American National Bankshares Reports Third Quarter Earnings

DANVILLE, Va., Oct. 22, 2020 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (NASDAQ: AMNB) (“American National” or the “Company”) today reported third quarter 2020 earnings of $7.2 million, or $0.66 per diluted common share. Those results compare to $8.7 million, or $0.78 per diluted common share, during the same quarter in the prior year, and net income of $5.5 million, or $0.50 per diluted common share, recognized for the second quarter of 2020. Earnings for the first nine months of 2020 were $21.3 million, or $1.93 per diluted common share, compared to $13.5 million, or $1.30 per diluted common share for the same period of 2019. Earnings for the nine months of 2019 were impacted by $11.3 million in merger related expenses.

President and Chief Executive Officer Jeffrey V. Haley commented, “We are pleased to report a strong quarter given the continuing challenges our nation and economy face with the pandemic. Capital, liquidity and credit quality all remain strong. Earnings and overall profitability continue to be relatively strong, and core deposit growth continued during the quarter at a robust pace.”

Third quarter 2020 highlights include:

• Earnings produced a return on average assets of 1.01% for the third quarter of 2020, compared to 0.80% in the previous quarter and 1.43% for the same quarter in the prior year.
  
  
• Average deposits grew 4.7% during the quarter and 21.0% over the same quarter of 2019; the cost of deposits decreased to 0.52% in the third quarter, compared to 0.64% in the previous quarter and 1.00% in the same quarter of the prior year.
  
  
• Net interest margin was 3.26% for the quarter, up from 3.22% in the second quarter of 2020 and down from 3.75% in the same quarter of the prior year (non-GAAP).
  
  
• Noninterest revenues increased $457 thousand, or 11.9%, when compared to the previous quarter, and increased $121 thousand, or 2.9%, compared to the same quarter in the prior year.
  
  
• Noninterest expense increased $1.7 million, or 13.7%, when compared to the previous quarter, and increased $348 thousand, or 2.5% when compared to the same quarter in the prior year.
  
  
• The third quarter provision for loan losses totaled $2.6 million, which compares to a provision of $4.8 million for the previous quarter, and a recovery of $12 thousand in the same quarter in the prior year. The allowance for loan losses as a percentage of loans held for investment increased to 1.01% at period end. Excluding Paycheck Protection Program (“PPP”) loans, the allowance as a percentage of loans increased to 1.16% at period end.
  
  
• Nonperforming assets as a percentage of total assets remained stable at 0.16% at September 30, 2020 and at June 30, 2020, and up from 0.15% at September 30, 2019.
  
  
• Annualized net charge-offs were 0.01% for the third quarter of 2020, compared to zero for the corresponding quarter in the prior year and down from 0.06% for the second quarter of 2020.
  
  
• During the third quarter of 2020, the Company continued to participate in the Small Business Administration’s PPP under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was intended to provide economic relief to small businesses that have been adversely impacted by the COVID-19 global pandemic. The Company had outstanding net PPP loans of $266.0 million at September 30, 2020, which compares to $264.0 million at June 30, 2020. The Company had net unamortized PPP loan origination fees with a balance of $6.8 million at September 30, 2020, which compares to $7.8 million at June 30, 2020.
  

NET INTEREST INCOME

Net interest income for the third quarter of 2020 was $21.5 million, an increase of $1.2 million, or 6.1%, from the prior quarter and an increase of $873 thousand, or 4.2%, from the third quarter of 2019. The third quarter of 2020 included $800,000 in cash basis accretion income related to the collection of a purchased loan previously charged off in a prior American National bank acquisition. The fully taxable equivalent (“FTE”) net interest margin for the quarter was 3.26%, up from 3.22% in the prior quarter and down from 3.75% in the same period a year ago (non-GAAP). The increase from second quarter was attributable to the increase in cash basis accretion during the period, partially offset by the full quarter impact of lower yielding PPP loans and the continuing effects of a significantly lower rate environment. The decrease from the same quarter in the prior period was attributable to lower yielding PPP loans coupled with a significantly lower rate environment.

The Company’s FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the third quarter of 2020, net accretion related to acquisition accounting amounted to $861 thousand, compared to $948 thousand for the same period in 2019 and $801 thousand in the prior quarter. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):

For the remaining three months of 2020 (estimated)		$530
For the years ending (estimated):
2021		1,850
2022		1,139
2023		697
2024		367
2025		266
Thereafter		978

ASSET QUALITY

Nonperforming assets (“NPAs”) totaled $4.6 million as of September 30, 2020 and June 30, 2020, and up from $3.7 million at September 30, 2019. NPAs as a percentage of total assets were 0.16% at September 30, 2020 and June 30, 2020, compared to 0.15% at September 30, 2019.

