SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

April 27, 2012 09:43 ET

UPDATE: American National Bankshares Inc. Reports First Quarter 2012 Earnings

DANVILLE, VA--(Marketwire - Apr 27, 2012) - American National Bankshares Inc. (NASDAQ: AMNB)

  • Completed third quarter of operations post-merger with MidCarolina
  • Software conversion completed
  • Q1 net income of $4.2 million and diluted EPS of $0.53
  • Net interest margin 4.65% for 2012 quarter
  • Average shareholders' equity of $155 million is 11.79% of average assets

American National Bankshares Inc. (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced first quarter 2012 net income of $4,175,000 compared to $1,778,000 for the first quarter of 2011, a $2,397,000 or 135% increase. Earnings per share, basic and diluted, were $0.53 for the 2012 quarter compared to $0.29 for the 2011 quarter. This quarterly net income produced for 2012 a return on average assets of 1.27%, a return on average equity of 10.80%, and a return on average tangible equity of 16.70%.

Earnings for the first quarter of 2012 were favorably impacted by the mid 2011 merger between American National and MidCarolina Financial Corporation ("MidCarolina"). Unless otherwise noted, most of the material changes between periods are related to the merger.

Financial Performance and Overview
Charles H. Majors, Chairman and Chief Executive Officer, reported, "As we begin 2012, American National is continuing to adjust to its larger size and complexity after the 2011 merger with MidCarolina. In addition, during this quarter, we made major changes to the bank's management information systems, a computer software conversion, in an effort to lay the foundation for a 21st century community bank. As one would expect, it was a large and complex project, and ultimately vital to the long range well-being of our bank by insuring our ability to take care of our customers' banking needs.

"As we begin the second quarter of 2012, we believe the merger related transition and the computer and management information system transition have been successful.

"Earnings for the quarter were very good. Our net income was $4,175,000 for 2012, compared to $1,778,000 for the prior year quarter, an increase of 135%. On a diluted EPS basis we earned $0.53 compared to $0.29 a year earlier.

"Much of the increase was driven by the merger with MidCarolina. Approximately $2,300,000 of our 2012 quarter pretax income was directly related to various categorical fair value adjustments, the majority of which results from the loan portfolio purchase discount. In fact, of this income, over $900,000 related to early pay offs of loans in the purchased credit impaired loan portfolio.

"We are always reviewing and assessing the overall credit risk in the loan portfolio for the Virginia side of the bank and for the acquired loans in North Carolina. As we recognize accretion income on the acquired loans, we are aware of the rapid reduction in the credit portion of the fair value purchase discount, also known as the mark. The mark is reducing at a faster velocity than the related loan balances, because of loan structure, and this has implications for our loan loss methodology. Consequently, during the first quarter, in addition to our normally determined provision expense, our analysis determined we needed to provide an additional $400,000.

Majors concluded, "There is a lot going on in our industry and with our community bank. This is a truly an exciting time for American National. We invite our customers and shareholders to help us build and grow a community bank for the new century."

Capital
American National's capital ratios remain strong and exceed all regulatory requirements. For the quarter ended March 31, 2012, average shareholders' equity was 11.79% of average assets and average tangible equity was 16.70% of average assets.

Book value per common share was $19.80 at March 31, 2012, compared to $17.77 for the same date in 2011.

Tangible book value per common share was $14.00 at March 31, 2012, compared to $13.92 for the same date in 2011.

Credit Quality Measurements
Nonperforming assets ($13.3 million of non-performing loans and $6.4 million of foreclosed real estate) represented 1.49% of total assets at March 31, 2012, compared to 0.82% at March 31, 2011.

Annualized net charge offs to average loans were -21 basis points (-0.21%, a net recovery position) for the 2012 first quarter, compared to 39 basis points (0.39%) for the same quarter in 2011. The 2012 quarter was impacted by a large recovery of approximately $600,000 related to a loan charged off by MidCarolina prior to the merger.

The allowance for loan losses as a percentage of total loans was 1.43% at March 31, 2012 compared to 1.60% the prior year. The loans acquired in connection with the MidCarolina merger, all valued at the merger date at fair value, whereby loan losses are implicit in the valuation, have had a significant impact on this ratio. The allowance for loan losses as a percentage of total loans, net of fair value loans, a non-GAAP measurement, was 2.13% at March 31, 2012.

Net Interest Income
Net interest income before provision for loan losses increased to $13,172,000 in the first quarter of 2012 from $6,605,000 in first quarter of 2011, an increase of $6,567,000 or 99.4%.

For the 2012 quarter, the net interest margin increased 99 basis points (0.99%) to 4.65% compared to the same period in 2011.

