AMERICAN NATIONAL BANKSHARES : REPORTS SECOND QUARTER EARNINGS OF $10.8 MILLION (Form 8-K)

AMERICAN NATIONALBANKSHARES

REPORTS SECOND QUARTER EARNINGS OF $10.8 MILLION

($.99 PER SHARE)

Danville, VA, July 22, 2021 - American National Bankshares Inc. (NASDAQ: AMNB) ('American National' or the 'Company') today reported second quarter 2021 earnings of $10.8 million, or $.99 per diluted common share. Those results compare to net income of $5.5 million, or $.50 per diluted common share, during the same quarter in the prior year, and net income of $11.3 million, or $1.03 per diluted common share, recognized for the first quarter of 2021.

President and Chief Executive Officer Jeffrey V. Haley commented, 'American National delivered strong earnings performance for the second quarter, in spite of the continuing challenges associated with the low interest rate environment. Credit quality remains excellent, and coupled with significant improvement in the reopening economy resulted in a $1.4 million negative provision for loan losses for the period. We had another strong quarter for our core noninterest revenue lines, with income from SBIC investments, mortgage and wealth management continuing to provide meaningful contributions. Deposit growth was again exceptional, and with significant PPP forgiveness during the period contributed to some additional excess liquidity on our balance sheet. Loan balances, excluding PPP, have begun to grow, although market pressures remain fierce. Key areas of focus are loan growth, talent management, process improvement initiatives and our digital product offerings.'

Second quarter 2021 highlights include:

●

Earnings produced a return on average tangible common equity (annualized) of 17.30% for the second quarter of 2021, compared to 18.45% in the previous quarter and 9.85% for the same quarter in the prior year (non-GAAP).

●

Average deposits grew 3.7% during the quarter and 15.1% over the same quarter of 2020; the cost of interest-bearing deposits decreased to 0.21% in the second quarter, compared to 0.30% in the previous quarter and 0.64% in the same quarter of the prior year.

●

Fully taxable equivalent ('FTE') net interest margin was 3.00% for the quarter, down from 3.20% in the first quarter of 2021 and from 3.22% in the same quarter of the prior year (non-GAAP).

●

Noninterest revenues decreased $780 thousand, or 13.2%, when compared to the previous quarter, and increased $1.3 million, or 34.1%, compared to the same quarter in the prior year.

●

Noninterest expense increased $572 thousand, or 4.1%, when compared to the previous quarter, and increased $2.2 million, or 17.7%, when compared to the same quarter in the prior year.

●

The Company recorded a negative provision for loan losses in the second quarter of 2021 of $1.4 million and no provision in the first quarter, compared to a provision expense of $4.8 million in the second quarter in the prior year. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were (0.01%) for the second quarter of 2021, 0.00% for the first quarter of 2021 and 0.06% for the corresponding quarter in the prior year.

●

Nonperforming assets as a percentage of total assets were 0.07% at June 30, 2021, down from 0.10% at March 31, 2021 and 0.16% at June 30, 2020.

SMALL BUSINESS ADMINISTRATION's PPP

The Company continued to participate in the U.S. Small Business Administration's Paycheck Protection Program ('PPP') under the Coronavirus Aid, Relief, and Economic Security ('CARES') Act in the second quarter of 2021. The Company has processed a total of $364.2 million in PPP loans with $80.0 million forgiven in the second quarter of 2021 compared to $105.1 million in the first quarter. Total outstanding net PPP loans were $104.1 million at June 30, 2021, down from $183.8 million at March 31, 2021. Total PPP fees recognized in net interest income during the quarter were $1.8 million compared to the prior quarter's $2.9 million as a result of the forgiveness. The interest income from the PPP portfolio outstanding generated $360,000 in revenues for the second quarter compared to $526,000 in the previous quarter.

