National Bankshares, Inc. Reports First Quarter Earnings

BLACKSBURG, VA--(Marketwired - Apr 23, 2015) - National Bankshares, Inc. (NASDAQ: NKSH) today announced its results of operations for the first quarter of 2015. The Company reported net income of almost $3.97 million for the quarter ended March 31, 2015 compared to $4.40 million at March 31, 2014. Basic earnings per share were $0.57 at March 31, 2015 compared to $0.63 for the same period in 2014. For the first quarter, the return on average assets was 1.40% and the return on average equity was 9.50% compared to 1.61% and 11.92%, respectively, for the first quarter of 2014. At March 31, 2015, the Company had total assets of $1.16 billion which was an increase of 3.72% when compared to $1.12 billion at the end of the first quarter of 2014.

Commenting on the Company's financial results, National Bankshares Chairman, President & CEO James G. Rakes said, "We experienced write downs of $394 thousand on other real estate owned during the first quarter that contributed to the lower net income. Among other expenses, we had increased employee benefit expenses, mostly the result of pension related costs. Our loans, however, showed positive growth of over $33 million, or 5.71%, compared to first quarter of 2014. We still face challenges, such as the low interest rate environment which affect our margins, but we continue to be optimistic and focused on opportunities to grow our business and deliver the promise of successful community banking to our customers, employees, and stockholders."

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)				March 31, 2015				March 31, 2014				December 31, 2014
Assets
Cash and due from banks				$	12,452			$	14,723			$	12,894
Interest-bearing deposits					87,676				109,181				102,548
Federal funds sold					---				---				---
Securities available for sale, at fair value					238,496				190,061				222,844
Securities held to maturity					156,135				165,398				161,452
Restricted stock					1,129				1,089				1,089
	Total securities				395,760				356,548				385,385
Mortgage loans held for sale					1,091				---				291
Loans:
	Loans, net of unearned income and deferred fees				622,171				589,048				605,466
	Less: allowance for loan losses				(8,257	)			(8,297	)			(8,263	)
		Loans, net			613,914				580,751				597,203
Premises and equipment, net					8,998				9,428				9,131
Accrued interest receivable					5,506				5,893				5,748
Other real estate owned					4,573				4,901				4,744
Intangible assets and goodwill					6,954				8,029				7,223
Bank-owned life insurance					21,946				21,335				21,797
Other assets					5,975				12,321				7,767
		Total assets		$	1,164,845			$	1,123,110			$	1,154,731
Liabilities and Stockholders' Equity
Noninterest-bearing deposits				$	160,217			$	145,963			$	150,744
Interest-bearing demand deposits					526,388				503,596				533,641
Savings deposits					85,615				77,467				81,297
Time deposits					212,737				237,060				216,746
		Total deposits			984,957				964,086				982,428
Other borrowed funds					---				---				---
Accrued interest payable					70				78				68
Other liabilities					7,096				5,529				5,932
		Total liabilities			992,123				969,693				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, 6,950,474 shares at March 31, 2015 and December 31, 2014 and 6,947,974 shares at March 31, 2014.					8,688				8,685				8,688
Retained earnings					167,253				158,575				163,287
Accumulated other comprehensive loss, net					(3,219	)			(13,843	)			(5,672	)
		Total stockholders' equity			172,722				153,417				166,303
	Total liabilities and stockholders' equity			$	1,164,845			$	1,123,110			$	1,154,731

