GlobeNewswire Inc | Oct 22, 2020 07:30AM EDT

October 22, 2020

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

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

Third quarter 2020 highlights include:

-- Earnings produced a return on average assets of 1.01% for the third quarter of 2020, compared to 0.80% in the previous quarter and 1.43% for the same quarter in the prior year. -- Average deposits grew 4.7% during the quarter and 21.0% over the same quarter of 2019; the cost of deposits decreased to 0.52% in the third quarter, compared to 0.64% in the previous quarter and 1.00% in the same quarter of the prior year. -- Net interest margin was 3.26% for the quarter, up from 3.22% in the second quarter of 2020 and down from 3.75% in the same quarter of the prior year (non-GAAP). -- Noninterest revenues increased $457 thousand, or 11.9%, when compared to the previous quarter, and increased $121 thousand, or 2.9%, compared to the same quarter in the prior year. -- Noninterest expense increased $1.7 million, or 13.7%, when compared to the previous quarter, and increased $348 thousand, or 2.5% when compared to the same quarter in the prior year. -- The third quarter provision for loan losses totaled $2.6 million, which compares to a provision of $4.8 million for the previous quarter, and a recovery of $12 thousand in the same quarter in the prior year. The allowance for loan losses as a percentage of loans held for investment increased to 1.01% at period end. Excluding Paycheck Protection Program (PPP) loans, the allowance as a percentage of loans increased to 1.16% at period end. -- Nonperforming assets as a percentage of total assets remained stable at 0.16% at September 30, 2020 and at June 30, 2020, and up from 0.15% at September 30, 2019. -- Annualized net charge-offs were 0.01% for the third quarter of 2020, compared to zero for the corresponding quarter in the prior year and down from 0.06% for the second quarter of 2020. -- During the third quarter of 2020, the Company continued to participate in the Small Business Administrations PPP under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was intended to provide economic relief to small businesses that have been adversely impacted by the COVID-19 global pandemic. The Company had outstanding net PPP loans of $266.0 million at September 30, 2020, which compares to $264.0 million at June 30, 2020. The Company had net unamortized PPP loan origination fees with a balance of $6.8 million at September 30, 2020, which compares to $7.8 million at June 30, 2020.

NET INTEREST INCOME

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

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

For the remaining three months of 2020 (estimated) $530For the years ending (estimated): 2021 1,8502022 1,1392023 6972024 3672025 266Thereafter 978

ASSET QUALITY

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

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

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

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

NONINTEREST INCOME

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

NONINTEREST EXPENSE

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

INCOME TAXES

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

BALANCE SHEET

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

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

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

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

ABOUT AMERICAN NATIONAL

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

NON-GAAP FINANCIAL MEASURES

This release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States (GAAP). American Nationals management uses these non-GAAP financial measures in its analysis of American Nationals 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 Nationals 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 Nationals ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) the impacts of the ongoing COVID-19 pandemic; (2) expected revenue synergies and cost savings from acquisitions and depositions; (3)changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (4) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American Nationals market areas; (5) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (6) accounting principles, policies, and guidelines; and (7)other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

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

Consolidated Balance Sheets(Dollars in thousands, except per share data)Unaudited September 30 2020 2019 Assets Cash and due from banks $ 35,633 $ 47,025 Interest-bearing deposits in other banks 234,638 95,592 Securities available for sale, at fair 358,493 308,490 valueRestricted stock, at cost 8,707 8,621 Loans held for sale 6,789 5,646 Loans, net of deferred fees and costs 2,086,094 1,804,447 Less allowance for loan losses (21,088 ) (12,758 )Net Loans 2,065,006 1,791,689 Premises and equipment, net 39,979 39,261 Other real estate owned, net 999 1,353 Goodwill 85,048 84,633 Core deposit intangibles, net 6,482 8,165 Bank owned life insurance 28,278 27,612 Other assets 33,252 36,442 Total assets $ 2,903,304 $ 2,454,529 Liabilities Noninterest-bearing deposits $ 820,384 $ 604,498 Interest-bearing deposis 1,650,316 1,437,364 Total deposits 2,470,700 2,041,862 Customer repurchase agreements 41,906 38,924 Long-term borrowings 35,609 35,524 Other liabilities 23,108 20,973 Total liabilities 2,571,323 2,137,283 Shareholders' equity Preferred stock, $5 par value, 2,000,000 shares authorized,none outstanding - - Common stock, $1 par value, 20,000,000 shares authorized,10,969,756 shares outstanding at September 30, 2020 and 11,116,250 shares outstanding at September 10,919 11,063 30, 2019Capital in excess of par value 154,495 159,792 Retained earnings 163,855 147,030 Accumulated other comprehensive income 2,712 (639 )(loss), netTotal shareholders' equity 331,981 317,246 Total liabilities and shareholders' equity $ 2,903,304 $ 2,454,529

