SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-12820
AMERICAN NATIONAL BANKSHARES INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1284688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
628 Main Street
Danville, Virginia 24541
(Address of principal executive offices) (Zip Code)
(804) 792-5111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No .
The number of shares outstanding of the issuer's common stock as of
May 10, 1995 was 2,400,000.
AMERICAN NATIONAL BANKSHARES INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of March 31, 1995
and December 31, 1994......................................... 3
Consolidated Condensed Statements of Income for the three months
ended March 31, 1995 and 1994................................. 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1994................................. 5
Notes to Consolidated Condensed Financial Statements............ 6-7
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations..................................... 8-10
Part II. Other Information............................................... 11
SIGNATURES ................................................................ 11
2
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
March 31 December 31
ASSETS 1995 1994
-------- ----------
CASH AND DUE FROM BANKS...............................$ 9,236 $ 9,177
FEDERAL FUNDS SOLD.................................... -- 4,650
INTEREST-BEARING DEPOSITS IN OTHER BANKS.............. 83 1,586
INVESTMENT SECURITIES (Note 2):
U. S. Government and Federal agencies.............. 63,791 68,761
State and municipal................................ 10,475 10,480
Other investments.................................. 10 10
-------- --------
Total investment securities (market value
$73,579 at March 31, 1995 and $77,231
at December 31, 1994)...................... 74,276 79,251
-------- --------
LOANS................................................. 163,036 155,436
Less: Unearned income....................... (1,526) (1,957)
Reserve for loan losses......... (2,415) (2,353)
-------- --------
Net loans.................................... 159,095 151,126
-------- --------
OTHER ASSETS.......................................... 7,862 7,978
-------- --------
Total assets.................................$250,552 $253,768
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
LIABILITIES:
Demand deposits--non-interest bearing..............$ 30,004 $ 27,827
Demand deposits--interest bearing.................. 32,170 31,773
Money Market deposits.............................. 13,338 21,916
Savings deposits................................... 50,760 54,029
Time deposits...................................... 83,504 80,316
-------- --------
Total deposits............................... 209,776 215,861
Federal funds purchased............................ 2,200 --
Repurchase agreements.............................. 5,012 6,105
Accrued interest payable and other liabilities..... 1,705 1,017
-------- --------
Total liabilities............................ 218,693 222,983
-------- --------
SHAREHOLDERS' INVESTMENT:
Common stock, $1 par, 3,000,000 shares authorized,
2,400,000 shares outstanding .................... 2,400 2,400
Capital in excess of par value..................... 5,400 5,400
Net unrealized gain or (loss) (Note 2)............. 36 (29)
Retained earnings.................................. 24,023 23,014
-------- --------
Total shareholders' investment............... 31,859 30,785
-------- --------
Total liabilities and
shareholders' investment...................$250,552 $253,768
======== ========
The accompanying notes are an integral part of these balance sheets.
3
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands)
Three Months Ended
March 31
------------------
1995 1994
---- ----
INTEREST INCOME:
Interest and fees on loans..................................$3,432 $2,667
Interest on federal funds sold and other.................... 15 47
Income on investment securities:
U. S. Government.......................................... 807 819
Federal Agencies.......................................... 38 142
State and municipal (tax exempt).......................... 152 155
------ ------
Total interest income................................. 4,444 3,830
------ ------
INTEREST EXPENSE:
Interest on deposits:
Demand.................................................... 248 175
Money Market.............................................. 141 119
Savings................................................... 387 386
Time...................................................... 947 864
Interest on federal funds purchased and
repurchase agreements..................................... 63 8
------ ------
Total interest expense................................ 1,786 1,552
------ ------
NET INTEREST INCOME............................................ 2,658 2,278
PROVISION FOR LOAN LOSSES ..................................... 93 54
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES............................................. 2,565 2,224
------ ------
NON-INTEREST INCOME:
Trust department............................................ 346 307
Service charges on deposit accounts......................... 81 64
Fees and insurance premiums................................. 23 21
Other....................................................... 29 25
------ ------
Total non-interest income.............................. 479 417
------ ------
NON-INTEREST EXPENSE:
Salaries ................................................... 736 681
Pension and other employee benefits......................... 149 146
Occupancy and equipment expense............................. 197 214
FDIC insurance expense...................................... 121 122
Postage and printing........................................ 68 73
Other....................................................... 295 250
------ ------
Total non-interest expense............................ 1,566 1,486
------ ------
INCOME BEFORE INCOME TAX PROVISION............................. 1,478 1,155
INCOME TAX PROVISION .......................................... 469 360
------ ------
NET INCOME.....................................................$1,009 $ 795
====== ======
NET INCOME PER COMMON SHARE, based on
2,400,000 weighted average shares outstanding .............. $.42 $.33
The accompanying notes are an integral part of these statements.
