NOTE 7DERIVATIVE FINANCIAL
INSTRUMENTS AND HEDGING ACTIVITIES
Historically, Enterprise has utilized
derivative financial instruments to manage certain interest rate risks.
Derivative financial instruments are utilized when they can be demonstrated to
effectively hedge a designated asset or liability and such asset or liability
exposes the Company to interest rate or fair value risk. The decision to enter
into an interest rate swap or cap is made after considering the asset/liability
mix and the desired asset/liability sensitivity of the Company.
The Company accounts for its
derivatives under SFAS No. 133, as amended, which, requires recognition of all
derivatives as either assets or liabilities in the consolidated balance sheet
and require measurement of those instruments at fair value through adjustments
to the hedged item, other comprehensive income, or current earnings, as
appropriate.
To qualify for hedge accounting
treatment, a derivative must be highly effective in mitigating the designated
changes in fair value or cash flow of the hedged item. Prior to entering into a
hedge, the Company formally documents the relationship between hedging
instruments and hedged items, as well as the related risk management objective.
The documentation process includes linking derivatives that are designated as
fair value or cash flow hedges to specific assets or liabilities in the
consolidated balance sheet or to specific forecasted transactions, and defining
the effectiveness and ineffectiveness testing methods to be used. The Company
also formally assesses, both at the hedges inception and on an ongoing basis,
whether the derivatives that are used in hedging transactions have been, and are
expected to continue to be, highly effective in offsetting changes in fair
values or cash flows of hedged items.
The Companys credit exposure related
to derivative financial instruments represents the accounting loss Enterprise
would incur in the event the counterparties failed completely to perform
according to the terms of the derivative financial instruments. At December 31,
2008, we had pledged, as collateral in connection with our interest rate swap
agreements, cash of $470,000. At December 31, 2007, we had not pledged
securities or received collateral in connection with our derivative
agreements.
Cash Flow Hedges
At December 31, 2008, Enterprise had two
outstanding interest rate swap agreements whereby Enterprise pays a variable
rate of interest equivalent to the prime rate and receives a fixed rate of
interest. The interest rate swaps have notional amounts of $40,000,000 each and
Enterprise receives fixed rates of 4.81% and 4.25%, respectively. The swaps were
designed to hedge the cash flows associated with a portfolio of prime based
loans. Amounts paid or received under these swap agreements are accounted for on
an accrual basis and recognized in interest income on loans in the 2008
consolidated statements of income. The net cash flows related to these cash flow
hedges increased interest income on loans by $76,000 in 2008. Enterprise had no
cash flow hedges at December 31, 2007. Previously, Enterprise had entered into
similar interest rate swaps, which matured in 2006. Those swaps decreased net
interest income on loans by $410,000 in 2006.
At December 31, 2008, the Company had
recorded $1,291,000 in Other assets in the consolidated balance sheet related to
the fair value of the interest rate swaps. The effective portion of the change
in the derivatives gain or loss is reported as a component of other
comprehensive income, net of taxes. The ineffective portion of the change in the
cash flow hedges gain or loss is recorded in earnings. On December 16, 2008,
the prime rate used to determine the variable rate payments Enterprise would be
making to its counterparty was lowered to a rate less than the Enterprise prime
rate which is used to determine the variable rate receipts from the prime based
borrowers. As a result of the variable rate differential, the Company concluded
that the cash flow hedges would not be prospectively effective and dedesignated
the related interest rate swaps.
The Company used the Hypothetical
Derivative Method to measure ineffectiveness. As a result, at December 31, 2008,
the Company reclassified $638,500 from Accumulated other comprehensive income in
the consolidated statement of shareholders equity and comprehensive income and
into Noninterest income in the consolidated statement of income for the year
then ended.
The amount of gain or loss associated
with the cash flow hedge remaining in other comprehensive income of $652,500
will be reclassified into earnings as the underlying loans are repaid. The
Company expects to reclassify $248,000 of remaining hedge-related amounts from
Accumulated other comprehensive income to earnings over the next twelve
months.
On February 4, 2009, the swaps were
terminated. The Company received cash of $861,000, and recorded a loss of
$530,000.
67
All cash flow hedges in 2006 were
effective, and therefore, no gain or loss was recorded in earnings in 2006.
There were no cash flow hedges outstanding during any period in 2007.
Fair Value
Hedges
At December 31, 2008 and 2007,
Enterprise had no derivative financial instruments designated as fair value
hedges. Previously, Enterprise had entered into interest rate swap agreements
whereby Enterprise paid a variable rate of interest based on a spread to the one
or three-month LIBOR and received a fixed rate of interest equal to that of the
hedged instrument. The changes in fair value of the derivative instrument and
related hedged item were recognized through interest expense. For 2007 and 2006,
all fair value hedges were effective, and therefore, the amounts recorded to
interest expense for the derivative instrument and related hedged item were
entirely offset.
One swap with a notional amount of
$10,000,000, under which Enterprise received a fixed rate of 2.90%, matured in
February 2007. The fair value of the swap was ($35,000) at December 31, 2006.
Two swaps, each with a $10,000,000 notional amount, under which Enterprise
received fixed rates of 2.30% and 2.45%, matured in February and April 2006,
respectively.
Amounts paid or received were accounted
for on an accrual basis and recognized as interest expense of the related hedged
instrument. The net cash flows related to fair value hedges increased interest
expense on certificates of deposit by $0, $41,000, and $363,000 in 2008, 2007
and 2006, respectively.
At inception of the CD, Enterprise paid
broker placement fees by reducing the proceeds received from the issued CD. The
fees did not affect the inception value of the interest rate swap. Placement
fees are capitalized and amortized into interest expense over the life of the CD
in a manner similar to debt issuance costs.
Non-Designated Hedges
Interest rate swaps
At December 31, 2008 and 2007, the
Company had interest rate swap agreements with notional amounts aggregating
$17,476,000 and $5,397,000, respectively. The swaps economically hedge changes
in fair value of a group of fixed rate loans. The related loans are also carried
at fair value. These swap agreements provide for Enterprise to pay a fixed rate
of interest equal to that of the underlying fixed rate loans and to receive a
variable rate of interest based on a spread to one-month LIBOR. The net cash
flows related to these swaps decreased Interest and fees on loans in the
consolidated statements of income by $164,000, $3,900, and $2,100 in 2008, 2007,
and 2006, respectively. The change in fair value of the interest rate swaps
decreased Interest and fees on loans in the consolidated statements of income by
$1,167,000, $228,000, and $119,000 in 2008, 2007 and 2006, respectively. The
changes in fair value of the interest rate swaps were partially offset by
increases in the fair value of the related fixed rate loans of $1,101,000,
$221,000, and $124,000 in 2008, 2007, and 2006, respectively. The fair value of
the swaps was ($1,467,000), ($300,000), and ($119,000) at December 31, 2008,
2007, and, 2006, respectively.
Interest rate caps
In 2008, Enterprise entered into interest
rate cap contracts which entitle Enterprise to receive from the issuer at
specified dates, the amount, if any, by which a specified market rate exceeds
the cap strike interest, applied to a notional principal amount. At December 31,
2008, the Company had interest rate cap contracts with notional amounts totaling
$188,050,000. Enterprise paid a premium of $2,082,000 at the inception of the
contract. No principal payments are exchanged. The change in fair value
decreased Noninterest income in the consolidated statement of income by
$1,538,000 in 2008. At December 31, 2008, the caps fair value was $544,000.
68
NOTE 8FIXED ASSETS
A summary of fixed assets at December
31, 2008 and 2007 is as follows:
|
|
December 31,
|
(in thousands)
|
|
2008
|
|
2007
|
Land
|
|
$
|
2,249
|
|
$
|
2,299
|
Buildings and
leasehold improvements
|
|
|
22,726
|
|
|
18,827
|
Furniture, fixtures and equipment
|
|
|
12,658
|
|
|
11,617
|
Capitalized
software
|
|
|
214
|
|
|
84
|
|
|
|
37,847
|
|
|
32,827
|
Less accumulated
depreciation and amortization
|
|
|
12,689
|
|
|
10,604
|
Total fixed assets
|
|
$
|
25,158
|
|
$
|
22,223
|
Depreciation and amortization of
building, leasehold improvements, and furniture, fixtures, equipment and
capitalized software included in noninterest expense amounted to $2,690,000,
$2,465,000 and $1,901,000 in 2008, 2007, and 2006, respectively.
The Company has facilities leased under
agreements that expire in various years through 2026. The Companys aggregate
rent expense totaled $2,631,000, $2,356,000, and $1,724,000 in 2008, 2007 and
2006, respectively. Sublease rental income was $110,236, $37,000 and $39,000 for
2008, 2007 and 2006. The future aggregate minimum rental commitments (in
thousands) required under the leases are as follows:
Year
|
|
Amount
|
2009
|
|
|
2,378
|
2010
|
|
|
2,388
|
2011
|
|
|
1,392
|
2012
|
|
|
1,318
|
2013
|
|
|
549
|
Thereafter
|
|
|
4,225
|
Total
|
|
$
|
12,249
|
For leases which renew or are subject
to periodic rental adjustments, the monthly rental payments will be adjusted
based on then current market conditions and rates of inflation.
69
NOTE 9GOODWILL AND INTANGIBLE
ASSETS
The tables below present an analysis of
the goodwill and intangible assets for the years ended December 31, 2008, 2007
and 2006.
|
|
Reporting Unit
|
(in thousands)
|
|
Millennium
|
|
Bank
|
|
Total
|
Balance at December 31, 2005
|
|
$
|
10,104
|
|
|
$
|
1,938
|
|
|
$
|
12,042
|
|
Acquisition-related adjustments (1)
|
|
|
189
|
|
|
|
-
|
|
|
|
189
|
|
Goodwill from purchase of NorthStar Bancshares, Inc
|
|
|
-
|
|
|
|
17,752
|
|
|
|
17,752
|
|
Balance at
December 31, 2006
|
|
|
10,293
|
|
|
|
19,690
|
|
|
|
29,983
|
|
Acquisition-related adjustments (1)
|
|
|
-
|
|
|
|
481
|
|
|
|
481
|
|
Goodwill from purchase of Clayco Banc
Corporation
|
|
|
-
|
|
|
|
25,208
|
|
|
|
25,208
|
|
Goodwill from purchase of 40% of Millennium Brokerage
Group
|
|
|
1,505
|
|
|
|
-
|
|
|
|
1,505
|
|
Balance at
December 31, 2007
|
|
|
11,798
|
|
|
|
45,379
|
|
|
|
57,177
|
|
Acquisition-related adjustments (1)
|
|
|
36
|
|
|
|
776
|
|
|
|
812
|
|
Goodwill write-off related to sale of Liberty
branch
|
|
|
-
|
|
|
|
(97
|
)
|
|
|
(97
|
)
|
Goodwill write-off related to sale of DeSoto branch
|
|
|
-
|
|
|
|
(680
|
)
|
|
|
(680
|
)
|
Goodwill impairment related to Millennium Brokerage
Group
|
|
|
(8,700
|
)
|
|
|
-
|
|
|
|
(8,700
|
)
|
Balance at December 31, 2008
|
|
$
|
3,134
|
|
|
$
|
45,378
|
|
|
$
|
48,512
|
|
(1)
|
|
Includes additional purchase
accounting adjustments on the Millennium, NorthStar and Clayco
acquisitions necessary to reflect additional valuation data since the
respective acquisition dates. See Note 2 Acquisitions and Divestitures
for more information.
|
|
|
|
Customer and
|
|
|
|
|
|
|
Trade
Name
|
|
Core
Deposit
|
|
|
(in thousands)
|
|
Intangibles
|
|
Intangible
|
|
Net Intangible
|
Balance at December 31, 2005
|
|
$
|
4,548
|
|
|
$
|
-
|
|
|
$
|
4,548
|
|
Intangibles from purchase of NorthStar Bancshares,
Inc
|
|
|
-
|
|
|
|
2,369
|
|
|
|
2,369
|
|
Amortization expense
|
|
|
(912
|
)
|
|
|
(216
|
)
|
|
|
(1,128
|
)
|
Balance at
December 31, 2006
|
|
|
3,636
|
|
|
|
2,153
|
|
|
|
5,789
|
|
Intangibles from purchase of Clayco Banc Corporation
|
|
|
-
|
|
|
|
1,868
|
|
|
|
1,868
|
|
Amortization expense
|
|
|
(912
|
)
|
|
|
(692
|
)
|
|
|
(1,604
|
)
|
Balance at December 31, 2007
|
|
|
2,724
|
|
|
|
3,329
|
|
|
|
6,053
|
|
Amortization expense
|
|
|
(845
|
)
|
|
|
(599
|
)
|
|
|
(1,444
|
)
|
Intangible write-off related to sale of Liberty branch
|
|
|
-
|
|
|
|
(269
|
)
|
|
|
(269
|
)
|
Intangible write-off related to sale of DeSoto
branch/Great American charter
|
|
|
-
|
|
|
|
(336
|
)
|
|
|
(336
|
)
|
Intangible write-off related to Millennium
|
|
|
(500
|
)
|
|
|
-
|
|
|
|
(500
|
)
|
Balance at
December 31, 2008
|
|
$
|
1,379
|
|
|
$
|
2,125
|
|
|
$
|
3,504
|
|
The following table reflects the
expected amortization schedule for the customer, trade name and core deposit
intangibles (in thousands) at December 31, 2008.
