Sign in

You're signed outSign in or to get full access.

NB

NATIONAL BANKSHARES INC (NKSH)·Q2 2015 Earnings Summary

Executive Summary

  • Q2 2015 net income was $4.11M and EPS was $0.59, essentially flat year over year (Q2 2014: $4.11M, $0.59), and up sequentially from Q1 2015 EPS of $0.57 .
  • Net interest margin compressed to 3.90% (Q2) from 4.02% (Q2 2014) and 3.95% (Q1 2015), reflecting lower yields on earning assets despite lower funding costs .
  • Loans grew $33.54M (+5.65%) YoY, with management highlighting stronger credit demand; deposits were stable with mix shifts (time deposits down YoY) .
  • No formal guidance or earnings call transcript was available; estimate comparisons could not be retrieved from S&P Global due to access limits (consensus unavailable).

What Went Well and What Went Wrong

What Went Well

  • Loan growth: “Loan growth of over $33.54 million, or 5.65%, from June 30, 2014 is a positive indicator of a stronger demand for credit” — James G. Rakes, Chairman, President & CEO .
  • Sequential efficiency improvement: Efficiency ratio improved to 48.81% in Q2 from 52.05% in Q1, aided by lower noninterest expense vs Q1 .
  • Credit card fees edged higher YoY: $976K in Q2 vs $961K in Q2 2014; trust fees remained resilient ($299K vs $332K) .

What Went Wrong

  • Margin pressure: Net interest margin fell to 3.90% (Q2) vs 4.02% (Q2 2014), driven by decline in earning asset yields; management had previously cited competitive repricing and market yields as headwinds .
  • Asset quality mix: Nonperforming assets increased YoY to $13.35M (Q2 2015) from $10.30M (Q2 2014); allowance coverage of NPLs fell to 91.31% from 159.13% YoY .
  • Dividend reduced YoY: Dividends declared per share were $0.53 in Q2 vs $0.55 in Q2 2014, modestly lowering capital return .

Financial Results

Headline Metrics vs Prior Periods

MetricQ4 2014Q1 2015Q2 2015
Net Income ($USD Millions)$4.138 $3.966 $4.110
EPS ($)$0.60 $0.57 $0.59
Net Interest Income ($USD Millions)$9.770 $9.746 $9.746
Noninterest Income ($USD Millions)$2.260 $2.240 $2.419
Net Interest Margin (%)3.92% 3.95% 3.90%
Efficiency Ratio (%)47.45% 52.05% 48.81%
Return on Avg Assets (%)1.44% 1.40% 1.43%
Dividends per Share ($)$0.58 $— $0.53

Notes:

  • Net interest income unchanged Q1→Q2; sequential EPS rose; efficiency improved from Q1 .
  • Noninterest income increased sequentially in Q2, driven by higher other income and credit card fees .

Balance Sheet and Mix

MetricQ4 2014Q1 2015Q2 2015
Loans, Net ($USD Millions)$597.203 $613.914 $618.810
Total Deposits ($USD Millions)$982.428 $984.957 $974.156
Noninterest-bearing Deposits ($USD Millions)$150.744 $160.217 $157.983
Interest-bearing Demand ($USD Millions)$533.641 $526.388 $526.749
Savings ($USD Millions)$81.297 $85.615 $86.354
Time Deposits ($USD Millions)$216.746 $212.737 $203.070

Asset Quality and Capital

MetricQ4 2014Q1 2015Q2 2015
Nonperforming Assets ($USD Millions)$14.031 $13.798 $13.346
Allowance for Loan Losses ($USD Millions)$8.263 $8.257 $8.131
Allowance / Loans (%)1.36% 1.33% 1.30%
NPA / (Loans + OREO) (%)2.30% 2.20% 2.11%
Allowance / NPLs (%)88.97% 89.51% 91.31%
CET1 Ratio (%)—25.08% —

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
————No formal guidance provided in Q2 materials .

Earnings Call Themes & Trends

No Q2 2015 earnings call transcript was available; company did not publish a call transcript in the period reviewed.

TopicPrevious Mentions (Q4 2014 and Q1 2015)Current Period (Q2 2015)Trend
Interest rate environment / marginsManagement noted low-rate environment compressing margins; net interest margin 3.92% (Q4) and 3.95% (Q1); competitive repricing pressures cited in MD&A .NIM fell to 3.90%; continued yield pressure on earning assets .Negative pressure persists.
Loan growth / demandLoans net rose to $613.9M (Q1); CEO emphasized ongoing growth opportunities .Loans net $618.8M; CEO highlighted +$33.54M (+5.65%) YoY loan growth .Positive growth.
Asset quality / TDRsNPA $13.80M; TDRs $12.12M; allowance/loans 1.33% (Q1) .NPA $13.35M; allowance/loans 1.30% .Mixed; coverage modest, NPA elevated.
Efficiency / costsEfficiency worsened to 52.05% in Q1 due to OREO write-downs and pension costs; noninterest expense +8.51% YoY (Q1) .Efficiency improved to 48.81% in Q2 .Sequential improvement.
Capital returns (dividends)$0.58 dividend in Q4 2014; no dividend declared in Q1 2015 per table .$0.53 dividend in Q2 2015 .Slightly lower YoY.

Management Commentary

  • “Loan growth of over $33.54 million, or 5.65%, from June 30, 2014 is a positive indicator of a stronger demand for credit. We continue to focus on meeting the financial needs of our customers…” — James G. Rakes, Chairman, President & CEO (Q2 press release) .
  • “We experienced write downs of $394 thousand on other real estate owned during the first quarter… increased employee benefit expenses, mostly the result of pension related costs… We still face challenges, such as the low interest rate environment which affect our margins…” — James G. Rakes (Q1 press release) .
  • “The 31 basis point decline in the yield on loans stemmed from contractual repricing terms and the renegotiation of loan interest rates in response to competition.” — MD&A (Q1 10-Q) .

Q&A Highlights

  • No Q2 earnings call transcript was available; therefore no Q&A, guidance clarifications, or tone shifts can be assessed from an analyst call in this period.

Estimates Context

  • Wall Street consensus estimates (S&P Global) for Q2 2015 EPS and revenue could not be retrieved due to access limits; as a result, comparison to consensus is unavailable for this recap.

Key Takeaways for Investors

  • Sequential stabilization: EPS improved to $0.59 with efficiency ratio down to 48.81% vs Q1’s 52.05%, signaling near-term operating leverage despite margin headwinds .
  • Margin pressure remains the central constraint: NIM slid to 3.90%, and management attributes yield compression to market/competitive dynamics—investors should watch loan pricing discipline and securities reinvestment yields .
  • Credit growth is intact: Loans net rose to $618.8M; management highlighted broad-based demand—supportive for medium-term earnings if credit costs remain contained .
  • Asset quality elevated but stable: NPAs at $13.35M and allowance coverage ~91%—monitor TDR performance and OREO dispositions as catalysts for expense variance .
  • Capital and dividends: CET1 ratio strong (25.08% as of Q1); dividend of $0.53 in Q2 supports yield, though lower YoY—board flexibility preserved by robust capital .
  • Near-term trading implications: Expect sensitivity to any indications of margin relief (rate moves, mix shift), and to asset quality headlines; medium-term thesis hinges on sustained loan growth and cost control with disciplined credit underwriting .