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American National Bankshares Inc.: American National Bankshares Inc. Reports Third Quarter 2009 Earnings

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  Published in Business and Finance on Wednesday, October 21st 2009 at 15:49 GMT by Market Wire
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DANVILLE, VA--(Marketwire - October 21, 2009) - American National Bankshares Inc. (NASDAQ: [ AMNB ])

 -- Q3 net income of $2.2 million and diluted EPS of $0.35 per share -- Q3 net interest margin 3.91% -- Average shareholders' equity of $103 million represents 12.77% of assets 

American National Bankshares Inc. (NASDAQ: [ AMNB ]), parent company of American National Bank and Trust Company, today announced third quarter 2009 net income of $2,167,000 compared to $2,224,000 for the same quarter in 2008, a 2.6% decline. Basic earnings per share were $0.36 for the 2009 quarter, unchanged from the 2008 quarter. Diluted earnings per share were $0.35 for the 2009 quarter compared to $0.36 for the 2008 quarter. This net income produced returns on average assets and average equity of 1.07% and 8.38%, respectively. For the quarter, return on tangible equity was 11.30%.

Net income for the nine month period of 2009 was $4,641,000 compared to $6,338,000 for the comparable period of 2008, a 26.8% decline. Earnings per share, basic and diluted, were $0.76 for the 2009 period compared to $1.04, basic and diluted, for the 2008 period. Earnings for the 2009 period were adversely impacted by a first quarter $1.2 million pre-tax charge writing down other real estate owned and increased FDIC premiums and a special assessment.

Financial Performance and Overview

"Our third quarter net income was almost $2.2 million, down less than 3% from the same quarter a year ago," stated Charles H. Majors, President and Chief Executive Officer. "While we are not satisfied with these earnings, we are encouraged that American National continues to be solidly profitable and maintains its position as a well capitalized community bank.

"We believe that our primary corporate mission is to build shareholder value and that, over time, the primary driver of that process is the quality and consistency of our earnings. We think our shareholders are seeing the fruits of that strategy more than most of our peers. Our market price at the end of the quarter was 127% of book value. Our total shareholder return for the twelve months ended June 30, 2009 was sixth highest among publicly traded bank holding companies.

"During the third quarter, compared to the prior year quarter, we experienced decreases in service charge income and trust income and increased costs of deposit insurance. However, we were pleased, and somewhat surprised, that we did not have another special FDIC assessment comparable to the second quarter charge of $360,000. Further, our secondary market mortgage operation showed significant gains and net interest income improved over 2%.

"Businesses and consumers are continuing to deleverage their balance sheets. This macroeconomic trend is reflected in a 5.6% decline in our loan portfolio since year-end. These are difficult times, but we are optimistic that the business cycle will improve and, when that occurs, we will be prepared to resume quality growth in earning assets and profitability."

Capital

American National's capital ratios are among the highest in its peer group. At September 30, 2009, average shareholders' equity was 12.77% of average assets.

Credit Quality Measurements

Nonperforming assets ($3.1 million of non-accrual loans and $4.6 million of foreclosed real estate) were significantly below industry averages and represented 0.95% of total assets at September 30, 2009, compared to 0.91% at December 31, 2008. The allowance for loan losses was $8.3 million or 1.53% of loans at September 30, 2009 compared to 1.37% at December 31, 2008.

Net Interest Income

Net interest income increased to $7,000,000 in the third quarter of 2009 from $6,856,000 in the third quarter of 2008, an increase of 2.1%. Net interest income has been adversely impacted by historically low market interest rates. The Bank has mitigated the environment by reducing the cost of its interest bearing liabilities. The Company's net interest margin has improved one basis point (0.01%) in the third quarter 2009 compared to the same quarter in 2008, though for the nine month period the margin declined eight basis points (0.08%).

Noninterest Income

Noninterest income totaled $2,119,000 in the third quarter of 2009, compared with $2,062,000 in the third quarter of 2008, a 2.8% increase. Noninterest income continued to be negatively impacted by the market-related declines in trust and brokerage income. However, increases in secondary market mortgage income and smaller increases in other categories offset that negative impact.

Noninterest Expense

Noninterest expense totaled $5,598,000 in the third quarter of 2009, compared to $5,485,000 in the third quarter of 2008, a 2.1% increase. The major factor impacting noninterest expense was deposit insurance costs. During the third quarter the Bank incurred costs of $203,000 compared to $47,000 for the prior year quarter, over a 300% increase. For the nine month period FDIC costs increased $896,000, over a 1000% increase over the prior year. These increases were due primarily to industry-wide conditions which resulted in increased FDIC costs for all member banks.

