American National Bankshares Inc.
Annual Report 2022

Plain-text annual report

2022 SUMMARY ANNUAL REPORT 1 EVOLVING WITH PURPOSE AND RELEVANCE In loving memory of: Charles Somerville Harris 1951-2022 The 2022 Summary Annual Report is dedicated to Charles Somerville Harris, who served as a director of American National Bankshares since 2008. FORWARD LOOKING STATEMENTS Statements made in this release, 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 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 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 4 Letters to Shareholders • Charles H. Majors, Chairman • Jeffrey V. Haley, President & CEO 6 Evolving with Purpose & Relevance • Three-year strategic plan • Our Values 8 Making a Difference • Community Impact • Employee Awards 2022 Financial Highlights 10 12 Our People • Board of Directors • Executive Team • State Banking Board Members 15 Shareholder Information LETTERS OUR SHAREHOLDERS TO Dear Shareholders, At the conclusion of the Annual Shareholders’ Meeting in May, I will retire as Chair of the Board, having served over forty-one years as a member of the Board. The first eleven was as an independent director and the last thirty while serving sequentially as President, Chief Executive Officer, Executive Chair and now non-executive Chair of the Board. What a journey this has been! Let’s look at some comparative statistics over these mileposts. When I joined the Board of Directors in September 1981, the Bank had assets of less than $100 million. When I joined the executive team as President in 1993, assets were approximately $240 million. Today, assets of your company exceed $3 billion. Annual earnings in 1981 were $1.2 million. In 1993, earnings had grown to $3.3 million and last year in 2022, earnings were $34.4 million. In 1981, as well as in 1993, the Bank had six offices – all in the City of Danville. We now have twenty-six banking offices in 11 distinct markets in Virginia and North Carolina. How did we have such growth in assets, earnings and offices? First and foremost, we have adapted to the necessary changes to be relevant and successful as we became a regional community financial institution. Those changes had to be made while retaining our corporate culture which has attracted and retained customers, employees and shareholders. We used a strategy consisting of organic growth in our legacy markets, while also entering new growth markets through branch acquisitions, de novo branching, and mergers and acquisitions. Successful execution of that strategy required a strong team. As we have grown, we had long-tenured employees, balanced with new teammates who liked what they saw and chose to join us. We have always had a board of directors who provided positive strategic advice and who represented our shareholders wisely. And importantly, we have shareholders who believe in American National and who have supported us – often as customers as well as “owners.” I have always felt that any success I have helped to bring to the Bank and the Company would be measured greatly on whether we had an effective transition of leadership as I leave. I feel we have met that goal. I strongly believe that we have executive leadership up to the task for future success. I am also confident that the Board consists of strong and dedicated business and community leaders who represent your interests appropriately and wisely. It has been a privilege to serve as director, President, CEO, and Board Chair for you. I thank you for the opportunity. Sincerely, Charles H. Majors Charles H. Majors Chairman of the Board Chairman of the Board 4 Board Chairman Charley Majors (left) and President & CEO Jeffrey Haley (right) Dear Shareholders, American National is evolving. We are evolving our operations. We are evolving our customer experience. We are evolving our talent and leadership. We are not just evolving for evolution’s sake; we are evolving with purpose and relevance. Succession planning is critical to any company’s evolution and something we continue to take very seriously at all levels of the bank. We have done tremendous work in this area and specifically at the board level. We were extremely saddened to lose a valuable, longtime director, Charles Harris in December of 2022. Charles served as a director at American National since 2008 with numerous contributions to our Company, most recently serving as Chair of our Audit Committee. He was an amazing person and we remain grateful for the time he shared with us. As we work to maintain a strong board, we added two directors, William Farrell and Nathan Duggins, both of whom were members of our state banking boards. William was a director with HomeTown Bank, the bank we acquired in April 2019, and has remained involved as a member of our Virginia State Banking Board. He is President of Berglund Automotive, which operates 12 dealerships representing 25 brands in Virginia. Nathan has been a key member of our North Carolina State Banking Board since its inception. He is Managing Partner of Tuggle Duggins in Greensboro, a firm founded in 1974 that serves domestic and international clients in a wide assortment of industries. The completion of Charley Majors’s final board term this May marks a significant leadership evolution for the Company. Charley succeeded James Motley as President. Charley gets a lot of credit for where this company is today. He oversaw our expansion to other markets including our purchase of a branch in Yanceyville, North Carolina, making American National the first nationally chartered bank in history to purchase a branch across state lines. We became listed on NASDAQ, we adopted an online banking platform, we completed multiple acquisitions, growing to over $3.0 billion in assets during his entire 41-year tenure. Those who know Charley know what an exceptional leader and person he is. Our Company and communities have benefited from the many roles he has played during his time here and including the impact he has had as a