1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934--For the quarterly period
ended September 30, 2001
[ ] 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: ___________
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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 October 15, 2001:
Common Stock, $.01 par value---- 9,254,496 shares outstanding
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ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets
At September 30, 2001 and December 31, 2000..............................1
Consolidated Statements of Income
Three Months and Nine Months Ended September 30, 2001 and 2000...........2
Consolidated Statements of Comprehensive Income
Three Months and Nine Months Ended September 30, 2001 and 2000...........4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2001 and 2000............................5
Notes to Unaudited 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 ...24
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................II-1
Signatures...............................................................II-2
3
PART I - ITEM 1
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
At September 30, At December 31,
2001 2000
------------------ ------------------
Assets
------
Cash and due from banks $ 34,127,839 $ 25,933,462
Federal funds sold 70,201,888 58,302,921
Interest-bearing deposits 1,337,042 39,987
Investments in debt and equity securities:
Available for sale, at estimated fair value 36,481,254 50,569,333
Held to maturity, at amortized cost 218,317 521,280
(estimated fair value of $219,160 at September 30,
2001 and $519,442 at December 31, 2000)
Other investments 2,262,550 2,262,550
------------------ ------------------
Total investments in debt and equity securities 38,962,121 53,353,163
------------------ ------------------
Loans held for sale 1,479,837 945,095
Loans, less unearned loan fees 638,658,163 556,792,591
Less allowance for loan losses 7,304,509 7,096,544
------------------ ------------------
Loans, net 631,353,654 549,696,047
------------------ ------------------
Other real estate owned 48,000 76,680
Fixed assets, net 9,778,204 8,792,020
Accrued interest receivable 3,562,115 4,258,710
Investment in Enterprise Merchant Banc, LLC 2,295,137 2,326,422
Investment in Enterprise Fund, L.P. 583,057 576,664
Goodwill 2,135,179 2,278,104
Prepaid expenses and other assets 7,977,851 4,359,063
------------------ ------------------
Total assets $ 803,841,924 $ 710,938,338
================== ==================
Liabilities and Shareholders' Equity
------------------------------------
Deposits:
Demand $ 115,329,136 $ 105,649,983
Interest-bearing transaction accounts 55,826,079 61,314,029
Money market accounts 313,651,616 271,060,782
Savings 8,303,688 7,326,217
Certificates of deposit:
$100,000 and over 95,522,501 84,535,714
Other 126,362,811 102,550,712
------------------ ------------------
Total deposits 714,995,831 632,437,437
Guaranteed preferred beneficial interests in
EBH-subordinated debentures 11,000,000 11,000,000
Federal Home Loan Bank advances 14,901,022 9,965,899
Federal funds purchased -- 1,225,000
Notes payable 1,500,000 --
Accrued interest payable 1,498,970 1,687,288
Accounts payable and accrued expenses 2,084,274 1,138,931
------------------ ------------------
Total liabilities 745,980,097 657,454,555
------------------ ------------------
Shareholders' equity:
Common stock, $.01 par value; authorized
20,000,000 shares; issued and outstanding
9,254,496 shares at September 30, 2001 and
9,072,521 shares at December 31, 2000 92,545 90,725
Surplus 37,157,365 35,840,371
Retained earnings 20,346,268 17,418,811
Accumulated other comprehensive income 265,649 133,876
------------------ ------------------
Total shareholders' equity 57,861,827 53,483,783
------------------ ------------------
Total liabilities and shareholders'equity $ 803,841,924 $ 710,938,338
================== ==================
- ----------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
4
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------ ------------------------------
2001 2000 2001 2000
------------------------------ -------------------------------
Interest income:
Interest and fees on loans $ 12,191,313 $ 12,759,978 $ 37,755,020 $ 35,913,151
Interest on securities:
Taxable 472,121 939,545 1,798,199 2,547,825
Nontaxable 4,068 8,798 14,533 27,232
Interest on federal funds sold 506,496 837,913 1,297,431 2,208,701
Interest on interest-bearing deposits 6,213 553 14,630 927
-------------- -------------- -------------- --------------
Total interest income 13,180,211 14,546,787 40,879,813 40,697,836
-------------- -------------- -------------- --------------
Interest expense:
Interest-bearing transaction accounts 138,517 202,314 477,691 614,915
Money market accounts 2,309,575 3,575,317 7,972,964 9,430,163
Savings 40,409 46,971 131,841 136,509
Certificates of deposit:
$100,000 and over 1,279,653 1,331,305 4,020,654 3,276,953
Other 1,754,256 1,700,427 5,077,864 5,255,369
Other borrowed funds 209,567 124,460 558,278 405,454
Guaranteed preferred beneficial interests
in EBH-subordinated debentures 264,245 264,244 778,195 790,309
-------------- -------------- -------------- --------------
Total interest expense 5,996,222 7,245,038 19,017,487 19,909,672
-------------- -------------- -------------- --------------
Net interest income 7,183,989 7,301,749 21,862,326 20,788,164
Provision for loan losses 175,000 214,914 770,000 763,356
-------------- -------------- -------------- --------------
Net interest income after
provision for loan losses 7,008,989 7,086,835 21,092,326 20,024,808
-------------- -------------- -------------- --------------
Noninterest income:
Service charges on deposit accounts 319,375 291,532 932,750 886,470
Trust and financial advisory income 409,304 283,835 978,405 590,202
Gain on sale of trading security -- -- -- 500
Other service charges and fee income 119,900 261,704 316,357 527,887
Gain on sale of other real estate 12,630 -- 12,630 --
Gains on sale of mortgage loans 348,919 158,816 861,728 353,607
Gains on sale of securities -- -- 82,246 --
Income (loss) from investment in
Enterprise Merchant Banc, LLC (10,683) 55,813 (34,392) 79,648
Income from investment in
Enterprise Fund, L.P. 5,590 326 6,393 28,102
-------------- -------------- -------------- --------------
Total noninterest income 1,205,035 1,052,026 3,156,117 2,466,416
-------------- -------------- -------------- --------------
Noninterest expense:
Salaries 3,389,674 2,818,623 9,867,025 7,848,513
Payroll taxes and employee benefits 691,218 625,193 2,042,948 1,731,222
Occupancy 418,459 384,791 1,216,465 1,143,939
Furniture and equipment 254,629 126,795 716,399 511,093
Data processing 273,171 344,853 812,074 699,164
Amortization of goodwill 47,642 47,642 142,925 142,924
Other 1,379,668 1,506,135 3,945,051 4,410,017
-------------- -------------- -------------- --------------
Total noninterest expense 6,454,461 5,854,032 18,742,887 16,486,872
-------------- -------------- -------------- --------------
Income before income tax
expense 1,759,563 2,284,829 5,505,556 6,004,352
Income tax expense 713,120 862,400 2,163,824 2,298,164
-------------- -------------- -------------- --------------
Net income $ 1,046,443 $ 1,422,429 $ 3,341,732 $ 3,706,188
============== ============== ============== ==============
- ---------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements
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5
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited) continued
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
2001 2000 2001 2000
------------------------------- -------------------------------
Per share amounts
Basic earnings per share $ 0.11 $ 0.16 $ 0.36 $ 0.41
Basic weighted average common shares
outstanding 9,249,804 8,989,253 9,182,260 8,966,252
Diluted earnings per share $ 0.11 $ 0.15 $ 0.35 $ 0.38
Diluted weighted average common
shares outstanding 9,645,722 9,639,253 9,613,331 9,664,094
- ---------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements
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ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------------- --------------------------------
2001 2000 2001 2000
-------------------------------- --------------------------------
Net income $ 1,046,443 $ 1,422,429 $ 3,341,732 $ 3,706,188
Other comprehensive income, before tax
Realized and unrealized gain (loss)
arising during the period, net of tax 102,145 (263,955) 186,055 178,218
Less: reclassification adjustment for
realized gains included in net
income, net of tax -- -- 54,282 --
-------------- -------------- -------------- --------------
Total other comprehensive income (loss),
net of tax 102,145 (263,955) 131,773 178,218
-------------- -------------- -------------- --------------
Total comprehensive income $ 1,148,588 $ 1,158,474 $ 3,473,505 $ 3,884,406
============== ============== ============== ==============
- ----------------------------------------------
See accompanying notes to unaudited consolidated financial statements
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7
ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Nine months ended September 30,
2001 2000
---------------- -----------------
Cash flows from operating activities:
Net income $ 3,341,732 $ 3,706,188
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,202,782 1,018,142
Provision for loan losses 770,000 763,356
Proceeds from sale of trading security -- 910,500
