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• Q3 2019 net income of $8.7 million and diluted EPS of $0.78
• Net interest margin of 3.75% for Q3 2019
• Average shareholders’ equity of $315.0 million is 12.98% of average assets
• Nonperforming assets to total assets 0.15% for Q3 2019

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DANVILLE, Va., Oct. 17, 2019 (GLOBE NEWSWIRE) — American National Bankshares Inc. (“American National”) (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced net income of $8,692,000 for the third quarter of 2019 compared to $5,785,000 for the third quarter of 2018, a $2,907,000 or 50.3% increase.  Basic and diluted net income per common share was $0.78 for the 2019 quarter compared to $0.66 for the 2018 quarter. Net income for the third quarter of 2019 produced annualized returns on average assets of 1.43%, on average equity of 11.04%, and on average tangible equity of 16.31%.

Net income for the first nine months of 2019 was $13,465,000 compared to $17,577,000 for the comparable period of 2018, a $4,112,000 or 23.4% decrease. Basic and diluted net income per common share was $1.30 for the 2019 period compared to $2.02 for the 2018 period. The nine-month period for 2019 was adversely impacted by $11.3 million in one time, merger related expenses associated with the HomeTown Bankshares Corporation (“HomeTown”) acquisition in April 2019.

Financial Performance and Overview

Jeffrey V. Haley, President and Chief Executive Officer, said, “Net income for the third quarter of 2019 was $8.7 million. This was a $2.9 million or 50.3% increase over the comparable quarter of 2018. This increase was primarily related to the April 1, 2019 merger with HomeTown.

“Net interest income for the 2019 quarter compared to the 2018 quarter significantly increased, it was up $5.9 million or 39.8%.

“The improvement in net interest income was related to a higher average balance of loans for the 2019 quarter compared to the 2018 quarter. Loan average balances for the 2019 quarter were up $491.3 million or 36.9% over the 2018 quarter. Loan yields for the 2019 quarter were 40 basis points higher than the 2018 quarter.

“End of period loan balances for September 30, 2019, compared to December 31, 2018, increased $447.0 million. Of this increase, $444.3 million was the result of the HomeTown merger and $2.7 million represents other growth in the franchise.

“September 30, 2019 loan balances compared to June 30, 2019 balances fell $31.8 million (1.7%). These balances were adversely impacted by unexpected customer pay downs. They resulted from sales of businesses, debt reduction from cash, movement into the permanent, non-recourse market, and other drivers. These unexpected pay downs aggregated roughly $36 million during the 2019 quarter.

“Average interest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased substantially, up $325.0 million or 29.0% with a 27 basis point higher cost. This cost increase reflects increased deposit competition throughout our franchise.

“End of period interest bearing deposit balances for September 30, 2019, compared to December 31, 2018, increased $307.0 million. Of this increase, $364.2 million was the result of the HomeTown merger and $57.2 million represents deposit reduction throughout the franchise.

“Average noninterest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased; they were up $144.7 million or 34.1%.

“End of period noninterest bearing deposit balances for September 30, 2019, compared to December 31, 2018, increased $168.7 million (38.7%). Of this increase, $119.5 million was the result of the HomeTown merger and $49.2 million represents deposit growth throughout the remainder of the franchise.”

Haley concluded, “The market is very challenging. We were dealing with rising interest rates a year ago. We are dealing with declining interest rates as we approach the end of 2019.  This means continued pressure on our net interest margin. Strategically, American National will maintain its focus on maintaining high asset quality, strive to shorten the duration of our time deposits and, where prudent, extend the duration of our earning assets. One of the few certainties we have is that economic cycles ebb and flow. American National has over a century of history and experience dealing with all sorts of economic environments and we will continue to do so. By doing so, we will continue to provide our customers with the best in banking products and services and produce a strong return for our shareholders.”
   
Capital
American National’s capital ratios remain strong and exceed all regulatory requirements. 

For the quarter ended September 30, 2019, average shareholders’ equity was 12.98% of average assets, compared to 11.87% for the quarter ended September 30, 2018.

