8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 18, 2019
AMERICAN NATIONAL BANKSHARES INC.
(Exact name of registrant as specified in its charter)
Virginia	0-12820	54-1284688
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
628 Main Street, Danville, VA		24541
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: 434-792-5111
Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	AMNB	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02 Results of Operations and Financial Condition

On July 18, 2019, American National Bankshares Inc. ("the Company") reports earnings for second quarter 2019.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits:

99.1 July 18, 2019 News Release

99.2 Quarterly Balance Sheets, Statements of Income, Net Interest Income Analysis and Selected Financial Data

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 18, 2019                         /s/ William W. Traynham

Executive Vice President and Chief Financial Officer

EX-99.1

Date:	July 18, 2019
Contact:	William W. Traynham, Chief Financial Officer
	434-773-2242
	traynhamw@amnb.com
Traded:	NASDAQ Global Select Market	Symbol:	AMNB

AMERICAN NATIONAL BANKSHARES INC. REPORTS SECOND QUARTER 2019 EARNINGS AND THIRD QUARTER DIVIDEND INCREASE

Merger with HomeTown Bankshares Corp. consummated April 1, 2019

• Merger related expense (pretax) for Q2 2019 of $10.9 million

• Net loss of $1.2 million and diluted EPS of ($0.11) for Q2 2019

• Net interest margin of 3.82% for Q2 2019

• Increased cash dividend declared for Q3 and represents an 8% increase

Danville, VA -- American National Bankshares Inc. (“American National”) (NASDAQ: AMNB), parent company of American National Bank and Trust Company, today announced a net loss of $1,230,000 for the second quarter 2019 compared to net income of $5,980,000 for the second quarter of 2018, a $7,210,000 or 120.6% decrease. Income for the second quarter of 2019 was impacted adversely by $10,871,000 in one-time merger expense related to the HomeTown acquisition.

Basic and diluted net income per common share was a loss of $0.11 for the 2019 quarter compared to net income per common share of $0.69 for the 2018 quarter. Net loss for the second quarter of 2019 produced annualized returns on average assets of (0.20%), on average equity of (1.60%), and on average tangible equity of (1.62%).

Net income for the first six months of 2019 was $4,773,000 compared to $11,792,000 for the comparable period of 2018, a $7,019,000 or 59.5% decrease. Basic and diluted net income per common share was $0.48 for the 2019 period compared to $1.36 for the 2018 period.

Income for the six-month period of 2019 was impacted adversely by $11,322,000 in one-time merger expense related to the HomeTown acquisition.

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HomeTown Bankshares Corporation Merger

On April 1, 2019, American National completed its merger with Roanoke, Virginia based HomeTown Bankshares Corporation (“HomeTown”). The merger, valued at approximately $83.3 million, significantly expanded American National’s operations in Roanoke and added a new presence in the New River Valley.

Dividends

American National also announced that its Board of Directors has declared a quarterly cash dividend of $0.27 per common share, payable September 20, 2019, to shareholders of record September 6, 2019. This represents an 8% increase in the cash dividend from the current $0.25 per common share per quarter.

American National considers the payment of appropriate dividends to be a vital part of its capital planning and management program. The Company adheres to a dividend policy based on a review of earnings, growth, capital and such other factors that the Board of Directors considers relevant to the dividend decision process.

Financial Performance and Overview

Jeffrey V. Haley, President and Chief Executive Officer, said, “The merger with HomeTown Bankshares brought us some of the best community bankers in the Roanoke market, $444 million in loans, and $484 million in deposits. American National is now the largest community bank in the Roanoke market.

“Income for the 2019 quarter was a loss of $1.2 million. On a pretax basis the loss for the 2019 quarter was $1.6 million. This was directly related to the $10.9 million in nonrecurring merger related expense.

“Net interest income for the 2019 quarter compared to the 2018 quarter significantly increased, it was up $6.2 million or 41.9%.

“This improvement in net interest income was primarily related to an increase in the average balance of loans for the 2019 quarter compared to the 2018 quarter. Loan average balances for the 2019 quarter were up $494.7 million or 37.4% over the 2018 quarter. Loan yields for the 2019 quarter were 51 basis points higher than the 2018

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quarter. Of the increase in balances, $444.3 million represents loans acquired in the HomeTown merger and $50.4 million (3.8%) represents growth in the other parts of our franchise.

