SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

April 23, 2015 16:05 ET

American National Bankshares Inc. Reports First Quarter 2015 Earnings

DANVILLE, VA--(Marketwired - Apr 23, 2015) -  American National Bankshares Inc. (NASDAQ: AMNB)

  • Merger with MainStreet BankShares, Inc. ("MainStreet"), parent of Franklin Community Bank, N.A. ("Franklin"), closed January 1, 2015
  • Q1 2015 net income of $3.5 million and diluted EPS of $0.40
  • Net interest margin of 3.73% for Q1 2015
  • Nonperforming assets 0.50% of total assets
  • Average shareholders' equity of $196 million is 12.91% of average assets

American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced first quarter 2015 net income of $3,515,000 compared to $3,450,000 for the first quarter of 2014, a $65,000 or 1.9% increase. Diluted earnings per share were $0.40 for the 2015 quarter compared to $0.44 for the 2014 quarter. Net income for the first quarter of 2015 produced a return on average assets of 0.93%, a return on average equity of 7.17%, and a return on average tangible equity of 10.02%.

Earnings for the 2015 quarter were favorably impacted by the January 2015 merger between American National and MainStreet Bankshares, Inc. 

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "The lead story for early 2015 is our acquisition of MainStreet and its banking subsidiary, Franklin Community Bank, N.A. This merger closed on January 1, 2015, and it is a wonderful way to start the New Year. We are delighted to welcome the Franklin County bankers and their customers into the American National community bank family and we plan to continue the high quality of service our Franklin customers have come to expect, with even more options in banking products and services.

"The merger with MainStreet has had a substantial impact on our balance sheet.

"At March 31, 2015, American National had $965,902,000 in loans compared to $783,369,000 at March 31, 2014, an increase of $182,533,000 or 23.3%. Of this increase, $112,901,000 or 61.8% relates directly to the MainStreet acquisition. 

"Organic loan growth over the past year was $69,632,000 or 8.9%. Organic loan growth over the past quarter was $12,076,000 or 1.4%. 

"At March 31, 2015, American National had $1,242,675,000 in deposits compared to $1,051,249,000 at March 31, 2014, an increase of $191,426,000 or 18.2%. Of this increase, $135,568,000 or 70.8% relates directly to the MainStreet acquisition. The deposit growth was strong in all categories, but notably in non-maturity (core) deposits. We are continuously attempting to grow core deposits and their affiliated relationships, but the challenge in this ongoing low rate environment is to do that in a cost effective and yet competitive manner. Our cost of interest bearing deposits for the first quarter was 0.52%, compared to 0.60% for the 2014 quarter.

"On the income statement side, our net income for the first quarter was $3,515,000, up from $3,450,000 in the 2014 quarter, an increase of $65,000 or 1.9%.

"We had several drivers that impacted quarterly results.

"The merger with MainStreet had a significant and positive impact to operating results.

"Provision for loan loss increased during the 2015 quarter, related to organic growth in loan volume and our regular review of cash flow expectations on loans acquired with deteriorated credit quality.

"Noninterest income was higher in the 2015 quarter by $453,000 or 16.8%, related mostly to the MainStreet merger.

"Noninterest expense was higher in the 2015 quarter by $1,624,000 or 19.3%, related mostly to the merger and to merger related, one-time expenses. The one-time merger costs were $359,000 for the quarter. "

Haley concluded, "The beginning of a New Year is a great time to reflect on strategy and corporate goals. We continue to believe that community banking is an industry where imagination and flexibility pay long term dividends. For American National, we will continue our focus on high quality organic growth, and at the same time prepare American National for the next appropriate strategic acquisition opportunity that may arise."

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

For the quarter ended March 31, 2015, average shareholders' equity was 12.91% of average assets, compared to 13.04% for the quarter ended December 31, 2014, and compared to 13.05% for the quarter ended March 31, 2014.

Book value per common share was $22.58 at March 31, 2015, compared to $22.07 at December 31, 2014, and $21.57 at March 31, 2014.

Tangible book value per common share was $17.09 at March 31, 2015, compared to $16.86 at December 31, 2014, and $16.27 at March 31, 2014.

Credit Quality Measurements
Non-performing assets ($5,123,000 of non-performing loans and $2,653,000 of other real estate owned) represented 0.50% of total assets at March 31, 2015, compared to 0.68% at March 31, 2014. 

