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American National Bankshares Inc. Reports Second Quarter 2019 Earnings and Third Quarter Dividend Increase

  • Merger with HomeTown Bankshares Corp. consummated April 1, 2019

  • Merger related expense (pretax) for Q2 2019 of $10.9 million

  • Net loss of $1.2 million and diluted EPS of ($0.11) for Q2 2019

  • Net interest margin of 3.82% for Q2 2019

  • Increased cash dividend declared for Q3 and represents an 8% increase

DANVILLE, Va., July 18, 2019 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (“American National”) (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced a net loss of $1,230,000 for the second quarter 2019 compared to net income of $5,980,000 for the second quarter of 2018, a $7,210,000 or 120.6% decrease. Income for the second quarter of 2019 was impacted adversely by $10,871,000 in one-time merger expense related to the HomeTown acquisition.

Basic and diluted net income per common share was a loss of $0.11 for the 2019 quarter compared to net income per common share of $0.69 for the 2018 quarter. Net loss for the second quarter of 2019 produced annualized returns on average assets of (0.20%), on average equity of (1.60%), and on average tangible equity of (1.62%).

Net income for the first six months of 2019 was $4,773,000 compared to $11,792,000 for the comparable period of 2018, a $7,019,000 or 59.5% decrease. Basic and diluted net income per common share was $0.48 for the 2019 period compared to $1.36 for the 2018 period.

Income for the six-month period of 2019 was impacted adversely by $11,322,000 in one-time merger expense related to the HomeTown acquisition.

HomeTown Bankshares Corporation Merger
On April 1, 2019, American National completed its merger with Roanoke, Virginia based HomeTown Bankshares Corporation (“HomeTown”). The merger, valued at approximately $83.3 million, significantly expanded American National’s operations in Roanoke and added a new presence in the New River Valley.

Dividends
American National also announced that its Board of Directors has declared a quarterly cash dividend of $0.27 per common share, payable September 20, 2019, to shareholders of record September 6, 2019. This represents an 8% increase in the cash dividend from the current $0.25 per common share per quarter.

American National considers the payment of appropriate dividends to be a vital part of its capital planning and management program. The Company adheres to a dividend policy based on a review of earnings, growth, capital and such other factors that the Board of Directors considers relevant to the dividend decision process.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, said, “The merger with HomeTown Bankshares brought us some of the best community bankers in the Roanoke market, $444 million in loans, and $484 million in deposits. American National is now the largest community bank in the Roanoke market.

“Income for the 2019 quarter was a loss of $1.2 million. On a pretax basis the loss for the 2019 quarter was $1.6 million. This was directly related to the $10.9 million in nonrecurring merger related expense.

“Net interest income for the 2019 quarter compared to the 2018 quarter significantly increased, it was up $6.2 million or 41.9%.

“This improvement in net interest income was primarily related to an increase in the average balance of loans for the 2019 quarter compared to the 2018 quarter. Loan average balances for the 2019 quarter were up $494.7 million or 37.4% over the 2018 quarter. Loan yields for the 2019 quarter were 51 basis points higher than the 2018 quarter. Of the increase in balances, $444.3 million represents loans acquired in the HomeTown merger and $50.4 million (3.8%) represents growth in the other parts of our franchise.

“End of period loan balance for June 30, 2019, compared to December 31, 2018, increased $478.8 million. Of this increase, $444.3 million was related to the HomeTown merger and $34.5 million (2.5%) represents growth throughout the rest of our franchise.

“Average interest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased substantially, up $317.9 million or 27.7% with a 30 basis point higher cost. This reflects increased competition for deposits, especially evident in our new HomeTown market. Of the increase, $364.1 million represents deposits acquired in the HomeTown merger. Legacy deposits were down slightly for the same period.

“Average noninterest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased substantially; they were up $140.3 million or 33.4%. Of this increase, $119.5 million represents deposits acquired in the HomeTown merger; the remaining $20.8 million (5.0%) represents growth in other parts of our franchise.

“The market for loans and deposits continues to be very competitive. Market competition drives yields on loans down and rates on deposits up. This puts continuing pressure on our net interest margin. Our challenge is to maintain quality growth in assets and deposits and at the same time protect our net interest margin. Our margin for the 2019 quarter was 3.82%, a 32 basis point increase from the 2018 quarter.”

