<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1995
Commission File Number 33-3711
NATIONAL BANCSHARES CORPORATION
Ohio 34-1518564
--------------------- -----------------
State of incorporation IRS Employer
Identification No.
112 West Market Street, Orrville, Ohio 44667
----------------------------------------------
Address of principal executive offices
Registrant's telephone number: (216) 682-1010
---------------
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 the number of shares outstanding of each of the registrant's
classes of common stock, as of August 4, 1995:
Common Stock, $10.00 Par Value: 732,156 Shares Outstanding
1
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National Bancshares Corporation
<TABLE>
<CAPTION>
Index
Page
Number
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
as of June 30, 1995 and
December 31, 1994 (Unaudited)
Consolidated Statements of Income 4
for the three and six months ended
June 30, 1995 and 1994
(Unaudited)
Consolidated Statements of Cash Flows 5
for the six months ended
June 30, 1995 and 1994
(Unaudited)
Notes to Consolidated Financial 6
Statements (Unaudited)
Item 2. Management's Discussion and Analysis 6
of Financial Condition and
Results of Operations
Part II. Other Information 8
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of matters to a vote of
security holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
Signatures 9
</TABLE>
2
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (Unaudited) 06/30/95 12/31/94
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 7,408,516 $ 8,261,107
Investment securities
held to maturity 77,343,545 85,550,038
Approximate market value
June 30, 1995 $ 79,563,000
December 31, 1994 $ 84,126,000
Investment securities available for sale 4,902,790 4,687,610
Federal funds sold 8,755,000 11,885,000
Loans:
Commercial 22,685,128 18,030,839
Real estate mortgage 30,525,522 30,778,748
Installment 13,345,027 9,014,853
------------ ------------
Total loans 66,555,677 57,824,440
Less: Unearned income 575,688 718,683
Allowance for loan losses 970,913 890,666
------------ ------------
Loans, net 65,009,076 56,215,091
Accrued interest receivable 1,612,868 1,662,369
Premises and equipment 2,282,465 2,378,202
Other assets 2,559,082 2,402,567
------------ ------------
TOTAL $169,873,342 $173,041,984
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Demand $ 24,433,325 $ 24,036,115
Savings and N.O.W.s 71,331,080 77,298,869
Time 44,133,633 44,527,256
------------ ------------
Total deposits 139,898,038 145,862,240
Securities sold under
repurchase agreements 5,161,423 3,269,919
Federal reserve note account 1,000,000 1,000,000
Accrued interest payable 482,087 374,890
Other liabilities 371,498 445,686
------------ ------------
Total liabilities 146,913,046 150,952,735
------------ ------------
SHAREHOLDERS' EQUITY
Common stock - $10 par value;
6,000,000 and 750,720 shares authorized, 732,156
shares issued and outstanding 7,321,560 7,321,560
Surplus 4,689,800 4,689,800
Retained Earnings 10,948,936 10,077,889
------------ ------------
Total shareholders' equity 22,960,296 22,089,249
------------ ------------
TOTAL $169,873,342 $173,041,984
============ ============
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three months ended Six months ended
06/30/95 06/30/94 06/30/95 06/30/94
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,510,203 $1,153,709 $2,885,909 $2,259,520
Interest on federal funds sold 135,815 51,889 226,209 107,304
Interest and dividends
on investments
US government obligations 656,165 642,060 1,357,294 1,274,071
Obligations of states and
political subdivisions 262,854 266,886 526,858 537,713
Other securities 557,397 532,766 1,139,943 1,061,430
-----------------------------------------------------
Total interest income 3,122,434 2,647,310 6,136,213 5,240,038
INTEREST EXPENSE:
Interest on deposits 1,118,743 859,836 2,133,955 1,709,451
Expense of funds purchased 66,287 22,282 124,551 46,548
-----------------------------------------------------
Total interest expense 1,185,030 882,118 2,258,506 1,755,999
-----------------------------------------------------
Net interest income 1,937,404 1,765,192 3,877,707 3,484,039
PROVISION FOR LOAN LOSSES 45,000 45,000 90,000 90,000
-----------------------------------------------------