American National Bankshares Inc.Consolidated Statements of Income(Dollars in thousands, except per share data)Unaudited Three Months Ended Nine Months Ended September 30 September 30 2020 2019 2020 2019 Interestand Dividend Income:Interest andfees on $ 22,346 $ 22,470 $ 65,046 $ 60,737 loansInterest anddividends on securities:Taxable 1,545 1,890 5,228 5,691 Tax-exempt 107 134 330 660 Dividends 122 135 382 324 Otherinterest 59 329 356 853 incomeTotalinterest and 24,179 24,958 71,342 68,265 dividendincome Interest Expense:Interest on 2,118 3,655 7,908 9,647 depositsInterest onshort-term 42 166 237 516 borrowingsInterest onlong-term 524 515 1,523 1,423 borrowingsTotalinterest 2,684 4,336 9,668 11,586 expense Net Interest 21,495 20,622 61,674 56,679 IncomeProvisionfor(recovery 2,619 (12 ) 8,331 (6 )of) loanlosses Net InterestIncome After Provisionfor(Recoveryof) Loan 18,876 20,634 53,343 56,685 Losses Noninterest Income:Trust fees 1,054 979 3,019 2,826 Servicecharges on 618 783 1,880 2,101 depositaccountsOther feesand 996 1,003 2,888 2,726 commissionsMortgagebanking 1,030 710 2,472 1,702 incomeSecurities - 105 814 575 gains, netBrokerage 170 183 553 516 feesIncome fromSmallBusiness 98 143 34 174 InvestmentCompaniesLosses onpremises and (15 ) (2 ) (97 ) (89 )equipment,netOther 341 267 1,059 773 Totalnoninterest 4,292 4,171 12,622 11,304 income Noninterest Expense:Salaries andemployee 7,989 7,662 21,540 22,029 benefitsOccupancyand 1,423 1,448 4,116 3,963 equipmentFDICassessment 162 (175 ) 433 119 (credit)Bankfranchise 426 411 1,277 1,113 taxCore depositintangible 402 448 1,246 961 amortizationData 705 589 2,253 1,838 processingSoftware 353 287 1,112 932 Other realestate 28 47 34 16 owned, netMergerrelated - - - 11,322 expensesOther 2,652 3,075 7,895 8,744 Totalnoninterest 14,140 13,792 39,906 51,037 expense IncomeBefore 9,028 11,013 26,059 16,952 Income TaxesIncome Taxes 1,801 2,321 4,808 3,487 Net Income $ 7,227 $ 8,692 $ 21,251 $ 13,465 Net IncomePer Common Share:Basic $ 0.66 $ 0.78 $ 1.93 $ 1.30 Diluted $ 0.66 $ 0.78 $ 1.93 $ 1.30 WeightedAverageCommon SharesOutstanding:Basic 10,966,645 11,127,603 10,983,729 10,341,919 Diluted 10,969,901 11,138,008 10,988,090 10,351,753

