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American National Bankshares Reports Fourth Quarter and Full Year 2022 Earnings
Source: Nasdaq GlobeNewswire / 19 Jan 2023 07:30:01 America/New_York
DANVILLE, Va., Jan. 19, 2023 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (NASDAQ: AMNB) (“American National” or the “Company”) today reported fourth quarter 2022 earnings of $8.0 million, or $0.76 per diluted common share. Those results compare to earnings of $11.3 million, or $1.05 per diluted common share, during the same quarter in the prior year, and earnings of $9.3 million, or $0.87 per diluted common share, for the third quarter of 2022. Earnings for the twelve months ended December 31, 2022 were $34.4 million, or $3.23 per diluted common share, compared to $43.5 million, or $4.00 per diluted common share, for the same period of 2021.
President and Chief Executive Officer, Jeffrey V. Haley, commented, “American National finished 2022 on a positive note with strong earnings for the fourth quarter and the full year. Loan growth was again exceptional, and while we experienced deposit outflows during the period consistent with industry trends, we are pleased with balance sheet trends overall. While there has been some slowing, business activity and our local economies remain fairly stable in spite of factors associated with elevated inflation and rising rates.”
“I am so proud and appreciative of the efforts of our employees, the support of our customers and our shareholders over the past year. In October, American National was named one of the “Best Banks to Work For” by American Banker for the third consecutive year. This achievement is a testament to our efforts to provide a great place to work for a great team. We had a very successful year financially and achieved many other nonfinancial initiatives during the year as we prepare the Company for future growth and success.”
Fourth quarter 2022 highlights include:
- Earnings produced a return on average tangible common equity of 14.50% for the fourth quarter of 2022, compared to 15.74% in the previous quarter and 17.63% for the same quarter in the prior year (non-GAAP).
- Net interest income increased $281 thousand, or 1.2%, when compared to the previous quarter, and increased $1.2 million, or 5.1%, when compared to the same quarter in 2021.
- Fully taxable equivalent (“FTE”) net interest margin was 3.33% for the quarter, up from 3.20% in the third quarter of 2022 and up from 2.93% in the same quarter of the prior year (non-GAAP).
- Noninterest revenues decreased $1.2 million, or 24.2%, when compared to the previous quarter, and decreased $1.2 million, or 25.5%, compared to the same quarter in the prior year.
- Noninterest expense increased $386 thousand, or 2.3%, when compared to the previous quarter, and increased $1.4 million, or 8.9%, when compared to the same quarter in the prior year.
- Average loans held for investment excluding U.S. Small Business Administration Paycheck Protection Program (“PPP”) loans grew $104.6 million, or 20.3% annualized, during the fourth quarter compared to $57.2 million, or 11.4% annualized, growth in the third quarter of this year and $69.0 million, or 14.9% annualized, growth in the fourth quarter of the prior year.
- The Company recognized a provision for loan losses in the fourth quarter of 2022 of $1.2 million compared to $615 thousand in the third quarter of 2022 and a negative provision of $2.0 million in the fourth quarter of 2021. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were 0.15% for the fourth quarter of 2022 compared to (0.01%) in the previous quarter and (0.00%) in the same quarter of 2021.
- Nonperforming assets as a percentage of total assets were 0.05% at December 31, 2022 and September 30, 2022, down from 0.07% at December 31, 2021.
NET INTEREST INCOME
Net interest income for the fourth quarter of 2022 increased by $281 thousand, or 1.2%, to $24.3 million compared to $24.0 million for the third quarter of 2022. The fourth quarter of 2022 compared to the same quarter of 2021 reflected an increase of $1.2 million, or 5.1%. The FTE net interest margin for the quarter was 3.33%, up from 3.20% in the prior quarter and 2.93% in the same quarter a year ago (non-GAAP). The margin expansion relative to the previous quarter was primarily due to a 34-basis point increase in yield on average earning assets partially offset by a 36-basis point increase in the cost of interest-bearing liabilities. The higher yield resulted from a shift in the earning assets mix caused by excess deposits in other banks being deployed into the loan portfolio as well as increased yields on loans, securities, and deposits in other banks due to the rise in interest rates. The higher interest cost on liabilities was also a result of higher interest rates and some additional borrowing costs associated with short term FHLB advances during the period. The increase in margin from fourth quarter 2021 was also attributable to the higher rate environment and asset mix changes partially offset by substantially more PPP related income in 2021.
