American National Bankshares Inc.
Annual Report 2021

Plain-text annual report

2 0 2 1 SUMMARY ANNUAL REPORT The 2021 Summary Annual Report is in memory of Jim Motley, President of American National Bank from 1980 – 1992 James A. Motley (1928 – 2021) 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 release 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 included in 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 impacts of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus; (2) expected revenue synergies and cost savings from acquisitions and depositions; (3) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (4) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in American National’s market areas; (5) the adequacy of the level of the allowance for loan losses, the amount of loan loss provisions required in future quarters, and the failure of assumptions underlying the allowance for loan losses; (6) cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (7) accounting principles, policies, and guidelines; and (8) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise. CONTENTS Letter to Shareholders Strategic Initiatives Living Our Values Our Board & Leadership Financial Highlights Shareholder Information 3 5 7 9 11 13 TO OUR SHAREHOLDERS IIn February of this year, we celebrated the 113th birthday of American National. Our founders and those who followed them managed through many challenges including World War I, World War II, the Great Depression, and other historical events. We are not sure if they could have imagined where the bank would be today, or the challenges it’s faced during the past two years. In March of 2020, a global pandemic began that impacted our customers and staff in a profound way. At its onset, we established four goals: (1) to keep our staff safe; (2) to serve our customers’ needs; (3) to protect the financial performance of the bank; and finally, (4) to ensure the stock of AMNB continues to perform better than our peers. We are pleased that each of these goals was achieved, and we feel quite positive about our position as we move forward. 2021 was an exceptional year for American National. We achieved record earnings which were largely driven by the Paycheck Protection Program (PPP). Our net income was $43.5 million in 2021, compared to $30.0 million in 2020, and our return on average assets was 1.37% compared to 1.08% the prior year. Based on the four goals mentioned above and looking at both years of the pandemic – 2020 and 2021 – as one reporting period, our financial performance has been quite strong. Our success amid an ever-evolving backdrop can only be attributed to our people – at every level. From the strong team of leaders that helps shape our culture and drive change to those working directly and indirectly to serve our customers, we are proud of everyone who contributed to our strong performance – both operationally and financially – during this period. We continued to adapt to the changes in our industry and beyond. We introduced a new digital banking platform and online customer support center while remaining flexible and responsive to the needs of our customers and employees. EARNINGS for 2021 were $4.00 per diluted common share, compared to $2.73 for 2020 NONINTEREST INCOME was $21.0 million, an increase of $4.2 million over fiscal 2020 NET LOANS (which excludes PPP loans) increased 7.2% over 2020 DEPOSITS increased 10.7% over 2020, and CORE DEPOSITS increased 14.5% year over year American National’s prior three-year strategic plan expired at the end of 2020. With all the changes happening in our industry, across our nation and the world, we took our time to undergo a deeper and more comprehensive process when developing our 2022-2024 strategic plan. The process spanned about a year, working with our Board and Management teams on its contents. We now have a robust plan to guide us for the next three years, broken down into five key pillars to direct our focus: (1) maintain strong financial performance; (2) grow our franchise; (3) enhance the customer experience; (4) achieve operational excellence; and (5) invest in talent and strengthen our culture of success. To use a single word to describe our direction – it’s “evolution.” Things are evolving all around us. Not just in financial services, but in our economy, with our society and the focus on diversity, equity, and inclusion (DE&I) and environmental, social, and governance (ESG) and with new customer behaviors and changing attitudes in the workforce. There are different expectations for both customers and employees provoked by the pandemic, and we are evolving as a company to remain relevant and strong as we work to continue to meet those expectations. American National is, and has been, fortunate to have dedicated individuals involved at all levels of the organization. Over the past year, we have lost three such individuals who helped shape who we are today. Jim Motley was President of the Bank from 1980 to 1992, Landon Wyatt served as a Director from 1965 to 2000 and Brenda Gibson was employed by American National for 46 years. All three of these people contributed to where we are today in very meaningful ways, and we are grateful for the time they shared with us. Together we have served this Company for 41 years. In that time, we’ve never felt more positive about what we have done and what we have built to move this company forward for our shareholders, our customers, and our employees. We thank you for your continued support as we propel forward in 2022 and beyond. Very Truly Yours, Charley H. Majors Chairman of the Board