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American National Bankshares Reports Fourth Quarter and Full Year 2021 Earnings

·18 min read
GlobeNewswire Inc.

DANVILLE, Va., Jan. 20, 2022 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (NASDAQ: AMNB) (“American National” or the “Company”) today reported fourth quarter 2021 earnings of $11.3 million, or $1.05 per diluted common share. Those results compare to $8.8 million, or $0.80 per diluted common share, during the same quarter in the prior year, and net income of $10.2 million, or $0.94 per diluted common share, recognized for the third quarter of 2021. Earnings for the twelve months ended December 31, 2021 were $43.5 million, or $4.00 per diluted common share, compared to $30.0 million, or $2.73 per diluted common share, for the same period of 2020.

President and Chief Executive Officer, Jeffrey V. Haley, commented, “American National finished 2021 on a positive note with strong earnings for the fourth quarter and the full year. Core loan growth for the quarter was 6.6% annualized in spite of some significant paydown activity, and deposit growth continued to exceed expectations. Business activity and our local economies remain fairly robust in spite of factors associated with elevated inflation, supply chain issues and the ongoing pandemic.”

“I am so proud and appreciative of the efforts of our employees, the support of our customers and our shareholders over the past year. We had a very successful year financially, but also achieved many other milestones as we continue to build the Company for future success.”

Fourth quarter 2021 highlights include:

  • Average loans held for investment, excluding U.S. Small Business Administration Paycheck Protection Program (“PPP”) loans, grew $69.0 million, or 14.9% annualized, during the fourth quarter compared to growth of $39.5 million, or 8.7% annualized, in the third quarter of this year and compared to a decrease of $13.6 million, or 3.0% annualized, in the fourth quarter of the prior year.

  • Earnings produced a return on average tangible common equity of 17.63% for the fourth quarter of 2021, compared to 16.01% in the previous quarter and 14.90% for the same quarter in the prior year (non-GAAP).

  • Average deposits grew 5.3% during the quarter and 14.9% over the same quarter of 2020; the cost of interest-bearing deposits decreased to 0.14% in the fourth quarter, compared to 0.17% in the previous quarter and 0.43% in the same quarter of the prior year.

  • Fully taxable equivalent (“FTE”) net interest margin was 2.93% for the quarter, down from 3.09% in the third quarter of 2021 and from 3.22% in the same quarter of the prior year (non-GAAP).

  • Noninterest revenues decreased $279 thousand, or 5.4%, when compared to the previous quarter, and increased $623 thousand, or 14.8%, compared to the same quarter in the prior year.

  • Noninterest expense increased $620 thousand, or 4.2%, when compared to the previous quarter, and increased $804 thousand, or 5.5%, when compared to the same quarter in the prior year.

  • The Company recognized a negative provision for loan losses in the fourth quarter of 2021 of $2.0 million compared to a provision expense of $482 thousand in the third quarter of 2021 and $585 thousand in the fourth quarter of 2020. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were (0.00%) for the fourth quarter 2021, (0.01%) for the third quarter of 2021 and 0.05% for the fourth quarter of 2020.

  • Nonperforming assets as a percentage of total assets were 0.07% at December 31, 2021, up from 0.06% at September 30, 2021 but down from 0.12% at December 31, 2020.

SMALL BUSINESS ADMINISTRATION’S PPP

The Company has processed a total of $364.2 million in PPP loans, with total remaining outstanding net PPP loans of $12.2 million at December 31, 2021, down from $37.2 million at September 30, 2021. These quarter-end balances are net of $24.9 million of loans forgiven in the fourth quarter of 2021 compared to $66.9 million forgiven in the third quarter. Total PPP fees recognized in net interest income during the fourth quarter of 2021 were $919,000 compared to the prior quarter’s $2.4 million. The interest income from the outstanding PPP portfolio generated $68,000 and $169,000, respectively, in the fourth and third quarters of 2021.

