10/21/2021 | Press release | Distributed by Public on 10/21/2021 15:17

AMERICAN NATIONAL BANKSHARES REPORTS THIRD QUARTER EARNINGS - Form 8-K

AMERICAN NATIONALBANKSHARES

REPORTS THIRD QUARTER EARNINGS

Danville, VA, October 21, 2021 - American National Bankshares Inc. (NASDAQ: AMNB) ("American National" or the "Company") today reported third quarter 2021 earnings of $10.2 million, or $0.94 per diluted common share. Those results compare to net income of $10.8 million, or $0.99 per diluted common share recognized for the second quarter of 2021 and $7.2 million, or $0.66 per diluted common share, during the same quarter in the prior year. Earnings for the nine months ended September 30, 2021 were $32.2 million, or $2.95 per diluted common share, compared to $21.3 million, or $1.93 per diluted common share, for the same period of 2020.

President and Chief Executive Officer, Jeffrey V. Haley commented, "American National's history of top tier financial performance continued during the third quarter, generating profitable growth for our shareholders. Strong organic loan growth was a highlight, with commercial real estate loans growing $82.4 million, or 31.9% annualized, during the quarter as our lending teams had some funding momentum during the period. This growth, in addition to accelerated income from our participation as a lender in the U.S. Small Business Administration's Paycheck Protection Program ("PPP"), contributed to top line revenue growth during the quarter. Credit metrics remain excellent, and provision expense for the quarter was a result of the strong loan growth during the period. The low interest rate environment and excess liquidity in the financial system continue to present challenges and will be a headwind going into 2022, but we are cautiously optimistic that we can continue to grow our balance sheet and maintain our strong financial performance."

"We successfully upgraded and added to our digital product offerings during the quarter, which represents a significant step in our digital transformation strategy. We have heard much positive feedback from customers, and believe we will benefit from increased scale and efficiencies in the future."

Third quarter 2021 highlights include:

●

Net loans held for investment, excluding PPP loans, grew $92.9 million, or 5.1%, during the third quarter compared to $15.4 million, or 0.9%, in the second quarter of this year and $83.0 million, or 4.6%, in the third quarter of the prior year.

●

Earnings produced a return on average tangible common equity (annualized) of 16.01% for the third quarter, compared to 17.30% in the second quarter of 2021 and 12.66% in the third quarter of the prior year (non-GAAP).

●

Average deposits grew 3.4% during the quarter and 13.7% over the third quarter of 2020; the cost of interest-bearing deposits decreased to 0.17% in the third quarter from 0.21% in the second quarter of 2021 and 0.52% in the third quarter of the prior year.

●

Fully taxable equivalent ("FTE") net interest margin was 3.09% for the third quarter, up from 3.00% in the second quarter of 2021 but down from 3.26% in the third quarter of the prior year (non-GAAP).

●

Noninterest revenues decreased $19 thousand, or 0.4%, when compared to the previous quarter, and increased $831 thousand, or 19.4%, compared to the same quarter in the prior year.

●

Noninterest expense increased $206 thousand, or 1.4%, when compared to the previous quarter, and increased $703 thousand, or 5.0%, when compared to the same quarter in the prior year.

●

The Company recorded a provision for loan losses in the third quarter of 2021 of $482 thousand compared to a negative provision in the second quarter of $1.4 million and a provision expense of $2.6 million in the third quarter in the prior year. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were (0.01%) for the third and second quarters of 2021 and 0.01% for the third quarter of 2020.

●

Nonperforming assets as a percentage of total assets were 0.06% at September 30, 2021, down from 0.07% at June 30, 2021 and 0.16% at September 30, 2020.

