News Details

FOR IMMEDIATE RELEASE

CONTACTS:

F. Brad Denardo, Chairman, President & CEO  (540) 951-6213  bdenardo@nbbank.com  
Lora M. Jones, Treasurer & CFO  (540) 951-6238  ljones@nbbank.com

National Bankshares, Inc. Reports Results for the First Half of 2024

BLACKSBURG, VA., July 25, 2024 -- National Bankshares, Inc. (“the Company”) (Nasdaq: NKSH), parent company of The National Bank of Blacksburg (“the Bank”) and National Bankshares Financial Services, Inc., today announced its results of operations for the first half of 2024. The Company reported net income of $1.87 million or $0.31 basic earnings per common share for the six months ended June 30, 2024.  This compares with $8.43 million or $1.43 basic earnings per common share for the first half of 2023. National Bankshares, Inc. ended June 30, 2024 with total assets of $1.81 billion.

 President and CEO F. Brad Denardo commented, “The completion of our merger with Frontier Community Bank during the second quarter marks an exciting chapter in the 133-year-long history of The National Bank of Blacksburg. Our newly acquired branches in Waynesboro, Staunton, and Lynchburg, Virginia are our first full-service branches outside of the New River Valley and southwestern portions of the state. These regions have dynamic, growing economies with good growth opportunities, and will dovetail geographically with our new Roanoke branch office slated to open this fall. We are excited to be serving new customers and communities, and we are enthusiastic about the opportunity to deliver an enhanced return on investment through our growth strategy.”

Highlights

Merger: Income Statement Impacts

During the six months ended June 30, 2024, the Company recorded merger-related expense of $2.74 million, of which $2.26 million was recognized during the second quarter. Upon acquisition of the Frontier Community Bank (“FCB”) loans, the Company recorded a provision for credit loss of $1.29 million.

 Merger: Balance Sheet Impacts

Consideration for the acquisition of FCB totaled $16.35 million, including $14.30 million in shares of the Company’s common stock and $2.05 million in cash for shareholder elections, fractional shares and to settle outstanding options.

The acquisition was accounted for under the purchase method of accounting, with acquired assets and liabilities recorded at fair value.  Key items are presented in the following table as of the merger date:

Within a short period following the merger, the Company sold FCB’s securities and repaid its borrowings.

Net Interest Income

The yield on earning assets improved from the first quarter due to repricing and the impact of the acquisition. Many of the Company’s loans are adjustable with repricing dates in the future.  If rates remain at the current level or do not decrease substantially, repricing will continue to contribute to improved interest income. 

The cost of deposits increased when compared with the first quarter, due to the acquisition and continued competitive pressure.  The Company believes that if the Federal Reserve decreases its target rate, competition may ease. The Company continuously monitors its deposit base and funding costs. 

Noninterest Income 

Noninterest income for the second quarter increased slightly when compared with the first quarter of 2024, due to fee structure changes implemented in March 2024 and higher volume generating debit and credit card fees.  Noninterest income for 2023 reflects payout of a BOLI policy, gain on the sale of an investment in VISA Class B shares, and loss on the sale of securities.

Noninterest Expense

Noninterest expense for the second quarter of 2024 increased when compared with the first quarter of 2024, due primarily to the merger expenses discussed above. Additionally, contract termination expense was recorded to reflect the Company’s notification to a vendor that it intends to end its relationship in 2025. During 2023, the Company reported expenses included in professional services associated with a threatened proxy contest.

Securities

Market interest rate expectations at June 30, 2024 were similar to those at March 31, 2024, resulting in a similar fair valuation adjustment. The Company’s Asset Liability Management Committee closely monitors interest rate risk on all of the Company’s financial assets and liabilities.  As of June 30, 2024, the Company has the ability to hold securities until maturity.  Analysis as of June 30, 2024 did not indicate credit risk concerns with any of the Company’s securities. 

Deposits
The Company’s depositors within its market areas 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 24% 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 21% 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 2023, the Company accessed short-term borrowings with the FHLB and Federal Reserve 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.

Loans

Loans increased from March 31, 2024 due to the acquisition of FCB and organic loan growth. The Company is positioned to continue to make every loan that meets its underwriting standards. 

Credit Quality

Loan metrics continue to reflect low credit risk, with low charge-off and past due levels. 

Stockholders’ Equity

Stockholders’ equity as of June 30, 2024 increased when compared with December 31, 2023 primarily due to the acquisition. 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 affect regulatory capital ratios.  The Bank is considered well capitalized, with capital ratios substantially higher than minimum regulatory requirements, and meets all requirements for borrowing from the FHLB. 

 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 27 full-service offices, primarily in southwest and central Virginia, and two loan production offices in Roanoke and Charlottesville, 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.”

 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. Although we believe that our expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of our existing knowledge of our business and operations, there can be no assurance that actual future results, performance, achievements, or trends will not differ materially from any projected future results, performance, achievements or trends expressed or implied by such forward-looking statements. Actual future results, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the following: the businesses of the Company and Frontier Community Bank (“FCB”) may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; the expected growth opportunities or cost savings from the merger with FCB may not be fully realized or may take longer to realize than expected; deposit attrition, operating costs, customer losses and business disruption prior to and following the merger with FCB, including adverse effects on relationships with employees and customers, may be greater than expected; the regulatory and shareholder approvals required for the merger with FCB may not be obtained; the level of inflation; interest rates; national and local economic conditions; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation, and the impact of any policies or programs implemented pursuant to financial reform legislation; unanticipated increases in the level of unemployment in the Company’s market; the quality or composition of the loan and/or investment portfolios; the sufficiency of the Company’s allowance for credit losses; demand for loan products; deposit flows, including impact on liquidity; competition; demand for financial services in the Company’s market; the real estate market conditions in the Company’s market; laws, regulations and policies impacting financial institutions; adverse developments in the financial industry generally, such as the recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer behavior; technological risks and developments, and cyber-threats, attacks or events; the Company’s technology initiatives; geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts; the occurrence of significant natural disasters, including severe weather conditions, floods, and other catastrophic events; the Company's ability to identify, attract, and retain experienced management, relationship managers, and support personnel, particularly in a competitive labor environment; performance by the Company’s counterparties or vendors; applicable accounting principles, policies and guidelines; the impact of public health events, including the adverse impact on our business and operations and on our customers; and other factors described from time to time in the Company’s reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

National Bankshares, Inc.
Consolidated Balance Sheets
(Unaudited)

 National Bankshares, Inc.
Consolidated Statements of Income

(Unaudited)

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

National Bankshares, Inc.
Net Interest Margin
(Unaudited)

 ⁽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 $55, $48 and $66 for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

⁽³⁾    Includes loans held for sale and nonaccrual loans.

⁽⁴⁾    Daily averages are shown at amortized cost.

⁽⁵⁾    Includes restricted stock.

National Bankshares, Inc.
Net Interest Margin
(Unaudited)

   ⁽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 $103 and $106 for the six months ended June 30, 2024 and June 30, 2023, respectively.

   ⁽³⁾         Includes loans held for sale and nonaccrual loans.

   ⁽⁴⁾         Daily averages are shown at amortized cost.

   ⁽⁵⁾         Includes restricted stock.

National Bankshares, Inc.
Key Ratios and Other Data
(Unaudited)