-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MSvX1dJrqTs3TvVqFFCyDTCd2DcKCcGVIR9bNuZNIg4o6QGc6K8GCq9uZ59A/Bkb V3soBiUKnDQrSFckSj2ggQ== 0000893847-99-000003.txt : 19990514 0000893847-99-000003.hdr.sgml : 19990514 ACCESSION NUMBER: 0000893847-99-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCHANGE NATIONAL BANCSHARES INC CENTRAL INDEX KEY: 0000893847 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 431626350 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23636 FILM NUMBER: 99620565 BUSINESS ADDRESS: STREET 1: 132 E HIGH ST CITY: JEFFERSON CITY STATE: MO ZIP: 65101 BUSINESS PHONE: 3147616100 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 0-23636 EXCHANGE NATIONAL BANCSHARES, INC. (Exact name of registrant as specified in its charter) Missouri 43-1626350 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 132 East High Street, Jefferson City, Missouri 65101 (Address of principal executive offices) (Zip Code) (573) 761-6100 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of May 1, 1999, the registrant had 718,511 shares of common stock, par value $1.00 per share, outstanding. Page 1 of 25 pages Index to Exhibits located on page 25 PART I - FINANCIAL INFORMATION Item 1. Financial Statements EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 1999 1998 ____________ ____________ ASSETS Loans: Commercial $100,085,365 98,298,265 Real estate -- construction 20,818,000 19,414,000 Real estate -- mortgage 120,556,248 123,534,055 Consumer 46,774,383 46,971,185 ____________ ____________ 288,233,996 288,217,505 Less allowance for loan losses 4,566,934 4,412,921 ____________ ____________ Loans, net 283,667,062 283,804,584 ____________ ____________ Investment in debt and equity securities: Available-for-sale, at fair value 71,660,503 70,316,733 Held-to-maturity, fair value of $29,333,478 at March 31, 1999 and $31,390,916 at December 31, 1998 28,807,145 30,748,943 ____________ ____________ Total investment in debt and equity securities 100,467,648 101,065,676 ____________ ____________ Federal funds sold 30,100,000 26,400,000 Cash and due from banks 13,948,355 19,803,744 Premises and equipment 12,394,546 12,064,252 Accrued interest receivable 3,860,482 3,794,092 Intangible assets 10,576,971 10,763,915 Other assets 1,454,959 1,007,111 ____________ ____________ $456,470,023 458,703,374 ============ ============
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CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (Unaudited) March 31, December 31, 1999 1998 ____________ ____________ LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits $ 49,785,411 54,765,805 Time deposits 318,164,935 318,755,981 ____________ ____________ Total deposits 367,950,346 373,521,786 Securities sold under agreements to repurchase 19,718,261 16,990,911 Interest-bearing demand notes to U.S. Treasury 374,080 675,941 Other borrowed money 17,150,568 17,150,568 Accrued interest payable 2,078,953 2,166,955 Other liabilities 2,534,475 2,084,031 ____________ ____________ Total liabilities 409,806,683 412,590,192 ____________ ____________ Stockholders' equity: Common Stock - $1 par value; 1,500,000 shares authorized; 718,511 issued and outstanding 718,511 718,511 Surplus 1,281,489 1,281,489 Retained earnings 44,479,858 43,730,026 Accumulated other comprehensive income 183,482 383,156 ____________ ____________ Total stockholders' equity 46,663,340 46,113,182 ____________ ____________ $456,470,023 458,703,374 ============ ============
See accompanying notes to condensed consolidated financial statements. EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended March 31, _______________________ 1999 1998 ___________ ___________ Interest income $ 7,652,736 8,093,756 Interest expense 3,869,723 4,423,528 ___________ ___________ Net interest income 3,783,013 3,670,288 Provision for loan losses 180,000 172,500 ___________ ___________ Net interest income after provision for loan losses 3,603,013 3,497,728 Noninterest income 722,775 701,839 Noninterest expense 2,659,700 2,487,969 ___________ ___________ Income before income taxes 1,666,088 1,711,598 Income taxes 557,000 564,545 ___________ ___________ Net income $ 1,109,088 1,147,053 =========== =========== Basic and diluted earnings per share $1.54 1.60 ===== ===== Dividends per share: Declared $0.50 0.50 ===== ===== Paid $0.50 0.50 ===== =====
See accompanying notes to condensed consolidated financial statements. EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, __________________________ 1999 1998 ___________ ___________ Cash flows from operating activities: Net income $ 1,109,088 1,147,053 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 180,000 172,500 Depreciation expense 188,680 133,343 Net amortization of debt securities premiums and discounts 82,228 52,683 Amortization of intangible assets 186,944 208,942 Decrease (increase) in accrued interest receivable (66,390) 247,292 Increase in other assets (330,580) (151,675) Increase (decrease)in accrued interest payable (88,002) 86,119 Increase in other liabilities 450,444 791,250 Net securities gains -- (6,491) Other, net (70,264) 129,243 Origination of mortgage loans for sale (11,043,083) (19,328,390) Proceeds from the sale of mortgage loans held for sale 11,043,083 19,328,390 ___________ ___________ Net cash provided by operating activities 1,642,148 2,810,259 ___________ ___________ Cash flows from investing activities: Net decrease (increase) in loans (117,231) 2,199,205 Purchases of available-for-sale debt securities (10,174,564) (4,690,922) Purchases of held-to-maturity debt securities -- (18,721,051) Proceeds from maturities of debt securities: Available-for-sale 3,334,517 6,057,503 Held-to-maturity 1,296,906 6,725,852 Proceeds from calls of debt securities: Available-for-sale 5,125,000 6,455,029 Held-to-maturity 617,000 559,076 Purchases of premises and equipment (518,974) (788,473) Proceeds from sales of other real estate owned and repossessions 145,015 302,327 ___________ ___________ Net cash used in investing activities (292,331) (1,901,454) ___________ ___________
