SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

October 22, 2015 16:05 ET

American National Bankshares Inc. Reports Third Quarter 2015 Earnings

DANVILLE, VA--(Marketwired - Oct 22, 2015) - American National Bankshares Inc. (NASDAQ: AMNB)

  • Q3 2015 net income of $4.0 million
  • Diluted EPS $0.47 for Q3 2015 compared to $0.40 for Q3 2014
  • Net interest margin of 3.64% for Q3 2015
  • Average shareholders' equity of $196 million is 12.95% of average assets

American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced net income for the third quarter of 2015 of $4,037,000 compared to $3,168,000 for the third quarter of 2014, an $869,000 or 27.4% increase. Basic and diluted net income per common share was $0.47 for the 2015 quarter compared to $0.40 for the 2014 quarter. Net income for the third quarter of 2015 produced a return on average assets of 1.07%, a return on average equity of 8.25%, and a return on average tangible equity of 11.42%.

Net income for the first nine months of 2015 was $10,432,000 compared to $9,851,000 for the comparable period of 2014, a $581,000 or 5.9% increase. Basic and diluted net income per common share was $1.20 for the 2015 period compared to $1.25 for the 2014 period.

The 2015 nine month period was negatively impacted by nonrecurring, merger related costs associated with the January 2015 acquisition of MainStreet BankShares, Inc. ("MainStreet"). Merger related costs for the 2015 nine month period were $1,948,000.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "The third quarter of 2015 and the year to date have been very good for American National.

"At September 30, 2015, American National had $980,984,000 in loans compared to $816,588,000 at September 30, 2014, an increase of $164,396,000 or 20.1%. Of that increase, $106,166,000 or 64.6% relates directly to the MainStreet acquisition. 

"We also have had notable growth in our other markets. Organic loan growth over the past year was $58,230,000 or 7.1%. A combination of active business development and gradually improving local market economic conditions are beginning to result in loan growth. However, we did see a slowdown in the third quarter 2015 as loans outstanding fell slightly, $1,921,000 or 0.2%, compared to the end of the second quarter. Even though the current quarter showed no net growth, we were very pleased to see a substantial portion of new loan production in the form of credits that will fund over time, so their benefit will manifest over the next several quarters.

"On the liability side of the balance sheet, at September 30, 2015, American National had $1,226,521,000 in deposits compared to $1,051,060,000 at September 30, 2014, an increase of $175,461,000 or 16.7%. Of that increase, $121,995,000 or 69.5% is related 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 third quarter was 0.52%, compared to 0.55% for the comparable 2014 quarter.

"On the earnings side, our net income for the third quarter was $4,037,000, up from $3,168,000 in the 2014 quarter, an increase of $869,000 or 27.4%. 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. Net interest income for the quarter is up by $1,601,000 and of that increase 88.1% relates to the MainStreet acquisition.

"Noninterest income was higher in the 2015 quarter by $74,000 or 2.5%. Virtually all categories showed notable improvement, but the increase was reduced by a decrease in securities gains of $309,000 compared to the comparable prior year quarter.

"Noninterest expense was higher in the 2015 quarter by $561,000 or 6.4%. The magnitude of the increase was reduced by an improvement in other real estate expense and a decrease in nonrecurring merger related expenses.

"We are very sensitive to the issue of operational efficiency. During the third quarter we closed two underperforming banking offices, one in the Danville market and one in the Lynchburg market.

"Our efficiency ratio, basically the cost to produce one dollar of revenue, was 61.25 during the current quarter, down from 72.76 for the second quarter, and down from 64.35 for the third quarter of 2014. The second quarter of 2015 was negatively impacted by significant nonrecurring merger expenses."

Haley concluded, "As we review the current quarter and the last nine months, we are pleased with 2015. The successful merger and integration of Franklin Community Bank earlier this year was a major accomplishment and has significantly increased our size and market footprint. We are extremely pleased to see the beginning of significant, though somewhat erratic, organic loan growth. Bar none, this is our favorite leading indicator of improving business and economic conditions.

"American National has a century long legacy of providing high quality banking products and services and an exemplary return to its shareholders. Our goal is to continue that tradition, build and improve on it. We will do this by continuing to provide quality banking products and services, growing our balance sheet, maintaining strong asset quality, and seeking ways to more effectively deploy our capital. Among those ways is our stock repurchase plan, which during the quarter bought approximately 70,000 shares, ongoing consideration of future merger and acquisition opportunities, and a regular review of our dividend policy."

