10-K405 1 NATIONAL BANCSHARES FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended Dec. 31, 1994 Commission File Number 33-3711 NATIONAL BANCSHARES CORPORATION Ohio 34-1518564 State of incorporation I.R.S. Employer Identification No. 112 West Market Street, Orrville, Ohio 44667 Address of principal executive offices Registrant's telephone number: (216) 682-1010 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Stock, $10.00 Par Value Title of Class 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. __X__ State the aggregate market value of the voting stock held by non-affiliates of the registrant as of March 15, 1995: $26,357,616. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of March 15, 1995. Common Stock, $10.00 Par Value: 732,156 Documents Incorporated by Reference: - Portions of the registrant's Proxy Statement dated March 31, 1995, and previously filed March 10, 1995, are incorporated by reference into Part III. - Portions of the registrant's Annual Report to shareholders, December 31, 1994 are incorporated by reference in Parts I, II, IV. PAGE 1 2
Form 10-K Cross Reference Index Page Part I Item 1 - Business Description of Business 4 Financial Ratios - Note 1 A18 Daily Average Balance Sheets, Interest and Rates - Note 1 A17 Volume and Rate Variance Analysis 5 Rate Sensitivity Analysis 6 Investment Portfolio 7 Loan Portfolio 8 Summary of Loan Loss Experience 9 Deposits 10 Item 2 - Properties 4 Item 3 - Legal Proceedings 4 Item 4 - Submission of Matters to a Vote of Security Holders - None Part II Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters - Note 1 A7 Item 6 - Selected Financial Data - Note 1 A1 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation - Note 1 A2-7 Item 8 - Financial Statements - Note 1 A8-17 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - None Part III Item 10- Directors of the Registrant - Note 2 B3-4 Executive Officers of the Registrant 4 Item 11- Executive Compensation - Note 2 B8-9 Item 12- Security Ownership of Certain Beneficial Owners and Management - Note 2 B3-4 Item 13- Certain Relationships and Related Transactions Note 2 B10 Part IV Item 14- Exhibits, Financial Statement Schedules and Reports on Form 8-K Report of Deloitte & Touche, Independent Auditors A17 Financial Statements: - Note 1 Consolidated Balance Sheets as of December 31, 1994 and 1993 A8 Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 A9 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 A11 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 A10 Notes to Financial Statements - Note 1 A12-16 Reports on Form 8-K filed in fourth quarter of 1994: None Exhibit Table 12 Signatures 11 Appendix A - National Bancshares 1994 Annual Report to A Shareholders
PAGE 2 3 Note 1 - Incorporated by reference from the registrant's Annual Report to Shareholders for the year ended December 31, 1994 -- Appendix A Note 2 - Incorporated by reference from the registrant's proxy statement dated March 31, 1995 previously filed with the SEC on March 10, 1995 PAGE 3 4 Item 1 - Business: National Bancshares Corporation (the "Company"), incorporated in 1985, is a one bank holding company for First National Bank, Orrville, Ohio (the "Bank"). The formation was approved by shareholders on April 24, 1986 and consummated on June 2, 1986. The Bank offers a full line of services usually found in any commercial bank operation, including checking accounts, savings accounts, certificates of deposit, personal loans, loans to business and industry, installment loans, safety deposit boxes and credit cards. The Bank does not have trust powers and, therefore, does not offer trust services. The Bank operates nine full service offices and one limited service office in a market area comprising most of Wayne County, portions of western Stark County, northeastern Holmes County and southern Medina County. There are approximately 17 other banking and thrift organizations in the immediate market area. No major elimination of services presently offered is anticipated in the immediate future. The Bank is a member of the Federal Reserve System and its deposits are insured by the Federal Deposit Insurance Corporation. It is subject to supervision, examination and regulation by the Comptroller of the Currency. The Company is subject to supervision, examination and regulation by the Federal Reserve System. Management is not currently aware of any regulatory recommendations which if were to be implemented would have a material effect on the registrant. Item 2 - Properties: The headquarters of the Company and the Bank are located in Orrville, Ohio. The Bank has a total of nine banking office buildings which are located in Orrville, Dalton, Kidron, Smithville, Mt. Eaton, Apple Creek, Lodi and Seville, Ohio. All buildings are owned by the Bank with the exception of the Seville Office which is a leased facility. Item 3 - Legal Proceedings There were no legal proceedings other than ordinary routine litigation incidental to business during 1994. Item 10 - Executive Officers The Executive Officers of the Company are as follows: Name Age Position Charles J. Dolezal 42 President President of First National Bank Michael D. Hofstetter 42 Sr. Vice President & Secretary-Treasurer Sr. Vice President & Controller of First National Bank There is no family relationship between any of the above executive officers. Mr. Dolezal has been an executive officer of the Company since its formation in 1986 and the Bank during the past 5 years. Mr. Hofstetter was appointed Sr. Vice President and Secretary-Treasurer of the Company on January 1, 1990 and has been an executive officer of the Bank during the past 5 years. PAGE 4 5 VOLUME AND RATE VARIANCE ANALYSIS The following table represents a summary analysis of changes in interest income, interest expense and the resulting net interest income on a tax equivalent basis for the periods presented each, as compared with the preceding period. Volume is based on daily average balances.
(Dollars in thousands) 1994 versus 1993 1993 versus 1992 Increase (Decreases) Increase (Decreases) Due to Changes In Due to Changes In ----------------------------------------------------------- Net Net Volume Rate Change Volume Rate Change -------------------------- -------------------------- Interest Income Investment securities: Taxable $310 ($373) ($63) $194 ($361) ($167) Nontaxable 85 (31) 54 27 (142) (115) (tax equivalent basis)* Federal funds sold (81) 98 17 62 (53) 9 Loans (including nonaccrual loans) 259 (116) 143 100 (356) (256) -------------------------- -------------------------- Total interest Income (tax equivalent basis)* $573 ($422) $151 $382 ($911) ($529) ========================== ========================== Interest Expense Deposits Interest bearing checking $34 ($29) $5 $51 ($192) ($141) Savings 114 (133) (19) 273 (271) 2 Time, $100,000 and over (4) 47 43 36 (48) (12) Time, other (74) (36) (110) (337) (394) (731) Other funds purchased (13) 20 7 5 (15) (10) -------------------------- -------------------------- Total interest expense $57 ($131) ($74) $28 ($920) ($892) ========================== ========================== Changes in net interest income (tax equivalent basis)* $516 ($291) $225 $354 $9 $363 ========================== ========================== * Tax equivalence based on highest statutory tax rates of 34%.
PAGE 5 6 RATE SENSITIVITY ANALYSIS The following table summarizes the repricing opportunities of interest bearing assets and liabilities Gap Report December 31, 1994 (Millions of dollars)
3 Months 6 Months 12 Months 1-5 Years 5+ Years Period Accum. Period Accum. Period Accum. Period Accum. Period Accum. Rate Sensitive Assets: Fed Funds Sold $11.9 $11.9 $0.0 $11.9 $0.0 $11.9 $0.0 $11.9 $0.0 $11.9 Securities 1.6 1.6 5.1 6.7 4.2 10.9 48.2 59.1 31.0 90.1 Net Loans 18.1 18.1 6.3 24.4 16.5 40.9 12.9 53.8 5.1 58.9 -------------------------------------------------------------------------------------------- Total Sensitive Assets $31.6 $31.6 $11.4 $43.0 $20.7 $63.7 $61.1 $124.8 $36.1 $160.9 ============================================================================================ Rate Sensitive Liabilities Checking (1) $33.4 $33.4 $0.0 $33.4 $0.0 $33.4 $0.0 $33.4 $0.0 $33.4 Savings (2) 0.0 0.0 0.0 0.0 0.0 0.0 43.9 43.9 0.0 43.9 Time 18.8 18.8 6.8 25.6 7.0 32.6 11.5 44.1 0.3 44.4 Money Market 3.3 3.3 0.0 3.3 0.0 3.3 0.0 3.3 0.0 3.3 Borrow TT&L Note Account 1.0 1.0 0.0 1.0 0.0 1.0 0.0 1.0 0.0 1.0 -------------------------------------------------------------------------------------------- Total Sensitive $56.5 $56.5 $6.8 $63.3 $7.0 $70.3 $55.4 $125.7 $0.3 $126.0 Liabilities -------------------------------------------------------------------------------------------- Rate Sensitivity Gap ($24.9) ($24.9) $4.6 ($20.3) $13.7 ($6.6) $5.7 ($0.9) $35.8 $34.9 ============================================================================================ Gap Percentage 56% 56% 168% 68% 296% 91% 110% 99% 12033% 128% Gap/Total Assets -14% -14% 3% -12% 8% -4% 3% -1% 21% 20% Gap/Capital -113% -113% 21% -92% 62% -30% 26% -4% 162% 158% (1) Checking includes NOW and MMDA (2) Savings includes passbook and statement savings which do not have a preset repricing date and have been included in the 1-5 years due to the relative interest rate insensitivity. The potential impact on the net interest margin from modestly rising interest would be relatively insignificant due to the short duration of mismatch within the first 12 months. If interest rates were to immediately increase by 50 basis points, this could cause an increase interest expense greater than interest income. The potential impact would equate to lowering the current net interest margin by less than 5 basis points over the first 12 months.