Annualized net charge offs to average loans was eight basis points 0.08% for the 2015 first quarter, compared to 1 basis point (0.01%) of net recoveries for the same quarter in 2014.

The allowance for loan losses as a percentage of total loans was 1.33% at March 31, 2015 compared to 1.61% at March 31, 2014. The largest driver of this change was the merger with MainStreet, whose loans have been marked to fair value at the merger date and whose related allowance for loan loss was eliminated in the valuation process.

Other real estate owned was $2,653,000 at March 31, 2015, compared to $3,233,000 at March 31, 2014, a decrease of $580,000 or 17.9%.

Merger related financial impact
The fair value adjustments related to our two recent mergers have had a favorable impact on pretax income for the American National.

The July 2011 merger with MidCarolina Financial Corporation ("MidCarolina") continues to have a positive, but declining, impact on net interest income and pretax income. For the first quarter of 2015, the fair value impact to net interest income for this acquisition was $410,000, compared to $605,000 for the comparable quarter in 2014. The net impact to pretax income for the first quarter of 2015 was $184,000, compared to $378,000 for the comparable quarter of 2014.

The January 2015 merger with MainStreet was closed at the beginning of this quarter. For the first quarter of 2015, the fair value impact to net interest income for this acquisition was $703,000. The net impact to pretax income for the first quarter of 2015 was $629,000.

Net Interest Income
Net interest income before provision for loan losses increased to $12,378,000 in the first quarter of 2015 from $10,459,000 in first quarter of 2014, an increase of $1,919,000 or 18.3%. 

For the 2015 quarter, the net interest margin was 3.73% compared to 3.71% for the same quarter in 2014, an increase of two basis points. This increase was driven by higher levels of accretion income and greater volumes of earning assets.

Provision for loan losses
Provision expense for the first quarter of 2015 was $600,000 compared to zero for the first quarter of 2014.

The need for additional provision expense was driven primarily by an increase in loan volume, the regular quarterly review of expected cash flows on certain purchased credit impaired loans from the MidCarolina merger, and a small uptick in loan charge offs. It was partially mitigated by improving economic conditions and continuing strong asset quality metrics.

Noninterest Income 
Noninterest income totaled $3,156,000 in the first quarter of 2015, compared with $2,703,000 in the first quarter of 2014, an increase of $453,000 or 16.8%. The primary driver of the increase was the increase in transaction volume related to the MainStreet merger.

Noninterest Expense
Noninterest expense totaled $10,047,000 in the first quarter of 2015, compared to $8,423,000 in the first quarter of 2014, an increase of $1,624,000 or 19.3%. 

All expense categories were impacted by the MainStreet merger and the integration of Franklin Community Bank into American National's operations. 

However, one time, merger related expense, related to the MainStreet acquisition, accounted for $359,000 or 22% of the increase. The operational conversion of the Franklin Community Bank was originally anticipated in late first quarter 2015. However, due to logistical issues between technology vendors it has been delayed until mid-May. Consequently, management expects there will be significant additional one time, merger related expense during the second quarter, mostly related to data processing system integration. The expenses in this category are one-time in nature, related directly to effecting the merger transaction, and are comprised of data processing, legal and accounting, investment banking, and change-in-control payments.

About American National
As of January 1, 2015, with the closing of the acquisition of MainStreet BankShares, Inc., American National Bankshares Inc. is a multi-state bank holding company with total assets of approximately $1.5 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 27 banking offices and two loan production offices. American National Bank and Trust Company also manages an additional $748 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 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   2015     2014  
                 
Cash and due from banks   $ 23,995     $ 25,880  
Interest-bearing deposits in other banks     75,254       45,466  
Federal funds sold     13,616       -  
                 
Securities available for sale, at fair value     352,208       349,123  
Restricted stock, at cost     5,336       4,529  
Loans held for sale     1,936       1,389  
                 
Loans     965,902       783,369  
  Less allowance for loan losses     (12,844 )     (12,614 )
    Net Loans     953,058       770,755  
                 
Premises and equipment, net     24,371       23,359  
Other real estate owned, net     2,653       3,233  
Goodwill     44,210       39,043  
Core deposit intangibles, net     3,583       2,828  
Bank owned life insurance     17,261       14,845  
Accrued interest receivable and other assets     22,617       19,352  
                 