Jeffrey V. Haley President & CEO TOTAL ASSETS at December 2021 were $3.3 billion, an increase of $284.6 million from the prior year NON-PERFORMING ASSETS as a percentage of total assets were 0.07%, down from 0.12% for fiscal 2020 TOTAL ASSETS in billions $3.3 $3.1 $2.5 $1.8 $1.9 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 3 4 PROPEL FORWARD As we witness transformation all around us – in banking and beyond – we will be active participants. Our foundation is strong; we will leverage our past success to push through the status quo and embrace change. We will nurture existing relationships at the same time we invest in new initiatives and markets to quickly fuel our growth. Never taking our employees or customers for granted, we will efficiently adapt to their needs and propel forward. MAINTAIN STRONG FINANCIAL PERFORMANCE GROW OUR FRANCHISE ENHANCE THE ACHIEVE INVEST IN TALENT & CUSTOMER OPERATIONAL STRENGTHEN EXPERIENCE EXCELLENCE OUR CULTURE OF SUCCESS Our new strategic plan contains plenty of action and we have been busy working on many initiatives that align with our goals and values. Namely, we’ve adopted a DE&I strategic plan. We are committed to advancing a culture of belonging, with a focus on diversity, equity, and inclusion. Not only do we believe the creation of a diverse and inclusive climate is the right thing to do, we believe it’s central to our success. A workforce that values varied perspectives helps encourage innovation and a healthy, open culture while strengthening connections with our customers and communities. We challenge ourselves daily to be and do better at nurturing the equitable and inclusive employment experience necessary for all to succeed and thrive. We are also embracing environmental, social and governance (ESG) as we believe it will become increasingly central to our industry. We are working to understand and develop our ESG strategies now to be sure it’s part of our culture and we remain ahead of social or regulatory expectations. As stated, we take a proactive approach rather than wait for changes to happen. These items as well as other initiatives and focus areas are outlined in our three-year plan. The plan contains five pillars to direct our focus (shown above), but it can also be summed up in one word: EVOLUTION. 5 6 LIVING OUR VALUES Left: Our Rocky Mount team donating food to their local United Way. Above: Roanoke-based EVPs Eddie Martin and Lutheria Smith presenting TAP with a donation. Below: Martinsville bank- er, Doreen Fickel reading to Albert Harris E.S. students for the Virginia Reads One Book program. Right: Our Burlington team proudly displays their angel gifts at Christmas. CHARLEY MAJORS ACHIEVEMENT AWARD WINNER CASEY STOWE, Customer Support Supervisor, assumed a new leadership role to launch our customer support center and she didn’t miss a beat. With her leadership, she and her team have successful- ly handled thousands of customer support requests – both online and offline – in the first few months of the center’s launch. Casey’s patient and helpful attitude creates fans among our customers and teammates with each interaction she has. BILL TRAYNHAM OUTSTANDING SERVICE AWARD WINNER JAINA KENT, Digital Solutions Specialist, is known for her superb service to customers, both internal and external. People value her can-do attitude and how she goes above and beyond to serve our customers at a moment’s notice, before hours, and after hours, and even if its their 5th or 6th time calling. Jaina always answers the phone with a “smile” and will dig down deep to help you find the answers you need. COMMUNITY CHAMPION AWARD WINNER STETSON FRANKLIN, Danville Relationship Banker, was named our Community Champion award winner. Stetson proudly attends many community events and often takes on a leadership role. He has a passion for volunteering in the community he calls home, as evident by serving as Kiwanis Club President, team leader in the Danville Heart Walk, leader in the Community Holiday Meal, as well as staying active in his church and many other community events. 7 8 BOARD OF DIRECTORS Charles H. Majors Chairman of the Board American National Bankshares Inc. American National Bank & Trust Company Director since 1981 Committees 6, 7 Ronda M. Penn Chief Financial Officer Plexus Capital, LLC Director since 2015 Committees 1, 2, 6 Dan M. Pleasant Chief Operating Officer The Dewberry Companies Inc. Director since 2011 Committees 3, 4, 6 Joel R. Shepherd President Virginia Home Furnishings, Inc. 220 Self Storage Inc. Director since 2015 Committees 1, 2, 6 Susan K. Still Retired President & CEO HomeTown Bank Director since 2019 Committees 5, 7 BOARD COMMITTEES 1. Audit 2. Capital Management 3. Corporate Governance & Nominating 4. Human Resources & Compensation 5. Risk & Compliance 6. Stock Grant & Options 7. Trust 8. Sub-committee on Technology Nancy Howell Agee President & CEO Carilion Clinic Director since 2019 Committees 2, 3, 6 Tammy Moss Finley Executive Vice President and General Counsel Advance Auto Parts, Inc. Director since 2017 Committees 4, 5, 6, 8 Jeffrey V. Haley President & CEO 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 Retired Assistant to the President for External Relations Averett University Director since 2008 Committees 1, 5, 6 F. D. Hornaday, III President & CEO 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 9 EXECUTIVE TEAM AMERICAN NATIONAL BANKSHARES INC. AMERICAN NATIONAL BANK & TRUST COMPANY Jeffrey V. Haley President Chief Executive Officer Jeffrey W. Farrar Chief Operating Officer Chief Financial Officer Edward C. Martin Chief Administrative