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 JUNE 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
incorporation or organization) No.)
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 August 11, 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
June 30, 1997 and December 31, 1996
Condensed consolidated statements of income -- 4
Three and Six months ended June 30, 1997 and 1996
Condensed consolidated statements of cash flows -- 5
Six months ended June 30, 1997 and 1996
Notes to condensed consolidated financial 6
statements -- June 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 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXCHANGE BANCSHARES, INC.
Luckey, Ohio
CONSOLIDATED BALANCE SHEETS
____________________________________________________________________________________________________
< ---------- Dollars in thousands ---------->
June30, December 31,
(Unaudited) (Unaudited)
1997 1996
____ ____
<S> <C> <C>
Assets
Cash and cash equivalents
Cash and due from banks $ 2,668 $ 2,440
Federal funds sold 1,668 2,254
_______ _______
Total cash and cash equivalents 4,336 4,694
Securities being held-to-maturity 2,950 3,184
(Fair value of $2,631 in 1997 and $3,149 in 1996)
Securities available-for-sale, at fair value 16,841 17,664
Loans (net of unearned interest) 44,686 41,471
Less:Allowance for loan losses (648) (508)
_______ _______
Loans - net 44,038 40,963
Properties and equipment 879 892
Accrued income receivable 647 646
Other real estate 22 0
Deferred federal income taxes 33 22
Other assets 160 141
_______ _______
Total assets $69,906 $68,206
_______ _______
Liabilities and Shareholders' Equity
Deposits
Demand accounts $16,533 $16,024
Savings accounts 14,802 15,225
Time deposits, $100,000 or over 4,375 3,995
Other time deposits 25,722 24,914
_______ _______
Total deposits 61,432 60,158
FHLB advances 200 0
Accrued interest payable 130 121
Accrued expenses and other liabilities 54 110
_______ _______
Total liabilities $61,816 $60,389
_______ _______
Shareholders' Equity
Common stock -- $5.00 par value 2,498 2,379
Shares Authorized -- 750,000
Shares Issued -- 499,534
Surplus 3,362 3,050
Retained earnings 2,340 2,459
Treasury stock (10,340 shares in 1997 and
8,815 shares in 1996) (155) (131)
Unrealized loss on securities available-for-sale, 45 60
net of applicable deferred income taxes
_______ _______
Total shareholders' equity 8,090 7,817
_______ _______
Total liabilities and shareholders' equity $69,906 $68,206
_______ _______
____________________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
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</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 6 Months Ended
June 30, June 30,
1997 1996 1997 1996
____ ____ ____ ____
<S> <C> <C> <C> <C>
Interest and dividend income
Interest and fees on loans $ 1,040 $ 933 $ 2,015 $ 1,856
Interest on investment securities:
Taxable 284 311 577 591
Exempt from federal income tax 16 15 33 31
Dividend income 5 0 5 0
Interest on federal funds sold 35 41 64 93
_______ _______ _______ _______
Total interest income 1,380 1,300 2,694 2,571
_______ _______ _______ _______
Interest expense
Interest on interest-bearing
checking accounts 75 68 143 131
Interest on savings deposits 98 107 195 214
Interest on time deposit 403 366 790 727
Interest on FHLB advances 1 0 1 0
_______ _______ _______ _______
Total interest expense 577 541 1,129 1,072
_______ _______ _______ _______
Net interest income 803 759 1,565 1,499
Provision for loan losses 0 22 0 45
_______ _______ _______ _______
Net interest income after
provision for loan loss 803 737 1,565 1,454
Noninterest income
Service charges on deposit accounts 48 61 96 118
Gain on sale of other assets 0 0 2 0
Other income 37 19 61 43
_______ _______ _______ _______
Total noninterest income 85 80 159 161
_______ _______ _______ _______
Noninterest expense
Salaries and employee benefits 289 287 543 532
Net occupancy expense 34 35 73 73
Equipment expense 36 36 70 71
FDIC deposit insurance assessment 2 0 3 1
State and other taxes 29 27 58 55
Other expense 216 196 396 367
_______ _______ _______ _______
Total noninterest expense 606 581 1,143 1,099
_______ _______ _______ _______
Income before income taxes 282 236 581 516
Federal income tax expense 86 72 178 160
_______ _______ _______ _______
Net income $ 196 $ 164 $ 403 $ 356
_______ _______ _______ _______
_________________________________________________________________________________________________________
Per share data:
Net income per share
of common stock $ 0.40 $ 0.33 $ 0.82 $ 0.72
Weighted average shares
outstanding 488,549 495,776 488,686 495,906
_________________________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
- -4-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXCHANGE BANCSHARES, INC.
