------------------- ----
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
(As of March 31, 1998 (unaudited) and September 30, 1997) 1
Consolidated Statements of Earnings for the three and six
months ended March 31, 1998 (unaudited) and 1997 (unaudited) 2
Consolidated Statements of Cash Flows for the six months
ended March 31, 1998 (unaudited) and 1997 (unaudited) 3
Notes to unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Part II. Other Information
- --------------------------
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Securities Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997
-------------- ------------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 818 $
811
Federal Funds sold 7,000 8,000
Interest-bearing deposits in other financial institutions 12,889 2,330
--------- ----------
Cash and cash equivalents 20,707 11,141
Investment securities available for sale - at market 1,086 698
Mortgage-backed securities available for - sale at market 83,543 61,457
Loans receivable - net 245,661 191,096
Office premises and equipment-at depreciated cost 4,136 3,544
Federal Home Loan Bank stock - at cost 7,258 5,500
Accrued interest receivable on loans 1,003 608
Accrued interest receivable on mortgage-backed securities 336 409
Accrued interest receivable on interest-bearing deposits 121 96
Goodwill and other intangible assets 902 20
Prepaid expenses and other assets 532 290
Prepaid federal income tax -- 29
Deferred federal income tax asset 340 --
--------- ----------
Total assets $ 365,625 $ 274,888
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 198,867 $ 146,297
Advances from Federal Home Loan Bank 125,740 95,000
Accrued interest payable 825 636
Other liabilities 3,145 1,365
Accrued federal income taxes 379 --
Deferred federal income taxes 262 166
--------- ----------
Total liabilities $ 329,218 $ 243,464
Commitments -- --
Stockholders' equity
Preferred stock, no par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $.01 par value, 4,000,000 shares authorized,
2,268,596 issued 23 23
Additional paid-in capital 23,432 23,082
Less 57,600 and 194,268 shares of treasury stock (333) (4,386)
Less shares acquired by employee stock benefit plans (1,543) (1,927)
Retained earnings - restricted 14,725 14,581
Unrealized gain on securities designated as available
for sale, net of related tax effects 103 51
--------- ----------
Total stockholders' equity 36,407 31,424
--------- ----------
Total liabilities and stockholders' equity $ 365,625 $ 274,888
--------- ----------
--------- ----------
</TABLE>
The accompanying narrative is an integral part of these statements.
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest income:
Loans $ 4,712 $ 3,424 $ 8,850 $ 6,699
Mortgage-backed securities 1,275 1,078 2,355 2,076
Interest-bearing deposits and other 371 157 598 346
------- ------- ------- -------
Total interest income 6,358 4,659 11,803 9,121
Interest expense:
Deposits 2,426 1,796 4,310 3,567
Borrowings 1,886 1,042 3,474 1,921
------- ------- ------- -------
Total interest expense 4,312 2,838 7,784 5,488
Net interest income 2,046 1,821 4,019 3,633
Provision for losses on loans 45 45 90 75
------- ------- ------- -------
Net interest income after provision for losses on loans 2,001 1,776 3,929 3,558
Other operating income:
Gain on sale of securities 313 136 336 435
Other operating income 35 30 80 58
------- ------- ------- -------
Total other income 348 166 416 493
Operating expenses:
Employee compensation and benefits 768 607 1,575 1,264
Occupancy and equipment 128 97 224 193
Federal deposit insurance premiums 44 5 67 76
Franchise taxes 117 111 223 224
Data processing 39 49 73 71
Amortization of intangible assets 23 8 31 15
Other 156 137 291 242
------- ------- ------- -------
Total operating expenses 1,275 1,014 2,484 2,085
Earnings before income taxes 1,074 928 1,861 1,966
Federal income taxes 397 331 668 679
------- ------- ------- -------
Net earnings $ 677 $ 597 $ 1,193 $ 1,287
------- ------- ------- -------
------- ------- ------- -------
Earnings per share
Basic $ .34 $ .31 $ .62 $ .66
------- ------- ------- -------
------- ------- ------- -------
Diluted $ .32 $ .30 $ .57 $ .63
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The accompanying narrative is an integral part of these statements.