About American National

American National Bankshares Inc. is a bank holding company with assets of $810 million. Headquartered in Danville, Virginia, it is the holding company of American National Bank and Trust Company, a community bank serving Southern and Central Virginia and the northern portion of Central North Carolina with nineteen banking offices. The Bank also manages an additional $423 million of assets in its Trust and Investment Services Division. Additional information is available on the Bank's website at [ www.amnb.com ]. The shares of American National Bankshares Inc. are traded on the NASDAQ Global Select Market under the symbol "AMNB."

Forward-Looking Statements

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 Company 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 Company'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 Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except share and per share data) Unaudited September 30 ---------------------------- ASSETS 2009 2008 ------------- ------------- Cash and due from banks $ 17,451 $ 25,136 Interest-bearing deposits in other banks 8,892 8,050 Securities available for sale, at fair value 181,953 134,114 Securities held to maturity 6,540 7,133 ------------- ------------- Total securities 188,493 141,247 ------------- ------------- Loans held for sale 3,840 2,269 Loans 539,188 576,598 Less allowance for loan losses (8,260) (8,083) ------------- ------------- Net Loans 530,928 568,515 ------------- ------------- Premises and equipment, net 19,390 16,459 Other real estate owned 4,558 707 Goodwill 22,468 22,468 Core deposit intangibles, net 1,792 2,169 Accrued interest receivable and other assets 12,534 13,625 ------------- ------------- Total assets $ 810,346 $ 800,645 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Demand deposits -- noninterest-bearing $ 105,100 $ 102,065 Demand deposits -- interest-bearing 92,012 107,228 Money market deposits 71,424 56,574 Savings deposits 62,420 59,563 Time deposits 265,339 263,627 ------------- ------------- Total deposits 596,295 589,057 Short-term borrowings: Customer repurchase agreements 71,339 44,951 Other short-term borrowings 4,000 25,920 Long-term borrowings 8,675 13,825 Trust preferred capital notes 20,619 20,619 Accrued interest payable and other liabilities 4,513 3,559 ------------- ------------- Total liabilities 705,441 697,931 ------------- ------------- Shareholders' equity: Common stock, $1 par, 10,000,000 shares authorized, 6,107,327 shares outstanding at September 30, 2009 and 6,090,804 shares outstanding at September 30, 2008 6,107 6,091 Capital in excess of par value 26,900 26,439 Retained earnings 71,445 70,962 Accumulated other comprehensive income (loss), net 453 (778) ------------- ------------- Total shareholders' equity 104,905 102,714 ------------- ------------- Total liabilities and shareholders' equity $ 810,346 $ 800,645 ============= ============= American National Bankshares Inc. and Subsidiaries Consolidated Statements of Income (Dollars in thousands, except share and per share data) Unaudited Three Months Ended Nine Months Ended September 30 September 30 -------------------- -------------------- 2009 2008 2009 2008 ---------- --------- --------- --------- Interest and Dividend Income: Interest and fees on loans $ 7,666 $ 8,916 $ 23,617 $ 27,347 Interest and dividends on securities: Taxable 1,241 1,179 3,594 3,644 Tax-exempt 434 388 1,236 1,240 Dividends 27 41 70 191 Other interest income 96 75 287 225 ---------- --------- --------- --------- Total interest and dividend income 9,464 10,599 28,804 32,647 ---------- --------- --------- --------- Interest Expense: Interest on deposits 1,921 2,845 6,628 9,543 Interest on short-term borrowings 135 429 548 1,340 Interest on long-term borrowings 65 126 276 423 Interest on trust preferred capital notes 343 343 1,030 1,030 ---------- --------- --------- --------- Total