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American National Bankshares Reports Second Quarter Earnings
Source: Nasdaq GlobeNewswire / 21 Jul 2022 06:30:02 America/Chicago
DANVILLE, Va., July 21, 2022 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (NASDAQ: AMNB) (“American National” or the “Company”) today reported second quarter 2022 earnings of $8.1 million, or $0.76 per diluted common share. Those results compare to earnings of $10.8 million, or $0.99 per diluted common share, during the same quarter in the prior year, and earnings of $9.0 million, or $0.84 per diluted common share, for the first quarter of 2022. Earnings for the six months ended June 30, 2022 were $17.1 million, or $1.60 per diluted common share, compared to $22.1 million, or $2.01 diluted common share, for the same period of 2021.
President and Chief Executive Officer, Jeffrey V. Haley, commented, “Core earnings remained solid during the quarter, with strong growth in net interest income reflecting our earnings capacity in a rising rate environment and offsetting some pressure on our fee based lines of business. Operating expenses remained stable, and we saw a return to a more normalized level of provision expense primarily associated with our loan growth. Asset quality remains strong and while we do not see any deterioration at this time, we are maintaining a watchful eye on a slowing economy.
“We continue to focus on adding talent and investing in the business. We successfully implemented several major projects during the quarter, including contactless debit cards and a new treasury management platform. Many other projects are in flight to further our digital offerings and better serve our customers.
“Looking forward, we should continue to benefit from rising rates in the short term, which should mitigate expected pressures on fee-based revenues and operating costs. Our history of exceptional credit quality should serve us well if we do experience an economic downturn.”
Second quarter 2022 highlights include:
- Earnings produced a return on average tangible common equity of 13.87% for the second quarter of 2022, compared to 14.14% in the previous quarter and 17.30% for the same quarter in the prior year (non-GAAP).
- Net interest income increased $1.0 million, or 5.1%, when compared to the previous quarter, and decreased $281 thousand, or 1.3%, when compared to the same quarter in 2021.
- Fully taxable equivalent (“FTE”) net interest margin was 2.76% for the quarter, up from 2.63% in the first quarter of 2022 and down from 3.00% in the same quarter of the prior year (non-GAAP).
- Noninterest revenues decreased $763 thousand, or 13.6%, when compared to the previous quarter, and decreased $305 thousand, or 5.9%, compared to the same quarter in the prior year.
- Noninterest expense increased $106 thousand, or less than 1%, when compared to the previous quarter, and increased $818 thousand, or 5.6%, when compared to the same quarter in the prior year.
- Average loans held for investment, excluding U.S. Small Business Administration Paycheck Protection Program (“PPP”) loans, grew $44.5 million, or 9.1% annualized, during the second quarter as compared to the previous quarter of $44.5 million, or 9.5% annualized.
- The Company recognized a provision for loan losses in the second quarter of 2022 of $581 thousand compared to negative provisions of $758 thousand in the first quarter of 2022 and $1.4 million in the second quarter of 2021. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were 0.01% for the second quarter of 2022, compared to (0.01%) in the previous quarter and the same quarter in the prior year.
- Nonperforming assets as a percentage of total assets were 0.05% at June 30, 2022, down from 0.06% at March 31, 2022, and down from 0.07% at June 30, 2021.
NET INTEREST INCOME
Net interest income for the second quarter of 2022 increased by $1.0 million, or 5.1%, to $21.5 million compared to $20.5 million for the first quarter of 2022. The second quarter of 2022 compared to the same quarter of 2021 reflected a decrease of $281 thousand, or 1.3%. The FTE net interest margin for the quarter was 2.76%, up from 2.63% in the prior quarter but down from 3.00% in the same quarter a year ago (non-GAAP). The margin expansion relative to the previous quarter was the product of a shift in the earning assets mix resulting from excess deposits in other banks being deployed into the loan and investment portfolios as well as higher yields on securities and deposits in other banks due to the increase in interest rates. The decrease in margin from second quarter 2021 was attributable to significantly more PPP related income in 2021, partially offset by lower interest expense.
