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American National Bankshares Reports Third Quarter Earnings

American National Bankshares, Inc.
·30 min read

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

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

Third quarter 2020 highlights include:

  • Earnings produced a return on average assets of 1.01% for the third quarter of 2020, compared to 0.80% in the previous quarter and 1.43% for the same quarter in the prior year.

  • Average deposits grew 4.7% during the quarter and 21.0% over the same quarter of 2019; the cost of deposits decreased to 0.52% in the third quarter, compared to 0.64% in the previous quarter and 1.00% in the same quarter of the prior year.

  • Net interest margin was 3.26% for the quarter, up from 3.22% in the second quarter of 2020 and down from 3.75% in the same quarter of the prior year (non-GAAP).

  • Noninterest revenues increased $457 thousand, or 11.9%, when compared to the previous quarter, and increased $121 thousand, or 2.9%, compared to the same quarter in the prior year.

  • Noninterest expense increased $1.7 million, or 13.7%, when compared to the previous quarter, and increased $348 thousand, or 2.5% when compared to the same quarter in the prior year.

  • The third quarter provision for loan losses totaled $2.6 million, which compares to a provision of $4.8 million for the previous quarter, and a recovery of $12 thousand in the same quarter in the prior year. The allowance for loan losses as a percentage of loans held for investment increased to 1.01% at period end. Excluding Paycheck Protection Program (“PPP”) loans, the allowance as a percentage of loans increased to 1.16% at period end.

  • Nonperforming assets as a percentage of total assets remained stable at 0.16% at September 30, 2020 and at June 30, 2020, and up from 0.15% at September 30, 2019.

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

  • During the third quarter of 2020, the Company continued to participate in the Small Business Administration’s PPP under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was intended to provide economic relief to small businesses that have been adversely impacted by the COVID-19 global pandemic. The Company had outstanding net PPP loans of $266.0 million at September 30, 2020, which compares to $264.0 million at June 30, 2020. The Company had net unamortized PPP loan origination fees with a balance of $6.8 million at September 30, 2020, which compares to $7.8 million at June 30, 2020.

NET INTEREST INCOME

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

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

For the remaining three months of 2020 (estimated)

$530

For the years ending (estimated):

2021

1,850

2022

1,139

2023

697

2024

367

2025

266

Thereafter

978

ASSET QUALITY

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

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

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

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

NONINTEREST INCOME

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

NONINTEREST EXPENSE

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

INCOME TAXES

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

BALANCE SHEET

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

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

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

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

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $2.9 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving Virginia and North Carolina with 25 banking offices. American National Bank also manages an additional $884 million of trust, investment and brokerage assets in its Wealth Division. Additional information about American National and American National Bank is available on American National's website at www.amnb.com.

NON-GAAP FINANCIAL MEASURES

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

FORWARD-LOOKING STATEMENTS

Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) the impacts of the ongoing COVID-19 pandemic; (2) expected revenue synergies and cost savings from acquisitions and depositions; (3) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (4) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American National’s market areas; (5) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (6) accounting principles, policies, and guidelines; and (7) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

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

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

Unaudited

September 30

2020

2019

Assets

Cash and due from banks

$

35,633

$

47,025

Interest-bearing deposits in other banks

234,638

95,592

Securities available for sale, at fair value

358,493

308,490

Restricted stock, at cost

8,707

8,621

Loans held for sale

6,789

5,646

Loans, net of deferred fees and costs

2,086,094

1,804,447

Less allowance for loan losses

(21,088

)

(12,758

)

