<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 September 30, 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: 4,658,734 shares
of Common Stock, $.001 par value, as of November 6, 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>
SEPTEMBER 30, DECEMBER 31,
1996 1995
--------------- ---------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 16,430 $ 14,707
Interest-bearing accounts 419 193
Federal funds sold 19,375 19,845
Investment securities available for sale 86,147 66,864
Investment securities held to maturity 70,435 65,775
Loans, net of discounts 110,311 91,588
Allowance for possible loan losses (2,512) (1,906)
Bank premises and equipment, net 6,933 6,569
Other assets 9,577 6,457
--------------- ---------------
Total Assets $ 317,115 $ 270,092
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand deposits, non-interest bearing $ 45,483 $ 37,706
Interest-bearing transaction accounts (NOW) 36,237 31,379
Savings and money market accounts 57,581 52,111
Certificates and time deposits under $100,000 82,882 72,481
Certificates and time deposits $100,000 and over 48,894 38,260
--------------- ---------------
Total Deposits 271,077 231,937
--------------- ---------------
Accrued interest, taxes and other liabilities 1,594 1,097
Short term notes payable 3,639 --
Long term notes payable 359 366
--------------- ---------------
Total Liabilities 276,669 233,400
--------------- ---------------
Series B Redeemable preferred stock (A) -- 715
--------------- ---------------
Stockholders' Equity:
Common Stock, $.001 par value, 100,000,000 shares authorized,
issued and outstanding: 4,658,734 at September 30, 1996 and
4,529,855 at December 31, 1995 5 4
Surplus - common stock 16,341 15,619
Retained earnings 23,743 19,611
Unrealized gain on securities available for sale, net of tax 357 743
--------------- ---------------
Total Stockholders' Equity 40,446 35,977
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 317,115 $ 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 September 30, 1996 and 715,000 shares
outstanding at December 31, 1995.
See Notes to Consolidated Financial Statements.
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 NINE MONTHS ENDED
---------------------------------- ----------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $ 2,578 $ 2,488 $ 7,537 $ 7,280
Interest on Investment Securities 2,325 2,003 6,721 5,925
Interest on Federal Funds Sold 238 282 706 782
Interest on Deposits in Banks 2 7 7 20
--------------- --------------- --------------- ---------------
TOTAL INTEREST INCOME 5,143 4,780 14,971 14,007
INTEREST EXPENSE:
Interest on Deposits 1,989 1,859 5,798 5,335
Interest on Debt 6 38 20 142
--------------- --------------- --------------- ---------------
TOTAL INTEREST EXPENSE 1,995 1,897 5,818 5,477
NET INTEREST INCOME 3,148 2,883 9,153 8,530
Less: Provision (Credit) for Possible Loan Losses 10 (300) 40 (510)
--------------- --------------- --------------- ---------------
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR
POSSIBLE LOAN LOSSES 3,138 3,183 9,113 9,040
NON-INTEREST INCOME:
Service Charges and Fees 586 568 1,742 1,659
Net realized Gains (Losses) on Sales of Securities -- 1 (1) --
Net Gains on Sales of Other Real Estate 71 239 86 312
Miscellaneous Income 70 42 240 46
--------------- --------------- --------------- ---------------
TOTAL NON-INTEREST INCOME 727 850 2,067 2,017
NON-INTEREST EXPENSE:
Salaries and Employee Benefits 1,166 1,078 3,465 3,225
Occupancy and Equipment Expenses 379 241 1,118 846
Other Expenses 765 819 2,342 2,565
--------------- --------------- --------------- ---------------
TOTAL NON-INTEREST EXPENSE 2,310 2,138 6,925 6,636
INCOME BEFORE FEDERAL INCOME TAXES AND
EXTRAORDINARY ITEM 1,555 1,895 4,255 4,421
Federal Income Tax Expense 37 44 123 103
--------------- --------------- --------------- ---------------
INCOME BEFORE EXTRAORDINARY ITEM 1,518 1,851 4,132 4,318
Gain Realized on Prepayment of Debt, net of tax -- -- -- 219
--------------- --------------- --------------- ---------------
NET INCOME $ 1,518 $ 1,851 $ 4,132 $ 4,537
=============== =============== =============== ===============
INCOME PER COMMON AND COMMON-EQUIVALENT SHARE:
Before Extraordinary Item $ 0.32 $ 0.39 $ 0.88 $ 0.91
Extraordinary Item -- -- -- 0.04