Year
|
|
Amount
|
2009
|
|
$
|
1,077
|
2010
|
|
|
1,015
|
2011
|
|
|
371
|
2012
|
|
|
309
|
2013
|
|
|
247
|
After
2013
|
|
|
485
|
|
|
$
|
3,504
|
Historically, the goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill impairment test date
for the Millennium reporting unit to September 30 of each fiscal year. This
change in the testing date was designed to provide sufficient time for
independent experts to complete the Millennium reporting unit testing prior to
year end reporting. The goodwill impairment test date for the Banking reporting
unit did not change.
70
The goodwill associated with Millennium
was evaluated in accordance with SFAS 142,
Goodwill and Other Intangible Assets
.
Due primarily to continued pressures in the sales margin and resulting earnings
of Millennium, the Companys wholesale insurance
brokerage business, this analysis determined that the carrying value of the
reporting unit was higher than the fair value of the reporting unit, which
resulted in a non-cash goodwill impairment charge of $8,700,000 in 2008. The
Millennium intangible assets are related to their customer lists and tradename.
The Company also tested the Millennium intangible assets for impairment in
conformity with SFAS 144,
Accounting for the
Impairment or Disposal of Long-Lived Asset,
and determined that the customer related intangible was impaired by $500,000.
These impairment charges did not reduce the Companys regulatory capital or cash
flow. The carrying value of the Millennium customer lists and tradename, were
$1,165,000 and $214,000, respectively, as of December 31, 2008.
The annual goodwill impairment
evaluation in 2008 did not identify any impairment at the
Banking unit. However, paragraph 28 of SFAS 142 requires that the goodwill impairment
analysis be conducted when events or circumstances occur that would more likely than not
reduce the fair value of a reporting unit below its carrying amount. An example of such an
event includes significant adverse changes in the business climate, such as a significant
decline in the Companys market capitalization.
NOTE 10MATURITY OF CERTIFICATES OF
DEPOSIT
Following is a summary of certificates
of deposit maturities at December 31, 2008:
|
$100,000
|
|
|
|
|
|
|
(in thousands)
|
and Over
|
|
Other
|
|
Total
|
Less than 1 year
|
$
|
373,045
|
|
$
|
147,387
|
|
$
|
520,432
|
Greater than 1
year and less than 2 years
|
|
112,953
|
|
|
27,766
|
|
|
140,719
|
Greater than 2 years and less than 3 years
|
|
33,064
|
|
|
11,182
|
|
|
44,246
|
Greater than 3
years and less than 4 years
|
|
596
|
|
|
1,179
|
|
|
1,775
|
Greater than 4 years and less than 5 years
|
|
100
|
|
|
342
|
|
|
442
|
Over 5
years
|
|
439
|
|
|
14
|
|
|
453
|
|
$
|
520,197
|
|
$
|
187,870
|
|
$
|
708,067
|
NOTE 11SUBORDINATED
DEBENTURES
The Corporation has nine wholly-owned
statutory business trusts. These trusts issued preferred securities that were
sold to third parties. The sole purpose of the trusts was to invest the proceeds
in junior subordinated debentures of the Company that have terms identical to
the trust preferred securities. In addition to the statutory business trusts, on
September 30, 2008, Enterprise completed a $2,500,000 private placement of
subordinated capital notes. The notes mature in 2018, pay a fixed rate of
interest at 10%, and are callable by Enterprise in five years.
On December 12, 2008, the Company
closed an offering of $25,000,000 in convertible trust preferred securities
through EFSC Capital Trust VIII, a statutory business trust sponsored by the
Company. The proceeds from the offering were used to provide additional parent
company liquidity and regulatory capital. The securities have a 9% coupon,
mature in 30 years and are callable by the Company after 5 years. They are
convertible to 1,439,263 of the Companys common stock. The Company may
terminate the conversion rights, subject to certain limitations, after a
two-year lockout period, if the Companys price per share exceeds $22.58 for
twenty consecutive trading days.
On September 20, 2007, the Company
issued EFSC Capital Trust VII. The proceeds from the offering were used to
refinance EFSC Capital Trust I, which was redeemed on September 30, 2007. EFSC
Capital Trust I redeemed all of its $4,000,000 variable rate trust preferred
securities and its $124,000 of variable rate common securities. At the time of
the redemption, the Company recognized an $82,000 charge in noninterest expense
for unamortized debt issuance costs related to this instrument.
On February 26, 2007 the Company issued
EFSC Capital Trust VI to partially fund the Clayco acquisition. On February 28,
2007, as part of the Clayco acquisition, the Company acquired Clayco Trust I and
Clayco Trust II.
71
The amounts and terms of each
respective issuance at December 31 were as follows:
|
|
Amount
|
|
|
|
|
|
|
(in thousands)
|
|
|
2008
|
|
2007
|
|
Maturity Date
|
|
Call date
|
|
Interest Rate
|
EFSC Clayco Trust I
|
|
$
|
3,196
|
|
$
|
3,196
|
|
December 17, 2033
|
|
December 17, 2008
|
|
Floats @ 3MO LIBOR + 2.85%
|
EFSC Capital
Trust II
|
|
|
5,155
|
|
|
5,155
|
|
June 17,
2034
|
|
June 17,
2009
|
|
Floats @ 3MO
LIBOR + 2.65%
|
EFSC Capital Trust III
|
|
|
11,341
|
|
|
11,341
|
|
December 15, 2034
|
|
December 15, 2009
|
|
Floats @ 3MO LIBOR + 1.97%
|
EFSC Clayco
Trust II
|
|
|
4,124
|
|
|
4,124
|
|
September 15,
2035
|
|
September 15,
2010
|
|
Floats @ 3MO
LIBOR + 1.83%
|
EFSC Capital Trust IV
|
|
|
10,310
|
|
|
10,310
|
|
December 15, 2035
|
|
December 15, 2010
|
|
Fixed for 5 years @ 6.14%(1)
|
EFSC Capital
Trust V
|
|
|
4,124
|
|
|
4,124
|
|
September 15,
2036
|
|
September 15,
2011
|
|
Floats @ 3MO
LIBOR + 1.60%
|
EFSC Capital Trust VI
|
|
|
14,433
|
|
|
14,433
|
|
March 30, 2037
|
|
March 30, 2012
|
|
Fixed for 5 years @ 6.573%(2)
|
EFSC Capital
Trust VII
|
|
|
4,124
|
|
|
4,124
|
|
December 15,
2037
|
|
December 15,
2012
|
|
Floats @ 3MO
LIBOR + 2.25%
|
EFSC Capital Trust VIII
|
|
|
25,774
|
|
|
-
|
|
December 15, 2038
|
|
December 15, 2013 (3)
|
|
Fixed @ 9%
|
Total trust preferred
securities
|
|
|
82,581
|
|
|
56,807
|
|
|
|
|
|
|
|
Enterprise Subordinated Notes
|
|
|
2,500
|
|
|
-
|
|
October 1, 2018
|
|
October 1, 2013
|
|
Fixed @ 10%
|
Total
Subordinated Debentures
|
|
$
|
85,081
|
|
$
|
56,807
|
|
|
|
|
|
|
(1)
|
|
After October 2010,
floats @ 3MO LIBOR + 1.44%
|
|
(2)
|
|
After February 2012,
floats @ 3MO LIBOR + 1.60%
|
|
(3)
|
|
Convertible to EFSC
common stock at a conversion price of $17.37. Forced conversion by EFSC if
EFSC common stock trades at greater than or equal to $22.58 for twenty
consecutive trading days after two years.
|
The subordinated debentures, which are
the sole assets of the trusts, are subordinate and junior in right of payment to
all present and future senior and subordinated indebtedness and certain other
financial conditions of the Company. The Company fully and unconditionally
guarantees each trusts securities obligations. The trust preferred securities
are included in Tier 1 capital for regulatory capital purposes, subject to
certain limitations.
The securities are redeemable in whole
or in part on or after their respective call dates. Mandatory redemption dates
may be shortened if certain conditions are met. The securities are classified as
subordinated debentures in the Companys consolidated balance sheets. Interest
on the subordinated debentures held by the trusts is recorded as interest
expense in the Companys consolidated statements of income. The Companys
investment in these trusts are included in other investments in the consolidated
balance sheets.
An entity managed and controlled by
certain members of the Companys Board of Directors purchased $5,000,000 of the
convertible trust preferred securities of EFSC Capital Trust VIII on December
12, 2008.
NOTE 12FEDERAL HOME LOAN BANK
ADVANCES
FHLB advances are collateralized by 1-4
family residential real estate loans, business loans and certain commercial real
estate loans. At December 31, 2008 and 2007 the carrying value of the loans
pledged to the FHLB of Des Moines was $465,000,000 and $336,000,000,
respectively.
Enterprise also has a $7,517,000
investment in the capital stock of the FHLB of Des Moines and maintains a line
of credit that had availability of approximately $164,300,000 at December 31,
2008.
The following table summarizes the
type, maturity and rate of the Companys FHLB advances at December
31:
|
|
|
2008
|
|
2007
|
|
|
|
Outstanding
|
|
Weighted
|
|
Outstanding
|
|
Weighted
|
(in thousands)
|
Term
|
|
Balance
|
|
Rate
|
|
Balance
|
|
Rate
|
Long term non-amortizing fixed advance
|
less than 1 year
|
|
$
|
81,050
|
|
3.48%
|
|
$
|
58,387
|
|
3.76%
|
Long term
non-amortizing fixed advance
|
1 - 2
years
|
|
|
20,800
|
|
4.19%
|
|
|
55,536
|
|
4.05%
|
Long term non-amortizing fixed advance
|
2 - 3 years
|
|
|
300
|
|
6.07%
|
|
|
20,800
|
|
4.19%
|
Long term
non-amortizing fixed advance
|
3 - 4
years
|
|
|
7,000
|
|
4.52%
|
|
|
300
|
|
6.07%
|
Long term non-amortizing fixed advance
|
4 - 5 years
|
|
|
-
|
|
-
|
|
|
7,000
|
|
4.52%
|
Long term
non-amortizing fixed advance
|
5 - 10
years
|
|
|
10,000
|
|
4.53%
|
|
|
10,000
|
|
4.53%
|
Mortgage matched fixed advance
|
10 - 15 years
|
|
|
807
|
|
5.69%
|
|
|
878
|
|
5.69%
|
|
Total Federal Home Loan Bank
Advances
|
|
|
$
|
119,957
|
|
3.77%
|
|
$
|
152,901
|
|
4.02%
|
72
All of the FHLB advances have fixed
interest rates. At December 31, 2008, $50,000,000 of the advances are prepayable
by the Company at anytime, subject to prepayment penalties. Of the advances with
a term of less than one year, at December 31, 2008, $20,000,000, $25,000,000,
and $25,000,000 is callable by the FHLB beginning on the option date in February
2009, March 2009 and December 2009, respectively, and quarterly thereafter.
