American National Bankshares Inc.
Annual Report 2016

Plain-text annual report

ON COURSE FOR THE ~_ -~~ ~~ AMERICAN NATIONAL BANKSHARES INC. AMERICAN NATIONAL American National Bankshares Inc. is a bank holding company with assets of $1.7 billion. Headquartered in Danville, Va., it is the holding company of American National Bank and Trust Company (the "Bank"), a community bank serving Virginia and North Carolina through 26 banking offices. Iv addition, the Bank manages $781 million through its Trust &Investment Services division. The Bank provides a full array of financial products and services, including personal and business banking, trust and investment services, and mortgage and insurance services. Electronic banking solutions range from a convenient Automated Teller Machine (AT11~ network and debit cards to real-time Online Banking with Bill Pay, Mobile Banking with Mobile Deposit, mobile Debit Card alerts and Telephone Banking. Chartered in 1909, the Bank is entering its 109th year of operation. It has grown from a single office on Main Street in Danville to a progressive multi-state, regional financial institution. The focus on building relationships through quality financial services with exceptional customer service has remained constant. The Bank operates under a strong community bank philosophy and is a leader in charitable and civic support in all its markets. Many Bank employees serve on the boards of civic organizations throughout the Bank's market area. •r „ April 3, 2017 TO OUR SHAREHOLDERS: r~ J I am pleased to make this report to you. 2016 was yet another exciting year with significant growth in earnings, loans and deposits, as well as the entrance into two new market areas. Net income was up 8.4%, loan growth We also have a strong and effective Board of Directors. They do an outstanding job of representing the shareholders by providing strategic policy leadership and management oversight. You should be proud of them. I was 15.8%, and deposits grew 8.6%. In September, we am proud to work with them. announced that we were entering the Roanoke, Virginia, and Winston-Salem, North Carolina, markets. Our net income for the year was $16.3 million compared to $15 million for 2015 net income. Basic and per common share was $1.89 for the 2016 period compared to $1.73 for 2015. I wish to recognize one director who will be retiring at the annual meeting of shareholders in May. Ben Davenport has been a director since 1992 and will be retiring pursuant to our directors' retirement policy. While we will miss his long and valuable service as a director, we are pleased that he will continue as a Director Emeritus during the next yeaz. Our capital ratios remain strong and continue to exceed all regulatory minimums. In 2016, we worked to deploy our capital more effectively and efficiently to maximize We know the importance of your investment in our company, and we appreciate your support. We shareholder return while maintaining capital ratios work hard to manage the company prudently and that are well above regulatory requirements. For the appropriately. year ended December 31, 2016, average shareholders' equity to average assets was 12.64%. Our book value per common share was $23.37 compared to $22.95 on December 31, 2015. We are pleased that the market price of our stock closed Very truly yours, ~~ l1 on December 31, 2016, at $34.80, compared to the Charles H. Majors December 31, 2015, closing price of $25.61. While the Chairman of the Board stock market was up generally at year end, we believe our stock price was impacted significantly by the growth American National Bankshares Inc. American National Bank and Trust Company discussed above and by the excellent work by our great team of employees, led by Jeff Haley and his talented executive group. Apri13, 2017 TO OUR SHAREHOLDERS: The year 2016 proved to be very positive and productive While new growth is exciting, the steady growth of legacy for American National, both financially and strategically. markets is also important. We were pleased to see the Charley Majors outlined our financial success in his letter de novo markets in Roanoke and Winston-Salem start to you, so I will focus my comments on our strategic strong and are equally happy to report that our legacy accomplishments following the conclusion of our 108th markets grew both loans and deposits as well. year of community banking. An additional strategic priority is our commitment to the Our bank has athree-year strategic plan that guides our efforts and focal points, and each year we fine-tune that communities we serve. The "Course