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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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.)
227 Main Street, 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
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 STATED VALUE
(Title of Class)
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 such 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )
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Based on the closing sales price of February 29, 1996, the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$231,150,938.
The number of shares outstanding of the registrant's common stock, $1.00 stated
value was 4,611,137 at February 29, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1995. (Part I, Part II, and Part IV)
(2) Portions of the Registrant's Proxy Statement for the Annual Shareholders'
Meeting to be held April 16, 1996. (Part III)
Exhibit Index appears on page 22.
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NATIONAL CITY BANCSHARES, INC.
1995 FORM 10-K ANNUAL REPORT
Table of contents
PAGE
NUMBER
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of Security Holders . 14
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . 15
Item 6. Selected Financial Data . . . . . . . . . . . . . . . 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation . . . . . . . . . . 15
Item 8. Financial Statements and Supplementary Data . . . . . 15
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . 15
PART III
Item 10. Directors and Executive Officers of the Registrant . . 16
Item 11. Executive Compensation . . . . . . . . . . . . . . . . 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . 18
Item 13. Certain Relationships and Related Transactions . . . . 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . 19
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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FORM 10-K
NATIONAL CITY BANCSHARES, INC.
December 31, 1995
PART I
ITEM 1. BUSINESS
National City Bancshares, Inc., (hereinafter referred to as the "Corporation"),
is an Indiana Corporation organized in 1985 to engage in the business of a bank
holding company. Based in Evansville, Indiana, the Corporation has eleven
wholly owned subsidiaries, including nine commercial banks and one savings bank
serving twenty-three communities with a total of thirty-two banking centers,
one leasing corporation, and one insurance agency (which is a subsidiary of a
subsidiary bank). Each subsidiary, its locations, number of offices, year
founded, and date of merger is shown below.
<TABLE>
<CAPTION>
Subsidiary Number of Year Date of
Principal and Other Cities Offices Founded Merger
<S> <C> <C> <C>
The National City Bank of Evansville 9 1850 May 6, 1985
Evansville and Newburgh, Indiana
The Peoples National Bank of Grayville 1 1937 May 16, 1988
Grayville, Illinois
The Farmers and Merchants Bank 1 1896 January 30, 1989
Fort Branch, Indiana
First Kentucky Bank 4 1916 November 30, 1990
Sturgis, Morganfield, and
Poole, Kentucky
Lincolnland Bank 5 1904 December 17, 1993
Dale, Chrisney, Grandview,
Hatfield, and Rockport, Indiana
The Bank of Mitchell 4 1882 December 17, 1993
Mitchell, Bedford, and Paoli, Indiana
Pike County Bank 3 1900 December 17, 1993
Petersburg, Arthur, and
Spurgeon, Indiana
The State Bank of Washington 2 1910 December 17, 1993
Washington and Odon, Indiana
White County Bank 1 1904 June 30, 1995
Carmi, Illinois
United Federal Savings Bank 2 1890 August 31, 1995
Vincennes and Princeton, Indiana
NCBE Leasing Corp. 1 1994 November 1, 1994
Evansville, Indiana
UniFed, Inc. 3 1980 August 31, 1995
Petersburg, Princeton, and
Vincennes, Indiana
</TABLE>
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The Corporation's subsidiary banks provide a wide range of financial services
to the communities they serve in Southwestern Indiana, Western Kentucky and
Southeastern Illinois. These services include various types of deposit
accounts; safe deposit boxes; safekeeping of securities; automated teller
machines; consumer, mortgage, and commercial loans; mortgage loan sales and
servicing; letters of credit; accounts receivable management (financing,
accounting, billing and collecting); and complete personal and corporate trust
services. All banks are members of the Federal Deposit Insurance Corporation.
The Corporation's nonbank subsidiary, NCBE Leasing Corp., operates as a full
service equipment and real property leasing company offering its services to
all commercial clients of the Corporation's subsidiary banks.
UniFed, Inc., a wholly owned nonbank subsidiary of Pike County Bank (which is a
wholly owned subsidiary of the Corporation), operates as an insurance agency
offering various insurance products through several insurance companies or
underwriters and sells the following types of insurance: casualty, property,
homeowners, business, and automobile.
At December 31, 1995, the Corporation and its subsidiaries had 445 full-time
equivalent employees. The subsidiaries provide a wide range of employee
benefits and consider employee relations to be excellent.
COMPETITION
The Corporation has active competition in all areas in which it presently
engages in business. Each subsidiary bank competes for commercial and
individual deposits and loans with commercial banks, savings and loan
associations, credit unions connected with local businesses, and other
non-banking institutions. The Corporation's leasing company competes with bank
and nonbank leasing companies as well as finance subsidiaries of major
equipment vendors.
FOREIGN OPERATIONS
The Corporation and its subsidiaries have no foreign branches or significant
business with foreign obligers or depositors.
REGULATION AND SUPERVISION
The following is a summary of certain statutes and regulations affecting the
Corporation and its subsidiaries. This summary is qualified in its entirety by
such statutes and regulations.
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The Corporation
The Corporation is a registered bank holding company under the Bank Holding
Company Act as amended ("BHC Act") and as such is subject to regulation by the
Board of Governors of the Federal Reserve Board ("FRB"). A bank holding
company is required to file with the FRB quarterly reports and other
information regarding its business operations and those of its subsidiaries. A
bank holding company and its subsidiary banks are also subject to examination
by the FRB.
The BHC Act requires every bank holding company to obtain the prior approval of
the FRB before acquiring substantially all the assets of any bank or bank
holding company or ownership or control of any voting shares of any bank or
bank holding company, if, after such acquisition, it would own or control,
directly or indirectly, more than 5% of the voting shares of such bank or bank
holding company. Bank holding companies are also prohibited from acquiring
shares of any bank located outside the state in which the operations of the
bank holding company's banking subsidiaries are principally conducted, unless
such an acquisition is specifically authorized by statute of the state in which
the bank whose shares are to be acquired is located. However, the BHC Act does
not place territorial restrictions on the activities of nonbank subsidiaries of
a bank holding company.
In approving acquisitions by bank holding companies of companies engaged in
banking-related activities, the FRB considers whether the performance of any
such activity by a subsidiary of the holding company reasonably can be expected
to produce benefits to the public, such as greater convenience, increased
competition, or gains in efficiency, which outweigh possible adverse effects,
such as over concentration of resources, decrease of competition, conflicts of
interest, or unsound banking practices.
Bank holding companies are restricted in, and subject to, limitations regarding
transactions with subsidiaries and other affiliates.
In addition, bank holding companies and their subsidiaries are prohibited from
engaging in certain "tie in" arrangements in connection with any extensions of
credit, leases, sales of property or furnishing of services.
In connection with its acquisition of United Federal Savings Bank ("UFSB"), the
Corporation became subject to supervision and regulation by the Office of
Thrift Supervision ("OTS"), as a registered thrift holding company under the
provision of the Home Owners Loan Act. The OTS has regulatory and supervisory
jurisdiction over UFSB as well as the Corporation.
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Subsidiaries of the Corporation
The Corporation operates two national banks, The National City Bank of
Evansville and The Peoples National Bank of Grayville. As national banks,
these banks are supervised and regulated by the Comptroller of the Currency
("OCC"), and subject to laws and regulations applicable to national banks.
In addition to its national bank subsidiaries, the Corporation operates five
Indiana state chartered banks; The Farmers and Merchants Bank, Lincolnland
Bank, The Bank of Mitchell, Pike County Bank, and The State Bank of Washington;
a Kentucky state chartered bank, First Kentucky Bank; and an Illinois state
chartered bank, White County Bank. As state banks, they are supervised and
regulated by their state banking supervisor and the Federal Deposit Insurance
Corporation ("FDIC") as their primary federal banking regulatory agency.
Finally, the Corporation operates a federal savings bank, United Federal
Savings Bank, which is supervised and regulated by the OTS.
Capital
The FRB, OCC, OTS, and FDIC require banks and holding companies to maintain
minimum capital ratios.
The FRB has adopted final "risk-adjusted" capital guidelines for bank holding
companies. The new guidelines became fully implemented as of December 31,
1992. The OCC, OTS, and FDIC have adopted substantially similar risk-based
capital guidelines. These ratios involve a mathematical process of assigning
various risk weights to different classes of assets, then evaluating the sum of
the risk-weighted balance sheet structure against the Corporation's capital
base. The rules set the minimum guidelines for the ratio of capital to
risk-weighted assets (including certain off-balance sheet activities, such as
standby letters of credit) at 8%. At least half of the total capital is to be
composed of common equity, retained earnings, and a limited amount of perpetual
preferred stock less certain goodwill items ("Tier I Capital"). The remainder
may consist of a limited amount of subordinated debt, other preferred stock, or
a limited amount of loan loss reserves.
In addition, the federal banking regulatory agencies have adopted leverage
capital guidelines for banks and bank holding companies. Under these
guidelines, banks and bank holding companies must maintain a minimum ratio of
3% Tier 1 Capital (as defined for purposes of the year-end 1992 risk-based
capital guidelines) to total assets. The FRB has indicated, however, that
banking organizations that are experiencing or anticipating significant growth,
are expected to maintain capital ratios well in excess of the minimum levels.
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Regulatory authorities may increase such minimum requirements for all banks and
bank holding companies or for specified banks or bank holding companies.
Increases in the minimum required ratios could adversely affect the Corporation
and the subsidiary banks, including the ability to pay dividends.
Additional Regulation
The Corporation's banks are also subject to federal regulation as to such
matters as required reserves, limitation as to the nature and amount of its
loans and investments, regulatory approval of any merger or consolidation,
issuance or retirement of their own securities, limitations upon the payment of
dividends and other aspects of banking operations. In addition, the activities
and operations of the Corporation's banks are subject to a number of additional
detailed, complex and sometimes overlapping laws and regulations. These
include state usury and consumer credit laws, state laws relating to
fiduciaries, the Federal Truth-in-Lending Act and Regulation Z, the Federal
Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act,
the Truth in Savings Act, the Community Reinvestment Act, anti-redlining
legislation and antitrust laws.
Dividend Regulation
The ability of the Corporation to obtain funds for the payment of dividends and
for other cash requirements is largely dependent on the amount of dividends
which may be declared by the Corporation's banks. Generally, the Corporation's
banks may not declare a dividend, without the approval of the appropriate
federal and state regulatory agencies if the total of dividends declared by
such subsidiary bank in a calendar year exceeds the total of its net profits
for that year combined with its retained profits of the preceding two years.
Government Policies and Legislation
The policies of regulatory authorities, including the FRB, OCC, FDIC, OTS and
the Depository Institutions Deregulation Committee, have had a significant
effect on the operating results of commercial banks and thrifts in the past and
are expected to do so in the future. An important function of the Federal
Reserve System is to regulate aggregate national credit and money supply
through such means as open market dealings in securities, establishment of the
discount rate on member bank borrowings, and changes in reserve requirements
against member bank deposits. Policies of these agencies may be influenced by
many factors, including inflation, unemployment, short-term and long-term
changes in the international trade balance and fiscal policies of the United
States government.
The United States Congress has periodically considered and adopted legislation
which has resulted in further deregulation of both banks and other financial
institutions, including mutual funds, securities
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brokerage firms and investment banking firms. No assurance can be given as to
whether any additional legislation will be adopted or as to the effect such
legislation would have on the business of the Corporation or the Corporation's
banks.
In addition to the relaxation or elimination of geographic restrictions on
banks and bank holding companies, a number of regulatory and legislative
initiatives have the potential for eliminating many of the product line
barriers presently separating the services offered by commercial banks from
those offered by nonbanking institutions. For example, Congress recently has
considered legislation which would expand the scope of permissible business
activities for bank holding companies (and in some cases banks) to include
securities underwriting, insurance services, and various real estate related
activities as well as allowing interstate branching.
Deposit Insurance
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
was enacted in 1991. Among other things, FDICIA requires federal bank
regulatory authorities to take "prompt corrective action" with respect to banks
that do not meet minimum capital requirements. For these purposes, FDICIA
established five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. The Corporation and each of the Corporation's banks
currently exceed the regulatory definition of a "well capitalized" financial
institution.
The FRB, OCC, OTS, and FDIC have adopted regulations to implement the prompt
corrective action provisions of FDICIA, effective December 19, 1992. Among
other things, the regulations define the relevant capital measures for the five
capital categories. An institution is deemed to be "well capitalized" if it
has a total risk-based capital ratio (total capital to risk-weighted assets) of
10% or greater, a Tier 1 risk-based capital ratio (Tier 1 Capital to
risk-weighted assets) of 6% or greater, and a Tier 1 leverage capital ratio
(Tier 1 Capital to total assets) of 5% or greater, and is not subject to a
regulatory order, agreement or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital of 4% or greater, and (generally) a Tier 1
leverage capital ratio of 4% or greater, and the institution does not meet the
definition of a "well capitalized" institution. An institution is deemed to be
"critically undercapitalized" if it has a ratio of tangible equity (as defined
in the regulations) to total assets that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth limitations and are required to
submit a capital restoration plan. If an "undercapitalized" bank fails to
submit an acceptable plan, it is treated as if it is significantly
undercapitalized. "Significantly undercapitalized" banks may be subject to a
number of
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requirements and restrictions, including orders to sell sufficient voting stock
to become adequately capitalized, requirements to reduce total assets, and
cessation of receipt of deposits from correspondent banks. "Critically
undercapitalized" institutions may not, beginning 60 days after becoming
"critically undercapitalized", make any payment of principal or interest on
their subordinated debt.
As an FDIC-insured institution, each of the Corporation's banks is required to
pay deposit insurance premium assessments to the FDIC. Pursuant to FDICIA, the
FDIC adopted a transitional risk-based assessment system, effective January 1,
1993, under which all insured depository institutions were placed into one of
nine categories and assessed insurance premiums, ranging from .23% to .31% of
deposits, based upon their level of capital and supervisory evaluation.
Institutions classified as well-capitalized (as defined by the FDIC) and
considered healthy pay the lowest premium while institutions that are less than
adequately capitalized (as defined by the FDIC) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semiannual assessment period.
On June 17, 1993, the FDIC issued regulations establishing a permanent
risk-based assessment system. These regulations took effect October 1, 1993,
and were first used to determine assessments for the assessment period
commencing January 1, 1994. Although the FDIC previously requested comments on
whether the range of risk-based premiums should be expanded so that
institutions posing the least risk to the deposit insurance funds would pay
less than .23% of deposits and institutions posing the highest risk would pay
more than .31% of deposits, the FDIC did not change the premium range and the
permanent risk-based assessment system adopted by the FDIC is substantially the
same as the transitional system. During 1994, the Corporation's banks were
assessed at the rate of .23% of deposits under the transitional assessment
system.
Effective July 1, 1995, the FDIC implemented a change to the insurance premium
rates charged by the Bank Insurance Fund (BIF) and reduced the rates charged to
those institutions posing the least risk to the deposit insurance fund to .04%
of deposits. Effective January 1, 1996, the FDIC further reduced the BIF rates
applicable to those institutions posing the least risk to the deposit insurance
fund to a flat fee of $2,000, regardless of the amount of deposits of such
institution. In institutions posing the least risk, deposits continue to be
insured by Savings Association Insurance Fund (SAIF) at the rate of .23% of
deposits. The Corporation's banking and thrift subsidiaries are all insured by
the BIF and SAIF at the lowest premium rates charged.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution has
engaged or is engaging in unsafe or unsound practices, is in an unsafe or
unsound condition to continue
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operations, or has violated any applicable law, regulation, order, or any
condition imposed in writing by, or written agreement with, the FDIC. The FDIC
may also suspend deposit insurance temporarily during the hearing process for a
permanent termination of insurance if the institution has no tangible capital.
Management of the Corporation is not aware of any activity or condition that
could result in termination of the deposit insurance of the Corporation's
banks.
Recent Legislation
On September 29, 1994, the Reigle/Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was signed into law. This
Interstate Act effectively permits nationwide banking. The Interstate Act
provides that one year after enactment, adequately capitalized and adequately
managed bank holding companies may acquire banks in any state, even in those
jurisdictions that currently bar acquisitions by out-of-state institutions,
subject to deposit concentration limits. The deposit concentration limits
provide that regulatory approval by the FRB may not be granted for a proposed
interstate acquisition if after the acquisition, the acquiror on a consolidated
basis would control more than 10% of the total deposits nationwide or would
control more than 30% of deposits in the state where the acquiring institution
is located. The deposit concentration state limit does not apply for initial
acquisitions in a state and in every case, may be waived by the state
regulatory authority. Interstate acquisitions are subject to compliance with
the Community Reinvestment Act ("CRA"). States are permitted to impose age
requirements not to exceed five years on target banks for interstate
acquisitions. States are not allowed to opt-out of interstate banking.
Branching between states may be accomplished either by merging separate banks
located in different states into one legal entity, or by establishing de novo
branches in another state. Consolidation of banks is not permitted until June
1, 1997, provided that the state has not passed legislation "opting-out" of
interstate branching. If a state opts-out prior to June 1, 1997, then banks
located in that state may not participate in interstate branching. A state may
opt-in to interstate branching by bank consolidation or by de novo branching by
passing appropriate legislation earlier than June 1, 1997. Interstate
branching is also subject to a 30% statewide deposit concentration limit on a
consolidated basis, and a 10% nationwide deposit concentration limit. The laws
of the host state regarding community reinvestment, fair lending, consumer
protection (including usury limits) and establishment of branches shall apply
to the interstate branches.
De novo branching by an out-of-state bank is not permitted unless the host
state expressly permits de novo branching by banks from out-of-state. The
establishment of an initial de novo branch in a state is subject to the same
conditions as apply to initial acquisition of a bank in the host state other
than the deposit concentration limits.
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Effective one year after enactment, the Interstate Act permits bank
subsidiaries of a bank holding company to act as agents for affiliated
depository institutions in receiving deposits, renewing time deposits, closing
loans, servicing loans, and receiving payments on loans and other obligations.
A bank acting as agent for an affiliate shall not be considered a branch of the
affiliate. Any agency relationship between affiliates must be on terms that
are consistent with safe and sound banking practices. The authority for an
agency relationship for receiving deposits includes the taking of deposits for
an existing account but is not meant to include the opening or origination of
new deposit accounts. Subject to certain conditions, insured savings
associations which were affiliated with banks as of June 1, 1994, may act as
agents for such banks. An affiliate bank or savings association may not
conduct any activity as an agent which such institution is prohibited from
conducting as principal. If an interstate bank decides to close a branch
located in a low or moderate income area, it must comply with additional branch
closing notice requirements. The appropriate regulatory agency is authorized
to consult with community organizations to explore options to maintain banking
services in the affected community where the branch is to be closed.
