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American National reports first quarter 2012 earnings

American National Bankshares Inc. (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, announced first quarter 2012 net income of $4,175,000 compared to $1,778,000 for the first quarter of 2011, a $2,397,000 or 135 percent increase.  

Earnings per share, basic and diluted, were $0.53 for the 2012 quarter compared to $0.29 for the 2011 quarter. This quarterly net income produced for 2012 a return on average assets of 1.27 percent, a return on average equity of 10.80 percent, and a return on average tangible equity of 16.70 percent.

Earnings for the first quarter of 2012 were favorably impacted by the mid 2011 merger between American National and MidCarolina Financial Corporation (“MidCarolina”). Unless otherwise noted, most of the material changes between periods are related to the merger. 

Financial Performance and Overview

Charles H. Majors, chairman and chief executive officer, reported, “As we begin 2012, American National is continuing to adjust to its larger size and complexity after the 2011 merger with MidCarolina. In addition, during this quarter, we made major changes to the bank’s management information systems, a computer software conversion, in an effort to lay the foundation for a 21st century community bank. As one would expect, it was a large and complex  project, and ultimately vital to the long range well-being of our bank by insuring our ability to take care of our customers’ banking needs. 

 “As we begin the second quarter of 2012, we believe the merger related transition and the computer and management information system transition have been successful.

 “Earnings for the quarter were very good. Our net income was $4,175,000 for 2012, compared to $1,778,000 for the prior year quarter, an increase of 135 percent.  On a diluted EPS basis we earned $0.53 compared to $0.29 a year earlier.

“Much of the increase was driven by the merger with MidCarolina. Approximately $2,300,000 of our 2012 quarter pretax income was directly related to various categorical fair value adjustments, the majority of which results from the loan portfolio purchase discount. In fact, of this income, over $900,000 related to early pay offs of loans in the purchased credit impaired loan portfolio. 

 “We are always reviewing and assessing the overall credit risk in the loan portfolio for the Virginia side of the bank and for the acquired loans in North Carolina. As we recognize accretion income on the acquired loans, we are aware of the rapid reduction in the credit portion of the fair value purchase discount, also known as the mark. The mark is reducing at a faster velocity than the related loan balances, because of loan structure, and this has implications for our loan loss methodology. Consequently, during the first quarter, in addition to our normally determined provision expense, our analysis determined we needed to provide an additional $400,000.

Majors concluded, “There is a lot going on in our industry and with our community bank. This is a truly an exciting time for American National. We invite our customers and shareholders to help us build and grow a community bank for the new century.”