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) July 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 July 20, 2023, National Bankshares, Inc. issued a press release reporting its financial results for the period ended June 30, 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 July 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: July 20, 2023
| By: | /s/ F. Brad Denardo |
|---|---|
| F. Brad Denardo | |
| Chairman, President & CEO |
Page 2 of 2 Pages
ex_545767.htm
Exhibit 99.1
FOR IMMEDIATE RELEASE
| CONTACTS: | F. Brad Denardo, Chairman, President & CEO | Lora M. Jones, Treasurer & CFO |
|---|---|---|
| (540) 951-6213 bdenardo@nbbank.com | (540) 951-6238 ljones@nbbank.com |
National Bankshares, Inc. Reports Results for the Second Quarter and First Half of 2023
BLACKSBURG, VA., July 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 second quarter and first half of 2023. The Company reported net income of $3.90 million, or basic earnings per common share of $0.66, for the second quarter and $8.43 million, or basic earnings per common share of $1.43, for the six months ended June 30, 2023. This compares to net income of $5.57 million, or basic earnings per common share of $0.93, for the second quarter of 2022 and $10.46 million, or basic earnings per common share of $1.74, for the six months ended June 30, 2022. National Bankshares, Inc. ended June 30, 2023 with total assets of $1.63 billion.
President and CEO F. Brad Denardo commented, “Financial institutions across the nation have encountered intense interest rate pressure in the first half of 2023. Drastic increases in the interest paid on deposits outpaced the return on loans and other assets, resulting in lower net interest income for the quarter. In addition to reduced net interest income, the costs incurred by National Bankshares in a successfully-averted proxy contest and the increased salary expense resulting from last year’s 4th quarter base pay increase also contributed to lower net income when compared to the same period in 2022.”
Mr. Denardo continued, “While the current economic environment may last for some time, we are never satisfied with reduced earnings and are doing everything within our power to return to increased profitability in the second half of 2023. National Bankshares remains well-capitalized, and our lenders are working tirelessly to deploy that capital through sound, profitable loans. Our talented community bankers are seeking new opportunities for growth and deepening existing relationships to deliver profits through multiple lines of service. As always, we are working to increase operational efficiencies and reduce costs while maintaining our outstanding customer experience.”
Highlights
Dividends
The Company paid a semiannual dividend of $0.73 per share in June 2023. Along with a special one-time cash dividend of $1.00 per common share during the first quarter of 2023, the Company rewarded shareholders with a dividend payout ratio of 120.84% for the first half of 2023.
Growth
The Company is pleased to announce that construction on a new branch in Roanoke, Virginia will begin during the third quarter of 2023. The full service branch will expand our already successful Loan Production Office and enhance our service in the Roanoke Valley.
Net Income
Net income for the three and six month periods ended June 30, 2023 decreased when compared with the three months ended March 31, 2023 and June 30, 2022, and the six months ended June 30, 2022. Key items that impacted results are discussed below.
Net Interest Income
The Federal Reserve raised its benchmark interest rate by 500 basis points between March 2022 and May 2023, improving interest income when results for the three and six months ended June 30, 2023 are compared with the same periods of 2022. However, rising rates and competition for deposits during 2023 increased interest expense and compressed the net interest margin when compared with 2022.
101 Hubbard Street / Blacksburg, Virginia 24060
P.O. Box 90002 / Blacksburg, Virginia 24062-9002
540 951-6300 / 800 552-4123
www.nationalbankshares.com
Noninterest Income
Noninterest income for the second quarter of 2023 improved from the first quarter of 2023. During the second quarter, the Company recognized a gain of $2.97 million on the sale of its VISA Class B securities, as well as a gain of $1.04 million from the payout of a Bank Owned Life Insurance policy. The Company also sold securities during the second quarter and recorded a loss of $3.34 million. The sale of securities is discussed in more detail below.
Noninterest income for the first half of 2023 improved when compared with the first half of 2022, due primarily to the same factors discussed above.
Noninterest Expense
Noninterest expense for the second quarter of 2023 decreased when compared with the first quarter of 2023, reflecting lower expenses for professional services, partially offset by increased FDIC insurance expense. Professional services include legal and other expenses for the Company’s response to the previously mentioned proxy contest that amounted to $327 thousand for the second quarter and $441 thousand for the first quarter of 2023. The Company does not anticipate any further material expense for this matter. FDIC insurance expense increased due to an increase in the FDIC’s general assessment rate.
When the first half of 2023 is compared with the first half of 2022, noninterest expense increased due to the FDIC assessment and the proxy contest, as discussed above, as well as salary and employee benefits, data processing and ATM, and pension non-service cost. As mentioned above, the Company increased its base compensation during 2022 in order to attract and retain talent, which is reflected in 2023 results. Data processing and ATM expense increased due to higher maintenance costs. Pension non-service cost, included in other operating expense, increased $174 thousand based upon actuarial calculations.
