SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

April 21, 2016 16:23 ET

American National Bankshares Inc. Reports First Quarter 2016 Earnings

DANVILLE, VA--(Marketwired - Apr 21, 2016) - American National Bankshares Inc. ("American National") (NASDAQ: AMNB)

  • Q1 2016 net income of $4.1 million
  • Diluted EPS $0.48 for Q1 2016 compared to $0.40 for Q1 2015
  • Net interest margin of 3.67% for Q1 2016
  • Average shareholders' equity for Q1 of $199.5 million is 12.86% of average assets
  • Loan growth for Q1 2016 2.9%

American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced net income for the first quarter of 2016 of $4,128,000 compared to $3,515,000 for the first quarter of 2015, a $613,000 or 17.4% increase. Basic and diluted net income per common share was $0.48 for the first quarter of 2016 compared to $0.40 for the 2015 quarter. Net income for the first quarter of 2016 produced a return on average assets of 1.06%, a return on average equity of 8.28%, and a return on average tangible equity of 12.86%.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "As we start 2016, we are seeing increases in business activity throughout our market areas and that is resulting in an increased demand for new credit.

"One of our primary, and favorite, missions is to accommodate the credit needs of our customers. This past year, from March 2015 to March 2016, our loan portfolio had organic growth of $68.7 million (7.1%). During the first quarter of 2016, our loan portfolio grew $29.0 million (2.9%).

"Our primary funding source for loans is deposits, especially core deposits. During the past year, from March 2015 to March 2016, our deposits grew $49.8 million (4.0%). During the first quarter of 2016, our deposits grew $29.8 million (2.4%).

"We're very encouraged by the increasing level of business activity.

"On the earnings side, our net income for the first quarter of 2016 was $4,128,000, up from $3,515,000 in the first quarter of 2015, an increase of $613,000 or 17.4%.

"Net interest income is up by $206,000 (1.7%) in the first quarter of 2016 compared to the first quarter of 2015.

"Provision for loan losses was down $550,000 in the first quarter of 2016, compared to the first quarter of 2015. Provision expense in the 2015 quarter was unusually large, and was related to the results of the quarterly review of expected cash flows from certain purchased credit impaired loans.

"Noninterest income was higher in the first quarter of 2016 by $141,000 (4.5%), compared to the first quarter of 2015. The improvement related mostly to mortgage banking, electronic banking fees and securities gains.

"Noninterest expense was decreased in the 2016 quarter by $129,000 (1.3%). The lower level of expense related mostly to nonrecurring MainStreet acquisition expenses paid in the first quarter of 2015."

Haley concluded, "We had an excellent start to 2016 on our balance sheet, as evidenced by the growth in loans and deposits. We expect the growth in earning assets will fuel increasing net interest income in coming quarters and continued high asset quality will control provision for loan losses expense. We are making concerted efforts to improve noninterest income and efficiently and effectively control noninterest expense. All things considered, we feel good about the first quarter and we are optimistic about the remainder of 2016."

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

For the quarter ended March 31, 2016, average shareholders' equity was 12.86% of average assets, compared to 12.91% for the quarter ended March 31, 2015.

Book value per common share was $23.27 at March 31, 2016, compared to $22.58 at March 31, 2015.

Tangible book value per common share was $17.90 at March 31, 2016, compared to $17.09 at March 31, 2015.

Credit Quality Measurements
Non-performing assets ($5,276,000 of non-performing loans and $1,493,000 of other real estate owned) represented 0.43% of total assets at March 31, 2016, compared to 0.50% at March 31, 2015. 

Annualized net charge offs to average loans were minus one basis point (-0.01%), a net recovery, for the 2016 first quarter, compared to eight basis points (0.08%) for the same quarter in 2015.

Other real estate owned was $1,493,000 at March 31, 2016, compared to $2,653,000 at March 31, 2015, a decrease of $1,160,000 or 43.7%.

Acquisition related financial impact
The purchase accounting adjustments related to our two recent acquisitions have had and continue to have a positive impact on net interest income and income before income tax for American National. The impact of the adjustments is summarized below (dollars in thousands):

       
Acquisition related financial impact March 31, 2016   March 31,2015
           
Net interest income $ 1,001   $ 1,113
Income before Income taxes $ 713   $ 813
           

During the first quarter 2016, the Company received two substantial payoffs of purchased credit impaired loans from our 2011 acquisition that resulted in $460,000 in current quarter cash-basis accretion income. Of the $460,000, approximately $117,000 related to a consumer purpose loan. This is a relatively small segment of our loan portfolio and the additional accretion had a material and favorable impact on the segment's yield for the quarter. In addition, the 2016 quarter was negatively impacted by the amortization of a time deposit valuation adjustment related to the MainStreet acquisition of $72,000, which increased interest expense.