“End of period loan balance for June 30, 2019, compared to December 31, 2018, increased $478.8 million. Of this increase, $444.3 million was related to the HomeTown merger and $34.5 million (2.5%) represents growth throughout the rest of our franchise.

“Average interest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased substantially, up $317.9 million or 27.7% with a 30 basis point higher cost. This reflects increased competition for deposits, especially evident in our new HomeTown market. Of the increase, $364.1 million represents deposits acquired in the HomeTown merger. Legacy deposits were down slightly for the same period.

“Average noninterest bearing deposits for the 2019 quarter compared to the 2018 quarter also increased substantially; they were up $140.3 million or 33.4%. Of this increase, $119.5 million represents deposits acquired in the HomeTown merger; the remaining $20.8 million (5.0%) represents growth in other parts of our franchise.

“The market for loans and deposits continues to be very competitive. Market competition drives yields on loans down and rates on deposits up. This puts continuing pressure on our net interest margin. Our challenge is to maintain quality growth in assets and deposits and at the same time protect our net interest margin. Our margin for the 2019 quarter was 3.82%, a 32 basis point increase from the 2018 quarter.”

Haley concluded, “We are optimistic about the future of community banking, but realistic enough to know that it is not a given, it must be earned. For American National that earning is what we strive for every day – through continued asset quality, continued relevance to existing and new customers with modern banking products and services, continued organic and acquisition growth, and continued superior returns to our shareholders.”

Capital

American National’s capital ratios remain strong and exceed all regulatory requirements.

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For the quarter ended June 30, 2019, average shareholders’ equity was 12.62% of average assets, compared to 11.62% for the quarter ended June 30, 2018.

Book value per common share was $28.00 at June 30, 2019, compared to $24.50 at June 30, 2018.

Tangible book value per common share was $19.63 at June 30, 2019, compared to $19.34 at June 30, 2018.

Credit Quality Measurements

Nonperforming assets represented 0.14% of total assets at June 30, 2019, compared to 0.18% at June 30, 2018.

Annualized net charge offs to average loans were zero basis points (0.00%) for the second quarter of 2019 compared to one basis point (0.01%) for the same quarter in 2018.

Other real estate owned was $1,433,000 compared to $1,124,000 at June 30, 2018, an increase of $309,000 or 27.5%.

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 June 30,	2019		2018
Net Interest Income	$	1,118	$	377
Income Before Income Taxes	$	660	$	300
For the six months ended June 30,	2019		2018
Net Interest Income	$	1,373	$	804
Income Before Income Taxes	$	860	$	650

In the table above, the impact for the quarter ended June 30, 2019 related to the HomeTown merger on net interest income was $884,000 and on income before taxes was $481,000.

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The second quarter of 2019 includes $225,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $231,000 for the comparable quarter of 2018.

For the six month period ended June 30, 2019, cash basis accretion income was $396,000, compared to $486,000 for the same period in 2018.

Net Interest Income

Net interest income before the provision for loan losses increased to $20,989,000 in the second quarter of 2019 from $14,788,000 in the second quarter of 2018, an increase of $6,201,000 or 41.9%.

For the 2019 quarter, the net interest margin was 3.82% compared to 3.50% for the same quarter in 2018, an increase of 32 basis points.

The major drivers affecting margin between the 2019 quarter and the 2018 quarter were:

• Positively – a $504.1 million increase (29.5%) in average earning assets, mostly loans, at a 56 basis point higher yield.

• Positively – a $140.3 million increase (33.4%) in average noninterest bearing deposits.

• Negatively – a $317.9 million increase (27.7%) in the average balance of interest bearing deposits, at a 30 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 second quarter of 2019 was a recovery of $10,000 compared to a recovery of $30,000 for the second quarter of 2018, a decrease of $20,000. The provision for both quarters related to adjustments on the specific reserves for the impaired loan loss allowance.

The allowance for loan losses as a percentage of total loans was 0.70% at June 30, 2019 compared to 1.01% at June 30, 2018. The primary driver for the decrease in this ratio was the HomeTown merger which increased loan balances $444.3 million. In

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conformity with generally accepted accounting standards, these loans were accounted for at fair value at the merger date and were recorded at the total outstanding principal balance of the loans net of a $10.7 million credit mark (included in the gross loan balances as a separate allowance) and a $4.0 million liquidity mark.