NOTE 13OTHER BORROWINGS AND NOTES
PAYABLE
A summary of other borrowings is as
follows:
|
December 31,
|
(in thousands)
|
2008
|
|
2007
|
Federal funds purchased
|
$
|
19,400
|
|
|
$
|
1,784
|
|
Securities sold
under repurchase agreements
|
|
26,760
|
|
|
|
8,896
|
|
Total
|
$
|
46,160
|
|
|
$
|
10,680
|
|
|
Average balance during the year
|
$
|
35,781
|
|
|
$
|
8,068
|
|
Maximum balance
outstanding at any month-end
|
|
55,232
|
|
|
|
10,782
|
|
Weighted average interest rate during the year
|
|
1.81
|
%
|
|
|
3.32
|
%
|
Weighted average
interest rate at December 31
|
|
0.38
|
%
|
|
|
3.17
|
%
|
Enterprise also has a line with the
Federal Reserve Bank of St. Louis for back-up liquidity purposes. As of December
31, 2008, approximately $310,500,000 was available under this line. This line is
secured by a pledge of certain eligible loans.
Notes Payable
At December 31, 2008 the Company had a $16,000,000 unsecured
bank line of credit and a $4,000,000 term loan that expire on April 30, 2009. As
of September 30, 2008, the Company became noncompliant with certain covenants
regarding classified loans as a percentage of bank equity and loan loss
reserves. As a result, the Company repaid all outstanding balances on the line
of credit and term loan in December 2008. The Company does not expect to renew
this arrangement at maturity. Both the line of credit and term loan accrue
interest based on LIBOR plus 1.25% and are payable quarterly. For the year ended
December 31, 2008, the average balance and maximum month-end balance of these
instruments was $12,849,000 and $20,000,000, respectively.
NOTE 14LITIGATION AND OTHER CLAIMS
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 15INCOME TAXES
The components of income tax expense
for the years ended December 31 are as follows:
|
Years ended December 31,
|
(in thousands)
|
2008
|
|
2007
|
|
2006
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
$
|
7,599
|
|
|
$
|
7,637
|
|
$
|
9,023
|
|
State and local
|
|
233
|
|
|
|
632
|
|
|
546
|
|
Deferred
|
|
(6,246
|
)
|
|
|
747
|
|
|
(1,244
|
)
|
|
$
|
1,586
|
|
|
$
|
9,016
|
|
$
|
8,325
|
|
73
A reconciliation of expected income tax
expense, computed by applying the statutory federal income tax rate of 35% in
2008, 2007, and 2006 to income before income taxes and the amounts reflected in
the consolidated statements of income is as follows:
|
Years ended December 31,
|
(in thousands)
|
2008
|
|
2007
|
|
2006
|
Income tax expense at statutory rate
|
$
|
2,106
|
|
|
$
|
9,308
|
|
|
$
|
8,327
|
|
Increase
(reduction) in income tax resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt income
|
|
(401
|
)
|
|
|
(303
|
)
|
|
|
(274
|
)
|
State and
local income tax expense
|
|
151
|
|
|
|
411
|
|
|
|
355
|
|
Non-deductible expenses
|
|
208
|
|
|
|
258
|
|
|
|
236
|
|
Other,
net
|
|
(478
|
)
|
|
|
(658
|
)
|
|
|
(319
|
)
|
Total income tax expense
|
$
|
1,586
|
|
|
$
|
9,016
|
|
|
$
|
8,325
|
|
A net deferred income tax asset of
$13,225,000 and $7,492,000 is included in other assets in the consolidated
balance sheets at December 31, 2008 and 2007, respectively. The tax effect of
temporary differences that gave rise to significant portions of the deferred tax
assets and deferred tax liabilities is as follows:
|
Years ended December 31,
|
(in thousands)
|
2008
|
|
2007
|
Deferred tax assets:
|
|
|
|
|
|
Allowance for loan
losses
|
$
|
11,292
|
|
$
|
7,693
|
Deferred
compensation
|
|
824
|
|
|
897
|
Merchant
banking investments
|
|
239
|
|
|
239
|
Loans
|
|
21
|
|
|
102
|
Intangible
assets
|
|
3,244
|
|
|
-
|
Other
|
|
75
|
|
|
-
|
Total deferred tax assets
|
|
15,695
|
|
|
8,931
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Unrealized
gains on securities available for sale
|
|
467
|
|
|
24
|
State tax
credits, net
|
|
1,056
|
|
|
-
|
Core deposit
intangibles
|
|
774
|
|
|
1,212
|
Office
equipment and leasehold improvements
|
|
173
|
|
|
203
|
Total deferred tax liabilities
|
|
2,470
|
|
|
1,439
|
Net deferred tax asset
|
$
|
13,225
|
|
$
|
7,492
|
A valuation allowance is provided on
deferred tax assets when it is more likely than not that some portion of the
assets will not be realized. The Company did not have any valuation allowances
as of December 31, 2008 or December 31, 2007. Management believes it is more
likely than not that the results of future operations will generate sufficient
taxable income to realize the deferred tax assets above.
The Company, or one of its
subsidiaries, files income tax returns in the U.S. federal jurisdiction and in
seven states. With few exceptions, the Company is no longer subject to U.S.
federal, state or local income tax audits by tax authorities for years before
2005. The Company is not currently under audit by any taxing
jurisdiction.
The Company recognizes interest and
penalties related to uncertain tax positions in income tax expense and
classifies such interest and penalties in the liability for unrecognized tax
benefits. As of December 31, 2008, the Company had approximately $230,000
accrued for interest and penalties.
The Company adopted the provisions of
Financial Accounting Standards Board Interpretation No. 48,
Accounting for
Uncertainty in Income Taxes
, an Interpretation of FAS No. 109,
Accounting for Income Taxes
on January
1, 2007. As a result of the implementation, the Company recognized a $138,000
decrease in the liability for unrecognized tax benefits, which was accounted for
as an increase to the January 1, 2007 balance of retained earnings. The Company
recognizes interest and penalties related to uncertain tax positions in income
tax expense and classifies such interest and penalties in the liability for
unrecognized tax benefits.
74
As of December 31, 2008, the gross
amount of unrecognized tax benefits was $1,690,000 and the total amount of
unrecognized tax benefits that would impact the effective tax rate, if
recognized, was $1,200,000. The Company believes it is reasonably possible that
an additional $430,000 in unrecognized tax benefits related to certain federal
and state tax items will be recognized during 2009 as a result of the expiration
of certain statues of limitations.
The activity in the accrued liability
for unrecognized tax benefits was as follows:
(in thousands)
|
|
2008
|
|
2007
|
Balance at beginning of year
|
|
$
|
2,412
|
|
|
$
|
2,430
|
|
Additions based
on tax positions related to the
|
|
|
|
|
|
|
|
|
current year
|
|
|
245
|
|
|
|
484
|
|
Additions for tax positions of prior years
|
|
|
241
|
|
|
|
112
|
|
Reductions for tax positions of prior years
|
|
|
(491
|
)
|
|
|
-
|
|
Settlements of lapse of exposure
|
|
|
(717
|
)
|
|
|
(614
|
)
|
Balance at end of year
|
|
$
|
1,690
|
|
|
$
|
2,412
|
|
NOTE 16REGULATORY MATTERS
The Company and each of its bank
subsidiaries are subject to various regulatory capital requirements administered
by the Federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possible additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
financial statements of the Company and its banking subsidiaries. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and each bank must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. Each banks capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by
regulation to ensure capital adequacy require the Company and each bank to
maintain minimum amounts and ratios (set forth in the following table) of total
and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average
assets. Management believes, as of December 31, 2008 and 2007, that the Company
and bank meet all capital adequacy requirements to which they are subject.
As of December 31, 2008 and 2007, the
bank was categorized as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized each bank must
maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios
as set forth in the table.
75
The actual capital amounts and ratios
are also presented in the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Be
Well
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized Under
|
|
|
|
|
|
|
|
|
|
For
Capital
|
|
Applicable
|
|
|
Actual
|
|
|
Adequacy Purposes
|
|
Action Provisions
|
(in thousands)
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
As of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk
Weighted Assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Financial Services Corp
|
|
$
|
273,978
|
|
12.81
|
%
|
|
$
|
171,136
|
|
8.00
|
%
|
|
$
|
-
|
|
-
|
%
|
Enterprise Bank & Trust
|
|
|
230,008
|
|
10.86
|
|
|
|
169,479
|
|
8.00
|
|
|
|
211,848
|
|
10.00
|
|
Tier I
Capital (to Risk Weighted Assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Financial Services Corp
|
|
|
190,253
|
|
8.89
|
|
|
|
85,568
|
|
4.00
|
|
|
|
-
|
|
-
|
|
Enterprise Bank & Trust
|
|
|
200,968
|
|
9.49
|
|
|
|
84,739
|
|
4.00
|
|
|
|
127,109
|
|
6.00
|
|
Tier I
Capital (to Average Assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Financial Services Corp
|
|
|
190,253
|
|
8.40
|
|
|
|
67,961
|
|
3.00
|
|
|
|
-
|
|
-
|
|
Enterprise Bank & Trust
|
|
|
200,968
|
|
8.95
|
|
|
|
67,392
|
|
3.00
|
|
|
|
112,319
|
|
5.00
|
|
|
|
As of December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital
(to Risk Weighted Assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Financial Services Corp
|
|
$
|
186,549
|
|
10.54
|
%
|
|
$
|
141,534
|
|
8.00
|
%
|
|
$
|
-
|
|
-
|
%
|
Enterprise Bank & Trust
|
|
|
160,862
|
|
10.02
|
|
|
|
128,463
|
|
8.00
|
|
|
|
160,579
|
|
10.00
|
|
Great American Bank
|
|
|
18,381
|
|
11.80
|
|
|
|
12,457
|
|
8.00
|
|
|
|
15,571
|
|
10.00
|
|
Tier I
Capital (to Risk Weighted Assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Financial Services Corp
|
|
|
164,957
|
|
9.32
|
|
|
|
70,767
|
|
4.00
|
|
|
|
-
|
|
-
|
|
Enterprise Bank & Trust
|
|
|
141,259
|
|
8.80
|
|
|
|
64,231
|
|
4.00
|
|
|
|
96,347
|
|
6.00
|
|
Great American Bank
|
|
|
16,434
|
|
10.55
|
|
|
|
6,229
|
|
4.00
|
|
|
|
9,343
|
|
6.00
|
|
Tier I
Capital (to Average Assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Financial Services Corp
|
|
|
164,957
|
|
8.85
|
|
|
|
55,938
|
|
3.00
|
|
|
|
-
|
|
-
|
|
Enterprise Bank & Trust
|
|
|
141,259
|
|
8.32
|
|
|
|
50,959
|
|
3.00
|
|
|
|
84,931
|
|
5.00
|
|
Great American Bank
|
|
|
16,434
|
|
8.14
|
|
|
|
55,938
|
|
3.00
|
|
|
|
10,094
|
|
5.00
|
|
NOTE 17COMPENSATION PLANS
The Company has adopted share-based
compensation plans to reward and provide long-term incentive for directors and
key employees of the Company. These plans provide for the granting of stock,
stock options, stock appreciation rights, and restricted stock units (RSUs),
as designated by the Companys Board of Directors. The Company uses authorized
and unissued shares to satisfy share award exercises. During 2008, share-based
compensation was issued in the form of stock, stock options, stock-settled stock
appreciation rights and RSUs. At December 31, 2008, there were 885,523 shares
available for grant under the various share-based compensation plans. An
additional 80,346 shares of stock were available for issuance under the Stock
Plan for Non-Management Directors approved by the Shareholders in April
2006.
