SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934--For the quarterly period ended June 30, 2005
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ____________ to ____________
	Commission file number:  001-15373

ENTERPRISE FINANCIAL SERVICES CORP
(Exact Name of Registrant as Specified in its Charter)
Delaware	43-1706259
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
150 North Meramec, Clayton, MO	63105
(Address of Principal Executive Offices)	(Zip Code)
Registrant’s telephone number, including area code:  314-725-5500

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x    No    o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities and Exchange Act of 1934).

Yes   x    No    o

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of July 31, 2005:

        Common Stock, $.01 par value---- 10,067,002 shares outstanding

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

TABLE OF CONTENTS

			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited):
	Consolidated Balance Sheets At June 30, 2005 and December 31, 2004		2
	Consolidated Statements of Operations Three Months and Six Months Ended June 30, 2005 and 2004		3
	Consolidated Statements of Comprehensive Income Three Months and Six Months Ended June 30, 2005 and 2004		4
	Consolidated Statements of Cash Flows Six Months Ended June 30, 2005 and 2004		5
	Notes to Consolidated Financial Statements		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
	Item 4.	Disclosure Control and Procedures	23
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	24
	Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	24
	Item 3.	Defaults Upon Senior Securities	24
	Item 4.	Submission of Matters to a Vote of Security Holders	25
	Item 5.	Other Information	25
	Item 6.	Exhibits	26
	Signatures		27
	Certifications		32

PART I
Item 1 – Financial Statements
ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)

	At June 30, 2005			At December 31, 2004
		(Unaudited)			(Audited)
Assets
Cash and due from banks	$	35,156		$	28,324
Federal funds sold		43,149			—
Interest-bearing deposits		94			156
Total cash and cash equivalents		78,399			28,480
Investments in debt and equity securities:
Available for sale, at estimated fair value		89,193			121,630
Held to maturity, at amortized cost (estimated fair value of $8 at December 31, 2004)		—			8
Total investments in debt and equity securities		89,193			121,638
Loans held for sale		3,996			2,376
Loans, less unearned loan fees		958,878			898,505
Less: Allowance for loan losses		12,769			11,665
Loans, net		946,109			886,840
Other real estate owned		123			123
Fixed assets, net		9,556			8,044
Accrued interest receivable		4,620			4,238
Goodwill		1,938			1,938
Prepaid expenses and other assets		6,588			6,273
Total assets	$	1,140,522		$	1,059,950
Liabilities and Shareholders’ Equity
Deposits:
Demand	$	199,136		$	197,283
Interest-bearing transaction accounts		86,815			85,523
Money market accounts		445,085			432,340
Savings		4,708			3,919
Certificates of deposit:
$100 and over		207,304			178,851
Other		52,636			41,712
Total deposits		995,684			939,628
Subordinated debentures		20,620			20,620
Federal Home Loan Bank advances		30,564			10,299
Other borrowings		7,230			9,616
Notes payable		—			250
Accrued interest payable		1,929			1,665
Accounts payable and accrued expenses		4,055			5,146
Total liabilities		1,060,082			987,224
Shareholders’ equity:
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding 10,056,002 shares at June 30, 2005 and 9,778,357 at December 31, 2004.		101			98
Additional paid in capital		46,350			41,326
Unearned compensation		(1,874	)		—
Retained earnings		36,961			32,075
Accumulated other comprehensive loss		(1,098	)		(773	)
Total shareholders’ equity		80,440			72,726
Total liabilities and shareholders’ equity	$	1,140,522		$	1,059,950

See accompanying notes to consolidated financial statements.

2

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
(In thousands, except share and per share data)

	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Interest income:
Interest and fees on loans	$	15,424	$	11,058	$	29,311	$	21,515
Interest on debt and equity securities:
Taxable		664		569		1,380		978
Nontaxable		10		10		20		20
Interest on federal funds sold		76		38		87		86
Interest on interest-bearing deposits		1		1		1		1
Dividends on equity securities		57		25		87		45
Total interest income		16,232		11,701		30,886		22,645
Interest expense:
Interest-bearing transaction accounts		220		58		370		97
Money market accounts		2,311		904		4,090		1,763
Savings		9		3		14		6
Certificates of deposit:
$100 and over		1,532		974		2,787		1,835
Other		320		256		594		521
Subordinated debentures		288		345		548		662
Federal Home Loan Bank borrowings		522		235		899		420
Notes payable and other borrowings		28		3		59		28
Total interest expense		5,230		2,778		9,361		5,332
Net interest income		11,002		8,923		21,525		17,313
Provision for loan losses		226		740		1,012		1,337
Net interest income after provision for loan losses		10,776		8,183		20,513		15,976
Noninterest income:
Service charges on deposit accounts		537		540		1,020		997
Wealth Management income		1,487		1,048		2,711		1,904
Other service charges and fee income		121		88		229		185
Gain on sale of mortgage loans		80		142		102		210
Gain on sale of securities		—		—		—		1
Total noninterest income		2,225		1,818		4,062		3,297
Noninterest expense:
Employee compensation and benefits		5,402		4,585		10,600		9,274
Occupancy		554		522		1,084		1,018
Furniture and equipment		188		176		360		358
Data processing		248		192		473		378
Other		1,779		1,653		3,372		2,971
Total noninterest expense		8,171		7,128		15,889		13,999
Income before income tax expense		4,830		2,873		8,686		5,274
Income tax expense		1,689		886		3,098		1,761
Net income	$	3,141	$	1,987	$	5,588	$	3,513
Per share amounts:
Basic earnings per share	$	0.31	$	0.21	$	0.56	$	0.36
Basic weighted average common shares outstanding		10,045,802		9,680,006		9,984,125		9,660,075
Diluted earnings per share	$	0.29	$	0.20	$	0.53	$	0.35
Diluted weighted average common shares outstanding		10,675,548		9,987,261		10,601,412		9,977,520

See accompanying notes to consolidated financial statements.

3

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (unaudited)
(In thousands)

	Three months ended June 30,					Six months ended June 30,
	2005		2004			2005			2004
Net income	$	3,141	$	1,987		$	5,588		$	3,513
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities arising during the period, net of tax		444		(877	)		(219	)		(816	)
Unrealized gain (loss) on cash flow type derivative instruments arising during the period, net of tax		120		(724	)		(106	)		(693	)
Total other comprehensive income (loss)		564		(1,601	)		(325	)		(1,509	)
Total comprehensive income	$	3,705	$	386		$	5,263		$	2,004

See accompanying notes to consolidated financial statements.

