<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, 1996
Commission File Number 0-14773
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: (330) 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 July 26, 1996:
Common Stock, $10.00 Par Value: 913,202 Shares Outstanding
<PAGE> 2
National Bancshares Corporation
Index
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
as of June 30, 1996 and
December 31, 1995 (Unaudited)
Consolidated Statements of Income 4
for the three and six months ended
June 30, 1996 and 1995
(Unaudited)
Consolidated Statements of Cash Flows 5
for the six months ended
June 30, 1996 and 1995
(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
<PAGE> 3
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
06/30/96 12/31/95
<S> <C> <C>
ASSETS:
Cash and due from banks $6,088,809 $7,946,503
Investment securities
held to maturity 68,358,214 74,770,469
Approximate market value
June 30, 1996: $69,050,000
December 31, 1995: $77,242,490
Investment securities available
for sale (at fair value) 5,125,371 3,917,235
Federal funds sold 7,055,000 9,294,346
Loans:
Commercial 30,995,183 26,717,316
Real estate mortgage 33,242,340 31,514,599
Installment 14,013,036 16,491,699
-----------------------------------
Total loans 78,250,559 74,723,614
Less: Unearned income 497,644 535,786
Allowance for loan losses 1,155,781 1,046,542
-----------------------------------
Loans, net 76,597,134 73,141,286
Accrued interest receivable 1,546,553 1,637,600
Premises and equipment 2,224,425 2,220,358
Other assets 2,398,540 2,216,288
-----------------------------------
TOTAL $169,394,046 $175,144,085
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Demand $23,821,608 $25,013,013
Savings and N.O.W.s 70,317,685 73,206,119
Time 46,873,010 48,776,982
-----------------------------------
Total deposits 141,012,303 146,996,114
Securities sold under
repurchase agreements 2,248,102 3,279,655
Federal reserve note account 1,000,000 351,110
Accrued interest payable 545,696 558,289
Other liabilities 380,000 572,986
-----------------------------------
Total liabilities 145,186,101 151,758,154
-----------------------------------
SHAREHOLDERS' EQUITY
Common stock - $10 par value;
6,000,000 shares authorized, 915,651 shares issued 9,156,510 9,156,510
Surplus 4,689,800 4,689,800
Retained earnings 10,477,762 9,734,575
Less: Treasury shares: 3,262 and 5,476 shares as of
June 30, 1996 and December 31, 1995, respectively (116,127) (194,954)
-----------------------------------
Total shareholders' equity 24,207,945 23,385,931
-----------------------------------
TOTAL $169,394,046 $175,144,085
===================================
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three months ended Six months ended
06/30/96 06/30/95 06/30/96 06/30/95
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,802,139 $1,510,203 $3,563,025 $2,885,909
Interest on federal funds sold 98,471 135,815 182,267 226,209
Interest and dividends
on investments
US government obligations 563,996 656,165 1,154,765 1,357,294
Obligations of states and
political subdivisions 253,873 262,854 509,506 526,858
Other securities 439,533 557,397 913,907 1,139,943
-------------------------------------------------------
Total interest income 3,158,012 3,122,434 6,323,470 6,136,213
INTEREST EXPENSE:
Interest on deposits 1,161,580 1,118,743 2,331,797 2,133,955
Expense of funds purchased 17,827 66,287 41,334 124,551
-------------------------------------------------------
Total interest expense 1,179,407 1,185,030 2,373,131 2,258,506
-------------------------------------------------------
Net interest income 1,978,605 1,937,404 3,950,339 3,877,707
PROVISION FOR LOAN LOSSES 45,000 45,000 90,000 90,000
-------------------------------------------------------
Net interest income after
provision for loan losses 1,933,605 1,892,404 3,860,339 3,787,707
NONINTEREST INCOME 205,209 176,554 395,114 370,346
NONINTEREST EXPENSE:
Salaries and employee benefits 688,349 620,684 1,388,149 1,249,173
Net occupancy expense 101,094 95,474 200,261 198,412
Data processing expense 182,584 170,795 362,929 343,688
Franchise tax 83,250 77,250 165,781 154,500
FDIC premium 500 78,096 1,000 156,196
Other expenses 338,549 367,828 652,382 700,984
-------------------------------------------------------
Total noninterest expense 1,394,326 1,410,127 2,770,502 2,802,953
-------------------------------------------------------
INCOME BEFORE INCOME TAXES 744,488 658,831 1,484,951 1,355,100
INCOME TAXES 168,246 135,968 334,667 280,855
-------------------------------------------------------
NET INCOME $576,242 $522,863 $1,150,284 $1,074,245
=======================================================
EARNINGS PER COMMON SHARE * $0.63 $0.57 $1.26 $1.17
=======================================================
<FN>
*Earnings per common share have been restated for the current weighted
average number of shares outstanding for 1996.