Net Interest Income
Net interest income before the provision for loan losses increased to $12,584,000 in the first quarter of 2016 from $12,378,000 in the first quarter of 2015, an increase of $206,000 or 1.7%.

For the 2016 quarter, the net interest margin was 3.67% compared to 3.73% for the same quarter in 2015, a decrease of six basis points or 0.06%. 

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the first quarter of 2016 was $50,000 compared to $600,000 for the first quarter of 2015, a decrease of $550,000 or 91.7%.

The allowance for loan losses as a percentage of total loans was 1.23% at March 31, 2016 compared to 1.33% at March 31, 2015.

There was significant growth in the loans outstanding in the first quarter 2016, a net of $29.0 million or 2.9%. The need for additions to the allowance for loan losses was reduced by improvement in various qualitative factors used in the determination of the allowance, notably asset quality and local economic conditions. As noted in the Credit Quality discussion, non-performing assets, charge-offs, and other real estate owned are all improved over the past year.

Provision expense in the 2015 quarter was negatively impacted by the regular quarterly review of expected cash flows on certain purchased credit impaired loans.

Noninterest Income 
Noninterest income totaled $3,297,000 in the first quarter of 2016, compared with $3,156,000 in the first quarter of 2015, an increase of $141,000 or 4.5%. 

Trust fees showed a decrease of $22,000 directly related to volatility in the equity markets. Other fees and commissions showed an increase of $84,000 mostly related to higher levels of VISA debit card income. Mortgage banking income showed a $70,000 increase resulting from increases in the volume of originations. Securities gains showed an increase of $56,000 related to actions resulting from asset/liability strategy decisions. We showed a $68,000 decrease in income from our investment in Small Business Investment Corporations (SBIC).

Noninterest Expense
Noninterest expense totaled $9,918,000 in the first quarter of 2016, compared to $10,047,000 in the first quarter of 2015, a decrease of $129,000 or 1.3%. The first quarter of 2015 was negatively impacted by $359,000 in acquisition related expenses related to the acquisition of MainStreet.

About American National
American National is a multi-state bank holding company with total assets of approximately $1.6 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 also manages an additional $760 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 in technology and information security; 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.  
Consolidated Balance Sheets  
(Dollars in thousands, except share and per share data)  
Unaudited  
             
    March 31  
ASSETS   2016     2015  
                 
Cash and due from banks   $ 26,345     $ 23,995  
Interest-bearing deposits in other banks     61,186       75,254  
Federal funds sold     -       13,616  
                 
Securities available for sale, at fair value     356,998       352,208  
Restricted stock, at cost     5,355       4,979  
Loans held for sale     785       1,936  
                 
Loans     1,034,564       965,902  
  Less allowance for loan losses     (12,675 )     (12,844 )
    Net Loans     1,021,889       953,058  
                 
Premises and equipment, net     23,241       24,371  
Other real estate owned, net     1,493       2,653  
Goodwill     43,872       44,210  
Core deposit intangibles, net     2,395       3,583  
Bank owned life insurance     17,773       17,261  
Accrued interest receivable and other assets     21,222       22,974  
                 
    Total assets   $ 1,582,554     $ 1,540,098  
                 
                 
Liabilities                
  Demand deposits -- noninterest-bearing   $ 321,599     $ 289,818  
  Demand deposits -- interest-bearing     231,970       229,721  
  Money market deposits     218,543       202,706  
  Savings deposits     119,286       110,104  
  Time deposits     401,033       410,326  
    Total deposits     1,292,431       1,242,675  
                 
  Short-term borrowings:                
  Customer repurchase agreements     42,184       53,664  
  Long-term borrowings     9,963       9,941  
  Junior subordinated debt     27,648       27,546  
  Accrued interest payable and other liabilities     9,885       9,583  
    Total liabilities     1,382,111       1,343,409  
                 
