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 16, 2020 (July 16, 2020)
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 16, 2020, National Bankshares, Inc. issued a press release announcing and commenting on its financial results for the quarter ended June 30, 2020. A copy of the press release is attached as Exhibit 99.1.
| ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS |
|---|---|
| (d) | Exhibits |
| --- | --- |
| 99.1 | National Bankshares, Inc. Press Release, dated July 16, 2020. |
| --- | --- |
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 16, 2020 |
|---|---|
| By: /s/ F. BRAD DENARDO | |
| --- | |
| F. Brad Denardo<br><br> <br>Chairman, President & CEO |
Page 2 of 2 Pages
ex_193978.htm
Exhibit 99.1
****
FOR IMMEDIATE RELEASE
| CONTACTS: **** | F. Brad Denardo, Chairman, President & CEO<br><br> <br>(540) 951-6213 bdenardo@nbbank.com | David K. Skeens, Treasurer & CFO<br><br> <br>(540) 951-6347 dskeens@nbbank.com |
|---|
National Bankshares, Inc. Reports Second Quarter and First Half Earnings
BLACKSBURG, VA., July 16, 2020 -- 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 2020. The Company reported net income of $6.96 million, or $1.07 per common share, for the six months ended June 30, 2020. For the six months ended June 30, 2019, the Company reported net income of $8,437 or $1.27 per common share. National Bankshares, Inc. ended the first half of 2020 with total assets of $1.43 billion. Additionally, the Company declared a semi-annual dividend to common shareholders of sixty-seven cents ($0.67) per common share during the second quarter of 2020.
Chairman, President, and CEO F. Brad Denardo commented, “National Bankshares and our subsidiaries have been working throughout the COVID-19 pandemic to meet the everyday banking needs as well as the emergency relief needs of our customers and communities. The situation is ongoing and the economic outlook remains uncertain, and we see this reflected in the second quarter numbers. Nonetheless, we remain committed to serving our customers through these difficult times, and are thankful for the continuing support of our customers, our communities, and our shareholders.”
First **** Half Highlights
In Light of the Pandemic
| - | In order to protect our employees and customers during the COVID-19 Pandemic, we closed our branch offices on March 20^th^ and they have remained closed. We continue to serve customers through other channels or in person when requested. We plan to reopen those offices sometime in third quarter. |
|---|---|
| - | In order to aid our many business customers in their time of financial hardship, we have modified or deferred payments on 297 loans totaling $119.70 million. |
| - | Through July 6, 2020, National Bank has originated 806 Paycheck Protection Program loans totaling $58.1 million. We will continue to accept applications until August 8, 2020. |
Income Statement
| - | Our current net income includes a loan loss provision of $1.83 million, an increase of $1.58 million over the provision for the first half of 2019. The additional provision was taken in order to recognize the potential effect of the slowdown in business activity. |
|---|---|
| - | Despite the significant increase in the loan loss provision, the return on average assets was still a positive 1.03% for the first six months of 2020. |
| - | The net interest margin decreased to 3.05% for the six months ended June 30, 2020 from 3.32% for the six months ended June 30, 2019. |
| - | The Company has worked to contain expenses such that total noninterest expense for the six months ended June 30, 2020 is $0.374 million less than for the same period ending June 30, 2019. |
Balance Sheet
| - | Total assets have increased from June 30, 2019 by $164 million to $1.43 billion at June 30, 2020. |
|---|---|
| - | Total deposits have increased from June 30, 2019 by $149.8 million to $1.22 billion at June 30, 2020. |
| - | With total stockholders equity of $195.8 million, the Company’s capital position provides a source of strength and continues to significantly exceed all regulatory capital guidelines. |
101 Hubbard Street / Blacksburg, Virginia 24060
P.O. Box 90002 / Blacksburg, Virginia 24062-9002
540 951-6300 / 800 552-4123
www.nationalbankshares.com
Other Notables
| - | No shares of the Company’s common stock were repurchased this quarter. |
|---|---|
| - | Nonperforming loans as a percentage of total loans decreased to 0.48% at June 30, 2020, a 17.1% decrease from June 30, 2019. |
| - | The efficiency ratio decreased to 54.5% for the six months ended June 30, 2020, down from 55.6% for the six months ended June 2019. |
| - | The allowance for loan losses to total loans increased to 1.05%, compared with 1.00% at June 30, 2019. Excluding the Paycheck Protection Program loans, that ratio increases to 1.13% at June 30, 2020. |
| - | Book value per common share at June 30, 2020 increased to $30.17 from $28.26 at June 30, 2019. |
Non-GAAP Financial Measures
In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this document include the efficiency ratio and certain financial measures presented on a fully taxable-equivalent (“FTE”) basis. FTE basis is calculated using the federal statutory income tax rate of 21%. Further, the Company elects not to annualize net securities gains and losses in 2020 and 2019 or the insurance recovery received in 2019 in calculating the return on average equity and return on average assets. 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.
