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American National Bankshares Inc. Reports First Quarter 2016 Earnings

4/21/2016

For more information, contact:
William W. Traynham, Chief Financial Officer
434-773-2242
traynhamw@amnb.com

Traded: NASDAQ           Global Select Market Symbol: AMNB

  • Q1 2016 net income of $4.1 million
  • Diluted EPS $0.48 for Q1 2016 compared to $0.40 for Q1 2015
  • Net interest margin of 3.67% for Q1 2016
  • Average shareholders’ equity for Q1 of $199.5 million is 12.86% of average assets
  • Loan growth for Q1 2016 2.9%

Danville, VA — American National Bankshares Inc. (“American National”) (NASDAQ:

AMNB), parent company of American National Bank and Trust Company, today

announced net income for the first quarter of 2016 of $4,128,000 compared to $3,515,000

for the first quarter of 2015, a $613,000 or 17.4% increase. Basic and diluted net income

per common share was $0.48 for the first quarter of 2016 compared to $0.40 for the 2015

quarter. Net income for the first quarter of 2016 produced a return on average assets of

1.06%, a return on average equity of 8.28%, and a return on average tangible equity of

12.86%.

Financial Performance and Overview

     Jeffrey V. Haley, President and Chief Executive Officer, reported, As we start

2016, we are seeing increases in business activity throughout our market areas and that is

resulting in an increased demand for new credit.

     “One of our primary, and favorite, missions is to accommodate the credit needs of

our customers. This past year, from March 2015 to March 2016, our loan portfolio had

organic growth of $68.7 million (7.1%). During the first quarter of 2016, our loan portfolio

grew $29.0 million (2.9%).

     “Our primary funding source for loans is deposits, especially core deposits. During

the past year, from March 2015 to March 2016, our deposits grew $49.8 million (4.0%).

During the first quarter of 2016, our deposits grew $29.8 million (2.4%).

     “We’re very encouraged by the increasing level of business activity.

     “On the earnings side, our net income for the first quarter of 2016 was $4,128,000,

up from $3,515,000 in the first quarter of 2015, an increase of $613,000 or 17.4%.

     “Net interest income is up by $206,000 (1.7%) in the first quarter of 2016 compared

to the first quarter of 2015.

     “Provision for loan losses was down $550,000 in the first quarter of 2016, compared

to the first quarter of 2015. Provision expense in the 2015 quarter was unusually large, and

was related to the results of the quarterly review of expected cash flows from certain

purchased credit impaired loans.

     “Noninterest income was higher in the first quarter of 2016 by $141,000 (4.5%),

compared to the first quarter of 2015. The improvement related mostly to mortgage

banking, electronic banking fees and securities gains.

     “Noninterest expense was decreased in the 2016 quarter by $129,000 (1.3%). The

lower level of expense related mostly to nonrecurring MainStreet acquisition expenses paid

in the first quarter of 2015.

     Haley concluded, “We had an excellent start to 2016 on our balance sheet, as

evidenced by the growth in loans and deposits. We expect the growth in earning assets will

fuel increasing net interest income in coming quarters and continued high asset quality will

control provision for loan losses expense. We are making concerted efforts to improve

noninterest income and efficiently and effectively control noninterest expense. All things

considered, we feel good about the first quarter and we are optimistic about the remainder

of 2016.”

Capital

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

requirements.

     For the quarter ended March 31, 2016, average shareholders’ equity was 12.86%

of average assets, compared to 12.91% for the quarter ended March 31, 2015.

     Book value per common share was $23.27 at March 31, 2016, compared to

$22.58 at March 31, 2015.

     Tangible book value per common share was $17.90 at March 31, 2016, compared

to $17.09 at March 31, 2015.

Credit Quality Measurements

     Non-performing assets ($5,276,000 of non-performing loans and $1,493,000 of

other real estate owned) represented 0.43% of total assets at March 31, 2016, compared

to 0.50% at March 31, 2015.

     Annualized net charge offs to average loans were minus one basis point (-0.01%),

a net recovery, for the 2016 first quarter, compared to eight basis points (0.08%) for the

same quarter in 2015.

     Other real estate owned was $1,493,000 at March 31, 2016, compared to

$2,653,000 at March 31, 2015, a decrease of $1,160,000 or 43.7%.

