1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
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 Identification No.)
incorporation or organization)
132 EAST HIGH STREET, JEFFERSON CITY, MISSOURI 65101
(Address of principal executive offices) (Zip Code)
(573) 761-6100
(Registrant's telephone number)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
None N/A
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
Common Stock, par value $1.00 per share
(Title of Class)
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. YES [X] NO[ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF THE 2,123,677 SHARES OF VOTING STOCK OF
THE ISSUER HELD BY NON-AFFILIATES COMPUTED BY REFERENCE TO THE $23.00 CLOSING
PRICES OF SUCH STOCK ON MARCH 15, 2001, IS $48,844,571. AS OF MARCH 15, 2001,
THE REGISTRANT HAD 2,863,493 SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE,
OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into
the indicated parts of this report: (1) 2000 Annual Report to Shareholders -
Part II and (2) definitive Proxy Statement for the 2001 Annual Meeting of
Shareholders to be filed with the Commission pursuant to Regulation 14A - Part
III.
2
PART I
ITEM 1. BUSINESS.
GENERAL
Exchange National Bancshares, Inc. is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended. Exchange was
incorporated under the laws of the State of Missouri on October 23, 1992, and on
April 7, 1993 it acquired all of the issued and outstanding capital stock of The
Exchange National Bank of Jefferson City, a national banking association,
pursuant to a corporate reorganization involving an exchange of shares. On
November 3, 1997, our Company acquired Union State Bancshares, Inc., and Union's
wholly-owned subsidiary, Union State Bank and Trust of Clinton. Following the
May 4, 2000 acquisition of Calhoun Bancshares, Inc. by Union State Bank.,
Calhoun Bancshares' wholly-owned subsidiary, Citizens State Bank of Calhoun,
merged into Union State Bank. The surviving bank in this merger is called
Citizens Union State Bank & Trust. On January 3, 2000, our Company acquired Mid
Central Bancorp, Inc., and Mid Central's wholly-owned subsidiary, Osage Valley
Bank. On June 16, 2000, our Company acquired CNS Bancorp, Inc. and its
subsidiary, City National Savings Bank, FSB. City National subsequently was
merged into Exchange National Bank.
Our Company's principal executive offices are located at 132 East High
Street, Jefferson City, Missouri 65101, and its telephone number is (573)
761-6100. Except as otherwise provided herein, references herein to "Exchange"
or our "Company" include Exchange and its consolidated subsidiaries, and
references herein to the "Banks" refer to Exchange National Bank, Citizens Union
State Bank and Osage Valley Bank.
DESCRIPTION OF BUSINESS
EXCHANGE. Exchange is a bank holding company registered under the Bank
Holding Company Act. Our Company's activities currently are limited to
ownership, directly or indirectly through subsidiaries, of the outstanding
capital stock of Exchange National Bank, Citizens Union State Bank and Osage
Valley Bank. In addition to ownership of its subsidiaries, Exchange could seek
expansion through acquisition and may engage in those activities (such as
investments in banks or operations closely related to banking) in which it is
permitted to engage under applicable law. It is not currently anticipated that
Exchange will engage in any business other than that directly related to its
ownership of its banking subsidiaries or other financial institutions.
UNION. Union is a bank holding company registered under the Bank Holding
Company Act. Union's activities currently are limited to ownership of the
outstanding capital stock of Citizens Union State Bank. It is not currently
anticipated that Union will engage in any business other than that directly
related to its ownership of Citizens Union State Bank.
MID CENTRAL BANCORP. Mid Central Bancorp is a bank holding company
registered under the Bank Holding Company Act. Mid Central Bancorp's activities
currently are limited to ownership of the outstanding capital stock of Osage
Valley Bank. It is not currently anticipated that Mid Central Bancorp will
engage in any business other than that directly related to its ownership of
Osage Valley Bank.
EXCHANGE NATIONAL BANK. Exchange National Bank, located in Jefferson
City, Missouri, was founded in 1865. Exchange National Bank is the oldest bank
in Cole County, and became a national bank in 1927. Exchange National Bank has
seven banking offices, including its principal office at 132 East High Street in
Jefferson City's central business district, three Jefferson City branch
facilities and a branch facility in each of the Missouri communities of Tipton,
California and St. Robert. See "Item 2. Properties".
2
3
Exchange National Bank is a full service bank conducting a general
banking and trust business, offering its customers checking and savings
accounts, electronic cash management services, internet banking, debit cards,
certificates of deposit, trust services, brokerage services, safety deposit
boxes and a wide range of lending services, including credit card accounts,
commercial and industrial loans, single payment personal loans, installment
loans and commercial and residential real estate loans.
Exchange National Bank's deposit accounts are insured by the Federal
Deposit Insurance Corporation (the "FDIC") to the extent provided by law, and it
is a member of the Federal Reserve System. Exchange National Bank's operations
are supervised and regulated by the Office of the Comptroller of the Currency
(the "OCC"), the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") and the FDIC. A periodic examination of Exchange National Bank
is conducted by representatives of the OCC. Such regulations, supervision and
examinations are principally for the benefit of depositors, rather than for the
benefit of the holders of Exchange National Bank's common stock. See "Regulation
Applicable to Bank Holding Companies " and "Regulation Applicable to the Banks".
CITIZENS UNION STATE BANK. Citizens Union State Bank was founded in 1932
as a Missouri bank known as Union State Bank of Clinton. Citizens Union State
Bank converted from a Missouri bank to a Missouri trust company on August 16,
1989, changing its name to Union State Bank and Trust of Clinton. Citizens Union
State Bank has eight banking offices, including its principal office at 102
North Second Street in Clinton, Missouri, four Clinton branch facilities, and a
branch facility in each of the Missouri communities of Collins, Osceola and
Calhoun. See "Item 2. Properties".
Citizens Union State Bank is a full service bank conducting a general
banking and trust business, offering its customers checking and savings
accounts, internet banking, debit cards, certificates of deposit, trust
services, brokerage services, safety deposit boxes and a wide range of lending
services, including credit card accounts, commercial and industrial loans,
single payment personal loans, installment loans and commercial and residential
real estate loans.
Citizens Union State Bank's deposit accounts are insured by the FDIC to
the extent provided by law. Citizens Union State Bank's operations are
supervised and regulated by the FDIC and the Missouri Division of Finance.
Periodic examinations of Citizens Union State Bank are conducted by
representatives of the FDIC and the Missouri Division of Finance. Such
regulations, supervision and examinations are principally for the benefit of
depositors, rather than for the benefit of the holders of Citizens Union State
Bank's common stock. See "Regulation Applicable to Bank Holding Companies " and
"Regulation Applicable to the Banks".
OSAGE VALLEY BANK. Osage Valley Bank was founded in 1891 as a Missouri
state bank. Osage Valley Bank has two banking offices, including its principal
office at 200 Main Street in Warsaw, Missouri and a branch facility in Warsaw,
Missouri. See "Item 2. Properties".
Osage Valley Bank is a full service bank conducting a general banking
business, offering its customers checking and savings accounts, debit cards,
certificates of deposit, safety deposit boxes and a wide range of lending
services, including credit card accounts, commercial and industrial loans,
single payment personal loans, installment loans and commercial and residential
real estate loans.
Osage Valley Bank's deposit accounts are insured by the FDIC to the
extent provided by law. Osage Valley Bank's operations are supervised and
regulated by the FDIC and the Missouri Division of Finance. Periodic
examinations of Osage Valley Bank are conducted by representatives of the FDIC
and the Missouri Division of Finance. Such regulations, supervision and
examinations are principally for the benefit of depositors, rather than for the
benefit of the holders of Osage Valley Bank's common stock. See "Regulation
Applicable to Bank Holding Companies " and "Regulation Applicable to the Banks".
3
4
EMPLOYEES
As of December 31, 2000, Exchange and its subsidiaries had approximately
202 full-time and 33 part-time employees. None of its employees is presently
represented by any union or collective bargaining group, and our Company
considers its employee relations to be satisfactory.
COMPETITION
Bank holding companies and their subsidiaries and affiliates encounter
intense competition from nonbanking as well as banking sources in all of their
activities. The Banks' competitors include other commercial banks, savings and
loan associations, savings banks, credit unions and money market mutual funds.
Savings and loan associations and credit unions now have the authority to offer
checking accounts and to make corporate and agricultural loans and were granted
expanded investment authority by recent federal regulations. As a result, these
thrift institutions are expected to continue to offer increased competition to
commercial banks in the future. In addition, large national and multinational
corporations have in recent years become increasingly visible in offering a
broad range of financial services to all types of commercial and consumer
customers. In the Banks' respective service areas, new competitors, as well as
the expanding operations of existing competitors, have had, and are expected to
continue to have, an adverse impact on the Banks' market share of deposits and
loans in such service areas.
Exchange National Bank experiences substantial competition for deposits
and loans within both its primary service area of Jefferson City and its
secondary service area of the nearby communities in Cole County. Exchange
National Bank's principal competition for deposits and loans comes from four
other banks within its primary service area of Jefferson City and, to an
increasing extent, nine other banks in nearby communities. Based on publicly
available information, management believes that Exchange National Bank is the
second largest (in terms of assets) of the banks within Cole County. The main
competition for Exchange National Bank's trust services is from other commercial
banks.
