8-K
NATIONAL BANKSHARES INC (NKSH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 20, 2023
NATIONAL BANKSHARES, INC.
(Exact name of Registrant as specified in its charter)
| Virginia | 0-15204 | 54-1375874 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) |
101 Hubbard Street
Blacksburg, VA 24060
(Address of principal executive offices)
(540) 951-6300
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report) Not applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | NKSH | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
ITEM 2.02. RESULTS OF OPERATIONS, FINANCIAL STATEMENTS AND EXHIBITS
On April 20, 2023, National Bankshares, Inc. issued a press release reporting its financial results for the period ended March 31, 2023. A copy of the press release is being furnished as an exhibit to this report and is incorporated by reference into this Item 2.02.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
| (d) | Exhibits |
|---|---|
| 99.1 | National Bankshares, Inc. Press Release, dated April 20, 2023. |
| --- | --- |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL BANKSHARES, INC.
Date: April 20, 2023
| By: /s/ F. Brad Denardo |
|---|
| F. Brad Denardo<br><br> <br>Chairman, President & CEO |
Page 2 of 2 Pages
ex_504214.htm
Exhibit 99.1
FOR IMMEDIATE RELEASE
| CONTACTS: | F. Brad Denardo, Chairman, President & CEO<br><br> <br>(540) 951-6213 bdenardo@nbbank.com | Lora M. Jones, Treasurer & CFO<br><br> <br>(540) 951-6238 ljones@nbbank.com |
|---|
National Bankshares, Inc. Reports Results for the First Quarter of 2023
BLACKSBURG, VA., April 20, 2023 -- National Bankshares, Inc. (“the Company”) **** (Nasdaq: NKSH), parent company of The National Bank of Blacksburg (“the Bank”), today announced its results of operations for the first quarter of 2023. The Company reported net income for the quarter of $4.53 million, or $0.77 per common share. This compares to net income for the first quarter of 2022 of $4.89 million, or $0.81 per common share. National Bankshares, Inc. ended March 31, 2023 with total assets of $1.65 billion.
President and CEO, F. Brad Denardo, commented, “Our proven business model has served us well through a challenging first quarter. In the face of broad banking sector volatility, our Company continued to operate from a position of strength, with ample capital and liquidity levels and solid earnings. National Bankshares remains confident in locally-based community banking and is committed to driving long-term stockholder value.”
Highlights
Special Dividend
The Company paid a special one-time cash dividend of $1.00 per common share during the first quarter of 2023. The dividend rewarded stockholders for the Company’s positive performance during 2022, which included a one-time gain on the sale of a private equity investment.
Deposits
The Company’s deposits experienced increased competitive pressure during the first quarter of 2023, continuing a trend that began impacting the Company during the fourth quarter of 2022. Deposits at March 31, 2023 declined by 2.03% when compared with the level at December 31, 2022. The Company responded to the trend early in the quarter with special CD offering rates, as well as improved rates on other deposits that substantially reversed the trend later in the quarter, at costs well below the cost of borrowing.
The Company’s deposit base is diverse, including individuals, businesses and municipalities within its market area. The Company does not have any brokered deposits. Depositors are insured up to the FDIC maximum of $250 thousand. Municipal deposits, which account for approximately one-fourth of the Company’s deposits, have additional security from bonds pledged as collateral, in accordance with state regulation. Of the Company’s non-municipal deposits, approximately 24% are uninsured.
Liquidity
The Company’s liquidity position remains solid. The Company’s borrowing capacity with the Federal Home Loan Bank of Atlanta (“FHLB”) and other correspondent relationships currently exceeds $400 million as of March 31, 2023. During the first quarter of 2023, the Company accessed FHLB borrowings to reinforce liquidity. The advances were fully repaid during March 2023, due to the success of the Company’s deposit strategy. Combined with a loan-to-deposit ratio of 56.70%, positive results of the latest liquidity stress testing and success of recent deposit marketing, the Company believes it is well-positioned to meet foreseeable liquidity demands.
