-----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, I9e/F85JGAWwebuYE1HSFe2QkxME1OZPUilDxD9oNcL2SAumWV9JrOVzM5yQS9q4 F4XMx7Sn+3fYak7TKVPPig== 0000796534-97-000007.txt : 19970520 0000796534-97-000007.hdr.sgml : 19970520 ACCESSION NUMBER: 0000796534-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97605910 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 FIRST QUARTER MARCH 31,1997 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, 1997 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 25, 1997 - ------------------------------- --------------------------------- COMMON STOCK, $2.50 PAR VALUE 3,792,833 (This report contains 20 pages) NATIONAL BANKSHARES, INC. FORM 10-Q INDEX Page ---- PART I FINANCIAL INFORMATION - -------------------------------- ITEM 1 - FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS, MARCH 31, 1997 AND DECEMBER 31, 1996 4-5 CONSOLIDATED STATEMENTS OF INCOME, THREE MONTHS ENDED MARCH 31, 1997 AND 1996 6 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY, THREE MONTHS ENDED MARCH 31, 1997 AND 1996 7 CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 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- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES PART I ------ FINANCIAL INFORMATION --------------------- ITEM 1. FINANCIAL STATEMENTS The consolidated financial statements of National Bankshares, Inc. (Bankshares) and its wholly-owned subsidiaries, The National Bank of Blacksburg (NBB) and Bank of Tazewell County (BTC), 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, 1997 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 1996 Annual Report to Stockholders and additional information supplied in the 1996 Form 10-K. -3- CONSOLIDATED BALANCE SHEETS NATIONAL BANKSHARES, INC. AND SUBSIDIARIES MARCH 31, 1997 AND DECEMBER 31, 1996 (UNAUDITED) MARCH 31, DECEMBER ($000's) 1997 31, 1996 ========= ======== ASSETS Cash and due from banks $ 10,973 9,989 Interest-bearing deposits 3,994 91 Federal funds sold 11,395 1,910 Securities available for sale 57,661 62,534 Securities held to maturity (fair value $98,184 in 1997 and $108,755 in 1996) 98,938 108,710 Mortgage loans held for sale 205 516 Loans: Real estate construction loans 9,265 6,295 Real estate mortgage loans 42,622 43,917 Commercial and industrial loans 89,034 87,519 Loans to individuals 61,863 60,991 -------- ------- Total loans 202,784 198,722 Less unearned income and deferred fees 2,502 2,549 -------- ------- Loans, net of unearned income and deferred fees 200,282 196,173 Less allowance for loan losses 2,445 2,575 -------- ------- Loans, net 197,837 193,598 -------- ------- Bank premises and equipment, net 5,112 5,037 Accrued interest receivable 3,561 3,510 Other real estate owned, net 445 474 Other assets 2,757 2,481 -------- ------- Total assets $392,878 388,850 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY Noninterest-bearing demand deposits $ 42,539 44,096 Interest-bearing demand deposits 76,702 73,804 Savings deposits 48,394 48,164 Time deposits 169,891 168,520 -------- ------- Total deposits 337,526 334,584 -------- ------- Other borrowed funds 533 627 Accrued interest payable 722 700 Other liabilities 1,551 1,495 -------- ------- Total liabilities 340,332 337,406 -------- ------- Common stock subject to ESOP put option 1,668 1,643 -------- ------- -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 3,792,833 shares 9,482 9,482 Retained earnings 43,740 42,210 Net unrealized losses on securities available for sale (676) (248) Common stock subject to ESOP put option (1,668) (1,643) -------- ------- Total stockholders' equity 50,878 49,801 Commitments and contingent liabilities -------- ------- Total liabilities and stockholders' equity $392,878 388,850 ======== ======= -5- CONSOLIDATED STATEMENTS OF INCOME NATIONAL