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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
OR
[ ] 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: 0-23636
EXCHANGE NATIONAL BANCSHARES, INC.
(Name of small business issuer in its charter)
MISSOURI 43-1626350
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
132 EAST HIGH STREET, JEFFERSON CITY, MISSOURI 65101
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (573) 761-6100
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
None N/A
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
Common Stock, par value $1.00 per share
(Title of Class)
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[ ]
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN
RESPONSE TO ITEM 405 OF REGULATION S-B CONTAINED IN THIS FORM,
AND NO DISCLOSURE WILL BE CONTAINED, TO THE BEST OF REGISTRANT'S
KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY
AMENDMENT TO THIS FORM 10-KSB. [X]
STATE ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR:
$22,068,701.
THE AGGREGATE MARKET VALUE OF THE 551,865 SHARES OF VOTING
STOCK OF THE ISSUER HELD BY NON-AFFILIATES COMPUTED BY REFERENCE
TO THE AVERAGE BID AND ASKED PRICES OF SUCH STOCK ON MARCH 17,
1997, IS $25,937,655. AS OF MARCH 17, 1997, THE ISSUER HAD
718,511 SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE,
OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference into the indicated parts of this report: (1) 1996
Annual Report to Shareholders - Part II and (2) definitive Proxy
Statement for the 1997 Annual Meeting of Shareholders to be filed
with the Commission pursuant to Regulation 14A - Part III.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: YES[ ] NO[X]
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<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Exchange National Bancshares, Inc. ("Bancshares" or the
"Company") is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "BHC Act").
Although Bancshares was incorporated under the laws of the State
of Missouri on October 23, 1992, it did not engage in any
business activity until April 7, 1993. On that date, it acquired
all of the issued and outstanding capital stock of The Exchange
National Bank of Jefferson City, a national banking association
(the "Bank") pursuant to a corporate reorganization involving an
exchange of shares. The Company's activities currently are
limited to ownership of the outstanding capital stock of the
Bank. Except as otherwise provided herein, references herein to
"Bancshares" or the "Company" include Bancshares and its consol-
idated subsidiary.
The Company's principal executive offices are located at 132
East High Street, Jefferson City, Missouri 65101, and its
telephone number is (573) 761-6100.
DESCRIPTION OF BUSINESS
BANCSHARES. Bancshares is a bank holding company registered
under the Holding Company Act. The Company's activities
currently are limited to ownership of the outstanding capital
stock of the Bank. In addition to ownership of the Bank,
Bancshares could seek expansion through acquisition and may
engage in those activities (such as investments in banks or
operations closely related to banking) in which it is permitted
to engage under applicable law. It is not currently anticipated
that Bancshares will engage in any business other than that
directly related to its ownership of the Bank or other financial
institutions.
THE BANK. The Bank, located in Jefferson City, Missouri,
was founded in 1865. The Bank is the oldest bank in Cole County,
and became a national bank in 1927. The Bank has four banking
offices; its principal office at 132 East High Street in
Jefferson City's central business district, a facility at 217
West Dunklin near the city's south side business district, a
facility at 3701 West Truman Boulevard adjacent to the Capitol
Mall Shopping Center, and a facility at 800 Eastland Drive near
the city's east side business district. See "Item 2.
Description of Property".
The Bank is a full service bank conducting a general banking
and trust business, offering its customers checking and savings
accounts, debit cards, certificates of deposit, trust services,
safety deposit boxes and a wide range of lending services,
including credit card accounts, commercial and industrial loans,
single payment personal loans, installment loans and commercial
and residential real estate loans.
The Bank's deposit accounts are insured by the Federal
Deposit Insurance Corporation (the "FDIC") to the extent provided
by law, and it is a member of the Federal Reserve System. The
Bank's operations are supervised and regulated by the Office of
the Comptroller of the <PAGE> Currency (the "OCC"), the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board") and the FDIC. A periodic examination of the Bank is
conducted by representatives of the OCC. Such regulations,
supervision and examinations are principally for the benefit of
depositors, rather than for the benefit of the holders of the
Bank's common stock. See "Regulation Applicable to Bancshares"
and "Regulation Applicable to the Bank".
EMPLOYEES
As of December 31, 1996, Bancshares and the Bank had
approximately 98 full-time and 19 part-time employees. None of
its employees is presently represented by any union or collective
bargaining group, and the Company considers its employee
relations to be satisfactory.
COMPETITION
The Bank experiences substantial competition for deposits
and loans within both its primary service area of Jefferson City
and its secondary service area of the nearby communities in Cole
County. The Bank's competitors include other commercial banks,
savings and loan associations, savings banks, credit unions and
money market mutual funds. Savings and loan associations and
credit unions now have the authority to offer checking accounts
and to make corporate and agricultural loans and were granted
expanded investment authority by recent federal regulations. As
a result, these thrift institutions are expected to continue to
offer increased competition to commercial banks in the future.
In addition, large national and multinational corporations have
in recent years become increasingly visible in offering a broad
range of financial services to all types of commercial and
consumer customers.
The Bank's principal competition for deposits and loans
comes from four other banks within its primary service area of
Jefferson City and, to an increasing extent, six other banks in
nearby communities. Based on publicly available information,
management believes that the Bank is the second largest (in terms
of deposits) of the banks within Cole County, behind only Central
Trust Bank. The main competition for the Bank's trust services
is from other commercial banks, and in particular Central Trust
Bank.
REGULATION APPLICABLE TO BANCSHARES
GENERAL. Bancshares is a registered bank holding company
within the meaning of the BHC Act, subject to the supervision of
the Federal Reserve Board. Bancshares is required to file with
the Federal Reserve Board an annual report and such other
additional information as the Federal Reserve Board may require
pursuant to the BHC Act. Also, the Federal Reserve Board
periodically examines Bancshares. The Federal Reserve Board has
authority to issue cease and desist orders against bank holding
companies if it determines that their actions represent unsafe
and unsound practices or violations of law. In addition, the
Federal Reserve Board is empowered to impose substantial civil
money penalties for violations of certain banking statutes and
regulations. Regulation by the Federal Reserve Board is intended
to protect depositors of the Bank, not shareholders of
Bancshares.
<PAGE>
SOURCE OF STRENGTH. Federal Reserve Board policy requires a
bank holding company to serve as a source of financial and
managerial strength to its subsidiary banks. Under this policy,
a bank holding company is expected to stand ready to use its
available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity,
and to maintain resources and the capacity to raise capital which
it can commit to its subsidiary banks. It is the Federal Reserve
Board's position that the failure of a bank holding company to
serve as a source of strength to a distressed subsidiary bank is
an unsafe and unsound banking practice. This has become known as
the "source of strength doctrine." It is not clear whether the
source of strength doctrine is legally enforceable by the Federal
Reserve Board.
LIMITATION ON ACQUISITIONS. The BHC Act requires every bank
holding company to obtain the prior approval of the Federal
Reserve Board before (i) taking any action that causes a bank to
become a controlled subsidiary of the bank holding company, (ii)
acquiring direct or indirect ownership or control of voting
shares of any bank or bank holding company, if the acquisition
results in the acquiring bank holding company having control of
more than 5% of the outstanding shares of any class of voting
securities of such bank or holding company and such bank or bank
holding company is not majority-owned by the acquiring bank
holding company prior to the acquisition, (iii) the acquisition
by a bank holding company or any nonbank subsidiary thereof of
all or substantially all of the assets of a bank, or (iv) a
merger or consolidation with another bank holding company.
In determining whether to approve a proposed acquisition,
merger or consolidation, the Federal Reserve Board is required to
take into account the competitive effects of the proposed
acquisition, the convenience and needs of the community to be
served, and the financial and managerial resources and future
prospects of the bank holding companies and banks concerned. If
a proposed acquisition, merger or consolidation might have the
effect in any section of the United States to substantially
lessen competition or to tend to create a monopoly, or if such
proposed acquisition, merger, or consolidation otherwise would be
in restraint of trade, then the Federal Reserve Board may not
approve it unless it finds that the anticompetitive effects are
clearly outweighed in the public interest by the probable effect
of the proposed transaction in meeting the convenience and needs
of the community to be served. Bancshares has no current plans
to acquire any interest in the voting stock or assets of any bank
or other financial institution, although such an acquisition may
be considered in the future.
LIMITATION ON CERTAIN ACTIVITIES. The BHC Act also
prohibits a bank holding company, with certain exceptions, from
engaging in, and from acquiring direct or indirect ownership or
control of the voting shares or assets of any company engaged in,
any activity other than banking or managing or controlling banks,
and any activity which the Federal Reserve Board determines to be
so closely related to banking, or managing or controlling banks,
as to be a proper incident thereto. In acting on an application
to engage in such an activity, the Federal Reserve Board is
required to weigh the expected benefits to the public, such as
greater convenience, increased competition or gains in
efficiency, against the risks of possible adverse effects, such
as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
This consideration includes an evaluation of the financial and
managerial <PAGE> resources of the applicant, including its
subsidiaries, and any company to be acquired, and the effect of
the proposed transaction on those resources.
To date, the Federal Reserve Board, by regulation, has
determined that, subject to expressed limitations, certain
activities are permissible for bank holding companies and their
subsidiaries and may be engaged in upon notice to the Federal
Reserve Board without prior approval. These permissible
activities include furnishing or providing services for the
internal operations of the bank holding company and its
subsidiaries, operating a safe deposit business, making and
servicing loans, operating an industrial bank, performing certain
trust company functions, acting as an investment or financial
advisor in certain capacities, leasing certain real or personal
property, making certain investments to promote community
development, providing certain data processing services,
performing certain insurance agency and underwriting functions,
owning, controlling and operating a savings association,
providing specified courier services, providing management
consulting advice to nonaffiliated banks and nonbank depository
institutions, selling certain money orders, United States savings
bonds and traveler's checks, performing appraisals of real and
personal property, arranging certain commercial real estate
equity financing, providing securities brokerage services,
underwriting and dealing in certain government obligations and
money market instruments, providing foreign exchange advisory and
transactional services, acting as a futures commission merchant,
providing investment advice on financial futures and options on
futures, providing consumer financial counseling, providing tax
planning and preparation services, providing certain check
guaranty services, operating a collection agency and operating a
credit bureau.
The Federal Reserve Board also has determined that certain
other activities, including real estate brokerage and
syndication, land development, property management, management
consulting, underwriting of life insurance not sold in connection
with a credit transaction, and insurance premium funding, are
improper activities for bank holding companies and their
subsidiaries. In the future the Federal Reserve Board may take
additional actions, adding and refusing to add particular
activities to the list of activities that the Federal Reserve
Board deems to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Certain
bank holding companies and their subsidiaries possess
"grandfather rights" giving them authority to engage in one or
more of the activities which are not generally permissible
because they were engaged in such activities prior to the
adoption of legislation restricting such activities.
Under cross-guaranty provisions of the Federal Deposit
Insurance Act (the "FDIA"), bank subsidiaries of a bank holding
company are liable for any loss incurred (or reasonably
anticipated to be incurred) by the Bank Insurance Fund (the
"BIF"), the federal deposit insurance fund for banks, in
connection with the failure of any other bank subsidiary of the
bank holding company. Liability under such cross-guaranty would
be junior to deposit liabilities and most secured obligations,
but senior to obligations to shareholders and most obligations to
affiliates. The FDIC has authority to prospectively waive the
cross-guaranty provision. Currently the Bank is the only
subsidiary of Bancshares.
<PAGE>
A bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with
the extension of credit or the lease or sale of any property or
the furnishing of services. Subsidiary banks of a bank holding
company are also subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to the bank
holding company or any of its subsidiaries, or investment in the
stock or other securities thereof, and on the taking of such
stocks or securities as collateral for loans.
REGULATORY CAPITAL REQUIREMENTS. The Federal Reserve Board
has promulgated "capital adequacy guidelines" for use in its
examination and supervision of bank holding companies. A holding
company's ability to pay dividends and expand its business
through the acquisition of new banking subsidiaries can be
restricted if its capital falls below levels established by these
guidelines. In addition, holding companies whose capital falls
below specified levels can be required to implement a plan to
increase capital.
The Federal Reserve Board's capital adequacy guidelines
provide for the following types of capital: Tier 1 capital (also
referred to as core capital), Tier 2 capital (also referred to as
supplementary capital), Tier 3 capital (consisting of short-term
subordinated debt that meets certain conditions and used only in
the measure of market risk, as discussed below) and Total
capital. A bank holding company's Tier 1 capital generally
includes the following elements: common shareholders' equity,
qualifying noncumulative perpetual preferred stock and related
surplus, qualifying cumulative perpetual preferred stock and
related surplus (limited to a maximum of 25% of Tier 1 capital
elements) and minority interests in the equity accounts of
consolidated subsidiaries. Goodwill is generally excluded from
Tier 1 capital. Most intangible assets are also deducted from
Tier 1 capital. A bank holding company's Tier 2 capital
generally includes allowances for loan and lease losses (limited
to 1.25% of risk-weighted assets), most perpetual preferred stock
and any related surplus (noncumulative and cumulative, without
percentage limits), certain hybrid capital instruments, perpetual
debt and mandatory convertible debt securities, and certain
intermediate-term preferred stock and intermediate-term
subordinated debt instruments (to a maximum of 50% of Tier 1
capital excluding goodwill, but phased-out as the instrument
matures). The maximum amount of supplementary capital that
qualifies as Tier 2 capital is limited to 100% of Tier 1 capital
(net of goodwill). For purposes of calculating the total
risk-based capital ratio, Total capital generally includes Tier 1
capital, plus qualifying Tier 2 capital, minus investments in
unconsolidated subsidiaries, reciprocal holdings of bank holding
company capital securities, certain deferred tax assets and other
deductions as determined by the Federal Reserve Board.
The Federal Reserve Board issued a regulation which limits
the amount of intangible assets which may be included in Tier 1
capital. Under the regulation, mortgage servicing rights
("MSRs") and purchased credit card relationships ("PCCRs") are
included in Tier 1 capital to the extent that, in the aggregate,
they do not exceed 50% of Tier 1 capital and, to the further
extent that PCCRs, individually, do not exceed 25% of Tier 1
capital. MSRs and PCCRs in excess of these limits, as well as
core deposit intangibles ("CDI") and all other identified
intangible assets, must be deducted in determining Tier 1
capital. As of December 31, 1996, Bancshares did not have MSRs,
PCCRs or CDIs and had $53,334 in other identified intangible
assets.
<PAGE>
The Federal Reserve Board's capital adequacy guidelines
require a bank holding company to satisfy a Tier 1 Leverage
Ratio, a total risk-based capital ratio and a Tier 1 risk-based
capital ratio. Under the Tier 1 Leverage Ratio capital
guideline, a bank holding company must have and maintain Tier 1
capital in an amount equal to at least 3.0% of its average total
consolidated assets. In general, average total consolidated
assets means the quarterly average total assets (net of the
allowance for loan and lease losses) reported on a bank holding
company's Consolidated Financial Statements (FR Y-9C Report),
minus goodwill and any other intangible assets or investments in
subsidiaries which are deducted from Tier 1 capital. The 3.0%
minimum Tier 1 Leverage Ratio is considered the absolute minimum
amount of Tier 1 capital which the most highly rated bank holding
companies (those rated composite 1 under the BOPEC rating system
for bank holding companies) is required to maintain. All other
bank holding companies must maintain a minimum Tier 1 Leverage
Ratio of 3.0% plus an additional cushion of at least 100 to 200
basis points.
Under the Federal Reserve Board's capital adequacy
guidelines, a bank holding company must have and maintain a ratio
of Total capital to risk-weighted assets of 8.00%, and a ratio of
Tier 1 capital to risk-weighted assets of 4%. The amount of a
bank holding company's risk-weighted assets is determined by
multiplying the balance sheet amount of each of the bank holding
company's consolidated assets by a specified risk-weight factor
of 0%, 20%, 50% or 100%, in accordance with the relative risk
level of the asset. In determining risk-weighted assets,
off-balance sheet items, such as standby letters of credit, are
converted to an on-balance sheet credit equivalent amount by
multiplying the face amount of the off-balance sheet item by a
credit conversion factor of 0%, 20%, 50% or 100%, in accordance
with the probability that the off-balance sheet item will become
a credit extended by the bank holding company. In general,
intangible assets and other assets which are deducted in
determining Tier 1 capital and Total capital may also be excluded
from risk-weighted assets.
The Federal Reserve Board has proposed to permit portions of
claims (including repurchase agreements) collateralized by cash
on deposit with the lending institution or by securities issued
or guaranteed by the U.S. Treasury, U.S. government agencies, or
the central governments in other OECD countries to be eligible
for a zero percent risk weight. The effect of this proposal is
to allow banks and bank holding companies to hold less capital
for these types of collateralized transactions.
On September 6, 1996, the Federal Reserve Board, amended its
credit risk-based capital standards to incorporate a measure for
market risk to cover all positions located in an institution's
trading account and foreign exchange and commodity positions
wherever located. The new regulation applies to any bank or bank
holding company (i) whose trading activity equals 10% or more of
its total assets or (ii) whose trading activity equals $1 billion
or more. By January 1, 1998, each of these institutions must use
its own internal value-at-risk model to measure its exposure to
market risk and hold capital in support of that exposure. The
regulation does not mandate a standardized approach for measuring
general market risk. However, the regulation retains the
standardized approach methodologies for determining capital
charges for specific risk, which an institution must use as its
basis for its specific risk charge for debt and equity positions
in its trading account. The regulation supplements the existing
credit risk-based capital standards <PAGE> by requiring an affected
institution to adjust its risk-based capital ratio to reflect
market risk. In measuring market risk, institutions may use Tier
3 capital to meet the market risk capital requirements. Tier 3
capital is subordinated debt that is unsecured, fully paid up,
has an original maturity of at least 2 years, is not redeemable
before maturity without the prior approval of the institution's
supervisor, is subject to a lock-in clause that prevents the
issuer from repaying the debt even at maturity if the issuer's
capital ratio is, or with repayment, would become, less than the
minimum 8% risk-based capital ratio, and does not contain and is
not covered by any covenants, terms or restrictions that may be
inconsistent with safe and sound banking practices.
On December 31, 1996, Bancshares was in compliance with all
of the Federal Reserve Board's capital guidelines. On such date,
Bancshares had a Tier 1 leverage ratio of 14.45% (compared with a
minimum requirement of 3%), a ratio of total capital to
risk-weighted assets of 23.14% (compared with a minimum
requirement of 8%) and a ratio of Tier 1 capital to
risk-weighted assets of 21.89% (compared with a minimum
requirement of 4%).
INTERSTATE BANKING AND BRANCHING. Under the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal Act"), bank holding companies are permitted to
acquire the stock or substantially all of the assets of banks
located in any state regardless of whether such transaction is
prohibited under the laws of any state. The Federal Reserve
Board, however, may not approve an interstate acquisition if as a
result of the acquisition the bank holding company would control
more than 10% of the total amount of insured deposits in the
United States or would control more than 30% of the insured
deposits in the home state of the acquired bank. The 30% of
insured deposits state limit does not apply if the acquisition is
the initial entry into a state by a bank holding company or if
the home state waives such limit.
Under the Riegle-Neal Act, individual states may restrict
interstate acquisitions in two ways. First, a state may prohibit
an out-of-state bank holding company from acquiring a bank
located in the state unless the target bank has been in existence
for a specified minimum period of time (not to exceed five
years). Second, a state may establish limits on the total amount
of insured deposits within the state which are controlled by a
single bank holding company (a "deposit cap"), provided that such
deposit limit does not discriminate against out-of-state bank
holding companies. Missouri prohibits bank holding companies
which did not have a subsidiary bank in Missouri on January 1,
1995 from acquiring any bank or bank holding company in Missouri
which is less than five years old. Missouri currently has a
statewide deposit cap of 13%.
