Summary Annual Report 2020 2020: a pivotal year Contents LETTER TO SHAREHOLDERS From your Chairman and President & CEO OUR 2020 PIVOT Customers & Communities VISION & VALUES Cultural Pivot 2020 EMPLOYEE RECOGNITIONS Charley Majors Award & Bill Traynham Outstanding Service Award FINANCIALS Historical Highlights, Balance Sheet, Income Statement OUR LEADERSHIP Executive Leadership, Board of Directors and State Banking Board Members SHAREHOLDER INFORMATION 2 4 8 10 11 14 16 piv·ot /’pivƏt/ verb turn on or as if on a pivot noun the central point, pin, or shaft on which a mechanism turns or oscillates Definitions from Oxford Languages To Our Shareholders If you approached us at the start of 2020 and told us that we should close our lobbies and serve our customers through the drive-thru and digital channels only, we would have certainly questioned your judgment. If you told us we should send home everyone that was able to work remotely and asked us what Zoom was, we wouldn’t know how to respond. And if you asked us to stand up a team to work around the clock to make or defer loans for most of our business customers based on unclear and constantly changing lending terms, we really would have thought you lost your mind. But in 2020, we did all of this and it’s thanks to the severity of COVID-19 as we had two team hard work and dedication of an amazing group members pass away due to complications from of bankers. Like many essential businesses, the virus. Bill Stephens, who spent the bulk of his we pivoted to new ways of doing things in career at American National and served as our IT order to keep our employees and communities Director until 2019, passed away in October of safe and to continue to meet the needs of our 2020. Then at the start of 2021, Scotty Glazener, customers. We didn’t just stay open– we went who was a valued part of our team for the past above and beyond to respond to our customers ten years, fell victim to the virus. And sadly, those and communities when they needed us. Upon were not the only losses we experienced this past passage of the Cares Act, we assembled a team year. Bill Traynham, the Chief Financial Officer that worked 24/7 to make sure our customers got of American National until his 2019 medical the PPP funding. We have approved nearly 3,000 retirement, lost his hard-fought battle to cancer PPP loans through March 10, 2021 totaling just in April of 2020. Our condolences continue to be shy of $350 million in both the first and second extended to the families and loved ones of these rounds of the program. We are extremely proud three wonderful men. and humbled to be able to effectively help our local businesses get the funding they needed. We know 2020 had an impact on countless others, and as the vaccine distributions continue we can all take something positive away from this period. The quote, “never waste a crisis,” was recited many times throughout the year, and as we reflect on the past year, we are encouraged by the team of people that we have assembled and the overwhelming support of our valuable customers, board members, and shareholders. We have learned a lot about what we are capable of and will certainly use our experiences from 2020 as we move forward. There are two board members we would like to recognize for their contributions as they transition off our board. The first is Claude Owen, who joined our board in 1984 and served his final year with us in 2021 as an Emeritus Director. His contributions to our Company have been immeasurable as he has been with us since we were a small, community bank serving a single market to where we are today as a regional community bank in 11 markets. Ken Bowling, who joined our board in 2019 with our acquisition of HomeTown Bankshares, will be retiring as a director at the May 2021 annual meeting. Ken was influential in establishing HomeTown Bank’s presence in the New River Valley market of Virginia in 2008, and we have appreciated his continued service. Despite the significant economic impact of COVID-19 and with increasing our loan loss allowance by $8.3 million, our net income for the year was $30.0 million compared to $20.9 million in 2019. The 2019 earnings were impacted by $11.8 million in merger-related expenses. We ended the year with total assets at $3.1 billion and $2.6 billion in total deposits, compared to $2.5 billion and $2.1 billion, respectively, in 2019. The growth over the same period a year ago is