DANVILLE, VA--(Marketwire - Apr 20, 2011) - American National Bankshares Inc. (NASDAQ: AMNB)
-- Q1 net income of $1,778,000 and diluted EPS of $0.29 per share
-- Q1 net interest margin 3.66%.
-- Average shareholders' equity of $109 million represents 13.03% of
average assets
American National Bankshares Inc. (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced net income of $1,778,000 for the first quarter 2011, compared to $2,185,000 for the first quarter 2010, an 18.6% decrease. Basic and diluted earnings per share were $0.29 for the 2011 quarter compared to $0.36 for the 2010 quarter. This quarterly net income produced a return on average assets of 0.85%, a return on average equity of 6.51%, and a return on tangible equity of 8.64%.
Financial Performance and Overview
Charles H. Majors, President and Chief Executive Officer, stated, "American National had an eventful first quarter 2011. We were not satisfied with the first quarter operating results, but we were not surprised. Our income for the quarter was $1.78 million, an 18.6% decrease compared to the same quarter in 2010. This decline was driven by two major factors: a decline in net interest income and expenses associated with our pending merger with MidCarolina Financial Corporation. The decrease in net interest income reflects market driven competition for loans, declining bond yields, and compression of our net interest margin. We consider the merger related costs to be the beginning of an investment in a new and even better American National Bankshares Inc.
"Trust income was up $116,000 or 14.3% for the 2011 quarter, as a result of asset growth and improvement in the stock market.
"Service charge income declined $58,000 or 12.1% mostly as a result of declining overdraft fee income, a trend we've seen over the past few years and expect to continue.
"Secondary market mortgage income declined $99,000 or 40.2%, because of decreasing volume. We anticipated a slowdown in this revenue in 2011.
"Our noninterest expenses for the 2011 quarter increased $260,000 or 4.7%, compared to 2010 quarter. This mostly related to $309,000 in expenses associated with our pending merger with MidCarolina Financial.
"During 2010 we experienced historically low interest rates and an ongoing deleveraging in the economy. But, during the year we saw a bottoming out of our loan portfolio and small increases in volume starting in the second quarter and continuing through year end. Year over year our loan portfolio has grown slightly, by $1.3 million or 0.2%. We are anticipating modest, single digit growth in the balance of 2011.
"We are pleased with the growth in our deposits over the past year. They have grown by $49.9 million or 8.2%. This will help provide needed liquidity as the economy begins to recover and as we move closer to the anticipated consummation of our merger with MidCarolina. We expect that growth to continue during 2011 and plan to make every effort to grow our balances more for transaction accounts.
"Our credit quality measurements continue to be strong relative to our peers. We are maintaining our allowance ratios and, unlike many recent announcements, we are not releasing reserves to boost net income to offset soft loan demand and tightened margins."
Majors concluded, "We believe we are at the early stages of an economic recovery. We expect it will be slow and erratic, but our Bank is ready, willing and able to help our market areas move quickly to increasing levels of economic activity. As we move forward in this year, we are very optimistic about the opportunities for market area growth and business development that will come from our pending merger with MidCarolina Financial Corporation, which we hope to have approved by shareholders and regulators during the second quarter of 2011."
Capital
American National's capital ratios are among the highest in its peer group. For the first quarter of 2011, average shareholders' equity was 13.03% of average assets.
Credit Quality Measurements
Nonperforming assets ($3.4 million of non-accrual loans and $3.5 million of foreclosed real estate) were below industry averages and represented 0.83% of total assets at March 31, 2011, compared to 0.89% at March 31, 2010.
The allowance for loans losses was $8.3 million or 1.60% of loans at March 31, 2011, compared to $8.1 million or 1.57% at March 31, 2010.
Annualized net charge offs were 0.39% for the first quarter 2011 compared to 0.26% for the first quarter in 2010.
Net Interest Income
Net interest income, on a taxable equivalent basis, decreased to $7,004,000 in the first quarter of 2011 from $7,174,000 in first quarter of 2010, a decrease of 2.4%. Net interest income has been adversely impacted by low market interest rates and shifts between categories of earning assets. The Bank has mitigated the impact by reducing the cost of its interest bearing liabilities. The Company's net interest margin declined to 3.66% from 3.90%, a decrease of 24 basis points (0.24%) from the first quarter 2010.
