[x]QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For
the quarterly period ended June 30, 2010
|
[ ]TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
Virginia
(State
or other jurisdiction of incorporation or organization)
|
54-1375874
(I.R.S.
Employer Identification No.)
|
101
Hubbard Street
P.
O. Box 90002
Blacksburg,
VA
|
24062-9002
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Class
Common
Stock, $1.25 Par Value
|
Outstanding at July 30, 2010
6,933,474
|
Page
|
||
Item
1
|
3
|
|
3-4
|
||
5-6
|
||
7-8
|
||
9
|
||
|
||
10-11
|
||
|
||
12-20
|
||
Item
2
|
20-28
|
|
Item
3
|
28
|
|
Item
4
|
28
|
|
Item
1
|
28
|
|
Item
1A
|
28
|
|
Item
2
|
28
|
|
Item
3
|
29
|
|
|
||
Item
4
|
29
|
|
|
||
Item
5
|
29
|
|
Item
6
|
29
|
|
29
|
||
30-31
|
|
(Unaudited)
|
|||||||
June
30,
|
December
31,
|
|||||||
$
in thousands, except per share data
|
2010
|
2009
|
||||||
Assets
|
||||||||
Cash
and due from banks
|
$
|
12,609
|
$
|
12,894
|
||||
Interest-bearing
deposits
|
53,311
|
32,730
|
||||||
Securities
available for sale, at fair value
|
161,691
|
168,041
|
||||||
Securities
held to maturity (fair value approximates $134,946 at June 30, 2010 and
$129,892 at December 31, 2009)
|
132,893
|
129,376
|
||||||
Mortgage
loans held for sale
|
2,191
|
126
|
||||||
Loans:
|
||||||||
Real
estate construction loans
|
48,604
|
45,625
|
||||||
Real
estate mortgage loans
|
173,724
|
165,542
|
||||||
Commercial
and industrial loans
|
270,897
|
283,998
|
||||||
Loans
to individuals
|
90,702
|
95,844
|
||||||
Total
loans
|
583,927
|
591,009
|
||||||
Less
unearned income and deferred fees
|
(1,002
|
)
|
(1,062
|
)
|
||||
Loans,
net of unearned income and deferred fees
|
582,925
|
589,947
|
||||||
Less
allowance for loan losses
|
(7,553
|
)
|
(6,926
|
)
|
||||
Loans,
net
|
575,372
|
583,021
|
||||||
Premises
and equipment, net
|
10,721
|
10,628
|
||||||
Accrued
interest receivable
|
6,023
|
6,250
|
||||||
Other
real estate owned, net
|
3,170
|
2,126
|
||||||
Intangible
assets and goodwill
|
12,084
|
12,626
|
||||||
Other
assets
|
24,810
|
24,549
|
||||||
Total
assets
|
$
|
994,875
|
$
|
982,367
|
||||
Liabilities
and Stockholders' Equity
|
||||||||
Noninterest-bearing
demand deposits
|
$
|
125,694
|
$
|
122,549
|
||||
Interest-bearing
demand deposits
|
324,038
|
310,629
|
||||||
Savings
deposits
|
58,399
|
51,622
|
||||||
Time
deposits
|
351,206
|
367,312
|
||||||
Total
deposits
|
859,337
|
852,112
|
||||||
Accrued
interest payable
|
356
|
336
|
||||||
Other
liabilities
|
7,357
|
7,843
|
||||||
Total
liabilities
|
867,050
|
860,291
|
||||||
Commitments
and contingencies
|
---
|
---
|
Stockholders'
Equity
|
||||||||
Preferred stock, no par value,
5,000,000 sharesauthorized;
|
||||||||
none
issued and outstanding
|
---
|
---
|
||||||
Common stock of $1.25 par
value.
