National Bankshares, Inc. Reports 2019 Earnings

BLACKSBURG, Va., January 30, 2020 – National Bankshares, Inc. (the “Company”) (NASDAQ: NKSH), parent company of The National Bank of Blacksburg, today announced its results of operations for the quarter and year ended December 31, 2019.  The Company reported net income of $17.47 million, or $2.65 per common share, for the year ended December 31, 2019. The Company also reported net income of $4.78 million, or $0.74 per common share, for the quarter ended December 31, 2019.  National Bankshares, Inc. ended 2019 with total assets of $1.32 billion.
 
2019 Financial Highlights
  • Net Income increased $1.32 million from $16.15 million for the year ended December 31, 2018 to $17.47 million for the year ended December 31, 2019. This includes $566,000 (pre-tax) in realized gains from a partial restructure of the securities portfolio.
  • Earnings per share increased $0.33 from $2.32 for the year ended December 31, 2018 to $2.65 for the year ended December 31, 2019.
  • Return on average assets increased to 1.39% for the year ended December 31, 2019, from 1.29% for the year ended December 31, 2018.
  • Return on average equity increased to 9.87% for the year ended December 31, 2019, from 8.65% for the year ended December 31, 2018.
  • Net loans increased $24.18 million or 3.44% from December 31, 2018 to $726.59 million as of December 31, 2019. 
 
“In 2019 our Company achieved steady growth in net income, net loans, and total assets, and we were happy to share that success through increased dividends for our stockholders,” said National Bankshares Chairman, President and CEO F. Brad Denardo. “We believe that the more our industry changes, the more the fundamentals stay the same and that safety, strength, and service still matter in an ever-changing financial services marketplace. As we celebrate another successful year, we would like to thank the customers, communities, and shareholders who trust and support National Bankshares, Inc.”
 
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 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 located 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,

 
   

2019

   

2018

 

Assets

               

Cash and due from banks

  $ 10,290     $ 12,882  

Interest-bearing deposits

    76,881       43,491  

Securities available for sale, at fair value

    435,263       425,010  

Restricted stock

    1,220       1,220  

Total securities

    436,483       426,230  

Mortgage loans held for sale

    905       72  

Loans:

               

Loans, net of unearned income and deferred fees and costs

    733,451       709,799  

Less: allowance for loan losses

    (6,863

)

    (7,390

)

Loans, net

    726,588       702,409  

Premises and equipment, net

    8,919       8,646  

Operating lease right of use asset

    2,277       ---  

Accrued interest receivable

    4,285       5,160  

Other real estate owned, net

    1,612       2,052  

Intangible assets and goodwill

    5,848       5,848  

Bank-owned life insurance

    35,567       34,657  

Other assets

    12,182       14,585  

Total assets

  $ 1,321,837     $ 1,256,032  
                 

Liabilities and Stockholders' Equity

               

Noninterest-bearing deposits

  $ 201,866     $ 195,441  

Interest-bearing demand deposits

    643,482       616,527  

Savings deposits

    146,377       138,175  

Time deposits

    128,028       101,799  

Total deposits

    1,119,753       1,051,942  

Accrued interest payable

    144       89  

Operating lease liability

    2,286       ---  

Other liabilities

    15,928       13,763  

Total liabilities

    1,138,111       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 December 31, 2019 and 6,957,974 shares at December 31, 2018

    8,112       8,698  

Retained earnings

    184,120       193,625  

Accumulated other comprehensive loss, net

    (8,506

)

    (12,085

)

Total stockholders' equity

    183,726       190,238  

Total liabilities and stockholders' equity

  $ 1,321,837     $ 1,256,032  

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 

 

   

Three Months Ended

December 31,

   

Twelve Months Ended

December 31,

 

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

 

2019

   

2018

   

2019

   

2018

 

Interest Income

                               