The Company’s FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the second quarter of 2022, net accretion related to acquisition accounting amounted to $336 thousand compared to $566 thousand in the prior quarter and $875 thousand for the same quarter in 2021. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):
For the years ending (estimated): 2022 $ 436 2023 719 2024 420 2025 298 2026 185 Thereafter 225 ASSET QUALITY
Nonperforming assets (“NPAs”) totaled $1.6 million as of June 30, 2022, down from $2.0 million at March 31, 2022, and down substantially from $2.4 million at June 30, 2021. NPAs as a percentage of total assets were 0.05% at June 30, 2022, compared to 0.06% at March 31, 2022 and 0.07% at June 30, 2021. The Company recorded a provision for loan losses for the second quarter of 2022 of $581 thousand compared to a recovery of provision of $758 thousand in the previous quarter and a recovery of provision of $1.4 million in the second quarter of the previous year. The provision expense for the second quarter of 2022 was a function of continued loan growth during the period and a slight increase in specific reserves. The increased provision expense as compared to the previous quarter and same quarter in 2021 was associated with downward adjustments in qualitative factors during those previous periods as the economy improved.
The allowance for loan losses was $18.5 million at June 30, 2022, compared to $18.0 million at March 31, 2022 and $20.1 million at June 30, 2021. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were 0.01% for the second quarter of 2022, compared to (0.01%) in both the previous quarter of 2022 and in the same quarter in the prior year. The allowance as a percentage of loans held for investment was 0.91% at June 30, 2022, compared to 0.90% at March 31, 2022, and 1.05% at June 30, 2021. Excluding PPP loans, the allowance as a percentage of loans was 0.91% at June 30, 2022 and March 31, 2022, compared to 1.11% at June 30, 2021.
NONINTEREST INCOME
Noninterest income decreased $763 thousand, or 13.6%, to $4.8 million for the quarter ended June 30, 2022 from $5.6 million in the prior quarter and decreased $305 thousand, or 5.9%, from the same quarter in the prior year. Mortgage banking and insurance were the primary contributors to this decline, with mortgage banking revenues contracting $244 thousand, or 36.3%, and income from insurance investments contracting $350 thousand, or 78.3%. Lower originations because of higher mortgage rates impacted mortgage banking income, and the decrease in income from insurance investments reflects a nonrecurring dividend of $350 thousand received in the first quarter of 2022.
The second quarter of 2022 compared to the second quarter of 2021 reflected a significant decrease in mortgage banking income, partially offset by growth in trust and brokerage fees, service charges on deposits, income from Small Business Investment Corporations and decreased losses on premises and equipment.
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 2022 amounted to $15.5 million, up $106 thousand, or less than a 1% increase, when compared to $15.3 million for the previous quarter and up $818 thousand, or 5.6%, from $14.6 million during the same quarter in the previous year. The increase in the second quarter compared to the first quarter of 2022 was due to increased salary and benefits and other operational expenses.
The second quarter 2022 increase compared to the same quarter of 2021 was primarily due to increased salary and employee benefits expenses including incentive accruals, bank franchise taxes, data processing and other operational expenses.
INCOME TAXES
The effective tax rate for the three months ended June 30, 2022 was 20.90%, compared to 21.49% for the prior quarter and 21.00% for the same quarter in the prior year. The effective tax rate fluctuations are attributable to changes in pre-tax earnings and the levels of permanent tax differences.
BALANCE SHEET
Total assets at June 30, 2022 were $3.2 billion, a decrease of $112.5 million from March 31, 2022 and an increase of $32.1 million from June 30, 2021. The decrease from the previous quarter is due to lower interest bearing deposits in other banks resulting from a decrease in deposits, partially offset by the increase in loans, net during the period.
At June 30, 2022, loans held for investment (net of deferred fees and costs) were $2.0 billion, an increase of $42.8 million, or 8.6%, annualized from March 31, 2022. Loans held for investment, excluding PPP loans, increased $220.5 million, or 12.2%, from June 30, 2021.
