<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
COMMISSION FILE NUMBER: 1-13472
* * * * * *
NATIONAL BANCSHARES CORPORATION OF TEXAS
(Exact name of small business issuer as specified in its charter)
TEXAS 74-1692337
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
104 EAST MANN ROAD, LAREDO, TEXAS 78042
(Address of principal executive offices)
(210) 724-2424
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 4,658,134 shares of
Common Stock, $.001 par value, as of May 3, 1996.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE> 2
Part I. Financial Information
Item 1. Financial Statements
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------------- ------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 12,985 $ 14,707
Interest-bearing accounts 190 193
Federal funds sold 14,140 19,845
Investment securities available for sale 81,939 66,864
Investment securities held to maturity 65,195 65,775
Loans, net of discounts 90,371 91,588
Allowance for possible loan losses (1,961) (1,906)
Bank premises and equipment, net 6,644 6,569
Other assets 6,995 6,457
--------------- ------------
Total Assets $ 276,498 $ 270,092
=============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand deposits, non-interest bearing $ 37,361 $ 37,706
Interest-bearing transaction accounts (NOW) 31,908 31,379
Savings and money market accounts 53,227 52,111
Certificates and time deposits under $100,000 72,247 72,481
Certificates and time deposits $100,000 and over 42,319 38,260
--------------- -------------
Total Deposits 237,062 231,937
=============== ============
Accrued interest, taxes and other liabilities 1,062 1,097
Long Term Notes Payable 363 366
--------------- -------------
Total Liabilities 238,487 233,400
--------------- ------------
Series B Redeemable preferred stock (A) -- 715
--------------- ------------
Stockholders' Equity:
Common Stock, $.001 par value, 100,000,000 shares authorized,
issued and outstanding: 4,658,134 at March 31, 1996 and
4,529,855 at December 31, 1995 5 4
Surplus - Common Stock 16,337 15,619
Retained Earnings 20,972 19,611
Unrealized gain on securities available for sale, net of tax 697 743
--------------- ------------
Total Stockholders' Equity 38,011 35,977
--------------- ------------
Total Liabilities and Stockholders' Equity $ 276,498 $ 270,092
=============== ============
</TABLE>
(A) Series B Redeemable Preferred Stock with a par value of $0.01 per share,
redeemable at $1 per share on December 31, 1996 if not converted at the
rate of 5.59998 shares for each share of common Stock on or before that
date. None outstanding at March 31, 1996 and 715,000 shares outstanding
at December 31, 1995.
2
<PAGE> 3
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
----------------- -----------------
<S> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $ 2,456 $ 2,355
Interest on Investment Securities 2,084 1,957
Interest on Federal Funds Sold 283 232
Interest on Deposits in Banks 3 4
----------------- -----------------
TOTAL INTEREST INCOME 4,826 4,548
INTEREST EXPENSE:
Interest on Deposits 1,890 1,689
Interest on Debt 6 69
----------------- -----------------
TOTAL INTEREST EXPENSE 1,896 1,758
NET INTEREST INCOME 2,930 2,790
Less: Provision for Possible Loan Losses 20 30
----------------- -----------------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 2,910 2,760
NON-INTEREST INCOME:
Service Charges and Fees 595 530
Net realized Losses on Sales of Securities -- (1)
Net Gains on Sales of Other Real Estate and Assets -- 61
Miscellaneous Income 144 12
----------------- -----------------
TOTAL NON-INTEREST INCOME 739 602
NON-INTEREST EXPENSE:
Salaries and Employee Benefits 1,153 1,080
Occupancy and Equipment Expenses 355 285
Other Expenses 727 832
----------------- -----------------
TOTAL NON-INTEREST EXPENSE 2,235 2,197
INCOME BEFORE FEDERAL INCOME TAXES AND
EXTRAORDINARY ITEM 1,414 1,165
Federal Income Tax Expense 53 32
----------------- -----------------
INCOME BEFORE EXTRAORDINARY ITEM 1,361 1,133
Gain Realized on Prepayment of Debt, net of tax -- 219
----------------- -----------------
NET INCOME $ 1,361 $ 1,352
================= =================
INCOME PER COMMON AND COMMON-EQUIVALENT SHARE:
Before Extraordinary Item $ 0.29 $ 0.24
Extraordinary Credit -- 0.04
----------------- -----------------
NET INCOME PER SHARE $ 0.29 $ 0.28
================= =================
Weighted Average Number of Common and Common-
Equivalent Shares Outstanding 4,713,739 4,772,306
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
UNREALIZED
PREFERRED STOCK (A) COMMON STOCK (B) RETAINED GAIN(LOSS)
PAR VALUE SURPLUS PAR VALUE SURPLUS EARNINGS SECURITIES(C) TOTAL
-------- ------ --------- ------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 $ 22 $2,171 $ 4 $ 14,537 $ 13,487 $ (835) $29,386
Net Income -- -- -- -- 6,124 -- 4,537
Redemption of Preferred
Stock (13) (1,256) -- 160 -- -- (1,107)
Conversion of Preferred
to Common (9) (917) -- 923 -- -- (2,996)
