National Bankshares' Net Income Soars 65% on Strong Net Interest Growth

TL;DR

**NKSH is crushing it with net income up 65%, but keep an eye on those shrinking deposits.**

AI Summary

NATIONAL BANKSHARES INC (NKSH) reported a significant increase in net income for the three months ended September 30, 2025, reaching $4.42 million, up 65.1% from $2.677 million in the same period of 2024. For the nine months ended September 30, 2025, net income more than doubled to $9.945 million from $4.544 million in 2024. This growth was primarily driven by a substantial increase in net interest income, which rose to $11.674 million for the three-month period, a 23.7% increase from $9.433 million in 2024, and to $32.915 million for the nine-month period, a 24.9% increase from $26.340 million. Total assets slightly decreased to $1.802 billion as of September 30, 2025, from $1.811 billion at December 31, 2024, while total deposits decreased to $1.561 billion from $1.644 billion. Loans, net, increased to $1.005 billion from $977.688 million. The company also saw an increase in its allowance for credit losses to $10.579 million from $10.262 million, reflecting a provision for credit losses of $306,000 for the three months ended September 30, 2025, compared to a recovery of $5,000 in the prior year. Stockholders' equity improved significantly to $179.22 million from $156.409 million at December 31, 2024, largely due to an unrealized holding gain on available-for-sale securities.

Why It Matters

This strong performance by NATIONAL BANKSHARES INC (NKSH) indicates effective management of its interest-earning assets and liabilities, leading to a substantial boost in profitability for investors. The significant increase in net interest income suggests the bank is successfully navigating the current interest rate environment, potentially outperforming regional peers. For employees, this financial health could translate into job security and growth opportunities. Customers might benefit from a more stable and competitive banking partner, although the decrease in total deposits could signal some customer outflow or strategic deposit management. The broader market will watch if NKSH can sustain this growth, especially given the slight decrease in total assets and deposits, which could impact its competitive standing against larger financial institutions.

Risk Assessment

Risk Level: medium — The company's total deposits decreased by $82.848 million from $1.644 billion at December 31, 2024, to $1.561 billion at September 30, 2025, including a $71.201 million drop in interest-bearing demand deposits. This decline in deposits, coupled with an increase in borrowings to $50 million from zero, indicates a potential shift in funding strategy or increased cost of funds, which could impact future net interest margin. Additionally, the provision for credit losses increased to $306,000 for the three months ended September 30, 2025, from a recovery of $5,000 in the prior year, suggesting a more cautious outlook on loan quality.

Analyst Insight

Investors should consider NKSH's strong net income growth and improved stockholders' equity as positive indicators. However, they should closely monitor future deposit trends and the cost of borrowings, as these could impact sustained profitability. A deeper dive into the composition of the loan portfolio and the drivers behind the increased provision for credit losses would also be prudent to assess underlying credit risk.

Financial Highlights

debt To Equity

0.28

revenue

$16,272,000

operating Margin

N/A

total Assets

$1,802,407,000

total Debt

$51,616,000

net Income

$4,420,000

eps

$0.70

gross Margin

N/A

cash Position

$42,305,000

revenue Growth

+13.6%

Revenue Breakdown

Key Numbers

• $4.42M — Net Income (Q3 2025) (Increased 65.1% from $2.677M in Q3 2024)
• $9.945M — Net Income (YTD Sep 2025) (Increased 118.9% from $4.544M in YTD Sep 2024)
• $11.674M — Net Interest Income (Q3 2025) (Increased 23.7% from $9.433M in Q3 2024)
• $32.915M — Net Interest Income (YTD Sep 2025) (Increased 24.9% from $26.340M in YTD Sep 2024)
• $1.005B — Loans, net (Sep 30, 2025) (Increased from $977.688M at Dec 31, 2024)
• $1.561B — Total Deposits (Sep 30, 2025) (Decreased from $1.644B at Dec 31, 2024)
• $50M — Borrowings (Sep 30, 2025) (Increased from $0 at Dec 31, 2024)
• $179.22M — Total Stockholders' Equity (Sep 30, 2025) (Increased from $156.409M at Dec 31, 2024)
• $0.70 — Basic Net Income Per Common Share (Q3 2025) (Increased from $0.42 in Q3 2024)
• $1.56 — Basic Net Income Per Common Share (YTD Sep 2025) (Increased from $0.75 in YTD Sep 2024)

