NATIONAL BANKSHARES INC: How They Did This Year

I’ve put together this guide to help you understand how National Bankshares Inc.—the parent company of The National Bank of Blacksburg—performed this year. My goal is to turn complex financial data into plain English so you can decide if this company fits your investment goals.

1. What does this company do?

Think of National Bankshares as a neighborhood hub for money. They take deposits from local folks and businesses and turn them into loans for homes, cars, and local construction. They aren't trying to be a global giant. Instead, they focus on being the go-to bank for communities across southwest, western, and central Virginia. As of December 31, 2025, they operate 28 full-service branches and offer a full range of banking, trust, and investment services.

2. How did they perform this year?

2025 was a year of steady progress following their 2024 purchase of Frontier Community Bank. This $33.5 million deal allowed them to expand into new areas like Roanoke and Lynchburg.

By the end of 2025, the bank held $1.82 billion in assets and $1.65 billion in deposits. They earned $16.86 million in profit. This resulted in a return on assets of 0.93% and a return on equity of about 10.8%. These figures show a stable earnings profile, with earnings per share reaching $2.52.

3. Where does their money come from?

The bank makes money in three main ways:

• Interest on Loans (65% of revenue): This is their bread and butter. They collect interest on a loan portfolio worth about $1.15 billion. Most of these loans are for commercial real estate (42%) and residential mortgages (35%).
• Interest on Investments (20% of revenue): When they aren't lending, they keep extra cash in safe government-backed securities and bonds. This $580 million portfolio provides consistent income.
• Non-Interest Income (15% of revenue): This includes service charges, trust fees, and card processing fees, totaling about $12.4 million.

4. Major wins and hurdles

• The Win: They successfully integrated the Frontier Community Bank branches. With 28 locations now, they have a stronger presence in university towns like Charlottesville and Blacksburg. This helps them attract a more diverse customer base.
• The Hurdle: Competition is fierce. They face pressure from other banks, credit unions, and fintech apps offering higher interest rates. Because the bank had to pay more to keep customer deposits, their profit margin on interest—known as the net interest margin—was squeezed to 3.15%.

5. Key risks to watch

• Economic Sensitivity: Because they focus on Virginia, they are vulnerable to local downturns. If local manufacturing or farming struggles, the bank may see more loan defaults.
• Concentration: Nearly half of their loans are tied to commercial real estate and construction. If the local property market cools, the bank may struggle to collect on those loans. They set aside $1.2 million in 2025 to cover potential losses.
• Interest Rate Risk: The bank’s profit depends on Federal Reserve policy. If interest rates stay high, the bank’s costs to fund its operations rise, which can shrink profit margins.

6. Future outlook

The focus for next year is efficiency. Now that the acquisition is finished, the bank wants to lower its "efficiency ratio"—currently 68%—by streamlining back-office work. They plan to grow their loan portfolio by 3-5% while keeping strict lending standards to protect against risk.

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Investor Takeaway: National Bankshares is a classic "community bank" play. If you are looking for a stable, regional institution that is focused on steady growth and local lending rather than high-risk, high-reward ventures, this company is worth a closer look. Keep an eye on their efficiency ratio in upcoming quarterly reports; if they successfully lower it, that could be a strong signal that their post-acquisition strategy is working.