American National Bankshares Inc.
Annual Report 2017

Plain-text annual report

S U M M A R Y A N N U A L R E P O R T 2 0 1 7 Progressive Growth. Regional Strength. Bright Future. When an organization begins to review their future prospects and construct strategic plans, they begin by accounting for their Table of Contents achievements to date and identifying the Mission, Vision, Guiding Principles and Core Values ..... 1 opportunities that lie ahead. We are proud to report that our future is quite bright! We have built a strong foundation of progressive Executive Leadership Letter .......................................... 2 Financial Highlights ........................................................ 4 growth by creating an organization with Consolidated Balance Sheets ........................................ 6 regional strength placing an emphasis on local decisions and cultivating lasting relationships. This balance positions us for exciting years Consolidated Statements of Income ............................. 7 Progressive Growth. ahead and is the inspiration behind the theme Regional Strength. Bright Future. .................................. 8 of this report. This theme speaks to a fundamental core of our strength: progressive growth, which highlights our ability to connect with our customers and our markets. Further, this theme articulates our singular goal: to maintain Preparing for the Future .............................................. 10 Our Focus: Purposeful Progress .................................. 12 90 Years and Growing .................................................. 13 Our Communities ......................................................... 14 Charley Majors Employee Achievement Award .......... 15 our strong community bank roots, to engage Our Commitment Grows ............................................. 16 our customers and to serve our communities in ways that provide for a greater good. We have a unique story to tell that dates back Our Board Leadership .................................................. 18 Our Executive Leadership............................................ 19 over 110 years of providing financial services Shareholder Information .............................................. 20 and enabling success for our customers and shareholders. American National American National Bankshares Inc. (the “Company”) is a bank holding company with assets exceeding $1.8 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. In addition, the Bank manages nearly $850 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 ATM 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 110th year of operation. It has grown from a single office on Main Street in Danville to a progressive multistate, 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. Table of Contents Mission, Vision, Guiding Principles and Core Values ..... 1 Executive Leadership Letter .......................................... 2 Financial Highlights ........................................................ 4 Consolidated Balance Sheets ........................................ 6 Consolidated Statements of Income ............................. 7 Progressive Growth. Regional Strength. Bright Future. .................................. 8 Preparing for the Future .............................................. 10 Our Focus: Purposeful Progress .................................. 12 90 Years and Growing .................................................. 13 Our Communities ......................................................... 14 Charley Majors Employee Achievement Award .......... 15 Our Commitment Grows ............................................. 16 Our Board Leadership .................................................. 18 Our Executive Leadership............................................ 19 Shareholder Information .............................................. 20 Mission, Vision, Guiding Principles and Core Values Mission Statement: We provide quality financial services with Vision Statement: We will enhance the value of our shareholders’ exceptional customer service. investment by being our communities’ Guiding Principles: To achieve our vision and carry out our mission, we: • Operate a sound, efficient, and highly preferred provider of relationship-based financial services. Core Values: • Build personal relationships based on profitable company, honesty and integrity. • Identify and respond to our internal and • Treat people fairly and speak with candor external customers’ needs and expectations in an ever-changing financial services environment, and care. • Develop people to their highest potential. • Coach for improved performance. • Provide quality sales and quality service to • Show a passion for winning. our customers, • Act like business owners. • Produce profitable growth, • Celebrate individual and team successes • Provide an attractive return for our often. shareholders, • Communicate with strategic purpose and • Furnish positive leadership for the well- aim for consistency. being of all communities we serve, • Hold ourselves and our teammates • Continuously develop a challenging and accountable for results. rewarding work environment for our employees, and • Conduct our work with integrity and professionalism. 