• Q4 2018 annualized loan growth 8%
• Q4 2018 net income of $5.0 million
• 2018 net income $22.6 million
• Q4 2018 net interest margin of 3.48%
• Q4 2018 average shareholders’ equity of $218.4 million is 11.78% of average assets

DANVILLE, Va., Jan. 17, 2019 (GLOBE NEWSWIRE) — American National Bankshares Inc. (“American National”) (Nasdaq:  AMNB), parent company of American National Bank and Trust Company, today announced net income for the fourth quarter of  2018 of $5,002,000 compared to $2,120,000 for the fourth quarter of 2017, a $2,882,000 or 135.9% increase.  Basic net income per common share was $0.57 for the fourth quarter of 2018 compared to $0.25 for the 2017 quarter.  Diluted net income per common share was $0.57 for the fourth quarter of 2018 compared to $0.24 for the 2017 quarter.  Net income for the fourth quarter of 2018 produced a return on average assets of 1.08%, a return on average equity of 9.16%, and a return on average tangible equity of 11.63%.

Net income for the year ended December 31, 2018 was $22,579,000 compared to $15,249,000 for 2017, a $7,330,000 or 48.1% increase. Basic net income per common share was $2.60 for 2018 compared to $1.76 for 2017. Diluted net income per common share was $2.59 for 2018 compared to $1.76 for 2017. Net income for 2018 produced a return on average assets of 1.24%, a return on average equity of 10.56%, and a return on average tangible equity of 13.49%.

The enactment of the new federal tax law in late December 2017 negatively affected net income for the 2017 quarter and year. In order to account for the change in income tax rates from 35% to 21%, American National recognized a $2.7 million charge to its deferred tax asset and a corresponding increase in income tax expense in the fourth quarter of 2017. 

Beginning in 2018, income tax expense was positively affected by the substantial reduction in the corporate tax rate.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, “We are very pleased to report net income for the quarter of $5.0 million, an increase of 135.9% over the comparable quarter of 2017. Net income for 2018 was $22.6 million, an increase of 48.1% over 2017.

“Earnings were positively impacted for the quarter and the year by greater net interest income, lower loan loss provision, and lower corporate income taxes.

“Net interest income has increased with greater earning assets, mostly loans, and increasing market interest rates.

“Earnings have also increased due to a significant reduction in loan loss provision. Our need for loan loss provision was reduced by three factors: loan balances, continued strong asset quality metrics, and improvements in various qualitative factors we use in computing our allowance for loan losses.

“Lastly, benefiting earnings was the substantial decrease in our corporate tax rate. The tax cut, enacted in December 2017, reduced our statutory rate to 21% from 35%.

“Earnings for the fourth quarter 2018 were negatively impacted by unrealized losses on equity securities of $270,000. Accounting for fair value changes in equity securities changed in 2018 and unrealized gains and losses are now reflected in the income statement.

“Further, earnings were negatively impacted for the fourth quarter of 2018 and for the year by merger related expenses. Our pending acquisition of HomeTown Bank is generating significant non-recurring expense, $872,000 of which hit the fourth quarter.  

“The balance sheet grew last year. Year over year growth in loans was $21.4 million or 1.6%. Most of this growth occurred in the fourth quarter of 2018 where loans increased $26.3 million or 2.0%. Growth was muted in most of 2018 because of over $40 million in large commercial loan payoffs during the year. Current expectations for 2019 are for growth in loans at a moderate pace, probably in the mid-single digit percentage range.

“Year over year growth in deposits was $31.5 million or 2.1%. This growth is mostly in non-maturity core deposits (non-interest bearing accounts), which increased $41.5 million or 10.5%. Our cost of interest bearing deposits for the fourth quarter was 0.83%, compared to 0.61% for the 2017 quarter. Our net interest margin for the current quarter was 3.48%, up two basis points from the prior year quarter, due in large portion to  increasing yields on loans. Protecting our net interest margin is a continuing strategic imperative.

