10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

o 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
(State or other jurisdiction of
incorporation or organization) 43-1626350
(I.R.S. Employer Identification No.)

300 Southwest Longview Boulevard, Lee’s Summit, Missouri
(Address of principal executive offices) 64081
(Zip Code)

(816) 347-8100

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class	Name of Each Exchange on Which Registered
None	N/A

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, par value $1.00 per share
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b 2 of the Exchange Act. (Check one):

Large accelerated filer o                     Accelerated filer þ                     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes Yes o No þ

The aggregate market value of the 3,014,063 shares of voting and non-voting common equity of the registrant held by non-affiliates computed by reference to the $29.59 closing price of such common equity on June 30, 2006, the last business day of the registrant’s most recently completed second fiscal quarter, was $89,186,124. Aggregate market value excludes an aggregate of 1,155,784 shares of common stock held by officers and directors and by each person known by the registrant to own 5% or more of the outstanding common stock on such date. Exclusion of shares held by any of these persons should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant. As of March 1, 2007, the registrant had 4,298,353 shares of common stock, par value $1.00 per share, issued and 4,169,847 shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the following documents are incorporated by reference into the indicated parts of this report: (1) 2006 Annual Report to Shareholders — Part II and (2) definitive Proxy Statement for the 2007 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A — Part III.

TABLE OF CONTENTS

PART I
	Item 1. Business.
	Item 1A. Risk Factors.
	Item 1B. Unresolved Staff Comments.
	Item 2. Properties.
	Item 3. Legal Proceedings.
	Item 4. Submission of Matters to a Vote of Security Holders.
PART II
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
	Item 6. Selected Financial Data.
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
	Item 8. Financial Statements and Supplementary Data.
	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
	Item 9A. Controls and Procedures.
	Item 9B. Other Information.
PART III
	Item 10. Directors, Executive Officers and Corporate Governance.
	Item 11. Executive Compensation.
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
	Item 13. Certain Relationships and Related Transactions.
	Item 14. Principal Accountant Fees and Services.
PART IV
	Item 15. Exhibits, Financial Statement Schedules.
SIGNATURES
EXHIBIT INDEX
Annual Report to Shareholders
Consent of Independent Registered Public Accounting Firm
Certification of CEO
Certification of CFO
Section 1350 Certification of CEO
Section 1350 Certification of CFO

PART I

Item 1. Business.

     This report and the documents incorporated by reference herein contain forward-looking statements, which are inherently subject to risks and uncertainties. See “Forward Looking Statements” under Item 7 of this report.

General

     Our Company, 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 October 25, 1999, Exchange established ENB Holdings, Inc. as a wholly-owned subsidiary for the sole purpose of effecting the June 16, 2000 merger with CNS Bancorp, Inc. and its subsidiary, City National Savings Bank, FSB. City National subsequently was merged into Exchange National Bank. ENB Holdings owns 27.4% of Exchange National Bank with the balance owned by Exchange. On October 17, 2001, Exchange and Union each received approval from the Federal Reserve and elected to become a financial holding company. On May 2, 2005, our Company, completed its acquisition of 100% of the outstanding capital stock of Bank 10, a Missouri state bank. On December 1, 2006, our Company announced its development of a strategic plan in which, among other things, Exchange National Bank, Citizens Union State Bank, Osage Valley Bank and Bank 10 would be consolidated into a single bank under a Missouri state trust charter. As a result of this consolidation, three of our bank charters would become available for sale during 2007. Our Company’s strategic plan also provides for the relocation of our corporate headquarters from Jefferson City, Missouri to the Kansas City, Missouri metropolitan area.

     Except as otherwise provided herein, references herein to “Exchange” or our “Company” include Exchange and its consolidated subsidiaries, and references herein to our “Banks” refer to Exchange National Bank, Citizens Union State Bank, Osage Valley Bank and Bank 10.

Description of Business

     Exchange. Exchange is a bank holding company registered under the Bank Holding Company Act that has elected to become a financial holding company. 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, Osage Valley Bank and Bank 10. In addition to ownership of its subsidiaries, Exchange may seek expansion through acquisition and may engage in those activities (such as investments in banks or operations that are financial in nature) 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 that has elected to become a financial holding company. 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.

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     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.

     ENB Holdings. ENB Holdings is a bank holding company registered under the Bank Holding Company Act. ENB Holdings’ activities currently are limited to the ownership of 27.4% of the outstanding capital stock of Exchange National Bank. It is not currently anticipated that ENB Holdings will engage in any business other than that directly related to its minority ownership of Exchange National 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”.

     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 our Banks”.

     Citizens Union State Bank. Citizens Union State Bank was founded in 1932 as a Missouri bank known as Union State Bank of Clinton. 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. On May 4, 2000, Union State Bank merged with Citizens State Bank of Calhoun and changed its name to Citizens Union State Bank and Trust. Citizens Union State Bank has ten banking offices, including its principal office at 102 North Second Street in Clinton, Missouri, three Clinton branch facilities, and a branch facility in each of the Missouri communities of Springfield, Branson, Collins, Lee’s Summit, Osceola and Windsor. 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 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 our Banks”.

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     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, internet banking, debit cards, certificates of deposit, safety deposit boxes and a wide range of lending services, including 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 our Banks”.

     Bank 10. Bank 10 was founded in 1910 as a Missouri state bank. Bank 10 has six banking offices in the Missouri communities of Belton, Drexel, Harrisonville, Independence and Raymore. See “Item 2. Properties”.

     Bank 10 is a full service bank conducting a general banking business, offering its customers checking and savings accounts, internet banking, debit cards, certificates of deposit, safety deposit boxes and a wide range of lending services, including commercial and industrial loans, single payment personal loans, installment loans and commercial and residential real estate loans.

     Bank 10’s deposit accounts are insured by the FDIC to the extent provided by law. Bank 10’s operations are supervised and regulated by the FDIC and the Missouri Division of Finance. Periodic examinations of Bank 10 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 Bank 10’s common stock. See “Regulation Applicable to Bank Holding Companies” and “Regulation Applicable to our Banks”.

Employees

     As of December 31, 2006, Exchange and its subsidiaries had approximately 322 full-time and 67 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. Our Banks’ competitors include other commercial banks, thrifts, savings banks, credit unions and money market mutual funds. Thrifts 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. 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 our 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 our 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,

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Moniteau, and Pulaski Counties. Exchange National Bank’s principal competition for deposits and loans comes from other banks within its primary service area of Jefferson City and, to an increasing extent, other banks in nearby communities. Based on publicly available information, management believes that Exchange National Bank is the fourth largest (in terms of deposits) of the thirteen 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, Springfield, Branson, Collins, Lee’s Summit, Osceola and Windsor, Missouri and its secondary service area of the nearby communities in Henry, St. Clair, Greene and Jackson Counties. Citizens Union State Bank’s principal competition for deposits and loans comes from other banks within its primary service area and, to an increasing extent, other banks in nearby communities. Based on publicly available information, management believes that Citizens Union State Bank is the largest (in terms of deposits) of the nine banks within Henry County. 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 largest (in terms of deposits) of the five banks within Benton County.

     Bank 10 competes for deposits and loans in its primary service area of Belton, Drexel, Harrisonville, Independence and Raymore, Missouri and its secondary service area of nearby communities in Cass and Jackson counties. Bank 10’s principal competition for deposits and loans comes from banks within its primary service area of Belton and in nearby communities. Based on publicly available information, management believes that Bank 10 is the largest (in terms of deposits) of the eighteen banks within Cass County.

Regulation Applicable to Bank Holding Companies

     General. As a registered bank holding company and a financial holding company under the Bank Holding Company Act (the “BHC Act”) and the Gramm-Leach-Bliley Act (the “GLB Act”), Exchange is subject to supervision and examination by the Federal Reserve Board (the “FRB”). The FRB has authority to issue cease and desist orders against bank holding companies if it determines that their actions represent unsafe and unsound practices or violations of law. In addition, the FRB is empowered to impose civil money penalties for violations of banking statutes and regulations. Regulation by the FRB is intended to protect depositors of our Banks, not the shareholders of Exchange.

     Limitation on Acquisitions. The BHC Act requires a bank holding company to obtain prior approval of the FRB before:

• taking any action that causes a bank to become a controlled subsidiary of the bank holding company;

• 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 bank holding company, and such bank or bank holding company is not majority-owned by the acquiring bank holding company prior to the acquisition;

• acquiring substantially all of the assets of a bank; or

• merging or consolidating with another bank holding company.

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     Limitation on Activities. The activities of bank holding companies are generally limited to the business of banking, managing or controlling banks, and other activities that the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, under the GLB Act, a bank holding company, all of whose controlled depository institutions are “well capitalized” and “well managed” (as defined in federal banking regulations) and which obtains “satisfactory” Community Reinvestment Act ratings, may declare itself to be a “financial holding company” and engage in a broader range of activities.

     A financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. “Financial in nature” activities include:

• securities underwriting, dealing and market making;

• sponsoring mutual funds and investment companies;

• insurance underwriting and insurance agency activities;

• merchant banking; and

• activities that the FRB determines to be financial in nature or incidental to a financial activity; or which is complementary to a financial activity and does not pose a safety and soundness risk.

     A financial holding company that desires to engage in activities that are financial in nature or incidental to a financial activity but not previously authorized by the FRB must obtain approval from the FRB before engaging in such activity. Also, a financial holding company may seek FRB approval to engage in an activity that is complementary to a financial activity, if it shows that the activity does not pose a substantial risk to the safety and soundness of its insured depository institutions or the financial system.

     A financial holding company may acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature without prior approval from the FRB. Prior FRB approval is required, however, before the financial holding company may acquire control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association. In addition, under the FRB’s merchant banking regulations, a financial holding company is authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the duration of the investment, does not manage the company on a day-to-day basis, and the company does not cross-market its products or services with any of the financial holding company’s controlled depository institutions.

     If any subsidiary bank of a financial holding company ceases to be “well-capitalized” or “well-managed,” the FRB has authority to order the financial holding company to divest its subsidiary banks. Alternatively, the financial holding company may elect to limit its activities and the activities of its subsidiaries to those permissible for a bank holding company that is not a financial holding company. If any subsidiary bank of a financial holding company receives a rating under the Community Reinvestment Act (the “CRA”) of less than “satisfactory”, then the financial holding company is prohibited from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations until the rating is raised to “satisfactory” or better.

     Regulatory Capital Requirements. The FRB has promulgated capital adequacy guidelines for use in its examination and supervision of bank holding companies. If a bank holding company’s capital falls below minimum required levels, then the bank holding company must implement a plan to increase its capital, and its ability to pay dividends and make acquisitions of new bank subsidiaries may be restricted or prohibited.

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     The FRB’s capital adequacy guidelines provide for the following types of capital:

• Tier 1 capital, also referred to as core capital, calculated as:

• common stockholders’ equity;

• plus, perpetual preferred stock and any related surplus (limited to a maximum of 25% of Tier 1 capital elements);

• plus, minority interests in the equity accounts of consolidated subsidiaries;

• less, all intangible assets (other than certain mortgage servicing assets, non-mortgage servicing assets and purchased credit card relationships);

• less, certain credit-enhanced interest only strips and nonfinancial equity investments required to be deducted from capital; and

• less, certain deferred tax assets.

• Tier 2 capital, also referred to as supplementary capital, calculated as:

• allowances for loan and lease losses (limited to 1.25% of risk-weighted assets);

• plus, unrealized gains on certain equity securities (limited to 45% of pre-tax net unrealized gains);

• plus, cumulative perpetual and long-term preferred stock (original maturity of 20 years or more) and any related surplus (noncumulative and cumulative, without percentage limits);

• plus, auction rate and similar preferred stock (both cumulative and non-cumulative);

• plus, hybrid capital instruments (including mandatory convertible debt securities); and

• plus, term subordinated debt and intermediate-term preferred stock with an original weighted average maturity of five years or more (limited to 50% of Tier 1 capital).

The maximum amount of supplementary capital that qualifies as Tier 2 capital is limited to 100% of Tier 1 capital.

• Total capital, calculated as:

• Tier 1 capital;

• plus, qualifying Tier 2 capital;

• less, investments in banking and finance subsidiaries that are not consolidated for regulatory capital purposes;

• less, intentional, reciprocal cross-holdings of capital securities issued by banks; and

• less, other deductions (such as investments in other subsidiaries and joint ventures) as determined by supervising authority.

     The FRB’s capital adequacy guidelines require that a bank holding company maintain a Tier 1 leverage ratio equal to at least 4% of its average total consolidated assets, a Tier 1 risk-based capital ratio equal to 4% of its risk-weighted assets and a total risk-based capital ratio equal to 8% of its risk-weighted assets.

     On December 31, 2006, Exchange was in compliance with all of the FRB’s capital adequacy guidelines. Exchange’s capital ratios on December 31, 2006 are shown below:

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		Tier 1 Risk-Based	Total Risk-Based
	Leverage Ratio (3%	Capital Ratio (4%	Capital Ratio (8%
	minimum	minimum	minimum
	requirement)	requirement)	requirement)
Exchange	8.77%	11.28%	13.84%

     Interstate Banking and Branching. Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”), a bank holding company is 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 FRB will 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. The Riegle-Neal Act also authorizes banks to merge across state lines, thereby creating interstate branches. Banks are also permitted to acquire and to establish de novo branches in other states where authorized under the laws of those states.

     Under the Riegle-Neal Act, individual states may restrict interstate acquisitions in two ways. 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). A state may also establish limits on the total amount of insured deposits within the state which are controlled by a single bank holding company, provided that such deposit limit does not discriminate against out-of-state bank holding companies.

     Source of Strength. FRB policy requires a bank holding company to serve as a source of financial and managerial strength to its subsidiary banks. Under this “source of strength doctrine,” 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. Furthermore, the FRB has the right to order a bank holding company to terminate any activity that the FRB believes is a serious risk to the financial safety, soundness or stability of any subsidiary bank.

     Liability of Commonly Controlled Institutions. 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 by the Deposit Insurance Fund (the “DIF”), the federal deposit insurance fund for banks, in connection with the failure of any other bank subsidiary of the bank holding company.

     Missouri Bank Holding Company Regulation. Missouri prohibits any bank holding company from acquiring ownership or control of any bank or Missouri depository trust company that has Missouri deposits if, after such acquisition, the bank holding company would hold or control more than 13% of total Missouri deposits. Because of this restriction, a bank holding company, prior to acquiring control of a bank or depository trust company that has deposits in Missouri, must receive the approval of the Missouri Division of Finance.

Regulation Applicable to our Banks

     General. Exchange National Bank, a national bank, is subject to regulation and examination by the OCC and the FDIC. Citizens Union State Bank, a Missouri state non-member depository trust company, is subject to the regulation of the Missouri Division of Finance and the FDIC. Osage Valley Bank, a Missouri state non-member bank, is subject to the regulation of the Missouri Division of Finance and the FDIC. Bank 10, a Missouri state non-member bank, is subject to the regulation of the Missouri Division of Finance and the FDIC. Each of the OCC and the FDIC is empowered to issue cease and desist orders against our Banks if it

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determines that activities of any of our Banks represents unsafe and unsound banking practices or violations of law. In addition, the OCC and the FDIC have the power to impose civil money penalties for violations of banking statutes and regulations. Regulation by these agencies is designed to protect the depositors of the bank, not shareholders of Exchange.

     Bank 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 similar to the capital adequacy guidelines established by the FRB for bank holding companies. A special risk-based capital requirement (including a Tier 3 capital component) applies to certain large banks whose trading activity (on a worldwide consolidated basis) equals 10% or more of their total assets or $1 billion or more. None of our Banks is subject to such special capital requirement:

• “well-capitalized” if it has a total Tier 1 leverage ratio of 5% or greater, a Tier 1 risk-based capital ratio of 6% or greater and a total risk-based capital ratio of 10% or greater (and is not subject to any order or written directive specifying any higher capital ratio);

• “adequately capitalized” if it has a total 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), a Tier 1 risk-based capital ratio of 4% or greater and a total risk-based capital ratio of 8% or greater;

• “undercapitalized” if it has a total 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), a Tier 1 risk-based capital ratio that is less than 4% or a total risk-based capital ratio that is less than 8%;

• “significantly undercapitalized” if it has a total Tier 1 leverage ratio that is less than 3%, a Tier 1 risk based capital ratio that is less than 3% or a total risk-based capital ratio that is less than 6%; and

• “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.

     On December 31, 2006, each of our Banks was in compliance with its federal banking agency’s minimum capital requirements. The capital ratios and classifications of each of our Banks as of December 31, 2006 is shown on the following chart.

				Tier 1 Risk-Based			Total Risk-Based
	Leverage Ratio			Capital Ratio			Capital Ratio			Classification
Exchange National Bank		9.91	%		12.51	%		13.76	%	Well-Capitalized
Citizens Union State Bank		9.16	%		11.66	%		12.64	%	Well-Capitalized
Osage Valley Bank		6.35	%		10.18	%		11.02	%	Well-Capitalized
Bank 10		9.34	%		11.49	%		12.22	%	Well-Capitalized

     All of our Banks must be well-capitalized for Exchange to remain a financial holding company.

     Deposit Insurance and Assessments. The deposits of our Banks are insured by the DIF administered by the FDIC, in general up to a maximum of $100,000 per insured depositor. Under federal banking regulations, insured banks are required to pay semi-annual assessments to the FDIC for deposit

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insurance. The FDIC’s risk-based assessment system requires that DIF members pay varying assessment rates depending upon the level of the institution’s capital and the degree of supervisory concern over the institution. As of January 1, 2007, the FDIC’s assessment rates ranged from five cents to 43 cents per $100 of insured deposits. The FDIC has authority to increase the annual assessment rate and there is no cap on the annual assessment rate which the FDIC may impose. As of January 1, 2007, the assessment rate for each of our banks was five cents per $100 of insured deposits.

     Limitations on Interest Rates and Loans to One Borrower. 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 have resulted in reductions of net interest margins on certain classes of loans. Federal and state laws impose additional restrictions on the lending activities of banks. The maximum amount that a Missouri state-chartered bank may lend to any one person or entity is generally 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.

     Payment of Dividends. Our Banks are subject to federal and state laws limiting the payment of dividends. Under the FDIA, an FDIC-insured institution may not pay dividends while it is undercapitalized or if payment would cause it to become undercapitalized. The National Bank Act and Missouri banking law also prohibit the declaration of a dividend out of the capital and surplus of the bank. These laws and regulations are not expected to have a material effect upon the current dividend policies of our Banks.

     Community Reinvestment Act. Our Banks are subject to the CRA and implementing regulations. CRA regulations 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. CRA ratings are taken into account by regulators in reviewing certain applications made by Exchange and its banking subsidiaries.

     Limitations on Transactions with Affiliates. Exchange and its non-bank subsidiaries are “affiliates” within the meaning of the Federal Reserve Act. The amount of loans or extensions of credit which our Banks may make to non-bank affiliates, or to third parties secured by securities or obligations of the non-bank affiliates, 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.

     Other Banking Activities. The investments and activities of our Banks are also subject to regulation by federal banking agencies regarding investments in subsidiaries, investments for their own account (including limitations on investments in junk bonds and equity securities), loans to officers, directors and their affiliates, security requirements, anti-tying limitations, anti-money laundering, financial privacy and customer identity verification 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.

Changes in Laws and Monetary Policies

     Recent Legislation. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide the enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect

10

investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. The proposed changes are intended to allow shareholders to monitor the performance of companies and directors more easily and efficiently.

     The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC under the Securities and Exchange Act of 1934. Further, the Sarbanes-Oxley Act includes very specified additional disclosure requirements and new corporate governance rules, requires the SEC, securities exchanges and the NASDAQ Stock Market to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC and the Comptroller General. Given the extensive SEC role in implementing rules relating to many of the Sarbanes-Oxley Act’s new requirements, the final scope of these requirements remains to be determined.

     The Sarbanes-Oxley Act addresses, among other matters: audit committees; certification of financial statements by the chief executive officer and the chief financial officer; the forfeiture of bonuses and profits made by directors and senior officers in the twelve month period covered by restated financial statements; a prohibition on insider trading during pension plan black out periods; disclosure of off-balance sheet transactions; a prohibition on personal loans to directors and officers (excluding federally insured financial institutions); expedited filing requirements for stock transaction reports by officers and directors; the formation of a public accounting oversight board; auditor independence; and various increased criminal penalties for violations of securities laws. Management has taken various measures to comply with the requirements of the Sarbanes-Oxley Act.

     Future Legislation. Various pieces of legislation, including proposals to change substantially the financial institution regulatory system, are from time to time introduced and considered by the Missouri state legislature and the United States Congress. This legislation may change banking statutes and the operating environment of Exchange in substantial and unpredictable ways. If enacted, this legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. Exchange cannot predict whether any of this potential legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, could have on Exchange’s business, results of operations or financial condition.

     Fiscal Monetary Policies. Exchange’s business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies. Exchange is particularly affected by the policies of the FRB, which regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the FRB are:

• conducting open market operations in United States government securities;

• changing the discount rates of borrowings of depository institutions;

• imposing or changing reserve requirements against depository institutions’ deposits; and

• imposing or changing reserve requirements against certain borrowings by bank and their affiliates.

     These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the FRB have a material effect on Exchange’s business, results of operations and financial condition.

     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.

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Available Information

     The address of our principal executive offices is 300 Southwest Longview Boulevard, Lee’s Summit, Missouri 64081 and our telephone number at this location is (816) 347-8100. Our common stock trades on the Nasdaq national market under the symbol “EXJF”.

     We electronically file certain documents with the Securities and Exchange Commission (SEC). We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K (as appropriate), along with any related amendments and supplements. From time-to-time, we also may file registration and related statements pertaining to equity or debt offerings. You may read and download our SEC filings over the internet from several commercial document retrieval services as well as at the SEC’s internet website (www.sec.gov). You may also read and copy our SEC filings at the SEC’s public reference room located at 100 F Street, NE., Washington, DC 20549. Please call the SEC 1-800-SEC-0330 for further information concerning the public reference room and any applicable copy charges.

     Our internet website address is www.exchangebancshares.com. Under the “Documents” section of our website (www.exchangebancshares.com), we make available our public filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or any amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934. Our Company will provide a copy of any of our public filings, excluding exhibits, free of charge upon written request made to Kathleen L. Bruegenhemke, Exchange National Bancshares, Inc., 132 East High Street, Jefferson City, MO 65101. Please note that any internet addresses provided in this report are for information purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such internet addresses is intended or deemed to be incorporated by reference herein.

Item 1A. Risk Factors.

Risk Factors

     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. The risk factors highlighted below are not the only ones that our Company faces.

     Because We Primarily Serve 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 our banks’ loans to borrowers may decline, and

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• the overall quality of our 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 our banks could make other investments, our banks may earn less revenue on these investments than on loans. Also, our banks’ losses on loans may increase if borrowers are unable to make payments on their loans.

     Interest Rate Changes May Reduce Our Profitability And Our Banking Subsidiaries. The primary source of earnings for Exchange’s banking subsidiaries is net interest income. To be profitable, our 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 our banks earn on loans and investment securities may decrease more rapidly than the amount of interest our 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

• our banks’ ability to originate loans,

• the value of our banks’ loan and securities portfolios,

• our banks’ ability to realize gains from the sale of loans and securities,

• the average life of our banks’ deposits, and

• our banks’ ability to obtain deposits.

     Fluctuations in interest rates will ultimately affect both the level of income and expense recorded on a large portion of our banks’ assets and liabilities, and the market value of all interest-earning assets, other than interest-earning assets that mature in the short term. Our 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 our banks.

     Our Profitability 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. A recent review by our new credit officer identified areas of concern that resulted in heightened attention being given to reducing concentrations of credit and, in particular, to strengthening credit quality and administration. Our 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. Our banks attempt to minimize their credit risk through loan diversification. Although our 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 our 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.

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     Our Provisions For Probable Loan Losses May Need To Be Increased. Each of Exchange’s banking subsidiaries make a provision for loan losses based upon management’s analysis of probable losses in the loan portfolio and consideration of prevailing economic conditions. Each of our 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 our banks. Such agencies may require our 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 probable 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 We Are Unable To Successfully Compete For Customers In Our Market Area, Our 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. Our banks have numerous competitors for customers in their market area. Such competition for loans comes principally from:

• other commercial banks

• savings banks

• savings and loan associations

• mortgage banking companies

• finance companies

• credit unions

Competition for deposits comes principally from:

• other commercial banks

• savings banks

• savings and loan associations

• credit unions

• brokerage firms

• insurance companies

• money market mutual funds

• 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 our 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 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 law will likely increase the number and financial strength of companies that compete directly with our banks. The profitability of our 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 our banks’ market share of deposits and loans in our banks’ respective service areas. If our banks are unable to successfully compete, their financial condition and results of operations will be adversely affected.