Shareholders' equity                
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding     -       -  
  Common stock, $1 par, 20,000,000 shares authorized, 8,612,658 shares outstanding at March 31, 2016 and 8,709,935 shares outstanding at March 31, 2015     8,575       8,710  
  Capital in excess of par value     74,744       77,612  
  Retained earnings     113,628       106,102  
  Accumulated other comprehensive income, net     3,496       4,265  
    Total shareholders' equity     200,443       196,689  
                 
    Total liabilities and shareholders' equity   $ 1,582,554     $ 1,540,098  
                 
                 
                 
American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
         
    Three Months Ended
    March 31
    2016   2015
Interest and Dividend Income:            
  Interest and fees on loans   $ 12,115   $ 11,770
  Interest on federal funds sold     -     4
  Interest and dividends on securities:            
    Taxable     1,084     975
    Tax-exempt     823     960
    Dividends     91     82
  Other interest income     58     48
    Total interest and dividend income     14,171     13,839
             
Interest Expense:            
  Interest on deposits     1,297     1,194
  Interest on short-term borrowings     1     3
  Interest on long-term borrowings     81     80
  Interest on junior subordinated debt     208     184
    Total interest expense     1,587     1,461
             
Net Interest Income     12,584     12,378
  Provision for loan losses     50     600
             
Net Interest Income After Provision for Loan Losses     12,534     11,778
             
Noninterest Income:            
  Trust fees     930     952
  Service charges on deposit accounts     492     497
  Other fees and commissions     672     588
  Mortgage banking income     292     222
  Securities gains, net     366     310
  Brokerage fees     204     215
  Income from Small Business Investment Companies     166     234
  Other     175     138
    Total noninterest income     3,297     3,156
             
Noninterest Expense:            
  Salaries     4,215     4,147
  Employee benefits     1,114     1,075
  Occupancy and equipment     1,099     1,172
  FDIC assessment     188     185
  Bank franchise tax     256     235
  Core deposit intangible amortization     288     301
  Data processing     444     462
  Software     297     283
  Other real estate owned, net     104     53
  Merger related expenses     -     359
  Other     1,913     1,775
    Total noninterest expense     9,918     10,047
             
Income Before Income Taxes     5,913     4,887
Income Taxes     1,785     1,372
Net Income   $ 4,128   $ 3,515
             
Net Income Per Common Share:            
  Basic   $ 0.48   $ 0.40
  Diluted   $ 0.48   $ 0.40
Weighted Average Common Shares Outstanding:            
  Basic     8,608,728     8,723,633
  Diluted     8,613,896     8,732,679
             
             
             
American National Bankshares Inc.           
Financial Highlights           
                     
  (In thousands, except share, ratio and nonfinancial data, unaudited)                    
  1st Qtr   4th Qtr   1st Qtr   YTD   YTD  
  2016   2015   2015   2016   2015  
EARNINGS                              
  Interest income $ 14,171   $ 13,951   $ 13,839   $ 14,171   $ 13,839  
  Interest expense   1,587     1,507     1,461     1,587     1,461  
  Net interest income   12,584     12,444     12,378     12,584     12,378  
  Provision for loan losses   50     250     600     50     600  
  Noninterest income   3,297     3,818     3,156     3,297     3,156  
  Noninterest expense   9,918     9,466     10,047     9,918     10,047  
  Income taxes   1,785     1,939     1,372     1,785     1,372  
  Net income   4,128     4,607     3,515     4,128     3,515  
                               
PER COMMON SHARE                              
  Net income per share - basic $ 0.48   $ 0.53   $ 0.40   $ 0.48   $ 0.40  
  Net income per share - diluted   0.48     0.53     0.40     0.48     0.40  
  Cash dividends paid   0.24     0.24     0.23     0.24     0.23  
  Book value per share   23.27     22.95     22.58     23.17     22.58  
  Book value per share - tangible (a)   17.90     17.55     17.09     17.90     17.09  
  Closing market price   25.33     25.61     22.58     25.33     22.58  
                               
FINANCIAL RATIOS                              
  Return on average assets   1.06 %   1.20 %   0.93 %   1.06 %   0.93 %
  Return on average equity   8.28     9.32     7.17     8.28     7.17  
  Return on average tangible equity (b)   11.27     12.77     10.02     12.86     10.02  
  Average equity to average assets   12.86     12.88     12.91     12.86     12.91  
  Tangible equity to tangible assets (a)   10.04     10.08     9.98     10.04     9.98  
  Net interest margin, taxable equivalent   3.67     3.68     3.73     3.67     3.73  
  Efficiency ratio (c)   61.36     57.52     63.90     61.36     63.90  
  Effective tax rate   30.19     29.62     28.07     30.19     28.07  
                               
