American National Bankshares Inc. Reports First Quarter 2017 Earnings
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DANVILLE, VA -- (Marketwired) -- 04/20/17 --
- Q1 2017 net income of $4.1 million
- Diluted EPS $0.47 for Q1 2017
- Net interest margin of 3.44% for Q1 2017
- Average shareholders' equity for Q1 of $203.5 million is 11.97% of average assets
- Loan growth for Q1 2017 of $55.1 million or 4.7%
American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced net income for the first quarter of 2017 of $4,063,000 compared to $4,128,000 for the first quarter of 2016, a $65,000 or 1.6% decrease. Basic and diluted net income per common share was $0.47 for the first quarter of 2017 compared to $0.48 for the 2016 quarter. Net income for the first quarter of 2017 produced a return on average assets of 0.96%, a return on average equity of 7.99%, and a return on average tangible equity of 10.56%.
Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "This past year, from March 2016 to March 2017, our loan portfolio had growth of $185.4 million (17.9%). During the first quarter of 2017, our loan portfolio grew $55.1 million (4.7%).
"Our primary funding source for loans is deposits, especially core deposits. During the past year, from March 2016 to March 2017, our deposits grew $123.7 million (9.6%). During the first quarter of 2017, our deposits grew $45.5 million (3.3%).
"We're very encouraged by the increasing level of business activity in the bank. In September 2016, we announced our plans to enter two new markets - Roanoke, Virginia, and Winston-Salem, North Carolina. Our strategy was hiring top-notch bankers within those communities. These efforts have paid large dividends, while increasing expenses for the quarter, and have provided significant balance sheet growth, loans and deposits, for American National.
"On the earnings side, our net income for the first quarter of 2017 was $4,063,000, down slightly from $4,128,000 in the first quarter of 2016, a decrease of $65,000 or 1.6%.
"Net interest income was up by $550,000 (4.4%) in the first quarter of 2017 compared to the first quarter of 2016, driven primarily by growth in earning assets.
"Provision for loan losses was up $250,000 in the first quarter of 2017, compared to the first quarter of 2016. The need for additional provision expense was directly related to strong loan growth.
"Noninterest income was down slightly from the prior year quarter, mainly related to lower levels of securities gains and Small Business Investment Corporation ("SBIC") income, which was offset by an increase in mortgage banking income.
"Noninterest expense increased in the 2017 quarter by $523,000 (5.3%). The higher level of expense related mostly to our entry into two new markets in the fourth quarter of 2016."
Haley concluded, "2017 is off to an outstanding start. We are pleased with our balance sheet growth on both the asset and liability side. We acknowledge that rising interest rates and market forces together will likely put continued pressure on our net interest margin going forward. Since the election last year, stock prices for banks, ours included, have been remarkably buoyant. In the near term, preliminary indications are there may be an easing of the regulatory overload that has impaired our industry's ability to grow and generate optimum returns for our shareholders. American National is optimistic about the future of community banking."
Capital
American National's capital ratios remain strong and exceed all regulatory requirements.
For the quarter ended March 31, 2017, average shareholders' equity was 11.97% of average assets, compared to 12.86% for the quarter ended March 31, 2016.
Book value per common share was $23.64 at March 31, 2017, compared to $23.27 at March 31, 2016.
Tangible book value per common share was $18.38 at March 31, 2017, compared to $17.90 at March 31, 2016.
Credit Quality Measurements
Non-performing assets ($1,061,000 of 90 day past due loans, $2,428,000 of non-accrual loans and $1,664,000 of other real estate owned) represented 0.30% of total assets at March 31, 2017, compared to 0.43% at March 31, 2016.
Annualized net charge offs to average loans were zero basis points (0.00%) for the 2017 first quarter, compared to a one basis point (0.01%) net recovery for the same quarter in 2016.
Other real estate owned was $1,664,000 at March 31, 2017, compared to $1,493,000 at March 31, 2016, an increase of $171,000 or 11.4%.
Acquisition related financial impact
The purchase accounting adjustments related to our two most recent acquisitions have had and continue to have a positive impact on net interest income and income before income tax for American National. The impact of the adjustments for the quarters reported is summarized below (dollars in thousands):
Increases to: March 31, 2017 March 31, 2016
---------------- ----------------
Net Interest Income $ 434 $ 1,001
Income Before Income Taxes $ 268 $ 713
Net Interest Income
Net interest income before the provision for loan losses increased to $13,134,000 in the first quarter of 2017 from $12,584,000 in the first quarter of 2016, an increase of $550,000 or 4.4%.