To ensure that interstate branching does not result in taking deposits without
regard to a community's credit needs, the regulatory agencies are directed to
implement regulations prohibiting interstate branches from being used as
"deposit production offices". The regulations to implement its provisions are
due by June 1, 1997. The regulations must include a provision to the effect
that if loans made by an interstate branch are less than fifty percent of the
average of all depository institutions in the state, then the regulator must
review the loan portfolio of the branch. If the regulator determines that the
branch is not meeting the credit needs of the community, it has the authority
to close the branch and to prohibit the bank from opening new branches in that
state.
When the interstate banking provisions become effective in one year, the
Corporation will have enhanced opportunities to acquire banks in any state
subject to approval by the appropriate federal and state regulatory agencies.
When the interstate branching provisions become effective in June 1997, the
Corporation will have the opportunity to consolidate its affiliate banks to
create one legal entity with branches in more than one state should management
decide to do so, or to establish branches in different states, subject to any
state opt-out provisions. The agency authority permitting the Corporation's
affiliate banks to act as agents for each other in accepting deposits or
servicing loans should make it more convenient for customers of one of the
Corporation's bank to transact their banking business at a Corporation's
affiliate in another state provided that operations are in place to facilitate
these out-of-state transactions.
On November 18, 1993, the FDIC, together with the FRB, OCC, and OTS, published
for comment proposed rules implementing the FDICIA
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requirement that the federal banking agencies establish operational and
managerial standards to promote the safety and soundness of federally insured
depository institutions. The proposal would establish standards for internal
controls, information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth, and compensation,
fees and benefits. In general, the standards set forth in the proposal consist
of the goals to be achieved in each area, and each institution would be
responsible for establishing its own procedures to achieve those goals.
Additionally, the proposal would establish a maximum permissible ratio of
classified assets to capital and a minimum required earnings ratio. If an
institution failed to comply with any of the standards set forth in the
proposal, the institution would be required to submit to its primary federal
regulator a plan for achieving and maintaining compliance. Failure to submit
an acceptable plan, or failure to comply with a plan that has been accepted by
the appropriate regulator, would constitute grounds for further enforcement
action. Based upon a review of the proposal, management of the Corporation
believes that the proposal, if adopted in substantially the form proposed, will
not have a material adverse effect on the Corporation.
On May 17, 1995, the FDIC, together with the FRB, OCC, and OTS issued new
regulations under the Community Reinvestment Act ("CRA"). Under the
regulations, an institution's performance in meeting the credit needs of its
entire community, including low and moderate income areas, as required by the
CRA, are evaluated under three tests: the "lending test", which considers the
extent to which the institution makes loans in the low and moderate income
areas of its market; the "service test," which considers the extent to which
the institution makes branches accessible to low and moderate income areas of
its market and provides other services that promote credit availability; and
the "investment test", considers the extent to which the institution invests in
community and economic development activities.
Proposed Legislation
In addition to the above, there have been proposed a number of legislative and
regulatory proposals designed to strengthen the federal deposit insurance
system and to improve the overall financial stability of the U.S. banking
system. It is impossible to predict whether or in what form these proposals
may be adopted in the future, and if adopted, what their effect would be on the
Corporation.
STATISTICAL DISCLOSURE
The statistical disclosure on the Corporation and its subsidiaries, on a
consolidated basis, included on pages 1, 4 through 14 and 33 of the
Corporation's Annual Report to Shareholders for the fiscal year ended December
31, 1995, is hereby incorporated by reference herein.
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ITEM 2. PROPERTIES
The net investment of the Corporation and its subsidiaries in real estate and
equipment at December 31, 1995, was $14,739,000. The Corporation's offices are
located in a building owned by The National City Bank of Evansville
(hereinafter referred to as the Bank), in which the Bank's main office is
located. The main office of the Bank is located at 227 Main Street in downtown
Evansville, Indiana. This building is owned in fee by the Bank. The other
subsidiary banks, all branches, the leasing company, and the insurance company
are located on premises either owned or leased. None of the property is
subject to any major encumbrance. The National City Bank of Evansville
committed in 1995 to build an addition to its main office to be completed in
1997 with an approximate cost of $6,000,000. It is anticipated that the
project will be financed internally. There are no other material commitments
for capital expenditures.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
Pages 1 and 33 of the Corporation's Annual Report to Shareholders for the
fiscal year ended December 31, 1995, is hereby incorporated by reference
herein. Dividends are restricted by earnings and the need to maintain adequate
capital. Management intends to continue its current dividend policy subject to
these restrictions.
ITEM 6. SELECTED FINANCIAL DATA
Page 1 of the Corporation's Annual Report to Shareholders for the fiscal year
ended December 31, 1995, is hereby incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Pages 1, 4 through 14, and 33 of the Corporation's Annual Report to
Shareholders for the fiscal year ended December 31, 1995, are incorporated by
reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 15 through 29 of the Corporation's Annual Report to Shareholders for the
fiscal year ended December 31, 1995, are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Corporation
This information under the heading "Election of Directors and Information with
Respect to Directors and Officers" on pages 3 to 5 of the Corporation's Proxy
Statement for its Annual Meeting of Shareholders to be held April 16, 1996, is
hereby incorporated by reference herein.
(b) Executive Officers of the Corporation
The Executive Officers of the Corporation, some of whom are also Executive
Officers of The National City Bank of Evansville (hereinafter referred to as
the "Bank") are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
<S> <C> <C>
John D. Lippert 62 Chairman of the Board and Chief Executive
Officer of the Corporation since 1992.
President of the Corporation from 1985 to
1993. Director of the Corporation since
1985. Chairman of the Board of the Bank from
1992 to January 1996. Chief Executive Officer
of the Bank from 1989 to January 1996.
President of the Bank from 1984 to 1993 and a
Director since 1981.
Robert A. Keil 52 President and Director of the Corporation
since 1993. Executive Vice President of the
Corporation from 1991 to 1993. Assistant
Secretary and Assistant Treasurer of the
Corporation from 1985 to 1993. Executive Vice
President of the Bank from 1991 to 1993 and
Senior Vice President from 1987 to 1991.
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
<S> <C> <C>
Benjamin W. Bloodworth 60 Executive Vice President and Assistant
Secretary and Assistant Treasurer of the
Corporation since 1993. Senior Vice
President of the Corporation from 1989 to
1993. Executive Vice President of the Bank
from 1991 to January 1996. Senior Vice
President of the Bank from 1980 to 1991.
Director of The Peoples National Bank of
Grayville from 1988 to 1994 and from 1995 to
present. Director of White County Bank from
1995 to present. Director of The Farmers and
Merchants Bank from 1989 to 1993. Director of
Lincolnland Bank since 1994. Director of The
State Bank of Washington from 1994 to 1995.
Michael F. Elliott 44 Executive Vice President of the Corporation
since 1993. Director of the Corporation since
1994. Chairman of the Board of the Bank
since January 1996. President of the Bank
from 1994 to January 1996. Chief Executive
Officer and Director of the Bank since 1994.
Chairman of the Board of The State Bank of
Washington since 1989, Chief Executive Officer
and Director of The State Bank of Washington
from 1982 to 1994. Chairman of the Board from
1990 to December 1993 and President and Chief
Executive Officer from 1988 to December 1993
of Sure Financial Corporation.
Harold A. Mann 57 Secretary and Treasurer of the Corporation
since 1985. Senior Vice President and
Controller of the Bank from 1984 to 1995.
Director of Poole Deposit Bank from 1986 to
1990 and for 1994.
Nancy G. Epperson 51 Human Resources Director for the Corporation
since 1994. Personnel Director of the Bank
from 1985 to 1995.
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
<S> <C> <C>
Byron W. Jett 53 Senior Vice President of the Corporation
since 1995. Senior Vice President of
the Bank from 1994 to 1995 and Vice
President of the Bank from 1984 to 1994.
N. Ann Cavis 50 Senior Vice President of the Corporation
since 1995. Senior Vice President of the Bank
since 1995. Vice President of the Bank
from 1991 to 1995.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
The information under the heading "Compensation of Executive Officers" on pages
7 through 12 of the Corporation's Proxy Statement for its Annual Meeting of
Shareholders to be held April 16, 1996, is hereby incorporated by reference
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information under the heading "Voting Securities" on pages 1 through 3 of
the Corporation's Proxy Statement for its Annual Meeting of Shareholders to be
held April 16, 1996, is hereby incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Transactions with Management" on page 13 of
the Corporation's Proxy Statement for its Annual Meeting of Shareholders to be
held April 16, 1996, is hereby incorporated by reference herein.
18
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation and its
subsidiaries, included on pages 15 through 29 of the Corporation's Annual
Report to Shareholders for the fiscal year ended December 31, 1995, are hereby
incorporated by reference:
Independent Auditor's Report
Consolidated Statements of Financial Position, at
December 31, 1995 and 1994
Consolidated Statements of Income, for years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows, for years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity,
for years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or not required or
because the required information is included in the consolidated financial
statements or related notes.
EXHIBITS
The following exhibits are submitted herewith or incorporated by reference:
3(i) Articles of Incorporation, as amended
13 Annual Report to Shareholders for the year ended
December 31, 1995
21 Subsidiaries of the Registrant
23 Consent of McGladrey & Pullen, LLP
REPORTS ON FORM 8-K
CURRENT REPORT dated October 25, 1995, for event of October 18, 1995, regarding
the five percent stock dividend and an increase in the cash dividend.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the dates indicated.
NATIONAL CITY BANCSHARES, INC.
By /s/ JOHN D. LIPPERT 3/20/96
John D. Lippert Date
Chairman of the Board and
Chief Executive Officer
By /s/ ROBERT A. KEIL 3/20/96
Robert A. Keil Date
President and
Chief Financial Officer
By /s/ HAROLD A. MANN 3/20/96
Harold A. Mann Date
Secretary and Treasurer
(Chief Accounting Officer)
20
<PAGE> 21
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
----------------------- -------
Janice L. Beesley Date
Director
/s/ MICHAEL F. ELLIOTT 3/20/96
Michael F. Elliott Date
Director
----------------------- -------
Susanne R. Emge Date
Director
/s/ DONALD G. HARRIS 3/20/96
Donald G. Harris Date
Director
/s/ ROBERT A. KEIL 3/20/96
Robert A. Keil Date
Director
/s/ JOHN D. LIPPERT 3/20/96
John D. Lippert Date
Director
/s/ RONALD G. REHERMAN 3/20/96
Ronald G. Reherman Date
Director
/s/ LAURENCE R. STEENBERG 3/20/96
Laurence R. Steenberg Date
Director
21
<PAGE> 22
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
3(i) Articles of Incorporation, as amended
13 Annual Report to Shareholders for the year
ended December 31, 1995
21 Subsidiaries of the Registrant
23 Consent of McGladrey & Pullen, LLP
27 Financial Data Schedule
22
<PAGE> 1
EXHIBIT 3(i) - ARTICLES OF INCORPORATION AS AMENDED
ARTICLES OF INCORPORATION
OF
NATIONAL CITY BANCSHARES, INC.
The undersigned incorporator or incorporators, desiring to form a
corporation (hereinafter referred to as the "Corporation") pursuant to the
provisions of the Indiana General Corporation Act as amended (hereinafter
referred to as the "Act"), execute the following Articles of Incorporation:
ARTICLE I
Name
The name of the Corporation is National City Bancshares, Inc.
ARTICLE II
Purposes
The purposes for which the Corporation is formed are:
To engage in any lawful act or activity for which corporations may be
formed under the Indiana General Corporation Act and The Bank Holding Company
Act of 1956, as amended, and to possess all other rights and powers authorized
by the laws of the State of Indiana, and the laws of the United States of
America applicable to bank holding companies and the regulations of the Board
of Governors of the Federal Reserve System.
ARTICLE III
Period of Existence
The period during which the Corporation shall continue is perpetual.
<PAGE> 2
ARTICLE IV
Resident Agent and Principal Office
Section 1. Resident Agent.
The name and address of the Corporation's Resident Agent for service
of process is Mr. Harold A. Mann, 227 Main Street, Evansville, Indiana 47708.
Section 2. Principal Office.
The post office address of the principal office of the Corporation is
227 Main Street, Evansville, Indiana 47708.
ARTICLE V
Authorized Shares
Section 1. Number of Shares:
The total number of shares which the Corporation is to have authority
to issue is 10,000,000, all of which the Corporation designates as without par
value.
Section 2. Terms of Shares:
Shares of the corporation may be redeemed by the corporation at the
direction of a vote of a majority of the Board of Directors meeting at a
regularly or specially called meeting for said purpose.
Furthermore, the corporation, through its Board of Directors, shall
have the power to purchase, hold, sell, and transfer the shares of its own
capital stock provided that it does not use its funds or property for the
purchase of its own shares of capital stock when such use will cause any
impairment of its capital, except when otherwise permitted by law, and provided
further that shares of its own capital stock belonging to it are not voted upon
directly, or indirectly.
ARTICLE VI
Requirements Prior To Doing Business
The Corporation will not commence business until consideration of the
value of at least $1,000 (one thousand dollars) has been received for the
issuance of shares.
2
<PAGE> 3
ARTICLE VII
Directors
Section 1. Number of Directors:
The initial Board of Directors is composed of 14 members. The number
of directors may be from time to time fixed by the By-Laws of the Corporation
at any number. In the absence of a By-Law fixing the number of directors, the
number shall be fourteen (14).
Section 2. Names and Post Office Addresses of the Directors:
The names and post office addresses of the initial Board of Directors
of the Corporation are:
<TABLE>
<CAPTION>
Number and
Name Street or Building City State Zip Code
- ---------------------- ------------------------- ---------- ----- --------
<S> <C> <C> <C> <C>
Gilbert E. Betulius Denzer Road, R.R. 13 Evansville IN 47712
Donald B. Cox 4029 Fairfax Road Evansville IN 47710
Wilfred O. Doerner 960 St. Michael Court Evansville IN 47715
Victor R. Gallagher 431 S. Rotherwood Avenue Evansville IN 47714
C. Mark Hubbard 3400 Robin Place Evansville IN 47712
Edgar P. Hughes Riverside 1, Apt. 505,
101 Court Street Evansville IN 47708
R. Eugene Johnson 6840 Arcadian Highway Evansville IN 47715
Edwin F. Karges, Jr. 1106 Harrelton Court Evansville IN 47715
John D. Lippert 3636 Elmridge Drive Evansville IN 47711
John Lee Newman 717 S. Boeke Road Evansville IN 47714
Laurence R. Steenberg 5688 Cliftmore Drive Newburgh IN 47630
C. Wayne Worthington 3023 Oak Hill Road Evansville IN 47711
George A. Wright 6001 Lincoln Avenue Evansville IN 47715
Mrs. N. Keith Emge 7108 E. Chestnut Street Evansville IN 47715
</TABLE>
Section 3. Qualification of Directors:
Directors of this corporation who serve as directors of any subsidiary
banking corporation may hold shares in this corporation as qualifying shares
entitling such directors to serve in the capacity as a director of such
subsidiary banking corporation.
ARTICLE VIII
Incorporator
The name and post office address of the incorporator of the
Corporation is Mr. Harold A. Mann, 227 Main Street, Evansville, Indiana 47708.
3
<PAGE> 4
ARTICLE IX
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
Section 1. Capital Structure.
The Board of Directors of the corporation is hereby authorized to fix
and determine and to vary the amount of working capital of the corporation, to
determine whether any and, if any, what part of its surplus, however created or
arising, shall be used or disposed of or declared in dividends or paid to
shareholders, and, without action by the Shareholders, to use and apply such
surplus or any part thereof at any time or from time to time in the purchase or
acquisition of shares of any class, voting trust certificates for shares,
bonds, debentures, notes script, warrants, obligations, evidences of
indebtedness of the corporation or other securities of the corporation, to such
extent or amount and in such manner and upon such terms as the Board of
Directors of the corporation shall deem expedient to the extent not prohibited
by law.
Section 2. Reliance on Books of the Corporation.
Each officer, director or member of any committee designated by the
Board of Directors of the corporation shall, in the performance of his duties,
be fully protected in relying in good faith upon the books of account or
reports made to the corporation by any of its officers or employees or by an
independent public accountant or by an appraiser selected with reasonable care
by the Board of Directors of the corporation or by any such committee or in
relying in good faith upon other records of the corporation.
Section 3. Indemnification.
The corporation shall have the power to indemnify its present and past
directors, officers, employees, or agents, and such other persons as it shall
have the powers to indemnify, to the full extent permitted under, and subject
to the limitations of, Title 23 of the Indiana General Corporation Act.
The corporation may upon the affirmative vote of a majority of its
Board of Directors, purchase insurance for the purpose of indemnifying its
directors, officers, employees and agents to the extent that such
indemnification is allowed in the statute mentioned above.
Any indemnification as above provided (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification is proper in the circumstances because it
meets the standard set out in the statute above mentioned. Such determination
shall be made (a) by the Board of Directors, by a majority vote of a quorum
consisting of directors who are not parties to such action, suit or proceeding;
or (b) if such a quorum is not obtainable, or even if obtainable, if majority
vote of disinterested directors so directs,
4
<PAGE> 5
by independent legal counsel in a written opinion stating that such director,
officer, employee or agent has met such standards of conduct, or (c) by a
majority vote of a quorum of the shareholders of the corporation consisting of
shareholders who are not parties to such action, suit or proceeding.
Section 4. Voting Rights.
Each shareholder shall be entitled to one vote for each share of stock
standing in his name of the books of the corporation.
Each shareholder shall have the right to cumulate such voting power as
he possesses when electing directors, and to give one candidate as many votes
as the number of directors to be elected multiplied by the number of his votes
equals, or to distribute his votes on the same principle among two or more
candidates, as he sees fit.
Section 5. Classes of Directors.
The Bylaws of the Corporation may provide, that the Directors shall be
divided into two (2) or more classes whose terms of office shall expire at
different times, but no term shall continue longer than three (3) years.
Section 6. Voting Rights on Business Combinations.
Any merger, consolidation, or acquisition of this Corporation by
another corporation without this Corporation's Board of Directors' approval,
shall require the affirmative approval of the holders of eighty percent (80%)
of the issued and outstanding common shares of stock of the Corporation and
eighty percent (80%) of the issued and outstanding preferred shares or other
class of shares, regardless of limitations or restrictions on the voting power
thereof, entitled to vote at a meeting duly called for such purpose.
Irrespective of any other provisions of these Articles, this Section 6 may be
amended at any regular meeting or at a Special Meeting called for that purpose
by the affirmative vote of the holders of receipt of shares entitling them to
exercise eighty percent (80%) of the voting power on such proposal.
ARTICLE X
Except as otherwise restricted in Article IX, these Articles may be
amended at any regular meeting or at a special meeting called for that purpose
by the affirmative vote of the holders of record of shares entitling them to
exercise a majority of the voting power on such proposal.