Securities
As part of its interest rate risk management, the Company periodically evaluates its position in financial assets. During the second quarter, the Company strategically selected and sold securities with a market value of $25.52 million. The loss on the sale was largely offset by a gain on the sale of the Company’s VISA Class B stock. Additionally, during the first quarter of 2023, the Company sold $18.00 million of securities, resulting in a small net gain. The strategy for both sales prioritized enhancement of long-term earnings. Though not a primary objective, proceeds from the sales also bolstered liquidity.
The Company’s Asset Liability Management Committee is closely monitoring interest rate risk on all of the Company’s financial assets and liabilities. As of June 30, 2023, the Company has the ability to hold securities until maturity and there are no further sales planned. Analysis as of June 30, 2023 did not indicate any credit risk concerns with any of the Company’s securities.
Deposits
Competition continued to pressure the Company’s deposits during the second quarter of 2023, a trend that began impacting the Company during the fourth quarter of 2022. The Company implemented competitive pricing on CDs, raised offering rates on other deposits and negotiated with depositors to strengthen the deposit base, at costs well below the cost of borrowing.
The Company’s depositors within its market area are diverse, including individuals, businesses and municipalities. 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 26% 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 22% are uninsured.
Liquidity
The Company’s liquidity position remains solid. The Company maintains borrowing lines with the Federal Home Loan Bank of Atlanta (“FHLB”), the Federal Reserve and another correspondent bank that provide substantial borrowing capacity. During the first half of 2023, the Company accessed FHLB and Federal Reserve borrowings to reinforce liquidity. The advances were fully repaid due to the success of the Company’s deposit strategy. Combined with a low loan-to-deposit ratio, positive results of the latest liquidity stress testing and success of deposit marketing, the Company believes it is well-positioned to meet foreseeable liquidity demands.
2
Loans and Credit Risk
Loans decreased from 2022 and from March 31, 2023 as higher interest rates decreased demand. The Company is positioned to continue to make every loan that meets its underwriting standards.
Loan quality continues to reflect low credit risk, with low charge-off and past due levels. The allowance for credit losses on loans (“ACLL”) was 1.26% of loans as of June 30, 2023, compared with 1.24% of loans as of March 31, 2023. At both dates, the Company held a surplus in excess of the calculated requirement to account for uncertainty in the general economic environment. The Company adopted Accounting Standards Update 2016-13 (“ASU 2016-13”) as of January 1, 2023, which increased the ACL by $2.34 million from December 31, 2022.
Stockholders’ Equity
Stockholders’ equity as of June 30, 2023 decreased from March 31, 2023 due to dividends of $4.30 million and an increase of $2.21 million in accumulated other comprehensive loss, offset to an extent by earnings of $3.90 million. Compared with June 30, 2022, stockholders equity at June 30, 2023 decreased due to dividends, share repurchases during 2022 and an increase in the accumulated other comprehensive loss, offset to an extent by net income. 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.
The Company’s stockholders approved a new equity compensation plan at the annual meeting held in May 2023. Under the plan, part of the June 2023 semi-annual retainer for non-employee directors was paid in a restricted stock grant. The equity compensation plan aims to align decision making with long-term value creation for the Company’s shareholders.
Key Ratios
The impact of margin compression accounts for the decrease in the return on average equity and the return on average assets and the increase in the efficiency ratio when the second quarter of 2023 is compared with the first quarter of 2023. Margin compression also resulted in the decrease in the return on average assets and increase in the efficiency ratio when the first half of 2023 is compared with the first half of 2022. Return on average equity increased when the first half of 2023 is compared with the first half of 2022 primarily due to a lower denominator for 2023, attributable to an increase in unrealized securities losses reflected in the accumulated other comprehensive loss.
^(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 fully taxable equivalent 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 loss, net.
The net interest margin is calculated using the fully taxable equivalent interest income, 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.”
3
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by use of words such as “may,” “will,” “anticipates,” “believes,” “expects,” “plans,” “estimates,” “potential,” “continue,” “should,” and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein. For details on factors that could affect these expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and in the Company’s other periodic and current reports filed with the SEC. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company’s past results are not necessarily indicative of future performance.
4
National Bankshares, Inc.