The areas in which Citizens Union State Bank competes for deposits and
loans are its primary service areas of Clinton, Collins, Calhoun and Osceola,
Missouri and its secondary service area of the nearby communities in Henry and
St. Clair counties. Citizens Union State Bank's principal competition for
deposits and loans comes from eight other banks within its primary service area
and, to an increasing extent, four other banks in nearby communities. Based on
publicly available information, management believes that Citizens Union State
Bank is the largest (in terms of assets) of the banks within Henry and St. Clair
counties. The main competition for Citizens Union State Bank's trust services is
from the trust departments of other commercial banks in the Kansas City area.
Osage Valley Bank competes for deposits and loans in its primary service
area of Warsaw, Missouri and its secondary service area of the nearby
communities in Benton County. Osage Valley Bank's principal competition for
deposits and loans comes from banks within its primary service area of Warsaw
and in nearby communities. Based on publicly available information, management
believes that Osage Valley Bank is the second largest (in terms of assets) of
the banks within Benton County; however, Osage Valley Bank and two of the three
other banks in Benton County are comparable in size.
REGULATION APPLICABLE TO BANK HOLDING COMPANIES
GENERAL. Each of Exchange, Union and Mid Central Bancorp is a registered
bank holding company within the meaning of the Bank Holding Company Act, subject
to the supervision of the Federal Reserve Board. Each of Exchange, Union and Mid
Central Bancorp is required to file with the Federal Reserve Board an annual
report and such other additional information as the Federal Reserve Board may
require pursuant to the Bank Holding Company Act. Also, the Federal Reserve
Board periodically examines Exchange, Union and Mid Central Bancorp. The Federal
Reserve Board has authority to issue cease and desist orders against
4
5
bank holding companies if it determines that their actions represent unsafe and
unsound practices or violations of law. In addition, the Federal Reserve Board
is empowered to impose substantial civil money penalties for violations of
certain banking statutes and regulations. Regulation by the Federal Reserve
Board is intended to protect depositors of the Banks, not shareholders of
Exchange.
SOURCE OF STRENGTH. Federal Reserve Board policy requires a bank holding
company to serve as a source of financial and managerial strength to its
subsidiary banks. Under this policy, a bank holding company is expected to stand
ready to use its available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity, and to
maintain resources and the capacity to raise capital which it can commit to its
subsidiary banks. It is the Federal Reserve Board's position that the failure of
a bank holding company to serve as a source of strength to a distressed
subsidiary bank is an unsafe and unsound banking practice. This has become known
as the "source of strength doctrine." It is not clear whether the source of
strength doctrine is legally enforceable by the Federal Reserve Board.
LIMITATION ON ACQUISITIONS. The Bank Holding Company Act requires every
bank holding company to obtain the prior approval of the Federal Reserve Board
before (i) taking any action that causes a bank to become a controlled
subsidiary of the bank holding company, (ii) acquiring direct or indirect
ownership or control of voting shares of any bank or bank holding company, if
the acquisition results in the acquiring bank holding company having control of
more than 5% of the outstanding shares of any class of voting securities of such
bank or holding company and such bank or bank holding company is not
majority-owned by the acquiring bank holding company prior to the acquisition,
(iii) the acquisition by a bank holding company or any nonbank subsidiary
thereof of all or substantially all of the assets of a bank, or (iv) a merger or
consolidation with another bank holding company.
In determining whether to approve a proposed acquisition, merger or
consolidation, the Federal Reserve Board is required to take into account the
competitive effects of the proposed acquisition, the convenience and needs of
the community to be served, and the financial and managerial resources and
future prospects of the bank holding companies and banks concerned. If a
proposed acquisition, merger or consolidation might have the effect in any
section of the United States to substantially lessen competition or to tend to
create a monopoly, or if such proposed acquisition, merger, or consolidation
otherwise would be in restraint of trade, then the Federal Reserve Board may not
approve it unless it finds that the anticompetitive effects are clearly
outweighed in the public interest by the probable effect of the proposed
transaction in meeting the convenience and needs of the community to be served.
Exchange, Union and Mid Central Bancorp may from time to time acquire an
interest in the voting stock or assets of other banks or financial institutions.
LIMITATION ON CERTAIN ACTIVITIES. The Bank Holding Company Act also
prohibits a bank holding company, with certain exceptions, from engaging in, and
from acquiring direct or indirect ownership or control of the voting shares or
assets of any company engaged in, any activity other than banking or managing or
controlling banks, and any activity which the Federal Reserve Board has
determined before November 12, 1999 to be so closely related to banking, or
managing or controlling banks, as to be a proper incident thereto.
As of November 11, 1999, the Federal Reserve Board, by regulation, has
determined that, subject to expressed limitations, certain activities are
permissible for bank holding companies and their subsidiaries and may be engaged
in upon notice to the Federal Reserve Board without prior approval. These
permissible activities include furnishing or providing services for the internal
operations of the bank holding company and its subsidiaries, operating a safe
deposit business, making and servicing loans, operating an industrial bank,
performing certain trust company functions, acting as an investment or financial
advisor in certain capacities, leasing certain real or personal property, making
certain investments to promote community development, providing certain data
processing services, performing certain insurance agency and underwriting
functions, owning, controlling and operating a savings association, providing
specified courier services, providing management consulting advice to
nonaffiliated banks and nonbank depository institutions, selling certain
5
6
money orders, United States savings bonds and traveler's checks, performing
appraisals of real and personal property, arranging certain commercial real
estate equity financing, providing securities brokerage services, underwriting
and dealing in certain government obligations and money market instruments,
providing foreign exchange advisory and transactional services, acting as a
futures commission merchant, providing investment advice on financial futures
and options on futures, providing consumer financial counseling, providing tax
planning and preparation services, providing certain check guaranty services,
operating a collection agency and operating a credit bureau.
The Federal Reserve Board also has determined that certain other
activities, including real estate brokerage and syndication, land development,
property management, management consulting, underwriting of life insurance not
sold in connection with a credit transaction, and insurance premium funding, are
improper activities for bank holding companies and their subsidiaries. Under the
Gramm-Leach-Bliley Act (the "GLB Act"), which was enacted on November 12, 1999,
the Federal Reserve Board is prohibited from approving new kinds of activities
to be permissible for a bank holding company unless the bank holding company has
elected to be a financial holding company. Certain bank holding companies and
their subsidiaries possess "grandfather rights" giving them authority to engage
in one or more of the activities which are not generally permissible because
they were engaged in such activities prior to the adoption of legislation
restricting such activities.
Under cross-guaranty provisions of the Federal Deposit Insurance Act
(the "FDIA"), bank subsidiaries of a bank holding company are liable for any
loss incurred (or reasonably anticipated to be incurred) by the Bank Insurance
Fund (the "BIF"), the federal deposit insurance fund for banks, in connection
with the failure of any other bank subsidiary of the bank holding company.
Liability under such cross-guaranty would be junior to deposit liabilities and
most secured obligations, but senior to obligations to shareholders and most
obligations to affiliates. The FDIC has authority to prospectively waive the
cross-guaranty provision. Currently Exchange National Bank, Citizens Union State
Bank and Osage Valley Bank are the only bank subsidiaries of Exchange.
A bank holding company and its subsidiaries are prohibited from engaging
in certain tie-in arrangements in connection with the extension of credit or the
lease or sale of any property or the furnishing of services. Subsidiary banks of
a bank holding company are also subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to the bank holding company or
any of its subsidiaries, or investment in the stock or other securities thereof,
and on the taking of such stocks or securities as collateral for loans.
ACTIVITIES OF A FINANCIAL HOLDING COMPANY. Under the GLB Act, a bank
holding company that elects to be a financial holding company may engage in a
wider range of financial activities. Effective March 11, 2000, the GLB Act is
(i) terminating the restrictions of the Bank Holding Company Act that prohibit
banks from affiliating with insurance companies, (ii) terminating the
restrictions of the Glass-Steagall Act that prohibit affiliates of banks from
conducting certain securities underwriting activities, and (iii) permitting bank
holding companies to conduct other activities that the Federal Reserve Board and
the United States Department of Treasury ("Treasury") determine to be financial
in nature or incidental to a financial activity or the Federal Reserve Board
determines to be complementary to a financial activity.
To engage in the newly authorized financial activities, a bank holding
company must elect to become a financial holding company. The bank holding
company may make such an election by filing with the Federal Reserve Board (1) a
declaration that the company elects to be a financial holding company to engage
in Fed-approved financial activities or to acquire a company that engages in
such activities, and (2) a certification, based upon the most recent regulatory
examinations, that each of the bank holding company's insured depository
institutions is well-capitalized and well-managed. Furthermore, each of the
insured depository institutions must be rated "satisfactory" in its latest
Community Reinvestment Act examination.
6
7
The non-bank subsidiaries of a financial holding company may engage in
pre-approved financial activities, which include the underwriting of all types
of insurance and annuity products, the underwriting of all types of securities
products and mutual funds, merchant banking activities, full-service insurance
agency activities and operating a travel agency. A financial holding company may
conduct any of these activities, so long as the financial holding company
notifies the Federal Reserve Board within 30 days after the financial holding
company commences such activities or acquires a company that engages in such
activities. A financial holding company does not need to file a formal
application with or obtain prior approval from the Federal Reserve Board to
conduct such activities.
