FOR IMMEDIATE RELEASE
CONTACTS: James G. Rakes, Chairman, President & CEO (540) 951-6236
J. Robert Buchanan, Treasurer (276) 979-0341
NATIONAL BANKSHARES, INC.
ANNOUNCES HIGHER EARNINGS
IN 2006
BLACKSBURG, VA, FEBRUARY 2, 2007: National Bankshares, Inc. (Nasdaq Capital
Market: NKSH) today reported that it earned net income of more than $12.63
million in 2006. This was an increase of 1.67% over the $12.42 million in record
earnings posted by the company in 2005. Basic net income per share increased
from $1.77 in 2005 to $1.80 in 2006, reflecting both increased earnings and the
effects of the company's previously-announced stock repurchase plan. For the
full year, National Bankshares had a return on average assets of 1.50% and a
return on average equity of 13.41%. The company ended 2006 with total assets of
just over $868.20 million, up by 3.17% over the nearly $841.50 in total assets
at the end of 2005.
Net income attributable to the fourth quarter of 2006 of $3.20 million was
nearly even with the $3.23 million earned in the same period of 2005. This
translates to basic net income per share of $0.46 in the fourth quarters of both
2005 and 2006.
National Bankshares, Inc.'s Chairman, President & CEO, James G. Rakes stated, "I
am always pleased to report record earnings, although the year-over-year
increase in net income was not large. The continuation well into 2006 of the
pattern of interest-rate increases begun by the Federal Reserve during 2005
compressed our net interest margin and had a negative effect on earnings.
However, in addition to posting higher earnings, there were some other bright
spots in this year's financials. Because loan quality was excellent, there was
no need to fund the provision for loan losses above a minimal level. Other
noninterest income in 2006, at over $7.27 million, showed a nice 17.04% increase
above 2005. We worked hard to contain controllable expenses, such as salary and
benefits and occupancy expense, and these two categories experienced very modest
increases in 2006. Even though there were some costs associated with the merger
of our two community bank subsidiaries in May of 2006, other noninterest expense
this year declined by 6.26% from 2005." Rakes continued, "Last year we completed
both the merger of our two banks and certain upgrades in our technology
infrastructure. These steps will allow us to continue to do what we do best.
That is, to offer a full range of financial services in settings which emphasize
the importance of personal relationships with our customers."
National Bankshares, Inc. is a financial holding company, with two subsidiaries.
The National Bank of Blacksburg, which does business as National Bank, is
headquartered in Blacksburg, Virginia, and the bank has 26 offices throughout
Southwest Virginia. The company also has a non-bank financial services
subsidiary, National Bankshares Financial Services, Inc., which does business in
the same market as National Bankshares Investment Services and National
Bankshares Insurance Services. National Bankshares, Inc. stock is traded on the
Nasdaq Capital Market under the symbol "NKSH". Additional information about the
company is available on its web site at www.nationalbankshares.com.
