National Bankshares (NKSH) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACTS:   

F. BRAD DENARDO, PRESIDENT & CEO

(540) 951-6213   bdenardo@nbbank.com

DAVID K. SKEENS, TREASURER & CFO

(540) 951-6347   dskeens@nbbank.com

NATIONAL BANKSHARES, INC. REPORTS

SECOND QUARTER AND FIRST HALF EARNINGS

BLACKSBURG, VA, JULY 26, 2018:  National Bankshares, Inc. (NASDAQ Capital Market: NKSH) today announced its results of operations for the second quarter and first half of 2018. The Company reported net income of $7.34 million for the six months ended June 30, 2018 compared to $7.22 million at June 30, 2017. Basic earnings per share were $1.05 at June 30, 2018 compared to $1.04 for the same period in 2017. For the first half of the year, the return on average assets was 1.30% and the return on average equity was 8.81% compared to 1.18% and 7.98%, respectively, for the first six months of 2017. At June 30, 2018, the Company had total assets of close to $1.27 billion which was an increase of .65% when compared to $1.26 billion at the end of June 2017.

As we mentioned in an announcement earlier this year, the Company’s net income was impacted by a write-down of $1.59 million net of tax for an insurance receivable. Without this expense, net income for the six months ended June 30, 2018 would have been $8.93 million, an increase of $1.7 million, or 23.6% over net income for the first half of 2017.

“We are pleased to still report higher core net income and a solid increase in total loans compared to the same period last year,” said National Bankshares President and Chief Executive Officer F. Brad Denardo. “We feel that these latest results reflect the underlying strength of our community banking model. And as always, we would like to thank our customers and our stockholders for their continued support of National Bankshares.”

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 25 full service offices and one loan production office 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.

101 Hubbard Street / Blacksburg, Virginia 24060

P.O. Box 90002 / Blacksburg, Virginia 24062-9002

540 951-6300 / 800 552-4123

www.nationalbankshares.com

National Bankshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

($ in thousands, except for share and per share data)	June 30, 2018			June 30, 2017			December 31, 2017
Assets
Cash and due from banks	$	12,530		$	12,936		$	12,926
Interest-bearing deposits		29,981			89,096			51,233
Securities available for sale, at fair value		467,505			308,435			331,387
Securities held to maturity		---			130,712			127,164
Restricted stock		1,221			1,200			1,200
Total securities		468,726			440,347			459,751
Mortgage loans held for sale		1,118			491			260
Loans:
Loans, net of unearned income and deferred fees and costs		690,863			654,734			668,069
Less: allowance for loan losses		(7,579	)		(8,372	)		(7,925	)
Loans, net		683,284			646,362			660,144
Premises and equipment, net		8,757			8,557			8,221
Accrued interest receivable		5,400			5,139			5,297
Other real estate owned, net		2,582			3,008			2,817
Intangible assets and goodwill		5,873			5,923			5,898
Bank-owned life insurance		34,212			33,287			33,756
Other assets		15,014			14,208			16,454
Total assets	$	1,267,477		$	1,259,354		$	1,256,757
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	195,949		$	181,868		$	182,511
Interest-bearing demand deposits		625,447			618,223			622,189
Savings deposits		141,943			140,325			140,150
Time deposits		105,442			121,941			114,884
Total deposits		1,068,781			1,062,357			1,059,734
Accrued interest payable		51			43			62
Other liabilities		12,794			12,668			12,065
Total liabilities		1,081,626			1,075,068			1,071,861
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, 6,957,974 shares at June 30, 2018, June 30, 2017 and December 31, 2017		8,698			8,698			8,698
Retained earnings		189,194			181,546			185,893
Accumulated other comprehensive loss, net		(12,041	)		(5,958	)		(9,695	)
Total stockholders' equity		185,851			184,286			184,896
Total liabilities and stockholders' equity	$	1,267,477		$	1,259,354		$	1,256,757

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National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended				Six Months Ended
($ in thousands, except for share and per share data)	June 30, 2018		June 30, 2017		June 30, 2018			June 30, 2017
Interest Income
Interest and fees on loans	$	7,622	$	7,453	$	15,154		$	14,906
Interest on federal funds		---		---		---			---
Interest on interest-bearing deposits		226		231		398			379
Interest on securities - taxable		1,746		1,397		3,354			2,799
Interest on securities - nontaxable		1,132		1,214		2,304			2,449
Total interest income		10,726		10,295		21,210			20,533
Interest Expense
Interest on time deposits		116		135		237			280
Interest on other deposits		1,029		913		1,989			1,796
Interest on borrowed funds		---		---		---			---
Total interest expense		1,145		1,048		2,226			2,076
Net interest income		9,581		9,247		18,984			18,457
Provision for loan losses		342		464		(130	)		523
Net interest income after provision for loan losses		9,239		8,783		19,114			17,934
Noninterest Income
Service charges on deposit accounts		694		692		1,364			1,357
Other service charges and fees		34		41		67			110
Credit card fees		365		295		709			539
Trust income		374		361		776			762
Bank-owned life insurance		228		146		456			289
Other income		173		192		519			520
Realized securities gain, net		---		4		---			4
Total noninterest income		1,868		1,731		3,891			3,581
Noninterest Expense
Salaries and employee benefits		3,545		3,419		7,239			6,942
Occupancy and furniture and fixtures		491		469		963			907
Data processing and ATM		607		542		1,340			1,108
FDIC assessment		90		91		181			186
Intangibles and goodwill amortization		12		12		25			43
Net cost of other real estate owned		164		55		249			84
Franchise taxes		320		329		651			651
Write-down of insurance receivable		287		---		2,010			---
Other operating expenses		908		1,057		1,930			2,336
Total noninterest expense		6,424		5,974		14,588			12,257
Income before income tax expense		4,683		4,540		8,417			9,258
Income tax expense		642		970		1,080			2,039
Net Income	$	4,041	$	3,570	$	7,337		$	7,219
Basic net income per share	$	0.58	$	0.51	$	1.05		$	1.04
Fully diluted net income per share	$	0.58	$	0.51	$	1.05		$	1.04
Weighted average number of common shares outstanding
Basic		6,957,974		6,957,974		6,957,974			6,957,974
Diluted		6,957,974		6,957,974		6,957,974			6,957,974
Dividends declared per share	$	0.58	$	0.56	$	0.58		$	0.56
Dividend payout ratio		---		---		55.01	%		53.98	%
Book value per share		---		---	$	26.71		$	26.49

