UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1999
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.
(Exact name of registrant as specified in its charter)
Missouri 43-1626350
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
132 East High Street, Jefferson City, Missouri 65101
(Address of principal executive offices) (Zip Code)
(573) 761-6100
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
As of May 1, 1999, the registrant had 718,511 shares of common stock,
par value $1.00 per share, outstanding.
Page 1 of 25 pages
Index to Exhibits located on page 25
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1999 1998
____________ ____________
<S> <C> <C>
ASSETS
Loans:
Commercial $100,085,365 98,298,265
Real estate -- construction 20,818,000 19,414,000
Real estate -- mortgage 120,556,248 123,534,055
Consumer 46,774,383 46,971,185
____________ ____________
288,233,996 288,217,505
Less allowance for loan losses 4,566,934 4,412,921
____________ ____________
Loans, net 283,667,062 283,804,584
____________ ____________
Investment in debt and equity securities:
Available-for-sale, at fair value 71,660,503 70,316,733
Held-to-maturity, fair value of
$29,333,478 at March 31, 1999 and
$31,390,916 at December 31, 1998 28,807,145 30,748,943
____________ ____________
Total investment in debt
and equity securities 100,467,648 101,065,676
____________ ____________
Federal funds sold 30,100,000 26,400,000
Cash and due from banks 13,948,355 19,803,744
Premises and equipment 12,394,546 12,064,252
Accrued interest receivable 3,860,482 3,794,092
Intangible assets 10,576,971 10,763,915
Other assets 1,454,959 1,007,111
____________ ____________
$456,470,023 458,703,374
============ ============
</TABLE>
Continued on next page
<PAGE>
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
March 31, December 31,
1999 1998
____________ ____________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 49,785,411 54,765,805
Time deposits 318,164,935 318,755,981
____________ ____________
Total deposits 367,950,346 373,521,786
Securities sold under agreements to repurchase 19,718,261 16,990,911
Interest-bearing demand notes to U.S. Treasury 374,080 675,941
Other borrowed money 17,150,568 17,150,568
Accrued interest payable 2,078,953 2,166,955
Other liabilities 2,534,475 2,084,031
____________ ____________
Total liabilities 409,806,683 412,590,192
____________ ____________
Stockholders' equity:
Common Stock - $1 par value; 1,500,000 shares
authorized; 718,511 issued and outstanding 718,511 718,511
Surplus 1,281,489 1,281,489
Retained earnings 44,479,858 43,730,026
Accumulated other comprehensive income 183,482 383,156
____________ ____________
Total stockholders' equity 46,663,340 46,113,182
____________ ____________
$456,470,023 458,703,374
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
March 31,
_______________________
1999 1998
___________ ___________
<S> <C> <C>
Interest income $ 7,652,736 8,093,756
Interest expense 3,869,723 4,423,528
___________ ___________
Net interest income 3,783,013 3,670,288
Provision for loan losses 180,000 172,500
___________ ___________
Net interest income after
provision for loan losses 3,603,013 3,497,728
Noninterest income 722,775 701,839
Noninterest expense 2,659,700 2,487,969
___________ ___________
Income before
income taxes 1,666,088 1,711,598
Income taxes 557,000 564,545
___________ ___________
Net income $ 1,109,088 1,147,053
=========== ===========
Basic and diluted earnings per share $1.54 1.60
===== =====
Dividends per share:
Declared $0.50 0.50
===== =====
Paid $0.50 0.50
===== =====
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
__________________________
1999 1998
___________ ___________
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,109,088 1,147,053
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 180,000 172,500
Depreciation expense 188,680 133,343
Net amortization of debt securities
premiums and discounts 82,228 52,683
Amortization of intangible assets 186,944 208,942
Decrease (increase) in
accrued interest receivable (66,390) 247,292
Increase in other assets (330,580) (151,675)
Increase (decrease)in accrued interest payable (88,002) 86,119
Increase in other liabilities 450,444 791,250
Net securities gains -- (6,491)
Other, net (70,264) 129,243
Origination of mortgage loans for sale (11,043,083) (19,328,390)
Proceeds from the sale of mortgage loans
held for sale 11,043,083 19,328,390
___________ ___________
Net cash provided by operating activities 1,642,148 2,810,259
___________ ___________
Cash flows from investing activities:
Net decrease (increase) in loans (117,231) 2,199,205
Purchases of available-for-sale debt securities (10,174,564) (4,690,922)
Purchases of held-to-maturity debt securities -- (18,721,051)
Proceeds from maturities of debt securities:
Available-for-sale 3,334,517 6,057,503
Held-to-maturity 1,296,906 6,725,852
Proceeds from calls of debt securities:
Available-for-sale 5,125,000 6,455,029
Held-to-maturity 617,000 559,076
Purchases of premises and equipment (518,974) (788,473)
Proceeds from sales of other real estate
owned and repossessions 145,015 302,327
___________ ___________
Net cash used in
