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MNB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30, December 31,
2001 2000
(Unaudited)
ASSETS
Cash and cash equivalents $6,285,007 $3,833,693
Investment securities:
Held-to-maturity at amortized cost 899,089 914,309
(estimated fair value of $905,000
and $916,000 respectively)
Available-for-sale at estimated fair value 38,942,820 45,275,452
Loans, net 100,225,954 94,057,104
Premises and equipment, net 2,176,184 2,253,729
Other assets 6,319,878 6,562,566
Total assets $154,848,932 $152,896,853
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $130,661,252 $130,186,060
Other borrowings 6,223,367 6,497,740
Accrued expenses, taxes and other liabilities 2,325,576 1,537,127
Total liabilities 139,210,195 138,220,927
Stockholders' equity:
Common stock, $.01 par, 3,000,000 shares authorized,
1,563,905 and 1,534,828 shares issued and outstanding
at 2001 and 2000, respectively 15,639 15,348
Additional paid in capital 9,737,322 9,634,291
Retained earnings 5,358,779 4,931,576
Accumulated other comprehensive income 636,064 214,581
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Unearned employee benefits (109,067) (119,870)
Total stockholders' equity 15,638,737 14,675,926
Total liabilities and stockholders' equity $154,848,932 $152,896,853
</Table>
See accompanying notes to condensed consolidated financial statements.
MNB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<Table>
<Caption>
For the Three Months
Ended June 30,
2001 2000
Interest income:
Loans $2,158,951 $1,987,388
Investment securities 596,573 630,659
Other 36,862 31,869
Total interest income 2,792,386 2,649,916
Interest expense:
Deposits 1,369,600 1,178,306
Borrowed funds 97,996 286,928
Total interest expense 1,467,596 1,465,234
Net interest income 1,324,790 1,184,682
Provision for loan losses 39,500 20,000
Net interest income after
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provision for loan losses 1,285,290 1,164,682
Noninterest income:
Fees and service charges 294,935 278,339
Gains on sale of loans 86,216 25,472
Gains (losses) on sale of investments - (30,368)
Gains on sale of foreclosed and repossessed assets 18,958 -
Other 13,497 11,863
Total noninterest income 413,606 285,306
Noninterest expense:
Compensation and benefits 579,017 545,004
Occupancy and equipment 177,448 167,066
Amortization 64,509 53,492
Data processing 40,086 34,296
Other 339,105 302,786
Total noninterest expense 1,200,165 1,102,644
Earnings before income taxes 498,731 347,344
Income tax expense 153,823 109,079
Net earnings $344,908 $238,265
Earnings per share:
Basic $0.22 $0.16
Diluted $0.22 $0.15
Dividends per share $0.0625 $0.0595
</Table>
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See accompanying notes to condensed consolidated financial statements.
MNB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<Table>
<Caption>
For the Six Months
Ended June 30,
2001 2000
Interest income:
Loans $4,318,939 $3,893,213
Investment securities 1,235,550 1,238,588
Other 70,825 64,629
Total interest income 5,625,314 5,196,430
Interest expense:
Deposits 2,840,597 2,326,342
Borrowed funds 206,704 510,490
Total interest expense 3,047,301 2,836,832
Net interest income 2,578,013 2,359,598
Provision for loan losses 64,500 35,000
Net interest income after
provision for loan losses 2,513,513 2,324,598
Noninterest income:
Fees and service charges 561,892 492,145
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Gains on sale of loans 134,227 39,790
Gains (losses) on sale of investments - (30,368)
Gains on sale of foreclosed and repossessed assets 17,213 -
Other 26,942 28,881
Total noninterest income 740,274 530,448
Noninterest expense:
Compensation and benefits 1,159,498 1,100,902
Occupancy and equipment 360,451 328,785
Amortization 131,114 109,080
Data processing 76,076 69,357
Other 640,587 574,603
Total noninterest expense 2,367,726 2,182,727
Earnings before income taxes 886,061 672,319
Income tax expense 265,188 213,343
Net earnings $620,873 $458,976
Earnings per share:
Basic $0.40 $0.30
Diluted $0.39 $0.30
Dividends per share $0.125 $0.119
</Table>
See accompanying notes to condensed consolidated financial statements.