Net Value change -- -- -- -- -- 1,579 1,578
-------- ------ --------- -------- --------- -------- -------
BALANCE AT DECEMBER 31, 1995 -- -- 4 15,619 19,611 743 35,977
======== ====== ========= ======== ========= ======== =======
Net Income -- -- -- -- 1,361 -- 1,361
Conversion of Series B
Preferred to Common -- -- 1 714 -- -- 715
Stock Options Exercised -- -- -- 4 -- -- 4
Net Value Change -- -- -- -- -- (46) (46)
-------- ------ --------- -------- --------- -------- -------
BALANCE AT MARCH 31, 1996 $ -- $ -- $ 5 $ 16,337 $ 20,972 $ 697 $38,011
======== ====== ========= ======== ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
PREFERRED COMMON
STOCK (A) STOCK (B)
----------- ----------
(Number of Shares)
<S> <C> <C>
BALANCE AT JANUARY 1, 1995 2,193,315 4,414,133
Redemption of Preferred Stock (1,270,339) --
Conversion of Preferred to Common Stock (922,976) 115,722
----------- ----------
BALANCE AT DECEMBER 31, 1995 -- 4,529,855
Conversion of Preferred B to Common Stock -- 127,679
Exercise of Stock Options -- 600
----------- ----------
BALANCE AT MARCH 31, 1996 -- 4,658,134
=========== ==========
Book Value per Share at March 31,1996 (Full Dollars) $ -- $ 8.16
=========== ==========
</TABLE>
(A) Series A Convertible Preferred Stock with a par value of $0.01 per
share, callable at $1.00 or convertible to 1/8 share of Common Stock.
(B) Common Stock with a par value of $0.001 per share, 100,000,000 shares
authorized.
(C) Net unrealized holding gains (losses) on securities available for
sale, net of tax effect.
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,361 $ 1,352
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 269 121
Credit for deferred federal income taxes 48 436
Provision to allowance for possible loan losses 20 30
Net realized gains on securities available for sale -- 1
Direct write-downs of other real estate owned 3 --
Gain on sale of other real estate owned and other assets -- (61)
Extraordinary gain on prepayment of debt (gross) -- (224)
Increase in accrued interest receivable and other assets (409) (77)
Decrease in accrued interest payable and other liabilities (35) (508)
---------- ----------
Net cash provided by operating activities 1,257 1,070
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in federal funds sold 5,705 3,820
Net decrease (increase) in interest-bearing accounts 3 (169)
Net decrease (increase) in loans 1,241 (1,016)
Purchases of securities available for sale (17,385) (2,595)
Proceeds from sales of securities available for sale -- 988
Proceeds from maturities of securities available for sale 2,034 3,089
Purchases of securities held to maturity (5,125) (2,944)
Proceeds from maturities of securities held to maturity 5,663 5,077
Capital expenditures (240) (223)
Proceeds from sale of other real estate owned -- 126
---------- ----------
Net cash (used in) provided by investing activities (8,104) 6,153
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts,
savings and money-market accounts 1,299 (2,359)
Net increase in certificates of deposit and time deposits 3,825 1,476
Principal payments on other debt (3) (2,370)
Proceeds from exercise of common stock options 4 --
Redemption of Series A Convertible Preferred Stock -- (374)
---------- ----------
Net cash used in (provided by) financing activities 5,125 (3,627)
Net (decrease) increase in cash and due from banks (1,722) 3,596
Cash and due from banks at beginning of period 14,707 9,794
---------- ----------
Cash and due from banks at end of period $ 12,985 $ 13,390
========== ==========
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid $ 1,868 $ 1,686
Federal Income Taxes Paid $ 0 $ 55
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of National
Bancshares Corporation of Texas and its wholly- owned subsidiaries have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The consolidated financial statements include the
accounts of the parent company and all subsidiaries, and all significant
intercompany balances and transactions have been eliminated. Certain items in
prior year's financial statements have been reclassified in conformity with the
current year's presentation. The consolidated financial statements are
unaudited, but include all adjustments (consisting primarily of normal
recurring accruals) which, in the opinion of management, are necessary for a
fair statement of the results of the periods presented. The results of
operations for the three month period ended March 31, 1996 are not necessarily
indicative of the results that may be reported for the entire year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB for the year ended
December 31, 1995.
NOTE 2 - SUBSIDIARIES
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, NBT of Delaware, Inc. and the accounts of NBT of
Delaware, Inc.'s wholly-owned subsidiaries NBC Bank - Eagle Pass, N.A., Eagle
Pass, Texas; NBC Bank - Laredo, N.A., Laredo, Texas; and NBC Bank - Rockdale,
Rockdale, Texas.
