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 June 30, 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 AUGUST 11, 1994
(Common stock,
$3.33 1/3 par value) 3,675,095
<PAGE>
NATIONAL CITY BANCSHARES, INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Condensed consolidated statements of
financial position-
June 30, 1994, December 31, 1993,
and June 30, 1993 1
Condensed consolidated statements of income-
three months and six months ended
June 30, 1994 and 1993 2
Condensed consolidated statements of cash flows-
six months ended June 30, 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>
June December June
30 31 30
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 24,133 $ 29,885 $ 24,635
Interest-bearing deposits in banks 9,147 13,578 22,318
Securities held to maturity 69,317 74,040 187,092
Securities available for sale 127,028 101,722 1,692
Federal funds sold 25 42,224 23,990
Loans 457,650 435,021 430,839
Less: Allowance for possible
loan losses 3,764 3,791 4,323
-------- -------- --------
Loans, net 453,886 431,230 426,516
Premises and equipment 10,195 10,439 10,142
Other real estate owned 598 688 1,234
Other assets 13,570 13,333 13,448
-------- -------- --------
Total Assets $707,899 $717,139 $711,067
-------- -------- --------
-------- -------- --------
LIABILITIES
Deposits:
Noninterest-bearing demand $ 78,491 $ 81,385 $ 73,255
Interest-bearing savings and time 521,540 525,263 531,903
-------- -------- --------
Total deposits 600,031 606,648 605,158
Federal funds purchased and securities
sold under agreements to repurchase 12,493 13,173 10,131
Notes issued to the U.S. Treasury 4,782 5,393 7,749
Guaranteed bank loan of
Employee Stock Ownership Plan - 541 649
Other liabilities 4,720 5,483 4,815
-------- -------- --------
Total liabilities 622,026 631,238 628,502
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
Common stock -- $3.33 1/3 par value
<S> <C> <C> <C> <C> <C> <C>
Number of shares at:
6/30/94 12/31/93 6/30/93
--------- --------- ---------
Authorized 5,000,000 5,000,000 5,000,000
Outstanding 3,693,254 3,741,257 3,741,358 12,311 12,471 12,471
Capital surplus 34,507 36,128 36,140
Retained earnings 39,955 37,375 34,683
Unrealized gain(loss) on securities
available for sale (900) 468 (80)
Employee Stock Ownership Plan
obligation guaranty - (541) (649)
-------- -------- --------
Total shareholders' equity 85,873 85,901 82,565
-------- -------- --------
Total Liabilities and
Shareholders' Equity $707,899 $717,139 $711,067
-------- -------- --------
-------- -------- --------
</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 Six Months
Ended Ended
June 30 June 30
----------------- -----------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 9,290 $ 9,095 $18,009 $17,948
Interest and dividends on securities 2,706 2,778 5,092 5,498
Interest on federal funds sold 40 183 293 454
Interest on deposits in banks 108 262 241 590
------- ------- ------- -------
Total interest income 12,144 12,318 23,635 24,490
------- ------- ------- -------
INTEREST EXPENSE
Interest on deposits 4,315 4,784 8,607 9,794
Interest on funds borrowed 161 118 279 266
------- ------- ------- -------
Total interest expense 4,476 4,902 8,886 10,060
------- ------- ------- -------
NET INTEREST INCOME 7,668 7,416 14,749 14,430
Provision for loan losses 100 242 (53) 438
------- ------- ------- -------
Net interest income after
provision for loan losses 7,568 7,174 14,802 13,992
------- ------- ------- -------
NONINTEREST INCOME
Trust income 304 310 593 594
Service charges on deposit accounts 507 506 985 953
Securities gains (losses) 12 31 (170) 336
Other income 399 378 709 729
------- ------- ------- -------
Total noninterest income 1,222 1,225 2,117 2,612
------- ------- ------- -------
NONINTEREST EXPENSE
Salaries and employee benefits 2,881 2,792 5,767 5,568
Premises and fixed assets 862 742 1,676 1,555
Assessments of the FDIC 349 321 693 641
Other expenses 1,262 1,506 2,548 2,859
------- ------- ------- -------
Total noninterest expense 5,354 5,361 10,684 10,623
------- ------- ------- -------
Income before income taxes 3,436 3,038 6,235 5,981
Applicable income taxes 1,123 920 2,021 1,814
------- ------- ------- -------
NET INCOME $ 2,313 $ 2,118 $ 4,214 $ 4,167
------- ------- ------- -------
------- ------- ------- -------
Earnings per common share $0.62 $0.56 $1.13 $1.11
Weighted average shares outstanding 3,702,308 3,743,299 3,720,864 3,743,148
</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>
Six Months
Ended
June 30
-------------------
1994 1993
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 4,214 $ 4,167
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 706 647
Amortization 1,482 1,055
Provision for loan losses (53) 438
Write-down of other real estate owned 11 63
Securities losses (gains) 170 (336)
(Gain) on sale of premises and equipment (11) (5)
(Gain) Loss on sale of other real estate owned (6) 40
Loss on sale of other assets - 15
Increase (decrease) in deferred taxes (162) 37
Changes in assets and liabilities:
(Increase) decrease in income earned
