UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
The Securities Exchange Act of 1934
Date of Report (Date
of earliest event reported)
March 8, 2010
March 8, 2010
ENTERPRISE FINANCIAL SERVICES
CORP
(Exact name of registrant as specified in its charter)
CORP
(Exact name of registrant as specified in its charter)
| Delaware | 001-15373 | 43-1706259 |
| (State or Other Jurisdiction | (Commission | (IRS Employer |
| of Incorporation) | File Number) | Identification No.) |
| 150 N. Meramec, St. Louis, Missouri | 63105 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area
code
(314) 725-5500
(314) 725-5500
| Not applicable |
(Former name or
former address, if changed since last report)
Check the appropriate
box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following
provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial
Condition.
The information
required by this item is contained in Item 4.02 of this report and is
incorporated herein by reference.
Item 4.02 (a). Non-Reliance on Previously
Issued Financial Statements or a Related Audit Report or Completed Interim
Review.
Enterprise Financial
Services Corp (the “Company”) previously disclosed both in an exhibit to its
Current Report on Form 8-K filed on October 23, 2009 and in its Quarterly Report
on Form 10-Q for the quarter ended September 30, 2009, filed on November 6,
2009, the Company’s discovery of an error in its accounting for loan
participation agreements that affected the Company’s fiscal years ended December
31, 2007 and December 31, 2008, all quarters of fiscal year 2008 and the first
and second quarters of 2009. Except for labeling affected prior period financial
statements as “Restated,” no further changes are being made to the Company’s
above described corrected financial statements and no further restatement of the
Company’s financial statements is anticipated. As previously disclosed, as a
result of the amendment of the loan participation agreements, the overall effect
of these adjustments from the original period of correction to December 31, 2009
was neutral to the Company’s financial results. The Company expects to file its
Annual Report on Form 10-K for the fiscal year ended December 31, 2009 on
Tuesday, March 16, 2010.
Decision to Record the Correction of an
Immaterial Error
The Company’s Chief
Financial Officer and members of the Audit Committee discussed the error
described below with KPMG LLP (“KPMG”), the Company’s registered independent
public accounting firm. Management reviewed the impact of the accounting error
and concluded that the error was immaterial to the previously reported amounts
contained in its periodic reports. As a result, on October 12, 2009, management
concluded that the Company’s previously filed financial statements for fiscal
years ended December 31, 2007 and December 31, 2008, all quarters of fiscal year
2008 and the first and second quarters of fiscal year 2009 should be corrected.
The Company corrected its financial information for such periods and disclosed
corrected financial information for the first two quarters of 2009, the quarter
and nine months ended September 30, 2008, and the quarter ended December 31,
2008, with an explanation of the error, in its Quarterly Earnings Release on
October 23, 2009 and in its Form 10-Q, filed on November 6, 2009.
Description of the Correction of an Immaterial
Error, as previously disclosed in Quarterly Earnings Release on October 23, 2009
During a review of
loan participation agreements in the third quarter of 2009, the Company
determined that certain of its loan participation agreements contained language
inconsistent with sale accounting treatment. The agreements provided the Company
with the unilateral ability to repurchase participated portions of loans at
their outstanding loan balance plus accrued interest at any time, which
conflicts with sale accounting treatment. As a result, rather than accounting
for loans participated to other banks as sales, the Company should have recorded
the participated portion of the loans as portfolio loans, and should have
recorded secured borrowings from the participating banks to finance such loans.
In order to correct the error, the Company recorded the participated portion of
such loans as portfolio loans, along with a secured borrowing liability
(included in Other borrowings in the consolidated balance sheets) to finance the
loans. The revision did not impact net cash provided by operating
activities.
In the fourth quarter
of 2009, the Company obtained amended agreements so that all of the Company’s
loan participation agreements qualify for sale accounting treatment as of
December 31, 2009.
Determination that Restatement was Material
On December 31, 2009
the Company received a comment letter from the Securities and Exchange
Commission (the “SEC”) concerning, among other things, the Company’s
determination that the error was immaterial for the prior periods effected. The
Company has since been in discussions with the accounting staff of the SEC’s
Division of Corporate Finance, (the “Staff”), regarding this issue. On March 8,
2010, the Company was informed that the Staff disagreed with the Company’s
determination that the effect of the accounting error on the prior periods was
immaterial. As a result of the position of the Staff, the Company has concluded
that its audited consolidated financial statements in the Annual Reports on Form
10-K filed for fiscal years ended December 31, 2007 and December 31, 2008, and
its unaudited financial statements in the Quarterly Reports on Form 10-Q filed
for all quarters of fiscal year 2008 and the first and second quarters of 2009
should no longer be relied upon. Accordingly, in addition to the corrected
financial information that the Company has already disclosed in its earnings
press release filed as an exhibit to its Current Report on Form 8-K on October
23, 2009 and in its Quarterly Report on Form 10-Q, filed on November 6, 2009,
the Company intends to disclose restated financial information for the fiscal
years ended December 31, 2007 and December 31, 2008, as well as selected
financial data for all fiscal years ended on or after December 31, 2005 in its
10-K for the year ended December 31, 2009.
Internal Control over Financial
Reporting
In subsequent
discussions with the Staff regarding the error described above, the Company
concluded that a material weakness in its internal controls over financial
reporting existed during the periods affected by the error. The Company’s
management concluded that the material weakness was the Company’s lack of a
formal process to periodically review existing contracts and agreements with
continuing accounting significance.
During the fourth
quarter of 2009, the Company implemented a formal process to review all
contracts and agreements with continuing accounting significance on an annual
basis. As a result of the review conducted in the fourth quarter, management did
not identify any other errors in its previous accounting for such contracts or
agreements. The Company believes that these steps have remediated the above
described material weakness.
* *
* * *
Some of the
information disclosed herein regarding the final outcome of the Company’s
accounting review and actions that may be taken or required as a result of the
expected restatements and the conclusions reached by the Company’s management,
Audit Committee and Board of Directors based on results of the restatement
efforts, timing of filing of the amended periodic reports with respect to such
conclusion, and the nature, impact and extent of the Company’s restatement of
historical financial statements are “forward-looking statements” as defined in
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
typically are identified with use of terms such as “may,” “will,” “expect,”
“anticipate,” “estimate,” “potential,” “could” and similar words, although some
forward-looking statements are expressed differently. Actual results could
differ materially from results projected or referenced in these forward-looking
statements. Readers are cautioned to not place undue reliance on forward-looking
statements contained herein, which speak only as of the date of this disclosure.
The Company undertakes no obligations to publicly release or update the results
of any revisions to forward-looking statements, which may be made to reflect new
information, events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, except as required by law. For other factors
that could cause the Company’s results to vary from expectations, please see the
section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008 and other risk factors detailed from time to
time in the Company’s filings with the Securities and Exchange Commission.
Item 9.01. Financial Statements and Exhibits.
| (a) | Not applicable. | |
| (b) | Not applicable. | |
| (c) | Not applicable. | |
| (d) | Not applicable. |
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
ENTERPRISE
FINANCIAL SERVICES CORP
|
|||
| By: | |||
| Date: March 12, 2010 | /s/ | Deborah N. Barstow | |
| Deborah N. Barstow | |||
| Senior Vice President and Controller | |||