Noninterest Income
Noninterest income totaled $3,234,000 in the first quarter of 2012, compared with $1,971,000 in the first quarter of 2011, an increase of $1,263,000 or 64.1%. The 2012 quarter included a $495,000 gain on sale of bank owned real estate (a former bank branch site). Service charge related income and mortgage banking income have been favorably impacted by the merger.

Noninterest Expense
Noninterest expense totaled $9,927,000 in the first quarter of 2012, compared to $5,779,000 in the first quarter of 2011, an increase of $4,148,000 or 71.8%. Expenses for the quarter were negatively impacted by costs associated with the software conversion of approximately $190,000 and costs associated with the merger of $251,000.

About American National
American National Bankshares Inc. is a multi-state bank holding company with total assets of approximately $1.3 billion following the July 1, 2011, completion of the MidCarolina merger. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving southern and central Virginia and north central North Carolina with 25 banking offices and two loan production offices. American National Bank and Trust Company also manages an additional $577 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about the company and the bank is available on the bank's website at www.amnb.com.

Shares of American National are traded on the NASDAQ Global Select Market under the symbol "AMNB."

Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of federal securities laws. Certain of the statements involve significant risks and uncertainties. The statements herein are based on certain assumptions and analyses by American National and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates; changes in accounting principles, policies or guidelines; significant changes in the economic scenario; significant changes in regulatory requirements; significant changes in securities markets; and changes regarding acquisitions and dispositions. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in American National's most recent Form 10-K report and other documents filed with the Securities and Exchange Commission. American National Bankshares Inc. does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