|
||||||||
Authorized 10,000,000 shares;
issued and outstanding 6,933,474 shares in 2010 and in
2009
|
8,667
|
8,667
|
||||||
Retained
earnings
|
118,615
|
113,901
|
||||||
Accumulated other comprehensive
income (loss), net
|
543
|
(492
|
)
|
|||||
Total stockholders'
equity
|
127,825
|
122,076
|
||||||
Total liabilities and
stockholders' equity
|
$
|
994,875
|
$
|
982,367
|
June
30,
|
June
30,
|
|||||||
$
in thousands, except per share data
|
2010
|
2009
|
||||||
Interest
Income
|
||||||||
Interest
and fees on loans
|
$
|
9,260
|
$
|
9,392
|
||||
Interest
on interest-bearing deposits
|
30
|
26
|
||||||
Interest
on securities – taxable
|
1,466
|
1,605
|
||||||
Interest
on securities – nontaxable
|
1,591
|
1,688
|
||||||
Total
interest income
|
12,347
|
12,711
|
||||||
Interest
Expense
|
||||||||
Interest
on time deposits of $100,000 or more
|
894
|
1,493
|
||||||
Interest
on other deposits
|
1,956
|
2,781
|
||||||
Total
interest expense
|
2,850
|
4,274
|
||||||
Net
interest income
|
9,497
|
8,437
|
||||||
Provision
for loan losses
|
852
|
278
|
||||||
Net
interest income after provision for loan losses
|
8,645
|
8,159
|
||||||
Noninterest
Income
|
||||||||
Service
charges on deposit accounts
|
772
|
837
|
||||||
Other
service charges and fees
|
54
|
83
|
||||||
Credit
card fees
|
760
|
712
|
||||||
Trust
income
|
261
|
261
|
||||||
BOLI
income
|
176
|
172
|
||||||
Other
income
|
89
|
117
|
||||||
Realized
securities gains (losses), net
|
11
|
(10
|
)
|
|||||
Total
noninterest income
|
2,123
|
2,172
|
||||||
Noninterest
Expense
|
||||||||
Salaries
and employee benefits
|
2,654
|
2,794
|
||||||
Occupancy
and furniture and fixtures
|
477
|
425
|
||||||
Data
processing and ATM
|
349
|
314
|
||||||
FDIC
assessment
|
269
|
885
|
||||||
Credit
card processing
|
584
|
538
|
||||||
Intangible
assets amortization
|
271
|
273
|
||||||
Net
costs of other real estate owned
|
27
|
11
|
||||||
Franchise
taxes
|
242
|
273
|
||||||
Other
operating expenses
|
824
|
667
|
||||||
Total
noninterest expense
|
5,697
|
6,180
|
||||||
Income
before income taxes
|
5,071
|
4,151
|
||||||
Income
tax expense
|
1,075
|
794
|
||||||
Net
Income
|
$
|
3,996
|
$
|
3,357
|
||||
Basic
net income per share
|
$
|
0.58
|
$
|
0.48
|
||||
Fully
diluted net income per share
|
$
|
0.58
|
$
|
0.48
|
||||
Weighted
average number of common
|
||||||||
shares
outstanding – basic
|
6,933,474
|
6,932,023
|
||||||
Weighted
average number of common
|
||||||||
shares
outstanding – diluted
|
6,946,650
|
6,945,161
|
||||||
Dividends
declared per share
|
$
|
0.44
|
$
|
0.41
|
June
30,
|
June
30,
|
|||||||
$
in thousands, except per share data
|
2010
|
2009
|
||||||
Interest
Income
|
||||||||
Interest
and fees on loans
|
$
|
18,436
|
$
|
18,854
|
||||
Interest
on interest-bearing deposits
|
49
|
50
|
||||||
Interest
on securities – taxable
|
2,909
|
3,166
|
||||||
Interest
on securities – nontaxable
|
3,193
|
3,219
|
||||||
Total
interest income
|
24,587
|
25,289
|
||||||
Interest
Expense
|
||||||||
Interest
on time deposits of $100,000 or more
|
1,840
|
2,984
|
||||||
Interest
on other deposits
|
3,989
|
5,701
|
||||||
Interest
on borrowed funds
|
---
|
1
|
||||||
Total
interest expense
|
5,829
|
8,686
|
||||||
Net
interest income
|
18,758
|
16,603
|
||||||
Provision
for loan losses
|
1,499
|
648
|
||||||
Net
interest income after provision for loan losses
|
17,259
|
15,955
|
||||||
Noninterest
Income
|
||||||||
Service
charges on deposit accounts
|
1,486
|
1,641
|
||||||
Other
service charges and fees
|
151
|
156
|
||||||
Credit
card fees
|
1,426
|
1,337
|
||||||
Trust
income
|
530
|
537
|
||||||
BOLI
income
|
361
|
353
|
||||||
Other
income
|
143
|
185
|
||||||
Realized
securities gains (losses), net
|
(3
|
)
|
70
|
|||||
Total
noninterest income
|
4,094
|
4,279
|
||||||
Noninterest
Expense
|
||||||||
Salaries
and employee benefits
|
5,510
|
5,625
|
||||||
Occupancy
and furniture and fixtures
|
968
|
894
|
||||||
Data
processing and ATM
|
706
|
636
|
||||||
FDIC
assessment
|
532
|
1,006
|
||||||
Credit
card processing
|
1,092
|
1,001
|
||||||
Intangible
assets amortization
|
542
|
551
|
||||||
Net
costs of other real estate owned
|
60
|
71
|
||||||
Franchise
taxes
|
481
|
445
|
||||||
Other
operating expenses
|