     We May Experience Difficulties In Managing Our Growth And In Effectively Integrating Newly Acquired Companies. As part of our general strategy, Exchange may continue to acquire banks and businesses that it believes provide a strategic fit with its business. To the extent that our company does grow, there can be no assurances that we will be able to adequately and profitably manage such growth. Acquiring other banks and businesses will involve risks commonly associated with acquisitions, including:

• potential exposure to liabilities of the banks and businesses acquired;

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• difficulty and expense of integrating the operations and personnel of the banks and businesses acquired;

• difficulty and expense of instituting the necessary systems and procedures, including accounting and financial reporting systems, to manage the combined enterprises on a profitable basis;

• potential disruption to our existing business and operations;

• potential diversion of the time and attention of our management; and

• impairment of relationships with and the possible loss of key employees and customers of the banks and businesses acquired.

The success of our internal growth strategy will depend primarily on the ability of our banking subsidiaries to generate an increasing level of loans and deposits at acceptable risk levels and on acceptable terms without significant increases in non-interest expenses relative to revenues generated. There is no assurance that we will be successful in implementing our internal growth strategy.

     We 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.

     Our Success Largely Depends On The Efforts Of Our Executive Officers. The success of Exchange and its banking subsidiaries has been largely dependant on the efforts of James Smith, Chairman and CEO and David Turner, President and the other executive officers. These individuals are expected to continue to perform their services. However, the loss of the services of Messrs. Smith or Turner, or any of the other key executive officers could have a materially adverse effect on Exchange and its banks.

     We Cannot Predict How Changes In Technology Will Affect Our Business. The financial services market, including banking services, is increasingly affected by advances in technology, including developments in:

• telecommunications

• data processing

• automation

• Internet-based banking

• telebanking

• debit cards and so-called “smart cards”

     Our ability 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 our Banks will likely have to make additional capital investments. Although our Banks continually invest in new technology, there can be no assurance that our 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

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and financial analysts regarding our Banks or our Company; and (ii) changes in accounting policies and practices.

Item 1B. Unresolved Staff Comments.

     None.

Item 2. Properties.

     On February 14, 2007, our principal offices were relocated from Jefferson City, Missouri to the location of Citizen Union Bank’s branch at 300 Southwest Longview Boulevard, Lee’s Summit, Missouri. The Lee’s Summit location will serve as our principal offices temporarily until permanent facilities are located in the Kansas City metropolitan area. None of Exchange, Union, Mid Central Bancorp or ENB Holdings owns any property. Exchange is in the second year of a three year lease to occupy 1,302 square feet of office space at 7321 S. Lindbergh, St. Louis, Missouri.

     ENB Holdings 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 1998 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. In 2001, Exchange National Bank renovated 1,800 square feet of office space at 128 East High Street in Jefferson City for use as additional operations.

     Exchange National Bank also owns a branch in each of the California, Tipton and St. Robert communities. The California branch located at 1000 West Buchanan Street was constructed in 2002 and it is a single story structure with 2,270 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 1960’s. All of the St. Robert office space is used for Exchange National Bank’s operations. Exchange National Bank is constructing a 5,000 square foot, single story branch facility, in Columbia, Missouri, which is expected to be available for use in the second quarter of 2007. The entire facility will be used for Exchange National Bank 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 nine branch banking facilities, of which eight are owned by it. Citizens Union State Bank owns its

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downtown Clinton storage facility, which is located at 115 North Main Street. This facility has approximately 1,500 square feet of usable storage space, all of which is used in Citizens Union State Bank operations. Citizens Union State Bank owns a 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 second 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 third 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 lease having an initial five-year term that expired in January 2004. Citizens Union State Bank exercised the first of two five-year renewal options granted to it for this facility. Citizens Union State Bank owns one Springfield, Missouri branch banking facility located at 321 West Battlefield. The facility is a two-story building constructed in 1986 which has approximately 12,500 square feet of usable office space. The entire upper level (6,600 square feet) is leased to a non-affiliate with the remaining usable office space used for Citizens Union State Bank operations. 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 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 has a branch facility at 125 South Main in Windsor, Missouri. This facility has 3,600 square feet of office space of which 2,800 square feet is used for operations of Citizens Union State Bank. Citizens Union State Bank owns a two story, 11,000 square feet facility at 4675 Gretna Road in Branson which was constructed in 2005. Currently, the entire facility is used for operations of Citizens Union State Bank. Citizens Union State Bank’s last branch facility at 300 SW Long View in Lee’s Summit was constructed in 2005. The entire 11,700 square feet facility is used for Citizens Union State Bank operations and as temporary corporate headquarters for our Company. 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 owns and operates one branch banking facility constructed in 2005. Osage Valley Bank’s branch facility is a story and a half structure located at 1891 Commercial Drive in Warsaw, Missouri, and it has approximately 11,000 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.

     The principal offices of Bank 10 are located at 8127 E. 171^st Street in Belton, Missouri. The bank building, which is owned by Bank 10, has approximately 13,000 square feet of usable office space, all of which is currently used for Bank 10’s operations. Bank 10 also operates five branch banking facilities, of which four are owned by it. Bank 10 owns a Drexel, Missouri branch banking facility located at 115 S 2^nd. This facility has approximately 4,000 square feet of usable office space, all of which is used for Bank 10’s operations. Bank 10 owns a Harrisonville, Missouri branch banking facility located at 100 Plaza Drive. This facility has approximately 4,000 square feet of usable office space, all of which is used for Bank 10’s operations. Bank 10 owns two Independence, Missouri branch banking facilities located at 17430 E 39^th Street and 220 W. White Oak. These facilities have approximately 4,070 and 1,800 square feet respectively of usable office space, all of which is used for Bank 10’s operations. Bank 10 leases a Raymore, Missouri branch banking facility located at 500 Mott Drive Apartment 103C. This facility has approximately 462 square feet of usable office space, all of which is used for Bank 10’s operations. Management believes that

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the condition of these banking facilities presently is adequate for Bank 10’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, 2006.

EXECUTIVE OFFICERS OF THE REGISTRANT

     Executive officers of our company are appointed by the board of directors and serve at the discretion of the board. The following table sets forth certain information with respect to all executive officers of our company.

Name	Age		Position
James E. Smith		62	Chairman, Chief Executive Officer and Director
David T. Turner		50	President and Director
Richard G. Rose		55	Treasurer
Kathleen L. Bruegenhemke		41	Senior Vice President and Secretary
James H. Taylor, Jr.		57	Senior Vice President and Senior Credit Officer

     The business experience of the executive officers of our company during the last five years is as follows:

     James E. Smith has served as a Director of Citizens Union State Bank since 1975, of our company since 1997, of Osage Valley Bank since January 2000, of Exchange National Bank since March 2002 and of Bank 10 since May 2005. He served as Vice Chairman of our company from 1998 through March 2002 when he assumed the responsibilities of Chairman and Chief Executive Officer, as President and Secretary of Citizens Union State Bank from 1975 through May 2000 when he was promoted to Chairman and Chief Executive Officer, and as President of Osage Valley Bank from January 2000 through October 2002 when he was promoted to Vice Chairman.

     David T. Turner has served as a Director of Exchange National Bank and of our company since January 1997 and of Citizens Union State Bank since April 2002. Mr. Turner served as Vice Chairman of our company from June 1998 through March 2002 when he assumed the position of President. From 1993 until June 1998, he served as Senior Vice President of our company. Mr. Turner served as President of Exchange National Bank from January 1997 through March 2002 when he assumed the position of Chairman, Chief Executive Officer and President. He served as Senior Vice President of Exchange National Bank from June 1992 through December 1996 and as Vice President from 1985 until June 1992.

     Richard G. Rose has served as Treasurer of our company since July 1998 and as Senior Vice President and Controller of Exchange National Bank since July 1998. Prior to that he served as Senior Vice President and Controller of the First National Bank of St. Louis from June 1979 until June 1998.

     Kathleen L. Bruegenhemke has served as Senior Vice President and Secretary of our company since November 1997. From January 1992 until November 1997, she served as Internal Auditor of Exchange

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National Bank. Prior to joining Exchange National Bank, Ms. Bruegenhemke served as a Commissioned Bank Examiner for the Federal Deposit Insurance Corporation.

     James H. Taylor, Jr. has served as Senior Vice President and Senior Credit Officer of our company since June 2005. Prior to joining our company, Mr. Taylor served as an executive officer in various senior management capacities with Deutsche Financial Services Corp., a wholly owned subsidiary of Deutsche Bank, A.G., Frankfort, Germany.

     There is no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was selected as an officer.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

     Pursuant to General Instruction G(2) to Form 10-K, the information required by this Item, other than that referred to below, is incorporated herein by reference to the information under the caption “Market Price of and Dividends on Equity Securities and Related Matters” in our Company’s 2006 Annual Report to Shareholders.

     We refer you to Item 12 of this report under the caption “Securities Authorized For Issuance Under Equity Compensation Plans” for certain equity plan information.

Our Purchases of Equity Securities

     The following table summarizes the purchases made by or on behalf of our Company or certain affiliated purchasers of shares of our common stock during the fourth quarter of the year ended December 31, 2006:

							(d) Maximum Number
					(c) Total Number of		(or Approximate
					Shares (or Units)		Dollar Value) of
					Purchased as Part		Shares (or Units)
	(a) Total Number of		(b) Average Price		of Publicly		that May Yet Be
	Shares (or Units)		Paid per Share (or		Announced Plans or		Purchased Under the
Period	Purchased		Unit)		Programs		Plans or Programs *
October 1-31, 2006		0		—		—	$	1,280,783
November 1-30, 2006		0		—		—	$	1,280,783
December 1-31, 2006		0		—		—	$	1,280,783
Total		0		—		—	$	1,280,783

* On August 22, 2001, our Company announced that our Board of Directors authorized the purchase, through open market transactions, of up to $2,000,000 market value of our Company’s common stock. Management was given discretion to determine the number and pricing of the shares to be purchased, as well as, the timing of any such purchases. On November 26, 2002, our Company announced that our Board of Directors authorized an additional $2,000,000 for the purchase of our Company’s stock through open market transactions.

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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 our Company’s 2006 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 our Company’s 2006 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, strategy, 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 additional factors that could cause actual results to be materially different from those described in the forward-looking statements, which factors are identified in Item 1A of this report under the heading “Risk Factors.” 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 such statement is made. Except as otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

20

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     Our Company’s exposure to market risk is reviewed on a regular basis by our 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 our Bank’s management include the standard GAP report subject to different rate shock scenarios. At December 31, 2006, the rate shock scenario models indicated that annual net interest income could change by as much as 9.44% should interest rates rise or fall within 200 basis points from their current level over a one year period. However there are no assurances that the change will not be more or less than this estimate.

     Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item, other than that provided above, is incorporated herein by reference to:

(i)	the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Interest Sensitivity and Liquidity” in our Company’s 2006 Annual Report to Shareholders; and
(ii)	the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures About Market Risk” in our Company’s 2006 Annual Report to Shareholders.

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 our Company’s 2006 Annual Report to Shareholders.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

     None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

     Our Company’s management has evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures as of December 31, 2006. Based upon and as of the date of that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required. It should be noted that any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events. Because of these and other inherent limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

21

Internal Controls Over Financial Reporting.

      Management’s Report on Internal Control Over Financial Reporting.

     Our Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Securities Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, our Company’s management concluded that our internal control over financial reporting was effective as of December 31, 2006. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

      Report of Independent Registered Public Accounting Firm.

     Report of Independent Registered Public Accounting Firm

      The Board of Directors and Shareholders
      Exchange National Bancshares, Inc.:

We have audited management’s assessment, as set forth above, that Exchange National Bancshares, Inc. (the Company) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

22

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Exchange National Bancshares, Inc. maintained effective internal control over financial reporting as of December 31, 2006 is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by COSO. Also, in our opinion, Exchange National Bancshares, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the PCAOB (United States), the consolidated balance sheets of Exchange National Bancshares, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated March 16, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
St. Louis, Missouri
March 16, 2007

     Changes in Internal Controls.

     There has been no change in our Company’s internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

     None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

     Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item, other than that referred to below, is incorporated herein by reference to:

(i)	the information under the caption “Item 1: Election of Directors—What is the structure of our board and how often are directors elected?” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;
(ii)	the information under the caption “Item 1: Election of Directors—Who are this year’s nominees?” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;
(iii)	the information under the caption “Item 1: Election of Directors—What is the business experience of the nominees and of our continuing board members?” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;

23

(iv)	the information under the caption “Executive Officers of the Registrant” in Part I of this report;
(v)	the information under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;
(vi)	the information under the caption “Corporate Governance and Board Matters—Consideration of Director Nominees” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A; and
(vii)	the information under the caption “Corporate Governance and Board Matters—Committees of the Board—Audit Committee” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Code of Ethics

     Our Company has adopted a Code of Business Conduct and Ethics for directors, officers and employees including, our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. This Code of Business Conduct and Ethics is posted on our internet website (www.exchangebancshares.com) under “Governance Documents” and is available for your examination. Any substantive amendment to, or waiver from, a provision of this Code that applies to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions will be disclosed in a report on Form 8-K.

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 Related Matters” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;
(ii)	the information under the caption “Corporate Governance and Board Matters—Director Compensation” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A; and
(iii)	the information under the caption “Corporate Governance and Board Matters—Compensation Committee Interlocks and Insider Participation” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

     Pursuant to General Instruction G(3) to Form 10-K, the information required by this Item, other than that presented below, is incorporated herein by reference to the information under the caption “Ownership of Common Stock” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Securities Authorized For Issuance Under Equity Compensation Plans

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     Our Company has only one equity compensation plan for its employees pursuant to which options, rights or warrants may be granted. See Note 16 to the Consolidated Financial Statements for further information on the material terms of this plan. The following is a summary of the shares reserved for issuance pursuant to outstanding options, rights or warrants granted under equity compensation plans as of December 31, 2006:

						Number of
						securities
						remaining available
	Number of					for future issuance
	securities to be					under equity
	issued upon			Weighted-average		compensation plans
	exercise of			exercise price of		(excluding
	outstanding			outstanding		securities
	options, warrants			options, warrants		reflected in column
Plan category	and rights			and rights		(a))
	(a)			(b)		(c)
Equity compensation plans approved by security holders		202,739	*	$	25.66		225,869
Equity compensation plans not approved by security holders		—			—		—
Total		202,739	*	$	25.66		225,869

* Consists of shares reserved for issuance pursuant to outstanding stock option grants under our Company’s Incentive Stock Option Plan.

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:

(i)	the information under the caption “Related Party Transactions” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A;
(ii)	the information under the caption “Item 1: Election of Directors—What is the structure of our board and how often are directors elected?” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A; and
(iii)	the information under the caption “Corporate Governance and Board Matters—Committees of the Board” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

Item 14. Principal Accountant Fees and Services.

     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 “Independent Auditor Fees and Services” in our Company’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(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, 2006 under the caption “Consolidated Financial Statements”, are incorporated herein by reference:

     Report of Independent Registered Public Accounting Firm.

     Consolidated Balance Sheets as of December 31, 2006 and 2005.

     Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004.

     Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2006, 2005 and 2004.

     Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004.

     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.

3. Exhibits:

Exhibit No.	Description
3.1	Articles of Incorporation of our Company (filed as Exhibit 4.1 to our Company’s current report on Form 8-K filed May 25, 2000 and incorporated herein by reference).
3.1.1	Articles of Amendment to Articles of Incorporation of our Company (filed as Exhibit 4.1.1 to our Company’s current report on Form 8-K filed May 25, 2000 and incorporated herein by reference).
3.2	Bylaws of our Company (filed with our Company’s Annual Report on Form 10-K for the year ended December 31, 2000 as Exhibit 3.2 and incorporated herein by reference).
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-K 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).*

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Exhibit No.	Description
10.2	Form of Change of Control Agreement and schedule of parties thereto (filed with our Company’s Quarterly Report on Form 10-Q for the quarterly period March 31, 2005 as Exhibit 10.2 and incorporated herein by reference).*
13	The Registrant’s 2006 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).
14	Code of Business Conduct and Ethics of our Company (filed with our Company’s Annual Report on Form 10-K for the year ended December 31, 2003 as Exhibit 14 and incorporated herein by reference).
21	List of Subsidiaries (filed with our Company’s Annual Report on Form 10-K for the year ended December 31, 2005 as Exhibit 21 and incorporated herein by reference).
23	Consent of Independent Registered Public Accounting Firm.
24	Power of Attorney (included on the signature page to this Annual Report on Form 10-K).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contracts or compensatory plans or arrangements required to be identified by Item 15(a).

(b) Exhibits.

     See exhibits identified above under Item 15(a)3.

(c) Financial Statement Schedules.

     See financial statement schedules identified above under Item 15(a)2, if any.

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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, 2007	By	/s/ James E. Smith
	James E. Smith, Chairman of the Board       and Chief Executive Officer

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James E. Smith and Richard G. Rose, or either of them, his attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof.

     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, 2007	/s/ James E. Smith James E. Smith, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
March 16, 2007	/s/ Richard G. Rose Richard G. Rose, Treasurer (Principal Financial Officer and Principal Accounting Officer)
March 16, 2007	/s/ David T. Turner David T. Turner, Director
March 16, 2007	/s/ Charles G. Dudenhoeffer, Jr. Charles G. Dudenhoeffer, Jr., Director
March 16, 2007	/s/ Philip D. Freeman Philip D. Freeman, Director
March 16, 2007	/s/ Kevin L. Riley Kevin L. Riley, Director
March 16, 2007	/s/ Julius F. Wall Julius F. Wall, Director
March 16, 2007	/s/ Gus S. Wetzel, II Gus S. Wetzel, II, Director

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EXHIBIT INDEX

Exhibit No.	Description	Page No.
13	The Registrant’s 2006 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).
23	Consent of Independent Registered Public Accounting Firm.
24	Power of Attorney (included on the signature page to this Annual Report on Form 10-K).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-13

Exhibit 13

2006

ANNUAL REPORT

TO

SHAREHOLDERS

EXCHANGE NATIONAL BANCSHARES, INC.

Jefferson City, Missouri

EXCHANGE NATIONAL BANCSHARES, INC.

Lee’s Summit, Missouri

March 16, 2007

Dear Investors:

     In the 15 years since establishing itself as a multi-bank holding company, Exchange National Bancshares, Inc. has grown from a four-branch organization with total assets of $265 million to 26 branches with assets exceeding $1.1 billion. Much of that growth has been achieved via the acquisition of other banks that were brought into the organization and run as separate companies under the Exchange National Bancshares holding company. While maintaining separate bank charters for each acquisition proved beneficial, Exchange National Bancshares has reached the size that it can benefit from having a single branding identity that customers carry with them as they move throughout Missouri.

     As announced last December, Exchange National Bancshares is consolidating our subsidiary banks into a single charter and relocating our corporate headquarters to the Kansas City metropolitan area. Establishing our corporate headquarters in Kansas City provides many benefits to our Company, including improved visibility to a broader investor base. Our consolidation effort is proceeding well and we anticipate having our entire organization on a shared data processing platform during the second quarter of 2007.

     As we move forward in our strategic planning process, I assure you that Exchange National Bancshares, Inc. will not lose sight of its long standing tradition of providing excellent customer service. Exchange National Bancshares’ philosophy of having local leadership in decision making roles will remain unchanged.

     Shareholders received dividends totaling $0.84 per share in 2006 compared to $0.81 in 2005. At December 31, 2006, our Company’s dividend yield was above its peers at 2.67%. Management is proud of our Company’s healthy dividend.

     Regarding 2006 financial highlights, total assets increased to $1,142,712,000. For 2006, return on average equity was 10.79% and the return on average assets was 0.95%, compared to 10.47% and 0.91% respectively for 2005.

     Capitalization expressed in terms of tier one capital to adjusted average total assets (leverage ratio) was 8.77% at year-end 2006 compared to 7.88% at December 31, 2005. Total capital to risk-weighted assets was 13.84% at December 31, 2006 compared to 12.70% at year-end 2005. Both ratios continue to exceed the Federal Reserve’s definition of “well capitalized”.

     The Directors and Management of our Company thank you, our investors, for your continued support as we move forward with our strategic plan. We look forward to a busy 2007!

Sincerely,
 

 

JAMES E. SMITH 

Chairman & Chief Executive Officer 

EXCHANGE NATIONAL BANCSHARES, INC.
DESCRIPTION OF BUSINESS

     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, Citizens Union State Bank. 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 October 25, 1999, Exchange established ENB Holdings, Inc. as a wholly-owned subsidiary for the sole purpose of effecting the June 16, 2000 merger with CNS Bancorp, Inc. and its subsidiary, City National Savings Bank, FSB. City National subsequently was merged into Exchange National Bank. ENB Holdings owns 27.4% of Exchange National Bank with the balance owned by Exchange. On October 17, 2001, Exchange and Union each received approval from the Federal Reserve to become a financial holding company. On May 2, 2005 our Company acquired 100 percent of the outstanding common shares of Bank 10 from Drexel Bancshares, Inc. of Belton, Missouri. 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. Except as otherwise provided herein, references herein to “Exchange” or our “Company” include Exchange and its consolidated subsidiaries.

     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.

     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 ten banking offices, including its principal office at 102 North Second Street in Clinton, Missouri, three Clinton branch facilities, and a branch facility in each of the Missouri communities of Springfield, Branson, Collins, Lee’s Summit, Osceola and Windsor.

     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 at 1891 Commercial in Warsaw, Missouri.

     Bank 10 was founded in 1910 as a Missouri state bank. Bank 10 has six banking offices, including its principal office at 8127 East 171^st Street in Belton, Missouri with two branch facilities in the Missouri communities of Independence, Missouri, and a branch facility in each of the Missouri communities of Drexel, Harrisonville and Raymore.

     Each of our subsidiary Banks 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 commercial and industrial loans, residential real estate loans, single payment personal loans, installment loans and credit card accounts. In addition, Exchange National Bank and Citizens Union State Bank each provide trust services.

     The deposit accounts of our Banks are insured by the Federal Deposit Insurance Corporation (the “FDIC”) to the extent provided by law. Exchange National Bank is a member of the Federal Reserve System, and its 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. The operations of Citizens

2

Union State Bank, Osage Valley Bank and Bank 10 are supervised and regulated by the FDIC and the Missouri Division of Finance. A periodic examination of Exchange National Bank is conducted by representatives of the OCC, and periodic examinations of Citizens Union State Bank, Osage Valley Bank and Bank 10 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 shareholders. Exchange, Union, Mid Central Bancorp and ENB Holdings are subject to supervision by the Federal Reserve Board.

3

SELECTED CONSOLIDATED FINANCIAL DATA

     The following table presents selected consolidated financial information for our Company as of and for each of the years in the five-year period ended December 31, 2006. The selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements of our Company, including the related notes, presented elsewhere herein.

(Dollars expressed in thousands, except share and per share data)

	Year Ended December 31,
	2006			2005			2004			2003		2002
Income Statement Data
Interest income	$	71,423			57,340			41,091			38,922		40,463
Interest expense		32,766			23,673			13,387			12,798		16,326
Net interest income		38,657			33,667			27,704			26,124		24,137
Provision for loan losses		1,326			1,322			942			1,092		936
Net interest income after provision for loan losses		37,331			32,345			26,762			25,032		23,201
Security gains (losses), net		(18	)		(25	)		(8	)		38		163
Other noninterest income		8,618			7,290			5,741			6,666		5,940
Total noninterest income		8,600			7,265			5,733			6,704		6,103
Noninterest expense		30,148			25,368			20,383			18,536		17,832
Income before income taxes		15,783			14,242			12,112			13,200		11,472
Income taxes		4,908			4,327			3,807			4,156		3,379
Net income	$	10,875			9,915			8,305			9,044		8,093
Dividends
Declared on common stock	$	3,503			3,503			3,378			3,183		2,510
Paid on common stock		3,503			3,378			3,378			2,988		2,493
Ratio of total dividends declared to net income		32.21	%		35.33			40.67			35.19		31.01
Per Share Data
Basic earnings per common share	$	2.61			2.38			1.99			2.17		1.91
Diluted earnings per common share		2.59			2.36			1.98			2.15		1.90
Basic weighted average shares of common stock outstanding		4,169,847			4,169,847			4,169,847			4,169,432		4,242,858
Diluted weighted average shares of common stock outstanding		4,204,547			4,198,859			4,204,752			4,209,272		4,253,163

4

	Year Ended December 31,
	2006			2005		2004		2003		2002
Balance Sheet Data (at period end)
Investment securities	$	189,773			179,692		171,718		188,956		186,724
Loans		812,312			813,535		636,637		583,919		486,564
Total assets		1,142,712			1,126,470		923,874		875,596		794,418
Total deposits		899,865			881,455		726,649		665,262		591,191
Securities sold under agreements to repurchase and other short term borrowed funds		31,196			38,094		35,413		73,672		70,421
Subordinated notes		49,486			49,486		25,774		—		—
Other borrowed money		47,368			52,180		39,525		41,630		41,795
Total stockholders’ equity		104,945			96,733		91,771		87,783		82,827
Earnings Ratios
Return on average total assets		0.95	%		0.91		0.93		1.09		1.04
Return on average stockholders’ equity		10.79			10.47		9.16		10.45		9.89
Asset Quality Ratios
Allowance for loan losses to loans		1.11			1.12		1.18		1.42		1.46
Nonperforming loans to loans (1)		0.62			1.11		0.96		0.52		0.62
Allowance for loan losses to nonperforming loans (1)		177.95			100.39		123.05		274.29		236.66
Nonperforming assets to loans and foreclosed assets (2)		0.96			1.30		0.97		0.54		0.67
Net loan charge-offs to average loans		0.17			0.15		0.29		0.03		0.10
Capital Ratios
Average stockholders’ equity to average total assets		8.80	%		8.73		10.11		10.39		10.51
Total risk-based capital ratio		13.84			12.70		14.58		10.98		12.10
Tier 1 risk-based capital ratio		11.28			9.83		13.47		9.78		10.88
Leverage ratio		8.77			7.88		10.39		7.18		7.36

(1)	Nonperforming loans consist of nonaccrual loans and loans contractually past due 90 days or more and still accruing interest.
(2)	Nonperforming assets consist of nonperforming loans plus foreclosed assets.