If a financial holding company wishes to engage in activities that are
"financial in nature or incidental to a financial activity" but not yet
specifically authorized by the Federal Reserve Board, the financial holding
company must file an application with the Federal Reserve Board. If both the
Federal Reserve Board and Treasury approve the application, the financial
holding company may commence the new activity. The Federal Reserve Board may
also approve a new activity that is complementary to a financial activity, but
the financial holding company must make an additional showing that the activity
does not pose a substantial risk to the safety and soundness of depository
institutions or the financial system generally. On December 19, 2000, the
Federal Reserve promulgated a regulation permitting a financial holding company
to act as a "finder," which is the activity of bringing together one or more
buyers and sellers of any product or service for transactions that the parties
themselves negotiate and consummate.
A bank holding company that does not elect to become a financial holding
company may remain a bank holding company. A bank holding company's regulatory
requirements remain substantially the same, with two exceptions. First, the bank
holding company and its subsidiaries will be subject to new customer privacy
regulations, which will become effective on July 1, 2001. Second, a bank that
engages in securities brokerage activities may be required, under certain
circumstances, to move its securities brokerage activities to a subsidiary or
non-bank affiliate that is an NASD-registered broker-dealer.
REGULATORY CAPITAL REQUIREMENTS. The Federal Reserve Board has
promulgated "capital adequacy guidelines" for use in its examination and
supervision of bank holding companies. A holding company's ability to pay
dividends and expand its business through the acquisition of new banking
subsidiaries can be restricted if its capital falls below levels established by
these guidelines. In addition, holding companies whose capital falls below
specified levels can be required to implement a plan to increase capital.
The Federal Reserve Board's capital adequacy guidelines provide for the
following types of capital: Tier 1 capital (also referred to as core capital),
Tier 2 capital (also referred to as supplementary capital), Tier 3 capital
(consisting of short-term subordinated debt that meets certain conditions and
used only in the measure of market risk, as discussed below) and Total capital.
A bank holding company's Tier 1 capital generally includes the following
elements: common shareholders' equity, qualifying noncumulative perpetual
preferred stock and related surplus, qualifying cumulative perpetual preferred
stock and related surplus (limited to a maximum of 25% of Tier 1 capital
elements) and minority interests in the equity accounts of consolidated
subsidiaries. Goodwill is generally excluded from Tier 1 capital. Most
intangible assets are also deducted from Tier 1 capital. A bank holding
company's Tier 2 capital generally includes allowances for loan and lease losses
(limited to 1.25% of risk-weighted assets), most perpetual preferred stock and
any related surplus (noncumulative and cumulative, without percentage limits),
certain hybrid capital instruments, perpetual debt and mandatory convertible
debt securities, and certain intermediate-term preferred stock and
intermediate-term subordinated debt instruments (to a maximum of 50% of Tier 1
capital excluding goodwill, but phased-out as the instrument matures). The
maximum amount of supplementary capital that qualifies as Tier 2 capital is
limited to 100% of Tier 1 capital (net of goodwill). For purposes of calculating
the total risk-based capital ratio, Total capital generally includes Tier 1
capital, plus qualifying Tier 2 capital, minus investments in unconsolidated
subsidiaries, reciprocal holdings of bank holding company capital securities,
certain deferred tax assets and other deductions as determined by the Federal
Reserve Board.
7
8
The Federal Reserve Board issued a regulation effective on October 1,
1998 which increases the amount of intangible assets which may be included in
Tier 1 capital. Under the regulation, mortgage servicing rights ("MSRs"),
non-mortgage servicing assets ("NMSAs") and purchased credit card relationships
("PCCRs") are included in Tier 1 capital to the extent that, in the aggregate,
they do not exceed 100% of Tier 1 capital and, to the further extent that PCCRs
and NMSAs, in the aggregate, do not exceed 25% of Tier 1 capital. MSRs and PCCRs
in excess of these limits, as well as core deposit intangibles ("CDI") and all
other identified intangible assets, must be deducted in determining Tier 1
capital. As of December 31, 2000, Exchange, Union and Mid Central Bancorp had no
NMSAs or PCCRs. Additionally, neither Union, nor Mid Central Bancorp had MSRs.
As of December 31, 2000, Exchange had $622,000 of MSRs (which are included in
other assets), $1,042,000 of CDIs, $23,867,000 of goodwill and $425,000 of other
identified intangible assets, and Union had $1,042,000 of CDIs and $15,678,000
of goodwill. Mid Central Bancorp had $4,342,000 of goodwill and no CDIs.
Effective October 1, 1998, the Federal Reserve Board amended its capital
adequacy guidelines to permit bank holding companies to include as part of Tier
2 capital up to 45 percent of the pretax net unrealized holding gains on
available-for-sale equity securities.
The Federal Reserve Board's capital adequacy guidelines require a bank
holding company to satisfy a Tier 1 Leverage Ratio, a total risk-based capital
ratio and a Tier 1 risk-based capital ratio. Under the Tier 1 Leverage Ratio
capital guideline, a bank holding company must have and maintain Tier 1 capital
in an amount equal to at least 3.0% of its average total consolidated assets. In
general, average total consolidated assets means the quarterly average total
assets (net of the allowance for loan and lease losses) reported on a bank
holding company's Consolidated Financial Statements (FR Y-9C Report), minus
goodwill and any other intangible assets or investments in subsidiaries which
are deducted from Tier 1 capital. The 3.0% minimum Tier 1 Leverage Ratio is
considered the absolute minimum amount of Tier 1 capital which the most highly
rated bank holding companies (those rated composite 1 under the BOPEC rating
system for bank holding companies) or those bank holding companies that have
implemented the risk-based capital market risk measure set forth in the Federal
Reserve Board's capital adequacy guidelines are required to maintain. All other
bank holding companies must maintain a minimum Tier 1 Leverage Ratio of 4.0%.
Under the Federal Reserve Board's capital adequacy guidelines, a bank
holding company must have and maintain a ratio of Total capital to risk-weighted
assets of 8.00%, and a ratio of Tier 1 capital to risk-weighted assets of 4%.
The amount of a bank holding company's risk-weighted assets is determined by
multiplying the balance sheet amount of each of the bank holding company's
consolidated assets by a specified risk-weight factor of 0%, 20%, 50% or 100%,
in accordance with the relative risk level of the asset. In determining
risk-weighted assets, off-balance sheet items, such as standby letters of
credit, are converted to an on-balance sheet credit equivalent amount by
multiplying the face amount of the off-balance sheet item by a credit conversion
factor of 0%, 20%, 50% or 100%, in accordance with the probability that the
off-balance sheet item will become a credit extended by the bank holding
company. In general, intangible assets and other assets which are deducted in
determining Tier 1 capital and Total capital may also be excluded from
risk-weighted assets.
The Federal Reserve Board has proposed to permit portions of claims
(including repurchase agreements) collateralized by cash on deposit with the
lending institution or by securities issued or guaranteed by the U.S. Treasury,
U.S. government agencies, or the central governments in other OECD countries to
be eligible for a zero percent risk weight. The effect of this proposal is to
allow banks and bank holding companies to hold less capital for these types of
collateralized transactions.
Under the Federal Reserve Board's market risk rules, an institution with
significant trading activities must measure and hold capital for exposure to
general market risk arising from fluctuations in interest rates, equity prices,
foreign exchange rates and commodity prices and exposure to specific risk
associated with debt and equity positions in the trading portfolio. This
regulation applies to any bank holding company (i) whose
8
9
trading activity equals 10% or more of its total assets or (ii) whose trading
activity equals $1 billion or more. General market risk refers to changes in the
market value of on-balance sheet assets and off-balance sheet items resulting
from broad market movements. Specific risk refers to changes in the market value
of individual positions due to factors other than broad market movements and
includes such risks as the credit risk of an instrument's issuer. Under the
Federal Reserve Board's rules, an institution must measure its general market
risk using its internal risk measurement model to calculate a "value-at-risk"
based capital charge. An institution must also measure its specific risk either
through a valid internal model or by a so-called standardized approach. The
standardized approach for the measurement of specific risk uses a risk-weighing
process developed by the Federal Reserve Board which categorizes individual
instruments and then assesses a fixed capital charge. Until September 1997, an
institution that used an internal model to measure specific risk, rather than
the standardized approach, was required to hold capital for specific risk at
least equal to 50 percent of the specific risk charge calculated when using the
standardized approach (the minimum specific risk charge). If that portion of an
institution's "value-at-risk" capital charge which was attributable to specific
risk did not equal the minimum specific risk charge, the institution was subject
to additional charges to make up for such difference. In September 1997, the
Federal Reserve Board has eliminated the use of the minimum specific risk charge
and consequently, the need for a dual calculation if an institution uses its
internal model to measure specific risk. Therefore, an institution using a valid
internal model to measure specific risk may use the "value-at-risk" measures
generated by its model without being required to compare the model-generated
risk charge to the minimum specific risk charge as calculated under the
standardized approach.
The regulation supplements the existing credit risk-based capital
standards by requiring an affected institution to adjust its risk-based capital
ratio to reflect market risk. In measuring market risk, institutions may use
Tier 3 capital to meet the market risk capital requirements. Tier 3 capital is
subordinated debt that is unsecured, fully paid up, has an original maturity of
at least 2 years, is not redeemable before maturity without the prior approval
of the institution's supervisor, is subject to a lock-in clause that prevents
the issuer from repaying the debt even at maturity if the issuer's capital ratio
is, or with repayment, would become, less than the minimum 8% risk-based capital
ratio, and does not contain and is not covered by any covenants, terms or
restrictions that may be inconsistent with safe and sound banking practices.