NET INTEREST INCOME

Net interest income for the second quarter of 2021 was $21.8 million, a decrease of $652 thousand, or 2.9%, from the prior quarter and an increase of $1.5 million, or 7.5%, from the second quarter of 2020. The FTE net interest margin for the quarter was 3.00%, down from 3.20% in the prior quarter and down from 3.22% in the same period a year ago (non-GAAP). The second quarter of 2021 reflected $1.1 million less in net fees on PPP loans than the first quarter as $80.0 million of first round loans were forgiven in the second quarter compared to $105.1 million in the first quarter. The increase in net interest income from the same quarter in the prior year was primarily attributable to the PPP program and reduced deposit costs from a significantly lower rate environment.

The Company's FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the second quarter of 2021, net accretion related to acquisition accounting amounted to $875 thousand compared to $948 thousand in the prior quarter and $801 thousand for the same period in 2020. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):

For the remaining six months of 2021		$	840
For the years ending (estimated):
2022			1,208
2023			702
2024			419
2025			306
2026			187
Thereafter			500

ASSET QUALITY

Nonperforming assets ('NPAs') totaled $2.4 million as of June 30, 2021 down from $2.9 million at March 31, 2021, and down from $4.6 million at June 30, 2020. NPAs as a percentage of total assets were 0.07% at June 30, 2021, compared to 0.10% at March 31, 2021 and 0.16% at June 30, 2020.

The Company recorded a negative provision for the second quarter of 2021 of $1.4 million, as compared to no provision in the first quarter and a $4.8 million provision for the same period in the previous year. The second quarter negative provision as compared to the prior period and the same period of 2020 was driven by significant improvement in both national and local economic conditions, ongoing low charge-off and delinquency rates, and overall strong asset quality metrics. The allowance for loan losses was $20.1 million at June 30, 2021, $21.4 million at March 31, 2021 and $18.5 million at June 30, 2020. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding was a negative (0.01%) for the second quarter of 2021, compared to 0.00% in the previous quarter and 0.06% for the same period in the prior year. The allowance as a percentage of loans held for investment was 1.05% at June 30, 2021 compared to 1.08% at March 31, 2021 and 0.88% at June 30, 2020. Excluding PPP loans, the allowance as a percentage of loans was 1.11% at June 30, 2021, 1.19% at March 31, 2021 and 1.00% at June 30, 2020.

NONINTEREST INCOME

Noninterest income decreased $780 thousand, or 13.2%, to $5.1 million for the quarter ended June 30, 2021 from $5.9 million in the prior quarter and increased $1.3 million, or 34.1%, from the same period in the prior year. The largest fluctuations for the second quarter over the previous quarter were the decrease in income from insurance investments which was down $647 thousand, or 82.1%, and increased losses on premises and equipment, net, up $383 thousand or over 100%. The Company recorded a loss during the second quarter of 2021 from the sale of a building acquired in the HomeTown Bankshares acquisition. These declines were partially offset by growth in wealth management revenues, service charges on deposits and income from SBIC investments. Comparing the second quarter of 2021 to the second quarter of 2020, increases were noted in all categories except for securities gains, net, that recorded no activity in either period and had decreased income from insurance investments of $82 thousand, or 36.8%.

NONINTEREST EXPENSE

Noninterest expense for the second quarter of 2021 amounted to $14.6 million, up $572 thousand, or 4.1%, when compared to the $14.1 million for the previous quarter and up $2.2 million, or 17.7%, from $12.4 million during the same period in the previous year. Salary and benefit expense was up $660 thousand or 8.8% over the previous quarter, and up $2.0 million or 32.0% over the second quarter of 2020. These increases can largely be attributed to salary and benefit deferrals associated with loan originations under the PPP program. The second quarter of 2021 reflected $100 thousand in PPP related salaries and benefits deferrals, compared to $604 thousand in the first quarter and $1.6 million in the second quarter of 2020. Other operating expense components were in line with the previous quarter and represented normal growth levels over the same period in 2020.

INCOME TAXES

The effective tax rate for the three months ended June 30, 2021 was 21.0% and 20.9% for the three months ended March 31, 2021. This compares to 20.6% for the same period in the prior year.