American National Bankshares Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
Unaudited
March 31
ASSETS 2012 2011
Cash and due from banks $ 28,197 $ 14,248
Interest-bearing deposits in other banks 26,649 25,397
Securities available for sale, at fair value 337,376 226,171
Securities held to maturity - 3,146
Total securities 337,376 229,317
Restricted stock, at cost 6,019 4,062
Loans held for sale 3,774 1,309
Loans 816,471 516,629
Less allowance for loan losses (11,691 ) (8,257 )
Net Loans 804,780 508,372
Premises and equipment, net 25,833 19,308
Other real estate owned, net 6,369 3,532
Goodwill 39,352 22,468
Core deposit intangibles, net 6,048 1,226
Bank owned life insurance 13,165 4,137
Accrued interest receivable and other assets 25,698 11,862
Total assets $ 1,323,260 $ 845,238
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing $ 199,066 $ 117,260
Demand deposits -- interest-bearing 168,757 96,686
Money market deposits 174,110 57,530
Savings deposits 78,650 63,236
Time deposits 454,147 328,771
Total deposits 1,074,730 663,483
Short-term borrowings:
Customer repurchase agreements 48,651 43,871
Other short-term borrowings - -
Long-term borrowings 10,175 4,450
Trust preferred capital notes 27,237 20,619
Accrued interest payable and other liabilities 7,443 3,443
Total liabilities 1,168,236 735,866
Shareholders' equity:
Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding - -
Common stock, $1 par, 10,000,000 shares authorized, 7,830,247 shares outstanding at March 31, 2012 and 6,153,433 shares outstanding at March 31, 2011 7,830 6,153
Capital in excess of par value 56,633 27,541
Retained earnings 84,171 75,214
Accumulated other comprehensive income, net 6,390 464
Total shareholders' equity 155,024 109,372
Total liabilities and shareholders' equity $ 1,323,260 $ 845,238
American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
Three Months Ended
March 31
2012 2011
Interest and Dividend Income:
Interest and fees on loans $ 13,120 $ 6,679
Interest and dividends on securities:
Taxable 1,079 1,169
Tax-exempt 1,082 716
Dividends 51 27
Other interest income 10 70
Total interest and dividend income 15,342 8,661
Interest Expense:
Interest on deposits 1,837 1,580
Interest on short-term borrowings 43 80
Interest on long-term borrowings 84 53
Interest on trust preferred capital notes 206 343
Total interest expense 2,170 2,056
Net Interest Income 13,172 6,605
Provision for loan losses 733 337
Net Interest Income After Provision for Loan Losses 12,439 6,268
Noninterest Income:
Trust fees 882 928
Service charges on deposit accounts 488 421
Other fees and commissions 457 316
Mortgage banking income 531 147
Securities gains, net - 1
Other 876 158
Total noninterest income 3,234 1,971
Noninterest Expense:
Salaries 4,111 2,485
Employee benefits 1,078 541
Occupancy and equipment 965 699
FDIC assessment 233 205
Bank franchise tax 183 175
Core deposit intangible amortization 547 94
Foreclosed real estate, net (243 ) 22
Merger related expenses 251 309
Other 2,802 1,249
Total noninterest expense 9,927 5,779
Income Before Income Taxes 5,746 2,460
Income Taxes 1,571 682
Net Income $ 4,175 $ 1,778
Net Income Per Common Share:
Basic $ 0.53 $ 0.29
Diluted $ 0.53 $ 0.29
Average Common Shares Outstanding:
Basic 7,822,228 6,143,602
Diluted 7,833,061 6,152,738
American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and nonfinancial data, unaudited) 1st Qtr 4th Qtr 1st Qtr YTD YTD
2012 2011 2011 2012 2011
EARNINGS
Interest income $ 15,342 $ 17,177 $ 8,661 $ 15,342 $ 8,661
Interest expense 2,170 2,317 2,056 2,170 2,056
Net interest income 13,172 14,860 6,605 13,172 6,605
Provision for loan losses 733 1,972 337 733 337
Noninterest income 3,234 2,587 1,971 3,234 1,971
Noninterest expense 9,927 8,629 5,779 9,927 5,779
Income taxes 1,571 2,194 682 1,571 682
Net income 4,175 4,652 1,778 4,175 1,778
PER COMMON SHARE
Earnings per share - basic $ 0.53 $ 0.59 $ 0.29 $ 0.53 $ 0.29
Earnings per share - diluted 0.53 0.59 0.29 0.53 0.29
Cash dividends declared 0.23 0.23 0.23 0.23 0.23
Book value per share 19.80 19.58 17.77 19.80 17.77
Book value per share - tangible (a) 14.00 13.86 13.92 14.00 13.92
Closing market price 21.30 19.49 22.51 21.30 22.51
FINANCIAL RATIOS
Return on average assets 1.27 % 1.42 % 0.85 % 1.27 % 0.85 %
Return on average equity 10.80 12.28 6.51 10.80 6.51
Return on average tangible equity (b) 16.70 18.77 8.64 16.70 8.64
Average equity to average assets 11.79 11.59 13.03 11.79 13.03
Net interest margin, taxable equivalent 4.65 5.27 3.66 4.65 3.66
Efficiency ratio 61.65 49.57 64.16 61.65 64.16
Effective tax rate 27.34 32.05 27.72 27.34 27.72
PERIOD-END BALANCES
Securities $ 343,395 $ 339,385 $ 233,379 $ 343,395 $ 233,379
Loans held for sale 3,774 6,330 1,309 3,774 1,309
Loans, net of unearned income 816,471 824,758 516,629 816,471 516,629
Goodwill and other intangibles 45,400 44,640 23,694 45,400 23,694
Assets 1,323,260 1,304,522 845,238 1,323,260 845,238
Assets - tangible (a) 1,277,860 1,259,882 821,544 1,277,860 821,544
Deposits 1,074,730 1,058,754 663,483 1,074,730 663,483
