National Bankshares, Inc. Reports Income for the Nine Months Ended September 30, 2015

BLACKSBURG, VA--(Marketwired - Oct 29, 2015) - Today, National Bankshares, Inc. (NASDAQ: NKSH) announced net income of approximately $12.28 million through September 30, 2015 compared to $12.78 million reported for the first nine months of 2014. Basic earnings per share were $1.77 which compares with $1.84 reported at September 30, 2014. The return on average assets for the nine months ended September 30, 2015 was 1.43% compared to 1.53% in 2014. The return on average equity was 9.60% and 10.99% for the same two periods. At September 30, 2015, the Company had total assets of over $1.14 billion.

National Bankshares' Chairman, President & CEO James G. Rakes commented, "As our regional economy continues its steady recovery, we are seeing increasing demand for loans in our market area. We continue to emphasize quality over quantity in our lending approach and believe we are building a loan portfolio that will perform well in the future. While our earnings remain strong, we look to the future and continue our investment in our systems, products, processes and people."

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 26 offices throughout Southwest 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." Additional information is available at www.nationalbankshares.com.

Forward-Looking Statements
Certain statements in this press release may be "forward-looking statements." Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results that are not statements of historical fact and that involve significant risks and uncertainties. Although the Company believes that its expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual Company results will not differ materially from any future results implied by the forward-looking statements. Actual results may be materially different from past or anticipated results because of many factors, some of which may include changes in economic conditions, the interest rate environment, legislative and regulatory requirements, new products, competition, changes in the stock and bond markets and technology. The Company does not update any forward-looking statements that it may make.

National Bankshares, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
$ in thousands, except for share and per share data				September 30, 2015				September 30, 2014				December 31, 2014
Assets
Cash and due from banks				$	12,446			$	12,815			$	12,894
Interest-bearing deposits					90,295				87,621				102,548
Federal funds sold					---				---				---
Securities available for sale, at fair value					211,232				205,020				222,844
Securities held to maturity					154,644				162,457				161,452
Restricted stock					1,129				1,089				1,089
		Total securities			367,005				368,566				385,385
Mortgage loans held for sale					1,331				725				291
Loans:
	Loans, net of unearned income and deferred fees				625,755				595,801				605,466
	Less: allowance for loan losses				(8,117	)			(8,031	)			(8,263	)
		Loans, net			617,638				587,770				597,203
Premises and equipment, net					9,135				9,445				9,131
Accrued interest receivable					5,659				5,708				5,748
Other real estate owned					4,194				5,145				4,744
Intangible assets and goodwill					6,416				7,492				7,223
Bank-owned life insurance					22,248				21,643				21,797
Other assets					7,758				9,329				7,767
		Total assets		$	1,144,125			$	1,116,259			$	1,154,731
Liabilities and Stockholders' Equity
Noninterest-bearing deposits				$	163,877			$	153,118			$	150,744
Interest-bearing demand deposits					514,823				492,005				533,641
Savings deposits					86,659				79,870				81,297
Time deposits					197,171				223,930				216,746
		Total deposits			962,530				948,923				982,428
Other borrowed funds					---				---				---
Accrued interest payable					61				67				68
Other liabilities					7,142				4,447				5,932
		Total liabilities			969,733				953,437				988,428
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, 6,955,974 shares at September 30, 2015, and 6,950,474 shares at December 31, 2014 and at September 30, 2014, respectively.					8,695				8,688				8,688
Retained earnings					171,996				163,181				163,287
Accumulated other comprehensive loss, net					(6,299	)			(9,047	)			(5,672	)
		Total stockholders' equity			174,392				162,822				166,303
		Total liabilities and stockholders' equity		$	1,144,125			$	1,116,259			$	1,154,731

National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
			Three Months Ended						Nine Months Ended
			September 30, 2015			September 30, 2014			September 30, 2015				September 30, 2014
$ in thousands, except for share and per share data
Interest Income
Interest and fees on loans			$	7,676		$	7,729		$	22,886			$	23,406
Interest on federal funds				---			---			---				---
Interest on interest-bearing deposits				54			64			173				193
Interest on securities - taxable				1,678			1,718			5,124				5,068
Interest on securities - nontaxable				1,352			1,436			4,095				4,410
	Total interest income			10,760			10,947			32,278				33,077
Interest Expense
Interest on time deposits				301			361			943				1,133
Interest on other deposits				708			786			2,204				2,624
Interest on borrowed funds				---			---			---				---
	Total interest expense			1,009			1,147			3,147				3,757
	Net interest income			9,751			9,800			29,131				29,320
Provision for loan losses				178			356			734				1,160
	Net income after provision for loan losses			9,573			9,444			28,397				28,160
Noninterest Income
Service charges on deposit accounts				571			634			1,676				1,833
Other service charges and fees				45			42			164				145
Credit card fees				972			929			2,843				2,687
Trust Income				314			296			902				921
Bank-owned life insurance				151			153			451				462
Other income				234			200			977				783
Realized securities gains, net				2			4			5				5
	Total noninterest income			2,289			2,258			7,018				6,836
Noninterest Expense
Salaries and employee benefits				3,149			2,927			9,433				8,890
Occupancy and furniture and fixtures				436			403			1,296				1,250
Data processing and ATM				384			429			1,230				1,189
FDIC assessment				138			147			408				411
Credit card processing				701			673			1,986				1,887
Intangibles and goodwill amortization				269			269			807				807
Net cost of other real estate owned				52			98			569				259
Franchise taxes				329			307			959				874
Other operating expenses				864			862			2,690				2,747
	Total noninterest expense			6,322			6,115			19,378				18,314
Income before income tax expense				5,540			5,587			16,037				16,682
Income tax expense				1,341			1,324			3,762				3,906
	Net income		$	4,199		$	4,263		$	12,275			$	12,776
Basic net income per share			$	0.60		$	0.61		$	1.77			$	1.84
Fully diluted net income per share			$	0.60		$	0.61		$	1.76			$	1.84
Weighted average number of common shares outstanding
	Basic			6,955,126			6,948,681			6,952,716				6,948,212
	Diluted			6,959,168			6,956,777			6,956,689				6,960,444
Dividends declared per share				---			---		$	0.53			$	0.55
Dividend payout ratio				---			---			30.03	%			29.91	%
Book value per share				---			---		$	25.07			$	23.43

