American National Bankshares (AMNB) 8-K American National Bankshares Inc. Reports Second Quarter 2018 Earnings

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
	June 30
ASSETS	2018			2017
Cash and due from banks	$	24,042		$	23,765
Interest-bearing deposits in other banks	9,300			62,164
Equity securities, at fair value	2,177			—
Securities available for sale, at fair value	341,247			280,503
Restricted stock, at cost	5,463			5,501
Loans held for sale	2,296			2,379
Loans	1,339,379			1,288,693
Less allowance for loan losses	(13,508		)	(13,632		)
Net Loans	1,325,871			1,275,061
Premises and equipment, net	25,879			26,265
Other real estate owned, net	1,124			1,686
Goodwill	43,872			43,872
Core deposit intangibles, net	1,037			1,351
Bank owned life insurance	18,674			18,381
Accrued interest receivable and other assets	23,549			23,545
Total assets	$	1,824,531		$	1,764,473
Liabilities
Demand deposits -- noninterest-bearing	$	420,795		$	390,603
Demand deposits -- interest-bearing	251,056			218,714
Money market deposits	383,963			339,106
Savings deposits	132,839			125,237
Time deposits	372,093			389,181
Total deposits	1,560,746			1,462,841
Short-term borrowings:
Customer repurchase agreements	6,776			48,282
Other short-term borrowings	5,500			—
Long-term borrowings	—			9,991
Junior subordinated debt	27,876			27,775
Accrued interest payable and other liabilities	10,285			8,531
Total liabilities	1,611,183			1,557,420
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding	—			—
Common stock, $1 par, 20,000,000 shares authorized,
8,708,127 shares outstanding at June 30, 2018 and
8,642,913 shares outstanding at June 30, 2017	8,654			8,595
Capital in excess of par value	77,496			75,691
Retained earnings	135,108			123,795
Accumulated other comprehensive loss, net	(7,910		)	(1,028		)
Total shareholders' equity	213,348			207,053
Total liabilities and shareholders' equity	$	1,824,531		$	1,764,473

American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
	Three Months Ended					Six Months Ended
	June 30					June 30
	2018			2017		2018			2017
Interest and Dividend Income:
Interest and fees on loans	$	14,766		$	13,752	$	29,423		$	26,456
Interest and dividends on securities:
Taxable	1,540			1,133		2,864			2,287
Tax-exempt	423			509		842			1,144
Dividends	78			84		158			163
Other interest income	185			125		373			234
Total interest and dividend income	16,992			15,603		33,660			30,284
Interest Expense:
Interest on deposits	1,873			1,352		3,698			2,552
Interest on short-term borrowings	2			14		12			42
Interest on long-term borrowings	—			81		—			161
Interest on junior subordinated debt	329			244		619			483
Total interest expense	2,204			1,691		4,329			3,238
Net Interest Income	14,788			13,912		29,331			27,046
Provision for loan losses	(30		)	350		(74		)	650
Net Interest Income After Provision
for Loan Losses	14,818			13,562		29,405			26,396
Noninterest Income:
Trust fees	945			908		1,874			1,820
Service charges on deposit accounts	592			607		1,204			1,196
Other fees and commissions	679			627		1,321			1,234
Mortgage banking income	491			462		941			991
Securities gains, net	289			331		410			590
Brokerage fees	209			192		431			384
Income from Small Business Investment Companies	171			6		326			32
Other	187			215		389			372
Total noninterest income	3,563			3,348		6,896			6,619
Noninterest Expense:
Salaries	5,095			4,733		10,092			9,532
Employee benefits	1,111			1,061		2,286			2,181
Occupancy and equipment	1,100			1,148		2,228			2,216
FDIC assessment	132			134		278			263
Bank franchise tax	291			263		572			519
Core deposit intangible amortization	77			203		154			368
Data processing	467			502		889			989
Software	354			271		659			550
Other real estate owned, net	25			68		55			111
Other	2,350			2,328		4,491			4,423
Total noninterest expense	11,002			10,711		21,704			21,152

