AMNB American National Bankshares Inc

American National Bankshares Inc. (Nasdaq: AMNB) (“American National” or the “Company”) today reported first quarter 2023 earnings of $9.2 million, or $0.86 per diluted common share. Those results compare to earnings of $9.0 million, or $0.84 per diluted common share, during the same quarter in the prior year, and earnings of $8.0 million, or $0.76 per diluted common share, for the fourth quarter of 2022. Earnings produced a return on average tangible common equity of 15.95% for the first quarter of 2023, compared to 14.50% in the previous quarter and 14.14% for the same quarter in the prior year (non-GAAP).

President and Chief Executive Officer, Jeffrey V. Haley, commented, “I could not be prouder of our Company’s resiliency in the face of unfortunate turmoil in the banking industry over the course of the past few weeks. The failure of two large regional banks certainly created challenges for the regional and community banking industry, but our industry remains strong and American National remains strong. Our customers have continued to place trust in us, and we continue to serve their needs. Our balance sheet maintains strong liquidity and capital, and we were able to deliver a solid quarter of earnings performance for our shareholders. While economic activity in our markets is still fairly strong, we are seeing indications of slowing and have consciously narrowed our lending focus in the face of an uncertain economic future. We have placed additional emphasis on deposit gathering but continue to see a shift in funding mix and rising funding costs associated with higher market rates and fiscal policy. While certainly this represents a headwind, we are confident in our ability to pivot and continue to build franchise value.”

First quarter 2023 highlights include:

• Average loans held for investment grew $17.8 million, or 3.3% annualized, during the first quarter as compared to the previous quarter.
• Average deposits declined by 8.8% annualized during the quarter, while period-end deposits increased $15.9 million, or 2.5% annualized.
• Fully taxable equivalent (“FTE”) net interest margin was 3.20% for the quarter, down 13 basis points from 3.33% in the fourth quarter of 2022 and up 57 basis points from 2.63% in the same quarter of the prior year (non-GAAP).
• Noninterest revenues increased $762 thousand, or 21.1%, when compared to the previous quarter, and decreased $1.2 million, or 21.9%, compared to the same quarter in the prior year.
• Noninterest expense decreased $1.2 million, or 7.0% when compared to the previous quarter, and increased $299 thousand, or 1.9%, when compared to the same quarter in the prior year.
• On January 1, 2023, the Company adopted the current expected credit losses (“CECL”) standard for estimating credit losses, which resulted in increases of $5.2 million in the allowance for credit losses (“ACL”), $305 thousand in the reserve liability for unfunded commitments, $1.2 million in deferred tax assets and decreased retained earnings by $4.2 million.
• The Company recognized a provision for credit losses on loans in the first quarter of 2023 of $329 thousand compared to $1.2 million in the fourth quarter of 2022 and a negative provision in the first quarter of 2022 of $758 thousand.
• Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were 0.04% for the first quarter of 2023, compared to 0.15% in the previous quarter and (0.01%) in the same quarter in the prior year.
• Nonperforming assets as a percentage of total assets were 0.06% at March 31, 2023 and March 31, 2022 and 0.05% at December 31, 2022.

NET INTEREST INCOME

Net interest income for the first quarter of 2023 decreased by $1.1 million, or 4.4%, to $23.2 million compared to $24.3 million for the fourth quarter of 2022. The first quarter of 2023 compared to the same quarter of 2022 reflected an increase of $2.8 million, or 13.5%. The FTE net interest margin for the quarter was 3.20%, down from 3.33% in the prior quarter and up from 2.63% in the same quarter a year ago (non-GAAP). The margin contraction relative to the previous quarter resulted from funding costs increasing more than earning asset yields. The yield on average earning assets increased 22 basis points quarter-over-quarter, while the cost of average interest-bearing liabilities rose 55 basis points due to an acceleration in deposit repricing, shift of the deposit mix into interest-bearing accounts and increased reliance on short-term borrowings. The cost of interest-bearing deposits increased to 0.88% in the first quarter, compared to 0.39% in the previous quarter and 0.12% in the same quarter of the prior year. The improvement in net interest margin relative to the first quarter of 2022 is a reflection of an increase in the yield on average earning assets of 116 basis points partially offset by a 97 basis point rise in the cost of average interest-bearing liabilities.