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited) Three Months Ended March 31, __________________________ 1999 1998 ___________ ___________ Cash flows from financing activities: Net decrease in demand deposits (4,980,394) (2,505,119) Net increase in interest-bearing transaction accounts 132,673 4,323,908 Net increase (decrease) in time deposits (723,719) 231,469 Net increase in securities sold under agreements to repurchase 2,727,350 15,429,660 Net decrease in interest-bearing demand notes to U.S. Treasury (301,861) (2,885,533) Proceeds from Federal Home Loan Bank borrowings -- 2,800,000 Repayment of other borrowed money -- (2,803,000) Cash dividends paid (359,255) (359,255) ___________ ___________ Net cash provided by (used in) financing activities (3,505,206) 14,232,130 ___________ ___________ Net increase (decrease)in cash and cash equivalents (2,155,389) 15,140,935 Cash and cash equivalents, beginning of period 46,203,744 34,352,050 ___________ ___________ Cash and cash equivalents, end of period $44,048,355 49,492,985 =========== =========== Supplemental disclosure of cash flow information- Cash paid (received) during period for: Interest $ 3,957,725 4,337,409 Income taxes 90,393 (16,054) Supplemental schedule of noncash investing activities- Other real estate and repossessions acquired in settlement of loans 89,051 447,470
See accompanying notes to condensed consolidated financial statements. EXCHANGE NATIONAL BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three Months Ended March 31, 1999 and 1998 Exchange National Bancshares, Inc. ("Bancshares" or the "Company") is a bank holding company registered under the Bank Holding Company Act of 1956. Bancshares' activities currently are limited to ownership of the outstanding capital stock of The Exchange National Bank of Jefferson City (ENB) and Union State Bancshares, Inc.(Union) which owns 100% of Union State Bank and Trust of Clinton (USB). Bancshares acquired ENB on April 7, 1993. Bancshares acquired Union on November 3, 1997. Earnings per share is computed by dividing net income by 718,511, the weighted average number of common shares outstanding during the three month periods ended March 31, 1999 and 1998. Due to the fact Bancshares has no dilutive instruments, basic earnings per share and dilutive earnings per share are equal. On January 1, 1998 Bancshares adopted the provisions of Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130), which established standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. For the three-month periods ended March 31, 1999 and 1998, unrealized holding gains and losses on investment in debt and equity securities available-for-sale were Bancshares' only other comprehensive income component. Comprehensive income for the three-month periods ended March 31, 1999 and 1998 is summarized as follows:
Three Months Ended March 31, _______________________ 1999 1998 ___________ __________ Net income $ 1,109,088 1,147,053 Other comprehensive income (loss): Net unrealized holding gains (losses) on investments in debt and equity securities available-for-sale (199,674) 73,149 Adjustment for net securities gains realized in net income, net of applicable income taxes -- (4,089) Total other comprehensive income (loss) (199,674) 69,060 ___________ __________ Comprehensive income $ 909,414 1,216,113 =========== ==========
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133 establishes standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 133 is effective for all fiscal years beginning after June 15, 1999. Earlier application of SFAS 133 is encouraged but should not be applied retroactively to financial statements of prior periods. The Company is currently evaluating the requirements and impact of SFAS 133. In October 1998, the FASB issued Statement of Financial Accounting Standard No. 134, Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise (SFAS 134) which conforms the subsequent accounting for securities retained after the securitization of mortgage loans by a mortgage banking enterprise with the subsequent accounting for securities retained after the securitization of other types of assets by a nonmortgage banking enterprise. SFAS 134 is effective for the first fiscal quarter beginning after December 15, 1998. Since the Company does not securitize any mortgage loans, SFAS 134 had no impact on the Company's consolidated financial position and results of operations. Through the respective branch network, ENB and USB provide similar products and services in two defined geographic areas. The products and services offered include a broad range of commercial and personal banking services, including certificates of deposit, individual retirement and other time deposit accounts, checking and other demand deposit accounts, interest checking accounts, savings accounts and money market accounts. Loans include real estate, commercial, installment and other consumer loans. Other financial services include automatic teller machines, trust services, credit related insurance, and safe deposit boxes. The revenues generated by each business segment consist primarily of interest income, generated from the loan and debt and equity security portfolios, and service charges and fees, generated from the deposit products and services. The geographic areas are defined to be communities surrounding Jefferson City and Clinton, Missouri. The products and services offered to customers primarily within their respective geographical areas. The business segments results which follow are consistent with the Company's internal reporting system which is consistent, in all material respects, with generally accepted accounting principles and practices prevalent in the banking industry.