Book value per common share was $28.54 at September 30, 2019, compared to $24.79 at September 30, 2018.

Tangible book value per common share was $20.19 at September 30, 2019, compared to $19.65 at September 30, 2018.

Credit Quality Measurements
Nonperforming assets ($1,446,000 of nonaccrual loans, $874,000 of 90 days past due and accruing loans, and $1,353,000 of other real estate owned) represented 0.15% of total assets at September 30, 2019, compared to 0.18% at September 30, 2018. 

Annualized net charge-offs to average loans were zero basis points (0.00%) for the 2019 third quarter compared to a net recovery of three basis points (0.03%) for the same quarter in 2018.

Other real estate owned was $1,353,000 compared to $916,000 at September 30, 2018, an increase of $437,000 or 47.7%.

Merger Related Financial Impact
The merger accounting adjustments related to our acquisitions have had and continue to have a positive impact on net interest income and income before income taxes. The impact of these adjustments is summarized below (dollars in thousands):

For the quarter ended September 30,		2019			2018
Net Interest Income		$	948		$	198
Income Before Income Taxes		$	500		$	142
For the nine months ended September 30,		2019			2018
Net Interest Income		$	2,321		$	1,002
Income Before Income Taxes		$	1,360		$	792

In the table above, the impact for the quarter ended September 30, 2019 related to the HomeTown merger on net interest income was $764,000 and on income before taxes was $371,000.  The impact for the nine months ended September 30, 2019 related to the HomeTown merger on net interest income was $1,648,000 and on income before taxes was $852,000.

The third quarter of 2019 includes $148,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $59,000 for the comparable quarter of 2018. 

For the nine-month period ended September 30, 2019, cash basis accretion income was $544,000, compared to $545,000 for the same period in 2018. 

Net Interest Income
Net interest income before the provision for loan losses increased to $20,622,000 in the third quarter of 2019 from $14,751,000 in the third quarter of 2018, an increase of $5,871,000 or 39.8%.  

For the 2019 quarter, the net interest margin was 3.75% compared to 3.51% for the same quarter in 2018, an increase of 24 basis points (0.24%).  

The major drivers affecting the net interest margin were:

• Positively – a $514.0 million (30.3%) increase in average earning assets, mostly loans, at a 44 basis point higher yield.
• Positively – a $144.7 million (34.1%) increase in average noninterest bearing demand deposits.
• Negatively – a $325.0 million (29.0%) increase in average interest bearing deposits at a 27 basis point higher cost.

Most of these increases were directly related to the HomeTown merger.

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the third quarter of 2019 was a negative $12,000 compared to a negative $23,000 for the third quarter of 2018. Both quarters’ negative provision were related to adjustments on specific reserves for several acquired impaired loans.

The allowance for loan losses as a percentage of total loans was 0.71% at September 30, 2019 compared to 1.02% at September 30, 2018. The major driver of the change was the HomeTown merger on April 1, 2019, which resulted in American National acquiring $444.3 million in loans.

Net loans outstanding fell during the third quarter by $31.8 million or 1.7%. This significantly reduced the need for an increase to the allowance.

Noninterest Income
Noninterest income totaled $4,171,000 in the third quarter of 2019, compared with $3,380,000 in the third quarter of 2018, an increase of $791,000 or 23.4%.  The major driver was other fees and commissions, which increased $347,000 or 52.9%, mostly on the strength of debit card fee revenue, primarily related to the Hometown acquisition.

Noninterest Expense
Noninterest expense totaled $13,792,000 in the third quarter of 2019, compared to $10,904,000 in the third quarter of 2018, an increase of $2,888,000 or 26.5%. The 2019 quarter was positively impacted by the Small Bank Assessment Credit, which reduced FDIC insurance expense $330,000. The major driver of the increase in expense was the merger with HomeTown in the second quarter of 2019.

About American National
American National is a multi-state bank holding company with total assets of approximately $2.5 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving Virginia and North Carolina with 28 banking offices. American National Bank also manages an additional $855 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 Bank’s website at www.amnb.com.

