-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O/NI3OW9U/Kk2PA1D8H2kibvKXB+fRVQCwrYJileonMYJH7/oe2jFl70MTpyqy+z YukUT0ejSMmt15iHNEmEjQ== 0000950114-96-000336.txt : 19961210 0000950114-96-000336.hdr.sgml : 19961210 ACCESSION NUMBER: 0000950114-96-000336 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19961209 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERBANK HOLDINGS INC CENTRAL INDEX KEY: 0001025835 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 431706259 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-14737 FILM NUMBER: 96677719 BUSINESS ADDRESS: STREET 1: 150 NORTH MERAMEC STREET 2: P O BOX 16020 CITY: CLAYTON STATE: MO ZIP: 63105 BUSINESS PHONE: 3147255500 MAIL ADDRESS: STREET 1: 150 NORTH MERAMEC STREET 2: P O BOX 16020 CITY: CLAYTON STATE: MO ZIP: 63105 S-1/A 1 ENTERBANK HOLDINGS, INC. AMENDMENT NO. 1 TO FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996. REGISTRATION NO. 333-14737. ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ENTERBANK HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 6711 43-1706259 (State or other jurisdiction (Primary standard (I.R.S. employer of incorporation industrial classification identification or organization) code number) number) 150 NORTH MERAMEC P.O. BOX 16020 CLAYTON, MISSOURI 63105 (314) 725-5500 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) JOSEPH D. GAREA CHIEF FINANCIAL OFFICER ENTERBANK HOLDINGS, INC. 150 NORTH MERAMEC P.O. BOX 16020 CLAYTON, MISSOURI 63105 (314) 725-5500 (Name, address, including zip code, and telephone number, including area code, of agent for service of process) ------------------------ Copy to: Joseph T. Porter, Jr. Polsinelli, White, Vardeman & Shalton, P.C. 100 S. Fourth St., Ste. 1110 St. Louis, MO 63102 (314) 231-1950 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under this Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 2 ENTERBANK HOLDINGS, INC. -------------------------- CROSS REFERENCE SHEET Pursuant to Item 501(b) of Regulation S-K showing the location in the Prospectus of information required by Items of Form S-1
Form S-1 Item Number and Heading Location in Prospectus - -------------------------------- ---------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Outside Back Cover Page 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges Prospectus Summary; The Company; Risk Factors 4. Use of Proceeds Use of Proceeds 5. Determination of Offering Price Outside Front Cover Page; Risk Factors; Underwriting 6. Dilution Dilution 7. Selling Security Holders Inapplicable 8. Plan of Distribution Outside Front Cover Page; Inside Front Cover Page; Plan of Distribution 9. Description of Securities to be Registered Description of Capital Stock 10. Interests of Named Experts and Counsel Inapplicable 11. Information with Respect to the Registrant Outside Front Cover Page; Inside Front Cover Page; Prospectus Summary; The Company; Risk Factors; Use of Proceeds; Dividends; Capitalization; Selected Consolidated Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Governmental Regulation; Management; Certain Transactions; Principal Shareholders; Description of Capital Stock; Shares Eligible for Future Sale; Plan of Distribution; Consolidated Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Inapplicable
3 PROSPECTUS ENTERPRISE [LOGO] BANKING ENTERBANK HOLDINGS, INC. 451,612 SHARES OF COMMON STOCK Enterbank Holdings, Inc., a Delaware corporation (the "Company"), is offering a maximum of 451,612 shares and a minimum of 193,548 shares of its $.01 par value common stock (the "Common Stock") for sale to prospective investors at $15.50 per share. The offering price has been determined solely by the Company without independent review by, or as a result of negotiation with, an investment banker. See "Description of Capital Stocks." Prior to this offering, there has been no public market for the Common Stock of the Company. An established public trading market is not expected to develop following the offering. The minimum subscription per subscriber under this offering is 650 shares costing $10,075. A total of 77,736 shares of the Common Stock included in this offering are being reserved for sale to certain directors of the Company and its subsidiary, Enterprise Bank. See "Plan of Distribution." THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PRELIMINARY PROSPECTUS. THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK, FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ============================================================================================================================
PRICE SALES PROCEEDS TO TO PUBLIC COMMISSION COMPANY - ---------------------------------------------------------------------------------------------------------------------------- Per Share............................................. $ 15.50 $0 $ 14.88 $ 15.23 - ---------------------------------------------------------------------------------------------------------------------------- Minimum Per Subscription $ 10,075 $0 $ 9,672 (650 Shares)......................................... $ 9,902 - ---------------------------------------------------------------------------------------------------------------------------- Total Minimum Offering (193,548 shares)..................................... $3,000,000 $0 $2,880,000 - ---------------------------------------------------------------------------------------------------------------------------- Total Maximum Offering (451,612 shares)..................................... $7,000,000 $0 $6,880,000 ============================================================================================================================ The Common Stock is being offered by the Company solely through the efforts of certain officers and directors of the Company when, as, and if issued by the Company. No commissions or other remuneration will be paid in connection with the sale of the Common Stock. (See "Plan of Distribution"). After deducting offering expenses estimated at approximately $120,000 payable by the Company. Based on proposed minimum offering. Based on proposed maximum offering.
The shares of Common Stock are being offered to the public by the Company on a "best efforts" basis solely through the efforts of certain officers and directors of the Company. Funds paid by subscribers will be deposited in an interest-bearing escrow account and will be promptly refunded with interest, and without deduction therefrom if 193,548 shares are not sold on or before January 28, 1997, or by the end of any extended date, up to an additional 120 days, if the Company elects to extend the offering time. See "Plan of Distribution". A subscriber has no right to withdraw his investment during the offering. These shares are being offered subject to prior sale, to acceptance of an offer to purchase by the Company, and to the right to reject any offer to purchase in whole or in part. In the event the offering is oversubscribed, the Company reserves the right to allocate the shares among the subscribers in any manner deemed appropriate by the Company in its sole discretion. THE DATE OF THIS PROSPECTUS IS DECEMBER --, 1996. Prior to this offering, the Company has not been a reporting company with the Securities and Exchange Commission. Subsequent to this offering, the Company intends to furnish, to the extent required by law, its security holders with annual reports containing financial statements and quarterly reports for the first three quarters of each fiscal year containing unaudited interim financial information. 4 The Company intends to furnish its shareholders with annual reports which include audited financial statements and an opinion thereon expressed by the Company's independent accountants and such other periodic reports as the Company may determine to be appropriate or as may be required by law. 5 PROSPECTUS SUMMARY ------------------ This summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and the Company's consolidated financial statements, including the accompanying notes, appearing elsewhere in this Prospectus. Prospective investors should consider carefully the information set forth under the heading "Risk Factors." THE COMPANY Enterbank Holdings, Inc. (together with its consolidated subsidiaries the "Company") is a one-bank holding company headquartered in St. Louis County, Missouri. The Company conducts its banking activities through its wholly-owned subsidiary, Enterprise Bank (the "Bank"). The Bank began operations in 1988 as a newly-formed financial institution and has grown rapidly. The bank holding company structure was added in 1995. The philosophy of the organization is to provide a complete range of financial services to closely-held businesses, their owners and employees, and to professional persons. The Company's target market area consists of the entire St. Louis metropolitan area, including the City of St. Louis, the Missouri counties of St. Louis, St. Charles, Jefferson, Franklin, Lincoln and Warren and the Illinois county of St. Clair. The Company's goal is to grow its operation within its defined market niche by being well managed, well capitalized, and disciplined in its approach to managing and expanding its operations as growth opportunities arise. The Company was incorporated under the laws of the State of Delaware and was formed for the purpose of becoming a holding company for the ownership of the Bank. The Company's principle executive offices are located at 150 N. Meramec, Clayton, Missouri 63105, and its telephone number is (314) 725-5500. FINANCIAL SUMMARY At September 30, 1996, the Company had approximately $160.8 million in assets, $129.7 million in loans, $145.6 million in deposits, and $14.3 million in Shareholders' equity. From 1991 to 1995, the Company's net income increased from $207,000 to $1.3 million and net income per share increased from $.14 to $.79. During the same period, return on average equity increased from 2.42% to 11.13%. From December 31, 1991 to December 31, 1995, the Company's net loans increased from $53.3 million to $110.5 million, total assets increased from $80.5 million to $153.7 million and total deposits increased from $71.4 million to $141.1 million. During this same period, the Company's non-performing loans to total loans decreased from 1.35% to .10%. 6 As displayed in the following graphs, the Company has experienced significant growth in Earnings Per Share, Net Income, and Total Assets over the past five years. [EARNINGS PER SHARE GRAPH] [NET INCOME GRAPH] [TOTAL ASSETS GRAPH] 2 7 The Offering Common Stock Offered 193,548 minimum - 451,612 maximum shares of Common Stock. Common Stock Outstanding After the Offering Maximum of 2,113,972 shares Use of Proceeds Of the $6,880,000 estimated net proceeds to the Company from the offering (assuming the sale of all 451,612 shares pursuant to the offering), approximately $6,580,000 will be used for general corporate purposes and the working and regulatory capital necessary to allow for the future growth and physical expansion of the Bank into the St. Charles County and Sunset Hills markets pursuant to the Bank's internal business plan. Approximately $300,000 will be used to retire the Company's bank debt. Risk Factors The securities offered hereby involve a high degree of risk and prospective purchasers should consider the factors discussed herein under "Risk Factors." Plan of Distribution The securities offered hereby are being offered solely by designated officers and directors of the Company. The Company has reserved in the aggregate up to 77,736 shares of Common Stock for sale to certain directors of the Company who previously have not been significant owners of the Company's common stock. See "Plan of Distribution." - ---------------- Does not include options to purchase 213,000 shares of common stock granted to officers and employees of the Company. See "Management - Stock Option Plans."
SUMMARY OF SELECTED FINANCIAL DATA The table on the following page summarizes selected financial data for the nine month periods ended September 30, 1996 and 1995, and for the years ended December 31, 1995, 1994, 1993, 1992 and 1991. For the interim period information presented, the information was summarized from the Company's internal accounting records. For the fiscal year period information presented, the information was summarized from the Company's independently audited financial statements and/or internal accounting records, as applicable. As discussed in Note 1 to the accompanying consolidated financial statements, on May 9, 1995, Enterbank Holdings, Inc. was formed as a bank holding company. Enterbank Holdings, Inc. exchanged 1,463,400 shares of Enterbank Holdings, Inc. common stock for all 73,170 (100%) of the outstanding shares of Enterprise Bank in a twenty-for-one stock exchange. The merger represented a combination of entities under common control and, accordingly, was accounted for in a manner similar to a pooling of interest. Therefore, results of operations for periods presented prior to May 9, 1995 reflect the results of operations of Enterprise Bank. Additionally, Enterprise Capital Resources, Inc. was formed as a small business investment company in 1995 and, on May 11, 1995, Enterbank Holdings, Inc. acquired 100% of the outstanding shares of Enterprise Capital Resources, Inc. 3 8 Summary of Selected Financial Data
(Unaudited) Nine Months Ended September 30, Year Ended December 31, ----------------- ----------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- (Dollars and number of shares in Thousands except per share data) STATEMENT OF INCOME DATA Interest income $ 9,108 $ 7,927 $ 10,914 $ 7,374 $ 5,770 $ 5,297 $ 5,583 Interest expense 3,990 3,511 4,887 2,570 2,083 2,355 3,126 Net interest income 5,118 4,416 6,027 4,804 3,687 2,942 2,457 Provision for possible loan losses 144 290 631 450 162 181 435 Net interest income after provision for possible loan losses 4,974 4,126 5,396 4,354 3,525 2,761 2,022 Noninterest income 780 608 836 805 744 652 683 Noninterest expense 3,696 3,237 4,187 3,551 3,106 2,623 2,370 Income before income tax expense 2,058 1,497 2,045 1,608 1,163 790 335 Income tax expense 792 587 741 607 411 285 128 Net income 1,266 910 1,304 1,001 752 505 207 Net income per common share 0.74 0.55 0.79 0.62 0.48 0.33 0.14 Cash dividends per common share $ 0.06 $ 0.05 $ 0.07 $ 0.06 $ 0.05 $ -- $ -- Weighted average common shares outstanding 1,497 1,463 1,463 1,461 1,460 1,460 1,460 BALANCE SHEET Cash and due from banks $ 7,029 $ 11,357 $ 8,110 $ 5,930 $ 4,872 $ 2,650 $ 3,091 Federal funds sold 5,625 25,280 16,230 11,300 10,125 9,450 12,275 Investments in debt securities: Available-for-sale 14,918 13,663 16,065 15,740 2,999 -- 6,149 Held-to-maturity 938 1,173 842 802 6,680 6,620 4,037 Total Investments 15,856 14,836 16,907 16,542 9,679 6,620 10,186 Loans, less unearned loan fees 129,721 97,698 110,464 85,687 72,215 57,553 53,380 Allowance for loan losses 1,555 1,290 1,400 1,000 722 606 565 Total assets 160,767 151,448 153,706 122,212 99,266 79,398 80,461 Total deposits 145,561 139,368 141,140 104,799 89,113 69,612 71,397 Notes payable 300 -- -- -- -- -- -- Shareholders' equity 14,323 11,677 12,052 10,781 9,943 9,264 8,759 Book value per common share 8.62 7.98 8.24 7.38 6.81 6.35 6.00 Tangible book value per common share $ 8.61 $ 7.97 $ 8.23 $ 7.38 $ 6.81 $ 6.34 $ 5.98 SELECTED RATIOS Return on average assets 1.15% 0.95% 0.99% 0.96% 0.84% 0.66% 0.32% Return on average equity 13.65 10.97 11.13 9.71 7.83 5.62 2.42 Total capital to risk-adjusted assets 10.84 11.07 10.27 10.75 13.16 14.65 15.80 Net yield on average earning assets 8.92 9.01 9.00 7.78 7.14 7.63 7.36 Cost of interest-bearing liabilities 4.85 4.90 4.94 3.36 3.11 4.10 6.28 Net interest margin 5.01 5.02 4.98 5.07 4.57 4.24 4.09 Nonperforming loans as a percent of loans 0.08 0.02 0.10 0.00 0.78 0.91 1.35 Nonperforming assets as a percent of assets 0.61 0.82 0.64 1.45 2.08 2.58 1.82 Net loan charge offs (recoveries) as a percent of average loans (0.01) 0.00 0.24 0.23 0.07 0.25 0.70 Allowance for possible loan losses as a percent of net loans 1.20 1.32 1.27 1.17 1.00 1.05 1.06 Leverage ratio 8.92% 7.73% 7.85% 8.89% 10.02% 11.66% 10.84%
4 9 RISK FACTORS ------------ In addition to the other information contained in this Prospectus, the following factors should be considered carefully in evaluating an investment in the shares of Common Stock offered hereby. DEPENDENCE ON SENIOR MANAGEMENT The Company's growth and development to date have been largely the result of contributions by the senior executive officers of the Company and its subsidiaries. The loss of the services of one or more of such individuals could have a material adverse effect on the Company's business and develop- ment. No assurance can be given that replacements for any of these officers could provide similar leadership if these officers' services were no longer available. The Company has not entered into any employment contracts with its executive officers or any other key personnel. The Company maintains key employee insurance on Fred H. Eller, President and Chief Executive Officer of the Company. See "Management." DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS Historically, the Company has limited the payment of dividends in order to retain earnings sufficient to support its growth. Therefore, it is not anticipated the Company will provide dividend yields competitive with those of its peers in the banking industry. Because the Company's principal business operations are conducted through the Bank, cash available to pay dividends is derived primarily, if not entirely, from dividends paid to it by the Bank. The Bank's ability to pay dividends to the Company and the Company's ability to pay dividends to Shareholders are subject to and limited by legal and regulatory restrictions. See "Dividends" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." ABSENCE OF PUBLIC MARKET Prior to this offering, there has been no public market for the Common Stock. Moreover, an established public trading market for the Common Stock is not expected to develop following the offering. Accordingly, it is likely the shares of Common Stock will not be readily marketable and the purchasers of stock through the offering may be required to bear the economic risk of the investment for an indefinite period of time and may not be able to readily liquidate their investment in the event of an emergency. DETERMINATION OF OFFERING PRICE The offering price of the Common Stock has been determined solely by the Company without independent review by, or as a result of negotiation with, an investment banker. The Board of Directors considered and analyzed many factors prior to establishing the price for shares of Common Stock pursuant to this offering. The primary source of the analysis was the performance and trends exhibited by the Company's primary asset, the Bank, including the historical earnings of the Bank, the strengths and weaknesses of its operation and loan portfolio, the development and growth of its customer base, the depth of management, the Bank's business plan and philosophy, projection of asset growth and earnings performance, an evaluation of comparable financial institution stock prices and the economy of its market area. Recent trading history of the Company's Common Stock was also reviewed where the price of the transfer was known. As such, the offering price may bear no relationship to the market price of the Common Stock after this offering. 5 10 CONTROL BY MANAGEMENT Following completion of this offering, the Company's and Bank's directors and executive officers will beneficially own and control in the aggregate approximately 37% of the outstanding shares of Common Stock, determined based upon completion of the minimum offering and the purchase by such officers and directors of only the 77,736 shares of Common Stock reserved for sale to certain directors. Therefore, to the extent they vote together, the directors and executive officers of both the Company and Bank will have the ability to exert significant influence over the election of the Company's Board of Directors and other corporate actions requiring shareholder approval. See "Beneficial Ownership of Securities," "Plan of Distribution - Shares Reserved for Sale" and "Description of Capital Stock." SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, the Company will have outstanding up to 2,113,972 shares of Common Stock, assuming the maximum number of shares are sold pursuant to the offering. Of these shares, 1,915,012 will be freely tradeable without restriction or further registration under the Securities Act, except for any shares purchased by affiliates of the Company, which shares will be subject to some or all of the resale limitations of Rule 144. Since an established public trading market for the Common Stock is not expected to develop following the offering, the sale of even a small number of shares of Common Stock following this offering, or the potential of such sales, could adversely affect the prevailing market price of the shares. See "Description of Capital Stock - Shares Eligible for Future Sale." DELAWARE LAW PROVISIONS The Company was organized under Delaware law and as a result has certain takeover defenses in place. Section 203 of the Delaware General Corporation Law prevents a business combination with an interested shareholder (an owner of 15% or more of the Company's outstanding voting stock) for a period of 3 years unless the Board of Directors gives prior approval to the transaction or prior approval by a supermajority (66 2/3%) of the outstanding voting stock not held by the interested shareholder. The Company did not elect in its original Certificate of Incorporation nor have the shareholders amended the Company's Certificate of Incorporation or bylaws, not to be governed by this Section. This may impede the takeover of the Company without the approval of the Board of Directors and may result in the Company being less attractive to potential acquirors. See "Description of Capital Stock - Certain Anti-Takeover Effects." CREDIT RISK; ADEQUACY OF ALLOWANCE FOR LOAN LOSSES There are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of the collateral. The Bank maintains an allowance for loan losses based upon several factors, including but not limited to, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Using such factors, the Bank makes various assumptions and judgments about the ultimate collectibility of the loan portfolio and provides an allowance for potential loan losses based upon a percentage of the aggregate outstanding balances of the entire portfolio and special allowances for specific loans when their ultimate collectibility is considered questionable. Although the Bank believes that its allowance for loan losses is adequate, there can be no assurance that the allowance will prove sufficient to cover future losses. Future adjustments may be necessary if economic conditions differ or adverse 6 11 developments arise with respect to the Bank's nonperforming or performing loans. Material additions to the Bank's allowance for loan losses would result in a material decrease in the Bank's net income and, possibly, its capital, and could result, among other consequences, in its inability to pay dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operation - Provision for Loan Losses." LOCAL ECONOMIC CONDITIONS The success of the Company and the Bank is dependent to a certain extent upon the general economic conditions in the St. Louis metropolitan area, particularly the conditions for entrepreneurial entities and small businesses which are the focus of the Bank's customer base. Although the Company expects that economic conditions will be favorable in this market, no assurance can be given that favorable economic conditions will continue. Adverse changes in economic conditions in the St. Louis metropolitan area could impair the Bank's ability to collect loans and could otherwise have a negative effect on the overall financial condition of the Company. See "Business - Market Areas and Approach to Expansion." COMPETITION The financial institution industry is highly competitive. The Bank competes with other financial intermediaries including commercial banks, savings and loan associations, credit unions, mortgage banking companies, securities brokerage companies, insurance companies, and money market mutual funds operating in Missouri and elsewhere. Many of these competitors have greater resources and lending limits than the Company and offer services that the Company does not currently provide. In addition, non-depository institution competitors are generally not subject to the extensive regulation applicable to the Company. Recently enacted federal legislation is pending which may permit commercial banks to establish operations nationwide, further increasing competition from out-of-state financial institutions. See "Supervision and Regulation." REGULATORY ENVIRONMENT The banking industry is heavily regulated. The success of the Company and the Bank depends not only on competitive factors but also on the cost of complying with state and federal regulations affecting banks, and bank holding companies. The Bank is subject to regulation and supervision by the Federal Deposit Insurance Corporation (the "FDIC") and the Missouri Division of Finance (the "Division of Finance"), while the Company is subject to regulation and supervision by the Board of Governors of the Federal Reserve System (the "FRB"). The burden imposed by federal and state regulations puts banks at a competitive disadvantage compared to lesser regulated competitors such as finance companies, mortgage banking companies and leasing companies. Banking industry regulations are primarily intended to protect depositors, not shareholders, and are undergoing continuous change. The ultimate effect of such changes cannot be predicted. In September 1994, the Community Development and Regulatory Improvement Act and the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 were enacted. Additional statutes affecting financial institutions have been proposed and may be enacted. Regulations now affecting the Company may be modified at any time. There is no assurance that the cost of complying with government regulations will not adversely affect the business and economic performance of the Company. See "Supervision and Regulation." 7 12 DILUTION Purchasers of the Common Stock offered hereby will experience an immediate substantial dilution of the net tangible book value per share from the public offering purchase price. See "Dilution." NO ASSURANCE AS TO SALE OF COMMON STOCK The offering requires a minimum of 193,548 shares to be sold, which means that no shares will be sold unless 193,548 shares are sold to the public. Accordingly, there is no assurance that the minimum number of shares will be sold. LACK OF DIVERSIFICATION As a bank holding company subject to federal and state regulation, the Company may not engage in businesses other than those approved by the Board of Governors of the Federal Reserve System as closely related to the business of banking. Thus, the Company will not have the benefit of reducing risks by diversifying among a broader portfolio of operating subsidiaries. ASSET/LIABILITY MANAGEMENT The Company's profitability depends to a great extent upon the Bank's level of net interest income, which is the difference between the interest income earned on loans and investments and the interest expense paid on deposits and other borrowings. Although the maturities of the Bank's assets are well balanced in relation to maturities of liabilities, the management of interest rate risk is an ongoing issue which must be addressed continuously to estimate changes in the general level of interest rates and the impact of such change on the yields earned on assets and the rates paid on liabilities. Rate changes can vary depending upon the level of rates and the competitive factors. If the maturities of assets and liabilities are not properly balanced, a rapid increase or decrease in interest rates could have an adverse effect on the net interest margins and results of operations of the Bank and the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Interest Rate Sensitivity". The results of operations of the Company are affected by the credit policies of monetary authorities, particularly the Federal Reserve. There can be no assurance that the effect of actions by monetary and fiscal authorities, including the Federal Reserve, will not have an adverse effect on the deposit levels, net interest margin, loan demand, or the business and earnings of the Company. THE COMPANY ----------- Enterbank Holdings, Inc. (the "Company"), was incorporated under the laws of the State of Delaware on December 30, 1994, and was formed for the sole purpose of providing a holding company structure for the ownership of Enterprise Bank, a Missouri banking corporation. The Company acquired Enterprise Bank (the "Bank") through a tax-free exchange by Bank shareholders in May 1995. The bank holding company ownership structure gives the Bank a source of capital and financial strength and allows the organization some flexibility in expanding the products and services offered to clients. The Bank began operation on May 9, 1988, as a newly formed and chartered Missouri financial institution. Commercial banking services have been provided to Bank customers from 8 13 a single location in the City of Clayton, St. Louis County, Missouri. There are plans to add additional facilities in the near future in St. Charles County and the Sunset Hills area of St. Louis County. The Company organized Enterprise Capital Resources, Inc. ("Capital Resources") in 1995 as a wholly-owned subsidiary to provide merchant banking services to closely-held businesses and their owners. Capital Resources has formed a wholly-owned subsidiary, Enterprise Capital Management, Inc. ("Capital Management"), which manages and acts as the general partner of The Enterprise Fund, L.P., a licensed Small Business Investment Company ("SBIC") under the regulations of the Small Business Administration providing venture capital to growing companies. As used herein, unless the context indicates otherwise, the term "Company" refers to Enterbank Holdings, Inc. Enterprise Bank is referred to herein as the "Bank". Enterbank Holdings, Inc. and all of its subsidiaries are referred collectively as the "Organization". The Company's executive offices are located at 150 North Meramec, Clayton, Missouri. The Company's telephone number is (314) 725-5500. USE OF PROCEEDS --------------- The net proceeds to the Company from the sale of the Common Stock, after deducting estimated expenses of the Offering, will be approximately $2,880,000 if the minimum number of shares are sold and $6,880,000 if the maximum number are sold. The Company intends to use the net proceeds of the offering as follows:
Minimum Maximum Approximate Percent Approximate Percent Use Amount of Total Amount of Total --- ------ -------- ------ -------- Retirement of debt $ 300,000 10.4% $ 300,000 4.4% General corporate purposes and working capital 2,580,000 89.6% 6,580,000 95.6% ---------- ---- ---------- ---- Total $2,880,000 100% $6,880,000 100%
The retirement of debt section relates to the current outstanding balance of the Company's $1,000,000 unsecured line of credit. This line of credit is a one-year revolving line of credit bearing interest at the lender's prime rate, currently 8.25%, and maturing April 23, 1997. A portion of the net proceeds will be used to retire the outstanding balance under such line of credit. The remaining net proceeds of the Offering will be used to strengthen the Company's capital base and in turn the Bank's capital base as the Company makes additional capital contributions to the Bank. The Bank requires additional capital from time to time to assure the Bank meets or exceeds required regulatory capital ratios. The business plan for the Company provides for future growth and expansion of the Bank by establishing facilities in St. Charles County and the Sunset Hills area of St. Louis County, and it is anticipated that the additional business generated by such facilities may require additional capital in order to assure that the Bank continues to meet or exceed such regulatory capital ratios. Pending such uses, the net proceeds will be invested in a variety of short-term assets, including federal funds, interest-bearing deposits in other banks, and similar investments. 9 14 CAPITALIZATION -------------- The following table sets forth the capitalization of the Company as of September 30, 1996 and the pro forma capitalization as of such date to give effect to the issuance of the minimum and maximum number of shares of Common Stock offered hereby and the application of the proceeds.
As Adjusted ------------ If 193,548 If 451,612 Actual at Shares Shares September 30, 1996 Are Sold Are Sold ------------------ -------- -------- Short-term debt $ 300,000 -- -- =========== ========== ========== Shareholders' equity: Common stock $ 16,624 18,559 21,140 Additional paid-in surplus 9,595,956 12,474,021 16,471,440 Retained earnings, net of unrealized losses on available for sale securities 4,710,725 4,710,725 4,710,725 ----------- ---------- ---------- Total Shareholders' equity $14,323,305 17,203,305 21,203,305 =========== ========== ==========
DILUTION -------- Purchasers of the Common Stock being offered hereby will pay $15.50 per share. As of September 30, 1996, the Company had an aggregate of 1,662,360 shares of Common Stock outstanding and a net tangible book value, as reflected on its balance sheet of $14,312,305 or $8.61 per share. "Net tangible book value per share" represents the Company's total tangible assets less its liabilities, divided by the number of shares of Common Stock outstanding. After giving pro forma effect to this Offering, the Company will have an aggregate of 2,113,972 shares of Common Stock outstanding (assuming the maximum 451,612 shares offered hereby are sold) and a net tangible book value of $21,192,305, or approximately $10.02 per share. As a result of the Company's shares being sold for an amount greater than the net tangible book value per share, new Shareholders will experience an immediate dilution in net tangible book value per share of Common Stock of $5.48 from the $15.50 per share purchase price, while the present Shareholders will receive an immediate increase in the net tangible book value of the Common Stock of $1.41 per share. Such dilution represents the difference between the public offering price per share and the book value per share immediately after completion of the offering. The increase in book value per share of Common Stock held by the current Shareholders would be solely attributable to the cash paid by new Shareholders for their Common Stock. In the event the Company sells only 193,548 shares, the Company will have an aggregate of 1,855,908 shares of Common Stock outstanding and a net tangible book value of $17,192,305, or approximately $9.26 per share. New Shareholders will experience an immediate dilution in net tangible book value per share of Common Stock of $6.24 from the $15.50 purchase price, while the present Shareholders 10 15 will receive an immediate increase in the net tangible book value of Common Stock of $0.65 per share. The following table illustrates such dilution in net tangible book value to new investors:
If 193,548 If 451,612 Shares Shares Are Sold Are Sold -------- -------- Price per share $15.50 $15.50 Net tangible book value per share before offering 8.61 8.61 Net tangible book value per share before offering assuming exercise of 176,200 outstanding vested options 8.32 8.32 Pro forma net tangible book value after offering 9.26 10.02 Pro forma net tangible book value after offering assuming exercise of 176,200 outstanding vested options 8.95 9.69
The following table summarizes, on a pro forma basis as of September 30, 1996, the number of shares of Common Stock previously purchased from the Company, the total consideration paid, and the average price paid per share by the existing Shareholders and by the new investors purchasing the shares of Common Stock offered hereby:
If 193,548 shares are sold. Shares Purchased Total Consideration Average Price Per Number Percent Amount Percent Share Existing Shareholders 1,662,360 89.6% $ 9,612,580 76.9% $ 5.78 New Investors 193,548 10.4 2,880,000 23.1 15.50 --------- ----- ----------- ----- Total 1,855,908 100.0% $12,492,580 100.0% ========= ===== =========== ===== If 451,621 shares are sold. Shares Purchased Total Consideration Average Price Per Number Percent Amount Percent Share Existing Shareholders 1,662,360 78.6% $ 9,612,580 58.3% $ 5.78 New Investors 451,612 21.4 6,880,000 41.7 15.50 --------- ----- ----------- ----- Total 2,113,972 100.0% $16,492,580 100.0% ========= ===== =========== ===== - ------------------------ Does not include total shares of Common Stock issuable upon exercise of options under the Company's Stock Option Plans. See "Management - Stock Option Plans."
