National Bankshares, Inc.

National Bankshares, Inc. and Subsidiaries
Consolidated Balance Sheet
 

    (Unaudited)
            (Unaudited)
               
        
 ($ in thousands, except for per share data)
          September 30, 
2009
            September 30, 
2008
            December 31, 
2008
         
        
 Assets
                         
        
 Cash and due from banks
          $ 11,891     $ 16,511     $ 16,316  
        
 Interest-bearing deposits
            22,935       12,257       29,656  
        
 Federal funds sold
            ---       ---       ---  
        
 Securities available for sale
            169,457       151,592       147,227  
        
 Securities held to maturity
            132,786       127,108       117,772  
        
                   Total securities
            302,243       278,700       264,999  
        
 Mortgage loans held for sale
            628       95       348  
        
 Loans:
                               
        
      Real estate construction loans
            47,671       63,880       60,798  
        
      Real estate mortgage loans
            167,589       144,510       162,757  
        
      Commercial and industrial loans
            268,868       232,648       246,218  
        
      Consumer loans
            98,632       106,914       106,907  
        
                  Total loans
            582,760       547,952       576,680  
        
      Less: unearned income and deferred fees
            (1,119 )     (1,113 )     (1,123 )
        
                  Loans, net of unearned income and deferred fees
            581,641       546,839       575,557  
        
      Less: allowance for loan losses
            (6,453 )     (5,435 )     (5,858 )
        
                  Loans, net
            575,188       541,404       569,699  
        
 Bank premises and equipment, net
            10,734       11,470       11,204  
        
 Accrued interest receivable
            6,322       6,001       5,760  
        
 Other real estate owned
            1,944       1,037       1,984  
        
 Intangible assets
            12,897       13,997       13,719  
        
 Other assets
            21,106       20,811       21,689  
        
                 Total assets
          $ 965,888     $ 902,283     $ 935,374  
        
                         
        
 Liabilities and Stockholders' Equity
                               
        
 Noninterest-bearing deposits
          $ 122,519     $ 113,936     $ 109,630  
        
 Interest-bearing demand deposits
            277,884       235,809       256,416  
        
 Savings deposits
            50,241       46,453       45,329  
        
 Time deposits
            385,229       389,788       406,473  
        
                 Total deposits
            835,873       785,986       817,848  
        
 Other borrowed funds
            46       56       54  
        
 Accrued interest payable
            473       636       655  
        
 Other liabilities
            8,025       6,132       6,709  
        
                Total liabilities
            844,417       792,810       825,266  
        
                         
        
 Stockholders' Equity
                               
        
 Preferred stock of no par value. Authorized 5,000,000 shares; none issued and outstanding.
            ---       ---       ---  
        
 Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding 6,933,474 shares at September 30, 2009, 6,926,974 shares at 
September 30, 2008 and 6,929,474 shares at December 31, 2008
            8,667       8,659       8,662  
        
 Retained earnings
            113,087       104,843       105,356  
        
 Accumulated comprehensive income
            (283 )     (4,029 )     (3,910 )
        
               Total stockholders' equity
            121,471       109,473       110,108  
        
Total liabilities and stockholders' equity
          $ 965,888     $ 902,283     $ 935,374  
        
 
        
  



National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 

    Three Months Ended
            Nine Months Ended
         
        
    September 30, 
2009
            September 30, 
2008
            September 30, 
2009
            September 30, 
2008
         
        
 ($ in thousands, except for per share data)
                               
        
 Interest Income
                               
        
 Interest and fees on loans
          $ 9,316     $ 9,196     $ 28,170     $ 27,682  
        
 Interest on federal funds
            ---       ---       ---       ---  
        
 Interest on interest-bearing deposits
            23       36       73       426  
        
 Interest on securities - taxable
            1,600       1,726       4,766       5,175  
        
 Interest on securities - nontaxable
            1,677       1,451       4,896       4,309  
        
              Total interest income
            12,616       12,409       37,905       37,592  
        
                                 
        
 Interest Expense
                                       
        
 Interest on time deposits
            1,379       1,323       4,363       4,502  
        
 Interest on other deposits
            2,496       2,865       8,197       9,904  
        
 Interest on borrowed funds
            1       7       2       11  
        
             Total interest expense
            3,876       4,195       12,562       14,417  
        
             Net interest income
            8,740       8,214       25,343       23,175  
        
 Provision for loan losses
            305       280       953       515  
        
             Net interest income after provision for loan losses
            8,435       7,934       24,390       22,660  
        
