Exhibit 99.1
2013
Second Quarter
Report
Message to Our Stockholders:
I am pleased to report to you the financial information and theprogress of National Bankshares, Inc. through June 30, 2013.
For the second quarter of 2013, National Bankshares, Inc. had net income of over $4.43 million, an increase of 2.19% over net income for the quarter ended June 30, 2012. Basic earnings per share were $0.64 which compares to $0.63 for second quarter of 2012. The return on average assets for the second quarter remained unchanged at 1.62% when compared to 2012. The return on average equity was 11.57% and 11.90% for the same two periods. Year-to-date net income was above$8.65 million. The Company had total assets of $1.09 billion at June 30, 2013.
Of particular note, our Board approved a dividend of $0.54 per share which was 1.89% higher than the semi-annual dividend that was paid on June 1, 2012. Our ability to provide stockholders with this return on their investments shows our financial strength and stability.
Compression of the net interest margin because of historically low interest rates is still having an impact on the level of net interest income. While the market has shown signs that rates may rise, the Federal Reserve has indicated it will restrain rates through 2014 to assist with the economic recovery. Total interest income declined slightly from about $24.30 millionfor the six months ended June 30, 2012 to almost $23.16 million for this year while total interest expense was down from over $4.13 million to close to $3.23 million during the same period in 2013. The result was net interest income of$19.93 million at June 30 of this year.
As we move through the second half of the year, we look forward to the National Bank bankcard system upgrades that will result in an even better customer experience. These upgrades include new technologies to better serve our customers. We will continue to refine our operations to take the best possible advantage of opportunities to provide customers with the broadest range of products and services available. But, most importantly, our employees will remain focused on sticking to the basics of offering the very best in community banking.
On behalf of the directors and the employees, I thank you for your support and continued investment.
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James G. Rakes Chairman, President and Chief Executive Officer |
National Bankshares
101 Hubbard Street / P.O. Box 90002
Blacksburg, Virginia 24062-9002
National Bankshares, Inc.
Board of Directors
Lawrence J. Ball President Moog Components Group
John E. Dooley Chief Executive Officer Virginia Tech Foundation, Inc.
Charles E. Green, III Financial Planner AXA Advisors, LLC
Jack M. Lewis President New River Community College
Mary G. Miller President Interactive Design & Development, Inc. | William A. Peery President Cargo Oil Co., Inc.
James G. Rakes Chairman, President and CEO, National Bankshares, Inc.; Chairman, President and CEO, National Bank; Chairman, President and CEO, National Bankshares Financial Services, Inc.
Glenn P. Reynolds President Reynolds Architects Incorporated
James M. Shuler Vice Chairman of the Board Virginia House of Delegates, Retired |
Mission Statement
National Bankshares, Inc. strives to be an exceptional community bank holding company dedicated to providing shareholder value by offering financial services to customers through subsidiary financial institutions and affiliated companies in an efficient, friendly, personalized and cost-effective manner. We recognize that to do this, our financial institutions must retain the ability to make decisions locally and must actively participate in the communities they serve. We are committed to offering competitive and fair employment opportunities and to maintaining the highest standards in all aspects of our business.
