This is a conforming paper copy pursuant to Rule # 901(d) of
Regulation S-T.
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 June 30, 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 August 11, 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 June 30, 1995
and December 31, 1994......................................... 3
Consolidated Condensed Statements of Income for the three months
ended June 30, 1995 and 1994.................................. 4
Consolidated Condensed Statements of Income for the six months
ended June 30, 1995 and 1994.................................. 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1995 and 1994.................................. 6
Notes to Consolidated Condensed Financial Statements............ 7-8
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations.....................................9-11
Part II. Other Information............................................... 12
SIGNATURES ................................................................ 12
EXHIBITS - Financial Data Schedule......................................... 13
2
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
June 30 December 31
ASSETS 1995 1994
------- -----------
CASH AND DUE FROM BANKS...............................$ 7,554 $ 9,177
FEDERAL FUNDS SOLD.................................... 900 4,650
INTEREST-BEARING DEPOSITS IN OTHER BANKS.............. 97 1,586
INVESTMENT SECURITIES (Note 2):
U. S. Government and federal agencies.............. 58,807 68,761
State and municipal................................ 10,066 10,480
Other investments.................................. 10 10
-------- --------
Total investment securities (market value
$69,030 at June 30, 1995 and $77,231
at December 31, 1994)...................... 68,883 79,251
-------- --------
LOANS................................................. 169,734 155,436
Less: Unearned income....................... (1,224) (1,957)
Reserve for loan losses............... (2,527) (2,353)
-------- --------
Net loans.................................... 165,983 151,126
-------- --------
OTHER ASSETS.......................................... 8,126 7,978
-------- --------
Total assets.................................$251,543 $253,768
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
LIABILITIES:
Demand deposits--non-interest bearing..............$ 28,523 $ 27,827
Demand deposits--interest bearing.................. 30,632 31,773
Money market deposits.............................. 12,751 21,916
Savings deposits................................... 47,860 54,029
Time deposits...................................... 91,535 80,316
-------- --------
Total deposits............................... 211,301 215,861
Federal funds purchased............................ -- --
Repurchase agreements.............................. 6,329 6,105
Accrued interest payable and other liabilities..... 1,610 1,017
-------- --------
Total liabilities............................ 219,240 222,983
-------- --------
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
Retained earnings.................................. 24,414 23,014
Net unrealized gain (loss) (Note 2)................ 89 (29)
-------- --------
Total shareholders' investment............... 32,303 30,785
-------- --------
Total liabilities and
shareholders' investment...................$251,543 $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
June 30
------------------
1995 1994
INTEREST INCOME: ---- ----
Interest and fees on loans..................................$3,699 $2,802
Interest on federal funds sold and other.................... 14 43
Income on investment securities:
U. S. Government.......................................... 747 785
Federal Agencies.......................................... 38 52
State and municipal (tax exempt).......................... 147 160
------ ------
Total interest income................................. 4,645 3,842
------ ------
INTEREST EXPENSE:
Interest on deposits:
Demand.................................................... 238 171
Money Market.............................................. 109 117
Savings................................................... 366 381
Time...................................................... 1,148 867
Interest on federal funds purchased......................... 80 4
------ ------
Total interest expense................................ 1,941 1,540
------ ------
NET INTEREST INCOME............................................ 2,704 2,302
PROVISION FOR LOAN LOSSES...................................... 121 45
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES......................................... 2,583 2,257
------ ------
NON-INTEREST INCOME:
Trust department............................................ 345 369
Service charges on deposit accounts......................... 86 65
Fees and insurance premiums................................. 23 30
Other....................................................... 34 25
------ ------
Total non-interest income............................. 488 489
------ ------
NON-INTEREST EXPENSE:
Salaries ................................................... 740 683
Pension and other employee benefits......................... 166 142
Occupancy and equipment expense............................. 205 211
FDIC insurance expense...................................... 121 122
Postage and printing........................................ 41 52
Other....................................................... 310 261
------ ------
Total non-interest expense............................ 1,583 1,471
------ ------
INCOME BEFORE INCOME TAX PROVISION............................. 1,488 1,275
INCOME TAX PROVISION .......................................... 449 394
------ ------
NET INCOME.....................................................$1,039 $ 881
====== ======
NET INCOME PER COMMON SHARE, based on
2,400,000 shares outstanding ............................... $.43 $.37
CASH DIVIDENDS PAID per common share........................... $.27 $.25
The accompanying notes are an integral part of these statements.