Net Loans

2,065,006

1,791,689

Premises and equipment, net

39,979

39,261

Other real estate owned, net

999

1,353

Goodwill

85,048

84,633

Core deposit intangibles, net

6,482

8,165

Bank owned life insurance

28,278

27,612

Other assets

33,252

36,442

Total assets

$

2,903,304

$

2,454,529

Liabilities

Noninterest-bearing deposits

$

820,384

$

604,498

Interest-bearing deposis

1,650,316

1,437,364

Total deposits

2,470,700

2,041,862

Customer repurchase agreements

41,906

38,924

Long-term borrowings

35,609

35,524

Other liabilities

23,108

20,973

Total liabilities

2,571,323

2,137,283

Shareholders' equity

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

none outstanding

-

-

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

10,969,756 shares outstanding at September 30, 2020 and

11,116,250 shares outstanding at September 30, 2019

10,919

11,063

Capital in excess of par value

154,495

159,792

Retained earnings

163,855

147,030

Accumulated other comprehensive income (loss), net

2,712

(639

)

Total shareholders' equity

331,981

317,246

Total liabilities and shareholders' equity

$

2,903,304

$

2,454,529


American National Bankshares Inc.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

Unaudited

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Interest and Dividend Income:

Interest and fees on loans

$

22,346

$

22,470

$

65,046

$

60,737

Interest and dividends on securities:

Taxable

1,545

1,890

5,228

5,691

Tax-exempt

107

134

330

660

Dividends

122

135

382

324

Other interest income

59

329

356

853

Total interest and dividend income

24,179

24,958

71,342

68,265

Interest Expense:

Interest on deposits

2,118

3,655

7,908

9,647

Interest on short-term borrowings

42

166

237

516

Interest on long-term borrowings

524

515

1,523

1,423

Total interest expense

2,684

4,336

9,668

11,586

Net Interest Income

21,495

20,622

61,674

56,679

Provision for (recovery of) loan losses

2,619

(12

)

8,331

(6

)

Net Interest Income After Provision for

(Recovery of) Loan Losses

18,876

20,634

53,343

56,685

Noninterest Income:

Trust fees

1,054

979

3,019

2,826

Service charges on deposit accounts

618

783

1,880

2,101

Other fees and commissions

996

1,003

2,888

2,726

Mortgage banking income

1,030

710

2,472

1,702

Securities gains, net

-

105

814

575

Brokerage fees

170

183

553

516

Income from Small Business Investment Companies

98

143

34

174

Losses on premises and equipment, net

(15

)

(2

)

(97

)

(89

)

Other

341

267

1,059

773

Total noninterest income

4,292

4,171

12,622

11,304

Noninterest Expense:

Salaries and employee benefits

7,989

7,662

21,540

22,029

Occupancy and equipment

1,423

1,448

4,116

3,963

FDIC assessment (credit)

162

(175

)

433

119

Bank franchise tax

426

411

1,277

1,113

Core deposit intangible amortization

402

448

1,246

961

Data processing

705

589

2,253

1,838

Software

353

287

1,112

932

Other real estate owned, net

28

47

34

16

Merger related expenses

-

-

-

11,322

Other

2,652

3,075

7,895

8,744

Total noninterest expense

14,140

13,792

39,906

51,037

Income Before Income Taxes

9,028

11,013

26,059

16,952

Income Taxes

1,801

2,321

4,808

3,487

Net Income

$

7,227

$

8,692

$

21,251

$

13,465

Net Income Per Common Share:

Basic

$

0.66

$

0.78

$

1.93

$

1.30

Diluted

$

0.66

$

0.78

$

1.93

$

1.30

Weighted Average Common Shares Outstanding:

Basic

10,966,645

11,127,603

10,983,729

10,341,919

Diluted

10,969,901

11,138,008

10,988,090

10,351,753


American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

At or for the Nine Months

3rd Qtr

2nd Qtr

3rd Qtr

Ended September 30,

2020

2020

2019

2020

2019

EARNINGS

Interest income

$

24,179

$

23,297

$

24,958

$

71,342

$

68,265

Interest expense

2,684

3,037

4,336

9,668

11,586

Net interest income

21,495

20,260

20,622

61,674

56,679

Provision for (recovery of) loan losses

2,619

4,759

(12

)

8,331

(6

)

