GlobeNewswire Inc | Jul 23, 2020 07:30AM EDT

July 23, 2020

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 SBAs 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 its 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 Companys 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):

For the remaining six months of 2020 (estimated) $1,113For the years ending (estimated): 2021 1,852 2022 1,147 2023 678 2024 357 2025 260Thereafter 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 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 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 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.

American National Bankshares Inc.Consolidated Balance Sheets(Dollars in thousands, except per share data)Unaudited June 30 2020 2019 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 322,523 334,326 valueRestricted 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 35,059 33,133 assets 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 23,446 20,814 liabilities 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 10,911 11,089 30, 2019 Capital in excess of par value 154,222 160,572 Retained earnings 159,586 141,339 Accumulated other comprehensive 2,714 (1,083 )income (loss), net Total shareholders' equity 327,433 311,917 Total liabilities and shareholders' $ 2,864,539 $ 2,418,082 equity

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 2020 2019 2020 2019 Interestand Dividend Income: Interestand fees on $ 21,379 $ 22,629 $ 42,700 $ 38,267 loans Interestand dividends onsecurities: Taxable 1,646 1,980 3,683 3,801 111 239 223 526 Tax-exempt Dividends 128 105 260 189 Otherinterest 33 258 297 524 income Totalinterest and 23,297 25,211 47,163 43,307 dividendincome Interest Expense: Interest 2,478 3,520 5,790 5,992 on deposits Intereston 66 178 195 350 short-termborrowings Intereston long-term - 14 - 14 borrowings Intereston 123 122 245 122 subordinateddebt Intereston junior 370 388 754 772 subordinateddebt Totalinterest 3,037 4,222 6,984 7,250 expense Net Interest 20,260 20,989 40,179 36,057 Income Provisionfor(recovery 4,759 (10 ) 5,712 6 of) loanlosses Net InterestIncome After Provisionfor (Recoveryof) Loan 15,501 20,999 34,467 36,051 Losses Noninterest Income: Trust 953 933 1,965 1,847 fees Servicecharges on 541 724 1,262 1,318 depositaccounts Otherfees and 951 1,015 1,892 1,723 commissions Mortgagebanking 893 586 1,442 992 income

Securities - 147 814 470 gains, net Brokerage 172 186 383 333 fees Income(loss) fromSmall Business (119 ) (137 ) (64 ) 31 InvestmentCompanies Losses onpremises and - (87 ) (82 ) (87 )equipment,net Other 444 315 718 506 Totalnoninterest 3,835 3,682 8,330 7,133 income Noninterest Expense: Salaries 4,805 7,048 10,864 11,712 Employee 1,386 1,425 2,687 2,655 benefits Occupancyand 1,327 1,431 2,693 2,515 equipment FDIC 176 169 271 294 assessment Bankfranchise 425 412 851 702 tax Coredeposit 417 458 844 513 intangibleamortization Data 785 717 1,548 1,249 processing Software 403 321 759 645 Otherreal estate 15 (44 ) 6 (31 )owned, net Mergerrelated - 10,871 - 11,322 expenses Other 2,693 3,508 5,243 5,669 Totalnoninterest 12,432 26,316 25,766 37,245 expense Income(Loss) 6,904 (1,635 ) 17,031 5,939 BeforeIncome TaxesIncome 1,422 (405 ) 3,007 1,166 Taxes NetIncome $ 5,482 $ (1,230 ) $ 14,024 $ 4,773 (Loss) Net Income(Loss) Per CommonShare: Basic $ 0.50 $ (0.11 ) $ 1.28 $ 0.48 Diluted $ 0.50 $ (0.11 ) $ 1.28 $ 0.48 WeightedAverageCommon SharesOutstanding: 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

