SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT of 1934 FOR THE QUARTERLY PERIOD
ENDED March 31, 2000
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
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Commission file number 0-12820
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AMERICAN NATIONAL BANKSHARES INC.
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(Exact name of registrant as specified in its charter)
VIRGINIA 54-1284688
- --------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
628 Main Street
Danville, Virginia 24541
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(Address of principal executive offices) (Zip Code)
(804) 792-5111
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
----- -----
The number of shares outstanding of the issuer's common stock as of May 11, 2000
was 6,103,772.
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AMERICAN NATIONAL BANKSHARES INC.
INDEX
<CAPTION>
Page No.
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Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999............................................... 3
Consolidated Statements of Income for the three months
ended March 31, 2000 and 1999....................................... 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999....................................... 5
Notes to Consolidated Financial Statements............................ 6-8
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations........................................... 9-13
Part II. Other Information..................................................... 14
SIGNATURES...................................................................... 14
EXHIBITS - Financial Data Schedule.............................................. 15
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2
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<TABLE>
Consolidated Balance Sheets
American National Bankshares Inc. and Subsidiary
(In Thousands)
(Unaudited)
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<CAPTION>
March 31 December 31
2000 1999
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<S> <C> <C>
ASSETS
Cash and due from banks.........................................................$ 14,267 $ 13,885
Interest-bearing deposits in other banks........................................ 1,806 3,406
Investment securities:
Securities available for sale (at market value)............................... 127,073 121,872
Securities held to maturity (market value of $43,142 at
March 31, 2000 and $43,634 at December 31, 1999)............................ 44,035 44,400
---------- ----------
Total investment securities................................................. 171,108 166,272
---------- ----------
Loans, net of unearned income .................................................. 302,424 293,741
Less allowance for loan losses.................................................. (4,286) (4,135)
---------- ----------
Net loans..................................................................... 298,138 289,606
---------- ----------
Bank premises and equipment, at cost, less accumulated
depreciation of $8,421 in 2000 and $8,171 in 1999............................. 7,846 8,052
Accrued interest receivable and other assets.................................... 11,064 10,170
---------- ----------
Total assets..................................................................$ 504,229 $ 491,391
========== ==========
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- non-interest bearing.......................................$ 51,512 $ 47,495
Demand deposits -- interest bearing........................................... 57,847 55,623
Money market deposits......................................................... 22,310 22,326
Savings deposits.............................................................. 65,338 64,745
Time deposits................................................................. 200,054 195,369
---------- ----------
Total deposits.............................................................. 397,061 385,558
---------- ----------
Repurchase agreements........................................................... 24,529 24,954
FHLB borrowings................................................................. 21,090 21,000
Accrued interest payable and other liabilities.................................. 3,934 3,160
---------- ----------
Total liabilities............................................................. 446,614 434,672
---------- ----------
Shareholders' equity:
Preferred stock, $5 par, 200,000 shares authorized,
none outstanding............................................................ - -
Common stock, $1 par, 10,000,000 shares authorized,
6,103,772 shares outstanding at March 31, 2000
and 6,103,701 shares outstanding at December 31, 1999....................... 6,104 6,104
Capital in excess of par value................................................ 9,896 9,895
Retained earnings............................................................. 43,758 42,467
Accumulated other comprehensive income -
net unrealized (losses) gains on securities available for sale.............. (2,143) (1,747)
---------- ----------
Total shareholders' equity.................................................. 57,615 56,719
---------- ----------
Total liabilities and shareholders' equity..................................$ 504,229 $ 491,391
========== ==========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>
3
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<TABLE>
Consolidated Statements of Income
American National Bankshares Inc. and Subsidiary
(In Thousands)
(Unaudited)
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<CAPTION>
Three Months Ended
March 31
------------------------------
2000 1999
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<S> <C> <C>
Interest Income:
Interest and fees on loans....................................................$ 6,436 $ 5,827
Interest on federal funds sold and other...................................... 52 6
Income on investment securities:
U S Government.............................................................. 109 344
Federal agencies............................................................ 1,649 1,227
State and municipal......................................................... 488 433
Other investments........................................................... 333 325
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Total interest income..................................................... 9,067 8,162
---------- -----------
Interest Expense:
Interest on deposits:
Demand........................................................................ 264 272
Money market.................................................................. 189 123
Savings....................................................................... 427 442
Time.......................................................................... 2,519 2,232
Interest on fed funds and repos................................................. 274 269
