American National Bankshares Inc. Announces Increased Earnings for Second Quarter29 July 2006
American National Bankshares Inc. (Nasdaq: AMNB), parent company of American National Bank and Trust Company, announced second quarter 2006 net income of $3.0 million, a 23.8% increase over the second quarter of 2005. Basic earnings per share increased 11.4% to $0.49, from $0.44 in the year earlier quarter; diluted earnings per share increased 9.1% to $0.48, from $0.44 in the second quarter of 2005.
The recently completed quarter includes the results of the acquisition of Community First Financial Corporation ("Community First") which occurred on April 1, 2006. The merger was accounted for as a purchase under generally accepted accounting principles. Accordingly, all assets and liabilities of Community First were recorded at estimated fair market value as of the merger date. In accordance with these accounting principles, certain valuation adjustments, such as the ones pertaining to loans and deposits, are being amortized over the estimated lives of those assets and liabilities.
"The financial results for the second quarter are extremely gratifying," stated Charles H. Majors, President and Chief Executive Officer, "but even more gratifying is the fact that we completed the acquisition and the related systems conversion during the quarter with no major problems. For this, I express my sincere gratitude to the employees of our company who worked so hard to make the conversion a success. I also wish to welcome our new customers. We intend to earn their continued business by offering quality financial services with exceptional customer service. I welcome our new shareholders and trust that they will benefit from their investment in American National. Lastly, I welcome Dr. Frank C. Crist, who previously served as chairman of Community First Financial Corporation, to the board of directors."
Net Interest Income
Comparing the second quarter of 2006 to the second quarter of 2005, net interest income, the Company's largest source of revenue, increased $1.8 million, or 30.5%. The improvement was due largely to the impact of the Community First acquisition, which significantly increased the Company's interest-earning assets. Average interest-earning assets increased from $597.2 million in the second quarter of 2005 to $749.7 million in the recently completed quarter. Second quarter 2006 interest income included a positive impact of $134,000 related to the valuation of Community First's loans. Similarly, interest expense for the quarter was reduced by $66,000 related to the valuation of certain Community First deposits. Beginning April 1, 2006, the loan valuation is being amortized over fifty-two months and the deposit valuation over thirteen months. Excluding these purchase accounting adjustments, net interest income increased $1.6 million or 27.1%. The Company's net interest margin, on a fully taxable equivalent basis, was 4.24% during the second quarter of 2006. Excluding the effects of the aforementioned purchase accounting adjustments for loans and deposits, the net interest margin was 4.13%, compared to 4.14% during both the same quarter of 2005 and the first quarter of 2006.
To meet its funding needs for the Community First acquisition, the Company issued $20.6 million of trust preferred securities during the second quarter of 2006. These securities bear interest at a fixed rate of 6.66% for five years, after which the interest rate will vary quarterly based on changes in the ninety-day LIBOR index. The Company may repay all or a portion of the securities after five years. Interest expense associated with these securities was $320,000 during the quarter.
For the first six months of 2006, net interest income was $13.7 million, up from $11.8 million for the first half of 2005. The increase is attributable to the acquisition of Community First and to general increases in interest rates.
Noninterest Income
Noninterest income rose 15.8% from $2.0 million in the second quarter of 2005 to $2.3 million in the second quarter of 2006. The increase is primarily the result of higher trust and investment services fees, increased mortgage banking income, and the effect of the Community First acquisition. Noninterest income for the first half of 2006 was $4.2 million, up $143,000 or 3.6% over the first half of 2005. During the first quarter of 2005, the Company received $320,000 of nonrecurring income from the sale of its membership in a debit card processor.
Noninterest Expense
Noninterest expense increased $1.1 million from the second quarter of 2005 to 2006, due in large part to the impact of the Community First acquisition, the Company's initial expansion into the Lynchburg, Virginia market in 2005, and an increase in pension and other employee benefit expense. All personnel and other costs associated with operating the four Community First banking offices are included in the recently completed quarter. Approximate nonrecurring merger expenses incurred during the quarter were $118,000, and consisted primarily of consulting fees and severance payments to former Community First employees. Amortization expense during the second quarter of 2006 related to the Community First core deposit intangible asset was $94,000. Beginning April 1, 2006, this asset is being amortized over ninety-nine months.