Loans and Credit Risk
Loans, net of unearned income and deferred cost, grew by $37.64 million when March 31, 2023 is compared with March 31, 2022. When compared with December 31, 2022, loans grew by $4.22 million. Loan demand has contracted under current economic conditions but the Company is positioned to continue to make every loan that meets its underwriting standards.
101 Hubbard Street / Blacksburg, Virginia 24060
P.O. Box 90002 / Blacksburg, Virginia 24062-9002
540 951-6300 / 800 552-4123
www.nationalbankshares.com
Loan quality continues to reflect low credit risk. For the first quarter of 2023, the Company recorded a net recovery of $81 thousand, or 0.04% (annualized) of average loans. This compares with a recovery of $8 thousand for the three months ended December 31, 2022 and a net charge off of $20 thousand for the three months ended March 31, 2022.
The Company adopted Accounting Standards Update 2016-13 (“ASU 2016-13”) as of January 1, 2023. Upon adoption, the allowance for credit loss on loans (“ACLL”) increased by $2.34 million, moving the ratio of the ACLL to loans, net of deferred fees and costs, to 1.24%, from 0.96% at December 31, 2022. Adoption also increased the Company’s liability for credit loss on unfunded commitments by $207 thousand, increased the deferred tax asset by $535 thousand and reduced retained earnings by $2.01 million
Provision expense for the three months ended March 31, 2023 was $2 thousand, compared with $134 thousand for the three months ended March 31, 2022, and $10 thousand for the fourth quarter of 2022.
Income Statement
Net income for the three months ended March 31, 2023 decreased from the same period of 2022 by $355 thousand. Contributing to the decrease in net income were pre-tax expenses of $441 thousand incurred to respond to a threatened proxy contest initiated by an activist stockholder. The Company announced on March 31, 2023 that the activist had withdrawn its nominees for the Company’s Board of Directors with no concessions or negotiated settlement with the Company. The Company expects to receive in the second quarter additional bills associated with its response to the threatened proxy contest. Excluding the proxy contest expenses, net income for the three months ended March 31, 2023 would have been $4.88 million, similar to net income of $4.89 million for the three months ended March 31, 2022.
Net Interest Income
Federal Reserve interest rate increases beginning in March 2022 expanded interest income. When results for the three months ended March 31, 2023 and March 31, 2022 are compared, fully taxable equivalent (“FTE”) interest income**^(1)^** increased $2.98 million. Compared with results for the three months ended December 31, 2022, FTE interest income increased $41 thousand.
Interest expense increased $2.44 million when results for the three months ended March 31, 2023 are compared with results for the three months ended March 31, 2022. When the first quarter of 2023 is compared with the last quarter of 2022, interest expense increased $2.07 million. The increase reflects the current competitive environment for deposits.
Noninterest Income and Noninterest Expense
Noninterest income decreased $92 thousand when the three months ended March 31, 2023 are compared with the same period ended March 31, 2022, primarily due to a special commission on insurance sales received in 2022. When compared with the fourth quarter of 2022, noninterest income decreased $3.66 million, due to the gain on sale of a private equity investment of $3.82 million received in October of 2022.
Noninterest expense increased $1.05 million when the three months ended March 31, 2023 are compared with the same period ended March 31, 2022. When compared with the fourth quarter of 2022, noninterest expense increased $366. The increase stemmed primarily from the previously discussed proxy contest-related expenses, included in professional services expense, as well as increased salary and benefits expense. Like many employers, the Company faced challenges to hiring enough qualified employees in recent years. Since increasing its starting salary in 2022, the Company has been able to attract a better pool of applicants and fill needed positions.
Securities
Securities available for sale at March 31, 2023 decreased $5.81 million from December 31, 2022. Securities are reported at market value, which moves inversely to interest rate movements. The Federal Reserve’s aggressive rate hikes during 2022 led to an unrealized loss of $88.22 million at March 31, 2023. This compares with an unrealized loss of $103.07 million at December 31, 2022, and $39.21 million at March 31, 2022. During the first quarter of 2023, the Company sold $18 million of securities at a weighted average yield below the cost of borrowing. The sale resulted in a small net gain and benefitted the net interest margin. The Company’s Asset Liability Management Committee is closely monitoring interest rate risk on all of the Company’s financial assets and liabilities, and as of March 31, 2023, there are no credit risk concerns with any of the Company’s securities.
