U.S. Markets close in 5 hrs 24 mins

American National Bankshares Inc. Reports Fourth Quarter 2018 Earnings

  • Q4 2018 annualized loan growth 8%

  • Q4 2018 net income of $5.0 million

  • 2018 net income $22.6 million

  • Q4 2018 net interest margin of 3.48%

  • Q4 2018 average shareholders’ equity of $218.4 million is 11.78% of average assets

DANVILLE, Va., Jan. 17, 2019 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (“American National”) (Nasdaq: AMNB), parent company of American National Bank and Trust Company, today announced net income for the fourth quarter of 2018 of $5,002,000 compared to $2,120,000 for the fourth quarter of 2017, a $2,882,000 or 135.9% increase. Basic net income per common share was $0.57 for the fourth quarter of 2018 compared to $0.25 for the 2017 quarter. Diluted net income per common share was $0.57 for the fourth quarter of 2018 compared to $0.24 for the 2017 quarter. Net income for the fourth quarter of 2018 produced a return on average assets of 1.08%, a return on average equity of 9.16%, and a return on average tangible equity of 11.63%.

Net income for the year ended December 31, 2018 was $22,579,000 compared to $15,249,000 for 2017, a $7,330,000 or 48.1% increase. Basic net income per common share was $2.60 for 2018 compared to $1.76 for 2017. Diluted net income per common share was $2.59 for 2018 compared to $1.76 for 2017. Net income for 2018 produced a return on average assets of 1.24%, a return on average equity of 10.56%, and a return on average tangible equity of 13.49%.

The enactment of the new federal tax law in late December 2017 negatively affected net income for the 2017 quarter and year. In order to account for the change in income tax rates from 35% to 21%, American National recognized a $2.7 million charge to its deferred tax asset and a corresponding increase in income tax expense in the fourth quarter of 2017.

Beginning in 2018, income tax expense was positively affected by the substantial reduction in the corporate tax rate.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, “We are very pleased to report net income for the quarter of $5.0 million, an increase of 135.9% over the comparable quarter of 2017. Net income for 2018 was $22.6 million, an increase of 48.1% over 2017.

“Earnings were positively impacted for the quarter and the year by greater net interest income, lower loan loss provision, and lower corporate income taxes.

“Net interest income has increased with greater earning assets, mostly loans, and increasing market interest rates.

“Earnings have also increased due to a significant reduction in loan loss provision. Our need for loan loss provision was reduced by three factors: loan balances, continued strong asset quality metrics, and improvements in various qualitative factors we use in computing our allowance for loan losses.

“Lastly, benefiting earnings was the substantial decrease in our corporate tax rate. The tax cut, enacted in December 2017, reduced our statutory rate to 21% from 35%.

“Earnings for the fourth quarter 2018 were negatively impacted by unrealized losses on equity securities of $270,000. Accounting for fair value changes in equity securities changed in 2018 and unrealized gains and losses are now reflected in the income statement.

“Further, earnings were negatively impacted for the fourth quarter of 2018 and for the year by merger related expenses. Our pending acquisition of HomeTown Bank is generating significant non-recurring expense, $872,000 of which hit the fourth quarter.

“The balance sheet grew last year. Year over year growth in loans was $21.4 million or 1.6%. Most of this growth occurred in the fourth quarter of 2018 where loans increased $26.3 million or 2.0%. Growth was muted in most of 2018 because of over $40 million in large commercial loan payoffs during the year. Current expectations for 2019 are for growth in loans at a moderate pace, probably in the mid-single digit percentage range.

“Year over year growth in deposits was $31.5 million or 2.1%. This growth is mostly in non-maturity core deposits (non-interest bearing accounts), which increased $41.5 million or 10.5%. Our cost of interest bearing deposits for the fourth quarter was 0.83%, compared to 0.61% for the 2017 quarter. Our net interest margin for the current quarter was 3.48%, up two basis points from the prior year quarter, due in large portion to increasing yields on loans. Protecting our net interest margin is a continuing strategic imperative.

