UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File Number:
March 31, 1996 0-15204
NATIONAL BANKSHARES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1375874
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 South Main Street
P.O. Box 90002
Blacksburg, Virginia 24062-9002
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (540)552-2011
-------------
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 issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
- ------------------------------- ---------------------------------
COMMON STOCK, $2.50 PAR VALUE 1,714,152
(This report contains 21 pages) <PAGE>
NATIONAL BANKSHARES, INC.
FORM 10-Q
INDEX
Page
----
PART I FINANCIAL INFORMATION
- --------------------------------
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS, MARCH 31, 1996
AND DECEMBER 31, 1995 4-5
CONSOLIDATED STATEMENTS OF INCOME,
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 6
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY, THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 8-9
SELECTED CONSOLIDATED FINANCIAL DATA 10-14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15-18
PART II OTHER INFORMATION
- ----------------------------
ITEMS 1 - 3 - LEGAL PROCEEDINGS; CHANGES IN
SECURITIES; DEFAULTS UPON SENIOR SECURITIES 19
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 19
ITEM 5 - OTHER INFORMATION 19
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 - K 19
SIGNATURES 20
-2-<PAGE>
PART I
------
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of National Bankshares, Inc. (Bankshares)
and its wholly-owned subsidiary, The National Bank of Blacksburg (NBB), conform
to generally accepted accounting principles and to general practices within the
banking industry. The accompanying interim period consolidated financial
statements are unaudited; however, in the opinion of management, all
adjustments consisting of normal recurring adjustments which are necessary for
a fair presentation of the consolidated financial statements have been
included. The results of operations for the three months ended March 31, 1996
are not necessarily indicative of results of operations for the full year or
any other interim period. The interim period consolidated financial statements
and financial information included herein should be read in conjunction with
the notes to consolidated financial statements included in the Corporation's
1995 Annual Report to Stockholders and additional information supplied in the
1995 Form 10-K.
-3-<PAGE>
CONSOLIDATED BALANCE SHEETS
NATIONAL BANKSHARES, INC.
(UNAUDITED)
MARCH 31, 1996 AND DECEMBER 31, 1995
MARCH 31, DECEMBER
($000's) 1996 31, 1995
========= ========
ASSETS
Cash and due from banks $ 4,707 5,405
Federal funds sold 7,745 ---
Securities available for sale, at fair value 26,859 26,571
Securities held to maturity (fair value
$40,228 in 1996 and $40,866 in 1995) 39,792 40,166
Mortgage loans held for sale 574 880
Loans:
Real estate construction loans 5,389 6,007
Real estate mortgage loans 31,627 31,798
Commercial and industrial loans 41,643 40,749
Loans to individuals 48,071 48,132
-------- --------
Total loans 126,730 126,686
Less unearned income on loans (1,566) (1,633)
-------- --------
Loans, net of unearned income 125,164 125,053
Less allowance for loan losses (2,059) (2,080)
-------- --------
Loans, net 123,105 122,973
-------- --------
Bank premises and equipment, net 2,676 2,685
Accrued interest receivable 1,955 1,667
Other real estate owned, net 739 739
Other assets 2,414 2,303
-------- --------
Total assets $210,566 203,389
======== ========
LIABILITIES' AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits 24,754 22,861
Interest-bearing demand deposits 55,788 54,143
Savings deposits 15,192 15,153
Time deposits 90,261 87,516
-------- --------
Total deposits 185,995 179,673
-------- --------
Accrued interest payable 267 258
Other liabilities 1,090 904
-------- --------
Total liabilities 187,352 180,835
-------- --------
-4-<PAGE>
Stockholders' equity:
Preferred stock of no par value. Authorized
5,000,000 shares; none issued and outstanding --- ---
Common stock of $2.50 par value. Authorized
5,000,000 shares; issued and outstanding
1,714,152 in 1996 and 1995 4,285 4,285
Surplus 1,187 1,187
Undivided profits 17,910 16,967
Net unrealized gains (losses) on
securities available for sale (168) 115
-------- --------
Total stockholders' equity 23,214 22,554
Commitments and contingent liabilities
-------- --------
Total liabilities and
stockholders' equity $210,566 203,389
======== ========
-5-<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
NATIONAL BANKSHARES, INC. AND SUBSIDIARY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
MARCH 31, MARCH 31,
($000's) 1996 1995
========= =========
INTEREST INCOME
Interest and fees on loans $3,049 2,711
Interest on federal funds sold 51 26
Interest on securities-taxable 616 680
Interest on securities-nontaxable 382 335
------ ------
Total interest income 4,098 3,752
------ ------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 206 112
Interest on other deposits 1,518 1,416
Interest on federal funds purchased 2 2
------ ------
Total interest expense 1,726 1,530
------ ------