2
Stockholders’ Equity
Stockholders’ equity increased $8.36 million, or 6.81%, from December 31, 2022 to March 31, 2023. The ratio of tangible common equity to tangible assets**^(1)^** increased from 6.99% at December 31, 2022 to 7.59% at March 31, 2023. The unrealized loss on securities impacts stockholders’ equity through accumulated other comprehensive loss. Accumulated other comprehensive loss is excluded from the Bank’s regulatory capital and does not impact regulatory capital ratios. The Bank is considered well capitalized, with capital ratios considerably higher than minimum regulatory requirements, and meets all requirements for borrowing from the FHLB.
Key Ratios
Return on Average Equity
The return on average equity for the three months ended March 31, 2023 was 15.25%. For the three months ended March 31, 2022, the return on average equity was 10.21%. Excluding Accumulated Other Comprehensive Loss, the return on average equity for the three month periods ended March 31, 2023 and 2022 was 9.25%^(1)^ and 9.58%^(1)^, respectively. For the three months ended December 31, 2022, excluding the gain on sale of the private equity investment and accumulated other comprehensive loss, the return on average equity was 12.24%^(1)^.
Return on Average Assets
The return on average assets for the three months ended March 31, 2023 and 2022 was 1.16% and 1.11%, respectively. Excluding the unrealized loss on securities, the return on average assets for both of the three month periods ended March 31, 2023 and 2022 was 1.11%^(1)^. The return on average assets for the three months ended December 31, 2022, excluding the gain on sale of the private equity investment and the unrealized loss on securities was 1.42%^(1)^.
Efficiency Ratio
The efficiency ratio ^(1)^ for the three months ended March 31, 2023 and 2022 was 54.99% and 52.71%, respectively. For the three months ended December 31, 2022, the efficiency ratio was 47.95%. The efficiency ratio increased from the fourth quarter of 2022 due to higher interest expense, and from the first quarter of 2022 due to higher noninterest expense.
^(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 FTE interest income, the net interest margin, the efficiency ratio, tangible common equity to tangible assets, average assets excluding the impact of unrealized securities loss and average equity excluding accumulated other comprehensive income (loss).
Interest income and the net interest margin are presented on an FTE basis, using the federal statutory income tax rate of 21%. Efficiency ratio is calculated as noninterest expense divided by the sum of noninterest income, less non-recurring items, and net interest income on an FTE basis. Tangible common equity and tangible assets exclude goodwill. 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. For a reconciliation of non-GAAP financial measures, see “Reconciliation of Non-GAAP Financial Measures” at the end of this release.
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, primarily in southwest Virginia, and three loan production offices. 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.
3
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 is not obligated to update any forward-looking statements that it may make.
4
National Bankshares, Inc.
