x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT of
1934 FOR THE QUARTERLY PERIOD ENDED June
30, 2005.
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 FOR THE TRANSITION PERIOD FROM
TO .
|
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)
|
Yes
|
x
|
No
|
¨
|
Yes
|
x
|
No
|
¨
|
Index
|
Page
|
||
Part
I.
|
FINANCIAL
INFORMATION
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
||
and
December 31, 2004
|
3
|
||
ended
June 30, 2005 and 2004
|
4
|
||
ended
June 30, 2005 and 2004
|
5
|
||
for
the six months ended June 30, 2005 and 2004
|
6
|
||
ended
June 30, 2005 and 2004
|
7
|
||
8
|
|||
Item
2.
|
|||
and
Results of Operations
|
15
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
26
|
|
Item
4.
|
Controls
and Procedures
|
27
|
|
Part
II.
|
OTHER
INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
28
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
28
|
|
|
|||
Item
3.
|
Defaults
Upon Senior Securities
|
28
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
28
|
|
Item
5.
|
Other
Information
|
28
|
|
Item
6.
|
Exhibits
|
29
|
|
SIGNATURES
|
29
|
American
National Bankshares Inc. and Subsidiary
|
|||||||
Consolidated
Balance Sheets
|
|||||||
|
|||||||
(In
thousands, except share data)
|
(Unaudited)
|
(Audited)
|
|||||
June
30,
|
December
31,
|
||||||
ASSETS
|
2005
|
2004
|
|||||
Cash
and due from banks
|
$
|
14,363
|
$
|
12,371
|
|||
Interest-bearing
deposits in other banks
|
7,030
|
197
|
|||||
Securities
available for sale, at fair value
|
147,633
|
165,958
|
|||||
Securities
held to maturity (fair value of $19,862
|
|||||||
in
2005 and $23,088 in 2004)
|
19,221
|
22,205
|
|||||
Total
securities
|
166,854
|
188,163
|
|||||
Loans
held for sale
|
1,470
|
971
|
|||||
Loans,
net of unearned income
|
416,528
|
407,269
|
|||||
Less
allowance for loan losses
|
(8,378
|
)
|
(7,982
|
)
|
|||
Net
loans
|
408,150
|
399,287
|
|||||
Bank
premises and equipment, at cost, less accumulated
|
|||||||
depreciation
of $12,786 in 2005 and $12,362 in 2004
|
7,610
|
7,517
|
|||||
Core
deposit intangibles, net
|
259
|
484
|
|||||
Accrued
interest receivable and other assets
|
11,117
|
10,075
|
|||||
Total
assets
|
$
|
616,853
|
$
|
619,065
|
|||
LIABILITIES
and SHAREHOLDERS' EQUITY
|
|||||||
Liabilities:
|
|||||||
Demand
deposits -- noninterest bearing
|
$
|
91,653
|
$
|
75,256
|
|||
Demand
deposits -- interest bearing
|
76,541
|
80,793
|
|||||
Money
market deposits
|
39,289
|
52,031
|
|||||
Savings
deposits
|
81,157
|
83,216
|
|||||
Time
deposits
|
190,552
|
193,976
|
|||||
Total
deposits
|
479,192
|
485,272
|
|||||
Repurchase
agreements
|
44,241
|
38,945
|
|||||
FHLB
borrowings
|
19,313
|
21,338
|
|||||
Accrued
interest payable and other liabilities
|
2,814
|
2,510
|
|||||
Total
liabilities
|
545,560
|
548,065
|
|||||
Shareholders'
equity:
|
|||||||
Preferred
stock, $5 par, 200,000 shares authorized,
|
|||||||
none
outstanding
|
-
|
-
|
|||||
Common
stock, $1 par, 10,000,000 shares authorized,
|
|||||||
5,445,186
shares outstanding at June 30, 2005 and
|
|||||||
5,521,164
shares outstanding at December 31, 2004
|
5,445
|
5,521
|
|||||
Capital
in excess of par value
|
9,382
|
9,474
|
|||||
Retained
earnings
|
56,810
|
55,780
|
|||||
Accumulated
other comprehensive income (loss), net
|
(344
|
)
|
225
|
||||
Total
shareholders' equity
|
71,293
|
71,000
|
|||||
Total
liabilities and shareholders' equity
|
$
|
616,853
|
$
|
619,065
|
|||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
American
National Bankshares Inc. and Subsidiary
|
|||||||
Consolidated
Statements of Income
|
|||||||
|
|
|
|||||
Three
Months Ended
|
|||||||
(In
thousands, except per share data) Unaudited
|
June
30
|
||||||
2005
|
2004
|
||||||
Interest
Income:
|
|||||||
Interest
and fees on loans
|
$
|
6,382
|
$
|
5,572
|
|||
Interest
and dividends on securities:
|
|||||||
Taxable
|
1,021
|
1,284
|
|||||
Tax-exempt
|
497
|
505
|
|||||
Dividends
|
59
|
36
|
|||||
Other
interest income
|
28
|
13
|
|||||
Total
interest income
|
7,987
|
7,410
|
|||||
Interest
Expense:
|
|||||||
Interest
on deposits
|
1,612
|
1,490
|
|||||
Interest
on repurchase agreements
|
214
|
124
|
|||||
Interest
on other borrowings
|
251
|
250
|
|||||
Total
interest expense
|
2,077
|
1,864
|
|||||
Net
Interest Income
|
5,910
|
5,546
|
|||||
Provision
for Loan Losses
|
240
|
255
|
|||||
Net
Interest Income After Provision
|
|||||||
for
Loan Losses
|
5,670
|
5,291
|
|||||
Noninterest
Income:
|