investing activities (292,331) (1,901,454)
___________ ___________
</TABLE>
Continued on next page
<PAGE>
<TABLE>
EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Three Months Ended
March 31,
__________________________
1999 1998
___________ ___________
<S> <C> <C>
Cash flows from financing activities:
Net decrease in demand deposits (4,980,394) (2,505,119)
Net increase in interest-bearing
transaction accounts 132,673 4,323,908
Net increase (decrease) in time deposits (723,719) 231,469
Net increase in securities sold
under agreements to repurchase 2,727,350 15,429,660
Net decrease in interest-bearing
demand notes to U.S. Treasury (301,861) (2,885,533)
Proceeds from Federal Home Loan Bank borrowings -- 2,800,000
Repayment of other borrowed money -- (2,803,000)
Cash dividends paid (359,255) (359,255)
___________ ___________
Net cash provided by (used in)
financing activities (3,505,206) 14,232,130
___________ ___________
Net increase (decrease)in cash
and cash equivalents (2,155,389) 15,140,935
Cash and cash equivalents, beginning of period 46,203,744 34,352,050
___________ ___________
Cash and cash equivalents, end of period $44,048,355 49,492,985
=========== ===========
Supplemental disclosure of cash flow information-
Cash paid (received) during period for:
Interest $ 3,957,725 4,337,409
Income taxes 90,393 (16,054)
Supplemental schedule of noncash investing activities-
Other real estate and repossessions
acquired in settlement of loans 89,051 447,470
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended March 31, 1999 and 1998
Exchange National Bancshares, Inc. ("Bancshares" or the "Company") is a
bank holding company registered under the Bank Holding Company Act of 1956.
Bancshares' activities currently are limited to ownership of the outstanding
capital stock of The Exchange National Bank of Jefferson City (ENB) and Union
State Bancshares, Inc.(Union) which owns 100% of Union State Bank and Trust of
Clinton (USB). Bancshares acquired ENB on April 7, 1993. Bancshares acquired
Union on November 3, 1997.
Earnings per share is computed by dividing net income by 718,511, the
weighted average number of common shares outstanding during the three month
periods ended March 31, 1999 and 1998. Due to the fact Bancshares has no
dilutive instruments, basic earnings per share and dilutive earnings per share
are equal.
On January 1, 1998 Bancshares adopted the provisions of Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS
130), which established standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. For the three-month periods ended
March 31, 1999 and 1998, unrealized holding gains and losses on investment in
debt and equity securities available-for-sale were Bancshares' only other
comprehensive income component. Comprehensive income for the three-month
periods ended March 31, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
_______________________
1999 1998
___________ __________
<S> <C> <C>
Net income $ 1,109,088 1,147,053
Other comprehensive income (loss):
Net unrealized holding gains
(losses) on investments in debt
and equity securities
available-for-sale (199,674) 73,149
Adjustment for net securities gains
realized in net income, net
of applicable income taxes -- (4,089)
Total other comprehensive income (loss) (199,674) 69,060
___________ __________
Comprehensive income $ 909,414 1,216,113
=========== ==========
</TABLE>
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. SFAS 133 is effective for all fiscal years
beginning after June 15, 1999. Earlier application of SFAS 133 is encouraged
but should not be applied retroactively to financial statements of prior
periods. The Company is currently evaluating the requirements and impact of
SFAS 133.
In October 1998, the FASB issued Statement of Financial Accounting
Standard No. 134, Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise (SFAS 134) which conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortgage banking enterprise.
SFAS 134 is effective for the first fiscal quarter beginning after December
15, 1998. Since the Company does not securitize any mortgage loans, SFAS 134
had no impact on the Company's consolidated financial position and results of
operations.
Through the respective branch network, ENB and USB provide similar
products and services in two defined geographic areas. The products and
services offered include a broad range of commercial and personal banking
services, including certificates of deposit, individual retirement and other
time deposit accounts, checking and other demand deposit accounts, interest
checking accounts, savings accounts and money market accounts. Loans include
real estate, commercial, installment and other consumer loans. Other
financial services include automatic teller machines, trust services, credit
related insurance, and safe deposit boxes. The revenues generated by each
business segment consist primarily of interest income, generated from the loan
and debt and equity security portfolios, and service charges and fees,
generated from the deposit products and services. The geographic areas are
defined to be communities surrounding Jefferson City and Clinton, Missouri.
