SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

April 17, 2014 16:05 ET

American National Bankshares Inc. Reports First Quarter 2014 Earnings

DANVILLE, VA--(Marketwired - Apr 17, 2014) - American National Bankshares Inc. (NASDAQ: AMNB)

  • Q1 net income of $3.5 million, basic and diluted EPS of $0.44
  • Net interest margin of 3.71% for Q1 2014
  • Nonperforming assets 0.68% of total assets
  • Average shareholders' equity of $170 million is 13.05% of average assets
  • Accretion and merger related benefits reduced pretax income by $1 million compared to Q1 2013
  • Stock repurchase program approved

American National Bankshares Inc. (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced first quarter of 2014 net income of $3,450,000 compared to $4,151,000 for the first quarter of 2013, a $701,000 or 16.9% decrease. Basic and diluted earnings per share were $0.44 for the 2014 quarter compared to $0.53 for the 2013 quarter. Net income for the first quarter of 2014 produced a return on average assets of 1.06%, a return on average equity of 8.12%, and a return on average tangible equity of 11.54%.

Earnings for the 2014 and 2013 quarters were favorably impacted by the July 2011 merger between American National and MidCarolina Financial Corporation ("MidCarolina").

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "Income for the current quarter was adversely impacted by the expected and large reduction in accretion income. As you will recall, a large portion of our earnings have been driven by the 2011 merger with MidCarolina. Approximately $661,000 of pretax income for the first quarter of 2014 was directly related to various ongoing fair value adjustments, the vast majority of which results from the loan portfolio purchase discount. This compares to $1,657,000 of pretax income for the first quarter of 2013 directly related to fair value adjustments. Loan accretion in the 2014 quarter was positively impacted by unexpected accretion income of $266,000, related to payoffs and recoveries of acquired impaired loans.

"Income was also adversely impacted by a large decrease in mortgage income, which fell $455,000 or 63.3% year over year. This decline was directly related to changes in the mortgage market over the past year.

"Trust income was up $534,000, a 90.8% increase compared to the first quarter of 2013, which included a trust fee service refund of $330,000.

"With regard to the balance sheet, at March 31, 2014, American National had $783,369,000 in loans compared to $792,513,000 at March 31, 2013, a decrease of $9,144,000 or 1.2%. Approximately three quarters of this decline was related to the unanticipated first quarter 2014 payoff of a large commercial loan participation.

"On the liability side of the balance sheet, at March 31, 2014, American National had $1,051,249,000 in deposits compared to $1,037,748,000 at March 31, 2013, an increase of $13,501,000 or 1.3%. The deposit growth was strong in core (non-maturity) deposits. We are continuously attempting to grow core deposits and their affiliated relationships, but the challenge in this low rate environment is to do that in a cost effective and competitive manner. Our cost of deposits for the 2014 quarter was 0.60%, compared to 0.71% for the 2013 quarter."

Haley concluded, "The lack of loan growth in the first quarter of this year is unsatisfactory. But a three month period is a very short period of time and, over the long term, I am optimistic about all aspects of American National. We have a strong community bank, with a century long legacy, a fortress balance sheet, robust capital, and great bankers. Our continuing challenge and mission is to grow this franchise, organically and through acquisitions, to the next level. We know the task is not simple, quick or easy. We know the operating environment is and will continue to be challenging. But, we believe we have the tools, the infrastructure, and the employees to make it happen."

Capital
American National's capital ratios remain strong and exceed all regulatory requirements. 

For the quarter ended March 31, 2014, average shareholders' equity was 13.05% of average assets, compared to 12.69% at March 31, 2013.

Book value per common share was $21.57 at March 31, 2014, compared to $20.99 at March 31, 2013.

Tangible book value per common share was $16.27 at March 31, 2014, compared to $15.48 at March 31, 2013.

Credit Quality Measurements
Non-performing assets ($5,557,000 of non-performing loans and $3,233,000 of foreclosed real estate) represented 0.68% of total assets at March 31, 2014, compared to 0.85% at March 31, 2013. 

Annualized net recoveries to average loans were one basis point (0.01%) for the 2014 first quarter, compared to net recoveries of six basis points (0.06%) for the same quarter in 2013.