National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
			Three Months Ending
($ in thousands, except for share and per share data)			March 31, 2015				March 31, 2014
Interest Income
Interest and fees on loans			$	7,649			$	7,935
Interest on federal funds				---				---
Interest on interest-bearing deposits				64				65
Interest on securities - taxable				1,734				1,653
Interest on securities - nontaxable				1,386				1,500
	Total interest income			10,833				11,153
Interest Expense
Interest on time deposits of $100 or more				128				153
Interest on other deposits				959				1,162
Interest on borrowed funds				---				---
	Total interest expense			1,087				1,315
	Net interest income			9,746				9,838
Provision for loan losses				201				103
	Net income after provision for loan losses			9,545				9,735
Noninterest Income
Service charges on deposit accounts				535				592
Other service charges and fees				71				65
Credit card fees				895				797
Trust Income				289				293
Bank-owned life insurance				170				175
Other income				282				277
Realized securities gains (losses), net				(2	)			1
	Total noninterest income			2,240				2,200
Noninterest Expense
Salaries and employee benefits				3,072				2,999
Occupancy and furniture and fixtures				452				440
Data processing and ATM				434				363
FDIC assessment				135				147
Credit card processing				610				549
Intangibles and goodwill amortization				269				269
Net cost of other real estate owned				471				77
Franchise taxes				308				279
Other operating expenses				957				1,059
	Total noninterest expense			6,708				6,182
Income before income tax expense				5,077				5,753
Income tax expense				1,111				1,349
	Net income		$	3,966			$	4,404
Basic net income per share			$	0.57			$	0.63
Fully diluted net income per share			$	0.57			$	0.63
Weighted average number of common shares outstanding
	Basic			6,950,474				6,947,974
	Diluted			6,955,023				6,963,865
Dividends declared per share			$	---			$	---
Dividend payout ratio				---				---
Book value per share			$	24.85			$	22.08

National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
		Three Months Ended
($ in thousands)		March 31, 2015			March 31, 2014
Net income		$	3,966		$	4,404
Other Comprehensive Income, net of tax
Unrealized holding gains on available for sale securities net of deferred tax of $1,320 in 2015 and $1,681 in 2014			2,452			3,121
Reclassification adjustment, net of income tax (benefit) of $1 in 2015 and $0 in 2014			1			---
Other comprehensive income, net of tax of $1,321 and $1,681 for the periods ended March 31, 2015 and 2014, respectively		$	2,453		$	3,121
Total Comprehensive Income		$	6,419		$	7,525

National Bankshares, Inc. and Subsidiaries
Key Ratios and Other Data
(Unaudited)
		Three Months Ended
$ in thousands		March 31, 2015				March 31, 2014
Average Balances
Cash and due from banks		$	11,364			$	11,937
Interest-bearing deposits			104,104				103,024
Securities available for sale			222,161				184,497
Securities held to maturity			159,376				162,782
Restricted stock			1,095				1,385
Mortgage loans held for sale			460				382
Gross Loans			605,137				592,338
Loans, net			604,288				583,189
Intangible assets			7,109				8,185
Total assets			1,149,578				1,108,867
Total deposits			973,738				953,703
Other borrowings			---				---
Stockholders' equity			169,289				149,877
Interest-earning assets			1,092,481				1,062,323
Interest-bearing liabilities			821,308				812,690
Financial ratios
Return on average assets			1.40	%			1.61	%
Return on average equity			9.50	%			11.92	%
Net interest margin			3.95	%			4.12	%
Net interest income-fully taxable equivalent		$	10,648			$	10,799
Efficiency ratio			52.05	%			47.56	%
Average equity to average assets			14.73	%			13.52	%
Allowance for loan losses
Beginning balance		$	8,263			$	8,227
Provision for losses			201				103
Charge-offs			(260	)			(191	)
Recoveries			53				158
Ending balance		$	8,257			$	8,297

National Bankshares, Inc. and Subsidiaries
Asset Quality Data
(Unaudited)
$ in thousands
Nonperforming assets		March 31, 2015				March 31, 2014
Nonaccrual loans		$	3,102			$	5,071
Nonaccrual restructured loans			6,123				1,007
Total nonperforming loans			9,225				6,078
Other real estate owned			4,573				4,901
Total nonperforming assets		$	13,798			$	10,979
Accruing restructured loans			5,992				6,145
Loans 90 days or more past due		$	272			$	163
Asset quality ratios
Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned			2.20	%			1.85	%
Allowance for loans losses to total loans			1.33	%			1.41	%
Allowance for loan losses to nonperforming loans			89.51	%			136.51	%
Loans past due 90 days or more to loans net of unearned income and deferred fees			0.04	%			0.03	%