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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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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
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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)
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Missouri
(State or other jurisdiction of
incorporation or organization)
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43-1626350
(I.R.S. Employer Identification No.) |
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300 Southwest Longview Boulevard, Lees Summit, Missouri
(Address of principal executive offices)
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64081
(Zip Code) |
(816) 347-8100
(Registrants telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of Each Class |
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Name of Each Exchange on Which Registered |
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None |
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N/A |
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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 registrants 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 registrants 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.
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 Unions 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 Centrals 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 Companys 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 Companys 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. Unions 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 Bancorps 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 Citys 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 Banks 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 Banks 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 Banks 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, Lees 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 Banks deposit accounts are insured by the FDIC to the extent provided by
law. Citizens Union State Banks 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 Banks 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 Banks deposit accounts are insured by the FDIC to the extent provided by law.
Osage Valley Banks 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 Banks 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 10s deposit accounts are insured by the FDIC to the extent provided by law. Bank 10s
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 10s 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 Banks 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 Banks 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, Lees 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 Banks 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 Banks 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
Banks 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 10s 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:
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taking any action that causes a bank to become a controlled subsidiary of the bank
holding company; |
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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; |
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acquiring substantially all of the assets of a bank; or |
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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:
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securities underwriting, dealing and market making; |
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sponsoring mutual funds and investment companies; |
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insurance underwriting and insurance agency activities; |
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merchant banking; and |
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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 FRBs 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 companys 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 companys 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 FRBs capital adequacy guidelines provide for the following types of capital:
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Tier 1 capital, also referred to as core capital, calculated as: |
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common stockholders equity; |
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plus, perpetual preferred stock and any related surplus (limited to a maximum of 25%
of Tier 1 capital elements); |
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plus, minority interests in the equity accounts of consolidated subsidiaries; |
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less, all intangible assets (other than certain mortgage servicing assets,
non-mortgage servicing assets and purchased credit card relationships); |
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less, certain credit-enhanced interest only strips and nonfinancial equity
investments required to be deducted from capital; and |
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less, certain deferred tax assets. |
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Tier 2 capital, also referred to as supplementary capital, calculated as: |
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allowances for loan and lease losses (limited to 1.25% of risk-weighted assets); |
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plus, unrealized gains on certain equity securities (limited to 45% of pre-tax net
unrealized gains); |
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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); |
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plus, auction rate and similar preferred stock (both cumulative and non-cumulative); |
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plus, hybrid capital instruments (including mandatory convertible debt securities); and |
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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.
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Total capital, calculated as: |
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Tier 1 capital; |
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plus, qualifying Tier 2 capital; |
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less, investments in banking and finance subsidiaries that are not consolidated for
regulatory capital purposes; |
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less, intentional, reciprocal cross-holdings of capital securities issued by banks;
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less, other deductions (such as investments in other subsidiaries and joint
ventures) as determined by supervising authority. |
The FRBs 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 FRBs capital adequacy
guidelines. Exchanges capital ratios on December 31, 2006 are shown below:
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Tier 1 Risk-Based |
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Total Risk-Based |
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Leverage Ratio (3% |
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Capital Ratio (4% |
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Capital Ratio (8% |
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minimum |
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minimum |
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minimum |
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requirement) |
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requirement) |
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requirement) |
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Exchange |
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8.77% |
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11.28% |
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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:
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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); |
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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; |
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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%; |
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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 |
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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 agencys
minimum capital requirements. The capital ratios and classifications of each of our Banks as of
December 31, 2006 is shown on the following chart.
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Tier 1 Risk-Based |
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Total Risk-Based |
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|
|
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
9
insurance. The FDICs risk-based assessment system requires that DIF members pay varying
assessment rates depending upon the level of the institutions capital and the degree of
supervisory concern over the institution. As of January 1, 2007, the FDICs 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 institutions 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 Acts 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 Exchanges business, results of operations or financial condition.
Fiscal Monetary Policies. Exchanges 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 Exchanges 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.
11
Available Information
The address of our principal executive offices is 300 Southwest Longview Boulevard, Lees
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 SECs internet website (www.sec.gov). You may also read and copy our SEC filings
at the SECs 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 Companys results
of operations, financial condition or business and that could cause them to differ materially from
our Companys 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
Exchanges 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 Exchanges 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 |
12
|
|
|
the overall quality of our banks loan portfolio may decline. |
Making mortgage loans and consumer loans is a significant source of profits for Exchanges
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 Exchanges 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 Exchanges
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.
13
Our Provisions For Probable Loan Losses May Need To Be Increased. Each of Exchanges banking
subsidiaries make a provision for loan losses based upon managements 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. Exchanges 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:
|
|
|
savings and loan associations |
|
|
|
mortgage banking companies |
Competition for deposits comes principally from:
|
|
|
savings and loan associations |
|
|
|
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; |
14
|
|
|
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 banks 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:
|
|
|
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
15
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 Banks branch at 300 Southwest Longview Boulevard, Lees Summit,
Missouri. The Lees 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 Banks 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 branchs office space is used for Exchange National Banks 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 Banks operations. The Tipton
branch was constructed in the mid 1970s. 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 1960s. All of the St. Robert office space is used for Exchange National
Banks 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 Banks
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 Unions and Citizens Union State Banks operations.
