AMNB American National Bankshares Inc

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 2018 of $5,812,000 compared to $4,063,000 for the first quarter of 2017, a $1,749,000 or 43.0% increase. Basic and diluted net income per common share was $0.67 for the first quarter of 2018 compared to $0.47 for the 2017 quarter. Net income for the first quarter of 2018 produced a return on average assets of 1.28%, a return on average equity of 11.10%, and a return on average tangible equity of 14.29%.

Financial Performance and OverviewJeffrey V. Haley, President and Chief Executive Officer, reported, “We were pleased with our earnings for the first quarter of 2018. Earnings were strong, $5.8 million compared to $4.1 million for the comparable quarter of 2017, a 43.0% increase. There were two major causes of the increase: greater interest income and lower corporate taxes.

“The main driver was higher net interest income, resulting mostly from greater interest income on the loan portfolio. Net interest income increased, resulting from higher yields and higher loan volume. Average loan volume for the 2018 quarter was up $142.5 million or 11.9% compared to the first quarter of 2017. First quarter of 2018 compared to first quarter of 2017, loans are up $101.3 million or 8.3%.

“In the first quarter of 2018, our balance sheet experienced $24 million in payoffs associated with several large multifamily loans moving into the permanent, non-recourse market. Most of these projects started as construction loans on our balance sheet and achieved their projected occupancy and overall performance levels, allowing them to move off our balance sheet, as we anticipated. Overall, our loans outstanding declined on a net basis by $14.9 million, or 1.1% from year end because of these payoffs. Of these payoffs, $20 million was received on the last business day of the quarter.

“We expect loan growth to continue in the remainder of 2018, though likely at a reduced pace compared to the past record year.

“Deposits have grown substantially. Average deposits for the 2018 quarter were $165.0 million or 11.9% greater than the comparable quarter of 2017. Year over year deposits are up $143.1 million or 10.1%.

“In this rising interest rate environment, our continuing challenge will be to maintain quality growth in assets and deposits and, at the same time, maintain and improve our net interest margin. Our margin for the 2018 quarter was 3.46%, a two basis point increase from the 2017 quarter.

“The other driver on the earnings increase was a substantial decrease in our corporate tax rate. The tax cut, enacted in December 2017, reduced our statutory rate to 21% from 35% and our effective rate to 19.5% from 28.3%.”

Haley concluded, “American National reports results on a quarterly basis, like most publicly traded companies. This inherently results in some volatility in the reporting process. We manage the Bank for the long term, and we believe this reflects the underlying strength of our balance sheet and franchise. We continue to be optimistic about our markets, our industry, and our community bank.”

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

Average shareholders’ equity was 11.52% of average assets for the quarter ended March 31, 2018, compared to 11.97% for the quarter ended March 31, 2017.

Book value per common share was $24.19 at March 31, 2018, compared to $23.64 at March 31, 2017.

Tangible book value per common share was $19.00 at March 31, 2018, compared to $18.38 at March 31, 2017.

Credit Quality MeasurementsNon-performing assets ($273,000 of 90 day past due loans, $1,598,000 of non-accrual loans and $1,716,000 of other real estate owned) represented 0.20% of total assets at March 31, 2018, compared to 0.30% at March 31, 2017.

Annualized net charge offs to average loans were zero basis points (0.00%) for the 2018 first quarter, unchanged from the same quarter in 2017.

Other real estate owned was $1,716,000 at March 31, 2018, compared to $1,664,000 at March 31, 2017, an increase of $52,000 or 3.1%.

Acquisition related financial impactThe acquisition accounting adjustments related to our two most recent acquisitions have had and continue to have a positive impact on net interest income and income before income tax. The impact of these adjustments is summarized below (dollars in thousands):

For the quarter ended March 31,		2018			2017
Net Interest Income		$	427		$	434
Income Before Income Taxes		$	350		$	269

The first quarter of 2018 includes $255,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $78,000 for the comparable quarter of 2017.