Consolidated Balance Sheets
(Unaudited)
| ( in thousands, except share and per share data) | March 31, 2023 | June 30, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
| Assets | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and due from banks | 14,815 | $ | 11,695 | $ | 11,798 | |||
| Interest-bearing deposits | 55,241 | 42,966 | 95,812 | |||||
| Securities available for sale, at fair value | 614,178 | 651,047 | 682,251 | |||||
| Restricted stock, at cost | 929 | 929 | 941 | |||||
| Mortgage loans held for sale | - | - | 488 | |||||
| Loans: | ||||||||
| Real estate construction loans | 56,984 | 54,052 | 69,724 | |||||
| Consumer real estate loans | 226,453 | 223,438 | 217,143 | |||||
| Commercial real estate loans | 423,396 | 438,843 | 425,388 | |||||
| Commercial non real estate loans | 56,079 | 60,516 | 52,338 | |||||
| Public sector and IDA loans | 47,791 | 47,359 | 49,856 | |||||
| Consumer non-real estate loans | 36,236 | 33,188 | 34,825 | |||||
| Total loans | 846,939 | 857,396 | 849,274 | |||||
| Less: unearned income and deferred fees and costs | (398 | ) | (431 | ) | (460 | ) | ||
| Loans, net of unearned income and deferred fees and costs | 846,541 | 856,965 | 848,814 | |||||
| Less: allowance for credit losses | (10,626 | ) | (10,650 | ) | (8,069 | ) | ||
| Loans, net | 835,915 | 846,315 | 840,745 | |||||
| Premises and equipment, net | 11,044 | 10,431 | 9,773 | |||||
| Accrued interest receivable | 5,718 | 6,007 | 5,506 | |||||
| Other real estate owned, net | 662 | 662 | 957 | |||||
| Goodwill | 5,848 | 5,848 | 5,848 | |||||
| Bank-owned life insurance | 43,081 | 43,551 | 42,833 | |||||
| Other assets | 38,110 | 34,826 | 32,636 | |||||
| Total assets | 1,625,541 | $ | 1,654,277 | $ | 1,729,588 | |||
| Liabilities and Stockholders' Equity | **** | **** | **** | **** | **** | **** | **** | **** |
| Noninterest-bearing deposits | 300,713 | $ | 311,137 | $ | 334,576 | |||
| Interest-bearing demand deposits | 841,382 | 871,748 | 943,574 | |||||
| Savings deposits | 197,958 | 202,996 | 218,716 | |||||
| Time deposits | 146,979 | 125,571 | 80,965 | |||||
| Total deposits | 1,487,032 | 1,511,452 | 1,577,831 | |||||
| Accrued interest payable | 260 | 314 | 46 | |||||
| Other liabilities | 9,805 | 11,468 | 15,471 | |||||
| Total liabilities | 1,497,097 | 1,523,234 | 1,593,348 | |||||
| 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 5,891,739 (including 2,052 unvested) shares at June 30, 2023, 5,889,687 at March 31, 2023 and 5,980,775 at June 30, 2022 | 7,367 | 7,362 | 7,476 | |||||
| Retained earnings | 195,320 | 195,718 | 191,541 | |||||
| Accumulated other comprehensive loss, net | (74,243 | ) | (72,037 | ) | (62,777 | ) | ||
| Total stockholders' equity | 128,444 | 131,043 | 136,240 | |||||
| Total liabilities and stockholders' equity | 1,625,541 | $ | 1,654,277 | $ | 1,729,588 |
All values are in US Dollars.
5
National Bankshares, Inc.
Consolidated Statements of Income
(Unaudited)
| Three Months Ended | |||||||
|---|---|---|---|---|---|---|---|
| ($ in thousands, except share and per share data) | June 30,<br><br> <br>2023 | March 31,<br><br> <br>2023 | June 30,<br><br> <br>2022 | ||||
| Interest Income | **** | **** | **** | **** | **** | **** | **** |
| Interest and fees on loans | $ | 9,644 | $ | 9,333 | $ | 8,324 | |
| Interest on interest-bearing deposits | **** | 540 | 228 | 202 | |||
| Interest on securities - taxable | **** | 4,066 | 4,118 | 2,949 | |||
| Interest on securities - nontaxable | **** | 347 | 365 | 447 | |||
| Total interest income | **** | 14,597 | 14,044 | 11,922 | |||
| Interest Expense | **** | **** | **** | **** | **** | **** | **** |
| Interest on time deposits | **** | 1,054 | 359 | 37 | |||
| Interest on other deposits | **** | 4,314 | 2,454 | 610 | |||
| Interest on borrowings | **** | 12 | 285 | - | |||
| Total interest expense | **** | 5,380 | 3,098 | 647 | |||
| Net interest income | **** | 9,217 | 10,946 | 11,275 | |||
| Provision for credit losses | **** | 10 | 2 | 310 | |||
| Net interest income after provision for credit losses | **** | 9,207 | 10,944 | 10,965 | |||
| Noninterest Income | **** | **** | **** | **** | **** | **** | **** |
| Service charges on deposit accounts | **** | 637 | 592 | 603 | |||
| Other service charges and fees | **** | 49 | 53 | 51 | |||
| Credit and debit card fees, net | **** | 414 | 467 | 535 | |||
| Trust income | **** | 481 | 445 | 439 | |||