2
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 1,193 $ 1,287
Adjustments to reconcile net earnings
to net cash provided by (used in) operating activities:
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net 10 11
Amortization of deferred loan origination fees (147) (86)
Depreciation and amortization 129 53
Provision for losses on loans 90 45
Federal Home Loan Bank Stock dividends (226) (116)
Gains on sales of securities (336) (435)
Amortization of expense related to stock benefit plans 960 507
Increase (decrease) in cash due to change in:
Accrued interest receivable (347) (342)
Prepaid expenses and other assets (242) (231)
Accrued interest payable 189 86
Other liabilities 1,780 (871)
Federal income taxes
Current 408 (1)
Deferred 96 148
------- -------
Net cash provided by operating activities 3,557 55
Cash flows provided by (used in) investing activities:
Purchase of investment securities (1,086) --
Purchase of mortgage-backed securities (83,556) (37,393)
Sale of mortgage-backed securities 54,078 35,191
Principal repayments of mortgage-backed securities 3,415 2,466
Loan principal repayments 21,862 8,567
Loan disbursements (28,726) (29,407)
Purchase of office premises and equipment (50) (26)
Purchase of FHLB Stock (1,032) (1,384)
Cash received in acquisition 8,598 --
------- -------
Net cash used in investing activities (26,497) (21,986)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 3,499 3,572
Borrowed money 30,000 20,000
Escrow deposits -- (11)
Distribution to stockholders (993) (2,025)
Purchase of Treasury shares -- (874)
------- -------
Net cash provided by (used in) financing activities 32,506 20,662
------- -------
Net increase (decrease) in cash and cash equivalents 9,566 (1,269)
Cash and cash equivalents at beginning of period 11,141 12,938
------- -------
Cash and equivalents at end of period $ 20,707 $ 11,669
------- -------
------- -------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 700
-------
-------
Interest on deposits and borrowings $ 5,402
-------
-------
</TABLE>
The accompanying narrative is an integral part of these statements.
3
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
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 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 six months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the year ending
September 30, 1998. 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, 1997, contained in the
Corporation's 1997 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. The consolidated financial statements at March 31, 1998 and for
the three and six months ended March 31, 1998 include the accounts of North
Cincinnati Savings Bank ("NCSB"). In February 1998, NCSB was merged with and
into the Savings Bank (the "Merger") in a transaction that was accounted for as
a purchase for financial reporting purposes. Under this method of accounting,
the Corporation recorded the acquisition of NCSB at its cost at the effective
time of the acquisition ("Effective Time"), which cost included the cash paid in
the Merger, the fair value of the Corporation's common stock issued in the
Merger and all direct acquisition costs. The purchase price was allocated to the
acquired assets and assumed liabilities of NCSB based upon their estimated fair
values at the Effective Time in accordance with generally accepted accounting
principles. The purchase price in excess of the fair values of the identifiable
net assets acquired has been recorded as an intangible asset
4
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
and will be amortized over a period of 15 years for financial accounting
purposes.
Note 3 - Earnings Per Share
Basic earnings per share for the three month periods ended March 31, 1998
and 1997 were calculated assuming 1,984,000 and 1,928,000 shares were issued and
outstanding during the respective periods.
Diluted earnings per share for the three month periods ended March 31, 1998
and 1997 were calculated assuming 2,120,000 and 2,018,000 shares were issued and
outstanding during the respective periods.
Basic earnings per share for the six month periods ended March 31, 1998 and
1997 were calculated assuming 1,939,000 and 1,942,000 shares were issued and
outstanding during the respective periods.
Diluted earnings per share for the six month periods ended March 31, 1998
and 1997 were calculated assuming 2,076,000 and 2,033,000 shares were issued and
outstanding during the respective periods.
5
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Corporation's assets totaled $365.6 million at March 31, 1998 compared
to $274.9 million at September 30, 1997. This $90.7 million or 33.0% increase
was primarily due to a $54.6 million or 28.6% increase in loans receivable, net,
a $22.1 million or 35.9% increase in mortgage-backed securities and a $9.6
million or 85.9% increase in cash equivalents. Total liabilities amounted to
$329.2 million at March 31, 1998 compared to $243.4 million at September 30,
1997. This $85.8 million or 35.2% increase was primarily due to a $30.7 million
or 32.4% increase in advances from the Federal Home Loan Bank ("FHLB") of
Cincinnati and a $52.6 million or 35.9% increase in deposits. The increase in
total assets and total liabilities primarily reflects the acquisition of NCSB in
February 1998, as well as growth in the loan and investment portfolios funded by
an increase in deposits and borrowings. Total stockholders' equity increased
$5.0 million or 15.9% to $36.4 million at March 31, 1998 compared to $31.4
million at September 30, 1997. The increase in stockholders' equity was
primarily due to the payment of $4.1 million of Treasury Stock in the
acquisition of NCSB, net earnings of $1.2 million and stock benefit plan
allocations of $1.0 million which were partially offset by dividend
distributions of $1.0 million.