For the 2017 quarter, the net interest margin was 3.44% compared to 3.67% for the same quarter in 2016, a decrease of 23 basis points or 6.3%. The decline was mostly driven by lower yield levels on earning assets and reduced accretion income.
For the 2017 quarter, the net interest margin was 3.44% compared to 3.45% for the fourth quarter of 2016, a decrease of one basis point.
Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the first quarter of 2017 was $300,000 compared to $50,000 for the first quarter of 2016, an increase of $250,000.
There was significant growth in the loans outstanding in the first quarter 2017, a net of $55.1 million or 4.7%. The additional provision resulted principally from increased loan volume. It was somewhat mitigated by continued strong asset quality metrics.
The allowance for loan losses as a percentage of total loans was 1.07% at March 31, 2017 compared to 1.23% at March 31, 2016.
Noninterest Income
Noninterest income totaled $3,271,000 in the first quarter of 2017, compared with $3,297,000 in the first quarter of 2016, a decrease of $26,000 or 0.8%.
Mortgage banking income increased $237,000 (81.2%) over the first quarter of 2016, driven by volume.
Securities gains decreased $107,000. Securities sales are used as needed for liquidity purposes
SBIC income decreased $140,000. This is a volatile revenue source.
Noninterest Expense
Noninterest expense totaled $10,441,000 in the first quarter of 2017, compared to $9,918,000 in the first quarter of 2016, an increase of $523,000 or 5.3%. The major factor affecting expense was salaries, which increased $584,000 (13.9%), largely related to the new hires in Roanoke and Winston Salem. Total bank wide full-time equivalent employees were 326 for the first quarter of 2017, compared to 301 for the first quarter of 2016.
Income taxes for the first quarter of 2017 were favorably impacted by a change in accounting for employee stock compensation. The effective tax rate for the quarter was 28%, compared to 30% for the same quarter of 2016.
About American National
American National is a multi-state bank holding company with total assets of approximately $1.7 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 27 banking offices and two loan production offices. American National Bank also manages an additional $812 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; changes in technology and information security; 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.
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
Unaudited
---------------------------------------------------------------------------
March 31
----------------------------
ASSETS 2017 2016
------------- -------------
Cash and due from banks $ 27,418 $ 26,345
Interest-bearing deposits in other banks 67,372 61,186
Securities available for sale, at fair value 292,567 356,998
Restricted stock, at cost 5,492 5,355
Loans held for sale 1,872 785
Loans 1,219,958 1,034,564
Less allowance for loan losses (13,108) (12,675)
------------- -------------
Net Loans 1,206,850 1,021,889
------------- -------------
Premises and equipment, net 25,658 23,241
Other real estate owned, net 1,664 1,493
Goodwill 43,872 43,872
Core deposit intangibles, net 1,554 2,395
Bank owned life insurance 18,270 17,773
Accrued interest receivable and other assets 23,216 21,222
------------- -------------
Total assets $ 1,715,805 $ 1,582,554
============= =============
Liabilities
Demand deposits -- noninterest-bearing $ 381,247 $ 321,599
Demand deposits -- interest-bearing 222,356 231,970
Money market deposits 314,495 218,543
Savings deposits 126,774 119,286
Time deposits 371,232 401,033
------------- -------------
Total deposits 1,416,104 1,292,431
------------- -------------
Customer repurchase agreements 47,776 42,184
Long-term borrowings 9,985 9,963
Junior subordinated debt 27,749 27,648
Accrued interest payable and other
liabilities 9,950 9,885
------------- -------------
Total liabilities 1,511,564 1,382,111
------------- -------------
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares
authorized, none outstanding - -
Common stock, $1 par, 20,000,000 shares
