U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1997
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________ TO __________
Commission file number - 33-53596
EXCHANGE BANCSHARES, INC.
_____________________________________________________________
(Exact name of small business issuer as specified in its charter)
OHIO 34-1721453
______________________________ __________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
237 Main Street
P.O.Box 177, Luckey, Ohio 43443
______________________________________ ________
(Address of principal executive offices) (Zip Code)
(419) 833-3401
________________________
(Issuer's telephone number)
N/A
________
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
As of October 30, 1997, 489,194 shares of Common Stock of the Registrant were
outstanding. There were no preferred shares outstanding.
<PAGE>
<TABLE>
<CAPTION>
EXCHANGE BANCSHARES, INC.
LUCKEY, OHIO
FORM 10-QSB
INDEX
________________________________________________________________________________
Page Number
<S> <C>
PART I FINANCIAL INFORMATION
Item. 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- 3
September 30, 1997 and December 31, 1996
Condensed consolidated statements of income -- 4
Three and Nine months ended September 30, 1997 and 1996
Condensed consolidated statements of cash flows -- 5
Nine months ended September 30, 1997 and 1996
Notes to condensed consolidated financial statements -- 6
September 30, 1997, 1996 and December 31, 1996
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXCHANGE BANCSHARES, INC.
Luckey, Ohio
CONSOLIDATED BALANCE SHEETS
_________________________________________________________________________________________________
<--------Dollars in thousands-------->
(Unaudited) (Unaudited)
September 30, December 31,
1997 1996
____ ____
<S> <C> <C>
Assets
Cash and cash equivalents
Cash and due from banks $ 2,227 $ 2,440
Federal funds sold 3,997 2,254
_______ _______
Total cash and cash equivalents 6,224 4,694
Securities being held-to-maturity 2,612 3,184
(Fair value of $2,604 in 1997 and $3,149 in 1996)
Securities available-for-sale, at fair value 17,374 17,664
Loans (net of unearned interest) 45,398 41,471
Less: Allowance for loan losses (635) (508)
_______ _______
Loans - net 44,763 40,963
Properties and equipment 857 892
Accrued income receivable 793 646
Other real estate 0 0
Deferred federal income taxes 18 22
Other assets 118 141
_______ _______
Total assets $72,759 $68,206
_______ _______
Liabilities and Shareholders' Equity
Deposits
Demand accounts $17,653 $16,024
Savings accounts 14,499 15,225
Time deposits, $100,000 or more 4,609 3,995
Other time deposits 27,200 24,914
_______ _______
Total deposits 63,961 60,158
FHLB advances 199 0
Accrued interest payable 145 121
Accrued expenses and other liabilities 106 110
_______ _______
Total liabilities 64,411 60,389
_______ _______
Shareholders' Equity
Common share of $ 5.00 par value: 750,000 shares 2,498 2,379
authorized; 499,534 shares issued at September 30,
1997, and December 31, 1996
Surplus 3,363 3,050
Retained earnings, substantially restricted 2,570 2,459
Unrealized gain on securities available-for-sale, 72 60
net applicable deferred income taxes
Less cost of common treasury stock - 10,340 shares
and 8,815 shares at September 30, 1997, and
December 31, 1996, respectively (155) (131)
_______ _______
Total shareholders' equity 8,348 7,817
_______ _______
Total liabilities and shareholders' equity $72,759 $68,206
_______ _______
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXCHANGE BANCSHARES, INC.
