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 FIRST QUARTER EARNINGS
BLACKSBURG, VA, APRIL 26, 2018: National Bankshares, Inc. (NASDAQ Capital Market: NKSH) today announced its results of operations for the first quarter of 2018. The Company reported net income of $3.296 million for the quarter ended March 31, 2018 compared to $3.649 million for the quarter ending March 31, 2017. For the first quarter, the return on average assets was 1.32 %(1) and the return on average equity was 8.85%(1) compared to 1.21% and 8.20%, respectively, for the first quarter of 2017. At March 31, 2018, the Company had total assets of $1.27 billion, an increase of 2.20% when compared to $1.24 billion at the end of the first quarter of 2017.
As indicated in previous reports, the Company’s computer system experienced two cyber intrusions, one in May of 2016 and one in January of 2017. The theft of funds totaled approximately $2.4 million, although no customers experienced a loss and no customer information was compromised. The Company filed a claim with its insurance carrier on or about August 1, 2017.
On April 4, 2018, legal counsel informed the Company’s management of recent correspondence with the insurance carrier. The correspondence suggests the insurance carrier may apply coverage in such a way as to limit insurance liability for the losses to a maximum of $500,000. In this case, the insurance carrier likely would reimburse the Company for approximately $337,000. If this occurs, the Company will vigorously pursue litigation to recover the full amount. The Company strongly believes they are insured for and are entitled to recover the full amount of the losses from the breaches, less the applicable deductible, and that litigation will ultimately resolve the case in its favor. However, in light of the recent information from the carrier and to comply with accounting guidance surrounding contingencies, the Company believes it is prudent to reduce the amount of the insurance receivable to the worst-case scenario of $337,000 and recognize an expense of $1.7 million. If the Company recovers amounts in excess of the receivable, it will recognize a gain in the period of recovery.
“I would like to reassure our shareholders and our customers that we take cybersecurity very seriously,” said National Bankshares President & CEO Brad Denardo. “We have taken the necessary steps to avoid cyber intrusions of the sort we experienced in 2016 and 2017, and we continually work to monitor and prevent future threats.”
Mr. Denardo added, “Despite the expense associated with the cyber intrusions, we are pleased with the positive underlying trends in the first quarter of 2018. Interest income and the quality of our loan portfolio continued to improve while the Company benefitted from a reduced tax burden under the Tax Cuts and Jobs Act of 2017. Excluding the one-time expense, net income would have been $4.66 million, a 27.6% increase over the same period last year.”
|
(1) |
Return on assets and return on equity are calculated by annualizing net income to date. For 2018, the annualization factor was not applied to the insurance write-down or provision reversal. |
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., 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.
National Bankshares, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
|
($ in thousands, except for share and per share data) |
March 31, 2018 |
March 31, 2017 |
December 31, 2017 | |||||||||
|
Assets |
||||||||||||
|
Cash and due from banks |
$ | 10,598 | $ | 13,654 | $ | 12,926 | ||||||
|
Interest-bearing deposits |
76,571 | 85,552 | 51,233 | |||||||||
|
Securities available for sale, at fair value |
337,211 | 304,376 | 331,387 | |||||||||
|
Securities held to maturity |