1,590
|
1,581
|
||||||
Total
noninterest expense
|
11,481
|
11,810
|
||||||
Income
before income taxes
|
9,872
|
8,424
|
||||||
Income
tax expense
|
2,107
|
1,680
|
||||||
Net
Income
|
$
|
7,765
|
$
|
6,744
|
Basic
net income per share
|
$
|
1.12
|
$
|
0.97
|
||||
Fully
diluted net income per share
|
$
|
1.12
|
$
|
0.97
|
||||
Weighted
average number of common
|
||||||||
shares
outstanding – basic
|
6,933,474
|
6,930,756
|
||||||
Weighted
average number of common
|
||||||||
shares
outstanding – diluted
|
6,949,731
|
6,940,011
|
||||||
Dividends
declared per share
|
$
|
0.44
|
$
|
0.41
|
$
in thousands, except per share data
|
Common
Stock
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Comprehensive
Income
|
Total
|
|||||||||||||||
Balances
at December 31, 2008
|
$ | 8,662 | $ | 105,356 | $ | (3,910 | ) |
|
$ | 110,108 | ||||||||||
Net
income
|
--- | 6,744 | --- | $ | 6,744 | 6,744 | ||||||||||||||
Dividends
$0.41 per share
|
(2,843 | ) | (2,843 | ) | ||||||||||||||||
Exercise
of stock options
|
5 | 50 | 55 | |||||||||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||||||
Unrealized
gain on securities available for sale, net of income tax
$512
|
--- | --- | --- | 951 | --- | |||||||||||||||
Reclass
adjustment, net of tax $(19)
|
--- | --- | --- | (36 | ) | --- | ||||||||||||||
Other
comprehensive income, net of tax $493
|
--- | --- | 915 | 915 | 915 | |||||||||||||||
Comprehensive
income
|
--- | --- | --- | $ | 7,659 | --- | ||||||||||||||
Balances
at June 30, 2009
|
$ | 8,667 | $ | 109,307 | $ | (2,995 | ) | $ | 114,979 | |||||||||||
Balances
at December 31, 2009
|
$ | 8,667 | $ | 113,901 | $ | (492 | ) | $ | 122,076 | |||||||||||
Net
income
|
--- | 7,765 | --- | $ | 7,765 | 7,765 | ||||||||||||||
Dividends
$0.44 per share
|
(3,051 | ) | (3,051 | ) | ||||||||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||||||
Unrealized
gain on securities available for sale, net of income tax
$555
|
--- | --- | --- | 1,032 | --- | |||||||||||||||
Reclass
adjustment, net of tax $2
|
--- | --- | --- | 3 | --- | |||||||||||||||
Other
comprehensive income, net of tax $557
|
--- | --- | 1,035 | 1,035 | 1,035 | |||||||||||||||
Comprehensive
income
|
--- | --- | --- | $ | 8,800 | --- | ||||||||||||||
Balances
at June 30, 2010
|
$ | 8,667 | $ | 118,615 | $ | 543 | $ | 127,825 |
June
30,
|
June
30,
|
|||||||
$
in thousands
|
2010
|
2009
|
||||||
Cash
Flows from Operating Activities
|
||||||||
Net
income
|
$ | 7,765 | $ | 6,744 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Provision
for loan losses
|
1,499 | 648 | ||||||
Depreciation
of bank premises and equipment
|
446 | 462 | ||||||
Amortization
of intangibles
|
542 | 551 | ||||||
Amortization
of premiums and accretion of discounts, net
|
156 | 178 | ||||||
(Gains)
Losses on sales and calls of securities available for sale,
net
|
4 | (58 | ) | |||||
(Gains)
on calls of securities held to maturity, net
|
(1 | ) | (12 | ) | ||||
Losses and write-downs on other
real estate owned
|
1 | 44 | ||||||
Net
change in:
|
||||||||
Mortgage
loans held for sale
|
(2,065 | ) | (1,142 | ) | ||||
Accrued
interest receivable
|
227 | (758 | ) | |||||
Other
assets
|
(777 | ) | (742 | ) | ||||
Accrued
interest payable
|
20 | (97 | ) | |||||
Other
liabilities
|
(486 | ) | 605 | |||||
Net cash provided by operating
activities
|
7,331 | 6,423 | ||||||
Cash
Flows from Investing Activities
|
||||||||
Net
change interest-bearing deposits
|
(20,581 | ) | (8,036 | ) | ||||
Proceeds
from calls, principal payments, sales and maturities of securities
available for sale
|
32,416 | 15,414 | ||||||
Proceeds
from calls, principal payments and maturities of securities held to
maturity
|
15,968 | 28,231 | ||||||
Purchases
of securities available for sale
|
(24,625 | ) | (36,644 | ) | ||||
Purchases
of securities held to maturity
|
(19,534 | ) | (47,024 | ) | ||||
Purchases
of loan participations
|
--- | (13 | ) | |||||
Collections
of loan participations
|
2,671 | 596 | ||||||
Loan
originations and principal collections, net
|
1,851 | (1,612 | ) | |||||
Proceeds
from disposal of other real estate owned
|
484 | 267 | ||||||
Recoveries
on loans charged off
|
99 | 32 | ||||||
Additions
to bank premises and equipment
|
(539 | ) | (132 | ) | ||||
