1995 Annual Report
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American National Bankshares Inc.
1995 Annual Report
American National Bankshares Inc. is a bank
holding company whose only subsidiary is American
National Bank and Trust Company. The Bank offers
a wide variety of retail, commercial and trust banking
services through its offices located in the trade area
of the City of Danville, Virginia and the County of
Pittsylvania.
Annual Shareholders' Meeting
The Annual Meeting of Shareholders of Ameri-
can National Bankshares Inc. will be held Tuesday,
April 23, 1996 at 11:30 a.m. in the Piedmont Room,
of the Howard Johnson Hotel, 100 Tower Drive,
Danville, Virginia.
Form 10-K
The form 10-K Report filed with the Securities
and Exchange Commission may be obtained without
charge by request to Charles H. Majors, President
and Chief Executive Officer, American National
Bankshares Inc., P. O. Box 191, Danville,
Virginia, 24543.
TABLE OF CONTENTS
President's Report........................... 3
Selected Financial Data...................... 4
Management's Discussion and Analysis......... 6
Management's Report on Financial Statements..20
Report of Independent Public Accountants.....20
Consolidated Financial Statements............21
Notes to Consolidated Financial Statements...25
1
Financial Highlights
American National Bankshares Inc.
For the Year Ended
December 31
Percent
1995 1994 Change
Balance Sheet Highlights (in thousands)
Total assets.....................................................$305,083 $253,768 20.2 %
Deposits......................................................... 259,830 215,861 20.4
Net loans........................................................ 172,815 151,126 14.4
Investment securities............................................ 109,303 79,251 37.9
Shareholders' investment......................................... 34,125 30,786 10.8
Income Statement Highlights (in thousands)
Net interest income..............................................$ 11,184 $ 9,683 15.5 %
Provision for loan losses........................................ 476 272 75.0
Non-interest income.............................................. 1,927 1,886 2.2
Non-interest expense............................................. 6,768 6,119 10.6
Net income....................................................... 4,023 3,533 13.9
Per Share Data
Net income.......................................................$ 1.68 $ 1.47 14.3 %
Regular cash dividends paid...................................... .56 .50 12.0
Extra cash dividends paid........................................ .25 -
Book value....................................................... 14.22 12.83 10.8
Statistical Highlights
Return on average assets......................................... 1.49% 1.43%
Return on average shareholders' investment....................... 12.32% 11.64%
1991 1992 1993 1994 1995
Net Income (in millions) $3,052 $3,494 $3,303 $3,533 $4,023
1991 1992 1993 1994 1995
Regular Dividends Paid (per share) $0.41 $0.44 $0.47 $0.50 $0.56
2
American National Bankshares Inc.
P.O. Box 191 - 628 Main Street - Danville, Virginia 24543
Phone 1-804-792-5111
March 14, 1996
TO OUR SHAREHOLDERS:
We have exciting things to report to you.
First, our net income for 1995 increased 13.9% over 1994.
For the first time, our earnings exceeded $4 million, resulting
in record net income of $1.68 per share.
Our return on average assets increased to 1.49% and our return on
average shareholders' investment increased to 12.32%.
In August 1995, we completed the purchase of Crestar Bank's
branch office in Gretna, Virginia, adding $36 million in deposits
and $2 million in loans. Improved lending conditions enabled us
to increase our outstanding loans by $21 million. Assets at the
end of 1995 exceeded $305 million, a 20% increase over the $253
million at 1994 year end. Our shareholders' investment increased
almost 11% to over $34 million.
In September 1995, we signed an agreement to acquire Mutual
Savings Bank, F.S.B. by its merger into American National Bank
and Trust Company. Today we completed that transaction and we
now have 8 offices in Danville, the office in Gretna and an
office in Collinsville, Virginia. This transaction has increased
our total assets by $84 million and makes us the sixth largest
independent bank in Virginia.
In 1995, we completed our three-year strategic plan
outlining how we expect to meet our mission of providing quality
financial services and exceptional customer service. We believe
this strategic plan has been and will continue to be a vital part
of our continued success.
Since October 1995, we have had several market makers in our
stock and our transactions are now reported on the OTC Bulletin
Board under the symbol "AMNB". We believe this will provide
greater marketability and liquidity for our stock.
We appreciate the confidence and loyalty of our customers
and shareholders. We look forward to the new customers and new
shareholders from the recent merger with Mutual Savings Bank.
I wish to express my appreciation for the dedicated work of
our employees. They have made 1995 a success and have begun to
continue that success in 1996. We look forward to the challenges
and opportunities we face together.
Very truly yours,
/s/ Charles H. Majors
Charles H. Majors
President & Chief Executive Officer
3
SUMMARY of SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)
American National Bankshares Inc. and Subsidiary
1995 1994 1993 1992 1991
Operations Information:
Interest income:
Loans................................ $ 15,008 $ 11,798 $ 10,607 $ 11,039 $ 13,068
Federal funds sold and other......... 159 171 322 490 616
Investment securities................ 4,580 4,088 4,989 5,820 5,843
-------- -------- -------- -------- --------
Total interest income.............. 19,747 16,057 15,918 17,349 19,527
Interest expense....................... 8,563 6,374 7,017 8,826 11,669
-------- -------- -------- -------- --------
Net interest income.................... 11,184 9,683 8,901 8,523 7,858
Provision for loan losses.............. -476 -272 -214 -230 -214
Non-interest income.................... 1,927 1,886 1,871 1,728 1,383
Non-interest expense................... -6,768 -6,119 -5,772 -5,290 -4,981
-------- -------- -------- -------- --------
Income before income taxes............. 5,867 5,178 4,786 4,731 4,046
Income taxes........................... 1,844 1,645 1,483 1,237 994
-------- -------- -------- -------- --------
Net income............................. $ 4,023 $ 3,533 $ 3,303 $ 3,494 $ 3,052
======== ======== ======== ======== ========
Balance Sheet Information:
Investment securities.................. $109,303 $ 79,251 $ 91,826 $ 93,560 $ 85,822
Net loans.............................. 174,294 151,126 137,877 127,940 121,686
Total deposits......................... 259,830 215,861 217,655 212,439 200,620
Shareholders' investment............... 34,125 30,786 29,082 26,907 24,997
Total assets........................... 306,562 253,768 247,706 240,589 228,033
Per Share Information:*
Net income............................. $ 1.68 $ 1.47 $ 1.38 $ 1.46 $ 1.27
Dividends.............................. .56 .75 .47 .66 .41
Book value............................. 14.22 12.83 12.12 11.21 10.42
Ratios:
Return on average assets............... 1.49% 1.43% 1.36% 1.48% 1.37%
Return on average shareholders' equity. 12.32 11.64 11.96 13.50 12.93
Total risk-based capital/assets........ 20.12 21.30 22.25 22.20 22.05
Leverage capital/assets................ 11.19 12.13 11.74 11.18 10.96
Net charge-offs to average net loans... .11 .05 .12 .11 .09
Reserve for loan losses to period-end
loans, net of unearned income........ 1.50 1.53 1.54 1.61 1.62
* Per share amounts are based on 2,400,000 shares outstanding and have been restated to
retroactively reflect a 2 for 1 stock split declared on April 21, 1992.
_______________________________________________________________________________
MARKET PRICE OF THE CORPORATION'S COMMON STOCK:
Price per share Price per share
known to management known to management
1994 Low High 1995 Low High
4th quarter $30.50 $30.50 4th quarter $28.00 $31.00
3rd quarter $30.50 $30.50 3rd quarter $27.00 $30.50
2nd quarter $29.50 $30.50 2nd quarter $27.00 $30.50
1st quarter $29.00 $29.50 1st quarter $26.00 $30.50
American National Bankshares Inc. common stock is traded in the over-the-counter
market and is quoted on the OTC Bulletin Board under the symbol "AMNB". At
December 31, 1995 there were 903 shareholders of record.
1991 1992 1993 1994 1995
Shareholders' Investment (in millions) $24,997 $26,907 $29,082 $30,786 $34,125
4
The following table presents the Corporation's average assets, liabilities and
shareholders' investment for each of the past three years:
AVERAGE ASSETS 1995 1994 1993
Cash and Due from Banks..................................$ 8,993,806 $ 9,870,473 $ 10,718,599
Investment Securities:
Securities available for sale.......................... 17,764,263 461,483 --
Securities held to maturity............................ 66,413,659 82,346,549 88,322,335
------------ ------------ ------------
Average investment securities......................... 84,177,922 82,808,032 88,322,335
------------ ------------ ------------
Loans.................................................... 168,761,745 150,768,216 137,807,306
Less:
Unearned income.................................... -1,277,765 -3,108,380 -3,868,646
Reserve for loan losses............................ -2,502,148 -2,243,121 -2,176,180
------------ ------------ ------------
Average net loans.................................. 164,981,832 145,416,715 131,762,480
Federal Funds Sold....................................... 2,304,986 1,251,972 4,959,511
Federal Reserve Bank stock, Federal Home Loan Bank stock
and other.......................................... 958,860 834,661 201,500
Bank Premises and Equipment.............................. 3,540,673 3,145,712 3,323,240
Accrued Interest Receivable and Other Assets............. 4,133,645 3,453,243 3,648,718
------------ ------------ ------------
Average assets.....................................$269,091,724 $246,780,808 $242,936,383
============ ============ ============
AVERAGE LIABILITIES and SHAREHOLDERS' INVESTMENT
LIABILITIES:
Demand deposits -- non-interest bearing................$ 28,678,999 $ 25,235,223 $ 23,374,779
Demand deposits -- interest bearing.................... 33,762,979 30,917,878 30,141,138
Money market deposits.................................. 16,317,873 19,735,360 21,755,018
Savings deposits....................................... 50,626,596 56,870,304 58,538,081
Time deposits.......................................... 98,394,198 80,886,019 79,631,765
------------ ------------ ------------
Average deposits................................. 227,780,645 213,644,784 213,440,781
Federal funds purchased................................ 1,071,810 663,397 106,182
Securities sold under repurchase agreements............ 5,877,593 370,334 --
Accrued interest payable and other liabilities......... 1,718,059 1,764,981 1,766,907
------------ ------------ ------------
Average liabilities.............................. 236,448,107 216,443,496 215,313,870
------------ ------------ ------------
SHAREHOLDERS' INVESTMENT:
Common stock........................................... 2,400,000 2,400,000 2,400,000
Capital in excess of par value......................... 5,400,000 5,400,000 5,400,000
Net unrealized gains (losses)........................... 152,568 -2,437 --
Retained earnings...................................... 24,691,049 22,539,749 19,822,513
------------ ------------ ------------
Average shareholders' investment.................... 32,643,617 30,337,312 27,622,513
------------ ------------ ------------
Average liabilities and shareholders' investment....$269,091,724 $246,780,808 $242,936,383
============ ============ ============
5
MANAGEMENT'S DISCUSSION and
ANALYSIS of FINANCIAL CONDITION
and RESULTS of OPERATIONS
American National Bankshares Inc. (the Corporation) was
organized in 1984 for the purpose of acquiring all of the
outstanding shares of American National Bank and Trust
Company (the Bank). The Bank was chartered and opened for
business in February 1909. Under an agreement and plan of
merger, the Bank was acquired by the Corporation on
September 1, 1984.
Performance Summary
Net income increased 14% to $4,023,000 for the year
1995. This amount established a new high in earnings for
the history of the Bank and the Corporation.
The Company reported in its SEC Form 8-K, filed
September 7, 1995, that it had acquired the branch office of
Crestar Bank at Gretna, Virginia on August 24, 1995. In
addition to the branch facilities at Gretna, the Company
acquired $2,150,000 in loans and assumed deposits of
$36,295,000.
The economy of the Bank's trade area continues to be
healthy as evidenced by a strong loan demand. During 1995
net loans increased by a total of $21,689,000 or 14%,
including the loans from the Gretna branch acquisition.
Excluding the acquired Gretna loans, the percentage increase
was 13%. Total deposits increased during 1995 by
$43,969,000 or 20% including the Gretna acquisition.
Excluding the Gretna acquisition of deposits, the increase
was $7,674,000 or 4% over the prior year. In addition to
deposits, the Company increased its repurchase agreements by
$3,467,000 or 57%. No repurchase agreements were acquired
from the Gretna branch purchase.