NET INTEREST INCOME

Net interest income for the fourth quarter of 2021 was stable compared to the third quarter at $23.1 million. The fourth quarter of 2021 compared to the same quarter of 2020 reflected an increase of $958 thousand, or 4.3%. The FTE net interest margin for the quarter was 2.93%, down from 3.09% in the prior quarter and 3.22% in the same quarter a year ago (non-GAAP). The reduction in PPP income was offset by additional accretion income on purchased loans, higher interest income associated with higher average balances on loans and growth in investment income in the fourth quarter compared to the third quarter of 2021. The increase in net interest income from the same quarter in the prior year was attributable to the same factors as well as the significantly lower rate environment in 2021, which reduced interest expense on deposits $1.2 million, or 64.0%.

The Company’s FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the fourth quarter of 2021, net accretion related to acquisition accounting amounted to $2.1 million compared to $1.3 million in the prior quarter of 2021 and $1.2 million for the same quarter in 2020. Net accretion for the twelve months ended December 31, 2021 amounted to $5.2 million, compared to $3.8 million for the same period in 2020. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):

For the years ending (estimated):

2022

$1,100

2023

690

2024

429

2025

292

2026

171

Thereafter

234

ASSET QUALITY

Nonperforming assets (“NPAs”) totaled $2.4 million as of December 31, 2021, up slightly from $2.1 million at September 30, 2021, and down significantly from $3.7 million at December 31, 2020. NPAs as a percentage of total assets were 0.07% at December 31, 2021, compared to 0.06% at September 30, 2021 and 0.12% at December 31, 2020.

The Company recorded a negative provision for the fourth quarter of 2021 of $2.0 million compared to the recognition of a provision of $482 thousand in the third quarter and $585 thousand in the fourth quarter in the previous year. The fourth quarter 2021 negative provision compared to the third quarter of 2021 and the fourth quarter of 2020 was the result of continued improvement in economic conditions, ongoing low charge-off and delinquency rates, and overall strong asset quality metrics. In addition, the third quarter provision was higher due to significant loan growth during the period. The allowance for loan losses was $18.7 million at December 31, 2021, compared to $20.6 million at September 30, 2021 and $21.4 million at December 31, 2020. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were (0.00%) for the fourth quarter of 2021, compared to (0.01%) in the previous quarter and 0.05% for the same quarter in the prior year. The allowance as a percentage of loans held for investment was 0.96% at December 31, 2021, compared to 1.06% at September 30, 2021, and 1.06% at December 31, 2020. Excluding PPP loans, the allowance as a percentage of loans decreased to 0.97% at December 31, 2021, compared to 1.08% at September 30, 2021 and 1.19% at December 31, 2020.

NONINTEREST INCOME

Noninterest income decreased $279 thousand, or 5.4%, to $4.8 million for the quarter ended December 31, 2021 from $5.1 million in the prior quarter and increased $623 thousand, or 14.8%, from the same quarter in the prior year. The fourth quarter of 2021 decrease from the prior quarter was the result of increased write-downs on premises and equipment, net of $190 thousand or 178% and a decrease in mortgage banking income of $243 thousand or 24.6%. The increased expense was partially offset by an increase in other fees and commissions of $162 thousand, or 14.1%, in the fourth quarter compared to the third quarter of 2021.

The fourth quarter of 2021 compared to the fourth quarter of 2020 reflected significant growth in trust fees of $240 thousand, or 23.4%, other fees and commissions of $272 thousand, or 26.2%, income from small business investment companies of $226 thousand, or 95.8%, offset by a $296 thousand, or 28.4%, decrease in mortgage banking income.

NONINTEREST EXPENSE

Noninterest expense for the fourth quarter of 2021 amounted to $15.5 million, up $620 thousand, or 4.2%, when compared to the $14.8 million for the previous quarter and up $804 thousand, or 5.5%, from $14.7 million during the same quarter in the previous year. The increase in the fourth quarter compared to the third quarter of 2021 was due to higher compensation costs associated primarily with incentive accrual adjustments, and in other expenses which included $150,000 in additional charitable contributions. Fourth quarter 2021 increases compared to the same quarter of 2020 were primarily due to increased compensation costs and expense seasonality.

INCOME TAXES

The effective tax rate for the three months ended December 31, 2021 was 21.80%, compared to 21.05% for the prior quarter and 20.94% for the same quarter in the prior year. The effective tax rate was relatively consistent among the periods, with slight increases in the 2021 periods attributable to changes in pre-tax earnings and the levels of permanent tax differences.

