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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) April 22, 1999
NATIONAL BANCSHARES CORPORATION OF TEXAS
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Texas 1-13472 74-1692337
(State of Incorporation) (Commission File Number) (IRS Employer Identification Number)
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12400 HIGHWAY 281 NORTH, SAN ANTONIO, TEXAS 78216
(Address of principal executive offices)
Telephone number: (210) 403-4200
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
In October 1998, the Audit Committee of the Board of Directors of the
Company authorized the engagement of KPMG, LLP ("KPMG") as the Company's
auditor for the 1999 fiscal year. This decision to change accountants was
prompted by the ability of KPMG to provide audit services for a recently formed
subsidiary of the Company which was established for the purpose of becoming
approved as a securities broker dealer. The Audit Committee believed that it
would be more efficient to have one firm of independent public accountants
provide audit services for the Company and its subsidiaries, rather than have
two firms of independent public accountants. The Audit Committee determined
that Padgett, Stratemann & Co. LLP ("Padgett"), who have served as the
Company's independent accountants since 1992, would continue to serve until
completion of the audit for the year ended December 31, 1998.
KPMG entered into an engagement letter with the Company on April 22,
1999 and concurrently with that engagement, the Company, at the direction of
the Audit Committee, "dismissed" Padgett as its auditor within the meaning of
Item 304(a)(1)(i) of Regulation S-K of the Securities and Exchange Commission.
Item 4. Changes In Registrant's Certifying Accountant
(a) Previous independent accountants
(i) On April 22,1999, the Company dismissed Padgett, Stratemann & Co., LLP
("Padgett") which served as the Company's independent accountants since 1992,
and engaged KPMG, LLP ("KPMG") as its new independent accountants for the 1999
fiscal year.
(ii) The reports of Padgett on the financial statements for the past two
fiscal years of the Company contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
(iii) The Audit Committee of the Company's Board of Directors participated
in and approved the decision to change independent accountants.
(iv) In connection with its audit for the two most recent fiscal years and
through April 22, 1999, there were no disagreements with Padgett on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Padgett would have caused Padgett to make reference thereto in
their report on the financial statements for such years. However, as noted in
Item 5 below, the Company has determined to restate its financial statements
for 1996, 1997 and 1998 because of an error in the application of an accounting
principle related to the reporting of income taxes. Padgett has concurred in
the conclusion that there was an error in the prior financial statements
regarding this issue.
(v) During the two most recent fiscal years and through April 22, 1999,
there were no reportable events as that term is defined in Item 304 (a)(1)(v)
of Regulation S-K.
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(vi) The Company has requested that Padgett furnish it with a letter
addressed to the Commission stating whether or not it agrees with the above
statements. A copy of such letter, dated April 22, 1999, is filed as Exhibit 16
of this Form 8-K.
(b) New independent accountants
As stated above, the Company engaged KPMG as its new independent
accountants as of April 22, 1999. Such engagement was authorized by the Audit
Committee of the Company's Board of Directors on October 15, 1998; however,
KPMG recently completed its pre-engagement due diligence and, in connection
with such process, made inquiry regarding the issue which has now resulted in
the restatement of earnings. During the two most recent fiscal years and
through April 22, 1999, the Company has not consulted with KPMG regarding
either:
(i) the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements, and neither a written report
was provided to the registrant nor oral advice was provided that KPMG concluded
was an important factor considered by the registrant in reaching a decision as
to the accounting, auditing or financial reporting issue; or
(ii) any matter that was either the subject of a disagreement, as that
term is defined in Item 304 (a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that term
is defined in Item 304 (a) (1) (v) of Regulation S-K.
ITEM 5 OTHER EVENTS
On April 14, 1999, the Company determined to restate its financial
statements for 1996, 1997, and 1998 based on its conclusion that it had
erroneously applied Statement of Financial Accounting Standards No. 109, and
Statement of Position 90-7, as they relate to the reporting of income taxes.
The Company is in the process of amending its Annual Report on Form 10-K, which
will contain the audited restated financial statements, and expects to file the
amended Form 10-K promptly. In connection with the decision to restate its
financial statements, on April 22, 1999, the Company issued the press release
filed as Exhibit 99 to this Current Report on Form 8-K. The Company's decision
to restate its financial statements is unrelated to its decision to dismiss
Padgett as its auditor and to retain KPMG to serve as its independent public
accountant for the 1999 fiscal year.
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ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description
16 Letter from Padgett, Stratemann & Co., LLP regarding change
in certifying accountant.
99 Press Release: National Bancshares Corporation of Texas
(NBT: AMEX) to report earnings net of tax benefits
Dated April 23, 1999
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
National Bancshares Corporation of Texas
/s/ Anne Renfroe
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Anne R. Renfroe
Chief Financial Officer and Chief Accounting Officer
Date: April 23, 1999
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EXHIBIT INDEX
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Exhibit No. Description
- ----------- -----------
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16 Letter from Padgett, Stratemann & Co., LLP regarding change
in certifying accountant.
