SOURCE: National Bankshares, Inc.

January 30, 2006 15:30 ET

National Bankshares, Inc. Announces Higher Earnings for 2005

BLACKSBURG, VA -- (MARKET WIRE) -- January 30, 2006 --National Bankshares, Inc. (NASDAQ: NKSH) today announced 2005 net income of over $12.42 million, or basic net income per share of $3.54. This represents an increase of 1.59% over the record earnings posted by the company in 2004. For the year, National Bankshares showed a return on average assets of 1.52% and a return on average equity of 13.73%. Net income attributable to the fourth quarter of 2005 was nearly $3.23 million, up by 3.40% over the fourth quarter of 2004. National Bankshares experienced growth in total assets of 5.70%, as compared with December 31, 2004, ending 2005 with total assets of $841.50 million.

In discussing year-end results, National Bankshares Chairman, President & CEO James G. Rakes said, "Although National Bankshares achieved record earnings once again in 2005, the year-over-year increase was not large. A major contributor was the pattern of interest rate increases put into place by the Federal Reserve during 2005, which compressed our net interest margin and, in turn, impacted earnings. In addition, non-interest expense categories were higher this year as compared with 2004, reflecting the first full year of expenses associated with a bank acquired in mid-2004. However, we are pleased with the solid organic growth in net assets achieved in 2005. National Bankshares also experienced a good increase in net loans despite a highly competitive market, ending the year with net loans of $487.16 million. Each of the measures of loan quality was excellent, improving from 2004's fine levels." Rakes continued, "We are committed to the future of community banking, because we believe that personal relationships and trust are important to people dealing with their finances. The employees in our banks and insurance and investment subsidiary believe in working closely with customers to help them reach their goals. National Bankshares strives to support them in these efforts by offering a full range of financial services in convenient locations throughout our market area."

National Bankshares, Inc. is a financial holding company with two community bank subsidiaries, The National Bank, headquartered in Blacksburg, Virginia, and Bank of Tazewell County, with headquarters in Tazewell, Virginia. The two banks have 26 offices throughout Southwest Virginia. The company also operates a non-bank financial services subsidiary, National Bankshares Financial Services, Inc., which does business in the same market as National Bankshares Investment Services and National Bankshares Insurance Services. National Bankshares, Inc. stock is traded on the NASDAQ Capital Market under the symbol "NKSH." Additional information about the company is available on its web site at www.nationalbankshares.com.


(unaudited tables follow)

                National Bankshares, Inc. And Subsidiaries
(000's), except ratios and percent data

Three months ending                December 31,   December 31,   Change
                                       2005           2004
Selected Consolidated Data :
Interest income                      $  11,594     $  10,837       6.99%
Interest expense                         4,095         2,963      38.20%
Net interest income                      7,499         7,874      -4.76%
Provision for loan losses                   10           304     -96.71%
Trust income                               336           331       1.51%
Other noninterest income                 1,690         1,526      10.75%
Salary and benefits                      2,731         2,683       1.79%
Occupancy expense                          481           460       4.57%
Amortization of intangibles                285           268       6.34%
Other noninterest expense                1,742         1,915      -9.03%
Income taxes                            -1,051          -982       7.03%
Net income                           $   3,225     $   3,119       3.40%
Basic net income per share           $    0.92     $    0.89     $ 0.03

Daily averages:
Gross loans                          $ 495,920     $ 475,790       4.23%
Loans,net                              489,479       469,159       4.33%
Total securities                       263,887       254,778       3.58%
Total deposits                         736,500       698,177       5.49%
Other borrowings                           177           712     -75.14%
Stockholders' equity                    92,426        87,990       5.04%
Cash and due from                       17,430        15,449      12.82%
Interest-earning assets                780,753       742,079       5.21%
Interest-bearing liabilities           622,233       594,542       4.66%
Intangible assets                       17,444        17,426       0.10%
Total assets                           832,999       789,921       5.45%

Financial ratios: Note (1)
Return on average assets                  1.54%         1.57%     -0.03
Return on average equity                 13.84%        14.10%     -0.26
Net interest margin                       4.17%         4.62%     -0.45
Average equity to average assets         11.10%        11.14%     -0.04
 Note (1)  Ratio change measured in bp