ASSET QUALITY

Nonperforming assets (“NPAs”) totaled $2.0 million as of March 31, 2023 and 2022, respectively, up $564 thousand from December 31, 2022. NPAs as a percentage of total assets were 0.06% at March 31, 2023 and 2022, respectively, compared to 0.05% at December 31, 2022. The Company recorded a provision for credit losses for the first quarter of 2023 of $329 thousand compared to $1.2 million in the previous quarter and a negative provision of $758 thousand in the first quarter of the previous year. The first quarter of 2023 and fourth quarter of 2022 provisions were the result of loan growth and replenishment of the allowance for net charge-off activity. The negative provision expense for the first quarter of 2022 was the result of improvement in economic conditions, ongoing low charge-off and delinquency rates, and overall strong asset quality metrics from the prior quarter.

The allowance for credit losses on loans increased $5.2 million from the fourth quarter of 2022 resulting from the Day 1 adjustment for the adoption of CECL to $24.9 million at March 31, 2023 as compared to $19.6 million at December 31, 2022. The reserve for unfunded commitments increased $305 thousand to $682 thousand as a result of the Day 1 adoption of CECL. Annualized net charge-offs (recoveries) as a percentage of average loans outstanding were 0.04% for the first quarter of 2023, compared to 0.15% in the previous quarter and (0.01%) in the same quarter in the prior year. The ACL as a percentage of loans held for investment was 1.13% at March 31, 2023, compared to 0.89% at December 31, 2022, and 0.90% at March 31, 2022.

NONINTEREST INCOME

Noninterest income increased $762 thousand, or 21.1%, to $4.4 million for the quarter ended March 31, 2023 from $3.6 million in the prior quarter and decreased $1.2 million, or 21.9%, from the same quarter in the prior year. The increase in the first quarter of 2023 from the fourth quarter of 2022 was primarily the result of increased income from small business investment companies of $590 thousand and income from insurance commissions of $265 thousand included in other fees and commissions.

The first quarter of 2023 compared to the first quarter of 2022 reflected a decrease in the majority of line items, with the most significant decrease in mortgage banking income of $529 thousand, or 78.6%, and a decrease in income from insurance investments of $418 thousand, or 93.5%, partially offset by increased interchange fees of $129 thousand, or 13.1%, and $216 thousand, or 81.2%, in other fees and commissions.

NONINTEREST EXPENSE

Noninterest expense for the first quarter of 2023 amounted to $15.6 million, down $1.2 million, or 7.0%, when compared to the $16.8 million for the previous quarter and up $299 thousand, or 1.9%, from $15.3 million during the same quarter in the previous year. The decrease in the first quarter compared to the fourth quarter of 2022 was the result of reduced incentive accruals in salaries and employee benefits of $638 thousand partially offset by a $262 thousand increase in payroll taxes and retirement contributions; reduced costs in the first quarter associated with deferred compensation programs of $203 thousand; and one-time seasonal expenses and fraud losses included in the fourth quarter of 2022 of $300 thousand and $184 thousand, respectively.

The first quarter 2023 increase compared to the same quarter of 2022 was primarily due to a higher salary base partially offset by reduced incentive and commission expense.

INCOME TAXES

The effective tax rate for the three months ended March 31, 2023 was 21.19%, compared to 18.90% for the prior quarter and 21.49% for the same quarter in the prior year. The Company recognized a tax benefit in the fourth quarter in the prior year resulting from investment partnership income tax returns reducing the effective tax rate for that period. The decrease in effective tax rate from the March 31, 2022 quarter was attributable to changes in pre-tax earnings and the levels of permanent tax differences.