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Six Months Ended
06/30/96 06/30/95
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $1,150,284 $1,074,245
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and Amortization 300,349 315,624
Provision for Loan Losses 90,000 90,000
Changes in Operating Assets and Liabilities (213,112) 3,210
----------------------------
Total Adjustments 177,237 408,834
----------------------------
Net Cash Provided by Operating Activities 1,327,521 1,483,079
Cash Flows From Investing Activities:
Proceeds from Maturities of Investments 7,480,815 7,931,359
Purchases of Investment Securities (2,500,000) 0
Capital Expenditures (128,704) (40,983)
Net (Increase) in Loans (3,545,848) (8,883,985)
Decrease in Other Assets 72,641 76,538
----------------------------
Net Cash Provided by(Used in) Investing Activities 1,378,904 (917,071)
Cash Flows from Financing Activities:
Net (Decrease) in Demand
and Savings Accounts (4,079,839) (5,570,579)
Net (Decrease) in time deposits (1,903,972) (393,623)
Net Increase(Decrease) in Short-Term Borrowings (382,663) 1,891,504
Dividends Paid (519,073) (475,901)
Issue of Stock under Dividend Reinvestment Plan 82,082 0
----------------------------
Net Cash (Used in) Financing Activities (6,803,465) (4,548,599)
----------------------------
Net Change in Cash and Cash Equivalents (4,097,040) (3,982,591)
Cash and Cash Equivalents at Beginning of the Period 17,240,849 20,146,107
----------------------------
Cash and Cash Equivalents at End of the Period $13,143,809 $16,163,516
============================
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $2,385,724 $2,151,309
Income Taxes $459,952 $271,235
</TABLE>
Cash and Cash Equivalents include Cash and Due From Banks and Federal Funds
Sold.
See notes to consolidated financial statements.
5
<PAGE> 6
National Bancshares Corporation
Note to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
The consolidated balance sheet as of June 30, 1996, the consolidated
statements of earnings for the six month periods ended June 30, 1996 and 1995,
and the consolidated statements of cash flows for the six month periods ended
June 30, 1996 and 1995 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, 1995.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
On November 3, 1995, 622 shares were issued under the dividend
reinvestment plan. A five for four (25%) stock dividend was declared on November
21, 1995. The record date for the stock dividend was November 30, 1995 and the
issue date was December 15, 1995. 321.5 fractional shares calculated were paid
in cash, resulting in 915,651 shares issued following the stock dividend.
Earnings per common share have been restated for the current weighted average
number of shares outstanding for 1996 of 911,510 shares.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
Balance Sheets
Total assets decreased $5.7 million or 3.3% below 12/31/95. Cash and
due from banks decreased approximately $1.9 million, mainly the result of
decreased outgoing check letters at the end of the quarter as compared to
12/31/95. Total investment securities held to maturity decreased $6.4 million
from 12/31/95 mainly the result of maturities and early calls by issuers.
Investment securities available for sale increased by $1.2 million above
12/31/95. Net loans increased $3.5 million or 4.7% due to increased demand in
the commercial loan and real estate mortgage loan areas.
Total deposits decreased $6.0 million or approximately 4.1% below
12/31/95. Non-interest bearing demand accounts decreased by 4.8%, non-time
interest bearing accounts decreased by 3.9% and time deposits decreased by 3.9%.
Securities sold under repurchase agreements decreased $1.0 million below
12/31/95. Total shareholders' equity increased $0.8 million or 3.5% over
12/31/95.
Statements of Cash Flows
Net cash provided by operating activities for the first six months of
1996 was $1.3 million as compared to $1.5 million for the same period in 1995.
Net cash provided by investing activities was $1.4 million as compared to $.9
million used in same period of 1995. Primarily as a result of decrease in total
deposits, $6.8 million net cash was used by financing activities. This caused a
net decrease in cash and cash equivalents of $4.1 million during the first six
months of 1996 as
6
<PAGE> 7
compared to a $4.0 million decrease in 1995. With total cash
and cash equivalents of $13.1 million as of 6/30/96, 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 6/30/96.