American National Bankshares Inc.Financial Highlights Unaudited (Dollars in thousands, except per share At or for the Nine Months data) 3rd Qtr 2nd Qtr 3rd Qtr Ended September 30, 2020 2020 2019 2020 2019 EARNINGS Interest income $ 24,179 $ 23,297 $ 24,958 $ 71,342 $ 68,265 Interest expense 2,684 3,037 4,336 9,668 11,586 Net interest income 21,495 20,260 20,622 61,674 56,679 Provision for(recovery of) loan 2,619 4,759 (12 ) 8,331 (6 ) lossesNoninterest income 4,292 3,835 4,171 12,622 11,304 Noninterest expense 14,140 12,432 13,792 39,906 51,037 Income taxes 1,801 1,422 2,321 4,808 3,487 Net income 7,227 5,482 8,692 21,251 13,465 PER COMMON SHARE Net income per share - $ 0.66 $ 0.50 $ 0.78 $ 1.93 $ 1.30 basicNet income per share - 0.66 0.50 0.78 1.93 1.30 dilutedCash dividends paid 0.27 0.27 0.27 0.81 0.77 Book value per share 30.26 29.86 28.54 30.26 28.54 Book value per share - 21.92 21.48 20.19 21.92 20.19 tangible (a)Closing market price 20.92 25.04 35.47 20.92 35.47 FINANCIAL RATIOS Return on average 1.01 % 0.80 % 1.43 % 1.05 % 0.80 %assetsReturn on average 8.76 6.68 11.04 8.66 6.35 equityReturn on average 12.66 9.85 16.31 12.60 9.23 tangible equity (a)Average equity to 11.50 11.91 12.98 12.09 12.60 average assetsTangible equity to 8.55 8.49 9.50 8.55 9.50 tangible assets (a)Net interest margin, 3.26 3.22 3.75 3.32 3.70 taxable equivalentEfficiency ratio (a) 53.00 49.74 53.79 52.40 57.25 Effective tax rate 19.95 20.60 21.08 18.45 20.57 PERIOD-END BALANCES Securities $ 367,200 $ 331,217 $ 317,111 $ 367,200 $ 317,111 Loans held for sale 6,789 2,845 5,646 6,789 5,646 Loans, net 2,086,094 2,101,711 1,804,447 2,086,094 1,804,447 Goodwill and other 91,530 91,932 92,798 91,530 92,798 intangiblesAssets 2,903,304 2,864,539 2,454,529 2,903,304 2,454,529 Assets - tangible (a) 2,811,774 2,772,607 2,361,731 2,811,774 2,361,731 Deposits 2,470,700 2,431,776 2,041,862 2,470,700 2,041,862 Customer repurchase 41,906 46,296 38,924 41,906 38,924 agreementsLong-term borrowings 35,609 35,588 35,524 35,609 35,524 Shareholders' equity 331,981 327,433 317,246 331,981 317,246 Shareholders' equity - 240,451 235,501 224,448 240,451 224,448 tangible (a) AVERAGE BALANCES Securities (b) $ 333,778 $ 315,659 $ 323,202 $ 339,701 $ 340,439 Loans held for sale 9,943 4,554 3,904 5,899 2,890 Loans, net 2,092,412 2,048,277 1,817,732 1,990,312 1,663,856 Interest-earning 2,648,990 2,525,998 2,207,935 2,483,908 2,054,087 assetsGoodwill and other 91,749 92,161 93,077 91,883 77,154 intangiblesAssets 2,870,213 2,755,470 2,426,678 2,706,359 2,243,343 Assets - tangible (a) 2,778,464 2,663,309 2,333,601 2,614,476 2,166,189 Interest-bearing 1,619,960 1,564,430 1,443,947 1,560,204 1,347,532 depositsDeposits 2,434,645 2,325,331 2,012,653 2,277,211 1,864,230 Customer repurchase 45,689 43,716 39,470 