Luckey, Ohio
CONSOLIDATED STATEMENTS OF INCOME
____________________________________________________________________________________________________________
<----Dollars in thousands, except per share amounts---->
(Unaudited) (Unaudited)
3 Months Ended 9 Months Ended
September 30, September 30,
1997 1996 1997 1996
____ ____ ____ ____
<S> <C> <C> <C> <C>
Interest and dividend income
Interest and fees on loans $ 1,050 $ 949 $ 3,065 $ 2,805
Interest on investment securities:
Taxable 280 300 857 891
Exempt from federal income tax 16 21 49 52
Dividend income 3 0 8 0
Interest on federal funds sold 55 42 119 135
_______ _______ _______ _______
Total interest income 1,404 1,312 4,098 3,883
_______ _______ _______ _______
Interest expense
Interest on interest-bearing checking accounts 85 78 228 209
Interest on savings deposits 97 105 292 319
Interest on time deposit 430 364 1,220 1,091
Interest on FHLB advances 3 0 4 0
_______ _______ _______ _______
Total interest expense 615 547 1,744 1,619
_______ _______ _______ _______
Net interest income 789 765 2,354 2,264
Provision for loan losses 0 20 0 65
_______ _______ _______ _______
Net interest income after provision for loan loss 789 745 2,354 2,199
_______ _______ _______ _______
Noninterest income
Service charges on deposit accounts 49 57 145 175
Gain on sale of other assets (1) 0 1 0
Other income 32 20 93 63
_______ _______ _______ _______
Total noninterest income 80 77 239 238
_______ _______ _______ _______
Noninterst expense
Salaries and employee benefits 268 261 811 793
Net occupancy expense 37 36 110 109
Equipment expense 38 34 108 105
FDIC deposit insurance assessment 2 1 5 2
State and other taxes 21 27 79 82
Other expense 169 164 565 531
_______ _______ _______ _______
Total noninterest expense 535 523 1,678 1,622
_______ _______ _______ _______
Income before income taxes 334 299 915 815
Federal income tax expense 105 93 283 253
_______ _______ _______ _______
Net income $ 229 $ 206 $ 632 $ 562
_______ _______ _______ _______
____________________________________________________________________________________________________________
Per share data:
Net income per share of common stock $0.47 $0.42 $1.29 $1.14
Weighted average shares outstanding 489,194 491,011 488,832 494,262
____________________________________________________________________________________________________________
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXCHANGE BANCSHARES, INC.
Luckey, Ohio
CONSOLIDATED STATEMENTS OF CASH FLOWS
_________________________________________________________________________________________________
<-----Dollars in thousands---->
(Unaudited) (Unaudited)
9 Months Ended 9 Months Ended
September 30, September 30,
1997 1996
____ ____
<S> <C> <C>
Cash flows from operating activities:
Net income $ 632 $ 561
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 90 98
Provision for loan losses 0 65
Deferred income taxes (3) 2
Net gain on sale of other assets (1) 0
Amortization/Accretion - net 82 99
Changes in operating assets and liabilities:
Increase in accrued income receivable (147) (167)
(Increase) decrease in other assets 22 (31)
Increase (decrease) in accrued interest payable 24 (2)
Increase in other liabilities 31 29
Increase (decrease) in taxes payable (35) 19
_______ _______
Total adjustments 63 112
_______ _______
Net cash provided by operations 695 673
Cash flows from investing activities:
Purchase of held-to-maturity securities 0 (100)
Purchase of available-for-sale securities (4,241) (8,581)
Payments on maturities on held-to-maturity securities 541 470
Payments on maturities on available-for-sale securities 4,500 6,400
Net change in loans (3,822) (1,694)
Capital purchases (54) (101)
Proceeds from sale of other real estate 22 0
Proceeds from sale of other assets 1 0
_______ _______
Net cash used in investing activities (3,053) (3,606)
Cash flows from financing activities:
Net increase in deposits 3,803 2,885
Increase in short-term borrowings 199 0
Sale of treasury stock 22 0
Purchase of treasury stock (43) (117)
Dividends paid (93) (68)
_______ _______
Net cash provided by financing activities 3,888 2,700
_______ _______
Net increase (decrease) in cash and cash equivalents 1,530 (233)
Cash and cash equivalents at beginning of period 4,694 6,092
_______ _______
Cash and cash equivalents at end of period $ 6,224 $ 5,859
_______ _______
_________________________________________________________________________________________________
Supplemental information:
Cash paid for:
Interest $ 1,721 $ 1,621
Net income taxes 321 232
_________________________________________________________________________________________________
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
EXCHANGE BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997, 1996 and December 31, 1996
________________________________________________________________________________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Corporation is a bank holding company whose activities are primarily
limited to holding the stock of The Exchange Bank, Luckey, Ohio, (the
"Company"). The Company conducts a general banking business in northwest Ohio
which consists of attracting deposits from the general public and applying those
funds to the origination of loans for residential, consumer and non-residential
purposes. The Company's profitability is significantly dependent on net
interest income which is the difference between interest income generated from
interest-earning assets (i.e., loans and investments) and the interest expense
paid on interest-bearing liabilities (i.e., customer deposits and borrowed
funds). Net interest income is affected by the relative amount of interest-
earning assets and interest-bearing liabilities and interest received or paid on
these balances. The level of interest rates paid or received by the Company
can be significantly influenced by a number of environmental factors, such as
governmental monetary policy, that are outside of management control.