REGULATORY CAPITAL
<TABLE>
<CAPTION>
(Dollars in Tangible Core Risk Based
Thousands) Capital Capital Capital
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
regulatory
capital $22,994 20.89% $22,994 20.89% $24,150 21.94%
Fully phased
in regulatory
capital
requirement 1,651 1.50% 4,402 4.00% 8,804 8.00%
---------------------------------------------------------------------------
Regulatory
capital
excess $21,343 19.39% $18,592 16.89% $15,346 13.94%
===========================================================================
<FN>
*Adjusted risk based assets $ 110,056 (thousands)
</TABLE>
RESULTS OF OPERATIONS
The Company is on a fiscal year ending December 31st. Interest income
totaled $3.2 million or $36 thousand higher for the three months ended 6/30/96
as compared to the same period in 1995. Interest expense was $1.2 million for
the three months ended 6/30/96 or $6 thousand below 1995. This caused an
increase of $41 thousand net interest income or approximately 2.2% increase for
the three month period ended 6/30/96 as compared to 6/30/95. The six month
results for the periods ended 6/30/96 and 6/30/95 were an increase in interest
income of $187 thousand and interest expense up $115 thousand. This provided for
a net interest income increase of $73 thousand or a 1.9% increase for the six
months ended 6/30/96 when compared to 6/30/95.
Net interest rate margins were 5.33% and 5.42% for the first six months
of 1996 and 1995, respectively. Interest income yields decreased 3 basis points
as compared to interest costs which increased 6 basis points in 1996 over 1995.
The increase in interest costs were mainly the result of the general increase in
time deposit rates.
Provision for loan losses were $45,000 for the three month periods and
$90,000 for the six month periods ended 6/30/96 and 6/30/95. Net recoveries for
the six months ended 6/30/96 were $19 thousand as compared to a net charge off
of $10 thousand for the same period in 1995.
Noninterest income was $205 thousand for the three months ended 6/30/96
or approximately $29 thousand above the same period in 1995. Noninterest income
for the six months ended 6/30/96 was $395 thousand or approximately 6.7% over
1995.
7
<PAGE> 8
Noninterest expense was $1.4 million for the three months ended 6/30/96
or 1.1% below the same period ended 6/30/95. Year to date noninterest expenses
for 1996 were $2.8 million or 1.2% below the same period 1995. There were
reductions in FDIC premiums and other expenses which more than offset the
increases in salary and benefits, net occupancy, data processing and Franchise
tax.
Net income was $576 thousand for the three months ended 6/30/96 or
10.2% above the same quarter of 1995. Net income was approximately $1.2 million
for the six months ended 6/30/96 or 7.1% above the first six months of 1995.
This $76 thousand increase was caused by higher net interest and noninterest
income and lower non-interest expense.
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
</TABLE>
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 6/30/96.
8
<PAGE> 9
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: July 26, 1996 /s/Charles J. Dolezal
--------------------- -----------------------------------------
Charles J. Dolezal, President
Date: July 26, 1996 /s/Michael D. Hofstetter
--------------------- --------------------------------------------
Michael D. Hofstetter, Secretary - Treasurer
(Principal Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,088,809
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,055,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,125,371
<INVESTMENTS-CARRYING> 68,358,214
<INVESTMENTS-MARKET> 69,050,000
<LOANS> 78,250,559
<ALLOWANCE> 1,155,781
<TOTAL-ASSETS> 169,394,046
<DEPOSITS> 141,012,303
<SHORT-TERM> 3,248,102
<LIABILITIES-OTHER> 925,696
<LONG-TERM> 0
<COMMON> 9,156,510
0
0
<OTHER-SE> 15,051,435
<TOTAL-LIABILITIES-AND-EQUITY> 169,394,046
<INTEREST-LOAN> 3,563,025
<INTEREST-INVEST> 2,578,178
<INTEREST-OTHER> 182,267
<INTEREST-TOTAL> 6,323,470
<INTEREST-DEPOSIT> 2,331,797
<INTEREST-EXPENSE> 2,373,131
<INTEREST-INCOME-NET> 3,950,339
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,770,502
<INCOME-PRETAX> 1,484,951
<INCOME-PRE-EXTRAORDINARY> 1,150,284
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,150,284
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
<YIELD-ACTUAL> 5.33
<LOANS-NON> 156,236
<LOANS-PAST> 28,185
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,987,525
<ALLOWANCE-OPEN> 1,046,542
<CHARGE-OFFS> 23,884
<RECOVERIES> 43,123
<ALLOWANCE-CLOSE> 1,155,781
<ALLOWANCE-DOMESTIC> 163,946
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 991,835
</TABLE>