| BOLI income | **** | 1,279 | 239 | 241 | |||
| Gain on sale of mortgage loans | **** | 55 | 16 | 35 | |||
| Gain on sale of investment | **** | 2,971 | - | - | |||
| Other income | **** | 249 | 375 | 208 | |||
| Realized securities (loss) gain, net | **** | (3,344 | ) | 12 | - | ||
| Total noninterest income | **** | 2,791 | 2,199 | 2,112 | |||
| Noninterest Expense | **** | **** | **** | **** | **** | **** | **** |
| Salaries and employee benefits | **** | 4,465 | 4,434 | 4,011 | |||
| Occupancy, furniture and fixtures | **** | 411 | 542 | 464 | |||
| Data processing and ATM | **** | 879 | 873 | 793 | |||
| FDIC assessment | **** | 254 | 117 | 111 | |||
| Net costs of other real estate owned | **** | 4 | 11 | - | |||
| Franchise taxes | **** | 358 | 375 | 371 | |||
| Professional services | **** | 551 | 753 | 214 | |||
| Other operating expenses | **** | 635 | 559 | 347 | |||
| Total noninterest expense | **** | 7,557 | 7,664 | 6,311 | |||
| Income before income tax expense | **** | 4,441 | 5,479 | 6,766 | |||
| Income tax expense | **** | 540 | 948 | 1,192 | |||
| Net Income | $ | 3,901 | $ | 4,531 | $ | 5,574 | |
| Basic net income per common share | $ | 0.66 | $ | 0.77 | $ | 0.93 | |
| Fully diluted net income per common share | $ | 0.66 | $ | 0.77 | $ | 0.93 | |
| Weighted average number of common shares outstanding, basic | **** | 5,889,687 | 5,889,687 | 6,004,425 | |||
| Weighted average number of common shares outstanding, diluted | **** | 5,890,048 | 5,889,687 | 6,004,425 | |||
| Dividends declared per common share | $ | 0.73 | $ | 1.00 | $ | 0.72 | |
| Book value per share | $ | 21.81 | $ | 22.25 | $ | 22.78 |
6
National Bankshares, Inc.
Consolidated Statements of Income
(Unaudited)
| Six Months Ended | |||||
|---|---|---|---|---|---|
| ($ in thousands, except share and per share data) | June 30, 2023 | June 30, 2022 | |||
| Interest Income | **** | **** | **** | **** | **** |
| Interest and fees on loans | $ | 18,977 | $ | 16,424 | |
| Interest on interest-bearing deposits | **** | 768 | 251 | ||
| Interest on securities - taxable | **** | 8,184 | 5,422 | ||
| Interest on securities - nontaxable | **** | 712 | 875 | ||
| Total interest income | **** | 28,641 | 22,972 | ||
| Interest Expense | **** | **** | **** | **** | **** |
| Interest on time deposits | **** | 1,413 | 74 | ||
| Interest on other deposits | **** | 6,768 | 1,228 | ||
| Interest on borrowings | **** | 297 | - | ||
| Total interest expense | **** | 8,478 | 1,302 | ||
| Net interest income | **** | 20,163 | 21,670 | ||
| Provision for credit losses | **** | 12 | 444 | ||
| Net interest income after provision for credit losses | **** | 20,151 | 21,226 | ||
| Noninterest Income | **** | **** | **** | **** | **** |
| Service charges on deposit accounts | **** | 1,229 | 1,165 | ||
| Other service charges and fees | **** | 102 | 106 | ||
| Credit and debit card fees, net | **** | 881 | 975 | ||
| Trust income | **** | 926 | 882 | ||
| BOLI income | **** | 1,518 | 479 | ||
| Gain on sale of mortgage loans | **** | 71 | 96 | ||
| Gain on sale of investment | **** | 2,971 | - | ||
| Other income | **** | 624 | 700 | ||
| Realized securities loss, net | **** | (3,332 | ) | - | |
| Total noninterest income | **** | 4,990 | 4,403 | ||
| Noninterest Expense | **** | **** | **** | **** | **** |
| Salaries and employee benefits | **** | 8,899 | 7,989 | ||
| Occupancy, furniture and fixtures | **** | 953 | 956 | ||
| Data processing and ATM | **** | 1,752 | 1,580 | ||
| FDIC assessment | **** | 371 | 222 | ||
| Net costs of other real estate owned | **** | 15 | 10 | ||
| Franchise taxes | **** | 733 | 733 | ||
| Professional services | **** | 1,304 | 439 | ||
| Other operating expenses | **** | 1,194 | 995 | ||
| Total noninterest expense | **** | 15,221 | 12,924 | ||
| Income before income tax expense | **** | 9,920 | 12,705 | ||
| Income tax expense | **** | 1,488 | 2,245 | ||
| Net Income | $ | 8,432 | $ | 10,460 | |
| Basic net income per common share | $ | 1.43 | $ | 1.74 | |
| Fully diluted net income per common share | $ | 1.43 | $ | 1.74 | |
| Weighted average number of common shares outstanding, basic | **** | 5,889,687 | 6,025,709 | ||
| Weighted average number of common shares outstanding, diluted | **** | 5,889,868 | 6,025,709 | ||
| Dividends declared per common share | $ | 1.73 | $ | 0.72 | |
| Book value per share | $ | 21.81 | $ | 22.78 |
7
National Bankshares, Inc.