11 16 BUSINESS -------- GENERAL The Company is a one-bank holding company headquartered in St. Louis County, Missouri. The Company conducts its banking activities through its wholly-owned subsidiary, Enterprise Bank (the "Bank"). Additionally, the Company operates other subsidiaries related to its merchant banking activities. STRATEGY The Company's strategy is to provide a complete range of financial services designed to appeal to closely-held businesses and their owners and employees, and to professional persons in the St. Louis metropolitan area, consisting of the City of St. Louis, Missouri, the Missouri counties of St. Louis, St. Charles, Jefferson, Franklin, Lincoln and Warren and the Illinois County of St. Clair. The Company's goal is to grow its operations within its defined market niche by being well-managed, well-capitalized, and disciplined in its approach to managing and expanding its operations as growth opportunities arise. The Company believes its goals for such growth can be accomplished while providing attractive returns on Shareholders' equity. Operations growth and return on Shareholders' equity are the financial measures the Company considers most critical in measuring success. The Company currently delivers a full range of commercial banking services to the closely-held business market through the Bank, which was founded in 1988. Merchant banking and venture capital services are conducted through the Company's subsidiaries, Enterprise Capital Resources, Inc. and Enterprise Capital Management, Inc. The Company began offering merchant banking and venture capital services in 1995. The Company plans to continue to expand the range of services it provides within its market niche while expanding the base of customers to which it provides its current services. THE BANK The Bank offers a broad range of commercial and personal banking services to its customers. Loans include commercial, commercial real estate, financial and industrial development, real estate construction and development, residential real estate and a small amount of consumer loans. Other services include merchant credit card processing services, cash management services, safe-deposit boxes, and lock boxes. The Bank does not have trust powers. Deposit services include certificates of deposit, checking and other demand deposit accounts, interest-bearing checking accounts, savings accounts, and money market accounts. The Bank provides ATM cards to its customers and encourages their use by allowing a number of transactions per month at no charge to the customer. Management believes that the Bank is able to compete effectively in its market because: (i) the Company's officers and senior management maintain close working relationships with their commercial customers and their businesses; (ii) the Bank's management structure enables it to react more quickly to customer requests for deposit services and loan requests than larger competitors; (iii) the Bank's management and officers have significant experience in the communities serviced by the Bank; (iv) the Company's focus on the closely-held business and professional market; and (v) industry consolidation has resulted in fewer independent banks and fewer banks serving the Bank's target market niche. Management believes that the Bank is the only bank in its market area whose primary strategy is to focus on closely-held businesses, and their owners and employees. 12 17 The Bank's historical growth strategy has been both customer and asset driven. The Bank continuously seeks to add customers that fit its target market. This strategy has enabled the Bank to attract customers whose borrowing needs have grown along with the Bank's increasing capacity to fund loan requests. Additionally, the Bank has increased its loan portfolio based on lending opportunities developed by calling officers, which meet the Bank's underwriting standards. The Bank funds its loan growth by attracting deposits from its business and professional customers and by attracting wholesale deposits which are considered stable deposit sources and which are priced at levels below the Bank's alternative cost of borrowing funds. The Bank has generally not advertised for deposits. The Bank's operating strategy results in efficient operating ratios despite its increasing investment in sales personnel whose goal is to expand the number and depth of the Bank's customer relationships. The Bank can expand its customer relationships and control operating costs by: (i) operating a small number of offices with a high per office asset base; (ii) emphasizing commercial loans which tend to be larger in size than retail loans; (iii) employing an experienced staff, all of whom are rewarded on the basis of sales and customer service; (iv) improving data processing and operational systems to increase productivity and control risk; (v) leasing facilities so that capital can be deployed more effectively to support growth in earning assets; and, (vi) outsourcing services where possible. The Bank has a strong orientation toward commercial banking, with a specific focus on closely-held businesses, and their owners and employees, and professionals located in its target service areas. The Bank stresses personal service, flexibility in structuring loans and deposit relationships to meet the customer's needs, and timely responsiveness to the needs of its customers. Senior management of the Bank makes it a practice to maintain close working relationships and personal contact with its commercial customers. The Bank's Board of Directors is comprised primarily of business owners and professionals who fit the target customer profile of the Bank. The Board of Directors takes an active role in the Bank's business development activities and the credit review process. Its input and understanding of the needs of the Bank's current and target customers is considered to be a critical factor in the Bank's past success and its plans for future growth. The Bank has historically had a low turnover of relationship officers, and its policy is to keep officers assigned to accounts for long periods of time. This practice improves each officer's understanding of clients' businesses and results in knowledgeable credit assessments and superior customer service. Relationship officers are supported by credit analysts and other support personnel who are familiar with each assigned customer, thus creating a team approach to serving a customer's needs. A significant portion of the Bank's new business results from referrals from existing customers. The Bank's growth in loans and profitability has been due in large measure to its strategy of targeting closely-held businesses, and to the business and personal relationships and long experience of the Bank's management and directors in the St. Louis community, rather than as a result of greater risk-taking or price concessions. The Bank's current legal lending limit is in excess of $3,000,000. Any loan request in excess of $400,000 requires approval by a committee of the Bank's Board of Directors. Loan requests in excess of $1,500,000 require approval by the Bank's full Board of Directors. As of September 30, 1996 the Bank had 21 customers with outstanding loans or unfunded commitments exceeding $1,000,000, but none in excess of $2,000,000. None of these large loans are considered by management to be problem credits. 13 18 Recent acquisitions and mergers in the St. Louis market have resulted in few remaining banks in the $100 million to $1 billion asset size and, in the belief of management, none whose primary focus is small and medium-sized commercial customers. Management believes that these conditions will continue into the foreseeable future and provide the basis for the Bank's continued growth in the coming years. Additionally, the Company plans to continue to expand the range of services it provides to both current and future customers who fit within its market niche. MARKET AREAS AND APPROACH TO EXPANSION The Company plans to expand its Bank operations using its current strategy and delivering its services to new business markets through new facilities located in areas of high growth for the Company's established market niche. As mentioned above, the Company believes that local management and the involvement of a Board of Directors comprised of local business persons and professionals are key ingredients for success. Management believes that credit decisions, pricing matters, business development strategies, etc. should be made locally by managers, all of whom either have or following the offering will have an equity stake in the Company, along with the Bank's Board of Directors. See "Management." The Company's plans to grow its St. Charles County and Sunset Hills units are built upon such local involvement and presence. The Company, as part of its expansion effort, plans to continue its strategies of operating a small number of offices with a high per office asset base, emphasizing commercial loans, and employing experienced staff who are rewarded on the basis of sales and customer service. The following is a list of the Bank's current and planned facilities:
Operating Unit Address - -------------- ------- Current - ------- Enterprise Bank, Clayton 150 North Meramec, Clayton, Missouri 63105 Planned - ------- Enterprise Bank, St. Charles 300 St. Peters Center Blvd., St. Peters, Missouri 63376 Enterprise Bank, Sunset Hills 3890 South Lindbergh Blvd., Sunset Hills, Missouri 63127 The St. Charles facility currently operates from a temporary facility located on the site of its permanent location. The facility can make loans, collect deposits, and offers substantially all of the products and services that will be offered from the Bank's permanent facility. The targeted opening date for the permanent facility is June of 1997. The lease for the planned office is contingent upon approval of the location by the Missouri Commissioner of Finance and the FDIC. The Sunset Hills facility is expected to be operational in July of 1997.
ENTERPRISE CAPITAL RESOURCES Enterprise Capital Resources, Inc. ("Capital Resources"), a wholly-owned subsidiary of the Company, was organized in 1995 to provide merchant banking services to closely-held businesses and their owners as part of the Company's overall strategy to deliver financial services to that market. 14 19 Operations to date have consisted of formation of a Small Business Investment Company (SBIC) which is managed by Enterprise Capital Management, Inc. ("Capital Management"), a wholly-owned subsidiary of Capital Resources, and, to a lesser extent, fee-based services related to capital formation and company acquisition. Capital Management acts as the general partner of The Enterprise Fund, L.P. ("Enterprise Fund"), a licensed SBIC formed in 1995 under the regulations of the Small Business Administration ("SBA"). The Enterprise Fund provides venture capital to growing companies in need of additional capital which qualify under the SBA's definition of a small business eligible for investment by an SBIC. The Enterprise Fund may also participate in certain qualifying management buy out situations involving companies eligible for investment by an SBIC. The Enterprise Fund began its operations in the fourth quarter of 1995. The Fund's committed capital is approximately $10 million, of which $1 million was committed by the Company as a limited partner. Capital Management collects annual management fees of 2% of committed capital, plus an incentive payment based upon the investment results achieved over the ten year life of Enterprise Fund. LENDING ACTIVITIES The Company provides a broad range of commercial and retail lending services, including commercial revolving lines of credit, residential and commercial real estate mortgage loans and, to a lesser extent, consumer loans. The Company's primary lending focus is on commercial loans to small and medium-sized businesses and professionals. At September 30, 1996, substantially all loans outstanding were to customers within the Company's market area. See "Business-Market Areas and Approach to Expansion." Interest rates charged on loans vary with the degree of risk, maturity, underwriting and servicing costs, loan amount, and extent of other banking relationships maintained with customers, and are further subject to competitive pressures, money market rates, availability of funds and government regulations. Approximately 73% of the loans in the Company's portfolio at September 30, 1996 had interest rates that float with the Company's base rate or some other reference rate. INVESTMENTS The Company's investment policy is designed to enhance net income and return on equity through prudent management of risk; to ensure liquidity for cash-flow requirements; to help manage interest rate risk; to ensure collateral is available for public deposits, advances and repurchase agreements; and to manage asset diversification. The Company, through its Asset/Liability Management Committee ("ALCO"), monitors investment activity and manages the Company's liquidity by structuring the maturity dates of the Company's investments to maintain necessary liquidity. However, the primary goal of the Company's investment policy is to maintain an appropriate relationship between assets and liabilities while maximizing interest rates spreads. Accordingly, the ALCO monitors the sensitivity of its assets and liabilities with respect to changes in interest rates and maturities and directs the overall acquisition and allocation of funds. DEPOSITS The Company's primary source of funds has historically been customer deposits. The Company offers a variety of accounts for depositors designed to attract both short-term and long-term deposits. These accounts include certificates of deposit, savings accounts, money market accounts, checking and negotiable order of withdrawal accounts and individual retirement accounts. Interest-bearing accounts earn interest at rates established by management based on competitive market factors and management's desire to increase or decrease certain types of maturities or deposits. 15 20 FACILITIES The Company's principal office is located at 150 N. Meramec, Clayton, Missouri 63105. This facility is leased under an agreement that expires in 1999. The operating lease for the Company's principal facility has options to renew the leases for additional periods with future rentals based upon increases in the consumer price index. The lease provides that the Company pay taxes, maintenance, insurance, and certain other operating expenses generally applicable to the leased premises. Rent expense, net of income from the sublet portions of premises, amounted to $202,784 and $200,125 and $180,844 in 1995, 1994, and 1993 respectively. The future minimum rental commitments required under the operating lease for 150 N. Meramec are as follows: 1996 $294,318 1997 307,068 1998 307,068 1999 102,356
The Company has signed preliminary leases for the Sunset Hills and St. Charles locations which are contingent upon obtaining regulatory approval for the facilities. Both of these buildings are currently under construction and are expected to be completed in mid 1997. The lease payments begin upon completion of the buildings and leasehold improvements. Annual rental expense for the Sunset Hills and St. Charles locations are expected to approximate $176,000 and $172,000 respectively. EMPLOYEES At September 30, 1996, the Company had approximately 58 employees, which included 53 full-time employees. None of the Company's employees is covered by a collective bargaining agreement and management believes that its relationship with its employees is good. 16 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- INTRODUCTION The following discussion and analysis is intended to review the significant factors of the financial condition and results of operations of the Company for the nine months ended September 30, 1996 and September 30, 1995, respectively, and the three-year period ended December 31, 1995. Reference should be made to those statements and the selected financial data presented elsewhere herein for an understanding of the following review. OVERVIEW Since its inception, the Company's objective has been to maximize its return on shareholders' equity and to retain earnings sufficient to support its growth strategy. From December 31, 1991 to September 30, 1996, the Company's shareholders' equity increased 62.5% from $8.8 million to $14.3 million with tangible book value per share increasing from $5.98 to $8.61. From December 31, 1991 to September 30, 1996, the Company's total assets increased 99.8% from $80.5 million to $160.8 million. During this same period, net income per share was $.14, $.33, $.48, $.62 and $.79, for the years ended December 31, 1991, 1992, 1993, 1994 and 1995, respectively and $.74 per share for the nine months ending September 30, 1996. From December 31, 1991 to September 30, 1996, the Company's outstanding loans increased by 142.5% from $53.4 million to $129.5 million. This significant increase has been primarily the result of the Company's focus on local relationship banking and emphasis on commercial lending to privately held businesses and professionals. NET INCOME ANALYSIS Net income for 1995 was $1,304,000 as compared to $1,001,000 for 1994 and $752,000 for 1993. The increase in net income for 1995 as compared to 1994 was due primarily to an increase in net interest income of $1,227,000, partially offset by a $636,000 increase in noninterest expense. The increase in net income for 1994 as compared to 1993 was primarily due to a $1,124,000 increase in net interest income, partially offset by a $445,000 increase in noninterest expense. The Company continues to realize the benefits from the economies of size associated with growth of its earning asset base. Net income was $1,266,000 as compared to $910,000 for the nine months ended September 30, 1996 and 1995, respectively. The earnings increase was due primarily to an increase in net interest income, loan fee income and noninterest expense control in relationship to asset growth. NET INTEREST INCOME The largest component of the Company's net income is its net interest income. Net interest income is the difference between interest income, principally from loans and investment securities, and interest expense, principally on customer deposits and borrowings. Changes in net interest income result from changes in volume, net interest spread and net interest margin. Volume refers to the average dollar levels of interest-earning assets and interest-bearing liabilities. Net interest spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Net interest margin refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities. The Company's net interest income increased by 25% to $6,041,000 during 1995 after an increase of 30% 17 22 in 1994. The net interest margin was 4.98% in 1995 as compared to 5.07% and 4.57% in 1994 and 1993, respectively. The decrease in the net interest margin during 1995 primarily resulted from the change in the mix of earning assets from higher yielding loans to lower yielding securities and federal funds sold. The Company's average loan to asset ratio decreased to 71.84% from 73.41% for 1995 and 1994, respectively. The Company also increased its average yield on earning assets from 7.78% in 1994 to 9.00% in 1995. For the same periods, the average cost of interest- bearing liabilities increased from 3.36% to 4.94%, primarily resulting from a general rise in the interest rate environment. The Company's average federal funds sold position increased from $8,603,000 in 1994 to $12,837,000 in 1995. This shift in asset mix further impacted the net interest margin. The increase in the net interest margin during 1994 versus 1993 primarily resulted from an overall increase in the level of interest rates. Additionally, the average yield on earning assets increased to 7.78% in 1994 versus 7.14% in 1993. This compares to an average yield of 3.36% in 1994, up from 3.11% in 1993 on interest-bearing liabilities. During 1995, an increase in the average volume of earning assets caused an increase in interest income of $2,146,000. Additionally, interest income increased $1,398,000 due to an increase in rates on earning assets. Increases in the average volume of interest-bearing demand deposits, savings and money market accounts, time deposits and federal funds purchased resulted in an increase in interest expense of $1,132,000. Changes in interest rates on the average volume of interest-bearing liabilities resulted in an increase in interest expense of $1,185,000. The net effect of the volume and rate changes associated with all categories in interest-earning assets during 1995 as compared to 1994 increased interest income by $3,544,000 while the net effect of the volume and rate changes associated with all categories of interest-bearing liabilities increased interest expense by $2,317,000. During 1994, increases in the average volume of all interest-earning assets resulted in an increase in interest income of $1,113,000. Changes in interest rates on the average volume of loans, investment securities, federal funds sold and other interest bearing assets resulted in an increase in interest income of $498,000. Increases in the average balances of all interest-bearing liabilities resulted in an increase in interest expense of $372,000. Changes in interest rates on the average volume of interest-bearing liabilities resulted in an increase in interest expense of $115,000. The net effect of the volume and rate changes associated with all categories of interest-earning assets during 1994 as compared to 1993 increased interest income by $1,611,000, while the net effect of the volume and rate changes associated with all categories of interest-bearing liabilities increased interest expense by $487,000. Net interest income was $5,118,076 for the first nine months of 1996, a 15.9% increase from the same period in 1995. Interest income increased $1,181,206 for the first nine months of 1996, and interest expense increased $479,231 as compared to the same period of 1995. These increases are primarily attributable to the increased volume of earning assets and interest-bearing deposits. The following table presents, on a tax equivalent basis for the periods indicated, certain information related to the Company's average balance sheet items or accounts and its average yield on assets and average cost of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from quarterly averages, which are indicative of daily averages. 18 23
Year Ended December 31, - ------------------------------------------------------------------------------------------------------------------------------- 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------- 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) Interest-earning assets: Loans $ 94,737 71.84% $ 9,394 9.92% $ 76,263 73.41% $6,612 8.67% Taxable investments in debt securities 13,093 9.93 745 5.69 9,407 9.06 369 3.92 Non-taxable investments in debt securities 687 0.52 42 6.11 561 0.54 33 5.88 Federal funds sold 12,837 9.73 745 5.80 8,603 8.28 367 4.27 Certificates of deposit 63 0.05 2 3.17 98 0.09 3 3.06 -------- ------ ------- ---- -------- ------ ------ ---- Total interest-earning assets 121,417 92.07 10,928 9.00 94,932 91.38 7,384 7.78 ------- ==== ------ ==== Noninterest-earning assets: Cash and due from banks 7,856 5.96 6,430 6.19 Office equipment and leasehold improvements 766 0.58 629 0.61 Prepaid expenses and other assets 3,025 2.30 2,773 2.67 Allowance for loan losses (1,196) (0.91) (879) (0.85) -------- ------ -------- ------ Total Assets $131,868 100.00% $103,885 100.00% ======== ====== ======== ====== Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing transaction accounts 14,002 10.62% 352 2.51% 14,226 13.69% 292 2.05% Money market 38,084 28.88 1,741 4.57 33,548 32.29 1,053 3.14 Savings 1,068 0.81 32 3.00 1,275 1.23 33 2.59 Certificates of deposit 45,669 34.63 2,760 6.04 27,440 26.41 1,190 4.34 Federal funds purchased 41 0.03 2 4.88 36 0.03 2 5.56 -------- ------ ------- ---- -------- ------ ------ ---- Total interest-bearing liabilities 98,864 74.97 4,887 4.94 76,525 73.65 2,570 3.36 ------- ==== ------ ==== Noninterest-bearing liabilities: Demand deposits 20,532 15.57 16,686 16.07 Other liabilities 755 0.57 369 0.36 -------- ------ -------- ------ Total Liabilities 120,151 91.11 93,580 90.08 Shareholders' equity 11,717 8.89 10,305 9.92 -------- ------ -------- ------ Total Liabilities and Shareholders' equity $131,868 100.00% $103,885 100.00% ======== ====== ======== ====== Net Interest Income $ 6,041 $4,814 ======= ====== Net Interest Margin 4.98% 5.07% ==== ==== Year Ended December 31, - ----------------------------------------------------------------------------------- 1993 - ----------------------------------------------------------------------------------- Percent Interest Average Average of Total Income Yield/ Balance Assets Expense Rate - ----------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Interest-earning assets: Loans $ 64,290 71.89% $ 5,211 8.11% Taxable investments in debt securities 7,667 8.57 295 3.85 Non-taxable investments in debt securities 101 0.11 8 7.92 Federal funds sold 8,357 9.35 243 2.91 Certificates of deposit 402 0.46 16 3.98 -------- ------ ------- ---- Total interest-earning assets 80,817 90.38 5,773 7.14 ------- ==== Noninterest-earning assets: Cash and due from banks 6,287 7.03 Office equipment and leasehold improvements 605 0.68 Prepaid expenses and other assets 2,396 2.67 Allowance for loan losses (682) (0.76) -------- ------ Total Assets $ 89,423 100.00% ======== ====== Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing transaction accounts 14,590 16.32% 371 2.54% Money market 30,976 34.64 883 2.85 Savings 740 0.83 22 2.97 Certificates of deposit 20,627 23.07 807 3.91 Federal funds purchased -- -- -- -- -------- ------ ------- ---- Total interest-bearing liabilities 66,933 74.86 2,083 3.11 ------- ==== Noninterest-bearing liabilities: Demand deposits 12,457 13.93 Other liabilities 426 0.48 -------- ------ Total Liabilities 79,816 89.27 Shareholders' equity 9,607 10.73 -------- ------ Total Liabilities and Shareholders' equity $ 89,423 100.00% ======== ====== Net Interest Income $ 3,690 4.57% ======= ==== Net Interest Margin - ------------------------ 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 $385,000, $293,000, and $295,000 for December 31, 1995, 1994, and 1993, respectively. Non-taxable investment income is presented on a fully tax-equivalent basis assuming a tax rate of 34%.
19 24 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:
Amount of Increase (Decrease) ------------------------------------------------------------- 1995 Compared to 1994 1994 Compared to 1993 Increase (Decrease) Due to Increase (Decrease) Due to ------------------------------------------------------------- Volume Rate Net Volume Rate Net ---------- -------- --- ---------- -------- --- (Dollars in Thousands) Interest earned on: Loans $1,746 $1,036 $2,782 $1,020 $ 381 $1,401 Taxable investments in debt securities 175 201 376 68 6 74 Non-taxable investments in debt securities 8 1 9 28 (3) 25 Federal funds sold 218 160 378 7 117 124 Certificates of deposit (1) -- (1) (10) (3) (13) ------ ------ ------ ------ ----- ------ Total interest-earning assets 2,146 1,398 3,544 1,113 498 1,611 ------ ------ ------ ------ ----- ------ Interest paid on: Interest-bearing transaction accounts (5) 65 60 (9) (70) (79) Money Market 157 531 688 77 93 170 Savings (6) 5 (1) 14 (3) 11 Certificates of deposit 986 584 1,570 288 95 383 Federal funds purchased -- -- -- 2 -- 2 ------ ------ ------ ------ ----- ------ Total interest-bearing liabilities 1,132 1,185 2,317 372 115 487 ------ ------ ------ ------ ----- ------ Net interest income $1,014 $ 213 $1,227 $ 741 $ 383 $1,124 ====== ====== ====== ====== ===== ====== - --------------- Change in volume multiplied by yield/rate of prior period. Change in yield/rate multiplied by volume of prior period. 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.
20 25 LOAN PORTFOLIO Loans, as a group, are the largest asset and the primary source of interest income for the Company. Diversification among different categories of loans reduces the risks associated with any single type of loan. The following table sets forth the composition of the Company's loan portfolio by type of loans at the dates indicated:
September 30, December 31, ------------------- -------------------------------------------------------------------- 1996 1995 1994 1993 ------------------------------------------------------------------------------------------- Percent Percent Percent Percent of Total of Total of Total of Total Amount Loans Amount Loans Amount Loans Amount Loans ------ ----- ------ ----- ------ ----- ------ ----- (Dollars in Thousands) Commercial and industrial $ 42,360 32.66% $ 43,728 39.59% $ 30,001 35.01% $ 30,896 42.78% Real estate: Commercial 23,918 18.43 25,507 23.09 22,333 26.06 16,746 23.19 Construction 23,940 18.46 11,634 10.53 10,186 11.89 7,638 10.58 Residential 36,013 27.76 24,537 22.21 21,483 25.07 16,109 22.31 Consumer and other 3,490 2.69 5,058 4.58 1,684 1.97 826 1.14 -------- ------ -------- ------ -------- ------ -------- ------ Total Loans $129,721 100.00% $110,464 100.00% $ 85,687 100.00% $ 72,215 100.00% ======== ====== ======== ====== ======== ====== ======== ======
The Company's subsidiary bank grants commercial, residential and consumer loans primarily in the St. Louis metropolitan area. The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio is secured by real estate. As of year end 1995, $61,678,000 in loans, or 56% of the loan portfolio, involved real estate as part or all of the collateral package. Of these loans, $23,533,000, or 38%, were personal and business loans and loans on owner-occupied properties. Management views these types of loans as having less risk than traditional real estate loans because the primary source of repayment for the loans is not dependent upon the cash flow or sale of the real estate securing the loans. When evaluating the appropriateness of the allowance for loan losses, these loans are evaluated based on commercial considerations such as the financial condition, cash flow and income of the borrower as well as the value of all collateral securing the loans, including the market value of any real estate securing the loan. 21 26 The following table sets forth the interest rate sensitivity of the loan portfolio at December 31, 1995:
Loans Maturing or Repricing ----------------------------------------------------- After One In One Year Through After or Less Five Years Five Years Total ------- ---------- ---------- ----- (Dollars in Thousands) FIXED RATE LOANS - ---------------- Commercial and industrial $ 2,606 $ 2,766 $ -- $ 5,372 Real estate: Commercial 2,218 5,131 13 7,362 Construction -- -- -- -- Residential 2,134 4,935 12 7,081 Consumer and other 112 3,168 -- 3,280 ------- ------- ------- -------- Total $ 7,070 $16,000 $ 25 $ 23,095 ======= ======= ======= ======== VARIABLE RATE LOANS - ------------------- Commercial and industrial $38,349 $ -- $ -- $ 38,439 Real estate: Commercial 18,149 -- -- 18,149 Construction 11,634 -- -- 11,634 Residential 17,459 -- -- 17,459 Consumer and other 1,778 -- -- 1,778 ------- ------- ------- -------- Total $87,369 $ -- $ -- $ 87,369 ======= ======= ======= ======== TOTAL LOANS - ----------- Commercial and industrial $40,955 $ 2,766 $ -- $ 43,721 Real estate: Commercial 20,367 5,131 13 25,511 Construction 11,634 -- -- 11,634 Residential 19,593 4,935 12 24,540 Consumer and other 1,890 3,168 -- 5,058 ------- ------- ------- -------- Total $94,439 $16,000 $ 25 $110,464 ======= ======= ======= ========
PROVISION FOR LOAN LOSSES The provision for loan losses charged to expense was $631,000, $450,000 and $162,000 in 1995, 1994 and 1993, respectively. Although the Company has not experienced significant loan losses with any one particular category or class of loans, management remains cognizant of the credit risks associated with the business and the Company's increase in loan volume. The Company has charged-off a total of $492,717 in principal from January 1, 1993 through September 30, 1996. Total recoveries for the same period are $54,820, resulting in historical net charge-off experience of $437,897. The allowance for loan losses is maintained at a level considered adequate to provide for potential losses. The provision for loan losses is based on a periodic analysis which considers, among other factors, current economic conditions, loan portfolio composition, past loan loss experience, independent appraisals, loan collateral and payment experience. In addition to the allowance for estimated losses on identified problem loans, an overall unallocated allowance is established to provide for unidentified credit losses inherent in the portfolio. As adjustments to the allowance for loan losses become necessary, they are reflected in the results of operations in the periods in which they become known. 22 27 Management believes the allowance for loan losses is adequate to absorb losses in the loan portfolio. While management uses available information to recognize loan losses, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses. Such agencies may require the Company to increase the allowance for 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-off experience during an extended period of rapid loan growth, management remains cognizant that historical loan loss and nonperforming asset experience may not be indicative of future results. If the experience were to deteriorate and additional provisions for loan losses were required, future operating results would be negatively impacted. Both management and the Board continually monitor changes in asset quality, market conditions, concentration of credit and other factors which impact the credit risk associated with the Company's loan portfolio. The provision for loan losses charged to operations was $144,000 for the nine months ended September 30, 1996 compared to $290,000 for the same period in 1995. The decrease in provision for loan losses resulted from an increase in the overall quality of the loan portfolio and net recoveries of $11,000. The allowance for loan losses increased $155,000 to $1,555,000 during the nine months ended September 30, 1996 to account for loan growth of $19 million and improved asset quality. During the same period, impaired loans decreased from $1,055,000 to $475,588 and the allowance for loan losses to non-performing loans increased from 1,308% to 1,453%. The Company increased the allowance for loan losses during the nine months ending September 30, 1995 due to loan growth of $12 million in the same period and the effects of an anticipated charge off of two specific loans in the fourth quarter of 1995. During the fourth quarter of 1995 the Company incurred net charge offs of $231,000 and increased the allowance for loan losses an additional $110,000. As of December 31, 1995 and September 30, 1996, the Company had 5 and 7 impaired loans in the amount of $1,055,000 and $475,588 respectively, all of which are considered potential problem loans. Non-performing assets decreased during the nine months ended September 30, 1996 by $7,000, from $988,000 as of December 31, 1995. 23 28 The following table sets forth information concerning the Company's nonperforming assets as of the dates indicated:
December 31, ---------------------------------- September 1996 1995 1994 1993 ---- ---- ---- ---- (Dollars in Thousands) Non-accrual loans $ 107 $ 107 $ -- $ 566 Loans past due 90 days or more -- -- -- -- Restructured loans -- -- -- -- -------- -------- -------- ------- Total non-performing loans 107 107 0 566 Foreclosed property 874 881 1,776 1,496 -------- -------- -------- ------- Total non-performing assets $ 981 $ 988 $ 1,776 $ 2,062 ======== ======== ======== ======= Total Assets $160,767 $153,706 $122,212 $99,266 Total Loans 129,721 110,464 85,687 72,215 Total Loans plus Foreclosed Property $130,383 $111,345 $ 87,463 $73,711 Non-performing loans to total loans 0.08% 0.10% 0.00% 0.78% Non-performing assets to loans plus foreclosed property 0.75 0.89 2.03 2.80 Non-performing assets to total assets 0.61% 0.64% 1.45% 2.08%
24 29 The following table summarizes changes in the allowance for loan losses arising from loans charged-off and recoveries on loans previously charged-off, by loan category and additions to the allowance that have been charged to expense:
December 31, ---------------------------------- September 30, 1996 1995 1994 1993 ---- ---- ---- ---- (Dollars in Thousands) Allowance at beginning of period $ 1,400 $ 1,000 $ 722 $ 606 -------- -------- ------- ------- Loans charged off: Commercial and industrial -- 19 45 27 Real estate: Commercial -- 118 132 -- Construction -- -- -- -- Residential -- 106 -- 32 Consumer and other -- -- 14 -- -------- -------- ------- ------- Total loans charged off $ -- $ 243 $ 191 $ 59 ======== ======== ======= ======= Recoveries of loans previously charged off: Commercial and industrial $ -- $ -- $ 18 $ 9 Real estate: Commercial -- 12 -- -- Construction -- -- -- -- Residential 10 -- -- 3 Consumer and other 1 -- 1 1 -------- -------- ------- ------- Total recoveries of loans previously charged off 11 12 19 13 -------- -------- ------- ------- Net loans charged off (recovered) (11) 231 172 46 -------- -------- ------- ------- Provisions charged to operations 144 631 450 162 -------- -------- ------- ------- Allowance at end of period $ 1,555 $ 1,400 $ 1,000 $ 722 ======== ======== ======= ======= Average Loans $116,958 $ 94,737 $76,263 $64,290 Total Loans 129,721 110,464 85,687 72,215 Nonperforming Loans 107 107 -- 566 Net charge-offs (recoveries) to average loans (0.01)% 0.24% 0.23% 0.07% Allowance for loan losses to loans 1.20 1.27 1.17 1.00 Allowance for loan losses to non-performing loans 1,453.27 % 1,308.41% N/A 127.56%
25 30 The following table sets forth the allocation of the allowance for loan losses by loan category as an indication of the estimated risk of loss for each loan type. The unallocated portion of the allowance is intended to cover loss exposure related to potential problem loans for which no specific allowance has been estimated and for the possible risks in the remainder of the loan portfolio.
December 31, -------------------------------------------------------------------------------------- 1995 1994 1993 -------------------------------------------------------------------------------------- Percent of Percent of Percent of Loans in Each Loans in Each Loans in Each Category to Category to Category to Allowance Total Loans Allowance Total Loans Allowance Total Loans --------- ----------- --------- ----------- --------- ----------- (Dollars in Thousands) Commercial and industrial $ 348 39.59% $ 247 35.01% $ 212 42.78% Real estate: Commercial 264 23.09 218 26.06 145 23.19 Construction 93 10.53 69 11.89 41 10.58 Residential 510 22.21 350 25.07 214 22.31 Consumer and other 44 4.58 16 1.97 110 1.14 Not allocated 140 -- 100 -- -- -- ------- ------- ------- ------- ------ ------- $ 1,400 100.00% $ 1,000 100.00% $ 722 100.00% ======= ======= ======= ======= ===== =======
The above allocation by loan category does not mean that actual loan charge-offs will be incurred in the categories indicated. The risk factors considered in determining the above allocation are the same as those used when determining the overall level of the allowance. The policy of the Company is to discontinue the accrual of interest on loans when principal or interest is due and has remained unpaid for 90 days or more. NONINTEREST INCOME In 1995, the Company's noninterest income was $836,271, representing a 3.85% increase from 1994 results. In comparison, 1994 noninterest income of $805,264 represented a 8.28% increase over 1993 results. Service charges on deposit accounts decreased by $36,000, or 21.43%, in 1995 due to a general increase in interest rates and a subsequent increase in the earnings credit offsetting the service charges on commercial checking accounts. Credit card merchant income represented $562,449, $434,991 and $401,967 of non-interest income of 1995, 1994 and 1993, respectively. Corresponding direct expenses relating to the credit card merchant income were $455,718, $321,217 and $301,368 for the same periods. Noninterest income increased in 1996 due to income from Capital Resources, the merchant banking subsidiary. Capital Management earned management fee income of $98,675 in 1995 and $156,075 for the nine months ending September 30, 1996. Other fee income earned by Capital Resources consisted of $8,000 in 1995 and $16,000 for the nine months ending September 30, 1996. 26 31 Subsequent to September 30, 1996, the Company entered into a contract to sell its merchant credit card processing portfolio. The terms of the sale call for $400,000 cash upon closing and a three year agency and non-compete agreement with the purchaser. The agency agreement is a revenue sharing agreement based on business referred to the purchaser. Noninterest income for the nine months ended September 30, 1996 was $780,444 as compared to $607,945 for the same period in 1995. NONINTEREST EXPENSE Noninterest expense increased $635,974 and $445,036 or 17.91% and 14.33%, respectively, for 1995 and 1994 over the previous year. Noninterest expense for the nine month periods ending September 30, 1996 and 1995 was $3,695,888 and $3,236,842 respectively. Salaries and employee benefits, the largest component of noninterest expense, increased by $528,887 and $191,240, or 34.93% and 14.46%, respectively, for 1995 and 1994. For the nine months ending September 30, 1996 and 1995 salaries and employee benefits were $2,022,917 and $1,528,863 respectively. These increases are primarily attributable to the rapid growth experienced by the Company. The increase in salaries and employee benefits was slightly offset by a decrease in Federal Deposit Insurance Corporation (FDIC) premiums. FDIC insurance expense was $114,944, $194,231 and $154,660 for 1995, 1994 and 1993 respectively. FDIC insurance expense was $1,500 and $102,871 for the nine months ending September 30, 1996 and 1995 respectively. Increases in other expenses, comprised of occupancy, data processing, furniture and equipment and other operating expenses have contributed to the increase in noninterest expense exclusive of salaries and employee benefits. On August 8, 1995, the FDIC voted to reduce the deposit insurance premiums paid by most members of the Bank Insurance Fund (BIF) and to keep existing assessment rates intact for members of the Savings Association Insurance Fund (SAIF). The Company's banking subsidiary is member of the BIF. Under the reduced assessment rate schedule for the BIF, the best rated institutions will pay an annual rate of four cents per $100.00 of assessable deposits, down from the previous rate of 23 cents per $100.00. The SAIF members will continue to pay the 23 cents per $100.00 of assessable deposits. The reduction in the BIF became effective June 1, 1995. In addition, as a result of the continued improvement in the capitalization of the FDIC's BIF, the assessment for the best rated BIF members was further reduced to the statutory annual minimum payment of $2,000, effective January 1, 1996. In response to concerns that the insurance premium disparity between the BIF and the SAIF could have a negative effect on SAIF insured institutions and the SAIF, legislation was enacted by Congress to, among other things, eliminate the deposit insurance premium disparity by merging the BIF and SAIF into a new Deposit Insurance Fund on January 1, 1999. This legislation is not expected to have a significant effect on the Company. INCOME TAXES Income tax expense was $741,091 for 1995, $606,756 for 1994, and $410,908 for 1993. Income tax expense of $792,553 and $587,227 was recorded for the nine months ended September 30, 1996 and 1995, respectively. The effective tax rate was 36%, 38% and 35% for the years ended December 31, 1995, 1994, and 1993 respectively. The effective income tax rate was 38% and 39% for the nine months ended September 30, 1996 and 1995, respectively. 27 32 LIQUIDITY AND INTEREST RATE SENSITIVITY Liquidity is provided by the Company's earning assets, including short-term investments in federal funds sold, maturities in the loan portfolio, maturities in the investment portfolio, and amortization of term loans, and by the Company's deposit inflows, proceeds from borrowings, and retained earnings. 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. The following tables reflect the Company's GAP analysis (rate sensitive assets minus rate sensitive liabilities) as of September 30, 1996 and December 31, 1995:
September 30, 1996 -------------------------------------------------------------------- Over Over 3 Months 1 Year 3 Months Through Through After or Less 12 Months 5 Years 5 Years Total ------- --------- ------- ------- ----- Assets: (Dollars in thousands) Investment securities $ 1,451 $ 9,604 $ 4,756 $ 45 $ 15,856 Loans 97,385 6,198 25,913 225 129,721 Federal funds sold 5,625 -- -- -- 5,625 Certificates of Deposit -- -- -- -- -- -------- -------- ------- ------- -------- Total interest-sensitive assets $104,461 $ 15,802 $30,669 $ 270 $151,202 Liabilities: Interest-bearing transaction accounts $ 12,247 $ -- $ -- $ -- $ 12,247 Savings and money market accounts 47,403 -- -- -- 47,403 Certificates of deposit 16,084 36,306 6,143 -- 58,533 Note payable -- 300 -- -- 300 -------- -------- ------- ------- -------- Total interest-sensitive liabilities 75,734 36,606 6,143 -- 118,483 -------- -------- ------- ------- -------- Interest-sensitivity GAP at September 30, 1996: GAP by period 28,727 (20,804) 24,526 270 32,719 -------- -------- ------- ------- ======== Cumulative GAP $ 28,727 $ 7,923 $32,449 $32,719 ======== ======== ======= ======= Ratio of interest-sensitive assets to interest-sensitive liabilities: Periodic 1.38 0.43 4.99 -- 1.28 ======== Cumulative GAP 1.38 1.07 1.27 1.28 ======== ======== ======= =======
28 33 As indicated in the preceding table, the Company was asset sensitive on a cumulative basis in the near term (3 months or less) at September 30, 1996 based on contractual maturities. In this regard, a decrease in the general level of interest rates would generally have a negative effect on the Company's net interest income as the repricing of the larger volume of interest sensitive assets would create a larger reduction in interest revenue as compared to the reduction in interest expense created by the repricing of the smaller volume of interest sensitive liabilities. The Company's revenue was also slightly asset sensitive on a one year basis.