Earnings and Capital
On a per common share basis net income was $1.68 in
1995, $1.47 in 1994, and $1.38 in 1993. The significant
items affecting the increase in net earnings per share in
1995 are summarized as follows:
1994 Earnings per Share $1.47
Net interest income .62
Provision for loan losses (.08)
Non-interest income .02
Non-interest expense (.27)
Income tax provision (.08)
Net increase .21
1995 Earnings Per Share $1.68
The Corporation increased its capital during 1995 by
$3,340,000 or 11% through the retention of $2,679,000 in
earnings and an increase in net unrealized gains on
securities of $661,000. This followed an increase in
capital of $1,704,000, or 6%, in 1994. The increase in 1994
resulted from a combination of an increase in retained
earnings of $1,733,000 and a decrease from a net unrealized
loss on securities of $29,000. Shareholders' investment was
11.2% of assets at December 31, 1995 and 12.1% at December
31, 1994.
During 1995, the Corporation increased its reserve for
loan losses to $2,649,000 an increase of $296,000 or 13%
from 1994. The reserve, as a percentage of loans, was 1.51%
at December 31, 1995 and 1.53% at December 31, 1994.
Return on average total assets was 1.49% in 1995,
compared with 1.43% in 1994 and 1.36% in 1993. The return
on average shareholders' investment was 12.32% in 1995,
11.64% in 1994, and 11.96% in 1993.
Shareholders' equity was $34,125,000 at December 31,
1995 and $30,786,000 at December 31, 1994. This was an
increase of $3,340,000 or 11% over the prior year-end. The
total market value of American National Bankshares Inc.
common stock at $28.875 per share (the last trade recorded
on the OTC Bulletin Board during 1995) was $69,300,000. he
market value was 203 percent of the $34,125,000
shareholders' investment. Book value per common share was
$14.22 at the close of 1995.
Merger with Mutual
On September 26, 1995, American National Bankshares
Inc. and Mutual Savings Bank, F.S.B. signed and announced a
definitive merger agreement providing for the merger of
Mutual into American National Bank and Trust Company.
American National Bankshares Inc. agreed to exchange
.705 of a share of its common stock for each share of Mutual
common stock and assume all outstanding Mutual stock
options. Based on American National Bankshares stock price
as of February 27, 1996 of $27, the transaction represents
an exchange value of approximately $19.04 for each share of
Mutual common stock. The purchase price will be 1.69 times
Mutual's June 30, 1995 book value.
The merger, which will be accounted for as a pooling of
interests, was consummated during the first quarter of 1996.
The merger is also expected to be a tax-free reorganization
for federal income tax purposes.
At December 31, 1995, Mutual had total assets of
approximately $84,706,000, total deposits of approximately
$68,732,000 and shareholders' equity of $14,956,000.
Upon consummation of the merger, the Corporation will
have total assets of approximately $390,000,000, total
deposits
6
of approximately $329,000,000, total shareholder's
equity of approximately $47,000,000. According to a survey
of independent Virginia banks published by Scott &
Stringfellow Inc. in 1995, American National Bank will be
the sixth largest independent commercial bank in Virginia
based on assets and deposits and the third largest based on
equity after the merger is consummated. American National
Bankshares will have more than 3,200,000 shares of common
stock outstanding, held by more than 1,500 shareholders.
Trends and Future Events
The economic conditions of the Corporation's trade area
have continued to be healthy during the year 1995 as
evidenced by a strong loan demand. The Corporation's net
loans grew at a rate of 14% during 1995. The indicated
strong loan demand is expected to continue into 1996.
The weighted average yield on interest earning assets
and the weighted average cost of deposits increased during
1995 due to a combination of increased volume in both assets
and deposits and an increase in rates of loans and deposits.
As a result of the Corporation's asset and liability
repricing strategy and increased loan demand, the
Corporation was able to increase its net interest income
(interest income less interest expense) by 16%. Management
believes the Corporation positioned itself to continue to
maintain this level of net interest income into the near
future.
During 1995, time deposits increased by $40,680,000 or
51%. Interest bearing demand deposits increased $6,666,000
or 21% and non-interest bearing demand deposits also
increased by $4,035,000 or 15%. Money market deposits
declined by $4,366,000 or 20% and savings deposits declined
by $3,047,000 or 6%. The net effect of these changes in the
Corporation's deposit structure reduced the Corporation's
dependency on short term deposits and provided more stable
funding for loans with the increase in time deposits. On
February 1, 1996, the Federal Reserve Bank lowered its
discount rate by 1/4% and the major money center banks
followed by lowering their prime rate by 1/4%. Although a
downward trend has been indicated in early 1996, Management
does not expect a major shift of funds within the Bank's
deposit categories in 1996.
As mandated by the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), the FDIC
adopted regulations effective January 1, 1993, for the
transition from a flat-rate insurance assessment system to
a risk-based system by January 1, 1994. Pursuant to these
regulations, the Bank's deposit insurance assessment was
set at the lowest allowable rate of $.23 per $100 of
deposits for the year 1994. During the year 1995 the
assessment rate was further dropped to $.04 per $100 of
deposits. The Bank has been advised that for the first six
months of 1996, it will be assessed the minimum fee of $500
per calendar quarter.
Among other things, FDICIA identifies five capital
categories for insured depository institutions: "well
capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically
undercapitalized". FDICIA requires the federal banking
regulators to take prompt corrective action with respect to
insured depository institutions that do not meet minimum
capital requirements.
The FRB has adopted regulations establishing relevant
capital requirements for banks. Under the regulations, a
well capitalized institution must have a Tier I risk-based
capital ratio of at least six percent, a total risk-based
capital ratio of at least ten percent and a leverage ratio
of at least five percent and not be subject to a capital
directive order. Under these guidelines the Bank has always
been and continues to be considered well capitalized.
Net Interest Income
Net interest income, the most significant component of
earnings, is the excess of interest income over interest
expense. For analytical purposes, net interest income is
adjusted to a taxable equivalent basis to recognize the
income tax savings on tax-exempt assets, such as state and
municipal securities. A tax rate of 34% was used in
adjusting interest on tax-exempt securities and loans to a
fully taxable equivalent basis for the years 1995, 1994 and
1993.
During 1995, taxable equivalent net interest income
increased to $11,421,000, up 15% from $9,958,000 in 1994.
Taxable equivalent net interest income for 1994 was up 8%
from the $9,226,000 recorded in 1993. The $1,463,000
increase in taxable equivalent net interest income during
1995 consisted of $827,000 due to increases in volume and
$636,000 due to increases in rates. The $732,000 increase
in taxable equivalent net interest income during 1994 was
the net result of an increase of $514,000 due to volume and
$218,000 due to increases in rate.
Due to the reduced availability of qualified tax exempt
investments and loans, a reduction in tax exempt assets is
expected in future years.
7
The following is an analysis of net interest income, on a taxable equivalent
basis. Nonaccrual loans are included in average balances. Interest income on
nonaccrual loans if recognized is recorded on a cash basis.
(In thousands, except rates):
Average Balance Interest Income/Expense Average Yield/Rate
1995 1994 1993 1995 1994 1993 1995 1994 1993
Interest income
Loans:
Commercial $ 57,173 $ 51,460 $ 43,664 $ 5,103 $ 3,939 $ 2,970 8.93 % 7.65 % 6.80 %
Mortgage 72,816 65,570 62,792 6,405 5,081 4,901 8.80 7.75 7.80
Installment 37,495 30,630 27,483 3,542 2,845 2,838 9.45 9.29 10.33
-------- -------- -------- ------- ------- -------
Total loans 167,484 147,660 133,939 15,050 11,865 10,709 8.99 8.04 8.00
-------- -------- -------- ------- ------- -------
Investment securities:
U. S. Government 71,290 68,058 69,315 3,860 3,204 3,710 5.41 4.71 5.35
Federal agencies 2,729 4,320 8,624 149 273 623 5.46 6.32 7.22
State and municipal 10,149 10,420 10,373 765 818 879 7.54 7.85 8.48
Other investments 10 10 10 1 1 1 5.50 5.50 5.50
-------- -------- -------- ------- ------- -------
Total investment securities 84,178 82,808 88,322 4,775 4,296 5,213 5.67 5.19 5.90
-------- -------- -------- ------- ------- -------
Federal funds sold and other 2,612 3,459 8,446 159 171 321 6.09 4.94 3.81
-------- -------- -------- ------- ------- -------
Total interest-earning assets 254,274 233,927 230,707 $19,984 $16,332 $16,243 7.86 6.98 7.04
-------- -------- -------- ------- ------- ------- ----- ----- -----
Non-earning assets 14,818 12,854 12,229
-------- -------- --------
Total assets $269,092 $246,781 $242,936
======== ======== ========
Interest expense
Deposits:
Demand $ 33,763 $ 30,918 $ 30,141 $ 1,007 $ 752 $ 797 2.98 2.43 2.64
Money market 16,318 19,736 21,755 524 510 591 3.21 2.58 2.72
Savings 50,627 56,870 58,538 1,524 1,577 1,871 3.01 2.77 3.20
Time 98,394 80,886 79,632 5,201 3,494 3,755 5.29 4.32 4.72
-------- -------- -------- ------- ------- -------
Total deposits 199,102 188,410 190,066 8,256 6,333 7,014 4.15 3.36 3.69
Federal funds purchased 1,072 664 106 66 29 3 6.16 4.37 2.83
Repurchase agreements 5,877 370 -- 241 12 -- 4.10 3.24
-------- -------- -------- ------- ------- -------
Total interest-bearing
liabilities 206,051 189,444 190,172 $ 8,563 $ 6,374 $ 7,017 4.16 3.36 3.69
------- ------- ------- ----- ----- -----
Demand deposits 28,679 25,235 23,375
Other liabilities 1,718 1,765 1,767
Shareholders' investment 32,644 30,337 27,622
-------- -------- --------
Total liabilities and
shareholders' investment $269,092 $246,781 $242,936
======== ======== ========
Interest rate spread 3.70 % 3.62 % 3.35 %
===== ===== =====
Net interest income $11,421 $ 9,958 $ 9,226
======= ======= =======
Taxable equivalent adjustment $ 237 $ 275 $ 325
======= ======= =======
Net yield on earning assets 4.49 % 4.26 % 4.00 %
===== ===== =====
8
Changes in Net Interest Income (Rate/Volume Analysis)
Net interest income is the product of the volume of average earning assets
and the average rates earned, less the volume of average interest-bearing
liabilities and the average rates paid. The portion of change relating to both
rate and volume is allocated to each of the rate and volume changes based on
the relative change in each category. The following table analyzes the changes
in both rate and volume components of net interest income on a taxable
equivalent basis for the past two years (in thousands):
1995 vs. 1994 1994 vs. 1993
Interest Change Interest Change
Increase Attributable to Increase Attributable to
(Decrease) Rate Volume (Decrease) Rate Volume
Interest Income:
Loans:
Commercial $1,164 $ 698 $ 466 $ 969 $ 400 $ 569
Mortgage 1,324 728 596 180 -35 215
Installment 697 49 648 7 -301 308
------ ------ ------ ------ ------ ------
Total loans 3,185 1,475 1,710 1,156 64 1,092
------ ------ ------ ------ ------ ------
Investment securities:
U.S. Government 656 498 158 -506 -440 -66
Federal agencies -124 -33 -91 -350 -70 -280
State and municipal -53 -32 -21 -61 -65 4
------ ------ ------ ------ ------ ------
Total investment securities 479 433 46 -917 -575 -342
------ ------ ------ ------ ------ ------
Federal funds sold and other -12 35 -47 -150 77 -227
------ ------ ------ ------ ------ ------
Total interest income 3,652 1,943 1,709 89 -434 523
------ ------ ------ ------ ------ ------
Interest expense
Deposits:
Demand 255 181 74 -45 -65 20
Money market 14 111 -97 -81 -28 -53
Savings -53 128 -181 -294 -242 -52
Time 1,707 868 839 -261 -319 58
------ ------ ------ ------ ------ ------
Total deposits 1,923 1,288 635 -681 -654 -27
Federal funds purchased 37 15 22 26 2 24
Repurchase agreements 229 4 225 12 -- 12
------ ------ ------ ------ ------ ------
Total interest expense 2,189 1,307 882 -643 -652 9
------ ------ ------ ------ ------ ------
Net interest income $1,463 $ 636 $ 827 $ 732 $ 218 $ 514
====== ====== ====== ====== ====== ======
Provision and Reserve for Loan Losses
The provision for loan losses is an amount added to the
reserve against which loan losses are charged. The amount
of the provision is determined by management based upon its
assessment of the size and quality of the loan portfolio and
the adequacy of the reserve in relation to the risks
inherent within the loan portfolio.
The 1995 provision for loan losses was $476,000 and
compares with $272,000 in 1994 and $214,000 in 1993.
The reserve for loan losses totaled $2,649,000 at
December 31, 1995, an increase of 13% over December 31,
1994. The increase in the reserve for loan losses during
1995 of $296,000 consists of the provision of $476,000 less
net charge-offs of $180,000. The ratio of reserve to loans,
less unearned discount, was 1.51% at December 31, 1995 and
1.53% at December 31, 1994.