BALANCE SHEET

Total assets at December 31, 2021 were $3.3 billion, an increase of $45.5 million from September 30, 2021 and $284.6 million from December 31, 2020. The growth over the previous quarter and over the same quarter of 2020 is the result of continued core deposit growth, deployment of excess liquidity into investments, and loan growth.

At December 31, 2021, loans held for investment (net of deferred fees and costs) were $1.9 billion, an increase of $6.2 million, or 1.3%, annualized from September 30, 2021. This increase is net of $25.9 million of PPP loans forgiven during the fourth quarter of 2021. Loans held for investment increased $130.6 million, or 7.2%, from December 31, 2020 excluding PPP loans.

Investment securities available for sale amounted to $692.5 million at December 31, 2021, with growth of $48.6 million, or 7.5%, compared to September 30, 2021, and growth of $226.4 million, or 48.6%, compared to December 31, 2020.

Deposits amounted to $2.9 billion at December 31, 2021, with growth of $28.3 million, or 4.0%, annualized from September 30, 2021 and $279.0 million, or 10.7%, compared to December 31, 2020. The growth over the same quarter and prior quarter of 2020 is a result of continued higher than average cash balances being maintained by customers.

The Company continues to be well-capitalized as defined by regulators, with tangible common equity to tangible assets of 8.17% at December 31, 2021 compared to 8.14% at September 30, 2021 and compared to 8.34% at December 31, 2020. The Company’s common equity Tier 1, Tier 1, total, and Tier 1 leverage capital ratios were 12.43%, 13.73%, 14.61% and 9.13%, respectively, at December 31, 2021.

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $3.3 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 Virginia and North Carolina with 26 banking offices. American National Bank also manages an additional $1.2 billion of trust, investment and brokerage assets in its Wealth Division. Additional information about American National and American National Bank is available on American National's website at www.amnb.com.

NON-GAAP FINANCIAL MEASURES

This release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States (“GAAP”). American National’s management uses these non-GAAP financial measures in its analysis of American National’s performance. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of American National’s core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. For a reconciliation of non-GAAP financial measures, see “Reconciliation of Non-GAAP Financial Measures” at the end of this release.

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. 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 include but are not limited to: (1) the impacts of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus; (2) expected revenue synergies and cost savings from acquisitions and depositions; (3) 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; (4) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American National’s market areas; (5) the adequacy of the level of the allowance for loan losses, the amount of loan loss provisions required in future quarters, and the failure of assumptions underlying the allowance for loan losses; (6) cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (7) accounting principles, policies, and guidelines; and (8) 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.


Consolidated Balance Sheets

(Dollars in thousands, except per share data)

December 31

2021

2020

(Unaudited)

(Audited)

Assets

Cash and due from banks

$

23,095

$

30,767

Interest-bearing deposits in other banks

487,773

343,603

Securities available for sale, at fair value

692,467

466,091

Restricted stock, at cost

8,056

8,715

Loans held for sale

8,481

15,591

Loans, net of deferred fees and costs

1,946,580

2,015,056

Less allowance for loan losses

(18,678

)

(21,403

)

Net Loans

1,927,902

1,993,653

Premises and equipment, net

35,564

39,723

Other real estate owned, net

143

958

Goodwill

85,048

85,048

Core deposit intangibles, net

4,627

6,091

Bank owned life insurance

29,107

28,482

Other assets

32,334

31,288

Total assets

$

3,334,597

$

3,050,010

Liabilities

Demand deposits -- noninterest-bearing

$

1,009,081

$

830,094

Demand deposits -- interest-bearing

547,878

501,283

Money market deposits

719,498

666,122

Savings deposits

259,193

217,405

Time deposits

354,703

396,426

Total deposits

2,890,353

2,611,330

Customer repurchase agreements

41,128

42,551

Long-term borrowings

28,232

35,630

Other liabilities

20,092

22,605

Total liabilities

2,979,805

2,712,116

Shareholders' equity

Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding

-

-

Common stock, $1 par value, 20,000,000 shares authorized, 10,766,967 shares outstanding at December 31, 2021 and 10,982,367 shares outstanding at December 31, 2020