The allowance for loan losses as a percentage of total loans was 1.61% at March 31, 2014, compared to 1.58% at March 31, 2013. The primary drivers of this modest increase have been renewals of performing acquired loans and increases in specific reserves.

Other real estate owned was $3,233,000 at March 31, 2014, compared to $5,822,000 at March 31, 2013.

Net Interest Income
Net interest income before provision for loan losses decreased to $10,459,000 in the first quarter of 2014 from $11,682,000 in first quarter of 2013, a decrease of $1,223,000 or 10.5%. 

For the 2014 quarter, the net interest margin was 3.71% compared to 4.19% for the same quarter in 2013, a decrease of 48 basis points (0.48%). This decline was mostly driven by lower levels of accretion income and was partially mitigated by reduced cost of interest bearing liabilities.

Provision expense
Provision expense for the first quarter of 2014 was zero compared to $294,000 for the first quarter of 2013.

Any need for additional provision expense has been offset by unusually strong loan recoveries, unexpectedly large loan pay downs, and continuing strong asset quality metrics.

Noninterest Income 
Noninterest income totaled $2,703,000 in the first quarter of 2014, compared with $2,770,000 in the first quarter of 2013, a decrease of $67,000 or 2.4%. Mortgage income declined $455,000 or 63.3% compared to the 2013 quarter. Trust income was up $534,000, a 90.8% increase compared to the first quarter of 2013, which included a trust fee service refund of $330,000.

Noninterest Expense
Noninterest expense totaled $8,423,000 in the first quarter of 2014, compared to $8,318,000 in the first quarter of 2013, an increase of $105,000 or 1.3%. The largest component of this change was personnel expense, which was $175,000 higher in the 2014 quarter than the 2013 quarter.

Authorization of Stock Repurchase Program
American National's board of directors has authorized a stock repurchase program of up to 250,000 shares of the company's outstanding common stock, par value $1.00 per share, for a period of two years. Repurchases may be made through open market purchases or in privately negotiated transactions, and shares repurchased will be returned to the status of authorized and unissued shares of common stock. The actual timing, number and value of shares repurchased under the program will be determined by management in its discretion and will depend on a number of factors, including the market price of the shares, general market and economic conditions, applicable legal requirements and other conditions.

About American National
American National Bankshares Inc. is a multi-state bank holding company with total assets of approximately $1.3 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving southern and central Virginia and north central North Carolina with 25 banking offices and two loan production offices. American National Bank and Trust Company also manages an additional $625 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about the company and the bank is available on the bank's website at www.amnb.com.

Shares of American National are traded on the NASDAQ Global Select Market under the symbol "AMNB."

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of federal securities laws. Certain of the statements involve significant risks and uncertainties. The statements herein are based on certain assumptions and analyses by American National 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 American National'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   2014     2013  
                 
Cash and due from banks   $ 25,880     $ 15,365  
Interest-bearing deposits in other banks     45,466       42,280  
                 
Securities available for sale, at fair value     349,123       341,176  
Restricted stock, at cost     4,529       4,876  
Loans held for sale     1,389       4,395  
                 
Loans     783,369       792,513  
  Less allowance for loan losses     (12,614 )     (12,528 )
    Net Loans     770,755       779,985  
                 
Premises and equipment, net     23,359       24,297  
Other real estate owned, net     3,233       5,822  
Goodwill     39,043       39,043  
Core deposit intangibles, net     2,828       4,240  
Bank owned life insurance     14,845       14,391  
Accrued interest receivable and other assets     19,352       18,193  
                 
    Total assets   $ 1,299,802     $ 1,294,063  
                 
                 
Liabilities                
  Demand deposits -- noninterest-bearing   $ 218,795     $ 210,201  
  Demand deposits -- interest-bearing     170,894       154,407  
  Money market deposits     194,528       173,724  
  Savings deposits     89,024       83,966  
  Time deposits     378,008       415,450  
    Total deposits     1,051,249       1,037,748  
                   