4

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(In thousands)

	Six months ended June 30
	2005			2004
Cash flows from operating activities:
Net income	$	5,588		$	3,513
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		521			500
Provision for loan losses		1,012			1,337
Net amortization of debt and equity securities		280			247
Gain on sale of available for sale investment securities		—			(1	)
Mortgage loans originated		(28,524	)		(36,479	)
Proceeds from mortgage loans sold		27,006			37,154
Gain on sale of mortgage loans		(102	)		(210	)
Noncash compensation for stock option grants and restricted share units		306			80
Tax benefit for nonqualified stock options		267			—
Increase in accrued interest receivable		(382	)		(600	)
Decrease in accrued interest payable		264			295
Decrease in accrued salaries payable		(971	)		(1,166	)
Other, net		(419	)		832
Net cash provided by operating activities		4,846			5,502
Cash flows from investing activities:
Net increase in loans		(60,555	)		(83,744	)
Purchases of available for sale debt and equity securities		(5,596	)		(67,509	)
Proceeds from sales of available for sale debt securities		9,995			37,752
Proceeds from redemption of equity securities		3,455			620
Proceeds from maturities and principal paydowns on available for sale debt and equity securities		23,970			18,098
Recoveries of loans previously charged off		274			55
Purchases of fixed assets		(2,034	)		(251	)
Net cash used in investing activities		(30,491	)		(94,979	)
Cash flows from financing activities:
Net increase in non-interest bearing deposit accounts		1,853			17,727
Net increase in interest bearing deposit accounts		54,203			56,885
Proceeds from issuance of subordinated debentures		—			5,155
Proceeds from Federal Home Loan Bank advances		299,200			55,000
Repayments of Federal Home Loan Bank advances		(278,935	)		(18,068	)
Decrease in federal funds purchased		(6,333	)		(8,381	)
Increase in customer repurchase agreements		3,947			—
Decrease in other borrowings		—			(1,070	)
(Paydowns) proceeds of notes payable		(250	)		100
Cash dividends paid		(702	)		(484	)
Proceeds from the exercise of common stock options		2,581			397
Net cash provided by financing activities		75,564			107,261
Net increase in cash and cash equivalents		49,919			17,785
Cash and cash equivalents, beginning of period		28,480			26,488
Cash and cash equivalents, end of period	$	78,399		$	44,273
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	9,097		$	5,037
Income taxes		2,916			950
Noncash transactions:
Transfer to other real estate owned in settlement of loans		—			273

See accompanying notes to consolidated financial statements.

5

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation

The accompanying consolidated financial statements are unaudited and contain the accounts of Enterprise Financial Services Corp (the “Company”) and its wholly-owned subsidiary, Enterprise Bank & Trust (the “Bank”.)   All significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  They do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three and six month periods ended June 30, 2005 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2005.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.  Certain reclassifications have been made to prior balances to conform to the current year presentation. Such reclassifications had no effect on previously reported consolidated net income or shareholders’ equity.

Stock Option Plans

The Company accounts for its fixed-plan stock options using the intrinsic-value-based method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations.   As allowed by SFAS No. 123, Accounting for Stock-Based Compensation, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an Amendment of FASB Statement No. 123.  The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each period.

	Three months ended June 30,						Six months ended June 30,
(In thousands, except per share data)	2005			2004			2005			2004
Net income, as reported	$	3,141		$	1,987		$	5,588		$	3,513
Add total stock-based employee compensation expense included in reported net income, net of tax		68			—			185			—
Deduct total stock-based employee compensation expense determined under fair-value-based method for all awards, net of tax		(70	)		(340	)		(187	)		(686	)
Pro forma net income	$	3,139		$	1,647		$	5,586		$	2,827
Earnings per share:
Basic:
As reported	$	0.31		$	0.21		$	0.56		$	0.36
Pro forma		0.31			0.17			0.56			0.29
Diluted:
As reported	$	0.29		$	0.20		$	0.53		$	0.35
Pro forma		0.29			0.16			0.53			0.28

6

New Accounting Standards

On May 5, 2005, the Financial Accounting Standards Board (“FASB”) issued FAS No. 154, Statement Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3.  FAS 154 changes the requirements for the accounting for and reporting of a voluntary change in accounting principle.  Essentially, the statement requires retrospectively adjusting prior periods’ financial statements for the direct effect of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The statement provides guidance for situations when it is impracticable to determine the period-specific effects or the cumulative effect and also defines various terms such as retrospective application and restatements.   The Statement carries forward without change previous guidance for reporting the correction of an error in previously issued financial statements and changes in accounting estimates. The Statement also carries forward previous guidance requiring justification of a change in accounting principle on the basis of preferability.  The statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company expects the implementation of FAS 154 will have no material effect on the Company’s consolidated financial position or results of operations.

On March 1, 2005, the Board of Governors of the Federal Reserve System, or Board, adopted a final rule, Risk-Based Capital Standards: Trust Preferred Securities and the Definition of Capital, that allows for the continued limited inclusion of trust preferred securities in Tier 1 capital.  The Board’s final rule limits restricted core capital elements to 25% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability.  Amounts of restricted core capital elements in excess of these limits may generally be included in Tier 2 capital.  Amounts of qualifying trust preferred securities and cumulative perpetual preferred stock in excess of the 25% limit may be included in Tier 2 capital, but limited, together with subordinated debt and limited-life preferred stock, to 50% of Tier 1 capital.  In addition, the final rule provides that in the last five years before the maturity of the underlying subordinated note, the outstanding amount of the associated trust preferred securities is excluded from Tier 1 capital and included in Tier 2 capital, subject to one-fifth amortization per year.  The final rule provides for a five-year transition period, ending March 31, 2009, for the application of the quantitative limits.  Until March 31, 2009, the aggregate amount of qualifying cumulative perpetual preferred stock and qualifying trust preferred securities that may be included in Tier 1 capital is limited to 25% of the sum of the following core capital elements: qualifying common stockholders’ equity, qualifying noncumulative and cumulative perpetual preferred stock, qualifying minority interest in the equity accounts of consolidated subsidiaries and qualifying trust preferred securities.  The Company has evaluated the impact of the final rule on the Company’s financial condition and results of operations, and determined the implementation of the Board’s final rule, as adopted, will not have a material impact on the Company’s regulatory capital ratios.

In December 2004, FASB issued FAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”).  FAS No. 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  FAS No. 123(R) requires compensation costs related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award.

The accounting provisions of FAS 123(R) are effective for annual reporting periods beginning after June 15, 2005, therefore, the Company will be required to adopt FAS 123R in the first quarter of fiscal 2006. The pro forma disclosures previously permitted under FAS 123 will no longer be an alternative to financial statement recognition. See Note 1 in our Notes to Consolidated Financial Statements for the pro forma net income and net income per share amounts, for the three and six months ended June 30, 2005, and June 30, 2004, as if we had used a fair-value-based method similar to the methods required under FAS 123R to measure compensation expense for employee stock incentive awards.  The Company expects the implementation of FAS 123R will have no material effect on the Company’s consolidated financial position or results of operations.

7

In March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on criteria to evaluate whether to record a loss and disclose additional information about unrealized losses relating to debt and equity securities under EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The consensus applies to investments in debt and marketable equity securities that are accounted under FAS 115, Accounting for Certain Investments in Debt and Equity Securities.  After many organizations, including banks, which could be impacted by this guidance, asked for clarification on the meaning of other-than-temporary impairment and its application to certain investments, the FASB postponed the implementation.  In July 2005, the FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment, but instead issued FASB staff position (“FSP”) EITF 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, as final.  The final position supersedes several previously issued EITF topics and replaces guidance set forth in several others.  The final position, titled FAS 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, will codify guidance set forth in EITF Topic D-44, Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value, and clarifies that an investor should recognize an impairment loss no later than when the impairment is deemed other than temporary, even if a decision to sell has not been made.  The Company has evaluated the impact of the final rule and expects the implementation of FAS 115-1 will not have a material effect on the Company’s consolidated financial position or results of operations.

NOTE 2 – EARNINGS PER SHARE

The following table shows the components of basic and diluted earnings per share (in thousands, except share and per share data) for the three and six months ended June 30, 2005 and 2004.