On December 31, 2000, Exchange, Union and Mid Central Bancorp each was
in compliance with all of the Federal Reserve Board's capital guidelines. On
such date, Exchange had a Tier 1 leverage ratio of 7.07% (compared with a
minimum requirement of 3%), a ratio of total capital to risk-weighted assets of
11.90% (compared with a minimum requirement of 8%) and a ratio of Tier 1 capital
to risk-weighted assets of 10.65% (compared with a minimum requirement of 4%),
Union had a Tier 1 leverage ratio of 8.02%, a ratio of total capital to
risk-weighted assets of 15.32% and a ratio of Tier 1 capital to risk-weighted
assets of 14.06% and Mid Central Bancorp had a Tier 1 leverage ratio of 7.09%, a
ratio of total capital to risk-weighted assets of 18.91% and a ratio of Tier 1
capital to risk-weighted assets of 17.83%.
INTERSTATE BANKING AND BRANCHING. Under the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), bank
holding companies are permitted to acquire the stock or substantially all of the
assets of banks located in any state regardless of whether such transaction is
prohibited under the laws of any state. The Federal Reserve Board, however, may
not approve an interstate acquisition if as a result of the acquisition the bank
holding company would control more than 10% of the total amount of insured
deposits in the United States or would control more than 30% of the insured
deposits in the home state of the acquired bank. The 30% of insured deposits
state limit does not apply if the acquisition is the initial entry into a state
by a bank holding company or if the home state waives such limit.
Under the Riegle-Neal Act, individual states may restrict interstate
acquisitions in two ways. First, a state may prohibit an out-of-state bank
holding company from acquiring a bank located in the state unless the target
bank has been in existence for a specified minimum period of time (not to exceed
five years). Second, a state may establish limits on the total amount of insured
deposits within the state which are controlled by a
9
10
single bank holding company (a "deposit cap"), provided that such deposit limit
does not discriminate against out-of-state bank holding companies. In 1995,
Missouri enacted legislation that provides that a bank holding company whose
bank subsidiaries were conducting business in states other than the state of
Missouri as of January 1, 1995, may not charter de novo a bank or trust company
under Missouri law or a national bank located in Missouri, and such bank holding
company may not acquire any such bank or trust company or a national bank
located in Missouri that has been in continuous existence for less than five
years. This provision was enacted to implement a state option permitting bank
charter age requirements under the Riegle-Neal Act. Missouri currently has a
statewide deposit cap of 13%.
The Riegle-Neal Act now permits affiliated banks in different states to
act as agents for each other for purposes of receiving deposits, renewing time
deposits, closing loans, servicing loans and receiving payments on loans and
other obligations. A bank acting as an agent for an affiliated bank is not
considered a branch of the affiliated bank.
Beginning on June 1, 1997, the Riegle-Neal Act authorized interstate
branching by a merger of banks with different home states which results in a
single bank with branches in both states. The Riegle-Neal Act gave states the
right to "opt out" and prohibit interstate mergers by passing legislation before
June 1, 1997 that expressly prohibits all merger transactions with out-of-state
banks. The Riegle-Neal Act also gave states the right to "opt in" and authorize
early interstate mergers by passing legislation that expressly permits
interstate merger transactions with all out-of-state banks. The Riegle-Neal Act
authorized banks to establish and operate de novo branches in a state (other
than the bank's home state) only if the host state "opts in" to authorize de
novo interstate banking by passing legislation that expressly permits all
out-of-state banks to establish de novo branches in the state. As of June 1,
1997, approximately 44 states acted on the Riegle-Neal Act. Only two states,
Texas and Montana, opted out. Seven states contiguous with Missouri's borders,
Arkansas, Illinois, Iowa, Kentucky, Nebraska, Oklahoma and Tennessee,
affirmatively "opted-in." Neither Missouri nor Kansas acted by June 1, 1997 to
"opt-in" or "opt-out." Therefore, interstate branching of banks by merger is
permitted in Missouri and its contiguous states.
Effective October 10, 1997, the Riegle-Neal Act prohibits any bank from
establishing or acquiring a branch or branches outside its home state primarily
for the purpose of deposit production. An interstate branch must reasonably help
meet the credit needs of the communities served as determined by a
loan-to-deposit ratio screen. The FDIC and other banking agencies, under the
final rule, will determine a bank's total loan-to-deposit ratio for all branches
opened in a particular state one year or more after the bank has established an
interstate branch. If the ratio is less than 50 percent of the average
loan-to-deposit ratio for all banks headquartered in that state, the banking
regulators will try to determine whether the branches are making a "reasonable"
effort to meet the needs of the community served in that state by using six
mitigating factors. The agencies may impose sanctions on institutions found not
to meet the community credit needs. The regulators may require the bank to close
branches in the state where it has a low loan-to deposit ratio, and may prohibit
the bank from opening any new branches unless the institution assures the
agencies that it will attempt to meet those credit needs.
MISSOURI BANK HOLDING COMPANY REGULATION. Under Missouri law, a bank
holding company is prohibited from acquiring control over a bank, savings
association or trust company which has its principal banking office in Missouri
if such acquisition would cause the aggregate deposits held by all banks,
savings associations and trust companies in which such bank holding company has
an interest to exceed 13% of the total deposits of banking and savings
institutions in Missouri. Further, an acquisition by a bank holding company of
control of a bank or trust company which has its principal banking office in
Missouri requires approval of the Missouri Director of Finance. Neither such
limitation applies, however, in situations where the acquisition was requested
by the Missouri Director of Finance, the FDIC or the Federal Reserve Board in
order to protect the public interest against the failure or probable failure of
a bank or trust company.
REGULATION APPLICABLE TO THE BANKS
10
11
GENERAL. As a national bank, Exchange National Bank is subject to
regulation and examination primarily by the OCC. Exchange National Bank is also
regulated by the Federal Reserve Board and the FDIC. As Missouri state
non-member banks, Citizens Union State Bank and Osage Valley Bank are subject to
regulation and examination by the Missouri Division of Finance and the FDIC.
Regulation by these agencies is designed to protect bank depositors rather than
our shareholders. Each of the OCC and the FDIC has the authority to issue cease
and desist orders if it determines that activities of any of our subsidiary
Banks represents unsafe and unsound banking practices or violations of law. In
addition, the OCC and FDIC are empowered to impose substantial civil money
penalties for violations of banking statutes and regulations.
REGULATORY CAPITAL REQUIREMENTS. The OCC and the FDIC have adopted
minimum capital requirements applicable to national banks and state non-member
banks, respectively, which are substantially similar to the capital adequacy
guidelines established by the Federal Reserve Board for bank holding companies.
There are, however, technical differences in the methodologies used to calculate
the capital ratios.
On December 31, 2000, Exchange National Bank, Citizens Union State Bank
and Osage Valley Bank each was in compliance with all of the OCC's and FDIC's
minimum capital requirements. On such date Exchange National Bank had a Tier 1
Leverage Ratio of 10.77% (compared with a minimum requirement of 3%), a ratio of
Total capital to risk-weighted assets of 15.42% (compared with a minimum
requirement of 8%), and a ratio of Tier 1 capital to risk-weighted assets of
14.16% (compared with a minimum requirement of 4%), Citizens Union State Bank
had a Tier 1 Leverage Ratio of 8.01%, a ratio of Total capital to risk-weighted
assets of 15.32%, and a ratio of Tier 1 capital to risk-weighted assets of
14.06% and Osage Valley Bank had a Tier 1 Leverage Ratio of 8.04%, a ratio of
Total capital to risk-weighted assets of 18.99%, and a ratio of Tier 1 capital
to risk-weighted assets of 17.92%.
CLASSIFICATION OF BANKS. Federal banking laws classify financial
institutions in one of the following five categories, depending upon the amount
of their capital: well-capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized or critically undercapitalized. Under OCC and
FDIC regulations, a bank is deemed to be (i) "well capitalized" if it has a
total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital
ratio of 6% or greater and a Tier 1 leverage ratio of 5% or greater (and is not
subject to any order or written directive specifying any higher capital ratio),
(ii) "adequately capitalized" if it has a total risk-based capital ratio of 8%
or greater, a Tier 1 risk-based capital ratio of 4% or greater and a Tier 1
leverage ratio of 4% or greater (or a Tier 1 leverage ratio of 3% or greater, if
the bank has a CAMELS rating of 1), (iii) "undercapitalized" if it has a total
risk-based capital ratio that is less than 8%, a Tier 1 risk-based capital ratio
that is less than 4% or a Tier 1 leverage ratio that is less than 4% (or a Tier
1 leverage ratio that is less than 3%, if the bank has a CAMELS rating of 1),
(iv) "significantly undercapitalized" if it has a total risk-based capital ratio
that is less than 6%, a Tier 1 risk based capital ratio that is less than 3% or
a Tier 1 leverage ratio that is less than 3%, and (v) "critically
undercapitalized" if it has a Tier 1 leverage ratio that is equal to or less
than 2%. Federal banking laws require the federal regulatory agencies to take
prompt corrective action against undercapitalized financial institutions. Under
OCC regulations, Exchange National Bank was a well capitalized institution as of
December 31, 2000, and under FDIC regulations, Citizens Union State Bank and
Osage Valley Bank were well capitalized institutions as of December 31, 2000.