Allowance for loan losses:
Beginning balance                    $   5,620     $   5,835      -3.68%
Provision for losses                        10           304     -96.71%
Charge-offs                               -289          -459     -37.04%
Recoveries                                 108            49     120.41%
Ending balance                       $   5,449     $   5,729      -4.89%


Year to Date                        December 31,   December 31,  Change
                                       2005           2004
Selected Consolidated Data :
Interest income                      $  45,380     $  41,492       9.37%
Interest expense                        14,180        11,125      27.46%
Net interest income                     31,200        30,367       2.74%
Provision for loan losses                  567         1,189     -52.31%
Trust income                             1,398         1,436      -2.65%
Other noninterest income                 6,215         5,706       8.92%
Salary and benefits                     11,265        10,498       7.31%
Occupancy expense                        1,931         1,797       7.46%
Amortization of intangibles              1,117           967      15.51%
Other noninterest expense                7,585         7,074       7.22%
Income taxes                            -3,924        -3,754       4.53%
Net income                           $  12,424     $  12,230       1.59%
Basic net income per share           $    3.54     $    3.48     $ 0.06
Dividends per share                  $    1.42     $    1.28         --
Dividend payout ratio                    40.17         36.83         --
Book value per share                 $   26.19         24.75     $ 1.44

Balance sheet at period-end:
Gross loans                          $ 493,524     $ 478,809       3.07%
Loans, net                           $ 487,162     $ 472,199       3.17%
Total securities                       272,541       250,708       8.71%
Cash and due From                       20,115        12,493      61.01%
Total deposits                         745,649       705,932       5.63%
Other borrowings                           357           297      20.20%
Stockholders' equity                    91,939        87,088       5.57%
Intangible assets                       17,113        16,924       1.12%
Total assets                           841,498       796,154       5.70%

Daily averages:
Gross loans                          $ 493,668     $ 445,210      10.88%
Loans,net                              487,130       438,761      11.02%
Total securities                       261,743       250,305       4.57%
Cash and due From                       15,976        14,322      11.55%
Total deposits                         724,015       665,627       8.77%
Other borrowings                           420           531     -20.90%
Stockholders' equity                    90,470        84,479       7.09%
Cash and due from                       15,976        14,322      11.55%
Interest-earning assets                769,931       711,789       8.17%
Interest-bearing liabilities           610,534       572,838       6.58%
Intangible assets                       17,500        13,736      27.40%
Total assets                           819,341       753,730       8.70%

Financial ratios: Note (1)
Return on average assets                  1.52%         1.62%     -0.10
Return on average equity                 13.73%        14.48%     -0.75
Net interest margin                       4.44%         4.70%     -0.26
Efficiency ratio                         52.39%        50.21%      2.18
Average equity to average assets         11.04%        11.21%     -0.17

Note (1)  Ratio change measured in bp

Allowance for loan losses:
Beginning balance                    $   5,729     $   5,369       6.71%
Provision for losses                       567         1,189     -52.31%
Charge-offs                             -1,101        -1,550     -28.97%
Recoveries                                 254           223      13.90%
Acquisition of CNB                          --           498    -100.00%
Ending balance                       $   5,449     $   5,729      -4.89%

Nonperforming assets:
Nonaccrual loans                     $     178     $     394     -54.82%
Total nonperforming loans Note (2)         178           394     -54.82%
Other real estate owned                    376           895     -57.99%
Total nonperforming assets           $     554     $   1,289     -57.02%

Asset quality ratios: Note (3)
Nonperforming loans to total loans        0.04%         0.08%     -0.05
Allowance for loan losses
 to total loans                           1.11%         1.20%     -0.09
Allowance for loan losses
   to nonperforming loans              3061.24%      1454.06%   1607.18

Note (2)  Loans 90 days past due or more not included

Note (3)  Ratio change measured in bp

Contact Information

  • CONTACTS:
    James G. Rakes
    Chairman, President & CEO
    (540) 951-6236

    J. Robert Buchanan
    Treasurer
    (276) 979-0341