authorized, 8,638,744 shares outstanding at
March 31, 2017 and 8,612,658 shares
outstanding at March 31, 2016 and 8,591 8,575
Capital in excess of par value 75,445 74,744
Retained earnings 121,590 113,628
Accumulated other comprehensive income
(loss), net (1,385) 3,496
------------- -------------
Total shareholders' equity 204,241 200,443
------------- -------------
Total liabilities and shareholders' equity $ 1,715,805 $ 1,582,554
============= =============
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
----------------------------------------------------------------------------
Three Months Ended
March 31
-----------------------------
2017 2016
-------------- --------------
Interest and Dividend Income:
Interest and fees on loans $ 12,704 $ 12,115
Interest and dividends on securities:
Taxable 1,154 1,084
Tax-exempt 635 823
Dividends 79 91
Other interest income 109 58
-------------- --------------
Total interest and dividend income 14,681 14,171
-------------- --------------
Interest Expense:
Interest on deposits 1,200 1,297
Interest on short-term borrowings 28 1
Interest on long-term borrowings 80 81
Interest on junior subordinated debt 239 208
-------------- --------------
Total interest expense 1,547 1,587
-------------- --------------
Net Interest Income 13,134 12,584
Provision for loan losses 300 50
-------------- --------------
Net Interest Income After Provision for Loan
Losses 12,834 12,534
-------------- --------------
Noninterest Income:
Trust fees 912 930
Service charges on deposit accounts 484 492
Other fees and commissions 712 672
Mortgage banking income 529 292
Securities gains, net 259 366
Brokerage fees 192 204
Income from Small Business Investment
Companies 26 166
Other 157 175
-------------- --------------
Total noninterest income 3,271 3,297
-------------- --------------
Noninterest Expense:
Salaries 4,799 4,215
Employee benefits 1,183 1,114
Occupancy and equipment 1,068 1,099
FDIC assessment 129 188
Bank franchise tax 256 256
Core deposit intangible amortization 165 288
Data processing 487 444
Software 279 297
Other real estate owned, net 43 104
Other 2,032 1,913
-------------- --------------
Total noninterest expense 10,441 9,918
-------------- --------------
Income Before Income Taxes 5,664 5,913
Income Taxes 1,601 1,785
-------------- --------------
Net Income $ 4,063 $ 4,128
============== ==============
Net Income Per Common Share:
Basic $ 0.47 $ 0.48
Diluted $ 0.47 $ 0.48
Average Common Shares Outstanding:
Basic 8,633,219 8,611,840
Diluted 8,651,139 8,617,008
American National
Bankshares Inc.
Financial
Highlights
(In thousands,
except share,
ratio and
nonfinancial
data,
unaudited) 1st Qtr 4th Qtr 1st Qtr YTD YTD
2017 2016 2016 2017 2016
---------- ---------- ---------- ---------- ----------
EARNINGS
Interest
income $ 14,681 $ 14,167 $ 14,171 $ 14,681 $ 14,171
Interest
expense 1,547 1,521 1,587 1,547 1,587
Net interest
income 13,134 12,646 12,584 13,134 12,584
Provision for
loan losses 300 50 50 300 50
Noninterest
income 3,271 3,721 3,297 3,271 3,297
Noninterest
expense 10,441 10,360 9,918 10,441 9,918
Income taxes 1,601 1,835 1,785 1,601 1,785
Net income 4,063 4,122 4,128 4,063 4,128
PER COMMON SHARE
Income per
share - basic $ 0.47 $ 0.48 $ 0.48 $ 0.47 $ 0.48
Income per
share -
diluted 0.47 0.48 0.48 0.47 0.48
Cash dividends
paid 0.24 0.24 0.24 0.24 0.24
Book value per
share 23.64 23.37 23.27 23.64 23.27
Book value per
share -
tangible (a) 18.38 18.08 17.90 18.38 17.90
Closing market
price 37.25 34.80 25.33 37.25 25.33
FINANCIAL RATIOS
Return on
average
assets 0.96% 1.00% 1.06% 0.96% 1.06%
Return on
average
equity 7.99 8.10 8.28 7.99 8.28
Return on
average
tangible
equity (b) 10.56 10.73 11.27 10.56 11.27
Average equity
to average
assets 11.97 12.39 12.86 11.97 12.86
Tangible
equity to
tangible
assets (a) 9.51 9.54 10.04 9.51 10.04
Net interest
margin,
taxable
equivalent 3.44 3.45 3.67 3.44 3.67
Efficiency
ratio (c) 62.97 62.32 61.36 62.97 61.36
Effective tax
rate 28.27 30.80 30.19 28.27 30.19
PERIOD-END
BALANCES
Securities $ 298,059 $ 352,726 $ 362,353 $ 298,059 $ 362,353
Loans held for
sale 1,872 5,996 785 1,872 785
Loans, net of
unearned
