SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

July 23, 2015 16:05 ET

American National Bankshares Inc. Reports Second Quarter 2015 Earnings

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

  • Organic loan growth of $61.5 million (7.6%) over last four quarters
  • Completed integration of MainStreet BankShares, Inc.
  • Q2 2015 net income of $2.9 million and diluted EPS of $0.33
  • Net interest margin of 3.69% for Q2 2015
  • Average shareholders' equity of $197 million is 12.85% of average assets

American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced twelve month organic loan growth of 7.6%, the completion of the integration of MainStreet BankShares, Inc., and $2,880,000 net income for the second quarter 2015. 

The net income of $2,880,000 compared to $3,233,000 for the second quarter of 2014, is a $353,000 or 10.9% decrease. Basic and diluted net income per common share was $0.33 for the 2015 quarter compared to $0.41 for the 2014 quarter. Net income for the second quarter of 2015 produced a return on average assets of 0.75%, a return on average equity of 5.86%, and a return on average tangible equity of 8.26%.

Net income for the first six months of 2015 was $6,395,000 compared to $6,683,000 for the comparable period of 2014, a $288,000 or 4.3% decrease. Basic and diluted net income per common share was $0.73 for the 2015 period compared to $0.85 for the 2014 period.

The 2015 quarter and six month period were negatively impacted by nonrecurring, merger related costs associated with the January acquisition of MainStreet BankShares, Inc. ("MainStreet"). Merger related costs for the 2015 quarter were $1,502,000 and for the six month period $1,861,000.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "One major story for early 2015 continues to be our acquisition of MainStreet and its banking subsidiary, Franklin Community Bank, N.A. ("Franklin Community Bank"). This merger closed on January 1, 2015, and we completed the operational and technology aspects of the union in mid-May. We are extremely pleased with the integration progress made during the first half of this year and we are fortunate to have the employees and customers of Franklin Community Bank as part of our growing American National corporate family.

"The merger has had a positive impact on our balance sheet and we are also seeing organic balance sheet growth in our other markets.

"At June 30, 2015, American National had $982,905,000 in loans compared to $813,057,000 at June 30, 2014, an increase of $169,848,000 or 20.9%. Of this increase, $108,326,000 or 63.8% relates directly to the MainStreet acquisition. 

"Our other major story for early 2015 is organic growth. Organic loan growth over the past year was $61,522,000 or 7.6%. We are very encouraged that a combination of active business development and gradually improving local market economic conditions are beginning to result in high quality growth. 

"At June 30, 2015, American National had $1,234,018,000 in deposits compared to $1,035,800,000 at June 30, 2014, an increase of $198,218,000 or 19.1%. Of this increase, $125,320,000 or 63.2% relates directly to the MainStreet acquisition. The deposit growth was strong in all categories, but most notably in non-maturity (core) deposits. We are continuously working 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 second quarter was 0.50%, compared to 0.57% for the 2014 quarter.

"On the earnings side, our net income for the second quarter was $2,880,000, down from $3,233,000 in the 2014 quarter, a decrease of $353,000 or 10.9%.

"We had several drivers that impacted the 2015 quarter compared to the 2014 quarter.

"The merger with MainStreet had a significant and positive impact to operating results by adding substantially to earning assets.

"The provision for loan loss decreased by $50,000 during the quarter. This decrease was primarily related to improving economic conditions and continuing strong asset quality metrics, but was offset by loan growth during the quarter.

"Noninterest income was higher in the 2015 quarter by $558,000 or 20.7%, related mostly to the MainStreet merger.

"Noninterest expense was higher in the 2015 quarter by $3,277,000 or 39.2%, related mostly to the merger and to merger related, nonrecurring expenses. The nonrecurring merger costs were $1,502,000 for the quarter."

Haley concluded, "The first half of 2015 has been busy and productive for American National. The Franklin Community Bank merger in January and operational conversion in May were major accomplishments and I want to thank all people that worked so hard and successfully to make them happen.

"On another front, we are extremely pleased to see the beginning of significant organic loan growth. This is our favorite leading indicator of improving business conditions.