Earnings per common share were computed by dividing net income by the
weighted-average number of shares outstanding for both the three- and nine-month
periods ended September 30, 1997 and 1996. The weighted-average number of
shares outstanding for the three-month periods ended September 30, 1997 and
1996, were 489,194 and 491,011, respectively. The weighted-average number of
shares outstanding for the nine-month periods ended September 30, 1997 and
1996, were 488,832 and 494,262, respectively.
The consolidated financial information presented herein has been prepared
in accordance with generally accepted accounting principles ("GAAP") and
general accounting practices within the financial services industry. In
preparing consolidated financial statements in accordance with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Actual results could differ from
such estimates.
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with instructions to Form 10-QSB and
Article 10 of Regulation S-X and Rule 310 of Regulation SB. Accordingly, they
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Operating results are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997.
<PAGE>
EXCHANGE BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
________________________________________________________________________________
The following focuses on the consolidated financial condition of the
Corporation at September 30, 1997, compared to December 31, 1996, and the
results of operations for the three- and nine-month periods ended September
30, 1997, compared to the same periods in 1996. The purpose of this
discussion is to provide a better understanding of the consolidated financial
statements and footnotes included in the Form 10-QSB. The Corporation is not
aware of any market or institutional trend, events or uncertainties that will
have or are reasonably likely to have a material effect on liquidity, capital
resources or operations except as discussed herein. Other than as discussed
herein, the Corporation is not aware of any current recommendations by
regulatory authorities which would have such effect if implemented.
Note Regarding Forward-Looking Statements
In addition to historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, the Corporation's operations and the
Corporation's actual results could differ significantly from those discussed
in the forward-looking statements. Some of the factors that could cause or
contribute to such differences are discussed herein but also include changes
in the economy and interest rates in the nation and the Corporation's market
area generally. Some of the forward-looking statements included herein are
the statements regarding the allowance for loan losses.
Financial Condition
Liquidity
Liquidity relates to the Company's ability to meet cash demands of its
customers and their credit needs. Liquidity is provided by the Company's
ability to readily convert assets to cash and readily marketable, short-term
assets, such as federal funds sold and deposits in other banks.
Cash and cash equivalents, investment securities available-for-sale, and
mortgage-backed securities available-for-sale were $23.60 million at
September 30, 1997, an increase of $1.24 million from the December 31, 1996
total. The increase was attributable to the maturing investment securities,
approximately $862,000, net inflow of funds from depositors and short-term
Federal Home Loan Bank advances. Additional funds were provided from the
maturity and repayment loans.
Liability liquidity relates to the Company's ability to retain existing
deposits, obtain new deposits and borrow in the marketplace. Total deposits
increased $2.53 million for the three months ended September 30, 1997,
compared to the increase of $1.27 million experienced in the first six months
of 1997. During the third three months, i.e. third quarter, of 1997, the
balances in demand and savings categories of deposits increased by $817,000
while the time deposits increased $1,712,000. Overall, the net increase in
deposits since December 31, 1996, was $3.80 million, or 6.32%.
Access to funds from the Federal Reserve Bank (the "FED") in the
form short- and long-term borrowings and the Federal Home Loan Bank (the
"FHLB") in the form of short- and long-term advances are supplemental sources
of cash to meet liquidity needs.
<PAGE>
Capital Resources
Shareholders' equity totaled $8.35 million at September 30, 1997,
compared to $8.09 million at June 30, 1997 and to $7.82 million at December
31, 1996. These increases are primarily due to the retention of the quarterly
earnings of $229,000, $196,000 and $207,000, respectively, and an increase of
$12,000 in unrealized gains on securities available-for-sale, being offset by
the purchase of additional shares of treasury stock, and the payment of
$93,000 in cash dividends. As of September 30, 1997, the Corporation's ratio
of shareholders' equity to assets was 11.47%, compared to 11.57% at June 30,
1997, 11.20% at March 31, 1997, and 11.46% at December 31, 1996.