PERIOD-END BALANCES                              
  Securities $ 362,353   $ 345,661   $ 357,187   $ 362,353   $ 357,187  
  Loans held for sale   785     3,266     1,936     785     1,936  
  Loans, net of unearned income   1,034,564     1,005,525     965,902     1,034,564     965,902  
  Goodwill and other intangibles   46,267     46,555     47,793     46,267     47,793  
  Assets   1,582,554     1,547,599     1,540,098     1,582,554     1,540,098  
  Assets - tangible (a)   1,536,287     1,501,044     1,492,305     1,536,287     1,492,305  
  Deposits   1,292,431     1,262,660     1,242,675     1,292,431     1,242,675  
  Customer repurchase agreements   42,184     40,611     53,664     42,184     53,664  
  Long-term borrowings   37,611     37,580     37,487     37,611     37,487  
  Shareholders' equity   200,443     197,835     196,689     200,443     196,689  
  Shareholders' equity - tangible (a)   154,176     151,280     148,896     154,176     148,896  
                               
AVERAGE BALANCES                              
  Securities $ 347,290   $ 349,116   $ 345,800   $ 347,290   $ 345,800  
  Loans held for sale   2,055     3,446     939     2,055     939  
  Loans, net of unearned income   1,016,696     983,725     954,882     1,016,696     954,882  
  Interest-earning assets   1,424,808     1,386,256     1,382,817     1,424,808     1,382,817  
  Goodwill and other intangibles   46,441     47,193     47,988     46,441     47,988  
  Assets   1,551,124     1,534,247     1,518,449     1,551,124     1,518,449  
  Assets - tangible (a)   1,504,683     1,487,054     1,470,461     1,504,683     1,470,461  
  Interest-bearing deposits   950,271     931,223     938,064     950,271     938,064  
  Deposits   1,260,534     1,247,612     1,221,037     1,260,534     1,221,037  
  Customer repurchase agreements   44,412     42,524     53,181     44,412     53,181  
  Long-term borrowings   37,593     37,561     37,469     37,593     37,469  
  Shareholders' equity   199,525     197,658     196,086     199,525     196,086  
  Shareholders' equity - tangible (a)   153,084     150,465     148,098     153,084     148,098  
                               
CAPITAL                              
  Weighted average shares outstanding - basic   8,608,728     8,627,414     8,723,633     8,608,728     8,723,633  
  Weighted average shares outstanding - diluted   8,613,896     8,633,778     8,732,679     8,613,896     8,732,679  
                               
ALLOWANCE FOR LOAN LOSSES                              
  Beginning balance $ 12,601   $ 12,611   $ 12,427   $ 12,601   $ 12,427  
  Provision for loan losses   50     250     600     50     600  
  Charge-offs   (40)     (317)     (309)     (40)     (309)  
  Recoveries   64     57     126     64     126  
  Ending balance $ 12,675   $ 12,601   $ 12,844   $ 12,675   $ 12,844  
                               
LOANS                              
  Construction and land development $ 82,711   $ 72,968   $ 68,069   $ 82,711   $ 68,069  
  Commercial real estate   424,538     430,186     436,562     424,538     436,562  
  Residential real estate   225,737     220,434     211,261     225,737     211,261  
  Home equity   100,019     98,449     97,811     100,019     97,811  
  Commercial and industrial   196,110     177,481     146,280     196,110     146,280  
  Consumer   5,449     6,007     5,919     5,449     5,919  
  Total $ 1,034,564   $ 1,005,525   $ 965,902   $ 1,034,564   $ 965,902  
                               
NONPERFORMING ASSETS AT PERIOD-END                              
  Nonperforming loans:                              
    90 days past due and accruing $ -   $ -   $ -   $ -   $ -  
    Nonaccrual   5,276     5,205     5,123     5,276     5,123  
  Other real estate owned   1,493     2,184     2,653     1,493     2,653  
  Nonperforming assets $ 6,769   $ 7,389   $ 7,776   $ 6,769   $ 7,776  
                               
