<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 March 31, 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 May 3, 1996:
Common Stock, $10.00 Par Value: 911,547 Shares Outstanding
1
<PAGE> 2
National Bancshares Corporation
Index
<TABLE>
<CAPTION>
Page
Number
Part I. Financial Information
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 3
as of March 31, 1996 and
December 31, 1995 (Unaudited)
Consolidated Statements of Income 4
for the three months ended
March 31, 1996 and 1995
(Unaudited)
Consolidated Statements of Cash Flows 5
for the three months ended
March 31, 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
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
Signatures 9
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (Unaudited) 3/31/96 12/31/95
<S> <C> <C>
ASSETS:
Cash and due from banks $ 7,611,408 $ 7,946,503
Investment securities
held to maturity 72,718,634 74,770,469
Approximate market value
March 31, 1996: $74,489,000
December 31, 1995: $77,242,490
Investment securities available
for sale (at fair value) 5,163,793 3,917,235
Federal funds sold 4,740,000 9,294,346
Loans:
Commercial 27,974,318 26,717,316
Real estate mortgage 31,987,268 31,514,599
Installment 16,341,561 16,491,699
----------------------------
Total loans 76,303,147 74,723,614
Less: Unearned income 519,946 535,786
Allowance for loan losses 1,112,172 1,046,542
----------------------------
Loans, net 74,671,029 73,141,286
Accrued interest receivable 1,866,779 1,637,600
Premises and equipment 2,277,089 2,220,358
Other assets 2,304,718 2,216,288
----------------------------
TOTAL $171,353,450 $175,144,085
============================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Demand $ 23,974,326 $ 25,013,013
Savings and N.O.W.s 72,210,440 73,206,119
Time 48,791,175 48,776,982
----------------------------
Total deposits 144,975,941 146,996,114
Securities sold under
repurchase agreements 551,593 3,279,655
Federal reserve note account 1,000,000 351,110
Accrued interest payable 512,066 558,289
Other liabilities 509,291 572,986
----------------------------
Total liabilities 147,548,891 151,758,154
----------------------------
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 10,104,351 9,734,575
Less: Treasury shares; 4,104 and 5,476 shares as of
March 31, 1996 and December 31, 1995, respectively (146,102) (194,954)
----------------------------
Total shareholders' equity 23,804,559 23,385,931
----------------------------
TOTAL $171,353,450 $175,144,085
============================
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three months ended
3/31/96 3/31/95
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,760,886 $1,375,706
Interest on federal funds sold 83,796 90,394
Interest and dividends
on investments
US government obligations 590,769 701,129
Obligations of states and
political subdivisions 255,633 264,004
Other securities 474,374 582,546
-------------------------
Total interest income 3,165,458 3,013,779
INTEREST EXPENSE:
Interest on deposits 1,170,217 1,015,212
Expense of funds purchased 23,507 58,264
-------------------------
Total interest expense 1,193,724 1,073,476
-------------------------
Net interest income 1,971,734 1,940,303
PROVISION FOR LOAN LOSSES 45,000 45,000
-------------------------
Net interest income after
provision for loan losses 1,926,734 1,895,303
NONINTEREST INCOME 189,905 193,792
NONINTEREST EXPENSE:
Salaries and employee benefits 699,800 628,489
Net occupancy expense 99,167 102,938
Data processing expense 180,345 172,893
Franchise tax 82,531 77,250
FDIC premium 500 78,100
Other expenses 313,833 333,156
-------------------------
Total noninterest expense 1,376,176 1,392,826
-------------------------
INCOME BEFORE INCOME TAXES 740,463 696,269
INCOME TAXES 166,421 144,887
-------------------------
NET INCOME $ 574,042 $ 551,382
=========================
EARNINGS PER COMMON SHARE * $ 0.63 $ 0.60
=========================
<FN>
* Earnings per common share have been restated for the 25% stock dividend
issued December 15, 1995.
See notes to consolidated financial statements
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three Months Ended
03/31/96 03/31/95
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 574,042 $ 551,382
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and Amortization 150,512 169,304
Provision for Loan Losses 45,000 45,000
Changes in Operating Assets and Liabilities (318,688) (340,903)
-------------------------
Total Adjustments (123,176) (126,599)
-------------------------
Net Cash Provided by Operating Activities 450,866 424,783
Cash Flows From Investing Activities:
Proceeds from Maturities of Investments 1,692,901 2,185,241
Purchases of Investment Securities (1,000,000) 0
Capital Expenditures (119,265) (17,467)
Net (Increase) in Loans (1,574,743) (3,297,012)
Decrease in Other Assets 46,822 44,497
--------------------------
Net Cash (Used in) Investing Activities (954,285) (1,084,741)
Cash Flows from Financing Activities:
Net (Decrease) in Demand
and Savings Accounts (2,034,366) (3,521,106)
Net Increase (Decrease) in time deposits 14,193 (3,324,850)
Net Increase (Decrease) in Short-Term Borrowings (2,079,172) 935,573
Dividends Paid (336,763) (314,827)
Issue of Stock under Dividend Reinvestment Plan 50,086 0
--------------------------
Net Cash (Used in) by Financing Activities (4,386,022) (6,225,210)
--------------------------
Net Change in Cash and Cash Equivalents (4,889,441) (6,885,168)
Cash and Cash Equivalents at Beginning of the Period 17,240,849 20,146,107
--------------------------
Cash and Cash Equivalents at End of the Period $12,351,408 $13,260,939
==========================
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 1,239,947 $ 1,059,490
Income Taxes $82,569 ($10,678)
<FN>
Cash and Cash Equivalents include Cash and Due From Banks
and Federal Funds Sold.
See notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
National Bancshares Corporation
Note to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
The consolidated balance sheet as of March 31, 1996, the consolidated
statements of earnings for the three month periods ended March 31, 1996 and
1995, and the consolidated statements of cash flows for the three month periods
ended March 31, 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 three months ended March 31, 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
issued 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 to reflect the 915,651 shares issued.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
Balance Sheets
Total assets decreased $3.8 million or 2.2% below 12/31/95. Cash and
due from banks decreased approximately $0.3 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 $2.1 million
from 12/31/95 mainly the result of maturities and early calls by issuers. Net
loans increased $1.5 million or 2.1% due to increased demand in the commercial
loan and real estate mortgage loan areas.
Total deposits decreased $2.0 million or approximately 1.4% below
12/31/95. Non-interest bearing demand accounts decreased by 4.2%, non-time
interest bearing accounts decreased by 1.4%. Securities sold under repurchase
agreements decreased $2.7 million below 12/31/95. Total shareholders' equity
increased $0.4 million or 1.8% over 12/31/95.
Statements of Cash Flows
Net cash provided by operating activities for the first three months of
1996 was $451 thousand as compared to $425 thousand for the same period in 1995.
Net cash used in investing activities was $954 thousand. As a result of decrease
in total deposits, $4.4 million net cash was used by financing activities. This
caused a net decrease in cash and cash equivalents of $4.9 million during the
three nine months of 1996. With total cash and cash equivalents of $12.4 million
as of 3/31/96, the Corporation's liquidity ratios continue to remain favorable.
6
<PAGE> 7
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 3/31/96.
<TABLE>
<CAPTION>
REGULATORY CAPITAL
(Dollars in Tangible Core Risk Based
Thousands) Capital Capital Capital
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
regulatory
capital $22,562 20.23% $22,562 20.23% $23,674 21.23%
Fully phased
in regulatory
capital
requirement 1,673 1.50% 4,460 4.00% 8,921 8.00%
-------------------------------------------------------------------------
Regulatory
capital
excess $20,889 18.73% $18,102 16.23% $14,753 13.23%
=========================================================================
<FN>
*Adjusted risk based assets $111,511 (thousands)
</TABLE>
RESULTS OF OPERATIONS
The Company is on a fiscal year ending December 31st. Interest income
totaled $3.2 million or $152 thousand higher for the three months ended 3/31/96
as compared to same period in 1995. Interest expense was $1.2 million for the
three months ended 3/31/96 or $120 thousand above 1995. This caused an increase
of $31 thousand net interest income or approximately 1.6% increase for the three
month period ended 3/31/96 as compared to 3/31/95.
Net interest rate margins were 5.33% and 5.52% for the first three
months of 1996 and 1995, respectively. Interest income yields decreased 3 basis
points as compared to interest costs which increased 17 basis points in 1996
over 1995. This increase in interest costs were mainly the result of a the
general increase in time deposits.
Provision for loan losses were $45,000 for the three month periods
ended 3/31/96 and 3/31/95. Net recoveries for the three months ended 3/31/96
were $21 thousand as compared to net charge off of $7 thousand for the same
period in 1995.
Noninterest income was $190 thousand for the three months ended 3/31/96
or approximately $4 thousand below the same period in 1995.
Noninterest expense was $1.4 million for the three months ended 3/31/96
or 1.2% below the same period ended 3/31/95. There were reductions in net
occupancy, FDIC premiums and other expenses which more than offset the increases
in salary and benefits, data processing and Franchise tax.
Net income was $574 thousand for the quarter ended 3/31/96 or 4.1%
above the same quarter of 1995. This was caused primarily by increased net
interest income and reduced non-interest expenses.
7
<PAGE> 8
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 - Notice
of annual meeting of shareholders and proxy statement date
March 29, 1996 was previously filed with the SEC on March
26, 1996.
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
3/31/96.
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: May 10, 1996 /s/Charles J. Dolezal
------------------------- ---------------------------------
Charles J. Dolezal, President
Date: May 10, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,611,408
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,740,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,163,793
<INVESTMENTS-CARRYING> 72,718,634
<INVESTMENTS-MARKET> 74,489,000
<LOANS> 75,783,201
<ALLOWANCE> 1,112,172
<TOTAL-ASSETS> 171,353,450
<DEPOSITS> 144,975,941
<SHORT-TERM> 1,551,593
<LIABILITIES-OTHER> 1,021,357
<LONG-TERM> 0
<COMMON> 9,156,510
0
0
<OTHER-SE> 14,648,049
<TOTAL-LIABILITIES-AND-EQUITY> 171,353,450
<INTEREST-LOAN> 1,760,886
<INTEREST-INVEST> 1,320,776
<INTEREST-OTHER> 83,796
<INTEREST-TOTAL> 3,165,458
<INTEREST-DEPOSIT> 1,170,217
<INTEREST-EXPENSE> 1,193,724
<INTEREST-INCOME-NET> 1,971,734
<LOAN-LOSSES> 45,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,376,176
<INCOME-PRETAX> 740,463
<INCOME-PRE-EXTRAORDINARY> 574,042
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 574,042
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<YIELD-ACTUAL> 5.33
<LOANS-NON> 175,991
<LOANS-PAST> 115,978
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,911,103
<ALLOWANCE-OPEN> 1,046,542
<CHARGE-OFFS> 15,762
<RECOVERIES> 36,392
<ALLOWANCE-CLOSE> 1,112,172
<ALLOWANCE-DOMESTIC> 147,132
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 965,040
</TABLE>
