SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

January 21, 2016 16:05 ET

American National Bankshares Inc. Reports Fourth Quarter 2015 Earnings

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

  • Q4 2015 net income of $4.6 million
  • Diluted EPS $0.53 for Q4 2015 compared to $0.37 for Q4 2014
  • Net interest margin of 3.68% for Q4 2015
  • Average shareholders' equity for Q4 of $197.7 million is 12.88% of average assets
  • Organic loan growth for 2015 of 7%

American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced net income for the fourth quarter of 2015 of $4,607,000 compared to $2,890,000 for the fourth quarter of 2014, a $1,717,000 or 59.4% increase. Basic and diluted net income per common share was $0.53 for the fourth quarter of 2015 compared to $0.37 for 2014. Net income for the fourth quarter of 2015 produced a return on average assets of 1.20%, a return on average equity of 9.32%, and a return on average tangible equity of 12.77%.

Net income for the year ended December 31, 2015 was $15,039,000 compared to $12,741,000 for 2014, a $2,298,000 or 18.04% increase. Basic and diluted net income per common share was $1.73 for the 2015 period compared to $1.62 for the 2014 period.

The quarter and the year were positively impacted by the January 2015 acquisition of MainStreet BankShares and its subsidiary Franklin Community Bank.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "As we think about 2015, it was an exciting, productive, challenging, and ultimately very successful year for American National.

"American National has a long and enviable legacy of strong capital. We are working to deploy this capital more effectively and efficiently, while still maintaining that fundamental legacy strength. This past year we've seen the results of those strategic efforts: the acquisition of MainStreet, significant organic growth in our existing markets, an increase in our cash dividend to the shareholders, and an active stock repurchase program.

"Acquiring another financial institution is one of the most important and complicated activities any bank ever undertakes. Under any circumstances it brings a host of operational, technical, personnel and customer related challenges. The acquisition of MainStreet, consummated early in 2015, went remarkably well, thanks to the combined efforts of our employees and our new colleagues from MainStreet.

"Organic growth has been difficult during the recent economic downturn. This past year our loan portfolio grew $165 million (19.6%). Of that growth, $106 million related to the MainStreet merger and $59 million was organic. Put another way, our loans, exclusive of acquired loans, grew 7.0% last year. To fund these loans our deposits grew $187 million (17.4%) last year. Of that growth, $117 million related to the MainStreet merger and $70 million was organic growth. Legacy deposit growth, on its own, was 6.6%. We're very pleased with the growth on both sides of our balance sheet.

"American National considers the payment of appropriate dividends a vital part of its capital planning strategy. The Company adheres to a dividend policy based on a review of earnings, growth, capital and other factors that are relevant to the dividend decision process. Accordingly, the Company increased its cash dividend in the fourth quarter to $0.24 per share, an increase of one cent or 4.3% and the first change in the dividend payment since 2007. Based on the current price of the stock, the dividend yield on American National is approximately 4.2%.

"The Company also realizes that, in some circumstances, an efficient capital management strategy can be repurchase of its common stock. During 2015, the Company has repurchased approximately 155,000 shares at an average price of $23.31. Any future repurchase activity will ebb and flow with changes in circumstances and as alternative uses for our capital may develop.

"On the earnings side, our net income for the fourth quarter was $4,607,000, up from $2,890,000 in the 2014 quarter, an increase of $1,717,000 or 59.4%.

"The biggest driver of that increase was the MainStreet merger, which had a significant and positive impact to operating results by adding substantially to earning assets. Net interest income for the quarter is up by $1,989,000 and of that increase 61.3% relates to the MainStreet acquisition.

"Noninterest income was higher in the 2015 quarter by $1,026,000 or 36.7%. Almost all categories showed notable improvement compared to the prior year quarter.

"Noninterest expense was higher in the 2015 quarter by $523,000 or 5.8%. The size of the increase was reduced by a decrease in merger related expenses.

Haley concluded, "We had a really good year in 2015. The merger with MainStreet went well. We had solid organic growth on both sides of the balance sheet -- loans and deposits. Earnings were strong, even after allowing for almost $2 million in merger related costs during the year. But that's behind us now and we are focused on 2016 and making it an even better year."

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

For the quarter ended December 31, 2015, average shareholders' equity was 12.88% of average assets, compared to 13.04% for the quarter ended December 31, 2014.

Book value per common share was $22.95 at December 31, 2015, compared to $22.07 at December 31, 2014.

Tangible book value per common share was $17.55 at December 31, 2015, compared to $16.86 at December 31, 2014.