Noninterest income

4,292

3,835

4,171

12,622

11,304

Noninterest expense

14,140

12,432

13,792

39,906

51,037

Income taxes

1,801

1,422

2,321

4,808

3,487

Net income

7,227

5,482

8,692

21,251

13,465

PER COMMON SHARE

Net income per share - basic

$

0.66

$

0.50

$

0.78

$

1.93

$

1.30

Net income per share - diluted

0.66

0.50

0.78

1.93

1.30

Cash dividends paid

0.27

0.27

0.27

0.81

0.77

Book value per share

30.26

29.86

28.54

30.26

28.54

Book value per share - tangible (a)

21.92

21.48

20.19

21.92

20.19

Closing market price

20.92

25.04

35.47

20.92

35.47

FINANCIAL RATIOS

Return on average assets

1.01

%

0.80

%

1.43

%

1.05

%

0.80

%

Return on average equity

8.76

6.68

11.04

8.66

6.35

Return on average tangible equity (a)

12.66

9.85

16.31

12.60

9.23

Average equity to average assets

11.50

11.91

12.98

12.09

12.60

Tangible equity to tangible assets (a)

8.55

8.49

9.50

8.55

9.50

Net interest margin, taxable equivalent

3.26

3.22

3.75

3.32

3.70

Efficiency ratio (a)

53.00

49.74

53.79

52.40

57.25

Effective tax rate

19.95

20.60

21.08

18.45

20.57

PERIOD-END BALANCES

Securities

$

367,200

$

331,217

$

317,111

$

367,200

$

317,111

Loans held for sale

6,789

2,845

5,646

6,789

5,646

Loans, net

2,086,094

2,101,711

1,804,447

2,086,094

1,804,447

Goodwill and other intangibles

91,530

91,932

92,798

91,530

92,798

Assets

2,903,304

2,864,539

2,454,529

2,903,304

2,454,529

Assets - tangible (a)

2,811,774

2,772,607

2,361,731

2,811,774

2,361,731

Deposits

2,470,700

2,431,776

2,041,862

2,470,700

2,041,862

Customer repurchase agreements

41,906

46,296

38,924

41,906

38,924

Long-term borrowings

35,609

35,588

35,524

35,609

35,524

Shareholders' equity

331,981

327,433

317,246

331,981

317,246

Shareholders' equity - tangible (a)

240,451

235,501

224,448

240,451

224,448

AVERAGE BALANCES

Securities (b)

$

333,778

$

315,659

$

323,202

$

339,701

$

340,439

Loans held for sale

9,943

4,554

3,904

5,899

2,890

Loans, net

2,092,412

2,048,277

1,817,732

1,990,312

1,663,856

Interest-earning assets

2,648,990

2,525,998

2,207,935

2,483,908

2,054,087

Goodwill and other intangibles

91,749

92,161

93,077

91,883

77,154

Assets

2,870,213

2,755,470

2,426,678

2,706,359

2,243,343

Assets - tangible (a)

2,778,464

2,663,309

2,333,601

2,614,476

2,166,189

Interest-bearing deposits

1,619,960

1,564,430

1,443,947

1,560,204

1,347,532

Deposits

2,434,645

2,325,331

2,012,653

2,277,211

1,864,230

Customer repurchase agreements

45,689

43,716

39,470

43,649

39,265

Other short-term borrowings

-

-

1,986

1

3,502

Long-term borrowings

35,597

35,575

35,806

35,575

33,107

Shareholders' equity

330,038

328,051

314,980

327,231

282,644

Shareholders' equity - tangible (a)

238,289

235,890

221,903

235,348

205,490

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

At or for the Nine Months

3rd Qtr

2nd Qtr

3rd Qtr

Ended September 30,

2020

2020

2019

2020

2019

CAPITAL

Weighted average shares outstanding - basic

10,966,645

10,959,545

11,127,603

10,983,729

10,341,919

Weighted average shares outstanding - diluted

10,969,901

10,963,248

11,138,008

10,988,090

10,351,753

ALLOWANCE FOR LOAN LOSSES

Beginning balance

$

18,507

$

14,065

$

12,786

$

13,152

$

12,805

Provision for (recovery of) loan losses

2,619

4,759

(12

)

8,331

(6

)

