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American National Bankshares Inc. Reports Second Quarter 2016 Earnings


DANVILLE, VA--(Marketwired - July 21, 2016) - American National Bankshares Inc. ("American National") (NASDAQ: AMNB)

  • Organic loan growth of $75.1 million (7.6%) during last four quarters
  • Q2 2016 net income of $4.1 million and diluted EPS of $0.47
  • Net interest margin of 3.45% for Q2 2016
  • Average shareholders' equity of $201.7 million is 12.67% of average assets

/EINPresswire.com/ -- American National Bankshares Inc. ("American National") (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced net income of $4,088,000 compared to $2,880,000 for the second quarter of 2015, a $1,208,000 or 41.9% increase. Basic and diluted net income per common share was $0.47 for the 2016 quarter compared to $0.33 for the 2015 quarter. Net income for the second quarter of 2016 produced annualized returns on average assets of 1.03%, on average equity of 8.11%, and on average tangible equity of 10.99%.

Net income for the first six months of 2016 was $8,216,000 compared to $6,395,000 for the comparable period of 2015, a $1,821,000 or 28.5% increase. Basic and diluted net income per common share was $0.95 for the 2016 period compared to $0.73 for the 2015 period.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, "We are seeing improving economic conditions in our markets and this is resulting in increased demand for credit. Loans have increased $75.1 million or 7.6% during the past year. In the past six months, loans have increased $52.4 million or 5.2%. We are very encouraged that a combination of active business development and gradually improving local market economic conditions are resulting in this high quality growth. However, the continuing challenge for our industry in this competitive environment is achieving reasonable risk adjusted yield on our earning assets.

"Loans don't exist in isolation; they require liquidity. Deposits have grown $64.4 million or 5.2% over the past year. In the past six months, deposits have grown $35.7 million or 2.8%. This growth is mostly in non-maturity, core deposits, the heart of our balance sheet. We continue working to grow these core deposits and their affiliated relationships, but the challenge in this ongoing low rate environment is to do that in a cost effective yet competitive manner. Our cost of interest bearing deposits for the second quarter was 0.54%, compared to 0.50% for the 2015 quarter.

"On the earnings side, net income for the second quarter was $4,088,000 compared to $2,880,000, an increase of $1,208,000 or 41.9%.

"The major driver was the noninterest expense, which was reduced $1,986,000 or 17.1%. This mostly related to non-recurring MainStreet acquisition expenses, which totaled $1,502,000 in the second quarter 2015.

"We also saw significant expense reduction in salaries, which declined $277,000 or 6.4% compared to the second quarter of 2015. Full time equivalent employees for the current quarter were 302, down from 322 for the prior year quarter. The magnitude of the decrease was directly related to the completion and integration of the MainStreet acquisition."

Haley concluded, "The first half of 2016 has been very productive for American National. Average loan balances this quarter are $75.2 million or 7.7% greater than the second quarter of 2015. American National will continue to grow its balance sheet and maintain high asset quality. However, capital will remain a strategic priority."

Capital
American National's capital ratios remain strong and exceed all regulatory requirements.

For the quarter ended June 30, 2016, average shareholders' equity was 12.67% of average assets, compared to 12.85% for the quarter ended June 30, 2015.

Book value per common share was $23.54 at June 30, 2016, compared to $22.43 at June 30, 2015.

Tangible book value per common share was $18.20 at June 30, 2016, compared to $16.96 at June 30, 2015.

Credit Quality Measurements
Non-performing assets ($3,412,000 of non-performing loans and $1,289,000 of other real estate owned) represented 0.29% of total assets at June 30, 2016, compared to 0.39% at June 30, 2015.

Annualized net charge offs to average loans was two basis points (0.02%) for the 2016 second quarter, compared to six basis points (0.06%) for the same quarter in 2015.

Other real estate owned was $1,289,000 compared to $2,113,000 at June 30, 2015, a decrease of $824,000 or 39.0%.

