SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of Report (Date of earliest event reported) November 3,1997
EXCHANGE NATIONAL BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
Missouri 0-23636 43-1626350
(State or other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
132 East High Street, Jefferson City, Missouri 65101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (573) 761-6100
_________________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the Acquisition Agreement, dated July 11,
1997, as amended August 25, 1997 (the "Acquisition Agreement"),
by and among the Registrant, ENBUSB Acquisition Company, Inc., a
Missouri corporation and wholly-owned subsidiary of the
Registrant ("ENBUSB"), Union State Bank & Trust of Clinton, a
Missouri trust company ("Bank") and Union State Bancshares, Inc.,
a Missouri corporation ("USB") and certain shareholders of USB
("Shareholders"), and a related Merger Agreement, dated October
22, 1997, by and between USB and ENBUSB, ENBUSB was merged (the
"Merger") with and into USB on November 3, 1997, with USB
thereupon becoming a wholly-owned subsidiary of the Registrant.
The Acquisition Agreement provided all shareholders
with the opportunity to elect to receive cash in exchange for
their shares of USB common stock. The Acquisition Agreement
further provided certain shareholders with the opportunity to
receive, in addition to or in lieu of cash, five year promissory
notes in their favor in exchange for their shares of USB common
stock. The valuation methodology for the Merger was negotiated
and agreed to by the parties to the Acquisition Agreement. At
the closing, Registrant paid to the shareholders of USB merger
consideration of approximately $17,750,000 (the "Merger
Consideration") in exchange for 100% of the USB common stock.
The Registrant paid approximately $11,700,500 of the Merger
Consideration in the form of five year promissory notes in favor
of eight shareholders and the balance of the Merger Consideration
was paid in cash. The Registrant funded the cash portion of the
Merger Consideration primarily with funds drawn on a $10,000,000
line of credit provided by Mercantile Bank, National Association.
The Registrant also satisfied and discharged $2,350,000 of USB's
indebtedness at the closing.
Immediately prior to the Merger, USB, through its
wholly-owned subsidiary, the Bank, engaged in a general banking
business, accepting funds for deposit, making loans and
performing the other usual and customary banking services. As of
September 30, 1997, the Bank had total assets of approximately
$132.9 million. The Bank's principal banking facility is located
in Clinton, Missouri with four branch locations in Clinton,
Osceola and Collins, Missouri. The Registrant, through the Bank,
will continue to engage in the general banking business from the
facilities referred to above.
Prior to the Merger, USB was managed by Gus S. Wetzel,
II, USB's Chairman of the Board, Douglas L. Thomason, USB's
President and James E. Smith, USB's Secretary and Treasurer. Mr.
Smith and Mr. Wetzel will continue to serve on USB's board of
directors. Mr. Smith also will serve as USB's President,
Treasurer and Assistant Secretary. Donald L. Campbell, Chairman
of the Board and President of the Registrant, will be added to
USB's board of directors and will serve as USB's Chairman of the
Board and Secretary. The operations of the Bank will not change
significantly. Mr. Wetzel and Mr. Smith have been elected to the
board of directors of the Registrant with Mr. Wetzel acting as an
advisory member.
<PAGE>
With the exception of the newly established
relationship, there is not a material relationship between any of
the controlling shareholders of USB and the Registrant or any of
the Registrant's affiliates, directors or officers, or any
associate of the Registrant's directors or officers. Certain
former stockholders of USB may be employed by the Registrant.
A press release of Registrant issued November 3, 1997,
announcing the consummation of the Merger, is attached as an
exhibit to this report and incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial Statements of Business Acquired
Audited consolidated balance sheet as of December
31, 1996 and related consolidated statements of
income, stockholders' equity and cash flows for
the year then ended. Unaudited consolidated
balance sheet as of September 30, 1997 and related
consolidated statements of income and cash flows
for the nine months ended September 30, 1997 and
1996.
(b) Pro Forma Financial Information
Unaudited pro forma consolidated condensed balance
sheet as of September 30, 1997 and unaudited pro
forma consolidated statements of income for the
nine months ended September 30, 1997 and for the
year ended December 31, 1996.
(c) Exhibits
The following exhibits are filed with this report.
Exhibit
No. Description
2.1 Acquisition Agreement, dated as of July 11, 1997, as
amended August 25, 1997, by and among the Registrant,
ENBUSB, the Bank, USB and certain shareholders of USB
(filed on November 7, 1997 as Exhibit 2.1 to the
original filing of this report on Form 8-K and
incorporated herein by reference).
2.2 Merger Agreement, dated as of October 22, 1997 by and
between USB and ENBUSB (filed on November 7, 1997 as
Exhibit 2.2 to the original filing of this report on
Form 8-K and incorporated herein by reference).
99.1 Press Release of Registrant, issued November 3, 1997
(filed on November 7, 1997 as Exhibit 99.1 to the
original filing of this report on Form 8-K and
incorporated herein by reference).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
EXCHANGE NATIONAL BANCSHARES, INC.
Date: December 30, 1997 By: /s/ Donald L. Campbell
Name: Donald L. Campbell
Title: Chairman of the Board
and President
<PAGE>
EXHIBIT INDEX
2.1 Acquisition Agreement, dated as of July 11, 1997, as
amended August 25, 1997, by and among the Registrant,
ENBUSB, the Bank, USB and certain shareholders of USB
(filed on November 7, 1997 as Exhibit 2.1 to the
original filing of this report on Form 8-K and
incorporated herein by reference).
2.2 Merger Agreement, dated as of October 22, 1997 by and
between USB and ENBUSB (filed on November 7, 1997 as
Exhibit 2.2 to the original filing of this report on
Form 8-K and incorporated herein by reference).
99.1 Press Release of Registrant, issued November 3, 1997
(filed on November 7, 1997 as Exhibit 99.1 to the
original filing of this report on Form 8-K and
incorporated herein by reference).