Interest on other borrowings.................................................... 277 234
---------- ----------
Total interest expense........................................................ 3,950 3,572
----------- ----------
Net Interest Income............................................................. 5,117 4,590
Provision for Loan Losses....................................................... 215 180
----------- ----------
Net Interest Income After Provision
For Loan Losses............................................................... 4,902 4,410
----------- ----------
Non-Interest Income:
Trust and investment services................................................. 692 624
Service charges on deposit accounts........................................... 250 217
Other fees and commissions.................................................... 128 114
Mortgage banking income....................................................... 62 116
Other income.................................................................. 43 26
---------- ----------
Total non-interest income................................................... 1,175 1,097
---------- ----------
Non-Interest Expense:
Salaries...................................................................... 1,462 1,325
Pension and other employee benefits........................................... 281 258
Occupancy and equipment....................................................... 507 454
Postage and printing.......................................................... 123 111
Core deposit intangible amortization ......................................... 112 112
Other......................................................................... 638 520
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Total non-interest expense.................................................. 3,123 2,780
---------- ----------
Income Before Income Tax Provision.............................................. 2,954 2,727
Income Tax Provision............................................................ 839 803
---------- ----------
Net Income......................................................................$ 2,115 $ 1,924
========== ==========
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Net Income Per Common Share:
Basic...........................................................................$ .35 $ .32
Diluted.........................................................................$ .35 $ .32
- --------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding:
Basic...........................................................................6,103,741 3,051,733
Diluted.........................................................................6,114,595 3,052,870
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The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
4
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<TABLE>
Consolidated Statements of Cash Flows
American National Bankshares Inc. and Subsidiary
(In Thousands)
(Unaudited)
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<CAPTION>
Three Months Ended
------------------------------
2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income....................................................................$ 2,115 $ 1,924
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses................................................. 215 180
Depreciation.............................................................. 25 240
Core deposit intangible amortization...................................... 112 112
Amortization (accretion) of premiums and discounts
on investment securities................................................ (10) 20
Gain on sale of securities................................................ - (8)
Gain on sale of loans..................................................... (62) (116)
Deferred income taxes benefit............................................. (84) (133)
Increase in interest receivable........................................... (429) (114)
(Increase) decrease in other assets....................................... (289) 41
Increase (decrease) in interest payable................................... 54 (28)
Increase in other liabilities............................................. 720 550
---------- ----------
Net cash provided by operating activities............................... 2,592 2,668
---------- ----------
Cash Flows from Investing Activities:
Proceeds from maturities, calls, and sales of securities ..................... 1,468 23,836
Purchases of securities available for sale.................................... (6,894) (15,986)
Net increase in loans......................................................... (8,685) (8,755)
Purchases of property and equipment........................................... (44) (293)
---------- ----------
Net cash used in investing activities....................................... (14,155) (1,198)
---------- ----------
Cash Flows from Financing Activities:
Net increase (decrease) in demand, money market,
and savings deposits........................................................ 6,818 (1,672)
Net increase in time deposits................................................. 4,685 6,575
Net decrease in federal funds purchased
and repurchase agreements................................................... (425) (11,573)
Net increase in Federal Home Loan Bank borrowings............................. 90 3,540
Cash dividends paid........................................................... (824) (732)
Proceeds from exercise of stock options....................................... 1 -
---------- ----------
Net cash (used in) provided by financing activities......................... 10,345 (3,862)
---------- ----------
Net (Decrease) Increase in Cash and Cash Equivalents............................ (1,218) (2,392)
Cash and Cash Equivalents at Beginning of Period................................ 17,291 14,778
---------- ----------
Cash and Cash Equivalents at End of Period......................................$ 16,073 $ 12,386
========== ==========
Supplemental Schedule of Cash and Cash Equivalents:
Cash:
Cash and due from banks.....................................................$ 14,267 $ 12,367
Interest-bearing deposits in other banks.................................... 1,806 19
---------- ----------
$ 16,073 $ 12,386
========== ==========
Supplemental Disclosure of Cash Flow Information:
Interest paid.................................................................$ 3,897 $ 3,600
Income taxes paid.............................................................$ 5 $ 250
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
5
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AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly American National Bankshares'
financial position as of March 31, 2000, the results of its operations and its
cash flows for the three months then ended. Operating results for the
three-month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000.
