-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HiXLbosqrT2PRq1lFlR5d8VHpWzgPLtwL7o8HX9mk4aLnY5t2u8StWIdf+xhM54z Dkpk4dB3kUzLxkEh5mFo2g== 0000741516-97-000011.txt : 19970815 0000741516-97-000011.hdr.sgml : 19970815 ACCESSION NUMBER: 0000741516-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN NATIONAL BANKSHARES INC CENTRAL INDEX KEY: 0000741516 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 541284688 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12820 FILM NUMBER: 97661103 BUSINESS ADDRESS: STREET 1: 628 MAIN ST CITY: DANVILLE STATE: VA ZIP: 24541 BUSINESS PHONE: 8047925111 MAIL ADDRESS: STREET 1: 628 MAIN STREET CITY: DANVILLE STATE: VA ZIP: 24541 10-Q 1 This is a conforming paper copy pursuant to Rule # 901(d) of Regulation S-T. 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 JUNE 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number 0-12820 AMERICAN NATIONAL BANKSHARES INC. (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 (Address of principal executive offices) (Zip Code) (804) 792-5111 (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 August 5, 1997 was 3,051,733. AMERICAN NATIONAL BANKSHARES INC. INDEX Part I Financial Information Page No. Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 3 Condensed Consolidated Statements of Income for the three months ended June 30, 1997 and 1996 4 Condensed Consolidated Statements of Income for the six months ended June 30, 1997 and 1996 5 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 6 Notes to Condensed Consolidated Financial Statements 7-8 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
Consolidated Balance Sheets American National Bankshares Inc. and Subsidiary (In Thousands) (Unaudited) June 30 December 31 ASSETS 1997 1996 ------------------------- Cash and due from banks $13,816 $14,623 Interest-bearing deposits in other banks 145 199 Federal funds sold - - Investment securities: Securities available for sale (at market value) 64,491 87,371 Securities held to maturity (market value of $75,114 at June 30, 1997 and $88,621at December 31, 1996 74,976 88,386 ------------------------- Total investment securities 139,467 175,757 ------------------------- Loans 253,707 237,039 Less-- Unearned income (379) (460) Reserve for loan losses (3,416) (3,070) ------------------------- Net loans 249,912 233,509 ------------------------- Bank premises and equipment, at cost, less accumulated depreciation of $6,427 in 1997 and $6,148 in 1996 6,476 6,385 Accrued interest receivable and other assets 9,442 9,685 ------------------------- Total assets. $419,258 $440,158 ========================= LIABILITIES and STOCKHOLDERS' EQUITY Liabilities: Demand deposits -- non-interest bearing $39,462 $41,891 Demand deposits -- interest bearing 46,707 46,777 Money market deposits 18,649 21,810 Savings deposits 70,700 69,998 Time deposits 175,444 181,507 ------------------------- Total deposits 350,962 361,983 ------------------------- Federal funds purchased 2,975 8,425 Repurchase agreements 15,093 15,059 Accrued interest payable and other liabilities 2,515 2,473 ------------------------- Total liabilities 371,545 387,940 ------------------------- Stockholders' equity: Preferred stock, $5 par, 200,000 shares authorized, none outstanding - - Common stock, $1 par,10,000,000 shares authorized, 3,051,733 shares outstanding at June 30, 1997 and 3,279,798 shares outstanding at December 31, 1996 3,052 3,280 Capital in excess of par value 9,892 10,631 Retained earnings 34,570 37,993 Net unrealized gain 199 314 ------------------------- Total stockholders' equity 47,713 52,218 ------------------------- Total liabilities and stockholders' equity $419,258 $440,158 ========================= The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
Consolidated Statements of Income American National Bankshares Inc. and Subsidiary (In Thousands) (Unaudited) Three Months Ended June 30 ------------------------- 1997 1996 ------------------------- Interest Income: Interest and fees on loans $5,609 $4,917 Interest on federal funds sold and other 37 148 Income on investment securities: U. S. Government 1,010 1,599 Federal agencies 843 194 State and municipal 282 220 Other investments 102 104 ------------------------- Total interest income 7,883 7,182 ------------------------- Interest Expense: Interest on deposits: Demand 342 341 Money market 140 127 Savings 534 492 Time 2,401 2,380 Interest on short-term borrowed funds 202 140 ------------------------- Total interest expense 3,619 3,480 ------------------------- Net Interest Income 4,264 3,702 