American National Bankshares Reports Second Quarter Earnings

Rhea-AI Summary

On July 23, 2020, American National Bankshares (NASDAQ: AMNB) reported Q2 2020 earnings of $5.5 million ($0.50 per share), a turnaround from last year's net loss of $1.2 million. Year-to-date earnings reached $14.0 million, significantly higher than $4.8 million in 2019. The bank's loan portfolio expanded by $247 million, driven by PPP participation, totaling $272 million in loans. However, net interest margin declined to 3.22%, and noninterest income fell by 14.7%. Loan loss provisions increased to $4.8 million amid economic uncertainty, but credit quality indicators remained stable.

Positive

• Q2 2020 earnings of $5.5 million, compared to a net loss of $1.2 million in Q2 2019.
• Year-to-date earnings of $14.0 million, significantly up from $4.8 million in 2019.
• Increased loan portfolio by $247 million, primarily due to PPP loans totaling $272 million.
• Stable nonperforming assets at 0.16% of total assets.

Negative

• Net interest margin decreased to 3.22%, down from 3.52% in Q1 2020.
• Noninterest income decreased by $660,000 or 14.7% compared to the previous quarter.

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

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

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

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

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

Second quarter 2020 highlights include:

• Earnings produced a return on average assets of 0.80% for the second quarter of 2020, compared to 1.37% in the previous quarter and (0.20%) for the same quarter in the prior year.
   
• Paycheck Protection Program (“PPP”) loans drove the $247 million expansion in net loans receivable for the quarter. At June 30, 2020, PPP loans totaled $272 million; declines in other categories offset some of the growth during the quarter. In addition, average deposits grew 12.3% during the quarter, as proceeds from PPP funding contributed to significant deposit growth.
   
• Net interest margin was 3.22% for the quarter, down from 3.52% in the first quarter of 2020 and down from 3.82% in the same quarter of the prior year (non-GAAP).
   
• Noninterest revenues decreased $660 thousand, or 14.7%, when compared to the previous quarter, and increased $153 thousand, or 4.2%, compared to the same quarter in the prior year.
   
• Noninterest expense decreased $902 thousand, or 6.8%, when compared to the previous quarter, and decreased $13.9 million, or 52.8% when compared to the same quarter in the prior year.
   
• The second quarter provision for loan losses totaled $4.8 million, which compares to a provision of $953 thousand for the previous quarter, and a recovery of $10 thousand in the same quarter in the prior year. The allowance for loan losses as a percentage of loans held for investment increased to 0.88% at period end. Excluding PPP loans, the allowance as a percentage of loans increased to 1.00% at period end.
   
• Nonperforming assets as a percentage of total assets remained stable at 0.16% at June 30, 2020 and at March 31, 2020, and up from 0.14% at June 30, 2019.
   
• Annualized net charge-offs were 0.06% for the second quarter of 2020, compared to zero for the corresponding quarter in the prior year and up from 0.01% for the first quarter of 2020.

NET INTEREST INCOME

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

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

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For the remaining six months of 2020 (estimated)	$1,113
For the years ending (estimated):
2%; width:2%; min-width:2%;">	50%; width:50%; min-width:50%;">2021	11%; width:11%; min-width:11%;">	37%; width:37%; min-width:37%;">1,852
	2022		1,147
	2023		678
	2024		357
	2025		260
Thereafter		1,188

ASSET QUALITY/LOAN LOSS PROVISION

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

The provision for loan losses was $4.8 million for the second quarter of 2020, as compared to $953 thousand for the previous quarter and a recovery of $10 thousand for the same period in the previous year. The increase over the prior periods reflects a reserve build in response to the declining and uncertain economic landscape caused by the COVID-19 pandemic. The allowance for loan losses was $18.5 million at June 30, 2020, compared to $14.1 million at March 31, 2020 and $12.8 million at June 30, 2019. Annualized net charge-offs as a percentage of average loans outstanding was 0.06% for the second quarter of 2020, compared to 0.01% in the previous quarter and none for the same period in the prior year. The allowance as a percentage of loans held for investment was 0.88% at June 30, 2020, compared to 0.76% at March 31, 2020 and 0.70% at June 30, 2019.