For the first half of 2006, noninterest expense was $9.7 million, up 18.6% from $8.2 million during the first half of 2005. Approximate nonrecurring merger expenses during the first six months of 2006 were $172,000.
Deposits and Loans
Average deposits were $638.0 million during the recently completed quarter, up from $480.6 million during the comparable 2005 period. Average loans were $550.7 million during the second quarter of 2006, compared with $420.6 million in the second quarter of 2005. For the first half of 2006, average loans increased 15.9% over 2005. The increases in loans and deposits are primarily the result of the Community First acquisition.
Allowance for Loan Losses and Credit Quality
The allowance for loan losses represented 1.49% of loans at June 30, 2006, down significantly from 2.01% at June 30, 2005, and down slightly from 1.50% at March 31, 2006. Nonperforming assets were $5.0 million or 0.61% of assets at June 30, 2006, compared with 1.40% one year earlier and 0.69% at March 31, 2006.
About American National
American National Bankshares Inc. is the holding company of American National Bank and Trust Company, a community bank with eighteen full service offices serving the areas of Danville, Pittsylvania County, Martinsville, Henry County, South Boston, Halifax County, Lynchburg, Bedford, Bedford County, Campbell County, and portions of Nelson County in Virginia, along with portions of Caswell County in North Carolina. The Bank also operates a loan production office in Greensboro, North Carolina.
American National Bank and Trust Company provides a full array of financial products and services, including commercial, mortgage, and consumer banking; trust and investment services; and insurance. Services are also provided through twenty-three ATMs, "AmeriLink" Internet banking, and 24-hour "Access American" phone banking. Additional information is available on the Bank's website at http://www.amnb.com. The shares of American National Bankshares Inc. are traded on the NASDAQ Global Select Market under the symbol "AMNB."
This press release may contain "forward-looking statements," within the meaning of federal securities laws that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Corporation 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; and significant changes in securities markets. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Corporation's most recent Form 10-K report and other documents filed with the Securities and Exchange Commission. American National Bankshares Inc. 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 Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except share data)
Unaudited
June 30
ASSETS 2006 2005
Cash and due from banks $19,352 $14,363
Interest-bearing deposits in other banks 16,425 7,030
Securities available for sale, at
fair value 157,636 147,633
Securities held to maturity 15,501 19,221
Total securities 173,137 166,854
Loans held for sale 1,005 1,470
Loans, net of unearned income 551,434 416,528
Less allowance for loan losses (8,208) (8,378)
Net Loans 543,226 408,150
Bank premises and equipment, net 12,640 7,610
Goodwill 22,517 -
Core deposit intangibles, net 3,071 259
Accrued interest receivable and other assets 19,195 11,117
Total assets $810,568 $616,853
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing $109,161 $91,653
Demand deposits -- interest-bearing 119,767 76,541
Money market deposits 48,111 39,289
Savings deposits 81,078 81,157
Time deposits 274,505 190,552
Total deposits 632,622 479,192
Repurchase agreements 43,667 44,241
FHLB borrowings 17,163 19,313
Trust preferred capital notes 20,619 -
Accrued interest payable and other
liabilities 4,666 2,814
Total liabilities 718,737 545,560
