<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 September 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 November 6, 1996:
Common Stock, $10.00 Par Value: 913,967 Shares Outstanding
1
<PAGE> 2
<TABLE>
National Bancshares Corporation
Index
<CAPTION>
Page
Number
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
as of September 30, 1996 and
December 31, 1995 (Unaudited)
Consolidated Statements of Income for the three 4
and nine months ended September 30, 1996 and 1995
(Unaudited)
Consolidated Statements of Cash Flows 5
for the nine months ended
September 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
<TABLE>
NATIONAL BANCSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
09/30/96 12/31/95
<S> <C> <C>
ASSETS:
Cash and due from banks $7,633,763 $7,946,503
Investment securities
held to maturity 68,697,140 74,770,469
Approximate market value
September 30, 1996: $69,571,000
December 31, 1995: $77,242,490
Investment securities available
for sale (at fair value) 3,378,675 3,917,235
Federal funds sold 9,655,000 9,294,346
Loans:
Commercial 32,438,258 26,717,316
Real estate mortgage 34,229,158 31,514,599
Installment 13,439,315 16,491,699
------------------------------------
Total loans 80,106,731 74,723,614
Less: Unearned income 495,268 535,786
Allowance for loan losses 1,185,779 1,046,542
------------------------------------
Loans, net 78,425,684 73,141,286
Accrued interest receivable 1,684,713 1,637,600
Premises and equipment 2,401,512 2,220,358
Other assets 2,356,463 2,216,288
------------------------------------
TOTAL $174,232,950 $175,144,085
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Demand $21,597,686 $25,013,013
Savings and N.O.W.s 72,272,972 73,206,119
Time 51,141,694 48,776,982
------------------------------------
Total deposits 145,012,352 146,996,114
Securities sold under
repurchase agreements 2,617,993 3,279,655
Federal reserve note account 995,378 351,110
Accrued interest payable 509,486 558,289
Other liabilities 480,174 572,986
------------------------------------
Total liabilities 149,615,383 151,758,154
------------------------------------
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 10,858,442 9,734,575
Less: Treasury shares (at cost): 2,449 and 5,476 shares as of
September 30, 1996 and December 31, 1995, respectively (87,185) (194,954)
------------------------------------
Total shareholders' equity 24,617,567 23,385,931
------------------------------------
TOTAL $174,232,950 $175,144,085
====================================
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
<TABLE>
NATIONAL BANCSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Unaudited) Three months ended Nine months ended
09/30/96 09/30/95 09/30/96 09/30/95
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,829,806 $1,626,122 $5,392,831 $4,512,031
Interest on federal funds sold 105,990 166,720 288,257 392,929
Interest and dividends
on investments
US government obligations 567,536 609,109 1,722,301 1,966,403
Obligations of states and
political subdivisions 252,671 261,093 762,177 787,951
Other securities 413,971 527,930 1,327,878 1,667,873
-------------------------------------------------------------
Total interest income 3,169,974 3,190,974 9,493,444 9,327,187
INTEREST EXPENSE:
Interest on deposits 1,161,798 1,180,105 3,493,595 3,314,060
Expense of funds purchased 40,987 67,986 82,321 192,537
-------------------------------------------------------------
Total interest expense 1,202,785 1,248,091 3,575,916 3,506,597
-------------------------------------------------------------
Net interest income 1,967,189 1,942,883 5,917,528 5,820,590
PROVISION FOR LOAN LOSSES 45,000 45,000 135,000 135,000
-------------------------------------------------------------
Net interest income after
provision for loan losses 1,922,189 1,897,883 5,782,528 5,685,590
NONINTEREST INCOME 208,476 178,070 603,590 548,416
NONINTEREST EXPENSE:
Salaries and employee benefits 672,467 705,995 2,060,616 1,955,168
Net occupancy expense 111,083 110,186 311,344 308,598
Data processing expense 191,702 183,764 554,631 527,452
Franchise tax 83,250 77,250 249,031 231,750
FDIC premium 500 (9,174) 1,500 147,022
Other expenses 339,884 321,017 992,266 1,022,001
-------------------------------------------------------------
Total noninterest expense 1,398,886 1,389,038 4,169,388 4,191,991
-------------------------------------------------------------
INCOME BEFORE INCOME TAXES 731,779 686,915 2,216,730 2,042,015
INCOME TAXES 160,231 146,164 494,898 427,019
-------------------------------------------------------------
NET INCOME $571,548 $540,751 $1,721,832 $1,614,996
=============================================================
EARNINGS PER COMMON SHARE * $0.63 $0.59 $1.89 $1.77
=============================================================
<FN>
* 1995 Earnings per common share have been restated for 25% stock dividend. See Note 1.