The provision for loan losses was $2.6 million for the third quarter of 2020, as compared to $4.8 million for the previous quarter and a recovery of $12 thousand for the same period in the previous year. A smaller provision was needed in the third quarter compared to the second as economic factors stabilized; however, the bank continues to see stress in certain industry segments, has an active Disaster Assistance Program, and recorded higher specific reserves during the period. The allowance for loan losses was $21.1 million at September 30, 2020, compared to $18.5 million at June 30, 2020 and $12.8 million at September 30, 2019. Annualized net charge-offs as a percentage of average loans outstanding was 0.01% for the third quarter of 2020, compared to 0.06% in the previous quarter and none for the same period in the prior year. The allowance as a percentage of loans held for investment was 1.01% at September 30, 2020, compared to 0.88% at June 30, 2020 and 0.71% at September 30, 2019. Excluding PPP loans, the allowance as a percentage of loans increased to 1.16% at September 30, 2020, compared to 1.01% at June 30, 2020 and 0.71% at September 30, 2019.

American National continues to utilize a Disaster Assistance Program during the pandemic for borrowers. At September 30, 2020, American National has provided interest only and payment deferrals to customers with balances amounting to $135.2 million, representing 6.5% of total loans held for investment, which compares to $395 million or 18.8% of outstanding loans held for investment at June 30, 2020. At September 30, 2020, in accordance with Section 4013 of the CARES Act, the Company has granted $15 million in second time payment or interest deferrals, representing less than 1% of total loans held for investment.

American National continues to use an incurred loss model for its allowance methodology and has not implemented the new current expected credit losses standard (“CECL”). CECL incorporates an estimation of expected losses over the life of the loans instead of the current model which is an incurred loss model. The CECL implementation guidance was amended in October 2019 allowing for the deferral of CECL for smaller reporting companies. American National qualified under this amendment and elected to defer the implementation until January 2023.

NONINTEREST INCOME

Noninterest income increased $457 thousand or 11.9% to $4.3 million for the quarter ended September 30, 2020 from $3.8 million in the prior quarter and increased $121 thousand or 2.9% from the same period in the prior year. Mortgage banking income was higher by $137 thousand or 15.3% over the prior quarter primarily the result of increased mortgage loan refinance volumes due to the current low interest rate environment. Trust revenues were up $101 thousand or 10.6% over the previous quarter. Income from small business investment companies ("SBICs") was up $217 thousand or 182.4% over the previous quarter. Comparing the third quarter of 2020 to the third quarter of 2019, the increase was reflective of increased mortgage banking income and trust revenues, offset by decreased service charges on deposit accounts and securities gains.

NONINTEREST EXPENSE

Noninterest expense for the third quarter of 2020 amounted to $14.1 million, up $1.7 million, or 13.7%, when compared to the $12.4 million for the previous quarter and up from $13.8 million or 2.5% when compared to the same period in the previous year. The increase from the second quarter of 2020 was a result of the deferral of salary expenses of $1.6 million related to PPP originations in the second quarter. The third quarter of 2019 reflected a small bank credit from the Federal Deposit Insurance Corporation (“FDIC”) assessment which accounted for the majority of the change period over period.

INCOME TAXES

The effective tax rate for the three months ended September 30, 2020 was 20.0%, compared to 20.6% for the prior quarter and 21.1% for the same period in the prior year.

BALANCE SHEET

Total assets at September 30, 2020 were $2.9 billion, an increase of $38.8 million from June 30, 2020 and $448.8 million from the same quarter one year ago. The improvement over the same period a year ago is primarily due to loan growth from the origination of PPP loans and an increase in cash and cash equivalents, partially attributable to the PPP deposits.

At September 30, 2020, loans held for investment (net of deferred fees and costs) were $2.1 billion, a decrease of $15.6 million or 3.0% annualized from June 30, 2020. Loans held for investment increased $281.6 million or 15.6%, from June 30, 2019. Excluding PPP loans, loans held for investment were only slightly higher year over year.