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
September 30, 1997 (unaudited) and December 31, 1996
_________________________________________________________________
September 30, December 31,
Assets 1997 1996
_________________________________________________________________
Loans, net of allowance for
loan losses of $1,307,386
and 1,284,040 at September 30,
1997 and December 31, 1996,
respectively 74,312,288 72,886,634
Investments in debt and equity
securities:
Available for sale 33,461,206 29,513,185
Held to maturity 7,919,000 10,079,466
_________________________________________________________________
Total investments in debt and
equity securities $41,380,206 $39,592,651
_________________________________________________________________
Federal funds sold 9,325,000 5,975,000
Cash and due from banks 4,702,626 5,540,143
Interest-bearing deposits 189,323 461,197
Premises and equipment 1,219,111 1,205,543
Accrued interest receivable 1,452,018 1,221,443
Deferred income taxes, net 94,805 192,585
Goodwill 192,546 209,209
Other assets 91,895 160,819
_________________________________________________________________
$132,959,818 $127,445,224
_________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
_________________________________________________________________
Deposits:
Demand 12,192,168 12,531,944
NOW 26,329,564 24,183,182
Money market 4,297,691 3,638,899
Savings 10,037,806 9,451,013
Time deposits $100,000 and over 13,631,000 10,794,958
Other time deposits 51,981,136 52,950,242
_________________________________________________________________
Total deposits $118,469,365 $113,550,238
_________________________________________________________________
Advances from the Federal Home
Loan Bank 3,100,000 3,300,000
Note payable 3,175,000 3,650,000
Accrued interest payable 1,100,113 1,016,400
Other liabilities 95,463 123,217
_________________________________________________________________
Total liabilities $125,939,941 $121,639,855
_________________________________________________________________
Commitments and contingent liabilities
Stockholders' equity:
Common stock - $10 par value;
3,000 shares authorized,
887.375 shares issued,
and 556.875 shares outstanding 8,874 8,874
Surplus 1,464,663 1,464,663
Undivided profits 10,665,619 9,644,660
Treasury stock, at cost -
330.5 shares (5,399,869) (5,399,869)
Unrealized holding gains on
investments in debt and equity
securities available for sale 280,590 87,041
_________________________________________________________________
Total stockholders' equity $ 7,019,877 $ 5,805,369
_________________________________________________________________
$132,959,818 $127,445,224
_________________________________________________________________
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income
Nine months ended September 30, 1997 and 1996 (unaudited)
Nine months ended September 30
1997 1996
Interest income:
Interest and fees on loans 4,857,966 4,597,329
Interest and dividends on
investments in debt
and equity securities:
Taxable 1,706,854 1,664,166
Exempt from federal income tax 293,000 279,000
Interest on federal funds sold 289,893 235,985
Interest on interest-bearing deposits 7,132 7,486
$7,154,845 $6,783,966
Interest expense:
Interest on:
NOW accounts 438,720 371,877
Money market 63,799 67,610
Savings accounts 227,245 210,563
Time deposit accounts $100,000
and over 488,056 396,421
Other time deposits 2,210,755 2,228,443
Advances from the Federal
Home Loan Bank 159,312 169,562
Note payable 190,495 234,339
$3,778,382 $3,678,815
Net interest income 3,376,463 3,105,151
Provision for loan losses 45,000 67,500
Net interest income after provision
for loan losses 3,331,463 3,037,651
Noninterest income:
Service charges on deposit accounts 261,973 250,284
Trust fees 31,304 29,438
Other 106,280 54,945
$ 399,557 $ 334,667
Noninterest expense:
Salaries, wages, and employee benefits 994,360 907,981
Occupancy expense 135,700 131,198
Furniture and equipment expense 99,807 98,430
Data processing 134,170 132,269
FDIC insurance assessment 3,065 1,500
Office supplies 64,902 59,821
Advertising and promotion 30,783 29,671
Postage and freight 47,621 47,886
Management fees 346,950 225,000
Other 477,600 437,374
$2,334,958 $2,071,130
Income before income taxes 1,396,062 1,301,188
Income taxes 375,103 410,461
Net income $1,020,959 $ 890,727
Earnings per share $ 1,833 $ 1,571
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996 (unaudited)
Nine months ended September 30,
1997 1996
Cash flows from operating activities:
Net income 1,020,959 890,727
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 45,000 67,500
Depreciation expense 171,900 179,575
Net amortization of debt
securities premiums and discounts 7,901 11,908
Amortization of goodwill 16,662 16,662
Increase in accrued interest
receivable (230,575) (37,096)
Decrease in other assets 68,924 5,862
Increase in accrued interest
payable 83,713 16,570
Decrease in other liabilities (27,754) (111,862)
Other, net 152,842 2,476
Net cash provided by operating
activities 1,309,572 1,042,322
Cash flows from investing activities:
Net increase in loans (1,596,722) (2,676,126)
Purchases of debt and equity
securities available for sale (12,026,948) (11,800,435)
Proceeds from maturities of debt
securities:
Available for sale 8,229,501 4,731,565
Held to maturity 2,144,419 3,479,294
Proceeds from sales of debt
securities available for sale 498,203
Purchases of premises and equipment (177,968) (249,617)
Proceeds from sales of premises
and equipment 6,095
Proceeds from sales of other
real estate 114,628 181,739
Net cash used in investing activities (3,313,090) (5,829,282)
Cash flows from financing activities:
Net decrease in demand deposits (339,776) (876,755)
Net increase in interest-bearing
transaction accounts 3,391,967 2,934,217
Net increase in time deposits 1,866,936 1,757,296
Principal payments on advances from
the Federal Home Loan Bank (200,000) (200,000)
Proceeds from note payable 500,000
Principal payments on note payable (475,000) (675,000)
Purchase of common stock for treasury (490,200)
Net cash provided by financing
activities 4,244,127 2,949,558
Net increase (decrease) in cash and
cash equivalents 2,240,609 (1,837,402)
Cash and cash equivalents,
beginning of period 11,976,340 11,148,956
Cash and cash equivalents,
end of period 14,216,949 9,311,554
Supplemental information:
Cash payments for interest 3,694,669 3,662,245
Cash payments for income taxes 368,062
Loans transferred to other real estate 126,068
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
Nine months ended September 30, 1997 and 1996 (Unaudited)
Note 1: Union State Bancshares, Inc. (the Company), through its
wholly owned subsidiary, Union State Bank & Trust of
Clinton, provides a full range of banking services to
individuals and corporate customers located in Clinton,
Missouri and the surrounding communities.
Note 2: Earnings per share of common stock is computed by
dividing net income by the weighted average number of
common shares outstanding for the period. The weighted
average number of common shares outstanding were
556.875 and 566.875 for the nine months ended
September 30, 1997 and 1996, respectively.