5
<PAGE> 1
EXHIBIT 13
NATIONAL CITY
BANCSHARES, INC.
1 9 9 5
Annual Report
<PAGE> 2
Contents
<TABLE>
<S> <C>
Financial Review 1
Message to Shareholders 2
Management's Discussion 4
Management's Report 15
Independent Auditor's Report 15
Statements of Financial Position 16
Statements of Income 17
Statements of Cash Flows 18
Statements of Shareholders' Equity 20
Notes to Financial Statements 21
Official Organization
Subsidiaries 30
National City Bancshares, Inc. 32
Shareholder Information 33
</TABLE>
<PAGE> 3
FINANCIAL REVIEW
<TABLE>
<CAPTION>
(Dollar Amounts Other Than Share Data in Thousands) As Of And For The Year Ended December 31
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Net interest income $ 40,167 $ 36,008 $ 34,427 $ 34,513 $ 32,907
Provision for loan losses 294 18 581 1,327 2,910
Noninterest income 6,724 4,945 6,453 6,000 5,355
Noninterest expense 26,343 26,101 25,853 25,025 24,554
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 20,254 14,834 14,446 14,161 10,798
Income taxes 7,139 5,155 4,519 4,395 3,101
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 13,115 $ 9,679 $ 9,927 $ 9,766 $ 7,697
================================================================================================================================
PER COMMON SHARE*
Net income $ 2.81 $ 2.08 $ 2.11 $ 2.07 $ 1.63
Book value 25.40 22.70 22.26 20.66 18.30
Cash dividends declared by
National City Bancshares, Inc. 0.88 0.89 0.84 0.80 0.74
TOTALS AT YEAR-END
Loans $664,285 $575,018 $515,848 $ 500,084 $504,232
Allowance for loan losses 5,323 4,899 4,757 5,243 5,511
Securities 241,287 248,660 245,793 256,195 259,656
Total assets 979,440 906,506 897,831 913,964 946,368
Deposits 774,720 764,451 760,729 784,529 813,112
Shareholders' equity 119,311 104,635 104,458 97,503 86,345
SELECTED FINANCIAL RATIOS
Net income to average assets 1.41% 1.08% 1.11% 0.99% 0.82%
Net income to average equity 11.70 9.24 9.84 9.90 9.23
Cash dividend payout 31.32 42.79 39.81 38.65 45.40
Average equity to average assets 12.06 11.74 11.30 10.01 8.85
Tangible equity to tangible assets 11.94 11.42 11.49 10.51 8.94
Total capital to risk-weighted assets 18.02 18.71 20.21 19.43 16.50
OTHER DATA
Number of shares* 4,697,198 4,610,163 4,693,291 4,718,355 4,718,143
Number of shareholders 2,106 2,104 2,040 2,025 1,946
Number of full-time equivalent employees 445 446 466 473 492
Weighted average number of common
shares outstanding* 4,671,257 4,646,672 4,694,461 4,718,802 4,721,533
</TABLE>
*Restated to reflect stock dividends.
[THREE BAR GRAPHS]
1991 $7,697 1991 $504,232 1991 $86,345
1992 $9,766 1992 $500,084 1992 $97,503
1993 $9,927 1993 $515,848 1993 $104,458
1994 $9,679 1994 $575,018 1994 $104,635
1995 $13,115 1995 $664,285 1995 $119,311
NET INCOME LOANS SHAREHOLDERS' EQUITY
1
<PAGE> 4
MESSAGE TO SHAREHOLDERS
March 12,1996
Corporate and subsidiary management remains focused on its responsibility to
enhance shareholder value for you, the Corporation's 2,100 owners.
The forthcoming proxy statement will indicate in graph form that a $100
investment in National City Bancshares, Inc. stock five years ago (1990) would
have had a value of $236 at the end of 1995. This represents a compounded
annual return of 18.8%.
National City Bancshares, Inc. completed its most profitable year in its
eleven-year history. Net income for 1995 was $13,115,000, or $2.81 per share,
compared to $9,679,000, or $2.08 per share, for 1994. This is an increase of
$3,436,000, or 35.5%.
Return on average equity was 11.70%, compared to 9.24% in 1994. Return on
average assets during 1995 increased to 1.41%, up from 1.08% last year.
The significant increase in earnings was a direct result of strong loan growth
in most of our subsidiary banks. Equally important, the increase in loans was
not at the expense of quality. Our ratio of underperforming loans as a
percentage of total loans is at a historic low and is well below the industry
average. The allowance for loan losses was 255.18% of underperforming loans at
the end of 1995.
During the year, we completed the acquisitions of United Financial Bancorp,
Inc., White County Bank, and the First National Bank of Paoli, bringing
approximately $190,000,000 in additional assets to our family of banks. These
acquisitions give our company a presence in geographic areas that we consider
essential for the Corporation's future growth. Except for Paoli, the
acquisitions were accounted for on a pooling of interests basis. Purchase
accounting rules were used for the Paoli acquisition. Also, the Boards of
Directors of The Spurgeon State Bank and Pike County Bank determined that in
order to better serve their respective customers they would merge the bank in
Spurgeon, Indiana, and its branch in Arthur, Indiana, into the Pike County
Bank. This merger also allowed Roger M. Duncan, former president of The
Spurgeon State Bank, the opportunity to assume a larger role with the
Corporation's lead bank, The National City Bank of Evansville.
[Photo of Newspaper article on new building]
2
<PAGE> 5
Nearly 500 new shareholders were added during the past year as the result of
the three acquisitions completed in 1995. The Corporation's Dividend
Reinvestment Plan continues to be very well received, with more than 49% of our
shareholders participating and with many of them also taking advantage of
the optional cash contribution feature of the plan to purchase additional
shares.
Early this year, management was realigned to allow greater emphasis on
corporate development; John D. Lippert and Benjamin W. Bloodworth relinquished
their duties with National City Bank to devote their efforts full time to
corporate matters. Michael F. Elliott became Chairman and Chief Executive
Officer of National City Bank, and Thomas L. Austerman replaced Mr. Elliott as
the Bank's President. Mr. Elliott will continue to have holding company
responsibilities as well. Many other promotions and retirements occurred
throughout our network of banks, and we express our congratulations and best
wishes to all who were affected.
One of many major announcements in 1995 was the construction of a new main
office for National City Bank. The Bank has outgrown its offices; and after
much planning, the decision was made to build a new, efficient facility
adjacent to its historic office. The new nine-story complex will be occupied
by the Bank on the first three floors. The corporate offices of National
City Bancshares, Inc. will also be located in the new structure. Other floors
have been or will be sold as condominiums.
In conclusion, we continue to follow our corporate strategy of inviting willing
area banks to join our family of banks, if mutually beneficial. Again, we
solicit your banking business and your support, and look forward to serving
you in 1996.
/s/ John D. Lippert
John D. Lippert
Chairman of the Board and
Chief Executive Officer
/s/ Robert A. Keil
Robert A. Keil
President, Chief Financial Officer
and Chief Administrative Officer
[PHOTO]
NATIONAL CITY BANCSHARES, INC.
EXECUTIVE OFFICERS
Robert A. Keil, President; Benjamin W. Bloodworth, Executive Vice President;
Michael F. Elliott, Executive Vice President; and John D. Lippert, Chairman
and Chief Executive Officer
3
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollar Amounts Other Than Share Data in Thousands)
- --------------------------------------------------------------------------------
INTRODUCTION
The discussion and analysis which follows is presented to assist in the
understanding and evaluation of the financial condition and results of
operations of National City Bancshares, Inc. and its subsidiaries as presented
in the following consolidated financial statements and related notes. The text
of this review is supplemented with various financial data and statistics. All
information has been retroactively restated to include bank acquisitions
accounted for using the pooling of interests method and to give effect to stock
dividends.
- --------------------------------------------------------------------------------
BUSINESS DESCRIPTION
National City Bancshares, Inc. (Corporation) is an Indiana corporation
established in 1985 to engage in the business of a bank holding company. Based
in Evansville, Indiana, the Corporation has eleven wholly owned subsidiaries,
including nine commercial banks and one savings bank serving twenty-three
communities with a total of thirty-two banking centers, one leasing
corporation, and one insurance agency (which is a subsidiary of a subsidiary
bank). Each subsidiary, its location, number of offices, year founded, date of
merger, and size in assets and equity is shown below.
The Corporation's subsidiary banks provide a wide range of financial services
to the communities they serve in Southwestern Indiana, Western Kentucky, and
Southeastern Illinois. These services include various types of deposit
accounts; safe deposit boxes; safekeeping of securities; automated teller
machines; consumer, mortgage, and commercial loans; mortgage loan sales and
servicing; letters of credit; accounts receivable management (financing,
accounting, billing, and collecting); and complete personal and corporate trust
services. All banks are members of the Federal Deposit Insurance Corporation.
<TABLE>
<CAPTION>
SUBSIDIARY
Number of Year
Principal and Other Cities Offices Founded Date of Merger
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
THE NATIONAL CITY BANK OF EVANSVILLE
Evansville and Newburgh, Indiana 9 1850 May 6, 1985
THE PEOPLES NATIONAL BANK OF GRAYVILLE
Grayville, Illinois 1 1937 May 16, 1988
THE FARMERS AND MERCHANTS BANK
Fort Branch, Indiana 1 1896 January 30, 1989
FIRST KENTUCKY BANK
Sturgis, Morganfield, and Poole, Kentucky 4 1916 November 30, 1990
LINCOLNLAND BANK
Dale, Chrisney, Grandview, Hatfield, 5 1904 December 17, 1993
and Rockport, Indiana
THE BANK OF MITCHELL
Mitchell, Bedford, and Paoli, Indiana 4 1882 December 17, 1993
PIKE COUNTY BANK
Petersburg, Arthur, and Spurgeon, Indiana 3 1900 December 17, 1993
THE STATE BANK OF WASHINGTON
Washington and Odon, Indiana 2 1910 December 17, 1993
WHITE COUNTY BANK
Carmi, Illinois 1 1904 June 30, 1995
UNITED FEDERAL SAVINGS BANK
Vincennes and Princeton, Indiana 2 1890 August 31, 1995
NCBE LEASING CORP.
Evansville, Indiana 1 1994 November 1, 1994
UNIFED, INC.
Petersburg, Princeton, and Vincennes, Indiana 3 1980 August 31, 1995
<CAPTION>
SUBSIDIARY
12/31/95 (millions)
-------------------
Principal and Other Cities Assets Equity
- --------------------------------------------------------------
<S> <C> <C>
THE NATIONAL CITY BANK OF EVANSVILLE
Evansville and Newburgh, Indiana $411 $38
THE PEOPLES NATIONAL BANK OF GRAYVILLE
Grayville, Illinois 39 5
THE FARMERS AND MERCHANTS BANK
Fort Branch, Indiana 39 4
FIRST KENTUCKY BANK
Sturgis, Morganfield, and Poole, Kentucky 87 11
LINCOLNLAND BANK
Dale, Chrisney, Grandview, Hatfield, 115 13
and Rockport, Indiana
THE BANK OF MITCHELL
Mitchell, Bedford, and Paoli, Indiana 60 8
PIKE COUNTY BANK
Petersburg, Arthur, and Spurgeon, Indiana 47 5
THE STATE BANK OF WASHINGTON
Washington and Odon, Indiana 44 4
WHITE COUNTY BANK
Carmi, Illinois 63 7
UNITED FEDERAL SAVINGS BANK
Vincennes and Princeton, Indiana 106 11
NCBE LEASING CORP.
Evansville, Indiana 5 -
UNIFED, INC.
Petersburg, Princeton, and Vincennes, Ind - -
</TABLE>
4
<PAGE> 7
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
Highlights for 1991 through 1995 are presented in the financial review on page
1. An average balance sheet and analysis of net interest income is provided on
page 14. A higher net interest margin and continued cost controls contributed
to the 1995 earnings per share of $2.81, an increase of $.73, or 35.1%. Seventy
percent of 1995 earnings were retained, increasing the book value per share
$2.70 to $25.40 and resulting in a very strong ratio of average equity capital
to average assets of 12.06%. Current proposed legislation could result in a
special assessment of up to $775 on Savings Association Insurance Fund (SAIF)
insured deposits to recapitalize the SAIF. We are not aware of any other
current recommendations by the regulatory authorities which, if they were to be
implemented, would have a material effect on our operations, capital resources,
or liquidity.
Average earning assets and average assets increased $37,578, or 4.5% and
$37,591, or 4.2%, respectively, in 1995, compared to 1994, when both categories
remained approximately the same. During 1995, average interest-bearing deposits
in banks decreased $13,232, or 61.5%; average short-term money market
investments decreased $1,284, or 49.4%; and average federal funds sold
decreased $2,101, or 15.0%. Average securities decreased $24,584, or 9.5% with
the largest decrease being in U.S. Government and agencies which decreased
$25,163, or 13.4%. Nontaxable state and municipals decreased $198, or 0.5%,
while taxable municipals increased $380, or 15.7%. All other types of
securities increased $899, or 3.3%. The average market value adjustment on
securities available for sale decreased $502, or 44.7%. Average loans increased
$78,779, or 14.6%. Commercial, consumer, and mortgage loans had significant
increases, with the largest being $32,069, or 16.9%, in average commercial
loans. A strong loan demand contributed to the growth of the loan portfolio.
The change in earning asset mix was intended and resulted in improved earnings
in 1995 and a continued strong condition to begin 1996.
A decrease of $14,989, or 6.8%, in average savings and interest-bearing
checking accounts was more than offset by an increase of $29,463, or 7.8%, in
average certificates of deposit and other time deposits. Money market accounts
also increased $1,681 or 2.5%. Average federal funds purchased and securities
sold under agreements to repurchase increased $1,743, or 8.8%. Average other
borrowings increased $9,806, or 192.2%, to fund loans. Average
noninterest-bearing deposits increased $155, or .2%. It is the Corporation's
philosophy to only increase deposits if they are needed to fund loan growth.
- --------------------------------------------------------------------------------
SECURITY PORTFOLIO
Average securities comprised 26.8% of the 1995 average earning assets compared
to 30.9% and 30.2% in 1994 and 1993, respectively. They represent the second
largest component after loans. The Corporation holds various types of
securities, including mortgage-backed securities. Inherent in mortgage-backed
securities is prepayment risk, which occurs when borrowers prepay their
obligations due to market fluctuations and rates. In an effort to reduce this
risk, management closely monitors the amount of mortgage-backed securities
contained in the portfolio. The Corporation has no securities by any issuer,
with the exception of the U. S. Government, exceeding 10% of shareholders'
equity. The Corporation manages the quality and risk of securities through its
Asset/Liability Committee, which recommends and monitors the overall security
portfolio approved by the Corporation's Board of Directors. Among other things,
the investment policy establishes guidelines for the level, type, quality, and
mix of securities appropriate for the portfolio. The security portfolio at
December 31, 1995, included $6,662 in structured notes, which were comprised of
$2,560 in multi-coupon step-up notes that have a price volatility comparable to
a callable U.S. Government agency of like maturity; $3,202 in capped floating
rate notes; $300 in a ratchet capped floating rate note; and $600 in delevered
floating notes. These securities have risk characteristics which are well
within the constraints of the non-structured securities held in the security
portfolio.
As of December 31, 1993, the Corporation adopted Financial Accounting Standards
Board Statement No. 115. For 1995, 1994 and 1993, securities classified as held
to maturity are carried at amortized cost, and those classified as available
for sale are carried at fair value.
The available-for-sale securities included unrealized losses of approximately
$650 and unrealized gains of $1,146 at December 31, 1995. The fair value of
held-to-maturity securities was $92,236, reflecting unrealized losses of $243
and unrealized gains of $2,561. At December 31, 1995, the Corporation's
available-for-sale securities included $56,096 in mortgage-backed securities,
or 37.1% of the available-for-sale portfolio. The held-to-maturity portfolio
contained $6,071 in mortgage-backed securities or 6.8% of the held-to-maturity
portfolio. The weighted average maturity of the available-for-sale and
held-to-maturity portfolios at December 31, 1995, was 5.9 years and 6.3 years,
respectively. The weighted average maturity of the available-for-sale and the
held-to-maturity portfolios at December 31, 1994, was 3.6 years and 4.2 years,
respectively.
The following is a three-year analysis of the year-end balances in the security
portfolio and an analysis of the maturities and weighted average yields as of
December 31, 1995. The weighted average yields on municipal securities that
are tax-exempt have been computed on a federal-tax-equivalent basis using a
35.0% tax rate.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
SECURITY PORTFOLIO
<TABLE>
<CAPTION>
Carrying Value at December 31
---------------------------------------------------------------------------
1995 1994 1993
---------------------- ---------------------- ---------------------
HELD TO AVAILABLE Held to Available Held to Available
MATURITY FOR SALE Maturity For Sale Maturity For Sale
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Debt Securities:
U.S. Treasury securities $ 500 $ 33,880 $ 7,577 $ 38,392 $ 33,396 $ 19,071
U.S. Government agencies 5,448 51,300 23,829 55,640 18,693 63,500
Taxable municipals 3,120 - 2,530 - 1,646 -
Tax-exempt municipals 57,897 - 42,308 - 39,435 -
Corporate securities 16,882 4,638 18,544 6,721 11,369 1,122
Mortgage-backed securities 6,071 56,096 17,512 32,144 38,685 15,457
- ---------------------------------------------------------------------------------------------------------------
Total debt securities 89,918 145,914 112,300 132,897 143,224 99,150
Equity securities - 5,455 - 3,463 - 3,419
- ---------------------------------------------------------------------------------------------------------------
Total securities $89,918 $151,369 $112,300 $136,360 $143,224 $102,569
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MATURITY ANALYSIS After 1 Year After 5 Year
DECEMBER 31, 1995 but but
Within 1 Year Within 5 Years Within 10 Years After 10 Years Total
--------------- -------------- -------------- --------------- --------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES CLASSIFIED AS
HELD TO MATURITY:
U.S. Treasury securities $ 500 4.27% $ - - $ - - $ - - $ 500 4.27%
U.S. Government agencies 1,989 7.71% 2,995 7.51% 59 7.33% 405 6.56% 5,448 7.51%
Taxable municipals 346 8.75% 1,559 6.18% 1,215 7.17% - - 3,120 6.85%
Tax-exempt municipals 2,940 5.26% 18,621 6.63% 19,504 7.00% 16,832 6.59% 57,897 6.67%
Corporate securities 4,991 4.93% 11,891 6.52% - - - - 16,882 6.05%
- --------------------------------------------------------------------------------------------------------------------------
Total maturing securities $ 10,766 5.63% $ 35,066 6.65% $ 20,778 7.01% $ 17,237 6.59% 83,847 6.59%
========================================================================================================
Mortgage-backed securities 6,071 7.92%
----------------
Total securities $ 89,918 6.68%
================
<CAPTION>
SECURITIES CLASSIFIED AS
AVAILABLE FOR SALE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 22,923 5.21% $ 10,408 6.77% 549 7.76% $ - - $ 33,880 5.73%
U.S. Government agencies 18,426 5.73% 29,867 6.23% 3,007 5.94% - - 51,300 6.03%
Corporate securities 1,215 5.64% 3,423 6.38% - - - - 4,638 6.19%
- --------------------------------------------------------------------------------------------------------------------------
Total maturing securities $ 42,564 5.45% $ 43,698 6.37% $ 3,556 6.22% $ - - 89,818 5.93%
========================================================================================================
Mortgage-backed securities 56,096 6.14%
Equity securities 5,455 5.15%
----------------
Total securities $ 151,369 5.98%
================
</TABLE>
- --------------------------------------------------------------------------------
LOANS
Each subsidiary bank has competent lending officers who follow loan policies
approved by their boards of directors. These policies are compatible with the
Corporation's loan policy approved by its Board of Directors. The lending
policies address risks associated with each type of lending, collateralization,
loan-to-value ratios, loan concentrations, insider lending, and other pertinent
matters. These functions are monitored by subsidiary and corporate loan review
personnel and by the loan committees of the boards of directors for compliance
and loan quality. Close loan administration and high credit standards minimize
credit risk, as evidenced by the ratio of underperforming loans to total loans.