for the Future" theme is our commitment to community-style banking. It is at the plan based on changes that occur in our industry and our markets. One of our key strategic goals is growth. In September, we announced that we were entering the heart of our organization, and I see many members of our staff bringing this theme to life in significant ways. Roanoke, Virginia, and Winston-Salem, North Carolina, We have a mix of homegrown talent and newly infused markets. Each of these mazkets represents areas where our expertise through recently hired team members. We commitment to community banking values, local decision- making and strong leadership will bring energy and growth believe this staffing combination brings energy and vitality and ensures that organizational knowledge about how we to our company. We are excited to have strong teams in place in both Roanoke and Winston-Salem. Early results for these operations are very encouraging. Both of these new markets are conriguous to our existing footprints, and we believe they will provide us with strong growth opportunities in both the short and long term. $34.80 $25.61 $24.81 THREE -YEAR STOCK (~z~i! Closing Price) - $23,308 - $21,059 $17,943 TOTAL REVENUE (fin millions, befinr in7errst and taxes) ` ` I BELIEVE 2017 WILL BRING NEW OPPORTUNITIES THAT WILL AFFIRM WE ARE `ON COURSE FOR THE FUTURE."' ..~. 3.52% footprint brings sustainable and consistent opportunity ' 3.69% to positively impact the financial lives of our clients and strengthen the communities in which we serve. NET INTEREST MARGIN 3.66% ~ ~ 14.81 16.34% 17.86% RISK-BASED CAPITAL RATIO do community banking continues and evolves. Our team is second to none and a key element of our success. In addition to planning for growth and committing to ow communities, we also focus a significant amount of time on strategic succession planning. To that end, in December our chief credit officer, Helm Dobbins, announced his retirement effecrive March 30, 2017. Through his long tenure at the bank, Helm wrote an important chapter in the book of American National Bank history by developing a credit infrastructure that served us very well through the recent economic downturn. I would like to thank Helm for the work he did for our company; but more importantly, I would like to thank him for his friendship. As progress continues to keep us "On Course for the Future" in 2017, the year ahead is indeed bright and full of opportunity. Leveraging our connected Our team is composed of people from all walks of life that come together for a common purpose which is to serve our customers. That service takes the shape of community leadership roles, exceptional customer service, and community involvement. With each passing year, it becomes more apparent that our most important asset is our people. We have employees who have been with us many years and then we have new employees who have joined us during 2016. They are dedicated, experienced and professional and they performed again at a high level to produce these strong results for you. I commend all of our employees for their work and their loyalty to this organization, and I believe 2017 will bring new opportunities that will affirm we are "On Course for the Future." Very truly yours, ~ ~ C Jeffrey V. Haley President and Chief Executive Officer American National Bankshares Inc. American National Bank and Trust Company FINANCIAL HIGHLIGHTS As of December 31. (Amounts in thousands, except per share information and ratios) Results of Operations: Interest income Interest expense Net interest income Provision for loan losses Noninterest income Noninterest expense Income before income talc provision Income tax provision Net income Financial Condition: Assets Loans, net of unearned income Securities Deposits Shareholders' equity Shareholders' equity, tangible Per Share Information: Earnings per share, basic Earnings per share, diluted Cash dividends paid Book value Book value, tangible 2016 2015 2014 2013 2012 $ 56,170 6,316 49,854 250 13,505 39,801 23,308 7,007 16,301 $ 55,169 5,904 49,265 950 13,287 40,543 21,059 6,020 $ 15,039 $ 47,455 5 ,730 41,725 400 11,176 34,558 17,943 5,202 $ 12,741 $ 52,956 6,583 46,373 294 10,827 35,105 21,801 6,054 $ 15,747 $ 57,806 8,141 49,665 2,133 11,410 36,643 22,299 6,293 $ 16,006 $ 1,678,638 1,164,821 352,726 1,370,644 201,380 155,789 $ 1,547 ,599 1,005,525 345,661 1,262,660 197,835 151,280 $ 1,346,492 840,925 349,250 1,075,837 173,780 132,692 $ 1,307,512 794,671 351,013 1,057,675 167,551 125,349 $ 1,283,687 788,705 340,533 1,027,667 163,246 119,543 $ 1.89 1.89 0.96 23.37 18.08 $ 1.73 