SOURCE: American National Bankshares Inc.

American National Bankshares Inc.

April 20, 2017 16:05 ET

American National Bankshares Inc. Reports First Quarter 2017 Earnings

DANVILLE, VA--(Marketwired - April 20, 2017) -

  • 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         
                   

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