PAGE 6 7 INVESTMENT PORTFOLIO The carrying amounts and distribution of the Company's investment securities held are summarized in the Annual Report (Appendix A, Page 13, Note 3. Investment Securities). The carrying amount, maturities and approximate weighted average yields (on a tax equivalent basis) at December 31, 1994 are as follows:
(Dollars in Total 0 to 1 yr 1 to 5 yrs 5 yrs and Thousands) over Amount Yield Amount Yield Amount Yield Amount Yield US Treasury $24,807 7.3% $3,951 6.5% $18,952 7.4% $1,904 8.1% US Agencies 14,962 8.0% 2,534 9.4% 6,670 7.9% 5,758 7.4% State & political subdivisions 17,699 9.5% 536 9.3% 2,961 11.7% 14,202 9.1% Other securities $32,488 7.3% 3,766 8.5% 19,625 7.2% 9,097 7.0% ----------------------------------------------------------------------------------------------- Total investment securities $89,956 7.9% $10,787 8.0% $48,208 7.7% $30,961 8.1% ============================================================================================= $6.4 million of investment securities have a remaining maturity more than 10 years. There was no single issuer of securities where the total book value of such securities exceeded 10% of shareholders' equity except for US government obligations.
PAGE 7 8 LOAN PORTFOLIO The detail of the loan portfolio balances are included in Note 4 of the Annual Report to Shareholders (Appendix A, Page 13, Note 4). MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES The following are approximate maturities and sensitivity to changes in interest rates of certain loans exclusive of real estate mortgages and consumer loans as of December 31, 1994.
Types of Loans 0 to 1 Year 1 to 5 Years 5 and Over Years Total (Dollars in Thousands) Commercial $6,308 $653 $290 $7,251 Real Estate Construction $226 $109 $54 $389 Above loans due beyond 1 year with: Predetermined interest rates $288 Adjustable interest rates $818
NONACCRUAL AND PAST DUE LOANS Generally, recognition of interest income is discontinued where reasonable doubt exists as to the collectability of the interest. Income from nonaccrual loans is recorded when received. The difference between interest income recognized on such loans and income that would have been recognized at original contractual rates is immaterial. The bank generally places loans on a non-accrual status when a default of principal or interest has existed for 90 days or more. The bank generally does not renegotiate loans due to deterioration in the financial position of the borrower. The amounts of renegotiated loans are not considered material.
(Dollars in Thousands) 12/31/94 12/31/93 90 Days Past Due and Accruing $59 $109 Nonaccruing Loans $111 $373
POTENTIAL LOAN PROBLEMS Management reviews the loan portfolio for potential loan problems on a monthly basis. The following loans were classified by management and include in the above nonaccrual and past due loan totals. The amount shown below is the outstanding loan balance which has not been reduced by collateral values.
(Dollars in Thousands) 12/31/94 12/31/93 Loss $0 $11 Doubtful 104 299 Substandard 750 1,244 OAEM 957 462 Watch 7 85 Total $1,818 $2,101
LOAN CONCENTRATIONS Due to the nature of our market area, it is management's opinion there are no significant loan concentrations of 10% of total loans to borrowers engaged in similar activities other than noted in the loan categories disclosed in Footnote 4 on Page 13 of the Annual Report to Shareholders. PAGE 8 9 SUMMARY OF LOAN LOSS EXPERIENCE The determination of the balance of the allowance for loan losses historically has been based on an overall analysis of the loan portfolio and reflects an amount, which, in management's judgment, is adequate to provide for potential loan losses. This analysis considers, among other things, the Company's loan loss experience, present and potential risks of the loan portfolio and general economic conditions. In addition, management considers the examinations of the loan portfolio by federal regulatory agencies and internal reviews and evaluations. The Company's allocation of the allowance for loan losses by category represents only an estimate for each category of loans based upon a detailed review of the loan portfolio by management. Transactions in the allowance for loan losses are maintained by three major loan categories and the summary of such transactions for periods indicated follows:
(Dollars in Thousands) 1994 1993 Balance at the beginning of period $606 $750 Loans charged off: Commercial & industrial 20 40 Real estate 15 183 Consumer 14 121 ---------------- ---------------- Total loans charged off 49 344 ---------------- ---------------- Recoveries of loans charged off: Commercial & industrial 30 4 Real estate 18 0 Consumer 106 16 ---------------- ---------------- Total recoveries 154 20 ---------------- ---------------- Net loans charged off -105 324 ---------------- ---------------- Provision charged to operating 180 180 expense ---------------- ---------------- Balance at end of period $891 $606 ================ ================ Ratio of net charge offs to average loans outstanding during the period -0.18 0.60 ================ ================ Distribution of allowance for Percent of loans Percent of loans loan losses by category at in each category in each category December 31. Amount to total loans Amount to total loans Commercial & industrial $97 16% $144 19% Real estate construction 0 1% 0 1% Real estate mortgages 5 69% 7 67% Consumer loans 10 14% 15 13% Unallocated 779 N/A 440 N/A -------- ---------------- -------- ---------------- $891 100% $606 100% ======== ================ ======== ================
PAGE 9 10 DEPOSITS The classification of average deposits and the average rate paid on such deposits for periods ending December 31, 1994, 1993 and 1992 is included in Analysis of Net Interest Earnings included in the Annual Report to Shareholders (Appendix A, Page 18). The summary of maturities of time deposits of $100,000 or more is included in footnote 7 of the financial statements included in the Annual Report to Shareholders (Appendix A, Page 14, Note 7). PAGE 10 11 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: 3-21-95 /s/ Charles J. Dolezal -------------------- ------------------------------------- Charles J. Dolezal, President DATE: 3-21-95 /s/ Michael D. Hofstetter -------------------- ------------------------------------- Michael D. Hofstetter, Secretary- Treasurer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. DATE: 3-21-95 /s/ Charles J. Dolezal -------------------- ------------------------------------- Charles J. Dolezal, Chairman DATE: 3-21-95 /s/ James L. Gerber -------------------- ------------------------------------- James L. Gerber, Director DATE: 3-21-95 /s/ Sara E. Balzarini -------------------- ------------------------------------- Sara E. Balzarini, Director DATE: 3-21-95 /s/ John E. Sprunger -------------------- ------------------------------------- John E. Sprunger, Director DATE: 3-21-95 /s/ James F. Woolley -------------------- ------------------------------------- James F. Woolley, Director DATE: 3-21-95 /s/ Paul H. Smucker -------------------- ------------------------------------- Paul H. Smucker, Director PAGE 11 12
EXHIBIT INDEX Exhibit No. If incorporated by Reference, Under Reg. Form 10-K Documents with Which Exhibit S-K, Item 601 Exhibit No. Description of Exhibits was Previously filed with SEC (3)(i) Amended Articles of Incorporation Registration Statement S-4 filed 3/31/86 File No. 33-03711 (3)(ii) Code of Regulations Registration Statement S-4 filed 3/31/86 File No. 33-03711 (11) A18 Computation of Earnings per Share Incorporated by reference (12) A18 Computation of Ratios Incorporated by reference (13) A 1994 Annual Report to Shareholders Incorporated by reference (21) A1 Subsidaries of the registrant Incorporated by reference (27) Financial Data Schedule Incorporated by reference No other Exhibits are required herewith pursuant Item 601 of Regulation S-K.
PAGE 12 EX-13 2 EXHIBIT 13 1 CORPORATE PROFILE National Bancshares Corporation is a one bank holding company with assets totaling over $173 million. First National Bank, its subsidiary, is headquartered in Orrville, Ohio. First National Bank serves eastern Wayne County, southern Medina County and western Stark County through ten banking offices, offering a variety of retail and commercial deposit and lending services. FINANCIAL HIGHLIGHTS
FINANCIAL POSITION Percentage (Year End Balances) 1994 1993 Change Total Assets $ 173,041,984 $ 157,825,715 9.64% Deposits 145,862,240 132,446,096 10.13% Loans - Net 56,215,091 53,200,635 5.67% Investment Securities 90,237,648 80,175,588 12.55% Shareholders' Equity 22,089,249 20,863,330 5.88% ------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Net Interest Income 7,071,263 6,862,832 3.04% Net Income 2,018,235 2,000,053 0.91% --------------------------------------------------- Regular Cash Dividends 736,730 689,162 6.90% Net Income Per Share* 2.76 2.73 0.91% Cash Dividends Per Share* 1.01 0.94 6.90% Book Value Per Share* $ 30.17 $ 28.50 5.88% --------------------------------------------------- *Per share restated for a 5 for 4 stock split on October 15, 1994.
