National Bankshares Reports 7.83% Asset Growth, 16.96% Loan Portfolio Increase Amidst Challenging Profitability and Credit Risk Environment

As of September 30, 2024, National Bankshares, Inc. reported total assets of $1,785,033 thousand, marking a 7.83% increase from $1,655,370 thousand at the end of 2023. Total deposits rose to $1,602,953 thousand, up 6.58% from $1,503,972 thousand, driven by a significant increase in time deposits, which surged by 38.90% to $310,077 thousand. The company’s total stockholders' equity also increased by 19.40% to $167,782 thousand from $140,522 thousand.

The loan portfolio saw substantial growth, with net loans increasing to $991,331 thousand, a 16.96% rise from $847,552 thousand at the end of 2023. This growth was attributed to the acquisition of Frontier Community Bank (FCB) on June 1, 2024, which expanded the company's operations into new markets. The acquisition involved converting FCB shares into cash or National Bankshares stock, resulting in the issuance of 464,855 shares and a cash payment of $2,050 thousand to former FCB shareholders.

For the three months ended September 30, 2024, National Bankshares reported net income of $2,676 thousand, down from $3,074 thousand in the same period of 2023. The basic net income per share decreased to $0.42 from $0.52. For the nine months ended September 30, 2024, net income was $4,544 thousand, significantly lower than $11,506 thousand for the same period in 2023. This decline in profitability was attributed to net interest margin compression, merger-related expenses, and contract termination costs.

Total interest income for the three months ended September 30, 2024, was $18,666 thousand, up from $14,679 thousand in 2023, while total interest expense increased to $9,218 thousand from $6,039 thousand. Net interest income for the same period rose to $9,448 thousand from $8,640 thousand. However, for the nine months ended September 30, 2024, net interest income decreased to $26,393 thousand from $28,803 thousand in 2023.

Noninterest income for the three months ended September 30, 2024, increased to $2,272 thousand from $2,115 thousand in 2023, driven by higher service charges and trust income. However, total noninterest income for the nine months decreased to $6,717 thousand from $7,105 thousand in 2023.

The company’s allowance for credit losses (ACLL) increased to $10,328 thousand as of September 30, 2024, from $9,094 thousand at the end of 2023, reflecting a cautious approach amid rising credit risks. The effective tax rate for the nine months ended September 30, 2024, was 16.39%, up from 15.47% in 2023, influenced by non-deductible merger-related expenses.

Overall, National Bankshares, Inc. is navigating a period of growth through strategic acquisitions while facing challenges related to profitability and credit risk management.