American National Bankshares Inc. Reports Third Quarter 2013 Earnings

DANVILLE, VA--(Marketwired - Oct 17, 2013) - American National Bankshares Inc. ( NASDAQ : AMNB )

  • Q3 net income of $4.2 million and diluted EPS of $0.54
  • Net interest margin of 4.06% for Q3 2013
  • Nonperforming assets 0.67% of total assets
  • Tangible common equity to tangible assets 9.62%

American National Bankshares Inc. ( NASDAQ : AMNB ), parent company of American National Bank and Trust Company, today announced third quarter 2013 net income of $4,243,000 compared to $3,639,000 for the third quarter of 2012, a $604,000 or 16.6% increase. Diluted earnings per share were $0.54 for the 2013 quarter and $0.46 for the comparable 2012 quarter. This quarterly net income produced for 2013 a return on average assets of 1.30%, a return on average equity of 10.40%, and a return on average tangible equity of 14.90%.

Net income for the first nine months of 2013 was $12,604,000 compared to $12,088,000 for the comparable period of 2012, a $516,000 or 4.3% increase. Diluted earnings per share were $1.60 for the 2013 period compared to $1.54 for the 2012 period.

Earnings for the 2013 and 2012 periods were favorably impacted by the July 2011 merger between American National and MidCarolina Financial Corporation ("MidCarolina").

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "We are pleased that over the past year our loan portfolio has seen growth. This is the third consecutive quarter that our loan portfolio has grown, albeit modest growth. The growth was noteworthy because this is the first time since the July 2011 merger with MidCarolina that we've been able to report year-over-year loan growth. The bank's loan growth was driven by its North Carolina market.

"At September 30, 2013, American National had $798,996,000 in loans compared to $797,818,000 at September 30, 2012, an increase of $1,178,000 or 0.15%.

"At September 30, 2013, American National had $1,071,083,000 in deposits compared to $1,052,427,000 at September 30, 2012, an increase of $18,656,000 or 1.8%. This growth is concentrated in transaction accounts, which we consider core deposits. The struggle in this ongoing low, but likely transitioning, rate environment is to continue to grow core deposits, but do it in a cost effective and competitive manner. Our cost of deposits for the third quarter 2013 was 0.64%, down from 0.81% for the third quarter 2012.

"On the income statement side, our earnings for the third quarter were strong at $4,243,000. This is up $604,000 or 16.6% from the same quarter of 2012. On a diluted per share basis, earnings were $0.54 per share for the 2013 quarter compared to $0.46 per share for the 2012 quarter.

"The impact of the fair value accounting from the MidCarolina merger continues to be favorable and significant. We had a pretax benefit of $1,522,000 for the third quarter of 2013, compared to $1,281,000 for the third quarter of 2012. Accretion during the 2013 quarter was favorably impacted by $400,000 in recoveries of loans charged off by MidCarolina prior to the merger. Looking forward, we expect the merger benefit will continue to accrete rapidly to income.

"There was no provision for loan loss expense for the 2013 quarter, which is $333,000 lower than the comparable 2012 quarter. The need for provision expense has been positively impacted by continued improvement in asset quality and significant loan recoveries.

"In noninterest expense, our costs improved $425,000 compared to the comparable quarter of 2012. We realized substantial savings from reductions in full time equivalent employees, which are down 28 (8.8%) over the past year. These reductions were mostly the result of retirements and normal attrition."

Haley concluded, "We are pleased with our third quarter earnings and we are very pleased with the beginning of year-over-year growth in our primary earning asset, loans. As we move to the final quarter of 2013 and look forward to 2014, we continue to focus on our strategic priorities of credit quality with growth."

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

Average shareholders' equity was 12.48% of average assets at September 30, 2013, compared to 12.32% at September 30, 2012.

Book value per common share was $21.03 at September 30, 2013, compared to $20.66 at September 30, 2012.

Tangible book value per common share was $15.63 at September 30, 2013, compared to $15.03 at September 30, 2012.

Tangible common equity to tangible assets was 9.62% at September 30, 2013, compared to 9.35% at September 30, 2012.

Credit Quality Measurements
Non-performing assets, consisting of $4,647,000 of non-performing loans and $4,215,000 of foreclosed real estate, represented 0.67% of total assets at September 30, 2013, compared to 1.08% at September 30, 2012. 

Annualized net charge-offs for the third quarter of 2013 were zero basis points (0.00%) of average loans, compared to net charge-offs of 22 basis points (0.22%) for the third quarter of 2012.

Annualized net (recoveries) charge-offs for the nine-month period ended September 30, 2013, were (0.05%) compared to 0.05% for the comparable period for 2012.

Net Interest Income
Net interest income before provision for loan losses decreased to $11,493,000 in the third quarter of 2013 from $11,500,000 in third quarter of 2012, a decrease of $7,000. 