4
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
March 31
-------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 4,696 $ 4,017
Fees and commissions received 489 439
Interest paid (1,768) (1,588)
Cash paid to suppliers and employees (1,383) (1,313)
-------- --------
Net cash provided by operating activities 2,034 1,555
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing investment securities 4,974 12,150
Purchase of investment securities and
corporate stock (18) (6,859)
Proceeds from maturing interest-bearing
deposits in other banks 1,503 --
Interest-bearing deposits made in other banks -- (61)
Net increase in loans made to customers (8,062) (3,762)
Capital expenditures (44) (6)
-------- --------
Net cash (used) provided by investing activities (1,647) 1,462
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, money market and
savings accounts (9,273) (2,407)
Net increase in certificates of deposit 3,188 1,668
Net increase in federal funds purchased
and repurchase agreements 1,107 --
-------- --------
Net cash used by financing activities (4,978) (739)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,591) 2,278
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,827 7,858
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,236 $ 10,136
======== ========
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net income $ 1,009 $ 795
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 95 111
Provision for possible loan losses 93 54
Provision (benefit) for deferred income taxes 111 (12)
Decrease (increase) in accrued interest
receivable and other assets 70 (1)
Increase in accrued interest payable and
other liabilities 656 608
-------- --------
Net cash provided by operating activities $ 2,034 $ 1,555
======== ========
The accompanying notes are an integral part of these statements.
5
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
necessary to present fairly American National Bankshares' financial
position as of March 31, 1995, the results of its operations and its
cash flows for the three months then ended. A summary of the
Corporation's significant accounting policies is set forth in Note 1
to the Consolidated Financial Statements in the Corporation's Annual
Report to Shareholders for 1994.
2. Investment Securities
Management determines the appropriate classification of securities
at the time of purchase. Securities classified as held for investment
are those securities that management intends to hold to maturity,
subject to continued credit-worthiness of the issuer, and that the
Bank has the ability to hold on a long-term basis. Accordingly, these
securities are stated at cost, adjusted for amortization of premium
and accretion of discount on the level yield method. Securities
designated as available for sale have been adjusted to their
respective market values and a corresponding adjustment made to
shareholders' investment at March 31, 1995 and December 31, 1994.
3. Commitments and Contingencies
The Bank has available to it a line of credit in the amount of
$5,153,000 with the Federal Home Loan Bank of Atlanta. As of March
31, 1995 and December 31, 1994, there were no borrowings outstanding
under this line of credit.
Commitments to extend credit, which amount to $32,445,000 at March
31, 1995 and $34,150,000 at December 31, 1994, represent legally
binding agreements to lend to a customer with fixed expiration dates
or other termination clauses. Since many of the commitments are
expected to expire without being funded, the total commitment amounts
do not necessarily represent future liquidity requirements.
Standby letters of credit are conditional commitments issued by
the Bank guaranteeing the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. At March 31, 1995 and December 31, 1994 the
Bank had $554,000 and $672,000 in outstanding standby letters of
credit.
6
PAGE
4. New Accounting Pronouncements
During the first quarter of 1995 the Bank adopted the provisions
of Statement of Financial Accounting Standards Nos. 114 and 118, which
address accounting by creditors for loan impairment. The effect of
adopting these standards did not have a material impact on the Bank's
financial position.
7
PAGE
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EARNINGS and CAPITAL
The Corporation's net income for the first quarter of 1995 was
$1,009,000, an increase of 27% from $795,000 earned in the first
quarter of 1994. Net income per common share was $.42 for the first
quarter of 1995 and $.33 for the same period of 1994. Per share
earnings for both periods have been computed on 2,400,000 weighted
average shares of common stock outstanding.
On an annualized basis, return on average total assets was 1.62%
for the first quarter of 1995 and 1.29% for the same period of 1994.
Return on average common shareholders' equity was 12.90% for the first
quarter of 1995 and 10.79% for the first quarter of 1994.
TRENDS AND FUTURE EVENTS
During the first quarter of 1995, the volume of net loans
increased by
$7,969,000 or 5.3%. This increase is the result of a strong loan
demand and is further evidence of a healthy local economy. The
increase in loans was funded from the proceeds of maturing investment
securities and cash.
