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American National Bankshares Reports Second Quarter Earnings of $10.8 Million ($.99 Per Share)
Source: Nasdaq GlobeNewswire / 22 Jul 2021 07:30:01 America/New_York
DANVILLE, Va., July 22, 2021 (GLOBE NEWSWIRE) -- 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 (estimated) $840 For the years ending (estimated): 2022 1,268 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.
Consolidated Balance Sheets (Dollars in thousands, except per share data) Unaudited June 30 2021 2020 Assets 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 value, 2,000,000 shares authorized, none outstanding - - Common stock, $1 par value, 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) At or for the Six Months 2nd Qtr 1st Qtr 2nd Qtr 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 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 American National Bankshares Inc. Financial Highlights Unaudited (Dollars in thousands, except per share data) At or for the Six Months 2nd Qtr 1st Qtr 2nd Qtr Ended June 30, 2021 2021 2020 2021 2020 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 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 ATMs 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 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 (b) 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 - - - 0.50 Long-term borrowings 35,612 35,565 952 999 5.35 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 (c) 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) At or for the Six Months 2nd Qtr 1st Qtr 2nd Qtr 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 % Contact:
Jeffrey W. Farrar
Executive Vice President, COO & CFO
(434)773-2274
farrarj@amnb.com
- 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).