10,710

10,926

Capital in excess of par value

147,777

154,850

Retained earnings

201,380

169,681

Accumulated other comprehensive income (loss), net

(5,075

)

2,437

Total shareholders' equity

354,792

337,894

Total liabilities and shareholders' equity

$

3,334,597

$

3,050,010


American National Bankshares Inc.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

For the Three Months Ended

For the Twelve Months Ended

12/31/21

9/30/21

12/31/20

12/31/21

12/31/20

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

Interest and Dividend Income:

Interest and fees on loans

$

21,706

$

21,974

$

22,654

$

87,040

$

87,700

Interest and dividends on securities:

Taxable

2,012

1,896

1,536

7,309

6,764

Tax-exempt

92

94

103

385

433

Dividends

115

112

121

464

503

Other interest income

223

201

84

598

440

Total interest and dividend income

24,148

24,277

24,498

95,796

95,840

Interest Expense:

Interest on deposits

655

781

1,821

3,645

9,729

Interest on short-term borrowings

3

3

22

22

259

Interest on long-term borrowings

386

400

509

1,738

2,032

Total interest expense

1,044

1,184

2,352

5,405

12,020

Net Interest Income

23,104

23,093

22,146

90,391

83,820

(Recovery of) Provision for loan losses

(1,955

)

482

585

(2,825

)

8,916

Net Interest Income After (Recovery of) Provision for Loan Losses

25,059

22,611

21,561

93,216

74,904

Noninterest Income:

Trust fees

1,265

1,311

1,025

5,022

4,044

Service charges on deposit accounts

695

664

677

2,611

2,557

Other fees and commissions

1,309

1,147

1,037

4,953

3,925

Mortgage banking income

746

989

1,042

4,195

3,514

Securities gains, net

35

-

-

35

814

Brokerage fees

264

265

192

997

745

Income from Small Business Investment Companies

462

491

236

1,972

270

Income (loss) from insurance investments

137

132

(58

)

1,199

321

Losses on premises and equipment, net

(297

)

(107

)

(13

)

(885

)

(110

)

Other

228

231

83

932

763

Total noninterest income

4,844

5,123

4,221

21,031

16,843

Noninterest Expense:

Salaries and employee benefits

8,461

8,185

8,225

32,342

29,765

Occupancy and equipment

1,484

1,513

1,470

6,032

5,586

FDIC assessment

220

194

206

864

639

Bank franchise tax

446

440

425

1,767

1,702

Core deposit intangible amortization

351

361

391

1,464

1,637

Data processing

734

748

764

2,958

3,017

Software

357

344

342

1,368

1,454

Other real estate owned, net

(17

)

21

26

131

60

Other

3,427

3,037

2,810

12,082

10,705

Total noninterest expense

15,463

14,843

14,659

59,008

54,565

Income Before Income Taxes

14,440

12,891

11,123

55,239

37,182

Income Taxes

3,147

2,713

2,329

11,713

7,137

Net Income

$

11,293

$

10,178

$

8,794

$

43,526

$

30,045

Net Income Per Common Share:

Basic

$

1.05

$

0.94

$

0.80

$

4.00

$

2.74

Diluted

$

1.05

$

0.94

$

0.80

$

4.00

$

2.73

Weighted Average Common Shares Outstanding:

Basic

10,774,268

10,833,875

10,975,349

10,873,817

10,981,623

Diluted

10,776,970

10,836,293

10,978,931

10,877,231

10,985,790


American National Bankshares Inc.

Financial Highlights

(Dollars in thousands, except per share data)

At or for the Twelve Months

4rd Qtr

3rd Qtr

4th Qtr

Ended December 31,

2021

2021

2020

2021

2020

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

EARNINGS

Interest income

$

24,148

$

24,277

$

24,498

$

95,796

$

95,840

Interest expense

1,044

1,184

2,352

5,405

12,020

Net interest income

23,104

23,093

22,146

90,391

83,820

(Recovery of) Provision for loan losses

(1,955

)

482

585

(2,825

)

8,916

Noninterest income

4,844

5,123

4,221

21,031

16,843

Noninterest expense

15,463

14,843

14,659

59,008

54,565

Income taxes

3,147

2,713

2,329

11,713

7,137

11,293