The share-based compensation expense
that was charged against income was $2,255,000, $1,906,000 and $1,252,000 for
the years ended December 31, 2008, 2007 and 2006, respectively. The total income
tax benefit recognized in the income statement for share-based compensation
arrangements was $460,000, $381,000 and $525,000 for the years ended December
31, 2008, 2007 and 2006, respectively.
In determining compensation cost for
stock options, the Black-Scholes option-pricing model is used to estimate the
fair value of options on date of grant. The Black-Scholes model is a closed-end
model that uses the assumptions in the following table. The risk-free rate for
the expected term is based on the U.S. Treasury zero-coupon spot rates in effect
at the time of grant. Expected volatility is based on historical volatility of
the Companys common stock. The Company uses historical exercise behavior and
other factors to estimate the expected term of the options, which represents the
period of time that the options granted are expected to be
outstanding.
|
|
2008
|
|
2007
|
|
2006
|
Risk-free interest rate
|
|
3.9%
|
|
5.2%
|
|
4.5%
|
Expected
dividend rate
|
|
0.6%
|
|
0.6%
|
|
0.3%
|
Expected volatility
|
|
39.4%
|
|
36.0%
|
|
54.6%
|
Expected
term
|
|
6
years
|
|
6
years
|
|
9.5
years
|
76
Employee Stock Options and
Stock-settled Stock Appreciation Rights
Stock options were granted to key employees with exercise prices equal to
the market price of the Companys common stock at the date of grant and have
10-year contractual terms. Stock options have a vesting schedule of between
three to five years. In 2007, the Company began granting stock-settled stock
appreciation rights (SSAR) to key employees. The SSARs are subject to
continued employment, have a 10-year contractual term and vest ratably over five
years. Neither stock options nor SSARs carry voting or dividend rights until
exercised. At December 31, 2008, there was $32,000 and $2,883,000 of total
unrecognized compensation cost related to stock options and SSARs,
respectively, which is expected to be recognized over a weighted average period
of 1.3 years and 3.6 years, respectively.
(in thousands, except grant date
fair value)
|
|
2008
|
|
2007
|
|
2006
|
Weighted average grant date fair value of options
|
|
$
|
8.27
|
|
$
|
10.69
|
|
$
|
18.34
|
Compensation
expense
|
|
|
705
|
|
|
452
|
|
|
21
|
Intrinsic value of option exercises on date of exercise
|
|
|
2,177
|
|
|
1,961
|
|
|
1,750
|
Cash received
from the exercise of stock options
|
|
|
3,148
|
|
|
1,233
|
|
|
1,226
|
Following is a summary of the employee
stock option activity for 2008.
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
(Dollars in thousands, except share
data)
|
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
Outstanding at December 31, 2007
|
|
891,816
|
|
|
$
|
15.42
|
|
|
|
|
|
|
Granted
|
|
305,198
|
|
|
|
19.79
|
|
|
|
|
|
|
Exercised
|
|
(265,779
|
)
|
|
|
11.84
|
|
|
|
|
|
|
Forfeited
|
|
(103,764
|
)
|
|
|
24.58
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
827,471
|
|
|
$
|
17.03
|
|
6.5 years
|
|
$
|
(1,484
|
)
|
Exercisable at
December 31, 2008
|
|
485,274
|
|
|
$
|
14.24
|
|
4.5 years
|
|
$
|
485
|
|
Vested and expected to vest at December 31, 2008
|
|
765,457
|
|
|
$
|
16.47
|
|
6.5 years
|
|
$
|
(941
|
)
|
Restricted Stock
Units
As part of a long-term incentive
plan, the Company awards nonvested stock, in the form of RSUs to employees.
RSUs are subject to continued employment and vest ratably over five years.
RSUs do not carry voting or dividend rights until vested. Sales of the units
are restricted prior to vesting.
(in thousands)
|
|
2008
|
|
2007
|
|
2006
|
Compensation expense
|
|
$
|
1,380
|
|
$
|
1,308
|
|
$
|
1,029
|
Total fair value
at vesting date
|
|
|
765
|
|
|
1,384
|
|
|
1,421
|
Total unrecognized compensation cost for nonvested
|
|
|
|
|
|
|
|
|
|
stock units
|
|
|
3,038
|
|
|
3,441
|
|
|
3,418
|
Expected years
to recognize unearned compensation
|
|
|
3.0 years
|
|
|
3.1 years
|
|
|
3.5
years
|
A summary of the status of the Company's
restricted stock unit awards as of December 31, 2008 and changes during the year
then ended is presented below.
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
Grant Date
|
|
|
Shares
|
|
Fair Value
|
Outstanding at December 31, 2007
|
|
168,286
|
|
|
$
|
23.74
|
Granted
|
|
95,067
|
|
|
|
21.39
|
Vested
|
|
(59,510
|
)
|
|
|
22.63
|
Forfeited
|
|
(53,385
|
)
|
|
|
23.20
|
Outstanding at December 31, 2008
|
|
150,458
|
|
|
$
|
22.89
|
77
Stock Plan for Non-Management
Directors
In 2006, the Company adopted a
Stock Plan for Non-Management Directors, which provides for issuing shares of
common stock to non-employee directors as compensation in lieu of cash. The plan
was approved by the shareholders and allows up to 100,000 shares to be awarded.
Shares are issued twice a year and compensation expense is recorded as the
shares are earned, therefore, there is no unrecognized compensation cost related
to this plan. In 2008, the Company issued 9,544 shares of stock at a weighted
average fair value of $17.83 per share. In 2007, the Company issued 6,729 shares
of stock at a weighted average fair value of $27.40 per share. The Company
recognized $170,000 and $146,000 of stock-based compensation expense for the
shares issued to the directors in 2008 and 2007, respectively.
Moneta Plan
In 1997, the Company entered into a solicitation and referral
agreement with Moneta Group, Inc. (Moneta), a nationally recognized firm in
the financial planning industry. There have been no options granted to Moneta
under the agreement since 2003. The fair value of each option granted to Moneta
was estimated on the date of grant using the Black-Scholes option pricing model.
The Company recognized the fair value of the options over the vesting period as
expense. As of December 31, 2006, the fair value of all Moneta options had been
recognized. The Company recognized $17,000 in Moneta option-related expenses
during 2006.
Following is a summary of the Moneta stock
option activity for 2008.
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
(Dollars in thousands, except share
data)
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
Outstanding at December 31, 2007
|
137,098
|
|
|
$
|
12.62
|
|
|
|
|
|
Granted
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
(53,680
|
)
|
|
|
10.34
|
|
|
|
|
|
Forfeited
|
(4,169
|
)
|
|
|
15.32
|
|
|
|
|
|
Outstanding at December 31, 2008
|
79,249
|
|
|
$
|
14.02
|
|
1.4 years
|
|
$
|
97
|
Exercisable at
December 31, 2008
|
79,249
|
|
|
$
|
14.02
|
|
1.4 years
|
|
$
|
97
|
401(k) plans
Effective January 1, 1993, the Company adopted a 401(k) thrift
plan which covers substantially all full-time employees over the age of 21. In
addition, substantially all employees of Millennium can elect to participate in
a safe-harbor 401(k) plan. The amount charged to expense for the Companys
contributions to the plans was $529,000, $447,000 and $323,000 for 2008, 2007,
and 2006, respectively.
NOTE 18COMMITMENTS
The Company 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 Companys extent of involvement and
maximum 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 Company uses the same credit policies in making commitments and
conditional obligations as it does for financial instruments included on its
consolidated balance sheets. At December 31, 2008, no amounts have been accrued
for any estimated losses for these financial instruments.
The contractual amount of
off-balance-sheet financial instruments as of December 31, 2008 and 2007 is as
follows:
|
December 31,
|
|
December 31,
|
(in thousands)
|
2008
|
|
2007
|
Commitments to extend credit
|
$
|
555,361
|
|
$
|
535,227
|
Standby letters
of credit
|
|
33,875
|
|
|
36,464
|
78
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 usually 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, 2008 and 2007, approximately
$131,000,000 and $61,181,000, respectively, 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 Company evaluates each customers 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 managements credit evaluation of
the borrower. Collateral held varies, but may include accounts receivable,
inventory, premises and equipment, and real estate.
Standby letters of credit are conditional
commitments issued by the bank subsidiaries to guarantee the performance of a
customer to a third party. These standby letters of credit are issued to support
contractual obligations of each banks customers. The credit risk involved in
issuing letters of credit is essentially the same as the risk involved in
extending loans to customers. The approximate remaining term of standby letters
of credit range from 1 month to 5 years at December 31, 2008.
NOTE 19FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Company
adopted SFAS 157,
Fair Value Measurements,
for financial assets and financial
liabilities. In accordance with FSP 157-2,
Effective Date of FASB Statement No. 157
(FSP 157-2), the Company will delay application of SFAS 157 for
non-financial assets and non-financial liabilities, until January 1, 2009. SFAS
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements.
SFAS 157 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. A fair value measurement
assumes that the transaction to sell the asset or transfer the liability occurs
in the principal market for the asset or liability or, in the absence of a
principal market, the most advantageous market for the asset or liability. The
price in the principal (or most advantageous) market used to measure the fair
value of the asset or liability shall not be adjusted for transaction costs. An
orderly transaction is a transaction that assumes exposure to the market for a
period prior to the measurement date to allow for marketing activities that are
usual and customary for transactions involving such assets and liabilities; it
is not a forced transaction. Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgeable, (iii) able to
transact and (iv) willing to transact.
SFAS 157 requires the use of valuation
techniques that are consistent with the market approach, the income approach
and/or the cost approach. The market approach uses prices and other relevant
information generated by market transactions involving identical or comparable
assets and liabilities. The income approach uses valuation techniques to convert
future amounts, such as cash flows or earnings, to a single present amount on a
discounted basis. The cost approach is based on the amount that currently would
be required to replace the service capacity of an asset (replacement cost).
Valuation techniques should be consistently applied. Inputs to valuation
techniques refer to the assumptions that market participants would use in
pricing the asset or liability. Inputs may be observable, meaning those that
reflect the assumptions market participants would use in pricing the asset or
liability developed based on market data obtained from independent sources, or
unobservable, meaning those that reflect the reporting entity's own assumptions
about the assumptions market participants would use in pricing the asset or
liability developed based on the best information available in the
circumstances. In that regard, SFAS 157 establishes a fair value hierarchy for
valuation inputs that gives the highest priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as follows:
-
Level 1 Inputs
- Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
-
Level 2 Inputs
- Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly. These
might include quoted prices for similar assets or liabilities in active
markets, quoted prices for identical or similar assets or liabilities in
markets that are not active, inputs other than quoted prices that are
observable for the asset or liability (such as interest rates, volatilities,
prepayment speeds, credit risks, etc.) or inputs that are derived principally
from or corroborated by market data by correlation or other
means.
-
Level 3 Inputs
- Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entity's own assumptions about the assumptions
that market participants would use in pricing the assets or liabilities.
79
In general, fair value is based upon
quoted market prices, where available. If such quoted market prices are not
available, fair value is based upon internally developed models that primarily
use, as inputs, observable market-based parameters. Valuation adjustments may be
made to ensure that financial instruments are recorded at fair value. These
adjustments may include amounts to reflect counterparty credit quality, the
Company's creditworthiness, among other things, as well as unobservable
parameters. Any such valuation adjustments are applied consistently over time.
The Company's valuation methodologies may produce a fair value calculation that
may not be indicative of net realizable value or reflective of future fair
values. While management believes the Company's valuation methodologies are
appropriate and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different estimate of fair value at the reporting
date. These valuation methodologies were applied to all of the Company's
financial assets and financial liabilities carried at fair value effective
January 1, 2008.
