National Bankshares (NKSH) Q2 2024 earnings summary

Executive summary

• Completed acquisition of Frontier Community Bank on June 1, 2024, expanding into new Virginia markets and increasing average balances, net interest income, and expenses for Q2 and H1 2024 compared to prior periods.

• Net income for H1 2024 was $1.87 million ($0.31 per share), down from $8.43 million ($1.43 per share) in H1 2023, mainly due to net interest margin compression, merger-related expenses, and credit loss provisions.

• Net income for Q2 2024 was $(306) thousand, down from $3,901 thousand in Q2 2023.

• Net interest margin declined to 2.13% for Q2 2024 and 2.11% for H1 2024, compared to 2.34% and 2.57% in the prior year periods.

• The merger with FCB is expected to support future growth and expand the branch network.

Financial highlights

• Total assets increased to $1.81 billion at June 30, 2024, up from $1.66 billion at December 31, 2023, and $1.63 billion a year earlier, reflecting the FCB acquisition.

• Loans, net, rose to $978.9 million, and total deposits grew to $1.65 billion since year-end 2023.

• Net interest income for H1 2024 was $16.95 million, down from $20.16 million year-over-year.

• Noninterest expense increased 33.9% year-over-year for Q2 2024, driven by $2.74 million in merger-related costs and a $173,000 contract termination expense.

• Efficiency ratio worsened to 68.8% for Q2 2024 and 68.45% for H1 2024, from 62.5% and 58.03% in the prior year.

Outlook and guidance

• Management expects continued pressure on net interest margin due to higher funding costs, but anticipates further repricing of adjustable loans may support interest income if rates remain stable.

• The company expects growth opportunities from the expanded branch network and new markets following the FCB merger.

• Construction of a new branch in Roanoke, VA, is expected to complete in the second half of 2024.