The Company’s FTE net interest margin includes the impact of acquisition accounting fair value adjustments. During the fourth quarter of 2022, net accretion related to acquisition accounting amounted to $253 thousand compared to $454 thousand in the prior quarter and $2.1 million for the same quarter in 2021. Estimated remaining net accretion from acquisitions for the periods indicated is as follows (dollars in thousands):
For the years ending December 31, (estimated): 2023 $ 744 2024 457 2025 324 2026 252 2027 116 Thereafter 112 ASSET QUALITY
Nonperforming assets (“NPAs”) totaled $1.4 million as of December 31, 2022 and as of September 30, 2022, down substantially from $2.4 million at December 31, 2021. NPAs as a percentage of total assets were 0.05% at December 31, 2022 and September 30, 2022, and 0.07% at December 31, 2021. The Company recorded a provision for loan losses for the fourth quarter of 2022 of $1.2 million compared to $615 thousand in the previous quarter and a negative provision of $2.0 million in the fourth quarter of the previous year. The provision expense increase for the fourth quarter as compared to third quarter of 2022 was a function of continued loan growth coupled with charge-off activity during the period. The negative provision in the fourth quarter of 2021 was the result of continued improvement in economic conditions, ongoing low charge-off and delinquency rates, and overall strong asset quality metrics.
The allowance for loan losses was $19.6 million at December 31, 2022, compared to $19.2 million at September 30, 2022 and $18.7 million at December 31, 2021. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were 0.15% for the fourth quarter of 2022 compared to (0.01%) and (0.00%) in the third quarter of 2022 and fourth quarter of 2021, respectively. The allowance as a percentage of loans held for investment was 0.89% at December 31, 2022, compared to 0.91% at September 30, 2022, and 0.96% at December 31, 2021.
NONINTEREST INCOME
Noninterest income decreased $1.2 million, or 24.2%, to $3.6 million for the quarter ended December 31, 2022 from the prior quarter and $1.2 million, or 25.5%, from $4.8 million in the same quarter in the prior year. The decrease in the fourth quarter of 2022 compared to the third quarter was primarily due to a reduction in equity income from investments in small business investment companies. During the fourth quarter of 2022, investments in these entities resulted in losses recorded of $263 thousand, compared to earnings of $501 thousand in the prior quarter and $462 thousand in the same quarter of the prior year. In addition, an impairment charge of $146 thousand was recorded during the fourth quarter of 2022 on an acquired real estate property from a previous acquisition. Mortgage income also decreased $212 thousand in the fourth quarter of 2022 as demand continues to slow due to higher mortgage rates. The decrease for the fourth quarter of 2022 as compared to the same quarter in the prior year can also be attributed to the aforementioned small business investment company losses and from mortgage revenue contraction associated with lower volumes due to higher mortgage rates. Mortgage banking income decreased by $570 thousand, or 76.4%, compared to the same quarter of 2021.
NONINTEREST EXPENSE
Noninterest expense for the fourth quarter of 2022 amounted to $16.8 million, up $386 thousand, or 2.3%, when compared to $16.4 million for the previous quarter and up $1.4 million, or 8.9%, from $15.5 million for the same quarter in the previous year. The increase in the fourth quarter compared to the third quarter of 2022 was primarily from increased charitable contributions and data processing and technology costs. The increase from the same quarter of 2021 was the result of higher compensation associated with a lower staffing vacancy rate and increased incentive accruals.
INCOME TAXES
The effective tax rate for the three months ended December 31, 2022 was 18.90%, compared to 20.92% for the prior quarter and 21.79% for the same quarter in the prior year. The Company recognized a tax benefit in the fourth quarter of 2022 resulting from adjustments from investment partnership income tax returns. The effective tax rate fluctuations are attributable to changes in pre-tax earnings and the levels of permanent tax differences.
