American National Bankshares Inc. Reports First Quarter 2015 Earnings
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DANVILLE, VA -- (Marketwired) -- 04/23/15 -- American National Bankshares Inc. (NASDAQ: AMNB)
- Merger with MainStreet BankShares, Inc. ("MainStreet"), parent of Franklin Community Bank, N.A. ("Franklin"), closed January 1, 2015
- Q1 2015 net income of $3.5 million and diluted EPS of $0.40
- Net interest margin of 3.73% for Q1 2015
- Nonperforming assets 0.50% of total assets
- Average shareholders' equity of $196 million is 12.91% of average assets
American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced first quarter 2015 net income of $3,515,000 compared to $3,450,000 for the first quarter of 2014, a $65,000 or 1.9% increase. Diluted earnings per share were $0.40 for the 2015 quarter compared to $0.44 for the 2014 quarter. Net income for the first quarter of 2015 produced a return on average assets of 0.93%, a return on average equity of 7.17%, and a return on average tangible equity of 10.02%.
Earnings for the 2015 quarter were favorably impacted by the January 2015 merger between American National and MainStreet Bankshares, Inc.
Financial Performance and Overview Jeffrey V. Haley, President and Chief Executive Officer, reported, "The lead story for early 2015 is our acquisition of MainStreet and its banking subsidiary, Franklin Community Bank, N.A. This merger closed on January 1, 2015, and it is a wonderful way to start the New Year. We are delighted to welcome the Franklin County bankers and their customers into the American National community bank family and we plan to continue the high quality of service our Franklin customers have come to expect, with even more options in banking products and services.
"The merger with MainStreet has had a substantial impact on our balance sheet.
"At March 31, 2015, American National had $965,902,000 in loans compared to $783,369,000 at March 31, 2014, an increase of $182,533,000 or 23.3%. Of this increase, $112,901,000 or 61.8% relates directly to the MainStreet acquisition.
"Organic loan growth over the past year was $69,632,000 or 8.9%. Organic loan growth over the past quarter was $12,076,000 or 1.4%.
"At March 31, 2015, American National had $1,242,675,000 in deposits compared to $1,051,249,000 at March 31, 2014, an increase of $191,426,000 or 18.2%. Of this increase, $135,568,000 or 70.8% relates directly to the MainStreet acquisition. The deposit growth was strong in all categories, but notably in non-maturity (core) deposits. We are continuously attempting to grow core deposits and their affiliated relationships, but the challenge in this ongoing low rate environment is to do that in a cost effective and yet competitive manner. Our cost of interest bearing deposits for the first quarter was 0.52%, compared to 0.60% for the 2014 quarter.
"On the income statement side, our net income for the first quarter was $3,515,000, up from $3,450,000 in the 2014 quarter, an increase of $65,000 or 1.9%.
"We had several drivers that impacted quarterly results.
"The merger with MainStreet had a significant and positive impact to operating results.
"Provision for loan loss increased during the 2015 quarter, related to organic growth in loan volume and our regular review of cash flow expectations on loans acquired with deteriorated credit quality.
"Noninterest income was higher in the 2015 quarter by $453,000 or 16.8%, related mostly to the MainStreet merger.
"Noninterest expense was higher in the 2015 quarter by $1,624,000 or 19.3%, related mostly to the merger and to merger related, one-time expenses. The one-time merger costs were $359,000 for the quarter. "
Haley concluded, "The beginning of a New Year is a great time to reflect on strategy and corporate goals. We continue to believe that community banking is an industry where imagination and flexibility pay long term dividends. For American National, we will continue our focus on high quality organic growth, and at the same time prepare American National for the next appropriate strategic acquisition opportunity that may arise."
Capital American National's capital ratios remain strong and exceed all regulatory requirements.
For the quarter ended March 31, 2015, average shareholders' equity was 12.91% of average assets, compared to 13.04% for the quarter ended December 31, 2014, and compared to 13.05% for the quarter ended March 31, 2014.
Book value per common share was $22.58 at March 31, 2015, compared to $22.07 at December 31, 2014, and $21.57 at March 31, 2014.
Tangible book value per common share was $17.09 at March 31, 2015, compared to $16.86 at December 31, 2014, and $16.27 at March 31, 2014.
Credit Quality Measurements Non-performing assets ($5,123,000 of non-performing loans and $2,653,000 of other real estate owned) represented 0.50% of total assets at March 31, 2015, compared to 0.68% at March 31, 2014.
