DANVILLE, Va., April 21 /PRNewswire-FirstCall/ -- American National Bankshares Inc. , parent company of American National Bank and Trust Company, today announced first quarter net income of $2.31 million. Earnings per share were $0.38 on both a basic and diluted basis.
This net income produced annualized returns on average assets and average equity of 1.18% and 9.01%, respectively. Annualized return on average tangible equity was 12.24%. Net income declined from $2.70 million, or $0.44 per share, in the first quarter of 2007.
"We are pleased to report solid results amidst very challenging market conditions," stated President and Chief Executive Officer Charles H. Majors. "Changes in the economy have resulted in a national climate of low interest rates, compressed interest margins, reductions in employment and business growth, and concerns about the ability of borrowers to make their loan payments. We anticipate our first quarter results will continue to place our company's performance well above industry averages. However, while these results are satisfying for most financial companies, they are not up to the high standards of American National. Consequently, the Company is working even harder on initiatives involving interest margin management, expense control, retention and expansion of profitable customer relationships, operational efficiency, and capital management. At the same time, we will continue our efforts to maintain a loan portfolio with high credit quality. I believe that, as a result of our continued focus on these important areas, the Company will emerge from this economic cycle in a position of strength."
Credit Quality Remains Favorable
Nonperforming assets represented 0.42% of total assets at March 31, 2008, down from 0.48% one year earlier and consistent with the previous quarter-end. Annualized net charge-offs were 0.08% of average loans during the quarter. The provision for loan losses totaled $140,000 during the first quarter of 2008, down from $303,000 in the first quarter of 2007, and exceeded net charge-offs by $30,000 in the current quarter. "We are very pleased with our credit quality during these uncertain economic times," stated Majors. "Our levels of nonperforming assets and charge-offs are significantly less than our peer group and reflect our conservative underwriting practices."
Net Interest Income Impacted by Extreme Changes In Interest Rates
The decline in net income over the first quarter of 2007 is largely the result of a decrease in net interest income, the Company's largest source of revenue. Beginning in September 2007, the Federal Reserve lowered interest rates quickly and significantly; as a result, rates earned on loans fell more quickly than rates paid on deposits. This led to a drop in the Company's net interest margin and a 5.8% decrease in net interest income over the first quarter of 2007. The net interest margin was 3.88% in the first quarter of 2008 compared to 4.13% in the year-earlier period. Year-over-year growth in quarterly average loans and deposits was not significant enough to overcome the decline in the net interest margin. Loans increased 2.1% on average, while average deposits and customer repurchase agreements, excluding brokered and institutional deposits, increased 1.6%.
Noninterest Income $2.14 Million
Noninterest income, the Company's other source of revenue, totaled $2.14 million in the first quarter of 2008, a decline of 3.5% over the first quarter of 2007. A 60.7% increase in retail brokerage fees was more than offset by decreases in deposit account service charges and other income. Service charges on deposit accounts declined $57,000, or 9.2%, primarily due to a drop in customer overdraft activity. Trust fees remained the Company's largest source of noninterest income and were virtually unchanged from the first quarter of 2007. Volatility in the financial markets negatively impacted account asset values, which offset the income from new account activity. A substantial portion of Trust fees are earned based on account values. Mortgage banking income, other fees and commissions, and net securities gains all recorded slight increases over the first quarter of 2007.
Noninterest Expense Up 5.4% Over the First Quarter of 2007
Noninterest expense totaled $5.45 million in the first quarter of 2008, up 5.4% over the same quarter of 2007, due primarily to general increases in personnel expense and to increases in occupancy and equipment expense. Noninterest expense was impacted by investments in new operational technology, costs associated with the Company's new offices at Smith Mountain Lake and Bedford, Virginia, and $44,000 in one-time costs associated with the termination of a lease.
About American National
American National Bankshares Inc. is a bank holding company with assets of $785 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 and a loan production office. The Bank also manages an additional $476 million of assets in its Trust and Investment Services Division.
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."