Key Players & Entities

• NATIONAL BANKSHARES, INC. (company) — registrant
• The National Bank of Blacksburg (company) — wholly-owned subsidiary
• National Bankshares Financial Services, Inc. (company) — wholly-owned subsidiary
• FASB (regulator) — Financial Accounting Standards Board
• $4.42 million (dollar_amount) — Net Income for Q3 2025
• $2.677 million (dollar_amount) — Net Income for Q3 2024
• $9.945 million (dollar_amount) — Net Income for nine months ended Sep 30, 2025
• $4.544 million (dollar_amount) — Net Income for nine months ended Sep 30, 2024
• $1.802 billion (dollar_amount) — Total assets as of September 30, 2025
• $1.561 billion (dollar_amount) — Total deposits as of September 30, 2025

FAQ

Risk Factors

• Credit Loss Provisions [medium — financial]: The company recorded a provision for credit losses of $306,000 for the three months ended September 30, 2025, a significant shift from a recovery of $5,000 in the prior year. The allowance for credit losses increased to $10.579 million from $10.262 million, indicating management's increased caution regarding potential loan defaults.
• Deposit Outflows [medium — financial]: Total deposits decreased to $1.561 billion from $1.644 billion at December 31, 2024. This outflow, coupled with an increase in borrowings to $50 million from $0, suggests potential liquidity management challenges or a strategic shift in funding sources.
• Interest Rate Sensitivity [medium — market]: While net interest income increased significantly, the company's performance is sensitive to interest rate fluctuations. Changes in interest income from loans ($14.232M vs $13.174M) and securities ($3.704M vs $4.177M taxable) highlight this sensitivity.
• Asset Management [low — operational]: Total assets saw a slight decrease to $1.802 billion from $1.811 billion. While loans net increased to $1.005 billion, a decrease in cash and cash equivalents (from $108.117M to $42.305M) warrants monitoring.

Industry Context

National Bankshares Inc. operates within the community banking sector, characterized by a focus on local markets and relationship-based lending. The industry is highly competitive, facing pressure from larger national banks, credit unions, and increasingly, fintech companies. Trends include a continued focus on digital transformation, evolving regulatory landscapes, and managing interest rate sensitivity.

Regulatory Implications

As a financial institution, NKSH is subject to stringent regulatory oversight from bodies like the FDIC and state banking authorities. Compliance with capital adequacy, liquidity, and consumer protection regulations is paramount. The increase in the allowance for credit losses and the provision for credit losses may attract regulatory scrutiny regarding loan portfolio quality.

What Investors Should Do

1. Monitor loan portfolio quality and credit loss trends.
2. Analyze the drivers of deposit outflows and increased borrowings.
3. Evaluate the impact of interest rate changes on net interest income.
4. Assess the contribution of non-interest income sources.

Key Dates

• 2025-09-30: Quarterly Financial Reporting — Reported significant net income growth of 65.1% and net interest income increase of 23.7% for Q3 2025.
• 2025-09-30: Balance Sheet Date — Total assets slightly decreased to $1.802B, while loans net increased to $1.005B and total deposits decreased to $1.561B.
• 2024-12-31: Prior Year End Reporting — Provided the comparative baseline for asset, liability, and equity changes, with total assets at $1.811B and total equity at $156.409M.

Glossary

Net Interest Income

The difference between interest income generated by the bank and the interest paid out to its depositors and lenders. (A primary driver of profitability for banks, which increased by 23.7% to $11.674 million in Q3 2025.)

Allowance for Credit Losses

An estimate of the losses expected from loans that may not be repaid. (Increased to $10.579 million, reflecting a provision of $306,000 for Q3 2025, indicating potential concerns about loan quality.)

Available-for-sale securities

Investments in debt or equity securities that are not classified as held-to-maturity or trading securities. Their unrealized gains or losses are reported in other comprehensive income. (An unrealized holding gain on these securities contributed significantly to the improvement in stockholders' equity.)

BOLI

Bank-Owned Life Insurance. Life insurance policies owned by the bank on the lives of key employees or directors, often used as an investment or to fund employee benefits. (Represents a significant asset on the balance sheet ($48.262 million as of Sep 30, 2025).)