Credit Quality Measurements
Non-performing assets ($5,205,000 of non-performing loans and $2,184,000 of other real estate owned) represented 0.48% of total assets at December 31, 2015, compared to 0.46% at December 31, 2014. 

Annualized net charge offs to average loans were eleven basis points (0.11%) for the 2015 fourth quarter, compared to twenty-two basis points (0.22%) for the same quarter in 2014.

Other real estate owned was $2,184,000 at December 31, 2015, compared to $2,119,000 at December 31, 2014, a decrease of $65,000 or 3.1%.

Merger related financial impact
The fair value adjustments related to our two recent mergers 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):

                 
                 
MainStreet   December 31, 2015    
    For the three months ended   For the twelve months ended        
Net Interest Income   $ (232)   $ 864            
Income Before Income Taxes   $ (306)   $ 569            
                         
MidCarolina   December 31, 2015   December 31, 2014
    For the three months ended   For the twelve months ended   For the three months ended   For the twelve months ended
Net Interest Income   $ 1,052   $ 2,459   $ 605   $ 2,669
Income Before Income Taxes   $ 826   $ 1,553   $ 378   $ 1,744

The MainStreet merger was effective January 1, 2015; therefore, no comparative 2014 information is presented.

During the fourth quarter 2015, management evaluated the performance of the MainStreet purchased credit impaired ("PCI") loan portfolio. A large dollar volume of principal payoffs, in excess of $4 million, indicated the possibility that the initial valuation assumptions at the merger date may have been overly pessimistic. The Company conducted a detailed review that resulted in a measurement period adjustment of the PCI portfolio. The net result was a $533,000 reduction in year-to-date accretion income and adjustments to goodwill.

In addition, during the fourth quarter, the Company received a payoff of a PCI loan in the MidCarolina portfolio that resulted in $540,000 in current quarter cash-basis accretion income.

Net Interest Income
Net interest income before provision for loan losses increased to $12,444,000 in the fourth quarter of 2015 from $10,455,000 in the fourth quarter of 2014, an increase of $1,989,000 or 19.0%.

For the 2015 quarter, the net interest margin was 3.68% compared to 3.59% for the same quarter in 2014, an increase of 0.09%. 

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for both the fourth quarters of 2015 and 2014 was $250,000.

The allowance for loan losses as a percentage of total loans was 1.25% at December 31, 2015 compared to 1.48% at December 31, 2014. The largest driver of this decrease was the merger with MainStreet, whose loans were marked to fair value at the merger date and whose related allowance for loan loss was eliminated in the accounting for the business combination.

There was significant growth in the loans outstanding in the fourth quarter, a net of $24.5 million. The need for additional loan loss provision was partially mitigated by some improvement in various qualitative factors used in the determination of the allowance.

Noninterest Income 
Noninterest income totaled $3,818,000 in the fourth quarter of 2015, compared with $2,792,000 in the fourth quarter of 2014, an increase of $1,026,000 or 36.7%. Almost all income categories showed increases, much of which were related to increased transaction volumes resulting from the MainStreet transaction.

Trust fees showed a decrease of $93,000 (8.7%); revenue for this category is directly impacted by changes in the equity markets. Securities gains showed a $313,000 increase from the fourth quarter of 2014; this was related to actions resulting from asset/liability strategy decisions. Other income showed an increase of $543,000, most of which was related to income from investments in a Small Business Investment Corporation (SBIC).

Noninterest Expense
Noninterest expense totaled $9,466,000 in the fourth quarter of 2015, compared to $8,943,000 in the fourth quarter of 2014, an increase of $523,000 or 5.8%. 

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

The increase in noninterest expense was mitigated by a $462,000 reduction in nonrecurring merger related expense, which were $50,000 in the current quarter and $512,000 in the prior year quarter.