Interest and fees on loans

  $ 8,592     $ 8,174     $ 33,869     $ 31,333  

Interest on interest-bearing deposits

    475       163       1,523       672  

Interest on securities - taxable

    1,874       1,731       6,725       6,856  

Interest on securities - nontaxable

    487       1,001       3,030       4,363  

Total interest income

    11,428       11,069       45,147       43,224  

Interest Expense

                               

Interest on time deposits

    566       182       1,805       526  

Interest on other deposits

    1,242       1,334       5,575       4,357  

Interest on borrowed funds

    ---       60       ---       164  

Total interest expense

    1,808       1,576       7,380       5,047  

Net interest income

    9,620       9,493       37,767       38,177  

Recovery of (provision for) loan losses

    224       174       (126

)

    81  

Net interest income after provision for loan losses

    9,844       9,667       37,641       38,258  

Noninterest Income

                               

Service charges on deposit accounts

    613       641       2,453       2,678  

Other service charges and fees

    49       45       198       132  

Credit card fees

    383       360       1,398       1,431  

Trust income

    414       434       1,622       1,565  

Bank-owned life insurance

    229       223       910       901  

Other income

    275       204       1,643       1,005  

Realized securities gain, net

    384       17       566       17  

Total noninterest income

    2,347       1,924       8,790       7,729  

Noninterest Expense

                               

Salaries and employee benefits

    3,852       3,628       15,298       14,506  

Occupancy and furniture and fixtures

    456       449       1,866       1,845  

Data processing and ATM

    808       760       3,171       2,784  

FDIC assessment

    ---       90       167       359  

Intangibles and goodwill amortization

    ---       13       ---       50  

Net cost of other real estate owned

    2       30       47       553  

Franchise taxes

    343       313       1,333       1,278  

Write-down of insurance receivable

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

Other operating expenses

    989       942       3,872       3,891  

Total noninterest expense

    6,450       6,225       25,754       27,276  

Income before income tax expense

    5,741       5,366       20,677       18,711  

Income tax expense

    964       803       3,211       2,560  

Net Income

  $ 4,777     $ 4,563     $ 17,466     $ 16,151  

Basic net income per share

  $ 0.74     $ 0.66     $ 2.65     $ 2.32  

Fully diluted net income per share

  $ 0.74     $ 0.66     $ 2.65     $ 2.32  

Weighted average number of common shares outstanding

                               

Basic

    6,489,574       6,957,974       6,580,659       6,957,974  

Diluted

    6,489,574       6,957,974       6,580,659       6,957,974  

Dividends declared per share

  $ 0.72     $ 0.63     $ 1.39     $ 1.21  

Dividend payout ratio

    ---       ---       51.71 %     52.13 %

Book value per share

    ---       ---     $ 28.31     $ 27.34  

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

 

   

Three Months Ended

December 31,

 

($ in thousands)

 

2019

   

2018

 

Net income

  $ 4,777     $ 4,563  
                 

Other Comprehensive Loss, Net of Tax

               

Unrealized holding gain (loss) on available for sale securities net of tax of ($663) in 2019 and $783 in 2018

    (2,494

)

    2,936  

Reclassification adjustment for gain included in net income, net of tax of ($81) in 2019 and ($4) in 2018

    (303

)

    (13

)

Net pension loss arising during the period, net of tax of ($394) in 2019 and ($249) in 2018

    (1,482

)

    (936

)

Less amortization of prior service cost included in net periodic pension cost, net of tax of ($23) in 2019 and ($24) in 2018

    (87

)

    (86

)

Other comprehensive loss, net of tax

  $ (4,366

)

  $ 1,901  

Total Comprehensive Income

  $ 411     $ 6,464  

 

 

 

   

Twelve Months Ended

December 31,

 

($ in thousands)

 

2019

   

2018

 

Net income

  $ 17,466     $ 16,151  
                 

Other Comprehensive Income (Loss), Net of Tax

               