Forward-Looking Statements
Certain statements in this press release may be “forward-looking statements.” Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results that are not statements of historical fact and that involve significant risks and uncertainties. Although the Company believes that its expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual Company results will not differ materially from any future results implied by the forward-looking statements. Actual results may be materially different from past or anticipated results because of many factors, some of which may include changes in economic conditions, the interest rate environment, legislative and regulatory requirements, new products, competition, changes in the stock and bond markets and technology. The Company does not update any forward-looking statements that it may make.
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National Bankshares, Inc.
Consolidated Balance Sheets
(Unaudited)
| ( in thousands, except for share and per share data) | June 30,<br><br> <br>2019 | December 31,<br><br> <br>2019 | ||||||
|---|---|---|---|---|---|---|---|---|
| Assets | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and due from banks | 13,315 | $ | 17,170 | $ | 10,290 | |||
| Interest-bearing deposits | 73,251 | 60,038 | 76,881 | |||||
| Securities available for sale, at fair value | 489,926 | 396,347 | 435,263 | |||||
| Restricted stock | 1,279 | 1,220 | 1,220 | |||||
| Total securities | 491,205 | 397,567 | 436,483 | |||||
| Mortgage loans held for sale | 2,367 | 809 | 905 | |||||
| Loans: | ||||||||
| Loans, net of unearned income and deferred fees and costs | 791,002 | 729,559 | 733,451 | |||||
| Less: allowance for loan losses | (8,308 | ) | (7,304 | ) | (6,863 | ) | ||
| Loans, net | 782,694 | 722,255 | 726,588 | |||||
| Premises and equipment, net | 9,955 | 9,012 | 8,919 | |||||
| Accrued interest receivable | 4,797 | 5,192 | 4,285 | |||||
| Other real estate owned, net | 1,553 | 2,025 | 1,612 | |||||
| Intangible assets and goodwill | 5,848 | 5,848 | 5,848 | |||||
| Bank-owned life insurance | 36,007 | 35,108 | 35,567 | |||||
| Other assets | 12,758 | 14,493 | 14,459 | |||||
| Total assets | 1,433,750 | $ | 1,269,517 | $ | 1,312,837 | |||
| Liabilities and Stockholders' Equity | **** | **** | **** | **** | **** | **** | **** | **** |
| Noninterest-bearing deposits | 263,113 | $ | 203,534 | $ | 201,866 | |||
| Interest-bearing demand deposits | 678,062 | 608,506 | 643,482 | |||||
| Savings deposits | 160,551 | 143,024 | 146,377 | |||||
| Time deposits | 117,882 | 114,733 | 128,028 | |||||
| Total deposits | 1,219,608 | 1,069,797 | 1,119,753 | |||||
| Accrued interest payable | 117 | 145 | 144 | |||||
| Other liabilities | 18,244 | 15,727 | 18,214 | |||||
| Total liabilities | 1,237,969 | 1,085,669 | 1,138,111 | |||||
| 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 6,489,574 shares at June 30, 2020 and December 31, 2019 and 6,505,574 at June 30, 2019 | 8,112 | 8,132 | 8,112 | |||||
| Retained earnings | 186,733 | 180,272 | 184,120 | |||||
| Accumulated other comprehensive loss, net | 936 | (4,556 | ) | (8,506 | ) | |||
| Total stockholders' equity | 195,781 | 183,848 | 183,726 | |||||
| Total liabilities and stockholders' equity | 1,433,750 | $ | 1,269,517 | $ | 1,321,837 |
All values are in US Dollars.