About American National
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 Virginia and North Carolina with 25 banking offices and two loan production offices. American National Bank and Trust Company also manages an additional $749 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.  
Consolidated Balance Sheets  
(Dollars in thousands, except share and per share data)  
Unaudited  
             
    December 31  
ASSETS   2015     2014  
                 
Cash and due from banks   $ 19,352     $ 29,272  
Interest-bearing deposits in other banks     75,985       38,031  
                 
Securities available for sale, at fair value     340,349       344,716  
Restricted stock, at cost     5,312       4,367  
Loans held for sale     3,266       616  
                 
Loans     1,005,525       840,925  
  Less allowance for loan losses     (12,601 )     (12,427 )
    Net Loans     992,924       828,498  
                 
Premises and equipment, net     23,567       23,025  
Other real estate owned, net     2,184       2,119  
Goodwill     43,872       39,043  
Core deposit intangibles, net     2,683       2,045  
Bank owned life insurance     17,658       15,193  
Accrued interest receivable and other assets     19,737       19,567  
                 
    Total assets   $ 1,546,889     $ 1,346,492  
                 
                 
Liabilities                
  Demand deposits -- noninterest-bearing   $ 322,442     $ 254,458  
  Demand deposits -- interest-bearing     227,030       193,432  
  Money market deposits     200,495       174,000  
  Savings deposits     115,383       90,130  
  Time deposits     397,310       363,817  
    Total deposits     1,262,660       1,075,837  
                 
  Customer repurchase agreements     40,611       53,480  
  Long-term borrowings     9,958       9,935  
  Junior subordinated debt     27,622       27,521  
  Accrued interest payable and other liabilities     8,203       5,939  
    Total liabilities     1,349,054       1,172,712  
                 
Shareholders' equity                
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding    
-
     
-
 
  Common stock, $1 par, 20,000,000 shares authorized, 8,622,007 shares outstanding at December 31, 2015 and 7,873,474 shares outstanding at December 31, 2014    

8,605
     

7,872
 
  Capital in excess of par value     75,375       57,650  
  Retained earnings     111,565       104,594  
  Accumulated other comprehensive income, net     2,290       3,664  
    Total shareholders' equity     197,835       173,780  
                 
    Total liabilities and shareholders' equity   $ 1,546,889     $ 1,346,492  
                 
                 
American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
                 
    Three Months Ended   Twelve Months Ended
    December 31   December 31
    2015   2014   2015   2014
Interest and Dividend Income:                        
  Interest and fees on loans   $ 11,849   $ 9,859   $ 46,860   $ 39,257
  Interest on federal funds sold     -     -     6     -
  Interest and dividends on securities:                        
    Taxable     1,051     925     4,072     3,775
    Tax-exempt     882     954     3,681     3,971
    Dividends     88     75     346     296
  Other interest income     81     56     204     156
      Total interest and dividend income     13,951     11,869     55,169     47,455
                         
Interest Expense:                        
  Interest on deposits     1,228     1,144     4,811     4,654
  Interest on short-term borrowings     2     1     9     9
  Interest on long-term borrowings     81     82     324     325
  Interest on junior subordinated debt     196     187     760     742
    Total interest expense     1,507     1,414     5,904     5,730
                         
Net Interest Income     12,444     10,455     49,265     41,725
  Provision for loan losses     250     250     950     400
                         
Net Interest Income After Provision for Loan Losses     12,194     10,205     48,315     41,325
                         
Noninterest Income:                        
  Trust fees     972     1,065     3,935     4,196
  Service charges on deposit accounts     523     450     2,066     1,735
  Other fees and commissions     590     487     2,377     1,903
  Mortgage banking income     333     246     1,320     1,126
  Securities gains (losses), net     314     1     867     505
  Other     1,086     543     2,722     1,711
    Total noninterest income     3,818     2,792     13,287     11,176
                         
Noninterest Expense:                        
  Salaries     3,920     3,798     16,554     14,688
  Employee benefits     1,096     367     4,311     2,988
  Occupancy and equipment     1,135     948     4,425     3,727
  FDIC assessment     185     161     750     647
  Bank franchise tax     223     232     898     901
  Core deposit intangible amortization     300     226     1,201     1,114
  Data processing     414     394     1,725     1,448
  Software     308     274     1,158     1,019
  Other real estate owned, net     39     92     99     240
  Merger related expenses     50     512     1,998     780
  Other     1,796     1,939     7,424     7,006
    Total noninterest expense     9,466     8,943     40,543     34,558
                         
Income Before Income Taxes     6,546     4,054     21,059     17,943
Income Taxes     1,939     1,164     6,020     5,202
Net Income   $ 4,607   $ 2,890   $ 15,039   $ 12,741
                         
Net Income Per Common Share:                        
  Basic   $ 0.53   $ 0.37   $ 1.73   $ 1.62
  Diluted   $ 0.53   $ 0.37   $ 1.73   $ 1.62
Weighted Average Common Shares Outstanding:                        
  Basic     8,627,414     7,855,872     8,680,502     7,867,198
  Diluted     8,634,570     7,866,111     8,688,648     7,877,576
                         
