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American National Bankshares Reports Second Quarter Earnings

American National Bankshares, Inc.
·28 mins read

DANVILLE, Va., July 23, 2020 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (NASDAQ: AMNB) (“American National” or the “Company”) today reported second quarter 2020 earnings of $5.5 million, or $0.50 per diluted common share. Those results compare to a net loss of $1.2 million, or ($0.11) per diluted common share, during the same quarter in the prior year, and net income of $8.5 million, or $0.77 per diluted common share, recognized for the first quarter of 2020. Earnings for the first six months of 2020 were $14.0 million, or $1.28 per diluted common share, compared to $4.8 million, or $0.48 per diluted common share for the same period of 2019. Earnings for the second quarter and six months of 2019 were impacted by $10.9 million and $11.3 million, respectively, in merger related expenses.

President and Chief Executive Officer Jeffrey V. Haley commented, “In spite of a challenging interest rate and economic operating environment brought on by the pandemic, our Company performed well in the quarter. Capital, liquidity and credit quality all remain strong. From an earnings perspective, earnings were solid and absorbed a significant loan loss provision in anticipation of possible impacts from the economic uncertainty and stressed environment.

“We were an active participant in the SBA’s Paycheck Protection Program during the quarter, assisting our small business customers with just under 2,200 loans for a total of $272 million. We also were active with our disaster assistance program, providing interest and payment deferrals to $395 million of our loans outstanding at quarter end.

“We continue to focus on the welfare of our employees, customers and communities. We have raised the emphasis around the critical issues of racial justice and equality in our country, and are having meaningful dialogue around what we can do as a company to improve opportunities for all.

“I continue to be amazed at our employees’ unwavering commitment to serve our customers while supporting each other during this challenging time. American National has seen our share of challenges during our 111 years in banking, and it’s this solid foundation that has provided us with the tools to operate our bank during times of adversity. We have successfully demonstrated our strengths including the ability to be nimble in order to quickly and effectively respond to the needs of our communities.”

Second quarter 2020 highlights include:

  • Earnings produced a return on average assets of 0.80% for the second quarter of 2020, compared to 1.37% in the previous quarter and (0.20%) for the same quarter in the prior year.

  • Paycheck Protection Program (“PPP”) loans drove the $247 million expansion in net loans receivable for the quarter. At June 30, 2020, PPP loans totaled $272 million; declines in other categories offset some of the growth during the quarter. In addition, average deposits grew 12.3% during the quarter, as proceeds from PPP funding contributed to significant deposit growth.

  • Net interest margin was 3.22% for the quarter, down from 3.52% in the first quarter of 2020 and down from 3.82% in the same quarter of the prior year (non-GAAP).

  • Noninterest revenues decreased $660 thousand, or 14.7%, when compared to the previous quarter, and increased $153 thousand, or 4.2%, compared to the same quarter in the prior year.

  • Noninterest expense decreased $902 thousand, or 6.8%, when compared to the previous quarter, and decreased $13.9 million, or 52.8% when compared to the same quarter in the prior year.

  • The second quarter provision for loan losses totaled $4.8 million, which compares to a provision of $953 thousand for the previous quarter, and a recovery of $10 thousand in the same quarter in the prior year. The allowance for loan losses as a percentage of loans held for investment increased to 0.88% at period end. Excluding PPP loans, the allowance as a percentage of loans increased to 1.00% at period end.

  • Nonperforming assets as a percentage of total assets remained stable at 0.16% at June 30, 2020 and at March 31, 2020, and up from 0.14% at June 30, 2019.

  • Annualized net charge-offs were 0.06% for the second quarter of 2020, compared to zero for the corresponding quarter in the prior year and up from 0.01% for the first quarter of 2020.