Gain on sale of trading security -- (500)
Net accretion of debt and equity securities (55,312) (201,246)
Gain on sale of available for sale investment securities (82,246) --
Income from investment in Enterprise Fund, L.P. (6,393) (28,102)
Loss (income) from investment in Enterprise Merchant Banc, LLC 34,392 (79,648)
Mortgage loans originated (64,257,678) (29,391,565)
Proceeds from mortgage loans sold 64,584,664 29,695,213
Gain on sale on mortgage loans (861,728) (353,607)
Noncash compensation expense attributed to stock option grants 145,249 --
Decrease (increase) in accrued interest receivable 696,595 (715,073)
(Decrease) increase in accrued interest payable (188,318) 641,989
(Increase) in receivable from Enterprise Merchant Banc, LLC (1,500,000) --
Other, net (1,441,385) 309,818
---------------- -----------------
Net cash provided by operating activities 2,382,354 6,275,465
---------------- -----------------
Cash flows from investing activities:
Increase in interest-bearing deposits (1,297,055) (13,996)
Purchases of available for sale debt securities (51,486,799) (26,041,235)
Purchases of available for sale equity securities -- (332,200)
Purchase of held to maturity debt securities 101,195) --
Proceeds from sale of available for sale debt and equity securities 2,517,209 804,187
Proceeds from maturities and principal paydowns on available for
sale debt and equity securities 63,375,375 7,881,860
Proceeds from maturities and principal paydowns on held to maturity
debt securities 400,000 150,000
Proceeds from sale of other real estate 313,630 30,000
Net increase in loans 82,550,389) (54,302,209)
Recoveries of loans previously charged off 98,832 55,006
Proceeds from sale of fixed assets 15,300 --
Purchases of fixed assets (2,058,618) (1,315,696)
Investment in Enterprise Merchant Banc, LLC (43,107) (1,635,888)
---------------- -----------------
Net cash used in investing activities (70,816,817) (74,720,171)
---------------- -----------------
Cash flows from financing activities:
Net increase in non-interest bearing deposit accounts 9,679,153 11,166,606
Net increase in interest bearing deposit accounts 72,879,241 62,529,897
Decrease in federal funds purchased (1,225,000) (1,300,000)
Paydowns of Federal Home Loan Bank advances (3,064,877) (1,137,963)
Proceeds from borrowings of Federal Home Loan Bank advances 8,000,000 --
Increase in notes payable 1,500,000 --
Cash dividends paid (414,275) (291,857)
Proceeds from the exercise of common stock options 1,173,565 491,753
---------------- -----------------
Net cash provided by financing activities 88,527,807 71,458,436
---------------- -----------------
Net increase in cash and cash equivalents 20,093,344 3,013,730
Cash and cash equivalents, beginning of year 84,236,383 74,179,316
---------------- -----------------
Cash and cash equivalents, end of year $ 104,329,727 $ 77,193,046
================ =================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 19,205,805 $ 19,267,683
Income taxes 3,218,300 3,168,194
================ =================
Noncash transactions:
Loans made to facilitate sale of other real estate owned 28,680 --
- ----------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
5
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ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
They do not include all information and footnotes required by accounting
principles generally accepted in the United States of America for complete
consolidated financial statements. The accompanying consolidated financial
statements of Enterbank Holdings, Inc. and subsidiaries (the "Company" or
"Enterbank") are unaudited and should be read in conjunction with the
consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
In the opinion of management, all adjustments consisting of normal
recurring accruals considered necessary for a fair presentation of the
results of operations for the interim periods presented herein have been
included. Operating results for the three and nine month periods ended
September 30, 2001 are not necessarily indicative of the results that may
be expected for any other interim period or for the year ending December
31, 2001. 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, 2000 have
been reclassified to conform to the 2001 presentation. Such
reclassifications had no effect on previously reported consolidated net
income or shareholders' equity.
(2) SEGMENT DISCLOSURE
To help the Company more effectively manage the
geographic areas in which it operates, management has taken a regional
management approach. The different geographic regions in which we operate
are evaluated separately on their individual performance, as well as their
contribution to the Company as a whole. The corporate, other, and
intercompany reclassifications includes the holding company, merchant
banking activities, trust preferred securities activities and intercompany
eliminations and reclassifications. The Company incurs general corporate
expenses and owns Enterprise Bank and Enterprise Merchant Banc, Inc.
Enterprise Merchant Banc, Inc. maintains 4.9% ownership in Enterprise
Merchant Banc, LLC, which offers merchant banking and venture capital
services. The majority of the activity for the Company occurs in Enterprise
Bank which includes the St. Louis Region and the Kansas Region. On
September 28, 2001, the Company completed the merger between its two
banking subsidiaries, Enterprise Bank and Enterprise Banking, N.A. with
Enterprise Bank (the "Bank") being the survivor of the merger. The Bank
provides 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, individual, 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 financial advisory
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. The St. Louis Region includes Enterprise Trust, which provides trust
and financial advisory services.
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9
The following are the financial results and balance sheet information for the
Company's operating segments as of and for the nine month periods ended
September 30, 2001 and 2000 (unaudited):
Corporate, other
St. Louis Kansas and intercompany
Region Region reclassification Total
----------------- ----------------- ----------------- -----------------
BALANCE SHEET INFORMATION:
AT SEPTEMBER 30, 2001
- ----------------------------
Investment securities $ 25,257,544 $ 13,704,577 $ -- $ 38,962,121
Loans, less unearned loan fees 505,720,398 132,937,765 -- 638,658,163
Total assets 630,661,760 165,941,831 7,238,333 803,841,924
Deposits 568,559,590 146,647,606 (211,365) 714,995,831
Shareholders' equity 48,124,417 14,756,235 (5,018,825) 57,861,827
================= ================= ================= =================
AT SEPTEMBER 30, 2000
- ----------------------------
Investment securities $ 44,068,130 $ 18,614,420 $ -- $ 62,682,550
Loans, less unearned loan fees 432,092,813 102,420,501 -- 534,513,314
Total assets 548,818,647 37,724,238 4,149,304 690,692,189
Deposits 498,192,992 119,414,877 (1,582,739) 616,025,130
Shareholders' equity 41,364,274 15,011,683 (5,248,061) 51,127,896
================= ================= ================= =================
7
10
Corporate, other
St. Louis Kansas and intercompany
Region Region reclassification Total
---------------- --------------- ------------------ ----------------
INCOME STATEMENT INFORMATION:
THREE MONTHS ENDED SEPTEMBER 30, 2001
- -----------------------------------------
Interest income $ 10,290,672 $ 2,889,539 $ -- $ 13,180,211
Interest expense 4,384,291 1,347,686 264,245 5,996,222
---------------- --------------- ------------------ ----------------
Net interest income 5,906,381 1,541,853 (264,245) 7,183,989
Provision for loan losses 150,000 25,000 -- 175,000
Noninterest income (loss) 957,675 252,453 (5,093) 1,205,035
Noninterest expense 4,515,406 1,396,651 542,404 6,454,461
---------------- --------------- ------------------ ----------------
Income (loss) before income tax expense 2,198,650 372,655 (811,742) 1,759,563
Income tax expense (benefit) 857,475 141,656 (286,011) 713,120
---------------- --------------- ------------------ ----------------
Net income (loss) $ 1,341,175 $ 230,999 $ (525,731) $ 1,046,443
================ =============== ================== ================
THREE MONTHS ENDED SEPTEMBER 30, 2000
- -----------------------------------------
Interest income $ 11,762,050 $ 2,784,737 $ -- $ 14,546,787
Interest expense 5,698,557 1,284,396 262,085 7,245,038
---------------- --------------- ------------------ ----------------
Net interest income 6,063,493 1,500,341 (262,085) 7,301,749
Provision for loan losses 159,914 55,000 -- 214,914
Noninterest income 633,348 180,927 237,751 1,052,026
Noninterest expense 4,037,567 1,216,064 600,401 5,854,032
---------------- --------------- ------------------ ----------------
Income (loss) before income tax expense 2,499,360 410,204 (624,735) 2,284,829
Income tax expense (benefit) 943,043 154,198 (234,841) 862,400
---------------- --------------- ------------------ ----------------
Net income (loss) $ 1,556,317 $ 256,006 $ (389,894) $ 1,422,429
================ =============== ================== ================
NINE MONTHS ENDED SEPTEMBER 30, 2001
- -----------------------------------------
Interest income $ 32,380,730 $ 8,499,083 $ -- $ 40,879,813
Interest expense 14,189,722 4,050,846 776,919 19,017,487
---------------- --------------- ------------------ ----------------
Net interest income 18,191,008 4,448,237 (776,919) 21,862,326
Provision for loan losses 650,000 120,000 -- 770,000