March 31, 1999 The Exchange Union National State Bank Bank of and Trust Corporate Jefferson City of Clinton and other Total Balance sheet information: Loans, net of allowance for loan losses $204,049,467 79,617,595 -- 283,667,062 Debt and equity securities 66,092,720 34,374,928 -- 100,467,648 Total assets 306,317,146 150,101,217 51,660 456,470,023 Deposits 249,168,539 120,523,750 (1,741,943) 367,950,346 Stockholders' equity 34,634,899 22,247,757 (10,219,316) 46,663,340 =========== =========== ========== ===========
December 31, 1998 The Exchange Union National State Bank Bank of and Trust Corporate Jefferson City of Clinton and other Total Balance sheet information: Loans, net of allowance for loan losses $201,929,359 81,875,225 -- 283,804,584 Debt and equity securities 64,721,489 36,344,187 -- 101,065,676 Total assets 304,838,954 153,830,907 33,513 458,703,374 Deposits 250,661,815 124,471,279 (1,611,308) 373,521,786 Stockholders' equity 34,473,970 22,058,347 (10,419,135) 46,113,182 =========== =========== ========== ===========
Three Months Ended March 31, 1999 The Exchange Union National State Bank Bank of and Trust Corporate Jefferson City of Clinton and other Total Statement of income information: Total interest income $5,276,436 2,376,300 -- 7,652,736 Total interest expense 2,459,053 1,208,715 201,955 3,869,723 Net interest income 2,817,383 1,167,585 (201,955) 3,783,013 Provision for loan losses 150,000 30,000 -- 180,000 Noninterest income 585,403 137,372 -- 722,775 Noninterest expense 1,797,783 811,550 50,367 2,659,700 Income taxes 465,150 177,250 (85,400) 557,000 Net income (loss) 989,853 286,157 (166,922) 1,109,088 ========= ========= ========= =========
Three Months Ended March 31, 1998 The Exchange Union National State Bank Bank of and Trust Corporate Jefferson City of Clinton and other Total Statement of income information: Total interest income $5,685,768 2,407,988 -- 8,093,756 Total interest expense 2,920,341 1,262,568 240,619 4,423,528 Net interest income 2,765,427 1,145,420 (240,619) 3,670,228 Provision for loan losses 150,000 22,500 -- 172,500 Noninterest income 573,108 128,731 -- 701,839 Noninterest expense 1,674,138 756,825 57,006 2,487,969 Income taxes 488,000 165,545 (89,000) 564,545 Net income (loss) 1,026,397 329,281 (208,625) 1,147,053 ========= ========= ========= =========
The accompanying condensed consolidated financial statements include all adjustments which in the opinion of management are necessary in order to make those statements not misleading. Certain amounts in the 1998 condensed consolidated financial statements have been reclassified to conform with the 1999 condensed consolidated presentation. Such reclassifications have no effect on previously reported net income. Operating results for the period ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. It is suggested that these condensed consolidated interim financial statements be read in conjunction with the Company's audited consolidated financial statements included in its 1998 Annual Report to Shareholders under the caption "Consolidated Financial Statements" and incorporated by reference into its Annual Report on Form 10-KSB for the year ended December 31, 1998 as Exhibit 13. PAGE Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS MADE IN THIS REPORT ON FORM 10-Q ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE WORDS "SHOULD", "EXPECT", "ANTICIPATE", "BELIEVE", "INTEND", "MAY", "HOPE", "FORECAST" AND SIMILAR EXPRESSIONS MAY IDENTIFY FORWARD LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, FINANCIAL CONDITION, OR BUSINESS COULD DIFFER MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION, OR BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION, OR BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THE FORWARD LOOKING STATEMENTS HEREIN INCLUDE MARKET CONDITIONS AS WELL AS CONDITIONS SPECIFICALLY AFFECTING THE BANKING INDUSTRY GENERALLY AND FACTORS HAVING A SPECIFIC IMPACT ON BANCSHARES INCLUDING, BUT NOT LIMITED TO, FLUCTUATIONS IN INTEREST RATES AND IN THE ECONOMY; THE IMPACT OF LAWS AND REGULATIONS APPLICABLE TO BANCSHARES AND CHANGES THEREIN; COMPETITIVE CONDITIONS IN THE MARKETS IN WHICH BANCSHARES CONDUCTS ITS OPERATIONS, INCLUDING COMPETITION FROM BANKING AND NON-BANKING COMPANIES WITH SUBSTANTIALLY GREATER RESOURCES THAN BANCSHARES, SOME OF WHICH MAY OFFER AND DEVELOP PRODUCTS AND SERVICES NOT OFFERED BY BANCSHARES; AND THE ABILITY OF BANCSHARES TO RESPOND TO CHANGES IN TECHNOLOGY, INCLUDING EFFECTS OF THE YEAR 2000 PROBLEM. ADDITIONAL FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES WERE DISCUSSED UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION, OR BUSINESS," IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1998, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. Net income for the three months ended March 31, 1999 of $1,109,000 decreased $38,000 when compared to the first quarter of 1998. Earnings per common share for the first quarter of 1999 of $1.54 decreased 6 cents or 3.8% when compared to the first quarter of 1998. The following table provides a comparison of fully taxable equivalent earnings, including adjustments to interest income and tax expense for interest on tax-exempt loans and investments.