Net interest income after
provision for loan losses 1,892,404 1,720,192 3,787,707 3,394,039
NONINTEREST INCOME 176,554 159,162 370,346 340,813
NONINTEREST EXPENSE:
Salaries and employee benefits 620,684 585,301 1,249,173 1,131,133
Net occupancy expense 95,474 91,830 198,412 196,802
Data processing expense 170,795 163,609 343,688 327,715
Franchise tax 77,250 75,750 154,500 151,500
FDIC premium 78,096 72,300 156,196 144,602
Other expenses 367,828 297,673 700,984 585,408
-----------------------------------------------------
Total noninterest expense 1,410,127 1,286,463 2,802,953 2,537,160
-----------------------------------------------------
INCOME BEFORE INCOME TAXES 658,831 592,891 1,355,100 1,197,692
INCOME TAXES 135,968 108,049 280,855 219,718
-----------------------------------------------------
NET INCOME $522,863 $484,842 $1,074,245 $977,974
=====================================================
EARNINGS PER COMMON SHARE * $0.71 $0.66 $1.47 $1.34
=====================================================
* Earnings per common share have been restated for the 25% stock dividend issued October 15, 1994.
See notes to consolidated financial statements
4
</TABLE>
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CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited) Six months ended
06/30/95 06/30/94
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $1,074,245 $977,974
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and Amortization 315,624 330,947
Provision for Loan Losses 90,000 90,000
Changes in Operating Assets and Liabilities 3,210 (49,993)
---------------------------
Total Adjustments 408,834 370,954
---------------------------
Net Cash Provided by Operating Activities 1,483,079 1,348,928
Cash Flows From Investing Activities:
Proceeds from Maturities of Investments 7,931,359 3,825,000
Purchases of Investment Securities 0 (7,756,126)
Capital Expenditures (40,983) (23,583)
Net (Increase) in Loans (8,883,985) (2,099,359)
Decrease (Increase) in Other Assets 76,538 (1,096,197)
---------------------------
Net Cash (Used in) Investing Activities (917,071) (7,150,265)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Demand
and Savings Accounts (5,570,579) 1,046,750
Net (Decrease) in time deposits (393,623) (6,644,567)
Net Increase (Decrease) in Short-Term Borrowings 1,891,504 (149,905)
Dividends Paid (475,901) (445,342)
---------------------------
Net Cash Provided by Financing Activities (4,548,599) (6,193,064)
---------------------------
Net Change in Cash and Cash Equivalents (3,982,591) (11,994,401)
Cash and Cash Equivalents at Beginning of the Period 20,146,107 20,022,624
---------------------------
Cash and Cash Equivalents at End of the Period $16,163,516 $8,028,223
===========================
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $2,151,309 $1,771,187
Income Taxes $271,235 $159,314
Cash and Cash Equivalents include Cash and Due From Banks and Federal Funds Sold.
</TABLE>
See notes to consolidated financial statements.
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National Bancshares Corporation
Note to Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The consolidated balance sheet as of June 30, 1995, the consolidated
statements of earnings for the three month and the six periods ended June 30,
1995 and 1994, and the consolidated statements of cash flows for the six month
periods ended June 30, 1995 and 1994 have been prepared by the Corporation
without audit. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included.
The consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q, but do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. It is suggested that these statements be read in
conjunction with the consolidated financial statements and footnotes in the
Corporation's annual report on Form 10-K for the year ended December 31, 1994.
Operating results for the six months ended June 30, 1995 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1995.
A 5 for 4 (25%) stock dividend was declared on September 20, 1994. The
record date for the stock dividend was September 30, 1994 and issued October
15, 1994. 314 fractional shares calculated were paid in cash, resulting in
732,156 shares outstanding following the stock dividend. Earnings per common
share have been restated to reflect the 732,156 shares outstanding.