1 April 6, 2018 To Our Shareholders, Jeffrey V. Haley Charles H. Majors For the past several years, we have been writing two letters to you – one from the Chairman and one from the Chief Executive Officer. This year, we opted to deliver one message and to focus on the theme of this annual report: Progressive Growth. Regional Strength. Bright Future. We are pleased to report to you that 2017 was an exciting and successful year for our company and our bank. It was our first full year in our new markets – Roanoke, Virginia and Winston-Salem, North Carolina. We have assembled strong teams in both markets, and the results have been impressive. We now offer banking services in nine market areas in Southern and Southwest Virginia and Piedmont Triad North Carolina. These markets offer a balance of economic opportunities creating “regional strength,” which produces “progressive growth” for a “bright future” for our company, our employees, our customers and our shareholders. While we had “progressive growth” in loans and deposits across the bank, loan growth was led by our Greensboro, Roanoke and Winston-Salem markets. Our loan portfolio grew $171 million or 14.7%. Deposits across the bank increased $164 million or 12.0%. Leading that growth were Roanoke, Greensboro and Martinsville/Henry County, Virginia (one of our legacy markets). Net income for 2017 was down slightly as compared with 2016. The enactment of the new federal tax law in December 2017 negatively affected net income for 2017. The law provides for the corporate tax rate to be reduced from 35% to 21%. While this change will positively affect our income tax expense in 2018 and going forward, GAAP accounting required a revaluation of our deferred tax assets at the new rate with a one-time charge in the fourth quarter of 2017. With the deferred tax asset adjustment, net income for 2017 was $15.2 million compared to $16.3 million for 2016. Without this charge, 2017 net income would have been $17.9 million – “progressive growth” in earnings. Earnings per share were $1.76 for 2017 compared to $1.89 in 2016. Without the one-time deferred tax adjustment, 2017 earnings per share would have been $2.07. Total assets of the company on December 31, 2017, exceeded $1.8 billion. Shareholders’ equity was $209 million, and our average equity to average assets was 11.64%. Our book value per common share grew to $24.13 from $23.37 on December 31, 2016. All of these numbers show growth and strength for a “bright future.” 2017 2016 2015 $38.30 $34.80 $25.61 T H R E E - Y E A R S T O C K (12/31 Closing Price) 2 In addition to earnings per share, we recognize the importance of total return to the shareholder, which we define as increase in your share price plus your dividend. We continued to see the market price of our stock increase – it closed on December 31, 2017, at $38.30, compared to the December 31, 2016, closing price of $34.80. In the fourth quarter, we increased our quarterly dividend to $0.25 per share. Again this shows growth and strength reflecting a bright future. We continue to grow a strong team across our markets, united by a common culture committed to our mission of providing quality financial services with exceptional customer service. We live and work in a manner that is consistent with our vision, guiding principles and core values, which are set out on page 1 of this report. We hope that, as you read them, you will understand why we are successful and why we believe we have a “bright future.” We have a great team of employees, led by a talented executive group. As we grow and expand into new markets, it becomes more evident that our most important asset is our people – those who have been with us for many years and those who have joined us recently. We also have a strong, effective and dedicated board of directors. As shareholders, you elect them and they do an outstanding job of representing you in strategic policy leadership and management oversight. We are proud to work with them, and we hope you are also proud of their work. In last year’s report, we recognized Ben Davenport, who retired as a director at the May 2017 annual 2017 2016 2015 $26,075,066 $23,307,631 $21,059,359 I N C O M E B E F O R E I N C O M E T A X P R O V I S I O N meeting after 24 years on the board. Ben’s term as director emeritus will end at this May’s annual meeting of shareholders. We will miss his wise counsel. In September 2017, Tammy Moss Finley was elected as a director of the company and the bank. A native of the Danville area and a current resident of the Roanoke Valley area, Tammy serves as executive vice president, general counsel and corporate secretary of Advance Auto Parts, Inc., a leading automotive aftermarket parts provider and a Fortune 500 public company. She brings significant insight and expertise regarding legal, human resources, risk management and public company corporate governance matters. We are pleased and feel fortunate to have Tammy join our board of directors. We appreciate your support and recognize the importance of your investment in our company. We, our entire employee team and our directors, work hard to manage the company prudently. Together we look forward to continuing a successful