The consolidated financial statements include the amounts and results of
operations of American National Bankshares Inc. ("the Corporation") and its
wholly owned subsidiary, American National Bank and Trust Company ("the Bank")
and the Bank's two subsidiaries, ANB Mortgage Corp. and ANB Services Corp. A
summary of the Corporation's significant accounting policies is set forth in
Note 1 to the Consolidated Financial Statements in the Corporation's 1999 Annual
Report on Form 10-K.
On June 15, 1999, the Corporation's Board of Directors approved a 2-for-1
stock split effected in the form of a 100% stock dividend to shareholders of
record July 1, 1999 with a distribution date of July 15, 1999. All per share
data and weighted average shares have been restated as appropriate to reflect
the split.
This report contains forward-looking statements with respect to the
financial condition, results of operations and business of the Corporation and
Bank. These forward-looking statements involve risks and uncertainties and are
based on the beliefs and assumptions of management of the Corporation and Bank
and on information available at the time these statements and disclosures were
prepared. Factors that may cause actual results to differ materially from those
expected include the following:
o General economic conditions may deteriorate and negatively impact credit
quality and deposit retention.
o Changes in interest rates could reduce net interest income.
o Competitive pressures among financial institutions may increase.
o Legislative or regulatory changes, including changes in accounting
standards, may adversely affect the businesses that the Corporation and
Bank are engaged in.
o New products developed or new methods of delivering products could result
in a reduction in business and income for the Corporation and Bank.
o Adverse changes may occur in the securities market.
2. Investment Securities
---------------------
The Corporation classifies investment securities in one of three
categories: held to maturity, available for sale and trading.
Debt securities acquired with both the intent and ability to be held to
maturity are classified as held to maturity and reported at amortized cost.
Securities which may be used to meet liquidity needs arising from
unanticipated deposit and loan fluctuations, changes in regulatory capital and
investment requirements, or unforeseen changes in market conditions, including
interest rates, market values or inflation rates, are classified as available
for sale. Securities available for sale are reported at estimated fair value,
with unrealized gains and losses reported as a separate component of
shareholders' equity, net of tax. Gains or losses realized from the sale of
securities available for sale are determined by specific identification and are
included in non-interest income.
The Corporation does not permit the purchase or sale of trading account
securities. Premiums and discounts on investment securities are amortized using
the interest method.
6
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3. Commitments and Contingencies
-----------------------------
The Bank has credit availability of 15% of assets, approximately
$75,000,000 with the Federal Home Loan Bank of Atlanta at March 31, 2000. As of
March 31, 2000 and December 31, 1999, there were $21,090,000 and $21,000,00,
respectively, outstanding under this availability.
Commitments to extend credit, which amount to $96,359,000 at March 31, 2000
and $86,931,000 at December 31, 1999, represent legally binding agreements to
lend to a customer with fixed expiration dates or other termination clauses.
Since many of the commitments are expected to expire without being funded, the
total commitment amounts do not necessarily represent future liquidity
requirements.
There were no commitments at March 31, 2000 and December 31, 1999 to
purchase securities when issued.
Standby letters of credit are conditional commitments issued by the Bank
guaranteeing the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. At
March 31, 2000 and December 31, 1999 the Bank had $1,363,000 and $1,193,000,
respectively, in outstanding standby letters of credit.
4. New Accounting Pronouncements
-----------------------------
The Corporation adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income", during the first quarter of
1998. This statement establishes standards for reporting a measure of all
changes in equity of an enterprise that result from transactions and economic
events of the period other than transactions with owners ("economic income").
SFAS No. 130 requires an enterprise to report comprehensive income in the notes
to the financial statements on an interim basis. The following is a detail of
comprehensive income for the quarter ended March 31, 2000 and 1999:
2000 1999
---- ----
Net Income $2,115,000 $1,924,000
Unrealized holding gains (losses) arising during
period (net of tax expense) (396,000) (635,000)
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Total comprehensive income $1,719,000 $1,289,000
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The FASB also issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", in June 1997, which establishes new
standards for reporting information about operating segments in annual and
interim financial statements. This statement also requires descriptive
information about the way operating segments are determined, the products and
services provided by the segments and the nature of differences between
reportable segment measurements and those used for the consolidated entity. The
disclosure requirements of SFAS No.131 have been adopted and are included in
Note 5 to the Consolidated Condensed Financial Statements.