	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Basic
Net income	$	3,141	$	1,987	$	5,588	$	3,513
Weighted average common shares outstanding		10,045,802		9,680,006		9,984,125		9,660,075
Basic earnings per share	$	0.31	$	0.21	$	0.56	$	0.36
Diluted
Net income	$	3,141	$	1,987	$	5,588	$	3,513
Weighted average common shares outstanding		10,045,802		9,680,006		9,984,125		9,660,075
Effect of dilutive stock options and restricted share units (1)		629,746		307,255		617,287		317,445
Diluted weighted average common shares outstanding		10,675,548		9,987,261		10,601,412		9,977,520
Diluted earnings per share	$	0.29	$	0.20	$	0.53	$	0.35

(1) Represents average shares which would have resulted from the exercise of dilutive stock options and issuance

      of restricted share units.

For the three months ended June 30, 2005 and 2004, 3,253 stock appreciation rights and 24,388 stock options, respectively, were excluded from the earnings per share computation solely because their effect was anti-dilutive.   For the six months ended June 30, 2005 and 2004, 3,200 stock appreciation rights and 19,843 stock options, respectively, were excluded from the earnings per share computation solely because their effect was anti-dilutive.

8

NOTE 3 – SEGMENT DISCLOSURE

Following are the balance sheet information and financial results for the Company’s operating segments as of June 30, 2005 and December 31, 2004, and for the three and six months ended June 30, 2005 and 2004 (in thousands) (unaudited):

Balance Sheet Information:

	Banking		Wealth Management		Corporate and Intercompany			Total
June 30, 2005
Loans, less unearned loan fees	$	958,878	$	—	$	—		$	958,878
Goodwill		1,938		—		—			1,938
Deposits		996,197		—		(513	)		995,684
Borrowings		37,794		—		20,620			58,414
Total assets	$	1,138,649	$	421	$	1,452		$	1,140,522
December 31, 2004
Loans, less unearned loan fees	$	898,505	$	—	$	—		$	898,505
Goodwill		1,938		—		—			1,938
Deposits		939,784		—		(156	)		939,628
Borrowings		19,914		—		20,871			40,785
Total assets	$	1,058,124	$	414	$	1,412		$	1,059,950

Income Statement Information:

	Banking		Wealth Management		Corporate and Intercompany			Total
Three months ended June 30, 2005
Net interest income	$	11,266	$	16	$	(280	)	$	11,002
Provision for loan losses		226		—		—			226
Noninterest income	$	726		1,487		12			2,225
Noninterest expense		6,081		1,184		906			8,171
Income (loss) before income tax expense		5,685		319		(1,174	)		4,830
Income tax expense (benefit)		1,996		112		(419	)		1,689
Net income (loss)	$	3,689	$	207	$	(755	)	$	3,141
Three months ended June 30, 2004
Net interest income	$	9,238	$	20	$	(335	)	$	8,923
Provision for loan losses		740		—		—			740
Noninterest income		775		1,048		(5	)		1,818
Noninterest expense		5,360		966		802			7,128
Income (loss) before income tax expense		3,913		102		(1,142	)		2,873
Income tax expense (benefit)		1,268		33		(415	)		886
Net income (loss)	$	2,645	$	69	$	(727	)	$	1,987
Six months ended June 30, 2005
Net interest income	$	22,023	$	35	$	(533	)		21,525
Provision for loan losses		1,012		—		—			1,012
Noninterest income		1,331		2,711		20			4,062
Noninterest expense		11,900		2,295		1,694			15,889
Income (loss) before income tax expense		10,442		451		(2,207	)		8,686
Income tax expense (benefit)		3,728		162		(792	)		3,098
Net income (loss)	$	6,714	$	289	$	(1,415	)	$	5,588
Six months ended June 30, 2004
Net interest income	$	17,916	$	39	$	(642	)	$	17,313
Provision for loan losses		1,337		—		—			1,337
Noninterest income		1,390		1,904		3			3,297
Noninterest expense		10,772		1,839		1,388			13,999
Income (loss) before income tax expense		7,197		104		(2,027	)		5,274
Income tax expense (benefit)		2,459		35		(733	)		1,761
Net income (loss)	$	4,738	$	69	$	(1,294	)	$	3,513

9

Management segregates the Company into three distinct businesses: Banking, Wealth Management and Corporate.  The Banking and Wealth Management segments are evaluated separately on their individual performance, as well as, their contribution to the Company as a whole.

The majority of the Company’s assets and income result from the Banking segment.  The Bank consists of four banking branches and an operations center in the St. Louis region and two banking branches in the Kansas City region.  The products and services offered by the banking branches include a broad range of commercial and personal banking services, including certificates of deposit, individual retirement accounts, checking and other demand deposit accounts, interest checking accounts, savings accounts and money market accounts.  Loans include commercial, financial, real estate construction and development, commercial and residential real estate, consumer and installment loans.  Other financial services include mortgage banking, debit and credit cards, automatic teller machines, internet account access, safe deposit boxes, and treasury management services.

Wealth Management provides fee-based personal and corporate financial consulting and trust services.  Personal financial consulting includes estate planning, investment management, and retirement planning.  Corporate consulting services are focused in the areas of retirement plans, management compensation and strategic planning issues.  The Wealth Management segment also provides life, annuity, disability income, and long-term care products and mutual funds.

Corporate and intercompany includes the holding company and subordinated debentures.  The Company incurs general corporate expenses and owns the Bank.

NOTE 4 -DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company utilizes interest rate swap derivatives as one method to manage some of its interest rate risk from recorded financial assets and liabilities. These derivatives are utilized when they can be demonstrated to effectively hedge a designated asset or liability and such asset or liability exposes the Bank to interest rate risk.

The Bank accounts for its derivatives under Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities and SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  These Standards require recognition of all derivatives as either assets or liabilities in the balance sheet and require measurement of those instruments at fair value through adjustments to either other comprehensive income, current earnings, or both, as appropriate.

The decision to enter into an interest rate swap is made after considering the asset/liability position of the Bank, the desired asset/liability sensitivity and interest rate levels.  Prior to entering into a hedge transaction, the Bank formally documents the relationship between hedging instruments and the hedged items, as well as the risk management objective for undertaking the various hedge transactions.

The following is a summary of the Company’s accounting policies for derivative instruments and its activities under SFAS No. 149 and SFAS No. 133.

Cash Flow Hedges – The Bank enters into interest rate swap agreements to convert floating-rate loan assets to fixed rates. The swap agreements provide for the Bank to pay a variable rate of interest equivalent to the prime rate and to receive a fixed rate of interest.  Under the swap agreements the Bank is to pay or receive interest quarterly.  Amounts to be paid or received under these swap agreements are accounted for on an accrual basis and recognized as interest income of the related loan asset.  The net cash flows related to cash flow hedges decreased interest income on loans by $91,000 and $71,000 for the three and six months ended June 30, 2005, respectively.  The net cash flows related to cash flow hedges increased interest income on loans by $351,000 and $672,000 for the three and six months ended June 30, 2004, respectively.

Cash flow hedges are accounted for at fair value.  The effective portion of the change in the cash flow hedge’s 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 hedge’s gain or loss is recorded in earnings on each quarterly measurement date.  At June 30, 2005 and December 31, 2004, $453,000 and $347,000, respectively, in deferred losses, net of tax, were recorded in accumulated other comprehensive income.  All cash flow hedges were effective; therefore, no gain or loss was recorded in earnings for the periods presented.  The maximum term over which the Bank is hedging its exposure to the variability of future cash flows is less than 1 year.