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

DISASTER ASSISTANCE AND PAYCHECK PROTECTION PROGRAMS

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

NONINTEREST INCOME

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

NONINTEREST EXPENSE

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

INCOME TAXES

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

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $2.9 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving Virginia and North Carolina with 26 banking offices. American National Bank also manages an additional $837 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about American National and American National Bank is available on American National's website at www.amnb.com.

NON-GAAP FINANCIAL MEASURES

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

FORWARD-LOOKING STATEMENTS

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

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American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
		June 30
74%; width:74%; min-width:74%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">
Assets
Cash and due from banks		$	44,607			$	34,460
Interest-bearing deposits in other banks			206,998				20,454
Equity securities, at fair value			-				125
Securities available for sale, at fair value			322,523				334,326
Restricted stock, at cost			8,694				7,796
Loans held for sale			2,845				3,165
Loans, net of unearned income			2,101,711				1,836,241
Less allowance for loan losses			(18,507	)			(12,786	)
Net Loans			2,083,204				1,823,455
Premises and equipment, net			39,571				39,038
Other real estate owned, net			984				1,433
Goodwill			85,048				84,633
Core deposit intangibles, net			6,884				8,613
Bank owned life insurance			28,122				27,451
Accrued interest receivable and other assets			35,059				33,133
Total assets		$	2,864,539			$	2,418,082
Liabilities
Demand deposits -- noninterest-bearing		$	824,679			$	554,400
Demand deposits -- interest-bearing			406,322				326,105
Money market deposits			562,061				451,343
Savings deposits			200,518				178,723
Time deposits			438,196				488,526
Total deposits			2,431,776				1,999,097
Short-term borrowings:
Customer repurchase agreements			46,296				37,222
Other short-term borrowings			-				13,528
Subordinated debt			7,508				7,526
Junior subordinated debt			28,080				27,978
Accrued interest payable and other liabilities			23,446				20,814
Total liabilities			2,537,106				2,106,165
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding			-				-
Common stock, $1 par, 20,000,000 shares authorized,
10,964,320 shares outstanding at June 30, 2020 and
11,141,355 shares outstanding at June 30, 2019			10,911				11,089
Capital in excess of par value			154,222				160,572
Retained earnings			159,586				141,339
Accumulated other comprehensive income (loss), net			2,714				(1,083	)
Total shareholders' equity			327,433				311,917
Total liabilities and shareholders' equity		$	2,864,539			$	2,418,082

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American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
		Three Months Ended		Six Months Ended
		June 30		June 30
48%; width:48%; min-width:48%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">
Interest and Dividend Income:
Interest and fees on loans		$	21,379			$	22,629			$	42,700			$	38,267
Interest and dividends on securities:
Taxable			1,646				1,980				3,683				3,801
Tax-exempt			111				239				223				526
Dividends			128				105				260				189
Other interest income			33				258				297				524
Total interest and dividend income			23,297				25,211				47,163				43,307
Interest Expense:
Interest on deposits			2,478				3,520				5,790				5,992
Interest on short-term borrowings			66				178				195				350
Interest on long-term borrowings			-				14				-				14
Interest on subordinated debt			123				122				245				122
Interest on junior subordinated debt			370				388				754				772
Total interest expense			3,037				4,222				6,984				7,250
Net Interest Income			20,260				20,989				40,179				36,057
Provision for (recovery of) loan losses			4,759				(10	)			5,712				6
Net Interest Income After Provision for
(Recovery of) Loan Losses			15,501				20,999				34,467				36,051
Noninterest Income:
Trust fees			953				933				1,965				1,847
Service charges on deposit accounts			541				724				1,262				1,318
Other fees and commissions			951				1,015				1,892				1,723
Mortgage banking income			893				586				1,442				992
Securities gains, net			-				147				814				470
Brokerage fees			172				186				383				333
Income (loss) from Small Business Investment Companies		(119	)			(137	)			(64	)			31
Losses on premises and equipment, net			-				(87	)			(82	)			(87	)
Other			444				315				718				506
Total noninterest income			3,835				3,682				8,330				7,133
Noninterest Expense:
Salaries			4,805				7,048				10,864				11,712
Employee benefits			1,386				1,425				2,687				2,655
Occupancy and equipment			1,327				1,431				2,693				2,515
FDIC assessment			176				169				271				294
Bank franchise tax			425				412				851				702
Core deposit intangible amortization			417				458				844				513
Data processing			785				717				1,548				1,249
Software			403				321				759				645
Other real estate owned, net			15				(44	)			6				(31	)
Merger related expenses			-				10,871				-				11,322
Other			2,693				3,508				5,243				5,669
Total noninterest expense			12,432				26,316				25,766				37,245
Income (Loss) Before Income Taxes			6,904				(1,635	)			17,031				5,939
Income Taxes			1,422				(405	)			3,007				1,166
Net Income (Loss)		$	5,482			$	(1,230	)		$	14,024			$	4,773
Net Income (Loss) Per Common Share:
Basic		$	0.50			$	(0.11	)		$	1.28			$	0.48
Diluted		$	0.50			$	(0.11	)		$	1.28			$	0.48
Weighted Average Common Shares Outstanding:
Basic			10,959,545				11,126,800				10,992,365				9,942,566
Diluted			10,963,248				11,126,800				10,997,279				9,952,115