NOTE 3 - INVESTMENT SECURITIES
The following tables present the amortized cost and approximate fair value of
the investment securities portfolio as of March 31, 1996 and December 31, 1995
(Dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury Securities $ 78,954 $ 729 $ (197) $ 79,486
U. S. Government agency and mortgage-backed securities 708 26 -- 734
Equity securities including Federal Reserve Bank Stock 1,383 336 -- 1,719
-------- ------- -------- ----------
Totals $ 81,045 $ 1,091 $ (197) $ 81,939
======== ======= ======== ==========
SECURITIES HELD TO MATURITY:
U.S. Treasury Securities $ 61,492 $ 849 $ (53) $ 62,288
U. S. Government agency and mortgage-backed securities 3,646 2 (10) 3,638
States and municipal securities 20 -- -- 20
Foreign debt securities 37 -- (6) 31
-------- ------- -------- ----------
Totals $ 65,195 $ 851 $ (69) $ 65,977
======== ======= ======== ==========
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury Securities $ 63,631 $1,094 $ (43) $ 64,682
U. S. Government agency and mortgage-backed securities 717 24 -- 741
Equity securities including Federal Reserve Bank Stock 1,407 34 -- 1,247
-------- ------ ------- ----------
Totals $ 65,755 $1,152 $ (43) $ 66,864
======== ====== ======= ==========
SECURITIES HELD TO MATURITY:
U.S. Treasury Securities $ 61,906 $1,310 $ (29) $ 63,187
U. S. Government agency and mortgage-backed securities 3,812 22 (2) 3,832
States and municipal securities 20 -- -- 20
Foreign debt securities 37 3 -- 40
-------- ------ ------- ----------
Totals $ 65,775 $1,335 $ (31) $ 67,079
======== ====== ======= ==========
</TABLE>
Unrealized gains and losses on investment securities held at March 31, 1996 and
December 31, 1995 have been judged to be temporary market fluctuations with no
material financial impact on the Company.
The following table shows the maturity schedule of the Company's investment
portfolio as of March 31, 1996 (Dollars in Thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
------------------------------- -------------------------------
AMORTIZED APPROXIMATE AMORTIZED APPROXIMATE
COST FAIR VALUE COST FAIR VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $20,076 $ 20,130 $14,069 $ 14,105
Due in one year to five years 59,079 59,564 47,478 48,233
Due from five to ten years 336 346 2 1
Due after ten years 1,554 1,899 3,646 3,638
------- ---------- ------- ----------
Totals $81,045 $ 81,939 $65,195 $ 65,977
======= ========== ======= ==========
</TABLE>
The carrying value of investment securities pledged to secure public funds
amounted to approximately $33,630,000 at March 31, 1996 and $33,406,000 at
December 31, 1995.
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
An analysis of the allowance for possible loan losses for the three months
ended March 31, 1996 and 1995 is presented below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
(Dollars in Thousands)
<S> <C> <C>
Balance at beginning of period $ 1,906 $ 2,495
Provisions to allowance for possible loan losses 20 30
Losses charged to the allowance (39) (101)
Recoveries credited to the allowance 74 99
-------- --------
Net recoveries (charge-offs) 35 (2)
-------- --------
Balance at end of period $ 1,961 $ 2,523
======== ========
</TABLE>
7
<PAGE> 8
NOTE 5 - LONG TERM NOTES PAYABLE
In May 1994 and July 1995, a subsidiary Bank borrowed $200,000 and $175,000,
respectively, from the Federal Home Loan Bank of Dallas. The notes bear
interest rates of 7.49% and 6.393%, respectively. The maturity dates of the
notes are June 1999 and August 2015, respectively. Principal and interest
payments are due monthly in the approximate amount of $2,900 per month in the
aggregate with the remaining balances due at maturity. Both of these loans are
secured by a certain block of fixed rate mortgage loans carried by the
subsidiary Bank.
NOTE 6 - INCOME TAX EXPENSE
The provision for Federal income tax expense is less than that computed by
applying the federal statutory rate of 34% as indicated in the following
analysis:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
Tax based on statutory rate $ 463 $ 396
Decrease in deferred tax asset valuation allowance (457) (420)
Alternative minimum tax 27 28
Other, net 20 28
------ ------
Federal income tax expense $ 53 $ 32
====== ======
</TABLE>
The Company had approximately $113 million in net operating loss carryforwards
at March 31, 1996 which will be available to reduce tax liabilities through the
year 2006. The net operating loss carryforwards, along with certain other
items, create deferred tax assets. A valuation allowance has been created to
reduce deferred tax assets to an amount more likely than not to be realized.
During the three months ended March 31, 1996 and 1995, the valuation allowance
has been reduced to adjust the recorded deferred tax asset to the realizable
amount. Pursuant to Statement of Financial Accounting Standards No, 109,
"Accounting for Income Taxes", reductions to the valuation allowance are
recorded as decreases in current period income tax expense.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company analyzes the major elements of the
Company's consolidated balance sheets and statements of income. This
discussion should be read in conjunction with the Consolidated Financial
Statements, accompanying notes, and selected financial data appearing elsewhere
in this Report.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1996 was $1.4 million
or $.29 per common share (4,713,739 weighted average shares), compared with
$1.1 million or $.24 per common share (4,772,306 weighted average shares) for
the three months ended March 31, 1995 before an extraordinary credit due to the
prepayment of debt of $214,000, net of tax, or $.04 per common share. After
the extraordinary credit, total net income for the three months ended March 31,
1995 was $1.4 million or $.28 per common share. The $228,000 or 20.1 percent
increase in net income before the extraordinary credit for the three months
ended March 31, 1996 over the prior year's same period was primarily
attributable to a $140,000 or 5.0 percent increase in net interest income.