The Riegle-Neal Act now permits affiliated banks in
different states to act as agents for each other for purposes of
receiving deposits, renewing time deposits, closing loans,
servicing loans and receiving payments on loans and other
obligations. A bank acting as an agent for an affiliated bank is
not considered a branch of the affiliated bank.
Beginning on June 1, 1997, the Riegle-Neal Act authorizes
interstate branching by a merger of banks with different home
states which results in a single bank with branches in both
states. The Riegle-Neal Act gives states the right to "opt out"
and prohibit interstate mergers by passing legislation before
June 1, 1997 that expressly prohibits all merger transactions
with <PAGE> out-of-state banks. The Riegle-Neal Act also gives states
the right to "opt in" and authorize early interstate mergers by
passing legislation that expressly permits interstate merger
transactions with all out-of-state banks. The Riegle-Neal Act
authorizes banks to establish and operate de novo branches in a
state (other than the bank's home state) only if the host state
"opts in" to authorize de novo interstate banking by passing
legislation that expressly permits all out-of-state banks to
establish de novo branches in the state. As of March 1, 1997,
approximately 44 states had acted on the Riegle-Neal Act. Only
one state, Texas, has opted out. Of the eight states contiguous
with Missouri's borders, Arkansas, Illinois, Iowa, Kentucky,
Oklahoma and Tennessee have opted in, and Kansas and Nebraska
have not acted. As of March 1, 1997, Missouri had not acted,
however a bill had been introduced to the Missouri state
legislature to "opt out." If no action is taken by the state
legislature by June 1, 1997, interstate branching by merger of
banks will be permitted in Missouri under the provisions of the
Riegle-Neal Act.
In 1995, both Missouri and Kansas enacted legislation which
permits its state banks located within thirty (30) miles of the
state's border to relocate their charter to the neighboring
state. The legislation requires reciprocal authority by the
"receiving" state. As of March 1, 1997, of the eight states
contiguous with Missouri's borders, only Kansas has enacted such
a reciprocal statute. As of March 1, 1997, three Kansas banks
have relocated their charters to Missouri and one Missouri bank
has relocated its charter to Kansas. As both states permit
"statewide" branching, a bank with a branch in each of Missouri
and Kansas is permitted to establish, upon prior approval of the
respective state banking authority, a branch located anywhere in
each of the two states. After June 1, 1997, this statute may no
longer be used to accomplish a de novo interstate bank in
Missouri.
MISSOURI BHC REGULATION. Under Missouri law, a bank holding
company is prohibited from acquiring control over a bank or trust
company which has its principal banking office in Missouri if
such acquisition would cause the aggregate deposits held by all
banks and trust companies in which such bank holding company has
an interest to exceed 13% of the total deposits of banking and
savings institutions in Missouri. Further, an acquisition by a
bank holding company of control of a bank or trust company which
has its principal banking office in Missouri requires approval of
the Missouri Commissioner of Finance. Neither such limitation
applies, however, in situations where the acquisition was
requested by the Missouri Commissioner of Finance, the FDIC or
the Federal Reserve Board in order to protect the public interest
against the failure or probable failure of a bank or trust
company.
REGULATION APPLICABLE TO THE BANK
GENERAL. As a national bank, the Bank is subject to
regulation and examination primarily by the OCC. The Bank is
also regulated by the Federal Reserve Board and the FDIC.
Regulation by these agencies is designed to protect depositors of
the Bank rather than shareholders of Bancshares. The OCC has the
authority to issue cease and desist orders if it determines that
activities of the Bank represent unsafe and unsound banking
practices or violations of law. In addition, the OCC is
empowered to impose substantial civil money penalties for
violations of banking statutes and regulations.
<PAGE>
REGULATORY CAPITAL REQUIREMENTS. The OCC has adopted
minimum capital requirements applicable to national banks which
are substantially similar to the capital adequacy guidelines
established by the Federal Reserve Board for bank holding
companies. There are, however, technical differences in the
methodologies used to calculate the capital ratios.
On December 31, 1996, the Bank was in compliance with all of
the OCC's minimum capital requirements. On such date the Bank
had a Tier 1 Leverage Ratio of 14.42% (compared with a minimum
requirement of 3%), a ratio of Total capital to risk-weighted
assets of 23.01% (compared with a minimum requirement of 8%), and
a ratio of Tier 1 capital to risk-weighted assets of 21.77%
(compared with a minimum requirement of 4%).
CLASSIFICATION OF BANKS. Federal banking laws classify
financial institutions in one of the following five categories,
depending upon the amount of their capital: well-capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. Under OCC
regulations, a bank is deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10% or greater, a Tier 1
risk-based capital ratio of 6% or greater and a Tier 1 leverage
ratio of 5% or greater (and is not subject to any order or
written directive specifying any higher capital ratio), (ii)
"adequately capitalized" if it has a total risk-based capital
ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4%
or greater and a Tier 1 leverage ratio of 4% or greater (or a
Tier 1 leverage ratio of 3% or greater, if the bank has a CAMEL
rating of 1), (iii) "undercapitalized" if it has a total
risk-based capital ratio that is less than 8%, a Tier 1
risk-based capital ratio that is less than 4% or a Tier 1
leverage ratio that is less than 4% (or a Tier 1 leverage ratio
that is less than 3%, if the bank has a CAMEL rating of 1), (iv)
"significantly undercapitalized" if it has a total risk-based
capital ratio that is less than 6%, a Tier 1 risk based capital
ratio that is less than 3% or a Tier 1 leverage ratio that is
less than 3%, and (v) "critically undercapitalized" if it has a
Tier 1 leverage ratio that is equal to or less than 2%. Federal
banking laws require the federal regulatory agencies to take
prompt corrective action against undercapitalized financial
institutions. Under OCC regulations, the Bank was a well
capitalized institution as of December 31, 1996.
Federal banking laws provide that if an insured depository
institution receives a less than satisfactory examination rating
for asset quality, management, earnings or liquidity, the
examining agency may deem such financial institution to be
engaging in an unsafe or unsound practice. The potential
consequences of being found to have engaged in an unsafe or
unsound practice are significant, because the appropriate federal
regulatory agency may: (i) if the financial institution is
well-capitalized, reclassify the financial institution as
adequately capitalized; (ii) if the financial institution is
adequately capitalized, take any of the prompt corrective actions
authorized for undercapitalized financial institutions and impose
restrictions on capital distributions and management fees; and
(iii) if the financial institution is undercapitalized, take any
of the prompt corrective actions authorized for significantly
undercapitalized financial institutions.
DEPOSIT INSURANCE AND ASSESSMENTS. The deposits of the Bank
are insured by the BIF administered by the FDIC, in general, to a
maximum of $100,000 per insured depositor. Under federal banking
regulations, the Bank is required to pay annual assessments to
the FDIC for <PAGE> deposit insurance. The FDIC has adopted a
risk-based assessment system. Under the risk-based assessment
system, BIF members pay varying assessment rates depending upon
the level of the institution's capital and the degree of
supervisory concern over the institution. The assessment rates
are set by the FDIC semiannually. The FDIC's assessment rates
through June 30, 1997 range from zero (0) cents to 27 cents per
$100 of insured deposits and thereafter will range from 4 cents
to 31 cents per $100 of insured deposits. Institutions
qualifying for the $0 assessment rate are no longer required to
pay the minimum deposit premium payment of $2,000 annually. As
of January 1, 1997, the Bank's assessment rate was zero (0) cents
per $100 of insured deposits. The FDIC has authority to increase
the annual assessment rate if it determines that a higher
assessment rate is necessary to increase BIF's reserve ratio.
There is no cap on the annual assessment rate which the FDIC may
impose.
In addition to any assessments that may be imposed by the
FDIC as described above, the Deposit Insurance Funds Act of 1996
provides for the imposition of annual assessments by the
Financing Corporation on Savings Association Insurance
Fund-assessable deposits and BIF-assessable deposits. These
assessments are scheduled to remain in effect from January 1,
1997 through December 31, 1999. As of January 1, 1997, the
annual assessment rate applicable to the Bank was approximately
1.296 basis points of its assessable deposits.
INTEREST RATES. The rate of interest a bank may charge on
certain classes of loans is limited by state and federal law. At
certain times in the past, these limitations, in conjunction with
national monetary and fiscal policies that affect the interest
rates paid by banks on deposits and borrowings, have resulted in
reductions of net interest margins on certain classes of loans.
Such circumstances may recur in the future, although the trend of
recent federal and state legislation has been to eliminate
restrictions on the rates of interest which may be charged on
some types of loans and to allow maximum rates on other types of
loans to be determined by market factors.
LOANS TO ONE BORROWER. In addition to limiting the rate of
interest chargeable by banks on certain loans, federal law
imposes additional restrictions on a national bank's lending
activities. For example, under federal law the maximum amount
that a national bank may lend to one borrower (and certain
related entities of such borrower) generally is limited to 15% of
the bank's unimpaired capital and unimpaired surplus, plus an
additional 10% for loans fully secured by readily marketable
collateral. There are certain exceptions to the general rule
including loans fully secured by government securities or deposit
accounts in the bank. As of December 31, 1996, the Bank's
lending limit under this regulation was approximately $6,428,000,
and its current largest loan to one borrower (aggregate loans to
the borrower and its related entities) was approximately
$5,650,000.
PAYMENT OF DIVIDENDS. The National Bank Act restricts the
payment of dividends by a national bank as follows: (i) no
dividends may be paid if the bank has no undivided profits or
retained earnings then on hand; (ii) until the surplus fund of
the bank is equal to its capital stock, no dividends may be
declared unless there has been carried to the surplus fund not
less than one-tenth of the bank's net profits of the preceding
half-year period in the case of quarterly or semiannual
dividends, or not less than one-tenth of the net profits of the
preceding two <PAGE> consecutive half-year periods in the case
of annual dividends; and (iii) the approval of the OCC is required
if dividends declared by the bank in any year would exceed the
total of net profits for that year combined with retained net
profits for the preceding two years, less any required transfers to
surplus. These laws and related regulations are applicable to
the Bank, but are not expected to have a material effect upon the
Bank's current dividend policies.
COMMUNITY REINVESTMENT ACT. On May 4, 1995, the Federal
Reserve Board, the FDIC and the OCC adopted regulations relating
to the Community Reinvestment Act (the "CRA"). The purpose of
the CRA regulations is to establish the framework and criteria by
which the bank regulatory agencies assess an institution's record
of helping to meet the credit needs of its community, including
low- and moderate-income neighborhoods, and to provide that the
agencies' assessment shall be taken into account in reviewing
certain applications. The regulations seek to emphasize an
institution's performance rather than the process, to promote
consistency in evaluation of institutions, and to eliminate
unnecessary reporting burdens. The regulations replace the
previous twelve assessment factors for large banks with three
tests: (i) a lending test, (ii) a service test, and (iii) an
investment test. While documentation requirements have been
substantially reduced, the safe harbors from CRA protest have
also been eliminated.
OTHER REGULATORY LIMITATIONS. Bancshares and the Bank are
"affiliates" within the meaning of the Federal Reserve Act. As
such, the amount of loans or extensions of credit which the Bank
may make to Bancshares or to third parties, secured by securities
or obligations of Bancshares, are substantially limited by the
Federal Reserve Act and the FDIA. Such acts further restrict the
range of permissible transactions between a bank and an
affiliated company. A bank and its subsidiaries may engage in
certain transactions, including loans and purchases of assets,
with an affiliated company only if the terms and conditions of
the transaction, including credit standards, are substantially
the same as, or at least as favorable to the bank as, those
prevailing at the time for comparable transactions with
non-affiliated companies or, in the absence of comparable
transactions, on terms and conditions that would be offered to
non-affiliated companies.
The Bank is also authorized to invest in a service
corporation that can offer the same services as the banking
related services that bank holding companies are authorized to
provide. However, prior regulatory approval must generally be
obtained prior to making such an investment or the performance of
such services.
BANKING ACTIVITIES. The investments and activities of the
Bank are subject to substantial regulation by the OCC and the
FDIC, including without limitation investments in subsidiaries,
investments for their own account (including limitations on
investments in junk bonds and equity securities), investments in
loans, loans to officers, directors and affiliates, security
requirements, truth-in-lending, the types of interest bearing
deposit accounts which they can offer, trust department
operations, brokered deposits, audit requirements, issuance of
securities, branching and mergers and acquisitions.
<PAGE>
MONETARY POLICY AND ECONOMIC CONDITIONS
The principal sources of funds essential to the business of
banks and bank holding companies are deposits, shareholders'
equity and borrowed funds. The availability of these various
sources of funds and other potential sources such as preferred
stock or commercial paper, and the extent to which they are
utilized, depends on many factors, the most important of which
are the monetary policies of the Federal Reserve Board and the
relative costs of different types of funds.
An important function of the Federal Reserve Board is to
regulate the national supply of bank credit in order to combat
recession and curb inflationary pressures. Among the instruments
of monetary policy used by the Federal Reserve Board to implement
these objectives are open market operations in United States
government securities, changes in the discount rate on bank
borrowings and changes in reserve requirements against bank
deposits.
The Bank is subject to regulations issued by the Federal
Reserve Board which require depository institutions to maintain
non-interest bearing reserves against their transaction accounts
and non-personal time deposits. These regulations require
depository institutions to maintain reserves equal to 3% of
transaction accounts up to $49.3 million plus 10% (subject to
adjustment by the Federal Reserve Board between 8% and 14%) of
the total over $49.3 million. In addition, reserves, subject to
adjustment by the Federal Reserve Board between 0% and 9%, must
be maintained on non-personal time deposits. This reserve
percentage is currently 0%. Depository institutions may
designate and exempt up to $4.4 million of reservable liabilities
from the above reserve requirements. Because these reserves must
generally be maintained in cash or non-interest-bearing accounts,
the effect of the reserve requirements is to increase the cost of
funds to depository institutions. As of December 31, 1996, the
Bank was required to maintain a reserve balance of $1.4 million.
Substantially all of the restrictions on the maximum
interest rates banks are permitted to pay on deposits have been
removed, although banks are still prohibited from paying interest
on demand deposits. Consequently, banks and thrift organizations
are substantially free to pay interest at any rate. Deregulation
has increased competition among such institutions for attracting
deposits and has resulted in an overall increase in such
institutions' cost of funds.
The monetary policies of the Federal Reserve Board have had
a significant effect on the operating results of commercial banks
in the past and are expected to continue to do so in the future.
In view of the continuing changes in regulations affecting
commercial banks and other actions and proposed actions by the
Federal government and its monetary and fiscal authorities,
including proposed changes in the structure of banking in the
United States and general economic conditions, no prediction can
be made as to future changes in interest rates, credit
availability, deposit levels, loan demand or the overall
performance of banks generally and the Bank and Bancshares in
particular.
<PAGE>
The references in the foregoing discussion to various
aspects of statutes and regulation are merely summaries which do
not purport to be complete and which are qualified in their
entirety by reference to the actual statutes and regulations.
ITEM 2. DESCRIPTION OF PROPERTY.
Bancshares neither owns nor leases any property.
The principal offices of both Bancshares and the Bank are
located at 132 East High Street in the central business district
of Jefferson City, Missouri. The building, which is owned by the
Bank, is a three-story structure constructed in 1927. It has
approximately 14,000 square feet of usable office space, all of
which is currently used for the Bank's operations. Although
management believes that the condition of this building presently
is minimally adequate for the Bank's business, management has
determined that it is necessary to expand this facility
significantly in order to better serve the Bank's customers. It
is anticipated that the cost of this facilities expansion will
not exceed $4,000,000 and that work on this facilities expansion
will begin in April 1997 and continue into 1998. Management
believes that this facility is adequately covered by insurance.
The Bank also owns a branch banking facility at 3701 West
Truman Boulevard in Jefferson City. This facility has
approximately 21,000 square feet of usable office space, all of
which is used for Bank operations, and has full drive-in
facilities. The Bank also owns a second branch banking facility,
which is located at 217 West Dunklin Street in Jefferson City.
This facility is a one-story building which has approximately
2,400 square feet of usable office space, all of which is used
for Bank operations. In addition, the Bank has established a
branch banking facility at 800 Eastland Drive in Jefferson City.
Management believes that the condition of these banking
facilities presently is adequate for the Bank's business and that
these facilities are adequately covered by insurance.
The Bank invests in all types of real estate mortgages,
including mortgages on single family dwellings, multi-family
dwellings, office buildings, unimproved land and land development
loans. The limits of the Bank's investment in real estate
mortgages is directed by guidelines contained in the Bank's loan
policy. Changes in this policy do not require a vote of the
security holders. The Bank's policy is to invest in real estate
mortgages primarily for income. In regard to investment in real
estate mortgages, the Bank intends to originate and service real
estate mortgages but does not intend to warehouse those mortgages
for possible capital gains. The turnover of the Bank's real
estate mortgage portfolio is greatly dependent upon interest rate
trends but generally turns at a moderate level.
ITEM 3. LEGAL PROCEEDINGS.
Neither Bancshares nor the Bank is not involved in any
material pending legal proceedings, other than routine litigation
incidental to their business.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the holders of the
Company's Common Stock during the fourth quarter of the year
ended December 31, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Pursuant to General Instruction E(2) to Form 10-KSB, the
information required by this Item is incorporated herein by
reference to the information under the caption "Market Price of
and Dividends on Equity Securities and Related Matters" in
Bancshares' 1996 Annual Report to Shareholders.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.
Pursuant to General Instruction E(2) to Form 10-KSB, the
information required by this Item is incorporated herein by
reference to the information under the captions "Selected
Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in
Bancshares' 1996 Annual Report to Shareholders.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
STATEMENTS MADE IN THIS REPORT ON FORM 10-KSB ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS COULD DIFFER
MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION OR
BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW UNDER THE
CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS,
FINANCIAL CONDITION OR BUSINESS," AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL
CONDITION OR BUSINESS
In order to take advantage of the safe harbor provisions for
forward-looking statements contained in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, added to those Acts
by the Private Securities Litigation Reform Act of 1995, the
Company is hereby identifying important risks and uncertainties
that could affect the Company's actual results of operations,
financial condition or business and that could cause the
Company's actual results of operations, financial condition or
business to differ materially from its historical results of
operations, financial condition or <PAGE> business, or the results of
operations, financial condition or business contemplated by
forward-looking statements made herein or elsewhere, orally or in
writing, by, or on behalf of, the Company. Factors that could
cause or contribute to such differences include, but are not
limited to, those factors described below.
ECONOMIC CONDITIONS IN THE COMPANY'S PRIMARY MARKET AREA.
The profitability of the Company is dependant on the
profitability of its subsidiary, The Exchange National Bank of
Jefferson City, which is a national banking association operating
out of central Missouri. The Bank's financial condition is
affected by fluctuations in the economic conditions prevailing in
that portion of Missouri in which the Bank's banking operations
are located. Accordingly, the financial conditions of both the
Bank and the Company would be adversely affected by deterioration
in the general economic and real estate climate in the State of
Missouri. The Bank's business is also subject to fluctuations in
interest rates, national and local economic conditions, monetary
and regulatory policies and consumer and institutional confidence
in the Bank. The fluctuations are neither predictable nor
controllable and may have materially adverse consequences upon
the operations and financial condition of the Bank and the
Company in the future even if other favorable events occur.
