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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

American National Bankshares Inc. Reports Third Quarter 2019 Earnings

October 17, 2019

-- Q3 2019 net income of $8.7 million and diluted EPS of $0.78 -- Net interest margin of 3.75% for Q3 2019 -- Average shareholders’ equity of $315.0 million is 12.98% of average assets -- Nonperforming assets to total assets 0.15% for Q3 2019

DANVILLE, Va., Oct. 17, 2019 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (“American National”) (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced net income of $8,692,000 for the third quarter of 2019 compared to $5,785,000 for the third quarter of 2018, a $2,907,000 or 50.3% increase. Basic and diluted net income per common share was $0.78 for the 2019 quarter compared to $0.66 for the 2018 quarter. Net income for the third quarter of 2019 produced annualized returns on average assets of 1.43%, on average equity of 11.04%, and on average tangible equity of 16.31%.

Net income for the first nine months of 2019 was $13,465,000 compared to $17,577,000 for the comparable period of 2018, a $4,112,000 or 23.4% decrease. Basic and diluted net income per common share was $1.30 for the 2019 period compared to $2.02 for the 2018 period. The nine-month period for 2019 was adversely impacted by $11.3 million in one time, merger related expenses associated with the HomeTown Bankshares Corporation (“HomeTown”) acquisition in April 2019.

Financial Performance and Overview

Jeffrey V. Haley, President and Chief Executive Officer, said, “Net income for the third quarter of 2019 was $8.7 million. This was a $2.9 million or 50.3% increase over the comparable quarter of 2018. This increase was primarily related to the April 1, 2019 merger with HomeTown.

“Net interest income for the 2019 quarter compared to the 2018 quarter significantly increased, it was up $5.9 million or 39.8%.

“The improvement in net interest income was related to a higher average balance of loans for the 2019 quarter compared to the 2018 quarter. Loan average balances for the 2019 quarter were up $491.3 million or 36.9% over the 2018 quarter. Loan yields for the 2019 quarter were 40 basis points higher than the 2018 quarter.

“End of period loan balances for September 30, 2019, compared to December 31, 2018, increased $447.0 million. Of this increase, $444.3 million was the result of the HomeTown merger and $2.7 million represents other growth in the franchise.

“September 30, 2019 loan balances compared to June 30, 2019 balances fell $31.8 million (1.7%). These balances were adversely impacted by unexpected customer pay downs. They resulted from sales of businesses, debt reduction from cash, movement into the permanent, non-recourse market, and other drivers. These unexpected pay downs aggregated roughly $36 million during the 2019 quarter.

“Average interest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased substantially, up $325.0 million or 29.0% with a 27 basis point higher cost. This cost increase reflects increased deposit competition throughout our franchise.

“End of period interest bearing deposit balances for September 30, 2019, compared to December 31, 2018, increased $307.0 million. Of this increase, $364.2 million was the result of the HomeTown merger and $57.2 million represents deposit reduction throughout the franchise.

“Average noninterest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased; they were up $144.7 million or 34.1%.

“End of period noninterest bearing deposit balances for September 30, 2019, compared to December 31, 2018, increased $168.7 million (38.7%). Of this increase, $119.5 million was the result of the HomeTown merger and $49.2 million represents deposit growth throughout the remainder of the franchise.”

Haley concluded, “The market is very challenging. We were dealing with rising interest rates a year ago. We are dealing with declining interest rates as we approach the end of 2019. This means continued pressure on our net interest margin. Strategically, American National will maintain its focus on maintaining high asset quality, strive to shorten the duration of our time deposits and, where prudent, extend the duration of our earning assets. One of the few certainties we have is that economic cycles ebb and flow. American National has over a century of history and experience dealing with all sorts of economic environments and we will continue to do so. By doing so, we will continue to provide our customers with the best in banking products and services and produce a strong return for our shareholders.” CapitalAmerican National’s capital ratios remain strong and exceed all regulatory requirements.

For the quarter ended September 30, 2019, average shareholders’ equity was 12.98% of average assets, compared to 11.87% for the quarter ended September 30, 2018.