Noninterest income (loss) 2,512,230 671,886 (27,999) 3,156,117
Noninterest expense 13,420,566 4,123,668 1,198,653 18,742,887
---------------- --------------- ------------------ ----------------
Income (loss) before income tax expense 6,632,672 876,455 (2,003,571) 5,505,556
Income tax expense (benefit) 2,590,024 331,189 (757,389) 2,163,824
---------------- --------------- ------------------ ----------------
Net income (loss) $ 4,042,648 $ 545,266 $ (1,246,182) $ 3,341,732
================ =============== ================== ================
NINE MONTHS ENDED SEPTEMBER 30, 2000
- -----------------------------------------
Interest income $ 32,772,352 $ 7,925,484 $ -- $ 40,697,836
Interest expense 15,548,618 3,577,954 783,100 19,909,672
---------------- --------------- ------------------ ----------------
Net interest income 17,223,734 4,347,530 (783,100) 20,788,164
Provision for loan losses 558,356 205,000 -- 763,356
Noninterest income 1,534,264 571,194 360,958 2,466,416
Noninterest expense 11,373,660 3,245,576 1,867,636 16,486,872
---------------- --------------- ------------------ ----------------
Income (loss) before income tax expense 6,825,982 1,468,148 (2,289,778) 6,004,352
Income tax expense (benefit) 2,555,938 513,655 (771,429) 2,298,164
---------------- --------------- ------------------ ----------------
Net income (loss) $ 4,270,044 $ 954,493 $ (1,518,349) $ 3,706,188
================ =============== ================== ================
8
11
The St. Louis Region provided approximately 80% of the loans, deposits, and
assets for the Company as of September 30, 2001 and 2000. During the same
periods, the Kansas Region provided approximately 20% of the loans, deposits and
assets for the Company. In the St. Louis Region, loans increased $74 million, or
17%, while loans in the Kansas Region increased $31 million, or 30%, from
September 30, 2000 to September 30, 2001. Assets and deposits increased 15% and
14% in the St. Louis Region, respectively, and 20% and 23%, respectively, in the
Kansas Region from September 30, 2000 to September 30, 2001. The increase in
loans and deposits is attributed to the continued calling efforts of the
Company's relationship officers. Investment securities in the St. Louis Region
decreased $19 million, or 43%, while investment securities decreased $5 million,
or 26%, in the Kansas Region from September 30, 2000 to September 30, 2001. The
decrease in investment securities in both regions was the result of a liquidity
strategy to help facilitate and fund loan growth.
St. Louis Region's interest income decreased $1,471,378, or 13%, and interest
expense decreased $1,314,266, or 23%, for the three month period ended September
30, 2001 compared to the same period ended September 30, 2000. St. Louis Region
net interest income decreased $157,112, or 3%, during the three months ended
September 30, 2001 as compared to the same period in 2000. The decrease in
interest income and interest expense is a result of a dramatic decline in the
interest rate environment since December 2000. The Kansas Region experienced a
$104,802, or 4%, increase in interest income and a $63,290, or 5%, increase in
interest expense during the three month period ended September 30, 2001 compared
to the same period in 2000. The increase in interest income and interest expense
is a result of an increase in average balances outstanding in interest-earning
assets and interest-bearing liabilities partially offset by a dramatic decline
in the interest rate environment since December 2000. Net interest income
increased $41,512 in the Kansas Region during the three months ended September
30, 2001 as compared to the same period in 2000 or 3%. Noninterest income
increased $324,327, or 51%, in the St. Louis Region as a result of increased
activity in the trust and financial advisory services as well as gains on the
sale of mortgage loans during the three months ended September 30, 2001 as
compared to the same period in 2000. The Company made significant investments in
personnel and technology in the Kansas Region which resulted in a $180,587, or
15%, increase in noninterest expense during the three months ended September 30,
2001 as compared to the same period in 2000. The $477,839, or 12%, increase in
noninterest expense in the St. Louis Region was the result of the addition of
resources and infrastructure for continued growth during the three months ended
September 30, 2001 as compared to the same period in 2000. The corporate, other,
and intercompany reclassification segment provided a $5,093 loss in the
noninterest income category for the three months ended September 30, 2001, which
is a $242,844 decrease as compared to the same period in 2000. This decrease is
due to the recognition of a $175,000 nonrecurring merchant banking fee during
the nine months ended September 30, 2000 and a decrease in merchant banking
activity during 2001.
Interest income decreased $391,622, or 1%, and interest expense decreased
$1,358,896, or 9%, resulting in an increase in net interest income of $967,274
or 6%, for the St. Louis Region for the nine months ended September 30, 2001 as
compared to the same period in 2000. The decrease in interest income is a result
of a dramatic decline in the interest rate environment offset by an increase in
average balances outstanding in interest-earning assets. The decrease in
interest expense is a result of a dramatic decline in the interest rate
environment since December 2000 offset by an increase in average balances
outstanding in interest-bearing liabilities. During the same period, the Kansas
Region experienced an increase of $573,599, or 7%, and $472,892, or 13%, in
interest income and expense, respectively. The increase in interest income and
interest expense is a result of an increase in average balances outstanding in
interest-earning assets and interest-bearing liabilities partially offset by a
dramatic decline in the interest rate environment since December 2000. These
increases resulted in an increase of $100,707, or 2%, in net interest income for
the Kansas Region. Noninterest income increased $977,966, or 64%, in the St.
Louis Region as a result of increased activity in the trust and financial
advisory services as well as gains on the sale of mortgage loans during the nine
months ended September 30, 2001 as compared to the same period in 2000. The
Company made significant investments in personnel and technology in the Kansas
Region which resulted in a $878,092, or 27%, increase in noninterest expense
during the nine months ended September 30, 2001 as compared to the same period
in 2000. The $2,046,906, or 18%, increase in noninterest expense in the St.Louis
Region was the result of the addition of resources and infrastructure for
continued growth during the nine months ended September 30, 2001 as compared to
the same period in 2000. Noninterest expense was $1,198,653 and
9
12
$1,867,636 at the corporate, other, and intercompany reclassification segment
for the nine months ended September 30, 2001 and 2000, respectively. The
$668,983, or 36%, decrease in noninterest expense is a result of approximately
$500,000 in legal, accounting, travel, and other nonrecurring expenses related
to the merger completed in June 2000.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Readers should note that in addition to the historical information contained
herein, this Form 10-Q contains forward looking statements which are inherently
subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated by such statements. Factors that could cause
or contribute to such differences include, but are not limited to: the effect
that changes in interest rates and cost of funds have on earnings and assets,
the level of loan defaults and delinquencies, the ability to successfully grow
and realize profits from commercial banking operations and strategic non-banking
lines of business, concentrations of loans in two geographic areas, the ability
to retain key personnel, the degree and nature of competition, and changes in
government regulation of business, as well as those factors discussed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
INTRODUCTION
This 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, 2001 compared
to the three and nine month periods ended September 30, 2000 and the year ended
December 31, 2000. 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, 2000.
FINANCIAL CONDITION
Total assets at September 30, 2001 were $804 million, an increase of $93
million, or 13%, over total assets of $711 million at December 31, 2000. Loans
and leases, net of unearned loan fees, were $639 million, an increase of $82
million, or 15%, over total loans and leases of $557 million at December 31,
2000. The increase in loans is, in part, attributed to the Company's investment
in additional business development officers and the success of the Company's
relationship officers' efforts. Federal funds sold and investment securities
were $109 million, a decrease of $3 million, or 2%, from total federal funds
sold and investment securities of $112 million at December 31, 2000. The
decrease resulted primarily from the shift in earning assets from short-term
investments to loans during the first nine months of 2001.
Total deposits at September 30, 2001 were $715 million, an increase of $83
million, or 13%, over total deposits of $632 million at December 31, 2000.
Deposit growth is attributed to direct calling efforts of relationship officers.