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American National Bankshares Inc.
Financial Highlights
Unaudited
(Dollars in thousands, except per share data)						At or for the Six Months
	2nd Qtr		1st Qtr		2nd Qtr		Ended June 30,
35%; width:35%; min-width:35%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">
EARNINGS
Interest income	$	23,297			$	23,866			$	25,211			$	47,163			$	43,307
Interest expense		3,037				3,947				4,222				6,984				7,250
Net interest income		20,260				19,919				20,989				40,179				36,057
Provision for (recovery of) loan losses		4,759				953				(10	)			5,712				6
Noninterest income		3,835				4,495				3,682				8,330				7,133
Noninterest expense		12,432				13,334				26,316				25,766				37,245
Income taxes		1,422				1,585				(405	)			3,007				1,166
Net income (loss)		5,482				8,542				(1,230	)			14,024				4,773
PER COMMON SHARE
Net income (loss) per share - basic	$	0.50			$	0.77			$	(0.11	)		$	1.28			$	0.48
Net income (loss) per share - diluted		0.50				0.77				(0.11	)			1.28				0.48
Cash dividends paid		0.27				0.27				0.25				0.54				0.50
Book value per share		29.86				29.50				28.00				29.86				28.00
Book value per share - tangible (a)		21.48				21.08				19.63				21.48				19.63
Closing market price		25.04				23.90				38.75				25.04				38.75
FINANCIAL RATIOS
Return on average assets		0.80		%		1.37		%		(0.20	)	%		1.07		%		0.44		%
Return on average equity		6.68				10.56				(1.60	)			8.61				3.59
Return on average tangible equity (a)		9.85				15.32				(1.62	)			12.56				5.25
Average equity to average assets		11.91				12.99				12.62				12.42				12.38
Tangible equity to tangible assets (a)		8.49				9.61				9.41				8.49				9.41
Net interest margin, taxable equivalent		3.22				3.52				3.82				3.36				3.67
Efficiency ratio (a)		49.74				54.46				60.94				52.08				59.24
Effective tax rate		20.60				15.65				(24.77	)			17.66				19.63
PERIOD-END BALANCES
Securities	$	331,217			$	351,451			$	342,247			$	331,217			$	342,247
Loans held for sale		2,845				2,666				3,165				2,845				3,165
Loans, net		2,101,711				1,854,928				1,836,241				2,101,711				1,836,241
Goodwill and other intangibles		91,932				92,349				93,246				91,932				93,246
Assets		2,864,539				2,495,065				2,418,082				2,864,539				2,418,082
Assets - tangible (a)		2,772,607				2,402,716				2,324,836				2,772,607				2,324,836
Deposits		2,431,776				2,070,667				1,999,097				2,431,776				1,999,097
Customer repurchase agreements		46,296				42,114				37,222				46,296				37,222
Long-term borrowings		35,588				35,567				35,504				35,588				35,504
Shareholders' equity		327,433				323,293				311,917				327,433				311,917
Shareholders' equity - tangible (a)		235,501				230,944				218,671				235,501				218,671
AVERAGE BALANCES
Securities (b)	$	315,659			$	369,730			$	354,506			$	342,695			$	349,199
Loans held for sale		4,554				3,156				2,913				3,855				2,375
Loans, net		2,048,277				1,829,125				1,816,203				1,938,700				1,585,643
Interest-earning assets		2,525,998				2,274,920				2,211,273				2,400,459				1,975,887
Goodwill and other intangibles		92,161				91,738				93,075				91,950				69,060
Assets		2,755,470				2,491,591				2,433,948				2,623,531				2,150,157
Assets - tangible (a)		2,663,309				2,399,853				2,340,873				2,531,581				2,081,097
Interest-bearing deposits		1,564,430				1,495,565				1,463,613				1,529,997				1,298,526
Deposits		2,325,331				2,069,927				2,023,557				2,197,629				1,788,789
Customer repurchase agreements		43,716				41,519				35,657				42,617				39,161
Other short-term borrowings		-				3				7,627				2				3,865
Long-term borrowings		35,575				35,554				36,301				35,565				32,142
Shareholders' equity		328,051				323,573				307,281				325,812				266,208
Shareholders' equity - tangible (a)		235,890				231,835				214,206				233,862				197,148
American National Bankshares Inc.
Financial Highlights
Unaudited
(Dollars in thousands, except per share data)						At or for the Six Months
	2nd Qtr		1st Qtr		2nd Qtr		Ended June 30,
		2020				2020				2019				2020				2019
CAPITAL
Weighted average shares outstanding - basic		10,959,545				11,025,185				11,126,800				10,992,365				9,942,566
Weighted average shares outstanding - diluted		10,963,248				11,031,310				11,126,800				10,997,279				9,952,115
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	14,065			$	13,152			$	12,806			$	13,152			$	12,805
Provision for (recovery of) loan losses		4,759				953				(10	)			5,712				6
Charge-offs		(444	)			(105	)			(54	)			(549	)			(123	)
Recoveries		127				65				44				192				98
Ending balance	$	18,507			$	14,065			$	12,786			$	18,507			$	12,786
LOANS
Construction and land development	$	141,392			$	141,154			$	152,876			$	141,392			$	152,876
Commercial real estate		978,768				953,363				880,146				978,768				880,146
Residential real estate		291,242				301,284				328,400				291,242				328,400
Home equity		114,397				118,030				121,905				114,397				121,905
Commercial and industrial		566,859				331,507				340,427				566,859				340,427
Consumer		9,053				9,590				12,487				9,053				12,487
Total	$	2,101,711			$	1,854,928			$	1,836,241			$	2,101,711			$	1,836,241
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing	$	375			$	459			$	930			$	375			$	930
Nonaccrual		2,855				2,579				969				2,855				969
Other real estate owned and repossessions		1,346				984				1,433				1,346				1,433
Nonperforming assets	$	4,576			$	4,022			$	3,332			$	4,576			$	3,332
ASSET QUALITY RATIOS
Allowance for loan losses to total loans		0.88		%		0.76		%		0.70		%		0.88		%		0.70		%
Allowance for loan losses to
nonperforming loans		572.97				462.97				673.30				572.97				673.30
Nonperforming assets to total assets		0.16				0.16				0.14				0.16				0.14
Nonperforming loans to total loans		0.15				0.16				0.10				0.15				0.10
Annualized net charge-offs
to average loans		0.06				0.01				0.00				0.04				0.00
OTHER DATA
Fiduciary assets at period-end (c) (d)	$	536,014			$	492,850			$	547,731			$	536,014			$	547,731
Retail brokerage assets at period-end (c) (d)	$	301,096			$	235,359			$	314,051			$	301,096			$	314,051
Number full-time equivalent employees (e)		345				355				371				345				371
Number of full service offices		26				26				28				26				28
Number of loan production offices		1				1				-				1				-
Number of ATMs		38				38				39				38				39
Notes:
(a) - This financial measure is not calculated in accordance with GAAP. For a reconciliation of non-GAAP financial measures, see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.
(b) - Average does not include unrealized gains and losses.
(c) - Market value.
(d) - Assets are not owned by American National and are not reflected in the consolidated balance sheet.
(e) - Average for quarter.