SMALL BUSINESS ADMINISTRATION's PPP

The Company has processed a total of $364.2 million in PPP loans, with total remaining outstanding net PPP loans of $37.2 million at September 30, 2021, down from $104.1 million at June 30, 2021. These quarter-end balances are net of $66.9 million of loans forgiven in the third quarter of 2021 compared to $80.0 million forgiven in the second quarter. Total PPP fees recognized in net interest income during the third quarter of 2021 were $2.4 million compared to the prior quarter's $1.8 million. The interest income from the outstanding PPP portfolio generated $169,000 and $369,000, respectively, in the third and second quarters of 2021.

NET INTEREST INCOME

Net interest income for the third quarter of 2021 was $23.1 million, an increase of $1.3 million, or 6.1%, from the prior quarter and an increase of $1.6 million, or 7.4%, from the third quarter of 2020. The FTE net interest margin for the quarter was up to 3.09% from 3.00% in the prior quarter and down from 3.26% in the same period a year ago (non-GAAP). The third quarter of 2021 reflected $600 thousand more in net fees on PPP loans than the second quarter as $66.9 million were forgiven in the third quarter compared to $80.0 million in the second quarter. The increase in net interest income from the same quarter in the prior year was primarily attributable to the PPP program and reduced deposit costs from 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 2021, net accretion related to acquisition accounting amounted to $1.3 million compared to $875 thousand in the prior quarter and $1.6 million for the same period in 2020. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):

For the remaining three months of 2021 (estimated)		$	395
For the years ending (estimated):
2022			1,278
2023			710
2024			450
2025			324
2026			194
Thereafter			366

ASSET QUALITY

Nonperforming assets ("NPAs") totaled $2.1 million as of September 30, 2021, down from $2.4 million at June 30, 2021, and down from $4.6 million at September 30, 2020. NPAs as a percentage of total assets were 0.06% at September 30, 2021, compared to 0.07% at June 30, 2021 and 0.16% at September 30, 2020.

The Company recorded a provision of $482 thousand in the third quarter and a negative provision for the second quarter of 2021 of $1.4 million, as compared to a $2.6 million provision for the third quarter in the previous year. The need for provision expense in the third quarter of 2021 was driven by the net loan growth of $92.9 million, excluding PPP loans. The second quarter reflected significant improvement in both national and local economic conditions, ongoing low charge-off and delinquency rates, and overall strong asset quality metrics and resulted in a negative provision. The continued improvement in those factors during the third quarter of 2021 partially offset the provision expense resulting from the loan growth.

The allowance for loan losses was $20.6 million at September 30, 2021, $20.1 million at June 30, 2021 and $21.1 million at September 30, 2020. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were (0.01%) for the third and second quarters of 2021, compared to 0.01% for the third quarter in the prior year. The allowance as a percentage of loans held for investment was 1.06% at September 30, 2021 compared to 1.05% at June 30, 2021 and 1.01% at September 30, 2020. Excluding PPP loans, the allowance as a percentage of loans was 1.08% at September 30, 2021, 1.11% at June 30, 2021 and 1.16% at September 30, 2020.

NONINTEREST INCOME

Noninterest income decreased $19 thousand, or 0.4%, for the quarter ended September 30, 2021 compared to the second quarter and increased $831 thousand, or 19.4%, from the third quarter in the prior year. The largest fluctuations for the third quarter over the previous quarter were the decreases in other fees and commissions of $211 thousand, or 15.5%, and mortgage banking income of $153 thousand, or 13.4%, offset by decreased losses on premises and equipment of $325 thousand, or 75.2%. The Company recorded losses during the third and second quarters of 2021 of $107 thousand and $432 thousand, respectively, from the sale of buildings acquired in the HomeTown Bankshares Corporation acquisition. Comparing the third quarter of 2021 to the third quarter of 2020, after considering the increased loss on premises and equipment previously noted, the majority of categories of income increased except for mortgage banking income which decreased $41 thousand, or 4.0%, and other income which decreased $2 thousand, or 0.9%.