Haley concluded, “We are optimistic about the future of community banking, but realistic enough to know that it is not a given, it must be earned. For American National that earning is what we strive for every day – through continued asset quality, continued relevance to existing and new customers with modern banking products and services, continued organic and acquisition growth, and continued superior returns to our shareholders.”

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

For the quarter ended June 30, 2019, average shareholders’ equity was 12.62% of average assets, compared to 11.62% for the quarter ended June 30, 2018.

Book value per common share was $28.00 at June 30, 2019, compared to $24.50 at June 30, 2018.

Tangible book value per common share was $19.63 at June 30, 2019, compared to $19.34 at June 30, 2018.

Credit Quality Measurements
Nonperforming assets represented 0.14% of total assets at June 30, 2019, compared to 0.18% at June 30, 2018.

Annualized net charge offs to average loans were zero basis points (0.00%) for the second quarter of 2019 compared to one basis point (0.01%) for the same quarter in 2018.

Other real estate owned was $1,433,000 compared to $1,124,000 at June 30, 2018, an increase of $309,000 or 27.5%.

Merger Related Financial Impact
The 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 June 30,

2019

2018

Net Interest Income

$

1,118

$

377

Income Before Income Taxes

$

660

$

300

For the six months ended June 30,

2019

2018

Net Interest Income

$

1,373

$

804

Income Before Income Taxes

$

860

$

650

In the table above, the impact for the quarter ended June 30, 2019 related to the HomeTown merger on net interest income was $884,000 and on income before taxes was $481,000.

The second quarter of 2019 includes $225,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $231,000 for the comparable quarter of 2018.

For the six month period ended June 30, 2019, cash basis accretion income was $396,000, compared to $486,000 for the same period in 2018.

Net Interest Income
Net interest income before the provision for loan losses increased to $20,989,000 in the second quarter of 2019 from $14,788,000 in the second quarter of 2018, an increase of $6,201,000 or 41.9%.

For the 2019 quarter, the net interest margin was 3.82% compared to 3.50% for the same quarter in 2018, an increase of 32 basis points.

The major drivers affecting margin between the 2019 quarter and the 2018 quarter were:

  • Positively – a $504.1 million increase (29.5%) in average earning assets, mostly loans, at a 56 basis point higher yield.

  • Positively – a $140.3 million increase (33.4%) in average noninterest bearing deposits.

  • Negatively – a $317.9 million increase (27.7%) in the average balance of interest bearing deposits, at a 30 basis point higher cost.

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

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the second quarter of 2019 was a recovery of $10,000 compared to a recovery of $30,000 for the second quarter of 2018, a decrease of $20,000. The provision for both quarters related to adjustments on the specific reserves for the impaired loan loss allowance.

The allowance for loan losses as a percentage of total loans was 0.70% at June 30, 2019 compared to 1.01% at June 30, 2018. The primary driver for the decrease in this ratio was the HomeTown merger which increased loan balances $444.3 million. In conformity with generally accepted accounting standards, these loans were accounted for at fair value at the merger date and were recorded at the total outstanding principal balance of the loans net of a $10.7 million credit mark (included in the gross loan balances as a separate allowance) and a $4.0 million liquidity mark.

However, the need for additional loan loss provision for the remainder of the loan portfolio was mitigated by continued high asset quality, low charge offs, and improvement in various qualitative factors, notably economic, political and regulatory, used in the determination of the allowance.

Noninterest Income
Noninterest income totaled $3,682,000 in the second quarter of 2019, compared with $3,563,000 in the second quarter of 2018, an increase of $119,000 or 3.3%.

Service charge income increased $132,000 or 22.3%, mainly related to the HomeTown merger.

Other fees and commissions increased $336,000 or 49.5%. This revenue category was up in virtually all of our markets, but the largest driver was check card income in our new Roanoke and New River region.

Mortgage banking income increased $95,000 or 19.3% based on increased volume related to some dips in mortgage interest rates.

Securities gains decreased $142,000 or 49.1%, related to the sale of most of our equity investments in 2019, thus reducing the accounting volatility in this revenue category.

