National Bankshares, Inc. Reports First Quarter Earnings

BLACKSBURG, VA--(Marketwired - Apr 24, 2014) -  Today, National Bankshares, Inc. (NASDAQ: NKSH) announced results for the first quarter of 2014. Net income was $4.40 million for the quarter ended March 31, 2014 compared to $4.22 million at March 31, 2013. Basic net income per share was $0.63. The return on average assets for the first quarter was 1.61% and the return on average equity was 11.92% compared to 1.56% and 11.26%, respectively, for the first quarter of 2013. At March 31, 2014, the Company had total assets of $1.12 billion, an increase of 2.24% when compared to the end of the first quarter of 2013.

National Bankshares' Chairman, President & CEO James G. Rakes commented, "We are pleased to report our strong first quarter results. While our results reflect some of the headwinds usually faced during the first quarter, our increase in total loans provided a positive beginning to 2014. We are focused on improving the fundamental performance of the National Bank by increasing market share, providing meaningful solutions to our customers and creating value for our shareholders." Mr. Rakes went on to say, "We strongly feel that our commitment to customer service and to the communities in our market area reinforces National Bank as the local choice in banking."

National Bankshares, Inc., headquartered in Blacksburg, Virginia, is the parent company of 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 25 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 data)					March 31, 2014				March 31, 2013				December 31, 2013
Assets
Cash and due from banks					$	14,723			$	10,674			$	13,283
Interest-bearing deposits						108,841				107,176				97,376
Federal funds sold						---				---				---
Securities available for sale						190,401				190,215				182,402
Securities held to maturity						165,398				166,947				163,983
Restricted Stock						1,089				1,414				1,414
			Total securities			356,888				358,576				347,799
Mortgage loans held for sale						---				313				1,276
Loans:
	Loans, net of unearned income and deferred fees					589,048				574,958				595,690
	Less: allowance for loan losses					(8,297	)			(8,291	)			(8,227	)
			Loans, net			580,751				566,667				587,463
Bank premises and equipment, net						9,428				10,237				9,951
Accrued interest receivable						5,893				5,878				5,949
Other real estate owned						4,901				1,094				4,712
Intangible assets						8,029				9,106				8,299
Bank-owned life insurance						21,335				20,690				21,181
Other assets						12,321				8,092				13,341
			Total Assets		$	1,123,110			$	1,098,503			$	1,110,630
Liabilities and Stockholders' Equity
Noninterest-bearing deposits					$	145,963			$	144,815			$	142,645
Interest-bearing demand deposits						503,596				449,992				501,541
Savings deposits						77,467				72,420				74,141
Time deposits						237,060				269,892				241,709
			Total deposits			964,086				937,119				960,036
Other borrowed funds						---				---				---
Accrued interest payable						78				146				92
Other liabilities						5,529				7,878				4,610
			Total Liabilities			969,693				945,143				964,738
Stockholders' Equity
Preferred stock of no par value. Authorized 5,000,000 shares; none issued and outstanding						---				---				---
Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding 6,947,974 shares at March 31, 2014, March 31, 2013 and December 31, 2013						8,685				8,685				8,685
Retained earnings						158,575				148,378				154,171
Accumulated other comprehensive loss, net						(13,843	)			(3,703	)			(16,964	)
		Total Stockholders' Equity				153,417				153,360				145,892
			Total Liabilities and Stockholders' Equity		$	1,123,110			$	1,098,503			$	1,110,630