10

Fair Value Hedges - The Bank enters into interest rate swap agreements with the objective of converting the fixed interest rate on brokered CDs to a variable interest rate.  The swap agreements require the Bank to pay a variable rate of interest based on a spread to the three-month London Interbank Offered Rate (LIBOR) and to receive a fixed rate of interest equal to that of the brokered CD (hedged instrument.) Under the swap agreements the Bank is to pay or receive interest semiannually.  Amounts to be paid or received under these swap agreements are accounted for on an accrual basis and recognized as interest expense of the related liability.  The net cash flows related to fair value hedges increased interest expense on certificates of deposit by $54,000 and $110,000 for the three and six months ended June 30, 2005, respectively.  The net cash flows related to fair value hedges decreased interest expense on certificates of deposit by $140,000 and $317,000 for the three and six months ended June 30, 2004, respectively.

Fair value hedges are accounted for at fair value.  The swaps qualify for the “shortcut method” under SFAS No. 133.  Based on this shortcut method, no ineffectiveness is assumed.  As a result, changes in the fair value of the swaps directly offset changes in the fair value of the underlying hedged item (i.e., brokered CDs).  All changes in fair value are measured on a quarterly basis.

The maturity dates, notional amounts, interest rates paid and received and fair value of our interest rate swap agreements as of June 30, 2005 were as follows:

Cash Flow Hedges	June 30, 2005			December 31, 2004
		(Dollars in thousands)
Notional amount	$	70,000		$	90,000
Weighted average pay rate		6.25	%		5.25	%
Weighted average receive rate		5.39	%		5.74	%
Weighted average maturity in months		10			12
Unrealized loss related to interest rate swaps	$	(691	)	$	(511	)

Fair Value Hedges	June 30, 2005			December 31, 2004
		(Dollars in thousands)
Notional amount	$	30,000		$	40,000
Weighted average pay rate		3.37	%		2.60	%
Weighted average receive rate		2.55	%		2.34	%
Weighted average maturity in months		13			14
Unrealized loss related to interest rate swaps	$	(418	)	$	(415	)

NOTE 5 - DISCLOSURES ABOUT FINANCIAL INSTRUMENTS

The Bank issues financial instruments with off balance sheet risk in the normal course of the business of meeting the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  These instruments may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Bank’s 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 Bank uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets.  At June 30, 2005 and December 31, 2004, no amounts have been accrued for any estimated losses for these financial instruments.

11

The contractual amount (in thousands) of off-balance-sheet financial instruments as of June 30, 2005 and December 31, 2004 is as follows:

	June 30, 2005		December 31, 2004
Commitments to extend credit	$	307,574	$	296,561
Standby letters of credit		26,494		20,263

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee.  Since certain of these commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the borrower.  Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  These standby letters of credit are primarily issued to support contractual obligations of the Bank’s 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 terms of standby letters of credit range from 1 month to 5 years at June 30, 2005.

Item 2 - Management’s Discussion and Analysis of
Financial Condition and Results of Operations

The following discussion describes significant changes in the financial condition of the Company that have occurred during the first six months of 2005 compared to December 31, 2004.  In addition, this discussion summarizes the significant factors affecting the consolidated results of operations, liquidity and cash flows of the Company for the three and six months ended June 30, 2005 compared to the three and six months ended June 30, 2004.  This discussion should be read in conjunction with our consolidated financial statements and notes thereto included in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2004. 

Results of Operations

Net income for the three and six months ended June 30, 2005 was $3.1 million and $5.6 million, an increase of 55% and 60%, respectively, compared to $2.0 million and $3.5 million for the same periods in 2004.  Fully diluted earnings per share for the three and six months ended June 30, 2005 were $0.29 and $0.53, an increase of 45% and 51% respectively, compared to $0.20 and $0.35 for the same periods in 2004.

Financial Condition

Total assets increased $81 million, or 7.5%, from $1.06 billion at December 31, 2004 to $1.14 billion at June 30, 2005. 

For the six months ended June 30, 2005, loans, net of unearned loan fees, increased $60 million to $959 million, or 13% annualized since December 31, 2004.  This is an increase of $92 million from June 30, 2004.  At December 31, 2004, our loan pipeline was robust, and as a result loan volume in first quarter 2005 was a strong 33% annualized.  Principal payments, primarily on variable commercial & industrial and commercial real estate loans, late in the second quarter drove down the outstanding loan balance on June 30, 2005.  As a result, from a point in time perspective, loans declined $14 million from March 31, 2005.  However, average loans were $967 million for the second quarter of 2005, an increase of almost 4% over first quarter 2005 average loans of $935 million and an increase of 13% over second quarter 2004 average loans of $853 million.

12

The growth in loans was funded by increases in deposits and advances from the Federal Home Loan Bank (“FHLB”).  Total deposits at June 30, 2005 were $996 million, an increase of $56 million, or 12% annualized, over total deposits of $940 million at December 31, 2004.  Following a decline in first quarter due to normal seasonal cash demands of our clients, deposits grew $59 million in second quarter.  Money market accounts increased $13 million and time deposits, excluding brokered CDs, increased $29 million during the first half of 2005.  During first quarter 2005, we executed $30 million of brokered certificates of deposits, a net increase of $10 million from year-end.  The growth in time deposits was primarily due to competitive time deposit promotions at selected branches, including our new location in St. Charles, Missouri.

During the second quarter as core deposits grew, we relied less on overnight FHLB advances; however, to take advantage of attractive rates, we entered into $22 million of long-term FHLB advances at an average rate of 4.50% with an average term of 8 years.  Some fixed rate loans with similar maturities will be funded with these fixed rate advances.  At June 30, 2005, FHLB advances were $31 million, a $20 million increase over December 31, 2004.  There were no short-term FHLB advances outstanding at June 30, 2005. 

At June 30, 2005, federal funds sold were $43 million compared to $6 million of federal funds purchased at December 31, 2004. 

Total shareholders’ equity was $80 million at June 30, 2005 compared to $73 million at December 31, 2004.  The $7 million increase in equity is due to net income of $5.6 million for the six months ended June 30, 2005 and the exercise of incentive stock options by employees offset by dividends paid to shareholders and changes in accumulated other comprehensive income.

Net Interest Income

Net interest income, the most significant component of our earnings, is the difference between interest income earned on loans, investment securities and other interest-earning assets less interest expense on deposit accounts and other interest-bearing liabilities.  The level of net interest income is determined by the mix and volume of interest-earning assets, interest-bearing deposits and borrowed funds, and by changes in interest rates.  Business volumes are influenced by overall economic factors including inflation, market interest rates, business spending, consumer confidence and competitive conditions within the marketplace.  Net interest rate margin represents net interest income on a tax equivalent basis as a percentage of average interest-earning assets during the period.  Net interest rate margin is affected by the spread between average yields earned on interest-earning assets and the average rates paid on interest-bearing deposits and borrowings.  The level of non-interest bearing funds, primarily consisting of demand deposits and stockholders’ equity, also affects the net interest rate margin.

Net interest income (on a tax-equivalent basis) was $11.1 million for the three months ended June 30, 2005, compared to $9.0 million for the same period of 2004, an increase of 23%.  Average interest-earning assets for the three months ended June 30, 2005 were $1.067 billion, an increase of $110 million, or 11% over $958 million, for the same period in 2004. For the three months ended June 30, 2005, average interest-bearing liabilities were $829 million, an increase of $90 million, or 12% over $739 million for the same period in 2004. 