In February 1998, SFAS No. 132, "Employers' Disclosures about Pension and
Other Postretirement Benefits", was issued, amending FASB Statements No. 87, 88,
and 106. This Statement does not change the measurement or recognition of
pension and postretirement benefit plans but standardizes disclosure
requirements. The new disclosure requirements of SFAS No. 132 have been adopted
and are included in the Consolidated Financial Statements in the Corporation's
1999 Annual Report on Form 10-K.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards requiring balance sheet recognition of all derivative instruments at
fair value. The statement specifies that changes in the fair value of derivative
instruments be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows derivative
gains and losses to offset related results on hedged items in the income
statement. Companies must formally document, designate and assess the
effectiveness of transactions utilizing hedge accounting. The statement is
effective for fiscal years beginning after June 15, 2000 according to SFAS No.
137. Adoption is not expected to have a material impact on the Corporation.
7
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5. Segment and Related Information
-------------------------------
The Corporation adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", in 1998. Reportable segments include
community banking and trust and investment services. Community banking involves
making loans to and generating deposits from individuals and businesses in the
markets where the Bank has offices. All assets and liabilities of the Bank are
allocated to community banking. Investment income from fixed income investments
is a major source of income in addition to loan interest income. Service charges
from deposit accounts and non-deposit fees such as automatic teller machine fees
and insurance commissions generate additional income for community banking.
Trust and investment services includes estate and trust planning and
administration and investment management for various entities. The trust and
investment services division of the Bank manages trusts, estates and purchases
equity, fixed income and mutual fund investments for customer accounts. The
trust and investment services division receives fees for investment and
administrative services. Fees are also received by this division for individual
retirement accounts managed for the community banking segment.
The accounting policies of the segments and the basis of segmentation are
the same as those described in the summary of significant accounting policies
set forth in Note 1 to the Consolidated Financial Statements in the
Corporation's 1999 Annual Report on Form 10-K. All intersegment sales prices are
market based.
Segment information for the three months ended March 31, 2000 and 1999 is
shown in the following table (in thousands). The "Other" column includes
corporate related items, results of insignificant operations and, as it relates
to segment profit (loss), income and expense not allocated to reportable
segments.
<TABLE>
Three Months Ended March 31, 2000
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<CAPTION>
Trust and
Community Investment Intersegment
Banking Services Other Eliminations Total
--------- ---------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Interest income $ 9,067 $ - $ 6 $ (6) $ 9,067
Interest expense 3,950 - 6 (6) 3,950
Non-interest income - external customers 409 693 73 - 1,175
Non-interest income - internal customers - 13 - (13) -
Operating income before income taxes 2,539 489 2,065 (2,139) 2,954
Depreciation and amortization 349 9 4 - 362
Total assets 503,951 - 58,141 (57,863) 504,229
Capital expenditures 41 - 3 - 44
</TABLE>
<TABLE>
Three Months Ended March 31, 1999
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<CAPTION>
Trust and
Community Investment Intersegment
Banking Services Other Eliminations Total
--------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
Interest income $ 8,162 $ - $ 13 $ (13) $ 8,162
Interest expense 3,572 - 13 (13) 3,572
Non-interest income - external customers 358 624 115 - 1,097
Non-interest income - internal customers - 13 - (13) -
Operating income before income taxes 2,290 436 1,930 (1,929) 2,727
Depreciation and amortization 337 11 4 - 352
Total assets 458,616 - 56,804 (57,089) 458,331
Capital expenditures 290 - 3 - 293
</TABLE>
8
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AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EARNINGS and CAPITAL
The Corporation's net income for the first quarter of 2000 was $2,115,000,
an increase of 9.9% over the $1,924,0000 earned during the first quarter of
1999. On a basic and diluted per share basis, net income totaled $.35 for the
quarter, up 9.4% from $.32 in 1999. On an annualized basis, return on average
total assets was 1.71% for the first quarter of 2000 compared to 1.68% for the
first quarter of 1999. Return on average common shareholders' equity increased
6.3% to 14.77% in the first quarter of 2000 from 13.90% for the first quarter of
1999.