The Corporation's Loan Committee has responsibility for
determining the level of the reserve for loan losses,
subject to the review of the Board of Directors. The Loan
Committee has taken economic factors, as well as any other
external events that may affect the value and collectibility
of the loan portfolio, into consideration when making its
assessment and recommendation.
The methodology used to determine the level of the loan
loss reserve on a quarterly basis includes the
identification of losses from a review of the Corporation's
loan "Watch" list. In addition to these identifiable
potential losses, an experience factor for each major
category of loans is applied against the remaining portion
of the loans considered to have no more than a normal risk
9
of collectibility. Additional factors considered in
determining the level of the loan loss reserve are economic
conditions, historical losses, trends and other external
factors. The sum of these elements is the Loan Committee's
recommended level of the reserve for loan losses.
If the existing level of the loan loss reserve is below
the Loan Committee's recommended level of the reserve at the
close of an interim period, an increase sufficient to
eliminate the deficiency is recorded in the current period
provision for loan losses. If the existing level of the
reserve exceeds the recommended level at the close of an
interim period, no adjustment is made to the provision for
loan losses if loan growth is expected.
The economy of the Corporation's trade area, which
includes the City of Danville and Pittsylvania County, is
dependent primarily on the success of the city's largest
employer (a textile manufacturing firm), tobacco farming
(the major crop of rural Pittsylvania County), tobacco
marketing and processing and the city's second largest
employer, a tire manufacturing plant. Textile
manufacturing, tobacco farming and tobacco processing have
been subjected to extreme market pressures in recent years.
The local economy of the Corporation's trade area
continues to be strong at this time and the Corporation's
loan losses have not been significant in recent years;
however, an inherent risk to the loan portfolio exists if a
significant decline occurs in any of these industries along
with a corresponding reduction in employment. Management
believes the reserve for loan losses is appropriate in view
of this geographic concentration.
The adoption in 1995, of Statement of Financial
Accounting Standards Nos. 114 and 118, which address
accounting by creditors for loan impairment, did not have a
significant impact on the provision for loan losses.
Management has allocated the reserve for loan losses to loan categories as
follows (in thousands):
1995 1994 1993 1992 1991
__________________ _________________ _________________ __________________ _______________
Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans
in each in each in each in each in each
category category category category category
to total to total to total to total to total
Amount loans Amount loans Amount loans Amount loans Amount loans
Commercial and
agricultural loans $ 1,570 28 % $ 1,505 28 % $ 1,378 25 % $ 1,339 28 % $ 1,280 29%
Real estate-
construction loans 47 3 45 2 41 1 40 2 38 2
Real estate-
mortgage loans 261 46 253 46 232 51 225 48 215 48
Installment loans 682 23 471 24 431 23 419 22 400 21
Unallocated 89 -- 79 -- 73 -- 71 -- 68 --
Balance at end of year $ 2,649 100 % $ 2,353 100 % $ 2,155 100 % $ 2,094 100 % $ 2,001 100%
Management's criteria for evaluating the adequacy of its loan loss reserve
includes individual evaluation of significant loans and overall portfolio
analyses of more homogeneous, smaller balance loan portfolios. Based on
management's evaluation, estimated loan loss reserves are assigned to the
individual loans which present a greater risk of loan loss. The remaining
loan loss reserve is allocated to the remaining loans on an overall portfolio
basis based on historical loss experience. The assessed risk of loan loss is
higher in the commercial and agricultural loan categories as these categories
contain loans which are more significant to ANB and to the individual borrowers,
thereby exposing ANB to a greater risk of loss in the event of downturns in the
financial position of individual borrowers. The remaining loan categories are
typically for lesser amounts and are distributed over a much larger population
of borrowers, thereby reducing the Corporation's risk of loan loss.
_______________________________________________________________________________
Loan Losses - Ratios
1995 1994 1993
------- ------- -------
Reserve as percentage of
outstanding loans, net of
unearned income 1.51% 1.53% 1.54%
Net charge-offs as percentage
of reserve 6.78 3.11 7.07
Net charge-offs as percentage
of average loans, net of
unearned income 0.11 0.05 .12
Provision as percentage of
net charge-offs 264.77 371.51 140.12
Provision as percentage of
average loans, net of
unearned income 0.28 0.18 .16
Reserve for loan losses
to nonperforming loans 94.62 X 13.76 X 4.61 X
10
Non-Interest Income
Non-interest income totaled $1,926,000 in 1995 compared
with $1,886,000 in 1994 and $1,871,000 in 1993. This was an
increase of 2% during 1995. During 1994, non-interest
income increased 1% from the 1993 level. The major
components of non-interest income are trust department
income, service charges on deposit accounts, non-deposit
fees and insurance commissions and other income.
The trust department services have been expanded in
both corporate and personal trusts during the past three
years and the income from the administration of several
large estates during this period has caused some fluctuation
in the department's income. The trust department reported
income of $1,343,000 in 1995, a decrease of 4% from the
$1,396,000 in 1994 which in turn was a 5% decrease from the
$1,470,000 reported in 1993. The trust department has
recently expanded its services to include alternate
investments for both corporate and personal trusts.
Service charges on deposit accounts were $361,000 in
1995, an increase of 30% over $279,000 reported in 1994,
which was a 9% increase over the $256,000 recorded for 1993.
The increase in 1995 was caused in part by the increase in
deposit accounts of $36,295,000 from the acquisition of the
Gretna branch office.
Non-deposit fees and insurance commissions were $93,000
in 1995, a decrease of 10% from the $104,000 in 1994. The
amount recorded in 1994 was an increase of 29% over the
$80,000 recorded in 1993. In 1994 the Bank increased its
loans with related non-deposit fees and insurance
commissions. Due to market conditions the Bank was not able
to sustain the same increase in such loans during 1995.
Other income was $128,000 in 1995, an increase of 20%
over the $107,000 in 1994, which in turn was an increase of
66% over the $65,000 in 1993. The increase in both 1994 and
1995 resulted primarily from dividends received from the
Federal Home Loan Bank. During 1995 the Bank increased its
investment in the Federal Home Loan Bank.
Non-Interest Expense
Non-interest expense totaled $6,768,000 in 1995, an
increase of $649,000 or 11% over the $6,119,000 in 1994,
which in turn was an increase of $347,000 or 6% over the
$5,772,000 recorded for 1993. Non-interest expense includes
salaries, pension and other employee benefits, occupancy and
equipment expense, postage and printing and other expenses.
Salaries totaled $2,991,000 for 1995, an increase of 8%
over 1994. The increase in 1995 included the addition of
employees from the acquisition of the Gretna branch office.
Salaries totaled $2,767,000 in 1994, an increase of 1% over
the $2,754,000 for 1993.
Pension and other employee benefits totaled $843,000 in
1995, an increase of 23% over the $683,000 recorded in 1994
which in turn was an increase of 45% over the $472,000
reported in 1993. The increase in 1994 was due primarily to
an increase in pension cost. In 1995 both the pension plan
and the executive deferred compensation plan were amended
and employees from the Gretna acquisition were added to the
pension plan.
The total occupancy and equipment expense was $871,000
for both 1995 and 1994. The total of 1994 was an increase
of 5% over the $831,000 recorded in 1993.
FDIC insurance expense was $253,000 in 1995, a decrease
of 48% from the $484,000 recorded in 1994. The 1994 FDIC
insurance expense was an increase of 3% over the $470,000
shown in 1993. The increase in 1994 was the result of an
increase in the deposit assessment base. The decrease in
1995 resulted from a reduction, at mid-year, in the premium
required by the FDIC, from $.23 per one hundred of deposits
to $.04 per one hundred of deposits. The Bank will receive
a further reduction in 1996. The FDIC has notified the Bank
that the assessment for the first six months of 1996 will be
at the minimum of $500 per quarter.
Postage and printing expense was $248,000 in 1995, an
increase of 4% from the $237,000 recorded in 1994, which in
turn was a decrease of 7% from the $255,000 recorded in
1993.
Other expenses were $1,562,000 in 1995, an increase of
45% over the $1,076,000 reported in 1994. Other expenses in
1994 increased 9% over the $991,000 recorded in 1993. Other
expenses in 1995 included $103,000 of amortization expense
of core deposit intangibles related to the Gretna
acquisition and expenditures made in 1995 of approximately
$140,000 for legal and other fees related to the merger with
Mutual Savings Bank. Other expenses in 1995 also included
an increase in consulting fees for general operational and
planning purposes.
Income Taxes
The provision for income taxes (total of current and
deferred) was $1,844,000 in 1995, compared with $1,645,000
in 1994 and $1,483,000 in 1993. In each year, the
Corporation was subject to a Federal tax rate of 34%. The
major difference between the statutory rate and the
effective rate results from income which is not taxable for
Federal income tax purposes. The primary non-taxable income
11
is that of state and municipal securities and industrial
revenue bonds or loans.
The increase in the 1995 provision for income taxes,
compared to the 1994 provision, results primarily from an
increase in taxable income caused by increases in pre-tax
income and lower amounts of non-taxable income due to
limited availability of tax exempt investments.
Capital Management
Regulatory agencies issued risk-based capital
guidelines which were fully effective in 1992. The
guidelines were established to more appropriately consider
the credit risk inherent in the assets and off-balance sheet
activities of a financial institution in the assessment of
capital adequacy.
Under the guidelines, total capital has been redefined
as core (Tier I) capital and supplementary (Tier II)
capital. The Bank's Tier I capital consists primarily of
shareholder's equity, while Tier II capital consists of the
reserve for loan losses. The definition of assets has been
modified to include items on and off the balance sheet, with
each item being assigned a "risk-weight" for the
determination of the ratio of capital to risk-adjusted
assets.
The guidelines require that total capital (Tier I and
Tier II) of 8% be held against total risk-adjusted assets,
at least half of which (4%) must be Tier I capital. At
December 31, 1995, the Bank's Tier I and Total capital
ratios were 18.9% and 20.3%, respectively. At December 31,
1994, these ratios were 20.1% and 21.3%, respectively. The
ratios for both years were well in excess of the regulatory
requirements.
The Corporation's leverage ratios (shareholder's equity
divided by year-end assets) were 11.19% and 12.13% at
December 31, 1995 and 1994, respectively. The leverage
ratio has a regulatory minimum of 3%, with most institutions
required to maintain a ratio 100 to 200 basis points above
the 3% minimum depending upon risk profiles and other
factors.
The Corporation's 1995 capital formation rate (net
income less dividends declared, divided by average
shareholders' investment) was 8.2%. This compares with 5.7%
in 1994 and 7.9% in 1993. These ratios evidence the
Corporation's attainment of its goal of meeting future
capital requirements by retaining a portion of operating
earnings while providing steadily increasing cash dividends.
On May 16, 1995, the Board of Directors declared a
regular semi-annual cash dividend of $.27 per share of
common stock payable on June 23, 1995. On November 21,
1995, the Board of Directors declared a regular semi-annual
cash dividend of $.29 per share of common stock making a
total of $.56 dividends per share for 1995.
Since 1990, regular cash dividends (excluding extra
dividends) paid by the Corporation have increased at a
compounded annual rate of 8%. The Board of Directors
reviews the Corporation's dividend policy regularly and
increases dividends when justified by earnings after
considering future capital needs.
Liquidity
Liquidity is the measure of the Corporation's ability
to generate sufficient funds to meet customer demands for
loans and the withdrawal of deposit balances. The
Corporation, in its normal course of business, maintains
cash reserves and has an adequate flow of funds from
maturing loans and investment securities to meet present
liquidity needs.
Expansion of the Corporation's earning assets is based
largely on the growth of deposits from individuals and small
and medium size businesses. These deposits are more stable
in number and size than large denomination certificates of
deposit. In addition, the Corporation's customers have
relatively stable requirements for funds.
The Corporation's major source of funds and liquidity
is its deposit base. The mix of this deposit base has been
shifting over the past few years. During 1995 the trend in
this shifting has been to time deposits due to an increase
in interest rates. The most notable changes in the
components of the deposit base during 1995 consisted of a
51% increase in time deposits, a 21% increase in interest
bearing demand deposits, a 15% increase in non-interest
bearing demand deposits, a 20% decrease in money market
deposits and a 6% decrease in savings deposits. In 1994
deposit interest rates were lower but began to rise in the
latter part of the year. The most notable changes in the
components of the deposit base during 1994 consisted of a 7%
increase in money market deposits, a 3% increase in
certificates of deposit and a 9% decrease in savings
deposits. Demand deposits (both interest bearing and non-
interest bearing) remained approximately the same in 1994.
