NKSH National Bankshares Inc

Virginia	0-15204	54-1375874
(State or other jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

☐	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))

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	NKSH	NASDAQ

☐	Emerging growth company

ITEM 2.02.

RESULTS OF OPERATIONS, FINANCIAL STATEMENTS AND EXHIBITS

ITEM 9.01.

FINANCIAL STATEMENTS AND EXHIBITS

(d)

Exhibits

99.1	National Bankshares, Inc. Press Release, dated January 25, 2024.

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

By:         /s/ F. Brad Denardo

F. Brad Denardo Chairman, President & CEO

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 Fourth Quarter and Year Ended December 31, 2023

 

BLACKSBURG, VA., January 25, 2024 -- National Bankshares, Inc. (“the Company”) (Nasdaq: NKSH), parent company of The National Bank of Blacksburg (“the Bank”) and National Bankshares Financial Services, today announced its results of operations for the fourth quarter and year ended December 31, 2023. The Company reported net income of $4.19 million, or basic and diluted earnings per common share of $0.71, for the fourth quarter and $15.69 million, or basic and diluted earnings per common share of $2.66, for the year ended December 31, 2023. This compares with net income of $9.31 million, or basic earnings per common share of $1.57, for the fourth quarter of 2022 and $25.93 million, or basic earnings per common share of $4.33, for the year ended December 31, 2022. National Bankshares, Inc. ended December 31, 2023 with total assets of $1.66 billion.

 

President and CEO F. Brad Denardo commented, “In an exceptionally challenging year for the banking sector, National Bankshares remains fundamentally strong, with solid, diversified deposits, excellent asset quality, and ample liquidity. 2023’s sustained Federal Reserve interest rate hikes pressured net interest margins, while the failure of several high-profile regional banks shook public confidence in the industry. Our effort to maintain a strong deposit base in this difficult environment was successful but at a substantial cost to 2023 net income.”

 

Mr. Denardo continued, “Throughout 2023 and into the first quarter of 2024, we have not only survived, but we have continued to pursue growth, with investments in our people, improvements in our infrastructure, and entry into promising new markets. Yesterday we announced that we have entered into a definitive merger agreement to acquire Frontier Community Bank headquartered in Waynesboro, Virginia. The acquisition will allow us to expand our community banking model into the Shenandoah Valley and central Virginia markets. As we move ahead into the promise of a new year, we remain confident in our ability to deliver value for our customers, our communities, and our shareholders.”

 

Highlights

 

Credit Quality

Loan quality continues to reflect low credit risk, with low charge-off and past due levels. Along with improvements in the forecast and credit risk indicators, the calculation for the allowance for credit losses on loans (“ACLL”) indicated a decrease in risk when December 31, 2023 is compared with September 30, 2023 and January 1, 2023, resulting in a recovery of previously recognized provision.  The Company adopted Accounting Standards Update 2016-13 (“ASU 2016-13”) as of January 1, 2023, which increased the ACLL by $2.34 million from December 31, 2022.

 

Net Income

Net income for the fourth quarter of 2023 improved from net income recorded for the third quarter of 2023, primarily due to the recovery of the provision discussed above and improvement in noninterest expense. When the years ended December 31, 2023 and December 31, 2022 are compared, net income decreased. Key items that affected results are discussed below.

 

Net Interest Income

The 525 basis point increase in the Federal Reserve’s benchmark interest rate between March 2022 and July 2023 expanded the yield on earning assets when the fourth quarter is compared with the third quarter of 2023, and when the years ended December 31, 2023 and December 31, 2022 are compared. 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 rapidity and magnitude of the Federal Reserve’s rate increases stimulated competition for deposits, resulting in higher cost of funds and compressed net interest margin when results for 2023 are compared with 2022. The Company continuously monitors its deposit base and funding costs.

 

Noninterest Income

Noninterest income increased when the fourth quarter is compared with the third quarter of 2023. During the fourth quarter, the Company recognized income of $232 thousand upon receipt of a contract contingency payment associated with the 2022 sale of a private equity investment.