Total shareholders' equity at September 30, 2001 was $58 million, an increase of
$5 million, or 9%, over total shareholders' equity of $53 million at December
31, 2000. The increase in equity is due to net income of $3.3 million for the
nine months ended September 30, 2001, and the exercise of incentive stock
options by employees and directors, less dividends paid to shareholders.
10
13
RESULTS OF OPERATIONS
Net income was $1,046,443 for the three month period ended September 30, 2001, a
decrease of 26% compared to net income of $1,422,429 for the same period in
2000. Net income was $3,341,732 for the nine month period ended September 30,
2001, a decrease of 10% compared to net income of $3,706,188 for the same period
in 2000. The decrease in net income for the three months ended September 30,
2001 is attributed to a decrease in the net interest margin precipitated by a
dramatic decline in the interest rate environment since December 2000. Basic
earnings per share for the three month periods ended September 30, 2001 and 2000
were $0.11 and $0.16, respectively. Diluted earnings per share for the three
month periods ended September 30, 2001 and 2000 were $0.11 and $0.15,
respectively. Basic earnings per share for the nine month periods ended
September 30, 2001 and 2000 were $0.36 and $0.41, respectively. Diluted earnings
per share for the nine month periods ended September 30, 2001 and 2000 were
$0.35 and $0.38, respectively.
NET INTEREST INCOME
Net interest income (on a tax equivalent basis)was $7.2 million, or 3.97%, of
average interest-earning assets, for the three months ended September 30, 2001,
compared to $7.3 million, or 4.58%, of average interest-earning assets, for the
same period in 2000. The $127,000 decrease in net interest income for the three
months ended September 30, 2001 as compared to the same period in 2000 was the
result of a decrease in interest rates of average interest-earning assets and an
increase in average interest-bearing liabilities offset by an increase in
average interest-earning assets and a decrease in the interest rates on average
interest-bearing liabilities. Average interest-earning assets for the three
months ended September 30, 2001 were $719 million, an $82 million, or 13%,
increase over $637 million, during the same period in 2000. The increase in
average interest-earning assets is attributed to the continued calling efforts
of the Company's relationship officers. The yield on average interest-earning
assets decreased to 7.28% for the three month period ended September 30, 2001
compared to 9.10% for the three month period ended September 30, 2000. The
decrease in asset yield was primarily due to a 350 basis point decrease in the
prime rate since December 2000 and a general decrease in the average yield on
loans and investment securities. Average interest-bearing liabilities increased
to $594 million for the three months ended September 30, 2001 from $536 million
for the same period in 2000. The increase in money market accounts and
certificates of deposit is attributed to continued calling efforts of the
Company's relationship officers. The cost of interest-bearing liabilities
decreased to 4.00% for the three months ended September 30, 2001 compared to
5.38% for the same period in 2000. This decrease is attributed mainly to
declines in market interest rates for all sources of funding.
We expect continued pressure on our interest rate spreads and net interest rate
margin for the fourth quarter as declines in the prime rate during the third
quarter are absorbed. Continued repricing of our funding sources over the next
six months should offset some of this negative impact on asset yields. In
addition, loan volume growth should continue and, with existing volumes, result
in greater net interest income for the remainder of the year.
11
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 interest spread and net interest rate margin for
the three month periods ended September 30, 2001 and 2000:
Three months ended September 30,
----------------------------------------------------------------------------------------
2001 2000
------------------------------------------------ --------------------------------------
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)
ASSETS
Interest-earning assets:
Loans (1)(2) $ 624,088 81.74% $ 12,212 7.76% $ 526,618 78.46% $ 12,786 9.66%
Taxable investments in debt
securities 34,448 4.51 472 5.44 58,933 8.78 940 6.34
Non-taxable investments in
debt securities(2) 262 0.03 6 9.32 676 0.10 13 7.85
Federal funds sold 59,784 7.83 506 3.36 51,203 7.63 838 6.51
Interest-bearing deposits 713 0.09 6 3.46 36 0.01 1 6.06
--------- --------- --------- --------- --------- ---------
Total interest-earning assets 719,295 94.20 13,202 7.28 37,466 94.98 14,578 9.10
Noninterest-earning assets:
Cash and due from banks 25,506 3.34 20,093 2.99
Fixed assets, net 9,586 1.26 8,205 1.22
Investment in Enterprise Mercahnt
Banc, LLC 2,293 0.30 1,755 0.26
Prepaid expenses and other assets 13,920 1.82 10,784 1.61
Allowance for loan losses (7,126) (0.92) (7,089) (1.06)
--------- --------- --------- ---------
Total assets $ 763,474 100.00% $ 671,214 100.00%
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 51,210 6.71% $ 138 1.07% $ 47,589 7.09% $ 202 1.69%
Money market accounts 289,333 37.90 2,310 3.17 262,718 39.14 3,575 5.41
Savings 7,878 1.03 40 2.04 7,251 1.08 47 2.58
Certificates of deposit 218,502 28.62 3,034 5.51 197,546 29.43 3,032 6.11
Borrowed funds 16,207 2.12 210 5.13 10,003 1.49 125 4.95
Guaranteed preferred beneficial
interests in EBH-subordinated
debentures 11,000 1.44 264 9.53 11,000 1.64 264 9.56
--------- --------- --------- --------- --------- ---------
Total interest-bearing liabilities 594,130 77.82 5,996 4.00 536,107 79.87 7,245 5.38
Noninterest-bearing liabilities:
Demand deposits 103,024 13.49 81,658 12.17
Other liabilities 8,825 1.16 2,973 0.44
--------- --------- --------- ---------
Total liabilities 705,979 92.47 620,738 92.48
Shareholders' equity 57,495 7.53 50,476 7.52
--------- --------- --------- ---------
Total liabilities and shareholders'
equity $ 763,474 100.00% 671,214 100.00%
========= ========= ========= =========
Net interest income $ 7,206 $ 7,333
========= =========
Net interest spread 3.28 3.72
Net interest margin(3) 3.97% 4.58%
========= ========
<FN>
(1) Average balances include non-accrual loans. The income on such loans is
included in interest but is recognized only upon receipt.Loan fees included
in interest income are approximately $307,000 and $217,000, for the
three months September 30, 2001 and 2000, respectively.
(2) Non-taxable income is presented on a fully tax-equivalent basis assuming
a tax rate of 34%.
(3) Net interest income divided by average total interest-earning assets.
</FN>
12
15
NET INTEREST INCOME
Net interest income, presented on a tax equivalent basis, was $21.9 million, or
4.30% of average interest-earning assets, for the nine months ended September
30, 2001, compared to $20.9 million, or 4.55% of average interest-earning
assets, for the same period in 2000. The $1,030,000 increase in net interest
income for the nine months ended September 30, 2001 as compared to the same
period in 2000 was the result of an increase in average interest-earning assets
and a decrease in the interest rates on average interest-bearing liabilities
offset by a decrease in the interest rates of average interest earning assets
and an increase in average interest-bearing liabilities. Average
interest-earning assets for the nine months ended September 30, 2001 were $681
million, a $68 million, or 11%, increase over $613 million during the same
period in 2000. 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 decreased to 8.04% for the nine month period ended
September 30, 2001 compared to 8.89% for the same period ended September 30,
2000. The decrease in asset yield was primarily due to a 350 basis point
decrease in the prime rate since December 2000 and a general decrease in the
average yield on loans and investment securities. Average interest-bearing
liabilities increased $51 million, or 10%, to $567 million, for the nine months
ended September 30, 2001 from $517 million for the same period in 2000. The
increase in interest-bearing transaction accounts, money market accounts and
certificates of deposit is attributed to continued calling efforts of the
Company's relationship officers. The cost of interest-bearing liabilities
decreased to 4.48% for the nine months ended September 30, 2001 compared to
5.15% for the same period in 2000. This decrease is attributed mainly to
declines in market interest rates for all sources of funding.
