National Bankshares, Inc. Reports Income for Third Quarter and Nine Months Ended September 30, 2019

BLACKSBURG, VA., October 17, 2019 – National Bankshares, Inc. (the “Company”) (NASDAQ: NKSH), parent company of The National Bank of Blacksburg, today reported net income of $4.25 million, or $0.65 per common share, for the quarter ended September 30, 2019. Net income was $12.69 million or $1.92 per common share, for the nine months ended September 30, 2019. At September 30, 2019, the Company had total assets of $1.27 billion.
 
Highlights for the Nine Months Ended September 30, 2019
  • Net income increased $1.10 million from $11.59 million for the nine months ended September 30, 2018 to $12.69 million for the nine months ended September 30, 2019.
  • Earnings per share increased $0.25 from $1.67 for the nine months ended September 30, 2018 to $1.92 for the nine months ended September 30, 2019.
  • Return on average assets increased to 1.34% for the nine months ended September 30, 2019, from 1.28% for the nine months ended September 30, 2018.
  • Return on average equity increased to 9.13% for the nine months ended September 30, 2019, from 8.61% for the nine months ended September 30, 2018.
  • In spite of curtailments totaling more than $10 million, net loans increased $20.90 million or 3.01% from September 30, 2018 to $715.03 million as of September 30, 2019.
  • The Company repurchased 16,000 common shares during the third quarter.
 
“National Bankshares continues to perform well in 2019 with another strong quarterly result,” said F. Brad Denardo, Chairman, President and CEO. “We believe that our focus on making quality loans, providing outstanding customer service and increasing efficiencies will allow us to deliver above-average results for our shareholders now and well into the future.”
 
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%. 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 measures 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)

 

September 30, 2019

 

September 30, 2018

 

December 31, 2018

Assets

                       

Cash and due from banks

  $ 14,206     $ 11,533     $ 12,882  

Interest-bearing deposits

    135,490       28,328       43,491  

Securities available for sale, at fair value

    334,150       448,485       425,010  

Restricted stock

    1,220       2,708       1,220  

Total securities

    335,370       451,193       426,230  

Mortgage loans held for sale

    2,333       1,027       72  

Loans:

                       

Loans, net of unearned income and deferred fees and costs

    722,287       701,834       709,799  

Less: allowance for loan losses

    (7,262 )     (7,713 )     (7,390 )

Loans, net

    715,025       694,121       702,409  

Premises and equipment, net

    8,993       8,727       8,646  

Operating lease right of use asset

    2,351       ---       ---  

Accrued interest receivable

    4,233       5,589       5,160  

Other real estate owned, net

    1,470       2,214       2,052  

Intangible assets and goodwill

    5,848       5,861       5,848  

Bank-owned life insurance

    35,338       34,434       34,657  

Other assets

    12,064       15,262       14,585  

Total assets

  $ 1,272,721     $ 1,258,289     $ 1,256,032  
                         

Liabilities and Stockholders' Equity

                       

Noninterest-bearing deposits

  $ 217,720     $ 199,953     $ 195,441  

Interest-bearing demand deposits

    580,533       584,305       616,527  

Savings deposits

    145,188       141,751       138,175  

Time deposits

    124,586       96,167       101,799  

Total deposits

    1,068,027       1,022,176       1,051,942  

Other borrowed funds

    ---       35,000       ---  

Accrued interest payable

    133       165       89  

Operating lease liability

    2,358       ---       ---  

Other liabilities

    14,215       12,791       13,763  

Total liabilities

    1,084,733       1,070,132       1,065,794  
                         

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 6,489,574 shares at September 30, 2019 and 6,957,974 shares at September 30, 2018 and December 31, 2018

    8,112       8,698       8,698  

Retained earnings

    184,016       193,445       193,625  

Accumulated other comprehensive loss, net

    (4,140 )     (13,986 )     (12,085 )