Consolidated Balance Sheets
(Unaudited)
| ( in thousands, except for per share data) | December 31,<br><br> <br>2022 | March 31,<br><br> <br>2022 | ||||||
|---|---|---|---|---|---|---|---|---|
| Assets | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and due from banks | 11,695 | $ | 12,403 | $ | 12,247 | |||
| Interest-bearing deposits | 42,966 | 59,026 | 108,028 | |||||
| Securities available for sale, at fair value | 651,047 | 656,852 | 699,354 | |||||
| Restricted stock, at cost | 929 | 941 | 941 | |||||
| Mortgage loans held for sale | - | - | - | |||||
| Loans: | ||||||||
| Real estate construction loans | 54,052 | 54,579 | 59,741 | |||||
| Consumer real estate loans | 223,438 | 221,052 | 209,072 | |||||
| Commercial real estate loans | 438,843 | 437,888 | 416,953 | |||||
| Commercial non real estate loans | 60,516 | 57,652 | 52,796 | |||||
| Public sector and IDA loans | 47,359 | 48,074 | 47,156 | |||||
| Consumer non-real estate loans | 33,188 | 33,948 | 34,056 | |||||
| Total loans | 857,396 | 853,193 | 819,774 | |||||
| Less unearned income and deferred fees and costs | (431 | ) | (449 | ) | (446 | ) | ||
| Loans, net of unearned income and deferred fees and costs | 856,965 | 852,744 | 819,328 | |||||
| Less: allowance for credit losses | (10,650 | ) | (8,225 | ) | (7,788 | ) | ||
| Loans, net | 846,315 | 844,519 | 811,540 | |||||
| Premises and equipment, net | 10,431 | 10,371 | 9,764 | |||||
| Accrued interest receivable | 6,007 | 6,001 | 5,433 | |||||
| Other real estate owned, net | 662 | 662 | 957 | |||||
| Goodwill | 5,848 | 5,848 | 5,848 | |||||
| Bank-owned life insurance | 43,551 | 43,312 | 42,592 | |||||
| Other assets | 34,826 | 37,616 | 24,800 | |||||
| Total assets | 1,654,277 | $ | 1,677,551 | $ | 1,721,504 | |||
| Liabilities and Stockholders' Equity | **** | **** | **** | **** | **** | **** | **** | **** |
| Noninterest-bearing deposits | 311,137 | $ | 327,713 | $ | 338,031 | |||
| Interest-bearing demand deposits | 871,748 | 933,269 | 908,790 | |||||
| Savings deposits | 202,996 | 214,114 | 220,083 | |||||
| Time deposits | 125,571 | 67,629 | 76,849 | |||||
| Total deposits | 1,511,452 | 1,542,725 | 1,543,753 | |||||
| Accrued interest payable | 314 | 106 | 51 | |||||
| Other liabilities | 11,468 | 12,033 | 16,411 | |||||
| Total liabilities | 1,523,234 | 1,554,864 | 1,560,215 | |||||
| Commitments and contingencies | - | - | - | |||||
| 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 5,889,687 shares at March 31, 2023 and December 31, 2022 and 6,022,752 shares at March 31, 2022 | 7,362 | 7,362 | 7,528 | |||||
| Retained earnings | 195,718 | 199,091 | 191,645 | |||||
| Accumulated other comprehensive loss, net | (72,037 | ) | (83,766 | ) | (37,884 | ) | ||
| Total stockholders' equity | 131,043 | 122,687 | 161,289 | |||||
| Total liabilities and stockholders' equity | 1,654,277 | $ | 1,677,551 | $ | 1,721,504 |
All values are in US Dollars.
5
National Bankshares, Inc.
Consolidated Statements of Income
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| ($ in thousands, except for per share data) | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | March 31,<br><br> <br>2022 | |||
| Interest Income | **** | **** | **** | **** | **** | **** |
| Interest and fees on loans | $ | 9,333 | $ | 9,013 | $ | 8,100 |
| Interest on interest-bearing deposits | **** | 228 | 596 | 49 | ||
| Interest on securities - taxable | **** | 4,118 | 3,941 | 2,473 | ||
| Interest on securities - nontaxable | **** | 365 | 432 | 428 | ||
| Total interest income | **** | 14,044 | 13,982 | 11,050 | ||
