Unassociated Document

($ in thousands, except for per share data)	December 31, 2012			December 31, 2011
Assets
Cash and due from banks	$	14,783		$	11,897
Interest-bearing deposits		96,597			98,355
Federal funds sold		---			---
Securities available for sale		191,504			174,918
Securities held to maturity		160,539			143,995
Total securities		352,043			318,913
Mortgage loans held for sale		2,796			2,623
Loans:
Loans, net of unearned income and deferred fees		592,162			588,470
Less allowance for loan losses		(8,349	)		(8,068	)
Loans, net		583,813			580,402
Bank premises and equipment, net		10,401			10,393
Accrued interest receivable		6,247			6,304
Other real estate owned		1,435			1,489
Intangible assets		9,377			10,460
Bank-owned life insurance		20,523			19,812
Other assets		6,346			6,454
Total assets	$	1,104,361		$	1,067,102

Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	144,252		$	142,163
Interest-bearing demand deposits		455,713			404,801
Savings deposits		69,063			61,298
Time deposits		277,738			311,071
Total deposits		946,766			919,333
Accrued interest payable		139			206
Other liabilities		7,347			6,264
Total liabilities		954,252			925,803

Stockholders' Equity
Preferred stock of no par value. Authorized 5,000,000 shares; none issued and outstanding		---			---
Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding 6,947,974 shares at December 31, 2012 and 6,939,974 at December 31, 2011		8,685			8,675
Retained earnings		144,162			133,945
Accumulated other comprehensive loss		(2,738	)		(1,321	)
Total stockholders' equity		150,109			141,299
Total liabilities and stockholders' equity	$	1,104,361		$	1,067,102

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended						Twelve Months Ended
	December 31, 2012			December 31, 2011			December 31, 2012		December 31, 2011
($ in thousands, except for per share data)
Interest Income
Interest and fees on loans	$	8,800		$	9,128		$	35,354	$	36,514
Interest on federal funds		---			---			---		---
Interest on interest-bearing deposits		53			51			240		155
Interest on securities – taxable		1,622			1,630			6,613		6,745
Interest on securities – nontaxable		1,662			1,620			6,463		6,532
Total interest income		12,137			12,429			48,670		49,946

Interest Expense
Interest on time deposits of $100,000 or more		320			468			1,491		2,019
Interest on other deposits		1,496			1,709			6,396		7,165
Total interest expense		1,816			2,177			7,887		9,184
Net interest income		10,321			10,252			40,783		40,762
Provision for loan losses		580			753			3,134		2,949
Net interest income after provision for loan losses		9,741			9,499			37,649		37,813

Noninterest Income
Service charges on deposit accounts		638			665			2,594		2,617
Other service charges and fees		113			113			243		287
Credit card fees		837			832			3,278		3,197
Trust income		276			270			1,313		1,087
Bank-owned life insurance		209			203			814		762
Other income		131			156			472		449
Realized securities gains (losses), net		(8	)		18			25		11
Total noninterest income		2,196			2,257			8,739		8,410

Noninterest Expense
Salaries and employee benefits		2,991			2,796			12,005		11,357
Occupancy and furniture and fixtures		408			392			1,589		1,599
Data processing and ATM		387			412			1,593		1,701
FDIC assessment		132			(372	)		475		677
Credit card processing		625			614			2,442		2,485
Intangibles and goodwill amortization		271			270			1,083		1,083
Net costs of other real estate owned		(1	)		237			208		518
Franchise taxes		255			161			901		780
Other operating expenses		798			832			3,100		3,138
Total noninterest expense		5,866			5,342			23,396		23,338
Income before income tax expense		6,071			6,414			22,992		22,885
Income tax expense		1,386			1,525			5,245		5,247
Net income	$	4,685		$	4,889		$	17,747	$	17,638

Basic net income per share	$	0.67		$	0.70		$	2.56	$	2.54
Fully diluted net income per share	$	0.67		$	0.70		$	2.55	$	2.54
Weighted average outstanding number of common shares
Basic		6,947,887			6,939,148			6,942,411		6,936,869
Diluted		6,964,482			6,949,960			6,959,867		6,950,863
Dividends declared per share	$	0.57		$	0.52		$	1.10	$	1.00
Dividend payout ratio		---			---			43.04		39.34
Book value per share	$	---		$	---		$	21.60	$	20.36