Provision for Loan Losses 257 122 ------------------------- Net Interest Income After Provision For Loan Losses 4,007 3,580 ------------------------- Non-Interest Income: Trust department income 470 567 Service charges on deposit accounts 197 144 Non-deposit fees and insurance commissions 25 29 Other income 91 21 ------------------------- Total non-interest income 783 761 ------------------------- Non-Interest Expense: Salaries 1,211 993 Pension and other employee benefits 258 217 Occupancy and equipment expense 320 268 FDIC insurance expense 20 40 Postage and printing 114 96 Core deposit intangible 112 73 Merger related expense - 17 Other expenses 507 382 ------------------------- Total non-interest expense 2,542 2,086 ------------------------- Income Before Income Tax Provision 2,248 2,255 Income Tax Provision 704 697 ------------------------- Net Income $1,544 $1,558 ========================= Net Income Per Common Share, based on weighted average shares outstanding of 3,199,599 at June 30, 1997 and 3,279,798 at June 30, 1996 $0.48 $0.48 Cash dividends paid per share $0.21 $0.18 The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Income American National Bankshares Inc. and Subsidiary (In Thousands) (Unaudited) Six Months Ended June 30 ---------------------- 1997 1996 ---------------------- Interest Income: Interest and fees on loans $10,961 $9,874 Interest on federal funds sold and other 61 216 Income on investment securities: U. S. Government 2,266 2,964 Federal agencies 1,693 632 State and municipal 574 447 Other investments 204 234 ---------------------- Total interest income 15,759 14,367 ---------------------- Interest Expense: Interest on deposits: Demand 681 612 Money market 286 325 Savings 1,062 986 Time 4,863 4,766 Interest on short-term borrowed funds 404 267 ---------------------- Total interest expense 7,296 6,956 ---------------------- Net Interest Income 8,463 7,411 Provision for Loan Losses 500 253 ---------------------- Net Interest Income After Provision For Loan Losses 7,963 7,158 ---------------------- Non-Interest Income: Trust department income 897 1,012 Service charges on deposit accounts 382 254 Non-deposit fees and insurance commissions 52 55 Other income 190 50 ---------------------- Total non-interest income 1,521 1,371 ---------------------- Non-Interest Expense: Salaries 2,389 1,978 Pension and other employee benefits 529 421 Occupancy and equipment expense 667 571 FDIC insurance expense 39 79 Postage and printing 226 211 Core deposit intangible 225 146 Merger related expense - 1,185 Other expenses 982 808 ---------------------- Total non-interest expense 5,057 5,399 ---------------------- Income Before Income Tax Provision 4,427 3,130 Income Tax Provision 1,346 1,708 ---------------------- Net Income $3,081 $1,422 ====================== Net Income Per Common Share, based on weighted average shares outstanding of 3,239,477 at June 30, 1997 and 3,254,139 at June 30, 1996 $0.95 $0.44 Cash dividends paid per share $0.39 $0.33 The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Cash Flows American National Bankshares Inc. and Subsidiary (In Thousands) (Unaudited) Six Months Ended ------------------------ June 30 1997 1996 ------------------------ Cash Flows from Operating Activities: Net income $3,081 $1,422 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 500 253 Depreciation 326 236 Amortization of intangibles 225 146 Accretion of (discounts) and amortization of premiums on investment securities (27) 38 (Gain) loss on sale of securities (31) 338 (Benefit) provision for deferred income taxes (157) 445 Reconciliation of fiscal year of merged company to calendar year - (379) Decrease (increase) in interest receivable 183 (685) Decrease (increase) in other assets 50 (126) (Decrease) increase in interest payable (141) 497 Increase (decrease) in other liabilities 183 (237) ------------------------ Net cash provided by operating activities 4,192 1,948 ------------------------ Cash Flows from Investing Activities: Proceeds from maturities, calls, and sales of securities 36,174 41,310 Purchases of securities available for sale - (23,314) Purchases of securities held to maturity - (17,228) Net increase in loans (16,903) (6,143) Purchases of property and equipment (416) (221) ------------------------ Net cash provided by investing activities 18,855 (5,596) ------------------------ Cash Flows from Financing Activities: Net decrease in demand, money market, and savings deposits (4,958) (1,004) Net (decrease) increase in certificates of deposit (6,063) 3,579 Net (decrease) increase