BALANCE SHEET
Total assets at December 31, 2022 were $3.1 billion, an increase of $16.6 million from September 30, 2022 and a decrease of $268.7 million from December 31, 2021. The increase from the previous quarter is due to an increase in loans, net, partially offset by lower interest-bearing deposits in other banks resulting from a decrease in deposits and a decrease in the investment portfolio for maturities during the period.
At December 31, 2022, loans held for investment (net of deferred fees and costs) were $2.2 billion, an increase of $67.0 million, or 12.7% annualized, from September 30, 2022. Loans held for investment (net of deferred fees and costs) increased $239.9 million, or 12.3%, from December 31, 2021.
Investment securities available for sale amounted to $608.1 million at December 31, 2022, a decrease of $33.8 million, or 5.3%, compared to September 30, 2022, and a decrease of $84.4 million, or 12.2%, compared to December 31, 2021.
Deposits amounted to $2.6 billion at December 31, 2022, a decrease of $94.5 million, or 14.1% annualized, from September 30, 2022 and a decrease of $294.0 million, or 10.2%, compared to December 31, 2021.
The Company continues to be well-capitalized as defined by regulators, with tangible common equity to tangible assets of 7.82% at December 31, 2022 compared to 7.59% at September 30, 2022 and compared to 8.17% at December 31 2021 (non-GAAP). The Company’s common equity Tier 1, Tier 1, total, and Tier 1 leverage capital ratios were 11.69%, 12.84%, 13.65% and 10.35%, respectively, at December 31, 2022.
ABOUT AMERICAN NATIONAL
American National is a multi-state bank holding company with total assets of approximately $3.0 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 $1.2 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 quarters, 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.
Contact:
Jeffrey W. Farrar
Executive Vice President, COO & CFO
(434)773-2274
farrarj@amnb.comAmerican National Bankshares Inc. Consolidated Balance Sheets (Dollars in thousands, except per share data) Unaudited December 31 2022 2021 Assets Cash and due from banks $ 32,207 $ 23,095 Interest-bearing deposits in other banks 41,133 487,773 Securities available for sale, at fair value 608,062 692,467 Restricted stock, at cost 12,651 8,056 Loans held for sale 1,061 8,481 Loans, net of deferred fees and costs 2,186,449 1,946,580 Less allowance for loan losses (19,555 ) (18,678 ) Net Loans 2,166,894 1,927,902 Premises and equipment, net 32,900 35,564 Assets held-for-sale 1,382 - Other real estate owned, net 27 143 Goodwill 85,048 85,048 Core deposit intangibles, net 3,367 4,627 Bank owned life insurance 29,692 29,107 Other assets 51,478 32,334 Total assets $ 3,065,902 $ 3,334,597 Liabilities Demand deposits -- noninterest-bearing $ 1,010,602 $ 1,009,081 Demand deposits -- interest-bearing 484,037 547,878 Money market deposits 574,330 719,498 Savings deposits 269,426 259,193 Time deposits 257,933 354,703 Total deposits 2,596,328 2,890,353 Customer repurchase agreements 370 41,128 Other short-term borrowings 100,531 - Long-term borrowings 28,334 28,232 Other liabilities 19,165 20,092 