    Total assets   $ 1,540,098     $ 1,299,802  
                 
                 
Liabilities                
  Demand deposits -- noninterest-bearing   $ 289,818     $ 218,795  
  Demand deposits -- interest-bearing     229,721       170,894  
  Money market deposits     202,706       194,528  
  Savings deposits     110,104       89,024  
  Time deposits     410,326       378,008  
    Total deposits     1,242,675       1,051,249  
                 
  Short-term borrowings:                
    Customer repurchase agreements     53,664       34,153  
    Other short-term borrowings     -       -  
  Long-term borrowings     9,941       9,919  
  Trust preferred capital notes     27,546       27,444  
  Accrued interest payable and other liabilities     9,583       6,538  
    Total liabilities     1,343,409       1,129,303  
                 
Shareholders' equity                
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding     -       -  
  Common stock, $1 par, 10,000,000 shares authorized, 8,727,696 shares outstanding at March 31, 2015 and 7,905,243 shares outstanding at March 31, 2014     8,710       7,905  
  Capital in excess of par value     77,612       58,202  
  Retained earnings     106,102       100,721  
  Accumulated other comprehensive income, net     4,265       3,671  
    Total shareholders' equity     196,689       170,499  
                   
    Total liabilities and shareholders' equity   $ 1,540,098     $ 1,299,802  
                 
                 
                 
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
    2015     2014
Interest and Dividend Income:              
  Interest and fees on loans   $ 11,770     $ 9,847
  Interest on federal funds sold     4       -
  Interest and dividends on securities:              
    Taxable     975       964
    Tax-exempt     960       1,035
    Dividends     82       75
  Other interest income     48       33
      Total interest and dividend income     13,839       11,954
               
Interest Expense:              
  Interest on deposits     1,194       1,229
  Interest on short-term borrowings     3       2
  Interest on long-term borrowings     80       80
  Interest on trust preferred capital notes     184       184
      Total interest expense     1,461       1,495
               
Net Interest Income     12,378       10,459
  Provision for loan losses     600       -
               
Net Interest Income After Provision for Loan Losses     11,778       10,459
               
Noninterest Income:              
  Trust fees     952       1,122
  Service charges on deposit accounts     497       413
  Other fees and commissions     588       444
  Mortgage banking income     222       263
  Securities gains, net     310       39
  Other     587       422
      Total noninterest income     3,156       2,703
               
Noninterest Expense:              
  Salaries     4,147       3,538
  Employee benefits     1,075       975
  Occupancy and equipment     1,172       936
  FDIC assessment     185       164
  Bank franchise tax     235       222
  Core deposit intangible amortization     301       331
  Data processing     462       348
  Software     283       262
  Foreclosed real estate, net     (5 )     16
  Merger related expenses     359       -
  Other     1,833       1,631
      Total noninterest expense     10,047       8,423
               
Income Before Income Taxes     4,887       4,739
Income Taxes     1,372       1,289
Net Income   $ 3,515     $ 3,450
               
Net Income Per Common Share:              
  Basic   $ 0.40     $ 0.44
  Diluted   $ 0.40     $ 0.44
Average Common Shares Outstanding:              
  Basic     8,723,633       7,904,759
  Diluted     8,732,679       7,917,601
                 
                 
                 
American National Bankshares Inc. and Subsidiaries  
Financial Highlights  
   
(In thousands, except share, ratio and nonfinancial data, unaudited) 1st Qtr
2015
  4th Qtr 
2014
  1st Qtr
 2014
  YTD
2015
  YTD
2014
 
                               
EARNINGS                              
  Interest income $ 13,839   $ 11,869   $ 11,954   $ 13,839   $ 11,954  
  Interest expense   1,461     1,414     1,495     1,461     1,495  
  Net interest income   12,378     10,455     10,459     12,378     10,459  
  Provision for loan losses   600     250     -     600     -  
  Noninterest income   3,156     2,792     2,703     3,156     2,703  
  Noninterest expense   10,047     8,943     8,423     10,047     8,423  
  Income taxes   1,372     1,164     1,289     1,372     1,289  
  Net income   3,515     2,890     3,450     3,515     3,450  
                               
PER COMMON SHARE                              
  Earnings per share - basic $ 0.40   $ 0.37   $ 0.44   $ 0.40   $ 0.44  
  Earnings per share - diluted   0.40     0.37     0.44     0.40     0.44  
  Cash dividends paid   0.23     0.23     0.23     0.23     0.23  
  Book value per share (f)   22.58     22.07     21.57     22.58     21.57  
  Book value per share - tangible (a) (f)   17.09     16.86     16.27     17.09     16.27  
  Closing market price   22.58     24.81     23.52     22.58     23.52  
                               