Highly speculative loans are prohibited, and the normal loan-to-value ratio is
a maximum of 80% for real estate loans. The loan portfolio contains no foreign
loans. All real estate loans, and more than 85% of commercial and consumer
loans, are secured.
6
<PAGE> 9
The Corporation's loan portfolio is well diversified by type of loan, industry,
and geographic location, which minimizes economic risk. The loan portfolio
contained 30% commercial loans, 51% real estate loans (primarily residential),
and 19% consumer loans at December 31, 1995. The Corporation's affiliate banks
lend to customers in various industries including manufacturing, agricultural,
health and other services, transportation, mining, wholesale, and retail.
Commercial loans increased dramatically in 1995 and 1994 due to a general
increase in business among the communities the Corporation's banks serve.
Management feels little risk is associated with this growth because most of the
borrowers are long-standing customers who increased their lines of credit for
expansion and inventory purposes. Consumer loans also grew appreciably as a
direct result of increased automobile sales. Strict underwriting standards, as
evidenced by negligible loan losses, should minimize future losses on these
loans.
Agriculture in our trade area was profitable for the third straight year,
allowing credit "clean up" and pay down on agriculture-related credit while
also increasing outstandings. The Corporation's banks do not make loans for
land speculation or other high credit risk farm ventures. The increase in real
estate lending was a direct result of strong loan demand during most of 1995.
This portfolio is mostly comprised of single-family, owner-occupied housing.
Guidelines for residential mortgage lending were followed, advances normally
did not exceed 80% of appraised value, and the customer's ability to repay was
closely scrutinized.
At December 31, 1995, there was no concentration of credit risk from borrowers
engaged in the same or similar industries exceeding 10% of total loans.
Geographic diversification is provided by the Corporation's policy to extend
credit to customers in its geographic market areas in and around its subsidiary
banks' twenty-three cities located in Southwestern Indiana, Southeastern
Illinois, and Western Kentucky.
The following is a five-year summary of the loan portfolio and an analysis of
the loan maturities and rate sensitivities at December 31, 1995.
LOAN PORTFOLIO AT YEAR END, FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans $339,880 $316,742 $296,869 $289,651 $295,701
Loans to financial institutions - - 50 50 500
Loans for purchasing/carrying securities - - - 350 350
Agricultural loans 29,152 28,299 26,757 24,067 25,345
Commercial and industrial loans 152,648 116,162 99,491 96,067 83,224
Economic development loans and
other obligations of state and
political subdivisions 9,887 12,833 9,916 9,478 11,622
Consumer loans 124,864 99,683 83,609 83,585 88,099
Direct lease financing 7,873 1,293 503 1,678 2,192
All other loans 291 275 845 145 3,798
- -------------------------------------------------------------------------------------------------
Total loans - gross 664,595 575,287 518,040 505,071 510,831
Less: unearned income 310 269 2,192 4,987 6,599
- -------------------------------------------------------------------------------------------------
Total loans - net of unearned income 664,285 575,018 515,848 500,084 504,232
Less: allowance for loan losses 5,323 4,899 4,757 5,243 5,511
- -------------------------------------------------------------------------------------------------
Total loans - net $658,962 $570,119 $511,091 $494,841 $498,721
=================================================================================================
</TABLE>
LOAN MATURITIES AND RATE SENSITIVITIES AT DECEMBER 31, 1995 ON AGRICULTURAL,
COMMERCIAL, AND TAX-EXEMPT LOANS
<TABLE>
<CAPTION>
After
1 Year But
Within Within Over
Rate sensitivities: 1 Year 5 Years 5 Years Total
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed rate loans $ 21,707 $38,200 $ 9,719 $ 69,626
Variable rate loans 119,524 743 1,517 121,784
- -------------------------------------------- ----------------------------------------------
Subtotal $141,231 $38,943 $11,236 191,410
============================================ =================================
Percent of subtotal 73.78% 20.35% 5.87%
Nonaccrual loans 277
--------
Total loans net of unearned income $191,687
========
</TABLE>
7
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
- -------------------------------------------------------------------------------
UNDERPERFORMING ASSETS
Underperforming assets consist of nonaccrual securities and loans, restructured
loans, 90 days past due loans, and other real estate held. Nonaccrual
securities are those which have defaulted on interest payments. Nonaccrual
loans are loans on which interest recognition has been suspended because of
doubts as to the borrower's ability to repay principal or interest. Loans are
generally placed on nonaccrual status after becoming 90 days past due if the
ultimate collectibility of the loan is in question. Loans which are current,
but for which serious doubt exists about repayment ability, may also be placed
on nonaccrual status. Restructured loans are loans where the terms have been
changed to provide a reduction or deferral of principal or interest because of
the borrower's financial position. Past-due loans are accruing loans that are
contractually past due ninety days or more as to interest or principal
payments. Other real estate held represents properties obtained for debts
previously contracted. Management is not aware of any loans which have not been
disclosed that represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity or capital resources, or represent material credits about which
management is aware of any information which causes management to have serious
doubt as to the ability of such borrower to comply with loan repayment terms.
The following is a five-year summary of the underperforming assets as of
December 31:
UNDERPERFORMING ASSETS AT YEAR END, FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Underperforming loans:
Nonaccrual $1,037 $1,025 $2,187 $ 3,356 $ 4,853
Restructured 143 223 222 2,147 2,842
90 days past due 906 594 279 1,735 3,695
- -----------------------------------------------------------------------------------
Total underperforming loans 2,086 1,842 2,688 7,238 11,390
Nonaccrual municipal securities - - 81 182 104
Other real estate held 383 636 1,059 3,512 3,905
- -----------------------------------------------------------------------------------
Total $2,469 $2,478 $3,828 $10,932 $15,399
===================================================================================
</TABLE>
Past due 90 days or more, nonaccrual, and restructured loans were 0.3% of total
loans at the end of 1995 and 1994. Of the loans in these categories, $929, or
44.5%, were secured by real estate at the end of 1995, compared to $1,049, or
56.9%, at the end of 1994. Additional interest income that would have been
recorded, if nonaccrual and restructured loans had been current and in
accordance with their original terms, was $133, $107, and $157 in 1995, 1994,
and 1993, respectively. The interest recognized on nonaccrual loans was
approximately $58, $84, and $29 in 1995, 1994, and 1993, respectively. Other
real estate held at the end of 1992 included properties valued at $2,011 which
were sold with The National City Bank of Evansville holding the mortgages.
In addition to those loans classified as underperforming, management was
closely monitoring loans of approximately $26,560 and $19,383 as of the end of
1995 and 1994, respectively, for the borrowers' abilities to comply with
present loan repayment terms. All impaired loans discussed in Note 5 to the
financial statements in this report are included in the above mentioned
underperforming or closely monitored loans.
- -------------------------------------------------------------------------------
RISK MANAGEMENT
As of December 31, 1995, management considered the allowance for loan losses
adequate to provide for potential losses. Management reviews delinquent and
problem loans weekly. Loans which are judged uncollectible are charged off on a
timely basis. The allowance for loan losses is reviewed quarterly in order to
evaluate and maintain its adequacy based on a thorough analysis of the entire
loan portfolio. 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. The
Corporation and its banks closely monitor loan portfolios using models designed
in part by regulatory agencies.
Total loans charged off during 1995 decreased $97, or 13.8%, and recoveries
were $231, or 27.9%, lower than in 1994. The provision for loan losses was
decreased for 1994 and 1993 as a result of receiving payments on loans which
had been allocated for in previous quarterly evaluations or previously charged
off and improved loan quality as evidenced by the significant reductions in
underperforming loans and in charge-offs in both periods. The provision was
increased for 1995 due to increased loan volume.
8
<PAGE> 11
The following is a five-year analysis of loan loss experience and allocation of
allowance for loan losses:
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE (ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES)
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, January 1 $ 4,899 $ 4,757 $ 5,243 $ 5,511 $ 5,127
Changes due to purchase acquisition 140 - - - -
Loans charged off:
Commercial 182 237 1,251 1,628 1,975
Real estate 65 267 204 687 433
Consumer 361 201 296 427 512
- -------------------------------------------------------------------------------------------------------------
Total 608 705 1,751 2,742 2,920
- -------------------------------------------------------------------------------------------------------------
Recoveries on charged-off loans:
Commercial 319 211 383 650 273
Real estate 173 189 186 239 249
Consumer 106 429 115 230 71
- -------------------------------------------------------------------------------------------------------------
Total 598 829 684 1,119 593
- -------------------------------------------------------------------------------------------------------------
Net charge-offs 10 (124) 1,067 1,623 2,327
Provision for loan losses 294 18 581 1,355 2,711
- -------------------------------------------------------------------------------------------------------------
Allowance for loan losses, December 31 $ 5,323 $ 4,899 $ 4,757 $ 5,243 $ 5,511
=============================================================================================================
Total loans at year end $664,285 $575,018 $515,848 $500,084 $504,232
Average loans $618,529 $539,750 $509,031 $506,261 $508,645
As a percent of year-end loans:
Net charge-offs 0.00% -0.02% 0.21% 0.32% 0.46%
Provision for loan losses 0.04% 0.00% 0.11% 0.27% 0.54%
Year-end allowance balance 0.80% 0.85% 0.92% 1.05% 1.09%
As a percent of average loans:
Net charge-offs 0.00% -0.02% 0.21% 0.32% 0.46%
Provision for loan losses 0.05% 0.00% 0.11% 0.27% 0.53%
Year-end allowance balance 0.86% 0.91% 0.93% 1.04% 1.08%
Allowance for loan losses as a percent
of underperforming loans 255.18% 265.96% 176.97% 72.44% 48.38%
</TABLE>
<TABLE>
<CAPTION>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31
Allowance Applicable to
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loan Type 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------
Commercial $2,244 $1,862 $1,521 $1,901 $2,252
Real estate 947 946 957 1,320 1,212
Consumer 908 561 600 571 509
- ---------------------------------------------------------------------
Allocated 4,099 3,369 3,078 3,792 3,973
Unallocated 1,224 1,530 1,679 1,451 1,538
- ---------------------------------------------------------------------
Total $5,323 $4,899 $4,757 $5,243 $5,511
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Percent of Loans to Total Gross Loans
- ----------------------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
30% 28% 27% 26% 25%
51% 55% 57% 57% 58%
19% 17% 16% 17% 17%
- ----------------------------------------------------------------
100% 100% 100% 100% 100%
================================================================
</TABLE>
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
- -------------------------------------------------------------------------------
DEPOSITS
The Corporation's Asset/Liability Committee manages the deposits of its banks
to best utilize short-term and long-term benefits of deposit growth. Average
deposits increased $16,310, or 2.2%, during 1995. Average time deposits of
$100,000 or more increased $28,159, or 43.5%. Time deposits of $100,000 or more
increased $6,853, or 8.0%, during 1995, compared to an increase of $19,836, or
30.1%, during 1994. Of the 1994 increase, $8,250 was deposited to collateralize
a standby letter of credit. Time deposits of $100,000 or more are from local
depositors and are not brokered deposits. They are not considered to present an
undue risk, and their averages have remained at less than 10% of average total
assets during the past three years.
The following is a three-year summary of average deposit balances and rates.
Also presented is a comparative analysis of time deposits of $100,000 or more.
AVERAGE DEPOSITS
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------------ ------------------
AMOUNT RATE Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand $ 88,011 - $ 87,856 - $ 83,432 -
Money market accounts 69,358 3.72% 67,677 2.66% 71,217 2.80%
Interest-bearing demand 131,987 2.26% 138,018 2.40% 131,780 2.49%
Savings 73,281 2.67% 82,239 2.55% 77,132 2.80%
Time deposits of $100,000 or more 92,927 5.68% 64,768 4.92% 65,195 3.54%
Other time deposits 315,329 5.14% 314,025 4.22% 332,097 4.67%
- ---------------------------------------------------------------------------------------------------
Total $770,893 $754,583 $760,853
===================================================================================================
<CAPTION>
TIME DEPOSITS OF $100,000 OR MORE AT DECEMBER 31
1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Maturing:
3 months or less $31,735 $37,075 $23,489
Over 3 to 6 months 44,317 23,723 20,569
Over 6 to 12 months 13,915 10,826 6,499
Over 12 months 2,622 14,112 15,343
- -------------------------------------------------------------
Total $92,589 $85,736 $65,900
=============================================================
</TABLE>
- --------------------------------------------------------------------------------
CAPITAL RESOURCES
At the end of 1995, shareholders' equity totaled $119,311, an increase of
$14,676, or 14.0%, over 1994. The equity to asset ratio on an average basis was
12.06% and 11.74% for 1995 and 1994, respectively. The dividend payout ratio
for 1995 was 31.32% compared to 42.79% in 1994. The National City Bank of
Evansville committed in 1995 to build an addition to its main office to be
completed in 1997 with an approximate cost of $6,000. It is anticipated that
the project will be financed internally. There are no other material
commitments for capital expenditures.
Guidelines for minimum capital levels have been established by the Federal
Reserve Board. Tier I (core) capital consists of shareholders' equity less
goodwill, other identifiable intangible assets, and unrealized losses on
marketable equity securities. Total capital consists of Tier I capital plus
allowance for loan losses. Regulatory minimum capital levels are 3% for the
leverage ratio which is defined as Tier I capital as a percentage of total
assets less goodwill and other identifiable intangible assets; 4% for Tier I
capital to risk-weighted assets; and 8% for total capital to risk-weighted
assets. The Corporation has, by far, exceeded each of these levels. Its
leverage ratio was 12.3% and 12.1%; Tier I capital to risk-weighted assets was
17.2% and 17.9%; and total capital to risk-weighted assets was 18.0% and 18.7%
at the end of 1995 and 1994, respectively. In addition, each of its subsidiary
banks has exceeded the capital guidelines established by bank regulators.
10
<PAGE> 13
- --------------------------------------------------------------------------------
SHORT-TERM BORROWINGS
Federal funds purchased are borrowings from other financial institutions
maturing daily. Repurchase agreements are secured transactions with customers.
Repurchase agreements generally mature within six months. Notes payable U.S.
Treasury are demand notes created by treasury tax and loan account funds
transfers. Short-term borrowings increased $27,795, or 100.0%, during 1995. All
types of short-term borrowings increased during 1995, with the largest increase
being in federal funds purchased, which increased $23,925, or 226.2%. A
detailed analysis of these three types of borrowings follows:
<TABLE>
<CAPTION>
SHORT-TERM BORROWINGS AT DECEMBER 31
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased $34,500 $10,575 $ -
Securities sold under
agreements to repurchase 18,329 14,553 16,778
Notes payable U.S. Treasury 2,769 2,675 5,393
- ------------------------------------------------------------------
Total $55,598 $27,803 $22,171
==================================================================
<CAPTION>
Securities Notes
Federal Sold Under Payable
Funds Agreements U.S.
Purchased to Repurchase Treasury
- ------------------------------------------------------------------
<S> <C> <C> <C>
1995
AVERAGE AMOUNT OUTSTANDING $ 4,536 $17,064 $2,655
MAXIMUM AMOUNT AT ANY MONTH END 34,500 20,649 6,647
WEIGHTED AVERAGE INTEREST RATE:
DURING YEAR 5.89% 4.64% 5.67%
END OF YEAR 5.90% 4.10% 5.15%
1994
Average amount outstanding $ 5,300 $14,557 $2,096
Maximum amount at any month end 19,450 18,235 4,783
Weighted average interest rate:
During year 4.81% 3.69% 3.81%
End of year 5.64% 4.62% 5.20%
1993
Average amount outstanding $ 427 $15,737 $3,567
Maximum amount at any month end 2,233 19,169 8,568
Weighted average interest rate:
During year 3.48% 3.37% 2.82%
End of year - 3.28% 2.76%
</TABLE>
- -------------------------------------------------------------------------------
LIQUIDITY
The liquidity of a banking institution reflects the ability to provide funds to
meet loan requests, to accommodate possible outflows in deposits, and to take
advantage of interest rate market opportunities. Funding of loan requests,
providing for liability outflows, and management of interest rate fluctuations
require continuous analysis in order to match maturities of specific categories
of short-term and long-term loans and investments with specific types of
deposits and borrowings. Bank liquidity is thus normally considered in terms of
the nature of mix of the banking institution's sources and uses of funds.
For National City Bancshares, Inc., the primary sources of short-term liquidity
have been federal funds sold, interest-bearing deposits in banks, and U.S.
Government and agency securities available for sale. In addition to these
sources, short-term liquidity is provided by maturing loans and securities. The
balance between these sources and needs to fund loan demand and deposit
withdrawals is closely monitored by the Corporation's asset/liability
management program and by each subsidiary bank to provide liquidity without
penalizing earnings. The increased loan demand throughout the year was funded
by primary assets, federal funds sold, and U.S. Government and agency
securities available for sale. However, management remains comfortable with the
shift in earning assets, mainly because of the deposits following from loans
and a continued shortening of loan maturities. Additionally, the Corporation's
underwriting standards for its mortgage loan portfolio is in accordance with
standards established by government housing agencies; and thereby, a portion
of the mortgage loan portfolio could be sold to provide additional liquidity. At
December 31, 1995 and 1994, respectively, federal funds sold were $1,420 and
$3,050, interest-bearing deposits in banks were $5,739 and $13,008, and U.S.
Government and agency securities available for sale were $85,180 and $94,032.
These sources and other liquid assets also provide long-term liquidity needs.