The 1995 Consolidated Statement of Cash Flows appearing
in the financial statement section shows a net decrease in
cash and cash equivalents of $3,194,000 during the past
year. This decrease was the result of a combination of
$4,376,000 provided by operating activities, $17,488,000 net
cash used by investing activities (primarily used to
purchase securities with the proceeds of assumed deposits
from the Gretna, Virginia acquisition), and $9,919,000
provided by financing activities.
It is the policy of the Bank to schedule maturities of
investments through a laddered structure which provides
12
sources of liquidity on a periodic basis in each year. The
cash provided by operating and financing activities, in
addition to the cash provided by maturing of investments,
more than adequately supplied the Corporation's liquidity
needs at all times during the year.
Liquidity strategies are implemented and monitored by the
Corporation's Asset Liability/Investment Committee on a day
to day basis. The activities of the Committee are reported
to and reviewed by the Board of Directors. The Committee
uses a simulation model to assess the future liquidity needs
of the Corporation and manage the investment of funds and
net interest income. The Corporation's ability to reprice
both assets and liabilities, as well as its policy to
schedule maturities of investments, give it flexibility in
its control over liquidity needs.
The following interest rate sensitivity table reflects
the Corporation's assets and liabilities on December 31,
1995 that will either be repriced in accordance with market
rates or mature within the periods indicated. The
Corporation monitors and manages its interest rate risk
position with the objectives of increasing earnings and
minimizing adverse changes in net interest income. The
objectives are attained through a policy of maintaining a
relatively balanced interest-sensitive ratio. The optimum
position for the least risk to the Corporation is a ratio of
1.00. Although management attempts to maintain a ratio
close to 1.00, in a declining interest rate market it is
more desirable to have a ratio below 1.00, permitting the
Corporation to reprice more liabilities than assets. In a
rising interest rate market, however, it is more
advantageous to have a ratio greater than 1.00, allowing the
Corporation to reprice a greater amount of assets than
liabilities.
Although all of the ratios shown below do not appear as
balanced, it should be recognized that the Corporation's
interest-sensitive position changes quickly as a result of
management decisions and market conditions. No prepayment
assumptions are reflected in the table. The table shows the
sensitivity of the Corporation's balance sheet at one point
in time and is not necessarily indicative of its position on
other dates.
Interest Rate Sensitivity Analysis
December 31, 1995 (in thousands)
Over 3 Over 6
3 Months Months Over 1
Months - 6 - 12 Year - Over 5
or Less Months Months 5 years Years Total
Interest sensitive assets:
Interest bearing deposits with other banks $ 128 $ -- $ -- $ -- $ -- $ 128
Investment securities 11,009 6,880 12,513 68,606 10,295 109,303
Commercial loans 42,879 1,996 6,351 2,289 1,319 54,834
Mortgage loans 25,995 8,248 21,959 19,031 5,212 80,445
Consumer loans 5,462 3,448 6,758 25,268 -- 40,936
Federal funds sold 1,100 -- -- -- -- 1,100
-------- -------- -------- -------- -------- --------
Total interest sensitive assets 86,573 20,572 47,581 115,194 16,826 286,746
-------- -------- -------- -------- -------- --------
Interest sensitive liabilities:
NOW and savings deposits 89,421 -- -- -- -- 89,421
Money market deposits 17,550 -- -- -- -- 17,550
Time deposits 24,073 19,265 21,563 56,095 -- 120,996
Repurchase agreements 8,715 558 299 -- -- 9,572
-------- -------- -------- -------- -------- --------
Total interest sensitive liabilities 139,759 19,823 21,862 56,095 -- 237,539
-------- -------- -------- -------- -------- --------
Interest sensitivity gap $-53,186 749 25,719 59,099 16,826 $ 49,207
======== -------- -------- -------- -------- ========
Cumulative interest sensitivity gap $-52,437 $-26,718 $ 32,381 $ 49,207
======== ======== ======== ========
Percentage of cumulative gap
to total interest sensitive assets -19 % -18 % -9 % 11 % 17 %
Investment securities include $44,080 designated as "available for sale".
Of the loans in the above table that either mature or can be repriced in
periods over 1 year, $25,109 have adjustable rates and $28,010 have fixed
rates.
13
Investment Portfolio
INVESTMENT PORTFOLIO
The following table presents information on the book and market values, maturities and taxable equivalent yields of
investment securities at the end of the last 3 years (in thousands, except yields):
1995 1994 1993
----------------------------- ----------------------------- ---------------------------
Taxable Taxable Taxable
Book Market Equivalent Book Market Equivalent Book Market Equivalent
Value Value Yield Value Value Yield Value Value Yield
U.S. Government:
Within 1 year $29,055 $29,124 5.60 % $29,059 $28,590 4.11 % $33,029 $33,211 5.16 %
1 to 5 years 64,923 65,091 6.00 36,893 35,719 5.75 40,305 40,480 4.42
------- ------- ------- ------- ------- -------
Total 93,978 94,215 5.88 65,952 64,309 5.03 73,334 73,691 4.75
------- ------- ------- ------- ------- -------
Federal Agencies:
Within 1 year 452 456 7.15 -- -- -- -- -- --
1 to 5 years 2,002 1,985 4.68 2,568 2,383 5.21 7,875 7,951 7.12
After 10 years 199 210 8.27 241 237 8.27 331 354 8.27
------- ------- ------- ------- ------- -------
Total 2,653 2,651 7.49 2,809 2,620 5.47 8,206 8,305 7.13
------- ------- ------- ------- ------- -------
State and Municipal:
Within 1 year 885 888 7.91 1,395 1,397 9.08 1,416 1,442 10.08
1 to 5 years 1,681 1,733 8.74 2,194 2,213 9.35 3,522 3,692 9.16
6 to 10 years 6,556 6,807 8.27 6,221 6,029 8.50 4,201 4,468 8.73
After 10 years 3,540 3,540 7.59 670 653 8.87 1,137 1,191 8.37
------- ------- ------- ------- ------- -------
Total 12,662 12,968 8.18 10,480 10,292 8.78 10,276 10,793 9.03
------- ------- ------- ------- ------- -------
Other Investments:
Within 1 year 10 10 5.50 -- -- -- -- -- --
1 to 5 years -- -- -- 10 10 5.50 10 10 5.50
------- ------- ------- ------- ------- -------
Total 10 10 5.50 10 10 5.50 10 10 5.50
------- ------- ------- ------- ------- -------
Total portfolio $109,303 $109,844 6.12 $79,251 $77,231 5.54 $91,826 $92,799 5.38%
======== ======== ======= ======= ======= =======
At December 31, 1995, securities available for sale
included (at amortized cost) $38,783,000 in U. S.
Governments and $4,339,000 in State and Municipal
securities. A net unrealized gain of $958,000 related to
these securities was recorded at December 31, 1995. At
December 31, 1994, one U. S. Government security maturing
within 1 to 5 years with an amortized cost of $2,794,000 was
classified as "available for sale". In 1994 the Corporation
recorded a net unrealized loss of $29,000 on this security.
The "held to maturity" securities totaled $65,223,000
and $76,486,000 at December 31, 1995 and 1994, respectively
and had respective estimated fair values of $65,763,000 and
$74,466,000. Of the amount at December 31, 1995,
$54,347,000, or 83%, were U. S. Government direct
obligations, all maturing within 5 years. Securities "held
to maturity" in 1995 also included $2,653,000, or 4%, in
Federal agency obligations, maturing within 5 years. The
remaining portion of the "held to maturity" category (13%),
consisted of $8,213,000 tax exempt state and municipal
securities and $10,000 in other investments. The state and
municipal securities were diversified among many different
issues and localities. All investments by the Corporation
in state and municipal securities were rated "A" or better.
The book value of the total investment portfolio at
December 31, 1995 exceeded the market value by $1,498,000.
No losses are anticipated since the Corporation has the
ability and intent to hold these securities until their
respective maturities. The maturities of the investment
portfolio are laddered in a consistent pattern to meet the
Corporation's liquidity needs of future years.
- -------------------------------------------------------------------
Loan Portfolio
Total gross loans increased $20,779,000 or 13% during
1995. As shown in schedule A on page 15, the primary
increases in types of loans were commercial and industrial
loans, loans to individuals for personal expenditures, real
estate loans secured by nonfarm, nonresidential properties
and real estate loans secured by 1 - 4 family residential
properties.
The loan portfolio is diversified and consists of 46%
mortgage loans, 31% commercial loans and 23% consumer loans.
Note 9 of the Consolidated Financial Statements
presents related party loan activity. The majority of the
loan additions and payments result from floorplan activity
by two automobile dealerships owned separately by two of the
Corporation's Directors.
The Corporation does not participate in highly
leveraged lending transactions, as defined by the bank
regulators and there are no loans of this nature recorded in
the loan portfolio. The Corporation has no foreign loans in
its portfolio.
Real Estate Loans
Commercial real estate loans have received considerable
attention in recent years by the bank regulators and the
news media. The concerns have been in real estate values in
certain areas of the country and the quality of banks'
commercial real estate portfolios. It is difficult to
measure commercial real estate values within the
Corporation's trade area due to the light sales activity.
Commercial real estate values did not escalate to levels
seen in other areas of the state and country during the ten
years prior to the last recession and Management has not
detected a significant change in values within our trade
area during 1995 or 1994. Management has confined its real
estate lending to its trade area and has always taken a
14
conservative approach in its lending practice to maintain
equity in real estate loans. The Bank has not experienced
any commercial real estate charge-offs in recent years.
The Corporation is conforming to the real estate
appraisal guidelines set forth by the Comptroller of the
Currency.
The total of outstanding real estate loans at December
31, 1995 was $84,608,000. This consisted of $47,332,000 or
56% in loans secured by 1-4 family residential properties,
$31,083,000 or 37% in loans secured by non-farm, non-
residential properties, $5,032,000 or 6% in construction and
land development, $1,032,000 or 1% in loans secured by
farmland and $129,000 of other real estate loans.
Nonperforming real estate loans at December 31, 1995
and 1994 were $12,000 and $22,000, respectively. There were
$23,000 in real estate loans on accrual status and past due
90 days or more at December 31, 1995 and none at December
31, 1994.
Asset Quality
The Corporation identifies specific credit exposures
through its periodic analysis of the loan portfolio and
monitors general exposures from economic trends, market
values and other external factors. The Corporation
maintains a reserve for loan losses, which is available to
absorb losses inherent in the loan portfolio. The reserve
is increased by the provision for losses and by recoveries
from losses. Charge-offs decrease the reserve. The
adequacy of the reserve for loan losses is determined on a
quarterly basis. Various factors as defined in the previous
section "Provision and Reserve for Loan Losses" are
considered in determining the adequacy of the reserve.
Loans, other than consumer, are generally placed on
nonaccrual status when any portion of principal or interest
is 90 days past due or collectibility is uncertain. Unless
loans are in the process of collection, income recognized on
consumer loans is discontinued and the loans are charged off
after a delinquency of 90 days. At December 31, 1995 and
1994, loans in a nonaccrual or restructured status totaled
approximately $28,000 and $171,000, respectively.
Under the Corporation's policy a nonaccuring loan may
be restored to accrual status when none of its principal and
interest is due and unpaid and the Corporation expects
repayment of the remaining contractual principal and
interest or when it otherwise becomes well secured and in
the process of collection.
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 1995 and 1994.
Foreclosed properties held at the close of 1993 were
$17,500. As shown in schedule C on page 16, loans on
accrual status and past due 90 days or more have increased
during 1995 by $48,000 from $113,000 in 1994 to $161,000 in
1995. The increase occurred in all loan types except
installment loans. Total nonperforming loans and past due
loans 90 days or more on an accrual status is considered
very low by industry standards.
A. The following table presents the year-end balances of loans, classified by type (in thousands):
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
Real estate loans:
Construction and land development $ 5,032 $ 3,684 $ 1,925 $ 2,416 $ 3,293
Secured by farmland 1,032 872 716 745 1,189
Secured by 1-4 family residential
properties 47,332 43,458 42,194 39,985 37,098
Secured by multi-family (5 or more)
residential properties 129 50 63 76 87
Secured by nonfarm, nonresidential
properties 31,083 26,412 27,946 23,094 22,210
Loans for purchasing or carrying securities -- -- -- 40 42
Loans to farmers 2,529 2,173 1,768 2,066 2,458
Commercial and industrial loans 46,180 40,865 31,337 32,629 30,329
Loans to individuals for personal
expenditures 40,936 35,512 35,358 28,928 26,168
Loans for nonrated industrial development
obligations 1,901 2,155 2,528 3,666 4,462
All other loans 61 255 11 121 87
-------- -------- -------- -------- --------
Total loans $176,215 $155,436 $143,846 $133,766 $127,423
======== ======== ======== ======== ========
There were no foreign loans outstanding during any of the above periods.