IMPORTANCE OF NET INTEREST INCOME AND SUSCEPTIBILITY TO
CHANGES IN INTEREST RATES. The primary source of earnings for
the Bank and the Company is net interest income, which is the
difference between interest and fees earned on loans and other
interest-earning assets, and the interest paid on deposits and
other interest-bearing liabilities. There may be a difference
between the amount of interest-earning assets scheduled to
reprice in any given period and the amount of interest-bearing
liabilities scheduled to reprice over the same time. Any
difference can create a lag between the time it takes the rate
the bank earns interest to respond to market fluctuations and the
time it takes the rate the bank incurs interest costs to respond
to market fluctuations, and vice-versa. Because of these
"interest sensitivity gaps," the amount of net interest income
may be affected by fluctuations in the interest rate.
ASSET QUALITY AND LENDING RISKS. Success in the banking
industry largely depends on the quality of loans and other
assets. The Bank's loan officers are actively encouraged to
identify deteriorating loans. Loans are also monitored and
categorized through an analysis of their payment status. The
Bank's failure to timely and accurately monitor the quality of
its loans and other assets could have a materially adverse effect
on the operations and financial condition of the Bank and the
Company. There is a degree of credit risk associated with any
lending activity. The Company attempts to minimize its credit
risk through loan diversification. Although the Company's loan
portfolio is varied, with no undue concentration in any one
industry, substantially all of the loans in the portfolio have
been made to borrowers in central Missouri. Therefore, the loan
portfolio is susceptible to factors affecting the central
Missouri area and the level of non-performing assets is heavily
dependant upon local conditions. See "Economic Conditions in the
Company's Primary Market Area." There can be no assurance that
the level of the Company's non-performing assets will not
increase above current levels. High levels of non-performing
assets could have a materially adverse effect on the operations
and financial condition of the Bank and the Company.
<PAGE>
PROVISIONS FOR POSSIBLE LOAN LOSSES. The Company makes a
provision for loan losses based upon management's analysis of
potential losses in the loan portfolio and consideration of
prevailing economic conditions. The Company may need to increase
the provision for loan losses through additional provisions in
the future if the financial condition of any of its borrowers
deteriorates or if real estate values decline. See "Asset
Quality and Lending Risks." Furthermore, various regulatory
agencies, as an integral part of their examination process,
periodically review the Company's loan portfolio, provision for
loan losses, and real estate acquired by foreclosure. Such
agencies may require the Company to recognize additions to the
provision for loan losses based on their judgments of information
available to them at the time of the examination. Any additional
provisions for possible loan losses, whether required as a result
of regulatory review or initiated by the Company itself, may
materially alter the financial outlook of the Bank and the
Company.
COMPETITION IN THE COMPANY'S MARKET AREA. The Bank
experiences substantial competition for deposits and loans within
both its primary service area of Jefferson City and its secondary
service area of the nearby communities in Cole County. The
Bank's competitors include other commercial banks, savings and
loan associations, savings banks, credit unions and money market
mutual funds. Savings and loan associations and credit unions
now have the authority to offer checking accounts and to make
corporate and agricultural loans and were granted expanded
investment authority by recent federal regulations. As a result,
these thrift institutions are expected to continue to offer
increased competition to commercial banks in the future. In
addition, large national and multinational corporations have in
recent years become increasingly visible in offering a broad
range of financial services to all types of commercial and
consumer customers. Competition from larger institutions may
increase due to an acceleration of bank mergers and
consolidations in Missouri and the rest of the nation. An
increase in the intensity of competition from other banks in the
central Missouri market could have a materially adverse impact on
the operations and financial condition of the Bank and the
Company.
REGULATION. Banks and bank holding companies such as the
Company are subject to regulation by both federal and state bank
regulatory agencies. The regulations, which are designed to
protect borrowers and promote certain social policies, include
limitations on the operations of banks and bank holding
companies, such as minimum capital requirements and restrictions
on dividend payments. These regulations are not necessarily
designed to maximize the profitability of banking institutions.
Future changes in the banking laws and regulations could have a
materially adverse effect on the operations and financial
condition of the Bank and the Company.
IMPORTANCE OF EXECUTIVE OFFICERS. The success of the Bank
and the Company has been largely dependant on the efforts of
Donald Campbell and the other executive officers. These
individuals are expected to continue to perform their services.
However, the loss of the services of Donald Campbell, or any of
the other key executive officers could have a materially adverse
effect on the Bank and the Company.
<PAGE>
ADDITIONAL FACTORS. Additional risks and uncertainties that
may affect the future results of operations, financial condition
or business of the Bank and the Company include, but are not
limited to: (i) the ability to keep pace with technological
change including developing and implementing technological
advances timely and cost-effectively in order to provide better
service and remain competitive; (ii) adverse publicity, news
coverage by the media, or negative reports by brokerage firms,
industry and financial analysts regarding the Bank or the
Company; and (iii) changes in accounting policies and practices.
ITEM 7. FINANCIAL STATEMENTS.
Pursuant to General Instruction E(2) to Form 10-KSB, the
information required by this Item is incorporated herein by
reference to the report of the independent auditors and the
information under the caption "Consolidated Financial Statements"
in Bancshares' 1996 Annual Report to Shareholders.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Pursuant to General Instruction E(3) to Form 10-KSB, the
information required by this Item is incorporated herein by
reference to (i) the information under the caption "Election of
Directors--The Board of Directors," (ii) the information under
the caption "Election of Directors--Nominees and Directors
Continuing in Office," (iii) the information under the caption
"Executive Officers and Compensation--Executive Officers," and
(iv) the information under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance," in each case, in the
Registrant's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A.
ITEM 10. EXECUTIVE COMPENSATION.
Pursuant to General Instruction E(3) to Form 10-KSB, the
information required by this Item is incorporated herein by
reference to (i) the information under the caption "Executive
Officers and Compensation--Executive Compensation," (ii) the
information under the caption "Executive Officers and
Compensation--Profit-Sharing Trust," (iii) the information under
the caption "Executive Officers and Compensation--Pension Plan,"
and (iv) the information under the caption "Election of
Directors--Compensation of Directors", in each case, in the
Registrant's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Pursuant to General Instruction E(3) to Form 10-KSB, the
information required by this Item is incorporated herein by
reference to the information under the caption "Ownership of
Common Stock" in the Registrant's definitive Proxy Statement for
its 1997 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to General Instruction E(3) to Form 10-KSB, the
information required by this Item is incorporated herein by
reference to the information under the caption "Transactions with
Directors and Officers" in the Registrant's definitive Proxy
Statement for its 1997 Annual Meeting of Shareholders to be filed
pursuant to Regulation 14A.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
1. The following consolidated financial statements of the
Company and reports of the Company's independent
auditors, included in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1996 under
the caption "Consolidated Financial Statements", are
incorporated by reference in Item 7 to this report:
Independent Auditors' Report.
Consolidated Balance Sheets as of December
31, 1996 and 1995.
Consolidated Statements of Income for each of
the years ended December 31, 1996, 1995, and
1994.
Consolidated Statements of Stockholders'
Equity for each of the years ended December
31, 1996, 1995, and 1994.
Consolidated Statements of Cash Flows for
each of the years ended December 31, 1996,
1995, and 1994.
Notes to Consolidated Financial Statements.
2. Exhibits:
Exhibit No. Description
3.1 Articles of Incorporation of the Company (filed as
Exhibit 3(a) to the Company's Registration
Statement on Form S-4 (Registration No. 33-54166)
and incorporated herein by reference).
<PAGE>
3.2 Bylaws of the Company (filed as Exhibit 3(b) to
the Company's Registration Statement on Form S-4
(Registration No. 33-54166) and incorporated
herein by reference).
4 Specimen certificate representing shares of the
Company's $1.00 par value common stock (filed as
Exhibit 4 to the Company's Registration Statement
on Form S-4 (Registration No. 33-54166 and
incorporated herein by reference).
10.1 The Exchange National Bank of Jefferson City
Profit Sharing Trust, as amended and restated
(filed with the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1994 as
Exhibit 10.1 and incorporated herein by
reference).*
10.2 Retirement Plan for Employees of The Exchange
National Bank of Jefferson City, as amended and
restated (executed October 18, 1995) (filed with
the Registrant's Annual Report on Form 10-KSB for
the year ended December 31, 1995 as Exhibit 10.2
and incorporated herein by reference).*
10.3 The Exchange National Bank of Jefferson City
Retirement Trust, as amended and restated (filed
as Exhibit 10(c) to the Company's Registration
Statement on Form S-4 (Registration No. 33-54166)
and incorporated herein by reference).*
10.3.1 Amendment to The Exchange National Bank of Jefferson
City Retirement Trust, dated April 21, 1993 (filed with
the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1993 as Exhibit 10.3.1 and
incorporated herein by reference).*
13 The Registrant's 1996 Annual Report to
Shareholders (only those portions of this Annual
Report to Shareholders which are specifically
incorporated by reference into this Annual Report
on Form 10-KSB shall be deemed to be filed with
the Commission).
21 List of Subsidiaries (filed with the Registrant's
Annual Report on Form 10-KSB for the year ended
December 31, 1993 as Exhibit 21 and incorporated
herein by reference).
27 Financial Data Schedule.
_______________________
* Management contracts or compensatory plans or arrangements
required to be identified by Item 13(a).
<PAGE>
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
EXCHANGE NATIONAL BANCSHARES, INC.
By /s/ Donald L. Campbell
Donald L. Campbell, President
Dated: March 24, 1997
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Date Signature and Title
/s/ Donald L. Campbell
Donald L. Campbell, Chairman of the Board
March 24, 1997 of Directors and Principal Executive Officer
/s/ Carl A. Brandenburg, Sr.
Carl A. Brandenburg, Sr., Principal
Financial Officer and Principal
March 24, 1997 Accounting Officer
/s/ David T. Turner
March 24, 1997 David T. Turner, Director
/s/ James R. Loyd
March 25, 1997 James R. Loyd, Director
/s/ Charles G. Dudenhoeffer, Jr.
March 25, 1997 Charles G. Dudenhoeffer, Jr., Director
/s/ David R. Goller
March 25, 1997 David R. Goller, Director
/s/ Philip D. Freeman
March 25, 1997 Philip D. Freeman, Director
/s/ Kevin L. Riley
March 25, 1997 Kevin L. Riley, Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
3.1 Articles of Incorporation of the **
Company (filed as Exhibit 3(a) to
the Company's Registration on Form S-4
(Registration No. 33-54166) and
incorporated herein by reference).
3.2 Bylaws of the Company (filed as **
Exhibit 3(b) to the Company's
Registration on Form S-4 (Registration
No. 33-54166) and incorporated
hereby by reference).
4 Specimen certificate representing **
shares of the Company's $1.00 par
value common stock (filed as Exhibit 4
to the Company's Registration Statement
on Form S-4 (Registration No. 33-054166 and
incorporated herein by reference).
10.1 The Exchange National Bank of **
Jefferson City Profit Sharing Trust
Agreement, as amended and restated (filed
with the Registrant's Annual Report on
Form 10-KSB for the year ended
December 31, 1994 as Exhibit 10.1 and
incorporated herein by reference).*
10.2 Retirement Plan for Employees of The **
Exchange National Bank of Jefferson City,
as amended and restated (executed
October 18, 1995) (filed with the
Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1995 as
Exhibit 10.2 and incorporated herein by
reference).*
10.3 The Exchange National Bank of Jefferson **
City Retirement Trust, as amended and
restated (filed as Exhibit 10(c) to the
Company's Registration Statement on Form S-4
(Registration No. 33-54166) and incorporated
herein by reference).*
10.3.1 Amendment to The Exchange National **
Bank of Jefferson City Retirement Trust,
dated April 21, 1993 (filed with the
Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1993 as
Exhibit 10.3.1 and incorporated herein by
reference).*
13 The Registrant's 1996 Annual Report to __
Shareholders (only <PAGE> those portions of
this Annual Report to Shareholders which
are specifically incorporated by reference
into this Annual Report on Form 10-KSB shall
be deemed to be filed with the Commission)
21 List of Subsidiaries (filed with the **
Registrant's Annual Report on
Form 10-KSB for the year ended
December 31, 1993 as Exhibit 21 and
incorporated herein by reference).
27 Financial Data Schedule. __
_______________________
* Management contracts or compensatory plans or
arrangements required to be identified by Item 13(a).
** Incorporated by reference from previous filings.
1996
ANNUAL REPORT
TO
SHAREHOLDERS
EXCHANGE NATIONAL BANCSHARES, INC.
JEFFERSON CITY, MISSOURI
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
Jefferson City, Missouri
March 25, 1997
To Our Shareholders:
Your Board of Directors and management are pleased to report
that Exchange National Bancshares' net income for 1996 increased
22 cents per share of common stock to $5.35, an increase of 4.3%
over the $5.13 reported for 1995. Growth in average loan volume
was the primary contributor to the increase.
Shareholders received dividends totaling $1.84 per share of
common stock during 1996, an increase of 22 cents or 13.6% over
the amount received during 1995. Quarterly dividends of 38 cents
per share of common stock were paid January 1 and April 1, 1996
and quarterly dividends of 44 cents per share were paid July 1
and October 1, 1996. A special dividend of 20 cents per share of
common stock was paid December 1, 1996.
Your Company's earnings performance expressed in terms of
net income divided by average total assets (or return on assets)
was 1.39% for 1996 compared to 1.42% for 1995, and return on
average total stockholders' equity was 9.76% for 1996 compared to
10.06% for 1995.
Capitalization of your Company expressed in terms of tier
one capital to adjusted total assets (leverage ratio) was 14.45%
at December 31, 1996 compared to 14.98% at December 31, 1995, and
its total capital to risk-weighted assets ratio was 23.14% at
December 31, 1995 compared to 23.66% at December 31, 1995. Those
ratios far exceeded the Federal Reserve Board's minimum required
ratios at both dates.
Your Board of Directors would like to take this opportunity
to thank Harold G. Butzer and James R. Loyd for their past
service to The Exchange National Bank and Exchange National
Bancshares. Having reached mandatory retirement age, Harold G.
Butzer resigned from the Board of Directors of the Bank and
Bancshares effective December 28, 1996. We are pleased that Mr.
Butzer will continue to serve as an advisory director of both the
Bank and Bancshares. On October 1, 1996, after serving the Bank
for more than 46 years, James R. Loyd retired as Executive Vice
President of both the Bank and Bancshares. Mr. Loyd will
continue to serve as a director of the Bank and Bancshares.
Having served the east end of Jefferson City for over 10
years, we are excited to be opening our spacious new branch early
this spring. This new facility will allow us to better serve the
rapidly growing east end of Jefferson City. In 1997, we will
begin an extensive remodeling and expansion of our main banking
facilities at 132 East High Street.
Finally, your Board of Directors is pleased to announce that
effective January 1, 1997, David T. Turner was elected President
and a Director of The Exchange National Bank and a Director of
Exchange National Bancshares. David is a very talented and
dedicated individual. He will make an outstanding President.
Once again, we appreciate the opportunity to serve you, our
shareholders, as well as our customers and look forward to
another challenging and profitable year.
Very truly yours,
DONALD L. CAMPBELL
Chairman of the Board and
President
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
DESCRIPTION OF BUSINESS
Exchange National Bancshares, Inc. ("Bancshares" or the
"Company") is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "Holding Company
Act"). Although Bancshares was incorporated under the laws of
the State of Missouri on October 23, 1992, it did not engage in
any business activity until April 7, 1993. On that date, it
acquired all of the issued and outstanding capital stock of The
Exchange National Bank of Jefferson City, a national banking
association (the "Bank") pursuant to a corporate reorganization
involving an exchange of shares. The Company's activities
currently are limited to ownership of the outstanding capital
stock of the Bank. In addition to ownership of the Bank,
Bancshares could seek expansion through acquisition and may
engage in those activities (such as investments in banks or
operations closely related to banking) in which it is permitted
to engage under applicable law. It currently is not anticipated
that Bancshares will engage in any business other than that
directly related to its ownership of the Bank. Except as
otherwise provided herein, references herein to "Bancshares" or
the "Company" include Bancshares and its consolidated subsidiary.
The Bank, located in Jefferson City, Missouri, was founded
in 1865. The Bank is the oldest bank in Cole County, and became
a national bank in 1927. The Bank has four banking offices; its
principal office at 132 East High Street in Jefferson City's
central business district, a facility at 217 West Dunklin near
the city's south side business district, a facility at 3701 West
Truman Boulevard adjacent to the Capitol Mall Shopping Center,
and a facility at 800 Eastland Drive near the city's east side
business district.
The Bank is a full service bank conducting a general banking
and trust business, offering its customers checking and savings
accounts, debit cards, certificates of deposit, trust services,
safety deposit boxes and a wide range of lending services,
including credit card accounts, commercial and industrial loans,
single payment personal loans, installment loans and commercial
and residential real estate loans.
The Bank's deposit accounts are insured by the Federal
Deposit Insurance Corporation (the "FDIC") to the extent provided
by law, and it is a member of the Federal Reserve System. The
Bank's operations are supervised and regulated by the Office of
the Comptroller of the Currency (the "OCC"), the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board") and the FDIC. A periodic examination of the Bank is
conducted by representatives of the OCC. Such regulations,
supervision and examinations are principally for the benefit of
depositors, rather than for the benefit of the holders of the
Bank's common stock. Bancshares is subject to supervision by
the Federal Reserve Board.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial
information for the Company as of and for each of the years in
the five-year period ended December 31, 1996. The selected
consolidated financial data should be read in conjunction with
the Consolidated Financial Statements of the Company, including
the related notes, presented elsewhere herein.
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income $ 20,179 $18,628 16,062 16,144 17,801
Interest expense 9,784 8,649 6,847 7,051 9,121
Net interest income 10,395 9,979 9,215 9,093 8,680
Provision for loan
losses 395 265 139 370 305
Net interest income
after provision for
loan losses 10,000 9,714 9,076 8,723 8,375
Security gains, net -- 4 8 11 18
Other noninterest income 1,890 1,745 1,749 1,652 1,426
Total noninterest
income 1,890 1,749 1,757 1,663 1,444
Noninterest expense 6,185 6,002 6,095 5,832 5,494
Income before income
taxes 5,705 5,461 4,738 4,554 4,325
Income taxes 1,862 1,772 1,474 1,383 1,297
Net income $ 3,843 3,689 3,264 3,171 3,028
DIVIDENDS
Declared on common
stock $ 1,365 1,200 1,092 1,030 922
Paid on common stock 1,322 1,164 1,092 1,010 900
Ratio of total
dividends declared
to net income 35.52% 32.53 33.46 32.48 30.45
PER SHARE DATA
Earnings per common
share $ 5.35 5.13 4.54 4.40 4.17
Weighted averages
shares of common
stock outstanding 718,511 718,511 718,511 720,481 726,000
BALANCE SHEET DATA (AT PERIOD END)
Investment
securities $ 80,623 68,507 79,882 96,784 101,946
Loans, net of
unearned discount 173,309 154,339 144,162 125,609 121,231
Total assets 284,079 257,340 262,839 266,632 268,698
Total deposits 228,024 206,815 207,021 213,187 211,996
Securities sold under
agreements to
repurchase and other
short term borrowed
funds 13,338 10,416 19,575 18,136 23,616
Total stockholders'
equity 40,681 38,355 34,665 33,918 31,687
<PAGE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
EARNINGS RATIOS
Return on average
total assets 1.39% 1.42 1.24 1.21 1.14
Return on average total
stockholders' equity 9.76 10.06 9.49 9.71 9.90
ASSET QUALITY RATIOS
Allowance for loan
losses to loans 1.33 1.41 1.35 1.49 1.52
Nonperforming loans
to loans /1/ 0.63 0.54 0.49 0.69 1.17
Allowance for loan
losses to nonperforming
loans /1/ 211.26 260.02 275.21 214.94 130.27
Nonperforming assets
to loans and foreclosed
assets/2/ 0.70 0.59 0.56 0.78 1.31
Net loan charge-offs
to average loans 0.16 0.02 0.05 0.28 0.12
CAPITAL RATIOS
Average total stockholders'
equity to average
total assets 14.28 14.15 13.09 12.42 11.55
Total risk-based
capital ratio 23.14 23.66 23.10 23.30 22.73
Leverage ratio 14.45 14.98 13.70 12.84 11.99
__________
(1) Nonperforming loans consist of nonaccrual loans and loans contractually
past due 90 days or more.