NONINTEREST EXPENSE

Noninterest expense for the third quarter of 2021 amounted to $14.8 million, up $206 thousand, or 1.4%, when compared to the $14.6 million for the previous quarter and up $703 thousand, or 5.0%, from $14.1 million during the same period in the previous year. The increase from the second quarter and third quarter of 2020 was primarily in the other expense category caused by increased loan related expenses and expense seasonality. The third quarter of 2021's occupancy expense increase over the third quarter of 2020 quarter is attributable to the additional lease for the Triangle banking office which commenced in 2021.

INCOME TAXES

The effective tax rate for the three months ended September 30, 2021 was 21.1% and 21.0% for the three months ended June 30, 2021. This compares to 20.0% for the third quarter of 2020.

BALANCE SHEET

Total assets at September 30, 2021 were $3.3 billion, an increase of $87.5 million, or 2.7%, from the previous quarter and $385.8 million, or 13.3%, from the third quarter of 2020. The balance sheet at September 30, 2021 remained primarily consistent with the end of the second quarter with continued growth in core deposits deployed in investments, interest bearing cash and loan growth during the period. The growth over the same period a year ago is primarily due to growth in core deposits as well.

At September 30, 2021, loans held for investment (net of deferred fees and costs) were $1.9 billion, an increase of $26.0 million, or 1.4%, from June 30, 2021. The increase, excluding PPP forgiveness of $66.9 million, of loans held for investment was $92.9 million, or 5.1%, from the second quarter, and $89.2 million, or 4.6%, compared to September 30, 2020.

Investment securities available for sale amounted to $643.9 million at September 30, 2021, with growth of $88.5 million, or 15.9%, compared to June 30, 2021, and growth of $285.5 million, or 79.6%, compared to September 30, 2020.

Deposits amounted to $2.9 billion at September 30, 2021, an increase of $92.3 million, or 3.3%, over the previous quarter and $391.4 million, or 15.8%, compared to the end of the third quarter of 2020. The growth over the previous quarter and the same period of 2020 is primarily a result of remaining impacts from federal stimulus efforts, and continued higher than average cash balances being maintained by customers as elevated savings rates and liquidity patterns continue.

The Company continues to be well-capitalized as defined by regulators, with tangible common equity to tangible assets of 8.14% at September 30, 2021 compared to 8.27% at June 30, 2021 and compared to 8.55% at September 30, 2020. The Company's common equity Tier 1, Tier 1, total, and Tier 1 leverage capital ratios were 12.44%, 13.78%, 14.78% and 9.34%, respectively at September 30, 2021.

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $3.3 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 $1.1 billion 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 and the associated efforts to limit the spread of the virus; (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 adequacy of the level of the allowance for loan losses, the amount of loan loss provisions required in future periods, and the failure of assumptions underlying the allowance for loan losses; (6) cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (7) accounting principles, policies, and guidelines; and (8) 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

		September 30,
ASSETS		2021			2020
Cash and due from banks		$	38,349			$	35,633
Interest-bearing deposits in other banks			480,052				234,638
Securities available for sale, at fair value			643,949				358,493
Restricted stock, at cost			8,046				8,707
Loans held for sale			9,518				6,789
Loans, net of deferred fees and costs			1,940,332				2,086,094
Less allowance for loan losses			(20,630	)			(21,088	)
Net Loans			1,919,702				2,065,006
Premises and equipment, net			37,021				39,979
Other real estate owned, net			213				999
Goodwill			85,048				85,048
Core deposit intangibles, net			4,978				6,482
Bank owned life insurance			28,950				28,278
Other assets			33,237				33,252
Total assets		$	3,289,063			$	2,903,304
Liabilities
Demand deposits -- noninterest-bearing		$	980,985			$	820,384
Demand deposits -- interest-bearing			524,328				426,043
Money market deposits			733,515				602,392
Savings deposits			254,456				212,070
Time deposits			368,797				409,811
Total deposits			2,862,081				2,470,700
Customer repurchase agreements			26,595				41,906
Long-term borrowings			28,207				35,609
Other liabilities			21,793				23,108
Total liabilities			2,938,676				2,571,323
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding			-				-
Common stock, $1 par, 20,000,000 shares authorized, 10,778,562 shares outstanding at September 30, 2021 and 10,969,756 shares outstanding at September 30, 2020			10,715				10,919
Capital in excess of par value			148,069				154,495
Retained earnings			193,107				163,855
Accumulated other comprehensive income, net			(1,504	)			2,712
Total shareholders' equity			350,387				331,981
Total liabilities and shareholders' equity		$	3,289,063			$	2,903,304

