BLACKSBURG, VA, FEBRUARY 10, 2011: National Bankshares, Inc. (NASDAQ Capital Market: NKSH) today announced that it had record net income of nearly $15.57 million for the twelve months ended December 31, 2010, an 8.7% increase over the nearly $14.32 million earned in 2009. Basic net income per share grew from $2.07 for 2009 to $2.25 in 2010. The return on average assets for 2010 was 1.57% and the return on average equity was 12.07%. This compares to 1.47% and 12.23%, respectively, for 2009. National Bankshares, Inc. is the parent company of the National Bank of Blacksburg, which does business as National Bank from 25 offices throughout Southwest Virginia. It also has a non-bank financial services subsidiary, National Bankshares Financial Services, Inc., which does business in the same market as National Bankshares Insurance Services and National Bankshares Investment Services.
National Bankshares, Inc. ended 2010 with total assets of $1.02 billion, up by 4.06 % over the nearly $982.37 million in total assets reported at December 31, 2009. The Company experienced a modest 2.44% decline in net loans, from $583.02 million at December 31, 2009 to $568.78 million at the end of 2010.
For the three months ended December 31, 2010, National Bankshares, Inc. had net income of nearly $3.81 million, up slightly from the $3.80 million for the same three month period of 2009. Net interest income increased from $9.32 million for the fourth quarter of 2009 to $9.66 million for the last three months of 2010. An increase in the provision for loan losses, from $681 thousand in 2009 to $1.20 million in the three months ended December 31, 2010, resulted in net interest income after provision for loan losses of $8.46 million for the final quarter of 2010. This compares with nearly $8.64 million in the same period of 2009. The decline in this category was offset by a drop in total noninterest expense, from $6.15 million for the final three months of 2009 to $5.82 million for the three months ended December 31, 2010.
Commenting on the Company's financial results for 2010, National Bankshares Chairman, President & CEO James G. Rakes said, "Despite challenges in the national and local economies, we were able to maintain strong core earnings in 2010. Our subsidiary bank kept its traditional and conservative focus again this year. Net income for 2010 was largely the result of higher net interest income and lower noninterest expense. Interest rates remained low and stable throughout the year, and we saw a drop in total interest income. However, total interest expense declined at a faster rate than interest income, resulting in a 9.58% increase in net interest income, from $34.66 million for the twelve months ended December 31, 2009 to over $37.98 million for 2010. As a result of a higher provision for loan losses, the ratio of the allowance for loan losses to total loans grew from 1.17% at December 31, 2009 to 1.33% at December 31, 2010. We increased the provision for loan losses in 2010 because some of our loan customers are still dealing with the effects of the prolonged economic downturn. We therefore experienced an increase in total nonperforming loans, from $6.75 million at the end of 2009 to $8.42 million at December 31, 2010. The ratio of nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned, increased from 1.50% at year-end 2009 to 1.75% at the end of December 2010. The ratio is high when compared with historical levels here at National Bankshares, but it remains reasonable when compared with peers. It seems as if our market area did not feel the full effects of the national recession as early as some other parts of the country, but now it is not recovering as quickly as certain other regions."
Mr. Rakes continued, "In May, we will be celebrating the 120th anniversary of the founding of National Bank. Milestones like this give us an opportunity to reflect on our history and to put current challenges into a larger perspective. We are proud of our heritage as traditional bankers, and we look forward to serving our communities for many years to come."
National Bankshares, Inc. is a financial holding company headquartered in Blacksburg, Virginia. Its stock is traded on the NASDAQ Capital Market under the symbol "NKSH".
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.