“We have noted that many stocks in the financial sector, including American National, have declined substantially and, in many cases, disproportionately, over the last several months. American National approved a stock repurchase program in January 2018 authorizing the repurchase of up to 300,000 shares over the following two years. We will revisit our intention with respect to the plan, subsequent to completion of the merger with HomeTown Bank, based on then current facts and circumstances.”

Haley concluded, “This is an exciting time for American National. Our employees are working diligently with their new friends at HomeTown Bank to consummate our merger in a few months. The transaction will give American National the largest deposit market share of any community bank in the Roanoke, Virginia market. Our earnings for 2018 were good and we’re expecting 2019, excluding merger related costs, and 2020 will be strong. Balance sheet growth took an uptick late in 2018, but sets the stage for strong expectations in 2019. Our operating philosophy will continue to focus on asset quality, volume and rate – in that order.”

Capital
American National’s capital ratios remain strong and exceed all regulatory requirements. 

For the quarter ended December 31, 2018, average shareholders’ equity was 11.78% of average assets, compared to 11.64% for the quarter ended December 31, 2017.

Book value per common share was $25.52 at December 31, 2018, compared to $24.13 at December 31, 2017.

Tangible book value per common share was $20.38 at December 31, 2018, compared to $18.92 at December 31, 2017.

Credit Quality Measurements
Non-performing assets composed of ($1,090,000 of non-performing loans, $72,000 of 90 day past due and accruing loans, and $869,000 of other real estate owned) represented 0.11% of total assets at December 31, 2018, compared to 0.21% at December 31, 2017. 

Annualized net charge offs to average loans were 23 basis points for the fourth quarter of 2018, compared to six basis points for the same quarter in 2017. Net charge offs for 2018 were five basis points, compared to two basis points for 2017.

Other real estate owned was $869,000 at December 31, 2018, compared to $1,225,000 at December 31, 2017, a decrease of $356,000 or 29.1%.

Merger Related Financial Impact
The acquisition accounting adjustments related to our 2011 and 2015 acquisitions have had and continue to have a positive impact on net interest income and income before income taxes.  The impact of these adjustments is summarized below (dollars in thousands):

For the quarter ended December 31,			2018			2017
Net Interest Income		$	286		$	529
Income Before Income Taxes		$	231		$	449
For the year ended December 31,			2018			2017
Net Interest Income		$	1,288		$	2,114
Income Before Income Taxes		$	1,023		$	1,586

The fourth quarter of 2018 includes $143,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $348,000 for the comparable quarter of 2017.  For 2018, cash basis accretion income was $688,000, compared to $968,000 for 2017.

The positive financial impact of these merger related accounting adjustments will continue to decline in upcoming quarters.

Net Interest Income
Net interest income before the provision for loan losses increased to $15,012,000 in the fourth quarter of 2018 from $14,363,000 in the fourth quarter of 2017, an increase of $649,000 or 4.5%.

For the 2018 quarter, the net interest margin was 3.48% compared to 3.46% for the same quarter in 2017, an increase of 0.02%.

The major drivers affecting margin were:

• Positively affecting margin was a $41.4 million (2.4%) increase in average earning assets, at a 19 basis point higher yield.
• Positively affecting margin was a $30.6 million (7.4%) increase in average noninterest bearing deposits.
• Negatively affecting margin was a $7.6 million (0.7%) increase in the average balance of interest bearing deposits at a 22 basis point higher cost.

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the fourth quarter of 2018 was a negative $6,000 compared to a negative $74,000 for the fourth quarter of 2017. The fourth quarter 2018 negative provision was related to adjustments on the specific reserves for several impaired loans.

The allowance for loan losses as a percentage of total loans was 0.94% at December 31, 2018 compared to 1.02% at December 31, 2017.