Deposits amounted to $2.5 billion at September 30, 2020, with growth of $38.9 million or 6.4% annualized from June 30, 2020 and $428.8 million or 21.0% annualized compared to the same quarter of 2019. The growth over the prior quarter and prior period of 2019 relates to the continued growth in new accounts and higher average cash balances. Customers have continued to maintain higher cash balances throughout the second and third quarters of 2020 as future liquidity needs remain uncertain. This buildup of cash reserves primarily accounts for the significant increase over the same period of 2019.

The Company continues to be well-capitalized as defined by regulators, with tangible common equity to tangible assets of 8.55% at September 30, 2020 as compared to 8.49% at June 30, 2020 and 9.50% at September 30, 2019.

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $2.9 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. American National Bank also manages an additional $884 million of trust, investment and brokerage assets in its Wealth Division. Additional information about American National and American National Bank is available on American National's website at www.amnb.com.

NON-GAAP FINANCIAL MEASURES

This release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States (“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 STATEMENTS

Statements 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) the impacts of the ongoing COVID-19 pandemic; (2) expected revenue synergies and cost savings from acquisitions and depositions; (3) 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; (4) 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; (5) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (6) accounting principles, policies, and guidelines; and (7) 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:
Jeffrey W. Farrar
Executive Vice President, COO & CFO
[phone]
[e-mail]

Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
		September 30
			2020				2019
Assets
Cash and due from banks		$	35,633			$	47,025
Interest-bearing deposits in other banks			234,638				95,592
Securities available for sale, at fair value			358,493				308,490
Restricted stock, at cost			8,707				8,621
Loans held for sale			6,789				5,646
Loans, net of deferred fees and costs			2,086,094				1,804,447
Less allowance for loan losses			(21,088	)			(12,758	)
Net Loans			2,065,006				1,791,689
Premises and equipment, net			39,979				39,261
Other real estate owned, net			999				1,353
Goodwill			85,048				84,633
Core deposit intangibles, net			6,482				8,165
Bank owned life insurance			28,278				27,612
Other assets			33,252				36,442
Total assets		$	2,903,304			$	2,454,529
Liabilities
Noninterest-bearing deposits		$	820,384			$	604,498
Interest-bearing deposis			1,650,316				1,437,364
Total deposits			2,470,700				2,041,862
Customer repurchase agreements			41,906				38,924
Long-term borrowings			35,609				35,524
Other liabilities			23,108				20,973
Total liabilities			2,571,323				2,137,283
Shareholders' equity
Preferred stock, $5 par value, 2,000,000 shares authorized,
none outstanding			-				-
Common stock, $1 par value, 20,000,000 shares authorized,
10,969,756 shares outstanding at September 30, 2020 and
11,116,250 shares outstanding at September 30, 2019			10,919				11,063
Capital in excess of par value			154,495				159,792
Retained earnings			163,855				147,030
Accumulated other comprehensive income (loss), net			2,712				(639	)
Total shareholders' equity			331,981				317,246
Total liabilities and shareholders' equity		$	2,903,304			$	2,454,529

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
			2020				2019				2020				2019
Interest and Dividend Income:
Interest and fees on loans		$	22,346			$	22,470			$	65,046			$	60,737
Interest and dividends on securities:
Taxable			1,545				1,890				5,228				5,691
Tax-exempt			107				134				330				660
Dividends			122				135				382				324
Other interest income			59				329				356				853
Total interest and dividend income			24,179				24,958				71,342				68,265
Interest Expense:
Interest on deposits			2,118				3,655				7,908				9,647
Interest on short-term borrowings			42				166				237				516
Interest on long-term borrowings			524				515				1,523				1,423
Total interest expense			2,684				4,336				9,668				11,586
Net Interest Income			21,495				20,622				61,674				56,679
Provision for (recovery of) loan losses			2,619				(12	)			8,331				(6	)
Net Interest Income After Provision for
(Recovery of) Loan Losses			18,876				20,634				53,343				56,685
Noninterest Income:
Trust fees			1,054				979				3,019				2,826
Service charges on deposit accounts			618				783				1,880				2,101
Other fees and commissions			996				1,003				2,888				2,726
Mortgage banking income			1,030				710				2,472				1,702
Securities gains, net			-				105				814				575
Brokerage fees			170				183				553				516
Income from Small Business Investment Companies			98				143				34				174
Losses on premises and equipment, net			(15	)			(2	)			(97	)			(89	)
Other			341				267				1,059				773
Total noninterest income			4,292				4,171				12,622				11,304
Noninterest Expense:
Salaries and employee benefits			7,989				7,662				21,540				22,029
Occupancy and equipment			1,423				1,448				4,116				3,963
FDIC assessment (credit)			162				(175	)			433				119
Bank franchise tax			426				411				1,277				1,113
Core deposit intangible amortization			402				448				1,246				961
Data processing			705				589				2,253				1,838
Software			353				287				1,112				932
Other real estate owned, net			28				47				34				16
Merger related expenses			-				-				-				11,322
Other			2,652				3,075				7,895				8,744
Total noninterest expense			14,140				13,792				39,906				51,037
Income Before Income Taxes			9,028				11,013				26,059				16,952
Income Taxes			1,801				2,321				4,808				3,487
Net Income		$	7,227			$	8,692			$	21,251			$	13,465
Net Income Per Common Share:
Basic		$	0.66			$	0.78			$	1.93			$	1.30
Diluted		$	0.66			$	0.78			$	1.93			$	1.30
Weighted Average Common Shares Outstanding:
Basic			10,966,645				11,127,603				10,983,729				10,341,919
Diluted			10,969,901				11,138,008				10,988,090				10,351,753