Net cash used in investing
activities
|
(11,790 | ) | (48,921 | ) | ||||
Cash
Flows from Financing Activities
|
||||||||
Net
change in time deposits
|
(16,106 | ) | 3,132 | |||||
Net
change in other deposits
|
23,331 | 40,882 | ||||||
Net
change in other borrowed funds
|
--- | (5 | ) | |||||
Cash
dividends
|
(3,051 | ) | (2,843 | ) | ||||
Stock
options exercised
|
--- | 55 | ||||||
Net cash provided by financing
activities
|
4,174 | 41,221 | ||||||
Net
change in cash and due from banks
|
(285 | ) | (1,277 | ) | ||||
Cash
and due from banks at beginning of period
|
12,894 | 16,316 | ||||||
Cash
and due from banks at end of period
|
$ | 12,609 | $ | 15,039 |
Supplemental
Disclosures of Cash Flow Information
|
||||||||
Interest
paid on deposits and borrowed funds
|
$ | 5,809 | $ | 8,783 | ||||
Income
taxes paid
|
$ | 2,881 | $ | 2,169 | ||||
Supplemental
Disclosure of Noncash Activities
|
||||||||
Loans
charged against the allowance for loan losses
|
$ | 971 | $ | 254 | ||||
Loans
transferred to other real estate owned
|
$ | 1,529 | $ | 196 | ||||
Unrealized
gains on securities available for sale
|
$ | 1,592 | $ | 1,408 |
Options
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||||
Outstanding
at January 1, 2010
|
109,500 | $ | 22.14 | |||||||||||||
Exercised
|
--- | --- | ||||||||||||||
Forfeited
or expired
|
--- | --- | ||||||||||||||
Outstanding
June 30, 2010
|
109,500 | $ | 22.14 | 4.99 | $ | 229 | ||||||||||
Exercisable
at June 30, 2010
|
109,500 | $ | 22.14 | 4.99 | $ | 229 |
Six
Months ended
June
30,
|
Year
ended
December
31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
Balance
at beginning of period
|
$ | 6,926 | $ | 5,858 | $ | 5,858 | ||||||
Provision
for loan losses
|
1,499 | 648 | 1,634 | |||||||||
Loans
charged off
|
(971 | ) | (254 | ) | (647 | ) | ||||||
Recoveries
of loans previously charged off
|
99 | 32 | 81 | |||||||||
Balance
at the end of period
|
$ | 7,553 | $ | 6,284 | $ | 6,926 | ||||||
Ratio
of allowance for loan losses to the end of period loans, net of unearned
income and deferred fees
|
1.30 | % | 1.09 | % | 1.17 | % | ||||||
Ratio
of net charge-offs to average loans, net of unearned income and deferred
fees(1)
|
0.30 | % | 0.08 | % | 0.10 | % | ||||||
Ratio
of allowance for loan losses to nonperforming loans(2)
|
105.39 | % | 230.27 | % | 102.61 | % |
(1)
|
Net
charge-offs are on an annualized
basis.
|
(2)
|
The
Company defines nonperforming loans as total nonaccrual and restructured
loans. Loans 90 days past due and still accruing are
excluded.
|
June
30,
|
December
31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
Nonperforming
assets:
|
||||||||||||
Nonaccrual
loans
|
$ | 7,167 | $ | 2,729 | $ | 4,098 | ||||||
Restructured
loans
|
--- | --- | 2,652 | |||||||||
Total
nonperforming loans
|
7,167 | 2,729 | 6,750 | |||||||||
Other
real estate owned, net
|
3,170 | 1,869 | 2,126 | |||||||||
Total
nonperforming assets
|
$ | 10,337 | $ | 4,598 | $ | 8,876 | ||||||
Ratio
of nonperforming assets to loans, net of unearned income and deferred
fees, plus other real estate owned
|
1.76 | % | 0.80 | % | 1.50 | % |
June
30,
|
December
31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
Loans
past due 90 days or more and still accruing
|
$ | 389 | $ | 1,746 | $ | 1,697 | ||||||
Ratio
of loans past due 90 days or more and still accruing to loans, net of
unearned income and deferred fees
|
0.07 | % | 0.30 | % | 0.29 | % | ||||||
Impaired
loans:
|
||||||||||||
Total
impaired loans
|
$ | 6,586 | $ | 4,664 | $ | 7,680 | ||||||
Impaired
loans with a valuation allowance
|
$ | 6,586 | $ | 3,636 | $ | 7,630 | ||||||
Valuation
allowance
|
(1,758 | ) | (1,128 | ) | (2,495 | ) | ||||||
Impaired
loans, net of allowance
|
$ | 4,828 | $ | 2,508 | $ | 5,135 | ||||||
Impaired
loans with no valuation allowance
|
$ | --- | $ | 1,028 | $ | 50 | ||||||
Average
recorded investment in impaired loans
|
$ | 6,927 | $ | 4,674 | $ | 7,851 | ||||||
Income
recognized on impaired loans
|
$ | --- | $ | 85 | $ | 169 | ||||||
Amount
of income recognized on a cash basis
|
$ | --- | $ | --- | $ | --- |
June
30, 2010
|
||||||||||||||||
Amortized
Costs
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Values
|
|||||||||||||
Available
for sale:
|
||||||||||||||||
U.S.