Noninterest Expense
Noninterest expense totaled $26,316,000 in the second quarter of 2019, compared to $11,002,000 in the second quarter of 2018, an increase of $15,314,000 or 139.2%.

The major factor causing the increase in noninterest expense was merger related expense. These are related to the HomeTown merger, are nonrecurring in nature, and totaled $10,871,000 during the second quarter of 2019. The largest component of merger expenses was $8,900,000 in costs related to data processing contract termination and conversion.

The second major factor was salaries and benefits. Salaries increased $1,953,000 or 38.3% and benefits increased $314,000 or 28.3%. Most of this increase was related to a 48 full-time equivalent increase in staff compared to the prior year quarter.

The effective income tax rate for the 2019 quarter was a benefit of 24.8%, compared to provision of 19.0% for the same quarter of 2018. The 2019 quarter was impacted by $10,871,000 in merger related expense, which generated a $1,635,000 pretax loss.

About American National
American National is a multi-state bank holding company with total assets of approximately $2.4 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 $862 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 Measures
This 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 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) 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 and business operations 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.

American National Bankshares Inc.

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

Unaudited

June 30

2019

2018

Assets

Cash and due from banks

$

34,460

$

24,042

Interest-bearing deposits in other banks

20,454

9,300

Equity securities, at fair value

125

2,177

Securities available for sale, at fair value

334,326

341,247

Restricted stock, at cost

7,796

5,463

Loans held for sale

3,165

2,296

Loans

1,836,241

1,339,379

Less allowance for loan losses

(12,786

)

(13,508

)

Net Loans

1,823,455

1,325,871

Premises and equipment, net

39,038

25,879

Other real estate owned, net

1,433

1,124

Goodwill

84,633

43,872

Core deposit intangibles, net

8,613

1,037

Bank owned life insurance

27,451

18,674

Accrued interest receivable and other assets

33,133

23,549

Total assets

$

2,418,082

$

1,824,531

Liabilities

Demand deposits -- noninterest-bearing

$

554,400

$

420,795

Demand deposits -- interest-bearing

326,105

251,056

Money market deposits

451,343

383,963

Savings deposits

178,723

132,839

Time deposits

488,526

372,093

Total deposits

1,999,097

1,560,746

Short-term borrowings:

Customer repurchase agreements

37,222

6,776

Other short-term borrowings

13,528

5,500

Subordinated debt

7,526

-

Junior subordinated debt

27,978

27,876

Accrued interest payable and other liabilities

20,814

10,285

Total liabilities

2,106,165

1,611,183

Shareholders' equity

Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding

-

-

Common stock, $1 par, 20,000,000 shares authorized, 11,141,355 shares outstanding at June 30, 2019 and 8,708,127 shares outstanding at June 30, 2018

11,089

8,654

Capital in excess of par value

160,572

77,496

Retained earnings

141,339

135,108

Accumulated other comprehensive loss, net

(1,083

)

(7,910

)

Total shareholders' equity

311,917

213,348

Total liabilities and shareholders' equity

$

2,418,082

$

1,824,531

American National Bankshares Inc.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

Unaudited

Three Months Ended

Six Months Ended

June 30

June 30

2019

2018

2019

2018

Interest and Dividend Income:

Interest and fees on loans

$

22,629

$

14,766

$

38,267

$

29,423

Interest and dividends on securities:

Taxable

1,980

1,540

3,801

2,864

Tax-exempt

239

423

526

842

Dividends

105

78

189

158

Other interest income

258

185

524

373

Total interest and dividend income

25,211

16,992

43,307

33,660

Interest Expense:

Interest on deposits

3,520

1,873

5,992

3,698

Interest on short-term borrowings

178

2

350

12

Interest on long-term borrowings

14

-

14

-

Interest on subordinated debt

122

-

122

-

Interest on junior subordinated debt

388

329

772

619

Total interest expense

4,222

2,204

7,250

4,329

Net Interest Income

20,989

14,788

36,057

29,331

Provision for (recovery of) loan losses

(10

)

(30

)

6

(74

)

Net Interest Income After Provision for Loan Losses

20,999

14,818

36,051

29,405

Noninterest Income:

Trust fees

933

945

1,847

1,874

Service charges on deposit accounts

724

592

1,318

1,204

Other fees and commissions

1,015

679

1,723

1,321

Mortgage banking income

586

491

992

941

Securities gains, net

147

289

470

410

Brokerage fees

186

209

333

431

Income from Small Business Investment Companies

(137

)

171

31

326

Gains (losses) on premises and equipment, net

(87

)

-

(87

)

3

Other

315

187

506

386

Total noninterest income

3,682

3,563

7,133

6,896

Noninterest Expense:

Salaries

7,048

5,095

11,712

10,092

Employee benefits

1,425

1,111

2,655

2,286

Occupancy and equipment

1,431

1,100

2,515

2,228

FDIC assessment

169

132

294

278

Bank franchise tax

412

291

702

572

Core deposit intangible amortization

458

77

513

154

Data processing

717

467

1,249

889

Software

321

354

645

659

Other real estate owned, net

(44

)

25

(31

)

55

Merger related expenses

10,871

-

11,322

-

Other

3,508

2,350

5,669

4,491

Total noninterest expense

26,316

11,002

37,245

21,704

Income (Loss) Before Income Taxes

(1,635

)

7,379

5,939

14,597

Income Taxes

(405

)

1,399

1,166

2,805

Net Income (Loss)

$

(1,230

)

$

5,980

$

4,773

$

11,792

Net Income (Loss) Per Common Share:

Basic

$

(0.11

)

$

0.69

$

0.48

$

1.36

Diluted

$

(0.11

)

$

0.69

$

0.48

$

1.36

Weighted Average Common Shares Outstanding:

Basic

11,126,800

8,692,107

9,942,566

8,680,739

Diluted

11,126,800

8,704,726

9,952,115

8,695,860

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

2nd Qtr

1st Qtr

2nd Qtr

YTD

YTD

2019

2019

2018

2019

2018

EARNINGS

Interest income

$

25,211

$

18,096

$

16,992

$

43,307

$

33,660

Interest expense

4,222

3,028

2,204

7,250

4,329

Net interest income

20,989

15,068

14,788

36,057

29,331

Provision for (recovery of) loan losses

(10

)

16

(30

)

6

(74

)

Noninterest income

3,682

3,451

3,563

7,133

6,896

Noninterest expense

26,316

10,929

11,002

37,245

21,704

Income taxes

(405

)

1,571

1,399

1,166

2,805

Net income

(1,230

)

6,003

5,980

4,773

11,792

PER COMMON SHARE

Income per share - basic

$

(0.11

)

$

0.69

$

0.69

$

0.48

$

1.36

Income per share - diluted

(0.11

)

0.69

0.69

0.48

1.36

Cash dividends paid

0.25

0.25

0.25

0.50

0.50

Book value per share

28.00

26.21

24.50

28.00

24.50

Book value per share - tangible (a)

19.63

21.10

19.34

19.63

19.34

Closing market price

38.75

34.92

40.00

38.75

40.00

FINANCIAL RATIOS

Return on average assets

(0.20

)%

1.29

%

1.31

%

0.44

%

1.29

%

Return on average equity

(1.60

)

10.69

11.27

3.59

11.19

Return on average tangible equity (a)

(1.62

)

13.44

14.44

5.25

14.37

Average equity to average assets

12.62

12.06

11.62

12.38

11.57

Tangible equity to tangible assets (a)

9.41

10.13

9.46

9.41

9.46

Net interest margin, taxable equivalent

3.82

3.50

3.50

3.67

3.48

Efficiency ratio (a)

60.94

56.95

59.96

59.24

59.66

Effective tax rate

(24.77

)

20.74

18.96

19.63

19.22

PERIOD-END BALANCES

Securities

$

342,247

$

331,657

$

348,887

$

342,247

$

348,887

Loans held for sale

3,165

1,252

2,296

3,165

2,296

Loans, net of unearned income

1,836,241

1,360,063

1,339,379

1,836,241

1,339,379

Goodwill and other intangibles

93,246

44,743

44,909

93,246

44,909

Assets

2,418,082

1,868,404

1,824,531

2,418,082

1,824,531

Assets - tangible (a)