-
Securities available for sale
. Securities classified as available for sale are reported
at fair value utilizing Level 2 and Level 3 inputs. The Company obtains fair
value measurements from an independent pricing service. The fair value
measurements consider observable data that may include dealer quotes, market
spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade
execution data, market consensus prepayment speeds, credit information and the
bond's terms and conditions. Through September 30, 2008, Level 3 securities
available for sale included a Federal Home Loan Mortgage Corporation pool.
This security was sold during the fourth quarter of 2008.
-
Portfolio Loans.
Certain fixed rate portfolio loans are accounted for as trading
instruments and reported at fair value. Fair value on these loans is
determined using a third party valuation model with observable Level 2 market
data inputs.
-
State tax credits held for sale.
Pursuant to the provisions of SFAS 159, the
Company elected to record its state tax credits held for sale at fair value.
The cumulative effect adjustment necessary to carry the credits on hand at
January 1, 2008 was $570,000, which was
recorded, net of tax as an adjustment to retained earnings as of January 1,
2008.
The Company is not aware of
an active market that exists for the 10-year streams of state tax credit
financial instruments. However, the Companys principal market for these tax
credits consists of state residents who buy these credits from local and
regional accounting firms who broker them. As such, the Company employed a
discounted cash flow analysis (income approach) to determine the fair
value.
The fair value measurement
is calculated using an internal valuation model with observable market data
including discounted cash flows based upon the terms and conditions of the tax
credits. Assuming that the underlying project remains in compliance with the
various federal and state rules governing the tax credit program, each project
will generate about 10 years of tax credits. The inputs to the fair value
calculation include: the amount of tax credits generated each year, the
anticipated sale price of the tax credit, the timing of the sale and a
discount rate. The discount rate is defined as the LIBOR swap curve at a point
equal to the remaining life in years of credits plus a 205 basis point spread.
With the exception of the discount rate, the other inputs to the fair value
calculation are observable and readily available. The discount rate is
considered a Level 3 input because it is an unobservable input and is based
on the Companys assumptions. Given the significance of this input to our fair
value calculation, the state tax credit assets are reported as Level 3
assets.
Economically, the Company equates the state tax credits
to a fixed rate loan. After considering various risks, such as credit risk,
compliance risk, and recapture risk, management concluded the state tax
credits are equivalent to a fixed rate loan priced at Prime minus 75 basis
points. When pricing a fixed rate loan, most banks utilize the Prime-based
swap curve, which is based on the LIBOR swap curve plus a prime equivalent
spread of 265 to 285 basis points depending on market pricing and the maturity
of the underlying loan. The Prime-based swap curve is available daily on
Bloomberg or other national pricing services. As a result, management
concluded the spread of 205 basis points (prime equivalent spread of 285 basis
points minus 75 basis points) to the LIBOR curve should be utilized in the
fair value calculation.
At
December 31, 2008, the discount rates utilized in our state tax credits fair
value calculation ranged from 3.80% to 4.61%. Resulting changes in the fair
value of the state tax credits held for sale of $4,635,000 were reported in
Gain on state tax credits in the consolidated statement of income for the year
ended December 31, 2008.
-
Derivatives
.
Derivatives are reported at fair value utilizing Level 2 inputs. The Company
obtains counterparty quotations to value its interest rate swaps and caps. In
addition, the Company validates the counterparty quotations with third party
valuation sources. Derivatives with negative fair values are included in Other
liabilities in the consolidated balance sheets.
Derivatives with positive fair value are included in Other assets in the
consolidated balance sheets.
80
The following table summarizes financial
instruments measured at fair value on a recurring basis as of December 31, 2008,
segregated by the level of the valuation inputs within the fair value hierarchy
utilized to measure fair value:
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair
|
(in thousands)
|
Inputs
|
|
Inputs
|
|
Inputs
|
|
Value
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
$
|
-
|
|
$
|
96,431
|
|
$
|
-
|
|
$
|
96,431
|
State tax credits held for sale
|
|
-
|
|
|
-
|
|
|
39,142
|
|
|
39,142
|
Derivative financial instruments
|
|
-
|
|
|
1,835
|
|
|
-
|
|
|
1,835
|
Portfolio loans
|
|
-
|
|
|
18,875
|
|
|
-
|
|
|
18,875
|
Total
assets
|
$
|
-
|
|
$
|
117,141
|
|
$
|
39,142
|
|
$
|
156,283
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
$
|
-
|
|
$
|
1,467
|
|
$
|
-
|
|
$
|
-
|
Total liabilities
|
$
|
-
|
|
$
|
1,467
|
|
$
|
-
|
|
$
|
-
|
The following table presents the changes
in Level 3 financial instruments measured at fair value as of December 31,
2008.
|
Securities
|
|
|
|
|
available for
|
|
|
|
|
sale,
at fair
|
|
State
tax credits
|
(in thousands)
|
value
|
|
held for sale
|
Balance at January 1, 2008
|
$
|
-
|
|
|
$
|
22,547
|
Total gains or losses (realized and
unrealized):
|
|
|
|
|
|
|
Included in earnings
|
|
-
|
|
|
|
5,740
|
Included in other comprehensive income
|
|
(37
|
)
|
|
|
-
|
Purchases, sales, issuances and settlements, net
|
|
37
|
|
|
|
10,855
|
Transfer in and/or out of Level 3
|
|
-
|
|
|
|
-
|
Balance at December 31, 2008
|
$
|
-
|
|
|
$
|
39,142
|
|
Change in unrealized gains or losses relating to assets still
held
|
|
|
|
|
|
|
at the reporting date
|
$
|
-
|
|
|
$
|
4,635
|
Certain financial assets and financial
liabilities are measured at fair value on a non-recurring basis; that is, the
instruments are not measured at fair value on an ongoing basis but are subject
to fair value adjustments in certain circumstances (for example, when there is
evidence of impairment).
-
Loans held for sale
. These loans are reported at the lower of cost or fair value. Fair
value is determined based on expected proceeds based on sales contracts and
commitments and are considered Level 2 inputs.
-
Impaired loans.
Impaired loans are included as Portfolio loans on the Companys
consolidated balance sheet with amounts specifically reserved for credit
impairment in the Allowance for loan losses. The fair value of impaired loans
is based on underlying collateral. These assets are classified as Level
2.
-
Other Real Estate.
These assets are reported at the lower of the loan carrying amount at
foreclosure or fair value less estimated costs to sell. Fair value is based on
third party appraisals of each property and the Companys judgment of other
relevant market conditions. These are considered Level 2
inputs.
81
The following table presents the financial
instruments measured at fair value on a non-recurring basis as of December 31,
2008.
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
Total
Fair
|
(in thousands)
|
Input
|
|
Input
|
|
Input
|
|
Value
|
Loans held for sale
|
$
|
-
|
|
$
|
2,632
|
|
$
|
-
|
|
$
|
2,632
|
Impaired
loans
|
|
-
|
|
|
33,322
|
|
|
-
|
|
|
33,322
|
Other real estate
|
|
-
|
|
|
13,868
|
|
|
-
|
|
|
13,868
|
Total
|
$
|
-
|
|
$
|
49,822
|
|
$
|
-
|
|
$
|
49,822
|
Certain non-financial assets and
non-financial liabilities measured at fair value on a recurring basis include
reporting units measured at fair value in the first step of a goodwill
impairment test. Certain non-financial assets measured at fair value on a
non-recurring basis include non-financial assets and non-financial liabilities
measured at fair value in the second step of a goodwill impairment test, as well
as intangible assets and other non-financial long-lived assets measured at fair
value for impairment assessment. As stated above, FSP 157-2 will be applicable
to these fair value measurements beginning January 1, 2009.
Effective January 1, 2008, the Company
adopted the provisions of SFAS No. 159,
The
Fair Value Option for Financial Assets and Financial Liabilities - Including an
amendment of FASB Statement No. 115.
There
were no valuation allowances related to the state tax credits held for sale that
were impacted by the adoption of SFAS 159. Below is a summary of the impact of
the initial implementation of the FVO.
|
|
|
|
|
|
|
|
January 1, 2008
|
|
December 31, 2007
|
|
Cumulative effect of
|
|
fair
value (carrying
|
|
(carrying value prior
|
|
adjustment at
|
|
value
after
|
(in thousands)
|
to adoption)
|
|
January 1, 2008
|
|
adoption)
|
State tax credits held for sale
|
$
|
23,117
|
|
$
|
(570
|
)
|
|
$
|
22,547
|
Pretax
cumulative effect of adoption of the fair value option
|
|
|
|
|
(570
|
)
|
|
|
|
Increase in deferred tax asset
|
|
|
|
|
205
|
|
|
|
|
Cumulative
effect of adoption of the fair value option
|
|
|
|
|
|
|
|
|
|
(charge to
retained earnings)
|
|
|
|
$
|
(365
|
)
|
|
|
|
SFAS 107,
Disclosures about Fair Value of Financial Instruments
, 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.
82
Following is a summary of the carrying
amounts and fair values of the Companys financial instruments on the
consolidated balance sheets at December 31, 2008 and 2007:
|
|
2008
|
|
2007
|
|
|
Carrying
|
|
Estimated
|
|
Carrying
|
|
Estimated
|
(in thousands)
|
|
Amount
|
|
fair value
|
|
Amount
|
|
fair value
|
Balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from
banks
|
|
$
|
25,626
|
|
$
|
25,626
|
|
$
|
76,265
|
|
$
|
76,265
|
Federal Funds
Sold
|
|
|
2,637
|
|
|
2,637
|
|
|
75,665
|
|
|
75,665
|
Interest-bearing deposits
|
|
|
14,384
|
|
|
14,384
|
|
|
1,719
|
|
|
1,719
|
Securities
available for sale
|
|
|
96,431
|
|
|
96,431
|
|
|
70,756
|
|
|
70,756
|
Other
investments
|
|
|
11,884
|
|
|
11,884
|
|
|
12,577
|
|
|
12,577
|
Loans held
for sale
|
|
|
2,632
|
|
|
2,632
|
|
|
3,420
|
|
|
3,420
|
Derivative
financial instruments
|
|
|
1,835
|
|
|
1,835
|
|
|
300
|
|
|
300
|
Loans, net of
allowance for loan losses
|
|
|
1,945,866
|
|
|
1,991,183
|
|
|
1,619,839
|
|
|
1,622,977
|
State tax
credits, held for sale
|
|
|
39,142
|
|
|
39,142
|
|
|
23,149
|
|
|
23,149
|
Accrued
interest receivable
|
|
|
7,557
|
|
|
7,557
|
|
|
8,334
|
|
|
8,334
|
|
Balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,792,784
|
|
|
1,800,958
|
|
|
1,585,012
|
|
|
1,588,539
|
Subordinated
debentures
|
|
|
85,081
|
|
|
71,393
|
|
|
56,807
|
|
|
57,050
|
Other
borrowed funds
|
|
|
166,117
|
|
|
180,864
|
|
|
169,580
|
|
|
182,065
|
Derivative
financial instruments
|
|
|
1,467
|
|
|
1,467
|
|
|
-
|
|
|
-
|
Accrued
interest payable
|
|
|
2,473
|
|
|
2,473
|
|
|
3,710
|
|
|
3,710
|
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, Federal funds sold, and other
short-term instruments
For cash and due
from banks, federal funds purchased, interest-bearing deposits, and accrued
interest receivable (payable), the carrying amount is a reasonable estimate of
fair value, as such instruments reprice in a short time period.
Securities available for sale
The Company obtains fair value
measurements for available for sale debt instruments from an independent pricing
service. The fair value measurements consider observable data that may include
dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live
trading levels, trade execution data, market consensus prepayment speeds, credit
information and the bond's terms and conditions.
Other investments
Other investments, which primarily
consists of membership stock in the FHLB is reported at cost, which approximates
fair value.
Loans, net of allowance for loan
losses
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 for the same remaining maturities.