Treasury
|
$ | 2,017 | $ | 180 | $ | --- | $ | 2,197 | ||||||||
U.S.
Government agencies
|
56,712 | 958 | --- | 57,670 | ||||||||||||
Mortgage-backed
securities
|
13,539 | 794 | --- | 14,333 | ||||||||||||
States
and political subdivisions
|
64,343 | 1,903 | 205 | 66,041 | ||||||||||||
Corporate
|
16,927 | 705 | --- | 17,632 | ||||||||||||
Federal
Home Loan Bank stock
|
1,677 | --- | --- | 1,677 | ||||||||||||
Federal
Reserve Bank stock
|
92 | --- | --- | 92 | ||||||||||||
Other
securities
|
2,282 | --- | 233 | 2,049 | ||||||||||||
Total
|
$ | 157,589 | $ | 4,540 | $ | 438 | $ | 161,691 |
June
30, 2010
|
||||||||||||||||
Amortized
Costs
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Values
|
|||||||||||||
Held
to maturity:
|
||||||||||||||||
U.S.
Government agencies
|
$ | 21,070 | $ | 496 | $ | 2 | $ | 21,564 | ||||||||
Mortgage-backed
securities
|
1,293 | 106 | --- | 1,399 | ||||||||||||
States
and political subdivisions
|
104,368 | 2,212 | 715 | 105,865 | ||||||||||||
Corporate
|
6,162 | 36 | 80 | 6,118 | ||||||||||||
Total
|
$ | 132,893 | $ | 2,850 | $ | 797 | $ | 134,946 |
June
30, 2010
|
||||||||||||||||
Less
Than 12 Months
|
12
Months or More
|
|||||||||||||||
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||
Temporarily
impaired securities:
|
||||||||||||||||
U.S.
Government agencies
|
$ | --- | $ | --- | $ | 998 | $ | 2 | ||||||||
States
and political subdivisions
|
15,533 | 309 | 20,935 | 611 | ||||||||||||
Corporate
|
1,000 | --- | 1,920 | 80 | ||||||||||||
Other
securities
|
--- | --- | 260 | 233 | ||||||||||||
Total
|
$ | 16,533 | $ | 309 | $ | 24,113 | $ | 926 |
December
31, 2009
|
||||||||||||||||
Less
Than 12 Months
|
12
Months or More
|
|||||||||||||||
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||
Temporarily
impaired securities:
|
||||||||||||||||
U.S.
Government agencies
|
$ | 42,876 | $ | 1,351 | $ | --- | $ | --- | ||||||||
States
and political subdivisions
|
28,537 | 571 | 13,382 | 698 | ||||||||||||
Corporate
|
662 | 1 | 3,517 | 483 | ||||||||||||
Other
securities
|
--- | --- | 277 | 217 | ||||||||||||
Total
|
$ | 72,075 | $ | 1,923 | $ | 17,176 | $ | 1,398 |
Pension
Benefits
|
||||||||
Six
Months ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Service
cost
|
$ | 200 | $ | 176 | ||||
Interest
cost
|
344 | 330 | ||||||
Expected
return on plan assets
|
(304 | ) | (264 | ) | ||||
Amortization
of prior service cost
|
(50 | ) | (50 | ) | ||||
Amortization
of net obligation at transition
|
(6 | ) | (6 | ) | ||||
Recognized
net actuarial loss
|
124 | 168 | ||||||
Net periodic benefit
cost
|
$ | 308 | $ | 354 |
Level
1 –
|
Valuation
is based on quoted prices in active markets for identical assets and
liabilities.
|
||
Level
2 –
|
Valuation
is based on observable inputs including quoted prices in active markets
for similar assets and liabilities, quoted prices for identical or similar
assets and liabilities in less active markets, and model-based valuation
techniques for which significant assumptions can be derived primarily from
or corroborated by observable data in the market.
|
||
Level
3 –
|
Valuation
is based on model-based techniques that use one or more significant inputs
or assumptions that are unobservable in the
market.