The products and services offered to customers primarily within their
respective geographical areas. The business segments results which follow are
consistent with the Company's internal reporting system which is consistent,
in all material respects, with generally accepted accounting principles and
practices prevalent in the banking industry.
<TABLE>
<CAPTION>
March 31, 1999
The Exchange Union
National State Bank
Bank of and Trust Corporate
Jefferson City of Clinton and other Total
<S> <C> <C> <C> <C>
Balance sheet information:
Loans, net of allowance
for loan losses $204,049,467 79,617,595 -- 283,667,062
Debt and equity securities 66,092,720 34,374,928 -- 100,467,648
Total assets 306,317,146 150,101,217 51,660 456,470,023
Deposits 249,168,539 120,523,750 (1,741,943) 367,950,346
Stockholders' equity 34,634,899 22,247,757 (10,219,316) 46,663,340
=========== =========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1998
The Exchange Union
National State Bank
Bank of and Trust Corporate
Jefferson City of Clinton and other Total
<S> <C> <C> <C> <C>
Balance sheet information:
Loans, net of allowance
for loan losses $201,929,359 81,875,225 -- 283,804,584
Debt and equity securities 64,721,489 36,344,187 -- 101,065,676
Total assets 304,838,954 153,830,907 33,513 458,703,374
Deposits 250,661,815 124,471,279 (1,611,308) 373,521,786
Stockholders' equity 34,473,970 22,058,347 (10,419,135) 46,113,182
=========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
The Exchange Union
National State Bank
Bank of and Trust Corporate
Jefferson City of Clinton and other Total
<S> <C> <C> <C> <C>
Statement of income information:
Total interest income $5,276,436 2,376,300 -- 7,652,736
Total interest expense 2,459,053 1,208,715 201,955 3,869,723
Net interest income 2,817,383 1,167,585 (201,955) 3,783,013
Provision for loan losses 150,000 30,000 -- 180,000
Noninterest income 585,403 137,372 -- 722,775
Noninterest expense 1,797,783 811,550 50,367 2,659,700
Income taxes 465,150 177,250 (85,400) 557,000
Net income (loss) 989,853 286,157 (166,922) 1,109,088
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
The Exchange Union
National State Bank
Bank of and Trust Corporate
Jefferson City of Clinton and other Total
<S> <C> <C> <C> <C>
Statement of income information:
Total interest income $5,685,768 2,407,988 -- 8,093,756
Total interest expense 2,920,341 1,262,568 240,619 4,423,528
Net interest income 2,765,427 1,145,420 (240,619) 3,670,228
Provision for loan losses 150,000 22,500 -- 172,500
Noninterest income 573,108 128,731 -- 701,839
Noninterest expense 1,674,138 756,825 57,006 2,487,969
Income taxes 488,000 165,545 (89,000) 564,545
Net income (loss) 1,026,397 329,281 (208,625) 1,147,053
========= ========= ========= =========
</TABLE>
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. Certain amounts in the 1998 condensed
consolidated financial statements have been reclassified to conform with the
1999 condensed consolidated presentation. Such reclassifications have no
effect on previously reported net income. Operating results for the period
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
It is suggested that these condensed consolidated interim financial
statements be read in conjunction with the Company's audited consolidated
financial statements included in its 1998 Annual Report to Shareholders under
the caption "Consolidated Financial Statements" and incorporated by reference
into its Annual Report on Form 10-KSB for the year ended December 31, 1998 as
Exhibit 13.
PAGE
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS MADE IN
THIS REPORT ON FORM 10-Q ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE WORDS "SHOULD", "EXPECT", "ANTICIPATE", "BELIEVE",
"INTEND", "MAY", "HOPE", "FORECAST" AND SIMILAR EXPRESSIONS MAY IDENTIFY
FORWARD LOOKING STATEMENTS. 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 MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY THE FORWARD LOOKING STATEMENTS HEREIN INCLUDE MARKET
CONDITIONS AS WELL AS CONDITIONS SPECIFICALLY AFFECTING THE BANKING INDUSTRY
GENERALLY AND FACTORS HAVING A SPECIFIC IMPACT ON BANCSHARES INCLUDING, BUT
NOT LIMITED TO, FLUCTUATIONS IN INTEREST RATES AND IN THE ECONOMY; THE IMPACT
OF LAWS AND REGULATIONS APPLICABLE TO BANCSHARES AND CHANGES THEREIN;
COMPETITIVE CONDITIONS IN THE MARKETS IN WHICH BANCSHARES CONDUCTS ITS
OPERATIONS, INCLUDING COMPETITION FROM BANKING AND NON-BANKING COMPANIES WITH
SUBSTANTIALLY GREATER RESOURCES THAN BANCSHARES, SOME OF WHICH MAY OFFER AND
DEVELOP PRODUCTS AND SERVICES NOT OFFERED BY BANCSHARES; AND THE ABILITY OF
BANCSHARES TO RESPOND TO CHANGES IN TECHNOLOGY, INCLUDING EFFECTS OF THE YEAR
2000 PROBLEM. ADDITIONAL FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES WERE 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, 1998, AS WELL AS
THOSE DISCUSSED ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION.