Long-term liquidity is managed in the same way, only with longer maturities, to
provide for future needs while maintaining interest margins. In excess of
$5,002 was available to the Corporation at December 31, 1995, from dividends by
subsidiaries without prior regulatory approval. Note 13 to the financial
statements in this report provides more detail about restrictions on dividends
from subsidiaries. These dividends provide liquidity for the Corporation. The
Corporation has no material long-term commitments.
- -------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY
Management of liquidity must be coordinated with interest rate management. The
following "Interest Rate Sensitivity Analysis" schedule shows assets and
liabilities which are maturing at various periods in time and which will be
subject to repricing.
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
INTEREST RATE SENSITIVITY, CONTINUED
Money market accounts are shown in the shortest period, and savings accounts
are shown in the longest period presented. Interest-bearing demand accounts are
divided between the shortest and longest periods based on the historical
pattern of the interest rate sensitivity of the account. Variable rate
interest-earning assets and interest-bearing liabilities are distributed based
on repricing opportunities while fixed rate interest-earning assets and
interest-bearing liabilities are distributed based on contractual maturity. No
adjustments were made for projected prepayment assumptions or for projected
response to changes in market interest rates. Liabilities to be repriced in
three months or less and on a cumulative basis through one year exceed assets
to be repriced in the same time periods. In times of rising interest rates,
this will reduce net interest margin and thus the earnings of the banks, as
liabilities will be repriced at higher rates while matching assets remain at
their old lower rates until maturity. In times of falling interest rates, this
will increase net interest margin and thus the earnings of the banks. Interest
rate levels cannot be predicted at any future point in time; therefore, it is
in our best interest to match maturities of assets and liabilities so that the
gap will be as close to zero as possible. This can be accomplished by
shortening maturities of investment purchases and/or purchasing investments
where the rates adjust every thirty to ninety days. While more liabilities than
assets are subject to repricing within three months, we believe our
asset/liability management program allows adequate reaction time for changes in
rates as they occur, maximizing the potential positive effect of an increase in
interest rates.
Corporate asset liability gap positions are targeted at plus or minus 10% at
the six-month and one-year horizons. At December 31, 1995, all subsidiary banks
were within, or close to, their targeted spreads. The cumulative gap position
through one year of negative $39,491 at the end of 1995 was 4.0% of total
assets, a relatively balanced position in the opinion of management. Management
believes interest-bearing liabilities are driven by changes in the
Corporation's assets.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1995
Over Over
3 Months 1 Year
3 Months through through Over
EARNING ASSETS: or Less 1 Year 5 Years 5 Years Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans - net of unearned income
(excluding nonaccrual) $196,907 $129,130 $198,538 $138,673 $663,248
Securities (excluding nonaccrual) 29,007 44,983 89,337 77,960 241,287
Interest-bearing deposit in banks 2,583 2,167 989 - 5,739
Federal Funds sold 1,420 - - - 1,420
- -----------------------------------------------------------------------------------------------------
Total earning assets 229,917 176,280 288,864 216,633 911,694
- -----------------------------------------------------------------------------------------------------
RATE-SENSITIVE LIABILITIES:
Interest-bearing liabilities:
Interest-bearing demand 47,311 - - 84,661 131,972
Money market and other savings 68,180 - - 69,026 137,206
Time deposits of $100,000 or more 31,735 44,317 13,915 2,622 92,589
Other time 84,048 113,492 101,765 12,239 311,544
Borrowed funds 51,753 4,852 15,902 3,500 76,007
- -----------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 283,027 162,661 131,582 172,048 749,318
Noninterest-bearing demand - - - 101,409 101,409
- -----------------------------------------------------------------------------------------------------
Total rate-sensitive liabilities 283,027 162,661 131,582 273,457 850,727
- -----------------------------------------------------------------------------------------------------
Interest sensitivity gap (53,110) 13,619 157,282 (56,824)
Cumulative gap (53,110) (39,491) 117,791 60,967
</TABLE>
<TABLE>
<CAPTION>
CHANGES IN NET INTEREST INCOME
(INTEREST ON A FEDERAL-TAX-EQUIVALENT BASIS)
1995 COMPARED TO 1994 1994 Compared to 1993
------------------------------ ---------------------------------
CHANGE DUE TO Change Due to
A CHANGE IN a Change in
---------------- -----------------
VOLUME RATE TOTAL CHANGE Volume Rate Total Change
------------------------------ ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income increase (decrease)
Loans $7,171 $3,741 $10,912 $2,584 $ (984) $1,600
Securities (1,552) 1,397 (155) 411 (610) (199)
Other short-term investments (938) 634 (304) (1,462) 281 (1,181)
- -----------------------------------------------------------------------------------------------------
Total interest income 4,681 5,772 10,453 1,533 (1,313) 220
- -----------------------------------------------------------------------------------------------------
Interest expense increase (decrease)
Deposits 686 4,669 5,355 (379) (1,206) (1,585)
Borrowings 646 287 933 93 104 197
- -----------------------------------------------------------------------------------------------------
Total interest expense 1,332 4,956 6,288 (286) (1,102) (1,388)
- -----------------------------------------------------------------------------------------------------
Net interest income increase (decrease) $3,349 $ 816 $ 4,165 $1,819 $ (211) $1,608
=====================================================================================================
</TABLE>
12
<PAGE> 15
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net income increased $3,436, or 35.5%, in 1995 and decreased $248, or 2.5%, in
1994. Income also increased on a per-share basis in 1995 and decreased slightly
in 1994. Due to increased net interest margins, net interest income increased
$4,159, or 11.6%, in 1995 and increased $1,581, or 4.6%, in 1994. The provision
for loan losses decreased in 1994 due to high loan quality and increased in
1995 due to increased loan volume.
Changes in net interest income for the last two years are presented in the
preceding schedule with dollar changes allocated to rate and volume variances.
The combined rate-volume variances are included in the total volume variances.
In addition to this schedule, on page 14 is a three-year balance sheet analysis
on an average basis and an analysis of net interest income, setting forth (i)
average assets, liabilities, and shareholders' equity; (ii) interest income
earned on interest-earning assets and interest expense incurred on
interest-bearing liabilities; (iii) average yields earned on interest-earning
assets and average rates incurred on interest-bearing liabilities; (iv) the net
interest margin (i.e. the average yield earned on interest-earning assets less
the average rate incurred on interest-bearing liabilities); and (v) the net
yield on interest-earning assets (i.e. net interest income divided by average
interest-earning assets). Nonaccrual loans are included in the average balances
shown on the three-year balance sheet analysis and in the average balances used
to compute the volume variances in the changes in net interest income.
A summary analysis of operations and return on equity and assets is provided in
a five-year financial review on page 1. The following discussion of results of
operations is on a federal-tax-equivalent basis. Average loans increased 14.6%
during 1995, compared to an increase of 6.0% during 1994. Loan income increased
24.0% in 1995 and 3.7% in 1994. The average yield on loans increased from 8.41%
in 1994 to 9.10% in 1995, a direct result of higher interest rates. Average
securities before market value adjustments decreased 9.3% in 1995 and increased
2.7% in 1994. Securities income decreased 1.0% during 1995 and 1.3% during
1994. The yield on securities increased from 5.91% in 1994 to 6.45% in 1995.
Average earning assets were approximately the same for 1993 and 1994 and
increased 4.5% in 1995 while income increased 16.8% during 1995 and 0.4% during
1994. The average yield on total earning assets increased from 7.44% in 1994 to
8.32% in 1995. Interest income in 1995 increased mainly due to an increase in
rates and in 1994 due to an increase in volume of earning assets.
Average total interest-bearing deposits decreased 1.6% during 1994 and
increased 2.4% during 1995. The average cost of interest-bearing deposits
decreased from 3.73% in 1993 to 3.55% in 1994 and increased to 4.25% in 1995.
Rate was the stronger factor during 1995 and 1994, and the larger changes were
recorded in 1995.
In 1995 and 1994 the increase in net interest income due to volume was stronger
than the changes due to rate, resulting in a $4,165 and $1,608 increase in net
interest income in 1995 and 1994, respectively.
- -------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest income for 1995 increased $1,779, or 36.0%, over 1994, compared to
a decrease of $1,508, or 23.4%, for 1994 from 1993. Service charges on deposit
accounts, the largest item in this category, increased $578, or 26.3%, during
1995 and $28, or 1.3%, during 1994. Trust income increased $241, or 19.2%,
during 1995, compared to a $42, or 3.2%, decrease during 1994. These changes
are due to fluctuations in the number of estates each year. Other service
charges and fees increased $353, or 25.1%, during 1995 and decreased $19, or
1.3%, during 1994. Included in security gains and losses were write-downs of
$164 and $54 during 1994 and 1993, respectively, to reflect a decline in value
of certain securities deemed to be other than temporary under regulatory
guidelines. During 1993 some securities previously written down were sold for a
$303 recovery. The other types of noninterest income increased $111 during 1995
and decreased $323 during 1994.
- -------------------------------------------------------------------------------
NONINTEREST EXPENSE
Noninterest expense increased $242, or 0.9%, during 1995, and $248, or 1.0%,
during 1994. The expense of salaries and other employee benefits increased
$967, or 6.9%, in 1995 and increased $527, or 3.9%, in 1994. Occupancy expense
of bank premises decreased $246, or 12.0%, during 1995 compared to an increase
of $41, or 2.0%, during 1994. Furniture and equipment expense increased $92, or
5.1%, and $120, or 7.2%, during 1995 and 1994, respectively. The FDIC
assessment decreased $738, or 42.7%, during 1995 due to lower premiums and
increased $42, or 2.5%, during 1994 due to a increase in deposits. Other types
of noninterest expenses increased $167, or 2.6%, and decreased $482, or 6.9%,
during 1995 and 1994, respectively. Included in 1995 and 1994, respectively,
were $146 and $461 in merger and acquisition expense.
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME
1995 1994
------------------------------ ----------------------------------
AVERAGE INTEREST YIELD/ Average Interest Yield/
BALANCES & FEES COST Balances & Fees Cost
EARNING ASSETS: ------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits in banks $ 8,297 $ 437 5.27% $ 21,529 $ 897 4.17%
Short-term money market investments 1,317 87 6.61% 2,601 96 3.69%
Federal funds sold 11,863 688 5.80% 13,964 523 3.75%
Securities:
U.S. Government and agency 163,156 9,714 5.95% 188,319 10,081 5.35%
State and municipal - taxable 2,806 182 6.49% 2,426 150 6.18%
State and municipal - nontaxable 41,652 3,639 8.74% 41,850 3,706 8.86%
Other 28,373 1,678 5.91% 27,474 1,431 5.21%
- -------------------------------------------------------------------------------------------------------------
Securities before market value
adjustment 235,987 15,213 6.45% 260,069 15,368 5.91%
Market value adjustment on
securities available for sale (1,625) (1,123)
- -------------------------------------------------------------------------------------------------------------
Total securities 234,362 258,946
Loans:
Commercial 221,412 20,643 9.32% 189,343 15,759 8.32%
Consumer 118,442 11,741 9.91% 92.834 8,542 9.20%
Real estate mortgage 268,520 22,896 8.53% 246,871 20,132 8.15%
Economic development and
other municipal loans 10,155 1,026 10.10% 10,702 961 8.98%
- -------------------------------------------------------------------------------------------------------------
Total loans 618,529 56,306 9.10% 539,750 45,394 8.41%
- -------------------------------------------------------------------------------------------------------------
Total earning assets 874,368 $72,731 8.32% 836,790 $62,278 7.44%
======= =======
NON-EARNING ASSETS:
Allowance for loan losses (5,082) (4,887)
Cash and due from banks 27,783 31,173
Premises and equipment 13,564 12,112
Other assets 19,051 16,905
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $929,684 $892,093
=============================================================================================================
INTEREST-BEARING LIABILITIES:
Savings and interest-bearing demand $205,268 $ 4,940 2.41% $220,257 $ 5,411 2.46%
Money market accounts 69,358 2,582 3.72% 67,677 1,802 2.66%
Certificates of deposit and other time 408,256 21,483 5.26% 378,793 16,437 4.34%
- -------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 682,882 29,005 4.25% 666,727 23,650 3.55%
Federal funds purchased and securities
sold under agreements to repurchase 21,600 1,059 4.90% 19,857 792 3.99%
Other borrowings 14,908 984 6.60% 5,102 318 6.23%
- -------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 719,390 $31,048 4.32% 691,686 $24,760 3.58%
======= =======
NONINTEREST-BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY:
Noninterest-bearing demand deposits 88,011 87,856
Other liabilities 10,169 7,789
Shareholders' equity 112,114 104,762
- -------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $929,684 $892,093
=============================================================================================================
Interest income/earning assets $72,731 8.32% $62,278 7.44%
Interest expense/earning assets 31,048 3.55% 24,760 2.96%
- -------------------------------------------------------------------------------------------------------------
Net interest income/earning assets $41,683 4.77% $37,518 4.48%
=============================================================================================================
<CAPTION>
1993
---------------------------------
Average Interest Yield/
Balances & Fees Cost
EARNING ASSETS: ---------------------------------
<S> <C> <C> <C>
Interest-bearing deposits in banks $ 36,189 $ 1,542 4.26%
Short-term money market investments 3,401 102 3.00%
Federal funds sold 35,250 1,053 2.99%
Securities:
U.S. Government and agency 193,838 10,660 5.50%
State and municipal - taxable 1,095 79 7.21%
State and municipal - nontaxable 39,879 3,725 9.34%
Other 18,308 1,103 6.03%
- --------------------------------------------------------------------------
Securities before market value
adjustment 253,120 15,567 6.15%
Market value adjustment on
securities available for sale -
- --------------------------------------------------------------------------
Total securities 253,120
Loans:
Commercial 178,902 13,995 7.82%
Consumer 82,072 8,240 10.04%
Real estate mortgage 238,228 20,658 8.67%
Economic development and
other municipal loans 9,829 901 9.17%
- --------------------------------------------------------------------------
Total loans 509,031 43,794 8.60%
- --------------------------------------------------------------------------
Total earning assets 836,991 $62,058 7.41%
=======
NON-EARNING ASSETS:
Allowance for loan losses (5,296)
Cash and due from banks 31,633
Premises and equipment 12,145
Other assets 17,362
- --------------------------------------------------------------------------
TOTAL ASSETS $892,835
==========================================================================
INTEREST-BEARING LIABILITIES:
Savings and interest-bearing demand $208,912 $ 5,439 2.60%
Money market accounts 71,217 1,994 2.80%
Certificates of deposit and other time 397,292 17,802 4.48%
- --------------------------------------------------------------------------
Total interest-bearing deposits 677,421 25,235 3.73%
Federal funds purchased and securities
sold under agreements to repurchase 16,164 544 3.37%
Other borrowings 6,707 369 5.50%
- --------------------------------------------------------------------------
Total interest-bearing liabilities 700,292 $26,148 3.73%
=======
NONINTEREST-BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY:
Noninterest-bearing demand deposits 83,432
Other liabilities 8,237
Shareholders' equity 100,874
- --------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $892,835
==========================================================================
Interest income/earning assets $62,058 7.41%
Interest expense/earning assets 26,148 3.12%
- --------------------------------------------------------------------------
Net interest income/earning assets $35,910 4.29%
==========================================================================
Note: Income is on a federal-tax-equivalent basis using a 35% tax rate for
1995, 34.3% for 1994, and 34% for 1993.
Average volume includes nonaccrual loans.
Loans are classified by department.
</TABLE>
14
<PAGE> 17
REPORT ON MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
March 12, 1996
The Management of National City Bancshares, Inc. is responsible for the
preparation, integrity, and objectivity of the consolidated financial
statements and other financial information presented in this Annual Report. The
financial reports have been prepared in accordance with generally accepted
accounting principles and properly reflect the effects of amounts that are
based on the best judgments and estimates made by Management.
The Corporation maintains a system of internal controls which, in the opinion
of Management, provides reasonable assurance that its financial records can be
relied on in the preparation of financial statements and that its assets are
safeguarded against loss or unauthorized use. The careful selection and
training of qualified personnel, the use of written policies and procedures,
and an audit program carried out by a professional staff of internal auditors
contribute to the effectiveness of this system.
The consolidated financial statements of the Corporation have been audited by
McGladrey & Pullen, LLP, independent certified public accountants. These audits
were conducted in accordance with generally accepted auditing standards and
included a review of the financial controls and such other procedures and tests
of the accounting records as they considered necessary under the circumstances.
The Audit Committee of the Board of Directors, composed solely of directors who
are not officers or employees of the Corporation, meets regularly with the
internal auditor and with the independent certified public accountants, and
Management, when appropriate, to review auditing, accounting, reporting, and
internal control matters. Both the internal and external auditors have direct
and private access to the Audit Committee.
/s/ John D. Lippert /s/ Robert A. Keil
John D. Lippert Robert A Keil
Chairman of the Board President, Chief Financial Officer
and Chief Executive Officer and Chief Administrative Officer
- -------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
National City Bancshares, Inc.