| Interest Expense | **** | **** | **** | **** | **** | **** |
| Interest on time deposits | **** | 359 | 36 | 37 | ||
| Interest on other deposits | **** | 2,454 | 992 | 618 | ||
| Interest on borrowings | **** | 285 | - | - | ||
| Total interest expense | **** | 3,098 | 1,028 | 655 | ||
| Net interest income | **** | 10,946 | 12,954 | 10,395 | ||
| Provision for credit losses | **** | 2 | 10 | 134 | ||
| Net interest income after provision for credit losses | **** | 10,944 | 12,944 | 10,261 | ||
| Noninterest Income | **** | **** | **** | **** | **** | **** |
| Service charges on deposit accounts | **** | 592 | 599 | 562 | ||
| Other service charges and fees | **** | 53 | 57 | 55 | ||
| Credit and debit card fees, net | **** | 467 | 493 | 440 | ||
| Trust income | **** | 445 | 443 | 443 | ||
| BOLI income | **** | 239 | 240 | 238 | ||
| Gain on sale of mortgage loans | **** | 16 | 21 | 61 | ||
| Gain on sale of private equity investment | **** | - | 3,823 | - | ||
| Other income | **** | 375 | 182 | 492 | ||
| Realized securities gain, net | **** | 12 | - | - | ||
| Total noninterest income | **** | 2,199 | 5,858 | 2,291 | ||
| Noninterest Expense | **** | **** | **** | **** | **** | **** |
| Salaries and employee benefits | **** | 4,434 | 4,386 | 3,978 | ||
| Occupancy, furniture and fixtures | **** | 542 | 502 | 492 | ||
| Data processing and ATM | **** | 873 | 832 | 787 | ||
| FDIC assessment | **** | 117 | 141 | 111 | ||
| Net costs of other real estate owned | **** | 11 | 247 | 10 | ||
| Franchise taxes | **** | 375 | 375 | 362 | ||
| Professional services | **** | 753 | 306 | 225 | ||
| Other operating expenses | **** | 559 | 509 | 648 | ||
| Total noninterest expense | **** | 7,664 | 7,298 | 6,613 | ||
| Income before income tax expense | **** | 5,479 | 11,504 | 5,939 | ||
| Income tax expense | **** | 948 | 2,194 | 1,053 | ||
| Net Income | $ | 4,531 | $ | 9,310 | $ | 4,886 |
| Basic and fully diluted net income per common share | $ | 0.77 | $ | 1.57 | $ | 0.81 |
| Weighted average number of common shares outstanding | ||||||
| Basic and Diluted | **** | 5,889,687 | 5,933,201 | 6,047,230 | ||
| Dividends declared per common share | $ | 1.00 | $ | 0.78 | $ | - |
| Book value per share | $ | 22.25 | $ | 20.83 | $ | 26.78 |
6
National Bankshares, Inc.
Net Interest Margin
(Unaudited)
| ($ in thousands) | Three Months Ended March 31, 2023 | Three Months Ended December 31, 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||
| Interest-earning assets: | ||||||||||||||
| Loans ^(1)(2)(3)^ | $ | 855,093 | $ | 9,414 | **** | 4.46 | % | $ | 845,373 | $ | 9,095 | 4.27 | % | |
| Taxable securities ^(4)(5)^ | **** | 678,543 | **** | 4,118 | **** | 2.46 | % | 689,370 | 3,941 | 2.27 | % | |||
| Nontaxable securities ^(1)(4)^ | **** | 67,335 | **** | 493 | **** | 2.97 | % | 74,540 | 580 | 3.09 | % | |||
| Interest-bearing deposits | **** | 19,715 | **** | 228 | **** | 4.69 | % | 62,393 | 596 | 3.79 | % | |||
| Total interest-earning assets | $ | 1,620,686 | $ | 14,253 | **** | 3.57 | % | $ | 1,671,676 | $ | 14,212 | 3.37 | % | |
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 856,591 | $ | 2,373 | **** | 1.12 | % | $ | 908,209 | $ | 955 | 0.42 | % | |
| Savings deposits | **** | 208,376 | **** | 81 | **** | 0.16 | % | 215,594 | 37 | 0.07 | % | |||
| Time deposits | **** | 91,666 | **** | 359 | **** | 1.59 | % | 70,874 | 36 | 0.20 | % | |||
| Borrowings | **** | 23,962 | **** | 285 | **** | 4.82 | % | - | - | - | ||||
| Total interest-bearing liabilities | $ | 1,180,595 | $ | 3,098 | **** | 1.06 | % | $ | 1,194,677 | $ | 1,028 | 0.34 | % | |