December 31, 1995 -------------------------------------------------------------------- Over Over 3 Months 1 Year 3 Months Through Through After or Less 12 Months 5 Years 5 Years Total ------- --------- ------- ------- ----- Assets: (Dollars in thousands) Investment securities $ 3,160 $ 3,956 $ 8,160 $ 1,631 $ 16,907 Loans 88,919 5,520 16,000 25 110,464 Federal funds sold 16,230 -- -- -- 16,230 -------- -------- ------- ------- -------- Total interest-sensitive assets $108,309 $ 9,476 $24,160 $ 1,656 $143,601 Liabilities: Interest-bearing transaction accounts $ 21,663 $ -- $ -- $ -- $ 21,663 Savings and money market accounts 44,163 -- -- -- 44,163 Certificates of deposit 18,382 26,036 5,464 -- 49,882 -------- -------- ------- ------- -------- Total interest-sensitive liabilities 84,208 26,036 5,464 -- 115,708 -------- -------- ------- ------- -------- Interest-sensitivity GAP at December 31, 1995: GAP by period 24,101 (16,560) 18,696 1,656 27,893 -------- -------- ------- ------- ======== Cumulative GAP $ 24,101 $ 7,541 $26,237 $27,893 ======== ======== ======= ======= Ratio of interest-sensitive assets to interest-sensitive liabilities: Periodic 1.29 0.36 4.44 -- 1.24 ======== Cumulative GAP 1.29 1.07 1.23 1.24 ======== ======== ======= =======
As indicated in the preceding table, the Company was asset sensitive on a cumulative basis in the near term (three months or less) and on the one year term at December 31, 1995 based on contractual maturities. 29 34 The following table summarizes certain trends in the Company's balance sheet during the three-year period ended December, 1995:
December 31, ---------------------------------------------------------------------------- 1995 1994 1993 ---------------------------------------------------------------------------- (Dollars in Thousands) Total Assets $153,706 $122,212 $99,266 Earning Assets 143,601 113,627 92,117 Deposits 141,140 104,799 89,113 Loans to Deposits 78.27% 81.76% 81.04% Loans to Total Assets 71.87 70.11 72.75 Investment Securities to Total Assets 11.00 13.54 9.75 - ---------------------------------------------------------------------------------------------------------------------- Loans $110,496 $ 85,718 $72,239 Unearned Loan Fees (32) (31) (24) -------- -------- ------- Net Loans $110,464 $ 85,687 $72,215 ======== ======== ======= Investment Securities - AFS $ 16,065 $ 15,740 $ 2,999 Investment Securities -HTM 842 802 6,680 -------- -------- ------- Total Investments $ 16,907 $ 16,542 $ 9,679 ======== ======== ======= Investment Securities - AFS $ 16,065 $ 15,740 $ 2,999 Investment Securities - HTM 842 802 6,680 Federal Funds Sold 16,230 11,300 10,125 Interest-Bearing Deposits -- 98 98 Loans 110,496 85,718 72,239 Unearned Loan Fees (32) (31) (24) -------- -------- ------- Total Earning Assets $143,601 $113,627 $92,117 ======== ======== ======= AFS (Available For Sale) HTM (Held to Maturity)
The composition of total assets and earning assets remained relatively consistent over the three years ending December 31, 1995. For the nine months ended September 30, 1996 total loans as a percentage of total assets increased to 80.69% from 71.87% as of December 31, 1995. Earning assets increased $29,973,819 or 26% from December 31, 1994 to December 31, 1995 while total assets increased $31,494,295 or 26% during the same period. Interest-bearing liabilities increased $34,353,722 while total deposits increased $36,341,152 for the same period. The Company's earning assets increased $7,601,485 from December 31, 1995 to September 30, 1996 while total assets increased $7,060,832 during the same period. Total deposit growth for the period was $4,421,203. 30 35 The following table shows, for the periods indicated, the average annual amount and the average rate paid by type of deposit:
Year Ended December 31, ------------------------------------------------------------------------------------------------------- 1995 1994 1993 -------------------------------- ------------------------------- ------------------------------ (Dollars in Thousands) Average Interest Average Interest Average Interest Balance Expense Rate Balance Expense Rate Balance Expense Rate ------- ------- ---- ------- ------- ---- ------- ------- ---- Noninterest-bearing demand deposits $ 20,532 -- -- % $16,686 $ -- -- % $12,457 $ -- -- % Interest-bearing transaction accounts 14,002 352 2.51 14,226 292 2.05 14,590 371 2.54% Money market accounts 38,084 1,741 4.57 33,548 1,053 3.14 30,976 883 2.85% Savings accounts 1,068 32 3.00 1,275 33 2.59 740 22 2.97% Certificates of deposit 45,669 2,760 6.04 27,440 1,190 4.34 20,627 807 3.91% -------- ----- ---- ------- ------ ---- ------- ------ ---- $119,355 4,885 4.09% $93,175 $2,568 2.76% $79,390 $2,083 2.62% ======== ===== ==== ======= ====== ==== ======= ====== ====
Since inception, the Company has experienced rapid loan and deposit growth primarily due to an aggressive direct calling effort and sustained economic growth in the local market served by the Company. Management has pursued privately held businesses who desire a close working relationship with a locally-managed, full service bank. Additionally, the Company belongs to a national network of time depositors (primarily credit unions) who place time deposits with the Company, typically in increments of $99,000. The Company has used this source of deposits for three years and considers it to be a stable source of deposits that allows the Company to acquire funds at a cost below its alternative cost of funds. There were $16,488,000 of deposits from the national network with the Company as of December 31, 1995. There were $28,203,000 and $17,760,000 of time deposits from the national network with the Company as of September 30, 1996 and September 30, 1995, respectively. The following table sets forth the amount and maturity of certificates of deposit that had balances of more than $100,000 at December 31, 1995.
Remaining Maturity Amount ------------------ ------ Three months or less $10,415 Over three through six months 4,755 Over six through twelve months 5,824 Over twelve months 2,292 ------- TOTAL $23,286 =======
31 36 The table below sets forth the carrying value of investment securities held by the Company at the dates indicated:
December 31, --------------------------------------------------------------------- 1995 1994 1993 --------------------------------------------------------------------- Percent Percent Percent of Total of Total of Total Amount Securities Amount Securities Amount Securities ------ ---------- ------ ---------- ------ ---------- (Dollars in Thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $15,698 92.85% $15,740 95.15% $9,398 97.10% Municipal Bonds 792 4.68 746 4.51 213 2.20 Mortgage-backed securities 50 0.30 56 0.34 68 0.70 Federal Home Loan Bank Stock 367 2.17 -- -- -- -- ------- ------ ------- ------ ------ ------ Total $16,907 100.00% $16,542 100.00% $9,679 100.00% ======= ====== ======= ====== ====== ======
Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards ("SFAS") 115 for which the cumulative effect was recorded on the consolidated balance sheet on that date. On January 1, 1994, debt securities with an amortized cost of $280,553 were classified as "held-to-maturity" securities; debt securities with an amortized cost of $9,398,256 were classified as "available-for-sale" securities; a market valuation account was established for the available-for-sale securities of $44,207 to adjust the recorded balance of such securities at January 1, 1994 to their fair value on that date; a deferred tax asset of $15,030 was recorded for the tax effect of the market valuation account; and the net decrease resulting from the market valuation adjustment at January 1, 1994 was recorded as a separate component of shareholders' equity. As of December 31, 1995, debt securities with an amortized cost of $841,732 were classified as held-to-maturity securities, debt and equity securities with an amortized cost of $16,102,111 were classified as available-for-sale securities, the market valuation account for the available-for-sale securities was adjusted to $24,361 to decrease the recorded balance of such securities at December 31, 1995 to fair value on that date. The change in the market valuation account and related components resulted from reinvestment of maturing investments at higher market rates in 1995. As of September 30, 1996, debt securities with an amortized cost of $938,266 were classified as held-to-maturity securities; debt and equity securities with an amortized cost of $14,962,687 were classified as available-for-sale securities; the market valuation account for the available-for-sale securities was adjusted to approximately $29,677 to decrease the recorded balance of such securities at September 30, 1996 to fair value on that date. The change in the market valuation account and related components resulted from an overall increase in the interest rate environment during the nine months ended September 30, 1996. 32 37 The following table summarizes maturity and yield information on the investment portfolio at December 31, 1995:
Weighted Average Carrying Tax-Equivalent Value Yield -------- -------------- (In thousands of dollars) U.S. Treasury securities and obligations of U.S. government corporations and agencies 0 to 1 year $ 6,749 5.31% 1 to 5 years 7,593 5.51 5 to 10 years 1,356 5.87 No stated maturity -- -- ------- Total $15,698 5.44% ======= ==== Municipal Bonds 0 to 1 year $ -- -- % 1 to 5 years 567 6.29 5 to 10 years 225 6.10 No stated maturity -- -- ------- Total $ 792 6.26% ======= ==== Mortgage-backed securities 0 to 1 year $ -- -- % 1 to 5 years -- -- 5 to 10 years -- -- Over 10 years 50 6.38 ------- Total $ 50 6.38% ======= ==== Federal Home Loan Bank Stock 0 to 1 year $ -- -- % 1 to 5 years -- -- 5 to 10 years -- -- No stated maturity 367 5.28 ------- Total $ 367 5.28% ======= ==== Total 0 to 1 year $ 6,749 5.31% 1 to 5 years 8,160 5.57 5 to 10 years 1,581 5.89 Over 10 years 50 6.38 No stated maturity 367 5.28 ------- Total $16,907 5.53% ======= ====
CAPITAL ADEQUACY The Company's Shareholders' equity was $14,323,305 at September 30, 1996. This represented an increase of 18.8% over Shareholders' equity at December 31, 1995. The $2,271,158 increase in Shareholders' equity was the result of $1,266,339 in earnings for the first nine months of 1996, a $5,316 decrease in the unrealized holding loss on investment securities available-for-sale (adjusted for taxes), a 33 38 $1,094,280 increase from the exercise of outstanding warrants for common stock, and dividends of $84,146 paid to Shareholders during the nine month period ended September 30, 1996. In April 1996, the Company obtained a $1,000,000 unsecured line of credit. The line of credit is a one year interest only note accruing interest at the prime rate. The outstanding principal balance on the loan as of September 30, 1996 was $300,000. The Company's Shareholders' equity was $12,052,147, and $10,780,913 at December 31, 1995, and 1994, respectively. During 1995, shareholders' equity increased $1,271,234, or 11.79%, as a result of net income of $1,304,267 and a $63,904 decrease in the net unrealized holding loss on investment securities available-for sale, offset by $102,437 in dividends paid. In addition, equity increased in 1995 by $5,500 due to the exercise of warrants. During 1994, Shareholders' equity increased $838,007, or 8.43%, as a result of net income of $1,001,181 and $12,800 from a stock option exercise, offset by a $59,088 increase in the net unrealized holding loss on investment securities available for sale and $87,709 in dividends paid. Risk-based capital guidelines for financial institutions were adopted by regulatory authorities effective January 1, 1991. These guidelines were designed to relate regulatory capital requirements to the risk profile of the specific institutions and to provide for uniform requirements among the various regulators. Currently, the risk-based capital guidelines require the Company to meet a minimum total capital ratio of 8.0% of which at least 4.0% must consist of Tier 1 capital. Tier 1 capital generally consists of (a) common Shareholders' equity (excluding the unrealized market value adjustments on the available for sale securities), (b) qualifying perpetual preferred stock and related surplus subject to certain limitations specified by the FDIC, and (c) minority interests in the equity accounts of consolidated subsidiaries less goodwill and any other intangible assets and investments in subsidiaries that the FDIC determines should be deducted from Tier 1 capital. The FDIC also requires a minimum leverage ratio of 3.0%, defined as the ratio of Tier 1 capital less purchased mortgage servicing rights to total assets, for banking organizations deemed the strongest and most highly rated by banking regulators. A higher minimum leverage ratio is required of less highly rated banking organizations. The following table summarizes the Company's risk-based capital and leverage ratios at the dates indicated:
December 31 Sept. 30, ---------------------------------- 1996 1995 1994 1993 ---- ---- ---- ---- Tier I Capital 10.83% 10.30% 10.76% 13.17% Total Risk Based Capital 12.00 11.45 11.76 14.12 Leverage Ratio 8.92 7.85 8.89 10.02 Tangible Capital to Assets 9.89% 8.76% 9.71% 10.74%
Primary capital, a measure of capital adequacy, includes equity capital, allowance for possible loan losses, and debt considered equity for regulatory capital purposes. Tangible primary capital represents primary capital reduced by total intangible assets included in the balance sheet. At Decem- ber 31, 1995, the Company's primary capital was $13,476,508 compared to $11,869,178 and $10,664,906 at December 31, 1994 and 1993, respectively. The Company's primary capital to asset ratio on a consolidated basis was 8.77%, 9.71%, and 10.74% at December 31, 1995, 1994, and 1993, respectively. The Company's tangible primary capital was $13,463,508, $11,869,178 and $10,664,906 at December 31, 1995, 1994, and 1993, respectively. 34 39 RECENT SALES OF UNREGISTERED SECURITIES On September 30, 1996, the Company issued 198,960 shares of its Common Stock to holders of common stock of the Bank incidental to a plan of reorganization for the purpose of making the Company the sole owner of Bank capital stock. Such securities were issued in reliance on Section 4(2) of the Securities Act of 1933. RISK MANAGEMENT The Company's management objective in structuring the balance sheet is to maximize the return on shareholder's equity while minimizing associated risks, including credit and asset/liability management risk. The risks the Company assumes in providing products to customers is fundamental to its business operation. The following discussion describes these risks as they relate to the Company and the Company's management policies for monitoring and controlling these risks. Credit Risk Management. Credit risk management includes defining an accept- able level of risk and return, establishing policies and procedures to govern the credit process, and maintaining a thorough portfolio review function. Credit policies are ultimately the responsibility of the Company's Board of Directors and, as such, are reviewed and approved by the Board of Directors on a regular basis. Additionally, directors of the Bank serve on loan committees which meet semi-monthly to review and act upon loan requests which bring the aggregate indebtedness of a single borrower (plus related entities) above $400,000. Loan requests for less than $400,000 are reviewed and acted upon by a committee of management which includes, among others, the President of the Company, the Presidents of the various bank units, loan officers, and credit analysts. Of equal importance in this risk management process are the ongoing monitoring procedures performed by management. Asset/Liability Management Risk. Interest rate risk, investment risk and liquidity risk are dynamic risks associated with the Company's balance sheet. The Asset Liability Committee ("ALCO") consists of management personnel and reports to the Board of Directors. The ALCO meets periodically to review exposure to these risks and recommend adjustments to the components of the balance sheet to effectively manage these risks. The ALCO determines the acceptable levels of each type of risk and establishes policies to monitor and govern the risk assessment process. Asset/Liability risks are ultimately the responsibility of the Company's Board of Directors and, as such, the Board of Directors reviews and approves the activities of the ALCO. Management of interest rate, liquidity and investment risks is a dynamic process requiring continuous review. Daily monitoring of these risks are an important part of management responsibilities. IMPLEMENTATION OF NEW ACCOUNTING PRONOUNCEMENTS Effective January 1, 1995, the Company adopted SFAS 114, "Accounting by Creditors for Impairment of a Loan" and SFAS 118, "Accounting by Creditors for Impairment of a loan - Income Recognition and Disclosures", which amends SFAS 114. SFAS 114 (as amended by SFAS 118) defines the recognition criteria for loan impairment and the measurement methods for certain impaired loans and loans for which terms have been modified in troubled-debt restructurings (a restructured loan). Specifically, a loan is considered impaired when it is probable a creditor will be unable to collect all amounts due, both principal and interest, according to the contractual terms of the loan agreement. When measuring impairment, the expected future cash flows of an impaired loan are required to be discounted at the loan's effective interest rate. Alternatively, 35 40 impairment can be measured by reference to an observable market price, if one exists, or the fair value of the collateral for a collateral dependent loan. Regardless of the historical measurement method used, SFAS 114 requires a creditor to measure impairment based on the fair value of the collateral when the creditor determines foreclosure is probable. SFAS 118 amends SFAS 114 to allow a creditor to use existing methods for recognizing interest income on an impaired loan. The Company has elected to continue to use its existing nonaccrual methods for recognizing interest on impaired loans. The Company continues to apply all payments received on impaired loans to the outstanding balance of the loan until such a time as the loan balance is reduced to zero, after which payments are applied to interest income until such time as the foregone interest is recovered, or until such a time as an improvement in the condition of the loan has occurred which would warrant resumption of interest accruals. The adoption of SFAS 114 and SFAS 118 resulted in no adjustment to the provision for possible loan losses. SFAS 119 requires disclosures about the amounts, nature, and terms of derivative financial instruments that are not subject to SFAS No. 105, "Disclosure of Information about Financial Instruments with Off-Balance-Sheet risk and Financial Instruments with Concentrations of Credit Risk" because they do not result in off-balance-sheet risk of accounting loss. SFAS 119 requires that a distinction be made between financial instruments held or issued for trading purposes and financial instruments held or issued for purposes other than trading. SFAS 119 is effective for financial statements issued for fiscal years ending after December 15, 1994, except for entities with less than $150 million in total assets. For those entities, SFAS 119 is effective for financial statements issued for fiscal years ending after December 31, 1995. SFAS 119 did not have a material effect on the consolidated balance sheet of the Company. EFFECT OF INFLATION Persistent high rates of inflation can have a significant effect on the reported financial condition and results of operation of all industries. However, the asset and liability structure of commercial banks is substantially different from that of an industrial company in that virtually all assets and liabilities of commercial banks are monetary is nature. Accordingly, changes in interest rates may have a significant impact on a commercial bank's performance. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Inflation does have an impact on the growth of total assets in the banking industry, often resulting in a need to increase equity capital at higher than normal rates to maintain an appropriate equity-to-assets ratio. SUPERVISION AND REGULATION -------------------------- The Company and the Bank are subject to state and federal banking laws and regulations which impose specific requirements or restrictions on and provide for general regulatory oversight with respect to virtually all aspects of operations. These laws and regulations are generally intended to protect depositors, not shareholders. To the extent that the following summary describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. Any change in applicable laws or regulations may have a material effect on the business and prospects of the Company. Major legislative enactments have been passed during the last several years, including the Community Development and Regulatory Improvement Act and the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, and additional legislation is proposed. Compliance with the numerous regulations and policies promulgated by the regulatory authorities is a difficult and ever- 36 41 changing atmosphere in which to operate. The Company and the Bank commit substantial resources in order to comply with these statutes, regulations and policies. The operations of the Company and the Bank may be affected by legislative changes and the policies of various regulatory authorities. The Company is unable to predict the nature or the extent of the effect on its business and earnings that fiscal or monetary policies, economic control, or new federal or state legislation may have in the future. FEDERAL BANK HOLDING COMPANY REGULATION The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the "BHCA"). Under the BHCA, the Company is subject to periodic examination by the Federal Reserve and is required to file periodic reports of its operations and such additional information as the Federal Reserve may require. The Company's and the Bank's activities are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries, or engaging in any other activity that the Federal Reserve determines to be closely related to banking. Investments, Control and Activities. With certain limited exceptions, the BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before (i) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company. Recent federal legislation permits bank holding companies to acquire control of banks throughout the United States. In addition, and subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with regulations thereunder, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company acquiring "control" of a bank holding company, such as the Company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Under Federal Reserve regulations applicable to the Company, control will be rebuttably presumed to exist if a person acquires at least 10% of the outstanding shares of any class of voting securities once the Company registers the Common Stock under the Securities and Exchange Act of 1934. The regulations provide a procedure for challenge of the rebuttable control presumption. Under the BHCA, the Company is generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in, nonbanking activities, unless the Federal Reserve, by order or regulation, has found those activities to be so closely related to banking or managing or controlling banks as to be a related activity. Some of the activities that the Federal Reserve has determined by regulation to be proper incidents to the business of banking include investment in and management of Small Business Investment Companies, making or servicing loans and certain types of leases, engaging in certain insurance and brokerage activities, performing data processing services, acting in certain circumstances as a fiduciary or investment or financial advisor, owning savings associations, and making investments in limited projects designed primarily to promote community welfare. Source of Strength; Cross-Guarantee. In accordance with Federal Reserve policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which the Company might not otherwise do so. Under the BHCA, the Federal Reserve may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary 37 42 depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution's financial condition. THE BANK General. The Company is the holding company for a single state bank. The Bank is not a member of the federal reserve system. The Missouri Division of Finance and the FDIC are primary regulators for the Bank. These regulatory authorities regulate or monitor all areas of the Bank's operations, including security devices and procedures, adequacy of capitalization and loss reserves, loans, investments, borrowings, deposits, mergers, issuances of securities, payment of dividends, interest rates payable on deposits, interest rates or fees chargeable on loans, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe lending and deposit gathering practices. The Bank must maintain certain capital ratios and is subject to limitations on aggregate investments in real estate, bank premises, and furniture and fixtures. All insured institutions must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual and quarterly reports to the FDIC and the appropriate agency and the state supervisor. Transactions With Affiliates and Insiders. The Bank is subject to the provisions of Section 23A of the Federal Reserve Act, which place limits on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. In addition, most of these loans and certain other transactions must be secured in prescribed amounts. The Bank is also subject to the provisions of Section 23B of the Federal Reserve Act that, among other things, prohibit an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliated companies. The Bank is subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and their related interests. Such extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. Community Reinvestment Act. The Community Reinvestment Act ("CRA") requires that, in connection with examinations of financial institutions within its jurisdiction, the FDIC shall evaluate the record of the financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. The Company has a satisfactory rating under CRA. Other Regulations. Interest and certain other charges collected or contracted for by the Bank are subject to state usury laws and certain federal laws concerning interest rates. The Bank's loan operations are also subject to certain federal laws applicable to credit transactions, such as the federal Truth-In-Lending Act governing disclosures of credit terms to consumer borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves, the Equal Credit Opportunity Act prohibiting discrimination 38 43 on the basis of race, creed or other prohibited factors in extending credit, the Fair Credit Reporting Act of 1978 governing the use and provision of information to credit reporting agencies, the Fair Debt Collection Act governing the manner in which consumer debts may be collected by collection agencies, and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of the Banks also are subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services. DEPOSIT INSURANCE The deposits of the Bank are currently insured to a maximum of $100,000 per depositor, subject to certain aggregation rules. The FDIC establishes rates for the payment of premiums by federally insured banks for deposit insurance. An insurance fund (BIF) is maintained for commercial banks, with insurance premiums from the industry used to offset losses from insurance payouts when banks and thrifts fail. The FDIC has adopted a risk-based deposit insurance premium system for all insured depository institutions, including the Bank, which requires premiums from a depository institution based upon its capital levels and risk profile, as determined by its primary federal regulator on a semiannual basis. DIVIDENDS The principal source of the Company's cash revenues comes from dividends received from the Bank. The amount of dividends that may be paid by the Bank to the Company depends on the Bank's earnings and capital position and is limited by federal and state law, regulations, and policies. CAPITAL REGULATIONS The federal bank regulatory authorities have adopted risk-based capital guidelines for banks and bank holding companies that are designed to make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, account for off-balance sheet exposure, and minimize disincentives for holding liquid assets. The resulting capital ratios represent qualifying capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the federal regulators have noted that banks and bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios well in excess of the minimums. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio, a portion of which must be Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles and excludes the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital, mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate term-preferred stock, and general reserves for loan and lease losses up to 1.25% of risk-weighted assets. Under these guidelines, banks' and bank holding companies' assets are given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for first mortgage loans fully secured by residential property and, under certain circumstances, 39 44 residential construction loans, both of which carry a 50% rating. Most investment securities are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% rating, and direct obligations of or obligations guaranteed by the United States Treasury or United States Government agencies, which have a 0% rating. The federal bank regulatory authorities have also implemented a leverage ratio, which is Tier 1 capital as a percentage of average total assets less intangibles, to be used as a supplement to the risk-based guidelines. The principal objective of the leverage ratio is to place a constraint on the maximum degree to which a bank holding company may leverage its equity capital base. LEGISLATIVE DEVELOPMENTS From time to time, various bills are introduced in the United States Congress with respect to the regulation of financial institutions. Certain of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry. The Company cannot predict whether any of these proposals will be adopted or, if adopted, how these proposals will affect the Company. On September 30, 1996 Congress enacted the Deposit Insurance Funds Act of 1996. This legislation includes language requiring the merger of the BIF and the SAIF into a new Deposit Insurance Fund, and addresses the disparity between the deposit insurance premiums paid by banking institutions and savings institutions. This legislation is not expected to have an immediate effect on the Company. However, future deposit insurance assessments may be affected. Under the current assessment rate schedule, the best rated institutions pay an annual rate of four cents per $100 of assessable deposits. The Company's banking subsidiary currently qualifies as a best rated institution for BIF assessments. The Company has not been notified of any changes in the assessment rate for the best rated institutions. As a result of the continued improvement in the capitalization of the FDIC's BIF, effective January 1, 1996, the assessment for the best rated BIF members was further reduced to the statutory annual minimum payment of $2,000. If the Company was required to pay FDIC insurance based on the current assessment schedule, the annual expense would be approximately $58,000 based on total deposits at September 30, 1996. 40 45 MANAGEMENT ---------- EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY The executive officers and directors of the Company are as follows:
PRESENT POSITION(S) PRINCIPAL OCCUPATION NAME AND AGE WITH THE COMPANY DURING PAST 5 YEARS - ------------ ---------------- -------------------- Fred H. Eller, 51 President and Chief Executive Officer, Director President, Chief Executive Officer and Director of the Company (since 1995); Chairman of the Board of the Bank (since 1996); Chief Executive Officer and Director of the Bank (since 1988) Ronald E. Henges, 64 Chairman of the Board, Director Chief Executive Officer, Creve Coeur Camera (multi-store retailer of camera and video equipment); President and Chief Executive Officer of Henges Associates, Inc. (manufacturer and installer of prefabricated wall systems) 1991-1995; Chairman of the Board of the Company (since 1995); Chairman of the Board of the Bank, 1988-1996 Kevin C. Eichner, 45 Vice Chairman of the Board, Director President, The Financial Collaborative, Inc. (a management consulting firm); Vice Chairman of the Board of the Company (since 1996); Vice Chairman of the Board of the Bank, 1991-1996 Joseph D. Garea, 41 Chief Financial Officer, Director Chief Financial Officer and Director of the Company (since 1996); President, Enterprise Capital Management, Inc. (since 1995); President, Enterprise Capital Resources, Inc. (since 1995); Senior Vice President, United Postal Savings, 1991-1994 Paul R. Cahn, 70 Director President, Elan Polo Imports, Inc. (importer of women's and children's casual shoes); Director of the Company (since 1996); Director of the Bank, 1991-1993 and 1995-1996 Birch M. Mullins, 53 Director President, Baur Properties (developer of commercial real estate properties); Director of the Company (since 1996); Director of the Bank, 1991-1996 41 46 Robert E. Saur, 53 Director President, Conrad Properties (developer of commercial and residential real estate properties); Director of the Company (since 1995); Director of the Bank, 1991-1996 Henry D. Warshaw, 42 Director Principal, Moneta Group (provides financial planning products and services to individuals); Director of the Company (since 1996); Director of the Bank, 1991-1996; Chairman of Clayton Banking Unit (since 1996) James L. Wilhite, 61 Director President, Stange Corporation (manufacturer of marketing and incentive items); Director of the Company (since 1996); Director of the Bank (since 1996); Chairman of the St. Charles Banking Unit (since 1996)
EXECUTIVE OFFICERS AND DIRECTORS OF THE BANK The executive officers and directors of the Bank (in addition to Mr. Eller, Mr. Warshaw, and Mr. Wilhite discussed above) are as follows:
PRESENT POSITION PRINCIPAL OCCUPATION NAME AND AGE WITH THE BANK DURING PAST 5 YEARS - ------------ ------------- ------------------- Clayton Banking Unit David J. Mishler, 37 President, Clayton Unit, Director President of the Clayton Unit of the Bank and Director (since 1996); Vice President of the Bank 1991-1996 Mark S. Carlie, 41 Director Chief Executive Officer, Stone Carlie & Company (public accounting firm); Director of the Bank (since 1996) Jeffrey W. Glik, 40 Director President, Glik's (multi-store retail chain of women's clothing stores); Director of the Bank (since 1995) William H. McCormick, 46 Director President, Capital Communications Corporation (telecommunications firm which sells and services voice and data products); Director of the Bank (since 1995) Edward A. Schultz, 52 Director President, Code Consultants (consulting firm which provides design and construction consulting directed toward fire and safety code compliance); Director of the Bank (since 1989) 42 47 Orville J. Middendorf, 64 Director President, Middendorf Meat Company (meat wholesaler); Director of the Bank (since 1988) James L. Stewart, 40 Director President, Stewart Properties (developer of commercial and residential real estate properties); Director of the Bank (since 1988) Sunset Hills Banking Unit James E. Graser, 36 President, Sunset Hills Unit, Director President of the Sunset Hills Unit of the Bank and Director (since 1996); Vice President of the Bank 1991-1996 Joseph E. Barry, 59 Director President, Barry Sales, Ltd. (manufacturer's representative firm serving the plastics industry); Director of the Bank (since 1995) R. Bruce Earls, 50 Director President, Marlo Coil (manufacturer of air handling systems and commercial heating and cooling units); Director of Bank (since 1996) Robert F. O'Loughlin, 52 Director President and Chief Executive Officer, Lodging Hospitality Management Co. (firm which provides hotel management services); Director of the Bank (since 1996) Robert H. Pecha, 63 Director President and Chief Executive Officer, Fleming Printing Company (commercial printer servicing primarily the multi-color advertising market); Chairman of the Board, Resource Packaging; Chairman of the Board, Printfax Graphics; Director of the Bank (since 1988) Nancy R. Siwak, 59 Director Director of the Bank (since 1995) James A. Williams, 44 Director President, Sunset Transportation (trucking brokerage and consulting firm); Director of the Bank (since 1996) St. Charles Banking Unit Richard C. Leuck, 38 President, St. Charles Unit, Director President of the St. Charles Unit of the Bank and Director (since 1996); President and Chief Executive Officer of Duchesne Bank 1994-1996; Senior Lending Officer of Duchesne Bank 1991-1994 Charles W. Bennett, 57 Director Owner and President, C. Bennett Building Supply (wholesale supplier of home interior finish items); Director of the Bank (since 1996) 43 48 Ernie Dempsey, 55 Director Owner, Pio's Restaurant (a family owned restaurant); Director of the Bank (since 1996) John Kastner, 50 Director President, Client Services, Inc. (a collection agency); Director of the Bank (since 1996) John Gloss, 45 Director President, Barnes-Jewish St. Peter's Hospital (a full service hospital); Director of the Bank (since 1996) Patricia Rodeheaver, 49 Director President, Custom Design Telephone Systems, Inc. (firm which sells and services telephone systems to businesses); Director of the Bank (since 1996)
All directors of the Company are elected at the annual meeting of Shareholders and serve until their successors are duly elected and qualified or until their earlier resignation or removal. All directors of the Bank are elected by the Bank's shareholder and serve until their successors are duly elected and qualified or until their earlier resignation or removal. Because the Company is the sole shareholder of the Bank, it controls the election of the Board of Directors of the Bank. The Company has no standing committees. The Bank's entire Board of Directors performs the functions of the Audit and Compensation Committees. Each Bank Unit Board is comprised of local business owners and professionals who fit the customer profile of the particular bank unit. These Directors take an active role in the business activities and the credit review processes of the particular unit over which they have oversight responsibility. The Loan Committee of the Bank consists of all members of the Board of Directors, who serve on a rotating basis. All loan requests are initially reviewed by a committee of management officials, which includes among others, the Presidents of all geographic Banking Units and the Chief Executive Officer. This group has authority to approve loans where the aggregate loan balance of all the borrower's loans (including loans to affiliated entities) is less than $400,000. Loan requests where the borrower's aggregate loan balance is above $400,000 are also reviewed and examined by the respective Board Committee of the geographic Banking Unit. Loan requests where the borrower's aggregate loan balance is above $1,500,000 require approval of the Bank's full Board of Directors. Notwithstanding the required Board Committee approvals where the aggregate loan balance is greater than $400,000, all such loans are subsequently reported to the full Board of Directors for review and comment. ADVISORY DIRECTORS To assist in the continued evaluation of its services to the community, the Bank has designated certain advisory directors. These individuals advise and consult with the Bank's management from time to time on an informal basis. The advisory directors have no formal duties, authority, or management obligations and its members receive no compensation. The advisory directors and their principal occupations are as follows: 44 49
Name Principal Occupation - ---- -------------------- David A. Bayer President, DBX Corporation Glen Johnson Sheffield Mayor, City of Webster Groves (1991-1994) Menlo F. Smith President, Sunmark Capital George W. Von Hoffmann, Jr. President, GVH, Inc.