This improvement is primarily a result of the retirement of all of the Parent
Company's debt totaling $4 million during 1995. The debt generated interest
expense offsetting interest income in the amount of $69,000 for the three
months ended March 31,1995. Non-interest income for the three months ended
March 31, 1996 improved $137,000 over the same period of 1995 and non-interest
expense for the three months ended increased by $38,000 over the like period of
1995.
For the three months ended March 31, 1996, the Company's return on
average assets was 2.00% compared to 1.82% for the three months ended March 31,
1995. The Company's return on average equity for the three months ended March
31, 1996 was 14.95% compared to 15.82% for the three months ended March 31,
1995. The decline in the return on average equity ratio is due to an increase
in the capital of the Company. The ratio of average stockholders' equity to
total average assets was 13.4% and 11.5% for the three months ended March 31,
1996 and 1995, respectively.
NET INTEREST INCOME
Net interest income constitutes the principal source of income for the
Banks and represents the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities. The increase of
$140,000 or 5.0 percent in net interest income for the three months ended March
31, 1996 compared to the same period in 1995 was due primarily to an increase
in the investment securities portfolio, the increase in average yield on loans
and the liquidation of all of the Parent Company's debt. On an average basis,
other debt at March 31, 1996 decreased 86.7 percent compared to the March 31,
1995. The net interest margin for the three months ended March 31,1996 was 4.74
percent compared to 4.71 percent as of March 31, 1995. The net interest margin
is the net return on earning assets which is computed by dividing taxable
equivalent net interest income by average total earning assets.
The net interest spread decreased three basis points to 3.93 percent
at March 31, 1996 from 3.96 percent at March 31, 1995. The decrease in the net
interest spread is primarily due to a higher cost of funds in 1996.
9
<PAGE> 10
INTEREST EARNED/INCURRED AND RATES
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
-------------------------------------- -----------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------------------------------- -----------------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE YIELD/RATE BALANCE EXPENSE YIELD/RATE
--------- -------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing accounts $ 194 $ 3 5.31% $ 317 $ 4 5.12%
Federal funds sold 20,252 283 5.61% 15,611 232 6.03%
Investment securities:
US Treasuries 131,294 1,995 6.10% 128,083 1,868 5.91%
US Government agencies 4,443 77 6.96% 5,172 82 6.43%
States and political subdivisions 58 1 7.01% 77 1 5.27%
Other 1,380 11 3.15% 520 6 4.68%
--------- -------- ----- --------- -------- -----
Total investment securities 137,175 2,084 6.10% 133,852 1,957 5.93%
Loans, net of discounts (A) 90,861 2,461 10.86% 91,343 2,363 10.49%
--------- -------- ----- --------- -------- -----
Total interest-earning assets 249,847 4,831 7.80% 241,123 4,556 7.66%
NON-INTEREST BEARING ASSETS:
Cash and due from banks 12,232 11,479
Allowance for possible loan losses (1,936) (2,498)
Other assets 13,544 11,114
--------- ---------
Total assets 272,322 261,218
========= =========
INTEREST-BEARING LIABILITIES:
Interest bearing transaction accounts 83,346 606 2.92% 85,843 619 2.92%
Time deposits 113,025 1,284 4.56% 103,883 1,070 4.18%
Long term debt 365 6 7.19% 2,742 69 10.21%
--------- -------- ----- --------- -------- -----
Total interest-bearing liabilities 196,736 1,896 3.87% 192,468 1,758 3.70%
NON-INTEREST BEARING LIABILITIES:
Demand deposits 37,663 37,226
Other liabilities 1,185 784
--------- ---------
Total liabilities 235,584 230,478
Redeemable preferred stock 214 715
STOCKHOLDERS' EQUITY (F) 36,524 30,025
--------- ---------
Total liabilities and stockholders'
equity $ 272,322 $ 261,218
========= =========
Taxable-equivalent net interest income $ 2,935 $ 2,798
Less: taxable-equivalent adjustment 5 8
-------- --------
Net interest income $ 2,930 $ 2,790
======== ========
Net interest spread (B) 3.93% 3.96%
===== =====
Net interest margin (C) 4.74% 4.71%
===== =====
SELECTED OPERATING RATIOS:
Return on average assets (D) 2.00% 1.82%
===== =====
Return on average equity (E) 14.95% 15.82%
===== =====
</TABLE>
______________________
(A) Non-accrual loans are included in the average balances used in calculating
this table.
(B) The net interest spread is the difference between the average rate on total
interest-earning assets and interest-bearing liabilities.
(C) The net interest margin is the taxable-equivalent net interest income
divided by average interest-earning assets.
(D) The return on assets ratio was computed by dividing net income by average
total assets.
(E) The return on equity ratio was computed by dividing net income by average
total stockholders' equity.
(F) The average balance has been adjusted to exclude the effect of the
unrealized gain or loss on securities available for sale.