"American National will continue to grow its balance sheet and maintain high asset quality. Asset quality is a fundamental value for us. But, at the same time, we are constantly seeking ways to better deploy our capital. Among those ways is our ongoing stock repurchase plan, which during the quarter bought almost 52,000 shares. These efforts will continue to manifest themselves through continuing consideration of future merger and acquisition opportunities, continuing timely and economical stock repurchase activity, and an ongoing review of our dividend policy."

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

For the quarter ended June 30, 2015, average shareholders' equity was 12.85% of average assets, compared to 13.22% for the quarter ended June 30, 2014.

Book value per common share was $22.43 at June 30, 2015, compared to $21.95 at June 30, 2014.

Tangible book value per common share was $16.96 at June 30, 2015, compared to $16.65 at June 30, 2014.

Credit Quality Measurements
Non-performing assets ($3,772,000 of non-performing loans and $2,113,000 of other real estate owned) represented 0.39% of total assets at June 30, 2015, compared to 0.60% at June 30, 2014. 

Annualized net charge offs to average loans was six basis points (0.06%) for the 2015 second quarter, compared to zero basis points (0.00%) for the same quarter in 2014.

The allowance for loan losses as a percentage of total loans was 1.30% at June 30, 2015 compared to 1.57% at June 30, 2014. The largest driver of this decrease 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 $2,113,000 at June 30, 2015, compared to $2,622,000 at June 30, 2014, a decrease of $509,000 or 19.4%.

Merger related financial impact
The fair value adjustments related to our two recent mergers have had a favorable impact on net interest income and income before income tax for American National. The adjustments are summarized below (dollars in thousands):

 
                 
MainStreet   June 30, 2015    
    For the three months ended   For the six months ended        
Net Interest Income   $ 316   $ 1,019            
Income Before Income Taxes   $ 243   $ 872            
                         
MidCarolina   June 30, 2015   June 30, 2014
    For the three months ended   For the six months ended   For the three months ended   For the six months ended
Net Interest Income   $ 528   $ 938   $ 604   $ 1,500
Income Before Income Taxes   $ 301   $ 485   $ 368   $ 1,029
                         

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

Net Interest Income
Net interest income before provision for loan losses increased to $12,382,000 in the second quarter of 2015 from $10,351,000 in the second quarter of 2014, an increase of $2,031,000 or 19.6%. 

For the 2015 quarter, the net interest margin was 3.69% compared to 3.68% for the same quarter in 2014, an increase of one basis point (0.01%). 

Provision for loan losses
Provision expense for the second quarter of 2015 was $100,000 compared to $150,000 for the second quarter of 2014.

The need for provision expense in the 2015 quarter was driven primarily by an increase in loan volume of approximately $17 million. It was partially mitigated by improving economic conditions and continuing strong asset quality metrics.

Noninterest Income
Noninterest income totaled $3,258,000 in the second quarter of 2015, compared with $2,700,000 in the second quarter of 2014, an increase of $558,000 or 20.7%. Almost all income categories showed substantial increases, most of which were related to increased transaction volumes resulting from the MainStreet transaction.

Noninterest Expense
Noninterest expense totaled $11,642,000 in the second quarter of 2015, compared to $8,365,000 in the second quarter of 2014, an increase of $3,277,000 or 39.2%. 

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

However, the major driver of the increase was nonrecurring, merger related expenses, related to the MainStreet acquisition, which accounted for $1,502,000 or 45.8% of the increase. The operational conversion of Franklin Community Bank was completed in mid-May and substantially all of the related technology costs have been recognized. Accordingly, management expects no substantial expense in this category in future periods.

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 $767 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  
                 
      June 30  
ASSETS     2015       2014  
                     
Cash and due from banks     $ 24,548       $ 21,295  
Interest-bearing deposits in other banks       50,758         22,948  
Federal funds sold       408         -  
                     
Securities available for sale, at fair value       355,595         349,719  
Restricted stock, at cost       5,581         4,998  
Loans held for sale       2,720         118  
                     
Loans       982,905         813,057  
  Less allowance for loan losses       (12,793 )       (12,763 )
    Net Loans       970,112         800,294  
                     
Premises and equipment, net       24,182         23,083  
Other real estate owned, net       2,113         2,622  
Goodwill       44,210         39,043  
Core deposit intangibles, net       3,283         2,498  
Bank owned life insurance       17,376         14,945  
Accrued interest receivable and other assets       23,470         19,085  
                     