income 1,219,958 1,164,821 1,034,564 1,219,958 1,034,564
Goodwill and
other
intangibles 45,426 45,591 46,267 45,426 46,267
Assets 1,715,805 1,678,638 1,582,554 1,715,805 1,582,554
Assets -
tangible (a) 1,670,379 1,633,047 1,536,287 1,670,379 1,536,287
Deposits 1,416,104 1,370,640 1,292,431 1,416,104 1,292,431
Customer
repurchase
agreements 47,776 39,166 42,184 47,776 42,184
Other short-
term
borrowings - 20,000 - - -
Long-term
borrowings 37,734 37,704 37,611 37,734 37,611
Shareholders'
equity 204,241 201,380 200,443 204,241 200,443
Shareholders'
equity -
tangible (a) 158,815 155,789 154,176 158,815 154,176
AVERAGE BALANCES
Securities (d) $ 324,588 $ 345,035 $ 347,290 $ 324,588 $ 347,290
Loans held for
sale 2,414 4,758 2,055 2,414 2,055
Loans, net of
unearned
income 1,195,560 1,110,524 1,016,696 1,195,560 1,016,696
Interest-
earning
assets 1,574,460 1,515,597 1,424,808 1,574,460 1,424,808
Goodwill and
other
intangibles 45,517 45,693 46,441 45,517 46,441
Assets 1,699,730 1,643,250 1,551,124 1,699,730 1,551,124
Assets -
tangible (a) 1,654,213 1,597,557 1,504,683 1,654,213 1,504,683
Interest-
bearing
deposits 1,021,110 986,622 950,271 1,021,110 950,271
Deposits 1,392,117 1,345,743 1,260,534 1,392,117 1,260,534
Customer
repurchase
agreements 45,106 45,281 44,412 45,106 44,412
Other short-
term
borrowings 11,833 1,087 - 11,833 -
Long-term
borrowings 37,717 37,686 37,593 37,717 37,593
Shareholders'
equity 203,459 203,603 199,525 203,459 199,525
Shareholders'
equity -
tangible (a) 157,942 157,910 153,084 157,942 153,084
American National
Bankshares Inc.
Financial
Highlights
(In thousands,
except share,
ratio and
nonfinancial
data,
unaudited) 1st Qtr 4th Qtr 1st Qtr YTD YTD
2017 2016 2016 2017 2016
---------- ---------- ---------- ---------- ----------
CAPITAL
Average shares
outstanding -
basic 8,633,219 8,615,700 8,611,840 8,633,219 8,611,840
Average shares
outstanding -
diluted 8,651,139 8,629,777 8,617,008 8,651,139 8,617,008
ALLOWANCE FOR
LOAN LOSSES
Beginning
balance $ 12,801 $ 12,757 $ 12,601 $ 12,801 $ 12,601
Provision for
loan losses 300 50 50 300 50
Charge-offs (49) (81) (40) (49) (40)
Recoveries 56 75 64 56 64
---------- ---------- ---------- ---------- ----------
Ending balance $ 13,108 $ 12,801 $ 12,675 $ 13,108 $ 12,675
LOANS
Construction
and land
development $ 130,691 $ 114,258 $ 82,711 $ 130,691 $ 82,711
Commercial
real estate 538,069 510,960 424,538 538,069 424,538
Residential
real estate 216,035 215,104 225,737 216,035 225,737
Home equity 110,844 110,751 100,019 110,844 100,019
Commercial and
industrial 219,455 208,717 196,110 219,455 196,110
Consumer 4,864 5,031 5,449 4,864 5,449
---------- ---------- ---------- ---------- ----------
Total $1,219,958 $1,164,821 $1,034,564 $1,219,958 $1,034,564
NONPERFORMING
ASSETS AT
PERIOD-END
Nonperforming
loans:
90 days past
due and
accruing $ 1,061 $ 587 $ 371 $ 1,061 $ 371
Nonaccrual 2,428 2,965 4,905 2,428 4,905
Other real
estate owned 1,664 1,328 1,493 1,664 1,493
---------- ---------- ---------- ---------- ----------
Nonperforming
assets $ 5,153 $ 4,880 $ 6,769 $ 5,153 $ 6,769
ASSET QUALITY
RATIOS
Allowance for
loan losses
to total
loans 1.07% 1.10% 1.23% 1.07% 1.23%
Allowance for
loan losses
to
nonperforming
loans 375.70 360.39 240.24 375.70 240.24
Nonperforming
assets to
total assets 0.30 0.29 0.43 0.30 0.43
Nonperforming
loans to
total loans 0.29 0.30 0.51 0.29 0.51
Annualized net
charge-offs
(recoveries)
to average
loans 0.00 0.00 (0.01) 0.00 (0.01)
OTHER DATA
Fiduciary assets
at period-end
(e) (f) $ 519,901 $ 498,767 $ 491,257 $ 519,901 $ 491,257
Retail brokerage
assets at
period-end (e)
(f) $ 292,505 $ 282,454 $ 268,542 $ 292,505 $ 268,542
Number full-time
equivalent
employees (g) 326 320 301 326 301
Number of full
service offices 27 26 25 27 25
Number of loan
production
offices 2 2 2 2 2
Number of ATM's 34 34 33 34 33
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 gains or losses on the sale of OREO by net interest income
including tax equivalent income on nontaxable loans and securities and
noninterest income and excluding (i) gains or losses on securities and
(ii) gains or losses on sale of premises and equipment.