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares
authorized, 6,162,490 shares outstanding
at June 30, 2006 and 5,445,186 shares
outstanding at June 30, 2005 6,162 5,445
Capital in excess of par value 26,353 9,382
Retained earnings 61,423 56,810
Accumulated other comprehensive
income (loss), net (2,107) (344)
Total shareholders' equity 91,831 71,293
Total liabilities and
shareholders' equity $810,568 $616,853
American National Bankshares Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
Interest Income:
Interest and fees on loans $10,089 $6,382 $17,045 $12,414
Interest and dividends on
securities:
Taxable 1,358 1,021 2,510 2,140
Tax-exempt 430 497 881 1,024
Dividends 78 59 135 105
Other interest income 191 28 423 70
Total interest
income 12,146 7,987 20,994 15,753
Interest Expense:
Deposits 3,538 1,612 5,845 3,132
Repurchase agreements 335 214 644 367
Other borrowings 242 251 455 495
Trust preferred capital notes 320 - 320 -
Total interest expense 4,435 2,077 7,264 3,994
Net Interest Income 7,711 5,910 13,730 11,759
Provision for Loan Losses 354 240 480 540
Net Interest Income After
Provision for Loan Losses 7,357 5,670 13,250 11,219
Noninterest Income:
Trust and investment services 885 767 1,640 1,487
Service charges on deposit
accounts 737 632 1,308 1,191
Other fees and commissions 292 273 601 524
Mortgage banking income 203 165 336 265
Securities gains, net 17 - 38 45
Other 133 121 245 513
Total noninterest
income 2,267 1,958 4,168 4,025
Noninterest Expense:
Salaries 2,527 2,049 4,511 3,921
Pension and other employee
benefits 673 503 1,322 971
Occupancy and equipment 744 633 1,390 1,234
Bank franchise tax 170 134 310 272
Core deposit intangible
amortization 134 113 173 225
Other 1,108 788 2,033 1,588
Total noninterest
expense 5,356 4,220 9,739 8,211
Income Before Income Tax
Provision 4,268 3,408 7,679 7,033
Income Tax Provision 1,266 984 2,271 2,026
Net Income $3,002 $2,424 $5,408 $5,007
Net Income Per Common Share:
Basic $0.49 $0.44 $0.93 $0.91
Diluted $0.48 $0.44 $0.93 $0.90
Average Common Shares
Outstanding:
Basic 6,172,522 5,472,021 5,805,287 5,491,211
Diluted 6,207,543 5,517,736 5,840,871 5,538,074
Financial Highlights
American National Bankshares Inc. and Subsidiary
(Dollars in thousands,
except share data, unaudited) Three Months Ended June 30
2006 2005 Change
EARNINGS
Interest income $12,146 $7,987 52.1 %
Interest expense 4,435 2,077 113.5
Net interest income 7,711 5,910 30.5
Provision for loan losses 354 240 47.5
Noninterest income 2,267 1,958 15.8
Noninterest expense 5,356 4,220 26.9
Income taxes 1,266 984 28.7
Net income 3,002 2,424 23.8
PER COMMON SHARE
Earnings per share - basic $0.49 $0.44 11.4 %
Earnings per share - diluted 0.48 0.44 9.1
Cash dividends paid 0.22 0.21 4.8
FINANCIAL RATIOS
Return on average assets 1.48 % 1.56 % (8)bp
Return on average equity 13.38 13.58 (20)
Return on average tangible equity (b) 19.52 14.09 543
Average equity to average assets 11.07 11.52 (45)
Net interest margin (FTE) 4.24 4.14 10
Efficiency ratio 54.01 51.87 214
AVERAGE BALANCES
Securities $183,393 $172,577 6.3 %
Total loans 550,706 420,612 30.9
Interest-earning assets 749,709 597,153 25.5
Goodwill and other intangibles 26,268 304 N/A
Assets 810,627 619,758 30.8
Assets - tangible (a) 784,359 619,454 26.6
Interest-bearing deposits 525,889 397,602 32.3
Deposits 638,020 480,625 32.7
Repurchase agreements 41,594 44,274 (6.1)
Other borrowings 37,878 21,426 76.8
Shareholders' equity 89,729 71,397 25.7
Shareholders' equity - tangible (a) 63,461 71,093 (10.7)
CAPITAL
Average shares outstanding - basic 6,172,522 5,472,021 12.8 %
Average shares outstanding -
diluted 6,207,543 5,517,736 12.5
Shares repurchased 17,300 48,950 (64.7)
Average price of shares repurchased $23.25 $24.39 (4.7)