However, the need for additional loan loss provision for the remainder of the loan portfolio was mitigated by continued high asset quality, low charge offs, and improvement in various qualitative factors, notably economic, political and regulatory, used in the determination of the allowance.

Noninterest Income

Noninterest income totaled $3,682,000 in the second quarter of 2019, compared with $3,563,000 in the second quarter of 2018, an increase of $119,000 or 3.3%.

Service charge income increased $132,000 or 22.3%, mainly related to the HomeTown merger.

Other fees and commissions increased $336,000 or 49.5%. This revenue category was up in virtually all of our markets, but the largest driver was check card income in our new Roanoke and New River region.

Mortgage banking income increased $95,000 or 19.3% based on increased volume related to some dips in mortgage interest rates.

Securities gains decreased $142,000 or 49.1%, related to the sale of most of our equity investments in 2019, thus reducing the accounting volatility in this revenue category.

Noninterest Expense

Noninterest expense totaled $26,316,000 in the second quarter of 2019, compared to $11,002,000 in the second quarter of 2018, an increase of $15,314,000 or 139.2%.

The major factor causing the increase in noninterest expense was merger related expense. These are related to the HomeTown merger, are nonrecurring in nature, and totaled $10,871,000 during the second quarter of 2019. The largest component of merger

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expenses was $8,900,000 in costs related to data processing contract termination and conversion.

The second major factor was salaries and benefits. Salaries increased $1,953,000 or 38.3% and benefits increased $314,000 or 28.3%. Most of this increase was related to a 48 full-time equivalent increase in staff compared to the prior year quarter.

    The effective income tax rate for the 2019 quarter was a benefit of 24.8%, compared to provision of 19.0% for the same quarter of 2018. The 2019 quarter was impacted by $10,871,000 in merger related expense, which generated a $1,635,000 pretax loss.

About American National

American National is a multi-state bank holding company with total assets of approximately $2.4 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 $862 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

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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 and business operations 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.

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EX-99.2

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
	June 30
ASSETS	2019			2018
Cash and due from banks	$	34,460		$	24,042
Interest-bearing deposits in other banks	20,454			9,300
Equity securities, at fair value	125			2,177
Securities available for sale, at fair value	334,326			341,247
Restricted stock, at cost	7,796			5,463
Loans held for sale	3,165			2,296
Loans	1,836,241			1,339,379
Less allowance for loan losses	(12,786		)	(13,508		)
Net Loans	1,823,455			1,325,871
Premises and equipment, net	39,038			25,879
Other real estate owned, net	1,433			1,124
Goodwill	84,633			43,872
Core deposit intangibles, net	8,613			1,037
Bank owned life insurance	27,451			18,674
Accrued interest receivable and other assets	33,133			23,549
Total assets	$	2,418,082		$	1,824,531
Liabilities
Demand deposits -- noninterest-bearing	$	554,400		$	420,795
Demand deposits -- interest-bearing	326,105			251,056
Money market deposits	451,343			383,963
Savings deposits	178,723			132,839
Time deposits	488,526			372,093
Total deposits	1,999,097			1,560,746
Short-term borrowings:
Customer repurchase agreements	37,222			6,776
Other short-term borrowings	13,528			5,500
Subordinated debt	7,526			—
Junior subordinated debt	27,978			27,876
Accrued interest payable and other liabilities	20,814			10,285
Total liabilities	2,106,165			1,611,183
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding	—			—
Common stock, $1 par, 20,000,000 shares authorized,
11,141,355 shares outstanding at June 30, 2019 and
8,708,127 shares outstanding at June 30, 2018	11,089			8,654
Capital in excess of par value	160,572			77,496
Retained earnings	141,339			135,108
Accumulated other comprehensive loss, net	(1,083		)	(7,910		)
Total shareholders' equity	311,917			213,348
Total liabilities and shareholders' equity	$	2,418,082		$	1,824,531