For the 2013 quarter, the net interest margin was 4.06% compared to 4.14% for the same quarter in 2012, a decrease of eight basis points (0.08%). 

The small decline in net interest income and net interest margin was driven by falling yields on earning assets and lower levels of average outstanding loan balances. It was partially mitigated by higher accretion income and reduced cost of interest bearing liabilities.

Provision expense
Provision expense for the third quarter of 2013 was zero compared to $333,000 for the third quarter of 2012.

The allowance for loan losses as a percentage of total loans was 1.59% at September 30, 2013, compared to 1.50% at September 30, 2012.

Noninterest Income 
Noninterest income totaled $2,767,000 in the third quarter of 2013, compared with $2,690,000 in the third quarter of 2012, an increase of $77,000 or 2.9%.

A variety of factors impacted noninterest income during the quarter. Increased trust income was offset by declines in mortgage banking income. Service charge income increased moderately during the quarter.

Noninterest Expense
Noninterest expense totaled $8,455,000 in the third quarter of 2013, compared to $8,880,000 in the third quarter of 2012, a decrease of $425,000 or 4.8%. 

For the 2013 quarter compared to the 2012 quarter, there were significant cost reductions in personnel expense. Full time equivalent employees were reduced by 28 (8.8%) over the past year through a combination of retirements and normal attrition.

About American National
American National Bankshares Inc. is a multi-state bank holding company with total assets of approximately $1.3 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 $607 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  
             
    September 30  
ASSETS   2013     2012  
                 
Cash and due from banks   $ 24,071     $ 25,740  
Interest-bearing deposits in other banks     54,198       41,900  
                 
Securities available for sale, at fair value     347,618       327,994  
Restricted stock, at cost     4,885       5,284  
Loans held for sale     3,919       8,118  
                 
Loans     798,996       797,818  
  Less allowance for loan losses     (12,684 )     (11,998 )
    Net Loans     786,312       785,820  
                 
Premises and equipment, net     23,982       24,885  
Other real estate owned, net     4,215       6,259  
Goodwill     39,043       39,043  
Core deposit intangibles, net     3,489       5,081  
Bank owned life insurance     14,597       14,137  
Accrued interest receivable and other assets     17,856       21,446  
                 
    Total assets   $ 1,324,185     $ 1,305,707  
                 
                 
Liabilities                
  Demand deposits -- noninterest-bearing   $ 231,583     $ 215,012  
  Demand deposits -- interest-bearing     170,641       152,706  
  Money market deposits     181,559       164,266  
  Savings deposits     85,016       78,665  
  Time deposits     402,284       441,778  
    Total deposits     1,071,083       1,052,427  
                   
  Customer repurchase agreements     44,026       45,761  
  Long-term borrowings     9,983       10,111  
  Trust preferred capital notes     27,394       27,292  
  Accrued interest payable and other liabilities     5,873       8,071  
    Total liabilities     1,158,359       1,143,662  
                 
Shareholders' equity                
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding     -       -  
  Common stock, $1 par, 20,000,000 shares authorized, 7,886,476 shares outstanding at September 30, 2013 and 7,843,221 shares outstanding at September 30, 2012 and     7,886       7,843  
  Capital in excess of par value     57,905       57,045  
  Retained earnings     97,762       88,478  
  Accumulated other comprehensive income, net     2,273       8,679  
    Total shareholders' equity     165,826       162,045  
                   
    Total liabilities and shareholders' equity   $ 1,324,185     $ 1,305,707  
                 
                 
                 
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
    2013   2012   2013   2012
Interest and Dividend Income:                        
  Interest and fees on loans   $ 11,100   $ 11,421   $ 33,853   $ 37,224
  Interest and dividends on securities:                        
    Taxable     845     995     2,574     3,130
    Tax-exempt     1,056     1,059     3,153     3,218
    Dividends     67     52     176     155
  Other interest income     38     19     106     47
      Total interest and dividend income     13,106     13,546     39,862     43,774
                         
Interest Expense:                        
  Interest on deposits     1,338     1,725     4,143     5,291
  Interest on short-term borrowings     3     33     38     127
  Interest on long-term borrowings     82     84     246     252
  Interest on trust preferred capital notes     190     204     567     616
    Total interest expense     1,613     2,046     4,994     6,286
                         
Net Interest Income     11,493     11,500     34,868     37,488
  Provision for loan losses     -     333     294     1,799
                         
Net Interest Income After Provision for Loan Losses     11,493     11,167     34,574     35,689
                         
Noninterest Income:                        
  Trust fees     1,077     926     2,609     2,774
  Service charges on deposit accounts     452     414     1,290     1,315
  Other fees and commissions     471     421     1,393     1,323
  Mortgage banking income     464     615     1,713     1,665
  Securities gains, net     4     -     203     160
  Other     299     314     1,015     1,487
    Total noninterest income     2,767     2,690     8,223     8,724
                         