in federal funds purchased and repurchase agreements (5,416) 6,740 Cash dividends paid (1,231) (1,082) Cash paid in lieu of fractional shares - (3) Repurchase of stock (6,240) - Proceeds from exercise of stock options - 460 ------------------------ Net cash (used in) provided by financing activities (23,908) 8,690 ------------------------ Net Increase in Cash and Cash Equivalents (861) 5,042 Cash and Cash Equivalents at Beginning of Period 14,822 12,789 ------------------------ Cash and Cash Equivalents at End of Period $13,961 $17,831 ======================== Supplemental Schedule of Cash and Cash Equivalents: Cash: Cash and due from banks $13,816 $9,570 Interest-bearing deposits in other banks 145 3,261 Federal funds sold - 5,000 ------------------------ $13,961 $17,831 ======================== Supplemental Disclosure of Cash Flow Information: Interest paid $7,437 $6,458 Income taxes paid $1,358 $1,275
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 June 30, 1997, the results of its operations for the three and six months ended June 30, 1997 and June 30, 1996 and its cash flows for the six months ended June 30, 1997 and June 30, 1996. Operating results for the three and six month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. A summary of the Corporation's significant accounting policies is set forth in Note 1 to the Consolidated Financial Statements in the Corporation's Annual Report to Shareholders for 1996. 2. Investment Securities The Bank 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. Gains or losses realized from the sale of any securities held to maturity are determined by specific identification and are included in non-interest income. Securities which may be used to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital and investment requirements, or unforeseen changes in market conditions, including interest rates, market values or inflation rates, are classified as available for sale. Securities available for sale are reported at estimated fair value, with unrealized gains and losses reported as a separate component of stockholders' 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. Trading account securities, of which none were held on June 30, 1997 and December 31, 1996, are reported at fair value. Market adjustments, fees, gains or losses and income earned on trading account securities are included in non-interest income. Gains or losses realized from the sale of trading securities are determined by specific identification and are included in non-interest income. Management determines the appropriate classification of securities at the time of purchase. Securities classified as held for investment are those securities that management intends to hold to maturity, subject to continued credit-worthiness of the issuer, and that the Bank has the ability to hold on a long-term basis. Accordingly, these securities are stated at cost, adjusted for amortization of premium and accretion of discount on the level yield method. Securities designated as available for sale have been adjusted to their respective market values and a corresponding adjustment made to shareholders' investment at June 30, 1997 and December 31, 1996. 3. Commitments and Contingencies The Bank has an established credit availability in the amount of $29,000,000 with the Federal Home Loan Bank of Atlanta. As of June 30, 1997 and December 31, 1996, there were no borrowings outstanding under this availability. Commitments to extend credit, which amount to $53,691,000 at June 30, 1997 and $65,030,000 at December 31, 1996, 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. 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 June 30, 1997 and December 31, 1996 the Bank had $1,118,000 and $705,000 in outstanding standby letters of credit. 4. Merger and Acquisitions On March 14, 1996, the Corporation completed the acquisition of Mutual Savings Bank, F.S.B. (Mutual) upon the approval of the shareholders of each company. The Corporation exchanged 879,805 common shares, at an exchange ratio of .705 of a share of the Corporation's common stock, for Mutual's 1,248,100 common shares. The transaction was accounted for as a pooling of interests. The financial position and results of operations of the Corporation and Mutual were combined and the fiscal year of Mutual was conformed to the Corporation's fiscal year. In October 1996, the Corporation acquired the branch office of FirstSouth Bank located in Yanceyville, North Carolina. In addition to the branch facilities and an ATM located in Yanceyville, the Corporation acquired $4,775,000 in loans and assumed deposits of $21,405,000. This transaction was accounted for as a purchase. In conjunction with the Yanceyville purchase, the Corporation recorded a core deposit intangible of $1,516,000, approximately 7% of the deposits assumed. 