ONE 2 FELLOW SHAREHOLDERS: [PICTURE OF CHARLES J. DOLEZAL] We are pleased to bring you this report of financial condition for the year ending 1994. Total assets reached an all time high exceeding $173 million. This was an increase of $15.2 million or 9.6% over the previous year. While almost $25 million in new loans were granted in 1994, net loans increased by over $3 million or 5.7%. Total deposits increased approximately $13.4 million or 10.1%. Total shareholders' equity increased by $1.2 million or 5.9%. This increase was realized entirely through retained earnings. Net income also hit an all time high increasing by approximately 1% over last year's previous all time high. During this past year, we have continued to be recognized by a number of independent bank analysis companies by receiving their top ratings. Due to our financial strength and stability, these ratings have placed us among the top banks in the country. We have worked hard to achieve this level of recognition and strive diligently to maintain our financial strength. This offers our customers and shareholders peace of mind in dealing with a fiscally sound financial institution. The purchase of the Seville Office from Bank One, Akron NA became final on December 16, 1994. As we entered the Seville market, we acquired over $7 million in deposit business. No loans were purchased in the transaction. The deposits were deployed immediately in earning assets in the form of investment securities. As we begin the process of developing additional loan business in this market, these deposits will be redeployed to meet our customer's borrowing needs. The existing full-time staff and management of this office were hired to provide continuity of service to the customers of the Seville area. We are very pleased to expand our market area in southern Medina County. We hope to increase our market penetration in this area as opportunities are developed. Total cash dividends declared in 1994 amounted to over $736 thousand or approximately $1 per share. This was an increase of over 6 cents per share or approximately 7% higher than 1993's cash dividends declared. Cash dividends to shareholders have increased each year consecutively for more than the past twenty-five years. We hope to continue this trend of increasing annual cash dividends. In addition to the cash dividends that were declared this past year, a 5 for 4 stock split payable in the form of a 25% stock dividend was issued in October. Total shareholders' equity peaked $22 million and equates to an approximate book value of $30.17 per share. Market value continued to increase with the market makers bid price at $35 per share at year end. As was stated earlier this year, we have been working on the formulation of a dividend reinvestment plan and a stock buyback plan. Through these plans the company may purchase its own stock in the open market, as availability lends itself, and will enable shareholders to reinvest their cash dividends into additional shares of common stock of National Bancshares Corporation without incurring brokerage fees. The company would utilize stock purchased from the open market to first satisfy the dividend reinvestment demand. If there is not enough available stock on the market to meet this need, we would then issue stock from authorized but unissued shares. We will need your approval to increase the number of authorized shares to help facilitate this plan. More information about this is contained in the proxy statement. TWO 3 Our commitment to the many communities we serve goes far beyond providing high quality financial services. This commitment extends to supporting many civic and charitable organizations which improves the quality of life in our communities. We embrace and support these many organizations with thousands of dollars of financial support in the form of contributions as well as countless hours of volunteer time by our employees. They give of their free time and expertise in leadership and volunteer positions in many community-oriented organizations assisting in making our communities a better place to live and work. Working shoulder to shoulder with community members, to help assure the continuing economic, cultural and social improvement of our communities, is our way of recognizing our civic and business obligations to our market area. During 1994 we experienced a significant change in the interest rate environment. As the economy, nationally, became rather heated, the Federal Reserve pushed short term interest rates up on six different occasions. This resulted in short term rates rising over 300 to 400 basis points in less than twelve months. These interest rate increases were made to ward off an increase of inflation which normally rises during periods of strong economic activity. The annual rate of inflation remained around 3% where it has been for some time with modest movements from month to month. Since the Federal Reserve has shown its resolve to control inflation, long term interest rates rose at a slower pace than that of short term creating a flattening of the yield curve. Economists are projecting that interest rates may peak and the economy may begin slowing in 1995. Time will tell if the Federal Reserve will be successful in slowing the economy without it sliding into a recession. With 1994 now behind us, we look toward 1995 with guarded optimism. As interest rates have been on the rise, downward pressure has been seen on net interest margins. Through careful asset and liability management, however, we have thus far minimized any significant negative effect to our net interest margin. As the new Congress has vowed to ease government's burden, we hope to see a reduction of the excessively expensive regulatory environment that we have experienced during recent years. The FDIC's bank insurance fund is estimated to reach its regulated minimum level of bank deposits in the second half of 1995. The deposit insurance premiums that skyrocketed in the early 90's should plummet back to lower levels at this time. We anxiously await this change to occur. It will have a positive impact to most commercial banks' bottom line. While we work diligently to maximize revenues from earning assets, we also strive to control operating costs on an ongoing basis. While 1995 will present many challenges, we continue to be optimistic about the future growth of both our company and industry. We appreciate your support and confidence as shareholders. We also endeavor to serve your financial needs as customers. Your business is appreciated as it also helps improve the value of your ownership. "CASH DIVIDENDS TO SHAREHOLDERS HAVE INCREASED EACH YEAR CONSECUTIVELY FOR MORE THAN THE PAST TWENTY-FIVE YEARS" /s/ Charles J. Dolezal Charles J. Dolezal President and Chairman THREE 4 FINANCIAL REVIEW 1994 proved to be another strong year for National Bancshares Corporation by setting a number of new records. Total assets grew approximately $15.2 million ending 1994 at $173,041,984. This represents a 9.6% increase over the previous year. The acquisition of the Seville Office in December of 1994 accounted for approximately $7.2 million of the end of the year growth. Average assets for 1994 increased to $155.9 million from $150.1 million in 1993 or an increase of $5.8 million. Net income for 1994 was $2,018,235 which exceeded 1993 net income by approximately 1%. Cash and due from banks was $8,261,107 and $8,242,624 for December 31, 1994 and 1993, respectively. Cash reserves are maintained at appropriate levels in order to meet customer needs and provide stability to the local economy with consideration given to security. Excess cash is prudently invested in order to maximize a safe and profitable return on assets. A significant portion of this account is in the normal processing of outgoing cash letters. Total investment securities grew approximately $10 million ending 1994 at $90,237,648 compared to $80,175,588 at the end of 1993. This increase was primarily due to the cash received through the acquisition of the Seville office. The average balance of taxable investment securities grew from $61.4 million in 1993 to $65.5 million in 1994 and average nontaxable investment securities were up approximately $909 thousand in 1994 over 1993. The market or fair value of the total portfolio was $88,813,739 and $84,009,039 as of December 31, 1994 and 1993, respectively.
INVESTMENT SECURITIES 94 93 92 91 90 90,237,648 80,175,588 74,894,150 74,278,941 64,634,657
U.S. treasury and agency obligations increased by approximately $7 million or 25.4% with balances of $34,408,100 on December 31, 1994 compared to $27,431,486 on December 31, 1993. The net market depreciation of this category was approximately $522 thousand as of December 31, 1994. Mortgage backed securities were $5,360,658 and $6,610,464 on December 31, 1994 and 1993, respectively. This was a decline of $1.2 million or 18.9%. The net market depreciation of these securities was $223 thousand on December 31, 1994. Obligations of states and political subdivisions ended 1994 at $17,698,561 which was .4% below the $17,767,156 balance on December 31, 1993. The net market appreciation was approximately $73 thousand as of December 31, 1994. The change in the federal tax laws in 1986 has generally reduced the supply of bank qualified tax free security issues. However, to assist in local development, the bank actively purchases bonds issued by local municipalities, school systems and other public entities when opportunities present themselves. Other securities ended 1994 at $32,770,329 which was 15.5% higher than the December 31, 1993 balance of $28,366,482. This group of securities is primarily comprised of high quality corporate bonds and notes. The market or fair value of these securities were $32,018,002 or approximately $752 thousand below the carrying amount as of December 31, 1994. Federal funds sold were $11,885,000 and $11,780,000 as of December 31, 1994 and 1993, respectively. Average balances decreased during the year with 1994 averaging $7.1 million compared to $9.8 million during 1993. The lower average balances were the result of growth in loans and investment securities. Federal funds sold are overnight investments with our correspondent banks. This is a significant investment tool that is used to maximize the earning assets of the bank. Total net loans increased by approximately $3 million or 5.7% during 1994. Net loan balances were $56,215,091 and $53,200,635 on December 31, 1994 and 1993 respectively. Average net loans posted an increase of $2.9 million with a yearly average of $55.1 million for 1994. Loans collateralized by real estate were $40,541,407 on December 31, 1994 as compared to $37,130,453 as of December 31, 1993. There was a $2.5 million increase in commercial real estate loans and a $1.1 million increase in residential mortgages. However, home equity loans decreased
LOANS 94 93 92 91 90 56,215,091 53,200,635 54,766,115 47,080,705 47,631,633
FOUR 5 $42 thousand and construction loans declined by $170 thousand. Consumer loans totaling $7,253,952 on December 31, 1994 were 10.4% above the 1993 ending total of $6,571,635. The unearned income associated with these consumer loans continued to decrease indicating the consumers demand for simple rate loans. Commercial loans were $7,250,601 and $7,948,409 as of December 31, 1994 and 1993, respectively. Credit card loans increased slightly during the year with balances of $812,737 on December 31, 1994. Other loans decreased $251 thousand during 1994 ending the year at $1,965,743. The allowance for loan losses was $890,666 and $605,792 as of December 31, 1994 and 1993, respectively. The allowance for loan losses to total loans percentages were 1.56% and 1.13% and net charge-off to total loans percentages were (.18%) and .60% for 1994 and 1993, respectively. The net recovery for 1994 was primarily in the commercial loan area. As with any charge-off, the bank continues to attempt recovery where feasible. Management reviews the allowance for loan losses on a regular basis to determine the adequacy of the reserve. In the normal course of business, the bank makes commitments to lend money to various customers. These commitments totaled approximately $21.9 million as of December 31, 1994. They are to businesses and individuals for general credit, real estate construction and letters of credit. Accrued interest receivable ended 1994 at $1,662,369 which was a 7.6% increase over December 31, 1993. Accrued interest receivable is interest income earned on investment securities and loans, but not yet received.
DEPOSITS 94 93 92 91 90 145,862,240 132,446,096 125,296,209 118,394,001 112,529,772
Premises and equipment totaled $2,378,202 on December 31, 1994 as compared to $2,453,677 on December 31, 1993. Improvements and repairs to bank buildings and equipment are performed as needed to keep them in good working order in an effort to provide convenient and pleasant banking offices to meet our customers needs. Other assets totaled $2,402,567 and $427,558 as of December 31, 1994 and 1993, respectively. These assets mainly include intangible assets, prepaid expenses and other real estate owned. The increase in 1994 was primarily a combination of the acquisition premium for the Seville Office and the funding of the directors' retirement plan. The approximate $15.2 million increase in total assets was fueled by a strong growth in deposits in existing markets and the acquisition of the Seville Office. Total deposits posted a $13.4 million or 10.1% increase ending 1994 at $145,862,240 as compared to $132,446,096 on December 31, 1993. Approximately $7.2 million of this increase was due to the acquisition of the Seville Office on December 16, 1994. Average deposits increased from $126.2 million in 1993 to $131.2 million during 1994. Demand deposits which represent non-interest bearing checking accounts ended 1994 at $24,036,115 which was a growth of 10.6% over the December 31, 1993 balance of $21,729,520. The average demand accounts for 1994 were $20.8 million as compared to $18.7 million in 1993. Interest bearing checking accounts finished 1994 at $33,430,545 in comparison to $28,367,021 a year earlier. This was an increase of $5.1 million or 17.9%. Average balances grew $1.2 million from $28.3 million in 1993 to $29.5 million in 1994. Interest bearing checking accounts include our Negotiable Order of Withdrawal accounts and Money Market Deposit Accounts. Savings accounts totaled $43,868,324 on December 31, 1994 or $1.4 million above the end of the previous year. Average savings accounts increased from $39.9 million during 1993 to approximately $43.3 million in 1994. First National offers both passbook and statement savings accounts. Total time deposits were $44,527,257 and $39,837,641 as of December 31, 1994 and 1993, respectively. This 11.8% growth in total time deposits was a combination of increases in both deposits less than $100,000 and deposits of $100,000 and greater. Average time balances dropped approximately $1.8 million giving 1994 an average time deposit balance of $37.6 million as compared to $39.4 million in 1993.