company through Progressive Growth and Regional Strength for a Bright Future. Very truly yours, Charles H. Majors Chairman of the Board American National Bankshares Inc. American National Bank and Trust Company Jeffrey V. Haley President and Chief Executive Officer American National Bankshares Inc. American National Bank and Trust Company 3 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 tax 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 2017 2016 2015 2014 2013 $ 63,038 7,291 55,747 1,016 14,227 42,883 26,075 10,826 15,249 $ 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 $ 1,816,078 1,336,125 327,447 1,534,726 208,717 163,654 $ 1,678,638 1,164,821 352,726 1,370,640 201,380 155,789 $ 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 $ 1.76 1.76 0.97 24.13 18.92 $ 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 Average shares outstanding, basic Average shares outstanding, diluted 8,641,717 8,660,628 8,611,507 8,621,241 8,680,502 8,688,450 7,867,198 7,877,576 7,872,870 7,884,561 Selected Ratios: Return on average assets Return on average equity1 Return 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-performing 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 ratio4 0.87% 7.34% 9.59% 54.98% 60.89% 3.50% 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% 1.02% 1.10% 1.25% 1.48% 1.59% 531.37% 0.21% 0.02% 360.39% 0.29% 0.00% 242.09% 0.48% 0.08% 302.21% 0.46% 0.07% 248.47% 0.65% (0.02)% 14.39% 11.50% 13.42% 10.95% 9.24% 14.81% 11.77% 13.83% 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% 1 Return on average equity is calculated by dividing net income available to common shareholders by average common equity. 2 Return on average tangible equity is calculated by dividing net income available to common shareholders plus amortization of intangibles tax effected by average common equity less average intangibles. 3 The efficiency ratio is calculated by dividing noninterest 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-end common equity less period-end intangibles by period-end assets less period-end intangibles. 4 Performance Graphs On December 31, 2017, we completed a three-year strategic plan. The results are not only progressive, but also demonstrate our strength and bring into clarity a truly bright future. As a team, we accomplished significant gains in assets, deposits, loans and shareholder value via our stock price. Three-Year Strategic Plan Score Card YTD 12/31/2017 YTD 12/31/2014 Three-Year CAGR % Change During Plan Stock Price (EOP) $38.30 $24.81 15.57% Total Assets $1,816,078 $1,346,492 10.49% Total Loans 1,336,125 840,925 16.69% Total Deposits 1,534,726 1,075,837 12.57% 54.37% 34.87% 58.89% 42.65% Total Deposits (in millions) Total Assets (in millions) 2017 2016 2015 $1,535 2017 $1,816 $1,371 $1,263 2016 2015 $1,679 $1,548 Total Loans (in millions) 2017 2016 2015 $1,336 $1,165 $1,006 5 Consolidated Balance Sheets As of December 31. (Dollars in thousands, except for share data) 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 $147 in 2017 and $192 in 2016 Goodwill Core deposit intangibles, net Bank owned life insurance Accrued interest receivable and other assets Total assets Liabilities 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: 2017 2016 $ 28,594 23,883 321,337 6,110 1,639 1,336,125 (13,603) 1,322,522 $ 20,268 32,939 346,502 6,224 5,996 1,164,821 (12,801 ) 1,152,020 25,901 25,439 1,225 43,872 1,191 18,460 21,344 1,816,078 394,344 226,914 403,024 126,786 383,658 1,534,726 10,726 24,000 — 27,826 10,083 1,607,361 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 Preferred stock, $5 par, 2,000,0000 shares authorized, none outstanding Common stock $1 par, 20,000,000 shares authorized, 8,650,574 shares at December 31, 2017, and 8,618,051 shares at December 31, 2016 Capital in excess of par value Retained earnings Accumulated other comprehensive loss, net Total shareholders’ equity Total liabilities and shareholders’ equity — — 8,604 76,179 127,010 (3,076 ) 208,717 1,816,078 8,578 75,076 119,600 (1,874 ) 201,380 1,678,638 6 Consolidated Statements of Income Interest and Dividend Income: Interest and fees on loan Interest on federal funds sold Interest and 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 expense 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 Gains (losses) on premises and equipment, net Other Total noninterest income Noninterest Expense: Salaries Employee benefits Occupancy and equipment FDIC assessment Bank franchise tax Core deposit intangible amortization Data processing Software Other real estate owned, net Merger-related expenses Other Total noninterest expense Income before income taxes Income taxes Net Income Net Income Per Common Share: Basic Diluted Average Common Shares Outstanding: Basic Diluted 2017 2016 2015 $ 55,276 — $ 47,971 — $ 46,860 6 4,666 2,043 319 734 63,038 5,794 173 296 1,028 7,291 55,747 1,016 54,731 3,926 2,002 2,895 2,208 812 829 236 344 975 14,227 19,829 4,519 4,487 538 1,072 528 2,014 1,144 303 — 8,449 42,883 26,075 10,826 15,249 1.76 1.76 4,454 3,135 334 276 56,170 5,103 10 325 878 6,316 49,854 250 49,604 3,791 2,048 2,680 1,713 836 843 463 (9 ) 1,140 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 1.89 1.89 4,072 3,681 346 204 55,169 4,811 9 324 