American National Bankshares Inc.
Financial Highlights
Unaudited
(Dollars in thousands, except per share data)																At or for the Nine Months
				3rd Qtr				2nd Qtr				3rd Qtr				Ended September 30,
					2020				2020				2019				2020				2019
EARNINGS
Interest income				$	24,179			$	23,297			$	24,958			$	71,342			$	68,265
Interest expense					2,684				3,037				4,336				9,668				11,586
Net interest income					21,495				20,260				20,622				61,674				56,679
Provision for (recovery of) loan losses					2,619				4,759				(12	)			8,331				(6	)
Noninterest income					4,292				3,835				4,171				12,622				11,304
Noninterest expense					14,140				12,432				13,792				39,906				51,037
Income taxes					1,801				1,422				2,321				4,808				3,487
Net income					7,227				5,482				8,692				21,251				13,465
PER COMMON SHARE
Net income per share - basic				$	0.66			$	0.50			$	0.78			$	1.93			$	1.30
Net income per share - diluted					0.66				0.50				0.78				1.93				1.30
Cash dividends paid					0.27				0.27				0.27				0.81				0.77
Book value per share					30.26				29.86				28.54				30.26				28.54
Book value per share - tangible (a)					21.92				21.48				20.19				21.92				20.19
Closing market price					20.92				25.04				35.47				20.92				35.47
FINANCIAL RATIOS
Return on average assets					1.01		%		0.80		%		1.43		%		1.05		%		0.80		%
Return on average equity					8.76				6.68				11.04				8.66				6.35
Return on average tangible equity (a)					12.66				9.85				16.31				12.60				9.23
Average equity to average assets					11.50				11.91				12.98				12.09				12.60
Tangible equity to tangible assets (a)					8.55				8.49				9.50				8.55				9.50
Net interest margin, taxable equivalent					3.26				3.22				3.75				3.32				3.70
Efficiency ratio (a)					53.00				49.74				53.79				52.40				57.25
Effective tax rate					19.95				20.60				21.08				18.45				20.57
PERIOD-END BALANCES
Securities				$	367,200			$	331,217			$	317,111			$	367,200			$	317,111
Loans held for sale					6,789				2,845				5,646				6,789				5,646
Loans, net					2,086,094				2,101,711				1,804,447				2,086,094				1,804,447
Goodwill and other intangibles					91,530				91,932				92,798				91,530				92,798
Assets					2,903,304				2,864,539				2,454,529				2,903,304				2,454,529
Assets - tangible (a)					2,811,774				2,772,607				2,361,731				2,811,774				2,361,731
Deposits					2,470,700				2,431,776				2,041,862				2,470,700				2,041,862
Customer repurchase agreements					41,906				46,296				38,924				41,906				38,924
Long-term borrowings					35,609				35,588				35,524				35,609				35,524
Shareholders' equity					331,981				327,433				317,246				331,981				317,246
Shareholders' equity - tangible (a)					240,451				235,501				224,448				240,451				224,448
AVERAGE BALANCES
Securities (b)				$	333,778			$	315,659			$	323,202			$	339,701			$	340,439
Loans held for sale					9,943				4,554				3,904				5,899				2,890
Loans, net					2,092,412				2,048,277				1,817,732				1,990,312				1,663,856
Interest-earning assets					2,648,990				2,525,998				2,207,935				2,483,908				2,054,087
Goodwill and other intangibles					91,749				92,161				93,077				91,883				77,154
Assets					2,870,213				2,755,470				2,426,678				2,706,359				2,243,343
Assets - tangible (a)					2,778,464				2,663,309				2,333,601				2,614,476				2,166,189
Interest-bearing deposits					1,619,960				1,564,430				1,443,947				1,560,204				1,347,532
Deposits					2,434,645				2,325,331				2,012,653				2,277,211				1,864,230
Customer repurchase agreements					45,689				43,716				39,470				43,649				39,265
Other short-term borrowings					-				-				1,986				1				3,502
Long-term borrowings					35,597				35,575				35,806				35,575				33,107
Shareholders' equity					330,038				328,051				314,980				327,231				282,644
Shareholders' equity - tangible (a)					238,289				235,890				221,903				235,348				205,490
American National Bankshares Inc.
Financial Highlights
Unaudited
(Dollars in thousands, except per share data)																At or for the Nine Months
				3rd Qtr				2nd Qtr				3rd Qtr				Ended September 30,
					2020				2020				2019				2020				2019
CAPITAL
Weighted average shares outstanding - basic					10,966,645				10,959,545				11,127,603				10,983,729				10,341,919
Weighted average shares outstanding - diluted					10,969,901				10,963,248				11,138,008				10,988,090				10,351,753
ALLOWANCE FOR LOAN LOSSES
Beginning balance				$	18,507			$	14,065			$	12,786			$	13,152			$	12,805
Provision for (recovery of) loan losses					2,619				4,759				(12	)			8,331				(6	)