American National Bankshares Inc.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

Unaudited

		For the Three Months Ended			For the Nine Months Ended
		9/30/21			6/30/21			9/30/20			9/30/21			9/30/20
Interest and Dividend Income:
Interest and fees on loans		$	21,974			$	21,087			$	22,346			$	65,334			$	65,046
Interest and dividends on securities:
Taxable			1,896				1,769				1,545				5,297				5,228
Tax-exempt			94				96				107				293				330
Dividends			112				117				122				349				382
Other interest income			201				98				59				375				356
Total interest and dividend income			24,277				23,167				24,179				71,648				71,342
Interest Expense:
Interest on deposits			781				922				2,118				2,990				7,908
Interest on short-term borrowings			3				5				42				19				237
Interest on long-term borrowings			400				469				524				1,352				1,523
Total interest expense			1,184				1,396				2,684				4,361				9,668
Net Interest Income			23,093				21,771				21,495				67,287				61,674
(Recovery of) Provision for loan losses			482				(1,352	)			2,619				(870	)			8,331
Net Interest Income After (Recovery of) Provision for Loan Losses			22,611				23,123				18,876				68,157				53,343
Noninterest Income:
Trust fees			1,311				1,240				1,054				3,757				3,019
Service charges on deposit accounts			664				630				618				1,916				1,880
Other fees and commissions			1,147				1,358				996				3,644				2,888
Mortgage banking income			989				1,142				1,030				3,449				2,472
Securities gains, net			-				-				-				-				814
Brokerage fees			265				250				170				733				553
Income from Small Business Investment Companies			491				591				98				1,510				34
Income from insurance investments			132				141				108				1,062				271
Losses on premises and equipment, net			(107	)			(432	)			(15	)			(588	)			(97	)
Other			231				222				233				704				788
Total noninterest income			5,123				5,142				4,292				16,187				12,622
Noninterest Expense:
Salaries and employee benefits			8,185				8,178				7,989				23,881				21,540
Occupancy and equipment			1,513				1,502				1,423				4,548				4,116
FDIC assessment			194				226				162				644				433
Bank franchise tax			440				443				426				1,321				1,277
Core deposit intangible amortization			361				371				402				1,113				1,246
Data processing			748				698				705				2,224				2,253
Software			344				338				353				1,011				1,112
Other real estate owned, net			21				10				28				148				34
Other			3,037				2,871				2,652				8,655				7,895
Total noninterest expense			14,843				14,637				14,140				43,545				39,906
Income Before Income Taxes			12,891				13,628				9,028				40,799				26,059
Income Taxes			2,713				2,862				1,801				8,566				4,808
Net Income		$	10,178			$	10,766			$	7,227			$	32,233			$	21,251
Net Income Per Common Share:
Basic		$	0.94			$	0.99			$	0.66			$	2.96			$	1.93
Diluted		$	0.94			$	0.99			$	0.66			$	2.95			$	1.93
Weighted Average Common Shares Outstanding:
Basic			10,833,875				10,919,333				10,966,645				10,907,721				10,983,729
Diluted			10,836,293				10,923,156				10,969,901				10,911,372				10,988,090