4
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands)
Six Months Ended
June 30
------------------
1995 1994
INTEREST INCOME: ---- ----
Interest and fees on loans..................................$7,131 $5,469
Interest on federal funds sold and other.................... 29 90
Income on investment securities:
U. S. Government.......................................... 1,554 1,604
Federal Agencies.......................................... 76 194
State and municipal (tax exempt).......................... 299 315
------ ------
Total interest income................................. 9,089 7,672
------ ------
INTEREST EXPENSE:
Interest on deposits:
Demand.................................................... 486 346
Money Market.............................................. 250 236
Savings................................................... 753 767
Time...................................................... 2,095 1,731
Interest on federal funds purchased......................... 143 12
------ ------
Total interest expense................................ 3,727 3,092
------ ------
NET INTEREST INCOME............................................ 5,362 4,580
PROVISION FOR LOAN LOSSES ..................................... 214 99
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES............................................. 5,148 4,481
------ ------
NON-INTEREST INCOME:
Trust department............................................ 691 676
Service charges on deposit accounts......................... 167 129
Fees and insurance premiums................................. 46 51
Other....................................................... 63 50
------ ------
Total non-interest income............................. 967 906
------ ------
NON-INTEREST EXPENSE:
Salaries ................................................... 1,476 1,364
Pension and other employee benefits......................... 315 288
Occupancy and equipment expense............................. 402 425
FDIC insurance expense...................................... 242 244
Postage and printing........................................ 109 135
Other....................................................... 605 501
------ ------
Total non-interest expense............................ 3,149 2,957
------ ------
INCOME BEFORE INCOME TAX PROVISION............................. 2,966 2,430
INCOME TAX PROVISION .......................................... 918 754
------ ------
NET INCOME.....................................................$2,048 $1,676
====== ======
NET INCOME PER COMMON SHARE, based on
2,400,000 shares outstanding ............................... $.85 $.70
CASH DIVIDENDS PAID per common share........................... $.27 $.25
The accompanying notes are an integral part of these statements.
5
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Six Months Ended
June 30
------------------
1995 1994
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 9,163 $ 7,806
Fees and commissions received 861 800
Interest paid (3,594) (3,122)
Cash paid to suppliers and employees (2,783) (2,480)
Income taxes paid (850) (706)
-------- --------
Net cash provided by operating activities 2,797 2,298
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing investment securities 10,499 26,803
Purchase of corporate stock (18) (15,750)
Proceeds from maturing interest bearing deposits
in other banks 1,489 2,000
Interest bearing deposits in other banks -- (61)
Net increase in loans made to customers (15,071) (8,225)
Capital expenditures (85) (60)
-------- --------
Net cash provided (used) by investing activities (3,186) 4,707
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, money market and
savings accounts (15,779) (7,607)
Net increase in certificates of deposit 11,219 2,650
Net increase in repurchase agreements 224 --
Dividends paid (648) (600)
-------- --------
Net cash provided by financing activities (4,984) (5,557)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS (5,373) 1,448
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,827 7,858
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,454 $ 9,306
======== ========
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net income $ 2,048 $ 1,676
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 194 224
Provision for possible loan losses 214 99
Deferred income tax benefit (25) (25)
Increase in accrued interest receivable
and other assets (259) (102)
Increase in accrued interest payable
and other liabilities 625 426
-------- --------
Net cash provided by operating activities $ 2,797 $ 2,298
======== ========
The accompanying notes are an integral part of these statements.
6
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 June
30, 1995, the results of its operations for the three and six months
periods and its cash flows for the six 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 shareholder's investment at June 30, 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 June 30,
1995 and December 31, 1994, there were no borrowings outstanding under
this line of credit.
Commitments to extend credit, which amount to $31,650,000 at June 30,
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 June 30, 1995 and December 31, 1994 the Bank had
$566,000 and $672,000 in outstanding standby letters of credit.
7
3. 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.
8
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 second quarter of 1995 was $1,039,000,
an increase of 18% from the $881,000 earned in the second quarter of 1994. For
the six months period ended June 30, 1995, net income was $2,048,000, a 22%
increase over the $1,676,000 reported in the same period of 1994.
Net income per common share was $.43 for the second quarter of 1995,
compared to $.37 recorded during the same period of 1994. For the first six
months of 1995 and 1994, net income per share was $.85 and $.70, respectively.
Per share earning for both periods have been computed on 2,400,000 weighted
average shares of common stock outstanding.