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MNB BANCSHAES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
For the Six Months
Ended June 30,
2001 2000
Net cash provided by operating activities $268,230 $1,919,875
INVESTING ACTIVITIES
Net increase in loans (5,224,129) (6,252,114)
Maturities and prepayments of investments held to maturity 14,180 387,416
Maturities and prepayments of investments available for sale 7,225,004 7,498,412
Proceeds from sale of investments available for sale - 2,280,547
Purchase of investments available for sale (205,333) (11,468,211)
Purchases of premises and equipment, net (72,326) (148,080)
Proceeds from sale of foreclosed assets 326,042 27,190
Improvements of real estate owned (1,628) (8,659)
Net cash provided by (used in) investing activities 2,061,810 (7,683,499)
FINANCING ACTIVITIES
Net increase in deposits 475,192 2,014,035
Federal Home Loan Bank borrowings 34,530,000 76,795,000
Federal Home Loan Bank repayments (34,648,570) (74,188,570)
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Proceeds (repayments) on note payable (145,000) 105,000
Purchase of treasury stock - (45,448)
Issuance of common stock under stock option plan 103,322 3,142
Payment of dividends (193,670) (180,833)
Net cash used in financing activities 121,274 4,502,326
Net increase (decrease) in cash and cash equivalents 2,451,314 (1,261,298)
Cash and cash equivalents at beginning of period 3,833,693 4,315,013
Cash and cash equivalents at end of period $6,285,007 $3,053,715
Supplemental disclosure of cash flow information:
Cash paid during period for interest $3,025,000 $2,733,000
Cash paid during period for taxes $250,000 $167,000
Supplemental schedule of noncash investing activities:
Transfer of loans to real estate owned $75,000 $199,000
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</Table>
MNB BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements of MNB Bancshares, Inc.
(the "Company") and subsidiaries have been prepared in accordance with the
instructions to Form 10-Q. To the extent that information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements are contained in or consistent with the
consolidated audited financial statements
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incorporated by reference in the Company's Form 10-K for the year ended
December 31, 2000, such information and footnotes have not been duplicated
herein. In the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation of financial
statements have been reflected herein. The December 31, 2000 condensed
consolidated balance sheet has been derived from the audited consolidated
balance sheet as of that date. The results of the interim periods ended June
30, 2001 are not necessarily indicative of the results expected for the year
ending December 31, 2001.
2. EARNINGS PER SHARE
Basic earnings per share have been computed based upon the weighted
average number of common shares outstanding during each year. Diluted
earnings per share include the effect of all potential common shares
outstanding during each year. Earnings per share for all periods presented
have been adjusted to give effect to the 5% stock dividends paid by the
Company annually since 1994.
The shares used in the calculation of basic and diluted income per
share are shown below:
<Table>
<Caption>
For the six months For the three months
ended June 30, ended June 30,
2001 2000 2001 2000
Weighted average common
shares outstanding
1,558,925 1,517,690 1,563,905 1,516,115
Stock options 17,118 32,422 13,699 32,151
Total 1,576,043 1,550,112 1,577,604 1,548,266
</Table>
3. COMPREHENSIVE INCOME
The Company's only component of other comprehensive income is the
unrealized holding gains and losses on available for sale securities.
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<Table>
<Caption>
For the six months For the three months
ended June 30, ended June 30,
2001 2000 2001 2000
Net earnings $620,873 458,976 344,908 238,265
Unrealized holding gains (losses) 679,813 (37,182) (20,549) 109,856
Less - reclassification adjustment for
loss included in net earnings - (30,368) - (30,368)
Net unrealized gains (losses) 679,813 (6,814) (20,549) 140,224
Income tax expense (benefit) 258,330 (2,589) (7,809) 41,745
Total comprehensive income $1,042,356 454,751 332,168 336,744
</Table>
MNB BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL. MNB Bancshares, Inc. is a bank holding company incorporated
under the laws of the State of Delaware and is engaged in the banking
business through its wholly-owned subsidiary, Security National Bank. The
home office for the Bank is Manhattan, Kansas, with additional branch
locations in Auburn, Manhattan, Osage City, Topeka and Wamego, Kansas. On
January 6, 2000, we opened an in-store supermarket branch in Manhattan. We
also completed the purchase of the Wamego and Osage City branches of
Commercial Federal Bank on July 21, 2000, which had total deposits of $14
million and total loans of $1 million. The acquisition and related costs of
the acquisition resulted in a premium of approximately $787,000, which is
being amortized over 15 (straight-line) years.
We announced on April 19, 2001, an agreement to enter into a merger
of equals with Landmark Bancshares, Inc. Landmark Bancshares is
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