Net Interest Margin
(Unaudited)
| ($ in thousands) | Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||
| Interest-earning assets: | ||||||||||||||
| Loans ^(1)(2)(3)^ | $ | 853,119 | $ | 9,730 | **** | 4.57 | % | $ | 855,093 | $ | 9,414 | 4.46 | % | |
| Taxable securities ^(4)(5)^ | **** | 654,021 | **** | 4,066 | **** | 2.49 | % | 678,543 | 4,118 | 2.46 | % | |||
| Nontaxable securities ^(1)(4)^ | **** | 65,231 | **** | 470 | **** | 2.89 | % | 67,335 | 493 | 2.97 | % | |||
| Interest-bearing deposits | **** | 41,947 | **** | 540 | **** | 5.16 | % | 19,715 | 228 | 4.69 | % | |||
| Total interest-earning assets | $ | 1,614,318 | $ | 14,806 | **** | 3.68 | % | $ | 1,620,686 | $ | 14,253 | 3.57 | % | |
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 847,986 | $ | 4,115 | **** | 1.95 | % | $ | 856,591 | $ | 2,373 | 1.12 | % | |
| Savings deposits | **** | 199,606 | **** | 199 | **** | 0.40 | % | 208,376 | 81 | 0.16 | % | |||
| Time deposits | **** | 138,261 | **** | 1,054 | **** | 3.06 | % | 91,666 | 359 | 1.59 | % | |||
| Borrowings | **** | 954 | **** | 12 | **** | 5.05 | % | 23,962 | 285 | 4.82 | % | |||
| Total interest-bearing liabilities | $ | 1,186,807 | $ | 5,380 | **** | 1.82 | % | $ | 1,180,595 | $ | 3,098 | 1.06 | % | |
| Net interest income and interest rate spread | **** | **** | $ | 9,426 | **** | 1.86 | % | $ | 11,155 | 2.51 | % | |||
| Net yield on average interest‑earning assets | **** | **** | **** | **** | **** | 2.34 | % | 2.79 | % | |||||
| ($ in thousands) | Three Months Ended June 30, 2022 | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| Average Balance | Interest | Average Yield/ Rate | ||||||||||||
| Interest-earning assets: | ||||||||||||||
| Loans ^(1)(3)(6)^ | $ | 833,270 | $ | 8,403 | 4.04 | % | ||||||||
| Taxable securities ^(4)(5)^ | 676,064 | 2,949 | 1.75 | % | ||||||||||
| Nontaxable securities ^(1)(4)^ | 76,061 | 598 | 3.15 | % | ||||||||||
| Interest-bearing deposits | 90,606 | 202 | 0.89 | % | ||||||||||
| Total interest-earning assets | $ | 1,676,001 | $ | 12,152 | 2.91 | % | ||||||||
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 912,036 | $ | 573 | 0.25 | % | ||||||||
| Savings deposits | 219,464 | 37 | 0.07 | % | ||||||||||
| Time deposits | 83,753 | 37 | 0.18 | % | ||||||||||
| Total interest-bearing liabilities | $ | 1,215,253 | $ | 647 | 0.21 | % | ||||||||
| Net interest income and interest rate spread | $ | 11,505 | 2.70 | % | ||||||||||
| Net yield on average interest‑earning assets | 2.75 | % | ||||||||||||
| ^(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 $66 and $40 for the three months ended June 30, 2023 and March 31, 2023, 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 $25 for the three months ended June 30, 2022. | |||||||||||||
| --- | --- |
8
National Bankshares, Inc.