primarily due to loan and deposit growth associated with the PPP program. We are so grateful for our employees and customers for their ability to pivot to new ways of operating this past year, but we would be remiss if we did not also thank you, our shareholders. It is your support and continued investment in our Company that ultimately strengthens our communities. Very truly yours, Unfortunately, we were not immune to the and we emerge from the pandemic, we hope that Chairman of the Board President & Chief Executive Officer 2 3 Financial Heroes 2020 showed us how much we need each other. So many people throughout the country stepped up to help their neighbors and their communities, despite the health risk we were all facing. From healthcare workers and grocery store personnel, to teachers and caregivers, we saw heroes among us. And while so many people weren’t able to work or had to shut the doors to their businesses, banks across the country were on the financial frontlines ready to help. We were proud to be one of them. American National has some of the most reliable and flexible bankers around who were ready to roll up their sleeves, put on a mask, and do whatever it takes to help our customers. Relationships matter. You can count on us. 4 4 5 Community Banks Buil d Better Communities We kicked off 2020 by sponsoring the Virginia We were also hands-on in hosting food drives in Reads One Book (VAROB) program at some area visible corridors as we tried to help alleviate this elementary schools in our footprint. But before pressing need. we knew it and before our school visits could be completed, schools were shut down as we At the same time, we worked tirelessly with entered a national state of emergency due to the thousands of our business customers to quickly COVID-19 pandemic. stand up a process for implementing loan And within weeks, millions of people lost their jobs, and there was an immediate need for food deferments as well as the Paycheck Protection Program, part of the CARES Act stimulus package aimed at helping small businesses in our communities. American National took the impacted by COVID-19. lead in responding to this crisis and called on many banks in our footprint to make a donation These acts were completed without question to Feeding Southwest Virginia. The result was and without hesitation. As a leading community two truckloads totaling over $50,000 in food to bank, it was our responsibility and privilege to help those who truly needed it. be there for our customers and communities. 2230 PPP LOANS FOR $275 MILLION in round one of PPP $428 MILLION IN DISASTER ASSISTANCE PROGRAM interest and payment deferrals at 6/30/20 618 PPP LOANS through 3/10/21 in round two of PPP 6 4 7 Our Promise & Values While our century-plus history matters, we believe that to serve our customers, we need to look forward and embrace fresh ideas and diverse perspectives to be better than the day before. We believe that our customers’ experience matters and no one should feel like a number. We believe in being genuine and following through on promises isn’t optional – it’s just what good people and businesses do. We believe that making smart decisions with a long-term view enables our real strength: being here through thick and thin to help others pursue their dreams to make our communities a better place for us all. Relationship Focus Establishing trust based on respecting others and doing the right thing Constant Improvement Embracing change as we push ourselves to be better Teamwork Working as one team, we value diverse perspectives to move us forward together Reliability Doing what we say we are going to do through responsive communication and service Authenticity Being genuine and practical in our words and actions In addition to a pandemic, 2020 brought large- We made adjustments where we found the scale awakening to the systemic racism that need and recommitted ourselves to our core persists across our nation. As we condemned values while creating a Diversity, Equity, and the tragic deaths that sparked our nation's Inclusion (DEI) task force to determine what outcry, we also looked inward at our corporate further actions were needed to ensure that culture, to ensure our practices, policies, and American National is a part of the solution procedures aligned with our values and that to combatting the racial injustices in our they promote openness and accessibility and communities and across our country. enable all employees to thrive. 