Luckey, Ohio
CONSOLIDATED STATEMENTS OF CASH FLOWS
____________________________________________________________________________________________________
<------- Dollars in thousands ------->
6 Months ended June 30,
1997 1996
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 403 $ 356
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 60 65
Provision for loan losses 0 45
Deferred income taxes (3) 2
Net gain on sale of other assets (2) 0
Amortization/Accretion - net 54 70
Changes in operating assets and liabilities:
Increase in accrued income receivable (1) (127)
Increase in other assets (20) (76)
Increase (decrease) in accrued interest
payable 9 (6)
Decrease in other liabilities (1) (1)
Decrease in taxes payable (54) (7)
_______ _______
Total adjustments 42 (35)
_______ _______
Net cash provided by operating activities 445 321
Cash flows from investing activities:
Purchase of available-for-sale securities (3,234) (5,523)
Payments on maturities on held-to-maturity
securities 214 332
Payments on maturities on available-for-sale
securities 4,000 3,900
Net change in loans (2,897) (789)
Capital purchases (47) (95)
Proceeds from sale of other assets 2 0
_______ _______
Net cash used in investing activities (1,962) (2,175)
Cash flows from financing activities:
Net change in deposits 1,273 86
Sale of treasury stock 22 0
Purchase of treasury stock (43) (45)
Dividends paid (93) (68)
_______ _______
Net cash provided by (used in) financing activities 1,159 (27)
_______ _______
Net increase (decrease) in cash and cash
equivalents (358) (1,881)
Cash and cash equivalents at beginning of period 4,694 6,092
_______ _______
Cash and cash equivalents at end of period $ 4,336 $ 4,211
_______ _______
____________________________________________________________________________________________________
Supplemental information:
Cash paid for:
Interest $ 1,120 $ 1,078
Net income taxes 236 165
____________________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
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</TABLE>
<PAGE>
EXCHANGE BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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
six-month periods ended June 30, 1997 and 1996. The weighted average number
of shares outstanding for the three-month periods ended June 30, 1997 and
1996, were 488,549 and 495,776, respectively. The weighted average number of
shares outstanding for the six-month periods ended June 30, 1997 and 1996,
were 488,686 and 495,906, 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.
-6-
<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 June 30, 1997, compared to December 31, 1996, and the results
of operations for the three- and six-month periods ended June 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 $21.18 million at June 30,
1997, a decrease of $1.18 million from the December 31, 1996 total. Such
decrease was attributable to the net outflow of funds to satisfy borrowers
credit needs which approximated $3.22 million, which were greater than the
$1.27 million increase in deposits. Additional funds were provided from the
maturity and repayment of investments and federal funds sold.
Liability liquidity relates to the Company's ability to retain existing
deposits, obtain new deposits and borrow in the marketplace. Total deposits
decreased $1.08 million for the three months ended June 30, 1997, compared to
the increase of $2.36 million experienced in the first three months of 1997.
During the second three months of 1997, the balances in demand and savings
categories of deposits decreased while the overall time deposit balances
remained relatively constant. Overall, the net increase in deposits since
December 31, 1996, was $1.27 million, or 2.12%.
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.