760 5,904 49,265 950 48,315 3,935 2,066 2,377 1,320 867 946 912 11 853 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 1.73 1.73 8,641,717 8,660,628 8,611,507 8,621,241 8,680,502 8,688,450 7 7 Progressive Growth. Regional Strength. Bright Future. Merriam Webster dictionary defines “progress” as: forward or onward movement toward a destination; a higher stage. When American National Bank began in 1909, progress meant reaching our first anniversary and simply taking care of our customers’ basic needs. Today, our progressive growth signals something far more productive and impactful—it means taking care of individual customers through each financial stage of life and ensuring our communities thrive and prosper. We know and operate under the premise that “the bank will only be as successful as the communities we serve.” For 110 years we have taken care of our customers and our communities, and that history has served as the base for our operating theme: “Progressive Growth. Regional Strength. Bright Future.” Our staff live, work, shop, raise families and help lead in the communities we serve. The cycle of support, success, growth and prosperity is important to us as stakeholders of our community. Importantly, being a “community” bank is the hallmark of our efforts and the path that leads us forward. Progressive Growth. Regional Strength. Bright Future. Progressive Growth. Progressive growth symbolizes an organization that methodically, consistently and with an eye toward tomorrow marches forward in lock-step with our customers. It means bringing technology improvements for our customers, new products to the marketplace and continuing to serve our communities. It also means that we understand the needs of our market and know the true pulse of the areas in which we operate. Progressive growth comes at a sustainable pace that leads our team and customers forward. We have introduced new services and accounts tailored to our customers. With consistent increases in assets, income and funds managed, our progressive growth is proven and demonstrates sustainable results. 8 Regional Strength. Having regional strength provides a strong bench and supporting staff that enable our local commitment to progressive growth to take hold. We have the capability to grow with our customers’ needs and the personal touch to take every step of the journey together. Our strength brings opportunity to our customers, community, staff and our entire region through ensuring sustainable progress forward and having the wherewithal to enact positive change and impact. Our new markets of Roanoke and Winston-Salem bring into clear focus our regional strength and broader reach. Our customers can now enjoy increased access to options, resources and services that our greater network of branches have made possible. Bright Future. Having a bright future is all about sustainable success and the ability to seize opportunities when presented. As a community bank, we continue to invest in our staff, our facilities and our ability to deliver the personal service and support that our customers consistently praise, whether it’s a small business seeking capital to take that next step forward, a commercial customer fueling their growth, or a We have consistently received excellent ratings for capital and asset quality and maintain strength today for the future that tomorrow brings. By increasing staff expertise through training and mentoring, we have ensured a strong foundation to grow into the future mortgage customer buying his or her very first home. needs of our customers and communities. 9 Preparing for the Future. In 2017, the bank redefined several key aspects of our business which will continue to help power our progressive growth for both our footprint and more importantly, service and support for our customers and communities. Paying heed to our community bank roots yet adding power to our team brings with it the resources of a regional bank such as treasury services and experienced commercial relationship managers. Our customers tell us that they want us to help them in more ways and with a deeper understanding of their business—this is a top priority. As we celebrated our 90th year with our Trust customers, we added an additional Trust officer to keep up with customer demand and ensure our service levels remain extraordinary. In nine decades of customer service, our reputation has grown into a proven leader and our financial expertise has helped our customers mold their future. The more support we bring our customers, the more volume and product demand we receive. Across all lines of business, we are united in our focus on being a partner for our customers, not just a transaction provider. As banks have consolidated around us, we have kept our focus of delivering relationship banking and local decisions. To facilitate local decision making, and to be more aware of the true “pulse of our community,” we have realigned our branch reporting structure so that there is in- market leadership responsible for the management activities in each community. This not only speeds decisions but also enables us to make decisions closer to the customer point of contact. Our growing branch network means more access, closer support and more options for our customers across the region. 