National Bankshares Inc.
Annual Report 2012

Plain-text annual report

Local focus Personal attention Strength & stability A future you can bank on 2012 Annual Report National Bankshares Financial Highlights In 2012, National Bankshares increased net income, total assets and net loans in what remains a challenging economic environment. By executing our core philosophy of providing excellent customer service, making prudent loans and serving the needs of our communities, we were able to continue our tradition of rewarding shareholders with an increased dividend. 2012 2011 2010 2009 2008 Net income $ 17,747 $ 17,638 $ 15,569 $ 14,319 $ 13,593 Basic net income per share Diluted net income per share Cash dividends per share Book value per share Loans, net Total securities Total assets Total deposits Stockholders’ equity 2.56 2.55 1.10 21.60 583,813 352,043 2.54 2.54 1.00 20.36 580,402 318,913 2.25 2.24 0.91 18.63 568,779 315,907 1,104,361 1,067,102 1,022,238 946,766 150,109 919,333 141,299 884,583 129,187 2.07 2.06 0.84 17.61 583,021 297,417 982,367 852,112 122,076 1.96 1.96 0.80 15.89 569,699 264,999 935,374 817,848 110,108 Net Income ($ in millions) Cash Dividends Per Share ($) Book Value Per Share ($) 6 . 7 1 7 . 7 1 6 . 5 1 . 3 4 1 6 . 3 1 20 15 10 5 0 0 1 . 1 0 0 . 1 1 9 . 0 4 8 . 0 0 8 . 0 1.2 1.0 0.8 0.6 0.4 0.2 0.0 25 20 15 10 5 0 0 6 . 1 2 6 3 . 0 2 3 6 . 8 1 1 6 . 7 1 9 8 . 5 1 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Loans, Net ($ in millions) Total Assets ($ in millions) 7 . 9 6 5 0 . 3 8 5 8 . 8 6 5 4 . 0 8 5 8 . 3 8 5 600 500 400 300 200 100 0 4 . 2 8 9 2 . 2 2 0 , 1 4 . 5 3 9 4 . 4 0 1 , 1 1 . 7 6 0 , 1 1200 1000 800 600 400 200 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 To Our Shareholders We are pleased to provide you with National Bankshares’ 2012 financial results. During our 121st year of community banking, we are proud to report to you that we have again achieved record earnings even with the continued economic and regulatory challenges that we are facing and will continue to face. Increased Earnings in 2012 to work to maximize our net interest margins, control In 2012, Bankshares earned close to $17.75 million, a our costs and explore new ways to enhance our revenue slight increase over the $17.64 million earned in 2011. streams. This resulted in a return on average assets of 1.64% and a return on average equity of 12.01%. In spite of the Growth in Other Key Areas fact that interest rates remain at historically low levels causing our net interest margin to decrease from 4.59% to 4.38%, this increase in earnings resulted primarily from a small increase in our net interest income from $40.76 million in 2011 to $40.78 million in 2012 and from a nice By the end of 2012, your Company has grown to total assets of $1.10 billion, an increase of 3.49% from $1.07 billion at December 31, 2011. Our good earnings mentioned above and our increase in total assets has allowed our basic earnings per share to increase to $2.56 improvement in our noninterest income from $8.41 from the $2.54 reported last year. million in 2011 to $8.74 million in 2012. We will continue >>> National Bankshares Executive Officers (from left): F. Brad Denardo, Executive Vice President/Chief Operating Officer; James G. Rakes, Chairman, President & Chief Executive Officer; David K. Skeens, Senior Vice President/Operations & Risk Management, Treasurer & Chief Financial Officer. 1 To Our Shareholders Bankshares continues to perform well, and in return for that performance we were pleased to be able to increase the dividends paid to our stockholders to $1.10 per share from the total dividend of $1.00 paid in 2011. Loan Portfolio Offers Challenges Delivering Dividends We continue to have challenges in our loan portfolio. The challenges mentioned above notwithstanding, Our total nonperforming loans increased to $5.62 million Bankshares continues to perform well, and in return for at the end of 2012 from $5.20 million in 2011. Although that performance we were pleased to be able to increase these numbers compare very favorably with our peer the dividends paid to our stockholders to $1.10 per share institutions, we are devoting a great deal of attention from the total dividend of $1.00 paid in 2011. This resulted to them. To further compensate for this increase, in an increase in the dividend payout ratio to 43.04% in our allowance for loan losses at the end of 2012 was 2012 from the ratio of 39.34% in 2011. increased to $8.35 million, or 1.41% of outstanding loans, an increase from $8.07 million, or 1.37% of outstanding Thank You loans, at December 31, 2011. As always, we are extremely grateful to the Directors and Advisory Directors of National Bankshares and the Regulations Continue to Increase National Bank for the time, energy, talents and dedication Bankshares and National Bank continue to be subjected they continue to give to us. I also want to thank our to additional regulatory burdens imposed by laws that employees whose efforts continue to prove the value of emanated from the economic downturn. These new a community