-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HrRDkRkqZWsMtfU6imUnDRT5gMwQ6JoBXqtT6MMtES/ElKeGV6miez3dayS7UoH5 VPJb3bTCKSnkQMzUNS0q3g== 0000796534-96-000008.txt : 19960514 0000796534-96-000008.hdr.sgml : 19960514 ACCESSION NUMBER: 0000796534-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL BANKSHARES INC CENTRAL INDEX KEY: 0000796534 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 541375874 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15204 FILM NUMBER: 96561376 BUSINESS ADDRESS: STREET 1: 100 SOUTH MAIN ST CITY: BLACKSBURG STATE: VA ZIP: 24062-9002 BUSINESS PHONE: 7035522011 MAIL ADDRESS: STREET 1: 100 SOUTH MAIN STREET STREET 2: PO BOX 90002 CITY: BLACKSBURG STATE: VA ZIP: 24062-9002 10-Q 1 1ST QUARTER ENDED MAR 31, 1996 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) 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- AVERAGE BALANCES AND INTEREST RATES
($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) ======= ======= ======= ======= ======= ======= 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% ===== ===== ===== 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 ========= =========== ============ ========= ======== 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.
-12- 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- 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- 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- 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- 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- 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- 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- 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- 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- EX-27 2
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 4707 0 7745 0 26859 39792 40228 125738 2059 210566 185995 0 1357 0 0 0 4285 18929 210566 3049 998 51 4098 1724 1726 2372 45 2 1523 1255 0 0 0 943 .55 .55 0 0 0 0 0 0 0 0 0 0 0 0
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