Total liabilities 2,744,728 2,979,805 Shareholders' equity Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding - - Common stock, $1 par value, 20,000,000 shares authorized, 10,608,781 shares outstanding at December 31, 2022 and 10,766,967 shares outstanding at December 31, 2021 10,538 10,710 Capital in excess of par value 141,948 147,777 Retained earnings 223,664 201,380 Accumulated other comprehensive loss, net (54,976 ) (5,075 ) Total shareholders' equity 321,174 354,792 Total liabilities and shareholders' equity $ 3,065,902 $ 3,334,597 American National Bankshares Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) Unaudited For the Three Months Ended For the Twelve Months Ended 12/31/22 9/30/22 12/31/21 12/31/22 12/31/21 Interest and Dividend Income: Interest and fees on loans $ 23,544 $ 21,160 $ 21,706 $ 82,568 $ 87,040 Interest and dividends on securities: Taxable 2,721 2,664 2,012 10,065 7,309 Tax-exempt 110 110 92 407 385 Dividends 126 118 115 473 464 Other interest income 415 1,099 223 2,491 598 Total interest and dividend income 26,916 25,151 24,148 96,004 95,796 Interest Expense: Interest on deposits 1,597 741 655 3,553 3,645 Interest on short-term borrowings 633 11 3 659 22 Interest on long-term borrowings 398 392 386 1,554 1,738 Total interest expense 2,628 1,144 1,044 5,766 5,405 Net Interest Income 24,288 24,007 23,104 90,238 90,391 Provision for (recovery of) loan losses 1,159 615 (1,955 ) 1,597 (2,825 ) Net Interest Income After Provision for (recovery of) Loan Losses 23,129 23,392 25,059 88,641 93,216 Noninterest Income: Trust and brokerage fees 1,522 1,603 1,529 6,521 6,019 Service charges on deposit accounts 597 681 695 2,676 2,611 Interchange fees 1,117 1,013 1,127 4,107 4,152 Other fees and commissions 207 233 182 906 801 Mortgage banking income 176 388 746 1,666 4,195 Securities gains, net - - 35 - 35 Income (loss) from Small Business Investment Companies (263 ) 501 462 1,409 1,972 Income from insurance investments 103 100 137 747 1,199 Losses on premises and equipment, net (146 ) (2 ) (297 ) (228 ) (885 ) Other 297 243 228 1,003 932 Total noninterest income 3,610 4,760 4,844 18,807 21,031 Noninterest Expense: Salaries and employee benefits 9,446 9,618 8,461 36,382 32,342 Occupancy and equipment 1,499 1,514 1,484 6,075 6,032 FDIC assessment 209 227 220 903 864 Bank franchise tax 501 488 446 1,953 1,767 Core deposit intangible amortization 300 310 351 1,260 1,464 Data processing 864 818 734 3,310 2,958 Software 417 362 357 1,505 1,368 Other real estate owned, net (1 ) 3 (17 ) 3 131 Other 3,599 3,108 3,427 12,695 12,082 Total noninterest expense 16,834 16,448 15,463 64,086 59,008 Income Before Income Taxes 9,905 11,704 14,440 43,362 55,239 Income Taxes 1,872 2,448 3,147 8,934 11,713 Net Income $ 8,033 $ 9,256 $ 11,293 $ 34,428 $ 43,526 Net Income Per Common Share: Basic $ 0.76 $ 0.87 $ 1.05 $ 3.23 $ 4.00 Diluted $ 0.76 $ 0.87 $ 1.05 $ 3.23 $ 4.00 Weighted Average Common Shares Outstanding: Basic 10,607,678 10,640,952 10,774,268 10,672,314 10,873,817 Diluted 10,609,937 10,643,073 10,776,970 10,674,613 10,877,231
