National Bankshares, Inc. Announces Earnings for 2018

BLACKSBURG, Va., January 31, 2019 -- National Bankshares, Inc. (NASDAQ: NKSH), parent company of The National Bank of Blacksburg, today announced its results of operations for the quarter and year ended December 31, 2018.  The Company reported net income of $16.15 million, or $2.32 per common share, for the year ended December 31, 2018. The Company also reported net income of $4.56 million, or $0.66 per common share, for the quarter ended December 31, 2018.  National Bankshares, Inc. ended 2018 with total assets of $1.26 billion.
 
2018 Financial Highlights
  • Net Income increased $2.06 million from $14.09 million for the year ended December 31, 2017 to $16.15 million for the year ended December 31, 2018.
  • Earnings per share increased $0.29 from $2.03 for the year ended December 31, 2017 to $2.32 for the year ended December 31, 2018.
  • Return on average assets increased to 1.29% for the year ended December 31, 2018, from 1.14% for the year ended December 31, 2017. Return on average equity increased to 8.65% for the year ended December 31, 2018, from 7.64% for the year ended December 31, 2017.
  • Loans net of unearned income and deferred fees and costs increased $41.73 million or 6.25% from December 31, 2017 to $709.80 million as of December 31, 2018. 
  • The ratio of the allowance for loan losses to loans net of unearned income and deferred fees and costs decreased to 1.04% as of December 31, 2018, from 1.19% as of December 31 2017, due to improvements in asset quality and net charge-off trends.
 
F. Brad Denardo, President and CEO, commented, “We are pleased to report a substantial year-over-year increase in earnings for 2018. While the Tax Cuts and Jobs Act of 2017 was very beneficial for our bottom line, we are also encouraged by the underlying performance of the Company, with solid loan growth and improved asset quality contributing significantly to our profitability.”  
 
Mr. Denardo added, “These higher earnings have enabled us to make substantial investments in key areas of the Company and to reward our shareholders with a dividend payment of $1.21 per share in 2018, up from $1.17 per share in 2017.  We are optimistic about the future of National Bankshares and thankful for the ongoing support of our shareholders, customers and communities.”
 
Non-GAAP Financial Measures
In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends and comparing financial results to other financial institutions.  The non-GAAP financial measures presented in this document include the efficiency ratio and certain financial measures presented on a fully taxable-equivalent (“FTE”) basis.  FTE basis is calculated using the federal statutory income tax rate of 21% for the periods after January 1, 2018 and 35% for the periods prior to January 1, 2018.  The Company believes certain non-GAAP financial measures enhance the understanding of its business and performance.  Non-GAAP financial measures are supplemental and not a substitute for, or more important than, financial measure prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions.
 
About National Bankshares
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 www.nationalbankshares.com.
  
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.

 

 


 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

 

($ in thousands, except for share and per share data)

 

December 31,

2018

   

December 31,

2017

 

Assets

               

Cash and due from banks

  $ 12,882     $ 12,926  

Interest-bearing deposits

    43,491       51,233  

Federal funds sold

    ---       ---  

Securities available for sale, at fair value

    425,010       331,387  

Securities held to maturity

    ---       127,164  

Restricted stock

    1,220       1,200  

Total securities

    426,230       459,751  

Mortgage loans held for sale

    72       260  

Loans:

               

Loans, net of unearned income and deferred fees and costs

    709,799       668,069  

Less: allowance for loan losses

    (7,390

)

    (7,925

)

Loans, net

    702,409       660,144  

Premises and equipment, net

    8,646       8,221  

Accrued interest receivable

    5,160       5,297  

Other real estate owned

    2,052       2,817  

Intangible assets and goodwill

    5,848       5,898  

Bank-owned life insurance

    34,657       33,756  

Other assets

    14,585       16,454  

Total assets

  $ 1,256,032     $ 1,256,757  
                 

Liabilities and Stockholders' Equity

               

Noninterest-bearing deposits

  $ 195,441     $ 182,511  

Interest-bearing demand deposits

    616,527       622,189  

Savings deposits

    138,175       140,150  

Time deposits

    101,799       114,884  

Total deposits

    1,051,942       1,059,734  

Other borrowed funds

    ---       ---  

Accrued interest payable

    89       62  

Other liabilities

    13,763       12,065  

Total liabilities

    1,065,794       1,071,861  
                 

Stockholders' Equity

               

Preferred stock, no par value, 5,000,000 shares authorized; none issued and outstanding

    ---       ---  

Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding, 6,957,974 shares at December 31, 2018 and December 31, 2017.