                                 
        
 Noninterest Income
                                       
        
 Service charges on deposit accounts
            865       930       2,506       2,502  
        
 Other service charges and fees
            107       88       263       250  
        
 Credit card fees
            723       728       2,060       2,101  
        
 Trust income
            255       307       792       929  
        
 Bank owned life insurance
            201       144       554       446  
        
 Other income
            78       87       263       314  
        
 Realized securities gains/(losses), net
            (17 )     (76 )     53       189  
        
              Total noninterest income
            2,212       2,208       6,491       6,731  
        
                                 
        
 Noninterest Expense
                                       
        
 Salaries and employee benefits
            2,784       2,792       8,409       8,395  
        
 Occupancy and furniture and fixtures
            450       437       1,344       1,328  
        
 Data processing and ATM
            380       355       1,016       1,033  
        
 FDIC  assessment
            423       47       1,429       90  
        
 Credit card processing
            550       546       1,551       1,570  
        
 Intangibles and goodwill amortization
            271       279       822       841  
        
 Net costs of other real estate owned
            29       52       100       64  
        
 Franchise taxes
            221       208       666       619  
        
 Other operating expenses
            783       815       2,364       2,354  
        
              Total noninterest expense
            5,891       5,531       17,701       16,294  
        
 Income before income tax expense
            4,756       4,611       13,180       13,097  
        
 Income tax expense
            976       996       2,656       2,832  
        
             Net income
          $ 3,780     $ 3,615     $ 10,524     $ 10,265  
        
                                 
        
 Basic net income per share
          $ 0.55     $ 0.52     $ 1.52     $ 1.48  
        
 Fully diluted net income per share
          $ 0.54     $ 0.52     $ 1.52     $ 1.48  
        
 Weighted average outstanding number of common shares
                                       
        
            Basic
            6,933,474       6,926,974       6,931,672       6,930,133  
        
            Diluted
            6,948,083       6,932,438       6,942,712       6,937,018  
        
 Dividends declared per share
            ---       ---     $ 0.41     $ 0.39  
        
 Dividend payout ratio
            ---       ---       27.01       26.32  
        
 Book value per share
            ---       ---     $ 17.52     $ 15.80  
        
       
        
  

         
Key Ratios and Other Data
(Unaudited)
  

    Three Months Ended
            Nine Months Ended
         
        
Average Balances
          September 30, 
2009
        
        
            September 30, 
2008
        
            September 30, 
2009
        
            September 30, 
2008
        
         
        
Cash and due from banks
          $ 11,368     $ 12,789     $ 11,886     $ 12,848  
        
Interest-bearing deposits
            34,418       7,607       38,706       22,011  
        
Securities available for sale
            169,149       156,309       166,446       160,312  
        
Securities held to maturity
            135,419       128,915       131,888       123,590  
        
Mortgage loans held for sale
            636       356       901       391  
        
Gross loans
            579,248       540,911       577,262       531,914  
        
Loans, net
            571,837       534,504       570,014       525,577  
        
Intangible assets
            13,053       14,158       13,324       14,436  
        
Total assets
            974,574       892,260       972,363       894,544  
        
Total deposits
            848,836       775,614       849,255       779,078  
        
Other borrowings
            48       1,004       50       379  
        
Stockholders' equity
            117,868       108,974       115,337       108,297  
        
Interest-earning assets
            916,773       831,899       914,332       836,105  
        
Interest-bearing liabilities
            730,628       661,912       735,764       666,185  
        
                                 
        
Financial ratios
                                       
        
Return on average assets
            1.56 %     1.61 %     1.45 %     1.53 %
        
Return on average equity
            12.86 %     13.20 %     12.20 %     12.66 %
        
Net interest margin
            4.26 %     4.34 %     4.13 %     4.11 %
        
Net interest income - fully taxable equivalent
          $ 9,735     $ 9,084     $ 28,265     $ 25,743  
        
Efficiency ratio
            49.24 %     48.65 %     50.93 %     50.17 %
        
Average equity to average assets
            12.09 %     12.21 %     11.86 %     12.11 %
        
                                 
        