Net loans outstanding increased during the fourth quarter by $27.1 million or 2.1%. However, the need for additions to the allowance for loan losses was reduced by improvement in various qualitative factors used in the determination of the allowance, notably national and local economic conditions, and loan volume.

Noninterest Income 
Noninterest income totaled $2,998,000 in the fourth quarter of 2018, compared with $3,804,000 in the fourth quarter of 2017, a decrease of $806,000 or 21.2%. The major drivers of this decrease were mortgage banking and securities gains and losses.

Mortgage banking income was down $235,000 or 38.8%, primarily due to lower demand.

Securities gains and losses were down $492,000 or 221.6%, almost entirely related to the change in accounting for equity investments requiring unrealized gains and losses to be reflected in the income statement.       

Noninterest Expense
Noninterest expense totaled $11,638,000 in the fourth quarter of 2018, compared to $11,021,000 in the fourth quarter of 2017, an increase of $617,000 or 5.6%.   

The primary driver of this increase was merger related expenses related to the pending acquisition of HomeTown Bank. These nonrecurring expenses totaled $872,000 in the fourth quarter of 2018.   

About American National
American National is a multi-state bank holding company with total assets of approximately $1.9 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 24 banking offices and two loan production offices. American National Bank also manages an additional $769 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about the company and the bank is available on the bank’s website at www.amnb.com.

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. These include statements as to the anticipated performance of American National and the benefits of the proposed merger with HomeTown Bank, including future financial and operating results, cost savings and enhanced revenues that may be realized from the merger as well as other statements of expectations regarding the merger and any other statements regarding future results or expectations. 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 and the resulting company after the proposed merger with HomeTown Bank, include but are not limited to: (1) the businesses of American National and/or HomeTown Bank may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe; (3) revenues following the merger may be lower than expected; (4) customer and employee relationships and business operations may be disrupted by the merger; (5) the ability to obtain required regulatory and shareholder approvals, and the ability to complete the merger on the expected timeframe may be more difficult, time-consuming or costly than expected; (6) 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; (7) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in the companies’ respective market areas; (8) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (9) accounting principles, policies, and guidelines; and (10) 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.

Contact:	William W. Traynham, Chief Financial Officer
	434-773-2242
	[email protected]

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
		December 31
Assets			2018				2017
Cash and due from banks		$	29,587			$	28,594
Interest-bearing deposits in other banks			34,668				23,883
Equity securities, at fair value			1,830				–
Securities available for sale, at fair value			332,653				321,337
Restricted stock, at cost			5,247				6,110
Loans held for sale			640				1,639
Loans			1,357,476				1,336,125
Less allowance for loan losses			(12,805	)			(13,603	)
Net Loans			1,344,671				1,322,522
Premises and equipment, net			26,675				25,901
Other real estate owned, net			869				1,225
Goodwill			43,872				43,872
Core deposit intangibles, net			926				1,191
Bank owned life insurance			18,941				18,460
Accrued interest receivable and other assets			22,287				21,344
Total assets		$	1,862,866			$	1,816,078
Liabilities
Demand deposits — noninterest-bearing		$	435,828			$	394,344
Demand deposits — interest-bearing			234,621				226,914
Money market deposits			401,461				403,024
Savings deposits			132,360				126,786
Time deposits			361,957				383,658
Total deposits			1,566,227				1,534,726
Short-term borrowings:
Customer repurchase agreements			35,243				10,726
Other short-term borrowings			–				24,000
Junior subordinated debt			27,927				27,826
Accrued interest payable and other liabilities			10,927				10,083
Total liabilities			1,640,324				1,607,361
Shareholders’ equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding			–				–
Common stock, $1 par, 20,000,000 shares authorized,
8,720,337 shares outstanding at December 31, 2018 and
8,650,547 shares outstanding at December 31, 2017			8,668				8,604
Capital in excess of par value			78,172				76,179
Retained earnings			141,537				127,010
Accumulated other comprehensive loss, net			(5,835	)			(3,076	)
Total shareholders’ equity			222,542				208,717
Total liabilities and shareholders’ equity		$	1,862,866			$	1,816,078