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

		3rd Qtr			2nd Qtr			3rd Qtr			At or for the Nine Months Ended September 30,
		2021			2021			2020			2021			2020
EARNINGS
Interest income		$	24,277			$	23,167			$	24,179			$	71,648			$	71,342
Interest expense			1,184				1,396				2,684				4,361				9,668
Net interest income			23,093				21,771				21,495				67,287				61,674
(Recovery of) Provision for loan losses			482				(1,352	)			2,619				(870	)			8,331
Noninterest income			5,123				5,142				4,292				16,187				12,622
Noninterest expense			14,843				14,637				14,140				43,545				39,906
Income taxes			2,713				2,862				1,801				8,566				4,808
Net income			10,178				10,766				7,227				32,233				21,251
PER COMMON SHARE
Net income per share - basic		$	0.94			$	0.99			$	0.66			$	2.96			$	1.93
Net income per share - diluted			0.94				0.99				0.66				2.95				1.93
Cash dividends paid			0.27				0.27				0.27				0.81				0.81
Book value per share			32.51				31.96				30.26				32.51				30.26
Book value per share - tangible (a)			24.16				23.65				21.92				24.16				21.92
Closing market price			33.04				31.09				20.92				33.04				20.92
FINANCIAL RATIOS
Return on average assets			1.27	%			1.38	%			1.01	%			1.38	%			1.05	%
Return on average common equity			11.58				12.44				8.76				12.40				8.66
Return on average tangible common equity (a)			16.01				17.30				12.66				17.24				12.60
Average common equity to average assets			10.99				11.10				11.50				11.13				12.09
Tangible common equity to tangible assets (a)			8.14				8.27				8.55				8.14				8.55
Net interest margin, taxable equivalent			3.09				3.00				3.26				3.10				3.32
Efficiency ratio (a)			51.03				52.06				53.00				50.24				52.40
Effective tax rate			21.05				21.00				19.95				21.00				18.45
PERIOD-END BALANCES
Securities		$	651,995			$	563,479			$	367,200			$	651,995			$	367,200
Loans held for sale			9,518				13,807				6,789				9,518				6,789
Loans, net			1,940,332				1,914,371				2,086,094				1,940,332				2,086,094
Goodwill and other intangibles			90,026				90,387				91,530				90,026				91,530
Assets			3,289,063				3,201,584				2,903,304				3,289,063				2,903,304
Assets - tangible (a)			3,199,037				3,111,197				2,811,774				3,199,037				2,811,774
Deposits			2,862,081				2,769,750				2,470,700				2,862,081				2,470,700
Customer repurchase agreements			26,595				35,440				41,906				26,595				41,906
Long-term borrowings			28,207				28,181				35,609				28,207				35,609
Shareholders' equity			350,387				347,633				331,981				350,387				331,981
Shareholders' equity - tangible (a)			260,361				257,246				240,451				260,361				240,451

