AMERICAN NATIONAL BANKSHARES INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - 8-K - AMERICAN NATIONAL BANKSHARES INC.	form8-kearningsrelease0123.htm

Exhibit 99.1



FOR IMMEDIATE RELEASE

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

AMERICAN NATIONAL BANKSHARES

REPORTS FOURTH QUARTER EARNINGS

Danville, VA, January 23, 2020 - American National Bankshares Inc. (NASDAQ: AMNB) (“American National” or “the Company”) today reported fourth quarter 2019 earnings of $7.4 million or $0.67 per diluted common share. Those results compare to net income of $5.0 million, or $0.57 per diluted common share during the same quarter in the prior year, and net income of $8.7 million or $0.78 per diluted common share recognized for the third quarter of 2019. Earnings for the twelve months ended December 31, 2019 amounted to $20.9 million or $1.98 per diluted share, compared to $22.6 million or $2.59 per diluted share in 2018. Results for 2019 include the impact of merger related costs of $11.8 million associated with the HomeTown Bank (HomeTown) acquisition.

“2019 was a transformative year for American National, as we successfully completed the acquisition of HomeTown, added some key management talent and just announced the opening of a loan production office in the strong Raleigh, North Carolina market” said Jeffrey V. Haley, President and Chief Executive Officer of the Company. “Loan growth picked up in the quarter, and our credit quality continues to be strong. Margin compression continues to be a challenge in this low rate environment, both from market pricing pressure as well as the impact from recent reductions in short term rates. We incurred some additional merger related expenses associated with completing the HomeTown acquisition during the quarter, as well as some expenses associated with the Raleigh loan production office. I am proud of our accomplishments in 2019 to grow the Company and maintain our solid financial performance, and look to 2020 with optimism and enthusiasm.”

Fourth quarter 2019 highlights include:


•	Earnings produced a return on average assets of 1.20% for the fourth quarter of 2019, compared to 1.43% in the previous quarter and 1.08% for the same quarter in prior year.


•	Net loans receivable increased $26.4 million for the quarter or 5.8% annualized.


•	Net interest margin was 3.62% for the quarter, down from 3.75% in the third quarter of 2019 and up from 3.48% in the same quarter of the prior year.


•	Noninterest revenues decreased $305.0 thousand or 7.3% when compared to the previous quarter, but increased $868.0 thousand or 29.0% to $3.9 million from $3.0 million in the same quarter in the prior year.


•	The fourth quarter provision for loan losses totaled $462 thousand, which compares to a net recovery of $12 thousand for the previous quarter, and a net recovery of $6 thousand in the same quarter in the prior year.


•	Nonperforming assets as a percentage of total assets remained level at 0.15% at December 31, 2019, compared with 0.15% at September 30, 2019, and up from 0.11% at December 31, 2018.


•	Annualized net charge-offs were 0.02% for the fourth quarter of 2019, compared to 0.23% for the corresponding quarter in the prior year and up from none for the third quarter of 2019.

NET INTEREST INCOME

Net interest income for the fourth quarter of 2019 was $20.4 million, a decrease of $174 thousand or 0.8% from the prior quarter and an increase of $5.4 million or 36.2% from the fourth quarter of 2018. The year-over-year growth was positively impacted by higher earning asset balances and higher loan yields in large part associated with the HomeTown acquisition. The quarter-over-quarter decrease in net interest income was principally the result of lower yields on assets associated with the recent decreases in short term rates and market pricing pressure in the commercial portfolio offset in part by a decrease in funding costs. The fully taxable equivalent (“FTE”) net interest margin for the quarter was 3.62%, down from 3.75% in the prior quarter and up from 3.48% in the same period a year ago.

The Company’s FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the fourth quarter of 2019, net accretion related to acquisition accounting increased $118 thousand from the prior quarter to $1.1 million and increased $780 thousand from the fourth quarter of 2018. Net accretion for the twelve months ended December 31, 2019 amounted to $3.4 million, compared to $1.3 million for the same period in 2018. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):



2020	$1,968
2021	1,479
2022	980
2023	657
2024	371
Thereafter	1,631

ASSET QUALITY/LOAN LOSS PROVISION

Non-performing assets (“NPAs”) totaled $3.6 million as of December 31, 2019, down from $3.7 million at September 30, 2019 and up from $2.0 million at December 31, 2018. NPAs as a percentage of total assets were 0.15% at December 31, 2019, which compares to 0.15% at September 30, 2019 and 0.11% at December 31, 2018.