(Dollars expressed in thousands) Three Months Ended March 31, _______________ 1999 1998 _______ _______ Interest income $ 7,653 8,094 Fully taxable equivalent (FTE) adjustment 144 151 _______ _______ Interest income (FTE basis) 7,797 8,245 Interest expense 3,870 4,423 _______ _______ Net interest income (FTE basis) 3,927 3,822 Provision for loan losses 180 173 _______ _______ Net interest income after provision for loan losses (FTE basis) 3,747 3,649 Noninterest income 723 702 Noninterest expense 2,660 2,488 _______ _______ Earnings before income taxes (FTE basis) 1,810 1,863 _______ _______ Income taxes 557 565 FTE adjustment 144 151 _______ _______ Income taxes (FTE basis) 701 716 _______ _______ Net income $ 1,109 1,147 ======= =======
Net interest income on a fully taxable equivalent basis increased $105,000 or 2.7% to $3,927,000 or 3.88% of average earning assets for the first quarter of 1999 compared to $3,822,000 or 3.67% of average earning assets for the same period of 1998. The provision for loan losses for the three months ended March 31, 1999 was $180,000 compared to $173,000 for the same period of 1998. Noninterest income and noninterest expense for the three month periods ended March 31, 1999 and 1998 were as follows:
(Dollars expressed in thousands) Three Months Ended March 31, Increase (decrease) ________________ __________________ 1999 1998 Amount % _______ _______ ________ ________ Noninterest Income Service charges on deposit accounts $ 261 233 28 12.0 % Trust department income 87 187 (100) (53.5) Mortgage loan servicing fees 112 95 17 17.9 Gain on sales of mortgage loans 152 87 65 74.7 Net gain on sales and calls of debt securities -- 6 (6) (100.0) Credit card fees 29 35 (6) (17.1) Other 82 59 23 39.0 _______ _______ _______ $ 723 702 21 3.0 % ======= ======= ======= Noninterest Expense Salaries and employee benefits $ 1,474 1,342 132 9.8 % Occupancy expense 155 117 38 32.5 Furniture and equipment expense 260 204 56 27.5 FDIC insurance assessment 17 17 -- -- Advertising and promotion 50 58 (8) (13.8) Postage, printing, and supplies 119 146 (27) (18.5) Legal, examination, and professional fees 58 68 (10) (14.7) Credit card expenses 19 23 (4) (17.4) Credit investigation and loan collection expenses 37 42 (5) (11.9) Amortization of intangible assets 187 209 (22) (10.5) Other 284 262 22 8.4 _______ _______ _______ $ 2,660 2,488 172 6.9 % ======= ======= =======
Noninterest income increased $21,000 or 3.0% to $723,000 for the first quarter of 1999 compared to $702,000 for the same period of 1998. The $28,000 or 12.0% increase in service charges on deposit accounts is due to improved collections of charges as opposed to increases in product pricing. The $100,000 or 53.5% decline in trust department income is the result of the receipt of an unusually large estate distribution fee at ENB in 1998. The $65,000 or 74.7% increase in gain on sales of mortgage loans is due to higher margins on the sale of mortgage loans in the first quarter of 1999 compared to 1998. The Company sold $11,043,000 of loans during the first quarter of 1999 compared to $19,328,000 during the same period in 1998. The $23,000 or 39.0% increase in other noninterest income includes $14,000 of commissions earned on sales of investment products through a relationship with a third party investment company. This relationship was established during the latter part of 1998. Noninterest expense increased $172,000 or 6.9% to $2,660,000 for the first quarter of 1999 compared to $2,488,000 for the first quarter of 1998. Salaries and benefits increased $132,000 or 9.8%. Of this increase, $123,000 represents increased salary expense as a result of normal salary increases plus additional employees. The $38,000 or 32.5% increase in occupancy expense and the $56,000 or 27.5% increase in furniture and equipment expense are primarily related to a renovation project at ENB's main banking facility which was completed during March 1999. Income taxes as a percentage of earnings before income taxes as reported in the condensed consolidated financial statements was 33.4% for the first quarter of 1999 compared to 33.0% for the first quarter of 1998. After adding a fully taxable equivalent adjustment to both income taxes and earnings before income taxes for tax exempt income on loans and investment securities, the fully taxable equivalent ratios of income taxes as a percentage of earnings before income taxes were 38.7% for the first quarter of 1999 and 38.4% for the first quarter of 1998. NET INTEREST INCOME Fully taxable equivalent net interest income increased $105,000 or 2.7% for the three month period ended March 31, 1999 compared to the same period in 1998. Although total interest earning assets declined $11,983,000 or 2.8%, net interest income and the net interest margin increased due to the loss of some public fund repurchase agreements the proceeds of which had been invested in low margin securities. The following table presents average balance sheets, net interest income, average yields of earning assets, and average costs of interest bearing liabilities on a fully taxable equivalent basis for the three month periods ended March 31, 1999 and 1998.
