National Bankshares Inc. Reports Operating Results (10-Q)
National Bankshares Inc. has a market cap of $191.63 million; its shares were traded at around $27.64 with a P/E ratio of 13.62 and P/S ratio of 3.24. The dividend yield of National Bankshares Inc. stocks is 2.97%. National Bankshares Inc. had an annual average earning growth of 24% over the past 5 years. Highlight of Business Operations:The return on average assets for the nine months ended September 30, 2009 was 1.45%, a decline of 6 basis points from 1.51% for the year ended December 31, 2008. The decline is the result of internally generated asset growth increasing at a faster rate than earnings. The return on average equity declined from 12.52% for the year ended December 31, 2008 to 12.20% for the nine months ended September 30, 2009. Return on average equity declined because the Company s equity, mostly from retained earnings, grew at a faster rate than earnings. As discussed below, higher costs for Federal Deposit Insurance Corporation Deposit Insurance Fund premiums had a negative effect on the Company s earnings for the first nine months in 2009. The total of FDIC premiums for the three quarters of 2009 was $1,429, as compared with $90 for the same period of 2008. In the third quarter of 2009, the total of FDIC premiums was $423, as compared with $47 in the third quarter of 2008. The net interest margin, at a healthy 4.13%, was 1 basis point higher than the 4.12% at year-end.
Nonperforming loans at September 30, 2009, all of which were nonaccrual loans, were $3,888, or 0.67% of loans net of unearned income and deferred fees, plus other real estate owned. Nonperforming loans increased by $2,555 over the $1,333 reported on December 31, 2008. Loans past due 90 days or more at the end of the third quarter of 2009 were $2,153, up $1,026 from the total at year-end and were 0.37% of loans net of unearned income at September 30, 2009. Although the totals of nonperforming loans and loans past due 90 days or more have grown when compared with year-end, the ratios of both to total loans remained low when compared with peers and are consistent with the Company s conservative underwriting policies. The Company anticipates further increases in nonperforming and past due loans as its market area is impacted by the effects of the slow economy. Exposure to loss is somewhat mitigated because a significant percentage of loans are collateralized with real estate.
Net interest income for the nine months of 2009 was $25,343, an increase of $2,168, or 9.4%, when compared with the same period in 2008. This net increase is attributable to a decrease of $1,855 in interest expense and an increase in interest income of $313. As compared with the first nine months of 2008, the lower interest rate environment in the first three quarters of 2009 caused the Company s yield on earning assets to decline. However, a higher volume of earning assets resulted in the $2,168 increase in total interest income for the nine months ended September 30, 2009. Despite an increase in total deposits when September 30, 2009 and September 30, 2008 are compared, as noted above, total interest expense dropped by $1,855. This decline is attributable to a combination of lower interest rates and the Company s prudent deposit pricing.
Credit card fees for the first nine months of 2009 were $2,060. This was a decrease of $41, or 1.95%, when compared with the $2,101 total reported for the same period last year. The decline was due to a lower volume of merchant transaction fees and credit card fees.
Other income is income that cannot be classified in another category. Some examples include net gains from the sales of fixed assets, rent from foreclosed properties and revenue from investment and insurance sales. Other income for the nine months ended September 30, 2009 was $261. This represents a decrease of $53, or 16.88%, when compared with the nine months ended September 30, 2008. There was a $13 gain from the sale of repossessed automobiles in the first nine months of 2008 that was not repeated in the same period in 2009, and income from commissions for the sale of securities in NBFS has declined by $27 when the two periods are compared.
During the first quarter of 2008, the Company recognized $290 in a one-time gain from the initial public offering of Visa, Inc. When the credit card processor went public, the Company was required to sell a portion of its Class B shares. This gain, offset by losses in called investment securities, was the source of the relative high level of realized securities gains for the nine months ended September 30, 2008. Realized securities gains for the nine months ended September 30, 2009 were $55, as compared with $189 for the same period in 2008. Realized securities gains in 2009 have come solely from gains in called securities.
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