Federal banking laws provide that if an insured depository institution
receives a less than satisfactory examination rating for asset quality,
management, earnings or liquidity, the examining agency may deem such financial
institution to be engaging in an unsafe or unsound practice. The potential
consequences of being found to have engaged in an unsafe or unsound practice are
significant, because the appropriate federal regulatory agency may: (i) if the
financial institution is well-capitalized, reclassify the financial institution
as adequately capitalized; (ii) if the financial institution is adequately
capitalized, take any of the prompt corrective actions authorized for
undercapitalized financial institutions and impose restrictions on capital
distributions and management fees; and (iii) if the financial institution is
undercapitalized, take any of the prompt corrective actions authorized for
significantly undercapitalized financial institutions.
11
12
DEPOSIT INSURANCE AND ASSESSMENTS. The deposits of our subsidiary Banks
are insured by the BIF administered by the FDIC, in general, to a maximum of
$100,000 per insured depositor. Under federal banking regulations, our Banks are
required to pay semi-annual assessments to the FDIC for deposit insurance. The
FDIC has adopted a risk-based assessment system. Under the risk-based assessment
system, BIF members pay varying assessment rates depending upon the level of the
institution's capital and the degree of supervisory concern over the
institution. The assessment rates are set by the FDIC semiannually. The FDIC's
assessment rates range from zero (0) cents to 27 cents per $100 of insured
deposits. Institutions qualifying for the $0 assessment rate are no longer
required to pay the minimum deposit premium payment of $2,000 annually. As of
January 1, 2001, Exchange National Bank's, Citizens Union State Bank's and Osage
Valley Bank's assessment rate was zero cents per $100 of insured deposits. The
FDIC has authority to increase the annual assessment rate if it determines that
a higher assessment rate is necessary to increase BIF's reserve ratio. There is
no cap on the annual assessment rate which the FDIC may impose.
In addition to any assessments that may be imposed by the FDIC as
described above, the Deposit Insurance Funds Act of 1996 provides for the
imposition of annual assessments by the Financing Corporation on Savings
Association Insurance Fund-assessable ("SAIF-assessable") deposits and
BIF-assessable deposits. Generally speaking, until December 31, 1999, the
assessment rate imposed by Financing Corporation with respect to BIF-assessable
deposits was at a rate equal to one-fifth (1/5) of the assessment rate for
SAIF-assessable deposits. As of January 1, 2000, BIF-assessable deposits and
SAIF-assessable deposits were assessed by Financing Corporation at the same rate
of 1.96 basis points of assessable deposits. As of January 1, 2001, Exchange
National Bank, Citizens Union State Bank and Osage Valley Bank only had
BIF-assessable deposits. Consequently, the change in Financing Corporation's
assessment rates has resulted in these banks receiving an increased annual
assessment from Financing Corporation.
INTEREST RATES. The rate of interest a bank may charge on certain
classes of loans is limited by state and federal law. At certain times in the
past, these limitations, in conjunction with national monetary and fiscal
policies that affect the interest rates paid by banks on deposits and
borrowings, have resulted in reductions of net interest margins on certain
classes of loans. Such circumstances may recur in the future, although the trend
of recent federal and state legislation has been to eliminate restrictions on
the rates of interest which may be charged on some types of loans and to allow
maximum rates on other types of loans to be determined by market factors.
LOANS TO ONE BORROWER. In addition to limiting the rate of interest
chargeable by banks on certain loans, federal law imposes additional
restrictions on a national bank's lending activities. For example, under federal
law the maximum amount that a national bank may lend to one borrower (and
certain related entities of such borrower) generally is limited to 15% of the
bank's unimpaired capital and unimpaired surplus, plus an additional 10% for
loans fully secured by readily marketable collateral. There are certain
exceptions to the general rule including loans fully secured by government
securities or deposit accounts in the bank. As of December 31, 2000, Exchange
National Bank's lending limit under this regulation was approximately
$6,918,000, and its current largest loan to one borrower (aggregate loans to the
borrower and its related entities) was approximately $6,042,000.
Missouri banking law imposes restrictions on a state-chartered bank's
lending activities. According to Missouri law, the maximum amount that a bank
may lend to any one person or entity is limited to 15% of the unimpaired capital
of the bank located in a city having a population of 100,000 or more, 20% of the
unimpaired capital of the bank located in a city having a population of less
than 100,000 and over 7,000, and 25% of the unimpaired capital of the bank if
located elsewhere in the state. These restrictions have some exceptions. As of
December 31, 2000, Citizens Union State Bank's lending limit under this law was
approximately $7,285,605, and its current largest loan to one borrower was
approximately $2,205,000. As of December 31, 2000, Osage Valley Bank's lending
limit under this law was approximately $2,107,700, and its current largest loan
to one borrower was approximately $665,000.
12
13
PAYMENT OF DIVIDENDS. The National Bank Act restricts the payment of
dividends by a national bank as follows: (i) no dividends may be paid if the
bank has no undivided profits or retained earnings then on hand; (ii) until the
surplus fund of the bank is equal to its capital stock, no dividends may be
declared unless there has been carried to the surplus fund not less than
one-tenth of the bank's net profits of the preceding half-year period in the
case of quarterly or semiannual dividends, or not less than one-tenth of the net
profits of the preceding two consecutive half-year periods in the case of annual
dividends; and (iii) the approval of the OCC is required if dividends declared
by the bank in any year would exceed the total of net profits for that year
combined with retained net profits for the preceding two years, less any
required transfers to surplus. These laws and related regulations are applicable
to Exchange National Bank. Exchange National Bank has obtained approval from the
OCC to pay up to $5,000,000 in dividends to Exchange in 2001, although no
assurances can be given that such dividends will be declared.
Citizens Union State Bank and Osage Valley Bank, as state non-member
banks, are subject to the dividend restrictions set forth by Missouri law and
the FDIC. Under the FDIA, a FDIC-insured institution may not pay any dividend if
payment would cause it to become undercapitalized or while it is
undercapitalized. Missouri banking law prohibits the declaration of a dividend
if the bank has not made good any existing impairment of its capital. These laws
and related regulations are not expected to have a material effect upon the
current dividend policies of Citizens Union State Bank and Osage Valley Bank.
COMMUNITY REINVESTMENT ACT. On May 4, 1995, the Federal Reserve Board,
the FDIC and the OCC adopted regulations relating to the Community Reinvestment
Act (the "CRA"). The purpose of the CRA regulations is to establish the
framework and criteria by which the bank regulatory agencies assess an
institution's record of helping to meet the credit needs of its community,
including low- and moderate-income neighborhoods, and to provide that the
agencies' assessment shall be taken into account in reviewing certain
applications. The regulations seek to emphasize an institution's performance
rather than the process, to promote consistency in evaluation of institutions,
and to eliminate unnecessary reporting burdens. The regulations replace the
previous twelve assessment factors for large banks with three tests: (i) a
lending test, (ii) a service test, and (iii) an investment test. While
documentation requirements have been substantially reduced, the safe harbors
from CRA protest have also been eliminated.
The Federal Reserve Board, the FDIC and the OCC have adopted
regulations, effective April 1, 2001, that require public disclosure of written
CRA agreements between any insured depository institution or its affiliates and
any nongovernmental entity or person. The regulations require each insured
depository institution that is a party to any CRA agreement to provide initial
and annual disclosures of such agreement to the appropriate federal banking
agency.
OTHER REGULATORY LIMITATIONS. Exchange, Union, Mid Central and the Banks
are "affiliates" within the meaning of the Federal Reserve Act. As such, the
amount of loans or extensions of credit which Exchange National Bank, Citizens
Union State Bank, or Osage Valley Bank may make to Exchange, Union, Mid Central
or to third parties, secured by securities or obligations of Exchange, Union or
Mid Central, are substantially limited by the Federal Reserve Act and the FDIA.
Such acts further restrict the range of permissible transactions between a bank
and an affiliated company. A bank and its subsidiaries may engage in certain
transactions, including loans and purchases of assets, with an affiliated
company only if the terms and conditions of the transaction, including credit
standards, are substantially the same as, or at least as favorable to the bank
as, those prevailing at the time for comparable transactions with non-affiliated
companies or, in the absence of comparable transactions, on terms and conditions
that would be offered to non-affiliated companies.
Each of Exchange National Bank, Citizens Union State Bank and Osage
Valley Bank is also authorized to invest in a service corporation that can offer
the same services as the banking related services that bank holding companies
are authorized to provide. However, regulatory approval must generally be
obtained prior to making such an investment or the performance of such services.
13
14
BANKING ACTIVITIES. The investments and activities of Exchange National
Bank are subject to substantial regulation by the OCC, the Federal Reserve Board
and the FDIC, including without limitation investments in subsidiaries,
investments for their own account (including limitations on investments in junk
bonds and equity securities), investments in loans, loans to officers, directors
and affiliates, security requirements, truth-in-lending, the types of interest
bearing deposit accounts which it can offer, trust department operations,
brokered deposits, audit requirements, issuance of securities, branching and
mergers and acquisitions.
Under the GLB Act, the OCC regulates and monitors the Fair Credit Report
Act's restrictions on the transfer of customer information between Exchange
National Bank and its affiliates. Starting on either November 12, 2000 or a date
thereafter that is specified by the OCC, the OCC will also regulate and monitor
restrictions on the transfer of nonpublic personal information of consumers to
nonaffiliated third parties.