The provision for loan losses was $462 thousand for the fourth quarter of 2019, as compared to a net recovery $12 thousand for the previous quarter and a net recovery of $6 thousand for the same period in the previous year. The allowance for loan losses was $13.2 million at December 31, 2019, compared to $12.8 million at September 30, 2019 and $12.8 million at December 31, 2018. Annualized net charge-offs as a percentage of average loans outstanding was 0.02% for the fourth quarter of 2019, compared to none in the previous quarter and 0.23% for the same period in the prior year. The allowance as a percentage of loans held for investment was 0.72% at December 31, 2019, compared to 0.71% at September 30, 2019 and 0.94% at December 31, 2018.

NONINTEREST INCOME

Noninterest income decreased $305.0 thousand to $3.9 million for the quarter ended December 31, 2019 from $4.2 million in the prior quarter and increased from $3.0 million for the same period in the prior year. Losses of $309 thousand related to the write-down of premises and equipment in connection with an ATM replacement initiative accounted for most of the decrease from the previous quarter, while increases in other fees and commissions, mortgage banking fees and securities gains partially offset by losses on premises and equipment accounted for much of the increase over the same period in the prior year.

NONINTEREST EXPENSE

Noninterest expense for the fourth quarter amounted to $15.0 million, up $1.2 million or 9.0% when compared to the $13.8 million for the previous quarter and up $3.4 million or 29.2% when compared to the same period in the previous year. The increase as compared to the previous quarter was driven by additional merger costs of $460 thousand incurred during the quarter, compensation costs associated with establishing the Raleigh loan production office, corporate incentive compensation adjustments, other professional fees and data processing costs. The increase from the same period in the prior year is primarily related to regulatory, data processing and compensation costs associated with the acquisition of HomeTown.

INCOME TAXES

The effective tax rate for the three months ended December 31, 2019 was 15.6% compared to 21.1% for the three months ended September 30, 2019 and 21.6% for the same period in the prior year. The decrease in the effective tax rate as compared to the previous periods was primarily due to a change in future effective rate assumption related to state apportionments which was prompted by the HomeTown acquisition.

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 26 banking offices. American National Bank also manages an additional $878 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 (“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) 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; (3) 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; (4) the implementation of

new technologies, and the ability to develop and maintain secure and reliable electronic systems; (5) accounting principles, policies, and guidelines; and (6) 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

	December 31
ASSETS	2019			2018

Cash and due from banks	$	32,505		$	29,587
Interest-bearing deposits in other banks	47,077			34,668

Equity securities, at fair value	—			1,830
Securities available for sale, at fair value	379,195			332,653
Restricted stock, at cost	8,630			5,247
Loans held for sale	2,027			640

Loans	1,830,815			1,357,476
Less allowance for loan losses	(13,152		)	(12,805		)
Net Loans	1,817,663			1,344,671

Premises and equipment, net	39,848			26,675
Other real estate owned, net	1,308			869
Goodwill	84,002			43,872
Core deposit intangibles, net	7,728			926
Bank owned life insurance	27,817			18,941
Accrued interest receivable and other assets	30,750			22,287

Total assets	$	2,478,550		$	1,862,866

Liabilities
Demand deposits -- noninterest-bearing	$	578,606		$	435,828
Demand deposits -- interest-bearing	328,015			234,621
Money market deposits	504,651			401,461
Savings deposits	177,505			132,360
Time deposits	471,770			361,957
Total deposits	2,060,547			1,566,227

Customer repurchase agreements	40,475			35,243
Subordinated debt	7,517			—
Junior subordinated debt	28,029			27,927
Accrued interest payable and other liabilities	21,724			10,927
Total liabilities	2,158,292			1,640,324

Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding	—			—
Common stock, $1 par, 20,000,000 shares authorized,
11,071,540 shares outstanding at December 31, 2019 and
8,720,337 shares outstanding at December 31, 2018	11,019			8,668
Capital in excess of par value	158,244			78,172
Retained earnings	151,478			141,537
Accumulated other comprehensive loss, net	(483		)	(5,835		)
Total shareholders' equity	320,258			222,542

Total liabilities and shareholders' equity	$	2,478,550		$	1,862,866



American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited

	Three Months Ended						Twelve Months Ended
	December 31						December 31
	2019			2018			2019			2018
Interest and Dividend Income:
Interest and fees on loans	$	21,947		$	15,481		$	82,684		$	59,966
Interest and dividends on securities:
Taxable	1,991			1,674			7,682			6,106
Tax-exempt	117			298			777			1,502
Dividends	127			81			451			321
Other interest income	408			357			1,261			873
Total interest and dividend income	24,590			17,891			92,855			68,768