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

Forward-Looking Statements
Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) expected revenue synergies and cost savings from the recently completed merger with HomeTown may not be fully realized or realized within the expected timeframe; (2) the businesses of American National and/or HomeTown may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (3) revenues following the merger may be lower than expected; (4) customer and employee relationships may be disrupted by the merger; (5) 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; (6) 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; (7) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (8) accounting principles, policies, and guidelines; and (9) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
		September 30
			2019				2018
Assets
Cash and due from banks		$	47,025			$	32,688
Interest-bearing deposits in other banks			95,592				37,355
Equity securities, at fair value			–				2,087
Securities available for sale, at fair value			308,490				295,777
Restricted stock, at cost			8,621				5,239
Loans held for sale			5,646				1,934
Loans			1,804,447				1,331,153
Less allowance for loan losses			(12,758	)			(13,588	)
Net Loans			1,791,689				1,317,565
Premises and equipment, net			39,261				25,690
Other real estate owned, net			1,353				916
Goodwill			84,633				43,872
Core deposit intangibles, net			8,165				981
Bank owned life insurance			27,612				18,785
Accrued interest receivable and other assets			36,442				23,602
Total assets		$	2,454,529			$	1,806,491
Liabilities
Demand deposits — noninterest-bearing		$	604,498			$	420,486
Demand deposits — interest-bearing			323,871				230,984
Money market deposits			450,022				362,575
Savings deposits			176,803				135,702
Time deposits			486,668				373,360
Total deposits			2,041,862				1,523,107
Customer repurchase agreements			38,924				29,104
Subordinated debt			7,521				–
Junior subordinated debt			28,003				27,902
Accrued interest payable and other liabilities			20,973				10,312
Total liabilities			2,137,283				1,590,425
Shareholders’ equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding			–				–
Common stock, $1 par, 20,000,000 shares authorized,
11,116,250 shares outstanding at September 30, 2019 and
8,714,431 shares outstanding at September 30, 2018			11,063				8,661
Capital in excess of par value			159,792				77,842
Retained earnings			147,030				138,715
Accumulated other comprehensive loss, net			(639	)			(9,152	)
Total shareholders’ equity			317,246				216,066
Total liabilities and shareholders’ equity		$	2,454,529			$	1,806,491

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
			2019				2018				2019				2018
Interest and Dividend Income:
Interest and fees on loans		$	22,470			$	15,062			$	60,737			$	44,485
Interest and dividends on securities:
Taxable			1,890				1,568				5,691				4,432
Tax-exempt			134				362				660				1,204
Dividends			135				82				324				240
Other interest income			329				143				853				516
Total interest and dividend income			24,958				17,217				68,265				50,877
Interest Expense:
Interest on deposits			3,655				2,048				9,647				5,746
Interest on short-term borrowings			162				29				512				41
Interest on long-term borrowings			–				–				14				–
Interest on subordinated debt			123				–				245				–
Interest on junior subordinated debt			396				389				1,168				1,008
Total interest expense			4,336				2,466				11,586				6,795
Net Interest Income			20,622				14,751				56,679				44,082
Recovery of loan losses			(12	)			(23	)			(6	)			(97	)
Net Interest Income After Recovery
of Loan Losses			20,634				14,774				56,685				44,179
Noninterest Income:
Trust fees			979				1,001				2,826				2,875
Service charges on deposit accounts			783				605				2,101				1,809
Other fees and commissions			1,003				656				2,726				1,977
Mortgage banking income			710				551				1,702				1,492
Securities gains (losses), net			105				(17	)			575				393
Brokerage fees			183				172				516				603
Income from Small Business Investment Companies			143				150				174				476
Gains (losses) on premises and equipment, net			(2	)			63				(89	)			66
Other			267				199				773				585
Total noninterest income			4,171				3,380				11,304				10,276
Noninterest Expense:
Salaries			6,295				5,285				18,007				15,377
Employee benefits			1,367				1,036				4,022				3,322
Occupancy and equipment			1,448				1,069				3,963				3,297
FDIC assessment			(175	)			134				119				412
Bank franchise tax			411				291				1,113				863
Core deposit intangible amortization			448				56				961				210
Data processing			589				420				1,838				1,309
Software			287				307				932				966
Other real estate owned, net			47				46				16				101
Merger related expenses			–				–				11,322				–
Other			3,075				2,260				8,744				6,751
Total noninterest expense			13,792				10,904				51,037				32,608
Income Before Income Taxes			11,013				7,250				16,952				21,847
Income Taxes			2,321				1,465				3,487				4,270
Net Income		$	8,692			$	5,785			$	13,465			$	17,577
Net Income Per Common Share:
Basic		$	0.78			$	0.66			$	1.30			$	2.02
Diluted		$	0.78			$	0.66			$	1.30			$	2.02
Weighted Average Common Shares Outstanding:
Basic			11,127,603				8,712,443				10,341,919				8,691,423
Diluted			11,138,008				8,718,918				10,351,753				8,703,662

