National Bankshares, Inc. Announces First Quarter 2018 Earnings

BLACKSBURG, VA, APRIL 26, 2018:  National Bankshares, Inc. (NASDAQ Capital Market: NKSH) today announced its results of operations for the first quarter of 2018. The Company reported net income of $3.296 million for the quarter ended March 31, 2018 compared to $3.649 million for the quarter ending  March 31, 2017.  For the first quarter, the return on average assets was 1.32 %(1) and the return on average equity was 8.85%(1) compared to 1.21% and 8.20%, respectively, for the first quarter of 2017. At March 31, 2018, the Company had total assets of $1.27 billion, an increase of 2.20% when compared to $1.24 billion at the end of the first quarter of 2017.
As indicated in previous reports, the Company’s computer system experienced two cyber intrusions, one in May of 2016 and one in January of 2017. The theft of funds totaled approximately $2.4 million, although no customers experienced a loss and no customer information was compromised. The Company filed a claim with its insurance carrier on or about August 1, 2017.
On April 4, 2018, legal counsel informed the Company’s management of recent correspondence with the insurance carrier.  The correspondence suggests the insurance carrier may apply coverage in such a way as to limit insurance liability for the losses to a maximum of $500,000.  In this case, the insurance carrier likely would reimburse the Company for approximately $337,000. If this occurs, the Company will vigorously pursue litigation to recover the full amount. The Company strongly believes they are insured for and are entitled to recover the full amount of the losses from the breaches, less the applicable deductible, and that litigation will ultimately resolve the case in its favor. However, in light of the recent information from the carrier and to comply with accounting guidance surrounding contingencies, the Company believes it is prudent to reduce the amount of the insurance receivable to the worst-case scenario of $337,000 and recognize an expense of $1.7 million.  If the Company recovers amounts in excess of the receivable, it will recognize a gain in the period of recovery.
 “I would like to reassure our shareholders and our customers that we take cybersecurity very seriously,” said National Bankshares President & CEO Brad Denardo. “We have taken the necessary steps to avoid cyber intrusions of the sort we experienced in 2016 and 2017, and we continually work to monitor and prevent future threats.”
Mr. Denardo added, “Despite the expense associated with the cyber intrusions, we are pleased with the positive underlying trends in the first quarter of 2018. Interest income and the quality of our loan portfolio continued to improve while the Company benefitted from a reduced tax burden under the Tax Cuts and Jobs Act of 2017. Excluding the one-time expense, net income would have been $4.66 million, a 27.6% increase over the same period last year.”
National Bankshares, Inc., headquartered in Blacksburg, Virginia, is the parent company of The National Bank of Blacksburg, which does business as National Bank, and of National Bankshares Financial Services, Inc.  National Bank is a community bank operating from 25 full service offices and one loan production office throughout Southwest Virginia. National Bankshares Financial Services, Inc. is an investment and insurance subsidiary in the same trade area.  The Company’s stock is traded on the NASDAQ Capital Market under the symbol “NKSH.” Additional information is available at
  1. Return on assets and return on equity are calculated by annualizing net income to date.  For 2018, the annualization factor was not applied to the insurance write-down or provision reversal. 
Forward-Looking Statements
Certain statements in this press release may be “forward-looking statements.”  Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results that are not statements of historical fact and that involve significant risks and uncertainties.  Although the Company believes that its expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual Company results will not differ materially from any future results implied by the forward-looking statements.  Actual results may be materially different from past or anticipated results because of many factors, some of which may include changes in economic conditions, the interest rate environment, legislative and regulatory requirements, new products, competition, changes in the stock and bond markets and technology.  The Company does not update any forward-looking statements that it may make.