BLACKSBURG, VA., July 15, 2021 -- National Bankshares, Inc. (NASDAQ: NKSH), parent company of The National Bank of Blacksburg, today announced its results of operations for the second quarter and first half of 2021. The Company reported net income of $9.38 million, or $1.49 per common share, for the six months ended June 30, 2021. This compares to net income of $6.96 million, or $1.07 per common share, for the six months ended June 30, 2020. National Bankshares, Inc. ended the first half of 2021 with total assets of $1.66 billion.
President and Chief Executive Officer F. Brad Denardo commented, “National Bankshares delivered increased earnings for the first half of 2021, driven by an improved loan volume, by good growth in noninterest income, by a large reduction in the loan loss provision, and by lower interest rates paid on deposits. We are excited to be serving our customers in our lobbies once again, and look forward to meeting and exceeding the needs of our customers, communities, and shareholders for the rest of 2021 and beyond. Thank you for your continued investment in National Bankshares.”
Highlights for the Six Months Ended June 30, 2021
Loan Modifications for Pandemic-Related Relief
Paycheck Protection Program Loans
- Of the loans modified for pandemic related hardships, at June 30, 2021, four loans totaling $5.7 million remained in an interest-only period. Each modification is governed by an agreement that provides a date at which the modification will expire.
- We continue to participate in the SBA’s Paycheck Protection Program (“PPP”). The Company assisted local businesses through the PPP by providing 1,259 loans totaling $83 million since the program’s inception in April of 2020. During the first six months of 2021, we funded 446 loans totaling $24.8 million and received pay-off of 463 loans with original amounts totaling $30.1 million. Gross PPP loans totaling $31.5 million remain on the balance sheet.
- For the six months ended June 30, 2021, contractual interest earned on PPP loans totaled $198 thousand, while net fees accreted to interest income totaled $233 thousand, and fees recognized at pay off or forgiveness totaled $662 thousand.
- Net income of $9.38 million for the six months ended June 30, 2021 benefitted from a reduced loan loss provision when compared with the six months ended June 30, 2020. Loan loss provision for the six months ended June 30, 2021 was $54 thousand, compared with $1.83 million for the six months ended June 30, 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 return on average assets and the return on average equity for the six months ended June 30, 2021 were 1.18% and 9.63% respectively, improved from 1.01% and 7.15% respectively, for the six months ended June 30, 2020.
- The low interest rate environment that impacted net interest income for the six months ended June 30, 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 0.74% for the six months ended June 30, 2020 to 0.32% for the six months ended June 30, 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 3.59% for the six months ended June 30, 2020 to 3.03% for the six months ended June 30, 2021.
- Fees and interest income from PPP loans helped increase our net interest margin(1). Our margin for the six months ended June 30, 2021 was 2.80%, down from 3.05% for the six months ended June 30, 2020. For the six months ended June 30, 2021, PPP loans increased average loans by $38.1 million and added $1.1 million in interest and fee income. If PPP loans are excluded, the net interest margin for the six months ended June 30, 2021 would have been 2.66%.
- Total noninterest income for the six months ended June 30, 2021 was up $395 thousand, or 10.18%, when compared to the six months ended June 30, 2020. 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 $439 thousand, or 3.50%, when the six months ended June 30, 2021 is compared with the six months ended June 30, 2020.
Other Notable Information
- Total assets increased by $228 million, or 15.90%, to $1.66 billion.
- Total deposits increased by $230 million, or 18.86%, to $1.45 billion, in part due to government stimulus funds received by depositors, especially municipal accounts.
- Gross loans outstanding were $807.2 million at June 30, 2021, an increase of $13.7 million from June 30, 2020. PPP loans decreased $26.3 million from June 30, 2020 to June 30, 2021, while non-PPP loans grew $40.1 million.
- Total stockholders’ equity at June 30, 2021 was $191.2 million. The Company’s capital position provides a source of great strength and continues to significantly exceed all regulatory capital guidelines.
(1)Non-GAAP Financial Measures
- The Company repurchased 150,130 shares in the 2nd quarter of 2021.
- Nonperforming loans as a percentage of total loans were 0.47% at June 30, 2021, down slightly from 0.48% at June 30, 2020 and similar to 0.47% at March 31, 2021.
- The efficiency ratio(1) was 53.26% for the six months ended June 30, 2021, an improvement over 55.24% for the six months ended June 30, 2020, and a slight improvement from 53.87% for the quarter ended March 31, 2020.
- The allowance for loan losses to total loans was 1.00% at June 30, 2021. Excluding PPP loans, the ratio was 1.04%.
- The Company’s net charge offs for the six months ended June 30, 2021 were $458 thousand, compared with net charge offs of $386 thousand for the six months ended June 30, 2020.
- The book value per common share as of June 30, 2021 was $30.99, an improvement from $30.17 as of June 30, 2020, and up from $29.98 as of March 31, 2021.
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 www.nationalbankshares.com
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.