2,324,836

1,823,661

1,779,622

2,324,836

1,779,622

Deposits

1,999,097

1,559,790

1,560,746

1,999,097

1,560,746

Customer repurchase agreements

37,222

35,945

6,776

37,222

6,776

Long-term borrowings

35,504

27,953

27,876

35,504

27,876

Shareholders' equity

311,917

229,473

213,348

311,917

213,348

Shareholders' equity - tangible (a)

218,671

184,730

168,439

218,671

168,439

AVERAGE BALANCES

Securities (b)

$

354,506

$

343,834

$

342,486

$

349,199

$

328,143

Loans held for sale

2,913

1,830

2,616

2,375

2,328

Loans, net of unearned income

1,816,203

1,352,521

1,321,812

1,585,643

1,329,890

Interest-earning assets

2,211,273

1,736,887

1,707,223

1,975,887

1,703,287

Goodwill and other intangibles

93,075

44,778

44,956

69,060

44,993

Assets

2,433,948

1,863,212

1,825,860

2,150,157

1,822,165

Assets - tangible (a)

2,340,873

1,818,434

1,780,904

2,081,097

1,777,172

Interest-bearing deposits

1,463,613

1,131,604

1,145,701

1,298,526

1,151,380

Deposits

2,023,557

1,551,413

1,565,321

1,788,789

1,561,258

Customer repurchase agreements

35,657

42,705

11,347

39,161

11,795

Other short-term borrowings

7,627

61

247

3,865

1,210

Long-term borrowings

36,301

27,937

27,861

32,142

27,848

Shareholders' equity

307,281

224,677

212,256

266,208

210,852

Shareholders' equity - tangible (a)

214,206

179,899

167,300

197,148

165,859

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

2nd Qtr

1st Qtr

2nd Qtr

YTD

YTD

2019

2019

2018

2019

2018

CAPITAL

Weighted average shares outstanding - basic

11,126,800

8,745,174

8,692,107

9,942,566

8,680,739

Weighted average shares outstanding - diluted

11,126,800

8,745,723

8,704,726

9,952,115

8,695,860

ALLOWANCE FOR LOAN LOSSES

Beginning balance

$

12,806

$

12,805

$

13,575

$

12,805

$

13,603

Provision for (recovery of) loan losses

(10

)

16

(30

)

6

(74

)

Charge-offs

(54

)

(69

)

(130

)

(123

)

(174

)

Recoveries

44

54

93

98

153

Ending balance

$

12,786

$

12,806

$

13,508

$

12,786

$

13,508

LOANS

Construction and land development

$

152,876

$

93,759

$

96,740

$

152,876

$

96,740

Commercial real estate

880,146

659,133

633,128

880,146

633,128

Residential real estate

328,400

212,665

207,374

328,400

207,374

Home equity

121,905

99,979

105,558

121,905

105,558

Commercial and industrial

340,427

289,301

291,454

340,427

291,454

Consumer

12,487

5,226

5,125

12,487

5,125

Total

$

1,836,241

$

1,360,063

$

1,339,379

$

1,836,241

$

1,339,379

NONPERFORMING ASSETS AT PERIOD-END

Nonperforming loans:

90 days past due and accruing

$

930

$

197

$

229

$

930

$

229

Nonaccrual

969

1,111

1,861

969

1,861

Other real estate owned

1,433

646

1,124

1,433

1,124

Nonperforming assets

$

3,332

$

1,954

$

3,214

$

3,332

$

3,214

ASSET QUALITY RATIOS

Allowance for loan losses to total loans

0.70

%

0.94

%

1.01

%

0.70

%

1.01

%

Allowance for loan losses to nonperforming loans

673.30

979.05

646.32

673.30

646.32

Nonperforming assets to total assets

0.14

0.10

0.18

0.14

0.18

Nonperforming loans to total loans

0.10

0.10

0.16

0.10

0.16

Annualized net charge-offs to average loans

0.00

0.00

0.01

0.00

0.00

OTHER DATA

Fiduciary assets at period-end (c) (d)

$

547,731

$

533,063

$

510,552

$

547,731

$

510,552

Retail brokerage assets at period-end (c) (d)

$

314,051

$

303,045

$

326,692

$

314,051

$

326,692

Number full-time equivalent employees (e)

