National Bankshares, Inc. Reports First Quarter Earnings

BLACKSBURG, Va., April 23, 2020 -- National Bankshares, Inc. (the “Company”) (NASDAQ: NKSH), parent company of The National Bank of Blacksburg, today announced its results of operations for the first quarter of 2020.  The Company reported net income of $3.98 million, or $0.61 per common share, for the quarter ended March 31, 2020. National Bankshares, Inc. ended the first quarter of 2020 with total assets of $1.32 billion.
 
First Quarter 2020 Highlights
  • Net income decreased $0.46 million from $4.44 million for the quarter ended March 31, 2019 to $3.98 million for the quarter ended March 31, 2020. This decrease was due to a large one-time addition to Other Income in first quarter 2019 coupled with the allocation of $479,000 to the Allowance for Loan Losses this quarter to address the potential effects of the COVID-19 situation.
  • Net loans increased $11.23 million or 1.58% from March 31, 2019 to $722.24 million as of March 31, 2020.
  • Total deposits increased $47.98 million or 4.53% from March 31, 2019 to $1.11 billion as of March 31, 2020.
  • Earnings per share decreased $0.04 from $0.65 for the quarter ended March 31, 2019 to $0.61 for the quarter ended March 31, 2020.
  • Return on average assets decreased to 1.22% for the quarter ended March 31, 2020, from 1.34% for the quarter ended March 31, 2019.
  • Return on average equity decreased to 8.42% for the quarter ended March 31, 2020, from 8.91% for the quarter ended March 31, 2019.
  • Stock repurchases have been suspended for the foreseeable future.
 
F. Brad Denardo, National Bankshares Chairman, President and CEO stated, “The coronavirus (COVID-19) pandemic poses an unprecedented challenge to our world, to our nation, and to our local communities. Our priority is helping our customers and our communities get through this crisis while protecting the health and well-being of our employees and the people we serve.”
 
Mr. Denardo added, “Our first quarter results continue to reflect the underlying strength of our business model, with gains in total assets, net loans, and interest income. Despite the economic uncertainties presented by COVID-19, National Bankshares remains strong and well-capitalized. We are confident that our balance sheet strength will allow us to meet the credit and liquidity needs of our customers and community during this critical period.”
 
He continued, “The large addition to the Allowance for Loan Losses, up to the maximum amount allowed by bank policy, is indicative of the Company’s evaluation of its exposure to the possibility of increased loan losses related to the COVID-19 pandemic. We have further identified industry segments that are most impacted by the pandemic and are monitoring them closely.”
 
“The nation’s banks play an essential role in times of crisis, and this is a responsibility we take very seriously,” said Mr. Denardo. “We are working with customers directly and through emergency programs such as the Small Business Administration’s Paycheck Protection Program to help them navigate and survive the current economic upheaval. We are also taking all necessary precautions to protect public health while continuing to serve our customers. All of our branch offices have switched to drive-through only service with lobby service available for special needs. We are encouraging customers to use our online banking, mobile banking and ATM networks to safely conduct their everyday transactions. Internally, we have reduced office occupancy and facilitated telework whenever possible. I am very proud of our employees, who are working hard under extraordinary circumstances to follow health and safety guidelines while making sure our customers’ financial needs are met. And we are thankful for our customers and shareholders, who continue to support National Bankshares during these challenging times.”
 
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 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)

 

March 31,

2020

 

March 31,

2019

 

December 31,

2019

Assets

                       

Cash and due from banks

  $ 12,404     $ 15,332     $ 10,290  

Interest-bearing deposits

    71,898       53,381       76,881  

Securities available for sale, at fair value

    439,019       404,645       435,263  

Restricted stock

    1,279       1,220       1,220  

Total securities

    440,298       405,865       436,483  

Mortgage loans held for sale

    1,787       602       905  

Loans:

                       

Loans, net of unearned income and deferred fees and costs

    729,483       718,371       733,451  

Less allowance for loan losses

    (7,240

)

    (7,360

)

    (6,863

)

Loans, net

    722,243       711,011       726,588  

Premises and equipment, net

    10,058       8,830       8,919  

Accrued interest receivable

    4,280       5,401       4,285  

Other real estate owned, net

    1,584       2,025       1,612  

Intangible assets and goodwill

    5,848       5,848       5,848  

Bank-owned life insurance

    35,788       34,876       35,567  

Other assets

    12,788       14,832       14,459  

Total assets

  $ 1,318,976     $ 1,258,003     $ 1,312,837  
                         

Liabilities and Stockholders' Equity

                       

Noninterest-bearing deposits

  $ 210,131     $ 199,449     $ 201,866  

Interest-bearing demand deposits

    624,412       608,227       643,482  

Savings deposits

    149,842       142,675       146,377  

Time deposits

    123,798       109,854       128,028  

Total deposits

    1,108,183       1,060,205       1,119,753  

Accrued interest payable

    137       140       144  

Other liabilities

    19,097       16,430       18,214  

Total liabilities

    1,127,417       1,076,775       1,138,111  
                         

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 March 31, 2020 and December 31, 2019 and 6,505,574 shares at March 31, 2019