On January 1, 1995 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, " Accounting by creditors for Impairment
of a Loan", and SFAS No. 118, "Accounting by creditors for Impairment of a Loan
Income Recognition and Disclosures", which impose certain requirements on the
measurement of impaired loans. The Company has previously measured such loans
in accordance with the methods prescribed in SFAS No. 114. Consequently, no
additional loss provisions were required by the adoption of these statements.
SFAS No. 114 also requires that impaired loans for which foreclosure is
probable be accounted for as loans. The amounts of impaired loans, as defined
in SFAS No. 114, and impaired loans for which foreclosure is probable are not
significant. Thus, neither the initial adoption of SFAS No. 114 and SFAS No.
118, nor the on-going effect of these statements, has had, or is expected to
have, a material effect on the financial condition or results of operations of
the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Balance Sheets
Total assets decreased $3.2 million or 1.8% below 12/31/94. Cash and
due from banks decreased approximately $853 thousand, mainly the result of
decreased outgoing check letters at the end of the quarter as compared to
12/31/94. Total investment securities held to maturity decreased $8.2 million
from 12/31/94 mainly the result of maturities and early calls by issuers. Net
loans increased $8.8 million or 15.6% due to increased demand in the commercial
loan and installment loan areas.
Total deposits declined $6 million or approximately 4.1% below
12/31/94. Non-interest bearing demand accounts had a modest increase of 1.7%,
non-time interest bearing accounts decreased by $6 million. Time deposits
decreased $394 thousand or approximately 0.9% below 12/31/94 primarily in the
public fund jumbo CD accounts. Securities sold under repurchase
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agreements increased $1.9 million above 12/31/94. Total shareholders'
equity increased $871 thousand or 3.9% over 12/31/94 through retained earnings.
Statements of Cash Flows
Net cash provided by operating activities for the first six months of
1995 was $1.5 million as compared to $1.3 million for the same period in 1994.
Net loans increased $8.9 million exceeding the proceeds of maturing investment
securities creating a net cash used in investing activities of $917 thousand.
As a result of decreasing total deposits, $4.5 million net cashed was used in
financing activities. This caused a net decrease in cash and cash equivalents
of $4 million during the first six months of 1995. With total cash and cash
equivalents of $16.2 million as of 6/30/95, the Corporation's liquidity ratios
continue to remain favorable.
Analysis of Equity
Commercial banks whose deposits are insured by the Bank Insurance Fund
("BIF") are required to comply with certain minimum regulatory capital
requirements. The following is a summary of the Bank's regulatory capital
levels at 6/30/95.
REGULATORY CAPITAL
<TABLE>
<CAPTION>
(Dollars in Tangible Core Risk Based
Thousands) Capital Capital Capital
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
regulatory
capital $21,442 19.52% $21,442 19.52% $22,413 20.40%
Fully phased
in regulatory
capital
requirement 1,648 1.50% 4,395 4.00% 8,789 8.00%
-------------------------------------------------------------------
Regulatory
capital
excess $19,794 18.02% $17,047 15.52% $13,624 12.40%
====================================================================
*Adjusted risk based assets $ 109,864 (thousands)
</TABLE>
RESULTS OF OPERATIONS
The company is on a fiscal year ending December 31st. Interest income
totaled $3.1 million or $475 thousand higher for the three months ended 6/30/95
as compared to same period in 1994. Interest expense was $1.2 million for the
three months ended 6/30/95 or $303 thousand above 1994. This caused an increase
of $172 thousand net interest income or approximately 9.8% increase for the
three month period ended 6/30/95 as compared to 6/30/94. The six month results
for the periods ended 6/30/95 and 6/30/94 were an increase in interest income of
$896 thousand and an interest expense increase of $503 thousand. This provided
for a net interest income
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increase of $394 thousand or an 11.3% increase for the six months ended
6/30/95 when compared to 6/30/94.