  Customer repurchase agreements     34,153       46,666  
  Long-term borrowings     9,919       10,047  
  Trust preferred capital notes     27,444       27,343  
  Accrued interest payable and other liabilities     6,538       7,227  
    Total liabilities     1,129,303       1,129,031  
                 
Shareholders' equity                
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding     -       -  
  Common stock, $1 par, 10,000,000 shares authorized, 7,905,243 shares outstanding at March 31, 2014 and 7,862,701 shares outstanding at March 31, 2013     7,905       7,863  
  Capital in excess of par value     58,202       57,341  
  Retained earnings     100,721       92,933  
  Accumulated other comprehensive income, net     3,671       6,895  
    Total shareholders' equity     170,499       165,032  
                   
    Total liabilities and shareholders' equity   $ 1,299,802     $ 1,294,063  
                 
                 
 
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
    2014   2013
Interest and Dividend Income:            
  Interest and fees on loans   $ 9,847   $ 11,395
  Interest and dividends on securities:            
      Taxable     964     878
      Tax-exempt     1,035     1,052
      Dividends     75     55
  Other interest income     33     29
      Total interest and dividend income     11,954     13,409
             
Interest Expense:            
  Interest on deposits     1,229     1,436
  Interest on short-term borrowings     2     21
  Interest on long-term borrowings     80     82
  Interest on trust preferred capital notes     184     188
      Total interest expense     1,495     1,727
             
Net Interest Income     10,459     11,682
  Provision for loan losses     -     294
             
Net Interest Income After Provision for Loan Losses     10,459     11,388
             
Noninterest Income:            
  Trust fees     1,122     588
  Service charges on deposit accounts     413     409
  Other fees and commissions     444     459
  Mortgage banking income     263     718
  Securities gains (losses), net     39     198
  Other     422     398
    Total noninterest income     2,703     2,770
             
Noninterest Expense:            
  Salaries     3,538     3,439
  Employee benefits     975     899
  Occupancy and equipment     936     916
  FDIC assessment     164     161
  Bank franchise tax     222     187
  Core deposit intangible amortization     331     420
  Data processing     348     277
  Software     262     212
  Foreclosed real estate, net     16     243
  Other     1,631     1,564
    Total noninterest expense     8,423     8,318
             
Income Before Income Taxes     4,739     5,840
Income Taxes     1,289     1,689
Net Income   $ 3,450   $ 4,151
             
Net Income Per Common Share:            
  Basic   $ 0.44   $ 0.53
  Diluted   $ 0.44   $ 0.53
Average Common Shares Outstanding:            
  Basic     7,904,759     7,861,991
  Diluted     7,917,601     7,871,508
             
                   
                   
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  
    2014   2013   2013   2014   2013  
EARNINGS                                
  Interest income   $ 11,954   $ 13,094   $ 13,409   $ 11,954   $ 13,409  
  Interest expense     1,495     1,589     1,727     1,495     1,727  
  Net interest income     10,459     11,505     11,682     10,459     11,682  
  Provision for loan losses     -     -     294     -     294  
  Noninterest income     2,703     2,604     2,770     2,703     2,770  
  Noninterest expense     8,423     9,904     8,318     8,423     8,318  
  Income taxes     1,289     1,062     1,689     1,289     1,689  
  Net income     3,450     3,143     4,151     3,450     4,151  
                                 
PER COMMON SHARE                                
  Earnings per share - basic   $ 0.44   $ 0.40   $ 0.53   $ 0.44   $ 0.53  
  Earnings per share - diluted     0.44     0.40     0.53     0.44     0.53  
  Cash dividends paid     0.23     0.23     0.23     0.23     0.23  
  Book value per share     21.57     21.23     20.99     21.57     20.99  
  Book value per share - tangible (a)     16.27     15.89     15.48     16.27     15.48  
  Closing market price     23.52     26.25     21.56     23.52     21.56  
                                 