Acquisition Related Financial Impact
The acquisition accounting adjustments related to our two recent acquisitions have had and continue to have a positive impact on net interest income and income before income tax for American National. The impact of the adjustments is summarized below (dollars in thousands):

                                                                            
Acquisition related financial impact                                        
                                                                            
For the quarter ended June 30,                               2016       2015
                                                       ---------- ----------
Net interest income                                          $352       $843
Income before Income taxes                                    $64       $543
                                                                            
For the period ended June 30,                                2016       2015
                                                       ---------- ----------
Net interest income                                        $1,353     $1,955
Income before Income taxes                                   $777     $1,354
                                                                            

During the first quarter of 2016, the Company received two substantial payoffs of purchased credit impaired loans from our 2011 MidCarolina acquisition that resulted in $460,000 in cash-basis accretion income.

Net Interest Income
Net interest income before the provision for loan losses decreased to $12,160,000 in the second quarter of 2016 from $12,382,000 in the second quarter of 2015, a decrease of $222,000 or 1.8%.

For the 2016 quarter, the net interest margin was 3.45% compared to 3.69% for the same quarter in 2015, a decrease of 24 basis points (0.24%). The decrease in net interest income and margin was mostly driven by reduced levels of accretion income.

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the second quarter of 2016 was $50,000 compared to $100,000 for the second quarter of 2015.

The allowance for loan losses as a percentage of total loans was 1.20% at June 30, 2016 compared to 1.30% at June 30, 2015.

There was significant growth in the loans outstanding in the second quarter 2016, a net of $23.4 million or 2.3%. The need for additions to the allowance for loan losses was reduced by improvement in various qualitative factors used in the determination of the allowance, notably asset quality and local economic conditions. As noted in the Credit Quality discussion, non-performing assets, charge-offs, and other real estate owned are all improved over the past year.

Noninterest Income
Noninterest income totaled $3,367,000 in the second quarter of 2016, compared with $3,258,000 in the second quarter of 2015, an increase of $109,000 or 3.3%. There was very little change in most revenue categories during the quarter.

Noninterest Expense
Noninterest expense totaled $9,656,000 in the second quarter of 2016, compared to $11,642,000 in the second quarter of 2015, a decrease of $1,986,000 or 17.1%. The major driver of the decrease was nonrecurring merger related expenses, from the January 2015 MainStreet acquisition, which accounted for $1,502,000 or 75.6% of the decrease.

Salaries expense was down $277,000 or 6.4% for the second quarter of 2016 compared to the comparable period. This mostly related to a reduction in the number of full time equivalent employees to 302 from 322.

About American National
American National is a multi-state bank holding company with total assets of approximately $1.6 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving Virginia and North Carolina with 25 banking offices and two loan production offices. American National Bank also manages an additional $761 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about the company and the bank is available on the bank's website at www.amnb.com.

Shares of American National are traded on the NASDAQ Global Select Market under the symbol "AMNB."

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws. Certain of the statements involve significant risks and uncertainties. The statements herein are based on certain assumptions and analyses by American National and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates; changes in accounting principles, policies or guidelines; significant changes in the economic scenario; significant changes in regulatory requirements; significant changes in securities markets; and changes in technology and information security; and changes regarding acquisitions and dispositions. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in American National's most recent Form 10-K report and other documents filed with the Securities and Exchange Commission. American National does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

                                                                            
                     American National Bankshares Inc.                      
                        Consolidated Balance Sheets                         
          (Dollars in thousands, except share and per share data)           
                                 Unaudited                                  
--------------------------------------------------------------------------- 
                                                                            
                                                     June 30      June 30   
                                                   -----------  ----------- 
ASSETS                                                 2016         2015    
                                                   -----------  ----------- 
                                                                            
Cash and due from banks                            $    21,625  $    24,548 
Interest-bearing deposits in other banks                51,716       50,758 
Federal funds sold                                           -          408 
                                                                            
Securities available for sale, at fair value           362,800      355,595 
Restricted stock, at cost                                5,362        5,329 
Loans held for sale                                      4,692        2,720 
                                                                            
Loans                                                1,057,959      982,905 
  Less allowance for loan losses                       (12,674)     (12,793)
                                                   -----------  ----------- 
    Net Loans                                        1,045,285      970,112 
                                                   -----------  ----------- 
                                                                            