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

For the quarter ended September 30, 2015, average shareholders' equity was 12.95% of average assets, compared to 13.18% for the quarter ended September 30, 2014.

Book value per common share was $22.81 at September 30, 2015, compared to $22.08 at September 30, 2014.

Tangible book value per common share was $17.32 at September 30, 2015, compared to $16.81 at September 30, 2014.

Credit Quality Measurements
Non-performing assets ($5,360,000 of non-performing loans and $1,333,000 of other real estate owned) represented 0.44% of total assets at September 30, 2015, compared to 0.52% at September 30, 2014. 

Annualized net charge offs to average loans was seven basis points (0.07%) for the 2015 third quarter, equal to that for the same quarter in 2014.

The allowance for loan losses as a percentage of total loans was 1.29% at September 30, 2015 compared to 1.55% at September 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 $1,333,000 at September 30, 2015, compared to $2,364,000 at September 30, 2014, a decrease of $1,031,000 or 43.6%.

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

MainStreet September 30, 2015    
  For the three months ended   For the nine months ended        
Net Interest Income $ 78   $ 1,097            
Income Before Income Taxes $ 4   $ 876            
                       
MidCarolina September 30, 2015   September 30, 2014
  For the three months ended   For the nine months ended   For the three months ended   For the nine months ended
Net Interest Income $ 471   $ 1,409   $ 564   $ 2,064
Income Before Income Taxes $ 244   $ 729   $ 337   $ 1,366

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

The fair value impact of the MainStreet merger was affected during the third quarter by a change in accounting estimates. The rules for business combinations allow up to a year after a merger to refine estimates based on additional relevant information. The impact of this one-time adjustment to operations was a reduction in loan accretion income of $353,000, which was offset by a reduction in goodwill on the balance sheet.

Net Interest Income
Net interest income before provision for loan losses increased to $12,061,000 in the third quarter of 2015 from $10,460,000 in the third quarter of 2014, an increase of $1,601,000 or 15.3%. 

For the 2015 quarter, the net interest margin was 3.64% compared to 3.68% for the same quarter in 2014, a decrease of four basis points (0.04%). 

Provision for loan losses
Provision expense for the third quarters of 2015 and 2014 was zero.

There was no need for a provision expense in the 2015 quarter, as any potential provision expense was primarily mitigated by a small decline in loan volume during the quarter and improvement in some impaired loan allowance allocations.

Noninterest Income 
Noninterest income totaled $3,055,000 in the third quarter of 2015, compared with $2,981,000 in the third quarter of 2014, an increase of $74,000 or 2.5%. Almost all income categories showed large increases, most of which were related to increased transaction volumes resulting from the MainStreet transaction. However, the 2014 quarter included $315,000 in securities gains compared to only $6,000 in the 2015 quarter.

Noninterest Expense
Noninterest expense totaled $9,388,000 in the third quarter of 2015, compared to $8,827,000 in the third quarter of 2014, an increase of $561,000 or 6.4%. 

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 $267,000 improvement in other real estate owned, net, and an $181,000 reduction in nonrecurring merger related expense.

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 southern and central Virginia and north central North Carolina with 25 banking offices and two loan production offices. American National Bank and Trust Company also manages an additional $733 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  
             
    September 30  
ASSETS   2015     2014  
                 
Cash and due from banks   $ 19,280     $ 22,699  
Interest-bearing deposits in other banks     46,637       58,278  
                 
Securities available for sale, at fair value     358,306       328,534  
Restricted stock, at cost     5,308       4,362  
Loans held for sale     2,998       811  
                 
Loans     980,984       816,588  
  Less allowance for loan losses     (12,611 )     (12,620 )
    Net Loans     968,373       803,968  
                 
Premises and equipment, net     23,854       23,085  
Other real estate owned, net     1,333       2,364  
Goodwill     44,333       39,043  
Core deposit intangibles, net     2,983       2,271  
Bank owned life insurance     17,491       15,044  
Accrued interest receivable and other assets     21,541       18,698  
                 
