SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number: 0-13585
NATIONAL CITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1632155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 868, EVANSVILLE, INDIANA 47705-0868
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 464-9800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 11, 1994
(Common stock,
$3.33 1/3 par value) 3,698,704
<PAGE>
NATIONAL CITY BANCSHARES, INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Condensed consolidated statements of
financial position-
March 31, 1994, December 31, 1993,
and March 31, 1993 1
Condensed consolidated statements of income-
three months ended March 31, 1994 and 1993 2
Condensed consolidated statements of cash flows-
three months ended March 31, 1994 and 1993 3-4
Notes to condensed consolidated financial statements 5
Management's discussion and analysis of financial
condition and results of operations 6-9
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES 10
<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Condensed Consolidated Statements of Financial Position
(Dollars in thousands)
<TABLE>
<CAPTION>
March December March
31 31 31
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 24,050 $ 29,885 $ 31,001
Interest-bearing deposits in banks 10,712 13,578 28,048
Securities held to maturity 70,476 74,040 184,607
Securities available for sale 117,515 101,722 1,691
Federal funds sold 21,130 42,224 20,283
Loans 437,777 435,021 418,365
Less: Allowance for possible
loan losses 3,840 3,791 4,224
-------- -------- --------
Loans, net 433,937 431,230 414,141
Premises and equipment 10,277 10,439 10,253
Other real estate owned 646 688 3,172
Other assets 12,935 13,333 13,177
-------- -------- --------
Total Assets $701,678 $717,139 $706,373
-------- -------- --------
-------- -------- --------
LIABILITIES
Deposits:
Noninterest-bearing demand $ 78,056 $ 81,385 $ 78,254
Interest-bearing savings and time 515,698 525,263 527,654
-------- -------- --------
Total deposits 593,754 606,648 605,908
Federal funds purchased and securities
sold under agreements to repurchase 13,458 13,173 11,017
Notes issued to the U.S. Treasury 2,355 5,393 2,126
Guaranteed bank loan of
Employee Stock Ownership Plan 432 541 649
Other liabilities 5,612 5,483 5,534
-------- -------- --------
Total liabilities 615,611 631,238 625,234
-------- -------- --------
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
Common stock -- $3.33 1/3 par value
<S> <C> <C> <C> <C> <C> <C>
Number of shares at:
3/31/94 12/31/93 3/31/93
--------- --------- ---------
Authorized 5,000,000 5,000,000 5,000,000
Outstanding 3,730,327 3,741,257 3,741,206 12,434 12,471 12,471
Capital surplus 35,774 36,128 36,144
Retained earnings 38,454 37,375 33,254
Unrealized gain(loss) on securities
available for sale (163) 468 (81)
Employee Stock Ownership Plan
obligation guaranty (432) (541) (649)
-------- -------- --------
Total shareholders' equity 86,067 85,901 81,139
-------- -------- --------
Total Liabilities and
Shareholders' Equity $701,678 $717,139 $706,373
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
1<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months
Ended
March 31
--------------------
1994 1993
------- -------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 8,719 $ 8,853
Interest and dividends on securities 2,386 2,720
Interest on federal funds sold 253 271
Interest on deposits in banks 133 328
------- -------
Total interest income 11,491 12,172
------- -------
INTEREST EXPENSE
Interest on deposits 4,292 5,010
Interest on funds borrowed 118 148
------- -------
Total interest expense 4,410 5,158
------- -------
NET INTEREST INCOME 7,081 7,014
Provision for loan losses (153) 196
------- -------
Net interest income after
provision for loan losses 7,234 6,818
------- -------
NONINTEREST INCOME
Trust income 289 284
Service charges on deposit accounts 478 447
Securities gains (losses) (182) 305
Other income 310 351
------- -------
Total noninterest income 895 1,387
------- -------
NONINTEREST EXPENSE
Salaries and employee benefits 2,886 2,776
Premises and fixed assets 814 813
Assessments of the FDIC 344 320
Other expenses 1,286 1,353
------- -------
Total noninterest expense 5,330 5,262
------- -------
Income before income taxes 2,799 2,943
Applicable income taxes 898 894
------- -------
NET INCOME $ 1,901 $ 2,049
------- -------
------- -------
Earnings per common share $0.51 $0.55
Weighted average shares outstanding 3,739,626 3,742,995
</TABLE>
The accompanying notes are an integral part of these statements.