NET INCOME 94 93 92 91 90 2,018,235 2,000,053 1,823,340 1,696,972 1,605,336
FIVE 6 Securities sold under agreements to repurchase were $3,269,919 on December 31, 1994 in comparison to $2,765,004 at the end of 1993 or approximately $505 thousand higher. Federal reserve note account ended both 1994 and 1993 at $1 million. The note account is determined by the cash needs of the federal government. The average of other funds purchased decreased in 1994 to $2.4 million from $2.9 million during 1993. Other liabilities which include accrued interest payable, dividends declared not yet payable and other accrued expenses increased in 1994 with balances of $820,576 and $751,285 as of December 31, 1994 and 1993, respectively. Shareholders' equity exceeded $22 million during 1994 with an ending balance of $22,089,249 on December 31, 1994. This is an increase of $1.2 million or 5.9% above the 1993 ending balance of $20,863,330. This growth was through retained earnings which equaled $1.67 per share raising the book value per share to $30.17 on December 31, 1994 as compared to $28.50 on December 31, 1993. Under the risk based capital regulations with an 8% minimum, the total capital to risk based assets of 20.45% on December 31, 1994 was more than twice the minimum required by federal regulations. The bank has remained in a very favorable position when compared to its peer group in the area of capitalization. In summary, the corporation generally grew in most major areas of the balance sheet through 1994 noting specifically increases in total investments, total deposits and shareholders' equity with the total assets ending 1994 at $173,041,984 or 9.6% above 1993 final balances.
DIVIDENDS PER SHARE 94 93 92 91 90 1.01 0.94 0.86 0.81 0.79
LIQUIDITY Liquidity is the consideration of the corporation's ability to meet the necessary outgoing cash flow needs. Cash equivalents for the cash flow statement is composed of $8.3 million in cash and due from banks and $11.9 million in federal funds sold with a combined total in excess of $20 million. Therefore, management considers that the corporation is in a good liquidity position to meet the demands of its customers and the local economy. RESULTS OF OPERATIONS 1994 concluded with net income setting a new record high of $2,018,235 or approximately 1% over 1993 net income of $2,000,053. The primary source of income continues to be interest on loans and other investments with additional revenues generated from fees on non-interest rated services. Interest and fees on loans of $4,737,318 for 1994 was above 1993 by 3.1% or approximately $144 thousand. The increase in average loan volume more than offset the decrease in average interest yields. Interest on federal funds sold was $314,566 and $297,814 for 1994 and 1993 respectively. This slight increase of $17 thousand was the result of higher average interest yields during 1994 even though the volume of average funds sold dropped from $9.8 million in 1993 to $7.1 million in 1994. Interest on taxable investment securities declined by approximately $63 thousand ending 1994 at $4,640,286. This 1.3% drop in interest income was due to the greater effect of lower average interest rates as compared to increased average investment balances. Interest on obligations of states and political subdivisions totaled $1,073,839 for 1994 which was $36 thousand or 3.4% above 1993. The average balances increased $909 thousand which was enough to offset the decline in average tax equivalent yield from 9.37% in 1993 to 9.20% in 1994. Total interest income of $10,766,011 was $134 thousand higher than 1993's total of $10,632,243 as a result of the increasing balance volumes more than offsetting the decreasing average yields in loans and investments. Interest on deposits totaled $3,603,025 in 1994 as compared to $3,684,743 in 1993. This $82 thousand decrease which equaled a 2.2% drop reflected the greater impact of lower average rates than the increasing balances. Average balances increased in demand deposit and savings accounts and declined in time certificates of deposits.
SHAREHOLDERS' EQUITY 94 93 92 91 90 22,089,249 20,863,330 19,560,804 18,365,897 17,259,840
SIX 7 Interest expense on other funds purchased was $91,723 or approximately $7 thousand more than 1993. This was the result of rising average interest rates more than offset the slightly lower average balances. Net interest income before provision for loan losses increased by 3% in 1994 totaling $7,071,263 as compared to $6,862,832 in 1993. The net interest margin which is calculated on a tax equivalent basis decreased from 5.28% in 1993 to 5.24% in 1994 reflecting a slightly lowering interest margin for the company. The bank provides for potential loan losses throughout the year. In 1994 and 1993 this provision expense was $180,000. As previously mentioned, net charge-off to total loans was a net recovery of .18% in 1994 and a net charge-off of .60% in 1993. Net interest income after loan losses provision was $6,891,263 in 1994 which was $208 thousand or 3.1% above 1993's total. Noninterest income totaled $740,183 and $702,636 for 1994 and 1993, respectively. Noninterest income is primarily comprised of checking account fees which were $487 thousand in 1994 as compared to $485 thousand in 1993. Other noninterest income includes safety deposit box rents, net security gains/losses and other miscellaneous fees and collections.
AVERAGE ASSETS 94 93 92 91 90 155,897,232 150,090,260 143,942,597 134,508,201 126,449,736
Noninterest expenses were $5,152,378 for 1994 in comparison to $4,924,868 in 1993. This was a $228 thousand or 4.6% increase over 1993. Generally there were increases in all categories of non-interest expense which include salaries and employee benefits, data processing fees, net occupancy expenses, State of Ohio franchise tax, FDIC insurance premiums and miscellaneous other expenses. FDIC premium rates remained constant for 1994 and the bank has been assigned the lowest premium rate for the first half of 1995 due to its high capitalization level and favorable regulatory evaluations. Income tax provision was $460,833 and $460,547 for 1994 and 1993, respectively. Net income for 1994 set a new record at $2,018,235 or approximately 1% higher than 1993's total of $2,000,053. This equates to be $2.76 per share as compared to $2.73 per share in 1993. Cash dividends declared during 1994 were approximately $1.01 per share or $.07 per share above 1993's dividend of $0.94 per share. The dividend payout percentage for 1994 was 36.5% of net income. After dividends declared, $1.2 million was added to shareholder equity through retained earnings. Return on average equity was 9.37% and 9.88% for 1994 and 1993, respectively. Return on average assets was a respectable 1.29% in 1994 and 1.33% in 1993. PRICE RANGES OF COMMON STOCK The Shares of common stock of National Bancshares Corporation are traded on the local over-the-counter market primarily with brokers in the Corporation's service area. The stock prices below reflect inter-dealer bid prices, without adjustment for retail markups, markdowns or commissions and may not represent actual transactions. ------------------------------------------------------------------------------ 1994 High Low Dividends per Share First Quarter 32.01 31.21 .19 Second Quarter 32.81 32.01 .19 Third Quarter 32.81 32.81 .19 Fourth Quarter 35.00 32.81 .43 ------------------------------------------------------------------------------ 1993 High Low Dividends per Share First Quarter 26.26 26.26 .18 Second Quarter 28.81 26.26 .18 Third Quarter 29.61 28.81 .18 Fourth Quarter 31.21 29.61 .42 ------------------------------------------------------------------------------
Per share information restated for a 5 for 4 stock split on October 15, 1994. A copy of the Corporation's 1994 Annual Report on Form 10-K as filed with the SEC will be furnished free of charge to shareholders upon written request to the Corporation. SEVEN 8 CONSOLIDATED BALANCE SHEETS December 31, 1994 and 1993 ASSETS 1994 1993 Cash and due from banks (Note 2) $ 8,261,107 $ 8,242,624 Federal funds sold 11,885,000 11,780,000 Investment securities - held to maturity (approximate market or fair value $84,126,129 and $84,009,039 - Note 3) 85,550,038 80,175,588 Investment securities - available for sale (amortized cost $4,755,846 - Note 3) 4,687,610 Loans, less allowance for loan losses of $890,666 and $605,792 (Note 4) 56,215,091 53,200,635 Accrued interest receivable 1,662,369 1,545,633 Premises and equipment - net (Note 6) 2,378,202 2,453,677 Other assets 2,402,567 427,558 ------------------------------------ TOTAL $ 173,041,984 $ 157,825,715 ==================================== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits (Note 7) $ 145,862,240 $ 132,446,096 Securities sold under repurchase agreements 3,269,919 2,765,004 Federal reserve note account 1,000,000 1,000,000 Accrued interest payable 374,890 308,313 Dividends payable 314,827 304,708 Other accrued expenses 130,859 138,264 ------------------------------------ Total liabilities 150,952,735 136,962,385 COMMITMENTS (Note 5) SHAREHOLDERS' EQUITY (Note 13): Common stock - $10 par value; 750,720 shares authorized, 732,156 and 585,976 shares issued and outstanding in 1994 and 1993, respectively 7,321,560 5,859,760 Surplus 4,689,800 4,689,800 Net unrealized depreciation in the fair value of securities available for sale (45,036) Retained earnings 10,122,925 10,313,770 ------------------------------------ Total shareholders' equity 22,089,249 20,863,330 ------------------------------------ TOTAL $ 173,041,984 $ 157,825,715 ==================================== See notes to consolidated financial statements.