15
B. An analysis of the loan maturity and interest rate sensitivity is as
follows:
Remaining Maturities or First
Repricing Opportunities
(in thousands)
Over 1 Over
1 Year Year to Five
or less 5 Years Years Total Percent
Commercial, financial
and agricultural $ 46,194 $ 2,289 $1,319 $ 49,802 28%
Real estate construction 5,032 -- -- 5,032 3%
Real estate mortgage 56,202 19,031 5,212 80,445 46%
Consumer 15,668 25,268 -- 40,936 23%
-------- ------- ------ --------
$123,096 $46,588 $6,531 $176,215 100.00%
======== ======= ====== ========
Rate Sensitivity:
Pre-determined rate $ 14,417 $27,239 $ 771 $ 42,427 24%
Floating or adjustable rate 108,679 19,349 5,760 133,788 76%
-------- ------- ------ --------
$123,096 $46,588 $6,531 $176,215 100%
======== ======= ====== ========
Percent 70% 26% 4% 100%
Certain short term loans and demand loans within the commercial, financial
and agricultural classifications are anticipated to be curtailed prior to any
renewal. Normally these loans are expected to be paid within one year and all
such loans have been classified within the one year category. Any rollovers
allowed depend upon the Bank's loan policy after a reappraisal of the
borrower's creditworthiness at the date of maturity.
C. Nonperforming loans and loans past due 90 days or more (in thousands, except ratios):
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Nonaccruing loans:
Real Estate $12 $22 $138 $129 $165
Commercial -- 40 73 185 364
Agricultural 16 -- -- -- --
---- ---- ---- ---- ----
Total nonaccruing loans 28 62 211 314 529
Restructured loans:
Commercial -- 109 256 332 152
Total restructured loans -- 109 256 332 152
---- ---- ---- ---- ----
Total nonperforming loans $28 $171 $467 $646 $681
==== ==== ==== ==== ====
Loans on accrual status past
due 90 days or more:
Real Estate $23 $ -- $ -- $28 $85
Installment 95 112 108 61 235
Revolving credit 6 1 -- -- 2
Commercial 22 -- -- -- --
Agricultural 15 -- -- -- --
---- ---- ---- ---- ----
Total past due loans $161 $113 $108 $89 $322
==== ==== ==== ==== ====
Asset Quality Ratios:
Reserve for loan losses
to year-end net loans 1.51% 1.53% 1.54% 1.61% 1.62%
Nonperforming loans
to year-end net loans .02% .11% .34% .50% .56%
Reserve for loan losses
to nonperforming loans 94.62X 13.76X 4.61X 3.24X 2.94X
At December 31, 1995, the Bank had no loan concentrations (loans to
borrowers engaged in similar activities) which exceeded 10% of total loans,
other than as shown in A on page 15.
16
The total of nonperforming loans and loans past due 90
days or more at December 31, 1995 was $189,000, a decrease
of $95,000 from the $284,000 shown at December 31, 1994.
Total nonperforming loans and loans past due 90 days or more
represent .1% of total loans at December 31, 1995 and .2% at
December 31, 1994. The sizeable decline in nonperforming
loans and loans past due 90 days or more from 1993 to the
close of 1994 was due primarily to two large loans (one real
estate and one commercial) that were returned to a current
payment status in 1994 and in compliance with the guidelines
of the Comptroller of the Currency and the Bank's loan
policy.
Management has in place an aggressive program to
control loan delinquencies and the level of past due loans
and nonperforming loans is considered to be within an
acceptable range.
Summary of Loan Loss Experience
An analysis of the reserve for loan losses is set forth in the following
table (in thousands):
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Balance at beginning of period $2,353 $2,155 $2,094 $2,001 $1,895
------ ------ ------ ------ ------
Charge-offs:
Commercial loans -- 5 80 24 7
Real estate loans -- 14 11 23 15
Installment loans 240 112 113 119 145
------ ------ ------ ------ ------
240 131 204 166 167
------ ------ ------ ------ ------
Recoveries:
Commercial loans -- -- -- -- 24
Real estate loans -- 4 -- -- --
Installmemt loans 60 53 51 29 35
------ ------ ------ ------ ------
60 57 51 29 59
------ ------ ------ ------ ------
Net charge-offs 180 74 153 137 108
Provision for loan losses 476 272 214 230 214
------ ------ ------ ------ ------
Balance at end of period $2,649 $2,353 $2,155 $2,094 $2,001
====== ====== ====== ====== ======
Percent of net charge-offs
to average net loans outstanding
during the period .11% .05% .12% .11% .09%
====== ====== ====== ====== ======
The reserve for loan losses is based upon the quality of loans as
determined by management taking into consideration historical loan loss
experience, diversification of the loan portfolio, amount of secured and
unsecured loans, banking industry standards and averages, and general economic
conditions. At the time that collection of the outstanding balance of specific
loans together with related interest is considered doubtful, such loans are
placed in a nonaccruing status.
17
Deposits
The following table presents the average amount of deposits and the
average rate paid on those deposits for the past 3 years (in thousands):
1995 1994 1993
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate
Demand deposits - non-interest bearing $ 28,679 -- % $ 25,235 -- % $ 23,375 -- %
Demand deposits - interest bearing 33,763 2.98 30,918 2.43 30,141 2.64
Money market 16,318 3.21 19,736 2.59 21,755 2.72
Savings 50,627 3.01 56,870 2.77 58,538 3.20
Time 98,394 5.29 80,886 4.32 79,632 4.72
$227,781 4.15% $213,645 3.36% $213,441 3.69%
_____________________________________________________________________________
Certificates of Deposit
Certificates of deposit at the end of 1995 in amounts of $100,000 or more were
classified by maturity as follows (in thousands):
3 months or less $ 6,590
Over 3 through 6 months 3,338
Over 6 through 12 months 3,881
Over 12 months 9,767
$23,576
______________________________________________________________________________
Return on Shareholders' Investment and Assets
The following table presents certain rates of return and percentages for
the past 3 years:
1995 1994 1993
Return on average assets 1.49% 1.43% 1.36%
Return on average shareholders' investment 12.32% 11.64% 11.96%
Dividend payout 33.41% 50.95% 34.15%
Average shareholders' investment to
average assets 12.13% 12.29% 11.37%
Impact of Inflation and Changing Prices
The majority of assets and liabilities of a financial
institution are monetary in nature and therefore differ
greatly from most industrial companies that have significant
investments in fixed assets. Due to this fact, the effects
of inflation on the Corporation's balance sheet are minimal,
meaning that there are no substantial increases or decreases
in net purchasing power over time. The most significant
effect of inflation is on other expenses which tend to rise
during periods of general inflation.
Management feels that the most significant impact on
financial results is changes in interest rates and the
Corporation's ability to react to those changes. As
discussed previously, management is attempting to maintain
an essentially balanced position between interest sensitive
assets and liabilities in order to protect against wide
interest rate fluctuations.
18
QUARTERLY FINANCIAL RESULTS
(in thousands, except per share amounts)
American National Bankshares Inc. and Subsidiary
Fourth Third Second First
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1995
----
Interest Income $5,589 $5,069 $4,645 $4,444
Interest Expense 2,585 2,251 1,941 1,786
------ ------ ------ ------
Net Interest Income 3,004 2,818 2,704 2,658
Provision for Loan Losses 102 160 121 93
------ ------ ------ ------
Net Interest Income After Provision 2,902 2,658 2,583 2,565
Non-Interest Income 435 525 488 479
Non-Interest Expense 2,072 1,547 1,583 1,566
------ ------ ------ ------
Income Before Income Tax Provision 1,265 1,636 1,488 1,478
Income Tax Provision 413 513 449 469
------ ------ ------ ------
Net Income $ 852 $1,123 $1,039 $1,009
====== ====== ====== ======
Per Common Share:
Net Income $ .36 $ .47 $ .43 $ .42
Cash Dividends $ .29 $ -- $ .27 $ --
1994
----
Interest Income $4,304 $4,081 $3,842 $3,830
Interest Expense 1,703 1,579 1,540 1,552
------ ------ ------ ------
Net Interest Income 2,601 2,502 2,302 2,278
Provision for Loan Losses 83 90 45 54
------ ------ ------ ------
Net Interest Income After Provision 2,518 2,412 2,257 2,224
Non-Interest Income 558 422 489 417
Non-Interest Expense 1,666 1,496 1,471 1,486
------ ------ ------ ------
Income Before Income Tax Provision 1,410 1,338 1,275 1,155
Income Tax Provision 451 440 394 360
------ ------ ------ ------
Net Income $ 959 $ 898 $ 881 $ 795
====== ====== ====== ======
Per Common Share:
Net Income $ .40 $ .37 $ .37 $ .33
Cash Dividends $ .50 $ -- $ .25 $ --
19
MANAGEMENT'S REPORT ON
FINANCIAL STATEMENTS
The following consolidated financial statements and
related notes to consolidated financial statements of
American National Bankshares Inc. and Subsidiary were
prepared by Management which has the primary responsibility
for the integrity of the financial information. The
statements have been prepared in conformity with generally
accepted accounting principles appropriate in the
circumstances and include amounts that are based on
Management's best estimates and judgement. Financial
information elsewhere in this Annual Report is presented on
a basis consistent with that in the financial statements.
In meeting its responsibility for the fair presentation
of the financial statements, Management relies on the
Corporation's comprehensive system of internal accounting
controls. This system provides reasonable assurance that
assets are safeguarded and transactions are recorded to
permit the preparation of appropriate financial information.
The system of internal controls is characterized by an
effective control-oriented environment within the
Corporation which is augmented by written policies and
procedures, internal audits and the careful selection and
training of qualified personnel.
The functioning of the accounting system and related
internal accounting controls is under the general oversight
of the Audit Committee of the Board of Directors which is
comprised of three outside directors. The accounting system
and related controls are reviewed by an extensive program of
internal audits. The Audit Committee meets regularly with
the internal auditors to review their work and ensure that
they are properly discharging their responsibilities. In
addition, the Committee reviews and approves the scope and
timing of the internal audits and any findings with respect
to the system of internal controls. The Audit Committee
also meets periodically with representatives of Arthur
Andersen LLP, the Corporation's independent public
accountants, to discuss the results of their audit as well
as other audit and financial matters. Reports of
examinations conducted by the Office of the Comptroller of
the Currency are also reviewed by the committee members.
The responsibility of Arthur Andersen LLP is limited to
an expression of their opinion as to the fairness of the
financial statements presented. Their opinion is based on
an audit conducted in accordance with generally accepted
auditing standards as described in the second paragraph of
their report.
Charles H. Majors
President and Chief
Executive Officer
David Hyler
Senior Vice-President,
Secretary & Treasurer
- -----------------------------------------------------------------------------
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of
American National Bankshares Inc.:
We have audited the accompanying consolidated balance
sheets of American National Bankshares Inc. (a Virginia
corporation) and Subsidiary as of December 31, 1995 and
1994, and the related consolidated statements of income,
changes in shareholders' investment and cash flows for each
of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of American National
Bankshares Inc. and Subsidiary as of December 31, 1995 and
1994, and the consolidated results of their operations and
their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Greensboro, North Carolina,
March 14, 1996.