banking model that emphasizes superior regulations limit our ability to realize revenue in certain customer service and the development of strong areas of our Company and they certainly add to our business relationships. And lastly, I want to thank you, our compliance costs. Since there appears to be no end stockholders, for your continued support and trust. in sight to the new regulations, we will continue to devote the resources necessary to comply with all new requirements while at the same time trying to minimize the impact on our loyal customers. Creating a Better Customer Experience We continue to invest in technology that improves our customers’ banking experience. In 2012 we introduced an improved version of our Internet Banking that is more user-friendly and now includes paperless eStatements for our customers. Early in 2013 we introduced Mobile Banking. This new product will allow our many customers to manage their accounts anytime and from anywhere through their mobile devices. 2 James G. Rakes Chairman, President & Chief Executive Officer National Bankshares, Inc. Board of Directors National Bankshares recognizes the importance of an active, accountable and representative board of directors in the leadership of our Company. We are fortunate to work with leaders from public and private institutions that represent some of the key economic sectors in our region. Their experience, vision and high ethical standards contribute greatly to the success of our Company and we are proud to have them as part of our team. Glenn P. Reynolds President Reynolds Architects, Inc. Dr. James M. Shuler Delegate Virginia House of Delegates, Retired Lawrence J. Ball President Moog Components Group John E. Dooley Chief Executive Officer Virginia Tech Foundation, Inc. Charles E. Green, III Financial Planner AXA Advisors, L.L.C. Dr. Jack M. Lewis President New River Community College William A. Peery President Cargo Oil Co., Inc. Dr. Mary G. Miller President Interactive Design and Development, Inc. James G. Rakes Chairman, President and Chief Executive Officer National Bankshares, Inc. Chairman, President and Chief Executive Officer National Bank Chairman, President and Chief Executive Officer National Bankshares Financial Services, Inc. Standing, from left: Glenn P. Reynolds, Lawrence J. Ball, William A. Peery, John E. Dooley. Seated, from left: Charles E. Green, III, Dr. Mary G. Miller, Dr. James M. Shuler, Dr. Jack M. Lewis, James G. Rakes. 3 Consolidated Balance Sheets Assets December 31, 2012) December 31, 2011) Cash and due from banks Interest-bearing deposits Securities available for sale, at fair value Securities held to maturity (fair value approximates $170,846 at December 31, 2012 and $151,429 at December 31, 2011) Total securities Mortgage loans held for sale Loans: Real estate construction loans Consumer real estate loans Commercial real estate loans Commercial non-real estate loans Public sector and IDA Consumer non real estate loans Total loans Less unearned income and deferred fees Loans, net of unearned income and deferred fees Less allowance for loan losses Loans, net Premises and equipment, net Accrued interest receivable Other real estate owned, net Intangible assets and goodwill Bank-owned life insurance Other assets Total assets Liabilities and Stockholders’ Equity Noninterest-bearing demand deposits Interest-bearing demand deposits Savings deposits Time deposits Total deposits Accrued interest payable Other liabilities Total liabilities Commitments and contingencies 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, 6,947,974 shares in 2012 and 6,939,974 shares in 2011 Retained earnings Accumulated other comprehensive (loss), net Total stockholders’ equity Total liabilities and stockholders’ equity 4 $ $ $ $ 14,783) 96,597) 191,504) 160,539) 352,043) 2,796) 50,313) 143,262) 304,308) 37,349) 26,169) 31,714) 593,115) (953) 592,162) (8,349) 583,813) 10,401) 6,247) 1,435) 9,377) 20,523) 6,346) 1,104,361) 144,252) 455,713) 69,063) 277,738) 946,766) 139) 7,347) 954,252) ---) $ $ $ 11,897) 98,355) 174,918) 143,995) 318,913) 2,623) 48,531) 150,224) 303,192) 38,832) 15,571) 33,072) 589,422) (952) 588,470) (8,068) 580,402) 10,393) 6,304) 1,489) 10,460) 19,812) 6,454) 1,067,102) 142,163) 404,801) 61,298) 311,071) 919,333) 206) 6,264) 925,803) ---) ---) ---) 8,685) 144,162) (2,738) 150,109) 1,104,361) 8,675) 133,945) (1,321) 141,299) 1,067,102) $ Consolidated Statements of Income Interest Income Interest and fees on loans Interest on interest-bearing deposits Interest on securities – taxable Interest on securities – nontaxable Total interest income Interest Expense Interest on time deposits of $100,000 or more Interest on other deposits Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest Income Service charges on deposit accounts Other service charges and fees Credit card fees Trust income BOLI income Other income Realized securities gains (losses), net Total noninterest income Noninterest Expense Salaries and employee benefits Occupancy and furniture and fixtures Data processing and ATM FDIC assessment Credit card processing