 

Noninterest income for the year ended December 31, 2023 decreased when compared with the year ended December 31, 2022. During 2022, the Company recorded a gain of $3.82 million for the previously mentioned sale of a private equity investment. During 2023, the Company recognized non-recurring items, including a gain of $2.97 million on the sale of VISA Class B securities, $1.04 million from the payout of a Bank Owned Life Insurance policy, and a loss of $3.33 million on the sale of securities.

 

Noninterest Expense

Noninterest expense for the fourth quarter decreased when compared with the third quarter of 2023, primarily due to adjustment of discretionary expense accruals and the Company’s ongoing cost control initiatives.

 

Noninterest expense for the year ended December 31, 2023 increased when compared with the year ended December 31, 2022, due to expenses within professional services of $786 thousand associated with a proxy contest in 2023, as well as increased salary and employee benefits, data processing and ATM, FDIC insurance and pension non-service cost. 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 ATM upgrades and higher maintenance costs. FDIC insurance increased due to an industry-wide assessment increase implemented by the FDIC. Pension non-service cost, included in other operating expense, increased $348 thousand based upon actuarial calculations.

 

Securities

The impact of the Federal Reserve’s interest rate increases reduced the market value of the Company’s bond portfolio. Federal Open Market Committee minutes from December 2023 indicated that further increases are less likely, which improved the market value of the Company’s securities as of December 31, 2023 when compared with September 30, 2023.

 

As part of its interest rate risk management, the Company strategically selected and sold securities during 2023 with a market value of $43.52 million. The sale prioritized enhancement of long-term earnings. The loss on the securities sale was largely offset by a gain on the sale of the Company’s VISA Class B stock.

 

The Company’s Asset Liability Management Committee closely monitors interest rate risk on all of the Company’s financial assets and liabilities. As of December 31, 2023, the Company has the ability to hold securities until maturity and there are no further sales planned. Analysis as of December 31, 2023 did not indicate credit risk concerns with any of the Company’s securities.

 

Deposits
Deposit levels improved during the fourth quarter when compared with September 30, 2023. Time deposits as well as interest bearing demand deposits increased. In response to competitive pressure during 2023, 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 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 25% 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 20% 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 slightly from September 30, 2023. While higher interest rates challenged loan demand during 2023, the Company is positioned to continue to make every loan that meets its underwriting standards.

 

Stockholders’ Equity

Stockholders’ equity as of December 31, 2023 increased from September 30, 2023 due to improvement in market value of securities. 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.

 

Dividends

The Company paid regular dividends of $1.51 per common share in 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 94.21% for 2023.

 

Key Ratios

Long-term strategies as well as management of the business environment of the period affected results for 2023 and 2022. As previously mentioned, during 2023, the Company also incurred expense to respond to a proxy contest. The expense associated with the proxy contest reduced earnings by $0.11 per share and reduced the return on average equity by 50 basis points. The return on average assets was lower by 4 basis points. Please refer to the Reconciliation of Non-GAAP Financial Measures for detail.

 

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 in Roanoke, Staunton 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)

 