American National Bankshares Inc.
Financial Highlights
Unaudited
(Dollars in thousands, except per share data)
	3rd Qtr				2nd Qtr				3rd Qtr				YTD				YTD
		2019				2019				2018				2019				2018
EARNINGS
Interest income	$	24,958			$	25,211			$	17,217			$	68,265			$	50,877
Interest expense		4,336				4,222				2,466				11,586				6,795
Net interest income		20,622				20,989				14,751				56,679				44,082
Recovery of loan losses		(12	)			(10	)			(23	)			(6	)			(97	)
Noninterest income		4,171				3,682				3,380				11,304				10,276
Noninterest expense		13,792				26,316				10,904				51,037				32,608
Income taxes		2,321				(405	)			1,465				3,487				4,270
Net income (loss)		8,692				(1,230	)			5,785				13,465				17,577
PER COMMON SHARE
Income (loss) per share – basic	$	0.78			$	(0.11	)		$	0.66			$	1.30			$	2.02
Income (loss) per share – diluted		0.78				(0.11	)			0.66				1.30				2.02
Cash dividends paid		0.27				0.25				0.25				0.77				0.75
Book value per share		28.54				28.00				24.79				28.54				24.79
Book value per share – tangible (a)		20.19				19.63				19.65				20.19				19.65
Closing market price		35.47				38.75				39.00				35.47				39.00
FINANCIAL RATIOS
Return on average assets		1.43	%			(0.20	)%			1.28	%			0.80	%			1.29	%
Return on average equity		11.04				(1.60	)			10.76				6.35				11.04
Return on average tangible equity (a)		16.31				(1.62	)			13.70				9.23				14.14
Average equity to average assets		12.98				12.62				11.87				12.60				11.67
Tangible equity to tangible assets (a)		9.50				9.41				9.72				9.50				9.72
Net interest margin, taxable equivalent		3.75				3.82				3.51				3.70				3.49
Efficiency ratio (a)		53.79				60.94				59.35				57.25				59.56
Effective tax rate		21.08				(24.77	)			20.21				20.57				19.55
PERIOD-END BALANCES
Securities	$	317,111			$	342,247			$	303,103			$	317,111			$	303,103
Loans held for sale		5,646				3,165				1,934				5,646				1,934
Loans, net of unearned income		1,804,447				1,836,241				1,331,153				1,804,447				1,331,153
Goodwill and other intangibles		92,798				93,246				44,853				92,798				44,853
Assets		2,454,529				2,418,082				1,806,491				2,454,529				1,806,491
Assets – tangible (a)		2,361,731				2,324,836				1,761,638				2,361,731				1,761,638
Deposits		2,041,862				1,999,097				1,523,107				2,041,862				1,523,107
Customer repurchase agreements		38,924				37,222				29,104				38,924				29,104
Long-term borrowings		35,524				35,504				27,902				35,524				27,902
Shareholders’ equity		317,246				311,917				216,066				317,246				216,066
Shareholders’ equity – tangible (a)		224,448				218,671				171,213				224,448				171,213
AVERAGE BALANCES
Securities (b)	$	323,202			$	354,506			$	335,320			$	340,439			$	330,561
Loans held for sale		3,904				2,913				3,282				2,890				2,650
Loans, net of unearned income		1,817,732				1,816,203				1,327,060				1,663,856				1,328,936
Interest-earning assets		2,207,935				2,211,273				1,693,912				2,054,087				1,700,128
Goodwill and other intangibles		93,077				93,075				44,887				77,154				44,958
Assets		2,426,678				2,433,948				1,811,631				2,243,343				1,818,615
Assets – tangible (a)		2,333,601				2,340,873				1,766,744				2,166,189				1,773,657
Interest-bearing deposits		1,443,947				1,463,613				1,118,929				1,347,532				1,140,443
Deposits		2,012,653				2,023,557				1,542,945				1,864,230				1,555,086
Customer repurchase agreements		39,470				35,657				11,896				39,265				11,829
Other short-term borrowings		1,986				7,627				2,176				3,502				1,536
Long-term borrowings		35,806				36,301				27,886				33,107				27,861
Shareholders’ equity		314,980				307,281				215,054				282,644				212,268
Shareholders’ equity – tangible (a)		221,903				214,206				170,167				205,490				167,310
American National Bankshares Inc.
Financial Highlights
Unaudited
(Dollars in thousands, except per share data)
	3rd Qtr				2nd Qtr				3rd Qtr				YTD				YTD
		2019				2019				2018				2019				2018
CAPITAL
Weighted average shares outstanding – basic		11,127,603				11,126,800				8,712,443				10,341,919				8,691,423
Weighted average shares outstanding – diluted		11,138,008				11,126,800				8,718,918				10,351,753				8,703,662
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	12,786			$	12,806			$	13,508			$	12,805			$	13,603
Recovery of loan losses		(12	)			(10	)			(23	)			(6	)			(97	)
Charge-offs		(66	)			(54	)			(28	)			(189	)			(202	)
Recoveries		50				44				131				148				284
Ending balance	$	12,758			$	12,786			$	13,588			$	12,758			$	13,588
LOANS
Construction and land development	$	143,788			$	152,876			$	99,546			$	143,788			$	99,546
Commercial real estate		883,219				880,146				632,022				883,219				632,022
Residential real estate		318,833				328,400				205,277				318,833				205,277
Home equity		122,074				121,905				104,873				122,074				104,873
Commercial and industrial		324,508				340,427				284,176				324,508				284,176
Consumer		12,025				12,487				5,259				12,025				5,259
Total	$	1,804,447			$	1,836,241			$	1,331,153			$	1,804,447			$	1,331,153
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing	$	874			$	930			$	74			$	874			$	74
Nonaccrual		1,446				969				2,238				1,446				2,238
Other real estate owned		1,353				1,433				916				1,353				916
Nonperforming assets	$	3,673			$	3,332			$	3,228			$	3,673			$	3,228
ASSET QUALITY RATIOS
Allowance for loan losses to total loans		0.71	%			0.70	%			1.02	%			0.71	%			1.02	%
Allowance for loan losses to
nonperforming loans		549.91				673.30				587.72				549.91				587.72
Nonperforming assets to total assets		0.15				0.14				0.18				0.15				0.18
Nonperforming loans to total loans		0.13				0.10				0.17				0.13				0.17
Annualized net charge-offs
to average loans		0.00				0.00				(0.03	)			0.00				(0.01	)
OTHER DATA
Fiduciary assets at period-end (c) (d)	$	546,407			$	547,731			$	523,754			$	546,407			$	523,754
Retail brokerage assets at period-end (c) (d)	$	308,820			$	314,051			$	333,565			$	308,820			$	333,565
Number full-time equivalent employees (e)		365				371				316				365				316
Number of full service offices		28				28				24				28				24
Number of loan production offices		1				1				2				1				2
Number of ATM’s		40				39				34				40				34
Notes:
(a) – This financial measure is not calculated in accordance with GAAP. For a reconciliation of non-GAAP financial measures, see
“Reconciliation of Non-GAAP Financial Measures” at the end of this release.
(b) – Average does not include unrealized gains and losses.
(c) – Market value.
(d) – Assets are not owned by American National and are not reflected in the consolidated balance sheet.
(e) – Average for quarter.