--------------- --------------- --------------- ---------------
NET INCOME PER SHARE $ 0.32 $ 0.39 $ 0.88 $ 0.95
=============== =============== =============== ===============
Weighted Average Number of Common and
Common -Equivalent Shares Outstanding 4,714,532 4,790,983 4,714,744 4,783,168
</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 JANUARY 1, 1995 $ 22 $ 2,171 $ 4 $ 14,537 $ 13,487 $ (835) $ 29,386
Net Income -- -- -- -- 6,124 -- 6,124
Redemption of Preferred
Stock (13) (1,257) -- 159 -- -- (1,111)
Conversion of Preferred
to Common Stock (9) (914) -- 923 -- -- --
Net Value Change -- -- -- -- -- 1,578 1,578
----------- ---------- ----------- ---------- ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1995 -- -- 4 15,619 19,611 743 35,977
=========== ========== =========== ========== ============ ============ ============
Net Income -- -- -- -- 4,132 -- 4,132
Conversion of Series B
Preferred to Common Stock -- -- 1 714 -- -- 715
Stock Options Exercised -- -- -- 8 -- -- 8
Net Value Change -- -- -- -- -- (386) (386)
=========== ========== =========== ========== ============ ============ ============
BALANCE AT SEPTEMBER 30, 1996 $ -- $ -- $ 5 $ 16,341 $ 23,743 $ 357 $ 40,446
=========== ========== =========== ========== ============ ============ ============
</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 -- 1,200
------------ ------------
BALANCE AT SEPTEMBER 30, 1996 -- 4,658,734
============ ============
Book Value per Share at September 30,1996 (Full Dollars) $ -- $ 8.68
============ ============
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,132 $ 4,537
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 715 248
Credit for deferred federal income taxes 34 56
Provision (credit) to allowance for possible loan losses 40 (510)
Net realized losses (gains) on securities available for sale 1 --
Direct write-downs of other real estate owned 18 22
Gain on sale of other real estate owned and other assets (86) (312)
Extraordinary gain on prepayment of debt (gross) -- (224)
(Increase) decrease in accrued interest receivable and other (471) 267
assets
Increase (decrease) in accrued interest payable and other
liabilities 322 (131)
------------ ------------
Net cash provided by operating activities 4,705 3,953
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in federal funds sold 5,595 5,830
Net decrease (increase) in interest-bearing accounts 70 (281)
Net increase in loans (3,613) (873)
Purchases of securities available for sale (32,863) (11,192)
Proceeds from sales of securities available for sale 4,045 2,064
Proceeds from maturities of securities available for sale 12,215 9,227
Purchases of securities held to maturity (16,840) (10,128)
Proceeds from maturities of securities held to maturity 13,004 16,048
Capital expenditures (506) (1,418)
Proceeds from sale of other real estate owned 166 438
Net (payments for) cash acquired from acquisitions (46) --
------------ ------------
Net cash (used in) provided by investing activities (18,773) 9,715
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts,
savings and money market accounts 5,019 (9,368)
Net increase in certificates of deposit and time deposits 10,771 3,406
Proceeds from advances on short term debt 140 173
Principal payments on other debt (147) (2,231)
Proceeds from exercise of common stock options 8 --
Redemption of Series A Convertible Preferred Stock -- (378)
------------ ------------
Net cash (used in) provided by financing activities 15,791 (8,398)
Net increase in cash and due from banks 1,723 5,270
Cash and due from banks at beginning of period 14,707 9,794
------------ ------------
Cash and due from banks at end of period $ 16,430 $ 15,064
============ ============
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid $ 5,784 $ 5,378
Federal Income Taxes Paid $ 89 $ 129
Other Real Estate Acquired by Settlement of Loans $ -- $ 61
Bank Financed Sales of Other Real Estate $ -- $ 358
</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 nine month period ended September 30, 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 subsidiaries, NBC Holdings - Texas, Inc., Laredo, Texas and
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; NBC Bank - Rockdale, Rockdale, Texas; The First National
Bank in Luling, Luling, Texas.
