American National Bankshares Inc. Reports Third Quarter 2012 Earnings

Marketwired

DANVILLE, VA--(Marketwire - Oct 18, 2012) - American National Bankshares Inc. (NASDAQ: AMNB)

  • Q3 net income of $3.6 million and diluted EPS of $0.46
  • Net interest margin of 4.14% for Q3 2012
  • Nonperforming assets 1.08% of total assets
  • Average shareholders' equity of $160 million is 12.32% of average assets 

American National Bankshares Inc. (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced third quarter 2012 net income available to common shareholders of $3,639,000 compared to $4,078,000 for the third quarter of 2011, a $439,000 or 10.77% decrease. Diluted earnings per share were $0.46 for the 2012 quarter compared to $0.52 for the 2011 quarter. This quarterly net income produced for 2012 a return on average assets of 1.12%, a return on average equity of 9.11%, and a return on average tangible equity of 13.69%.

Net income available to common shareholders for the nine months of 2012 was $12,088,000 compared to $6,868,000 for the comparable period of 2011. Basic and diluted earnings per share were $1.54 for the 2012 period compared to $1.02 for the 2011 period.

Earnings for the 2012 quarter and nine month period were favorably impacted by the July 2011 merger between American National and MidCarolina Financial Corporation ("MidCarolina"). Earnings for the comparable 2011 quarter were also favorably impacted by the merger; however the nine month period was negatively impacted by costs associated with the merger.

Financial Performance and Overview
Charles H. Majors, Chairman and Chief Executive Officer, reported, "As we conclude the first year after the merger with MidCarolina and begin our second year, we are focused on the future of community banking and American National. We believe that our bank has all the prerequisites to survive and prosper in the 21st century. Specifically, those requirements are strong capital, high asset quality, state-of-the-art technology and relationship banking.

"At September 30, 2012, American National had $798 million in loans compared to $818 million at September 30, 2011. Over the past year total loans are down $20 million or 2.5%. This is the result of a deliberate strategy to reduce the problem and criticized loan balances brought over from the merger. However, we are pleased to report that, on a standalone basis for the same period, our Virginia market is up approximately $18 million. 

"At September 30, 2012, American National had $1.052 billion in deposits compared to $1.064 billion at September 30, 2011. Over the past year total deposits are down $12 million or 1.1%. This is primarily the result of a planned strategy to reduce wholesale funding since the merger. One of our strategic goals is growing deposit market share through increases in core deposits.

"Our earnings for the third quarter have been good, over $3.6 million. This is down from $4.1 million in the same quarter of 2011. Most of this change has been driven by declining yields in earning assets. Loans earned 5.65% in the 2012 quarter, compared to 6.04% in the 2011 quarter. Investment yields declined also; we earned 3.27% in the 2012 quarter, compared to 3.75% in the 2011 quarter. Our net interest margin was 4.14% for the 2012 quarter compared to 4.41% for the 2011 quarter.

"A large portion of our earnings were driven by the merger with MidCarolina. Approximately $1,281,000 of pretax income for the third quarter of 2012 was directly related to various ongoing categorical fair value adjustments, the vast majority of which results from the loan portfolio purchase discount.

"As we expected, the favorable earnings impact of the merger and the related fair value accounting is decreasing rapidly quarter to quarter. This is normal in the context of current rules for merger accounting."

Majors concluded, "As we move forward, we are continuing to seek high quality organic growth in all our markets and, at the same time, preparing American National for any strategic acquisition opportunities that may arise in the next few years. The current economic and regulatory environment, notably implementation of Dodd-Frank and the potential implementation of Basel III, is adding significantly to the challenges faced by smaller community banks. We expect that these macro-level forces will be the catalyst for a wave of merger and acquisition opportunities in our industry over the next few years. Therefore, we are building and improving an infrastructure that will allow us to grow and prosper in any regulatory and economic environment." 