1.73 0.93 22.95 17.55 $ 1.62 1.62 0.92 22.07 16.86 $ 2.00 2.00 0.92 21.23 15.89 $ 2.04 2.04 0.92 20.80 15.23 Weighted average shares outstanding, basic Weighted average shares outstanding, diluted 8,611,507 8,621,241 8,680,502 8,688,450 7,867,198 7,877,576 7,872,870 7,884,561 7,834,351 7,845,652 Selected Ratios: Return on average assets Return on average equity' Retum on average tangible equity2 Dividend payout ratio Efficiency ratio3 Net interest margin Asset Quality Ratios: Allowance for loan losses to period-end loans Allowance for loan losses to period-end non-perfomvng loans Non-performing assets to total assets Net charge-offs to average loans Capital Ratios: Total risk-based capital ratio Common equity tier 1 capital ratio Tier 1 risk-based capital ratio Tier 1 leverage ratio Tangible equity to tangible assets ratio° 1.02% 8.07% 10.85% 50.71% 61.47% 3.52% 0.99% 7.65% 10.62% 53.65% 63.81% 3.69% 0.97% 7.40% 10.31% 56.80% 63.41% 3.66% 1.20% 9.52% 13.75% 46.03% 57.57% 4.10% 1.23% 10.08% 15.25% 45.06% 58.23% 4.44% 1.10% 1.25% 1.48% 1.59% 1.54% 360.39% 0.29% 0.00% 242.09% 0.48°Io 0.08% 302.21% 0.46% 0.07% 248.47% 0.65% (0.02)% 227.95% 0.90% 0.07% 14.81% 11.77% 13.83°10 11.67% 9.54% 16.34% 12.88% 15.23% 12.05% 10.08% 17.86% n/a 16.59% 12.16% 10.00% 18.14% n/a 16.88% 11.81% 9.91% 17.00% n/a 15.75% 11.27% 9.64% Rerun on average equi[y is calculated by dividing net income available to common shareholders by average common equity. 2 Return on average tangible equity is calwlated by dividing net income available to common shareholders plus amortization of intangibles tax effuted by avernge common equity less average intangibles. 3 The efficiency mtio is calculated by dividing ~roninterest expense excluding gains or losses on the sale of other real estate owned by net interest income including tax equivalent income on nontaxable loans and securities and excluding (a) gains or losses on securities and (b) gains or losses on sale of premises and equipment. 4 Tangible equity to tangible assets ratio is calculated by dividing period~nd common equity less period-end intangibles by period-end assets less periodcnd intangibles. n TOTAL ASSETS ,,,~ m,,~,~~,~.~, ~ ~ X2014 The charts say it all... progress forward and increased assets, deposits and loans PLUS an increase in total households. Our current legacy markets are producing, and our new opportunity markets are producing, too! $1,679 $1,548 $1,346 $1,308 $1,284 TOTAL DEPOSITS ,r,,,,~,~r,,,,~.,, TOTAL LOANS din mifliorccl 2014 n X1,371 $1,263 ~ ~ 201 $1,076 $1,058 $1,028 x1,165 $1,006 $841 $795 $789 5 CONSOLIDA TED BALANCE SHEETS ,rooe~e,~.3,.,~~la..s;n,,~us~ds.eX~ePro..s,~.~~o, Assets: Cash and due from banks Interest-bearing deposits in other banks Securities available for sale, at fair value Restricted stock, at cost Loans held for sale Loans, net of unearned income Less allowance for loan losses Net Loans Premises and equipment, net Other real estate owned, net of valuation allowance of $192 in 2016 and $329 in 2015 Goodwill Core deposit intangibles, net Bank owned life insurance Accrued interest receivable and other assets Total assets I,i~►bilities and Shareholders' Equity: Liabilities: Demand deposits-noninterest bearing Demand deposits-interest bearing Money market deposits Savings deposits Time deposits Total deposits Short-term borrowings: Customer repurchase agreements Other short-term borrowings Long-term borrowings Junior subordinated debt Accrued interest payable and other liabilities Total liabilities Commitments and Contingencies Shareholders' equity: 2016 $ 20,268 32,939 346,502 6,224 5,996 1,164,821 (12,801) 1,152,020 25,439 1,328 43,872 1,719 18,163 24,168 $ 1,678,638 $ 378,600 209,430 283,035 120,720 378,855 1,370,640 39,166 20,000 9,980 27,724 9,748 1,477,258 2015 $ 19,352 75,985 340,349 5,312 3,266 1,005,525 (12,601) 992,924 23,567 2,184 43,872 2,683 17,658 20,447 $ 1,54799 $ 322,442 227,030 200,495 115,383 39710 1,262,600 40,611 9,958 27,622 8,913 1,349,764 Preferred stock, $5 par, 2,000,0000 shares authorized, none outstanding Common stock $1 paz, 20,000,000 shares authorized, 8,618,051 shares outstanding at December 31, 2016, and 8,622,007 shares outstanding at December 31,2015 Capital in excess of paz value Retained earnings Accumulated other comprehensive income, net Total shareholders' equity Total liabilities and shareholders' equity 8,578 75,076 119,600 (1,874) 201,380 $ 1,678,638 8,605 75,375 111,565 2,290 197,835 $ 1,547,599 6 CONSOLIDATED STATEMENTS OF INCOME Interest and Dividend Income: Interest and fees on loan Interest on federal funds sold Interest ar~d dividends on