Net interest rate margin (on a tax-equivalent basis) was 4.19% for the second quarter of 2005, up from 3.80% in the second quarter of 2004.   The increase in net interest rate margin reflects a 118 basis point increase in yields on average interest-earning assets and an increasing benefit from non-interest bearing deposits and equity, offset by a 102 basis point increase in the cost of average interest-bearing liabilities.  The increase in average interest-earning asset yields was the result of prime rate increases in the latter half of 2004 and first half of 2005.  Approximately two-thirds of the Company’s loan portfolio floats with the prime rate.  The increase in cost of funds was primarily due to increases in money market and certificate of deposit rates.

13

Net interest income (on a tax-equivalent basis) was $21.8 million for the six months ended June 30, 2005, compared to $17.5 million for the same period of 2004, an increase of 25%.  Average interest-earning assets for the six months ended June 30, 2005 were $1.051 billion, an increase of $131 million, or 14% over $920 million, for the same period in 2004. Average interest-bearing liabilities increased $104 million, or 15% to $816 million for the six months ended June 30, 2005 compared to $712 million for the six months ended June 30, 2004.

Net interest rate margin (on a tax-equivalent basis) was 4.18% for the first half of 2005, up from 3.84% in the first half of 2004.  The increase in net interest rate margin reflects a 97 basis point increase in yields on average interest-earning assets and an increasing benefit from non-interest bearing deposits and equity, offset by an 80 basis point increase in the costs of average interest-bearing liabilities. Increases in yields and cost of funds are the same as those described above.

The following tables set forth, on a tax-equivalent basis, certain information relating to the Company’s average balance sheet and reflects the average yield earned on interest-earning assets, the average cost of interest-bearing liabilities and the resulting net interest spread and net interest rate margin for the three and six months ended June 30, 2005 and 2004.

	Three months ended June 30,
	2005											2004
(Dollars in thousands)	Average Balance			Percent of Total Assets			Interest Income/ Expense		Average Yield/ Rate			Average Balance			Percent of Total Assets			Interest Income/ Expense		Average Yield/ Rate
Assets
Interest-earning assets:
Taxable loans (1)	$	949,338			85.3	%	$	15,178		6.41	%	$	836,222			84.0	%	$	10,848		5.22	%
Tax-exempt loans(2)		17,402			1.6			385		8.87			16,643			1.7			329		7.95
Total loans		966,740			86.9			15,563		6.46			852,865			85.7			11,177		5.27
Taxable investments in debt and equity securities		88,960			8.0			721		3.25			81,800			8.2			593		2.92
Non-taxable investments in debt and equity securities(2)		1,530			0.1			15		3.93			1,644			0.2			16		3.91
Short-term investments		10,136			0.9			77		3.05			21,209			2.1			39		0.74
Total securities and short-term investments		100,626			9.0			813		3.24			104,653			10.5			648		2.49
Total interest-earning assets		1,067,366			95.9			16,376		6.15			957,518			96.2			11,825		4.97
Non-interest-earning assets:
Cash and due from banks		36,504			3.3								26,998			2.7
Other assets		21,965			2.0								21,600			2.2
Allowance for loan losses		(12,760	)		(1.2	)							(10,977	)		(1.1	)
Total assets	$	1,113,075			100.0	%						$	995,139			100.0	%
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	85,204			7.7	%	$	220		1.04	%	$	66,868			6.7	%	$	58		0.35	%
Money market accounts		413,531			37.2			2,311		2.24			380,917			38.3			904		0.95
Savings		4,658			0.4			9		0.77			4,192			0.4			3		0.29
Certificates of deposit		239,464			21.5			1,852		3.10			229,705			23.1			1,230		2.15
Total interest-bearing deposits		742,857			66.8			4,392		2.37			681,682			68.5			2,195		1.30
Subordinated debentures		20,620			1.9			288		5.60			18,353			1.8			345		7.56
Borrowed funds		65,077			5.9			550		3.39			39,006			3.9			238		2.45
Total interest-bearing liabilities		828,554			74.6			5,230		2.53			739,041			74.2			2,778		1.51
Noninterest-bearing liabilities:
Demand deposits		199,609			17.9								181,751			18.3
Other liabilities		6,211			0.4								6,164			0.6
Total liabilities		1,034,374			92.9								926,956			93.1
Shareholders’ equity		78,701			7.1								68,183			6.9
Total liabilities & shareholders’ equity	$	1,113,075			100.0	%						$	995,139			100.0	%
Net interest income							$	11,146										$	9,047
Net interest spread										3.62	%										3.46	%
Net interest rate margin(3)										4.19	%										3.80	%

(1)	Average balances include non-accrual loans.  The income on such loans is included in interest but is recognized only upon receipt. Loan fees included in interest income are approximately $504,000 and $427,000 for the quarters ended June 30, 2005 and 2004, respectively.
(2)	Non-taxable income is presented on a fully tax-equivalent basis assuming a tax rate of 36% for 2005 and 36% for 2004. The approximate tax-equivalent adjustments were $144,000 and $124,000 for the quarters ended June, 2005 and 2004, respectively.
(3)	Net interest income divided by average total interest-earning assets.

14

	Six months ended June 30,
	2005											2004
(Dollars in thousands)	Average Balance			Percent of Total Assets			Interest Income/ Expense		Average Yield/ Rate			Average Balance			Percent of Total Assets			Interest Income/ Expense		Average Yield/ Rate
Assets
Interest-earning assets:
Taxable loans (1)	$	933,247			85.3	%	$	28,823		6.23	%	$	811,297			84.7	%	$	21,089		5.23	%
Tax-exempt loans(2)		17,528			1.6			762		8.77			16,900			1.8			665		7.91
Total loans		950,775			86.9			29,585		6.27			828,197			86.5			21,754		5.28
Taxable investments in debt and equity securities		92,526			8.5			1,467		3.20			68,216			7.1			1,023		3.02
Non-taxable investments in debt and equity securities(2)		1,558			0.1			31		4.01			1,649			0.2			32		3.90
Short-term investments		6,178			0.6			88		2.87			21,462			2.2			87		0.82
Total securities and short-term investments		100,262			9.2			1,586		3.19			91,327			9.5			1,142		2.51
Total interest-earning assets		1,051,037			96.1			31,171		5.98			919,524			96.0			22,896		5.01
Non-interest-earning assets:
Cash and due from banks		34,893			3.2								27,543			2.9
Other assets		21,026			1.8								21,626			2.2
Allowance for loan losses		(12,454	)		(1.1	)							(10,900	)		(1.1	)
Total assets	$	1,094,502			100.0	%						$	957,793			100.0	%
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	85,138			7.8	%	$	370		0.88	%	$	61,236			6.4	%	$	97		0.32	%
Money market accounts		414,225			37.8			4,090		1.99			376,972			39.4			1,763		0.94
Savings		4,429			0.4			14		0.64			4,214			0.4			6		0.29
Certificates of deposit		232,118			21.2			3,381		2.94			221,266			23.1			2,356		2.14
Total interest-bearing deposits		735,910			67.2			7,855		2.15			663,688			69.3			4,222		1.28
Subordinated debentures		20,620			1.9			548		5.36			16,909			1.8			662		7.87
Borrowed funds		59,664			5.5			958		3.24			31,628			3.3			448		2.85
Total interest-bearing liabilities		816,194			74.6			9,361		2.31			712,225			74.4			5,332		1.51
Noninterest-bearing liabilities:
Demand deposits		195,340			17.8								172,427			18.0
Other liabilities		6,089			0.6								6,008			0.6
Total liabilities		1,017,623			92.9								890,660			93.0
Shareholders’ equity		76,879			7.0								67,133			7.0
Total liabilities & shareholders’ equity	$	1,094,502			100.0	%						$	957,793			100.0	%
Net interest income							$	21,810										$	17,564
Net interest spread										3.67	%										3.50	%
Net interest rate margin(3)										4.18	%										3.84	%

(1)	Average balances include non-accrual loans. The income on such loans is included in interest but is recognized only upon receipt. Loan fees included in interest income are approximately $920,000 and $735,000 for the six months ended June 30, 2005 and 2004, respectively.
(2)	Non-taxable income is presented on a fully tax-equivalent basis assuming a tax rate of 36% for 2005 and 36% for 2004. The approximate tax-equivalent adjustments were $286,000 and $251,000 for the six months ended June, 2005 and 2004, respectively.
(3)	Net interest income divided by average total interest-earning assets.