American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
	Three Months Ended						Six Months Ended
	June 30						June 30
	2019			2018			2019			2018
Interest and Dividend Income:
Interest and fees on loans	$	22,629		$	14,766		$	38,267		$	29,423
Interest and dividends on securities:
Taxable	1,980			1,540			3,801			2,864
Tax-exempt	239			423			526			842
Dividends	105			78			189			158
Other interest income	258			185			524			373
Total interest and dividend income	25,211			16,992			43,307			33,660
Interest Expense:
Interest on deposits	3,520			1,873			5,992			3,698
Interest on short-term borrowings	178			2			350			12
Interest on long-term borrowings	14			—			14			—
Interest on subordinated debt	122			—			122			—
Interest on junior subordinated debt	388			329			772			619
Total interest expense	4,222			2,204			7,250			4,329
Net Interest Income	20,989			14,788			36,057			29,331
Provision for (recovery of) loan losses	(10		)	(30		)	6			(74		)
Net Interest Income After Provision
for Loan Losses	20,999			14,818			36,051			29,405
Noninterest Income:
Trust fees	933			945			1,847			1,874
Service charges on deposit accounts	724			592			1,318			1,204
Other fees and commissions	1,015			679			1,723			1,321
Mortgage banking income	586			491			992			941
Securities gains, net	147			289			470			410
Brokerage fees	186			209			333			431
Income from Small Business Investment Companies	(137		)	171			31			326
Gains (losses) on premises and equipment, net	(87		)	—			(87		)	3
Other	315			187			506			386
Total noninterest income	3,682			3,563			7,133			6,896
Noninterest Expense:
Salaries	7,048			5,095			11,712			10,092
Employee benefits	1,425			1,111			2,655			2,286
Occupancy and equipment	1,431			1,100			2,515			2,228
FDIC assessment	169			132			294			278
Bank franchise tax	412			291			702			572
Core deposit intangible amortization	458			77			513			154
Data processing	717			467			1,249			889
Software	321			354			645			659
Other real estate owned, net	(44		)	25			(31		)	55

Merger related expenses	10,871			—		11,322		—
Other	3,508			2,350		5,669		4,491
Total noninterest expense	26,316			11,002		37,245		21,704
Income (Loss) Before Income Taxes	(1,635		)	7,379		5,939		14,597
Income Taxes	(405		)	1,399		1,166		2,805
Net Income (Loss)	$	(1,230	)	$	5,980	$	4,773	$	11,792
Net Income (Loss) Per Common Share:
Basic	$	(0.11	)	$	0.69	$	0.48	$	1.36
Diluted	$	(0.11	)	$	0.69	$	0.48	$	1.36
Weighted Average Common Shares Outstanding:
Basic	11,126,800			8,692,107		9,942,566		8,680,739
Diluted	11,126,800			8,704,726		9,952,115		8,695,860

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
		2nd Qtr				1st Qtr			2nd Qtr				YTD			YTD
		2019				2019			2018				2019			2018
EARNINGS
Interest income		$	25,211			$	18,096		$	16,992			$	43,307		$	33,660
Interest expense		4,222				3,028			2,204				7,250			4,329
Net interest income		20,989				15,068			14,788				36,057			29,331
Provision for (recovery of) loan losses		(10		)		16			(30		)		6			(74		)
Noninterest income		3,682				3,451			3,563				7,133			6,896
Noninterest expense		26,316				10,929			11,002				37,245			21,704
Income taxes		(405		)		1,571			1,399				1,166			2,805
Net income		(1,230		)		6,003			5,980				4,773			11,792
PER COMMON SHARE
Income per share - basic		$	(0.11	)		$	0.69		$	0.69			$	0.48		$	1.36
Income per share - diluted		(0.11		)		0.69			0.69				0.48			1.36
Cash dividends paid		0.25				0.25			0.25				0.50			0.50
Book value per share		28.00				26.21			24.50				28.00			24.50
Book value per share - tangible (a)		19.63				21.10			19.34				19.63			19.34
Closing market price		38.75				34.92			40.00				38.75			40.00
FINANCIAL RATIOS
Return on average assets		(0.20		)	%	1.29		%	1.31			%	0.44		%	1.29			%
Return on average equity		(1.60		)		10.69			11.27				3.59			11.19
Return on average tangible equity (a)		(1.62		)		13.44			14.44				5.25			14.37
Average equity to average assets		12.62				12.06			11.62				12.38			11.57
Tangible equity to tangible assets (a)		9.41				10.13			9.46				9.41			9.46
Net interest margin, taxable equivalent		3.82				3.50			3.50				3.67			3.48
Efficiency ratio (a)		60.94				56.95			59.96				59.24			59.66
Effective tax rate		(24.77		)		20.74			18.96				19.63			19.22
PERIOD-END BALANCES
Securities		$	342,247			$	331,657		$	348,887			$	342,247		$	348,887
Loans held for sale		3,165				1,252			2,296				3,165			2,296
Loans, net of unearned income		1,836,241				1,360,063			1,339,379				1,836,241			1,339,379
Goodwill and other intangibles		93,246				44,743			44,909				93,246			44,909
Assets		2,418,082				1,868,404			1,824,531				2,418,082			1,824,531
Assets - tangible (a)		2,324,836				1,823,661			1,779,622				2,324,836			1,779,622
Deposits		1,999,097				1,559,790			1,560,746				1,999,097			1,560,746
Customer repurchase agreements		37,222				35,945			6,776				37,222			6,776
Long-term borrowings		35,504				27,953			27,876				35,504			27,876
Shareholders' equity		311,917				229,473			213,348				311,917			213,348
Shareholders' equity - tangible (a)		218,671				184,730			168,439				218,671			168,439