                               
American National Bankshares Inc.                
Financial Highlights                
                               
(In thousands, except share, ratio and                              
nonfinancial data, unaudited)   4th Qtr     3rd Qtr     4th Qtr     YTD     YTD  
    2015     2015     2014     2015     2014  
EARNINGS                                        
  Interest income   $ 13,951     $ 13,542     $ 11,869     $ 55,169     $ 47,455  
  Interest expense     1,507       1,481       1,414       5,904       5,730  
  Net interest income     12,444       12,061       10,455       49,265       41,725  
  Provision for loan losses     250       -       250       950       400  
  Noninterest income     3,818       3,055       2,792       13,287       11,176  
  Noninterest expense     9,466       9,388       8,943       40,543       34,558  
  Income taxes     1,939       1,691       1,164       6,020       5,202  
  Net income     4,607       4,037       2,890       15,039       12,741  
                                         
PER COMMON SHARE                                        
  Net income per share - basic   $ 0.53     $ 0.47     $ 0.37     $ 1.73     $ 1.62  
  Net income per share - diluted     0.53       0.47       0.37       1.73       1.62  
  Cash dividends paid     0.24       0.23       0.23       0.93       0.92  
  Book value per share (a)     22.95       22.81       22.07       22.95       22.07  
  Book value per share - tangible (a) (b)     17.55       17.32       16.86       17.55       16.86  
  Closing market price     25.61       23.45       24.81       25.61       24.81  
                                         
FINANCIAL RATIOS                                        
  Return on average assets     1.20 %     1.07 %     0.86 %     0.99 %     0.97 %
  Return on average equity     9.32       8.25       6.63       7.65       7.40  
  Return on average tangible equity (c)     12.77       11.42       9.12       10.62       10.31  
  Average equity to average assets     12.88       12.95       13.04       12.90       13.12  
  Tangible equity to tangible assets (b)     10.08       10.18       10.16       10.08       10.16  
  Net interest margin, taxable equivalent     3.68       3.64       3.59       3.70       3.66  
  Efficiency ratio (d)     57.52       61.25       64.60       63.81       63.41  
  Effective tax rate     29.62       29.52       28.71       28.59       28.99  
                                         
PERIOD-END BALANCES                                        
  Securities   $ 345,661     $ 363,614     $ 349,250     $ 345,661     $ 349,083  
  Loans held for sale     3,266       2,998       616       3,266       616  
  Loans, net of unearned income     1,005,525       980,984       840,925       1,005,525       840,925  
  Goodwill and other intangibles     46,555       47,316       41,088       46,555       41,088  
  Assets     1,546,894       1,512,437       1,346,492       1,546,894       1,346,492  
  Assets - tangible (b)     1,500,339       1,465,121       1,305,404       1,500,339       1,305,404  
  Deposits     1,262,660       1,226,521       1,075,837       1,262,660       1,075,837  
  Customer repurchase agreements     40,611       43,579       53,480       40,611       53,480  
  Long-term borrowings     37,580       37,549       37,456       37,580       37,456  
  Shareholders' equity     197,835       196,451       173,780       197,835       173,780  
  Shareholders' equity - tangible (b)     151,280       149,135       132,692       151,280       132,692  
                                         
AVERAGE BALANCES                                        
  Securities   $ 349,116     $ 357,427     $ 331,785     $ 349,116     $ 338,468  
  Loans held for sale     3,446       2,873       982       2,531       1,672  
  Loans, net of unearned income     983,725       982,212       815,271       973,329       803,187  
  Interest-earning assets     1,386,256       1,380,576       1,220,818       1,391,486       1,196,095  
  Goodwill and other intangibles     47,193       47,446       41,222       47,575       41,620  
  Assets     1,534,247       1,511,464       1,338,240       1,523,766       1,312,472  
  Assets - tangible (b)     1,487,054       1,464,018       1,297,018       1,476,191       1,270,852  
  Interest-bearing deposits     931,223       923,840       816,965       934,716       818,381  
  Deposits     1,247,612       1,223,328       1,069,995       1,232,199       1,052,530  
  Customer repurchase agreements     42,524       45,444       50,493       48,105       43,724  
  Long-term borrowings     37,561       37,531       37,438       37,515       37,398  
  Shareholders' equity     197,658       195,660       174,453       196,518       172,207  
  Shareholders' equity - tangible (b)     150,465       148,214       133,231       148,943       130,587  
                                         