Year 2000. The Company outsources its primary data processing functions. A
challenging problem exists as the millennium ("year 2000") approaches as many
computer systems worldwide do not have the capability of recognizing the year
2000 or years thereafter. To date, the Company has received confirmations from
its primary vendors that plans have been developed by them to address and
correct the issues associated with the year 2000 problem.
Results of Operations for the Three Months Ended March 31, 1998 and 1997
Net Income. The Corporation's net income amounted to $677,000 for the three
months ended March 31, 1998 compared to $597,000 for the comparable period in
1997. The $80,000 or 13.4% increase was due primarily to an increase in net
interest income and increased gains on sales of securities.
Net Interest Income. Net interest income before provision for loan losses
increased $225,000 or 12.4% to $2.0 million for the three months ended March 31,
1998 compared to the same period in 1997. Net interest income is determined by
the Corporation's interest rate spread (i.e., the difference between the yields
earned on its
6
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
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
interest-earning assets. The increase in interest-earning assets was primarily
due to the acquisition of NCSB and growth in the loan and mortgage-backed
securities portfolios.
Interest Income. Interest income amounted to $6.4 million for the three
months ended March 31, 1998 compared to $4.7 million for the same period in
1997. The increase of $1.7 million or 36.4% was primarily due to an increase in
interest income on loans of $1.3 million or 37.6% to $4.7 million for the 1998
period compared to the 1997 period. Such increase was primarily due to an
increase in the average balance of such assets due to the acquisition of NCSB
and increased loan demand.
Interest Expense. Interest expense increased $1.5 million or 51.9% to $4.3
million for the three months ended March 31, 1998 compared to the same period in
1997 as a result of an increase in interest expense on both deposits and
borrowed money. Interest expense on deposits increased $630,000 or 35.1% due to
an increase in the average balance of deposits primarily due to the acquisition
of NCSB. Interest expense on borrowed money increased $844,000 or 81.0% due to
an increase in the average balance of such liabilities to fund the origination
of loans and the purchase of mortgage-backed securities.
Other Operating Income. Other operating income amounted to $348,000 and
$166,000 during the three months ended March 31, 1998 and 1997, respectively.
The $182,000 increase during the 1998 period was primarily due to increased
gains on sales of securities.
Operating Expenses. Operating expenses increased $261,000 or 25.7% to $1.3
million for the three months ended March 31, 1998 compared to $1.0 for the three
months ended March 31, 1997. Such increase was primarily due to an $161,000 or
26.5% increase in employee compensation and benefits which were primarily due to
personnel retained in the acquisition of NCSB and normal annual salary
increases.
Federal Income Taxes. Federal income taxes amounted to $397,000 and $331,000
for the three months ended March 31, 1998 and 1997, respectively, resulting in
effective tax rates of 37.0% and 35.7%, respectively.
Results of Operations for the Six Months Ended March 31, 1998 and 1997
Net Income. The Corporation's net income amounted to $1.2 million for the
six months ended March 31, 1998 compared to $1.3 million for the comparable
period
7
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
in fiscal 1997. The $94,000 or 7.3% decrease was due primarily to an increase in
operating expenses.
Net Interest Income. Net interest income before provision for loan losses
increased $386,000 or 10.6% for the six months ended March 31, 1998 compared to
the same period in fiscal 1997. The increase in net interest income was due to
an increase in interest-earning assets. The increase in interest-earning assets
was primarily due to the acquisition of NCSB and the increased origination of
loans.
Interest Income. Interest income amounted to $11.8 million for the six
months ended March 31, 1998 compared to $9.1 million for the same period in
fiscal 1997. The increase of $2.7 million or 29.4% was primarily due to an
increase in interest income on loans of $2.2 million or 32.1% to $8.9 million
for the fiscal 1998 period compared to the fiscal 1997 period. Such increase was
primarily due to an increase in the average balance of such assets due to
increased loan demand and loans received in the acquisition of NCSB.
Interest Expense. Interest expense increased $2.3 million or 41.8% to $7.8
million for the six months ended March 31, 1998 compared to the same period in
fiscal 1997 as a result of an increase in interest expense on both deposits and
borrowed money. Interest expense on deposits increased $743,000 or 20.8% due to
an increase in the average balance of deposits primarily due to the acquisition
of NCSB. Interest expense on borrowed money increased $1.6 million or 80.8%
primarily due to an increase in the average balance of such liabilities to fund
loan originations and purchases of mortgage-backed securities.