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

For the quarter ended September 30, 2012, average shareholders' equity was 12.32% of average assets.

Book value per common share was $20.66 at September 30, 2012, compared to $19.40 at September 30, 2011.

Tangible book value per common share was $15.03 at September 30, 2012, compared to $13.65 at September 30, 2011.

Credit Quality Measurements
Non-performing assets ($7.8 million of non-performing loans and $6.3 million of foreclosed real estate) represented 1.08% of total assets at September 30, 2012, compared to 1.48% at September 30, 2011. 

Annualized net charge offs to average loans were 22 basis points (0.22%) for the 2012 third quarter, compared to nine basis points (0.09%) for the same quarter in 2011.

The allowance for loan losses as a percentage of total loans was 1.50% at September 30, 2012 compared to 1.11% at September 30, 2011.

Net Interest Income
Net interest income before provision for loan losses decreased to $11,500,000 in the third quarter of 2012 from $12,343,000 in third quarter of 2011, a decrease of $843,000 or 6.8%. 

For the 2012 quarter, the net interest margin was 4.14% compared to 4.41% for the same quarter in 2011, a decrease of 27 basis points (0.27%). This decline was mostly driven by falling yields on earnings assets and only partially mitigated by reduced costs of interest bearing liabilities.

Noninterest Income
Noninterest income totaled $2,690,000 in the third quarter of 2012, compared with $2,698,000 in the third quarter of 2011, a nominal decrease of $8,000 or 0.3%. Mortgage banking income increased to $615,000, up from $374,000 for the 2011 quarter, a 64.4% increase. This income increase was offset by declines in service charges and overdraft fees.

Noninterest Expense
Noninterest expense totaled $8,880,000 in the third quarter of 2012, compared to $8,564,000 in the third quarter of 2011, an increase of $316,000 or 3.7%. Most of this change was related to personnel costs resulting from an increase in the number of full time equivalent employees, increased health insurance, and salary continuation agreements related to former MidCarolina employees.

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, Va., 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 $580 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   2012     2011  
                 
Cash and due from banks   $ 25,740     $ 23,450  
Interest-bearing deposits in other banks     41,900       30,086  
                 
Securities available for sale, at fair value     327,994       311,517  
Securities held to maturity     -       2,383  
  Total securities     327,994       313,900  
                 
Restricted stock, at cost     5,284       6,404  
Loans held for sale     8,118       3,359  
                 
Loans     797,818       817,858  
  Less allowance for loan losses     (11,998 )     (9,086 )
    Net Loans     785,820       808,772  
                 
Premises and equipment, net     24,885       26,263  
Other real estate owned, net     6,259       5,920  
Goodwill     39,043       37,709  
Core deposit intangibles, net     5,081       7,142  
Bank owned life insurance     13,380       12,948  
Accrued interest receivable and other assets     22,203       29,186  
                 
    Total assets   $ 1,305,707     $ 1,305,139  
                 
                 
Liabilities                
  Demand deposits -- noninterest-bearing   $ 215,012     $ 170,398  
  Demand deposits -- interest-bearing     152,706       188,480  
  Money market deposits     164,266       199,172  
  Savings deposits     78,665       72,428  
  Time deposits     441,778       433,999  
    Total deposits     1,052,427       1,064,477  
                 
  Customer repurchase agreements     45,761       43,758  
  Long-term borrowings     10,111       10,238  
  Trust preferred capital notes     27,292       27,190  
  Accrued interest payable and other liabilities     8,071       8,115  
    Total liabilities     1,143,662       1,153,778  
                 
Shareholders' equity                
  Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding at September 30, 2012 and 1,000,000 outstanding at September 30, 2011    
-
     
5,000
 
  Common stock, $1 par, 20,000,000 shares authorized, 7,843,221 shares outstanding at September 30, 2012 and 7,802,976 shares outstanding at September 30, 2011    
7,843
     