(Dollars expressed in thousands) Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 ___________________________ ___________________________ Interest Rate Interest Rate Average Income/ Earned/ Average Income/ Earned/ Balance Expense/1/ Paid/1/ Balance Expense/1/ Paid/1/ ________ __________ _______ ________ __________ _______ ASSETS Loans:/2/ Commercial $ 97,478 $2,056 8.55% $ 89,896 $1,959 8.84% Real estate 140,567 2,868 8.27 142,024 3,051 8.71 Consumer 46,496 1,007 8.78 44,137 964 8.86 Investment securities:/3/ U.S. Treasury and U.S. Government agencies 70,825 1,034 5.92 91,689 1,394 6.17 State and municipal 26,964 482 7.25 27,300 503 7.47 Other 1,422 23 6.56 1,536 26 6.86 Federal funds sold 26,680 324 4.93 25,758 341 5.37 Interest-bearing deposits 230 3 5.29 305 7 9.31 ________ ______ ________ ______ Total interest earning assets 410,662 7,797 7.70 422,645 8,245 7.91 All other assets 42,482 41,077 Allowance for loan losses (4,490) (4,015) ________ ________ Total assets $448,654 $459,707 ======== ========
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Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 ___________________________ ___________________________ Interest Rate Interest Rate Average Income/ Earned/ Average Income/ Earned/ Balance Expense/1/ Paid/1/ Balance Expense/1/ Paid/1/ ________ __________ _______ ________ __________ _______ LIABILITIES AND STOCKHOLDERS' EQUITY NOW accounts $ 54,318 $ 303 2.26% $ 56,216 $ 356 2.57% Savings 35,705 255 2.90 33,978 306 3.65 Money market 40,361 377 3.79 39,332 381 3.93 Deposits of $100,000 and over 24,614 341 5.39 28,216 385 5.53 Other time deposits 162,632 2,100 5.27 158,340 2,218 5.68 ________ ______ ________ ______ Total time deposits 317,630 3,376 4.31 316,082 3,646 4.68 Securities sold under agreements to repurchase 16,025 202 5.11 31,772 442 5.64 Interest-bearing demand notes to U.S. Treasury 449 7 6.32 606 14 9.37 Other borrowed money 17,150 285 6.74 19,050 321 6.83 ________ ______ ________ ______ Total interest- bearing liabilities 351,254 3,870 4.47 367,510 4,423 4.88 ______ ______ Demand deposits 46,970 44,284 Other liabilities 3,878 4,254 ________ ________ Total liabilities 402,102 416,048 Stockholders' equity 46,552 43,659 ________ ________ Total liabilities and stockholders' equity $448,654 $459,707 ======== ======== Net interest income $ 3,927 $ 3,822 ======= ======= Net interest margin/4/ 3.88% 3.67% __________ ==== ==== /1/ Interest income and yields are presented on a fully taxable equivalent basis using the Federal statutory income tax rate of 34%, net of nondeductible interest expense. Such adjustments were $144,000 in 1999 and $151,000 in 1998. /2/ Non-accruing loans are included in the average amounts outstanding. /3/ Average balances based on amortized cost. /4/ Net interest income divided by average total interest earning assets.