13
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 spread and rate margin for the nine
month periods ended September 30, 2001 and 2000:
Nine Months Ended September 30,
-------------------------------------------------------------------------------------------
2001 2000
----------------------------------------------- ------------------------------------------
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)
ASSETS
Interest-earning assets:
Loans (1)(2) $ 601,536 83.32% $ 37,814 8.40% $ 509,009 78.69% $ 36,010 9.45%
Taxable investments in debt
securities 37,354 5.17 1,798 6.44 54,793 8.47 2,548 6.21
Non-taxable investments in equity
securities(2) 326 0.05 22 9.03 712 0.11 41 7.67
Federal funds sold 41,526 5.75 1,297 4.18 8,368 7.48 2,209 6.10
Interest-bearing deposits 549 0.07 15 3.57 24 0.00 1 5.57
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets 681,291 94.36 40,946 8.04 612,906 94.75 40,809 8.89
Noninterest-earning assets:
Cash and due from banks 23,548 3.26 19,511 3.02
Fixed assets, net 9,285 1.29 8,197 1.27
Investment in Enterprise Merchant
Banc, LLC 2,287 0.32 968 0.15
Prepaid expenses and other assets 12,749 1.77 11,879 1.83
Allowance for loan losses (7,236) (1.00) (6,612) (1.02)
---------- ---------- ---------- ----------
Total assets $ 721,924 100.00% $ 646,849 100.00%
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing transaction
accounts $ 52,058 7.21% $ 478 1.23% $ 47,525 7.35% $ 615 1.73%
Money market accounts 277,713 38.47 7,973 3.84 246,159 38.06 9,430 5.12
Savings 7,525 1.04 132 2.34 7,058 1.09 137 2.59
Certificates of deposit 204,606 28.34 9,098 5.95 194,514 30.07 8,532 5.86
Borrowed funds 14,462 2.00 558 5.16 10,571 1.63 405 5.12
Guaranteed preferred beneficial
interestsin EBH-subordinated
debentures 11,000 1.52 778 9.46 11,000 1.70 791 9.59
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities 567,364 78.58 19,017 4.48 516,827 79.90 19,910 5.15
Noninterest-bearing liabilities:
Demand deposits 94,581 13.10 76,655 11.85
Other liabilities 3,865 0.55 4,054 0.63
---------- ---------- ---------- ----------
Total liabilities 665,810 92.23 597,536 92.38
Shareholders' equity 56,114 7.77 49,313 7.62
---------- ---------- ---------- ----------
Total liabilities & shareholders'
equity $ 721,924 100.00% $ 646,849 100.00%
========== ========== ========== ==========
Net interest income $ 21,929 $ 20,899
========== ==========
Net interest spread 3.56 3.74
Net interest margin(3) 4.30% 4.55%
======== ========
<FN>
(1) Average balances include non-accrual loans. The income on such loans
is included in interest but is recognized only upon receipt.Loan fees
included in interest income are approximately $996,000, and $820,000
for the nine months ended September 30, 2001, and 2000, respectively.
(2) Non-taxable income is presented on a fully tax-equivalent basis assuming
a tax rate of 34%.
(3) Net interest income divided by average total interest-earning assets.
</FN>
14
17
During the three months ended September 30, 2001, an increase in the average
volume of interest-earning assets resulted in an increase in interest income of
$9,805,000. Interest income decreased $11,181,000 due to a decrease in rates on
average interest-earning assets. Increases in the average volume of
interest-bearing demand deposits, savings and money market accounts, time
deposits and borrowed funds resulted in an increase in interest expense of
$3,488,000. Changes in interest rates on the average volume of interest-bearing
liabilities resulted in a decrease in interest expense of $4,737,000. The net
effect of the volume and rate changes associated with all categories of
interest-earning assets during the three months ended September 30, 2001 as
compared to the same period in 2000 was a decrease in interest income of
$1,376,000, while the net effect of the volume and rate changes associated with
all categories of interest-bearing liabilities was a decrease in interest
expense of $1,249,000.
During the nine months ended September 30, 2001 as compared to the same period
in 2000, an increase in the average volume of interest-earning assets resulted
in an increase in interest income of $6,559,000, offset by a decrease of
$6,422,000 due to a decrease in interest rates on interest-earning assets.
Increases in the average volume of interest-bearing demand deposits, savings and
money market accounts, borrowed funds, and guaranteed preferred beneficial
interests in EBH-subordinated debentures resulted in an increase in interest
expense of $2,325,000. Changes in interest rates on the average volume of
interest-bearing liabilities resulted in a decrease in interest expense of
$3,218,000. The net effect of the volume and rate changes associated with all
categories of interest-earning assets during the nine months ended September 30,
2001 as compared to the same period in 2000, increased interest income by
$137,000, while the net effect of the volume and rate changes associated with
all categories of interest-bearing liabilities was a decrease in interest
expense of $893,000.
The following table sets forth, on a tax-equivalent basis for the periods
indicated, a summary of the changes in interest income and interest expense
resulting from changes in yield/rates and volume:
2001 Compared to 2000
---------------------------------------------------------------------------
3 months ended September 30 9 months ended September 30
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------------ ------------------------------------
Volume(1) Rate(2) Net Volume(1) (Rate(2) Net
---------- ---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
Interest earned on:
Loans $ 9,422 $ (9,998) $ (576) $ 7,754 $ (5,950) $ 1,804
Taxable investments in debt
and equity securities (349) (119) (468) (897) 148 (749)
Nontaxable investments in debt
and equity securities (3) (20) 14 (6) (29) 10 (19)
Federal funds sold 745 (1,076) (331) (283) (629) (912)
Certificates of deposit 7 (2) 5 14 (1) 13
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets $ 9,805 $ (11,181) $ ( 1,370) $ 6,559 $ (6,422) $ 137
---------- ---------- ---------- ---------- ---------- ----------
Interest paid on:
Interest-bearing demand deposits $ (231) $ 189 $ (42) $ 84 $ (221) $ (137)
Money market rate deposits 3,277 (4,564) 1,287) 1,642 (3,099) (1,457)
Savings deposits 21 28) (7) 12 (17) (5)
Time deposits 1,232 (1,230) 2 437 129 566
Borrowed funds 80 5 85 150 3 153
Guaranteed preferred beneficial
interests in EBH-subordinated
debentures -- -- -- -- (13) (13)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 4,379 $ (5,628) $ (1,249) $ 2,325 $ (3,218) $ (893)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income (loss) $ 5,426 $ (5,552) $ (127) $ 4,234 $ (3,204) $ 1,030
========== ========== ========== ========== ========== ==========
<FN>
(1) Change in volume multiplied by yield/rate of prior period.
(2) Change in yield/rate multiplied by volume of prior period.
(3) Nontaxable investments in debt securities are presented on a fully
tax-equivalent basis assuming a tax rate of 34%.
NOTE: The change in interest due to both rate and volume has been allocated to
rate and volume changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
</FN>
15
18
PROVISION FOR LOAN LOSSES
The provision for loan losses was $175,000 and $770,000 for the three month and
nine month periods ended September 30, 2001, respectively, compared to $215,000
and $763,000 for the same periods in 2000. The Company had net chargeoffs of
$562,000 for the nine months ended September 30, 2001 compared to net charge
offs of $625,000 during the same period ended September 30, 2000. During May
2001, the Kansas Region restructured a $1.5 million commercial loan on
nonaccrual which resulted in a charge off of $270,000. This restructured loan
was approximately 41% of the charge offs during the nine months ended September
30, 2001. The Kansas Region specifically reserved for this loan relationship.
Two other loans were charged off for an additional amount of $287,000. These
three charged off commercial loans represent 84% of the total chargeoffs during
the nine months ended September 30, 2001. Loan growth remained strong during the
first nine months of 2001. The Company increased its allowance for loan losses
for the nine months ended September 30, 2001 by charging $770,000 to the
provision for loan losses.
The following table summarizes changes in the allowance for loan losses arising
from loans charged off and recoveries on loans previously charged off, by loan
category, and additions to the allowance that have been charged to the
provision:
Nine Months Ended
September 30,
-----------------------
2001 2000
--------- ---------
(Dollars in Thousands)
Allowance at beginning of year $ 7,097 $ 6,758
Loans charged off:
Commercial and industrial 166 630
Real estate:
Commercial 270 36
Construction -- --
Residential 167 --
Consumer and other 58 14
--------- ---------
Total loans charged off 661 680
--------- ---------
Recoveries of loans previously charged off:
Commercial and industrial 20 44
Real estate:
Commercial 26 5
Construction -- --
Residential 49 1
Consumer and other 4 5
--------- ---------
Total recoveries of loans previously charged off 99 55
--------- ---------
Net loans charged off 562 625
--------- ---------
Provision charged to operations 770 763
--------- ---------
Allowance at end of period $ 7,305 $ 6,896
========= =========
Average loans $ 601,536 $ 509,009
Ending total loans, less unearned loan fees $ 638,658 $ 534,513
Ending nonperforming loans $ 2,472 $ 1,984
Net charge offs to average loans (annualized) 0.12% 0.16%
Allowance for loan losses to total loans 1.14% 1.29%
The Company's credit management policies 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
16
19
process and subsequently tested in external audits and regulatory bank
examinations. The system requires rating all loans at the time they are made.