The Missouri Division of Finance and the FDIC regulate or monitor all
areas of the operations of Citizens Union State Bank and Osage Valley Bank,
including capital requirements; issuance of stock; declaration of dividends;
interest rates; deposits; record keeping; establishment of branches;
acquisitions; mergers; loans; investments; borrowing; security requirements,
devices and procedures; employee responsibility and conduct; and directors and
affiliates. The Missouri Division of Finance also limits the issuing of capital
notes or debentures, holding of real estate and personal property and requires
Citizens Union State Bank and Osage Valley Bank to maintain a certain ratio of
reserves against deposits.
Under the GLB Act, the FDIC regulates and monitors the Fair Credit
Reporting Act's restrictions on the transfer of customer information between
Citizens Union State Bank and Osage Valley Bank and their affiliates. Starting
on July 1, 2001, the FDIC will also regulate and monitor restrictions on the
transfer of nonpublic personal information of consumers to nonaffiliated third
parties.
ACTIVITIES OF A FINANCIAL SUBSIDIARY OF A NATIONAL BANK. The GLB Act
authorizes a "financial subsidiary" of a national bank to conduct any financial
activity that the Federal Reserve Board permits a financial holding company to
conduct, except for (i) insurance underwriting, (ii) real estate development and
(iii) merchant banking. The Federal Reserve Board and Treasury may jointly adopt
rules to permit a financial subsidiary to engage in merchant banking activities
beginning five years after enactment of the GLB Act.
MONETARY POLICY AND ECONOMIC CONDITIONS
The principal sources of funds essential to the business of banks and
bank holding companies are deposits, shareholders' equity and borrowed funds.
The availability of these various sources of funds and other potential sources
such as preferred stock or commercial paper, and the extent to which they are
utilized, depends on many factors, the most important of which are the monetary
policies of the Federal Reserve Board and the relative costs of different types
of funds.
An important function of the Federal Reserve Board is to regulate the
national supply of bank credit in order to combat recession and curb
inflationary pressures. Among the instruments of monetary policy used by the
Federal Reserve Board to implement these objectives are open market operations
in United States government securities, changes in the discount rate on bank
borrowings and changes in reserve requirements against bank deposits.
Our Banks are subject to regulations issued by the Federal Reserve Board
which require depository institutions to maintain non-interest bearing reserves
against their transaction accounts and non-personal time deposits. These
regulations require depository institutions to maintain reserves equal to 3% of
transaction accounts up to $42.8 million plus 10% (subject to adjustment by the
Federal Reserve Board between 8% and 14%) of the total over $42.8 million. In
addition, reserves, subject to adjustment by the Federal Reserve Board between
0% and 9%, must be maintained on non-personal time deposits. This reserve
percentage is
14
15
currently 0%. Depository institutions may designate and exempt up to $5.5
million of reservable liabilities from the above reserve requirements. Because
these reserves must generally be maintained in cash or non-interest-bearing
accounts, the effect of the reserve requirements is to increase the cost of
funds to depository institutions. As of December 31, 2000, Exchange National
Bank was required to maintain a reserve balance of $3,476,000, Citizens Union
State Bank was required to maintain a reserve balance of $1,879,000 and Osage
Valley Bank was required to maintain a reserve balance of $390,000.
Substantially all of the restrictions on the maximum interest rates
banks are permitted to pay on deposits have been removed, although banks are
still prohibited from paying interest on demand deposits. Consequently, banks
and thrift organizations are substantially free to pay interest at any rate.
Deregulation has increased competition among such institutions for attracting
deposits and has resulted in an overall increase in such institutions' cost of
funds.
The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future. In view of the continuing
changes in regulations affecting commercial banks and other actions and proposed
actions by the Federal government and its monetary and fiscal authorities,
including proposed changes in the structure of banking in the United States and
general economic conditions, no prediction can be made as to future changes in
interest rates, credit availability, deposit levels, loan demand or the overall
performance of banks generally and Exchange National Bank, Citizens Union State
Bank, Osage Valley Bank, Union, Mid Central Bancorp and Exchange in particular.
The references in the foregoing discussion to various aspects of
statutes and regulation are merely summaries which do not purport to be complete
and which are qualified in their entirety by reference to the actual statutes
and regulations.
ITEM 2. PROPERTIES.
None of Exchange, Union or Mid Central Bancorp owns or leases any
property.
The principal offices of Exchange and Exchange National Bank are located
at 132 East High Street in the central business district of Jefferson City,
Missouri. The building, which is owned by Exchange National Bank, is a
three-story structure constructed in 1927. A recently completed renovation and
expansion project increased usable office space from 14,000 square feet to
approximately 33,000 square feet. All of this office space is currently used by
Exchange and Exchange National Bank. Management believes that this facility is
adequately covered by insurance.
Exchange National Bank also owns a branch banking facility at 3701 West
Truman Boulevard in Jefferson City. This facility has approximately 21,000
square feet of usable office space, all of which is used for Exchange National
Bank operations, and has full drive-in facilities. Exchange National Bank owns a
second branch banking facility, which is located at 217 West Dunklin Street in
Jefferson City. This facility is a one-story building which has approximately
2,400 square feet of usable office space, all of which is used for Exchange
National Bank operations. In addition, Exchange National Bank has established a
branch banking facility at 800 Eastland Drive in Jefferson City with
approximately 4,100 square feet of usable office space, all of which is used for
Exchange National Bank's operations. Exchange National Bank also owns a branch
in each of the California, Tipton and St. Robert communities. The California
branch located at 201 East Main Street was constructed in the mid 1970's and it
is a single story structure with 2,942 square feet of usable office space. All
of the California branch's office space is used for Exchange National Bank's
operations. The Tipton branch which is located at 445 South Moreau is a single
story structure with 1,962 square feet of usable office space all of which is
used for Exchange National Bank's operations. The Tipton branch was constructed
in the mid 1970's. The St. Robert branch located at 595 Missouri Avenue is a
single story structure with 2,236 square feet of usable office space. The St.
Robert branch was constructed in the late
15
16
1960's. All of the St. Robert office space is used for Exchange National Bank's
operations. Management believes that the condition of these banking facilities
presently is adequate for Exchange National Bank's business and that these
facilities are adequately covered by insurance.
The principal offices of Union and Citizens Union State Bank are located
at 102 North Second Street in Clinton, Missouri. The bank building, which is
owned by Citizens Union State Bank, is a one-story structure constructed in
1972. It has approximately 5,000 square feet of usable office space, all of
which is currently used for Union's and Citizens Union State Bank's operations.
Citizens Union State Bank also operates seven branch banking facilities, of
which six are owned by it. Citizens Union State Bank owns its downtown Clinton
branch, which is located at 115 North Main Street. This facility has
approximately 1,500 square feet of usable office space, all of which is used in
Citizens Union State Bank operations. Citizens Union State Bank owns a second
branch banking facility, which is located at 1603 East Ohio in Clinton. This
facility is a two-story building which has approximately 5,760 square feet of
usable office space, all of which is used for Citizens Union State Bank
operations. Citizens Union State Bank owns its third branch banking facility,
which is located at 608 East Ohio Street in Clinton. This facility is a
one-story building which has approximately 3,500 square feet of usable office
space, all of which is used for Citizens Union State Bank's operations. Citizens
Union State Bank leases its fourth Clinton branch banking facility, which is
located inside the Wal-Mart store at 1712 East Ohio. Citizens Union State Bank
leases approximately 600 square feet of space at this facility under a five-year
lease expiring in January 2004, with two five-year renewal options granted to
Citizens Union State Bank. Citizens Union State Bank owns one Osceola, Missouri
branch banking facility located at 4th and Chestnut. This facility is a
one-story building which has approximately 1,580 square feet of usable office
space, all of which is used for Citizens Union State Bank operations. Citizens
Union State Bank owns one Calhoun, Missouri branch banking facility located at
201 East Main. This facility is a one-story building which has approximately
1,296 square feet of usable office space, all of which is used for Citizens
Union State Bank operations. Finally, Citizens Union State Bank owns a 1,500
square foot branch banking facility located at the intersection of Highways 13
and 54 in Collins, Missouri. In addition to its existing facilities, Citizens
Union State Bank is constructing a new branch facility at 125 South Main in
Windsor, Missouri. The new facility will have 3,600 square feet of office space
of which 2,800 square feet is to be used for operations of Citizens Union State
Bank. Management believes that the condition of these banking facilities
presently is adequate for Citizens Union State Bank's business and that these
facilities are adequately covered by insurance.
The principal offices of Mid Central Bancorp and Osage Valley Bank are
located at 200 Main Street in Warsaw, Missouri. The bank building, which is
owned by Osage Valley Bank, is a two-story structure constructed in 1891. It has
approximately 8,900 square feet of usable office space, all of which is
currently used for Osage Valley Bank's operations. Osage Valley Bank also
operates one branch banking facility, which is owned by it. Osage Valley Bank's
branch facility is a one-story structure located at 2102 Long View Drive in
Warsaw, Missouri, and it has approximately 1,000 square feet of usable office
space, all of which is used for Osage Valley Bank operations. Management
believes that the condition of these banking facilities presently is adequate
for Osage Valley Bank's business and that these facilities are adequately
covered by insurance.
ITEM 3. LEGAL PROCEEDINGS.
None of Exchange or its subsidiaries is involved in any material pending
legal proceedings, other than routine litigation incidental to their business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the holders of our Company's common
stock during the fourth quarter of the year ended December 31, 2000.
16
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Pursuant to General Instruction G(2) to Form 10-K, the information
required by this Item is incorporated herein by reference to the information
under the caption "Market Price of and Dividends on Equity Securities and
Related Matters" in Exchange's 2000 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA.