	Three Months Ended
($ in thousands)	December 31, 2012			December 31, 2011
Net Income	$	4,685		$	4,889
Other Comprehensive Income, Net of Tax
Unrealized holding losses on available for sale securities net of deferred taxes of ($141) in 2012 and ($222) in 2011		(261	)		(412	)
Reclassification adjustment, net of income taxes of $3 in 2012 and $2 in 2011		6			3
Net pension loss arising during the period, net of taxes of ($405) in 2012 and ($731) in 2011		(752	)		(1,356	)
Less: amortization of prior service cost included in net periodic pension cost, net taxes of ($35) in 2012 and ($35) in 2011		(66	)		(66	)
Other comprehensive loss, net of tax of ($578) and ($986)	$	(1,073	)	$	(1,831	)
Total Comprehensive Income	$	3,612		$	3,058

	Twelve Months Ended
($ in thousands)	December 31, 2012			December 31, 2011
Net Income	$	17,747		$	17,638
Other Comprehensive Income, Net of Tax
Unrealized holding gains (losses) on available for sale securities net of deferred taxes of ($320) in 2012 and $1,468 in 2011		(592	)		2,725
Reclassification adjustment, net of income taxes of ($3) in 2012 and $9 in 2011		(7	)		17
Net pension loss arising during the period, net of taxes of ($405) in 2012 and ($731) in 2011		(752	)		(1,356	)
Less: amortization of prior service cost included in net periodic pension cost, net taxes of ($35) in 2012 and ($35) in 2011		(66	)		(66	)
Other comprehensive income (loss), net of tax of ($763) and $711	$	(1,417	)	$	1,320
Total Comprehensive Income	$	16,330		$	18,958

	Three Months Ended						Twelve Months Ended
Average Balances	December 31, 2012			December 31, 2011			December 31, 2012			December 31, 2011
Cash and due from banks	$	8,958		$	12,548		$	11,129		$	11,654
Interest-bearing deposits		89,703			87,266			94,724			64,977
Securities available for sale		192,724			177,387			189,850			186,296
Securities held to maturity		161,344			139,318			149,566			134,612
Mortgage loans held for sale		2,543			1,411			1,765			818
Gross loans		591,604			590,425			589,129			589,414
Loans, net		582,272			580,766			579,817			580,037
Intangible assets		9,531			10,614			9,936			11,019
Total assets		1,091,032			1,050,417			1,080,351			1,031,899
Total deposits		932,678			902,055			925,986			888,044
Other borrowings		---			---			---			---
Stockholders' equity		151,660			142,292			147,812			136,794
Interest-earning assets		1,032,929			990,999			1,019,887			973,171
Interest-bearing liabilities		789,684			760,567			784,717			752,164

Financial ratios
Return on average assets		1.71	%		1.85	%		1.64	%		1.71	%
Return on average equity		12.29	%		13.63	%		12.01	%		12.89	%
Net interest margin		4.37	%		4.50	%		4.39	%		4.59	%
Net interest income – fully taxable equivalent	$	11,354		$	11,230		$	44,712		$	41,914
Efficiency ratio		43.29	%		39.66	%		43.77	%		44.00	%
Average equity to average assets		13.90	%		13.55	%		13.68	%		13.26	%

Allowance for loan losses
Beginning balance	$	8,254		$	8,719		$	8,068		$	7,664
Provision for losses		580			753			3,134			2,949
Charge-offs		(509	)		(1,423	)		(2,953	)		(2,628	)
Recoveries		24			19			100			83
Ending balance	$	8,349		$	8,068		$	8,349		$	8,068

Asset Quality Data

(Unaudited)

Nonperforming assets	December 31, 2012			December 31, 2011
Nonaccrual loans	$	3,466		$	1,398
Nonaccrual restructured loans		2,151			3,806
Total nonperforming loans		5,617			5,204
Other real estate owned		1,435			1,489
Total nonperforming assets	$	7,052		$	6,693
Accruing restructured loans	$	2,005		$	3,756
Loans 90 days or more past due	$	170		$	481

Asset quality ratios
Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned		1.19	%		1.13	%
Allowance for loan losses to total loans		1.41	%		1.37	%
Allowance for loan losses to nonperforming loans		148.64	%		155.03	%
Loans past due 90 days or more to loans net of unearned income and deferred fees		0.03	%		0.08	%