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			Net Interest Income Analysis
			For the Three Months Ended June 30, 2020 and 2019
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance		Income/Expense (a)		Yield/Rate
1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	27%; width:27%; min-width:27%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">
Loans:
	Commercial	$	513,765		$	321,263		$	4,377		$	3,899		3.43	%	4.87	%
	Real estate		1,529,723			1,485,665			16,901			18,578		4.42		5.00
	Consumer		9,343			12,188			149			201		6.41		6.61
		Total loans (b)		2,052,831			1,819,116			21,427			22,678		4.18		4.99
Securities:
	U.S. Treasury		2,250			-			9			-		1.60		-
	Federal agencies & GSEs		47,197			140,516			284			858		2.41		2.44
	Mortgage-backed & CMOs		203,268			127,718			1,059			809		2.08		2.53
	State and municipal		42,742			68,185			288			480		2.70		2.82
	Other		20,202			18,087			272			233		5.39		5.15
		Total securities		315,659			354,506			1,912			2,380		2.42		2.69
Deposits in other banks		157,508			37,651			33			258		0.08		2.75
	Total interest-earning assets		2,525,998			2,211,273			23,372			25,316		3.70		4.58
Non-earning assets		229,472			222,675
		Total assets	$	2,755,470		$	2,433,948
Deposits:
	Demand	$	371,451		$	335,879			115			112		0.12		0.13
	Money market		554,318			448,722			591			1,394		0.43		1.25
	Savings		192,354			179,375			24			98		0.05		0.22
	Time		446,307			499,637			1,748			1,916		1.58		1.54
		Total deposits		1,564,430			1,463,613			2,478			3,520		0.64		0.96
Customer repurchase agreements		43,716			35,657			66			140		0.61		1.57
Other short-term borrowings		-			7,627			-			38		-		1.99
Long-term borrowings		35,575			36,301			493			524		5.54		5.77
	Total interest-bearing
		liabilities		1,643,721			1,543,198			3,037			4,222		0.74		1.10
Noninterest bearing demand deposits		760,901			559,944
Other liabilities		22,797			23,525
Shareholders' equity		328,051			307,281
		Total liabilities and
			shareholders' equity	$	2,755,470		$	2,433,948
Interest rate spread									2.96	%	3.48	%
Net interest margin									3.22	%	3.82	%
Net interest income (taxable equivalent basis)					20,335			21,094
Less: Taxable equivalent adjustment (c)					75			105
Net interest income					$	20,260		$	20,989
Notes:
(a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/ amortization of deferred loan fees and costs.
(b) - Nonaccrual loans are included in the average balances.
(c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