Interest Expense:
Interest on deposits	3,496			2,340			13,143			8,086
Interest on short-term borrowings	134			145			650			186
Interest on long-term borrowings	—			—			14			—
Interest on subordinated debt	122			—			367			—
Interest on junior subordinated debt	390			394			1,554			1,402
Total interest expense	4,142			2,879			15,728			9,674

Net Interest Income	20,448			15,012			77,127			59,094
Provision for (recovery of) loan losses	462			(6		)	456			(103		)

Net Interest Income After Provision
for Loan Losses	19,986			15,018			76,671			59,197

Noninterest Income:
Trust fees	1,021			908			3,847			3,783
Service charges on deposit accounts	765			646			2,866			2,455
Other fees and commissions	967			660			3,693			2,637
Mortgage banking income	737			370			2,439			1,862
Securities gains (losses), net	32			(270		)	607			123
Brokerage fees	205			192			721			795
Income from Small Business Investment Companies	37			161			211			637
Gains (losses) on premises and equipment, net	(338		)	(6		)	(427		)	60
Other	440			337			1,213			922
Total noninterest income	3,866			2,998			15,170			13,274

Noninterest Expense:
Salaries	6,665			5,132			24,672			20,509
Employee benefits	1,321			1,048			5,343			4,370
Occupancy and equipment	1,454			1,081			5,417			4,378
FDIC assessment	—			125			119			537
Bank franchise tax	531			191			1,644			1,054
Core deposit intangible amortization	437			55			1,398			265
Data processing	729			382			2,567			1,691
Software	363			313			1,295			1,279
Other real estate owned, net	15			21			31			122



Merger related expenses	460		872		11,782		872
Other	3,062		2,418		11,806		9,169
Total noninterest expense	15,037		11,638		66,074		44,246

Income Before Income Taxes	8,815		6,378		25,767		28,225
Income Taxes	1,374		1,376		4,861		5,646
Net Income	$	7,441	$	5,002	$	20,906	$	22,579

Net Income Per Common Share:
Basic	$	0.67	$	0.57	$	1.99	$	2.60
Diluted	$	0.67	$	0.57	$	1.98	$	2.59
Weighted Average Common Shares Outstanding:
Basic	11,094,346		8,717,572		10,531,572		8,698,014
Diluted	11,103,905		8,722,645		10,541,337		8,708,462



American National Bankshares Inc.
Financial Highlights
Unaudited

	(Dollars in thousands, except per share data)
													At or for the Year Ended
		4th Qtr			3rd Qtr				4th Qtr				December 31,
		2019			2019				2018				2019			2018
EARNINGS
Interest income		$	24,590		$	24,958			$	17,891			$	92,855		$	68,768
Interest expense		4,142			4,336				2,879				15,728			9,674
Net interest income		20,448			20,622				15,012				77,127			59,094
Provision for (recovery of) loan losses		462			(12		)		(6		)		456			(103		)
Noninterest income		3,866			4,171				2,998				15,170			13,274
Noninterest expense		15,037			13,792				11,638				66,074			44,246
Income taxes		1,374			2,321				1,376				4,861			5,646
Net income		7,441			8,692				5,002				20,906			22,579

PER COMMON SHARE
Net income per share - basic		$	0.67		$	0.78			$	0.57			$	1.99		$	2.60
Net income per share - diluted		0.67			0.78				0.57				1.98			2.59
Cash dividends paid		0.27			0.27				0.25				1.04			1.00
Book value per share		28.93			28.54				25.52				28.93			25.52
Book value per share - tangible (a)		20.64			20.19				20.38				20.64			20.38
Closing market price		39.57			35.47				29.31				39.57			29.31

FINANCIAL RATIOS
Return on average assets		1.20		%	1.43			%	1.08			%	0.91		%	1.24			%
Return on average equity		9.31			11.04				9.16				7.16			10.56
Return on average tangible equity (a)		13.71			16.31				11.63				10.43			13.49
Average equity to average assets		12.88			12.98				11.78				12.68			11.70
Tangible equity to tangible assets (a)		9.57			9.50				9.78				9.57			9.78
Net interest margin, taxable equivalent		3.62			3.75				3.48				3.68			3.49
Efficiency ratio (a)		57.24			53.79				58.15				57.25			59.20
Effective tax rate		15.59			21.08				21.57				18.87			20.00

