SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

January 30, 2012 16:30 ET

American National Bankshares Inc. Reports Fourth Quarter 2011 Earnings

DANVILLE, VA--(Marketwire - Jan 30, 2012) - American National Bankshares Inc. (NASDAQ: AMNB)

  • Completes first two quarters of combined operations with MidCarolina
  • Q4 net income of $4.6 million and diluted EPS of $0.59 per share
  • Net interest margin 4.35% for 2011
  • Average shareholders' equity of $151 million represents 11.59% of average assets

American National Bankshares Inc. (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced fourth quarter 2011 net income available to common shareholders of $4,600,000 compared to $1,851,000 for the fourth quarter in 2010, a 149% increase. Earnings per share, basic and diluted, were $0.59 for the 2011 quarter compared to $0.30 for the 2010 quarter. This quarterly net income produced for 2011 a return on average assets of 1.42%, a return on average equity of 12.28%, and a return on tangible equity of 18.77%.

Net income available to common shareholders was $11,468,000 for 2011 compared to $8,278,000 for 2010, a 39% increase. Earnings per share, basic and diluted, were $1.64 for 2011 compared to $1.35 for 2010. This net income produced for 2011 a return on average assets of 1.07%, a return on average equity of 8.88%, and a return on tangible equity of 12.97%.

Earnings for the fourth quarter of 2011 and for the year were favorably impacted by the July 1, 2011, merger between American National and MidCarolina Financial Corporation ("MidCarolina"). Unless otherwise noted, most of the material changes between periods are related to the merger.

Financial Performance and Overview
Charles H. Majors, Chairman and Chief Executive Officer, reported, "July 1, 2011, was the first day of a new and exciting chapter in the life of American National. We consummated the merger with MidCarolina and grew our community bank assets to $1.3 billion from $800 million. In that same transaction, we added significantly to the depth and breadth of our market footprint, our pool of talented bankers, and, most importantly, our ability to serve customers.

"We now have over $800 million in loans and over $1 billion in deposits. We also have the best community bankers in the industry. Every day we are ready and eager to grow an exemplary community bank for the 21st century so we can help grow our local markets.

"Earnings for the year were strong. Our net income available to common shareholders was $11.5 million for 2011, compared to $8.3 million for the prior year, an increase of 39%. Much of the increase was driven by the merger with MidCarolina.

"The accounting rules that govern business combinations are complex and require the balance sheet of the acquired company be valued at 'fair value.' This process can result in significant fair value adjustments that are effectively purchase discounts ('mark'). A large portion of this fair value discount has been added to our earnings for the second half of 2011. Approximately $5,100,000 of our 2011 pretax income was directly related to various fair value adjustments, the majority of which results from the loan portfolio purchase discount.

"We are also constantly reviewing and assessing the overall credit risk in the loan portfolio for the legacy Virginia bank and for the newly acquired loans in North Carolina. We only have two quarters of operations of the combined bank, so we have very little in the way of objective historical experience for the new loans. We also have a much faster decline in the credit portion of the fair value mark than the decline in the related contractual loan balances, which relates to amortization periods versus maturity dates. Consequently, during the fourth quarter, in addition to our normally determined provision expense our analysis determined we needed to provide an additional $1.6 million. This amount was determined after assessing loan charge offs, within and outside the purchase mark, on the North Carolina loan portfolio and after consideration of the change in the purchase mark versus the change in the related loan principal balances.

"No business combination this substantial comes easily or inexpensively. During 2011, American National recorded approximately $1.6 million in non-recurring, merger related expenses. This is reflected in our noninterest expense totals for the year.

Majors concluded, "This was a truly remarkable year for American National. We invite our customers and shareholders to help us build and grow a community bank for the new century."

Capital
American National's capital ratios remain strong and exceed all regulatory requirements. For the quarter ended December 31, 2011, average shareholders' equity was 11.59% of average assets and average tangible equity was 18.77% of average assets.

Book value per common share was $19.58 at December 31, 2011, compared to $17.64 for the same date in 2010.

Tangible book value per common share was $13.86 at December 31, 2011, compared to $13.76 for the same date in 2010.

Credit Quality Measurements
Nonperforming assets ($13.7 million of non-accrual loans and $5.4 million of foreclosed real estate) represented 1.46% of total assets at December 31, 2011, compared to 0.76% at December 31, 2010.