NOTE 3 - INVESTMENT SECURITIES
The following tables present the amortized cost and approximate fair value of
the investment securities portfolio as of September 30, 1996 and December 31,
1995:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
------------ ------------ ------------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury Securities $ 79,168 345 (535) $ 78,978
U. S. Government agency and mortgage-backed securities 2,682 20 -- 2,702
Equity securities including Federal Reserve Bank Stock 3,981 486 -- 4,467
------------ ------------ ------------ ------------
Totals $ 85,831 851 (535) $ 86,147
============ ============ ============ ============
HELD-TO-MATURITY SECURITIES:
U.S. Treasury Securities $ 66,674 385 (240) $ 66,819
U. S. Government agency and mortgage-backed securities 3,320 19 (3) 3,336
Corporate Bonds 378 -- -- 378
Foreign debt securities 63 -- (11) 52
------------ ------------ ------------ ------------
Totals $ 70,435 404 (254) $ 70,585
============ ============ ============ ============
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
------------ ------------ ------------ ------------
(Dollars in Thousands)
<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 -- 1,441
------------ ------------ ------------ ------------
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 September 30,
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 September 30, 1996:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
--------------------------- ---------------------------
AMORTIZED APPROXIMATE AMORTIZED APPROXIMATE
COST FAIR VALUE COST FAIR VALUE
------------ ------------ ------------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 18,632 $ 18,653 $ 16,946 $ 16,941
Due in one year to five years 63,088 62,890 50,117 50,265
Due from five to ten years -- -- 52 42
Due after ten years 4,111 4,604 3,320 3,337
------------ ------------ ------------ ------------
Totals $ 85,831 $ 86,147 $ 70,435 $ 70,585
============ ============ ============ ============
</TABLE>
The carrying value of investment securities pledged to secure public funds
amounted to approximately $43,568,000 at September 30, 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 nine months
ended September 30, 1996 and 1995 is presented below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------
(Dollars in Thousands)
<S> <C> <C>
Balance at beginning of period $ 1,906 $ 2,495
Allowance on acquired loans 467 --
Provisions (Credits) to allowance for possible loan losses 40 (510)
Losses charged to the allowance (129) (268)
Recoveries credited to the allowance 228 520
------------ ------------
Net recoveries (charge-offs) 99 252
------------ ------------
Balance at end of period $ 2,512 $ 2,237
============ ============
</TABLE>
7
<PAGE> 8
NOTE 5 - DEBT
As a result of the Luling acquisition (see Note 7), the Company has entered
into short term notes payable with three individuals in the aggregate amount
of $3,638,746. The notes bear interest rates of 5%. The maturity dates of the
notes are January 2, 1997.
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>
NINE MONTHS ENDED
----------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------
(Dollars in thousands)
<S> <C> <C>
Tax based on statutory rate $ 1,447 $ 1,503
Decrease in deferred tax asset valuation allowance (1,429) (1,544)
Alternative minimum tax 85 91
Other, net 20 53
------------------ ------------------
Federal income tax expense $ 123 $ 103
================== ==================
</TABLE>
The Company had approximately $108 million in net operating loss carryforwards
at September 30, 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 nine months ended September 30, 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.
NOTE 7 - ACQUISITION
On September 30, 1996, the Company acquired Luling Bancshares, Inc., including
its subsidiary, The First National Bank in Luling in Luling, Texas. The
transaction was accounted for as a purchase. The Corporation acquired
approximately $26 million in total assets and assumed liabilities of
approximately $24 million. The Company paid a premium of approximately $2
million over the book value of the net assets. The Company paid approximately
$1.2 million in cash and executed notes payable of $3.6 million for the
remainder of the purchase price.
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 September 30, 1996 was $1.5
million or $.32 per common share (4,714,532 weighted average shares), compared
with $1.9 million or $.39 per common share (4,790,983 weighted average shares)
for the three months ended September 30, 1995. The three months ended
September 30, 1995, included a $300,000 credit to the provision for possible
loan losses compared to a $10,000 provision expense provided during the three
months ended September 30, 1996. Excluding the credit to the provision for
possible loan losses, net income for the three months ended September 30, 1996
decreased one percent over the three month period of September 30, 1995.
Non-interest income for the three months ended September 30, 1996 decreased
$123,000 over the same period of 1995 due to gains realized on the sale of
other real estate in 1995. Non-interest expense for the three months ended
increased by $172,000 over the like period of 1995 due primarily to salaries
and occupancy expense related to the new in-house data center and Eagle Pass
branch.
