BLACKSBURG, VA., February 3, 2022 -- National Bankshares, Inc. (NASDAQ: NKSH), parent company of The National Bank of Blacksburg, today announced its results of operations for the quarter and year ended December 31, 2021. The Company reported net income of $20.38 million, or $3.28 per common share, for the year ended December 31, 2021. This compares to net income of $16.08 million, or $2.48 per common share, for the year ended December 31, 2020. National Bankshares, Inc. ended 2021 with total assets of $1.70 billion.
President and Chief Executive Officer F. Brad Denardo commented, “Our Company posted strong results for 2021, with net income up nearly 27% compared to 2020. The lowered cost of interest paid on our deposit base, along with a reversal of some of the loan loss provisions made during the height of the pandemic, were key drivers of increased income. Increased fee and noninterest income also contributed to earnings, with steady loan growth and gains in efficiency highlighting the fundamental strength of our business model.”
Mr. Denardo added, “As we move into a new year, National Bankshares remains well-positioned to serve the financial needs of our customers and communities while offering a solid return on shareholder investment.”
Highlights for the Year Ended December 31, 2021
Paycheck Protection Program Loans
- Most of the Company’s $83.02 million in PPP loans have been repaid, with only $1.05 million remaining on the balance sheet.
- For the year ended December 31, 2021, contractual interest earned on PPP loans totaled $267 thousand, while net fees recognized totaled $2.44 million. For the year ended December 31, 2020, contractual interest earned on PPP loans totaled $387 thousand and net fees recognized totaled $1.37 million.
- Net income of $20.38 million for the year ended December 31, 2021 benefitted from the reversal of a portion of previous loan loss provisions. For the year ended December 31, 2021, the Company recovered $398 thousand, compared with a provision expense of $1.99 million for the year ended December 31, 2020.
- The return on average assets and the return on average equity for the year ended December 31, 2021, were 1.26% and 10.59% respectively, improved from 1.15% and 8.21% respectively, for the year ended December 31, 2020.
- The cost of interest-bearing liabilities decreased from 0.62% for the year ended December 31, 2020 to 0.28% for the year ended December 31, 2021.
- The Company experienced high levels of calls on securities and loan refinance activity that resulted in a decrease in the yield on earning assets(1) to 3.01% for the year ended December 31, 2021, from 3.42% for the year ended December 31, 2020.
- Our net interest margin(1) for the year ended December 31, 2021 was 2.81%, down from 2.98% for the year ended December 31, 2020.
- Fees and interest income from PPP loans increased our net interest margin. For the year ended December 31, 2021, PPP loans increased average loans by $25.60 million and added $2.71 million in interest and fee income. For the year ended December 31, 2020, PPP loans increased average loans by $36.88 million and added $1.75 million in interest and fee income. If PPP loans are excluded, the net interest margin would have been 2.63% for the year ended December 31, 2021 and 2.85% for the year ended December 31, 2020.
- Total noninterest income for the year ended December 31, 2021 increased $482 thousand, or 6.07%, when compared to the year ended December 31, 2020. Higher noninterest income was driven by increased credit and debit card fees and Trust income.
- Noninterest expense increased $1.11 million, or 4.45%, when the year ended December 31, 2021 is compared with the year ended December 31, 2020. Contributing to the increase were higher pension expense and a return to normal FDIC insurance expense. FDIC insurance expense benefitted in 2020 from credits provided by the FDIC.
Other Notable Information
- Total assets increased by $182.50 million, or 12.01%, from $1.52 billion at December 31, 2020 to $1.70 billion at December 31, 2021.
- Total deposits increased by $197.44 million, or 15.22%, to $1.49 billion, in part due to government stimulus funds received by depositors, especially municipal accounts.
- Gross loans outstanding were $803.73 million at December 31, 2021, an increase of $33.70 million from December 31, 2020. PPP loans decreased $35.81 million from December 31, 2020 to December 31, 2021, while non-PPP loans grew $69.51 million, or 9.48%.
- Total stockholders’ equity at December 31, 2021 was $191.75 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 33,021 shares in the 4th quarter of 2021. Shares repurchased for the year ended December 31, 2021 total 368,083 shares.
- Nonperforming loans as a percentage of total loans were 0.36% at December 31, 2021, down from 0.48% at December 31, 2020.
- The efficiency ratio(1) was 51.34% for the year ended December 31, 2021, an improvement over 53.49% for the year ended December 31, 2020.
- The allowance for loan losses to total loans was 0.96% at December 31, 2021, down from 1.10% at December 31, 2020.
- The Company’s net charge offs for the year ended December 31, 2021 were $409 thousand, compared with net charge offs of $373 thousand for the year ended December 31, 2020.
- The book value per common share as of December 31, 2021 was $31.62, compared with $31.19 as of December 31, 2020.
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 24 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 including a full version of this release with data tables 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.