Evansville, Indiana
We have audited the accompanying consolidated statements of financial position
of National City Bancshares, Inc. and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three-year period ended December
31, 1995. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
National City Bancshares, Inc. and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ McGladrey and Pullen, LLP
Champaign, Illinois
January 19, 1996
15
<PAGE> 18
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(Dollar Amounts Other Than Share Data in Thousands)
December 31,
1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 38,228 $ 40,170
Short-term money market investments - 982
Interest-bearing deposits in banks 5,739 13,008
Securities held to maturity (fair value: 1995 - $92,236; 1994 - $109,876) 89,918 112,300
Securities available for sale 151,369 136,360
Federal funds sold 1,420 3,050
Loans - net of allowance for loan losses of $5,323 in 1995 and $4,899 in 1994 658,962 570,119
Premises and equipment 14,739 12,489
Other real estate owned 383 636
Income earned but not collected 10,242 9,812
Income taxes receivable - 118
Deferred income taxes - 797
Other assets 8,440 6,665
- --------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $979,440 $906,506
==============================================================================================================
LIABILITIES
Deposits:
Noninterest-bearing demand $101,409 $ 94,329
Interest-bearing:
Savings, daily interest checking, and money market accounts 269,178 279,379
Time deposits of $100,000 or more 92,589 85,736
Other time 311,544 305,007
- --------------------------------------------------------------------------------------------------------------
Total deposits 774,720 764,451
Federal funds purchased and securities sold under agreements to repurchase 52,829 25,128
Notes issued to the U.S. Treasury 2,769 2,675
Other borrowings 20,409 3,000
Dividends payable 1,175 805
Accrued interest payable 3,562 2,808
Income taxes payable 611 228
Deferred income taxes 1,005 -
Other liabilities 3,049 2,776
- --------------------------------------------------------------------------------------------------------------
Total liabilities 860,129 801,871
- --------------------------------------------------------------------------------------------------------------
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK
SHAREHOLDERS' EQUITY
Common Stock: 1995 1994
$1.00 $3.33 1/3
STATED VALUE Par Value
------------ ---------
Shares authorized 10,000,000 5,000,000
Shares outstanding 4,697,198 4,390,632 4,697 14,635
Capital surplus 59,491 36,962
Retained earnings 54,818 55,633
Unrealized gain (loss) on securities available for sale 305 (2,595)
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 119,311 104,635
- --------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $979,440 $906,506
==============================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
16
<PAGE> 19
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Dollar Amounts Other Than Share Data in Thousands) Year Ended December 31
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable $55,280 $44,433 $42,893
Nontaxable 693 650 613
Interest and dividends on securities:
Taxable 11,574 11,662 11,842
Nontaxable 2,456 2,507 2,530
Interest on federal funds sold 688 523 1,053
Interest on deposits in banks 437 897 1,542
Interest on short-term money market investments 87 96 102
- -----------------------------------------------------------------------------------------------
Total interest income 71,215 60,768 60,575
- -----------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 5,274 3,186 2,308
Interest on other deposits 23,731 20,464 22,927
Interest on federal funds purchased and
securities sold under agreements to repurchase 1,059 792 544
Interest on funds borrowed 984 318 369
- -----------------------------------------------------------------------------------------------
Total interest expense 31,048 24,760 26,148
- -----------------------------------------------------------------------------------------------
NET INTEREST INCOME 40,167 36,008 34,427
Provision for loan losses 294 18 581
- -----------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 39,873 35,990 33,846
- -----------------------------------------------------------------------------------------------
NONINTEREST INCOME
Trust income 1,494 1,253 1,295
Service charges on deposit accounts 2,775 2,197 2,169
Other service charges and fees 1,758 1,405 1,424
Securities gains (losses) 26 (470) 682
Other income 671 560 883
- -----------------------------------------------------------------------------------------------
Total noninterest income 6,724 4,945 6,453
- -----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries, wages, and other employee benefits 15,041 14,074 13,547
Occupancy expense of bank premises 1,804 2,050 2,009
Furniture and equipment expense 1,881 1,789 1,669
Assessments of the Federal Deposit Insurance Corporation 990 1,728 1,686
Other expenses 6,627 6,460 6,942
- -----------------------------------------------------------------------------------------------
Total noninterest expense 26,343 26,101 25,853
- -----------------------------------------------------------------------------------------------
Income before income taxes 20,254 14,834 14,446
Income taxes 7,139 5,155 4,519
- -----------------------------------------------------------------------------------------------
NET INCOME $13,115 $ 9,679 $ 9,927
===============================================================================================
EARNINGS PER SHARE $ 2.81 $ 2.08 $ 2.11
===============================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
17
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollar Amounts Other Than Share Data in Thousands) Year Ended December 31
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $13,115 $ 9,679 $ 9,927
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 1,316 2,657 2,668
Depreciation 1,609 1,636 1,491
Provision for loan losses 294 18 581
Write-down of securities and other assets 69 43 78
Securities (gains) losses (26) 470 (682)
(Gain) on sale of premises and equipment (15) (148) (30)
(Gain) loss on sale of other real estate owned 39 (26) 48
(Gain) on sale of subsidiary (206) (8) -
Increase (decrease) in deferred taxes (27) (202) 476
Changes in assets and liabilities:
(Increase) decrease in income earned but not collected (284) (1,002) 978
(Increase) decrease in other assets (199) (605) (922)
Increase (decrease) in accrued interest payable 701 128 (583)
Increase (decrease) in other liabilities 611 1,213 (511)
- -----------------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities 16,997 13,853 13,519
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits in banks 7,668 14,176 13,993
Proceeds from maturities of securities held to maturity 25,681 39,652 96,041
Proceeds from maturities of securities available for sale 41,381 71,193 -
Proceeds from sales of securities - - 14,589
Proceeds from sales of securities available for sale 118 1,999 -
Purchases of securities held to maturity (33,607) (40,945) (100,941)
Purchases of securities available for sale (18,745) (82,577) -
(Increase) decrease in federal funds sold 3,605 44,174 1,477
(Increase) decrease in loans made to customers (78,456) (59,148) (15,464)
Capital expenditures (3,655) (1,924) (1,398)
Proceeds from sale of other real estate owned 543 807 960
Proceeds from sale of premises and equipment 63 206 29
Purchase of subsidiary, net of cash and due from banks acquired (309) - -
Cash transferred to buyer in sale of subsidiary (10,370) (68) -
- -----------------------------------------------------------------------------------------------------------
Net cash flows provided by (used in) investing activities (66,083) (12,455) 9,286
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 4,383 3,722 (23,800)
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase 27,701 8,350 128
Net proceeds (payments) on notes issued to the U.S. Treasury 94 (2,718) 1,118
Proceeds from other borrowings 17,434 - 2,213
Payments on other borrowings (25) (210) (2,515)
Dividends paid (3,598) (3,772) (2,959)
Repurchase of common stock (863) (4,075) (1,112)
Sale of common stock 1,036 820 641
- -----------------------------------------------------------------------------------------------------------
Net cash flows provided by (used in) financing activities 46,162 2,117 (26,286)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,924) 3,515 (3,481)
Cash and cash equivalents at beginning of year 41,152 37,637 41,118
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $38,228 $41,152 $ 37,637
===========================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $30,294 $24,632 $ 26,731
Income taxes 6,640 5,379 4,873
</TABLE>
Consolidated Statements of Cash Flows are continued on the following page.
18
<PAGE> 21
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NON CASH
INVESTING & FINANCING ACTIVITIES
Change in allowance for unrealized gain (loss) on securities
available for sale $ 4,704 $(4,988) $ 864
Change in deferred taxes attributable to securities available for sale (1,804) 1,925 (313)
Employee Stock Ownership Plan obligation guaranty note payment - 541 108
Other real estate acquired in settlement of loans 363 402 644
Loans originated on sales of other real estate owned - - 2,011
Transfer from other real estate owned to other assets 7 - -
Transfer from premises and equipment to other real estate owned 41 - -
Dividends declared not yet paid 1,175 805 824
Transfer of securities held to maturity to available for sale 34,987 - -
Sale of subsidiary:
Loan receivable $ 300
=======================================================================================================================
Assets disposed of, principally intangible assets,
premises and equipment, and cash $ 333
Liabilities assumed by buyer, principally accounts payable (41)
Gain on sale of subsidiary 8
- -----------------------------------------------------------------------------------------------------------------------
$ 300
=======================================================================================================================
Purchase of subsidiary:
Purchase price $ 896
=======================================================================================================================
Assets acquired:
Cash and due from banks $ 587
Interest-bearing deposits in banks 399
Securities 3,753
Federal funds sold 1,975
Loans 11,069
Premises and equipment 355
Income earned but not collected 146
Other assets 1,962
Liabilities assumed:
Deposits (16,742)
Accrued interest payable (92)
Deferred taxes payable (25)
Other liabilities (49)
Common stock issued (2,442)
- -----------------------------------------------------------------------------------------------------------------------
$ 896
=======================================================================================================================
Sale of branch:
Cash paid $ 10,244
=======================================================================================================================
Assets disposed:
Cash $ (126)
Loans (25)
Premises and equipment (33)
Other assets (265)
Liabilities assumed by buyer:
Deposits 10,856
Accrued interest payable 39
Other liabilities 4
Gain on sale of branch (206)
- -----------------------------------------------------------------------------------------------------------------------
$ 10,244
=======================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
19
<PAGE> 22
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Dollar Amounts Other Than Share Data in Thousands)
For the Years Ended
December 31, 1995, 1994, and 1993
Employee
Unrealized Stock
Gain(Loss) Ownership
on Securities Plan
Common Common Capital Retained Availabile Obligation
Shares Stock Surplus Earnings For Sale Guaranty
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1992,
as previously reported 3,740,678 $ 12,469 $36,139 $31,896 $ (83) $(649)
Adjusted for pooling of interests 752,994 2,510 4,112 11,109 - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1992
AS RESTATED 4,493,672 14,979 40,251 43,005 (83) (649)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - - - 9,927 - -
Cash dividends declared - - - (3,225) - -
Payment for fractional shares for merger
and stock dividends (355) (1) (14) - - -
Repurchase of outstanding shares (42,783) (143) (969) - - -
Shares issued in Dividend
Reinvestment Program 19,267 64 592 - - -
Change in unrealized gain (loss) on securities - - - - 551 -
Amortization of stock award program - - 65 - - -
Employee Stock Ownership Plan note payment - - - - - 108
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 4,469,801 14,899 39,925 49,707 468 (541)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - - - 9,679 - -
Cash dividends declared - - - (3,753) - -
Repurchase of outstanding shares (102,343) (341) (3,734) - - -
Shares issued in Dividend
Reinvestment Program 19,228 64 681 - - -
Change in unrealized gain (loss) on securities - - - - (3,063) -
Issuance of stock under United Financial
Bancorp, Inc. Stock Option Plan 3,946 13 62 - - -
Amortization of stock award program - - 28 - - -
Employee Stock Ownership Plan note payment - - - - - 541
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 4,390,632 14,635 36,962 55,633 (2,595) -
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - - - 13,115 - -
Cash dividends declared - - - (3,968) - -
Repurchase of outstanding shares (19,500) (30) (833) - - -
Shares issued in Dividend
Reinvestment Program 18,842 51 752 - - -
Change in unrealized gain (loss) on securities - - - - 2,900 -
Issuance of common stock related to
acquisition of subsidiary 55,509 185 2,257 - - -
Payment for fractional shares for merger - - (9) - - -
Reflect change to $1.00 stated value - (10,395) 10,395 - - -
Stock dividend 223,861 224 9,738 (9,962) - -
Payment for fractional shares for stock dividend (526) (1) (24) - - -
Issuance of stock under United Financial
Bancorp, Inc. Stock Option Plan 28,380 28 239 - - -
Amortization of stock award program - - 14 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 4,697,198 $ 4,697 $59,491 $54,818 $ 305 $ -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
20
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar Amounts Other Than Share Data in Thousands)
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
National City Bancshares, Inc. (Corporation) is a holding company whose
subsidiaries provide a full range of banking services to individual and
corporate customers through its eleven wholly owned subsidiaries located in
Southwestern Indiana, Southeastern Illinois, and Western Kentucky. The Banks
are subject to competition from other financial institutions and nonfinancial
institutions providing financial products. Additionally, the Corporation and
its subsidiaries are subject to the regulations of certain regulatory agencies
and undergo periodic examinations by those regulatory agencies.
The consolidated financial statements of the Corporation have been prepared in
conformity with generally accepted accounting principles and conform to
predominate practice within the banking industry.
Following is a description of the more significant of these policies.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Corporation and its wholly-owned subsidiaries: The National City Bank of
Evansville, The Peoples National Bank of Grayville, The Farmers and Merchants
Bank, First Kentucky Bank, Lincolnland Bank, The Bank of Mitchell, Pike County
Bank (and its wholly-owned subsidiary: UniFed, Inc.), The State Bank of
Washington, White County Bank, United Federal Savings Bank, and NCBE Leasing
Corp. All significant intercompany transactions and balances have been
eliminated.
The Corporation and its subsidiaries utilize the accrual basis of accounting
for major items.
In preparing the consolidated financial statements, Corporation management is
required to make estimates and assumptions which significantly affect the
amounts reported in the consolidated financial statements. Significant
estimates which are particularly susceptible to change in a short period of
time include the determination of the allowance for loan losses and valuation
of real estate and other properties acquired in connection with foreclosures or
in satisfaction of amounts due from borrowers on loans. Actual results could
differ from those estimates.
CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents includes cash
on hand, amounts due from banks, and short-term money market investments.
Interest-bearing deposits in banks, regardless of maturity, are considered
short-term investments.
TRUST ASSETS
Property held for customers in fiduciary or agency capacities, other than trust
cash on deposit at the bank, is not included in the accompanying consolidated
financial statements since such items are not assets of the Corporation or its
subsidiaries.
SECURITIES
Securities classified as held to maturity are those securities the Corporation
has both the intent and ability to hold to maturity regardless of changes in
market conditions, liquidity needs, or changes in general economic conditions.
These securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method over their contractual
lives.
Securities classified as available for sale are those debt securities that the
Corporation intends to hold for an indefinite period of time, but not
necessarily to maturity, and marketable equity securities. Any decision to sell
a security classified as available for sale would be based on various factors,
including significant movements in interest rates, changes in the maturity mix
of assets and liabilities, liquidity needs, regulatory capital considerations,
and other similar factors. Securities available for sale are carried at fair
value. Unrealized gains or losses are reported as increases or decreases in
shareholders' equity, net of the related deferred tax effect. Realized gains or
losses, determined on the basis of the cost of specific securities sold, are
included as a component of net income.
LOANS
Loans are stated at the principal amount outstanding, less unearned interest
income and an allowance for loan losses. Unearned income on installment loans
is recognized as income based on the sum-of-the-months digits method which
approximates the interest method. Interest income on substantially all other
loans is credited to income based on the principal balances of loans
outstanding.
The Corporation's policy is to discontinue the accrual of interest income on
any loan when, in the opinion of management, there is reasonable doubt as to
the timely collectibility of interest or principal. Interest income on these
loans is recognized to the extent interest payments are received, and the
principal is considered fully collectible. Nonaccrual loans are returned to
accrual status when, in the opinion of management, the financial position of
the borrower indicates there is no longer any reasonable doubt as to the timely
collectibility of interest and principal.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to provide for known and inherent risks in the loan portfolio. The
allowance is based upon a continuing evaluation of the risk characteristics of
the loan portfolios, past loan loss experience, and current economic
conditions. The continuing review considers such factors as the financial
condition of the borrower, fair market value of the collateral, and other
considerations which, in management's opinion, deserve current recognition in
estimating loan losses.
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Loans which are deemed to be uncollectible are charged to the allowance. The
provision for loan losses and recoveries are credited to the allowance.
On January 1, 1995, the Corporation adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by FAS 118, which requires
loans to be considered impaired when, based on current information and events,
it is probable the Corporation will not be able to collect all amounts due. The
portion of the allowance for loan losses applicable to impaired loans has been
computed based on the present value of the estimated future cash flows of
interest and principal discounted at the loan's effective interest rate or on
the fair value of the collateral for collateral dependent loans. The entire
change in present value of expected cash flows of impaired loans or of
collateral value is reported as bad debt expense in the same manner in which
impairment initially was recognized or as a reduction in the amount of bad debt
expense that otherwise would be reported.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation.
Provisions for depreciation are charged to operating expense over the useful
lives of the assets, computed principally by the straight-line method.
OTHER REAL ESTATE OWNED
Property acquired in settlement of loans is recorded at the lower of the
current estimated fair value less estimated costs to sell or the fair value at
the time of foreclosure. Management periodically reviews each property for
changes in market conditions or other developments which may result in a
reduction of the carrying value of the property. Reductions of the carrying
values and costs associated with holding the properties are charged to
operating expenses.
INCOME TAXES
The Corporation and its subsidiaries file a consolidated Federal income tax
return with each organization computing its taxes on a separate company basis.
The provision for income taxes is based on income as reported in the financial
statements. Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future.
The deferred tax assets and liabilities are computed based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to an amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the
change during the period in deferred tax assets and liabilities.
EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the weighted average
number of shares outstanding giving effect to stock dividends. The weighted
average number of shares used in computing earnings per share are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C>
4,671,257 4,646,672 4,694,461
</TABLE>
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSION
The Corporation is recognizing the transition obligation using the
straight-line method over the plan participants' average future service period
of twenty years. Management does not expect this obligation to increase.
PENSION BENEFITS
The Corporation maintains a noncontributory pension plan in which substantially
all employees are eligible to participate upon the completion of one year of
service.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 122 (FAS 122), "Accounting for Mortgage
Servicing Rights." FAS 122 requires the Corporation to recognize as separate
assets rights to service mortgage loans for others, however those servicing
rights are acquired. If the Corporation acquires mortgage servicing rights
through either the purchase or origination of mortgage loans and sells or
securitizes those loans with servicing rights retained, the Corporation should
allocate the total cost of the mortgage loans to mortgage servicing rights and
the loans (without the mortgage servicing rights) based on their relative fair
values. The mortgage servicing rights should be amortized in proportion to and
over the period of estimated net servicing income.
FAS 122 is effective for fiscal years beginning after December 15, 1995.
The Corporation believes the adoption of FAS 122 will not have a material
impact on its consolidated financial statements.
- -------------------------------------------------------------------------------
NOTE 2. BUSINESS COMBINATIONS
On June 29, 1995, the Corporation issued 55,509 shares, valued at $2,442, in
exchange for all of the outstanding preferred stock and paid cash of $847 in
exchange for all of the common stock of First National Bank of Paoli, Paoli,
Indiana. The excess of the total acquisition cost over the fair value of the
net assets acquired of $1,969 is being amortized over fifteen years using the
straight-line method.
On June 29, 1995, First National Bank of Paoli was merged with and became a
branch of The Bank of Mitchell. This acquisition has been accounted for as a
purchase and the results
22
<PAGE> 25
of operations of First National Bank of Paoli since the acquisition have been
included in the consolidated financial statements.
On June 30, 1995, the Corporation issued 263,996 shares of its common stock in
exchange for all of the outstanding common stock of White County Bank, Carmi,
Illinois in connection with the acquisition of White County Bank by the
Corporation.
On August 31, 1995, the Corporation issued 496,874 shares of its common stock
in exchange for all of the outstanding common stock of United Financial
Bancorp, Inc., the parent company of United Federal Savings Bank, Vincennes and
Princeton, Indiana, in connection with the merger of United Financial Bancorp,
Inc. into the Corporation.
These two 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
United Financial Bancorp, Inc. and White County Bank for all periods presented.
Certain reclassifications have been made to United Financial Bancorp, Inc. and
White County Bank's historical financial statements to conform to the
Corporation's presentation.
Assets, loans, deposits, interest income, net interest income and net income of
the Corporation (NCBE), United Financial Bancorp, Inc. (UFBI) and White County
Bank (WCB) for the periods prior to the acquisition are shown in the table
below. Due to the elimination of intercompany transactions, the historical data
may not aggregate to the consolidated amounts.