Net interest rate margins were 5.42% and 5.29% for the first six months
of 1995 and 1994, respectively. Both the interest yields on assets and
interest rates on interest bearing liabilities were generally higher in the
first six months of 1995 over 1994. Yields increased 60 basis points as
compared to interest costs which increased only 47 basis points in 1995 over
1994. These increases were mainly the result of a generally increasing
interest rate environment
Provision for loan losses were $45,000 for the three month periods and
$90,000 for six month periods ended 6/30/95 and 6/30/94. Net charge- offs for
the six months ended 6/30/95 were $10 thousand as compared to $20 thousand for
the same period in 1994.
Noninterest income was $177 thousand for the three months ended 6/30/95
or approximately $17 thousand above the same period in 1994. Noninterest income
for the six months ended 6/30/95 were $370 thousand or approximately 11.6% over
1994.
Noninterest expense was $1.4 million for the three months ended 6/30/95
or 9.6% over the same period ended 6/30/94. Year to date noninterest expenses
were $2.8 million and $2.5 million for the periods ended 6/30/94 and 6/30/95,
respectively. This $266 thousand increase is primarily comprised of an $118
increase in salaries and benefits and $116 thousand in other expenses. A
significant portion of these increases are the result of increased business
volumes in existing markets along with the acquisition of the Seville Office on
December 16, 1994. The F.D.I.C. has recently announced the reduction of the
lowest annual deposit insurance premium rate from 23 basis points to 4 basis
points.
Net income was $522 thousand for the quarter ended 6/30/95 or 7.8%
above the same quarter of 1994. Net income was $1,074,245 for six months ended
6/30/95 as compared to $977,974 on 6/30/94. This $96 thousand increase is
equal to 9.8%. The increase was the result of increased volumes and improved
net interest margins during the first six months of 1995 as compared to the
same period in 1994.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of matters to a vote of security holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<S> <C> <C> <C>
Exhibit No. If incorporated by Reference,
Under Reg. Form 10-Q Documents with Which Exhibit
S-K, Item 601 Exhibit No. Description of Exhibits was Previously Filed with SEC
(11) 1 (pg 4) Computation of Earnings per Share Incorporated by reference
(27) Financial Data Schedule
No other exhibits are required to be filed herewith pursuant to Item 601 of Regulation S-K.
b. There were no Reports on Form 8-K filed for the quarter ended 6/30/95.
</TABLE>
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Bancshares Corporation
Date: August 11, 1995 /s/ Charles J. Dolezal
--------------- ---------------------------------
Charles J. Dolezal, President
Date: August 11, 1995 /s/ Michael D. Hofstetter
--------------- ---------------------------------
Michael D. Hofstetter,
Secretary - Treasurer
(Principal Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 7,408,516
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,755,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,902,790
<INVESTMENTS-CARRYING> 77,343,545
<INVESTMENTS-MARKET> 79,563,000
<LOANS> 65,979,989
<ALLOWANCE> 970,913
<TOTAL-ASSETS> 169,873,342
<DEPOSITS> 139,898,038
<SHORT-TERM> 6,161,423
<LIABILITIES-OTHER> 853,585
<LONG-TERM> 0
<COMMON> 7,321,560
0
0
<OTHER-SE> 15,638,736
<TOTAL-LIABILITIES-AND-EQUITY> 169,873,342
<INTEREST-LOAN> 2,885,909
<INTEREST-INVEST> 3,024,095
<INTEREST-OTHER> 226,209
<INTEREST-TOTAL> 6,136,213
<INTEREST-DEPOSIT> 2,133,955
<INTEREST-EXPENSE> 2,258,506
<INTEREST-INCOME-NET> 3,877,707
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,802,953
<INCOME-PRETAX> 1,355,100
<INCOME-PRE-EXTRAORDINARY> 1,355,100
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,074,245
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
<YIELD-ACTUAL> 5.42
<LOANS-NON> 163,798
<LOANS-PAST> 43,471
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,704,320
<ALLOWANCE-OPEN> 890,666
<CHARGE-OFFS> 16,863
<RECOVERIES> 7,110
<ALLOWANCE-CLOSE> 970,913
<ALLOWANCE-DOMESTIC> 108,007
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 862,906
</TABLE>