    Total assets   $ 1,512,437     $ 1,319,157  
                 
                 
Liabilities                
  Demand deposits -- noninterest-bearing   $ 305,110     $ 244,469  
  Demand deposits -- interest-bearing     220,562       185,982  
  Money market deposits     191,534       173,192  
  Savings deposits     108,992       88,226  
  Time deposits     400,323       359,191  
    Total deposits     1,226,521       1,051,060  
                 
  Customer repurchase agreements     43,579       51,945  
  Long-term borrowings     9,952       9,930  
  Trust preferred capital notes     27,597       27,495  
  Accrued interest payable and other liabilities     8,337       5,562  
    Total liabilities     1,315,986       1,145,992  
                 
Shareholders' equity                
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding     -       -  
  Common stock, $1 par, 20,000,000 shares authorized, 8,630,329 shares outstanding at September 30, 2015 and 7,843,454 shares outstanding at September 30, 2014     8,611       7,843  
  Capital in excess of par value     75,524       57,087  
  Retained earnings     109,030       103,515  
  Accumulated other comprehensive income, net     3,286       4,720  
    Total shareholders' equity     196,451       173,165  
                     
    Total liabilities and shareholders' equity   $ 1,512,437     $ 1,319,157  
                 
                 
                 
American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
                   
    Three Months Ended   Nine Months Ended
    September 30   September 30
    2015     2014   2015   2014
Interest and Dividend Income:                          
  Interest and fees on loans   $ 11,474     $ 9,864   $ 35,011   $ 29,398
  Interest on federal funds sold     1       -     6     -
  Interest and dividends on securities:                          
    Taxable     1,052       918     3,021     2,850
    Tax-exempt     899       966     2,799     3,017
    Dividends     91       72     258     221
  Other interest income     25       32     123     100
      Total interest and dividend income     13,542       11,852     41,218     35,586
                           
Interest Expense:                          
  Interest on deposits     1,205       1,120     3,583     3,510
  Interest on short-term borrowings     2       4     7     8
  Interest on long-term borrowings     82       82     243     243
  Interest on trust preferred capital notes     192       186     564     555
      Total interest expense     1,481       1,392     4,397     4,316
                           
Net Interest Income     12,061       10,460     36,821     31,270
  Provision for loan losses     -       -     700     150
                           
Net Interest Income After Provision for Loan Losses     12,061       10,460     36,121     31,120
                           
Noninterest Income:                          
  Trust fees     1,006       992     2,963     3,131
  Service charges on deposit accounts     521       441     1,543     1,285
  Other fees and commissions     592       479     1,787     1,416
  Mortgage banking income     376       342     987     880
  Securities gains, net     6       315     553     504
  Other     554       412     1,636     1,168
      Total noninterest income     3,055       2,981     9,469     8,384
                           
Noninterest Expense:                          
  Salaries     4,179       3,714     12,634     10,890
  Employee benefits     1,029       799     3,215     2,621
  Occupancy and equipment     1,094       933     3,290     2,779
  FDIC assessment     185       157     565     486
  Bank franchise tax     220       216     675     669
  Core deposit intangible amortization     300       227     901     888
  Data processing     366       361     1,311     1,054
  Software     290       248     850     745
  Other real estate owned, net     (126 )     141     60     148
  Merger related expenses     87       268     1,948     268
  Other     1,764       1,763     5,628     5,067
      Total noninterest expense     9,388       8,827     31,077     25,615
                             
  Income Before Income Taxes     5,728       4,614     14,513     13,889
  Income Taxes     1,691       1,446     4,081     4,038
Net Income   $ 4,037     $ 3,168   $ 10,432   $ 9,851
                           
Net Income Per Common Share:                          
  Basic   $ 0.47     $ 0.40   $ 1.20   $ 1.25
  Diluted   $ 0.47     $ 0.40   $ 1.20   $ 1.25
Weighted Average Common Shares Outstanding:                          
  Basic     8,668,618       7,841,078     8,698,394     7,871,016
  Diluted     8,676,571       7,851,735     8,706,870     7,881,441
                             
                             
                           
American National Bankshares Inc. and Subsidiaries  
Financial Highlights  
   
(In thousands, except share, ratio and nonfinancial data, unaudited) 3rd Qtr
2015
    2nd Qtr
2015
    3rd Qtr
2014
    YTD
2015
    YTD
2014
 