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
		2nd Qtr			1st Qtr			2nd Qtr			YTD			YTD
		2019			2019			2018			2019			2018
AVERAGE BALANCES
Securities (b)		$	354,506		$	343,834		$	342,486		$	349,199		$	328,143
Loans held for sale		2,913			1,830			2,616			2,375			2,328
Loans, net of unearned income		1,816,203			1,352,521			1,321,812			1,585,643			1,329,890
Interest-earning assets		2,211,273			1,736,887			1,707,223			1,975,887			1,703,287
Goodwill and other intangibles		93,075			44,778			44,956			69,060			44,993
Assets		2,433,948			1,863,212			1,825,860			2,150,157			1,822,165
Assets - tangible (a)		2,340,873			1,818,434			1,780,904			2,081,097			1,777,172
Interest-bearing deposits		1,463,613			1,131,604			1,145,701			1,298,526			1,151,380
Deposits		2,023,557			1,551,413			1,565,321			1,788,789			1,561,258
Customer repurchase agreements		35,657			42,705			11,347			39,161			11,795
Other short-term borrowings		7,627			61			247			3,865			1,210
Long-term borrowings		36,301			27,937			27,861			32,142			27,848
Shareholders' equity		307,281			224,677			212,256			266,208			210,852
Shareholders' equity - tangible (a)		214,206			179,899			167,300			197,148			165,859
CAPITAL
Weighted average shares outstanding - basic		11,126,800			8,745,174			8,692,107			9,942,566			8,680,739
Weighted average shares outstanding - diluted		11,126,800			8,745,723			8,704,726			9,952,115			8,695,860
ALLOWANCE FOR LOAN LOSSES
Beginning balance		$	12,806		$	12,805		$	13,575		$	12,805		$	13,603
Provision for (recovery of) loan losses		(10		)	16			(30		)	6			(74		)
Charge-offs		(54		)	(69		)	(130		)	(123		)	(174		)
Recoveries		44			54			93			98			153
Ending balance		$	12,786		$	12,806		$	13,508		$	12,786		$	13,508
LOANS
Construction and land development		$	152,876		$	93,759		$	96,740		$	152,876		$	96,740
Commercial real estate		880,146			659,133			633,128			880,146			633,128
Residential real estate		328,400			212,665			207,374			328,400			207,374
Home equity		121,905			99,979			105,558			121,905			105,558
Commercial and industrial		340,427			289,301			291,454			340,427			291,454
Consumer		12,487			5,226			5,125			12,487			5,125
Total		$	1,836,241		$	1,360,063		$	1,339,379		$	1,836,241		$	1,339,379