 

American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
		Three Months Ended								Twelve Months Ended
		December 31								December 31
			2018				2017				2018				2017
Interest and Dividend Income:
Interest and fees on loans		$	15,481			$	14,426			$	59,966			$	55,276
Interest and dividends on securities:
Taxable			1,674				1,271				6,106				4,666
Tax-exempt			298				439				1,502				2,043
Dividends			81				79				321				319
Other interest income			357				265				873				734
Total interest and dividend income			17,891				16,480				68,768				63,038
Interest Expense:
Interest on deposits			2,340				1,713				8,086				5,794
Interest on short-term borrowings			145				79				186				173
Interest on long-term borrowings			–				53				–				296
Interest on junior subordinated debt			394				272				1,402				1,028
Total interest expense			2,879				2,117				9,674				7,291
Net Interest Income:			15,012				14,363				59,094				55,747
Provision for loan losses			(6	)			(74	)			(103	)			1,016
Net Interest Income After Provision
for Loan Losses			15,018				14,437				59,197				54,731
Noninterest Income:
Trust fees			908				1,008				3,783				3,926
Service charges on deposit accounts			646				608				2,455				2,426
Other fees and commissions			660				619				2,637				2,471
Mortgage banking income			370				605				1,862				2,208
Securities gains (losses), net			(270	)			222				123				812
Brokerage fees			192				226				795				829
Income from Small Business Investment Companies			161				118				637				236
Gains (losses) on premises and equipment, net			(6	)			7				60				344
Other			337				391				922				975
Total noninterest income			2,998				3,804				13,274				14,227
Noninterest Expense:
Salaries			5,132				5,225				20,509				19,829
Employee benefits			1,048				1,045				4,370				4,274
Occupancy and equipment			1,081				1,120				4,378				4,487
FDIC assessment			125				137				537				538
Bank franchise tax			191				277				1,054				1,072
Core deposit intangible amortization			55				80				265				528
Data processing			382				550				1,691				2,014
Software			313				291				1,279				1,144
Other real estate owned, net			21				130				122				303
Merger related expenses			872				–				872				–
Other			2,418				2,166				9,169				8,694
Total noninterest expense			11,638				11,021				44,246				42,883
Income Before Income Taxes			6,378				7,220				28,225				26,075
Income Taxes			1,376				5,100				5,646				10,826
Net Income		$	5,002			$	2,120			$	22,579			$	15,249
Net Income Per Common Share:
Basic		$	0.57			$	0.25			$	2.60			$	1.76
Diluted		$	0.57			$	0.24			$	2.59			$	1.76
Average Common Shares Outstanding:
Basic			8,717,572				8,648,494				8,698,014				8,641,717
Diluted			8,723,388				8,668,765				8,708,647				8,660,628

 