1 0 To ensure our customers and partners have the tools The customer impact is clear through greater efficiency available to best serve their needs, we have added and action. We are positioned for progressive growth, new services such as: • Purchasing Cards • Lockbox Services • ACH Positive Pay and our new processes ensure both our local decision makers and regional support staff have the tools and teams in place. Our progress forward has lead our bank on a path of significant growth from both recent acquisitions and Proactive financial management is key to maintaining organic growth. Our future is bright based on our track progress forward and ensuring a bright future for our record of successful growth and our regional presence. customers! With a clear focus on operational efficiency, customer support and management of new volumes, we have Total Assets As of December 31 each year. 2017 $1,816,078,395 also added key staff in: • Mortgage Origination • Mortgage Operations • Credit Administration • Trust Services • Loan Review • Loan Compliance • Risk and Compliance 2016 2015 2014 2013 2012 2011 2010 $1,678,638,319 $1,547,598,530 $1,346,491,991 $1,307,511,663 $1,283,686,656 $1,304,705,874 $833,664,416 1 1 Our Focus. Purposeful Progress Administration • Added Tammy Finley as a new Board Member from our Roanoke market • Appointed Eddie Martin as Chief Credit Officer Retail Banking • Officially opened new offices in Winston-Salem and Roanoke Commercial Trust and Investments Insurance • Added additional resources within our Credit Administration area to help us build better processes that position us for additional growth • Enhanced our Treasury Services products and services • Celebrated our 90th anniversary and $58M in growth of assets under management • Added a Trust Officer to enhance the customer experience and administration staff to handle increased volume • Brought new Cyber Security support for our customers and business partners Mortgage Lending • Implemented new processes within our Mortgage Operations team which allows for expedited closings • Added new mortgage originators to support our broader region 1 2 T H Powerful Legacy and a Prosperous Future! For the past 90 years, Trust and Investment Services has In 2017, we reached a milestone of 90 years of been a fundamental part of our company’s overall success. service to our Trust customers and helping each From humble beginnings driven by the desire to help our plan their success in a personalized manner. The customers succeed today and plan for tomorrow, we have efforts of the Trust and Investment Services team built a division that now oversees $850M in assets. have paved the way for a prosperous future in which the next generation of customers and communities A key component of our commitment to our communities will benefit from our powerful legacy. and customers is being a full-service provider of trust, investment and banking services. From checking accounts to the most complex estate planning, we are committed to meeting the needs of our communities and customers. Because of our community commitment, dedication and hard work, generations of families have entrusted Generations of families have placed their trust with American National Bank. American National Bank and Trust Company with growing As we build our plans for the next 90 years, rest and preserving their assets, planning their futures, assured that American National Bank and Trust protecting their heirs, providing for the charities they care Company will focus on leading the industry and our about and ensuring that their family legacy thrives. customers forward. “In 2017, we were thrilled to celebrate our 90th year of helping multiple generations of families improve their financial lives and preserve their legacies. We look forward to helping current and future generations reach their wealth management priorities.” - John Settle, President of Trust and Investment Services 1 3 Our Communities COLLINSVILLE 2484 Virginia Avenue Collinsville, VA 24078 ROANOKE 3000 Ogden Road Roanoke, VA 24018 GRAHAM 842 South Main Street Graham, NC 27253 GRETNA 109 North Main Street Gretna, VA 24557 ROCKY MOUNT 400 Old Franklin Turnpike Rocky Mount, VA 24151 HARDY Westlake 12930 Booker T Washington Hwy Hardy, VA 24101 LYNCHBURG Graves Mill 1646 Graves Mill Road Lynchburg, VA 24502 Timberlake 20479 Timberlake Road Lynchburg, VA 24502 MARTINSVILLE 900 Liberty Street Martinsville, VA 24112 RIDGEWAY / 220 SOUTH 3810 Greensboro Road Ridgeway, VA 24148 SOUTH BOSTON 3609 Old Halifax Road South Boston, VA 24592 UNION HALL Southlake 25 Southlake Drive Union Hall, VA 24176 Phone: (540)576-1218 North Carolina BURLINGTON South Church Street 3101 South Church Street Burlington, NC 27215 Cum Park Plaza 2214 North Church Street Burlington, NC 27217 Village at Brookwood 1840 Brookwood Avenue Burlington, NC 27215 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 MEBANE 1008 Mebane Oaks Road Mebane, NC 27302 YANCEYVILLE 173 Main Street Yanceyville, NC 27379 WINSTON-SALEM 110 Oakwood Drive, Suite 520 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 1 4 Charley Majors Employee Achievement Award In honor of our Chairman and Retired Chief