National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
		Three Months Ended
$ in thousands		September 30, 2015				September 30, 2014
Net income		$	4,199			$	4,263
Other Comprehensive Income, net of tax
Unrealized holding gains on available for sale securities net of tax of $1,396 in 2015 and $919 in 2014			2,587				1,708
Reclassification adjustment for gains included in net income, net of tax of ($1) in 2015 and ($1) in 2014			(1	)			(3	)
Other comprehensive income, net of tax of $1,395 in 2015 and $918 in 2014		$	2,586			$	1,705
Total Comprehensive Income		$	6,785			$	5,968

		Nine Months Ended
$ in thousands		September 30, 2015				September 30, 2014
Net income		$	12,275			$	12,776
Other Comprehensive Income, net of tax
Unrealized holding gains (losses) on available for sale securities net of tax of ($334) in 2015 and $4,264 in 2014			(624	)			7,920
Reclassification adjustment for gains included in net income, net of tax of ($2) in 2015 and ($1) in 2014			(3	)			(3	)
Other comprehensive income (loss), net of tax of ($336) in 2015 and $4,263 in 2014		$	(627	)		$	7,917
Total Comprehensive Income		$	11,648			$	20,693

National Bankshares, Inc. and Subsidiaries
Key Ratios and Other Data
(Unaudited)
$ in thousands		Three Months Ended								Nine Months Ended
Average Balances		September 30, 2015				September 30, 2014				September 30, 2015				September 30, 2014
Cash and due from banks		$	11,612			$	11,863			$	11,506			$	11,811
Interest-bearing deposits			84,882				100,349				91,791				101,908
Securities available for sale			216,949				202,113				222,823				193,549
Securities held to maturity			154,978				162,531				156,678				163,268
Restricted stock			1,129				1,089				1,118				1,187
Mortgage loans held for sale			986				439				781				359
Gross Loans			627,596				593,165				619,204				592,528
Loans, net			618,611				584,308				610,135				583,521
Intangible assets			6,571				7,646				6,838				7,914
Total assets			1,144,723				1,121,501				1,150,026				1,115,643
Total deposits			966,199				956,804				972,104				955,058
Other borrowings			---				---				---				---
Stockholders' equity			171,698				160,310				170,883				155,447
Interest-earning assets			1,089,803				1,068,583				1,093,699				1,066,031
Interest-bearing liabilities			805,655				808,075				814,800				810,808
Financial ratios
Return on average assets			1.46	%			1.51	%			1.43	%			1.53	%
Return on average equity			9.70	%			10.55	%			9.60	%			10.99	%
Net interest margin			3.89	%			3.98	%			3.90	%			4.03	%
Net interest income-fully taxable equivalent		$	10,673			$	10,719			$	31,881			$	32,139
Efficiency ratio			48.77	%			47.12	%			49.82	%			46.99	%
Average equity to average assets			15.00	%			14.29	%			14.86	%			13.93	%
Allowance for loan losses
Beginning balance		$	8,131			$	7,971			$	8,263			$	8,227
Provision for losses			178				356				734				1,160
Charge-offs			(226	)			(324	)			(1,002	)			(1,568	)
Recoveries			34				28				122				212
Ending balance		$	8,117			$	8,031			$	8,117			$	8,031

National Bankshares, Inc. and Subsidiaries
Asset Quality Data
(Unaudited)
$ in thousands		September 30, 2015				September 30, 2014
Nonperforming assets
Nonaccrual loans		$	3,207			$	5,366
Nonaccrual restructured loans			5,781				2,360
Total nonperforming loans			8,988				7,726
Other real estate owned			4,194				5,145
Total nonperforming assets		$	13,182			$	12,871
Accruing restructured loans			6,080				5,947
Loans 90 days or more past due		$	47			$	485
Asset quality ratios
Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned			2.09	%			2.14	%
Allowance for loans losses to total loans			1.30	%			1.35	%
Allowance for loan losses to nonperforming loans			90.31	%			103.95	%
Loans past due 90 days or more to loans net of unearned income and deferred fees			0.01	%			0.08	%