BANKSHARES, INC. AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) MARCH 31, MARCH 31, ($000's, except per share data) 1997 1996 ========= ========= INTEREST INCOME Interest and fees on loans $4,602 3,997 Interest on interest-bearing deposits 20 --- Interest on federal funds sold 82 162 Interest on securities-taxable 1,998 2,338 Interest on securities-nontaxable 463 502 ------ ------ Total interest income 7,165 6,999 ------ ------ INTEREST EXPENSE Interest on time deposits of $100,000 or more 533 515 Interest on other deposits 2,643 2,762 Interest on borrowed funds 25 7 ------ ------ Total interest expense 3,201 3,284 ------ ------ Net interest income 3,964 3,715 Provision for loan losses 109 45 ------ ------ Net interest income after provision for loan losses 3,855 3,670 ------ ------ NONINTEREST INCOME Service charges on deposit accounts 278 258 Other service charges and fees 84 56 Credit card fees 120 110 Trust income 182 132 Other income 6 2 Realized securities gains, net 8 4 ------ ------ Total noninterest income 678 562 ------ ------ NONINTEREST EXPENSE Salaries and employee benefits 1,372 1,202 Occupancy and furniture and fixtures 244 236 Data processing and ATM 74 52 FDIC assessment 3 --- Credit card processing 120 97 Goodwill amortization 7 5 Net costs of other real estate owned 1 2 Other operating expense 620 691 ------ ------ Total noninterest expense 2,441 2,285 ------ ------ Income before income tax expense 2,092 1,947 Income tax expense 562 552 ------ ------ Net income $1,530 1,395 ====== ====== Net income per share $ 0.40 0.37 ====== ====== -6- CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY NATIONAL BANKSHARES, INC. AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) NET UNREALIZED GAINS COMMON (LOSSES) STOCK ON SUBJECT SECURITIES TO ESOP COMMON RETAINED AVAILABLE PUT ($000's) STOCK EARNINGS FOR SALE OPTION TOTAL ====== ========= ========== ====== ===== Balances, December 31, 1995 $9,482 38,390 282 --- 48,154 Net income --- 1,395 --- --- 1,395 Change in net unrealized gains (losses) on securities available for sale, net of income tax benefit of $372 --- --- (722) --- (722) ------ ------ ----- ------ ------ Balances, March 31, 1996 $9,482 39,785 (440) --- 48,827 ====== ====== ===== ====== ====== Balances, December 31, 1996 $9,482 42,210 (248) (1,643) 49,801 Net income --- 1,530 --- 1,530 Change in net unrealized gains (losses) on securities available for sale, net of income tax benefit of $220 --- --- (428) --- (428) Change in common stock subject to ESOP put option --- --- --- (25) (25) ------ ------ ----- ------ ------ Balances, March 31, 1997 $9,482 43,740 (676) (1,668) 50,878 ====== ====== ===== ====== ====== -7- CONSOLIDATED STATEMENTS OF CASH FLOWS NATIONAL BANKSHARES, INC. AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) MARCH 31, MARCH 31, ($000's) 1997 1996 ========= ========= CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 1,530 1,395 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 109 45 Provision for deferred income taxes (127) --- Depreciation of bank premises and equipment 113 114 Amortization of intangibles 31 30 Amortization of premiums and accretion of discounts, net --- (3) Gains on bank premises and equipment disposals (2) --- Gains on sales and calls of securities available for sale, net (23) (4) Gains on calls of securities held to maturity, net (8) --- Net decrease in mortgage loans held for sale Losses and writedowns on other real estate --- --- owned 311 306 (Increase) decrease in: Accrued interest receivable --- --- Other assets Increase (decrease) in: (51) (250) Accrued interest payable 41 (487) Other liabilities 22 7 56 (441) ------- ------ Net cash provided by operating activities 2,002 712 ------- ------ CASH FLOWS FROM INVESTING ACTIVITIES Net increase in federal funds sold (9,485) (7,845) Net increase in interest-bearing