but not collected (149) 510
(Increase) decrease in other assets (217) (319)
Increase (decrease) in accrued interest payable (180) (302)
Increase (decrease) in other liabilities 467 (439)
-------- --------
Net cash flows provided by operating activities 6,272 5,571
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing
deposits in banks 4,433 7,228
Proceeds from matured securities-held to maturity 18,925 39,332
Proceeds from matured securities-available for sale 25,957 -
Proceeds from sales of securities-held to maturity - 2,989
Purchases of securities-held to maturity (14,525) (48,294)
Purchases of securities-available for sale (54,688) -
(Increase) decrease in federal funds sold 42,199 20,661
(Increase) decrease in loans made to customers (22,706) (12,985)
Capital expenditures (490) (333)
Proceeds from sale of other real estate owned 188 311
Proceeds from sale of premises and equipment 18 6
-------- --------
Net cash flows provided by investing activities (689) 8,915
-------- --------
</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>
Six Months
Ended
June 30
-------------------
1994 1993
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C>
Net increase (decrease) in deposits $ (6,617) $(19,685)
Net increase (decrease) in federal funds
purchased and securities sold under
agreements to repurchase (680) (5,323)
Net proceeds (payments) in notes issued to
the U.S. Treasury (611) 3,474
Payments on other borrowings - (512)
Dividends paid (1,645) (1,354)
Repurchase of common stock (2,149) (311)
Sale of common stock 367 314
-------- --------
Net cash flows (used in) financing activities (11,335) (23,397)
-------- --------
Net increase (decrease) in cash and due from banks (5,752) (8,911)
Cash and due from banks at beginning of period 29,885 33,546
-------- --------
Cash and due from banks at end of period $ 24,133 $ 24,635
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $9,066 $10,362
Income taxes 2,115 2,341
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCIAL ACTIVITIES
Change in allowance for unrealized gain
(loss) on securities available for sale $2,245 $ 4
Employee Stock Ownership Plan obligation
guaranty note payment 541 -
Increase (decrease) in deferred taxes
attributable to securities available for sale (879) -
Other real estate acquired in settlement of loans 103 359
Transfer to loans from other real estate owned - 2,011
Dividends declared not yet paid 813 585
</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>
6/30/94 12/31/93
----------- -----------
<S> <C> <C>
Standby letters of credit $ 2,823,000 $ 2,511,000
Commitments to extend credit $77,395,000 $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 June 30, 1994, was $2,313,000, or
$0.62 per share, compared to $2,118,000, or $0.56 per share, for the
second quarter of 1993. This is an increase of $195,000, or 9.2
percent, in net income. For the first six months of 1994, net income
was $4,214,000, or $1.13 per share, compared to $4,167,000, or $1.11
per share, for the first six months of 1993, an increase of $47,000,
or 1.1 percent in net income. The weighted average number of shares
outstanding was 3,702,308 and 3,720,864 for the three and six months,
respectively, ended June 30, 1994, compared to 3,743,299 and 3,743,148
during the like periods last year. 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 second quarter of 1994 increased $226,000,
or 2.9 percent, on a tax equivalent basis, from the year-ago quarter.
For the first six months of 1994, net interest income increased
$278,000, or 1.8 percent, on a tax equivalent basis, from the same
period last year. Average earning assets were $664 million and $670
million, a decrease of $6 million, or 0.9 percent, during the second
quarters of 1994 and 1993, respectively. For the first six months of
1994 and 1993, average earning assets were $659 million and $662
million, respectively. Interest-bearing deposits in banks decreased
an average of $18 million, or 65.0 percent, for the quarter and
average federal funds sold decreased $16 million, or 65.4 percent, for
the quarter. These decreases were due to an increase in the average
loan demand of $17 million and an increase in average securities of
$12 million. Average total deposits decreased $6 million. Although
average noninterest-bearing deposits increased slightly, $10 million
of average interest-bearing deposits decreased due to low interest
rates in the industry.
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 $896,000, or 3.6 percent,
on a tax equivalent basis, during the first six months of 1994 from
the same period of 1993, compared to a $1,174,000, or 11.7 percent
decrease in total interest expense. The decrease in interest income
resulted from lower rates of interest earned and decreased average
earning assets.
6
<PAGE>
The net interest margin increased to 4.84 percent for the second
quarter of 1994, compared to 4.67 percent during the year-ago quarter
and to 4.72 percent for the first six months of 1994 from 4.62 percent
during the same period last year.