Premises and equipment, net                             22,878       24,182 
Other real estate owned, net                             1,289        2,113 
Goodwill                                                43,872       44,210 
Core deposit intangibles, net                            2,107        3,283 
Bank owned life insurance                               17,885       17,376 
Accrued interest receivable and other assets            22,140       23,722 
                                                   -----------  ----------- 
                                                                            
    Total assets                                   $ 1,601,651  $ 1,524,356 
                                                   ===========  =========== 
                                                                            
                                                                            
Liabilities                                                                 
  Demand deposits -- noninterest-bearing           $   321,442  $   294,342 
  Demand deposits -- interest-bearing                  205,440      239,582 
  Money market deposits                                252,118      190,799 
  Savings deposits                                     116,047      109,732 
  Time deposits                                        403,338      399,563 
                                                   -----------  ----------- 
    Total deposits                                   1,298,385    1,234,018 
                                                   -----------  ----------- 
                                                                            
  Customer repurchase agreements                        53,369       50,123 
  Long-term borrowings                                   9,969        9,947 
  Junior subordinated debt                              27,673       27,571 
  Accrued interest payable and other liabilities         9,551        7,814 
                                                   -----------  ----------- 
    Total liabilities                                1,398,947    1,329,473 
                                                   -----------  ----------- 
                                                                            
Shareholders' equity                                                        
  Preferred stock, $5 par, 2,000,000 shares                                 
   authorized,none outstanding                               -            - 
  Common stock, $1 par, 20,000,000 shares                                   
   authorized,8,609,160 shares outstanding at June                          
   30, 2016 and8,688,480 shares outstanding at                              
   June 30, 2015                                         8,572        8,671 
  Capital in excess of par value                        74,753       76,826 
  Retained earnings                                    115,648      106,984 
  Accumulated other comprehensive income, net            3,731        2,402 
                                                   -----------  ----------- 
    Total shareholders' equity                         202,704      194,883 
                                                   -----------  ----------- 
                                                                            
    Total liabilities and shareholders' equity     $ 1,601,651  $ 1,524,356 
                                                   ===========  =========== 
                                                                            
                                                                            
                      American National Bankshares Inc.                     
                      Consolidated Statements of Income                     
           (Dollars in thousands, except share and per share data)          
                                  Unaudited                                 
----------------------------------------------------------------------------
                                                                            
                                Three Months Ended       Six Months Ended   
                                     June 30                 June 30        
                             ----------------------- -----------------------
                                 2016        2015        2016        2015   
                             ----------- ----------- ----------- -----------
  Interest and Dividend                                                     
   Income:                                                                  
  Interest and fees on loans $    11,642 $    11,767 $    23,757 $    23,537
  Interest on federal funds                                                 
   sold                                -           1           -           5
  Interest and dividends on                                                 
   securities:                                                              
    Taxable                        1,150         994       2,234       1,969
    Tax-exempt                       817         940       1,640       1,900
    Dividends                         93          85         184         167
  Other interest income               67          50         125          98
                             ----------- ----------- ----------- -----------
      Total interest and                                                    
       dividend income            13,769      13,837      27,940      27,676
                             ----------- ----------- ----------- -----------
                                                                            
Interest Expense:                                                           
  Interest on deposits             1,314       1,184       2,611       2,378
  Interest on short-term                                                    
   borrowings                          1           2           2           5
  Interest on long-term                                                     
   borrowings                         81          81         162         161
  Interest on junior                                                        
   subordinated debt                 213         188         421         372
                             ----------- ----------- ----------- -----------
      Total interest expense       1,609       1,455       3,196       2,916
                             ----------- ----------- ----------- -----------
                                                                            
Net Interest Income               12,160      12,382      24,744      24,760
  Provision for loan losses           50         100         100         700
                             ----------- ----------- ----------- -----------
                                                                            
Net Interest Income After                                                   
 Provision for Loan Losses        12,110      12,282      24,644      24,060
                             ----------- ----------- ----------- -----------
                                                                            
Noninterest Income:                                                         
  Trust fees                         961       1,005       1,891       1,957
  Service charges on deposit                                                
   accounts                          514         525       1,006       1,022
  Other fees and commissions         656         607       1,328       1,195
  Mortgage banking income            365         389         657         611
  Securities gains, net              222         237         588         547
  Brokerage fees                     223         211         427         426
  Income from Small Business                                                
   Investment Companies               72          94         238         328
  Other                              354         190         529         328
                             ----------- ----------- ----------- -----------
      Total noninterest                                                     
       income                      3,367       3,258       6,664       6,414
                             ----------- ----------- ----------- -----------
                                                                            