BALANCE SHEET

Total assets at June 30, 2021 were $3.2 billion, an increase of $128.1 million or 4.2% growth from the previous quarter and increased $337.0 million or 11.8% from the second quarter of 2020. The asset mix of the balance sheet at June 30, 2021 remained primarily consistent with the first quarter with a decrease in loans as a result of the forgiveness of PPP loans, the proceeds from which were reinvested in the securities portfolio. The growth over the same period a year ago is primarily due to deposit growth in core deposits during the period.

At June 30, 2021, loans held for investment (net of deferred fees and costs) were $1.9 billion, a decrease of $64.3 million, or 3.2%, from March 31, 2021. The decline was primarily a result of the changes discussed previously from the PPP. Excluding PPP loans, loans held for investment increased $15.4 million, or 0.86%, from the first quarter, and decreased $27.5 million or 1.5% compared to June 30, 2020.

Investment securities amounted to $555.4 million at June 30, 2021, with growth of $73.4 million, or 15.2%, compared to March 31, 2021, and growth of $233.0 million, or 72.2%, compared to June 30, 2020.

Deposits amounted to $2.8 billion at June 30, 2021 and $2.6 billion at March 31, 2021, an increase of $137.2 million, or 5.2%, over the previous quarter and growth of $338.0 million, or 13.9%, compared to the second quarter of 2020. The growth over the previous quarter and the prior period of 2020 is primarily a result of continued federal stimulus efforts, and continued higher than average cash balances being maintained by customers as elevated savings rates and liquidity patterns continue.

The Company continues to be well-capitalized as defined by regulators, with tangible common equity to tangible assets of 8.27% at June 30, 2021 compared to 8.42% at March 31, 2021 and compared to 8.49% at June 30, 2020. The Company's common equity Tier 1, Tier 1, total, and Tier 1 leverage capital ratios were 12.79%, 14.19%, 15.21% and 9.42%, respectively at June 30, 2021.

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $3.2 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 $1.1 billion of trust, investment and brokerage assets in its Wealth Division. Additional information about American National and American National Bank is available on American National's website at www.amnb.com.

NON-GAAP FINANCIAL MEASURES

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

FORWARD-LOOKING STATEMENTS

Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National's ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) the impacts of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus; (2) expected revenue synergies and cost savings from acquisitions and depositions; (3) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (4) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American National's market areas; (5) the adequacy of the level of the allowance for loan losses, the amount of loan loss provisions required in future periods, and the failure of assumptions underlying the allowance for loan losses; (6) cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (7) accounting principles, policies, and guidelines; and (8) 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,
ASSETS		2021			2020
Cash and due from banks		$	38,237			$	44,607
Interest-bearing deposits in other banks			502,300				206,998
Securities available for sale, at fair value			555,444				322,523
Restricted stock, at cost			8,035				8,694
Loans held for sale			13,807				2,845
Loans, net of deferred fees and costs			1,914,371				2,101,711
Less allowance for loan losses			(20,097	)			(18,507	)
Net Loans			1,894,274				2,083,204
Premises and equipment, net			37,478				39,571
Other real estate owned, net			213				984
Goodwill			85,048				85,048
Core deposit intangibles, net			5,339				6,884
Bank owned life insurance			28,791				28,122
Other assets			32,618				35,059
Total assets		$	3,201,584			$	2,864,539
Liabilities
Demand deposits -- noninterest-bearing		$	959,574			$	824,679
Demand deposits -- interest-bearing			482,586				406,322
Money market deposits			700,670				562,061
Savings deposits			241,746				200,518
Time deposits			385,174				438,196
Total deposits			2,769,750				2,431,776
Customer repurchase agreements			35,440				46,296
Long-term borrowings			28,181				35,588
Other liabilities			20,580				23,446
Total liabilities			2,853,951				2,537,106
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding			-				-
Common stock, $1 par, 20,000,000 shares authorized, 10,875,756 shares outstanding at June 30, 2021 and 10,964,320 shares outstanding at June 30, 2020			10,811				10,911
Capital in excess of par value			150,947				154,222
Retained earnings			185,843				159,586
Accumulated other comprehensive income, net			32				2,714
Total shareholders' equity			347,633				327,433
Total liabilities and shareholders' equity		$	3,201,584			$	2,864,539