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			Net Interest Income Analysis
			For the Six Months Ended June 30, 2020 and 2019
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance		Income/Expense (a)		Yield/Rate
1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	27%; width:27%; min-width:27%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">
Loans:
	Commercial	$	423,343		$	293,575		$	7,919		$	6,790		3.76	%	4.66	%
	Real estate		1,509,520			1,285,842			34,564			31,294		4.58		4.87
	Consumer		9,692			8,601			307			276		6.37		6.47
		Total loans (b)		1,942,555			1,588,018			42,790			38,360		4.41		4.84
Securities:
	U.S. Treasury		5,650			-			44			-		1.56		-
	Federal agencies & GSEs		75,254			139,993			861			1,708		2.29		2.44
	Mortgage-backed & CMOs		200,521			119,754			2,202			1,502		2.20		2.51
	State and municipal		41,784			73,362			576			1,018		2.76		2.78
	Other		19,486			16,090			537			411		5.51		5.11
		Total securities		342,695			349,199			4,220			4,639		2.46		2.66
Deposits in other banks		115,209			38,670			297			524		0.52		2.73
	Total interest-earning assets		2,400,459			1,975,887			47,307			43,523		3.95		4.41
Non-earning assets		223,072			174,270
		Total assets	$	2,623,531		$	2,150,157
Deposits:
	Demand	$	351,404		$	287,424			238			126		0.14		0.09
	Money market		534,828			422,359			1,779			2,548		0.67		1.22
	Savings		185,625			156,843			77			107		0.08		0.14
	Time		458,140			431,900			3,696			3,211		1.62		1.50
		Total deposits		1,529,997			1,298,526			5,790			5,992		0.76		0.93
Customer repurchase agreements		42,617			39,161			195			311		0.92		1.60
Other short-term borrowings		2			3,865			-			39		0.50		2.02
Long-term borrowings		35,565			32,142			999			908		5.62		5.65
	Total interest-bearing
		liabilities		1,608,181			1,373,694			6,984			7,250		0.87		1.06
Noninterest bearing demand deposits		667,632			490,263
Other liabilities		21,906			19,992
Shareholders' equity		325,812			266,208
		Total liabilities and
			shareholders' equity	$	2,623,531		$	2,150,157
Interest rate spread									3.08	%	3.35	%
Net interest margin									3.36	%	3.67	%
Net interest income (taxable equivalent basis)					40,323			36,273
Less: Taxable equivalent adjustment (c)					144			216
Net interest income					$	40,179		$	36,057
Notes:
(a) - Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/ amortization of deferred loan fees and costs.
(b) - Nonaccrual loans are included in the average balances.
(c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