Net interest income 2,372 2,222
Provision for loan losses 45 65
------ ------
Net interest income after provision
for loan losses 2,327 2,157
------ ------
NONINTEREST INCOME
Service charges on deposit accounts 181 166
Other service charges and fees 40 39
Credit card fees 110 91
Trust income 116 78
Other income 2 10
Realized securities gains (losses), net 2 (3)
------ ------
Total noninterest income 451 381
------ ------
NONINTEREST EXPENSE
Salaries and employee benefits 796 774
Occupancy and furniture and fixtures 142 136
Data processing and ATM 75 95
FDIC assessment --- 100
Credit card processing 97 88
Goodwill amortization 8 7
Net costs of other real estate owned 3 26
Other operating expense 402 350
------ ------
Total noninterest expense 1,523 1,576
------ ------
Income before income tax expense 1,255 962
Income tax expense 312 208
------ ------
Net income $ 943 754
====== ======
Net income per share $ 0.55 0.44
====== ======
-6-<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NATIONAL BANKSHARES, INC. AND SUBSIDIARY
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
NET
UNREALIZED
GAINS
(LOSSES) ON
SECURITIES
COMMON UNDIVIDED AVAILABLE
($000's) STOCK SURPLUS PROFITS FOR SALE TOTAL
======= ======= ========= =========== =======
Balances, December 31, 1994 $4,285 1,187 14,791 (126) 20,137
Net income --- --- 754 --- 754
Cash dividends --- --- --- --- ---
Change in net unrealized
gains on securities
available for sale, net
of income taxes of $50 --- --- --- 98 98
------ ------ ------ ----- ------
Balances, March 31, 1995 $4,285 1,187 15,545 (28) 20,989
====== ====== ====== ===== ======
Balances, December 31, 1995 $4,285 1,187 16,967 115 22,554
Net income --- --- 943 --- 943
Change in net unrealized
gains on securities
available for sale, net
of income taxes of $146 --- --- --- (283) (283)
------ ------ ------ ----- ------
Balances, March 31, 1996 $4,285 1,187 17,910 (168) 23,214
====== ====== ====== ===== ======
-7-<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
NATIONAL BANKSHARES, INC. AND SUBSIDIARY
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
MARCH 31, MARCH 31,
($000's) 1996 1995
========= =========
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 943 754
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 45 65
Depreciation of bank premises and equipment 78 98
Amortization of intangibles 30 41
Amortization of premiums and accretion of
discounts, net 19 31
Gains on bank premises and equipment
disposals --- (2)
Gains on maturities of securities available
for sale, net (2) ---
Gains on calls of securities held to
maturity, net --- ---
Gains on maturities of securities held to
maturity, net --- (18)
Net decrease in mortgage loans held for sale 306 245
Losses and writedowns on other real estate
owned --- ---
(Increase) decrease in:
Accrued interest receivable (288) (199)
Other assets 81 32
Increase (decrease) in:
Accrued interest payable 9 (10)
Other liabilities 186 6
------ ------
Net cash provided by operating
activities 1,407 1,043
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in federal funds sold (7,745) (365)
Proceeds from calls and maturities of securities
available for sale 2,256 509
Proceeds from calls and maturities of securities
held to maturity 1,364 2,844
Purchases of securities available for sale (2,972) (500)
Purchases of securities held to maturity (1,008) (210)
Net increase in loans made to customers (188) (2,072)
Proceeds from disposal of other real estate owned --- 3
Recoveries on loans charged-off 11 13
Bank premises and equipment expenditures (145) (47)
Proceeds from sale of bank premises and equipment --- 2
------ ------
Net cash used in investing
activities (8,427) 177
------ ------
-8-<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in time deposits 2,745 3,542
Net increase (decrease) in other deposits 3,577 (6,064)
------ ------
Net cash provided by financing
activities 6,322 (2,522)
------ ------
Net increase (decrease) in cash and due from
banks (698) (1,302)
Cash and due from banks at beginning of year 5,405 6,648
------ ------
Cash and due from banks at end of three months $4,707 5,346
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION
Unrealized gains/losses in securities available
for sale (gross) $ (429) (148)
Deferred taxes 146 50
------ ------
Net unrealized gains (losses) on securities
available for sale $ (283) (28)
====== ======
Loans charged to the allowance for loan losses $ 77 41
====== ======
Interest paid $1,717 1,540
====== ======
-9-<PAGE>
NATIONAL BANKSHARES, INC. AND SUBSIDIARY
SELECTED CONSOLIDATED
FINANCIAL DATA
MARCH 31, DECEMBER 31,
(In $000's except for % data) 1996 1995 1995
====== ====== ============
Selected Ratios and Per Share Data:
----------------------------------
Net income $ 943 754 3,256
Return on average assets 1.84 1.53 1.62
Return on average equity 16.35 14.65 15.09
Net income per share $ 0.55 0.44 1.90
Book value per share $ 13.54 12.24 13.16
Selected Balance Sheet Data:
---------------------------
Securities $ 66,651 66,997 66,737
Loans, net 123,105 115,712 122,973
Total assets 210,566 198,053 203,389
Total deposits 185,995 176,114 179,673
Stockholders' equity 23,214 20,989 22,554
-10-<PAGE>
NATIONAL BANKSHARES, INC.