The Corporation's growth in earnings resulted from two principal factors.
First, net interest income after provision improved $492,000, or 11.2% from
growth in interest-earning assets and a higher interest rate spread between
interest earning assets and liabilities in first quarter 2000 compared to first
quarter 1999. Second, the 7.1% growth in noninterest income in the 2000 quarter
over 1999 demonstrates the continued success of the Corporation's expanded trust
and investment services.
TRENDS and FUTURE EVENTS
During the first quarter of 2000, net loans increased $8,532,000 or 2.9%
and were funded by increased deposits of $11,503,000 or 3.0%. Investment
securities increased $4,836,000 or 2.9% during the first quarter of 2000.
During the first quarter of 2000, the Corporation declared a quarterly cash
dividend of $.135 per share. This dividend was paid on March 24, 2000 to
shareholders of record on March 10, 2000.
The Corporation's stock began trading on the NASDAQ National Market on
April 23, 1999 after having been traded on the OTC Bulletin Board for many
years. The change to NASDAQ was made to improve the marketability of the stock.
The Federal Reserve Board ("FRB") increased short term interest rates in
the later half of 1999 by raising federal funds by .75% and the discount rate by
.50%, and the major banks followed by increasing the prime rate by .75%. The
prime rate, federal funds and the discount rate have increased .50% since
December 31, 1999. The Federal Reserve actions in raising interest rates in 1999
and 2000 were designed to moderate national economic growth which could be
inflationary if left unchecked.
YEAR 2000 ISSUE
The Corporation did not encounter computer or system problems from the
transition into the new millennium (Year 2000). The "Year 2000" problem was
widely publicized as the possible failure or malfunction of systems or computer
chips that improperly recognized date sensitive information when the year
changed to 2000. The Corporation is not aware of Year 2000 problems encountered
by major customers, suppliers or hardware and software vendors. No liquidity
problems or material withdrawals by depositors of the Bank were experienced
during the transition into the Year 2000.
Total Year 2000 project costs were approximately $125,000 as had previously
been estimated and disclosed. The expenditures did not have a material impact on
the Corporation's results of operations, liquidity or capital resources.
Although highly unlikely, certain Year 2000 problems could surface later
during 2000. The Corporation continues to monitor systems for possible future
disruptions and has a business resumption plan to deal with such problems.
NET INTEREST INCOME
Net interest income on a fully taxable equivalent ("FTE") basis was
$5,324,000 for the first quarter of 2000 compared to $4,781,000 for the first
quarter of 1999, an increase of 11.4%. Net interest income on a FTE basis
increased due to growth of $38,727,000 in average interest-earning assets while
average interest-bearing liabilities grew only $28,195,000 and due to a growing
interest rate spread to 3.79%. Growth in non interest-bearing deposits and
retained income resulted in greater growth in average interest-earning assets
over interest-bearing liabilities.
The interest rate spread increased to 3.79% from 3.73% and the net yield on
earning assets increased to 4.51% from 4.41% in the first quarter of 2000
compared to the first quarter of 1999, respectively. The increased spread
9
<PAGE>
and yield resulted from increased focus on pricing of loans and deposits and
from higher short-term interest rates as loan and investment yields rose more
than deposit and interest-bearing liability yields.
The following table demonstrates fluctuations in net interest income and
the related yields for the first quarter of 2000 and 1999.