7,803
 
  Capital in excess of par value     57,045       56,094  
  Retained earnings     88,478       77,092  
  Accumulated other comprehensive income, net     8,679       5,372  
    Total shareholders' equity     162,045       151,361  
                 
    Total liabilities and shareholders' equity   $ 1,305,707     $ 1,305,139  
                 
                 
                       
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  
    2012     2011     2012   2011  
  Interest and Dividend Income:                              
  Interest and fees on loans   $ 11,421     $ 12,510     $ 37,224   $ 25,807  
  Interest and dividends on securities:                              
    Taxable     995       1,192       3,130     3,446  
    Tax-exempt     1,059       1,014       3,218     2,557  
    Dividends     52       35       155     88  
  Other interest income     19       28       47     112  
      Total interest and dividend income     13,546       14,779       43,774     32,010  
                               
Interest Expense:                              
  Interest on deposits     1,725       2,079       5,291     5,246  
  Interest on short-term borrowings     33       82       127     244  
  Interest on long-term borrowings     84       86       252     144  
  Interest on trust preferred capital notes     204       189       616     829  
      Total interest expense     2,046       2,436       6,286     6,463  
                               
Net Interest Income     11,500       12,343       37,488     25,547  
  Provision for loan losses     333       525       1,799     1,198  
                               
Net Interest Income After Provision for Loan Losses     11,167       11,818       35,689     24,349  
                               
Noninterest Income:                              
  Trust fees     926       921       2,774     2,727  
  Service charges on deposit accounts     414       575       1,315     1,396  
  Other fees and commissions     421       429       1,323     1,083  
  Mortgage banking income     615       374       1,665     792  
  Securities gains (losses), net     -       -       160     (18 )
  Other     314       399       1,487     677  
      Total noninterest income     2,690       2,698       8,724     6,657  
                               
Noninterest Expense:                              
  Salaries     3,933       3,676       11,853     8,707  
  Employee benefits     780       731       2,657     1,896  
  Occupancy and equipment     929       916       2,942     2,311  
  FDIC assessment     84       94       530     496  
  Bank franchise tax     173       206       538     557  
  Core deposit intangible amortization     421       545       1,514     734  
  Foreclosed real estate, net     412       (32 )     430     490  
  Merger related expenses     (30 )     390       19     1,534  
  Other     2,178       2,038       7,157     4,646  
      Total noninterest expense     8,880       8,564       27,640     21,371  
                               
Income Before Income Taxes     4,977       5,952       16,773     9,635  
Income Taxes     1,338       1,823       4,685     2,716  
Net Income     3,639       4,129       12,088     6,919  
Dividends on preferred stock     -       51       -     51  
Net income available to common shareholders   $ 3,639     $ 4,078     $ 12,088   $ 6,868  
                               
Net Income Per Common Share:                              
  Basic   $ 0.46     $ 0.52     $ 1.54   $ 1.02  
  Diluted   $ 0.46     $ 0.52     $ 1.54   $ 1.02  
Average Common Shares Outstanding:                              
  Basic     7,838,314       7,800,614       7,830,928     6,705,607  
  Diluted     7,855,537       7,806,668       7,846,659     6,712,960  
                               
                               
 
American National Bankshares Inc. and Subsidiaries
Financial Highlights               
                               
(In thousands, except share, ratio and nonfinancial data, unaudited)                       
    3rd Qtr     2nd Qtr     3rd Qtr     YTD     YTD  
    2012     2012     2011     2012     2011  
EARNINGS                                        
  Interest income   $ 13,546     $ 14,886     $ 14,779     $ 43,774     $ 32,010  
  Interest expense     2,046       2,070       2,436       6,286       6,463  
  Net interest income     11,500       12,816       12,343       37,488       25,547  
  Provision for loan losses     333       733       525       1,799       1,198  
  Noninterest income     2,690       2,800       2,698       8,724       6,657  
  Noninterest expense     8,880       8,833       8,564       27,640       21,371  
  Income taxes     1,338       1,776       1,823       4,685       2,716  
  Net income     3,639       4,274       4,129       12,088       6,919  
                                         