NET INTEREST INCOME

Net interest income for the second quarter of 2020 was $20.3 million, an increase of $341 thousand, or 1.7%, from the prior quarter and a decrease of $729 thousand, or 3.5%, from the second quarter of 2019. The sequential quarter-over-quarter increase in net interest income was principally caused by an increase in average loan balances and reduced funding costs. The year-over-year decrease was the result of five reductions of the federal funds rate over the period totaling 225 basis points. The fully taxable equivalent (“FTE”) net interest margin for the quarter was 3.22%, down from 3.52% in the prior quarter and from 3.82% in the same period a year ago (non-GAAP).

The Company’s FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the second quarter of 2020, net accretion related to acquisition accounting amounted to $801 thousand, compared to $1.1 million for the same period in 2019 and $957 thousand in the prior quarter. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):

For the remaining six months of 2020 (estimated)

$1,113

For the years ending (estimated):

2021

1,852

2022

1,147

2023

678

2024

357

2025

260

Thereafter

1,188

ASSET QUALITY/LOAN LOSS PROVISION

Nonperforming assets (“NPAs”) totaled $4.6 million as of June 30, 2020, up from $4.0 million at March 31, 2020 and up from $3.3 million at June 30, 2019. NPAs as a percentage of total assets were 0.16% at June 30, 2020, which compares to 0.16% at March 31, 2020 and 0.14% at June 30, 2019.

The provision for loan losses was $4.8 million for the second quarter of 2020, as compared to $953 thousand for the previous quarter and a recovery of $10 thousand for the same period in the previous year. The increase over the prior periods reflects a reserve build in response to the declining and uncertain economic landscape caused by the COVID-19 pandemic. The allowance for loan losses was $18.5 million at June 30, 2020, compared to $14.1 million at March 31, 2020 and $12.8 million at June 30, 2019. Annualized net charge-offs as a percentage of average loans outstanding was 0.06% for the second quarter of 2020, compared to 0.01% 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 0.88% at June 30, 2020, compared to 0.76% at March 31, 2020 and 0.70% at June 30, 2019.

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.

DISASTER ASSISTANCE AND PAYCHECK PROTECTION PROGRAMS

American National has implemented a Disaster Assistance Program and is participating in the PPP initiated by the U.S. Treasury on April 3, 2020. At June 30, 2020, American National has provided interest only and payment deferrals to over 729 customers of predominately commercial real estate loan balances of approximately $395 million. With respect to the PPP program, American National has to date processed with U.S. Small Business Administration approval 2,179 applications for loans in excess of $272 million. From a funding perspective, the Company continues to utilize core funding sources.

NONINTEREST INCOME

Noninterest income decreased $660 thousand to $3.8 million for the quarter ended June 30, 2020 from $4.5 million in the prior quarter and increased $153 thousand from the same period in the prior year. The gain on the sale of securities of $814 thousand in the first quarter, partially offset by increased mortgage banking income in the second quarter, accounted for the majority of the decrease quarter over quarter in 2020. The increase from the same period of 2019 was reflective of increased mortgage banking income, offset by decreased service charges on deposit accounts and other fees and commissions.

NONINTEREST EXPENSE

Noninterest expense for the second quarter of 2020 amounted to $12.4 million, down $902 thousand, or 6.8%, when compared to the $13.3 million for the previous quarter and down from $26.3 million when compared to the same period in the previous year. The decrease from the first quarter of 2020 was a result of a reduction in salary expenses of $1.6 million for the deferral of loan costs related to PPP originations. The decrease from the same period in the prior year was primarily related to the expenses incurred in the acquisition of HomeTown Bankshares (“HomeTown”) completed on April 1, 2019.

INCOME TAXES

The effective tax rate for the three months ended June 30, 2020 was 20.6%, compared to 15.7% for the prior quarter and (24.8%) for the same period in the prior year. The effective tax rate for the quarter ended March 31, 2020 benefitted by the enactment of the Coronavirus Aid, Relief, and Economic Security Act, whereas, the Company recognized a tax benefit for its decision to utilize the net operating loss (“NOL”) five-year carryback provision for the NOL acquired in the HomeTown acquisition. The 2019 quarter was impacted by $10.9 million in merger related expense relating to the HomeTown acquisition, which generated a $1.6 million pretax loss.