|||||||
Trust
fees
|
767
|
743
|
|||||
Service
charges on deposit accounts
|
632
|
631
|
|||||
Other
fees and commissions
|
273
|
222
|
|||||
Mortgage
banking income
|
165
|
211
|
|||||
Securities
gains, net
|
-
|
14
|
|||||
Other
|
121
|
224
|
|||||
Total
noninterest income
|
1,958
|
2,045
|
|||||
Noninterest
Expense:
|
|||||||
Salaries
|
2,049
|
1,846
|
|||||
Pension
and other employee benefits
|
503
|
412
|
|||||
Occupancy
and equipment
|
633
|
647
|
|||||
Bank
franchise tax
|
134
|
138
|
|||||
Core
deposit intangible amortization
|
113
|
113
|
|||||
Other
|
788
|
793
|
|||||
Total
noninterest expense
|
4,220
|
3,949
|
|||||
Income
Before Income Tax Provision
|
3,408
|
3,387
|
|||||
Income
Tax Provision
|
984
|
963
|
|||||
Net
Income
|
$
|
2,424
|
$
|
2,424
|
|||
Net
Income Per Common Share:
|
|||||||
Basic
|
$
|
0.44
|
$
|
0.43
|
|||
Diluted
|
$
|
0.44
|
$
|
0.43
|
|||
Average
Common Shares Outstanding:
|
|||||||
Basic
|
5,472,021
|
5,610,462
|
|||||
Diluted
|
5,517,736
|
5,657,721
|
|||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
American
National
Bankshares Inc. and Subsidiary
|
|||||||
Consolidated
Statements of Income
|
|||||||
|
|
|
|||||
Six
Months Ended
|
|||||||
(In
thousands, except per share data) Unaudited
|
June
30
|
||||||
2005
|
2004
|
||||||
Interest
Income:
|
|||||||
Interest
and fees on loans
|
$
|
12,414
|
$
|
11,313
|
|||
Interest
and dividends on securities:
|
|||||||
Taxable
|
2,140
|
2,551
|
|||||
Tax-exempt
|
1,024
|
996
|
|||||
Dividends
|
105
|
87
|
|||||
Other
interest income
|
70
|
44
|
|||||
Total
interest income
|
15,753
|
14,991
|
|||||
Interest
Expense:
|
|||||||
Interest
on deposits
|
3,132
|
3,087
|
|||||
Interest
on repurchase agreements
|
367
|
251
|
|||||
Interest
on other borrowings
|
495
|
491
|
|||||
Total
interest expense
|
3,994
|
3,829
|
|||||
Net
Interest Income
|
11,759
|
11,162
|
|||||
Provision
for Loan Losses
|
540
|
470
|
|||||
Net
Interest Income After Provision
|
|||||||
for
Loan Losses
|
11,219
|
10,692
|
|||||
Noninterest
Income:
|
|||||||
Trust
fees
|
1,487
|
1,471
|
|||||
Service
charges on deposit accounts
|
1,191
|
1,205
|
|||||
Other
fees and commissions
|
524
|
468
|
|||||
Mortgage
banking income
|
265
|
344
|
|||||
Securities
gains, net
|
45
|
119
|
|||||
Other
|
513
|
291
|
|||||
Total
noninterest income
|
4,025
|
3,898
|
|||||
Noninterest
Expense:
|
|||||||
Salaries
|
3,921
|
3,614
|
|||||
Pension
and other employee benefits
|
971
|
834
|
|||||
Occupancy
and equipment
|
1,234
|
1,264
|
|||||
Bank
franchise tax
|
272
|
278
|
|||||
Core
deposit intangible amortization
|
225
|
225
|
|||||
Other
|
1,588
|
1,535
|
|||||
Total
noninterest expense
|
8,211
|
7,750
|
|||||
Income
Before Income Tax Provision
|
7,033
|
6,840
|
|||||
Income
Tax Provision
|
2,026
|
1,946
|
|||||
Net
Income
|
$
|
5,007
|
$
|
4,894
|
|||
Net
Income Per Common Share:
|
|||||||
Basic
|
$
|
0.91
|
$
|
0.87
|
|||
Diluted
|
$
|
0.90
|
$
|
0.86
|
|||
Average
Common Shares Outstanding:
|
|||||||
Basic
|
5,491,211
|
5,629,370
|
|||||
Diluted
|
5,538,074
|
5,681,795
|
|||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
Consolidated
Statements of Changes in Shareholders' Equity
|
|||||||||||||||||||
Six
Months Ended June 30, 2005 and 2004
|
|||||||||||||||||||
Accumulated
|
|||||||||||||||||||
(In
thousands) (Unaudited)
|
Common
Stock
|
Capital
in
|
Other
|
Total
|
|||||||||||||||
Excess
of
|
Retained
|
Comprehensive
|
Shareholders'
|
||||||||||||||||
Shares
|
Amount
|
Par
Value
|
Earnings
|
Income
(Loss)
|
Equity
|
||||||||||||||
Balance,
December 31, 2003
|
5,660,419
|
$
|
5,660
|
$
|
9,437
|
$
|
55,538
|
$
|
1,296
|
$
|
71,931
|
||||||||
Net
income
|
-
|
-
|
-
|
4,894
|
-
|
4,894
|
|||||||||||||
Change
in unrealized gains on securities
|
|||||||||||||||||||
available
for sale, net of tax of $ (1,154)
|
-
|
-
|
-
|
-
|
(2,240
|
)
|
|||||||||||||
Less:
Reclassification adjustment for (gains)
|
|||||||||||||||||||
losses
on securities available for sale, net of
|
|||||||||||||||||||
tax
of $ (29)
|
-
|
-
|
-
|
-
|
(56
|
)
|
|||||||||||||
Other
comprehensive income
|
(2,296
|
)
|
(2,296
|
)
|
|||||||||||||||
Total
comprehensive income
|
2,598
|
||||||||||||||||||
Stock
repurchased and retired
|
(75,568
|
)
|
(76
|
)
|
(126
|
)
|
(1,621
|
)
|
-
|
(1,823
|
)
|
||||||||
Stock
options exercised
|
8,579
|
9
|
135
|
-
|
-
|
144
|
|||||||||||||
Cash
dividends paid
|
-
|
-
|
-
|
(2,191
|
)
|
-
|
(2,191
|
)
|
|||||||||||