10
<PAGE> 11
The following table analyzes the increase in taxable-equivalent net
interest income stemming from changes in interest rates and from asset and
liability volume, including mix, for the three months ended March 31, 1996 and
1995. Non-accruing loans have been included in assets for calculating this
table, thereby reducing the yield on loans. The changes in interest due to
both rate and volume in the table below have been allocated to volume or rate
change on a pro-rata basis.
ANALYSIS OF CHANGES IN TAXABLE EQUIVALENT NET INTEREST INCOME
<TABLE>
<CAPTION>
March 31, 1996 vs. March 31, 1995
------------------------------------------------
Due to Changes in
Increase ------------------------------
(Decrease) Rates Volume
----------- ----------- -------------
(Dollars in Thousands)
<S> <C> <C> <C>
TAXABLE-EQUIVALENT INTEREST INCOME:
Interest-bearing accounts $ (1) $ 0 $ (1)
Federal funds sold 51 (21) 72
Investment securities 128 67 61
Loans, net of discounts 98 111 (13)
----------- ----------- -------------
Total taxable-equivalent interest income 276 157 119
INTEREST EXPENSE:
Interest-bearing deposits 201 115 86
Other debt (62) (3) (59)
----------- ----------- -------------
Total interest expense 139 112 27
----------- ----------- -------------
TAXABLE-EQUIVALENT NET INTEREST INCOME $ 137 $ 45 $ 92
=========== =========== =============
</TABLE>
Taxable-equivalent net interest income for the three months ended March 31,
1996 increased $137,000 or 5 percent over the same period in 1995. The
increase is reflected in the increase in the market rates of earning assets and
the increase in the volume of earning assets.
11
<PAGE> 12
INTEREST RATE SENSITIVITY
Management seeks to maintain consistent growth of net interest income
through periods of changing interest rates by avoiding fluctuating net interest
margins. Interest rate sensitivity is the relationship between changes in
market interest rates and changes in net interest income due to repricing
characteristics of interest earning assets and liabilities.
The following table indicates the Company's interest rate sensitivity
position at March 31, 1996:
INTEREST-RATE SENSITIVE ASSETS AND LIABILITIES
(Dollars in thousands)
<TABLE>
<CAPTION>
NON-RATE
RATE SENSITIVE SENSITIVE
----------------------------------------------------- ----------
IMMEDIATELY WITHIN WITHIN OVER
0-30 DAYS 90 DAYS ONE YEAR TOTAL ONE YEAR TOTAL
------------ --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans, net of discounts $ 39,458 $ 3,286 $ 20,307 $ 63,051 $ 27,320 $ 90,371
Investment securities 3,004 8,003 23,138 34,145 112,095 46,240
Federal funds sold 14,140 -- -- 14,140 -- 14,140
Interest-bearing accounts 190 -- -- 190 -- 190
------------ --------- --------- --------- ---------- ---------
Total earning assets 56,792 11,289 43,445 111,526 139,415 250,941
============ ========= ========= ========= ========== =========
Interest-bearing liabilities:
Interest-bearing transaction,
savings and money market 85,135 -- -- 85,135 -- 85,135
Certificates and time deposits 25,883 34,282 50,378 110,543 4,023 114,566
Long term debt 1 1 1 3 360 363
------------ --------- --------- --------- ---------- ---------
Total interest-bearing
liabilities $ 111,019 $ 34,283 $ 50,379 195,681 $ 4,383 $ 200,064
============ ========= ========= ========= ========== =========
Interest sensitivity gap $ (54,227) $ (22,994) $ (6,934) $ (84,155)
============ ========= ========= =========
Cumulative gap $ (54,227) $ (77,221) $ (84,155) $ (84,155)
============ ========= ========= =========
Ratio of earning assets to
interest-bearing liabilities 51.2% 32.9% 86.2% 57.0%
</TABLE>
The interest rate sensitivity table reflects a cumulative liability
sensitive position during the one year period shown. Generally, this indicates
that the liabilities reprice more quickly than the assets in a given period,
and that a decline in market rates will benefit net interest income. An
increase in market rates would have the opposite effect.
12
<PAGE> 13
NON-INTEREST INCOME
The major components of non-interest income are service charges and fees
earned on deposit accounts. The following table summarizes changes in
non-interest income for the three months ended March 31, 1996 and 1995:
NON-INTEREST INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1996/1995
---------------------------------- ---------------------------
MARCH 31, 1996 MARCH 31, 1995 $ CHANGE % CHANGE
--------------- --------------- -------- --------
<S> <C> <C> <C> <C>
Service charges and fees $ 595 $ 530 $ 65 12.3%
Net realized losses on sales of securities 0 (1) 1 100.0%
Net gains on sales of other real estate owned 0 61 (61) -100.0%
Miscellaneous income 144 12 132 1096.6%
--------------- --------------- -------- ------
Total non-interest income $ 739 $ 602 $ 137 22.7%
=============== =============== ======== ======
</TABLE>
The $137,000 or 22.7 percent increase in non-interest income for the three
months ended March 31, 1996 is due primarily to miscellaneous income received
by the Banks for the recovery of some stock that was written off in previous
years.