PERIOD-END BALANCES
Securities		$	387,825		$	317,111			$	339,730			$	387,825		$	339,730
Loans held for sale		2,027			5,646				640				2,027			640
Loans, net		1,830,815			1,804,447				1,357,476				1,830,815			1,357,476
Goodwill and other intangibles		91,730			92,798				44,798				91,730			44,798
Assets		2,478,550			2,454,529				1,862,866				2,478,550			1,862,866
Assets - tangible (a)		2,386,820			2,361,731				1,818,068				2,386,820			1,818,068
Deposits		2,060,547			2,041,862				1,566,227				2,060,547			1,566,227
Customer repurchase agreements		40,475			38,924				35,243				40,475			35,243
Long-term borrowings		35,546			35,524				27,927				35,546			27,927
Shareholders' equity		320,258			317,246				222,542				320,258			222,542
Shareholders' equity - tangible (a)		228,528			224,448				177,744				228,528			177,744



American National Bankshares Inc.
Financial Highlights
Unaudited

	(Dollars in thousands, except per share data)
											At or for the Year Ended
		4th Qtr			3rd Qtr			4th Qtr			December 31,
		2019			2019			2018			2019			2018
AVERAGE BALANCES
Securities (b)		$	347,502		$	323,202		$	332,230		$	342,219		$	330,982
Loans held for sale		4,991			3,904			1,201			3,419			2,285
Loans, net		1,810,744			1,817,732			1,335,469			1,700,880			1,330,582
Interest-earning assets		2,264,687			2,207,935			1,736,453			2,107,169			1,709,283
Goodwill and other intangibles		92,607			93,077			44,831			81,049			44,926
Assets		2,482,502			2,426,678			1,854,492			2,303,624			1,827,658
Assets - tangible (a)		2,389,895			2,333,601			1,809,661			2,222,575			1,782,732
Interest-bearing deposits		1,466,116			1,443,947			1,116,911			1,377,422			1,134,512
Deposits		2,066,435			2,012,653			1,558,864			1,915,197			1,556,039
Customer repurchase agreements		38,742			39,470			37,905			39,134			18,401
Other short-term borrowings		—			1,986			—			2,694			1,149
Long-term borrowings		35,537			35,806			27,914			33,644			27,874
Shareholders' equity		319,851			314,980			218,430			292,022			213,821
Shareholders' equity - tangible (a)		227,244			221,903			173,599			210,973			168,895

CAPITAL
Weighted average shares outstanding - basic		11,094,346			11,127,603			8,717,572			10,531,572			8,698,014
Weighted average shares outstanding - diluted		11,103,905			11,138,008			8,722,645			10,541,337			8,708,462

ALLOWANCE FOR LOAN LOSSES
Beginning balance		$	12,758		$	12,786		$	13,588		$	12,805		$	13,603
Provision for (recovery of) loan losses		462			(12		)	(6		)	456			(103		)
Charge-offs		(144		)	(66		)	(818		)	(333		)	(1,020		)
Recoveries		76			50			41			224			325
Ending balance		$	13,152		$	12,758		$	12,805		$	13,152		$	12,805

LOANS
Construction and land development		$	137,920		$	143,788		$	97,240		$	137,920		$	97,240
Commercial real estate		899,199			883,219			655,800			899,199			655,800
Residential real estate		324,315			318,833			209,438			324,315			209,438
Home equity		119,423			122,074			103,933			119,423			103,933
Commercial and industrial		339,077			324,508			285,972			339,077			285,972
Consumer		10,881			12,025			5,093			10,881			5,093
Total		$	1,830,815		$	1,804,447		$	1,357,476		$	1,830,815		$	1,357,476



American National Bankshares Inc.
Financial Highlights
Unaudited

	(Dollars in thousands, except per share data)
											At or for the Year Ended
		4th Qtr			3rd Qtr			4th Qtr			December 31,
		2019			2019			2018			2019			2018
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing		$	361		$	874		$	72		$	361		$	72
Nonaccrual		1,944			1,446			1,090			1,944			1,090
Other real estate owned		1,308			1,353			869			1,308			869
Nonperforming assets		$	3,613		$	3,673		$	2,031		$	3,613		$	2,031

ASSET QUALITY RATIOS
Allowance for loan losses to total loans		0.72		%	0.71		%	0.94		%	0.72		%	0.94		%
Allowance for loan losses to nonperforming loans		570.59			549.91			1,101.98			570.59			1,101.98
Nonperforming assets to total assets		0.15			0.15			0.11			0.15			0.11
Nonperforming loans to total loans		0.13			0.13			0.09			0.13			0.09
Annualized net charge-offs to average loans		0.02			0.00			0.23			0.01			0.05