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) Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 _______________________________ Change due to Total ____________________ Change Volume Rate ________ ________ _________ Interest income on a fully taxable equivalent basis: Loans: /1/ Commercial $ 97 161 (64) Real estate /2/ (183) (31) (152) Consumer 43 51 (8) Investment securities: U.S. Treasury and U.S. Government agencies (360) (307) (53) State and municipal /2/ (21) (6) (15) Other (3) (2) (1) Federal funds sold (17) 12 (29) Interest-bearing deposits (4) (2) (2) _______ _______ ________ Total interest income (448) (124) (324) Interest expense: NOW accounts (53) (12) (41) Savings (51) 15 (66) Money market (4) 10 (14) Deposits of $100,000 and over (58) (48) (10) Other time deposits (104) 59 (163) Securities sold under agreements to repurchase (240) (201) (39) Interest-bearing demand notes to U.S. Treasury (7) (3) (4) Other borrowed money (36) (32) (4) _______ _______ ________ Total interest expense (553) (212) (341) _______ _______ ________ Net interest income on a fully taxable equivalent basis $ 105 88 17 ___________ ======= ======= ======== /1/ Non-accruing loans are included in the average amounts outstanding. /2/ Interest income and yields are presented on a fully taxable equivalent basis using the federal statutory income tax rate of 34%, net of nondeductible interest expense. Such adjustments totaled $144,000 in 1999 and $151,000 in 1998.
Provision and Allowance for Loan Losses The provision for loan losses is based on management's evaluation of the loan portfolio in light of national and local economic conditions, changes in the composition and volume of the loan portfolio, changes in the volume of past due and nonaccrual loans, and other relevant factors. The allowance for loan losses which is reported as a deduction from loans, is available for loan charge-offs. The allowance is increased by the provision charged to expense and is reduced by loan charge-offs, net of loan recoveries. Management formally reviews all loans in excess of certain dollar amounts (periodically established) at least annually. In addition, on a monthly basis, management reviews past due, "classified", and "watch list" loans in order to classify or reclassify loans as "loans requiring attention," "substandard," "doubtful," or "loss". During that review, management also determines what loans should be considered to be "impaired". Management believes, but there can be no assurance, that these procedures keep management informed of possible problem loans. Based upon these procedures, both the allowance and provision for loan losses are adjusted to maintain the allowance at a level considered adequate by management for estimated losses inherent in the loan portfolio. See additional discussion concerning nonperforming loans under "Financial Condition." The allowance for loan losses was decreased by net loan charge-offs of $25,987 for the first quarter of 1999 compared to net recoveries of $21,855 for the first quarter of 1998. The allowance for loan losses was increased by a provision charged to expense of $180,000 for the first quarter of 1999 compared to $172,500 for the first quarter of 1998. The balance of the allowance for loan losses was $4,566,934 at March 31, 1999 compared to $4,412,921 at December 31, 1999 and $4,118,738 at March 31, 1998. The allowance for loan losses as a percent of outstanding loans was 1.58% at March 31, 1999 compared to 1.53% at December 31, 1998 and 1.49% at March 31, 1998. FINANCIAL CONDITION Total assets decreased $2,233,351 or 0.5% to $456,470,023 at March 31, 1999 compared to $458,703,374 at December 31, 1998. Total liabilities decreased $2,783,509 or 0.7% to $409,806,683 and stockholders' equity increased $550,158 or 1.2% to $46,663,340. Loans increased $16,491 or 0.1% to $288,233,996 at March 31, 1999 compared to $288,217,505 at December 31, 1998. Commercial loans increased $1,787,100 or 1.8%; real estate construction loans increased $1,404,000 or 7.2%; real estate mortgage loans decreased $2,977,807 or 2.4%; and consumer loans decreased $196,802 or 0.4%. Nonperforming loans, defined as loans on nonaccrual status, loans 90 days or more past due, and restructured loans totaled $1,489,000 or 0.52% of total loans at March 31, 1999 compared to $810,000 or 0.28% of total loans at December 31, 1998. Detail of those balances plus other real estate and repossessions is as follows:
(Dollars expressed in thousands) March 31, 1999 December 31, 1998 _________________ _________________ % of % of Gross Gross Balance Loans Balance Loans _______ _____ _______ _____ Nonaccrual loans: Commercial $ 102 .03% $ 102 .04% Real Estate: Construction 392 .14 274 .09 Mortgage 755 .26 272 .09 Consumer 46 .02 59 .02 ______ ____ ______ ____ 1,295 .45 707 .24 ______ ____ ______ ____ Loans contractually past-due 90 days or more and still accruing: Commercial -- -- -- -- Real Estate: Construction -- -- -- -- Mortgage 106 .04 -- -- Consumer 8 -- 18 .01 ______ ____ ______ ____ 114 .04 18 .01 ______ ____ ______ ____ Restructured loans 80 .03 85 .03 ______ ____ ______ ____ Total nonperforming loans 1,489 .52% 810 .28% ==== ==== Other real estate 80 85 Repossessions 43 93 ______ ______ Total nonperforming assets $1,612 $ 988 ====== ======