Book value per common share was $28.54 at September 30, 2019, compared to $24.79 at September 30, 2018.

Tangible book value per common share was $20.19 at September 30, 2019, compared to $19.65 at September 30, 2018.

Credit Quality MeasurementsNonperforming assets ($1,446,000 of nonaccrual loans, $874,000 of 90 days past due and accruing loans, and $1,353,000 of other real estate owned) represented 0.15% of total assets at September 30, 2019, compared to 0.18% at September 30, 2018.

Annualized net charge-offs to average loans were zero basis points (0.00%) for the 2019 third quarter compared to a net recovery of three basis points (0.03%) for the same quarter in 2018.

Other real estate owned was $1,353,000 compared to $916,000 at September 30, 2018, an increase of $437,000 or 47.7%.

Merger Related Financial ImpactThe merger accounting adjustments related to our acquisitions have had and continue to have a positive impact on net interest income and income before income taxes. The impact of these adjustments is summarized below (dollars in thousands):

For the quarter ended September 30, 2019 2018 --------------------------------------- ------- ------- Net Interest Income $ 948 $ 198 Income Before Income Taxes $ 500 $ 142 For the nine months ended September 30, 2019 2018 --------------------------------------- ------- ------- Net Interest Income $ 2,321 $ 1,002 Income Before Income Taxes $ 1,360 $ 792

In the table above, the impact for the quarter ended September 30, 2019 related to the HomeTown merger on net interest income was $764,000 and on income before taxes was $371,000. The impact for the nine months ended September 30, 2019 related to the HomeTown merger on net interest income was $1,648,000 and on income before taxes was $852,000.

The third quarter of 2019 includes $148,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $59,000 for the comparable quarter of 2018.

For the nine-month period ended September 30, 2019, cash basis accretion income was $544,000, compared to $545,000 for the same period in 2018.

Net Interest IncomeNet interest income before the provision for loan losses increased to $20,622,000 in the third quarter of 2019 from $14,751,000 in the third quarter of 2018, an increase of $5,871,000 or 39.8%.

For the 2019 quarter, the net interest margin was 3.75% compared to 3.51% for the same quarter in 2018, an increase of 24 basis points (0.24%).

The major drivers affecting the net interest margin were:

-- Positively – a $514.0 million (30.3%) increase in average earning assets, mostly loans, at a 44 basis point higher yield. -- Positively – a $144.7 million (34.1%) increase in average noninterest bearing demand deposits. -- Negatively – a $325.0 million (29.0%) increase in average interest bearing deposits at a 27 basis point higher cost.

Most of these increases were directly related to the HomeTown merger.

Provision for Loan Losses and Allowance for Loan LossesProvision expense for the third quarter of 2019 was a negative $12,000 compared to a negative $23,000 for the third quarter of 2018. Both quarters’ negative provision were related to adjustments on specific reserves for several acquired impaired loans.

The allowance for loan losses as a percentage of total loans was 0.71% at September 30, 2019 compared to 1.02% at September 30, 2018. The major driver of the change was the HomeTown merger on April 1, 2019, which resulted in American National acquiring $444.3 million in loans.

Net loans outstanding fell during the third quarter by $31.8 million or 1.7%. This significantly reduced the need for an increase to the allowance.

Noninterest IncomeNoninterest income totaled $4,171,000 in the third quarter of 2019, compared with $3,380,000 in the third quarter of 2018, an increase of $791,000 or 23.4%. The major driver was other fees and commissions, which increased $347,000 or 52.9%, mostly on the strength of debit card fee revenue, primarily related to the Hometown acquisition.

Noninterest ExpenseNoninterest expense totaled $13,792,000 in the third quarter of 2019, compared to $10,904,000 in the third quarter of 2018, an increase of $2,888,000 or 26.5%. The 2019 quarter was positively impacted by the Small Bank Assessment Credit, which reduced FDIC insurance expense $330,000. The major driver of the increase in expense was the merger with HomeTown in the second quarter of 2019.

About American NationalAmerican National is a multi-state bank holding company with total assets of approximately $2.5 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 28 banking offices. American National Bank also manages an additional $855 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about American National and American National Bank is available on American National Bank’s website at www.amnb.com.