Charge-offs

(126

)

(444

)

(66

)

(675

)

(189

)

Recoveries

88

127

50

280

148

Ending balance

$

21,088

$

18,507

$

12,758

$

21,088

$

12,758

LOANS

Construction and land development

$

151,613

$

141,392

$

143,788

$

151,613

$

143,788

Commercial real estate - owner occupied

382,121

388,947

348,857

382,121

348,857

Commercial real estate - non-owner occupied

608,954

589,821

534,362

608,954

534,362

Residential real estate

279,815

291,242

318,833

279,815

318,833

Home equity

111,448

114,397

122,074

111,448

122,074

Commercial and industrial

543,746

566,859

324,508

543,746

324,508

Consumer

8,397

9,053

12,025

8,397

12,025

Total

$

2,086,094

$

2,101,711

$

1,804,447

$

2,086,094

$

1,804,447

NONPERFORMING ASSETS AT PERIOD-END

Nonperforming loans:

90 days past due and accruing

$

285

$

375

$

874

$

285

$

874

Nonaccrual

3,088

2,855

1,446

3,088

1,446

Other real estate owned and repossessions

1,210

1,346

1,353

1,210

1,353

Nonperforming assets

$

4,583

$

4,576

$

3,673

$

4,583

$

3,673

ASSET QUALITY RATIOS

Allowance for loan losses to total loans

1.01

%

0.88

%

0.71

%

1.01

%

0.71

%

Allowance for loan losses to

nonperforming loans

625.20

572.97

549.91

625.20

549.91

Nonperforming assets to total assets

0.16

0.16

0.15

0.16

0.15

Nonperforming loans to total loans

0.16

0.15

0.13

0.16

0.13

Annualized net charge-offs

to average loans

0.01

0.06

0.00

0.03

0.00

OTHER DATA

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

$

569,095

$

536,014

$

546,407

$

569,095

$

546,407

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

$

314,809

$

301,096

$

308,820

$

314,809

$

308,820

Number full-time equivalent employees (e)

341

345

365

341

365

Number of full service offices

25

26

28

25

28

Number of loan production offices

1

1

1

1

1

Number of ATMs

37

38

40

37

40

Notes:

(a) - This financial measure is not calculated in accordance with GAAP. For a reconciliation of non-GAAP financial measures, see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

(b) - Average does not include unrealized gains and losses.

(c) - Market value.

(d) - Assets are not owned by American National and are not reflected in the consolidated balance sheet.

(e) - Average for quarter.


Net Interest Income Analysis

For the Three Months Ended September 30, 2020 and 2019

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense (a)

Yield/Rate

2020

2019

2020

2019

2020

2019

Loans:

Commercial

$

544,712

$

320,802

$

4,495

$

3,820

3.28

%

4.72

%

Real estate

1,549,078

1,489,155

17,755

18,487

4.58

4.97

Consumer

8,565

11,679

144

209

6.69

7.10

Total loans (b)

2,102,355

1,821,636

22,394

22,516

4.26

4.94

Securities:

U.S. Treasury

10,541

-

3

-

0.11

-

Federal agencies & GSEs

61,405

127,956

287

767

1.87

2.40

Mortgage-backed & CMOs

194,585

133,121

942

851

1.94

2.56

State and municipal

46,432

45,830

294

330

2.53

2.88

Other

20,815

16,295

275

242

5.28

5.94

Total securities

333,778

323,202

1,801

2,190

2.16

2.71

Deposits in other banks

212,857

63,097

59

329

0.11

2.07

Total interest-earning assets

2,648,990

2,207,935

24,254

25,035

3.66

4.53

Non-earning assets

221,223

218,743

Total assets

$

2,870,213

$

2,426,678

Deposits:

Demand

$

410,228

$

324,058

56

119

0.05

0.15

Money market

580,200

453,873

475

1,415

0.33

1.24

Savings

206,493

176,673

24

94

0.05

0.21

Time

423,039

489,343

1,563

2,027

1.47

1.64

Total deposits

1,619,960

1,443,947

2,118

3,655

0.52

1.00

Customer repurchase agreements

45,689

39,470

42

150

0.37

1.51

Other short-term borrowings

-

1,986

-

12

-

2.42

Long-term borrowings

35,597

35,806

524

519

5.89

5.80

Total interest-bearing

liabilities

1,701,246

1,521,209

2,684

4,336

0.63

1.13

Noninterest bearing demand deposits

814,685

568,706

Other liabilities

24,244

21,783

Shareholders' equity

330,038

314,980

Total liabilities and

shareholders' equity

$

2,870,213

$

2,426,678

Interest rate spread

3.03

%

3.40

%

Net interest margin

3.26

%

3.75

%

Net interest income (taxable equivalent basis)

21,570

20,699

Less: Taxable equivalent adjustment (c)

75

77

Net interest income

$

21,495

$

20,622

Notes:

(a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/amortization of deferred loan fees and costs.

(b) - Nonaccrual loans are included in the average balances.

(c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.


Net Interest Income Analysis

For the Nine Months Ended September 30, 2020 and 2019

(Dollars in thousands)

Unaudited

Interest

Average Balance

Income/Expense (a)

Yield/Rate

2020

2019

2020

2019

2020

2019

Loans:

Commercial

$

464,094

$

302,750

$

12,414

$

10,609

3.57

%

4.69

%

Real estate

1,522,803

1,354,358

52,319

49,782

4.58

4.90

Consumer

9,314

9,638

451

485

6.47

6.73

Total loans (b)

1,996,211

1,666,746

65,184

60,876

4.36

4.87

Securities:

U.S. Treasury

7,292

-

47

-

0.86

-

Federal agencies & GSEs

70,604

135,937

1,147

2,475

2.17

2.43

Mortgage-backed & CMOs

198,528

124,258

3,144

2,353

2.11

2.52

State and municipal

43,345

64,084

871

1,348

2.68

2.80

Other

19,932

16,160

812

653

5.43

5.39

Total securities

339,701

340,439

6,021

6,829

2.36

2.67

Deposits in other banks

147,996

46,902

356

853

0.32

2.43

Total interest-earning assets

2,483,908

2,054,087

71,561

68,558

3.84

4.45

Non-earning assets

222,451

189,256

Total assets

$

2,706,359

$

2,243,343

Deposits:

Demand

$

371,155

$

299,769

294

245

0.11

0.11

Money market

550,063

432,980

2,254

3,962

0.55

1.22

Savings

192,632

163,525

101

201

0.07

0.16

Time

446,354

451,258

5,259

5,239

1.57

1.55

Total deposits

1,560,204

1,347,532

7,908

9,647

0.68

0.96

Customer repurchase agreements

43,649

39,265

237

461

0.73

1.57

Other short-term borrowings

1

3,502

-

51

0.50

1.94

Long-term borrowings

35,575

33,107

1,523

1,427

5.71

5.75

Total interest-bearing

liabilities

1,639,429

1,423,406

9,668

11,586

0.79

1.09

Noninterest bearing demand deposits

717,007

516,698

Other liabilities

22,692

20,595

Shareholders' equity

327,231

282,644

Total liabilities and

shareholders' equity

$

2,706,359

$

2,243,343

Interest rate spread

3.05

%

3.36

%

Net interest margin

3.32

%

3.70

%

Net interest income (taxable equivalent basis)

61,893

56,972

Less: Taxable equivalent adjustment (c)

219

293

Net interest income

$

61,674

$

56,679

Notes:

(a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/amortization of deferred loan fees and costs.

(b) - Nonaccrual loans are included in the average balances.

(c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.


American National Bankshares Inc.