ALLOWANCE FOR LOAN LOSSES
Beginning balance $6,164 $8,127 (24.2)%
Allowance acquired in merger 1,598
Provision for loan losses 354 240 47.5
Charge-offs (75) (39) 92.3
Recoveries 167 50 234.0
Ending balance $8,208 $8,378 (2.0)
ASSET QUALITY RATIOS (c)
Net chargeoffs (recoveries) to
average loans (0.07)% (0.01)% (6)bp
Financial Highlights
American National Bankshares Inc. and Subsidiary
(Dollars in thousands,
except share data, unaudited) Six Months Ended June 30
2006 2005 Change
EARNINGS
Interest income $20,994 $15,753 33.3 %
Interest expense 7,264 3,994 81.9
Net interest income 13,730 11,759 16.8
Provision for loan losses 480 540 (11.1)
Noninterest income 4,168 4,025 3.6
Noninterest expense 9,739 8,211 18.6
Income taxes 2,271 2,026 12.1
Net income 5,408 5,007 8.0
PER COMMON SHARE
Earnings per share - basic $0.93 $0.91 2.2 %
Earnings per share - diluted 0.93 0.90 3.3
Cash dividends paid 0.43 0.41 4.9
Book value per share 14.90 13.09 13.8
Book value per share - tangible (a) 10.75 13.05 (17.6)
Closing market price 23.13 23.58 (1.9)
FINANCIAL RATIOS
Return on average assets 1.50 % 1.61 % (11)bp
Return on average equity 13.32 14.07 (75)
Return on average tangible equity (b) 16.28 14.60 168
Average equity to average assets 11.25 11.47 (22)
Net interest margin (FTE) 4.19 4.12 7
Efficiency ratio 53.96 50.31 365
PERIOD END BALANCES
Securities $173,137 $166,854 3.8 %
Loans held for sale 1,005 1,470 (31.6)
Loans, net of unearned income 551,434 416,528 32.4
Goodwill and other intangibles 25,588 259 N/A
Assets 810,568 616,853 31.4
Assets - tangible (a) 784,980 616,594 27.3
Deposits 632,622 479,192 32.0
Repurchase agreements 43,667 44,241 (1.3)
FHLB borrowings 17,163 19,313 (11.1)
Trust preferred capital notes 20,619 - N/A
Shareholders' equity 91,831 71,293 28.8
Shareholders' equity - tangible (a) 66,243 71,034 (6.7)
AVERAGE BALANCES
Securities $177,796 $176,586 0.7 %
Total loans 481,818 415,598 15.9
Interest-earning assets 678,053 597,583 13.5
Goodwill and other intangibles 13,260 360 N/A
Assets 721,685 620,333 16.3
Assets - tangible (a) 708,425 619,973 14.3
Interest-bearing deposits 469,624 402,860 16.6
Deposits 570,098 483,605 17.9
Repurchase agreements 40,772 41,813 (2.5)
Other borrowings 27,070 21,360 26.7
Shareholders' equity 81,194 71,163 14.1
Shareholders' equity - tangible (a) 67,934 70,803 (4.1)
CAPITAL
Average shares outstanding - basic 5,805,287 5,491,211 5.7 %
Average shares outstanding -
diluted 5,840,871 5,538,074 5.5
Shares repurchased 31,200 79,350 (60.7)
Average price of shares repurchased $23.28 $24.54 (5.1)
ALLOWANCE FOR LOAN LOSSES
Beginning balance $6,109 $7,982 (23.5)%
Allowance acquired in merger 1,598
Provision for loan losses 480 540 (11.1)
Charge-offs (226) (272) (16.9)
Recoveries 247 128 93.0
Ending balance $8,208 $8,378 (2.0)
NONPERFORMING ASSETS
Nonperforming loans:
90 days past due $226 $290 (22.1)%
Nonaccrual 4,297 8,216 (47.7)
Foreclosed real estate 435 158 175.3
Nonperforming assets $4,958 $8,664 (42.8)
ASSET QUALITY RATIOS (c)
Net chargeoffs (recoveries) to
average loans (0.01)% 0.07 % (8)bp
Nonperforming assets to total
assets 0.61 1.40 (79)
Nonperforming loans to total loans 0.82 2.04 (122)
Allowance for loan losses to total
loans 1.49 2.01 (52)
Allowance for loan losses
to nonperforming loans 1.81 0.98 83
Notes:
(a) - Excludes goodwill and other intangible assets
(b) - Excludes amortization expense, net of tax, of intangible assets
(c) - Balance sheet amounts used in calculations are based on period end
balances
bp - Change is measured as difference in basis points
FTE - Fully taxable equivalent basis
N/A - Percentage change is not applicable or not meaningful
Source: prnewswire
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