(2) Nonperforming assets consist of nonperforming loans plus foreclosed
assets.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
STATEMENTS MADE IN THIS ANNUAL REPORT ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS COULD DIFFER
MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION OR
BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER THE
CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS,
FINANCIAL CONDITION OR BUSINESS" IN THE COMPANY'S ANNUAL REPORT
ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1996, AS WELL AS
THOSE DISCUSSED ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
GENERAL
Bancshares was organized on October 23, 1992, and on April
7, 1993, it acquired the Bank. The acquisition of the Bank
represented a combination of entities under common control and,
accordingly, was accounted for in a manner similar to a pooling
of interest.
Bancshares' consolidated net income for 1996 increased
$154,000 or 4.2% over 1995 and followed a $425,000 or 13.0%
increase for 1995 compared to 1994. Earnings per common share
increased from $4.54 for 1994 to $5.13 for 1995 and to $5.35 for
1996. Return on average total assets increased from 1.24% for
1994 to 1.42% for 1995 and then declined slightly to 1.39% for
1996. Return on average total stockholders' equity increased
from 9.49% for 1994 to 10.06% for 1995 and then declined slightly
to 9.76% for 1996.
Average loan volume, excluding bankers acceptances' and
commercial paper (money market loans) increased $15,172,000 or
10.3% to $163,024,000 for 1996 compared to $147,852,000 for 1995
and followed a $13,966,000 or 10.4% increase for 1995 compared to
1994. Average commercial loan volume increased $4,855,000 or
14.1% for 1996 compared to 1995 and followed a $6,510,000 or
23.2% increase for 1995 compared to 1994. Average real estate
loan volume increased $8,347,000 or 10.1% for 1996 compared to
1995 and followed an $7,830,000 or 10.5% increase for 1995
compared to 1994. The increase in both commercial and real
estate loan volumes over the last two years reflected several
factors. External factors included a stable local economy and
stable interest rates which fueled increased loan demand.
Internal factors included an emphasis on Small Business
Administration loans. Average consumer loan volume increased
$1,970,000 or 6.4% for 1996 compared to 1995 and followed a
$374,000 or 1.2% decrease for 1995 compared to 1994. The
variances in consumer loan volume were due primarily to rate
competition from other financial institutions which affects the
volume of indirect loans purchased from auto dealers.
Average interest-bearing time deposits increased $15,411,000
or 9.0% to $186,058,000 for 1996 compared to $170,647,000 for
1995 and followed a $4,466,000 or 2.6% decrease for 1995 compared
to 1994. The increase in average total interest-bearing deposits
for 1996 primarily reflected an increase in rates paid in order
to attract additional funds, while the decrease for 1995
primarily reflected a decrease in balances maintained by several
large depositors. Average securities sold under agreements to
repurchase decreased $1,766,000 or 9.7% to $16,512,000 for 1996
compared to $18,278,000 for 1995 and followed a $2,076,000 or
10.2% decrease for 1995 compared to 1994. Those decreases both
reflect increased competition for institutional funds awarded
based upon competitive bids.
<PAGE>
The following table provides a comparison of fully taxable
equivalent earnings, including adjustments to interest income and
tax expense for interest on tax-exempt loans and investments.
Year Ended December 31,
1996 1995 1994
(dollars expressed in thousands)
Interest income $ 20,179 18,628 16,062
Fully taxable equivalent
(FTE) adjustment 366 357 423
Interest income (FTE basis) 20,545 18,985 16,485
Interest expense 9,784 8,649 6,847
Net interest income (FTE basis) 10,761 10,336 9,638
Provision for loan losses 395 265 139
Net interest income after
provision for loan losses
(FTE basis) 10,366 10,071 9,499
Noninterest income 1,890 1,749 1,757
Noninterest expense 6,185 6,002 6,095
Income before income taxes
(FTE basis) 6,071 5,818 5,161
Income taxes 1,862 1,772 1,474
FTE adjustment 366 357 423
Income taxes (FTE basis) 2,228 2,129 1,897
Net income $ 3,843 3,689 3,264
Average total earning assets $261,183 245,404 246,497
Net interest margin 4.12% 4.21 3.91
<PAGE>
The Company's primary source of earnings is net interest
income, which is the difference between the interest earned on
interest earning assets and the interest paid on interest-bearing
liabilities. Net interest income on a fully taxable equivalent
basis increased $425,000 or 4.1% to $10,761,000 for 1996 compared
to $10,336,000 for 1995, and followed a $698,000 or 7.2% increase
for 1995 compared to 1994. The increases for both 1996 and 1995
reflect the favorable effects of growth in average loan volume.
Measured as a percentage of average earning assets, the net
interest margin (expressed on a fully taxable equivalent basis)
increased from 3.91% for 1994 to 4.21% for 1995 and then
decreased to 4.12% for 1996.
The provision for loan losses increased $130,000 or 49.1% to
$395,000 for 1996 compared to $265,000 for 1995 and followed a
$126,000 or 90.6% increase for 1995 compared to 1994. The
provision increased in 1995 due primarily to loan growth, and in
1996 due primarily to an increase in consumer loan charge-offs.
The allowance for loan losses totaled $2,307,000 or 1.33% of
loans outstanding at December 31, 1996 compared to $2,179,000 or
1.41% of loans outstanding at December 31, 1995 and $1,943,000 or
1.35% of loans outstanding at December 31, 1994. The allowance
for loan losses expressed as a percentage of nonperforming loans
was 275.21% at December 31, 1994; 260.02% at December 31, 1995;
and 211.26% at December 31, 1996.
RESULTS OF OPERATIONS
Years Ended December 31, 1996 and 1995
The Company's net income increased by $154,000 or 4.2% to
$3,843,000 for the year ended December 31, 1996 compared to
$3,689,000 for 1995. Net interest income on a fully taxable
equivalent basis increased to $10,761,000 or 4.12% of average
earning assets for 1996 compared to $10,336,000 or 4.21% for
1995. The provision for loan losses for 1996 was $395,000
compared to $265,000 for 1995. Net loans charged off for 1996
were $267,000 compared to $29,000 for 1995.
Noninterest income and noninterest expense for the years
ended December 31, 1996 and 1995 were as follows:
YEAR ENDED
DECEMBER 31, INCREASE (DECREASE)
1996 1995 AMOUNT %
(DOLLARS EXPRESSED IN THOUSANDS)
NONINTEREST INCOME
Service charges on
deposit accounts $701 666 35 5.3%
Trust department income 286 230 56 24.3
Mortgage loan servicing
fees 297 267 30 11.2
Gain on sales of mortgage
loans 113 129 (16) (12.4)
Gain on calls of debt
securities -- 4 (4) (100.0)
Credit card fees 345 309 36 11.7
Other 148 144 4 2.8
$1,890 1,749 141 8.1%
NONINTEREST EXPENSE
Salaries, wages, and
employee benefits $3,368 3,083 285 9.2%
Occupancy expense, net 295 312 (17) (5.4)
Furniture and equipment
expense 442 448 (6) (1.3)
FDIC insurance assessment 2 234 (232) (99.1)
Advertising and promotion 348 277 71 25.6
Postage, printing, and
supplies 349 344 5 1.5
Legal, examination, and
professional fees 217 255 (38) (14.9)
Credit card expenses 299 272 27 9.9
Credit investigation and
loan collection 116 87 29 33.3
Other 749 690 59 8.6
$6,185 6,002 183 3.0 %
Noninterest income increased $141,000 or 8.1% to $1,890,000
for 1996 compared to $1,749,000 for 1995 due to growth in most
major categories. Trust department income increased $56,000 or
24.3% due to a combination of <PAGE> an increase in fees charged, growth
in the market value of assets managed, and an increase in volume
of estate distribution fees. Credit card fees increased $36,000
and service charges on deposit accounts increased $35,000. Both
of those increases reflected increased volume. Mortgage loan
servicing fees, which increased $30,000, also reflected increased
volume. Average loans serviced during 1996 totaled approximately
$70,900,000 compared to $60,800,000 for 1995. Although total
loans originated and sold to the secondary market (including
refinances of existing loans previously sold) during 1996
increased to approximately $21,436,000 compared to $19,652,000
for 1995, gain on sales of mortgage loans declined $16,000.
Local competitive pressure resulted in fewer loan origination
fees.
Noninterest expense increased $183,000 or 3.0% to $6,185,000
for 1996 compared to $6,002,000 for 1995 due primarily to a
$285,000 or 9.2% increase in salaries, wages, and employee
benefits and a $71,000 or 25.6% increase in advertising and
promotion. Those increases were partially offset by a $232,000
decrease in FDIC insurance assessment. The increase in salaries,
wages, and employee benefits reflected a combination of
recruiting expense, increases in non-officer employee salaries to
respond to local market conditions, officer merit increases of
approximately 4.0%, increases in pension and profit sharing
expense, and increased payroll taxes. The increase in
advertising and promotion reflected increased costs associated
with a new logo and a special advertising program. The decrease
in FDIC insurance assessment primarily reflected a decrease in
the annual assessment rate from 23 cents per $100 of deposits for
the first half of 1995 and 4 cents per $100 of deposits for the
remainder of 1995 to a minimum assessment of $2,000 for 1996.
Credit investigation and loan collection increased $29,000 or
33.3% due primarily to increased cost associated with loan
collections.
YEARS ENDED DECEMBER 31, 1995 AND 1994
The Company's net income increased by $425,000 or 13.0% to
$3,689,000 for the year ended December 31, 1995 compared to
$3,264,000 for 1994. Net interest income on a fully taxable
equivalent basis increased to $10,336,000 or 4.21% of average
earning assets for 1995 compared to $9,638,000 or 3.91% for 1994.
The provision for loan losses for 1995 was $265,000 compared to
$139,000 for 1994. Net loans charged off for 1995 were $29,000
compared to $66,000 for 1994.
Noninterest income and noninterest expense for the years
ended December 31, 1995 and 1994 were as follows:
YEAR ENDED
DECEMBER 31, INCREASE (DECREASE)
1995 1994 AMOUNT %
(DOLLARS EXPRESSED IN THOUSANDS)
NONINTEREST INCOME
Service charges on
deposit accounts $ 666 678 (12) (1.8)%
Trust department income 230 222 8 3.6
Mortgage loan servicing
fees 267 231 36 15.6
Gain on sales of
mortgage loans 129 117 12 10.3
Gain on calls of debt
securities 4 8 (4) (50.0)
Credit card fees 309 271 38 14.1
Gain on land taken by
Highway Department -- 95 (95) (100.0)
Other 144 135 9 6.7
$ 1,749 1,757 (8) (0.5)%
<PAGE>
<TABLE>
YEAR ENDED
DECEMBER 31, INCREASE (DECREASE)
1995 1994 AMOUNT %
(DOLLARS EXPRESSED IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C>
NONINTEREST EXPENSE
Salaries, wages, and
employee benefits $ 3,083 3,035 48 (1.6)%
Occupancy expense, net 312 322 (10) (3.1)
Furniture and equipment
expense 448 463 (15) (3.2)
FDIC insurance assessment 234 464 (230) (49.6)
Advertising and promotion 277 237 40 16.9
Postage, printing, and
supplies 344 346 (2) (0.6)
Legal, examination, and
professional fees 255 249 6 2.4
Credit card expenses 272 204 68 33.3
Credit investigation and
loan collection 87 100 (13) (13.0)
Other 690 675 15 2.2
$6,002 6,095 (93) (1.5)%
</TABLE>
Noninterest income decreased $8,000 or 0.5% to $1,749,000
for 1995 compared to $1,757,000 for 1994. The primary reason for
the decrease was a non-recurring $95,000 gain recorded in 1994 on
the portion of the East Bank land taken by the Highway Department
for a new interchange. Other significant changes in noninterest
income were a $38,000 increase in credit card fees, a $36,000
increase in mortgage loan servicing fees, and a $12,000 increase
in gain on sales of mortgage loans. The increase in credit card
fees primarily reflected an increase in the volume of fees
received for processing merchant transactions. The increases in
mortgage loan servicing fees and gain on sales of mortgage loans
also primarily reflected increased volume. Average loans
serviced during 1995 totaled approximately $60,800,000 compared
to $53,300,000 for 1994, and total loans originated and sold to
the secondary market during 1995 (including refinances of
existing loans previously sold) were approximately $19,652,000
compared to $17,845,000 for 1994.
Noninterest expense decreased $93,000 or 1.5% to $6,002,000
for 1995 compared to $6,095,000 for 1994 due primarily to a
$230,000 decrease in FDIC insurance assessment. The decrease in
FDIC insurance assessment primarily reflected a decrease in the
annual assessment rate from 23 cents per $100 of deposits for the
year 1994 and first half of 1995 to 4 cents per $100 of deposits
for the remainder of 1995. Other significant changes in
noninterest expense were a $68,000 increase in credit card
expenses and a $40,000 increase in advertising and promotion.
The increase in credit card expenses primarily reflected and
increase in fees charged to the Company by its credit card
processor for merchant transactions and an increase in the volume
of those transactions processed. The increase in advertising and
promotion reflected the cost of developing and implementing a new
advertising campaign. Salaries, wages, and employee benefits,
the largest component of noninterest expense increased only
$48,000 or 1.6%. Salaries and wages increased approximately
$68,000 or 2.7% due to merit increases which were offset in part
by a reduction in the average number of full-time equivalent
employees. Employee benefits decreased approximately $20,000 due
primarily to a decrease in pension expense.
NET INTEREST INCOME
The increases in fully taxable equivalent net interest
income for both 1996 and 1995 reflect the favorable effects of
growth in average loan volume.
<PAGE>
The following table presents average balance sheets, net
interest income, average yields of earning assets, and average
costs of interest-bearing liabilities on a fully taxable
equivalent basis for each of the years in the three-year period
ended December 31, 1996.
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense(1) Paid(1) Balance Expense/1/ Paid/1/
(DOLLARS EXPRESSED IN THOUSANDS)
<CAPTION>
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans: /2/
Commercial $39,380 3,553 9.02% $34,525 $3,307 9.58%
Real estate 90,685 8,024 8.85 82,338 7,215 8.76
Consumer 32,959 3,064 9.30 30,989 2,711 8.75
Money market /3/ 2,246 123 5.48 141 8 5.67
Investment in debt
and equity
securities:/4/
U.S. Treasury and
U.S. Government
agencies 58,960 3,395 5.76 59,876 3,242 5.41
State and
municipal 15,740 1,222 7.76 14,499 1,137 7.84
Other 3,186 205 6.43 5,344 325 6.08
Federal funds
sold 17,996 958 5.32 17,677 1,039 5.88
Interest bearing
deposits 31 1 3.23 15 1 6.67
Total interest
earning assets 261,183 20,545 7.87 245,404 18,985 7.74
Noninterest
earning
assets 16,680 15,956
Allowance for
loan losses (2,278) (2,085)
Total assets $275,585 $259,275
LIABILITIES AND
STOCKHOLDERS'
EQUITY
NOW accounts $27,975 748 2.67 $28,188 752 2.67
Savings 22,191 876 3.95 21,320 839 3.94
Money market 31,615 1,323 4.18 31,547 1,312 4.16
Time deposits of
$100,00 and
over 9,914 541 5.46 5,643 287 5.09
Other time
deposits 94,363 5,489 5.82 83,949 4,460 5.31
Total interest-
bearing
deposits 186,058 8,977 4.82 170,647 7,650 4.48
Securities sold
under agreements
to repurchase 16,512 767 4.65 18,278 937 5.13
Interest-bearing
demand notes to
U.S. Treasury 760 40 5.26 1,097 62 5.65
Total interest
bearing
liabilities 203,330 9,784 4.81 190,022 8,649 4.55
Demand deposits 31,072 30,992
Other liabilities 1,826 1,584
Total
liabilities 236,228 222,598
Stockholders'
equity 39,357 36,677
Total
liabilities
and stockholders'
equity $275,585 $259,275
Net interest
income 10,761 10,336
Net interest
margin 4.12% 4.21%
/1/ Interest income and yields are presented on a fully taxable equivalent basis using the Federal
statutory income tax rate of 34%, net of nondeductible interest expense. Such adjustments totaled
$366,000, $357,000, and $423,000 for the years ended December 31, 1996, 1995, and 1994, respectively.
/2/ Nonaccruing loans are included in the average amounts outstanding.
/3/ Includes banker's acceptances and commercial paper.
/4/ Average balances based on amortized cost.
</TABLE>
<TABLE>
(Table continued)
YEAR ENDED DECEMBER 31,
1994
Interest Rate
Average Income/ Earned/
Balance Expense(1) Paid(1)
(DOLLARS EXPRESSED IN THOUSANDS)
<CAPTION>
ASSETS
<S> <C> <C> <C>
Loans: /2/
Commercial $28,015 2,275 8.12%
Real estate 74,508 5,634 7.56
Consumer 31,363 2,709 8.64
Money market /3/ 3,055 137 4.48
Investment in debt
and equity
securities:/4/
U.S. Treasury and
U.S. Government
agencies 68,504 3,215 4.69
State and
municipal 14,909 1,273 8.54
Other 8,713 511 5.86
Federal funds
sold 17,430 731 4.19
Interest bearing
deposits -- -- --
Total interest
earning assets 246,497 16,485 6.69
Noninterest
earning
assets 18,248
Allowance for
loan losses (1,931)
Total assets $262,814
LIABILITIES AND
STOCKHOLDERS'
EQUITY
NOW accounts $32,734 892 2.72
Savings 21,036 632 3.00
Money market 35,734 1,115 3.12
Time deposits of
$100,00 and
over 4,549 161 3.54
Other time
deposits 81,060 3,304 4.08
Total interest-
bearing
deposits 175,113 6,104 3.49
Securities sold
under agreements
to repurchase 20,354 705 3.46
Interest-bearing
demand notes to
U.S. Treasury 1,041 38 3.65
Total interest
bearing
liabilities 196,508 6,847 3.48
Demand deposits 30,541
Other liabilities 1,364
Total
liabilities 228,413
Stockholders'
equity 34,401
Total
liabilities
and stockholders'
equity $262,814
Net interest
income 9,638
Net interest
margin 3.91%
/1/ Interest income and yields are presented on a fully taxable equivalent basis using the Federal
statutory income tax rate of 34%, net of nondeductible interest expense. Such adjustments totaled
$366,000, $357,000, and $423,000 for the years ended December 31, 1996, 1995, and 1994, respectively.
/2/ Nonaccruing loans are included in the average amounts outstanding.
/3/ Includes banker's acceptances and commercial paper.
/4/ Average balances based on amortized cost.
</TABLE>
<PAGE>
The following table presents, on a fully taxable equivalent basis, an
analysis of changes in net interest income resulting from changes in average
volumes of earning assets and interest bearing liabilities and average rates
earned and paid. The change in interest due to the combined rate/volume
variance has been allocated to rate and volume changes in proportion to the
absolute dollar amounts of change in each.
<TABLE>
Year Ended Year Ended
December 31, 1996 December 31, 1995
Compared to Compared to
December 31, 1995 December 31, 1994
Total Change due to Total Change due to
Change Volume Rate Change Volume Rate
<CAPTION> (dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income on a fully
taxable equivalent basis:
Loans: /1/
Commercial $ 246 446 (200) $ 1,032 582 450
Real estate /2/ 809 737 72 1,581 629 952
Consumer 353 178 175 2 (32) 34
Money market 115 115 -- (129) (157) 28
Investment in debt
and equity securities:
U.S. Treasury and U.S.