On a annualized basis, return on average total assets was 1.67% for the
second quarter of 1995 and 1.64% for the first six months of 1995 compared with
1.44% for the second quarter of 1994 and 1.37% for the first six months of 1994.
Return on average common shareholders' equity was 12.97% for the second quarter
of 1995 and 12.94% for the first six months of 1995 compared to 11.76% for the
same quarter of 1994 and 11.19% for the first six months of 1994.
TRENDS AND FUTURE EVENTS
During the first six months of 1995, the volume of net loans increased
$14,857,000 or 9.8%. The increase is the result of a strong loan demand and is
further evidence of a continuing healthy local economy. This increase in loans
was funded primarily from the proceeds of maturing investment securities and
cash. During the same period deposits decreased 4,560,000 or 2.1% which is a
normal trend for the first six months of each year. During the first six months
of 1994, deposits decreased 2.3%. As a result of the growth in loans and the
decrease in deposits during the first six months of 1995, investment securities
have declined $10,368,000 during this period.
On June 5, 1995 American National Bank received approval of the
Comptroller of the Currency for the acquisition of the Gretna, Virginia branch
office of Crestar Bank by American National Bank and Trust Company. The
effective date of the purchase has been set at the close of business August
24, 1995. American National Bank and Trust Company will assume, approximately
$39,000,000 in deposits of the Gretna branch. The branch will continue
operations after August 24, 1995 as a branch of American National Bank and will
utilize all of the existing Crestar employees of the branch.
On July 28, 1995, Charles A. Womack, Jr., Register Acquisition Corp. and
Andrew C. Boor, Trustee of an Employee Stock Ownership Plan to be Formed served
American National Bank and Trust Company with a Bill of Complaint. The suit was
filed in the Circuit Court of Pittsylvania County. The suit names as defendants
the Bank in its capacity as Executor under the Will of E. Stuart James Grant, as
Trustee of the E. Stuart James Grant Charitable Trust and the Bank in its own
capacity. The suit seeks to compel the Bank to sell to plaintiffs the stock
of the Register Publishing Company, the primary asset of the Grant Estate. In
the alternative, plaintiffs seek damages of $10,000,000. Management believes
the complaint is without merit and intends to defend vigorously the allegations
in this Bill of Complaint. This suit was filed after a federal district court
for the Western District of Virginia dismissed on July 14, 1995, a suit seeking
to compel the sale of the Register Publishing Company to Trustees of the
Register Publishing Company Employee Stock Ownership Plan. The Bank was named
as a defendant in its capacity as Executor and Trustee. In the opinion of
management, the outcome of the above legal proceeding will not have a material
adverse affect on the financial position of the Bank.
NET INTEREST INCOME
Net interest income is the excess of interest income over interest expense.
During the second quarter of 1995, net interest income increased $402,000 or
17.5% over the same period a year ago.
9
During the first six months of 1995, net interest income increased $782,000 or
17.1% over the same period of 1994. The increase in net interest income for
both periods was attributable primarily to an increase in the volume of loans
and an increase in the yield on interest earning assets.
Taxable equivalent net yield on interest earning assets was 4.67% in the
second quarter of 1995, compared to 4.04% for the second quarter of 1994, and
4.64% for the first six months of 1995 compared to 4.01% for the first six
months of 1994.
During the next twelve months repricing opportunities in assets will exceed
repricing opportunities in liabilities by approximately $3,000,000 or 1.2% of
assets. This makes the Corporation slightly asset sensitive. Management
considers this position to be relatively balanced but any decrease in market
interest rates during the next twelve months may tend to decrease the
Corporation's taxable equivalent net yield on interest earning assets. It
should be recognized however, that the Corporation's interest-sensitive position
changes quickly as a result of management decisions and market conditions. In
any event this interest-sensitive position is not expected to have a substantial
effect upon the earnings of the Corporation during the next twelve months.
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 during the reporting period.
Nonperforming assets were $244,000 at June 30, 1995 and $171,000 at December 31,
1994, an increase of $73,000 during the first six months of 1995.
For the six months period ending June 30, 1995, the gross amount of
interest income that would have been recorded on nonaccrual loans and
restructured loans at June 30, 1995, if all such loans had been accruing
interest at the original contractual rate, was $8,000. No interest payments
were recorded during the first six months of 1995 as interest income for all
such nonperforming loans.
Nonperforming assets as a percentage of net loans were .15% at June 30,
1995 and .11% at December 31, 1994.