FINANCIAL RATIOS                              
  Return on average assets   0.93 %   0.86 %   1.06 %   0.93 %   1.06 %
  Return on average equity   7.17     6.63     8.12     7.17     8.12  
  Return on average tangible equity (b)   10.02     9.12     11.54     10.02     11.54  
  Average equity to average assets   12.91     13.04     13.05     12.91     13.05  
  Tangible equity to tangible assets (a)   9.98     10.16     10.23     9.98     10.23  
  Efficiency ratio (e)   63.90     64.60     61.82     63.90     61.82  
  Effective tax rate   28.07     28.71     27.20     28.07     27.20  
                               
PERIOD-END BALANCES                              
  Securities $ 357,544   $ 349,250   $ 353,652   $ 357,544   $ 353,652  
  Loans held for sale   1,936     616     1,389     1,936     1,389  
  Loans, net of unearned income   965,902     840,925     783,369     965,902     783,369  
  Goodwill and other intangibles   47,793     41,088     41,871     47,793     41,871  
  Assets   1,540,098     1,346,492     1,299,802     1,540,098     1,299,802  
  Assets - tangible (a)   1,492,305     1,305,404     1,257,931     1,492,305     1,257,931  
  Deposits   1,242,675     1,075,837     1,051,249     1,242,675     1,051,249  
  Customer repurchase agreements   53,664     53,480     34,153     53,664     34,153  
  Other short-term borrowings   -     -     -     -     -  
  Long-term borrowings   37,487     37,456     37,363     37,487     37,363  
  Shareholders' equity   196,689     173,780     170,499     196,689     170,499  
                               
AVERAGE BALANCES                              
  Securities $ 345,800   $ 331,785   $ 345,152   $ 345,800   $ 345,152  
  Loans held for sale   939     982     2,032     939     2,032  
  Loans, net of unearned income   954,882     815,271     788,419     954,882     788,419  
  Interest-earning assets   1,382,817     1,220,818     1,186,904     1,382,817     1,186,904  
  Goodwill and other intangibles   47,988     41,222     42,077     47,988     42,077  
  Assets   1,518,449     1,338,240     1,302,639     1,518,449     1,302,639  
  Assets - tangible (a)   1,470,461     1,297,018     1,260,562     1,470,461     1,260,562  
  Interest-bearing deposits   938,064     816,965     830,229     938,064     830,229  
  Deposits   1,221,037     1,069,995     1,051,614     1,221,037     1,051,614  
  Customer repurchase agreements   53,181     50,493     37,797     53,181     37,797  
  Other short-term borrowings   -     -     -     -     -  
  Long-term borrowings   37,469     37,438     37,373     37,469     37,373  
  Shareholders' equity   196,086     174,453     170,046     196,086     170,046  
                               
                               
American National Bankshares Inc. and Subsidiaries  
Financial Highlights  
                       
(In thousands, except share, ratio and nonfinancial data, unaudited)   1st Qtr
2015
  4th Qtr
2014
  1st Qtr
2014
  YTD
2015
  YTD
2014
 
                                 
CAPITAL                                
  Weighted average shares outstanding - basic     8,723,633     7,855,872     7,904,759     8,723,633     7,904,759  
  Weighted average shares outstanding - diluted     8,732,679     7,866,111     7,917,601     8,732,679     7,917,601  
                                 
ALLOWANCE FOR LOAN LOSSES                                
  Beginning balance   $ 12,427   $ 12,620   $ 12,600   $ 12,427   $ 12,600  
  Provision for loan losses     600     250     -     600     -  
  Charge-offs     (309 )   (566 )   (73 )   (309 )   (73 )
  Recoveries     126     123     87     126     87  
  Ending balance   $ 12,844   $ 12,427   $ 12,614   $ 12,844   $ 12,614  
                                 
LOANS                                
  Construction and land development   $ 68,069   $ 50,863   $ 40,458   $ 68,069   $ 40,458  
  Commercial real estate     436,562     391,472     358,362     436,562     358,362  
  Residential real estate     211,261     175,293     170,517     211,261     170,517  
  Home equity     97,811     91,075     89,081     97,811     89,081  
  Commercial and industrial     146,280     126,981     119,042     146,280     119,042  
  Consumer     5,919     5,241     5,909     5,919     5,909  
  Total   $ 965,902   $ 840,925   $ 783,369   $ 965,902   $ 783,369  
                                 