                                       
EARNINGS                                      
  Interest income $ 13,542     $ 13,837     $ 11,852     $ 41,218     $ 35,586  
  Interest expense   1,481       1,455       1,392       4,397       4,316  
  Net interest income   12,061       12,382       10,460       36,821       31,270  
  Provision for loan losses   -       100       -       700       150  
  Noninterest income   3,055       3,258       2,981       9,469       8,384  
  Noninterest expense   9,388       11,642       8,827       31,077       25,615  
  Income taxes   1,691       1,018       1,446       4,081       4,038  
  Net income   4,037       2,880       3,168       10,432       9,851  
                                       
PER COMMON SHARE                                      
  Net income per share - basic $ 0.47     $ 0.33     $ 0.40     $ 1.20     $ 1.25  
  Net income per share - diluted   0.47       0.33       0.40       1.20       1.25  
  Cash dividends paid   0.23       0.23       0.23       0.69       0.69  
  Book value per share (a)   22.81       22.43       22.08       22.81       22.08  
  Book value per share - tangible (a) (b)   17.32       16.96       16.81       17.32       16.81  
  Closing market price   23.45       23.81       22.75       23.45       22.75  
                                       
FINANCIAL RATIOS                                      
  Return on average assets   1.07 %     0.75 %     0.97 %     0.91 %     1.01 %
  Return on average equity   8.25       5.86       7.35       7.09       7.66  
  Return on average tangible equity (c)   11.42       8.26       10.12       9.90       10.72  
  Average equity to average assets   12.95       12.85       13.18       12.90       13.15  
  Tangible equity to tangible assets (b)   10.18       9.98       10.32       10.18       10.32  
  Net interest margin, taxable equivalent   3.64       3.69       3.68       3.69       3.69  
  Efficiency ratio (d)   61.25       72.76       64.35       66.00       63.01  
  Effective tax rate   29.52       26.12       31.34       28.12       29.07  
                                       
PERIOD-END BALANCES                                      
  Securities $ 363,614     $ 361,176     $ 333,063     $ 363,614     $ 333,063  
  Loans held for sale   2,998       2,720       811       2,998       811  
  Loans, net of unearned income   980,984       982,905       816,588       980,984       816,588  
  Goodwill and other intangibles   47,316       47,493       41,314       47,316       41,314  
  Assets   1,512,437       1,524,356       1,319,157       1,512,437       1,319,157  
  Assets - tangible (b)   1,465,121       1,476,863       1,277,843       1,465,121       1,277,843  
  Deposits   1,226,521       1,234,018       1,051,060       1,226,521       1,051,060  
  Customer repurchase agreements   43,579       50,123       51,945       43,579       51,945  
  Other short-term borrowings   -       -       -       -       -  
  Long-term borrowings   37,549       37,518       37,425       37,549       37,425  
  Shareholders' equity   196,451       194,883       173,165       196,451       173,165  
  Shareholders' equity - tangible (b)   149,135       147,390       131,851       149,135       131,851  
                                       
AVERAGE BALANCES                                      
  Securities $ 357,427     $ 349,813     $ 329,455     $ 350,831     $ 340,720  
  Loans held for sale   2,873       2,836       1,998       2,223       1,905  
  Loans, net of unearned income   982,212       972,083       815,564       969,826       799,114  
  Interest-earning assets   1,380,576       1,397,448       1,192,761       1,386,714       1,187,763  
  Goodwill and other intangibles   47,446       47,682       41,455       47,703       41,754  
  Assets   1,511,464       1,530,867       1,309,120       1,520,235       1,303,788  
  Assets - tangible (b)   1,464,018       1,483,185       1,267,665       1,472,532       1,262,034  
  Interest-bearing deposits   923,840       945,931       806,267       935,893       818,858  
  Deposits   1,223,328       1,236,626       1,044,913       1,227,005       1,046,644  
  Customer repurchase agreements   45,444       51,417       45,725       49,985       41,443  
  Long-term borrowings   37,531       37,499       37,406       37,500       37,385  
  Shareholders' equity   195,660       196,663       172,493       196,135       171,450  
  Shareholders' equity - tangible (b)   148,214       148,981       131,038       148,432       129,696  
                                         