securities: Taxable Tax-exempt Dividends Other interest income Total interest and dividend income Interest Expense: Interest on deposits Interest on short-term borrowings Interest on long-term borrowings Interest on junior subordinated debt Total interest e~ense Net Interest Income: Provision for Loan Losses Net Interest Income after Provision for Loan Losses: Noninterest Income: Trust fees Service charges on deposit accounts Other fees and commissions Mortgage banking income Securities gains, net Brokerage fees Income from Small Business Investment Companies Other Total noninterest income Noninterest Expense: Salaries Employee benefits Occupancy and equipment FDIC assessment Bank franchise ta~c Core deposit intangible amortization Data processing Sofrwaze Other real estate owned, net Merger-related expenses Other Total noninterest elcpense Income before income taxes Income taxes Net Income Net Income Per Common Share: Basic Diluted Average Common Shares Outstanding: Basic Diluted 2016 2015 2014 $ 47,971 - $46,860 6 $ 39,257 - 4,454 3,135 334 276 56,170 5,103 10 325 878 616 49,854 250 49,604 3,791 2,048 2,680 1,713 836 843 463 1,131 13,505 17,568 4,264 4,246 647 995 964 1,828 1,143 336 7.810 39,801 23,308 7,007 $16,301 4,072 3,681 346 204 55.169 4,81 l 9 324 760 504 49,265 qsn 4ti,315 3,935 2,066 2,377 1,320 867 946 912 864 13,287 16,554 4,311 4,425 750 898 1,201 1,725 1,158 99 1,998 7,424 40,543 21,059 6,020 $15,039 3,775 3,971 296 156 47A55 4,654 9 325 742 5,730 41,725 arx~ 41X25 4,196 1,735 1,903 1,126 505 643 176 892 11,176 14,688 2,988 3,727 647 901 1,114 1,448 1,019 240 780 7,006 34,558 1743 5,202 $12,741 $ 1.89 $ 1.89 $ 1.73 $ 1.73 $ 1.62 $1.62 8,611,507 8,621,241 8,680,502 8,688,450 7,867,198 7,877,576 . ~ ~ ~ , ~ e , a , ^ ~ ' % / ~ ~, / / t o m ' ' ~ ; ~ , , ~ ~ f . ~ 7 ~ i . % , , ~ , , l ~ ~ ~ ~ ~ ~ j ji i~ ~ ~ / / ~ ~ , ~ ° ' ~ ~ . - , S ~ i l , , t ~ ' ~ ' ~ . . ~ . ~ ~ ~ ~ ` „ - ~ ; . . ; ~ ,r t . i ~ R y ~ , , , 4 ~ 1t ~ . : r j ~ ' j j ~ ~ ~ ~ ~ , ~ / ~ l ~ b ~ e ~ ~ l ~ ~ ~ ~ - ~ \, , , . „ ~ ~ ~ f ~ `:~ L V ~ 4 / / I ~ ~ ; ~ , ~ ~ , r ~ ~ , ~ , , , , , ` ~ ~ \ ~ ~ ' ' - - a t w ~ ' ~ ~ ~ ~ ~ • ; , ~ ~ ' ~ r . r ^ 1 ~ ' t i _ _ _ V V 3 ~ - - ~ w H O ~ ~ - l ~ , ~ ~ o z Q z ~ z ~ w ~ ~ " ~ ~ ' ¢ z H w ~ Q Q Q Q Z A H x o ~ H D ~ a ~ x ~ „ z w 3 ~ W w x ¢ ~ ~ z 3 Q ~ W W x z Q , ~ ~ ~ z ¢ ¢ ~ ~ ~ , ~ w z H w ¢ ~ x ¢ a W x w U x a ~ w ~ o ~ ~ x x ~ Q z ,.. ' ~h~. - ,~, ,~'' ~ wrr..-~- ~~I ON COURSE FOR THE We have charted a "Course for the Future" on a strong foundation of loyal customers and staff and a historical economic impact for our communities that builds confidence. To succeed in these efforts requires a strong bond, and American National Bankshares and our operating subsidiary American National Bank and Trust Company shares that bond with our staff, communities and future. There is a clear path to and connection between the communities we call home and the growth and prosperity of our organization. Because while there are many types of banks —international, national, regional, local — we believe the best fit for our communities we serve and our organization is that of a "community bank" where our actions and benefits apply to our local community. Loans we grant enable staff leaders, and vibrant new products and services to meet our customers' needs are both testaments to our community banking focus and a guide for future success. The American National Bank brand, the instant thought one has about our bank, provides a strong backdrop for working with our communities, introducing ourselves to new customers and ensuring we have a playbook to which every member of our team subscribes. Our brand is 108 years in the making and represents a solid and successful past; an engaging present; and a future full of hope, opportunity and wonder. We believe that certain traits underscore our connection between the communities we serve and the community small business success and the achievement of home banking heritage we share. ownership. The deposits we accept increase the value of our customer financial holdings, making them safe AMONG THESE ARE: and easily accessible. The financial planning and • CONSISTENT GROWTH investing we complete provides a clear financial future • SUSTAINABLE PROGRESS of customers and businesses. • ENGAGED COMMUNITIES • COMMUNITY LEADERSHIP ROLES On Course for the Future is a carefully articulated FOR STAFF strategy that leverages our strengths, ma~cimizes our opportunities, and inclusively engages key stakeholders • REINVESTMENT IN OUR LOCAL MARKETS • PROGRESSIVE VISION, CONSERVATIVE in our success. Record loan growth, new markets, new APPLICATION r~ ` ;/ .