Treasury Services area whereby Executive Officer, we established the Charley today we can offer similar Majors Employee Achievement Award in 2014. services as to any of our Mr. Majors is a champion of the bank’s progressive competitors. She epitomizes growth and has been a major influence on the the spirit of the Charley culture and achievements of our staff. Majors Employee Achievement Award in her actions, energy This award is given to the employee who best and passion for helping both exemplifies the American National Core Values, customers and fellow staff Jennifer Stetler, Senior Vice President—Treasury Services who is a constant team supporter, who exhibits members succeed. the “extra mile” of effort and leadership in the face of adversity, and who demonstrates a cheerful spirit of service to customers and co-workers. The recipient will possess an exceptional degree of character, high personal integrity and a sense of service beyond question. For 2017 the honored employee is Jennifer Stetler, SVP, Treasury Services. Jennifer is a highly respected team member and key contributor to many new services meeting the needs of our customers. Treasury Services is a newer business line for American National Bank and we needed a spirited leader with experience, purpose and commitment—that is Jennifer Stetler in a nutshell. Jennifer approaches life with a “can-do” spirit. “Jennifer’s positive, proactive, solutions oriented, team approach makes her a winner both for our customers and our employees. Jennifer cares and Jennifer matters!” - Gregg Strader, EVP and Chief Banking Officer She is willing to jump in, chip in and do whatever We are pleased to present Jennifer Stetler as she has to do to make the American National the 2017 Charley Majors Employee Achievement Bank team shine. Jennifer has expanded our Award winner. 1 5 Our Commitment Grows In 2017, the American National Bank team other organizations through our broad footprint participated in outside leadership roles across in the marketplace. For American National nearly 300 organizations of various sizes, Bank, we elevate our commitment to a higher focus and location. Employees dedicate their personal time, passion and skills to help level and bring our regional strength to bear in benefiting the organizations our staff members these organizations. In addition, the Bank participate in and support. supports their efforts by contributing to these organizations with financial support. We take our role of “community bank” very seriously and realize that one of a company’s Leadership roles in nearly 300 organizations fiduciary responsibilities is active leadership From Lynchburg to Winston-Salem and within the community. A bank has a unique Roanoke to South Boston we have integrated level of impact for organizations—from leadership assistance, financial planning ourselves into the fabric of the communities we serve and have initiated programs and support, strategic planning and connections to support that bring progressive growth and sustainable involvement. 1 6 Here is a sampling of the organizations we supported in 2017: Blue Ridge Mountains Council, BSA 37th District Scholarship Fund Action Greensboro AJ Linville Foundation Alamance Co. Chamber of Commerce Alamance Co. Economic Development Foundation Alamance Community College Foundation Alamance Eldercare Alamance Junior Tennis Foundation Alamance Reg. Charitable Foundation Albert Harris Elementary School Alliance Human Services Inc. Alzheimer’s Association American Cancer Society American Legion Andrew Haley Memorial Art at the Rives Theater Bassett High School Bedford Area YMCA Better Together Inc. Big Brothers Big Sisters Blue Ridge Regional Library Foundation Inc. Boys & Girls Club of Danville Brambleton Area Business Association Inc. Burlington Christian Academy Burlington Parks & Recreation Carlisle School Caswell Co. Chamber of Commerce Center in the Square Chatham High School Booster Club Children’s Assistive Technology Services Comet Baseball Booster Club Community Foundation-Dan River Community Partnership for Franklin County Cool Branch Fire & Rescue Fund CUMC Cystic Fibrosis Foundation Dan River High School JROTC Dan River Region Assoc. of Realtors Danville Art League Danville Family YMCA Danville Heart Association Danville Life Saving Crew Danville Museum of Fine Arts & History Danville Parks & Recreation Danville Pittsylvania Co. Chamber Danville River District Association Danville Science Center Danville Shrine Club Danville Speech & Hearing Center Dearington Elementary School DESI Dixie Youth Baseball Don Holliday Memorial Scholarship Downtown Greensboro Foundation Downtown Roanoke Inc. Ducks Unlimited Education Foundation Inc. EHS All Sports Foundation EMM Reading Project EMM Community Service Project Enrichment Fund for Guilford County Schools Everfi Faith Christian School Inc. Ferrum College Athletics Ferrum College Fieldale Heritage Inc. Figsboro Ruritan Club Five Star Sports Folds of Honor Franklin Co. Lacrosse Club, Inc. Franklin Co. Parks & Recreation Franklin County Sheriff’s Office Freshmore Boys Basketball Front St. United Methodist Church Future of The Piedmont Foundation Gallery Players God’s Pit Crew God’s Storehouse Graham Rotary Club Greensboro Chamber of