- -7-
<PAGE>
Capital Resources
Shareholders' equity totaled $8.09 million at June 30, 1997, compared to
$7.92 million at March 31, 1997 and to $7.82 million at December 31, 1996.
These increases are primarily due to the retention of the quarterly earnings
of $196,000, which were offset by $15,000 unrealized losses on securities
available-for-sale, the purchase of additional shares of treasury stock, and
the payment of $93,000 in cash dividends. As of June 30, 1997, the
Corporation's ratio of shareholders' equity to assets was 11.57%, compared to
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 June 30, 1997 December 31, 1996
__________________________________________________________________________________
<S> <C> <C> <C>
Tier I 4.00% 19.07% 21.33%
risk-based
capital......
Total Risk- 8.00% 20.32% 22.58%
Based capital
Tier I 3.00% - 5.00% 11.37% 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 $69.91 million
at June 30, 1997, reflecting an increase of $1.70 million, or 2.49%, over the
$68.21 million at December 31, 1996. This growth was primarily attributable
to an increase in loans outstanding, funded in part, 44.39%, by the proceeds
from the growth in deposit accounts, proceeds from repayments and maturities
of investment securities, and minor reductions 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 $1.42 million between
December 31, 1996, and June 30, 1997. The primary changes were a decrease in
cash and cash equivalents from $4.69 million at December 31, 1996, to $4.34
million at June 30, 1997, and a decrease in investment securities from $20.85
million at December 31, 1996, to $19.79 million at June 30, 1997.
-8-
<PAGE>
Loans Receivable. Net loans receivable equaled $44.04 million at June 30,
1997, compared to $43.05 million at March 31, 1997 and to $40.96 million at
December 31, 1996, an increase of 2.30%in the latest quarter, 5.09% in the
first quarter, and 7.52% for the six-months ended June 30, 1997. The demand
for mortgage and commercial loans continues to be strong. Average total loans
outstanding for the three-month period ended June 30, 1997, equaled $41.78
million, compared to $38.74 million for the same three-month period ended June
30, 1996, which represents an increase of $3.04 million, or 7.85%.
Approximately 64.61% of this increase was experienced in the mortgage loan
portfolio. Management is continuing to emphasize local lending to qualified
borrowers.
Deposits. Total deposits decreased by $1.08 million, or 1.76%, during
the second three months of 1997. Overall deposits increased by $1.27 million,
or 2.12% during the six-month period ended June 30, 1997. Total time deposits
increased by $1.19 million, or 4.11%, while demand and savings deposits
increased a net amount of $86,000, or 0.28%, during the six-month period ended
June 30, 1997.
At June 30, 1997, advances totaled $200,000. Liabilities other than
deposits and FHLB advances decreased by $53,000 in the three-month period
ended June 30, 1997. Such decrease was primarily attributed to the accrual
for current period income taxes. The Company has begun utilizing advances
from the Federal Home Loan Bank (FHLB) as a source of funds.
Results of Operations
General. The Corporation recorded a consolidated net income of $196,000
for the three- month period ended June 30, 1997, compared to $164,000 for the
same quarter in 1996. Year-to-date net income was $403,000 for the six-month
period ended June 30, 1997 , as compared to $356,000 for the same period in
1996.
Three Months Ended June 30, 1997, Compared to Three Months Ended June 30, 1996
Net Interest Income. The Corporation's net interest income for the three
months ended June 30, 1997, increased by 5.80%, from $759,000, to $803,000,
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 4.91% for the three months ended June 30, 1996, to
4.70% 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 28 basis points, to 3.98%. Average
loans outstanding increased by $5.08 million as compared to 1996, which
contributed approximately $118,000 to the net interest income, while the
change in average yield on loans outstanding decreased the net interest income
by approximately $11,000.
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.
-9-
<PAGE>
Management determined that additional provisions to the allowance for
loan loss account were not necessary during the quarter ended June 30, 1997,
due to the net recoveries on loans previously charged-off of $2,000 during the
three months ended June 30, 1997.