Adversely rated credits, including loans requiring close monitoring, which would
not normally be considered criticized credits by regulators, are included on a
monthly loan watch list. Loans may be added to the watch list for reasons which
are temporary and correctable, such as the absence of current financial
statements of the borrower or a deficiency in loan documentation. Other loans
are added whenever any adverse circumstance is detected which might affect the
borrower's ability to meet the terms of the loan. This could be initiated by the
delinquency of a scheduled loan payment, a deterioration in the borrower's
financial condition identified in a review of periodic financial statements, a
decrease in the value of the collateral securing the loan, or a change in the
economic environment in which the borrower operates. Loans on the watch list
require detailed loan status reports prepared by the responsible officer every
six months, which are then discussed in formal meetings with the Asset
Quality/Risk Management Area and the Executive Loan Committee. 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
Executive Loan Committee generally at the time of the formal quarterly watch
list review meetings.
Each month, management prepares a detailed list of loans on the watch list and
summaries of the entire loan portfolio categorized by risk rating. These are
coupled with an analysis of changes in the risk profiles of the portfolios,
changes in past due and non-performing loans and changes in watch list and
classified loans over time. In this manner, the overall increases or decreases
in the levels of risk in the portfolios are monitored continually. Factors are
applied to the loan portfolios for each category of loan risk to determine
acceptable levels of allowance for loan losses. These factors are derived
primarily from the actual loss experience. The calculated allowance for loan
losses required for the portfolios are then compared to the actual allowance
balances to determine the provision necessary to maintain the allowance for loan
losses 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. Additionally, the Company does
not have any concentrations of loans exceeding 10% of total loans which are not
otherwise disclosed in the loan portfolio composition table provided in the most
recent form 10-K. The Company does not have a material amount of
interest-bearing assets which would have been included in non-accrual, past due
or restructured loans if such assets were loans.
Management believes the allowance for loan losses is adequate to absorb probable
losses in the loan portfolio. While management uses available information to
recognize loan losses, future additions to the allowance for loan losses 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 loss and non-performing 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.
17
20
The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated:
September 30, December 31,
2001 2000
-------------- --------------
(Dollars in Thousands)
Non-accrual loans $ 1,215 $ 1,798
Loans past due 90 days or more
and still accruing interest -- 207
Restructured loans 1,257 --
-------------- --------------
Total nonperforming loans 2,472 2,005
Foreclosed property 48 77
-------------- --------------
Total non-performing assets $ 2,520 $ 2,082
============== ==============
Total assets $ 803,842 $ 710,938
Total loans, less unearned loan fees $ 638,658 $ 556,793
Total loans plus foreclosed property $ 638,706 $ 556,870
Nonperforming loans to loans 0.39% 0.36%
Nonperforming assets to loans plus
foreclosed property 0.39% 0.37%
Nonperforming assets to total assets 0.31% 0.29%
Currently, economic indicators suggest a business "slowdown" or even
"recession". Management has not yet seen any adverse trends in credit quality
but expects delinquencies and credit risk in the loan portfolio to increase over
the next few quarters in response to economic conditions. However, given our
underwriting standards and monitoring procedures, losses should remain minimal.
NONINTEREST INCOME
Noninterest income was $1,205,035 and $3,156,117 for the three month and nine
month periods ended September 30, 2001, respectively, compared to $1,052,026 and
$2,466,416 for the same periods in 2000. The increases are primarily attributed
to increases in trust and financial advisory income and increases in the gains
on the sale of mortgage loans. Trust and financial advisory income was $409,304
and $978,405 for the three and nine month periods ended September 30, 2001,
respectively, as compared to $283,835 and $590,202 for the same periods in 2000.
The increases in fees were the result of increased transaction-based fees and
assets under management at Enterprise Trust. Management expects fee growth to
continue throughout 2001. The gains on the sale of mortgage loans were $348,919
and $861,728 for the three month and nine month periods ended September 30,
2001, respectively, as compared to $158,816 and $353,607 for the same periods in
2000. The increases in these gains were due to a dramatic decrease in interest
rates during the first nine months of 2001, which spurred residential mortgage
loan refinancing and an increase in mortgage loans sold. Approximately 65% of
the mortgage gains were the result of refinanced loans. The Company generally
sells its mortgage loans and the related servicing rights to various third party
investors. The gains on sale of investment securities were $0 and $82,246 for
the three month and nine month periods ended September 30, 2001 as compared to
no gains during the same periods in 2000. The Company sold three investment
securities during the first six months of 2001 for liquidity purposes. These
increases were slightly offset by decreases in other service charges and fee
income. Other service charges and fee income were $119,900 and $316,357 for the
three month and nine month periods ended September 30, 2001, respectively, as
compared to $261,704 and $527,887 for the same periods in 2000. The decrease is
primarily attributed to a nonrecurring $175,000 merchant banking fee the Company
recognized in September of 2000. These increases were also offset by decreases
in the income from the Company's investment in Enterprise Merchant Banc, LLC
18
21
and the income on investment in Enterprise Fund, L.P. during the nine month
period ended September 30, 2001 as compared to the same period in 2000. Both of
these decreases were a result of decreased fee income earned by these businesses
during 2001 as compared to 2000.
NONINTEREST EXPENSE
Noninterest expense was $6.5 million and $18.7 million for the three month and
nine month periods ended September 30, 2001, respectively, compared to $5.9
million and $16.5 million for the same periods in 2000. The increases in
noninterest expense was primarily due to: 1) the investment in several new
business development officers in the St. Louis Region and additional management
in the Kansas Region; 2) increased commission-based activity and backroom
processing growth in trust and financial advisory services; 3) increased
commissions related to the sale of mortgage loans; and 4) normal increases
associated with continued growth. The Company also expanded its computer and
data processing infrastructure for the additional Kansas locations and
communication between the regions, which increased expenses. In April 2001, the
Company completed a computer system conversion to bring Enterprise Banking, N.A.
on the same core processing system utilized by Enterprise Bank. The computer
conversion, including fees to software vendors and training, increased
noninterest expenses by approximately $100,000 during the nine months ended
September 30, 2001 as compared to the same period in 2000. Other noninterest
expense was $1,379,668 and $3,945,051 for the three month and nine month periods
ended September 30, 2001, respectively, a decrease of $126,467, or 8%, and
$464,966, or 11%, compared to the three month and nine month periods ended
September 30, 2000. These decreases are attributed to the elimination of
nonrecurring corporate merger related expenses. During the nine months ended
September 30, 2000 the Company expensed approximately $500,000 in legal,
accounting, travel and other costs related to the merger completed in June 2000.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is provided by the Company's earning assets, including short-term
investments in federal funds sold, maturities in loan and investment portfolios,
and amortization of term loans, along with deposit inflows, and proceeds from
borrowings. At September 30, 2001 the loan to deposit ratio was 89%, as compared
to 88% at December 31, 2000. Federal funds sold and investment securities were
$109 million at September 30, 2001 as compared to $112 million at December 31,
2000. During the nine months ended September 30, 2001, the Company experienced
loan growth of $82 million and deposit growth of $83 million. This decrease in
the Company's liquidity position resulted in the utilization of maturing
investment securities and federal funds sold balances to fund loan growth. The
Company increased its Federal Home Loan Bank advances to $15 million at
September 30, 2001 from $10 million at December 31, 2000.
The Company closely monitors its current liquidity position and believes there
are sufficient backup sources of liquidity. As of September 30, the Company has
over $64 million available from the Federal Home Loan Bank of Des Moines under a
blanket loan pledge and $9 million from the Federal Reserve under a pledged loan
agreement. The Company also has access to over $36 million in overnight federal
funds purchased from various banking institutions. 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. For further discussion, see Item 3 on page
24.
19
22
CAPITAL ADEQUACY
Enterbank Holdings, Inc. and Enterprise Bank are subject to various regulatory
capital requirements administered by the federal and state banking agencies.