Commerce Greensboro Merchants Association Greensboro Science Center Greensboro Young Life Gretna Band Gretna Volunteer Fire Department Gretna Volunteer Rescue Squad Gretna Youth Sports Guilford Merchants Association Hadassah Halifax Co. Booster Club Halifax Co. Chamber of Commerce Halifax Co. Fair Halifax Co. High School Halifax County Public Schools Education Foundation Halifax County Fire Department Halifax County Little League Halifax County Little Theatre Hargrave Military Academy Harvester Performance Center HC-SB Sports Hall of Fame Healing Garden at Alamance Regional Henry Co. Sheriff’s Office Historic Garden Week Historical Society of Western Virginia Horizons Residential Care Center Hospice League of Alamance- Caswell James Madison Middle School Jill’s Buddy Camp Junior Achievement of Southwest Virginia, Inc. Junior League of Greensboro Kaleideum King’s Grant Kiwanis Club of Botetourt County Kiwanis Club of Burlington Kiwanis Club of Danville Kiwanis Club of Greensboro Lady Eagles Softball Booster Club Lake Sugar Tree Motorsports Park Little Pink Houses of Hope Local Office on Aging Inc. Luncheon Pilot Club of Danville Lynchburg Baseball Corp. Lynchburg City Schools Education Lynchburg Morning Rotary Club Lynchburg Public Library Lynchburg Regional Business Alliance Magna Vista High School Martinsville City Public Schools Martinsville City Sheriff’s Office Martinsville Henry Co. Chamber Martinsville Henry Co. Lions Club Martinsville Henry County National Society of Black Engineers Mebane Business Association Mentor/Role Model Program Inc. Merchants Association of Gretna MHS After Prom Committee Mill Mountain Theatre Moneta Lions Club Nat Greene Kiwanis National D-Day Memorial New London Horse Show North Carolina Bankers Association North Carolina Wildlife Habitat Old North State Council BSA Olde Dominion Ag. Complex Operation Merry Christmas Optimist Club of Graham PCYLA Piedmont Arts Association Piedmont Youth Soccer League Pigg River Community Center Pittsylvania Career & Technical Center Pittsylvania County Schools Pittsylvania Pet Center Presbyterian Community Center Preservation Greensboro Inc. RADAR Ralph Scott Life Services RCC/Holy Strokes Fundraiser Rebounding Roanoke Redwood United Methodist Church Region 2000 Retail Merchants Association Ringgold Vol Fire Dept Roanoke Branch NAACP, Unit 7114 Roanoke Children’s Theatre Roanoke Kiwanis Foundation Roanoke Regional Chamber of Commerce Roanoke Regional Partnership Roanoke Regional SBDC Roanoke Valley Assoc of Realtors Roanoke Valley Firefighters Foundation Inc. Rocky Mount Police Dept Rooster Walk, Inc. Rotary Club of Chatham Rotary Club of Danville Rotary Club of Danville- Riverview Rotary Club of Greensboro Rotary Club of Henry County Rotary Club of Martinsville Rotary Club of Rocky Mount Sacred Heart Catholic School Salem Rotary Salvation Army Boys & Girls Club Scholastic Sports, Inc. Scottsburg Athletic Association Smith Mountain Lake Civitan Club Smith Mountain Lake Regional Chamber of Commerce Smith Mountain Lake Marine Volunteer Fire Rescue Smith River Sports Complex Smith Mountain Lake Charity Home Tour Smith Mountain Lake Good Neighbor South Boston Pizza Festival Spencer-Penn Centre Star City Soccer Foundation Summit Rotary Foundation Inc. Swansonville Pentecostal Holiness The Agape Center The Children’s Heart Foundation The Volunteer Center of Greensboro Triple Negative Breast Cancer Foundation Tunstall Golf Team Tunstall High School DECA United Way Virginia Bankers Association VBA Education Foundation Virginia Chamber of Commerce Virginia Government Finance Officers Association Virginia Reds Travel Baseball Team Virginia Special Olympics Virginia Squires Baseball Ward Burton Wildlife Foundation We Care of Franklin County Inc. Western Alamance Science Club Western High Athletic Boosters Westover Christian Academy Williams High Athletic Boosters Wyndham Championship YMCA Camp Weaver YMCA of Alamance County YMCA of Central Virginia YMCA of Franklin County 1 7 Our Board Leadership Director Emeritus Ben J. Davenport Jr. Board of Directors Fred A. Blair President Blair 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 Tammy M. Finley Executive Vice President and General Counsel Advance Auto Parts, Inc. Roanoke, VA Director since 2017 Committee 6 Jeffrey V. Haley President & Chief Executive Officer American National Bankshares Inc. American National Bank and Trust Company Danville, VA Director since 2010 Committee 7 Michael P. Haley Retired Advisor Fenway Partners New York, NY Director since 2002 Committees 1, 2, 4, 6, 8 Charles S. Harris Executive Vice President Averett University Danville, VA Director since 2008 Committees 1, 5, 6 F. D. Hornaday III President & Chief Executive Officer 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. Burlington, NC Director since 2011 Committees 4, 5, 6 Franklin W. Maddux, M.D. Chief Medical Officer Executive Vice 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. American National Bank and Trust Company Danville, VA Director 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, 4, 6 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 1 8 Dan M. Pleasant Chief Operating Officer The Dewberry Companies Inc. Fairfax, VA Director since 2011 Committees 4, 6, 8 Joel