15

The following table sets forth, on a tax equivalent basis, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume for the three and six months ended June 30, 2005 and 2004.

	2005 Compared to 2004
	3 month Increase (decrease) due to									6 month Increase (decrease ) due to
	Volume(1)			Rate(2)			Net			Volume(1)			Rate(2)			Net
	(Dollars in thousands)									(Dollars in thousands)
Interest earned on:
Loans	$	1,607		$	2,723		$	4,330		$	3,402		$	4,332		$	7,734
Nontaxable loans (3)		16			40			56			25			72			97
Taxable investments in debt and equity securities		55			73			128			380			64			444
Nontaxable investments in debt and equity securities (3)		(1	)		—			(1	)		(2	)		1			(1	)
Short-term investments		(29	)		67			38			(96	)		97			1
Total interest-earning assets	$	1,648		$	2,903		$	4,551		$	3,709		$	4,566		$	8,275
Interest paid on:
Interest-bearing transaction accounts	$	20		$	142		$	162		$	50		$	223		$	273
Money market accounts		84			1,323			1,407			189			2,138			2,327
Savings		—			6			6			—			8			8
Certificates of deposit		54			568			622			119			906			1,025
Subordinated debentures		40			(97	)		(57	)		125			(239	)		(114	)
Borrowed funds		199			113			312			442			68			510
Total interest-bearing liabilities		397			2,055			2,452			925			3,104			4,029
Net interest income	$	1,251		$	848		$	2,099		$	2,784		$	1,462		$	4,246

(1)	Change in volume multiplied by yield/rate of prior period.
(2)	Change in yield/rate multiplied by volume of prior period.
(3)	Non taxable income is presented on a fully tax-equivalent basis assuming a tax rate of 36% in 2005 and 2004.

NOTE: The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each.

16

Provision for Loan Losses

The provision for loan losses is affected by changes in the loan portfolio, management’s assessment of the collectability of the loan portfolio, loss experience and economic and market factors.  A description of the process used to determine the loan loss provision is below.  The provision for loan losses was $226,000 for the second quarter 2005 compared to $740,000 for the same period in 2004 due to lower nonperforming loan levels and slower loan growth in the quarter.  The allowance for loan losses as a percentage of total loans was 1.33% at June 30, 2005 compared to 1.30% at December 31, 2004 and 1.32% at June 30, 2004. 

Asset quality remains strong.  Nonperforming loans were $2.1 million or 22 basis points of total loans at June 30, 2005 versus 28 basis points and 20 basis points at June 30, 2004 and December 31, 2004, respectively.  At June 30, 2005, three relationships comprised $1.5 million, or 69% of the non-performing loans.  The remaining non-performing loans represented four different relationships.  At June 30, 2004, three relationships comprised $1.8 million, or 76% of the non-performing loans.  One of the relationships was foreclosed and sold in first quarter 2005.  The Company recovered $73,000 on the property.  In March 2005, the Company also recovered $92,000 on a loan previously charged off.

The following table summarizes changes in the allowance for loan losses for the three and six months ended June 30, 2005 and 2004.

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
	(Dollars in thousands)						(Dollars in Thousands)
Allowance at beginning of period	$	12,639		$	10,686		$	11,665		$	10,590
Loans charged off:
Commercial and industrial		65			—			68			—
Real estate:
Commercial		100			—			100			427
Construction		—			—			—			—
Residential		—			—			—			100
Consumer and other		14			—			14			7
Total loans charged off		179			—			182			534
Recoveries of loans previously charged off:
Commercial and industrial		57			—			77			9
Real estate:
Commercial		—			—			73			—
Construction		—			—			—			—
Residential		19			16			114			32
Consumer and other		7			6			10			14
Total recoveries of loans previously charged off:		83			22			274			55
Net loans charged off (recovered)		96			(22	)		(92	)		479
Provision for loan losses		226			740			1,012			1,337
Allowance at end of period	$	12,769		$	11,448		$	12,769		$	11,448
Average loans	$	966,740		$	852,865		$	950,775		$	828,197
Total loans		958,878			866,814			958,878			866,814
Non-performing loans		2,136			2,401			2,136			2,401
Net charge-offs (recoveries) to average loans (annualized)		0.04	%		(0.01	)%		(0.02	)%		0.12	%
Allowance for loan losses to loans		1.33			1.32			1.33			1.32
Allowance for loan losses to non-performing loans		598			477			598			477

17

The Company’s credit management policies and procedures focus on identifying, measuring, and controlling credit exposure.  These procedures employ a lender-initiated system of rating credits, which is ratified in the loan approval process and subsequently tested in internal loan reviews and regulatory bank examinations. The system requires rating all loans at the time they are made, and at each renewal date.

Adversely rated credits, including loans requiring close monitoring, which would normally not be considered criticized credits by regulators, are included on a monthly loan watch list. Other loans are added whenever any adverse circumstances are detected which might affect the borrower’s ability to meet the terms of the loan.  This could be initiated by any of the following:

1)	delinquency of a scheduled loan payment;
2)	deterioration in the borrower’s financial condition identified in a review of periodic financial statements;
3)	decrease in the value of collateral securing the loan; or
4)	change in the economic environment in which the borrower operates.

Loans on the watch list require detailed loan status reports, including recommended corrective actions, prepared by the responsible loan officer every three months.  These reports are then discussed in formal meetings with the Chief Credit Officer and Chief Executive Officer of the Bank.

Downgrades of loan risk ratings may be initiated by the responsible loan officer, internal loan review, or the credit analyst department at any time.  Upgrades of risk ratings may only be made with the concurrence of the Chief Credit Officer and Loan Review.

In determining the allowance and the related provision for loan losses, three principal elements are considered:

• specific allocations based upon probable losses identified during a monthly review of the loan portfolio;

• allocations based principally on the Company’s risk rating formulas; and

• an unallocated allowance based on subjective factors.

The first element reflects management’s estimate of probable losses based upon a systematic review of specific loans considered to be impaired.  These estimates are based upon collateral exposure, if they are collateral dependent for collection.  Otherwise, discounted cash flows are estimated and used to assign loss.

The second element reflects the application of the Company’s loan rating system.  This rating system is similar to those employed by state and federal banking regulators.  Loans are rated and assigned a loss allocation factor for each category that is consistent with our historical losses, adjusted for environmental factors.  The higher the rating assigned to a loan, the greater the allocation percentage that is applied.

The unallocated allowance is based on management’s evaluation of conditions that are not directly reflected in the determination of the formula and specific allowances.  The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they may not be identified with specific problem credits or portfolio segments.  The conditions evaluated in connection with the unallocated allowance include the following:

• general economic and business conditions affecting our key lending areas;

• credit quality trends (including trends in nonperforming loans expected to result from existing conditions);

• collateral values;

• loan volumes and concentrations;

• competitive factors resulting in shifts in underwriting criteria;

• specific industry conditions within portfolio segments;

• recent loss experience in particular segments of the portfolio;

• bank regulatory examination results; and

• findings of our internal loan review department.