Non-GAAP Financial MeasuresThis release contains financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). American National’s management uses these non-GAAP financial measures in its analysis of American National’s performance. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of American National’s core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. For a reconciliation of non-GAAP financial measures, see “Reconciliation of Non-GAAP Financial Measures” at the end of this release.

Forward-Looking StatementsStatements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) expected revenue synergies and cost savings from the recently completed merger with HomeTown may not be fully realized or realized within the expected timeframe; (2) the businesses of American National and/or HomeTown may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (3) revenues following the merger may be lower than expected; (4) customer and employee relationships may be disrupted by the merger; (5) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (6) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American National’s market areas; (7) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (8) accounting principles, policies, and guidelines; and (9) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

Contact: William W. Traynham, Chief Financial Officer 434-773-2242 traynhamw@amnb.com

American National Bankshares Inc. Consolidated Balance Sheets (Dollars in thousands, except per share data) Unaudited ----------------------------------------------------------------------------------- September 30 ---------------------------- 2019 2018 - --------- - - --------- - Assets Cash and due from banks $ 47,025 $ 32,688 Interest-bearing deposits in other banks 95,592 37,355 Equity securities, at fair value - 2,087 Securities available for sale, at fair value 308,490 295,777 Restricted stock, at cost 8,621 5,239 Loans held for sale 5,646 1,934 Loans 1,804,447 1,331,153 Less allowance for loan losses (12,758 ) (13,588 ) - --------- - - --------- - Net Loans 1,791,689 1,317,565 - --------- - - --------- - Premises and equipment, net 39,261 25,690 Other real estate owned, net 1,353 916 Goodwill 84,633 43,872 Core deposit intangibles, net 8,165 981 Bank owned life insurance 27,612 18,785 Accrued interest receivable and other assets 36,442 23,602 - --------- - - --------- - Total assets $ 2,454,529 $ 1,806,491 - --------- - - --------- - Liabilities Demand deposits -- noninterest-bearing $ 604,498 $ 420,486 Demand deposits -- interest-bearing 323,871 230,984 Money market deposits 450,022 362,575 Savings deposits 176,803 135,702 Time deposits 486,668 373,360 Total deposits 2,041,862 1,523,107 - --------- - - --------- - Customer repurchase agreements 38,924 29,104 Subordinated debt 7,521 - Junior subordinated debt 28,003 27,902 Accrued interest payable and other liabilities 20,973 10,312 - --------- - - --------- - Total liabilities 2,137,283 1,590,425 - --------- - - --------- - Shareholders’ equity Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding - - Common stock, $1 par, 20,000,000 shares authorized, 11,116,250 shares outstanding at September 30, 2019 and 8,714,431 shares outstanding at September 30, 2018 11,063 8,661 Capital in excess of par value 159,792 77,842 Retained earnings 147,030 138,715 Accumulated other comprehensive loss, net (639 ) (9,152 ) - --------- - - --------- - Total shareholders’ equity 317,246 216,066 - --------- - - --------- - Total liabilities and shareholders’ equity $ 2,454,529 $ 1,806,491 - --------- - - --------- -