American National Bankshares Inc.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

Unaudited

		For the Three Months Ended			For the Six Months Ended
		6/30/21			3/31/21			6/30/20			6/30/21			6/30/20
Interest and Dividend Income:
Interest and fees on loans		$	21,087			$	22,273			$	21,379			$	43,360			$	42,700
Interest and dividends on securities:
Taxable			1,769				1,632				1,646				3,401				3,683
Tax-exempt			96				103				111				199				223
Dividends			117				119				128				236				260
Other interest income			98				77				33				175				297
Total interest and dividend income			23,167				24,204				23,297				47,371				47,163
Interest Expense:
Interest on deposits			922				1,287				2,478				2,209				5,790
Interest on short-term borrowings			5				11				66				16				195
Interest on long-term borrowings			469				483				493				952				999
Total interest expense			1,396				1,781				3,037				3,177				6,984
Net Interest Income			21,771				22,423				20,260				44,194				40,179
(Recovery of) Provision for loan losses			(1,352	)			-				4,759				(1,352	)			5,712
Net Interest Income After (Recovery of) Provision for Loan Losses			23,123				22,423				15,501				45,546				34,467
Noninterest Income:
Trust fees			1,240				1,206				953				2,446				1,965
Service charges on deposit accounts			630				622				541				1,252				1,262
Other fees and commissions			1,358				1,139				951				2,497				1,892
Mortgage banking income			1,142				1,318				893				2,460				1,442
Securities gains, net			-				-				-				-				814
Brokerage fees			250				218				172				468				383
Income (loss) from Small Business Investment Companies			591				428				(119	)			1,019				(64	)
Income from insurance investments			141				788				223				929				271
Losses on premises and equipment, net			(432	)			(49	)			-				(481	)			(82	)
Other			222				252				221				474				447
Total noninterest income			5,142				5,922				3,835				11,064				8,330
Noninterest Expense:
Salaries and employee benefits			8,178				7,518				6,191				15,696				13,551
Occupancy and equipment			1,502				1,533				1,327				3,035				2,693
FDIC assessment			226				224				176				450				271
Bank franchise tax			443				438				425				881				851
Core deposit intangible amortization			371				381				417				752				844
Data processing			698				778				785				1,476				1,548
Software			338				329				403				667				759
Other real estate owned, net			10				117				15				127				6
Other			2,871				2,747				2,693				5,618				5,243
Total noninterest expense			14,637				14,065				12,432				28,702				25,766
Income Before Income Taxes			13,628				14,280				6,904				27,908				17,031
Income Taxes			2,862				2,991				1,422				5,853				3,007
Net Income		$	10,766			$	11,289			$	5,482			$	22,055			$	14,024
Net Income Per Common Share:
Basic		$	0.99			$	1.03			$	0.50			$	2.02			$	1.28
Diluted		$	0.99			$	1.03			$	0.50			$	2.01			$	1.28
Weighted Average Common Shares Outstanding:
Basic			10,919,333				10,971,466				10,959,545				10,945,256				10,992,365
Diluted			10,923,156				10,976,177				10,963,248				10,949,523				10,997,279