Regulatory Capital Requirements
The Company complies with the capital requirements established by the
Federal Reserve System, which are summarized as follows:
<TABLE>
<CAPTION>
Capital Position
Regulatory as of
Minimum September 30, 1997 December 31, 1996
__________________________________________________________________________
<S> <C> <C> <C>
Tier I 4.00% 18.57% 21.33%
risk-based
capital......
Total Risk- 8.00% 19.82% 22.58%
Based capital
Tier I 3.00% - 5.00% 11.40% 11.15%
leverage.....
</TABLE>
Under "Prompt Corrective Action" regulations adopted in September 1992,
the Federal Deposit Insurance Corporation (FDIC) has defined five categories
of capitalization (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized). The Company
meets the "well capitalized" definition, which requires a total risk-based
capital ratio of at least 10%, and a leverage ratio of at least 8%. Effective
January 1, 1997, the Federal Financial Institutions Examination Council (the
FFIEC) adopted the Uniform Financial Institutions Rating System (the UFIRS).
Under the revised UFIRS interest rate risk became an additional element in
measuring risk-based capital. This change is not expected to significantly
impact the Company's compliance with capital guidelines.
Changes in Financial Condition
General. The Corporation's consolidated total assets were $72.76 million
at September 30, 1997, reflecting an increase of $4.55 million, or 6.68%, over
the $68.21 million at December 31, 1996. This growth was primarily
attributable to an increase in loans outstanding, funded primarily by the
proceeds from the growth in deposit accounts. The proceeds from repayments
and maturities of investment securities were utilized to the increase in cash
and cash equivalent balances.
Cash and Cash Equivalents, Investment Securities, Mortgage-Backed
Securities and FHLB Stock. Cash and cash equivalents, investment securities,
mortgage-backed securities and FHLB stock decreased by $668,000 between
December 31, 1996, and September 30, 1997. The primary changes were a
decrease in securities being held-to-maturity from $3.18 million at December
31, 1996, to $2.61 million at September 30, 1997, and a decrease in investment
securities available-for-sale from $17.66 million at December 31, 1996, to
$17.37 million at September 30, 1997.
<PAGE>
Loans Receivable. Net loans receivable equaled $44.76 million at
September 30, 1997, compared to $44.04 million at June 30, 1997 and to $40.96
million at December 31, 1996, an increase of 725,000, or 1.65%in the third
quarter, 7.51% in the first two quarters, and 9.28% for the nine-months ended
September 30, 1997. The demand for mortgage and commercial loans continues to
be strong. Average total loans outstanding for the three-month period ended
September 30, 1997, equaled $44.86 million, compared to $40.55 million for the
same three-month period ended September 30, 1996, which represents an increase
of $4.31 million, or 10.63%. Average total loans outstanding for the
nine-month period ended September 30, 1997, equaled $44.04 million, compared
to $39.20 million for the same nine-month period ended September 30, 1996,
which represents an increase of $4.85 million, or 12.37%. Approximately 53.73%
of this increase was experienced in the commercial loan portfolio and 37.50%
in the mortgage loan portfolio. Management is continuing to emphasize local
lending to qualified borrowers.
Deposits. Total deposits increased by $2.53 million, or 4.12%, during
the third quarter of 1997. Overall deposits increased by $3.80 million, or
6.32% during the nine-month period ended September 30, 1997. Total time
deposits increased by $2.90 million, or 10.03%, while demand and savings
deposits increased a net amount of $903,000, or 2.89%, during the nine-month
period ended September 30,1997.
At September 30, 1997, advances totaled $199,000. Liabilities other than
deposits and FHLB advances increased by $67,000 in the three-month period
ended September 30, 1997. Such increase was primarily attributed to the
accrual for current period operating expenses. The Company began utilizing
advances from the Federal Home Loan Bank (FHLB) as a source of funds on a
limited basis during the second quarter of 1997.