3
National Bankshares, Inc.
Consolidated Statements of Income
(Unaudited)
| Three Months Ended | Six Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands, except for share and per share data) | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||
| Interest Income | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Interest and fees on loans | $ | 8,419 | $ | 8,460 | $ | 16,885 | $ | 16,729 | |||
| Interest on federal funds | **** | --- | --- | **** | --- | --- | |||||
| Interest on interest-bearing deposits | **** | 14 | 382 | **** | 231 | 641 | |||||
| Interest on securities - taxable | **** | 1,863 | 1,603 | **** | 4,219 | 3,286 | |||||
| Interest on securities - nontaxable | **** | 454 | 848 | **** | 803 | 1,775 | |||||
| Total interest income | **** | 10,750 | 11,293 | **** | 22,138 | 22,431 | |||||
| Interest Expense | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Interest on time deposits | **** | 522 | 419 | **** | 1,081 | 716 | |||||
| Interest on other deposits | **** | 1,076 | 1,495 | **** | 2,313 | 2,991 | |||||
| Total interest expense | **** | 1,598 | 1,914 | **** | 3,394 | 3,707 | |||||
| Net interest income | **** | 9,152 | 9,379 | **** | 18,744 | 18,724 | |||||
| Provision for loan losses | **** | 1,352 | 55 | **** | 1,831 | 255 | |||||
| Net interest income after provision for loan losses | **** | 7,800 | 9,324 | **** | 16,913 | 18,469 | |||||
| Noninterest Income | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Service charges on deposit accounts | **** | 377 | 607 | **** | 959 | 1,197 | |||||
| Other service charges and fees | **** | 37 | 51 | **** | 76 | 103 | |||||
| Credit card fees | **** | 386 | 356 | **** | 692 | 665 | |||||
| Trust income | **** | 387 | 371 | **** | 821 | 768 | |||||
| Bank-owned life insurance | **** | 219 | 232 | **** | 440 | 451 | |||||
| Other income | **** | 277 | 231 | **** | 810 | 1,141 | |||||
| Realized securities gain, net | **** | 62 | 8 | **** | 82 | 20 | |||||
| Total noninterest income | **** | 1,745 | 1,856 | **** | 3,880 | 4,345 | |||||
| Noninterest Expense | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Salaries and employee benefits | **** | 3,692 | 3,802 | **** | 7,671 | 7,623 | |||||
| Occupancy and furniture and fixtures | **** | 458 | 477 | **** | 908 | 942 | |||||
| Data processing and ATM | **** | 806 | 789 | **** | 1,597 | 1,540 | |||||
| FDIC assessment | **** | 40 | 82 | **** | 40 | 167 | |||||
| Net cost of other real estate owned | **** | (4 | ) | 3 | **** | 18 | 28 | ||||
| Franchise taxes | **** | 335 | 333 | **** | 678 | 647 | |||||
| Other operating expenses | **** | 750 | 967 | **** | 1,632 | 1,971 | |||||
| Total noninterest expense | **** | 6,077 | 6,453 | **** | 12,544 | 12,918 | |||||
| Income before income tax expense | **** | 3,468 | 4,727 | **** | 8,249 | 9,896 | |||||
| Income tax expense | **** | 486 | 733 | **** | 1,288 | 1,459 | |||||
| Net Income | $ | 2,982 | $ | 3,994 | $ | 6,961 | $ | 8,437 | |||
| Basic net income per share | $ | 0.46 | $ | 0.61 | $ | 1.07 | $ | 1.27 | |||
| Fully diluted net income per share | $ | 0.46 | $ | 0.61 | $ | 1.07 | $ | 1.27 | |||