Note 3: The accompanying condensed consolidated financial
statements include all adjustments which, in the
opinion of management, are necessary in order to make
those statements not misleading. Operating results for
the nine months ended September 30, 1997 are not
necessary indicative of the results that may be
expected for the year ending December 31, 1997. It is
suggested that these condensed consolidated financial
statements be read in conjunction with the Company's
audited consolidated financial statements as of and for
the year ended December 31, 1996.
Note 4: On November 3, 1997, the Company was acquired for cash
and seller notes by Exchange National Bancshares, Inc.
(Exchange), a one-bank holding company located in
Jefferson City, Missouri. At September 30, 1997, the
consolidated total assets and stockholders' equity of
Exchange was $301.6 million and $42.7 million,
respectively.
<PAGE>
UNION STATE BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1996
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Union State Bancshares, Inc.
Clinton, Missouri:
We have audited the accompanying consolidated balance sheet of
Union State Bancshares, Inc. and subsidiary (the Company) as of
December 31, 1996, and the related consolidated statements of
income, stockholders' equity, and cash flows for the year then
ended. 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 audit.
We conducted our audit 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 audit provides 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 Union State Bancshares, Inc. and subsidiary as of
December 31, 1996, and the results of their operations and their
cash flows for the year then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
July 25, 1997
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheet
December 31, 1996
Assets
Loans, net of allowance for loan
losses of $1,284,040 $ 72,886,634
Investments in debt and equity
securities:
Available-for-sale, at estimated
market value 29,513,185
Held-to-maturity, estimated market
value of $10,223,222 10,079,466
Total investments in debt and
equity securities 39,592,651
Federal funds sold 5,975,000
Cash and due from banks 5,540,143
Interest-bearing deposits 461,197
Premises and equipment 1,205,543
Accrued interest receivable 1,221,443
Deferred income taxes, net 192,585
Goodwill 209,209
Other assets 160,819
$127,445,224
Liabilities and Stockholders' Equity
Deposits:
Demand 12,531,944
NOW 24,183,182
Money market 3,638,899
Savings 9,451,013
Time deposits $100,000 and over 10,794,958
Other time deposits 52,950,242
Total deposits 113,550,238
Advances from the Federal Home Loan Bank 3,300,000
Note payable 3,650,000
Accrued interest payable 1,016,400
Other liabilities 123,217
Total liabilities 121,639,855
Commitments and contingent liabilities
Stockholders' equity:
Common stock - $10 par value; 3,000 shares
authorized, 887.375 shares issued, and
556.875 shares outstanding 8,874
Surplus 1,464,663
Undivided profits 9,644,660
Treasury stock, at cost - 330.5 shares (5,399,869)
Unrealized holding gains on investments in
debt and equity securities
available-for-sale 87,041
Total stockholders' equity 5,805,369
$127,445,224
See accompanying notes to consolidated financial statements.
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statement of Income
Year ended December 31, 1996
Interest income:
Interest and fees on loans $6,155,281
Interest and dividends on investments in debt
and equity securities:
Taxable 2,234,064
Exempt from federal income tax 355,731
Interest on federal funds sold 300,679
Interest on interest-bearing deposits 11,859
9,057,614
Interest expense:
Interest on:
NOW accounts 507,457
Money market 87,644
Savings accounts 285,077
Time deposit accounts $100,000 and over 524,906
Other time deposits 2,981,663
Advances from the Federal Home Loan Bank 226,331
Note payable 303,574
4,916,652
Net interest income 4,140,962
Provision for loan losses 90,000
Net interest income after provision for
loan losses 4,050,962
Noninterest income:
Service charges on deposit accounts 337,785
Trust fees 36,973
Other 82,600
457,358
Noninterest expense:
Salaries, wages, and employee benefits 1,207,624
Occupancy expense 180,433
Furniture and equipment expense 142,542
Data processing 176,829
FDIC insurance assessment 2,000
Office supplies 78,403
Advertising and promotion 43,448
Postage and freight 92,236
Management fees 250,000
Other 741,511
2,915,026
Income before income taxes 1,593,294
Income taxes 423,313
Net income $1,169,981
Earnings per share $2,073
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Year ended December 31, 1996
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Unrealized
holding
gains on
investments
in debt
and equity
securities Total
Common Undivided Treasury available- stockholders'
stock Surplus profits stock for-sale equity
Balance,
December 31,
1995
(unaudited) $ 8,874 1,464,663 8,474,679 (4,910,269) 201,216 5,239,163
Net income - - 1,169,981 - - 1,169,981
Purchase of 30
shares of
common stock
for treasury - - - (489,600) - (489,600)
Change in
unrealized
holding
gains on
investments
in debt and
equity
securities
available-for-
sale - - - - (114,175) (114,175)
Balance,
December 31,
1996 $ 8,874 1,464,663 9,644,660 (5,399,869) 87,041 5,805,369
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
Year ended December 31, 1996
Cash flows from operating activities:
Net income $1,169,981
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 90,000
Depreciation expense 247,365
Net amortization of debt securities
premiums and discounts 13,033
Amortization of goodwill 21,615
Decrease in accrued interest receivable 78,096
Increase in other assets (68,443)
Increase in accrued interest payable 14,876
Decrease in other liabilities (29,099)
Other, net (5,096)
Net cash provided by operating activities 1,532,328
Cash flows from investing activities:
Net increase in loans (4,564,076)
Purchases of debt and equity securities
available-for-sale (12,278,991)
Proceeds from maturities of debt securities:
Available-for-sale 6,088,591
Held-to-maturity 3,425,294
Proceeds from sales of debt securities
available-for-sale 2,297,879
Purchases of premises and equipment (270,920)
Proceeds from sales of premises and equipment 6,095
Proceeds from sales of other real estate 296,367
Net cash used in investing activities (4,999,761)
Cash flows from financing activities:
Net increase in demand deposits 839,705
Net increase in interest-bearing
transaction accounts 2,078,597
Net increase in time deposits 2,416,115
Principal payments on advances from the
Federal Home Loan Bank (200,000)
Proceeds from note payable 500,000
Principal payments on note payable (850,000)
Purchase of common stock for treasury (489,600)
Net cash provided by financing activities 4,294,817
Net increase in cash and cash equivalents 827,384
Cash and cash equivalents, beginning of year 11,148,956
Cash and cash equivalents, end of year $11,976,340
Supplemental information:
Cash payments for interest $4,901,776
Cash payments for income taxes 468,062
Loans transferred to other real estate 126,068
See accompanying notes to consolidated financial statements.