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

		3rd Qtr			2nd Qtr			3rd Qtr			At or for the Nine Months Ended September 30,
		2021			2021			2020			2021			2020
AVERAGE BALANCES
Securities (b)		$	569,508			$	512,981			$	333,778			$	514,156			$	339,701
Loans held for sale			9,835				15,883				9,943				12,313				5,899
Loans, net			1,913,446				1,947,797				2,092,412				1,956,452				1,990,312
Interest-earning assets			2,989,661				2,909,216				2,648,990				2,905,032				2,483,908
Goodwill and other intangibles			90,257				90,577				91,749				90,600				91,883
Assets			3,199,514				3,118,687				2,870,213				3,115,683				2,706,359
Assets - tangible (a)			3,109,257				3,028,110				2,778,464				3,025,083				2,614,476
Interest-bearing deposits			1,817,595				1,761,203				1,619,960				1,773,354				1,560,204
Deposits			2,768,268				2,677,101				2,434,645				2,676,650				2,277,211
Customer repurchase agreements			29,681				37,591				45,689				36,954				43,649
Other short-term borrowings			-				-				-				-				1
Long-term borrowings			28,192				35,584				35,597				33,111				35,575
Shareholders' equity			351,646				346,210				330,038				346,730				327,231
Shareholders' equity - tangible (a)			261,389				255,633				238,289				256,130				235,348
CAPITAL
Weighted average shares outstanding - basic			10,833,875				10,919,333				10,966,645				10,907,721				10,983,729
Weighted average shares outstanding - diluted			10,836,293				10,923,156				10,969,901				10,911,372				10,988,090
COMMON STOCK REPURCHASE PROGRAM
Total shares of common stock repurchased			100,764				93,212				-				247,999				140,526
Average price paid per share of common stock		$	32.87			$	34.73			$	-			$	32.84			$	35.44
ALLOWANCE FOR LOAN LOSSES
Beginning balance		$	20,097			$	21,416			$	18,507			$	21,403			$	13,152
(Recovery of) Provision for loan losses			482				(1,352	)			2,619				(870	)			8,331
Charge-offs			(19	)			(29	)			(126	)			(70	)			(675	)
Recoveries			70				62				88				167				280
Ending balance		$	20,630			$	20,097			$	21,088			$	20,630			$	21,088
LOANS
Construction and land development		$	120,193			$	133,592			$	151,613			$	120,193			$	151,613
Commercial real estate - owner occupied			404,029				384,095				382,121				404,029				382,121
Commercial real estate - non-owner occupied			713,339				650,862				608,954				713,339				608,954
Residential real estate			280,351				264,680				279,815				280,351				279,815
Home equity			95,317				100,835				111,448				95,317				111,448
Commercial and industrial			320,278				372,759				543,746				320,278				543,746
Consumer			6,825				7,548				8,397				6,825				8,397
Total		$	1,940,332			$	1,914,371			$	2,086,094			$	1,940,332			$	2,086,094

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

		3rd Qtr			2nd Qtr			3rd Qtr			At or for the Nine Months Ended September 30,
		2021			2021			2020			2021			2020
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing		$	-			$	125			$	285			$	-			$	285
Nonaccrual			1,903				2,057				3,088				1,903				3,088
Other real estate owned and repossessions			213				213				1,210				213				1,210
Nonperforming assets		$	2,116			$	2,395			$	4,583			$	2,116			$	4,583
ASSET QUALITY RATIOS
Allowance for loan losses to total loans			1.06	%			1.05	%			1.01	%			1.06	%			1.01	%
Allowance for loan losses to nonperforming loans			1,084.08				921.04				625.20				1,084.08				625.20
Nonperforming assets to total assets			0.06				0.07				0.16				0.06				0.16
Nonperforming loans to total loans			0.10				0.11				0.16				0.10				0.16
Annualized net charge-offs (recoveries) to average loans			(0.01	)			(0.01	)			0.01				(0.01	)			0.03
OTHER DATA
Fiduciary assets at period-end (c) (d)		$	697,546			$	697,528			$	569,095			$	697,546			$	569,095
Retail brokerage assets at period-end (c) (d)		$	406,408			$	392,881			$	314,809			$	406,408			$	314,809
Number full-time equivalent employees (e)			345				340				341				345				341
Number of full service offices			26				26				25				26				25
Number of loan production offices			1				1				1				1				1
Number of ATMs			36				36				37				36				37

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, 2021 and 2020

(Dollars in thousands)