~ ~~ + ~. ~' ~~~ r ~ a r ~ ~ r ~~ r _, '~>,- .~- r, r - I r n; ~= u ,. n ~ ~ ~~~,_, r ~~~ , ~~ • i _ ~~. III' 111'' ~ .~~_ ~ III " ~ ,,-' ,~ , ~ , 1J~I_l~I~~J I. !111 '! ~ _ ,_. _ ~_, I II III~I II,i~~~`~ -- i _—;'1 ~~ '~F _ a 7 a a ~ ~ _ ~:Lt` ~.. yr ~ .` ~ s 1~~ . ~?,i 4. x ~~ t { ~ : Y ~ ~, ~r e.. ~ ` \l~ ~~~~~ ~.~ - +fi '.Y~ } .~ r ~C, ~~ ' '~, ~ t ~ . ..~i '. =,~ ~. ' - j ''t ~ ''" ~ ~ ,~ '..f' :~ ~~~.` ~~ ,tea W ~A = _ ~ ,~ ~ -,~ 1 ~. ;',M r :~.~ "_~- ~~ G ~ OUR BANK HAS ATHREE-YEAR STRATEGIC PLAN THAT GUIDES OUR EFFORTS AND FOCAL POINTS. EACH YEAR WE FINE-TUNE IT BASED ON OUR MARKETS AND INDUSTRY CHANGES." —JEFF HALEY, PRESIDENT AND CEO ~_, ~j ._F - ~ --- v~ .":' E ~.. Y A PROGRESSIVE 2016 proved to be a successful year in our financial • EMV CHIP CARDS statements, service to our customers, commitment of our staff, and work in our communities. American National Bank's progressive, consistent and The new EMV chip cards provide an enhanced layer of security and protection for our cardholders. The new technology creates safety and confidence in sustainable outcomes are based on years of work and your ANB card for everyday use. our 108-year history. The recent strategic planning and subsequent development of a tactical strategy to • NEW ATM implement that plan have placed our organization on the course for the future. In 2016, we released many new products, enhanced several services, launched new market areas, and refined customer service processes all designed to We also created additional convenient access through our new ATM placed at our Guildford College branch. The 24-access and capability of the new ATM increase a customer's ability to get cash, transfer funds, and much more. provide our customers a better way to bank. • TREASURY MANAGEMENT SOME OF OUR 2016 ADDITIONS: • OPENING ACT We launched the Opening Act which allows customers the freedom to open a new checking or savings account online at AMNB.com. Customers can access Opening Act through our website or directly through SERVICES EXPANSION Lastly, our Treasury Management Services for our commercial customers expanded our capabilities and grew significantly in 2016, almost doubling our service footprint. Access to these services greatly enhances our customers' ability to manage their funds efficiently and effectively. n OUR Our roadmap for success and to stay "On Course for the Future" relies on maintaining the close relationships between our bankers and customers. Being knowledgeable about our customer needs, technology preferences, and service requirements ensures that we deliver products and services tailored to their needs. Whether it be asmall-business owner looking for astart-up loan, a corporation looking for health insurance, a new family looking for their first home, or a student seeking a checking account, we can meet those needs with a smiling face, warm welcome and the time and attentive listening of a true community bank. We have grown our footprint in communities served by maintaining a focus on helping people manage their finances easier and more effectively. Most importantly, we have maintained the service our customers expect and the local decisions and community engagement that is our hallmark. In 2016, we announced two key growth opportunities with de novo market introductions into Roanoke, Virginia, and Winston-Salem, North Carolina. These markets are contiguous to current markets and allow our growth to follow a pattern of similar communities where we are located and provide access to new, growing areas. We added two teams of experienced bankers representing 19 staff positions that immediately brought benefit to the bank as a result of their existing relationships, expertise and experience in the local communities. We continue to creatively look for outlets for growth that allow our community banking model to shine and our customer base to enjoy greater access and convenience. ANB'S COMMUNITY BANKING DELIVERY -I- STRONG FINANCIAL PERFORMANCE + O ~ 1 IZ Growing and expanding, center of excellence, two new markets, full service lenders, local decisions. TRUST AND New leadership, $781 million in managed assets, full product INVESTMENT suite, tailored planning, experience and expertise. Personal, business and health coverage; Bankers Insurance is one of the largest independent agencies in Virginia. PERSONAL BANKING Focus on core deposits, new relationships, 26 offices, excellent customer service, new access tools and technology. Loan growth, flexible programs, local decisions, in-house processing. FINANCIAL Consistent