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
<TABLE>
NATIONAL BANCSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Unaudited) Nine Months Ended
09/30/96 09/30/95
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $1,721,832 $1,614,996
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and Amortization 449,170 462,758
Provision for Loan Losses 135,000 135,000
Net Losses on Sales of Investment Securities 21,097 0
Changes in Operating Assets and Liabilities (202,508) (143,637)
------------------------------------
Total Adjustments 402,759 454,121
------------------------------------
Net Cash Provided by Operating Activities 2,124,591 2,069,117
Cash Flows From Investing Activities:
Proceeds from Maturities of Investments 9,778,533 10,000,271
Proceeds from Sale of Investments (AFS) 1,000,000 0
Purchases of Investment Securities (4,500,000) (1,000,000)
Capital Expenditures (376,973) (84,339)
Net (Increase) in Loans (5,419,398) (13,446,648)
Decrease in Other Assets 29,266 175,393
-----------------------------------
Net Cash Provided by (Used in) Investing Activities 511,428 (4,355,323)
Cash Flows from Financing Activities:
Net (Decrease) in Demand
and Savings Accounts (4,348,474) (5,760,466)
Net Increase in time deposits 2,364,712 6,315,430
Net Increase (Decrease) in Short-Term Borrowings (17,394) 821,437
Dividends Paid (701,550) (636,975)
Issuance of Stock under Dividend Reinvestment Plan 114,601 0
-----------------------------------
Net Cash Provided by (Used in) Financing Activities (2,588,105) 739,426
-----------------------------------
Net Change in Cash and Cash Equivalents 47,914 (1,546,780)
Cash and Cash Equivalents at Beginning of the Period 17,240,849 20,146,107
-----------------------------------
Cash and Cash Equivalents at End of the Period $17,288,763 $18,599,327
===================================
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $3,624,719 $3,388,313
Income Taxes $625,345 $410,817
Cash and Cash Equivalents include Cash and Due From Banks and Federal Funds
Sold.
</TABLE>
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 September 30, 1996, the
consolidated statements of earnings for the three and nine month periods ended
September 30, 1996 and 1995, and the consolidated statements of cash flows for
the nine month periods ended September 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 nine months ended September 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 as of September 30, 1996 of 912,016 shares. A five
for four (25%) stock dividend was declared on October 15, 1996 with a record
date of October 31, 1996 and an issue date of November 15, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Balance Sheets
Total assets decreased $0.9 million or 0.5% below 12/31/95. Cash and
due from banks decreased approximately $0.3 million, mainly the result of a
lower outgoing check letter at the end of the quarter as compared to 12/31/95.
Total investment securities held to maturity decreased $6.1 million from
12/31/95 mainly the result of maturities and early calls by issuers. Investment
securities available for sale decreased by $0.5 million below 12/31/95. Net
loans increased $5.3 million or 7.2% due to increased demand in the commercial
loan and real estate mortgage loan areas.
Total deposits decreased $2.0 million or approximately 1.3% below
12/31/95 as result of increased competition for deposits. Non-interest bearing
demand accounts decreased by 13.7%, non-time interest bearing accounts decreased
by 1.3% and time deposits increased by 4.8%. Securities sold under repurchase
agreements decreased $0.7 million below 12/31/95. Total shareholders' equity
increased $1.2 million or 5.3% over 12/31/95.
Statements of Cash Flows
Net cash provided by operating activities for the first nine months of
1996 and 1995 was $2.1 million. Net cash provided by investing activities was
$0.5 million as compared to $4.4 million used in same period of 1995 due to
lower levels of loan origination in 1996. Net cash of $2.6 million
6
<PAGE> 7
was used by financing activities primarily as a result of the decrease in total
deposits. The above items caused a net increase in cash and cash equivalents of
$48 thousand during the first nine months of 1996 as compared to a $1.5 million
decrease in 1995. With total cash and cash equivalents of $17.3 million as of
9/30/96, 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 9/30/96.