<TABLE>
<CAPTION>
NCBE
NCBE UFBI WCB Consolidated
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995:
LOANS, NET OF UNEARNED INCOME $566,932 $ 71,475 $25,878 $664,285
DEPOSITS 635,027 87,321 54,667 774,720
ASSETS 819,128 107,152 62,948 979,440
December 31, 1994:
Loans, net of unearned income $483,592 $ 68,875 $22,551 $575,018
Deposits 615,968 90,948 57,596 764,451
Assets 731,764 110,103 64,680 906,506
YEAR ENDED DECEMBER 31, 1995:
INTEREST INCOME $ 59,024 $ 8,029 $ 4,319 $ 71,215
INTEREST EXPENSE 24,466 4,720 2,019 31,048
NET INTEREST INCOME 34,558 3,309 2,300 40,167
PROVISION FOR LOAN LOSSES 270 28 (4) 294
NET INCOME 11,456 1,075 584 13,115
EARNINGS PER SHARE 2.96 2.34 60.83 2.81
Year ended December 31, 1994:
Interest income $49,231 $ 7,471 $ 4,066 $ 60,768
Interest expense 18,550 4,383 1,828 24,760
Net interest income 30,681 3,088 2,238 36,008
Provision for loan losses (5) 22 - 18
Net income 9,063 402 215 9,679
Earnings per share 2.34 .91 22.35 2.08
Year ended December 31, 1993:
Interest income $48,488 $ 7,804 $ 4,284 $ 60,575
Interest expense 19,514 4,793 1,841 26,148
Net interest income 28,974 3,011 2,443 34,427
Provision for loan losses 654 47 (120) 581
Net income 8,374 890 663 9,927
Earnings per share 2.13 1.94 69.08 2.11
</TABLE>
- --------------------------------------------------------------------------------
NOTE 3. CASH AND DUE FROM BANKS
Aggregate cash and due from bank balances of $8,967 and $8,538 as of December
31, 1995 and 1994, respectively, were maintained in satisfaction of statutory
reserve requirements of the Federal Reserve Bank.
- --------------------------------------------------------------------------------
NOTE 4. SECURITIES
Amortized cost and fair value of securities classified as held to maturity are
as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
AGENCY SECURITIES $ 5,948 $ 147 $ 5 $ 6,090
STATE AND MUNICIPAL
SECURITIES:
TAXABLE 3,120 109 10 3,219
NONTAXABLE 57,897 1,924 185 59,636
CORPORATE SECURITIES 16,882 194 43 17,033
MORTGAGE-BACKED SECURITIES 6,071 187 - 6,258
------------------------------------------------
TOTAL $89,918 $2,561 $243 $92,236
================================================
<CAPTION>
As Of December 31, 1994
- ----------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and
agency securities $ 31,406 $ 10 $1,103 $ 30,313
State and municipal
securities:
Taxable 2,530 14 97 2,447
Nontaxable 42,308 711 705 42,314
Corporate securities 18,544 8 583 17,969
Mortgage-backed securities 17,512 50 729 16,833
-------------------------------------------------
Total $112,300 $793 $3,217 $109,876
=================================================
</TABLE>
Amortized cost and fair value of securities classified as available for sale
are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
- ----------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
AGENCY SECURITIES $ 84,484 $ 865 $169 $ 85,180
CORPORATE SECURITIES 4,624 14 - 4,638
MORTGAGE-BACKED SECURITIES 56,185 267 356 56,096
-------------------------------------------------
SUBTOTAL 145,293 1,146 525 145,914
EQUITY SECURITIES 5,580 - 125 5,455
-------------------------------------------------
TOTAL $150,873 $1,146 $650 $151,369
=================================================
</TABLE>
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
NOTE 4. SECURITIES, CONTINUED
<TABLE>
<CAPTION>
As Of December 31, 1994
- ----------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and
agency securities $ 95,971 $45 $1,984 $ 94,032
Corporate securities 6,936 - 215 6,721
Mortgage-backed securities 33,982 22 1,860 32,144
- ----------------------------------------------------------------------------------
Subtotal 136,889 67 4,059 132,897
Equity securities 3,679 - 216 3,463
- ----------------------------------------------------------------------------------
Total $140,568 $67 $4,275 $136,360
==================================================================================
</TABLE>
The amortized cost and fair value of the securities as of December 31, 1995, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because certain securities may be called or prepaid
without penalties.
MATURITY SCHEDULE OF SECURITIES HELD TO MATURITY:
<TABLE>
<CAPTION>
December 31, 1995 Amortized Cost Fair Value
- -----------------------------------------------------------------------
<S> <C> <C>
Less than 1 year $10,766 $10,797
1 year to 5 years 35,066 35,885
5 years to 10 years 20,778 21,836
Over 10 years 17,237 17,460
Mortgage-backed securities 6,071 6,258
- -----------------------------------------------------------------------
Total $89,918 $92,236
=======================================================================
</TABLE>
MATURITY SCHEDULE OF DEBT SECURITIES AVAILABLE FOR SALE:
<TABLE>
<CAPTION>
December 31, 1995 Amortized Cost Fair Value
- -----------------------------------------------------------------------
<S> <C> <C>
Less than 1 year $ 42,502 $ 42,564
1 year to 5 years 43,124 43,698
5 years to 10 years 3,482 3,556
Mortgage-backed securities 56,185 56,096
- -----------------------------------------------------------------------
Total $145,293 $145,914
=======================================================================
</TABLE>
Securities gains and (losses) can be summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Gross realized gains $31 $ 16 $890
Gross realized losses (5) (322) (154)
Recognized losses
not yet realized - (164) (54)
- -----------------------------------------------------------------------
Total $26 $(470) $682
=======================================================================
</TABLE>
As of December 31, 1995 and 1994, the carrying value of securities pledged as
collateral for public deposits and for other purposes as required or permitted
by law were $64,434 and $61,869, respectively.
During 1995, the Financial Accounting Standards Board decided to allow all
enterprises to make a one-time reassessment of the classification of securities
made under FAS 115, "Accounting for Certain Investments in Debt and Equity
Securities". The corporation transferred debt securities with an amortized
cost of $34,987 from held-to-maturity classification to the available-for-sale
classification and recorded, as a component of equity, an unrealized gain of
$205, net of $128 of deferred taxes.
- -------------------------------------------------------------------------------
NOTE 5. LOANS
A summary of loans as of December 31 follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------
<S> <C> <C>
Real estate loans $339,880 $316,742
Agricultural loans 29,152 28,299
Commercial and industrial loans 152,648 116,162
Economic development loans and
other obligations of state and
political subdivisions 9,887 12,833
Consumer loans 124,864 99,683
Direct lease financing 7,873 1,293
All other loans 291 275
- --------------------------------------------------------------------
Total loans - gross 664,595 575,287
Unearned income on loans (310) (269)
- --------------------------------------------------------------------
Total loans - net of
unearned income 664,285 575,018
Allowance for loan losses (5,323) (4,899)
- --------------------------------------------------------------------
Total loans - net $658,962 $570,119
====================================================================
</TABLE>
The following table presents data on impaired loans at December 31, 1995.
Impaired loans for which there is a related allowance for
loan losses $2,772
Impaired loans for which there is no related allowance for
loan losses 20
- --------------------------------------------------------------------------
Total impaired loans $2,792
==========================================================================
Allowance for loan losses for impaired loans included in the
allowance for loan losses $ 584
Average recorded investment in impaired loans 2,634
Interest income recognized from impaired loans 150
Cash basis interest income recognized from impaired loans 8
As of December 31, 1994, the accrual of interest was discontinued or
renegotiated on loans in the amount of $1,184. If these loans had been current
according to original loan terms, additional gross income in the amount of $107
would have been recorded in 1994.
In the normal course of business, the banks make loans to their executive
officers and directors, and to companies and individuals affiliated with
officers and directors of the banks and the Corporation. In the opinion of
management, these loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. The activity in these loans during 1995
is as follows:
<TABLE>
<S> <C>
Balance as of January 1, 1995 $16,815
New loans 11,819
Repayments (11,786)
- ---------------------------------------------------------------
Balance as of December 31, 1995 $16,848
===============================================================
</TABLE>
24
<PAGE> 27
- --------------------------------------------------------------------------------
NOTE 6. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows during the three years
ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $4,899 $4,757 $5,243
Allowance associated with
acquisition 140 - -
Provision charged to operations 294 18 581
Recoveries credited to allowance 598 829 684
Loans charged to allowance (608) (705) (1,751)
- -----------------------------------------------------------------------
Balance at end of year $5,323 $4,899 $4,757
=======================================================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7. PREMISES AND EQUIPMENT
Premises and equipment as of December 31 consist of:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,776 $ 1,561
Buildings 16,178 14,542
Equipment 11,525 11,308
Leasehold improvements 1,213 1,281
- ------------------------------------------------------------------------
Total cost 30,692 28,692
Less accumulated depreciation 15,953 16,203
- ------------------------------------------------------------------------
Net premises and equipment $ 14,739 $ 12,489
========================================================================
</TABLE>
The Corporation has a $6,000 commitment for construction of an office building
in Evansville, Indiana. Portions of the contracts not completed at year-end are
not reflected in the consolidated financial statements and total
approximately $5,500. It is anticipated that the project will be financed
internally, and it is scheduled for completion in 1997.
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES
The components of income tax expense for the years ended December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ 5,734 $ 4,406 $ 3,231
Deferred (58) (402) 327
- -------------------------------------------------------------------
Total 5,676 4,004 3,558
- -------------------------------------------------------------------
State:
Current 1,432 951 812
Deferred 31 200 149
- -------------------------------------------------------------------
Total 1,463 1,151 961
- -------------------------------------------------------------------
Total income taxes $ 7,139 $ 5,155 $ 4,519
===================================================================
</TABLE>
The portion of the tax provision relating to realized security gains and losses
amounted to $9, ($164), and $232 for 1995, 1994, and 1993, respectively.
A reconciliation of income tax in the statement of income, with the amount
computed by applying the statutory rate of 35% in 1995 and 1994 and 34% in
1993, is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax computed
at the statutory rates $7,088 $5,192 $4,912
Adjusted for effect of:
Nontaxable municipal interest (1,107) (1,105) (1,100)
Nondeductible expenses 280 343 335
State income taxes, net of
federal tax benefit 951 748 634
Benefit of income taxed at
lower rates (100) (100) -
Change in deferred tax asset
valuation allowance (25) 48 4
Other differences 52 29 (266)
- ------------------------------------------------------------------------------
Total income taxes $7,139 $5,155 $4,519
==============================================================================
</TABLE>
The net deferred tax asset (liability) in the accompanying balance sheet
includes the following amounts of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liability $(2,612) $(2,076)
Deferred tax asset 2,083 3,374
Valuation allowance for deferred
tax assets (476) (501)
- ------------------------------------------------------------------------------
Net deferred tax asset (liability) $(1,005) $ 797
==============================================================================
</TABLE>
The tax effects of principal temporary differences are shown in the following
table:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Allowance for loan losses $ 1,373 $ 1,283
Direct financing and leveraged leases 55 4
Prepaid pension costs (1,416) (1,425)
Fixed assets (1,006) (666)
Unrealized gain (loss) on securities
available for sale (191) 1,613
State net operating loss carryforwards 523 558
Other 133 (69)
- ------------------------------------------------------------------------------
Net temporary differences (529) 1,298
Valuation allowance (476) (501)
- ------------------------------------------------------------------------------
Net deferred tax asset (liability) $(1,005) $ 797
==============================================================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 9. OTHER BORROWINGS
Other borrowings at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank advances:
Due June 5, 1998, 6.02% $10,000 $ -
Due May 25, 1997, 6.33% 3,000 -
Due February 4, 2002, cost of funds
plus .05 (an effective rate of 7.64%
at December 31, 1995) 2,000 2,000
Due May 27, 1996, 8.5% 1,000 1,000
Notes payable:
Norlease, Inc., quarterly interest payments
of $68 through July 27, 1997, quarterly
principal and interest payments of $111
through July 27, 2002, final balloon
payment due July 27, 2002, 7.74%,
collateralized by equipment 3,500 -
Other 909 -
- ------------------------------------------------------------------------------
$20,409 $3,000
==============================================================================
</TABLE>
The Federal Home Loan Bank advances are collateralized by a blanket
collateral agreement on qualified mortgage loans and securities.
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
- -------------------------------------------------------------------------------
NOTE 10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table reflects a comparison of the carrying amounts and fair
values of financial instruments of the Corporation and its subsidiary banks at
December 31:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and short-term
investments $ 45,387 $ 45,387 $ 57,210 $ 57,210
Securities 241,287 243,605 248,660 246,236
Loans - net of
allowance 651,089 665,408 568,826 553,354
Liabilities:
Deposits 774,720 776,165 764,451 754,976
Short-term debt 55,598 55,598 27,803 27,803
Long-term debt 20,409 19,535 3,000 3,000
</TABLE>
The above fair value information was derived using the information described
below for the groups of instruments listed. It should be noted the fair values
disclosed in this table do not represent market values of all assets and
liabilities of the Corporation and, thus, should not be interpreted to
represent a market or liquidation value for the Corporation. In addition, the
carrying value for loans above differs from that reported elsewhere due to the
exclusion of direct finance leases receivable of $7,873 and $1,293 in 1995 and
1994, respectively.
CASH AND SHORT-TERM INVESTMENTS
Cash and short-term investments include cash and due from banks, short-term
money market investments, interest-bearing deposits in banks, and federal funds
sold. For cash and short-term investments, the carrying amount is a reasonable
estimate of fair value.
SECURITIES
For securities, fair value equals quoted market price, if available. If a
quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
LOANS
For certain homogeneous categories of loans, such as some residential
mortgages, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated by
discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities.
DEPOSITS
The fair value of demand deposits, savings accounts, money market deposits, and
variable rate certificates of deposit is the amount payable on demand at the
reporting date. The fair value of other time deposits is estimated using
the rates currently offered for deposits of similar remaining maturities.
SHORT-TERM DEBT
Rates currently available to the Corporation for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt. These
instruments adjust on a periodic basis and thus the carrying amount represents
fair value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For
fixed-rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
guarantees and letters of credit is based on fees currently charged for similar
agreements or on the estimated cost to terminate them or otherwise settle the
obligations with the counterparties at the reporting date. Because all
commitments and standby letters of credit reflect current fees and interest
rates, no unrealized gains or losses are reflected in the summary of fair
values.
- -------------------------------------------------------------------------------
NOTE 11. COMMITMENTS, CONTINGENCIES, AND CREDIT RISK
Most of the business activity of the Corporation and its subsidiaries is
conducted with customers located in the immediate geographical area of their
offices. These areas, comprised of Southwestern Indiana, Western Kentucky, and
Southeastern Illinois, are dependent on the agribusiness, and to a lesser
degree, energy economic sectors. While the Corporation maintains a diversified
loan portfolio, approximately $59,029 and $55,987 of the Corporation's loans
were directly related to the agricultural sector as of December 31, 1995 and
1994, respectively.
The Corporation and its subsidiaries evaluate each credit request of their
customers in accordance with established lending policies. Based on these
evaluations and the underlying policies, the amount of required collateral (if
any) is established. Collateral held varies but may include negotiable
instruments, accounts receivable, inventory, property, plant and equipment,
income producing properties, residential real estate, and vehicles. The
lenders' access to these collateral items is generally established through the
maintenance of recorded liens or, in the case of negotiable instruments,
possession.
The Corporation and its subsidiaries are parties to legal action which arise in
the normal course of their business activities. In the opinion of management,
the ultimate resolution of these matters is not expected to have a material
effect on the financial position or on the results of operations of the
Corporation and its subsidiaries.
The Corporation is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
26
<PAGE> 29
These instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the balance sheet. The contract
or notional amounts of those instruments reflect the extent of involvement the
Corporation has in particular classes of financial instruments.
The Corporation's exposure to credit loss, in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
and standby letters of credit, is represented by the contractual notional
amount of those instruments. The Corporation uses the same credit policies in
making commitments and conditional obligations as it does for other on-balance
sheet instruments. Financial instruments whose contract amounts represent
credit risk at December 31 follows:
<TABLE>
<CAPTION>
Range of Rates
Variable Rate Fixed Rate Total on Fixed Rate
1995 Commitment Commitment Commitment Commitments
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commitments
to extend credit $68,930 $8,733 $77,663 6.3% to 18.5%
Standby letters
of credit - - 17,825 -
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
Standby letters of credit written are conditional commitments issued by the
banks to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers.
The Corporation does not engage in the use of interest rate swaps, futures,
forwards, or option contracts.
- -------------------------------------------------------------------------------
NOTE 12. DIVIDEND REINVESTMENT PLAN
The Corporation established a Dividend Reinvestment Plan for its shareholders
in 1989. The Plan permits the issuance of previously authorized and unissued
shares or the repurchase of outstanding shares for reissuance. As of December
31, 1995, 143,265 shares of authorized but unissued common stock were reserved
for Plan requirements.
- -------------------------------------------------------------------------------
NOTE 13. RESTRICTIONS ON DIVIDENDS FROM SUBSIDIARIES
The principal source of income for the Corporation is dividends from its
subsidiary banks. Banking regulations impose restrictions on the ability of
subsidiaries to pay dividends to the Corporation. The limitation is generally
based on net income less dividends paid for the three years in the period ended
December 31, 1995. At December 31, 1995, regulatory approval would have been
required for aggregate dividends in excess of approximately $5,002. The amount
of dividends that could be paid is further restricted by management to maintain
prudent capital levels.
- -------------------------------------------------------------------------------
NOTE 14. GUARANTEED BANK LOAN OF EMPLOYEE STOCK OWNERSHIP PLAN
In accordance with the consensus reached on issue number 89-10 of the Financial
Accounting Standards Board's Emerging Issues Task Force, the Corporation
recorded the debt of the Employee Stock Ownership Plan as an increase in
liabilities and a reduction of shareholders' equity. This debt was
guaranteed by the Corporation and was paid in full during 1994.
- -------------------------------------------------------------------------------
NOTE 15. EMPLOYEE RETIREMENT PLANS
The Corporation maintains a noncontributory pension plan in which substantially
all employees are eligible to participate upon the completion of one year of
service. No company contribution or funding was required in any of the years
reported here. The assets of the pension plan primarily consist of corporate
obligations and equity securities. The plan does not hold any equity
securities of the Corporation.