Balance,
June 30, 2004
|
5,593,430
|
$
|
5,593
|
$
|
9,446
|
$
|
56,620
|
$
|
(1,000
|
)
|
$
|
70,659
|
|||||||
Balance,
December 31, 2004
|
5,521,164
|
$
|
5,521
|
$
|
9,474
|
$
|
55,780
|
$
|
225
|
$
|
71,000
|
||||||||
Net
income
|
-
|
-
|
-
|
5,007
|
-
|
5,007
|
|||||||||||||
Change
in unrealized losses on securities
|
|||||||||||||||||||
available
for sale, net of tax of $ (293)
|
-
|
-
|
-
|
-
|
(569
|
)
|
|||||||||||||
Other
comprehensive income
|
(569
|
)
|
(569
|
)
|
|||||||||||||||
Total
comprehensive income
|
4,438
|
||||||||||||||||||
Stock
repurchased and retired
|
(79,350
|
)
|
(79
|
)
|
(136
|
)
|
(1,732
|
)
|
-
|
(1,947
|
)
|
||||||||
Stock
options exercised
|
3,372
|
3
|
44
|
-
|
-
|
47
|
|||||||||||||
Cash
dividends paid
|
-
|
-
|
-
|
(2,245
|
)
|
-
|
(2,245
|
)
|
|||||||||||
Balance,
June 30, 2005
|
5,445,186
|
$
|
5,445
|
$
|
9,382
|
$
|
56,810
|
$
|
(344
|
)
|
$
|
71,293
|
|||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
Consolidated
Statements of Cash Flows
|
|||||||
|
|||||||
Six
Months Ended
|
|||||||
(In
thousands) (Unaudited)
|
June
30
|
||||||
2005
|
2004
|
||||||
Cash
Flows from Operating Activities:
|
|||||||
Net
income
|
$
|
5,007
|
$
|
4,894
|
|||
Adjustments
to reconcile net income to net
|
|||||||
cash
provided by operating activities:
|
|||||||
Provision
for loan losses
|
540
|
470
|
|||||
Depreciation
|
452
|
490
|
|||||
Core
deposit intangible amortization
|
225
|
225
|
|||||
Net
amortization (accretion) of bond premiums and discounts
|
117
|
390
|
|||||
Net
gain on sale or call of securities
|
(45
|
)
|
(119
|
)
|
|||
Gain
on loans held for sale
|
(184
|
)
|
(263
|
)
|
|||
Proceeds
from sales of loans held for sale
|
7,155
|
13,223
|
|||||
Originations
of loans held for sale
|
(7,470
|
)
|
(13,459
|
)
|
|||
Net
gain (loss) on foreclosed real estate
|
(2
|
)
|
14
|
||||
Valuation
allowance on foreclosed real estate
|
27
|
-
|
|||||
Gain
on sale of premises and equipment
|
-
|
(150
|
)
|
||||
Deferred
income taxes benefit
|
(288
|
)
|
(109
|
)
|
|||
Increase
in interest receivable
|
(237
|
)
|
(4
|
)
|
|||
Increase
in other assets
|
(287
|
)
|
(417
|
)
|
|||
Increase
(decrease) in interest payable
|
73
|
(114
|
)
|
||||
Increase
in other liabilities
|
231
|
807
|
|||||
Net
cash provided by operating activities
|
5,314
|
5,878
|
|||||
Cash
Flows from Investing Activities:
|
|||||||
Proceeds
from sales of securities available for sale
|
-
|
4,567
|
|||||
Proceeds
from maturities and calls of securities available for sale
|
83,894
|
40,266
|
|||||
Proceeds
from maturities and calls of securities held to maturity
|
2,992
|
16,591
|
|||||
Purchases
of securities available for sale
|
(66,511
|
)
|
(57,275
|
)
|
|||
Net
(increase) decrease in loans
|
(9,403
|
)
|
5,167
|
||||
Proceeds
from sale of bank property and equipment
|
-
|
205
|
|||||
Purchases
of bank property and equipment
|
(545
|
)
|
(537
|
)
|
|||
Proceeds
from sales on foreclosed real estate
|
38
|
198
|
|||||
Net
cash provided by investing activities
|
10,465
|
9,182
|
|||||
Cash
Flows from Financing Activities:
|
|||||||
Net
decrease in demand, money market,
|
|||||||
and
savings deposits
|
(2,656
|
)
|
(1,343
|
)
|
|||
Net
decrease in time deposits
|
(3,424
|
)
|
(15,448
|
)
|
|||
Net
increase in repurchase agreements
|
5,296
|
876
|
|||||
Net
(decrease) increase in FHLB borrowings
|
(2,025
|
)
|
2,763
|
||||
Cash
dividends paid
|
(2,245
|
)
|
(2,191
|
)
|
|||
Repurchase
of stock
|
(1,947
|
)
|
(1,823
|
)
|
|||
Proceeds
from exercise of stock options
|
47
|
144
|
|||||
Net
cash (used in) financing activities
|
(6,954
|
)
|
(17,022
|
)
|
|||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
8,825
|
(1,962
|
)
|
||||
Cash
and Cash Equivalents at Beginning of Period
|
12,568
|
17,888
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
21,393
|
$
|
15,926
|
|||
Supplemental
Schedule of Cash and Cash Equivalents:
|
|||||||
Cash:
|
|||||||
Cash
and due from banks
|
$
|
14,363
|
$
|
14,829
|
|||
Interest-bearing
deposits in other banks
|
7,030
|
1,097
|
|||||
$
|
21,393
|
$
|
15,926
|
||||
Supplemental
Disclosure of Cash Flow Information:
|
|||||||
Interest
paid
|
$
|
3,921
|
$
|
3,943
|
|||
Income
taxes paid
|
$
|
2,271
|
$
|
1,726
|
|||
Transfer
of loans to other real estate owned
|
$
|
-
|
$
|
160
|
|||
Unrealized
loss on securities available for sale
|
$
|
(862
|
)
|
$
|
(3,479
|
)
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
1.