5

A WORD CONCERNING FORWARD-LOOKING STATEMENTS

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, and

• changes may occur in the securities markets.

We have described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, and in other reports that we file with the SEC from time to time, additional factors that could cause actual results to be materially different from those described in the forward-looking 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.

6

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     This overview of management’s discussion and analysis highlights selected information in this document and may not contain all of the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources and critical accounting estimates, you should carefully read this entire document. These have an impact on our Company’s financial condition and results of operation.

     Business History: In 1865, The Exchange National Bank of Jefferson City opened for business serving the loan and deposit needs of citizens living in Missouri’s State Capitol of Jefferson City. Leveraging off of its strong equity position, Exchange National Bank’s Board of Directors established Exchange National Bancshares, Inc., a multi-bank holding company on October 23, 1992. On April 7, 1993, Exchange National Bancshares, Inc. acquired The Exchange National Bank of Jefferson City. On November 3, 1997, our Company acquired Union State Bancshares, Inc. and its wholly-owned subsidiary, Union State Bank and Trust of Clinton, Missouri. 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 of Warsaw, Missouri. On June 16, 2000, our Company acquired CNS Bancorp, Inc. and its subsidiary, City National Savings Bank, FSB, Jefferson City, Missouri. City National subsequently was merged into Exchange National Bank. On June 26, 2003 our Company purchased the Springfield, Missouri branch of Missouri State Bank. Following the purchase, this branch was merged into Citizens Union State Bank and Trust. On May 2, 2005 our Company purchased Bank 10 of Belton, Missouri.

     Material Challenges and Risks: Our Company may experience difficulties in managing growth and in effectively integrating newly established branches. As part of our general strategy, our Company may continue to acquire banks and establish de novo branches that we believe provide a strategic fit. To the extent that our Company does grow, there can be no assurances that we will be able to adequately and profitably manage such growth.

     The successes of our Company’s growth strategy will depend primarily on the ability of our banking subsidiaries to generate an increasing level of loans and deposits at acceptable risk levels and on acceptable terms without significant increases in non-interest expenses relative to revenues generated. Our Company’s financial performance also depends, in part, on our ability to manage various portfolios and to successfully introduce additional financial products and services. Furthermore, the success of our Company’s growth strategy will depend on our ability to maintain sufficient regulatory capital levels and on general economic conditions that are beyond our control.

     Revenue Source: Through the respective branch network, Exchange National Bank, Citizens Union State Bank, Osage Valley Bank and Bank 10 provide similar products and services in four defined geographic areas. The products and services offered include a broad range of commercial and personal banking services, including certificates of deposit, individual retirement and other time deposit accounts, checking and other demand deposit accounts, interest checking accounts, savings accounts, and money market accounts. Loans include real estate, commercial, installment, and other consumer loans. Other financial services include automatic teller machines, trust services, credit related insurance, and safe deposit boxes. The revenues generated by each business segment consist primarily of interest income, generated primarily from the loan and debt and equity security portfolios, and service charges and fees, generated from the deposit products and services. The geographic areas are defined to be communities surrounding Jefferson City, Clinton, Warsaw, and Lee’s Summit, Missouri. The products and services are offered to customers primarily within their respective geographical areas. The business segment results which follow are consistent with our Company’s internal reporting system which is consistent, in all material respects, with generally accepted accounting principles and practices prevalent in the banking industry.

     Much of our Company’s business is commercial, commercial real estate development, and mortgage lending. Our Company has experienced steady loan demand in the communities within which we operate even

7

during economic slowdowns. Our Company’s income from mortgage brokerage activities is directly dependent on mortgage rates and the level of home purchases and refinancings.

     Our Company’s primary source of revenue is net interest income derived primarily from lending and deposit taking activities. A secondary source of revenue is investment income. Our Company also derives income from trust, brokerage, credit card and mortgage banking activities and service charge income.

     Our Company has prepared all of the consolidated financial information in this report in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). In preparing the consolidated financial statements in accordance with U.S. GAAP, our Company makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurances that actual results will not differ from those estimates.

     Our Company’s consolidated net income increased $960,000 or 9.7% to $10,875,000 for 2006 compared to $9,915,000 for 2005 and followed a $1,610,000 or 19.4% increase for 2005 compared to 2004. Basic earnings per common share increased from $1.99 for 2004 to $2.38 for 2005 and increased to $2.61 for 2006. Diluted earnings per common share increased from $1.98 for 2004 to $2.36 for 2005 and increased to $2.59 for 2006. Return on average total assets decreased from 0.93% for 2004 to 0.91% for 2005 and increased to 0.95% for 2006. Return on average total stockholders’ equity increased from 9.16% for 2004 to 10.47% for 2005 and increased to 10.79% for 2006.

     Average loans outstanding increased $81,324,000 or 10.9% to $824,706,000 for 2006 compared to $743,382,000 for 2005 and followed a $142,019,000 or 23.6% increase for 2005 compared to 2004. Approximately $60,230,000 of the increase in average loans during 2006 and $89,844,000 of the increase in 2005 reflects loans of Bank 10. Bank 10’s loans were on our Company’s books for a full year in 2006 versus eight months in 2005. Total loans at our Company’s other banks increased approximately $21,094,000 or 3.2% for 2006 compared to 2005.

     Although total average loans increased from 2005 to 2006, some categories of loans experienced decreases in the period. Retail mortgage lending declined slightly due to a slow down in the retail real estate market as a result of higher interest rates during the period. Excluding the variances caused by Bank 10, average commercial loans outstanding decreased approximately $1,829,000 or 1.3% for 2006 compared to 2005 and followed a $3,635,000 or 2.6% increase for 2005 compared to 2004. Average real estate loans outstanding increased approximately $25,785,000 or 5.4% for 2006 compared to 2005 and followed a $50,730,000 or 11.9% increase for 2005 compared to 2004. Average consumer loans outstanding decreased approximately $2,906,000 or 8.1% for 2006 compared to 2005 and followed a $2,190,000 or 5.8% decrease for 2005 compared to 2004.

     Our Company continued to experience strong loan demand in the area of commercial real estate construction lending while regular commercial lending declined slightly. Also, consumer loans decreased on average in 2006 and 2005 . These decreases reflect the low rates that exist in the consumer auto market that is fueled by manufacturers’ low or zero rate financing programs. Our Company chose to not aggressively pursue consumer auto loans during the periods presented and as such this portion of the loan portfolio declined in balance.

     Average investment securities and federal funds sold decreased $36,489,000 or 15.1% to $204,457,000 for 2006 compared to $240,955,000 for 2005 and followed a $17,342,000 or 7.8% increase for 2005 compared to 2004. The decrease in average investment securities during 2006 reflects the use of investment liquidity to fund our Company’s growth in the loan portfolio as well as a reduction in public funds that required pledging for securities for collateral.

     Average demand deposits increased $15,072,000 or 12.8% to $132,912,000 for 2006 compared to $117,840,000 for 2005 and followed a $25,775,000 or 28.0% increase for 2005 compared to 2004. Approximately $8,283,000 of the increase in average demand deposits during 2006 and $17,179,000 of the increase in 2005 is due to the acquisition of Bank 10. Bank 10’s demand deposits were on our Company’s books for a full year in 2006 versus eight months in 2005. Excluding the increase in 2006 as a result of the acquisition of Bank 10 our Company’s demand deposits increased approximately $6,789,000 or 6.7% and is primarily the result of our expanded branch network.

8

     Average total time deposits increased $29,430,000 or 4.1% to $753,945,000 for 2006 compared to $724,515,000 for 2005 and followed a $132,619,000 or 22.4% increase for 2005 compared to 2004. Approximately $42,640,000 of the increase in average time deposits in 2006 and $84,463,000 in 2005 is attributed to the acquisition of Bank 10. Bank 10’s time deposits were on our Company’s books for a full year in 2006 versus eight months in 2005. Other than the increase attributed to the acquisition, average time deposits at our Company’s other banks decreased approximately $13,211,000 or 2.1%. The decrease in 2006 is primarily attributed to the loss of one public fund time deposit that switched from a deposit relationship to an investment relationship. The increase in 2005 is attributed to a 47.0% or $41,674,000 increase in money markets from 2004 to 2005 due to special money market promotions and the opening of two new branches. Approximately $6,388,000 of the remaining increase in average time deposits for 2005 represents brokered time deposits. These brokered time deposits represent certificates of deposit issued in denominations of less than $100,000 for various terms up to two years in length.

     Average federal funds purchased and securities sold under agreements to repurchase decreased $3,915,000 or 8.5% to $42,350,000 for 2006 compared to $46,265,000 for 2005 and followed a $13,028,000 or 22.0% decrease for 2005 compared to 2004.

     Average interest-bearing demand notes to U.S. Treasury increased $8,000 or 1.1% to $704,000 for 2006 compared to $696,000 for 2005 and followed a $17,000 or 2.5% increase for 2005 compared to 2004. Balances in this account are governed by the U.S. Treasury’s funding requirements.

     Average subordinated notes increased $4,872,000 or 10.9% to $49,486,000 for 2006 compared to $44,614,000 for 2005 and followed a $24,262,000 or 119.2% increase for 2005 compared to 2004. Our Company issued $23,712,000 and $25,774,000 of subordinated notes in March 2005 and 2004, respectively. In 2005, the proceeds were used to provide part of the funding for the acquisition of Bank 10. In 2004, $11,000,000 of the proceeds were used to pay existing debt with the balance retained for general corporate purposes.

     Average other borrowed money increased $8,327,000 or 17.2% to $56,757,000 for 2006 compared to $48,430,000 for 2005 and followed a $12,928,000 or 36.4% increase for 2005 compared to 2004. The increase in 2006 reflects increased funding for loan growth. Approximately $8,986,000 of the increase in average borrowed money from 2004 to 2005 is attributed to the acquisition of Bank 10. The balances of the 2005 increase reflects additional borrowings to fund loan growth.

     Average stockholders’ equity increased $6,158,000 or 6.5% to $100,821,000 for 2006 compared to $94,663,000 for 2005 and followed a $4,038,000 or 4.5% increase for 2005 compared to 2004. The increases represent net income retained in excess of dividends declared plus adjustments for unrealized gains or losses on debt and equity securities, net of taxes.

9

The following table provides a comparison of fully taxable equivalent earnings, including adjustments to interest income and tax expense for interest on tax-exempt loans and investments.

(Dollars expressed in thousands)

	Year Ended December 31,
	2006			2005			2004
Interest income	$	71,423			57,340			41,091
Fully taxable equivalent (FTE) adjustment		1,009			882			663
Interest income (FTE basis)		72,432			58,222			41,754
Interest expense		32,766			23,673			13,387
Net interest income (FTE basis)		39,666			34,549			28,367
Provision for loan losses		1,326			1,322			942
Net interest income after provision for loan losses (FTE basis)		38,340			33,227			27,425
Noninterest income		8,600			7,265			5,733
Noninterest expense		30,148			25,368			20,383
Income before income taxes (FTE basis)		16,792			15,124			12,775
Income taxes		4,908			4,327			3,807
FTE adjustment		1,009			882			663
Income taxes (FTE basis)		5,917			5,209			4,470
Net income	$	10,875			9,915			8,305
Average total earning assets	$	1,031,423			985,848			827,710
Net interest margin		3.85	%		3.50	%		3.43	%

     Our Company’s primary source of earnings is net interest income, which is the difference between the interest earned on interest earning assets and the interest paid on interest bearing liabilities. Net interest income on a fully taxable equivalent basis increased $5,117,000 or 14.8% to $39,666,000 for 2006 compared to $34,549,000 for 2005, and followed a $6,182,000 or 21.8% increase for 2005 compared to 2004. Measured as a percentage of average earning assets, the net interest margin (expressed on a fully taxable equivalent basis) increased from 3.43% for 2004 to 3.50% for 2005, and increased to 3.85% for 2006. The increase in net interest margin in 2006 and 2005 reflects increases in interest rates during those periods.

     Our Company was able to increase the net interest margin during this period by increasing the effective rate of our earning assets by a larger amount than we increased the effective rate of our funding sources. There is no assurance that our Company can maintain this margin in future periods.

10

     The provision for loan losses increased $4,000 or 0.3% to $1,326,000 for 2006 compared to $1,322,000 for 2005 and followed a $380,000 or 40.3% increase for 2005 compared to 2004. The 2006 provision reflects the amount management determined was appropriate to maintain the allowance for loan losses at a level that was adequate to cover probable losses in the loan portfolio. The allowance for loan losses totaled $9,015,000 or 1.11% of loans outstanding at December 31, 2006 compared to $9,085,000 or 1.12% of loans outstanding at December 31, 2005 and $7,495,000 or 1.18% of loans outstanding at December 31, 2004. The allowance for loan losses expressed as a percentage of nonperforming loans was 177.95% at December 31, 2006, 100.39% at December 31, 2005, and 123.05% at December 31, 2004. Further discussion of managements methodology related to the allowance for loan losses may be found in the Lending and Credit Management section of this report.

CRITICAL ACCOUNTING POLICIES

     The following accounting policies are considered most critical to the understanding of our Company’s financial condition and results of operations. These critical accounting policies require management’s most difficult, subjective and complex judgments about matters that are inherently uncertain. Because these estimates and judgments are based on current circumstances, they may change over time or prove to be inaccurate based on actual experiences. In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of a materially different financial condition and/or results of operations could reasonably be expected. The impact and any associated risks related to our critical accounting policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such polices affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 1 of our consolidated financial statements.

Allowance for Loan Losses

     We have identified the accounting policy related to the allowance for loan losses as critical to the understanding of our Company’s results of operations, since the application of this policy requires significant management assumptions and estimates that could result in materially different amounts to be reported if conditions or underlying circumstances were to change. The impact and any associated risks related to these policies on our business operations are discussed in the “Lending and Credit Management” section below.

Income Taxes

     Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

     Our Company estimates income tax expense based on amounts expected to be owed to various tax jurisdictions. The estimated income tax expense is reported in the Consolidated Statement of Income. Accrued taxes represent the net estimated amount due or to be received from taxing jurisdictions either currently or in the future and are reported in other assets or other liabilities on the Consolidated Balance Sheet. In estimating accrued taxes, our Company assesses the relative merits and risks of the appropriate tax treatment considering statutory, judicial and regulatory guidance in the context of the tax position. Because of the complexity of tax laws and regulations, interpretation can be difficult and subject to legal judgment given specific facts and circumstances. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions regarding the estimated amounts of accrued taxes.

     Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations being conducted by various taxing authorities, and newly enacted statutory, judicial and regulatory guidance that impact the relative merits and risks of tax positions. These changes, when they occur, affect accrued taxes and can be significant to the operating results of our Company. Refer to Note 14 of the Notes to Consolidated Financial Statements for additional information regarding income taxes.

11

Goodwill and Other Intangible Assets

     Goodwill represents the excess of costs over fair value of net assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually. Intangible assets with estimable useful lives are also amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

     Our Company performs an annual review of intangible assets for impairment to determine whether the carrying value of underlying assets may not be recoverable. Our Company measures recoverability based upon the future cash flows expected to result from the use of the underlying asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the underlying asset, Our Company recognizes an impairment loss. The impairment loss recognized represents the amount by which the carrying value of the underlying asset exceeds the fair value of the underlying asset. As such adjustments become necessary, they are reflected in the results of operations in the periods in which they become known.

Results of Operations

     Years Ended December 31, 2006 and 2005

     Our Company’s net income increased by $960,000 or 9.7% to $10,875,000 for the year ended December 31, 2006 compared to $9,915,000 for 2005. Net interest income on a fully taxable equivalent basis increased to $39,666,000 or 3.85% of average earning assets for 2006 compared to $34,549,000 or 3.50% of average earning assets for 2005. The provision for loan losses for 2006 was $1,326,000 compared to $1,322,000 for 2005. Net loans charged off for 2006 were $1,395,000 compared to $1,151,000 for 2005. Approximately $809,000 of the 2006 charge-offs is represented by various commercial loans, $474,000 is represented by real estate loans, and approximately $484,000 is represented by various consumer credits.

12

     Noninterest income and noninterest expense for the years ended December 31, 2006 and 2005 were as follows:

(Dollars expressed in thousands)

	Year Ended
	December 31,						Increase (decrease)
	2006			2005			Amount			%
Noninterest Income
Service charges on deposit accounts	$	5,730			4,245			1,485			35.0	%
Trust department income		799			810			(11	)		(1.4	)
Mortgage loan servicing fees, net		433			427			6			(1.4	)
Gain on sales of mortgage loans		432			676			(244	)		(36.1	)
Loss on sales and calls of debt securities		(18	)		(25	)		7			(28.0	)
Other		1,224			1,132			92			8.1
	$	8,600			7,265			1,335			18.4	%
Noninterest Expense
Salaries and employee benefits	$	17,019			13,920			3,099			22.3	%
Occupancy expense, net		1,995			1,600			395			24.7
Furniture and equipment expense		2,301			2,150			151			7.0
Legal, examination, and professional fees		1,431			1,420			11			0.8
Advertising and promotion		897			819			78			9.5
Postage, printing, and supplies		1,147			976			171			17.5
Processing expense		1,009			751			258			34.4
Amortization of intangible assets		1,033			807			226			28.0
Other		3,316			2,925			391			13.4
	$	30,148			25,368			4,780			18.8	%

     Noninterest income increased $1,335,000 or 18.4% to $8,600,000 for 2006 compared to $7,265,000 for 2005. Approximately $890,000 of the increase in noninterest income is attributed to the acquisition of Bank 10. Bank 10 contributed a full year of noninterest income during 2006 compared to eight months in 2005. Excluding noninterest income associated with the acquisition, service charge income increased $698,000 or 22.1%. Gain on sale of mortgage loans decreased $244,000 or 36.1% due to a decrease in volume of loans originated and sold to the secondary market from approximately $38,768,000 in 2005 to approximately $20,457,000 in 2006. Mortgage rates increased during 2006. As a result, there were fewer loans refinanced during 2006 than in 2005 resulting in the decreased volume of loans sold.

     Noninterest expense increased $4,780,000 or 18.8% to $30,148,000 for 2006 compared to $25,368,000 for 2005. Approximately $2,253,000 of the increase in noninterest expense is attributed to the acquisition of Bank 10. Bank 10 contributed a full year of noninterest income during 2006 compared to eight months in 2005. Excluding costs associated with the acquisition, salaries and benefits increased $1,683,000 or 14.3%, occupancy expense increased $213,000 or 16.7%, postage, printing and supplies increased $99,000 or 13.0%, processing expense increased $121,000 or 22.2% and other noninterest expense increased $295,000 or 11.4%. In addition to the increase in salaries and employee benefits represented by normal salary increases and additional hire, $218,000 of the increase reflects share-based compensation expense recorded as a result of the adoption of SFAS No. 123R, $254,000 reflects increased pension expense. The increase in occupancy expense primarily reflects additional costs associated with three new branch facilities. The increase in postage, printing and supplies reflects both higher postage rates and additional mail volume. The increase in processing expense reflects higher cost associated with various data processing systems utilized by our Company.

13

     Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 31.1% for 2006 compared to 30.4% for 2005. The increase in the effective tax rate is due to an decrease in state taxable income as a percentage of total income in the current year.

     Fourth Quarter Results for 2006

     Our Company’s net income of $2,396,000 for the fourth quarter ended December 31, 2006 declined $462,000, or $0.11 per diluted earnings per share compared to $2,858,000 for the third quarter ended September 30, 2006 and declined $285,000, or $0.07 per diluted earnings per share compared to net income of $2,681,000 for the fourth quarter ended December 31, 2005. Net interest income of $9,638,000 decreased $87,000 from third quarter 2006 net interest income of $9,725,000 due to a slight decrease in average interest earning assets. Fourth quarter 2006 net interest income was $290,000 higher than fourth quarter 2005 net interest income of $9,348,000 due to a both higher net interest margin and higher average earning assets during the current period.

     The fourth quarter 2006 $398,000 provision for loan losses was $98,000 higher than third quarter 2006’s provision of $300,000 and was based upon management’s determination of the loan loss reserve required to cover probable losses in the loan portfolio at year-end. The fourth quarter 2006 provision was $191,000 less than fourth quarter 2005’s provision of $589,000.

     Noninterest expense of $7,896,000 for fourth quarter 2006 increased $414,000 and $833,000, respectively; from third quarter 2006’s noninterest expense of $7,482,000 and fourth quarter 2005’s noninterest expense of $7,063,000.

     Our Company experienced higher expenses in the fourth quarter 2006 compared to third quarter 2006 in the areas of legal and professional fees, real estate loan expense, and donations. Legal and professional fees were $485,000 for fourth quarter 2006 compared to $334,000 for third quarter 2006. Real estate loan expense was $$119,000 for fourth quarter 2006 compared to $13,000 third quarter 2006. Donations were $180,000 for fourth quarter 2006 compared to $58,000 for third quarter 2006.

     Our Company paid approximately $93,000 in legal fees during the fourth quarter related to lawsuits involving two loan customers. Although there are no assurances, management anticipates that these lawsuits will be resolved in our Company’s favor. In addition approximately $45,000 was paid for an operational assessment at one of our subsidiary banks. Impairment losses of $93,000 were recognized on two parcels of other real estate owned. Donations were approximately $140,000 higher as our Company’s subsidiaries satisfied several charitable contribution commitments at year-end.

     Comparing fourth quarter 2006 to the same period in 2005, our Company had higher expenses in the areas of salaries and employee benefits, occupancy and equipment expense, and impairment losses on real estate owned. Salaries and benefits were $4,077,000 for fourth quarter 2006 compared to $3,700,000 for fourth quarter 2005. The $377,000 increase in salaries and benefits expense reflects $128,000 in higher pension expense and $56,000 of stock option compensation expense. The balance of the increase reflects higher salaries and benefits as a result of normal increases in salaries and benefits. Occupancy and equipment expense increased from $1,051,000 for fourth quarter 2005 to $1,241,000 for fourth quarter 2006. The $190,000 increase reflects higher depreciation and occupancy costs associated with our expanded branch network. Real estate loan expense increased from $13,000 in fourth quarter 2005 to $$119,000 in fourth quarter 2006. As mentioned in the prior paragraph our Company recognized $93,000 of impairment losses on two parcels of other real estate owned.

     Years Ended December 31, 2005 and 2004

     Our Company’s net income increased by $1,610,000 or 19.4% to $9,915,000 for the year ended December 31, 2005 compared to $8,305,000 for 2004. Net interest income on a fully taxable equivalent basis increased to $34,549,000 or 3.50% of average earning assets for 2005 compared to $28,367,000 or 3.43% of average earning assets for 2004. The provision for loan losses for 2005 was $1,322,000 compared to $942,000 for 2004. Net loans charged off for 2005 were $1,151,000 compared to $1,714,000 for 2004. Approximately $875,000 of the 2005 charge-offs is represented by two credits. One is an automobile dealership and one represents the loss on a foreclosure of a single family residence.