371

299

323

371

323

Number of full service offices

28

24

26

28

26

Number of loan production offices

-

-

2

-

2

Number of ATM's

39

33

34

39

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 June 30, 2019 and 2018

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense

Yield/Rate

2019

2018

2019

2018

2019

2018

Loans:

Commercial

$

321,263

$

267,996

$

3,899

$

2,652

4.87

%

3.97

%

Real estate

1,485,665

1,052,105

18,578

12,087

5.00

4.60

Consumer

12,188

4,327

201

77

6.61

7.14

Total loans

1,819,116

1,324,428

22,678

14,816

4.99

4.48

Securities:

Federal agencies & GSEs

140,516

127,033

858

707

2.44

2.23

Mortgage-backed & CMOs

127,718

108,789

809

609

2.53

2.24

State and municipal

68,185

91,636

480

653

2.82

2.85

Other

18,087

15,028

233

176

5.15

4.68

Total securities

354,506

342,486

2,380

2,145

2.69

2.51

Deposits in other banks

37,651

40,309

258

185

2.75

1.84

Total interest-earning assets

2,211,273

1,707,223

25,316

17,146

4.58

4.02

Non-earning assets

222,675

118,637

Total assets

$

2,433,948

$

1,825,860

Deposits:

Demand

$

335,879

$

246,493

112

13

0.13

0.02

Money market

448,722

395,135

1,394

802

1.25

0.81

Savings

179,375

132,190

97

10

0.22

0.03

Time

499,637

371,883

1,916

1,048

1.54

1.13

Total deposits

1,463,613

1,145,701

3,519

1,873

0.96

0.66

Customer repurchase agreements

35,657

11,347

140

1

1.57

0.04

Other short-term borrowings

7,627

247

39

1

2.05

1.62

Long-term borrowings

36,301

27,861

524

329

5.77

4.72

Total interest-bearing liabilities

1,543,198

1,185,156

4,222

2,204

1.10

0.75

Noninterest bearing demand deposits

559,944

419,620

Other liabilities

23,525

8,828

Shareholders' equity

307,281

212,256

Total liabilities and shareholders' equity

$

2,433,948

$

1,825,860

Interest rate spread

3.48

%

3.27

%

Net interest margin

3.82

%

3.50

%

Net interest income (taxable equivalent basis)

21,094

14,942

Less: Taxable equivalent adjustment

105

154

Net interest income

$

20,989

$

14,788

Net Interest Income Analysis

For the Six Months Ended June 30, 2019 and 2018

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense

Yield/Rate

2019

2018

2019

2018

2019

2018

Loans:

Commercial

$

293,575

$

263,300

$

6,790

$

5,096

4.66

%

3.90

%

Real estate

1,285,842

1,064,605

31,294

24,277

4.87

4.56

Consumer

8,601

4,313

276

153

6.47

7.15

Total loans

1,588,018

1,332,218

38,360

29,526

4.84

4.44

Securities:

Federal agencies & GSEs

139,993

115,182

1,708

1,224

2.44

2.13

Mortgage-backed & CMOs

119,754

108,808

1,502

1,208

2.51

2.22

State and municipal

73,362

89,000

1,018

1,287

2.78

2.89

Other

16,090

15,153

411

351

5.11

4.63

Total securities

349,199

328,143

4,639

4,070

2.66

2.48

Deposits in other banks

38,670

42,926

524

373

2.73

1.75

Total interest-earning assets

1,975,887

1,703,287

43,523

33,969

4.41

3.99

Non-earning assets

174,270

118,878

Total assets

$

2,150,157

$

1,822,165

Deposits:

Demand

$

287,424

$

239,477

126

24

0.09

0.02

Money market

422,359

402,612

2,548

1,585

1.22

0.79

Savings

156,843

131,453

107

20

0.14

0.03

Time

431,900

377,838

3,211

2,069

1.50

1.10

Total deposits

1,298,526

1,151,380

5,992

3,698

0.93

0.65

Customer repurchase agreements

39,161

11,795

311

2

1.60

0.03

Other short-term borrowings

3,865

1,210

39

10

2.02

1.65

Long-term borrowings

32,142

27,848

908

619

5.65

4.45

Total interest-bearing liabilities

1,373,694

1,192,233

7,250

4,329

1.06

0.73

Noninterest bearing demand deposits

490,263

409,878

Other liabilities

19,992

9,202

Shareholders' equity

266,208

210,852

Total liabilities and shareholders' equity

$

2,150,157

$

1,822,165

Interest rate spread

3.35

%

3.26

%

Net interest margin

3.67

%

3.48

%

Net interest income (taxable equivalent basis)

36,273

29,640

Less: Taxable equivalent adjustment

216

309

Net interest income

$

36,057

$

29,331


American National Bankshares Inc.