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

		2nd Qtr			1st Qtr			2nd Qtr			At or for the Six Months Ended June 30,
		2021			2021			2020			2021			2020
EARNINGS
Interest income		$	23,167			$	24,204			$	23,297			$	47,371			$	47,163
Interest expense			1,396				1,781				3,037				3,177				6,984
Net interest income			21,771				22,423				20,260				44,194				40,179
(Recovery of) Provision for loan losses			(1,352	)			-				4,759				(1,352	)			5,712
Noninterest income			5,142				5,922				3,835				11,064				8,330
Noninterest expense			14,637				14,065				12,432				28,702				25,766
Income taxes			2,862				2,991				1,422				5,853				3,007
Net income			10,766				11,289				5,482				22,055				14,024
PER COMMON SHARE
Net income per share - basic		$	0.99			$	1.03			$	0.50			$	2.02			$	1.28
Net income per share - diluted			0.99				1.03				0.50				2.01				1.28
Cash dividends paid			0.27				0.27				0.27				0.54				0.54
Book value per share			31.96				31.19				29.86				31.96				29.86
Book value per share - tangible (a)			23.65				22.91				21.48				23.65				21.48
Closing market price			31.09				33.07				25.04				31.09				25.04
FINANCIAL RATIOS
Return on average assets			1.38	%			1.49	%			0.80	%			1.44	%			1.07	%
Return on average common equity			12.44				13.19				6.68				12.81				8.61
Return on average tangible common equity (a)			17.30				18.45				9.85				17.87				12.56
Average common equity to average assets			11.10				11.31				11.91				11.20				12.42
Tangible common equity to tangible assets (a)			8.27				8.42				8.49				8.27				8.49
Net interest margin, taxable equivalent			3.00				3.20				3.22				3.10				3.36
Efficiency ratio (a)			52.06				47.70				49.74				49.84				52.08
Effective tax rate			21.00				20.95				20.60				20.97				17.66
PERIOD-END BALANCES
Securities		$	563,479			$	490,167			$	331,217			$	563,479			$	331,217
Loans held for sale			13,807				17,929				2,845				13,807				2,845
Loans, net			1,914,371				1,978,640				2,101,711				1,914,371				2,101,711
Goodwill and other intangibles			90,387				90,758				91,932				90,387				91,932
Assets			3,201,584				3,073,432				2,864,539				3,201,584				2,864,539
Assets - tangible (a)			3,111,197				2,982,674				2,772,607				3,111,197				2,772,607
Deposits			2,769,750				2,632,534				2,431,776				2,769,750				2,431,776
Customer repurchase agreements			35,440				39,205				46,296				35,440				46,296
Long-term borrowings			28,181				35,656				35,588				28,181				35,588
Shareholders' equity			347,633				341,793				327,433				347,633				327,433
Shareholders' equity - tangible (a)			257,246				251,035				235,501				257,246				235,501

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

		2nd Qtr			1st Qtr			2nd Qtr			At or for the Six Months Ended June 30,
		2021			2021			2020			2021			2020
AVERAGE BALANCES
Securities (b)		$	512,981			$	458,760			$	315,659			$	486,020			$	342,695
Loans held for sale			15,883				11,237				4,554				13,573				3,855
Loans, net			1,947,797				2,009,166				2,048,277				1,978,312				1,938,700
Interest-earning assets			2,909,216				2,814,291				2,525,998				2,862,016				2,400,459
Goodwill and other intangibles			90,577				90,976				92,161				90,775				91,950
Assets			3,118,687				3,026,952				2,755,470				3,073,073				2,623,531
Assets - tangible (a)			3,028,110				2,935,976				2,663,309				2,982,298				2,531,581
Interest-bearing deposits			1,761,203				1,740,418				1,564,430				1,750,867				1,529,997
Deposits			2,677,101				2,582,539				2,325,331				2,630,081				2,197,629
Customer repurchase agreements			37,591				43,746				43,716				40,651				42,617
Other short-term borrowings			-				-				-				-				2
Long-term borrowings			35,584				35,640				35,575				35,612				35,565
Shareholders' equity			346,210				342,231				328,051				344,232				325,812
Shareholders' equity - tangible (a)			255,633				251,255				235,890				253,457				233,862
CAPITAL
Weighted average shares outstanding - basic			10,919,333				10,971,466				10,959,545				10,945,256				10,992,365
Weighted average shares outstanding - diluted			10,923,156				10,976,177				10,963,248				10,949,523				10,997,279
COMMON STOCK REPURCHASE PROGRAM
Total shares of common stock repurchased			93,212				54,023				-				147,235				140,526
Average price paid per share of common stock		$	34.73			$	29.51			$	-			$	32.81			$	35.44
ALLOWANCE FOR LOAN LOSSES
Beginning balance		$	21,416			$	21,403			$	14,065			$	21,403			$	13,152
(Recovery of) Provision for loan losses			(1,352	)			-				4,759				(1,352	)			5,712
Charge-offs			(29	)			(22	)			(444	)			(51	)			(549	)
Recoveries			62				35				127				97				192
Ending balance		$	20,097			$	21,416			$	18,507			$	20,097			$	18,507
LOANS
Construction and land development		$	133,592			$	159,801			$	141,392			$	133,592			$	141,392
Commercial real estate - owner occupied			384,095				364,549				388,947				384,095				388,947
Commercial real estate - non-owner occupied			650,862				628,742				589,821				650,862				589,821
Residential real estate			264,680				266,595				291,242				264,680				291,242
Home equity			100,835				100,643				114,397				100,835				114,397
Commercial and industrial			372,759				447,109				566,859				372,759				566,859
Consumer			7,548				11,201				9,053				7,548				9,053
Total		$	1,914,371			$	1,978,640			$	2,101,711			$	1,914,371			$	2,101,711