NON-INTEREST EXPENSE
Non-interest expense includes all expenses of the Company other than
interest expense, loan loss provision and income tax expense. The following
table summarizes the changes in non-interest expense for the three months ended
March 31, 1996 and 1995:
NON-INTEREST EXPENSE
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1996/1995
-------------------------------- ------------------------
MARCH 31, 1996 MARCH 31, 1995 $ CHANGE % CHANGE
-------------- -------------- --------- --------
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 1,153 $ 1,080 $ 73 6.7%
Occupancy and equipment expenses 355 285 70 24.6%
Data processing fees 93 177 (84) -47.5%
FDIC insurance 2 124 (123) -98.8%
Insurance 28 25 3 10.9%
Office supplies 90 67 23 34.5%
Postage & Courier 94 76 18 23.4%
Professional fees 167 200 (33) -16.7%
Miscellaneous other expenses 253 163 92 57.0%
-------------- -------------- --------- -----
Total non-interest expense $ 2,235 $ 2,197 $ 39 1.8%
============== ============== ========= =====
</TABLE>
Total non-interest expense for the three months ended March 31, 1996
increased $39,000 or 1.8 percent over 1995. However, as a percentage of
average assets, non-interest expense declined slightly from 3.36 percent in
1995 to 3.27 percent in 1996. Salaries and benefits rose $73,000 or 6.7
percent in 1996 due to the addition of personnel for the new San Antonio data
center and the Eagle Pass branch established in the last quarter of 1995. The
$70,000 or 24.6 percent increase in occupancy and equipment expenses is due to
the completion of a $1.2 million branch facility in Eagle Pass, Texas and the
addition of $1 million in new data and item processing equipment purchased
throughout the year. The decline in FDIC insurance premiums of $123,000 or 98.8
percent occurred as a result of a reduction in the rates previously being
charged by the FDIC. Data processing fees also declined $84,000 or 47.5% due
to two of the Bank's changing from an outside data processor to the in-house
system. Some of the increase shown in occupancy and equipment and salaries and
benefits offset this decline.
13
<PAGE> 14
INCOME TAXES
The Company recognized income tax expense of $53,000 for the three months
ended March 31, 1996 compared to $32,000 for the three months ended March 31,
1995. At March 31, 1996, the Company had approximately $113 million in net
operating loss carryforwards that will be available to reduce income tax
liabilities in future years. If unused, approximately $109 million of such
carryforwards will expire in 2005, with the remaining approximately $4 million
expiring in 2006.
LOANS
The following table presents the composition of the Company's loan
portfolio by type of loan:
LOAN PORTFOLIO
(Dollars in thousands)
<TABLE>
<CAPTION>
% OF % OF
MARCH 31, 1996 TOTAL DECEMBER 31, 1995 TOTAL
-------------- ----- ----------------- -----
<S> <C> <C> <C> <C>
Commercial $ 12,563 13.9% $ 13,643 14.9%
Real estate construction 13,035 14.4% 11,868 13.0%
Real estate mortgage 50,589 56.0% 51,664 56.4%
Consumer installment loans,
net of unearned discount 14,184 15.7% 14,413 15.7%
---------- ----- ---------- -----
Total loans $ 90,371 100.0% $ 91,588 100.0%
========== ===== ========== =====
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through charges to operations
in the form of a provision for loan losses. Loans, or portions thereof, which
are considered to be uncollectible are charged against the allowance and
subsequent recoveries, if any, are credited to the allowance. The allowance
represents the amount, which in the judgment of each subsidiary Bank's
management, will be adequate to absorb possible losses. The adequacy of the
allowance is determined by management's continuous evaluation of the loan
portfolio and by the employment of third party loan review consultants.
Industry concentrations, specific credit risks, past loan loss experience,
delinquency ratios, current loan portfolio quality and projected economic
conditions in the Bank's market areas are pertinent factors in determining the
adequacy of the allowance for loan losses. Loans identified as losses by
management, external loan review or bank examiners are charged-off.
The Company recorded net recoveries of $35,000 for the three months ended
March 31, 1996 compared to net charge-offs of $2,000 for the three months
ended March 31, 1995.
14
<PAGE> 15
The following table summarizes, for the periods presented, the activity in
the allowance for loan losses arising from provisions credited to operations,
loans charged off and recoveries of loans previously charged off.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months ended March 31,
---------------------------
1996 1995
-------- ---------
<S> <C> <C>
Average loans outstanding $ 90,861 $ 91,343
Balance of allowance for loan losses
at beginning of year $ 1,906 $ 2,495
Provision for loan losses 20 30
Charge-Offs:
Commercial 2 34
Real estate construction -- --
Real estate mortgage -- --
Consumer installment 37 67
-------- ---------
Total charge-offs 39 101
-------- ---------
Recoveries:
Commercial 12 7
Real estate construction -- --
Real estate mortgage 15 29
Consumer installment 47 63
-------- ---------
Total recoveries 74 99
-------- ---------
Net charge-offs (recoveries) (35) 2
-------- ---------
Balance of allowance for loan losses
at end of period $ 1,961 $ 2,523
======== =========
Net charge-offs (recoveries) as a
percentage of average loans outstanding -0.04% 0.00%
======== =========
Allowance for loan losses as a
percentage of:
Total loans, net of unearned discount 2.17% 2.76%
======== =========
Non-performing assets 86.92% 122.18%
======== =========
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets consist of non-accrual loans and foreclosed real
estate. Loans to a customer whose financial condition has deteriorated are
considered for non-accrual status whether or not the loan is ninety days or
more past due. All installment loans past due ninety days or more are placed
on non-accrual unless the loan is well secured or in the process of collection.