Failure to meet minimum requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, Enterbank Holdings, Inc. and Enterprise Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
Quantitative measures established by regulations to ensure capital adequacy
require Enterbank Holdings, Inc. and Enterprise Bank to maintain minimum amounts
and ratios of total and Tier I capital (as defined in the regulations) to
risk-weighted assets, and of Tier I capital to average assets. Management
believes, as of September 30, 2001, that Enterbank Holdings, Inc. and Enterprise
Bank were each well capitalized.
As of September 30, 2001, the most recent notification from the Company's
primary regulator categorized Enterbank Holdings, Inc. and Enterprise Bank as
well capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, Enterbank Holdings, Inc. and Enterprise Bank
must maintain minimum total risk-based, Tier I risk-based and Tier I leverage
ratios as set forth in the following table.
20
23
At September 30, 2001 and December 31, 2000, the required and actual capital
ratios for Enterbank Holdings, Inc. and Enterprise Bank were as follows:
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------------------- --------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ------------ ------------ ------------ ------------ -----------
AT SEPTEMBER 30, 2001:
- ----------------------
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 73,765,508 11.24% $ 52,496,365 8.00% $ 65,620,456 10.00 %
Enterprise Bank 67,784,334 10.45 51,911,346 8.00 4,889,182 10.00
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 66,460,999 10.13% $ 26,248,182 4.00% $ 39,372,274 6.00 %
Enterprise Bank 60,479,825 9.32 25,955,673 4.00 38,933,509 6.00
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $ 66,460,999 8.71% $ 22,904,227 3.00% $ 38,173,712 5.00 %
Enterprise Bank 60,479,825 8.00 22,668,487 3.00 37,780,812 5.00
AT DECEMBER 31, 2000:
- ---------------------
Total Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 69,043,524 11.79% $ 46,859,325 8.00% $ 58,574,157 10.00 %
Enterprise Bank 61,205,313 10.54 46,446,857 8.00 58,058,571 10.00
Tier I Capital (to Risk Weighted Assets)
Enterbank Holdings, Inc. $ 62,071,803 10.60% $ 23,429,663 4.00% $ 35,144,494 6.00 %
Enterprise Bank 54,948,985 9.46 23,223,428 4.00 34,835,143 6.00
Tier I Capital (to Average Assets)
Enterbank Holdings, Inc. $ 62,071,803 9.41% $ 19,796,366 3.00% $ 32,993,943 5.00 %
Enterprise Bank 54,948,985 8.38 19,673,541 3.00 32,789,235 5.00
21
24
EFFECT OF INFLATION
Changes in interest rates may have a significant impact on a commercial bank's
performance because virtually all assets and liabilities of commercial banks are
monetary in nature. Interest rates do not necessarily move in the same direction
or in the same magnitude as the prices of goods and services. Inflation does
have an impact on the growth of total assets in the banking industry, often
resulting in a need to increase equity capital at higher than normal rates to
maintain an appropriate equity to asset ratio.
EFFECT OF IMPLEMENTING RECENTLY ISSUED ACCOUNTING STANDARDS
In September 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,
which replaces SFAS No. 125. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. The standards are based on the consistent application of
the financial components approach, whereupon after a transfer, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, and relieves financial liabilities when extinguished. This
Statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. This Statement
was effective for recognition and reclassification of collateral and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. A transfer of financial assets in which
the transferor surrenders control is accounted for as a sale to the extent that
consideration other than beneficial interests in the transferred assets is
received in exchange. This Statement requires that liabilities and derivatives
transferred be initially measured at fair value, if practicable. Servicing
assets and other retained interests in the transferred assets are to be measured
by allocating the previous carrying amount between the assets and retained
interests sold, if any, based on their relative fair values on the date of the
transfer. This Statement requires that servicing assets and liabilities be
subsequently measured by amortization in proportion to and over the period of
estimated net servicing income or loss, and assessment for asset impairment or
increased obligation based on their fair values. This Statement requires that a
liability be relieved if the debtor pays the creditor and is relieved of its
obligation for the liability, or the debtor is legally released from being the
primary obligor under the liability either judicially or by the creditor. The
implementation of this Statement did not have a material effect on the Company's
consolidated financial statements.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill. Statement 142 will
require that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of Statement 142. Statement 142 will also require
that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company is required to adopt the provisions of Statement 141 immediately and
Statement 142 effective January 1, 2002. Furthermore, any goodwill and any
intangible asset determined to have an indefinite useful life that are acquired
in a purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
the appropriate pre-Statement 142 accounting literature. Goodwill and intangible
assets acquired in business combinations completed before July 1, 2001 will
continue to be amortized prior to the adoption of Statement 142.
Upon adoption of Statement 142, Statement 141 will require that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination,and to make any necessary reclassifications
in
22
25
order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.
In connection with the transitional goodwill impairment evaluation, Statement
142 will require the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this the Company must identify its reporting units and determine the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill and intangible assets, to those reporting units as of the
date of adoption. The Company will then have up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of it assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with Statement 141, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's statement of
earnings. Finally, any unamortized negative goodwill existing at the date
Statement 142 is adopted must be written off as the cumulative effect of a
change in accounting principle.
As of the date of adoption, the Company expects to have unamortized goodwill in
the amount of $2,087,000, no unamortized identifiable intangible assets, and no
negative goodwill, all of which will be subject to the transition provisions of
Statements 141 and 142. Amortization expense related to goodwill was $190,567
and $142,925 for the year ended December 31, 2000 and the nine months ended
September 30, 2001, respectively. Because of the extensive effort needed to
comply with adopting Statements 141 and 142, it is not practicable to reasonably
estimate the impact of adopting these Statements on the Company's consolidated
financial statements at the date of this report, including whether any
transitional impairment losses will be required to be recognized as the
cumulative effect of a change in accounting principle.
23
26
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
The Company's exposure to market risk is reviewed on a regular basis by the
Asset/Liability Committee. Interest rate risk is the potential of economic
losses due to future interest rate changes. These economic losses can be
reflected as a loss of future net interest income and/or a loss of current fair
market values. The objective is to measure the effect on net interest income and
to adjust the balance sheet to minimize the interest risk while at the same time
maximizing income. Management realizes certain risks are inherent and that the
goal is to identify and minimize those risks. Tools used by management include
the standard GAP report subject to different rate shock scenarios. At September
30, 2001, the rate shock scenario models indicated that annual net interest
income would change by less than 5% should rates rise or fall within 100 basis
points from their current level over a one year period. The Bank has no market
risk sensitive instruments held for trading purposes.
As the following table indicates, the Company is asset sensitive. In this
regard, a decrease in the general level of interest rates would have a negative
effect on the Company's net interest income as compared to the reduction in
interest expense created by the repricing of the smaller volume of interest
sensitive liabilities. Likewise, an increase in the general level of interest
rates would have a positive effect on net interest margin. Management is aware
of the consequences of being asset sensitive and will likely continue to remain
asset sensitive in the future.
24
27
The following tables present the scheduled maturity of market risk sensitive
instruments at September 30, 2001:
Beyond 5
Years or No
Stated
Year 1 Year 2 Year 3 Year 4 Year 5 Maturity Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
ASSETS
Securities $ 6,738 $ 2,940 $ 7,099 $ 3,783 $ 6,722 $ 11,680 $ 38,962
Interest-bearing
deposits 1,337 -- -- -- -- -- 1,337
Federal funds sold 70,202 -- -- -- -- -- 70,202
Loans 469,273 38,927 77,886 2,699 18,511 11,362 638,658
Loans held for sale 1,480 -- -- -- -- -- 1,480
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 549,030 $ 41,867 $ 84,985 $ 26,482 $ 25,233 $ 23,042 $ 750,639
=========== =========== =========== =========== =========== =========== ===========
LIABILITIES
Savings, NOW, money
market deposits $ 377,782 -- -- -- -- -- $ 377,782
Certificates of
deposit 190,185 $ 22,756 $ 6,528 $ 1,736 $ 680 -- 221,885
Guaranteed preferred
beneficial interest
in EBH-subordinated -- -- -- -- -- 11,000 11,000
debentures
Borrowed funds 6,021 1,300 5,300 1,000 435 845 14,901
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 573,988 $ 24,056 $ 11,828 $ 2,736 $ 1,115 $ 11,845 $ 625,568
=========== =========== =========== =========== =========== =========== ===========
Average
Interest
Rate for
Nine Months
Ended
Carrying September Estimated
Value 30, 2001 Fair Value
----------- ----------- -----------
ASSETS
Securities $ 38,962 6.46% $ 38,963
Interest-earning
deposits 1,337 3.57 1,337
Federal funds sold 70,202 4.18 70,202
Loans 638,658 8.40 640,846
Loans held for sale 1,480 1,480
----------- -----------
Total $ 750,639 $ 752,828
=========== ===========
LIABILITIES
Savings, NOW, money
market deposits $ 377,782 3.40% $ 377,782
Certificates of
deposit 221,885 5.95 224,906
Guaranteed preferred
beneficial interest
in EBH-subordinated 11,000 9.46 12,165
debentures
Borrowed funds 14,901 5.16 15,095
----------- -----------
Total $ 625,568 $ 629,948
=========== ===========
25
28
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a). Exhibits.