COMPENSATION OF EXECUTIVE OFFICERS AND OTHERS The following table shows the compensation paid by the Company or the Bank, to the Company's Chief Executive Officer and each of the other executive officers of the Company or the Bank who earned more than $100,000 per year in compensation for any of the years ended December 31, 1995, 1994 and 1993: SUMMARY COMPENSATION TABLE
Name and Current Position Annual Compensation Other Year Salary Bonus Compensation Fred H. Eller 1995 $165,000 $64,000 $6,950 President and Chief Executive Officer of 1994 150,000 23,500 3,640 the Company, Chairman and Chief 1993 150,000 15,000 3,291 Executive Officer of the Bank Joseph D. Garea Chief Financial Officer and Director of 1995 $100,000 $ 5,000 0 the Company, President, Enterprise 1994 8,333 0 0 Capital Management, Inc., President, 1993 N/A 0 0 Enterprise Capital Resources, Inc. David Mishler 1995 $109,000 $25,000 $4,181 President of the Clayton Banking Unit, 1994 91,666 15,000 3,431 Director of the Bank 1993 82,000 12,500 3,076 James E. Graser 1995 $ 77,000 $24,500 $3,277 President of the Sunset Hills Banking 1994 68,500 13,000 2,751 Unit, Director of the Bank 1993 63,833 10,000 2,305 Includes employer matching contribution pursuant to the Company's 401(k) program and life insurance premiums paid by the Company.
STOCK OPTION PLANS In 1988 and 1992, the Bank established two Incentive Stock Option Plans pursuant to which certain officers and employees of the Bank received the right to purchase shares of Bank capital stock. Substantially all of the options available under the two initial stock option plans have been granted. Upon 45 50 formation of the Company and in conjunction with the Company's plan to acquire all of the outstanding common stock of the Bank, the options to purchase Bank capital stock were exchanged for options to purchase an aggregate of 213,000 shares of Company Common Stock. Earlier this year, the Company adopted by shareholder vote a Third Incentive Stock Option Plan ("ISO Plan III"), which sets aside up to 200,000 shares of Company Common Stock to grant options to certain Key Employees of the Company or any of its subsidiaries. There are limitations as to the number of options which may be granted to any individual and additional restrictions for options which may be granted to any individual who is also a ten percent shareholder. The Company believes strongly in motivating its Key Employees by encouraging ownership in the organization. To date, none of the options available under ISO III have been granted. DIRECTORS' COMPENSATION Non-employee directors of the Company and the Bank receive directors' fees of $200 for each Board of Directors meeting and $50 for each committee meeting they attend. EXCULPATION AND INDEMNIFICATION The Certificate of Incorporation of the Company contains a provision which, subject to the exceptions described below, indemnifies a director from individual liability to the Company or its Shareholders for monetary damages for any breach of such director's fiduciary duty as a director. This provision does not indemnify the director (i) for violating his duty of loyalty to the Company or its Shareholders, (ii) for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (iii) for liability under Section 174 of the Delaware General Corporation Law (the "DGCL") relating to unlawful dividends and distributions, or (iv) for any transaction from which the director derived an improper personal benefit. The Bylaws of the Company require the Company to indemnify any person who was, is, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of service by such person as a director or officer of the Company. Such directors and officers are entitled to be indemnified against judgments, penalties, fines, settlements, and reasonable expenses (including attorneys' fees) actually incurred by the director or officer in connection with the proceeding, except that no payments may be made with respect to liability which is not eliminated pursuant to the provision of the Company's Certificate of Incorporation described in the preceding paragraph. In addition to the Bylaws of the Company, Section 145(c) of the DGCL requires the Company to indemnify any director who has been successful on the merits or otherwise in defending any proceeding described above. The DGCL also provides that a court may order indemnification of a director if it determines that the director is fairly and reasonably entitled to such indemnification. The Board of Directors of the Company also has the authority to extend to its employees and agents the same indemnification rights held by officers and directors, subject to all the accompanying conditions and obligations. The Company, Capital Resources and Capital Management have collectively entered into Indemnification Agreements with each of the directors of Capital Management, pursuant to which the Company, Capital Resources and Capital Management agreed to jointly and severally indemnify such directors in a manner similar to that set out in the preceding paragraphs with respect to the Company. 46 51 These Indemnification Agreements also provide for the advancement of expenses incurred by the directors as a result of a qualifying proceeding subject to certain conditions and limitations. BENEFICIAL OWNERSHIP OF SECURITIES ---------------------------------- The following table provides information concerning those persons known by the Company to be the beneficial owners of 5% or more of its outstanding common stock, each director and executive officer, and all directors and executive officers of the Company as a group. For purposes of the table, a person is deemed to be a beneficial owner of the subject shares if the person has or shares the power to vote or dispose of them.
Percentage of Class -------------------------------------- Ownership of After Offering Holding Company ----------------------- Stock Before Before Beneficial Owner Offering Offering Minimum Maximum ---------------- ---------------- -------- ------- ------- Executive Officers and Directors of the Company Fred H. Eller 88,260 4.80% 4.34% 3.86% Ronald E. Henges 135,140 7.35% 6.65% 5.90% Kevin C. Eichner 73,193 3.98% 3.60% 3.20% Joseph D. Garea 2,000 Paul R. Cahn 67,467 3.67% 3.32% 2.95% Birch M. Mullins 16,600 Robert E. Saur 39,000 2.12% 1.92% 1.70% Henry D. Warshaw 17,260 James L. Wilhite 1 Executive Officers and Directors of the Bank David J. Mishler 31,309 1.70% 1.54% 1.38% Mark S. Carlie 20 Jeffrey W. Glik 3,060 William H. McCormick 20 Edward A. Schultz 22,915 1.25% 1.13% 1.00% Orville J. Middendorf 73,000 3.97% 3.59% 3.19% James L. Stewart 12,850 James E. Graser 10,250 Joseph E. Barry 7,020 R. Bruce Earls 1 Robert F. O'Loughlin 1 Robert H. Pecha 75,630 4.11% 3.72% 3.30% 47 52 Nancy R. Siwak 2,520 James A. Williams 1 Richard C. Leuck 1 Charles W. Bennett 1 Ernie Dempsey 1 John Kastner 1 John Gloss 1 Patricia Rodeheaver 1 Fred H. Eller See information above James L. Wilhite See information above Henry D. Warshaw See information above All Directors and Executive Officers as a Group (28 individuals) 677,524 36.85% 33.34% 29.58% Less than 1% Percentages are calculated based on 1,838,560 shares which represents 1,662,360 shares outstanding as of September 30, 1996, plus Options outstanding and exercisable as of September 30, 1996 or within 60 days thereafter totalling 176,200 shares; 2,032,108 shares if the minimum amount is sold; and 2,290,172 shares if the maximum amount is sold. Unless otherwise indicated, the named person has sole voting and dispositive power for all shares shown. Assumes the exercise of Options outstanding and exercisable as of September 30, 1996 or within 60 days thereafter, including those beneficially owned by the named person, as follows: Mr. Eichner, 26,000 shares; Mr. Eller, 49,000 shares; Mr. Henges, 26,000 shares; Mr. Graser, 6,000 shares; Mr. Mishler, 19,000 shares; all directors and executive officers as a group, 126,000 shares. Excludes 23,980 held by two adult children of Mr. Cahn. Includes 5,000 shares held in trust for the benefit of Mr. Cahn's spouse, to which Mr. Cahn has voting power; 1,000 shares held in trust for the benefit of Mr. Cahn, to which Mr. Cahn has voting power; and 61,447 shares held of record by Cahn Family Partnership, L.P., to which Mr. Cahn has voting power. Includes 39,240 shares held jointly by Mr. Eller and his spouse. Excludes all of the 13,960 shares held of record by EBSP Partnership in which each of Mr. Eller, Mr. Graser and Mr. Mishler hold a 1/7 partnership interest, but for which none of the named persons holds voting power. Excludes all of the 13,820 shares held of record by EBSP II Partnership in which each of Mr. Eller, Mr. Graser and Mr. Mishler hold a 1/7 partnership interest, but for which none of the named persons holds voting power. Includes 2,000 shares held in trust for the benefit of Mr. Garea, to which Mr. Garea has voting power. Excludes 11,600 shares held jointly by the adult daughter and son-in-law of Mr. Henges; 2,740 shares held in an Individual Retirement Account for the benefit of the adult daughter of Mr. Henges; 1,020 shares held by the adult son of Mr. Henges; and 1,680 shares held in an Individual Retirement Account for the benefit of the adult son of Mr. Henges. Includes 54,270 shares held of record by MICALA Partnership Ltd., to which Mr. Henges has voting power; 22,285 shares held in an Individual Retirement Account for the benefit of Mr. Henges, to which Mr. Henges has voting power; 3,285 shares held in an Individual Retirement Account for the benefit of the spouse of Mr. Henges, to which Mr. Henges has voting power; 3,600 shares held in trust for six minor grandchildren of Mr. Henges, of which the spouse of Mr. Henges is trustee, and to which Mr. Henges has voting power; and 25,680 shares held in six separate trusts, each for the benefit of one of the grandchildren of Mr. Henges, to which Mr. Henges has voting power. The address of Mr. Henges of 13398 Conway Road, St. Louis, Missouri 63141. Includes 8,580 shares held in an Individual Retirement Account for the benefit of Mr. Warshaw, to which Mr. Warshaw has voting power; and 8,660 shares held in an Individual Retirement Account for the benefit of the spouse of Mr. Warshaw, to which Mr. Warshaw has voting power. Includes 7,000 shares held in trust for the benefit of Mr. Barry, to which Mr. Barry has voting power. Includes 4,250 shares held jointly by Mr. Graser and his spouse. Includes 72,980 shares held in trust for the benefit of Mr. Middendorf, to which Mr. Middendorf has voting power. 48 53 Includes 9,678 shares held jointly by Mr. Mishler and his spouse; and 2,631 shares held in an Individual Retirement Account for the benefit of Mr. Mishler, to which Mr. Mishler has voting power. Includes 75,610 shares held in trust for the benefit of Mr. Pecha, to which Mr. Pecha has voting power. Includes 10,780 shares held jointly by Mr. Schultz and his spouse. Includes 2,500 shares held in trust for the benefit of Ms. Siwak, to which Ms. Siwak has voting power. Includes 2,500 shares held in an Individual Retirement Account for the benefit of Mr. Stewart, to which Mr. Stewart has voting power.
DIVIDENDS --------- The holders of Common Stock of the Company are entitled to dividends when, as, and if declared by the Company's Board of Directors out of funds legally available therefor. The amount of dividends, if any, that may be declared by the Company will necessarily be dependent on many factors, including future earnings, capital requirements and business conditions as they affect the Bank. As a result, no assurance can be given that dividends will be paid in the future with respect to the Common Stock. Historically the Company's dividends have been limited as a result of the Company's policy to retain earnings sufficient to sustain the Company's growth. The Company declared and paid dividends quarterly during calendar years 1993, 1994, and 1995, in annual amounts of $.05, $.06, and $.07 per share, respectively. For the first three quarters of 1996, the Company has declared and paid dividends of a total of $.0575 per share. MARKET FOR COMMON STOCK ----------------------- As of September 30, 1996, the Company had approximately 225 Common Stock shareholders of record. Prior to the offering, the Common Stock had not been traded on an exchange or in any established public trading market, although there have been a limited number of private transactions in the shares that have been made known to the Company. Based solely on the information made available to the Company from a limited number of buyers and sellers, the Company believes the selling prices for the Common Stock ranged, during 1995, from $11.50 to $12.00 per share and, during 1996, from $13.00 per share to $13.75 per share. There was a single transaction in 1996 between two Directors of the Company at $15.00 per share involving additional consideration beyond the purchase of the stock. There may have been other transactions at other prices not known to the Company. Since the Company does not expect to list its stock on any exchange or seek quotation of its stock on NASDAQ in the near future, no established public trading market for the Common Stock is expected to develop following the offering. DESCRIPTION OF CAPITAL STOCK ---------------------------- GENERAL The authorized capital stock of the Company consists of 3,000,000 shares of common stock, par value $.01 per share (the "Common Stock"). Reference is made to the Certificate of Incorporation of the Company (the "Certificate"), which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, for a detailed description of the provisions thereof summarized below. 49 54 COMMON STOCK Holders of shares of the Common Stock are entitled to receive such dividends as may from time to time be declared by the Board of Directors of the Company out of funds legally available therefor. Holders of Common Stock are entitled to one vote per share on all matters on which the holders of Common Stock are entitled to vote and may cumulate their votes in any election of directors. Holders of Common Stock have no preemptive, conversion, redemption or sinking fund rights. In the event of a liquidation, dissolution or winding-up of the Company, holders of Common Stock are entitled to share equally and ratably in the assets of the Company, if any, remaining after the payment of all debts and liabilities of the Company. The outstanding shares of Common Stock are, and the shares of Common Stock offered by the Company hereby when issued will be, fully paid and nonassessable. The Company has reserved 413,000 shares for issuance under the Stock Option Plans. See "Management - Stock Option Plans." OFFERING PRICE The offering price has been established solely by the Company without independent review by or as a result of negotiation with an investment banker. See "Risk Factors -- Offering Price". The primary source of financial information used to analyze and determine the offering price relates to the historical performance and trends of the Company's primary asset, its wholly-owned banking subsidiary. The Board reviewed the historical earnings of the Bank, the strengths and weaknesses of its operation and loan portfolio, the development of the growth of its customer base, the depth of management, the Bank's business plan and its projected growth and earnings performance, an evaluation of comparable banks and bank holding companies, the current condition of the industry, and the economy of the St. Louis metropolitan area. The recent trading history of the Company's common stock where the price of such transfers has been brought to the attention of Management was also reviewed. CERTAIN ANTI-TAKEOVER EFFECTS The provisions of the Certificate, the Bylaws and the Delaware Corporation Law summarized in the following paragraphs may be deemed to have anti-takeover effects and may delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider to be in such shareholder's best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders, and may make removal of management more difficult. Authorized but Unissued Stock. The authorized but unissued shares of Common Stock will be available for future issuance without shareholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Common Stock may enable the Board of Directors to issue shares to persons friendly to current management, which could render more difficult or discourage any attempt to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of the Company's management. Section 203 of the Delaware Corporation Law. Subject to certain exclusions summarized below, Section 203 of the Delaware Corporation Law ("Section 203") prohibits any "Interested Shareholder" from engaging in a "Business Combination" with a Delaware corporation for three years following the date such person became an Interested Shareholder. "Interested Shareholder" generally includes: (a) (i) any person who is the beneficial owner of 15% or more of the outstanding voting stock of the 50 55 corporation or (ii) any person who is an affiliate or associate of the corporation and who was the beneficial owner of 15% or more of the outstanding voting stock of the corporation at any time within three years before the date on which such person's status as an Interested Shareholder is determined; and (b) the affiliates and associates of such person. Subject to certain exceptions, a "Business Combination" includes (i) any merger or consolidation of the corporation or a majority-owned subsidiary of the corporation, (ii) the sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets of the corporation or a majority-owned subsidiary of the corporation having an aggregate market value equal to 10% or more of either the aggregate market value of all assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation, (iii) any transaction that results in the issuance or transfer by the corporation or a majority-owned subsidiary of the corporation of any stock of the corporation or the subsidiary to the Interested Shareholder, except pursuant to a transaction that effects a pro rata distribution to all shareholders of the corporation, (iv) any transaction involving the corporation or a majority-owned subsidiary of the corporation that has the effect of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation or the subsidiary that is owned by the Interested Shareholder and (v) any receipt by the Interested Shareholder of the benefit (except proportionately as a shareholder) of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or a majority-owned subsidiary of the corporation. Section 203 does not apply to a Business Combination if (i) before a person became an Interested Shareholder, the board of directors of the corporation approved either the transaction in which the Interested Shareholder became an Interested Shareholder or the Business Combination, (ii) upon consummation of the transaction that resulted in the person becoming an Interested Shareholder, the Interested Shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (other than certain excluded shares), or (iii) following a transaction in which the person became an Interested Shareholder, the Business Combination is (a) approved by the board of directors of the corporation and (b) authorized at a regular or special meeting of Shareholders (and not by written consent) by the affirmative vote of the holders of at least two-thirds of the outstanding voting stock of the corporation not owned by the Interested Shareholder. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, the Company will have outstanding up to 2,113,972 shares of Common Stock, assuming the maximum number of shares are sold pursuant to the offering. Of these shares, 1,915,012 will be freely tradeable without restriction or further registration under the Securities Act, except for any shares purchased by "affiliates" of the Company (as that term is defined in Rule 144 under the Securities Act, the "Affiliates"), which shares will be subject to some or all of the resale limitations of Rule 144. An affiliate of the issuer is defined in Rule 144 under the Securities Act as a person that directly or indirectly, through one or more intermediate, controls, is controlled by, or is under common control with the issuer. Rule 405 under the Securities Act defines the term "control" to mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the person whether through the ownership of voting securities, by contract or otherwise. For purposes of Rule 144, all executive officers and directors of the Company, and certain executive officers of the Bank, will be deemed to be affiliates of the Company. The remaining 198,960 shares of Common Stock ("Restricted Securities") currently outstanding may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemption contained in Rule 144. 51 56 In general, and except as set forth below, under Rule 144 as currently in effect, an Affiliate of the Company or other person (or persons whose shares are aggregated) who has beneficially owned Restricted Securities for at least two years, may sell, within any three-month period, a number of such shares that does not exceed the greater of (i) 1% of the then outstanding shares of the Company's Common Stock (approximately 21,140 shares immediately after the offering, assuming the maximum number of shares are purchased pursuant to the offering) or (ii) the average weekly trading volume of the Common Stock on all national securities exchanges or NASDAQ during the four calendar weeks preceding the sale. It is not anticipated that shares of the Common Stock will be listed on a national securities exchange or quoted on the NASDAQ. Rule 144 also requires that (i) the securities must be sold in "brokers' transactions," as defined in the Securities Act, and the person selling the securities may not solicit orders or make any payment in connection with the offer or sale of securities to any person other than the broker who executes the order to sell the securities, and (ii) sales pursuant to Rule 144 are subject to certain requirements relating to notices and availability of current public information about the Company. A person (or persons whose shares are aggregated) who is not deemed to have been an Affiliate of the Company at any time during the 90 days immediately preceding the sale and who has beneficially owned Restricted Securities for at least three years is entitled to sell such shares under Rule 144(k) without regard to the limitations described above. In general, Affiliates who purchased shares of Common Stock of the Company prior to the offering pursuant to a Section 3(a)(12) exemption provided under the Securities Act for certain bank holding company reorganizations, will also need to comply with the resale limitations for Rule 144 described above, except for the two-year holding period. Prior to the offering there has not been a public market for the Common Stock of the Company. Since an established public trading market for the Common Stock is not expected to develop following the offering, sales of even a small number of shares of Common Stock, or the perception that such sales could occur, could adversely affect the prevailing market price of the shares of Common Stock. TRANSFER AGENT AND REGISTRAR The Company serves as its own transfer agent and registrar for the Common Stock. CERTAIN TRANSACTIONS -------------------- The Company and the Bank have and expect to continue to have banking and other transactions in the ordinary course of business with directors and executive officers of the Company and their affiliates, including members of their families or corporations, partnerships or other organizations in which such directors or executive officers have a controlling interest, on substantially the same terms (including price, or interest rates and collateral) as those prevailing at the time for comparable transactions with unrelated parties. Such transactions are not expected to involve more than the normal risk of collectibility nor present other unfavorable features to the Company and the Bank. The Bank is subject to limits on the aggregate amount it can lend to the Bank's and the Company's directors and officers as a group. This limit is currently equal to two times the applicable entity's unimpaired capital and surplus. Loans to individual directors and officers must also comply with the Bank's lending policies and statutory lending limits, and directors with a personal interest in any loan application are excluded from the consideration of such loan application. The Company's Clayton banking facility is leased from a limited partnership in which Fred H. Eller, the Company's Chief Executive Officer, is a limited partner and Robert E. Saur, a director of the Company, is a general partner. Rent expense, net of income from the sublet portions of the premises, amounted to $202,784 in 1995. 52 57 During 1995 and 1996, the Company purchased its current telephone system from Capital Communication Corp., of which William H. McCormick, a director of the Bank, is the President, for a total of $45,428. Since January 7, 1995, a total of $56,757 has been paid by the Company to Capital Communication Corp. for hardware, software and service related to the telephone system. During 1995, the Company purchased leasehold improvements in the aggregate amount of $111,181 from Henges Associates, Inc., of which Ronald E. Henges, the Chairman of the Company, was the President. PLAN OF DISTRIBUTION -------------------- PLAN OF DISTRIBUTION The Company is offering up to 451,612 shares of its Common Stock, $.01 par value at a cash purchase price of $15.50 per share. This offering is not underwritten and the Company has not employed any dealers, brokers, or salesmen in connection herewith. The Company is offering the Common Stock through its directors, officers, and employees on a best efforts basis. None of these individuals will be entitled to any commissions or other remuneration for selling the Common Stock. The Company has reserved the right to close the offering at any time the Company has received Subscription Agreements acceptable to the Company for not less than 193,548 shares of Common Stock. The Company has also reserved the right to terminate the offering at any time. If the Company has not received any acceptable Subscription Agreements for at least 193,548 shares of Common Stock on or before January 28, 1997, or by the end of any extended time, up to an additional 120 days, if the Company elects to extend the offering time, the offering will be terminated and no shares of Common Stock will be sold. Those shares of Common Stock which are reserved for sale to certain directors of the Company and the Bank (as described below), and which are actually subscribed for by such directors, will be included in determining whether the minimum number of shares has been reached. SHARES RESERVED FOR SALE Based upon indications of interest received, the Company has reserved an aggregate of 77,736 shares of Common Stock for sale to certain directors of the Company and the Bank who have previously not been shareholders of the Company (other than qualifying shares), in the amounts set forth below opposite their respective names:
Company/Bank Directors No. of Shares Reserved for Purchase ---------------------- ----------------------------------- Charles W. Bennett 6,451 Ernie Dempsey 9,677 John Gloss 9,677 John Kastner 6,451 Richard C. Leuck 6,451 Patricia Rodeheaver 6,451 James L. Wilhite 6,451 R. Bruce Earls 4,839 53 58 Robert O'Loughlin 6,451 James Williams 6,451 Joseph D. Garea 6,451 Nancy R. Siwak 1,935 ------ 77,736 ======
METHOD OF SUBSCRIPTION Persons desiring to purchase the Common Stock offered hereunder may subscribe to purchase such Common Stock by executing a Subscription Agreement for the Common Stock and by mailing or delivering such Subscription Agreement, together with the subscriber's check in the full amount of the subscription price for the Common Stock subscribed for, to the Company in care of the Jefferson Bank & Trust, as escrow agent. All checks should be made payable to "Jefferson Bank & Trust, as Escrow Agent for Enterbank Holdings, Inc." Unless a lesser amount is approved by the Company in its sole discretion, the minimum subscription per subscriber will be for 650 shares ($10,075) and shall constitute an irrevocable offer to purchase the Common Stock subscribed for. The Company reserves the right to reject, in whole or in part, the Subscription Agreement of any subscriber for any reason. No Subscription Agreement will entitle a subscriber to purchase Common Stock until such person's Subscription Agreement has been accepted by the Company and the Company has given written notice of acceptance thereof to the subscriber. ESCROW OF SUBSCRIPTION PAYMENTS All subscription payments will be deposited in an escrow account at Jefferson Bank & Trust, pending the closing or termination of this offering, whichever shall first occur. The deposits in the escrow account will earn interest at prevailing money market rates. If this offering is terminated, all funds so received will be promptly returned to the subscriber, with interest thereon and without deduction therefrom. Any funds held in the escrow account for any subscriber which are in excess of the purchase price for the number of shares of Common Stock which such subscriber has been allocated by the Company will be promptly refunded to each such subscriber, with interest. During the selling period, subscribers will not have the right to demand return of their subscriptions. ISSUANCE OF STOCK Certificates representing Common Stock duly subscribed and fully paid will be issued as soon as practicable following the closing of the offering. LEGAL MATTERS ------------- The validity of the Common Stock offered hereby has been passed on for the Company by Polsinelli, White, Vardeman & Shalton, P.C., St. Louis, Missouri. 54 59 EXPERTS ------- The consolidated financial statements of the Company as of December 31, 1995 and 1994 and for the years then ended, appearing in the Prospectus and the Registration Statement have been audited by KPMG Peat Marwick LLP, independent auditors, as stated in their report appearing elsewhere herein, and is included in reliance upon such report given upon the authority of that firm as experts in accounting and auditing. The consolidated financial statements of Enterprise Bank for the year ended December 31, 1993 appearing in this Prospectus and the Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such reports, given upon the authority of such firm as experts in accounting and auditing. On April 27, 1994, the Company's independent auditors, Ernst & Young LLP, were dismissed. The independent accountants' report issued by Ernst & Young LLP on the Bank's consolidated financial statements as of and for the year ended December 31, 1993 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles. The decision to change accountants was recommended and approved by the Board of Directors. There was no disagreement during 1993, or any preceding year, between the Company and Ernst & Young LLP on any matters or accounting principles or practices, financial statement disclosure, or auditing scope of procedure, which disagreement, if not resolved to the satisfaction of Ernst & Young LLP, would have caused it to make reference to the subject matter of the disagreement in connection with its report. On April 27, 1994, the Company engaged KPMG Peat Marwick LLP to serve as the new independent auditors and to report on the Company's consolidated financial statements as of and for the year ended December 31, 1994. 55 60
INDEX TO FINANCIAL STATEMENTS Independent Auditors' Report dated January 26, 1996 F-2 Independent Auditors' Report dated January 18, 1994 F-3 Consolidated Balance Sheets dated September 30, 1996 (unaudited) and December 31, 1995 and 1994 F-4 Consolidated Statements of Income for the Years Ended December 31, 1995, 1994, and 1993 and the Nine Months ended September 30, 1996 and 1995 (unaudited) F-5 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1995, 1994, and 1993 and the Nine Months ended September 30, 1996 (unaudited) F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994, and 1993 and the Nine Months ended September 30, 1996 and 1995 (unaudited) F-7 Notes to Consolidated Financial Statements F-8
F-1 61 Independent Auditors' Report ---------------------------- The Board of Directors and Shareholders Enterbank Holdings, Inc.: We have audited the accompanying consolidated balance sheets of Enterbank Holdings, Inc. and subsidiaries (the Company) as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The accompanying consolidated statements of income, shareholders' equity, and cash flows of Enterprise Bank for the year ended December 31, 1993 were audited by other auditors whose report thereon, dated January 18, 1994, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Enterbank Holdings, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick LLP St. Louis, Missouri January 26, 1996 F-2 62 [LOGO] ERNST & YOUNG LLP / / Gateway One / / Phone: 314 259 1000 Suite 1400 701 Market Street St. Louis, Missouri 63101 Report of Independent Auditors The Board of Directors and Shareholders Enterprise Bank We have audited the consolidated statements of income, shareholders' equity, and cash flows of Enterprise Bank for the year ended December 31, 1993 (see Note 1 to consolidated financial statements of Enterbank Holdings, Inc.). These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Enterprise Bank for the year ended December 31, 1993 in conformity with generally accepted accounting principles. /s/Ernst & Young LLP January 18, 1994 Ernst & Young LLP is a member of Ernst & Young International, Ltd. F-3 63 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets September 30, 1996 and December 31, 1995 and 1994
December 31 September 30 ------------------- 1996 1995 1994 ---- ---- ---- Assets (Unaudited) ------- Cash and due from banks $ 7,029,095 $ 8,109,804 $ 5,929,650 Certificates of deposit -- -- 98,000 Federal funds sold 5,625,000 16,230,000 11,300,000 Investments in debt securities: Available-for-sale, at estimated fair value 14,917,725 16,065,201 15,739,904 Held-to-maturity, at amortized cost (estimated fair value of $934,005 at September 30, 1996, $840,566 in 1995 and $778,190 in 1994) 938,266 841,732 802,209 ------------ ------------ ------------ Total investments in debt securities 15,855,991 16,906,933 16,542,113 ------------ ------------ ------------ Loans, less unearned loan fees 129,721,178 110,463,751 85,686,752 Less allowance for loan losses 1,555,000 1,400,000 1,000,000 ------------ ------------ ------------ Loans, net 128,166,178 109,063,751 84,686,752 ------------ ------------ ------------ Other real estate owned 874,426 881,072 1,776,366 Office equipment and leasehold improvements 876,456 795,377 684,328 Accrued interest receivable 910,645 981,042 600,642 Prepaid expenses and other assets 1,429,108 738,088 593,921 ------------ ------------ ------------ Total assets $160,766,899 $153,706,067 $122,211,772 ============ ============ ============ Liabilities and Shareholders' Equity ------------------------------------ Deposits: Demand $ 27,379,121 $ 25,432,639 $ 23,445,209 Interest-bearing transaction accounts 12,246,838 21,662,697 15,450,658 Money market accounts 46,155,611 42,993,844 29,221,646 Savings 1,247,242 1,169,242 979,866 Certificates of deposit: $100,000 and over 21,883,622 23,285,939 19,061,313 Other 36,648,833 26,595,703 16,640,220 ------------ ------------ ------------ Total deposits 145,561,267 141,140,064 104,798,912 Federal funds purchased -- -- 6,500,000 Notes payable 300,000 -- -- Accounts payable and accrued expenses 582,327 513,856 131,947 ------------ ------------ ------------ Total liabilities 146,443,594 141,653,920 111,430,859 ------------ ------------ ------------ Shareholders' equity: Common stock, $.01 par value; authorized 3,000,000 at September 30, 1996, 1,879,000 in 1995 and 1994, issued and outstanding 1,662,360 shares at September 30, 1996, 1,463,400 shares in 1995 and 1,462,400 shares in 1994 16,624 14,634 14,624 Surplus 9,595,956 8,503,666 8,498,176 Retained earnings 4,740,402 3,558,208 2,356,378 Net unrealized holding losses on available-for-sale securities (29,677) (24,361) (88,265) ------------ ------------ ------------ Total shareholders' equity 14,323,305 12,052,147 10,780,913 ------------ ------------ ------------ Total liabilities and shareholders' equity $160,766,899 $153,706,067 $122,211,772 ============ ============ ============ See accompanying notes to consolidated financial statements.