43,649 39,265 agreementsOther short-term - - 1,986 1 3,502 borrowingsLong-term borrowings 35,597 35,575 35,806 35,575 33,107 Shareholders' equity 330,038 328,051 314,980 327,231 282,644 Shareholders' equity - 238,289 235,890 221,903 235,348 205,490 tangible (a) American National Bankshares Inc.Financial Highlights Unaudited (Dollars in thousands, except per share At or for the Nine Months data) 3rd Qtr 2nd Qtr 3rd Qtr Ended September 30, 2020 2020 2019 2020 2019 CAPITAL Weightedaverageshares 10,966,645 10,959,545 11,127,603 10,983,729 10,341,919 outstanding -basicWeightedaverageshares 10,969,901 10,963,248 11,138,008 10,988,090 10,351,753 outstanding -diluted ALLOWANCE FOR LOAN LOSSESBeginning balance $ 18,507 $ 14,065 $ 12,786 $ 13,152 $ 12,805 Provision for(recovery of) loan 2,619 4,759 (12 ) 8,331 (6 ) lossesCharge-offs (126 ) (444 ) (66 ) (675 ) (189 ) Recoveries 88 127 50 280 148 Ending balance $ 21,088 $ 18,507 $ 12,758 $ 21,088 $ 12,758 LOANS Construction and land $ 151,613 $ 141,392 $ 143,788 $ 151,613 $ 143,788 developmentCommercial real estate 382,121 388,947 348,857 382,121 348,857 - owner occupiedCommercialreal estate - 608,954 589,821 534,362 608,954 534,362 non-owneroccupiedResidential real 279,815 291,242 318,833 279,815 318,833 estateHome equity 111,448 114,397 122,074 111,448 122,074 Commercial and 543,746 566,859 324,508 543,746 324,508 industrialConsumer 8,397 9,053 12,025 8,397 12,025 Total $ 2,086,094 $ 2,101,711 $ 1,804,447 $ 2,086,094 $ 1,804,447 NONPERFORMING ASSETS AT PERIOD-END Nonperforming loans: 90 days past due and $ 285 $ 375 $ 874 $ 285 $ 874 accruingNonaccrual 3,088 2,855 1,446 3,088 1,446 Other realestate owned 1,210 1,346 1,353 1,210 1,353 andrepossessionsNonperforming assets $ 4,583 $ 4,576 $ 3,673 $ 4,583 $ 3,673 ASSET QUALITY RATIOS Allowance for loan 1.01 % 0.88 % 0.71 % 1.01 % 0.71 %losses to total loansAllowance for loan losses tononperforming loans 625.20 572.97 549.91 625.20 549.91 Nonperforming assets 0.16 0.16 0.15 0.16 0.15 to total assetsNonperforming loans to 0.16 0.15 0.13 0.16 0.13 total loansAnnualized net charge-offsto average loans 0.01 0.06 0.00 0.03 0.00 OTHER DATA Fiduciary assets at $ 569,095 $ 536,014 $ 546,407 $ 569,095 $ 546,407 period-end (c) (d)Retailbrokerageassets at $ 314,809 $ 301,096 $ 308,820 $ 314,809 $ 308,820 period-end(c) (d)Number full-timeequivalent employees 341 345 365 341 365 (e)Number of full service 25 26 28 25 28 officesNumber of loan 1 1 1 1 1 production officesNumber of ATMs 37 38 40 37 40 Notes: (a) - This financial measure is not calculated in accordance with GAAP. For areconciliation ofnon-GAAP financial measures, see "Reconciliation of Non-GAAPFinancial Measures" at the endof 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 balancesheet.(e) - Average for quarter.