Annualized net charge offs to average loans were 26 basis points (0.26%) for the 2011 fourth quarter, compared to 47 basis points (0.24%) for the same quarter in 2010.

The allowance for loan losses as a percentage of total loans was 1.28% at December 31, 2011 compared to 1.62% the prior year. The loans acquired in connection with the MidCarolina merger, all valued at the merger date at fair value, whereby loan losses are implicit in the valuation, have had a significant impact on this ratio. The allowance for loan losses as a percentage of total loans, net of fair value loans, was 1.96% at December 31, 2011.

Net Interest Income
Net interest income before provision for loan losses increased to $14,860,000 in the fourth quarter of 2011 from $6,693,000 in fourth quarter of 2010, an improvement $8,167,000 or 122%.

For 2011 the net interest margin increased 57 basis points (0.57%) to 4.35% compared to the same period in 2010.

Noninterest Income
Noninterest income totaled $2,587,000 in the fourth quarter of 2011, compared with $2,906,000 in the fourth quarter of 2010, a decrease of $319,000 or 11%. The 2010 quarter included a $450,000 gain on sale of bank owned real estate (non-OREO). Service charge related income has been favorably impacted by the merger.

Noninterest Expense
Noninterest expense totaled $8,629,000 in the fourth quarter of 2011, compared to $6,474,000 in the fourth quarter of 2010, an increase of $2,155,000 or 33.3%.

About American National
American National Bankshares Inc. is a multi-state bank holding company with total assets of approximately $1.3 billion following the July 1, 2011, completion of the MidCarolina merger. 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 one loan production office. The banking offices in Alamance and Guilford counties in North Carolina operate as MidCarolina Bank, a division of American National Bank. American National Bank and Trust Company also manages an additional $532 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
December 31
ASSETS 2011 2010
Cash and due from banks $ 22,561 $ 9,547
Interest-bearing deposits in other banks 6,332 8,967
Securities available for sale, at fair value 333,366 228,295
Securities held to maturity - 3,334
Total securities 333,366 231,629
Restricted stock, at cost 6,019 4,062
Loans held for sale 6,330 3,135
Loans 824,758 520,781
Less allowance for loan losses (10,529 ) (8,420 )
Net Loans 814,229 512,361
Premises and equipment, net 26,804 19,509
Other real estate owned, net 5,353 3,716
Goodwill 38,045 22,468
Core deposit intangibles, net 6,595 1,320
Accrued interest receivable and other assets 38,888 16,950
Total assets $ 1,304,522 $ 833,664
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing $ 179,148 $ 105,240
Demand deposits -- interest-bearing 189,212 90,012
Money market deposits 182,347 59,891
Savings deposits 74,193 62,522
Time deposits 433,854 322,433
Total deposits 1,058,754 640,098
Short-term borrowings:
Customer repurchase agreements 45,575 47,084
Other short-term borrowings 3,000 6,110
Long-term borrowings 10,206 8,488
Trust preferred capital notes 27,212 20,619
Accrued interest payable and other liabilities 6,946 3,178
Total liabilities 1,151,693 725,577
Shareholders' equity:
Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding at December 31, 2011 and December 31, 2010 - -
Common stock, $1 par, 20,000,000 shares authorized, 7,806,869 shares outstanding at December 31, 2011 and 6,127,735 shares outstanding at December 31, 2010 7,807 6,128
Capital in excess of par value 56,395 27,268
Retained earnings 81,797 74,850
Accumulated other comprehensive income (loss), net 6,830 (159 )
Total shareholders' equity 152,829 108,087
Total liabilities and shareholders' equity $ 1,304,522 $ 833,664