F-4 64 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Income Nine months ended September 30, 1996 and 1995 and years ended December 31, 1995, 1994 and 1993
September 30, December 31, ------------------- ---------------------------------- 1996 1995 1995 1994 1993 ---- ---- ---- ---- ---- (Unaudited) (Unaudited) Interest income: Interest and fees on loans $8,325,759 $6,856,245 $ 9,393,945 $6,612,560 $5,211,099 Interest on debt securities: Available-for-sale 493,807 501,104 741,709 365,279 -- Held-to-maturity 28,544 22,729 30,674 25,573 300,246 Interest on federal funds sold 260,374 535,736 745,044 366,743 243,100 Interest on certificates of deposit -- 2,464 2,464 3,663 16,126 ---------- ---------- ----------- ---------- ---------- Total interest income 9,108,484 7,927,278 10,913,836 7,373,818 5,770,571 ---------- ---------- ----------- ---------- ---------- Interest expense: Interest-bearing transaction accounts 251,667 259,983 351,998 291,801 370,843 Money market accounts 1,409,203 1,200,455 1,740,701 1,053,459 882,833 Savings 23,505 23,397 31,958 32,936 22,237 Certificates of deposit: $100,000 and over 1,018,983 920,553 1,246,703 568,376 356,654 Other 1,277,152 1,104,108 1,513,251 621,537 450,755 Federal funds purchased 949 2,681 2,681 2,325 -- Notes payable 8,949 -- -- -- -- ---------- ---------- ----------- ---------- ---------- Total interest expense 3,990,408 3,511,177 4,887,292 2,570,434 2,083,322 ---------- ---------- ----------- ---------- ---------- Net interest income 5,118,076 4,416,101 6,026,544 4,803,384 3,687,249 Provision for loan losses 143,739 290,000 630,734 449,962 162,462 ---------- ---------- ----------- ---------- ---------- Net interest income after provision for loan losses 4,974,337 4,126,101 5,395,810 4,353,422 3,524,787 ---------- ---------- ----------- ---------- ---------- Noninterest income: Service charges on deposit accounts 95,034 97,878 131,640 168,018 171,634 Other service charges and fee income 744,788 514,363 712,853 624,346 492,849 Data processing fees -- -- -- 12,900 52,400 Loss on investment in Enterprise Fund, L.P. (59,378) (4,296) (8,222) -- -- Gain on sale of debt securities -- -- -- -- 26,774 ---------- ---------- ----------- ---------- ---------- Total noninterest income 780,444 607,945 836,271 805,264 743,657 ---------- ---------- ----------- ---------- ---------- Noninterest expense: Salaries 1,676,699 1,299,819 1,710,740 1,231,596 1,056,433 Payroll taxes and employee benefits 346,218 229,044 332,220 282,477 266,400 Occupancy 236,598 205,526 275,179 269,259 266,358 FDIC insurance 1,500 102,871 114,944 194,231 154,660 Data processing 63,493 48,086 209,267 179,066 117,482 Other operating 1,371,380 1,351,496 1,544,373 1,394,120 1,244,380 ---------- ---------- ----------- ---------- ---------- Total noninterest expense 3,695,888 3,236,842 4,186,723 3,550,749 3,105,713 ---------- ---------- ----------- ---------- ---------- Income before income tax expense 2,058,893 1,497,204 2,045,358 1,607,937 1,162,731 Income tax expense 792,553 587,227 741,091 606,756 410,908 ---------- ---------- ----------- ---------- ---------- Net income $1,266,340 $ 909,977 $ 1,304,267 $1,001,181 $ 751,823 ========== ========== =========== ========== ========== Earnings per share .74 .55 .79 .62 .48 Weighted average common shares 1,496,933 1,463,157 1,463,219 1,461,312 1,460,000 outstanding See accompanying notes to consolidated financial statements.
F-5 65 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Nine months ended September 30, 1996 and years ended December 31, 1995, 1994 and 1993
Net unrealized holding gains (losses) on Common Stock available- Total ------------ Retained for-sale shareholders' Shares Amount Surplus earnings securities equity ------ ------ ------- -------- ---------- ------ Balance, December 31, 1992 1,460,000 $14,600 $8,485,400 $ 764,083 $ -- $ 9,264,083 Net income -- -- -- 751,823 -- 751,823 Dividends declared ($.05 per share) -- -- -- (73,000) -- (73,000) --------- ------- ---------- ---------- -------- ----------- Balance, December 31, 1993 1,460,000 14,600 8,485,400 1,442,906 -- 9,942,906 Cumulative effect of change in accounting for debt securities, net of tax effect -- -- -- -- (29,177) (29,177) Net income -- -- -- 1,001,181 -- 1,001,181 Dividends declared ($.06 per share) -- -- -- (87,709) -- (87,709) Stock options exercised 2,400 24 12,776 -- -- 12,800 Change in net unrealized holding gains (losses) on available-for-sale securities, net of tax effect -- -- -- -- (59,088) (59,088) --------- ------- ---------- ---------- -------- ----------- Balance, December 31, 1994 1,462,400 14,624 8,498,176 2,356,378 (88,265) 10,780,913 Net income -- -- -- 1,304,267 -- 1,304,267 Dividends declared ($.07 per share) -- -- -- (102,437) -- (102,437) Stock warrants exercised 1,000 10 5,490 -- -- 5,500 Change in net unrealized holding gains (losses) on available-for-sale securities, net of tax effect -- -- -- -- 63,904 63,904 --------- ------- ---------- ---------- -------- ----------- Balance, December 31, 1995 1,463,400 14,634 8,503,666 3,558,208 (24,361) 12,052,147 Net income -- -- -- 1,266,340 -- 1,266,340 Dividends declared ($.06 per share) -- -- -- (84,146) -- (84,146) Stock warrants exercised 198,960 1,990 1,092,290 -- -- 1,094,280 Change in net unrealized holding gains (losses) on available-for-sale securities, net of tax effect -- -- -- -- (5,316) (5,316) --------- ------- ---------- ---------- -------- ----------- Balance, September 30, 1996 (unaudited) 1,662,360 $16,624 $9,595,956 $4,740,402 $(29,677) $14,323,305 ========= ======= ========== ========== ======== =========== See accompanying notes to consolidated financial statements.
F-6 66 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flow Nine months ended September 30, 1996 and 1995 and years ended December 31, 1995, 1994 and 1993
September 30, December 31, ------------------- ---------------------------------- 1996 1995 1995 1994 1993 ---- ---- ---- ---- ---- (Unaudited) Cash flows from operating activities: Net income $ 1,266,340 $ 909,977 $ 1,304,267 $ 1,001,181 $ 751,823 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 160,607 130,665 177,454 147,346 148,597 Provision for loan losses 144,000 290,000 630,734 449,962 162,462 Write-downs and losses on other real estate owned, net 6,646 242,138 152,982 138,757 22,362 Net accretion of debt securities 23,832 (228,521) (149,398) (70,037) 38,808 Loss in investment in Enterprise Fund, L.P. 59,378 4,296 8,222 -- -- Gain on sale of debt securities -- -- -- -- (26,774) (Increase) Decrease in accrued interest receivable 70,397 (217,437) (380,400) (211,592) (45,799) (Increase) Decrease in prepaid expenses and other assets 71,208 (73,752) (106,635) (183,612) (10,254) Increase (Decrease) in accounts payable and accrued expenses (229,899) 241,541 425,670 31,393 (331,229) ----------- ------------ ------------ ------------ ------------ Net cash provided by operating activities 1,572,509 1,298,907 2,062,896 1,303,398 709,996 ----------- ------------ ------------ ------------ ------------ Cash flows from investing activities: Net increase in federal funds sold 10,605,000 (13,980,000) (4,930,000) (1,175,000) (675,000) Purchases of available-for-sale debt securities (8,922,967) (13,677,537) (20,877,229) (10,994,009) -- Purchases of available-for-sale equity securities (94,200) (294,150) (366,800) -- -- Purchases of held-to-maturity debt securities (109,004) (111,600) (255,367) (538,811) (6,895,231) Proceeds from sales of debt securities -- -- -- -- 1,530,083 Proceeds from maturities of available-for-sale debt securities 10,140,000 16,000,000 21,200,000 4,588,662 -- Proceeds from maturities and principal paydowns on held-to-maturity debt securities 5,229 104,152 180,799 17,155 2,993,000 Proceeds from maturity of certificates of deposit -- 98,000 98,000 -- -- Net increase in loans outstanding (19,246,427) (12,011,596) (24,557,838) (14,127,248) (14,826,075) Capitalized expense on other real estate owned -- -- -- (50,673) (141,489) Proceeds from sale of other real estate owned -- 302,011 292,417 115,244 270,683 Purchases of office equipment and leasehold improvements (241,686) (198,497) (288,503) (194,835) (190,994) Investment in Enterprise Fund, L.P. (520,500) (100,000) (100,500) -- -- ----------- ------------ ------------ ------------ ------------ Net cash used in investing activities (8,384,555) (23,869,217) (29,605,021) (22,359,515) (17,935,023) ----------- ------------ ------------ ------------ ------------ Cash flows from financing activities: Net increase in demand and savings accounts (4,229,610) 22,473,762 22,161,043 4,076,677 8,617,844 Net increase in certificates of deposit 8,650,813 12,095,660 14,180,109 11,608,748 10,883,988 Net increase (decrease) in federal funds purchased -- (6,500,000) (6,500,000) 6,500,000 -- Proceeds from notes payable 300,000 -- -- -- -- Cash dividends paid (84,146) (76,827) (124,373) (84,023) (54,750) Proceeds from exercise of stock warrants 1,094,280 5,500 5,500 -- -- Proceeds from exercise of common stock options -- -- -- 12,800 -- ----------- ------------ ------------ ------------ ------------ Net cash provided by financing activities 5,731,337 27,998,095 29,722,279 22,114,202 19,447,082 ----------- ------------ ------------ ------------ ------------ Net increase in cash and due from banks (1,080,709) 5,427,785 2,180,154 1,058,085 2,222,055 Cash and due from banks, beginning of year 8,109,804 5,929,650 5,929,650 4,871,565 2,649,510 ----------- ------------ ------------ ------------ ------------ Cash and due from banks, end of year $ 7,029,095 $ 11,357,435 $ 8,109,804 $ 5,929,650 $ 4,871,565 =========== ============ ============ ============ ============ Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 4,017,213 $ 3,404,523 $ 4,759,095 $ 2,501,376 $ 2,054,447 Income taxes 739,759 586,500 779,900 706,480 768,056 Noncash transactions: Transfers to other real estate owned in settlement of loans 50,000 -- -- 483,382 118,010 Loans made to facilitate the sale of other real estate owned 50,000 -- 449,895 -- 33,500 Transfer of held-for-sale securities to available-for-sale debt securities -- -- -- 2,998,817 -- Transfer of held-to-maturity debt securities to available-for-sale debt securities -- -- -- 6,399,439 -- =========== ============ ============ ============ ============ See accompanying notes to consolidated financial statements.
F-7 67 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 NOTE 1--ORGANIZATION On May 9, 1995, Enterbank Holdings, Inc. (the Company) was formed as a bank holding company. Enterbank Holdings, Inc. exchanged 1,463,400 shares of Enterbank Holdings, Inc. for all 73,170 (100%) of outstanding shares of Enterprise Bank in a twenty-for-one stock exchange. The merger represented a combination of entities under common control and, accordingly, was accounted for in a manner similar to a pooling of interest. Therefore, results of operations for periods prior to May 9, 1995 reflect the results of operations for Enterprise Bank. Additionally, Enterprise Capital Resources, Inc. was formed as a small business investment company in 1995 and, on May 11, 1995, Enterbank Holdings, Inc. acquired 100% of the outstanding shares of Enterprise Capital Resources, Inc. NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company provides a full range of banking services to individual and corporate customers located within St. Louis, Missouri and the surrounding communities through its subsidiary, Enterprise Bank (the Bank). The Company is subject to competition from other financial and nonfinancial institutions providing financial services in the markets served by the Company's subsidiaries. Additionally, the Company and its subsidiaries are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory agencies. The more significant accounting policies used by the Company in the preparation of the consolidated financial statements are summarized below: BASIS OF FINANCIAL STATEMENT PRESENTATION The consolidated financial statements of the Company and its subsidiaries have been prepared in conformity with generally accepted accounting principles and conform to predominant practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions which significantly affect the reported amounts in the consolidated financial statements. Estimates which are particularly susceptible to change in a short period of time include the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of amounts due from borrowers on loans. Actual amounts could differ from those estimates. F-8 68 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 CONSOLIDATION The consolidated financial statements include the accounts of the Company; its banking subsidiary, Enterprise Bank (100% owned) and its merchant banking company, Enterprise Capital Resources, Inc. (100% owned). All significant intercompany accounts and transactions have been eliminated. INVESTMENTS IN DEBT AND EQUITY SECURITIES The Company currently classifies investments in debt and equity securities as follows: Trading - includes securities which the Company has bought and held principally for the purpose of selling them in the near term. The Company has not held any trading securities. Held-to-maturity - includes debt securities which the Company has the positive intent and ability to hold until maturity. Available-for-sale - includes debt and marketable equity securities not classified as held-to-maturity or trading (i.e., investments which the Company has no present plans to sell but may be sold in the future under different circumstances). Debt securities classified as held-to-maturity are carried at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses for held-to-maturity securities are excluded from earnings and shareholders' equity. Debt and equity securities classified as available-for-sale are carried at estimated fair value. Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a net amount in a separate component of shareholders' equity until realized. All previous fair value adjustments included in the separate component of shareholders' equity are reversed upon sale. Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers of securities from the held-to-maturity category to the available- for-sale category are recorded as a separate component of shareholders' equity. A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. F-9 69 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 For securities in the held-to-maturity and available-for-sale categories, premiums and discounts are amortized or accreted over the lives of the respective securities as an adjustment to yield using the interest method. Dividend and interest income is recognized when earned. Realized gains and losses for securities classified as available-for-sale and held-to-maturity are included in earnings and are derived using the specific-identification method for determining the cost of securities sold. INTEREST AND FEES ON LOANS Interest income on loans is accrued and credited to income based on the principal amount outstanding. The recognition of interest income is discontinued when a loan becomes 90 days past due or a significant deterioration in the borrower's credit has occurred which, in management's opinion, negatively impacts the collectibility of the loan. Subsequent interest payments received on such loans are applied to principal if any doubt exists as to the collectibility of such principal; otherwise, such receipts are recorded as interest income. Loans are returned to accrual status when management believes full collectibility of principal and interest is expected. 70 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 Effective January 1, 1995, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures (SFAS 118). SFAS 114 defines the recognition criteria for loan impairment and the measurement methods for certain impaired loans and loans for which terms have been modified in troubled-debt restructurings. Impairment of a loan is measured by discounting the total expected future cash flows at the loan's effective rate of interest as stated in the original loan agreement or at the fair value of the collateral for a collateral-dependent loan. SFAS 114 requires a creditor to measure impairment based on the fair value of the collateral when the creditor determines foreclosure is probable. SFAS 118 allows the creditor to use existing methods for recognizing interest income on impaired loans. The Company has elected to continue to use its existing nonaccrual methods for recognizing interest income on impaired loans. The adoption of SFAS 114 and SFAS 118 resulted in no prospective adjustment to the provision for loan losses. OTHER REAL ESTATE OWNED Other real estate owned represents property acquired through foreclosure or deeded to the Company's subsidiary bank in lieu of foreclosure on loans on which the borrowers have defaulted as to the payment of principal and interest. Other real estate owned is recorded on an individual asset basis at the lower of (1) current fair value minus estimated selling costs or (2) fair value at the time of the acquisition (cost). If the fair value minus estimated selling costs is less than cost, the deficiency is expensed or recorded in a valuation reserve account through a provision against income. Subsequent increases in the fair value minus estimated selling costs are recorded through a reversal of the valuation reserve, but not below zero. Gains and losses resulting from the sale of other real estate owned are credited or charged to current period earnings. Costs of maintaining and operating other real estate owned are expensed as incurred, and expenditures to complete or improve other real estate owned properties are capitalized if the expenditures are expected to be recovered upon ultimate sale of the property. OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS Office equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization computed using the straight-line method over their respective estimated useful lives. F-11 71 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 INCOME TAXES The Company and its subsidiaries file consolidated federal income tax returns. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. EARNINGS PER SHARE Earnings per share is calculated by dividing net income by the weighted average number of common shares and common stock equivalents outstanding using the treasury stock method. Common stock equivalents consist of stock options and warrants to purchase common stock, neither of which have a material dilutive effect on earnings per share. CASH FLOW INFORMATION For purposes of reporting cash flows, the Company considers cash and due from banks to be cash and cash equivalents. FINANCIAL INSTRUMENTS For purposes of information included in note 13 regarding disclosures about financial instruments, financial instruments are defined as cash, evidence of an ownership interest in an entity, or a contract that both: * Imposes on one entity a contractual obligation to deliver cash or another financial instrument to a second entity or to exchange other financial instruments on potentially unfavorable terms with the second entity, and * Conveys to that second entity a contractual right to receive cash or another financial instrument from the first entity or to exchange other financial instruments on potentially favorable terms with the first entity. F-12 72 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 RECLASSIFICATION Certain reclassifications have been made to the prior year amounts to conform to the present year presentation. NOTE 3--REGULATORY RESTRICTIONS The Company's subsidiary bank is subject to regulations by regulatory authorities which require the maintenance of minimum capital standards which may affect the amount of dividends the Company's subsidiary bank can pay. At December 31, 1995 and 1994, approximately $1,083,000 and $971,000, respectively, of cash and due from banks represented required reserves on deposits maintained by the Bank in accordance with Federal Reserve Bank requirements. NOTE 4--INVESTMENTS IN DEBT AND EQUITY SECURITIES A summary of the amortized cost and estimated fair value of debt and equity securities classified as available-for-sale at December 31, 1995 and 1994 is as follows:
1995 --------------------------------------------------------- Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value --------- ---------- ---------- ---------- U.S. Treasury securities and obligations of U.S. government corporations and agencies $15,735,311 13,360 (50,270) 15,698,401 Federal Home Loan Bank Stock 366,800 -- -- 366,800 ----------- ------ ------- ---------- $16,102,111 13,360 (50,270) 16,065,201 =========== ====== ======= ========== 1994 --------------------------------------------------------- Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value --------- ---------- ---------- ---------- U.S. Treasury securities and obligations of U.S. government corporations and agencies $15,873,640 530 (134,266) 15,739,904 =========== ====== ======= ==========
The amortized cost and estimated fair value of debt and equity securities classified as available-for-sale at December 31, 1995, by contractual maturity, are shown below. F-13 73 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated cost fair value ------------ ---------- Due in one year or less $ 6,775,630 6,749,436 Due after one year through five years 7,604,953 7,593,099 Due after five years through ten years 1,354,728 1,355,866 Securities with no stated maturity 366,800 366,800 ------------ ---------- $ 16,102,111 16,065,201 ============ ==========
A summary of the amortized cost and estimated fair value of debt and equity securities classified as held-to-maturity at December 31, 1995 and 1994 as follows:
1995 --------------------------------------------------------- Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value --------- ---------- ---------- ---------- Municipal bonds $791,599 2,433 (4,226) 789,806 Mortgage-backed securities 50,133 627 -- 50,760 -------- ----- ------- ------- $841,732 3,060 (4,226) 840,566 ======== ===== ======= ======= 1994 --------------------------------------------------------- Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value --------- ---------- ---------- ---------- Municipal bonds $746,276 -- (22,411) 723,865 Mortgage-backed securities 55,933 -- (1,608) 54,325 -------- ----- ------- ------- $802,209 -- (24,019) 778,190 ======== ===== ======= =======
The amortized cost and estimated fair value of debt securities classified as held-to-maturity at December 31, 1995, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated cost fair value --------- ---------- Due in one year or less $ -- -- Due after one year through five years 567,381 566,643 Due after five years through ten years 224,218 223,163 Mortgage backed securities 50,133 50,760 -------- ------- $841,732 840,566 ======== =======
F-14 74 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 There were no sales of investments in debt securities in 1995 or 1994. Proceeds from sales of investments in debt securities during 1993 were $1,530,083 with gross gains of $26,774 realized on those sales. Debt securities having a carrying value of $8,955,282 and $5,000,721 at December 31, 1995 and 1994, respectively, were pledged as collateral to secure public deposits and for other purposes as required by law. As a member of the Federal Home Loan Bank system administered by the Federal Housing Finance Board, the Bank is required to maintain an investment in the capital stock of the Federal Home Loan Bank of Des Moines (FHLB) in an amount equal to the greater of 1% of the aggregate outstanding balance of loans secured by dwelling units at the beginning of each year or .3% of the total assets of Enterprise Bank. The stock is recorded at cost which represents redemption value. NOTE 5--LOANS A summary of loans by category at December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- Commercial and industrial loans $ 43,727,848 30,001,231 Loans secured by real estate 61,679,002 54,002,216 Other 5,089,353 1,714,356 ------------ ---------- 110,496,203 85,717,803 Less deferred loan fees 32,452 31,051 ------------ ---------- $110,463,751 85,686,752 ============ ==========
The breakdown of loans secured by real estate at December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- Business and personal loans $17,358,778 14,040,576 Income-producing properties 24,933,943 22,680,931 Owner-occupied properties 6,173,812 8,100,332 Real estate development properties 13,212,469 9,180,377 ----------- ---------- $61,679,002 54,002,216 =========== ==========
The Company's subsidiary bank grants commercial, residential, and consumer loans throughout its service area, which consists primarily of the immediate area in which the Bank is located. The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio is concentrated in and secured by real estate. The ability of the Company's borrowers to honor their contractual obligations is dependent upon the local economy and its effect on the real estate market. F-15 75 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 In connection with the investment in FHLB Stock, the Bank has obtained a $2 million line of credit from the FHLB. As collateral for the line, the Bank has entered into a blanket agreement which pledges first mortgage loans with principal balances aggregating 150% of outstanding advances. No advances on the line were made during 1995. Following is a summary of activity for the year ended December 31, 1995 of loans to executive officers and directors or to entities in which such individuals had beneficial interest as Shareholders, officers, or directors. Such loans were made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers and did not involve more than the normal risk of collectibility. Balance, December 31, 1994 $ 4,851,636 New loans 3,370,644 Payments and other reductions (1,855,221) ------------ Balance, December 31, 1995 $ 6,367,059 ============
A summary of activity in the allowance for loan losses for the years ended December 31, 1995, 1994 and 1993 is as follows:
1995 1994 1993 ---- ---- ---- Balance at beginning of year $1,000,000 722,000 606,000 Provisions charged to operations 630,734 449,962 162,462 Loans charged off (242,734) (190,879) (59,104) Recoveries of loans previously charged off 12,000 18,917 12,642 ---------- --------- ------- Balance at end of year $1,400,000 1,000,000 722,000 ========== ========= =======
F-16 76 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 A summary of impaired loans, which include nonaccrual loans, at December 31, 1995, follows:
Impaired loans Allowance for Impaired loans with Nonaccrual continuing to Total impaired losses on no related allowance loans accrue interest loans impaired loans for loan losses - ---------- --------------- -------------- -------------- -------------------- $106,504 948,510 1,055,014 166,045 -- ======== ======= ========= ======= ==========
The average balance of impaired loans during 1995 was $1,252,362. Loans listed as impaired have been considered by Bank management in the loan loss reserve calculation. A summary of interest income on nonaccrual and other impaired loans for the year ended December 31, 1995, follows:
Impaired loans Nonaccrual continuing to loans accrue interest Total ---------- --------------- ----- Income recognized $ -- 90,251 90,251 ======= ====== ====== Interest income had interest accrued $ 3,119 90,251 93,370 ======= ====== ======
At December 31, 1994, the Bank had no loans on a nonaccrual basis. NOTE 6--OTHER REAL ESTATE OWNED A summary of activity in the valuation allowance for other real estate owned for the years ended December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- Balance at beginning of year $ 75,000 -- Provision charged to operations 152,982 75,000 Charge-offs and reversals (207,982) -- --------- ------ Balance at end of year $ 20,000 75,000 ========= ======
F-17 77 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 NOTE 7--OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS A summary of office equipment and leasehold improvements at December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- Data processing equipment $ 536,037 470,261 Furniture, fixtures and equipment 733,505 616,880 Leasehold improvements 497,321 391,219 Automobile 26,426 26,426 ---------- --------- 1,793,289 1,504,786 Less accumulated depreciation and amortization 997,912 820,458 ---------- --------- $ 795,377 684,328 ========== =========
Depreciation and amortization of office equipment and leasehold improvements included in occupancy expense amounted to $177,454 in 1995, $147,346 in 1994 and $148,597 in 1993. The Company's banking facility is leased under an agreement that expires in 1999. The Company has options to renew the lease for three additional five-year periods with future rentals to be agreed upon. This lease provides that the Company pay taxes, maintenance, insurance, and certain other operating expenses applicable to the leased premises. Two portions of the premises are sublet and the proceeds are used to reduce the Company's occupancy expenses. Rent expense amounted to $285,178, $240,905 and $224,044 in 1995, 1994 and 1993, respectively, and sublease rental income amounted to $82,394 in 1995, $40,780 in 1994 and $43,200 in 1993. The Company leases its operating facilities from a partnership in which a director and an officer have an ownership interest. The future minimum rental commitments required under the lease are as follows:
Year Amount ---- -------- 1996 $294,318 1997 307,068 1998 307,068 1999 102,356 ========
Total minimum future rental payments in 1996 will be reduced by $52,214 of sublease rentals to be received in the future under two noncancellable subleases expiring on May 31, 1996 and October 31, 1996. F-18 78 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 NOTE 8--INVESTMENT IN ENTERPRISE FUND, L. P. The Company and its subsidiaries have a 10% interest in a limited liability merchant banking partnership, Enterprise Fund L.P., for which a subsidiary of the Company serves as the general partner. Through December 31, 1995, the Company has invested $100,500 in the partnership, and has an additional $904,500 in future capital commitments. These capital commitments are payable at the partnership's discretion but cannot exceed $333,000 in any one year. This investment, which is accounted for using the equity method of accounting, had a carrying value of $92,278 at December 31, 1995. NOTE 9--INCOME TAXES The components of income tax expense for the years ended December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993 ---- ---- ---- Current: Federal $711,751 572,540 387,110 State 84,086 90,622 70,698 Deferred (54,746) (56,406) (46,900) -------- ------- ------- $741,091 606,756 410,908 ======== ======= =======
A reconciliation of expected income tax expense, computed by applying the statutory federal income tax rate of 34% in 1995, 1994 and 1993, to income before income taxes and the amounts reflected in the consolidated statements of income is as follows:
1995 1994 1993 ---- ---- ---- Income tax expense at statutory rate $695,422 546,699 395,328 Increase (reduction) in income taxes resulting from: Tax-exempt income (24,660) (12,989) (5,018) State and local income taxes, net of federal income tax benefit 55,497 59,810 46,661 Other, net 14,832 13,236 (26,063) -------- ------- ------- Total tax expense $741,091 606,756 410,908 ======== ======= =======
F-19 79 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 A net deferred income tax asset of $337,701 and $315,877 is included in prepaid expenses and other assets in the consolidated balance sheets at December 31, 1995 and 1994, respectively. The tax effect of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 follows:
1995 1994 ---- ---- Deferred tax assets: Allowance for loan losses $412,140 290,064 Other real estate owned 7,493 53,194 Unrealized losses on securities available for sale 12,549 45,471 Other 11,493 -- -------- ------- Total deferred tax assets 443,675 388,729 Deferred tax liabilities: Deferred loan fees 68,244 40,769 Office equipment and leasehold improvements 37,730 32,083 -------- ------- Total deferred tax liabilities 105,974 72,852 -------- ------- Net deferred tax asset $337,701 315,877 ======== =======
A valuation allowance would be provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized. The Company has not established a valuation allowance as of December 31, 1995, due to management's belief that all criteria for recognition have been met, including the existence of a history of taxes paid sufficient to support the realization of the deferred tax assets. NOTE 10--SHAREHOLDERS' EQUITY There were outstanding warrants to purchase 9,950 and 10,000 shares of the Bank common stock at $110 per share on December 31, 1995 and 1994, respectively. The warrants became exercisable in 1990 and expire on June 30, 1996. Warrants representing 50 shares have been exercised as of December 31, 1995 and exchanged for 1,000 shares of the Company's common stock. NOTE 11--COMPENSATION PLANS INCENTIVE STOCK OPTION PLAN The Bank has a qualified stock option plan for the Bank's Executive Committee and key employees. Under the Plan, no employee will be granted stock options if that employee owns 10% or more of the stock. All options must be exercised within a period of less than 10 years from the date of grant. The exercise price of the options may not be less than the fair value of the common stock at the time the options are granted. F-20 80 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 The first portion of the incentive stock option plan is for the benefit of the Executive Committee. It gives the Bank's Board of Directors (the Board) the discretion to grant members of the Executive Committee options to purchase up to an aggregate of 5% of the 48,000 shares of common stock originally issued by the Bank at the time of incorporation (2,400 shares). During 1989, the Board granted options to Executive Committee members to purchase 2,400 shares of Enterprise Bank common stock at an option price of $100 per share. Options become exercisable at the rate of 20% per year. The second portion of the incentive stock option plan is for the benefit of selected employees of the Bank (key employees) and gives the Board the discretion to award to such key employees options equal to 10% of the 48,000 shares of common stock originally issued by the Bank at the time of incorporation (4,800 shares). During 1989, the Board granted options to key employees to purchase 4,800 shares of Enterprise Bank common stock at an option price of $100 per share. Options become exercisable at the rate of 20% per year. At December 31, 1995 and 1994, 100 shares forfeited by participants were available for future issuance under the plan. As a result of a secondary common stock offering in 1990, the Bank's shareholders approved a second qualified stock option plan for members of the Executive Committee and key employees. The provisions are identical to the first plan described previously, and give the Board discretion to grant additional options to purchase up to 1,250 shares to members of the Executive Committee and up to 2,500 shares to key employees. Effective December 1, 1992, the Board of Directors granted options under this second plan to Executive Committee members to purchase 1,250 shares of Enterprise Bank common stock and key employees to purchase 2,500 shares with an exercise price of $140 per share. At December 31, 1995, 80 shares forfeited by participants were available for future issuance under the plan. Following is a summary of the various plan transactions:
Number Price of shares per share Total --------- --------- ----- December 31, 1993 10,500 $ 100 - 140 $1,222,000 Granted 250 140 35,000 Exercised (120) 100 - 140 (12,800) Forfeited (80) 140 (11,200) ------ ----------- ---------- December 31, 1994 10,550 $ 100 - 140 1,233,000 Granted 100 185 18,500 Forfeited -- -- -- ------ ----------- ---------- December 31, 1995 10,650 $ 100 - 185 $1,251,500 ====== =========== ==========
F-21 81 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 Effective January 1, 1993, the Company adopted a 401(k) thrift plan which covers substantially all full-time employees over the age of 21. The amount charged to expense for contributions to the plan was $30,000 for both 1995 and 1994 and $22,452 in 1993. NOTE 12--LITIGATION Various legal claims have arisen during the normal course of business which, in the opinion of management, after discussion with legal counsel, will not result in any material liability. NOTE 13--DISCLOSURES ABOUT FINANCIAL INSTRUMENTS The Bank issues financial instruments with off-balance-sheet risk in the normal course of the business of meeting the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company's extent of involvement and potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its balance sheets. The contractual amount of off-balance-sheet financial instruments as of December 31, 1995 and 1994 is as follows:
1995 1994 ---- ---- Commitments to extend credit $51,501,823 32,556,015 Standby letters of credit 3,114,206 2,403,889 =========== ==========
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Of the total commitments to extend credit at December 31, 1995, approximately $63,500 represents fixed rate loan commitments. Since certain of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate. F-22 82 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support contractual obligations of Bank customers. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. At December 31, 1995, the Company adopted the provisions of SFAS 107, Disclosures About Fair Value of Financial Instruments. SFAS 107 extends existing fair value disclosure for some financial instruments by requiring disclosure of the fair value of such financial instruments, both assets and liabilities recognized and not recognized in the consolidated balance sheets. Following is a summary of the carrying amounts and fair values of the Company's financial instruments on the consolidated balance sheets at December 31, 1995:
1995 ----------------------- Carrying Estimated amount fair value -------- ---------- Balance sheet assets: Cash and due from banks $ 8,109,804 8,109,804 Federal funds sold 16,230,000 16,230,000 Investments in debt and equity securities 16,906,933 16,905,767 Loans, net 109,063,751 110,714,776 Accrued interest receivable 981,042 981,042 ============ =========== Balance sheet liabilities: Deposits $141,140,064 141,444,569 Accrued interest payable 287,199 287,199 ============ ===========
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate such value: CASH AND OTHER SHORT-TERM INSTRUMENTS For cash and due from banks, federal funds sold and accrued interest receivable (payable), the carrying amount is a reasonable estimate of fair value, as such instruments reprice in a short time period. INVESTMENTS IN DEBT AND EQUITY SECURITIES Fair values are based on quoted market prices or dealer quotes. F-23 83 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 LOANS The fair value of adjustable-rate loans approximates cost. The fair value of fixed-rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. DEPOSITS The fair value of demand deposits, interest-bearing transaction accounts, money market accounts and savings deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT The fair value of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties drawing on such financial instruments, and the present credit worthiness of such counterparties. The Company believes such commitments have been made on terms which are competitive in the markets in which it operates; however, no premium or discount is offered thereon and accordingly, the Company has not assigned a value to such instruments for purposes of this disclosure. LIMITATIONS - Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates. F-24 84 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 NOTE 14--PARENT COMPANY ONLY FINANCIAL STATEMENTS Condensed Balance Sheets
December 31 1995 ----------- Assets ------ Cash $ 26,466 Investment in Enterprise Bank 11,849,039 Investment in Enterprise Capital Resources 101,195 Investment in Enterprise Fund, L.P. 82,612 Other assets 13,000 ----------- Total assets $12,072,312 =========== Liabilities and Shareholders' Equity ------------------------------------ Accounts payable and other liabilities $ 20,165 Shareholders' equity 12,052,147 ----------- Total liabilities and shareholders' equity $12,072,312 =========== Condensed Statements of Operations Year Ended December 31 1995 ----------- Income: Dividends from subsidiaries $ 300,000 ----------- Expenses: Loss on investment in Enterprise Fund, L.P. 7,388 Other expenses 27,460 ----------- Total expenses $ 34,848 ----------- Income before tax benefit and equity in undistributed earnings of subsidiaries 265,152 Income tax benefit 13,590 ----------- Income before equity in undistributed earnings of subsidiaries 278,742 Equity in undistributed earnings of subsidiaries 1,025,525 ----------- Net income $ 1,304,267 ===========
F-25 85 ENTERBANK HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 Condensed Statements of Cash Flow
Year Ended December 31 1995 ----------- Cash flows from operating activities: Net Income $1,304,267 Adjustments to reconcile net income to net cash provided by operating activities: Net income of subsidiaries (1,325,525) Dividends from subsidiaries 300,000 Other, net 14,553 ---------- Net cash provided by (used in) operating activities 293,295 ---------- Cash flows from investing activities: Capital contributions to subsidiaries (100,000) Investment in Enterprise Fund, L.P. (90,000) ---------- Net cash provided by (used in) investing activities (190,000) ---------- Cash flows from financing activities: Payment of stock dividends (76,829) ---------- Net cash provided by (used in) financing activities (76,829) ---------- Net increase (decrease) in cash and cash equivalents 26,466 Cash and cash equivalents, beginning of year 0 ---------- Cash and cash equivalents, end of year $ 26,466 ==========
NOTE 15--BASIS OF PRESENTATION--INTERIM FINANCIAL STATEMENTS (UNAUDITED) The unaudited interim consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions. The unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. All adjustments made were of a normal recurring nature. F-26 86 ======================================================= TABLE OF CONTENTS
Page ---- Prospectus Summary 1 Risk Factors 5 The Company 8 Use of Proceeds 9 Capitalization 10 Dilution 10 Business 12 Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Supervision and Regulation 36 Management 41 Beneficial Ownership of Securities 47 Dividends 49 Market for Common Stock 49 Description of Capital Stock 49 Certain Transactions 52 Plan of Distribution 53 Legal Matters 54 Experts 55 Index to Financial Statements F-1
--------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. ======================================================= ======================================================= 451,612 Shares ENTERBANK HOLDINGS, INC. Common Stock ------------------ Prospectus , 1996 ------------------ ======================================================= 87 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The estimated expenses to be paid by the Company in connection with the distribution of the securities being registered, other than underwriting discounts and commissions, are as follows: Securities and Exchange Commission Fee $ 3,000 --------- Accounting Fees and Expenses $ 35,000 --------- Blue Sky Fees and Expenses $ 2,000 --------- Legal Fees and Expenses $ 50,000 --------- Printing Expenses $ 20,000 --------- Miscellaneous Expenses $ 10,000 --------- Total $ 120,000 =========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Under Sections 102(b)(7) and 145 of the Delaware General Corporate Law ("DGCL"), the Company has broad power to indemnify and insure its directors and officers against liabilities they may incur in their capacities as such. Section 102(b)(7) of the DGCL permits a corporation to adopt a provision in its Certificate of Incorporation eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except that such provision shall not limit the liability of a director for: (i) any breach of the director's duty of loyalty to the corporation or its shareholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) liability under Section 174 of the DGCL for unlawful payment of dividends or stock purchases or redemptions; or (iv) any transaction from which the director derived an improper personal benefit. The Company's Certificate of Incorporation limits the personal liability of the Company's directors for monetary damages to the fullest extent permissible under applicable law. Under Section 145 of the DGCL, a corporation may indemnify any person made a party or threatened to be made a party to any type of proceeding (other than an action by or in the right of the corporation) because he is or was an officer, director, employee or agent of the corporation, or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or entity, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such proceeding: (i) if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation; or (ii) in the case of a criminal proceeding, he had no reasonable cause to believe that his conduct was unlawful. A corporation may indemnify any person made a party or threatened to be made a party to any threatened, pending or completed action or suit brought by or in the right of the corporation because he was an officer, director, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or other entity, against expenses actually and reasonably incurred in connection with such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that there may be no such II-1 88 indemnification if the person is found liable to the corporation unless, in such a case, the court determines the person is entitled thereto. A corporation must indemnify a director, officer, employee or agent against expenses actually and reasonably incurred by him who successfully defends himself in a proceeding to which he was a party because he was a director, officer, employee or agent of the corporation. Expenses incurred by an officer or director (or other employees or agents as deemed appropriate by the Board of Directors) in defending a civil or criminal proceeding may be paid by the Company in advance of the final disposition of such proceeding upon delivery of a written affirmation by the director of his good faith belief that the standard of conduct necessary for indemnification has been met and upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. The Delaware law indemnification and expense advancement provisions are not exclusive of any other rights which may be granted by the bylaws, a vote of shareholders or disinterested directors, agreement or otherwise. The Company's Bylaws provide for the indemnification of (but not advancement of defense costs to the) directors and officers (but not employees and agents) of the Company to the fullest extent not prohibited by Delaware law. The Company has also obtained directors and officers liability insurance covering, subject to certain exceptions, actions taken by the Company's directors and officers in their capacities as such. The indemnification and insurance provisions discussed above may be sufficiently broad to permit indemnification of the Company's officers and directors for liabilities arising under the Securities Act. The Company has been advised that the Securities and Exchange Commission is of the opinion that indemnification for liabilities under the Securities Act is against public policy. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES On September 30, 1996, the Company issued 198,960 shares of its Common Stock to holders of common stock of the Bank incidental to a plan of reorganization for the purpose of making the Company the sole owner of Bank capital stock. Such securities were issued in reliance on Section 4(2) of the Securities Act of 1933. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits The exhibits are as set forth in the Exhibit Index. (b) Financial Statement Schedules ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes that: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; II-2 89 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 90 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the undersigned Registrant has duly caused this Amendment to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri, on the 9th day of December, 1996 ENTERBANK HOLDINGS, INC. By /s/ Fred H. Eller ---------------------------------- Fred H. Eller Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Fred H. Eller ------------------------------------ Chief Executive Officer and Director December 9, 1996 Fred H. Eller Principal Executive Officer /s/ Joseph D. Garea ------------------------------------ Chief Financial Officer, Treasurer and December 9, 1996 Joseph D. Garea Director Principal Financial Officer /s/ James C. Wagner ------------------------------------ Vice President and Controller December 9, 1996 James C. Wagner Principal Accounting Officer ------------------------------------ Director December 9, 1996 Kevin C. Eichner ------------------------------------ Director December 9, 1996 Robert F. Saur ------------------------------------ Director December 9, 1996 Henry D. Warshaw By /s/ Joseph D. Garea ----------------------------- Joseph D. Garea, Attorney-in-Fact Joseph D. Garea, by signing his name hereto, does sign this document on behalf of the persons named above, pursuant to a power of attorney duly executed by such persons, filed herewith as Exhibit 24.1.