The balance sheets reflect a decrease in total deposits from
December 31, 1994 to March 31, 1995 of $6,085,000 and a decrease of
$1,093,000 in repurchase agreements during the same period. These
decreases are distorted by two events. The first is a large
repurchase agreement of approximately $4,500,000 which was made from
new funds deposited on December 30, 1994. These funds remained with
the Bank for only 4 days. The second event was a shift in deposit
base of approximately $4,000,000 from deposits to repurchase
agreements during the first quarter of 1995. Disregarding the
temporary repurchase agreement of 4 days, the combination of deposits
and repurchase agreements declined $2,700,000, which Management
believes to be a normal seasonal trend for the first quarter of each
year. Management believes there is currently a demand from commercial
customers for higher yielding short term deposit instruments and the
Bank is now offering repurchase agreements as an alternative to
satisfy this demand.
On April 4, 1995 the Bank announced that it has entered into a
Purchase and Assumption agreement with Crestar Bank (subject to the
approval of the Comptroller of the Currency) which provides for the
acquisition of the Gretna, Virginia branch office of Crestar Bank by
American National Bank & Trust Company. In connection with the
acquisition, American National Bank & Trust Company will purchase the
bank facility and related furniture and fixtures, together with
designated loans and will assume approximately $39,000,000 in
deposits. All of the Crestar employees of the Gretna branch will
become employees of American National Bank & Trust Company and will
continue to serve the customers of the Gretna community. It is
anticipated that the branch purchase will be consummated by the end of
the third quarter of 1995.
NET INTEREST INCOME
Net interest income is the excess of interest income over
interest expense. During the first quarter of 1995, net interest
income increased
$380,000 or 16.7% over the same period of 1994.
Taxable equivalent net yield on interest earning assets was 4.59%
in the first quarter of 1995 compared with 3.96% for the first quarter
of 1994. During the first quarter of 1995, interest market rates rose
slightly. During the next twelve months repricing opportunities in
liabilities will exceed repricing opportunities of assets by
approximately $11,000,000, (approximately 4.3% of total assets), which
makes the Corporation slightly liability sensitive. Any further
increase in market interest rates within the next twelve months may
tend to decrease the Corporation's taxable equivalent net yield on
interest earning assets but Management does not expect this to have a
substantial effect upon the earnings of the Corporation during the
projected period.
ASSET QUALITY
Nonperforming assets include loans on which interest is no longer
accrued, loans classified as troubled debt restructurings and
foreclosed properties. There were no foreclosed properties held at
the close of the reporting period. Nonperforming assets were $141,000
at March 31, 1995 and $171,000 at December 31, 1994, a decrease of
$30,000 during the current quarter.
During the first quarter of 1995 the gross amount of interest
income that would have been recorded on nonaccrual loans and
restructured loans at March 31, 1995, if all such loans had been
accruing interest at the original contractual rate, was $3,000. No
interest payments were recorded during the reporting period as
interest income for all such nonperforming loans.
Nonperforming assets as a percentage of net loans were .09% at
March 31, 1995 and .11% at December 31, 1994.
Loans accruing and past due 90 days or more totaled $51,000 at
March 31, 1995 and $113,000 at December 31, 1994. This was a decrease
of $62,000.
PROVISION and RESERVE FOR LOAN LOSSES
The provision for loan losses was $93,000 for the first quarter
of 1995 and $54,000 for the first quarter of 1994. The reserve for
loan losses totaled $2,415,000 at March 31, 1995 an increase of 2.6%
over the $2,353,000 recorded at December 31, 1994. The ratio of
reserves to loans, less unearned discount, was 1.50% at March 31, 1995
and 1.53% at December 31, 1994. In Management's opinion, the current
reserve for loan losses is adequate.
8
PAGE
NON-INTEREST INCOME
Non-interest income for the first quarter of 1995 was $479,000,
an increase of 15% from the $417,000 reported in the first quarter of
1994. The components of the increase in the first quarter of 1995
included a 13% increase in trust department income, a 27% increase in
service charges on deposit accounts, a 10% increase in fees and
insurance commissions, and a 16.0% increase on other income. The
increase in trust department income was the result of new business
booked. The increase in service charges on deposit accounts was the
result of policy changes in the application of service charges. The
increase in fees and insurance commissions was due to an overall
increase in the volume of outstanding loans and the increase in other
income was primarily from an increase in Federal Home Loan Bank
dividends received.
NON-INTEREST EXPENSE
Non-interest expense for the first quarter was $1,566,000, a 5.4%
increase over the $1,486,000 reported for the same period last year.
Salaries increased 8% from the same period last year. Pension and
other employee benefits increased 2%. Occupancy and equipment expense
decreased 8%, FDIC insurance expense decreased 1% and postage and
printing expense decreased 7%. Other non-interest expense increased
18%. The increases in salaries and pension and other employee
benefits were attributable to a combination of wage rates and the
addition of personnel. Other non-interest expense increased due
primarily to fees paid to a consultant for strategic planning.