American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
Three Months Ended Twelve Months Ended
December 31 December 31
2011 2010 2011 2010
Interest and Dividend Income:
Interest and fees on loans $ 14,881 $ 6,928 $ 40,688 $ 28,148
Interest and dividends on securities:
Taxable 1,149 1,198 4,595 5,042
Tax-exempt 1,089 647 3,646 2,288
Dividends 43 24 131 95
Other interest income 15 92 127 360
Total interest and dividend income 17,177 8,889 49,187 35,933
Interest Expense:
Interest on deposits 1,957 1,704 7,203 6,708
Interest on short-term borrowings 81 85 325 382
Interest on long-term borrowings 85 64 229 256
Interest on trust preferred capital notes 194 343 1,023 1,373
Total interest expense 2,317 2,196 8,780 8,719
Net Interest Income 14,860 6,693 40,407 27,214
Provision for loan losses 1,972 485 3,170 1,490
Net Interest Income After Provision for Loan Losses 12,888 6,208 37,237 25,724
Noninterest Income:
Trust fees 834 936 3,561 3,391
Service charges on deposit accounts 567 457 1,963 1,897
Other fees and commissions 427 307 1,510 1,163
Mortgage banking income 470 543 1,262 1,560
Securities gains (losses), net 17 84 (1 ) 126
Other 272 579 949 977
Total noninterest income 2,587 2,906 9,244 9,114
Noninterest Expense:
Salaries 3,702 2,473 12,409 10,063
Employee benefits 785 605 2,681 2,442
Occupancy and equipment 888 727 3,199 2,936
FDIC assessment 155 198 651 795
Bank franchise tax 206 167 763 670
Core deposit intangible amortization 547 95 1,282 378
Foreclosed real estate, net 122 304 296 583
Merger related expenses 73 - 1,607 -
Other 2,151 1,905 7,112 5,512
Total noninterest expense 8,629 6,474 30,000 23,379
Income Before Income Taxes 6,846 2,640 16,481 11,459
Income Taxes 2,194 789 4,910 3,181
Net Income 4,652 1,851 11,571 8,278
Dividends on preferred stock 52 - 103 -
Net income available to common shareholders $ 4,600 $ 1,851 $ 11,468 $ 8,278
Net Income Per Common Share:
Basic $ 0.59 $ 0.30 $ 1.64 $ 1.35
Diluted $ 0.59 $ 0.30 $ 1.64 $ 1.35
Average Common Shares Outstanding:
Basic 7,804,245 6,126,817 6,982,524 6,123,870
Diluted 7,811,243 6,141,123 6,989,877 6,131,650
American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and nonfinancial data, unaudited) 4th Qtr 3rd Qtr 4th Qtr YTD YTD
2011 2011 2010 2011 2010
EARNINGS
Interest income $ 17,177 $ 14,779 $ 8,889 $ 49,187 $ 35,933
Interest expense 2,317 2,436 2,196 8,780 8,719
Net interest income 14,860 12,343 6,693 40,407 27,214
Provision for loan losses 1,972 525 485 3,170 1,490
Noninterest income 2,587 2,698 2,906 9,244 9,114
Noninterest expense 8,629 8,564 6,474 30,000 23,379
Income taxes 2,194 1,823 789 4,910 3,181
Net income 4,652 4,129 1,851 11,571 8,278
PER COMMON SHARE
Earnings per share - basic $ 0.59 $ 0.52 $ 0.30 $ 1.64 $ 1.35
Earnings per share - diluted 0.59 0.52 0.30 1.64 1.35
Cash dividends declared 0.23 0.23 0.23 0.92 0.92
Book value per share 19.58 19.40 17.64 19.58 17.64
Book value per share - tangible (a) 13.86 13.65 13.76 13.86 13.76
Closing market price 19.49 18.00 23.55 19.49 23.55
FINANCIAL RATIOS
Return on average assets 1.42 % 1.26 % 0.88 % 1.07 % 1.00 %
Return on average equity 12.28 11.08 6.69 8.88 7.59
Return on average tangible equity (b) 18.77 17.24 8.83 12.97 10.05
Average equity to average assets 11.59 11.40 13.12 12.10 13.18
Net interest margin, taxable equivalent 5.27 4.41 3.65 4.35 3.78
Efficiency ratio 49.57 57.03 65.70 58.48 61.53
Effective tax rate 32.05 30.63 29.89 29.79 27.76
PERIOD-END BALANCES
Securities $ 339,385 $ 320,304 $ 235,691 $ 339,385 $ 235,691
Loans held for sale 6,330 3,359 3,135 6,330 3,135