Net income for the three months ended March 31, 1999 of $1,109,000
decreased $38,000 when compared to the first quarter of 1998. Earnings per
common share for the first quarter of 1999 of $1.54 decreased 6 cents or 3.8%
when compared to the first quarter of 1998.
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.
<TABLE>
<CAPTION>
(Dollars expressed in thousands)
Three Months
Ended
March 31,
_______________
1999 1998
_______ _______
<S> <C> <C>
Interest income $ 7,653 8,094
Fully taxable equivalent (FTE) adjustment 144 151
_______ _______
Interest income (FTE basis) 7,797 8,245
Interest expense 3,870 4,423
_______ _______
Net interest income (FTE basis) 3,927 3,822
Provision for loan losses 180 173
_______ _______
Net interest income after provision
for loan losses (FTE basis) 3,747 3,649
Noninterest income 723 702
Noninterest expense 2,660 2,488
_______ _______
Earnings before income taxes
(FTE basis) 1,810 1,863
_______ _______
Income taxes 557 565
FTE adjustment 144 151
_______ _______
Income taxes (FTE basis) 701 716
_______ _______
Net income $ 1,109 1,147
======= =======
</TABLE>
Net interest income on a fully taxable equivalent basis increased
$105,000 or 2.7% to $3,927,000 or 3.88% of average earning assets for the
first quarter of 1999 compared to $3,822,000 or 3.67% of average earning
assets for the same period of 1998. The provision for loan losses for the
three months ended March 31, 1999 was $180,000 compared to $173,000 for the
same period of 1998.
Noninterest income and noninterest expense for the three month periods
ended March 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
(Dollars expressed in thousands)
Three Months
Ended
March 31, Increase (decrease)
________________ __________________
1999 1998 Amount %
_______ _______ ________ ________
<S> <C> <C> <C> <C>
Noninterest Income
Service charges on deposit accounts $ 261 233 28 12.0 %
Trust department income 87 187 (100) (53.5)
Mortgage loan servicing fees 112 95 17 17.9
Gain on sales of mortgage loans 152 87 65 74.7
Net gain on sales and calls
of debt securities -- 6 (6) (100.0)
Credit card fees 29 35 (6) (17.1)
Other 82 59 23 39.0
_______ _______ _______
$ 723 702 21 3.0 %
======= ======= =======
Noninterest Expense
Salaries and employee benefits $ 1,474 1,342 132 9.8 %
Occupancy expense 155 117 38 32.5
Furniture and equipment expense 260 204 56 27.5
FDIC insurance assessment 17 17 -- --
Advertising and promotion 50 58 (8) (13.8)
Postage, printing, and supplies 119 146 (27) (18.5)
Legal, examination, and
professional fees 58 68 (10) (14.7)
Credit card expenses 19 23 (4) (17.4)
Credit investigation and loan
collection expenses 37 42 (5) (11.9)
Amortization of intangible assets 187 209 (22) (10.5)
Other 284 262 22 8.4
_______ _______ _______
$ 2,660 2,488 172 6.9 %
======= ======= =======
</TABLE>
Noninterest income increased $21,000 or 3.0% to $723,000 for the first
quarter of 1999 compared to $702,000 for the same period of 1998. The $28,000
or 12.0% increase in service charges on deposit accounts is due to improved
collections of charges as opposed to increases in product pricing. The
$100,000 or 53.5% decline in trust department income is the result of the
receipt of an unusually large estate distribution fee at ENB in 1998. The
$65,000 or 74.7% increase in gain on sales of mortgage loans is due to higher
margins on the sale of mortgage loans in the first quarter of 1999 compared to
1998. The Company sold $11,043,000 of loans during the first quarter of 1999
compared to $19,328,000 during the same period in 1998. The $23,000 or 39.0%
increase in other noninterest income includes $14,000 of commissions earned on
sales of investment products through a relationship with a third party
investment company. This relationship was established during the latter part
of 1998.
Noninterest expense increased $172,000 or 6.9% to $2,660,000 for the first
quarter of 1999 compared to $2,488,000 for the first quarter of 1998. Salaries
and benefits increased $132,000 or 9.8%. Of this increase, $123,000
represents increased salary expense as a result of normal salary increases
plus additional employees. The $38,000 or 32.5% increase in occupancy expense
and the $56,000 or 27.5% increase in furniture and equipment expense are
primarily related to a renovation project at ENB's main banking facility which
was completed during March 1999.