American National Bankshares Inc.

Financial Highlights

Unaudited

(Dollars in thousands, except per share data)

		2nd Qtr			1st Qtr			2nd Qtr			At or for the Six Months Ended June 30,
		2021			2021			2020			2021			2020
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing			125				162				375				125				375
Nonaccrual			2,057				2,323				2,855				2,057				2,855
Other real estate owned and repossessions			213				443				1,346				213				1,346
Nonperforming assets		$	2,395			$	2,928			$	4,576			$	2,395			$	4,576
ASSET QUALITY RATIOS
Allowance for loan losses to total loans			1.05	%			1.08	%			0.88	%			1.05	%			0.88	%
Allowance for loan losses to nonperforming loans			921.04				861.81				572.97				921.04				572.97
Nonperforming assets to total assets			0.07				0.10				0.16				0.07				0.16
Nonperforming loans to total loans			0.11				0.13				0.15				0.11				0.15
Annualized net charge-offs (recoveries) to average loans			(0.01	)			0.00				0.06				0.00				0.04
OTHER DATA
Fiduciary assets at period-end (c) (d)		$	697,528			$	666,653			$	536,014			$	697,528			$	536,014
Retail brokerage assets at period-end (c) (d)		$	392,881			$	382,419			$	301,096			$	392,881			$	301,096
Number full-time equivalent employees (e)			340				340				345				340				345
Number of full service offices			26				26				26				26				26
Number of loan production offices			1				1				1				1				1
Number of ATM's			36				36				38				36				38

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 June 30, 2021 and 2020

(Dollars in thousands)