FINANCIAL RATIOS                                
  Return on average assets     1.06 %   0.95 %   1.28 %   1.06 %   1.28 %
  Return on average equity     8.12     7.50     10.09     8.12     10.09  
  Return on average tangible equity (b)     11.54     10.86     14.71     11.54     14.71  
  Average equity to average assets     13.05     12.67     12.69     13.05     12.69  
  Tangible equity to tangible assets (a)     10.23     9.91     9.73     10.23     9.73  
  Net interest margin, taxable equivalent     3.71     4.00     4.19     3.71     4.19  
  Efficiency ratio     61.82     72.76     55.74     61.82     55.74  
  Effective tax rate     27.20     22.77     28.92     27.20     28.92  
                                 
PERIOD-END BALANCES                                
  Securities   $ 349,123   $ 351,013   $ 346,052   $ 349,123   $ 346,052  
  Loans held for sale     1,389     2,760     4,395     1,389     4,395  
  Loans, net of unearned income     783,369     794,671     792,513     783,369     792,513  
  Goodwill and other intangibles     41,871     42,202     43,283     41,871     43,283  
  Assets     1,299,802     1,307,512     1,294,063     1,299,802     1,294,063  
  Assets - tangible (a)     1,257,931     1,265,310     1,250,780     1,257,931     1,250,780  
  Deposits     1,051,249     1,057,675     1,037,748     1,051,249     1,037,748  
  Customer repurchase agreements     34,153     39,478     46,666     34,153     46,666  
  Long-term borrowings     37,363     37,370     37,390     37,363     37,390  
  Shareholders' equity     170,499     167,551     165,032     170,499     165,032  
  Shareholders' equity - tangible (a)     128,628     125,349     121,749     128,628     121,749  
                                 
AVERAGE BALANCES                                
  Securities   $ 345,152   $ 350,974   $ 326,348   $ 345,152   $ 326,348  
  Loans held for sale     2,032     1,669     8,910     2,032     8,910  
  Loans, net of unearned income     788,419     793,007     782,346     788,419     782,346  
  Interest-earning assets     1,186,904     1,206,058     1,171,424     1,186,904     1,171,424  
  Goodwill and other intangibles     42,077     42,404     43,552     42,077     43,552  
  Assets     1,302,639     1,322,242     1,296,250     1,302,639     1,296,250  
  Assets - tangible (a)     1,260,562     1,279,838     1,252,698     1,260,562     1,252,698  
  Interest-bearing deposits     830,229     829,753     823,822     830,229     823,822  
  Deposits     1,051,614     1,063,920     1,038,135     1,051,614     1,038,135  
  Customer repurchase agreements     37,797     47,220     50,296     37,797     50,296  
  Long-term borrowings     37,373     37,380     37,399     37,373     37,399  
  Shareholders' equity     170,046     167,545     164,520     170,046     164,520  
  Shareholders' equity - tangible (a)     127,969     125,141     120,968     127,969     120,968  
                                 
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
 
    2014   2013   2013   2014   2013  
CAPITAL                                
Average shares outstanding - basic     7,904,759     7,887,811     7,861,991     7,904,759     7,861,991  
Average shares outstanding - diluted     7,917,601     7,901,198     7,871,508     7,917,601     7,871,508  
                                 
ALLOWANCE FOR LOAN LOSSES                                
Beginning balance   $ 12,600   $ 12,684   $ 12,118   $ 12,600   $ 12,118  
Provision for loan losses     -     -     294     -     294  
Charge-offs     (73 )   (208 )   (287 )   (73 )   (287 )
Recoveries     87     124     403     87     403  
Ending balance   $ 12,614   $ 12,600   $ 12,528   $ 12,614   $ 12,528  
                                 
LOANS                                
Construction and land development   $ 40,458   $ 41,822   $ 45,327   $ 40,458   $ 45,327  
Commercial real estate     358,362     364,616     361,406     358,362     361,406  
Residential real estate     170,517     171,917     163,920     170,517     163,920  
Home equity     89,081     87,797     88,356     89,081     88,356  
Commercial and industrial     119,042     122,553     127,028     119,042     127,028  
Consumer     5,909     5,966     6,476     5,909     6,476  
Total   $ 783,369   $ 794,671   $ 792,513   $ 783,369   $ 792,513  
                                 