Net Interest Margin
(Unaudited)
| ($ in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||
| Interest-earning assets: | ||||||||||||||
| Loans ^(1)(2)(3)^ | $ | 854,101 | $ | 19,144 | **** | 4.52 | % | $ | 818,564 | $ | 16,584 | 4.09 | % | |
| Taxable securities ^(4)(5)^ | **** | 666,214 | **** | 8,184 | **** | 2.48 | % | 652,319 | 5,422 | 1.68 | % | |||
| Nontaxable securities ^(1)(4)^ | **** | 66,277 | **** | 963 | **** | 2.93 | % | 76,383 | 1,172 | 3.09 | % | |||
| Interest-bearing deposits | **** | 30,892 | **** | 768 | **** | 5.01 | % | 102,365 | 251 | 0.49 | % | |||
| Total interest-earning assets | $ | 1,617,484 | $ | 29,059 | **** | 3.62 | % | $ | 1,649,631 | $ | 23,429 | 2.86 | % | |
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 852,264 | $ | 6,488 | **** | 1.54 | % | $ | 899,502 | $ | 1,153 | 0.26 | % | |
| Savings deposits | **** | 203,967 | **** | 280 | **** | 0.28 | % | 216,210 | 75 | 0.07 | % | |||
| Time deposits | **** | 115,093 | **** | 1,413 | **** | 2.48 | % | 80,887 | 74 | 0.18 | % | |||
| Borrowings | **** | 12,394 | **** | 297 | **** | 4.83 | % | - | - | - | ||||
| Total interest-bearing liabilities | $ | 1,183,718 | $ | 8,478 | **** | 1.44 | % | $ | 1,196,599 | $ | 1,302 | 0.22 | % | |
| Net interest income and interest rate spread | **** | **** | $ | 20,581 | **** | 2.18 | % | $ | 22,127 | 2.64 | % | |||
| Net yield on average interest‑earning assets | **** | **** | **** | **** | **** | 2.57 | % | 2.70 | % | |||||
| ^(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 $106 and $113 for the six months ended June 30, 2023 and June 30, 2022, respectively. | |||||||||||||
| --- | --- | |||||||||||||
| ^(3)^ | Includes loans held for sale and nonaccrual loans. | |||||||||||||
| --- | --- | |||||||||||||
| ^(4)^ | Daily averages are shown at amortized cost. | |||||||||||||
| --- | --- | |||||||||||||
| ^(5)^ | Includes restricted stock. | |||||||||||||
| --- | --- |
9
National Bankshares, Inc.
Key Ratios and Other Data
(Unaudited)
| As of and for the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| ( in thousands) | June 30, 2023 | March 31, 2023 | June 30, 2022 | |||||
| Average Balances | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and due from banks | 12,140 | $ | 11,412 | $ | 12,063 | |||
| Interest-bearing deposits | 41,947 | 19,715 | 90,606 | |||||
| Securities available for sale, at fair value | 629,616 | 645,097 | 696,399 | |||||
| Mortgage loans held for sale | 338 | 58 | 141 | |||||
| Loans, gross | 853,196 | 855,483 | 833,576 | |||||
| Loans, net of unearned income and deferred fees and costs | 852,781 | 855,035 | 833,129 | |||||
| Loans, net of allowance for credit losses | 842,147 | 844,411 | 825,307 | |||||
| Goodwill | 5,848 | 5,848 | 5,848 | |||||
| Total assets | 1,627,794 | 1,625,041 | 1,719,128 | |||||
| Noninterest bearing deposits | 300,480 | 308,908 | 338,795 | |||||
| Interest-bearing and savings deposits | 1,047,592 | 1,064,967 | 1,131,500 | |||||
| Time deposits | 138,261 | 91,666 | 83,753 | |||||
| Total deposits | 1,486,333 | 1,465,541 | 1,554,048 | |||||
| Stockholders' equity | 129,738 | 123,996 | 149,019 | |||||
| Financial Ratios | **** | **** | **** | **** | **** | **** | **** | **** |
| Return on average assets(1) | 0.87 | % | 1.16 | % | 1.30 | % | ||
| Return on average equity(1) | 10.94 | % | 15.25 | % | 15.00 | % | ||
| Efficiency ratio(2) | 62.58 | % | 54.14 | % | 46.35 | % | ||
| Average equity to average assets | 7.97 | % | 7.63 | % | 8.67 | % | ||
| Tangible common equity to tangible assets(3) | 7.57 | % | 7.59 | % | 7.56 | % | ||
| Allowance for Credit Losses | **** | **** | **** | **** | **** | **** | **** | **** |
| Beginning balance | 10,650 | $ | 8,225 | $ | 7,788 | |||
| Provision for credit losses | 10 | 2 | 310 | |||||
| Charge-offs | (68 | ) | (92 | ) | (75 | ) | ||
| Recoveries | 34 | 173 | 46 | |||||
| Adoption of ASU 2016-13 | - | 2,342 | - | |||||
| Ending balance | 10,626 | $ | 10,650 | $ | 8,069 |
All values are in US Dollars.
| (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. |
| --- | --- |
| (3) | Tangible common equity and tangible assets exclude goodwill of $5,848. See “Reconciliation of Non-GAAP Financial Measures” at the end of this release. |
| --- | --- |
10
National Bankshares, Inc.