Results of Operations
General. The Corporation recorded a consolidated net income of $229,000
for the three-month period ended September 30, 1997, compared to $206,000 for
the same quarter in 1996. Year-to-date net income was $632,000 for the
nine-month period ended September 30, 1997, as compared to $562,000 for the
same period in 1996.
Three Months Ended September 30, 1997, Compared to Three Months Ended
September 30, 1996
Net Interest Income. The Corporation's net interest income for the three
months ended September 30, 1997, increased by 3.12%, from $765,000, to
$789,000, compared to the same period in 1996. The net interest margin, which
consists of net interest income as a percentage of average interest-earning
assets, decreased from 4.59% for the three months ended September 30, 1996, to
4.29% for the same period in 1997, primarily as a result of the repricing of
earning assets. During the same period, the net interest spread, which
reflects average yield on interest-earning assets less average costs of
interest-bearing liabilities, decreased 40 basis points, to 3.54%. Average
loans outstanding increased by $4.31 million as compared to 1996, which
contributed approximately $335,000 to the net interest income, while the
change in average yield on loans outstanding decreased the net interest income
by approximately $56,000.
Provision for Loan Losses. The allowance for loan losses was established
and is maintained by periodic charges to the provision for loan loss, an
operating expense, in order to provide for the risk of loss inherent in the
Company's loan portfolio. Loan losses and recoveries are charged or
credited, respectively, to the allowance for loan losses as they occur.
The allowance and provision for loan losses is determined by management
upon consideration of such factors as the size and character of the loan
portfolio, loan loss experience, problem loans and economic conditions in the
Company's market area. Management attempts to minimize the risk associated
with each loan by evaluating each loan independently based upon criteria which
include, but are not limited to, (a) the purpose of the loan, (b) the credit
history of the borrower, (c.) the borrower's financial standing and trends,
(d) the market value of the collateral involved, and (e) the down payment
received. Quarterly reviews of the loan portfolio are conducted to identify
<PAGE>
problem loans and to determine appropriate courses of action on a loan-by-loan
basis. While management believes that it uses the best information available
to determine the allowance for loan losses, unforeseen market conditions
could result in material adjustments, and net earnings could be significantly
adversely affected, if circumstances differ substantially from the assumptions
used in making the final determination. Increases in the loan portfolio,
increases in the types of loans carrying greater risk of loss, increases in
non-performing loans and changes in the local and national economy all could
cause the allowance for loan losses to be insufficient.
Management determined that additional provisions to the allowance for
loan loss account were not necessary during the quarter ended September 30,
1997, due to the net loans charged-off of only $13,000 during the three months
ended September 30, 1997.
Noninterest Income and Expense. Noninterest income was $80,000 for the
three months ended September 30, 1997, compared to $77,000, for the same period
in 1996. Other fee income increased by $12,000 while service charge income on
deposit accounts decreased by $8,000. Noninterest expense increased by $12,000
for the three months ended September 30, 1997, compared to the same period in
1996. The increase was attributed to the increased costs of employee salaries
and benefit plans, professional fees, and other miscellaneous operating
expenses.
Nine Months Ended September 30, 1997, Compared to Nine Months Ended September
30, 1996
Net Interest Income. The Corporation's net interest income for the nine
months ended September 30, 1997, increased by 3.98%, from $2,264,000 to
$2,354,000, compared to the same period in 1996. The net interest margin,
which consists of net interest income as a percentage of average interest-
earning assets, decreased slightly, from 4.73% for the nine months ended
September 30, 1996, to 4.71% for the same period in 1997, primarily as a result
of the repricing of earning assets and changes in the composition of both the
interest-earning assets and interest-bearing liabilities. During the same
period, the net interest spread, which reflects average yield on interest-
earning assets less average costs of interest-bearing liabilities, decreased
12 basis points, to 3.97%. Average loans outstanding increased by $4.69 million
as compared to 1996, which contributed approximately $130,000 to the net
interest income, while the change in average yield on loans outstanding
decreased the net interest income by approximately $29,000.
Provision for Loan Losses. The allowance for loan losses was established
and is maintained by periodic charges to the provision for loan loss, an
operating expense, in order to provide for the risk of loss inherent in the
Company's loan portfolio. Loan losses and recoveries are charged or credited,
respectively, to the allowance for loan losses as they occur.