American National Bankshares Inc. Financial Highlights Unaudited (Dollars in thousands, except per share data) At or for the Twelve Months 4th Qtr 3rd Qtr 4th Qtr Ended December 31, 2022 2022 2021 2022 2021 EARNINGS Interest income $ 26,916 $ 25,151 $ 24,148 $ 96,004 $ 95,796 Interest expense 2,628 1,144 1,044 5,766 5,405 Net interest income 24,288 24,007 23,104 90,238 90,391 Provision for (recovery of) loan losses 1,159 615 (1,955 ) 1,597 (2,825 ) Noninterest income 3,610 4,760 4,844 18,807 21,031 Noninterest expense 16,834 16,448 15,463 64,086 59,008 Income taxes 1,872 2,448 3,147 8,934 11,713 Net income 8,033 9,256 11,293 34,428 43,526 PER COMMON SHARE Net income per share - basic $ 0.76 $ 0.87 $ 1.05 $ 3.23 $ 4.00 Net income per share - diluted 0.76 0.87 1.05 3.23 4.00 Cash dividends paid 0.30 0.28 0.28 1.14 1.09 Book value per share 30.27 29.54 32.95 30.27 32.95 Book value per share - tangible (a) 21.94 21.18 24.62 21.94 24.62 Closing market price 36.93 31.95 37.68 36.93 37.68 FINANCIAL RATIOS Return on average assets 1.05 % 1.17 % 1.35 % 1.43 % 1.37 % Return on average common equity 10.15 11.21 12.82 13.81 12.50 Return on average tangible common equity (a) 14.50 15.74 17.63 19.41 17.34 Average common equity to average assets 10.33 10.42 10.50 10.35 10.96 Tangible common equity to tangible assets (a) 7.82 7.59 8.17 7.82 8.17 Net interest margin, taxable equivalent (a) 3.33 3.20 2.93 2.97 3.05 Efficiency ratio (a) 58.82 55.98 53.45 57.37 51.05 Effective tax rate 18.90 20.92 21.79 20.60 21.20 PERIOD-END BALANCES Securities $ 620,713 $ 650,267 $ 700,523 $ 620,713 $ 700,523 Loans held for sale 1,061 2,852 8,481 1,061 8,481 Loans, net 2,186,449 2,119,415 1,946,580 2,186,449 1,946,580 Goodwill and other intangibles 88,415 88,715 89,675 88,415 89,675 Assets 3,065,902 3,049,320 3,334,597 3,065,902 3,334,597 Assets - tangible (a) 2,977,487 2,960,605 3,244,922 2,977,487 3,244,922 Deposits 2,596,328 2,690,870 2,890,353 2,596,328 2,890,353 Customer repurchase agreements 370 625 41,128 370 41,128 Long-term borrowings 28,334 28,308 28,232 28,334 28,232 Shareholders' equity 321,174 313,390 354,792 321,174 354,792 Shareholders' equity - tangible (a) 232,759 224,675 265,117 232,759 265,117 AVERAGE BALANCES Securities (b) $ 713,996 $ 728,535 $ 654,595 $ 720,001 $ 549,554 Loans held for sale 972 3,915 8,121 3,235 11,257 Loans, net 2,168,636 2,064,088 1,943,238 2,052,158 1,953,121 Interest-earning assets 2,920,992 3,005,292 3,154,730 3,042,775 2,967,799 Goodwill and other intangibles 88,593 88,886 89,855 89,048 90,413 Assets 3,066,362 3,170,328 3,357,223 3,211,668 3,176,564 Assets - tangible (a) 2,977,769 3,081,442 3,267,368 3,122,620 3,086,151 Interest-bearing deposits 1,609,503 1,723,931 1,868,695 1,765,134 1,797,385 Deposits 2,641,133 2,775,516 2,914,381 2,794,005 2,736,571 Customer repurchase agreements 704 18,719 39,645 24,005 37,632 Long-term borrowings 28,318 28,293 28,218 28,280 31,878 Shareholders' equity 316,697 330,318 352,395 332,356 348,158 Shareholders' equity - tangible (a) 228,104 241,432 262,540 243,308 257,745 American National Bankshares Inc. Financial Highlights Unaudited (Dollars in thousands, except per share data) At or for the Twelve Months 4th Qtr 3rd Qtr 4th Qtr Ended December 