PER COMMON SHARE                                        
  Earnings per share - basic   $ 0.46     $ 0.55     $ 0.52     $ 1.54     $ 1.02  
  Earnings per share - diluted     0.46       0.54       0.52       1.54       1.02  
  Cash dividends declared     0.23       0.23       0.23       0.69       0.69  
  Book value per share     20.66       20.22       19.40       20.66       19.40  
  Book value per share - tangible (a)     15.03       14.49       13.65       15.03       13.65  
  Closing market price     22.59       23.56       18.00       22.59       18.00  
                                         
FINANCIAL RATIOS                                        
  Return on average assets     1.12 %     1.31 %     1.26 %     1.23 %     0.92 %
  Return on average equity     9.11       10.86       11.08       10.24       7.49  
  Return on average tangible equity (b)     13.69       16.62       17.24       15.65       10.73  
  Average equity to average assets     12.32       12.03       11.40       12.05       12.33  
  Net interest margin, taxable equivalent     4.14       4.57       4.41       4.47       3.98  
  Efficiency ratio     62.00       55.56       57.03       58.20       63.24  
  Effective tax rate     26.88       29.36       30.63       27.93       28.19  
                                         
PERIOD-END BALANCES                                        
  Securities   $ 333,278     $ 340,791     $ 320,304     $ 333,278     $ 320,304  
  Loans held for sale     8,118       9,215       3,359       8,118       3,359  
  Loans, net of unearned income     797,818       808,069       817,858       797,818       817,858  
  Goodwill and other intangibles     44,124       44,854       44,851       44,124       44,851  
  Assets     1,305,707       1,290,892       1,305,139       1,305,707       1,305,139  
  Assets - tangible (a)     1,261,583       1,246,038       1,260,288       1,261,583       1,260,288  
  Deposits     1,052,427       1,042,485       1,064,477       1,052,427       1,064,477  
  Customer repurchase agreements     45,761       46,113       43,758       45,761       43,758  
  Long-term borrowings     37,403       37,409       37,428       37,403       37,428  
  Shareholders' equity     162,045       158,424       151,361       162,045       151,361  
  Shareholders' equity - tangible (a)     117,921       113,570       106,510       117,921       106,510  
                                         
AVERAGE BALANCES                                        
  Securities   $ 323,555     $ 335,996     $ 296,095     $ 326,227     $ 253,059  
  Loans held for sale     8,237       5,819       2,641       6,525       2,048  
  Loans, net of unearned income     802,213       814,042       827,720       811,731       619,812  
  Interest-earning assets     1,166,572       1,173,487       1,171,982       1,171,774       904,023  
  Goodwill and other intangibles     44,561       45,214       44,437       45,027       30,688  
  Assets     1,297,698       1,308,384       1,306,796       1,306,104       999,219  
  Assets - tangible (a)     1,253,137       1,263,170       1,262,359       1,261,077       968,531  
  Interest-bearing deposits     839,902       854,673       896,873       839,210       664,091  
  Deposits     1,044,434       1,054,427       1,067,491       1,044,656       797,099  
  Customer repurchase agreements     46,297       48,742       45,356       46,297       45,452  
  Other short-term borrowings     -       1,878       2       -       45  
  Long-term borrowings     37,413       37,419       37,439       37,413       28,820  
  Shareholders' equity     159,868       157,390       149,033       157,323       123,184  
  Shareholders' equity - tangible (a)     115,307       112,176       104,596       112,296       92,496  
                                         
CAPITAL                                        
  Average shares outstanding - basic     7,838,314       7,832,162       7,800,614       7,830,928       6,705,607  
  Average shares outstanding - diluted     7,855,537       7,849,142       7,806,668       7,846,659       6,712,960  
                                         