Unaudited

										Interest
		Average Balance			Income/Expense (a)			Yield/Rate
		2021			2020			2021			2020			2021			2020
Loans:
Commercial		$	325,692			$	544,712			$	5,185			$	4,495				6.32	%			3.28	%
Real estate			1,590,858				1,549,078				16,702				17,755				4.20				4.58
Consumer			6,731				8,565				125				144				7.37				6.69
Total loans (b)			1,923,281				2,102,355				22,012				22,394				4.57				4.26
Securities:
U.S. Treasury			53,347				10,541				139				3				1.04				0.11
Federal agencies & GSEs			90,876				61,405				265				287				1.17				1.87
Mortgage-backed & CMOs			335,940				194,585				1,091				942				1.30				1.94
State and municipal			62,883				46,432				320				294				2.04				2.53
Other			26,462				20,815				311				275				4.70				5.28
Total securities			569,508				333,778				2,126				1,801				1.49				2.16
Deposits in other banks			496,872				212,857				201				59				0.16				0.11
Total interest-earning assets			2,989,661				2,648,990				24,339				24,254				3.25				3.66
Non-earning assets			209,853				221,223
Total assets		$	3,199,514			$	2,870,213
Deposits:
Demand		$	481,032			$	410,228				38				56				0.03				0.05
Money market			713,846				580,200				166				475				0.09				0.33
Savings			247,536				206,493				6				24				0.01				0.05
Time			375,181				423,039				571				1,563				0.60				1.47
Total deposits			1,817,595				1,619,960				781				2,118				0.17				0.52
Customer repurchase agreements			29,681				45,689				3				42				0.04				0.37
Long-term borrowings			28,192				35,597				400				524				5.68				5.89
Total interest-bearing liabilities			1,875,468				1,701,246				1,184				2,684				0.25				0.63
Noninterest bearing demand deposits			950,673				814,685
Other liabilities			21,727				24,244
Shareholders' equity			351,646				330,038
Total liabilities and shareholders' equity		$	3,199,514			$	2,870,213
Interest rate spread																			3.00	%			3.03	%
Net interest margin																			3.09	%			3.26	%
Net interest income (taxable equivalent basis)											23,155				21,570
Less: Taxable equivalent adjustment (c)											59				75
Net interest income										$	23,096			$	21,495

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, 2021 and 2020

(Dollars in thousands)

Unaudited

										Interest
		Average Balance			Income/Expense (a)			Yield/Rate
		2021			2020			2021			2020			2021			2020
Loans:
Commercial		$	393,571			$	464,094			$	15,433			$	12,414				5.24	%			3.57	%
Real estate			1,568,055				1,522,803				49,642				52,319				4.22				4.58
Consumer			7,139				9,314				364				451				6.82				6.47
Total loans (b)			1,968,765				1,996,211				65,439				65,184				4.43				4.36
Securities:
U.S. Treasury			36,969				7,292				265				47				0.96				0.86
Federal agencies & GSEs			99,595				70,604				867				1,147				1.16				2.17
Mortgage-backed & CMOs			292,207				198,528				3,025				3,144				1.38				2.11
State and municipal			61,210				43,345				958				871				2.09				2.68
Other			24,175				19,932				900				812				4.96				5.43
Total securities			514,156				339,701				6,015				6,021				1.56				2.36
Deposits in other banks			422,111				147,996				375				356				0.12				0.32
Total interest-earning assets			2,905,032				2,483,908				71,829				71,561				3.30				3.84
Non-earning assets			210,651				222,451
Total assets		$	3,115,683			$	2,706,359
Deposits:
Demand		$	466,999			$	371,155				116				294				0.03				0.11
Money market			700,027				550,063				657				2,254				0.13				0.55
Savings			238,349				192,632				19				101				0.01				0.07
Time			367,979				446,354				2,198				5,259				0.80				1.57
Total deposits			1,773,354				1,560,204				2,990				7,908				0.23				0.68
Customer repurchase agreements			36,954				43,649				19				237				0.07				0.73
Other short-term borrowings			-				1				-				-				-				0.50
Long-term borrowings			33,111				35,575				1,352				1,523				5.44				5.71
Total interest-bearing liabilities			1,843,419				1,639,429				4,361				9,668				0.32				0.79
Noninterest bearing demand deposits			903,296				717,007
Other liabilities			22,238				22,692
Shareholders' equity			346,730				327,231
Total liabilities and shareholders' equity		$	3,115,683			$	2,706,359
Interest rate spread																			2.98	%			3.05	%
Net interest margin																			3.10	%			3.32	%
Net interest income (taxable equivalent basis)											67,468				61,893
Less: Taxable equivalent adjustment (c)											181				219
Net interest income										$	67,287			$	61,674