31, 2022 2022 2021 2022 2021 CAPITAL Weighted average shares outstanding - basic 10,607,678 10,640,952 10,774,268 10,672,314 10,873,817 Weighted average shares outstanding - diluted 10,609,937 10,643,073 10,776,970 10,674,613 10,877,231 COMMON STOCK REPURCHASE PROGRAM Total shares of common stock repurchased 3,269 60,104 16,580 206,978 264,579 Average price paid per share of common stock $ 36.44 $ 34.26 $ 37.12 $ 36.26 $ 33.10 ALLOWANCE FOR LOAN LOSSES Beginning balance $ 19,189 $ 18,505 $ 20,630 $ 18,678 $ 21,403 Provision for (recovery of) loan losses 1,159 615 (1,955 ) 1,597 (2,825 ) Charge-offs (834 ) (31 ) (76 ) (1,019 ) (146 ) Recoveries 41 100 79 299 246 Ending balance $ 19,555 $ 19,189 $ 18,678 $ 19,555 $ 18,678 LOANS Construction and land development $ 197,525 $ 210,500 $ 134,221 $ 197,525 $ 134,221 Commercial real estate - owner occupied 418,462 423,678 391,517 418,462 391,517 Commercial real estate - non-owner occupied 827,728 764,963 731,034 827,728 731,034 Residential real estate 338,132 324,468 289,757 338,132 289,757 Home equity 93,740 93,659 93,203 93,740 93,203 Commercial and industrial 304,247 295,541 299,773 304,247 299,773 Consumer 6,615 6,606 7,075 6,615 7,075 Total $ 2,186,449 $ 2,119,415 $ 1,946,580 $ 2,186,449 $ 1,946,580 NONPERFORMING ASSETS AT PERIOD-END Nonperforming loans: 90 days past due and accruing $ 16 $ 18 $ 216 $ 16 $ 216 Nonaccrual 1,307 1,171 2,006 1,307 2,006 Other real estate owned and repossessions 80 196 143 80 143 Nonperforming assets $ 1,403 $ 1,385 $ 2,365 $ 1,403 $ 2,365 ASSET QUALITY RATIOS Allowance for loan losses to total loans 0.89 % 0.91 % 0.96 % 0.89 % 0.96 % Allowance for loan losses to nonperforming loans 1,478.08 1,613.88 840.59 1,478.08 840.59 Nonperforming assets to total assets 0.05 0.05 0.07 0.05 0.07 Nonperforming loans to total loans 0.06 0.06 0.11 0.06 0.11 Annualized net (recoveries) charge-offs to average loans 0.15 (0.01 ) (0.00 ) 0.05 (0.01 ) OTHER DATA Fiduciary assets at period-end (c) (d) $ 736,121 $ 693,153 $ 752,410 $ 736,121 $ 752,410 Retail brokerage assets at period-end (c) (d) $ 413,235 $ 376,891 $ 418,850 $ 413,235 $ 418,850 Number full-time equivalent employees (e) 359 363 346 359 346 Number of full service offices 26 26 26 26 26 Number of loan production offices 1 1 1 1 1 Number of ATMs 34 34 36 34 36 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 period. American National Bankshares Inc. Net Interest Income Analysis For the Three Months Ended December 31, 2022 and 2021 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2022 2021 2022 2021 2022 2021 Loans: Commercial $ 304,303 $ 310,175 $ 3,464 $ 3,386 4.52 % 4.33 % Real estate 1,858,591 1,634,660 20,014 18,244 4.31 4.46 Consumer 6,714 6,524 107 112 6.32 6.81 Total loans (b) 2,169,608 1,951,359 23,585 21,742 4.34 4.45 Securities: U.S. Treasury 152,082 116,629 351 242 0.92 0.83 Federal agencies & GSEs 105,119 93,042 364 265 1.39 1.14 Mortgage-backed & CMOs 345,217 355,492 1,498 1,117 1.74 1.26 State and municipal 69,451 63,148 361 314 2.08 1.99 Other 42,127 26,284 410 305 3.89 4.64 Total securities 713,996 654,595 2,984 2,243 1.67 1.37 Deposits in other banks 37,388 548,776 