AmericanNational Bankshares Inc.Financial HighlightsUnaudited (Dollars in thousands, except At or for the Six Months per share data) 2nd Qtr 1st Qtr 2nd Qtr Ended June 30, 2020 2020 2019 2020 2019 EARNINGS Interest $ 23,297 $ 23,866 $ 25,211 $ 47,163 $ 43,307 income Interest 3,037 3,947 4,222 6,984 7,250 expense Net interest 20,260 19,919 20,989 40,179 36,057 income Provision for(recovery of) 4,759 953 (10 ) 5,712 6 loan losses Noninterest 3,835 4,495 3,682 8,330 7,133 income Noninterest 12,432 13,334 26,316 25,766 37,245 expense Income taxes 1,422 1,585 (405 ) 3,007 1,166 Net income 5,482 8,542 (1,230 ) 14,024 4,773 (loss) PER COMMON SHARE Net income(loss) per share $ 0.50 $ 0.77 $ (0.11 ) $ 1.28 $ 0.48 - basic Net income(loss) per share 0.50 0.77 (0.11 ) 1.28 0.48 - diluted Cash 0.27 0.27 0.25 0.54 0.50 dividends paid Book value 29.86 29.50 28.00 29.86 28.00 per share Book valueper share - 21.48 21.08 19.63 21.48 19.63 tangible (a) Closing 25.04 23.90 38.75 25.04 38.75 market price FINANCIAL RATIOS Return on 0.80 % 1.37 % (0.20 ) % 1.07 % 0.44 %average assets Return on 6.68 10.56 (1.60 ) 8.61 3.59 average equity Return onaverage tangible 9.85 15.32 (1.62 ) 12.56 5.25 equity (a) Averageequity to 11.91 12.99 12.62 12.42 12.38 average assets Tangibleequity to 8.49 9.61 9.41 8.49 9.41 tangible assets(a) Net interestmargin, taxable 3.22 3.52 3.82 3.36 3.67 equivalent Efficiency 49.74 54.46 60.94 52.08 59.24 ratio (a) Effective tax 20.60 15.65 (24.77 ) 17.66 19.63 rate PERIOD-END BALANCES Securities $ 331,217 $ 351,451 $ 342,247 $ 331,217 $ 342,247 Loans held 2,845 2,666 3,165 2,845 3,165 for sale Loans, net 2,101,711 1,854,928 1,836,241 2,101,711 1,836,241 Goodwill andother 91,932 92,349 93,246 91,932 93,246 intangibles Assets 2,864,539 2,495,065 2,418,082 2,864,539 2,418,082 Assets - 2,772,607 2,402,716 2,324,836 2,772,607 2,324,836 tangible (a) Deposits 2,431,776 2,070,667 1,999,097 2,431,776 1,999,097 Customerrepurchase 46,296 42,114 37,222 46,296 37,222 agreements Long-term 35,588 35,567 35,504 35,588 35,504 borrowings Shareholders' 327,433 323,293 311,917 327,433 311,917 equity Shareholders'equity - 235,501 230,944 218,671 235,501 218,671 tangible (a) AVERAGE BALANCES Securities $ 315,659 $ 369,730 $ 354,506 $ 342,695 $ 349,199 (b) Loans held 4,554 3,156 2,913 3,855 2,375 for sale Loans, net 2,048,277 1,829,125 1,816,203 1,938,700 1,585,643

Interest-earning 2,525,998 2,274,920 2,211,273 2,400,459 1,975,887 assets Goodwill andother 92,161 91,738 93,075 91,950 69,060 intangibles Assets 2,755,470 2,491,591 2,433,948 2,623,531 2,150,157 Assets - 2,663,309 2,399,853 2,340,873 2,531,581 2,081,097 tangible (a)