American National Bankshares Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) Unaudited ------------------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30 September 30 ----------------------------- ----------------------------- 2019 2018 2019 2018 - ---------- - - --------- - - ---------- - - --------- - Interest and Dividend Income: Interest and fees on loans $ 22,470 $ 15,062 $ 60,737 $ 44,485 Interest and dividends on securities: Taxable 1,890 1,568 5,691 4,432 Tax-exempt 134 362 660 1,204 Dividends 135 82 324 240 Other interest income 329 143 853 516 Total interest and dividend income 24,958 17,217 68,265 50,877 - ---------- - - --------- - - ---------- - - --------- - Interest Expense: Interest on deposits 3,655 2,048 9,647 5,746 Interest on short-term borrowings 162 29 512 41 Interest on long-term borrowings - - 14 - Interest on subordinated debt 123 - 245 - Interest on junior subordinated debt 396 389 1,168 1,008 Total interest expense 4,336 2,466 11,586 6,795 - ---------- - - --------- - - ---------- - - --------- - Net Interest Income 20,622 14,751 56,679 44,082 Recovery of loan losses (12 ) (23 ) (6 ) (97 ) - ---------- - - --------- - - ---------- - - --------- - Net Interest Income After Recovery of Loan Losses 20,634 14,774 56,685 44,179 - ---------- - - --------- - - ---------- - - --------- - Noninterest Income: Trust fees 979 1,001 2,826 2,875 Service charges on deposit accounts 783 605 2,101 1,809 Other fees and commissions 1,003 656 2,726 1,977 Mortgage banking income 710 551 1,702 1,492 Securities gains (losses), net 105 (17 ) 575 393 Brokerage fees 183 172 516 603 Income from Small Business Investment Companies 143 150 174 476 Gains (losses) on premises and equipment, net (2 ) 63 (89 ) 66 Other 267 199 773 585 - ---------- - - --------- - - ---------- - - --------- - Total noninterest income 4,171 3,380 11,304 10,276 - ---------- - - --------- - - ---------- - - --------- - Noninterest Expense: Salaries 6,295 5,285 18,007 15,377 Employee benefits 1,367 1,036 4,022 3,322 Occupancy and equipment 1,448 1,069 3,963 3,297 FDIC assessment (175 ) 134 119 412 Bank franchise tax 411 291 1,113 863 Core deposit intangible amortization 448 56 961 210 Data processing 589 420 1,838 1,309 Software 287 307 932 966 Other real estate owned, net 47 46 16 101 Merger related expenses - - 11,322 - Other 3,075 2,260 8,744 6,751 - ---------- - - --------- - - ---------- - - --------- - Total noninterest expense 13,792 10,904 51,037 32,608 - ---------- - - --------- - - ---------- - - --------- - Income Before Income Taxes 11,013 7,250 16,952 21,847 Income Taxes 2,321 1,465 3,487 4,270 - ---------- - - --------- - Net Income $ 8,692 $ 5,785 $ 13,465 $ 17,577 - ---------- - - --------- - - ---------- - - --------- - Net Income Per Common Share: Basic $ 0.78 $ 0.66 $ 1.30 $ 2.02 Diluted $ 0.78 $ 0.66 $ 1.30 $ 2.02 Weighted Average Common Shares Outstanding: Basic 11,127,603 8,712,443 10,341,919 8,691,423 Diluted 11,138,008 8,718,918 10,351,753 8,703,662