deposits (Note 1) (3,994) Proceeds from calls and maturities of securities --- available for sale 4,726 Proceeds from calls and maturities of securities 5,746 held to maturity 12,795 Purchases of securities available for sale (500) 11,249 Purchases of securities held to maturity (2,993) (5,969) Purchases of loan participations --- (9,702) Collections of loan participations 174 (1,996) Net increase in loans made to customers (4,475) 529 Proceeds from disposal of other real estate owned 29 (901) Recoveries on loans charged-off 47 1 Bank premises and equipment expenditures (190) 12 Proceeds from sale of bank premises and equipment --- (207) ------- --- ------ Net cash used in investing activities (3,866) (9,083) ------- ------ -8- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in time deposits 1,371 1,648 Net increase in other deposits 1,571 5,125 Net increase (decrease) in other borrowed funds (94) 966 ------- ------ Net cash provided by financing activities 2,848 7,739 ------- ------ Net increase (decrease) in cash and due from banks 984 (632) Cash and due from banks at beginning of period 9,989 10,055 ------- ------ Cash and due from banks at end of period $10,973 9,423 ======= ====== SUPPLEMENTAL CASH FLOW INFORMATION Unrealized gains/losses in securities available for sale (gross) $ (648) (1,094) Deferred income tax benefit 220 372 ------- ------ Net unrealized losses on securities available for sale $ (428) (722) ======= ====== Loans charged to the allowance for loan losses $ 286 77 ======= ====== Interest paid $ 3,179 3,277 ======= ====== Note (1) Interest-bearing deposits have been reclassified on the balance sheet for the period ended March 31, 1997. Included in the cash flow of $3,994 is $91 which represents the reclassification of the December 31, 1996 period-end balance, which was included in Cash and due from deposits. -9- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES SELECTED BALANCE SHEET DATA MARCH 31, DECEMBER 31, ($000's) 1997 1996 ========= ============ SELECTED DATA AT PERIOD-END Loans, net $197,837 193,598 Total securities 156,599 171,244 Total assets 392,878 388,850 Total deposits 337,526 334,584 Stockholders' equity 50,878 49,801 SELECTED DATA DAILY AVERAGES Loans, net $195,355 177,419 Total securities 163,788 177,403 Total assets 389,743 388,045 Total deposits 333,400 335,938 Stockholders' equity 50,457 49,459 -10- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES SELECTED INCOME STATEMENT DATA MARCH 31, DECEMBER 31, ($000's, except per share data) 1997 1996 1996 ====== ====== ============ SELECTED RATIOS AND PER SHARE DATA Interest income $ 7,165 6,999 28,647 Interest expense 3,201 3,284 13,036 Net interest income 3,964 3,715 15,611 Provision for loan losses 109 45 331 Noninterest income 678 562 2,693 Noninterest expense 2,441 2,285 9,515 Income taxes 562 552 2,341 Net income 1,530 1,395 6,117 Return on average assets 1.59% 1.45% 1.58% Return on average equity 12.30% 11.37% 12.37% Net income per share $ 0.40 0.37 1.61 Book value per share (1) 13.85 12.88 13.56 Note - Book value per share has been computed including common stock subject to ESOP put option as part of stockholders' equity. -11- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES AVERAGE BALANCES AND INTEREST RATES
($000's) MARCH 31, 1997 MARCH 31, 1996 DECEMBER 31, 1996 AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/ BALANCE COST BALANCE COST BALANCE COST ======= ======= ======= ======= ======= ======= Interest-earning assets(1) $368,671 8.18% 361,871 8.19% 364,575 8.16% Interest-bearing liabilities 293,968 4.42% 293,302 4.49% 294,374 4.43% ----- ----- ----- Net interest spread 3.76% 3.70% 3.73% ===== ===== ===== Net interest margin 4.66% 4.55% 4.59% ===== ===== ===== (1) The yield on interest-earning assets is shown on a fully tax equivalent basis.