growth, strong capital ratio, progressive earnings, PERFORMANCE strong credit culture. ~3 OUR GRETNA 109 North Main Street Gretna, VA 24557 ROANOKE 3000 Ogden Road Roanoke, VA 24018 HARDY Westlake 12930 Booker T Washington Hwy Hardy, VA 24101 LOVINGSTON 150 Front Street Lovingston, VA 22949 LYNCHBURG Graves Mill 1646 Graves Mill Road Lynchburg, VA 24502 'I~mberlake 20479 Timberlake Road Lynchburg, VA 24502 MARTINSVILLE 900 Liberty Street Martinsville, VA 24112 RIDGEWAY / 220 SOUTH 3810 Greensboro Road Ridgeway, VA 24148 ROCKY MOUNT 400 Old Franklin Turnpike, Suite 100 Rocky Mount, VA 24151 SOUTH BOSTON 3609 Old Halifax Road South Boston, VA 24592 UNION HALL Southlake 25 Southlake Drive Union Hall, VA 24176 Phone: (540)576-1218 Village at Brookwood 1840 Brookwood Avenue Burlington, NC 27215 GRAHAM 842 South Main Stet Graham, NC 27253 GREENSBORO Green Valley Road 703 Green Valley Road, Suite 101 Greensboro, NC 27408 Guilford College 5509-A West Friendly Avenue, Suite 102 Greensboro, NC 27410 NORTH CAROLINA Mebane, NC 27302 MEBANE 1008 Mebane Oaks Road BURLINGTON SouW Church Street 3101 South Church Street Burlington, NC 27215 Cum Park Plaza 2214 North Church Street Burlington, NC 27217 YANCEYVILLE 173 Main Stet Y~ceyville, NC 27379 yy~NSTON-SALEM 110 Oakwood Dr Suite 510 Winston-Salem, NC 27103 VIRGINIA DANVILLE Main 628 Main Street Danville, VA 24541 Nor-Dan 239 Nor-Dan Drive Danville, VA 24540 Piedmont Drive 445 Mount Cross Road Danville, VA 24540 Airport 1407 South Boston Road Danville, VA 24540 BEDFORD 207 North Bridge Street Bedford, VA 24523 CHATHAM 13880 U.S. Highway 29 Chatham, VA 24531 COLLINSVILLE 2484 Vuginia Avenue Collinsville, VA 24078 _1~ ~ t _,y., l ' ~' r• ';• f / r' ~'z ~~.4 o -. ~~ -. _Y - is y? ~ `` •. ~ c., ~ +.a , ~ ' ~ ~-~ ~ -a ~~ ~~ l\ The Piedmont Valley, the Triad and our surrounding footprint comprise a wealth of economic activity and vitality. From world-renowned universities to major retailers, manufacturers and leaders in aviation healthcare and more, they all call our region home. The opportunity provided by the presence of these companies includes employment, development of feeder companies, stable economic impact, community infrastructure and an improved quality of life for the entire community. For American National Bank, our size and commitment to personalized service yield a strong banking partner with flexible products and services and local management decisions that provide key support. As our communities grow and reinvest in themselves, we are at the epicenter of the financial community and continually provide an opportunity for business to prosper, fund growth and expansion, and hue a growing and solid workforce. Reynolds ~~~~YOKOHAMA , K E A American n ~!LaI~COr HANE S GOOD YEAR =~LaboratoryCorporationofAmenca ~ Brands Inc ~.~~ Wake Forest°' Baptist Medical Center ~ HCA~/Gt~ Health System An HCA aHilmte m Logos displac. J ar. the property of the respective oHnars and do nol imply any endorsement. r ~ _ •.;- ~ -~- ~ ~ !: `'~ m ~ i r ~ s ~ 41 ~ *1 r ^I ~ ~ ; ~l 4 L•~ Connecting with our communities is both a As a bank, covering our 19 communities served, commitment of our organization and a fundamental American National Bankshares contributed part of who we are as a team of associates working support in: for American National Bank. We live, work and raise 24 local organization projects families in the communities we serve. •Financial education across all markets • Hundreds of community service hours by That connection creates a bond that sustains both the community and our staff along with the bank. Strong •Numerous leadership roles by our staff and more communities make great places to live for our staff our staff and an excellent banking environment for our bank. In 2016, we again demonstrated our commitment through hard work, leadership participation by our team in community organizations and by dollars contributed to help those organizations succeed. We are proud of our commitment, but more importantly stand proud with each organization to support and cheer their success. As the saying goes, it takes a village to raise a child and effect positive change —and we are happily part of that village! s u c-. ~~ I t ~ I ~ t / I it ~ I' ~„~,.~~ • -- ' ~~ y •6 ~ ~' * ~ ~~ I v ~rx ~" ti '~ '~ ~ i ~~ Inv +l t~'~'.~ +h -. 1 ~~~+ ~ l r ~ ,' ~r`~ ~ .-~ . r } ~; . ; ;. .q .. -- __. b.~ 4 ? _ ` 1 y r J~ I~ 1 1 THE FOLLOWING ARE A FEW OF THE ORGANIZATIONS THAT BENEFITED FROM OUR SUPPORT AND ASSISTANCE IN 2016, JOINING A LIST OF OVER 200 GROUPS WE HAVE RECENTLY SUPPORTED: s... _ J ~.