Income taxes as a percentage of earnings before income taxes as reported
in the condensed consolidated financial statements was 33.4% for the first
quarter of 1999 compared to 33.0% for the first quarter of 1998. After adding
a fully taxable equivalent adjustment to both income taxes and earnings before
income taxes for tax exempt income on loans and investment securities, the
fully taxable equivalent ratios of income taxes as a percentage of earnings
before income taxes were 38.7% for the first quarter of 1999 and 38.4% for the
first quarter of 1998.
NET INTEREST INCOME
Fully taxable equivalent net interest income increased $105,000 or 2.7%
for the three month period ended March 31, 1999 compared to the same period in
1998. Although total interest earning assets declined $11,983,000 or 2.8%,
net interest income and the net interest margin increased due to the loss of
some public fund repurchase agreements the proceeds of which had been invested
in low margin securities.
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 the three month periods
ended March 31, 1999 and 1998.
<PAGE>
<TABLE>
<CAPTION>
(Dollars expressed in thousands)
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
___________________________ ___________________________
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense/1/ Paid/1/ Balance Expense/1/ Paid/1/
________ __________ _______ ________ __________ _______
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:/2/
Commercial $ 97,478 $2,056 8.55% $ 89,896 $1,959 8.84%
Real estate 140,567 2,868 8.27 142,024 3,051 8.71
Consumer 46,496 1,007 8.78 44,137 964 8.86
Investment
securities:/3/
U.S. Treasury and
U.S. Government
agencies 70,825 1,034 5.92 91,689 1,394 6.17
State and municipal 26,964 482 7.25 27,300 503 7.47
Other 1,422 23 6.56 1,536 26 6.86
Federal funds sold 26,680 324 4.93 25,758 341 5.37
Interest-bearing
deposits 230 3 5.29 305 7 9.31
________ ______ ________ ______
Total interest
earning assets 410,662 7,797 7.70 422,645 8,245 7.91
All other assets 42,482 41,077
Allowance for loan
losses (4,490) (4,015)
________ ________
Total assets $448,654 $459,707
======== ========
</TABLE>
Continued on next page
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
___________________________ ___________________________
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense/1/ Paid/1/ Balance Expense/1/ Paid/1/
________ __________ _______ ________ __________ _______
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
NOW accounts $ 54,318 $ 303 2.26% $ 56,216 $ 356 2.57%
Savings 35,705 255 2.90 33,978 306 3.65
Money market 40,361 377 3.79 39,332 381 3.93
Deposits of
$100,000 and over 24,614 341 5.39 28,216 385 5.53
Other time deposits 162,632 2,100 5.27 158,340 2,218 5.68
________ ______ ________ ______
Total time deposits 317,630 3,376 4.31 316,082 3,646 4.68
Securities sold under
agreements to
repurchase 16,025 202 5.11 31,772 442 5.64
Interest-bearing demand
notes to U.S. Treasury 449 7 6.32 606 14 9.37
Other borrowed money 17,150 285 6.74 19,050 321 6.83
________ ______ ________ ______
Total interest-
bearing
liabilities 351,254 3,870 4.47 367,510 4,423 4.88
______ ______
Demand deposits 46,970 44,284
Other liabilities 3,878 4,254
________ ________
Total liabilities 402,102 416,048
Stockholders' equity 46,552 43,659
________ ________
Total liabilities
and stockholders'
equity $448,654 $459,707
======== ========
Net interest income $ 3,927 $ 3,822
======= =======
Net interest margin/4/ 3.88% 3.67%
__________ ==== ====
/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 were $144,000 in 1999
and $151,000 in 1998.
/2/ Non-accruing loans are included in the average amounts outstanding.
/3/ Average balances based on amortized cost.
/4/ Net interest income divided by average total interest earning assets.
</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>
<CAPTION>
(Dollars expressed in thousands)
Three Months Ended March
31, 1999 Compared to Three
Months Ended March 31, 1998
_______________________________
Change due to
Total ____________________
Change Volume Rate
________ ________ _________
<S> <C> <C> <C>
Interest income on a fully
taxable equivalent basis:
Loans: /1/
Commercial $ 97 161 (64)
Real estate /2/ (183) (31) (152)
Consumer 43 51 (8)
Investment securities:
U.S. Treasury and U.S.