EIGHT 9
CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 1994, 1993 and 1992 1994 1993 1992 INTEREST INCOME: Interest and fees on loans $ 4,737,318 $ 4,593,539 $ 4,850,346 Interest on federal funds sold 314,568 297,814 288,590 Interest and dividends on investment securities: U.S. government obligations 2,522,549 2,744,288 2,885,598 Obligations of states and political subdivisions - nontaxable 1,073,839 1,038,187 1,114,342 Other securities 2,117,737 1,958,415 1,984,108 ----------------------------------------------------- Total interest income 10,766,011 10,632,243 11,122,984 INTEREST EXPENSE: Time deposits, $100,000 and over 301,414 258,008 269,762 Other deposits 3,301,611 3,426,735 4,296,073 Short-term borrowings 91,723 84,668 95,441 ----------------------------------------------------- Total interest expense 3,694,748 3,769,411 4,661,276 ----------------------------------------------------- Net interest income 7,071,263 6,862,832 6,461,708 Provision for Loan Losses (Note 4) 180,000 180,000 120,000 ----------------------------------------------------- Net interest income after provision for loan losses 6,891,263 6,682,832 6,341,708 Noninterest Income (Note 10) 740,183 702,636 618,304 Noninterest Expense (Note 10) 5,152,378 4,924,868 4,655,878 ----------------------------------------------------- Income Before Income Taxes 2,479,068 2,460,600 2,304,134 Income Tax Expense (Note 9) 460,833 460,547 480,794 ----------------------------------------------------- Net Income $ 2,018,235 $ 2,000,053 $ 1,823,340 ===================================================== Weighted Average Number of Shares Outstanding (Restated in 1993 and 1992 for stock split in 1994) 732,156 732,156 732,156 ===================================================== Earnings Per Common Share 2.76 2.73 2.49 ===================================================== See notes to consolidated financial statements.
NINE 10
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Years Ended December 31, 1994, 1993 and 1992 Net Unrealized Appreciation/ Common Stock (Depreciation) Total -------------------- in Fair Value Retained Shareholders' Shares Amount Surplus of Securities Earnings Equity Balance, January 1, 1992 468,980 $4,689,800 $4,689,800 -- $ 8,986,297 $18,365,897 Net Income 1,823,340 1,823,340 Cash Dividends Declared, $.86 Per Share (628,433) (628,433) -------------------------------------------------------------------------- Balance, December 31, 1992 468,980 4,689,800 4,689,800 -- 10,181,204 19,560,804 Net Income 2,000,053 2,000,053 Stock Split (5 for 4) 116,996 1,169,960 (1,169,960) Cash Distribution in Lieu of Shares in Stock Split (8,365) (8,365) Cash Dividends Declared, $.94 Per Share (689,162) (689,162) -------------------------------------------------------------------------- Balance, December 31, 1993 585,976 5,859,760 4,689,800 -- 10,313,770 20,863,330 Change in Accounting for Investments $ 60,643 60,643 Net Income 2,018,235 2,018,235 Stock Split (5 for 4) 146,180 1,461,800 (1,461,800) Cash Distribution in Lieu of Shares in Stock Split (10,550) (10,550) Cash Dividends Declared, $1.01 Per Share (736,730) (736,730) Net Unrealized Depreciation in Fair Value of Securities Available for Sale (105,679) (105,679) -------------------------------------------------------------------------- Balance, December 31, 1994 732,156 $7,321,560 $4,689,800 $(45,036) $10,122,925 $22,089,249 ========================================================================== See notes to consolidated financial statements.
TEN 11
CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 1994, 1993 and 1992 1994 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,018,235 $ 2,000,053 $ 1,823,340 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 642,522 537,205 385,999 Provision for loan losses 180,000 180,000 120,000 Net (gain) loss on sales of investments (20,790) (51,017) 28,052 Changes in operating assets and liabilities 25,805 (230,259) (130,785) ------------------------------------------------------ Net cash provided by operating activities 2,845,772 2,435,982 2,226,606 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of investments 7,043,000 10,022,000 10,867,500 Proceeds from sales of investments 2,000,000 3,000,000 7,895,048 Purchases of investments (19,509,397) (18,549,111) (19,593,801) Capital expenditures (143,828) (806,213) (526,704) Net (increase) decrease in loans to customers (3,194,456) 1,385,480 (7,805,410) Net cash and cash equivalents received in connection with acquisitions 6,679,846 Other - net (1,289,508) 258,541 (127,360) ------------------------------------------------------ Net cash used in investing activities (8,414,343) (4,689,303) (9,290,727) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in demand and savings accounts 4,791,771 6,193,281 14,300,529 Net increase (decrease) in time deposits 3,298,563 956,606 (7,398,320) Net increase (decrease) in short-term borrowings (1,661,119) 520,548 (1,001,122) Dividends paid (737,161) (669,517) (619,054) ------------------------------------------------------ Net cash provided by financing activities 5,692,054 7,000,918 5,282,033 ------------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 123,483 4,747,597 (1,782,088) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 20,022,624 15,275,027 17,057,115 CASH AND CASH EQUIVALENTS, ------------------------------------------------------ END OF YEAR $ 20,146,107 $ 20,022,624 $ 15,275,027 ====================================================== See notes to consolidated financial statements.
ELEVEN 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1994, 1993 and 1992 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION - The financial statements include the accounts of National Bancshares Corporation (the Corporation) and its wholly-owned subsidiary, First National Bank (the Bank). All intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Bank reflect banking industry practices and conform to generally accepted accounting principles. The Bank has its main office in Orrville, Ohio and nine branches in eastern Wayne and southwestern Medina counties to serve its market area. INVESTMENT SECURITIES - The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as of January 1, 1994. The Statement requires that securities be classified as held for trading, available-for-sale or held-to-maturity. Securities held for trading are to be carried at estimated market value with the adjustment, if any, reflected in the statement of operations. Securities classified as available-for-sale also to be carried at estimated market value; however, the adjustment, if any, would be relected in shareholders' equity. Securities held-to-maturity are to continue to be carried at amortized cost. At January 1, 1994, the Company classified investment securities held to maturity having a carrying value of $78,980,325 and a fair value of $82,721,892, and avialable for sale have amortized cost of $1,195,263 and a fair value of $1,287,147. Accordingly, the $91,884 adjustment to estimated market value, net of deferred income taxes of $31,241, was recorded as a separate component of shareholders' equity. In the prior year, securities were classified as held for investment based on management's intent and ability to hold these securities to maturity. These securities were accounted for at cost adjusted for amortization of premiums and/or accretion of discounts, which were recognized as adjustments to interest income. LOANS - are stated at the amount of unpaid principal, reduced by unearned income for installment loans, unamortized discount on purchased loans and an allowance for loan losses. Interest on commercial and real estate mortgage loans is recognized in income on a daily basis based upon the simple interest method and the principal amount outstanding. Generally, interest on consumer installment loans is credited to operations based upon a method which approximates the effective interest method. Loans cease accruing interest when management determines such interest is uncollectible. ALLOWANCE FOR LOAN LOSSES - The provision for loan losses is based upon the Bank's past loan loss experience, current delinquencies, nature of the loan, general economic conditions and trends, and an evaluation of the potential losses in the current loan portfolio and is stated in accordance with generally accepted accounting principles. In management's opinion the allowance for loan losses is adequate. However, changes in this estimate and evaluation might be required depending on changing economic conditions and the economic prospects of borrowers. PREMISES AND EQUIPMENT are stated at cost, less accumulated depreciation. The provision for depreciation is computed using the straight-line method over the useful lives of the assets, generally ranging from 5 to 40 years. INTANGIBLE ASSETS - Core deposit premiums of $452,626 and goodwill of $448,971 which resulted from branch purchases are included in other assets, and are being amortized over the estimated average remaining life of the existing customer base acquired using the level-yield method. INCOME TAXES - The Corporation and the Bank file a consolidated federal income tax return. The Bank implemented Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," effective January 1, 1993. Prior to January 1, 1993 income taxes were computed in accordance with Accounting Principles Board Opinion No. 11, which has been superseded by SFAS No. 109. Refer to Note 9 - Income Taxes. EARNINGS PER SHARE are calculated based on the weighted average number of shares outstanding during the period. During 1994, the Corporation declared a 5 for 4 stock split, effected in the form of a 25% stock dividend and, accordingly, earnings per share and dividends per share for 1993 and 1992 have been restated to reflect the increased number of shares. STATEMENT OF CASH FLOWS - For purposes of this statement, the Corporation considers all cash and due from banks and federal funds sold to be cash equivalents. LOAN FEES - Loan origination fees received for loans, net of direct origination costs, are deferred and amortized to interest income over the contractual life of the loan using the level yield method. Fees received for loan commitments that are expected, based on the Bank's experience with similar commitments, to be drawn are deferred and amortized over the life of the loan using the level yield method. Fees for other loan commitments are deferred and amortized over the loan commitment period on a straight-line basis. Amortization of net deferred loan fees is discontinued on non-performing loans. NEW ACCOUNTING STANDARDS - In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", and in October 1994, issued Statement No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures", an amendment of FASB Statement No. 114. Statement No. 114 requires that certain impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. Statement No. 118 amends Statement No. 114 to allow a creditor to use existing methods for recognizing interest income on an impaired loan. These Statements apply to financial statements for years beginning after December 15, 1994. Management does not expect these statements will have a significant impact on the financial condition or results of operations of the Bank. The FASB also issued SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments" in October 1994. This statement requires disclosures about amounts, nature, and terms of derivative financial instruments. The Bank does not issue or hold any instruments covered by this statement except for fixed and variable rate loan commitments as described in Note 5 and Note 14. 2. CASH Regulations of the Federal Reserve require depository institutions to maintain reserves which are not available for investment purposes. Cash reserves of approximately $1,209,000 and $1,000,000 were maintained at December 31, 1994 and 1993, respectively. TWELVE 13