| Net interest income and interest rate spread | **** | **** | $ | 11,155 | **** | 2.51 | % | $ | 13,184 | 3.03 | % | |||
| Net yield on average interest‑earning assets | **** | **** | **** | **** | **** | 2.79 | % | 3.13 | % | |||||
| ($ in thousands) | Three Months Ended March 31, 2022 | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| Average Balance | Interest | Average Yield/ Rate | ||||||||||||
| Interest-earning assets: | ||||||||||||||
| Loans ^(1)(3)(6)^ | $ | 803,693 | $ | 8,181 | 4.13 | % | ||||||||
| Taxable securities ^(4)(5)^ | 628,311 | 2,473 | 1.60 | % | ||||||||||
| Nontaxable securities ^(1)(4)^ | 76,709 | 574 | 3.03 | % | ||||||||||
| Interest-bearing deposits | 114,254 | 49 | 0.17 | % | ||||||||||
| Total interest-earning assets | $ | 1,622,967 | $ | 11,277 | 2.82 | % | ||||||||
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 886,829 | $ | 580 | 0.27 | % | ||||||||
| Savings deposits | 212,920 | 38 | 0.07 | % | ||||||||||
| Time deposits | 77,989 | 37 | 0.19 | % | ||||||||||
| Total interest-bearing liabilities | $ | 1,177,738 | $ | 655 | 0.23 | % | ||||||||
| Net interest income and interest rate spread | $ | 10,622 | 2.59 | % | ||||||||||
| Net yield on average interest‑earning assets | 2.65 | % | ||||||||||||
| ^(1)^ | Interest on nontaxable loans and securities is computed on a fully taxable equivalent basis using a Federal income tax rate of 21%. See “Reconciliation of Non-GAAP Financial Measures” at the end of this release. | |||||||||||||
| --- | --- | |||||||||||||
| ^(2)^ | Interest income includes loan fees of $40 and $35 for the three months ended March 31, 2023 and December 31, 2022, respectively. | |||||||||||||
| ^(3)^ | Includes loans held for sale and nonaccrual loans. | |||||||||||||
| ^(4)^ | Daily averages are shown at amortized cost. | |||||||||||||
| ^(5)^ | Includes restricted stock. | |||||||||||||
| ^(6)^ | Interest income includes loan fees of $88 for the three months ended March 31, 2022. |
7
National Bankshares, Inc.
Key Ratios and Other Data
(Unaudited)
| As of and for the Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands) | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | March 31,<br><br> <br>2022 | ||||||
| Average Balances | |||||||||
| Cash and due from banks | $ | 11,412 | $ | 11,641 | $ | 11,693 | |||
| Interest-bearing deposits | **** | 19,715 | 62,393 | 114,254 | |||||
| Securities available for sale | **** | 645,097 | 653,153 | 697,328 | |||||
| Mortgage loans held for sale | **** | 58 | 75 | 216 | |||||
| Loans, gross | **** | 855,483 | 845,713 | 803,943 | |||||
| Loans, net of unearned income and deferred fees and costs | **** | 855,035 | 845,298 | 803,477 | |||||
| Loans, net of allowance for credit losses | **** | 844,411 | 837,063 | 795,817 | |||||
| Goodwill | **** | 5,848 | 5,848 | 5,848 | |||||
| Total assets | **** | 1,625,041 | 1,672,102 | 1,703,280 | |||||
| Noninterest bearing deposits | **** | 308,908 | 348,779 | 324,172 | |||||
| Interest-bearing and savings deposits | **** | 1,064,967 | 1,123,803 | 1,099,749 | |||||
| Time deposits | **** | 91,666 | 70,874 | 77,989 | |||||
| Total deposits | **** | 1,465,541 | 1,543,456 | 1,501,910 | |||||
| Stockholders' equity | **** | 123,996 | 110,331 | 185,324 | |||||
| Financial Ratios | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Return on average assets^(1)^ | **** | 1.16 | % | 1.67 | % | 1.11 | % | ||
| Return on average equity^(1)^ | **** | 15.25 | % | 25.36 | % | 10.21 | % | ||