Customer repurchase agreements 48,651 45,575 43,871 48,651 43,871
Other short-term borrowings - 3,000 - - -
Long-term borrowings 37,412 37,418 25,069 37,412 25,069
Shareholders' equity 155,024 152,829 109,372 155,024 109,372
Shareholders' equity - tangible (a) 109,624 108,189 85,678 109,624 85,678
AVERAGE BALANCES
Securities $ 333,951 $ 322,018 $ 226,595 $ 333,951 $ 226,595
Loans held for sale 5,500 5,989 1,508 5,500 1,508
Loans, net of unearned income 819,044 819,688 516,610 819,044 516,610
Interest-earning assets 1,190 1,172,965 765,291 1,190 765,291
Goodwill and other intangibles 45,400 44,455 23,750 45,400 23,750
Assets 1,311,794 1,306,699 838,151 1,311,794 838,151
Assets - tangible (a) 1,266,394 1,262,244 814,401 1,266,394 814,401
Interest-bearing deposits 834,972 886,551 542,104 834,972 542,104
Deposits 1,018,253 1,060,013 652,922 1,018,253 652,922
Customer repurchase agreements 47,229 49,257 43,762 47,229 43,762
Other short-term borrowings 115 130 136 115 136
Long-term borrowings 37,421 37,434 27,855 37,421 27,855
Shareholders' equity 154,685 151,496 109,224 154,685 109,224
Shareholders' equity - tangible (a) 109,285 107,041 85,474 109,285 85,474
CAPITAL
Average shares outstanding - basic 7,822,228 7,804,245 6,143,602 7,822,228 6,143,602
Average shares outstanding - diluted 7,833,061 7,811,243 6,152,738 7,833,061 6,152,738
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 10,529 $ 9,086 $ 8,420 $ 10,529 $ 8,420
Provision for loan losses 733 1,972 337 733 337
Charge-offs (340) (906) (571) (340) (571)
Recoveries 769 377 71 769 71
Ending balance $ 11,691 $ 10,529 $ 8,257 $ 11,691 $ 8,257
LOANS
Construction and land development $ 52,446 $ 54,433 $ 36,516 $ 52,446 $ 36,516
Commercial real estate 347,815 351,961 207,502 347,815 207,502
Residential real estate 182,010 179,812 118,603 182,010 118,603
Home equity 95,071 96,195 61,674 95,071 61,674
Commercial and industrial 131,711 134,166 84,702 131,711 84,702
Consumer 7,418 8,191 7,632 7,418 7,632
Total $ 816,471 $ 824,758 $ 516,629 $ 816,471 $ 516,629
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due $ 183 $ 197 $ - $ 183 $ -
Nonaccrual 13,154 13,523 3,417 13,154 3,417
Foreclosed real estate 6,369 5,353 3,532 6,369 3,532
Nonperforming assets $ 19,706 $ 19,073 $ 6,949 $ 19,706 $ 6,949
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans (0.21) % 0.26 % 0.39 % (0.21) % 0.39 %
Nonperforming assets to total assets 1.49 1.46 0.82 1.49 0.82
Nonperforming loans to total loans 1.63 1.66 0.66 1.63 0.66
Allowance for loan losses to total loans 1.43 1.28 1.60 1.43 1.60
Allowance for loan losses to total loans net or fair value loans (e) 2.13 1.96 1.60 2.13 1.60
Allowance for loan losses to
nonperforming loans 87.66 76.74 241.64 87.66 241.64
OTHER DATA
Fiduciary assets at period-end (c) $ 385,660 $ 355,202 $ 380,259 $ 385,660 $ 380,259
Retail brokerage assets at period-end (c) $ 191,446 $ 176,636 $ 50,175 $ 191,446 $ 50,175
Number full-time equivalent employees (d) 316 315 242 316 242
Number of full service offices 25 25 18 25 18
Number of loan production offices 2 1 1 2 1
Number of ATM's 31 31 26 31 26
Notes:
(a) - Excludes goodwill and other intangible assets
(b) - Excludes amortization expense, net of tax, of intangible assets
(c) - Market value
(d) - Average for quarter
(e) - Excludes acquired loans measured at fair value
Net Interest Income Analysis
For the Three Months Ended March 31, 2012 and 2011
(in thousands, except rates)
Interest
Average Balance Income/Expense Yield/Rate
2012 2011 2012 2011 2012 2011
Loans:
Commercial $ 132,100 $ 77,925 $ 1,811 $ 880 5.50 % 4.52 %
Real estate 673,876 432,688 11,118 5,695 6.60 5.26
Consumer 13,068 7,505 227 136 6.97 7.25
Total loans 819,044 518,118 13,156 6,711 6.43 5.18
Securities:
Federal agencies & GSE 40,551 43,345 162 323 1.60 2.98
Mortgage-backed & CMOs 99,714 59,297 529 490 2.12 3.31
State and municipal 185,331 117,916 1,976 1,408 4.26 4.78
Other 8,355 6,037 94 58 4.50 3.84
Total securities 333,951 226,595 2,761 2,279 3.31 4.02
Deposits in other banks 31,619 20,578 10 70 0.13 1.36
Total interest-earning assets 1,184,614 765,291 15,927 9,060 5.38 4.74
Non-earning assets 127,180 72,860
Total assets $ 1,311,794 $ 838,151
Deposits:
Demand $ 170,481 $ 96,698 56 18 0.13 0.07
Money market 140,622 63,125 161 83 0.46 0.53
Savings 76,505 62,505 29 21 0.15 0.13
Time 448,934 319,776 1,591 1,458 1.42 1.82
Total deposits 836,542 542,104 1,837 1,580 0.88 1.17
Customer repurchase agreements 47,229 43,762 43 80 0.37 0.73
Other short-term borrowings 115 136 0 0 0.35 0.47
Long-term borrowings 37,421 27,855 290 396 3.10 5.69
Total interest-bearing liabilities 921,307 613,857 2,170 2,056 0.94 1.34
Noninterest bearing demand deposits 183,575 110,818
Other liabilities 52,227 4,252
Shareholders' equity 154,685 109,224
Total liabilities and shareholders' equity $ 1,311,794 $ 838,151
Interest rate spread 4.44 % 3.40 %
Net interest margin 4.65 % 3.66 %
Net interest income (taxable equivalent basis) 13,757 7,004
Less: Taxable equivalent adjustment 585 399
Net interest income $ 13,172 $ 6,605