Net Interest Income Analysis
For the Three Months Ended September 30, 2019 and 2018
(Dollars in thousands)
Unaudited
							Interest
	Average Balance						Income/Expense							Yield/Rate
		2019			2018			2019			2018			2019		2018
Loans:
Commercial	$	320,802		$	268,296		$	3,820		$	2,715			4.72	%	4.01	%
Real estate		1,489,155			1,057,097			18,487			12,317			4.97		4.66
Consumer		11,679			4,949			209			76			7.10		6.09
Total loans		1,821,636			1,330,342			22,516			15,108			4.94		4.54
Securities:
Federal agencies & GSEs		127,956			128,284			767			732			2.40		2.28
Mortgage-backed & CMOs		133,121			107,817			851			604			2.56		2.24
State and municipal		45,830			84,147			330			583			2.88		2.77
Other		16,295			15,072			242			180			5.94		4.78
Total securities		323,202			335,320			2,190			2,099			2.71		2.50
Deposits in other banks		63,097			28,250			329			143			2.07		2.01
Total interest-earning assets		2,207,935			1,693,912			25,035			17,350			4.53		4.09
Non-earning assets		218,743			117,719
Total assets	$	2,426,678		$	1,811,631
Deposits:
Demand	$	324,058		$	231,339			119			12			0.15		0.02
Money market		453,873			377,074			1,415			839			1.24		0.88
Savings		176,673			132,450			94			10			0.21		0.03
Time		489,343			378,066			2,027			1,187			1.64		1.25
Total deposits		1,443,947			1,118,929			3,655			2,048			1.00		0.73
Customer repurchase agreements		39,470			11,896			150			17			1.51		0.57
Other short-term borrowings		1,986			2,176			12			12			2.42		2.21
Long-term borrowings		35,806			27,886			519			389			5.80		5.58
Total interest-bearing liabilities		1,521,209			1,160,887			4,336			2,466			1.13		0.84
Noninterest bearing demand deposits		568,706			424,016
Other liabilities		21,783			11,674
Shareholders’ equity		314,980			215,054
Total liabilities and shareholders’ equity	$	2,426,678		$	1,811,631
Interest rate spread														3.40	%	3.25	%
Net interest margin														3.75	%	3.51	%
Net interest income (taxable equivalent basis)								20,699			14,884
Less: Taxable equivalent adjustment								77			133
Net interest income							$	20,622		$	14,751