3. INVESTMENT SECURITIES The carrying amounts and approximate market or fair values of the investment securities are summarized as follows: December 31, 1994 December 31, 1993 Gross Gross Gross Gross Amortized Unrealized Unrealized Market or Amortized Unrealized Unrealized Market or HELD TO MATURITY: Cost Gains Losses Fair Value Cost Gains Losses Fair Value U.S. treasury and agency obligations $31,459,350 $ 235,011 $ (757,104) $30,937,257 $27,431,486 $1,875,822 $ (8,452) $29,298,856 Mortgage backed securities 5,360,658 60,665 (283,575) 5,137,748 6,610,464 164,188 (20,689) 6,753,963 Obligations of states and political subdivisions 17,152,511 435,412 (361,991) 17,225,932 17,767,156 1,384,018 (77,255) 19,073,919 Corporate bonds and notes 31,296,119 337,922 (1,090,249) 30,543,792 28,085,082 845,778 (329,959) 28,600,901 Federal Reserve Bank stock 281,400 281,400 281,400 281,400 ----------------------------------------------------------------------------------------------------- Total $85,550,038 $1,069,010 $(2,492,919) $84,126,129 $80,175,588 $4,269,806 $(436,355) $84,009,039 ===================================================================================================== AVAILABLE FOR SALE: U.S. treasury and agency obligations $2,948,458 $ 903 $ (611) $2,948,750 Obligations of states and political subdivisions 497,728 48,322 546,050 Corporate bonds and notes 1,309,660 4,882 (121,732) 1,192,810 ------------------------------------------------- Total $4,755,846 $ 54,107 $ (122,343) $4,687,610 =================================================
============================================================================ The amortized cost and market or fair value at December 31, 1994, by contractual maturity, is as follows:
Amortized Market or HELD TO MATURITY: Cost Fair Value Due in one year or less $ 9,894,792 $ 9,956,360 Due after one year through five years 45,459,842 44,809,985 Due after five years through ten years 24,291,243 23,565,778 Due after ten years 5,904,161 5,794,006 --------------------------------- $ 85,550,038 $ 84,126,129 ================================= AVAILABLE FOR SALE: Due in one year or less $ 974,765 $ 974,375 Due after one year through five years 2,488,508 2,455,085 Due after five years through ten years 794,846 712,100 Due after ten years 497,727 546,050 --------------------------------- $ 4,755,846 $ 4,687,610 =================================
Investment securities having a carrying amount and a market or fair value of approximately $21,800,000 and $21,500,000, respectively, at December 31, 1994 were pledged to secure deposits of public funds and for other purposes required or permitted by law. 4. LOANS The composition of the loan portfolio is as follows:
December 31 1994 1993 Collateralized by real estate: Commercial $ 20,026,651 $ 17,479,401 Residential mortgages 19,022,536 17,946,189 Home equity 1,103,677 1,145,736 Construction 388,543 559,127 ------------------------------- $ 40,541,407 $ 37,130,453 Consumer 7,253,952 6,571,635 Commercial 7,250,601 7,948,409 Credit cards - unsecured 812,737 775,149 Other 1,965,743 2,217,063 ------------------------------- 57,824,440 54,642,709 Unearned income (256,092) (328,113) Unamortized discount on purchased loans (462,591) (508,169) ------------------------------- 57,105,757 53,806,427 Allowance for loan losses (890,666) (605,792) ------------------------------- $ 56,215,091 $ 53,200,635 ===============================
The Bank grants commercial, mortgage and installment loans to its customers who are primarily located in its market area. The Bank has a diversified loan portfolio and the area has a diversified industrial base. The majority of the commercial loans are collateralized. Collateral varies and may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. The consumer loans are primarily collateralized by vehicles.
Activity within the allowance for loan losses is as follows: Years Ended December 31 1994 1993 1992 Balance, beginning of year $ 605,792 $ 750,134 $ 747,711 Provision for loan losses 180,000 180,000 120,000 Recoveries 154,279 20,058 59,918 Chargeoffs (49,405) (344,400) (177,495) ---------------------------------------- Balance, end of year $ 890,666 $ 605,792 $ 750,134 ========================================
5. COMMITMENTS In the normal course of business, the Bank makes various commitments to fund loans that are not presented in the accompanying financial statements. At December 31, 1994, the commitments include the following: THIRTEEN 14
Unused lines of credit: Commercial $ 14,598,821 Home equity 1,445,627 Credit cards - unsecured 2,929,324 ------------ 18,973,772 Real estate construction loans 542,241 Letters of credit 2,353,491 ------------ $ 21,869,504 ============
The unused commercial and home equity lines of credit and real estate construction loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial or residential properties. The letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral for nearly all letters of credit. Collateral includes certificates of deposit, other deposits, or lines of credit, which may or may not be collateralized. 6. PREMISES AND EQUIPMENT A summary of premises and equipment is as follows:
December 31 1994 1993 Land $ 287,592 $ 287,592 Buildings and improvements 2,919,002 2,859,050 Furniture and fixtures 2,138,596 2,038,372 ------------------------------- 5,345,190 5,185,014 Less accumulated depreciation 2,966,988 2,731,337 ------------------------------- $ 2,378,202 $ 2,453,677 ===============================
Depreciation expense recognized as noninterest expense in 1994, 1993 and 1992 was $262,431, $240,515 and $198,006, respectively. 7. DEPOSITS A summary of deposits is as follows:
December 31 1994 1993 Demand, noninterest bearing $ 24,036,115 $ 21,729,520 Demand, interest bearing (NOW) 33,430,545 28,367,021 Savings 43,868,323 42,511,914 Time, $100,000 and over 12,652,502 10,393,029 Time, other 31,874,755 29,444,612 ------------------------------- $ 145,862,240 $ 132,446,096 ================================
A summary of the maturities of time deposits of $100,000 or more is as follows:
December 31 1994 1993 Three months or less $ 11,323,000 $ 9,290,000 Over 3 months through 6 months --- --- Over 6 months through 12 months 733,494 540,954 Over 12 months 596,008 562,075 -------------------------------- $ 12,652,502 $ 10,393,029 ================================
8. BENEFIT PLANS The Bank has a defined benefit pension plan which covers substantially all employees. The plan benefit formulas generally base payments to retired employees upon their length of service and a percentage of qualifying compensation during their final years of employment. The Bank's funding policy is to contribute annually an amount necessary to satisfy ERISA funding standards. Plan assets are held by Principal Mutual Life Insurance Company. Net pension expense included the following components: Years Ended December 31 1994 1993 1992 Service cost - benefits earned during the period $ 85,837 $ 73,875 $ 66,918 Interest cost on projected benefit obligation 108,004 105,496 96,357 Actual return on plan assets 68,282 (168,591) (182,334) Net amortization and deferral: Amortization of unrecognized net asset existing at January 1, 1989 (1,827) (1,827) (1,827) Amortization of unrecognized prior service cost 5,057 5,057 5,057 Asset gain (loss) deferred (196,994) 46,000 77,151 --------------------------------- Net pension expense $ 68,359 $ 60,010 $ 61,322 =================================
The following table sets forth the plan's funded status:
December 31 1994 1993 Plan assets at fair market value $ 1,717,045 $ 1,748,388 Projected benefit obligation 1,802,232 1,579,733 ------------------------------- Plan assets in excess (less than) projected benefit obligation (85,187) 168,655 Unrecognized net (gain) loss 273,709 (26,108) Unrecognized prior service cost 44,198 49,255 Unrecognized net asset being amortized over 13 years from January 1, 1989 (12,665) (14,492) ------------------------------- Prepaid pension cost included in other assets $ 220,055 $ 177,310 ===============================
The accumulated benefit obligation at December 31, 1994 and 1993 was $1,368,812 and $1,202,401, respectively, which includes vested benefits of $1,344,441 and $1,183,990 on the respective dates. Assumptions used in computing pension expense were as follows: FOURTEEN 15
Years Ended December 31 1994 1993 1992 Weighted average discount rate 7.0% 7.0% 8.0% Rates of increased future compensation levels 5.4% 5.5% 6.5% Expected long-term rate of return on assets 7.5% 7.5% 8.0%
In January 1995, the Board of Directors approved the termination of the Bank's defined benefit pension plan effective March 31, 1995. The Bank will submit its termination request to the Department of Labor (DOL) in 1995. Regulatory approval and termination of the plan is expected to occur during 1996. The Bank expects to recognize a pre-tax charge of $200,000 - $300,000 in connection with the curtailment and settlement of benefits under this plan. Additionally, the Board approved the implementation of a 401(k) plan effective in 1995 which will cover substantially all employees. The Bank has an Employee Stock Purchase Incentive Plan for full-time Bank employees. Under the Plan each employee will be entitled to receive a cash payment from the Bank equal to 20% of the purchase price of Corporation common stock acquired by the employee on the open market up to a maximum of 100 shares per calendar year. The Bank has implemented a director retirement benefit and death benefit plan for the benefit of all members of the Board of Directors of the Bank. The plan is called the Director Defined Benefit Plan and is designed to provide an annual retirement benefit, to be paid to each director upon retirement from the board. The retirement benefit provided to each director is an annual benefit equal to $1,000 for each year of service on the board from and after August 24, 1994. In addition, each director shall have the option of deferring any portion or all of his or her director's fees to a maximum of $1,000 per month until retirement. 9. INCOME TAXES The Corporation adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), effective January 1, 1993. This statement supersedes Accounting Principles Board Opinion No. 11 which had been followed by the Corporation. The effect on net income for the year ended December 31, 1993 of adopting SFAS No. 109 was not significant. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes, and (b) tax credit carryforwards. Significant components of the Corporation's deferred tax assets and liabilities were as follows:
December 31 1994 1993 Deferred tax liabilities: Accretion income $ 105,561 $ 99,408 Pension 74,818 60,285 Depreciation 59,915 48,868 --------------------------- 240,294 208,561 Deferred tax assets: Bad debts 107,039 45,839 Deferred loan fees 54,962 53,270 Core deposit premium amortization 42,734 45,967 Market-to-market accounting 23,200 Other 2,429 12,140 --------------------------- 230,364 157,216 --------------------------- Net deferred tax liability $ 9,930 $ 51,345 ============================
The components of income tax expense is as follows:
Years Ended December 31 1994 1993 1992 Currently payable $ 479,048 $ 414,547 $ 475,794 Deferred (18,215) 46,000 5,000 ----------------------------------- $ 460,833 $ 460,547 $ 480,794 ===================================
The following is a reconciliation of income tax at the federal statutory rate to the effective rate of tax on the financial statements:
Years Ended December 31 1994 1993 1992 Rate Amount Rate Amount Rate Amount Tax at federal statutory rate 34% $842,883 34% $836,604 34% $783,406 Tax-exempt interest (14) (365,270) (14) (345,740) (15) (358,171) Unrecognized/ (recognized) capital losses (1) (16,780) (1) (31,140) 2% 54,697 Other 823 862 -------------------------------------------------------- Income tax expense 19% $460,833 19% $460,547 21% $480,794
The Corporation has unused capital loss carryforwards of approximately $20,000 at December 31, 1994, which can be used to offset future capital gains. 10. NONINTEREST INCOME AND EXPENSE Noninterest income consists of the following:
Years Ended December 31 1994 1993 1992 Checking account fees $ 487,097 $ 484,659 $ 475,268 Other 253,086 217,977 143,036 --------------------------------- $ 740,183 $ 702,636 $ 618,304 =================================
Noninterest expense consists of the following:
Years Ended December 31 1994 1993 1992 Salaries and employee benefits $2,296,701 $2,229,393 $2,082,108 Data processing fees 659,311 646,239 638,094 Net occupancy expenses 389,490 368,899 346,396 Franchise taxes 300,660 279,732 272,055 FDIC premiums 291,065 274,717 267,888 Other 1,215,151 1,125,888 1,049,337 ---------------------------------- $5,152,378 $4,924,868 $4,655,878 ==================================
FIFTEEN 16 11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1994 1993 1992 Cash paid during the year for: Interest $3,628,171 $3,830,278 $4,917,478 Income taxes 432,514 628,518 357,180
On December 16, 1994, the Bank acquired a branch office in Seville, Ohio and the related assets and deposit accounts from Bank One, Akron, N.A. The transaction has been accounted for as a purchase of assets. The assets acquired and the liabilities assumed are summarized below at estimated fair values: ASSETS: Cash $ 6,679,846 Premises and equipment 43,128 Cost in excess of fair value of net assets acquired 759,338 Other assets 10,407 ------------ $ 7,492,719 ============ LIABILITIES: Demand and savings deposits $ 3,934,758 Time deposits 1,391,052 Securities sold under repurchase agreements 2,166,034 Other liabilities 875 ------------ $ 7,492,719 ============
12. RELATED PARTY TRANSACTIONS Certain directors and officers of the Corporation, their families and certain entities in which they have an ownership interest, were customers of the Bank in 1994, 1993 and 1992. Any transactions with such parties, including loans and commitments, were in the ordinary course of business at normal terms, including interest rates and collateralization, prevailing at the time and did not represent more than normal risks. At December 31, 1994 and 1993, such loans amounted to $3,315,000 and $3,397,000, respectively. New loans to related parties totaled $820,000, $1,802,000 and $3,226,000 for 1994, 1993 and 1992, respectively, and repayments aggregated $902,000, $2,922,000 and $696,000 for the respective years. At December 31, 1994 unused commitments to related parties totaled $4,200,000. 13. REGULATORY MATTERS Federal regulations require banks to maintain minimum ratios of Tier 1 capital and total capital to risk-weighted assets of 4.00% and 8.00%, respectively. In addition, banks must maintain a minimum leverage ratio of Tier 1 capital to total assets of 3.00% for the strongest banks and not less than 4.00% to 5.00% for other banks. Failure to meet these minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by banking regulators that could have a direct material effect on the Bank's financial statements. The regulations also require the regulators to make qualitative judgments that could result in higher minimum capital requirements for certain institutions. At December 31, 1994, the Bank's ratios of Tier 1 capital and total capital to risk-weighted assets were 19.60% and 20.45%, respectively. At December 31, 1994 the Bank's leverage ratio was 11.9%. In September 1993 the Officer of the Comptroller of the Currency (OCC) published a notice of proposed rulemaking, "Risk-Based Capital Standards: Interest Rate Risk". The proposed rule would require a bank to determine its exposure to interest rate risk which would be measured as the effect that a specified change in interest rates would have on the net economic value of a bank. A bank would be required to maintain risk-based capital for the amount that the measured interest rate risk exposure exceeds 1% of total assets. The impact of this notice of proposed rulemaking on the Bank is not expected to have a significant impact on the financial condition or results of operations of the Bank. The Bank is subject to certain dividend restrictions set forth by the OCC. Under such restrictions, the Bank may not, without the prior approval of the OCC, declare dividends in excess of the sum of current year earnings (as defined) plus the retained earnings (as defined) from the prior two years. The dividends, as of December 31, 1994, that the Bank could declare without the approval of the OCC, amounted to $5,237,303. 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." The estimated fair value amounts have been determined by using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Corporation could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. In addition, SFAS No. 107 excludes all non-financial instruments from disclosure requirements; therefore, the aggregate fair value amounts presented do not represent, and should not be construed to represent, the full underlying value of the Corporation. The following table presents the estimates of fair value of financial instruments: December 31, 1994 December 31, 1993 ----------------------------------------------------------- Carrying Fair Carrying Fair Amount Value Amount Value Assets: Cash and cash equivalents $20,146,107 $20,146,107 $20,022,624 $20,022,624 Investment securities 90,237,648 88,813,739 80,175,588 84,009,039 Loans 56,215,091 55,624,207 53,200,635 53,931,863 Liabilities: Demand deposits 101,334,983 101,334,983 92,608,455 92,608,455 Time deposits 44,527,257 44,123,979 39,837,641 39,922,089 Short-term borrowings 4,269,919 4,269,919 3,765,004 3,765,004
CASH AND CASH EQUIVALENTS - For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value. INVESTMENT SECURITIES - Fair value equals quoted market price, if available. If a quoted market price is not available, fair value SIXTEEN 17 is estimated using quoted market prices for similar securities. LOANS - For variable rate loans that reprice based on the prime rate, fair values are based on carrying values. The fair values of other loans are estimated using discounted cash flow analyses and employ interest rates currently being offered for loans with similar terms. The fair value of loans is reduced by an estimate of losses inherent in the loan portfolio. DEMAND DEPOSITS AND TIME DEPOSITS - The fair value of demand deposits, which includes passbook accounts, money market accounts, and NOW accounts, is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. SHORT-TERM BORROWINGS - The fair value of short-term borrowings, including securities sold under repurchase agreements and the federal reserve note account, is estimated using rates currently available to the bank for debt with similar terms and remaining maturities. The carrying amount is a reasonable estimate of fair value. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - The fair value of the off-balance sheet financial instruments, including commitments to originate loans and standby letters of credit, is considered to be equivalent to the value of the current fees charged to enter into the commitments. These fees are not significant at December 31, 1994 and 1993. 15. PARENT ONLY FINANCIAL STATEMENTS Balance sheets as of December 31, 1994 and 1993 and statements of income and cash flows for the three years in the period ended December 31, 1994 for National Bancshares Corporation (parent only) are as follows:
December 31, BALANCE SHEETS: 1994 1993 Assets: Cash $ 646,148 $ 674,189 Dividend receivable 314,217 304,837 Prepaid expenses 207 Investment in Bank 21,443,711 20,188,805 --------------------------- $22,404,076 $21,168,038 =========================== Liability: Dividends payable $ 314,827 $ 304,708 Shareholders' Equity 22,089,249 20,863,330 --------------------------- $22,404,076 $21,168,038 ===========================
Years Ended December 31 1994 1993 1992 STATEMENTS OF INCOME: Income: Dividends $ 736,299 $ 656,571 $1,214,658 Expenses: Misc. expense 18,006 6,432 2,894 Undistributed equity in net income of Bank 1,299,942 1,349,914 611,576 ------------------------------------- Net income $2,018,235 $2,000,053 $1,823,340 =====================================
Years Ended December 31 1994 1993 1992 STATEMENTS OF CASH FLOWS: Cash Flows from Operating Activities: Net income $2,018,235 $2,000,053 $1,823,340 Adjustments to reconcile net income to net cash provided by operating activities: Undistributed earnings of Bank (1,299,942) (1,349,914) (611,576) Change of dividends receivable (9,380) (28,139) (9,379) Change in prepaid expenses 207 (207) -------------------------------------- Net cash provided by operating activities 709,120 621,793 1,202,385 Cash Flows from Financing Activities: Dividends paid (737,161) (669,517) (619,054) ------------------------------------- Net Increase (Decrease) in Cash (28,041) (47,724) 583,331 Cash, Beginning of Year 674,189 721,913 138,582 ------------------------------------- Cash, End of Year $ 646,148 $ 674,189 $ 721,913 =====================================
___________________________________________________________________ INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders National Bancshares Corporation, Orrville, Ohio We have audited the accompanying consolidated balance sheets of National Bancshares Corporation and Subsidiary as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of National Bancshares Corporation and Subsidiary at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Deloitte & Touche LLP Akron, Ohio February 28, 1995 SEVENTEEN 18 ANALYSIS OF NET INTEREST EARNINGS Rate spread and effective rate differential (on a tax equivalent basis). The following table presents an analysis of net interest earning assets and interest bearing liabilities.