Income Before Income Taxes	7,379		6,199		14,597		11,863
Income Taxes	1,399		1,920		2,805		3,521
Net Income	$	5,980	$	4,279	$	11,792	$	8,342
Net Income Per Common Share:
Basic	$	0.69	$	0.50	$	1.36	$	0.97
Diluted	$	0.69	$	0.49	$	1.36	$	0.96
Average Common Shares Outstanding:
Basic	8,692,107		8,640,648		8,680,739		8,636,954
Diluted	8,704,726		8,659,165		8,695,860		8,655,173

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
		2nd Qtr				1st Qtr				2nd Qtr			YTD				YTD
		2018				2018				2017			2018				2017
EARNINGS
Interest income		$	16,992			$	16,668			$	15,603		$	33,660			$	30,284
Interest expense		2,204				2,125				1,691			4,329				3,238
Net interest income		14,788				14,543				13,912			29,331				27,046
Provision for loan losses		(30		)		(44		)		350			(74		)		650
Noninterest income		3,563				3,333				3,348			6,896				6,619
Noninterest expense		11,002				10,702				10,711			21,704				21,152
Income taxes		1,399				1,406				1,920			2,805				3,521
Net income		5,980				5,812				4,279			11,792				8,342
PER COMMON SHARE
Income per share - basic		$	0.69			$	0.67			$	0.50		$	1.36			$	0.97
Income per share - diluted		0.69				0.67				0.49			1.36				0.96
Cash dividends paid		0.25				0.25				0.24			0.50				0.48
Book value per share		24.50				24.19				23.96			24.50				23.96
Book value per share - tangible (a)		19.34				19.00				18.72			19.34				18.72
Closing market price		40.00				37.60				36.95			40.00				36.95
FINANCIAL RATIOS
Return on average assets		1.31			%	1.28			%	0.99		%	1.29			%	0.97		%
Return on average equity		11.27				11.10				8.28			11.19				8.13
Return on average tangible equity (b)		14.44				14.29				10.93			14.37				10.75
Average equity to average assets		11.62				11.52				11.91			11.57				11.94
Tangible equity to tangible assets (a)		9.46				9.30				9.41			9.46				9.41
Net interest margin, taxable equivalent		3.50				3.46				3.54			3.48				3.49
Efficiency ratio (c)		60.38				59.79				61.76			60.09				62.35
Effective tax rate		18.96				19.48				30.97			19.22				29.68
PERIOD-END BALANCES
Securities		$	348,887			$	317,889			$	286,004		$	348,887			$	286,004
Loans held for sale		2,296				1,792				2,379			2,296				2,379
Loans, net of unearned income		1,339,379				1,321,221				1,288,693			1,339,379				1,288,693
Goodwill and other intangibles		44,909				44,986				45,223			44,909				45,223
Assets		1,824,531				1,817,574				1,764,473			1,824,531				1,764,473
Assets - tangible (a)		1,779,622				1,772,588				1,719,250			1,779,622				1,719,250
Deposits		1,560,746				1,559,251				1,462,841			1,560,746				1,462,841
Customer repurchase agreements		6,776				10,466				48,282			6,776				48,282
Other short-term borrowings		5,500				—				—			5,500				—
Long-term borrowings		27,876				27,851				37,766			27,876				37,766
Shareholders' equity		213,348				209,840				207,053			213,348				207,053
Shareholders' equity - tangible (a)		168,439				164,854				161,830			168,439				161,830