NONPERFORMING ASSETS AT PERIOD-END                                
Nonperforming loans:                                
90 days past due and accruing   $ -   $ -   $ -   $ -   $ -  
Nonaccrual     5,557     5,071     5,185     5,557     5,185  
Foreclosed real estate     3,233     3,422     5,822     3,233     5,822  
Nonperforming assets   $ 8,790   $ 8,493   $ 11,007   $ 8,790   $ 11,007  
                                 
ASSET QUALITY RATIOS                                
  Allowance for loan losses to total loans     1.61     1.59     1.58     1.61     1.58  
  Allowance for loan losses to nonperforming loans     226.99     248.47     241.62     226.99     241.62  
  Nonperforming assets to total assets     0.68     0.65     0.85     0.68     0.85  
  Nonperforming loans to total loans     0.71     0.64     0.65     0.71     0.65  
  Annualized net charge-offs (recoveries)                                
  to average loans     (0.01 )%   0.04 %   (0.06 )%   (0.01 )%   (0.06 )%
                                 
                                 
OTHER DATA                                
  Fiduciary assets at period-end (c)   $ 435,635   $ 442,583   $ 418,413   $ 435,635   $ 418,413  
  Retail brokerage assets at period-end (c)   $ 189,130   $ 185,810   $ 164,961   $ 189,130   $ 164,961  
  Number full-time equivalent employees (d)     292     290     292     292     292  
  Number of full service offices     25     25     25     25     25  
  Number of loan production offices     2     2     2     2     2  
  Number of ATM's     31     31     31     31     31  
                                 
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
(e) - The efficiency ratio is calculated by dividing noninterest expense excluding gains or losses on the sale of OREO by net interest income including tax equivalent income on nontaxable loans and securities and excluding (a) gains or losses on securities and (b) gains or losses on sale of premises and equipment.
 
 
     
Net Interest Income Analysis
For the Three Months Ended March 31, 2014 and 2013
(in thousands, except rates)
                             
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2014   2013   2014   2013   2014     2013  
Loans:                                    
  Commercial   $ 120,707   $ 123,615   $ 1,472   $ 1,590   4.95 %   5.22 %
  Real estate     664,772     661,538     8,296     9,728   4.99     5.88  
  Consumer     4,972     6,103     89     110   7.26     7.31  
    Total loans     790,451     791,256     9,857     11,428   5.00     5.79  
                                     
Securities:                                    
  Federal agencies & GSEs     68,356     46,006     178     116   1.04     1.01  
  Mortgage-backed & CMOs     66,631     79,432     403     380   2.42     1.91  
  State and municipal     193,542     189,056     1,899     1,932   3.92     4.09  
  Other     16,623     11,854     127     95   3.06     3.21  
    Total securities     345,152     326,348     2,607     2,523   3.02     3.09  
                                     
Deposits in other banks     51,301     53,820     33     29   0.26     0.22  
                                     
  Total interest-earning assets     1,186,904     1,171,424     12,497     13,980   4.22     4.78  
                                     
Non-earning assets     115,735     124,826                        
                                     
    Total assets   $ 1,302,639   $ 1,296,250                        
                                     
Deposits:                                    
  Demand   $ 168,080   $ 154,555     22     32   0.05     0.08  
  Money market     192,871     172,481     75     93   0.16     0.22  
  Savings     86,898     82,696     14     20   0.07     0.10  
  Time     382,380     414,090     1,118     1,291   1.19     1.26  
    Total deposits     830,229     823,822     1,229     1,436   0.60     0.71  
                                     
Customer repurchase agreements     37,797     50,296     2     21   0.02     0.17  
Long-term borrowings     37,373     37,399     264     270   2.83     2.89  
  Total interest-bearing liabilities     905,399     911,517     1,495     1,727   0.67     0.77  
                                     
Noninterest bearing demand deposits     221,385     214,313                        
Other liabilities     5,809     5,900                        
Shareholders' equity     170,046     164,520                        
    Total liabilities and shareholders' equity     $1,302,639      $1,296,250                        
                                     
Interest rate spread                           3.55 %   4.01 %
Net interest margin                           3.71 %   4.19 %
                                     
Net interest income (taxable equivalent basis)                 11,002     12,253            
Less: Taxable equivalent adjustment                 543     571            
Net interest income               $ 10,459   $ 11,682