State tax credits held for sale
The fair value of state tax credits held
for sale is calculated using an internal valuation model with unobservable
market data including discounted cash flows based upon the terms and conditions
of the tax credits.
Derivative financial instruments
The fair value of derivative financial
instruments is based on quoted market prices by the counterparty and verified by
the Company using public pricing information.
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 by discounting the future cash flows using
the rates currently offered for deposits of similar remaining maturities.
83
Subordinated debentures
Fair value of floating interest rate
subordinated debentures is assumed to equal carrying value. Fair value of fixed
interest rate subordinated debentures is based on discounting the future cash
flows using rates currently offered for financial instruments of similar
remaining maturities.
Other borrowed funds
Other borrowed funds include FHLB
advances, customer repurchase agreements, federal funds purchased, and notes
payable. The fair value of FHLB advances is based on the discounted value of
contractual cash flows. The discount rate is estimated using current rates on
borrowed money with similar remaining maturities. The fair value of federal
funds purchased, customer repurchase agreements and notes payable are assumed to
be equal to their carrying amount since they have an adjustable interest rate.
Commitments to extend credit and
standby letters of credit
The fair value
of commitments to extend credit and standby letters of credit would be 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
creditworthiness 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 are subjective in nature and involve uncertainties
and matters of significant judgment, and therefore, cannot be determined with
precision. Such estimates include the valuation of loans, goodwill, intangible
assets, and other long-lived assets, along with assumptions used in the
calculation of income taxes, among others. These estimates and assumptions are
based on managements best estimates and judgment. Management evaluates its
estimates and assumptions on an ongoing basis using historical experience and
other factors, including the current economic environment, which management
believes to be reasonable under the circumstances. We adjust such estimates and
assumptions when facts and circumstances dictate. Decreasing real estate values,
illiquid credit markets, volatile equity markets, and declines in consumer
spending have combined to increase the uncertainty inherent in such estimates
and assumptions. As future events and their effects cannot be determined with
precision, actual results could differ significantly from these estimates.
Changes in estimates resulting from continuing changes in the economic
environment will be reflected in the financial statement in future periods. In
addition, these estimates do not reflect any premium or discount that could
result from offering for sale at one time the Companys entire holdings of a
particular financial instrument. Fair value estimates are based on existing
on-balance 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.
NOTE 20SEGMENT REPORTING
The Company has two primary operating
segments, Banking and Wealth Management, which are delineated by the products
and services that each segment offers. The segments are evaluated separately on
their individual performance, as well as, their contribution to the Company as a
whole.
The Banking operating segment consists
of a full-service commercial bank, Enterprise, with locations in St. Louis and
Kansas City and a loan production office in Phoenix, Arizona. The majority of
the Companys assets and income result from the Banking segment. With the
exception of the loan production office, all banking locations have the same
product and service offerings, have similar types and classes of customers and
utilize similar service delivery methods. Pricing guidelines and operating
policies for products and services are the same across all regions.
The Wealth Management segment includes
the Trust division of Enterprise, the state tax credit brokerage activities, and
Millennium. The Trust division provides estate planning, investment management,
and retirement planning as well as consulting on management compensation,
strategic planning and management succession issues. State tax credits are part
of a fee initiative designed to augment the Companys wealth management segment
and banking lines of business. Millennium operates life insurance advisory and
brokerage operations from thirteen offices serving life agents, banks, CPA
firms, property & casualty groups, and financial advisors in 49
states.
84
The Corporate segments principal
activities include the direct ownership of the Companys banking and non-banking
subsidiaries and the issuance of debt and equity. Its principal source of
revenue is dividends from its subsidiaries and stock option exercises.
The financial information for each
business segment reflects that information which is specifically identifiable or
which is allocated based on an internal allocation method. There were no
material intersegment revenues among the three segments. Management periodically
makes changes to methods of assigning costs and income to its business segments
to better reflect operating results. When appropriate, these changes are
reflected in prior year information presented below.
Following are the financial results for
the Companys operating segments.
|
|
Years ended December 31,
|
|
|
2008
|
|
|
|
|
|
Wealth
|
|
Corporate and
|
|
|
|
|
(in thousands)
|
|
Banking
|
|
Management
|
|
Intercompany
|
|
Total
|
Net interest income (expense)
|
|
$
|
71,628
|
|
$
|
(1,043
|
)
|
|
$
|
(3,862
|
)
|
|
$
|
66,723
|
|
Provision for
loan losses
|
|
|
22,475
|
|
|
-
|
|
|
|
-
|
|
|
|
22,475
|
|
Noninterest income
|
|
|
10,027
|
|
|
15,049
|
|
|
|
197
|
|
|
|
25,273
|
|
Non interest
expense
|
|
|
38,851
|
|
|
11,536
|
|
|
|
3,918
|
|
|
|
54,305
|
|
Impairment charges related to Millennium Brokerage Group
|
|
|
-
|
|
|
9,200
|
|
|
|
-
|
|
|
|
9,200
|
|
Income (loss)
before income tax expense
|
|
|
20,329
|
|
|
(6,730
|
)
|
|
|
(7,583
|
)
|
|
|
6,016
|
|
Income tax expense (benefit)
|
|
|
7,296
|
|
|
(2,447
|
)
|
|
|
(3,263
|
)
|
|
|
1,586
|
|
Net income
(loss)
|
|
$
|
13,033
|
|
$
|
(4,283
|
)
|
|
$
|
(4,320
|
)
|
|
$
|
4,430
|
|
|
Loans, less unearned loan fees
|
|
$
|
1,977,175
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,977,175
|
|
Goodwill
|
|
|
45,378
|
|
|
3,134
|
|
|
|
-
|
|
|
|
48,512
|
|
Intangibles, net
|
|
|
2,126
|
|
|
1,378
|
|
|
|
-
|
|
|
|
3,504
|
|
Deposits
|
|
|
1,818,514
|
|
|
-
|
|
|
|
(25,730
|
)
|
|
|
1,792,784
|
|
Borrowings
|
|
|
168,617
|
|
|
-
|
|
|
|
82,581
|
|
|
|
251,198
|
|
Total
assets
|
|
|
2,204,341
|
|
|
48,775
|
|
|
|
17,058
|
|
|
|
2,270,174
|
|
|
|
|
2007
|
|
|
|
|
|
Wealth
|
|
Corporate and
|
|
|
|
|
|
|
Banking
|
|
Management
|
|
Intercompany
|
|
Total
|
Net interest income (expense)
|
|
$
|
64,840
|
|
$
|
138
|
|
|
$
|
(3,926
|
)
|
|
$
|
61,052
|
|
Provision for
loan losses
|
|
|
4,615
|
|
|
-
|
|
|
|
-
|
|
|
|
4,615
|
|
Noninterest income
|
|
|
4,472
|
|
|
14,772
|
|
|
|
429
|
|
|
|
19,673
|
|
Non interest
expense
|
|
|
35,483
|
|
|
10,674
|
|
|
|
3,359
|
|
|
|
49,516
|
|
Income (loss) before income tax expense
|
|
|
29,214
|
|
|
4,236
|
|
|
|
(6,856
|
)
|
|
|
26,594
|
|
Income tax
expense (benefit)
|
|
|
10,283
|
|
|
1,525
|
|
|
|
(2,792
|
)
|
|
|
9,016
|
|
Net income (loss)
|
|
$
|
18,931
|
|
$
|
2,711
|
|
|
$
|
(4,064
|
)
|
|
$
|
17,578
|
|
|
Loans, less unearned loan fees
|
|
$
|
1,641,432
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,641,432
|
|
Goodwill
|
|
|
45,379
|
|
|
11,798
|
|
|
|
-
|
|
|
|
57,177
|
|
Intangibles, net
|
|
|
3,330
|
|
|
2,723
|
|
|
|
-
|
|
|
|
6,053
|
|
Deposits
|
|
|
1,588,963
|
|
|
-
|
|
|
|
(3,951
|
)
|
|
|
1,585,012
|
|
Borrowings
|
|
|
163,581
|
|
|
-
|
|
|
|
62,807
|
|
|
|
226,388
|
|
Total
assets
|
|
|
1,952,495
|
|
|
42,542
|
|
|
|
4,081
|
|
|
|
1,999,118
|
|
|
|
|
2006
|
|
|
|
|
|
Wealth
|
|
Corporate and
|
|
|
|
|
|
|
Banking
|
|
Management
|
|
Intercompany
|
|
Total
|
Net interest income (expense)
|
|
$
|
53,639
|
|
$
|
105
|
|
|
$
|
(2,467
|
)
|
|
$
|
51,277
|
|
Provision for
loan losses
|
|
|
2,127
|
|
|
-
|
|
|
|
-
|
|
|
|
2,127
|
|
Noninterest income
|
|
|
3,056
|
|
|
13,809
|
|
|
|
51
|
|
|
|
16,916
|
|
Non interest
expense
|
|
|
28,563
|
|
|
9,207
|
|
|
|
3,624
|
|
|
|
41,394
|
|
Minority interest
|
|
|
-
|
|
|
(875
|
)
|
|
|
-
|
|
|
|
(875
|
)
|
Income (loss)
before income tax expense
|
|
|
26,005
|
|
|
3,832
|
|
|
|
(
6,040
|
)
|
|
|
23,797
|
|
Income tax expense (benefit)
|
|
|
9,119
|
|
|
1,379
|
|
|
|
( 2,173
|
)
|
|
|
8,325
|
|
Net income
(loss)
|
|
$
|
16,886
|
|
$
|
2,453
|
|
|
$
|
(3,867
|
)
|
|
$
|
15,472
|
|
|
Loans, less unearned loan fees
|
|
$
|
1,311,723
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,311,723
|
|
Goodwill
|
|
|
19,690
|
|
|
10,293
|
|
|
|
-
|
|
|
|
29,983
|
|
Intangibles, net
|
|
|
2,153
|
|
|
3,636
|
|
|
|
-
|
|
|
|
5,789
|
|
Deposits
|
|
|
1,319,201
|
|
|
-
|
|
|
|
(3,693
|
)
|
|
|
1,315,508
|
|
Borrowings
|
|
|
36,752
|
|
|
-
|
|
|
|
39,054
|
|
|
|
75,806
|
|
Total
assets
|
|
|
1,517,617
|
|
|
16,991
|
|
|
|
979
|
|
|
|
1,535,587
|
|
85
NOTE 21PARENT COMPANY ONLY
CONDENSED FINANCIAL STATEMENTS
Condensed Balance Sheets
|
December 31,
|
(in thousands)
|
2008
|
|
2007
|
Assets
|
|
|
|
|
|
Cash
|
$
|
23,840
|
|
$
|
487
|
Investment in Enterprise Bank & Trust
|
|
249,662
|
|
|
162,881
|
Investment in
Millennium Holding Company
|
|
8,861
|
|
|
17,754
|
Investment in Great American Bank
|
|
-
|
|
|
43,570
|
Other
assets
|
|
18,947
|
|
|
14,519
|
Total assets
|
$
|
301,310
|
|
$
|
239,211
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
Subordinated