    Total assets     $ 1,524,356       $ 1,300,648  
                     
                     
Liabilities                    
  Demand deposits -- noninterest-bearing     $ 294,342       $ 228,588  
  Demand deposits -- interest-bearing       239,582         189,700  
  Money market deposits       190,799         165,090  
  Savings deposits       109,732         88,539  
  Time deposits       399,563         363,883  
    Total deposits       1,234,018         1,035,800  
                     
  Short-term borrowings:                    
    Customer repurchase agreements       50,123         38,420  
    Other short-term borrowings       -         12,000  
  Long-term borrowings       9,947         9,924  
  Trust preferred capital notes       27,571         27,470  
  Accrued interest payable and other liabilities       7,814         4,951  
    Total liabilities       1,329,473         1,128,565  
                     
Shareholders' equity                    
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding                    
  Common stock, $1 par, 20,000,000 shares authorized, 8,688,480 shares outstanding at June 30, 2015 and 7,840,132 shares outstanding at June 30, 2014       8,671         7,840  
  Capital in excess of par value       76,826         56,944  
  Retained earnings       106,984         102,152  
  Accumulated other comprehensive income, net       2,402         5,147  
    Total shareholders' equity       194,883         172,083  
                         
    Total liabilities and shareholders' equity     $ 1,524,356       $ 1,300,648  
                     
                   
 
American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
                   
    Three Months Ended     Six Months Ended
    June 30     June 30
    2015   2014     2015   2014
Interest and Dividend Income:                          
  Interest and fees on loans   $ 11,767   $ 9,687     $ 23,537   $ 19,534
  Interest on federal funds sold     1     -       5     -
  Interest and dividends on securities:                          
    Taxable     994     968       1,969     1,932
    Tax-exempt     940     1,016       1,900     2,051
    Dividends     85     74       167     149
  Other interest income     50     35       98     68
      Total interest and dividend income     13,837     11,780       27,676     23,734
                           
Interest Expense:                          
  Interest on deposits     1,184     1,161       2,378     2,390
  Interest on short-term borrowings     2     2       5     4
  Interest on long-term borrowings     81     81       161     161
  Interest on trust preferred capital notes     188     185       372     369
      Total interest expense     1,455     1,429       2,916     2,924
                           
Net Interest Income     12,382     10,351       24,760     20,810
  Provision for loan losses     100     150       700     150
                           
Net Interest Income After Provision                          
  for Loan Losses     12,282     10,201       24,060     20,660
                           
Noninterest Income:                          
  Trust fees     1,005     1,017       1,957     2,139
  Service charges on deposit accounts     525     431       1,022     844
  Other fees and commissions     607     493       1,195     937
  Mortgage banking income     389     275       611     538
  Securities gains, net     237     150       547     189
  Other     495     334       1,082     756
      Total noninterest income     3,258     2,700       6,414     5,403
                           
Noninterest Expense:                          
  Salaries     4,308     3,638       8,455     7,176
  Employee benefits     1,111     847       2,186     1,822
  Occupancy and equipment     1,024     910       2,196     1,846
  FDIC assessment     195     165       380     329
  Bank franchise tax     220     231       455     453
  Core deposit intangible amortization     300     330       601     661
  Data processing     483     345       945     693
  Software     277     235       560     497
  Other real estate owned, net     133     (9 )     186     7
  Merger related expenses     1,502     -       1,861     -
  Other     2,089     1,673       3,864     3,304
      Total noninterest expense     11,642     8,365       21,689     16,788
                           
Income Before Income Taxes     3,898     4,536       8,785     9,275
Income Taxes     1,018     1,303       2,390     2,592
Net Income   $ 2,880   $ 3,233     $ 6,395   $ 6,683
                           
Net Income Per Common Share:                          
  Basic   $ 0.33   $ 0.41     $ 0.73   $ 0.85
  Diluted   $ 0.33   $ 0.41     $ 0.73   $ 0.85
Weighted Average Common Shares Outstanding:                          
  Basic     8,707,504     7,872,079       8,713,528     7,886,232
  Diluted     8,715,934     7,879,854       8,722,266     7,896,541
                           
                   
                   