Executive management reviews these conditions quarterly in discussion with the entire lending staff.  To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such conditions may be reflected as a specific allowance, applicable to such credit or portfolio segment.  Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s evaluation of the probable loss related to such condition is reflected in the unallocated allowance.

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Based on this quantitative and qualitative analysis, provisions are made to the allowance for loan losses.  Such provisions are reflected in the Company’s consolidated statements of income.

The Bank had no loans 90 days past due still accruing interest at June 30, 2005 or December 31, 2004. The following table sets forth information concerning the Company’s non-performing assets as of the dates indicated:

	June 30, 2005			December 31, 2004
	(Dollars in thousands)
Non-accrual loans	$	2,136		$	1,827
Total non-performing loans		2,136			1,827
Foreclosed real estate		123			123
Total non-performing assets	$	2,259		$	1,950
Total assets	$	1,140,522		$	1,059,950
Total loans		958,878			898,505
Total loans plus foreclosed property		959,001			898,628
Non-performing loans to loans		0.22	%		0.20	%
Non-performing assets to loans plus foreclosed property		0.24			0.22
Non-performing assets to total assets		0.20			0.18

The increase in nonperforming loans during the first six months of 2005 consists of a $539,000 credit that is secured by a first mortgage on a commercial property and a $300,000 credit to a manufacturer.  The increase was partially offset by a motel property that was foreclosed and sold during the first quarter of 2005.  Five other borrowers represent the remainder.

Noninterest Income

Noninterest income primarily consists of fees and service charges on deposit accounts, Wealth Management fee income and to a lesser extent, gains on sales of mortgage loans.  Noninterest income was $2.2 million for the three months ended June 30, 2005, compared to $1.8 million for the same period in 2004.  Driving this improvement was a 42% increase in Wealth Management income from $1.0 million for second quarter of 2004 to $1.5 million for the same quarter of 2005.  This increase was the result of both increased assets under administration and a more favorable mix of managed versus custodial assets.  Assets under administration in Enterprise Trust were $1.5 billion at June 30, 2005 versus $1.2 billion at June 30, 2004.  Service charges on deposit accounts of $537,000 were basically unchanged in the second quarter of 2005 compared to the same quarter in 2004.  This is due to a rising earnings crediting rate on commercial accounts which is offset by increased account activity. 

For the six months ended June 30, 2005, noninterest income was $4.1 million compared to $3.3 million for the same period in 2004.  Wealth management income increased $807,000, or 42%, to $2.7 million for the six month period ended June 30, 2005, compared to $1.9 million for the same period in 2004 as a result of the reasons stated above.   In addition, Wealth Products Group, which was introduced in March 2004, contributed $305,000 of the Wealth Management increase.  Service charges increased slightly from $997,000 to $1.02 million for the six month period ended June 30, 2005.  

Noninterest Expense

Total noninterest expense was $8.2 million for the three months ended June 30, 2005, an increase of $1.0 million over the same period in 2004.  Additional employee compensation and benefits comprised $817,000 of the increase.  Other expenses increased $126,000. 

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The increase in employee compensation and benefits was related to several factors.  Accrued expenses under the Company’s incentive bonus programs, which are tied to performance targets, increased $388,000.  Growth in the Wealth Management business increased commissions by $154,000.  Effective January 1, 2005, the Board of Directors awarded restricted share units (“RSUs”) to selected personnel during the first quarter of 2005.  RSUs will be expensed annually as they vest over five years.  Compensation expense related to the RSUs was $95,000 in the second quarter 2005.  Recruiting fees of $ 71,000 were incurred during the second quarter.  The remaining increase was attributable to annual merit increases for personnel, increases in medical and disability insurance costs and increases in temporary help.

The increase in other expenses was the result of additional legal and professional and director expenses offset by decreases in marketing and public relations.  Legal and professional expenses, including expenses related to Sarbanes-Oxley 404 compliance, increased $150,000 for the second quarter of 2005 compared to the same period in 2004.  Director expenses increased $99,000 for the second quarter of 2005 compared to the second quarter of 2004.  $42,000 of this increase was related to director stock appreciation rights, which are marked to market on a quarterly basis based upon the Company’s stock price. The remaining increase in director expenses was due to increases in compensation to more competitive levels.   Offsetting these increases was a $109,000 decrease in marketing and public relations expenses due to the timing of a media campaign in 2004. 

Total noninterest expense was $15.9 million for the six months ended June 30, 2005, representing a $1.8 million increase over the same period in 2004.  Employee compensation and benefits and other expenses compose the increase.   Fluctuations in these expense categories for the six month period are similar to those discussed above for the second quarter period.

Income Taxes

The provision for income taxes was $1.7 million and $3.1 million for the three and six months ended June 30, 2005 compared to $0.9 million and $1.8 for the three and six months ended June 30, 2004.  The effective tax rates for the three and six months ended June 30, 2005 were 35.0% and 35.7%, respectively.  The effective tax rates for the three and six months ended June 30, 2004 were 30.8% and 33.4%, respectively.  During the second quarter of 2004, we recognized state income tax refunds of $163,000 related to amendments of prior state income tax returns.

Liquidity

The objective of liquidity management is to ensure the Company has the ability to generate sufficient cash or cash equivalents in a timely and cost-effective manner to meet its commitments as they become due.  Funds are available from a number of sources, such as from the core deposit base and from loans and securities repayments and maturities.  Additionally, liquidity is provided from sales of the securities portfolio, lines of credit with major financial institutions, the Federal Reserve Bank and the Federal Home Loan Bank, the ability to acquire large and brokered deposits and the ability to sell loan participations to other banks.

The Company’s liquidity management framework includes measurement of several key elements, such as the loan to deposit ratio, wholesale deposits as a percentage of total deposits, and various dependency ratios used by banking regulators.  The Company’s liquidity framework also incorporates contingency planning to assess the nature and volatility of funding sources and to determine alternatives to these sources.

Strong capital ratios, credit quality and core earnings are essential to retaining cost-effective access to the wholesale funding markets.  Deterioration in any of these factors could have an impact on the Company’s ability to access these funding sources and, as a result, these factors are monitored on an ongoing basis as part of the liquidity management process.

While core deposits and loan and investment repayment are principal sources of liquidity, funding diversification is another key element of liquidity management.  Diversity is achieved by strategically varying depositor types, terms, funding markets, and instruments.

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Investment securities are an important part of the Company’s liquidity objective.  As of June 30, 2005, all of the investment portfolio was available for sale.  Of the $89.1 million available for sale investment portfolio, $18.8 million was pledged as collateral for public deposits, treasury, tax and loan notes, and other requirements.  The remaining securities could be pledged or sold to enhance liquidity if necessary.

The Bank has a variety of funding sources (in addition to key liquidity sources, such as core deposits, loan repayments, loan participations sold, and investment portfolio sales) available to increase financial flexibility.  At June 30, 2005, we had $31 million of outstanding FHLB long-term borrowings.  At June 30, 2005, we had an additional $85 million available for borrowing from the Federal Home Loan Bank of Des Moines under a blanket loan pledge, absent the Bank being in default of its credit agreement, and $170 million available from the Federal Reserve Bank under a pledged loan agreement.  During second quarter 2005, we reviewed our process for pledging loans as collateral to the FHLB and Federal Reserve.  We identified additional loans that were available for pledging to the Federal Reserve.  As a result, our amount available from the Federal Reserve has increased substantially over prior periods.  We also have access to over $70.0 million in overnight federal funds purchased lines from various banking institutions.  Finally, since the Bank is a “well-capitalized” institution, it has the ability to sell certificates of deposit through various national or regional brokerage firms, if needed.