|
Fair
Value Measurements
Using
|
|||||||||||||||||
Date
|
Description
|
Balance
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
||||||||||||
Assets:
|
|||||||||||||||||
June
30, 2010
|
Securities
available for sale
|
$ | 159,922 | $ | --- | $ | 159,922 | $ | --- | ||||||||
December
31, 2009
|
Securities
available for sale
|
166,272 | --- | 166,272 | --- |
Carrying
Value
|
|||||||||||||||||
Date
|
Description
|
Balance
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
||||||||||||
Assets:
|
|||||||||||||||||
June
30, 2010
|
Impaired
loans net of valuation allowance
|
$ | 4,828 | $ | --- | $ | --- | $ | 4,828 | ||||||||
December
31, 2009
|
Impaired
loans net of valuation allowance
|
5,135 | --- | --- | 5,135 |
Carrying
Value
|
|||||||||||||||||
Date
|
Description
|
Balance
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
||||||||||||
Assets:
|
|||||||||||||||||
June
30, 2010
|
Other
real estate owned net of valuation allowance
|
$ | 1,297 | $ | --- | $ | --- | $ | 1,297 | ||||||||
December
31, 2009
|
Other
real estate owned net of valuation allowance
|
1,868 | --- | --- | 1,868 |
June
30, 2010
|
December
31, 2009
|
|||||||||||||||
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
|||||||||||||
Financial
assets:
|
||||||||||||||||
Cash and due from
banks
|
$ | 12,609 | $ | 12,609 | $ | 12,894 | $ | 12,894 | ||||||||
Interest-bearing
deposits
|
53,311 | 53,311 | 37,730 | 37,730 | ||||||||||||
Securities
|
294,584 | 296,637 | 297,417 | 297,933 | ||||||||||||
Mortgage loans held for
sale
|
2,191 | 2,191 | 126 | 126 | ||||||||||||
Loans, net
|
575,372 | 548,713 | 583,021 | 588,201 | ||||||||||||
Accrued interest
receivable
|
6,023 | 6,023 | 6,250 | 6,250 | ||||||||||||
Financial
liabilities:
|
||||||||||||||||
Deposits
|
$ | 859,337 | 856,998 | $ | 852,112 | $ | 856,556 | |||||||||
Accrued interest
payable
|
356 | $ | 356 | 336 | 336 |
·
|
monetary
and fiscal policies of the U.S. Government, including policies of the U.S.
Treasury, the Office of the Comptroller of the Currency and the Federal
Reserve Board, and the impact of any policies or programs implemented
pursuant to the Emergency Economic Stabilization Act of 2008 (EESA) and
other financial reform legislation,
|
·
|
the
effects of increased regulation of financial service companies and banks
as a result of the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010,
|
June
30,
2010
|
December
31,
2009
|
|||||||
Return
on average assets
|
1.60 | % | 1.47 | % | ||||
Return
on average equity
|
12.41 | % | 12.23 | % | ||||
Basic
net earnings per share
|
$ | 1.12 | $ | 2.07 | ||||
Fully
diluted net earnings per share
|
$ | 1.12 | $ | 2.06 | ||||
Net
interest margin (1)
|
4.55 | % | 4.23 | % | ||||
Noninterest
margin (2)
|
1.52 | % | 1.55 | % |
(1)
|
Net
interest margin: Year-to-date tax-equivalent net interest income divided
by year-to-date average earning
assets.
|
(2)
|
Noninterest
margin: Noninterest income (excluding securities gains and losses) less
noninterest expense (excluding the provision for bad debts and income
taxes) divided by average year-to-date
assets.
|
June
30, 2010
|
December
31, 2009
|
Percent
Change
|
|||||||||||
Securities
|
$ | 294,584 | $ | 297,417 | (0.95 | ) | % | ||||||
Loans,
net
|
575,372 | 583,021 | (1.31 | ) | % | ||||||||
Deposits
|
859,337 | 852,112 | 0.85 | % | |||||||||
Total
assets
|
994,875 | 982,367 | 1.27 | % |
June
30, 2010
|
June
30, 2009
|
December
31, 2009
|
|||||||||||
Nonperforming
loans
|
$ | 7,167 | $ | 2,729 | $ | 6,750 | |||||||
Loans
past due 90 days or more
|
389 | 1,746 | 1,697 | ||||||||||
Other
real estate owned
|
3,170 | 1,869 | 2,126 | ||||||||||
Allowance
for loan losses to loans
|
1.30 | % | 1.09 | % | 1.17 | % | |||||||
Net
charge-off ratio
|
0.30 | % | 0.08 | % | 0.10 | % | |||||||
Ratio