(d) - Average does not include unrealized gains and losses.
(e) - Market value.
(f) - Assets are not owned by the Company and are not reflected in the
consolidated balance sheet.
(g) - Average for quarter.
Net Interest Income Analysis
For the Three Months Ended March 31, 2017 and 2016
(in thousands, except rates)
Interest
Average Balance Income/Expense Yield/Rate
----------------------- ----------------- -------------
2017 2016 2017 2016 2017 2016
----------- ----------- -------- -------- ---- -------
Loans:
Commercial $ 219,922 $ 188,275 $ 2,054 $ 1,855 3.79% 3.96%
Real estate 973,215 824,970 10,624 10,090 4.37 4.89
Consumer 4,837 5,506 91 231 7.63 16.87
----------- ----------- -------- -------- ---- -------
Total loans 1,197,974 1,018,751 12,769 12,176 4.27 4.79
----------- ----------- -------- -------- ---- -------
Securities:
Federal agencies
& GSEs 96,965 88,283 442 378 1.82 1.71
Mortgage-backed &
CMOs 78,054 75,891 413 400 2.12 2.11
State and
municipal 131,397 166,187 1,152 1,493 3.51 3.59
Other 18,172 16,929 186 146 4.09 3.45
----------- ----------- -------- -------- ---- -------
Total
securities 324,588 347,290 2,193 2,417 2.70 2.78
----------- ----------- -------- -------- ---- -------
Deposits in other
banks 51,898 58,767 109 58 0.85 0.40
----------- ----------- -------- -------- ---- -------
Total interest-
earning assets 1,574,460 1,424,808 15,071 14,651 3.84 4.12
---- -------
Non-earning assets 125,270 126,316
----------- -----------
Total assets $ 1,699,730 $ 1,551,124
=========== ===========
Deposits:
Demand $ 215,930 $ 231,368 11 36 0.02 0.06
Money market 305,639 205,274 241 76 0.32 0.15
Savings 124,250 117,650 9 14 0.03 0.05
Time 375,291 395,979 939 1,171 1.01 1.19
----------- ----------- -------- -------- ---- -------
Total deposits 1,021,110 950,271 1,200 1,297 0.48 0.55
Customer repurchase
agreements 45,106 44,412 1 1 0.01 0.01
Other short-term
borrowings 11,833 - 27 - 0.91 -
Long-term
borrowings 37,717 37,593 319 289 3.38 3.08
----------- ----------- -------- -------- ---- -------
Total interest-
bearing
liabilities
1,115,766 1,032,276 1,547 1,587 0.56 0.62
-------- -------- ---- -------
Noninterest bearing
demand deposits 371,007 310,263
Other liabilities 9,498 9,060
Shareholders'
equity 203,459 199,525
----------- -----------
Total liabilities
and
shareholders'
equity
$ 1,699,730 $ 1,551,124
=========== ===========
Interest rate
spread 3.28% 3.50%
==== =======
Net interest margin 3.44% 3.67%
==== =======
Net interest income
(taxable
equivalent basis) 13,524 13,064
Less: Taxable
equivalent
adjustment 390 480
-------- --------
Net interest income $ 13,134 $ 12,584
======== ========
Contact: William W. TraynhamChief Financial Officer 434-773-2242 [email protected]
Source: American National Bankshares Inc.
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