Government agencies (360) (307) (53)
State and municipal /2/ (21) (6) (15)
Other (3) (2) (1)
Federal funds sold (17) 12 (29)
Interest-bearing deposits (4) (2) (2)
_______ _______ ________
Total interest income (448) (124) (324)
Interest expense:
NOW accounts (53) (12) (41)
Savings (51) 15 (66)
Money market (4) 10 (14)
Deposits of
$100,000 and over (58) (48) (10)
Other time deposits (104) 59 (163)
Securities sold under
agreements to repurchase (240) (201) (39)
Interest-bearing demand
notes to U.S. Treasury (7) (3) (4)
Other borrowed money (36) (32) (4)
_______ _______ ________
Total interest expense (553) (212) (341)
_______ _______ ________
Net interest income on a fully
taxable equivalent basis $ 105 88 17
___________ ======= ======= ========
/1/ Non-accruing 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 $144,000 in
1999 and $151,000 in 1998.
</TABLE>
<PAGE>
Provision and Allowance for Loan Losses
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. The 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 what 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. See additional discussion concerning nonperforming loans
under "Financial Condition."
The allowance for loan losses was decreased by net loan charge-offs of
$25,987 for the first quarter of 1999 compared to net recoveries of $21,855
for the first quarter of 1998. The allowance for loan losses was increased by
a provision charged to expense of $180,000 for the first quarter of 1999
compared to $172,500 for the first quarter of 1998.
The balance of the allowance for loan losses was $4,566,934 at March 31,
1999 compared to $4,412,921 at December 31, 1999 and $4,118,738 at March 31,
1998. The allowance for loan losses as a percent of outstanding loans was
1.58% at March 31, 1999 compared to 1.53% at December 31, 1998 and 1.49% at
March 31, 1998.
FINANCIAL CONDITION
Total assets decreased $2,233,351 or 0.5% to $456,470,023 at March 31,
1999 compared to $458,703,374 at December 31, 1998. Total liabilities
decreased $2,783,509 or 0.7% to $409,806,683 and stockholders' equity
increased $550,158 or 1.2% to $46,663,340.
Loans increased $16,491 or 0.1% to $288,233,996 at March 31, 1999 compared
to $288,217,505 at December 31, 1998. Commercial loans increased $1,787,100
or 1.8%; real estate construction loans increased $1,404,000 or 7.2%; real
estate mortgage loans decreased $2,977,807 or 2.4%; and consumer loans
decreased $196,802 or 0.4%.
<PAGE>
Nonperforming loans, defined as loans on nonaccrual status, loans 90 days
or more past due, and restructured loans totaled $1,489,000 or 0.52% of total
loans at March 31, 1999 compared to $810,000 or 0.28% of total loans at
December 31, 1998. Detail of those balances plus other real estate and
repossessions is as follows:
<TABLE>
<CAPTION>
(Dollars expressed in thousands)
March 31, 1999 December 31, 1998
_________________ _________________
% of % of
Gross Gross
Balance Loans Balance Loans
_______ _____ _______ _____
<S> <C> <C> <C> <C>
Nonaccrual loans:
Commercial $ 102 .03% $ 102 .04%
Real Estate:
Construction 392 .14 274 .09
Mortgage 755 .26 272 .09
Consumer 46 .02 59 .02
______ ____ ______ ____
1,295 .45 707 .24
______ ____ ______ ____
Loans contractually past-due 90 days
or more and still accruing:
Commercial -- -- -- --
Real Estate:
Construction -- -- -- --
Mortgage 106 .04 -- --
Consumer 8 -- 18 .01
______ ____ ______ ____
114 .04 18 .01
______ ____ ______ ____
Restructured loans 80 .03 85 .03
______ ____ ______ ____
Total nonperforming loans 1,489 .52% 810 .28%
==== ====
Other real estate 80 85
Repossessions 43 93
______ ______
Total nonperforming assets $1,612 $ 988
====== ======
</TABLE>
The allowance for loan losses was 306.71% of nonperforming loans at March
31, 1999 compared to 544.81% of nonperforming loans at December 31, 1998. The
$483,000 increase to $755,000 in nonaccrual mortgage loans is primarily
represented by one credit totaling approximately $344,000. The $96,000
increase to $114,000 in loans past-due 90 days or more and still accruing
consists of two residential mortgages that were 90 days past due at March 31,
1999. No significant loss is expected from these credits.
It is the Company's policy to discontinue the accrual of interest income
on loans when the full collection of interest or principal is in doubt, or
when the payment of interest or principal has become contractually 90 days
past due unless the obligation is both well secured and in the process of
collection. 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. Interest on loans on nonaccrual status at
March 31, 1999 and 1998, which would have been recorded under the original
terms those loans, was approximately $24,000 and $19,000 for the three months
ended March 31, 1999 and 1998, respectively. Approximately $3,000 and $1,000
was actually recorded as interest income on such loans for the three months
ended March 31, 1999 and 1998, respectively.