Exhibit
Number Description
------- -----------
11.1 (1) Statement regarding computation of per share earnings
(1) Filed herewith.
(b). During the three months ended September 30, 2001, there were no
reports filed on form 8-K.
II-1
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clayton, State of
Missouri on the 14th day of November 2001.
ENTERBANK HOLDINGS, INC.
By: /s/ Fred H. Eller
----------------------------------
Fred H. Eller
Chief Executive Officer
By: /s/ Frank H. Sanfilippo
----------------------------------
Frank H. Sanfilippo
Chief Financial Officer
II-2
1
EXHIBIT 11.1
STATEMENT REGARDING CALCULATION OF EARNINGS PER SHARE
Basic Diluted
EPS number EPS number Net Basic Diluted
of shares of shares Income EPS EPS
------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 2000 8,989,253 9,639,253 $1,422,429 $0.16 $0.15
THREE MONTHS ENDED SEPTEMBER 30, 2001 9,249,804 9,645,722 $1,046,443 $0.11 $0.11
Basic Diluted
------------ ------------
THREE MONTHS ENDED SEPTEMBER 30, 2000
Average Shares Outstanding 8,989,253 8,989,253
Options - Plan 1 15,978
Average Option Price $2.33
Total Exercise Cost $37,229
Shares Repurchased 2,314
Net Shares from Option - Plan 1 13,664
Options - Plan 2 204,287
Average Option Price $2.56
Total Exercise Cost $522,975
Shares Repurchased 32,503
Net Shares from Option - Plan 2 171,784
Options - Plan 3 549,670
Average Option Price $6.20
Total Exercise Cost $3,407,954
Shares Repurchased 211,806
Net Shares from Option - Plan 3 337,864
Options - Plan 4 50,313
Average Option Price $15.00
Total Exercise Cost $754,695
Shares Repurchased 46,905
Net Shares from Option - Plan 4 3,408
Options - EFA Non-qualified 85,500
Average Option Price $10.19
Total Exercise Cost $871,245
Shares Repurchased 54,148
Net Shares from Option - EFA Non-qualified 31,352
Options-CGB Qualified 167,828
Average Option Price $9.99
Total Exercise Cost $1,676,602
Shares Repurchased 104,201
Net Shares from Option -CGB Qualified 63,627
Options - CGB Non-qualified 83,246
Average Option Price $10.62
Total Exercise Cost $884,073
Shares Repurchased 54,945
Net Shares from Option - CGB Non-qualified 28,301
------------ ------------
Gross Shares 8,989,253 9,639,253
Price $16.09
1
2
EXHIBIT 11.1 (CONTINUED)
STATEMENT REGARDING CALCULATION OF EARNINGS PER SHARE
Basic Diluted
------------ ------------
THREE MONTHS ENDED SEPTEMBER 30, 2001
Average Shares Outstanding 9,249,804 9,249,804
Options - Plan 2 153,200
Average Option Price $2.64
Total Exercise Cost $404,448
Shares Repurchased 32,643
Net Shares from Option - Plan 2 120,557
Options - Plan 3 527,903
Average Option Price $6.75
Total Exercise Cost $3,563,345
Shares Repurchased 287,598
Net Shares from Option - Plan 3 240,305
Options - Plan 4 425,860
Average Option Price $13.03
Total Exercise Cost $5,548,956
Shares Repurchased 447,858
Net Shares from Option - Plan 4 --
Options - EFA Non-qualified 85,500
Average Option Price $10.19
Total Exercise Cost $871,245
Shares Repurchased 70,318
Net Shares from Option - EFA Non-qualified 15,182
Options-CGB Qualified 59,825
Average Option Price $10.53
Total Exercise Cost $629,957
Shares Repurchased 50,844
Net Shares from Option -CGB Qualified 8,981
Options - CGB Non-qualified 72,961
Average Option Price $10.54
Total Exercise Cost $769,009
Shares Repurchased 62,067
Net Shares from Option - CGB Non-qualified 10,894
------------ -----------
Gross Shares 9,249,804 9,645,722
Price $12.39
2
3
EXHIBIT 11.1 (CONTINUED)
STATEMENT REGARDING CALCULATION OF EARNINGS PER SHARE
Basic Diluted
EPS number EPS number Net Basic Diluted
of shares of shares Income EPS EPS
------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 2000 8,966,252 9,664,094 $3,706,188 $0.41 $0.38
NINE MONTHS ENDED SEPTEMBER 30, 2001 9,182,260 9,613,331 $3,341,732 $0.36 $0.35
Basic Diluted
------------ ------------
NINE MONTHS ENDED SEPTEMBER 30, 2000
Average Shares Outstanding 8,966,252 8,966,252
Options - Plan 1 25,292
Average Option Price $2.33
Total Exercise Cost $58,930
Shares Repurchased 3,418
Net Shares from Option - Plan 1 21,874
Options - Plan 2 207,470
Average Option Price $2.56
Total Exercise Cost $531,123
Shares Repurchased 30,808
Net Shares from Option - Plan 2 176,662
Options - Plan 3 550,456
Average Option Price $6.01
Total Exercise Cost $3,308,241
Shares Repurchased 191,893
Net Shares from Option - Plan 3 358,563
Options - Plan 4 16,893
Average Option Price $15.00
Total Exercise Cost $253,395
Shares Repurchased 14,698
Net Shares from Option - Plan 4 2,195
Options-EFA Non-qualified 84,504
Average Option Price $10.10
Total Exercise Cost $853,490
Shares Repurchased 49,506
Net Shares from Option - EFA Non-qualified 34,998
Options-CGB Qualified 170,225
Average Option Price $9.99
Total Exercise Cost $1,700,548
Shares Repurchased 98,640
Net Shares from Option-CGB Qualified 71,585
Options - CGB Non-qualified 83,246
Average Option Price $10.62
Total Exercise Cost $884,073
Shares Repurchased 51,280
Net Shares from Option - CGB Non-qualified 31,966
------------ --------------
Gross Shares 8,966,252 9,664,094
Price
$17.24
3
4
EXHIBIT 11.1 (CONTINUED)
STATEMENT REGARDING CALCULATION OF EARNINGS PER SHARE
Basic Diluted
------------ --------------
NINE MONTHS ENDED SEPTEMBER 30, 2001
Average Shares Outstanding 9,182,260 9,182,260
Options - Plan 2 161,738
Average Option Price $2.62
Total Exercise Cost $423,754
Shares Repurchased 33,106
Net Shares from Option - Plan 2 128,632
Options - Plan 3 532,278
Average Option Price $6.64
Total Exercise Cost $3,534,326
Shares Repurchased 276,119
Net Shares from Option - Plan 3 256,159
Options - Plan 4 257,148
Average Option Price $13.83
Total Exercise Cost $3,556,357
Shares Repurchased 277,840
Net Shares from Option - Plan 4 --
Options-EFA Non-qualified 85,500
Average Option Price $10.19
Total Exercise Cost $871,245
Shares Repurchased 68,066
Net Shares from Option - EFA Non-qualified 17,434
Options-CGB Qualified 73,801
Average Option Price $10.27
Total Exercise Cost $757,936
Shares Repurchased 59,214
Net Shares from Option-CGB Qualified 14,587
Options - CGB Non-qualified 74,388
Average Option Price $10.56
Total Exercise Cost $785,537
Shares Repurchased 61,370
Net Shares from Option - CGB Non-qualified 13,018
Stock Appreciation Rights 99,291
Average Stock Appreciation Rights Price $12.64
Total Exercise Cost $1,255,038
Shares Repurchased 98,050
Net Shares from Stock Appreciation Rights 1,241
------------ --------------
Gross Shares 9,182,260 9,613,331
Price $12.80
4