SELECTED BALANCE SHEET
DAILY AVERAGES
MARCH 31, DECEMBER 31,
($000's) 1996 1995
========= ============
Federal funds sold $ 4,201 4,258
Securities available for sale 26,758 13,528
Securities held to maturity 39,953 52,226
Loans, net of unearned income (1) 124,682 121,540
Total assets 205,039 201,906
Noninterest-bearing deposits 22,662 22,230
Interest-bearing deposits 157,922 156,911
Stockholders' equity 23,072 21,583
(1): Total includes mortgage loans held for sale
-11-<PAGE>
<TABLE>
AVERAGE BALANCES AND INTEREST RATES
<CAPTION>
($000 except for % data) MARCH 31, 1996 MARCH 31, 1995 DECEMBER 31, 1995
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE COST(1) BALANCE COST(1) BALANCE COST(1)
======= ======= ======= ======= ======= =======
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets $195,404 8.86% 186,464 8.49% 188,772 8.94%
Interest-bearing
liabilities 158,043 4.37% 154,404 3.96% 156,957 4.27%
----- ----- -----
Net interest spread 4.49% 4.53% 4.67%
===== ===== =====
Net interest margin 5.33% 5.21% 5.39%
===== ===== =====
<CAPTION>
INTEREST RATE RISK
Interest-sensitive days
($000's)
Cumulative interest-
sensitivity gap(2) 1-90 Days 91-180 Days 191-365 Days 1-5 Years >5 Years
========= =========== ============ ========= ========
<S> <C> <C> <C> <C> <C>
March 31, 1996 $(33,627) (29,413) (34,574) (4,836) 38,571
======== ======= ======= ====== =======
December 31, 1995 $(40,911) (37,622) (30,527) (1,865) 35,438
======== ======= ======= ====== =======
(1) Fully taxable equivalent basis. Yields on securities held for sale included in these yields are
calculated based on historical cost.
(2) Nonaccrual loans excluded.
</TABLE>
-12-<PAGE>
LOAN LOSS DATA
For the periods ended
MARCH 31, MARCH 31, DECEMBER 31,
($000's except for % data) 1996 1995 1995
========= ========= ============
Balance at beginning of period $ 2,080 2,006 2,006
Provision 45 65 275
Loans charged-off (77) (41) (269)
Recoveries 11 13 68
------- ------ ------
Balance at end of period $ 2,059 2,043 2,080
======= ====== ======
Ratio of allowance for loan
losses to loans net of
unearned income 1.65% 1.74% 1.66%
======= ====== ======
Ratio of net charge-offs to
average loans net of unearned
income (1) .21% .10% .17%
======= ====== ======
Ratio of allowance for loan
losses to nonperforming loans
(2) 481.07% 486.43% 495.24%
======= ====== ======
(1) Net charge-offs are on an annualized basis.
(2) Bankshares defines nonperforming loans as total nonaccrual and restructured
loans. Excluded are loans 90 days past due and still accruing.