5. New Accounting Pronouncements In February 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS No. 128 requires presentation of basic earnings per share and diluted earnings per share and supersedes or amends all previous earnings per share presentation requirements. Basic earnings per share will be based on income available to common shareholders divided by the weighted average number of common shares outstanding. Diluted earnings per share is also based on income available to common shareholders divided by the sum of the weighted average number of common shares outstanding and all diluted potential common shares. SFAS No. 128 is effective for fiscal years ending after December 15, 1997. Earlier adoption is not allowed. The impact of adopting this new standard is not expected to significantly impact the Corporation's earnings per share presentations. AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EARNINGS and CAPITAL On March 14, 1996, the Corporation completed the merger of Mutual Savings Bank, F.S.B. (Mutual) into American National Bankshares Inc. (ANB). For comparative reporting purposes the financial results for the first six months ended June 30, 1996 include income and expenses of both Mutual and ANB during this period. The Corporation's net income for the six months ended June 30, 1997 was $3,081,000 an increase of $1,659,000 or 117% over the net income of $1,422,000 recorded in the same period of 1996. Net income recorded during the six months ended June 30, 1996 included cost associated with the merger of Mutual into the American National Bankshares. Excluding the effect of this cost and all related income tax effects, net income for the six months ended June 30, 1996 was $2,986,000. The $3,081,00 net income for the six months ended June 30, 1997 was an increase of $95,000 or 3% over the $2,986,000 for 1996. The components of the one-time cost, associated with the merger, in the first six months of 1996, include a federal income tax recapture on untaxed loan loss reserves of Mutual and consulting, legal, accounting, conversion, regulatory and other related fees and expense. Also included in the merger related expense is a loss on the sale of securities. These were securities held by Mutual and were not compatible with ANB's investment program. Net income for the three months ended June 30, 1997 was $1,544,000, a decrease of $14,000 or 1% from the $1,558,000 recorded during the same period of 1996. During 1996 most of the merger related expense mentioned above was recorded in the first quarter. During the second quarter ended June 30, 1996, merger related expense was only $17,000. The decrease of $14,000 during the second quarter of 1997 as compared to the same period of 1996 resulted primarily from start-up costs for the Corporation's subsidiary, Mutual Mortgage of the Piedmont Inc. and from a comparison with unusual high trust income recorded during the same quarter of 1996 due to fee income in a large estate. The after-tax effect of the two items was approximately $77,000. Net income per common share based on weighted average shares outstanding of 3,239,477 was $.95 for the first six months of 1997 compared to $.44, based on weighted average shares outstanding of 3,254,139 during the same period of 1996. Net income per common share based on weighted average shares outstanding of 3,199,599 was $.48 for the three months ended June 30, 1997. Net income per common share based on weighted average shares outstanding of 3,279,798 was $.48 for the three months ended June 30, 1996. On an annualized basis, return on average total assets was 1.46% for the second quarter of 1997 and 1.62% on income before merger related expense for the same period of 1996. Return on average total assets was 1.45% for the first six months of 1997 compared to 1.52% on income before merger related expense for the same period of 1996. Return on average common shareholders' equity was 12.30% for the second quarter of 1997 and 13.04% on income before merger related expense for the second quarter of 1996. Return on average common shareholders' equity was 12.00% for the first six months of 1997 and 12.15% on income before merger related expense for the first six months of 1996. TRENDS AND FUTURE EVENTS At June 30, 1997, assets were $419,258,000, a