II-4 91 EXHIBIT INDEX
Exhibit Number Description - ------ ----------- 3.1 The Company's Certificate of Incorporation, as amended. 3.2 The Company's Bylaws, as amended. 5.1 Opinion of Polsinelli, White, Vardeman & Shalton, P.C. 10.1 Lease with respect to the Company's Clayton banking facility. 10.2 Escrow Agreement with respect to funds received for subscriptions under the Offering. 11.1 Statement re computation of per share earnings. 16.1 Letter of Ernst & Young LLP regarding change in certifying accountant. 21.1 List of Subsidiaries of the Company. 23.1 Consent of KPMG Peat Marwick LLP with regard to the use of its report of the Company's financial statements. 23.2 Consent of Ernst & Young LLP with regard to the use of its report of the Company's financial statements. 23.3 Consent of Polsinelli, White, Vardeman & Shalton, P.C. (included in Exhibit 5.1). 24.1 Powers of Attorney (filed on October 24, 1996, as Exhibit 24.1 to the Company's Registration Statement and incorporated herein by this reference). 99.1 Cover letter to accompany the prospectus.
92 APPENDIX Page 2 of the Registration Statement contains performance charts depicting Earnings Per Share, Net Income and Total Assets. EX-3.1 2 CERTIFICATE OF INCORPORATION 1 CERTIFICATE OF INCORPORATION ---------------------------- OF -- ENTERBANK HOLDINGS, INC. ------------------------ The undersigned, being a natural person of the age of eighteen (18) years or more, for the purpose of forming a corporation under the "General Corporation Law of the State of Delaware", does hereby adopt the following Articles of Incorporation: ARTICLE ONE ----------- The name of the corporation is Enterbank Holdings, Inc. ARTICLE TWO ----------- The address of the corporation's initial registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, Delaware, 19801, County of New Castle, and the name of its initial registered agent at such address is The Corporation Trust Company. ARTICLE THREE ------------- The corporation is formed for the specific purpose to act as a bank holding company, as defined by the Bank Holding Company Act and any amendments thereto, and is authorized to engage in any and all activities permitted under that Act as well as to engage in all other lawful acts or activities for which corporations may be organized under the "General Corporation Law of the State of Delaware". ARTICLE FOUR ------------ The aggregate number of shares which the corporation shall have authority to issue shall be one million eight hundred seventy nine thousand (1,879,000) shares of common stock par value $.01 each. The distinguishing preferences, qualifications, limitations, restrictions and special or relative rights in respect to the common stock is as follows: (a) In all elections of Directors of this Corporation, each common shareholder shall have the right to cast as many votes as shall equal (x) the number of such shares held by him or her and multiplied by (y) the number of Directors to be elected, and he or she may cast all of such votes for a single Director or may distribute them among the number of Directors to be elected, or any two (2) or more of them, as such shareholder may deem fit. 2 ARTICLE FIVE ------------ No holder of any shares of stock of the corporation, whether now or hereafter authorized or outstanding, shall have any preemptive or preferential right of any kind to acquire, subscribe for or have offered to him any shares of stock or any other securities of the corporation, whether such stock or other securities are now or hereafter authorized or issued. ARTICLE SIX ----------- The name and mailing address of the incorporator is as follows: Dennis S. Dockins 10 South Broadway Suite 1800 St. Louis, MO 63102 ARTICLE SEVEN ------------- The number of directors shall be fixed by, or in the manner provided in, the By-laws of the corporation. Unless and except to the extent that the By-laws of the corporation shall so require, the election of the directors of the corporation need not be by written ballot. ARTICLE EIGHT ------------- In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the board of directors is expressly authorized and empowered: (a) to make, alter, change, add to or repeal the By-laws of the corporation. (b) subject to the laws of the State of Delaware, from time to time to sell, lease or otherwise dispose of any part or parts of the properties of the corporation and to cease to conduct the business connected therewith or again to resume the same, as it may deem best; and (c) in addition to the powers and authorities hereinbefore stated or conferred upon the board of directors by the laws of the State of Delaware, to execute all such powers and to do all acts and things as may be exercised or done by the corporation; subject, however, to the express provisions of said laws, this certificate of incorporation and the By-laws of the corporation. ARTICLE NINE ------------ Any director or any officer of the corporation elected or appointed by the stockholders of the corporation or by its board of directors may be removed at any time in the manner prescribed by the By-laws of the corporation. - 2 - 3 ARTICLE TEN ----------- The duration of the corporation is perpetual. ARTICLE ELEVEN -------------- The corporation shall indemnify all its directors and officers to the fullest extent permitted by the General Corporation Law of the State of Delaware and as further set forth in the By-laws. ARTICLE TWELVE -------------- No director shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director, as a director; provided, however, a director shall be liable to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for liability under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article shall not adversely affect any right or protection of a director of the corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification. IN WITNESS WHEREOF, I have hereunto set my hand this 29th day -------- of December, 1994. /s/ Dennis S. Dockins ----------------------------------------- Dennis S. Dockins - 3 - 4 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF ENTERBANK HOLDINGS, INC. ------------------------ Enterbank Holdings, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify: FIRST: That the Board of Directors of the Corporation at a meeting duly convened and held adopted the following resolution: RESOLVED, that the Certificate of Incorporation of Enterbank Holdings, Inc. is hereby amended so that ARTICLE FOUR thereof shall read in its entirety as follows: "ARTICLE FOUR ------------ The aggregate number of shares which the Corporation shall have authority to issue shall be three million (3,000,000) shares of common stock par value $.01 each. The distinguishing preferences, qualifications, limitations, restrictions and special or relative rights in respect to the common stock are as follows: In all elections of Directors of the Corporation, each common shareholder shall have the right to cast as many votes as shall equal (x) the number of shares held by him or her, and multiplied by (y) the number of Directors to be elected, and he or she may cast all of such votes for a single Director or may distribute them among the number of Directors to be elected, or any two (2) or more of them, as such shareholder may deem fit." SECOND: That said amendment has been approved and authorized by the holders of a majority of the issued and outstanding Common Stock entitled to vote, on July 25, 1996 at a special meeting of the stockholders called and held upon notice in accordance with the provisions of Section 222 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware. 5 IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Fred H. Eller, President of the Corporation, this _____ day of July, 1996. /s/ Fred H. Eller ----------------------------------------- Fred H. Eller, President ATTEST: /s/ Frank J. Sgroi - ---------------------------------- Frank J. Sgroi, Secretary STATE OF MISSOURI ) ) COUNTY OF ST. LOUIS ) I, Kimberly D.H. Crossman, a Notary Public, do hereby certify that on ---------------------- this 30th day of July, 1996, personally appeared before me Fred H. Eller ------ who being by me first duly sworn, declared that he is the President of Enterbank Holdings, Inc., that he signed the foregoing document as President of the Corporation, and that the statements therein contained are true. /s/ Kimberly D.H. Crossman ---------------------------------------- Notary Public My Commission Expires: Kimberly D.H. Crossman Notary Public State of Missouri St. Louis County My Commission Expires Nov. 20, 1996 - ---------------------------------------- (SEAL) 2 EX-3.2 3 BY-LAWS 1 BYLAWS ------ OF -- ENTERBANK HOLDINGS, INC. ------------------------ (A Delaware Corporation) As used in these Bylaws, unless the context otherwise requires, the term: 1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation. 1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation. 1.3 "Board" means the Board of Directors of the Corporation. 1.4 "Bylaws" means the initial bylaws of the Corporation, as amended from time to time. 1.5 "Certificate of Incorporation" means the initial certificate of incorporation of the Corporation, as amended, supplemented or restated from time to time. 1.6 "Corporation" means Enterbank Holdings, Inc. 1.7 "Directors" means directors of the Corporation. 1.8 "General Corporation Law" means the General Corporation Law of the State of Delaware, as amended from time to time. 1.9 "Office of the Corporation" means the executive office of the Corporation, anything in Section 131 of the General Corporation Law to the contrary notwithstanding. 1.10 "President" means the President of the Corporation. 1.11 "Secretary" means the Secretary of the Corporation. 1.12 "Stockholders" means stockholders of the Corporation. 2 1.13 "Total number of directors" means the total number of directors determined in accordance with Section 141(b) of the General Corporation Law and Section 3.2 of the Bylaws. 1.14 "Treasurer" means the Treasurer of the Corporation. 1.15 "Vice President" means a Vice President of the Corporation. 1.16 "Whole Board" means the total number of directors of the Corporation. ARTICLE 2 STOCKHOLDERS ------------ 2.1 Place of Meeting. Every meeting of stockholders shall be held at ---------------- the office of the Corporation or at such other place within or without the State of Delaware as shall be specified or fixed in the notice of such meeting or in the waiver or notice thereof. 2.2 Annual Meeting. A meeting of stockholders shall be held annually -------------- for the election of directors and the transaction of other business at such hour as may be determined by the Board on the fourth Thursday in April of each year, starting in 1996, or the next succeeding business day if that day is a legal holiday. 2.3 Deferred Meeting for Election of Directors, Etc. If the annual ------------------------------------------------ meeting of stockholders for the election of directors and the transaction of other business is not held within the month specified in Section 2.2, the Board shall call a meeting of stockholders for the election of directors and the transaction of other business as soon thereafter as convenient. 2.4 Other Special Meetings. A special meeting of stockholders (other ---------------------- than a special meeting of the election of directors), unless otherwise prescribed by statute, may be called at any time by the President, by a majority of the Board or upon written request of the holders of at least fifty percent (50%) of all of the issued and outstanding shares entitled to vote, provided they 2 3 shall make written application to the Secretary stating the time, place, and purpose or purposes, and the Secretary shall thereupon call the meeting and issue notice as herein provided. At any special meeting of stockholders, only such business may be transacted as is related to the purpose or purposes of such meeting set forth in the notice thereof given pursuant to Section 2.6 of the Bylaws or in any waiver of notice thereof given pursuant to Section 2.7 of the Bylaws. 2.5 Fixing Record Date. For the purpose of determining the stockholders ------------------ entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a date as the record date for any such determination of stockholders. Such date shall not be more than fifty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no such record date is fixed: 2.5.1 The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; 2.5.2 The record date for determining stockholders entitled to express consent to corporation action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed; 3 4 2.5.3 The record date for determining stockholders for any purpose other than those specified in Sections 2.5.1 and 2.5.2 shall be at the close of business on the day on which the Board adopts the resolution relating thereto. When a determination of stockholders entitled to notice of or to vote at any meeting of stockholders has been made as provided in this Section 2.5, such determination shall apply to any adjournment thereof, unless the Board fixes a new record date for the adjourned meeting. 2.6 Notice of Meetings of Stockholders. Except as otherwise provided in ---------------------------------- Sections 2.5 and 2.7 of the Bylaws, whenever under the General Corporation Law or the Certificate of Incorporation or the Bylaws, stockholders are required or permitted to take any action at a meeting, written notice shall be given stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. A copy of the notice of any meeting shall be given, personally or by mail, not less than ten nor more than fifty days before the date of the meeting, to each stockholder entitled to notice of or to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice required by this section has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted at the meeting as originally called. If, however, the adjournment is for more than thirty days, or if after 4 5 the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.7 Waivers of Notice. Whenever notice is required to be given to any ----------------- stockholder under any provision of the General Corporation Law or the Certificate of Incorporation or the Bylaws, a written waiver thereof, signed by the stockholder entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. 2.8 List of Stockholders. The Secretary shall prepare and make, or -------------------- cause to be prepared and made, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 5 6 2.9 Quorum of Stockholders; Adjournment. The holders of a majority of ----------------------------------- the shares of stock entitled to vote at any meeting of stockholders, present in person or represented by proxy, shall constitute a quorum for the transaction of any business at such meeting. When a quorum is once present to organize a meeting of stockholders, it is not broken by the subsequent withdrawal of any stockholders. The holders of a majority of the shares of stock present in person or represented by proxy at any meeting of stockholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. 2.10 Voting; Proxies. Unless otherwise provided in the Certificate of --------------- Incorporation, every stockholder of record shall be entitled at every meeting of stockholders to one vote for each share of capital stock standing in his name on the record of stockholders determined in accordance with Section 2.5 of the Bylaws. If the Certificate of Incorporation provides for more or less than one vote for any share, on any matter, every reference in the Bylaws or the General Corporation Law to a majority of other proportion of stock shall refer to such majority or other proportion of the votes of such stock. The provisions of Sections 212 and 217 of the General Corporation Law shall apply in determining whether any shares of capital stock may be voted and the persons, if any, entitled to vote such shares; but the Corporation shall be protected in treating the persons in whose names shares of capital stock stand on the record of stockholders as owners thereof for all purposes. At any meeting of stockholders (at which a quorum was present to organize the meeting), all matters, except as otherwise provided by law or by the Certificate of Incorporation or by the Bylaws, shall be decided by a majority of the votes cast at such meeting by the holders of shares present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present when the vote is taken. All elections of directors shall be by 6 7 written ballot unless otherwise provided in the Certificate of Incorporation. In all elections for directors, each stockholder shall have as many votes as shall equal the number of voting shares held by such stockholder in the Corporation, multiplied by the number of directors to be elected, and such stockholder may cast all his votes, either in person or by proxy, for one candidate or distribute then among two or more candidates. In voting on any other question on which a vote by ballot is required by law or is demanded by any stockholder entitled to vote, the voting shall be by ballot. Each ballot shall be signed by the stockholder voting or by his proxy, and shall state the number of shares voted. On all other questions, the voting may be by viva voce. Every stockholder entitled to vote at a meeting of stockholders or - ---- ---- to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. The validity and enforceability of any proxy shall be determined in accordance with Section 212 of the General Corporation Law. 2.11 Denial of Preemptive Rights. No shareholder of the Corporation shall --------------------------- have any preemptive right to subscribe for or to purchase, or to have offered to him for subscription or purchase, any additional securities of the Corporation. 2.12 Selection and Duties of Inspectors at Meetings of Stockholders. -------------------------------------------------------------- The Board, in advance of any meeting of stockholders, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at such meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint one or more inspectors. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the Board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall 7 8 take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspector or inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting or any stockholder entitled to vote thereat, the inspector or inspectors shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. Any report or certificate made by the inspector or inspectors shall be prima facie evidence of the facts stated and of the vote as certified by him or them. 2.13 Organization. At every meeting of stockholders, the President, or ------------ in the absence of the President, a Vice President, and in case more than one Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President, based on age, present), shall act as chairman of the meeting. The Secretary, or in his absence one of the Assistant Secretaries, shall act as secretary of the meeting. In case none of the officers above designated to act as chairman or secretary of the meeting, respectively, shall be present, a chairman or a secretary of the meeting, respectively, shall be present, a chairman or a secretary of the meeting, as the case may be, shall be chosen by a majority of the votes cast at such meeting by the holders of shares of capital stock present in person or represented by proxy and entitled to vote at the meeting. 8 9 2.14 Order of Business. The order of business at all meetings of ----------------- stockholders shall be as determined by the chairman of the meeting, but the order of business to be followed at any meeting at which a quorum is present may be changed by a majority of the votes cast at such meeting by the holders of shares of capital stock present in person or represented by proxy and entitled to vote at the meeting. 2.15 Written Consent of Stockholders Without a Meeting. Unless otherwise ------------------------------------------------- provided in the Certificate of Incorporation, any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE 3 DIRECTORS --------- 3.1 General Powers. Except as otherwise provided in the Certificate of -------------- Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and regulations, not inconsistent with the Certificate of Incorporation or the Bylaws or applicable laws, as it may deem proper for the conduct of its meetings and the management of the Corporation. In addition to the powers expressly conferred 9 10 by the Bylaws, the Board may exercise all powers and perform all acts which are not required, by the Bylaws or the Certificate of Incorporation or by law, to be exercised and performed by the stockholders. 3.2 Number; Qualification; Term of Office. The Board shall initially ------------------------------------- consist of four (4) members. The classes of directors shall be fixed initially by the incorporator and may thereafter be changed from time to time by action of the Board. Directors need not be stockholders. Each director shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. 3.3 Election. Directors shall, except as otherwise required by law or -------- by the Certificate of Incorporation, be elected by a plurality of the votes cast at a meeting of stockholders by the holders of shares entitled to vote in the election. 3.4 Newly Created Directorships and Vacancies. Unless otherwise provided ----------------------------------------- in the Certificate of Incorporation, newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any other reason, including the removal of directors without cause, may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, or may be elected by a plurality of the votes cast by the holders of shares of capital stock entitled to vote in the election at a special meeting of stockholders called for that purpose. A director elected to fill a vacancy shall be elected to hold office until his successor is elected and qualified, or until his earlier death, resignation or removal. 3.5 Resignations. Any director may resign at any time by written notice ------------ to the Corporation. Such resignation shall take effect at the time therein specified, and, unless 10 11 otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. 3.6 Removal of Directors. Subject to the provisions of Section 141(k) -------------------- of the General Corporation Law, any or all of the directors may be removed with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. 3.7 Compensation. Each director, in consideration of his service as such, ------------ shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at directors' meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties. Each director who shall serve as a member of any committee of directors in consideration of his serving as such shall be entitled to such additional amount per annum or such fees for attendance at committee meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable expenses incurred by him in the performance of his duties. Nothing contained in this section shall preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving proper compensation therefor. 3.8 Place and Time of Meetings of the Board. Meetings of the Board, --------------------------------------- regular or special, may be held at any place within or without the State of Delaware. The times and places for holding meetings of the board may be fixed from time to time by resolution of the Board or (unless contrary to resolution of the Board) in the notice of the meeting. 3.9 Annual Meetings. On the day when and at the place where the annual --------------- meeting of stockholders for the election of directors is held, and as soon as practicable thereafter, the Board 11 12 may hold its annual meeting, without notice of such meeting, for the purposes of organization, the election of officers and the transaction of other business. The annual meeting of the Board may be held at any other time and place specified in a notice given as provided in Section 3.11 of the Bylaws for special meetings of the Board or in a waiver of notice thereof. 3.10 Regular Meetings. Regular meetings of the Board may be held at such ---------------- times and places as may be fixed from time to time by the Board. Unless otherwise required by the Board, regular meetings of the Board may be held without notice. If any day fixed for a regular meeting of the Board shall be a Saturday or Sunday or a legal holiday at the place where such meeting is to be held, then such meeting shall be held at the same hour at the same place on the first business day thereafter which is not a Saturday, Sunday or legal holiday. 3.11 Special Meetings. Special meetings of the Board shall be held ---------------- whenever called by the President or the Secretary or by a majority of the directors. Notice of such special meeting of the Board shall, if mailed, be addressed to each director at the address designated by him for the purpose or, if none is designated, at his last known address at least three days before the date on which the meeting is to be held; or such notice shall be sent to each director at such address by telegraph, cable or wireless, or be delivered to him personally, not later than the day before the date on which such meeting is to be held. Every such notice shall state the time and place of the meeting but need not state the purposes of the meeting, except to the extent required by law. If mailed, each notice shall be deemed given when deposited, with postage thereon prepaid, in a post office or official depository under the exclusive care and custody of the United States post office department. Such mailing shall be by first class mail. 12 13 3.12 Adjourned Meetings. A majority of the directors present at any ------------------ meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. Notice of any adjourned meeting of the Board need not be given to any director whether or not present at the time of the adjournment. Any business may be transacted at any adjourned meeting that might have been transacted at the meeting as originally called. 3.13 Waiver of Notice. Whenever notice is required to be given to any ---------------- director or member of a committee of directors under any provision of the General Corporation Law or of the Certificate of Incorporation or Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice. 3.14 Organization. At each meeting of the Board, the President of the ------------ Corporation, or in the absence of the President, a chairman chosen by a majority of the directors present, shall preside. The Secretary shall act as secretary at each meeting of the Board. In case the Secretary shall be absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all 13 14 Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the meeting. 3.15 Quorum of Directors. The lowest number of directors that constitutes ------------------- more than one half (1/2) of the elected Board of Directors shall constitute a quorum, and the affirmative vote of not less than such number shall be required in order to constitute the act of the Board of Directors. 3.16 Action by the Board. All corporate action taken by the Board or any ------------------- committee thereof shall be taken at a meeting of the Board, or of such committee, as the case may be, except that any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.16 shall constitute presence in person at such meeting. Except as otherwise provided by the Certificate of Incorporation or by law, the vote of a majority of the directors present (including those who participate by means of conference telephone or similar communications equipment) at the time of the vote, if a quorum is present at such time, shall be the act of the Board. 14 15 ARTICLE 4 COMMITTEES OF THE BOARD ----------------------- The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and, unless the resolution designating it expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. 15 16 ARTICLE 5 OFFICERS -------- 5.1 Officers. The Board shall elect a President, a Secretary and a -------- Treasurer, and may elect or appoint a Chief Executive Officer, one or more Vice Presidents and such other officers as it may determine. The Board may designate one or more Vice Presidents as Executive Vice Presidents, and may use descriptive words or phrases to designate the standing, seniority or area of special competence of the Vice Presidents elected or appointed by it. Each officer shall hold his office until his successor is elected and qualified or until his earlier death, resignation or removal in the manner provided in Section 5.2 of the Bylaws. Any two or more offices may be held by the same person. The Board may require any officer to give a bond or other security for the faithful performance of his duties, in such amount and with such sureties as the Board may determine. All officers as between themselves and the Corporation shall have such authority and perform such duties in the management of the Corporation as may be provided in the Bylaws or as the Board may from time to time determine. 5.2 Removal of Officers. Any officer elected or appointed by the Board ------------------- may be removed by the Board with or without cause. The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. 5.3 Resignations. Any officer may resign at any time by so notifying the ------------ Board, the President or the Secretary in writing. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the 16 17 acceptance of such resignation shall not be necessary to make it effective. The resignation of an officer shall be without prejudice to the contract rights of the Corporation, if any. 5.4 Vacancies. A vacancy in any office because of death, resignation, --------- removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed in the Bylaws for the regular election or appointment to such office. 5.5 Compensation. Salaries or other compensation of the officers may be ------------ fixed from time to time by the Board. No officer shall be prevented from receiving a salary or other compensation by reason of the fact that he is also a director. 5.6 Chief Executive Officer. The Chief Executive Officer of the Company ----------------------- shall exercise general supervision, direction, management and control over all the business and affairs of the Company, subject at all times to the control of the Board of Directors. Subject to the provisions of Article 2, the Chief Executive Officer shall act as chairman of each meeting of the shareholders. The Chief Executive Officer shall also act as chairman of each meeting of the Board of Directors when he is present, and in general shall perform all duties incident to the Office of Chief Executive Office and such other duties as from time to time may be assigned to him by the Board. 5.7 President. If there is no Chief Executive Officer elected or --------- appointed, then the President shall assume the duties of the Chief Executive Officer as set forth above and as stated herein. If the Chief Executive Officer is elected but is unable to act, then the President shall become Acting Chairman of the Board and in that capacity perform all of the duties of the Chief Executive Officer, unless some other officer is designated by the Board of Directors to perform those duties. The President shall convene meetings of the stockholders pursuant to Article 2. He 17 18 may, with the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, sign certificates for shares of the capital stock of the Corporation and, in general, he shall perform all duties incident to the office of President and such other duties as from time to time may be prescribed by the Board of Directors or by the Chief Executive Officer. 5.8 Vice Presidents. At the request of the President, or in his absence, --------------- at the request of the Board, the Vice President shall (in such order as may be designated by the Board or, in the absence of any such designation, in order of seniority based on age) perform all of the duties of the President and so acting shall have all the powers of and be subject to all restrictions upon the President. Any Vice President may also, with the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, sign certificates for shares of capital stock of the Corporation; may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing and execution thereof shall be expressly delegated by the Board or by the Bylaws to some other officer or agent of the Corporation, or shall be required by law otherwise to be signed or executed; and shall perform such other duties as from time to time may be assigned to him by the Board or by the President. 5.9 Secretary. The Secretary, if present, shall act as secretary of all --------- meetings of the stockholders and of the Board, and shall keep the minutes thereof in the proper book or books to be provided for that purpose; he shall see that all notices required to be given by the Corporation are duly given and served; he may, with the President or a Vice President, sign certificates for shares of capital stock of the Corporation; he shall be custodian of the seal of the Corporation and may seal with the seal of the Corporation, or a facsimile thereof, all certificates for shares of 18 19 the capital stock of the Corporation and all documents the execution of which on behalf of the Corporation under its corporate seal is authorized in accordance with the provisions of the Bylaws; he shall have charge of the stock ledger and also of the other books, records and papers of the Corporation relating to its organization and management as a Corporation, and shall see that the reports, statements and other documents required by law are properly kept and filed; and shall, in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board or by the President. 5.10 Treasurer. The Treasurer shall have charge and custody of, and be --------- responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with these Bylaws; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed in such manner as shall be determined in accordance with any provisions of the Bylaws, and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books to be kept by him or under his direction full and adequate account of all moneys received or paid by him for the account of the Corporation; have the right to require, from time to time, reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the President or the Board, whenever the President or the Board, respectively, shall require him so to do, an account of the financial condition of the Corporation and of all his transactions as Treasurer; exhibit at all reasonable times his books of account and other records to any of the 19 20 directors upon application at the office of the Corporation where such books and records are kept; and, in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board or by the President; and he may sign with the President or a Vice President certificates for shares of capital stock of the Corporation. 5.11 Assistant Secretaries and Assistant Treasurers. Assistant ---------------------------------------------- Secretaries and Assistant Treasurers, if any, shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by the Board or by the President. Assistant Secretaries and Assistant Treasurers may, with the President or a Vice President, sign certificates for shares of capital stock of the Corporation. ARTICLE 6 CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. ---------------------------------------------- 6.1 Execution of Contracts. The Board may authorize any officer, ---------------------- employee or agent, in the name and on behalf of the Corporation, to enter into any contract or execute and satisfy any instrument, and any such authority may be general or confined to specific instances or otherwise limited. 6.2 Loans. The President or any other officer, employee or agent ----- authorized by the Bylaws or by the Board may effect loans and advances at any time for the Corporation from any bank, trust company or other institutions or from any firm, corporation or individual and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, and, when authorized by the Board so to do, may pledge and hypothecate or transfer any securities or other property of the 20 21 Corporation as security for any such loans or advances. Such authority conferred by the Board may be general or confined to specific instances or otherwise limited. 6.3 Checks, Drafts, Etc.. All checks, drafts and other orders for the -------------------- payment of money out of the funds of the Corporation and all notes or other evidences of indebtedness of the Corporation shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by resolution of the Board. 6.4 Deposits. The funds of the Corporation not otherwise employed shall -------- be deposited from time to time to the order of the Corporation in such banks, trust companies or other depositaries as the Board may select or as may be selected by an officer, employee or agent of the Corporation to whom such power may from time to time be delegated by the Board. ARTICLE 7 STOCK AND DIVIDENDS ------------------- 7.1 Certificates Representing Shares. The shares of capital stock of the -------------------------------- Corporation shall be represented by certificates in such form (consistent with the provisions of Section 158 of the General Corporation Law) as shall be approved by the Board. Such certificate shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the seal of the Corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles, if the certificate is countersigned by a transfer agent or registrar other than the Corporation itself or its employee. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may, unless otherwise ordered by the 21 22 Board, be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. 7.2 Transfer of Shares. Transfers of shares of capital stock of the ------------------ Corporation shall be made only on the books of the Corporation by the holder thereof or by his duly authorized attorney appointed by a power of attorney duly executed and filed with the Secretary or a transfer agent of the Corporation, and on surrender of the certificate or certificates representing such shares of capital stock properly endorsed for transfer and upon payment of all necessary transfer taxes. Every certificate exchanged, returned or surrendered to the Corporation shall be marked "Cancelled," with the date of cancellation, by the Secretary or an Assistant Secretary or the transfer agent of the Corporation. A person in whose name shares of capital stock shall stand on the books of the Corporation shall be deemed the owner thereof to receive dividends, to vote as such owner and for all other purposes as respects the Corporation. No transfer of shares of capital stock shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until such transfer shall have been entered on the books of the Corporation by an entry showing from and to whom transferred. 