The allowance for loan losses was 306.71% of nonperforming loans at March 31, 1999 compared to 544.81% of nonperforming loans at December 31, 1998. The $483,000 increase to $755,000 in nonaccrual mortgage loans is primarily represented by one credit totaling approximately $344,000. The $96,000 increase to $114,000 in loans past-due 90 days or more and still accruing consists of two residential mortgages that were 90 days past due at March 31, 1999. No significant loss is expected from these credits. It is the Company's policy to discontinue the accrual of interest income on loans when the full collection of interest or principal is in doubt, or when the payment of interest or principal has become contractually 90 days past due unless the obligation is both well secured and in the process of collection. A loan remains on nonaccrual status until the loan is current as to payment of both principal and interest and/or the borrower demonstrates the ability to pay and remain current. Interest on loans on nonaccrual status at March 31, 1999 and 1998, which would have been recorded under the original terms those loans, was approximately $24,000 and $19,000 for the three months ended March 31, 1999 and 1998, respectively. Approximately $3,000 and $1,000 was actually recorded as interest income on such loans for the three months ended March 31, 1999 and 1998, respectively. A loan is considered "impaired" when it is probable a creditor will be unable to collect all amounts due - both principal and interest - according to the contractual terms of the loan agreement. In addition to nonaccrual loans at March 31, 1999 included in the table above, which were considered "impaired", management has identified additional loans totaling approximately $6,373,000 which are not included in the nonaccrual table above but are considered by management to be "impaired". Management believes that the loans are well secured and all have performed according to their contractual terms during the first quarter of 1999. The $6,373,000 of loans identified by management as being "impaired" reflected various commercial, commercial real estate, real estate, and consumer loans ranging in size from approximately $3,000 to approximately $3,100,000. The average balance of nonaccrual and other "impaired" loans for the first three months of 1999 was approximately $7,707,000. At March 31, 1999 the allowance for loan losses on impaired loans was $574,000 compared to $554,000 at December 31, 1998. As of March 31, 1999 and December 31, 1998 approximately $1,812,000 and $2,457,000 of loans not included in the nonaccrual table above or identified by management as being "impaired" were classified by management as having more than normal risk. Investment in debt and equity securities classified as available-for-sale increased $1,343,770 or 1.9% to $71,660,503 at March 31, 1999 compared to $70,316,733 at December 31, 1998. Investments classified as available-for-sale are carried at fair value. At December 31, 1998 the market valuation account for the available-for-sale investments of $608,184 increased the amortized cost of those investments to their fair value on that date and the net after tax increase resulting from the market valuation adjustment of $383,156 was reflected as a separate positive component of stockholders' equity. During 1999, the market valuation account was decreased $316,942 to $291,242 to reflect the fair value of available-for-sale investments at March 31, 1999 and the net after tax decrease resulting from the change in the market valuation adjustment of $199,674 decreased the stockholders' equity component to $183,482 at March 31, 1999. Investments in debt securities classified as held-to-maturity decreased $1,941,798 or 6.3% to $28,807,145 at March 31, 1999 compared to $30,748,943 at December 31, 1998. Investments classified as held-to-maturity are carried at amortized cost. At March 31, 1999 and December 31, 1998 the aggregate fair value of Bancshares' held-to-maturity investment portfolio was approximately $526,000 and $642,000, respectively, more than its aggregate carrying value. Cash and cash equivalents, which consist of cash and due from banks and Federal funds sold, decreased $2,155,389 or 4.7% to $44,048,355 at March 31, 1999 compared to $46,203,744 at December 31, 1998. Premises and equipment increased $380,294 or 2.7% to $12,394,546 at March 31, 1999 compared to $12,064,252 at December 31, 1998. The increase reflected expenditures for premises and equipment of $518,974 and depreciation expense of $188,680. The expenditures for premises and equipment primarily reflected construction costs for renovating and expanding ENB's main bank building located in downtown Jefferson City. The renovation and expansion project was substantially completed by March 31, 1999 at a cost of approximately $5,500,000. Total deposits decreased $5,571,440 or 1.5% to $367,950,346 at March 31, 1999 compared to $373,521,786 at December 31, 1998. Demand deposits decreased $4,980,394 due to seasonal fluctuations and time deposits decreased $591,046. Securities sold under agreements to repurchase increased $2,727,350 to $19,718,261 at March 31, 1999 compared to $16,990,911 at December 31, 1998 due primarily to new funds obtained from a public entity. The increase in stockholders' equity reflects net income of $1,109,088 less dividends declared of $359,255 and $199,674 in unrealized holding losses on investment in debt and equity securities available-for-sale. No material changes in the Company's liquidity or capital resources have occurred since December 31, 1998. Year 2000 Compliance Bancshares is committed to taking the necessary steps to enable both new and existing systems, applications and equipment to effectively process transactions up to and beyond Year 2000. To that end, Bancshares is well underway with its Year 2000 readiness program, having spent approximately $500,000 to date. The total cost of the program is currently estimated at $750,000, comprised of capital improvements of $650,000 and direct expense of $100,000. The capital improvements will be charged to expense in the form of depreciation expense or lease expense, generally over a period of 60 months. Because of such ongoing readiness efforts, Year 2000 processing issues and risks are not expected to have a material adverse impact on the ability of Bancshares to continue its general business operations. Currently, Bancshares and its