SOURCE: National Bankshares, Inc.

October 13, 2006 16:00 ET

National Bankshares, Inc. Announces Higher Third Quarter Earnings

BLACKSBURG, VA -- (MARKET WIRE) -- October 13, 2006 -- National Bankshares, Inc. (NASDAQ: NKSH) announced today that it had net income for the third quarter of $3.2 million. This is an increase of 4.8% over the same quarter in 2005, and it translates to a basic net income per share of $0.46. Year-to-date net income at September 30 totaled $9.43 million, an increase of 2.5% over the same period last year, and a basic net income per share was $1.35. At the end of the third quarter, the financial holding company headquartered in Blacksburg, Virginia, had total assets of nearly $845 million.

James G. Rakes, National Bankshares' Chairman, President & CEO, noted that the company's earnings continue to experience the effects of compression of the net interest margin. "Interest income earned primarily from loans has lagged behind the increased interest paid on bank deposits, because loans tend to re-price at a slower pace than deposits." Mr. Rakes said that he is encouraged by indications from the Federal Reserve that it is changing its long program of regular rate increases.

National Bankshares is the parent company of 115 year-old National Bank of Blacksburg, which does business as National Bank in 26 locations throughout Southwest Virginia. The company has a non-bank subsidiary, National Bankshares Financial Services, Inc. that offers investments and insurance. Additional information about National Bankshares, Inc. is available at www.nationalbankshares.com.

                National Bankshares, Inc.  And Subsidiaries

(000's), except ratios and percent data

Three months ending                        September  September
                                           30, 2006   30, 2005     Change
Selected Consolidated Data:                ---------  ---------  ---------
Interest income                            $  12,042  $  11,483       4.87%
                                           ---------  ---------  ---------
Interest expense                               4,691      3,816      22.93%
                                           ---------  ---------  ---------
Net interest income                            7,351      7,667      -4.12%
                                           ---------  ---------  ---------
Provision for loan losses                         16        169     -90.53%
                                           ---------  ---------  ---------
Trust income                                     314        326      -3.68%
                                           ---------  ---------  ---------
Other noninterest income                       1,918      1,566      22.48%
                                           ---------  ---------  ---------
Salary and benefits                            2,866      2,822       1.56%
                                           ---------  ---------  ---------
Occupancy expense                                474        491      -3.46%
                                           ---------  ---------  ---------
Amortization of intangibles                      284        283       0.35%
                                           ---------  ---------  ---------
Other noninterest expense                      1,772      1,783      -0.62%
                                           ---------  ---------  ---------
Income taxes                                    -970       -957       1.36%
                                           ---------  ---------  ---------
Net income                                 $   3,201  $   3,054       4.81%
                                           ---------  ---------  ---------
Basic net income per share                 $    0.46  $    0.44  $    0.02
                                           ---------  ---------  ---------

Daily averages:
                                           ---------  ---------  ---------
Gross loans                                $ 495,539  $ 497,152      -0.32%
                                           ---------  ---------  ---------
Loans, net                                   489,243    490,614      -0.28%
                                           ---------  ---------  ---------
Total securities                             267,339    261,951       2.06%
                                           ---------  ---------  ---------
Total deposits                               732,009    728,295       0.51%
                                           ---------  ---------  ---------
Other borrowings                                 582         70     731.43%
                                           ---------  ---------  ---------
Stockholders' equity                          95,443     91,071       4.80%
                                           ---------  ---------  ---------
Cash and due from                             15,113     16,077      -6.00%
                                           ---------  ---------  ---------
Interest-earning assets                      771,234    775,015      -0.49%
                                           ---------  ---------  ---------
Interest-bearing liabilities                 627,895    615,276       2.05%
                                           ---------  ---------  ---------
Intangible assets                             16,424     17,554      -6.44%
                                           ---------  ---------  ---------
Total assets                                 832,157    823,188       1.09%
                                           ---------  ---------  ---------

Financial ratios: Note (1)
                                           ---------  ---------  ---------
Return on average assets                        1.53%      1.51%      0.02
                                           ---------  ---------  ---------
Return on average equity                       13.31%     13.69%     -0.38
                                           ---------  ---------  ---------
Net interest margin                             4.04%      4.25%     -0.21
                                           ---------  ---------  ---------
Average equity to average assets               11.47%     11.06%      0.41
                                           ---------  ---------  ---------
 Note (1)  Ratio change measured in bp

Allowance for loan losses:
                                           ---------  ---------  ---------
Beginning balance                          $   5,340  $   5,632      -5.18%
                                           ---------  ---------  ---------
Provision for losses                              16        169     -90.53%
                                           ---------  ---------  ---------
Charge-offs                                     -136       -227     -40.09%
                                           ---------  ---------  ---------
Recoveries                                        32         46     -30.43%
                                           ---------  ---------  ---------
Ending balance                             $   5,252  $   5,620      -6.55%
                                           ---------  ---------  ---------