Net Interest Income Analysis For the Three Months Ended September 30, 2020 and 2019 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2020 2019 2020 2019 2020 2019 Loans: Commercial $ 544,712 $ 320,802 $ 4,495 $ 3,820 3.28 % 4.72 % Real estate 1,549,078 1,489,155 17,755 18,487 4.58 4.97 Consumer 8,565 11,679 144 209 6.69 7.10 Total loans (b) 2,102,355 1,821,636 22,394 22,516 4.26 4.94 Securities: U.S. Treasury 10,541 - 3 - 0.11 - Federal agencies & 61,405 127,956 287 767 1.87 2.40 GSEs Mortgage-backed & 194,585 133,121 942 851 1.94 2.56 CMOs State and municipal 46,432 45,830 294 330 2.53 2.88 Other 20,815 16,295 275 242 5.28 5.94 Total securities 333,778 323,202 1,801 2,190 2.16 2.71 Deposits in other 212,857 63,097 59 329 0.11 2.07 banks Total interest-earning 2,648,990 2,207,935 24,254 25,035 3.66 4.53 assets Non-earning assets 221,223 218,743 Total assets $ 2,870,213 $ 2,426,678 Deposits: Demand $ 410,228 $ 324,058 56 119 0.05 0.15 Money market 580,200 453,873 475 1,415 0.33 1.24 Savings 206,493 176,673 24 94 0.05 0.21 Time 423,039 489,343 1,563 2,027 1.47 1.64 Total deposits 1,619,960 1,443,947 2,118 3,655 0.52 1.00 Customer repurchase 45,689 39,470 42 150 0.37 1.51 agreementsOther short-term - 1,986 - 12 - 2.42 borrowingsLong-term borrowings 35,597 35,806 524 519 5.89 5.80 Total interest-bearing liabilities 1,701,246 1,521,209 2,684 4,336 0.63 1.13 Noninterest bearing 814,685 568,706 demand depositsOther liabilities 24,244 21,783 Shareholders' equity 330,038 314,980 Total liabilities and shareholders' $ 2,870,213 $ 2,426,678 equity Interest rate spread 3.03 % 3.40 %Net interest margin 3.26 % 3.75 % Net interest income (taxable 21,570 20,699 equivalent basis)Less: Taxable equivalent adjustment 75 77 (c)Net interest income $ 21,495 $ 20,622 Notes: (a) - Interest income includes net accretion/amortization of acquired loan fairvalue adjustments and the net accretion/amortization of deferred loan fees and costs.(b) - Nonaccrual loans are included in the average balances. (c) - A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