debentures
|
$
|
82,581
|
|
$
|
56,807
|
Notes payable
|
|
-
|
|
|
6,000
|
Accounts payable
and other liabilities
|
|
941
|
|
|
3,255
|
Shareholders' equity
|
|
217,788
|
|
|
173,149
|
Total liabilities
and shareholders' equity
|
$
|
301,310
|
|
$
|
239,211
|
Condensed Statements of Income
|
Years ended December 31,
|
(in thousands)
|
2008
|
|
2007
|
|
2006
|
Income:
|
|
|
|
|
|
|
|
|
|
Dividends from
subsidiaries
|
$
|
45,811
|
|
|
$
|
8,440
|
|
$
|
9,669
|
Other
|
|
3,162
|
|
|
|
559
|
|
|
133
|
Total
income
|
|
48,973
|
|
|
|
8,999
|
|
|
9,802
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Interest
expense-subordinated debentures
|
|
3,471
|
|
|
|
3,859
|
|
|
2,343
|
Interest
expense-notes payable
|
|
507
|
|
|
|
197
|
|
|
207
|
Other
expenses
|
|
4,918
|
|
|
|
3,359
|
|
|
3,623
|
Total expenses
|
|
8,896
|
|
|
|
7,415
|
|
|
6,173
|
|
Net income before taxes and equity in undistributed earnings of
subsidiaries
|
|
40,077
|
|
|
|
1,584
|
|
|
3,629
|
|
Income tax benefit
|
|
2,338
|
|
|
|
2,792
|
|
|
2,173
|
|
Net income before equity in undistributed earnings of
subsidiaries
|
|
42,415
|
|
|
|
4,376
|
|
|
5,802
|
|
Equity in undistributed earnings of subsidiaries
|
|
(37,985
|
)
|
|
|
13,202
|
|
|
9,670
|
Net
income
|
$
|
4,430
|
|
|
$
|
17,578
|
|
$
|
15,472
|
86
Condensed Statements of Cash Flow
|
Years Ended December 31,
|
(in thousands)
|
2008
|
|
2007
|
|
2006
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
4,430
|
|
|
$
|
17,578
|
|
|
$
|
15,472
|
|
Adjustments to
reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of charter
|
|
(2,850
|
)
|
|
|
-
|
|
|
|
-
|
|
Share-based compensation
|
|
2,255
|
|
|
|
1,944
|
|
|
|
1,153
|
|
Net income of subsidiaries
|
|
(7,826
|
)
|
|
|
(21,642
|
)
|
|
|
(19,339
|
)
|
Dividends from subsidiaries
|
|
45,811
|
|
|
|
8,440
|
|
|
|
9,669
|
|
Excess tax benefits of share-based
compensation
|
|
(460
|
)
|
|
|
(381
|
)
|
|
|
(525
|
)
|
Additional share-based compensation from acquisition of
Clayco
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
Other, net
|
|
(28
|
)
|
|
|
(2,096
|
)
|
|
|
10
|
|
Net cash provided by operating activities
|
|
42,332
|
|
|
|
3,843
|
|
|
|
6,440
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Cash contributions
to subsidiaries
|
|
(73,988
|
)
|
|
|
-
|
|
|
|
-
|
|
Cash received in
sale of charter, net of cash and cash equivalents paid
|
|
5,575
|
|
|
|
-
|
|
|
|
-
|
|
Cash paid for
acquisitions, net of cash acquired
|
|
-
|
|
|
|
(17,085
|
)
|
|
|
(8,060
|
)
|
Purchases of
available for sale debt securities
|
|
(1,494
|
)
|
|
|
(784
|
)
|
|
|
(538
|
)
|
Proceeds from
maturities and principal paydowns on available
|
|
|
|
|
|
|
|
|
|
|
|
for sale debt securities
|
|
-
|
|
|
|
124
|
|
|
|
-
|
|
Purchase of limited
partnership interests
|
|
(5,034
|
)
|
|
|
(1,171
|
)
|
|
|
-
|
|
Net cash used in
investing activities
|
|
(74,941
|
)
|
|
|
(18,916
|
)
|
|
|
(8,598
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes
payable
|
|
15,000
|
|
|
|
6,750
|
|
|
|
10,000
|
|
Paydowns of notes
payable
|
|
(21,000
|
)
|
|
|
(4,751
|
)
|
|
|
(10,745
|
)
|
Proceeds from
issuance of subordinated debentures
|
|
25,774
|
|
|
|
18,557
|
|
|
|
4,124
|
|
Paydown of
subordinated debentures
|
|
-
|
|
|
|
(4,124
|
)
|
|
|
-
|
|
Cash dividends
paid
|
|
(2,661
|
)
|
|
|
(2,638
|
)
|
|
|
(1,977
|
)
|
Excess tax benefits
of share-based compensation
|
|
460
|
|
|
|
381
|
|
|
|
525
|
|
Issuance of
preferred stock and warrants
|
|
35,000
|
|
|
|
-
|
|
|
|
-
|
|
Common stock
repurchased
|
|
-
|
|
|
|
(1,743
|
)
|
|
|
-
|
|
Proceeds from the
exercise of common stock options
|
|
3,389
|
|
|
|
1,304
|
|
|
|
1,189
|
|
Net cash provided by financing activities
|
|
55,962
|
|
|
|
13,736
|
|
|
|
3,116
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
23,353
|
|
|
|
(1,337
|
)
|
|
|
958
|
|
Cash and cash
equivalents, beginning of year
|
|
487
|
|
|
|
1,824
|
|
|
|
866
|
|
Cash and cash equivalents, end of year
|
$
|
23,840
|
|
|
$
|
487
|
|
|
$
|
1,824
|
|
|
Noncash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for acquisitions of businesses
|
$
|
-
|
|
|
$
|
22,482
|
|
|
$
|
5,249
|
|
87
NOTE 22QUARTERLY CONDENSED
FINANCIAL INFORMATION (Unaudited)
The following table presents the
unaudited quarterly financial information for the years ended December 31, 2008
and 2007.
|
2008
|
|
4th
|
|
3rd
|
|
2nd
|
|
1st
|
(in thousands, except per share
data)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
Interest income
|
$
|
29,163
|
|
|
$
|
29,289
|
|
$
|
29,283
|
|
$
|
30,246
|
|
Interest
expense
|
|
11,963
|
|
|
|
12,705
|
|
|
12,481
|
|
|
14,109
|
|
Net interest income
|
|
17,200
|
|
|
|
16,584
|
|
|
16,802
|
|
|
16,137
|
|
|
Provision for loan losses
|
|
14,125
|
|
|
|
2,825
|
|
|
3,200
|
|
|
2,325
|
|
|
Net interest
income after provision for loan losses
|
|
3,075
|
|
|
|
13,759
|
|
|
13,602
|
|
|
13,812
|
|
|
Noninterest income
|
|
7,650
|
|
|
|
7,641
|
|
|
4,444
|
|
|
5,538
|
|
Noninterest
expense
|
|
17,817
|
|
|
|
19,133
|
|
|
12,723
|
|
|
13,832
|
|
|
Income before
income tax expense
|
|
(7,092
|
)
|
|
|
2,267
|
|
|
5,323
|
|
|
5,518
|
|
|
Income tax expense
|
|
(3,140
|
)
|
|
|
948
|
|
|
1,823
|
|
|
1,955
|
|
Net
income
|
$
|
(3,952
|
)
|
|
$
|
1,319
|
|
$
|
3,500
|
|
$
|
3,563
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.32
|
)
|
|
$
|
0.10
|
|
$
|
0.28
|
|
$
|
0.29
|
|
Diluted
|
|
(0.32
|
)
|
|
|
0.10
|
|
|
0.27
|
|
|
0.28
|
|
|
|
|
2007
|
|
4th
|
|
3rd
|
|
2nd
|
|
1st
|
(in thousands, except per share
data)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
Interest income
|
$
|
31,916
|
|
|
$
|
31,807
|
|
$
|
30,946
|
|
$
|
27,848
|
|
Interest
expense
|
|
15,713
|
|
|
|
16,002
|
|
|
15,821
|
|
|
13,929
|
|
Net interest
income
|
|
16,203
|
|
|
|
15,805
|
|
|
15,125
|
|
|
13,919
|
|
|
Provision for loan losses
|
|
2,450
|
|
|
|
600
|
|
|
715
|
|
|
850
|
|
|
Net interest
income after provision for loan losses
|
|
13,753
|
|
|
|
15,205
|
|
|
14,410
|
|
|
13,069
|
|
|
Noninterest income
|
|
6,230
|
|
|
|
4,638
|
|
|
4,906
|
|
|
3,899
|
|
Noninterest
expense
|
|
13,083
|
|
|
|
12,202
|
|
|
12,370
|
|
|
11,861
|
|
|
Minority interest in net income of consolidated
subsidiary
|
|
-
|
|
|
|
-
|
|
|
157
|
|
|
(157
|
)
|
|
Income before
income tax expense
|
|
6,900
|
|
|
|
7,641
|
|
|
7,103
|
|
|
4,950
|
|
|
Income tax expense
|
|
1,994
|
|
|
|
2,642
|
|
|
2,588
|
|
|
1,792
|
|
Net
income
|
$
|
4,906
|
|
|
$
|
4,999
|
|
$
|
4,515
|
|
$
|
3,158
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.40
|
|
|
$
|
0.40
|
|
$
|
0.37
|
|
$
|
0.27
|
|
Diluted
|
|
0.39
|
|
|
|
0.40
|
|
|
0.36
|
|
|
0.26
|
|
The sum of the quarterly EPS amounts
may not equal the full year amounts due to rounding.
88
ITEM 9: CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
ITEM 9A: CONTROLS AND
PROCEDURES
Disclosure Controls and Procedures
As of December 31, 2008, under the
supervision and with the participation of the Companys Chief Executive Officer
(CEO) and the Chief Financial Officer (CFO), management has evaluated the
effectiveness of the design and operation of the Companys disclosure controls
and procedures pursuant to Exchange Act Rule 13a-15. Based on that evaluation,
the CEO and CFO concluded that the Companys disclosure controls and procedures
were effective as of December 31, 2008, to ensure that information required to
be disclosed in the Companys periodic SEC filings is processed, recorded,
summarized and reported when required. There were no significant changes in the
Companys internal controls or in the other factors that could significantly
affect those controls subsequent to the date of the evaluation.
Managements Report on Internal
Control over Financial Reporting
Managements Report on Internal
Controls over financial reporting and the audit report of KPMG LLP, the
Companys independent registered public accounting firm, are included in Item 8
and are incorporated in this Item 9A by reference.
ITEM 9B: OTHER INFORMATION
The Company is not aware of any
information required to be disclosed in a report on Form 8-K during the fourth
quarter covered by their Form 10-K, but not reported, whether or not otherwise
required by this Form 10-K.
PART III
ITEM 10: DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
The information required by this item
is incorporated herein by reference to the Companys Proxy Statement for its
annual meeting to be held on Thursday, April 30, 2009. The Companys executive
officers consist of the named executive officers disclosed in the Compensation
Discussion and Analysis Section of the Proxy Statement.
ITEM 11: EXECUTIVE COMPENSATION
The information required by this item
is incorporated herein by reference to the Companys Proxy Statement for its
annual meeting to be held on Thursday, April 30, 2009.
ITEM 12: SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item
is incorporated herein by reference to the Companys Proxy Statement for its
annual meeting to be held on Thursday, April 30, 2009.
ITEM 13: CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information required by this item
is incorporated herein by reference to the Companys Proxy Statement for its
annual meeting to be held on Thursday, April 30, 2009.
ITEM 14: PRINCIPAL ACCOUNTANT FEES
AND SERVICES
The information required by this item
is incorporated by reference to the Companys Proxy Statement for its annual
meeting to be held on Thursday, April 30, 2009.
89
PART IV
ITEM 15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES
(a) 1. Financial Statements
The consolidated financial statements
of Enterprise Financial Services Corp and its subsidiaries and independent
auditors' reports are included in Part II (Item 8) of this Form 10 K.
2. Financial Statement
Schedules
All financial statement schedules have
been omitted, as they are either inapplicable or included in the Notes to
Consolidated Financial Statements.