<PAGE>
UNION STATE BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Union State Bancshares, Inc. (the Company), through its
wholly owned subsidiary, Union State Bank and Trust of
Clinton (the Bank), provides a full range of banking
services to individual and corporate customers located in
Clinton, 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 allow-
ance 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>
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 as
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.
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 recog-
nized 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.
<PAGE>
A decline in the market value of any 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. This investment is 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 40 years for buildings and
improvements and 3 to 20 years for furniture and equipment.
Maintenance and repairs are charged to operations as
incurred.
Goodwill
Goodwill relates to the excess of cost over fair value of
net assets acquired in the acquisition of the former
Boatmen's Bank location in Clinton, Missouri. Also included
in goodwill is the costs related to the acquisition of the
Bank by the Company in 1977. Goodwill is being amortized to
expense over 15 years using the straight-line method.
Other Real Estate
Other real estate, included in other assets in the
accompanying consolidated balance sheet, 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 temporary differences are expected to be
recovered or settled. The effect on <PAGE> deferred tax assets and
liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
The Company and Bank have elected S Corporation status
effective January 1, 1997. Earnings and losses after that
date will be included in the personal income tax returns of
the stockholders and taxed depending on their personal tax
positions. Accordingly, the Company and Bank will not be
subject to additional income tax obligations, except for the
"built-in gains tax" and certain state taxes. Therefore,
future consolidated financial statements will generally not
include a provision for income taxes.
Trust Department
Property held by the Bank in fiduciary or agency capacities
for its customers is not included in the accompanying
consolidated balance sheet, since such items are not assets
of the Company. Trust fees are recognized on the accrual
basis.
Earnings Per Share
Earnings per share of common stock is computed by dividing
net income by 564.375, the weighted average number of common
shares outstanding during 1996.
Consolidated Statement of Cash Flows
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and due from
banks, federal funds sold, and interest-bearing deposits.
(2) CAPITAL REQUIREMENTS
The Bank is 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 Bank must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and
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 Bank to maintain minimum
amounts and ratios (set forth in the following table) 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 Bank meets
all capital adequacy requirements to which it is subject.
<PAGE>
The Bank is also subject to the regulatory framework for
prompt corrective action. The most recent notification from
the Federal Deposit Insurance Corporation (FDIC), dated May
30, 1997, 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.
The actual and required capital amounts and ratios for the Bank
as of December 31, 1996 are as follows:
To be
well capitalized
under prompt
Capital corrective
Actual requirements action provisions
Amount Ratio Amount Ratio Amount Ratio
Total
capital
(to risk-
weighted
assets) $9,886,142 15.23% $5,193,920 8.00% $6,492,400 10.00%
Tier I
capital
(to risk-
weighted
assets) 9,069,142 13.97 2,596,960 4.00 3,895,440 6.00
Tier I
capital (to
adjusted
average
assets) 9,069,142 7.17 3,796,470 3.00 6,327,450 5.00
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
$2,741,692 were available for the declaration of dividends
to the Company without prior approval from the FDIC.
(3) LOANS
A summary of loans, by classification, at December 31, 1996
is as follows:
Real estate $32,104,326
Commercial 25,572,885
Agriculture 11,131,677
Installment and other consumer 5,361,786
74,170,674
Less allowance for loan losses 1,284,040
$72,886,634
The Bank grants real estate, commercial, agriculture, and
installment and other consumer loans to customers located in
Clinton, Missouri and the surrounding communities. As such,
the Bank is susceptible to changes in the economic
environment in Clinton, Missouri <PAGE> 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 $1,077,761
New loans 442,508
Payments received (670,179)
Balance at December 31, 1996 $ 850,090
Changes in the allowance for loan losses for 1996 are as follows:
Balance, beginning of year $1,207,236
Provision charged to expense 90,000
Charge-offs (47,506)
Recoveries of loans previously charged off 34,310
Balance, end of year $1,284,040
A summary of nonaccrual and other impaired loans at December 31,
1996 is as follows:
Nonaccrual loans $ 98,486
Impaired loans continuing to accrue interest 280,787
Total impaired loans $ 379,273
Allowance for loan losses on impaired loans $ 56,891
Impaired loans with no related allowance for
loan losses $ -
The average balance of impaired loans during 1996 was $318,709.
A summary of interest income on nonaccrual and other impaired
loans for 1996 is as follows:
Impaired
loans
continuing
Nonaccrual to accrue
loans interest Total
Income recognized $3,503 81,260 84,763
Interest income if
interest had accrued 4,817 - 4,817
$8,320 81,260 89,580
<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 are as follows:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
U.S. Treasury
securities $13,668,909 64,385 23,310 13,709,984
Securities of U.S.
government
agencies 13,131,153 57,915 59,879 13,129,189
Obligations of
states and
political
subdivisions 2,155,361 108,066 9,015 2,254,412
Total debt
securities 28,955,423 230,366 92,204 29,093,585
Federal Home Loan
Bank stock 419,600 - - 419,600
$29,375,023 230,366 92,204 29,513,185
The amortized cost and estimated market value of debt
securities classified as available-for-sale at December 31,
1996 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.
Estimated
Amortized market
cost value
Due in one year or less $ 9,396,545 9,447,992
Due after one year through five years 13,268,440 13,262,474
Due after five years through ten years 3,090,720 3,146,728
25,755,705 25,857,194
Mortgage-backed securities 3,199,718 3,236,391
$28,955,423 29,093,585
The amortized cost and estimated market values of debt
securities classified as held-to-maturity at December 31,
1996 is as follows:
<PAGE>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
U.S. Treasury
securities $ 2,997,114 31,101 246 3,027,969
Securities of
U.S. government
agencies 1,851,112 28,540 21,441 1,858,211
Obligations of
states and
political
subdivisions 5,231,240 110,854 5,052 5,337,042
$10,079,466 170,495 26,739 10,223,222
The amortized cost and estimated market value of debt
securities classified as held-to-maturity at December 31,
1996, 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.
Estimated
Amortized market
cost value
Due in one year or less $2,214,055 2,220,886
Due after one year through five years 3,525,128 3,591,720
Due after five years through ten years 1,904,162 1,911,426
Due after ten years 585,010 640,979
8,228,355 8,365,011
Mortgage-backed securities 1,851,111 1,858,211
$10,079,466 10,223,222
Debt securities with carrying values aggregating
approximately $12,343,000 at December 31, 1996 were pledged
to secure public funds and for other purposes as required or
permitted by law. Proceeds from the sale of debt
securities available-for-sale was $2,297,879 during 1996.
