National Bankshares, Inc.

What they do

NBI is a financial holding company organized in 1986 under Virginia law, listed on Nasdaq under NKSH. It owns The National Bank of Blacksburg (chartered 1891), a community bank with 28 banking locations across southwest, western and central Virginia, including a Roanoke branch opened in 2025, an upgraded Lynchburg location and a Charlottesville loan production office. The Bank offers retail and commercial lending, deposits, and trust/wealth management, and operates 26 ATMs. Its other subsidiary, National Bankshares Financial Services, Inc., offers non-deposit investment and insurance products and does not significantly contribute to net income.

Revenue drivers

• Interest and fees on loans — The largest revenue component at 65.00% of total operating revenue in 2025, up from 60.59% in 2024. Lending focuses on small and mid-sized businesses and individuals, including commercial and agricultural, commercial real estate, construction, residential real estate, home equity and consumer loans.
• Interest on investments — The second-largest component at approximately 19% of total operating revenue in 2025. The securities portfolio was repositioned in Q2 2026, selling securities yielding 1.80% and buying mortgage-backed securities yielding 5.26%.
• Noninterest income — Includes service charges on deposit accounts (non-sufficient funds fees), credit and debit card fees, trust income and gains on sale of mortgage loans held for sale. Trust income improved in Q2 2026 on estate fee income.
• Insurance and investment services — Provided through NBFS, which works with Osaic, Inc. for investments and Bearing Insurance Group, LLC for insurance. NBFS does not significantly contribute to NBI's net income.

Recent performance

For the six months ended June 30, 2026, the Company reported net income of $10.01 million, or $1.57 per diluted common share, versus $5.53 million, or $0.87 per diluted common share, in the first half of 2025. Q2 2026 net income was $5.03 million, or $0.79 per diluted share, compared with $2.29 million, or $0.36 per diluted share, in Q2 2025. Results included a $6.57 million gain on the sale of the Company's membership interest in Bearing Insurance Group, LLC, and a $6.55 million pre-tax loss on the repositioning of a portion of the available-for-sale securities portfolio. Total assets were $1.83 billion at June 30, 2026. Annual net income was $15.8 million in 2025 on $8.2 million of revenue, with diluted EPS of $2.49.

Strategy

In Q2 2026 the Company sold its stake in a community-bank insurance consortium and used the proceeds to reposition part of the securities portfolio, selling $110.69 million amortized cost of agency securities and $21.18 million of mortgage-backed securities and purchasing $127.33 million of mortgage-backed securities. Management expects this to increase interest income by $4.25 million annually, adding 12 basis points to projected 2026 net interest margin and 24 basis points to 2027. The Company cites recent expansions, including the 2025 Roanoke branch, the upgraded Lynchburg location and the Charlottesville loan production office, as it focuses on building market share. Prior expansion included the June 1, 2024 acquisition of Frontier Community Bank. Management also cites optimizing products, technology and training.

Risks

• Small-business credit concentration — Most commercial business and commercial real estate loans are to small business or middle market customers, which the Company says have fewer financial resources and heightened vulnerability to economic conditions.
• Allowance adequacy — The allowance for credit losses on loans may not cover actual losses, and future provisions could materially and adversely affect operating results.
• Interest rate and margin pressure — Inflation and changes in interest rates could reduce margins or the fair value of financial instruments.
• Deposit retention and liquidity — The Company cites the ability to maintain adequate liquidity by retaining deposit customers and secondary funding sources, especially if its or the banking industry's reputation is damaged.

Outlook

Management said that in the second half of 2026 and beyond it will focus on building market share, especially through recent expansions, while optimizing products, technology and training. The securities repositioning is expected to add $4.25 million in annual interest income and 12 basis points to the 2026 projected net interest margin and 24 basis points to 2027. The Company expects to recover the $6.55 million pre-tax loss on the sale through improved earnings over approximately 1.8 years. No specific earnings or revenue guidance figures were provided beyond these margin and income expectations.