Annualized net charge offs to average loans was eight basis points 0.08% for the 2015 first quarter, compared to 1 basis point (0.01%) of net recoveries for the same quarter in 2014.
The allowance for loan losses as a percentage of total loans was 1.33% at March 31, 2015 compared to 1.61% at March 31, 2014. The largest driver of this change was the merger with MainStreet, whose loans have been marked to fair value at the merger date and whose related allowance for loan loss was eliminated in the valuation process.
Other real estate owned was $2,653,000 at March 31, 2015, compared to $3,233,000 at March 31, 2014, a decrease of $580,000 or 17.9%.
Merger related financial impact The fair value adjustments related to our two recent mergers have had a favorable impact on pretax income for the American National.
The July 2011 merger with MidCarolina Financial Corporation ("MidCarolina") continues to have a positive, but declining, impact on net interest income and pretax income. For the first quarter of 2015, the fair value impact to net interest income for this acquisition was $410,000, compared to $605,000 for the comparable quarter in 2014. The net impact to pretax income for the first quarter of 2015 was $184,000, compared to $378,000 for the comparable quarter of 2014.
The January 2015 merger with MainStreet was closed at the beginning of this quarter. For the first quarter of 2015, the fair value impact to net interest income for this acquisition was $703,000. The net impact to pretax income for the first quarter of 2015 was $629,000.
Net Interest Income Net interest income before provision for loan losses increased to $12,378,000 in the first quarter of 2015 from $10,459,000 in first quarter of 2014, an increase of $1,919,000 or 18.3%.
For the 2015 quarter, the net interest margin was 3.73% compared to 3.71% for the same quarter in 2014, an increase of two basis points. This increase was driven by higher levels of accretion income and greater volumes of earning assets.
Provision for loan losses Provision expense for the first quarter of 2015 was $600,000 compared to zero for the first quarter of 2014.
The need for additional provision expense was driven primarily by an increase in loan volume, the regular quarterly review of expected cash flows on certain purchased credit impaired loans from the MidCarolina merger, and a small uptick in loan charge offs. It was partially mitigated by improving economic conditions and continuing strong asset quality metrics.
Noninterest Income Noninterest income totaled $3,156,000 in the first quarter of 2015, compared with $2,703,000 in the first quarter of 2014, an increase of $453,000 or 16.8%. The primary driver of the increase was the increase in transaction volume related to the MainStreet merger.
Noninterest Expense Noninterest expense totaled $10,047,000 in the first quarter of 2015, compared to $8,423,000 in the first quarter of 2014, an increase of $1,624,000 or 19.3%.
All expense categories were impacted by the MainStreet merger and the integration of Franklin Community Bank into American National's operations.
However, one time, merger related expense, related to the MainStreet acquisition, accounted for $359,000 or 22% of the increase. The operational conversion of the Franklin Community Bank was originally anticipated in late first quarter 2015. However, due to logistical issues between technology vendors it has been delayed until mid-May. Consequently, management expects there will be significant additional one time, merger related expense during the second quarter, mostly related to data processing system integration. The expenses in this category are one-time in nature, related directly to effecting the merger transaction, and are comprised of data processing, legal and accounting, investment banking, and change-in-control payments.