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National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended
($ in thousands)	June 30, 2018		June 30, 2017
Net income	$	4,041	$	3,570
Other Comprehensive Income, net of tax
Unrealized holding gain on available for sale securities net of tax of $82 in 2018 and $874 in 2017		309		1,626
Other comprehensive income, net of tax of $82 in 2018 and $874 in 2017	$	309	$	1,626
Total Comprehensive Income	$	4,350	$	5,196

	Six Months Ended
($ in thousands)	June 30, 2018			June 30, 2017
Net income	$	7,337		$	7,219
Other Comprehensive Income (Loss), net of tax
Unrealized holding gain (loss) on available for sale securities net of tax of ($624) in 2018 and $1,454 in 2017		(2,346	)		2,701
Other comprehensive income (loss), net of tax of ($624) in 2018 and $1,454 in 2017	$	(2,346	)	$	2,701
Total Comprehensive Income	$	4,991		$	9,920

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Key Ratios and Other Data

(Unaudited)

	Three Months Ended						Six Months Ended
($ in thousands)	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Average Balances
Cash and due from banks	$	11,100		$	11,579		$	11,173		$	11,346
Interest-bearing deposits		50,182			87,694			47,973			80,050
Securities available for sale		367,332			305,058			350,342			304,833
Securities held to maturity		97,399			132,477			111,145			133,472
Restricted stock		1,221			1,200			1,211			1,186
Mortgage loans held for sale		221			262			227			238
Gross Loans		671,699			652,644			668,599			651,560
Loans, net		663,729			643,702			660,348			642,561
Intangible assets		5,880			5,931			5,887			5,940
Total assets		1,263,837			1,242,223			1,255,003			1,233,594
Total deposits		1,066,765			1,045,464			1,057,896			1,038,775
Other borrowings		---			---			---			---
Stockholders' equity		185,060			184,108			185,103			182,319
Interest-earning assets		1,196,542			1,181,413			1,186,829			1,174,273
Interest-bearing liabilities		874,682			867,065			871,418			864,013
Financial Ratios
Return on average assets(1)		1.34	%		1.15	%		1.30	%		1.18	%
Return on average equity(1)		9.13	%		7.78	%		8.81	%		7.98	%
Net interest margin		3.35	%		3.42	%		3.36	%		3.46	%
Net interest income-fully taxable equivalent	$	9,982		$	10,074		$	19,790		$	20,122
Efficiency ratio(2)		51.79	%		50.61	%		53.11	%		51.71	%
Average equity to average assets		14.64	%		14.82	%		14.75	%		14.78	%
Allowance for Loan Losses
Beginning balance	$	7,391		$	8,261		$	7,925		$	8,300
Provision for losses		342			464			(130	)		523
Charge-offs		(201	)		(409	)		(340	)		(552	)
Recoveries		47			56			124			101
Ending balance	$	7,579		$	8,372		$	7,579		$	8,372

(1) Return on average assets and return on average equity are calculated by annualizing net income to date. For 2018, the annualization factor was not applied to the recovery of loan losses and the insurance write-off.

(2) Efficiency ratio is calculated as noninterest expense, less non-recurring items, divided by the sum of noninterest income and net interest income on a fully taxable equivalent basis.

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Asset Quality Data

(Unaudited)

($ in thousands)	June 30, 2018			June 30, 2017
Nonperforming Assets
Nonaccrual loans	$	---		$	9
Nonaccrual restructured loans		2,687			3,188
Total nonperforming loans		2,687			3,197
Other real estate owned	$	2,582		$	3,008
Total nonperforming assets	$	5,269		$	6,205
Accruing restructured loans		8,337			3,711
Loans 90 days or more past due	$	61		$	259
Asset Quality Ratios
Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned		0.76	%		0.94	%
Allowance for loans losses to total loans		1.10	%		1.28	%
Allowance for loan losses to nonperforming loans		282.06	%		261.87	%
Loans past due 90 days or more to loans net of unearned income and deferred fees		0.01	%		0.04	%

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