14

     Noninterest income and noninterest expense for the years ended December 31, 2005 and 2004 were as follows:

(Dollars expressed in thousands)

	Year Ended
	December 31,						Increase (decrease)
	2005			2004			Amount			%
Noninterest Income
Service charges on deposit accounts	$	4,245			3,041			1,204			39.6	%
Trust department income		810			694			116			16.7
Mortgage loan servicing fees, net		427			431			(4	)		0.9
Gain on sales of mortgage loans		676			797			(121	)		(15.2	)
Loss on sales and calls of debt securities		(25	)		(8	)		(17	)		212.5
Other		1,132			778			354			45.5
	$	7,265			5,733			1,532			26.7	%
Noninterest Expense
Salaries and employee benefits	$	13,920			11,227			2,693			24.0	%
Occupancy expense, net		1,600			1,143			457			40.0
Furniture and equipment expense		2,150			2,014			136			6.8
Legal, examination, and professional fees		1,420			1,108			312			28.2
Advertising and promotion		819			575			244			42.4
Postage, printing, and supplies		976			825			151			18.3
Processing expense		751			401			350			87.3
Amortization of intangible assets		807			215			592			275.3
Other		2,925			2,875			50			1.7
	$	25,368			20,383			4,985			24.5	%

     Noninterest income increased $1,532,000 or 26.7% to $7,265,000 for 2005 compared to $5,733,000 for 2004. $1,188,000 of the increase in noninterest income is attributed to the acquisition of Bank 10. Excluding noninterest income associated with the acquisition, service charge income increased $120,000 or 3.9%. Trust department income increased $116,000 or 16.7% due primarily to the collection of more transactional based distribution fees during 2005 compared to 2004. Gain on sale of mortgage loans decreased $121,000 or 15.2% due to a decrease in volume of loans originated and sold to the secondary market from approximately $48,989,000 in 2004 to approximately $38,768,000 in 2005. Mortgage rates were relatively stable during 2005 and 2004. As a result, there were fewer loans refinanced during 2005 and 2004 resulting in the decreased volume of loans sold.

     Noninterest expense increased $4,985,000 or 24.5% to $25,368,000 for 2005 compared to $20,383,000 for 2004. Approximately $4,333,000 of the increase in noninterest expense is attributed to the acquisition of Bank 10. Excluding costs associated with the acquisition, salaries and benefits increased $528,000 or 4.7%, occupancy expense increased $130,000 or 11.4%, advertising and promotion increased $103,000 or 17.9%, legal, examination, and professional fees increased $119,000 or 10.7%, processing expense increased $144,000 or 35.9% and other noninterest expense decreased $276,000 or 9.6%. The increase in salaries and benefits reflects normal salary increases, additional hires and higher health insurance premiums. The increase in occupancy expense primarily reflects additional costs associated with two new branch facilities. The increase in advertising and promotion expense reflects additional advertising and promotion in new market areas. The increase in legal, examination, and professional fees reflects additional costs incurred with the acquisition, higher audit costs associated with Sarbanes-Oxley compliance, internal audit and benefit consulting, and legal fees associated with various lawsuits our Company is involved in related to various problem credits. The increase in processing expense is related to costs

15

associated with switching to a new ATM network. The decrease in other noninterest expense reflects an IRS settlement of $318,000 paid in 2004 related to income that had been deferred for tax purposes but not book.

     Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 30.4% for 2005 compared to 31.4% for 2004. The reduction in the effective tax rate is due to an increase in tax-exempt income as a percentage of total income in the current year.

Net Interest Income

     Fully taxable equivalent net interest income increased $5,117,000 or 14.8% to $39,666,000 for 2006 compared to $34,549,000 for 2005, and followed a $6,182,000 or 21.8% increase from 2005 compared to 2004. The increases in net interest income in both 2006 and 2005 were the result of increases in both earning assets and the net interest margin.

16

     The following table presents average balance sheets, net interest income, average yields of earning assets, and average costs of interest bearing liabilities on a fully taxable equivalent basis for each of the years in the three-year period ended December 31, 2006.

(Dollars expressed in thousands)

	Year Ended December 31,
	2006								2005								2004
				Interest		Rate						Interest		Rate						Interest		Rate
	Average			Income/		Earned/			Average			Income/		Earned/			Average			Income/		Earned/
	Balance			Expense(1)		Paid(1)			Balance			Expense(1)		Paid(1)			Balance			Expense(1)		Paid(1)
ASSETS
Loans: (2) (4)	$	824,706		$	62,729		7.61	%	$	743,382		$	49,437		6.65	%	$	601,363		$	35,338		5.88	%
Investment in debt and equity securities: (3)
Government sponsored enterprises		129,437			5,645		4.36			156,553			4,963		3.17			161,449			3,921		2.43
State and municipal		53,465			2,894		5.41			45,442			2,505		5.51			31,359			1,893		6.04
Other		6,818			316		4.63			6,765			259		3.83			5,125			165		3.22
Federal funds sold		14,737			748		5.08			32,195			1,019		3.17			25,680			403		1.57
Interest bearing deposits in other financial institutions		2,260			100		4.42			1,511			39		2.58			2,734			34		1.24
Total interest earning assets		1,031,423			72,432		7.02			985,848			58,222		5.91			827,710			41,754		5.04
All other assets		124,036								106,528								76,930
Allowance for loan losses		(9,309	)							(8,630	)							(8,596	)
Total assets	$	1,146,150							$	1,083,746							$	896,044

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	Year Ended December 31,
	2006							2005							2004
			Interest		Rate					Interest		Rate					Interest		Rate
	Average		Income/		Earned/			Average		Income/		Earned/			Average		Income/		Earned/
	Balance		Expense(1)		Paid(1)			Balance		Expense(1)		Paid(1)			Balance		Expense(1)		Paid(1)
LIABILITIES AND STOCKHOLDERS’ EQUITY
NOW accounts	$	106,605	$	1,390		1.30	%	$	125,303	$	1,666		1.33	%	$	115,277	$	794		0.69	%
Savings		52,137		298		0.57			55,826		319		0.57			55,743		319		0.57
Money market		157,643		5,186		3.29			145,004		3,618		2.50			88,352		1,265		1.43
Time deposits of $100,000 and over		122,594		5,251		4.28			105,661		3,330		3.15			84,983		1,929		2.27
Other time deposits		314,966		12,466		3.96			292,721		8,741		2.99			247,541		5,931		2.40
Total time deposits		753,945		24,591		3.26			724,515		17,674		2.44			591,896		10,238		1.73
Federal funds purchased and securities sold under agreements to repurchase		42,350		1,811		4.28			46,265		1,256		2.71			59,293		689		1.16
Interest — bearing demand notes to U.S. Treasury		704		31		4.40			696		20		2.87			679		7		1.03
Subordinated notes		49,486		3,528		7.13			44,614		2,747		6.16			20,352		886		4.35
Other borrowed money		56,757		2,805		4.94			48,430		1,976		4.08			35,502		1,567		4.41
Total interest — bearing liabilities		903,242		32,766		3.63			864,520		23,673		2.74			707,722		13,387		1.89
Demand deposits		132,912							117,840							92,065
Other liabilities		9,175							6,723							5,632
Total liabilities		1,045,329							989,083							805,419
Stockholders’ equity		100,821							94,663							90,625
Total liabilities and stockholders’ equity	$	1,146,150						$	1,083,746						$	896,044
Net interest income			$	39,666						$	34,549						$	28,367
Net interest margin						3.85	%						3.50	%						3.43	%

(1)	Interest income and yields are presented on a fully taxable equivalent basis using the Federal statutory income tax rate of 35%, net of nondeductible interest expense. Such adjustments totaled $1,009,000, $882,000 and $663,000 for the years ended December 31, 2006, 2005 and 2004, respectively.
(2)	Nonaccruing loans are included in the average amounts outstanding.
(3)	Average balances based on amortized cost.
(4)	Fees on loans are included in interest income.

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     The following table presents, on a fully taxable equivalent basis, an analysis of changes in net interest income resulting from changes in average volumes of earning assets and interest bearing liabilities and average rates earned and paid. The change in interest due to the combined rate/volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of change in each.

(Dollars expressed in thousands)

	Year Ended									Year Ended
	December 31, 2006									December 31, 2005
	Compared to									Compared to
	December 31, 2005									December 31, 2004
	Total			Change due to						Total		Change due to
	Change			Volume			Rate			Change		Volume			Rate
Interest income on a fully taxable equivalent basis:
Loans: (1) (3)	$	13,292			5,745			7,547		$	14,099		9,055			5,044
Investment in debt and equity securities:
Government sponsored entities		682			(962	)		1,644			1,042		(122	)		1,164
State and municipal(2)		389			435			(46	)		612		788			(176	)
Other		57			2			55			94		59			35
Federal funds sold		(271	)		(711	)		440			616		123			493
Interest bearing deposits in other financial Institutions		61			25			36			5		(20	)		25
Total interest income		14,210			4,534			9,676			16,468		9,883			6,585

Continued on next page

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	Year Ended									Year Ended
	December 31, 2006									December 31, 2005
	Compared to									Compared to
	December 31, 2005									December 31, 2004
	Total			Change due to						Total		Change due to
	Change			Volume			Rate			Change		Volume			Rate
Interest expense:
NOW accounts		(276	)		(245	)		(31	)		872		74			798
Savings		(21	)		(21	)		—			—		—			—
Money market		1,568			336			1,232			2,353		1,090			1,263
Time deposits of $100,000 and over		1,921			593			1,328			1,401		539			862
Other time Deposits		3,725			705			3,020			2,810		1,197			1,613
Federal funds purchased and securities sold under agreements to repurchase		555			(114	)		669			567		(179	)		746
Interest-bearing demand notes to U.S. Treasury		11			—			11			13		—			13
Subordinated notes		781			319			462			1,861		1,381			480
Other borrowed money		829			372			457			409		535			(126	)
Total interest expense		9,093			1,945			7,148			10,286		4,637			5,649
Net interest income on a fully taxable equivalent basis	$	5,117			2,589			2,528		$	6,182		5,246			936

(1)	Nonaccruing loans are included in the average amounts outstanding.
(2)	Interest income and yields are presented on a fully taxable equivalent basis using the federal statutory income tax rate of 35%, net of nondeductible interest expense. Such adjustments totaled $1,009,000, $882,000 and $663,000 for the years ended December 31, 2006, 2005 and 2004, respectively.
(3)	Fees on loans are included in interest income.

Lending and Credit Management

     Interest earned on the loan portfolio is a primary source of interest income for our Company. Net loans represented 70.3% of total assets as of December 31, 2006. Total loans increased steadily from December 31, 2002 through December 31, 2006 due to stable local economies and reasonable interest rates as well as an expanded branch network and the acquisition of Bank 10.

     Lending activities are conducted pursuant to written loan policies approved by our Banks’ Boards of Directors. Larger credits are reviewed by our Banks’ Discount Committees. These committees are comprised of members of senior management.

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     The following table shows the composition of the loan portfolio by major category and each category as a percentage of the total portfolio as of the dates indicated.

(Dollars expressed in thousands)

	December 31,
	2006					2005					2004					2003					2002
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Commercial, financial and agricultural	$	145,697		17.9	%	$	154,868		19.0	%	$	141,151		22.2	%	$	130,931		22.4	%	$	97,917		20.1	%
Real estate — Construction		150,891		18.6			139,316		17.1			65,075		10.2			46,672		8.0			41,437		8.5
Real estate — Mortgage		478,854		59.0			480,531		59.1			392,656		61.7			364,620		62.5			300,252		61.7
Installment loans to individuals		36,870		4.5			38,820		4.8			37,755		5.9			41,696		7.1			46,958		9.7
Total loans	$	812,312		100.0	%	$	813,535		100.0	%	$	636,637		100.0	%	$	583,919		100.0	%	$	486,564		100.0	%

     The $9,171,000 decrease in commercial loans between December 31, 2005 and December 31, 2006 reflects the payoff of two loans for approximately $3,297,000 that were classified as impaired at December 31,2005. Our Company recognized an additional charge-off of $315,000 on one of those credits during 2006. An additional $1,862,000 represents the payoff of one credit that moved to the commercial finance market. $3,711,000 represents reductions in lines of credits of various other borrowers.

The $11,575,000 increase in real estate construction loans is primarily represented by two large commercial construction projects in the Kansas City area.

     Loans at December 31, 2006 mature as follows:

(Dollars expressed in thousands)

			Over One Year
			Through Five
			Years				Over Five Years
	One Year		Fixed		Floating		Fixed		Floating
	Or Less		Rate		Rate		Rate		Rate		Total
Commercial, financial, and agricultural	$	74,644	$	31,841	$	35,512	$	250	$	3,450	$	145,697
Real estate — construction		148,221		2,647		7		—		16		150,891
Real estate — mortgage		108,036		232,293		64,054		33,450		41,021		478,854
Installment loans to individuals		16,123		20,222		207		267		51		36,870
Total loans	$	347,024	$	287,003	$	99,780	$	33,967	$	44,538	$	812,312

     Our Company generally does not retain long-term fixed rate residential mortgage loans in its portfolio. Fixed rate loans conforming to standards required by the secondary market are offered to qualified borrowers, but are not funded until our Company has a non-recourse purchase commitment from the secondary market at a predetermined price. At December 31, 2006 our Company was servicing approximately $215,000,000 of loans sold to the secondary market.

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     Mortgage loans retained in our Company’s portfolio generally include provisions for rate adjustments at one to three year intervals. Commercial loans and real estate construction loans generally have maturities of less than one year. Installment loans to individuals are primarily fixed rate loans with maturities from one to five years.

     The provision for loan losses is based on management’s evaluation of the loan portfolio in light of national and local economic conditions, changes in the composition and volume of the loan portfolio, changes in the volume of past due and nonaccrual loans, value of underlying collateral and other relevant factors. The allowance for loan losses which is reported as a deduction from loans is available for loan charge-offs. This allowance is increased by the provision charged to expense and is reduced by loan charge-offs net of loan recoveries.

     Management formally reviews all loans in excess of certain dollar amounts (periodically established) at least annually. In addition, on a monthly basis, management reviews past due, “classified”, and “watch list” loans in order to classify or reclassify loans as “loans requiring attention,” “substandard,” “doubtful,” or “loss”. During that review, management also determines what loans should be considered to be “impaired”. Management follows the guidance provided in Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan, (SFAS 114) in identifying and measuring loan impairment. If management determines that it is probable that all amounts due on a loan will not be collected under the original terms of the loan agreement the loan is considered to be impaired. Once a loan has been identified as impaired management generally measures impairment based upon the fair value of the underlying collateral. Management believes, but there can be no assurance, that these procedures keep management informed of possible problem loans. Based upon these procedures, both the allowance and provision for loan losses are adjusted to maintain the allowance at a level considered adequate by management for probable losses inherent in the loan portfolio.

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     The following table summarizes loan loss experience for the periods indicated:

(Dollars expressed in thousands)

	Year Ended December 31,
	2006			2005		2004		2003		2002
Analysis of allowance for loan losses:
Balance beginning of year	$	9,085			7,496		8,267		7,121		6,673
Allowance for loan losses of acquired companies at date of acquisitions		—			1,418		—		212		—
Charge-offs:
Commercial, financial, and agricultural		809			589		1,596		58		146
Real estate — construction		84			185		—		—		19
Real estate — mortgage		474			286		26		86		22
Installment loans to individuals		484			261		236		340		581
Total charge-offs		1,851			1,321		1,858		484		768
Recoveries:
Commercial, financial, and agricultural		206			40		18		164		115
Real estate — construction		13			—		—		—		—
Real estate — mortgage		91			28		—		—		1
Installment loans to individuals		145			102		127		162		164
Total recoveries		455			170		145		326		280
Net charge-offs		1,396			1,151		1,713		158		488
Provision for loan losses		1,326			1,322		942		1,092		936
Balance at end of year	$	9,015			9,085		7,496		8,267		7,121
Loans outstanding:
Average	$	824,706			743,382		601,363		539,912		475,366
End of period		812,312			813,535		636,637		583,919		486,564
Allowance for loan losses to loans outstanding:
Average		1.09	%		1.22		1.25		1.53		1.50
End of period		1.11			1.12		1.18		1.42		1.46
Net charge-offs to average loans outstanding		0.17			0.15		0.29		0.03		0.10

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	Year Ended December 31,
	2006			2005			2004		2003		2002
Allocation of allowance for loan losses at end of period:
Commercial, financial, and agricultural	$	3,114			2,687			3,700		3,979		2,627
Real estate — construction		755			764			288		201		168
Real estate — mortgage		3,526			4,138			2,563		2,538		2,208
Installment loans to individuals		529			473			429		561		542
Unallocated		1,091			1,023			516		988		1,576
Total	$	9,015			9,085			7,496		8,267		7,121
Percent of categories to total loans:
Commercial, financial, and agricultural		17.9	%		19.0	%		22.2		22.4		20.1
Real estate — construction		18.6			17.1			10.2		8.0		8.5
Real estate — mortgage		59.0			59.1			61.7		62.5		61.7
Installment loans to individuals		4.5			4.8			5.9		7.1		9.7
Total		100.0			100.0			100.0		100.0		100.0

     Nonperforming loans, defined as loans on nonaccrual status, loans 90 days or more past due, and restructured loans totaled $5,066,000 or 0.62% of total loans at December 31, 2006 compared to $9,063,000 or 1.11% of total loans at December 31, 2005. The following table summarizes our Company’s nonperforming assets at the dates indicated:

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(Dollars expressed in thousands)

	December 31,
	2006			2005			2004		2003		2002
Nonaccrual loans:
Commercial, financial, and agricultural	$	2,495			5,705			4,213		1,520		1,179
Real estate — construction		1,657			1,760			—		59		69
Real estate — mortgage		644			1,090			1,246		1,270		1,152
Installment loans to individuals		73			56			30		55		81
Total nonaccrual loans		4,869			8,611			5,489		2,904		2,481
Loans contractually past — due 90 days or more and still accruing:
Commercial, financial, and agricultural		5			238			12		66		85
Real estate — construction		—			—			—		—		169
Real estate — mortgage		170			187			591		4		254
Installment loans to individuals		22			14			—		40		20
Total loans contractually past -due 90 days or more and still accruing		197			439			603		110		528
Restructured loans		—			—			—		—		—
Total nonperforming loans		5,066			9,050			6,092		3,014		3,009
Other real estate		2,720			1,568			30		47		116
Repossessions		15			—			42		73		115
Total nonperforming assets	$	7,801			10,618			6,164		3,134		3,240
Loans	$	812,313			813,535			636,637		583,919		486,564
Allowance for loan losses to loans		1.11	%		1.12	%		1.18		1.42		1.46
Nonperforming loans to loans		0.62			1.11			0.96		0.52		0.62
Allowance for loan losses to nonperforming loans		177.95			100.39			123.05		274.29		236.66
Nonperforming assets to loans and foreclosed assets		0.96			1.30			0.97		0.54		0.67

As can be seen from the preceding tables, our Company’s total loans, nonperforming loans and allowance for loan losses have decreased in 2006 following increases in 2005 and 2004.

     The $3,742,000 decrease in nonaccrual loans is primarily represented by two large commercial credits. One credit of approximately $1,811,000 represented an auto dealership that was sold during 2006 and the loan repaid with no additional loss recognized. The other credit of approximately $1,569,000 represented a drywall contractor. Our Company recognized a charge-off of approximately $315,000 during 2006 upon liquidation against a loan loss reserve allocation of $500,000.

     It is our Company’s policy to discontinue the accrual of interest income on loans when the full collection of principal or interest is in doubt, or when the payment of principal or interest has become contractually 90 days past due unless the obligation is both well secured and in the process of collection. Interest on year-end nonaccrual loans, which would have been recorded under the original terms of the loans, was approximately $896,000, $767,000 and $547,000 for the years ended December 31, 2006, 2005 and 2004, respectively. Approximately $63,000, $253,000 and $134,000 was actually recorded as interest income on such loans for the year ended December 31, 2006, 2005 and 2004, respectively.

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     A loan is considered impaired when it is probable a creditor will be unable to collect all amounts due — both principal and interest — according to the contractual terms of the loan agreement. In addition to nonaccrual loans at December 31, 2006 included in the table above, which were considered impaired, management has identified additional loans totaling approximately $9,187,000 which is not included in the nonaccrual table above but is considered by management to be impaired compared to $2,369,000 at December 31, 2005. The $6,818,000 increase in other impaired loans is represented by two credits. One credit is a retail lumberyard and the second credit is a cabinet manufacturer. Both credits were determined to be impaired during the fourth quarter of 2006.

     Once a loan has been identified as impaired (as defined by paragraph 8 of SFAS 114), Accounting by Creditors for Impairment of a Loan, management generally measures impairment based upon the fair value of the underlying collateral. In general, market prices for loans in our portfolio are not available, and we have found the fair value of the underlying collateral to be more readily available and reliable than discounting expected future cash flows to be received. Once a fair value of collateral has been determined and the impairment amount calculated, a specific reserve allocation is made. At December 31, 2006, $3,287,000 of our Company’s allowance for loan losses was allocated to impaired loans totaling approximately $14,056,000.

     As of December 31, 2006 and 2005 approximately $7,102,000 and $16,387,000, respectively, of loans not included in the nonaccrual table above or identified by management as being “impaired” were classified by management as having more than normal risk which raised doubts as to the ability of the borrower to comply with present loan repayment terms. The $9,285,000 decrease in classified loans is primarily represented by a large commercial real estate loan representing a condominium development project and a large commercial credit representing a retail lumberyard. The commercial real estate loan has reduced its outstanding balance by $4,886,000 during the current year. The loan is well secured and is performing in accordance with the terms of the loan agreement. The commercial credit is included in our impaired loan totals at year-end 2006. In addition to the classified list, our Company also maintains an internal loan watch list of loans which for various reasons, not all related to credit quality, management is monitoring more closely than the average loan in the portfolio. Loans may be added to this list for reasons which are temporary and correctable, such as the absence of current financial statements of the borrower, or a deficiency in loan documentation. Other loans are added as soon as any problem is detected which might affect the borrower’s ability to meet the terms of the loan. This could be initiated by the delinquency of a scheduled loan payment, a deterioration in the borrower’s financial condition identified in a review of periodic financial statements, a decrease in the value of the collateral securing the loan, or a change in the economic environment within which the borrower operates. Once a loan is placed on our Company’s watch list, its condition is monitored closely. Any further deterioration in the condition of the loan is evaluated to determine if the loan should be assigned to a higher risk category.

     The allowance for loan losses is available to absorb probable loan losses regardless of the category of loan to be charged off. The allowance for loan losses consists of three components: asset-specific reserves, reserves based on expected loss estimates, and unallocated reserves.

     The asset-specific component applies to loans evaluated individually for impairment and is based on management’s best estimate of proceeds from liquidating collateral. The actual timing and amount of repayments and the ultimate realizable value of the collateral may differ from management’s estimate.

     The expected loss component is generally determined by applying percentages to pools of loans by asset type. These pre-established percentages are based upon standard bank regulatory classification percentages as well as average historical loss percentages. These expected loss estimates are sensitive to changes in delinquency status, realizable value of collateral, and other risk factors.

     The unallocated portion of the allowance is based on management’s evaluation of conditions that are not directly reflected in the determination of the asset-specific component and the expected loss component discussed above. The evaluation of inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they may not be identified with specific problem credits or portfolio segments. Conditions evaluated in connection with the unallocated portion of the allowance include general economic and business conditions affecting our key lending areas, credit quality trends (including trends in substandard loans expected to result from existing conditions), collateral values, specific industry conditions within portfolio segments, bank regulatory examination results, and findings of our internal loan review department.

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     The underlying assumptions, estimates and assessments used by management to determine these components are continually evaluated and updated to reflect management’s current view of overall economic conditions and relevant factors impacting credit quality and inherent losses. Changes in such estimates could significantly impact the allowance and provision for credit losses. Our Company could experience credit losses that are different from the current estimates made by management.

     At December 31, 2006, management allocated $8,012,000 of the $9,015,000 total allowance for loan losses to specific loans and loan categories and $1,003,000 was unallocated. Considering the size of several of our Company’s lending relationships and the loan portfolio in total, management believes that the December 31, 2006 allowance for loan losses is adequate.

     Our Company does not lend funds for the type of transactions defined as “highly leveraged” by bank regulatory authorities or for foreign loans. Additionally, our Company does not have any concentrations of loans exceeding 10% of total loans which are not otherwise disclosed in the loan portfolio composition table. Our Company does not have any interest-earning assets which would have been included in nonaccrual, past due, or restructured loans if such assets were loans.

Investment Portfolio

     Our Company classifies its debt and equity securities into one of the following two categories:

     Held-to-Maturity — includes investments in debt securities which our Company has the positive intent and ability to hold until maturity.

     Available-for-Sale — includes investments in debt and equity securities not classified as held to maturity or trading (i.e., investments which our Company has no present plans to sell in the near-term but may be sold in the future under different circumstances).

     Debt securities classified as held-to-maturity are carried at amortized cost, while debt and equity securities classified as trading or available-for-sale are carried at estimated market value. Unrealized holding gains and losses from available-for-sale securities are excluded from earnings and reported, net of applicable taxes, as a separate component of stockholders’ equity until realized.

     Our Company does not engage in trading activities and accordingly does not have any debt or equity securities classified as trading securities. Historically our Company’s practice had been to purchase and hold debt instruments until maturity unless special circumstances exist. However, since the investment portfolio’s major function is to provide liquidity and to balance our Company’s interest rate sensitivity position, certain debt securities along with stock of the Federal Home Loan Bank and the Federal Reserve Bank are classified as available-for-sale.