American National Bankshares Inc. and Subsidiaries  
Financial Highlights  
                       
(In thousands, except share, ratio and                      
nonfinancial data, unaudited)   2nd Qtr   1st Qtr   2nd Qtr   YTD   YTD  
    2015   2015   2014   2015   2014  
EARNINGS                                
  Interest income   $ 13,837   $ 13,839   $ 11,780   $ 27,676   $ 23,734  
  Interest expense     1,455     1,461     1,429     2,916     2,924  
  Net interest income     12,382     12,378     10,351     24,760     20,810  
  Provision for loan losses     100     600     150     700     150  
  Noninterest income     3,258     3,156     2,700     6,414     5,403  
  Noninterest expense     11,642     10,047     8,365     21,689     16,788  
  Income taxes     1,018     1,372     1,303     2,390     2,592  
  Net income     2,880     3,515     3,233     6,395     6,683  
                                 
PER COMMON SHARE                                
  Income per share - basic   $ 0.33   $ 0.40   $ 0.41   $ 0.73   $ 0.85  
  Income per share - diluted     0.33     0.40     0.41     0.73     0.85  
  Cash dividends paid     0.23     0.23     0.23     0.46     0.46  
  Book value per share (a)     22.43     22.58     21.95     22.43     21.95  
  Book value per share - tangible (a) (b)     16.96     17.09     16.65     16.96     16.65  
  Closing market price     23.81     22.58     21.73     23.81     21.73  
                                 
FINANCIAL RATIOS                                
  Return on average assets     0.75 %   0.93 %   1.00 %   0.84 %   1.03 %
  Return on average equity     5.86     7.17     7.53     6.51     7.82  
  Return on average tangible equity (c)     8.26     10.02     10.67     9.14     11.10  
  Average equity to average assets     12.85     12.91     13.22     12.88     13.14  
  Tangible equity to tangible assets (b)     9.98     9.98     10.37     9.98     10.37  
  Net interest margin, taxable equivalent     3.69     3.73     3.68     3.71     3.69  
  Efficiency ratio (d)     72.76     63.90     62.87     68.36     62.34  
  Effective tax rate     26.12     28.07     28.73     27.21     27.95  
                                 
PERIOD-END BALANCES                                
  Securities   $ 361,176   $ 357,544   $ 354,717   $ 361,176   $ 354,717  
  Loans held for sale     2,720     1,936     118     2,720     118  
  Loans, net of unearned income     982,905     965,902     813,057     982,905     813,057  
  Goodwill and other intangibles     47,493     47,793     41,541     47,493     41,541  
  Assets     1,524,356     1,540,098     1,300,648     1,524,356     1,300,648  
  Assets - tangible (b)     1,476,863     1,492,305     1,259,107     1,476,863     1,259,107  
  Deposits     1,234,018     1,242,675     1,035,800     1,234,018     1,035,800  
  Customer repurchase agreements     50,123     53,664     38,420     50,123     38,420  
  Other short-term borrowings     -     -     12,000     -     12,000  
  Long-term borrowings     37,518     37,487     37,394     37,518     37,394  
  Shareholders' equity     194,883     196,689     172,083     194,883     172,083  
  Shareholders' equity - tangible (b)     147,390     148,896     130,542     147,390     130,542  
                                 
AVERAGE BALANCES                                
  Securities   $ 349,813   $ 345,800   $ 347,726   $ 347,816   $ 346,446  
  Loans held for sale     2,836     939     1,685     1,893     1,858  
  Loans, net of unearned income     972,083     954,882     793,060     963,530     790,752  
  Interest-earning assets     1,397,448     1,382,817     1,183,559     1,390,172     1,185,172  
  Goodwill and other intangibles     47,682     47,988     41,738     47,834     41,907  
  Assets     1,530,867     1,518,449     1,299,535     1,524,693     1,301,078  
  Assets - tangible (b)     1,483,185     1,470,461     1,257,797     1,476,859     1,259,171  
  Interest-bearing deposits     945,931     938,064     820,342     942,019     825,258  
  Deposits     1,236,626     1,221,037     1,043,479     1,228,874     1,047,524  
  Customer repurchase agreements     51,417     53,181     40,720     52,294     39,267  
  Long-term borrowings     37,499     37,469     37,376     37,484     37,374  
  Shareholders' equity     196,663     196,086     171,784     196,376     170,920  
  Shareholders' equity - tangible (b)     148,981     148,098     130,046     148,542     129,013  
                       