In establishing the amounts reflected in the financial statements, the
following significant assumption rates were used:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.5% 8.0%
Increase in compensation rate 5.0% 5.0%
Expected long-term rate of return 9.0% 9.0%
</TABLE>
The following summary reflects the plan's funded status and the amounts
reflected on the Corporation's financial statements. Actuarial present value of
benefit obligations at December 31 are:
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Dollar Amounts Other Than Share Data in Thousands)
NOTE 15. EMPLOYEE RETIREMENT PLANS, CONTINUED
<TABLE>
<CAPTION>
1995 1994 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated benefit obligation
including vested benefits of
$3,899, $3,562 and $4,214
in 1995, 1994, and 1993 $(4,420) $(3,757) $(4,466)
Effects of projected future
compensation levels (2,000) (1,795) (2,433)
- --------------------------------------------------------------------------------
Projected benefit obligation
for service rendered to date (6,420) (5,552) (6,899)
Plan assets at fair value 10,856 9,669 12,182
- --------------------------------------------------------------------------------
Plan assets in excess of
projected benefit obligation 4,436 4,117 5,283
Unrecognized net loss (gain)
from past experience
different from that assumed
and effects of changes in
assumptions (494) 257 (1,189)
Prior service cost not yet
recognized in net periodic
pension cost (108) (116) 22
Unrecognized net asset at
January, 1, 1987, being
recognized over 11.11
years from that date (347) (728) (962)
- --------------------------------------------------------------------------------
Prepaid pension cost
included in other assets $ 3,487 $ 3,530 $ 3,154
================================================================================
</TABLE>
Net periodic pension cost (credit) included the following components for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 618 $ 450 $ 425
Interest cost on projected
benefit obligation 456 483 483
Return on assets (2,789) (500) (693)
Net amortization and deferral 1,758 (809) (637)
- --------------------------------------------------------------------------------
Net periodic pension
cost (credit) $ 43 $ (376) $ (422)
================================================================================
</TABLE>
The Corporation also maintains a savings and profit-sharing plan for
substantially all employees who have completed one year of service. Employees
may voluntarily contribute to the plan. The company's contribution to the plan
is an amount equal to 7% of the net income before income taxes at the
discretion of the Board of Directors. Company contributions were $1,384,
$1,017, and $628 during 1995, 1994, and 1993, respectively.
United Financial Bancorp, Inc. had a Stock Option Plan and a Management
Recognition and Retention Plan for its directors and officers. The cost of the
shares awarded under the retention plan was amortized using an accelerated
method over vesting periods. At consummation of the merger with the
Corporation, these plans were terminated.
As the result of previous mergers and subsequent amendment of the Corporation's
pension and profit-sharing plans to include employees of the other
subsidiaries, retirement plans previously maintained by those subsidiaries have
been terminated or frozen.
The plans have been amended to comply with requirements of the Employee
Retirement Income Security Act of 1974 and the Tax Reform Act of 1986.
Sure Financial Corporation maintained a profit-sharing 401(k) plan for
substantially all employees of its subsidiaries. Contributions to the plan were
$116 during 1993. This plan was merged into the Corporation's savings and
profit-sharing plan during 1994.
Lincolnland Bancorp, Inc. maintained an Employee Stock Ownership Plan in which
substantially all employees were eligible to participate. Contributions to the
plan were made at the discretion of the Board of Directors and amounted to $88
for 1993. This plan was terminated during 1994. The Employee Stock Ownership
Trust obligation, which was guaranteed by the Corporation was reflected as a
liability and shareholders' equity was reduced by the same amount. The
obligation was reduced by $108 in principal repayments in 1993. In addition,
the plan paid interest amounting to $31 during 1993.
- -------------------------------------------------------------------------------
NOTE 16. UNAUDITED INTERIM FINANCIAL DATA
The following table reflects summarized quarterly data for the periods
described (unaudited):
<TABLE>
<CAPTION>
1995
- -------------------------------------------------------------------------------
DECEMBER SEPTEMBER JUNE MARCH
31 30 30 31
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 18,733 $ 18,437 $ 17,411 $ 16,634
INTEREST EXPENSE 8,333 8,154 7,561 7,000
- ------------------------------------------------------------------------------
NET INTEREST INCOME 10,400 10,283 9,850 9,634
PROVISION FOR LOAN
LOSSES 179 68 23 24
NONINTEREST INCOME 1,695 1,780 1,770 1,479
NONINTEREST EXPENSE 6,653 6,327 6,709 6,654
- ------------------------------------------------------------------------------
INCOME BEFORE
INCOME TAXES 5,263 5,668 4,888 4,435
INCOME TAXES 1,873 2,024 1,723 1,519
- ------------------------------------------------------------------------------
NET INCOME $ 3,390 $ 3,644 $ 3,165 $ 2,916
==============================================================================
EARNINGS PER SHARE $ 0.72 $ 0.78 $ 0.68 $ 0.63
</TABLE>
<TABLE>
<CAPTION>
1994
- -------------------------------------------------------------------------------
December September June March
31 30 30 31
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 15,928 $ 15,553 $ 14,991 $ 14,296
Interest expense 6,585 6,204 6,018 5,953
- ------------------------------------------------------------------------------
Net interest income 9,343 9,349 8,973 8,343
Provision for loan
losses 37 22 106 (147)
Noninterest income 992 1,454 1,395 1,104
Noninterest expense 6,914 6,344 6,425 6,418
- ------------------------------------------------------------------------------
Income before
income taxes 3,384 4,437 3,837 3,176
Income taxes 1,299 1,548 1,274 1,034
- ------------------------------------------------------------------------------
Net income $ 2,085 $ 2,889 $ 2,563 $ 2,142
==============================================================================
Earnings per share $ 0.46 $ 0.62 $ 0.55 $ 0.45
</TABLE>
28
<PAGE> 31
- -------------------------------------------------------------------------------
NOTE 17. FINANCIAL INFORMATION OF PARENT COMPANY
Condensed financial data for National City Bancshares, Inc. (parent company
only) follows:
CONDENSED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 227 $ 220
Short-term money market investment - 502
Investment in bank subsidiaries 106,299 98,651
Securities available for sale 1,304 785
Securities purchased under
agreements to resell 10,000 3,100
Note receivable 681 300
Property and equipment 728 498
Income taxes receivable 400 219
Other assets 1,545 1,736
- -------------------------------------------------------------------------
TOTAL ASSETS $121,184 $106,011
=========================================================================
LIABILITIES
Dividends payable $ 1,175 $ 805
Deferred income taxes 22 84
Other liabilities 676 487
- -------------------------------------------------------------------------
Total liabilities 1,873 1,376
- -------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock 4,697 14,635
Capital surplus 59,491 36,962
Retained earnings 54,818 55,633
Unrealized gain (loss) on
securities available for sale 305 (2,595)
- -------------------------------------------------------------------------
Total shareholders' equity 119,311 104,635
- -------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $121,184 $106,011
=========================================================================
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends from subsidiaries $12,496 $ 9,989 $6,946
Other income 2,662 872 523
- -------------------------------------------------------------------------
Total income 15,158 10,861 7,469
- -------------------------------------------------------------------------
Interest expense - - 152
Other expenses 3,255 2,092 1,620
- -------------------------------------------------------------------------
Total expenses 3,255 2,092 1,772
- -------------------------------------------------------------------------
Income before income taxes
and equity in undistributed
earnings of subsidiaries 11,903 8,769 5,697
Income tax benefit (273) (178) (278)
- -------------------------------------------------------------------------
Income before equity in undistributed
earnings of subsidiaries 12,176 8,947 5,975
Equity in undistributed earnings
of subsidiaries 939 732 3,952
- -------------------------------------------------------------------------
Net income $13,115 $ 9,679 $9,927
==========================================================================
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $13,115 $ 9,679 $9,927
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 451 548 612
Undistributed earnings of
subsidiaries (939) (732) (3,952)
Securities losses (gains) (18) - -
(Gain) on sale of subsidiary - (8) -
Increase (decrease) in deferred
taxes (64) 7 2
Changes in assets and liabilities:
(Increase) decrease in other assets (209) (167) (337)
Increase (decrease) in other liabilities 191 446 6
- -------------------------------------------------------------------------
Net cash flows provided by
operating activities 12,527 9,773 6,258
- -------------------------------------------------------------------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from maturities of
securities available for sale 250 2,396 -
Proceeds from maturities of
securities held to maturity - - 464
Proceeds from sales of securities
available for sale 118 - -
Purchase of securities
available for sale (877) (2,328) -
Purchase of securities
held to maturity - - (231)
Disbursement on notes receivable (381) - -
Capital expenditures (446) (47) (349)
Proceeds from sale of premises
and equipment - 14 -
Investment in subsidiary (1,361) (52) -
(Increase) in securities purchased
under agreements to resell (6,900) (3,100) -
- -------------------------------------------------------------------------
Net cash flows provided by
(used in) investing activities (9,597) (3,117) (116)
- -------------------------------------------------------------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Dividends paid (3,598) (3,772) (2,959)
Payments on notes payable - (210) (2,515)
Increase in notes payable - - 210
Repurchase of common stock (863) (4,075) (1,112)
Sale of common stock 1,036 820 641
- -------------------------------------------------------------------------
Net cash flows (used in)
financing activities (3,425) (7,237) (5,735)
- -------------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents (495) (581) 407
Cash and cash equivalents
at beginning of year 722 1,303 896
- -------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 227 $ 722 $1,303
=========================================================================
SUPPLEMENTAL DISCLOSURE
OF NONCASH INVESTING
ACTIVITIES
Change in unrealized
gain (loss) on securities
available for sale, net $ 2,900 $(3,063) $ 551
Employee Stock Ownership Plan
obligation guaranty note payment - 541 108
Sale of subsidiary:
Loan receivable - 300 -
</TABLE>
29
<PAGE> 32
OFFICIAL ORGANIZATION
- --------------------------------------------------------------------------------
SUBSIDIARIES
THE BANK OF MITCHELL
MITCHELL, INDIANA
BOARD OF DIRECTORS
Christopher W. Burton, Esq.
Dana J. Dunbar [PHOTO]
Brooks Galloway
James F. King, D.D.S.
Harvey W. Pinney
Randall L. Young
Randall L. Young
President & CEO
------------------------------
SENIOR OFFICER
Randall L. Young
THE FARMERS AND MERCHANTS BANK
FORT BRANCH, INDIANA
BOARD OF DIRECTORS
John N. Clauss
Roger M. Duncan
Harvey J. Hirsch [PHOTO]
Michael J. Hirsch
Marlene A. Obert
Barbara A. Wilson
John N. Clauss
President & CEO
------------------------------
SENIOR OFFICERS
John N. Clauss
Barbara A. Wilson
FIRST KENTUCKY BANK
STURGIS, KENTUCKY
BOARD OF DIRECTORS
Garland Certain
Charles Hamilton Floyd [PHOTO]
Charles L. Pryor
Joseph W. Sprague
Slaton Sprague
William R. Sprague
James D. Syers
James B. Vaughn
Joe Woodring
Garland Certain
President & CEO
------------------------------
SENIOR OFFICER
Garland Certain
LINCOLNLAND BANK
DALE, INDIANA
BOARD OF DIRECTORS
Eric Ayer, Esq.
Benjamin W. Bloodworth
Narl Conner [PHOTO]
Donald E. Kirkland
Edgar Mulzer
Albert W. Raven
Wm. Stephen Schroer
Lon Youngblood
SENIOR OFFICERS Wm. Stephen Schroer
Edgar Mulzer President & CEO
Wm. Stephen Schroer ------------------------------
Donald E. Kirkland
Albert W. Raven
Scott K. Neff
THE NATIONAL CITY BANK OF EVANSVILLE
EVANSVILLE, INDIANA
BOARD OF DIRECTORS
Thomas L. Austerman
Donald B. Cox
Michael F. Elliott
Michael D. Gallagher
Dr. H. Ray Hoops [PHOTO]
R. Eugene Johnson, Esq.
John D. Lippert
John Lee Newman Thomas L. Austerman
Edward E. Peyronnin President
Peter L. Stevenson, M.D. ------------------------------
George A. Wright
SENIOR OFFICERS
Thomas L. Austerman
Richard E. Braukhoff
N. Ann Cavis [PHOTO]
Roger M. Duncan
Michael F. Elliott
Thomas R. Lampkins
Larry J. Northernor
Roger M. Duncan
Executive Vice President
------------------------------
30
<PAGE> 33
THE PEOPLES NATIONAL BANK OF GRAYVILLE
GRAYVILLE, ILLINOIS
BOARD OF DIRECTORS
Lyndle Barnes, Jr.
John C. Blood, Jr.
Benjamin W. Bloodworth
Sam Broster
Richard L. Elliott [PHOTO]
Victor R. Gallagher, Jr.
William H. Mitchell
Joseph M. Siegert
Herbert W. Sutter Lyndle Barnes, Jr.
President & CEO
SENIOR OFFICER ------------------------
Lyndle Barnes, Jr.
PIKE COUNTY BANK
PETERSBURG, INDIANA
BOARD OF DIRECTORS
Max D. Elliott
Denver Gladish
John L. Hayes [PHOTO]
Karl O. Schafer
Anthony P. Uebelhor
John E. Yager, Jr.
SENIOR OFFICER
Max D. Elliott Max D. Elliott
President & CEO
------------------------
THE STATE BANK OF WASHINGTON
WASHINGTON, INDIANA
BOARD OF DIRECTORS
John P. Cavanaugh
Max D. Elliott
Michael F. Elliott [PHOTO]
Harry W. Hanson, Esq.
John L. Hayes Harvey W. Pinney
E. Joseph Kremp President & CEO
Jerry D. McClarren, D.D.S. ------------------------
Harvey W. Pinney
SENIOR OFFICER
Harvey W. Pinney
UNITED FEDERAL SAVINGS BANK
VINCENNES, INDIANA
BOARD OF DIRECTORS
Janice L. Beesley
John H. Bobe
Michael F. Elliott
Horace A. Foncannon, Jr. Esq. [PHOTO]
George D. Gardner
John H. Harrison
Ralph J. Jacqmain, M.D.
Joseph M. Vieck
Robert E. Vincent
Janice L. Beesley
SENIOR OFFICER President & CEO
Janice L. Beesley ------------------------
WHITE COUNTY BANK
CARMI, ILLINOIS
BOARD OF DIRECTORS
Dr. Frank Barbre
Benjamin W. Bloodworth
Donald D. Drone [PHOTO]
Paul D. Hayse
R. Keith Hoskins
George H. Schanzle
SENIOR OFFICER R. Keith Hoskins
R. Keith Hoskins President & CEO
------------------------
NCBE LEASING CORP.
EVANSVILLE, INDIANA
BOARD OF DIRECTORS
Benjamin W. Bloodworth
Michael D. Gallagher
Dr. H. Ray Hoops [PHOTO]
Charles J. Kelly, Jr.
John Lee Newman
SENIOR OFFICERS
Benjamin W. Bloodworth
Charles J. Kelly, Jr.
Harold A. Mann Charles J. Kelly, Jr.
President & CEO
------------------------
UNIFED, INC.
VINCENNES, INDIANA
BOARD OF DIRECTORS
Janice L. Beesley
Horace A. Foncannon, Jr., Esq.
Patrick W. Lenahan
G. Jeffrey Palmer
SENIOR OFFICER
Janice L. Beesley
31
<PAGE> 34
OFFICIAL ORGANIZATION, CONTINUED
- --------------------------------------------------------------------------------
NATIONAL CITY BANCSHARES, INC.
BOARD OF DIRECTORS
Janice L. Beesley
Michael F. Elliott
Susanne R. Emge
Donald G. Harris
Robert A. Keil
John D. Lippert
Ronald G. Reherman
Laurence R. Steenberg
SENIOR MANAGEMENT
Benjamin W. Bloodworth
N. Ann Cavis
Michael F. Elliott
Nancy G. Epperson
Byron W. Jett
Robert A. Keil
John D. Lippert
Harold A. Mann
[PHOTO]
NATIONAL CITY BANCSHARES, INC.
SENIOR OFFICERS
N. Ann Cavis, Senior Vice President; Harold A. Mann, Secretary and
Treasurer; Byron W. Jett, Senior Vice President; and
Nancy G. Epperson, Human Resources Director
- --------------------------------------------------------------------------------
32
<PAGE> 35
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
STOCK AND DIVIDEND INFORMATION
The Corporation's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market(SM) under the symbol: NCBE.
The following table lists the stock price for the past two years and dividend
information for the Corporation's common stock.
Stock prices and dividends have been retroactively adjusted to reflect the 5%
stock dividend declared in October 1995.
<TABLE>
<CAPTION>
RANGE OF STOCK PRICE
-------------------- DIVIDEND
QUARTER LOW HIGH DECLARED
------------------------------------------
<S> <C> <C> <C>
1994
1st $32.86 $35.24 $0.21
2nd 33.33 39.05 0.21
3rd 37.86 41.43 0.21
4th 39.76 44.05 0.26
1995
1ST $40.24 $44.76 $0.21
2ND 38.10 40.48 0.21
3RD 37.62 40.71 0.21
4TH 39.05 48.50 0.25
</TABLE>
DIVIDEND REINVESTMENT PLAN
As a service to its shareholders, the Corporation provides an easy way for a
shareholder to acquire additional shares of National City Bancshares, Inc.
common stock through its DIVIDEND REINVESTMENT PLAN. The plan allows a
shareholder to purchase this stock without brokerage fees using dividends and
additional voluntary cash investments. For information about this plan, a
shareholder can contact the Corporation's TRANSFER AGENT.
MARKET MAKERS
The following firms make a market in the stock of
National City Bancshares, Inc.:
The Chicago Corporation
J.J.B. Hilliard, W.L. Lyons, Inc.
Herzog, Heine, Geduld, Inc.
M.A. Schapiro & Co., Inc.
NatCity Investments, Inc.
FOR FURTHER INFORMATION
The Corporation's TRANSFER AGENT
and REGISTRAR is
The National City Bank of Evansville
Trust Department
227 Main Street
P.O. Box 868
Evansville, IN 47705-0868
Telephone (812) 464-9665
The Corporation's HEADQUARTERS is located at
National City Bancshares, Inc.
227 Main Street
P.O. Box 868
Evansville, IN 47705-0868
Telephone (812) 464-9677
ALL SUBSIDIARY BANKS OF NATIONAL CITY BANCSHARES, INC.
ARE MEMBERS OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
33
<PAGE> 36
[OUTSIDE BACK COVER]
National City Bancshares, Inc., 227 Main Street, Evansville, Indiana 47708
<PAGE> 1
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
<S> <C>
The National City Bank United States
of Evansville
Evansville, Indiana
The Peoples National Bank United States
of Grayville
Grayville, Illinois
The Farmers and Merchants Bank State of Indiana
Fort Branch, Indiana
First Kentucky Bank Commonwealth of Kentucky
Sturgis, Kentucky
Lincolnland Bank State of Indiana
Dale, Indiana
The Bank of Mitchell State of Indiana
Mitchell, Indiana
Pike County Bank State of Indiana
Petersburg, Indiana
The State Bank of Washington State of Indiana
Washington, Indiana
White County Bank State of Illinois
Carmi, Illinois
United Federal Savings Bank United States
Vincennes, Indiana
NCBE Leasing Corp. State of Indiana
Evansville, Indiana
</TABLE>
<PAGE> 1
EXHIBIT 23
[McGLADREY & PULLEN LETTERHEAD]
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Annual Report on
Form 10-K of National City Bancshares, Inc. for the year ending December 31,
1995 of our report dated January 19, 1996, which appears on Page 15 of the
Annual Report to shareholders.
/s/ McGLADREY & PULLEN, LLP
Champaign, Illinois
March 22, 1996
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0
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<ALLOWANCE-UNALLOCATED> 1224
</TABLE>