18 8 9 2020 Award Recipients Financial Highlights for the year ended December 31 (Dollars in thousands except for share and per share data) for the year ended December 31 (Dollars in thousands except for share and per share data) Charley Majors Achievement Award Matthew Blake This award is given to the person who best exemplifies the values of American National and exhibits the "extra mile" of leadership. As manager of our retail teams and branch network, 2020 was full of challenges for Matt. But he met each and every one of them with a positive attitude, demonstrating exceptional leadership as he motivated teams while finding innovative ways to operate in order to keep our employees safe while meeting the needs of our customers. He is a humble, hard-working professional, and we are thankful for his leadership. Results of Operations Interest income Interest expense Net interest income Provision for (recovery of) loan losses Noninterest income Noninterest expense Income before income tax Income tax Net income Financial Condition Assets Loans, net 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 2020 2019 2018 2017 2016 $95,840 12,020 83,820 8,916 16,843 54,565 37,182 7,137 30,045 $92,855 15,728 77,127 456 15,170 66,074 25,767 4,861 20,906 $68,768 9,674 59,094 (103) 13,274 44,246 28,225 5,646 22,579 $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 $3,050,010 2,015,056 474,806 2,611,330 337,894 246,755 $2,478,550 1,830,815 387,825 2,060,547 320,258 228,528 $1,862,866 1,357,476 339,730 1,566,227 222,542 177,744 $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 $2.74 2.73 1.08 30.77 22.47 $1.99 1.98 1.04 28.93 20.64 $2.60 2.59 1.00 25.52 20.38 $1.76 1.76 0.97 24.13 18.92 $1.89 1.89 0.96 23.37 18.08 Bill Traynham Outstanding Service Award Weighted average common shares outstanding, basic Weighted average common shares outstanding, diluted 10,981,623 10,985,790 10,531,572 10,541,337 8,698,014 8,708,462 8,641,717 8,660,628 8,611,507 8,621,241 Bryan Lunsford Bryan was instrumental to the success of our PPP program, a task he did not hesitate to take on in addition to his already full plate as a credit officer. He goes above and beyond completing projects with professionalism and a great attitude and his peers describe him as a helpful resource, and a joy to work with. Bryan truly embodies the criteria for this award as someone who goes above and beyond to help his or her fellow co- workers and does so with a can-do attitude. Selected Ratios Return on average assets Return on average common equity Return on average tangible common equity Dividend payout ratio Efficiency ratio Net interest margin Asset Quality Ratios 1.08% 9.12% 13.19% 39.41% 52.80% 3.30% 0.91% 7.16% 10.43% 52.45% 57.25% 3.68% 1.24% 10.56% 13.49% 38.54% 59.20% 3.49% 0.87% 7.34% 9.59% 54.98% 60.14% 3.50% 1.02% 8.07% 10.85% 50.71% 59.97% 3.52% 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 1.06% 793.88% 0.12% 0.03% 0.72% 570.59% 0.15% 0.01% 0.94% 1,101.98% 0.11% 0.05% 1.02% 531.37% 0.21% 0.02% 1.10% 360.39% 0.29% 0.00% Capital Ratios Total risk-based capital ratio Common equity tier 1 capital ratio Tier 1 risk-based capital ratio Tier 1 leverage ratio Tangible common equity to tangible assets ratio 15.18% 12.36% 13.78% 9.48% 8.34% 14.04% 11.56% 12.98% 10.75% 9.57% 15.35% 12.55% 14.46% 11.62% 9.78% 14.39% 11.50% 13.42% 10.95% 9.24% 14.81% 11.77% 13.83% 11.67% 9.54% 10 11 Balance Sheet Income Statement for the year ended December 31 (Dollars in thousands except for share and per share data) for the year ended December 31 (Dollars in thousands except for share and per share data) 2020 2019 2018 $87,700 $82,684 $59,966 2018 2020 2019 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 deffered fees and costs Less allowance for loan losses Net Loans Premises and equipment, net Other real estate owned, net Goodwill Core deposit intangibles, net Bank owned life insurance 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 Customer repurchase agreements Subordinated debt Junior subordinated debt Other liabilities Total liabilities Commitments and Contingencies SHAREHOLDERS’ EQUITY Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding Common stock, $1 par value, 20,000,000 shares authorized, 10,982,367 shares outstanding at December 31, 2020 and 11,071,540 shares outstanding at December 31, 2019 Capital in excess of par value Retained earnings Accumulated other