7.3 Transfer and Registry Agents. The Corporation may from time to time ---------------------------- maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board. 7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of -------------------------------------------------- any shares of capital stock of the Corporation shall immediately notify the Corporation of any loss, destruction, theft or mutilation of the certificate representing such shares, and the Corporation may issue a 22 23 new certificate to replace the certificate alleged to have been lost, destroyed, stolen or mutilated. The Board may, in its discretion, as a condition to the issue of any such new certificate, require the owner of the lost, destroyed, stolen or mutilated certificate, or his legal representatives, to make proof satisfactory to the Board of such loss, destruction, theft or mutilation and to advertise such fact in such manner as the Board may require, and to give the Corporation and its transfer agents and registrars, or such of them as the Board may require, a bond in such form, in such sums and with such surety or sureties as the Board may direct, to indemnify the Corporation and its transfer agents and registrars against any claim that may be made against any of them on account of the continued existence of any such certificate so alleged to have been lost, destroyed, stolen or mutilated and against any expense in connection with such claim. 7.5 Regulations. The Board may make such rules and regulations as it may ----------- deem expedient, not inconsistent with the Bylaws or with the Certificate of Incorporation, concerning the issue, transfer and registration of certificates representing shares of its capital stock. 7.6 Restriction on Transfer of Stock. A written restriction on the -------------------------------- transfer or registration of transfer of capital stock of the Corporation, if permitted by Section 202 of the General Corporation Law and noted conspicuously on the certificate representing such capital stock, may be enforced against the holder of the restricted capital stock or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder. Unless noted conspicuously on the certificate representing such capital stock, a restriction, even though permitted by Section 202 of the General Corporation Law, shall be ineffective except against a person with actual knowledge of the restriction. A restriction on the transfer or registration of 23 24 transfer of capital stock of the Corporation may be imposed either by the Certificate of Incorporation or by an agreement among any number of stockholders or among such stockholders and the Corporation. No restriction so imposed shall be binding with respect to capital stock issued prior to the adoption of the restriction unless the holders of such capital stock are parties to an agreement or voted in favor of the restriction. 7.7 Dividends, Surplus, Etc. Subject to the provisions of the Certificate ------------------------ of Incorporation and of law, the Board: 7.7.1 May declare and pay dividends or make other distributions on the outstanding shares of capital stock in such amounts and at such time or times as, in its discretion, the condition of the affairs of the Corporation shall render advisable; 7.7.2 May use and apply, in its discretion, any of the surplus of the Corporation in purchasing or acquiring any shares of capital stock of the Corporation, or warrants therefore, or any of its bonds, debentures, notes, scrip or other securities or evidences of indebtedness in accordance with law; 7.7.3 May set aside from time to time out of such surplus or net profits such sum or sums as, in its discretion, it may think proper, as a reserve fund to meet contingencies, or for equalizing dividends or for the purpose of maintaining or increasing the property or business of the Corporation, or for any purpose it may think conducive to the best interests of the Corporation. 24 25 ARTICLE 8 INDEMNIFICATION --------------- 8.1 Indemnification of Officers and Directors. The Corporation shall ----------------------------------------- indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or any officer of the Corporation, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the fullest extent and in the manner set forth in and permitted by the General Corporation Law, and any other applicable law, as from time to time in effect. Such right of indemnification shall not be deemed exclusive of any other rights to which such director or officer may be entitled apart from the foregoing provisions. The foregoing provisions of this Section 8.1 shall be deemed to be a contract between the Corporation and each director and officer who serves in such capacity at any time while this Article 8 and the relevant provisions of the General Corporation Law and other applicable law, if any, are in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts. 8.2 Indemnification of Other Persons. The Corporation may indemnify any -------------------------------- person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the 25 26 request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the extent and in the manner set forth in and permitted by the General Corporation Law, and any other applicable law, as from time to time in effect. Such right of indemnification shall not be deemed exclusive of any other rights to which any such person may be entitled apart from the foregoing provisions. 8.3 Insurance. The Corporation shall have power to purchase and maintain --------- insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of Sections 8.1 and 8.2 of the Bylaws or under Section 145 of the General Corporation Law or any other provision of law. ARTICLE 9 BOOKS AND RECORDS ----------------- 9.1 Books and Records. The Corporation shall keep correct and complete ----------------- books and records of account and shall keep minutes of the proceedings of the stockholders, the Board and any committee of the Board. The Corporation shall keep at the office designated in the Certificate of Incorporation or at the office of the transfer agent or registrar of the Corporation, a 26 27 record containing the names and addresses of all stockholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. 9.2 Form of Records. Any records maintained by the Corporation in the --------------- regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micro-photographs, or any other information storage device, provided that the records so kept be converted into clearly legible written form within a reasonable time. The Corporation shall so convert any records so kept under the request of any person entitled to inspect the same. 9.3 Inspection of Books and Records. Except as otherwise provided by ------------------------------- law, the Board shall determine from time to time whether, and, if allowed, when and under what conditions and regulations, the accounts, books, minutes and other records of the Corporation, or any of them, shall be open to the inspection of the stockholders. ARTICLE 10 SEAL ---- The Board may adopt a corporate seal which shall be in the form of a circle and shall bear the name of the Corporation and the word "Delaware." ARTICLE 11 FISCAL YEAR ----------- The fiscal year of the Corporation shall be for such period of twelve (12) months as the Board shall determine. 27 28 ARTICLE 12 VOTING OF SHARES HELD --------------------- Unless otherwise provided by resolution of the Board, or the President may, from time to time, appoint one or more attorneys or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation, any of whose shares or securities may be held by the Corporation, at meetings of the holders of stock or other securities of such other corporation, or to consent in writing to any action by any such other corporation, or to consent in writing to any action by any such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, consents, waivers or other instruments as he may deem necessary or proper in the premises; or the President may himself attend any meeting of the holders of the stock or other securities of any such other corporation and thereat vote or exercise any or all other powers of the Corporation as the holder of such stock or other securities of such other corporation. ARTICLE 13 AMENDMENTS ---------- The Bylaws may be altered, changed, added to or repealed, amended, or new Bylaws may be adopted, as set forth in the Articles of Incorporation. 28 29 CERTIFICATE ----------- The undersigned hereby certifies that the foregoing is a true copy of the Bylaws of the Corporation adopted as of the 30th day of December, 1994. /s/ Frank J. Sgroi ---------------------------------------- Secretary 29 EX-5.1 4 OPINION RE LEGALITY 1 [letterhead of Polsinelli, White, Vardeman & Shalton] October 24, 1996 Enterbank Holdings, Inc. 150 N. Meramec Clayton, MO 63105 Re: Registration Statement on Form S-1 ---------------------------------- Ladies and Gentlemen: With reference to the Registration Statement on Form S-1 filed by Enterbank Holdings, Inc. ("Enterbank") on October 24, 1996 (the "Registration Statement") with the Securities and Exchange Commission under the Securities Act of 1993, as amended, pertaining to the proposed issuance by Enterbank of shares of Enterbank's common stock, $.01 par value (the "Shares") with a maximum aggregate offering price of $7,000,000, as provided in the Registration Statement, we have examined such corporate records of Enterbank, such other information as we have deemed relevant, including Enterbank's Certificate of Incorporation and Bylaws, as amended and currently in effect, the resolution adopted by Enterbank's Board of Directors related to the proposed offering, certificates received from state officials and statements we have received from officers and representatives of Enterbank. In delivering this opinion, the undersigned assumes the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as certified, photostatic or conformed copies, the authenticity of the originals of all such latter documents, and the correctness of statements submitted to us by officers and representatives of Enterbank. Based solely on the foregoing, the undersigned is of the opinion that: 1. Enterbank has been duly incorporated and is validly existing under the laws of the State of Delaware; and 2. The Shares to be issued by Enterbank under the proposed offering will be duly authorized, validly issued and fully paid and nonassessable. 2 POLSINELLI, WHITE, VARDEMAN & SHALTON October 24, 1996 Page 2 We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference of this firm in the section of the Prospectus entitled "Legal Matters." We further consent to the filing of copies of this opinion with agencies of such states and other jurisdictions as you deem necessary in the course of complying with the laws of the states and jurisdictions regarding the sale and issuance of the Shares in accordance with the Registration Statement. Very truly yours, POLSINELLI, WHITE, VARDEMAN & SHALTON, P.C. By: /s/ Joseph T. Porter, Jr. ------------------------------------ Joseph T. Porter, Jr. JTP/kjd EX-10.1 5 LEASE RE COMPANY'S CLAYTON BANKING FACILITY 1 STARTING DATE AGREEMENT ----------------------- This Agreement made and entered into as of the 1st day of May, 1989, by and between Conrad Properties Corporation as agent for One Fifty Building Associates ("Landlord") and Enterprise Bank ("Tenant"). WHEREAS, Landlord and Tenant entered into a Lease dated as of January 31, 1989, for office space in the premises located at 150 N. Meramec Ave., Suites 100 and 200, Clayton, MO 63105. WHEREAS, the provision of said Lease relating to commencement of the term provided for a change in the Commencement Date in the event that the leased premises are not ready for occupancy on the date set forth in the lease as the commencement term; and WHEREAS, the leased premises were ready for occupancy on the 1st day of May, 1989, and the Landlord and Tenant now desire to set forth in the instrument the exact commencement and expiration dates of the term of said lease. NOW, THEREFORE, W I T N E S S E T H Notwithstanding anything in said Lease to the contrary, Landlord and Tenant, for themselves, their heirs, successors and assigns, intending to be legally bound hereby, agree and stipulate that the original term of said Lease commenced on May 1, 1989 and will expire on April 30, 1994 at midnight, unless sooner terminated as in said Lease provided. IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as a supplement and amendment to said Lease for the purpose set forth above, in any number of counterpart copies each of which counterpart copy shall for all purposes be deemed an original as of the day of May 1, 1989. CONRAD PROPERTIES CORPORATION BY: /s/ Robert E. Saur --------------------------- Landlord ENTERPRISE BANK BY: /s/ Fred H. Eller --------------------------- Tenant 2 LEASE ----- This Lease, entered into as of the 31st day of January 1989, between CONRAD PROPERTIES CORPORATION as agent for ONE FIFTY BUILDING ASSOCIATES, hereinafter called "Landlord", and ENTERPRISE BANK, hereinafter called "Tenant". W I T N E S S E T H: 1. Premises. Landlord, for and in consideration of the rents, --------- covenants and agreements hereinafter mentioned and hereby agreed to be paid, kept and performed by Tenant, does hereby lease with covenant for quiet enjoyment to Tenant, and Tenant hereby leases from Landlord space in the building known as THE ONE FIFTY BUILDING (the "Building"), located 150 North Meramec Avenue, Clayton, Missouri, described as Suites 100 and 200, which consist of 7,995 net rentable square feet of space on the first floor and 5,128 net rentable square feet on the second floor, hereinafter referred to as the "leased premises". The Building, garage, parking area and grounds are hereinafter described as the "Property". 2. Use of Premises. The leased premises shall be used and occupied ---------------- by Tenant, subject to the conditions herein contained, for general office purposes only. In no event shall the leased premises be used or occupied by the Tenant in any manner contrary to law, zoning regulations, or recorded restrictions, if any. 3. Term. The term of this lease shall be for 60 months, commencing ----- on April 1, 1989 and ending on March 31, 1994, both dates inclusive. Tenant agrees to make material and/or color selections (when applicable) within fifteen (15) days after being requested to do so by Landlord, failing which, Landlord shall make such material and/or color selection without Tenant's participation. If the leased premises are not available or ready for occupancy at the stated commencement date, and such unavailability or unreadiness is not occasioned or caused by Tenant (such as Tenant's failure promptly to approve plans, or make improvements to the leased premises which are to be made by Tenant), then the commencement date shall be the first day of the month succeeding the month in which the leased premises are available and ready for occupancy, as evidenced by written notice given by Landlord to Tenant, and the termination date shall be extended accordingly. In the event the commencement and termination dates have been determined as aforesaid, upon the demand of either the Landlord or the Tenant, the parties hereto agree to execute a written declaration expressing the specific commencement and termination dates. Subject to the availability of the leased premises, the Tenant shall have the right, prior to the commencement date, to enter upon the leased premises at reasonable times for the purpose of preparing the leased premises for their intended use. Tenant shall not be required to pay rent during the time required to prepare the leased premises. If by mutual 3 consent of the parties, Tenant takes possession of the leased premises and begins conducting its business therein prior to the commencement date, then during such pre-term period, Tenant shall pay rent as herein established on a pro rata basis and such occupancy shall be under all of the terms and conditions of this lease, but such pre-term occupancy shall not affect the lease term as herein otherwise established. 4. Rent. Tenant shall, without deduction, abatement or setoff ----- of any nature whatsoever, pay to Landlord as fixed Rent for the leased premises the as follows:
SUITE NO. MONTHLY AMOUNT ANNUAL AMOUNT -------------------------------------------------------------- 100 $13,992.00 $167,904.00 200 $10,068.00 $120,816.00
each, in advance, and without demand, on the first day of each and every month throughout the term of this lease. The rent shall be payable at the office of Landlord, or at such other place as Landlord may from time to time designate in writing. SEE ADDENDUM FOR ADDITIONAL PROVISIONS. 5. Rent Adjustments. ----------------- (a) The Tenant shall pay as additional rent, Tenant's Share of all Operating Expenses and Taxes of the Property, to the extent they exceed $5.25 per square foot annually. Taxes shall mean: (i) All real estate taxes, including State equalization factor, if any, payable (adjusted after protest or litigation, if any) for any part of the term of this Lease, exclusive of penalties or discounts, on the Property, (ii) any taxes which shall be levied in lieu of any such real estate taxes on the gross rentals of the Property, provided that in no event shall "taxes" include any income or profits taxes, (iii) any special assessments against the Property which shall be required to be paid during the calendar year in respect to which taxes are being determined, and (iv) the expense of contesting the amount or validity of any such taxes, charges or assessments, such expense to be applicable to the period of the item contested. Operating Expenses shall mean: Those expenses incurred or paid on behalf of the Landlord in respect of the operation and maintenance of the Property which, in accordance with accepted principles of sound accounting practice used by the Landlord, as applied to the operation and maintenance of first class office buildings, are properly chargeable to the operation and maintenance of the Property, and the cost, as reasonably amortized by the Landlord, with interest at the rate of ten (10%) per cent per annum on the unamortized amount of any capital improvement made after completion of initial construction of the Building which reduces other Operating Expenses, but in an amount not to exceed such reduction for the relevant year. Operating 4 Expenses shall not include franchise or income taxes imposed on the Landlord, nor the cost of the Landlord of any work or service performed in any instance for any tenant (including the Tenant). In order to provide for current payments on account of an increase in the Taxes and Operating Expenses in excess of $5.25 per square foot, the Tenant agrees, at Landlord's request, to pay, as additional rent, Tenant's share due for the ensuing twelve (12) months, as estimated by Landlord from time to time, 1/12th of Tenant's Share so estimated by Landlord commencing on the first day of the month following the month in which Landlord notifies Tenant of the amount of such estimated Tenant's Share. If, as finally determined, Tenant's Share shall be greater than or be less than the aggregate of all installments so paid on account to the Landlord for such twelve (12) month period, then Tenant shall pay to Landlord the amount of such underpayment, or the Landlord shall credit Tenant for the amount of such overpayment, as the case may be. It is the intention hereunder to estimate the amount of Taxes and Operating Expenses for each year and then to adjust such estimate in the following year based on actual taxes and Operating Expenses incurred and/or paid by Landlord. The obligation of the Tenant with respect to the payment of Rent shall survive the termination of this lease. Any payment, refund, or credit made pursuant to this paragraph shall be made without prejudice to any right of the Tenant to dispute, or of the Landlord to correct, any item(s) as billed pursuant to the provisions hereof. (b) Upon receipt of the Landlord's statement, Tenant does hereby covenant and agree promptly to pay the increases in Rent pursuant to Paragraph (a) of this Section as and when the same shall become due and payable, without further demand therefor, and without any set-off or deduction whatsoever. Failure to give such statement shall not constitute a waiver by Landlord of its right to require an increase in Rent nor shall such failure deprive Tenant of a decrease in Rent, as the case may be. Landlord shall make its records of actual taxes and operating expenses available to Tenant for Tenant's inspection for a period of ninety (90) days following Tenant's receipt of the Landlord's statement. (c) For the purpose of determining Tenant's Share hereunder, it is agreed that the net rentable area contained in the leased premises is 13,123 square feet and the net rentable area of the building is 63,129 square feet. Tenant's Share, based upon the ratio that its net rentable area bears to the entire net rentable area of the building is 20.79%. (d) No decrease in Taxes and/or Operating Expenses shall reduce Tenant's Rent below the annual Rent set forth in Section 4. 6. Services by Landlord. Landlord covenants and agrees: --------------------- 5 (a) To condition the air of the leased premises from 8:00 a.m. to 6:00 p.m. on all business days (which shall include Monday through Friday of each week excluding legal holidays) and from 8:00 a.m. to 1:00 p.m. on Saturdays, by heating or cooling the leased premises to reasonable temperatures for normal occupancy and use. Landlord shall not be obligated hereunder to provide any services that would violate any governmental rule, regulation or order, and particularly any orders as to maximum or minimum temperatures. (b) To provide elevator service. (c) To provide water for lavatory and drinking purposes in places designated by the Landlord. (d) To provide maintenance services to keep the public areas of the Building in good order; to provide janitorial services to the leased premises on each business day (except Saturday); to cause the windows of the public areas and the leased premises to be cleaned at reasonable intervals, all to the standards of first class office buildings in the metropolitan St. Louis area. No interruption or malfunction of any of the services to be furnished by Landlord hereunder shall constitute an eviction or disturbance of Tenant's use and possession of the leased premises, or a breach by the Landlord of any of its obligations hereunder, or render the Landlord liable for damages or entitle Tenant to be relieved of any of its obligations hereunder (including obligation to pay rent or grant Tenant any right of setoff or recoupment). In the event of any such interruption or malfunction of such services, however, Landlord agrees to use reasonable diligence to restore such service. 7. Utilities. Landlord shall pay for normal electricity service ---------- to the leased premises for lighting, business machines and business equipment. Tenant shall furnish all replacement light bulbs. In the event Tenant uses computer, continuously operated machines, or any other machine that has more than the normal use of electricity, Landlord and Tenant shall make separate arrangements for electricity charges for such use. 8. Repairs and Maintenance. Landlord shall, at its own cost and ------------------------ expense, except as may be provided elsewhere herein, make all necessary repairs to the corridors, lobby and structural members of the Building, and to the equipment used to provide the services furnished by the Landlord hereunder, unless any such damage is caused by acts or omissions of Tenant, its officers, agents, employees or invitees, in which event Tenant shall bear the cost of such repairs. Tenant shall not injure the leased premises or the Building, but shall maintain the leased premises in a clean, attractive condition and in good repair, except as to damage to be repaired by Landlord as provided above and except 6 for the cleaning services to be rendered by Landlord as provided above. Tenant further covenants not to do or suffer any waste to the leased premises. 9. Tenant's Improvements. No alteration, addition, improvements, ---------------------- or refinishing of or to the leased premises shall be made by Tenant without the prior written consent of the Landlord. Any alteration, addition, or improvement made by the Tenant after such consent shall have been obtained, and any fixtures permanently installed by Tenant (excluding movable partitions, work stations, shelving and the like, but including wall-to-wall carpeting and wall paneling), shall become the property of the Landlord upon the expiration or other sooner termination of this lease. Tenant shall not permit any mechanics' lien to be filed against the fee of the leased premises or against the Tenant's leasehold interest in the premises by reason of work, labor, services or materials supplied or claimed to have been supplied to the Tenant or anyone holding the leased premises through or under the Tenant, whether prior to or subsequent to the commencement of the term hereof. If any such mechanics' lien shall at any time be filed against the leased premises and Tenant shall fail to remove same or to post adequate security and diligently contest same within thirty (30) days thereafter, it shall constitute a default under the provisions of this lease. 10. Damage or Destruction. The destruction of the leased premises ---------------------- or the Building, by fire or the elements or other casualty or such material injury thereto so as to render the leased premises unquestionably untenantable for one hundred twenty (120) days, shall produce and work a termination of this lease. Provided, however, that such destruction or injury so as to render the leased premises unquestionably untenantable for more than twenty (20%) percent of the unexpired term shall also, at the option of the Landlord, produce and work a termination of this lease. If Landlord and Tenant cannot agree as to the number of days the Building or leased premises are unquestionably untenantable, the fact shall be determined by arbitration; the Landlord and Tenant shall each choose an arbitrator within five (5) days after either has notified the other in writing of such damage. The two arbitrators so chose, before entering on the discharge of their duties, shall elect a third, and the decision of any two of such arbitrators shall be conclusive and binding upon both parties hereto. If it is determined by arbitration, or by agreement between the Landlord and Tenant, that said premises are not unquestionably untenantable for one hundred twenty (120) days or twenty (20%) percent of the unexpired term, whichever is applicable, then Landlord shall restore said premises to substantially the same condition in which they existed prior to such damage, at Landlord's own expense, with all reasonable speed and promptness, and in such case a just and proportionate part of 7 said rental shall be abated in direct proportion to the proportion of Tenant's space that is unoccupiable, provided however, if more than 30% of the leased premises are unoccupiable and Tenant ceases all of its operations in the leased premises, rent shall be fully abated until said premises have been restored; provided, however, that in the event the damage to said premises has not resulted in a termination of this lease under the above provisions and such damage is caused by the negligent act of Tenant, as aforesaid, during such period of restoration or rebuilding there shall be no rent abatement hereunder. In determining what constitutes reasonable speed and promptness, consideration shall be given to delays caused by strikes, adjustment of insurance, and other causes beyond the Landlord's control. In no event shall the Landlord be required to restore any alterations, additions or improvements made by or for the Tenant and not required by this lease to be furnished by Landlord, nor any trade fixtures, furniture, equipment or other property belonging to Tenant. 11. Liability. Landlord shall not be responsible or liable to the ---------- Tenant for any injury or damage to person or property caused by gasoline, oil, steam, gas, electricity, hurricane, tornado, earthquake, flood, wind or similar storms and disturbances, nor water, rain or snow which may be upon any sidewalk or any entranceway or which may leak or flow from the roof, skylight, trap door, sewer, pipes, gas mains or any subsurface area or opening in the Building; nor for loss resulting from theft or mysterious disappearance; nor from any interference with light or air except for such losses attributable to Landlord's negligence or Landlord's failure to perform maintenance and repair obligations pursuant to this lease. Landlord shall not be liable for any personal injury to Tenant, its officers, agents, employees and invitees, nor any other occupant of any part of the leased premises, nor for any damages to any property of the Tenant or of any other occupant of any part of the leased caused, whether from action of the elements or acts of negligence of the occupants of adjacent properties except for such injuries attributable to Landlord's negligence or Landlord's failure to perform maintenance and repair obligations pursuant to this lease. 12. Waiver of Subrogation. Notwithstanding anything herein to the ---------------------- contrary, Landlord and Tenant, and all parties claiming under them, hereby mutually release and discharge the other from all claims arising from or caused by any hazard covered by insurance on the leased premises or the Property, regardless of the cause of the damage or loss. This release shall apply only to the extent that such loss or damage is covered by insurance and only so long as the applicable insurance policies contain a clause to the effect that this release shall not affect the right of the insured to recover under such policies. 13. Condemnation. If the whole or any part of the premises shall ------------- be taken under the power of eminent domain, or if Landlord 8 shall discontinue operating the Building, or areas in the Building not taken, by reason of eminent domain, this lease shall thereupon terminate as of the date possession shall be so taken and Tenant shall pay rent to such date. All income, rent, awards or interest derived from or damages awarded for any such taking under the power of eminent domain, whether for the whole or a part of the leased premises, shall belong to and be the property of Landlord, whether such damages shall be awarded as compensation for diminution in value of the leasehold except the loss of Tenant's fixtures or for moving expenses shall belong to and be the property of Tenant. A voluntary sale by Landlord to any party having the power of eminent domain, either under threat of condemnation or while condemnation proceedings are pending, shall be deemed to be a taking by eminent domain. 14. Right of Entry. Landlord, and its duly authorized agents, --------------- employees and contractors shall have access to the leased premises at all reasonable times and upon reasonable advance notice for the purpose of inspecting the same and making necessary repairs or replacements as called for hereunder or as the Landlord shall elect to undertake for the safety, preservation, benefit or welfare of the Building or other tenants thereof, or for exhibiting the Property for sale, lease or financing, provided that such entry does not interrupt or interfere with Tenant's business therein. 15. Restrictions on Use. The Tenant shall not allow, permit or -------------------- suffer any noise, smoke or odor to escape from the leased property in a manner which will disturb other occupants of the Building, nor occupy the leased property in such manner as to disturb the peaceful and quiet occupancy of the other tenants of the Building or constitute a public or private nuisance. No sign, fixture, advertisement or notice shall be displayed, inscribed, painted or affixed by Tenant on any part of the inside or outside of the Building without the prior written consent of the Landlord. Tenant shall not install any draperies, shades or venetian blinds visible from the exterior of the Building unless the color, materials, shape, style and size have been approved by the Landlord. Tenant shall not install or permit the installation of vending machines in the leased property, without the prior written consent of the Landlord. Movement in and out of the Building of furniture or office equipment, or dispatch or receipt by the Tenant of any merchandise or materials, shall be done only during the hours designated by the Landlord and by means of an elevator and exit designated by the Landlord. 16. Rules. The Landlord shall have the right, from time to time, ------ to make, establish and promulgate reasonable rules and regulations, applicable equally to all Tenants, for the Property and the occupants and tenants thereof, and Tenant hereby covenants that it will, and will cause its employees to, observe, keep and comply with such rules and regulations. 17. Assignment and Subletting. Tenant shall not assign or -------------------------- 9 encumber this lease, nor sublet nor permit the leased premises or any part thereof to be used by others, without first obtaining the prior written consent of the Landlord and the Trustee, as provided in Paragraph 30, in each instance, which consent shall not be unreasonably withheld or delayed. No such consent by the Landlord, nor the acceptance of an assignee, subtenant or occupant as a tenant shall release the Tenant from the further performance by the Tenant of the covenants in this lease or be construed to relieve the Tenant from obtaining the consent in writing of the Landlord to any further assignment or subletting. In any event Tenant shall remain primarily liable on this lease for the entire term hereof and shall in no wise be released from the full and complete performance of all of the terms, conditions, covenants and agreements herein contained. Notwithstanding the foregoing, Tenant may assign or sublet the leased premises to a corporation or partnership that is a subsidiary of Tenant, is controlled by Tenant, results from a merger, acquisition or consolidation of Tenant or is similarly related to Tenant without Landlord's or Trustees consent. This lease may be assigned by Landlord, in which event upon assumption of Landlord's duties and obligations hereunder by the assignee, Landlord shall be relieved of any further obligations and duties under this lease, except for obligations or duties arising prior to, or resulting from events occurring prior to the date of such assignment. Any assignment of Landlord shall explicitly assume all of the obligations of the Landlord hereunder and shall recognize and attorn to Tenant. 18. Surrender upon Termination. At the expiration of the lease --------------------------- term, Tenant shall surrender the leased premises in as good condition as they were at the beginning of the term, reasonable wear and tear and insured casualty excepted. Notwithstanding any provision of law or any judicial decision to the contrary, no notice shall be required to terminate the term of this lease as herein provided, and the term of this lease shall expire on the termination date herein mentioned without notice being required from either party. In the event that Tenant or any party holding under Tenant shall holdover the leased premises beyond the expiration of the term of this lease such party shall pay one and one half times the base rent hereunder during such holdover period. Provided, however, that if Tenant shall remain in possession of the leased premises beyond the expiration of the term with the express written consent of the Landlord, then such possession shall be as a month-to-month tenant at the same rent as the last month of the lease term, and the provisions of this lease shall be applicable. Prior to termination of this lease, or any extension thereof, if Tenant is not in default on any obligation or covenant under this lease, Tenant may remove its office supplies and movable office furniture and equipment from the leased premises, and shall promptly repair any damage caused by such removal. 19. Default. The following events shall be deemed to be events of -------- default by Tenant under this lease: (i) if Tenant 10 shall fail to pay any fixed or additional rent hereby reserved when due; (ii) if Tenant shall fail to comply with any term, or provision, or covenant of this lease, other than the payment of rent, and shall not cure such default within ten (10) days after written notice thereof to Tenant, or in the case of defaults that cannot be cured within ten (10) days shall not have commenced and be diligently prosecuting said cure; (iii) if Tenant shall become insolvent, or shall make a transfer in fraud of its creditors, or shall make an assignment for the benefit of its creditors; (iv) if Tenant shall file a petition under any section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statute of the United States or any state thereof; or Tenant shall be adjudicated bankrupt or insolvent in proceedings filed against Tenant hereunder; (v) if a receiver or trustee shall be appointed for all or substantially all of the assets of Tenant; or (vi) if Tenant shall desert or vacate any substantial portion of the leased premises. Upon the occurrence of any such event of default, Landlord shall have the option to pursue any one or more of the following remedies (as well as any other remedies provided by law) without any notice or demand whatsoever. (a) Declare immediately due and payable the entire amount of the rent then remaining to be paid under this lease for the balance of the lease term; (b) Enter upon and take possession of the leased premises by summary proceedings, force or in any other manner, and dispossess, expel, and remove the Tenant and any other person who may be occupying the leased premises or any part thereof (including changing or altering the locks and other security devices) and remove and expel any personal property or trade fixtures located therein, all without being liable to any prosecution therefor or for any damages resulting therefrom. Such reentry and/or repossession by Landlord, Landlord shall also have the option to relet the leased premises as agent for Tenant, (in the name of Landlord or in the name of Tenant) at any rent and for any term readily obtainable and receive the therefor, in which event Tenant shall be given credit for any rents that may arise by reason of such reletting (after first deducting all repossession costs, brokerage commissions, legal expenses, attorneys' fees and all other expenses in cleaning, repairing and altering the premises for reletting); (c) Forfeit and terminate this lease forthwith. In the event of such termination, Tenant shall immediately surrender the leased premises to Landlord and if Tenant fails to do so, Landlord may enter upon and take possession of the leased premises and expel or remove Tenant and any other person who may be occupying said premises or any part thereof, and any personal property or trade fixtures located therein. Pursuit by Landlord of any of the foregoing remedies or 11 any other remedy provided by law shall not constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation by Tenant of any of the terms, provisions and covenants of this lease. In no event shall Tenant be relieved from its obligation to pay the rentals specified in this lease by reason of a surrender of possession unless specifically agreed to in writing by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants of this lease shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. If Landlord incurs any expenses, including court costs and attorneys' fees, as a result of a default by Tenant under this lease, then such expenses shall be reimbursed by Tenant as additional rent, whether or not such default is subsequently cured. If Tenant incurs any expenses, including court costs and attorneys' fees enforcing its rights hereunder or successfully defending any action brought by Landlord hereunder, such expenses shall be reimbursed by Landlord whether or not Landlord cures any default asserted by Tenant. 