OTHER DATA
Fiduciary assets at period-end (c) (d)		$	560,776		$	546,407		$	494,034		$	560,776		$	494,034
Retail brokerage assets at period-end (c) (d)		$	317,262		$	308,820		$	274,552		$	317,262		$	274,552
Number full-time equivalent employees (e)		355			365			305			355			305
Number of full service offices		26			28			24			26			24
Number of loan production offices		1			1			—			1			—
Number of ATMs		38			40			33			38			33



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 December 31, 2019 and 2018
			(Dollars in thousands)
			Unaudited

								Interest
				Average Balance				Income/Expense (a)				Yield/Rate

				2019		2018		2019		2018		2019		2018
Loans:
	Commercial			$	315,902	$	262,040	$	3,516	$	2,768	4.42	%	4.19	%
	Real estate			1,488,577		1,069,515		18,268		12,681		4.91		4.74
	Consumer			11,256		5,115		209		76		7.37		5.89
		Total loans (b)		1,815,735		1,336,670		21,993		15,525		4.84		4.64

Securities:
	Federal agencies & GSEs			123,950		128,826		716		752		2.31		2.33
	Mortgage-backed & CMOs			164,727		110,753		996		655		2.42		2.37
	State and municipal			41,109		78,223		303		529		2.95		2.71
	Other			17,716		14,428		250		187		5.64		5.18
		Total securities		347,502		332,230		2,265		2,123		2.61		2.56

Deposits in other banks				101,450		67,553		408		357		1.60		2.10

	Total interest-earning assets			2,264,687		1,736,453		24,666		18,005		4.35		4.14

Non-earning assets				217,815		118,039

		Total assets		$	2,482,502	$	1,854,492

Deposits:
	Demand			$	329,759	$	229,286	126		13		0.15		0.02
	Money market			482,671		391,289		1,283		1,081		1.05		1.10
	Savings			176,686		133,350		83		10		0.19		0.03
	Time			477,000		362,986		2,004		1,236		1.67		1.35
		Total deposits		1,466,116		1,116,911		3,496		2,340		0.95		0.83

Customer repurchase agreements				38,742		37,905		134		145		1.37		1.52
Long-term borrowings				35,537		27,914		512		394		5.76		5.65
	Total interest-bearing
		liabilities		1,540,395		1,182,730		4,142		2,879		1.07		0.97

Noninterest bearing demand deposits				600,319		441,953
Other liabilities				21,937		11,379
Shareholders' equity				319,851		218,430
		Total liabilities and
			shareholders' equity	$	2,482,502	$	1,854,492

Interest rate spread												3.28	%	3.17	%
Net interest margin												3.62	%	3.48	%

Net interest income (taxable equivalent basis)								20,524		15,126
Less: Taxable equivalent adjustment (c)								76		114
Net interest income								$	20,448	$	15,012

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.



			Net Interest Income Analysis
			For the Years Ended December 31, 2019 and 2018
			(Dollars in thousands)
			Unaudited

								Interest
				Average Balance				Income/Expense (a)				Yield/Rate

				2019		2018		2019		2018		2019		2018
Loans:
	Commercial			$	306,065	$	264,241	$	14,125	$	10,579	4.62	%	4.00	%
	Real estate			1,388,188		1,063,950		68,050		49,275		4.90		4.63
	Consumer			10,046		4,676		694		305		6.91		6.52
		Total loans (b)		1,704,299		1,332,867		82,869		60,159		4.86		4.51

Securities:
	Federal agencies & GSEs			132,916		121,923		3,191		2,708		2.40		2.22
	Mortgage-backed & CMOs			134,458		109,048		3,350		2,467		2.49		2.26
	State and municipal			58,293		85,061		1,650		2,399		2.83		2.82
	Other			16,552		14,950		903		718		5.46		4.80
		Total securities		342,219		330,982		9,094		8,292		2.66		2.51

Deposits in other banks				60,651		45,434		1,261		873		2.08		1.92

	Total interest-earning assets			2,107,169		1,709,283		93,224		69,324		4.42		4.06

Non-earning assets				196,455		118,375

		Total assets		$	2,303,624	$	1,827,658

Deposits:
	Demand			$	307,329	$	234,857	370		49		0.12		0.02
	Money market			445,505		393,321		5,246		3,505		1.18		0.89
	Savings			166,842		132,182		284		40		0.17		0.03
	Time			457,746		374,152		7,243		4,492		1.58		1.20
		Total deposits		1,377,422		1,134,512		13,143		8,086		0.95		0.71