|
BASIS
OF PRESENTATION
|
2.
|
STOCK
BASED COMPENSATION
|
Six
Months Ended
|
|||||||
June
30
|
|||||||
(Dollars
in thousands except per share amounts)
|
2005
|
2004
|
|||||
Net
income, as reported
|
$
|
5,007
|
$
|
4,894
|
|||
Deduct:
total stock-based employee compensation expense determined based
on fair
value method of awards
|
-
|
(141
|
)
|
||||
Pro
forma net income
|
$
|
5,007
|
$
|
4,753
|
|||
Basic
earnings per share:
|
|||||||
As
reported
|
$
|
0.91
|
$
|
0.87
|
|||
Pro
forma
|
$
|
0.91
|
$
|
0.85
|
|||
Diluted
earnings per share:
|
|||||||
As
reported
|
$
|
0.90
|
$
|
0.86
|
|||
Pro
forma
|
$
|
0.90
|
$
|
0.84
|
3.
|
SECURITIES
|
|
June
30, 2005
|
||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
||||||||||
Cost
|
Gains
|
Losses
|
Fair
Value
|
||||||||||
Securities
available for sale:
|
|||||||||||||
Federal
agencies
|
$
|
73,212
|
$
|
17
|
$
|
881
|
$
|
72,348
|
|||||
Mortgage-backed
|
25,190
|
201
|
126
|
25,265
|
|||||||||
State
and municipal
|
34,717
|
356
|
169
|
34,904
|
|||||||||
Corporate
bonds
|
8,548
|
148
|
47
|
8,649
|
|||||||||
Equity
securities:
|
|||||||||||||
FHLB
stock - restricted
|
2,184
|
-
|
-
|
2,184
|
|||||||||
Federal
Reserve stock - restricted
|
363
|
-
|
-
|
363
|
|||||||||
FNMA
& FHLMC preferred stock
|
3,515
|
50
|
70
|
3,495
|
|||||||||
Other
securities
|
425
|
-
|
-
|
425
|
|||||||||
Total
securities available for sale
|
148,154
|
772
|
1,293
|
147,633
|
|||||||||
Securities
held to maturity:
|
|||||||||||||
Federal
agencies
|
1,498
|
-
|
17
|
1,481
|
|||||||||
Mortgage-backed
|
565
|
21
|
-
|
586
|
|||||||||
State
and municipal
|
17,158
|
652
|
15
|
17,795
|
|||||||||
Total
securities held to maturity
|
19,221
|
673
|
32
|
19,862
|
|||||||||
Total
securities
|
$
|
167,375
|
$
|
1,445
|
$
|
1,325
|
$
|
167,495
|
|
December
31, 2004
|
||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
||||||||||
Cost
|
Gains
|
Losses
|
Fair
Value
|
||||||||||
Securities
available for sale:
|
|||||||||||||
Federal
agencies
|
$
|
83,969
|
$
|
107
|
$
|
755
|
$
|
83,321
|
|||||
Mortgage-backed
|
28,608
|
402
|
77
|
28,933
|
|||||||||
State
and municipal
|
35,714
|
658
|
88
|
36,284
|
|||||||||
Corporate
bonds
|
10,776
|
295
|
42
|
11,029
|
|||||||||
Equity
securities:
|
|||||||||||||
FHLB
stock - restricted
|
2,248
|
-
|
-
|
2,248
|
|||||||||
Federal
Reserve stock - restricted
|
363
|
-
|
-
|
363
|
|||||||||
FNMA
& FHLMC preferred stock
|
3,515
|
-
|
160
|
3,355
|
|||||||||
Other
securities
|
425
|
-
|
-
|
425
|
|||||||||
Total
securities available for sale
|
165,618
|
1,462
|
1,122
|
165,958
|
|||||||||
Securities
held to maturity:
|
|||||||||||||
Federal
agencies
|
3,496
|
5
|
10
|
3,491
|
|||||||||
Mortgage-backed
|
701
|
36
|
-
|
737
|
|||||||||
State
and municipal
|
18,008
|
860
|
8
|
18,860
|
|||||||||
Total
securities held to maturity
|
22,205
|
901
|
18
|
23,088
|
|||||||||
Total
securities
|
$
|
187,823
|
$
|
2,363
|
$
|
1,140
|
$
|
189,046
|
|||||
Total
|
Less
than 12 Months
|
12
Months or More
|
|||||||||||||||||
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
||||||||||||||
Federal
agencies
|
$
|
67,383
|
$
|
898
|
$
|
21,592
|
$
|
151
|
$
|
45,791
|
$
|
747
|
|||||||
Mortgage-backed
|
15,958
|
126
|
14,591
|
107
|
1,367
|
19
|
|||||||||||||
State
and municipal
|
15,586
|
184
|
9,434
|
79
|
6,152
|
105
|
|||||||||||||
Corporate
bonds
|
1,438
|
47
|
-
|
-
|
1,438
|
47
|
|||||||||||||
Preferred
stock
|
1,805
|
70
|
1,805
|
70
|
-
|
-
|
|||||||||||||
Total
|
$
|
102,170
|
$
|
1,325
|
$
|
47,422
|
$
|
407
|
$
|
54,748
|
$
|
918
|
Total
|
12
Months or More
|
Less
than 12 Months
|
|||||||||||||||||
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
||||||||||||||
Federal
agencies
|
$
|
66,796
|
$
|
765
|
$
|
8,880
|
$
|
126
|
$
|
57,916
|
$
|
639
|
|||||||
Mortgage-backed
|
10,954
|
77
|
1,358
|
3
|
9,596
|
74
|
|||||||||||||
State
and municipal
|
8,067
|
96
|
198
|
7
|
7,869
|
89
|
|||||||||||||
Corporate
bonds
|
1,442
|
42
|
-
|
-
|
1,442
|
42
|
|||||||||||||
Preferred
stock
|
3,355
|
160
|
3,355
|
160
|
-
|
-
|
|||||||||||||
Total
|
$
|
90,614
|
$
|
1,140
|
$
|
13,791
|
$
|
296
|
$
|
76,823
|
$
|
844
|
4.
