<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, 1997
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 April 28, 1997:
Common Stock, $10.00 Par Value: 1,144,764 Shares Outstanding
<PAGE> 2
<TABLE>
<CAPTION>
National Bancshares Corporation
Index
Page
Number
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
as of March 31, 1997 and
December 31, 1996 (Unaudited)
Consolidated Statements of Income 4
for the three months ended
March 31, 1997 and 1996
(Unaudited)
Consolidated Statements of Cash Flows 5
for the three months ended
March 31, 1997 and 1996
(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>
NATIONAL BANCSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
3/31/97 12/31/96
ASSETS:
<S> <C> <C>
Cash and due from banks $ 7,702,751 $ 8,194,813
Federal funds sold 6,340,000 10,800,000
Investment securities available
for sale (at fair value) 6,372,875 6,513,258
Investment securities
held to maturity 71,130,275 70,206,047
Approximate market value
March 31, 1997: $71,857,000
December 31, 1996: $71,620,000
Federal bank stock 679,100 546,600
Loans:
Commercial 31,615,529 31,144,549
Real estate mortgage 36,006,945 35,682,999
Installment 12,332,684 12,958,706
------------------------------
Total loans 79,955,158 79,786,254
Less: Unearned income 463,277 485,342
Allowance for loan losses 1,160,377 1,150,917
------------------------------
Loans, net 78,331,504 78,149,995
Accrued interest receivable 1,852,765 1,580,820
Premises and equipment 2,443,122 2,517,654
Other assets 2,225,930 2,121,827
------------------------------
TOTAL $ 177,078,322 $ 180,631,014
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Demand $ 22,217,820 $ 25,210,638
Savings and N.O.W.s
72,994,385 73,507,040
Time 52,720,346 51,106,643
------------------------------
Total deposits 147,932,551 149,824,321
Securities sold under
repurchase agreements 2,002,535 4,034,780
Federal reserve note account 996,413 875,656
Accrued interest payable 527,189 549,430
Other liabilities 441,045 542,579
------------------------------
Total liabilities 151,899,733 155,826,766
------------------------------
SHAREHOLDERS' EQUITY
Common stock - $10 par value; 6,000,000 shares
authorized; 1,144,202 shares issued 11,442,020 11,442,020
Surplus 4,689,800 4,689,800
Retained earnings 9,056,737 8,732,378
Less: Treasury shares (at cost): 350 and 2,105 shares as of
March 31, 1997 December 31, 1996, respectively (9,968) (59,950)
------------------------------
Total shareholders' equity 25,178,589 24,804,248
------------------------------
TOTAL $ 177,078,322 $ 180,631,014
==============================
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
<TABLE>
<CAPTION>
NATIONAL BANCSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three months ended
3/31/97 3/31/96
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,804,340 $1,760,886
Interest on federal funds sold 100,157 83,796
Interest and dividends
on investments
US government obligations 661,541 590,769
Obligations of states and
political subdivisions 252,401 255,633
Other securities 389,613 474,374
---------------------------
Total interest income 3,208,052 3,165,458
INTEREST EXPENSE:
Interest on deposits 1,196,262 1,170,217
Expense of funds purchased 35,881 23,507
---------------------------
Total interest expense 1,232,143 1,193,724
---------------------------
Net interest income 1,975,909 1,971,734
PROVISION FOR LOAN LOSSES 30,000 45,000
---------------------------
Net interest income after
provision for loan losses 1,945,909 1,926,734
NONINTEREST INCOME 189,744 189,905
NONINTEREST EXPENSE:
Salaries and employee benefits 680,189 699,800
Net occupancy expense 109,070 99,167
Data processing expense 179,359 180,345
Franchise tax 88,875 82,531
FDIC premium 4,065 500
Other expenses 351,895 313,833
---------------------------
Total noninterest expense 1,413,453 1,376,176
---------------------------
INCOME BEFORE INCOME TAXES 722,200 740,463
INCOME TAXES 162,105 166,421
---------------------------
NET INCOME $ 560,095 $ 574,042
===========================
EARNINGS PER COMMON SHARE * $ 0.49 $ 0.50
===========================
</TABLE>
* 1996 Earnings per common share have been restated for 25% stock dividend. See
Note 1. See notes to consolidated financial statements
4
<PAGE> 5
<TABLE>
<CAPTION>
NATIONAL BANCSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three Months Ended
03/31/97 03/31/96