American National Bankshares Inc. Financial Highlights Unaudited (Dollars in thousands, except per share data) 3rd Qtr 2nd Qtr 3rd Qtr YTD YTD 2019 2019 2018 2019 2018 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - EARNINGS Interest income $ 24,958 $ 25,211 $ 17,217 $ 68,265 $ 50,877 Interest expense 4,336 4,222 2,466 11,586 6,795 Net interest income 20,622 20,989 14,751 56,679 44,082 Recovery of loan losses (12 ) (10 ) (23 ) (6 ) (97 ) Noninterest income 4,171 3,682 3,380 11,304 10,276 Noninterest expense 13,792 26,316 10,904 51,037 32,608 Income taxes 2,321 (405 ) 1,465 3,487 4,270 Net income (loss) 8,692 (1,230 ) 5,785 13,465 17,577 PER COMMON SHARE Income (loss) per share - basic $ 0.78 $ (0.11 ) $ 0.66 $ 1.30 $ 2.02 Income (loss) per share - 0.78 (0.11 ) 0.66 1.30 2.02 diluted Cash dividends paid 0.27 0.25 0.25 0.77 0.75 Book value per share 28.54 28.00 24.79 28.54 24.79 Book value per share - tangible 20.19 19.63 19.65 20.19 19.65 (a) Closing market price 35.47 38.75 39.00 35.47 39.00 FINANCIAL RATIOS Return on average assets 1.43 % (0.20 )% 1.28 % 0.80 % 1.29 % Return on average equity 11.04 (1.60 ) 10.76 6.35 11.04 Return on average tangible 16.31 (1.62 ) 13.70 9.23 14.14 equity (a) Average equity to average assets 12.98 12.62 11.87 12.60 11.67 Tangible equity to tangible 9.50 9.41 9.72 9.50 9.72 assets (a) Net interest margin, taxable 3.75 3.82 3.51 3.70 3.49 equivalent Efficiency ratio (a) 53.79 60.94 59.35 57.25 59.56 Effective tax rate 21.08 (24.77 ) 20.21 20.57 19.55 PERIOD-END BALANCES Securities $ 317,111 $ 342,247 $ 303,103 $ 317,111 $ 303,103 Loans held for sale 5,646 3,165 1,934 5,646 1,934 Loans, net of unearned income 1,804,447 1,836,241 1,331,153 1,804,447 1,331,153 Goodwill and other intangibles 92,798 93,246 44,853 92,798 44,853 Assets 2,454,529 2,418,082 1,806,491 2,454,529 1,806,491 Assets - tangible (a) 2,361,731 2,324,836 1,761,638 2,361,731 1,761,638 Deposits 2,041,862 1,999,097 1,523,107 2,041,862 1,523,107 Customer repurchase agreements 38,924 37,222 29,104 38,924 29,104 Long-term borrowings 35,524 35,504 27,902 35,524 27,902 Shareholders’ equity 317,246 311,917 216,066 317,246 216,066 Shareholders’ equity - tangible 224,448 218,671 171,213 224,448 171,213 (a) AVERAGE BALANCES Securities (b) $ 323,202 $ 354,506 $ 335,320 $ 340,439 $ 330,561 Loans held for sale 3,904 2,913 3,282 2,890 2,650 Loans, net of unearned income 1,817,732 1,816,203 1,327,060 1,663,856 1,328,936 Interest-earning assets 2,207,935 2,211,273 1,693,912 2,054,087 1,700,128 Goodwill and other intangibles 93,077 93,075 44,887 77,154 44,958 Assets 2,426,678 2,433,948 1,811,631 2,243,343 1,818,615 Assets - tangible (a) 2,333,601 2,340,873 1,766,744 2,166,189 1,773,657 Interest-bearing deposits 1,443,947 1,463,613 1,118,929 1,347,532 1,140,443 Deposits 2,012,653 2,023,557 1,542,945 1,864,230 1,555,086 Customer repurchase agreements 39,470 35,657 11,896 39,265 11,829 Other short-term borrowings 1,986 7,627 2,176 3,502 1,536 Long-term borrowings 35,806 36,301 27,886 33,107 27,861 Shareholders’ equity 314,980 307,281 215,054 282,644 212,268 Shareholders’ equity - tangible 221,903 214,206 170,167 205,490 167,310 (a) American National Bankshares Inc. Financial Highlights Unaudited (Dollars in thousands, except per share data) 3rd Qtr 2nd Qtr 3rd Qtr YTD YTD 2019 2019 2018 2019 2018 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - CAPITAL Weighted average shares 11,127,603 11,126,800 8,712,443 10,341,919 8,691,423 outstanding - basic Weighted average shares 11,138,008 11,126,800 8,718,918 10,351,753 8,703,662 outstanding - diluted ALLOWANCE FOR LOAN LOSSES Beginning balance $ 12,786 $ 12,806 $ 13,508 $ 12,805 $ 13,603 Recovery of loan losses (12 ) (10 ) (23 ) (6 ) (97 ) Charge-offs (66 ) (54 ) (28 ) (189 ) (202 ) Recoveries 50 44 131 148 284 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - Ending balance $ 12,758 $ 12,786 $ 13,588 $ 12,758 $ 13,588 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - LOANS Construction and land $ 143,788 $ 152,876 $ 99,546 $ 143,788 $ 99,546 development Commercial real estate 883,219 880,146 632,022 883,219 632,022 Residential real estate 318,833 328,400 205,277 318,833 205,277 Home equity 122,074 121,905 104,873 122,074 104,873 Commercial and industrial 324,508 340,427 284,176 324,508 284,176 Consumer 12,025 12,487 5,259 12,025 5,259 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - Total $ 1,804,447 $ 1,836,241 $ 1,331,153 $ 1,804,447 $ 1,331,153 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - NONPERFORMING ASSETS AT PERIOD-END Nonperforming loans: 90 days past due and accruing $ 874 $ 930 $ 74 $ 874 $ 74 Nonaccrual 1,446 969 2,238 1,446 2,238 Other real estate owned 1,353 1,433 916 1,353 916 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - Nonperforming assets $ 3,673 $ 3,332 $ 3,228 $ 3,673 $ 3,228 - ---------- - - ---------- -- - --------- - - ---------- - - --------- - ASSET QUALITY RATIOS Allowance for loan losses to 0.71 % 0.70 % 1.02 % 0.71 % 1.02 % total loans Allowance for loan losses to nonperforming loans 549.91 673.30 587.72 549.91 587.72 Nonperforming assets to total 0.15 0.14 0.18 0.15 0.18 assets Nonperforming loans to total 0.13 0.10 0.17 0.13 0.17 loans Annualized net charge-offs to average loans 0.00 0.00 (0.03 ) 0.00 (0.01 ) OTHER DATA Fiduciary assets at period-end $ 546,407 $ 547,731 $ 523,754 $ 546,407 $ 523,754 (c) (d) Retail brokerage assets at $ 308,820 $ 314,051 $ 333,565 $ 308,820 $ 333,565 period-end (c) (d) Number full-time equivalent 365 371 316 365 316 employees (e) Number of full service offices 28 28 24 28 24 Number of loan production 1 1 2 1 2 offices Number of ATM’s 40 39 34 40 34 Notes: (a) - This financial measure is not calculated in accordance with GAAP. For a reconciliation of non-GAAP financial measures, see “Reconciliation of Non-GAAP Financial Measures” at the end of this release. (b) - Average does not include unrealized gains and losses. (c) - Market value. (d) - Assets are not owned by American National and are not reflected in the consolidated balance sheet. (e) - Average for quarter.