($ in thousands, except per share data)		December 31, 2023				September 30, 2023				December 31, 2022
Assets
Cash and due from banks		$	12,967			$	13,089			$	12,403
Interest-bearing deposits			73,636				40,353				59,026
Securities available for sale, at fair value			618,601				591,552				656,852
Restricted stock, at cost			1,264				1,264				941
Mortgage loans held for sale			406				82				-
Loans:
Real estate construction loans			55,379				64,181				54,579
Consumer real estate loans			241,564				226,671				221,052
Commercial real estate loans			419,130				424,765				437,888
Commercial non real estate loans			41,555				42,940				57,652
Public sector and IDA loans			60,551				51,591				48,074
Consumer non-real estate loans			38,996				39,269				33,948
Total loans			857,175				849,417				853,193
Less: unearned income and deferred fees and costs			(529	)			(442	)			(449	)
Loans, net of unearned income and deferred fees and costs			856,646				848,975				852,744
Less: allowance for credit losses			(9,094	)			(10,181	)			(8,225	)
Loans, net			847,552				838,794				844,519
Premises and equipment, net			11,109				11,091				10,371
Accrued interest receivable			6,313				6,180				6,001
Other real estate owned, net			-				662				662
Goodwill			5,848				5,848				5,848
Bank-owned life insurance			43,583				43,327				43,312
Other assets			34,091				39,660				37,616
Total assets		$	1,655,370			$	1,591,902			$	1,677,551
Liabilities and Stockholders' Equity
Noninterest-bearing deposits		$	281,215			$	303,166			$	327,713
Interest-bearing demand deposits			821,661				789,148				933,269
Savings deposits			177,856				184,801				214,114
Time deposits			223,240				187,885				67,629
Total deposits			1,503,972				1,465,000				1,542,725
Accrued interest payable			1,416				551				106
Other liabilities			9,460				10,238				12,033
Total liabilities			1,514,848				1,475,789				1,554,864
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 5,893,782 (including 4,095 unvested) shares at December 31, 2023 5,891,739 (including 2,052 unvested) at September 30, 2023 and 5,889,687 at December 31, 2022			7,404				7,383				7,362
Retained earnings			197,984				198,394				199,091
Accumulated other comprehensive loss, net			(64,866	)			(89,664	)			(83,766	)
Total stockholders' equity			140,522				116,113				122,687
Total liabilities and stockholders' equity		$	1,655,370			$	1,591,902			$	1,677,551

 

 

National Bankshares, Inc.

Consolidated Statements of Income

(Unaudited)

 

		Three Months Ended
($ in thousands, except per share data)		December 31, 2023				September 30, 2023				December 31, 2022
Interest Income
Interest and fees on loans		$	10,131			$	9,816			$	9,013
Interest on interest-bearing deposits			775				439				596
Interest on securities - taxable			4,268				4,084				3,941
Interest on securities - nontaxable			339				340				432
Total interest income			15,513				14,679				13,982
Interest Expense
Interest on time deposits			2,124				1,452				36
Interest on other deposits			4,909				4,584				992
Interest on borrowings			-				3				-
Total interest expense			7,033				6,039				1,028
Net interest income			8,480				8,640				12,954
(Recovery) provision for credit losses			(889	)			(401	)			10
Net interest income after (recovery) provision for credit losses			9,369				9,041				12,944
Noninterest Income
Service charges on deposit accounts			647				642				599
Other service charges and fees			44				151				57
Credit and debit card fees, net			402				395				493
Trust income			470				505				443
BOLI income			255				253				240
Gain on sale of mortgage loans			14				22				21
Gain on sale of investment			232				-				3,823
Other income			190				147				182
Total noninterest income			2,254				2,115				5,858
Noninterest Expense
Salaries and employee benefits			3,957				4,462				4,386
Occupancy, furniture and fixtures			505				547				502
Data processing and ATM			819				978				832
FDIC assessment			188				190				141
Net costs of other real estate owned			2				14				247
Franchise taxes			350				339				375
Professional services			184				251				306
Other operating expenses			554				684				509
Total noninterest expense			6,559				7,465				7,298
Income before income tax expense			5,064				3,691				11,504
Income tax expense			879				617				2,194
Net Income		$	4,185			$	3,074			$	9,310
Basic net income per common share		$	0.71			$	0.52			$	1.57
Fully diluted net income per common share		$	0.71			$	0.52			$	1.57
Weighted average number of common shares outstanding, basic			5,889,687				5,889,687				5,933,201
Weighted average number of common shares outstanding, diluted			5,890,471				5,889,939				5,933,201
Dividends declared per common share		$	0.78			$	-			$	0.78
Book value per share		$	23.86			$	19.71			$	20.83

 

 

National Bankshares, Inc.