Allowance for loan losses
                                       
        
Beginning balance
          $ 6,284     $ 5,267     $ 5,858     $ 5,219  
        
Provision for losses
            305       280       953       515  
        
Charge-offs
            (168 )     (127 )     (422 )     (409 )
        
Recoveries
            32       15       64       110  
        
Ending balance
          $ 6,453     $ 5,435     $ 6,453     $ 5,435  
        
 
        
 
Asset Quality Data
(Unaudited)
 

Nonperforming assets
          September 30, 
2009
            September 30, 
2008
         
        
Nonaccrual loans
          $ 3,888     $ 2,003  
        
Restructured loans
            ---       ---  
        
Total nonperforming loans
            3,888       2,003  
        
Other real estate owned
            1,944       1,037  
        
Total nonperforming assets
          $ 5,832     $ 3,040  
        
Loans 90 days or more past due
          $ 2,153     $ 1,324  
        
                 
        
Asset quality ratios
                       
        
Nonperforming loans to loans net of unearned income and deferred fees, plus other real estate owned
            0.67  %     0.37  %
        
Allowance for loan losses to total loans
            1.11 %     0.99 %
        
Allowance for loan losses to nonperforming loans
            165.97 %     271.34 %
        
Loans past due 90 days or more to loans net of unearned income and deferred fees
            0.37 %     0.24 %

	(Unaudited)			(Unaudited)
($ in thousands, except for per share data)	September 30, 2009			September 30, 2008			December 31, 2008
Assets
Cash and due from banks	$	11,891		$	16,511		$	16,316
Interest-bearing deposits		22,935			12,257			29,656
Federal funds sold		---			---			---
Securities available for sale		169,457			151,592			147,227
Securities held to maturity		132,786			127,108			117,772
Total securities		302,243			278,700			264,999
Mortgage loans held for sale		628			95			348
Loans:
Real estate construction loans		47,671			63,880			60,798
Real estate mortgage loans		167,589			144,510			162,757
Commercial and industrial loans		268,868			232,648			246,218
Consumer loans		98,632			106,914			106,907
Total loans		582,760			547,952			576,680
Less: unearned income and deferred fees		(1,119	)		(1,113	)		(1,123	)
Loans, net of unearned income and deferred fees		581,641			546,839			575,557
Less: allowance for loan losses		(6,453	)		(5,435	)		(5,858	)
Loans, net		575,188			541,404			569,699
Bank premises and equipment, net		10,734			11,470			11,204
Accrued interest receivable		6,322			6,001			5,760
Other real estate owned		1,944			1,037			1,984
Intangible assets		12,897			13,997			13,719
Other assets		21,106			20,811			21,689
Total assets	$	965,888		$	902,283		$	935,374

Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	122,519		$	113,936		$	109,630
Interest-bearing demand deposits		277,884			235,809			256,416
Savings deposits		50,241			46,453			45,329
Time deposits		385,229			389,788			406,473
Total deposits		835,873			785,986			817,848
Other borrowed funds		46			56			54
Accrued interest payable		473			636			655
Other liabilities		8,025			6,132			6,709
Total liabilities		844,417			792,810			825,266

Stockholders' Equity
Preferred stock of no par value. Authorized 5,000,000 shares; none issued and outstanding.		---			---			---
Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding 6,933,474 shares at September 30, 2009, 6,926,974 shares at September 30, 2008 and 6,929,474 shares at December 31, 2008		8,667			8,659			8,662
Retained earnings		113,087			104,843			105,356
Accumulated comprehensive income		(283	)		(4,029	)		(3,910	)
Total stockholders' equity		121,471			109,473			110,108
Total liabilities and stockholders' equity	$	965,888		$	902,283		$	935,374

	Three Months Ended						Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009		September 30, 2008
($ in thousands, except for per share data)
Interest Income
Interest and fees on loans	$	9,316		$	9,196		$	28,170	$	27,682
Interest on federal funds		---			---			---		---
Interest on interest-bearing deposits		23			36			73		426
Interest on securities - taxable		1,600			1,726			4,766		5,175
Interest on securities - nontaxable		1,677			1,451			4,896		4,309
Total interest income		12,616			12,409			37,905		37,592

Interest Expense
Interest on time deposits		1,379			1,323			4,363		4,502
Interest on other deposits		2,496			2,865			8,197		9,904
Interest on borrowed funds		1			7			2		11
Total interest expense		3,876			4,195			12,562		14,417
Net interest income		8,740			8,214			25,343		23,175
Provision for loan losses		305			280			953		515
Net interest income after provision for loan losses		8,435			7,934			24,390		22,660