“We have noted that many stocks in the financial sector, including American National, have declined substantially and, in many cases, disproportionately, over the last several months. American National approved a stock repurchase program in January 2018 authorizing the repurchase of up to 300,000 shares over the following two years. We will revisit our intention with respect to the plan, subsequent to completion of the merger with HomeTown Bank, based on then current facts and circumstances.”

Haley concluded, “This is an exciting time for American National. Our employees are working diligently with their new friends at HomeTown Bank to consummate our merger in a few months. The transaction will give American National the largest deposit market share of any community bank in the Roanoke, Virginia market. Our earnings for 2018 were good and we’re expecting 2019, excluding merger related costs, and 2020 will be strong. Balance sheet growth took an uptick late in 2018, but sets the stage for strong expectations in 2019. Our operating philosophy will continue to focus on asset quality, volume and rate – in that order.”

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

For the quarter ended December 31, 2018, average shareholders’ equity was 11.78% of average assets, compared to 11.64% for the quarter ended December 31, 2017.

Book value per common share was $25.52 at December 31, 2018, compared to $24.13 at December 31, 2017.

Tangible book value per common share was $20.38 at December 31, 2018, compared to $18.92 at December 31, 2017.

Credit Quality Measurements
Non-performing assets composed of ($1,090,000 of non-performing loans, $72,000 of 90 day past due and accruing loans, and $869,000 of other real estate owned) represented 0.11% of total assets at December 31, 2018, compared to 0.21% at December 31, 2017.

Annualized net charge offs to average loans were 23 basis points for the fourth quarter of 2018, compared to six basis points for the same quarter in 2017. Net charge offs for 2018 were five basis points, compared to two basis points for 2017.

Other real estate owned was $869,000 at December 31, 2018, compared to $1,225,000 at December 31, 2017, a decrease of $356,000 or 29.1%.

Merger Related Financial Impact
The acquisition accounting adjustments related to our 2011 and 2015 acquisitions have had and continue to have a positive impact on net interest income and income before income taxes. The impact of these adjustments is summarized below (dollars in thousands):

For the quarter ended December 31,

2018

2017

Net Interest Income

$

286

$

529

Income Before Income Taxes

$

231

$

449

For the year ended December 31,

2018

2017

Net Interest Income

$

1,288

$

2,114

Income Before Income Taxes

$

1,023

$

1,586

The fourth quarter of 2018 includes $143,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $348,000 for the comparable quarter of 2017. For 2018, cash basis accretion income was $688,000, compared to $968,000 for 2017.

The positive financial impact of these merger related accounting adjustments will continue to decline in upcoming quarters.

Net Interest Income
Net interest income before the provision for loan losses increased to $15,012,000 in the fourth quarter of 2018 from $14,363,000 in the fourth quarter of 2017, an increase of $649,000 or 4.5%.

For the 2018 quarter, the net interest margin was 3.48% compared to 3.46% for the same quarter in 2017, an increase of 0.02%.

The major drivers affecting margin were:

  • Positively affecting margin was a $41.4 million (2.4%) increase in average earning assets, at a 19 basis point higher yield.

  • Positively affecting margin was a $30.6 million (7.4%) increase in average noninterest bearing deposits.

  • Negatively affecting margin was a $7.6 million (0.7%) increase in the average balance of interest bearing deposits at a 22 basis point higher cost.

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the fourth quarter of 2018 was a negative $6,000 compared to a negative $74,000 for the fourth quarter of 2017. The fourth quarter 2018 negative provision was related to adjustments on the specific reserves for several impaired loans.

The allowance for loan losses as a percentage of total loans was 0.94% at December 31, 2018 compared to 1.02% at December 31, 2017.