Consolidated Statements of Income

(Unaudited)

 

		Twelve Months Ended
($ in thousands, except per share data)		December 31, 2023				December 31, 2022
Interest Income
Interest and fees on loans		$	38,924			$	34,253
Interest on interest-bearing deposits			1,982				1,353
Interest on securities - taxable			16,536				12,788
Interest on securities - nontaxable			1,391				1,715
Total interest income			58,833				50,109
Interest Expense
Interest on time deposits			4,989				141
Interest on other deposits			16,261				2,942
Interest on borrowings			300				-
Total interest expense			21,550				3,083
Net interest income			37,283				47,026
(Recovery) provision for credit losses			(1,278	)			706
Net interest income after (recovery) provision for credit losses			38,561				46,320
Noninterest Income
Service charges on deposit accounts			2,518				2,425
Other service charges and fees			297				214
Credit and debit card fees, net			1,678				1,916
Trust income			1,901				1,817
BOLI income			2,026				958
Gain on sale of mortgage loans			107				157
Gain on sale of investment			3,203				3,823
Other income			961				1,091
Realized securities loss, net			(3,332	)			-
Total noninterest income			9,359				12,401
Noninterest Expense
Salaries and employee benefits			17,318				16,519
Occupancy, furniture and fixtures			2,005				1,934
Data processing and ATM			3,549				3,186
FDIC assessment			749				477
Net costs of other real estate owned			31				325
Franchise taxes			1,422				1,483
Professional services			1,739				999
Other operating expenses			2,432				2,035
Total noninterest expense			29,245				26,958
Income before income tax expense			18,675				31,763
Income tax expense			2,984				5,831
Net Income		$	15,691			$	25,932
Basic net income per common share		$	2.66			$	4.33
Fully diluted net income per common share		$	2.66			$	4.33
Weighted average number of common shares outstanding, basic			5,889,687				5,989,601
Weighted average number of common shares outstanding, diluted			5,889,953				5,989,601
Dividends declared per common share		$	2.51			$	1.50
Book value per share		$	23.86			$	20.83

 

 

National Bankshares, Inc.

Net Interest Margin

(Unaudited)

 

($ in thousands)		Three Months Ended December 31, 2023												Three Months Ended September 30, 2023
		Average Balance				Interest				Average Yield/ Rate				Average Balance				Interest				Average Yield/ Rate
Interest-earning assets:
Loans (1)(2)(3)		$	853,233			$	10,252				4.77	%		$	843,546			$	9,924				4.67	%
Taxable securities (4)(5)			637,349				4,268				2.66	%			640,578				4,084				2.53	%
Nontaxable securities (1)(4)			64,297				461				2.84	%			64,415				461				2.84	%
Interest-bearing deposits			56,132				775				5.48	%			32,503				439				5.36	%
Total interest-earning assets		$	1,611,011			$	15,756				3.88	%		$	1,581,042			$	14,908				3.74	%
Interest-bearing liabilities:
Interest-bearing demand deposits		$	801,000			$	4,669				2.31	%		$	799,772			$	4,358				2.16	%
Savings deposits			182,006				240				0.52	%			192,702				226				0.47	%
Time deposits			206,770				2,124				4.08	%			163,476				1,452				3.52	%
Borrowings			-				-				-				207				3				5.75	%
Total interest-bearing liabilities		$	1,189,776			$	7,033				2.35	%		$	1,156,157			$	6,039				2.07	%
Net interest income and interest rate spread						$	8,723				1.53	%						$	8,869				1.67	%
Net yield on average interest‑earning assets											2.15	%											2.23	%

 

($ in thousands)		Three Months Ended December 31, 2022
		Average Balance				Interest				Average Yield/ Rate
Interest-earning assets:
Loans (1)(3)(6)		$	845,373			$	9,095				4.27	%
Taxable securities (4)(5)			689,370				3,941				2.27	%
Nontaxable securities (1)(4)			74,540				580				3.09	%
Interest-bearing deposits			62,393				596				3.79	%
Total interest-earning assets		$	1,671,676			$	14,212				3.37	%
Interest-bearing liabilities:
Interest-bearing demand deposits		$	908,209			$	955				0.42	%
Savings deposits			215,594				37				0.07	%
Time deposits			70,874				36				0.20	%
Total interest-bearing liabilities		$	1,194,677			$	1,028				0.34	%
Net interest income and interest rate spread						$	13,184				3.03	%
Net yield on average interest‑earning assets											3.13	%

 

(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 $52 and $56 for the three months ended December 31, 2023 and September 30, 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 $35 for the three months ended December 31, 2022.