10
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<TABLE>
The following is an analysis of net interest income, on a taxable equivalent basis. Nonaccrual loans are included in
average balances. Interest income on nonaccrual loans if recognized is recorded on a cash basis. (In thousands,
except rates):
<CAPTION>
Interest
Average Balance Income/Expense Yield/Rate
--------------------- -------------------- ---------------------
2000 1999 2000 1999 2000 1999
-------- -------- ------- ------- -------- --------
For three months ended March 31
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $ 88,452 $ 82,534 $ 1,946 $ 1,691 8.80% 8.31%
Mortgage 157,592 137,910 3,245 2,866 8.24 8.31
Consumer 51,969 53,289 1,258 1,277 9.68 9.72
-------- -------- ------- ------- -------- -------
Total loans 298,013 273,733 6,449 5,834 8.66 8.59
-------- -------- ------- ------- -------- -------
Investment securities:
U. S. Government 7,000 22,997 109 344 6.23 5.98
Federal agencies 102,211 78,583 1,649 1,227 6.45 6.25
State and municipal 39,919 36,393 682 617 6.83 6.78
Other investments 21,045 20,988 333 325 6.33 6.19
-------- -------- ------- ------- -------- -------
Total investment securities 170,175 158,961 2,773 2,513 6.52 6.32
-------- -------- ------- ------- -------- -------
Federal funds sold and other 3,728 495 52 6 5.58 4.85
-------- -------- ------- ------- -------- -------
Total interest-earning assets 471,916 433,189 9,274 8,353 7.86 7.75
------- ------- -------- -------
Other non-earning assets 23,609 25,608
-------- --------
Total assets $495,525 $458,797
======== ========
Interest-bearing deposits:
Demand $ 55,953 $ 53,410 264 272 1.89 2.07
Money market 23,135 18,647 189 123 3.27 2.68
Savings 64,990 68,278 427 442 2.63 2.63
Time 198,743 174,620 2,519 2,232 5.07 5.18
-------- -------- ------- ------- -------- -------
Total interest-bearing deposits 342,821 314,955 3,399 3,069 3.97 3.95
Repurchase agreements 24,140 26,493 274 269 4.54 4.12
Other borrowings 21,284 18,602 277 234 5.21 5.03
-------- -------- ------- ------- -------- -------
Total interest-bearing
liabilities 388,245 360,050 3,950 3,572 4.07 4.02
------- ------- -------- -------
Demand deposits 46,757 40,761
Other liabilities 3,225 2,596
Shareholders' equity 57,298 55,390
-------- --------
Total liabilities and
shareholders' equity $495,525 $458,797
======== ========
Interest rate spread 3.79% 3.73%
======== =======
Net interest income 5,324 4,781
======= =======
Taxable equivalent adjustment 207 191
======= =======
Net yield on earning assets 4.51% 4.41%
======== =======
</TABLE>
11
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ASSET QUALITY
Nonperforming assets include loans on which interest is no longer accrued,
loans classified as troubled debt restructurings and foreclosed properties.
Nonperforming assets declined to $272,000 at March 31, 2000 from $322,000 at
December 31, 1999.
Foreclosed properties were $30,000 at March 31,2000 and December 31, 1999.
Loans in a nonaccrual status at March 31, 2000 were $242,000 compared with
$292,000 at December 31, 1999. Loans on accrual status and past due 90 or more
at March 31, 2000 were $147,000 compared with $287,000 at December 31, 1999.
Total nonperforming loans and loans past due 90 days or more as a
percentage of net loans were .1% at March 31, 2000 and .2% at December 31, 1999.
Total nonperforming loans and loans past due 90 days or more, on an accrual
status, are considered low by industry standards. Net charge-offs for the
quarter, annualized, as a percentage of average loans decreased to .09% in 2000
from .13% in the 1999 quarter. These charge-off ratios are low by industry
standards.
During the first quarter of 2000 the gross amount of interest income that
would have been recorded on nonaccrual loans and restructured loans at March 31,
2000, if all such loans had been accruing interest at the original contractual
rate, was $6,000. No interest payments were recorded during the reporting period
as interest income for all such nonperforming loans.
PROVISION and RESERVE FOR LOAN LOSSES
The provision for loan losses was $215,000 for the first quarter of 2000
and $180,000 for the first quarter of 1999. The reserve for loan losses totaled
$4,286,000 at March 31, 2000 an increase of 3.7% over the $4,135,000 recorded at
December 31, 1999. The ratio of reserves to loans, less unearned discount, was
1.42% at March 31, 2000 and 1.41% at December 31, 1999. In Management's opinion,
the current reserve for loan losses is adequate.
NON-INTEREST INCOME
Non-interest income for the first quarter of 2000 was $1,175,000, an
increase of 7.1% from the $1,097,000 reported in the first quarter of 1999. The
major reasons for the 2000 first quarter growth in non-interest income were a
10.9% increase in trust and investment services to $692,000 and an increase in
service charges on deposit accounts and additional other income. Mortgage
banking income declined 46.6% to $62,000 due to decreased origination and sale
of fixed rate residential mortgage loans.