decrease of $20,900,000 or 5% from the $440,158,000 recorded at December 31, 1996. Net loans were $249,912,000 at June 30, 1997, an increase of $16,403,000 or 7% above the $233,509,000 recorded at December 31, 1996. The increase in loans resulted from a strong loan demand and is further evidence of a continuing strong local economy. At June 30, 1997, deposits were $350,962,000, a decrease of 3% from the $361,983,000 recorded at December 31, 1996. Due to seasonal fluctuations in the volume of deposits (caused primarily by the local marketing of tobacco) it is not unusual for the Corporation to experience a flat or declining volume of deposits and or assets during the first six months of the year. Most of the Corporation's deposit growth takes place in the second half of the year. The decline in assets, during the first six months of 1997, is attributable both to a decline in deposits and a reduction in equity of approximately $6,240,000. The reduction in equity is the result of the Company's repurchase of its stock through a "Dutch Auction". The Dutch Auction is discussed below. On April 9, 1997, the Corporation announced that it was offering to purchase 250,000 shares of American National Bankshares Inc. common stock (or such lesser numbers as are properly tendered), or approximately 7.62% of the currently outstanding shares, from existing shareholders. The Corporation conducted the tender offer through a procedure commonly referred to as a modified "Dutch Auction." The price was set in an amount not be in excess of $27 nor less than $25 per share. The modified "Dutch Auction" allowed the shareholder to select the price within the specified price range at which the shareholder was willing to sell all or some of their shares to the Corporation. A total of 228,065 shares were properly tendered. The Corporation paid $27 per share for all shares it purchased in the offer. This price was the highest price of those specified by tendering shareholders. At the annual meeting of shareholders, held April 22, 1997, the shareholders approved a Stock Option Plan permitting the Corporation to issue up to a total of 150,000 shares of common stock, upon the exercise of options granted under the plan, prior to December 31, 2006. The Plan is to be administered by the Stock Option Committee of the Board of Directors. The Committee currently consists only of the Company's independent non-employee Directors. No stock options have been issued under this plan. During the second quarter of 1997, the Corporation declared a quarterly cash dividend of $.21 per share. This dividend was a 17% increase over the dividend declared in the first quarter of $.18 per share. The second quarter dividend was paid on June 27, 1997 to shareholders of record on June 13, 1997. Certain statements contained above in this section are forward-looking statements that involve a number of risks and uncertainties. In addition to the factors discussed above regarding the local economy and the fluctuation of deposits are other factors that could cause actual results to differ materially. These factors include business conditions, development of new products and services, interest rate trends, future legislation, regulatory controls and the risks described from time to time in the Corporation's SEC reports. NET INTEREST INCOME Net interest income is the excess of interest income over interest expense. During the first six months of 1997, net interest income increased $1,052,000 or 14% over the same period of 1996. During the second quarter of 1997, net interest income increased $562,000 or 15% over the same quarter of 1996. During the first six months of 1997, short term interest market rates increased slightly due to the action of the Federal Reserve Board by increasing short term rates by 1/4% in March. During the next twelve months the Corporation's repricing opportunities in liabilities will exceed repricing opportunities of assets by approximately $73,519,000, (approximately 18% of total assets), which makes the Corporation liability sensitive. Included in the liabilities are savings accounts of $71,263,000 which are not as sensitive to change as money market and interest bearing checking accounts. Considering the reality of the sensitivity of the savings accounts makes the repricing opportunities more balanced. Any further increases in market interest rates within the next twelve months may tend to decrease the Corporation's net yield on interest earning assets but Management does not expect this to have a substantial effect upon the earnings of the Corporation