| Efficiency ratio^(2)^ | **** | 54.99 | % | 47.95 | % | 52.71 | % | ||
| Average equity to average assets | **** | 7.63 | % | 6.60 | % | 10.88 | % | ||
| Tangible common equity to tangible assets | **** | 7.59 | % | 6.99 | % | 9.06 | % | ||
| Allowance for Credit Losses | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Beginning balance | $ | 8,225 | $ | 8,207 | $ | 7,674 | |||
| Provision for credit losses | **** | 2 | 10 | 134 | |||||
| Charge-offs | **** | (92 | ) | (51 | ) | (60 | ) | ||
| Recoveries | **** | 173 | 59 | 40 | |||||
| Adoption of ASU 2016-13 | **** | 2,342 | - | - | |||||
| Ending balance | $ | 10,650 | $ | 8,225 | $ | 7,788 | |||
| (1) | The return on average assets and return on average equity are calculated by annualizing net income and dividing by average period-to-date assets or equity, respectively. Any significant nonrecurring items within net income are not annualized. See “Reconciliation of Non-GAAP Financial Measures” at the end of this release. | ||||||||
| --- | --- | ||||||||
| (2) | The efficiency ratio is calculated as noninterest expense divided by the sum of noninterest income, less non-recurring items, and net interest income on a fully taxable equivalent basis. See “Reconciliation of Non-GAAP Financial Measures” at the end of this release. | ||||||||
| --- | --- |
8
National Bankshares, Inc.
Asset Quality Data
(Unaudited)
| ($ in thousands) | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | March 31,<br><br> <br>2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Nonperforming Assets | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Nonaccrual loans | $ | 2,814 | $ | 2,847 | $ | 2,862 | |||
| Other real estate owned | **** | 662 | 662 | 957 | |||||
| Total nonperforming assets | $ | 3,476 | $ | 3,509 | $ | 3,819 | |||
| Loans 90 days or more past due and accruing | $ | 33 | $ | 8 | $ | 381 | |||
| Asset Quality Ratios | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Nonperforming assets to loans^(1)^ plus other real estate owned | **** | 0.41 | % | 0.41 | % | 0.47 | % | ||
| Allowance for credit losses on loans to total loans^(1)^ | **** | 1.24 | % | 0.96 | % | 0.95 | % | ||
| Allowance for credit losses on loans to nonperforming loans | **** | 378.46 | % | 288.90 | % | 272.12 | % | ||
| Loans past due 90 days or more to loans^(1)^ | **** | 0.00 | % | 0.00 | % | 0.05 | % | ||
| (1) | Loans are net of unearned income and deferred fees and costs | ||||||||
| --- | --- |
9
National Bankshares, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
| ( in thousands) | December 31,<br><br> <br>2022 | March 31, 2022 | ||||||
| Net Interest Income, FTE | **** | **** | **** | **** | **** | **** | **** | **** |
| Total interest income (GAAP) | 14,044 | $ | 13,982 | $ | 11,050 | |||
| FTE adjustment | 209 | 230 | 227 | |||||
| Total interest income (non-GAAP) | 14,253 | 14,212 | 11,277 | |||||
| Total interest expense (GAAP) | 3,098 | 1,028 | 655 | |||||
| Net interest income, FTE (non-GAAP) | 11,155 | $ | 13,184 | $ | 10,622 | |||
| Noninterest Expense for Efficiency Ratio | **** | **** | **** | **** | **** | **** | **** | **** |
| Noninterest expense (GAAP) | 7,664 | $ | 7,298 | $ | 6,613 | |||
| Less: proxy contest-related expense | (441 | ) | - | - | ||||
| Noninterest expense for efficiency ratio (non-GAAP) | 7,223 | $ | 7,298 | $ | 6,613 | |||
| Total Income for Efficiency Ratio | **** | **** | **** | **** | **** | **** | **** | **** |
| Noninterest income (GAAP) | 2,199 | $ | 5,858 | $ | 2,291 | |||
| Less: securities gains | (12 | ) | - | - | ||||
| Less: partnership income | (208 | ) | - | (367 | ) | |||