NON-INTEREST EXPENSE
Non-interest expense for the first quarter of 2000 was $3,123,000, a 12.3%
increase from the $2,780,000 reported for the same period last year. The 2000
increase was primarily due a new branch office in Martinsville, Virginia which
opened in September 1999 and merit salary adjustments which were effective
January 1, 2000.
INCOME TAX PROVISION
The income tax provision for the first quarter of 2000 was $839,000, an
increase of $36,000 from the $803,000 reported a year earlier. The effective tax
rate for the first quarter of 2000 was 28.4% compared to 29.4% for the first
quarter of 1999. The decline in the effective tax rate resulted from increased
tax-exempt interest on state and municipal securities and other adjustments.
CAPITAL MANAGEMENT
Federal regulatory risk-based capital ratio guidelines require percentages
to be applied to various assets including off-balance-sheet assets in relation
to their perceived risk. Tier I capital includes shareholders' equity and Tier
II capital includes certain components of nonpermanent preferred stock and
subordinated debt. The Corporation has no nonpermanent preferred stock or
subordinated debt. Banks and bank holding companies must have a Tier I capital
ratio of at least 4% and a total ratio, including Tier I and Tier II capital, of
at least 8%. As of March 31, 2000 the Corporation had a ratio of 16.31% for Tier
I and a ratio of 17.45% for total capital. At December 31, 1999 these ratios
were 16.57% and 17.79%, respectively.
A cash dividend of $.135 per share was paid on 6,103,772 shares of common
stock outstanding on March 24, 2000 to shareholders of record March 10, 2000.
This dividend totaled $824,000.
12
<PAGE>
MARKET RISK MANAGEMENT
The effective management of market risk is essential to achieving the
Corporation's objectives. As a financial institution, interest rate risk and its
impact on net interest income is the primary market risk exposure. The
Asset/Liability Investment Committee ("ALCO") is primarily responsible for
establishing asset and liability strategies and for monitoring and controlling
liquidity and interest rate risk. ALCO uses computer simulation analysis to
measure the sensitivity of earnings and market value of equity to changes in
interest rates.
The projected changes in net interest income and market value of portfolio
equity ("MVE") to changes in interest rates are calculated and monitored by ALCO
as indicators of interest rate risk. The projected changes in net interest
income and MVE to changes in interest rates at March 31, 2000 were not
materially different from December 31, 1999.
The Bank's net liquid assets to net liabilities ratio was 25.7% at March
31, 2000 and 25.8% at December 31, 1999. Both of these ratios are considered to
reflect adequate liquidity for the respective periods.
Management constantly monitors and plans the Corporation's liquidity
position for future periods. Liquidity is provided from cash and due from banks,
federal funds sold, interest-bearing deposits in other banks, repayments from
loans, seasonal increases in deposits, lines of credit from two correspondent
banks and two federal agency banks and a planned structured continuous maturity
of investments. Management believes that these factors provide sufficient and
timely liquidity for the foreseeable future.
13
<PAGE>
PART II
OTHER INFORMATION
Item:
1. Legal Proceedings
The nature of the business of the Corporation's banking subsidiary
ordinarily results in a certain amount of litigation. The subsidiary of the
Corporation is involved in various legal proceedings, all of which are
considered incidental to the normal conduct of business. Management believes
that the liabilities arising from these proceedings will not have a material
adverse effect on the consolidated financial position or consolidated results of
operations of the Corporation.
2. Changes in securities
None
3. Defaults upon senior securities
None
4. Results of votes of security holders
None
5. Other information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits - Financial Data Schedule EX-27
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN NATIONAL BANKSHARES INC.
/s/ Charles H. Majors
---------------------------------
Charles H. Majors
Date - May 11, 2000 President and Chief Executive Officer
/s/ T. Allen Liles
---------------------------------
T. Allen Liles
Senior Vice-President and
Date - May 11, 2000 Secretary-Treasurer (Chief Financial Officer)
14
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<CIK> 0000741516
<NAME> American National Bankshares Inc.
<MULTIPLIER> 1000
<S> <C> <C>
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<FISCAL-YEAR-END> DEC-31-2000 DEC-31-2000
<PERIOD-START> JAN-01-2000 JAN-01-2000
<PERIOD-END> MAR-31-2000 MAR-31-2000
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