<TABLE>
REGULATORY CAPITAL*
<CAPTION>
(Dollars in Tangible Core Risk Based
Thousands) Capital Capital Capital
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
regulatory
capital $23,408 21.06% $23,408 21.06% $24,594 22.13%
Fully phased
in regulatory
capital
requirement 1,667 1.50% 4,445 4.00% 8,890 8.00%
------------------------------------------------------------------------
Regulatory
capital
excess $21,741 19.56% $18,963 17.06% $15,704 14.13%
========================================================================
<FN>
* Adjusted risk based assets $111,125 (thousands)
</TABLE>
RESULTS OF OPERATIONS
The Company is on a fiscal year ending December 31st. Interest income
totaled $3.2 million or $21 thousand lower for the three months ended 9/30/96 as
compared to the same period in 1995. Interest expense was $1.2 million for the
three months ended 9/30/96 or $45 thousand below 1995. This caused an increase
of $24 thousand net interest income or approximately 1.3% increase for the three
month period ended 9/30/96 as compared to 9/30/95. The nine month results for
the periods ended 9/30/96 and 9/30/95 were an increase in interest income of
$166 thousand and interest expense up $69 thousand. This provided for a net
interest income increase of $97 thousand or a 1.7% increase for the nine months
ended 9/30/96 when compared to 9/30/95.
Net interest rate margins were 5.30% and 5.33% for the first nine
months of 1996 and 1995, respectively. Interest income yields decreased 3 basis
points as compared to interest costs which increased 1 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
$135,000 for the nine month periods ended 9/30/96 and 9/30/95. Net recoveries
for the nine months ended 9/30/96 were $4 thousand as compared to a net charge
off of $7 thousand for the same period in 1995.
7
<PAGE> 8
Noninterest income was $208 thousand for the three months ended 9/30/96
or approximately $30 thousand above the same period in 1995. Noninterest income
for the nine months ended 9/30/96 was $604 thousand or approximately 10.1% over
1995.
Noninterest expense was $1.4 million for the three months ended 9/30/96
or 0.7% above the same period ended 9/30/95. Year to date noninterest expenses
for 1996 were $4.2 million or 0.5% 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 $572 thousand for the three months ended 9/30/96 or 5.7%
above the same quarter of 1995. Net income was approximately $1.7 million for
the nine months ended 9/30/96 or 6.6% above the first nine months of 1995. This
$107 thousand increase was caused by higher net interest and noninterest income
combined with 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
Exhibit No. If incorporated by Reference,
Under Reg. Documents with Which Exhibit
S-K, Item 601 Description of Exhibits was Previously Filed with SEC
(11) Computation of Earnings per Share Filed Herewith
(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 9/30/96.
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: November 6, 1996 /s/Charles J. Dolezal
------------------- ---------------------------------
Charles J. Dolezal, President
Date: November 6, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,633,763
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,655,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,378,675
<INVESTMENTS-CARRYING> 68,697,140
<INVESTMENTS-MARKET> 69,571,000
<LOANS> 80,106,731
<ALLOWANCE> 1,185,779
<TOTAL-ASSETS> 174,232,950
<DEPOSITS> 145,012,352
<SHORT-TERM> 3,613,371
<LIABILITIES-OTHER> 989,660
<LONG-TERM> 0
<COMMON> 9,156,510
0
0
<OTHER-SE> 15,461,057
<TOTAL-LIABILITIES-AND-EQUITY> 174,232,950
<INTEREST-LOAN> 5,392,831
<INTEREST-INVEST> 3,812,356
<INTEREST-OTHER> 288,257
<INTEREST-TOTAL> 9,493,444
<INTEREST-DEPOSIT> 3,493,595
<INTEREST-EXPENSE> 3,575,916
<INTEREST-INCOME-NET> 5,917,528
<LOAN-LOSSES> 135,000
<SECURITIES-GAINS> 21,097
<EXPENSE-OTHER> 4,169,388
<INCOME-PRETAX> 2,216,730
<INCOME-PRE-EXTRAORDINARY> 1,721,832
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,721,832
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
<YIELD-ACTUAL> 5.30
<LOANS-NON> 97,617
<LOANS-PAST> 92,918
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,944,745
<ALLOWANCE-OPEN> 1,046,542
<CHARGE-OFFS> 42,927
<RECOVERIES> 47,164
<ALLOWANCE-CLOSE> 1,185,779
<ALLOWANCE-DOMESTIC> 155,045
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,030,734
</TABLE>