3. Exhibits
The following documents are included or
incorporated by reference in this Annual Report on Form 10-K:
Exhibit
No.
|
|
|
3.1
|
|
Certificate of
Incorporation of Registrant, (incorporated herein by reference to Exhibit
3.1 of Registrants Registration Statement on Form S-1 filed on December
19, 1996 (File No. 333-14737)).
|
|
3.2
|
|
Amendment to the
Certificates of Incorporation of Registrant (incorporated herein by
reference to Exhibit 4.2 to Registrants Registration Statement on Form
S-8 filed on July 1, 1999 (File No. 333-82087)).
|
|
3.3
|
|
Amendment to the
Certificate of Incorporation of Registrant (incorporated herein by
reference to Exhibit 3.1 to Registrants Quarterly Report on Form 10-Q for
the period ending September 30, 1999).
|
|
3.4
|
|
Amendment to the
Certificate of Incorporation of Registrant (incorporated herein by
reference to Exhibit 99.2 to Registrants Current Report on Form 8-K filed
on April 30, 2002).
|
|
3.5
|
|
Amendment to the
Certificate of Incorporation of Registrant (incorporated herein by
reference to Appendix A to Registrants Proxy Statement on Form 14-A filed
on November 20, 2008).
|
|
3.6
|
|
Certificate of
Designations of Registrant for Fixed Rate Cumulative Perpetual Preferred
Stock, Series A, dated December 17, 2008 (incorporated herein by reference
to Exhibit 3.1 to Registrants Current Report on Form 8-K filed on
December 23, 2008).
|
|
3.7
|
|
Bylaws of Registrant,
as amended, (incorporated herein by reference to Exhibit 3.1 to
Registrants Current Report on Form 8-K filed on October 2,
2007).
|
|
10.1
|
|
Key Executive
Employment Agreement dated effective as of July 1, 2008 by and between
Registrant and Stephen P. Marsh (incorporated herein by reference to
Exhibit 99.1 to Registrants Current Report on Form 8-K filed on November
25, 2008), and amended by that First Amendment of Executive Employment
Agreement dated as of December 19, 2008 (incorporated herein by reference
to Exhibit 99.6 to Registrants Current Report on Form 8-K filed on
December 23, 2008).
|
|
10.2
|
|
Key Executive
Employment Agreement dated effective as of December 1, 2004 by and between
Registrant and Frank H. Sanfilippo (incorporated herein by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K filed on December
1, 2004), and amended by that First Amendment of Executive Employment
Agreement dated as of December 19, 2008 (incorporated herein by reference
to Exhibit 99.5 to Registrants Current Report on Form 8-K filed on
December 23, 2008).
|
|
10.3
|
|
Key Executive
Employment Agreement dated effective as of September 24, 2008, by and
between Registrant and Peter F. Benoist (incorporated herein by reference
to Exhibit 10.1 to Registrants Current Report on Form 8-K filed on
September 30, 2008), and amended by that First Amendment of
Executive Employment Agreement dated as of December 19,
2008 (incorporated herein by reference to Exhibit 99.3 to Registrants
Current Report on Form 8-K filed on December 23, 2008).
|
|
90
10.4
|
|
Key Executive
Employment Agreement dated effective as of November 1, 2004, by and
between Registrant and Linda M. Hanson (incorporated herein by reference
to Exhibit 10.14 to Registrants Report on Form 10-K for the year ended
December 31, 2007), and amended by that First Amendment of Executive
Employment Agreement dated as of December 19, 2008 (incorporated herein by
reference to Exhibit 99.4 to Registrants Current Report on Form 8-K filed
on December 23, 2008).
|
|
10.5
|
|
Key Executive
Employment Agreement dated effective as of October 5, 2007, by and among
Registrant, Enterprise Bank & Trust, and John G. Barry (filed
herewith), and amended by that First Amendment of Executive Employment
Agreement dated as of December 19, 2008 (incorporated herein by reference
to Exhibit 99.7 to Registrants Current Report on Form 8-K filed on
December 23, 2008).
|
|
10.6
|
|
Waiver executed by
each of Peter F. Benoist, Frank H. Sanfilippo, Linda M. Hanson, Stephen P.
Marsh and John G. Barry (incorporated herein by reference to Exhibit 99.2
to Registrants Current Report on Form 8-K filed on December 23,
2008).
|
|
10.7
|
|
Consulting Agreement
dated May 1, 2008, by and between Registrant and Kevin C. Eichner
(incorporated herein by reference to Exhibit 10.1 to Registrants Current
Report on Form 8-K filed on March 3, 2008).
|
|
10.8
|
|
Enterprise Financial
Services Corp Deferred Compensation Plan I (incorporated herein by
reference to Exhibit 10.1 of Registrants Quarterly Report on Form 10-Q
for the period ended March 31, 2000).
|
|
10.9
(1)
|
|
Enterprise Financial Services Corp Amended and Restated
Deferred Compensation Plan I dated effective as of December 31,
2008.
|
|
10.10
|
|
Enterprise Financial
Services Corp, Third Incentive Stock Option Plan (incorporated herein by
reference to Exhibit 4.5 to Registrants Registration Statement on Form
S-8 filed on December 29, 1997 (File No. 333-43365)).
|
|
10.11
|
|
Enterprise Financial
Services Corp, Fourth Incentive Stock Option Plan (incorporated herein by
reference to Registrants 1998 Proxy Statement on Form 14-A).
|
|
10.12
|
|
Enterprise Financial
Services Corp, Stock Plan for Non-Management Directors (incorporated
herein by reference to Registrants Proxy Statement on Form 14-A filed on
March 7, 2006).
|
|
10.13
|
|
Enterprise Financial
Services Corp, 2002 Stock Incentive Plan, as amended (incorporated herein
by reference to Registrants Proxy Statement on Form 14-A, filed on March
17, 2008).
|
|
10.14
|
|
Enterprise Financial
Services Corp, Annual Incentive Plan (incorporated herein by reference to
Registrants Proxy Statement on Form 14-A, filed on March 7,
2006).
|
|
10.15
|
|
Enterprise Financial
Services Corp, Incentive Stock Purchase Plan (incorporated herein by
reference to Exhibit 4.6 to Registrants Registration Statement on Form
S-8 filed on November 1, 2002 (File No. 333-100928)).
|
|
10.16
|
|
$20,000,000 Amended
and Restated Credit Agreement, as modified by the Third Modification
Agreement dated April 30, 2007, by and between Registrant and U.S. Bank
National Association (incorporated herein by reference to Exhibit 10.1 to
Registrants Current Report on Form 8-K filed on June 22,
2007).
|
|
10.16.1
(1)
|
|
$20,000,000 Amended and Restated Credit Agreement, as
modified by the Fourth, Fifth and Sixth Modification Agreements dated
April 30, 2008, June 30, 2008, and December 11, 2008, by and between
Registrant and U.S. Bank National Association.
|
91
10.17
|
|
Stock Purchase
Agreement dated February 5, 2008 between Registrant and First Financial
Bancshares, Inc. (incorporated herein by reference to Exhibit 2.1 to
Registrants Current Report on Form 8-K filed on February 6,
2008).
|
|
10.18
|
|
Membership Interest
Purchase Agreement (Second Installment Closing) by and among Registrant,
Millennium Holding Company, Inc., and Millennium Brokerage Group, LLC, et
al. dated December 31, 2007 (incorporated herein by reference to Exhibit
2.1 to Registrants Current Report on Form 8-K filed on January 7,
2008).
|
|
10.19
|
|
Condominium Sale
Contract, dated October 3, 2007, by and between Enterprise Bank &
Trust and Maryland Walk LLC (incorporated herein by reference to Exhibit
10.1 to Registrants Current Report on Form 8-K dated October 9,
2007).
|
|
10.20
|
|
Indenture dated
December 12, 2008, by and between Registrant and Wilmington Trust Company
(incorporated herein by reference to Exhibit 4.1 to Registrants Current
Report on Form 8-K filed on December 15, 2008).
|
|
10.21
|
|
Amended and Restated
Declaration of Trust dated December 12, 2008, by and among Registrant,
Wilmington Trust Company, and each of the Administrators named therein
(incorporated herein by reference to Exhibit 4.2 to Registrants Current
Report on Form 8-K filed on December 15, 2008).
|
|
10.22
|
|
Guarantee dated
December 12, 2008, by and between Registrant and Wilmington Trust Company
(incorporated herein by reference to Exhibit 4.3 to Registrants Current
Report on Form 8-K filed on December 15, 2008).
|
|
10.23
(1)
|
|
First Amendment to Amended and Restated Declaration of
Trust No. 2 dated January 9, 2009 by and among Registrant, Wilmington
Trust Company and each of the Administrators named therein.
|
|
10.24
|
|
Warrant to Purchase
Shares of Common Stock dated December 19, 2008, by Registrant in favor of
the United States Department of the Treasury (incorporated herein by
reference to Exhibit 4.1 to Registrants Current Report on Form 8-K filed
on December 23, 2008).
|
|
10.25
|
|
Letter Agreement dated
December 19, 2008, including Securities Purchase Agreement Standard
Terms incorporated by reference therein, by and between Registrant and the
United States Department of the Treasury (incorporated herein by reference
to Exhibit 99.1 to Registrants Current Report on Form 8-K filed on
December 23, 2008).
|
|
14.1
|
|
Code of Ethics for the
Principal Executive Officer and Senior Financial Officers (incorporated
herein by reference to Exhibit 14.1 to Registrants Report on Form 10-K
for the year ended December 31, 2003).
|
|
21.1
(1)
|
|
Subsidiaries of Registrant.
|
|
23.1
(1)
|
|
Consent of KPMG LLP.
|
|
24.1
(1)
|
|
Power of Attorney
|
|
31.1
(1)
|
|
Chief Executive Officers Certification required by Rule
13(a)-14(a).
|
|
31.2
(1)
|
|
Chief Financial Officers Certification required by Rule
13(a)-14(a).
|
|
32.1
(1)
|
|
Chief Executive Officer Certification pursuant to 18
U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
(1)
|
|
Chief Financial Officer Certification pursuant to 18
U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley
Act of 2002
|
(1)
Filed herewith
Note:
|
|
|
|
|
In accordance with Item 601 (b)
(4) (iii) of Regulation S-K, Registrant hereby agrees to furnish to the
Commission, upon request, the instruments defining the rights of holders
of each issue of long-term debt of Registrant and its consolidated
subsidiaries.
|
92
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 16th of March, 2009.
ENTERPRISE FINANCIAL SERVICES CORP
/s/ Peter F. Benoist
|
|
/s/ Frank H. Sanfilippo
|
|
Peter
F. Benoist
|
Frank
H. Sanfilippo
|
Chief
Executive Officer
|
Chief
Financial Officer
|
Pursuant to the requirements of the
Securities Act of 1934, this Report on Form 10-K has been signed by the
following persons in the capacities indicated on the 16
th
of March, 2009.
Signatures
|
|
Title
|
|
|
|
/s/ Peter F. Benoist*
|
|
|
Peter F.
Benoist
|
|
President and
Chief Executive Officer and Director
|
|
|
|
/s/ James J. Murphy, Jr.*
|
|
|
James J. Murphy,
Jr.
|
|
Chairman of the
Board of Directors
|
|
|
|
/s/ Kevin C. Eichner*
|
|
|
Kevin C.
Eichner
|
|
Vice Chairman
and Director
|
|
|
|
/s/ Michael A. DeCola*
|
|
|
Michael A.
DeCola
|
|
Director
|
|
|
|
/s/ William H. Downey*
|
|
|
William H.
Downey
|
|
Director
|
|
|
|
/s/ Robert E. Guest, Jr.*
|
|
|
Robert E. Guest,
Jr.
|
|
Director
|
|
|
|
/s/ Lewis A. Levey*
|
|
|
Lewis A.
Levey
|
|
Director
|
|
|
|
/s/ Birch M. Mullins*
|
|
|
Birch M.
Mullins
|
|
Director
|
|
|
|
/s/ Brenda D. Newberry*
|
|
|
Brenda D.
Newberry
|
|
Director
|
|
|
|
/s/ Robert E. Saur*
|
|
|
Robert E.
Saur
|
|
Director
|
|
|
|
/s/ Sandra A. Van Trease*
|
|
|
Sandra A. Van
Trease
|
|
Director
|
|
|
|
/s/ Henry D. Warshaw*
|
|
|
Henry D.
Warshaw
|
|
Director
|
|
|
|
*Signed by Power
of Attorney.
|
|
|
93
Enterprise Financial Ser... (NASDAQ:EFSC)
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Enterprise Financial Ser... (NASDAQ:EFSC)
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