Net Interest Income Analysis For the Three Months Ended September 30, 2019 and 2018 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense Yield/Rate ------------------------ ------------------- ----------- 2019 2018 2019 2018 2019 2018 - --------- - --------- - ------ - ------ ---- ---- Loans: Commercial $ 320,802 $ 268,296 $ 3,820 $ 2,715 4.72 % 4.01 % Real estate 1,489,155 1,057,097 18,487 12,317 4.97 4.66 Consumer 11,679 4,949 209 76 7.10 6.09 - --------- - --------- - ------ - ------ Total loans 1,821,636 1,330,342 22,516 15,108 4.94 4.54 - --------- - --------- - ------ - ------ ---- ---- Securities: Federal agencies & GSEs 127,956 128,284 767 732 2.40 2.28 Mortgage-backed & CMOs 133,121 107,817 851 604 2.56 2.24 State and municipal 45,830 84,147 330 583 2.88 2.77 Other 16,295 15,072 242 180 5.94 4.78 - --------- - --------- - ------ - ------ Total securities 323,202 335,320 2,190 2,099 2.71 2.50 - --------- - --------- - ------ - ------ ---- ---- Deposits in other banks 63,097 28,250 329 143 2.07 2.01 - --------- - --------- - ------ - ------ ---- ---- Total interest-earning assets 2,207,935 1,693,912 25,035 17,350 4.53 4.09 Non-earning assets 218,743 117,719 - --------- - --------- Total assets $ 2,426,678 $ 1,811,631 - --------- - --------- Deposits: Demand $ 324,058 $ 231,339 119 12 0.15 0.02 Money market 453,873 377,074 1,415 839 1.24 0.88 Savings 176,673 132,450 94 10 0.21 0.03 Time 489,343 378,066 2,027 1,187 1.64 1.25 - --------- - --------- - ------ - ------ ---- ---- Total deposits 1,443,947 1,118,929 3,655 2,048 1.00 0.73 Customer repurchase agreements 39,470 11,896 150 17 1.51 0.57 Other short-term borrowings 1,986 2,176 12 12 2.42 2.21 Long-term borrowings 35,806 27,886 519 389 5.80 5.58 - --------- - --------- - ------ - ------ ---- ---- Total interest-bearing liabilities 1,521,209 1,160,887 4,336 2,466 1.13 0.84 - ------ - ------ ---- ---- Noninterest bearing demand deposits 568,706 424,016 Other liabilities 21,783 11,674 Shareholders’ equity 314,980 215,054 - --------- - --------- Total liabilities and shareholders’ equity $ 2,426,678 $ 1,811,631 - --------- - --------- Interest rate spread 3.40 % 3.25 % ---- ---- Net interest margin 3.75 % 3.51 % ---- ---- Net interest income (taxable equivalent basis) 20,699 14,884 Less: Taxable equivalent adjustment 77 133 Net interest income $ 20,622 $ 14,751 - ------ - ------