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 26 banking offices. American National Bank also manages an additional $837 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'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 the recently completed merger with HomeTown may not be fully realized or realized within the expected timeframe; (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.


American National Bankshares Inc.

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

Unaudited

June 30

2020

2019

Assets

Cash and due from banks

$

44,607

$

34,460

Interest-bearing deposits in other banks

206,998

20,454

Equity securities, at fair value

-

125

Securities available for sale, at fair value

322,523

334,326

Restricted stock, at cost

8,694

7,796

Loans held for sale

2,845

3,165

Loans, net of unearned income

2,101,711

1,836,241

Less allowance for loan losses

(18,507

)

(12,786

)

Net Loans

2,083,204

1,823,455

Premises and equipment, net

39,571

39,038

Other real estate owned, net

984

1,433

Goodwill

85,048

84,633

Core deposit intangibles, net

6,884

8,613

Bank owned life insurance

28,122

27,451

Accrued interest receivable and other assets

35,059

33,133

Total assets

$

2,864,539

$

2,418,082

Liabilities

Demand deposits -- noninterest-bearing

$

824,679

$

554,400

Demand deposits -- interest-bearing

406,322

326,105

Money market deposits

562,061

451,343

Savings deposits

200,518

178,723

Time deposits

438,196

488,526

Total deposits

2,431,776

1,999,097

Short-term borrowings:

Customer repurchase agreements

46,296

37,222

Other short-term borrowings

-

13,528

Subordinated debt

7,508

7,526

Junior subordinated debt

28,080

27,978

Accrued interest payable and other liabilities

23,446

20,814

Total liabilities

2,537,106

2,106,165

Shareholders' equity

Preferred stock, $5 par, 2,000,000 shares authorized,

none outstanding

-

-

Common stock, $1 par, 20,000,000 shares authorized,

10,964,320 shares outstanding at June 30, 2020 and

11,141,355 shares outstanding at June 30, 2019

10,911

11,089

Capital in excess of par value

154,222

160,572

Retained earnings

159,586

141,339

Accumulated other comprehensive income (loss), net

2,714

(1,083

)

Total shareholders' equity

327,433

311,917

Total liabilities and shareholders' equity

$

2,864,539

$

2,418,082


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

2020

2019

2020

2019

Interest and Dividend Income:

Interest and fees on loans

$

21,379

$

22,629

$

42,700

$

38,267

Interest and dividends on securities:

Taxable

1,646

1,980

3,683

3,801

Tax-exempt

111

239

223

526

Dividends

128

105

260

189

Other interest income

33

258

297

524

Total interest and dividend income

23,297

25,211

47,163

43,307

Interest Expense:

Interest on deposits

2,478

3,520

5,790

5,992

Interest on short-term borrowings

66

178

195

350

Interest on long-term borrowings

-

14

-

14

Interest on subordinated debt

123

122

245

122

Interest on junior subordinated debt

370

388

754

772

Total interest expense

3,037

4,222

6,984

7,250

Net Interest Income

20,260

20,989

40,179

36,057

Provision for (recovery of) loan losses

4,759

(10

)

5,712

6

Net Interest Income After Provision for

(Recovery of) Loan Losses

15,501

20,999

34,467

36,051

Noninterest Income:

Trust fees

953

933

1,965

1,847

Service charges on deposit accounts

541

724

1,262

1,318

Other fees and commissions

951

1,015

1,892

1,723

Mortgage banking income

893

586

1,442

992

Securities gains, net

-

147

814

470

Brokerage fees

172

186

383

333

Income (loss) from Small Business Investment Companies

(119

)

(137

)

(64

)

31

Losses on premises and equipment, net

-

(87

)

(82

)

(87

)

Other

444

315

718

506

Total noninterest income

3,835

3,682

8,330

7,133

Noninterest Expense:

Salaries

4,805

7,048

10,864

11,712

Employee benefits

1,386

1,425

2,687

2,655

Occupancy and equipment

1,327

1,431

2,693

2,515

FDIC assessment

176

169

271

294

Bank franchise tax

425

412

851

702

Core deposit intangible amortization

417

458

844

513

Data processing

785

717

1,548

1,249

Software

403

321

759

645

Other real estate owned, net

15

(44

)