ASSET QUALITY RATIOS                              
  Allowance for loan losses to total loans   1.23 %   1.25 %   1.33 %   1.23 %   1.33 %
  Allowance for loan losses to nonperforming loans   240.24     242.09     250.71     240.24     250.71  
  Nonperforming assets to total assets   0.43     0.48     0.50     0.43     0.50  
  Nonperforming loans to total loans   0.51     0.52     0.53     0.51     0.53  
  Annualized net charge-offs (recoveries) to average loans   (0.01)     0.11     0.08     (0.01)     0.08  
                               
                               
OTHER DATA                              
  Fiduciary assets at period-end (d) (e) $ 491,257   $ 491,681   $ 502,779   $ 491,257   $ 502,779  
  Retail brokerage assets at period-end (d) (e) $ 268,542   $ 257,546   $ 244,725   $ 268,542   $ 244,725  
  Number full-time equivalent employees (f)   301     303     318     301     318  
  Number of full service offices   25     25     27     25     25  
  Number of loan production offices   2     2     2     2     2  
  Number of ATM's   33     33     34     33     33  
                               
Notes:
  (a) - Excludes goodwill and other intangible assets.
  (b) - Excludes amortization expense, net of tax, of intangible assets.
  (c) - The efficiency ratio is calculated by dividing noninterest expense excluding gains or losses on the sale of OREO by noninterest
  income and net interest income including tax equivalent income on nontaxable loans and securities and excluding (i) gains or losses on
  securities and (ii) gains or losses on sale of premises and equipment.
  (d) - Market value.
  (e) - Assets are not owned by the Company and are not reflected in the consolidated balance sheet.
  (f) - Average for quarter.
 
   
   
  Net Interest Income Analysis
  For the Three Months Ended March 31, 2016 and 2015
  (in thousands, except rates)
                         
                         
          Interest          
  Average Balance   Income/Expense   Yield/Rate  
                         
  2016   2015   2016   2015   2016   2015  
Loans:                                
  Commercial $ 188,275   $ 139,120   $ 1,855   $ 1,826   3.96 % 5.32 %
  Real estate   824,970     801,373     10,090     9,719   4.89   4.85  
  Consumer   5,506     15,328     231     240   16.87   6.35  
    Total loans   1,018,751     955,821     12,176     11,785   4.79   4.94  
                                 
Securities:                                
  Federal agencies & GSEs   88,283     74,850     378     245   1.71   1.31  
  Mortgage-backed & CMOs   75,891     65,558     384     378   2.02   2.31  
  State and municipal   166,187     190,216     1,493     1,763   3.59   3.71  
  Other   16,929     15,176     162     123   3.83   3.24  
    Total securities   347,290     345,800     2,417     2,509   2.78   2.90  
                                 
Federal funds sold   -     14,580     -     4   0.00   0.11  
Deposits in other banks   58,767     66,616     58     48   0.40   0.29  
                                 
    Total interest-earning assets   1,424,808     1,382,817     14,651     14,346   4.12   4.16  
                                 
Non-earning assets   126,316     135,632                      
                                 
    Total assets $ 1,551,124   $ 1,518,449                      
                                 
Deposits:                                
  Demand $ 231,368   $ 212,673     36     18   0.06   0.03  
  Money market   205,274     202,935     76     71   0.15   0.14  
  Savings   117,650     107,683     14     12   0.05   0.05  
  Time   395,979     414,773     1,171     1,093   1.19   1.07  
    Total deposits   950,271     938,064     1,297     1,194   0.55   0.52  
                                 
Customer repurchase agreements   44,412     53,181     1     3   0.01   0.02  
Long-term borrowings   37,593     37,469     289     264   3.08   2.82  
  Total interest-bearing liabilities   1,032,276     1,028,714     1,587     1,461   0.62   0.57  
                                 
Noninterest bearing demand deposits   310,263     282,973                      
Other liabilities   9,060     10,676                      
Shareholders' equity   199,525     196,086                      
  Total liabilities and shareholders' equity $ 1,551,124   $ 1,518,449                      
                                 
Interest rate spread                         3.50 % 3.59 %
Net interest margin                         3.67 % 3.73 %
                                 
Net interest income (taxable equivalent basis)               13,064     12,885          
Less: Taxable equivalent adjustment               480     507          
Net interest income             $ 12,584   $ 12,378