Net loans outstanding increased during the fourth quarter by $27.1 million or 2.1%. However, the need for additions to the allowance for loan losses was reduced by improvement in various qualitative factors used in the determination of the allowance, notably national and local economic conditions, and loan volume.

Noninterest Income
Noninterest income totaled $2,998,000 in the fourth quarter of 2018, compared with $3,804,000 in the fourth quarter of 2017, a decrease of $806,000 or 21.2%. The major drivers of this decrease were mortgage banking and securities gains and losses.

Mortgage banking income was down $235,000 or 38.8%, primarily due to lower demand.

Securities gains and losses were down $492,000 or 221.6%, almost entirely related to the change in accounting for equity investments requiring unrealized gains and losses to be reflected in the income statement.

Noninterest Expense
Noninterest expense totaled $11,638,000 in the fourth quarter of 2018, compared to $11,021,000 in the fourth quarter of 2017, an increase of $617,000 or 5.6%.

The primary driver of this increase was merger related expenses related to the pending acquisition of HomeTown Bank. These nonrecurring expenses totaled $872,000 in the fourth quarter of 2018.

About American National
American National is a multi-state bank holding company with total assets of approximately $1.9 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 Virginia and North Carolina with 24 banking offices and two loan production offices. American National Bank also manages an additional $769 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.

Forward-Looking Statements
Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. These include statements as to the anticipated performance of American National and the benefits of the proposed merger with HomeTown Bank, including future financial and operating results, cost savings and enhanced revenues that may be realized from the merger as well as other statements of expectations regarding the merger and any other statements regarding future results or expectations. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National and the resulting company after the proposed merger with HomeTown Bank, include but are not limited to: (1) the businesses of American National and/or HomeTown Bank may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe; (3) revenues following the merger may be lower than expected; (4) customer and employee relationships and business operations may be disrupted by the merger; (5) the ability to obtain required regulatory and shareholder approvals, and the ability to complete the merger on the expected timeframe may be more difficult, time-consuming or costly than expected; (6) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (7) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in the companies’ respective market areas; (8) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (9) accounting principles, policies, and guidelines; and (10) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:

William W. Traynham, Chief Financial Officer

434-773-2242

traynhamw@amnb.com


American National Bankshares Inc.

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

Unaudited

December 31

Assets

2018

2017

Cash and due from banks

$

29,587

$

28,594

Interest-bearing deposits in other banks

34,668

23,883

Equity securities, at fair value

1,830

-

Securities available for sale, at fair value

332,653

321,337

Restricted stock, at cost

5,247

6,110

Loans held for sale

640

1,639

Loans

1,357,476

1,336,125

Less allowance for loan losses

(12,805

)

(13,603

)

Net Loans

1,344,671

1,322,522

Premises and equipment, net

26,675

25,901

Other real estate owned, net

869

1,225

Goodwill

43,872

43,872

Core deposit intangibles, net

926

1,191

Bank owned life insurance

18,941

18,460

Accrued interest receivable and other assets

22,287

21,344

Total assets

$

1,862,866

$

1,816,078

Liabilities

Demand deposits -- noninterest-bearing

$

435,828

$

394,344

Demand deposits -- interest-bearing

234,621

226,914

Money market deposits

401,461

403,024

Savings deposits

132,360

126,786

Time deposits

361,957

383,658

Total deposits

1,566,227

1,534,726

Short-term borrowings:

Customer repurchase agreements

35,243

10,726

Other short-term borrowings

-

24,000

Junior subordinated debt

27,927

27,826

Accrued interest payable and other liabilities

10,927

10,083

Total liabilities

1,640,324

1,607,361

Shareholders' equity

Preferred stock, $5 par, 2,000,000 shares authorized,

none outstanding

-

-

Common stock, $1 par, 20,000,000 shares authorized,

8,720,337 shares outstanding at December 31, 2018 and

8,650,547 shares outstanding at December 31, 2017

8,668

8,604

Capital in excess of par value

78,172

76,179

Retained earnings

141,537

127,010

Accumulated other comprehensive loss, net

(5,835

)