Loans, net of unearned income 824,758 817,858 520,781 824,758 520,781
Goodwill and other intangibles 44,640 44,851 23,788 44,640 23,788
Assets 1,304,522 1,305,139 833,664 1,304,522 833,664
Assets - tangible (a) 1,259,882 1,260,288 809,876 1,259,882 809,876
Deposits 1,058,754 1,064,477 640,098 1,058,754 640,098
Customer repurchase agreements 45,575 43,758 47,084 45,575 47,084
Other short-term borrowings 3,000 - 6,110 3,000 6,110
Long-term borrowings 37,418 37,428 29,107 37,418 29,107
Shareholders' equity 152,829 151,361 108,087 152,829 108,087
Shareholders' equity - tangible (a) 108,189 106,510 84,299 108,189 84,299
AVERAGE BALANCES
Securities $ 322,018 $ 296,095 $ 215,208 $ 270,441 $ 203,296
Loans held for sale 5,989 2,641 5,629 3,042 4,159
Loans, net of unearned income 819,688 827,720 521,832 671,724 520,315
Interest-earning assets 1,172,965 1,171,982 770,649 974,601 754,833
Goodwill and other intangibles 44,455 44,437 23,844 34,158 23,982
Assets 1,306,699 1,306,796 843,922 1,077,094 827,422
Assets - tangible (a) 1,262,244 1,262,359 820,078 1,042,936 803,440
Interest-bearing deposits 886,551 896,873 537,662 720,163 522,614
Deposits 1,060,013 1,067,491 647,526 863,367 625,822
Customer repurchase agreements 49,257 45,356 52,068 46,411 59,270
Other short-term borrowings 130 2 251 66 87
Long-term borrowings 37,434 37,439 29,136 30,991 29,192
Shareholders' equity 151,496 149,033 110,688 130,320 109,060
Shareholders' equity - tangible (a) 107,041 104,596 86,844 96,162 85,078
CAPITAL
Average shares outstanding - basic 7,804,245 7,800,614 6,126,817 6,982,524 6,123,870
Average shares outstanding - diluted 7,811,243 7,806,668 6,141,123 6,989,877 6,131,650
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 9,086 $ 8,744 $ 8,542 $ 8,420 $ 8,166
Provision for loan losses 1,972 525 485 3,170 1,490
Charge-offs (906 ) (252 ) (662 ) (1,863 ) (1,531 )
Recoveries 377 69 55 802 295
Ending balance $ 10,529 $ 9,086 $ 8,420 $ 10,529 $ 8,420
LOANS
Construction and land development $ 54,433 $ 57,111 $ 37,168 $ 54,433 $ 37,168
Commercial real estate 351,961 346,715 210,393 351,961 210,393
Residential real estate 179,812 174,493 119,398 179,812 119,398
Home equity 96,195 99,727 61,064 96,195 61,064
Commercial and industrial 134,166 131,704 85,051 134,166 85,051
Consumer 8,191 8,108 7,707 8,191 7,707
Total $ 824,758 $ 817,858 $ 520,781 $ 824,758 $ 520,781
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due $ 197 $ - $ - $ 197 $ -
Nonaccrual 13,523 13,455 2,597 13,523 2,597
Foreclosed real estate 5,353 5,920 3,716 5,353 3,716
Nonperforming assets $ 19,073 $ 19,375 $ 6,313 $ 19,073 $ 6,313
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans 0.26 % 0.09 % 0.47 % 0.16 % 0.24 %
Nonperforming assets to total assets 1.46 1.48 0.76 1.46 0.76
Nonperforming loans to total loans 1.66 1.65 0.50 1.66 0.50
Allowance for loan losses to total loans 1.28 1.11 1.62 1.28 1.62
Allowance for loan losses to total loans net or fair value loans (e) 1.96 1.76 1.62 1.96 1.62
Allowance for loan losses to nonperforming loans 76.74 67.53 324.22 76.74 324.22
OTHER DATA
Fiduciary assets at period-end (c) $ 355,202 $ 340,941 $ 368,018 $ 355,202 $ 368,018
Retail brokerage assets at period-end (c) $ 176,636 $ 149,284 $ 49,311 $ 176,636 $ 49,311
Number full-time equivalent employees (d) 315 306 242 315 242
Number of full service offices 25 25 18 25 18
Number of loan production offices 1 1 1 1 1
Number of ATM's 31 31 26 31 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
(e) - Excludes acquired loans measured at fair value

