SOURCE: National Bankshares, Inc.

October 18, 2007 16:30 ET

National Bankshares, Inc. Reports Third Quarter Earnings

BLACKSBURG, VA--(Marketwire - October 18, 2007) - National Bankshares, Inc. (NASDAQ: NKSH) today reported that it posted third quarter net income of nearly $3.2 million. This translates to basic net income per share of $0.46. Year-to-date net income totaled $9.45 million, slightly higher than the $9.43 million reported at September 30, 2006. National Bankshares, Inc., a financial holding company with headquarters in Blacksburg, Virginia, had net loans of $509.20 million at the end of the third quarter, an increase of 3.42% over net loans in the same period last year. Total assets on September 30 were $861.89 million, up by 2% over 2006.

The Company's Chairman, President & CEO James G. Rakes commented, "I am pleased to report that National Bankshares' continued focus on the basics of community banking has allowed us to maintain a solid level of earnings. It is our lending philosophy that sound credit underwriting benefits both the customer and the bank, so we have never been involved in sub-prime lending. Loan quality remains good. And this quarter's addition to the allowance for loan losses is the first significant contribution in well over a year." Mr. Rakes continued, "As we deal with future challenges, we intend to continue to offer our customers a full range of financial products and services, with the personal attention they deserve."

National Bankshares, Inc. is the parent company of National Bank, a 116 year-old community bank with 26 office locations in Southwest Virginia. The Company also has a non-bank financial services subsidiary in the same market which does business as National Bankshares Investment Services and National Bankshares Insurance Services. National Bankshares, Inc. stock trades on the NASDAQ Stock Market under the symbol "NKSH." Additional information is available on the Company's web site at www.nationalbankshares.com.

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

                                     September 30,  September 30,
      Three months ending                 2007           2006       Change
                                     -------------  -------------  -------

Selected Consolidated Data :
Interest income                      $      12,693  $      12,042     5.41%
Interest expense                             5,442          4,691    16.01%
Net interest income                          7,251          7,351    -1.36%
Provision for loan losses                      119             16   643.75%
Trust income                                   286            314    -8.92%
Other noninterest income                     1,839          1,918    -4.12%
Salary and benefits                          2,621          2,866    -8.55%
Occupancy expense                              419            474   -11.60%
Amortization of intangibles                    284            284     0.00%
Other noninterest expense                    1,776          1,772     0.23%
Income taxes                                  -961           -970    -0.93%
Net income                           $       3,196  $       3,201    -0.16%
Basic net income per share           $        0.46  $        0.46  $  0.00

Daily averages:
Gross loans                          $     510,811  $     495,539     3.08%
Loans,net                                  504,725        489,243     3.16%
Total securities                           281,921        267,339     5.45%
Total deposits                             751,896        732,009     2.72%
Other borrowings                               134            528   -74.62%
Stockholders’ equity                       100,527         95,443     5.33%
Cash and due from                           13,021         15,113   -13.84%
Interest-earning assets                    800,998        771,234     3.86%
Interest-bearing liabilities               641,988        627,895     2.24%
Intangible assets                           15,286         16,424    -6.93%
Total assets                               859,736        832,157     3.31%

Financial ratios: Note (1)
Return on average assets                      1.47%          1.53%   -0.06
Return on average equity                     12.61%         13.31%   -0.70
Net interest margin                           3.98%          4.04%   -0.06
Average equity to average assets             11.69%         11.47%    0.22

Allowance for loan losses:
Beginning balance                    $       5,000  $       5,340    -6.37%
Provision for losses                           119             16   643.75%
Charge-offs                                    -94           -136   -30.88%
Recoveries                                      18             32   -43.75%
Ending balance                       $       5,043  $       5,252    -3.98%



                                     September 30,  September 30,
Year to Date                              2007           2006       Change
                                     -------------  -------------  -------

Selected Consolidated Data :
Interest income                        $     37,918  $     35,474     6.89%
Interest expense                             16,228        13,303    21.99%
Net interest income                          21,690        22,171    -2.17%
Provision for loan losses                       129            40   222.50%
Trust income                                  1,019         1,059    -3.78%
Other noninterest income                      5,544         5,444     1.84%
Salary and benefits                           8,240         8,706    -5.35%
Occupancy expense                             1,316         1,479   -11.02%
Amortization of intangibles                     853           853     0.00%
Other noninterest expense                     5,452         5,258     3.69%
Income taxes                                 -2,811        -2,907    -3.30%
Net income                             $      9,452  $      9,431     0.22%
Basic net income per share             $       1.36  $       1.35  $  0.01
Fully diluted net income per share     $       1.35  $       1.34  $  0.01
Dividends per share                    $       0.37  $       0.36  $  0.01
Dividend payout ratio                         27.34         26.77  $  0.57
Book value per share                   $      14.77         14.00  $  0.77

Balance sheet at period-end:
Gross loans                            $    515,350  $    498,626     3.35%
Loans, net                             $    509,203  $    492,353     3.42%
Total securities                            280,774       266,740     5.26%
Cash and due from                            12,058        14,598   -17.40%
Total deposits                              751,981       742,793     1.24%
Other borrowings                                 66            76   -13.16%
Stockholders’ equity                        102,770        97,803     5.08%
Intangible assets                            15,123        16,260    -6.99%
Total assets                                861,889       844,997     2.00%

Daily averages:
Gross loans                            $    507,921  $    491,829     3.27%
Loans,net                                   501,786       485,488     3.36%
Total securities                            284,675       270,524     5.23%
Total deposits                              757,185       736,511     2.81%
Other borrowings                                814           495    64.44%
Stockholders’ equity                         99,588        94,499     5.39%
Cash and due from                            13,971        16,028   -12.83%
Interest-earning assets                     804,839       772,356     4.21%
Interest-bearing liabilities                650,181       626,744     3.74%
Intangible assets                            15,570        16,687    -6.69%
Total assets                                864,570       835,494     3.48%

Financial ratios: Note (1)
Return on average assets                       1.46%         1.51%   -0.05
Return on average equity                      12.69%        13.34%   -0.65
Net interest margin                            4.00%         4.17%   -0.17
Efficiency ratio                              51.73%        53.08%   -1.35
Average equity to average assets              11.52%        11.31%    0.21

Allowance for loan losses:
Beginning balance                      $      5,157  $      5,449    -5.36%
Provision for losses                            129            40   222.50%
Charge-offs                                    -319          -345    -7.54%
Recoveries                                       76           108   -29.63%
Ending balance                         $      5,043  $      5,252    -3.98%

Nonperforming assets:
Nonaccrual loans                              1,208  $          4  -100.00%
Total nonperforming loans: Note (2)           1,208             4  -100.00%
Other real estate owned                         192           390   -50.77%
Total nonperforming assets             $      1,400  $        394   255.33%

Asset quality ratios: Note (3)
Nonperforming loans to total loans            0.235%          ---      ---
Allowance for loan losses to total
 loans                                         0.98%         1.06%   -7.93%
Allowance for loan losses to
 nonperforming loans                         417.47%      1313.00%     ---

  Note (1)  Ratio change measured in bp
  Note (2)  Loans 90 days past due or more not included
  Note (3)  Ratio change measured in bp

Contact Information

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

    J. Robert Buchanan
    (276) 979-0341