6

(31

)

Merger related expenses

-

10,871

-

11,322

Other

2,693

3,508

5,243

5,669

Total noninterest expense

12,432

26,316

25,766

37,245

Income (Loss) Before Income Taxes

6,904

(1,635

)

17,031

5,939

Income Taxes

1,422

(405

)

3,007

1,166

Net Income (Loss)

$

5,482

$

(1,230

)

$

14,024

$

4,773

Net Income (Loss) Per Common Share:

Basic

$

0.50

$

(0.11

)

$

1.28

$

0.48

Diluted

$

0.50

$

(0.11

)

$

1.28

$

0.48

Weighted Average Common Shares Outstanding:

Basic

10,959,545

11,126,800

10,992,365

9,942,566

Diluted

10,963,248

11,126,800

10,997,279

9,952,115


American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

At or for the Six Months

2nd Qtr

1st Qtr

2nd Qtr

Ended June 30,

2020

2020

2019

2020

2019

EARNINGS

Interest income

$

23,297

$

23,866

$

25,211

$

47,163

$

43,307

Interest expense

3,037

3,947

4,222

6,984

7,250

Net interest income

20,260

19,919

20,989

40,179

36,057

Provision for (recovery of) loan losses

4,759

953

(10

)

5,712

6

Noninterest income

3,835

4,495

3,682

8,330

7,133

Noninterest expense

12,432

13,334

26,316

25,766

37,245

Income taxes

1,422

1,585

(405

)

3,007

1,166

Net income (loss)

5,482

8,542

(1,230

)

14,024

4,773

PER COMMON SHARE

Net income (loss) per share - basic

$

0.50

$

0.77

$

(0.11

)

$

1.28

$

0.48

Net income (loss) per share - diluted

0.50

0.77

(0.11

)

1.28

0.48

Cash dividends paid

0.27

0.27

0.25

0.54

0.50

Book value per share

29.86

29.50

28.00

29.86

28.00

Book value per share - tangible (a)

21.48

21.08

19.63

21.48

19.63

Closing market price

25.04

23.90

38.75

25.04

38.75

FINANCIAL RATIOS

Return on average assets

0.80

%

1.37

%

(0.20

)

%

1.07

%

0.44

%

Return on average equity

6.68

10.56

(1.60

)

8.61

3.59

Return on average tangible equity (a)

9.85

15.32

(1.62

)

12.56

5.25

Average equity to average assets

11.91

12.99

12.62

12.42

12.38

Tangible equity to tangible assets (a)

8.49

9.61

9.41

8.49

9.41

Net interest margin, taxable equivalent

3.22

3.52

3.82

3.36

3.67

Efficiency ratio (a)

49.74

54.46

60.94

52.08

59.24

Effective tax rate

20.60

15.65

(24.77

)

17.66

19.63

PERIOD-END BALANCES

Securities

$

331,217

$

351,451

$

342,247

$

331,217

$

342,247

Loans held for sale

2,845

2,666

3,165

2,845

3,165

Loans, net

2,101,711

1,854,928

1,836,241

2,101,711

1,836,241

Goodwill and other intangibles

91,932

92,349

93,246

91,932

93,246

Assets

2,864,539

2,495,065

2,418,082

2,864,539

2,418,082

Assets - tangible (a)

2,772,607

2,402,716

2,324,836

2,772,607

2,324,836

Deposits

2,431,776

2,070,667

1,999,097

2,431,776

1,999,097

Customer repurchase agreements

46,296

42,114

37,222

46,296

37,222

Long-term borrowings

35,588

35,567

35,504

35,588

35,504

Shareholders' equity

327,433

323,293

311,917

327,433

311,917

Shareholders' equity - tangible (a)

235,501

230,944

218,671

235,501

218,671

AVERAGE BALANCES

Securities (b)