Net Interest IncomeNet interest income before the provision for loan losses increased to $14,543,000 in the first quarter of 2018 from $13,134,000 in the first quarter of 2017, an increase of $1,409,000 or 10.7%.

For the 2018 quarter, the net interest margin was 3.46% compared to 3.44% for the same quarter in 2017, an increase of two basis points.

Provision for Loan Losses and Allowance for Loan LossesProvision expense for the first quarter of 2018 was ($44,000) compared to $300,000 for the first quarter of 2017, a decrease of $344,000. The $44,000 negative provision related to a favorable adjustment on the specific reserve for an impaired loan loss allowance.

There was a decrease in the loans outstanding in the first quarter of 2018; loans were down from year-end of $14.9 million or 1.1%. This decline, combined with continued strong asset quality metrics, mitigated the need for provision expense.

The allowance for loan losses as a percentage of total loans was 1.03% at March 31, 2018 compared to 1.07% at March 31, 2017.

Noninterest IncomeNoninterest income totaled $3,333,000 in the first quarter of 2018, compared with $3,271,000 in the first quarter of 2017, an increase of $62,000 or 1.9%.

Mortgage banking income decreased $79,000 (14.9%) compared to the first quarter of 2017.

Securities gains decreased $138,000 (53.3%) compared to the first quarter of 2017. Gains in the 2018 quarter were almost entirely related to changes in the market value of equity securities held by the company, recorded in conformity with new accounting requirements.

SBIC income increased $129,000 compared to the first quarter of 2017. The Company believes this is a volatile revenue source.

Noninterest ExpenseNoninterest expense totaled $10,702,000 in the first quarter of 2018, compared to $10,441,000 in the first quarter of 2017, an increase of $261,000 or 2.5%.

The major factor affecting expense was salaries, which increased $198,000 or 4.1%, largely related to normal first of year adjustments. Total bank wide full-time equivalent employees were 326 at the end of the first quarter of 2018, unchanged from the first quarter of 2017.

Income taxes for the first quarter of 2018 were favorably impacted by the change in the corporate income tax rate. The effective tax rate for the 2018 quarter was 19.5%, compared to 28.3% for the same quarter of 2017.

About American NationalAmerican National is a multi-state bank holding company with total assets of approximately $1.8 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 and two loan production offices. American National Bank also manages an additional $826 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.

Forward-Looking StatementsThis 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 or law; significant changes in securities markets; changes in technology and information security; and changes regarding acquisitions and dispositions. Consequently, all forward-looking 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.

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
		March 31
ASSETS		2018				2017
Cash and due from banks		$	18,772			$	27,418
Interest-bearing deposits in other banks			57,881				67,372
Securities available for sale, at fair value			312,668				292,567
Restricted stock, at cost			5,221				5,492
Loans held for sale			1,792				1,872
Loans			1,321,221				1,219,958
Less allowance for loan losses			(13,575	)			(13,108	)
Net Loans			1,307,646				1,206,850
Premises and equipment, net			25,759				25,658
Other real estate owned, net			1,716				1,664
Goodwill			43,872				43,872
Core deposit intangibles, net			1,114				1,554
Bank owned life insurance			18,566				18,270
Accrued interest receivable and other assets			22,567				23,216
Total assets		$	1,817,574			$	1,715,805
Liabilities
Demand deposits -- noninterest-bearing		$	400,225			$	381,247
Demand deposits -- interest-bearing			233,973				222,356
Money market deposits			409,290				314,495
Savings deposits			134,171				126,774
Time deposits			381,592				371,232
Total deposits			1,559,251				1,416,104
Customer repurchase agreements			10,466				47,776
Long-term borrowings			-				9,985
Junior subordinated debt			27,851				27,749
Accrued interest payable and other liabilities			10,166				9,950
Total liabilities			1,607,734				1,511,564
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding			-				-
Common stock, $1 par, 20,000,000 shares authorized,
8,675,033 shares outstanding at March 31, 2018 and
8,638,744 shares outstanding at March 31, 2017			8,621				8,591
Capital in excess of par value			76,525				75,445
Retained earnings			131,299				121,590
Accumulated other comprehensive loss, net			(6,605	)			(1,385	)
Total shareholders' equity			209,840				204,241
Total liabilities and shareholders' equity		$	1,817,574			$	1,715,805

Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
		Three Months Ended
		March 31
		2018				2017
Interest and Dividend Income:
Interest and fees on loans		$	14,657			$	12,704
Interest and dividends on securities:
Taxable			1,324				1,154
Tax-exempt			419				635
Dividends			80				79
Other interest income			188				109
Total interest and dividend income			16,668				14,681
Interest Expense:
Interest on deposits			1,825				1,200
Interest on short-term borrowings			10				28
Interest on long-term borrowings			-				80
Interest on junior subordinated debt			290				239
Total interest expense			2,125				1,547
Net Interest Income			14,543				13,134
Provision for loan losses			(44	)			300
Net Interest Income After Provision
for Loan Losses			14,587				12,834
Noninterest Income:
Trust fees			929				912
Service charges on deposit accounts			551				523
Other fees and commissions			703				673
Mortgage banking income			450				529
Securities gains, net			121				259
Brokerage fees			222				192
Income from Small Business Investment Companies			155				26
Other			202				157
Total noninterest income			3,333				3,271
Noninterest Expense:
Salaries			4,997				4,799
Employee benefits			1,175				1,120
Occupancy and equipment			1,128				1,068
FDIC assessment			146				129
Bank franchise tax			281				256
Core deposit intangible amortization			77				165
Data processing			422				487
Software			305				279
Other real estate owned, net			30				43
Other			2,141				2,095
Total noninterest expense			10,702				10,441
Income Before Income Taxes			7,218				5,664
Income Taxes			1,406				1,601
Net Income		$	5,812			$	4,063
Net Income Per Common Share:
Basic		$	0.67			$	0.47
Diluted		$	0.67			$	0.47
Average Common Shares Outstanding:
Basic			8,669,728				8,633,219
Diluted			8,687,351				8,651,139