-13-<PAGE>
Nonperforming Assets, Past Due and Impaired Loans
MARCH 31, DECEMBER 31, MARCH 31,
($000's except for % data) 1996 1995 1995
========= ============ =========
Nonperforming Assets
-------------------
Nonaccrual loans $ 428 420 420
Restructured loans --- --- ---
------ ------ ------
Total nonperforming loans 428 420 420
------ ------ ------
Foreclosed property 739 739 1,080
Other repossessed property 3 11 13
------ ------ ------
Total foreclosed and
repossessed properties 742 750 1,093
------ ------ ------
Total Nonperforming assets $1,170 1,170 1,513
====== ====== ======
Ratio of nonperforming assets to
loans net of unearned income and
foreclosed/repossessed assets .93% .93% 1.27%
====== ====== ======
Accruing Loans Past Due 90 Days or More
---------------------------------------
Past due 90 days or more and
still accruing $ 210 210 401
====== ====== ======
Ratio of loans past due 90
days or more to loans, net
of unearned income .17% .17% .34%
====== ====== ======
Impaired Loans
--------------
Total impaired loans $ 515 539 822
====== ====== ======
Impaired loans with a
valuation allowance 377 449 762
Valuation allowance (296) (319) (409)
------ ------ ------
Impaired loans net of allowance $ 81 130 353
====== ====== ======
Impaired loans with no
valuation allowance $ 138 90 60
====== ====== ======
Average recorded investment
in impaired loans $ 527 757 822
====== ====== ======
Income recognized on impaired loans $ 5 47 5
====== ====== ======
Amount of income recognized
on a cash basis $ 5 5 3
====== ====== ======
-14-<PAGE>
NATIONAL BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion is to set forth information about National
Bankshares, Inc. (Bankshares) financial condition and results of operations
which is not otherwise apparent from the consolidated financial statements and
other information included in this report. Reference should be to the
financial statements and other information included in this report as well as
the 1995 Form 10-K for an understanding of the following discussion and
analysis.
Results of Operations
- ---------------------
Net income for the three months ended March 31, 1996 was $943,000 which
represents an increase of $189,000 or 25.1% over the first three months of
1995. The improvement in net income was also reflected by the return on
average assets and equity which were 1.84% and 16.35%, respectively. For the
period ended March 31, 1995, the return on average assets was 1.53% and the
return on average equity was 14.65%.
Earnings per share at the end of the first quarter of 1996 was $0.55 per
share, an increase of $0.11 per share over the first quarter of 1995.
The overall improvement in performance was attributable to an improvement
in all major categories except income tax expense which increased as a result
of the higher level of taxable earnings.
Net Interest Income
- -------------------
Net interest income at the end of the first three months of 1996 was
$2,372,000, an increase of $150,000 or 6.75% over the same period in 1995. The
yield on earning assets increased by 37 basis points during that period while
the cost to fund earning assets rose only 25 basis points. The net increase
was primarily due to loan growth.
When compared to December 31, 1995 the net interest margin decreased by 6
basis points. Nominal growth in the loan and investment portfolio was
experienced during the first quarter of 1996. The growth that occurred in
earning assets was principally directed toward federal funds sold which had the
effect of improving liquidity, but resulted in a slight decline in the yield on
earning assets. At the same time the cost to fund earning assets was rising as
deposits moved into the more costly time deposit category. The average level
of noninterest bearing liabilities experienced only a nominal increase.
Provision for Loan Losses
- -------------------------
The provision for loan losses for the period ended March 31, 1996 was
$45,000, a decrease of $20,000 or 30.77% from the same period the previous
year. Management, based on information currently available, anticipates that
only nominal provisions will be made in order to prevent an excessive
deterioration in the ratio of the allowance for loan losses to loans net of
unearned income.
-15-<PAGE>
Noninterest Income
- ------------------
Noninterest income for the period ended March 31, 1996 was $451,000, an
increase of $70,000 or 18.37%. Service charges on deposits increased by 9.04%
and was primarily attributable to an increase in return check fees. Bankcard
fees also improved with increased levels of business activity. Trust Income,
which is dependent on the market values of assets managed, increased 48.72%.
Trust income also benefited from the acquisition of new business.
Noninterest Expense
- -------------------
Noninterest expense for the first three months of 1996 was down 3.36% when
compared to the same period in 1995. The primary reason for this decrease was
the decline in FDIC insurance premiums. In 1995 the Bank Insurance Fund
reached mandated levels and rates charged to well capitalized banks were
reduced to a minimum of $2,000 per year. Bankshares' subsidiary, The National
Bank of Blacksburg qualified for the reduced rate and in doing so reduced its
expense by approximately $100,000 from the previous year's first quarter.