Noninterest Income
Service charges on deposit accounts		865			930			2,506		2,502
Other service charges and fees		107			88			263		250
Credit card fees		723			728			2,060		2,101
Trust income		255			307			792		929
Bank owned life insurance		201			144			554		446
Other income		78			87			263		314
Realized securities gains/(losses), net		(17	)		(76	)		53		189
Total noninterest income		2,212			2,208			6,491		6,731

Noninterest Expense
Salaries and employee benefits		2,784			2,792			8,409		8,395
Occupancy and furniture and fixtures		450			437			1,344		1,328
Data processing and ATM		380			355			1,016		1,033
FDIC assessment		423			47			1,429		90
Credit card processing		550			546			1,551		1,570
Intangibles and goodwill amortization		271			279			822		841
Net costs of other real estate owned		29			52			100		64
Franchise taxes		221			208			666		619
Other operating expenses		783			815			2,364		2,354
Total noninterest expense		5,891			5,531			17,701		16,294
Income before income tax expense		4,756			4,611			13,180		13,097
Income tax expense		976			996			2,656		2,832
Net income	$	3,780		$	3,615		$	10,524	$	10,265

Basic net income per share	$	0.55		$	0.52		$	1.52	$	1.48
Fully diluted net income per share	$	0.54		$	0.52		$	1.52	$	1.48
Weighted average outstanding number of common shares
Basic		6,933,474			6,926,974			6,931,672		6,930,133
Diluted		6,948,083			6,932,438			6,942,712		6,937,018
Dividends declared per share		---			---		$	0.41	$	0.39
Dividend payout ratio		---			---			27.01		26.32
Book value per share		---			---		$	17.52	$	15.80

	Three Months Ended						Nine Months Ended
Average Balances	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Cash and due from banks	$	11,368		$	12,789		$	11,886		$	12,848
Interest-bearing deposits		34,418			7,607			38,706			22,011
Securities available for sale		169,149			156,309			166,446			160,312
Securities held to maturity		135,419			128,915			131,888			123,590
Mortgage loans held for sale		636			356			901			391
Gross loans		579,248			540,911			577,262			531,914
Loans, net		571,837			534,504			570,014			525,577
Intangible assets		13,053			14,158			13,324			14,436
Total assets		974,574			892,260			972,363			894,544
Total deposits		848,836			775,614			849,255			779,078
Other borrowings		48			1,004			50			379
Stockholders' equity		117,868			108,974			115,337			108,297
Interest-earning assets		916,773			831,899			914,332			836,105
Interest-bearing liabilities		730,628			661,912			735,764			666,185

Financial ratios
Return on average assets		1.56	%		1.61	%		1.45	%		1.53	%
Return on average equity		12.86	%		13.20	%		12.20	%		12.66	%
Net interest margin		4.26	%		4.34	%		4.13	%		4.11	%
Net interest income - fully taxable equivalent	$	9,735		$	9,084		$	28,265		$	25,743
Efficiency ratio		49.24	%		48.65	%		50.93	%		50.17	%
Average equity to average assets		12.09	%		12.21	%		11.86	%		12.11	%

Allowance for loan losses
Beginning balance	$	6,284		$	5,267		$	5,858		$	5,219
Provision for losses		305			280			953			515
Charge-offs		(168	)		(127	)		(422	)		(409	)
Recoveries		32			15			64			110
Ending balance	$	6,453		$	5,435		$	6,453		$	5,435

Nonperforming assets	September 30, 2009			September 30, 2008
Nonaccrual loans	$	3,888		$	2,003
Restructured loans		---			---
Total nonperforming loans		3,888			2,003
Other real estate owned		1,944			1,037
Total nonperforming assets	$	5,832		$	3,040
Loans 90 days or more past due	$	2,153		$	1,324

Asset quality ratios
Nonperforming loans to loans net of unearned income and deferred fees, plus other real estate owned		0.67	%		0.37	%
Allowance for loan losses to total loans		1.11	%		0.99	%
Allowance for loan losses to nonperforming loans		165.97	%		271.34	%
Loans past due 90 days or more to loans net of unearned income and deferred fees		0.37	%		0.24	%