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 March 31, 1999 included in the table above, which were considered
"impaired", management has identified additional loans totaling approximately
$6,373,000 which are not included in the nonaccrual table above but are
considered by management to be "impaired". Management believes that the loans
are well secured and all have performed according to their contractual terms
during the first quarter of 1999. The $6,373,000 of loans identified by
management as being "impaired" reflected various commercial, commercial real
estate, real estate, and consumer loans ranging in size from approximately
$3,000 to approximately $3,100,000. The average balance of nonaccrual and
other "impaired" loans for the first three months of 1999 was approximately
$7,707,000. At March 31, 1999 the allowance for loan losses on impaired loans
was $574,000 compared to $554,000 at December 31, 1998.
As of March 31, 1999 and December 31, 1998 approximately $1,812,000 and
$2,457,000 of loans not included in the nonaccrual table above or identified
by management as being "impaired" were classified by management as having more
than normal risk.
Investment in debt and equity securities classified as available-for-sale
increased $1,343,770 or 1.9% to $71,660,503 at March 31, 1999 compared to
$70,316,733 at December 31, 1998. Investments classified as
available-for-sale are carried at fair value. At December 31, 1998 the market
valuation account for the available-for-sale investments of $608,184 increased
the amortized cost of those investments to their fair value on that date and
the net after tax increase resulting from the market valuation adjustment of
$383,156 was reflected as a separate positive component of stockholders'
equity. During 1999, the market valuation account was decreased $316,942 to
$291,242 to reflect the fair value of available-for-sale investments at March
31, 1999 and the net after tax decrease resulting from the change in the
market valuation adjustment of $199,674 decreased the stockholders' equity
component to $183,482 at March 31, 1999.
Investments in debt securities classified as held-to-maturity decreased
$1,941,798 or 6.3% to $28,807,145 at March 31, 1999 compared to $30,748,943 at
December 31, 1998. Investments classified as held-to-maturity are carried at
amortized cost. At March 31, 1999 and December 31, 1998 the aggregate fair
value of Bancshares' held-to-maturity investment portfolio was approximately
$526,000 and $642,000, respectively, more than its aggregate carrying value.
Cash and cash equivalents, which consist of cash and due from banks and
Federal funds sold, decreased $2,155,389 or 4.7% to $44,048,355 at March 31,
1999 compared to $46,203,744 at December 31, 1998.
Premises and equipment increased $380,294 or 2.7% to $12,394,546 at March
31, 1999 compared to $12,064,252 at December 31, 1998. The increase reflected
expenditures for premises and equipment of $518,974 and depreciation expense
of $188,680. The expenditures for premises and equipment primarily reflected
construction costs for renovating and expanding ENB's main bank building
located in downtown Jefferson City. The renovation and expansion project was
substantially completed by March 31, 1999 at a cost of approximately
$5,500,000.
Total deposits decreased $5,571,440 or 1.5% to $367,950,346 at March 31,
1999 compared to $373,521,786 at December 31, 1998. Demand deposits decreased
$4,980,394 due to seasonal fluctuations and time deposits decreased $591,046.
Securities sold under agreements to repurchase increased $2,727,350 to
$19,718,261 at March 31, 1999 compared to $16,990,911 at December 31, 1998 due
primarily to new funds obtained from a public entity.
The increase in stockholders' equity reflects net income of $1,109,088
less dividends declared of $359,255 and $199,674 in unrealized holding losses
on investment in debt and equity securities available-for-sale.
No material changes in the Company's liquidity or capital resources have
occurred since December 31, 1998.
Year 2000 Compliance
Bancshares is committed to taking the necessary steps to enable both new and
existing systems, applications and equipment to effectively process
transactions up to and beyond Year 2000. To that end, Bancshares is well
underway with its Year 2000 readiness program, having spent approximately
$500,000 to date. The total cost of the program is currently estimated at
$750,000, comprised of capital improvements of $650,000 and direct expense of
$100,000. The capital improvements will be charged to expense in the form of
depreciation expense or lease expense, generally over a period of 60 months.
Because of such ongoing readiness efforts, Year 2000 processing issues and
risks are not expected to have a material adverse impact on the ability of
Bancshares to continue its general business operations.
Currently, Bancshares and its subsidiaries have substantially completed the
following Year 2000 program initiatives:
Completed a comprehensive analysis of current functions which might be
impacted by Year 2000 issues and documented the results in a Year 2000
Assessment Report
Developed and implemented a detailed plan to address Year 2000 issues as
identified, particularly as they pertain to software and hardware
applications
Surveyed outside vendors to determine the degree of preparedness for the
Year 2000 to uncover potential issues arising from such business counter
parties
Raised organizational awareness not only with top management, but also at
the staff level, and involved business group leaders in reaching
solutions
Implemented an ongoing purchase/procurement plan which is responsive to
Year 2000 concerns.