| Weighted average number of common shares outstanding | |||||||||||
| Basic | **** | 6,489,574 | 6,505,574 | **** | 6,489,574 | 6,668,038 | |||||
| Diluted | **** | 6,489,574 | 6,505,574 | **** | 6,489,574 | 6,668,038 | |||||
| Dividends declared per share | $ | 0.67 | $ | 0.67 | $ | 0.67 | $ | 0.67 | |||
| Dividend payout ratio | **** | --- | --- | **** | 62.46 | % | 51.67 | % | |||
| Book value per share | $ | 30.17 | $ | 28.26 | $ | 30.17 | $ | 28.26 |
4
National Bankshares, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
| ( in thousands) | June 30, 2019 | ||||
| Net income | 2,982 | $ | 3,994 | ||
| Other Comprehensive Income, Net of Tax | **** | **** | **** | **** | **** |
| Unrealized holding gain on available for sale securities net of tax of 1,498 for the period ended June 30, 2020 and 795 for the period ended June 30, 2019 | 5,637 | 2,991 | |||
| Reclassification adjustment for gain included in net income, net of tax of (13) for the period ended June 30, 2020 and (2) for the period ended June 30, 2019 | (49 | ) | (6 | ) | |
| Other comprehensive income, net of tax | 5,588 | $ | 2,985 | ||
| Total Comprehensive Income | 8,570 | $ | 6,979 |
All values are in US Dollars.
| ( in thousands) | June 30, 2019 | ||||
| Net income | 6,961 | $ | 8,437 | ||
| Other Comprehensive Income, Net of Tax | **** | **** | **** | **** | **** |
| Unrealized holding gain on available for sale securities net of tax of 2,526 for the period ended June 30, 2020 and 2,003 for the period ended June 30, 2019 | 9,507 | 7,545 | |||
| Reclassification adjustment for gain included in net income, net of tax of (17) for the period ended June 30, 2020 and (4) for the period ended June 30, 2019 | (65 | ) | (16 | ) | |
| Other comprehensive income, net of tax | 9,442 | $ | 7,529 | ||
| Total Comprehensive Income | 16,403 | $ | 15,966 |
All values are in US Dollars.
5
National Bankshares, Inc.
Key Ratios and Other Data
(Unaudited)
| Three Months Ended | **** Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( $ in thousands ) | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||
| Average Balances | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and due from banks | $ | 11,466 | $ | 11,266 | $ | 11,335 | $ | 11,254 | ||||
| Interest-bearing deposits | **** | 91,425 | 63,456 | **** | 79,004 | 53,904 | ||||||
| Securities available for sale | **** | 452,549 | 398,602 | **** | 445,733 | 407,626 | ||||||
| Restricted stock | **** | 1,279 | 1,220 | **** | 1,252 | 1,220 | ||||||
| Mortgage loans held for sale | **** | 1,406 | 453 | **** | 949 | 304 | ||||||
| Gross Loans | **** | 764,336 | 720,910 | **** | 747,876 | 715,852 | ||||||
| Loans, net | **** | 756,590 | 713,000 | **** | 740,280 | 707,886 | ||||||
| Intangible assets | **** | 5,848 | 5,848 | **** | 5,848 | 5,848 | ||||||
| Total assets | **** | 1,393,227 | 1,260,195 | **** | 1,352,827 | 1,254,654 | ||||||
| Total deposits | **** | 1,180,484 | 1,061,692 | **** | 1,142,330 | 1,053,891 | ||||||
| Stockholders' equity | **** | 193,260 | 182,201 | **** | 191,388 | 184,800 | ||||||
| Interest-earning assets | **** | 1,303,352 | 1,183,803 | **** | 1,268,209 | 1,180,872 | ||||||