(3,076

)

Total shareholders' equity

222,542

208,717

Total liabilities and shareholders' equity

$

1,862,866

$

1,816,078

American National Bankshares Inc.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

Unaudited

Three Months Ended

Twelve Months Ended

December 31

December 31

2018

2017

2018

2017

Interest and Dividend Income:

Interest and fees on loans

$

15,481

$

14,426

$

59,966

$

55,276

Interest and dividends on securities:

Taxable

1,674

1,271

6,106

4,666

Tax-exempt

298

439

1,502

2,043

Dividends

81

79

321

319

Other interest income

357

265

873

734

Total interest and dividend income

17,891

16,480

68,768

63,038

Interest Expense:

Interest on deposits

2,340

1,713

8,086

5,794

Interest on short-term borrowings

145

79

186

173

Interest on long-term borrowings

-

53

-

296

Interest on junior subordinated debt

394

272

1,402

1,028

Total interest expense

2,879

2,117

9,674

7,291

Net Interest Income:

15,012

14,363

59,094

55,747

Provision for loan losses

(6

)

(74

)

(103

)

1,016

Net Interest Income After Provision

for Loan Losses

15,018

14,437

59,197

54,731

Noninterest Income:

Trust fees

908

1,008

3,783

3,926

Service charges on deposit accounts

646

608

2,455

2,426

Other fees and commissions

660

619

2,637

2,471

Mortgage banking income

370

605

1,862

2,208

Securities gains (losses), net

(270

)

222

123

812

Brokerage fees

192

226

795

829

Income from Small Business Investment Companies

161

118

637

236

Gains (losses) on premises and equipment, net

(6

)

7

60

344

Other

337

391

922

975

Total noninterest income

2,998

3,804

13,274

14,227

Noninterest Expense:

Salaries

5,132

5,225

20,509

19,829

Employee benefits

1,048

1,045

4,370

4,274

Occupancy and equipment

1,081

1,120

4,378

4,487

FDIC assessment

125

137

537

538

Bank franchise tax

191

277

1,054

1,072

Core deposit intangible amortization

55

80

265

528

Data processing

382

550

1,691

2,014

Software

313

291

1,279

1,144

Other real estate owned, net

21

130

122

303

Merger related expenses

872

-

872

-

Other

2,418

2,166

9,169

8,694

Total noninterest expense

11,638

11,021

44,246

42,883

Income Before Income Taxes

6,378

7,220

28,225

26,075

Income Taxes

1,376

5,100

5,646

10,826

Net Income

$

5,002

$

2,120

$

22,579

$

15,249

Net Income Per Common Share:

Basic

$

0.57

$

0.25

$

2.60

$

1.76

Diluted

$

0.57

$

0.24

$

2.59

$

1.76

Average Common Shares Outstanding:

Basic

8,717,572

8,648,494

8,698,014

8,641,717

Diluted

8,723,388

8,668,765

8,708,647

8,660,628

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

At or for the Year Ended

4th Qtr

3rd Qtr

4th Qtr

December 31,

2018

2018

2017

2018

2017

EARNINGS

Interest income

$

17,891

$

17,217

$

16,480

$

68,768

$

63,038

Interest expense

2,879

2,466

2,117

9,674

7,291

Net interest income

15,012

14,751

14,363

59,094

55,747

Provision for loan losses

(6

)

(23

)

(74

)

(103

)

1,016

Noninterest income

2,998

3,380

3,804

13,274

14,227

Noninterest expense

11,638

10,904

11,021

44,246

42,883

Income taxes

1,376

1,465

5,100

5,646

10,826

Net income

5,002

5,785

2,120

22,579

15,249

PER COMMON SHARE

Income per share - basic

$

0.57

$

0.66

$

0.25

$

2.60

$

1.76

Income per share - diluted

0.57

0.66

0.24

2.59

1.76

Cash dividends paid

0.25

0.25

0.25

1.00

0.97

Book value per share

25.52

24.79

24.13

25.52

24.13

Book value per share - tangible (a)