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 560,095 $ 574,042
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and Amortization 160,049 150,512
Provision for Loan Losses 30,000 45,000
Changes in Operating Assets and Liabilities (425,659) (318,688)
-----------------------------
Total Adjustments (235,610) (123,176)
-----------------------------
Net Cash Provided by Operating Activities 324,485 450,866
Cash Flows From Investing Activities:
Proceeds from Maturities of Investments 2,954,177 1,692,901
Purchases of Investment Securities (4,000,000) (1,000,000)
Capital Expenditures (11,112) (119,265)
Net (Increase) in Loans (211,508) (1,574,743)
Decrease in Other Assets 86,025 46,822
-----------------------------
Net Cash (Used in) Investing Activities (1,182,418) (954,285)
Cash Flows from Financing Activities:
Net (Decrease) in Demand
and Savings Accounts (3,505,473) (2,034,366)
Net Increase in time deposits 1,613,703 14,193
Net (Decrease) in Short-Term Borrowings (1,911,488) (2,079,172)
Dividends Paid (354,050) (336,763)
Issuance of Stock under Dividend Reinvestment Plan 63,179 50,086
-----------------------------
Net Cash (Used in) Financing Activities (4,094,129) (4,386,022)
-----------------------------
Net Change in Cash and Cash Equivalents (4,952,062) (4,889,441)
Cash and Cash Equivalents at Beginning of the Period 18,994,813 17,240,849
-----------------------------
Cash and Cash Equivalents at End of the Period $ 14,042,751 $ 12,351,408
=============================
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 1,254,384 $ 1,239,947
Income Taxes $ 63,370 $ 82,569
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 March 31, 1997, the consolidated
statements of earnings for the three month periods ended March 31, 1997 and
1996, and the consolidated statements of cash flows for the three month periods
ended March 31, 1997 and 1996 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, 1996.
Operating results for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997.
A five for four (25%) stock dividend was declared on October 15,
1996. The record date for the stock dividend was October 31, 1996 and the issue
date was November 15, 1996. 361.75 fractional shares calculated were paid in
cash, resulting in 1,144,202 shares issued following the stock dividend.
Accordingly, earnings per common share for the three months ended March 31, 1996
have been restated to reflect the increased number of shares.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
Balance Sheets
Total assets decreased $3.6 million or 2.0% below 12/31/96. Cash and
due from banks decreased approximately $0.5 million, mainly the result of lower
cash on hand and balances maintained at the Federal Reserve at the end of the
quarter as compared to 12/31/96. Federal funds sold decreased $4.5 million or
41.3% due to a decrease in deposits and securities sold under repurchase
agreements. Investment securities available for sale decreased $0.1 million or
2.2% from 12/31/96. Total investment securities held to maturity increased $0.9
million from 12/31/96 due to purchases of agency and corporate securities less
maturities and early calls by issuers. Net loans increased $0.2 million or 0.2%
due to increased demand in the commercial loan and real estate mortgage loan
areas.
Total deposits decreased $1.9 million or approximately 1.3% below
12/31/96 due to a cyclical drop in deposits and increased competition locally
for deposits. Non-interest bearing demand accounts decreased by 11.9%, non-time
interest bearing accounts decreased by 0.7% and time deposits increased by 3.2%.
Securities sold under repurchase agreements decreased $2.0 million below
12/31/96. Total shareholders' equity increased $0.4 million or 1.5% over
12/31/96.
6
<PAGE> 7
Statements of Cash Flows
Net cash provided by operating activities for the first three months of
1997 was $324 thousand as compared to $451 thousand for the same period in 1996.
Net cash used in investing activities was $1.2 million due primarily to a net
increase in investments. Net cash of $4.1 million was used by financing
activities primarily as a result of the decrease in total deposits and
short-term borrowings. As a result, cash and cash equivalents decreased $5.0
millon during the first three months of 1997. With total cash and cash
equivalents of $14.0 million as of 3/31/97, 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 3/31/97.