American National Bankshares Inc. and Subsidiaries  
Financial Highlights  
                       
(In thousands, except share, ratio and                      
nonfinancial data, unaudited)   2nd Qtr   1st Qtr   2nd Qtr   YTD   YTD  
    2015   2015   2014   2015   2014  
CAPITAL                                
  Weighted average shares outstanding - basic     8,707,504     8,723,633     7,872,079     8,713,528     7,886,232  
  Weighted average shares outstanding - diluted     8,715,934     8,732,679     7,879,854     8,722,266     7,896,541  
                                 
ALLOWANCE FOR LOAN LOSSES                                
  Beginning balance   $ 12,844   $ 12,427   $ 12,614   $ 12,427   $ 12,600  
  Provision for loan losses     100     600     150     700     150  
  Charge-offs     (321 )   (309 )   (95 )   (630 )   (168 )
  Recoveries     170     126     94     296     181  
  Ending balance   $ 12,793   $ 12,844   $ 12,763   $ 12,793   $ 12,763  
                                 
LOANS                                
  Construction and land development   $ 66,543   $ 68,069   $ 50,856   $ 66,543   $ 50,856  
  Commercial real estate     432,315     436,562     366,722     432,315     366,722  
  Residential real estate     220,778     211,261     175,387     220,778     175,387  
  Home equity     97,866     97,811     89,725     97,866     89,725  
  Commercial and industrial     159,015     146,280     125,163     159,015     125,163  
  Consumer     6,388     5,919     5,204     6,388     5,204  
  Total   $ 982,905   $ 965,902   $ 813,057   $ 982,905   $ 813,057  
                                 
NONPERFORMING ASSETS AT PERIOD-END                                
  Nonperforming loans:                                
    90 days past due and accruing   $ -   $ -   $ -   $ -   $ -  
    Nonaccrual     3,772     5,123     5,224     3,772     5,224  
  Other real estate owned     2,113     2,653     2,622     2,113     2,622  
  Nonperforming assets   $ 5,885   $ 7,776   $ 7,846   $ 5,885   $ 7,846  
                                 
ASSET QUALITY RATIOS                                
  Allowance for loan losses to total loans     1.30 %   1.33 %   1.57 %   1.30 %   1.57 %
  Allowance for loan losses to nonperforming loans     339.16     250.71     244.31     339.16     244.31  
  Nonperforming assets to total assets     0.39     0.50     0.60     0.39     0.60  
  Nonperforming loans to total loans     0.38     0.53     0.64     0.38     0.64  
  Annualized net charge-offs (recoveries) to average loans     0.06     0.08     0.00     0.07     0.00  
                                 
                                 
OTHER DATA                                
  Fiduciary assets at period-end (e) (f)   $ 509,289   $ 502,779   $ 450,352   $ 509,289   $ 450,352  
  Retail brokerage assets at period-end (e) (f)   $ 257,306   $ 244,725   $ 197,625   $ 257,306   $ 197,625  
  Number full-time equivalent employees (g)     322     318     291     322     291  
  Number of full service offices     27     27     25     27     25  
  Number of loan production offices     2     2     2     2     2  
  Number of ATM's     34     34     31     34     31  
                                 
 
Notes:
   
  (a) - Unvested restricted stock of 17,761 shares are not included in the calculation.
  (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 June 30, 2015 and 2014  
(in thousands, except rates)  
                             
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2015   2014   2015   2014   2015     2014  
Loans:                                    
  Commercial   $ 155,752   $ 120,216   $ 1,760   $ 1,285   4.53 %   4.29 %
  Real estate     807,605     669,537     9,841     8,325   4.87     4.97  
  Consumer     11,562     4,992     205     87   7.11     6.99  
    Total loans     974,919     794,745     11,806     9,697   4.85     4.88  
                                     
Securities:                                    
  Federal agencies & GSEs     86,815     79,284     324     227   1.49     1.15  
  Mortgage-backed & CMOs     61,738     62,356     334     368   2.16     2.36  
  State and municipal     185,848     190,821     1,719     1,866   3.70     3.91  
  Other     15,412     15,265     125     121   3.24     3.17  
    Total securities     349,813     347,726     2,502     2,582   2.86     2.97  
                                     
Federal funds sold     6,480     -     2     -   0.12     -  
Deposits in other banks     66,236     41,088     50     35   0.30     0.34  
                                     