     At December 31, 2006, debt and equity securities classified as available-for-sale represented 16.6% of total consolidated assets. Future levels of held-to-maturity and available-for-sale investment securities can be expected to vary depending upon liquidity and interest sensitivity needs as well as other factors.

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The following table presents the composition of the investment portfolio by major category.

(Dollars expressed in thousands)

	2006		2005		2004
	Available -		Available -		Available -
	for-Sale		for-Sale		for-Sale
U.S. Treasuries	$	1,068	$	—	$	—
Government sponsored enterprises		121,769		113,005		128,381
Asset-backed securities		5,068		6,250		4,470
Obligations of states and political subdivisions		55,661		53,426		33,321
Other debt securities		—		708		990
Total debt securities		183,566		173,389		167,162
Federal Home Loan Bank of Des Moines Stock		3,808		3,904		3,021
Federal Reserve Bank Stock		752		752		751
Midwest Independent Bank Stock		151		151		—
Federal Agricultural Mortgage Corporation		10		10		10
Other equity securities		1,486		1,486		774
Total investments	$	189,773	$	179,692	$	171,718

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     As of December 31, 2006, the maturity of debt securities in the investment portfolio was as follows:

(Dollars expressed in thousands)

				Over One			Over Five						Weighted
	One Year			Through			Through			Over			Average
	Or Less			Five Years			Ten Years			Ten Years			Yield (1)
Available-for-Sale
U.S. Treasuries	$	1,068		$	—		$	—		$	—			4.81	%
Government sponsored enterprises		27,264			87,350			6,911			244			4.65
Asset-backed (2)		1,020			3,837			211			—			4.36
States and political subdivisions (3)		4,051			16,608			22,768			12,234			5.22
Total available-for-sale debt securities	$	33,403		$	107,795		$	29,890		$	12,478			4.86	%
Weighted average yield (1)		4.59	%		4.76	%		5.32	%		5.23	%

(1)	Weighted average yield is based on amortized cost.
(2)	Asset-backed securities have been included using historic repayment speeds. Repayment speeds were determined from actual portfolio experience during the twelve months ended December 31, 2006 calculated separately for each mortgage-backed security. These repayment speeds are not necessarily indicative of future repayment speeds and are subject to change based on changing mortgage interest rates.
(3)	Rates on obligations of states and political subdivisions have been adjusted to fully taxable equivalent rates using the statutory Federal income tax rate of 35%.

     At December 31, 2006, $12,539,000 of debt securities classified as available-for-sale in the table above had variable rate provisions with adjustment periods ranging from one week to twelve months.

Interest Sensitivity and Liquidity

     The concept of interest sensitivity attempts to gauge exposure of our Company’s net interest income to adverse changes in market-driven interest rates by measuring the amount of interest sensitive assets and interest sensitive liabilities maturing or subject to repricing within a specified time period. Liquidity represents the ability of our Company to meet the day-to-day withdrawal demands of its deposit customers balanced against the fact that those deposits are invested in assets with varying maturities. Our Company must also be prepared to fulfill the needs of credit customers for loans with various types of maturities and other financing arrangements. Our Company monitors its interest sensitivity and liquidity through the use of static gap reports which measure the difference between assets and liabilities maturing or repricing within specified time periods.

     At December 31, 2006, Exchange National Bank, Citizens Union State Bank, Osage Valley Bank and Bank 10 each independently monitored their static gap reports with their goals being to limit each bank’s potential change in net interest income due to changes in interest rates to acceptable limits. Interest rate changes used by the individual banks ranged from 2.00% to 3.00% and the resulting net interest income changes ranged from approximately 6.7% to 15.8%.

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     The following table presents our Company’s consolidated static gap position at December 31, 2006 for the next twelve months and the potential impact on net interest income for 2006 of an immediate 2% increase in interest rates.

(Dollars expressed in thousands)

	Cumulative
	One Through
	Twelve Month
	Period
Assets maturing or repricing within one year	$	581,589
Liabilities maturing or repricing within one year		764,020
Gap	$	(182,431	)
Ratio of assets maturing or repricing to liabilities maturing or repricing		76	%
Impact on net interest income of an immediate 2.00% increase in interest rates	$	(3,649	)
Net interest income for 2006	$	38,657
Percentage change in 2006 net interest income due to an immediate 2.00% increase in interest rates		(9.44	)%

In addition to managing interest sensitivity and liquidity through the use of gap reports, the Banks have provided for emergency liquidity situations with informal agreements with correspondent banks which permit it to borrow up to $50,000,000 in federal funds on an unsecured basis. Exchange National Bank, Citizens Union State Bank, Osage Valley Bank and Bank 10 are members of the Federal Home Loan Bank of Des Moines which may be used to provide a funding source for fixed rate real estate loans and/or additional liquidity. Finally, our Company has $20,000,000 line of credit with a correspondent bank that had no balance outstanding at December 31, 2006.

     At December 31, 2006 and 2005, our Company had certificates and other time deposits in denominations of $100,000 or more which mature as follows:

(Dollars expressed in thousands)

	December 31,
	2006		2005
Three months or less	$	35,420	$	35,501
Over three months through six months		35,629		23,864
Over six months through twelve months		51,033		25,443
Over twelve months		13,804		29,801
	$	135,886	$	114,609

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     Securities sold under agreements to repurchase generally mature the next business day; however, certain agreements with local political subdivisions and select businesses are fixed rate agreements with original maturities generally ranging from 30 to 120 days. Information relating to securities sold under agreements to repurchase is as follows:

(Dollars expressed in thousands)

	At End of Period					For the Period Ending
			Weighted							Weighted
			Average			Maximum				Average
			Interest			Month-end		Average		Interest
	Balance		Rate			Balance		Balance		Rate
December 31, 2006	$	27,320		4.35	%	$	56,027	$	41,309		4.25	%
December 31, 2005		33,293		3.30			63,482		45,832		2.70
December 31, 2004		34,515		1.73			85,163		57,950		1.15

Liquidity

     The role of liquidity management is to ensure funds are available to meet depositors’ withdrawal and borrowers’ credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in the supply of those funds. Liquidity to meet the demands is provided by maturing assets, short-term liquid assets that can be converted to cash and the ability to attract funds from external sources, principally depositors. Due to the nature of services offered by our Company, management prefers to focus on transaction accounts and full service relationships with customers. Management believes it has the ability to increase deposits at any time by offering rates slightly higher than the market rate.

     Our Banks’ Asset/Liability Committees (ALCO), primarily made up of senior management, have direct oversight responsibility for our Company’s liquidity position and profile. A combination of daily, weekly and monthly reports provided to management detail the following: internal liquidity metrics, composition and level of the liquid asset portfolio, timing differences in short-term cash flow obligations, available pricing and market access to the financial markets for capital and exposure to contingent draws on our Company’s liquidity.

     Our Company has a number of sources of funds to meet liquidity needs on a daily basis. The deposit base, consisting of consumer and commercial deposits and large dollar denomination ($100,000 and over) certificates of deposit, is a source of funds. Our Company has an insignificant amount of deposits on which the rate paid exceeded the market rate by more that 50 basis points when the account was established.

     Other sources of funds available to meet daily needs include the sales of securities under agreements to repurchase and funds made available under a treasury tax and loan note agreement with the federal government. Also, the Banks are members of the Federal Home Loan Bank of Des Moines (FHLB). As members of the FHLB, the Banks have access to credit products of the FHLB. At December 31, 2006, the amounts of available credit from the FHLB totaled $72,506,000. As of December 31, 2006, the Banks had $52,180,000 in outstanding borrowings with the FHLB. The Banks have federal funds purchased lines with correspondent banks totaling $50,000,000. Finally, our Company has $20,000,000 line of credit with a correspondent bank that had no balance outstanding at December 31, 2006.

     Our Company’s liquidity depends primarily on the dividends paid to it as the sole shareholder of our subsidiary Banks. As discussed in Note 3 to our Company’s consolidated financial statements, the Banks may pay up to $11,242,000 in dividends to our Company without regulatory approval subject to the ongoing capital requirements of the Banks.

     Over the normal course of business, our Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through our Company’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of our Company’s liquidity. In the section entitled, “Other Off-Balance Sheet

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Activities”, we disclose that our Company has $130,260,000 in unused loan commitments as of December 31, 2006. While this commitment level would be difficult to fund given our Company’s current liquidity resources, we know that the nature of these commitments are such that the likelihood of such a funding demand is very low.

     For the years ended December 31, 2006, 2005 and 2004, net cash provided by operating activities was $16,637,000 in 2006 versus $16,892,000 in 2005 and $10,329,000 in 2004. The variances in net cash provided by operating activities between these years is primarily the result of differences in the timing of tax payments.

     Net cash used in investing activities was $14,565,000 in 2006 versus $61,449,000 in 2005, and $45,085,000 in 2004. The decrease in cash used in investing activities in 2006 versus 2005 is primarily due to a smaller increase in the loan portfolio as well as the purchase of Bank 10 in 2005. The increase in cash used in investing activities in 2005 versus 2004 is primarily due to the purchase of Bank 10.

     Net cash provided by financing activities was $3,198,000 in 2006 versus $26,580,000 in 2005, and $43,419,000 in 2004. The reduction in cash provided by financing activities in 2006 versus 2005 is primarily the result of the issuance of additional subordinated note of $23,712,000 in 2005. The reduction in cash provided by financing activities in 2005 versus 2004 is primarily due to a smaller increase in deposits.

Other Off-Balance Sheet Activities

     In the normal course of business, our Company is party to activities that contain credit, market and operational risk that are not reflected in whole or in part in our Company’s consolidated financial statements. Such activities include traditional off-balance sheet credit related financial instruments.

     Our Company provides customers with off-balance sheet credit support through loan commitments and standby letters of credit. Summarized credit-related financial instruments, including both commitments to extend credit and letters of credit at December 31, 2006 are as follows:

(Dollars expressed in thousands)

	Amount of Commitment Expiration per Period
			Less than		1-3		3-5		Over 5
	Total		1 Year		Years		Years		Years
Unused loan commitments	$	130,261	$	89,153	$	16,717	$	18,582	$	5,809
Standby letters of credit		3,997		2,985		789		—		223

     Since many of the unused commitments are expected to expire or be only partially used, the total amount of commitments in the preceding table does not necessarily represent future cash requirements.

Contractual Cash Obligations

     The required payments of time deposits and other borrowed money at December 31, 2006 are as follows:

(Dollars expressed in thousands)

	Payments due by Period
			Less than		1-3		3-5		Over 5
	Total		1 Year		Years		Years		Years
Time deposits	$	452,105	$	378,732	$	61,053	$	12,161	$	159
Other borrowed money		47,368		19,441		19,433		7,075		1,419

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Capital

     Risk-based capital guidelines for financial institutions were adopted by regulatory authorities effective January 1, 1991. These guidelines are designed to relate regulatory capital requirements to the risk profiles of the specific institutions and to provide more uniform requirements among the various regulators. Our Company is required to maintain a minimum risk-based capital to risk-weighted assets ratio of 8.00%, with at least 4.00% being “Tier 1” capital. In addition, a minimum leverage ratio, Tier 1 capital to adjusted total assets, of 3.00% must be maintained. However, for all but the most highly rated financial institutions, a leverage ratio of 3.00% plus an additional cushion of 100 to 200 basis points is expected.

     Detail concerning our Company’s capital ratios at December 31, 2006 is included in Note 3 of our Company’s consolidated financial statements included elsewhere in this report.

Recent Accounting Pronouncements

     In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 156). SFAS No. 156 requires all separately recognized servicing assets and liabilities to be initially measured at fair value. In addition, entities are permitted to choose to either subsequently measure servicing rights at fair value and report changes in fair value in earnings, or amortize servicing rights in proportion to and over the estimated net servicing income or loss and assess the rights for impairment. Beginning with fiscal year in which an entity adopts SFAS No. 156, it may elect to subsequently measure a class of servicing assets and liabilities at fair value. Post adoption, an entity may make this election as of the beginning of any fiscal year. An entity that elects to subsequently measure a class of servicing assets and liabilities at fair value should apply that election to all new and existing recognized servicing assets and liabilities within that class. The effect of remeasuring an existing class of servicing assets and liabilities at fair value is to be reported as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. SFAS No. 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006. The statement also requires additional disclosures. Our Company has adopted SFAS No. 156 as of January 1, 2007 and elected to use the amortized cost method of accounting for financial assets. As a result, the adoption of SFAS No. 156 is not expected to have a material impact on our Company’s financial position or results of operations.

     In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, “Accounting for Uncertainty in Income Taxes”, an Interpretation of FAS No. 109, Accounting for Income Taxes (FIN 48). The Interpretation defines the threshold for recognizing the financial impact of uncertain tax provisions in accordance with FAS 109. An enterprise would be required to recognize, in its financial statements, the best estimate of the impact of a tax position only if that position is “more-likely-than-not” of being sustained on audit based solely on the technical merits of the position on the reporting date. In evaluating whether the probable recognition threshold has been met, the Interpretation would require the presumption that the tax position will be evaluated during an audit by taxing authorities. The term “more-likely-than-not” is defined as a likelihood of more than 50 percent. Individual tax positions that fail to meet the recognition threshold will generally result in either (a) a reduction in the deferred tax asset or an increase in a deferred tax liability or (b) an increase in a liability for income taxes payable or the reduction of an income tax refund receivable. The impact may also include both (a) and (b). This Interpretation also provides guidance on disclosure, accrual of interest and penalties, accounting in interim periods, and transition. The Interpretation is effective for reporting periods after December 15, 2006. Our Company has completed the initial evaluation of the impact of the January 1, 2007 adoption of FIN 48 and determined that such adoption is not expected to have a material impact on our Company’s financial position or results of operations.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but rather, it provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value. The changes to current practice resulting from the application of this statement relates to the definition of fair value, the methods used to estimate fair value, and the requirements for expanded disclosures about estimates of fair value. SFAS No. 157 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Our Company is currently evaluating the impact

33

of the adoption of SFAS No. 157; however, it is not expected to have a material impact on our Company’s financial position or results of operations.

     In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS No. 158). SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. SFAS No. 158 became effective for our Company for the fiscal year ended December 31, 2006. The impact on our Company’s financial statements at December 31, 2006 from the adoption of SFAS No. 158 is included in Note 15 to the consolidated financial statements included within this report.

     In September, 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB No. 108). SAB No. 108 requires an entity to consider the effects of prior year misstatements when quantifying misstatements in current year financial statements for purposes of determining materiality. SAB No. 108 is effective for an entity’s first interim period of the first fiscal year ending after November 15, 2006. Adoption of SAB No. 108 has not resulted in a material impact on our Company’s financial position or results of operations.

     In September 2006, the Emerging Issues Task Force Issue 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, was ratified. This EITF Issue addresses accounting for separate agreements which split life insurance policy benefits between an employer and employee. The Issue requires the employer to recognize a liability for future benefits payable to the employee under these agreements. The effects of applying this Issue must be recognized through either a change in accounting principle through an adjustment to equity or through the retrospective application to all prior periods. For calendar year companies such as our Company, the Issue is effective beginning January 1, 2008. Early adoption is permitted as of January 1, 2007. Our Company does not expect the adoption of the Issue to have a material effect on our Company’s consolidated financial statements.

Effects of Inflation

     The effects of inflation on financial institutions are different from the effects on other commercial enterprises since financial institutions make few significant capital or inventory expenditures which are directly affected by changing prices. Because bank assets and liabilities are virtually all monetary in nature, inflation does not affect a financial institution as much as do changes in interest rates. The general level of inflation does underlie the general level of most interest rates, but interest rates do not increase at the rate of inflation as do prices of goods and services. Rather, interest rates react more to changes in the expected rate of inflation and to changes in monetary and fiscal policy.

     Inflation does have an impact on the growth of total assets in the banking industry, often resulting in a need to increase capital at higher than normal rates to maintain an appropriate capital to asset ratio. In the opinion of management, inflation did not have a significant effect on our Company’s operations for the three years ended December 31, 2006.

Quantitative and Qualitative Disclosures About Market Risk

     Our Company’s exposure to market risk is reviewed on a regular basis by our 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 our Banks’ management include the standard gap report subject to different rate shock scenarios. At December 31, 2006, the rate shock scenario models indicated that annual net interest income could change by as much as 9.44% should interest rates rise or fall within

34

200 basis points from their current level over a one year period. However there are no assurances that the change will not be more or less than this estimate. Management further believes this is an acceptable level of risk.

35

     The following table presents the scheduled repricing of market risk sensitive instruments at December 31, 2006:

											Over
											5 years or
											no stated
	Year 1		Year 2		Year 3		Year 4		Year 5		Maturity		Total
ASSETS
Inestments in debt and equity securities	$	77,000		27,540		16,496		18,555		10,616		39,566		189,773
Interest-bearing deposits		5,993		—		—		—		—		—		5,993
Federal funds sold and securities purchased under agreements to resell		9,923		—		—		—		—		—		9,923
Loans		488,673		101,498		82,450		33,073		21,840		84,779		812,313
Total	$	581,589		129,038		98,946		51,628		32,456		124,345		1,018,002
LIABILITIES
Savings, Now, Money Market deposits	$	308,873		—		—		—		—		—		308,873
Time deposits		378,735		45,454		15,599		9,267		2,892		158		452,105
Federal funds purchased and securities sold under agreements to repurchase		29,460		—		—		—		—		—		29,460
Interest-bearing demand notes of U.S. treasury		1,736		—		—		—		—		—		1,736
Subordinated notes		25,774		—		—		23,712		—		—		49,486
Other borrowed money		19,442		7,398		12,035		5,582		1,492		1,419		47,368
Total	$	764,020		52,852		27,634		38,561		4,384		1,577		889,028

CONSOLIDATED FINANCIAL STATEMENTS

     The following consolidated financial statements of our Company and reports of our Company’s independent auditors appear on the pages indicated.

	Page
Report of Independent Registered Public Accounting Firm.		37
Consolidated Balance Sheets as of December 31, 2006 and 2005.		38
Consolidated Statements of Income for each of the years ended December 31, 2006, 2005 and 2004.		39
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for each of the years ended December 31, 2006, 2005 and 2004.		40
Consolidated Statements of Cash Flows for each of the years ended December 31, 2006, 2005 and 2004.		41
Notes to Consolidated Financial Statements.		42

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Exchange National Bancshares, Inc.
Lee’s Summit, Missouri:

We have audited the accompanying consolidated balance sheets of Exchange National Bancshares, Inc. and subsidiaries (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Exchange National Bancshares, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP
St. Louis, Missouri
March 16, 2007

37

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2006 and 2005

	2006			2005
Assets
Loans, net of allowance for loan losses of $9,015,378 and $9,084,774 at December 31, 2006 and 2005, respectively	$	803,297,381			804,450,102
Investment in available-for-sale securities, at fair value		183,566,135			173,389,101
Investment in equity securities, at cost		6,207,175			6,302,725
Federal funds sold and securities purchased under agreements to resell		9,922,961			12,447,981
Cash and due from banks		43,077,605			35,282,568
Premises and equipment		34,706,857			32,890,908
Other real estate owned and repossessed assets		2,734,500			1,567,652
Accrued interest receivable		8,773,686			7,772,573
Mortgage servicing rights		1,350,375			1,536,331
Goodwill		40,323,775			40,323,775
Intangible assets		3,753,877			4,786,460
Cash surrender value — life insurance		1,750,420			1,682,836
Other assets		3,247,150			4,037,464
Total assets	$	1,142,711,897			1,126,470,476
Liabilities and Stockholders’ Equity
Deposits:
Demand	$	138,885,883			134,364,788
NOW		108,886,884			110,338,554
Savings		48,249,204			56,213,747
Money market		151,737,295			157,271,050
Time deposits $100,000 and over		135,886,042			114,609,472
Other time deposits		316,219,426			308,657,595
Total deposits		899,864,734			881,455,206
Federal funds purchased and securities sold under agreements to repurchase		29,460,492			36,995,735
Interest-bearing demand notes to U.S. Treasury		1,735,638			1,098,337
Subordinated notes		49,486,000			49,486,000
Other borrowed money		47,368,315			52,179,661
Accrued interest payable		4,366,250			3,124,365
Other liabilities		5,485,878			5,398,307
Total liabilities		1,037,767,307			1,029,737,611
Commitments and contingent liabilities
Stockholders’ equity:
Common stock, $1 par value. Authorized 15,000,000 shares; issued 4,298,353 shares		4,298,353			4,298,353
Surplus		22,248,319			22,030,074
Retained earnings		81,431,713			74,129,117
Accumulated other comprehensive loss, net of tax		(381,286	)		(1,072,170	)
Treasury stock; 128,506 shares, at cost		(2,652,509	)		(2,652,509	)
Total stockholders’ equity		104,944,590			96,732,865
Total liabilities and stockholders’ equity	$	1,142,711,897			1,126,470,476

See accompanying notes to consolidated financial statements.

38

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2006, 2005, and 2004

	2006			2005			2004
Interest income:
Interest and fees on loans	$	62,578,814			49,316,370			35,266,846
Interest on debt securities:
Taxable		5,750,751			5,095,896			4,023,535
Nontaxable		1,935,987			1,645,247			1,233,385
Interest on federal funds sold and securities purchased under agreements to resell		748,419			1,018,459			402,818
Interest on interest-bearing deposits		100,171			38,973			33,595
Dividends and interest on equity securities		309,150			225,089			130,417
Total interest income		71,423,292			57,340,034			41,090,596
Interest expense:
NOW accounts		1,390,264			1,665,813			794,070
Savings accounts		298,216			319,247			318,461
Money market accounts		5,186,055			3,618,277			1,265,068
Time deposit accounts $100,000 and over		5,251,329			3,330,402			1,928,942
Other time deposit accounts		12,465,782			8,740,619			5,931,091
Securities sold under agreements to repurchase		1,754,974			1,237,899			667,601
Interest-bearing demand notes to U.S. Treasury		30,785			19,950			7,459
Federal funds purchased		55,693			18,309			20,647
Subordinated notes		3,528,418			2,747,293			886,324
Other borrowed money		2,804,892			1,975,781			1,567,248
Total interest expense		32,766,408			23,673,590			13,386,911
Net interest income		38,656,884			33,666,444			27,703,685
Provision for loan losses		1,325,733			1,321,612			942,000
Net interest income after provision for loan losses		37,331,151			32,344,832			26,761,685
Noninterest income:
Service charges on deposit accounts		5,729,972			4,244,962			3,041,056
Trust department income		798,832			809,998			694,132
Mortgage loan servicing fees, net		432,517			427,127			431,284
Gain on sale of mortgage loans, net		432,112			676,666			796,595
Loss on sales of debt securities		(18,351	)		(25,416	)		(7,612	)
Other		1,224,982			1,131,959			777,102
Total noninterest income		8,600,064			7,265,296			5,732,557
Noninterest expense:
Salaries and employee benefits		17,019,086			13,920,030			11,226,511
Occupancy expense, net		1,994,592			1,600,424			1,142,734
Furniture and equipment expense		2,300,872			2,150,231			2,014,375
Legal, examination, and professional fees		1,431,354			1,419,614			1,108,335
Advertising and promotion		896,686			819,376			574,586
Postage, printing, and supplies		1,146,896			975,768			824,782
Processing expense		1,008,673			750,791			400,989
Amortization of intangible assets		1,032,583			806,896			215,112
Other		3,317,401			2,925,020			2,875,282
Total noninterest expense		30,148,143			25,368,150			20,382,706
Income before income taxes		15,783,072			14,241,978			12,111,536
Income taxes		4,907,867			4,326,700			3,806,556
Net income	$	10,875,205			9,915,278			8,304,980
Basic earnings per share	$	2.61			2.38			1.99
Diluted earnings per share		2.59			2.36			1.98

See accompanying notes to consolidated financial statements.