Unrealized holding gain (loss) on available for sale securities net of tax of $1,486 in 2019 and ($595) in 2018

    5,595       (2,246

)

Reclassification adjustment for gain included in net income, net of tax of ($119) in 2019 and ($4) in 2018

    (447

)

    (13

)

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

    ---       891  

Net pension loss arising during the period, net of tax of ($394) in 2019 and ($249) in 2018

    (1,482

)

    (936

)

Less amortization of prior service cost included in net periodic pension cost, net of tax of ($23) in 2019 and ($24) in 2018

    (87

)

    (86

)

Other comprehensive income (loss), net of tax

  $ 3,579     $ (2,390

)

Total Comprehensive Income

  $ 21,045     $ 13,761  

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Key Ratios and Other Data

(Unaudited)

 

 

   

Three Months Ended

December 31,

   

Twelve Months Ended

December 31,

 

($ in thousands)

 

2019

   

2018

   

2019

   

2018

 

Average Balances

                               

Cash and due from banks

  $ 12,142     $ 11,826     $ 11,563     $ 11,301  

Interest-bearing deposits

    114,048       28,243       74,527       36,562  

Securities available for sale

    378,157       434,670       393,136       399,173  

Securities held to maturity

    ---       ---       ---       55,116  

Restricted stock

    1,220       1,754       1,220       1,521  

Mortgage loans held for sale

    1,411       207       737       314  

Gross Loans

    725,848       703,345       719,729       683,913  

Loans, net

    718,037       695,029       711,851       675,647  

Intangible assets

    5,848       5,855       5,848       5,874  

Total assets

    1,296,594       1,243,414       1,255,935       1,251,843  

Total deposits

    1,091,846       1,029,996       1,062,683       1,045,798  

Other borrowings

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

Stockholders' equity

    187,689       188,297       176,906       186,637  

Interest-earning assets

    1,217,232       1,177,992       1,188,366       1,184,448  

Interest-bearing liabilities

    883,240       843,419       861,713       860,550  
                                 

Financial Ratios

                               

Return on average assets

    1.46 %     1.46 %     1.39 %     1.29 %

Return on average equity

    10.10 %     9.61 %     9.87 %     8.65 %

Net interest margin

    3.22 %     3.33 %     3.29 %     3.36 %

Net interest income-fully taxable equivalent

  $ 9,868     $ 9,878     $ 39,056     $ 39,764  

Efficiency ratio(1)

    52.80 %     52.75 %     54.44 %     53.20 %

Average equity to average assets

    14.48 %     15.14 %     14.09 %     14.91 %
                                 

Allowance for Loan Losses

                               

Beginning balance

  $ 7,262     $ 7,713     $ 7,390     $ 7,925  

Provision for (recovery of) losses

    (224

)

    (174

)

    126       (81

)

Charge-offs

    (224

)

    (202

)

    (920

)

    (689

)

Recoveries

    49       53       267       235  

Ending balance

  $ 6,863     $ 7,390     $ 6,863     $ 7,390  

 

(1)    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.

 

 

 

 

National Bankshares, Inc. and Subsidiaries

Asset Quality Data

(Unaudited)

 

 

($ in thousands)

 

December 31,

 
   

2019

   

2018

 

Nonperforming Assets

               

Nonaccrual loans

  $ 164     $ 311  

Nonaccrual restructured loans

    3,211       3,109  

Total nonperforming loans

    3,375       3,420  

Other real estate owned

  $ 1,612     $ 2,052  

Total nonperforming assets

  $ 4,987     $ 5,472  

Accruing restructured loans

    1,729       2,552  

Loans 90 days or more past due

  $ 231     $ 35  
                 

Asset Quality Ratios

               

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

    0.68 %     0.77 %

Allowance for loans losses to total loans

    0.94 %     1.04 %

Allowance for loan losses to nonperforming loans

    203.35 %     216.08 %

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

    0.03 %     0.00 %