BALANCE SHEET

Total assets at March 31, 2023 were $3.1 billion, an increase of $9.8 million or 1.3% annualized from December 31, 2022 and a decrease of $270.6 million, or 8.1%, from March 31, 2022.

At March 31, 2023, loans held for investment (net of deferred fees and costs) were $2.2 billion, an increase of $13.1 million, or 2.4% annualized, from December 31, 2022. Loans held for investment (net of deferred fees and costs) increased $211.5 million, or 10.6%, from March 31, 2022.

Investment securities available for sale amounted to $586.4 million at March 31, 2023, a decrease of $21.7 million, or 3.6%, from December 31, 2022, and a decrease of $99.8 million, or 14.5%, compared to March 31, 2022. The unrealized loss on available for sale securities was $62.4 million at March 31, 2023 compared to $71.0 million at December 31, 2022 and $33.0 million at March 31, 2022. The improvement relative to the prior quarter was primarily the result of declines in market yields for longer term securities. 65% of the market value of the securities portfolio is unencumbered and could be used to provide additional liquidity if needed.

Deposits amounted to $2.6 billion at March 31, 2023, with growth of $15.9 million, or 2.5% annualized, from December 31, 2022 and decreased $314.0 million, or 10.7%, compared to March 31, 2022. Deposit accounts that were uninsured amounted to 39.9% of total deposits (29.3% excluding collateralized municipal deposits) at March 31, 2023.

Borrowings from the Federal Home Loan Bank of Atlanta (“FHLB”) totaled $25.0 million at March 31, 2023, down from $100.5 million at December 31, 2022. The Company had no FHLB borrowings at March 31, 2022. The Company’s remaining credit availability from the FHLB was $723.3 million as of March 31, 2023, $485.8 million of which could be accessed without pledging additional collateral.

The Company continues to be well-capitalized as defined by regulators, with tangible common equity to tangible assets of 8.06% at March 31, 2023 compared to 7.82% at December 31, 2022 and compared to 7.54% at March 31, 2022 (non-GAAP). The Company’s preliminary common equity Tier 1, Tier 1, total, and Tier 1 leverage capital ratios were 11.75%, 12.90%, 13.93% and 10.46%, respectively, at March 31, 2023.