| Less: gain on sale of private equity investment | - | (3,823 | ) | - | ||||
| Noninterest income (non-GAAP) | 1,979 | 2,035 | 1,924 | |||||
| Net interest income, FTE (non-GAAP) | 11,155 | 13,184 | 10,622 | |||||
| Total income for efficiency ratio (non-GAAP) | 13,134 | $ | 15,219 | $ | 12,546 | |||
| Annualized Net Income | **** | **** | **** | **** | **** | **** | **** | **** |
| Net income (GAAP) | 4,531 | $ | 9,310 | $ | 4,886 | |||
| Less: items deemed by management to be non-recurring: | ||||||||
| Partnership income net of tax of (44) and (77) for the periods ended March 31, 2023 and 2022, respectively | (164 | ) | - | (290 | ) | |||
| Securities gain, net of tax of (3) for the period ended March 31, 2023 | (9 | ) | - | - | ||||
| Proxy contest-related expense, net of tax of 93 for the period ended March 31, 2023 | 348 | - | - | |||||
| Gain on sale of private equity investment, net of tax of (803) for the period ended December 31, 2022 | - | (3,020 | ) | - | ||||
| Adjusted net income | 4,706 | 6,290 | 4,596 | |||||
| Adjusted net income, annualized | 19,085 | 24,955 | 18,639 | |||||
| Add: items deemed by management to be non-recurring: | ||||||||
| Partnership income net of tax of 44 and 77 for the periods ended March 31, 2023 and 2022, respectively | 164 | - | 290 | |||||
| Securities gain, net of tax of 3 for the period ended March 31, 2023 | 9 | - | - | |||||
| Proxy contest-related expense, net of tax of (93) for the period ended March 31, 2023 | (348 | ) | - | - | ||||
| Gain on sale of private equity investment, net of tax of 803 for the period ended December 31, 2022 | - | 3,020 | - | |||||
| Annualized net income for ratio calculation (non-GAAP) | 18,910 | $ | 27,975 | $ | 18,929 | |||
| Continued |
All values are in US Dollars.
10
| ($ in thousands) | Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31,<br><br> <br>2022 | March 31, 2022 | |||||||
| Average Assets Excluding Unrealized Loss on Securities | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Average assets (GAAP) | $ | 1,625,041 | $ | 1,672,102 | $ | 1,703,280 | |||
| Average unrealized loss on securities | **** | 98,823 | 109,816 | 6,836 | |||||
| Average deferred tax asset, unrealized loss on securities | **** | (20,753 | ) | (23,061 | ) | (1,436 | ) | ||
| Average assets excluding unrealized loss on securities (non-GAAP) | $ | 1,703,111 | $ | 1,758,857 | $ | 1,708,680 | |||
| Average Stockholders’ Equity Excluding AOCI | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Average stockholders’ equity (GAAP) | $ | 123,996 | $ | 110,331 | $ | 185,324 | |||
| Average accumulated other comprehensive loss | **** | 80,415 | 93,617 | 12,312 | |||||
| Average stockholders’ equity excluding AOCI (non-GAAP) | $ | 204,411 | $ | 203,948 | $ | 197,636 | |||
| As of | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ($ in thousands) | March 31, 2023 | December 31,<br><br> <br>2022 | March 31, 2022 | ||||||
| Tangible Assets | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Total assets (GAAP) | $ | 1,654,277 | $ | 1,677,551 | $ | 1,721,504 | |||
| Less: Goodwill | **** | (5,848 | ) | (5,848 | ) | (5,848 | ) | ||
| Tangible assets (non-GAAP) | $ | 1,648,429 | $ | 1,671,703 | $ | 1,715,656 | |||
| Tangible Common Equity | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Total stockholders' equity (GAAP) | $ | 131,043 | $ | 122,687 | $ | 161,289 | |||
| Less: Goodwill | **** | (5,848 | ) | (5,848 | ) | (5,848 | ) | ||
| Tangible common equity (non-GAAP) | $ | 125,195 | $ | 116,839 | $ | 155,441 |
11