of nonperforming assets to loans, net of unearned income and deferred
fees, plus other real estate owned
|
1.76 | % | 0.80 | % | 1.50 | % | |||||||
Ratio
of allowance for loan losses to nonperforming loans
|
105.39 | % | 230.27 | % | 102.61 | % |
Six
Months ended
|
|||||||||||||
June
30, 2010
|
June
30, 2009
|
Percent
Change
|
|||||||||||
Service
charges on deposits
|
$ | 1,486 | $ | 1,641 | (9.45 | ) | % | ||||||
Other
service charges and fees
|
151 | 156 | (3.21 | ) | % | ||||||||
Credit
card fees
|
1,426 | 1,337 | 6.66 | % | |||||||||
Trust
fees
|
530 | 537 | (1.30 | ) | % | ||||||||
BOLI
income
|
361 | 353 | 2.27 | % | |||||||||
Other
income
|
143 | 185 | (22.70 | ) | % | ||||||||
Realized
securities gains (losses)
|
(3 | ) | 70 | (104.29 | ) | % |
Six
Months ended
|
|||||||||||||
June
30, 2010
|
June
30, 2009
|
Percent
Change
|
|||||||||||
Salaries
and employee benefits
|
$ | 5,510 | $ | 5,625 | (2.04 | ) | % | ||||||
Occupancy,
furniture and fixtures
|
968 | 894 | 8.28 | % | |||||||||
Data
processing and ATM
|
706 | 636 | 11.01 | % | |||||||||
FDIC
assessment
|
532 | 1,006 | (47.12 | ) | % | ||||||||
Credit
card processing
|
1,092 | 1,001 | 9.09 | % | |||||||||
Intangibles
amortization
|
542 | 551 | (1.63 | ) | % | ||||||||
Net
costs of other real estate owned
|
60 | 71 | (15.49 | ) | % | ||||||||
Franchise
taxes
|
481 | 445 | 8.09 | % | |||||||||
Other
operating expenses
|
1,590 | 1,581 | 0.57 | % |
Assets
|
June
30, 2010
|
December
31, 2009
|
Percent
Change
|
||||||||||
Interest-bearing
deposits
|
$ | 43,167 | $ | 35,841 | 20.44 | % | |||||||
Securities
available for sale
|
162,730 | 166,592 | (2.32 | ) | % | ||||||||
Securities
held to maturity
|
126,765 | 131,645 | (3.71 | ) | % | ||||||||
Mortgage
loans held for sale
|
806 | 911 | (11.53 | ) | % | ||||||||
Real
estate construction loans
|
47,248 | 52,579 | (10.14 | ) | % | ||||||||
Real
estate mortgage loans
|
166,174 | 165,434 | 0.45 | % | |||||||||
Commercial
and industrial loans
|
282,552 | 261,172 | 8.19 | % | |||||||||
Loans
to individuals
|
92,763 | 100,581 | (7.77 | ) | % | ||||||||
Total
Assets
|
980,852 | 971,538 | 0.96 | % | |||||||||
Liabilities
and stockholders’ equity
|
|||||||||||||
Noninterest-bearing
demand deposits
|
$ | 120,123 | $ | 115,240 | 4.24 | % | |||||||
Interest-bearing
demand deposits
|
312,061 | 282,532 | 10.45 | % | |||||||||
Savings
deposits
|
53,001 | 48,992 | 8.18 | % | |||||||||
Time
deposits
|
361,107 | 399,873 | (9.69 | ) | % | ||||||||
Other
borrowings
|
--- | 49 | (100.00 | ) | % | ||||||||
Stockholders’
equity
|
126,128 | 117,086 | 7.72 | % |
June
30, 2010
|
December
31, 2009
|
Percent
Change
|
|||||||||||
Commercial
and industrial loans
|
$ | 270,897 | $ | 283,998 | (4.61 | ) | % | ||||||
Real
estate construction loans
|
48,604 | 45,625 | 6.53 | % | |||||||||
Real
estate mortgage loans
|
173,724 | 165,542 | 4.94 | % | |||||||||
Loans
to individuals
|
90,702 | 95,844 | (5.36 | ) | % | ||||||||
Total
loans
|
$ | 583,927 | $ | 591,009 | (1.20 | ) | % |
June
30, 2010
|
December
31, 2009
|
Percent
Change
|
|||||||||||
Noninterest-bearing
demand deposits
|
$ | 125,694 | $ | 122,549 | 2.57 | % | |||||||
Interest-bearing
demand deposits
|
324,038 | 310,629 | 4.32 | % | |||||||||
Saving
deposits
|
58,399 | 51,622 | 13.13 | % | |||||||||
Time
deposits
|
351,206 | 367,312 | (4.38 | ) | % | ||||||||
Total
deposits
|
$ | 859,337 | $ | 852,112 | 0.85 | % | |||||||
DATE
August 6, 2010
|
/s/ JAMES G. RAKES
|
James
G. Rakes
President
and
Chief
Executive Officer
(Authorized
Officer)
|
|
DATE:
August 6, 2010
|
/s/ DAVID K. SKEENS
|
David
K. Skeens
Treasurer
and
Chief
Financial Officer
(Principal
Financial Officer)
(Principal
Accounting Officer)
|
Exhibit
No.
|
Description
|
Page
No. in
Sequential
System
|
3(i)
|
Amended
and Restated Articles of Incorporation of National Bankshares,
Inc.