 

 

National Bankshares, Inc.

Net Interest Margin

(Unaudited)

 

($ in thousands)		Twelve Months Ended December 31, 2023												Twelve Months Ended December 31, 2022
		Average Balance				Interest				Average Yield/ Rate				Average Balance				Interest				Average Yield/ Rate
Interest-earning assets:
Loans (1)(2)(3)		$	851,221			$	39,320				4.62	%		$	833,226			$	34,579				4.15	%
Taxable securities (4)(5)			652,477				16,536				2.53	%			669,515				12,788				1.91	%
Nontaxable securities (1)(4)			65,309				1,885				2.89	%			75,487				2,308				3.06	%
Interest-bearing deposits			37,660				1,982				5.26	%			88,963				1,353				1.52	%
Total interest-earning assets		$	1,606,667			$	59,723				3.72	%		$	1,667,191			$	51,028				3.06	%
Interest-bearing liabilities:
Interest-bearing demand deposits		$	826,112			$	15,515				1.88	%		$	910,989			$	2,794				0.31	%
Savings deposits			195,592				746				0.38	%			216,414				148				0.07	%
Time deposits			150,395				4,989				3.32	%			77,686				141				0.18	%
Borrowings			6,198				300				4.84	%			-				-				-
Total interest-bearing liabilities		$	1,178,297			$	21,550				1.83	%		$	1,205,089			$	3,083				0.26	%
Net interest income and interest rate spread						$	38,173				1.89	%						$	47,945				2.80	%
Net yield on average interest‑earning assets											2.38	%											2.88	%

 

(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 $214 and $230 for the twelve months ended December 31, 2023 and December 31, 2022, 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)

 

		As of and for the Three Months Ended
($ in thousands)		December 31, 2023				September 30, 2023				December 31, 2022
Average Balances
Cash and due from banks		$	12,718			$	11,929			$	11,641
Interest-bearing deposits			56,132				32,503				62,393
Securities available for sale, at fair value			593,500				609,404				653,153
Mortgage loans held for sale			57				88				75
Loans, gross			853,683				843,892				845,713
Loans, net of unearned income and deferred fees and costs			853,176				843,458				845,298
Loans, net of allowance for credit losses			843,040				832,861				837,063
Goodwill			5,848				5,848				5,848
Total assets			1,611,174				1,591,801				1,672,102
Noninterest bearing deposits			291,378				298,431				348,779
Interest-bearing and savings deposits			983,006				992,474				1,123,803
Time deposits			206,770				163,476				70,874
Total deposits			1,481,154				1,454,381				1,543,456
Stockholders' equity			118,257				126,612				110,331
Financial Ratios
Return on average assets(1)			0.87	%			0.71	%			1.67	%
Return on average equity(1)			11.82	%			8.89	%			25.36	%
Efficiency ratio(2)			61.04	%			67.96	%			47.95	%
Average equity to average assets			7.34	%			7.95	%			6.60	%
Tangible common equity to tangible assets(3)			8.16	%			6.95	%			6.99	%
Allowance for Credit Losses
Beginning balance		$	10,181			$	10,626			$	8,207
(Recovery) provision for credit losses			(889	)			(401	)			10
Charge-offs			(246	)			(72	)			(51	)
Recoveries			48				28				59
Ending balance		$	9,094			$	10,181			$	8,225

 

(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.

 

 

National Bankshares, Inc.