Government agencies 153 (51) 204 27 (433) 460
State and municipal /2/ 85 96 (11) (136) (34) (102)
Other (120) (138) 18 (186) (204) 18
Federal funds sold (81) 19 (100) 308 10 298
Interest bearing deposits -- 1 (1) 1 1 --
Total interest income 1,560 1,403 157 2,500 362 2,138
Interest expense:
NOW accounts (4) (6) 2 (140) (121) (19)
Savings 37 34 3 207 8 199
Money market 11 3 8 197 (142) 339
Time deposits of
$100,000 and over 254 232 22 126 45 81
Other time deposits 1,029 583 446 1,156 122 1,034
Securities sold under
agreements to repurchase (170) (86) (84) 232 (78) 310
Interest-bearing demand
notes to U.S. Treasury (22) (18) (4) 24 2 22
Total interest expense 1,135 742 393 1,802 (164) 1,966
Net interest income on a
fully taxable equivalent
basis $ 425 661 (236) $ 698 526 172
________________
(1) Nonaccruing loans are included in the average amounts outstanding.
(2) Interest income and yields are presented on a fully taxable
equivalent basis using the federal statutory income tax rate of
34%, net of nondeductible interest expense. Such adjustments
totaled $366,000, $357,000 and $423,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
</TABLE>
LENDING AND CREDIT MANAGEMENT
Interest earned on the loan portfolio is a primary source of
interest income for the Company. Net loans represented 60.2% of
total assets as of December 31, 1996. Total loans net of
unearned income increased steadily from December 31, 1992 through
December 31, 1996 due to a stable local economy and reasonable
interest rates and primarily reflected growth in commercial and
commercial real estate loans. Growth in volume of installment
loans to individuals historically has depended upon the purchase
of non-recourse contracts from automobile dealers. Competition
from other <PAGE> financial institutions has continued to affect the
volume of auto dealer contracts purchased. A significant amount
of the increase in consumer loans to individuals during 1996 came
as a result of the introduction of a new product, sub-prime
automobile loans. The interest rates and charge-offs related to
this product reflected the increased risk associated with the
more laxed underwriting standards associated with this type of
product.
Lending activities are conducted pursuant to a written loan
policy approved by the Bank's Board of Directors. Larger credits
are reviewed by the Bank's Discount Committee. This committee is
comprised of members of senior management.
The following table shows the composition of the loan
portfolio by major category and each category as a percentage of
the total portfolio as of the dates indicated.
<TABLE>
December 31,
1996 1995 1994 1993 1992
Amount % Amount % Amount % Amount % Amount %
<CAPTION>
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial,
and agricultural $ 40,208 23.2% $ 38,355 24.9% $ 32,912 22.8% $ 24,245 19.3% $ 24,783 20.4%
Real estate --
construction 22,737 13.1 11,740 7.6 11,136 7.8 9,474 7.5 4,588 3.8
Real estate --
mortgage 76,071 43.9 73,029 47.3 68,940 47.8 59,969 47.8 56,997 47.0
Installment loans
to individuals 34,293 19.8 31,215 20.2 31,174 21.6 31,921 25.4 34,863 28.8
Total loans net of
unearned income $173,309 100.0% $154,339 100.0% $144,162 100.0% $125,609 100.0% $121,231 100.0%
</TABLE>
Loans at December 31, 1996 mature as follows:
<TABLE>
Over One Year
Through Five
Years Over Five Years
<CAPTION>
One Year Fixed Floating Fixed Floating
Or Less Rate Rate Rate Rate Total
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
and agricultural $ 35,711 4,249 -- 248 -- 40,208
Real estate --
construction 22,737 -- -- -- -- 22,737
Real estate --
mortgage 45,696 17,564 8,812 4,629 -- 76,071
Installment loans
to individuals 3,041 30,065 -- 325 862 34,293
Total loans $107,185 51,878 8,812 5,202 862 173,309
</TABLE>
The Company generally does not retain long-term fixed rate
residential mortgage loans in its portfolio. Fixed rate loans
conforming to standards required by the secondary market are
offered to qualified borrowers, but are not funded until the
Company has a non-recourse purchase commitment from the secondary
market at a predetermined price. At December 31, 1996 the
Company was servicing approximately $75,800,000 of loans sold to
the secondary market. Mortgage loans retained in the Company's
portfolio generally include provisions for rate adjustments at
one to three year intervals. Commercial loans and real estate
construction loans generally have maturities of less than one
year. Installment loans to individuals are primarily fixed rate
loans with maturities from one to five years.
<PAGE>
Although loans, net of unearned income, increased by
$18,553,000 during 1994, the provision for loan losses decreased
in 1994 due to management's belief that the quality of the loan
portfolio had improved. The provision increased in 1995 due
primarily to loan growth, and in 1996 due primarily to an
increase in net loans charged off. A significant amount of the
increase in net charge-offs of installment loans to individuals
during 1996 came as a result of the introduction of a new
product, sub-prime automobile loans.
The provision for loan losses is based on management's
evaluation of the loan portfolio in light of national and local
economic conditions, changes in the composition and volume of the
loan portfolio, changes in the volume of past due and nonaccrual
loans, and other relevant factors. The allowance for loan losses
which is reported as a deduction from loans, is available for
loan charge-offs. This allowance is increased by the provision
charged to expense and is reduced by loan charge-offs net of loan
recoveries.
Management formally reviews all loans in excess of certain
dollar amounts (periodically established) at least annually. In
addition, on a monthly basis, management reviews past due,
"classified", and "watch list" loans in order to classify or
reclassify loans as "loans requiring attention," "substandard,"
"doubtful," or "loss". During that review, management also
determines which loans should be considered to be "impaired".
Management believes, but there can be no assurance, that these
procedures keep management informed of possible problem loans.
Based upon these procedures, both the allowance and provision for
loan losses are adjusted to maintain the allowance at a level
considered adequate by management for estimated losses inherent
in the loan portfolio.
The following table summarizes loan loss experience for the
periods indicated:
<TABLE>
Year Ended December 31,
1996 1995 1994 1993 1992
(dollars expressed in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Analysis of allowance for loan losses:
Balance beginning of
period $ 2,179 1,943 1,870 1,842 1,672
Charge-offs:
Commercial, financial, and
agricultural 37 7 -- 52 6
Real estate -- construction -- -- 72 -- --
Real estate -- mortgage -- -- -- -- 5
Installment loans to
individuals 355 153 259 395 194
392 160 331 447 205
Recoveries:
Commercial, financial, and
agricultural 5 23 128 -- 9
Real estate -- construction -- -- -- -- --
Real estate -- mortgage -- -- -- -- --
Installment loans to
individuals 120 108 137 105 61
125 131 265 105 70
Net charge-offs 267 29 66 342 135
Provision for loan losses 395 265 139 370 305
Balance at end of period $ 2,307 2,179 1,943 1,870 1,842
</TABLE>
<PAGE>
<TABLE>
Year Ended December 31,
1996 1995 1994 1993 1992
(dollars expressed in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Loans outstanding:
Average $165,270 $147,993 136,941 124,124 114,283
End of period 173,309 154,339 144,162 125,609 121,231
Ratio of allowance for loan
losses to loans
outstanding:
Average 1.40% 1.47 1.42 1.51 1.61
End of period 1.33 1.41 1.35 1.49 1.52
Ratio of net charge-offs
to average loans outstanding 0.16 0.02 0.05 0.28 0.12
Allocation of allowance for
loan losses at end of period:
Commercial, financial, and
agricultural $ 827 940 500 505 657
Real estate -- construction 253 84 85 45 47
Real estate -- mortgage 401 354 337 154 256
Installment loans to
individuals 423 215 272 352 344
Unallocated 403 586 749 814 538
Total $2,307 $ 2,179 1,943 1,870 1,842
Percent of categories to
total loans:
Commercial, financial, and
agricultural 23.2% 24.9% 22.8 19.3 20.4
Real estate -- construction 13.1 7.6 7.8 7.5 3.8
Real estate -- mortgage 43.9 47.3 47.8 47.8 47.0
Installment loans to
individuals 19.8 20.2 21.6 25.4 28.8
Total 100.0% 100.0 100.0 100.0 100.0
</TABLE>
The following table summarizes the Company's nonperforming assets for the
periods indicated:
<TABLE>
Year Ended December 31,
1996 1995 1994 1993 1992
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial, financial, and
agricultural $ 42 75 49 73 646
Real estate -- construction 327 354 385 397 427
Real estate -- mortgage 268 272 140 293 157
Installment loans to
individuals 61 20 6 16 --
Total nonaccrual loans 698 721 580 779 1,230
</TABLE>
<PAGE>
<TABLE>
Year Ended December 31,
1996 1995 1994 1993 1992
(dollars expressed in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Loans contractually past-due 90 days
or more:
Commercial, financial, and
agricultural $ 59 -- 75 70 16
Real estate -- construction 122 -- -- -- --
Real estate -- mortgage 186 110 43 -- 145
Installment loans to
individuals 27 7 8 21 23
Total loans
contractually past-due
90 days or more 394 117 126 91 184
Restructured loans -- -- -- -- --
Total nonperforming
loans 1,092 838 706 870 1,414
Other real estate 22 -- 5 5 31
Repossessions 106 70 96 102 143
Total nonperforming
assets $ 1,220 908 807 977 1,588
Loans, net of unearned
income $173,309 154,339 144,162 125,609 121,231
Allowance for loan losses
to loans 1.33% 1.41 1.35 1.49 1.52
Nonperforming loans to loans 0.63 0.54 0.49 0.69 1.17
Allowance for loan losses to
nonperforming loans 211.26 260.02 275.21 214.94 130.27
Nonperforming assets to
loans and foreclosed
assets 0.70 0.59 0.56 0.78 1.31
</TABLE>
It is the Company's policy to discontinue the accrual of
interest income on loans when the full collection of principal or
interest is in doubt, or when the payment of principal or
interest has become contractually 90 days past due unless the
obligation is both well secured and in the process of collection.
Interest on year-end nonaccrual loans, which would have been
recorded under the original terms of the loans, was approximately
$68,000 and $62,000 for the year ended December 31, 1996 and
1995, respectively. Approximately $22,000 and $19,000 was
actually recorded as interest income on such loans for the year
ended December 31, 1996 and 1995, respectively.
On January 1, 1995 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan" (SFAS 114), as amended by
Statement of Financial Accounting Standards No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" (SFAS 118). A loan is considered impaired when it
is probable a creditor will be unable to collect all amounts due
- - both principal and interest - according to the contractual
terms of the loan agreement. In addition to nonaccrual loans at
December 31, 1996 included in the table above, which were
considered "impaired", management has identified additional loans
totaling approximately $4,333,000 which are not included in the
nonaccrual table above but are considered by management to be
"impaired". Approximately $3,987,000 of those loans represented
commercial and real estate loans to a group of borrowers that
operate in an industry that has experienced some adverse economic
trends due to change in that industry's regulatory environment.
Management believes that the loans are well secured and all of
them performed according to their contractual terms during 1996.
The remainder of loans identified by management as being
"impaired" reflected two commercial loans totaling approximately
$167,000, one real estate loan totaling approximately $41,000,
and twenty consumer loans totaling approximately $138,000.
Allocations of the allowance for loan losses on "impaired" loans
were determined based on the fair value of the collateral
securing those loans, or in the case of loans guaranteed by the
Small Business Administration, the amount of that guarantee. At
December 31, 1996 $277,000 of the Company's allowance for loan
losses related to "impaired" loans. Of that $277,000, $113,000
related to commercial loans; $55,000 <PAGE> related to real estate
construction loans; $10,000 related to real estate mortgage
loans; and $99,000 related to installment loans to individuals.
As of December 31, 1996 and 1995 approximately $2,224,000
and $1,850,000, respectively, of loans not included in the
nonaccrual table above or identified by management as being
"impaired" were classified by management as having potential
credit problems which raised doubts as to the ability of the
borrower to comply with present loan repayment terms. Of the
$2,224,000 of "classified" loans at December 31, 1996, $202,000
represented three commercial loans ranging in size from
approximately $53,000 to $94,000; $1,666,000 represented seven
real estate loans ranging in size from approximately $55,000 to
$561,000; and $356,000 represented thirty nine installment loans
to individuals.
In addition to the "classified list", the Company also
maintains an internal loan "watch list" of loans which for
various reasons, not all related to credit quality, management is
monitoring more closely than the average loan in the portfolio.
Loans may be added to this list for reasons which are temporary
and correctable, such as the absence of current financial
statements of the borrower, or a deficiency in loan
documentation. Other loans are added as soon as any problem is
detected which might affect the borrower's ability to meet the
terms of the loan. This could be initiated by the delinquency of
a scheduled loan payment, a deterioration in the borrower's
financial condition identified in a review of periodic financial
statements, a decrease in the value of the collateral securing
the loan, or a change in the economic environment within which
the borrower operates. Once a loan is placed on the Company's
"watch list", its condition is monitored closely. Any further
deterioration in the condition of the loan is evaluated to
determine if the loan should be assigned to a higher risk
category.
The allowance for loan losses in its entirety is available
to absorb loan losses regardless of the category of loan to be
charged off. However, as a part of management's evaluation of
the adequacy of the allowance for loan losses, an allocation of
the allowance by loan category is made. At December 31, 1996,
management allocated $1,904,000 of the $2,307,000 total allowance
for loan losses to specific loan categories and $403,000 was
unallocated. Considering the size of several of the Company's
lending relationships and the loan portfolio in total, management
believes that the December 31, 1996 allowance for loan losses is
adequate.
The Company does not lend funds for the type of transactions
defined as "highly leveraged" by bank regulatory authorities or
for foreign loans. Additionally, the Company does not have any
concentrations of loans exceeding 10% of total loans which are
not otherwise disclosed in the loan portfolio composition table.
The Company does not have any interest-earning assets which would
have been included in nonaccrual, past due, or restructured loans
if such assets were loans.
The following table sets forth the amount of the Company's
outstanding loan and similar commitments, by type, as of the end
of each of the last two fiscal years:
December 31,
Type of Commitment 1996 1995
Commercial Loans $13,215,265 $ 8,581,330
Real Estate Loans 13,883,538 8,017,919
MasterCard/Visa Credit
Lines 5,890,661 6,018,276
Other 5,143,564 4,425,008
Total Commitments/1/ $38,133,028 $27,042,533
________________
/1/ Of the commitments shown as outstanding at December 31,
1996, management considers approximately $36,106,000 to be
"firm," and estimates that approximately $24,030,885 will be
exercised in 1997.
<PAGE>
Of the commitments shown in the foregoing table $17,116,147
and $12,001,316 represent fixed-rate loan commitments at December
31, 1996 and 1995, respectively. The remaining commitments
provide that the interest rates to be charged on amounts borrowed
thereunder will be determined by market conditions at the time of
borrowing.
INVESTMENT PORTFOLIO
The Company classifies its debt and equity securities into
one of the following three categories:
Held-to-Maturity - includes investments in debt securities
which the Company has the positive intent and ability to hold
until maturity.
Trading - includes investments in debt and equity securities
purchased and held principally for the purpose of selling them
in the near-term.
Available-for-Sale - includes investments in debt and equity
securities not classified as held to maturity or trading (i.e.,
investments which the Company has no present plans to sell in the
near-term but may be sold in the future under different
circumstances).
Debt securities classified as held-to-maturity are carried
at amortized cost, while debt and equity securities classified as
trading or available-for-sale are carried at estimated market
value. Unrealized holding gains and losses from trading
securities are to be included in earnings, while such gains and
losses for available-for-sale securities are to be excluded from
earnings and reported as a net amount as a separate component of
stockholders' equity until realized, net of applicable taxes, if
any.
The Company does not engage in trading activities and
accordingly does not have any debt or equity securities
classified as trading securities. Historically the Company's
practice had been to purchase and hold debt instruments until
maturity unless special circumstances exist. However, since the
investment portfolio's major function is to provide liquidity and
to balance the Company's interest rate sensitivity position,
certain debt securities along with stock of the Federal Home Loan
Bank and the Federal Reserve Bank are classified as
available-for-sale.
At December 31, 1996 debt securities classified as
held-to-maturity represented 10.4% of total consolidated assets
and debt and equity securities classified as available-for-sale
represented 18.0% of total consolidated assets. Future levels of
held-to-maturity and available-for-sale investment securities can
be expected to vary depending upon liquidity and interest
sensitivity needs as well as other factors.
<PAGE>
<TABLE>
The following table presents the composition of the investment portfolio by major
category.
December 31,
1996 1995 1994
Available- Held-to- Available- Held-to- Available- Held-to-
for-Sale Maturity Total for-Sale Maturity Total for-Sale Maturity Total
<CAPTION> (dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities $19,025 1,030 20,055 12,083 -- 12,083 16,747 390 17,137
U.S. Government
agencies and
corporations:
Mortgage-
backed 7,140 1,064 8,204 8,560 92 8,652 9,364 127 9,491
Other 19,462 13,631 33,093 22,644 6,872 29,516 19,477 12,367 31,844
States and
political
subdivisions 4,533 12,289 16,822 4,431 10,615 15,046 4,183 9,892 14,075
Other debt
securities -- 1,585 1,585 -- 2,346 2,346 -- 7,275 7,275
Total debt
securities 50,160 29,599 79,759 47,718 19,925 67,643 49,771 30,051 79,822
Federal Home
Loan Bank stock 804 -- 804 804 -- 804 -- -- --
Federal Reserve
Bank stock 60 -- 60 60 -- 60 60 -- 60
Total
investments $51,024 29,599 80,623 48,582 19,925 68,507 49,831 30,051 79,882
</TABLE>
As of December 31, 1996, the maturity of debt securities in the
investment portfolio was as follows:
<TABLE>
Over One Over Five Over Weighted
One Year Through Through Ten Average
or Less Five Years Ten Years Years Yield/1/
(dollars expressed in thousands)
<CAPTION>
Available-for-Sale
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities $6,030 12,995 -- -- 5.87%
U.S. Government agencies
and corporation:
Mortgage-backed /2/ 1,781 3,642 767 950 6.34
Other 3,013 16,449 -- -- 5.88
Total U.S. Government
agencies 4,794 20,091 767 950 6.01
States and political
subdivisions /3/ 803 3,730 -- -- 8.26
Total available-for-sale
debt securities $11,627 36,816 767 950 6.16%
Weight average yield /1/ 5.97% 6.21% 6.35% 6.37%
</TABLE>
<PAGE>
<TABLE>
Over One Over Five Over Weighted
One Year Through Through Ten Average
or Less Five Years Ten Years Years Yield/1/
(dollars expressed in thousands)
<CAPTION>
Held-to-Maturity
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ -- 1,030 -- -- 5.62%
U.S. Government agencies
and corporation:
Mortgage-backed /2/ 74 39 951 -- 6.63
Other 1,799 10,552 1,280 -- 6.16
Total U.S. Government
agencies 1,873 10,591 2,231 -- 6.19
States and political
subdivisions /3/ 325 4,389 5,514 2,061 7.59
Other debt securities 1,385 200 -- -- 6.77
Total held-to-maturity
debt securities $ 3,583 16,210 7,745 2,061 6.78 %
Weight average yield /1/ 6.26% 6.71% 7.00% 7.47%
__________________
(1) Weighted average yield is based on amortized cost for both available-for-sale and held-to-maturity securities.
(2) Mortgage-backed securities issued by U.S. Government agencies and
corporations have been included using historic repayment speeds.
Repayment speeds were determined from actual portfolio experience during
the twelve months ended December 31, 1996 calculated separately for each
mortgage-backed security. These repayment speeds are not necessarily
indicative of future repayment speeds and are subject to change based on
changing mortgage interest rates.