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)

		3rd Qtr			2nd Qtr			3rd Qtr			At or for the Nine Months Ended September 30,
		2021			2021			2020			2021			2020
EFFICIENCY RATIO
Noninterest expense		$	14,843			$	14,637			$	14,140			$	43,545			$	39,906
Add/subtract: gain/loss on sale of OREO			-				-				(23	)			(111	)			12
Subtract: core deposit intangible amortization			(361	)			(371	)			(402	)			(1,113	)			(1,246	)
		$	14,482			$	14,266			$	13,715			$	42,321			$	38,672
Net interest income		$	23,093			$	21,771			$	21,495			$	67,287			$	61,674
Tax equivalent adjustment			59				59				75				181				219
Noninterest income			5,123				5,142				4,292				16,187				12,622
Subtract: gain on securities			-				-				-				-				(814	)
Add: loss on fixed assets			107				432				15				588				97
		$	28,382			$	27,404			$	25,877			$	84,243			$	73,798
Efficiency ratio			51.03	%			52.06	%			53.00	%			50.24	%			52.40	%
TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income - loans		$	22,012			$	21,121			$	22,394			$	65,439			$	65,184
Interest income - investments and other			2,327				2,105				1,860				6,390				6,377
Interest expense - deposits			(781	)			(922	)			(2,118	)			(2,990	)			(7,908	)
Interest expense - customer repurchase agreements			(3	)			(5	)			(42	)			(19	)			(237	)
Interest expense - long-term borrowings			(400	)			(469	)			(524	)			(1,352	)			(1,523	)
Total net interest income		$	23,155			$	21,830			$	21,570			$	67,468			$	61,893
Less non-GAAP measures:
Tax benefit on nontaxable interest - loans			(38	)			(34	)			(48	)			(105	)			(138	)
Tax benefit on nontaxable interest - securities			(24	)			(25	)			(27	)			(76	)			(81	)
GAAP measures		$	23,093			$	21,771			$	21,495			$	67,287			$	61,674
RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)			11.58	%			12.44	%			8.76	%			12.40	%			8.66	%
Impact of excluding average goodwill and other intangibles			4.43				4.86				3.90				4.84				3.94
Return on average tangible equity (non-GAAP)			16.01	%			17.30	%			12.66	%			17.24	%			12.60	%
TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)			10.65	%			10.86	%			11.43	%			10.65	%			11.43	%
Impact of excluding goodwill and other intangibles			(2.51	)			(2.59	)			(2.88	)			(2.51	)			(2.88	)
Tangible equity to tangible assets ratio (non-GAAP)			8.14	%			8.27	%			8.55	%			8.14	%			8.55	%
TANGIBLE BOOK VALUE
Book value per share (GAAP basis)		$	32.51			$	31.96			$	30.26			$	32.51			$	30.26
Impact of excluding goodwill and other intangibles			(8.35	)			(8.31	)			(8.34	)			(8.35	)			(8.34	)
Tangible book value per share (non-GAAP)		$	24.16			$	23.65			$	21.92			$	24.16			$	21.92
ADJUSTED LOAN LOSS ALLOWANCE
Allowance for loan losses		$	20,630			$	20,097			$	21,088			$	20,630			$	21,088
Credit discount on purchased loans			5,258				6,055				7,896				5,258				7,896
Adjusted loan loss allowance		$	25,888			$	26,152			$	28,984			$	25,888			$	28,984
Total loans, net		$	1,940,332			$	1,914,371			$	2,086,094			$	1,940,332			$	2,086,094
Subtract: PPP loans, net			(37,199	)			(104,143	)			(265,941	)			(37,199	)			(265,941	)
Total loans less PPP loans, net		$	1,903,133			$	1,810,228			$	1,820,153			$	1,903,133			$	1,820,153
Adjusted loan loss allowance to total loans less PPP loans, net			1.36	%			1.44	%			1.59	%			1.36	%			1.59	%