(unaudited tables follow)
National Bankshares, Inc. And
Subsidiaries
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(000's), except ratios and percent data
Three months ending December 31, 2006 December 31, 2005 Change
Selected Consolidated Data :
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Interest income $12,427 $11,594 7.18%
Interest expense 5,261 4,095 28.47%
Net interest income 7,166 7,499 -4.44%
Provision for loan losses 9 10 -10.00%
Trust income 469 336 39.58%
Other noninterest income 1,830 1,690 8.28%
Salary and benefits 2,760 2,731 1.06%
Occupancy expense 478 481 -0.62%
Amortization of intangibles 284 285 -0.35%
Other noninterest expense 1,852 1,742 6.31%
Income taxes -881 -1,051 -16.18%
Net income $3,201 $3,225 -0.74%
Basic net income per share $0.46 $0.46 $0.00
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Daily averages:
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Gross loans $498,366 $495,920 0.49%
Loans,net 492,104 489,479 0.54%
Total securities 272,644 263,887 3.32%
Total deposits 751,639 736,500 2.06%
Other borrowings 0 177 -100.00%
Stockholders' equity 97,741 92,426 5.75%
Cash and due from 15,795 17,430 -9.38%
Interest-earning assets 792,919 780,753 1.56%
Interest-bearing liabilities 646,673 622,233 3.93%
Intangible assets 16,138 17,444 -7.49%
Total assets 854,040 832,999 2.53%
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Financial ratios: Note (1)
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Return on average assets 1.49% 1.54% -0.05
Return on average equity 12.99% 13.84% -0.85
Net interest margin 4.06% 4.17% -0.11
Average equity to average assets 11.44% 11.10% 0.35
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Note (1) Ratio change measured in bp
Allowance for loan losses:
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Beginning balance $5,252 $5,620 -6.55%
Provision for losses 9 10 -10.00%
Charge-offs -114 -289 -60.55%
Recoveries 10 108 -90.74%
Ending balance $5,157 $5,449 -5.36%
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Year to Date December 31, 2006 December 31, 2005 Change
Selected Consolidated Data :
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Interest income $47,901 $45,380 5.56%
Interest expense 18,564 14,180 30.92%
Net interest income 29,337 31,200 -5.97%
Provision for loan losses 49 567 -91.36%
Trust income 1,528 1,398 9.30%
Other noninterest income 7,274 6,215 17.04%
Salary and benefits 11,466 11,265 1.78%
Occupancy expense 1,957 1,931 1.35%
Amortization of intangibles 1,137 1,117 1.79%
Other noninterest expense 7,110 7,585 -6.26%
Income taxes -3,788 -3,924 -3.47%
Net income $12,632 $12,424 1.67%
Basic net income per share $1.80 $1.77 $0.03
Year to Date December 31, 2006 December 31, 2005 Change
Fully diluted net income per share $1.80 $1.76 $0.04
Dividends per share .73 .71 $0.02
Dividend payout ratio 40.44 40.17 $0.27
Book value per share $13.86 13.10 $0.76
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Balance sheet at period-end:
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Gross loans $501,702 $493,524 1.66%
Loans, net $495,486 $487,162 1.71%
Total securities 285,489 272,541 4.75%
Cash and due From Banks 15,283 20,115 -24.02%
Total deposits 764,692 745,649 2.55%
Other borrowings 73 357 -79.55%
Stockholders' equity 96,755 91,939 5.24%
Intangible assets 15,976 17,113 -6.64%
Total assets 868,203 841,498 3.17%
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Daily averages:
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Gross loans $494,945 $493,668 0.26%
Loans,net 488,624 487,130 0.31%
Total securities 271,066 261,743 3.56%
Total deposits 741,071 724,015 2.36%
Other borrowings 53 420 -87.38%
Stockholders' equity 94,194 90,470 4.12%
Cash and due from 15,968 15,976 -0.05%
Interest-earning assets 779,018 769,931 1.18%
Interest-bearing liabilities 632,514 610,534 3.60%
Intangible assets 16,025 17,500 -8.43%
Total assets 840,080 819,341 2.53%
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Financial ratios: Note (1)
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Return on average assets 1.50% 1.52% -0.02
Return on average equity 13.41% 13.73% -0.32
Net interest margin 4.14% 4.44% -0.30
Efficiency ratio 52.74% 52.39% 0.35
Average equity to average assets 11.21% 11.04% 0.17
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Note (1) Ratio change measured in bp
Allowance for loan losses:
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Beginning balance $5,449 $5,729 -4.89%
Provision for losses 49 567 -91.36%
Charge-offs -459 -1,101 -58.31%
Recoveries 118 254 -53.54%
Ending balance $5,157 $5,449 -5.36%
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Nonperforming assets:
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Nonaccrual loans 0 $178 -100.00%
Restructured loans --- --- ---
Total nonperforming loans Note (2) 0 178 -100.00%
Other real estate owned 390 376 3.72%
Total nonperforming assets $390 $554 -29.60%
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Asset quality ratios: Note (3)
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Nonperforming loans to total loans 0.000% 0.04% -100.00%
Allowance for loan losses to total loans 1.03% 1.11% -7.99%
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Allowance for loan losses to
nonperforming loans --- 3061.24% -100.00%
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Note (2) Loans 90 days past due or more not included
Note (3) Ratio change measured in bp