Key Ratios and Other Data

(Unaudited)

 

		As and for the Twelve Months Ended
($ in thousands)		December 31, 2023				December 31, 2022
Average Balances
Cash and due from banks		$	12,053			$	11,667
Interest-bearing deposits			37,660				88,963
Securities available for sale, at fair value			619,236				683,183
Mortgage loans held for sale			135				156
Loans, gross			851,537				833,512
Loans, net of unearned income and deferred fees and costs			851,086				833,070
Loans, net of allowance for credit losses			840,590				825,110
Goodwill			5,848				5,848
Total assets			1,613,854				1,705,614
Noninterest bearing deposits			299,748				338,269
Interest-bearing and savings deposits			1,021,704				1,127,403
Time deposits			150,395				77,686
Total deposits			1,471,847				1,543,358
Stockholders' equity			124,641				145,641
Financial Ratios
Return on average assets			0.97	%			1.52	%
Return on average equity			12.59	%			17.81	%
Efficiency ratio(1)			61.04	%			47.69	%
Average equity to average assets			7.72	%			8.54	%
Tangible common equity to tangible assets(2)			8.16	%			6.99	%
Allowance for Credit Losses
Beginning balance		$	8,225			$	7,674
(Recovery) provision for credit losses			(1,278	)			706
Charge-offs			(478	)			(367	)
Recoveries			283				212
Adoption of ASU 2016-13			2,342				-
Ending balance		$	9,094			$	8,225

 

(1)	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.

(2)	Tangible common equity and tangible assets exclude goodwill of $5,848. See “Reconciliation of Non-GAAP Financial Measures” at the end of this release.

 

 

National Bankshares, Inc.

Asset Quality Data

(Unaudited)

 

($ in thousands)		December 31, 2023				September 30, 2023				December 31, 2022
Nonperforming Assets
Nonaccrual loans		$	2,629			$	2,981			$	2,847
Other real estate owned			-				662				662
Total nonperforming assets		$	2,629			$	3,643			$	3,509
Loans 90 days or more past due and accruing		$	188			$	31			$	8
Asset Quality Ratios
Nonperforming assets to loans(1) plus other real estate owned			0.31	%			0.43	%			0.41	%
Allowance for credit losses on loans to total loans(1)			1.06	%			1.20	%			0.96	%
Allowance for credit losses on loans to nonperforming loans			345.91	%			341.53	%			288.90	%
Loans past due 90 days or more to loans(1)			0.02	%			0.00	%			0.00	%

 

(1)

Loans are net of unearned income and deferred fees and costs

 

 

National Bankshares, Inc.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

 

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. 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.

 

The non-GAAP financial measures presented in this document include fully taxable equivalent (“FTE”) interest income used in the net interest margin and the efficiency ratio, the efficiency ratio, and the ratio of tangible common equity to tangible assets. For periods that are shorter than twelve months, the Company annualizes net income for the return on average assets and return on average equity. In order to prevent distortion, the Company does not annualize significant non-recurring income and expense items.

 

Long-term strategies as well as management of the business environment of the period affected results for 2023 and 2022. As previously mentioned, during 2023, the Company also incurred expense to respond to a proxy contest. These expenses are not related to operation of the Company’s business. For the year ended December 31, 2023, non-GAAP pro-forma results excluding the costs associated with the proxy contest are presented for earnings per common share, return on average equity and return on average assets.

 

The following tables present calculations underlying non-GAAP financial measures.

 

		Three Months Ended
($ in thousands)		December 31, 2023				September 30, 2023				December 31, 2022
Net Interest Income, FTE
Interest income (GAAP)		$	15,513			$	14,679			$	13,982
Add: FTE adjustment			243				229				230
Interest income, FTE (non-GAAP)			15,756				14,908				14,212
Interest expense (GAAP)			7,033				6,039				1,028
Net interest income, FTE (non-GAAP)		$	8,723			$	8,869			$	13,184
Income for Efficiency Ratio
Noninterest income (GAAP)		$	2,254			$	2,115			$	5,858
Less: gain on sale of investment (1)			(232	)			-				(3,823	)
Noninterest income, adjusted (non-GAAP)			2,022				2,115				2,035
Net interest income, FTE (non-GAAP)			8,723				8,869				13,184
Total income for efficiency ratio (non-GAAP)		$	10,745			$	10,984			$	15,219
Annualized Net Income
Net income (GAAP)		$	4,185			$	3,074			$	9,310
Less: items deemed by management to be non-recurring:
Gain on sale of investment(1), net of tax of ($49) for the period ended December 31, 2023 and ($803) for the period ended December 31, 2022			(183	)			-				(3,020	)
Recovery of ACL on loans, net of tax of ($187) for the period ended December 31, 2023 and ($84) for the period ended September 30, 2023			(702	)			(317	)			-
Total non-recurring items			(885	)			(317	)			(3,020	)
Adjusted net income		$	3,300			$	2,757			$	6,290
Adjusted net income, annualized		$	13,092			$	10,938			$	24,955
Add: total non-recurring items			885				317				3,020
Annualized net income for ratio calculation (non-GAAP)		$	13,977			$	11,255			$	27,975

