AMERICAN NATIONAL BANKSHARES INC. ANNOUNCES FOURTH QUARTER EARNINGS
Danville, VA -- American National Bankshares Inc. (NASDAQ: AMNB), parent company of American National Bank and Trust Company, reported fourth quarter net income of $2.68 million, or $.49 per share on both a basic and diluted basis. Earnings were positively impacted by a $255,000 reduction in the allowance for loan losses, growth in net interest income, and increases in noninterest income. Additionally, the Bank sold its largest nonperforming loan at a discount during the quarter, resulting in a significant reduction in nonperforming assets and impaired loans. The discounted amount was recorded as a charge-off against the allowance for loan losses; however, the reserve for this potential loss was recorded and expensed in the fourth quarter of 2004. Net income for that quarter was $780,000, and was impacted by the additional loan loss provision as well as an impairment charge of $985,000 on FHLMC and FNMA preferred stock held in the Bank’s investment portfolio. For the full year, net income was $9.99 million in 2005, up from $8.01 million in 2004. Basic earnings per share improved from $1.43 in 2004 to $1.83 in 2005, and diluted earnings per share increased from $1.42 to $1.81.
As stated above, during the fourth quarter of 2005, the Bank sold its largest nonperforming loan, which was secured by a hotel located in a major North Carolina metropolitan area. The loan was sold at a discount and the remaining balance was charged-off. Primarily as a result of this action, nonperforming assets declined from $8.33 million or 1.35% of total assets at December 31, 2004, to $4.46 million or 0.72% of total assets at December 31, 2005. “While the resolution of this loan resulted in a significant charge-off, we are pleased to have this matter behind us and are equally pleased with the resulting improvement in our asset quality measurements,” stated Charles H. Majors, President and Chief Executive Officer. Net loan charge-offs for the quarter totaled $2.15 million, of which $2.13 million was related to this one loan. The specific reserve established for this loan exceeded the amount charged-off by approximately $415,000, and was a primary factor in recording a negative loan loss provision of $255,000 during the quarter.
Fourth Quarter Earnings Comparison
Comparing the fourth quarter of 2005 with the fourth quarter of 2004, net income increased from $780,000 to $2.68 million. Net interest income increased $193,000 or 3.3%, due primarily to interest rate movements and an increase in noninterest-bearing deposits. Noninterest income increased $99,000 or 5.3%, excluding the impact of the preferred stock impairment in 2004. This improvement is attributable to increases in trust fees, deposit service charges, retail brokerage activity, and mortgage banking revenue. Noninterest expense increased from $3.42 million in the 2004 final quarter to $4.45 million in the recently completed quarter. Profit sharing accruals were reversed in the 2004 quarter when the special loan loss provision was recorded. Noninterest expense during the 2005 quarter included approximately $215,000 in expenses related to the Bank’s new office in Lynchburg, Virginia, which was opened during 2005. The provision for loan losses was $2.37 million in the fourth quarter of 2004 compared to negative $255,000 for the 2005 quarter. As stated above, a specific reserve for the hotel loan was established during the last quarter of 2004, resulting in a significant increase in loan loss provision expense. The negative provision for loan losses in the recently completed quarter was largely attributable to the resolution of this loan.
Full Year Earnings Comparison
Comparing the full year 2005 with 2004, net income increased from $8.01 million to $9.99 million. Net interest income improved $1.10 million or 4.8%, due primarily to interest rate changes and growth in noninterest-bearing deposits. Excluding the prior year impact of the preferred stock impairment, noninterest income increased $401,000 or 5.4%, due to increases in trust fees, deposit service charges, retail brokerage activity, mortgage banking revenue, and $375,000 in income from the sale of a debit card and ATM processor, of which the Bank was a member. Noninterest income in 2004 was impacted by a $150,000 gain on the sale of a former branch office. Noninterest expense increased from $15.01 million to $17.08 million. The 2005 figure includes approximately $720,000 related to the new office in Lynchburg, opened during 2005. The 2004 figure was impacted by the elimination of profit sharing accruals described earlier. The provision for loan losses declined from $3.09 million in 2004 to $465,000 in 2005, due largely to the results of the hotel loan described above.
“We are pleased with our company’s 2005 results,” stated Majors. “We generated a 13.95% return on our shareholders’ equity, improved our asset quality indicators, entered the Lynchburg market, and announced the pending acquisition of Community First Financial Corporation to expand our presence there. We look forward to 2006 and beyond.”
About American National
American National Bankshares Inc. is the holding company of American National Bank and Trust Company, a community bank with fifteen full service offices and one loan production office. Full service offices are located in Danville, Chatham, Collinsville, Gretna, Martinsville, Henry County, South Boston, and Lynchburg, Virginia, and in Yanceyville, North Carolina. The Bank also operates a loan production office in Greensboro, North Carolina. On October 19, 2005, American National entered into a definitive agreement to acquire Community First Financial Corporation (OTCBB: CYFC), the parent company of Community First Bank, which operates four offices serving the city of Lynchburg, Virginia and the counties of Bedford, Campbell, and Nelson. Pending required approvals, the transaction is expected to close in April 2006.
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 nineteen ATMs, “AmeriLink” Internet banking, and 24-hour “Access American” phone banking. 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 National 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.