interest expense 2,464 3,743 8,482 12,336 ---------- --------- --------- --------- Net Interest Income 7,000 6,856 20,322 20,311 Provision for loan losses 492 280 1,334 1,020 ---------- --------- --------- --------- Net Interest Income After Provision for Loan Losses 6,508 6,576 18,988 19,291 ---------- --------- --------- --------- Noninterest Income: Trust fees 813 901 2,338 2,697 Service charges on deposit accounts 536 603 1,549 1,769 Other fees and commissions 257 193 750 622 Mortgage banking income 361 238 1,215 633 Brokerage fees 23 126 153 370 Securities gains (losses), net 1 (87) 2 (195) Impairment of securities - - - (255) Net loss on foreclosed real estate - - (1,222) (7) Other 128 88 321 404 ---------- --------- --------- --------- Total noninterest income 2,119 2,062 5,106 6,038 ---------- --------- --------- --------- Noninterest Expense: Salaries 2,471 2,466 7,734 7,416 Employee benefits 806 688 2,451 2,212 Occupancy and equipment 704 684 2,174 2,120 FDIC assessment 203 47 984 88 Bank franchise tax 160 172 483 522 Core deposit intangible amortization 94 94 283 283 Other 1,160 1,334 3,685 3,936 ---------- --------- --------- --------- Total noninterest expense 5,598 5,485 17,794 16,577 ---------- --------- --------- --------- Income Before Income Taxes 3,029 3,153 6,300 8,752 Income Taxes 862 929 1,659 2,414 ---------- --------- --------- --------- Net Income $ 2,167 $ 2,224 $ 4,641 $ 6,338 ========== ========= ========= ========= Net Income Per Common Share: Basic $ 0.36 $ 0.36 $ 0.76 $ 1.04 Diluted $ 0.35 $ 0.36 $ 0.76 $ 1.04 Average Common Shares Outstanding: Basic 6,104,505 6,093,851 6,094,261 6,099,933 Diluted 6,111,913 6,100,089 6,098,221 6,109,947 American National Bankshares Inc. and Subsidiaries Financial Highlights (In thousands, except share, ratio and nonfinancial data, unaudited) 3rd Qtr 2nd Qtr 3rd Qtr YTD YTD 2009 2009 2008 2009 2008 --------- --------- --------- --------- --------- EARNINGS Interest income $ 9,464 $ 9,690 $ 10,599 $ 28,804 $ 32,647 Interest expense 2,464 2,781 3,743 8,482 12,336 Net interest income 7,000 6,909 6,856 20,322 20,311 Provision for loan losses 492 492 280 1,334 1,020 Noninterest income 2,119 2,253 2,062 5,106 6,038 Noninterest expense 5,598 6,321 5,485 17,794 16,577 Income taxes 862 643 929 1,659 2,414 Net income 2,167 1,706 2,224 4,641 6,338 PER COMMON SHARE Earnings per share - basic $ 0.36 $ 0.28 $ 0.36 $ 0.76 $ 1.04 Earnings per share - diluted 0.35 0.28 0.36 0.76 1.04 Cash dividends declared 0.23 0.23 0.23 0.69 0.69 Book value per share 17.18 16.82 16.86 17.18 16.86 Book value per share - tangible (a) 13.20 12.83 12.82 13.20 12.82 Closing market price 21.82 19.25 18.00 21.82 18.00 FINANCIAL RATIOS Return on average assets 1.07% 0.84% 1.13% 0.77% 1.08% Return on average equity 8.38 6.63 8.72 6.00 8.26 Return on average tangible equity (b) 11.30 9.05 11.84 8.22 11.25 Average equity to average assets 12.77 12.66 12.97 12.74 13.02 Net interest margin, taxable equivalent 3.91 3.84 3.90 3.79 3.87 Efficiency ratio 59.77 66.98 59.51 65.07 60.33 Effective tax rate 28.46 27.37 29.46 26.33 27.58 PERIOD-END BALANCES Securities $ 188,493 $ 151,418 $ 141,247 $ 188,493 $ 141,247 Loans held for sale 3,840 10,408 2,269 3,840 2,269 Loans 539,188 557,042 576,598 539,188 576,598 Goodwill and other intangibles 24,260 24,354 24,637 24,260 24,637 Assets 810,346 811,483 800,645 810,346 800,645 Assets - tangible (a) 786,086 787,129 776,008 786,086 776,008 Deposits 596,295 615,231 589,057 596,295 589,057 Customer repurchase agreements 71,339 59,437 44,951 71,339 44,951 Other short-term borrowings 4,000 - 25,920 4,000 25,920 Long-term borrowings 29,294 29,331 34,444 29,294 34,444 Shareholders' equity 104,905 102,618 102,714 104,905 102,714 Shareholders' equity - tangible (a) 80,645 78,264 78,077 80,645 78,077 AVERAGE BALANCES Securities $ 159,314 $ 147,576 $ 141,697 $ 148,415 $ 147,863 Loans held for sale 6,540 7,787 1,986 5,788 1,936 