comprehensive income (loss), net Total shareholders’ equity Total liabilities and shareholders’ equity $30,767 343,603 466,091 8,715 15,591 2,015,056 (21,403) 1,993,653 39,723 958 85,048 6,091 28,482 31,288 $3,050,010 $32,505 47,077 379,195 8,630 2,027 1,830,815 (13,152) 1,817,663 39,848 1,308 84,002 7,728 27,817 30,750 $2,478,550 $830,094 501,283 666,122 217,405 396,426 2,611,330 42,551 7,500 28,130 22,605 2,712,116 $578,606 328,015 504,651 177,505 471,770 2,060,547 40,475 7,517 28,029 21,724 2,158,292 0 0 10,926 154,850 169,681 2,437 337,894 $3,050,010 11,019 158,244 151,478 (483) 320,258 $2,478,550 INTEREST AND DIVIDEND INCOME Interest and fees on loans 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 subordinated debt Interest on junior subordinated debt Total interest expense NET INTEREST INCOME Provision for (recovery of) loan losses Net interest income after provision for (recovery of) 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 and 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 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,764 433 503 440 95,840 9,729 259 0 489 1,543 12,020 83,820 8,916 74,904 4,044 2,557 3,925 3,514 814 745 270 (110) 1,084 16,843 29,765 5,586 639 1,702 1,637 3,017 1,454 60 0 10,705 54,565 37,182 7,137 $30,045 $2.74 $2.73 7,682 777 451 1,261 92,855 13,143 650 14 367 1,554 15,728 77,127 456 76,671 3,847 2,866 3,693 2,439 607 721 211 (427) 1,213 15,170 30,015 5,417 119 1,644 1,398 2,567 1,295 31 11,782 11,806 66,074 25,767 4,861 $20,906 $1.99 $1.98 12 Basic Diluted 10,981,623 10,985,790 10,531,572 10,541,337 13 6,106 1,502 321 873 68,768 8,086 186 0 0 1,402 9,674 59,094 (103) 59,197 3,783 2,455 2,637 1,862 123 795 637 60 922 13,274 24,879 4,378 537 1,054 265 1,691 1,279 122 872 9,169 44,246 28,225 5,646 $22,579 $2.60 $2.59 8,698,014 8,708,462 State Banking Board Members Rickey J. Barker President Supply Resource Danville Nathaniel L. Bishop Sr. Associate Dean Virginia Tech Carilion School of Medicine Christiansburg J. Brian Burton President J. E. Burton Construction South Boston Timothy J. Clark President Blair Construction Inc. Gretna VIRGINIA NORTH CAROLINA William J. Farrell, II President Berglund Automotive Group Roanoke William R. Rakes Senior Counsel Gentry-Locke Attorneys Roanoke Dr. Yun L. Boylston Physician Burlington Pediatrics Burlington R. Aubrey Linville, III Partner Linville Team Partners Winston-Salem Daniel D. Hamrick Attorney Hamrick Law Christiansburg John D. Lugar President Virginia Varsity Transfer & Storage Roanoke Monica T. Monday Managing Partner Gentry-Locke Attorneys Martinsville Thomas S. Stump President & Chief Executive Officer First Piedmont Corp. Chatham William C. Vaughn Vice President J&R Management Inc. Martinsville Barton J. Wilner President & Owner Entre Computer Center Roanoke Thomas E. Chandler, Jr. President Chandler Concrete Company Inc. Burlington James B. Crouch, Jr. Partner Harris, Crouch Financial Burlington J. Nathan Duggins, III Managing Partner Tuggle Duggins P.A. Greensboro Richard H. Ramsey Partner New Page Capital Greensboro Adrian T. Smith Chief Executive Officer Ice Age Management Greensboro Stephen T. Williams, Jr. Williams Development Group Winston-Salem Congratulations to Deanna Stone for her recent appointment to judgeship in the 22nd Judicial District of Virginia. This honorable position requires her resignation from our State Banking Board and we thank her for the value she provided our Company. Additionally, Bill Rakes and Dan Hamrick will also be rotating off the Virginia State Banking Board. Bill was a founder of HomeTown Bankshares, Inc (HTBK)and both Bill and Dan previously chaired the HTBK board. We are grateful for the community bank they helped build and subsequently transition to American National as well as the guidance and support they have provided since. Executive Team AMERICAN NATIONAL BANKSHARES INC. & AMERICAN NATIONAL BANK & TRUST COMPANY AMERICAN NATIONAL BANK & TRUST COMPANY Jeffrey V. Haley President Chief Executive Officer Jeffrey W. Farrar Executive Vice President Chief Operating Officer Chief Financial Officer Rhonda P. Joyce Executive Vice President Regional President, South Region Charles T. Canaday, Jr. Executive Vice President Regional President, East Region Edward C. Martin Executive Vice President Chief Administrative Officer H. Gregg Strader Executive Vice President Chief Banking Officer John H. Settle, Jr. Executive Vice President President of