Gross losses from such sales were $5,897.
<PAGE>
(5) PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1996 is
as follows:
Land $ 383,295
Buildings and improvements 1,284,745
Furniture and equipment 1,846,097
3,514,137
Less accumulated depreciation 2,308,594
$1,205,543
Depreciation expense was $247,365 for 1996.
(6) DEPOSITS
The scheduled maturities of time deposits at December 31,
1996 is as follows:
Due within:
One year $43,815,200
Two years 9,685,000
Three years 2,974,000
Four years 1,231,000
Five years 873,000
Thereafter 5,167,000
$63,745,200
(7) ADVANCES FROM THE FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank outstanding as of
December 31, 1996 are as follows:
Weighted
average
interest
rate Amount
Due in 1997 6.45% $ 200,000
Due in 1998 6.19 650,000
Due in 1999 6.13 450,000
Due in 2000 6.47 450,000
Due in 2001 6.60 450,000
Thereafter 7.50 1,100,000
6.73% $3,300,000
<PAGE>
Advances from the Federal Home Loan Bank are secured under a
blanket agreement which assigns all investment in Federal
Home Loan Bank stock as well as mortgage loans equal to 150%
of the outstanding advance balance to secure amounts
borrowed.
(8) NOTE PAYABLE
The note payable is with an unaffiliated financial
institution, bears variable interest at 2.25% over the 90
day U.S. Treasury Bill Index (7.42% at December 31, 1996),
matures on April 5, 1997, and is secured by 19,994 shares of
common stock of the Bank with a book value of approximately
$9,265,000 at December 31, 1996. The weighted average
interest rate paid on the note payable for 1996 was 7.62%.
(9) RESERVE REQUIREMENTS AND COMPENSATING BALANCES
The Federal Reserve Bank required the Bank to maintain a
balance of $859,000 at December 31, 1996. Compensating
balances held at correspondent banks were $1,870,242 at
December 31, 1996. The Bank maintains such compensating
balances with correspondent banks to offset charges for
services rendered by those banks.
(10) INCOME TAXES
The composition of income tax expense for 1996 is as
follows:
Current $449,631
Deferred (26,318)
Total provision for income taxes $423,313
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:
Tax at statutory federal income tax rate $541,720
Decrease in tax resulting from tax-exempt
income (119,294)
Amortization of nondeductible goodwill 7,553
Other, net (6,666)
$423,313
<PAGE>
The components of deferred tax assets and deferred tax
liabilities at December 31, 1996 is as follows:
Deferred tax assets:
Allowance for loan losses $259,385
Premises and equipment 8,679
Unearned loan fees 21,174
Total deferred tax assets 289,238
Deferred tax liabilities:
Available-for-sale securities 51,120
Federal Home Loan Bank stock
dividends 18,268
Other 27,265
Total deferred tax liabilities 96,653
Net deferred tax asset $192,585
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 the Company will realize the
benefits of these temporary differences at December 31, 1996
and, therefore, has not established a valuation reserve.
(11) RETIREMENT PLAN
The Bank has a profit sharing plan which covers all full-
time employees. Eligible employees may defer up to 8% of
his or her salary each year. The Bank is required to match
1/3 of each employee's deferral. In addition, a
discretionary contribution of 5% of each employee's salary
was made in 1996. Contributions to the profit sharing plan
for 1996 were $67,594.
(12) CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
The condensed balance sheet as of December 31, 1996 and the
related condensed schedules of income and cash flows for the
year ended December 31, 1996 of the Company are as follows:
<PAGE>
Condensed Balance Sheet
Assets
Cash $ 148,207
Investment in Bank 9,266,959
Income taxes receivable 7,220
Goodwill 98,433
$9,520,819
Liabilities and Stockholders' Equity
Note payable 3,650,000
Accrued interest payable 65,450
Stockholders' equity 5,805,369
$9,520,819
Condensed Schedule of Income
Revenues:
Dividends received from Bank $1,220,000
Interest income on deposits 2,493
Total revenues 1,222,493
Expenses:
Interest expense on note payable 303,574
Amortization of goodwill 4,696
Other 135,767
Total expenses 444,037
Income before income tax benefit and
equity in undistributed income of
Bank 778,456
Income tax benefit 144,447
Equity in undistributed income of
Bank 247,078
Net income $1,169,981
<PAGE>
Condensed Schedule of Cash Flows
Cash flows from operating activities:
Net income $1,169,981
Adjustments to reconcile net
income to net cash provided by
operating activities:
Equity in undistributed income of
Bank (247,078)
Amortization of goodwill 4,696
Other, net (6,430)
Net cash provided by operating
activities 921,169
Cash flows from financing activities:
Payment of principal on note
payable (850,000)
Proceeds from note payable 500,000
Purchase of common stock for
treasury (489,600)
Net cash used in financing
activities (839,600)
Net increase in cash 81,569
Cash at beginning of year 66,638
Cash at end of year $ 148,207
Supplemental information - income
taxes received $ 143,878
(13) 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 con-
solidated balance sheet.
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 are as
follows:
Commitments to extend credit $7,247,000
Standby letters of credit 503,176
<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 at December 31, 1996,
$3,746,779 represent fixed-rate loan commitments. Com-
mitments 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 is as
follows:
Carrying Fair
amount value
Assets:
Loans $ 72,886,634 73,473,000
Investments in debt and
equity securities 39,592,651 39,736,407
Federal funds sold 5,975,000 5,975,000
Cash and due from banks 5,540,143 5,540,143
Interest-bearing deposits 461,197 461,197
Accrued interest receivable 1,221,443 1,221,443
$125,677,068 126,407,190
Liabilities:
Deposits:
Demand $ 12,531,944 12,531,944
NOW 24,183,182 24,183,182
Money market 3,638,899 3,638,899
Savings 9,451,013 9,451,013
Time 63,745,200 64,249,000
Advances from the Federal Home
Loan Bank 3,300,000 3,362,674
Note payable 3,650,000 3,650,000
Accrued interest payable 1,016,400 1,016,400
$121,516,638 122,083,112
<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, commercial, agriculture,
installment, and other consumer. 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, CASH AND DUE FROM BANKS, AND
INTEREST-BEARING DEPOSITS
For federal funds sold, cash and due from banks, and
interest-bearing deposits, the carrying amount is a
reasonable estimate of fair value, as such instruments
reprice in a short time period.
ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST
PAYABLE
For accrued interest receivable and accrued interest
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
demand, NOW accounts, money market, and savings, 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 <PAGE> discount rate is estimated using the rates
currently offered for deposits of similar remaining
maturities.
ADVANCES FROM THE FEDERAL HOME LOAN BANK
The fair value of advances from the Federal Home Loan Bank
is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently
offered on advances from the Federal Home Loan Bank of
similar remaining maturities.
NOTE PAYABLE
For the note payable, the carrying amount is a reasonable
estimate of fair value, as such instrument reprices 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 in-
volve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the fair value
estimates.
(14) 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.
(15) SALE OF THE COMPANY
On July 9, 1997, the Company's Board of Directors approved
an acquisition agreement whereby Exchange National
Bancshares, Inc. (Exchange), a one-bank holding company in
Jefferson City, Missouri, will acquire for cash and seller
notes, 100% of the outstanding shares of common stock of the
Company. At June 30, 1997, the consolidated total assets
and stockholders' equity of Exchange was $293.3 million and
<PAGE>
$42.0 million, respectively. The sale of the Company is
expected to close in the fourth quarter of 1997. The
acquisition agreement rescinds all existing stockholder
agreements.
<PAGE>
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
EXCHANGE
NATIONAL UNION STATE PRO FORMA
BANCSHARES, INC. BANCSHARES, INC. PRO FORMA CONSOLIDATED
AND SUBSIDIARY AND SUBSIDIARY ADJUSTMENTS BALANCE SHEET
<S> <C> <C> <C> <C>
A S S E T S
CASH AND BALANCES DUE
FROM DEPOSITORY INSTITUTIONS:
NONINTEREST-BEARING BALANCES
AND CURRENCY AND COIN 9,067,352 4,702,626 (41,500)(5) 13,728,478
INTEREST-BEARING BALANCES IN
U.S. OFFICES 80,550 189,323 269,873
SECURITIES:
HELD-TO-MATURITY SECURITIES 30,709,687 7,919,000 84,070(6) 38,712,757
AVAILABLE-FOR-SALE SECURITIES 51,281,431 33,461,206 84,742,637
FEDERAL FUNDS SOLD 10,400,000 9,325,000 19,725,000
LOANS:
LOANS, NET OF UNEARNED INCOME 192,615,789 75,619,674 268,235,463
LESS ALLOWANCE FOR LOAN LOSSES (2,437,460) (1,307,386) (3,744,846)
LOANS, NET OF UNEARNED INCOME AND
ALLOWANCE FOR LOAN LOSSES 190,178,329 74,312,288 264,490,617
PREMISES AND FIXED ASSETS 5,150,656 1,219,111 1,000,000(7) 7,369,767
ACCRUED INTEREST RECEIVABLE 2,872,477 1,452,018 4,324,495
DEFERRED INCOME TAXES 602,446 94,805 (504,924)(8) 192,327
INTANGIBLE ASSETS:
ORGANIZATION COSTS 21,334 21,334
GOODWILL 188,640 192,546 9,655,557(10) 10,036,743
CONSULTING/NONCOMPETE AGREEMENTS 900,000(9) 900,000
OTHER ASSETS 1,067,038 91,895 1,158,933
TOTAL ASSETS 301,619,940 132,959,818 11,093,203 445,672,961
</TABLE>
<PAGE>
<TABLE>
EXCHANGE
NATIONAL UNION STATE PRO FORMA
BANCSHARES, INC. BANCSHARES, INC. PRO FORMA CONSOLIDATED
AND SUBSIDIARY AND SUBSIDIARY ADJUSTMENTS BALANCE SHEET
<CAPTION>
L I A B I L I T I E S A N D E Q U I T Y C A P I T A L
<S> <C> <C> <C> <C>
DEPOSITS IN DOMESTIC OFFICES:
NONINTEREST-BEARING 34,419,985 12,192,168 46,612,153
INTEREST-BEARING 196,434,776 106,277,197 302,711,973
FEDERAL FUNDS PURCHASED
AND SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE 22,408,559 22,408,559
OTHER BORROWED MONEY WITH
A REMAINING MATURITY OF
ONE YEAR OR LESS 3,172,311 6,275,000 (3,175,000)(3) 6,272,311
OTHER BORROWED MONEY WITH A
REMAINING MATURITY OF MORE
THAN ONE YEAR 0 0 20,208,500(2) 20,208,500
ACCRUED INTEREST PAYABLE 1,153,346 1,100,113 2,253,459
OTHER LIABILITIES 1,337,063 95,463 1,079,580(1) 2,512,106
TOTAL LIABILITIES 258,926,040 125,939,941 18,113,080 402,979,061
EQUITY CAPITAL:
COMMON STOCK 718,511 8,874 (8,874)(4) 718,511
CAPITAL SURPLUS 1,281,489 1,464,663 (1,464,663)(4) 1,281,489
RETAINED EARNINGS 40,629,783 10,665,619 (10,665,619)(4) 40,629,783
NET UNREALIZED HOLDING GAINS
(LOSSES) ON AVAILABLE-FOR-SALE
SECURITIES 64,117 280,590 (280,590)(4) 64,117
LESS TREASURY STOCK (5,399,869) 5,399,869 (4)
TOTAL EQUITY CAPITAL 42,693,900 7,019,877 (7,019,877) 42,693,900
TOTAL LIABILITIES AND
EQUITY CAPITAL 301,619,940 132,959,818 11,093,203 445,672,961
<PAGE>
(1) ACCRUAL OF LIABILITY FOR PROFESSIONAL FEES ASSOCIATED WITH THE ACQUISITION ($329,580) AND UNPAID
BALANCE OF CONSULTING/NONCOMPETE AGREEMENTS ($750,000).
(2) EXCHANGE NATIONAL BANCSHARES, INC. DEBT ISSUED IN CONNECTION WITH THE ACQUISITION WHICH CONSISTS OF
THE FOLLOWING: $11,700,568 OF NOTES ISSUED TO UNION STATE BANCSHARES, INC. SHAREHOLDERS BEARING
INTEREST AT A RATE OF 7% PER ANNUM WHICH ARE DUE ON THE FIFTH ANNIVERSARY OF THE ACQUISITION CLOSING
DATE; AND $8,507,932 OF NOTES ISSUED TO MERCANTILE BANK OF ST. LOUIS N.A. BEARING INTEREST AT A
FLOATING RATE OF PRIME MINUS 1%.