    8,698       8,698  

Retained earnings

    193,624       185,893  

Accumulated other comprehensive loss, net

    (12,084

)

    (9,695

)

Total stockholders' equity

    190,238       184,896  

Total liabilities and stockholders' equity

  $ 1,256,032     $ 1,256,757  

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 

   

Three Months Ended

   

Twelve Months Ended

 

($ in thousands, except for share and per share data)

 

December 31,

2018

   

December 31,

2017

   

December 31,

2018

   

December 31,

2017

 

Interest Income

                               

Interest and fees on loans

  $ 8,174     $ 7,553     $ 31,333     $ 29,932  

Interest on federal funds

    ---       ---       ---       ---  

Interest on interest-bearing deposits

    163       188       672       791  

Interest on securities - taxable

    1,731       1,486       6,856       5,711  

Interest on securities - nontaxable

    1,001       1,199       4,363       4,826  

Total interest income

    11,069       10,426       43,224       41,260  

Interest Expense

                               

Interest on time deposits

    182       127       526       537  

Interest on other deposits

    1,334       901       4,357       3,588  

Interest on borrowed funds

    60       ---       164       ---  

Total interest expense

    1,576       1,028       5,047       4,125  

Net interest income

    9,493       9,398       38,177       37,135  

Provision for loan losses

    (174

)

    (567

)

    (81

)

    157  

Net interest income after provision for loan losses

    9,667       9,965       38,258       36,978  

Noninterest Income

                               

Service charges on deposit accounts

    641       709       2,678       2,776  

Other service charges and fees

    45       53       132       205  

Credit card fees

    360       351       1,431       1,205  

Trust income

    434       403       1,565       1,530  

Bank-owned life insurance

    223       236       901       758  

Other income

    204       413       1,005       1,148  

Realized securities gain, net

    17       6       17       14  

Total noninterest income

    1,924       2,171       7,729       7,636  

Noninterest Expense

                               

Salaries and employee benefits

    3,628       3,250       14,506       13,670  

Occupancy and furniture and fixtures

    449       454       1,845       1,820  

Data processing and ATM

    760       607       2,784       2,280  

FDIC assessment

    90       85       359       364  

Intangibles and goodwill amortization

    13       12       50       68  

Net cost of other real estate owned

    30       63       553       205  

Franchise taxes

    313       332       1,278       1,315  

Write-down of insurance receivable

    ---       ---       2,010       ---  

Other operating expenses

    942       1,138       3,891       4,507  

Total noninterest expense

    6,225       5,941       26,276       24,229  

Income before income tax expense

    5,366       6,195       18,711       20,385  

Income tax expense

    803       3,107       2,560       6,293  

Net Income

  $ 4,563     $ 3,088     $ 16,151     $ 14,092  

Basic net income per share

  $ 0.66     $ 0.44     $ 2.32     $ 2.03  

Fully diluted net income per share

  $ 0.66     $ 0.44     $ 2.32     $ 2.03  

Weighted average number of common shares outstanding

                               

Basic

    6,957,974       6,957,974       6,957,974       6,957,974  

Diluted

    6,957,974       6,957,974       6,957,974       6,957,974  

Dividends declared per share

  $ 0.63     $ 0.61     $ 1.21     $ 1.17  

Dividend payout ratio

    ---       ---       52.13 %     57.77 %

Book value per share

  $ ---     $ ---     $ 27.34     $ 26.57  

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

   

Three Months Ended

 

($ in thousands)

 

December 31, 2018

   

December 31, 2017

 

Net income

  $ 4,563     $ 3,088  
                 

Other Comprehensive Loss, net of tax

               

Unrealized holding gain (loss) on available for sale securities net of tax of $265 in 2018 and ($940) in 2017

    992       (1,747

)

Reclassification adjustment for gain included in net income, net of tax of ($4) in 2018 and ($2) in 2017

    (13

)

    (4

)

Net pension gain (loss) arising during the period, net of taxes of ($249) in 2018 and $115 in 2017

    (936

)

    213  

Less amortization of prior service cost included in net periodic pension cost, net of tax of ($24) in 2018 and ($38) in 2017

    (86

)

    (71

)

Other comprehensive loss, net of tax of ($12) in 2018 and ($865) in 2017

  $ (43

)