|
(incorporated
herein by reference to Exhibit 3.1 of the Form 8K for filed on March 16,
2006)
|
3(ii)
|
Amended
By-laws of National Bankshares, Inc.
|
(incorporated
herein by reference to Exhibit 3(ii) of the Annual Report on Form 10K for
fiscal year ended December 31, 2007)
|
4(i)
|
Specimen
copy of certificate for National Bankshares, Inc. common
stock
|
(incorporated
herein by reference to Exhibit 4(a) of the Annual Report on Form 10K for
fiscal year ended December 31, 1993)
|
*10(iii)(A)
|
National
Bankshares, Inc. 1999 Stock Option Plan
|
(incorporated
herein by reference to Exhibit 4.3 of the Form S-8, filed as Registration
No. 333-79979 with the Commission on June 4, 1999)
|
*10(iii)(A)
|
Executive
Employment Agreement dated December 17, 2008, between National Bankshares,
Inc. and James G. Rakes
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K
for the fiscal year ended December 31, 2008)
|
*10(iii)(A)
|
Employee
Lease Agreement dated August 14, 2002, between National Bankshares, Inc.
and The National Bank of Blacksburg
|
(incorporated
herein by reference to Exhibit 10 (iii) (A) of Form 10Q for the period
ended September 30, 2002)
|
*10(iii)(A)
|
Executive
Employment Agreement dated December 17, 2008, between National Bankshares,
Inc. and F. Brad Denardo
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K
for the fiscal year ended December 31, 2008)
|
*10(iii)(A)
|
Executive
Employment Agreement dated December 17, 2008, between National Bankshares,
Inc. and Marilyn B. Buhyoff
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K
for the fiscal year ended December 31, 2008)
|
*10(iii)(A)
|
Salary
Continuation Agreement dated February 8, 2006, between The National Bank
of Blacksburg and James G. Rakes
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on February
8, 2006)
|
*10(iii)(A)
|
Salary
Continuation Agreement dated February 8, 2006, between The National Bank
of Blacksburg and F. Brad Denardo
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on February
8, 2006)
|
*10(iii)(A)
|
Salary
Continuation Agreement dated February 8, 2006, between
National
Bankshares, Inc. and Marilyn B. Buhyoff
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on February
8, 2006)
|
*10(iii)(A)
|
First
Amendment, dated December 19, 2007, to The National Bank of Blacksburg
Salary Continuation Agreement for James G. Rakes
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on December
19, 2007)
|
*10(iii)(A)
|
First
Amendment, dated December 19, 2007, to The National Bank of Blacksburg
Salary Continuation Agreement for F. Brad Denardo
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on December
19, 2007)
|
*10(iii)(A)
|
First
Amendment, dated December 19, 2007, to National Bankshares, Inc. Salary
Continuation Agreement for Marilyn B. Buhyoff
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on December
19, 2007)
|
*10(viii)(A)
|
Second
Amendment, dated June 12, 2008, to The National Bank of Blacksburg Salary
Continuation Agreement for F. Brad Denardo
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on June 12,
2008)
|
*10(viii)(A)
|
Second
Amendment, dated December 17, 2008, to The National Bank of Blacksburg
Salary Continuation Agreement for James G. Rakes
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K
for the fiscal year ended December 31, 2008)
|
*10(viii)(A)
|
Second
Amendment, dated December 17, 2008, to The National Bank of Blacksburg
Salary Continuation Agreement for Marilyn B. Buhyoff
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K
for the fiscal year ended December 31, 2008)
|
*10(viii)(A)
|
Third
Amendment, dated December 17, 2008, to The National Bank of Blacksburg
Salary Continuation Agreement for F. Brad Denardo
|
(incorporated
herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K
for the fiscal year ended December 31, 2008)
|
31(i)
|
Section
906 Certification of Chief Executive Officer
|
(included
herewith)
|
31(ii)
|
Section
906 Certification of Chief Financial Officer
|
(included
herewith)
|
32(i)
|
18
U.S.C. Section 1350 Certification of Chief Executive
Officer
|
(included
herewith)
|
32(ii)
|
18
U.S.C. Section 1350 Certification of Chief Financial
Officer
|
(included
herewith)
|
/s/ JAMES G. RAKES
|
James
G. Rakes
President
and Chief Executive Officer
(Principal
Executive Officer)
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of National Bankshares,
Inc.;
|
/s/ DAVID K. SKEENS
|
David
K. Skeens
Treasurer
and
Chief
Financial Officer
(Principal
Financial Officer)
|
/s/ JAMES G. RAKES
|
James
G. Rakes
President
and Chief Executive Officer
(Principal
Executive Officer)
August
6, 2010
|
/s/ DAVID K. SKEENS
|
David
K. Skeens
Treasurer
and
Chief
Financial Officer
(Principal
Financial Officer)
August
6, 2010
|