$

315,659

$

369,730

$

354,506

$

342,695

$

349,199

Loans held for sale

4,554

3,156

2,913

3,855

2,375

Loans, net

2,048,277

1,829,125

1,816,203

1,938,700

1,585,643

Interest-earning assets

2,525,998

2,274,920

2,211,273

2,400,459

1,975,887

Goodwill and other intangibles

92,161

91,738

93,075

91,950

69,060

Assets

2,755,470

2,491,591

2,433,948

2,623,531

2,150,157

Assets - tangible (a)

2,663,309

2,399,853

2,340,873

2,531,581

2,081,097

Interest-bearing deposits

1,564,430

1,495,565

1,463,613

1,529,997

1,298,526

Deposits

2,325,331

2,069,927

2,023,557

2,197,629

1,788,789

Customer repurchase agreements

43,716

41,519

35,657

42,617

39,161

Other short-term borrowings

-

3

7,627

2

3,865

Long-term borrowings

35,575

35,554

36,301

35,565

32,142

Shareholders' equity

328,051

323,573

307,281

325,812

266,208

Shareholders' equity - tangible (a)

235,890

231,835

214,206

233,862

197,148

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

At or for the Six Months

2nd Qtr

1st Qtr

2nd Qtr

Ended June 30,

2020

2020

2019

2020

2019

CAPITAL

Weighted average shares outstanding - basic

10,959,545

11,025,185

11,126,800

10,992,365

9,942,566

Weighted average shares outstanding - diluted

10,963,248

11,031,310

11,126,800

10,997,279

9,952,115

ALLOWANCE FOR LOAN LOSSES

Beginning balance

$

14,065

$

13,152

$

12,806

$

13,152

$

12,805

Provision for (recovery of) loan losses

4,759

953

(10

)

5,712

6

Charge-offs

(444

)

(105

)

(54

)

(549

)

(123

)

Recoveries

127

65

44

192

98

Ending balance

$

18,507

$

14,065

$

12,786

$

18,507

$

12,786

LOANS

Construction and land development

$

141,392

$

141,154

$

152,876

$

141,392

$

152,876

Commercial real estate

978,768

953,363

880,146

978,768

880,146

Residential real estate

291,242

301,284

328,400

291,242

328,400

Home equity

114,397

118,030

121,905

114,397

121,905

Commercial and industrial

566,859

331,507

340,427

566,859

340,427

Consumer

9,053

9,590

12,487

9,053

12,487

Total

$

2,101,711

$

1,854,928

$

1,836,241

$

2,101,711

$

1,836,241

NONPERFORMING ASSETS AT PERIOD-END

Nonperforming loans:

90 days past due and accruing

$

375

$

459

$

930

$

375

$

930

Nonaccrual

2,855

2,579

969

2,855

969

Other real estate owned and repossessions

1,346

984

1,433

1,346

1,433

Nonperforming assets

$

4,576

$

4,022

$

3,332

$

4,576

$

3,332

ASSET QUALITY RATIOS

Allowance for loan losses to total loans

0.88

%

0.76

%

0.70

%

0.88

%

0.70

%

Allowance for loan losses to

nonperforming loans

572.97

462.97

673.30

572.97

673.30

Nonperforming assets to total assets

0.16

0.16

0.14

0.16

0.14

Nonperforming loans to total loans

0.15

0.16

0.10

0.15

0.10

Annualized net charge-offs

to average loans

0.06

0.01

0.00

0.04

0.00

OTHER DATA

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

$

536,014

$

492,850

$

547,731

$

536,014

$

547,731

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

$

301,096

$

235,359

$

314,051

$

301,096

$

314,051

Number full-time equivalent employees (e)

345

355

371

345

371

Number of full service offices

26

26

28

26

28

Number of loan production offices

1

1

-

1

-

Number of ATMs

38

38

39

38

39

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, 2020 and 2019

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense (a)

Yield/Rate

2020

2019

2020

2019

2020

2019

Loans:

Commercial

$

513,765

$

321,263

$

4,377

$

3,899

3.43

%

4.87

%

Real estate

1,529,723

1,485,665

16,901

18,578

4.42

5.00

Consumer

9,343

12,188

149

201

6.41

6.61

Total loans (b)

2,052,831

1,819,116

21,427

22,678

4.18

4.99

Securities:

U.S. Treasury

2,250

-

9

-

1.60

-

Federal agencies & GSEs

47,197

140,516

284

858

2.41

2.44

Mortgage-backed & CMOs

203,268

127,718

1,059

809

2.08

2.53

State and municipal

42,742

68,185

288

480

2.70

2.82

Other

20,202

18,087

272

233

5.39

5.15

Total securities

315,659

354,506

1,912

2,380

2.42

2.69

Deposits in other banks

157,508

37,651

33

258

0.08

2.75

Total interest-earning assets

2,525,998

2,211,273

23,372

25,316

3.70

4.58

Non-earning assets

229,472

222,675

Total assets

$

2,755,470

$

2,433,948

Deposits:

Demand

$

371,451

$

335,879

115

112

0.12

0.13

Money market

554,318

448,722

591

1,394

0.43

1.25

Savings

192,354

179,375

24

98

0.05

0.22

Time

446,307

499,637

1,748

1,916

1.58

1.54

Total deposits

1,564,430

1,463,613

2,478

3,520

0.64

0.96

Customer repurchase agreements

43,716

35,657

66

140

0.61

1.57

Other short-term borrowings

-

7,627

-

38

-

1.99

Long-term borrowings

35,575

36,301

493

524

5.54

5.77

Total interest-bearing

liabilities

1,643,721

1,543,198

3,037

4,222

0.74

1.10

Noninterest bearing demand deposits

760,901

559,944

Other liabilities

22,797

23,525

Shareholders' equity

328,051

307,281

Total liabilities and

shareholders' equity

$

2,755,470

$

2,433,948

Interest rate spread

2.96

%

3.48

%

Net interest margin

3.22

%

3.82

%

Net interest income (taxable equivalent basis)

20,335

21,094

Less: Taxable equivalent adjustment (c)

75

105

Net interest income

$

20,260

$

20,989

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 Six Months Ended June 30, 2020 and 2019

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense (a)

Yield/Rate

2020

2019

2020

2019

2020

2019

Loans:

Commercial

$

423,343

$

293,575

$

7,919

$

6,790

3.76

%

4.66

%

Real estate

1,509,520

1,285,842

34,564

31,294

4.58

4.87

Consumer

9,692

8,601

307

276

6.37

6.47

Total loans (b)

1,942,555

1,588,018

42,790

38,360

4.41

4.84

Securities:

U.S. Treasury

5,650

-

44

-

1.56

-

Federal agencies & GSEs

75,254

139,993

861

1,708

2.29

2.44

Mortgage-backed & CMOs

200,521

119,754

2,202

1,502

2.20

2.51

State and municipal

41,784

73,362

576

1,018

2.76

2.78

Other

19,486

16,090

537

411

5.51

5.11

Total securities

342,695

349,199

4,220

4,639

2.46

2.66

Deposits in other banks

115,209

38,670

297

524

0.52

2.73

Total interest-earning assets

2,400,459

1,975,887

47,307

43,523

3.95

4.41

Non-earning assets

223,072

174,270

Total assets

$

2,623,531

$

2,150,157

Deposits:

Demand

$

351,404

$

287,424

238

126

0.14

0.09

Money market

534,828

422,359

1,779

2,548

0.67

1.22

Savings

185,625

156,843

77

107

0.08

0.14

Time

458,140

431,900

3,696

3,211

1.62

1.50

Total deposits

1,529,997

1,298,526

5,790

5,992

0.76

0.93

Customer repurchase agreements

42,617

39,161

195

311

0.92

1.60

Other short-term borrowings

2

3,865

-

39

0.50

2.02

Long-term borrowings

35,565

32,142

999

908

5.62

5.65

Total interest-bearing

liabilities

1,608,181

1,373,694

6,984

7,250

0.87

1.06

Noninterest bearing demand deposits

667,632

490,263

Other liabilities

21,906

19,992

Shareholders' equity

325,812

266,208

Total liabilities and

shareholders' equity

$

2,623,531

$

2,150,157

Interest rate spread

3.08

%

3.35

%

Net interest margin

3.36

%

3.67

%

Net interest income (taxable equivalent basis)