20
CONSOLIDATED BALANCE SHEETS -- December 31, 1995 and 1994
American National Bankshares Inc. and Subsidiary
ASSETS 1995 1994
Cash and due from banks .......................................$ 9,533,586 $ 9,177,088
Federal funds sold ............................................ 1,100,000 4,650,000
Interest-bearing deposits in other banks....................... 127,967 1,585,961
Investment securities:
Securities available for sale (at market value).............. 44,080,318 2,764,680
Securities held to maturity (market value of $65,763,472
in 1995 and $74,466,613 in 1994)........................... 65,222,646 76,486,213
--------------- --------------
Total investment securities.............................. 109,302,964 79,250,893
--------------- --------------
Loans ......................................................... 176,215,261 155,435,934
Less--
Unearned income............................................ -751,360 -1,956,678
Reserve for loan losses.................................... -2,649,401 -2,353,411
--------------- --------------
Net loans.............................................. 172,814,500 151,125,845
--------------- --------------
Federal Reserve Bank stock, Federal Home Loan Bank
stock and other, at cost................................... 962,800 944,600
Bank premises and equipment, at cost, less accumulated
depreciation of $4,631,517 in 1995 and $4,239,886 in 1994.... 3,948,493 3,401,759
Accrued interest receivable and other assets................... 7,292,549 3,632,185
--------------- --------------
Total assets...........................................$ 305,082,859 $ 253,768,331
=============== ==============
LIABILITIES and SHAREHOLDERS' INVESTMENT
Liabilities:
Demand deposits -- non-interest bearing......................$ 31,862,593 $ 27,827,503
Demand deposits -- interest bearing.......................... 38,439,165 31,773,232
Money market deposits........................................ 17,550,117 21,915,675
Savings deposits............................................. 50,981,782 54,028,591
Time deposits ............................................... 120,996,210 80,315,772
--------------- --------------
Total deposits......................................... 259,829,867 215,860,773
--------------- --------------
Repurchase agreements........................................ 9,572,035 6,104,795
Accrued interest payable and other liabilities............... 1,555,623 1,017,091
Total liabilities...................................... 270,957,525 222,982,659
Shareholders' investment: --------------- --------------
Preferred stock, $5 par, 200,000 shares authorized,
none outstanding........................................... -- --
Common stock, $1 par, 3,000,000 shares authorized,
2,400,000 shares outstanding............................... 2,400,000 2,400,000
Capital in excess of par value............................... 5,400,000 5,400,000
Retained earnings............................................ 25,693,188 23,014,313
Net unrealized gains (losses)................................ 632,146 -28,641
--------------- --------------
Total shareholders' investment......................... 34,125,334 30,785,672
--------------- --------------
Total liabilities and shareholders' investment.........$ 305,082,859 $ 253,768,331
=============== ==============
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
21
CONSOLIDATED STATEMENTS of INC0ME
FOR the YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
American National Bankshares Inc. and Subsidiary
1995 1994 1993
Interest Income:
Interest and fees on loans....................$ 15,008,441 $ 11,797,860 $ 10,606,879
Interest on federal funds sold and other...... 158,734 171,167 321,534
Income on investment securities:
U. S. Government............................ 3,860,228 3,203,707 3,710,226
Federal agencies............................ 148,593 272,729 622,617
State and municipal (tax-exempt)............ 570,870 610,851 656,374
Other investments........................... 550 550 550
------------- ------------- -------------
Total interest income..................... 19,747,416 16,056,864 15,918,180
------------- ------------- -------------
Interest Expense:
Interest on deposits:
Demand...................................... 1,007,187 751,388 796,821
Money market................................ 524,306 510,267 591,229
Savings..................................... 1,523,570 1,577,452 1,870,521
Time........................................ 5,201,062 3,494,147 3,755,283
Interest on federal funds purchased and
repurchase agreements....................... 307,014 41,033 3,387
------------- ------------- -------------
Total interest expense.................... 8,563,139 6,374,287 7,017,241
------------- ------------- -------------
Net Interest Income............................. 11,184,277 9,682,577 8,900,939
Provision for Loan Losses....................... 475,630 271,802 213,500
Net Interest Income After Provision ------------- ------------- -------------
For Loan Losses............................... 10,708,647 9,410,775 8,687,439
------------- ------------- -------------
Non-Interest Income:
Trust department income....................... 1,343,015 1,396,072 1,469,727
Service charges on deposit accounts........... 361,336 278,807 256,071
Non-deposit fees and insurance commissions.... 93,481 103,713 80,090
Other income.................................. 128,436 107,266 64,660
------------- ------------- -------------
Total non-interest income................. 1,926,268 1,885,858 1,870,548
------------- ------------- -------------
Non-Interest Expense:
Salaries...................................... 2,991,094 2,767,447 2,753,944
Pension and other employee benefits........... 843,369 683,386 472,440
Occupancy and equipment expense............... 870,630 870,545 830,645
FDIC insurance expense........................ 253,039 484,337 469,690
Postage and printing.......................... 247,526 237,108 254,519
Other expenses................................ 1,562,382 1,076,129 991,009
------------- ------------- -------------
Total non-interest expense................ 6,768,040 6,118,952 5,772,247
------------- ------------- -------------
Income Before Income Tax Provision.............. 5,866,875 5,177,681 4,785,740
Income Tax Provision............................ 1,844,000 1,645,000 1,483,000
------------- ------------- -------------
Net Income......................................$ 4,022,875 $ 3,532,681 $ 3,302,740
Net Income Per Common Share, based on ============= ============= =============
2,400,000 shares outstanding.................. $1.68 $1.47 $1.38
The accompanying notes to consolidated financial statements are
an integral part of these statements.
22
CONSOLIDATED STATEMENTS of CHANGES in SHAREHOLDERS' INVESTMENT
FOR the YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
American National Bankshares Inc. and Subsidiary
Common Stock Capital in Net Total
Excess of Retained Unrealized Shareholders'
Shares Amount Par Value Earnings Gains (Losses) Investment
Balance, December 31, 1992................. 2,400,000 $ 2,400,000 $ 5,400,000 $ 19,106,892 $ -- $ 26,906,892
Net income................................. -- -- -- 3,302,740 -- 3,302,740
Cash dividends, at $.47 per share.......... -- -- -- -1,128,000 -- -1,128,000
------------ ------------ ------------ ------------- ------------ -------------
Balance, December 31, 1993................. 2,400,000 $ 2,400,000 $ 5,400,000 $ 21,281,632 $ -- $ 29,081,632
Net income................................. -- -- -- 3,532,681 -- 3,532,681
Cash dividends, at $.75 per share.......... -- -- -- -1,800,000 -- -1,800,000
Net unrealized loss........................ -- -- -- -- -28,641 -28,641
------------ ------------ ------------ ------------- ------------ -------------
Balance, December 31, 1994................. 2,400,000 $ 2,400,000 $ 5,400,000 $ 23,014,313 $ -28,641 $ 30,785,672
Net income................................. -- -- -- 4,022,875 -- 4,022,875
Cash dividends, at $.56 per share.......... -- -- -- -1,344,000 -- -1,344,000
Net unrealized gain........................ -- -- -- -- 660,787 660,787
------------ ------------ ------------ ------------- ------------ -------------
Balance, December 31, 1995............. 2,400,000 $ 2,400,000 $ 5,400,000 $ 25,693,188 $ 632,146 $ 34,125,334
============ ============ ============ ============= ============ =============
23
CONSOLIDATED STATEMENTS of CASH FLOWS
FOR the YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
American National Bankshares Inc. and Subsidiary
1995 1994 1993
Cash Flows from Operating Activities:
Interest received.............................................. $ 18,779,282 $ 16,004,339 $ 16,392,487
Fees and commissions received.................................. 1,910,184 1,826,504 2,105,099
Interest paid.................................................. -8,306,940 -6,359,202 -7,064,332
Cash paid to suppliers and employees........................... -6,106,248 -5,723,550 -5,388,813
Income taxes paid.............................................. -1,900,517 -1,686,255 -1,736,707
-------------- -------------- --------------
Net cash provided by operating activities...................... 4,375,761 4,061,836 4,307,734
-------------- -------------- --------------
Cash Flows from Investing Activities:
Acquisition of branch operations............................... 30,716,425 -- --
Proceeds from maturities and sales of investment securities.... 28,085,119 39,803,176 37,252,284
Purchase of investment securities and corporate stock.......... -57,278,228 -28,174,861 -35,815,616
Proceeds from maturing interest-bearing deposits in
other banks.................................................. 1,457,994 2,000,000 --
Interest-bearing deposits made in other banks.................. -- -86,874 -1,498,725
Net increase in loans made to customers........................ -20,015,489 -13,520,859 -10,150,260
Capital expenditures........................................... -453,663 -623,829 -363,823
-------------- -------------- --------------
Net cash used by investing activities.......................... -17,487,842 -603,247 -10,576,140
-------------- -------------- --------------
Cash Flows from Financing Activities:
Net (decrease) increase in demand, money market and
savings deposits............................................. -12,166,014 -3,813,729 8,188,100
Net increase (decrease) in certificates of deposit............. 19,961,353 2,019,545 -2,972,016
Net increase in repurchase agreements.......................... 3,467,240 6,104,795 --
Dividends paid................................................. -1,344,000 -1,800,000 -1,128,000
-------------- -------------- --------------
Net cash provided by financing activities...................... 9,918,579 2,510,611 4,088,084
-------------- -------------- --------------
Net (Decrease) Increase In Cash And Cash Equivalents........ -3,193,502 5,969,200 -2,180,322
Cash And Cash Equivalents At Beginning Of Year........... 13,827,088 7,857,888 10,038,210
-------------- -------------- --------------
Cash And Cash Equivalents At End Of Year......................... $ 10,633,586 $ 13,827,088 $ 7,857,888
============== ============== ==============
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income..................................................... $ 4,022,875 $ 3,532,681 $ 3,302,740
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................ 512,114 455,349 393,941
Provision for loan losses.................................... 475,630 271,802 213,500
Provision (benefit) for deferred income taxes................ -50,000 -125,000 40,525
(Increase) decrease in accrued interest receivable and
other assets............................................... -1,021,840 -121,627 630,592
Increase (decrease) in interest payable and other
liabilites................................................. 436,982 48,631 -273,564
-------------- -------------- --------------
Net cash provided by operating activities...................... $ 4,375,761 $ 4,061,836 $ 4,307,734
============== ============== ==============
The accompanying notes to consolidated financial statements are an integral
part of these statements.
24
Notes To Consolidated Financial Statements
December 31, 1995, 1994 and 1993
American National Bankshares Inc. and Subsidiary
1. Summary of Accounting Policies:
Consolidation
The consolidated financial statements include the
amounts and results of operations of American National
Bankshares Inc. (the Corporation) and its wholly-owned
subsidiary, American National Bank and Trust Company (the
Bank). The Bank offers a wide variety of retail, commercial
and trust banking services through its offices located in
the trade area of the City of Danville, Virginia and the
County of Pittsylvania. All significant intercompany
transactions and accounts are eliminated in consolidation.
Investment Securities
In 1993, the Bank adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". SFAS No
115 addresses the accounting and reporting for investments
in equity securities that have readily determinable fair
values and for all investments in debt securities. These
investments are to be classified in one of three categories:
held to maturity, available for sale and trading.
Debt securities acquired with both the intent and
ability to be held to maturity are classified as held to
maturity and reported at amortized cost. Gains or losses
realized from the sale of any securities held to maturity
would be determined by specific identification and would be
included in non-interest income.
Securities which may be used to meet liquidity needs
arising from unanticipated deposit and loan fluctuations,
changes in regulatory capital and investment requirements,
or unforeseen changes in market conditions, including
interest rates, market values or inflation rates, are
classified as available for sale. Securities available for
sale are reported at estimated fair value, with unrealized
gains and losses reported as a separate component of
shareholders' investment, net of tax. Gains or losses
realized from the sale of securities available for sale are
determined by specific identification and are included in
non-interest income.
Trading account securities, of which none were held on
December 31, 1995, are reported at fair value. Market
adjustments, fees, gains or losses and income earned on
trading account securities are included in non-interest
income. Gains or losses realized from the sale of trading
securities are determined by specific identification and are
included in non-interest income.
During the fourth quarter of 1995, the Bank transferred
$2,631,000 of securities which were previously classified as
held to maturity under SFAS No. 115 to the available for
sale category. The Financial Accounting Standards Board
(FASB) provided enterprises the opportunity to make a one
time reassessment of the classification of all investment
securities held at that time, such that the reclassification
of any security from the held to maturity category would not
call into question the enterprise's intent to hold other
debt securities to maturity in the future. Management
anticipates that this classification will allow more
flexibility in the day-to-day management of the overall
portfolio than the prior classifications.
Loans
Loans are stated at the principal amount outstanding,
net of unearned income. Mortgage and commercial loans
accrue interest on the unpaid balance of the loans.
Consumer installment loans made prior to April 1, 1994 earn
interest on the level yield method based on the daily
outstanding balance. Consumer loans made subsequent to
April 1, 1994 accrue interest on the unpaid balance of the
loans. The net amount of nonrefundable loan origination
fees and direct costs associated with the lending process
are deferred and amortized to interest income over the
contractual lives of the loans using the effective interest
method.
Reserve for Loan Losses
The reserve for loan losses is an estimate of losses
inherent in the loan portfolio as determined by management
taking into consideration historical loan loss experience,
diversification of the loan portfolio, amount of secured and
unsecured loans, banking industry standards and averages,
and general economic conditions. Ultimate losses may vary
from current estimates. These estimates are reviewed
periodically and as adjustments become necessary, they are
reported in earnings in the periods in which they become
reasonably estimable.
Bank Premises and Equipment
Additions and major replacements are added to bank
premises and equipment at cost. Maintenance and repair
costs are charged to expense when incurred. Premises and
equipment are depreciated over their estimated useful lives
using primarily accelerated methods.