during the projected period. ASSET QUALITY Nonperforming assets include loans on which interest is no longer accrued, loans classified as troubled debt restructurings and foreclosed properties. There were no foreclosed properties held at the close of the reporting period. Loans in a nonaccrual status at June 30, 1997 were $1,029,000 compared with $33,000 at December 31, 1996. Loans on accrual status and past due 90 or more at June 30, 1997 were $566,000 compared with $479,000 at December 31, 1996. The increase in loans in a nonaccrual status resulted from the addition of three commercial loans. All three additions are secured by real estate. Two are in the process of foreclosure. The third loan is being modified and is expected to be collected under a modified plan. Two of the three loans, totaling $757,000 are considered impaired. Management has identified a specific valuation allowance totaling $191,000 to record these loans at their estimated fair value, based upon the collateral securing the loans. The estimated fair value of the remaining loan is in excess of the Bank's recorded value. Total nonperforming loans and loans past due 90 days or more as a percentage of net loans were .6% at June 30, 1997 and .2% at December 31, 1996. Total nonperforming loans and loans past due 90 days or more, on an accrual status, are considered acceptable by industry standards. During the first six months of 1997 the gross amount of interest income that would have been recorded on nonaccrual loans and restructured loans at June 30, 1997, if all such loans had been accruing interest at the original contractual rate, was $40,000. 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 $500,000 for the six months of 1996 and $257,000 for the second quarter of 1997. The reserve for loan losses totaled $3,416,000 at June 30, 1997 an increase of 11% over the $3,070,000 recorded at December 31, 1996. The ratio of reserves to loans, less unearned discount, was 1.35% at June 30, 1997 and 1.30% at December 31, 1996. In Management's opinion, the current reserve for loan losses is adequate. NON-INTEREST INCOME Non-interest income for the second quarter of 1997 was $783,000, an increase of 3% from the $761,000 reported in the second quarter of 1996. The components of the increase in the second quarter of 1997 included a 17% decrease in trust revenue due to the comparison of an unusually high trust fee from a large estate in the second quarter of 1996. Also included was a 37% increase in service charges on deposit accounts due to procedural changes in applying fees for overdrafts and returned checks, a 14% decrease in non-deposit fees and insurance commissions due primarily to a low demand for the type of loans providing insurance commissions and an increase of $70,000 in other income primarily from fees generated by the Bank's subsidiary, Mutual Mortgage of the Piedmont Inc. Mutual Mortgage of the Piedmont Inc. originates and sells loans in the secondary market. Non-interest income for the six months ended June 30, 1997 was $1,521,000, an 11% increase from the $1,371,000 reported for the same period of 1996. The components of the increase included an 11% decrease in trust department income due to the comparison of unusually high trust department fees recorded during the second quarter of 1996. The components of the increase also included a 50% increase in service charges on deposit accounts due primarily to procedural changes in applying fees for overdrafts and returned checks, a 5% decrease in non-deposit fees and insurance commission due to reduced insurance commissions and an increase of $140,000 in other income which consisted primarily of fees earned by the Bank's subsidiary, Mutual Mortgage of the Piedmont Inc. NON-INTEREST EXPENSE Non-interest expense for the second quarter ended June 30, 1997 was $2,542,000, a 22% increase over the $2,086,000 reported for the same quarter last year. Components of the increase included a 22% increase in salaries primarily from the addition of personnel at the Yanceyville branch office and Mutual Mortgage of the Piedmont Inc., a 19% increase in pension and other employee benefits, which included the addition of personnel at the Yanceyville location and the Mortgage Company, a 19% increase in occupancy and equipment expense which was also primarily attributable to the Yanceyville acquisition and a 50% reduction in FDIC insurance expense which resulted from a reduction in the premiums paid in the second quarter of 1997 on deposits of Mutual Savings Bank compared to the same quarter of 1996. Also