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American National Bankshares Inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited
(Dollars in thousands, except per share data)						At or for the Six Months
	2nd Qtr		1st Qtr		2nd Qtr		Ended June 30,
35%; width:35%; min-width:35%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">
EFFICIENCY RATIO
Noninterest expense	$	12,432			$	13,334			$	26,316			$	25,766			$	37,245
Add: gain on sale of OREO		8				27				76				35				78
Subtract: core deposit intangible amortization		(417	)			(427	)			(458	)			(844	)			(513	)
Subtract: merger related expenses		-				-				(10,871	)			-				(11,322	)
	$	12,023			$	12,934			$	15,063			$	24,957			$	25,488
Net interest income	$	20,260			$	19,919			$	20,989			$	40,179			$	36,057
Tax equivalent adjustment		75				69				105				144				216
Noninterest income		3,835				4,495				3,682				8,330				7,133
Subtract: gain on securities		-				(814	)			(147	)			(814	)			(470	)
Add: loss on fixed assets		-				82				87				82				87
	$	24,170			$	23,751			$	24,716			$	47,921			$	43,023
Efficiency ratio		49.74		%		54.46		%		60.94		%		52.08		%		59.24		%
TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income - loans	$	21,427			$	21,363			$	22,678			$	42,790			$	38,360
Interest income - investments and other		1,945				2,572				2,638				4,517				5,163
Interest expense - deposits		(2,478	)			(3,312	)			(3,520	)			(5,790	)			(5,992	)
Interest expense - customer repurchase
agreements		(66	)			(129	)			(140	)			(195	)			(311	)
Interest expense - other short-term borrowings		-				-				(38	)			-				(39	)
Interest expense - long-term borrowings		(493	)			(506	)			(524	)			(999	)			(908	)
Total net interest income	$	20,335			$	19,988			$	21,094			$	40,323			$	36,273
Less non-GAAP measures:
Tax benefit on nontaxable interest - loans		(48	)			(42	)			(49	)			(90	)			(93	)
Tax benefit on nontaxable interest - securities		(27	)			(27	)			(56	)			(54	)			(123	)
GAAP measures	$	20,260			$	19,919			$	20,989			$	40,179			$	36,057
RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)		6.68		%		10.56		%		(1.60	)	%		8.61		%		3.59		%
Impact of excluding average goodwill
and other intangibles		3.17				4.76				(0.02	)			3.95				1.66
Return on average tangible equity
(non-GAAP)		9.85		%		15.32		%		(1.62	)	%		12.56		%		5.25		%
TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)		11.43		%		12.96		%		12.90		%		11.43		%		12.90		%
Impact of excluding goodwill and
other intangibles		2.94				3.35				3.49				2.94				3.49
Tangible equity to tangible assets ratio
(non-GAAP)		8.49		%		9.61		%		9.41		%		8.49		%		9.41		%
TANGIBLE BOOK VALUE
Book value per share (GAAP basis)	$	29.86			$	29.50			$	28.00			$	29.86			$	28.00
Impact of excluding goodwill and
other intangibles		8.38				8.42				8.37				8.38				8.37
Tangible book value per share
(non-GAAP)	$	21.48			$	21.08			$	19.63			$	21.48			$	19.63

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

FAQ

What were American National Bankshares' Q2 2020 earnings?

American National Bankshares reported Q2 2020 earnings of $5.5 million, or $0.50 per diluted share.

How did American National Bankshares perform compared to last year?

In the same quarter last year, American National Bankshares reported a net loss of $1.2 million.

What was the increase in the loan portfolio for American National Bankshares?

The loan portfolio increased by $247 million in Q2 2020, driven by participation in the PPP.

What is the net interest margin for American National Bankshares?

The net interest margin decreased to 3.22% for Q2 2020.

What are the nonperforming assets as a percentage of total assets for AMNB?

Nonperforming assets remained stable at 0.16% of total assets as of June 30, 2020.