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American National Bankshares Inc. Reports Third Quarter 2019 Earnings

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  • 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.”

Capital
American 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 Measurements
Nonperforming 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 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 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 Income
Net 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 Losses
Provision 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 Income
Noninterest 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 Expense
Noninterest 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 National
American 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 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 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 - diluted

0.78

(0.11

)

0.66

1.30

2.02

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 (a)

20.19

19.63

19.65

20.19

19.65

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 equity (a)

16.31

(1.62

)

13.70

9.23

14.14

Average equity to average assets

12.98

12.62

11.87

12.60

11.67

Tangible equity to tangible assets (a)

9.50

9.41

9.72

9.50

9.72

Net interest margin, taxable equivalent

3.75

3.82

3.51

3.70

3.49

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 (a)

224,448

218,671

171,213

224,448

171,213

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 (a)

221,903

214,206

170,167

205,490

167,310

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 outstanding - basic

11,127,603

11,126,800

8,712,443

10,341,919

8,691,423

Weighted average shares outstanding - diluted

11,138,008

11,126,800

8,718,918

10,351,753

8,703,662

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 development

$

143,788

$

152,876

$

99,546

$

143,788

$

99,546

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 total loans

0.71

%

0.70

%

1.02

%

0.71

%

1.02

%

Allowance for loan losses to

nonperforming loans

549.91

673.30

587.72

549.91

587.72

Nonperforming assets to total assets

0.15

0.14

0.18

0.15

0.18

Nonperforming loans to total loans

0.13

0.10

0.17

0.13

0.17

Annualized net charge-offs

to average loans

0.00

0.00

(0.03

)

0.00

(0.01

)

OTHER DATA

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

$

546,407

$

547,731

$

523,754

$

546,407

$

523,754

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

$

308,820

$

314,051

$

333,565

$

308,820

$

333,565

Number full-time equivalent employees (e)

365

371

316

365

316

Number of full service offices

28

28

24

28

24

Number of loan production offices

1

1

2

1

2

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