Total stockholders' equity

    187,988       188,157       190,238  

Total liabilities and stockholders' equity

  $ 1,272,721     $ 1,258,289     $ 1,256,032  

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 

   

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

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

 

2019

 

2018

 

2019

 

2018

Interest Income

                               

Interest and fees on loans

  $ 8,548     $ 8,005     $ 25,277     $ 23,159  

Interest on federal funds

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

Interest on interest-bearing deposits

    407       111       1,048       509  

Interest on securities - taxable

    1,565       1,771       4,851       5,125  

Interest on securities - nontaxable

    768       1,058       2,543       3,362  

Total interest income

    11,288       10,945       33,719       32,155  

Interest Expense

                               

Interest on time deposits

    523       107       1,239       344  

Interest on other deposits

    1,342       1,034       4,333       3,023  

Interest on borrowed funds

    ---       104       ---       104  

Total interest expense

    1,865       1,245       5,572       3,471  

Net interest income

    9,423       9,700       28,147       28,684  

Provision for loan losses

    95       223       350       93  

Net interest income after provision for loan losses

    9,328       9,477       27,797       28,591  

Noninterest Income

                               

Service charges on deposit accounts

    643       673       1,840       2,037  

Other service charges and fees

    46       20       149       87  

Credit card fees

    350       362       1,015       1,071  

Trust income

    440       355       1,208       1,131  

Bank-owned life insurance

    230       222       681       678  

Other income

    227       282       1,368       801  

Realized securities gain, net

    162       ---       182       ---  

Total noninterest income

    2,098       1,914       6,443       5,805  

Noninterest Expense

                               

Salaries and employee benefits

    3,823       3,639       11,446       10,878  

Occupancy and furniture and fixtures

    468       433       1,410       1,396  

Data processing and ATM

    823       684       2,363       2,024  

FDIC assessment

    ---       88       167       269  

Intangibles and goodwill amortization

    ---       12       ---       37  

Net cost of other real estate owned

    17       274       45       523  

Franchise taxes

    343       314       990       965  

Write-down of insurance receivable

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

Other operating expenses

    912       1,019       2,883       2,949  

Total noninterest expense

    6,386       6,463       19,304       21,051  

Income before income tax expense

    5,040       4,928       14,936       13,345  

Income tax expense

    788       677       2,247       1,757  

Net Income

  $ 4,252     $ 4,251     $ 12,689     $ 11,588  

Basic net income per share

  $ 0.65     $ 0.61     $ 1.92     $ 1.67  

Fully diluted net income per share

  $ 0.65     $ 0.61     $ 1.92     $ 1.67  

Weighted average number of common shares outstanding

                               

Basic

    6,499,957       6,957,974       6,611,354       6,957,974  

Diluted

    6,499,957       6,957,974       6,611,354       6,957,974  

Dividends declared per share

    ---       ---     $ 0.67     $ 0.58  

Dividend payout ratio

    ---       ---       34.35 %     34.83 %

Book value per share

    ---       ---     $ 28.97     $ 27.04  

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

 

   

Three Months Ended

September 30,

($ in thousands)

 

2019

 

2018

Net income

  $ 4,252     $ 4,251  
                 

Other Comprehensive Income (Loss), Net of Tax

               

Unrealized holding gain (loss) on available for sale securities net of tax of $146 at September 30, 2019 and ($517) at September 30, 2018

    544       (1,945

)

Reclassification adjustment for gain included in net income, net of tax of ($34) for the period ended September 30, 2019

    (128

)

    ---  

Other comprehensive income (loss), net of tax

  $ 416     $ (1,945

)

Total Comprehensive Income

  $ 4,668     $ 2,306  

 

 

   

Nine Months Ended

September 30,

($ in thousands)

 

2019

 

2018

Net income

  $ 12,689     $ 11,588  
                 

Other Comprehensive Income (Loss), Net of Tax

               

Unrealized holding gain (loss) on available for sale securities net of tax of $2,149 at September 30, 2019 and ($1,378) at September 30, 2018