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)															At or for the Year Ended
				4th Qtr				3rd Qtr				4th Qtr				December 31,
					2018				2018				2017				2018				2017
EARNINGS
Interest income				$	17,891			$	17,217			$	16,480			$	68,768			$	63,038
Interest expense					2,879				2,466				2,117				9,674				7,291
Net interest income					15,012				14,751				14,363				59,094				55,747
Provision for loan losses					(6	)			(23	)			(74	)			(103	)			1,016
Noninterest income					2,998				3,380				3,804				13,274				14,227
Noninterest expense					11,638				10,904				11,021				44,246				42,883
Income taxes					1,376				1,465				5,100				5,646				10,826
Net income					5,002				5,785				2,120				22,579				15,249
PER COMMON SHARE
Income per share – basic				$	0.57			$	0.66			$	0.25			$	2.60			$	1.76
Income per share – diluted					0.57				0.66				0.24				2.59				1.76
Cash dividends paid					0.25				0.25				0.25				1.00				0.97
Book value per share					25.52				24.79				24.13				25.52				24.13
Book value per share – tangible (a)					20.38				19.65				18.92				20.38				18.92
Closing market price					29.31				39.00				38.30				29.31				38.30
FINANCIAL RATIOS
Return on average assets					1.08	%			1.28	%			0.47	%			1.24	%			0.87	%
Return on average equity					9.16				10.76				4.00				10.56				7.34
Return on average tangible equity (b)					11.63				13.70				5.21				13.49				9.59
Average equity to average assets					11.78				11.87				11.64				11.70				11.82
Tangible equity to tangible assets (a)					9.78				9.72				9.24				9.78				9.24
Net interest margin, taxable equivalent					3.48				3.51				3.46				3.49				3.50
Efficiency ratio (c)					58.45				59.65				59.93				59.57				60.89
Effective tax rate					21.57				20.21				70.64				20.00				41.52
PERIOD-END BALANCES
Securities				$	339,730			$	303,103			$	327,447			$	339,730			$	327,447
Loans held for sale					640				1,934				1,639				640				1,639
Loans, net of unearned income					1,357,476				1,331,153				1,336,125				1,357,476				1,336,125
Goodwill and other intangibles					44,798				44,853				45,063				44,798				45,063
Assets					1,862,866				1,806,491				1,816,078				1,862,866				1,816,078
Assets – tangible (a)					1,818,068				1,761,638				1,771,015				1,818,068				1,771,015
Deposits					1,566,227				1,523,107				1,534,726				1,566,227				1,534,726
Customer repurchase agreements					35,243				29,104				10,726				35,243				10,726
Other short-term borrowings					–				–				24,000				–				24,000
Long-term borrowings					27,927				27,902				27,826				27,927				27,826
Shareholders’ equity					222,542				216,066				208,717				222,542				208,717
Shareholders’ equity – tangible (a)					177,744				171,213				163,654				177,744				163,654
AVERAGE BALANCES
Securities (d)				$	332,230			$	335,320			$	304,254			$	330,982			$	301,377
Loans held for sale					1,201				3,282				4,269				2,285				3,185
Loans, net of unearned income					1,335,469				1,327,060				1,301,833				1,330,582				1,262,264
Interest-earning assets					1,736,453				1,693,912				1,695,091				1,709,283				1,631,853
Goodwill and other intangibles					44,831				44,887				45,109				44,926				45,287
Assets					1,854,492				1,811,631				1,820,499				1,827,658				1,758,012
Assets – tangible (a)					1,809,661				1,766,744				1,775,390				1,782,732				1,712,725
Interest-bearing deposits					1,116,911				1,118,929				1,109,286				1,134,512				1,061,519
Deposits					1,558,864				1,542,945				1,520,665				1,556,039				1,454,182
Customer repurchase agreements					37,905				11,896				42,540				18,401				46,335
