## Market Areas 

The Bank’s primary deposit gathering and lending markets are geographically diversified with locations in eastern, central, and western Kansas. The primary industries within these respective markets are also diverse and dependent upon a wide array of industry and governmental activity for their economic base. The Bank’s markets have not been immune to the effects of the challenging economic conditions of recent years. To varying degrees, the Bank’s markets generally have experienced either flat or declining commercial and residential real estate values, as well as depressed consumer confidence, heightened unemployment levels and muted consumer spending. Even though the geographic markets in which the Bank operates have been impacted by the economic conditions in recent years, the effect has not been as severe as those experienced in some areas of the United States. A brief description of the three geographic areas and the communities which the Bank serves is set forth below. 

Shawnee, Douglas, Miami, Osage, Bourbon and Franklin counties are located in eastern Kansas and encompass the Bank’s locations in Topeka, Auburn, Lawrence, Paola, Louisburg, Osawatomie, Osage City, Fort Scott and Wellsville. Shawnee County’s market, which encompasses the Bank’s locations in Topeka and Auburn, is strongly influenced by the State of Kansas, City of Topeka, two regional hospitals and several major private firms and public institutions which are the main employers in this area. The Bank’s Lawrence locations are located in Douglas County and are significantly impacted by the University of Kansas, the largest university in Kansas, in addition to several private industries and businesses in the community. The communities of Paola, Louisburg, Osawatomie and Wellsville, located within Miami and Franklin Counties, are influenced by the Kansas City market, resulting in housing growth and small private industries and business. Additionally, the Osawatomie State Hospital is a major government employer within Miami County. Bourbon and Osage Counties are primarily agricultural with small private industries and business firms while Bourbon County is also influenced by a regional hospital and Fort Scott Community College. 

Bank locations within central Kansas include the communities of Manhattan within Riley County, Wamego within Pottawatomie County and Junction City within Geary County. The Riley, Pottawatomie and Geary County economies are significantly impacted by employment at Fort Riley Military Base and Kansas State University, the second largest university in Kansas, which is located in Manhattan. Manhattan was also selected as the site of the new National Bio and Agro-Defense Facility, which is expected to have a significant impact on the regional economy as the facility is constructed and begins operations. Several private industries and businesses are also located within these counties. Additionally, manufacturing and service industries also play a key role within this central Kansas market. 

The Bank’s western Kansas branches are located in the communities of Dodge City in Ford County, Garden City in Finney County, Great Bend and Hoisington in Barton County and LaCrosse in Rush County. Agriculture, oil, and gas are the predominant industries in the western Kansas region. Predominant activities involve crop production, feed lot operations, and food processing. Dodge City is known as the “Cowboy Capital of the World” and maintains a significant tourism industry. Both Dodge City and Garden City are recognized as regional commercial centers within the state with small businesses, manufacturing, retail, and service industries having a significant influence upon the local economies. Additionally, both communities have a community college, which attracts a number of individuals from the surrounding area to live within the community to participate in educational programs and pursue a degree. 

## Competition 

The Company faces strong competition both in attracting deposits and making real estate, commercial and other loans. Its most direct competition for deposits comes from commercial banks and other savings institutions located in its principal market areas, including many larger financial institutions which have greater financial and marketing resources available to them. The ability of the Company to attract and retain deposits generally depends on its ability to provide a rate of return, liquidity and risk comparable to that offered by competing investment opportunities. The Company competes for loans principally through the interest rates and loan fees it charges and the efficiency and quality of services it provides borrowers. 

