Bay Street News

American National Bankshares Inc. Reports Fourth Quarter 2018 Earnings

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:

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 
  traynhamw@amnb.com

 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.