National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
			Three Months Ended
($ in thousands, except for share data)			March 31, 2014			March 31, 2013
Interest Income
Interest and fees on loans			$	7,935		$	8,319
Interest on federal funds				---			---
Interest on interest-bearing deposits				65			58
Interest on securities-taxable				1,653			1,512
Interest on securities-nontaxable				1,500			1,648
	Total interest income			11,153			11,537
Interest Expense
Interest on time deposits of $100 or more				153			268
Interest on other deposits				1,162			1,411
Interest on borrowed funds				---			---
	Total interest expense			1,315			1,679
	Net interest income			9,838			9,858
Provision for loan losses				103			671
	Net interest income after provision for loan losses			9,735			9,187
Noninterest Income
Service charges on deposit accounts				592			588
Other service charges and fees				65			60
Credit card fees				797			740
Trust income				293			289
Bank-owned life insurance				175			188
Other income				277			281
Realized securities gains net				1			9
	Total noninterest income			2,200			2,155
Noninterest Expense
Salaries and employee benefits				2,999			2,940
Occupancy and furniture and fixtures				440			432
Data processing and ATM				363			393
FDIC assessment				147			136
Credit card processing				549			552
Intangibles and goodwill amortization				269			271
Net costs of other real estate owned				77			75
Franchise taxes				279			258
Other operating expenses				1,059			907
	Total noninterest expense			6,182			5,964
Income before income tax expense				5,753			5,378
Income tax expense				1,349			1,162
	Net Income		$	4,404		$	4,216
Basic net income per share			$	0.63		$	0.61
Fully diluted net income per share			$	0.63		$	0.60
Weighted average outstanding number of common shares
	Basic			6,947,974			6,947,974
	Diluted			6,963,865			6,969,073
Dividends declared per share				---			---
Dividend payout ratio				---			---
Book value per share				22.08			22.07

National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
		Three Months Ended
($ in thousands)		March 31, 2014			March 31, 2013
Net Income		$	4,404		$	4,216
Other Comprehensive Income, Net of Tax
Unrealized holding gains (losses) on available for sale securities net of deferred taxes of $1,681 and ($516)			3,121			(959	)
Reclassification adjustment, net of income taxes of $0 and ($3)			----			(6	)
Other comprehensive income (loss), net of tax of $1,681 and ($519)		$	3,121		$	(965	)
Total Comprehensive Income		$	7,525		$	3,251

National Bankshares, Inc. and Subsidiaries
Key Ratios and Other Data
(Unaudited)
		Three Months Ended
($ in thousands)		March 31, 2014				March 31, 2013
Average Balances
Cash and due from banks		$	11,937			$	12,023
Interest-bearing deposits			102,240				99,216
Securities available for sale and restricted stock			186,666				189,707
Securities held to maturity			162,782				162,264
Mortgage loans held for sale			382				1,507
Gross loans			592,338				583,337
Loans, net			583,189				574,030
Intangible assets			8,185				9,262
Total assets			1,108,867				1,092,880
Total deposits			953,703				933,185
Other borrowings			---				---
Stockholders' equity			149,877				151,852
Interest-earning assets			1,062,323				1,032,736
Interest-bearing liabilities			812,690				795,321
Financial Ratios
Return on average assets			1.61	%			1.56	%
Return on average equity			11.92	%			11.26	%
Net interest margin			4.12	%			4.27	%
Net interest income - fully taxable equivalent		$	10,799			$	10,879
Efficiency ratio			47.56	%			45.76	%
Average equity to average assets			13.52	%			13.89	%
Allowance for Loan Losses
Beginning balance		$	8,227			$	8,349
Provision for losses			103				671
Charge-offs			(191	)			(754	)
Recoveries			158				25
Ending balance		$	8,297			$	8,291

National Bankshares, Inc. and Subsidiaries
Asset Quality Data
(Unaudited)
($ in thousands)
Nonperforming Assets		March 31, 2014				March 31, 2013
Nonaccrual loans		$	5,071			$	10,734
Nonaccrual restructured loans			1,007				1,691
Total nonperforming loans			6,078				12,425
Other real estate owned			4,901				1,094
Total nonperforming assets		$	10,979			$	13,519
Accruing restructured loans		$	6,145			$	5,732
Loans 90 days or more past due		$	163			$	568
Asset Quality Ratios
Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned			1.85	%			2.35	%
Allowance for loan losses to total loans			1.41	%			1.44	%
Allowance for loan losses to nonperforming loans			136.51	%			66.73	%
Loans past due 90 days or more and still accruing to loans net of unearned income and deferred fees			0.03	%			0.10	%