Net income for the nine months ended September 30, 1996 was $4.1
million or $.88 per common share (4,714,744 weighted average shares), compared
with $4.3 million or $.91 per common share (4,783,168 weighted average shares)
for the nine months ended September 30, 1995 before an extraordinary credit
due to the prepayment of debt of $219,000, net of tax or $.04 per common
share. After the extraordinary credit, total net income for the nine months
ended September 30, 1995 was $4.5 million or $.95 per common share.
For the nine months ended September 30, 1996, the Company's return on
average assets was 1.97% compared to 2.29% for the nine months ended September
30, 1995. The Company's return on average equity for the nine months ended
September 30, 1996 was 14.44% compared to 18.37% for the nine months ended
September 30, 1995. Excluding the net $510,000 credit to the provision for
possible loan losses and the net $219,000 extraordinary credit realized in
1995, the adjusted return on average assets would be 1.92% and the adjusted
return on average equity would be 15.41%. Therefore, with the exclusion of the
nonrecurring items, the return on average assets has improved slightly and the
return on average equity has decreased due to the $5 million increase in
average stockholders' equity. The ratio of average stockholders' equity to
total average assets was 13.6% and 12.5% for the nine months ended September
30, 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 $623,000 or 7.3 percent in net interest income for the nine
months ended September 30, 1996 compared to the same period in 1995 was due
primarily to an increase in the investment securities portfolio, the increase
in the average yield on loans and the liquidation of all of the Parent
Company's debt. On an average basis, other debt at September 30, 1996
decreased 84.1 percent compared to the September 30, 1995. The net interest
margin for the nine months ended September 30, 1996 was 4.77 percent compared
to 4.71 percent as of September 30, 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 increased six basis points to 3.97 percent
at September 30, 1996 from 3.91 percent at September 30, 1995. The increase in
the net interest spread is primarily due to higher rates and volume of earning
assets in 1996.
9
<PAGE> 10
INTEREST EARNED/INCURRED AND RATES
(Dollars in Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
------------------------------------ ---------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 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 $ 135 $ 7 6.88% $ 463 $ 20 5.78%
Federal funds sold 17,199 706 5.47% 17,628 782 5.93%
Investment securities:
US Treasuries 139,744 6,458 6.16% 127,656 5,668 5.94%
US Government agencies 4,266 218 6.83% 4,981 241 6.47%
States and political subdivisions 14 1 5.81% 35 2 7.64%
Other 2,559 44 2.30% 650 14 2.88%
--------- --------- ------ --------- --------- ------
Total investment securities 146,583 6,721 6.11% 133,322 5,925 5.94%
Loans, net of discounts (A) 91,868 7,548 10.94% 91,228 7,293 10.69%
--------- --------- ------ --------- --------- ------
Total interest-earning assets 255,785 14,982 7.80% 242,641 14,020 7.73%
NON-INTEREST BEARING ASSETS:
Cash and due from banks 12,192 11,652
Allowance for possible loan losses (1,990) (2,445)
Other assets 13,792 12,296
--------- ---------
Total assets 279,779 264,144
========= =========
INTEREST-BEARING LIABILITIES:
Interest bearing transaction accounts 31,575 682 2.88% 32,839 769 3.13%
Time deposits 170,341 5,116 4.00% 156,589 4,566 3.90%
Other debt 377 20 7.05% 2,371 142 8.01%
--------- --------- ------ --------- --------- ------
Total interest-bearing liabilities 202,293 5,818 3.83% 191,799 5,477 3.82%
NON-INTEREST BEARING LIABILITIES:
Demand deposits 37,815 37,426
Other liabilities 1,476 1,267
--------- ---------
Total liabilities 241,585 230,492
Redeemable preferred stock 80 715
STOCKHOLDERS' EQUITY (F) 38,115 32,937
--------- ---------
Total liabilities and stockholders'
equity $ 279,779 $ 264,144
========= =========
Taxable-equivalent net interest income $ 9,164 $ 8,543
Less: taxable-equivalent adjustment 11 13
--------- ---------
Net interest income $ 9,153 $ 8,530
========= =========
Net interest spread (B) 3.97% 3.91%
====== ======
Net interest margin (C) 4.77% 4.71%
====== ======
SELECTED OPERATING RATIOS:
Return on average assets (D) 1.97% 2.29%
====== ======
Return on average equity (E) 14.44% 18.37%
====== ======
</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 annualized taxable-equivalent net interest
income divided by average interest-earning assets.
