National Bankshares(NKSH) - 2021 Q1 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements This section presents National Bankshares, Inc.'s unaudited consolidated financial statements for Q1 2021, along with detailed notes on accounting policies and financial components Consolidated Balance Sheets As of March 31, 2021, total assets grew to $1.57 billion from $1.52 billion at year-end 2020, funded by increased deposits, while stockholders' equity decreased to $189.1 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $1,568,210 | $1,519,673 | | Loans, net | $770,824 | $760,318 | | Securities available for sale | $571,359 | $546,742 | | Total Liabilities | $1,379,141 | $1,319,066 | | Total deposits | $1,358,588 | $1,297,143 | | Total Stockholders' Equity | $189,069 | $200,607 | Consolidated Statements of Income For Q1 2021, net income increased by 19.8% to $4.77 million, driven by higher net interest and noninterest income, and a substantially lower provision for loan losses Q1 2021 vs Q1 2020 Income Statement (in thousands, except EPS) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Interest Income | $10,027 | $9,592 | | Provision for loan losses | $50 | $479 | | Noninterest Income | $2,334 | $2,135 | | Noninterest Expense | $6,536 | $6,467 | | Net Income | $4,766 | $3,979 | | Fully diluted EPS | $0.74 | $0.61 | Consolidated Statements of Comprehensive Income The company reported a total comprehensive loss of $7.55 million for Q1 2021, primarily due to a significant unrealized holding loss on available-for-sale securities Comprehensive Income (Loss) Summary (in thousands) | Component | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Income | $4,766 | $3,979 | | Other comprehensive income (loss), net of tax | ($12,313) | $3,854 | | Total Comprehensive Income (Loss) | ($7,547) | $7,833 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased from $200.6 million to $189.1 million in Q1 2021, primarily due to an other comprehensive loss and share repurchases, partially offset by net income - Key drivers for the change in stockholders' equity in Q1 2021 were net income of $4.77 million, common stock repurchases of $3.99 million (111,832 shares), and an other comprehensive loss of $12.31 million[19] Consolidated Statements of Cash Flows For Q1 2021, net cash provided by operating activities was $6.8 million, with investing activities using $64.7 million, largely funded by $57.5 million from financing activities Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,753 | $5,213 | | Net cash provided by (used in) investing activities | ($64,677) | $8,471 | | Net cash provided by (used in) financing activities | $57,454 | ($11,570) | | Net change in cash and due from banks | ($470) | $2,114 | Notes to Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies and financial statement components, including COVID-19 risks and CECL adoption - The company highlights the continued risks and uncertainties from the COVID-19 pandemic, which could adversely affect its business, financial condition, and results of operations, particularly in areas like interest income, lending, and credit quality[28][29][30] - The company is preparing for the adoption of the Current Expected Credit Losses (CECL) methodology (ASU 2016-13), which will be effective for fiscal years beginning after December 15, 2022[42] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes the company's Q1 2021 financial condition and operations, covering profitability, asset quality, liquidity, and capital resources Key Performance Ratios (Annualized) | Ratio | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Return on average assets | 1.19% | 1.16% | | Return on average equity | 9.30% | 8.03% | | Net interest margin | 2.89% | 3.20% | | Efficiency ratio | 53.87% | 55.67% | - The company participated in the SBA Paycheck Protection Program (PPP), holding $43.6 million in PPP loans as of March 31, 2021. These loans positively impacted net interest income[228][291] - In response to the COVID-19 pandemic, the company provided modifications to 39 loans totaling $34.2 million in Q1 2021. These were not designated as Troubled Debt Restructurings (TDRs) per regulatory guidance[276][278] Quantitative and Qualitative Disclosures About Market Risk The company identifies interest rate risk as its most significant market risk, with no material changes since the 2020 Form 10-K disclosures - The company's primary market risk is interest rate risk, and there have been no significant changes to its exposure since the end of 2020[329] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[330] - No material changes were made to the company's internal control over financial reporting during the first quarter of 2021[332] Part II – Other Information Legal Proceedings The company reports no pending or threatened legal proceedings expected to materially impact its financial condition - There are no material pending or threatened legal proceedings against the company[335] Risk Factors This section refers to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K and forward-looking statements - For a discussion of risk factors, the report refers to the company's 2020 Form 10-K[336] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company repurchased 111,832 shares of common stock at an average price of $35.69 per share under its authorized program Share Repurchase Activity (Q1 2021) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2021 | 0 | --- | | Feb 2021 | 25,900 | $33.22 | | Mar 2021 | 85,932 | $36.43 | | Total | 111,832 | $35.69 | Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[338] Mine Safety Disclosures This item is not applicable to the company - Not applicable[339] Other Information The company reported no other information for this item - None[340] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and financial data formatted in iXBRL