subsidiaries have substantially completed the following Year 2000 program initiatives: Completed a comprehensive analysis of current functions which might be impacted by Year 2000 issues and documented the results in a Year 2000 Assessment Report Developed and implemented a detailed plan to address Year 2000 issues as identified, particularly as they pertain to software and hardware applications Surveyed outside vendors to determine the degree of preparedness for the Year 2000 to uncover potential issues arising from such business counter parties Raised organizational awareness not only with top management, but also at the staff level, and involved business group leaders in reaching solutions Implemented an ongoing purchase/procurement plan which is responsive to Year 2000 concerns. The risk of failures of computer applications, systems and networks due to improper Year 2000 data processing are substantial, not only for users of information technologies, but also for any entities and individuals which interact with them. Moreover, when aggregated, multiple individual malfunctions and failures relating to Year 2000 issues can potentially cause broader, systemic disruptions across industries and economies. The risks arising from Year 2000 issues which face many companies, including Bancshares, include the potential diminished ability to respond to the needs and expectations of customers in a timely manner, the potential for inaccurate processing information. In recognition of these risks, Bancshares is focusing on mission critical applications in order that programming changes and equipment upgrades were well underway by March 31, 1999. The only major system that had not been upgraded by March 31, 1999 was ENB's teller system and that system is scheduled to be replaced and tested by the end of the second quarter 1999. In addition, Bancshares has begun developing contingency plans to complement the Year 2000 readiness efforts already in progress, including backup and offsite processing of certain information and functions and securing contingency funding sources. Bancshares anticipated that such contingency plans will provide an additional level of security to its Year 2000 efforts already underway. Bancshares is also participating with other financial institutions in a Year 2000 focus group in the central Missouri area. The goal of this group is to educate the general public about Year 2000 issues in general and the banks' preparedness for the Year 2000 changes in particular. The foregoing discussion of Year 2000 issues is based on current estimated of the management of Bancshares as to the amount of time and costs necessary to remediate and test the computer systems of Bancshares. Such estimates are based on the facts and circumstances existing at this time, and were derived utilizing multiple assumptions of future events, including, but not limited to, the continue availability of certain resources, third-party modification plans and implementation success, and other factors. However, there can be no guarantee that these estimated will be achieved, and actual costs and results could differ materially from the costs and results currently anticipated by Bancshares. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer code, the planning and modification success attained by the business counter parties of Bancshares, and similar uncertainties. Item 3. Quantitative and Qualitative Disclosures About Market Risk. No response is provided to this item pursuant to Instruction 1. to Paragraph 305c of Regulation S-K. PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit No. Description 3.1 Articles of Incorporation of the Company (filed as Exhibit 3(a) to the Company's Registration Statement on Form S-4 (Registration No. 33-54166) and incorporated herein by reference). 3.2 Bylaws of the Company (filed as Exhibit 3.2 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998 (Commission file number 0-23636) and incorporated herein by reference). 4 Specimen certificate representing shares of the Company's $1.00 par value common stock (filed as Exhibit 4 to the Company's Registration Statement on Form S-4 (Registration No. 33-54166) and incorporated herein by reference). 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the first quarter of 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EXCHANGE NATIONAL BANCSHARES, INC. Date By /s/ Donald L. Campbell ___________________________________ Donald L. Campbell, Chairman of the Board of Directors, President and May 13, 1999 Principal Executive Officer By /s/ Richard G. Rose ___________________________________ Richard G. Rose, Treasurer May 13, 1999 EXCHANGE NATIONAL BANCSHARES, INC. INDEX TO EXHIBITS March 31, 1999 Form 10-Q Exhibit No. Description Page No. 3.1 Articles of Incorporation of the Company (filed as Exhibit 3(a) to the Company's Registration Statement on Form S-4 (Registration No. 33-54166) and incorporated herein by reference). ** 3.2 Bylaws of the Company (filed as Exhibit 3.2 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997 (Commission file number 0-23636) and incorporated herein by reference). ** 4 Specimen certificate representing shares of the Company's $1.00 par value common stock (filed as Exhibit 4 to the Company's Registration Statement on Form S-4 (Registration No. 33-54166) and incorporated herein by reference). ** 27 Financial Data Schedule 25 ** Incorporated by reference. EX-27 2
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000893847 EXCHANGE NATIONAL BANCSHARES, INC. 1,000 3-MOS DEC-31-1998 JAN-01-1999 MAR-31-1999 13,694 254 30,100 0 71,661 28,807 29,333 288,234 4,567 456,470 367,950 20,092 4,613 17,151 0 0 719 45,944 456,470 5,924 1,402 327 7,653 3,375 3,870 3,783 180 0 2,660 1,666 1,109 0 0 1,109 1.54 1.54 3.88 1,295 114 80 8,185 4,413 64 37 4,567 3,204 0 1,363
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