The risk of failures of computer applications, systems and networks due to
improper Year 2000 data processing are substantial, not only for users of
information technologies, but also for any entities and individuals which
interact with them. Moreover, when aggregated, multiple individual
malfunctions and failures relating to Year 2000 issues can potentially cause
broader, systemic disruptions across industries and economies. The risks
arising from Year 2000 issues which face many companies, including Bancshares,
include the potential diminished ability to respond to the needs and
expectations of customers in a timely manner, the potential for inaccurate
processing information. In recognition of these risks, Bancshares is focusing
on mission critical applications in order that programming changes and
equipment upgrades were well underway by March 31, 1999. The only major
system that had not been upgraded by March 31, 1999 was ENB's teller system
and that system is scheduled to be replaced and tested by the end of the
second quarter 1999.
In addition, Bancshares has begun developing contingency plans to complement
the Year 2000 readiness efforts already in progress, including backup and
offsite processing of certain information and functions and securing
contingency funding sources. Bancshares anticipated that such contingency
plans will provide an additional level of security to its Year 2000 efforts
already underway. Bancshares is also participating with other financial
institutions in a Year 2000 focus group in the central Missouri area. The
goal of this group is to educate the general public about Year 2000 issues in
general and the banks' preparedness for the Year 2000 changes in particular.
The foregoing discussion of Year 2000 issues is based on current estimated of
the management of Bancshares as to the amount of time and costs necessary to
remediate and test the computer systems of Bancshares. Such estimates are
based on the facts and circumstances existing at this time, and were derived
utilizing multiple assumptions of future events, including, but not limited
to, the continue availability of certain resources, third-party modification
plans and implementation success, and other factors. However, there can be no
guarantee that these estimated will be achieved, and actual costs and results
could differ materially from the costs and results currently anticipated by
Bancshares. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant computer
code, the planning and modification success attained by the business counter
parties of Bancshares, and similar uncertainties.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
No response is provided to this item pursuant to Instruction 1. to
Paragraph 305c of Regulation S-K.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K.
(a) 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).
3.2 Bylaws of the Company (filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998 (Commission file number
0-23636) 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).
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the first quarter of
1999.
<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 thereunto duly authorized.
EXCHANGE NATIONAL BANCSHARES, INC.
Date By /s/ Donald L. Campbell
___________________________________
Donald L. Campbell, Chairman of the
Board of Directors, President and
May 13, 1999 Principal Executive Officer
By /s/ Richard G. Rose
___________________________________
Richard G. Rose, Treasurer
May 13, 1999
<PAGE>
EXCHANGE NATIONAL BANCSHARES, INC.
INDEX TO EXHIBITS
March 31, 1999 Form 10-Q
Exhibit No. Description Page No.
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). **
3.2 Bylaws of the Company (filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997 (Commission file
number 0-23636) 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). **
27 Financial Data Schedule 25
** Incorporated by reference.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000893847
<NAME> EXCHANGE NATIONAL BANCSHARES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,694
<INT-BEARING-DEPOSITS> 254
<FED-FUNDS-SOLD> 30,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 71,661
<INVESTMENTS-CARRYING> 28,807
<INVESTMENTS-MARKET> 29,333
<LOANS> 288,234
<ALLOWANCE> 4,567
<TOTAL-ASSETS> 456,470
<DEPOSITS> 367,950
<SHORT-TERM> 20,092
<LIABILITIES-OTHER> 4,613
<LONG-TERM> 17,151
0
0
<COMMON> 719
<OTHER-SE> 45,944
<TOTAL-LIABILITIES-AND-EQUITY> 456,470
<INTEREST-LOAN> 5,924
<INTEREST-INVEST> 1,402
<INTEREST-OTHER> 327
<INTEREST-TOTAL> 7,653
<INTEREST-DEPOSIT> 3,375
<INTEREST-EXPENSE> 3,870
<INTEREST-INCOME-NET> 3,783
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,660
<INCOME-PRETAX> 1,666
<INCOME-PRE-EXTRAORDINARY> 1,109
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,109
<EPS-PRIMARY> 1.54
<EPS-DILUTED> 1.54
<YIELD-ACTUAL> 3.88
<LOANS-NON> 1,295
<LOANS-PAST> 114
<LOANS-TROUBLED> 80
<LOANS-PROBLEM> 8,185
<ALLOWANCE-OPEN> 4,413
<CHARGE-OFFS> 64
<RECOVERIES> 37
<ALLOWANCE-CLOSE> 4,567
<ALLOWANCE-DOMESTIC> 3,204
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,363
</TABLE>