UNDERPERFORMING ASSETS
Listed below is a two-year comparison of the underperforming assets.
<TABLE>
<CAPTION>
6/30/94 6/30/93
---------- ----------
<S> <C> <C>
Nonaccrual loans $1,281,000 $2,308,000
Restructured loans 156,000 79,000
90 days past due loans 793,000 1,223,000
---------- ----------
Total underperforming loans 2,230,000 3,610,000
Other real estate held 598,000 1,234,000
---------- ----------
Total underperforming assets $2,828,000 $4,844,000
---------- ----------
---------- ----------
</TABLE>
Past due 90 days or more, nonaccrual, and renegotiated loans have
decreased from 0.8 percent of total loans at June 30, 1993, to 0.5
percent as of June 30, 1994. Of the loans in this category, 69.2 and
67.5 percent were secured by real estate at June 30, 1994 and 1993,
respectively. Potential problem loans, other than underperforming
loans, amounted to $18,038,000 at June 30, 1994 and $16,956,000 at
June 30, 1993.
PROVISION FOR LOAN LOSSES
Net charge-offs amounted to $176,000 during the second quarter of 1994
and net recoveries were $26,000 during the first six months of 1994,
compared to net charge-offs of $148,000 and $305,000 in the year-
earlier periods.
The provision for loan losses during the first six months of 1994 was
$(53,000), down $491,000 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 June 30,
1994, management considered the reserve for loan losses adequate to
provide for potential losses.
7
<PAGE>
NONINTEREST INCOME
Noninterest income for the second quarter of 1994 decreased $3,000, or
0.2 percent and for the first six months of 1994 decreased $495,000,
or 19.0 percent from the year-ago periods. Trust income remained
approximately the same for both years. Service charges on deposit
accounts increased $32,000 or 3.4 percent from the year ago period.
Net securities losses were $170,000 for the first six months of 1994,
compared to net securities gains of $336,000 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.
NONINTEREST EXPENSE
Noninterest expense decreased $7,000, or 0.1 percent and increased
$61,000 or 0.6 percent in the second quarter and the first six months
of 1994, respectively. Salaries and employee benefits increased
$89,000, or 3.2 percent for the second quarter and $199,000 or 3.6
percent for the first six months of 1994. Expenses of premises and
fixed assets increased $120,000 or 16.2 percent in the second quarter
and $121,000 or 7.8 percent for the first six months of 1994. The
cost of Federal Deposit Insurance increased $52,000, or 8.1 percent,
from 1993. Other items in this category decreased $311,000, or 10.9
percent. The largest decrease was in expenses on foreclosed property
which decreased $163,000 from 1993.
FINANCIAL POSITION ANALYSIS
Cash and due from banks decreased $502,000, or 2.0 percent, and
interest-bearing deposits in banks decreased $13,171,000, or 59.0
percent, during the past year. Federal funds sold decreased
$23,965,000, or 99.9 percent.
Securities increased $7,561,000, or 4.0 percent, during the past year.
The largest increase was in corporate and mortgage-backed securities
which increased $8,525,000, or 52.7 percent. Other increases were in
municipals, particularly taxable municipals, which increased
$1,930,000, or 314.1 percent, and nontaxable municipals which
increased $1,248,000, or 3.2 percent. Equity securities increased
$870,000, or 51.4 percent, due to the purchase of $960,000 of stock in
the Federal Home Loan Bank. Decreases were noted in U.S. Treasury
securities of $2,145,000, or 7.1 percent, and in U.S. Government
Agencies of $2,867,000, or 2.8 percent.
As part of its strategic plan, the Corporation successfully increased
total loans while maintaining high credit standards and competitive
rates. Loans increased $26,811,000, or 6.2 percent, during the past
year. The largest increase was in commercial loans, which increased
$13,582,000 or 15.1 percent. Loans secured by real estate increased
$4,192,000, or 1.8 percent, and consumer loans increased $6,822,000,
or 9.5 percent. All other types of loans, except agricultural loans,
decreased.
8
<PAGE>
Total deposits have decreased $5,127,000, or 0.8 percent, since June
30, 1993. Noninterest-bearing deposits increased $5,236,000 or 7.1
percent during the past year, while interest-bearing deposits
decreased $10,363,000, or 1.9 percent, during this period due to low
interest rates in the industry.
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 6/30/94 6/30/93
------------ ------- -------
<S> <C> <C> <C>
Tier I capital to
risk-based assets 4.00% 17.96% 18.04%
Total capital to
risk-based assets 8.00% 18.75% 19.01%
Leverage capital 3.00% 11.92% 11.36%
</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 -
NONE
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.)
August 12, 1994
10