    8,089       (5,182

)

Reclassification adjustment for gain included in net income, net of tax of ($38) for the period ended September 30, 2019

    (144

)

    ---  

Unrealized holding gain on securities transferred from held to maturity to available for sale, net of tax of $237 for the period ended September 30, 2018

    ---       891  

Other comprehensive income (loss), net of tax

  $ 7,945     $ (4,291

)

Total Comprehensive Income

  $ 20,634     $ 7,297  

 

 

 

 

Key Ratios and Other Data

(Unaudited)

 

 

   

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

($ in thousands)

 

2019

 

2018

 

2019

 

2018

Average Balances

                               

Cash and due from banks

  $ 11,590     $ 11,026     $ 11,367     $ 11,123  

Interest-bearing deposits

    75,581       22,432       61,209       39,366  

Securities available for sale

    376,792       459,745       397,235       387,210  

Securities held to maturity

    ---       ---       ---       73,690  

Restricted stock

    1,220       1,899       1,220       1,443  

Mortgage loans held for sale

    914       592       509       350  

Gross Loans

    721,238       694,606       717,667       677,363  

Loans, net

    713,463       686,366       709,766       669,116  

Intangible assets

    5,848       5,868       5,848       5,881  

Total assets

    1,250,473       1,254,055       1,253,245       1,254,684  

Total deposits

    1,050,817       1,037,798       1,052,855       1,051,123  

Other borrowings

    ---       15,978       ---       5,385  

Stockholders' equity

    183,273       187,996       184,286       186,078  

Interest-earning assets

    1,171,425       1,186,219       1,177,688       1,186,623  

Interest-bearing liabilities

    847,489       856,299       854,458       866,323  
                                 

Financial Ratios

                               

Return on average assets (1)

    1.35 %     1.34 %     1.34 %     1.28 %

Return on average equity(1)

    9.20 %     8.97 %     9.13 %     8.61 %

Net interest margin

    3.30 %     3.38 %     3.31 %     3.37 %

Net interest income-fully taxable equivalent

  $ 9,748     $ 10,096     $ 29,186     $ 29,886  

Efficiency ratio(2)

    53.91 %     53.81 %     55.01 %     53.35 %

Average equity to average assets

    14.66 %     14.99 %     14.70 %     14.83 %
                                 

Allowance for Loan Losses

                               

Beginning balance

  $ 7,304     $ 7,579     $ 7,390     $ 7,925  

Provision for losses

    95       223       350       93  

Charge-offs

    (188

)

    (147

)

    (696

)

    (487

)

Recoveries

    51       58       218       182  

Ending balance

  $ 7,262     $ 7,713     $ 7,262     $ 7,713  

 

 

(1)

Return on average assets and return on average equity are calculated by annualizing net income to date. For the nine months ended September 30, 2019, the annualization factor was not applied to the insurance recovery. For nine months ended September 30, 2018, the annualization factor was not applied to the insurance write-off.

 

(2)

Efficiency ratio is calculated as noninterest expense, less non-recurring items, divided by the sum of noninterest income, less non-recurring items, and net interest income on a fully taxable equivalent basis.

 

 

 

 

Asset Quality Data

(Unaudited)

 

 

($ in thousands)

 

September 30,

   

2019

 

2018

Nonperforming Assets

               

Nonaccrual loans

  $ 698     $ 220  

Nonaccrual restructured loans

    3,378       2,856  

Total nonperforming loans

    4,076       3,076  

Other real estate owned

  $ 1,470     $ 2,214  

Total nonperforming assets

  $ 5,546     $ 5,290  

Accruing restructured loans

    1,879       7,843  

Loans 90 days or more past due

  $ 212     $ 63  
                 

Asset Quality Ratios

               

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

    0.77 %     0.75 %

Allowance for loans losses to total loans

    1.01 %     1.10 %

Allowance for loan losses to nonperforming loans

    178.16 %     250.75 %

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

    0.03 %     0.01 %