39

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity and Comprehensive Income
Years ended December 31, 2006, 2005, and 2004

								Accumulated						Total
								other						stock-
	Common				Retained			comprehensive			Treasury			holders’
	stock		Surplus		earnings			income (loss)			Stock			equity
Balance, December 31, 2003	$	4,298,353		21,999,714		62,789,107			1,348,079			(2,652,509	)		87,782,744
Comprehensive income:
Net income		—		—		8,304,980			—			—			8,304,980
Other comprehensive loss:
Unrealized loss on debt and equity securities available- for-sale, net of tax		—		—		—			(959,493	)		—			(959,493	)
Adjustment for loss on sales and calls of debt and equity securities, net of tax		—		—		—			4,948			—			4,948
Total other comprehensive loss															(954,545	)
Total comprehensive income															7,350,435
Adjustment for deferred compensation plan		—		15,180		—			—			—			15,180
Stock options exercised		—		—		—			—			—			—
Cash dividends declared, $0.81 per share		—		—		(3,377,576	)		—			—			(3,377,576	)
Balance, December 31, 2004		4,298,353		22,014,894		67,716,511			393,534			(2,652,509	)		91,770,783
Comprehensive income:
Net income		—		—		9,915,278			—			—			9,915,278
Other comprehensive loss:
Unrealized loss on debt and equity securities available- for-sale, net of tax		—		—		—			(1,482,224	)		—			(1,482,224	)
Adjustment for loss on sales and calls of debt and equity securities, net of tax		—		—		—			16,520			—			16,520
Total other comprehensive loss															(1,465,704	)
Total comprehensive income															8,449,574
Adjustment for deferred compensation plan		—		15,180		—			—			—			15,180
Cash dividends declared, $0.84 per share		—		—		(3,502,672	)		—			—			(3,502,672	)
Balance, December 31, 2005		4,298,353		22,030,074		74,129,117			(1,072,170	)		(2,652,509	)		96,732,865
Comprehensive income:
Net income		—		—		10,875,205			—			—			10,875,205
Other comprehensive income:
Unrealized gain on debt and equity securities available- for-sale, net of tax		—		—		—			392,712			—			392,712
Adjustment for loss on sales and calls of debt and equity securities, net of tax		—		—		—			11,928			—			11,928
Total other comprehensive income															404,640
Total comprehensive income															11,279,845
Stock based compensation expense		—		218,245		—			—			—			218,245
Adjustment to initially apply SFAS No. 158, net of tax		—		—		(69,937	)		286,244						216,307
Cash dividends declared, $0.84 per share		—		—		(3,502,672	)		—			—			(3,502,672	)
Balance, December 31, 2006	$	4,298,353		22,248,319		81,431,713			(381,286	)		(2,652,509	)		104,944,590

See accompanying notes to consolidated financial statements.

40

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years ended December 31, 2006, 2005, and 2004

	2006			2005			2004
Cash flows from operating activities:
Net income	$	10,875,205			9,915,278			8,304,980
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,325,733			1,321,612			942,000
Depreciation expense		1,910,070			1,780,696			1,613,561
Net amortization (accretion) of debt securities, premiums, and discounts		(13,488	)		1,665,189			1,348,762
Amortization of intangible assets		1,032,583			806,896			215,112
Stock based compensation expense		218,245			—			—
Increase in accrued interest receivable		(1,001,113	)		(1,234,671	)		(181,103	)
Increase in cash surrender value -life insurance		(67,584	)		(71,798	)		(8,023	)
(Increase) decrease in other assets		(199,226	)		714,907			845,317
Increase in accrued interest payable		1,227,120			1,131,714			144,975
Increase (decrease) in other liabilities		472,775			1,927,354			(2,651,493	)
Loss on sales and calls of debt securities		18,351			25,416			7,612
Origination of mortgage loans for sale		(20,457,303	)		(38,767,565	)		(48,988,687	)
Proceeds from the sale of mortgage loans		20,889,415			39,444,231			49,785,282
Gain on sale of mortgage loans, net		(432,112	)		(676,666	)		(796,595	)
(Gain) loss on sales of premises and equipment		31,033			(60,068	)		(1,367	)
Other, net		807,639			(1,030,849	)		(251,403	)
Net cash provided by operating activities		16,637,343			16,891,676			10,328,930
Cash flows from investing activities:
Net increase in loans		(2,205,010	)		(49,456,777	)		(55,009,895	)
Purchase of available-for-sale debt securities		(146,710,971	)		(504,908,407	)		(290,617,546	)
Proceeds from maturities of available-for-sale debt securities		129,177,143			494,396,760			244,729,581
Proceeds from calls of available-for-sale debt securities		5,985,038			21,482,500			49,996,925
Proceeds from sales of available-for-sale debt securities		1,985,257			3,199,925			10,304,331
Purchase of equity securities		(1,008,150	)		—			—
Proceeds from sales of equity securities		1,103,700			—			—
Acquisition of subsidiary, net of cash and cash equivalents acquired		—			(21,800,539	)		—
Purchases of premises and equipment		(3,931,811	)		(6,387,156	)		(5,127,948	)
Proceeds from sales of premises and equipment		174,759			171,304			14,000
Proceeds from sales of other real estate owned and repossessions		865,151			1,853,174			625,936
Net cash used in investing activities		(14,564,894	)		(61,449,216	)		(45,084,616	)
Cash flows from financing activities:
Net increase in demand deposits		4,521,095			11,948,224			8,941,942
Net increase (decrease) in interest-bearing transaction accounts		(14,949,968	)		(11,603,004	)		53,394,065
Net increase (decrease) increase in time deposits		28,838,401			4,849,825			(948,496	)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase		(7,535,243	)		1,474,489			(38,468,100	)
Net increase in interest-bearing demand notes to U.S. Treasury		637,301			179,898			208,492
Proceeds from Federal Home Loan Bank advances		176,624,684			14,500,000			17,000,000
Repayment of bank debt and Federal Home Loan Bank advances		(181,436,030	)		(15,104,177	)		(19,105,146	)
Proceeds from issuance of subordinated notes		—			23,712,000			25,774,000
Cash dividends paid		(3,502,672	)		(3,377,576	)		(3,377,576	)
Net cash provided by financing activities		3,197,568			26,579,679			43,419,181
Net increase (decrease) in cash and cash equivalents		5,270,017			(17,977,861	)		8,663,495
Cash and cash equivalents, beginning of year		47,730,549			65,708,410			57,044,915
Cash and cash equivalents, end of year	$	53,000,566			47,730,549			65,708,410
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	31,524,523			22,541,876			13,241,936
Income taxes		5,033,881			3,645,000			6,302,761
Supplemental schedule of noncash investing and financing activities:
Other real estate and repossessions acquired in settlement of loans		2,031,998			3,348,616			578,645
Acquisition of Bank 10:
Increase in loans		—			130,522,517			—
Increase in deposits		—			149,610,685			—

See accompanying notes to consolidated financial statements.

41

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(1)	Summary of Significant Accounting Policies
	Exchange National Bancshares, Inc. (the Company) provides a full range of banking services to individual and corporate customers through The Exchange National Bank of Jefferson City, Citizens Union State Bank and Trust of Clinton, Osage Valley Bank of Warsaw, and Bank 10 of Belton (the Banks) located within the communities surrounding Jefferson City, Clinton, Warsaw, and Belton, Missouri. The Banks are subject to competition from other financial and nonfinancial institutions providing financial products. Additionally, the Company and its subsidiaries are subject to the regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies.
	The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles and conform to predominant practices within the banking industry. The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions, including the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
	The significant accounting policies used by the Company in the preparation of the consolidated financial statements are summarized below:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company; The Exchange National Bank of Jefferson City; Union State Bancshares, Inc. (USB) and its wholly owned subsidiary, Citizens Union State Bank and Trust of Clinton; Mid Central Bancorp, Inc. and its wholly owned subsidiary, Osage Valley Bank of Warsaw; and Bank 10 of Belton. All significant intercompany accounts and transactions have been eliminated in consolidation.

Loans

Loans are stated at unpaid principal balance amount less unearned income and the allowance for loan losses. Income on loans is accrued on a simple-interest basis.

Loans are placed on nonaccrual status when management believes that the borrower’s financial condition, after consideration of business conditions and collection efforts, is such that collection of interest is doubtful. Interest accrued in the current year is reversed against interest income. A loan remains on nonaccrual status until the loan is current as to payment of both principal and interest and/or the borrower demonstrates the ability to pay and remain current.

Loan origination fees and certain direct costs are deferred and recognized over the life of the loan as an adjustment to yield.

(Continued)

42

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The Exchange National Bank of Jefferson City originates certain loans which are sold in the secondary mortgage market to the Federal Home Loan Mortgage Corporation (Freddie Mac). These long-term, fixed-rate loans are sold on a note-by-note basis. Immediately upon locking in an interest rate, the Company enters into an agreement to sell the mortgage loan to Freddie Mac without recourse, thereby eliminating the Company’s exposure to interest rate fluctuations. At December 31, 2006 and 2005, no mortgage loans were held for sale. Mortgage loan servicing fees earned on loans sold to Freddie Mac are reported as income when the related loan payments are collected net of mortgage servicing right amortization. Operational costs to service such loans are charged to expense as incurred.

Allowance for Loan Losses

The allowance for loan losses is increased by provisions charged to expense and is reduced by loan charge-offs, net of recoveries. Management utilizes a systematic, documented approach in determining an adequate allowance for loan losses. Management’s approach, which provides for general and specific valuation allowances, is based on current economic conditions, past losses, collection experience, risk characteristics of the portfolio, assessment of collateral values by obtaining independent appraisals for significant properties, and such other factors, which, in management’s judgment, deserve current recognition in estimating loan losses.

Management believes the allowance for loan losses is adequate to absorb probable losses in the loan portfolio. While management uses available information to recognize loan losses, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses. Such agencies may require the Banks to increase the allowance for loan losses based on their judgment about information available to them at the time of their examination.

A loan is considered impaired when it is probable a creditor will be unable to collect all amounts due, both principal and interest, according to the contractual terms of the loan agreement. When measuring impairment, the expected future cash flows of an impaired loan are discounted at the loan’s effective interest rate. Alternatively, impairment is measured by reference to an observable market price, if one exists, or the fair value of the collateral for a collateral-dependent loan. Regardless of the historical measurement method used, the Company measures impairment based on the fair value of the collateral when foreclosure is probable. Additionally, impairment of a restructured loan is measured by discounting the total expected future cash flows at the loan’s effective rate of interest as stated in the original loan agreement. The Company follows its nonaccrual method for recognizing interest income on impaired loans.

Investment in Debt and Equity Securities

At the time of purchase, debt securities are classified into one of two categories: available-for-sale or held-to-maturity. Held-to-maturity securities are those securities which the Company has the ability and positive intent to hold until maturity. All debt securities not classified as held-to-maturity are classified as available-for-sale.

(Continued)

43

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization of premiums or discounts. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and reported as accumulated other comprehensive income, a separate component of stockholders’ equity, until realized.

Premiums and discounts are amortized using the interest method over the lives of the respective securities, with consideration of historical and estimated prepayment rates for mortgage-backed securities, as an adjustment to yield. Dividend and interest income are recognized when earned. Realized gains and losses for securities classified as available-for-sale are included in earnings based on the specific identification method for determining the cost of securities sold.

A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, and forecasted performance of the investee.

The Banks, as members of the Federal Home Loan Bank System administered by the Federal Housing Finance Board, are required to maintain an investment in the capital stock of the Federal Home Loan Bank of Des Moines (FHLB) in an amount equal to 0.12% of each bank’s total assets plus 4.45% of advances from the FHLB to each bank. Additionally, The Exchange National Bank of Jefferson City is required to maintain an investment in the capital stock of the Federal Reserve Bank. These investments are recorded at cost, which represents redemption value.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation applicable to buildings and improvements and furniture and equipment is charged to expense using straight-line and accelerated methods over the estimated useful lives of the assets. Such lives are estimated to be 5 to 55 years for buildings and improvements and 3 to 15 years for furniture and equipment. Maintenance and repairs are charged to expense as incurred.

Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of net assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives. and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

(Continued)

44

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The Company performs an annual review of goodwill and intangible assets for impairment to determine whether the carrying value of underlying assets may not be recoverable. The Company measures recoverability based upon the future cash flows expected to result from the use of the underlying asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the underlying asset, the Company recognizes an impairment loss. The impairment loss recognized represents the amount by which the carrying value of the underlying asset exceeds the fair value of the underlying asset. As such adjustments become necessary, they are reflected in the results of operations in the periods in which they become known.

The core deposit intangible assets established in the acquisitions of USB and the Springfield branch discussed in Note 2 are being amortized over ten-year and seven-year periods, respectively, on a straight-line method of amortization. The core deposit intangible asset established in the acquisition of Bank 10 is being amortized over an eight-year period on an accelerated method of amortization. Other intangible assets are amortized over periods up to six years.

Goodwill and intangible assets not subject to amortization are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

Impairment of Long-lived Assets

Long-lived assets, such as premises and equipment, and other intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less selling costs, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Other Real Estate

Other real estate, included in other assets in the accompanying consolidated balance sheets, is recorded at fair value, less estimated selling costs. If the fair value of other real estate declines subsequent to foreclosure, the difference is recorded as a valuation allowance through a charge to expense. Subsequent increases in fair value are recorded through a reversal of the valuation allowance. Expenses incurred in maintaining the properties are charged to expense.

(Continued)

45

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Pension Plan

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS No. 158). SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. SFAS No. 158 became effective for the Company for the fiscal year ended December 31, 2006.

The Company has a noncontributory defined benefit pension plan covering all of its employees upon their retirement. The benefits are based on age, years of service and the level of compensation during the employees highest ten years of compensation before retirement.

The Company records annual amounts relating to its pension plan based on calculations that incorporate various actuarial and other assumptions including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. The Company reviews its assumptions on an annual basis and may make modifications to the assumptions based on current rates and trends when it is appropriate to do so. The Company believes that the assumptions utilized in recording its obligations under its plan are reasonable based on its experience and market conditions.

The net periodic costs are recognized as employees render the services necessary to earn the retirement benefits.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company estimates income tax expense based on amounts expected to be owed to various tax jurisdictions. The estimated income tax expense is reported in the Consolidated Statement of Income. Accrued taxes represent the net estimated amount due or to be received from taxing jurisdictions either currently or in the future and are reported in other assets or other liabilities on the Consolidated Balance Sheet. In estimating accrued taxes, the Company assesses the relative merits and risks of the appropriate tax treatment considering statutory, judicial and regulatory guidance in the context of the tax position. Because of the complexity of tax laws and regulations, interpretation can be difficult and subject to legal judgment given specific facts and circumstances. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions regarding the estimated amounts of accrued taxes.

(Continued)

46

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations being conducted by various taxing authorities, and newly enacted statutory, judicial and regulatory guidance that impact the relative merits and risks of tax positions. These changes, when they occur, affect accrued taxes and can be significant to the operating results of the Company.

Trust Department

Property held by the Banks in fiduciary or agency capacities for customers is not included in the accompanying consolidated balance sheets, since such items are not assets of the Company. Trust department income is recognized on the accrual basis.

Earnings Per Share

Earnings per share is computed as follows:

	2006		2005		2004
Net income, basic and diluted	$	10,875,205		9,915,278		8,304,980
Average shares outstanding		4,169,847		4,169,847		4,169,847
Effect of dilutive stock options		34,700		29,012		34,905
Average shares outstanding including dilutive stock options		4,204,547		4,198,859		4,204,752
Net income per share, basic	$	2.61		2.38		1.99
Net income per share, diluted		2.59		2.36		1.98

Consolidated Statements of Cash Flows

For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of federal funds sold and securities sold purchased under agreements to resell, cash, and due from banks.

Stock Options

The Company maintains a stock-based incentive program. Prior to 2006, the Company applied the intrinsic value-based method, as outlined in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB No. 25”) and related interpretations, in accounting for stock options granted under these programs. Under the intrinsic value-based method, no compensation expense was recognized if the exercise price of the Company’s employee stock options equaled the market price of the underlying stock on the date of the grant. Accordingly, prior to 2006, no compensation cost was recognized in the consolidated statements of income for stock options granted to employees, since all options granted under the company’s share incentive programs had an exercise price equal to the fair value of the underlying common stock on the date of the grant.

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R) (SFAS No.123(R)) Share-Based Payment. This statement replaces SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB No. 25. SFAS No. 123(R) requires

(Continued)

47

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

that all stock-based compensation be recognized as an expense in the financial statements and that such cost be measured at the fair value of the award. This statement was adopted using the modified prospective method of application, which requires the Company to recognize compensation expense on a prospective basis. Therefore, prior period financial statements have not been restated. Under this method, in addition to reflecting compensation expense for new share-based awards, expense is also recognized to reflect the remaining service period of awards that had been included in pro forma disclosures in prior periods. SFAS No. 123(R) also requires that excess tax benefits related to stock option exercises be reflected as financing cash inflows instead of operating cash inflows. There were no stock options exercised during 2006.

Total stock-based compensation expense for the year ended December 31, 2006 was $218,000 ($142,000 after tax). As of December 31, 2006, the total unrecognized compensation expense related to non-vested stock awards was $394,000 and the related weighted average period over which it is expected to be recognized is approximately 2.0 years.

The following table illustrates the effect on net income and earnings per share if the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, had been applied to all outstanding and unvested awards in each prior period:

	2005			2004
Net income:
As reported	$	9,915,278			8,304,980
Deduct total stock-based employee compensation expense determined under fair-value based method for all awards, net of tax		(142,799	)		(136,228	)
Pro forma	$	9,772,479			8,168,752
Pro forma earnings per common share:
As reported basic	$	2.38			1.99
Pro forma basic		2.34			1.96
As reported diluted		2.36			1.98
Pro forma diluted		2.33			1.94

Treasury Stock

The purchase of the Company’s common stock is recorded at cost. Upon subsequent reissuance, the treasury stock account is reduced by the average cost basis of such stock.

(Continued)

48

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Comprehensive Income

The Company reports comprehensive income in the consolidated statements of stockholders’ equity and comprehensive income (loss).

Segment Information

The Company has defined its business segments to be the Banks, which is consistent with the management structure of the Company and the internal reporting system that monitors performance.

Recently Issued Accounting Standards

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 156). SFAS No. 156 requires all separately recognized servicing assets and liabilities to be initially measured at fair value. In addition, entities are permitted to choose to either subsequently measure servicing rights at fair value and report changes in fair value in earnings, or amortize servicing rights in proportion to and over the estimated net servicing income or loss and assess the rights for impairment. Beginning with fiscal year in which an entity adopts SFAS No. 156, it may elect to subsequently measure a class of servicing assets and liabilities at fair value. Post adoption, an entity may make this election as of the beginning of any fiscal year. An entity that elects to subsequently measure a class of servicing assets and liabilities at fair value should apply that election to all new and existing recognized servicing assets and liabilities within that class. The effect of remeasuring an existing class of servicing assets and liabilities at fair value is to be reported as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. SFAS No. 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006. The statement also requires additional disclosures. The Company has adopted SFAS No. 156 as of January 1, 2007 and elected to use the amortized cost method of accounting for financial assets. As a result, the adoption of SFAS No. 156 is not expected to have a material impact on the Company’s financial position or result of operations.

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, “Accounting for Uncertainty in Income Taxes”, an Interpretation of FAS No. 109, Accounting for Income Taxes (FIN 48). The Interpretation defines the threshold for recognizing the financial impact of uncertain tax provisions in accordance with FAS 109. An enterprise would be required to recognize, in its financial statements, the best estimate of the impact of a tax position only if that position is “more-likely-than-not” of being sustained on audit based solely on the technical merits of the position on the reporting date. In evaluating whether the probable recognition threshold has been met, the Interpretation would require the presumption that the tax position will be evaluated during an audit by taxing authorities. The term “more-likely-than-not” is defined as a likelihood of more than 50 percent. Individual tax positions that fail to meet the recognition threshold will generally result in either (a) a reduction in the deferred tax asset or an increase in a deferred tax liability or (b) an increase in a liability for income taxes payable or the reduction of an income tax refund receivable. The impact may also include both (a) and (b). This Interpretation also provides guidance on disclosure, accrual of interest and penalties, accounting in interim periods, and transition. The Interpretation is effective for reporting periods after December 15, 2006. The Company has

(Continued)

49

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

completed its initial evaluation of the impact of the January 1, 2007 adoption of FIN 48 and determined that such adoption is not expected to have a material impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but rather, it provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value. The changes to current practice resulting from the application of this statement relates to the definition of fair value, the methods used to estimate fair value, and the requirements for expanded disclosures about estimates of fair value. SFAS No. 157 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company is currently evaluating the impact of the adoption of SFAS No. 157; however, it is not expected to have a material impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS No. 158). SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. SFAS No. 158 became effective for the Company for the fiscal year ended December 31, 2006. The impact on the Company’s financial statements at December 31, 2006 from the adoption of SFAS No. 158 is included in Note 15.

In September, 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB No. 108). SAB No. 108 requires an entity to consider the effects of prior year misstatements when quantifying misstatements in current year financial statements for purposes of determining materiality. SAB No. 108 is effective for an entity’s first interim period of the first fiscal year ending after November 15, 2006. Adoption of SAB No. 108 has not resulted in a material impact on the Company’s financial position or results of operations.

In September 2006, the Emerging Issues Task Force Issue 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, was ratified. This EITF Issue addresses accounting for separate agreements which split life insurance policy benefits between an employer and employee. The Issue requires the employer to recognize a liability for future benefits payable to the employee under these agreements. The effects of applying this Issue must be recognized through either a change in accounting principle through an adjustment to equity or through the retrospective application to all prior periods. For calendar year companies, the Issue is effective beginning January 1, 2008. Early adoption is

(Continued)

50

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

permitted as of January 1, 2007. The Company does not expect the adoption of the Issue to have a material effect on the Company’s consolidated financial statements.

         Reclassifications

Certain prior year information has been reclassified to conform to the current year presentation.

(2) Acquisitions

On May 2, 2005 the Company acquired 100 percent of the outstanding common shares of Bank 10 from Drexel Bancshares, Inc. of Belton, Missouri. Accordingly, the results of operations of Bank 10 have been included in the condensed consolidated financial statements since the date of acquisition. Bank 10 has branches in Belton, Drexel, Independence, Harrisonville, and Raymore, Missouri.

A summary of unaudited pro forma combined financial information for the years ended December 31, 2005 and 2004 for the Company and Bank 10 as if the transaction had occurred on January 1, 2004 follows:

	December 31,
	2005		2004
Net interest income	$	35,399,301	$	33,537,965
Net income		10,109,876		9,212,975
Basic earnings per share	$	2.42	$	2.21
Diluted earnings per share	$	2.41	$	2.19

(3) Capital Requirements

The Company and the Banks are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines, the Company and the Banks must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification of the Company and the Banks are subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

Quantitative measures established by regulations to ensure capital adequacy require the Company and the Banks to maintain minimum amounts and ratios (set forth in the following table) of total and Tier I capital to risk-weighted assets, and of Tier I capital to adjusted-average assets. Management believes, as of December 31, 2006 and 2005, the Company and the Banks meet all capital adequacy requirements to which they are subject.

(Continued)

51

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

As of December 31, 2006, the most recent notification from the regulatory authorities categorized the banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Banks must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since the notifications that management believes have changed the Banks’ categories.

The actual and required capital amounts and ratios for the Company and the Banks as of December 31, 2006 and 2005 are as follows (dollars in thousands):

	2006
											To be well capitalized
											under prompt corrective
	Actual					Capital requirements					action provision
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital (to risk-weighted assets):
Company	$	118,184		13.84	%		68,293		8.00	%		—		—
The Exchange National Bank of Jefferson City		51,723		13.76			30,066		8.00			37,583		10.00	%
Citizens Union State Bank and Trust of Clinton		31,715		12.64			20,074		8.00			25,093		10.00
Osage Valley Bank		7,032		11.02			5,106		8.00			6,383		10.00
Bank 10 of Belton		19,846		12.22			12,987		8.00			16,234		10.00
Tier I capital (to risk-weighted assets):
Company		96,300		11.28			34,147		4.00			—		—
The Exchange National Bank of Jefferson City		47,023		12.51			15,033		4.00			22,550		6.00
Citizens Union State Bank and Trust of Clinton		29,269		11.66			10,037		4.00			15,056		6.00
Osage Valley Bank		6,499		10.18			2,553		4.00			3,830		6.00
Bank 10 of Belton		18,660		11.49			6,494		4.00			9,740		6.00
Tier I capital (to adjusted average assets):
Company		96,300		8.77			32,937		3.00			—		—
The Exchange National Bank of Jefferson City		47,023		9.91			14,241		3.00			23,736		5.00
Citizens Union State Bank and Trust of Clinton		29,269		9.16			9,583		3.00			15,972		5.00
Osage Valley Bank		6,499		6.35			3,071		3.00			5,119		5.00
Bank 10 of Belton		18,660		9.34			5,996		3.00			9,994		5.00

(Continued)

52

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

	2005
											To be well capitalized
											under prompt corrective
	Actual					Capital requirements					action provision
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital (to risk-weighted assets):
Company	$	109,838		12.70	%		86,337		8.00	%		—		—
The Exchange National Bank of Jefferson City		50,643		12.88			38,882		8.00			48,602		10.00	%
Citizens Union State Bank and Trust of Clinton		28,127		10.73			24,842		8.00			31,053		10.00
Osage Valley Bank		6,573		11.43			7,634		8.00			9,543		10.00
Bank 10 of Belton		16,458		10.85			14,810		8.00			18,512		10.00
Tier I capital (to risk-weighted assets):
Company		85,016		9.83			43,168		4.00			—		—
The Exchange National Bank of Jefferson City		45,726		11.63			19,441		4.00			29,161		6.00
Citizens Union State Bank and Trust of Clinton		25,738		9.82			12,421		4.00			18,632		6.00
Osage Valley Bank		6,024		10.48			3,817		4.00			5,726		6.00
Bank 10 of Belton		15,247		10.05			7,405		4.00			11,107		6.00
Tier I capital (to adjusted average assets):
Company		85,016		7.88			25,946		3.00			—		—
The Exchange National Bank of Jefferson City		45,726		9.41			11,800		3.00			19,666		5.00
Citizens Union State Bank and Trust of Clinton		25,738		8.29			7,867		3.00			13,111		5.00
Osage Valley Bank		6,024		6.31			1,725		3.00			2,875		5.00
Bank 10 of Belton		15,247		8.24			4,550		3.00			7,583		5.00

Bank dividends are the principal source of funds for payment of dividends by the Company to its stockholders. The Banks are subject to regulations which require the maintenance of minimum capital requirements. At December 31, 2006, unappropriated retained earnings of approximately $11,242,000 were available for the declaration of dividends to the Company without prior approval from regulatory authorities.