Balance Sheet
- -------------
Total assets at the end of the first three months of 1996 increased 3.53%
from December 31, 1995. Average total assets during the same time period
increased 1.55%. Deposit growth accounted for the majority of the growth
rising 3.52% from December 31, 1995. During this period, noninterest-bearing
deposits grew by 8.28%, and by interest-bearing deposits 2.82%. Savings
deposits remained essentially flat due to the higher rates offered for time
deposits. Time deposits of $100,000 or more increased by $1,350,000 during the
first quarter of 1996.
Asset Quality
- -------------
Nonperforming loans, which included nonaccrual loans and restructured
loans but exclude loans past due 90 days and still accruing, totaled $428,000
at March 31, 1996 and $420,000 at December 31, 1996 and March 31, 1995,
respectively. Total foreclosed properties and other repossessed property have
reflected a declining trend during the period. The level of impaired loans,
while down from March 31, 1995, was at approximately the same level at March
31, 1996 as it was at year-end 1995. The overall composition of nonperforming
assets at March 31, 1996 did not change materially from December 31, 1995. The
ratio of net charge-offs to loans net of unearned income was .21% at March 31,
1996. At year-end December 31, 1995, the ratio was .17% and .10% for the
period ended March 31, 1995. While annualized basis net charge-offs for the
first quarter of 1996 were higher than those disclosed at December 31, 1995,
management, based on information currently available, does not believe this
slight uptick is the beginning of a significant downward trend in asset
quality.
While asset quality trends are generally favorable at present, management
cannot predict the duration of the current trend as it can be affected by
changes in the local and national economic conditions, the impact of which
cannot be precisely determined.
-16-<PAGE>
Interest Rate Risk
- ------------------
Beyond one year, Bankshares' cumulative interest sensitive position
reflects a slightly liability sensitive position indicating that the adverse
effect of rising rates or benefit from falling rates would dissipate in the one
to five year time period. As can be seen by the interest rate risk table
provided elsewhere in this report, rate sensitivity has improved in the one to
ninety day time frame. This improvement is largely due to an increase federal
funds sold which were at $7,745,000 at March 31, 1996 and $0 at December 31,
1995.
Management typically adjusts its asset/liability strategies during times
of rising and falling rates to minimize or maximize the impact of changing
economic conditions.
Liquidity
- ---------
Liquidity is the ability to provide sufficient cash levels to meet
financial commitments and to fund loan demand and deposit withdrawals. Net
cash from operating activities increased from $1,043,000 at December 31, 1995
to $1,406,000 at March 31, 1996. Net cash used in investing activities was
$8,427,000 with the majority of that cash invested in securities and federal
funds sold. Net cash from financing activities was $6,322,000. Cash and due
from banks declined slightly from December 31, 1995 as result of the
aforementioned activities.
Management is not aware of any trend, commitment or events that will
result in or that are reasonably likely to result in a material increase or
decrease in liquidity other than the proposed merger discussed below. The
proposed merger is expected to have a positive impact on Bankshares' liquidity.
Capital Resources and Stockholder Information
- ---------------------------------------------
Total stockholder equity increased $660,000 or 2.93% from December 31,
1995. The following table sets forth various ratios that banks capital is
measured. Bankshares continues to be well capitalized.
March 31, December 31, March 31,
1996 1995 1995
========= ============ =========
Capital Ratios
--------------
Common stockholders' equity 11.03% 11.09% 10.61%
Regulatory capital 11.48% 11.16% 11.18%
Risk weighted capital:
Tier 1 15.70% 15.01% 15.25%
Tier 2 16.96% 16.27% 16.51%
Leverage ratio 10.92% 10.31% 10.07%
-17-<PAGE>
Dividend
Common Stock Information 1996 1995 Per Share
and Dividends High Low High Low 1996 1995
------------------------- ---- --- ---- --- ---- ----
First quarter $26.50 24.00 23.50 21.50 --- ---
Second quarter --- --- 25.00 22.00 --- .30
Third quarter --- --- 25.00 23.00 --- ---
Fourth quarter --- --- 25.50 24.00 --- .33
Accounting Considerations
- -------------------------
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of."