Investment securities available for sale amounted to $668.8 million at June 30, 2022, a decrease of $17.4 million, or 2.5%, compared to March 31, 2022, and growth of $113.3 million, or 20.4%, compared to June 30, 2021.
Deposits amounted to $2.8 billion at June 30, 2022, a decrease of $95.9 million, or 13.1% annualized, from March 31, 2022 and growth of $60.6 million, or 2.2%, compared to June 30, 2021.
The Company continues to be well-capitalized as defined by regulators, with tangible common equity to tangible assets of 7.58% at June 30, 2022 compared to 7.54% at March 31, 2022 and compared to 8.27% at June 30, 2021 (non-GAAP). The Company’s common equity Tier 1, Tier 1, total, and Tier 1 leverage capital ratios were 12.02%, 13.24%, 14.06% and 9.42%, respectively, at June 30, 2022.
ABOUT AMERICAN NATIONAL
American National is a multi-state bank holding company with total assets of approximately $3.2 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving Virginia and North Carolina with 26 banking offices. American National Bank also manages an additional $1.1 billion of trust, investment and brokerage assets in its Wealth Division. Additional information about American National and American National Bank is available on American National's website at www.amnb.com.
NON-GAAP FINANCIAL MEASURES
This release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States (“GAAP”). American National’s management uses these non-GAAP financial measures in its analysis of American National’s performance. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of American National’s core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. For a reconciliation of non-GAAP financial measures, see “Reconciliation of Non-GAAP Financial Measures” at the end of this release.
FORWARD-LOOKING STATEMENTS
Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) the impacts of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus; (2) expected revenue synergies and cost savings from acquisitions and depositions; (3) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (4) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American National’s market areas; (5) the adequacy of the level of the allowance for loan losses, the amount of loan loss provisions required in future quarters, and the failure of assumptions underlying the allowance for loan losses; (6) cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (7) accounting principles, policies, and guidelines; and (8) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.
American National Bankshares Inc. Consolidated Balance Sheets (Dollars in thousands, except per share data) Unaudited June 30 2022 2021 Assets Cash and due from banks $ 34,409 $ 38,237 Interest-bearing deposits in other banks 307,164 502,300 Securities available for sale, at fair value 668,765 555,444 Restricted stock, at cost 8,495 8,035 Loans held for sale 5,227 13,807 Loans, net of deferred fees and costs 2,030,818 1,914,371 Less allowance for loan losses (18,505 ) (20,097 ) Net Loans 2,012,313 1,894,274 Premises and equipment, net 34,878 37,478 Other real estate owned, net 143 213 Goodwill 85,048 85,048 Core deposit intangibles, net 3,977 5,339 Bank owned life insurance 29,318 28,791 Other assets 43,991 32,618 Total assets $ 3,233,728 $ 3,201,584 Liabilities Demand deposits -- noninterest-bearing $ 1,047,931 $ 959,574 Demand deposits -- interest-bearing 544,323 482,586 Money market deposits 702,159 700,670 Savings deposits 275,945 241,746 Time deposits 259,989 385,174 Total deposits 2,830,347 2,769,750 Customer repurchase agreements 32,038 35,440 Long-term borrowings 28,283 28,181 Other liabilities 15,629 20,580 Total liabilities 