Net Interest Income Analysis For the Nine Months Ended September 30, 2019 and 2018 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense Yield/Rate ------------------------ ------------------ ----------- 2019 2018 2019 2018 2019 2018 - --------- - --------- - ------ - ------ ---- ---- Loans: Commercial $ 302,750 $ 264,983 $ 10,609 $ 7,811 4.69 % 3.94 % Real estate 1,354,358 1,062,075 49,782 36,594 4.90 4.59 Consumer 9,638 4,528 485 229 6.73 6.76 - --------- - --------- - ------ - ------ Total loans 1,666,746 1,331,586 60,876 44,634 4.87 4.47 - --------- - --------- - ------ - ------ ---- ---- Securities: Federal agencies & GSEs 135,937 119,597 2,475 1,956 2.43 2.18 Mortgage-backed & CMOs 124,258 108,473 2,353 1,812 2.52 2.23 State and municipal 64,084 87,365 1,348 1,870 2.80 2.85 Other 16,160 15,126 653 531 5.39 4.68 - --------- - --------- - ------ - ------ Total securities 340,439 330,561 6,829 6,169 2.67 2.49 - --------- - --------- - ------ - ------ ---- ---- Deposits in other banks 46,902 37,981 853 516 2.43 1.82 - --------- - --------- - ------ - ------ ---- ---- Total interest-earning assets 2,054,087 1,700,128 68,558 51,319 4.45 4.03 Non-earning assets 189,256 118,487 - --------- - --------- Total assets $ 2,243,343 $ 1,818,615 - --------- - --------- Deposits: Demand $ 299,769 $ 236,734 245 36 0.11 0.02 Money market 432,980 394,005 3,962 2,424 1.22 0.82 Savings 163,525 131,789 201 30 0.16 0.03 Time 451,258 377,915 5,239 3,256 1.55 1.15 - --------- - --------- - ------ - ------ ---- ---- Total deposits 1,347,532 1,140,443 9,647 5,746 0.96 0.67 Customer repurchase agreements 39,265 11,829 461 19 1.57 0.21 Other short-term borrowings 3,502 1,536 51 22 1.94 1.91 Long-term borrowings 33,107 27,861 1,427 1,008 5.75 4.82 - --------- - --------- - ------ - ------ ---- ---- Total interest-bearing liabilities 1,423,406 1,181,669 11,586 6,795 1.09 0.77 - ------ - ------ ---- ---- Noninterest bearing demand deposits 516,698 414,643 Other liabilities 20,595 10,035 Shareholders’ equity 282,644 212,268 - --------- - --------- Total liabilities and shareholders’ equity $ 2,243,343 $ 1,818,615 - --------- - --------- Interest rate spread 3.36 % 3.26 % ---- ---- Net interest margin 3.70 % 3.49 % ---- ---- Net interest income (taxable equivalent basis) 56,972 44,524 Less: Taxable equivalent adjustment 293 442 Net interest income $ 56,679 $ 44,082 - ------ - ------