included was a 19% increase in postage and printing, resulting partially from the acquisition of the Yanceyville branch office and the Mortgage Company, a 53% increase in core deposit intangibles as a result of the acquisition of the Yanceyville branch office and a 33% increase in other expenses which included additional expenses related to the Yanceyville office and the Mortgage Company. The second quarter of 1996 included merger related expenses of $17,000. There were no merger related expenses in the second quarter of 1997. Non-interest expense for the first six months ended June 30, 1997 was $5,057,000, a 6% decrease from the $5,399,000 recorded during the first six months of 1996. The components of the decrease included a 21% increase in salaries due primarily to the addition of personnel at the Yanceyville office and the Mortgage Company, a 26% increase in pension and other employee benefits due primarily to the addition of personnel at the Yanceyville office and the Mortgage Company, a 17% increase in occupancy and equipment expense due primarily to the Yanceyville office addition and a 51% decrease in FDIC insurance expense due to the lower rates charged by the FDIC on deposits of Mutual Savings Bank after the merger occurred in the first quarter of 1996. Also included was a 7% increase in postage and printing, a 54% increase in core deposit intangible expense resulting from the Yanceyville acquisition and a 22% increase in other expenses primarily related to the addition of the Yanceyville office and the Mortgage Company. During the first six months of 1996 non-interest expense included $1,185,000 in merger related expense. There was no merger related expense in the first six months of 1997. INCOME TAX PROVISION The income tax provision for the first six months of 1997 was $1,346,000, an increase of $362,000 from the $1,708,000 reported a year earlier. The $1,708,000 recorded in 1996 included a one-time Federal tax assessment associated with Mutual's prior untaxed loan loss reserves. During the third quarter of 1996, this assessment was eliminated by Congressional action. The effective tax rate for the first six months of 1997 was 30%. 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 June 30, 1997 the Corporation had a ratio of 16.9% for Tier I and a ratio of 18.2% for total capital. At December 31, 1996 these ratios were 19.4% and 20.7%, respectively. A cash dividend of $.21 per share was paid on 3,051,733 shares of common stock outstanding on June 27, 1997 to shareholders of record June 13, 1997. This dividend totaled $640,864,000. LIQUIDITY The Corporation's net liquid assets to net liabilities ratio was 25% at June 30, 1997 and 32% at December 31, 1996. 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. PART II OTHER INFORMATION Item: 1. Legal Proceedings None 2. Changes in securities None 3. Defaults upon senior securities None 4. Results of votes of security holders At the annual meeting of shareholders, held April 22, 1997, the shareholders approved a Stock Option Plan permitting the Corporation to issue up to a total of 150,000 shares of common stock, upon the exercise of options granted under the plan, prior to December 31, 2006. The shareholders cast 2,718,663 votes for the approval of the Stock Option Plan, 58,804 votes against the Plan and 4,000 votes abstaining. 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 - August 11, 1997 President and Chief Executive Officer /s/ David Hyler --------------------------------- David Hyler Senior Vice-President and Date - August 11, 1997 Secretary-Treasurer (Chief Financial Officer) EX-27 2 FDS 6-30-97
9 0000741516 American National Bankshares Inc. 1000 3-MOS 6-MOS YEAR DEC-31-1997 DEC-31-1997 DEC-31-1997 JAN-01-1997 MAR-01-1997 JAN-01-1997 MAR-31-1997 JUN-30-1997 JUN-30-1997 $10,471 $13,816 $13,816 105 145 145 5,350 0 0 0 0 0 74,139 64,491 64,491 81,056 74,976 74,976 80,686 75,114 75,114 247,368 253,707 253,707 3,206 3,416 3,416 430,900 419,258 419,258 359,266 350,962 350,962 0 2,975 2,975 18,930 17,608 17,608 0 0 0 0 0 0 0 0 0 3,280 3,052 3,052 49,424 44,661 44,661 430,900 419,258 419,258 5,352 5,609 10,961 2,500 2,237 4,737 24 37 61 7,876 7,883 15,759 3,475 3,417 6,892 3,677 3,619 7,296 4,199 4,264 8,463 243 257 500 23 8 31 2,515 2,542 5,057 2,179 2,248 4,427 2,179 2,248 4,427 0 0 0 0 0 0 1,537 1,544 3,081 0.47 0.48 0.95 0.47 0.48 0.95 4.21 4.36 4.29 278 1,029 1,029 257 566 566 0 0 0 0 0 0 3,070 3,206 3,070 122 73 195 15 27 42 3,206 3,416 3,416 3,111 3,321 3,321 0 0 0 95 95 95
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