Noninterest Expense:                                                        
  Salaries                         4,031       4,308       8,246       8,455
  Employee benefits                1,055       1,111       2,169       2,186
  Occupancy and equipment          1,059       1,024       2,158       2,196
  FDIC assessment                    193         195         381         380
  Bank franchise tax                 256         220         512         455
  Core deposit intangible                                                   
   amortization                      288         300         576         601
  Data processing                    459         483         903         945
  Software                           274         277         571         560
  Other real estate owned,                                                  
   net                                76         133         209         186
  Merger related expenses              -       1,502           -       1,861
  Other                            1,965       2,089       3,849       3,864
                             ----------- ----------- ----------- -----------
      Total noninterest                                                     
       expense                     9,656      11,642      19,574      21,689
                             ----------- ----------- ----------- -----------
                                                                            
Income Before Income Taxes         5,821       3,898      11,734       8,785
Income Taxes                       1,733       1,018       3,518       2,390
                             ----------- ----------- ----------- -----------
Net Income                   $     4,088 $     2,880 $     8,216 $     6,395
                             =========== =========== =========== ===========
                                                                            
Net Income Per Common Share:                                                
  Basic                      $      0.47 $      0.33 $      0.95 $      0.73
  Diluted                    $      0.47 $      0.33 $      0.95 $      0.73
Weighted Average Common                                                     
 Shares Outstanding:                                                        
  Basic                        8,610,156   8,707,504   8,610,998   8,713,528
  Diluted                      8,619,833   8,715,934   8,616,873   8,722,266
                                                                            
                                                                            
American                                                                    
 National                                                                   
 Bankshares Inc.                                                            
Financial                                                                   
 Highlights                                                                 
                                                                            
  (In thousands,                                                            
   except share,                                                            
   ratio and                                                                
  nonfinancial                                                              
   data,                                                                    
   unaudited)      2nd Qtr     1st Qtr     2nd Qtr       YTD         YTD    
                    2016        2016        2015        2016        2015    
                 ----------  ----------  ----------  ----------  ---------- 
EARNINGS                                                                    
  Interest                                                                  
   income        $   13,769  $   14,171  $   13,837  $   27,940  $   27,676 
  Interest                                                                  
   expense            1,609       1,587       1,455       3,196       2,916 
  Net interest                                                              
   income            12,160      12,584      12,382      24,744      24,760 
  Provision for                                                             
   loan losses           50          50         100         100         700 
  Noninterest                                                               
   income             3,367       3,297       3,258       6,664       6,414 
  Noninterest                                                               
   expense            9,656       9,918      11,642      19,574      21,689 
  Income taxes        1,733       1,785       1,018       3,518       2,390 
  Net income          4,088       4,128       2,880       8,216       6,395 
                                                                            
PER COMMON SHARE                                                            
  Income per                                                                
   share - basic $     0.47  $     0.48  $     0.33  $     0.95  $     0.73 
  Income per                                                                
   share -                                                                  
   diluted             0.47        0.48        0.33        0.95        0.73 
  Cash dividends                                                            
   paid                0.24        0.24        0.23        0.48        0.46 
  Book value per                                                            
   share              23.54       23.27       22.43       23.54       22.43 
  Book value per                                                            
   share -                                                                  
   tangible (a)       18.20       17.90       16.96       18.20       16.96 
  Closing market                                                            
   price              25.18       25.33       23.81       25.18       23.81 
                                                                            
FINANCIAL RATIOS                                                            
  Return on                                                                 
   average                                                                  
   assets              1.03%       1.06%       0.75%       1.05%       0.84%
  Return on                                                                 
   average                                                                  
   equity              8.11        8.28        5.86        8.19        6.51 
  Return on                                                                 
   average                                                                  
   tangible                                                                 
   equity (b)         10.99       11.27        8.26       11.13        9.14 
  Average equity                                                            
   to average                                                               
   assets             12.67       12.86       12.85       12.76       12.88 
  Tangible                                                                  
   equity to                                                                
   tangible                                                                 
   assets (a)         10.07       10.04        9.98       10.07        9.98 
  Net interest                                                              
   margin,                                                                  
   taxable                                                                  
   equivalent          3.45        3.67        3.69        3.56        3.71 
  Efficiency                                                                
   ratio (c)          60.91       61.36       72.76       61.14       68.36 
  Effective tax                                                             
   rate               29.77       30.19       26.12       29.98       27.21 
                                                                            