2<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
March 31
-------------------
1994 1993
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 1,901 $ 2,049
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 350 324
Amortization 731 475
Provision for loan losses (153) 196
Write-down of securities and other assets 175 21
Securities losses (gains) 7 (305)
(Gain) on sale of premises and equipment (5) (5)
Loss on sale of other real estate owned - 6
Loss on sale of other assets - 15
Increase (decrease) in deferred taxes 106 (13)
Changes in assets and liabilities:
(Increase) decrease in income earned
but not collected 671 1,091
(Increase) decrease in other assets (337) (565)
Increase (decrease) in accrued interest payable (179) (186)
Increase (decrease) in other liabilities 610 214
-------- --------
Net cash flows provided by operating activities 3,877 3,317
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing
deposits in banks 2,868 1,491
Proceeds from matured securities-held to maturity 18,047 26,614
Proceeds from matured securities-available for sale 6,587 -
Proceeds from sales of securities-held to maturity - 528
Purchases of securities-held to maturity (14,480) (30,148)
Purchases of securities-available for sale (24,262) -
(Increase) decrease in federal funds sold 21,094 24,368
(Increase) decrease in loans made to customers (2,573) (2,255)
Capital expenditures (204) (114)
Proceeds from sale of other real estate owned 60 338
Proceeds from sale of premises and equipment 11 6
-------- --------
Net cash flows provided by investing activities 7,148 20,828
-------- --------
</TABLE>
(Continued on next page)
The accompanying notes are an integral part of these statements.
3<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
March 31
-------------------
1994 1993
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C>
Net increase (decrease) in deposits $(12,894) $(18,935)
Net increase (decrease) in federal funds
purchased and securities sold under
agreements to repurchase 285 (4,437)
Net proceeds (payments) in notes issued to
the U.S. Treasury (3,038) (2,149)
Payments on other borrowings - (512)
Dividends paid (822) (663)
Repurchase of common stock (570) (147)
Sale of common stock 179 153
-------- --------
Net cash flows (used in) financing activities (16,860) (26,690)
-------- --------
Net increase (decrease) in cash and due from banks (5,835) (2,545)
Cash and due from banks at beginning of period 29,885 33,546
-------- --------
Cash and due from banks at end of period $ 24,050 $ 31,001
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $4,589 $5,343
Income taxes 139 660
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCIAL ACTIVITIES
Change in allowance for unrealized gain
(loss) on securities available for sale $ 631 $ 2
Employee Stock Ownership Plan obligation
guaranty note payment 109 -
Increase (decrease) in deferred taxes
attributable to securities available for sale (408) -
Other real estate acquired in settlement of loans 19 236
Transfer to loans from other real estate owned - 2,011
</TABLE>
The accompanying notes are an integral part of these statements.
4<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
While the interim amounts are unaudited, they do reflect all adjustments
which, in the opinion of management, are necessary for a fair statement of
the results of operations for the interim periods. All such adjustments are
of a normal recurring nature. Year-end balance sheet amounts are condensed
from audited financial statements.
Because the results from commercial banking operations are so closely
related and responsive to changes in economic conditions, the results for
any interim period are not necessarily indicative of the results that can be
expected for the entire year.
NOTE 2
In the normal course of business, there are outstanding various other
commitments and contingent liabilities which are not reflected in the
accompanying financial statements. The Corporation uses the same credit
policies in making commitments and conditional obligations as it does for
other instruments.
<TABLE>
<CAPTION>
3/31/94 12/31/93
----------- -----------
<S> <C> <C>
Standby letters of credit $ 2,626,000 $ 2,511,000
Commitments to extend credit $74,946,000 $73,031,000
</TABLE>
NOTE 3
On December 17,1993, the Corporation issued 645,285 shares of its common
stock in exchange for all of the outstanding common stock of Lincolnland
Bancorp, Inc., the parent company of Lincolnland Bank, Dale, Indiana and
Ayer-Wagoner-Deal Insurance Agency, Inc., Rockport, Indiana. At
consummation of the merger, Lincolnland Bancorp, Inc. was merged with the
Corporation.
On December 17, 1993, the Corporation also issued 439,333 shares of its
common stock in exchange for all of the outstanding common stock of Sure
Financial Corporation, the parent company of The State Bank of Washington,
Washington, Indiana; The Bank of Mitchell, Mitchell, Indiana; Pike County
Bank, Petersburg, Indiana; and The Spurgeon State Bank, Spurgeon, Indiana.