(Continued)

53

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(4) Loans

A summary of loans, by classification, at December 31, 2006 and 2005 is as follows:

	2006			2005
Commercial	$	145,696,898			154,868,139
Real estate — construction		150,890,994			139,315,924
Real estate — mortgage		478,852,928			480,530,518
Installment and other consumer		36,967,543			39,276,070
Unamortized loan origination fees and costs, net		(95,604	)		(455,775	)
		812,312,759			813,534,876
Less allowance for loan losses		9,015,378			9,084,774
	$	803,297,381			804,450,102

The Banks grant real estate, commercial, installment, and other consumer loans to customers located within the communities surrounding Jefferson City, Clinton, Warsaw and Belton, Missouri. As such, the Banks are susceptible to changes in the economic environment in these communities. The Banks do not have a concentration of credit in any one economic sector. Installment and other consumer loans consist primarily of the financing of vehicles.

Following is a summary of activity in 2006 of loans made by the Banks to executive officers and directors or to entities in which such individuals had a beneficial interest. Such loans were made in the normal course of business on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the same time for comparable transactions with other persons, and did not involve more than the normal risk of collectibility or present unfavorable features.

Balance at December 31, 2005	$	15,905,724
New loans		9,388,726
Transfers of officers to executive category		223,852
Payments received		(9,960,856	)
Balance at December 31, 2006	$	15,557,446

(Continued)

54

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Changes in the allowance for loan losses for 2006, 2005 and 2004 are as follows:

	2006			2005			2004
Balance, beginning of year	$	9,084,774			7,495,594			8,267,380
Allowance for loan losses of acquired subsidiary at date of acquisition		—			1,418,084			—
Provision for loan losses		1,325,733			1,321,612			942,000
Charge-offs		(1,850,904	)		(1,321,154	)		(1,858,989	)
Recoveries of loans previously charged off		455,775			170,638			145,203
Balance, end of year	$	9,015,378			9,084,774			7,495,594

A summary of nonaccrual and other impaired loans at December 31, 2006 and 2005 is as follows:

	2006		2005
Nonaccrual loans	$	4,868,190		8,611,431
Impaired loans continuing to accrue interest		9,187,402		2,369,472
Total impaired loans	$	14,055,592		10,980,903
Allowance for loan losses on impaired loans	$	3,287,231		2,391,814
Impaired loans with no specific allowance for loan losses		3,117,489		1,217,130
Loans past due 90 days or more continuing to accrue interest	$	197,271		439,681

The average balance of impaired loans during 2006 and 2005 was $12,219,000 and $9,367,000, respectively.

(Continued)

55

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

A summary of interest income on nonaccrual and other impaired loans for 2006, 2005, and 2004 is as follows:

			Impaired
			loans
	Nonaccrual		continuing to
	loans		accrue interest		Total
2006:
Income recognized	$	62,793		578,766		641,559
Interest income had interest accrued		896,102		578,766		1,474,868
2005:
Income recognized		252,901		136,467		389,368
Interest income had interest accrued		766,693		136,467		903,160
2004:
Income recognized		134,208		1,034		135,242
Interest income had interest accrued		546,850		1,034		547,884

(Continued)

56

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(5) Investment in Debt and Equity Securities

The amortized cost and fair value of debt securities classified as available-for-sale at December 31, 2006 and 2005 are as follows:

	2006
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses		Fair value
U.S. treasuries	$	1,070,110		—		2,090		1,068,020
Government sponsored enterprises		122,692,450		86,038		1,009,597		121,768,891
Asset-backed securities		5,163,716		3,410		98,845		5,068,281
Obligations of states and political subdivisions		55,660,825		346,948		346,830		55,660,943
Total available for sale securities	$	184,587,101		436,396		1,457,362		183,566,135

	2005
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses		Fair value
Government sponsored enterprises	$	114,540,016		5,052		1,539,953		113,005,115
Asset-backed securities		6,346,814		4,427		101,034		6,250,207
Obligations of states and political subdivisions		53,430,317		434,331		439,019		53,425,629
Other debt securities		711,283		—		3,133		708,150
Total available for sale securities	$	175,028,430		443,810		2,083,139		173,389,101

Equity securities recorded at cost consist primarily of Federal Home Loan Bank Stock, Federal Reserve Stock, and the Company’s interest in the statutory trusts described in note 11.

(Continued)

57

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The amortized cost and fair value of debt securities classified as available-for-sale at December 31, 2006, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

	Amortized		Fair
	cost		value
Due in one year or less	$	32,468,093		32,382,854
Due after one year through five years		104,804,083		103,957,538
Due after five years through ten years		29,713,278		29,679,213
Due after ten years		12,437,931		12,478,249
		179,423,385		178,497,854
Asset-backed securities		5,163,716		5,068,281
	$	184,587,101		183,566,135

Debt securities with carrying values aggregating approximately $109,492,000 and $109,790,000 at December 31, 2006 and 2005, respectively, were pledged to secure public funds, securities sold under agreements to repurchase, and for other purposes as required or permitted by law.

Proceeds of $1,985,257 and gross losses of $18,351 were recorded on the sales of debt securities in 2006.
Proceeds of $3,199,925 and gross losses of $25,416 were recorded on the sales of debt securities in 2005.
Proceeds of $10,304,331 and gross losses of $7,612 were recorded on the sales of debt securities in 2004.

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2006, were as follows:

	Less than 12 months					12 months or more					Number of		Total
	Fair		Unrealized			Fair		Unrealized			Investment		Fair		Unrealized
	Value		Losses			Value		Losses			Positions		Value		Losses
U.S. treasuries	$	1,068,020		(2,090	)		—		—			1		1,068,020		(2,090	)
Government sponsored enterprises		27,672,457		(51,997	)		62,728,434		(957,600	)		96		90,400,891		(1,009,597	)
Asset-backed securities		16,401		(24	)		4,764,334		(98,821	)		21		4,780,735		(98,845	)
Obligations of states and political subdivisions		3,201,615		(24,441	)		30,712,056		(322,389	)		138		33,913,671		(346,830	)
	$	31,958,493		(78,552	)		98,204,824		(1,378,810	)		256		130,163,317		(1,457,362	)

Government sponsored enterprises: The unrealized losses on investments in government sponsored enterprises were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

(Continued)

58

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Asset-backed securities: The unrealized losses on asset-backed securities were caused by interest rate increases. The contractual cash flows of these securities are guaranteed by various government or government sponsored enterprises. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Obligations of states and political subdivisions: The unrealized losses on investments in obligations of states and political subdivisions were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

(6) Premises and Equipment

A summary of premises and equipment at December 31, 2006 and 2005 is as follows:

	2006		2005
Land	$	9,696,480		9,727,590
Buildings and improvements		24,229,498		23,731,572
Furniture and equipment		12,370,088		11,080,564
Construction in progress		2,024,514		305,885
		48,320,580		44,845,611
Less accumulated depreciation		13,613,723		11,954,703
	$	34,706,857		32,890,908

(7) Goodwill and Other Intangible Assets

A summary of goodwill and other intangible assets at December 31, 2006 and 2005 is as follows:

	2006		2005
Goodwill	$	40,323,775		40,323,775
Core deposit intangible		3,753,877		4,786,460
	$	44,077,652		45,110,235

(Continued)

59

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The gross carrying amount and accumulated amortization of the Company’s amortized intangible assets for the years ended December 31, 2006 and 2005 are as follows:

	December 31, 2006					December 31, 2005
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Amortized intangible assets:
Core deposit intangible	$	7,060,224		(3,306,347	)		7,060,224		(2,273,764	)
	$	7,060,224		(3,306,347	)		7,060,224		(2,273,764	)

The aggregate amortization expense of intangible assets subject to amortization for the past three years is as follows:

	Year ended
	December 31,
	2006		2005		2004
Aggregate amortization expense	$	1,032,583		806,896		215,112

The estimated amortization expense for the next five years is as follows:

For the year ending:
2007	$	922,337
2008		701,443
2009		626,111
2010		526,477
2011		434,763

(Continued)

60

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The Company’s goodwill associated with the purchase of subsidiaries by reporting segments is summarized as follows:

The Exchange	Citizens Union
National Bank	State Bank and		Osage
of Jefferson	Trust of		Valley Bank		Bank 10
City	Clinton		of Warsaw		of Belton		Total
$4,382,098		16,701,762		4,112,876		15,127,039		40,323,775

(8) Mortgage Servicing Rights

Mortgage loans serviced for others totaled approximately $215,700,000 and $220,127,000 at December 31, 2006 and 2005, respectively. Mortgage servicing rights totaled approximately $1,350,000 and $1,536,000 at December 31, 2006 and 2005, respectively.

Changes in the balance of servicing assets related to the loans serviced by The Exchange National Bank of Jefferson City for the years ended December 31, 2006 and 2005 are as follows:

Balance at December 31, 2004	$	1,605,930
Additions		386,203
Amortization		(455,802	)
Balance at December 31, 2005		1,536,331
Additions		239,873
Amortization		(425,829	)
Balance at December 31, 2006	$	1,350,375

The Company’s mortgage servicing rights are amortized in proportion to the related estimated net servicing income on a straight line basis over the estimated lives of the related mortgages which is seven years. The estimated amortization expense for the next five years is as follows:

For the year ending:
2007	$	353,000
2008		307,000
2009		233,000
2010		159,000
2011		133,000

(Continued)

61

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(9) Deposits

     The scheduled maturities of time deposits are as follows (in thousands):

	2006		2005
Due within:
One year	$	378,732		275,517
Two years		48,996		92,945
Three years		12,057		26,017
Four years		8,186		9,739
Five years		3,975		18,217
Thereafter		159		832
	$	452,105		423,267

(10) Securities Sold Under Agreements to Repurchase

Information relating to securities sold under agreements to repurchase is as follows:

	2006			2005
Average daily balance	$	41,308,902			45,832,211
Maximum balance at month-end		56,027,169			63,482,233
Year end balance		27,320,492			33,292,735
Weighted average interest rate at year-end		4.35	%		3.30	%
Weighted average interest rate for the year		4.25	%		2.70	%

The securities underlying the agreements to repurchase are under the control of the Banks.

Under agreements with unaffiliated banks, the Banks may borrow up to $50,000,000 in federal funds on an unsecured basis at December 31, 2006.

(11) Subordinated Notes

On March 17, 2005, Exchange Statutory Trust II, a newly formed business trust issued $23,000,000 of 30-year floating rate Trust Preferred Securities (TPS) to a Trust Preferred Securities Pool. The interest rate on the TPS is a fixed rate at 6.30% for five years then converting to a floating rate. The floating rate will be based on a specific margin above three-month LIBOR. The TPS can be prepaid without penalty at any time after five years from the issuance date.

The TPS represent preferred interests in the trust . The Company invested approximately $712,000 in common interests in the trust and the purchaser in the private placement purchased $23,000,000 in preferred interests. The proceeds were used by the trust to purchase from the Company its 30-year deeply subordinated debentures whose terms mirror those stated above for the TPS. The debentures are guaranteed by the Company pursuant to a subordinated guarantee. Distributions on the TPS are payable quarterly on March 17, June 17, September 17, and December 17 of each year that the TPS are outstanding. The trustee for the TPS holders is U.S. Bank, N.A. The trustee does not have the power to take enforcement action in

(Continued)

62

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

the event of a default under the TPS for five years from the date of default. In the event of default, however, the Company would be precluded from paying dividends until the default is cured.

The proceeds of the private placement TPS were used by the Company to facilitate the Bank 10 acquisition as described in Note 2.

On March 17, 2004, Exchange Statutory Trust I, a newly formed Delaware business trust and subsidiary of the Company issued $25,000,000 of floating TPS to a Trust Preferred Securities Pool. The floating rate is equal to the three-month LIBOR rate plus 2.70% and reprices quarterly. The TPS are fully, irrevocably, and unconditionally guaranteed on a subordinated basis by the Company. The proceeds of the TPS were invested in junior subordinated debentures of the Company. The net proceeds to the Company from the sale of the junior subordinated debentures, after deducting underwriting commissions and estimated offering expenses, were approximately $25,000,000. Distributions on the TPS are payable quarterly on March 17, June 17, September 17, and December 17 of each year that the TPS are outstanding. The TPS mature on March 17, 2034. That maturity date may be shortened to a date not earlier than March 17, 2009 if certain conditions are met. A portion of the proceeds from the offering were used to repay $11,000,000 of previously outstanding indebtedness with the remaining available for cash operating reserves at the holding company level.

The Exchange Statutory Trusts are not consolidated in the Company’s financial statements. Accordingly, the Company does not report the securities issued by the Exchange Statutory Trusts as liabilities, and instead reports the subordinated notes issued by the Company and held by the Exchange Statutory Trusts as liabilities. The amount of the subordinated notes as of December 31, 2006 and 2005 were $49,486,000 for both periods. The Company recorded the investments in the common securities issued by the Exchange Statutory Trusts and corresponding obligations of the subordinated notes, as well as interest income and interest expense on the investments and obligations.

(Continued)

63

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(12)	Other Borrowed Money
	Other borrowed money at December 31, 2006 and 2005 is summarized as follows:

	2006		2005
The Exchange National Bank of Jefferson City:
Federal Home Loan Bank of Des Moines advances, weighted average rates of 5.43% and 4.54% at December 31, 2006 and 2005, respectively, due at various dates through 2010	$	23,000,000		25,000,000
Citizens Union State Bank and Trust of Clinton:
Federal Home Loan Bank of Des Moines advances, weighted average rates of 5.42% and 5.40% at at December 31, 2006 and 2005, respectively, due at various dates through 2008		2,000,000		3,100,000
Osage Valley Bank of Warsaw:
Federal Home Loan Bank of Des Moines advances, weighted average rates of 3.75% and 3.66% at December 31, 2006 and 2005, respectively, due at various dates through 2013		4,821,042		5,332,388
Bank 10 of Belton:
Federal Home Loan Bank of Des Moines advances, weighted average rates of 5.08% and 4.04% at December 31, 2006 and 2005, respectively, due at various dates through 2009		17,547,273		18,747,273
	$	47,368,315		52,179,661

The Company has a $20,000,000 line of credit with US Bank secured by subsidiary stock. The interest rate charged on borrowings under the line is equal to the 30 day LIBOR plus 150 basis points and adjusts quarterly. The Company pays no fees on the unused portion of the line of credit. The line of credit was renewed in January 2007 and is now due December 2007. There was no outstanding balance on the line of credit at December 31, 2006 or 2005.

The advances from the Federal Home Loan Bank of Des Moines are secured under a blanket agreement which assigns all investment in Federal Home Loan Bank of Des Moines stock, as well as mortgage loans equal to 135% of the outstanding advance balance, to secure amounts borrowed at The Exchange National Bank of Jefferson City, 120% at Osage Valley Bank of Warsaw, 134% at Citizens Union State Bank and Trust of Clinton, and 163% at Bank 10 of Belton. The Exchange National Bank of Jefferson City has $5,000,000 and $10,000,000 of FHLB advances callable on March 3, 2007 and February 27, 2007, respectively. Citizens Union State Bank and Trust of Clinton has $2,000,000 callable on January 23, 2007.

(Continued)

64

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Based upon the collateral pledged to the Federal Home Loan Bank of Des Moines at December 31, 2006, the Banks’ had combined credit lines of $128,783,000, of which $81,414,000 was available for additional borrowings.

The scheduled principal reduction of other borrowed money at December 31, 2006 is as follows:

2007	$	19,441,468
2008		7,397,809
2009		12,035,455
2010		5,582,215
2011		1,492,267
2012 and thereafter		1,419,101
	$	47,368,315

(13)	Reserve Requirements and Compensating Balances
	The Federal Reserve Bank required the Banks to maintain cash or balances of $6,595,000 and $5,973,000 at December 31, 2006 and 2005, respectively, to satisfy reserve requirements.
	Average compensating balances held at correspondent banks were $3,248,000 and $3,503,000 at December 31, 2006 and 2005, respectively. The Banks maintain such compensating balances with correspondent banks to offset charges for services rendered by those banks.

(Continued)

65

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(14)	Income Taxes
	The composition of income tax expense (benefit) for 2006, 2005, and 2004 is as follows:

	2006		2005			2004
Current:
Federal	$	4,252,932		4,326,338			3,449,464
State		177,491		142,234			109,688
Total current		4,430,423		4,468,572			3,559,152
Deferred		477,444		(141,872	)		247,404
Total income tax expense	$	4,907,867		4,326,700			3,806,556

Applicable income taxes for financial reporting purposes differ from the amount computed by applying the statutory Federal income tax rate for the reasons noted in the table below:

	2006			2005			2004
Tax at statutory Federal income tax rate	$	5,447,567			4,884,692			4,139,038
Tax-exempt income		(685,580	)		(599,641	)		(450,431	)
State income tax, net of Federal tax benefit		115,369			92,452			71,297
Other, net		30,511			(50,803	)		46,652
	$	4,907,867			4,326,700			3,806,556

(Continued)

66

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The components of deferred tax assets and deferred tax liabilities at December 31, 2006 and 2005 are as follows:

	2006		2005
Deferred tax assets:
Allowance for loan losses	$	2,659,053		2,683,342
Nonaccrual loan interest		45,647		330,283
Core deposit intangible		302,703		68,692
Available-for-sale securities		353,437		567,160
Accrued pension expense		209,505		100,030
Deferred compensation		106,889		83,584
Other		281,763		143,500
Total deferred tax assets		3,958,997		3,976,591
Deferred tax liabilities:
Premises and equipment		805,482		850,260
Mortgage servicing rights		93,849		121,473
FHLB stock dividend		92,365		92,365
Intangible assets		1,266,329		401,502
Other		119,531		121,911
Total deferred tax liabilities		2,377,556		1,587,511
Net deferred tax asset	$	1,581,441		2,389,080

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these temporary differences at December 31, 2006 and, therefore, has not established a valuation reserve.

At December 31, 2006, the accumulation of prior years’ earnings representing tax bad debt deductions of The Exchange National Bank of Jefferson City were $2,931,503. If these tax bad debt reserves were charged for losses other than bad debt losses, The Exchange National Bank of Jefferson City would be required to recognize taxable income in the amount of the charge. It is not contemplated that such tax-restricted retained earnings will be used in a manner that would create federal income tax liabilities.

(Continued)

67

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(15)	Pension and Retirement Plans
	The Company provides a noncontributory defined benefit pension plan for all full-time employees.
	Pension expense for 2006, 2005, and 2004 is as follows:

	2006			2005			2004
Service cost—benefits earned during the year	$	620,564			471,319			292,059
Interest costs on projected benefit obligations		318,142			276,245			242,384
Expected return on plan assets		(369,164	)		(368,873	)		(374,586	)
Net amortization and deferral		—			(26,632	)		(35,512	)
Amortization of prior service cost		78,628			39,315			—
Amortization of net gains		(2,601	)		—			(6,695	)
Pension expense	$	645,569			391,374			117,650

As a result of adopting SFAS No. 158 on December 31, 2006, the measurement date used to determine pension benefit measures for the pension plan was changed to December 31. Prior to 2006 the measurement date was November 1.

A summary of the activity in the Plan’s projected benefit obligation, assets, funded status, and amounts recognized in the Company’s consolidated balance sheets at December 31, 2006 and 2005 are as follows:

	2006			2005
Benefit obligation:
Balance, January 1	$	6,184,323			4,785,746
Service cost		723,991			471,319
Interest cost		371,166			276,245
Plan amendment *		—			1,203,000
Actuarial (gain) loss		(120,800	)		(301,104	)
Benefits paid		(303,411	)		(250,883	)
Balance, December 31	$	6,855,269			6,184,323

* Plan amendment consisted of adding subsidiary banks that did not participate in the Plan prior to July 1, 2005.

(Continued)

68

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

	2006			2005
Plan assets:
Fair value, January 1	$	5,584,438			5,284,974
Actual return		975,654			550,347
Benefits paid		(303,411	)		(250,883	)
Fair value, December 31	$	6,256,681			5,584,438
Funded status plus items not yet recognized as a component of net periodic pension cost
Plan assets less than benefit obligation				$	(599,885	)
Unamortized prior service cost					1,163,685
Unrecognized net gains					(849,600	)
Accrued pension cost included in other liabilities				$	(285,800	)
Funded status:
Projected benefit obligtion	$	(6,855,269	)	$	(6,184,323	)
Plan assets at fair market value		6,256,681			5,584,438
Pension benefit liablity	$	(598,588	)		(599,885	)

Amounts recognized in accumulated other comprehensive income consist of:

	Pension benefits
	2006			2005
Minimum pension liability	$	—			427,705
Net actuarial gain		(434	)		—
Prior service costs		13,105
		12,671			427,705

The net gain and prior service cost for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit pension cost of the next fiscal year are $78,628 and $8,279, respectively.

(Continued)

69

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The following table shows the incremental effect of the application of SFAS No. 158 on individual line items in the statement of financial position as of December 31, 2006:

	Before						After
	Application of						Application of
	Statement No. 158			Adjustment			Statement No. 158
Liability for pension benefits	$	931,369		$	(332,781	)	$	598,588
Deferred income taxes		1,327,725			209,505			1,537,230
Total liabilities
Retained earnings		81,501,650			(69,937	)		81,431,713
Accumulated other comprehensive income		(667,530	)		286,244			(381,286	)
Total stockholders’ equity		104,728,283			216,307			104,944,590

Assumptions utilized to determine benefit obligations as of December 31, 2006 and 2005 and to determine pension expense for the year then ended are as follows:

	2006			2005
Benefit obligation:
Discount rate		5.50	%		5.25	%
Annual rate of compensation increase		4.50	%		5.00	%
Pension expense:
Discount rate for the service cost		5.25	%		5.25	%
Annual rate of compensation increase		5.00	%		6.00	%
Expected long-term rate of return on plan assets		7.00	%		7.00	%

The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories or plan assets.

The approximate weighted-average asset allocation of the plan’s assets at December 31, 2006 and 2005 were as follows: Equity securities 83%, debt securities 13% and other assets 4%.

(Continued)

70

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The Company’s investment goals are to invest the assets in a manner that they benefit both the current beneficiaries and the future beneficiaries of the pension plan, while minimizing the risk to the overall portfolio. The Company addresses these issues by diversifying the assets through investments in domestic and international fixed income securities and domestic and international equity securities. The assets are readily marketable and can be sold to fund benefit payment obligations as they become payable.

The benefits expected to be paid in the years 2007 to 2011 are $271,000, $271,000, $265,000, $291,000, and $320,000, respectively. The aggregate benefits to be paid in the five years from 2012 to 2016 are $1,986,000.

Under the provisions of the Pension Protection Act of 2006 the Company may make a contribution to the defined benefit pension plan in 2007.

In addition to the pension plan described above, the Company provides a profit-sharing plan which covers all full-time employees. The Company makes annual contributions in an amount up to 6% of income before income taxes and before contributions to the profit-sharing and pension plans for all participants, limited to the maximum amount deductible for Federal income tax purposes. Contributions to the profit-sharing plan for 2006, 2005, and 2004 were $1,051,140, $864,096, and $787,274, respectively.

In 2005, Bank 10 of Belton had a 401k plan covering all eligible employees. Matching contributions by Bank 10 to the 401k plan for 2005 were $98,490.

(16) Stock Option Plans

On December 4, 2000, the Incentive Stock Option Committee of the board of directors (the Committee) approved the Company’s stock plan, which provides for the grant of options to purchase up to 450,000 shares of the Company’s common stock to officers and other key employees of the Company and its subsidiaries. Terms and conditions (including price, exercise date, and number of shares) are determined by the Committee. All options were granted at fair value and vest over periods ranging from four to five years, except for 4,821 options issued in 2002 that vested immediately.