| Interest-bearing liabilities | **** | 931,099 | 861,350 | **** | 917,589 | 858,001 | ||||||
| Financial Ratios | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Return on average assets^(1)^ | **** | 0.85 | % | 1.27 | % | **** | 1.03 | % | 1.32 | % | ||
| Return on average equity^(1)^ | **** | 6.13 | % | 8.78 | % | **** | 7.28 | % | 8.96 | % | ||
| Net interest margin | **** | 2.90 | % | 3.30 | % | **** | 3.05 | % | 3.32 | % | ||
| Net interest income-fully taxable equivalent | $ | 9,409 | $ | 9,726 | $ | 19,220 | $ | 19,438 | ||||
| Efficiency ratio^(2)^ | **** | 54.79 | % | 55.75 | % | **** | 54.50 | % | 55.62 | % | ||
| Average equity to average assets | **** | 13.87 | % | 14.46 | % | **** | 14.15 | % | 14.73 | % | ||
| Allowance for Loan Losses | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Beginning balance | $ | 7,240 | $ | 7,360 | $ | 6,863 | $ | 7,390 | ||||
| Provision for losses | **** | 1,352 | 55 | **** | 1,831 | 255 | ||||||
| Charge-offs | **** | (365 | ) | (180 | ) | **** | (540 | ) | (508 | ) | ||
| Recoveries | **** | 81 | 69 | **** | 154 | 167 | ||||||
| Ending balance | $ | 8,308 | $ | 7,304 | $ | 8,308 | $ | 7,304 | ||||
| (1) | Return on average assets and return on average equity are calculated by dividing adjusted annualized net income by average assets or average equity, respectively. Net income is adjusted by removing securities gains, net of tax in 2020 and 2019 and the insurance recovery in 2019 net of tax and annualizing the remainder. Securities gains net of tax in 2020 and 2019 and the insurance recovery net of tax in 2019 are then added back to arrive at adjusted annualized net income. | |||||||||||
| --- | --- | |||||||||||
| (2) | Efficiency ratio is calculated as noninterest expense, less non-recurring items, divided by the sum of noninterest income and net interest income on a fully taxable equivalent basis. | |||||||||||
| (3) | Net interest margin is calculated as net interest income on a fully taxable equivalent basis divided by average interest earning assets. |
6
National Bankshares, Inc.
Asset Quality Data
(Unaudited)
| ( $ in thousands ) | June 30, 2020 | June 30, 2019 | ||||
|---|---|---|---|---|---|---|
| Nonperforming Assets | **** | **** | **** | **** | **** | **** |
| Nonaccrual loans | $ | 943 | $ | 856 | ||
| Nonaccrual restructured loans | **** | 2,887 | 3,406 | |||
| Total nonperforming loans | **** | 3,830 | 4,262 | |||
| Other real estate owned | $ | 1,553 | $ | 2,025 | ||
| Total nonperforming assets | $ | 5,383 | $ | 6,287 | ||
| Accruing restructured loans | **** | 1,453 | 1,954 | |||
| Loans 90 days or more past due | $ | 237 | $ | 50 | ||
| Asset Quality Ratios | **** | **** | **** | **** | **** | **** |
| Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned | **** | 0.68 | % | 0.86 | % | |
| Allowance for loans losses to total loans | **** | 1.05 | % | 1.00 | % | |
| Allowance for loan losses to nonperforming loans | **** | 216.92 | % | 171.37 | % | |
| Loans past due 90 days or more to loans net of unearned income and deferred fees | **** | 0.03 | % | 0.01 | % |
7