National Bankshares surges on earnings beat, NIM expansion
Virginia community bank beats EPS estimates by 39.4% as net interest margin expands to 2.93%
National Bankshares Inc. shares rallied Thursday after the Virginia-based community bank reported fourth-quarter earnings that comfortably exceeded analyst expectations, driven by a significant expansion in net interest margin and dramatic improvement in credit quality.
The company reported quarterly earnings per share of $0.92, beating the consensus estimate of $0.66 by 39.4 percent, according to an SEC 8-K filing. Net income surged 91 percent year-over-year to $5.88 million, as the bank's net interest margin expanded to 2.93 percent from 2.33 percent in the prior-year quarter.
The margin expansion of 60 basis points came despite a challenging interest rate environment that has pressured many regional banks' profitability. National Bankshares, which operates as the parent company of the National Bank of Blacksburg, has benefited from its ability to reprice its loan book faster than its deposit costs, a key advantage for banks with strong local relationships.
Perhaps most striking was the improvement in asset quality. Nonperforming assets plummeted to $188,000 from $2,027,000 a year earlier, a reduction of more than 90 percent that underscores the bank's conservative lending practices and the relative strength of the Virginia economy it serves.
For the full year 2025, earnings per share reached $2.49, more than double the $1.24 reported in 2024, reflecting a dramatic turnaround in performance. The bank's profit margin stands at 25.1 percent, with an operating margin of 40.9 percent over the trailing twelve months.
"The combination of margin expansion and exceptional credit quality improvement is rare in the current banking environment," said analysts in market commentary. "National Bankshares has demonstrated strong asset-liability management capabilities."
The stock, which has a market capitalization of approximately $218 million, currently trades with a price-to-earnings ratio of 16.7 times trailing earnings and a price-to-book ratio of 1.22 times. Analysts have set a price target of $34.50, suggesting modest upside from current levels.
Institutional investors hold approximately 35.1 percent of the company's shares, with BlackRock as the largest holder at 6.9 percent and Vanguard Group owning 5.2 percent. The stock pays a quarterly dividend yielding 4.4 percent at current prices, providing additional income attraction for shareholders.
National Bankshares, headquartered in Blacksburg, Virginia, operates as a community-focused banking institution providing retail and commercial banking services to individuals, businesses, non-profits, and local governments across the state. The bank's relatively low beta of 0.65 suggests lower volatility compared to broader market indices.
Looking ahead, investors will be watching whether the bank can sustain its net interest margin expansion as the Federal Reserve's interest rate path remains uncertain. The dramatic improvement in nonperforming assets may also face a tougher year-over-year comparison in coming quarters given the already low base.
The earnings beat comes at a time when regional banks are under increased scrutiny following last year's industry turmoil. National Bankshares' strong credit metrics and consistent profitability position it well relative to peers, though its smaller size and geographic concentration in Virginia remain key considerations for investors.