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 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 Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except share data) Unaudited March 31 ASSETS 2008 2007 Cash and due from banks $20,310 $22,844 Interest-bearing deposits in other banks 4,218 22,817 Securities available for sale, at fair value 149,636 138,533 Securities held to maturity 11,039 13,475 Total securities 160,675 152,008 Loans held for sale 1,681 2,017 Loans, net of unearned income 554,667 543,357 Less allowance for loan losses (7,425) (7,590) Net Loans 547,242 535,767 Premises and equipment, net 13,392 12,759 Goodwill 22,468 22,468 Core deposit intangibles, net 2,358 2,735 Accrued interest receivable and other assets 12,705 14,129 Total assets $785,049 $787,544 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Demand deposits -- noninterest-bearing $101,195 $116,940 Demand deposits -- interest-bearing 103,365 113,778 Money market deposits 52,574 52,856 Savings deposits 64,198 69,083 Time deposits 260,207 253,377 Total deposits 581,539 606,034 Repurchase agreements 58,179 44,526 FHLB borrowings 16,125 15,050 Trust preferred capital notes 20,619 20,619 Accrued interest payable and other liabilities 5,714 4,675 Total liabilities 682,176 690,904 Shareholders' equity: Common stock, $1 par, 10,000,000 shares authorized, 6,100,185 shares outstanding at March 31, 2008 and 6,156,823 shares outstanding at March 31, 2007 and 6,100 6,157 Capital in excess of par value 26,472 26,456 Retained earnings 69,866 65,726 Accumulated other comprehensive income (loss), net 435 (1,699) Total shareholders' equity 102,873 96,640 Total liabilities and shareholders' equity $785,049 $787,544 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 2008 2007 Interest and Dividend Income: Interest and fees on loans $9,444 $10,079 Interest and dividends on securities: Taxable 1,231 1,136 Tax-exempt 432 423 Dividends 77 89 Other interest income 76 171 Total interest and dividend income 11,260 11,898 Interest Expense: Interest on deposits 3,582 3,783 Interest on repurchase agreements 451 426 Interest on other borrowings 159 206 Interest on trust preferred capital notes 343 343 Total interest expense 4,535 4,758 Net Interest Income 6,725 7,140 Provision for Loan Losses 140 303 Net Interest Income After Provision for Loan Losses 6,585 6,837 Noninterest Income: Trust fees 880 879 Service charges on deposit accounts 565 622 Other fees and commissions 203 200 Mortgage banking income 195 190 Brokerage fees 143 89 Securities gains, net 30 25 Impairment of securities - - Other 119 207 Total noninterest income 2,135 2,212 Noninterest Expense: Salaries 2,469 2,390 Employee benefits 747 648 Occupancy and equipment 966 829 Bank franchise tax 177 168 Core deposit intangible amortization 94 94 Other 996 1,041 Total noninterest expense 5,449 5,170 Income Before Income Taxes 3,271 3,879 Income Taxes 966 1,175 Net Income $2,305 $2,704 Net Income Per Common Share: Basic $0.38 $0.44 Diluted $0.38 $0.44 Average Common Shares Outstanding: Basic 6,107,832 6,156,812 Diluted 6,121,285 6,185,084 Net Interest Income Analysis For the Three Months Ended March 31, 2008 and 2007 (in thousands, except rates) Interest Average Balance Income/Expense Yield/Rate 2008 2007 2008 2007 2008 2007 Loans: Commercial $85,632 $88,962 $1,466 $1,693 6.85 % 7.61 % Real Estate 460,429 444,854 7,777 8,165 6.76 7.34 Consumer 9,524 10,346 217 242 9.11 9.36 Total loans 555,585 544,162 9,460 10,100 6.81 7.42 Securities: Federal agencies 50,064 82,257 597 857 4.77 4.17 Mortgage-backed 47,405 20,001 603 241 5.09 4.82 State and municipal 47,847 45,963 656 634 5.48 5.52 Other 6,383 8,783 99 129 6.20 5.87 Total securities 151,699 157,004 1,955 1,861 5.15 4.74 Deposits in other banks 10,224 13,261 76 171 2.97 5.16 Total interest- earning assets 717,508 714,427 11,491 12,132 6.41 6.79 Non-earning assets 62,696 64,431 Total assets $780,204 $778,858 Deposits: Demand $107,994 $110,115 225 424 0.83 1.54 Money market 51,320 52,140 294 349 2.29 2.68 Savings 63,184 68,927 116 235 0.73 