PERIOD-END                                                                  
 BALANCES                                                                   
  Securities     $  368,162  $  362,353  $  361,176  $  368,162  $  361,176 
  Loans held for                                                            
   sale               4,692         785       2,720       4,692       2,720 
  Loans, net of                                                             
   unearned                                                                 
   income         1,057,959   1,034,564     982,905   1,057,959     982,905 
  Goodwill and                                                              
   other                                                                    
   intangibles       45,979      46,267      47,493      45,979      47,493 
  Assets          1,601,651   1,582,554   1,524,356   1,601,651   1,524,356 
  Assets -                                                                  
   tangible (a)   1,555,672   1,536,287   1,476,863   1,555,672   1,476,863 
  Deposits        1,298,385   1,292,431   1,234,018   1,298,385   1,234,018 
  Customer                                                                  
   repurchase                                                               
   agreements        53,369      42,184      50,123      53,369      50,123 
  Long-term                                                                 
   borrowings        37,642      37,611      37,518      37,642      37,518 
  Shareholders'                                                             
   equity           202,704     200,443     194,883     202,704     194,883 
  Shareholders'                                                             
   equity -                                                                 
   tangible (a)     156,725     154,176     147,390     156,725     147,390 
                                                                            
AVERAGE BALANCES                                                            
  Securities     $  361,064  $  347,290  $  349,813  $  354,038  $  347,816 
  Loans held for                                                            
   sale               2,087       2,055       2,836       2,071       1,893 
  Loans, net of                                                             
   unearned                                                                 
   income         1,047,993   1,016,696     972,083   1,032,345     963,530 
  Interest-                                                                 
   earning                                                                  
   assets         1,464,692   1,424,808   1,397,448   1,444,611   1,390,172 
  Goodwill and                                                              
   other                                                                    
   intangibles       46,150      46,441      47,682      46,296      47,834 
  Assets          1,592,261   1,551,124   1,530,867   1,571,692   1,524,693 
  Assets -                                                                  
   tangible (a)   1,546,111   1,504,683   1,483,185   1,525,396   1,476,859 
  Interest-                                                                 
   bearing                                                                  
   deposits         972,385     950,271     945,931     961,328     942,019 
  Deposits        1,295,520   1,260,534   1,236,626   1,278,027   1,228,874 
  Customer                                                                  
   repurchase                                                               
   agreements        47,607      44,412      51,417      46,008      52,294 
  Long-term                                                                 
   borrowings        37,624      37,593      37,499      37,609      37,484 
  Shareholders'                                                             
   equity           201,685     199,525     196,663     200,605     196,376 
  Shareholders'                                                             
   equity -                                                                 
   tangible (a)     155,535     153,084     148,981     154,309     148,542 
                                                                            
American                                                                    
National                                                                    
Bankshares Inc.                                                             
Financial                                                                   
Highlights                                                                  
                                                                            
  (In thousands,                                                            
  except share,                                                             
  ratio and                                                                 
  nonfinancial                                                              
  data,                                                                     
  unaudited)       2nd Qtr     1st Qtr     2nd Qtr       YTD         YTD    
                    2016        2016        2015        2016        2015    
                 ----------  ----------  ----------  ----------  ---------- 
CAPITAL                                                                     
  Weighted                                                                  
   average                                                                  
   shares                                                                   
   outstanding -                                                            
   basic          8,610,156   8,608,728   8,707,504   8,610,998   8,713,528 
  Weighted                                                                  
   average                                                                  
   shares                                                                   
   outstanding -                                                            
   diluted        8,619,833   8,613,896   8,715,934   8,616,873   8,722,266 
                                                                            