Pursuant to General Instruction G(2) to Form 10-K, the information
required by this Item is incorporated herein by reference to the report of the
independent auditors and the information under the caption "Selected
Consolidated Financial Data" in Exchange's 2000 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Pursuant to General Instruction G(2) to Form 10-K, certain information
required by this Item is incorporated herein by reference to the information
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Exchange's 2000 Annual Report to Shareholders.
FORWARD-LOOKING STATEMENTS
This report, including information included or incorporated by reference
in this report, contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of our Company and its subsidiaries, including, without
limitation:
- statements that are not historical in nature, and
- statements preceded by, followed by or that include the words
"believes," "expects," "may," "will," "should," "could,"
"anticipates," "estimates," "intends" or similar expressions.
Forward-looking statements are not guarantees of future performance or
results. They involve risks, uncertainties and assumptions. Actual results may
differ materially from those contemplated by the forward-looking statements due
to, among others, the following factors:
- competitive pressures among financial services companies may
increase significantly,
- costs or difficulties related to the integration of the business
of Exchange and its acquisition targets may be greater than
expected,
- changes in the interest rate environment may reduce interest
margins,
- general economic conditions, either nationally or in Missouri,
may be less favorable than expected,
- legislative or regulatory changes may adversely affect the
business in which Exchange and its subsidiaries are engaged,
- technological changes may be more difficult or expensive than
anticipated, and
- changes may occur in the securities markets.
We have described under " Factors That May Affect Future Results of Operations,
Financial Condition or Business" additional factors that could cause actual
results to be materially different from those described in the forward-looking
17
18
statements. Other factors that we have not identified in this report could also
have this effect. You are cautioned not to put undue reliance on any
forward-looking statement, which speak only as of the date they were made.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS
We are identifying important risks and uncertainties that could affect
our Company's results of operations, financial condition or business and that
could cause them to differ materially from our Company's historical results of
operations, financial condition or business, or those contemplated by
forward-looking statements made herein or elsewhere, by, or on behalf of, our
Company. Factors that could cause or contribute to such differences include, but
are not limited to, those factors described below.
BECAUSE EXCHANGE PRIMARILY SERVES MISSOURI, A DECLINE IN THE LOCAL
ECONOMIC CONDITIONS COULD LOWER EXCHANGE'S PROFITABILITY. The profitability of
Exchange is dependant on the profitability of its banking subsidiaries, which
operate out of central Missouri. The financial condition of these banks is
affected by fluctuations in the economic conditions prevailing in the portion of
Missouri in which their operations are located. Accordingly, the financial
conditions of both Exchange and its banking subsidiaries would be adversely
affected by deterioration in the general economic and real estate climate in
Missouri.
An increase in unemployment, a decrease in profitability of regional
businesses or real estate values or an increase in interest rates are among the
factors that could weaken the local economy. With a weaker local economy:
- customers may not want or need the products and services of
Exchange's banking subsidiaries,
- borrowers may be unable to repay their loans,
- the value of the collateral security of the banks' loans to
borrowers may decline, and
- the overall quality of the banks' loan portfolio may decline.
Making mortgage loans and consumer loans is a significant source of
profits for Exchange's banking subsidiaries. If individual customers in the
local area do not want these loans, profits may decrease. Although the banks
could make other investments, the banks may earn less revenue on these
investments than on loans. Also, the banks' losses on loans may increase if
borrowers are unable to make payments on their loans.
INTEREST RATE CHANGES MAY REDUCE THE PROFITABILITY OF EXCHANGE AND ITS
BANKING SUBSIDIARIES. The primary source of earnings for Exchange's banking
subsidiaries is net interest income. To be profitable, the banks have to earn
more money in interest and fees on loans and other interest-earning assets than
they pay as interest on deposits and other interest-bearing liabilities and as
other expenses. If prevailing interest rates decrease, as has already happened
on several occasions since January 2001, the amount of interest the banks earn
on loans and investment securities may decrease more rapidly than the amount of
interest the banks have to pay on deposits and other interest-bearing
liabilities. This would result in a decrease in the profitability of Exchange
and its banking subsidiaries, other factors remaining equal.
Changes in the level or structure of interest rates also affect
- the banks' ability to originate loans,
- the value of the banks' loan and securities portfolios,
- the banks' ability to realize gains from the sale of loans and
securities,
- the average life of the banks' deposits, and
- the banks' ability to obtain deposits.
18
19
Fluctuations in interest rates will ultimately affect both the level of
income and expense recorded on a large portion of the banks' assets and
liabilities, and the market value of all interest-earning assets, other than
interest-earning assets that mature in the short term. The banks' interest rate
management strategy is designed to stabilize net interest income and preserve
capital over a broad range of interest rate movements by matching the interest
rate sensitivity of assets and liabilities. Although Exchange believes that its
banks' current mix of loans, mortgage-backed securities, investment securities
and deposits is reasonable, significant fluctuations in interest rates may have
a negative effect on the profitability of the banks.
THE PROFITABILITY OF EXCHANGE'S BANKING SUBSIDIARIES DEPENDS ON THEIR
ASSET QUALITY AND LENDING Risks. Success in the banking industry largely depends
on the quality of loans and other assets. The loan officers of Exchange's
banking subsidiaries are actively encouraged to identify deteriorating loans.
Loans are also monitored and categorized through an analysis of their payment
status. The banks' failure to timely and accurately monitor the quality of their
loans and other assets could have a materially adverse effect on the operations
and financial condition of Exchange and its banking subsidiaries. There is a
degree of credit risk associated with any lending activity. The banks attempt to
minimize their credit risk through loan diversification. Although the banks'
loan portfolios are varied, with no undue concentration in any one industry,
substantially all of the loans in the portfolios have been made to borrowers in
central and west central Missouri. Therefore, the loan portfolios are
susceptible to factors affecting the central and west central Missouri area and
the level of non-performing assets is heavily dependant upon local conditions.
There can be no assurance that the level of the banks' non-performing assets
will not increase above current levels. High levels of non-performing assets
could have a materially adverse effect on the operations and financial condition
of Exchange and its banking subsidiaries.
THE PROVISIONS FOR POSSIBLE LOAN LOSSES OF EXCHANGE'S BANKING
SUBSIDIARIES MAY NEED TO BE INCREASED. Each of Exchange's banking subsidiaries
make a provision for loan losses based upon management's analysis of potential
losses in the loan portfolio and consideration of prevailing economic
conditions. Each of the banks may need to increase the provision for loan losses
through additional provisions in the future if the financial condition of any of
its borrowers deteriorates or if real estate values decline. Furthermore,
various regulatory agencies, as an integral part of their examination process,
periodically review the loan portfolio, provision for loan losses, and real
estate acquired by foreclosure of each of the banks. Such agencies may require
the banks to recognize additions to the provisions for loan losses based on
their judgments of information available to them at the time of the examination.
Any additional provisions for possible loan losses, whether required as a result
of regulatory review or initiated by Exchange itself, may materially alter the
financial outlook of Exchange and its banking subsidiaries.
IF EXCHANGE AND ITS BANKS ARE UNABLE TO SUCCESSFULLY COMPETE FOR
CUSTOMERS IN EXCHANGE'S MARKET AREA, THEIR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS COULD BE ADVERSELY AFFECTED. Exchange's banking subsidiaries face
substantial competition in making loans, attracting deposits and providing other
financial products and services. The banks have numerous competitors for
customers in their market area. Such competition for loans comes principally
from:
- other commercial banks - mortgage banking companies
- savings banks - finance companies
- savings and loan associations - credit unions
Competition for deposits comes principally from:
- other commercial banks - brokerage firms
- savings banks - insurance companies
- savings and loan associations - money market mutual funds
19
20
- credit unions - mutual funds (such as
corporate and government
securities funds)
Many of these competitors have greater financial resources and name
recognition, more locations, more advanced technology and more financial
products to offer than the banks. Competition from larger institutions may
increase due to an acceleration of bank mergers and consolidations in Missouri
and the rest of the nation. In addition, the recently enacted Gramm-Leach-Bliley
Act removes many of the remaining restrictions in federal banking law against
cross-ownership between banks and other financial institutions, such as
insurance companies and securities firms. The new law will likely increase the
number and financial strength of companies that compete directly with the banks.
The profitability of the banks depends of their continued ability to attract new
customers and compete in Missouri. New competitors, as well as the expanding
operations of existing competitors, have had, and are expected to continue to
have, an adverse impact on the banks' market share of deposits and loans in the
banks' respective service areas. If the banks are unable to successfully
compete, their financial condition and results of operations will be adversely
affected.
EXCHANGE AND ITS BANKING SUBSIDIARIES MAY BE ADVERSELY AFFECTED BY
CHANGES IN LAWS AND REGULATIONS AFFECTING THE FINANCIAL SERVICES INDUSTRY. Banks
and bank holding companies such as Exchange are subject to regulation by both
federal and state bank regulatory agencies. The regulations, which are designed
to protect borrowers and promote certain social policies, include limitations on
the operations of banks and bank holding companies, such as minimum capital
requirements and restrictions on dividend payments. The regulatory authorities
have extensive discretion in connection with their supervision and enforcement
activities and their examination policies, including the imposition of
restrictions on the operation of a bank, the classification of assets by an
institution and requiring an increase in a bank's allowance for loan losses.