The following table summarizes the Company’s stock option activity:

								Weighted average
	Number of shares							exercise price
	December 31							December 31
	2006			2005		2004		2006		2005		2004
Outstanding, beginning of year		160,809			125,391		98,891	$	24.54		23.44		20.27
Granted		44,276			35,418		26,500		29.95		28.45		35.25
Exercised		—			—		—		—		—		—
Canceled		(2,346	)		—		—		29.95		—		—
Outstanding, end of year		202,739			160,809		125,391		25.66		24.54		23.44
Exercisable, end of year		111,025			77,361		57,970		21.82		19.92		18.10

(Continued)

71

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Options outstanding at December 31, 2006 had a remaining contractual life of approximately seven years and an intrinsic value of $1,280,000.

Options exercisable at December 31, 2006 had a weighted average remaining contractual life of approximately six years and an intrinsic value of approximately $1,104,000.

Total stock-based compensation expense for the year ended December 31, 2006 was $218,000 ($142,000 after tax). As of December 31, 2006, the total unrecognized compensation expense related to non-vested stock awards was $394,000 and the related weighted average period over which it is expected to be recognized is approximately two years.

Prior to January 1, 2006, the Company applied APB Opinion No. 25 in accounting for the stock options and, accordingly, no compensation cost has been recognized in the consolidated financial statements for 2005 and 2004. The weighted average grant-date fair values of stock options granted during the following years and the weighted average significant assumptions used to determine those fair values, using the Black-Scholes option-pricing model, are as follows:

	2006			2005			2004
Options issued during:
Grant date fair value per share	$	6.13			6.30			9.73
Significant assumptions:
Risk-free interest rate at grant date		4.61	%		3.86	%		4.05	%
Expected annual rate of quarterly dividends		2.80			2.30			2.30
Expected stock price volatility		20			22			23
Expected life to exercise (years)		6.25			6.25			10

(Continued)

72

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(17) Segment Information

Through the respective branch network, the Banks provide similar products and services in four defined geographic areas. The products and services offered include a broad range of commercial and personal banking services, including certificates of deposit, individual retirement and other time deposit accounts, checking and other demand deposit accounts, interest checking accounts, savings accounts, and money market accounts. Loans include real estate, commercial, and installment and other consumer. Other financial services include automatic teller machines, trust services, credit related insurance, and safe deposit boxes. The revenues generated by each business segment consist primarily of interest income, generated from the loan and debt and equity security portfolios, and service charges and fees, generated from the deposit products and services. The geographic areas are defined to be communities surrounding Jefferson City, Clinton, Warsaw, and Belton Missouri. The products and services are offered to customers primarily within their respective geographic areas. The business segments results that follow are consistent with the Company’s internal reporting system, which is consistent, in all material respects, with accounting principles generally accepted in the United States of America and practices prevalent in the banking industry.

	2006
			Citizens
	The Exchange		Union
	National		State Bank		Osage Valley
	Bank of		and Trust		Bank		Bank 10		Corporate
	Jefferson City		of Clinton		of Warsaw		of Belton		and other			Total
Balance sheet information:
Loans, net of allowance for loan losses	$	350,563,084		246,555,958		58,032,091		148,146,248		—			803,297,381
Debt and equity securities		85,177,657		39,208,307		35,307,163		28,594,183		1,486,000			189,773,310
Goodwill		4,382,098		16,701,762		4,112,876		15,127,039		—			40,323,775
Intangible assets		—		367,908		—		3,385,969		—			3,753,877
Total assets		475,048,886		342,331,904		108,850,944		214,955,317		1,524,846			1,142,711,897
Deposits		384,413,021		274,600,786		92,364,036		157,263,345		(8,776,454	)		899,864,734
Stockholders’ equity		51,168,606		46,046,673		10,005,149		37,033,766		(39,309,604	)		104,944,590
Statement of income information:
Total interest income	$	32,219,012		20,094,088		5,263,747		13,740,491		105,954			71,423,292
Total interest expense		13,269,092		7,705,858		3,051,413		5,290,798		3,449,247			32,766,408
Net interest income		18,949,920		12,388,230		2,212,334		8,449,693		(3,343,293	)		38,656,884
Provision for loan losses		900,000		300,000		31,500		94,233		—			1,325,733
Noninterest income		4,148,175		1,833,242		617,781		2,078,268		(77,402	)		8,600,064
Noninterest expense		11,436,447		9,165,146		2,218,274		6,585,957		742,319			30,148,143
Income taxes		3,464,950		1,434,927		105,673		1,251,957		(1,349,640	)		4,907,867
Net income (loss)	$	7,296,698		3,321,399		474,668		2,595,814		(2,813,374	)		10,875,205
Capital expenditures	$	861,851		2,468,579		254,060		347,321		—			3,931,811

(Continued)

73

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

	2005
			Citizens
	The Exchange		Union
	National		State Bank		Osage Valley
	Bank of		and Trust		Bank		Bank 10		Corporate
	Jefferson City		of Clinton		of Warsaw		of Belton		and other			Total
Balance sheet information:
Loans, net of allowance for loan losses	$	374,467,039		238,347,946		53,132,834		138,502,283		—			804,450,102
Debt and equity securities		71,830,503		42,305,412		34,234,784		29,835,127		1,486,000			179,691,826
Goodwill		4,382,098		16,701,762		4,112,876		15,127,039		—			40,323,775
Intangible assets		—		583,020		—		4,203,440		—			4,786,460
Total assets		487,322,716		329,366,100		102,071,064		205,092,903		2,617,693			1,126,470,476
Deposits		391,682,694		265,370,183		84,823,313		148,430,696		(8,851,680	)		881,455,206
Stockholders’ equity		49,732,241		42,602,916		9,415,739		34,410,079		(39,428,110	)		96,732,865
Statement of income information:
Total interest income	$	28,266,336		16,517,644		4,720,339		7,754,331		81,384			57,340,034
Total interest expense		10,840,544		5,712,821		2,191,408		2,319,968		2,608,849			23,673,590
Net interest income		17,425,792		10,804,823		2,528,931		5,434,363		(2,527,465	)		33,666,444
Provision for loan losses		875,000		400,000		42,000		4,612		—			1,321,612
Noninterest income		3,842,239		1,742,060		574,036		1,187,809		(80,848	)		7,265,296
Noninterest expense		10,837,795		7,828,933		1,899,109		4,332,782		469,531			25,368,150
Income taxes		3,058,800		1,295,533		298,520		727,177		(1,053,330	)		4,326,700
Net income (loss)	$	6,496,436		3,022,417		863,338		1,557,601		(2,024,514	)		9,915,278
Capital expenditures	$	347,324		4,103,289		1,866,885		69,658		—			6,387,156

(Continued)

74

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005, and 2004

	2004
			Citizens
	The Exchange		Union
	National		State Bank		Osage Valley
	Bank of		and Trust		Bank		Corporate
	Jefferson City		of Clinton		of Warsaw		and other			Total
Balance sheet information:
Loans, net of allowance for loan losses	$	366,749,286		213,808,231		48,583,519		—			629,141,036
Debt and equity securities		99,466,264		36,449,804		35,027,567		774,000			171,717,635
Goodwill		4,382,098		16,701,762		4,112,876		—			25,196,736
Intangible assets		—		798,132		—		—			798,132
Total assets		513,839,636		311,756,271		97,507,515		770,848			923,874,270
Deposits		406,897,725		256,351,275		81,077,272		(17,676,796	)		726,649,476
Stockholders’ equity		49,643,120		39,954,448		9,654,137		(7,480,922	)		91,770,783
Statement of income information:
Total interest income	$	23,333,071		13,411,203		4,352,837		(6,515	)		41,090,596
Total interest expense		7,406,286		3,514,735		1,667,972		797,918			13,386,911
Net interest income		15,926,785		9,896,468		2,684,865		(804,433	)		27,703,685
Provision for loan losses		600,000		300,000		42,000		—			942,000
Noninterest income		3,848,193		1,585,141		386,263		(87,040	)		5,732,557
Noninterest expense		11,111,109		7,027,428		1,744,620		499,549			20,382,706
Income taxes		2,609,100		1,326,168		357,788		(486,500	)		3,806,556
Net income (loss)	$	5,454,769		2,828,013		926,720		(904,522	)		8,304,980
Capital expenditures	$	1,213,520		3,455,979		458,449		—			5,127,948

(Continued)

75

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005, and 2004

(18) Condensed Financial Information of Parent Company Only

The condensed balance sheets as of December 31, 2006 and 2005 and the related condensed statements of income and cash flows for the years ended December 31, 2006, 2005 and 2004 of the Company are as follows:

     Condensed Balance Sheets

	2006		2005
Assets
Cash and due from banks	$	8,717,354		8,792,405
Investment in equity securities		1,486,000		1,486,000
Investment in subsidiaries		144,799,226		136,706,007
Other assets		117,110		248,231
Total assets	$	155,119,690		147,232,643
Liabilities and Stockholders’ Equity
Subordinated notes	$	49,486,000		49,486,000
Other liabilities		689,100		1,013,778
Stockholders’ equity		104,944,590		96,732,865
Total liabilities and stockholders’ equity	$	155,119,690		147,232,643

(Continued)

76

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005, and 2004

Condensed Statements of Income

	2006		2005		2004
Revenue:
Dividends received from subsidiaries	$	6,000,000		7,600,000		6,400,000
Interest and dividends		185,125		219,828		142,179
Other		—		3,811		308
Total revenue		6,185,125		7,823,639		6,542,487
Expenses:
Interest on bank debt		—		—		60,288
Interest on subordinated notes		3,528,418		2,747,293		886,324
Other		819,721		554,190		586,897
Total expenses		4,348,139		3,301,483		1,533,509
Income before income tax benefit and equity in undistributed income of subsidiaries		1,836,986		4,522,156		5,008,978
Income tax benefit		1,349,640		1,053,330		486,500
Equity in undistributed income of subsidiaries		7,688,579		4,339,792		2,809,502
Net income	$	10,875,205		9,915,278		8,304,980

(Continued)

77

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005, and 2004

Condensed Statements of Cash Flows

	2006			2005			2004
Cash flows from operating activities:
Net income	$	10,875,205			9,915,278			8,304,980
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of subsidiaries		(7,688,579	)		(4,339,792	)		(2,809,502	)
Stock based compensation expense		218,245			—			—
Other, net		22,750			97,372			(95,210	)
Net cash provided by operating activities		3,427,621			5,672,858			5,400,268
Cash flows from investing activities:
Acquisition of subsidiary, net of cash acquired		—			(34,020,004	)		—
Net cash used in investing activities		—			(34,020,004	)		—
Cash flows from financing activities:
Purchase of available for sale securities		—			(712,000	)		(774,000	)
Proceeds from issuance of subordinated notes		—			23,712,000			25,774,000
Repayment of bank debt		—			—			(17,950,568	)
Cash dividends paid		(3,502,672	)		(3,377,576	)		(3,377,576	)
Net cash provided by (used in) financing activities		(3,502,672	)		19,622,424			3,671,856
Net increase (decrease) in cash		(75,051	)		(8,724,722	)		9,072,124
Cash and due from banks at beginning of year		8,792,405			17,517,127			8,445,003
Cash and due from banks at end of year	$	8,717,354			8,792,405			17,517,127

(19) Disclosures About Financial Instruments

The Company issues financial instruments with off-balance-sheet risk in the normal course of business of meeting the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

(Continued)

78

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The Company’s extent of involvement and maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets. At December 31, 2006, no amounts have been accrued for any estimated losses for these financial instruments.

The contractual amount of off-balance-sheet financial instruments as of December 31, 2006 and 2005 is as follows:

	2006		2005
Commitments to extend credit	$	130,260,627		142,489,989
Standby letters of credit		3,996,657		4,756,712

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Of the total commitments to extend credit at December 31, 2006, approximately $88,552,000 represents fixed-rate loan commitments. Of the total commitments to extend credit at December 31, 2005, approximately $105,481,000 represents fixed-rate loan commitments. Since certain of the commitments and letters of credit are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, furniture and equipment, and real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support contractual obligations of the Company’s customers. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. The approximate remaining term of standby letters of credit range from one month to ten years at December 31, 2006.

(Continued)

79

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

A summary of the carrying amounts and fair values of the Company’s financial instruments at December 31, 2006 and 2005 is as follows:

	2006				2005
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value
Assets:
Loans	$	803,297,381		809,906,000		804,450,102		803,460,000
Investment in debt and equity securities		189,773,310		189,773,310		179,691,826		179,691,826
Federal fund sold and securities purchased under agreements to resell		9,922,961		9,922,961		12,447,981		12,447,981
Cash and due from banks		43,077,605		43,077,605		35,282,568		35,282,568
Mortgage servicing rights		1,350,375		3,010,000		1,536,331		2,596,000
Accrued interest receivable		8,773,686		8,773,686		7,772,573		7,772,573
	$	1,056,195,318		1,064,463,562		1,041,181,381		1,041,250,948
Liabilities:
Deposits:
Demand	$	138,885,883		138,885,883		134,364,788		134,364,788
NOW		108,886,884		108,886,884		110,338,554		110,338,554
Savings		48,249,204		48,249,204		56,213,747		56,213,747
Money market		151,737,295		151,737,295		157,271,050		157,271,050
Time		452,105,468		453,230,000		423,267,067		423,490,000
Federal funds purchased and securities sold under agreements to repurchase		29,460,492		29,460,492		36,995,735		36,995,735
Interest-bearing demand notes to U.S. Treasury		1,735,638		1,735,638		1,098,337		1,098,337
Subordinated notes		49,486,000		49,486,000		49,486,000		49,486,000
Other borrowed money		47,368,315		47,251,000		52,179,661		52,461,000
Accrued interest payable		4,366,250		4,366,250		3,124,365		3,124,365
	$	1,032,281,429		1,033,288,646		1,024,339,304		1,024,843,576

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate such value:

          Loans

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as real estate, installment and other consumer, commercial, and bankers’ acceptances. Each loan category is further segmented into fixed and adjustable interest rate terms and by performing and nonperforming categories.

(Continued)

80

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

The fair value of performing loans is calculated by discounting scheduled cash flows through estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Company’s historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions.

The fair value for significant nonperforming loans is based on recent external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market and specific borrower information.

Investment in Debt and Equity Securities

Fair values are based on quoted market prices or dealer quotes.

Federal Funds Sold, Cash, and Due From Banks

For federal funds sold, cash, and due from banks, the carrying amount is a reasonable estimate of fair value, as such instruments reprice in a short time period.

Mortgage Servicing Rights

The fair value of mortgage servicing rights is based on the discounted value of contractual cash flows utilizing servicing rate, constant prepayment rate, servicing cost, and discount rate factors.

Accrued Interest Receivable and Payable

For accrued interest receivable and payable, the carrying amount is a reasonable estimate of fair value because of the short maturity for these financial instruments.

Deposits

The fair value of deposits with no stated maturity, such as noninterest-bearing demand, NOW accounts, savings, and money market, is equal to the amount payable on demand. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Securities Sold Under Agreements to Repurchase and Interest-bearing Demand Notes to U.S. Treasury

For securities sold under agreements to repurchase and interest-bearing demand notes to U.S. Treasury, the carrying amount is a reasonable estimate of fair value, as such instruments reprice in a short time period.

Subordinated Notes

For subordinated notes, the carrying value is a reasonable estimate of fair value, as such instruments reprice in a short time period.

(Continued)

81

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

Other Borrowed Money

The fair value of other borrowed money is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for other borrowed money of similar remaining maturities.

Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties drawing on such financial instruments, and the present creditworthiness of such counterparties. The Company believes such commitments have been made on terms, which are competitive in the markets in which it operates.

The fair value estimates provided are made at a point in time based on market information and information about the financial instruments. Because no market exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the fair value estimates.

(20) Litigation

Various legal claims have arisen in the normal course of business, which, in the opinion of management of the Company, will not result in any material liability to the Company.

(Continued)

82

EXCHANGE NATIONAL BANCSHARES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2006, 2005, and 2004

(21) Quarterly Financial Information

(unaudited)
(In thousands, except per share data)

	First		Second		Third		Fourth
	quarter		quarter		quarter		quarter		Year-to-Date
	2006
Interest income	$	16,793		17,930		18,314		18,386		71,423
Interest expense		7,334		8,095		8,589		8,748		32,766
Net interest income	$	9,459		9,835		9,725		9,638		38,657
Provision for loan losses	$	317		311		300		398		1,326
Noninterest income		2,026		2,249		2,216		2,109		8,600
Noninterest expense		7,312		7,458		7,482		7,896		30,148
Income taxes		1,167		1,383		1,301		1,057		4,908
Net income		2,689		2,932		2,858		2,396		10,875
Net income per share:
Basic earnings per share		0.64		0.70		0.69		0.58		2.61
Diluted earnings per share		0.64		0.70		0.68		0.57		2.59
	2005
Interest income	$	11,527		13,887		15,863		16,063		57,340
Interest expense		4,440		5,811		6,707		6,715		23,673
Net interest income	$	7,087		8,076		9,156		9,348		33,667
Provision for loan losses	$	235		238		260		589		1,322
Noninterest income		1,331		1,797		2,011		2,126		7,265
Noninterest expense		4,975		6,261		7,069		7,063		25,368
Income taxes		970		1,030		1,186		1,141		4,327
Net income		2,238		2,344		2,652		2,681		9,915
Net income per share:
Basic earnings per share		0.54		0.56		0.64		0.64		2.38
Diluted earnings per share		0.53		0.56		0.63		0.64		2.36

83

MARKET PRICE OF AND DIVIDENDS ON EQUITY SECURITIES AND RELATED MATTERS

     Market Price. Since June 19, 2000 our Company’s common stock has been traded on Nasdaq’s national market under the stock symbol of “EXJF.” The following table sets forth the range of high and low bid prices of our Company’s common stock by quarter for each quarter in 2006 and 2005 in which the stock was traded.

2006	High		Low
First Quarter		30.90		29.00
Second Quarter		30.52		28.21
Third Quarter		31.00		28.25
Fourth Quarter		33.24		29.70

2005	High		Low
First Quarter		30.06		28.50
Second Quarter		30.25		26.74
Third Quarter		29.46		26.00
Fourth Quarter		30.88		27.02

     Shares Outstanding. As of March 1, 2007, our Company had issued 4,298,353 shares of common stock, of which 4,169,847 shares were outstanding. The outstanding shares were held of record by approximately 1,445 persons. The common stock is the only class of equity security which our Company has outstanding.

     Dividends. The following table sets forth information on dividends paid by our Company in 2006 and 2005.

	Dividends Paid
Month Paid	Per Share
January, 2006	$	0.21
April, 2006		0.21
July, 2006		0.21
October, 2006		0.21
Total for 2006	$	0.84
January, 2005	$	0.18
April, 2005		0.18
July, 2005		0.18
October, 2005		0.18
December, 2005		0.09
Total for 2005	$	0.81

     Our Board of Directors intends that our Company will continue to pay quarterly dividends at least at the current rate. The actual amount of quarterly dividends and the payment, as well as the amount, of any special dividend ultimately will depend upon the payment of sufficient dividends by our subsidiary Banks to our Company. The payment by our Banks of dividends to our Company will depend upon such factors as our Banks’ financial condition, results of operations and current and anticipated cash needs, including capital requirements. As discussed in Note 3 to our Company’s consolidated financial statements, the Banks may pay up to $11,242,000 in dividends to our Company without regulatory approval subject to the ongoing capital requirements of the Banks.

     Stock Performance Graph. The following performance graph shows a comparison of cumulative total returns for our company, the Nasdaq Stock Market (U.S. Companies), a peer index of financial institutions having total assets of between $1 billion and $5 billion and an index of financial institutions having total assets of between $500 million and $1 billion utilized by the Company in prior years (as calculated by SNL Securities LC) for the period from December 31, 2001, through December 31, 2006. The cumulative total return on investment for each of the periods for our company, the Nasdaq Stock Market (U.S. Companies), the peer index and the index of financial institutions having total assets of

84

between $500 million and $1 billion used by the Company in prior years is based on the stock price or index at January 1, 2002. The performance graph assumes that the value of an investment in our common stock and each index was $100 at December 31, 2001 and that all dividends were reinvested. The information presented in the performance graph is historical in nature and is not intended to represent or guarantee future returns. In future years, the index of financial institutions having total assets of between $500 million and $1 billion will not be utilized, and instead the index of financial institutions having total assets of between $1 billion and $5 billion will be used as the Company’s peer index.

The comparison of cumulative total returns presented in the above graph was plotted using the following index values and common stock price values:

	12/31/01		12/31/02		12/31/03		12/31/04		12/31/05		12/31/06
Exchange National Bancshares	$	100.00	$	132.53	$	219.92	$	180.13	$	189.52	$	208.00
Nasdaq Stock Market (U.S. Companies)	$	100.00	$	68.76	$	103.67	$	113.16	$	115.57	$	127.58
Index of financial institutions ($500 million to $1 billion)	$	100.00	$	127.67	$	184.09	$	208.62	$	217.57	$	247.44
Index of financial institutions ($1 billion to $5 billion)	$	100.00	$	115.44	$	156.98	$	193.74	$	190.43	$	220.36

85

DIRECTORS AND EXECUTIVE OFFICERS OF OUR COMPANY

Name	Position with Our Company	Position with Subsidiary Banks	Principal Occupation
James E. Smith	Chairman, Chief Executive Officer and Director-Class I	Chairman, Chief Executive Officer, President and Director of Citizens Union State Bank, Vice Chairman and Director of Osage Valley Bank, Director of Exchange National Bank, Chairman and Director of Bank 10	Position with Exchange, Citizens Union State Bank, Osage Valley Bank, and Bank 10
David T. Turner	President and Director-Class III	Chairman, Chief Executive Officer , President and Director of Exchange National Bank, Director of Citizens Union State Bank	Position with Exchange and Exchange National Bank
Charles G. Dudenhoeffer, Jr.	Director-Class I	Director of Exchange National Bank	Retired
Philip D. Freeman	Director-Class I	Director of Exchange National Bank	Owner/Manager, Freeman Mortuary, Jefferson City, Missouri
Kevin L. Riley	Director-Class III	Director of Exchange National Bank	Co-owner, Riley Chevrolet, Inc. and Riley Toyota, Scion, Cadillac, Inc., Jefferson City, Missouri
Julius F. Wall	Director-Class II	Director of Citizens Union State Bank	Attorney, Poague, Wall, Eshelman, Cox & Adams, Clinton, Missouri
Gus S. Wetzel, II	Director-Class II	Director of Citizens Union State Bank	Physician, Wetzel Clinic, Clinton, Missouri
Richard G. Rose	Treasurer	Senior Vice President and Controller of Exchange National Bank	Position with Exchange and Exchange National Bank
Kathleen L. Bruegenhemke	Senior Vice President, Chief Risk Officer and Corporate Secretary		Position with Exchange
James H. Taylor, Jr.	Senior Vice President and Senior Credit Officer		Position with Exchange

ANNUAL REPORT ON FORM 10-K

A copy of our Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission, excluding exhibits, will be furnished without charge to shareholders entitled to vote at the 2007 annual meeting of shareholders upon written request to Kathleen L. Bruegenhemke, Secretary, Exchange National Bancshares, Inc., 132 East High Street, Jefferson City, Missouri 65101. Our Company will provide a copy of any exhibit to the Form 10-K to any such person upon written request and the payment of our Company’s reasonable expenses in furnishing such exhibits.

86

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Exchange National Bancshares, Inc:

We consent to the incorporation by reference in the registration statement (No. 333-68388 and No. 333-136477) on Form S-8 of Exchange National Bancshares, Inc. of our reports dated March 16, 2007, with respect to the consolidated balance sheets of Exchange National Bancshares, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of Exchange National Bancshares, Inc.

/s/ KPMG LLP
St. Louis, Missouri
March 16, 2006

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, James E. Smith, certify that:

     1. I have reviewed this report on Form 10-K of Exchange National Bancshares, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ James E. Smith
	James E. Smith
	Chairman of the Board and Chief Executive Officer

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EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Richard G. Rose, certify that:

     1. I have reviewed this report on Form 10-K of Exchange National Bancshares, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ Richard G. Rose
	Richard G. Rose
	Treasurer

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EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

     In connection with the Annual Report of Exchange National Bancshares, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission (the “Report”), I, James E. Smith, Chairman of the Board and Chief Executive Officer of the Company, hereby certify in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (b) The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

Dated: March 16, 2007

/s/ James E. Smith  

James E. Smith 

Chairman of the Board and Chief Executive Officer 

“A signed original of this written statement required by Section 906 has been provided to Exchange National Bancshares, Inc. and will be retained by Exchange National Bancshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.”

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EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

     In connection with the Annual Report of Exchange National Bancshares, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission (the “Report”), I, Richard G. Rose, Treasurer of the Company, hereby certify in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (b) The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

Dated: March 16, 2007

/s/ Richard G. Rose  

Richard G. Rose 

Treasurer 

“A signed original of this written statement required by Section 906 has been provided to Exchange National Bancshares, Inc. and will be retained by Exchange National Bancshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.”

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