On non-accrual loans, interest income is not recognized until actually
collected. At the time the loan is placed on non-accrual status, interest
previously accrued but not collected is reversed and charged against current
income.
Foreclosed real estate consists of property which has been acquired through
foreclosure. At the time of foreclosure, the property is recorded at the lower
of the estimated fair value less selling expenses or the loan balance
15
<PAGE> 16
with any write down charged to the allowance for loan losses. Any future write
downs on the property are charged to operations.
The following table discloses non-performing assets and loans ninety days
past due and still accruing interest as of March 31, 1996 and December 31,
1995: (Dollars in Thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
NON-PERFORMING ASSETS: 1996 1995
- ---------------------- -------- ------------
<S> <C> <C>
Non-accrual loans $1,361 $1,177
Foreclosed real estate 895 888
------ ------
Total non-performing assets $2,256 $2,065
====== =======
NON-PERFORMING ASSETS AS A PERCENTAGE OF:
Total assets 0.82% 0.76%
Total loans plus foreclosed real estate 2.47% 2.23%
Accruing loans past due 90 days or more $ 82 $ 383
</TABLE>
Independent third party loan reviews of the subsidiary Banks are performed
on an annual basis. The loans are also reviewed by banking regulators on an
eighteen month basis. On a monthly basis, the Board of Directors' Loan
Committee of each Bank reviews new loans, renewals and delinquencies.
Management of each Bank monitors on a continuing basis those loans which it
feels should be followed closely. The Banks are required by regulation to have
foreclosed real estate appraised periodically.
LIQUIDITY
Liquidity is the ability to have funds available at all times to meet the
commitments of the Company. Asset liquidity is provided by cash and assets
which are readily marketable or pledgeable or which will mature in the near
future. Liquid assets include cash and short-term investments in time deposits
in banks, federal funds sold and securities available for sale. Liquidity is
also provided by access to core funding sources, primarily core depositors in
the Company's trade area. The Banks have not and do not solicit brokered
deposits as a funding source.
At March 31, 1996, the Company's liquid assets amounted to $109 million or
40 percent of total gross assets, up from 30 percent at March 31, 1995.
Secondary sources of liquidity include the Banks' ability to sell loan
participations and purchase federal funds.
The Parent Company liquidated all of its outstanding debt during 1995
totaling approximately $4 million. On a consolidated basis, the only debt
remaining is $363,000 relating to a subsidiary Bank's long-term borrowings
secured by certain fixed rate mortgage loans carried by the Bank. The
borrowings mature in 1999 and 2015.
The Company's principal source of funds consists of dividends received from
the Banks, which derive their funds from deposits, interest and principal
payments on loans and investment securities, sales of investment securities and
borrowings.
CAPITAL RESOURCES
Total stockholders' equity increased $7.0 million to $38.0 million at
March 31, 1996 from $31.0 million at March 31, 1995. During 1995, all of the
Company's Series A Preferred Stock was either redeemed or converted into Common
Stock of the Company. Also, in February 1996, the Series B Preferred Stock
was converted into Common Stock at the ratio of 5.59998 shares for each share
of Common Stock. The ratio of total stockholders' equity to total assets was
13.7 percent at March 31, 1996 compared with 11.8 percent at March 31, 1995.
16
<PAGE> 17
The Company and subsidiary Banks are subject to minimum capital ratios
mandated by their respective banking industry regulators. The table below
illustrates the Company and subsidiary Bank's compliance with the risk-based
capital guidelines of the Federal Reserve Bank (FRB) and the Office of the
Comptroller of the Currency (OCC). These guidelines are designed to measure
Tier 1 and total capital while taking into consideration the risk inherent in
both on and off balance sheet items. Off balance sheet items at March 31, 1996
include unfunded loan commitments and letters of credit. Currently under the
regulatory guidelines, the net unrealized gain or loss on securities available
for sale is not included in the calculation of risk based capital and the
leverage ratio. The leverage ratio is Tier 1 capital divided by average total
assets. A leverage ratio of 3.0 percent is the minimum requirement for only
the most highly rated banking organizations and all other institutions are
required to maintain a leverage ratio of 3 to 5 percent.
Tier 1 capital includes common stockholders' equity and qualifying
perpetual preferred stock. Tier 2 capital includes perpetual preferred stock
(to the extent ineligible for Tier 1), limited amounts of subordinated debt,
and a portion of the allowance for loan losses. Total capital is Tier 1
capital plus Tier 2 capital. The ratios are calculated by dividing the
qualifying capital by the risk-weighted assets.