122,905 | 133,596 | 127,164 | |||||||||
|
Restricted stock |
1,221 | 1,200 | 1,200 | |||||||||
|
Total securities |
461,337 | 439,172 | 459,751 | |||||||||
|
Mortgage loans held for sale |
--- | 608 | 260 | |||||||||
|
Loans: |
||||||||||||
|
Loans, net of unearned income and deferred fees and costs |
658,663 | 652,313 | 668,069 | |||||||||
|
Less: allowance for loan losses |
(7,391 |
) |
(8,261 |
) |
(7,925 |
) |
||||||
|
Loans, net |
651,272 | 644,052 | 660,144 | |||||||||
|
Premises and equipment, net |
8,120 | 8,675 | 8,221 | |||||||||
|
Accrued interest receivable |
5,360 | 5,267 | 5,297 | |||||||||
|
Other real estate owned, net |
2,741 | 2,952 | 2,817 | |||||||||
|
Intangible assets and goodwill |
5,886 | 5,936 | 5,898 | |||||||||
|
Bank-owned life insurance |
33,984 | 23,141 | 33,756 | |||||||||
|
Other assets |
14,659 | 14,117 | 16,454 | |||||||||
|
Total assets |
$ | 1,270,528 | $ | 1,243,126 | $ | 1,256,757 | ||||||
|
Liabilities and Stockholders' Equity |
||||||||||||
|
Noninterest-bearing deposits |
$ | 190,746 | $ | 182,750 | $ | 182,511 | ||||||
|
Interest-bearing demand deposits |
628,540 | 599,936 | 622,189 | |||||||||
|
Savings deposits |
142,019 | 138,940 | 140,150 | |||||||||
|
Time deposits |
111,635 | 124,854 | 114,884 | |||||||||
|
Total deposits |
1,072,940 | 1,046,480 | 1,059,734 | |||||||||
|
Accrued interest payable |
55 | 45 | 62 | |||||||||
|
Other liabilities |
11,996 | 13,614 | 12,065 | |||||||||
|
Total liabilities |
1,084,991 | 1,060,139 | 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 March 31, 2018, March 31, 2017 and December 31, 2017 |
8,698 | 8,698 | 8,698 | |||||||||
|
Retained earnings |
189,189 | 181,873 | 185,893 | |||||||||
|
Accumulated other comprehensive loss, net |
(12,350 |
) |
(7,584 |
) |
(9,695 |
) |
||||||
|
Total stockholders' equity |
185,537 | 182,987 | 184,896 | |||||||||
|
Total liabilities and stockholders' equity |
$ | 1,270,528 | $ | 1,243,126 | $ | 1,256,757 | ||||||
National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
|
Three Months Ended |
||||||||
|
($ in thousands, except for per share data) |
March 31, 2018 |
March 31, 2017 |
||||||
|
Interest Income |
||||||||
|
Interest and fees on loans |
$ | 7,532 | $ | 7,453 | ||||
|
Interest on interest-bearing deposits |
172 | 148 | ||||||
|
Interest on securities - taxable |
1,608 | 1,402 | ||||||
|
Interest on securities - nontaxable |
1,172 | 1,235 | ||||||
|
Total interest income |
10,484 | 10,238 | ||||||
|
Interest Expense |
||||||||
|
Interest on time deposits |
121 | 145 | ||||||
|
Interest on other deposits |
960 | 883 | ||||||
|
Total interest expense |
1,081 | 1,028 | ||||||
|
Net interest income |
9,403 | 9,210 | ||||||
|
Provision for (recovery of) loan losses |
(472 |
) |
59 | |||||
|
Net interest income after provision for (recovery of) loan losses |
9,875 | 9,151 | ||||||
|
Noninterest Income |
||||||||
|
Service charges on deposit accounts |
670 | 665 | ||||||
|
Other service charges and fees |
33 | 69 | ||||||
|
Credit card fees |
344 | 244 | ||||||
|
Trust income |
402 | 401 | ||||||
|
Bank-owned life insurance |
228 | 143 | ||||||
|
Other income |
346 | 328 | ||||||
|
Total noninterest income |
2,023 | 1,850 | ||||||
|
Noninterest Expense |
||||||||
|
Salaries and employee benefits |
3,694 | 3,523 | ||||||
|
Occupancy and furniture and fixtures |
472 | 438 | ||||||
|
Data processing and ATM |
730 | 565 | ||||||
|
FDIC assessment |
91 | 95 | ||||||
|
Credit card processing |
3 | 1 | ||||||
|
Intangibles and goodwill amortization |
12 | 31 | ||||||
|
Net cost of other real estate owned |
85 | 29 | ||||||
|
Franchise taxes |
331 | 322 | ||||||
|
Other operating expenses |
2,746 | 1,279 | ||||||
|
Total noninterest expense |
8,164 | 6,283 | ||||||