About American National As of January 1, 2015, with the closing of the acquisition of MainStreet BankShares, Inc., American National Bankshares Inc. is a multi-state bank holding company with total assets of approximately $1.5 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 27 banking offices and two loan production offices. American National Bank and Trust Company also manages an additional $748 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 does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
American National Bankshares Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
Unaudited
March 31
--------------------------
ASSETS 2015 2014
------------ ------------
Cash and due from banks $ 23,995 $ 25,880
Interest-bearing deposits in other banks 75,254 45,466
Federal funds sold 13,616 -
Securities available for sale, at fair value 352,208 349,123
Restricted stock, at cost 5,336 4,529
Loans held for sale 1,936 1,389
Loans 965,902 783,369
Less allowance for loan losses (12,844) (12,614)
------------ ------------
Net Loans 953,058 770,755
------------ ------------
Premises and equipment, net 24,371 23,359
Other real estate owned, net 2,653 3,233
Goodwill 44,210 39,043
Core deposit intangibles, net 3,583 2,828
Bank owned life insurance 17,261 14,845
Accrued interest receivable and other assets 22,617 19,352
------------ ------------
Total assets $ 1,540,098 $ 1,299,802
============ ============
Liabilities
Demand deposits -- noninterest-bearing $ 289,818 $ 218,795
Demand deposits -- interest-bearing 229,721 170,894
Money market deposits 202,706 194,528
Savings deposits 110,104 89,024
Time deposits 410,326 378,008
------------ ------------
Total deposits 1,242,675 1,051,249
------------ ------------
Short-term borrowings:
Customer repurchase agreements 53,664 34,153
Other short-term borrowings - -
Long-term borrowings 9,941 9,919
Trust preferred capital notes 27,546 27,444
Accrued interest payable and other liabilities 9,583 6,538
------------ ------------
Total liabilities 1,343,409 1,129,303
------------ ------------
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares
authorized, none outstanding - -
Common stock, $1 par, 10,000,000 shares
authorized, 8,727,696 shares outstanding at
March 31, 2015 and 7,905,243 shares
outstanding at March 31, 2014 8,710 7,905
Capital in excess of par value 77,612 58,202
Retained earnings 106,102 100,721
Accumulated other comprehensive income, net 4,265 3,671
------------ ------------
Total shareholders' equity 196,689 170,499
------------ ------------
Total liabilities and shareholders' equity $ 1,540,098 $ 1,299,802
============ ============
American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
Three Months Ended
March 31
---------------------------
2015 2014
------------ -------------
Interest and Dividend Income:
Interest and fees on loans $ 11,770 $ 9,847
Interest on federal funds sold 4 -
Interest and dividends on securities:
Taxable 975 964
Tax-exempt 960 1,035
Dividends 82 75
Other interest income 48 33
------------ -------------
Total interest and dividend income 13,839 11,954
------------ -------------
Interest Expense:
Interest on deposits 1,194 1,229
Interest on short-term borrowings 3 2
Interest on long-term borrowings 80 80
Interest on trust preferred capital notes 184 184
------------ -------------
Total interest expense 1,461 1,495
------------ -------------
Net Interest Income 12,378 10,459
Provision for loan losses 600 -
------------ -------------
Net Interest Income After Provision for Loan
Losses 11,778 10,459
------------ -------------
Noninterest Income:
Trust fees 952 1,122
Service charges on deposit accounts 497 413
Other fees and commissions 588 444
Mortgage banking income 222 263
Securities gains, net 310 39
Other 587 422
------------ -------------
Total noninterest income 3,156 2,703
------------ -------------
Noninterest Expense:
Salaries 4,147 3,538
Employee benefits 1,075 975
Occupancy and equipment 1,172 936
FDIC assessment 185 164
Bank franchise tax 235 222
Core deposit intangible amortization 301 331
Data processing 462 348
Software 283 262
Foreclosed real estate, net (5) 16
Merger related expenses 359 -
Other 1,833 1,631
------------ -------------
Total noninterest expense 10,047 8,423
------------ -------------
Income Before Income Taxes 4,887 4,739
Income Taxes 1,372 1,289
------------ -------------
Net Income $ 3,515 $ 3,450
============ =============
Net Income Per Common Share:
Basic $ 0.40 $ 0.44
Diluted $ 0.40 $ 0.44
Average Common Shares Outstanding:
Basic 8,723,633 7,904,759
Diluted 8,732,679 7,917,601
American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except
share, ratio and
nonfinancial data, 1st Qtr 4th Qtr 1st Qtr YTD YTD
unaudited) 2015 2014 2014 2015 2014
---------- ---------- ---------- ---------- ----------
EARNINGS
Interest income $ 13,839 $ 11,869 $ 11,954 $ 13,839 $ 11,954
Interest expense 1,461 1,414 1,495 1,461 1,495