1994 1993 1992 ------------------------------------------------------------------------------------------------------- Daily Daily Daily Average Average Average Average Average Average (Dollars in Thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate ------------------------------------------------------------------------------------------------------- ASSETS Interest earning assets: Investment securities: Taxable $ 65,500 $ 4,640 7.08% $ 61,445 $ 4,703 7.65% $ 59,094 $ 4,870 8.24% Nontaxable (tax equivalent basis)* 17,693 1,627 9.20% 16,784 1,573 9.37% 16,521 1,688 10.22% Federal funds sold 7,147 315 4.41% 9,837 298 3.03% 8,110 289 3.56% Net loans (including nonaccrual loans) 55,091 4,737 8.60% 52,152 4,594 8.81% 51,103 4,850 9.49% ------------------------------------------------------------------------------------------------------- Total interest earning assets 145,431 11,319 7.78% 140,218 11,168 7.96% 134,828 11,697 8.68% ------------------------------------------------------------------------------------------------------- All other assets 10,466 9,875 9,115 ------------------------------------------------------------------------------------------------------- Total Assets $155,897 $150,093 $143,943 ======================================================================================================= LIABILITIES & SHAREHOLDERS' EQUITY Interest bearing liabilities Deposits: Interest bearing checking $ 29,524 $ 749 2.54% $ 28,251 $ 744 2.63% $ 26,710 $ 885 3.31% Savings 43,347 1,286 2.97% 39,858 1,305 3.27% 32,952 1,303 3.95% Time, $100,000 and over 7,256 301 4.15% 7,371 258 3.50% 6,503 270 4.15% Time, other 30,326 1,267 4.18% 32,049 1,377 4.30% 38,153 2,108 5.53% Other funds purchased 2,445 92 3.76% 2,891 85 2.94% 2,749 95 3.46% ------------------------------------------------------------------------------------------------------- Total interest bearing liabilities 112,898 3,695 3.27% 110,420 3,769 3.41% 107,067 4,661 4.35% ------------------------------------------------------------------------------------------------------- Demand deposits 20,804 18,705 16,966 Other liabilities 650 761 984 Shareholders' equity 21,545 20,207 18,926 ------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $155,897 $150,093 $143,943 ======================================================================================================= Net interest income (tax equivalent basis)* $ 7,624 $ 7,399 $ 7,036 ------------------------------------------------------------------------------------------------------- Net interest spread 4.51% 4.55% 4.32% ------------------------------------------------------------------------------------------------------- Net yield on total earning assets* 5.24% 5.28% 5.22% ------------------------------------------------------------------------------------------------------- *Tax equivalence based on highest statutory tax rate of 34%.
EIGHTEEN 19
HISTORICAL FINANCIAL SUMMARY FINANCIAL POSITION (Year End Balances) 1994 1993 1992 1991 1990 --------------------------------------------------------------------------------- Total Assets $ 173,041,984 $ 157,825,715 $ 149,027,311 $ 142,050,986 $ 134,177,176 Cash and Due from Banks 8,261,107 8,242,624 7,895,027 6,667,115 7,764,321 Investment Securities 90,237,648 80,175,588 74,894,150 74,278,941 64,634,657 Loans-Net 56,215,091 53,200,635 54,766,115 47,080,705 47,631,633 Deposits 145,862,240 132,446,096 125,296,209 118,394,001 112,529,772 Shareholders' Equity 22,089,249 20,863,330 19,560,804 18,365,897 17,259,840 Book Value Per Share (1) $ 30.17 $ 28.50 $ 26.72 $ 25.08 $ 23.57 --------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Total Interest Income $ 10,766,011 $ 10,632,243 $ 11,122,984 $ 11,626,717 $ 11,552,381 Total Interest Expense 3,694,748 3,769,411 4,661,276 5,768,868 5,975,225 --------------------------------------------------------------------------------- Net Interest Income 7,071,263 6,862,832 6,461,708 5,857,849 5,577,156 Provision for Loan Losses 180,000 180,000 120,000 65,000 60,000 --------------------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 6,891,263 6,682,832 6,341,708 5,792,849 5,517,156 Total Noninterest Income 740,183 702,636 618,304 669,843 577,279 Total Noninterest Expense 5,152,378 4,924,868 4,655,878 4,344,468 4,071,909 --------------------------------------------------------------------------------- Income Before Income Taxes 2,479,068 2,460,600 2,304,134 2,118,224 2,022,526 Income Taxes Expense 460,833 460,547 480,794 421,252 417,190 --------------------------------------------------------------------------------- Net Income $ 2,018,235 $ 2,000,053 $ 1,823,340 $ 1,696,972 $ 1,605,336 ================================================================================= Net Income Per Share (1) $ 2.76 $ 2.73 $ 2.49 $ 2.32 $ 2.19 Cash Dividends $ 736,730 $ 689,162 $ 628,433 $ 590,915 $ 581,535 Cash Dividends Per Share (1) $ 1.01 $ 0.94 $ 0.86 $ 0.81 $ 0.79 Dividend Payout Percentage 36.50% 34.46% 34.47% 34.82% 36.23% Weighted Average Number of Shares Outstanding (1) 732,156 732,156 732,156 732,156 732,156 Return on Average Assets 1.29% 1.33% 1.27% 1.26% 1.27% Return on Average Equity 9.37% 9.88% 9.57% 9.52% 9.56% Average Equity to Total Assets 13.82% 13.48% 13.23% 13.26% 13.28% Risk-Based Capital Percentage 20.45% 22.40% 22.53% 22.26% 22.08% Full Time Equivalent Staff 92 92 90 90 91 Total Assets to Full Time Equivalent Staff $ 1,880,891 $ 1,715,497 $ 1,655,859 $ 1,578,344 $ 1,474,474 --------------------------------------------------------------------------------- (1) All share and per share data is restated for a 5 for 4 stock split on October 15, 1994.
NINETEEN 20 DIRECTORS CHARLES J. DOLEZAL Chairman, President, Chief Executive Officer SARA BALZARINI Vice President of Finance Contours, Inc. JAMES L. GERBER Retired RAY D. GILL President Orrville Leather, Inc. JOHN W. KROPF Attorney Kropf, Wagner, & Hohenberger STEVE SCHMID President Smith Dairy Products, Inc. PAUL H. SMUCKER Chairman of the Executive Committe, J.M. Smucker Company JOHN E. SPRUNGER President Kidron Auction, Inc. JAMES F. WOOLLEY Chief Executive Officer, R.W.Screw Products, Inc. ROBERT F. GUMZ Director Emeritus FRANK J. SEIFRIED Director Emeritus OFFICERS NATIONAL BANCSHARES CORPORATION Charles J. Dolezal Michael D. Hofstetter President Sr. Vice President, Secretary/Treasurer ____________________________________________________________________ FIRST NATIONAL BANK Charles J. Dolezal President Michael D. Hofstetter Senior Vice President & Controller Kenneth R. VanSickle Vice President, Senior Loan Officer Robert Woodruff Vice President & Cashier Ron Armentrout Assistant Vice President, Security Officer, Compliance Officer Jackie Samsa Assistant Vice President, Manager of Human Resources Scott Holmes Assistant Vice President, Manager of Loan Department Jim Huntsberger Auditor Carolyn Forrer Administrative Officer, Manager, Main Office Lobby Angela Smith Assistant Controller Shannon Delaney Director of Marketing Karen Hicks Loan Officer Rob Hunter Loan Officer Dean Karhan Loan Officer William Mitchell Administrative Officer, Purchasing Sara Weeman Loan Officer Jan Zacharias Operations Officer ____________________________________________________________________ BRANCH ADMINISTRATION DALTON OFFICE: James Kuschmeader Assistant Vice President, Manager Rita Tyrrell Administrative Officer WEST HIGH OFFICE: Ruth Harding Administrative Officer, Manager KIDRON OFFICE: Harold Berkey Assistant Vice President, Manager SMITHVILLE OFFICE: Valerie Stein Assistant Vice President, Manager MT. EATON OFFICE: David Chapman Assistant Vice President, Manager MIDWAY OFFICE: Betty Wyant Assistant Vice President, Manager LODI OFFICE: Larry Kytta Assistant Vice President, Manager SEVILLE OFFICE: David Beard Assistant Vice President, Manager (C) 1995 National Bancshares Corporation Printed on Recycled Paper TWENTY EX-27 3 EXHIBIT 27
9 YEAR DEC-31-1994 DEC-31-1994 8,261,107 0 11,885,00 0 4,687,610 85,550,038 84,126,129 57,105,757 890,666 173,041,984 145,862,240 4,269,919 820,576 0 7,321,560 0 0 14,767,689 173,041,984 4,737,318 5,714,125 314,568 10,766,011 3,603,025 3,694,748 7,071,263 180,000 20,790 5,152,378 2,479,068 2,479,068 0 0 2,018,235 2.76 2.76 5.24 111,000 59,000 0 1,818,000 605,792 49,405 154,279 890,666 112,000 0 779,000