Noninterest Income
Noninterest income totaled $1,949,000 in the first quarter of 2011 compared with $1,921,000 in the first quarter of 2010, a 1.5% increase. Most of that increase was attributable to increased trust income.
Noninterest Expense
Noninterest expense totaled $5,757,000 in the first quarter of 2011, compared to $5,497,000 in the first quarter of 2010, a 4.7% increase. The major factor impacting noninterest expense were expenses associated with the pending merger with MidCarolina Financial. During the first quarter, the Company incurred merger-related costs of $309,000, reflected in other noninterest expenses, which accounted for virtually all the increase in costs. Much of these merger related expenses are not tax deductible.
Merger with MidCarolina Financial Corporation
On December 16, 2010, American National announced the signing of an agreement which calls for MidCarolina Financial Corporation to merge with American National in an all stock transaction. In connection with the proposed transaction, American National has filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4, which has not yet been declared effective, to register the shares of American National stock to be issued to the shareholders of MidCarolina. The registration statement includes a joint proxy statement/prospectus that will be sent to the shareholders of American National and MidCarolina after the registration statement is declared effective seeking the requisite approvals under the merger agreement. In addition, each of American National and MidCarolina may file other relevant documents concerning the proposed transaction with the SEC.
AMERICAN NATIONAL AND MIDCAROLINA URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4 AND THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT AMERICAN NATIONAL, MIDCAROLINA AND THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of these documents, when they become available, through the website maintained by the SEC at www.sec.gov. Free copies of the joint proxy statement/prospectus, when it becomes available, also may be obtained by directing a request by telephone or mail to American National Bankshares Inc., 628 Main Street, Danville, Virginia 24541, Attention: Investor Relations (telephone: (434) 792-5111) or MidCarolina Financial Corporation, 3101 South Church Street, Burlington, North Carolina 27216, Attention: Investor Relations (telephone: (336) 538-1600) or by accessing American National's website at www.amnb.com under "Investments" or MidCarolina's website at www.midcarolinabank.com under "Investor Relations." The information on American National's and MidCarolina's websites is not, and shall not be deemed to be, a part of this report or incorporated into other filings either company makes with the SEC.
American National and MidCarolina and their respective directors, executive officers and members of management may be deemed to be participants in the solicitation of proxies from the shareholders of American National and/or MidCarolina in connection with the merger. Information about the directors and executive officers of American National is set forth in the proxy statement for American National's 2011 annual meeting of shareholders filed with the SEC on April 15, 2011. Information about the directors and executive officers of MidCarolina is set forth in Amendment No. 1 to MidCarolina's Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on April 12, 2011. Additional information regarding the interests of these participants and other persons who may be deemed participants in the merger may be obtained by reading the joint proxy statement/prospectus regarding the merger when it becomes available.
About American National
American National Bankshares Inc. is a bank holding company with assets of $841 million. Headquartered in Danville, Virginia, it is the holding company of American National Bank and Trust Company, a community bank serving Southern and Central Virginia and the northern portion of Central North Carolina with eighteen banking offices. The Bank also manages an additional $430 million of assets in its Trust and Investment Services Division. Additional information is available on the Bank's website at www.amnb.com. The shares of American National Bankshares Inc. are traded on the NASDAQ Global Select Market under the symbol "AMNB."