Customer repurchase agreements				39,134		18,401		595		164		1.52		0.89
Other short-term borrowings				2,694		1,149		55		22		2.04		1.91
Long-term borrowings				33,644		27,874		1,935		1,402		5.75		5.03
	Total interest-bearing
		liabilities		1,452,894		1,181,936		15,728		9,674		1.08		0.82

Noninterest bearing demand deposits				537,775		421,527
Other liabilities				20,933		10,374
Shareholders' equity				292,022		213,821
		Total liabilities and
			shareholders' equity	$	2,303,624	$	1,827,658

Interest rate spread												3.34	%	3.24	%
Net interest margin												3.68	%	3.49	%

Net interest income (taxable equivalent basis)								77,496		59,650
Less: Taxable equivalent adjustment (c)								369		556
Net interest income								$	77,127	$	59,094

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.



American National Bankshares Inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited

	(Dollars in thousands, except per share data)
														At or for the Year Ended
		4th Qtr				3rd Qtr				4th Qtr				December 31,
		2019				2019				2018				2019				2018
EFFICIENCY RATIO
Noninterest expense		$	15,037			$	13,792			$	11,638			$	66,074			$	44,246
Add/subtract: gain/loss on sale of OREO		(3		)		(22		)		(11		)		52				(44		)
Subtract: core deposit intangible amortization		(437		)		(448		)		(55		)		(1,398		)		(265		)
Subtract: merger related expense		(460		)		—				(872		)		(11,782		)		(872		)
		$	14,137			$	13,322			$	10,700			$	52,946			$	43,065

Net interest income		$	20,448			$	20,622			$	15,012			$	77,127			$	59,094
Tax equivalent adjustment		76				77				114				369				556
Noninterest income		3,866				4,171				2,998				15,170				13,274
Add/subtract: loss/gain on securities		(32		)		(105		)		270				(607		)		(123		)
Add/subtract: loss/gain on fixed assets		338				2				6				427				(60		)
		$	24,696			$	24,767			$	18,400			$	92,486			$	72,741

Efficiency ratio		57.24			%	53.79			%	58.15			%	57.25			%	59.20			%

TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income - loans		$	21,993			$	22,516			$	15,525			$	82,869			$	60,159
Interest income - investments and other		2,673				2,519				2,480				10,355				9,165
Interest expense - deposits		(3,496		)		(3,655		)		(2,340		)		(13,143		)		(8,086		)
Interest expense - customer repurchase
agreements		(134		)		(150		)		(145		)		(595		)		(164		)
Interest expense - other short-term borrowings		—				(12		)		—				(55		)		(22		)
Interest expense - long-term borrowings		(512		)		(519		)		(394		)		(1,935		)		(1,402		)
Total net interest income		$	20,524			$	20,699			$	15,126			$	77,496			$	59,650
Less non-GAAP measures:
Tax benefit on nontaxable interest - loans		(46		)		(46		)		(43		)		(185		)		(192		)
Tax benefit on nontaxable interest - securities		(30		)		(31		)		(71		)		(184		)		(364		)
GAAP measures		$	20,448			$	20,622			$	15,012			$	77,127			$	59,094

RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)		9.31			%	11.04			%	9.16			%	7.16			%	10.56			%
Impact of excluding average goodwill
and other intangibles		4.40				5.27				2.47				3.27				2.93
Return on average tangible equity
(non-GAAP)		13.71			%	16.31			%	11.63			%	10.43			%	13.49			%



TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)	12.92		%	12.92		%	11.95		%	12.92		%	11.95		%
Impact of excluding goodwill and
other intangibles	3.35			3.42			2.17			3.35			2.17
Tangible equity to tangible assets ratio
(non-GAAP)	9.57		%	9.50		%	9.78		%	9.57		%	9.78		%

TANGIBLE BOOK VALUE
Book value per share (GAAP basis)	$	28.93		$	28.54		$	25.52		$	28.93		$	25.52
Impact of excluding goodwill and
other intangibles	8.29			8.35			5.14			8.29			5.14
Tangible book value per share
(non-GAAP)	$	20.64		$	20.19		$	20.38		$	20.64		$	20.38

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AMERICAN NATIONAL BANKSHARES INC. Reports