Income and Expense Recognition
The Bank utilizes the accrual method of accounting in
recognizing items of income and expense.
25
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Statement of Cash Flows
Cash and cash equivalents include cash and amounts due
from banks and Federal funds sold. Generally, Federal funds
are purchased and sold for one-day periods.
Income Taxes
Deferred income taxes have been provided where
different accounting methods have been used for reporting
income for income tax and for financial reporting purposes.
New Accounting Pronouncements
During 1995, the FASB issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". This statement establishes
accounting standards for long-lived assets, certain
identifiable intangibles and goodwill related to those
assets to be held and to be disposed of. The statement
requires such assets to be reviewed for impairment whenever
events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Any
resulting impairment loss is required to be reported in the
period in which the recognition criteria are first applied
and met. The Bank adopted the provisions of the statement
on January 1, 1996. The implementation did not have a
material impact on the consolidated financial position or
consolidated results of operations.
During 1995, the FASB issued SFAS No. 122, "Accounting
for Mortgage Servicing Rights" and SFAS No. 123, "Accounting
for Stock Based Compensation". The Bank adopted the
provisions of these statements on January 1, 1996. The
adoption of these statements did not have a material impact
on the Bank's consolidated financial position or
consolidated results of operations.
2. Parent Company Financial Information:
Condensed parent company financial information is as
follows (in thousands):
As of December 31
Condensed Balance Sheets 1995 1994
Assets:
Investment in Subsidiary $34,102 $30,761
Other Assets 23 25
Total Assets $34,125 $30,786
======= =======
Shareholders' Investment $34,125 $30,786
======= =======
For the Year Ended
December 31
Condensed Statements of Income 1995 1994 1993
Dividends from Subsidiary $1,344 $1,805 $1,128
Expenses (1) (1) (1)
Income Before Equity in Undistributed
Earnings of Subsidiary 1,343 1,804 1,127
Equity in Undistributed Earnings
of Subsidiary 2,680 1,729 2,176
Net Income $4,023 $3,533 $3,303
====== ====== ======
For the Year Ended
December 31
Condensed Statements of Cash Flows 1995 1994 1993
Cash provided by dividends received
from Subsidiary $1,344 $1,805 $1,128
Cash used for payment of dividends (1,344) (1,800) (1,128)
Other (1) (1) (1)
Net increase (decrease) in cash $ (1) $ 4 $ (1)
======= ======= =======
3. Mergers and Acquisitions
On March 14, 1996, the Corporation completed the acquisition of Mutual
Savings Bank, F.S.B. (Mutual) upon the approval of the shareholders of each
company. The Corporation exchanged approximately 879,805 common shares, at an
exchange ratio of .705 of a share of the Corporation's common stock, for each of
Mutual's 1,248,100 common shares.
The transaction will be accounted for as a pooling of interests. The
financial position and results of operations of the Corporation and Mutual will
be combined and the fiscal year of Mutual will be conformed to the Corporation's
fiscal year. In addition, all prior periods presented will be restated to give
effect to the merger.
The following unaudited presentation reflects key line items on an
historical basis for the Corporation and Mutual and on a proforma combined basis
assuming the merger was effective for the periods presented
26
(in thousands, except per share data):
American National Mutual Savings Proforma
Bankshares Inc. Bank, F.S.B. Combined
1995
Net interest income $11,184 $3,120 $14,304
Net income 4,023 993 5,016
Net income per share 1.68 .82 1.54
1994
Net interest income $ 9,683 $3,119 $12,802
Net income 3,533 976 4,509
Net income per share 1.47 .81 1.39
1993
Net interest income $ 8,901 $3,392 $12,293
Net income 3,303 1,262 4,565
Net income per share 1.38 1.06 1.41
In conjunction with the merger, certain material, non-recurring adjustments
will be recorded. These adjustments include recording the Federal tax liability
associated with Mutual's prior untaxed loan loss reserves. Based on a marginal
tax rate of 34% and Mutual's loan loss reserve of $3,158,000 at September 30,
1995, the impact of this adjustment will result in additional income tax
provision of approximately $1,074,000. Additionally, legislation was proposed
during the third quarter of 1995 that would result in the payment of a one-time
assessment by financial institutions with deposits insured by the Savings
Association Insurance Fund (SAIF). As a result of the merger with Mutual,
approximately 26% of the Bank's deposits will be SAIF-insured. The one-time
assessment rate, to be determined by the Federal Deposit Insurance Corporation,
is expected to be $.80 per $100 of deposits. Commercial banks with SAIF-insured
deposits acquired from thrifts will likely be allowed a reduction of 20% of the
assessment base. This adjustment would be available only to banks with less
than 50% of their total deposits in the SAIF. The pretax impact of this one-
time assessment on the Bank is not expected to exceed $500,000. The Bank will
record this expense when the legislation is enacted.
Subsequent to year-end, the shareholders of the Corporation approved an
amendment to the articles of incorporation to increase the number of authorized
shares of the Corporation's common stock from 3,000,000 shares to 10,000,000
shares.
In August 1995, The Corporation acquired the branch office of Crestar Bank
in Gretna, Virginia. In addition to the branch facilities at Gretna, the
Corporation acquired $2,150,000 in loans and assumed deposits of $36,295,000.
This transaction was accounted for as a purchase.
4. Investment Securities:
The amortized cost and estimated fair value of investments in debt
securities at December 31, 1995 and 1994 were as follows (in thousands):
1995
__________________________________________
Amortized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ------ ------ ----------
Securities held to maturity:
U.S. Government $ 54,347 $ 306 $ -70 $ 54,583
Federal Agencies 2,653 15 -17 2,651
State & Municipal 8,213 325 -19 8,519
Other 10 -- -- 10
-------- ------ -------- --------
Total securities held
to maturity 65,223 646 -106 65,763
-------- ------ -------- --------
Securities available for sale:
U.S. Government 38,783 848 -- 39,631
State & Municipal 4,339 110 -- 4,449
-------- ------ -------- --------
Total securities
available for sale 43,122 958 -- 44,080
-------- ------ -------- --------
Total securities $108,345 $1,604 $ -106 $109,843
======== ====== ======== ========
1994
__________________________________________
Amortized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ------ ------ ----------
Securities held to maturity:
U.S. Government $ 63,187 $ 5 $-1,648 $ 61,544
Federal Agencies 2,809 -- -189 2,620
State & Municipal 10,480 103 -291 10,292
Other 10 -- -- 10
-------- ------ ------- --------
Total securities held
to maturity 76,486 108 -2,128 74,466
-------- ------ ------- --------
Securities available for sale:
U.S. Government 2,794 -- -29 2,765
State & Municipal -- -- -- --
-------- ------ ------- --------
Total securities
available for sale 2,794 -- -29 2,765
-------- ------ ------- --------
Total securities $ 79,280 $ 108 $-2,157 $ 77,231
======== ====== ======= ========
The amortized cost and estimated fair value of investments in debt
securities at December 31, 1995, by contractual maturity, are shown below (in
thousands). Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
Held to Maturity Available for Sale
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $30,402 $30,477 $ -- $ --
Due after one year through
five years 28,975 29,178 38,783 39,631
Due after five years through
ten years 5,647 5,898 824 909
Due after ten years 199 210 3,515 3,540
------------------ --------------- ------------- ---------------
$65,223 $65,763 $43,122 $44,080
================== =============== ============= ===============
Proceeds from calls exercised by the issuers of investments in debt
securities were $545,000 in 1995 and $5,405,000 in 1994. Proceeds from sales of
investments in debt securities were $6,980,000 in 1995.
27
The Bank recognized losses of $22,000 on sales of securities during 1995.
There were no sales in 1994 or 1993.
Investment securities with a book value of approximately $19,382,000 at
December 31, 1995 were pledged to secure deposits of the U. S. Government, state
and political sub-divisions and for other purposes as required by law. Of this
amount, $11,387,000 was pledged to secure repurchase agreements.
5. Loans:
Outstanding loans at December 31, 1995 and 1994 were composed of the
following (in thousands):
1995 1994
Real Estate loans:
Construction and land development $ 5,032 $ 3,684
Secured by farmland 1,032 872
Secured by 1 - 4 family residential properties 47,332 43,458
Secured by multi-family (5 or more)
residential properties 129 50
Secured by nonfarm, nonresidential properties 31,083 26,412
Loans to farmers 2,529 2,173
Commercial and industrial loans 46,180 40,865
Loans to individuals for personal expenditures 40,936 35,512
Loans for nonrated industrial development
obligations 1,901 2,155
All other loans 61 255
Total loans $176,215 $155,436
======== ========
Loans, other than consumer, are generally placed on nonaccrual status when
any portion of principal or interest is 90 days past due or collectibility is
uncertain. Unless loans are in the process of collection, income recognition on
consumer loans is discontinued and the loans are charged off after a delinquency
of 90 days. At December 31, 1995, 1994 and 1993, loans in a nonaccrual or
restructured status totaled approximately $28,000, $171,000 and $467,000,
respectively.
Interest income on nonaccrual loans, if recognized, is recorded on a cash
basis. For the years 1995, 1994 and 1993, the gross amount of interest income
that would have been recorded on nonaccrual loans and restructured loans at
December 31, if all such loans had been accruing interest at the original
contractual rate, was $1,000, $20,000 and $59,000, respectively. No interest
payments were recorded in 1995 or 1994 as interest income for all such
nonperforming loans.
Under the Corporation's policy a nonaccruing loan may be restored to
accrual status when none of its principal and interest is due and unpaid and the
Corporation expects repayment of the remaining contractual principal and
interest or when it otherwise becomes well secured and in the process of
collection.
As of January 1, 1995, the Bank adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan", which was amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures". SFAS No. 114, as amended, requires that impaired loans be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate, or as a practical expedient, at the loan's
observable market price or the fair value of the collateral, if the loan is
collateral-dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance. The Bank had previously measured the reserve for loan losses using
methods similar to those prescribed in SFAS No. 114. As a result of adopting
these statements, no additional reserve for loan losses was required as of
January 1, 1995.
For purposes of applying SFAS No. 114, commercial loans on nonaccrual
status are evaluated for impairment on an individual basis. Management assesses
the current economic condition and the historical repayment patterns of the
creditor in determining whether delays in repayment on the loans are considered
to be insignificant shortfalls or indicators of impairment. Those loans for
which management considers it probable that the Bank will be unable to collect
all amounts due according to the contractual terms of the loan agreement are
considered to be impaired. All loans made by the Bank other than commercial
loans are excluded from the scope of SFAS No. 114 as they are considered
smaller-balance homogeneous loans that are collectively evaluated for
impairment. Interest income is recognized on impaired loans in the same manner
as loans on nonaccrual status.
During 1995, the Bank did not identify any loans as impaired.
The loan portfolio is concentrated primarily in the immediate geographic
region which is the Corporation's trade area consisting of the City of Danville
and Pittsylvania County, Virginia. There were no concentrations of loans to any
individual, group of individuals, businesses or industry that exceeded 10% of
the outstanding loans at December 31, 1995.
An analysis of the reserve for loan losses is as follows (in thousands):
1995 1994 1993
Balance, beginning of year $2,353 $2,155 $2,094
Provision for loan losses
charged to expense 476 272 214
Charge-offs (240) (131) (203)
Recoveries 60 57 50
Balance, end of year $2,649 $2,353 $2,155
====== ====== ======
28
6. Time Deposits:
Included in time deposits are certificates of deposit in denominations of
$100,000 or more totaling $23,576,000, $13,809,000 and $12,744,000 at December
31, 1995, 1994 and 1993, respectively. Interest expense on such deposits during
1995, 1994 and 1993 was $648,000, $390,000 and $395,000, respectively.
7. Income Taxes:
The components of the Corporation's net deferred tax assets as of December
31, 1995 and December 31, 1994, were as follows (in thousands):
December 31 December 31
1995 1994
Deferred tax assets:
Reserve for loan losses $ 697 $596
Deferred compensation 184 144
Other 47 46
928 786
Valuation allowance (194) (152)
734 634
Deferred tax liabilities:
Net unrealized gains 326 --
Prepaid pension 91 89
Other 80 32
497 121
Net deferred tax asset $ 237 $513
==== ===
The provision for income taxes consists of the following (in thousands):
For Years Ended
December 31
1995 1994 1993
Taxes currently payable $1,894 $1,770 $1,442
Deferred tax provision (benefit) (50) (125) 41
$1,844 $1,645 $1,483
====== ====== ======
The effective rates of the provision differ from the statutory federal income
tax rates due to the following items:
1995 1994 1993
Federal statutory rate 34.0% 34.0% 34.0%
Non-taxable interest income (3.5) (3.2) (5.4)
Other .9 1.0 2.4
31.4% 31.8% 31.0%
==== ==== ====
8. Commitments and Contingent Liabilities:
The consolidated financial statements do not reflect various commitments
and contingent liabilities which arise in the normal course of business to meet
the financing needs of customers. These include commitments to extend credit
and standby letters of credit. These instruments involve, to varying degrees,
elements of credit, interest rate and liquidity risk in excess of the amount
recognized in the consolidated balance sheets. The extent of the Bank's
involvement in various commitments or contingent liabilities is expressed by the
contract or notional amounts of such instruments.