Key Ratios and Other Data
(Unaudited)
| As and for the Six Months Ended | |||||
|---|---|---|---|---|---|
| ( in thousands) | June 30, 2023 | June 30, 2022 | |||
| Average Balances | **** | **** | **** | **** | **** |
| Cash and due from banks | 11,778 | $ | 11,879 | ||
| Interest-bearing deposits | 30,892 | 102,365 | |||
| Securities available for sale | 637,313 | 696,860 | |||
| Mortgage loans held for sale | 199 | 179 | |||
| Loans, gross | 854,333 | 818,841 | |||
| Loans, net of unearned income and deferred fees and costs | 853,902 | 818,385 | |||
| Loans, net of allowance for credit losses | 843,273 | 810,643 | |||
| Goodwill | 5,848 | 5,848 | |||
| Total assets | 1,626,425 | 1,711,248 | |||
| Noninterest bearing deposits | 304,671 | 331,524 | |||
| Interest-bearing and savings deposits | 1,056,231 | 1,115,712 | |||
| Time deposits | 115,093 | 80,887 | |||
| Total deposits | 1,475,995 | 1,528,123 | |||
| Stockholders' equity | 126,883 | 167,072 | |||
| Financial Ratios | **** | **** | **** | **** | **** |
| Return on average assets(1) | 1.03 | % | 1.22 | % | |
| Return on average equity(1) | 13.15 | % | 12.45 | % | |
| Efficiency ratio(2) | 58.06 | % | 48.71 | % | |
| Average equity to average assets | 7.80 | % | 9.76 | % | |
| Tangible common equity to tangible assets(3) | 7.57 | % | 7.56 | % | |
| Allowance for Credit Losses | **** | **** | **** | **** | **** |
| Beginning balance | 8,225 | $ | 7,674 | ||
| Provision for credit losses | 12 | 444 | |||
| Charge-offs | (160 | ) | (135 | ) | |
| Recoveries | 207 | 86 | |||
| Adoption of ASU 2016-13 | 2,342 | - | |||
| Ending balance | 10,626 | $ | 8,069 |
All values are in US Dollars.
| (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. |
| --- | --- |
| (3) | Tangible common equity and tangible assets exclude goodwill of $5,848. See “Reconciliation of Non-GAAP Financial Measures” at the end of this release. |
| --- | --- |
11
National Bankshares, Inc.
Asset Quality Data
(Unaudited)
| ($ in thousands) | June 30, 2023 | March 31, 2023 | June 30, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Nonperforming Assets | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Nonaccrual loans | $ | 3,075 | $ | 2,814 | $ | 2,979 | |||
| Other real estate owned | **** | 662 | 662 | 957 | |||||
| Total nonperforming assets | $ | 3,737 | $ | 3,476 | $ | 3,936 | |||
| Loans 90 days or more past due and accruing | $ | 21 | $ | 33 | $ | 7 | |||
| Asset Quality Ratios | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Nonperforming assets to loans^(1)^ plus other real estate owned | **** | 0.44 | % | 0.41 | % | 0.46 | % | ||
| Allowance for credit losses on loans to total loans^(1)^ | **** | 1.26 | % | 1.24 | % | 0.95 | % | ||
| Allowance for credit losses on loans to nonperforming loans | **** | 345.56 | % | 378.46 | % | 270.86 | % | ||
| Loans past due 90 days or more to loans^(1)^ | **** | 0.00 | % | 0.00 | % | 0.00 | % | ||
| (1) | Loans are net of unearned income and deferred fees and costs | ||||||||
| --- | --- |
12
National Bankshares, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
| ( in thousands) | March 31, 2023 | June 30, 2022 | |||||
| Net Interest Income, FTE | **** | **** | **** | **** | **** | **** | **** |
| Interest income (GAAP) | 14,597 | $ | 14,044 | $ | 11,922 | ||
| FTE adjustment | 209 | 209 | 230 | ||||
| Interest income, FTE (non-GAAP) | 14,806 | 14,253 | 12,152 | ||||
| Interest expense (GAAP) | 5,380 | 3,098 | 647 | ||||
| Net interest income, FTE (non-GAAP) | 9,426 | $ | 11,155 | $ | 11,505 | ||
| Noninterest Expense for Efficiency Ratio | **** | **** | **** | **** | **** | **** | **** |
| Noninterest expense (GAAP) | 7,557 | $ | 7,664 | $ | 6,311 | ||
| Less: proxy contest-related expense | (327 | ) | (441 | ) | - | ||
| Noninterest expense for efficiency ratio (non-GAAP) | 7,230 | $ | 7,223 | $ | 6,311 | ||
| Income for Efficiency Ratio | **** | **** | **** | **** | **** | **** | **** |
| Noninterest income (GAAP) | 2,791 | $ | 2,199 | $ | 2,112 | ||
| Realized securities loss (gain), net | 3,344 | (12 | ) | - | |||
| Gain on sale of investment | (2,971 | ) | - | - | |||