Officer AMERICAN NATIONAL BANK & TRUST COMPANY Rhonda P. Joyce Co-Head of Banking - Commercial Alex Jung Co-Head of Banking - Consumer & Financial Services Mark A. Smith Chief Credit Officer Lutheria H. Smith Chief Human Resources Officer Charles T. Canaday, Jr. Regional President John H. Settle, Jr. President, Wealth Management 10 STATE BANKING BOARD MEMBERS Nancy A. Hubbard University of Lynchburg Lynchburg John D. Lugar Virginia Varsity Transfer & Storage Roanoke Monica T. Monday Gentry Locke Attorneys Martinsville William C. Vaughn J&R Management, Inc. Martinsville Barton J. Wilner Entre Computer Roanoke VIRGINIA Rick J. Barker Supply Resources Danville Nathaniel L. Bishop Virginia Tech Carilion School of Medicine Christiansburg J. Brian Burton J. E. Burton Construction South Boston Timothy J. Clark Blair Construction Inc. Gretna William J. Farrell, II Berglund Automotive Group Roanoke Elizabeth K. Hammond Cobblestone Milk Coop- erative & Mountain View Farms of Virginia, LLC Roanoke NORTH CAROLINA Dr. Yun L. Boylston Burlington Pediatrics Burlington R. Aubrey Linville, III Linville Team Partners Winston-Salem Thomas E. Chandler, Jr. Chandler Concrete Company Inc. Burlington James B. Crouch, Jr. Harris, Crouch Financial Burlington J. Nathan Duggins, III Tuggle Duggins P.A. Greensboro Richard H. Ramsey New Page Capital Greensboro Adrian T. Smith Ice Age Management Greensboro Stephen T. Williams, Jr. Williams Development Group Winston-Salem FINANCIAL HIGHLIGHTS for the year ended December 31 (Dollars in thousands except for share and per share data) NET LOANS in billions $1.83 $1.80 $1.93 $1.34 $1.36 CORE DEPOSITS in billions $2.54 $2.21 $1.59 $1.15 $1.20 7 1 0 2 8 1 0 2 9 1 0 2 * 0 2 0 2 * 1 2 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 *excludes PPP loans NON-PERFORMING ASSETS TO TOTAL ASSETS NET INCOME in millions $43.5 0.21% 0.11% 0.15% 0.12% 0.07% $30.0 $22.6 $20.9 $15.2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 EARNINGS PER SHARE diluted $4.00 COMMON STOCK DIVIDEND $0.97 $1.00 $1.04 $1.08 $1.09 $2.59 $2.73 $1.76 $1.98 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 RESULTS OF OPERATIONS Interest income Interest expense Net interest income Provision for (recovery of) 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 2021 2020 2019 2018 2017 $95,796 5,405 90,391 (2,825) 21,031 59,008 55,239 11,713 43,526 $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 $3,334,597 1,946,580 700,523 2,890,353 354,792 265,117 $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 $4.00 4.00 1.09 32.95 24.62 $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 Average common shares outstanding, basic Average common shares outstanding, diluted 10,873,817 10,877,231 10,981,623 10,985,790 10,531,572 10,541,337 8,698,014 8,708,462 8,641,717 8,660,628 SELECTED RATIOS Return on average assets Return on average equity Return on average tangible equity Dividend payout ratio Efficiency ratio Net interest margin ASSET QUALITY RATIOS 1.37% 12.50% 17.34% 27.17% 51.05% 3.05% 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% 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 0.96% 840.59% 0.07% (0.01%) 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% 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 14.61% 12.43% 13.73% 9.13% 8.17% 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% for the year ended December 31 (Dollars in thousands except for share and per share data) 11 12 SHAREHOLDER INFORMATION ANNUAL MEETING EQUAL OPPORTUNITY EMPLOYER The 2022 Annual Meeting of Shareholders of American National Bank & Trust Company, a American National Bankshares Inc. will be held at wholly-owned subsidiary of American National The Wednesday Club at 1002 Main Street, Bankshares Inc., is an equal opportunity employer. Danville, Virginia 24541 on Tuesday, May 17, 2022, All matters regarding recruiting, hiring, training, at 9 a.m. (EDT). STOCK LISTING compensation, benefits, promotions, transfers and all other personnel policies will remain free from discriminatory practices. The common stock of American National Bankshares Inc. (the “Company”) is traded on the THIS REPORT NASDAQ Global Select Market under the symbol The American National Bankshares Inc. 2021 “AMNB.” SHAREHOLDER INQUIRIES Summary Annual Report is presented in a summary format to provide information regarding the performance of the Company in a manner that Shareholders needing information on stock transfer is meaningful and useful to the widest range requirements, lost certificates, dividends, the of readers. The audited consolidated financial dividend reinvestment plan and other shareholder statements of the Company and other more matters may contact: Computershare Inc. PO Box 30170 College Station, TX 77842 800.368.5948 detailed, analytical information regarding the Company are contained in the 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission. INVESTOR RELATIONS & FINANCIAL INDEPENDENT AUDITORS STATEMENTS Yount, Hyde & Barbour PC 50 South Cameron Street Winchester, VA 22601 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 REGULATORY AND SECURITIES COUNSEL upon written request and are also available on Williams Mullen Williams Mullen Center our website, amnb.com. Those with requests for this or other financial information about American 200 South 10th Street, Suite 1600 National Bankshares Inc. should contact: PO Box 1320 (23218) Richmond, VA 23219 American National Bankshares Inc. Investor Relations PO Box 191 Danville, VA 24543 800.240.8190 13 amnb.com MEMBER FDIC | EQUAL HOUSING LENDER 

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