Unaudited

										Interest
		Average Balance			Income/Expense (a)			Yield/Rate
		2021			2020			2021			2020			2021			2020
Loans:
Commercial		$	391,871			$	513,765			$	4,458			$	4,377				4.56	%			3.42	%
Real estate			1,564,747				1,529,723				16,551				16,901				4.23				4.42
Consumer			7,062				9,343				112				149				6.36				6.40
Total loans (b)			1,963,680				2,052,831				21,121				21,427				4.30				4.18
Securities:
U.S. Treasury			41,840				2,250				114				9				1.09				1.60
Federal agencies & GSEs			102,730				47,197				298				284				1.16				2.41
Mortgage-backed & CMOs			281,820				203,268				961				1,059				1.36				2.08
State and municipal			62,204				42,742				323				288				2.08				2.70
Other			24,387				20,202				311				272				5.10				5.39
Total securities			512,981				315,659				2,007				1,912				1.56				2.42
Deposits in other banks			432,555				157,508				98				33				0.09				0.08
Total interest-earning assets			2,909,216				2,525,998				23,226				23,372				3.20				3.70
Non-earning assets			209,471				229,472
Total assets		$	3,118,687			$	2,755,470
Deposits:
Demand		$	468,684			$	371,451				37				115				0.03				0.12
Money market			701,957				554,318				215				591				0.12				0.43
Savings			239,887				192,354				6				24				0.01				0.05
Time			350,675				446,307				664				1,748				0.76				1.57
Total deposits			1,761,203				1,564,430				922				2,478				0.21				0.64
Customer repurchase agreements			37,591				43,716				5				66				0.05				0.61
Other short-term borrowings			-				-				-				-				-				0.00
Long-term borrowings			35,584				35,575				469				493				5.27				5.54
Total interest-bearing liabilities			1,834,378				1,643,721				1,396				3,037				0.30				0.74
Noninterest bearing demand deposits			915,898				760,901
Other liabilities			22,201				22,797
Shareholders' equity			346,210				328,051
Total liabilities and shareholders' equity		$	3,118,687			$	2,755,470
Interest rate spread																			2.90	%			2.96	%
Net interest margin																			3.00	%			3.22	%
Net interest income (taxable equivalent basis)											21,830				20,335
Less: Taxable equivalent adjustment (c)											59				75
Net interest income										$	21,771			$	20,260

Notes:
(a) -	Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/amortization of deferred loan fees and costs.
(b) -	Nonaccrual loans are included in the average balances.
(c) -	A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

Net Interest Income Analysis

For the Six Months Ended June 30, 2021 and 2020

(Dollars in thousands)

Unaudited

										Interest
		Average Balance			Income/Expense (a)			Yield/Rate
		2021			2020			2021			2020			2021			2020
Loans:
Commercial		$	428,073			$	423,343			$	10,249			$	7,919				4.83	%			3.77	%
Real estate			1,556,465				1,509,520				32,941				34,564				4.23				4.58
Consumer			7,347				9,692				238				307				6.53				6.39
Total loans			1,991,885				1,942,555				43,428				42,790				4.37				4.41
Securities:
U.S. Treasury			28,645				5,650				126				44				0.88				1.56
Federal agencies & GSEs			104,026				75,254				602				861				1.16				2.29
Mortgage-backed & CMOs			269,977				200,521				1,934				2,202				1.43				2.20
State and municipal			60,359				41,784				637				576				2.11				2.76
Other			23,013				19,486				588				537				5.11				5.51
Total securities			486,020				342,695				3,887				4,220				1.60				2.46
Deposits in other banks			384,111				115,209				175				297				0.09				0.52
Total interest-earning assets			2,862,016				2,400,459				47,490				47,307				3.32				3.95
Non-earning assets			211,057				223,072
Total assets		$	3,073,073			$	2,623,531
Deposits:
Demand		$	459,867			$	351,404				77				238				0.03				0.14
Money market			693,002				534,828				491				1,779				0.14				0.67
Savings			233,680				185,625				13				77				0.01				0.08
Time			364,318				458,140				1,628				3,696				0.90				1.63
Total deposits			1,750,867				1,529,997				2,209				5,790				0.25				0.76
Customer repurchase agreements			40,651				42,617				16				195				0.08				0.92
Other short-term borrowings			-				2				-				-				0.00				0.50
Long-term borrowings			35,612				35,565				952				999				5.75				5.62
Total interest-bearing liabilities			1,827,130				1,608,181				3,177				6,984				0.35				0.87
Noninterest bearing demand deposits			879,214				667,632
Other liabilities			22,497				21,906
Shareholders' equity			344,232				325,812
Total liabilities and shareholders' equity		$	3,073,073			$	2,623,531
Interest rate spread																			2.97	%			3.08	%
Net interest margin																			3.10	%			3.36	%
Net interest income (taxable equivalent basis)											44,313				40,323
Less: Taxable equivalent adjustment											119				144
Net interest income										$	44,194			$	40,179

Notes:
(a) -	Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/amortization of deferred loan fees and costs.
(b) -	Nonaccrual loans are included in the average balances.
(c) -	A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

American National Bankshares Inc.