Charge-offs					(126	)			(444	)			(66	)			(675	)			(189	)
Recoveries					88				127				50				280				148
Ending balance				$	21,088			$	18,507			$	12,758			$	21,088			$	12,758
LOANS
Construction and land development				$	151,613			$	141,392			$	143,788			$	151,613			$	143,788
Commercial real estate - owner occupied					382,121				388,947				348,857				382,121				348,857
Commercial real estate - non-owner occupied					608,954				589,821				534,362				608,954				534,362
Residential real estate					279,815				291,242				318,833				279,815				318,833
Home equity					111,448				114,397				122,074				111,448				122,074
Commercial and industrial					543,746				566,859				324,508				543,746				324,508
Consumer					8,397				9,053				12,025				8,397				12,025
Total				$	2,086,094			$	2,101,711			$	1,804,447			$	2,086,094			$	1,804,447
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing				$	285			$	375			$	874			$	285			$	874
Nonaccrual					3,088				2,855				1,446				3,088				1,446
Other real estate owned and repossessions					1,210				1,346				1,353				1,210				1,353
Nonperforming assets				$	4,583			$	4,576			$	3,673			$	4,583			$	3,673
ASSET QUALITY RATIOS
Allowance for loan losses to total loans					1.01		%		0.88		%		0.71		%		1.01		%		0.71		%
Allowance for loan losses to
nonperforming loans					625.20				572.97				549.91				625.20				549.91
Nonperforming assets to total assets					0.16				0.16				0.15				0.16				0.15
Nonperforming loans to total loans					0.16				0.15				0.13				0.16				0.13
Annualized net charge-offs
to average loans					0.01				0.06				0.00				0.03				0.00
OTHER DATA
Fiduciary assets at period-end (c) (d)				$	569,095			$	536,014			$	546,407			$	569,095			$	546,407
Retail brokerage assets at period-end (c) (d)				$	314,809			$	301,096			$	308,820			$	314,809			$	308,820
Number full-time equivalent employees (e)					341				345				365				341				365
Number of full service offices					25				26				28				25				28
Number of loan production offices					1				1				1				1				1
Number of ATMs					37				38				40				37				40
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, 2020 and 2019
			(Dollars in thousands)
			Unaudited
										Interest
				Average Balance						Income/Expense (a)						Yield/Rate
				2020			2019			2020			2019			2020		2019
Loans:
	Commercial			$	544,712		$	320,802		$	4,495		$	3,820		3.28	%	4.72	%
	Real estate				1,549,078			1,489,155			17,755			18,487		4.58		4.97
	Consumer				8,565			11,679			144			209		6.69		7.10
		Total loans (b)			2,102,355			1,821,636			22,394			22,516		4.26		4.94
Securities:
	U.S. Treasury				10,541			-			3			-		0.11		-
	Federal agencies & GSEs				61,405			127,956			287			767		1.87		2.40
	Mortgage-backed & CMOs				194,585			133,121			942			851		1.94		2.56
	State and municipal				46,432			45,830			294			330		2.53		2.88
	Other				20,815			16,295			275			242		5.28		5.94
		Total securities			333,778			323,202			1,801			2,190		2.16		2.71
Deposits in other banks					212,857			63,097			59			329		0.11		2.07
	Total interest-earning assets				2,648,990			2,207,935			24,254			25,035		3.66		4.53
Non-earning assets					221,223			218,743
		Total assets		$	2,870,213		$	2,426,678
Deposits:
	Demand			$	410,228		$	324,058			56			119		0.05		0.15
	Money market				580,200			453,873			475			1,415		0.33		1.24
	Savings				206,493			176,673			24			94		0.05		0.21
	Time				423,039			489,343			1,563			2,027		1.47		1.64
		Total deposits			1,619,960			1,443,947			2,118			3,655		0.52		1.00
Customer repurchase agreements					45,689			39,470			42			150		0.37		1.51
Other short-term borrowings					-			1,986			-			12		-		2.42
Long-term borrowings					35,597			35,806			524			519		5.89		5.80
	Total interest-bearing
		liabilities			1,701,246			1,521,209			2,684			4,336		0.63		1.13
Noninterest bearing demand deposits					814,685			568,706
Other liabilities					24,244			21,783
Shareholders' equity					330,038			314,980
		Total liabilities and
			shareholders' equity	$	2,870,213		$	2,426,678
Interest rate spread																3.03	%	3.40	%
Net interest margin																3.26	%	3.75	%
Net interest income (taxable equivalent basis)											21,570			20,699
Less: Taxable equivalent adjustment (c)											75			77
Net interest income										$	21,495		$	20,622
Notes:
(a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/amortization of deferred loan fees and costs.
(b) - Nonaccrual loans are included in the average balances.
(c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