~ • 9th Annual Dentistry from the Heart Event • Piedmont VA Dental Health Foundation • Alamance Community College • Alamance County Economic Development Foundation • Bassett High School • Danville YMCA • Future of the Piedmont Foundation • Graham Area Business Association • Goodwill Industries • Habitat for Humanity • Martinsville/Henry County National Society of Black Engineers • United Way of Alamance County • United Way of Caswell County • United Way of Central VA • United Way of Danville/Pittsylvania County • United Way of Franklin County • United Way of Greensboro • United Way of Halifax/South Boston • United Way of Henry County/Martinsville • VBA Education Foundation • YMCA of Alamance County • YMCA of Greensboro 17 EXECUTIVE LEADERSHIP~~,,u~„~,,.,,zo„ Jeffrey V. Haley President Chief Executive O,~cer R. Helm Dobbins Executive ice President Chief Credit O„Qicer (retired March 30, 2017) Ramsey Hamadi Executive Vice President ChiefAdministrative Officer H. Gregg Strader Executive ice President Chief Banking OJj"icer William W.'I'raynham Executive ice President Chief Financial O, fficer BOARD O F DIRECTORS ~.~ ~~f~o~~4~.,, z~,~ BOARD OF DIRECTORS Fred A. Blair Chief Executive O,~icer Blau Construction Inc. Gretna, VA Director since 1992 Committees 1, 5, 6 Frank C. Crist Jr., D.D.S. President Brady & Crist Dentists Inc. Lynchburg, VA Director since 2006 Committees 3, 5, 6 Ben J. Davenport Jr. Chairman First Piedmont Corporation Davenport Energy Inc. Chatham, VA Director since 1992 Committees 2, 4, 6 Jeffrey V. Haley President &Chief Executive Officer American National Bankshazes Inc. and American National Bank and Trust Company Danville, VA Director since 2010 Committee 7 Michael P. Haley Retired Advisor Fenway Partners New York, NY Duector since 2002 Committees 1, 2, 4, 6, 8 Charles S. Harris Executive ice President Averett University Danville, VA Director since 2008 Committees 5, 6 R D. Hornaday III President &Chief Executive O,~cer Knit Wear Fabrics Inc. Burlington, NC Director since 2011 Committees 3, 6, 7 John H. Love President &Chief Executive Officer W. E. Love &Associates Inc. Bwlington, NC Director since 2011 Committees 4, 5, 6 Franklin W. Maddux, M.D. Chief Medical Officer Executive V ce President for Clinical &Scientific Affairs Fresenius Medical Care North America Waltham, MA Director since 2002 Committees 1, 3, 6 Charles H. Majors Chairman of the Board American National Bankshares Inc. and American National Bank and Trust Company Danville, VA Duector since 1981 Committee 7 Claude B. Owen Jr. Retired Chairman &Chief Executive Officer DIMON Inc. Danville, VA Director since 1984 Committees 2, 3, 6, 7, 8 Ronda M. Penn Chief Financial Officer Plexus Capital LLC Raleigh, NC Director since 2015 Committees 1, 6 Dan M. Pleasant Chief Operating Officer The Dewberry Companies Inc. Fairfax, VA Director since 201 I Committees 4, 6, 8 Joel R. Shepherd President Virginia Home Furnishings Inc. 220 Self Storage Inc. Roanoke, VA Director since 2015 Committees 6, 8 COMMITTEES: 1. Audit 2. Chief Executive Officer's Advisory 3. Corporate Governance and Nominating 4. Human Resources and Compensation 5. Risk and Compliance 6. Stock Grant and Option 7. Trust 8. Capital Management ` ` WE HAVE A STRONG AND EFFECTIVE BOARD OF DIRECTORS... PROVIDING ~ STRATEGIC POLICY LEADERSHIP AND MANAGEMENT OVERSIGHT." -CHARLES MAJORS, CHAIRMAN STATE ADVISORY BOARDS q.c ojJanuary 1, 2017 NORTH CAROLINA Thomas E. Chandler Jr. President Chandler Concrete Company Inc. Dawn S. Chaney President Chaney Properties James B. Crouch Jr. Partner Harris, Crouch, Long, Scott &Miller Inc. J. Nathan Duggins III Partner Tuggle, Duggins, P.A. Anthony E. Foriest Retired Xerox Corporation John A. Holt Sr. President &Chief Financial Offrcer DynaYam USA LLC David S. Johnson, M.D. Physician Burlington Pediatrics Teena M. Koury Owner Carolina Hosiery Mills John B. Leath Chief Executive Officer Acucote Inc. Phillip J. Nahser Jr., M.D. Cardiologist Cone Health Medical Group Richard H. Ramsey Operating Partner New Page Capital President Engineered Steel Products, Inc. Diane M. Rumley, CPA Partner Leeper, Kean & Rumley LLP Adrian T. Smith Chief Executive O„~"icer Ice Age Management James H. Smith Jr. President Villane Inc. VIRGINIA Kim E. Adkins Former Mayor City of Martinsville President KEA Consulting Services C. Scott Elliott President CS Custom Structures, Inc. T[ffany M. Franks, Ed.D. President Averett University Harold E. Green Jr. President Distinct Impressions Inc. Wanda B. Jeffress Owner Jeffress Funeral Home Earnest C. Jordan Retired Senior ice President American National Bank and Trust Company Jay E. Barker President JEB International