Net interest income 12,378 10,455 10,459 12,378 10,459
Provision for loan
losses 600 250 - 600 -
Noninterest income 3,156 2,792 2,703 3,156 2,703
Noninterest expense 10,047 8,943 8,423 10,047 8,423
Income taxes 1,372 1,164 1,289 1,372 1,289
Net income 3,515 2,890 3,450 3,515 3,450
PER COMMON SHARE
Earnings per share
- basic $ 0.40 $ 0.37 $ 0.44 $ 0.40 $ 0.44
Earnings per share
- diluted 0.40 0.37 0.44 0.40 0.44
Cash dividends paid 0.23 0.23 0.23 0.23 0.23
Book value per
share (f) 22.58 22.07 21.57 22.58 21.57
Book value per
share - tangible
(a) (f) 17.09 16.86 16.27 17.09 16.27
Closing market
price 22.58 24.81 23.52 22.58 23.52
FINANCIAL RATIOS
Return on average
assets 0.93% 0.86% 1.06% 0.93% 1.06%
Return on average
equity 7.17 6.63 8.12 7.17 8.12
Return on average
tangible equity
(b) 10.02 9.12 11.54 10.02 11.54
Average equity to
average assets 12.91 13.04 13.05 12.91 13.05
Tangible equity to
tangible assets
(a) 9.98 10.16 10.23 9.98 10.23
Efficiency ratio
(e) 63.90 64.60 61.82 63.90 61.82
Effective tax rate 28.07 28.71 27.20 28.07 27.20
PERIOD-END BALANCES
Securities $ 357,544 $ 349,250 $ 353,652 $ 357,544 $ 353,652
Loans held for sale 1,936 616 1,389 1,936 1,389
Loans, net of
unearned income 965,902 840,925 783,369 965,902 783,369
Goodwill and other
intangibles 47,793 41,088 41,871 47,793 41,871
Assets 1,540,098 1,346,492 1,299,802 1,540,098 1,299,802
Assets - tangible
(a) 1,492,305 1,305,404 1,257,931 1,492,305 1,257,931
Deposits 1,242,675 1,075,837 1,051,249 1,242,675 1,051,249
Customer repurchase
agreements 53,664 53,480 34,153 53,664 34,153
Other short-term
borrowings - - - - -
Long-term
borrowings 37,487 37,456 37,363 37,487 37,363
Shareholders'
equity 196,689 173,780 170,499 196,689 170,499
AVERAGE BALANCES
Securities $ 345,800 $ 331,785 $ 345,152 $ 345,800 $ 345,152
Loans held for sale 939 982 2,032 939 2,032
Loans, net of
unearned income 954,882 815,271 788,419 954,882 788,419
Interest-earning
assets 1,382,817 1,220,818 1,186,904 1,382,817 1,186,904
Goodwill and other
intangibles 47,988 41,222 42,077 47,988 42,077
Assets 1,518,449 1,338,240 1,302,639 1,518,449 1,302,639
Assets - tangible
(a) 1,470,461 1,297,018 1,260,562 1,470,461 1,260,562
Interest-bearing
deposits 938,064 816,965 830,229 938,064 830,229
Deposits 1,221,037 1,069,995 1,051,614 1,221,037 1,051,614
Customer repurchase
agreements 53,181 50,493 37,797 53,181 37,797
Other short-term
borrowings - - - - -
Long-term
borrowings 37,469 37,438 37,373 37,469 37,373
Shareholders'
equity 196,086 174,453 170,046 196,086 170,046
American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands,
except share, ratio
and nonfinancial 1st Qtr 4th Qtr 1st Qtr YTD YTD
data, unaudited) 2015 2014 2014 2015 2014
---------- ---------- ---------- ---------- ----------
CAPITAL
Weighted average
shares
outstanding -
basic 8,723,633 7,855,872 7,904,759 8,723,633 7,904,759
Weighted average
shares
outstanding -
diluted 8,732,679 7,866,111 7,917,601 8,732,679 7,917,601
ALLOWANCE FOR LOAN
LOSSES
Beginning balance $ 12,427 $ 12,620 $ 12,600 $ 12,427 $ 12,600
Provision for loan
losses 600 250 - 600 -
Charge-offs (309) (566) (73) (309) (73)
Recoveries 126 123 87 126 87
---------- ---------- ---------- ---------- ----------
Ending balance $ 12,844 $ 12,427 $ 12,614 $ 12,844 $ 12,614
LOANS
Construction and
land development $ 68,069 $ 50,863 $ 40,458 $ 68,069 $ 40,458
Commercial real
estate 436,562 391,472 358,362 436,562 358,362
Residential real
estate 211,261 175,293 170,517 211,261 170,517
Home equity 97,811 91,075 89,081 97,811 89,081
Commercial and
industrial 146,280 126,981 119,042 146,280 119,042
Consumer 5,919 5,241 5,909 5,919 5,909
---------- ---------- ---------- ---------- ----------
Total $ 965,902 $ 840,925 $ 783,369 $ 965,902 $ 783,369
NONPERFORMING ASSETS
AT PERIOD-END
Nonperforming
loans:
90 days past due
and accruing $ - $ - $ - $ - $ -
Nonaccrual 5,123 4,112 5,557 5,123 5,557
Other real estate
owned 2,653 2,119 3,233 2,653 3,233
---------- ---------- ---------- ---------- ----------
Nonperforming
assets $ 7,776 $ 6,231 $ 8,790 $ 7,776 $ 8,790
ASSET QUALITY RATIOS
Allowance for loan
losses to total
loans 1.33% 1.48% 1.61% 1.33% 1.61%
Allowance for loan
losses to
nonperforming
loans 250.71 302.21 226.99 250.71 226.99
Nonperforming
assets to total
assets 0.50 0.46 0.68 0.50 0.68
Nonperforming
loans to total
loans 0.53 0.49 0.71 0.53 0.71
Annualized net
charge-offs
(recoveries) to
average loans 0.08 0.22 (0.01) 0.08 (0.01)
OTHER DATA
Fiduciary assets
at period-end
(c) (g) $ 502,779 $ 450,498 $ 435,635 $ 502,779 $ 435,635
Retail brokerage
assets at period-
end (c) (g) $ 244,725 $ 210,265 $ 189,130 $ 244,725 $ 189,130
Number full-time
equivalent
employees (d) 318 284 292 318 292
Number of full
service offices 27 24 25 27 25
Number of loan
production
offices 2 2 2 2 2
Number of ATM's 34 31 31 34 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.