Net Interest Income Analysis For the Nine Months Ended September 30, 2020 and 2019 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2020 2019 2020 2019 2020 2019 Loans: Commercial $ 464,094 $ 302,750 $ 12,414 $ 10,609 3.57 % 4.69 % Real estate 1,522,803 1,354,358 52,319 49,782 4.58 4.90 Consumer 9,314 9,638 451 485 6.47 6.73 Total loans (b) 1,996,211 1,666,746 65,184 60,876 4.36 4.87 Securities: U.S. Treasury 7,292 - 47 - 0.86 - Federal agencies & 70,604 135,937 1,147 2,475 2.17 2.43 GSEs Mortgage-backed & 198,528 124,258 3,144 2,353 2.11 2.52 CMOs State and municipal 43,345 64,084 871 1,348 2.68 2.80 Other 19,932 16,160 812 653 5.43 5.39 Total securities 339,701 340,439 6,021 6,829 2.36 2.67 Deposits in other 147,996 46,902 356 853 0.32 2.43 banks Total interest-earning 2,483,908 2,054,087 71,561 68,558 3.84 4.45 assets Non-earning assets 222,451 189,256 Total assets $ 2,706,359 $ 2,243,343 Deposits: Demand $ 371,155 $ 299,769 294 245 0.11 0.11 Money market 550,063 432,980 2,254 3,962 0.55 1.22 Savings 192,632 163,525 101 201 0.07 0.16 Time 446,354 451,258 5,259 5,239 1.57 1.55 Total deposits 1,560,204 1,347,532 7,908 9,647 0.68 0.96 Customer repurchase 43,649 39,265 237 461 0.73 1.57 agreementsOther short-term 1 3,502 - 51 0.50 1.94 borrowingsLong-term borrowings 35,575 33,107 1,523 1,427 5.71 5.75 Total interest-bearing liabilities 1,639,429 1,423,406 9,668 11,586 0.79 1.09 Noninterest bearing 717,007 516,698 demand depositsOther liabilities 22,692 20,595 Shareholders' equity 327,231 282,644 Total liabilities and shareholders' $ 2,706,359 $ 2,243,343 equity Interest rate spread 3.05 % 3.36 %Net interest margin 3.32 % 3.70 % Net interest income (taxable 61,893 56,972 equivalent basis)Less: Taxable equivalent adjustment 219 293 (c)Net interest income $ 61,674 $ 56,679 Notes: (a) - Interest income includes net accretion/amortization of acquired loan fairvalue 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 MeasuresUnaudited (Dollars in thousands, except per At or for the Nine Months share data) 3rd Qtr 2nd Qtr 3rd Qtr Ended September 30, 2020 2020 2019 2020 2019 EFFICIENCY RATIO Noninterest expense $ 14,140 $ 12,432 $ 13,792 $ 39,906 $ 51,037 Add/subtract: gain/ (23 ) 8 (22 ) 12 55 loss on sale of OREOSubtract:core deposit (402 ) (417 ) (448 ) (1,246 ) (961 ) intangibleamortizationSubtract: merger - - - - (11,322 ) related expenses $ 13,715 $ 12,023 $ 13,322 $ 38,672 $ 38,809 Net interest income $ 21,495 $ 20,260 $ 20,622 $ 61,674 $ 56,679 Tax equivalent 75 75 77 219 293 adjustmentNoninterest income 4,292 3,835 4,171 12,622 11,304 Subtract: gain on - - (105 ) (814 ) (575 ) securitiesAdd: loss on fixed 15 - 2 97 89 assets $ 25,877 $ 24,170 $ 24,767 $ 73,798 $ 67,790 Efficiency ratio 53.00 % 49.74 % 53.79 % 52.40 % 57.25 % TAX EQUIVALENT NET INTEREST INCOME Non-GAAP measures: Interest income - $ 22,394 $ 21,427 $ 22,516 $ 65,184 $ 60,876 loansInterest income - 1,860 1,945 2,519 6,377 7,682 investments and otherInterest expense - (2,118 ) (2,478 ) (3,655 ) (7,908 ) (9,647 ) depositsInterest expense - customer repurchaseagreements (42 ) (66 ) (150 ) (237 ) (461 ) Interestexpense -other - - (12 ) - (51 ) short-termborrowingsInterest expense - (524 ) (493 ) (519 ) (1,523 ) (1,427 ) long-term borrowingsTotal net interest $ 21,570 $ 20,335 $ 20,699 $ 61,893 $ 56,972 incomeLess non-GAAP measures:Tax benefit onnontaxable interest - (48 ) (48 ) (46 ) (138 ) (139 ) loansTax benefitonnontaxable (27 ) (27 ) (31 ) (81 ) (154 ) interest -securitiesGAAP measures $ 21,495 $ 20,260 $ 20,622 $ 61,674 $ 56,679 RETURN ON AVERAGE TANGIBLE EQUITY Return on average 8.76 % 6.68 % 11.04 % 8.66 % 6.35 %equity (GAAP basis)Impact of excluding average goodwilland other intangibles 3.90 3.17 5.27 3.94 2.88 Return on average tangible equity(non-GAAP) 12.66 % 9.85 % 16.31 % 12.60 % 9.23 % TANGIBLE EQUITY TO TANGIBLE ASSETSEquity to assets 11.43 % 11.43 % 12.92 % 11.43 % 12.92 %ratio (GAAP basis)Impact of excluding goodwill andother intangibles 2.88 2.94 3.42 2.88 3.42 Tangible equity to tangible assets ratio(non-GAAP) 8.55 % 8.49 % 9.50 % 8.55 % 9.50 % TANGIBLE BOOK VALUE Book value per share $ 30.26 $ 29.86 $ 28.54 $ 30.26 $ 28.54 (GAAP basis)Impact of excluding goodwill andother intangibles 8.34 8.38 8.35 8.34 8.35 Tangible book value per share(non-GAAP) $ 21.92 $ 21.48 $ 20.19 $ 21.92 $ 20.19 ADJUSTED LOAN LOSS ALLOWANCEAllowance for loan $ 21,088 $ 18,507 $ 12,758 $ 21,088 $ 12,758 lossesCredit discount on 7,896 9,868 12,937 7,896 12,937 purchased loansAdjusted loan loss $ 28,984 $ 28,375 $ 25,695 $ 28,984 $ 25,695 allowance Total loans, net $ 2,086,094 $ 2,101,711 $ 1,804,447 $ 2,086,094 $ 1,804,447 Subtract: PPP loans, (265,941 ) (264,022 ) - (265,941 ) - netTotal loans less PPP $ 1,820,153 $ 1,837,689 $ 1,804,447 $ 1,820,153 $ 1,804,447 loans, net Adjusted loan loss allowance tototal loans less PPP 1.59 % 1.54 % 1.42 % 1.59 % 1.42 %loans, net