Reconciliation of Non-GAAP Financial Measures

Unaudited

(Dollars in thousands, except per share data)

2nd Qtr

1st Qtr

2nd Qtr

YTD

YTD

2019

2019

2018

2019

2018

EFFICIENCY RATIO

Noninterest expense

$

26,316

$

10,929

$

11,002

$

37,245

$

21,704

Add/subtract: loss/(gain) on sale of OREO

76

2

(3

)

78

2

Subtract: core deposit intangible amortization

(458

)

(55

)

(77

)

(513

)

(154

)

Subtract: merger related expense

(10,871

)

(451

)

-

(11,322

)

-

$

15,063

$

10,425

$

10,922

$

25,488

$

21,552

Net interest income

$

20,989

$

15,068

$

14,788

$

36,057

$

29,331

Tax equivalent adjustment

105

111

154

216

309

Noninterest income

3,682

3,451

3,563

7,133

6,896

Add/subtract: (gain)/loss on securities

(147

)

(323

)

(289

)

(470

)

(410

)

Add/subtract: (gain)/loss on fixed assets

87

-

-

87

(3

)

$

24,716

$

18,307

$

18,216

$

43,023

$

36,123

Efficiency ratio

60.94

%

56.95

%

59.96

%

59.24

%

59.66

%

TAX EQUIVALENT NET INTEREST INCOME

Non-GAAP measures:

Interest income - loans

$

22,678

$

15,682

$

14,816

$

38,360

$

29,526

Interest income - investments and other

2,638

2,525

2,330

5,163

4,443

Interest expense - deposits

(3,519

)

(2,472

)

(1,873

)

(5,992

)

(3,698

)

Interest expense - customer repurchase agreements

(140

)

(171

)

(1

)

(311

)

(2

)

Interest expense - other short-term borrowings

(39

)

(1

)

(1

)

(39

)

(10

)

Interest expense - long-term borrowings

(524

)

(384

)

(329

)

(908

)

(619

)

Total net interest income

$

21,094

$

15,179

$

14,942

$

36,273

$

29,640

Less non-GAAP measures:

Tax benefit on nontaxable interest - loans

(49

)

(44

)

(50

)

(93

)

(102

)

Tax benefit on nontaxable interest - securities

(56

)

(67

)

(104

)

(123

)

(207

)

GAAP measures

$

20,989

$

15,068

$

14,788

$

36,057

$

29,331

RETURN ON AVERAGE TANGIBLE EQUITY

Return on average equity (GAAP basis)

(1.60

)%

10.69

%

11.27

%

3.59

%

11.19

%

Impact of excluding average goodwill and other intangibles

(0.02

)

2.75

3.17

1.66

3.18

Return on average tangible equity (non-GAAP)

(1.62

)%

13.44

%

14.44

%

5.25

%

14.37

%

TANGIBLE EQUITY TO TANGIBLE ASSETS

Equity to assets ratio (GAAP basis)

12.90

%

12.28

%

11.69

%

12.90

%

11.69

%

Impact of excluding goodwill and other intangibles

3.49

2.15

2.23

3.49

2.23

Tangible equity to tangible assets ratio (non-GAAP)

9.41

%

10.13

%

9.46

%

9.41

%

9.46

%

TANGIBLE BOOK VALUE

Book value per share (GAAP basis)

$

28.00

$

26.21

$

24.50

$

28.00

$

24.50

Impact of excluding goodwill and other intangibles

8.37

5.11

5.16

8.37

5.16

Tangible book value per share (non-GAAP)

$

19.63

$

21.10

$

19.34

$

19.63

$

19.34


Contact:

William W. Traynham, Chief Financial Officer

434-773-2242

traynhamw@amnb.com