The allowance and provision for loan losses is determined by management
upon consideration of such factors as the size and character of the loan
portfolio, loan loss experience, problem loans and economic conditions in the
Company's market area. Management attempts to minimize the risk associated
with each loan by evaluating each loan independently based upon criteria which
include, but are not limited to, (a) the purpose of the loan, (b) the credit
history of the borrower,(c.) the borrower's financial standing and trends, (d)
the market value of the collateral involved, and (e) the down payment received.
Quarterly reviews of the loan portfolio are conducted to identify problem loans
and to determine appropriate courses of action on a loan-by-loan basis. While
management believes that it uses the best information available to determine
the allowance for loan losses, unforeseen market conditions could result in
material adjustments, and net earnings could be significantly adversely
affected, if circumstances differ substantially from the assumptions used in
making the final determination. Increases in the loan portfolio, increases
in the types of loans carrying greater risk of loss, increases in non-performing
loans and changes in the local and national economy all could cause the
allowance for loan losses to be insufficient.
Management determined that additional provisions to the allowance for
loan loss account were not necessary during the period ended September 30,
1997, due to the net recoveries on loans previously charged-off of $127,000
during the nine months ended September 30, 1997.
<PAGE>
Noninterest Income and Expense. Noninterest income was $239,000 for the
nine months ended September 30, 1997, compared to $238,000, for the same
period in 1996. This increase was a result of the $30,000 decrease
in service charge income on deposit accounts being offset by recognized
investment security gains of $1,000 and $30,000 increases realized from other
service charges and fee income. Noninterest expense increased by $56,000 for
the nine months ended September 30, 1997, compared to the same period in
1996. The increase was attributed to the increased costs of employee salaries
and benefit plans, professional fees, and other miscellaneous operating
expenses.
<PAGE>
EXCHANGE BANCSHARES, INC.
PART II - OTHER INFORMATION
________________________________________________________________________________
ITEM 1 -LEGAL PROCEEDINGS
Not Applicable
ITEM 2 -CHANGES IN SECURITIES
Not Applicable
ITEM 3 -DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 -SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5 -OTHER INFORMATION
Not Applicable
ITEM 6 -EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 27: Financial Data Schedule
b. No reports on Form 8-K were filed during the quarter
ended September 30, 1997.
<PAGE>
SIGNATURES
In accordance with 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.
EXCHANGE BANCSHARES, INC.
Date /s/ November 13, 1997 /s/ Marion Layman
_____________________________ ________________________________
Marion Layman
Chairman, President, and Chief Executive
Officer
Date /s/ November 13, 1997 /s/ Joseph R. Hirzel
____________________________ ________________________________
Joseph R. Hirzel
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of Sept.30,1997 and Dec. 31,1996, and the related
Consolidated Statements of Income for the three and nine months ended Sept.30,
1997 and 1996,and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000720912
<NAME> EXCHANGE BANCSHARES, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,227
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,997
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,374
<INVESTMENTS-CARRYING> 2,612
<INVESTMENTS-MARKET> 2,604
<LOANS> 45,398
<ALLOWANCE> 635
<TOTAL-ASSETS> 72,759
<DEPOSITS> 63,961
<SHORT-TERM> 0
<LIABILITIES-OTHER> 251
<LONG-TERM> 199
0
0
<COMMON> 2,498
<OTHER-SE> 5,850
<TOTAL-LIABILITIES-AND-EQUITY> 72,759
<INTEREST-LOAN> 1,050
<INTEREST-INVEST> 299
<INTEREST-OTHER> 55
<INTEREST-TOTAL> 1,404
<INTEREST-DEPOSIT> 612
<INTEREST-EXPENSE> 615
<INTEREST-INCOME-NET> 789
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 535
<INCOME-PRETAX> 334
<INCOME-PRE-EXTRAORDINARY> 229
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<YIELD-ACTUAL> 4.29
<LOANS-NON> 75
<LOANS-PAST> 127
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 648
<CHARGE-OFFS> 16
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 635
<ALLOWANCE-DOMESTIC> 635
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 489
</TABLE>