ALLOWANCE FOR LOAN LOSSES                                        
  Beginning balance   $ 12,099     $ 11,691     $ 8,744     $ 10,529     $ 8,420  
  Provision for loan losses     333       733       525       1,799       1,198  
  Charge-offs     (614 )     (728 )     (252 )     (1,682 )     (957 )
  Recoveries     180       403       69       1,352       425  
  Ending balance   $ 11,998     $ 12,099     $ 9,086     $ 11,998     $ 9,086  
                                         
LOANS                                        
  Construction and land development   $ 50,688     $ 50,913     $ 57,111     $ 50,688     $ 57,111  
  Commercial real estate     356,692       354,441       346,715       356,692       346,715  
  Residential real estate     162,404       170,893       174,493       162,404       174,493  
  Home equity     95,008       95,522       99,727       95,008       99,727  
  Commercial and industrial     126,339       128,846       131,704       126,339       131,704  
  Consumer     6,687       7,454       8,108       6,687       8,108  
  Total   $ 797,818     $ 808,069     $ 817,858     $ 797,818     $ 817,858  
                                         
NONPERFORMING ASSETS AT PERIOD-END                                        
  Nonperforming loans:                                        
    90 days past due   $ -     $ -     $ -     $ -     $ -  
    Nonaccrual     7,815       7,995       13,455       7,815       13,455  
  Foreclosed real estate     6,259       4,731       5,920       6,259       5,920  
  Nonperforming assets   $ 14,074     $ 12,726     $ 19,375     $ 14,074     $ 19,375  
                                         
ASSET QUALITY RATIOS                                        
  Annualized net chargeoffs to average loans     0.22 %     0.16 %     0.09 %     0.05 %     0.11 %
  Nonperforming assets to total assets     1.08       0.99       1.48       1.08       1.48  
  Nonperforming loans to total loans     0.98       0.99       1.65       0.98       1.65  
  Allowance for loan losses to total loans     1.50       1.50       1.11       1.50       1.11  
  Allowance for loan losses to nonperforming loans     153.53       151.33       67.53       153.53       67.53  
                                         
OTHER DATA                                        
  Fiduciary assets at period-end (c)   $ 391,055     $ 374,562     $ 340,941     $ 391,055     $ 340,941  
  Retail brokerage assets at period-end (c)   $ 197,434     $ 191,577     $ 149,284     $ 197,434     $ 149,284  
  Number full-time equivalent employees (d)     318       315       306       318       306  
  Number of full service offices     25       25       25       25       25  
  Number of loan production offices     2       2       1       2       1  
  Number of ATM's     31       31       31       31       31  
                                         
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
   
   
Net Interest Income Analysis
For the Three Months Ended September 30, 2012 and 2011
(in thousands, except rates)
 
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2012   2011   2012   2011   2012     2011  
Loans:                                    
  Commercial   $ 126,701   $ 136,204   $ 1,598   $ 1,603   5.00 %   4.67 %
  Real estate     676,905     685,628     9,743     10,778   5.76     6.29  
  Consumer     6,844     8,529     119     163   6.90     7.58  
     Total loans     810,450     830,361     11,460     12,544   5.65     6.04  
                                     
Securities:                                    
  Federal agencies     36,181     32,448     118     186   1.30     2.29  
  Mortgage-backed & CMOs     92,708     87,785     472     615   2.04     2.80  
  State and municipal     180,820     168,134     1,933     1,896   4.28     4.51  
  Other     13,846     7,728     121     78   3.50     4.04  
    Total securities     323,555     296,095     2,644     2,775   3.27     3.75  
                                     
Deposits in other banks     32,567     45,526     19     28   0.23     0.24  
                                     
  Total interest-earning assets     1,166,572     1,171,982     14,123     15,347   4.84     5.23  
                                     