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
				1st Qtr				4th Qtr				1st Qtr					YTD				YTD
				2018				2017				2017					2018				2017
EARNINGS
Interest income				$	16,668			$	16,480			$	14,681				$	16,668			$	14,681
Interest expense					2,125				2,117				1,547					2,125				1,547
Net interest income					14,543				14,363				13,134					14,543				13,134
Provision for loan losses					(44	)			(74	)			300					(44	)			300
Noninterest income					3,333				3,804				3,271					3,333				3,271
Noninterest expense					10,702				11,021				10,441					10,702				10,441
Income taxes					1,406				5,100				1,601					1,406				1,601
Net income					5,812				2,120				4,063					5,812				4,063
PER COMMON SHARE
Income per share - basic				$	0.67			$	0.25			$	0.47				$	0.67			$	0.47
Income per share - diluted					0.67				0.24				0.47					0.67				0.47
Cash dividends paid					0.25				0.25				0.24					0.25				0.24
Book value per share					24.19				24.13				23.64					24.19				23.64
Book value per share - tangible (a)					19.00				18.92				18.38					19.00				18.38
Closing market price					37.60				38.30				37.25					37.60				37.25
FINANCIAL RATIOS
Return on average assets					1.28		%		0.47		%		0.96		%			1.28		%		0.96		%
Return on average equity					11.10				4.00				7.99					11.10				7.99
Return on average tangible equity (b)					14.29				5.21				10.56					14.29				10.56
Average equity to average assets					11.52				11.64				11.97					11.52				11.97
Tangible equity to tangible assets (a)					9.30				9.24				9.51					9.30				9.51
Net interest margin, taxable equivalent					3.46				3.46				3.44					3.46				3.44
Efficiency ratio (c)					59.79				59.93				62.97					59.79				62.97
Effective tax rate					19.48				70.64				28.27					19.48				28.27
PERIOD-END BALANCES
Securities				$	317,889			$	327,447			$	298,059				$	317,889			$	298,059
Loans held for sale					1,792				1,639				1,872					1,792				1,872
Loans, net of unearned income					1,321,221				1,336,125				1,219,958					1,321,221				1,219,958
Goodwill and other intangibles					44,986				45,063				45,426					44,986				45,426
Assets					1,817,574				1,816,078				1,715,805					1,817,574				1,715,805
Assets - tangible (a)					1,772,588				1,771,015				1,670,379					1,772,588				1,670,379
Deposits					1,559,251				1,534,726				1,416,104					1,559,251				1,416,104
Customer repurchase agreements					10,466				10,726				47,776					10,466				47,776
Other short-term borrowings					-				24,000				-					-				-
Long-term borrowings					27,851				27,826				37,734					27,851				37,734
Shareholders' equity					209,840				208,717				204,241					209,840				204,241
Shareholders' equity - tangible (a)					164,854				163,654				158,815					164,854				158,815
AVERAGE BALANCES
Securities (d)				$	312,783			$	304,254			$	324,588				$	312,783			$	324,588
Loans held for sale					2,037				4,269				2,414					2,037				2,414
Loans, net of unearned income					1,338,058				1,301,833				1,195,560					1,338,058				1,195,560
Interest-earning assets					1,698,451				1,695,091				1,574,460					1,698,451				1,574,460
Goodwill and other intangibles					45,031				45,109				45,517					45,031				45,517
Assets					1,818,429				1,820,499				1,699,730					1,818,429				1,699,730
Assets - tangible (a)					1,773,398				1,775,390				1,654,213					1,773,398				1,654,213
Interest-bearing deposits					1,157,122				1,109,286				1,021,110					1,157,122				1,021,110
Deposits					1,557,149				1,520,665				1,392,117					1,557,149				1,392,117
Customer repurchase agreements					12,247				42,540				45,106					12,247				45,106
Other short-term borrowings					2,183				951				11,833					2,183				11,833
Long-term borrowings					27,836				34,331				37,717					27,836				37,717
Shareholders' equity					209,433				211,864				203,459					209,433				203,459
Shareholders' equity - tangible (a)					164,402				166,755				157,942					164,402				157,942
American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
				1st Qtr				4th Qtr				1st Qtr					YTD				YTD
				2018				2017				2017					2018				2017
CAPITAL
Average shares outstanding - basic					8,669,728				8,648,494				8,633,219					8,669,728				8,633,219
Average shares outstanding - diluted					8,687,351				8,668,765				8,651,139					8,687,351				8,651,139
ALLOWANCE FOR LOAN LOSSES
Beginning balance				$	13,603			$	13,858			$	12,801				$	13,603			$	12,801
Provision for loan losses					(44	)			(74	)			300					(44	)			300
Charge-offs					(44	)			(280	)			(49	)				(44	)			(49	)
Recoveries					60				99				56					60				56
Ending balance				$	13,575			$	13,603			$	13,108				$	13,575			$	13,108
LOANS
Construction and land development				$	93,031			$	123,147			$	130,691				$	93,031			$	130,691
Commercial real estate					624,164				637,701				538,069					624,164				538,069
Residential real estate					207,256				209,326				216,035					207,256				216,035
Home equity					108,024				109,857				110,844					108,024				110,844
Commercial and industrial					284,257				251,666				219,455					284,257				219,455
Consumer					4,489				4,428				4,864					4,489				4,864
Total				$	1,321,221			$	1,336,125			$	1,219,958				$	1,321,221			$	1,219,958
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing				$	273			$	359			$	1,061				$	273			$	1,061
Nonaccrual					1,598				2,201				2,428					1,598				2,428
Other real estate owned					1,716				1,225				1,664					1,716				1,664
Nonperforming assets				$	3,587			$	3,785			$	5,153				$	3,587			$	5,153
ASSET QUALITY RATIOS
Allowance for loan losses to total loans					1.03		%		1.02		%		1.07		%			1.03		%		1.07		%
Allowance for loan losses to
nonperforming loans					725.55				531.37				375.70					725.55				375.70
Nonperforming assets to total assets					0.20				0.21				0.30					0.20				0.30
Nonperforming loans to total loans					0.14				0.19				0.29					0.14				0.29
Annualized net charge-offs (recoveries)
to average loans					0.00				0.06				0.00					0.00				0.00
OTHER DATA
Fiduciary assets at period-end (e) (f)				$	509,668			$	518,284			$	519,901				$	509,668			$	519,901
Retail brokerage assets at period-end (e) (f)				$	316,064			$	321,151			$	292,505				$	316,064			$	292,505
Number full-time equivalent employees (g)					326				328				326					326				326
Number of full service offices					26				26				27					26				27
Number of loan production offices					2				2				2					2				2
Number of ATM's					34				34				34					34				34
Notes:
(a) - Excludes goodwill and other intangible assets.
(b) - Excludes amortization expense, net of tax, of intangible assets.
(c) - The efficiency ratio is calculated by dividing noninterest expense excluding gains or losses on the sale of OREO by net
interest income including tax equivalent income on nontaxable loans and securities and noninterest income and excluding (i) gains or
losses on securities and (ii) gains or losses on sale of premises and equipment.
(d) - Average does not include unrealized gains and losses.
(e) - Market value.
(f) - Assets are not owned by the Company and are not reflected in the consolidated balance sheet.
(g) - Average for quarter.