|
Income before income tax expense |
3,734 | 4,718 | ||||||
|
Income tax expense |
438 | 1,069 | ||||||
|
Net Income |
$ | 3,296 | $ | 3,649 | ||||
|
Basic net income per share |
$ | 0.47 | $ | 0.52 | ||||
|
Fully diluted net income per share |
$ | 0.47 | $ | 0.52 | ||||
|
Weighted average number of common shares outstanding |
||||||||
|
Basic |
6,957,974 | 6,957,974 | ||||||
|
Diluted |
6,957,974 | 6,957,974 | ||||||
|
Dividends declared per share |
--- | --- | ||||||
|
Dividend payout ratio |
--- | --- | ||||||
|
Book value per share |
$ | 26.67 | $ | 26.30 | ||||
National Bankshares, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
Three Months Ended |
||||||||
|
($ in thousands) |
March 31, 2018 |
March 31, 2017 |
||||||
|
Net income |
$ | 3,296 | $ | 3,649 | ||||
|
Other Comprehensive Income (Loss), net of tax |
||||||||
|
Unrealized holding gain (loss) on available for sale securities net of tax of ($706) in 2018 and $580 in 2017 |
(2,655 |
) |
1,075 | |||||
|
Other comprehensive income (loss), net of tax of ($706) in 2018 and $580 in 2017 |
$ | (2,655 |
) |
$ | 1,075 | |||
|
Total Comprehensive Income |
$ | 641 | $ | 4,724 | ||||
Key Ratios and Other Data
(Unaudited)
|
Three Months Ended |
||||||||
|
($ in thousands) |
March 31, 2018 |
March 31, 2017 | ||||||
|
Average Balances |
||||||||
|
Cash and due from banks |
$ | 11,246 | $ | 11,111 | ||||
|
Interest-bearing deposits |
45,740 | 73,322 | ||||||
|
Securities available for sale |
333,163 | 304,605 | ||||||
|
Securities held to maturity |
125,045 | 134,477 | ||||||
|
Restricted stock |
1,201 | 1,172 | ||||||
|
Mortgage loans held for sale |
233 | 214 | ||||||
|
Gross Loans |
665,466 | 650,464 | ||||||
|
Loans, net |
656,930 | 641,406 | ||||||
|
Intangible assets |
5,893 | 5,951 | ||||||
|
Total assets |
1,246,071 | 1,224,870 | ||||||
|
Total deposits |
1,048,929 | 1,032,012 | ||||||
|
Other borrowings |
--- | --- | ||||||
|
Stockholders' equity |
185,147 | 180,512 | ||||||
|
Interest-earning assets |
1,177,009 | 1,167,053 | ||||||
|
Interest-bearing liabilities |
868,118 | 860,928 | ||||||
|
Financial Ratios |
||||||||
|
Return on average assets(1) |
1.32 |
% |
1.21 |
% |
||||
|
Return on average equity(1) |
8.85 |
% |
8.20 |
% |
||||
|
Net interest margin |
3.38 |
% |
3.49 |
% |
||||
|
Net interest income-fully taxable equivalent |
$ | 9,808 | $ | 10,048 | ||||
|
Efficiency ratio(2) |
54.44 |
% |
52.81 |
% |
||||
|
Average equity to average assets |
14.86 |
% |
14.74 |
% |
||||
|
Allowance for Loan Losses |
||||||||
|
Beginning balance |
$ | 7,925 | $ | 8,300 | ||||
|
Provision for losses |
(472 |
) |
59 | |||||
|
Charge-offs |
(139 |
) |
(143 |
) |
||||
|
Recoveries |
77 | 45 | ||||||
|
Ending balance |
$ | 7,391 | $ | 8,261 | ||||
|
(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. |
Asset Quality Data
(Unaudited)
|
($ in thousands) |
March 31, 2018 |
March 31, 2017 |
||||||
|
Nonperforming Assets |
||||||||
|
Nonaccrual loans |
$ | 6 | $ | 1,040 | ||||
|
Nonaccrual restructured loans |
2,758 | 4,640 | ||||||
|
Total nonperforming loans |
2,764 | 5,680 | ||||||
|
Other real estate owned |
$ | 2,741 | $ | 2,952 | ||||
|
Total nonperforming assets |
$ | 5,505 | $ | 8,632 | ||||
|
Accruing restructured loans |
7,890 | 3,747 | ||||||
|
Loans 90 days or more past due |
$ | 52 | $ | 63 | ||||
|
Asset Quality Ratios |
||||||||
|
Nonperforming assets to loans net of unearned income and deferred fees, plus other real estate owned |
0.83 |
% |
1.32 |
% |
||||
|
Allowance for loans losses to total loans |
1.12 |
% |
1.27 |
% |
||||
|
Allowance for loan losses to nonperforming loans |
267.40 |
% |
145.44 |
% |
||||
|
Loans past due 90 days or more to loans net of unearned income and deferred fees |
0.01 |
% |
0.01 |
% |
||||
7