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
		2nd Qtr			1st Qtr			2nd Qtr			YTD			YTD
		2019			2019			2018			2019			2018
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing		930			197			229			930			229
Nonaccrual		969			1,111			1,861			969			1,861
Other real estate owned		1,433			646			1,124			1,433			1,124
Nonperforming assets		$	3,332		$	1,954		$	3,214		$	3,332		$	3,214
ASSET QUALITY RATIOS
Allowance for loan losses to total loans		0.70		%	0.94		%	1.01		%	0.70		%	1.01		%
Allowance for loan losses to
nonperforming loans		673.30			979.05			646.32			673.30			646.32
Nonperforming assets to total assets		0.14			0.10			0.18			0.14			0.18
Nonperforming loans to total loans		0.10			0.10			0.16			0.10			0.16
Annualized net charge-offs
to average loans		—			—			0.01			—			—
OTHER DATA
Fiduciary assets at period-end (c)(d)		$	547,731		$	533,063		$	510,552		$	547,731		$	510,552
Retail brokerage assets at period-end (c)(d)		$	314,051		$	303,045		$	326,692		$	314,051		$	326,692
Number full-time equivalent employees (e)		371			299			323			371			323
Number of full service offices		28			24			26			28			26
Number of loan production offices		—			—			2			—			2
Number of ATM's		39			33			34			39			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 June 30, 2019 and 2018
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance				Income/Expense				Yield/Rate
				2018		2017		2018		2017		2018		2017
Loans:
	Commercial			$	321,263	$	267,996	$	3,899	$	2,652	4.87	%	3.97	%
	Real estate			1,485,665		1,052,105		18,578		12,087		5.00		4.60
	Consumer			12,188		4,327		201		77		6.61		7.14
		Total loans		1,819,116		1,324,428		22,678		14,816		4.99		4.48
Securities:
	Federal agencies & GSEs			140,516		127,033		858		707		2.44		2.23
	Mortgage-backed & CMOs			127,718		108,789		809		609		2.53		2.24
	State and municipal			68,185		91,636		480		653		2.82		2.85
	Other			18,087		15,028		233		176		5.15		4.68
		Total securities		354,506		342,486		2,380		2,145		2.69		2.51
Deposits in other banks				37,651		40,309		258		185		2.75		1.84
	Total interest-earning assets			2,211,273		1,707,223		25,316		17,146		4.58		4.02
Non-earning assets				222,675		118,637
		Total assets		$	2,433,948	$	1,825,860
Deposits:
	Demand			$	335,879	$	246,493	112		13		0.13		0.02
	Money market			448,722		395,135		1,394		802		1.25		0.81
	Savings			179,375		132,190		97		10		0.22		0.03
	Time			499,637		371,883		1,916		1,048		1.54		1.13
		Total deposits		1,463,613		1,145,701		3,519		1,873		0.96		0.66
Customer repurchase agreements				35,657		11,347		140		1		1.57		0.04
Other short-term borrowings				7,627		247		39		1		2.05		1.62
Long-term borrowings				36,301		27,861		524		329		5.77		4.72
	Total interest-bearing
		liabilities		1,543,198		1,185,156		4,222		2,204		1.10		0.75
Noninterest bearing demand deposits				559,944		419,620
Other liabilities				23,525		8,828
Shareholders' equity				307,281		212,256
		Total liabilities and
			shareholders' equity	$	2,433,948	$	1,825,860
Interest rate spread												3.48	%	3.27	%
Net interest margin												3.82	%	3.50	%
Net interest income (taxable equivalent basis)								21,094		14,942
Less: Taxable equivalent adjustment								105		154
Net interest income								$	20,989	$	14,788

			Net Interest Income Analysis
			For the Six Months Ended June 30, 2019 and 2018
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance				Income/Expense				Yield/Rate
				2019		2018		2019		2018		2019		2018
Loans:
	Commercial			$	293,575	$	263,300	$	6,790	$	5,096	4.66	%	3.90	%
	Real estate			1,285,842		1,064,605		31,294		24,277		4.87		4.56
	Consumer			8,601		4,313		276		153		6.47		7.15
		Total loans		1,588,018		1,332,218		38,360		29,526		4.84		4.44
Securities:
	Federal agencies & GSEs			139,993		115,182		1,708		1,224		2.44		2.13
	Mortgage-backed & CMOs			119,754		108,808		1,502		1,208		2.51		2.22
	State and municipal			73,362		89,000		1,018		1,287		2.78		2.89
	Other			16,090		15,153		411		351		5.11		4.63
		Total securities		349,199		328,143		4,639		4,070		2.66		2.48
Deposits in other banks				38,670		42,926		524		373		2.73		1.75
	Total interest-earning assets			1,975,887		1,703,287		43,523		33,969		4.41		3.99
Non-earning assets				174,270		118,878
		Total assets		$	2,150,157	$	1,822,165
Deposits:
	Demand			$	287,424	$	239,477	126		24		0.09		0.02
	Money market			422,359		402,612		2,548		1,585		1.22		0.79
	Savings			156,843		131,453		107		20		0.14		0.03
	Time			431,900		377,838		3,211		2,069		1.50		1.10
		Total deposits		1,298,526		1,151,380		5,992		3,698		0.93		0.65
Customer repurchase agreements				39,161		11,795		311		2		1.60		0.03
Other short-term borrowings				3,865		1,210		39		10		2.02		1.65
Long-term borrowings				32,142		27,848		908		619		5.65		4.45
	Total interest-bearing
		liabilities		1,373,694		1,192,233		7,250		4,329		1.06		0.73
Noninterest bearing demand deposits				490,263		409,878
Other liabilities				19,992		9,202
Shareholders' equity				266,208		210,852
		Total liabilities and
			shareholders' equity	$	2,150,157	$	1,822,165
Interest rate spread												3.35	%	3.26	%
Net interest margin												3.67	%	3.48	%
Net interest income (taxable equivalent basis)								36,273		29,640
Less: Taxable equivalent adjustment								216		309
Net interest income								$	36,057	$	29,331

