LETTER 1 filename1.txt September 2, 2005 Mail Stop 4561 By U.S. Mail and facsimile to (573) 761-6272 Mr. James E. Smith Chief Executive Officer Exchange National Bancshares, Inc. 132 East High Street Jefferson City, MO 65101 Re: Exchange National Bancshares, Inc Form 10-K for Fiscal Year Ended December 31, 2004 File No. 000-23636 Dear Mr. Smith: We have reviewed your response letter dated August 19, 2005 and have the following additional comment. Form 10-K Exhibit 13 2004 Annual Report to Shareholders Management`s Discussion and Analysis of Financial Condition and Results of Operations Allocation of the Allowance for Loan Losses, page 21 1. We read your August 19, 2005 response to our August 9, 2005 comment letter. We are not yet able to understand the changes in your allowance which resulted in a substantially smaller allowance at December 31, 2004 since: * Total loans and nonperforming loans have significantly increased from December 31, 2003 to December 31, 2004; * Your allowance for loans not impaired decreased $1.8 million from $7.6 million in 2003 to $5.8 million in 2004, representing a decrease in your ratio of non-impaired loan allowance to total loans from 1.3% to 0.9%, and * Your average ratio of total loan loss allowance to total loans has decreased from 1.4% to 1.2%. Please provide us with a quantitative and qualitative analysis which shows how you applied your allowance methodology to loans not impaired in a consistent fashion to at each of December 31, 2004 and December 31, 2003. Your analysis should clearly demonstrate how you determined that the December 31, 2004 allowance and the related provision for the year of $942,000 were appropriate. In your response, consider the documentation requirements set forth in the FFIEC Policy Release on Allowances for Loan and Lease Losses dated July 2, 2001. * * * * Please respond to this comment within 10 business days or tell us when you will provide us with a response. Please furnish a letter that keys your responses to our comment and provide any requested supplemental information. Detailed letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your response to our comments. You may contact Paula Smith (Staff Accountant) at (202) 551- 3696 or me at (202) 551-3490 if you have any questions regarding comments on the financial statements and related matters. Sincerely, Don Walker Senior Assistant Chief Accountant ?? ?? ?? ?? James E. Smith, Chief Executive Officer Exchange National Bancshares, Inc. Page 1 of 2