(D) The return on assets ratio was computed by dividing annualized net income
by average total assets.
(E) The return on equity ratio was computed by dividing annualized 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 nine months ended September 30, 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>
September 30, 1996 vs. September 30, 1995
-----------------------------------------
Due to Changes in
Increase ------------------------
(Decrease) Rates Volume
---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
TAXABLE-EQUIVALENT INTEREST INCOME:
Interest-bearing accounts $ (13) $ 1 $ (14)
Federal funds sold (76) (57) (19)
Investment securities 796 183 613
Loans, net of discounts 255 204 51
---------- ---------- ----------
Total taxable-equivalent interest
income 962 331 631
INTEREST EXPENSE:
Interest-bearing deposits 464 80 384
Other debt (122) (3) (119)
---------- ---------- ----------
Total interest expense 342 77 265
---------- ---------- ----------
TAXABLE-EQUIVALENT NET INTEREST INCOME $ 620 $ 254 $ 366
========== ========== ==========
</TABLE>
Taxable-equivalent net interest income for the nine months ended
September 30, 1996 increased $620,000 or 7.3% 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 September 30, 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 $ 47,872 $ 7,124 $ 21,954 $ 76,950 $ 33,361 $ 110,311
Investment securities 1,187 8,427 29,223 38,837 117,745 156,582
Federal funds sold 19,375 -- -- 19,375 -- 19,375
Interest-bearing accounts 123 -- 99 222 197 419
---------- ---------- ---------- ---------- ---------- ----------
Total earning assets $ 68,557 $ 15,551 $ 51,276 $ 135,384 $ 151,303 $ 286,687
========== ========== ========== ========== ========== ==========
Interest-bearing
liabilities:
Interest-bearing
transaction, savings
and money market 93,818 -- -- 93,818 -- 93,818
Certificates and time
deposits 27,239 35,112 62,694 125,045 6,731 131,776
Debt 1 1 3,640 3,642 356 3,998
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing
liabilities $ 121,058 $ 35,113 $ 66,334 $ 222,505 $ 7,087 $ 229,592
========== ========== ========== ========== ========== ==========
Interest sensitivity gap $ (52,501) $ (19,562) $ (15,058) $ (87,121)
========== ========== ========== ==========
Cumulative gap $ (52,501) $ (72,063) $ (87,121) $ (87,121)
========== ========== ========== ==========
Ratio of earning assets to
interest-bearing liabilities 56.6% 44.3% 77.3% 60.8%
</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 nine months ended September 30, 1996 and 1995:
NON-INTEREST INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED 1996/1995
--------------------------------------------- ------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 $ CHANGE % CHANGE
---------------------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C>
Service charges and fees $ 1,742 $ 1,659 $ 83 5.0%
Net realized losses on sales of securities (1) -- (1) 100.0%
Net gains on sales of other real estate owned 86 312 (226) -72.4%
Miscellaneous income 240 46 193 419.0%
-------------------- -------------------- --------- ----------
Total non-interest income $ 2,067 $ 2,017 $ 49 2.4%
==================== ==================== ========= ==========
</TABLE>
The $49,000 or 2.4% increase in non-interest income for the nine
months ended September 30, 1996 is due primarily to an increase in
miscellaneous income received by the Banks for the recovery of some stock that
was written off in previous years offset by gains on the sale of other real
estate in 1995.
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 nine months ended
September 30, 1996 and 1995:
NON-INTEREST EXPENSE
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED 1996/1995
--------------------------------------- ----------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 $ CHANGE % CHANGE
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 3,465 $ 3,225 $ 240 7.4%
Occupancy and equipment expenses 1,118 846 272 32.2%
Data processing fees 298 516 (218) -42.2%
FDIC insurance 5 235 (230) -98.1%
Insurance 80 91 (11) -12.3%
Office supplies 267 197 70 35.6%
Postage & Courier 281 240 41 17.1%
Professional fees 530 630 (100) -15.9%
Miscellaneous other expenses 881 656 225 34.3%
------------------ ------------------ ------------------ ------------------
Total non-interest expense $ 6,925 $ 6,636 $ 289 4.4%
================== ================== ================== ==================
</TABLE>
Total non-interest expense for the nine months ended September 30,
1996 increased $289,000 or 4.4% over 1995. However, as a percentage of average
assets, non-interest expense declined slightly from 2.51% in 1995 to 2.48% in
1996. Salaries and benefits rose $240,000 or 7.4% in 1996 due to the addition
of personnel for the new San Antonio data center and the Eagle Pass branch
both of which were established in the last quarter of 1995. The $272,000 or
32.2% 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 $231,000 or 98.1% occurred as
a result of a reduction in the rates previously being charged by the FDIC.