Net Interest Income Analysis
For the Nine Months Ended September 30, 2019 and 2018
(Dollars in thousands)
Unaudited
							Interest
	Average Balance						Income/Expense						Yield/Rate
		2019			2018			2019			2018		2019		2018
Loans:
Commercial	$	302,750		$	264,983		$	10,609		$	7,811		4.69	%	3.94	%
Real estate		1,354,358			1,062,075			49,782			36,594		4.90		4.59
Consumer		9,638			4,528			485			229		6.73		6.76
Total loans		1,666,746			1,331,586			60,876			44,634		4.87		4.47
Securities:
Federal agencies & GSEs		135,937			119,597			2,475			1,956		2.43		2.18
Mortgage-backed & CMOs		124,258			108,473			2,353			1,812		2.52		2.23
State and municipal		64,084			87,365			1,348			1,870		2.80		2.85
Other		16,160			15,126			653			531		5.39		4.68
Total securities		340,439			330,561			6,829			6,169		2.67		2.49
Deposits in other banks		46,902			37,981			853			516		2.43		1.82
Total interest-earning assets		2,054,087			1,700,128			68,558			51,319		4.45		4.03
Non-earning assets		189,256			118,487
Total assets	$	2,243,343		$	1,818,615
Deposits:
Demand	$	299,769		$	236,734			245			36		0.11		0.02
Money market		432,980			394,005			3,962			2,424		1.22		0.82
Savings		163,525			131,789			201			30		0.16		0.03
Time		451,258			377,915			5,239			3,256		1.55		1.15
Total deposits		1,347,532			1,140,443			9,647			5,746		0.96		0.67
Customer repurchase agreements		39,265			11,829			461			19		1.57		0.21
Other short-term borrowings		3,502			1,536			51			22		1.94		1.91
Long-term borrowings		33,107			27,861			1,427			1,008		5.75		4.82
Total interest-bearing liabilities		1,423,406			1,181,669			11,586			6,795		1.09		0.77
Noninterest bearing demand deposits		516,698			414,643
Other liabilities		20,595			10,035
Shareholders’ equity		282,644			212,268
Total liabilities and shareholders’ equity	$	2,243,343		$	1,818,615
Interest rate spread													3.36	%	3.26	%
Net interest margin													3.70	%	3.49	%
Net interest income (taxable equivalent basis)								56,972			44,524
Less: Taxable equivalent adjustment								293			442
Net interest income							$	56,679		$	44,082