Other short-term borrowings					–				2,176				951				1,149				3,158
Long-term borrowings					27,914				27,886				34,331				27,874				36,887
Shareholders’ equity					218,430				215,054				211,864				213,821				207,807
Shareholders’ equity – tangible (a)					173,599				170,167				166,755				168,895				162,520
American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
																At or for the Year Ended
				4th Qtr				3rd Qtr				4th Qtr				December 31,
					2018				2018				2017				2018				2017
CAPITAL
Average shares outstanding – basic					8,717,572				8,712,443				8,648,494				8,698,014				8,641,717
Average shares outstanding – diluted					8,723,388				8,718,918				8,668,765				8,708,647				8,660,628
ALLOWANCE FOR LOAN LOSSES
Beginning balance				$	13,588			$	13,508			$	13,858			$	13,603			$	12,801
Provision for loan losses					(6	)			(23	)			(74	)			(103	)			1,016
Charge-offs					(818	)			(28	)			(280	)			(1,020	)			(690	)
Recoveries					41				131				99				325				476
Ending balance				$	12,805			$	13,588			$	13,603			$	12,805			$	13,603
LOANS
Construction and land development				$	97,240			$	99,546			$	123,147			$	97,240			$	123,147
Commercial real estate					655,800				632,022				637,701				655,800				637,701
Residential real estate					209,438				205,277				209,326				209,438				209,326
Home equity					103,933				104,873				109,857				103,933				109,857
Commercial and industrial					285,972				284,176				251,666				285,972				251,666
Consumer					5,093				5,259				4,428				5,093				4,428
Total				$	1,357,476			$	1,331,153			$	1,336,125			$	1,357,476			$	1,336,125
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing				$	72			$	74			$	359			$	72			$	359
Nonaccrual					1,090				2,238				2,201				1,090				2,201
Other real estate owned					869				916				1,225				869				1,225
Nonperforming assets				$	2,031			$	3,228			$	3,785			$	2,031			$	3,785
ASSET QUALITY RATIOS
Allowance for loan losses to total loans					0.94	%			1.02	%			1.02	%			0.94	%			1.02	%
Allowance for loan losses to
nonperforming loans					1,101.98				587.72				531.37				1,101.98				531.37
Nonperforming assets to total assets					0.11				0.18				0.21				0.11				0.21
Nonperforming loans to total loans					0.09				0.17				0.19				0.09				0.19
Annualized net charge-offs (recoveries)
to average loans					0.23				(0.03	)			0.06				0.05				0.02
OTHER DATA
Fiduciary assets at period-end (e) (f)				$	494,034			$	523,754			$	518,284			$	494,034			$	518,284
Retail brokerage assets at period-end (e) (f)				$	274,552			$	333,565			$	321,151			$	274,552			$	321,151
Number full-time equivalent employees (g)					305				316				328				305				328
Number of full service offices					24				24				26				24				26
Number of loan production offices					2				2				2				2				2
Number of ATM’s					33				34				34				33				34
Notes:
(a) – Excludes goodwill and other intangible assets.
  (b) – Excludes amortization expense, net of tax, of intangible assets.
(c) – The efficiency ratio is calculated by dividing noninterest expense excluding (i) gains (losses) on the sale of OREO, net and (ii) merger related expenses by net interest income including tax equivalent income on nontaxable loans and securities and noninterest income excluding (i) securities gains (losses), net and (ii) gains (losses) on premises and equipment, net.
(d) – Average does not include unrealized gains and losses.
(e) – Market value.
(f) – Assets are not owned by American National and are not reflected in the consolidated balance sheet.
(g) – Average for quarter.