(3) Rates on obligations of states and political subdivisions have been
adjusted to fully taxable equivalent rates using the statutory Federal
income tax rate of 34%.
</TABLE>
INTEREST SENSITIVITY AND LIQUIDITY
The concept of interest sensitivity attempts to gauge
exposure of the Company's net interest income to adverse changes
in market-driven interest rates by measuring the amount of
interest sensitive assets and interest sensitive liabilities
maturing or subject to repricing within a specified time period.
Liquidity represents the ability of the Company to meet the
day-to-day withdrawal demands of its deposit customers balanced
against the fact that those deposits are invested in assets with
varying maturities. The Company must also be prepared to fulfill
the needs of credit customers for loans with various types of
maturities and other financing arrangements. The Company
monitors its interest sensitivity and liquidity through the use
of static gap reports which measure the difference between assets
and liabilities maturing or repricing within specified time
periods.
The Company's asset/liability management policy addresses
interest sensitivity and liquidity in terms of an operating range
for the cumulative impact on the next twelve months' net interest
income of both a gradual two percent increase and a gradual two
percent decrease in interest rates. The operating range for the
cumulative first twelve months impact of a gradual two percent
change in interest rates is expressed as the after tax effect of
the projected change in net interest income as a percentage of
the current year's net income. The established range for the
impact of a gradual two percent change in interest rates is plus
or minus five percent.
The following tables present the Company's interest
sensitivity position at various intervals at December 31, 1996.
<PAGE>
<TABLE>
Over One Over Three Over Six Over Nine
Month Months Months Months Over One
Within Through Through Through Through Through
One Three Six Nine Twelve Five Over Five
Month Months Months Months Months Years Years Total
(dollars expressed in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RISING INTEREST RATE SCENARIO
Variable rate earning assets:
Loans $ 43,917 6,282 9,786 9,264 8,273 8,182 -- 85,704
Investment securities
(amortized cost) 6,608 86 1,091 459 886 2,327 575 12,032
Federal funds sold 13,500 -- -- -- -- -- -- 13,500
Interest-bearing deposits 69 -- -- -- -- -- -- 69
Total variable rate
earning assets 64,094 6,368 10,877 9,723 9,159 10,509 575 111,305
_______ _____ ______ _____ _____ _____ ____ ______
Fixed rate earning assets:
Loans 8,890 5,595 10,981 5,972 7,008 44,006 5,202 87,654
Investment securities
(amortized cost) 576 3,416 5,708 3,665 7,265 41,725 6,261 68,616
Total fixed rate
earning assets 9,466 9,011 16,689 9,637 14,273 85,731 11,463 156,270
Non-interest earning
assets -- -- -- -- -- -- 16,504 16,504
_____ ______ _____ ______ ______ ______ _____ ______
Total assets $ 73,560 15,379 27,566 19,360 23,432 96,240 28,542 284,079
Variable rate
interest-bearing
liabilities:
Money market and
selected NOW
accounts $ 32,074 -- -- -- -- -- -- 32,074
Securities sold
under agreements
to repurchase and
interest-bearing
notes to U.S.
Treasury 11,316 516 -- -- 1,506 -- -- 13,338
Total variable rate
interest-bearing
liabilities 43,390 516 -- -- 1,506 -- -- 45,412
Fixed rate time deposits 10,401 16,354 31,118 18,030 12,641 24,853 5 113,402
Regular NOW accounts 540 1,080 2,427 2,427 2,697 12,412 5,393 26,976
Savings accounts 682 1,364 2,046 2,046 2,274 9,780 4,544 22,736
Total interest-bearing
liabilities 55,013 19,314 35,591 22,503 19,118 47,045 9,942 208,526
Demand deposits 2,307 4,614 -- -- -- 22,432 3,482 32,835
Other liabilities and
stockholders' equity -- -- -- -- -- -- 42,718 42,718
Total liabilities and
stockholders'
equity $ 57,320 23,928 35,591 22,503 19,118 69,477 56,142 284,079
Interest sensitivity gap:
Periodic $ 16,240 (8,549) (8,025)(3,143) 4,314 26,763 (27,600) --
Cumulative 16,240 7,691 (334)(3,477) 837 27,600 -- N/A
Projected change in
interest rates 0.50% 0.50 1.00 1.50 2.00
Impact of projected
change in interest
rates on net interest
income
Periodic $ 78 (36) (50) (23) 13
Cumulative 78 42 (8) (31) (18)
Cumulative percentage change
in net income due to
projected change in
interest rates 1.28% 0.69 (0.13) (0.51) (0.30)
</TABLE>
<PAGE>
<TABLE>
Over One Over Three Over Six Over Nine
Month Months Months Months Over One
Within Through Through Through Through Through
One Three Six Nine Twelve Five Over Five
Month Months Months Months Months Years Years Total
(dollars expressed in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FALLING INTEREST RATE SCENARIO
Variable rate earning assets:
Loans $ 43,917 6,282 9,786 9,264 8,273 8,182 -- 85,704
Investment securities
(amortized cost) 6,608 86 1,091 459 886 2,327 575 12,032
Federal funds sold 13,500 -- -- -- -- -- -- 13,500
Interest-bearing
deposits 69 -- -- -- -- -- -- 69
Total variable rate
earning assets 64,094 6,368 10,877 9,723 9,159 10,509 575 111,305
_______ _____ ___ _____ _____ _____ ____ ______
Fixed rate earning assets:
Loans 9,445 6,705 12,646 7,637 8,673 41,975 573 87,654
Investment securities
(amortized cost) 576 3,416 5,708 3,665 7,265 41,725 6,261 68,616
Total fixed rate
earning asset 10,021 10,121 18,354 11,302 15,938 83,700 6,834 156,270
Non-interest earning
assets -- -- -- -- -- -- 16,504 16,504
Total assets $ 74,115 16,489 29,231 21,025 25,097 94,209 23,913 284,079
Variable rate
interest-bearing
liabilities:
Money market and
selected NOW
accounts $ 32,074 -- -- -- -- -- -- 32,074
Securities sold
under agreements to
repurchase and
interest-bearing
notes to U.S.
Treasury 11,316 516 -- -- 1,506 -- -- 13,338
Total variable rate
interest-bearing
liabilities 43,390 516 -- -- 1,506 -- -- 45,412
Fixed rate time deposits 10,401 16,354 31,118 18,030 12,641 24,853 5 113,402
Regular NOW accounts 540 1,080 25,356 -- -- -- -- 26,976
Savings accounts 682 1,364 20,690 -- -- -- -- 22,736
Total interest-bearing
lities 55,013 19,314 77,164 18,030 14,147 24,853 5 208,526
Demand deposits 2,307 4,614 -- -- -- 22,432 3,482 32,835
Other liabilities and
stockholders' equity -- -- -- -- -- -- 42,718 42,718
Total liabilities and
stockholders'
equity $ 57,320 23,928 77,164 18,030 14,147 47,285 46,205 284,079
Interest sensitivity gap:
Periodic $ 16,795 (7,439) (47,933) 2,995 10,950 46,924 (22,292) --
Cumulative 16,795 9,356 (38,577) (35,582) (24,632) 22,292 -- N/A
Projected change in
interest rates (0.50)% (0.50) (1.00) (1.50) (2.00)
Impact of projected
change in interest
rates on net interest
income
Periodic $ (80) 32 338 (13) (30)
Cumulative (80) (48) 290 277 247
Cumulative percentage
change in net income
due to projected change
in interest rates (1.31)% (0.79) 4.75 4.54 4.05
</TABLE>
The Company's NOW, savings and money market deposit account
rates be can raised or lowered at any time. However, management
believes that NOW and savings account rates are less sensitive
than money market deposit account rates and does not anticipate
significantly increasing NOW and savings account rates in a
gradually rising rate environment. Management also believes
that, considering the Company's present interest rate structure,
in a gradually falling rate environment once interest rates have
decreased one percent, NOW and savings account rates would be
lowered. Accordingly, in the preceding rising interest rate
scenario table NOW and savings account balances are projected to
gradually reprice as balances are withdrawn and placed in higher
paying investments. In the preceding falling rate scenario table
NOW and savings account balances are repriced once interest rates
have fallen one percent.
<PAGE>
Demand deposits are generally subject to immediate
withdrawal. However, for liquidity purposes, management
considers a core level of demand deposits to be a stable source
of funds based on the Company's historical experience. For
purposes of preparing the preceding tables, management considers
approximately 50 percent of its commercial deposits to be
volatile and subject to withdrawal within three months.
In addition to managing interest sensitivity and liquidity
through the use of gap reports, management historically has
provided for emergency liquidity situations with an informal
agreement with a correspondent bank which permits the Company to
borrow up to $15,000,000 in federal funds on a unsecured basis
and a formal agreement for a secured $10,000,000 reverse
repurchase agreement line. During 1995, the Company also joined
the Federal Home Loan Bank which may be used in the future to
provide a funding source for fixed rate real estate loans and/or
additional liquidity. Historically, the Company has not used any
of these funding vehicles.
At December 31, 1996 and 1995, the Company had certificates
and other time deposits in denominations of $100,000 or more
which mature as follows:
December 31,
1996 1995
(dollars expressed in thousands)
Three months or less $ 4,558 $1,813
Over three months through
six months 4,865 1,692
Over six months through
twelve months 4,479 2,122
Over twelve months 1,045 1,662
$14,947 $7,289
Securities sold under agreements to repurchase generally
mature the next business day; however, certain agreements with
local political subdivisions and select businesses are fixed rate
agreements with original maturities generally ranging from 30 to
120 days. Information relating to securities sold under
agreements to repurchase is as follows:
At End of Period For the Period Ended
Weighted Weighted
Average Maximum Average
Interest Month-End Average Interest
Balance Rate Balance Balance Rate
dollars expressed in thousands)
December 31, 1996 $12,303 4.51% $25,167 16,512 4.65%
December 31, 1995 10,138 4.40 29,590 18,278 5.13
December 31, 1994 18,801 4.64 28,179 20,354 3.46
<PAGE>
Capital
Risk-based capital guidelines for financial institutions
were adopted by regulatory authorities effective January 1, 1991.
These guidelines are designed to relate regulatory capital
requirements to the risk profiles of the specific institutions
and to provide more uniform requirements among the various
regulators. The Company is required to maintain a minimum
risk-based capital to risk-weighted assets ratio of 8.00%, with
at least 4.00% being "Tier 1" capital. In addition, a minimum
leverage ratio, Tier 1 capital to adjusted total assets, of 3.00%
must be maintained. However, for all but the most highly rated
financial institutions, a leverage ratio of 3.00% plus an
additional cushion of 100 to 200 basis points is expected.
In November, 1994 both the Office of the Comptroller of the
Currency and Federal Reserve Board issued final rules concerning
regulatory capital treatment for SFAS 115 adjustments for net
unrealized holding gains and losses on available-for-sale
securities. The final rule states that banking institutions
should not adjust Tier 1 capital for net unrealized holding gains
and losses on available-for-sale securities. Accordingly, in the
case of the Company, Tier 1 capital is common stockholders'
equity, excluding net unrealized holding gains and losses on
available-for-sale securities.
At December 31, 1996 and 1995 capital ratios for the Company
and for the Bank were as follows:
Risk-Based Capital Ratios Leverage
Total Tier 1 Ratio
Company
December 31, 1996 23.14% 21.89% 14.45%
December 31, 1995 23.66 22.41 14.98
Bank
December 31, 1996 23.01 21.77 14.42
December 31, 1995 23.62 22.37 14.96
EFFECTS OF INFLATION
The effects of inflation on financial institutions are
different from the effects on other commercial enterprises since
financial institutions make few significant capital or inventory
expenditures which are directly affected by changing prices.
Because bank assets and liabilities are virtually all monetary in
nature, inflation does not affect a financial institution as much
as do changes in interest rates. The general level of inflation
does underlie the general level of most interest rates, but
interest rates do not increase at the rate of inflation as do
prices of goods and services. Rather, interest rates react more
to changes in the expected rate of inflation and to changes in
monetary and fiscal policy.
Inflation does have an impact on the growth of total assets
in the banking industry, often resulting in a need to increase
capital at higher than normal rates to maintain an appropriate
capital to asset ratio. In the opinion of management, inflation
did not have a significant effect on the Company's operations for
the three years ended December 31, 1996.
FINANCIAL INSTRUMENT MARKET VALUES
As disclosed in note 12 of the Company's consolidated
financial statements, the market values of financial instrument
assets and liabilities included in the balance sheet as of
December 31, 1996 reflect fair values of approximately $1,946,000
and $489,000, respectively, higher than the amounts recorded on
the consolidated balance sheet. Such increases reflect the
effects of a decreasing rate environment, the effects of which
are partially offset by the effectiveness of the Company's
asset/liability and credit risk management programs.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of the
Company and reports of the Company's independent auditors appear
on the pages indicated.
Page
Independent Auditors' Report. 25
Consolidated Balance Sheets as of
December 31, 1996 and 1995. 26
Consolidated Statements of Income
for each of the years ended
December 31, 1996, 1995, and 1994. 27
Consolidated Statements of Stockholders'
Equity for each of the years ended
December 31, 1996, 1995, and 1994. 28
Consolidated Statements of Cash Flows
for each of the years ended
December 31, 1996, 1995, and 1994. 29
Notes to Consolidated Financial Statements. 30
<PAGE>
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1996, 1995, and 1994
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Exchange National Bancshares, Inc.
Jefferson City, Missouri:
We have audited the accompanying consolidated balance sheets of
Exchange National Bancshares, Inc. and subsidiary (the Company)
as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Exchange National Bancshares, Inc. and subsidiary as
of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
February 21, 1997
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Loans, net of allowance for loan losses of
$2,307,068 and $2,179,009 at December 31, 1996
and 1995, respectively $171,001,657 152,160,126
Investments in debt and equity securities:
Available-for-sale, at estimated market value 51,023,834 48,581,631
Held-to-maturity, estimated market value of
$29,659,353 and $19,923,718 at December 31,
1996 and 1995, respectively 29,599,537 19,925,266
Total investments in debt and equity
securities 80,623,371 68,506,897
Federal funds sold 13,500,000 18,000,000
Cash and due from banks 11,671,641 12,057,476
Premises and equipment 3,341,650 2,573,168
Accrued interest receivable 2,543,421 2,327,623
Deferred income taxes 649,306 513,690
Other assets 748,389 1,201,296
$284,079,435 257,340,276
Liabilities and Stockholders' Equity
Deposits:
Demand $32,834,946 32,033,568
NOW 27,742,102 27,005,598
Savings 22,736,453 21,161,309
Money market 31,308,333 29,517,878
Time deposits $100,000 and over 14,946,762 7,289,149
Other time deposits 98,455,176 89,807,811
Total deposits 228,023,772 206,815,313
Securities sold under agreements to repurchase 12,303,391 10,137,869
Interest-bearing demand notes to U.S. Treasury 1,034,432 278,012
Accrued interest payable 1,008,681 910,365
Other liabilities 1,027,857 843,531
Total liabilities 243,398,133 218,985,090
Commitments and contingent liabilities
Stockholders' equity:
Common stock - $1 par value; 1,500,000 shares
authorized, 718,511 shares issued and
outstanding 718,511 718,511
Surplus 1,281,489 1,281,489
Undivided profits 38,696,973 36,219,553
Unrealized holding gains (losses) on investments
in debt and equity securities available-for-sale (15,671) 135,633
Total stockholders' equity 40,681,302 38,355,186
$284,079,435 257,340,276
See accompanying notes to consolidated financial statements.
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995, and 1994
1996 1995 1994
Interest income:
Interest and fees on loans $14,728,837 13,197,335 10,704,966
Interest and dividends on
investments in debt
and equity securities:
U.S. Treasury securities 957,326 738,869 873,865
Securities of U.S. government
agencies 2,437,734 2,503,053 2,340,703
Obligations of states and
political subdivisions 890,505 824,046 900,326
Other securities 205,192 325,112 510,614
Interest on federal funds sold 957,598 1,039,309 731,124
Interest on time deposits with
other banks 1,323 740 -
20,178,515 18,628,464 16,061,598
Interest expense:
Interest on:
NOW accounts 747,952 752,286 891,532
Savings accounts 876,239 838,394 631,683
Money market accounts 1,322,543 1,312,169 1,115,457
Time deposit accounts $100,000
and over 540,455 287,194 160,629
Other time deposit accounts 5,489,355 4,460,013 3,304,330
Securities sold under agreements
to repurchase 767,154 937,020 704,754
Interest-bearing demand notes to
U.S. Treasury 39,856 62,327 38,714
9,783,554 8,649,403 6,847,099
Net interest income 10,394,961 9,979,061 9,214,499
Provision for loan losses 395,000 265,000 139,000
Net interest income after
provision for loan losses 9,999,961 9,714,061 9,075,499
Noninterest income:
Service charges on deposit accounts 701,378 666,252 677,886
Trust department income 286,317 229,524 222,373
Mortgage loan servicing fees 297,273 266,625 230,793
Gain on sales of mortgage loans 112,403 128,925 117,338
Gain on calls of debt securities - 4,502 8,000
Credit card fees 345,339 309,428 271,508
Gain on land taken by Highway
Department - - 94,738
Other 147,476 143,755 134,605
1,890,186 1,749,011 1,757,241
Noninterest expense:
Salaries, wages, and employee
benefits 3,368,169 3,083,036 3,035,021
Occupancy expense, net 295,521 311,631 321,838
Furniture and equipment expense 441,587 448,345 462,569
FDIC insurance assessment 2,000 234,366 464,118
Advertising and promotion 347,550 277,231 236,926
Credit card expenses 299,033 271,862 203,835
Other 1,431,696 1,375,915 1,370,488
6,185,556 6,002,386 6,094,795
Income before income taxes 5,704,591 5,460,686 4,737,945
Income taxes 1,862,000 1,772,000 1,474,000
Net income $3,842,591 3,688,686 3,263,945
Earnings per share $5.35 5.13 4.54
See accompanying notes to consolidated financial statements.
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995, and 1994
Unrealized
holding gains
(losses) on
investments in
debt and equity Total
securities stock-
Common Undivided available- holders'
stock Surplus profits for-sale equity
Balance,
December 31, 1993 $718,511 1,281,489 31,558,972 359,002 33,917,974
Net income - - 3,263,945 - 3,263,945
Cash dividends
declared, $1.52
per share - - (1,092,137) - (1,092,137)
Change in unrealized
holding gains (losses)
on investments in debt
and equity securities
available-for-sale - - - (1,424,771) (1,424,771)
Balance, December 31,
1994 718,511 1,281,489 33,730,780 (1,065,769) 34,665,011
Net income - - 3,688,686 - 3,688,686
Cash dividends declared,
$1.67 per share - - (1,199,913) - (1,199,913)
Change in unrealized
holding gains (losses)
on investments in debt
and equity securities
available-for-sale - - - 1,201,402 1,201,402
Balance, December 31,
1995 718,511 1,281,489 36,219,553 135,633 38,355,186
Net income - - 3,842,591 - 3,842,591
Cash dividends
declared, $1.90
per share - - (1,365,171) - (1,365,171)
Change in unrealized
holding gains (losses)
on investments in debt
and equity securities
available-for-sale - - - (151,304) (151,304)
Balance, December 31,
1996 $718,511 1,281,489 38,696,973 (15,671) 40,681,302
See accompanying notes to consolidated financial statements.