Forward-Looking Statements
This press release may contain "forward-looking statements," within the meaning of federal securities laws that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Company and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates; changes in accounting principles, policies, or guidelines; significant changes in the economic scenario; significant changes in regulatory requirements; significant changes in securities markets; and changes regarding acquisitions and dispositions. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company's most recent Form 10-K report and other documents filed with the Securities and Exchange Commission. American National Bankshares Inc. does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
American National Bankshares Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
Unaudited
March 31
--------------------
ASSETS 2011 2010
--------- ---------
Cash and due from banks $ 10,248 $ 11,059
Interest-bearing deposits in other banks 25,397 25,531
Securities available for sale, at fair value 226,171 190,949
Securities held to maturity 3,146 5,802
--------- ---------
Total securities 229,317 196,751
--------- ---------
Restricted stock, at cost 4,062 4,362
Loans held for sale 1,309 2,208
Loans 516,629 515,366
Less allowance for loan losses (8,257) (8,112)
--------- ---------
Net Loans 508,372 507,254
--------- ---------
Premises and equipment, net 19,308 19,145
Other real estate owned, net 3,532 3,815
Goodwill 22,468 22,468
Core deposit intangibles, net 1,226 1,603
Accrued interest receivable and other assets 15,999 16,458
--------- ---------
Total assets $ 841,238 $ 810,654
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing $ 113,260 $ 101,190
Demand deposits -- interest-bearing 96,686 98,968
Money market deposits 57,530 79,225
Savings deposits 63,236 64,721
Time deposits 328,771 265,517
--------- ---------
Total deposits 659,483 609,621
--------- ---------
Short-term borrowings:
Customer repurchase agreements 43,871 60,372
Other short-term borrowings - -
Long-term borrowings 4,450 8,600
Trust preferred capital notes 20,619 20,619
Accrued interest payable and other liabilities 3,443 4,260
--------- ---------
Total liabilities 731,866 703,472
--------- ---------
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares
authorized, 6,153,433 shares outstanding at
March 31, 2011 and 6,123,275 shares outstanding
at March 31, 2010 6,153 6,123
Capital in excess of par value 27,541 27,063
Retained earnings 75,214 72,985
Accumulated other comprehensive income (loss), net 464 1,011
--------- ---------
Total shareholders' equity 109,372 107,182
--------- ---------
Total liabilities and shareholders' equity $ 841,238 $ 810,654
========= =========
American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
Three Months Ended
March 31
--------------------
2011 2010
--------- ---------
Interest and Dividend Income:
Interest and fees on loans $ 6,679 $ 7,155
Interest and dividends on securities:
Taxable 1,169 1,316
Tax-exempt 716 466
Dividends 27 23
Other interest income 70 91
--------- ---------
Total interest and dividend income 8,661 9,051
--------- ---------
Interest Expense:
Interest on deposits 1,580 1,635
Interest on short-term borrowings 80 105
Interest on long-term borrowings 53 64
Interest on customer repurchase agreements
Interest on trust preferred capital notes 343 343
--------- ---------
Total interest expense 2,056 2,147
--------- ---------
Net Interest Income 6,605 6,904
Provision for loan losses 337 285
--------- ---------
Net Interest Income After Provision
for Loan Losses 6,268 6,619
--------- ---------
Noninterest Income:
Trust fees 928 812
Service charges on deposit accounts 421 479
Other fees and commissions 316 278
Mortgage banking income 147 246
Securities gains (losses), net 1 (29)
Foreclosed real estate (losses), net (22) (3)
Other 158 138
--------- ---------
Total noninterest income 1,949 1,921
--------- ---------
Noninterest Expense:
Salaries 2,485 2,398
Employee benefits 541 640