Commitments to extend credit, which amounted to $32,226,000 and $34,150,000
at December 31, 1995 and 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.
Commitments to purchase securities when issued amounted to $3,250,000 at
December 31, 1995. There were no commitments to purchase securities at the
close of 1994.
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
December 31, 1995 and 1994 the Bank had $632,000 and $672,000 in outstanding
standby letters of credit.
Management and the Corporation's counsel are not aware of any pending
litigation against the Corporation and believe that there are no contingent
liabilities outstanding that will result in a material adverse effect on the
Corporation's consolidated financial position and consolidated results of
operations.
The Bank is a member of the Federal Reserve System and is required to
maintain certain levels of its cash and due from bank balances as reserves based
on regulatory requirements. At December 31, 1995, this reserve requirement was
approximately $2,646,000.
9. Related Party Transactions:
The Directors provide the Bank with substantial amounts of business, and
many are among its largest depositors and borrowers. The total amount of loans
outstanding to the executive officers, directors and their business interests
was $13,845,000, $12,527,000, and $8,908,000 at December 31, 1995, 1994 and
1993, respectively. The maximum amount of loans outstanding to the officers,
directors and their business interests at any month-end during 1995, 1994 and
1993 was approximately 8.3% of gross loans. Management believes that all such
loans are made on substantially the same terms, including interest rates, as
those prevailing at the time for comparable loans to similar, unrelated
borrowers, and do not involve more than a normal risk of collectibility.
29
As of December 31, 1995, none of these loans were restructured, nor were any
related party loans charged off during 1995. An analysis of these loans for
1995 is as follows (in thousands):
Balance, beginning of year $12,527
Additions 23,545
Repayments (21,607)
Other changes (related to
changes in directors'
related party interests) (620)
Balance, end of year $13,845
======
10. Employee Benefit Plans:
The Bank's retirement plan is a non-contributory defined benefit pension
plan which covers substantially all employees of the Bank who are 21 years of
age or older and who have had at least one year of service. Advanced funding is
accomplished by using the actuarial cost method known as the collective
aggregate cost method.
The following table sets forth the plan's funded status as of December 31,
1995 and 1994 (in thousands):
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $2,190 in 1995 and
$1,969 in 1994 $(2,218) $(1,986)
======= =======
Projected benefit obligation at December 31 $(3,100) $(3,032)
Plan assets at fair value 3,271 2,700
Plan assets greater than (less than) projected
benefit obligation 171 (332)
Unrecognized net asset, at date of adoption,
being recognized over 16.4 years (91) (103)
Unrecognized net loss 447 698
Unrecognized prior service cost (264) --
Prepaid pension cost included in other assets $ 263 $ 263
======= =======
Net periodic pension cost for 1995 and 1994, based on the above valuation
included the following components (in thousands):
1995 1994
Service cost - benefits earned during
the period $106 $127
Interest cost on projected benefit
obligation 169 164
Actual return (gain) loss on plan assets (752) (56)
Net amortization and deferral 662 (85)
Net periodic pension cost $185 $150
==== ====
During 1995 and 1994, a rate of increase in future compensation levels of
4.0%, and a discount rate of 6.0% were used in determining the actuarial present
value of the projected benefit obligation. The expected long-term rate of
return on assets was 6.25% in 1995 and 1994.
Pension plan cost was $185,000, $150,000, and $51,000 for years 1995, 1994
and 1993, respectively. Additional pension expense of $95,000 was recognized in
1994 related to lump-sum settlements of accrued benefit obligations.
Presently the Bank has no postretirement benefits that are not charged to
expense during the years that the employees render service.
A non-contributory deferred compensation plan was adopted in 1982 by the
Board of Directors of the Bank which covers certain key executives. This plan
is being funded primarily by insurance and the expense is provided on a current
basis.
A 401-(k) savings plan was adopted in 1995 which covers substantially all
full-time employees of the Bank who have at least one year of service. The Bank
matches a portion of the contribution made by employee participants. The Bank's
1995 contribution of $41,000 is included in pension and other employee benefits
expense for the year ended December 31, 1995.
11. Dividend Restrictions and Capital:
The approval of the Comptroller of the Currency is required if the total of
all dividends declared by a national bank in any calendar year exceeds the
bank's net income, as defined, for that year combined with its retained net
income for the preceding two calendar years. Under this formula, the Bank can
distribute as dividends, without the approval of the Comptroller of the
Currency, $4,409,000 plus an additional amount equal to the Bank's net income
for 1996 up to the date of any
dividend declaration.
The Bank is required by the Federal Reserve Board and the Comptroller of
the Currency to maintain certain capital to assets ratios. At December 31, 1995
and 1994 these ratios were above the minimums prescribed for holding companies
and banks.
30
12. Fair Value of Financial Instruments:
The estimated fair values of the Corporation's financial instruments are as
follows (in thousands):
December 31, 1995 December 31, 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash and federal funds sold $ 10,634 $ 10,634 $ 13,827 $ 13,827
Investment securities 109,303 109,843 79,251 77,231
Other 1,091 1,074 2,530 2,530
Loans, net 172,815 179,089 151,126 150,608
Financial liabilities:
Deposits $(259,830) $(259,952) $(215,861) $(216,841)
Repurchase agreements (9,752) (9,572) (6,105) (6,100)
Unrecognized financial instruments:
Commitments to extend credit $ (32,226) -- $ (34,150) --
Standby letters of credit (632) (10) (672) (11)
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to estimate
that value:
Cash and federal funds sold
For short-term instruments, the carrying amount is a reasonable estimate of
fair value.
Investment securities and other
For marketable securities held for investment purposes, fair values are
based on quoted market prices or dealer quotes. For other securities held as
investments, fair value equals market price, if available. If a quoted market
price is not available, fair value is estimated using quoted market prices for
similar securities.
Loans
Due to the repricing characteristics of revolving credit lines, home equity
loans and adjustable demand loans, the carrying amount of these loans is a
reasonable estimate of fair value. The fair value of other types of loans is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for the
same remaining maturities. Prepayment rates are taken into consideration in the
calculation. The interest rates used to discount future cash flows are those in
effect at period-end or an average of such for the 10 working days surrounding
that date. The fair value of non-performing loans represents an estimate by
Management after considering the collectibility of each loan, taking into
account the financial position of the borrower, the value of supporting
collateral and the portion of the reserve for loan losses allocated to each of
these loans.
Deposits
The fair value of demand deposits, savings deposits, and money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is estimated by discounting the future
cash flows using the current rates at which similar deposit instruments would be
offered to depositors for the same remaining maturities at current rates.
Repurchase Agreements
The fair value of repurchase agreements is estimated by discounting the
future cash flows using the current rates at which similar repurchase agreements
would be offered to depositors for the same remaining maturities at current
rates.
Unrecognized financial instruments
The fair value of commitments to extend credit is estimated using the fees
currently charged (if any) to enter into agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. At December 31, 1995 no fees were charged for commitments to
extend credit and all such commitments were subject to current market rates;
therefore, no fair value has been estimated for these commitments.
The fair value of letters of credit is based on fees currently charged for
similar agreements or on the estimated cost to terminate them or otherwise
settle the obligations with the counterparties at the reporting date.
31
Board of Directors
American National Bankshares Inc.
and
American National Bank and Trust Company
Richard G. Barkhouser
President, Barkhouser Motors, Inc.
B. Carrington Bidgood
Retired Senior Vice President
Dibrell Brothers, Inc.
Fred A. Blair
President
Blair Construction, Inc.
Ben J. Davenport, Jr.
Chairman, First Piedmont Corporation
Lester A. Hudson, Jr.
Chairman
H & E Associates
E. Budge Kent, Jr.
Senior Vice President & Trust Officer
Fred B. Leggett, Jr.
Executive Vice President, Belk-Leggett Co., Incorporated
Leggett Stores
Charles H. Majors
President and Chief Executive Officer
James A. Motley
Retired Chairman and Chief Executive Officer
Claude B. Owen, Jr.
Chairman & Chief Executive Officer
DIMON Incorporated
Landon R. Wyatt, Jr.
President, Wyatt Buick Sales Co.
GRETNA AREA ADVISORY BOARD
American National Bank and Trust Company
Dr. Glen M. Bond
Physician
Melvin W. Bowling
Retired President, Crestar Bank, Gretna, Virginia
H. Chapman Brown, Jr.
President, Gretna Drug Company, Inc.
E. B. Fitzgerald, III
President, Peoples Mutual Telephone Company, Inc.
H. Victor Millner, Jr., Esquire
Attorney at Law
L. Vernon Moon
President, Gretna Tire and Recapping Company, Inc.
32
Officers
American National Bank and Trust Company
Charles H. Majors
President and
Chief Executive Officer
E. Budge Kent, Jr. David Hyler
Senior Vice President & Senior Vice President &
Trust Officer Controller
Gilmer D. Jefferson Carl T. Yeatts
Senior Vice President & Senior Vice President &
Cashier Senior Loan Officer
Ronnie C. Fowlkes Wayne D. Holley
Vice President Vice President
Michael L. Thomas John G. Wales
Vice President Vice President
Mildred B. Wilkerson
Vice President
B. Michael Barker Thomas Y. Chandler
Assistant Vice President Assistant Vice President
Barry L. Clarke Cameron W. Clement
Assistant Vice President Assistant Vice President
James A. Motley, Jr. Samuel W. Price, Jr.
Assistant Vice President Assistant Vice President
Mary H. Wertz John B. Hall, Jr.
Assistant Vice President Trust Officer
Linda P. Rhue Cheryl L. Clark
Trust Officer Assistant Cashier
Janice O. England Kaye S. Hayden
Assistant Cashier Assistant Cashier
Jean H. Hudgins Elaine T. Jones
Assistant Cashier Assistant Cashier
Peter A. Moore Beth M. Scearce
Assistant Cashier Assistant Cashier
Beverly A. Scruggs Nadine S. Crumpton
Assistant Cashier Auditor
William B. Stephens, Jr. Jane S. Baynes
Director of Technology Development Administrative Assistant
Carolyn H. Compton Brenda L. Gibson
Administrative Assistant Administrative Assistant
Delma C. Haley Faye W. Holland
Administrative Assistant Administrative Assistant
Patricia T. Hudson Garry C. Martin
Administrative Assistant Administrative Assistant
Linda C. Royal Bernetha W. Saunders
Administrative Assistant Administrative Assistant
Katherine P. Shelton Phyllis A. Wiles
Administrative Assistant Administrative Assistant
Voinda R. Wray
Administrative Assistant
VISION
We are committed to being our community's premier financial
services organization.
MISSION STATEMENT
Our mission is to provide quality financial services and exceptional
customer service.
GUIDING PRINCIPLES
To achieve our vision and carry our mission, we must:
- Respond to our customers' needs
- Conduct our work with integrity and professionalism
- Furnish positive leadership for the well-being of all
communities we serve
- Maintain a challenging quality service - quality sales work
environment
- Sustain a profitable return for our shareholders
BANK OFFICES
MAIN OFFICE
628 Main Street, Danville, Virginia 24541
GRETNA OFFICE
109 Main Street, Gretna, Virginia 24557
NOR-DAN OFFICE
239 Nor-Dan Drive, Danville, Virginia 24540
RIVERSIDE OFFICE
1081 Riverside Drive, Danville, Virginia 24540
SOUTH MAIN OFFICE
1013 South Main Street, Danville, Virginia 24541
WEST MAIN OFFICE
2016 West Main Street, Danville, Virginia 24541
SOUTH BOSTON ROAD OFFICE
1407 South Boston Road, Danville, Virginia 24540
ATM LOCATIONS
DRIVE-UP
Riverside Office - 1081 Riverside Drive, Danville, Virginia 24540
South Boston Road Office - 1407 South Boston Road, Danville, Virginia 24540
WALK-UP
Nor-Dan Office - 239 Nor-Dan Drive, Danville, Virginia 24540
Piedmont Mall - 325 Piedmont Drive, Danville, Virginia 24541
West Main Office - 2016 West Main Street, Danville, Virginia 24541
Express Mart - U. S. 29, Tightsqueeze, Virginia 24531