American National Bankshares Inc. Reports Third Quarter 2019 Earnings


  • 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

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.

Contact:William W. Traynham, Chief Financial Officer
 434-773-2242 
 traynhamw@amnb.com


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