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
		2nd Qtr			1st Qtr			2nd Qtr			YTD			YTD
		2018			2018			2017			2018			2017
AVERAGE BALANCES
Securities (d)		$	342,486		$	312,783		$	295,863		$	328,143		$	310,146
Loans held for sale		2,616			2,037			2,426			2,328			2,420
Loans, net of unearned income		1,321,812			1,338,058			1,258,346			1,329,890			1,227,127
Interest-earning assets		1,707,223			1,698,451			1,610,132			1,703,287			1,592,395
Goodwill and other intangibles		44,956			45,031			45,337			44,993			45,427
Assets		1,825,860			1,818,429			1,736,686			1,822,165			1,718,310
Assets - tangible (a)		1,780,904			1,773,398			1,691,349			1,777,172			1,672,883
Interest-bearing deposits		1,145,701			1,157,122			1,047,828			1,151,380			1,034,542
Deposits		1,565,321			1,557,149			1,433,852			1,561,258			1,413,100
Customer repurchase agreements		11,347			12,247			49,239			11,795			47,184
Other short-term borrowings		247			2,183			—			1,210			5,884
Long-term borrowings		27,861			27,836			37,748			27,848			37,733
Shareholders' equity		212,256			209,433			206,774			210,852			205,126
Shareholders' equity - tangible (a)		167,300			164,402			161,437			165,859			159,699
CAPITAL
Average shares outstanding - basic		8,692,107			8,669,728			8,640,648			8,680,739			8,636,954
Average shares outstanding - diluted		8,704,726			8,687,351			8,659,165			8,695,860			8,655,173
ALLOWANCE FOR LOAN LOSSES
Beginning balance		$	13,575		$	13,603		$	13,108		$	13,603		$	12,801
Provision for loan losses		(30		)	(44		)	350			(74		)	650
Charge-offs		(130		)	(44		)	(85		)	(174		)	(134		)
Recoveries		93			60			259			153			315
Ending balance		$	13,508		$	13,575		$	13,632		$	13,508		$	13,632
LOANS
Construction and land development		$	96,740		$	93,031		$	132,322		$	96,740		$	132,322
Commercial real estate		633,128			624,164			590,093			633,128			590,093
Residential real estate		207,374			207,256			211,305			207,374			211,305
Home equity		105,558			108,024			113,580			105,558			113,580
Commercial and industrial		291,454			284,257			236,418			291,454			236,418
Consumer		5,125			4,489			4,975			5,125			4,975
Total		$	1,339,379		$	1,321,221		$	1,288,693		$	1,339,379		$	1,288,693
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing		229			273			1,611			229			1,611
Nonaccrual		1,861			1,598			2,117			1,861			2,117
Other real estate owned		1,124			1,716			1,686			1,124			1,686
Nonperforming assets		$	3,214		$	3,587		$	5,414		$	3,214		$	5,414

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
		2nd Qtr			1st Qtr			2nd Qtr				YTD			YTD
		2018			2018			2017				2018			2017
ASSET QUALITY RATIOS
Allowance for loan losses to total loans		1.01		%	1.03		%	1.06			%	1.01		%	1.06			%
Allowance for loan losses to
nonperforming loans		646.32			725.55			365.67				646.32			365.67
Nonperforming assets to total assets		0.18			0.20			0.31				0.18			0.31
Nonperforming loans to total loans		0.16			0.14			0.29				0.16			0.29
Annualized net charge-offs (recoveries)
to average loans		0.01			—			(0.06		)		—			(0.03		)
OTHER DATA
Fiduciary assets at period-end (e) (f)		$	510,552		$	509,668		$	520,861			$	510,552		$	520,861
Retail brokerage assets at period-end (e) (f)		$	326,692		$	316,064		$	297,463			$	326,692		$	297,463
Number full-time equivalent employees (g)		323			326			328				323			328
Number of full service offices		26			26			27				26			27
Number of loan production offices		2			2			2				2			2
Number of ATM's		34			34			34				34			34
Notes:
(a) - Excludes goodwill and other intangible assets.
(b) - Excludes amortization expense, net of tax, of intangible assets.
(c) - The efficiency ratio is calculated by dividing noninterest expense excluding gains or losses on the sale of OREO
by net interest income including tax equivalent income on nontaxable loans and securities and noninterest income and
excluding (i) gains or losses on securities and (ii) gains or losses on sale of premises and equipment.
(d) - Average does not include unrealized gains and losses.
(e) - Market value.
(f) - Assets are not owned by the Company and are not reflected in the consolidated balance sheet.
(g) - Average for quarter.