ABOUT AMERICAN NATIONAL

American National is a multi-state bank holding company with total assets of approximately $3.1 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 STATEMENTSCertain statements in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding anticipated changes in the interest rate environment, future economic conditions and the impacts of current economic uncertainties, and projections, predictions, expectations, or beliefs about future events or results, or otherwise are not statements of historical fact. Such forward-looking statements are based on certain assumptions as of the time they are made, and are inherently subject to known and unknown risks and uncertainties, some of which cannot be predicted or quantified, that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “seek to,” “opportunity,” “potential,” “continue,” “confidence” or words of similar meaning, or other statements concerning opinions or judgment of our management about future events. Although we believe that our expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of our existing knowledge of our business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, us will not differ materially from any projected future results, performance, achievements or trends expressed or implied by such forward-looking statements. Actual future results, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in: the level of inflation; financial market volatility including the level of interest rates, could affect the values of financial instruments and the amount of net interest income earned; the adequacy of the level of the Company’s allowance for credit losses, the amount of credit loss provisions required in future periods, and the failure of assumptions underlying the allowance for credit losses; general economic or business conditions, either nationally or in the market areas in which the Company does business, may be less favorable than expected, resulting in deteriorating credit quality, reduced demand for credit, or a weakened ability to generate deposits; competition among financial institutions may increase, and competitors may have greater financial resources and develop products and technology that enable those competitors to compete more successfully than the Company; businesses that the Company is engaged in may be adversely affected by legislative or regulatory changes, including changes in accounting standards and tax laws; the ability to recruit and retain key personnel; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable and secure electronic systems; the effects of climate change, natural disasters, and extreme weather events; geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts of threats or terrorism and/or military conflicts, negatively impacting business and economic conditions in the U.S. and abroad; the impact of health emergencies, epidemics or pandemics, including the COVID-19 pandemic; risks related to environmental, social and governance practices; risks associated with mergers, acquisitions, and other expansion activities; and other factors described from time to time in the Company’s reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
	March 31
	2023				2022
Assets
Cash and due from banks	$	45,090			$	34,506
Interest-bearing deposits in other banks		58,340				452,562
Securities available for sale, at fair value		586,407				686,176
Restricted stock, at cost		9,319				8,484
Loans held for sale		650				2,524
Loans, net of deferred fees and costs		2,199,517				1,988,008
Less allowance for credit losses - loans		(24,861	)			(17,988	)