American National Bankshares Inc. and Subsidiaries  
Financial Highlights  
   
(In thousands, except share, ratio and nonfinancial data, unaudited) 3rd Qtr
2015
    2nd Qtr
2015
    3rd Qtr
2014
    YTD
2015
    YTD
2014
 
                                       
CAPITAL                                      
  Weighted average shares outstanding - basic   8,668,618       8,707,504       7,841,078       8,698,394       7,871,016  
  Weighted average shares outstanding - diluted   8,676,571       8,715,934       7,851,735       8,706,870       7,881,441  
                                       
ALLOWANCE FOR LOAN LOSSES                                      
  Beginning balance $ 12,793     $ 12,844     $ 12,763     $ 12,427     $ 12,600  
  Provision for loan losses   -       100       -       700       150  
  Charge-offs   (253 )     (321 )     (230 )     (883 )     (398 )
  Recoveries   71       170       87       367       268  
  Ending balance $ 12,611     $ 12,793     $ 12,620     $ 12,611     $ 12,620  
                                       
LOANS                                      
  Construction and land development $ 68,692     $ 66,543     $ 47,060     $ 68,692     $ 47,060  
  Commercial real estate   424,404       432,315       371,743       424,404       371,743  
  Residential real estate   219,415       220,778       175,091       219,415       175,091  
  Home equity   98,249       97,866       90,952       98,249       90,952  
  Commercial and industrial   164,025       159,015       126,437       164,025       126,437  
  Consumer   6,199       6,388       5,305       6,199       5,305  
  Total $ 980,984     $ 982,905     $ 816,588     $ 980,984     $ 816,588  
                                       
NONPERFORMING ASSETS AT PERIOD-END                                      
  Nonperforming loans:                                      
  90 days past due and accruing $ -     $ -     $ -     $ -     $ -  
  Nonaccrual   5,360       3,772       4,494       5,360       4,494  
  Other real estate owned   1,333       2,113       2,364       1,333       2,364  
  Nonperforming assets $ 6,693     $ 5,885     $ 6,858     $ 6,693     $ 6,858  
                                       
ASSET QUALITY RATIOS                                      
  Allowance for loan losses to total loans   1.29 %     1.30 %     1.55 %     1.29 %     1.55 %
  Allowance for loan losses to                                      
  nonperforming loans   235.28       339.16       280.82       235.28       280.82  
  Nonperforming assets to total assets   0.44       0.39       0.52       0.44       0.52  
  Nonperforming loans to total loans   0.55       0.38       0.55       0.55       0.55  
  Annualized net charge-offs (recoveries) to average loans   0.07       0.06       0.07       0.07       0.02  
                                       
                                       
OTHER DATA                                      
  Fiduciary assets at period-end (e) (f) $ 486,173     $ 509,289     $ 441,753     $ 486,173     $ 441,753  
  Retail brokerage assets at period-end (e) (f) $ 247,258     $ 257,306     $ 201,327     $ 247,258     $ 201,327  
  Number full-time equivalent employees (g)   310       322       292       310       292  
  Number of full service offices   25       27       24       25       24  
  Number of loan production offices   2       2       2       2       2  
  Number of ATM's   34       34       30       34       30  
                                       
Notes:
 
(a) - Unvested restricted stock of 19,155 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 September 30, 2015 and 2014  
(in thousands, except rates)  
   
          Interest            
  Average Balance   Income/Expense   Yield/Rate  
                           
  2015   2014   2015   2014   2015     2014  
Loans:                                  
  Commercial $ 164,551   $ 126,340   $ 1,801   $ 1,339   4.34 %   4.20 %
  Real estate   814,500     686,682     9,557     8,451   4.69     4.92  
  Consumer   6,034     4,540     150     85   9.86     7.43  
    Total loans   985,085     817,562     11,508     9,875   4.67     4.83  
                                   
Securities:                                  
  Federal agencies & GSEs   103,303     72,828     431     212   1.67     1.16  
  Mortgage-backed & CMOs   57,100     58,365     282     345   1.98     2.36  
  State and municipal   180,799     183,679     1,650     1,783   3.65     3.88  
  Other   16,225     14,583     140     114   3.45     3.13  
    Total securities   357,427     329,455     2,503     2,454   2.80     2.98  
                                   
Federal funds sold   76     -     1     -   5.22     -  
Deposits in other banks   37,988     45,744     25     32   0.26     0.28  
                                   