Noninterest Expense:                        
  Salaries     3,610     3,933     10,552     11,853
  Employee benefits     856     780     2,622     2,657
  Occupancy and equipment     933     929     2,721     2,942
  FDIC assessment     163     84     485     530
  Bank franchise tax     187     173     559     538
  Core deposit intangible amortization     330     421     1,171     1,514
  Foreclosed real estate, net     245     412     681     430
  Other     2,131     2,148     6,410     7,176
    Total noninterest expense     8,455     8,880     25,201     27,640
                         
Income Before Income Taxes     5,805     4,977     17,596     16,773
Income Taxes     1,562     1,338     4,992     4,685
Net Income   $ 4,243   $ 3,639   $ 12,604   $ 12,088
                         
Net Income Per Common Share:                        
  Basic   $ 0.54   $ 0.46   $ 1.60   $ 1.54
  Diluted   $ 0.54   $ 0.46   $ 1.60   $ 1.54
Average Common Shares Outstanding:                        
  Basic     7,877,901     7,838,314     7,867,835     7,830,928
  Diluted     7,892,015     7,855,537     7,878,961     7,846,659
                         
       
       
Net Interest Income Analysis  
For the Three Months Ended September 30, 2013 and 2012  
(in thousands, except rates)  
                             
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2013   2012   2013   2012   2013     2012  
Loans:                                    
  Commercial   $ 126,745   $ 126,701   $ 1,511   $ 1,598   4.73 %   5.00 %
  Real estate     663,539     676,905     9,517     9,743   5.74     5.76  
  Consumer     5,671     6,844     104     119   7.28     6.90  
    Total loans     795,955     810,450     11,132     11,460   5.59     5.65  
                                     
Securities:                                    
  Federal agencies & GSEs     55,543     36,181     126     118   0.91     1.30  
  Mortgage-backed & CMOs     72,505     92,708     322     472   1.78     2.04  
  State and municipal     195,673     180,820     1,945     1,933   3.98     4.28  
  Other     15,861     13,846     116     121   2.93     3.50  
    Total securities     339,582     323,555     2,509     2,644   2.96     3.27  
                                     
Deposits in other banks     54,307     32,567     38     19   0.28     0.23  
                                     
  Total interest-earning assets     1,189,844     1,166,572     13,679     14,123   4.59     4.84  
                                     
Non-earning assets     117,503     131,126                        
                                     
  Total assets   $ 1,307,347   $ 1,297,698                        
                                     
Deposits:                                    
  Demand   $ 163,825   $ 144,284     25     44   0.06     0.12  
  Money market     184,428     168,212     83     126   0.18     0.30  
  Savings     84,390     78,808     17     29   0.08     0.15  
  Time     401,662     448,598     1,213     1,526   1.20     1.35  
    Total deposits     834,305     839,902     1,338     1,725   0.64     0.81  
                                     
Customer repurchase agreements     46,712     46,297     3     33   0.03     0.28  
Long-term borrowings     37,388     37,413     272     288   2.91     3.08  
  Total interest-bearing liabilities     918,405     923,612     1,613     2,046   0.70     0.88  
                                     
Noninterest bearing demand deposits     218,819     204,532                        
Other liabilities     6,993     9,686                        
Shareholders' equity     163,130     159,868                        
                                     
  Total liabilities and shareholders' equity   $ 1,307,347   $ 1,297,698                        
                                     
Interest rate spread                           3.89 %   3.96 %
Net interest margin                           4.06 %   4.14 %
                                     
Net interest income (taxable equivalent basis)                 12,066     12,077            
Less: Taxable equivalent adjustment                 573     577            
Net interest income               $ 11,493   $ 11,500            
...
       
       
       
Net Interest Income Analysis  
For the Nine Months Ended September 30, 2013 and 2012  
(in thousands, except rates)  
                             
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2013   2012   2013   2012   2013     2012  
Loans:                                    
  Commercial   $ 127,592   $ 129,821   $ 4,706   $ 5,136   4.95 %   5.29 %
  Real estate     660,698     679,375     28,927     31,720   5.84     6.23  
  Consumer     5,955     9,060     316     485   7.12     7.16  
    Total loans     794,245     818,256     33,949     37,341   5.70     6.09  
                                     
Securities:                                    
  Federal agencies & GSEs     51,668     36,179     368     435   0.95     1.60  
  Mortgage-backed & CMOs     76,286     97,057     1,040     1,487   1.82     2.04  
  State and municipal     192,113     181,393     5,804     5,884   4.03     4.33  
  Other     13,718     11,598     306     332   2.97     3.82  
    Total securities     333,785     326,227     7,518     8,138   3.00     3.33  
                                     
Deposits in other banks     51,650     27,291     106     47   0.28     0.23  
                                     
  Total interest-earning assets     1,179,680     1,171,774     41,573     45,526   4.70     5.18  
                                     
Non-earning assets     122,390     134,330                        
                                     
    Total assets   $ 1,302,070