Loans accruing interest and past due 90 days or more totaled $132,000 at
June 30, 1995 and $113,000 at December 31, 1994. This was an increase of
$19,000.
PROVISION and RESERVE FOR LOAN LOSSES
The provision for loan losses for the second quarter of 1995 was $121,000
and $45,000 for the same period of 1994. The provision for loan losses was
$214,000 for the six months period ended June 30, 1995 and $99,000 for the same
period of 1994.
The reserve for loan losses was $2,527,000 at June 30, 1995 and $2,353,000
at December 31, 1994. As a percentage of total loans (less unearned income),
the reserve for loan losses was 1.50% at June 30, 1995 and 1.53% at December 31,
1994. In Management's opinion, the current reserve for loan losses is adequate.
NON-INTEREST INCOME
Non-interest income for the second quarter of 1995 was $488,000, a decrease
of .2% from the $489,000 reported in the second quarter of 1994. For the first
six months of 1995 non-interest income was $967,000, an increase of 6.7% from
the $906,000 reported for the same period of 1994.
The decrease in non-interest income during the quarter included a 6.5%
decrease in trust department income due primarily to a reduction in trust assets
administered, a 32.3% increase in service charges on deposit accounts due to an
increase in commercial account fees, a 23.3% decrease in fees and insurance
premiums due to a reduction in new loans associated with these fees and a 36.0%
increase in other non-interest income due primarily to an increase in dividends
received.
The increase in non-interest income for the first six months of 1995 over
the same period of 1994, included an increase of 2.2% in trust department
income, a 29.5% increase in service charges on deposit accounts due to an
increase in commercial account fees, a 9.8% decrease in fees and insurance
premiums and a 26.0% increase in other income due primarily form an increase in
10
dividends received.
NON-INTEREST EXPENSE
Non-interest expense for the second quarter of 1995 was $1,583,000, up 7.6%
from the $1,471,000 reported in the second quarter of 1994. For the first six
months of 1995 non-interest expense was $3,149,000, up 6.5% from the $2,957,000
reported for the same period of 1994.
The increase in non-interest expense for the quarterly period over 1994
included an 8.3% increase in salaries, a 16.9% increase in pension and other
employee benefits due primarily to an increase in net periodic pension costs,
partially offset by a reduced hospitalization insurance premium and a .3%
decrease in occupancy and equipment expense. Also included is an .8% decrease
in FDIC insurance expense, a 21.1% decrease in postage and printing and an 18.8%
increase in other expense. The increase in other expense was primarily from
consulting fees paid.
The increase in non-interest expense for the first six months period of
1995 over the same period of 1994 included an 8.2% increase in salaries, a 9.4%
increase in pension and other employee benefits due to an increase in net
periodic pension costs, partially offset by a reduced hospitalization insurance
premium, a 5.4% decrease in occupancy and equipment expense, an .8% decrease in
FDIC insurance expense, a 19.3% decrease in postage and printing and an 20.8%
increase in other expense. The increase in other expense was primarily from
consulting fees paid.
INCOME TAX PROVISION
The income tax provision for the second quarter of 1995 was $449,000, an
increase of $55,000 from the $394,000 reported a year earlier. The income tax
provision for the six month period in 1995 was $918,000, an increase of $164,000
from the $754,000 reported for the same period of 1994. The Corporation's
overall effective tax rate was 31.0% for both six months periods ended June 30,
1995 and 1994. Changes in the income tax provision were attributable to the
corresponding changes in taxable income.
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 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 June 30, 1995 the Corporation had a ratio of 19.5% for Tier I and a
combined total ratio for Tier I and Tier II capital of 20.7%. At December 31,
1994 these ratios were 20.1% and 21.3%, respectively.
On May 16, 1995 the Board of Directors declared a cash dividend of $.27 per
share on the outstanding 2,400,000 shares of stock, payable June 23, 1995 to
shareholders of record June 9, 1995.
LIQUIDITY
The Corporation's net liquid assets to net liabilities ratio was 26% at
June 30, 1995. At the close of the second quarter of 1994, this ratio was 29%.
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.
11
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 - Financial Data Schedule EX-27
(b) Reports on Form 8-K - There were no reports on
Form 8-K filed for the three months ended June 30,
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 - August 11, 1995 Executive Officer
/s/ David Hyler
---------------------------------
David Hyler
Senior Vice-President and
Secretary-Treasurer
Date - August 11, 1995 (Chief Financial Officer)
12