R. Shepherd President Virginia Home Furnishings Inc. 220 Self Storage Inc. Roanoke, VA Director since 2015 Committees 3, 6, 8 North Carolina Advisory Board Members: Advisory Boards (as of January 1, 2018) Thomas E. Chandler Jr. President Chandler Concrete Company Inc. Dawn S. Chaney President Chaney Properties James B. Crouch Jr. Vice President Harris, Crouch, Long, Scott & Miller Inc. J. Nathan Duggins, III Managing Partner Tuggle Duggins P.A. Anthony E. Foriest Retired Xerox Corporation John A. Holt Sr. President & Chief Financial Officer DynaYarn USA LLC David S. Johnson, M.D. Physician Burlington Pediatrics Ronald A. Joyce President & Chief Executive Officer Joyce Foods Teena M. Koury Owner Carolina Hosiery Mills John B. Leath Chief Executive Officer Acucote Inc. Timothy J. Clark Vice President Blair Construction Inc. James D. Coleman Jr. President Rives Brown Realty Nicholas C. Conte SVP and General Counsel Carilion Clinic Martha W. Medley Partner Daniel, Medley & Kirby P.C. Chris F. Mohr Chairman & Chief Executive Officer Ameristaff Inc. James K. Muehleck, D.D.S Dentist Martinsville C. Laine Dalton VP, General Manager & Partial Owner Dalton Insurance Agency Stephen A. Musselwhite President Musselwhite & Associates R. Aubrey Linville, III Partner Linville Team Partners, LLC Phillip J. Nahser Jr., M.D. Cardiologist Cone Health Medical Group Richard H. Ramsey Operating Partner New Page Capital President Engineered Steel Products, Inc. President American Industrial, LLC Diane M. Rumley, CPA Partner Leeper, Kean & Rumley LLP Adrian T. Smith Chief Executive Officer Ice Age Management James H. Smith Jr. President Villane Inc. Sherri K. Squier Chief Executive Officer All-State Express, Inc. John M. Deekens Retired General Manager Stuart Forest Products Harold E. Green Jr. President Distinct Impressions Inc. Tammy B. Jewell Business Manager Jewell Machinery, Inc. Richard H. Jones CPA Jones & Associates Kyle M. Winslow Vice President Briggs-Shaffner Acquisition Company Earnest C. Jordan Retired Senior Vice President American National Bank and Trust Company Virginia Advisory Board Members: Dr. Al N. Angle retired Drs. Saxon, Angle and Assoc., P.C. Andy C. Kelderhouse President Fralin & Waldron, Inc. John H. Laramore Realtor Wilkins and Co. Realtors W. Kelvin Bowles President & Owner Eastern Communications Associates John D. Lugar President Virginia Varsity Transfer & Storage J. Brian Burton President J.E. Burton Construction Company Lauren M. Mathena Director of Economic Development and Community Engagement Mid-Atlantic Broadband Communities Corp. Harry G. Norris President Howell’s Motor Freight Danny M. Purdue Vice President Perdue Properties Inc. Keith Robinson, M.D. Physician Danville R. Eddie Shelton Owner Diamond S Farms W. Earle Spruill Jr. President Osage, Inc. Thomas S. Stump President & Chief Executive Officer First Piedmont Corporation Michael A. Turner CEO & Partial Owner Turner’s Building Inc. William C. Vaughn Vice President J&R Management Inc. E. Linwood Wright Consultant Danville IDA Our Executive Leadership Executive Management (as of January 1, 2018) Jeffrey V. Haley President Chief Executive Officer Edward C. Martin Executive Vice President Chief Credit Officer H. Gregg Strader Executive Vice President Chief Banking Officer William W. Traynham Executive Vice President Chief Financial Officer John H. Settle Jr. Executive Vice President President of Trust and Investment Services 1 9 American National Bankshares Inc. Shareholder Information Stockholder Information Annual Meeting • The 2018 Annual Meeting of Shareholders of American National Bankshares Inc. will be held on Tuesday, May 15, 2018, 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 • Shareholders needing information on stock transfer requirements, lost certificates, dividends, the dividend retirement plan and other shareholder matters may contact: Computershare 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 Regulatory 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. 2017 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 2017 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 FORWARD-LOOKING STATEMENTS This Summary Annual Report may contain “forward-looking statements” within the meaning of federal securities laws that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Company 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: financial market volatility including the level of interest rates could affect the values of financial instruments and the amount of net interest income earned; 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; the ability to retain key personnel; the failure of assumptions underlying the allowance for loan losses; and risks associated with mergers, acquisitions, and other expansion activities. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company’s most recent Form 10-K report and other documents filed with the Securities and Exchange Commission. American National Bankshares Inc. does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. 2 0 “Progress lies not in enhancing what is, but in advancing toward what will be.” - Khalil Gibran 628 Main Street, Danville, VA 24541 434.792.5111 amnb.com 

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