|
LOANS
|
(in
thousands)
|
June
30
|
December
31
|
|||||
2005
|
2004
|
||||||
Real
estate:
|
|||||||
Construction
and land development
|
$
|
44,964
|
$
|
34,101
|
|||
Commercial
|
150,569
|
147,653
|
|||||
1-4
family residential
|
93,908
|
91,672
|
|||||
Home
equity
|
42,735
|
42,620
|
|||||
Total
real estate
|
332,176
|
316,046
|
|||||
Commercial
and industrial
|
71,649
|
75,847
|
|||||
Consumer
|
12,703
|
15,376
|
|||||
Total
loans
|
$
|
416,528
|
$
|
407,269
|
June
30
|
December
31
|
||||||
(in
thousands)
|
2005
|
2004
|
|||||
Impaired
loans without a valuation allowance
|
$
|
-
|
$
|
-
|
|||
Impaired
loans with a valuation allowance
|
6,112
|
6,310
|
|||||
Total
impaired loans
|
$
|
6,112
|
$
|
6,310
|
|||
Allowance
related to impaired loans,
|
|||||||
included
in the allowance for loan losses
|
$
|
3,036
|
$
|
3,151
|
|||
The
following summarizes average balances and interest income related
to
impaired loans for the three months ended:
|
June
30
|
June
30
|
|||||
2005
|
2004
|
||||||
Average
balance in impaired loans
|
$
|
6,054
|
$
|
3,527
|
|||
Interest
income recognized on impaired loans
|
$
|
23
|
$
|
36
|
|||
5.
|
ALLOWANCE
FOR LOAN LOSSES
|
(in
thousands)
|
June
30
|
December
31
|
June
30
|
|||||||
2005
|
2004
|
2004
|
||||||||
Balance,
January 1
|
$
|
7,982
|
$
|
5,292
|
$
|
5,292
|
||||
Provision
for loan losses
|
540
|
3,095
|
470
|
|||||||
Loans
charged-off
|
(272
|
)
|
(655
|
)
|
(419
|
)
|
||||
Recoveries
of loans charged-off
|
128
|
250
|
114
|
|||||||
Balance
at end of period
|
$
|
8,378
|
$
|
7,982
|
$
|
5,457
|
6.
|
EARNINGS
PER SHARE
|
Three
Months Ended
|
|||||||||||||
June
30
|
|||||||||||||
2005
|
2004
|
||||||||||||
Per
|
Per
|
||||||||||||
Share
|
Share
|
||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||
Basic
earnings per share
|
5,472,021
|
$
|
.44
|
5,610,462
|
$
|
.43
|
|||||||
Effect
of dilutive securities (stock options)
|
45,715
|
-
|
47,259
|
-
|
|||||||||
Diluted
earnings per share
|
5,517,736
|
$
|
.44
|
5,657,721
|
$
|
.43
|
Six
Months Ended
|
|||||||||||||
June
30
|
|||||||||||||
2005
|
2004
|
||||||||||||
Per
|
Per
|
||||||||||||
Share
|
Share
|
||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||
Basic
earnings per share
|
5,491,211
|
$
|
.91
|
5,629,370
|
$
|
.87
|
|||||||
Effect
of dilutive securities (stock options)
|
46,863
|
(.01
|
)
|
52,425
|
(.01
|
)
|
|||||||
Diluted
earnings per share
|
5,538,074
|
$
|
.90
|
5,681,795
|
$
|
.86
|
7.
|
DEFINED
BENEFIT PLAN
|
Components
of Net Period Benefit Cost
|
Six
Months Ended
|
||||||
(in
thousands)
|
June
30
|
||||||
2005
|
2004
|
||||||
Service
cost
|
$
|
220
|
$
|
216
|
|||
Interest
cost
|
184
|
180
|
|||||
Expected
return on plan assets
|
(252
|
)
|
(226
|
)
|
|||
Amortization
of prior service cost
|
(18
|
)
|
(11
|
)
|
|||
Amortization
of net obligation at transition
|
-
|
-
|
|||||
Recognized
net actuarial loss
|
42
|
41
|
|||||
Net
periodic benefit cost
|
$
|
176
|
$
|
200
|
8.