ALLOWANCE FOR                                                               
 LOAN LOSSES                                                                
  Beginning                                                                 
   balance       $   12,675  $   12,601  $   12,844  $   12,601  $   12,427 
  Provision for                                                             
   loan losses           50          50         100         100         700 
  Charge-offs          (119)        (40)       (321)       (159)       (630)
  Recoveries             68          64         170         132         296 
                 ----------  ----------  ----------  ----------  ---------- 
  Ending balance $   12,674  $   12,675  $   12,793  $   12,674  $   12,793 
                                                                            
LOANS                                                                       
  Construction                                                              
   and land                                                                 
   development   $   89,451  $   82,711  $   66,543  $   89,451  $   66,543 
  Commercial                                                                
   real estate      438,164     427,824     432,315     438,164     432,315 
  Residential                                                               
   real estate      216,857     222,451     220,778     216,857     220,778 
  Home equity       107,007     100,019      97,866     107,007      97,866 
  Commercial and                                                            
   industrial       201,381     196,110     159,015     201,381     159,015 
  Consumer            5,099       5,449       6,388       5,099       6,388 
                 ----------  ----------  ----------  ----------  ---------- 
  Total          $1,057,959  $1,034,564  $  982,905  $1,057,959  $  982,905 
                                                                            
NONPERFORMING                                                               
 ASSETS AT                                                                  
 PERIOD-END                                                                 
  Nonperforming                                                             
   loans:                                                                   
    90 days past                                                            
     due and                                                                
     accruing    $        -  $        -  $        -  $        -  $        - 
    Nonaccrual        3,412       5,276       3,772       3,412       3,772 
  Other real                                                                
   estate owned       1,289       1,493       2,113       1,289       2,113 
                 ----------  ----------  ----------  ----------  ---------- 
  Nonperforming                                                             
   assets        $    4,701  $    6,769  $    5,885  $    4,701  $    5,885 
                                                                            
ASSET QUALITY                                                               
 RATIOS                                                                     
  Allowance for                                                             
   loan losses                                                              
   to total                                                                 
   loans               1.20%       1.23%       1.30%       1.20%       1.30%
  Allowance for                                                             
   loan losses                                                              
   tononperformi                                                            
   ng loans          371.45      240.24      339.16      371.45      339.16 
  Nonperforming                                                             
   assets to                                                                
   total assets        0.29        0.43        0.39        0.29        0.39 
  Nonperforming                                                             
   loans to                                                                 
   total loans         0.32        0.51        0.38        0.32        0.38 
  Annualized net                                                            
   charge-offs                                                              
   (recoveries)t                                                            
   o average                                                                
   loans               0.02       (0.01)       0.06        0.01        0.07 
                                                                            
                                                                            
OTHER DATA                                                                  
  Fiduciary                                                                 
   assets at                                                                
   period-end                                                               
   (d) (e)       $  491,517  $  491,257  $  509,289  $  491,517  $  509,289 
  Retail                                                                    
   brokerage                                                                
   assets at                                                                
   period-end                                                               
   (d) (e)       $  269,066  $  268,542  $  257,306  $  269,066  $  257,306 
  Number full-                                                              
   time                                                                     
   equivalent                                                               
   employees (f)        302         301         322         302         322 
  Number of full                                                            
   service                                                                  
   offices               25          25          27          25          27 
  Number of loan                                                            
   production                                                               
   offices                2           2           2           2           2 
  Number of                                                                 
   ATM's                 33          33          34          33          34 
                                                                            
 Notes:                                                                     
                                                                            
     (a) - Excludes goodwill and other intangible assets.                   
     (b) - Excludes amortization expense, net of tax, of intangible assets. 
     (c) - The efficiency ratio is calculated by dividing noninterest       
     expense excluding gains or losses on the sale of OREO by net interest  
     income including tax equivalent income on nontaxable loans and         
     securities and noninterest income and excluding (i) gains or losses on 
     securities and (ii) gains or losses on sale of premises and equipment. 
     (d) - Market value.                                                    
     (e) - Assets are not owned by the Company and are not reflected in the 
     consolidated balance sheet.                                            
     (f) - Average for quarter.                                             
                                                                            
                                                                            
                        Net Interest Income Analysis                        
             For the Three Months Ended June 30, 2016 and 2015              
                    (in thousands, except yields/rates)                     
                                                                            