20. Parking. Landlord agrees to rent to Tenant or its employees -------- 39 parking spaces in or adjacent to the Building at an original rate of Fifty ($50.00) Dollars per month. Landlord shall have the right to increase parking charges once each twenty-four (24) month period, but not to exceed the rate charged by other first class office buildings in Clayton, Missouri, of approximately the same age as the Building. Landlord shall have the right to and may from time to time adopt such reasonable rules as are necessary to retain the exclusivity of parking for Building occupants. 21. Subordination and Attornment. Tenant agrees that upon delivery ----------------------------- to it by an mortgagee or proposed mortgagee of the leased premises of a "non-disturbance letter", as that phrase is defined below, this lease and Tenant's interest in this lease shall be subordinated to any mortgage, deed of trust or other method of financing or refinancing now or hereafter encumbering the leased premises, the land underlying the leased premises and/or the building which the leased premises comprise a part; and to all renewals, modifications, replacements, consolidations and extensions thereof. Tenant further agrees that in such event it will execute and deliver any and all documents necessary to evidence the subordination of its rights under this lease as aforesaid. The "non-disturbance letter" referred to above shall be a letter from the holder of any such mortgage, deed of trust or other security instrument to the effect that in the event of a foreclosure or other action taken under any such security 12 instrument that this lease and the rights of Tenant hereunder shall not be disturbed, diminished or interfered with, but shall continue in full force and effect so long as Tenant shall not be in default hereunder. Tenant shall, in the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage or deed of trust made by the Landlord covering the leased premises, attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this lease. 22. Estoppel Certificates. Within ten (10) days after request ---------------------- therefor by Landlord, or if upon sale, assignment of mortgaging of the building, an offset statement shall be required from Tenant, Tenant agrees to deliver in recordable form a certificate to Landlord or to the proposed mortgagee lender or purchaser, certifying (if such be the case) that this lease is in full force and effect and that there are no defenses or offsets thereto, or stating those claimed by Tenant, and certifying the amount of rent payable hereunder. 23. Notices. Any notice under this lease shall be in writing and -------- shall be deemed to be duly given if delivered personally or mailed by registered or certified mail, addressed to the Landlord at the address at which it receives rent and addressed to the Tenant at the leased property. 24. Headings and Definitions. ------------------------- (a) It is agreed that the headings and phrases as to the contents of particular paragraphs of this lease are inserted only as a matter of convenience and for reference, and in no way are or are intended to be a part of this lease, or in any way to define, limit or describe the scope or intent of the particular paragraph to which they refer. (b) Where in this instrument pronouns, or words indicating the singular number, appear, such words shall be considered as masculine, feminine or neuter pronouns or words indicating the plural number, and vice versa, where the context indicates the propriety of such use. 25. Modification. Landlord and Tenant agree that this lease ------------- contains the entire agreement between them and shall not be modified in any manner except by an instrument in writing signed by each of them. 26. Benefit. This lease shall inure to the benefit of and be -------- binding upon the Landlord and Tenant and their respective heirs, executors, administrators, successors and such assigns and sublessees as may be permitted hereunder. 27. Time of the Essence. Time is of the essence with -------------------- 13 respect to the performance of each of the covenants and agreements under this lease. 28. Default by Landlord. In the event of any default hereunder -------------------- by Landlord, Tenant agrees that no action will be taken as a result thereof unless or until written notice of the default has been given to Landlord and to the holder of any Deed of Trust encumbering the building whose name and address have been previously supplied to Tenant in writing and Landlord or such Deed of Trust holder shall have been given ten (10) days to cure or commence the cure of the default. The covenants and obligations of Landlord under this Lease are those of the Landlord as a partnership only and not that of the partners of Landlord, or any partner of a partner of Landlord. Only assets of the Landlord shall be subject to any liability of Landlord hereunder. No partner of Landlord and no partner of any partner of Landlord shall be liable for the breach of any covenant or obligation of Landlord and no recourse shall be had against any such partner of Landlord or any partner of a partner of Landlord, or against his, her or its respective assets for the satisfaction of any such obligation or claim by way of payment of sums due or any other relief, but Tenant shall look solely to the assets of Landlord only in satisfaction of any such obligation or claim. 29. Sale of Building by Landlord. In the event of any sale of the ----------------------------- Property by Landlord, Landlord shall be relieved of any liability under any and all of its covenants and obligations contained in or derived from this lease arising out of any act, occurrence or omission occurring after the consummation of such sale, and the purchaser shall be deemed, without any further agreement between the parties and any such purchaser, to have assumed and agreed to carry out any and all of the covenants and obligations of Landlord under this Lease except for obligations or duties arising prior to, or resulting from events occurring prior to the date of such assignment. Any assignment of Landlord shall explicitly assume all of the obligations of the Landlord hereunder and shall recognize and attorn to Tenant. 30. Industrial Development Bond Covenants. The acquisition and -------------------------------------- construction of the Building was financed in part by the issuance of Industrial Development Revenue Bonds (the "Bonds") issued by the Industrial Development Authority of Clayton, Missouri (the "Authority"). The Bonds were issued pursuant to an Indenture of Trust and Security Agreement dated as of December 1, 1986 between the Authority and Landmark Bank of St. Charles County, N.A. as trustee (said bank, and any successor as trustee with respect to the Bonds, is referred to as the "Trustee"). Notwithstanding anything else contained in this lease, so long as any of the Bonds remain outstanding the following provision shall be deemed to be a part of this lease and shall be binding upon and enforceable against Tenant: 14 (a) Tenant shall not use any of the premises, nor permit the premises to be used by any other person or entity, in such manner as would cause the interest on the Bonds to become taxable to the holder of the Bonds. (b) Tenant shall not assign or sublease Tenant's interest in the lease or to the leased premises without the prior written consent of the Trustee. (c) In the event Tenant leases more than ten (10%) percent of the rentable space in the Building, Tenant agrees to fill out, execute and deliver to Landlord, Landlord's form "Certificate and Agreement of Principal User" and to comply with all the terms and conditions of it. (d) Tenant acknowledges that Landlord has assigned to the Trustee all of Landlord's rights under this lease, including the rights to receive rental payments hereunder, and that upon receipt of written notification from Trustee, the Tenant will make all payments required to be made by Tenant hereunder directly to the Trustee. (e) All of the provisions contained in this Paragraph 30 may be enforced directly against Landlord and Tenant by the Trustee. Landlord and Tenant hereby release Trustee from any and all obligations or liabilities under this Lease and Trustee assumes no responsibilities or obligations under this lease by virtue of the provisions of this Paragraph 30. This Lease consists of THIRTY-EIGHT (38) paragraphs numbered consecutively. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above mentioned. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES CONRAD PROPERTIES CORPORATION By /s/ Robert E. Saur ------------------------------- Robert E. Saur, President "Landlord" ENTERPRISE BANK By /s/ Fred H. Eller ------------------------------- Name: Fred H. Eller Title: President "Tenant" 15 ADDENDUM -------- 31. Early Occupancy. It is understood and agreed that as further ---------------- consideration for the execution of and performance of all obligations to be performed by Tenant under the Lease, Landlord shall permit Tenant to enter and occupy the leased premises for the period commencing April 1, 1989 to and including March 31, 1990, and then Tenant will be allowed to continue to occupy 3,151 net rentable square feet of Suite 200 for the period commencing April 1, 1990 to and including September 30, 1990 ("The Pre-Lease Period"). Such occupancy during the Pre-Lease Period shall be subject to all of the provisions, terms and conditions of said Lease (including the payment of rent, taxes and insurance), provided, however, that the rent payable during said Pre-Lease Period shall be payable only if an event of default under the Lease occurs at any time during the term of the Lease or during the term of the Pre-Lease Period, in which event on the occurrence of such event of default all such rent for the Pre-Lease Period shall become immediately due and payable by the Tenant. If at the date of expiration of the original term of said Lease, Tenant is not in default thereunder, and has made all rent and other payments as provided hereunder, Landlord agrees to waive any payment of rent for the Pre-Lease Period. The provisions hereof shall not affect the termination date of the Lease set forth therein. Given the above provisions as defined in this section, Tenants rent schedule would be as follows:
MONTHS MONTHLY PAYMENT 1-12 Free 13-18 $18,283.00 19-60 $24,060.00
32. Landlord shall provide Tenant a THREE AND NO/100 DOLLARS ($3.00) allowance per square foot on net usable space in addition to the standard allowance of THIRTEEN AND NO/100 DOLLARS ($13.00) per net usable square foot to finish the leased premises. Any costs over and above the total of the standard allowance and additional allowance ($16.00) per net usable square foot shall be payable by Tenant upon occupancy. 33. Landlord shall allow Tenant to park with no cost for 39 parking spaces during the period from April 1, 1989 to and including March 31, 1990, and then Landlord shall allow Tenant to park with no cost for 9 parking spaces for the period from April 1, 1990 to and including September 30, 1990. 34. Notwithstanding any other provisions contained in this Lease, in the event the Tenant is closed or taken over by the banking authority of the State of Missouri, or other bank 16 supervisory authority, the Landlord may terminate the lease only with the concurrence of such banking authority or other bank supervisory authority, and any such authority shall in any event have the election to continue, to assign, or to terminate the lease. Provided, that in the event this lease is terminated, the maximum claim of Landlord for damages or indemnity for injury resulting from the rejection or abandonment of the unexpired term of the lease shall in no event be in an amount exceeding the rent reserved by the lease, without acceleration, for the year next succeeding the date of the surrender of the premises to the Landlord, or the date of re-entry of the Landlord, whichever first occurs, whether before or after the closing of the bank, plus an amount equal to the unpaid rent accrued, without acceleration up to such date. 35. Landlord agrees to allow Tenant to install a sign indicating Tenant's business on the building similar in nature to the one installed on the building in the City of Clayton occupied by Capital Bank, provided that Tenant obtains the approval of the Landlord and the City of Clayton as to its design and location prior to its installation. 36. In the event Tenant may in the future require a drive up facility on the surface parking area of the building, Landlord agrees to cooperate with the Tenant toward the establishment of such a facility. 37. Tenant shall have the option to renew this lease for four (4) additional terms of five (5) years each at a rate to be negotiated with Landlord, but at a rate as established by the market for similar space in the City of Clayton. Landlord will advise tenant of the expiration of lease in writing at lease 120 days prior to its expiration. Tenant will notify Landlord in writing ninety (90) days prior to the expiration of the current term of its intention to renew. 38. Tenant shall have the right to use the building lobby and adjacent common areas for the purpose of conducting seminars and other like functions, provided, a) that Tenant's use does not interfere with the normal use of such areas, b) that such activities are limited to evenings or weekends where the building is not occupied by other tenants, c) that Tenant secures the permission of the building management in advance for each function or meeting, and, d) that it shall be the responsibility of the Tenant to clean up and restore these areas immediately following use by Tenant. 17 [letterhead Conrad Properties Corporation] April 29, 1994 Frank J. Sgroi, V.P./Cashier Enterprise Bank 150 N. Meramec Ave Clayton, MO 63105 RE: ADDENDUM TO LEASE Dear Frank: I have enclosed three (3) copies of Addendum No. 2 to your lease which contains all the provisions of our proposal to you dated April 13, 1994 for execution. Please have all three copies signed and returned to me for Bob's signature. If you have any questions, please give me a call. Sincerely, /s/ Alfred C. Hellwig Alfred C. Hellwig Secretary Enclosures 18 ADDENDUM NO. 2 -------------- This is ADDENDUM NO. 2 to a Lease dated January 31, 1989 by and between CONRAD PROPERTIES CORPORATION, agent for ONE FIFTY BUILDING ASSOCIATES, L.P., hereinafter called "Landlord", and ENTERPRISE BANK, hereinafter called "Tenant". Landlord and Tenant have agreed, as of the date indicated below, to an extension of the Lease under certain terms and conditions, which are as follows: 1. NEW LEASE TERMINATION DATE: Tenant hereby serves notice to execute --------------------------- the first of the four (4) additional five (5) year terms as provided in the Lease under Paragraph 37 of the Addendum. The Lease shall thus be extended for five (5) years and shall have the new termination date of April 30, 1999. 2. RENTAL SCHEDULE: Tenant shall, without deduction, abatement (except as ---------------- provided in Paragraph 4 of this Addendum No. 2) or setoff of any nature whatsoever, pay to Landlord as fixed rent, as follows:
Commencing Per SF Annually Monthly ---------- ------ -------- ------- May 1, 1994 $19.00 $249,336.00 $20,778.00 November 1, 1996 $20.00 $262,464.00 $21,872.00
3. PARKING: The parking rate for the 39 spaces provided for Tenant shall -------- be $55.00 per space per month commencing May 1, 1994. This rate can be increased at a later date as provided in Paragraph 20 of the Lease. 4. TENANT DECORATING ALLOWANCE: Landlord hereby agrees to provide an ---------------------------- amount for redecorating equal to $3.00 per net rentable square feet of Tenant space, or a total of $39,369.00. Tenant has the option of using this allowance to do actual tenant redecorating work or as a direct rent abatement at any time during the lease extension period. Tenant must give Landlord at least 60 days written notice as to how and when Tenant elects to use the allowance. 5. REVISED RENT ADJUSTMENTS: Commencing May 1, 1994 and terminating on ------------------------- April 30, 1999, Tenant's liability for additional rent under Paragraph 5 subparagraphs (a) and (b) of the Lease is only to the extent that Tenant's Proportionate Share of operating expenses exceeds the actual operating expenses for the Building during the calendar year of 1993, or $7.52 per net rentable square foot. 6. TERMINATION: Tenant shall have the right to terminate this lease at ------------ any time after April 30, 1997 provided that Tenant complies with the following two (2) requirements: a) Tenant must give Landlord a minimum of nine (9) months prior written notice of its intent to terminate. b) Tenant must pay to Landlord, in full, at the time of termination, nine (9) months rent, parking and additional rent. 1 19 All other terms and conditions of the Lease by and between Landlord and Tenant dated January 31, 1989, shall remain the same and in full force and effect. This Addendum No. 2 is dated this 19th day of May, 1994. CONRAD PROPERTIES CORPORATION ENTERPRISE BANK BY: /s/ Robert E. Saur BY: /s/ Frank Sgroi ---------------------------------- ---------------------------------- Robert E. Saur, President "Landlord" Frank Sgroi, Vice President "Tenant" 2 20 ADDENDUM NO. 3 -------------- This is ADDENDUM NO. 3 to a Lease dated January 31, 1989 by and between CONRAD PROPERTIES CORPORATION, agent for ONE FIFTY BUILDING ASSOCIATES, L.P., hereinafter called "Landlord", and ENTERPRISE BANK, hereinafter called "Tenant". Landlord and Tenant have agreed, as of the date indicated below, to an extension of the Lease under certain terms and conditions, which are as follows: 1. SPACE TO BE LEASED: Tenant will lease an additional 2,176 net rentable ------------------- square feet (1,919 net usable SF) of space which is contiguous to their existing space known as Suite 200. 2. RENTAL PERIOD: The rental period will be for fifty (50) months -------------- commencing on March 1, 1995 and terminating on April 30, 1999. 3. RENTAL SCHEDULE: Tenant shall, without deduction, abatement (except as ---------------- provided in Paragraph 4 of this Addendum No. 3) or setoff of any nature whatsoever, pay to Landlord as fixed rent, as follows:
Commencing Per SF Annually Monthly ---------- ------ -------- ------- March 1, 1995 $19.50 $42,432.00 $3,536.00 November 1, 1996 $20.50 $44,608.00 $3,717.33
4. TENANT FINISH ALLOWANCE: Tenant agrees to complete all improvements to ------------------------ this additional space at its expense in exchange for rent abatement equivalent to a $15.00 per usable SF allowance, or $28,785.00. 5. PARKING: If and when needed, Tenant shall be allowed the use of an -------- additional six (6) parking spaces at the rate of $55.00 per space per month. This rate can be increased at a later date as provided in Paragraph 20 of the Lease. 6. TERMINATION: Tenant shall have the right to terminate this Addendum ------------ under the same terms and conditions as provided in Paragraph 6 of Addendum No. 2 to the lease. All other terms and conditions of the Lease by and between Landlord and Tenant dated January 31, 1989, shall remain the same and in full force and effect. This Addendum No. 3 is dated this 12th day of December, 1994. CONRAD PROPERTIES CORPORATION ENTERPRISE BANK By: /s/ Robert E. Saur By: /s/ Frank Sgroi ---------------------------------- ---------------------------------- Robert E. Saur, President Frank Sgroi, Vice President "Landlord" "Tenant" EX-10.2 6 ESCROW AGREEMENT 1 December __, 1996 Mr. Michael J. Ross Jefferson Bank & Trust 2301 Market Street St. Louis, MO 63103 RE: Escrow Agreement for Enterbank Holdings, Inc. Dear Mr. Ross: The undersigned is the authorized representative of Enterbank Holdings, Inc., a Delaware corporation (the "Corporation"). Common stock is being offered to certain prospective investors (the "Investors") pursuant to a Prospectus dated ------, 1996 (the "Prospectus"), a copy of which has been furnished to Jefferson Bank ("Jefferson"). Pursuant to the Prospectus, the Corporation is offering for sale a minimum of $3,000,000.00 and a maximum of $7,000,000.00 of its common stock. We have asked Jefferson to serve as Escrow Agent with respect to the funds contributed (the "Subscription Amount") by an investor whose subscription for common stock has been accepted (an "Investor"). Jefferson has agreed to serve as such Escrow Agent on the following terms: 1. The common stock is being offered by the Corporation. Upon receipt of an Investor's Subscription Amount and related subscription documents in form satisfactory to the Corporation, the Corporation will promptly deliver the Subscription Amount and the name and address of the Investor to Jefferson, such Subscription Amount to be in the form of a check payable to "Jefferson Bank & Trust, as Escrow Agent for Enterbank Holdings, Inc." Upon receipt of such check, Jefferson shall enter it for collection, and hold the proceeds in escrow subject to the provisions of this Agreement. 2. Jefferson shall invest the Subscription Amounts in such United States government securities, money market investments and/or certificates of deposit as the Corporation may direct in writing to Jefferson. Absent such direction, Jefferson Shall invest the Subscription Amounts in a commercial money market account at Jefferson. 3. If, by February 14, 1997 (Minimum Offering Expiration Date), unless extended in writing by the Corporation, the Corporation has received, pursuant to the Offering, acceptable subscriptions for a minimum of $3,000,000.00, then the Corporation will deliver to Jefferson a certificate to this effect in the form of Exhibit A hereto. Upon --------- receipt of such certificate, Jefferson will release from escrow and deliver to the Corporation all Subscription Amounts held by Jefferson as escrow agent, together with any income earned thereon, in the form of a check payable to the order of the Corporation or by other transfer to or for the account of the Corporation, as the Corporation may specify. In the 2 event Jefferson has not received the certificate set forth in Exhibit A hereto by 5:00 p.m. on the Minimum Offering Expiration Date, Subscription Amounts then held in escrow hereunder will be disbursed by Jefferson to each investor in the form of a check for his Subscription Amount, plus his pro rata share of any income earned on the total Subscription Amount, after deducting from any such income expenses incurred in connection with the Offering. Amounts so disbursed by Jefferson to each Investor hereunder shall not be less than the Subscription Amount. Any expenses which exceed the income earned on the Subscription Amounts shall be paid by the Corporation. 4. To induce Jefferson to act as Escrow Agent hereunder, it is agreed by the Corporation and on behalf of each of the Investors, that: (a) Jefferson shall not be under any duty to give the property held in escrow hereunder any greater degree of care than Jefferson gives its own similar property. (b) Jefferson may act in reliance upon any instrument or signature believed by it to be genuine and it may assume that any person giving any writing, notice, advice or instruction in connection with the provisions hereof has been duly authorized to do so. (c) Jefferson may act relative hereto upon advise of counsel with respect to any matter connected herewith and it shall not be liable for any mistake of fact or error in judgement or for any acts or omissions of any kind unless caused by its willful misconduct or gross negligence. (d) Jefferson's duties with respect to any and all matters relating to this Agreement shall be only as set forth herein, and there shall be no other implied duties or obligations on its part. (e) Jefferson makes no representation as to the validity, value, genuineness or collectible of any document or instrument held by or delivered to it. (f) The Corporation shall indemnify Jefferson and hold it harmless from and against any loss, liability, cost of expense (including costs of suit and reasonable attorneys' fees) of any kind which Jefferson may incur in connection with its services hereunder, except for such as may result from its gross negligence or willful misconduct. This indemnity agreement shall survive the termination of this Agreement. (g) In the event of a dispute, Jefferson may interplead any property held in escrow hereunder in any court of competent jurisdiction. (h) Jefferson shall not be obligated to risk its own funds in the administration of the 3 account and shall have a lien against any funds, securities, or other property in its possession or control for its fees, expenses, and advancements. Jefferson need not take any action under this Agreement which may involve it in any expense or liability until indemnified to its satisfaction for any expense or liability it reasonably believes it may incur. (i) Jefferson may execute any of the duties under this Agreement by or through agents or receivers. (j) Jefferson shall not be required to take notice or be deemed to have notice of any default or other fact or event under this Agreement unless Jefferson shall be specifically notified in writing of the default, fact or event. (k) Jefferson may at any time resign from the position created in this Agreement by giving 30 days written notice by registered or certified mail to the Corporation and the resignation shall take effect at the end of 30 days or upon the earlier appointment of a successor. (l) Unless specifically required by the terms of this Agreement, Jefferson need not take notice of or enforce any other document or relationship, including without limiting the generality of the foregoing, any contract, settlement, arrangement, plan, assignment, pledge, release, decree, or the like, but its duties shall be solely as set out in this Agreement. 5. Jefferson's duties and obligations hereunder may not be modified or increased without its consent. This Agreement may not be modified or amended as to the Subscription Amount paid by any Investor unless, as to such Amount, such amendment or modification has been agreed to by the Corporation, Jefferson and such Investor. This Agreement may be modified or amended in other respects with the consent of the Corporation and Jefferson, provided such modification or amendment is not in conflict with the terms of the Prospectus. 6. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri. 7. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, successors and assigns. 8. This Agreement is, in part, entered into for the benefit of the Investors, and it is expressly acknowledged that each Investor may enforce any rights expressly granted to such Investor hereunder. 9. Any notice to any party hereto, or to any Investor, shall be in writing and shall be 4 delivered or sent by first class mail, with adequate postage prepaid, to Jefferson at the address indicated on the first page hereof or, in the case of the Corporation, at 150 North Meramec, Clayton, Missouri 63105, or in the case of any Investor, at the address indicated in writing by notice as aforesaid. Such notice shall be deemed to have been duly made upon receipt of the notice by the addressee. If Jefferson is in agreement with the foregoing, please so indicate by signing the enclosed copy of this letter where indicated, whereupon this will be our valid and binding agreement in accordance with its terms. Very truly yours, Enterbank Holdings, Inc., By: ---------------------------------- James C. Wagner Vice President Enterbank Holdings, Inc. Accepted and agreed to this ___ day of December, 1996 Jefferson Bank & Trust By: ---------------------------------- Michael J. Ross President 5 EXHIBIT A --------- Jefferson Bank 2301 Market Street St. Louis, MO 63103 Attn: ---------- RE: Enterbank Holdings, Inc. Dear ----------: Please refer to the escrow letter agreement between the undersigned Corporation and Jefferson Bank ("Jefferson") dated - ---------- (the "Escrow Agreement"). In accordance with Section 3 of the Escrow Agreement, we hereby certify to Jefferson that the Corporation has received acceptable subscriptions for $3,000,000.00 of Common Stock, the minimum amount of Common Stock offered. Accordingly, Jefferson is instructed to deliver the entire amount held by it under the Escrow Agreement, together with any income earned therein, to the Corporation at 150 North Meramec, Clayton, Missouri 63105. Very truly yours, Enterbank Holdings, Inc. a Missouri corporation By: ---------------------------------- James C. Wagner Vice President EX-11.1 7 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1
Fully Diluted EPS Number EPS Number Fully Diluted of Shares of Shares Net Income EPS EPS ---------------------------------------------------------------------------- 1991 1,523,314 1,523,314 207,000 0.14 0.14 1992 1,530,400 1,530,400 505,000 0.33 0.33 1993 1,554,947 1,570,225 751,823 0.48 0.48 1994 1,602,311 1,624,080 1,001,181 0.62 0.62 Nine months 1995 1,643,815 1,657,040 909,977 0.55 0.55 1995 1,650,632 1,669,617 1,304,267 0.79 0.78 Nine months 1996 1,702,795 1,715,938 1,266,340 0.74 0.74 1991 Shares Outstanding 1,460,000 1,460,000 Warrants 200,000 200,000 Options - 1 vested 71,600 71,600 Options - 2 vested 0 0 Options - 2 vested 0 0 Gross Shares 1,731,600 1,731,600 Shares repurchased 208,286 208,286 Shares for EPS Calculation 1,523,314 1,523,314 Warrants 5.50 5.50 Options - 1 vested 5.00 5.00 Options - 2 vested 7.00 7.00 Options - 2 vested 9.25 9.25 Warrants 1,100,000 1,100,000 Options - 1 vested 358,000 358,000 Options - 2 vested 0 0 Options - 2 vested 0 0 Dollars for repurchase 1,458,000 1,458,000 Price 7.00 7.00 1992 Shares Outstanding 1,460,000 1,460,000 Warrants 200,000 200,000 Options - 1 vested 96,400 96,400 Options - 2 vested 0 0 Options - 2 vested 0 0 Gross Shares 1,756,400 1,756,400 Shares repurchased 226,000 226,000 Shares for EPS Calculation 1,530,400 1,530,400 Warrants 5.50 5.50 Options - 1 vested 5.00 5.00 Options - 2 vested 7.00 7.00 Options - 2 vested 9.25 9.25 Warrants 1,100,000 1,100,000 Options - 1 vested 482,000 482,000 Options - 2 vested 0 0 Options - 2 vested 0 0 Dollars for repurchase 1,582,000 1,582,000 Price 7.00 7.00 2 1993 Shares Outstanding 1,460,000 1,460,000 Warrants 200,000 200,000 Options - 1 vested 121,200 121,200 Options - 2 vested 18,200 18,200 Options - 2 vested 0 0 Gross Shares 1,799,400 1,799,400 Shares repurchased 244,453 229,175 Shares for EPS Calculation 1,554,947 1,570,225 Warrants 5.50 5.50 Options - 1 vested 5.00 5.00 Options - 2 vested 7.00 7.00 Options - 2 vested 9.25 9.25 Warrants 1,100,000 1,100,000 Options - 1 vested 606,000 606,000 Options - 2 vested 127,400 127,400 Options - 2 vested 0 0 Dollars for repurchase 1,833,400 1,833,400 Price 7.50 8.00 1994 Shares Outstanding 1,462,400 1,462,400 Warrants 200,000 200,000 Options - 1 vested 122,000 122,000 Options - 2 vested 35,600 35,600 Options - 2 vested 0 0 Gross Shares 1,820,000 1,820,000 Shares repurchased 217,689 195,920 Shares for EPS Calculation 1,602,311 1,624,080 Warrants 5.50 5.50 Options - 1 vested 5.00 5.00 Options - 2 vested 7.00 7.00 Options - 2 vested 9.25 9.25 Warrants 1,100,000 1,100,000 Options - 1 vested 610,000 610,000 Options - 2 vested 249,200 249,200 Options - 2 vested 0 0 Dollars for repurchase 1,959,200 1,959,200 Price 9.00 10.00 3 Nine Months 1995 Average Shares Outstanding 1,463,157 1,463,157 Warrants 199,000 199,000 Options - 1 vested 122,000 122,000 Options - 2 vested 35,600 35,600 Options - 2 vested 400 400 Gross Shares 1,820,157 1,820,157 Shares repurchased 176,342 163,117 Shares for EPS Calculation 1,643,815 1,657,040 Warrants 5.50 5.50 Options - 1 vested 5.00 5.00 Options - 2 vested 7.00 7.00 Options - 2 vested 9.25 9.25 Warrants 1,094,500 1,094,500 Options - 1 vested 610,000 610,000 Options - 2 vested 249,200 249,200 Options - 2 vested 3,700 3,700 Dollars for repurchase 1,957,400 1,957,400 Price 11.10 12.00 1995 Shares Outstanding 1,463,400 1,463,400 Warrants 199,000 199,000 Options - 1 vested 122,000 122,000 Options - 2 vested 53,400 53,400 Options - 2 vested 400 400 Gross Shares 1,838,200 1,838,200 Shares repurchased 187,568 168,583 Shares for EPS Calculation 1,650,632 1,669,617 Warrants 5.50 5.50 Options - 1 vested 5.00 5.00 Options - 2 vested 7.00 7.00 Options - 2 vested 9.25 9.25 Warrants 1,094,500 1,094,500 Options - 1 vested 610,000 610,000 Options - 2 vested 373,800 373,800 Options - 2 vested 3,700 3,700 Dollars for repurchase 2,082,000 2,082,000 Price 11.10 12.35 4 Nine Months 1996 Average Average Shares Outstanding 1,496,933 1,496,933 Warrants 165,467 165,467 Options - 1 vested 122,000 122,000 Options - 2 vested 53,400 53,400 Options - 2 vested 800 800 Gross Shares 1,838,600 1,838,600 Shares repurchased 135,805 122,662 Shares for EPS Calculation 1,702,795 1,715,938 Warrants 5.50 5.50 Options - 1 vested 5.00 5.00 Options - 2 vested 7.00 7.00 Options - 2 vested 9.25 9.25 Warrants 910,069 910,069 Options - 1 vested 610,000 610,000 Options - 2 vested 373,800 373,800 Options - 2 vested 7,400 7,400 Dollars for repurchase 1,901,269 1,901,269 Price 14.00 15.50
EX-16.1 8 LETTER RE CHANGE IN ACCOUNTANT 1 [letterhead of Ernst & Young LLP] December 9, 1996 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Gentlemen: We have read the information in the second paragraph under the caption EXPERTS of Form S-1 dated December 9, 1996 of Enterbank Holdings, Inc. and are in agreement with the statements contained therein. We have no basis to agree or disagree with other statements of the registrant contained therein. /s/ Ernst & Young LLP EX-21.1 9 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21.1 SUBSIDIARIES OF THE REGISTRANT
State of Percentage Incorporation of or Parent Subsidiary Ownership Organization - ------------------------- ------------------ --------------- ------------------- Enterbank Holdings, Inc. Enterprise Bank 100% Missouri Enterbank Holdings, Inc. Enterprise Capital 100% Missouri Resources, Inc. Enterprise Capital Enterprise Capital 100% Missouri Resources, Inc. Management, Inc.
EX-23.1 10 CONSENT OF EXPERT 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors Enterbank Holdings, Inc.: We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP St. Louis, Missouri December 6, 1996 EX-23.2 11 CONSENT OF EXPERT 1 Exhibit 23.2 CONSENT OF ERNST & YOUNG LLP We consent to the reference to our firm under the caption "Experts" and to the use of our report dated January 18, 1994, with respect to the financial statements of Enterprise Bank included in Amendment No. 1 to the Registration Statement (Form S-1 No. 333-14737) and related Prospectus of Enterbank Holdings, Inc. for the registration of 451,612 shares of its common stock. /s/ Ernst & Young LLP December 6, 1996 St. Louis, Missouri EX-99.1 12 COVER LETTER TO ACCOMPANY THE PROSPECTUS 1 Exhibit 99.1 ENTERBANK HOLDINGS, INC. Date _________________________ _________________________ _________________________ _________________________ Dear __________: Enterbank Holdings, Inc. is a one-bank holding company organized in 1995 in order to provide Enterprise Bank with a more flexible ownership structure. Enterprise Bank, which opened for business in 1988, serves primarily the market of closely-held businesses and their owners and employees. The Bank's sister corporations are Enterprise Capital Resources, Inc., a wholly-owned subsidiary of Enterbank Holdings formed to provide merchant banking services to the Bank's target customers, and Enterprise Capital Management, Inc., a wholly-owned subsidiary of Enterprise Capital Resources which manages and acts as the general partner of the Enterprise Fund, L.P., a licensed small business investment company providing venture capital to growing companies. These sister corporations, like the Bank, are also targeted for significant growth in the near future. One of the primary business principles of both Enterprise Bank and Enterbank Holdings has been to maintain a strong capital base at all times. Therefore, in order to fund the anticipated expansion of the Bank and continue to maintain a strong capital position, the management of Enterbank Holdings has decided to register and offer for sale to the public additional common stock of Enterbank Holdings. Enterbank Holdings is pleased to provide you with an opportunity to participate in this initial public offering of its common stock. Enclosed is a copy of the company's prospectus which provides greater detail regarding Enterbank Holdings and all of its subsidiaries, our plans for the future, and the offering itself. The prospectus also describes many of the risks involved in an investment in Enterbank Holdings' stock. Please review this prospectus carefully. If you believe Enterbank Holdings' common stock fits your investment needs, please complete the enclosed subscription card and return it to us. If you have any questions regarding any of our businesses or this offering, you may contact us at (314) 725-5500. Very truly yours, /s/ Fred H. Eller /s/ Ronald E. Henges Fred H. Eller Ronald E. Henges President/Chief Executive Officer Chairman of the Board 150 N. Meramec . Clayton, Missouri 63105-3753 . (314) 725-5500 . Fax (314) 721-6793 -----END PRIVACY-ENHANCED MESSAGE-----