Reconciliation of Non-GAAP Financial Measures

Unaudited

(Dollars in thousands, except per share data)

At or for the Nine Months

3rd Qtr

2nd Qtr

3rd Qtr

Ended September 30,

2020

2020

2019

2020

2019

EFFICIENCY RATIO

Noninterest expense

$

14,140

$

12,432

$

13,792

$

39,906

$

51,037

Add/subtract: gain/loss on sale of OREO

(23

)

8

(22

)

12

55

Subtract: core deposit intangible amortization

(402

)

(417

)

(448

)

(1,246

)

(961

)

Subtract: merger related expenses

-

-

-

-

(11,322

)

$

13,715

$

12,023

$

13,322

$

38,672

$

38,809

Net interest income

$

21,495

$

20,260

$

20,622

$

61,674

$

56,679

Tax equivalent adjustment

75

75

77

219

293

Noninterest income

4,292

3,835

4,171

12,622

11,304

Subtract: gain on securities

-

-

(105

)

(814

)

(575

)

Add: loss on fixed assets

15

-

2

97

89

$

25,877

$

24,170

$

24,767

$

73,798

$

67,790

Efficiency ratio

53.00

%

49.74

%

53.79

%

52.40

%

57.25

%

TAX EQUIVALENT NET INTEREST INCOME

Non-GAAP measures:

Interest income - loans

$

22,394

$

21,427

$

22,516

$

65,184

$

60,876

Interest income - investments and other

1,860

1,945

2,519

6,377

7,682

Interest expense - deposits

(2,118

)

(2,478

)

(3,655

)

(7,908

)

(9,647

)

Interest expense - customer repurchase

agreements

(42

)

(66

)

(150

)

(237

)

(461

)

Interest expense - other short-term borrowings

-

-

(12

)

-

(51

)

Interest expense - long-term borrowings

(524

)

(493

)

(519

)

(1,523

)

(1,427

)

Total net interest income

$

21,570

$

20,335

$

20,699

$

61,893

$

56,972

Less non-GAAP measures:

Tax benefit on nontaxable interest - loans

(48

)

(48

)

(46

)

(138

)

(139

)

Tax benefit on nontaxable interest - securities

(27

)

(27

)

(31

)

(81

)

(154

)

GAAP measures

$

21,495

$

20,260

$

20,622

$

61,674

$

56,679

RETURN ON AVERAGE TANGIBLE EQUITY

Return on average equity (GAAP basis)

8.76

%

6.68

%

11.04

%

8.66

%

6.35

%

Impact of excluding average goodwill

and other intangibles

3.90

3.17

5.27

3.94

2.88

Return on average tangible equity

(non-GAAP)

12.66

%

9.85

%

16.31

%

12.60

%

9.23

%

TANGIBLE EQUITY TO TANGIBLE ASSETS

Equity to assets ratio (GAAP basis)

11.43

%

11.43

%

12.92

%

11.43

%

12.92

%

Impact of excluding goodwill and

other intangibles

2.88

2.94

3.42

2.88

3.42

Tangible equity to tangible assets ratio

(non-GAAP)

8.55

%

8.49

%

9.50

%

8.55

%

9.50

%

TANGIBLE BOOK VALUE

Book value per share (GAAP basis)

$

30.26

$

29.86

$

28.54

$

30.26

$

28.54

Impact of excluding goodwill and

other intangibles

8.34

8.38

8.35

8.34

8.35

Tangible book value per share

(non-GAAP)

$

21.92

$

21.48

$

20.19

$

21.92

$

20.19

ADJUSTED LOAN LOSS ALLOWANCE

Allowance for loan losses

$

21,088

$

18,507

$

12,758

$

21,088

$

12,758

Credit discount on purchased loans

7,896

9,868

12,937

7,896

12,937

Adjusted loan loss allowance

$

28,984

$

28,375

$

25,695

$

28,984

$

25,695

Total loans, net

$

2,086,094

$

2,101,711

$

1,804,447

$

2,086,094

$

1,804,447

Subtract: PPP loans, net

(265,941

)

(264,022

)

-

(265,941

)

-

Total loans less PPP loans, net

$

1,820,153

$

1,837,689

$

1,804,447

$

1,820,153

$

1,804,447

Adjusted loan loss allowance to

total loans less PPP loans, net

1.59

%

1.54

%

1.42

%

1.59

%

1.42

%