20.38

19.65

18.92

20.38

18.92

Closing market price

29.31

39.00

38.30

29.31

38.30

FINANCIAL RATIOS

Return on average assets

1.08

%

1.28

%

0.47

%

1.24

%

0.87

%

Return on average equity

9.16

10.76

4.00

10.56

7.34

Return on average tangible equity (b)

11.63

13.70

5.21

13.49

9.59

Average equity to average assets

11.78

11.87

11.64

11.70

11.82

Tangible equity to tangible assets (a)

9.78

9.72

9.24

9.78

9.24

Net interest margin, taxable equivalent

3.48

3.51

3.46

3.49

3.50

Efficiency ratio (c)

58.45

59.65

59.93

59.57

60.89

Effective tax rate

21.57

20.21

70.64

20.00

41.52

PERIOD-END BALANCES

Securities

$

339,730

$

303,103

$

327,447

$

339,730

$

327,447

Loans held for sale

640

1,934

1,639

640

1,639

Loans, net of unearned income

1,357,476

1,331,153

1,336,125

1,357,476

1,336,125

Goodwill and other intangibles

44,798

44,853

45,063

44,798

45,063

Assets

1,862,866

1,806,491

1,816,078

1,862,866

1,816,078

Assets - tangible (a)

1,818,068

1,761,638

1,771,015

1,818,068

1,771,015

Deposits

1,566,227

1,523,107

1,534,726

1,566,227

1,534,726

Customer repurchase agreements

35,243

29,104

10,726

35,243

10,726

Other short-term borrowings

-

-

24,000

-

24,000

Long-term borrowings

27,927

27,902

27,826

27,927

27,826

Shareholders' equity

222,542

216,066

208,717

222,542

208,717

Shareholders' equity - tangible (a)

177,744

171,213

163,654

177,744

163,654

AVERAGE BALANCES

Securities (d)

$

332,230

$

335,320

$

304,254

$

330,982

$

301,377

Loans held for sale

1,201

3,282

4,269

2,285

3,185

Loans, net of unearned income

1,335,469

1,327,060

1,301,833

1,330,582

1,262,264

Interest-earning assets

1,736,453

1,693,912

1,695,091

1,709,283

1,631,853

Goodwill and other intangibles

44,831

44,887

45,109

44,926

45,287

Assets

1,854,492

1,811,631

1,820,499

1,827,658

1,758,012

Assets - tangible (a)

1,809,661

1,766,744

1,775,390

1,782,732

1,712,725

Interest-bearing deposits

1,116,911

1,118,929

1,109,286

1,134,512

1,061,519

Deposits

1,558,864

1,542,945

1,520,665

1,556,039

1,454,182

Customer repurchase agreements

37,905

11,896

42,540

18,401

46,335

Other short-term borrowings

-

2,176

951

1,149

3,158

Long-term borrowings

27,914

27,886

34,331

27,874

36,887

Shareholders' equity

218,430

215,054

211,864

213,821

207,807

Shareholders' equity - tangible (a)

173,599

170,167

166,755

168,895

162,520

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

At or for the Year Ended

4th Qtr

3rd Qtr

4th Qtr

December 31,

2018

2018

2017

2018

2017

CAPITAL

Average shares outstanding - basic

8,717,572

8,712,443

8,648,494

8,698,014

8,641,717

Average shares outstanding - diluted

8,723,388

8,718,918

8,668,765

8,708,647

8,660,628

ALLOWANCE FOR LOAN LOSSES

Beginning balance

$

13,588

$

13,508

$

13,858

$

13,603

$

12,801

Provision for loan losses

(6

)

(23

)

(74

)