<TABLE>
<CAPTION>
REGULATORY CAPITAL
(Dollars in Tangible Core Risk Based
Thousands) Capital* Capital** Capital**
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
regulatory
capital $24,000 13.60% $24,000 21.83% $25,160 22.89%
Fully phased
in regulatory
capital
requirement 3,529 2.00% 4,397 4.00% 8,793 8.00%
---------------------------------------------------------------------------
Regulatory
capital
excess $20,471 11.60% $19,603 17.83% $16,367 14.89%
===========================================================================
<FN>
*Tangible Assets $176,451 (thousands)
** Adjusted risk based assets $109,918 (thousands)
</TABLE>
RESULTS OF OPERATIONS
The Company is on a fiscal year ending December 31st. Interest income
totaled $3.2 million or $42 thousand higher for the three months ended 3/31/97
as compared to the same period in 1996. Interest expense was $1.2 million for
the three months ended 3/31/97 or $38 thousand above 1996. This caused an
increase of $4 thousand in net interest income or approximately 0.2% for the
three month period ended 3/31/97 as compared to 3/31/96.
Net interest rate margins were 5.19% and 5.33% for the first three
months of 1997 and 1996, respectively. Interest income yields decreased 12 basis
points as compared to interest costs which increased 1 basis point in 1997 over
1996.
7
<PAGE> 8
Provision for loan losses were $30,000 and $45,000 for the three month
periods ended 3/31/97 and 3/31/96,respectively. Net charge offs for the three
months ended 3/31/97 were $21 thousand as compared to a net recoveries of $21
thousand for the same period in 1996.
Noninterest income was $190 thousand for the three months ended 3/31/97
and 3/31/96.
Noninterest expense was $1.4 million for the three months ended 3/31/97
or 2.7% above the same period ended 3/31/96, resulting from increases in net
occupancy, franchise tax, depreciation,marketing, postage and freight expenses
Net income was $560 thousand for the three months ended 3/31/97 or 2.4%
below the same quarter of 1996. This was caused primarily by higher non-interest
expenses.
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
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 dated March, 27, 1997 was
previously filed with the SEC on March 20,
1997.
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
</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 3/31/97.
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: April 28, 1997 /s/Charles J. Dolezal
----------------------- ------------------------------------
Charles J. Dolezal, President
Date: April 28, 1997 /s/Lawrence M. Cardinal, Jr.
----------------------- ------------------------------------
Lawrence M. Cardinal, Jr., Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,702,751
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,340,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,051,975
<INVESTMENTS-CARRYING> 71,130,275
<INVESTMENTS-MARKET> 71,857,000
<LOANS> 79,491,881
<ALLOWANCE> 1,160,377
<TOTAL-ASSETS> 177,078,322
<DEPOSITS> 147,932,551
<SHORT-TERM> 2,998,948
<LIABILITIES-OTHER> 968,234
<LONG-TERM> 0
<COMMON> 11,442,020
0
0
<OTHER-SE> 13,736,569
<TOTAL-LIABILITIES-AND-EQUITY> 177,078,322
<INTEREST-LOAN> 1,804,340
<INTEREST-INVEST> 1,303,555
<INTEREST-OTHER> 100,157
<INTEREST-TOTAL> 3,208,052
<INTEREST-DEPOSIT> 1,196,262
<INTEREST-EXPENSE> 1,232,143
<INTEREST-INCOME-NET> 1,975,909
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,413,453
<INCOME-PRETAX> 722,200
<INCOME-PRE-EXTRAORDINARY> 560,095
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 560,095
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
<YIELD-ACTUAL> 5.19
<LOANS-NON> 470,435
<LOANS-PAST> 126,676
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,221,448
<ALLOWANCE-OPEN> 1,150,917
<CHARGE-OFFS> 29,364
<RECOVERIES> 8,824
<ALLOWANCE-CLOSE> 1,160,377
<ALLOWANCE-DOMESTIC> 93,901
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,066,476
</TABLE>