American National Bankshares Inc. Reconciliation of Non-GAAP Financial Measures Unaudited (Dollars in thousands, except per share data) 3rd Qtr 2nd Qtr 3rd Qtr YTD YTD 2019 2019 2018 2019 2018 - ------ - - ------- -- - ------ - - ------- - - ------ - EFFICIENCY RATIO Noninterest expense $ 13,792 $ 26,316 $ 10,904 $ 51,037 $ 32,608 Add/subtract: loss/(gain) on sale of OREO (22 ) 76 (36 ) 55 (33 ) Subtract: core deposit intangible amortization (448 ) (458 ) (56 ) (961 ) (210 ) Subtract: merger related expense - (10,871 ) - (11,322 ) - - ------ - - ------- -- - ------ - - ------- - - ------ - $ 13,322 $ 15,063 $ 10,812 $ 38,809 $ 32,365 - ------ - - ------- -- - ------ - - ------- - - ------ - Net interest income $ 20,622 $ 20,989 $ 14,751 $ 56,679 $ 44,082 Tax equivalent adjustment 77 105 133 293 442 Noninterest income 4,171 3,682 3,380 11,304 10,276 Add/subtract: (gain)/loss on securities (105 ) (147 ) 17 (575 ) (393 ) Add/subtract: (gain)/loss on fixed assets 2 87 (63 ) 89 (66 ) - ------- -- - ------ - $ 24,767 $ 24,716 $ 18,218 $ 67,790 $ 54,341 - ------ - - ------- -- - ------ - - ------- - - ------ - Efficiency ratio 53.79 % 60.94 % 59.35 % 57.25 % 59.56 % TAX EQUIVALENT NET INTEREST INCOME Non-GAAP measures: Interest income - loans $ 22,516 $ 22,678 $ 15,108 $ 60,876 $ 44,634 Interest income - investments and other 2,519 2,638 2,242 7,682 6,685 Interest expense - deposits (3,655 ) (3,519 ) (2,048 ) (9,647 ) (5,746 ) Interest expense - customer repurchase agreements (150 ) (140 ) (17 ) (461 ) (19 ) Interest expense - other short-term borrowings (12 ) (39 ) (12 ) (51 ) (22 ) Interest expense - long-term borrowings (519 ) (524 ) (389 ) (1,427 ) (1,008 ) - ------ - - ------- -- - ------ - - ------- - - ------ - Total net interest income $ 20,699 $ 21,094 $ 14,884 $ 56,972 $ 44,524 Less non-GAAP measures: Tax benefit on nontaxable interest - loans (46 ) (49 ) (46 ) (139 ) (149 ) Tax benefit on nontaxable interest - securities (31 ) (56 ) (87 ) (154 ) (293 ) - ------ - - ------- -- - ------ - - ------- - - ------ - GAAP measures $ 20,622 $ 20,989 $ 14,751 $ 56,679 $ 44,082 - ------ - - ------- -- - ------ - - ------- - - ------ - RETURN ON AVERAGE TANGIBLE EQUITY Return on average equity (GAAP basis) 11.04 % (1.60 )% 10.76 % 6.35 % 11.04 % Impact of excluding average goodwill and other intangibles 5.27 (0.02 ) 2.94 2.88 3.10 - ------ - - ------- -- - ------ - - ------- - - ------ - Return on average tangible equity (non-GAAP) 16.31 % (1.62 )% 13.70 % 9.23 % 14.14 % - ------ - - ------- -- - ------ - - ------- - - ------ - TANGIBLE EQUITY TO TANGIBLE ASSETS Equity to assets ratio (GAAP basis) 12.92 % 12.90 % 11.96 % 12.92 % 11.96 % Impact of excluding goodwill and other intangibles 3.42 3.49 2.24 3.42 2.24 - ------ - - ------- -- - ------ - - ------- - - ------ - Tangible equity to tangible assets ratio (non-GAAP) 9.50 % 9.41 % 9.72 % 9.50 % 9.72 % - ------ - - ------- -- - ------ - - ------- - - ------ - TANGIBLE BOOK VALUE Book value per share (GAAP basis) $ 28.54 $ 28.00 $ 24.79 $ 28.54 $ 24.79 Impact of excluding goodwill and other intangibles 8.35 8.37 5.14 8.35 5.14 - ------ - - ------- -- - ------ - - ------- - - ------ - Tangible book value per share (non-GAAP) $ 20.19 $ 19.63 $ 19.65 $ 20.19 $ 19.65 - ------ - - ------- -- - ------ - - ------- - - ------ -