2,906,297 2,853,951 Shareholders' equity Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding - - Common stock, $1 par value, 20,000,000 shares authorized, 10,663,599 shares outstanding at June 30, 2022 and 10,875,756 shares outstanding at June 30, 2021 10,588 10,811 Capital in excess of par value 143,337 150,947 Retained earnings 212,524 185,843 Accumulated other comprehensive (loss) income, net (39,018 ) 32 Total shareholders' equity 327,431 347,633 Total liabilities and shareholders' equity $ 3,233,728 $ 3,201,584 American National Bankshares Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) Unaudited For the Three Months Ended For the Six Months Ended 6/30/22 3/31/22 6/30/21 6/30/22 6/30/21 Interest and Dividend Income: Interest and fees on loans $ 19,076 $ 18,788 $ 21,087 $ 37,864 $ 43,360 Interest and dividends on securities: Taxable 2,441 2,239 1,769 4,680 3,401 Tax-exempt 97 90 96 187 199 Dividends 116 113 117 229 236 Other interest income 800 177 98 977 175 Total interest and dividend income 22,530 21,407 23,167 43,937 47,371 Interest Expense: Interest on deposits 646 569 922 1,215 2,209 Interest on short-term borrowings 9 6 5 15 16 Interest on long-term borrowings 385 379 469 764 952 Total interest expense 1,040 954 1,396 1,994 3,177 Net Interest Income 21,490 20,453 21,771 41,943 44,194 (Recovery of) provision for loan losses 581 (758 ) (1,352 ) (177 ) (1,352 ) Net Interest Income After (Recovery of) Provision for Loan Losses 20,909 21,211 23,123 42,120 45,546 Noninterest Income: Trust and brokerage fees 1,587 1,809 1,490 3,396 2,914 Service charges on deposit accounts 709 689 630 1,398 1,252 Interchange fees 996 981 1,178 1,977 2,064 Other fees and commissions 200 266 180 466 433 Mortgage banking income 429 673 1,142 1,102 2,460 Income from Small Business Investment Companies 678 493 591 1,171 1,019 Income from insurance investments 97 447 141 544 929 Gains (losses) on premises and equipment, net (84 ) 4 (432 ) (80 ) (481 ) Other 225 238 222 463 474 Total noninterest income 4,837 5,600 5,142 10,437 11,064 Noninterest Expense: Salaries and employee benefits 8,720 8,598 8,178 17,318 15,696 Employee benefits - - - Occupancy and equipment 1,520 1,542 1,502 3,062 3,035 FDIC assessment 228 239 226 467 450 Bank franchise tax 488 476 443 964 881 Core deposit intangible amortization 320 330 371 650 752 Data processing 781 847 698 1,628 1,476 Software 363 363 338 726 667 Other real estate owned, net 2 (1 ) 10 1 127 Other 3,033 2,955 2,871 5,988 5,618 Total noninterest expense 15,455 15,349 14,637 30,804 28,702 Income Before Income Taxes 10,291 11,462 13,628 21,753 27,908 Income Taxes 2,151 2,463 2,862 4,614 5,853 Net Income $ 8,140 $ 8,999 $ 10,766 $ 17,139 $ 22,055 Net Income Per Common Share: Basic $ 0.76 $ 0.84 $ 0.99 $ 1.60 $ 2.02 Diluted $ 0.76 $ 0.84 $ 0.99 $ 1.60 $ 2.01 Weighted Average Common Shares Outstanding: Basic 10,688,294 10,754,287 10,919,333 10,721,108 10,945,256 Diluted 10,690,496 10,756,902 10,923,156 10,723,517 10,949,523 American National Bankshares Inc. Financial Highlights Unaudited (Dollars in thousands, except per share data) At or for the Six Months 2nd Qtr 1st Qtr 2nd Qtr Ended June 30, 2022 2022 2021 2022 2021 EARNINGS Interest income $ 22,530 $ 21,407 $ 23,167 $ 43,937 $ 47,371 Interest expense 1,040 954 1,396 1,994 3,177 Net interest income 21,490 20,453 21,771 41,943 44,194 (Recovery of) provision for loan losses 581 (758 ) (1,352 ) (177 ) (1,352 ) Noninterest income 4,837 5,600 5,142 10,437 11,064 Noninterest expense 15,455 15,349 14,637 30,804 28,702 Income taxes 2,151 2,463 2,862 4,614 5,853 Net income 8,140 8,999 10,766 17,139 22,055 PER COMMON SHARE Net income per share - basic $ 0.76 $ 0.84 $ 0.99 $ 1.60 $ 2.02 Net income per share - diluted 0.76 0.84 0.99 1.60 2.01 Cash dividends paid 0.28 0.28 0.27 0.56 0.54 Book value per share 30.71 31.27 31.96 30.71 31.96 Book value per share - tangible (a) 22.36 22.94 23.65 22.36 23.65 Closing market price 34.61 37.68 31.09 34.61 31.09 FINANCIAL RATIOS Return on average assets 0.99 % 1.08 % 1.38 % 1.04 % 1.44 % Return on average common equity 9.83 10.24 12.44 10.04 12.81 Return on average tangible common equity (a) 13.87 14.14 17.30 14.01 17.87 Average common equity to average assets 10.06 10.59 11.10 10.32 11.20 Tangible common equity to tangible assets (a) 7.58 7.54 8.27 7.58 8.27 Net interest margin, taxable equivalent 2.76 2.63 3.00 2.70 3.10 Efficiency ratio (a) 57.18 57.53 52.06 57.35 49.84 Effective tax rate 20.90 21.49 21.00 21.21 20.97 PERIOD-END BALANCES Securities $ 677,260 $ 694,660 $ 563,479 $ 677,260 $ 563,479 Loans held for sale 5,227 2,524 13,807 5,227 13,807 Loans, net 2,030,818 1,988,008 1,914,371 2,030,818 1,914,371 Goodwill and other intangibles 89,025 89,345 90,387 89,025 90,387 Assets 3,233,728 3,346,238 3,201,584 3,233,728 3,201,584 Assets - tangible (a) 3,144,703 3,256,893 3,111,197 3,144,703 3,111,197 Deposits 2,830,347 2,926,207 2,769,750 2,830,347 2,769,750 Customer repurchase agreements 32,038 38,527 35,440 32,038 35,440 Long-term borrowings 28,283 28,257 28,181 28,283 28,181 Shareholders' equity 327,431 335,074 347,633 327,431 347,633 Shareholders' equity - tangible (a) 238,406 245,729 257,246 238,406 257,246 AVERAGE BALANCES Securities (b) $ 726,472 $ 710,873 $ 512,981 $ 718,716 $ 486,020 Loans held for sale 3,759 4,324 15,883 4,040 13,573 Loans, net 2,006,970 1,966,586 1,947,797 1,986,890 1,978,312 Interest-earning assets 3,120,925 3,126,561 2,909,216 3,123,728 2,862,016 Goodwill and other intangibles 89,200 89,525 90,577 89,362 90,775 Assets 3,292,913 3,320,314 3,118,687 3,306,538 3,073,073 Assets - tangible (a) 3,203,713 3,230,789 3,028,110 3,217,176 2,982,298 Interest-bearing deposits 1,849,664 1,880,873 1,761,203 1,865,182 1,750,867 Deposits 2,881,318 2,880,893 2,677,101 2,881,106 2,630,081 Customer repurchase agreements 35,766 41,337 37,591 38,536 40,651 Long-term borrowings 28,268 28,241 35,584 28,255 35,612 Shareholders' equity 331,276 351,539 346,210 341,352 344,232 Shareholders' equity - tangible (a) 242,076 262,014 255,633 251,990 253,457 American National Bankshares Inc. Financial Highlights Unaudited (Dollars in thousands, except per share data) At or for the Six Months 2nd Qtr 1st Qtr 2nd Qtr Ended June 30, 2022 2022 2021 2022 2021 CAPITAL Weighted average shares outstanding - basic 10,688,294 10,754,287 10,919,333 10,721,108 10,945,256 Weighted average shares outstanding - diluted 10,690,496 10,756,902 10,923,156 10,723,517 10,949,523 COMMON STOCK REPURCHASE PROGRAM Weighted average shares outstanding - basic Total shares of common stock repurchased 54,676 88,929 93,212 143,605 147,235 Weighted average shares outstanding - diluted Average price paid per share of common stock $ 35.32 $ 38.18 $ 34.73 $ 37.09 $ 32.81 ALLOWANCE FOR LOAN LOSSES Beginning balance $ 17,988 $ 18,678 $ 21,416 $ 18,678 $ 21,403 (Recovery of) provision for loan losses 581 (758 ) (1,352 ) (177 ) (1,352 ) Charge-offs (117 ) (37 ) (29 ) (154 ) (51 ) Recoveries 53 105 62 158 97 Ending balance $ 18,505 $ 17,988 $ 20,097 $ 18,505 $ 20,097 LOANS Construction and land development $ 174,361 $ 148,276 $ 133,592 $ 174,361 $ 133,592 Commercial real estate - owner occupied 403,478 402,306 384,095 403,478 384,095 Commercial real estate - non-owner occupied 749,174 752,817 650,862 749,174 650,862 Residential real estate 310,110 295,949 264,680 310,110 