Data processing fees also declined $218,000 or 42.2% due to two of the
subsidiary Banks 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 $123,000 for the nine
months ended September 30, 1996 compared to $103,000 for the nine months ended
September 30, 1995. At September 30, 1996, the Company had approximately $108
million in net operating loss carryforwards that will be available to reduce
income tax liabilities in future years. If unused, approximately $104 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
SEPTEMBER 30, 1996 TOTAL DECEMBER 31, 1995 TOTAL
------------------ ----------- ------------------ ----------
<S> <C> <C> <C> <C>
Commercial $ 18,974 17.2% $ 13,643 14.9%
Real estate construction 5,623 5.1% 11,868 13.0%
Real estate mortgage 68,658 62.2% 51,664 56.4%
Consumer installment loans,
net of unearned discount 17,056 15.5% 14,413 15.7%
------------------ ----------- ------------------ ----------
Total loans $ 110,311 100.0% $ 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 $99,000 for the nine months
ended September 30, 1996 compared to net recoveries of $252,000 for the nine
months ended September 30, 1995. Despite loan growth in 1995, a credit to the
provision for loan losses of $510,000 was made to reduce the allowance for
possible loan losses to an appropriate level. The improvement in credit
quality of the loan portfolio and recoveries of previously charged-off loans
that provided unanticipated additions to the allowance for possible loan
losses justify the credit made to the allowance.
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>
Nine Months Ended September 30,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Average loans outstanding $ 91,868 $ 91,228
Balance of allowance for loan losses
at beginning of year $ 1,906 $ 2,495
Provision (Credit) for loan losses 40 (510)
Allowance on acquired loans 467 --
Charge-Offs:
Commercial 29 51
Real estate construction -- 5
Real estate mortgage -- --
Consumer installment 100 212
---------- ----------
Total charge-offs 129 268
---------- ----------
Recoveries:
Commercial 34 43
Real estate construction -- --
Real estate mortgage 62 265
Consumer installment 132 212
---------- ----------
Total recoveries 228 520
---------- ----------
Net charge-offs (recoveries) (99) (252)
---------- ----------
Balance of allowance for loan losses at end of period $ 2,512 $ 2,237
========== ==========
Net charge-offs (recoveries) as a percentage
of average loans outstanding -0.11% -0.28%
========== ==========
Allowance for loan losses as a percentage of:
Total loans, net of unearned discount 2.28% 2.44%
========== ==========
Non-performing assets 114.91% 185.80%
========== ==========
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets consist of non-accrual loans, restructured
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 status 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. Restructured loans are those which
concessions, including reduction of interest rates or deferral of interest or
principal, have been granted, due to the borrower's weakened financial
condition. Interest on restructured loans is generally accrued at the
restructured rates when it is anticipated that no loss of original principal
will occur. As of September 30, 1996, all restructured loans were performing.
15
<PAGE> 16
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 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 September 30, 1996 and
December 31, 1995:
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Non-accrual loans $ 1,136 $ 1,177
Restructured loans 93 --
Foreclosed real estate 957 888
------------ ------------
Total non-performing assets $ 2,186 $ 2,065
============ ============
NON-PERFORMING ASSETS AS A PERCENTAGE OF:
Total assets 0.69% 0.76%
Total loans plus foreclosed real estate 1.97% 2.23%
Accruing loans past due 90 days or more $ 117 $ 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 September 30, 1996, the Company's liquid assets amounted to $122
million or 39% of total gross assets, up from 31% at September 30, 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 which mature
in 1999 and 2015 and the notes payable of $3.6 million related to the Luling
acquisition (see Note 5).
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.
