SOURCE: National Bankshares, Inc.

April 20, 2006 16:30 ET

National Bankshares, Inc. Announces First Quarter Earnings

BLACKSBURG, VA -- (MARKET WIRE) -- April 20, 2006 -- National Bankshares, Inc. (NASDAQ: NKSH) today announced first quarter net income of just over $3 million, or basic net income of $0.43 per share (adjusted to reflect a 2-for-1 stock split which was effective on March 31). This is a slight increase over the $2.99 million earned in the first quarter of 2005. At March 31, National Bankshares, Inc., the parent company of the National Bank of Blacksburg, Bank of Tazewell County and National Bankshares Financial Services had total assets of nearly $848 million, up by 3.79% over the total on March 31, 2005.

In making the earnings announcement, Chairman, President & CEO James G. Rakes said, "We continue to experience the effects of compression of the net interest margin, as regular interest rate increases by the Federal Reserve Bank have continued longer than some had predicted. Pressure on the interest margin has impacted earnings. However, we are pleased with the quality of the loan portfolio and with solid asset growth. With the recently announced consolidation of our two bank subsidiaries into National Bank, we are also taking steps to streamline operations and position our Company for a positive future."

National Bankshares, Inc. is a financial holding company headquartered in Blacksburg, Virginia. It now has two community bank subsidiaries, The National Bank of Blacksburg and Bank of Tazewell County, with its main office in Tazewell, Virginia. Together, the banks operate from 26 locations throughout Southwest Virginia. The company has a non-bank subsidiary, National Bankshares Financial Services, Inc., which does business as National Bankshares Investment Services and National Bankshares Insurance Services. Additional information about the company is available on its web site at www.nationalbankshares.com.

                National Bankshares, Inc. And Subsidiaries

(000's), except ratios and percent data

Three months ending         March 31, 2006  March 31, 2005           Change

Selected Consolidated Data:
Interest income             $       11,583  $       11,035            4.97%
Interest expense                     4,238           3,043           39.27%
Net interest income                  7,345           7,992           -8.10%
Provision for loan losses               17             190          -91.05%
Trust income                           380             408           -6.86%
Other noninterest income             1,679           1,360           23.46%
Salary and benefits                  2,911           2,862            1.71%
Occupancy expense                      533             479           11.27%
Amortization of intangibles            284             266            6.77%
Other noninterest expense            1,771           2,082          -14.94%
Income taxes                          -885            -888           -0.34%
Net income                  $        3,003  $        2,993            0.33%
Basic net income per share  $         0.43  $         0.43  $         0.00


Daily averages:
Gross loans                 $      491,410  $      484,551            1.42%
Loans,net                          485,031         477,992            1.47%
Total securities                   272,644         256,117            6.45%
Total deposits                     741,941         707,254            4.90%
Other borrowings                       146             204          -28.43%
Stockholders' equity                93,417          88,109            6.02%
Cash and due from                   17,149          14,082           21.78%
Interest-earning assets            777,400         753,895            3.12%
Interest-bearing liabilities       630,151         592,287            6.39%
Intangible assets                   16,988          17,121           -0.78%
Total assets                       839,478         802,861            4.56%

Financial ratios: Note (1)
Return on average assets              1.45%           1.51%          -0.06
Return on average equity             13.04%          13.78%          -0.74
Net interest margin                   4.22%           4.71%          -0.49
Efficiency ratio                         -               -               -
Average equity to average
 assets                              11.13%          10.97%           0.15

Note (1)  Ratio change measured in bp

Allowance for loan losses:
Beginning balance           $        5,449  $        5,729           -4.89%
Provision for losses                    17             190          -91.05%
Charge-offs                            -87            -253          -65.61%
Recoveries                              39              46          -15.22%
Acquisition of CNB                       -               -               -
Ending balance              $        5,418  $        5,712           -5.15%


Year to Date                March 31, 2006  March 31, 2005           Change

Selected Consolidated Data:
Interest income             $       11,583  $       11,035            4.97%
Interest expense                     4,238           3,043           39.27%
Net interest income                  7,345           7,992           -8.10%
Provision for loan losses               17             190          -91.05%
Trust income                           380             408           -6.86%
Other noninterest income             1,679           1,360           23.46%
Salary and benefits                  2,911           2,862            1.71%
Occupancy expense                      533             479           11.27%
Amortization of intangibles            284             266            6.77%
Other noninterest expense            1,771           2,082          -14.94%
Income taxes                          -885            -888           -0.34%
Net income                  $        3,003  $        2,993            0.33%
Basic net income per share  $         0.43  $         0.43  $         0.00
Fully diluted net income
 per share                               -               -               -
Dividends per share                      -               -               -
Dividend payout ratio                    -               -               -
Book value per share        $        13.44           12.61  $         0.83


Balance sheet at period-end:
Gross loans                 $      490,757  $      495,355           -0.93%
Loans, net                  $      484,391  $      488,735           -0.89%
Total securities                   275,828         262,204            5.20%
Cash and due From                   18,270          14,043           30.10%
Total deposits                     749,222         723,873            3.50%
Other borrowings                        83             431          -80.74%
Stockholders' equity                94,260          88,793            6.16%
Intangible assets                   16,829          17,964           -6.32%
Total assets                       847,956         816,988            3.79%


Daily averages:
Gross loans                 $      491,410  $      484,551            1.42%
Loans,net                          485,029         477,992            1.47%
Total securities                   272,644         256,117            6.45%
Total deposits                     741,941         707,254            4.90%
Other borrowings                       146             204          -28.43%
Stockholders' equity                93,419          88,109            6.03%
Cash and due from                   17,149          14,082           21.78%
Interest-earning assets            777,400         753,895            3.12%
Interest-bearing
 liabilities                       630,151         592,287            6.39%
Intangible assets                   16,988          17,121           -0.78%
Total assets                       839,478         802,861            4.56%


Financial ratios: Note (1)
Return on average assets              1.45%           1.51%          -0.06
Return on average equity             13.04%          13.78%          -0.74
Net interest margin                   4.22%           4.71%          -0.49
Efficiency ratio                     54.17%          54.12%           0.05
Average equity to average
 assets                              11.13%          10.97%           0.15

Note (1)  Ratio change measured in bp


Allowance for loan losses:
Beginning balance           $        5,449  $        5,729           -4.89%
Provision for losses                    17             190          -91.05%
Charge-offs                            -87            -253          -65.61%
Recoveries                              39              46          -15.22%
Acquisition of CNB                       -               -         -100.00%
Ending balance              $        5,418  $        5,712           -5.15%


Nonperforming assets:
Nonaccrual loans            $           92  $          347          -73.49%
Restructured loans                       -               -               -
Total nonperforming loans
 Note (2)                               92             347          -73.49%
Other real estate owned                390             715          -45.45%
Total nonperforming assets  $          482  $        1,062          -54.61%


Asset quality ratios: Note (3)
Nonperforming loans to
 total loans                          0.02%           0.07%          -0.05
Allowance for loan losses
 to total loans                       1.11%           1.16%          -0.05
Allowance for loan losses
 to nonperforming loans            5889.13%        1646.11%        4243.02

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
    Treasurer
    (276) 979-0341