American National Bankshares Inc.                   
Financial Highlights                   
                               
(In thousands, except share, ratio and                              
nonfinancial data, unaudited)   4th Qtr     3rd Qtr     4th Qtr     YTD     YTD  
    2015     2015     2014     2015     2014  
CAPITAL                                        
  Weighted average shares outstanding - basic     8,627,414       8,668,618       7,855,872       8,680,502       7,867,198  
  Weighted average shares outstanding - diluted     8,634,570       8,676,571       7,866,111       8,688,648       7,877,576  
                                         
ALLOWANCE FOR LOAN LOSSES                                        
  Beginning balance   $ 12,611     $ 12,793     $ 12,620     $ 12,427     $ 12,600  
  Provision for loan losses     250       -       250       950       400  
  Charge-offs     (317)       (253)       (566)       (1,200)       (964)  
  Recoveries     57       71       123       424       391  
  Ending balance   $ 12,601     $ 12,611     $ 12,427     $ 12,601     $ 12,427  
                                         
LOANS                                        
  Construction and land development   $ 72,968     $ 68,692     $ 50,863     $ 72,968     $ 50,863  
  Commercial real estate     428,932       424,404       391,472       428,932       391,472  
  Residential real estate     221,688       219,415       175,293       221,688       175,293  
  Home equity     98,449       98,249       91,075       98,449       91,075  
  Commercial and industrial     177,481       164,025       126,981       177,481       126,981  
  Consumer     6,007       6,199       5,241       6,007       5,241  
  Total   $ 1,005,525     $ 980,984     $ 840,925     $ 1,005,525     $ 840,925  
                                         
NONPERFORMING ASSETS AT PERIOD-END                                        
  Nonperforming loans:                                        
    90 days past due and accruing   $ -     $ -     $ -     $ -     $ -  
    Nonaccrual     5,205       5,360       4,112       5,205       4,112  
  Other real estate owned     2,184       1,333       2,119       2,184       2,119  
  Nonperforming assets   $ 7,389     $ 6,693     $ 6,231     $ 7,389     $ 6,231  
                                         
ASSET QUALITY RATIOS                                        
  Allowance for loan losses to total loans     1.25 %     1.29 %     1.48 %     1.25 %     1.48 %
  Allowance for loan losses to nonperforming loans    
242.09
     
235.28
     
302.21
     
242.09
     
302.21
 
  Nonperforming assets to total assets     0.48       0.44       0.46       0.48       0.46  
  Nonperforming loans to total loans     0.52       0.55       0.49       0.52       0.49  
  Annualized net charge-offs (recoveries) to average loans    
0.11
     
0.07
     
0.22
     
0.08
     
0.07
 
                                         
                                         
OTHER DATA                                        
  Fiduciary assets at period-end (e) (f)   $ 491,681     $ 486,173     $ 450,498     $ 491,681     $ 450,498  
  Retail brokerage assets at period-end (e) (f)   $ 257,546     $ 247,258     $ 210,265     $ 257,546     $ 210,265  
  Number full-time equivalent employees (g)     303       310       284       303       284  
  Number of full service offices     25       25       24       25       24  
  Number of loan production offices     2       2       2       2       2  
  Number of ATM's     33       34       31       33       31  
                                         
   
Notes:  
   
  (a) - Unvested restricted stock of 16,649 shares are not included in the calculation at 12-31-15.
  (b) - Excludes goodwill and other intangible assets.
  (c) - Excludes amortization expense, net of tax, of intangible assets.
  (d) - 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 (i) gains or losses on securities and (ii) gains or losses on sale of premises and equipment.
  (e) - Market value.
  (f) - Assets are not owned by the Company and are not reflected in the consolidated balance sheet.
  (g) - Average for quarter.
   
   
      Net Interest Income Analysis
      For the Three Months Ended December 31, 2015 and 2014
      (in thousands, except rates)
                                 
                Interest            
        Average Balance   Income/Expense   Yield/Rate  
                                 
        2015   2014   2015   2014   2015     2014  
Loans:                                    
  Commercial $ 166,771   $ 122,414   $ 1,506   $ 1,340   3.58 %   4.34 %
  Real estate   814,502     689,167     10,245     8,436   5.03     4.90  
  Consumer   5,898     4,672     135     93   9.08     7.90  
    Total loans   987,171     816,253     11,886     9,869   4.81     4.83  
                                         