16
<PAGE> 17
CAPITAL RESOURCES
Total stockholders' equity increased $5.6 million to $40.4 million
at September 30, 1996 from $34.8 million at September 30, 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 12.8% at September 30, 1996 compared with 13.3% at September
30, 1995.
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
September 30, 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 reduced by goodwill. 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 September 30, 1996:
<TABLE>
<CAPTION>
NBC BANK - NBC BANK - NBC BANK - THE FIRST NAT'L
CONSOLIDATED EAGLE PASS, N.A. LAREDO, N.A. ROCKDALE BANK IN LULING
---------------- ---------------- ---------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total average assets $ 279,779 $ 164,479 $ 61,561 $ 52,959 $ 25,228
Risk weighted assets $ 113,347 $ 47,662 $ 36,598 $ 15,589 $ 17,687
Tier 1 capital $ 38,359 $ 16,171 $ 7,137 $ 6,947 $ 2,779
Total capital $ 40,871 $ 16,767 $ 7,595 $ 7,142 $ 3,000
Leverage ratio 13.71% 9.83% 11.59% 13.12% 11.02%
Risk based capital ratios:
Tier 1 33.84% 33.93% 19.50% 44.56% 15.71%
Tier 1 capital minimum
requirement 4.00% 4.00% 4.00% 4.00% 4.00%
Total capital 35.10% 35.18% 20.75% 45.81% 16.96%
Total capital minimum
requirement 8.00% 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
27.1 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: November 8, 1996 By: /s/ Anne Renfroe
-----------------------------------------
Anne Renfroe, Chief Accounting Officer and
Principal Financial Officer
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <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
27.1 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHAREHOLDER:
Income before extraordinary credit $ 1,518 $ 1,851 $ 4,132 $ 4,318
Extraordinary credit, net of tax -- -- -- 219
---------- ---------- ---------- ----------
Primary earnings applicable to common shareholders $ 1,518 $ 1,851 $ 4,132 $ 4,537
========== ========== ========== ==========
COMMON SHARES USED IN PRIMARY PER SHARE CALCULATION:
Weighted average number of common shares outstanding 4,658 4,436 4,634 4,425
Addition from assumed exercise of stock options 56 42 56 29
Addition from assumed exercise of Series A Convertible
Preferred Stock -- 185 -- 202
Addition from assumed conversion of Series B
Convertible Preferred Stock -- 128 25 128
---------- ---------- ---------- ----------
Weighted average number of common and
common-equivalent shares outstanding 4,714 4,791 4,715 4,783
========== ========== ========== ==========
PRIMARY EARNINGS PER COMMON SHARE:
Income before extraordinary credit $ .32 $ .39 $ .88 $ .91
Extraordinary credit -- -- -- .04
---------- ---------- ---------- ----------
Earnings per share $ .32 $ .39 $ .88 $ .95
========== ========== ========== ==========
</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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 16,430
<INT-BEARING-DEPOSITS> 419
<FED-FUNDS-SOLD> 19,375
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 86,147
<INVESTMENTS-CARRYING> 70,435
<INVESTMENTS-MARKET> 70,585
<LOANS> 110,311
<ALLOWANCE> 2,512
<TOTAL-ASSETS> 317,115
<DEPOSITS> 271,077
<SHORT-TERM> 3,639
<LIABILITIES-OTHER> 1,594
<LONG-TERM> 359
0
0
<COMMON> 5
<OTHER-SE> 40,441
<TOTAL-LIABILITIES-AND-EQUITY> 317,115
<INTEREST-LOAN> 7,537
<INTEREST-INVEST> 6,721
<INTEREST-OTHER> 713
<INTEREST-TOTAL> 14,971
<INTEREST-DEPOSIT> 5,798
<INTEREST-EXPENSE> 20
<INTEREST-INCOME-NET> 5,818
<LOAN-LOSSES> 40
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 6,925
<INCOME-PRETAX> 4,255
<INCOME-PRE-EXTRAORDINARY> 4,255
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,132
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
<YIELD-ACTUAL> 7.80
<LOANS-NON> 1,136
<LOANS-PAST> 117
<LOANS-TROUBLED> 93
<LOANS-PROBLEM> 4,522
<ALLOWANCE-OPEN> 1,906
<CHARGE-OFFS> 129
<RECOVERIES> 228
<ALLOWANCE-CLOSE> 2,512
<ALLOWANCE-DOMESTIC> 2,512
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,619
</TABLE>