(103

)

1,016

Charge-offs

(818

)

(28

)

(280

)

(1,020

)

(690

)

Recoveries

41

131

99

325

476

Ending balance

$

12,805

$

13,588

$

13,603

$

12,805

$

13,603

LOANS

Construction and land development

$

97,240

$

99,546

$

123,147

$

97,240

$

123,147

Commercial real estate

655,800

632,022

637,701

655,800

637,701

Residential real estate

209,438

205,277

209,326

209,438

209,326

Home equity

103,933

104,873

109,857

103,933

109,857

Commercial and industrial

285,972

284,176

251,666

285,972

251,666

Consumer

5,093

5,259

4,428

5,093

4,428

Total

$

1,357,476

$

1,331,153

$

1,336,125

$

1,357,476

$

1,336,125

NONPERFORMING ASSETS AT PERIOD-END

Nonperforming loans:

90 days past due and accruing

$

72

$

74

$

359

$

72

$

359

Nonaccrual

1,090

2,238

2,201

1,090

2,201

Other real estate owned

869

916

1,225

869

1,225

Nonperforming assets

$

2,031

$

3,228

$

3,785

$

2,031

$

3,785

ASSET QUALITY RATIOS

Allowance for loan losses to total loans

0.94

%

1.02

%

1.02

%

0.94

%

1.02

%

Allowance for loan losses to

nonperforming loans

1,101.98

587.72

531.37

1,101.98

531.37

Nonperforming assets to total assets

0.11

0.18

0.21

0.11

0.21

Nonperforming loans to total loans

0.09

0.17

0.19

0.09

0.19

Annualized net charge-offs (recoveries)

to average loans

0.23

(0.03

)

0.06

0.05

0.02

OTHER DATA

Fiduciary assets at period-end (e) (f)

$

494,034

$

523,754

$

518,284

$

494,034

$

518,284

Retail brokerage assets at period-end (e) (f)

$

274,552

$

333,565

$

321,151

$

274,552

$

321,151

Number full-time equivalent employees (g)

305

316

328

305

328

Number of full service offices

24

24

26

24

26

Number of loan production offices

2

2

2

2

2

Number of ATM's

33

34

34

33

34

Notes:

(a) - Excludes goodwill and other intangible assets.

(b) - Excludes amortization expense, net of tax, of intangible assets.

(c) - The efficiency ratio is calculated by dividing noninterest expense excluding (i) gains (losses) on the sale of OREO, net and (ii) merger related expenses by net interest income including tax equivalent income on nontaxable loans and securities and noninterest income excluding (i) securities gains (losses), net and (ii) gains (losses) on premises and equipment, net.

(d) - Average does not include unrealized gains and losses.

(e) - Market value.

(f) - Assets are not owned by American National and are not reflected in the consolidated balance sheet.

(g) - Average for quarter.

Net Interest Income Analysis

For the Three Months Ended December 31, 2018 and 2017

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense

Yield/Rate

2018

2017

2018

2017

2018

2017

Loans:

Commercial

$

262,040

$

233,689

$

2,768

$

2,253

4.19

%

3.82

%

Real estate

1,069,515

1,068,273

12,681

12,171

4.74

4.56

Consumer

5,115

4,140

76

81

5.89

7.76

Total loans

1,336,670

1,306,102

15,525

14,505

4.64

4.44

Securities:

Federal agencies & GSEs

128,826

104,523

752

508

2.33

1.94

Mortgage-backed & CMOs

110,753

92,339

655

501

2.37

2.17

State and municipal

78,223

92,636

529

829

2.71

3.58

Other

14,428

14,756

187

171

5.18

4.64

Total securities

332,230

304,254

2,123

2,009

2.56

2.64

Deposits in other banks

67,553

84,735

357

265

2.10

1.24

Total interest-earning assets

1,736,453

1,695,091

18,005

16,779

4.14

3.95

Non-earning assets

118,039

125,408

Total assets

$

1,854,492

$

1,820,499

Deposits:

Demand

$

229,286

$

220,150

13

11

0.02

0.02

Money market

391,289

374,691

1,081

623

1.10

0.66

Savings

133,350

126,274

10

10

0.03

0.03

Time

362,986

388,171

1,236

1,069

1.35

1.09

Total deposits

1,116,911

1,109,286

2,340

1,713

0.83

0.61

Customer repurchase agreements

37,905

42,540

145

74

1.52

0.69

Other short-term borrowings

-

951

-

4

-

1.68

Long-term borrowings

27,914

34,331

394

326

5.65

3.80

Total interest-bearing liabilities

1,182,730

1,187,108

2,879

2,117

0.97

0.71

Noninterest bearing demand deposits

441,953

411,379

Other liabilities

11,379

10,148

Shareholders' equity

218,430

211,864

Total liabilities and shareholders' equity

$

1,854,492

$

1,820,499

Interest rate spread

3.17

%

3.24

%

Net interest margin

3.48

%

3.46

%

Net interest income (taxable equivalent basis)

15,126

14,662

Less: Taxable equivalent adjustment (a)

114

299

Net interest income

$

15,012

$

14,363

Notes:

(a) - Calculated using 21% and 35% statutory income tax rate in 2018 and 2017, respectively, due to tax rate change.

Net Interest Income Analysis

For the Years Ended December 31, 2018 and 2017

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense

Yield/Rate

2018

2017

2018

2017

2018

2017

Loans:

Commercial

$

264,241

$

229,239

$

10,579

$

8,829

4.00

%

3.85

%

Real estate

1,063,950

1,031,558

49,275

46,400

4.63

4.50

Consumer

4,676

4,652

305

352

6.52

7.57

Total loans

1,332,867

1,265,449

60,159

55,581

4.51

4.39

Securities:

Federal agencies & GSEs

121,923

97,670

2,708

1,849

2.22

1.89

Mortgage-backed & CMOs

109,048

82,042

2,467

1,725

2.26

2.10

State and municipal

85,061

105,869

2,399

3,781

2.82

3.57

Other

14,950

15,796

718

707

4.80

4.48

Total securities

330,982

301,377

8,292

8,062

2.51

2.68

Deposits in other banks

45,434

65,027

873

734

1.92

1.13

Total interest-earning assets

1,709,283

1,631,853

69,324

64,377

4.06

3.95

Non-earning assets

118,375

126,159

Total assets

$

1,827,658

$

1,758,012

Deposits:

Demand

$

234,857

$

217,833

49

43

0.02

0.02

Money market

393,321

335,085

3,505

1,668

0.89

0.50

Savings

132,182

125,157

40

38

0.03

0.03

Time

374,152

383,444

4,492

4,045

1.20

1.05

Total deposits

1,134,512

1,061,519

8,086

5,794

0.71

0.55

Customer repurchase agreements

18,401

46,335

164

142

0.89

0.31

Other short-term borrowings

1,149

3,158

22

31

1.91

0.98

Long-term borrowings

27,874

36,887

1,402

1,324

5.03

3.59

Total interest-bearing liabilities

1,181,936

1,147,899

9,674

7,291

0.82

0.64

Noninterest bearing demand deposits

421,527

392,663

Other liabilities

10,374

9,643

Shareholders' equity

213,821

207,807

Total liabilities and shareholders' equity

$

1,827,658

$

1,758,012

Interest rate spread

3.24

%

3.31

%

Net interest margin

3.49

%

3.50

%

Net interest income (taxable equivalent basis)

59,650

57,086

Less: Taxable equivalent adjustment (a)

556

1,339

Net interest income

$

59,094

$

55,747

Notes:

(a) - Calculated using 21% and 35% statutory income tax rate in 2018 and 2017, respectively, due to tax rate change.