Securities:                                  
  Federal agencies   88,255     77,015     364     235   1.65     1.22  
  Mortgage-backed & CMO's   62,652     58,281     352     337   2.25     2.31  
  State and municipal   176,148     182,501     1,613     1,759   3.66     3.86  
  Other    16,970     13,988     144     115   3.39     3.29  
    Total securities   344,025     331,785     2,473     2,446   2.88     2.95  
                                         
Deposits in other banks   74,449     72,780     81     56   0.43     0.31  
                                         
  Total interest-earning assets   1,405,645     1,220,818     14,440     12,371   4.11     4.05  
                                         
Non-earning assets   128,602     117,422                        
                                         
    Total assets $ 1,534,247   $ 1,338,240                        
                                         
Deposits:                                  
  Demand $ 223,724   $ 192,757     22     15   0.04     0.03  
  Money market   197,230     176,353     65     56   0.13     0.13  
  Savings   111,742     89,648     14     12   0.05     0.05  
  Time     398,527     358,207     1,127     1,061   1.12     1.18  
    Total deposits   931,223     816,965     1,228     1,144   0.52     0.56  
                                         
Customer repurchase agreements   42,524     50,493     2     1   0.02     0.01  
Long-term borrowings   37,561     37,438     277     269   2.95     2.87  
  Total interest-bearing liabilities   1,011,308     904,896     1,507     1,414   0.59     0.62  
                                         
Noninterest bearing demand deposits   316,389     253,030                        
Other liabilities   8,892     5,861                        
Shareholders' equity   197,658     174,453                        
    Total liabilities and shareholders' equity $ 1,534,247   $ 1,338,240                        
                                         
Interest rate spread                         3.52 %   3.43 %
Net interest margin                         3.68 %   3.59 %
                                         
Net interest income (taxable equivalent basis)           12,933     10,957            
Less: Taxable equivalent adjustment               489     502            
Net interest income             $ 12,444   $ 10,455            
                                         
                                         
      Net Interest Income Analysis
      For the Years Ended December 31, 2015 and 2014
      (in thousands, except yields and rates)
                                 
                Interest            
        Average Balance   Income/Expense   Yield/Rate  
                                 
        2015   2014   2015   2014   2015     2014  
Loans:                                    
  Commercial $ 156,646   $ 122,434   $ 6,893   $ 5,436   4.40 %   4.44 %
  Real estate   809,545     677,633     39,362     33,508   4.86     4.94  
  Consumer   9,669     4,792     730     354   7.55     7.39  
    Total loans   975,860     804,859     46,985     39,298   4.81     4.88  
                                         
Securities:                                  
  Federal agencies   88,384     74,390     1,364     852   1.54     1.15  
  Mortgage-backed & CMO's   61,741     61,377     1,346     1,453   2.18     2.37  
  State and municipal   183,208     187,595     6,746     7,307   3.68     3.90  
  Other   15,783     15,106     532     477   3.37     3.16  
    Total securities   349,116     338,468     9,988     10,089   2.86     2.98  
                                         
Federal funds sold   5,230     -     6     -   0.11     -  
Deposits in other banks   61,280     52,768     204     156   0.33     0.30  
                                         
  Total interest-earning assets   1,391,486     1,196,095     57,183     49,543   4.11     4.14  
                                         
Non-earning assets   132,280     116,377                        
                                         
    Total assets $ 1,523,766   $ 1,312,472                        
                                         
Deposits:                                  
  Demand $ 223,825   $ 183,994     82     71   0.04     0.04  
  Money market   196,828     177,046     260     232   0.13     0.13  
  Savings   109,697     88,629     53     47   0.05     0.05  
  Time     404,366     368,712     4,416     4,304   1.09     1.17  
    Total deposits   934,716     818,381     4,811     4,654   0.51     0.57  
                                         
Customer repurchase agreements   48,105     43,724     9     7   0.02     0.02  
Other short-term borrowings   14     701     -     2   0.36     0.29  
Long-term borrowings   37,515     37,398     1,084     1,067   2.89     2.85  
  Total interest-bearing liabilities   1,020,350     900,204     5,904     5,730   0.58     0.64  
                                         
Noninterest bearing demand deposits   297,483     234,149                        
Other liabilities   9,415     5,912                        
Shareholders' equity   196,518     172,207                        
    Total liabilities and shareholders' equity $ 1,523,766   $ 1,312,472                        
                                         
Interest rate spread                         3.53 %   3.50 %
Net interest margin                         3.69 %   3.66 %
                                         
Net interest income (taxable equivalent basis)           51,279     43,813            
Less: Taxable equivalent adjustment               2,014     2,088            
Net interest income             $ 49,265   $ 41,725