(e) - The efficiency ratio is calculated by dividing noninterest expense
excluding gains or losses on the sale of OREO by net
interest income including tax equivalent income on nontaxable loans and
securities and excluding (a) gains or losses on
securities and (b) gains or losses on sale of premises and equipment.
(f) - Unvested restricted stock of 17,761 shares are not included in the
calculation.
(g) - Assets are not owned by the Company and are not reflected in the
consolidated balance sheet.
Net Interest Income Analysis
For the Three Months Ended March 31, 2015 and 2014
(in thousands, except rates)
Interest
Average Balance Income/Expense Yield/Rate
--------------------- ----------------- ------------
2015 2014 2015 2014 2015 2014
---------- ---------- -------- -------- ----- -----
Loans:
Commercial $ 139,120 $ 120,707 $ 1,826 $ 1,472 5.32% 4.95%
Real estate 801,373 664,772 9,719 8,296 4.85 4.99
Consumer 15,328 4,972 240 89 6.35 7.26
---------- ---------- -------- -------- ----- -----
Total loans 955,821 790,451 11,785 9,857 4.94 5.00
---------- ---------- -------- -------- ----- -----
Securities:
Federal agencies &
GSEs 74,850 68,356 245 178 1.31 1.04
Mortgage-backed &
CMOs 65,558 66,631 378 403 2.31 2.42
State and municipal 190,216 193,542 1,763 1,899 3.71 3.92
Other 15,176 16,623 123 127 3.24 3.06
---------- ---------- -------- -------- ----- -----
Total securities 345,800 345,152 2,509 2,607 2.90 3.02
---------- ---------- -------- -------- ----- -----
Federal funds sold 14,580 - 4 - 0.11 -
Deposits in other
banks 66,616 51,301 48 33 0.29 0.26
---------- ---------- -------- -------- ----- -----
Total interest-
earning assets 1,382,817 1,186,904 14,346 12,497 4.16 4.22
----- -----
Non-earning assets 135,632 115,735
---------- ----------
Total assets $1,518,449 $1,302,639
========== ==========
Deposits:
Demand $ 212,673 $ 168,080 18 22 0.03 0.05
Money market 202,935 192,871 71 75 0.14 0.16
Savings 107,683 86,898 12 14 0.05 0.07
Time 414,773 382,380 1,093 1,118 1.07 1.19
---------- ---------- -------- -------- ----- -----
Total deposits 938,064 830,229 1,194 1,229 0.52 0.60
Customer repurchase
agreements 53,181 37,797 3 2 0.02 0.02
Long-term borrowings 37,469 37,373 264 264 2.82 2.83
---------- ---------- -------- -------- ----- -----
Total interest-
bearing liabilities 1,028,714 905,399 1,461 1,495 0.57 0.67
-------- -------- ----- -----
Noninterest bearing
demand deposits 282,973 221,385
Other liabilities 10,676 5,809
Shareholders' equity 196,086 170,046
---------- ----------
Total liabilities
and shareholders'
equity $1,518,449 $1,302,639
========== ==========
Interest rate spread 3.59% 3.55%
===== =====
Net interest margin 3.73% 3.71%
===== =====
Net interest income (taxable
equivalent basis) 12,885 11,002
Less: Taxable
equivalent adjustment 507 543
-------- --------
Net interest income $ 12,378 $ 10,459
======== ========
Source: American National Bankshares Inc.
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