National Bankshares, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ in thousands, except for per share data) | June 30, 2013 | June 30, 2012 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 13,474 | $ | 13,140 | ||||
Interest-bearing deposits | 63,731 | 105,102 | ||||||
Securities available for sale, at fair value | 207,362 | 189,768 | ||||||
Securities held to maturity (fair value $163,884 in 2013 and $155,654 in 2012) | 166,915 | 146,451 | ||||||
Mortgage loans held for sale | 1,950 | 1,395 | ||||||
Loans: | ||||||||
Loans, net of unearned income and deferred fees | 588,061 | 586,223 | ||||||
Less: allowance for loan losses | (7,952 | ) | (8,168 | ) | ||||
Loans, net | 580,109 | 578,055 | ||||||
Bank premises and equipment, net | 10,222 | 10,618 | ||||||
Accrued interest receivable | 6,291 | 6,273 | ||||||
Other real estate owned, net | 969 | 871 | ||||||
Intangible assets | 8,837 | 9,918 | ||||||
Bank-owned life insurance | 20,858 | 20,170 | ||||||
Other assets | 10,368 | 6,507 | ||||||
Total assets | $ | 1,091,086 | $ | 1,088,268 | ||||
Liabilities and Stockholders' Equity | ||||||||
Noninterest-bearing demand deposits | $ | 144,164 | $ | 146,899 | ||||
Interest-bearing demand deposits | 461,662 | 423,272 | ||||||
Savings deposits | 73,095 | 65,398 | ||||||
Time deposits | 259,600 | 299,869 | ||||||
Total deposits | 938,521 | 935,438 | ||||||
Other borrowed funds | --- | --- | ||||||
Accrued interest payable | 126 | 173 | ||||||
Other liabilities | 6,901 | 5,970 | ||||||
Total liabilities | 945,548 | 941,581 | ||||||
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 in 2013 and 6,939,974shares in 2012 | 8,685 | 8,675 | ||||||
Retained earnings | 149,061 | 139,036 | ||||||
Accumulated other comprehensive loss | (12,208 | ) | (1,024 | ) | ||||
Total stockholders' equity | 145,538 | 146,687 | ||||||
Total liabilities and stockholders' equity | $ | 1,091,086 | $ | 1,088,268 | ||||
National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
June 30, 2013 | June 30, 2012 | |||||||
($ in thousands, except for per share data) | ||||||||
Interest Income | ||||||||
Interest and fees on loans | $ | 16,511 | $ | 17,631 | ||||
Interest on interest-bearing deposits | 116 | 127 | ||||||
Interest on securities- taxable | 3,264 | 3,371 | ||||||
Interest on securities- nontaxable | 3,266 | 3,167 | ||||||
Total interest income | 23,157 | 24,296 | ||||||
Interest Expense | ||||||||
Interest on time deposits of $100,000 or more | 498 | 816 | ||||||
Interest on other deposits | 2,729 | 3,319 | ||||||
Interest on other borrowed funds | --- | --- | ||||||
Total interest expense | 3,227 | 4,135 | ||||||
Net interest income | 19,930 | 20,161 | ||||||
Provision for loan losses | 1,026 | 1,776 | ||||||
Net interest income after provision for loan losses | 18,904 | 18,385 | ||||||
Noninterest Income | ||||||||
Service charges on deposit accounts | 1,213 | 1,282 | ||||||
Other service charges and fees | 102 | 90 | ||||||
Credit card fees | 1,593 | 1,634 | ||||||
Trust income | 600 | 766 | ||||||
Bank-owned life insurance | 364 | 400 | ||||||
Other income | 340 | 211 | ||||||
Realized securities gains (losses), net | 84 | 52 | ||||||
Total noninterest income | 4,296 | 4,435 | ||||||
Noninterest Expense | ||||||||
Salaries and employee benefits | 5,932 | 5,910 | ||||||
Occupancy and furniture and fixtures | 836 | 794 | ||||||
Data processing and ATM | 811 | 816 | ||||||
FDIC assessment | 272 | 210 | ||||||
Credit card processing | 1,198 | 1,210 | ||||||
Intangibles and goodwill amortization | 540 | 542 | ||||||
Net costs of other real estate owned | 140 | 151 | ||||||
Franchise taxes | 523 | 388 | ||||||
Other operating expenses | 1,809 | 1,421 | ||||||
Total noninterest expense | 12,061 | 11,442 | ||||||
Income before income tax expense | 11,139 | 11,378 | ||||||
Income tax expense | 2,488 | 2,609 | ||||||
Net income | $ | 8,651 | $ | 8,769 | ||||
Basic net income per share | $ | 1.25 | $ | 1.26 | ||||
This financial information is a high level review and discussion of recent performance and activities. For a full discussion, investors should refer to the July 26, 2013 Earnings Press Release and our SEC Filings found atwww.sec.gov and on the company’s web site atwww.nationalbankshares.com.