-12- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES LOAN LOSS DATA For the periods ended MARCH 31, MARCH 31, DECEMBER 31, ($000's) 1997 1996 1996 ========= ========= ============ Balance at beginning of period $ 2,575 2,551 2,625 Provision for loan losses 109 45 331 Loans charged-off (286) (77) (506) Recoveries 47 12 125 ------- ------ ------ Balance at end of period $ 2,445 2,531 2,575 ======= ====== ====== Ratio of allowance for loan losses to loans, net of unearned income and deferred fees 1.22% 1.55% 1.31% ======= ====== ====== Ratio of net charge-offs to average loans, net of unearned income and deferred fees (1) .49% .15% .21% ======= ====== ====== Ratio of allowance for loan losses to nonperforming loans (2) 677.29% 357.34% 418.02% ======= ====== ====== (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- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES NONPERFORMING ASSETS, PAST DUE LOANS AND IMPAIRED LOANS MARCH 31, MARCH 31, DECEMBER 31, ($000's) 1997 1996 1996 ========= ========= ============ Nonperforming Assets -------------------- Nonaccrual loans $ 361 729 536 Restructured loans --- --- --- ------ ------ ------ Total nonperforming loans 361 729 536 ------ ------ ------ Nonaccrual securities 65 215 80 (Net of valuation allowance) Foreclosed property 445 761 474 Other repossessed property 23 3 27 ------ ------ ------ Total foreclosed and repossessed properties 468 764 501 ------ ------ ------ Total nonperforming assets $ 894 1,708 1,117 ====== ====== ====== Ratio of nonperforming assets to loans, net of unearned income and deferred fees and foreclosed/ repossessed assets (excludes nonaccrual securities) .41% .88% .52% ====== ====== ====== Accruing Loans Past Due 90 Days or More --------------------------------------- Past due 90 days or more and still accruing $ 460 562 458 ====== ====== ====== Ratio of loans past due 90 days or more to loans, net of unearned income and deferred fees .23% .33% .23% ====== ====== ====== Impaired Loans -------------- Total impaired loans $ 435 1,031 725 ====== ====== ====== Impaired loans with a valuation allowance 109 377 371 Valuation allowance --- (296) (290) ------ ------ ------ Impaired loans net of allowance $ 109 81 81 ====== ====== ====== Impaired loans with no valuation allowance $ 326 301 354 ====== ====== ====== Average recorded investment in impaired loans $ 580 1,041 800 ====== ====== ====== Income recognized on impaired loans $ 6 5 33 ====== ====== ====== Amount of income recognized on a cash basis $ 3 5 23 ====== ====== ====== -14- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this discussion is to set forth information about the financial condition and results of operations of National Bankshares, Inc. and its wholly-owned subsidiaries (the Company), which are not otherwise apparent from the consolidated financial statements and other information included in this report. Reference should be made to the financial statements and other information included in this report as well as the 1996 Annual Report and Form 10-K for an understanding of the following discussion and analysis. Results of Operations - --------------------- Net income for the three months ended March 31, 1997 was $1,530,000 which represents an increase of $135,000 or 9.68% over the first three months of 1996. The return on average assets as of March 31, 1997 and March 31, 1996 were 1.59% and 1.45%, respectively. The return on average equity was 12.30% and 11.37% at March 31, 1997 and 1996, respectively. Earnings per share at the end of the first quarter of 1997 was $0.40 per share, an increase of $0.03 per share over the first quarter of 1996. The overall improvement in performance was attributable to continued growth in all major income categories. Noninterest expense categories reflected controlled increases. Income tax expense increased as a result of the higher level of taxable income. Net Interest Income - ------------------- Net interest income at the end of the first three months of 1997 was $3,964,000, an increase of $249,000 or 6.70% over the same period in 1996. The net interest margin increased to 4.66% from 4.55% as a result of a slight decline in the yield on earning assets by 1 basis point during that period while the cost to fund earning assets declined by 12 basis points. The net increase was due to the shifting of investments to loans. Provision for Loan Losses - ------------------------- The provision for loan losses for the period ended March 31, 1997 was $109,000, an increase of $64,000 from the same period the previous year. The increased level of the provision in 1997 was primarily due to loan growth and the need to maintain a satisfactory ratio of the allowance for loan losses to loans. Net charge-offs, which bear directly on the amount of provisions, were up $174 in the first quarter of 1997. This increased level of net charge-offs reflects the write-off of previously identified and allocated credits and does not reflect an overall deterioration of asset quality or a declining trend. Management anticipates that additional provisions will be needed in future periods to ensure an adequate allowance for loan losses, due in most part to future loan growth. Since the amount of the provision is largely dependent on loan growth, the level of which is difficult to ascertain, management is unable to precisely determine the amount of provision that may ultimately be necessary. -15- Noninterest Income - ------------------ Noninterest income for the period ended March 31, 1997 was $678,000, an increase of $116,000 or 20.64%. Service charges on deposits increased by 7.75% and was primarily attributable to an increased collection of return check fees. Bankcard fees also improved by 9.09% due to the increased levels of business activity. Trust