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On Mar 6, Zacks Investment Research upgraded National Bankshares Inc. to Zacks Rank #1 (Strong Buy).

Why the Upgrade?

National Bankshares has been witnessing rising earnings estimates owing to strong fourth quarter 2012 results. Moreover, this regional bank delivered positive earnings surprises in 2 of the last 4 quarters with an average beat of 2.1%.

National Bankshares reported fourth-quarter results on Feb 14. Earnings per share came in at 67 cents, lagging the year-ago earnings by 4.3%. However, the earnings beat the Zacks Consensus Estimate by 9.84%. Results were primarily aided by improved net interest income and lower provision for credit losses, partially offset by a rise in expenses and lower non-interest income.

Net interest income rose 0.7% year over year to $10.3 million. However, non-interest income declined 2.7% to $2.2 million. Further, total non-interest expenses hiked 10.2% year over year to $5.9 million.

Credit quality was mixed at National Bankshares. Provision for credit losses declined to $0.6 million from $0.8 million in the prior-year quarter. However, as of Dec 31, 2012, nonperforming assets were 1.19% of total loans, up 6 basis points (bps) from the prior-year quarter. Moreover, allowance for loans losses were 1.41% of total loans, up 4 bps from the prior-year quarter.

The Zacks Consensus Estimate for 2013 increased 4.0% to $2.58.

Other Stocks to Consider

Besides National Bankshares, other stocks in the same sector like WesBanco Inc. (WSBC - Snapshot Report), Monarch Financial Holdings, Inc. (MNRK - Snapshot Report) and Bank of Kentucky Financial Corp. (BKYF - Snapshot Report) carry a Zacks Rank #1 and are worth considering.

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