Intangible assets amortization Net costs of other real estate owned Franchise taxes Other operating expenses Total noninterest expense Income before income tax expense Income tax expense Net income Basic net income per common share Fully diluted net income per common share Years ended December 31, 2011) 36,514) 155) 6,745) 6,532) 49,946) 2,019) 7,165) 9,184) 40,762) 2,949) 37,813) 2,617) 287) 3,197) 1,087) 762) 449) 11) 8,410) 11,357) 1,599) 1,701) 677) 2,485) 1,083) 518) 780) 3,138) 23,338) 22,885) 5,247) 17,638) 2.54) 2.54) $ $ $ $ 2010) 36,919) 128) 5,588) 6,504) 49,139) 3,439) 7,719) 11,158) 37,981) 3,409) 34,572) 2,858) 317) 2,954) 1,118) 760) 354) (14) 8,347) 10,963) 1,875) 1,499) 1,080) 2,300) 1,083) 214) 963) 3,150) 23,127) 19,792) 4,223) 15,569) 2.25) 2.24) $ $ $ $ 2012) 35,354) 240) 6,613) 6,463) 48,670) 1,491) 6,396) 7,887) 40,783) 3,134) 37,649) 2,594) 243) 3,278) 1,313) 814) 472) 25) 8,739) 12,005) 1,589) 1,593) 475) 2,442) 1,083) 208) 901) 3,100) 23,396) 22,992) 5,245) 17,747) 2.56) 2.55) $ $ $ $ 5 National Bank Board of Directors Standing, from left: Michael E. Dye, Pharmacist/Owner, New Graham Pharmacy; Dr. J. Lewis Webb, Jr., Retired Dentist; James C. Thompson, Chairman, Thompson & Litton, Inc. Seated from left: Dr. James M. Shuler, Delegate, Virginia House of Delegates, Retired; Mildred R. Johnson, Director of Undergraduate Admissions, Virginia Polytechnic Institute and State University; F. Brad Denardo, Executive Vice President, National Bankshares, Inc., Executive Vice President/Chief Operating Officer, National Bank, Treasurer, National Bankshares Financial Services, Inc.; James G. Rakes, Chairman, President and Chief Executive Officer, National Bankshares, Inc., Chairman, President and Chief Executive Officer, National Bank, Chairman, President and Chief Executive Officer, National Bankshares Financial Services, Inc. National Bank Advisory Boards Montgomery County Dan A. Dodson, Kathryn S. Oddo, James J. Owen, Arlene A. Saari, James C. Stewart, Marc A. Verniel, T. Cooper Via Giles County Dr. Terry E. Arbogast, Lisa W. Epperly, Dr. Robert C. McCracken, James E. Tyler Galax Thomas L. McChesney, Dr. James A. Williams, Jr., David F. Wilson Christiansburg/Radford/Pulaski County Charles R. Beller, III, William K. Cunningham, Gerard W. Higgins, Dr. Kenneth E. Jones, Dr. Peter J. McDonald, L. Scott Wade Richlands Thurmon T. Hackworth, Dr. Marvin D. Harman, Peter M. Mulkey, John M. Warner 6 About National Bankshares Headquartered in Blacksburg, Virginia, National Bankshares, Inc. is committed to providing comprehensive and personalized financial service solutions for individuals, businesses and institutions in communities throughout Southwest Virginia. We offer a complete line of banking products and services through our primary subsidiary, National Bank, a 121 year-old community bank with 25 branch offices. We also offer a full spectrum of insurance and investment solutions through our financial services subsidiary, National Bankshares Financial Services, Inc. For more information, visit the National Bankshares website at: www.nationalbankshares.com 7 Corporate Information National Bankshares, Inc. Executive Officers James G. Rakes Chairman, President and Chief Executive Officer F. Brad Denardo Executive Vice President David K. Skeens Treasurer and Chief Financial Officer Annual Meeting The Annual Meeting of Stockholders will be held on Tuesday, April 9, 2013 at 3:00 p.m. at Custom Catering Center, 902 Patrick Henry Drive, Blacksburg, Virginia. Corporate Stock National Bankshares, Inc. common stock trades on the Nasdaq Capital Market under the symbol “NKSH”. A copy of National Bankshares, Inc.’s annual report to the Securities and Exchange Commission on Form 10-K will be furnished without charge to any stockholder upon written request. The Form 10-K and other corporate publications are also available at www.nationalbankshares.com. Proxy materials for the Annual Meeting of Stockholders are available at www. nationalbanksharesproxy.com. Corporate Office National Bankshares, Inc. 101 Hubbard Street Blacksburg, Virginia 24060 P.O. Box 90002 Blacksburg, Virginia 24062-9002 www.nationalbankshares.com (540) 951-6300 or (800) 552-4123 Financial Information Investors and analysts seeking financial information about National Bankshares, Inc. should contact: James G. Rakes, Chairman, President and Chief Executive Officer (540) 951-6300 or (800) 552-4123 jrakes@nbbank.com Written requests may be directed to: National Bankshares, Inc. P.O. Box 90002, Blacksburg, VA 24062- 9002 Stockholder Services and Stock Transfer Agent Stockholders seeking information about stock transfer requirements, lost certificates, dividends and other stockholder matters should contact: Bryson J. Hunter Secretary and Counsel (540) 951-6300 or (800) 552-4123 bhunter@nbbank.com or Transfer Agent Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 (800) 368-5948 info@rtco.com 8 National Bankshares 101 Hubbard Street  P.O. Box 90002 Blacksburg, Virginia 24062-9002 www.nationalbankshares.com 

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