264,680 Home equity 95,352 89,593 100,835 95,352 100,835 Commercial and industrial 291,445 291,697 372,759 291,445 372,759 Consumer 6,898 7,370 7,548 6,898 7,548 Total $ 2,030,818 $ 1,988,008 $ 1,914,371 $ 2,030,818 $ 1,914,371 NONPERFORMING ASSETS AT PERIOD-END Nonperforming loans: 90 days past due and accruing $ 90 $ 71 $ 125 $ 90 $ 125 Nonaccrual 1,385 1,762 2,057 1385 2,057 Other real estate owned and repossessions 143 143 213 143 213 Nonperforming assets $ 1,618 $ 1,976 $ 2,395 $ 1,618 $ 2,395 ASSET QUALITY RATIOS Allowance for loan losses to total loans 0.91 % 0.90 % 1.05 % 0.91 % 1.05 % Allowance for loan losses to nonperforming loans 1,254.58 981.34 921.04 1,254.58 921.04 Nonperforming assets to total assets 0.05 0.06 0.07 0.05 0.07 Nonperforming loans to total loans 0.07 0.09 0.11 0.07 0.11 Annualized net recoveries to average loans 0.01 (0.01 ) (0.01 ) 0.00 0.00 to average loans OTHER DATA Fiduciary assets at period-end (c) (d) $ 709,264 $ 727,022 $ 697,528 $ 709,264 $ 697,528 Retail brokerage assets at period-end (c) (d) $ 370,493 $ 405,742 $ 392,881 $ 370,493 $ 392,881 Number full-time equivalent employees (e) 345 338 340 345 340 Number of full service offices 26 26 26 26 26 Number of loan production offices 1 1 1 1 1 Number of ATMs 36 36 36 36 36 Notes: (a) - This financial measure is not calculated in accordance with GAAP. For a reconciliation of non-GAAP financial measures, see "Reconciliation of Non-GAAP Financial Measures" at the end of this release. (b) - Average does not include unrealized gains and losses. (c) - Market value. (d) - Assets are not owned by American National and are not reflected in the consolidated balance sheet. (e) - Average for quarter.
American National Bankshares Inc. Net Interest Income Analysis For the Three Months Ended June 30, 2022 and 2021 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2022 2021 2022 2021 2022 2021 Loans: Commercial $ 289,092 $ 391,871 $ 2,473 $ 4,458 3.43 % 4.56 % Real estate 1,715,073 1,564,747 16,538 16,551 3.86 4.23 Consumer 6,564 7,062 98 112 5.99 6.36 Total loans (b) 2,010,729 1,963,680 19,109 21,121 3.80 4.30 Securities: U.S. Treasury 152,234 41,840 349 114 0.92 1.09 Federal agencies & GSEs 107,363 102,730 323 298 1.20 1.16 Mortgage-backed & CMOs 360,418 281,820 1,280 961 1.42 1.36 State and municipal 68,172 62,204 342 323 2.01 2.08 Other 38,285 24,387 385 311 4.02 5.10 Total securities 726,472 512,981 2,679 2,007 1.48 1.56 Deposits in other banks 383,724 432,555 800 98 0.84 0.09 Total interest-earning assets 3,120,925 2,909,216 22,588 23,226 2.90 3.20 Non-earning assets 171,988 209,471 Total assets $ 3,292,913 $ 3,118,687 Deposits: Demand $ 546,412 $ 468,684 36 37 0.03 0.03 Money market 744,653 701,957 225 215 0.12 0.12 Savings 275,957 239,887 8 6 0.01 0.01 Time 282,642 350,675 377 664 0.54 0.76 Total deposits 1,849,664 1,761,203 646 922 0.14 0.21 Customer repurchase agreements 35,766 37,591 8 5 0.09 0.05 Long-term borrowings 28,268 35,584 377 469 5.33 5.27 Total interest-bearing liabilities 1,913,698 1,834,378 1,031 1,396 0.22 0.30 Noninterest bearing demand deposits 1,031,654 915,898 Other liabilities 16,285 22,201 Shareholders' equity 331,276 346,210 Total liabilities and shareholders' equity $ 3,292,913 $ 3,118,687 Interest rate spread 2.68 % 2.90 % Net interest margin 2.76 % 3.00 % Net interest income (taxable equivalent basis) 21,557 21,830 Less: Taxable equivalent adjustment (c) 58 59 Net interest income $ 21,499 $ 21,771 Notes: (a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/ amortization of deferred loan fees and costs. (b) - Nonaccrual loans are included in the average balances. (c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.