| BOLI benefit payout | (1,037 | ) | - | - | |||
| Noninterest income, adjusted (non-GAAP) | 2,127 | 2,187 | 2,112 | ||||
| Net interest income, FTE (non-GAAP) | 9,426 | 11,155 | 11,505 | ||||
| Total income for efficiency ratio (non-GAAP) | 11,553 | $ | 13,342 | $ | 13,617 | ||
| Annualized Net Income | **** | **** | **** | **** | **** | **** | **** |
| Net income (GAAP) | 3,901 | $ | 4,531 | $ | 5,574 | ||
| Less: items deemed by management to be non-recurring: | |||||||
| Partnership income net of tax of (44) | - | (164 | ) | - | |||
| Realized securities loss (gain), net of tax of 702 for the period ended June 30, 2023 and (3) for the period ended March 31, 2023 | 2,642 | (9 | ) | - | |||
| Proxy contest-related expense, net of tax of 69 for the period ended June 30, 2023 and 93 for the period ended March 31, 2023 | 258 | 348 | - | ||||
| Gain on sale of investment, net of tax of 624 | (2,347 | ) | - | - | |||
| BOLI benefit payout | (1,037 | ) | - | - | |||
| Total non-recurring items | (484 | ) | 175 | - | |||
| Adjusted net income | 3,417 | $ | 4,706 | $ | 5,574 | ||
| Adjusted net income, annualized | 13,706 | $ | 19,085 | $ | 22,357 | ||
| Add: total non-recurring items | 484 | (175 | ) | - | |||
| Annualized net income for ratio calculation (non-GAAP) | 14,190 | $ | 18,910 | $ | 22,357 |
All values are in US Dollars.
13
National Bankshares, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
| ( in thousands) | June 30, 2022 | ||||
| Net Interest Income, FTE | **** | **** | **** | **** | **** |
| Interest income (GAAP) | 28,641 | $ | 22,972 | ||
| FTE adjustment | 418 | 457 | |||
| Interest income, FTE (non-GAAP) | 29,059 | 23,429 | |||
| Interest expense (GAAP) | 8,478 | 1,302 | |||
| Net interest income, FTE (non-GAAP) | 20,581 | $ | 22,127 | ||
| Noninterest Expense for Efficiency Ratio | **** | **** | **** | **** | **** |
| Noninterest expense (GAAP) | 15,221 | $ | 12,924 | ||
| Less: proxy contest-related expense | (768 | ) | - | ||
| Noninterest expense for efficiency ratio (non-GAAP) | 14,453 | $ | 12,924 | ||
| Income for Efficiency Ratio | **** | **** | **** | **** | **** |
| Noninterest income (GAAP) | 4,990 | $ | 4,403 | ||
| Realized securities loss, net | 3,332 | - | |||
| Gain on sale of investment | (2,971 | ) | - | ||
| BOLI benefit payout | (1,037 | ) | - | ||
| Noninterest income, adjusted (non-GAAP) | 4,314 | 4,403 | |||
| Net interest income, FTE (non-GAAP) | 20,581 | 22,127 | |||
| Total income for efficiency ratio (non-GAAP) | 24,895 | $ | 26,530 | ||
| Annualized Net Income | **** | **** | **** | **** | **** |
| Net income (GAAP) | 8,432 | $ | 10,460 | ||
| Less: items deemed by management to be non-recurring: | |||||
| Partnership income net of tax of (44) and (77) for the periods ended June 30, 2023 and 2022, respectively | (164 | ) | (290 | ) | |
| Realized securities loss, net of tax of 700 | 2,632 | - | |||
| Proxy contest-related expense, net of tax of 161 | 607 | - | |||
| Gain on sale of investment, net of tax of 624 | (2,347 | ) | - | ||
| BOLI benefit payout | (1,037 | ) | - | ||
| Total non-recurring items | (309 | ) | (290 | ) | |
| Adjusted net income | 8,123 | 10,170 | |||
| Adjusted net income, annualized | 16,381 | 20,509 | |||
| Add: total non-recurring items | 309 | 290 | |||
| Annualized net income for ratio calculation (non-GAAP) | 16,690 | $ | 20,799 |
All values are in US Dollars.
| As of | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands) | June 30, 2023 | March 31, 2023 | June 30, 2022 | ||||||
| Tangible Assets | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Total assets (GAAP) | $ | 1,625,541 | $ | 1,654,277 | $ | 1,729,588 | |||
| Less: Goodwill | **** | (5,848 | ) | (5,848 | ) | (5,848 | ) | ||
| Tangible assets (non-GAAP) | $ | 1,619,693 | $ | 1,648,429 | $ | 1,723,740 | |||
| Tangible Common Equity | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Total stockholders' equity (GAAP) | $ | 128,444 | $ | 131,043 | $ | 136,240 | |||
| Less: Goodwill | **** | (5,848 | ) | (5,848 | ) | (5,848 | ) | ||
| Tangible common equity (non-GAAP) | $ | 122,596 | $ | 125,195 | $ | 130,392 |
14