  Total interest-earning assets   1,380,576     1,192,761     14,037     12,361   4.06     4.14  
                                   
Non-earning assets   130,888     116,359                        
                                   
    Total assets $ 1,511,464   $ 1,309,120                        
                                   
Deposits:                                  
  Demand $ 221,700   $ 189,208     20     15   0.04     0.03  
  Money market   191,689     167,777     63     51   0.13     0.12  
  Savings   109,919     88,456     13     10   0.05     0.04  
  Time   400,532     360,826     1,109     1,044   1.10     1.15  
    Total deposits   923,840     806,267     1,205     1,120   0.52     0.55  
                                   
Customer repurchase agreements   45,444     45,725     2     2   0.02     0.02  
Other short-term borrowings   57     2,215     0     2   0.35     0.36  
Long-term borrowings   37,531     37,406     274     268   2.92     2.87  
    Total interest-bearing liabilities   1,006,872     891,613     1,481     1,392   0.58     0.62  
                                   
Noninterest bearing demand deposits   299,488     238,646                        
Other liabilities   9,444     6,368                        
Shareholders' equity   195,660     172,493                        
    Total liabilities and shareholders' equity $ 1,511,464   $ 1,309,120                        
                                   
Interest rate spread                         3.48 %   3.52 %
Net interest margin                         3.64 %   3.68 %
                                   
Net interest income (taxable equivalent basis)           12,556     10,969            
Less: Taxable equivalent adjustment               495     509            
Net interest income             $ 12,061   $ 10,460            
                                   
                                   
                                   
  Net Interest Income Analysis  
  For the Nine Months Ended September 30, 2015 and 2014  
  (in thousands, except rates)  
                           
          Interest            
  Average Balance   Income/Expense   Yield/Rate  
                           
  2015   2014   2015   2014   2015     2014  
Loans:                                  
  Commercial $ 153,234   $ 122,441   $ 5,387   $ 4,096   4.70 %   4.49 %
  Real estate   807,875     673,745     29,117     25,072   4.81     4.96  
  Consumer   10,940     4,833     595     261   7.27     7.25  
    Total loans   972,049     801,019     35,099     29,429   4.82     4.90  
                                   
Securities:                                  
  Federal agencies & GSEs   88,427     73,506     1,000     617   1.51     1.12  
  Mortgage-backed & CMOs   61,434     62,420     994     1,116   2.16     2.38  
  State and municipal   185,587     189,311     5,133     5,548   3.69     3.91  
  Other   15,383     15,483     388     362   3.36     3.12  
    Total securities   350,831     340,720     7,515     7,643   2.86     2.99  
                                   
Federal funds sold   6,992     -     6     -   0.11     -  
Deposits in other banks   56,842     46,024     123     100   0.29     0.29  
                                   
    Total interest-earning assets   1,386,714     1,187,763     42,743     37,172   4.11     4.18  
                                   
Non-earning assets   133,521     116,025                        
                                   
Total assets $ 1,520,235   $ 1,303,788                        
                                   
Deposits:                                  
  Demand $ 223,858   $ 181,040     60     56   0.04     0.04  
  Money market   196,693     177,279     195     176   0.13     0.13  
  Savings   109,008     88,286     39     35   0.05     0.05  
  Time   406,334     372,253     3,289     3,243   1.08     1.17  
    Total deposits   935,893     818,858     3,583     3,510   0.51     0.58  
                                   
Customer repurchase agreements   49,985     41,443     7     5   0.02     0.02  
Other short-term borrowings   19     937     0     3   0.35     0.43  
Long-term borrowings   37,500     37,385     807     798   2.87     2.85  
    Total interest-bearing liabilities   1,023,397     898,623     4,397     4,316   0.57     0.64  
                                   
Noninterest bearing demand deposits   291,112     227,786                        
Other liabilities   9,591     5,929                        
Shareholders' equity   196,135     171,450                        
    Total liabilities and shareholders' equity $ 1,520,235   $ 1,303,788                        
                                   
Interest rate spread                         3.54 %   3.54 %
Net interest margin                         3.69 %   3.69 %
                                   
Net interest income (taxable equivalent basis)           38,346     32,856            
Less: Taxable equivalent adjustment               1,525     1,586            
Net interest income             $ 36,821   $ 31,270