                                              Interest                      
                    Average Balance        Income/Expense      Yield/Rate   
                 --------------------- --------------------- -------------- 
                                                                            
                    2016       2015       2016       2015     2016    2015  
                 ---------- ---------- ---------- ---------- ------  ------ 
Loans:                                                                      
  Commercial     $  200,000 $  155,752 $    1,976 $    1,760   3.97%   4.53%
  Real estate       844,914    807,605      9,591      9,841   4.54    4.87 
  Consumer            5,166     11,562        140        205  10.90    7.11 
                 ---------- ---------- ---------- ---------- ------  ------ 
    Total loans   1,050,080    974,919     11,707     11,806   4.46    4.85 
                 ---------- ---------- ---------- ---------- ------  ------ 
                                                                            
Securities:                                                                 
  Federal                                                                   
   agencies &                                                               
   GSEs             100,205     86,815        446        324   1.78    1.49 
  Mortgage-                                                                 
   backed & CMOs     81,379     61,738        425        334   2.09    2.16 
  State and                                                                 
   municipal        164,788    185,848      1,472      1,720   3.57    3.70 
  Other              14,692     15,412        130        125   3.54    3.24 
                 ---------- ---------- ---------- ---------- ------  ------ 
    Total                                                                   
     securities     361,064    349,813      2,473      2,503   2.74    2.86 
                 ---------- ---------- ---------- ---------- ------  ------ 
                                                                            
Federal funds                                                               
 sold                     -      6,480          -          1   0.00    0.06 
Deposits in                                                                 
 other banks         53,548     66,236         66         50   0.50    0.30 
                 ---------- ---------- ---------- ---------- ------  ------ 
                                                                            
  Total                                                                     
   interest-                                                                
   earning                                                                  
   assets         1,464,692  1,397,448     14,246     14,360   3.89    4.11 
                                       ---------- ---------- ------  ------ 
                                                                            
Non-earning                                                                 
 assets             127,569    133,419                                      
                 ---------- ----------                                      
                                                                            
    Total assets $1,592,261 $1,530,867                                      
                 ========== ==========                                      
                                                                            
Deposits:                                                                   
  Demand         $  229,639 $  237,102         43         22   0.08    0.04 
  Money market      221,508    195,578         91         61   0.17    0.13 
  Savings           117,408    109,397         14         14   0.05    0.05 
  Time              403,830    403,854      1,166      1,087   1.16    1.08 
                 ---------- ---------- ---------- ---------- ------  ------ 
    Total                                                                   
     deposits       972,385    945,931      1,314      1,184   0.54    0.50 
                                                                            
Customer                                                                    
 repurchase                                                                 
 agreements          47,607     51,417          1          2   0.01    0.02 
Long-term                                                                   
 borrowings          37,624     37,499        294        269   3.13    2.87 
                 ---------- ---------- ---------- ---------- ------  ------ 
  Total                                                                     
   interest-                                                                
   bearing                                                                  
   liabilities    1,057,616  1,034,847      1,609      1,455   0.61    0.56 
                                       ---------- ---------- ------  ------ 
                                                                            
Noninterest                                                                 
 bearing demand                                                             
 deposits           323,135    290,695                                      
Other                                                                       
 liabilities          9,825      8,662                                      
Shareholders'                                                               
 equity             201,685    196,663                                      
                 ---------- ----------                                      
    Total                                                                   
     liabilities                                                            
     and                                                                    
     share-                                                            
     holders' 
     equity      $1,592,261 $1,530,867                                      
                 ========== ==========                                      
                                                                            
Interest rate                                                               
 spread                                                        3.28%   3.55%
                                                             ======  ====== 
Net interest                                                                
 margin                                                        3.45%   3.69%
                                                             ======  ====== 
                                                                            
Net interest                                                                
 income (taxable                                                            
 equivalent                                                                 
 basis)                                    12,637     12,905                
Less: Taxable                                                               
 equivalent                                                                 
 adjustment                                   478        523                
                                       ---------- ----------                
Net interest                                                                
 income                                $   12,159 $   12,382                
                                       ========== ==========                
                                                                            