|
SEGMENT
AND RELATED INFORMATION
|
|
Three
Months Ended June 30, 2005
|
|
|
|||||||||||||
Trust
and
|
||||||||||||||||
Community
|
Investment
|
Intersegment
|
||||||||||||||
Banking
|
Services
|
Other
|
Eliminations
|
Total
|
||||||||||||
Interest
income
|
$
|
7,987
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
7,987
|
||||||
Interest
expense
|
2,077
|
-
|
-
|
-
|
2,077
|
|||||||||||
Non-interest
income - external customers
|
1,082
|
871
|
5
|
-
|
1,958
|
|||||||||||
Non-interest
income - internal customers
|
-
|
12
|
-
|
(12
|
)
|
-
|
||||||||||
Operating
income before income taxes
|
3,026
|
420
|
(38
|
)
|
-
|
3,408
|
||||||||||
Depreciation
and amortization
|
328
|
6
|
0
|
-
|
334
|
|||||||||||
Total
assets
|
616,265
|
-
|
588
|
-
|
616,853
|
|||||||||||
Capital
expenditures
|
308
|
1
|
-
|
-
|
309
|
|
Three
Months Ended June 30, 2004
|
|
|
|||||||||||||
Trust
and
|
||||||||||||||||
Community
|
Investment
|
Intersegment
|
||||||||||||||
Banking
|
Services
|
Other
|
Eliminations
|
Total
|
||||||||||||
Interest
income
|
$
|
7,410
|
$
|
-
|
$
|
22
|
$
|
(22
|
)
|
$
|
7,410
|
|||||
Interest
expense
|
1,864
|
-
|
22
|
(22
|
)
|
1,864
|
||||||||||
Non-interest
income - external customers
|
1,041
|
743
|
261
|
-
|
2,045
|
|||||||||||
Non-interest
income - internal customers
|
-
|
12
|
-
|
(12
|
)
|
-
|
||||||||||
Operating
income before income taxes
|
2,959
|
378
|
50
|
-
|
3,387
|
|||||||||||
Depreciation
and amortization
|
352
|
6
|
1
|
-
|
359
|
|||||||||||
Total
assets
|
629,716
|
-
|
2,513
|
(1,658
|
)
|
630,571
|
||||||||||
Capital
expenditures
|
138
|
9
|
-
|
-
|
147
|
|
Six
Months Ended June 30, 2005
|
|
|
|||||||||||||
Trust
and
|
||||||||||||||||
Community
|
Investment
|
Intersegment
|
||||||||||||||
Banking
|
Services
|
Other
|
Eliminations
|
Total
|
||||||||||||
Interest
income
|
$
|
15,753
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
15,753
|
||||||
Interest
expense
|
3,994
|
-
|
-
|
-
|
3,994
|
|||||||||||
Non-interest
income - external customers
|
2,360
|
1,659
|
6
|
-
|
4,025
|
|||||||||||
Non-interest
income - internal customers
|
-
|
24
|
-
|
(24
|
)
|
-
|
||||||||||
Operating
income before income taxes
|
6,307
|
810
|
(84
|
)
|
-
|
7,033
|
||||||||||
Depreciation
and amortization
|
666
|
10
|
1
|
-
|
677
|
|||||||||||
Total
assets
|
616,265
|
-
|
588
|
616,853
|
||||||||||||
Capital
expenditures
|
511
|
34
|
-
|
-
|
545
|
|||||||||||
1176
|
|
Six
Months Ended June 30, 2004
|
|
|
|||||||||||||
Trust
and
|
||||||||||||||||
Community
|
Investment
|
Intersegment
|
||||||||||||||
Banking
|
Services
|
Other
|
Eliminations
|
Total
|
||||||||||||
Interest
income
|
$
|
14,991
|
$
|
-
|
$
|
30
|
$
|
(30
|
)
|
$
|
14,991
|
|||||
Interest
expense
|
3,829
|
-
|
30
|
(30
|
)
|
3,829
|
||||||||||
Non-interest
income - external customers
|
1,956
|
1,471
|
471
|
-
|
3,898
|
|||||||||||
Non-interest
income - internal customers
|
-
|
24
|
-
|
(24
|
)
|
-
|
||||||||||
Operating
income before income taxes
|
5,994
|
811
|
35
|
-
|
6,840
|
|||||||||||
Depreciation
and amortization
|
701
|
11
|
3
|
-
|
715
|
|||||||||||
Total
assets
|
629,716
|
-
|
2,513
|
(1,658
|
)
|
630,571
|
||||||||||
Capital
expenditures
|
508
|
29
|
-
|
-
|
537
|
·
|
General
economic conditions may deteriorate and negatively impact the ability
of
borrowers to repay loans and depositors to maintain account
balances.
|
·
|
Plant
closings or layoffs in the Corporation’s primary market area could occur,
which might negatively impact the ability of borrowers to repay loans
and
depositors to maintain account balances.
|
·
|
Changes
in interest rates could increase or reduce
income.
|
·
|
Competition
among financial institutions may
increase.
|
·
|
Businesses
that the Corporation is engaged in may be adversely affected by
legislative or regulatory changes, including changes in accounting
standards.
|
·
|
New
products developed or new methods of delivering products could result
in a
reduction in business and income for the
Corporation.
|
·
|
Adverse
changes may occur in the securities
market.
|
·
|
increase
the size of our loan portfolio without sacrificing credit quality
or
pricing,
|
·
|
grow
our checking, savings and money market deposits,
|
·
|
increase
fee income through our trust, investment, and mortgage banking services
and
|
·
|
continue
to control our costs.