Net Loans		2,174,656				1,970,020
Premises and equipment, net		32,440				34,001
Assets held-for-sale		1,382				1,382
Other real estate owned, net		27				143
Goodwill		85,048				85,048
Core deposit intangibles, net		3,085				4,297
Bank owned life insurance		29,853				29,159
Other assets		49,358				37,936
Total assets	$	3,075,655			$	3,346,238
Liabilities
Demand deposits -- noninterest-bearing	$	962,247			$	1,024,778
Demand deposits -- interest-bearing		481,499				539,252
Money market deposits		619,621				759,782
Savings deposits		252,121				271,384
Time deposits		296,762				331,011
Total deposits		2,612,250				2,926,207
Customer repurchase agreements		63,220				38,527
Other short-term borrowings		25,000				-
Long-term borrowings		28,359				28,257
Other liabilities		17,785				18,173
Total liabilities		2,746,614				3,011,164
Shareholders' equity
Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding		-				-
Common stock, $1 par value, 20,000,000 shares authorized, 10,626,066 shares outstanding at March 31, 2023 and 10,713,958 shares outstanding at March 31, 2022		10,536				10,638
Capital in excess of par value		141,713				144,848
Retained earnings		225,409				207,373
Accumulated other comprehensive loss, net		(48,617	)			(27,785	)
Total shareholders' equity		329,041				335,074
Total liabilities and shareholders' equity	$	3,075,655			$	3,346,238

American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
	For the Three Months Ended
	3/31/23				12/31/22				3/31/22
Interest and Dividend Income:
Interest and fees on loans	$	24,912			$	23,544			$	18,788
Interest and dividends on securities:
Taxable		2,684				2,721				2,239
Tax-exempt		65				110				90
Dividends		170				126				113
Other interest income		471				415				177
Total interest and dividend income		28,302				26,916				21,407
Interest Expense:
Interest on deposits		3,486				1,597				569
Interest on short-term borrowings		1,205				633				6
Interest on long-term borrowings		387				398				379
Total interest expense		5,078				2,628				954
Net Interest Income		23,224				24,288				20,453
Provision for (recovery of) credit losses		329				1,159				(758	)
Net Interest Income After Provision for
(Recovery of) Credit Losses		22,895				23,129				21,211
Noninterest Income:
Wealth management income		1,568				1,522				1,809
Service charges on deposit accounts		556				597				689
Interchange fees		1,110				1,117				981
Other fees and commissions		482				207				266
Mortgage banking income		144				176				673
Securities losses, net		(68	)			-				-
Income (loss) from Small Business Investment Companies		327				(263	)			493
Income from insurance investments		29				103				447
(Losses) gains on premises and equipment, net		(105	)			(146	)			4
Other		329				297				238
Total noninterest income		4,372				3,610				5,600
Noninterest Expense:
Salaries and employee benefits		9,172				9,446				8,598
Occupancy and equipment		1,444				1,499				1,542
FDIC assessment		207				209				239
Bank franchise tax		510				501				476
Core deposit intangible amortization		283				300				330
Data processing		851				864				847
Software		444				417				363
Other real estate owned, net		-				(1	)			(1	)
Other		2,737				3,599				2,955
Total noninterest expense		15,648				16,834				15,349
Income Before Income Taxes		11,619				9,905				11,462
Income Taxes		2,462				1,872				2,463
Net Income	$	9,157			$	8,033			$	8,999
Net Income Per Common Share:
Basic	$	0.86			$	0.76			$	0.84
Diluted	$	0.86			$	0.76			$	0.84
Weighted Average Common Shares Outstanding:
Basic		10,630,571				10,607,678				10,754,287
Diluted		10,632,681				10,609,937				10,756,902