Acquisition related financial impact

     The purchase accounting adjustments related to our two recent acquisitions have

had and continue to have a positive impact on net interest income and income before

income tax for American National. The impact of the adjustments is summarized below

(dollars in thousands):

Acquisition related financial impact March 31, 2016 March 31, 2015
Net interest income $  1,001 $  1,113
Income before income taxes $     713

$     813

    
     During the first quarter 2016, the Company received two substantial payoffs of

purchased credit impaired loans from our 2011 acquisition that resulted in $460,000 in

current quarter cash-basis accretion income. Of the $460,000, approximately $117,000

related to a consumer purpose loan. This is a relatively small segment of our loan portfolio

and the additional accretion had a material and favorable impact on the segment’s yield for

the quarter. In addition, the 2016 quarter was negatively impacted by the amortization of a

time deposit valuation adjustment related to the MainStreet acquisition of $72,000, which

increased interest expense.

Net Interest Income

     Net interest income before the provision for loan losses increased to $12,584,000

in the first quarter of 2016 from $12,378,000 in the first quarter of 2015, an increase of

$206,000 or 1.7%.

     For the 2016 quarter, the net interest margin was 3.67% compared to 3.73% for

the same quarter in 2015, a decrease of six basis points or 0.06%.

Provision for Loan Losses and Allowance for Loan Losses

     Provision expense for the first quarter of 2016 was $50,000 compared to $600,000

for the first quarter of 2015, a decrease of $550,000 or 91.7%.

     The allowance for loan losses as a percentage of total loans was 1.23% at March

31, 2016 compared to 1.33% at March 31, 2015.

     There was significant growth in the loans outstanding in the first quarter 2016, a

net of $29.0 million or 2.9%. The need for additions to the allowance for loan losses was

reduced by improvement in various qualitative factors used in the determination of the

allowance, notably asset quality and local economic conditions. As noted in the Credit

Quality discussion, non-performing assets, charge-offs, and other real estate owned are

all improved over the past year.

     Provision expense in the 2015 quarter was negatively impacted by the regular

quarterly review of expected cash flows on certain purchased credit impaired loans.

Noninterest Income

     Noninterest income totaled $3,297,000 in the first quarter of 2016, compared with

$3,156,000 in the first quarter of 2015, an increase of $141,000 or 4.5%.

     Trust fees showed a decrease of $22,000 directly related to volatility in the equity

markets. Other fees and commissions showed an increase of $84,000 mostly related to

higher levels of VISA debit card income. Mortgage banking income showed a $70,000

increase resulting from increases in the volume of originations. Securities gains showed

an increase of $56,000 related to actions resulting from asset/liability strategy decisions.

We showed a $68,000 decrease in income from our investment in Small Business

Investment Corporations (SBIC).

Noninterest Expense

     Noninterest expense totaled $9,918,000 in the first quarter of 2016, compared to

$10,047,000 in the first quarter of 2015, a decrease of $129,000 or 1.3%. The first

quarter of 2015 was negatively impacted by $359,000 in acquisition related expenses

related to the acquisition of MainStreet.

About American National

     American National is a multi-state bank holding company with total assets of

approximately $1.6 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 25 banking offices

and two loan production offices. American National Bank also manages an additional

$760 million of trust, investment and brokerage assets in its Trust and Investment

Services Division. Additional information about the company and the bank is available

on the bank's website at www.amnb.com.

     Shares of American National are traded on the NASDAQ Global Select Market

under the symbol "AMNB."

Forward-Looking Statements

     This press release contains forward-looking statements within the meaning of federal securities

laws. Certain of the statements involve significant risks and uncertainties. The statements herein are based

on certain assumptions and analyses by American National and are factors it believes are appropriate in the

circumstances. Actual results could differ materially from those contained in or implied by such statements

for a variety of reasons including, but not limited to: changes in interest rates; changes in accounting

principles, policies or guidelines; significant changes in the economic scenario; significant changes in

regulatory requirements; significant changes in securities markets; and changes in technology and

information security; and changes regarding acquisitions and dispositions. Consequently, all forwardlooking

statements made herein are qualified by these cautionary statements and the cautionary language in

American National's most recent Form 10-K report and other documents filed with the Securities and

Exchange Commission. American National does not undertake to update forward-looking statements to

reflect circumstances or events that occur after the date the forward-looking statements are made.

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