(3) RETIREMENT OF THE EXISTING DEBT OF UNION STATE BANCSHARES, INC.
(4) ELIMINATION OF THE EQUITY CAPITAL OF UNION STATE BANCSHARES, INC.
(5) PORTION OF CONSULTING/NONCOMPETE AGREEMENTS PAID IN CASH AT CLOSING.
(6) ADJUSTMENT OF HELD-TO-MATURITY INVESTMENT SECURITIES PORTFOLIO TO CURRENT MARKET VALUE.
(7) ADJUSTMENT OF PREMISES TO CURRENT MARKET VALUE. $300,000 INCREASE IN LAND VALUE AND $700,000
INCREASE IN BUILDING VALUE. INCREASE IN BUILDING VALUE TO BE DEPRECIATED OVER 20 YEARS.
(8) DEFERRED INCOME TAXES RESULTING FROM ADJUSTMENT OF INVESTMENT SECURITIES AND PREMISES TO MARKET
VALUE.
(9) CONSULTING/NONCOMPETE AGREEMENTS ($150,000 PER YEAR FOR SIX YEARS).
(10) EXCESS OF ACQUISITION COSTS OVER THE VALUE OF ASSETS ACQUIRED. SUCH GOODWILL TO BE AMORTIZED OVER 15
YEARS.
</TABLE>
<PAGE>
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<CAPTION>
EXCHANGE PRO FORMA
NATIONAL UNION STATE CONSOLIDATED
BANCSHARES, INC. BANCSHARES, INC. PRO FORMA STATEMENT
AND SUBSIDIARY AND SUBSIDIARY ADJUSTMENTS OF INCOME
<S> <C> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON LOANS 14,728,837 6,155,281 20,884,118
INTEREST AND DIVIDENDS ON
INVESTMENTS IN DEBT AND
EQUITY SECURITIES:
TAXABLE 3,600,252 2,234,064 (32,959)(1) 5,801,357
EXEMPT FROM FEDERAL INCOME
TAX 890,505 355,731 (58,206)(1) 1,188,030
INTEREST ON FEDERAL FUNDS SOLD 957,598 300,679 1,258,277
INTEREST ON INTEREST-BEARING
DEPOSITS 1,323 11,859 13,182
20,178,515 9,057,614 (91,165) 29,144,964
INTEREST EXPENSE:
INTEREST ON:
NOW ACCOUNTS 747,952 507,457 1,255,409
MONEY MARKET 1,322,543 87,644 1,410,187
SAVINGS ACCOUNTS 876,239 285,077 1,161,316
TIME DEPOSIT ACCOUNTS $100,000
AND OVER 540,455 524,906 1,065,361
OTHER TIME DEPOSITS 5,489,355 2,981,663 8,471,018
FEDERAL FUNDS PURCHASED AND
SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE 767,154 767,154
ADVANCES FROM THE FEDERAL HOME
LOAN BANK 226,331 226,331
INTEREST-BEARING DEMAND NOTES TO
U.S. TREASURY 39,856 39,856
NOTES PAYABLE 303,574 1,457,135(2) 1,760,709
9,783,554 4,916,652 1,457,135 16,157,341
NET INTEREST INCOME 10,394,961 4,140,962 (1,548,300) 12,987,623
PROVISION FOR LOAN LOSSES 395,000 90,000 485,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 9,999,961 4,050,962 (1,548,300) 12,502,623
</TABLE>
<PAGE>
<TABLE>
EXCHANGE PRO FORMA
NATIONAL UNION STATE CONSOLIDATED
BANCSHARES, INC. BANCSHARES, INC. PRO FORMA STATEMENT
AND SUBSIDIARY AND SUBSIDIARY ADJUSTMENTS OF INCOME
<CAPTION>
<S> <C> <C> <C> <C>
NONINTEREST INCOME:
SERVICE CHARGES ON DEPOSIT
ACCOUNTS 701,378 337,785 1,039,163
TRUST FEES 286,317 36,973 323,290
OTHER 902,491 82,600 985,091
1,890,186 457,358 0 2,347,544
NONINTEREST EXPENSE:
SALARIES, WAGES AND EMPLOYEE
BENEFITS 3,368,169 1,207,624 4,575,793
OCCUPANCY EXPENSE 295,521 180,433 35,000(3) 510,954
FURNITURE AND EQUIPMENT EXPENSE 441,587 319,371 760,958
FDIC INSURANCE ASSESSMENT 2,000 2,000 4,000
ADVERTISING AND PROMOTION 347,550 43,448 390,998
CREDIT CARD EXPENSES 299,033 299,033
MANAGEMENT FEES 250,000 250,000
CONSULTING/NONCOMPETE AGREEMENTS 150,000(4) 150,000
OTHER 1,431,696 912,150 643,704(5) 2,987,550
6,185,556 2,915,026 828,704 9,929,286
INCOME BEFORE INCOME TAXES 5,704,591 1,593,294 (2,377,004) 4,920,881
INCOME TAXES 1,862,000 423,313 (641,321)(6) 1,643,992
NET INCOME 3,842,591 1,169,981 (1,735,683) 3,276,889
EARNINGS PER SHARE 5.35 2,073.06 (2.42) 4.56
<PAGE>
(1) AMORTIZATION OF EXCESS OF FAIR VALUE OF SECURITIES ACQUIRED OVER HISTORICAL COST OF THOSE SECURITIES.
SUCH EXCESS AMORTIZED OVER THE ESTIMATED REMAINING LIFE OF THOSE SECURITIES OF 4 YEARS.
(2) INTEREST ON DEBT ISSUED IN CONNECTION WITH THE ACQUISITION WHICH CONSISTS OF THE FOLLOWING: $819,040
OF INTEREST ON $11,700,568 PRINCIPAL BALANCE OF 7% NOTES ISSUED TO UNION STATE BANCSHARES, INC.
SHAREHOLDERS; AND $638,095 OF INTEREST ON $8,507,932 PRINCIPAL BALANCE OF 7.50% NOTE ISSUED TO
MERCANTILE BANK OF ST. LOUIS, NA.