Over the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit.  These transactions are managed through the Company’s various risk management processes.  Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity.  The Company has $307 million in unused loan commitments as of June 30, 2005.  The Company believes that the nature of these commitments are such that the likelihood of such a funding demand is very low.

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Capital Adequacy

The Company and Bank are subject to various regulatory capital requirements administered by the Federal banking agencies.  Failure to meet minimum requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and 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.  The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulations to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets.  The Company believes, as of June 30, 2005 and December 31, 2004, that the Company and Bank meet all capital adequacy requirements to which they are subject.

As of June 30, 2005 and December 31, 2004, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.  To be categorized as “well capitalized” the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Applicable Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of June 30, 2005:
Total Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp	$	112,584		11.39	%	$	79,049		8.00	%	$	—		—	%
Enterprise Bank & Trust		107,395		10.87			79,010		8.00			98,763		10.00
Tier I Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp		100,228		10.14			39,524		4.00			—		—
Enterprise Bank & Trust		95,044		9.62			39,505		4.00			59,258		6.00
Tier I Capital (to Average Assets)
Enterprise Financial Services Corp		100,228		9.01			33,383		3.00			—		—
Enterprise Bank & Trust		95,044		8.55			33,338		3.00			55,564		5.00
As of December 31, 2004:
Total Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp	$	103,673		11.19		$	74,086		8.00		$	—		—
Enterprise Bank & Trust		99,545		10.76			74,036		8.00			92,545		10.00
Tier I Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp		92,096		9.94			37,043		4.00			—		—
Enterprise Bank & Trust		87,976		9.51			37,018		4.00			55,527		6.00
Tier I Capital (to Average Assets)
Enterprise Financial Services Corp		92,096		8.44			32,725		3.00			—		—
Enterprise Bank & Trust		87,976		8.08			32,659		3.00			54,432		5.00

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Readers should note that in addition to the historical information contained herein, some of the information in this report contains forward-looking statements within the meaning of the federal securities laws.  Forward-looking statements typically are identified with use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently.  You should be aware that the Company’s actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including burdens imposed by federal and state regulation of banks, credit risk, availability of capital to fund the expansion of the Company’s business, exposure to local economic conditions, risks associated with rapid increase or

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decrease in prevailing interest rates, critical accounting policies and competition from banks and other financial institutions, all of which could cause the Company’s actual results to differ from those set forth in the forward-looking statements.  The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

Market risk arises from exposure to changes in interest rates and other relevant market rate or price risk.  The Company faces market risk in the form of interest rate risk through other than trading activities.  Market risk from other than trading activities in the form of interest rate risk is measured and managed through a number of methods.  The Company uses financial modeling techniques that measure the sensitivity of future earnings due to changing rate environments to measure interest rate risk.  Policies established by the Company’s Asset/Liability Committee and approved by the Company’s Board of Directors limit exposure of earnings at risk.  General interest rate movements are used to develop sensitivity as the Company feels it has no primary exposure to a specific point on the yield curve.  These limits are based on the Company’s exposure to a 100 bp and 200 bp immediate and sustained parallel rate move, either upward or downward.

The following table (in thousands) presents the scheduled repricing of market risk sensitive instruments at June 30, 2005:

	Year 1		Year 2		Year 3		Year 4		Year 5		Beyond 5 years or no stated maturity		Total
ASSETS
Investments in debt and equity securities	$	1,843	$	22,513	$	54,570	$	4,749	$	51	$	5,467	$	89,193
Interest-bearing deposits		94		—		—		—		—		—		94
Loans (1)		741,679		62,445		70,237		31,137		42,607		10,773		958,878
Loans held for sale		3,996		—		—		—		—		—		3,996
Total	$	747,612	$	84,958	$	124,807	$	35,886	$	42,658	$	16,240	$	1,052,161
LIABILITIES
Savings, NOW, and Money market deposits	$	536,608	$	—	$	—	$	—	$	—	$	—	$	536,608
Certificates of deposit (1)		154,115		78,466		22,669		3,499		1,160		31		259,940
Subordinated debentures		20,620		—		—		—		—		—		20,620
Other borrowings		9,580		1,125		1,250		650		1,050		24,139		37,794
Total	$	720,923	$	79,591	$	23,919	$	4,149	$	2,210	$	24,170	$	854,962

Item 4 - Disclosure Control and Procedures

As of June 30, 2005, under the supervision and with the participation of the Company’s Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.  Based on that evaluation, the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2005, to ensure that information required to be disclosed in the Company’s periodic SEC filings is processed, recorded, summarized and reported when required.  There were no significant changes in the Company’s internal controls over financial reporting for the quarter ended June 30, 2005, that have materially affected, or are reasonably likely to affect, those controls.

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PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

There were no material changes in legal proceedings as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

(a)	During the quarter ended June 30, 2005, the Company issued 1,500 unregistered shares of its common stock to officers upon exercise of stock options pursuant to the 2002 Stock Incentive Plan (Plan V.)  The aggregate value of unregistered shares issued was $19,650.  The issuances were made in reliance upon the exemptions from registration (to the extent applicable) under Section 4(2) of the Securities Act of 1933.
(b)	Not applicable.
(c)	There were no repurchases of the Company’s common stock during the quarter ended June 30, 2005.

Item 3 – Defaults Upon Senior Securities

None.

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Item 4 - Submission of Matters to a Vote of Security Holders

ANNUAL MEETING OF SHAREHOLDERS:  The annual meeting of shareholders was held on April 20, 2005.  Proxies were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934.  There was no solicitation in opposition to management’s nominees for Directors and all nominees were elected.  The appointment of KPMG LLP to serve as independent registered public accounting firm for the Company in 2005 was ratified.

The results of the voting on each proposal submitted at the meeting are as follows:

PROPOSAL NO. 1: ELECTION OF DIRECTORS

Director	For	Abstain
Paul J. McKee, Jr.	7,126,882	86,943
Kevin C. Eichner	7,149,282	64,543
Peter F. Benoist	7,194,073	19,752
Paul R. Cahn	7,193,873	19,952
William H. Downey	7,191,573	22,252
Robert E. Guest, Jr.	7,192,973	20,852
Richard S. Masinton	7,182,051	31,774
Birch M. Mullins	7,194,073	19,752
James J. Murphy	7,193,973	19,852
Robert E. Saur	7,194,073	19,752
Sandra Van Trease	7,077,859	135,966
Henry D. Warshaw	7,193,973	19,852

PROPOSAL NO. 2:  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Accountants	For	Against	Abstain
KPMG LLP	7,170,376	34,739	8,710

Item 5 – Other Information

Not applicable or required.

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Item 6 - Exhibits

Exhibit Number	Description
*11.1	Statement regarding computation of per share earnings
*31.1	Chief Executive Officer’s Certification required by Rule 13(a)-14(a).
*31.2	Chief Financial Officer’s Certification required by Rule 13(a)-14(a).
*32.1	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	Chief Financial Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri on the day of August 5, 2005.

ENTERPRISE FINANCIAL SERVICES CORP
By:	/s/ KEVIN C. EICHNER
	Kevin C. Eichner
	Chief Executive Officer
By:	/s/ FRANK H. SANFILIPPO
	Frank H. Sanfilippo
	Chief Financial Officer

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