Sign in

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

NB

NATIONAL BANKSHARES INC (NKSH)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 EPS was $0.42, up from a Q2 loss of $0.05 but below Q3 2023’s $0.52; net income was $2.68M as margins improved sequentially with loan yields outpacing deposit costs .
  • Net interest margin (FTE) rose to 2.20% from 2.13% in Q2, though slightly below 2.23% in Q3 2023; efficiency ratio increased to 69.8%, reflecting ongoing cost pressure and merger-related items .
  • Total net revenue (net interest income + noninterest income) improved sequentially to ~$11.72M from $10.95M in Q2; YoY revenue rose modestly versus Q3 2023 ($10.76M) .
  • Management highlighted positive income statement trends and continued growth initiatives, including integration of Frontier Community Bank branches and a new Roanoke branch opening; dividend of $0.78 declared for December 2024 (annual $1.51 unchanged YoY) .
  • No formal guidance was provided; directional commentary pointed to lower deposit costs in Q4 following the Fed’s September rate cut, which should support margin trajectory .

What Went Well and What Went Wrong

What Went Well

  • Sequential margin expansion: “The net interest margin improved…with increases in loan yields that outpaced increases in deposit costs” (post-FCB acquisition benefit in Q3) .
  • Loan growth: Loans increased vs Q2, led by consumer and commercial real estate, with credit quality metrics remaining solid (low charge-offs/past dues) .
  • Capital and liquidity: Bank remains well-capitalized with ample borrowing capacity and low loan-to-deposit ratio; liquidity stress tests positive .

What Went Wrong

  • Elevated cost of funds: Deposit costs remained high YoY, compressing margins vs Q3 2023; efficiency ratio worsened to 69.8% .
  • Merger costs: $150K merger-related expense in Q3 (YTD $2.89M), plus $1.29M provision tied to FCB loans earlier in the year .
  • YoY earnings pressure: EPS down to $0.42 from $0.52 in Q3 2023; GAAP net income lower YoY amid higher operating expenses and funding costs .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
EPS (Basic, $)$0.52 $(0.05) $0.42
Net Interest Income ($000)$8,640 $8,700 $9,448
Noninterest Income ($000)$2,115 $2,246 $2,272
Total Net Revenue ($000)$10,755 $10,946 $11,720
Net Interest Margin (FTE, %)2.23% 2.13% 2.20%
Efficiency Ratio (%)67.67% 68.79% 69.80%
Net Income ($000)$3,074 $(306) $2,676
Balance KPIQ3 2023Q2 2024Q3 2024
Loans, Net ($000)$838,794 $978,865 $991,331
Total Deposits ($000)$1,465,000 $1,645,052 $1,602,953
Book Value/Share ($)$19.71 $23.42 $26.38
Asset Quality KPIQ3 2023Q2 2024Q3 2024
Nonaccrual Loans ($000)$2,981 $2,507 $2,283
90+ Days Accruing ($000)$31 $234 $71
NPA / Loans + OREO (%)0.43% 0.25% 0.23%
ACL to Loans (%)1.20% 1.06% 1.03%
ACL to NPL (%)341.53% 418.91% 452.39%
Results vs EstimatesQ3 2024
EPS vs ConsensusN/A – S&P Global consensus unavailable
Revenue vs ConsensusN/A – S&P Global consensus unavailable

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Deposit costs / NIMQ4 2024No numeric guidanceExpect deposit costs to decline after Sep Fed cut; supports margin trajectoryDirectional improvement
Dividend per share (semi-annual)Dec 2, 2024$0.73 declared in Q2 2024$0.78 payable Dec 2; annual $1.51 unchanged YoYRaised semi-annual payout; annual maintained
Operating / Earnings Guidance2024NoneNoneMaintained – no formal guidance

Earnings Call Themes & Trends

Note: No Q3 2024 earnings call transcript was available in filings; themes reflect press release and 10-Q commentary.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Interest rates & deposit costsCompetition elevated; higher deposit costs compressing NIM; merger-related impacts in Q2 NIM improved sequentially as loan yields outpaced deposit costs; Fed Sep cut expected to reduce deposit costs in Q4 Improving sequentially; cautious YoY
Merger integration (FCB)FCB acquisition closed; immediate merger expenses and provision recorded in Q2 Q3 benefitted full-quarter; remaining integration costs minimal ($150K) Integration largely complete; contribution building
Liquidity & fundingStrong lines with FHLB/FRB; low loan-to-deposit ratio; stress tests positive Ample capacity maintained; specific headroom: FHLB $293M, FRB $179M Stable/robust
Credit qualityLow charge-offs/past dues; ACL methodology stable NPLs and NPA ratios declined vs Q2/YoY; ACL/NPL coverage improved Improving
Technology/cybersecurityRenegotiated contracts reduced costs in 2023 Cybersecurity expense $92 in Q3; $276 YTD, down vs 2023 Cost efficiency improved

Management Commentary

  • “Year-to-date earnings remain burdened by high interest expense, but we were pleased with the positive income statement trends in the third quarter…Our acquisition of three branch offices in new markets, along with the upcoming opening of a newly constructed office in Roanoke, demonstrate our commitment to growth and to increasing long-term shareholder value.” – F. Brad Denardo, Chairman, President & CEO .
  • “The net interest margin improved…with increases in loan yields that outpaced increases in deposit costs…If rates remain at the current level or do not decrease substantially, repricing will continue to contribute to improved interest income.” .
  • “In September, 2024, the Federal Reserve cut its target interest rate by 50 basis points…[which] is expected to reduce deposit costs during the fourth quarter of 2024.” .

Q&A Highlights

  • No Q3 2024 earnings call transcript was available in the filings; no Q&A themes to report [ListDocuments returned none for earnings-call-transcript].

Estimates Context

  • Wall Street consensus EPS and revenue estimates via S&P Global were unavailable for NKSH; the company appears thinly covered, and the S&P Global feed returned errors preventing retrieval. As a result, no beat/miss assessment vs consensus can be provided [GetEstimates error].

Key Takeaways for Investors

  • Sequential recovery: EPS rebounded to $0.42 and total net revenue rose QoQ as NIM improved; watch for further margin support as deposit costs adjust to the Fed’s September cut .
  • Integration on track: FCB acquisition provided full-quarter contribution with limited remaining merger costs in Q3; loan growth broadened in consumer and commercial real estate .
  • Asset quality strength: NPA ratio fell to 0.23% and ACL-to-NPL rose to 452%, providing cushion against credit normalization .
  • Capital and liquidity robust: Well-capitalized bank with substantial FHLB/FRB capacity and low loan-to-deposit ratio, supporting flexibility in funding and growth .
  • Expense vigilance: Efficiency ratio elevated at ~70%; continued focus on cost discipline (incl. technology/cybersecurity spend) will be key to restoring profitability metrics .
  • Dividend signal: Semi-annual payout raised to $0.78; annual dividend maintained at $1.51, underscoring confidence in capital and earnings trajectory amidst integration .
  • Near-term trading: Catalysts include Q4 margin effects from lower deposit costs and any updates on Roanoke branch opening and organic growth; lack of consensus coverage may amplify idiosyncratic moves around company disclosures .