Wealth Management Top Row: Charley Majors, Jeff Haley, Joel Shephard, F. D. Hornaday Second Row: Susan Still, Claude Owen, Charles Harris, Ken Bowling Third Row: John Love, Nancy Agee, Dan Pleasant, Tammy FInley Bottom Row: Ronda Penn, Mike Haley Board of Directors Nancy Howell Agee President & CEO Carilion Clinic Director since 2019 Committees 2, 3, 6 Kenneth S. Bowling Vice President H.T. Bowling, Inc. Director since 2019 Committees 1, 5, 6 Tammy Moss Finley Executive Vice President and General Counsel Advance Auto Parts, Inc. Director since 2017 Committees 4, 5, 6 Jeffrey V. Haley President & Chief Executive Officer American National Bankshares Inc. American National Bank & Trust Company Director since 2012 Committee 7 Michael P. Haley Retired Advisor Fenway Partners, LLC Director since 2002 Committees 1, 2 ,3, 4, 6 Charles S. Harris Assistant to the President for External Relations Averett University Director since 2008 Committees 1, 5, 6 F. D. Hornaday, III President & Chief Executive Officer Knit Wear Fabrics, Inc. Director since 2011 Committees 3, 6, 7 John H. Love Retired President & Chief Operating Officer W. E. Love & Associates, LLC Director since 2011 Committees 4, 5, 6 Charles H. Majors Chairman of the Board American National Bankshares Inc. American National Bank & Trust Company Director since 1981 Committee 7 Ronda M. Penn Chief Financial Officer Plexus Capital, LLC Director since 2015 Committees 1, 4, 6 Dan M. Pleasant Chief OperatingOfficer The Dewberry Companies Inc. Director since 2011 Committees 2, 4, 6 Susan K. Still Retired President & CEO HomeTown Bank Director since 2019 Committees 5, 7 DIrector Emeritus Joel R. Shepherd President Virginia Home Furnishings, Inc. 220 Self Storage Inc. Director since 2015 Committees 2, 3, 6 Claude B. Owen Jr. Retired Chairman & Chief Executive Officer DIMON Inc. Director since 1984 Committee 2 (Advisor) Board Committees 1. Audit 2. Capital Management 3. Corporate Governance and Nominating 4. Human Resources and Compensation 5. Risk and Compliance 6. Stock Grant and Option 7. Trust 14 15 Shareholder Information Annual Meeting The 2021 Annual Meeting of Shareholders of American Equal Opportunity Employer American National Bank & Trust Company, a National Bankshares Inc. will be held at our Main wholly-owned subsidiary of American National Office Board Room at 628 Main Street in Danville, Bankshares Inc., is an equal opportunity employer. Virginia 24541 on Tuesday, May 18, 2021, at 9 a.m. All matters regarding recruiting, hiring, training, (EDT). 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 reinvestment 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 PO Box 1320 (23218) Richmond, VA 23219 compensation, benefits, promotions, transfers and all other personnel policies will remain free from discriminatory practices. This Report The American National Bankshares Inc. 2020 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 2020 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, www.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 Statements made in this Summary Annual Report, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this report and are based on current expectations and involve a number of assumptions. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward- looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National include but are not limited to: (1) the impact of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus; (2) financial market volatility including the level of interest rates, could affect the values of financial instruments and the amount of net interest income earned; (3) the adequacy of the level of the Company's allowance for loan losses, the amount of loan loss provisions required in future periods, and the failure of assumptions underlying the allowance for loan losses; (4) 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; (5) 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; (6) businesses that the Company is engaged in may be adversely affected by legislative or regulatory changes, including changes in accounting standards and tax laws; (7) the ability to recruit and retain key personnel; (8) cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable and secure electronic systems; and (9) risks associated with mergers, acquisitions, and other expansion activities. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise. 16 Member FDIC | Equal Housing Lender amnb.com