415 223 4.40 0.16 Total interest-earning assets 2,920,992 3,154,730 26,984 24,208 3.69 3.07 Non-earning assets 145,370 202,493 Total assets $ 3,066,362 $ 3,357,223 Deposits: Demand $ 494,572 $ 505,528 95 37 0.08 0.03 Money market 590,509 743,354 974 101 0.65 0.05 Savings 273,580 257,289 67 6 0.10 0.01 Time 250,842 362,524 461 511 0.73 0.56 Total deposits 1,609,503 1,868,695 1,597 655 0.39 0.14 Customer repurchase agreements 704 39,645 - 3 - 0.03 Other short-term borrowings 62,004 - 633 - 4.08 - Long-term borrowings 28,318 28,218 398 386 5.62 5.47 Total interest-bearing liabilities 1,700,529 1,936,558 2,628 1,044 0.62 0.21 Noninterest bearing demand deposits 1,031,630 1,045,686 Other liabilities 17,506 22,584 Shareholders' equity 316,697 352,395 Total liabilities and shareholders' equity $ 3,066,362 $ 3,357,223 Interest rate spread 3.07 % 2.86 % Net interest margin 3.33 % 2.93 % Net interest income (taxable equivalent basis) 24,356 23,164 Less: Taxable equivalent adjustment (c) 68 60 Net interest income $ 24,288 $ 23,104 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 Twelve Months Ended December 31, 2022 and 2021 (Dollars in thousands) Unaudited Interest Average Balance Income/Expense (a) Yield/Rate 2022 2021 2022 2021 2022 2021 Loans: Commercial $ 292,833 $ 372,538 $ 11,448 $ 18,819 3.91 % 5.05 % Real estate 1,755,982 1,584,856 70,837 67,887 4.03 4.28 Consumer 6,578 6,984 423 475 6.43 6.80 Total loans (b) 2,055,393 1,964,378 82,708 87,181 4.02 4.44 Securities: U.S. Treasury 150,886 57,048 1,372 507 0.91 0.89 Federal agencies & GSEs 107,311 97,943 1,348 1,132 1.26 1.16 Mortgage-backed & CMOs 355,331 308,158 5,420 4,142 1.53 1.34 State and municipal 68,928 61,698 1,399 1,272 2.03 2.06 Other 37,545 24,707 1,510 1,205 4.02 4.88 Total securities 720,001 549,554 11,049 8,258 1.53 1.50 Deposits in other banks 267,381 453,867 2,491 598 0.93 0.13 Total interest-earning assets 3,042,775 2,967,799 96,248 96,037 3.16 3.24 Non-earning assets 168,893 208,765 Total assets $ 3,211,668 $ 3,176,564 Deposits: Demand $ 522,043 $ 476,710 202 152 0.04 0.03 Money market 688,631 710,948 1,648 758 0.24 0.11 Savings 273,788 243,123 102 26 0.04 0.01 Time 280,672 366,604 1,601 2,709 0.57 0.74 Total deposits 1,765,134 1,797,385 3,553 3,645 0.20 0.20 Customer repurchase agreements 24,005 37,632 26 22 0.11 0.06 Other short-term borrowings 15,629 - 633 - 4.05 - Long-term borrowings 28,280 31,878 1,554 1,738 5.50 5.45 Total interest-bearing liabilities 1,833,048 1,866,895 5,766 5,405 0.31 0.29 Noninterest bearing demand deposits 1,028,871 939,186 Other liabilities 17,393 22,325 Shareholders' equity 332,356 348,158 Total liabilities and shareholders' equity $ 3,211,668 $ 3,176,564 Interest rate spread 2.85 % 2.95 % Net interest margin 2.97 % 3.05 % Net interest income (taxable equivalent basis) 90,482 90,632 Less: Taxable equivalent adjustment (c) 244 241 Net interest income $ 90,238 $ 90,391 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 Twelve Months 4th Qtr 3rd Qtr 4th Qtr Ended December 31, 2022 2022 2021 2022 2021 EFFICIENCY RATIO Noninterest expense $ 16,834 $ 16,448 $ 15,463 $ 64,086 $ 59,008 Subtract: loss (gain) on sale