Core deposit intangible, net

An intangible asset representing the value of a bank's stable, low-cost core deposit base. (Decreased from $1.863 million to $1.579 million, suggesting amortization or a re-evaluation of this intangible asset.)

Year-Over-Year Comparison

Compared to the prior year-end (December 31, 2024), National Bankshares Inc. has seen a slight decrease in total assets ($1.802B vs $1.811B) and a notable decrease in total deposits ($1.561B vs $1.644B). However, loans net have grown to $1.005B from $977.688M. Stockholders' equity has significantly improved to $179.22M from $156.409M, largely due to unrealized gains on securities. The company has also introduced $50 million in borrowings, a change from zero at year-end.

Key Financial Figures

• $1.25 — ch registered Common Stock, par value $1.25 per share NKSH Nasdaq Capital Marke

Filing Documents

• nksh-20250930.htm (10-Q) — 6239KB
• nksh-ex31_i.htm (EX-31.I) — 13KB
• nksh-ex31_ii.htm (EX-31.II) — 14KB
• nksh-ex32_i.htm (EX-32.I) — 6KB
• nksh-ex32_ii.htm (EX-32.II) — 6KB
• 0001193125-25-279374.txt ( ) — 25295KB
• nksh-20250930.xsd (EX-101.SCH) — 1636KB
• nksh-20250930_htm.xml (XML) — 7689KB

– Financial Information

Part I – Financial Information Page Item 1

Financial Statements

Financial Statements 3 Consolidated Balance Sheets, September 30, 2025 (Unaudited) and December 31, 2024 3 Consolidated Statements of Income for the Three Months Ended September 30, 2025 and 2024 (Unaudited) 4 Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2025 and 2024 (Unaudited) 5 Consolidated Statements of Income for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 6 Consolidated Statements of Comprehensive Income for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 7 Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended September 30, 2025 and 2024 (Unaudited) 8 Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 8 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 9

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 11 Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Item 3

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 45 Item 4

Controls and Procedures

Controls and Procedures 45

– Other Information

Part II – Other Information Item 1

Legal Proceedings

Legal Proceedings 45 Item 1A

Risk Factors

Risk Factors 45 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 45 Item 3 Defaults Upon Senior Securities 46 Item 4 Mine Safety Disclosures 46 Item 5 Other Information 47 Item 6 Exhibits 47

Signatures

Signatures 48 2 Table of Contents Pa rt I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements National Bankshares, Inc. Consol idated Balance Sheets (Unaudited) September 30, December 31, (in thousands, except share and per share data) 2025 2024 Assets Cash and due from banks $ 9,192 $ 13,564 Interest-bearing deposits 33,113 94,254 Federal funds sold - 299 Total cash and cash equivalents 42,305 108,117 Securities available for sale, at fair value 630,483 601,898 Mortgage loans held for sale 535 619 Loans: Real estate construction loans 46,381 50,798 Consumer real estate loans 324,597 307,855 Commercial real estate loans 490,968 478,078 Commercial non real estate loans 53,532 51,844 Public sector and IDA loans 54,332 57,171 Consumer non real estate loans 47,135 42,867 Total loans 1,016,945 988,613 Less: deferred fees and costs ( 543 ) ( 663 ) Loans, net of deferred fees and costs 1,016,402 987,950 Less: allowance for credit losses ( 10,579 ) ( 10,262 ) Loans, net 1,005,823 977,688 Premises and equipment, net 19,812 18,131 Accrued interest receivable 6,677 6,469 Goodwill 10,718 10,718 Core deposit intangible, net 1,579 1,863 Bank-owned life insurance ("BOLI") 48,262 47,369 Other assets 36,213 38,764 Total assets $ 1,802,407 $ 1,811,636 Liabilities and Stockholders' Equity Noninterest-bearing demand deposits $ 312,578 $ 290,088 Interest-bearing demand deposits 793,552 864,753 Savings deposits 140,635 143,109 Time deposits 315,139 346,802 Total deposits 1,561,904 1,644,752 Borrowings 50,000 - Accrued interest payable 1,616 1,462 Other liabilities 9,667 9,013 Total liabilities $ 1,623,187 $ 1,655,227 Commitments and contingencies Stockholders' Equity Preferred stock, no par value, 5,000,000 shares authorized; no ne issued and outstanding $ - $ - Common stock of $ 1.25 par value a

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