Net Interest Income Analysis
For the Three Months Ended December 31, 2011 and 2010
(in thousands, except rates)
Interest
Average Balance Income/Expense Yield/Rate
2011 2010 2011 2010 2011 2010
Loans:
Commercial $ 134,836 $ 75,012 $ 1,555 $ 868 4.58 % 4.59 %
Real estate 682,631 445,017 13,205 5,949 7.74 5.35
Consumer 8,210 7,432 156 144 7.54 7.69
Total loans 825,677 527,461 14,916 6,961 7.22 5.27
Securities:
Federal agencies 33,427 48,184 181 382 2.17 3.17
Mortgage-backed & CMO's 99,817 57,251 577 484 2.31 3.38
State and municipal 180,254 103,692 1,983 1,255 4.40 4.84
Other 8,520 6,081 86 55 4.04 3.62
Total securities 322,018 215,208 2,827 2,176 3.51 4.04
Deposits in other banks 25,270 27,980 15 92 0.24 1.30
Total interest-earning assets 1,172,965 770,649 17,758 9,229 6.05 4.79
Non-earning assets 133,734 73,273
Total assets $ 1,306,699 $ 843,922
Deposits:
Demand $ 180,874 $ 93,133 123 18 0.27 0.08
Money market 195,534 60,500 190 86 0.39 0.56
Savings 73,674 63,010 29 22 0.16 0.14
Time 436,469 321,019 1,615 1,578 1.47 1.95
Total deposits 886,551 537,662 1,957 1,704 0.88 1.26
Customer repurchase agreements 49,257 52,068 81 85 0.65 0.65
Other short-term borrowings 130 251 0 0 0.43 0.14
Long-term borrowings 37,434 29,136 279 407 2.98 5.59
Total interest-bearing liabilities 973,372 619,117 2,317 2,196 0.95 1.41
Noninterest bearing demand deposits 173,462 109,864
Other liabilities 8,369 4,253
Shareholders' equity 151,496 110,688
Total liabilities and shareholders' equity $ 1,306,699 $ 843,922
Interest rate spread 5.10 % 3.38 %
Net interest margin 5.27 % 3.65 %
Net interest income (taxable equivalent basis) 15,441 7,033
Less: Taxable equivalent adjustment 581 340
Net interest income $ 14,860 $ 6,693
Net Interest Income Analysis
For the Years Ended December 31, 2011 and 2010
(in thousands, except yields and rates)
Interest
Average Balance Income/Expense Yield/Rate
2011 2010 2011 2010 2011 2010
Loans:
Commercial $ 107,376 $ 77,382 $ 4,947 $ 3,694 4.61 % 4.77 %
Real estate 559,656 440,318 35,298 24,045 6.31 5.46
Consumer 7,734 6,774 575 541 7.43 7.99
Total loans 674,766 524,474 40,820 28,280 6.05 5.39
Securities:
Federal agencies 36,247 59,960 946 1,917 2.61 3.20
Mortgage-backed & CMO's 75,902 50,178 2,148 1,957 2.83 3.90
State and municipal 151,254 86,439 6,872 4,478 4.54 5.18
Other 7,038 6,719 279 240 3.96 3.57
Total securities 270,441 203,296 10,245 8,592 3.79 4.23
Deposits in other banks 29,394 27,063 127 360 0.43 1.33
Total interest-earning assets 974,601 754,833 51,192 37,232 5.25 4.93
Non-earning assets 102,493 72,589
Total assets $ 1,077,094 $ 827,422
Deposits:
Demand $ 137,211 $ 94,236 290 76 0.21 0.08
Money market 132,906 73,358 572 371 0.43 0.51
Savings 68,038 63,484 98 88 0.14 0.14
Time 382,008 291,536 6,243 6,173 1.63 2.12
Total deposits 720,163 522,614 7,203 6,708 1.00 1.28
Customer repurchase agreements 46,411 59,270 325 382 0.70 0.64
Other short-term borrowings 66 87 0 0 0.47 0.42
Long-term borrowings 30,991 29,192 1,252 1,629 4.04 5.58
Total interest-bearing liabilities 797,631 611,163 8,780 8,719 1.10 1.43
Noninterest bearing demand deposits 143,204 103,208
Other liabilities 5,939 3,991
Shareholders' equity 130,320 109,060
Total liabilities and shareholders' equity $ 1,077,094 $ 827,422
Interest rate spread 4.15 % 3.50 %
Net interest margin 4.35 % 3.78 %
Net interest income (taxable equivalent basis) 42,412 28,513
Less: Taxable equivalent adjustment 2,005 1,299
Net interest income $ 40,407 $ 27,214