Loans 547,075 562,654 572,196 559,938 563,667 Interest-earning assets 741,194 744,899 724,368 740,399 722,619 Goodwill and other intangibles 24,314 24,406 24,695 24,408 24,781 Assets 810,064 812,404 786,804 808,761 785,372 Assets - tangible (a) 785,750 787,998 762,109 784,353 760,591 Interest-bearing deposits 503,793 513,876 480,133 509,470 480,806 Deposits 606,134 612,134 577,263 607,440 578,922 Customer repurchase agreements 65,341 60,876 51,038 60,790 53,069 Other short-term borrowings 460 1,553 17,589 1,355 11,808 Long-term borrowings 29,325 30,460 34,474 31,376 34,195 Shareholders' equity 103,411 102,862 102,052 103,060 102,290 Shareholders' equity - tangible (a) 79,097 78,456 77,357 78,652 77,509 CAPITAL Average shares outstanding - basic 6,104,505 6,096,034 6,093,851 6,094,261 6,099,933 Average shares outstanding - diluted 6,111,913 6,097,047 6,100,089 6,098,221 6,109,947 Shares repurchased - - 7,850 7,600 39,050 Average price of shares repurchased $ - $ - $ 17.42 $ 15.92 $ 20.16 ALLOWANCE FOR LOAN LOSSES Beginning balance $ 7,934 $ 7,836 $ 7,932 $ 7,824 $ 7,395 Provision for loan losses 492 492 280 1,334 1,020 Charge-offs (318) (422) (179) (1,116) (552) Recoveries 152 28 50 218 220 --------- --------- --------- --------- --------- Ending balance $ 8,260 $ 7,934 $ 8,083 $ 8,260 $ 8,083 LOANS Construction and land development $ 46,175 $ 50,930 $ 65,826 $ 46,175 $ 65,826 Commercial real estate 209,470 210,832 208,046 209,470 208,046 Residential real estate 126,392 128,835 139,683 126,392 139,683 Home equity 62,519 61,818 55,665 62,519 55,665 Commercial and industrial 87,226 96,978 99,139 87,226 99,139 Consumer 7,406 7,649 8,239 7,406 8,239 --------- --------- --------- --------- --------- Total $ 539,188 $ 557,042 $ 576,598 $ 539,188 $ 576,598 NONPERFORMING ASSETS AT PERIOD-END Nonperforming loans: 90 days past due $ - $ - $ - $ - $ - Nonaccrual 3,106 2,745 6,674 3,106 6,674 Foreclosed real estate 4,558 4,033 707 4,558 707 --------- --------- --------- --------- --------- Nonperforming assets $ 7,664 $ 6,778 $ 7,381 $ 7,664 $ 7,381 ASSET QUALITY RATIOS Annualized net chargeoffs to average loans 0.12% 0.28% 0.09% 0.21% 0.08% Nonperforming assets to total assets 0.95 0.84 0.92 0.95 0.92 Nonperforming loans to total loans 0.58 0.49 1.16 0.58 1.16 Allowance for loan losses to total loans 1.53 1.42 1.40 1.53 1.40 Allowance for loan losses to nonperforming loans 265.94 289.03 121.11 265.94 121.11 OTHER DATA Fiduciary assets at period-end (c) $ 354,860 $ 333,754 $ 368,341 $ 354,860 $ 368,341 Retail brokerage assets at period-end (c) $ 63,893 $ 89,016 $ 91,026 $ 63,893 $ 91,026 Number full time-time equivalent employees (d) 246 255 258 246 258 Number of full service offices 19 19 20 19 20 Number of loan production offices 2 2 1 2 1 Number of ATM's 24 24 23 24 23 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 N/A - Percentage change is not applicable or not meaningful Net Interest Income Analysis For the Three Months Ended September 30, 2009 and 2008 (in thousands, except rates) Interest Average Balance Income/Expense Yield/Rate ------------------- ------------------- ------------------ 2009 2008 2009 2008 2009 2008 --------- --------- --------- --------- -------- -------- Loans: Commercial $ 85,894 $ 94,575 $ 1,027 $ 1,423 4.78% 6.02% Real estate 460,253 471,162 6,508 7,323 5.66 6.22 Consumer 7,468 8,445 158 192 8.46 9.09 --------- --------- --------- --------- -------- -------- Total loans 553,615 574,182 7,693 8,938 5.56 6.23 --------- --------- --------- --------- -------- -------- Securities: Federal agencies and GSE 56,706 43,543 538 534 3.80 4.91 Mortgage-backed & CMO's 37,609 48,000 506 607 5.38 5.06 State and municipal 56,665 44,104 798 602 5.63 5.46 Other 8,334 6,050 80 54 3.84 3.57 --------- --------- --------- --------- -------- -------- Total securities 159,314 141,697 1,922 1,797 4.83 5.07 --------- --------- --------- --------- -------- -------- Deposits