    8,112       8,132       8,112  

Retained earnings

    188,099       180,637       184,120  

Accumulated other comprehensive loss, net

    (4,652

)

    (7,541

)

    (8,506

)

Total stockholders' equity

    191,559       181,228       183,726  

Total liabilities and stockholders' equity

  $ 1,318,976     $ 1,258,003     $ 1,321,837  

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 

 

   

Three Months Ended March 31,

($ in thousands, except for per share data)

 

2020

 

2019

Interest Income

               

Interest and fees on loans

  $ 8,466     $ 8,269  

Interest on interest-bearing deposits

    217       259  

Interest on securities - taxable

    2,356       1,683  

Interest on securities - nontaxable

    349       927  

Total interest income

    11,388       11,138  

Interest Expense

               

Interest on time deposits

    559       297  

Interest on other deposits

    1,237       1,496  

Total interest expense

    1,796       1,793  

Net interest income

    9,592       9,345  

Provision for loan losses

    479       200  

Net interest income after provision for loan losses

    9,113       9,145  

Noninterest Income

               

Service charges on deposit accounts

    582       590  

Other service charges and fees

    39       52  

Credit card fees

    306       309  

Trust income

    434       397  

Bank-owned life insurance

    221       219  

Other income

    533       910  

Realized securities gain, net

    20       12  

Total noninterest income

    2,135       2,489  

Noninterest Expense

               

Salaries and employee benefits

    3,979       3,821  

Occupancy, furniture and fixtures

    450       465  

Data processing and ATM

    791       751  

FDIC assessment

    ---       85  

Net cost of other real estate owned

    22       25  

Franchise taxes

    343       314  

Other operating expenses

    882       1,004  

Total noninterest expense

    6,467       6,465  

Income before income tax expense

    4,781       5,169  

Income tax expense

    802       726  

Net Income

  $ 3,979     $ 4,443  

Basic net income per share

  $ 0.61     $ 0.65  

Fully diluted net income per share

  $ 0.61     $ 0.65  

Weighted average number of common shares outstanding

               

Basic and diluted

    6,489,574       6,839,733  

Dividends declared per share

    ---       ---  

Dividend payout ratio

    ---       ---  

Book value per share

  $ 29.52     $ 27.86  

 

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

   

Three Months Ended March 31,

($ in thousands)

 

2020

 

2019

Net income

  $ 3,979     $ 4,443  
                 

Other Comprehensive Income, Net of Tax

               

Unrealized holding gain on available for sale securities net of tax of $1,028 in 2020 and $1,209 in 2019

    3,870       4,553  

Reclassification adjustment for gain included in net income, net of tax of ($4) in 2020 and ($3) in 2019

    (16

)

    (9

)

Other comprehensive income, net of tax

  $ 3,854     $ 4,544  

Total Comprehensive Income

  $ 7,833     $ 8,987  

 

 

 

Key Ratios and Other Data

(Unaudited)

 

 

   

Three Months Ended March 31,

($ in thousands)

 

2020

 

2019

Average Balances

               

Cash and due from banks

  $ 11,205     $ 11,243  

Interest-bearing deposits

    66,583       44,264  

Securities available for sale

    438,916       416,750  

Restricted stock

    1,225       1,220  

Mortgage loans held for sale

    493       153  

Gross Loans

    731,418       710,738  

Loans, net

    723,971       702,716  

Intangible assets

    5,848       5,848  

Total assets

    1,312,427       1,249,052  

Total deposits

    1,104,176       1,046,003  

Stockholders' equity

    189,516       187,429  

Interest-earning assets

    1,233,067       1,177,910  

Interest-bearing liabilities

    904,080       854,614  
                 

Financial Ratios

               

Return on average assets (1)

    1.22 %     1.34 %

Return on average equity (1)

    8.42 %     8.91 %

Net interest margin

    3.20 %     3.34 %

Net interest income-fully taxable equivalent

  $ 9,811     $ 9,712  

Efficiency ratio (2)

    54.23 %     55.49 %

Average equity to average assets

    14.44 %     15.01 %
                 

Allowance for Loan Losses

               

Beginning balance

  $ 6,863     $ 7,390  

Provision for losses

    479       200  

Charge-offs

    (175

)

    (328

)

Recoveries

    73       98  

Ending balance

  $ 7,240     $ 7,360  

 

 

 

(1)

Return on average assets and return on average equity are calculated by annualizing net income to date.

 

(2)

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

 

 

 

Asset Quality Data

(Unaudited)

 

 

($ in thousands)

 

March 31, 2020

 

March 31, 2019

Nonperforming Assets

               

Nonaccrual loans

  $ 261     $ 294  

Nonaccrual restructured loans

    3,191       3,440  

Total nonperforming loans

    3,452       3,734  

Other real estate owned

  $ 1,584     $ 2,025  

Total nonperforming assets

  $ 5,036     $ 5,759  

Accruing restructured loans

    1,592       1,995  

Loans 90 days or more past due

  $ 170     $ 55  
                 

Asset Quality Ratios

               

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

    0.69 %     0.80 %

Allowance for loans losses to total loans

    0.99 %     1.02 %

Allowance for loan losses to nonperforming loans

    209.73 %     197.11 %

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

    0.02 %     0.01 %