At consummation of the merger, Sure Financial Corporation was merged with
the Corporation.
Both of these acquisitions were accounted for using the pooling of interests
method. Accordingly, the Corporation's financial statements and financial
data have been retroactively restated to include the accounts and operations
of Lincolnland Bancorp, Inc. and Sure Financial Corporation for 1993.
5<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET INCOME
Net income for the quarter ended March 31, 1994, was $1,901,000, or $0.51
per share, compared to $2,049,000, or $0.55 per share, for the first quarter
of 1993. This is a decrease of $148,000, or 7.2 percent, in net income.
The weighted average number of shares outstanding was 3,739,626 and
3,742,995 for the three months ended March 31, 1994 and 1993, respectively.
Stock has been repurchased by the Corporation for the dividend reinvestment
program and the stock repurchase program approved March 15, 1994.
NET INTEREST INCOME
Net interest income in the first quarter of 1994 increased $78,000, or 1.1
percent, on a tax equivalent basis, from the year-ago quarter. Average
earning assets were $657 million and $662 million, a decrease of $5 million,
or 0.8 percent, during the first quarters of 1994 and 1993, respectively.
The largest decrease in average earning assets was in interest-bearing
deposits in banks which decreased an average of $17 million, or 57.9
percent, for the quarter. Average federal funds sold decreased $4 million,
or 10.5 percent, for the quarter. These decreases were due to an increase
in the average loan demand of $16 million and a decrease in average total
deposits of $9 million. Although average noninterest-bearing deposits
increased slightly, $11 million of average interest-bearing deposits
decreased due to declining interest rates.
The increased net interest income was due to a change in the mix of average
earning assets and a decrease in average interest-bearing deposits. Total
interest income decreased $670,000, or 5.4 percent, on a tax equivalent
basis, during the first three months of 1994 from the same period of 1993,
compared to a $748,000, or 14.5 percent decrease in total interest expense.
The decrease in interest income resulted from lower rates of interest earned
and decreased average earning assets.
The net interest margin increased to 4.59 percent for the first quarter of
1994, compared to 4.50 percent during the year-ago quarter.
6<PAGE>
UNDERPERFORMING ASSETS
Listed below is a two-year comparison of the underperforming assets.
<TABLE>
<CAPTION>
3/31/94 3/31/93
---------- ----------
<S> <C> <C>
Nonaccrual loans $1,253,000 $3,085,000
Restructured loans 166,000 89,000
90 days past due loans 355,000 2,203,000
---------- ----------
Total underperforming loans 1,774,000 5,377,000
Nonaccrual securities:
Agency-Issued CMO 30,000 -
Other real estate held 646,000 3,172,000
---------- ----------
Total underperforming assets $2,450,000 $8,549,000
---------- ----------
---------- ----------
</TABLE>
Past due 90 days or more, nonaccrual, and renegotiated loans have decreased
from 1.3 percent of total loans at March 31, 1993, to 0.4 percent as of
March 31, 1994. Of the loans in this category, 54.5 and 42.6 percent were
secured by real estate at March 30, 1994 and 1993, respectively. Potential
problem loans, other than underperforming loans, amounted to $16,217,000 at
March 31, 1994, and $13,985,000 at March 31, 1993.
PROVISION FOR LOAN LOSSES
Net recoveries amounted to $202,000 during the first quarter of 1994,
compared to net charge offs of $157,000 in the year-earlier period.
The provision for loan losses during the first three months of 1994 was a
negative $153,000. This negative provision was due to net recoveries of
$202,000 which resulted in an overfunding of the allowance for loan losses.
The provision decreased $349,000 from the comparable year-ago period based
on the quarterly review of the allowance for possible loan losses. Some of
the factors used in this review include current economic conditions and
forecasts, risk by type of loan, previous loan loss experience, and
evaluation of specific borrowers and collateral. As of March 31, 1994,
management considered the reserve for loan losses adequate to provide for
potential losses.
NONINTEREST INCOME
Noninterest income for the first quarter of 1994 decreased $492,000, or 35.5
percent, from the year-ago period. Trust income and service charges on
deposit accounts remained approximately the same for both years. Net
securities losses were $182,000 for the first three months of 1994, compared
to net securities gains of $305,000 for the same period 1993. The losses
were mainly due to a permanent write-down on an interest-only bond. During
the first quarter of 1993, $700,000 of guaranteed investment contracts were
sold for $487,000. The securities were on a nonaccrual basis and had
previously been written down to $184,000. The sale resulted in a recovery
of $303,000, which is included in net securities gains.