of OREO 2 - - 2 (111 ) Subtract: core deposit intangible amortization (300 ) (310 ) (351 ) (1,260 ) (1,464 ) $ 16,536 $ 16,138 $ 15,112 $ 62,828 $ 57,433 Net interest income $ 24,288 $ 24,007 $ 23,104 $ 90,238 $ 90,391 Tax equivalent adjustment 68 59 60 244 241 Noninterest income 3,610 4,760 4,844 18,807 21,031 Subtract: gain on securities - - (35 ) - (35 ) Add: loss on fixed assets 146 2 297 228 885 $ 28,112 $ 28,828 $ 28,270 $ 109,517 $ 112,513 Efficiency ratio 58.82 % 55.98 % 53.46 % 57.37 % 51.05 % TAX EQUIVALENT NET INTEREST INCOME Non-GAAP measures: Interest income - loans $ 23,585 $ 21,191 $ 21,742 $ 82,708 $ 87,181 Interest income - investments and other 3,399 4,019 2,466 13,540 8,856 Interest expense - deposits (1,597 ) (741 ) (655 ) (3,553 ) (3,645 ) Interest expense - customer repurchase agreements - (11 ) (3 ) (26 ) (22 ) Interest expense - other short-term borrowings (633 ) - - (633 ) (1 ) Interest expense - long-term borrowings (398 ) (392 ) (386 ) (1,554 ) (1,738 ) Total net interest income $ 24,356 $ 24,066 $ 23,164 $ 90,482 $ 90,632 Less non-GAAP measures: Tax benefit on nontaxable interest - loans (41 ) (31 ) (36 ) (139 ) (141 ) Tax benefit on nontaxable interest - securities (27 ) (28 ) (24 ) (105 ) (100 ) GAAP measures $ 24,288 $ 24,007 $ 23,104 $ 90,238 $ 90,391 NET INTEREST MARGIN Net interest margin (FTE) (non-GAAP) 3.33 % 3.20 % 2.93 % 2.97 % 3.05 % Net interest margin (GAAP) 3.32 % 3.19 % 2.93 % 2.97 % 3.05 % RETURN ON AVERAGE TANGIBLE EQUITY Return on average equity (GAAP basis) 10.15 % 11.21 % 12.82 % 13.81 % 12.50 % Impact of excluding average goodwill and other intangibles 4.35 4.53 4.81 5.60 4.84 Return on average tangible equity (non-GAAP) 14.50 % 15.74 % 17.63 % 19.41 % 17.34 % TANGIBLE EQUITY TO TANGIBLE ASSETS Equity to assets ratio (GAAP basis) 10.48 % 10.28 % 10.64 % 10.48 % 10.64 % Impact of excluding goodwill and other intangibles (2.66 ) (2.69 ) (2.47 ) (2.66 ) (2.47 ) Tangible equity to tangible assets ratio (non-GAAP) 7.82 % 7.59 % 8.17 % 7.82 % 8.17 % TANGIBLE BOOK VALUE Book value per share (GAAP basis) $ 30.27 $ 29.54 $ 32.95 $ 30.27 $ 32.95 Impact of excluding goodwill and other intangibles (8.33 ) (8.36 ) (8.33 ) (8.33 ) (8.33 ) Tangible book value per share (non-GAAP) $ 21.94 $ 21.18 $ 24.62 $ 21.94 $ 24.62 ADJUSTED LOAN LOSS ALLOWANCE Allowance for loan losses $ 19,555 $ 19,189 $ 18,678 $ 19,555 $ 18,678 Credit discount on purchased loans 3,068 3,477 4,474 3,068 4,474 Adjusted loan loss allowance $ 22,623 $ 22,666 $ 23,152 $ 22,623 $ 23,152 Total loans, net $ 2,186,449 $ 2,119,415 $ 1,946,580 $ 2,186,449 $ 1,946,580 Subtract: PPP loans, net (74 ) (95 ) (12,239 ) (74 ) (12,239 ) Total loans less PPP loans, net $ 2,186,375 $ 2,119,320 $ 1,934,341 $ 2,186,375 $ 1,934,341 Adjusted loan loss allowance to total loans less PPP loans, net 1.03 % 1.07 % 1.20 % 1.03 % 1.20 % Allowance for loan losses to total loans less PPP loans, net 0.89 % 0.91 % 0.97 % 0.89 % 0.97 % 
- Earnings produced a return on average tangible common equity of 14.50% for the fourth quarter of 2022, compared to 15.74% in the previous quarter and 17.63% for the same quarter in the prior year (non-GAAP).