American National Bankshares Reports Fourth Quarter Earnings

DANVILLE, Va., Jan. 23, 2020 (GLOBE NEWSWIRE) -- American National Bankshares Inc. AMNB ("American National" or "the Company") today reported fourth quarter 2019 earnings of $7.4 million or $0.67 per diluted common share. Those results compare to net income of $5.0 million, or $0.57 per diluted common share during the same quarter in the prior year, and net income of $8.7 million or $0.78 per diluted common share recognized for the third quarter of 2019. Earnings for the twelve months ended December 31, 2019 amounted to $20.9 million or $1.98 per diluted share, compared to $22.6 million or $2.59 per diluted share in 2018. Results for 2019 include the impact of merger related costs of $11.8 million associated with the HomeTown Bank (HomeTown) acquisition.

"2019 was a transformative year for American National, as we successfully completed the acquisition of HomeTown, added some key management talent and just announced the opening of a loan production office in the strong Raleigh, North Carolina market" said Jeffrey V. Haley, President and Chief Executive Officer of the Company. "Loan growth picked up in the quarter, and our credit quality continues to be strong. Margin compression continues to be a challenge in this low rate environment, both from market pricing pressure as well as the impact from recent reductions in short term rates. We incurred some additional merger related expenses associated with completing the HomeTown acquisition during the quarter, as well as some expenses associated with the Raleigh loan production office. I am proud of our accomplishments in 2019 to grow the Company and maintain our solid financial performance, and look to 2020 with optimism and enthusiasm."

Fourth quarter 2019 highlights include:

• Earnings produced a return on average assets of 1.20% for the fourth quarter of 2019, compared to 1.43% in the previous quarter and 1.08% for the same quarter in prior year.
   
• Net loans receivable increased $26.4 million for the quarter or 5.8% annualized.
   
• Net interest margin was 3.62% for the quarter, down from 3.75% in the third quarter of 2019 and up from 3.48% in the same quarter of the prior year.   
   
• Noninterest revenues decreased $305.0 thousand or 7.3% when compared to the previous quarter, but increased $868.0 thousand or 29.0% to $3.9 million from $3.0 million in the same quarter in the prior year.
  
  
• The fourth quarter provision for loan losses totaled $462 thousand, which compares to a net recovery of $12 thousand for the previous quarter, and a net recovery of $6 thousand in the same quarter in the prior year.
  
  
• Nonperforming assets as a percentage of total assets remained level at 0.15% at December 31, 2019, compared with 0.15% at September 30, 2019, and up from 0.11% at December 31, 2018.
  
  
• Annualized net charge-offs were 0.02% for the fourth quarter of 2019, compared to 0.23% for the corresponding quarter in the prior year and up from none for the third quarter of 2019.

NET INTEREST INCOME

Net interest income for the fourth quarter of 2019 was $20.4 million, a decrease of $174 thousand or 0.8% from the prior quarter and an increase of $5.4 million or 36.2% from the fourth quarter of 2018. The year-over-year growth was positively impacted by higher earning asset balances and higher loan yields in large part associated with the HomeTown acquisition. The quarter-over-quarter decrease in net interest income was principally the result of lower yields on assets associated with the recent decreases in short term rates  and market pricing pressure in the commercial portfolio offset in part by a decrease in funding costs. The fully taxable equivalent ("FTE") net interest margin for the quarter was 3.62%, down from 3.75% in the prior quarter and up from 3.48% in the same period a year ago.

The Company's FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the fourth quarter of 2019, net accretion related to acquisition accounting increased $118 thousand from the prior quarter to $1.1 million and increased $780 thousand from the fourth quarter of 2018. Net accretion for the twelve months ended December 31, 2019 amounted to $3.4 million, compared to $1.3 million for the same period in 2018. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):

ASSET QUALITY/LOAN LOSS PROVISION

Non-performing assets ("NPAs") totaled $3.6 million as of December 31, 2019, down from $3.7 million at September 30, 2019 and up from $2.0 million at December 31, 2018. NPAs as a percentage of total assets were 0.15% at December 31, 2019, which compares to 0.15% at September 30, 2019 and 0.11% at December 31, 2018.

The provision for loan losses was $462 thousand for the fourth quarter of 2019, as compared to a net recovery $12 thousand for the previous quarter and a net recovery of $6 thousand for the same period in the previous year. The allowance for loan losses was $13.2 million at December 31, 2019, compared to $12.8 million at September 30, 2019 and $12.8 million at December 31, 2018. Annualized net charge-offs as a percentage of average loans outstanding was 0.02% for the fourth quarter of 2019, compared to none in the previous quarter and 0.23% for the same period in the prior year. The allowance as a percentage of loans held for investment was 0.72% at December 31, 2019, compared to 0.71% at September 30, 2019 and 0.94% at December 31, 2018.

NONINTEREST INCOME

Noninterest income decreased $305.0 thousand to $3.9 million for the quarter ended December 31, 2019 from $4.2 million in the prior quarter and increased from $3.0 million for the same period in the prior year. Losses of $309 thousand related to the write-down of premises and equipment in connection with an ATM replacement initiative accounted for most of the decrease from the previous quarter, while increases in other fees and commissions, mortgage banking fees and securities gains partially offset by losses on premises and equipment accounted for much of the increase over the same period in the prior year.

NONINTEREST EXPENSE

Noninterest expense for the fourth quarter amounted to $15.0 million, up $1.2 million or 9.0% when compared to the $13.8 million for the previous quarter and up $3.4 million or 29.2% when compared to the same period in the previous year. The increase as compared to the previous quarter was driven by additional merger costs of $460 thousand incurred during the quarter, compensation costs associated with establishing the Raleigh loan production office, corporate incentive compensation adjustments, other professional fees and data processing costs. The increase from the same period in the prior year is primarily related to regulatory, data processing and compensation costs associated with the acquisition of HomeTown.

INCOME TAXES

The effective tax rate for the three months ended December 31, 2019 was 15.6% compared to 21.1% for the three months ended September 30, 2019 and 21.6% for the same period in the prior year. The decrease in the effective tax rate as compared to the previous periods was primarily due to a change in future effective rate assumption related to state apportionments which was prompted by the HomeTown acquisition.

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $2.5 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 26 banking offices. American National Bank also manages an additional $878 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about American National and American National Bank is available on American National's website at www.amnb.com.

NON-GAAP FINANCIAL MEASURES

This release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). American National's management uses these non-GAAP financial measures in its analysis of American National's performance. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of American National's core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. For a reconciliation of non-GAAP financial measures, see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

Forward-Looking Statements

Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National's ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) expected revenue synergies and cost savings from the recently completed merger with HomeTown may not be fully realized or realized within the expected timeframe; (2) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (3) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American National's market areas; (4) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (5) accounting principles, policies, and guidelines; and (6) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:
Jeffrey W. Farrar
Executive Vice President, COO & CFO
(434)773-2274
farrarj@amnb.com