The table below illustrates the Company and its subsidiary Bank's
compliance with the risk-based capital guidelines as of March 31, 1996:
<TABLE>
<CAPTION>
NBC BANK - NBC BANK - NBC BANK -
CONSOLIDATED EAGLE PASS, N.A. LAREDO, N.A. ROCKDALE
------------ ---------------- ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Total average assets $ 272,322 $ 155,851 $ 59,528 $ 53,267
Risk weighted assets $ 96,290 $ 46,159 $ 36,474 $ 15,977
Tier 1 capital $ 37,314 $ 16,085 $ 7,045 $ 6,798
Total Tier 2 capital $ 38,519 $ 16,668 $ 7,502 $ 7,000
Leverage ratio 13.70% 10.32% 11.84% 12.76%
Risk based capital ratios:
Tier 1 38.75% 34.85% 19.32% 42.55%
Tier 1 capital minimum requirement 4.00% 4.00% 4.00% 4.00%
Total capital 40.01% 36.11% 20.57% 43.81%
Total capital minimum requirement 8.00% 8.00% 8.00% 8.00%
</TABLE>
17
<PAGE> 18
PART II - OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits are included as part of this report:
*2.1 Third Amended Joint Plan of Reorganization, as approved U.S.
Bankruptcy Court, effective May 26, 1992
*3.1 Restated Articles of Incorporation and Statement of Relative Rights
and Preferences of Preferred Stock, filed December 29, 1994
*3.2 Bylaws of the Company
11.1 Statement Regarding computation of Earnings Per Share
27 Financial Data Schedule
*Previously filed with the Company's Form 10-SB.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the last quarter of the period covered by this report.
18
<PAGE> 19
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NATIONAL BANCSHARES CORPORATION OF TEXAS
Date: May 10, 1996 By: /s/ ANNE RENFROE
------------------------------------
Anne Renfroe, Chief Accounting
Officer and Principal Financial
Officer
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
<S> <C> <C>
*2.1 Third Amended Joint Plan of Reorganization,
as approved U.S. Bankruptcy Court, effective
May 26, 1992
*3.1 Restated Articles of Incorporation and Statement
of Relative Rights and Preferences of Preferred
Stock, filed December 29, 1994
*3.2 Bylaws of the Company
11.1 Statement regarding computation of Earnings Per
Share
27 Financial Data Schedule
</TABLE>
- ------
*Previously filed with the Company's Form 10-SB.
<PAGE> 1
Exhibit 11.1
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
1996 1995
----- -----
<S> <C> <C>
NET INCOME PER COMMON SHAREHOLDER:
Income before extraordinary credit................................................ $1,361 $1,133
Extraordinary credit, net of tax.................................................. -- 219
------ ------
Primary earnings applicable to common shareholders................................ $1,361 $1,352
====== ======
COMMON STOCK SHARES USED IN PRIMARY PER SHARE CALCULATION:
Weighted average number of common shares outstanding.............................. 4,583 4,415
Addition from assumed exercise of stock options................................... 57 6
Addition from assumed exercise of Series A Convertible
Preferred Stock............................................................. -- 223
Addition from assumed conversion of Series B Convertible
Preferred Stock............................................................. 74 128
------ ------
Weighted average number of common and
common-equivalent shares outstanding.............................................. 4,714 4,772
====== =======
PRIMARY EARNINGS PER COMMON SHARE:
Income before extraordinary credit................................................ $ .29 $ .24
Extraordinary Credit.............................................................. -- .04
------ -------
Earnings per share............................................................ $ .29 $ .28
====== =======
</TABLE>
Note: Fully diluted earnings per share are not presented as dilution is less
than 3%.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 12,985
<INT-BEARING-DEPOSITS> 190
<FED-FUNDS-SOLD> 14,140
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,939
<INVESTMENTS-CARRYING> 65,195
<INVESTMENTS-MARKET> 65,977
<LOANS> 90,371
<ALLOWANCE> 1,961
<TOTAL-ASSETS> 276,498
<DEPOSITS> 237,062
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,062
<LONG-TERM> 363
<COMMON> 0
0
5
<OTHER-SE> 38,006
<TOTAL-LIABILITIES-AND-EQUITY> 276,498
<INTEREST-LOAN> 2,456
<INTEREST-INVEST> 2,084
<INTEREST-OTHER> 286
<INTEREST-TOTAL> 4,826
<INTEREST-DEPOSIT> 1,890
<INTEREST-EXPENSE> 6
<INTEREST-INCOME-NET> 2,930
<LOAN-LOSSES> 20
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,235
<INCOME-PRETAX> 1,414
<INCOME-PRE-EXTRAORDINARY> 1,414
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,361
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<YIELD-ACTUAL> 7.80
<LOANS-NON> 1,361
<LOANS-PAST> 82
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,041
<ALLOWANCE-OPEN> 1,906
<CHARGE-OFFS> 39
<RECOVERIES> 74
<ALLOWANCE-CLOSE> 1,961
<ALLOWANCE-DOMESTIC> 1,260
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 701
</TABLE>