Reconciliation of Non-GAAP Financial Measures

Unaudited

(Dollars in thousands, except per share data)

		2nd Qtr			1st Qtr			2nd Qtr			At or for the Six Months Ended June 30,
		2021			2021			2020			2021			2020
EFFICIENCY RATIO
Noninterest expense		$	14,637			$	14,065			$	12,432			$	28,702			$	25,766
Add/subtract: gain/loss on sale of OREO			-				(111	)			8				(111	)			35
Subtract: core deposit intangible amortization			(371	)			(381	)			(417	)			(752	)			(844	)
		$	14,266			$	13,573			$	12,023			$	27,839			$	24,957
Net interest income		$	21,771			$	22,423			$	20,260			$	44,194			$	40,179
Tax equivalent adjustment			59				60				75				119				144
Noninterest income			5,142				5,922				3,835				11,064				8,330
Subtract: gain on securities			-				-				-				-				(814	)
Add: loss on fixed assets			432				49				-				481				82
		$	27,404			$	28,454			$	24,170			$	55,858			$	47,921
Efficiency ratio			52.06	%			47.70	%			49.74	%			49.84	%			52.08	%
TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income - loans		$	21,121			$	22,307			$	21,427			$	43,428			$	42,790
Interest income - investments and other			2,105				1,957				1,945				4,062				4,517
Interest expense - deposits			(922	)			(1,287	)			(2,478	)			(2,209	)			(5,790	)
Interest expense - customer repurchase agreements			(5	)			(11	)			(66	)			(16	)			(195	)
Interest expense - long-term borrowings			(469	)			(483	)			(493	)			(952	)			(999	)
Total net interest income		$	21,830			$	22,483			$	20,335			$	44,313			$	40,323
Less non-GAAP measures:
Tax benefit on nontaxable interest - loans			(34	)			(34	)			(48	)			(68	)			(90	)
Tax benefit on nontaxable interest - securities			(25	)			(26	)			(27	)			(51	)			(54	)
GAAP measures		$	21,771			$	22,423			$	20,260			$	44,194			$	40,179
RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)			12.44	%			13.19	%			6.68	%			12.81	%			8.61	%
Impact of excluding average goodwill and other intangibles			4.86				5.26				3.17				5.06				3.95
Return on average tangible equity (non-GAAP)			17.30	%			18.45	%			9.85	%			17.87	%			12.56	%
TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)			10.86	%			11.12	%			11.43	%			10.86	%			11.43	%
Impact of excluding goodwill and other intangibles			(2.59	)			(2.70	)			(2.94	)			(2.59	)			(2.94	)
Tangible equity to tangible assets ratio (non-GAAP)			8.27	%			8.42	%			8.49	%			8.27	%			8.49	%
TANGIBLE BOOK VALUE
Book value per share (GAAP basis)		$	31.96			$	31.19			$	29.86			$	31.96			$	29.86
Impact of excluding goodwill and other intangibles			(8.31	)			(8.28	)			(8.38	)			(8.31	)			(8.38	)
Tangible book value per share (non-GAAP)		$	23.65			$	22.91			$	21.48			$	23.65			$	21.48
ADJUSTED LOAN LOSS ALLOWANCE
Allowance for loan losses		$	20,097			$	21,416			$	18,507			$	20,097			$	18,507
Credit discount on purchased loans			6,055				6,528				9,868				6,055				9,868
Adjusted loan loss allowance		$	26,152			$	27,944			$	28,375			$	26,152			$	28,375
Total loans, net		$	1,914,371			$	1,978,640			$	2,101,711			$	1,914,371			$	2,101,711
Subtract: PPP loans, net			(104,143	)			(183,783	)			(264,022	)			(104,143	)			(264,022	)
Total loans less PPP loans, net		$	1,810,228			$	1,794,857			$	1,837,689			$	1,810,228			$	1,837,689
Adjusted loan loss allowance to total loans less PPP loans, net			1.44	%			1.56	%			1.54	%			1.44	%			1.54	%