Other Operating Income. Other operating income amounted to $416,000 and
$493,000 during the six months ended March 31, 1998 and 1997, respectively. The
$77,000 decrease during the fiscal 1998 period was due to decreased gains on
sales of securities.
Operating Expenses. Operating expenses increased $399,000 or 19.1% to $2.5
million for the six months ended March 31, 1998 compared to $2.1 million for the
six months ended March 31, 1997. Such increase was primarily due to increased
employee compensation and benefits which were due to increased costs of stock
based benefit plans, personnel retained in the acquisition of NCSB and normal
annual salary increases.
Federal Income Taxes. Federal income taxes amounted to $668,000 and $679,000
for the six months ended March 31, 1998 and 1997, respectively, resulting in
effective tax rates of 35.9% and 34.5%, respectively.
8
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
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 March 31, 1998, the Corporation had $125.7 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 six month periods ended March 31, 1998 and 1997, 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 March
31, 1998, the total approved loan commitments outstanding amounted to $2.9
million. At the same time, the Corporation had $11.4 million of commitments
under unused lines and letters of credit and the unadvanced portion of
construction loans approximated $4.9 million. Certificates of deposit scheduled
to mature in one year or less at March 31, 1998 totaled $73.7 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 (as defined) in amounts equal
to 4% 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's average monthly liquidity ratio for March 1998 was 89%. As of
March 31, 1998, the Savings Bank's regulatory
9
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
capital substantially exceeded all regulatory capital requirements with
tangible, core and risk-based capital ratios of 6.8%, 6.8% and 13.5%,
respectively, compared to regulatory requirements of 1.5%, 4.0% and 8.0%,
respectively, as demonstrated in the table below.
<TABLE>
<CAPTION>
Regulatory Capital
--------------------------------------------------------------------
Tangible Core Risk-based
Capital Percent Capital Percent Capital Percent
------- ------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally accepted
accounting principles $ 25,780 $ 25,780 $ 25,780
Goodwill (902) (902) (902)
Unrealized gains (103) (103) (103)
General valuation allowances -- -- 716
--------- --------- ----------
Regulatory capital computed 24,775 6.8 24,775 6.8 25,491 13.4
Minimum capital requirement 5,455 1.5 14,613 4.0 15,141 8.0
--------- ----- --------- --- --------- -----
Regulatory capital - excess $ 19,320 5.3 $ 10,162 2.8 $ 10,350 5.4
--------- ----- --------- --- --------- -----
--------- ----- --------- --- --------- -----
</TABLE>
Impact of Inflation and Changing Prices
The financial statements and related data presented 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 a financial institution 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 as measured by the
consumer price index.
Quantitative and Qualitative Disclosures About Market Risk
For a discussion of the Corporation's asset and liability management
policies as well as the potential impact of interest rate changes upon the
market value of the Savings Bank's portfolio equity, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1997 Annual Report to Stockholders. There has been no material change in the
Corporation's asset and liability position or market value of portfolio equity
since September 30, 1997.
10
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
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 and Use of Proceeds
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.
11
<PAGE>
Enterprise Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
(unaudited)
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: May 18, 1998 By: /s/ Otto L. Keeton
-------------------------------------------
Otto L. Keeton
President & Chief Executive Officer
Date: May 18, 1998 By: /s/ Thomas J. Noe
------------------------------------------
Thomas J. Noe
Vice President and Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 818
<INT-BEARING-DEPOSITS> 12,889
<FED-FUNDS-SOLD> 7,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,086
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 245,661
<ALLOWANCE> 716
<TOTAL-ASSETS> 365,625
<DEPOSITS> 198,867
<SHORT-TERM> 40,000
<LIABILITIES-OTHER> 0
<LONG-TERM> 85,740
0
0
<COMMON> 23
<OTHER-SE> 36,384
<TOTAL-LIABILITIES-AND-EQUITY> 365,625
<INTEREST-LOAN> 8,850
<INTEREST-INVEST> 2,355
<INTEREST-OTHER> 598
<INTEREST-TOTAL> 11,803
<INTEREST-DEPOSIT> 4,310
<INTEREST-EXPENSE> 7,784
<INTEREST-INCOME-NET> 4,019
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 336
<EXPENSE-OTHER> 2,484
<INCOME-PRETAX> 1,861
<INCOME-PRE-EXTRAORDINARY> 1,861
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,193
<EPS-PRIMARY> .34
<EPS-DILUTED> .32
<YIELD-ACTUAL> 6.81
<LOANS-NON> 37
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 620
<CHARGE-OFFS> 0
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 716
<ALLOWANCE-DOMESTIC> 716
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