  Total interest-earning assets     1,397,448     1,183,559     14,360     12,314   4.11     4.16  
                                     
Non-earning assets     133,419     115,976                        
                                     
    Total assets   $ 1,530,867   $ 1,299,535                        
                                     
Deposits:                                    
  Demand   $ 237,102   $ 185,601     22     19   0.04     0.04  
  Money market     195,578     171,466     61     50   0.13     0.12  
  Savings     109,397     89,485     14     11   0.05     0.05  
  Time     403,854     373,790     1,087     1,081   1.08     1.16  
    Total deposits     945,931     820,342     1,184     1,161   0.50     0.57  
                                     
Customer repurchase agreements     51,417     40,720     2     1   0.02     0.01  
Other short-term borrowings     -     571     -     1   -     -  
Long-term borrowings     37,499     37,376     269     266   2.87     2.85  
  Total interest-bearing                                    
    liabilities     1,034,847     899,009     1,455     1,429   0.56     0.64  
                                     
Noninterest bearing demand deposits     290,695     223,137                        
Other liabilities     8,662     5,605                        
Shareholders' equity     196,663     171,784                        
  Total liabilities and                                    
    shareholders' equity   $ 1,530,867   $ 1,299,535                        
                                     
Interest rate spread                           3.55 %   3.52 %
Net interest margin                           3.69 %   3.68 %
                                     
Net interest income (taxable equivalent basis)                 12,905     10,885            
Less: Taxable equivalent adjustment                 523     534            
Net interest income               $ 12,382   $ 10,351            
                                     
       
       
    Net Interest Income Analysis  
    For the Six Months Ended June 30, 2015 and 2014  
    (in thousands, except rates)  
                             
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2015   2014   2015   2014   2015     2014  
Loans:                                    
  Commercial   $ 147,482   $ 120,460   $ 3,586   $ 2,757   4.90 %   4.62 %
  Real estate     804,507     667,168     19,560     16,621   4.86     4.98  
  Consumer     13,434     4,982     445     176   6.68     7.12  
    Total loans     965,423     792,610     23,591     19,554   4.89     4.94  
                                     
Securities:                                    
  Federal agencies & GSEs     80,866     73,850     569     405   1.41     1.10  
  Mortgage-backed & CMOs     63,637     64,482     712     771   2.24     2.39  
  State and municipal     188,020     192,174     3,482     3,765   3.70     3.92  
  Other     15,293     15,940     248     248   3.24     3.11  
    Total securities     347,816     346,446     5,011     5,189   2.88     3.00  
                                     
Federal funds sold     10,508     -     6     -   0.12     -  
Deposits in other banks     66,425     46,116     98     68   0.30     0.30  
                                     
  Total interest-earning assets     1,390,172     1,185,172     28,706     24,811   4.13     4.19  
                                     
Non-earning assets     134,521     115,906                        
                                     
    Total assets   $ 1,524,693   $ 1,301,078                        
                                     
Deposits:                                    
  Demand   $ 224,955   $ 176,889     40     41   0.04     0.05  
  Money market     199,236     182,109     132     125   0.13     0.14  
  Savings     108,545     88,199     26     25   0.05     0.06  
  Time     409,283     378,061     2,180     2,199   1.07     1.17  
    Total deposits     942,019     825,258     2,378     2,390   0.51     0.58  
                                     
Customer repurchase agreements     52,294     39,267     5     3   0.02     0.02  
Other short-term borrowings     -     287     -     1   -     -  
Long-term borrowings     37,484     37,374     533     530   2.84     2.84  
  Total interest-bearing                                    
    liabilities     1,031,797     902,186     2,916     2,924   0.57     0.65  
                                     
Noninterest bearing demand deposits     286,855     222,266                        
Other liabilities     9,665     5,706                        
Shareholders' equity     196,376     170,920                        
  Total liabilities and                                    
    shareholders' equity   $ 1,524,693   $ 1,301,078                        
                                     
Interest rate spread                           3.56 %   3.54 %
Net interest margin                           3.71 %   3.69 %
                                     
Net interest income (taxable equivalent basis)                 25,790     21,887            
Less: Taxable equivalent adjustment                 1,030     1,077            
Net interest income               $ 24,760   $ 20,810