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
1996 1995 1994
Cash flows from operating activities:
Net income $3,842,591 3,688,686 3,263,945
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loan losses 395,000 265,000 139,000
Depreciation expense 303,679 333,791 355,892
Net amortization of debt
securities premiums and
discounts 121,242 253,980 478,883
Gain on land taken by Highway
Department - - (94,738)
Federal Home Loan Bank stock
dividend - (15,800) -
Increase in accrued interest
receivable (215,798) (134,315) (183,615)
(Increase) decrease in other
assets 406,152 (437,264) 118,195
Increase in accrued interest
payable 98,316 225,151 102,985
Increase (decrease) in other
liabilities 184,326 (48,009) 83,082
Gain on calls of debt securities - (4,502) (8,000)
Other, net (64,975) (138,723) (76,372)
Origination of mortgage loans for
sale (21,435,514)(19,652,424)(17,844,711)
Proceeds from the sale of mortgage
loans 21,435,514 19,652,424 17,844,711
Net cash provided by operating
activities 5,070,533 3,987,995 4,179,257
Cash flows from investing activities:
Net increase in loans (20,838,529) (10,882,462)(19,768,919)
Purchases of debt securities:
Available-for-sale (43,984,364) (14,467,927) (5,101,444)
Held-to-maturity (16,371,850) (35,644,113)(35,034,476)
Proceeds from maturities of debt
securities:
Available-for-sale 39,724,343 14,504,340 16,631,025
Held-to-maturity 6,453,990 41,570,580 35,841,624
Proceeds from calls of debt securities:
Available-for-sale 1,500,000 3,000,000 -
Held-to-maturity 200,000 4,085,200 1,833,000
Purchases of premises and equipment (1,073,284) (247,515) (362,238)
Proceeds from sales of premises and
equipment 7,547 19,613 344,000
Proceeds from sales of other real
estate owned and repossessions 1,617,438 776,815 1,226,797
Net cash provided by (used in)
investing activities (32,764,709) 2,714,531 (4,390,631)
Cash flows from financing activities:
Net increase (decrease) in demand
deposits 801,378 (5,160,686) 2,033,074
Net increase (decrease) in interest-
bearing transaction accounts 4,102,103 (7,420,234)(6,951,598)
Net increase (decrease) in time
deposits 16,304,978 12,374,736(1,246,932)
Net increase (decrease) in securities
sold under agreements to
repurchase 2,165,522 (8,662,641) 4,414,613
Net increase (decrease) in interest-
bearing demand notes to U.S.
Treasury 756,420 (496,778) (2,975,553)
Cash dividends paid (1,322,060) (1,163,988) (1,092,137)
Net cash provided by (used in)
financing activities 22,808,341(10,529,591) (5,818,533)
Net decrease in cash and
cash equivalents (4,885,835)(3,827,065)(6,029,907)
Cash and cash equivalents,
beginning of year 30,057,476 33,884,541 39,914,448
Cash and cash equivalents,
end of year$ 25,171,641 30,057,476 33,884,541
Supplemental disclosure of cash
flow information:
Cash paid during the year for:
Interest $9,685,238 8,424,252 6,744,114
Income taxes 1,839,138 1,995,000 1,506,814
Supplemental schedule of noncash
investing activities:
Other real estate and repossessions
acquired in settlement of loans 1,675,520 737,497 1,220,714
See accompanying notes to consolidated financial statements.
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Exchange National Bancshares, Inc. (the Company), through
its wholly owned subsidiary, The Exchange National Bank of
Jefferson City (the Bank), provides a full range of banking
services to individual and corporate customers located
within Jefferson City, Missouri, and the surrounding
communities. The Bank is subject to competition from other
financial and nonfinancial institutions providing financial
products. Additionally, the Company and the Bank are
subject to the regulations of certain regulatory agencies
and undergo periodic examinations by those regulatory
agencies.
The consolidated financial statements of the Company have
been prepared in conformity with generally accepted
accounting principles and conform to predominant practices
within the banking industry. The preparation of the
consolidated financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions, including the
determination of the allowance for loan losses and the
valuation of real estate acquired in connection with
foreclosure or in satisfaction of loans, that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The significant accounting policies used by the Company in
the preparation of the consolidated financial statements are
summarized below:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of the Company and the Bank. All significant intercompany
accounts and transactions have been eliminated.
LOANS
Loans are stated at face amount less unearned income and the
allowance for loan losses. Income on loans is accrued on a
simple-interest basis.
Loans are placed on nonaccrual status when management
believes that the borrower's financial condition, after
consideration of business conditions and collection efforts,
is such that collection of interest is doubtful. Interest
accrued in the current year is reversed against interest
income, and prior years' interest is charged to the
allowance for loan losses. A loan remains on nonaccrual
status until the loan is current as to payment of both
principal and interest and/or the borrower demonstrates the
ability to pay and remain current.
Loan origination fees and costs are deferred and recognized
over the life of the loan as an adjustment to yield.
<PAGE>
The Bank originates certain loans which are sold in the
secondary mortgage market to the Federal Home Loan Mortgage
Corporation (Freddie Mac). These long-term, fixed-rate loans are
sold on a note-by-note basis. Immediately upon locking-in an
interest rate, the Company enters into an agreement to sell the
mortgage loan to Freddie Mac without recourse. The Company
allocates the entire cost of loans originated to the mortgage
loans, with no cost being allocated to the mortgage servicing
rights. At December 31, 1996 and 1995, no mortgage loans were
held for sale. Mortgage loan servicing fees earned on loans sold
to Freddie Mac are reported as income when the related loan
payments are collected. Operational costs to service such loans
are charged to expense as incurred.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions
charged to operations and is reduced by loan charge-offs
less recoveries. Management utilizes a systematic,
documented approach in determining the appropriate level of
the allowance for loan losses. Management's approach, which
provides for general and specific valuation allowances, is
based on current economic conditions, past losses,
collection experience, risk characteristics of the
portfolio, assessment of collateral values by obtaining
independent appraisals for significant properties, and such
other factors which, in management's judgment, deserve
current recognition in estimating loan losses.
Management believes the allowance for loan losses is
adequate to absorb possible losses in the loan portfolio.
While management uses available information to recognize
loan losses, future additions to the allowance may be
necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part
of their examination process, periodically review the
allowance for loan losses. Such agencies may require the
Bank to increase the allowance for loan losses based on
their judgment about information available to them at the
time of their examination.
A loan is considered impaired when it is probable a creditor
will be unable to collect all amounts due, both principal
and interest, according to the contractual terms of the loan
agreement.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
At the time of purchase, debt securities are classified in
one of two categories: available-for-sale or
held-to-maturity. Held-to-maturity securities are those
securities which the Company has the ability and intent to
hold until maturity. All equity securities, and debt
securities not classified as held-to-maturity, are
classified as available-for-sale.
Available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost,
adjusted for the amortization or accretion of premiums or
discounts. Unrealized gains and losses, net of the related
tax effect, on available-for-sale securities are excluded
from earnings and reported as a separate component of
stockholders' equity until realized.
<PAGE>
For securities in the available-for-sale and
held-to-maturity categories, premiums and discounts are
amortized or accreted over the lives of the respective
securities, with consideration of historical and estimated
prepayment rates for mortgage-backed securities, as an
adjustment to yield, using the interest method. Dividend
and interest income are recognized when earned. Realized
gains and losses for securities classified as
available-for-sale are included in earnings based on the
specific identification method for determining the cost of
securities sold.
A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other
than temporary results in a charge to earnings and the
establishment of a new cost basis for the security.
The Bank, as a member of the Federal Home Loan Bank System
administered by the Federal Housing Finance Board, is
required to maintain an investment in the capital stock of
the Federal Home Loan Bank (FHLB) in an amount equal to the
greater of 1% of the Bank's total mortgage-related assets at
the beginning of each year, 0.3% of the Bank's total assets
at the beginning of each year, or 5% of advances from the
FHLB to the Bank. Additionally, the Bank is required to
maintain an investment in the capital stock of the Federal
Reserve Bank. These investments are recorded at cost which
represents redemption value.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation applicable to buildings and
improvements and furniture and equipment is charged to
operating expense using straight-line and accelerated
methods over the estimated useful lives of the assets. Such
lives are estimated to be 5 to 55 years for buildings and
improvements and 3 to 15 years for furniture and equipment.
Maintenance and repairs are charged to operations as
incurred.
OTHER REAL ESTATE
Other real estate, included in other assets in the
accompanying consolidated balance sheets, is recorded at
fair value. If the fair value of other real estate declines
subsequent to foreclosure, the difference is recorded as a
valuation allowance through a charge to income. Subsequent
increases in fair value are recorded through a reversal of
the valuation allowance. Expenses incurred in maintaining
the properties are charged to operations.
INCOME TAXES
The Company and the Bank file a consolidated federal income
tax return.
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in
which those <PAGE> temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
TRUST DEPARTMENT
Property held by the Bank in fiduciary or agency capacities
for its customers is not included in the accompanying
consolidated balance sheets, since such items are not assets
of the Company. Trust department income is recognized on
the accrual basis.
EARNINGS PER SHARE
Earnings per share of common stock is computed by dividing
net income by 718,511, the weighted average number of common
shares outstanding during 1996, 1995, and 1994.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the purpose of the consolidated statements of cash
flows, cash and cash equivalents consist of cash and due
from banks and federal funds sold.
RECLASSIFICATIONS
Certain amounts in the 1995 and 1994 consolidated financial
statements have been reclassified to conform with the 1996
presentation. Such reclassifications have no effect on
previously reported net income.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENT
During June 1996, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 125
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities (SFAS 125). SFAS 125
provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial
components approach that focuses on control. It
distinguishes transfers of financial assets that are sales
from transfers that are secured borrowings. Under the
financial components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing
assets it controls and liabilities it has incurred and
derecognizes financial assets it no longer controls and
liabilities that have been extinguished. The financial
components approach focuses on the assets and liabilities
that exist after the transfer. Many of these assets and
liabilities are components of financial assets that existed
prior to the transfer. If a transfer does not meet the
criteria for a sale, the transfer is accounted for as a
secured borrowing with pledge of collateral.
SFAS 125 extends the "available-for-sale" or "trading"
approach in Statement of Financial Accounting Standards No.
115, Accounting Certain Investments in Debt and Equity
Securities (SFAS 115) to nonsecurity financial assets that
can contractually be prepaid or otherwise settled in such a
way that the holder of the asset would not recover
substantially all of its recorded investment. Thus,
nonsecurity financial assets (no matter how acquired) <PAGE> such
as loans, other receivables, interest only strips, or
residual interest in securitization trusts that are subject
to prepayment risk that could prevent recovery of
substantially all of the recorded amount are to be reported
at fair value with the change in fair value accounted for
depending on the asset's classification as
"available-for-sale" or "trading." SFAS 125 also amends
SFAS 115 to prevent a security from being classified as
held-to-maturity if the security can be prepaid or otherwise
settled in such a way that the holder of the security would
not recover substantially all of its recorded investment.
SFAS 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied
prospectively. Earlier or retroactive application is not
permitted. Also, the extension of the SFAS 115 approach to
certain nonsecurity financial assets and the amendment to
SFAS 115 is effective for financial assets held on or
acquired after January 1, 1997. Reclassifications that are
necessary because of the amendment do not call into question
an entity's intent to hold other debt securities to maturity
in the future. The adoption of SFAS 125 is not expected to
have a material impact on the Company's consolidated
financial statements.
(2) CAPITAL REQUIREMENTS
The Company and the Bank are subject to various regulatory
capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken,
could have a direct material effect on the Company's
consolidated financial statements. Under capital adequacy
guidelines, the Company and the 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
Company and the Bank's capital amounts and classification
are 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 the Bank to
maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of
Tier I capital (as defined) to adjusted average assets (as
defined). Management believes, as of December 31, 1996, the
Company and the Bank meet all capital adequacy requirements
to which they are subject.
The Bank is also subject to the regulatory framework for
prompt corrective action. The most recent notification from
the Office of the Comptroller of the Currency, dated
April22, 1996, categorized the Bank 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 I risk-based, and
Tier I leverage ratios as set forth in the table. There are
no conditions or events since that notification that
management believes have changed the Bank's category.
<PAGE>
The actual and required capital amounts and ratios for the
Company and the Bank as of December 31, 1996 are as follows
(dollars in thousands):
<TABLE>
To Be
well capitalized
under prompt
Capital corrective
Actual requirements action provisions
Amount Ratio Amount Ratio Amount Ratio
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-
weighted assets):
Company $42,951 23.14% $ 14,851 8.00% $ - -%
Bank 42,872 23.01 14,904 8.00 18,629 10.0
Tier I capital (to risk-
weighted assets):
Company 40,644 21.89 7,426 4.00 - -
Bank 40,565 21.77 7,452 4.00 11,178 6.0
Tier I capital (to
adjusted weighted
assets):
Company 40,644 14.45 8,439 3.00 - -
Bank 40,565 14.42 8,438 3.00 14,064 5.0
</TABLE>
Bank dividends are the principal source of funds for payment
of dividends by the Company to its stockholders. The Bank
is subject to regulations of regulatory authorities which
require the maintenance of minimum capital requirements. At
December 31, 1996, unappropriated undivided profits of
$7,218,733 were available for the declaration of dividends
to the Company without prior approval from the Office of the
Comptroller of the Currency.
(3) LOANS
A summary of loans, by classification, at December 31, 1996
and 1995 is as follows:
1996 1995
Real estate $ 98,807,524 84,769,575
Commercial 40,208,276 38,354,883
Installment and other
consumer 34,292,925 31,214,677
173,308,725 154,339,135
Less allowance for loan losses 2,307,068 2,179,009
$ 171,001,657 152,160,126
<PAGE>
The Bank grants real estate, commercial, and installment and
other consumer loans to customers located within Jefferson
City and the surrounding communities. As such, the Bank is
susceptible to changes in the economic environment in
Jefferson City and the surrounding communities. The Bank
does not have a concentration of credit in any one economic
sector. Installment and other consumer loans consist
primarily of the financing of vehicles.
Following is a summary of activity in 1996 of loans made by
the Bank to executive officers and directors or to entities
in which such individuals had a beneficial interest. Such
loans were made in the normal course of business on
substantially the same terms, including interest rates and
collateral requirements, as those prevailing at the same
time for comparable transactions with other persons, and did
not involve more than the normal risk of collectibility or
present unfavorable features.
Balance at December 31, 1995 $ 6,557,695
New loans 268,018
Payments received (2,153,762)
Balance at December 31, 1996 $ 4,671,951
Loans serviced for others totaled approximately $79,455,000
and $71,884,000 at December 31, 1996 and 1995, respectively.
Changes in the allowance for loan losses for 1996, 1995, and
1994 are as follows:
1996 1995 1994
Balance, beginning of year $2,179,009 1,943,325 1,869,788
Provision charged to expense 395,000 265,000 139,000
Charge-offs (391,813) (160,384) (330,920)
Recovering of loans previously
charged off 124,872 131,068 265,457
Balance, end of year $ 2,307,068 2,179,009 1,943,325
<PAGE>
A summary of nonaccrual and other impaired loans at December 31,
1996 and 1995 is as follows:
1996 1995
Nonaccrual loans $ 698,348 720,679
Impaired loans continuing to
accrued interest 4,332,307 379,779
Total impaired loans $ 5,030,655 1,100,458
Allowance for loan losses
on impaired loans $ 277,149 238,980
Impaired loans with no
related allowance for
loan losses $ 4,191,925 172,516
The average balance of impaired loans during 1996 and 1995
was $2,994,733 and $1,119,647, respectively.
A summary of interest income on nonaccrual and other
impaired loans for 1996 and 1995 is as follows:
Impaired
loans
continuing
Nonaccrual to accrue
loans interest Total
1996:
Income recognized $ 22,123 380,539 402,662
Interest income if interest
had accrued 46,354 - 46,354
$ 68,477 380,539 449,016
1995:
Income recognized $ 18,984 39,417 58,401
Interest income if interest
had accrued 42,937 - 42,937
$ 61,921 39,417 101,338
<PAGE>
(4) INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and estimated market values of debt and
equity securities classified as available-for-sale at
December 31, 1996 and 1995 are as follows:
1996
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
U.S. Treasury securities $18,982,950 73,866 31,896 19,024,920
Securities of U.S.
government agencies 26,698,935 65,757 163,168 26,601,524
Obligations of states and
political subdivisions 4,502,624 41,193 10,627 4,533,190
Total debt securities 50,184,509 180,816 205,691 50,159,634
Federal Home Loan Bank stock 804,200 - - 804,200
Federal Reserve Bank stock 60,000 - - 60,000
$51,048,709 180,816 205,691 51,023,834
1995
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
U.S. Treasury securities $ 11,973,384 114,829 5,763 12,082,450
Securities of U.S.
government agencies 31,171,683 113,733 81,488 31,203,928
Obligations of states and
political subdivisions 4,357,073 78,999 5,019 4,431,053
Total debt securities 47,502,140 307,561 92,270 47,717,431
Federal Home Loan Bank stock 804,200 - - 804,200
Federal Reserve Bank stock 60,000 - - 60,000
$ 48,366,340 307,561 92,270 48,581,631
The amortized cost and estimated market value of debt
securities classified as available-for-sale at December 31,
1996 and 1995, by contractual maturity or call date, are
shown below.
<PAGE>
Expected maturities may differ from contractual maturities
because borrowers have the right to prepay obligations with
or without prepayment penalties.
1996
Estimated Estimated
Amortized market Amortized market
cost value cost value
Due in one year or less $ 9,818,069 9,845,440 12,047,531 12,047,528
Due after one year
through five years 33,197,749 33,174,099 24,879,934 25,058,672
Due after five years
through ten years - - 2,022,639 2,051,470
43,015,818 43,019,539 38,950,104 39,157,670
Mortgage-backed
securities 7,168,691 7,140,095 8,552,036 8,559,761
$ 50,184,509 50,159,634 47,502,140 47,717,431
The amortized cost and estimated market values of debt
securities classified as held-to-maturity at December 31,
1996 and 1995 are as follows:
1996
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
U.S. Treasury
securities $ 1,030,000 319 - 1,030,319
Securities of U.S.
government agencies 14,695,324 40,114 76,448 14,658,990
Obligations of states
and political
subdivisions 12,288,884 159,862 71,148 12,377,598
Other debt securities 1,585,329 7,322 205 1,592,446
$ 29,599,537 207,617 147,801 29,659,353
1995
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
Securities of U.S.
government agencies $ 6,964,620 3,021 91,667 6,875,974
Obligations of states
and political
subdivisions 10,614,790 184,802 119,068 10,680,524
Other debt securities 2,345,856 24,963 3,599 2,367,220
$ 19,925,266 212,786 214,334 19,923,718
<PAGE>
The amortized cost and estimated market value of debt
securities classified as held-to-maturity at December 31,
1996 and 1995, by contractual maturity or call date, are
shown below. Expected maturities may differ from
contractual maturities because borrowers have the right to
prepay obligations with or without prepayment penalties.
1996 1995
Estimated Estimated
Amortized market Amortized market
cost value cost value
Due in one year or less $ 3,508,941 3,510,389 5,831,268 5,767,989
Due after one year
through five years 16,170,528 16,215,072 7,148,023 7,228,807
Due after five years
through ten years 6,793,888 6,800,457 4,687,724 4,665,121
Due after ten years 2,061,469 2,076,323 2,165,827 2,166,356
28,534,826 28,602,241 19,832,842 19,828,273
Mortgage-backed
securities 1,064,711 1,057,112 92,424 95,445
$29,599,537 29,659,353 19,925,266 19,923,718
Debt securities with carrying values aggregating
approximately $40,204,000 and $31,291,000 at December 31,
1996 and 1995, respectively, were pledged to secure public
funds, securities sold under agreements to repurchase, and
for other purposes as required or permitted by law.