INCOME TAX PROVISION
The income tax provision for the first quarter of 1995 was
$469,000, an increase of $109,000 from the $360,000 reported a year
earlier. This change resulted primarily from an increase in taxable
income. The Bank has not experienced any significant change in the
effective tax rate.
CAPITAL MANAGEMENT
Federal regulatory risk-based capital ratio guidelines require
percentages to be applied to various assets including off-balance-
sheet assets in relation to their perceived risk. Tier I capital
includes stockholders' equity and Tier II capital includes certain
components of nonpermanent preferred stock and subordinated debt. The
Corporation has no nonpermanent preferred stock or subordinated debt.
Banks and bank holding companies must have a Tier I capital ratio of
at least 4% and a total ratio, including Tier I and Tier II capital,
of at least 8%. As of March 31, 1995 the Corporation had a ratio of
20.0% for Tier I and a ratio of 21.2% for total capital. At December
31, 1994 these ratios were 20.1% and 21.3%, respectively.
Cash dividends are presently paid on a semi-annual basis,
normally near the close of the second and fourth quarters, and
consequently no dividends were declared during the first quarter of
1995 and 1994.
9
PAGE
LIQUIDITY
The Corporation's net liquid assets to net liabilities ratio was
29% at March 31, 1995. At the close of the first quarter of 1994,
this ratio was 40%. The reduction in this ratio was primarily the
result of funding new loans with maturing securities and the pledging
of investments to secure repurchase agreements.
Management constantly monitors and plans the Corporation's
liquidity position for future periods. Liquidity is provided from
cash and due from banks, federal funds sold, interest-bearing deposits
in other banks, repayments from loans, seasonal increases in deposits,
lines of credit from two correspondent banks and two federal agency
banks and a planned structured continuous maturity of investments.
Management believes that these factors provide sufficient and timely
liquidity for the foreseeable future.
10
PAGE
PART II
OTHER INFORMATION
Item:
1. Legal Proceedings
None
2. Changes in securities
None
3. Defaults upon senior securities
None
4. Results of votes of security holders
None
5. Other information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - There were no reports on
Form 8-K filed for the three months ended March 31,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMERICAN NATIONAL BANKSHARES INC.
/s/ Charles H. Majors
---------------------------------
Charles H. Majors
President and Chief
Date - May 12, 1995 Executive Officer
/s/ David Hyler
---------------------------------
David Hyler
Senior Vice-President and
Secretary-Treasurer
Date - May 12, 1995 (Chief Financial Officer)
11
ARTICLE TYPE 9
AMERICAN NATIONAL BANKSHARES INC.
FISCAL YEAR ENDING DECEMBER 31st
STARTING PERIOD - January 1, 1995
ENDING PERIOD - March 31, 1995
PERIOD TYPE - Quarter
(IN THOUSANDS, EXCEPT PER SHARE RESULTS)
QTR 1 QTR 2 QTR 3 QTR 4 YEAR
Cash and due from banks 9,236 9,236
Interest bearing deposits in other banks 83 83
Federal funds sold 0 0
Trading assets 0 0
Investments held-for-sale 2,807 2,807
Investments - carrying 74,276 74,276
Investments - market 73,579 73,579
Loans 163,036 163,036
Allowance for loan losses 2,415 2,415
Total assets 250,552 250,552
Deposits 209,776 209,776
Short-term borrowings 0 0
Liabilities - other 8,917 8,917
Long - term borrowings 0 0
Common stock 2,400 2,400
Preferred - Mandatory 0 0
Preferred stock 0 0
Other Shareholders' equity 29,459 29,459
Total Liabilities and equity 250,552 250,552
Interest income on loans 3,432 3,432
Interest income on investments 997 997
Interest income - other 15 15
Interest income total 4,444 4,444
Interest paid on deposits 1,723 1,723
Interest expense 1,786 1,786
Net interest income 2,658 2,658
Provision for loan losses 93 93
Securities gains or losses 0 0
Expense - other 1,566 1,566
Income - pretax 1,478 1,478
Income - pre-extraordinary 1,478 1,478
Extraordinary 0 0
Changes in accounting 0 0
Net income 1,009 1,009
Earnings per share - primary 0.42 0
Earnings per share - diluted 0.42 0
Net yield - interest earning assets - actual 4.52% 0
Loans - nonaccuring 141 141
Loans - past due 90 days or more 51 51
Loans - troubled debt restructurings 105 105
Loans - problem 0 0
Allowance for loan losses - opening balance 2,353 2,353
Charge-offs 45 45
Recoveries 14 14
Allowance for loan losses - closing balance 2,415 2,415
Allowance for loans losses - domestic 2,415 2,415
Allowance for loan losses - foreign 0 0
Allowance for loan losses - unallocated 0 0