 

Net Interest Income Analysis
For the Three Months Ended December 31, 2018 and 2017
(Dollars in thousands)
Unaudited
							Interest
	Average Balance						Income/Expense						Yield/Rate
		2018			2017			2018			2017		2018		2017
Loans:
Commercial	$	262,040		$	233,689		$	2,768		$	2,253		4.19	%	3.82	%
Real estate		1,069,515			1,068,273			12,681			12,171		4.74		4.56
Consumer		5,115			4,140			76			81		5.89		7.76
Total loans		1,336,670			1,306,102			15,525			14,505		4.64		4.44
Securities:
Federal agencies & GSEs		128,826			104,523			752			508		2.33		1.94
Mortgage-backed & CMOs		110,753			92,339			655			501		2.37		2.17
State and municipal		78,223			92,636			529			829		2.71		3.58
Other		14,428			14,756			187			171		5.18		4.64
Total securities		332,230			304,254			2,123			2,009		2.56		2.64
Deposits in other banks		67,553			84,735			357			265		2.10		1.24
Total interest-earning assets		1,736,453			1,695,091			18,005			16,779		4.14		3.95
Non-earning assets		118,039			125,408
Total assets	$	1,854,492		$	1,820,499
Deposits:
Demand	$	229,286		$	220,150			13			11		0.02		0.02
Money market		391,289			374,691			1,081			623		1.10		0.66
Savings		133,350			126,274			10			10		0.03		0.03
Time		362,986			388,171			1,236			1,069		1.35		1.09
Total deposits		1,116,911			1,109,286			2,340			1,713		0.83		0.61
Customer repurchase agreements		37,905			42,540			145			74		1.52		0.69
Other short-term borrowings		–			951			–			4		–		1.68
Long-term borrowings		27,914			34,331			394			326		5.65		3.80
Total interest-bearing liabilities		1,182,730			1,187,108			2,879			2,117		0.97		0.71
Noninterest bearing demand deposits		441,953			411,379
Other liabilities		11,379			10,148
Shareholders’ equity		218,430			211,864
Total liabilities and shareholders’ equity	$	1,854,492		$	1,820,499
Interest rate spread													3.17	%	3.24	%
Net interest margin													3.48	%	3.46	%
Net interest income (taxable equivalent basis)								15,126			14,662
Less: Taxable equivalent adjustment (a)								114			299
Net interest income							$	15,012		$	14,363
Notes:
(a) – Calculated using 21% and 35% statutory income tax rate in 2018 and 2017, respectively, due to tax rate change.

 

	Net Interest Income Analysis
	For the Years Ended December 31, 2018 and 2017
	(Dollars in thousands)
	Unaudited
							Interest
	Average Balance						Income/Expense						Yield/Rate
		2018			2017			2018			2017		2018		2017
Loans:
Commercial	$	264,241		$	229,239		$	10,579		$	8,829		4.00	%	3.85	%
Real estate		1,063,950			1,031,558			49,275			46,400		4.63		4.50
Consumer		4,676			4,652			305			352		6.52		7.57
Total loans		1,332,867			1,265,449			60,159			55,581		4.51		4.39
Securities:
Federal agencies & GSEs		121,923			97,670			2,708			1,849		2.22		1.89
Mortgage-backed & CMOs		109,048			82,042			2,467			1,725		2.26		2.10
State and municipal		85,061			105,869			2,399			3,781		2.82		3.57
Other		14,950			15,796			718			707		4.80		4.48
Total securities		330,982			301,377			8,292			8,062		2.51		2.68
Deposits in other banks		45,434			65,027			873			734		1.92		1.13
Total interest-earning assets		1,709,283			1,631,853			69,324			64,377		4.06		3.95
Non-earning assets		118,375			126,159
Total assets	$	1,827,658		$	1,758,012
Deposits:
Demand	$	234,857		$	217,833			49			43		0.02		0.02
Money market		393,321			335,085			3,505			1,668		0.89		0.50
Savings		132,182			125,157			40			38		0.03		0.03
Time		374,152			383,444			4,492			4,045		1.20		1.05
Total deposits		1,134,512			1,061,519			8,086			5,794		0.71		0.55
Customer repurchase agreements		18,401			46,335			164			142		0.89		0.31
Other short-term borrowings		1,149			3,158			22			31		1.91		0.98
Long-term borrowings		27,874			36,887			1,402			1,324		5.03		3.59
Total interest-bearing liabilities		1,181,936			1,147,899			9,674			7,291		0.82		0.64
Noninterest bearing demand deposits		421,527			392,663
Other liabilities		10,374			9,643
Shareholders’ equity		213,821			207,807
Total liabilities and shareholders’ equity	$	1,827,658		$	1,758,012
Interest rate spread													3.24	%	3.31	%
Net interest margin													3.49	%	3.50	%
Net interest income (taxable equivalent basis)								59,650			57,086
Less: Taxable equivalent adjustment (a)								556			1,339
Net interest income							$	59,094		$	55,747
Notes:
(a) – Calculated using 21% and 35% statutory income tax rate in 2018 and 2017, respectively, due to tax rate change.