Non-earning assets     131,126     134,814                        
                                     
    Total assets   $ 1,297,698   $ 1,306,796                        
                                     
Deposits:                                    
  Demand   $ 144,284   $ 171,744     44     132   0.12     0.30  
  Money market     168,212     208,962     126     232   0.30     0.44  
  Savings     78,808     72,088     29     26   0.15     0.14  
  Time     448,598     444,079     1,526     1,689   1.35     1.51  
    Total deposits     839,902     896,873     1,725     2,079   0.81     0.92  
                                     
Customer repurchase agreements     46,297     45,356     33     82   0.28     0.72  
Other short-term borrowings     -     2     -     -   -     0.75  
Long-term borrowings     37,413     37,439     288     275   3.08     2.94  
  Total interest-bearing liabilities     923,612     979,670     2,046     2,436   0.88     0.99  
                                     
Noninterest bearing demand deposits     204,532     170,618                        
Other liabilities     9,686     7,475                        
Shareholders' equity     159,868     149,033                        
    Total liabilities and shareholders' equity   $ 1,297,698   $ 1,306,796                        
                                     
Interest rate spread                           3.96 %   4.24 %
Net interest margin                           4.14 %   4.41 %
                                     
Net interest income (taxable equivalent basis)           12,077     12,911            
Less: Taxable equivalent adjustment                 577     568            
Net interest income               $ 11,500   $ 12,343            
                                     
                                     
 
Net Interest Income Analysis
For the Nine Months Ended September 30, 2012 and 2011
(in thousands, except rates)
                             
            Interest            
    Average Balance   Income/Expense   Yield/Rate  
                             
    2012   2011   2012   2011   2012     2011  
Loans:                                    
  Commercial   $ 129,821   $ 98,121   $ 5,136   $ 3,392   5.29 %   4.62 %
  Real estate     679,375     516,165     31,720     22,093   6.23     5.71  
  Consumer     9,060     7,574     485     419   7.16     7.40  
    Total loans     818,256     621,860     37,341     25,904   6.09     5.56  
                                     
Securities:                                    
  Federal agencies     36,179     37,197     435     765   1.60     2.74  
  Mortgage-backed & CMOs     97,057     67,843     1,487     1,571   2.04     3.09  
  State and municipal     181,393     141,481     5,884     4,889   4.33     4.61  
  Other     11,598     6,538     332     193   3.82     3.94  
    Total securities     326,227     253,059     8,138     7,418   3.33     3.91  
                                     
Deposits in other banks     27,291     29,104     47     112   0.23     0.51  
                                     
  Total interest-earning assets     1,171,774     904,023     45,526     33,434   5.18     4.93  
                                     
Non-earning assets     134,330     95,196                        
                                     
    Total assets   $ 1,306,104   $ 999,219                        
                                     
Deposits:                                    
  Demand   $ 144,284   $ 122,497     154     167   0.14     0.18  
  Money market     168,212     111,801     414     382   0.33     0.46  
  Savings     78,808     66,138     88     69   0.15     0.14  
  Time     447,906     363,655     4,635     4,628   1.38     1.70  
    Total deposits     839,210     664,091     5,291     5,246   0.84     1.06  
                                     
Customer repurchase agreements     46,297     45,452     125     244   0.36     0.72  
Other short-term borrowings     -     45     2     -   -     0.47  
Long-term borrowings     37,413     28,820     868     973   3.09     4.50  
  Total interest-bearing liabilities     922,920     738,408     6,286     6,463   0.91     1.17  
                                     
                                     
Noninterest bearing demand deposits     205,446     133,008                        
Other liabilities     20,415     4,619                        
Shareholders' equity     157,323     123,184                        
    Total liabilities and shareholders' equity   $ 1,306,104   $ 999,219                        
                                     
Interest rate spread                           4.27 %   3.76 %
Net interest margin                           4.47 %   3.98 %
                                     
Net interest income (taxable equivalent basis)           39,240     26,971            
Less: Taxable equivalent adjustment                 1,752     1,424            
Net interest income               $ 37,488   $ 25,547            
                                     
                                     
View Comments (0)