			Net Interest Income Analysis
			For the Three Months Ended June 30, 2018 and 2017
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance				Income/Expense				Yield/Rate
				2018		2017		2018		2017		2018		2017
Loans:
	Commercial			$	267,996	$	229,690	$	2,652	$	2,241	3.97	%	3.91	%
	Real estate			1,052,105		1,026,010		12,087		11,502		4.60		4.48
	Consumer			4,327		5,072		77		89		7.14		7.04
		Total loans		1,324,428		1,260,772		14,816		13,832		4.48		4.39
Securities:
	Federal agencies & GSEs			127,033		96,339		707		454		2.23		1.89
	Mortgage-backed & CMOs			108,789		80,003		609		412		2.24		2.06
	State and municipal			91,636		104,115		653		938		2.85		3.60
	Other			15,028		15,406		176		179		4.68		4.65
		Total securities		342,486		295,863		2,145		1,983		2.51		2.68
Deposits in other banks				40,309		53,497		185		125		1.84		0.94
	Total interest-earning assets			1,707,223		1,610,132		17,146		15,940		4.02		3.96
Non-earning assets				118,637		126,554
		Total assets		$	1,825,860	$	1,736,686
Deposits:
	Demand			$	246,493	$	219,743	13		11		0.02		0.02
	Money market			395,135		322,737		802		342		0.81		0.43
	Savings			132,190		125,134		10		9		0.03		0.03
	Time			371,883		380,214		1,048		990		1.13		1.04
		Total deposits		1,145,701		1,047,828		1,873		1,352		0.66		0.52
Customer repurchase agreements				11,347		49,239		1		14		0.04		0.11
Other short-term borrowings				247		—		1		—		1.62		—
Long-term borrowings				27,861		37,748		329		325		4.72		3.44
	Total interest-bearing
		liabilities		1,185,156		1,134,815		2,204		1,691		0.75		0.60
Noninterest bearing demand deposits				419,620		386,024
Other liabilities				8,828		9,073
Shareholders' equity				212,256		206,774
		Total liabilities and
			shareholders' equity	$	1,825,860	$	1,736,686
Interest rate spread												3.27	%	3.36	%
Net interest margin												3.50	%	3.54	%
Net interest income (taxable equivalent basis)								14,942		14,249
Less: Taxable equivalent adjustment (a)								154		337
Net interest income								$	14,788	$	13,912
Notes:
	(a) - Calculated using 21% and 35% statutory tax rate in 2018 and 2017, respectively, due to tax rate change.

			Net Interest Income Analysis
			For the Six Months Ended June 30, 2018 and 2017
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance				Income/Expense				Yield/Rate
				2018		2017		2018		2017		2018		2017
Loans:
	Commercial			$	263,300	$	224,833	$	5,096	$	4,294	3.90	%	3.85	%
	Real estate			1,064,605		999,484		24,277		22,126		4.56		4.43
	Consumer			4,313		5,230		153		181		7.15		6.98
		Total loans		1,332,218		1,229,547		29,526		26,601		4.44		4.33
Securities:
	Federal agencies & GSEs			115,182		96,651		1,224		896		2.13		1.85
	Mortgage-backed & CMOs			108,808		79,033		1,208		825		2.22		2.09
	State and municipal			89,000		117,681		1,287		2,090		2.89		3.55
	Other			15,153		16,781		351		365		4.63		4.35
		Total securities		328,143		310,146		4,070		4,176		2.48		2.69
Deposits in other banks				42,926		52,702		373		234		1.75		0.90
	Total interest-earning assets			1,703,287		1,592,395		33,969		31,011		3.99		3.90
Non-earning assets				118,878		125,915
		Total assets		$	1,822,165	$	1,718,310
Deposits:
	Demand			$	239,477	$	217,847	24		21		0.02		0.02
	Money market			402,612		314,235		1,585		583		0.79		0.37
	Savings			131,453		124,694		20		19		0.03		0.03
	Time			377,838		377,766		2,069		1,929		1.10		1.03
		Total deposits		1,151,380		1,034,542		3,698		2,552		0.65		0.50
Customer repurchase agreements				11,795		47,184		2		15		0.03		0.06
Other short-term borrowings				1,210		5,884		10		27		1.65		0.92
Long-term borrowings				27,848		37,733		619		644		4.45		3.41
	Total interest-bearing
		liabilities		1,192,233		1,125,343		4,329		3,238		0.73		0.58
Noninterest bearing demand deposits				409,878		378,558
Other liabilities				9,202		9,283
Shareholders' equity				210,852		205,126
		Total liabilities and
			shareholders' equity	$	1,822,165	$	1,718,310
Interest rate spread												3.26	%	3.32	%
Net interest margin												3.48	%	3.49	%
Net interest income (taxable equivalent basis)								29,640		27,773
Less: Taxable equivalent adjustment (a)								309		727
Net interest income								$	29,331	$	27,046
Notes:
	(a) - Calculated using 21% and 35% statutory tax rate in 2018 and 2017, respectively, due to tax rate change.