American National Bankshares Inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited
(Dollars in thousands, except per share data)
	3rd Qtr				2nd Qtr				3rd Qtr				YTD				YTD
		2019				2019				2018				2019				2018
EFFICIENCY RATIO
Noninterest expense	$	13,792			$	26,316			$	10,904			$	51,037			$	32,608
Add/subtract: loss/(gain) on sale of OREO		(22	)			76				(36	)			55				(33	)
Subtract: core deposit intangible amortization		(448	)			(458	)			(56	)			(961	)			(210	)
Subtract: merger related expense		–				(10,871	)			–				(11,322	)			–
	$	13,322			$	15,063			$	10,812			$	38,809			$	32,365
Net interest income	$	20,622			$	20,989			$	14,751			$	56,679			$	44,082
Tax equivalent adjustment		77				105				133				293				442
Noninterest income		4,171				3,682				3,380				11,304				10,276
Add/subtract: (gain)/loss on securities		(105	)			(147	)			17				(575	)			(393	)
Add/subtract: (gain)/loss on fixed assets		2				87				(63	)			89				(66	)
	$	24,767			$	24,716			$	18,218			$	67,790			$	54,341
Efficiency ratio		53.79	%			60.94	%			59.35	%			57.25	%			59.56	%
TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income – loans	$	22,516			$	22,678			$	15,108			$	60,876			$	44,634
Interest income – investments and other		2,519				2,638				2,242				7,682				6,685
Interest expense – deposits		(3,655	)			(3,519	)			(2,048	)			(9,647	)			(5,746	)
Interest expense – customer repurchase
agreements		(150	)			(140	)			(17	)			(461	)			(19	)
Interest expense – other short-term borrowings		(12	)			(39	)			(12	)			(51	)			(22	)
Interest expense – long-term borrowings		(519	)			(524	)			(389	)			(1,427	)			(1,008	)
Total net interest income	$	20,699			$	21,094			$	14,884			$	56,972			$	44,524
Less non-GAAP measures:
Tax benefit on nontaxable interest – loans		(46	)			(49	)			(46	)			(139	)			(149	)
Tax benefit on nontaxable interest – securities		(31	)			(56	)			(87	)			(154	)			(293	)
GAAP measures	$	20,622			$	20,989			$	14,751			$	56,679			$	44,082
RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)		11.04	%			(1.60	)%			10.76	%			6.35	%			11.04	%
Impact of excluding average goodwill
and other intangibles		5.27				(0.02	)			2.94				2.88				3.10
Return on average tangible equity
(non-GAAP)		16.31	%			(1.62	)%			13.70	%			9.23	%			14.14	%
TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)		12.92	%			12.90	%			11.96	%			12.92	%			11.96	%
Impact of excluding goodwill and
other intangibles		3.42				3.49				2.24				3.42				2.24
Tangible equity to tangible assets ratio
(non-GAAP)		9.50	%			9.41	%			9.72	%			9.50	%			9.72	%
TANGIBLE BOOK VALUE
Book value per share (GAAP basis)	$	28.54			$	28.00			$	24.79			$	28.54			$	24.79
Impact of excluding goodwill and
other intangibles		8.35				8.37				5.14				8.35				5.14
Tangible book value per share
(non-GAAP)	$	20.19			$	19.63			$	19.65			$	20.19			$	19.65