40,323

36,273

Less: Taxable equivalent adjustment (c)

144

216

Net interest income

$

40,179

$

36,057

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 Six Months

2nd Qtr

1st Qtr

2nd Qtr

Ended June 30,

2020

2020

2019

2020

2019

EFFICIENCY RATIO

Noninterest expense

$

12,432

$

13,334

$

26,316

$

25,766

$

37,245

Add: gain on sale of OREO

8

27

76

35

78

Subtract: core deposit intangible amortization

(417

)

(427

)

(458

)

(844

)

(513

)

Subtract: merger related expenses

-

-

(10,871

)

-

(11,322

)

$

12,023

$

12,934

$

15,063

$

24,957

$

25,488

Net interest income

$

20,260

$

19,919

$

20,989

$

40,179

$

36,057

Tax equivalent adjustment

75

69

105

144

216

Noninterest income

3,835

4,495

3,682

8,330

7,133

Subtract: gain on securities

-

(814

)

(147

)

(814

)

(470

)

Add: loss on fixed assets

-

82

87

82

87

$

24,170

$

23,751

$

24,716

$

47,921

$

43,023

Efficiency ratio

49.74

%

54.46

%

60.94

%

52.08

%

59.24

%

TAX EQUIVALENT NET INTEREST INCOME

Non-GAAP measures:

Interest income - loans

$

21,427

$

21,363

$

22,678

$

42,790

$

38,360

Interest income - investments and other

1,945

2,572

2,638

4,517

5,163

Interest expense - deposits

(2,478

)

(3,312

)

(3,520

)

(5,790

)

(5,992

)

Interest expense - customer repurchase

agreements

(66

)

(129

)

(140

)

(195

)

(311

)

Interest expense - other short-term borrowings

-

-

(38

)

-

(39

)

Interest expense - long-term borrowings

(493

)

(506

)

(524

)

(999

)

(908

)

Total net interest income

$

20,335

$

19,988

$

21,094

$

40,323

$

36,273

Less non-GAAP measures:

Tax benefit on nontaxable interest - loans

(48

)

(42

)

(49

)

(90

)

(93

)

Tax benefit on nontaxable interest - securities

(27

)

(27

)

(56

)

(54

)

(123

)

GAAP measures

$

20,260

$

19,919

$

20,989

$

40,179

$

36,057

RETURN ON AVERAGE TANGIBLE EQUITY

Return on average equity (GAAP basis)

6.68

%

10.56

%

(1.60

)

%

8.61

%

3.59

%

Impact of excluding average goodwill

and other intangibles

3.17

4.76

(0.02

)

3.95

1.66

Return on average tangible equity

(non-GAAP)

9.85

%

15.32

%

(1.62

)

%

12.56

%

5.25

%

TANGIBLE EQUITY TO TANGIBLE ASSETS

Equity to assets ratio (GAAP basis)

11.43

%

12.96

%

12.90

%

11.43

%

12.90

%

Impact of excluding goodwill and

other intangibles

2.94

3.35

3.49

2.94

3.49

Tangible equity to tangible assets ratio

(non-GAAP)

8.49

%

9.61

%

9.41

%

8.49

%

9.41

%

TANGIBLE BOOK VALUE

Book value per share (GAAP basis)

$

29.86

$

29.50

$

28.00

$

29.86

$

28.00

Impact of excluding goodwill and

other intangibles

8.38

8.42

8.37

8.38

8.37

Tangible book value per share

(non-GAAP)

$

21.48

$

21.08

$

19.63

$

21.48

$

19.63


Contact:
Jeffrey W. Farrar
Executive Vice President, COO & CFO
(434)773-2274
farrarj@amnb.com