American National Bankshares Inc.
Financial Highlights
Unaudited
(Dollars in thousands, except per share data)
	1st Qtr				4th Qtr				1st Qtr
	2023				2022				2022
EARNINGS
Interest income	$	28,302			$	26,916			$	21,407
Interest expense	5,078				2,628				954
Net interest income	23,224				24,288				20,453
Provision for (recovery of) credit losses	329				1,159				(758		)
Noninterest income	4,372				3,610				5,600
Noninterest expense	15,648				16,834				15,349
Income taxes	2,462				1,872				2,463
Net income	9,157				8,033				8,999
PER COMMON SHARE
Net income per share - basic	$	0.86			$	0.76			$	0.84
Net income per share - diluted	0.86				0.76				0.84
Cash dividends paid	0.30				0.30				0.28
Book value per share	30.97				30.27				31.27
Book value per share - tangible (a)	22.67				21.94				22.94
Closing market price	31.70				36.93				37.68
FINANCIAL RATIOS
Return on average assets	1.20		%		1.05		%		1.08		%
Return on average common equity	11.32				10.15				10.24
Return on average tangible common equity (a)	15.95				14.50				14.14
Average common equity to average assets	10.58				10.33				10.59
Tangible common equity to tangible assets (a)	8.06				7.82				7.54
Net interest margin, taxable equivalent	3.20				3.33				2.63
Efficiency ratio (a)	55.21				58.82				57.53
Effective tax rate	21.19				18.90				21.49
PERIOD-END BALANCES
Securities	$	595,726			$	620,713			$	694,660
Loans held for sale	650				1,061				2,524
Loans, net	2,199,517				2,186,449				1,988,008
Goodwill and other intangibles	88,133				88,415				89,345
Assets	3,075,655				3,065,902				3,346,238
Assets - tangible (a)	2,987,522				2,977,487				3,256,893
Interest-bearing deposits	1,650,003				1,585,726				1,901,429
Noninterest bearing demand deposits	962,247				1,010,602				1,024,778
Customer repurchase agreements	63,220				370				38,527
Other short-term borrowings	25,000				100,531				-
Long-term borrowings	28,359				28,334				28,257
Shareholders' equity	329,041				321,174				335,074
Shareholders' equity - tangible (a)	240,908				232,759				245,729
AVERAGE BALANCES
Securities (b)	$	677,938			$	713,996			$	710,873
Loans held for sale	611				972				4,324
Loans, net	2,186,475				2,168,636				1,966,586
Interest-earning assets	2,910,165				2,920,992				3,126,561
Goodwill and other intangibles	88,311				88,593				89,525
Assets	3,056,918				3,066,362				3,320,314
Assets - tangible (a)	2,968,607				2,977,769				3,230,789
Interest-bearing deposits	1,614,273				1,609,503				1,880,873
Noninterest bearing demand deposits	969,001				1,031,630				1,000,020
Customer repurchase agreements	6,597				704				41,337
Other short-term borrowings	98,497				62,004				-
Long-term borrowings	28,342				28,318				28,241
Shareholders' equity	323,497				316,697				351,539
Shareholders' equity - tangible (a)	235,186				228,104				262,014
American National Bankshares Inc.
Financial Highlights
Unaudited
	1st Qtr				4th Qtr				1st Qtr
	2023				2022				2022
CAPITAL
Weighted average shares outstanding - basic	10,630,571				10,607,678				10,754,287
Weighted average shares outstanding - diluted	10,632,681				10,609,937				10,756,902
COMMON STOCK REPURCHASE PROGRAM
Weighted average shares outstanding - basic	20,443				3,269				88,929
Weighted average shares outstanding - diluted	$	32.98			$	36.44			$	38.18
ALLOWANCE FOR CREDIT LOSSES - LOANS
Beginning balance	$	19,555			$	19,189			$	18,678
Day 1 Impact of CECL adoption	5,192				-				-
Provision for (recovery of) credit losses	329				1,159				(758		)
Charge-offs	(395		)		(834		)		(37		)
Recoveries	180				41				105
Ending balance	$	24,861			$	19,555			$	17,988
LOANS
Construction and land development	$	215,975			$	197,525			$	148,276
Commercial real estate - owner occupied	415,106				418,462				402,306
Commercial real estate - non-owner occupied	822,347				827,728				752,817
Residential real estate	343,548				338,132				295,949
Home equity	91,408				93,740				89,593
Commercial and industrial	304,486				304,247				291,697
Consumer	6,647				6,615				7,370
Total	$	2,199,517			$	2,186,449			$	1,988,008
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing	$	-			$	16			$	71
Nonaccrual	1,887				1,307				1,762
Other real estate owned and repossessions	80				80				143
Nonperforming assets	$	1,967			$	1,403			$	1,976
ASSET QUALITY RATIOS
Allowance for credit losses - loans to total loans	1.13		%		0.89		%		0.90		%
Allowance for credit losses - loans to nonperforming loans	1,317.49				1,478.08				981.34
Nonperforming assets to total assets	0.06				0.05				0.06
Nonperforming loans to total loans	0.09				0.06				0.09
Annualized net charge-offs (recoveries) to average loans to average loans	0.04				0.15				(0.01		)
OTHER DATA
Fiduciary assets at period-end (c) (d)	$	775,379			$	736,121			$	727,022
Retail brokerage assets at period-end (c) (d)	$	420,540			$	413,235			$	405,742
Number full-time equivalent employees (e)	357				359				338
Number of full service offices	26				26				26
Number of loan production offices	1				1				1
Number of ATMs	34				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 quarter.