			Net Interest Income Analysis
			For the Nine Months Ended September 30, 2020 and 2019
			(Dollars in thousands)
			Unaudited
										Interest
				Average Balance						Income/Expense (a)						Yield/Rate
				2020			2019			2020			2019			2020		2019
Loans:
	Commercial			$	464,094		$	302,750		$	12,414		$	10,609		3.57	%	4.69	%
	Real estate				1,522,803			1,354,358			52,319			49,782		4.58		4.90
	Consumer				9,314			9,638			451			485		6.47		6.73
		Total loans (b)			1,996,211			1,666,746			65,184			60,876		4.36		4.87
Securities:
	U.S. Treasury				7,292			-			47			-		0.86		-
	Federal agencies & GSEs				70,604			135,937			1,147			2,475		2.17		2.43
	Mortgage-backed & CMOs				198,528			124,258			3,144			2,353		2.11		2.52
	State and municipal				43,345			64,084			871			1,348		2.68		2.80
	Other				19,932			16,160			812			653		5.43		5.39
		Total securities			339,701			340,439			6,021			6,829		2.36		2.67
Deposits in other banks					147,996			46,902			356			853		0.32		2.43
	Total interest-earning assets				2,483,908			2,054,087			71,561			68,558		3.84		4.45
Non-earning assets					222,451			189,256
		Total assets		$	2,706,359		$	2,243,343
Deposits:
	Demand			$	371,155		$	299,769			294			245		0.11		0.11
	Money market				550,063			432,980			2,254			3,962		0.55		1.22
	Savings				192,632			163,525			101			201		0.07		0.16
	Time				446,354			451,258			5,259			5,239		1.57		1.55
		Total deposits			1,560,204			1,347,532			7,908			9,647		0.68		0.96
Customer repurchase agreements					43,649			39,265			237			461		0.73		1.57
Other short-term borrowings					1			3,502			-			51		0.50		1.94
Long-term borrowings					35,575			33,107			1,523			1,427		5.71		5.75
	Total interest-bearing
		liabilities			1,639,429			1,423,406			9,668			11,586		0.79		1.09
Noninterest bearing demand deposits					717,007			516,698
Other liabilities					22,692			20,595
Shareholders' equity					327,231			282,644
		Total liabilities and
			shareholders' equity	$	2,706,359		$	2,243,343
Interest rate spread																3.05	%	3.36	%
Net interest margin																3.32	%	3.70	%
Net interest income (taxable equivalent basis)											61,893			56,972
Less: Taxable equivalent adjustment (c)											219			293
Net interest income										$	61,674		$	56,679
Notes:
(a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/amortization of deferred loan fees and costs.
(b) - Nonaccrual loans are included in the average balances.
(c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