Interest-bearing 1,564,430 1,495,565 1,463,613 1,529,997 1,298,526 deposits Deposits 2,325,331 2,069,927 2,023,557 2,197,629 1,788,789 Customerrepurchase 43,716 41,519 35,657 42,617 39,161 agreements Othershort-term - 3 7,627 2 3,865 borrowings Long-term 35,575 35,554 36,301 35,565 32,142 borrowings Shareholders' 328,051 323,573 307,281 325,812 266,208 equity Shareholders'equity - 235,890 231,835 214,206 233,862 197,148 tangible (a) AmericanNational Bankshares Inc.Financial HighlightsUnaudited (Dollars in thousands, except At or for the Six Months per share data) 2nd Qtr 1st Qtr 2nd Qtr Ended June 30, 2020 2020 2019 2020 2019 CAPITAL Weightedaverage shares 10,959,545 11,025,185 11,126,800 10,992,365 9,942,566 outstanding -basic Weightedaverage shares 10,963,248 11,031,310 11,126,800 10,997,279 9,952,115 outstanding -diluted ALLOWANCE FOR LOAN LOSSES Beginning $ 14,065 $ 13,152 $ 12,806 $ 13,152 $ 12,805 balance Provision for(recovery of) 4,759 953 (10 ) 5,712 6 loan losses Charge-offs (444 ) (105 ) (54 ) (549 ) (123 ) Recoveries 127 65 44 192 98 Ending $ 18,507 $ 14,065 $ 12,786 $ 18,507 $ 12,786 balance LOANS Constructionand land $ 141,392 $ 141,154 $ 152,876 $ 141,392 $ 152,876 development Commercial 978,768 953,363 880,146 978,768 880,146 real estate Residential 291,242 301,284 328,400 291,242 328,400 real estate Home equity 114,397 118,030 121,905 114,397 121,905 Commercial 566,859 331,507 340,427 566,859 340,427 and industrial 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 $ 375 $ 459 $ 930 $ 375 $ 930 due and accruing Nonaccrual 2,855 2,579 969 2,855 969 Other realestate owned and 1,346 984 1,433 1,346 1,433 repossessions Nonperforming $ 4,576 $ 4,022 $ 3,332 $ 4,576 $ 3,332 assets ASSET QUALITY RATIOS Allowance forloan losses to 0.88 % 0.76 % 0.70 % 0.88 % 0.70 %total loans Allowance for loan losses to nonperforming 572.97 462.97 673.30 572.97 673.30 loans Nonperformingassets to total 0.16 0.16 0.14 0.16 0.14 assets Nonperformingloans to total 0.15 0.16 0.10 0.15 0.10 loans Annualized net charge-offs to average 0.06 0.01 0.00 0.04 0.00 loans OTHER DATA Fiduciaryassets at $ 536,014 $ 492,850 $ 547,731 $ 536,014 $ 547,731 period-end (c)(d) Retailbrokerage assets $ 301,096 $ 235,359 $ 314,051 $ 301,096 $ 314,051 at period-end(c) (d) Numberfull-time 345 355 371 345 371 equivalentemployees (e) Number offull service 26 26 28 26 28 offices Number ofloan production 1 1 - 1 - offices Number of 38 38 39 38 39 ATMs Notes: (a) - This financial measure is not calculated in accordance with GAAP. Fora reconciliation ofnon-GAAP financial measures, see "Reconciliation ofNon-GAAP Financial 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 June 30, 2020 and 2019 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2020 2019 2020 2019 2020 2019 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 & 47,197 140,516 284 858 2.41 2.44 GSEs Mortgage-backed & 203,268 127,718 1,059 809 2.08 2.53 CMOs 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 157,508 37,651 33 258 0.08 2.75 banks Total interest-earning 2,525,998 2,211,273 23,372 25,316 3.70 4.58 assets 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 43,716 35,657 66 140 0.61 1.57 agreementsOther short-term - 7,627 - 38 - 1.99 borrowingsLong-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 760,901 559,944 demand depositsOther liabilities 22,797 23,525 Shareholders' equity 328,051 307,281 Total liabilities and shareholders' $ 2,755,470 $ 2,433,948 equity Interest rate spread 2.96 % 3.48 %Net interest margin 3.22 % 3.82 % Net interest income (taxable 20,335 21,094 equivalent basis)Less: Taxable equivalent adjustment 75 105 (c)Net interest income $ 20,260 $ 20,989 Notes: (a) - Interest income includes net accretion/amortization of acquired loanfair 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 Six Months Ended June 30, 2020 and 2019 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2020 2019 2020 2019 2020 2019 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 2,400,459 1,975,887 47,307 43,523 3.95 4.41 assets 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 42,617 39,161 195 311 0.92 1.60 agreementsOther 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 667,632 490,263 depositsOther liabilities 21,906 19,992 Shareholders' equity 325,812 266,208 Total liabilities and shareholders' $ 2,623,531 $ 2,150,157 equity Interest rate spread 3.08 % 3.35 %Net interest margin 3.36 % 3.67 % Net interest income (taxable equivalent 40,323 36,273 basis)Less: Taxable equivalent adjustment (c) 144 216 Net interest income $ 40,179 $ 36,057 Notes: (a) - Interest income includes net accretion/amortization of acquired loanfair 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.