Occupancy and equipment 699 779
FDIC assessment 205 195
Bank franchise tax 175 167
Core deposit intangible amortization 94 94
Other 1,558 1,224
--------- ---------
Total noninterest expense 5,757 5,497
--------- ---------
Income Before Income Taxes 2,460 3,043
Income Taxes 682 858
--------- ---------
Net Income $ 1,778 $ 2,185
========= =========
Net Income Per Common Share:
Basic $ 0.29 $ 0.36
Diluted $ 0.29 $ 0.36
Average Common Shares Outstanding:
Basic 6,143,602 6,119,415
Diluted 6,152,738 6,124,306
American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share,
ratio and nonfinancial data,
unaudited) 1st Qtr 4th Qtr 1st Qtr YTD YTD
2011 2010 2010 2011 2010
--------- --------- --------- --------- ---------
EARNINGS
Interest income $ 8,661 $ 8,889 $ 9,051 $ 8,661 $ 9,051
Interest expense 2,056 2,196 2,147 2,056 2,147
Net interest
income 6,605 6,693 6,904 6,605 6,904
Provision for
loan losses 337 485 285 337 285
Noninterest
income 1,949 2,602 1,921 1,949 1,921
Noninterest
expense 5,757 6,170 5,497 5,757 5,497
Income taxes 682 789 858 682 858
Net income 1,778 1,851 2,185 1,778 2,185
PER COMMON SHARE
Earnings per
share - basic $ 0.29 $ 0.30 $ 0.36 $ 0.29 $ 0.36
Earnings per
share - diluted 0.29 0.30 0.36 0.29 0.36
Cash dividends
declared 0.23 0.23 0.23 0.23 0.23
Book value per
share 17.77 17.64 17.50 17.77 17.50
Book value per
share - tangible
(a) 13.92 13.76 13.57 13.92 13.57
Closing market
price 22.51 23.55 20.15 22.51 20.15
FINANCIAL RATIOS
Return on average
assets 0.85% 0.88% 1.08% 0.85% 1.08%
Return on average
equity 6.51 6.69 8.14 6.51 8.14
Return on average
tangible equity
(b) 8.64 8.83 10.83 8.64 10.83
Average equity to
average assets 13.03 13.12 13.24 13.03 13.24
Net interest
margin, taxable
equivalent 3.66 3.67 3.90 3.66 3.90
Efficiency ratio 64.16 65.70 60.22 64.16 60.22
Effective tax
rate 27.72 29.89 28.20 27.72 28.20
PERIOD-END BALANCES
Securities $ 233,379 $ 235,691 $ 201,113 $ 233,379 $ 201,113
Loans held for
sale 1,309 3,135 2,208 1,309 2,208
Loans, net of
unearned income 516,629 520,781 515,366 516,629 515,366
Goodwill and
other
intangibles 23,694 23,788 24,071 23,694 24,071
Assets 841,238 833,664 810,654 841,238 810,654
Assets - tangible
(a) 817,544 809,876 786,583 817,544 786,583
Deposits 659,483 640,098 609,621 659,483 609,621
Customer
repurchase
agreements 43,871 47,084 60,372 43,871 60,372
Other short-term
borrowings - 6,110 - - -
Long-term
borrowings 25,069 29,107 29,219 25,069 29,219
Shareholders'
equity 109,372 108,087 107,182 109,372 107,182
Shareholders'
equity -
tangible (a) 85,678 84,299 83,111 85,678 83,111
AVERAGE BALANCES
Securities $ 226,595 $ 215,208 $ 184,696 $ 226,595 $ 184,696
Loans held for
sale 1,508 5,629 2,444 1,508 2,444
Loans, net of
unearned income 516,610 521,832 518,403 516,610 520,847
Interest-earning
assets 765,291 770,649 736,183 765,291 736,183
Goodwill and
other
intangibles 23,750 23,844 24,125 23,750 24,125
Assets 838,151 843,922 810,620 838,151 810,620
Assets - tangible
(a) 814,401 820,078 786,495 814,401 786,495
Interest-bearing
deposits 542,104 537,662 507,209 542,104 507,209
Deposits 652,922 647,526 606,085 652,922 606,085
Customer
repurchase
agreements 43,762 52,068 63,947 43,762 63,947
Other short-term
borrowings 136 251 - 136 -
Long-term
borrowings 27,855 29,136 29,248 27,855 29,248
Shareholders'
equity 109,224 110,688 107,336 109,224 107,336
Shareholders'
equity -
tangible (a) 85,474 86,844 83,211 85,474 83,211
CAPITAL
Average shares
outstanding -
basic 6,143,602 6,126,817 6,119,415 6,143,602 6,119,415
Average shares
outstanding -
diluted 6,152,738 6,141,123 6,124,306 6,152,738 6,124,306
Shares
repurchased - - - - -
Average price of
shares
repurchased $ - $ - $ - $ - $ -
ALLOWANCE FOR LOAN
LOSSES
Beginning balance $ 8,420 $ 8,542 $ 8,166 $ 8,420 $ 8,166
Provision for
loan losses 337 485 285 337 285
Charge-offs (571) (662) (427) (571) (427)
Recoveries 71 55 88 71 88
--------- --------- --------- --------- ---------
Ending balance $ 8,257 $ 8,420 $ 8,112 $ 8,257 $ 8,112
LOANS