Proceeds from the calls of debt securities classified as
held-to-maturity were $200,000, $4,085,200, and $1,833,000,
during 1996, 1995, and 1994, respectively. Gross gains on
those calls were $4,502 and $8,000 during 1995 and 1994,
respectively. Proceeds from the calls of debt securities
classified as available-for-sale, which resulted in no gains
or losses, were $1,500,000 and $3,000,000 during 1996 and
1995, respectively. No debt securities were sold during
1996, 1995, and 1994.
<PAGE>
(5) PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1996 and
1995 is as follows:
1996 1995
Land $ 1,040,172 1,050,474
Buildings and improvements 3,570,610 3,569,977
Furniture and equipment 2,828,581 2,485,783
construction in process 715,114 -
8,154,477 7,106,234
Less accumulated depreciation 4,812,827 4,533,066
$ 3,341,650 2,573,168
Depreciation expense was $303,679, $333,791, and $355,892
for 1996, 1995, and 1994, respectively.
Construction in progress relates to a new branch facility
under construction which is scheduled to open in March 1997.
(6) DEPOSITS
The scheduled maturities of time deposits are as follows (in
thousands):
1996 1995
Due within:
One year $ 88,544 66,361
Two years 15,144 17,770
Three years 5,378 6,621
Four years 3,783 3,170
Five years 548 3,157
Thereafter 5 18
$ 113,402 97,097
<PAGE>
(7) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Information relating to securities sold under agreements to
repurchase is as follows:
1996 1995 1994
Average daily balance $ 16,512,000 18,278,000 20,354,000
Maximum balance at
month-end (March 1996,
February 1995, and
March 1994) 25,166,520 29,589,525 28,178,831
Weighted average interest
rate at year-end 4.51% 4.40 4.64
Weighted average interest
rate for the year 4.65 5.13 3.46
The securities underlying the agreements to repurchase are
under the control of the Bank.
Unused agreements with unaffiliated banks to sell and
repurchase securities on which the Bank may draw totaled
$10,000,000 at December 31, 1996. Additionally, under
agreements with unaffiliated banks, the Bank may borrow up
to $15,000,000 in federal funds on an unsecured basis at
December 31, 1996.
(8) RESERVE REQUIREMENTS AND COMPENSATING BALANCES
The Federal Reserve Bank required the Bank to maintain a
balance of $1,397,000 and $1,330,000 at December 31, 1996
and 1995, respectively, to satisfy reserve requirements.
Average compensating balances held at correspondent banks
were $1,302,817 and $2,438,935 during December 1996 and
1995, respectively. The Bank maintains such compensating
balances with correspondent banks to offset charges for
services rendered by those banks.
(9) INCOME TAXES
The composition of income tax expense (benefit) for 1996,
1995, and 1994 is as follows:
1996 1995 1994
Current:
Federal $ 1,673,216 1,615,893 1,301,846
State 235,539 231,677 208,121
Total current 1,908,755 1,847,570 1,509,967
Deferred:
Federal (42,964) (69,443) (33,051)
State (3,791) (6,127) (2,916)
Total deferred (46,755) (75,570) (35,967)
Total provision
income taxes $ 1,862,000 1,772,000 1,474,000
<PAGE>
Applicable income taxes for financial reporting purposes
differ from the amount computed by applying the statutory
federal income tax rate of 34% for the reasons noted in the
table below:
1996 1995 1994
Tax at statutory federal
income tax rate $ 1,939,561 1,856,633 1,610,901
Decrease in tax resulting
from tax-exempt income (241,574) (235,783) (279,348)
State income tax, net of
federal tax benefit 151,520 146,241 135,435
Other, net 12,493 4,909 7,012
$ 1,862,000 1,772,000 1,474,000
The components of deferred tax assets and deferred tax
liabilities at December 31, 1996 and 1995 are as follows:
1996 1995
Deferred tax assets:
Allowance for loan losses $635,872 588,490
Available-for-sale securities 9,204 -
Nonaccrual loan interest 18,331 12,708
Mortgage servicing rights 123,649 103,653
Total deferred tax assets 787,056 704,851
Deferred tax liabilities:
Available-for-sale securities - 79,658
Premises and equipment 51,348 42,561
Prepaid pension expense 29,916 34,847
Loan origination costs 35,608 24,382
Other 20,878 9,713
Total deferred tax liabilities 137,750 191,161
Net deferred tax asset $649,306 513,690
The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the
periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
Based upon the level of historical taxable income and
projections for future taxable income over the periods which
the deferred tax assets are deductible, management believes
it is more likely than not <PAGE> the Company will realize the
benefits of these temporary differences at December 31, 1996
and, therefore, has not established a valuation reserve.
(10) PENSION AND RETIREMENT PLANS
The Bank provides a noncontributory defined benefit plan in
which all full-time employees become participants upon the
later of the completion of one year of qualified service or
the attainment of age 21, and in which they continue to
participate as long as they continue to be full-time
employees, until their retirement, death, or termination of
employment prior to normal retirement date. The normal
retirement benefits provided under the plan vary depending
upon the participant's previous rate of compensation, length
of employment, and social security benefits. Retirement
benefits are payable for life but not less than 10 years.
Plan assets consist of U.S. Treasury and government agency
securities, corporate common stocks and bonds, real estate
mortgages, and demand deposits.
The net periodic pension expense (benefit) for the plan for
1996, 1995, and 1994 is as follows:
1996 1995 1994
Service cost $ 99,979 63,881 87,234
Interest cost 171,276 156,514 146,569
Return on assets:
Actual return (459,934) (432,302) (159,995)
Excess (deficit) of
actual compared to
assumed return 237,517 211,480 (32,379)
(222,417) (220,822) (192,374)
Net amortization of the
excess of market value
of plan assets over pro-
jected benefit obligation
at November 1, 1988 (35,512) (35,512) (35,512)
Net periodic pension
(benefit) expense $ 13,326 (35,939) 5,917
Rates utilized for the plan years ended December 31, 1996 and
1995 are as follows:
1996 1995
Assumed discount rate for net periodic
pension cost 6.40% 8.00
Discount rate for the funded status 6.70 6.40
Weighted average rate of compensation
increase used to measure the projected
benefit obligation 6.00 6.00
Expected long-term rate of return on
plan assets 7.00 7.00
<PAGE>
A summary of the funded status of the plan as of October 31, 1996
and 1995 is as follows:
1996 1995
Accumulated benefit obligation:
Vested $(2,307,480) (2,214,120)
Nonvested (1,612) (3,001)
Accumulated benefit obligation (2,309,092) (2,217,121)
Effect of projected compensation
increases (488,842) (498,180)
Projected benefit obligation (2,797,934) (2,715,301)
Plan assets at fair market value 3,773,556 3,391,848
Plan assets in excess of projected
benefit obligation $ 975,622 676,547
A composition of plan assets in excess of projected benefit
obligation is as follows:
1996 1995
Unamortized excess of market value
of plan assets over projected benefit
obligation at November 1, 1988,
being amortized over 16.75 years $ 310,728 346,240
Other unrecognized net gain from past
experience different from that assumed
and effect of changes in assumptions 584,039 236,126
Prepaid pension asset 80,855 94,181
$ 975,622 676,547
In addition to the pension plan described above, the Bank has a
profit sharing plan which covers all full-time employees. The
Bank is required to make annual contributions in an amount equal
to 6% of income before income taxes and before contributions to
the profit sharing and pension plans for all participants,
limited to the maximum amount deductible for federal income tax
purposes. Contributions to the profit sharing plan for 1996,
1995, and 1994 were $349,132, $338,089, and $307,032,
respectively. At December 31, 1996, the profit sharing plan held
69,704 shares of the common stock of the Company.
<PAGE>
(11) CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
The condensed balance sheets as of December 31, 1996 and
1995 and the related condensed schedules of income and cash
flows for the years ended December 31, 1996, 1995, and 1994
of the Company are as follows:
Condensed Balance Sheets
Assets 1996 1995
Cash $ 397,172 336,448
Investment in Bank 40,548,757 38,197,274
Other assets 53,346 95,943
Total assets $40,999,275 38,629,665
Liabilities and Stockholders' Equity
Dividends payable 316,145 273,034
Other liabilities 1,828 1,445
Stockholders' equity 40,681,302 38,355,186
Total liabilities and stockholders'
equity $40,999,275 38,629,665
Condensed Schedules of Income
1996 1995 1994
Revenue - dividends received
from Bank $ 1,379,400 1,212,420 1,103,520
Expenses:
Amortization of organization
costs 42,668 42,668 42,668
Other 16,928 12,288 23,631
59,596 54,956 66,299
Income before income tax
benefit and equity in
undistributed income of Bank 1,319,804 1,157,464 1,037,221
Income tax benefit 20,000 19,000 23,000
Equity in undistributed
income of Bank 2,502,787 2,512,222 2,203,724
Net income $ 3,842,591 3,688,686 3,263,945
<PAGE>
Condensed Schedules of Cash Flows
1996 1995 1994
Cash flows from operating
activities:
Net income $ 3,842,591 3,688,686 3,263,945
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Equity in undistributed
income of Bank (2,502,787)(2,512,222) (2,203,724)
Other, net 42,980 44,727 43,113
Net cash provided by
operating activities 1,382,784 1,221,191 1,103,334
Cash flows from financing
activities - cash dividends
paid (1,322,060)(1,163,988) (1,092,137)
Net increase in cash 60,724 57,203 11,197
Cash at beginning of year 336,448 279,245 268,048
Cash at end of year $ 397,172 336,448 279,245
Supplemental information
- income taxes received $ 19,929 21,059 22,000
(12) DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These financial
instruments include commitments to extend credit and
commercial and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the
consolidated balance sheets.
The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit and commercial
and standby letters of credit is represented by the
contractual amount of those instruments. The Company uses
the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet
instruments.
Off-balance-sheet financial instruments whose contractual
amounts represent credit risk at December 31, 1996 and 1995
are as follows:
1996 1995
Commitments to extend credit $ 37,160,684 26,183,238
Standby letters of credit 972,344 859,295
<PAGE>
Commitments to extend credit are agreements to lend to a
customer as long as there is not a violation of any
condition established in the contract. Of the total
commitments to extend credit, $17,116,147 and $12,001,316
represent fixed-rate loan commitments at December31, 1996
and 1995, respectively. Commitments generally have fixed
expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby and commercial letters of credit are conditional
commitments issued by the Company to guarantee the
performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to
customers.
The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained if
deemed necessary by the Company upon extension of credit is
based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable;
inventory; property, plant, and equipment; and
income-producing commercial properties.
A summary of the carrying amounts and fair values of the
Company's financial instruments at December 31, 1996 and
1995 is as follows:
1996 1995
Carrying Fair Carrying Fair
amount value amount value
Assets:
Loans $171,001,657 172,888,000 152,160,126 153,667,000
Investments in debt and
equity securities 80,623,371 80,683,187 68,506,897 68,505,349
Federal funds sold 13,500,000 13,500,000 18,000,000 18,000,000
Cash and due from banks 11,671,641 11,671,641 12,057,476 12,057,476
Accrued interest
receivable 2,543,421 2,543,421 2,327,623 2,327,623
$ 279,340,090 281,286,249 253,052,122 254,557,448
Liabilities:
Deposits:
Demand $ 32,834,946 32,834,946 32,033,568 32,033,568
NOW 27,742,102 27,742,102 27,005,598 27,005,598
Savings 22,736,453 22,736,453 21,161,309 21,161,309
Money market 31,308,333 31,308,333 29,517,878 29,517,878
Time 113,401,938 113,898,000 97,096,960 97,405,000
Securities sold under
agreements to
repurchase 12,303,391 12,296,000 10,137,869 10,137,869
Interest-bearing demand
notes to U.S.
Treasury 1,034,432 1,034,432 278,012 278,012
Accrued interest payable 1,008,681 1,008,681 910,365 910,365
$ 242,370,276 242,858,947 218,141,559 218,449,599
<PAGE>
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for
which it is practicable to estimate such value:
LOANS
Fair values are estimated for portfolios of loans with
similar financial characteristics. Loans are segregated by
type, such as real estate, installment and other consumer,
commercial, and bankers' acceptances. Each loan category is
further segmented into fixed and adjustable interest rate
terms and by performing and nonperforming categories.
The fair value of performing loans is calculated by
discounting scheduled cash flows through estimated maturity
using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loan. The
estimate of maturity is based on the Company's historical
experience with repayments for each loan classification,
modified, as required, by an estimate of the effect of
current economic and lending conditions.
The fair value for significant nonperforming loans is based
on recent external appraisals. If appraisals are not
available, estimated cash flows are discounted using a rate
commensurate with the risk associated with the estimated
cash flows. Assumptions regarding credit risk, cash flows,
and discount rates are judgmentally determined using
available market and specific borrower information.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Fair values are based on quoted market prices or dealer
quotes.
FEDERAL FUNDS SOLD AND CASH AND DUE FROM BANKS
For federal funds sold and cash and due from banks, the
carrying amount is a reasonable estimate of fair value, as
such instruments reprice in a short time period.
ACCRUED INTEREST RECEIVABLE AND PAYABLE
For accrued interest receivable and payable, the carrying
amount is a reasonable estimate of fair value because of the
short maturity for these financial instruments.
DEPOSITS
The fair value of deposits with no stated maturity, such as
non-interest-bearing demand, NOW accounts, savings, and
money market, is equal to the amount payable on demand. The
fair value of time deposits is based on the discounted value
of contractual cash flows. The discount rate is estimated
using the rates currently offered for deposits of similar
remaining maturities.
<PAGE>
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The fair value of securities sold under agreements to
repurchase is based on the discounted value of contractual
cash flows. The discount rate is estimated using the rates
currently offered for agreements of similar remaining
maturity.
INTEREST-BEARING DEMAND NOTES TO U.S. TREASURY
For interest-bearing demand notes to U.S. Treasury, the
carrying amount is a reasonable estimate of fair value, as
such instruments reprice in a short time period.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF
CREDIT
The fair value of commitments to extend credit and standby
letters of credit are estimated using the fees currently
charged to enter into similar agreements, taking into
account the remaining terms of the agreements, the
likelihood of the counterparties drawing on such financial
instruments, and the present creditworthiness of such
counterparties. The Company believes such commitments have
been made on terms which are competitive in the markets in
which it operates.
The fair value estimates provided are made at a point in
time based on market information and information about the
financial instruments. Because no market exists for a
portion of the Company's financial instruments, fair value
estimates are based on judgments regarding future expected
loss experience, current economic conditions, risk
characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment
and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the fair
value estimates.
(13) LITIGATION
Various legal claims have arisen in the normal course of
business, which, in the opinion of management of the
Company, will not result in any material liability to the
Company.
<PAGE>
MARKET PRICE OF AND DIVIDENDS ON EQUITY SECURITIES AND
RELATED MATTERS
While there has been some trading activity in the Company's
common stock since April 7, 1993 (the date on which Bancshares
became a publicly held company), there is no established market
for the shares. The following table sets forth the range of high
and low bid prices of the Company's common stock by quarter for
each quarter in 1996 and 1995 in which the stock was traded, as
reported by a local broker-dealer.
1996 High Low
Fourth Quarter $47.00 44.00
Third Quarter 44.00 44.00
Second Quarter 44.00 44.00
First Quarter 44.00 41.00
1995 High Low
Fourth Quarter $41.00 41.00
Third Quarter 40.00 40.00
Second Quarter 40.00 40.00
First Quarter 40.00 40.00
As of March 17, 1997, the Company had issued and outstanding
718,511 shares of common stock, which were held of record by
approximately 570 persons. The common stock is the only class of
equity security which the Company has outstanding and the shares
are not listed on any securities exchange.
The following table sets forth information on dividends paid
by the Company in 1996 and 1995.
Dividends Paid
Month Paid Per Share
January, 1996 $0.38
April, 1996 0.38
July, 1996 0.44
October, 1996 0.44
December, 1996 0.20
Total for 1996 $1.84
January, 1995 $0.33
April, 1995 0.33
July, 1995 0.38
October, 1995 0.38
December, 1995 0.20
Total for 1995 $1.62
The Company's Board of Directors intends that the Company
will continue to pay quarterly dividends at least at the current
rate. In addition, the Board of Directors intends, to the extent
appropriate, that the Company will continue to pay an additional
special dividend. The actual amount of quarterly dividends and
the payment, as well as amount, of any special dividend
ultimately will depend upon the payment of sufficient dividends
by the Bank to the Company. The payment by the Bank of dividends
to the Company will depend upon such factors as the Bank's
financial condition, results of operations and current and
anticipated cash needs, including capital requirements.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Position with Position with
Name the Bank Bancshares Principal Occupation
Donald L. Campbell Chairman of President, Position with
the Board Chairman of Bancshares
and Director the Board and the Bank
and Director-
Class III
David T. Turner President Senior Vice Position with
and Director President Bancshares
and Director- and the Bank
Class III
Charles G.
Dudenhoeffer, Jr. Senior Vice Senior Vice Position with
President, President and Bancshares
Trust Officer Director-Class and the Bank
and Director I
Philip D. Freeman Director Director-Class Owner/Manager,
I Freeman Mortuary,
Jefferson City,
Missouri
David R. Goller Director Director-Class II Attorney with the law
firm of Goller,
Gardner & Feather,
P.C., Jefferson City,
Missouri
James R. Loyd Director Director-Class II Retired
Kevin L. Riley Director Director-Class Co-owner, Riley
III Chevrolet, Inc. and
Riley Oldsmobile,
Cadillac, Inc.,
Jefferson City,
Missouri
Carl A.
Brandenburg, Senior Vice Treasurer and Position with
Sr. President and Chief Financial Bancshares
Chief Financial Officer and the Bank
Officer
Lamont C. Grubbs Senior Vice Secretary Position with
President Bancshares
and Cashier and the Bank
<PAGE>
ANNUAL REPORT ON FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1996, as filed with the Securities and
Exchange Commission, excluding exhibits, will be furnished
without charge to shareholders entitled to vote at the 1997
annual meeting of shareholders upon written request to Donald L.
Campbell, President, Exchange National Bancshares, Inc., 132 East
High Street, Jefferson City, Missouri 65101. The Company will
provide a copy of any exhibit to the Form 10-KSB to any such
person upon written request and the payment of the Company's
reasonable expenses in furnishing such exhibits.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,603
<INT-BEARING-DEPOSITS> 69
<FED-FUNDS-SOLD> 13,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 51,024
<INVESTMENTS-CARRYING> 29,599
<INVESTMENTS-MARKET> 29,659
<LOANS> 173,309
<ALLOWANCE> 2,307
<TOTAL-ASSETS> 284,079
<DEPOSITS> 228,024
<SHORT-TERM> 13,338
<LIABILITIES-OTHER> 2,036
<LONG-TERM> 0
0
0
<COMMON> 719
<OTHER-SE> 39,962
<TOTAL-LIABILITIES-AND-EQUITY> 284,079
<INTEREST-LOAN> 14,729
<INTEREST-INVEST> 4,491
<INTEREST-OTHER> 959
<INTEREST-TOTAL> 20,179
<INTEREST-DEPOSIT> 8,977
<INTEREST-EXPENSE> 9,784
<INTEREST-INCOME-NET> 10,395
<LOAN-LOSSES> 395
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,185
<INCOME-PRETAX> 5,705
<INCOME-PRE-EXTRAORDINARY> 3,843
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,843
<EPS-PRIMARY> 5.35
<EPS-DILUTED> 5.35
<YIELD-ACTUAL> 4.12
<LOANS-NON> 698
<LOANS-PAST> 394
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,557
<ALLOWANCE-OPEN> 2,179
<CHARGE-OFFS> 302
<RECOVERIES> 125
<ALLOWANCE-CLOSE> 2,307
<ALLOWANCE-DOMESTIC> 1,904
<ALLOWANCE-FOREIGN> 0
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</TABLE>