AmericanNational BanksharesInc.Reconciliation ofNon-GAAP Financial MeasuresUnaudited (Dollars in thousands, At or for the Six Months except per share data) 2nd Qtr 1st Qtr 2nd Qtr Ended June 30, 2020 2020 2019 2020 2019 EFFICIENCY RATIO

Noninterest $ 12,432 $ 13,334 $ 26,316 $ 25,766 $ 37,245 expense Add: gainon sale of 8 27 76 35 78 OREO Subtract:core deposit (417 ) (427 ) (458 ) (844 ) (513 ) intangibleamortization Subtract:merger - - (10,871 ) - (11,322 ) relatedexpenses $ 12,023 $ 12,934 $ 15,063 $ 24,957 $ 25,488 Netinterest $ 20,260 $ 19,919 $ 20,989 $ 40,179 $ 36,057 income Taxequivalent 75 69 105 144 216 adjustment

Noninterest 3,835 4,495 3,682 8,330 7,133 income Subtract:gain on - (814 ) (147 ) (814 ) (470 ) securities Add: losson fixed - 82 87 82 87 assets $ 24,170 $ 23,751 $ 24,716 $ 47,921 $ 43,023

Efficiency 49.74 % 54.46 % 60.94 % 52.08 % 59.24 %ratio TAX EQUIVALENT NET INTEREST INCOME Non-GAAP measures: Interestincome - $ 21,427 $ 21,363 $ 22,678 $ 42,790 $ 38,360 loans Interestincome - 1,945 2,572 2,638 4,517 5,163 investmentsand other Interestexpense - (2,478 ) (3,312 ) (3,520 ) (5,790 ) (5,992 ) deposits Interestexpense - customerrepurchase (66 ) (129 ) (140 ) (195 ) (311 ) agreements Interestexpense -other - - (38 ) - (39 ) short-termborrowings Interestexpense - (493 ) (506 ) (524 ) (999 ) (908 ) long-termborrowings Total netinterest $ 20,335 $ 19,988 $ 21,094 $ 40,323 $ 36,273 income Lessnon-GAAP measures: Taxbenefit onnontaxable (48 ) (42 ) (49 ) (90 ) (93 ) interest -loans Taxbenefit onnontaxable (27 ) (27 ) (56 ) (54 ) (123 ) interest -securities GAAP $ 20,260 $ 19,919 $ 20,989 $ 40,179 $ 36,057 measures RETURN ON AVERAGE TANGIBLE EQUITY Return onaverage 6.68 % 10.56 % (1.60 ) % 8.61 % 3.59 %equity (GAAPbasis) Impact ofexcluding averagegoodwill and other 3.17 4.76 (0.02 ) 3.95 1.66 intangibles Return onaverage tangibleequity 9.85 % 15.32 % (1.62 ) % 12.56 % 5.25 %(non-GAAP) TANGIBLE EQUITY TO TANGIBLE ASSETS Equity toassets ratio 11.43 % 12.96 % 12.90 % 11.43 % 12.90 %(GAAP basis) Impact ofexcluding goodwill and other 2.94 3.35 3.49 2.94 3.49 intangibles Tangibleequity to tangibleassets ratio 8.49 % 9.61 % 9.41 % 8.49 % 9.41 %(non-GAAP) TANGIBLE BOOK VALUE Bookvalue per $ 29.86 $ 29.50 $ 28.00 $ 29.86 $ 28.00 share (GAAPbasis) Impact ofexcluding goodwill and other 8.38 8.42 8.37 8.38 8.37 intangibles Tangiblebook value per share $ 21.48 $ 21.08 $ 19.63 $ 21.48 $ 19.63 (non-GAAP)

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