NONPERFORMING ASSETS AT PERIOD-END                                
  Nonperforming loans:                                
    90 days past due and accruing   $ -   $ -   $ -   $ -   $ -  
    Nonaccrual     5,123     4,112     5,557     5,123     5,557  
  Other real estate owned     2,653     2,119     3,233     2,653     3,233  
  Nonperforming assets   $ 7,776   $ 6,231   $ 8,790   $ 7,776   $ 8,790  
                                 
ASSET QUALITY RATIOS                                
  Allowance for loan losses to total loans     1.33 %   1.48 %   1.61 %   1.33 %   1.61 %
  Allowance for loan losses to                                
  nonperforming loans     250.71     302.21     226.99     250.71     226.99  
  Nonperforming assets to total assets     0.50     0.46     0.68     0.50     0.68  
  Nonperforming loans to total loans     0.53     0.49     0.71     0.53     0.71  
  Annualized net charge-offs (recoveries) to average loans     0.08     0.22     (0.01 )   0.08     (0.01 )
                                 
                                 
OTHER DATA                                
  Fiduciary assets at period-end                                
  (c) (g)   $ 502,779   $ 450,498   $ 435,635   $ 502,779   $ 435,635  
  Retail brokerage assets at period-end (c) (g)   $ 244,725   $ 210,265   $ 189,130   $ 244,725   $ 189,130  
  Number full-time equivalent employees (d)     318     284     292     318     292  
  Number of full service offices     27     24     25     27     25  
  Number of loan production offices     2     2     2     2     2  
  Number of ATM's     34     31     31     34     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.
  (f) - Unvested restricted stock of 17,761 shares are not included in the calculation.
  (g) - Assets are not owned by the Company and are not reflected in the consolidated balance sheet.
 
 
 
Net Interest Income Analysis  
For the Three Months Ended March 31, 2015 and 2014  
(in thousands, except rates)  
   
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2015   2014   2015   2014   2015     2014  
Loans:                                    
  Commercial   $ 139,120   $ 120,707   $ 1,826   $ 1,472   5.32 %   4.95 %
  Real estate     801,373     664,772     9,719     8,296   4.85     4.99  
  Consumer     15,328     4,972     240     89   6.35     7.26  
    Total loans     955,821     790,451     11,785     9,857   4.94     5.00  
                                     
Securities:                                    
  Federal agencies & GSEs     74,850     68,356     245     178   1.31     1.04  
  Mortgage-backed & CMOs     65,558     66,631     378     403   2.31     2.42  
  State and municipal     190,216     193,542     1,763     1,899   3.71     3.92  
  Other     15,176     16,623     123     127   3.24     3.06  
    Total securities     345,800     345,152     2,509     2,607   2.90     3.02  
                                     
Federal funds sold     14,580     -     4     -   0.11     -  
Deposits in other banks     66,616     51,301     48     33   0.29     0.26  
                                     
  Total interest-earning assets     1,382,817     1,186,904     14,346     12,497   4.16     4.22  
                                     
Non-earning assets     135,632     115,735                        
                                     
    Total assets   $ 1,518,449   $ 1,302,639                        
                                     
Deposits:                                    
  Demand   $ 212,673   $ 168,080     18     22   0.03     0.05  
  Money market     202,935     192,871     71     75   0.14     0.16  
  Savings     107,683     86,898     12     14   0.05     0.07  
  Time     414,773     382,380     1,093     1,118   1.07     1.19  
    Total deposits     938,064     830,229     1,194     1,229   0.52     0.60  
                                     
Customer repurchase agreements     53,181     37,797     3     2   0.02     0.02  
Long-term borrowings     37,469     37,373     264     264   2.82     2.83  
  Total interest-bearing liabilities     1,028,714     905,399     1,461     1,495   0.57     0.67  
                                     
Noninterest bearing demand deposits     282,973     221,385                        
Other liabilities     10,676     5,809                        
Shareholders' equity     196,086     170,046                        
  Total liabilities and shareholders' equity   $ 1,518,449   $ 1,302,639                        
                                     
Interest rate spread                           3.59 %   3.55 %
Net interest margin                           3.73 %   3.71 %
                                     
Net interest income (taxable equivalent basis)           12,885     11,002            
Less: Taxable equivalent adjustment                 507     543            
Net interest income               $ 12,378   $ 10,459