Net Interest Income Analysis For the Six Months Ended June 30, 2022 and 2021 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2022 2021 2022 2021 2022 2021 Loans: Commercial $ 289,569 $ 428,073 $ 5,105 $ 10,249 3.56 % 4.83 % Real estate 1,694,825 1,556,465 32,616 32,941 3.85 4.23 Consumer 6,536 7,347 210 238 6.48 6.53 Total loans (b) 1,990,930 1,991,885 37,931 43,428 3.81 4.37 Securities: U.S. Treasury 149,632 28,645 672 126 0.90 0.88 Federal agencies & GSEs 106,141 104,026 616 602 1.16 1.16 Mortgage-backed & CMOs 360,997 269,977 2,487 1,934 1.38 1.43 State and municipal 67,850 60,359 673 637 1.98 2.11 Other 34,096 23,013 697 588 4.09 5.11 Total securities 718,716 486,020 5,145 3,887 1.43 1.60 Deposits in other banks 414,082 384,111 977 175 0.48 0.09 Total interest-earning assets 3,123,728 2,862,016 44,053 47,490 2.82 3.32 Non-earning assets 182,810 211,057 Total assets $ 3,306,538 $ 3,073,073 Deposits: Demand $ 536,018 $ 459,867 73 77 0.03 0.03 Money market 748,498 693,002 326 491 0.09 0.14 Savings 270,040 233,680 15 13 0.01 0.01 Time 310,626 364,318 801 1,628 0.52 0.90 Total deposits 1,865,182 1,750,867 1,215 2,209 0.13 0.25 Customer repurchase agreements 38,536 40,651 15 16 0.08 0.08 Long-term borrowings 28,255 35,612 764 952 5.41 5.35 Total interest-bearing liabilities 1,931,973 1,827,130 1,994 3,177 0.21 0.35 Noninterest bearing demand deposits 1,015,924 879,214 Other liabilities 17,289 22,497 Shareholders' equity 341,352 344,232 Total liabilities and shareholders' equity $ 3,306,538 $ 3,073,073 Interest rate spread 2.61 % 2.97 % Net interest margin 2.70 % 3.10 % Net interest income (taxable equivalent basis) 42,059 44,313 Less: Taxable equivalent adjustment (c) 116 119 Net interest income $ 41,943 $ 44,194 Notes: (a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/ amortization of deferred loan fees and costs. (b) - Nonaccrual loans are included in the average balances. (c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.