|
Net
Interest Income and Rate / Volume Analysis
|
|||||||||||||||||||
For
the Three Months Ended June 30, 2005 and 2004
|
|||||||||||||||||||
(in
thousands, except rates)
|
|||||||||||||||||||
Interest
|
|||||||||||||||||||
Average
Balance
|
Income/Expense
|
Yield/Rate
|
|||||||||||||||||
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
||||||||||||||
Loans:
|
|||||||||||||||||||
Commercial
|
$
|
68,052
|
$
|
94,014
|
$
|
1,139
|
$
|
1,237
|
6.69
|
%
|
5.26
|
%
|
|||||||
Real
Estate
|
339,872
|
293,191
|
4,983
|
3,937
|
5.86
|
5.37
|
|||||||||||||
Consumer
|
12,688
|
18,512
|
283
|
424
|
8.92
|
9.16
|
|||||||||||||
Total
loans
|
420,612
|
405,717
|
6,405
|
5,598
|
6.09
|
5.52
|
|||||||||||||
Securities:
|
|||||||||||||||||||
Federal
agencies
|
77,652
|
105,592
|
584
|
835
|
3.01
|
3.16
|
|||||||||||||
Mortgage-backed
|
26,763
|
22,139
|
286
|
233
|
4.27
|
4.21
|
|||||||||||||
State
and municipal
|
52,392
|
52,635
|
756
|
769
|
5.77
|
5.84
|
|||||||||||||
Other
|
15,770
|
20,765
|
199
|
238
|
5.05
|
4.58
|
|||||||||||||
Total
securities
|
172,577
|
201,131
|
1,825
|
2,075
|
4.23
|
4.13
|
|||||||||||||
Deposits
in other banks
|
3,964
|
5,570
|
28
|
13
|
2.83
|
0.93
|
|||||||||||||
Total
interest-earning assets
|
597,153
|
612,418
|
8,258
|
7,686
|
5.53
|
5.02
|
|||||||||||||
Non-earning
assets
|
22,605
|
25,472
|
|||||||||||||||||
Total
assets
|
$
|
619,758
|
$
|
637,890
|
|||||||||||||||
Deposits:
|
|||||||||||||||||||
Demand
|
$
|
80,477
|
$
|
72,794
|
110
|
61
|
0.55
|
0.34
|
|||||||||||
Money
market
|
42,295
|
51,965
|
153
|
92
|
1.45
|
0.71
|
|||||||||||||
Savings
|
82,410
|
83,847
|
150
|
104
|
0.73
|
0.50
|
|||||||||||||
Time
|
192,420
|
208,766
|
1,199
|
1,233
|
2.49
|
2.36
|
|||||||||||||
Total
deposits
|
397,602
|
417,372
|
1,612
|
1,490
|
1.62
|
1.43
|
|||||||||||||
Repurchase
agreements
|
44,274
|
47,980
|
214
|
124
|
1.93
|
1.03
|
|||||||||||||
Other
borrowings
|
21,426
|
22,222
|
251
|
250
|
4.69
|
4.50
|
|||||||||||||
Total
interest-bearing
|
|||||||||||||||||||
liabilities
|
463,302
|
487,574
|
2,077
|
1,864
|
1.79
|
1.53
|
|||||||||||||
Noninterest
bearing
|
|||||||||||||||||||
demand
deposits
|
83,023
|
75,664
|
|||||||||||||||||
Other
liabilities
|
2,036
|
2,897
|
|||||||||||||||||
Shareholders'
equity
|
71,397
|
71,755
|
|||||||||||||||||
Total
liabilities and
|
|||||||||||||||||||
shareholders'
equity
|
$
|
619,758
|
$
|
637,890
|
|||||||||||||||
Interest
rate spread
|
3.74
|
%
|
3.49
|
%
|
|||||||||||||||
Net
interest margin
|
4.14
|
%
|
3.80
|
%
|
|||||||||||||||
Net
interest income (taxable equivalent basis)
|
6,181
|
5,822
|
|||||||||||||||||
Less:
Taxable equivalent adjustment
|
271
|
276
|
|||||||||||||||||
Net
interest income
|
$
|
5,910
|
$
|
5,546
|
Net
Interest Income and Rate / Volume Analysis
|
|||||||||||||||||||
For
the Six Months Ended June 30, 2005 and 2004
|
|||||||||||||||||||
(in
thousands, except rates)
|
|||||||||||||||||||
Interest
|
|||||||||||||||||||
Average
Balance
|
Income/Expense
|
Yield/Rate
|
|||||||||||||||||
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
||||||||||||||
Loans:
|
|||||||||||||||||||
Commercial
|
$
|
70,268
|
$
|
109,962
|
$
|
2,272
|
$
|
2,696
|
6.47
|
%
|
4.90
|
%
|
|||||||
Real
Estate
|
331,904
|
276,843
|
9,586
|
7,752
|
5.78
|
5.60
|
|||||||||||||
Consumer
|
13,426
|
20,076
|
603
|
916
|
8.98
|
9.13
|
|||||||||||||
Total
loans
|
415,598
|
406,881
|
12,461
|
11,364
|
6.00
|
5.59
|
|||||||||||||
Securities:
|
|||||||||||||||||||
Federal
agencies
|
79,848
|
103,859
|
1,232
|
1,657
|
3.09
|
3.19
|
|||||||||||||
Mortgage-backed
|
27,628
|
21,131
|
593
|
466
|
4.29
|
4.41
|
|||||||||||||
State
and municipal
|
52,846
|
51,523
|
1,558
|
1,519
|
5.90
|
5.90
|
|||||||||||||
Other
|
16,264
|
20,336
|
395
|
491
|
4.86
|
4.83
|
|||||||||||||
Total
securities
|
176,586
|
196,849
|
3,778
|
4,133
|
4.28
|
4.20
|
|||||||||||||
Deposits
in other banks
|
5,399
|
9,829
|
70
|
44
|
2.59
|
0.90
|
|||||||||||||
Total
interest-earning assets
|
597,583
|
613,559
|
16,309
|
15,541
|
5.46
|
5.07
|
|||||||||||||
Non-earning
assets
|
22,750
|
25,797
|
|||||||||||||||||
Total
assets
|
$
|
620,333
|
$
|
639,356
|
|||||||||||||||
Deposits:
|
|
|
|||||||||||||||||
Demand
|
$
|
79,954
|
$
|
71,724
|
214
|
120
|
0.54
|
0.33
|
|||||||||||
Money
market
|
47,185
|
53,146
|
308
|
194
|
1.31
|
0.73
|
|||||||||||||
Savings
|
82,883
|
83,802
|
280
|
213
|
0.68
|
0.51
|
|||||||||||||
Time
|
192,838
|
212,423
|
2,330
|
2,560
|
2.42
|
2.41
|
|||||||||||||
Total
deposits
|
402,860
|
421,095
|
3,132
|
3,087
|
1.55
|
1.47
|
|||||||||||||
Repurchase
agreements
|
41,813
|
48,628
|
367
|
251
|
1.76
|
1.03
|
|||||||||||||
Other
borrowings
|
21,360
|
21,819
|
495
|
491
|
4.63
|
4.50
|
|||||||||||||
Total
interest-bearing
|
|||||||||||||||||||
liabilities
|
466,033
|
491,542
|
3,994
|
3,829
|
1.71
|
1.56
|
|||||||||||||
Noninterest
bearing
|
|||||||||||||||||||
demand
deposits
|
80,745
|
73,146
|
|||||||||||||||||
Other
liabilities
|
2,392
|
2,563
|
|||||||||||||||||
Shareholders'
equity
|
71,163
|
72,105
|
|||||||||||||||||
Total
liabilities and
|
|||||||||||||||||||
shareholders'
equity
|
$
|
620,333
|
$
|
639,356
|
|||||||||||||||
Interest
rate spread
|
3.75
|
%
|
3.51
|
%
|
|||||||||||||||
Net
interest margin
|
4.12
|
%
|
3.82
|
%
|
|||||||||||||||
Net
interest income (taxable equivalent basis)
|
12,315
|
11,712
|
|||||||||||||||||
Less:
Taxable equivalent adjustment
|
556
|
550
|
|||||||||||||||||
Net
interest income
|
$
|
11,759
|
$
|
11,162
|
June
30
|
December
31
|
||||||
2005
|
2004
|
||||||
90
days past due
|
$
|
290
|
$
|
-
|
|||
Nonaccrual
|
8,216
|
8,113
|
|||||
Foreclosed
real estate
|
158
|
221
|
|||||
Nonperforming
assets
|
$
|
8,664
|
$
|
8,334
|
|||
Amount
|
Expiration
Date
|
$2,000,000
|
July
2005
|
2,000,000
|
July
2006
|
1,000,000
|
July
2007
|
3,000,000
|
June
2008
|
5,000,000
|
August
2008
|
5,000,000
|
April
2009
|
1,313,000
|
March
2014
|
$19,313,000
|
Off-Balance
Sheet Transactions
|
June
30, 2005
|
December
31, 2004
|
|||||
Commitments
to extend credit
|
$
|
115,631
|
$
|
130,862
|
|||
Standby
letters of credit
|
2,876
|
4,849
|
|||||
Commitments
to purchase securities
|
-
|
-
|
|||||
Mortgage
loan rate-lock commitments
|
2,473
|
2,818
|
1.
|
Legal
Proceedings
|
Repurchases
made for the Quarter Ended June 30, 2005
|
|||||||||||||
Total
Number of Shares Purchased
|
Average
Price Paid Per share
|
Total
Number of Shares Purchased as Part of Publicly Announced
Program
|
Maximum
Number of Shares that May Yet Be Purchased Under the
Program
|
||||||||||
April
1-30, 2005
|
5,000
|
$
|
24.98
|
5,000
|
132,700
|
||||||||
May
1-31, 2005
|
23,950
|
23.91
|
23,950
|
108,750
|
|||||||||
June
1-30, 2005
|
20,000
|
24.82
|
20,000
|
88,750
|
|||||||||
48,950
|
$
|
24.39
|
48,950
|
||||||||||
On
August 17, 2004, the Corporation’s board of directors approved the
extension of its stock repurchase plan, begun in 2000, to include
the
repurchase of up to 250,000 shares of the Corporation’s common stock
between August 18, 2004 and August 16, 2005. The stock may be purchased
in
the open market and/or in privately negotiated transactions as management
and the board of directors determine to be in the best interest of
the
Corporation.
|
3.
|
Defaults
Upon Senior Securities
|
None
|
4.
|
Submission
of Matters to a Vote of Security
Holders
|
(1)
|
Election
of Directors
|
Affirmative
Votes
|
Votes
Withheld
|
||||||
H.
Dan Davis
|
3,848,068
|
38,016
|
|||||
Lester
A Hudson, Jr. Ph.D.
|
3,825,933
|
60,151
|
|||||
Charles
H. Majors
|
3,857,289
|
28,795
|
|||||
Richard
G. Barkhouser
|
3,858,361
|
27,723
|
5.
|
Other
Information
|
6.
|
Exhibits
|
11.
|
Refer
to EPS calculation in the Notes to Financial
Statements
|
31.1
|
Section
302 Certification of Charles H. Majors, President and
CEO
|
31.2
|
Section
302 Certification of Neal A. Petrovich, Senior Vice President and
Chief
Financial Officer
|
32.1
|
Section
906 Certification of Charles H. Majors, President and
CEO
|
32.2
|
Section
906 Certification of Neal A. Petrovich, Senior Vice President and
Chief
Financial Officer
|
AMERICAN
NATIONAL BANKSHARES INC.
|
||
/s/
Charles H. Majors
|
||
Charles
H. Majors
|
||
Date
- August
4, 2005
|
President
and Chief Executive Officer
|
|
/s/
Neal A. Petrovich
|
||
Neal
A. Petrovich
|
||
Senior
Vice President and
|
||
Date
- August 4, 2005
|
Chief
Financial Officer
|