National Bankshares, Inc. Reports First Quarter 2021 Earnings

BLACKSBURG, VA., April 22, 2021 -- National Bankshares, Inc. (NASDAQ: NKSH), parent company of The National Bank of Blacksburg, today announced its results of operations for the first quarter of 2021. The Company reported net income of $4.77 million, or $0.74 per common share, for the quarter ended March 31, 2021. This compares to 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 2021 with total assets of $1.57 billion.
President and Chief Executive Officer F. Brad Denardo commented, “We are very encouraged by the increased earnings generated by our Company in the first quarter. After nearly a year of economic disruption, there have been signs of improvement for our customers and our local economies. As a result, we were able to safely reduce our loan loss provision for the quarter, which along with the very low interest rates on deposits, contributed to improved income. Moving ahead into the second quarter, we look forward to continued improvement in the business climate and a return to serving our customers with lobby service. We also remain confident in our ability to meet our customer's financial service needs while delivering a solid return on your investment. Thank you for your continued support and trust in National Bankshares.”
Highlights for the Quarter Ended March 31, 2021
Loan Modifications
  • Of the loans modified for pandemic related hardships, at March 31, 2021, 7 loans totaling $7.8 million remained in deferral and another 6 loans totaling $14.4 million remained on interest-only payments. Each modification is governed by an agreement that provides a date at which the modification will expire. One additional loan with a balance of $4.8 million was provided an extended amortization period.
Paycheck Protection Program Loans
  • We continue to participate in the SBA’s Paycheck Protection Program (“PPP”). The Company assisted local businesses through the PPP by providing 1,164 loans totaling $81.0 million since the program’s inception in April of 2020. During the first quarter of 2021, we funded 351 loans totaling $22.8 million and received pay-off of 302 loans with original amounts totaling $14.5 million.  
  • For the three months ended March 31, 2021, contractual interest earned on PPP loans totaled $100 thousand, while net fees accreted to interest income totaled $113 thousand, and fees recognized at pay off or forgiveness totaled $437 thousand.  Gross PPP loans totaling $45.14 million remain on the balance sheet.
Income Statement
  • The return on average assets and the return on average equity for the three months ended March 31, 2021 were 1.19% and 9.30% respectively, improved from 1.16% and 8.03% respectively, for the three months ended March 31, 2020.
  • Net income of $4.77 million for the three months ended March 31, 2021 benefitted from a reduced loan loss provision when compared with the three months ended March 31, 2020.  Loan loss provision for the three months ended March 31, 2021 was $50 thousand, compared with $479 thousand for the three months ended March 31, 2020. We will continue to closely monitor our loan portfolio for indications of heightened credit risk and the resulting need for any additional provision for loan losses.
  • The low interest rate environment that impacted net interest income for the three months ended March 31, 2021 began with Federal Reserve rate cuts on March 3 and March 16, 2020, decreasing the target Fed Funds rate from 1.75% to 0.25%.  The Company reacted by reducing interest rates on customer deposits.  The cost of interest-bearing liabilities decreased from 0.80% for the three months ended March 31, 2020 to 0.34% for the three months ended March 31, 2021. The Company also experienced high levels of calls on securities and loan refinance activity that resulted in a decrease in the yield on earning assets(1) from 3.79% for the three months ended March 31, 2020 to 3.13% for the three months ended March 31, 2021.
  • Fees and interest income from PPP loans helped increase our net interest margin(1). Our margin for the three months ended March 31, 2021 was 2.89%, down from 3.20% for the three months ended March 31, 2020.  For the three months ended March 31, 2021, PPP loans increased average loans by $38.2 million and added $650 thousand in interest and fee income.  If PPP loans are excluded, the net interest margin for the three months ended March 31, 2021 would have been 2.71%. 
  • Total noninterest income for the three months ended March 31, 2021 was up $199 thousand, or 9.32%, when compared to the three months ended March 31, 2021. Higher noninterest income was driven by increased credit and debit card fees and receipt of a one-time bonus from a partnership investment.
  • Noninterest expense was up $69 thousand, or 1.07%, when the three months ended March 30, 2021 is compared with the three months ended March 30, 2020.
Balance Sheet
  • Total assets increased by $249.23 million, or 18.90%, to $1.57 billion.
  • Total deposits increased by $250.41 million, or 22.60%, to $1.36 billion. We expect continued growth in deposits in the second quarter due to additional government stimulus funds received by depositors.
  • Gross loans outstanding were $781.24 million at March 31, 2021, an increase of $51.23 million from March 31, 2020.  PPP loans provided $45.1 million of the growth.
  • Total stockholders’ equity at March 31, 2021 was $189.10 million. The Company’s capital position provides a source of great strength and continues to significantly exceed all regulatory capital guidelines.
Other Notable Information
  • The Company repurchased 111,832 shares in the 1st quarter of 2021. We expect to continue to repurchase shares throughout 2021.
  • Nonperforming loans as a percentage of total loans were 0.47% at March 31, 2021, holding steady from 0.47% at March 31, 2020 and down slightly from 0.48% at December 31, 2020.
  • The efficiency ratio(1) was 53.87% for the quarter ended March 31, 2021, an improvement over the 55.67% reported for the quarter ended March 31, 2020, but up slightly from 53.11% for the year-ended December 31, 2020.
  • The allowance for loan losses to total loans was 1.10% at March 30, 2021. Excluding PPP loans, the ratio was 1.16%.
  • The Company experienced a net recovery of loan losses of $5 thousand for the three months ended March 31, 2021, compared with a net charge off of $373 thousand for the quarter ended March 31, 2020.
  • The book value per common share as of March 30, 2021 was $29.98, an improvement from $ 29.52 as of March 31, 2020, and down slightly from $31.19 as of December 31, 2020.

 (1)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 the net interest margin, which is presented on a fully taxable-equivalent (“FTE”) basis.  Efficiency ratio is calculated as noninterest expense, less non-recurring items, divided by the sum of noninterest income and net interest income on an 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
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.