SFAS No. 121 requires companies to review long-lived assets and certain
identifiable intangibles to be held, used or disposed of for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The adoption of this statement as of
January 1, 1996 did not have a significant effect on Bankshares' consolidated
financial statements.
Proposed Merger
- ---------------
In August of 1995, Bankshares and the Bank of Tazewell County (BTC)
entered into an affiliation agreement whereby Bankshares and BTC would merge.
Stockholders of Bankshares would receive an additional .11129 share of common
stock for each of their shares, and stockholders of BTC would receive one share
of Bankshares' common stock for each of their shares.
On April 23, 1996 BTC shareholder's approved the proposed merger. Final
regulatory approval was received from the Federal Reserve Bank on April 24,
1996. It is expected that the merger will become effective after the close of
business on May 31, 1996. (See Item 5, Other Information, Exhibit 1 of this
report).
-18-<PAGE>
NATIONAL BANKSHARES, INC.
PART II
OTHER INFORMATION
Items 1-3. Legal Proceedings; Changes in Securities; Defaults Upon Senior
Securities
None for the period ended
March 31, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
None for the period ended
March 31, 1996.
Item 5. Other Information
Exhibit I - Press Release Related to Proposed Affiliation
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Form 8-K
None
-19-<PAGE>
NATIONAL BANKSHARES, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Bankshares, Inc.
(Registrant)
Date: May 7, 1996 /s/ James G. Rakes
------------- -----------------------------
James G. Rakes, President and
Chief Executive Officer
Date: May 7, 1996 /s/ Joan C. Nelson
------------- -----------------------------
Joan C. Nelson, Treasurer
-20-<PAGE>
ITEM 5 - EXHIBIT I
NATIONAL BANKSHARES, INC.
- -------------------------------------------------------------------------------
100 South Main Street, P.O. Box 90002,
Blacksburg, Virginia 24062-9002/ (540) 552-2011
PRESS RELEASE
FOR IMMEDIATE RELEASE
May 1, 1996
NATIONAL BANKSHARES, INC. AND BANK OF TAZEWELL COUNTY
ANNOUNCE CLOSING DATE FOR THEIR AFFILIATION
AND DECLARATION OF DIVIDENDS
James G. Rakes, President and Chief Executive Officer of National
Bankshares, Inc. parent of The National Bank of Blacksburg, and R. E. Dodson,
President and Chief Executive Officer of Bank of Tazewell County, today jointly
announced that they presently anticipate that the affiliation between the two
institutions will take effect after the close of business on May 31, 1996. At
such time, Bank of Tazewell County will become a wholly owned subsidiary of
National Bankshares, Inc. and the shareholders of Bank of Tazewell County will
become shareholders of National Bankshares, Inc. The shareholders of Bank of
Tazewell County overwhelmingly approved the affiliation at a shareholders'
meeting last week and the final regulatory approval for the transaction was
received on April 24th. Mr. Rakes remarked that "We are pleased that the
shareholders of Bank of Tazewell County were so positive in their support of
our plans to affiliate. We are looking forward to the conclusion of the
process and to building an exceptional community bank holding company." Mr.
Dodson indicated that "My associates and I are enthusiastic about the direction
that Bank of Tazewell County will be heading and the prospects for the future
with the affiliation of a quality organization such as National Bankshares,
Inc. and an outstanding group of people they represent."
Mr. Dodson also noted that the May 31 closing date required the Bank of
Tazewell County to accelerate the payment of its semi-annual dividend which has
been historically paid in July. Mr. Dodson announced that the Bank's Board of
Directors has approved a $0.27 per share cash dividend payable on June 3, 1996
to shareholders of record on May 3, 1996.
National Bankshares, Inc. historically pays a semi-annual cash dividend in
June to its shareholders of record in May. Mr. Rakes stated that he did not
expect any change in this schedule. The Agreement and Plan of Merger also
provides that National Bankshares, Inc. will split its common stock ($2.50 par
value) by way of a stock dividend totalling 190,768 shares shortly before the
effective time of the affiliation in order to facilitate the exchange ratio.
Shareholders of Bank of Tazewell County who will become shareholders of
National Bankshares, Inc. will participate fully in any dividends declared by
National Bankshares, Inc. subsequent to the effective time of the affiliation.
Questions may be directed to James G. Rakes, at National Bankshares, Inc.,
(540) 552-2011 or to R. E. Dodson, at Bank of Tazewell County, (540) 988-5566.
-21-<PAGE>
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