  $ (1,609

)

Total Comprehensive Income

  $ 4,520     $ 1,479  

 

 

   

Twelve Months Ended

 

($ in thousands)

 

December 31, 2018

   

December 31, 2017

 

Net Income

  $ 16,151     $ 14,092  
                 

Other Comprehensive Income (Loss), Net of Tax

               

Unrealized holding gain (loss) on available for sale securities net of tax of ($596) in 2018 and $296 in 2017

    (2,245

)

    546  

Reclassification adjustment for gain included in net income, net of tax of ($4) in 2018 and ($4) in 2017

    (13

)

    (6

)

Transfer from held to maturity to available sale securities, net of tax of $237 in 2018

    891       ---  

Net pension gain (loss) arising during the period, net of tax of ($249) in 2018 and $115 in 2017

    (936

)

    213  

Less amortization of prior service cost included in net periodic pension cost, net of tax of ($24) in 2018 and ($38) in 2017

    (86

)

    (71

)

Other comprehensive income (loss), net of tax of ($636) in 2018 and $369 in 2017

    (2,389

)

    682  

Total Comprehensive Income

  $ 13,762     $ 14,774  

 

 

 

 

Key Ratios and Other Data

(Unaudited)

 

   

Three Months Ended

   

Twelve Months Ended

 

($ in thousands)

 

December 31, 2018

   

December 31, 2017

   

December 31, 2018

   

December 30, 2017

 

Average Balances

                               

Cash and due from banks

  $ 11,826     $ 11,895     $ 11,301     $ 11,443  

Interest-bearing deposits

    28,243       56,593       36,562       71,603  

Securities available for sale

    434,670       318,687       399,173       309,306  

Securities held to maturity

    ---       129,384       55,116       131,602  

Restricted stock

    1,754       1,200       1,521       1,193  

Mortgage loans held for sale

    207       538       314       392  

Gross Loans

    703,345       661,402       683,913       654,045  

Loans, net

    695,029       652,271       675,647       644,998  

Intangible assets

    5,855       5,905       5,874       5,926  

Total assets

    1,243,414       1,240,972       1,251,843       1,235,755  

Total deposits

    1,029,996       1,040,485       1,045,798       1,038,586  

Other borrowings

    12,554       ---       7,192       ---  

Stockholders' equity

    188,297       187,480       186,637       184,540  

Interest-earning assets

    1,177,992       1,170,033       1,184,448       1,170,376  

Interest-bearing liabilities

    843,419       855,845       860,550       859,878  
                                 

Financial Ratios

                               

Return on average assets

    1.46 %     0.99 %     1.29 %     1.14 %

Return on average equity

    9.61 %     6.53 %     8.65 %     7.64 %

Net interest margin

    3.33 %     3.47 %     3.36 %     3.45 %

Net interest income-fully taxable equivalent

  $ 9,878     $ 10,228     $ 39,764     $ 40,432  

Efficiency ratio

    52.75 %     50.51 %     53.20 %     53.08 %

Average equity to average assets

    15.14 %     15.11 %     14.91 %     14.93 %
                                 

Allowance for Loan Losses

                               

Beginning balance

  $ 7,713     $ 8,473     $ 7,925     $ 8,300  

Provision for losses

    (174

)

    (567

)

    (81

)

    157  

Charge-offs

    (202

)

    (130

)

    (689

)

    (819

)

Recoveries

    53       149       235       287  

Ending balance

  $ 7,390     $ 7,925     $ 7,390     $ 7,925  

 

 

 

 

Asset Quality Data

(Unaudited) 

 

($ in thousands)

 

December 31, 2018

   

December 31, 2017

 

Nonperforming Assets

               

Nonaccrual loans

  $ 311     $ 6  

Nonaccrual restructured loans

    3,109       2,763  

Total nonperforming loans

    3,420       2,769  

Other real estate owned

  $ 2,052     $ 2,817  

Total nonperforming assets

  $ 5,472     $ 5,586  

Accruing restructured loans

    2,552       5,134  

Loans 90 days or more past due

  $ 35     $ 51  
                 

Asset Quality Ratios

               

Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned

    0.77 %     0.83 %

Allowance for loans losses to total loans

    1.04 %     1.19 %

Allowance for loan losses to nonperforming loans

    216.08 %     268.20 %

Loans past due 90 days or more to loans net of unearned income and deferred fees

    0.00 %     0.01 %