Citizens Union State Bank also operates nine branch banking facilities, of which eight are owned by
it. Citizens Union State Bank owns its
16
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 Banks 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 Banks
last branch facility at 300 SW Long View in Lees 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 Banks 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 Banks operations. Osage Valley Bank also owns and
operates one branch banking facility constructed in 2005. Osage Valley Banks 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 Banks business and that these facilities are adequately covered by
insurance.
The principal offices of Bank 10 are located at 8127 E. 171st 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 10s 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 2nd. This facility has approximately
4,000 square feet of usable office space, all of which is used for Bank 10s 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 10s
operations. Bank 10 owns two Independence, Missouri branch banking facilities located at 17430 E
39th 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 10s 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 10s operations. Management believes that
17
the condition of these banking facilities presently is adequate for Bank 10s 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 Companys 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
18
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 Registrants 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 Companys
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 Companys
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 Companys stock through open market transactions. |
19
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 Companys 2006 Annual Report to
Shareholders.
Item 7. Managements 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 Managements Discussion
and Analysis of Financial Condition and Results of Operations in our Companys 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 Companys 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 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 Managements Discussion and Analysis of
Financial Condition and Results of Operations Interest Sensitivity and Liquidity in
our Companys 2006 Annual Report to Shareholders; and |
|
|
(ii) |
|
the information under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations Quantitative and Qualitative
Disclosures About Market Risk in our Companys 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 Companys 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 Companys 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.
Managements Report on Internal Control Over Financial Reporting.
Our Companys 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 Companys management concluded
that our internal control over financial reporting was effective as of December 31, 2006.
Our managements 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 managements 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
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Companys 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 managements assessment and an opinion on the effectiveness of the Companys
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 managements
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 companys 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 companys 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 companys 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, managements 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
ControlIntegrated 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
ControlIntegrated 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 Companys 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 DirectorsWhat is the
structure of our board and how often are directors elected? in our Companys
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 DirectorsWho are this
years nominees? in our Companys 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 DirectorsWhat is the
business experience of the nominees and of our continuing board members? in our
Companys 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 Companys 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
MattersConsideration of Director Nominees in our Companys 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
MattersCommittees of the BoardAudit Committee in our Companys 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 Companys 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
MattersDirector Compensation in our Companys 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
MattersCompensation Committee Interlocks and Insider Participation in our Companys
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 Companys 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
24
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 Companys 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 Companys
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 DirectorsWhat is the
structure of our board and how often are directors elected? in our Companys
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
MattersCommittees of the Board in our Companys 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 Companys definitive Proxy Statement for its 2007 Annual Meeting of Shareholders
to be filed pursuant to Regulation 14A.
25
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 Companys
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.
|
|
|
Exhibit No. |
|
Description |
|
|
|
3.1
|
|
Articles of Incorporation of our Company (filed as Exhibit 4.1 to our Companys 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 Companys current report on Form 8-K filed May 25, 2000 and incorporated herein by
reference). |
|
|
|
3.2
|
|
Bylaws of our Company (filed with our Companys 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 Companys $1.00 par value common stock (filed
with our Companys 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 Registrants 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 Companys
Annual Report on Form 10-K for the year ended December 31, 1999 as Exhibit 10.2 and
incorporated herein by reference).* |
26
|
|
|
Exhibit No. |
|
Description |
|
|
|
10.2
|
|
Form of Change of Control Agreement and schedule of parties thereto (filed with our Companys
Quarterly Report on Form 10-Q for the quarterly period March 31, 2005 as Exhibit 10.2 and
incorporated herein by reference).* |
|
|
|
13
|
|
The Registrants 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 Companys 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 Companys 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). |
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.
27
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
|
|
|
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/s/ Charles G. Dudenhoeffer, Jr.
Charles G. Dudenhoeffer, Jr., Director
|
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|
March 16, 2007
|
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/s/ Philip D. Freeman
Philip D. Freeman, Director
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March 16, 2007
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/s/ Kevin L. Riley
Kevin L. Riley, Director
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March 16, 2007
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/s/ Julius F. Wall
Julius F. Wall, Director
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March 16, 2007
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/s/ Gus S. Wetzel, II
Gus S. Wetzel, II, Director
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28
EXHIBIT INDEX
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Exhibit No. |
|
Description |
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Page No. |
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13 |
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The Registrants 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). |
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23 |
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Consent of Independent Registered Public Accounting Firm. |
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24 |
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Power of Attorney (included on the signature page to this
Annual Report on Form 10-K). |
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31.1 |
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Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended. |
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31.2 |
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Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended. |
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|
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32.1 |
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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. |
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32.2 |
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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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29