American National Bankshares Inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited
(Dollars in thousands, except per share data)																At or for the Nine Months
				3rd Qtr				2nd Qtr				3rd Qtr				Ended September 30,
					2020				2020				2019				2020				2019
EFFICIENCY RATIO
Noninterest expense				$	14,140			$	12,432			$	13,792			$	39,906			$	51,037
Add/subtract: gain/loss on sale of OREO					(23	)			8				(22	)			12				55
Subtract: core deposit intangible amortization					(402	)			(417	)			(448	)			(1,246	)			(961	)
Subtract: merger related expenses					-				-				-				-				(11,322	)
				$	13,715			$	12,023			$	13,322			$	38,672			$	38,809
Net interest income				$	21,495			$	20,260			$	20,622			$	61,674			$	56,679
Tax equivalent adjustment					75				75				77				219				293
Noninterest income					4,292				3,835				4,171				12,622				11,304
Subtract: gain on securities					-				-				(105	)			(814	)			(575	)
Add: loss on fixed assets					15				-				2				97				89
				$	25,877			$	24,170			$	24,767			$	73,798			$	67,790
Efficiency ratio					53.00		%		49.74		%		53.79		%		52.40		%		57.25		%
TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income - loans				$	22,394			$	21,427			$	22,516			$	65,184			$	60,876
Interest income - investments and other					1,860				1,945				2,519				6,377				7,682
Interest expense - deposits					(2,118	)			(2,478	)			(3,655	)			(7,908	)			(9,647	)
Interest expense - customer repurchase
agreements					(42	)			(66	)			(150	)			(237	)			(461	)
Interest expense - other short-term borrowings					-				-				(12	)			-				(51	)
Interest expense - long-term borrowings					(524	)			(493	)			(519	)			(1,523	)			(1,427	)
Total net interest income				$	21,570			$	20,335			$	20,699			$	61,893			$	56,972
Less non-GAAP measures:
Tax benefit on nontaxable interest - loans					(48	)			(48	)			(46	)			(138	)			(139	)
Tax benefit on nontaxable interest - securities					(27	)			(27	)			(31	)			(81	)			(154	)
GAAP measures				$	21,495			$	20,260			$	20,622			$	61,674			$	56,679
RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)					8.76		%		6.68		%		11.04		%		8.66		%		6.35		%
Impact of excluding average goodwill
and other intangibles					3.90				3.17				5.27				3.94				2.88
Return on average tangible equity
(non-GAAP)					12.66		%		9.85		%		16.31		%		12.60		%		9.23		%
TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)					11.43		%		11.43		%		12.92		%		11.43		%		12.92		%
Impact of excluding goodwill and
other intangibles					2.88				2.94				3.42				2.88				3.42
Tangible equity to tangible assets ratio
(non-GAAP)					8.55		%		8.49		%		9.50		%		8.55		%		9.50		%
TANGIBLE BOOK VALUE
Book value per share (GAAP basis)				$	30.26			$	29.86			$	28.54			$	30.26			$	28.54
Impact of excluding goodwill and
other intangibles					8.34				8.38				8.35				8.34				8.35
Tangible book value per share
(non-GAAP)				$	21.92			$	21.48			$	20.19			$	21.92			$	20.19
ADJUSTED LOAN LOSS ALLOWANCE
Allowance for loan losses				$	21,088			$	18,507			$	12,758			$	21,088			$	12,758
Credit discount on purchased loans					7,896				9,868				12,937				7,896				12,937
Adjusted loan loss allowance				$	28,984			$	28,375			$	25,695			$	28,984			$	25,695
Total loans, net				$	2,086,094			$	2,101,711			$	1,804,447			$	2,086,094			$	1,804,447
Subtract: PPP loans, net					(265,941	)			(264,022	)			-				(265,941	)			-
Total loans less PPP loans, net				$	1,820,153			$	1,837,689			$	1,804,447			$	1,820,153			$	1,804,447
Adjusted loan loss allowance to
total loans less PPP loans, net					1.59		%		1.54		%		1.42		%		1.59		%		1.42		%