American National Bankshares Inc. Reconciliation of Non-GAAP Financial Measures Unaudited (Dollars in thousands, except per share data) At or for the Six Months 2nd Qtr 1st Qtr 2nd Qtr Ended June 30, 2022 2022 2021 2022 2021 EFFICIENCY RATIO Noninterest expense $ 15,455 $ 15,349 $ 14,637 $ 30,804 $ 28,702 Subtract: loss on sale of OREO - - - - (111 ) Subtract: core deposit intangible amortization (320 ) (330 ) (371 ) (650 ) (752 ) $ 15,135 $ 15,019 $ 14,266 $ 30,154 $ 27,839 Net interest income $ 21,490 $ 20,453 $ 21,771 $ 41,943 $ 44,194 Tax equivalent adjustment 58 58 59 116 119 Noninterest income 4,837 5,600 5,142 10,437 11,064 Add/subtract: (gain)/loss on fixed assets 84 (4 ) 432 80 481 $ 26,469 $ 26,107 $ 27,404 $ 52,576 $ 55,858 Efficiency ratio 57.18 % 57.53 % 52.06 % 57.35 % 49.84 % TAX EQUIVALENT NET INTEREST INCOME Non-GAAP measures: Interest income - loans $ 19,109 $ 18,822 $ 21,121 $ 37,931 $ 43,428 Interest income - investments and other 3,479 2,643 2,105 6,122 4,062 Interest expense - deposits (646 ) (569 ) (922 ) (1,215 ) (2,209 ) Interest expense - customer repurchase agreements (8 ) (6 ) (5 ) (14 ) (16 ) Interest expense - long-term borrowings (377 ) (379 ) (469 ) (756 ) (952 ) Total net interest income $ 21,557 $ 20,511 $ 21,830 $ 42,068 $ 44,313 Less non-GAAP measures: Tax benefit on nontaxable interest - loans (34 ) (34 ) (34 ) (68 ) (68 ) Tax benefit on nontaxable interest - securities (24 ) (24 ) (25 ) (48 ) (51 ) GAAP measures $ 21,499 $ 20,453 $ 21,771 $ 41,952 $ 44,194 RETURN ON AVERAGE TANGIBLE EQUITY Return on average equity (GAAP basis) 9.83 % 10.24 % 12.44 % 10.04 % 12.81 % Impact of excluding average goodwill and other intangibles 4.04 3.90 4.86 3.97 5.06 Return on average tangible equity (non-GAAP) 13.87 % 14.14 % 17.30 % 14.01 % 17.87 % TANGIBLE EQUITY TO TANGIBLE ASSETS Equity to assets ratio (GAAP basis) 10.13 % 10.01 % 10.86 % 10.13 % 10.86 % Impact of excluding goodwill and other intangibles (2.55 ) (2.47 ) (2.59 ) (2.55 ) (2.59 ) Tangible equity to tangible assets ratio (non-GAAP) 7.58 % 7.54 % 8.27 % 7.58 % 8.27 % TANGIBLE BOOK VALUE Book value per share (GAAP basis) $ 30.71 $ 31.27 $ 31.96 $ 30.71 $ 31.96 Impact of excluding goodwill and other intangibles (8.35 ) (8.33 ) (8.31 ) (8.35 ) (8.31 ) Tangible book value per share (non-GAAP) $ 22.36 $ 22.94 $ 23.65 $ 22.36 $ 23.65 ADJUSTED LOAN LOSS ALLOWANCE Allowance for loan losses $ 18,505 $ 17,988 $ 20,097 $ 18,505 $ 20,097 Credit discount on purchased loans 3,741 4,001 6,055 3,741 6,055 Adjusted loan loss allowance $ 22,246 $ 21,989 $ 26,152 $ 22,246 $ 26,152 Total loans, net $ 2,030,818 $ 1,988,008 $ 1,914,371 $ 2,030,818 $ 1,914,371 Subtract: PPP loans, net (116 ) (689 ) (104,143 ) (116 ) (104,143 ) Total loans less PPP loans, net $ 2,030,702 $ 1,987,319 $ 1,810,228 $ 2,030,702 $ 1,810,228 Adjusted loan loss allowance to total loans less PPP loans, net 1.10 % 1.11 % 1.44 % 1.10 % 1.44 % Allowance for loan losses to total loans less PPP loans, net 0.91 % 0.91 % 1.11 % 0.91 % 1.11 % Contact:
Jeffrey W. Farrar
Executive Vice President, COO & CFO
(434)773-2274
farrarj@amnb.com
- Earnings produced a return on average tangible common equity of 13.87% for the second quarter of 2022, compared to 14.14% in the previous quarter and 17.30% for the same quarter in the prior year (non-GAAP).