Construction and
land development $ 36,516 $ 37,168 $ 39,421 $ 36,720 $ 39,421
Commercial real
estate 207,502 210,393 205,642 207,290 205,642
Residential real
estate 118,603 119,398 119,776 118,610 119,776
Home equity 61,674 61,064 63,302 61,674 63,302
Commercial and
industrial 84,702 85,051 80,331 84,702 80,331
Consumer 7,632 7,707 6,894 7,632 6,894
--------- --------- --------- --------- ---------
Total $ 516,629 $ 520,781 $ 515,366 $ 516,628 $ 515,366
NONPERFORMING ASSETS
AT PERIOD-END
Nonperforming loans:
90 days past due $ - $ - $ - $ - $ -
Nonaccrual 3,417 2,597 3,436 3,417 3,436
Foreclosed real
estate 3,532 3,716 3,815 3,532 3,815
--------- --------- --------- --------- ---------
Nonperforming
assets $ 6,949 $ 6,313 $ 7,251 $ 6,949 $ 7,251
ASSET QUALITY RATIOS
Annualized net
chargeoffs to
average loans 0.39% 0.47% 0.26% 0.39% 0.26%
Nonperforming
assets to total
assets 0.83 0.76 0.89 0.83 0.89
Nonperforming
loans to total
loans 0.66 0.50 0.67 0.66 0.67
Allowance for
loan losses to
total loans 1.60 1.62 1.57 1.60 1.57
Allowance for
loan losses to
nonperforming
loans 241.64 324.22 236.09 241.64 236.09
OTHER DATA
Fiduciary assets
at period-end
(c) $ 380,259 $ 368,018 $ 363,205 $ 380,259 $ 363,205
Retail brokerage
assets at
period-end (c) $ 50,175 $ 49,311 $ 51,848 $ 50,175 $ 51,848
Number full-time
equivalent
employees (d) 242 242 235 242 235
Number of full
service offices 18 18 18 18 18
Number of loan
production
offices 1 1 1 1 1
Number of ATM's 26 26 26 26 26
Notes:
(a) - Excludes goodwill and other intangible assets
(b) - Excludes amortization expense, net of tax, of intangible assets
(c) - Market value
(d) - Average for quarter
Net Interest Income Analysis
For the Three Months Ended March 31, 2011 and 2010
(in thousands, except rates)
Interest
Average Balance Income/Expense Yield/Rate
----------------- ----------------- ----------------
2011 2010 2011 2010 2011 2010
-------- -------- -------- -------- ------- -------
Loans:
Commercial $ 77,925 $ 79,279 $ 880 $ 953 4.52% 4.81%
Real estate 432,688 434,795 5,695 6,095 5.26 5.61
Consumer 7,505 6,773 136 134 7.25 7.91
-------- -------- -------- -------- ------- -------
Total loans 518,118 520,847 6,711 7,182 5.18 5.52
-------- -------- -------- -------- ------- -------
Securities:
Federal agencies &
GSE 43,345 65,751 323 551 2.98 3.35
Mortgage-backed
&CMO's 59,297 43,783 490 501 3.31 4.58
State and municipal 117,916 67,538 1,408 927 4.78 5.49
Other 6,037 7,624 58 69 3.84 3.62
-------- -------- -------- -------- ------- -------
Total securities 226,595 184,696 2,279 2,048 4.02 4.44
-------- -------- -------- -------- ------- -------
Deposits in other
banks 20,578 30,640 70 91 1.36 1.19
-------- -------- -------- -------- ------- -------
Total interest
earning assets 765,291 736,183 9,060 9,321 4.74 5.06
-------- -------- ------- -------
Nonearning assets 72,860 74,437
-------- --------
Total assets $838,151 $810,620
======== ========
Deposits:
Demand $ 96,698 $ 97,062 18 21 0.07 0.09
Money market 63,125 80,809 83 90 0.53 0.45
Savings 62,505 62,801 21 22 0.13 0.14
Time 319,776 266,537 1,458 1,502 1.82 2.25
-------- -------- -------- -------- ------- -------
Total deposits 542,104 507,209 1,580 1,635 1.17 1.29
Customer repurchase
agreements 43,762 63,947 80 105 0.73 0.66
Other short-term
borrowings 136 - - - 0.47 -
Long-term borrowings 27,855 29,248 396 407 5.69 5.57
-------- -------- -------- -------- ------- -------
Total interest
bearing
liabilities 613,857 600,404 2,056 2,147 1.34 1.43
-------- -------- ------- -------
Noninterest bearing
demand deposits 110,818 98,876
Other liabilities 4,252 4,004
Shareholders' equity 109,224 107,336
-------- --------
Total liabilities
and shareholders'
equity $838,151 $810,620
======== ========
Interest rate spread 3.40% 3.63%
======= =======
Net interest margin 3.66% 3.90%
======= =======
Net interest income
(taxable equivalent
basis) 7,004 7,174
Less: Taxable
equivalent
adjustment 399 270
-------- --------
Net interest income $ 6,605 $ 6,904
======== ========