American National Bankshares Inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited
	(Dollars in thousands, except per share data)
		2nd Qtr				1st Qtr				2nd Qtr				YTD				YTD
		2019				2019				2018				2019				2018
EFFICIENCY RATIO
Noninterest expense		$	26,316			$	10,929			$	11,002			$	37,245			$	21,704
Add/subtract: loss/(gain) on sale of OREO		76				2				(3		)		78				2
Subtract: core deposit intangible amortization		(458		)		(55		)		(77		)		(513		)		(154		)
Subtract: merger related expense		(10,871		)		(451		)		—				(11,322		)		—
		$	15,063			$	10,425			$	10,922			$	25,488			$	21,552
Net interest income		$	20,989			$	15,068			$	14,788			$	36,057			$	29,331
Tax equivalent adjustment		105				111				154				216				309
Noninterest income		3,682				3,451				3,563				7,133				6,896
Add/subtract: (gain)/loss on securities		(147		)		(323		)		(289		)		(470		)		(410		)
Add/subtract: (gain)/loss on fixed assets		87				—				—				87				(3		)
		$	24,716			$	18,307			$	18,216			$	43,023			$	36,123
Efficiency ratio		60.94			%	56.95			%	59.96			%	59.24			%	59.66			%
TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income - loans		$	22,678			$	15,682			$	14,816			$	38,360			$	29,526
Interest income - investments and other		2,638				2,525				2,330				5,163				4,443
Interest expense - deposits		(3,519		)		(2,472		)		(1,873		)		(5,992		)		(3,698		)
Interest expense - customer repurchase
agreements		(140		)		(171		)		(1		)		(311		)		(2		)
Interest expense - other short-term borrowings		(39		)		(1		)		(1		)		(39		)		(10		)
Interest expense - long-term borrowings		(524		)		(384		)		(329		)		(908		)		(619		)
Total net interest income		$	21,094			$	15,179			$	14,942			$	36,273			$	29,640
Less non-GAAP measures:
Tax benefit on nontaxable interest - loans		(49		)		(44		)		(50		)		(93		)		(102		)
Tax benefit on nontaxable interest - securities		(56		)		(67		)		(104		)		(123		)		(207		)
GAAP measures		$	20,989			$	15,068			$	14,788			$	36,057			$	29,331
RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)		(1.6		)	%	10.69			%	11.27			%	3.59			%	11.19			%
Impact of excluding average goodwill
and other intangibles		(0.02		)		2.75				3.17				1.66				3.18
Return on average tangible equity
(non-GAAP)		(1.62		)	%	13.44			%	14.44			%	5.25			%	14.37			%

TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)	12.90		%	12.28		%	11.69		%	12.90		%	11.69		%
Impact of excluding goodwill and
other intangibles	3.49			2.15			2.23			3.49			2.23
Tangible equity to tangible assets ratio
(non-GAAP)	9.41		%	10.13		%	9.46		%	9.41		%	9.46		%
TANGIBLE BOOK VALUE
Book value per share (GAAP basis)	$	28.00		$	26.21		$	24.50		$	28.00		$	24.50
Impact of excluding goodwill and
other intangibles	8.37			5.11			5.16			8.37			5.16
Tangible book value per share
(non-GAAP)	$	19.63		$	21.10		$	19.34		$	19.63		$	19.34