Noninterest Income and Expense. Noninterest income was $85,000 for the
three months ended June 30, 1997, compared to $80,000, for the same period in
1996. This increase was a result of the $13,000 decrease in service charge
income on deposit accounts being offset by other fee income increasing
$18,000. Noninterest expense increased by $25,000 for the three months ended
June 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, corporate franchise tax and other miscellaneous operating
expenses.
Six Months Ended June 30, 1997, Compared to Six Months Ended June 30, 1996
Net Interest Income. The Corporation's net interest income for the six
months ended June 30, 1997, increased by 4.40%, from $1.50 million to $1.57
million, 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 4.79% for the six months ended June 30, 1996,
to 4.70% 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 several basis points, to 3.98%.
Average loans outstanding increased by $3.82 million as compared to 1996,
which contributed approximately $178,000 to the net interest income, while the
change in average yield on loans outstanding decreased the net interest income
by approximately $19,000.
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 June 30, 1997,
due to the net recoveries on loans previously charged-off of $141,000 during
the six months ended June 30, 1997.
Noninterest Income and Expense. Noninterest income was $159,000 for the
six months ended June 30, 1997, compared to $161,000, for the same period in
1996. This decrease was a result of the $22,000 decrease in service charge
income on deposit accounts being offset by recognized investment security
gains of $2,000 and increases realized from other service charges and fee
income. Noninterest expense increased by $44,000 for the six months ended
June 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, corporate franchise tax and other miscellaneous operating
expenses.
- -10-
<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
On May 14, 1997 the Company held its annual meeting
of Shareholders and approved the following:
a. Elected three (3) Class II directors to the Board of
Directors for terms of three (3) years and until their
successors are elected and qualified.
b. Ratified the appointment of the Company's Independent
Accountants for the fiscal year ending December 31, 1997.
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 June 30, 1997.
- -11-
<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 August 12, 1997 /s/ Marion Layman
__________________________ _______________________________________
Marion Layman
Chairman, President, and
Chief Executive Officer
Date August 12, 1997 /s/ Joseph R. Hirzel
__________________________ ______________________________________
Joseph R. Hirzel
Secretary and Treasurer
- -12-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLI-
DATED BALANCE SHEETS AS OF JUNE 30,1997 & DECEMBER 31,1996,& THE RELATED CONSOLI
- -DATED STATEMENTS OF INCOME FOR THE THREE & SIX MONTHS ENDED JUNE 30,1997 & 1996,
& THE CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS ENDED JUNE 30, 1997 &
1996,& IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000720912
<NAME> EXCHANGE BANCSHARES,INC.
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,668
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,668
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,841
<INVESTMENTS-CARRYING> 2,950
<INVESTMENTS-MARKET> 2,631
<LOANS> 44,686
<ALLOWANCE> (648)
<TOTAL-ASSETS> 69,906
<DEPOSITS> 61,432
<SHORT-TERM> 0
<LIABILITIES-OTHER> 184
<LONG-TERM> 200
0
0
<COMMON> 2,498
<OTHER-SE> 5,592
<TOTAL-LIABILITIES-AND-EQUITY> 69,906
<INTEREST-LOAN> 1,040
<INTEREST-INVEST> 305
<INTEREST-OTHER> 35
<INTEREST-TOTAL> 1,380
<INTEREST-DEPOSIT> 576
<INTEREST-EXPENSE> 1
<INTEREST-INCOME-NET> 803
<LOAN-LOSSES> 0
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<EXPENSE-OTHER> 606
<INCOME-PRETAX> 282
<INCOME-PRE-EXTRAORDINARY> 196
<EXTRAORDINARY> 0
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<NET-INCOME> 196
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
<YIELD-ACTUAL> 4.70
<LOANS-NON> 77
<LOANS-PAST> 499
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<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (646)
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<RECOVERIES> (9)
<ALLOWANCE-CLOSE> (648)
<ALLOWANCE-DOMESTIC> (648)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (360)
</TABLE>