 

(1)

Income recognized upon receipt of a contract contingency payment associated with the 2022 sale of a private equity investment.

 

 

National Bankshares, Inc.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

 

		Twelve Months Ended
($ in thousands except per share data)		December 31, 2023				December 31, 2022
Net Interest Income, FTE
Interest income (GAAP)		$	58,833			$	50,109
Add: FTE adjustment			890				919
Interest income, FTE (non-GAAP)			59,723				51,028
Interest expense (GAAP)			21,550				3,083
Net interest income, FTE (non-GAAP)		$	38,173			$	47,945
Noninterest Expense for Efficiency Ratio
Noninterest expense (GAAP)		$	29,245			$	26,958
Less: proxy contest-related expense			(786	)			-
Noninterest expense for efficiency ratio (non-GAAP)		$	28,459			$	26,958
Income for Efficiency Ratio
Noninterest income (GAAP)		$	9,359			$	12,401
Add: realized securities loss, net			3,332				-
Less: gain on sale of investment (1)			(3,203	)			(3,823	)
Less: BOLI benefit payment included in BOLI income			(1,037	)			-
Noninterest income, adjusted (non-GAAP)			8,451				8,578
Net interest income, FTE (non-GAAP)			38,173				47,945
Total income for efficiency ratio (non-GAAP)		$	46,624			$	56,523
Key Ratios Excluding Proxy Contest Expense, 2023
Net income (GAAP)		$	15,691
Add: proxy contest expense, net of tax of $165			621
Net income excluding proxy contest expense (non-GAAP)		$	16,312
Basic net income per common share excluding proxy contest expense (non-GAAP)		$	2.77
Return on average equity excluding proxy contest expense (non-GAAP)			13.09	%
Return on average assets excluding proxy contest expense (non-GAAP)			1.01	%

 

(1)

Amount presented for 2022 reflects the gain on sale of a private equity investment. In 2023, amount reflects $232 recognized upon receipt of a contract contingency payment associated with the 2022 sale of a private equity investment and $2,971 gain on the sale of the Company’s VISA Class B shares.

 

		As of
($ in thousands)		December 31, 2023				September 30, 2023				December 31, 2022
Tangible Assets
Total assets (GAAP)		$	1,655,370			$	1,591,902			$	1,677,551
Less: Goodwill			(5,848	)			(5,848	)			(5,848	)
Tangible assets (non-GAAP)		$	1,649,522			$	1,586,054			$	1,671,703
Tangible Common Equity
Total stockholders' equity (GAAP)		$	140,522			$	116,113			$	122,687
Less: Goodwill			(5,848	)			(5,848	)			(5,848	)
Tangible common equity (non-GAAP)		$	134,674			$	110,265			$	116,839

 

v3.23.4

Document And Entity Information	Jan. 25, 2024
Document Information [Line Items]
Entity, Registrant Name	NATIONAL BANKSHARES, INC.
Document, Type	8-K
Document, Period End Date	Jan. 25, 2024
Entity, Incorporation, State or Country Code	VA
Entity, File Number	0-15204
Entity, Tax Identification Number	54-1375874
Entity, Address, Address Line One	101 Hubbard Street
Entity, Address, City or Town	Blacksburg
Entity, Address, State or Province	VA
Entity, Address, Postal Zip Code	24060
City Area Code	540
Local Phone Number	951-6300
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	NKSH
Security Exchange Name	NASDAQ
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0000796534

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