These regulations are not necessarily designed to maximize the profitability of
banking institutions. Future changes in the banking laws and regulations could
have a material adverse effect on the operations and financial condition of
Exchange and its banking subsidiaries.
THE SUCCESS OF EXCHANGE AND ITS BANKS LARGELY DEPENDS ON THE EFFORTS OF
THEIR EXECUTIVE OFFICERS. The success of Exchange and its banking subsidiaries
has been largely dependant on the efforts of Donald Campbell, James Smith and
David Turner and the other executive officers. These individuals are expected to
continue to perform their services. However, the loss of the services of Messrs.
Campbell, Smith or Turner, or any of the other key executive officers could have
a materially adverse effect on Exchange and its banks.
EXCHANGE CANNOT PREDICT HOW CHANGES IN TECHNOLOGY WILL AFFECT ITS
BUSINESS. The financial services market, including banking services, is
increasingly affected by advances in technology, including developments in:
- telecommunications - Internet-based banking
- data processing - telebanking
- automation - debit cards and so-called "smart cards"
The ability of Exchange's banking subsidiaries to compete successfully
in the future will depend on whether they can anticipate and respond to
technological changes. To develop these and other new technologies the banks
will likely have to make additional capital investments. Although the banks
continually invest in new technology, there can be no assurance that the banks
will have sufficient resources or access to the necessary proprietary technology
to remain competitive in the future
ADDITIONAL FACTORS. Additional risks and uncertainties that may affect
the future results of operations, financial condition or business of our Company
and its banking subsidiaries include, but are not limited to: (i) adverse
publicity, news coverage by the media, or negative reports by brokerage firms,
industry
20
21
and financial analysts regarding the Banks or our Company; and (ii) changes in
accounting policies and practices.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our Company's exposure to market risk is reviewed on a regular basis by
the Banks' Asset/Liability Committees and Boards of Directors. Interest rate
risk is the potential of economic losses due to future interest rate changes.
These economic losses can be reflected as a loss of future net interest income
and/or a loss of current fair market values. The objective is to measure the
effect on net interest income and to adjust the balance sheet to minimize the
inherent risk while at the same time maximizing income. Management realizes
certain risks are inherent and that the goal is to identify and minimize those
risks. Tools used by the bank's management include the standard GAP report
subject to different rate shock scenarios. At December 31, 2000, the rate shock
scenario models indicated that annual net interest income could change by as
much as 6% should interest rates rise or fall within 200 basis points from their
current level over a one year period.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Pursuant to General Instruction G(2) to Form 10-K, the information
required by this Item is incorporated herein by reference to the report of the
independent auditors and the information under the caption "Consolidated
Financial Statements" in Exchange's 2000 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to (i) the information
under the caption "Election of Directors--The Board of Directors," (ii) the
information under the caption "Election of Directors--Nominees and Directors
Continuing in Office," (iii) the information under the caption "Executive
Compensation and Other Information--Executive Officers," and (iv) the
information under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance," in each case, in Exchange's definitive Proxy Statement for its 2001
Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to (i) the information
under the caption "Executive Compensation and Other Information--Report on
Executive Compensation," (ii) the information under the caption "Executive
Compensation and Other Information--Compensation Committee Interlocks and
Insider Participation," (iii) the information under the caption "Executive
Compensation and Other Information--Executive Compensation," (iv) the
information under the caption "Executive Compensation and Other
Information--Option Exercises and Holdings," (v) the information under the
caption "Executive Compensation and Other Information--Exchange National Bank
Profit-Sharing Trust," (vi) the information under the caption "Executive
Compensation and Other Information--Citizens Union State Bank Profit-Sharing
Plan," (vii) the information under the caption "Executive Compensation and Other
Information--Stock Option Plan," (viii) the information under the caption
"Executive Compensation and Other Information--Pension Plan," (ix) the
information under the caption "Executive Compensation and Other
Information--Smith Employment Agreement," (x) the information under the caption
"Executive Compensation and Other Information--Change
21
22
of Control Agreement," (xi) the information under the caption "Executive
Compensation and Other Information--Company Performance," and (xii) the
information under the caption "Election of Directors--Compensation of
Directors", in each case, in Exchange's definitive Proxy Statement for its 2001
Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to the information
under the caption "Ownership of Common Stock" in Exchanges definitive Proxy
Statement for its 2001 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to the information
under the caption "Transactions with Directors and Officers" in Exchange's
definitive Proxy Statement for its 2001 Annual Meeting of Shareholders to be
filed pursuant to Regulation 14A.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Exhibits, Financial Statements and Financial Statement Schedules:
1. Financial Statements:
The following consolidated financial statements of our Company and
reports of our Company's independent auditors, included in our Annual Report to
Shareholders for the year ended December 31, 2000 under the caption
"Consolidated Financial Statements", are incorporated herein by reference:
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 2000 and 1999.
Consolidated Statements of Income for the years ended December
31, 2000, 1999, and 1998.
Consolidated Statements of Stockholders' Equity and Comprehensive
Income for the years ended December 31, 2000, 1999, and 1998.
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999, and 1998.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules:
Financial statement schedules have been omitted because they either are
not required or are not applicable or because equivalent information has been
included in the financial statements, the notes thereto or elsewhere herein.
22
23
3. Exhibits:
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation of our Company (filed as Exhibit 3(a) to
our Company's Registration Statement on Form S-4 (Registration No.
33-54166) and incorporated herein by reference).
3.2 Bylaws of our Company.
4 Specimen certificate representing shares of our Company's $1.00
par value common stock (filed with our Company's Annual Report on
Form 10-K for the year ended December 31, 1999 as Exhibit 4 and
incorporated herein by reference).
10.1 Employment Agreement, dated November 3, 1997, between the
Registrant and James E. Smith (filed with the Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 1997 as
Exhibit 10.4 and incorporated herein by reference).*
10.2 Exchange National Bancshares, Inc. Incentive Stock Option Plan
(filed with our Company's Annual Report on Form 10-K for the year
ended December 31, 1999 as Exhibit 10.2 and incorporated herein by
reference).
10.3 Form of Change of Control Agreement and schedule of parties
thereto.*
13 The Registrant's 2000 Annual Report to Shareholders (only those
portions of this Annual Report to Shareholders which are
specifically incorporated by reference into this Annual Report on
Form 10-K shall be deemed to be filed with the Commission).
21 List of Subsidiaries.
-----------------------
* Management contracts or compensatory plans or arrangements required to
be identified by Item 14(a).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by our Company during the three
month period ended December 31, 2000.
(c) Exhibits.
See exhibits identified above under Item 14(a)3.
(d) Financial Statement Schedules.
See financial statement schedules identified above under Item
14(a)2, if any.
23
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 16, 2001 By /s/ Donald L. Campbell
--------------------------------------
Donald L. Campbell, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date Signature and Title
---- -------------------
March 16, 2001 /s/ Donald L. Campbell
------------------------------------
Donald L. Campbell, President and Chairman of the Board of
Directors (Principal Executive Officer)
March 16, 2001 /s/ Richard G. Rose
------------------------------------
Richard G. Rose, Treasurer (Principal Financial Officer and
Principal Accounting Officer)
March 16, 2001 /s/ David T. Turner
------------------------------------
David T. Turner, Director
March 16, 2001 /s/ James R. Loyd
------------------------------------
James R. Loyd, Director
March 16, 2001 /s/ Charles G. Dudenhoeffer, Jr.
------------------------------------
Charles G. Dudenhoeffer, Jr., Director
March 16, 2001 /s/ David R. Goller
------------------------------------
David R. Goller, Director
March 16, 2001 /s/ Philip D. Freeman
------------------------------------
Philip D. Freeman, Director
March 16, 2001 /s/ Kevin L. Riley
------------------------------------
Kevin L. Riley, Director
March 16, 2001 /s/ James E. Smith
------------------------------------
James E. Smith, Director
March 16, 2001 /s/ Gus S. Wetzel, II
------------------------------------
Gus S. Wetzel, II, Director
24
25
EXHIBIT INDEX
Exhibit No. Description Page No.
----------- ----------- --------
3.1 Articles of Incorporation of our Company (filed as **
Exhibit 3(a) to our Company's Registration on Form S-4
(Registration No. 33-54166) and incorporated herein
by reference).
3.2 Bylaws of our Company __
4 Specimen certificate representing shares of our Company's **
$1.00 par value common stock (filed with our Company's Annual
Report on Form 10-K for the year ended December 31, 1999 as
Exhibit 4 and incorporated herein by reference).
10.1 Employment Agreement, dated November 3, 1997, between **
the Registrant and James E. Smith (filed with the Registrant's
Annual Report on Form 10-KSB for the year ended December 31,
1997 as Exhibit 10.4 and incorporated herein by reference).*
10.2 Exchange National Bancshares, Inc. Incentive Stock Option Plan **
(filed with our Company's Annual Report on Form 10-K for the
year ended December 31, 1999 as Exhibit 10.2 and incorporated
herein by reference).
10.3 Form of Change of Control Agreement and schedule of parties thereto.* __
13 The Registrant's 2000 Annual Report to Shareholders (only __
those portions of this Annual Report to Shareholders which
are specifically incorporated by reference into this Annual
Report on Form 10-K shall be deemed to be filed with
the Commission)
21 List of Subsidiaries __
-----------------------
* Management contracts or compensatory plans or arrangements required to
be identified by Item 14(a).
** Incorporated by reference from previous filings.
25