income, which is dependent on the market values of assets managed and the types of services provided, increased 37.88%. Trust income also benefited from the acquisition of new business. Noninterest Expense - ------------------- Noninterest expense for the first three months of 1997 was up 6.83% when compared to the same period in 1996. Salaries and benefits expense increased by $170,000, which was due in part to normal merit and promotion related salary increases. Occupancy expense remained essentially stable when the periods ending March 31, 1997 and March 31, 1996 are compared. It is anticipated that such expenses will increase with the opening of a new branch in Rich Creek, Virginia by NBB. Balance Sheet - ------------- Total assets at the end of the first three months of 1997 were $392,878,000, an increase of $4,028,000 or 1.04% over year-end 1996. Total deposits at period-end March 31, 1997 were $337,526,000 an increase of $2,942,000 from year-end 1996. While the interest-bearing deposits grew during the first three months of 1997, demand deposits at period-end reflected a 3.53% decrease. Asset Quality - ------------- Nonperforming loans, which include nonaccrual loans and restructured loans but exclude loans past due 90 days and still accruing, totaled $361,000 at March 31, 1997 and $536,000 at December 31, 1996. Total foreclosed properties and other repossessed property were $468,000 at March 31, 1997 a decline of $33,000 from December 31, 1996. The ratio of net charge-offs to average loans, net of unearned income and deferred fees was .49% at March 31, 1997. At year-end December 31, 1996, the ratio was .21%. The increased level of net charge-offs reflects for the most part, the write-off of previously identified and allocated credits and does not represent an overall deterioration of credit quality or the onset of an unfavorable trend based on information presently available to management. 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. 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 was $2,002,000 at March 31, 1997. Net cash used in -16- investing activities was $3,866,000 with the majority of that cash invested in securities and federal funds sold. Net cash from financing activities was $2,848,000. Net cash increased $984,000 from December 31, 1996. Management is not aware of any trend, commitment or events that will result in or that are reasonably likely to result in a decrease in liquidity that would be adverse and to a degree that operations would be materially impaired. Capital Resources - ----------------- Total stockholder equity increased $1,077,000 or 2.16% from December 31, 1996. During the first quarter of 1997, retained earnings grew by $1,530,000. This was, however, offset in part by a $428,000 increase in unrealized net losses on securities held for sale and a $25,000 increase in the value of common stock subject to put option. The common stock subject to put option is affected by the current market price of Bankshares common stock. The following table sets forth the various ratios by which bank capital is measured. Bankshares and its subsidiaries continue to be well capitalized. March 31, December 31, 1997 1996 ========= ============ Capital Ratios -------------- Total capital (to risk weighted assets) 23.24% 23.00% Tier 1 Capital (to risk weighted assets) 22.20% 21.89% Tier 1 capital (to average assets, leverage ratio) 13.50% 12.96% Accounting Considerations - ------------------------- The Company adopted the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" on January 1, 1997. This Statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on consistent application of a financial-components approach that focuses on control. It distinguishes transfers of financial assets that are sales from transfers that are secured borrowings. Adoption of this Statement did not have a material impact on the Company's consolidated financial position, results of operations or liquidity. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share". Statement 128 establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. Statement 128 simplifies the standards for computing earnings per share previously found in APB Opinion No. 15, "Earnings per Share", and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for -17- all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Statement 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. Statement 128 requires restatement of all prior-period EPS data presented. It is not anticipated that Statement 128 will have any effect on current or prior year's EPS data presented by the Company. -18- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES PART II OTHER INFORMATION Items 1-3. Legal Proceedings; Changes in Securities; Defaults Upon Senior Securities None for the period ended March 31, 1997. Item 4. Submission of Matters to a Vote of Security Holders None for the period ended March 31, 1997. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule (b) Form 8-K None -19- NATIONAL BANKSHARES, INC. AND SUBSIDIARIES 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: 05/13/97 /s/James G. Rakes ------------- ----------------------------- James G. Rakes, President and Chief Executive Officer Date: 05/13/97 /s/Joan C. Nelson ------------- ----------------------------- Joan C. Nelson, Treasurer (principal financial officer) -20- EX-27 2
9 THI SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1997 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q 3-MOS DEC-31-1997 MAR-31-1997 10,973 3,994 11,395 0 57,661 98,938 98,184 200,487 2,445 392,878 337,526 533 3,941 0 0 0 9,482 41,396 392,878 4,602 2,461 102 7,165 3,176 3,201 3,964 109 8 2,441 2,092 0 0 0 1,530 .40 .40 0 0 0 0 0 0 0 0 0 0 0 0
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