1.36 Time 263,700 262,624 2,947 2,775 4.47 4.23 Total deposits 486,198 493,806 3,582 3,783 2.95 3.06 Repurchase agreements 54,624 46,254 451 426 3.30 3.68 Other borrowings 33,870 36,720 502 549 5.93 5.98 Total interest- bearing liabilities 574,692 576,780 4,535 4,758 3.16 3.30 Noninterest bearing demand deposits 97,212 101,011 Other liabilities 5,958 5,735 Shareholders' equity 102,342 95,332 Total liabilities and shareholders' equity $780,204 $778,858 Interest rate spread 3.25 % 3.49 % Net interest margin 3.88 % 4.13 % Net interest income (taxable equivalent basis) 6,956 7,374 Less: Taxable equivalent adjustment 231 234 Net interest income $6,725 $7,140 Financial Highlights American National Bankshares Inc. and Subsidiaries (Dollars in thousands, except share data, unaudited) Three Months Ended March 31 2008 2007 Change EARNINGS Interest income $11,260 $11,898 (5.4)% Interest expense 4,535 4,758 (4.7) Net interest income 6,725 7,140 (5.8) Provision for loan losses 140 303 (53.8) Noninterest income 2,135 2,212 (3.5) Noninterest expense 5,449 5,170 5.4 Income taxes 966 1,175 (17.8) Net income 2,305 2,704 (14.8) PER COMMON SHARE Earnings per share - basic $0.38 $0.44 (13.6)% Earnings per share - diluted 0.38 0.44 (13.6) Cash dividends declared 0.23 0.22 4.5 Book value per share 16.86 15.70 7.4 Book value per share - tangible (a) 12.79 11.60 10.3 Closing market price 21.26 22.88 (7.1) FINANCIAL RATIOS Return on average assets 1.18 % 1.39 % (21)bp Return on average equity 9.01 11.35 (234) Return on average tangible equity (b) 12.24 15.81 (357) Average equity to average assets 13.12 12.24 88 Net interest margin, taxable equivalent 3.88 4.13 (25) Efficiency ratio 60.09 54.11 598 Effective tax rate 29.53 30.29 (76) PERIOD END BALANCES Securities $160,675 $152,008 5.7 % Loans held for sale 1,681 2,017 (16.7) Loans, net of unearned income 554,667 543,357 2.1 Goodwill and other intangibles 24,826 25,203 (1.5) Assets 785,049 787,544 (0.3) Assets - tangible (a) 760,223 762,341 (0.3) Deposits 581,539 606,034 (4.0) Repurchase agreements 58,179 44,526 30.7 Borrowings 36,744 35,669 3.0 Shareholders' equity 102,873 96,640 6.4 Shareholders' equity - tangible (a) 78,047 71,437 9.3 AVERAGE BALANCES Securities $151,699 $157,004 (3.4)% Loans held for sale 1,614 1,328 21.5 Loans, net of unearned income 553,971 542,834 2.1 Interest-earning assets 717,508 714,427 0.4 Goodwill and other intangibles 24,864 25,240 (1.5) Assets 780,204 778,858 0.2 Assets - tangible (a) 755,340 753,618 0.2 Interest-bearing deposits 486,198 493,806 (1.5) Deposits 583,410 594,817 (1.9) Repurchase agreements 54,624 46,254 18.1 Borrowings 33,870 36,720 (7.8) Shareholders' equity 102,342 95,332 7.4 Shareholders' equity - tangible (a) 77,478 70,092 10.5 CAPITAL Average shares outstanding - basic 6,107,832 6,156,812 (0.8)% Average shares outstanding - diluted 6,121,285 6,185,084 (1.0) Shares repurchased 28,800 11,600 148.3 Average price of shares repurchased $20.80 $23.15 (10.2) ALLOWANCE FOR LOAN LOSSES Beginning balance $7,395 $7,264 1.8 % Provision for loan losses 140 303 (53.8) Charge-offs (170) (49) 246.9 Recoveries 60 72 (16.7) Ending balance $7,425 $7,590 (2.2) NONPERFORMING ASSETS Nonperforming loans: 90 days past due $ - $ - - % Nonaccrual 2,772 3,689 (24.9) Foreclosed real estate 550 99 455.6 Nonperforming assets $3,322 $3,788 (12.3) ASSET QUALITY RATIOS Net chargeoffs (recoveries) to average loans 0.08 % (0.02)% 10 bp Nonperforming assets to total assets (c) 0.42 0.48 (6) Nonperforming loans to total loans (c) 0.50 0.68 (18) Allowance for loan losses to total loans (c) 1.34 1.40 (6) Allowance for loan losses to nonperforming loans (c) 2.68 X 2.06 X 62 OTHER DATA Fiduciary assets at period-end (d) $386,375 $388,405 (0.5)% Retail brokerage assets at period- end (d) $89,927 $81,270 10.7 Number full time-time equivalent employees 258 257 0 Number of full service offices 19 18 6 Number of loan production offices 1 1 - Number of ATM's 23 23 - 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 (d) - Market value bp - Change is measured in basis points