(3) DEPRECIATION OF INCREASE IN BUILDING VALUE OF $700,000 OVER 20 YEARS.
(4) AMORTIZATION OF CONSULTING/NONCOMPETE AGREEMENTS.
(5) AMORTIZATION OF THE EXCESS OF ACQUISITION COSTS OVER THE VALUE OF ASSETS ACQUIRED. SUCH GOODWILL
AMORTIZED OVER 15 YEARS.
(6) INCOME TAX BENEFIT AT AN EFFECTIVE COMBINED FEDERAL AND STATE INCOME TAX RATE OF 37% ON ADDITIONAL
SECURITIES AMORTIZATION, INTEREST EXPENSE, PREMISES DEPRECIATION, AND AMORTIZATION OF
CONSULTING/NONCOMPETE AGREEMENTS.
</TABLE>
<PAGE>
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
EXCHANGE PRO FORMA
NATIONAL UNION STATE CONSOLIDATED
BANCSHARES, INC. BANCSHARES, INC. PRO FORMA STATEMENT
AND SUBSIDIARY AND SUBSIDIARY ADJUSTMENTS OF INCOME
<S> <C> <C> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON LOANS 12,261,594 4,857,966 17,119,560
INTEREST AND DIVIDENDS ON
INVESTMENTS IN DEBT AND
EQUITY SECURITIES:
TAXABLE 2,944,232 1,706,854 (24,719)(1) 4,626,367
EXEMPT FROM FEDERAL INCOME
TAX 738,515 293,000 (43,655)(1) 987,860
INTEREST ON FEDERAL FUNDS SOLD 248,184 289,893 538,077
INTEREST ON INTEREST-BEARING
DEPOSITS 1,801 7,132 8,933
16,194,326 7,154,845 (68,374) 23,280,797
INTEREST EXPENSE:
INTEREST ON:
NOW ACCOUNTS 554,906 438,720 993,626
MONEY MARKET 1,009,941 63,799 1,073,740
SAVINGS ACCOUNTS 668,966 227,245 896,211
TIME DEPOSIT ACCOUNTS
$100,000 AND OVER 547,731 488,056 1,035,787
OTHER TIME DEPOSITS 4,309,319 2,210,755 6,520,074
FEDERAL FUNDS PURCHASED AND
SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE 691,110 691,110
ADVANCES FROM THE FEDERAL HOME
LOAN BANK 159,312 159,312
INTEREST-BEARING DEMAND NOTES
TO U.S. TREASURY 34,405 34,405
NOTES PAYABLE 190,495 1,096,486(2) 1,286,981
7,816,378 3,778,382 1,096,486 12,691,246
NET INTEREST INCOME 8,377,948 3,376,463 (1,164,860) 10,589,551
</TABLE>
<PAGE>
<TABLE>
EXCHANGE PRO FORMA
NATIONAL UNION STATE CONSOLIDATED
BANCSHARES, INC. BANCSHARES, INC. PRO FORMA STATEMENT
AND SUBSIDIARY AND SUBSIDIARY ADJUSTMENTS OF INCOME
<S> <C> <C> <C> <C>
PROVISION FOR LOAN LOSSES 525,000 45,000 570,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,852,948 3,331,463 (1,164,860) 10,019,551
NONINTEREST INCOME:
SERVICE CHARGES ON DEPOSIT
ACCOUNTS 525,743 261,973 787,716
TRUST FEES 150,950 31,304 182,254
OTHER 724,680 106,280 830,960
1,401,373 399,557 0 1,800,930
NONINTEREST EXPENSE:
SALARIES, WAGES AND EMPLOYEE
BENEFITS 2,598,919 994,360 3,593,279
OCCUPANCY EXPENSE 245,763 135,700 26,250(3) 407,713
FURNITURE AND EQUIPMENT EXPENSE 390,827 233,977 624,804
FDIC INSURANCE ASSESSMENT 20,806 3,065 23,871
ADVERTISING AND PROMOTION 245,111 30,783 275,894
CREDIT CARD EXPENSES 231,348 231,348
MANAGEMENT FEES 346,950 346,950
CONSULTING/NONCOMPETE AGREEMENTS 112,500(4) 112,500
OTHER 1,124,082 590,123 482,778(5) 2,196,983
4,856,856 2,334,958 621,528 7,813,342
INCOME BEFORE INCOME TAXES 4,397,465 1,396,062 (1,786,388) 4,007,139
INCOME TAXES 1,430,000 375,103 (482,336)(6) 1,322,767
NET INCOME 2,967,465 1,020,959 (1,304,052) 2,684,372
EARNINGS PER SHARE 4.13 1,833.37 (1.81) 3.74
<PAGE>
(1) AMORTIZATION OF EXCESS OF FAIR VALUE OF SECURITIES ACQUIRED OVER HISTORICAL COST OF THOSE SECURITIES.
SUCH EXCESS AMORTIZED OVER THE ESTIMATED REMAINING LIFE OF THOSE SECURITIES OF 4 YEARS.
(2) INTEREST ON DEBT ISSUED IN CONNECTION WITH THE ACQUISITION WHICH CONSISTS OF THE FOLLOWING: $612,597
OF INTEREST ON $11,700,568 PRINCIPAL BALANCE OF 7% NOTES ISSUED TO UNION STATE BANCSHARES, INC.
SHAREHOLDERS; AND $483,889 OF INTEREST ON $8,507,932 PRINCIPAL BALANCE OF 7.50% NOTE ISSUED TO
MERCANTILE BANK OF ST. LOUIS, NA.
(3) DEPRECIATION OF INCREASE IN BUILDING VALUE OF $700,000 OVER 20 YEARS.
(4) AMORTIZATION OF CONSULTING/NONCOMPETE AGREEMENTS.
(5) AMORTIZATION OF THE EXCESS OF ACQUISITION COSTS OVER THE VALUE OF ASSETS ACQUIRED. SUCH GOODWILL
AMORTIZED OVER 15 YEARS.
(6) INCOME TAX BENEFIT AT AN EFFECTIVE COMBINED FEDERAL AND STATE INCOME TAX RATE OF 37% ON ADDITIONAL
SECURITIES AMORTIZATION, INTEREST EXPENSE, PREMISES DEPRECIATION, AND AMORTIZATION OF
CONSULTING/NONCOMPETE AGREEMENTS.
</TABLE>