Tobacco Company Brian J. Kelleher President Atlantic Precision Resources Inc. James E. Barkhouser President Barkhouser Motors Inc. Martha W. Medley Partner Daniel, Medley &Kirby P.C. J. Brian Burton President J.E. Burton Construction Company Chris F. Mohr Chairman &Chief Executive Officer Ameristaff Inc. Thomas C. Capps President Capps Shoe Company Inc. Timothy J. Clark President Blair Construction Inc. James D. Coleman Jr. President Rives Brown Realty S. Cabell Dudley Jr. Retired Executive Vice President American National Bank and Trust Company James K. Muehleck, D.D.S Dentist Martinsville Thomas S. Stump President &Chief Executive O,~icer First Piedmont Corporation Michael A. Thornton President Progress Printing William C. Vaughn ice President J & R Management Inc. MARKET MAKERS STOCKHOLDER INFORMATION Annual Meeting • The 2017 Annual Meeting of Shareholders ofAmerican National Bankshares Inc. will be held on Tuesday, May 16, 2017, at 9 a.m. (EDT) at The Wednesday Club, 1002 Main Street, Danville, Va. Stock Listing • The common stock of American National Bankshares Inc. (the "Company") is traded on the NASDAQ Global Select Market under the symbol "AMNB." Shareholder Inquiries • Shazeholders needing information on stock transfer requirements, lost certificates, dividends, the dividend retirement plan and other shareholder matters may contact: Computersbare Inc. PO Box 30170 College Station, TX 77842 800.368.5948 General Corporate Information Independent Auditors Yount, Hyde &Barbour PC 50 South Cameron Street Winchester, VA 22601 Re ug latory and Securities Counsel Williams Mullen Williams Mullen Center 200 South 10th Street, Suite 1600 P.O. Box 1320 (23218) Richmond, VA 23219 Equal Opportunity Employer American National Bank and Trust Company, a wholly owned subsidiary of American National Bankshares Inc., is an equal opportunity employer. All matters regarding recruiting, hiring, training, compensation, benefits, promotions, transfers and all other personnel policies will remain free from discriminatory practices. This Report The American National Bankshares Inc. 2016 Summary Annual Report is presented in a summary format to provide information regarding the performance of the Company in a manner that is meaningful and useful to the widest range of readers. The audited consolidated financial statements of the Company and other more detailed analytical information regarding the Company are contained in the 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Investor Relations &Financial Statements A copy of the Company's annual reports on Form 10-K and quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission, are available without charge to shareholders upon written request and are also available on our website, amnb.com. Those with requests for this or other financial information about American National Bankshares Inc. should contact: American National Bankshares Inc. Investor Relations PO Box 191 Danville, VA 24543 800.240.8190 Y-, ~'~;;y ~~•..,t ~ ~'w~ ~a ~L"y~!y+~ ~ ~ - rr ~ -- 'A>~ ~ -- - - _ -~►.' /'- l"- MISSION, VISION, GUIDING PRINCIPLES AND I~ ~''~~ MISSION STATEMENT: VISION STATEMENT: We provide quality financial services with exceptional customer service. We will enhance the value of our shareholders' investment by being our communities' preferred provider of relationship-based GUIDING PRINCIPLES: To achieve our vision and carry out our mission, we: • Operate a sound, efficient, and highly profitable company, • Identify and respond to our internal and external customers' needs and expectations in an ever changing financial services environment, • Provide quality sales and quality service to our customers, • Produce profitable growth, • Provide an attractive return for our shareholders, • Furnish positive leadership for the well-being of all communities we serve, • Continuously develop a challenging and rewarding work environment for our employees, and • Conduct our work with integrity and professionalism. financial services. CORE VALUES: • Build personal relationships based on honesty and integrity • Treat people fairly and speak with candor and care • Develop people to their highest potential • Coach for improved performance • Show a passion for winning • Act like business owners • Celebrate individual and team successes often • Communicate with strategic purpose and aim for consistency • Hold ourselves and our teammates accountable for results. ~~ ~~MERICAN NATIONAL BANKSHARES INC. 21 ~~ ~~ AMERICAN NATIONAL BANKSHARES INC. 628 Main Street, Danville, VA 24541 ~~ n s~~ 

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