in other banks 28,265 8,489 96 75 1.36 3.53 --------- --------- --------- --------- -------- -------- Total interest- earning assets 741,194 724,368 9,711 10,810 5.24 5.97 --------- --------- -------- -------- Non-earning assets 68,870 62,436 --------- --------- Total assets $ 810,064 $ 786,804 ========= ========= Deposits: Demand $ 94,869 $ 110,230 31 215 0.13 0.78 Money market 76,416 54,642 107 246 0.56 1.80 Savings 62,985 60,499 38 76 0.24 0.50 Time 269,523 254,762 1,745 2,308 2.59 3.62 --------- --------- --------- --------- -------- -------- Total deposits 503,793 480,133 1,921 2,845 1.53 2.37 Customer repurchase agreements 65,341 51,038 134 313 0.82 2.45 Other short-term borrowings 460 17,589 1 116 0.87 2.64 Long-term borrowings 29,325 34,474 408 469 5.57 5.44 --------- --------- --------- --------- -------- -------- Total interest- bearing liabilities 598,919 583,234 2,464 3,743 1.65 2.57 --------- --------- -------- -------- Noninterest bearing demand deposits 102,341 97,130 Other liabilities 5,393 4,388 Shareholders' equity 103,411 102,052 --------- --------- Total liabilities and shareholders' equity $ 810,064 $ 786,804 ========= ========= Interest rate spread 3.59% 3.40% ======== ======== Net interest margin 3.91% 3.90% ======== ======== Net interest income (taxable equivalent basis) 7,247 7,067 Less: Taxable equivalent adjustment 247 211 --------- --------- Net interest income $ 7,000 $ 6,856 ========= ========= Net Interest Income Analysis For the Nine Months Ended September 30, 2009 and 2008 (in thousands, except rates) Interest Average Balance Income/Expense Yield/Rate ------------------- ------------------- ------------------ 2009 2008 2009 2008 2009 2008 --------- --------- --------- --------- -------- -------- Loans: Commercial $ 91,193 $ 90,301 $ 3,227 $ 4,219 4.72% 6.23% Real estate 466,787 466,346 19,956 22,580 5.70 6.46 Consumer 7,746 8,956 511 606 8.80 9.02 --------- --------- --------- --------- -------- -------- Total loans 565,726 565,603 23,694 27,405 5.58 6.46 --------- --------- --------- --------- -------- -------- Securities: Federal agencies and GSE 49,606 46,428 1,584 1,682 4.26 4.83 Mortgage-backed & CMO's 41,158 48,588 1,618 1,852 5.24 5.08 State and municipal 50,439 46,376 2,133 1,910 5.64 5.49 Other 7,212 6,471 185 243 3.42 5.01 --------- --------- --------- --------- -------- -------- Total securities 148,415 147,863 5,520 5,687 4.96 5.13 --------- --------- --------- --------- -------- -------- Deposits in other banks 26,258 9,153 287 225 1.46 3.28 --------- --------- --------- --------- -------- -------- Total interest- earning assets 740,399 722,619 29,501 33,317 5.31 6.15 --------- --------- -------- -------- Non-earning assets 68,362 62,753 --------- --------- Total assets $ 808,761 $ 785,372 ========= ========= Deposits: Demand $ 99,860 $ 108,463 263 600 0.35 0.74 Money market 73,112 52,365 453 779 0.83 1.98 Savings 62,284 62,107 115 276 0.25 0.59 Time 274,214 257,871 5,797 7,888 2.82 4.08 --------- --------- --------- --------- -------- -------- Total deposits 509,470 480,806 6,628 9,543 1.73 2.65 Customer repurchase agreements 60,790 53,069 543 1,103 1.19 2.77 Other short-term borrowings 1,355 11,808 5 237 0.49 2.68 Long-term borrowings 31,376 34,195 1,306 1,453 5.55 5.67 --------- --------- --------- --------- -------- -------- Total interest- bearing liabilites 602,991 579,878 8,482 12,336 1.88 2.84 --------- --------- -------- -------- Noninterest bearing demand deposits 97,970 98,116 Other liabilities 4,740 5,088 Shareholders' equity 103,060 102,290 --------- --------- Total liabilities and share- holders' equity $ 808,761 $ 785,372 ========= ========= Interest rate spread 3.43% 3.31% Net interest margin 3.79% 3.87% ======== ======== Net interest income (taxable equivalent basis) 21,019 20,981 Less: Taxable equivalent adjustment 697 670 --------- --------- Net interest income $ 20,322 $ 20,311 ========= =========