7<PAGE>
NONINTEREST EXPENSE
Noninterest expense increased $68,000, or 1.3 percent, in the first quarter
of 1994. Salaries and employee benefits increased $110,000, or 4.0 percent,
over the year-ago period. Expenses of premises and fixed assets were
approximately the same for both years. The cost of Federal Deposit
Insurance increased $24,000, or 7.5 percent, during 1994. Other items in
this category decreased $67,000, or 5.0 percent. This decrease was due to a
$70,000 decrease in expense on foreclosed property.
FINANCIAL POSITION ANALYSIS
Cash and due from banks decreased $6,951,000, or 22.4 percent, and interest-
bearing deposits in banks decreased $17,336,000, or 61.8 percent, during the
past year. Federal funds sold increased $847,000, or 4.2 percent.
Securities increased $1,693,000, or 0.9 percent, during the past year. The
largest increase was in other debt securities which increased $10,471,000,
or 66.9 percent. Other increases were in municipals, particularly taxable
municipals, which increased $2,032,000, or 394.8 percent, and nontaxable
municipals which increased $1,558,000, or 4.0 percent. Equity securities
increased $836,000, or 49.4 percent, due to the purchase of $897,000 of
stock in the Federal Home Loan Bank. Decreases were noted in U.S. Treasury
securities of $5,442,000, or 16.6 percent, and in U.S. Government Agencies
of $7,762,000, or 8.0 percent.
As part of its strategic plan, the Corporation successfully increased total
loans while maintaining high credit standards and competitive rates. Loans
increased $19,412,000, or 4.6 percent, during the past year. Loans secured
by real estate increased $17,648,000, or 8.0 percent, and consumer loans
increased $2,947,000, or 4.1 percent. All other types of loans, except
agricultural loans, decreased. The largest decrease was in commercial
loans, which decreased $2,070,000, or 2.1 percent.
Other real estate owned decreased $2,526,000, or 79.6 percent, from March
31, 1993. The 1993 total included a loan in the amount of $2,000,000 which
was required to be carried as other real estate owned. The National City
Bank of Evansville (Bank), the lead bank of the Corporation, was a party
with a director (of the Bank and of the Corporation) to a beneficial
arrangement which created a land trust to manage and sell certain real
property owned jointly by the parties. This arrangement was terminated in
1992 as the result of the sale of the underlying real estate. The Bank
entered into a financing arrangement with the new owner. Because of the
nature of the terms of the financing, the loan had to be reported as other
real estate owned. The Corporation's 1992 annual report stated that this
loan would continue to be reported in other real estate owned until
principal reductions had created equity by the borrower of at least 10
percent. During 1993, the Office of the Comptroller of the Currency revised
the 10 percent level to include the receipt and accumulation of interest
payments. The 10 percent level on this loan was met in 1993 and was no
longer included in other real estate owned after the first quarter of 1993.
8<PAGE>
Total deposits have decreased $12,154,000, or 2.0 percent, since March 31,
1993. Noninterest-bearing deposits decreased slightly, while interest-
bearing deposits decreased $11,956,000, or 2.27 percent, during this period
due to a decline in interest rates.
SHAREHOLDERS' EQUITY
The Corporation and each subsidiary have capital ratios which substantially
exceed all regulatory requirements. The Corporation's capital ratios are
shown below.
<TABLE>
<CAPTION>
Minimum
Requirements 3/31/94 3/31/93
------------ ------- -------
<S> <C> <C> <C>
Tier I capital to
risk-based assets 4.00% 18.36% 18.16%
Total capital to
risk-based assets 8.00% 19.19% 19.13%
Leverage capital 3.00% 12.00% 11.14%
</TABLE>
9<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
NONE
(b) Reports on Form 8-K -
CURRENT REPORT dated March 18, 1994 for event of
March 15, 1994, regarding the authorization for
the repurchase of up to five percent of the
Corporation's common stock over a twelve-month period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL CITY BANCSHARES, INC
(Registrant)
By /S/ HAROLD A. MANN
Harold A. Mann
Secretary and Treasurer
(On behalf of the registrant
and in his capacity as Chief
Accounting Officer.)
May 13, 1994
10