                                                                            
                        Net Interest Income Analysis                        
               For the Six Months Ended June 30, 2016 and 2015              
                     (in thousands, except yields/rates)                    
                                                                            
                                              Interest                      
                    Average Balance        Income/Expense      Yield/Rate   
                 --------------------- --------------------- -------------- 
                                                                            
                    2016       2015       2016       2015     2016    2015  
                 ---------- ---------- ---------- ---------- ------  ------ 
Loans:                                                                      
  Commercial     $  194,137 $  147,482 $    3,830 $    3,586   3.99%   4.90%
  Real estate       834,943    804,507     19,681     19,560   4.71    4.86 
  Consumer            5,336     13,434        371        445  14.06    6.68 
                 ---------- ---------- ---------- ---------- ------  ------ 
    Total loans   1,034,416    965,423     23,882     23,591   4.63    4.89 
                 ---------- ---------- ---------- ---------- ------  ------ 
                                                                            
Securities:                                                                 
  Federal                                                                   
   agencies &                                                               
   GSEs              94,244     80,866        824        569   1.75    1.41 
  Mortgage-                                                                 
   backed & CMOs     78,635     63,637        825        712   2.10    2.24 
  State and                                                                 
   municipal        165,349    188,020      2,964      3,483   3.59    3.70 
  Other              15,810     15,293        278        248   3.52    3.24 
                 ---------- ---------- ---------- ---------- ------  ------ 
    Total                                                                   
     securities     354,038    347,816      4,891      5,012   2.76    2.88 
                 ---------- ---------- ---------- ---------- ------  ------ 
                                                                            
Federal funds                                                               
 sold                     -     10,508          -          5   0.00    0.10 
Deposits in                                                                 
 other banks         56,157     66,425        125         98   0.45    0.30 
                 ---------- ---------- ---------- ---------- ------  ------ 
                                                                            
  Total                                                                     
   interest-                                                                
   earning                                                                  
   assets         1,444,611  1,390,172     28,898     28,706   4.01    4.13 
                                       ---------- ---------- ------  ------ 
                                                                            
Non-earning                                                                 
 assets             127,081    134,521                                      
                 ---------- ----------                                      
                                                                            
    Total assets $1,571,692 $1,524,693                                      
                 ========== ==========                                      
                                                                            
Deposits:                                                                   
  Demand         $  230,504 $  224,955         80         40   0.07    0.04 
  Money market      213,391    199,236        166        132   0.16    0.13 
  Savings           117,529    108,545         28         26   0.05    0.05 
  Time              399,904    409,283      2,337      2,180   1.18    1.07 
                 ---------- ---------- ---------- ---------- ------  ------ 
    Total                                                                   
     deposits       961,328    942,019      2,611      2,378   0.55    0.51 
                                                                            
Customer                                                                    
 repurchase                                                                 
 agreements          46,008     52,294          2          5   0.01    0.02 
Long-term                                                                   
 borrowings          37,609     37,484        583        533   3.10    2.84 
                 ---------- ---------- ---------- ---------- ------  ------ 
  Total                                                                     
   interest-                                                                
   bearing                                                                  
   liabilities    1,044,945  1,031,797      3,196      2,916   0.62    0.57 
                                       ---------- ---------- ------  ------ 
                                                                            
Noninterest                                                                 
 bearing demand                                                             
 deposits           316,699    286,855                                      
Other                                                                       
 liabilities          9,443      9,665                                      
Shareholders'                                                               
 equity             200,605    196,376                                      
                 ---------- ----------                                      
    Total                                                                   
     liabilities                                                            
     and                                                                    
     share                                                            
     holders' 
     equity      $1,571,692 $1,524,693                                      
                 ========== ==========                                      
                                                                            
Interest rate                                                               
 spread                                                        3.39%   3.56%
                                                             ======  ====== 
Net interest                                                                
 margin                                                        3.56%   3.71%
                                                             ======  ====== 
                                                                            
Net interest                                                                
 income (taxable                                                            
 equivalent                                                                 
 basis)                                    25,702     25,790                
Less: Taxable                                                               
 equivalent                                                                 
 adjustment                                   958      1,030                
                                       ---------- ----------                
Net interest                                                                
 income                                $   24,744 $   24,760                
                                       ========== ==========                
                                                                            


 
      
        


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