National Bankshares Margin Reaches 3.21% After MBS Swap

The Tip Desk · October 22, 2026 · 2 min read

Net interest income rose to $13.85 million as the taxable-securities yield jumped 54 bps to 3.34% after a second-quarter portfolio repositioning.

National Bankshares, Inc. (NKSH), parent of The National Bank of Blacksburg, expanded its net interest margin 21 basis points in the third quarter to 3.21%, as the taxable-securities yield jumped 54 bps after a second-quarter swap of lower-yielding securities for mortgage-backed paper.

Net interest income rose to $13.85 million from $13.05 million in the second quarter. Interest on taxable securities increased to $5.35 million from $4.44 million. Total interest expense was $6.44 million.

The company sold securities with an amortized cost of $131.87 million and a weighted average yield of 1.80%, then purchased $127.33 million of mortgage-backed securities at a 5.26% weighted average yield. It said the repositioning is expected to add $4.25 million of annual interest income and 12 bps to 2026 net interest margin. The taxable-securities yield on average balances rose to 3.34% from 2.80%.

Loan yield held at 5.66% and average loans were $1.016 billion. Interest-bearing demand deposit cost rose to 1.81% from 1.76%. Time-deposit cost fell to 3.20% from 3.27%.

Net income was $5.49 million, or $0.86 a share, up from $5.03 million, or $0.79 a share, in the second quarter. President and CEO Lara E. Ramsey said the sequential earnings increase of more than 9% was driven by securities yield improvement.

The efficiency ratio improved to 55.90% from 58.40%. Return on average equity rose to 11.52% from 10.64%. Noninterest expense was $9.32 million. The company said salaries rose with medical insurance and data processing for infrastructure upgrades, offset by lower other operating expense.

Total deposits declined to $1.577 billion from $1.629 billion at June 30, 2026. The company attributed the drop to annual cyclicality in municipal deposits, which typically bottom in the third quarter. Municipal deposits were 19% of the deposit base. The company has no brokered deposits.

Total loans were $1.018 billion at September 30, 2026, up from $1.015 billion at June 30. Real estate construction loans were $73.14 million and consumer real estate loans $338.92 million.

The provision for credit losses was $324 thousand, similar to $317 thousand in the second quarter. The allowance for credit losses on loans ended at $10.12 million after $264 thousand of charge-offs and $29 thousand of recoveries.

Borrowings of $17.90 million at September 30 supported securities purchases. The company said fourth-quarter paydowns and maturities are expected to pay off those borrowings.

Ramsey said higher yields on assets and reduced deposit costs have supported income growth throughout 2026, and the company expects continued loan repricing to sustain the trend.