99 Press Release: National Bancshares Corporation of Texas
(NBT: AMEX) to report earnings net of tax benefits
Dated April 23, 1999
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Exhibit 16
[Padgett, Stratemann & Co., LLP Letterhead]
April 22, 1999
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments in Item 4 of Form 8-K of National
Bancshares Corporation of Texas.
Yours truly,
/s/ Padgett, Stratemann & Co., LLP
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EXHIBIT 99
PRESS RELEASE
NATIONAL BANCSHARES CORPORATION OF TEXAS (NBT: AMEX) TO REPORT EARNINGS NET OF
TAX BENEFITS.
San Antonio, TX, April 23, 1999 - In conjunction with the appointment of KPMG,
LLP as its new auditors, National Bancshares Corporation of Texas will report
earnings net of tax benefits. This represents a change from previous years when
National Bancshares reported earnings that included the tax benefit generated
by the utilization of available tax loss carryforwards.
The company's previous auditors, Padgett Stratemann & Co., LLP, audited the
company's 1998 financial statements and has audited the company's restated
financial statements for 1996, 1997, and 1998.. The restatement for these years
is the result of a consensus among Padgett, Stratemann and National Bancshares
regarding the interpretation and application of Statement of Financial
Accounting Standards No. 109 and Statement of Position 90-7.
This restatement relates only to the manner of reporting the recognition of the
deferred tax asset of National Bancshares. That portion of tax loss
carryforwards that relates to prereorganization periods which can be used to
offset National Bancshares' federal income tax payable will now be credited
directly to additional paid in capital. In lay terms, the result of the
restatement is that "Federal Income Tax Expense" has increased, but this
increased amount was not actually paid in cash. It has no effect upon the cash
on hand, book value, cash flow, the amount of the tax loss carryforward, or the
amount of taxes due or owing. The restatement does have the effect of reducing
reported net income while increasing "Additional Paid-In Capital" in an amount
equal to the decrease in "Retained Earnings."
A comparison chart of previously reported earnings versus restated earnings is
as follows:
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FOR THE YEARS ENDING DECEMBER 31,
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1998 1997 1996
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AS PREVIOUSLY AS AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED AS RESTATED REPORTED RESTATED
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Balance Sheet:
Additional Paid-In Capital $ 16,355 $ 28,629 $ 16,341 $ 25,742 $ 16,341 $ 23,131
Retained Earnings 40,957 28,683 32,796 23,395 25,321 18,531
Total Stockholders' Equity 52,206 52,206 51,098 51,098 42,909 42,909
Income Statement:
Income Before
Federal Income Taxes $ 8,344 $ 8,344 $ 7,675 $ 7,675 $ 5,916 $ 5,916
Federal Income Tax Expense 183 3,056 200 2,811 206 2,155
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Net Income $ 8,161 $ 5,288 $ 7,475 $ 4,864 $ 5,710 $ 3,761
========= ========= ======== ========= ======== ========
Basic Earnings Per Share 1.81 1.17 1.60 1.04 1.23 0.81
Diluted Earnings Per Share 1.76 1.14 1.57 1.02 1.22 0.80
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Jay H. Lustig, Chairman of the Board, said: "The fact that National Bancshares
has over $95 million of tax loss carryforwards, which is about $22 per share,
remains an important part of our story. Because of our tax loss carryforward,
any amount that would otherwise go towards the payment of taxes instead
increases our capital base, which builds shareholder's equity. Our primary goal
remains to increase shareholder value by adding to our book value each year.
This restatement in no way effects that mission."
The Audit Committee of the Board of Directors for National Bancshares has
recommended that the company engage KPMG as its independent public accountants
for the fiscal year ended December 31, 1999, and KPMG has agreed to such
engagement. The company expects to submit the selection of KPMG as its auditor
for ratification by stockholders at the 1999 annual meeting. Assuming the
stockholders ratify the selection of KPMG as the company's auditor for 1999,
this change in accountants may be construed as a "dismissal" of Padgett,
Stratemann within the meaning of Item 304(a)(1)(i) of Regulation S-K of the
Securities and Exchange Commission. KPMG recently completed its pre-engagement
due diligence and, during this process, inquired about the issue which has now
resulted in the restatement of earnings. The decision to engage KPMG and to
dismiss Padgett, Stratemann was authorized by the Audit Committee of the Board
of Directors of National Bancshares in October 1998, and is unrelated to the
restatement of the company's financial statements. In accordance with SAS No.
1, the Company's previously issued financial statements and auditors' reports
should not be relied upon. Revised financial statements and auditors' reports
have been issued.
National Bancshares has bank locations in San Antonio, Eagle Pass, Giddings,
Laredo, Luling, Marble Falls, Rockdale, San Marcos and Taylor, Texas.