Year to Date                               September  September
                                           30, 2006   30, 2005     Change
Selected Consolidated Data:                ---------  ---------  ---------
Interest income                            $  35,474  $  33,786       5.00%
                                           ---------  ---------  ---------
Interest expense                              13,303     10,085      31.91%
                                           ---------  ---------  ---------
Net interest income                           22,171     23,701      -6.46%
                                           ---------  ---------  ---------
Provision for loan losses                         40        557     -92.82%
                                           ---------  ---------  ---------
Trust income                                   1,059      1,062      -0.28%
                                           ---------  ---------  ---------
Other noninterest income                       5,444      4,525      20.31%
                                           ---------  ---------  ---------
Salary and benefits                            8,706      8,534       2.02%
                                           ---------  ---------  ---------
Occupancy expense                              1,479      1,450       2.00%
                                           ---------  ---------  ---------
Amortization of intangibles                      853        832       2.52%
                                           ---------  ---------  ---------
Other noninterest expense                      5,258      5,843     -10.01%
                                           ---------  ---------  ---------
Income taxes                                  -2,907     -2,873       1.18%
                                           ---------  ---------  ---------
Net income                                 $   9,431  $   9,199       2.52%
                                           ---------  ---------  ---------
Basic net income per share                 $    1.35  $    1.31  $    0.04
                                           ---------  ---------  ---------
Fully diluted net income per share         $    1.34  $    1.30  $    0.04
                                           ---------  ---------  ---------
Dividends per share                              .46        .35  $    0.11
                                           ---------  ---------  ---------
Dividend payout ratio                          26.77      26.52  $    0.25
                                           ---------  ---------  ---------
Book value per share                       $   14.00      13.20  $    0.80
                                           ---------  ---------  ---------

Balance sheet at period-end:
                                           ---------  ---------  ---------
Gross loans                                $ 498,626  $ 499,787      -0.23%
                                           ---------  ---------  ---------
Loans, net                                 $ 492,353  $ 493,240      -0.18%
                                           ---------  ---------  ---------
Total securities                             266,740    263,943       1.06%
                                           ---------  ---------  ---------
Cash and due from                             14,598     17,114     -14.70%
                                           ---------  ---------  ---------
Total deposits                               742,793    732,177       1.45%
                                           ---------  ---------  ---------
Other borrowings                                  76        623     -87.80%
                                           ---------  ---------  ---------
Stockholders' equity                          97,803     92,670       5.54%
                                           ---------  ---------  ---------
Intangible assets                             16,260     17,397      -6.54%
                                           ---------  ---------  ---------
Total assets                                 844,997    828,907       1.94%
                                           ---------  ---------  ---------

Daily averages:
                                           ---------  ---------  ---------
Gross loans                                $ 491,829  $ 492,908      -0.22%
                                           ---------  ---------  ---------
Loans, net                                   485,488    486,338      -0.17%
                                           ---------  ---------  ---------
Total securities                             270,524    256,713       5.38%
                                           ---------  ---------  ---------
Total deposits                               736,511    719,989       2.29%
                                           ---------  ---------  ---------
Other borrowings                                 495        758     -34.70%
                                           ---------  ---------  ---------
Stockholders' equity                          94,499     85,343      10.73%
                                           ---------  ---------  ---------
Cash and due from                             16,028     15,769       1.64%
                                           ---------  ---------  ---------
Interest-earning assets                      772,356    762,072       1.35%
                                           ---------  ---------  ---------
Interest-bearing liabilities                 626,744    606,678       3.31%
                                           ---------  ---------  ---------
Intangible assets                             16,687     17,519      -4.75%
                                           ---------  ---------  ---------
Total assets                                 835,494    810,292       3.11%
                                           ---------  ---------  ---------

Financial ratios: Note (1)
                                           ---------  ---------  ---------
Return on average assets                        1.51%      1.51%      0.00
                                           ---------  ---------  ---------
Return on average equity                       13.34%     13.69%     -0.35
                                           ---------  ---------  ---------
Net interest margin                             4.17%      4.53%     -0.36
                                           ---------  ---------  ---------
Efficiency ratio                               53.08%     52.84%      0.24
                                           ---------  ---------  ---------
Average equity to average assets               11.31%     10.53%      0.78
                                           ---------  ---------  ---------
 Note (1)  Ratio change measured in bp


Allowance for loan losses:
                                           ---------  ---------  ---------
Beginning balance                          $   5,449  $   5,729      -4.89%
                                           ---------  ---------  ---------
Provision for losses                              40        557     -92.82%
                                           ---------  ---------  ---------
Charge-offs                                     -345       -812     -57.51%
                                           ---------  ---------  ---------
Recoveries                                       108        146     -26.03%
                                           ---------  ---------  ---------
Ending balance                             $   5,252  $   5,620      -6.55%
                                           ---------  ---------  ---------

Nonperforming assets:
                                           ---------  ---------  ---------
Nonaccrual loans                                   4  $     251    -100.00%
                                           ---------  ---------  ---------
Total nonperforming loans Note (2)                 4        251    -100.00%
                                           ---------  ---------  ---------
Other real estate owned                          390        429      -9.09%
                                           ---------  ---------  ---------
Total nonperforming assets                 $     394  $     680     -42.06%
                                           ---------  ---------  ---------

Asset quality ratios: Note (3)
                                           ---------  ---------  ---------
Nonperforming loans to total loans             0.001%      0.05%    -98.42%
                                           ---------  ---------  ---------
Allowance for loan losses to total loans        1.06%      1.13%     -7.45%
                                           ---------  ---------  ---------
Allowance for loan losses
to nonperforming loans                      1,313.00%  2,239.04%    -41.36%
                                           ---------  ---------  ---------

 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