	American National Bankshares Inc.
	Net Interest Income Analysis
	For the Three Months Ended March 31, 2023 and 2022
	(Dollars in thousands)
	Unaudited
								Interest
		Average Balance						Income/Expense (a)					Yield/Rate
		2023			2022			2023			2022		2023		2022
Assets:
Total loans (b)	$	2,187,086		$	1,970,910		$	24,957		$	18,822		4.57	%	3.83	%
Securities:
Taxable		665,635			692,998			2,854			2,351		1.72		1.36
Tax exempt		12,303			17,875			82			115		2.67		2.56
Total securities		677,938			710,873			2,936			2,466		1.74		1.39
Deposits in other banks		45,141			444,778			471			177		4.23		0.16
Total interest-earning assets		2,910,165			3,126,561			28,364			21,465		3.91		2.75
Non-earning assets		146,753			193,753
Total assets	$	3,056,918		$	3,320,314
Liabilities and Stockholders' Equity:
Deposits:
Demand	$	474,334		$	525,508			174			37		0.15		0.03
Savings and money market		864,008			1,016,443			2,288			108		1.07		0.04
Time		275,931			338,922			1,024			424		1.51		0.51
Total deposits		1,614,273			1,880,873			3,486			569		0.88		0.12
Customer repurchase agreements		6,597			41,337			65			6		4.02		0.06
Other short-term borrowings		98,497			-			1,140			-		4.63		-
Long-term borrowings		28,342			28,241			387			379		5.46		5.37
Total interest-bearing liabilities		1,747,709			1,950,451			5,078			954		1.17		0.20
Noninterest bearing demand deposits		969,001			1,000,020
Other liabilities		16,711			18,304
Shareholders' equity		323,497			351,539
Total liabilities and shareholders' equity	$	3,056,918		$	3,320,314
Interest rate spread													2.74	%	2.55	%
Net interest margin													3.20	%	2.63	%
Net interest income (taxable equivalent basis)								23,286			20,511
Less: Taxable equivalent adjustment (c)								62			58
Net interest income							$	23,224		$	20,453
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 and loans held for sale 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)
	1st Qtr				4th Qtr				1st Qtr
		2023				2022				2022
EFFICIENCY RATIO
Noninterest expense	$	15,648			$	16,834			$	15,349
Subtract: loss on sale of OREO		-				2				-
Subtract: core deposit intangible amortization		(283	)			(300	)			(330	)
	$	15,365			$	16,536			$	15,019
Net interest income	$	23,224			$	24,288			$	20,453
Tax equivalent adjustment		62				68				58
Noninterest income		4,372				3,610				5,600
Add: loss on securities		68				-				-
Add/subtract: (gain)/loss on fixed assets		105				146				(4	)
	$	27,831			$	28,112			$	26,107
Efficiency ratio		55.21	%			58.82	%			57.53	%
TAX EQUIVALENT NET INTEREST INCOME
Non-GAAP measures:
Interest income - loans	$	24,957			$	23,585			$	18,822
Interest income - investments and other		3,407				3,399				2,643
Interest expense - deposits		(3,486	)			(1,597	)			(569	)
Interest expense - customer repurchase agreements		(65	)			-				(6	)
Interest expense - other short-term borrowings		(1,140	)			(633	)			-
Interest expense - long-term borrowings		(387	)			(398	)			(379	)
Total net interest income	$	23,286			$	24,356			$	20,511
Less non-GAAP measures:
Tax benefit on nontaxable interest - loans		(45	)			(41	)			(34	)
Tax benefit on nontaxable interest - securities		(17	)			(27	)			(24	)
GAAP measures	$	23,224			$	24,288			$	20,453
NET INTEREST MARGIN
Net interest margin (FTE) (non-GAAP)		3.20	%			3.33	%			2.63	%
Net interest margin (GAAP)		3.19				3.32				2.63
RETURN ON AVERAGE TANGIBLE EQUITY
Return on average equity (GAAP basis)		11.32	%			10.15	%			10.24	%
Impact of excluding average goodwill and other intangibles		4.63				4.35				3.90
Return on average tangible equity (non-GAAP)		15.95	%			14.50	%			14.14	%
TANGIBLE EQUITY TO TANGIBLE ASSETS
Equity to assets ratio (GAAP basis)		10.70	%			10.48	%			10.01	%
Impact of excluding goodwill and other intangibles		(2.64	)			(2.66	)			(2.47	)
Tangible equity to tangible assets ratio (non-GAAP)		8.06	%			7.82	%			7.54	%
TANGIBLE BOOK VALUE
Book value per share (GAAP basis)	$	30.97			$	30.27			$	31.27
Impact of excluding goodwill and other intangibles		(8.30	)			(8.33	)			(8.33	)
Tangible book value per share (non-GAAP)	$	22.67			$	21.94			$	22.94
ADJUSTED CREDIT LOSS ALLOWANCE - LOANS
Allowance for credit losses - loans	$	24,861			$	19,555			$	17,988
Credit discount on purchased loans		-				3,068				4,001
Adjusted credit loss allowance - loans	$	24,861			$	22,623			$	21,989
Total loans, net	$	2,199,517			$	2,186,449			$	1,988,008
Subtract: PPP loans, net		(65	)			(74	)			(689	)
Total loans less PPP loans, net	$	2,199,452			$	2,186,375			$	1,987,319
Adjusted credit loss allowance - loans to total loans less PPP loans, net		1.13	%			1.03	%			1.11	%
Allowance for credit losses - loans to total loans less PPP loans, net		1.13	%			0.89	%			0.91	%

Contact:Jeffrey W. FarrarSenior Executive Vice President, COO & CFO(434)773-2274farrarj@amnb.com