Net Interest Income Analysis
For the Three Months Ended March 31, 2018 and 2017
(Dollars in thousands)
Unaudited
									Interest
			Average Balance						Income/Expense						Yield/Rate
			2018			2017			2018			2017			2018		2017
Loans:
Commercial			$	258,552		$	219,922		$	2,444		$	2,054		3.83	%	3.79	%
Real estate				1,077,243			973,215			12,189			10,624		4.53		4.37
Consumer				4,300			4,837			76			91		7.17		7.63
Total loans				1,340,095			1,197,974			14,709			12,769		4.40		4.27
Securities:
Federal agencies & GSEs				103,199			96,965			517			442		2.00		1.82
Mortgage-backed & CMOs				108,826			78,054			600			413		2.21		2.12
State and municipal				86,336			131,397			634			1,152		2.94		3.51
Other				14,422			18,172			175			186		4.85		4.09
Total securities				312,783			324,588			1,926			2,193		2.46		2.70
Deposits in other banks				45,573			51,898			188			109		1.67		0.85
Total interest-earning assets				1,698,451			1,574,460			16,823			15,071		3.97		3.84
Non-earning assets				119,978			125,270
Total assets			$	1,818,429		$	1,699,730
Deposits:
Demand			$	232,383		$	215,930			11			11		0.02		0.02
Money market				410,171			305,639			783			241		0.77		0.32
Savings				130,708			124,250			9			9		0.03		0.03
Time				383,860			375,291			1,022			939		1.08		1.01
Total deposits				1,157,122			1,021,110			1,825			1,200		0.64		0.48
Customer repurchase agreements				12,247			45,106			1			1		0.03		0.01
Other short-term borrowings				2,183			11,833			9			27		1.65		0.91
Long-term borrowings				27,836			37,717			290			319		4.17		3.38
Total interest-bearing
liabilities				1,199,388			1,115,766			2,125			1,547		0.72		0.56
Noninterest bearing demand deposits				400,027			371,007
Other liabilities				9,581			9,498
Shareholders' equity				209,433			203,459
Total liabilities and
shareholders' equity			$	1,818,429		$	1,699,730
Interest rate spread															3.25	%	3.28	%
Net interest margin															3.46	%	3.44	%
Net interest income (taxable equivalent basis)										14,698			13,524
Less: Taxable equivalent adjustment (a)										155			390
Net interest income									$	14,543		$	13,134
(a) - Calculated using 21% and 35% statutory tax rate in 2018 and 2017, respectively, due to tax rate change.

Contact:		William W. Traynham, Chief Financial Officer
		434-773-2242
		traynhamw@amnb.com