mentor to me. I am very pleased with our financial performance and how it compares to prior years and the overall industry. In comparison to 2021, which was a record year driven by the Paycheck Protection Program and its associated revenue, I would like to recognize that 2022 was also a successful year for American National. You can see our financial highlights on page 10 of this report along with the following notable accomplishments. We realized $34.4 million in net income and $3.23 earnings per share. We achieved significant loan growth with $239.9 million in loans, an increase of 12.3% over December 2021 and our credit quality remained very strong. Some key ratios as of December 31, 2022 are as follows: Return on average assets was 1.07%, Return on common tangible equity was 14.56% and our efficiency ratio remained low at 57.37%. Overall, 2022 was strong and we were pleased to offer an increase to our dividend again. At the start of 2023, our local economies remain fairly stable in spite of factors associated with elevated inflation and rising rates. Like other financial institutions, deposits remain a primary focus for us. While we work to grow our balance sheet, we remain committed to the pillars in our strategic plan as we evolve our company. Those pillars are: 1. grow our franchise; 2. enhance the customer experience; 3. achieve operational excellence; and 4. strengthen our culture and talent. As we strategically evolve the bank, we remain steadfast on 5. maintaining strong financial performance. Of course, none of this evolution is possible without the support of our stakeholders. I remain appreciative of the efforts of our employees and the support of our customers and shareholders. American National was named one of the “Best Banks to Work For” by American Banker for the third consecutive year. This achievement is a testament to our efforts to provide a great workplace culture. It is this committed workforce along with our strong Board of Directors that will help prepare the Company for future growth and success. That is how we are evolving with purpose and relevance. Sincerely, Jeffrey V. Haley Jeffrey V. Haley President & CEO 5 Board Chairman Charley Majors (left) and President & CEO Jeffrey Haley (right) One of the greatest joys serving a community as its hometown bank is seeing its people and businesses grow and thrive, generation after generation. Our charge in helping them these many years is twofold: staying true to the values that have guided our success, while also adapting our services and operations to meet the needs of our customers – both for today and tomorrow. It’s this marriage of steadfastness and purposeful evolution that has allowed us to be such a trusted financial partner to countless individuals and businesses for 114 years, a theme that was exemplified this past year. 6 2022-2024: THREE-YEAR STRATEGIC PLAN Maintain strong financial performance Grow our franchise Enhance the customer experience Achieve operational excellence Invest in talent & strengthen our culture of success OUR VALUES 2022 HIGHLIGHTS Relationship Focus. Establishing trust based on respecting others and doing the right thing 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 com- munication and service Constant Improvement. Embracing change as we push ourselves to be better Authenticity. Being genuine and practical in our words and actions $34.4 MILLION Net Income $3.23 Earnings per share $239.9 MILLION In loan growth, an increase of 12.3% 2,097 HOURS Volunteer hours AMNB employees logged in 2022 “BEST BANKS TO WORK FOR” Named by American Banker Magazine 7 MAKING A DIFFERENCE Strengthening our communities is what American National is all about, as we have long understood our bank is only as strong as the communities we serve. From sponsoring community events to volunteering on not-for-profit boards and teaching financial education at local schools, we are committed to help our communities thrive. In 2022, American National set a volunteer goal of 1,500 community volunteer hours in 2022 for our team, which we greatly exceeded thanks to having a team of people who care about the communities we are privileged to be part of. 2,097 Volunteer hours AMNB employees logged in 2022 11 Virginia & North Carolina communities reached 90 Not-for-profit organizations supported $45,879 Employee-matched donations going to local United Way chapters or other health and human service organizations in the AMNB footprint $359,660 Dollars given in corporate donations and sponsorships 8 AWARD-WINNING STAFF THE CHARLEY MAJORS EMPLOYEE ACHIEVEMENT AWARD DEBBIE DURHAM, Director of Enterprise Project Office, not only developed the bank’s project management department, but also assumed the responsibility of Vendor Management in 2022. She reaches across departmental lines to help the bank successfully implement many key projects that are essential to evolving the company. Debbie is calm and steadfast in her approach and is tireless in her commitment to helping employees and the bank achieve success. This award is given to the employee who best exemplifies the American National service principles, who is the constant team supporter, who exhibits 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. All employees are eligible for this award. THE BILL TRAYNHAM OUTSTANDING SERVICE AWARD AMBER NIKOLAY, Lending Assistant Manager, exemplifies American National’s core values in her day to day actions. Her positive attitude and focus on service is recognized across the bank and among our customers as she consistently exceeds expectations through responsive communication and a commitment to service. As a bank focused on relationships, Amber leads an amazing team of people that work hard to be sure we are consistently meeting and anticipating our customers’ needs. This award is given to a support employee that embodies the characteristics of hard work, perseverance and teamwork. This employee goes above and beyond to help co-workers and does so with a “can-do” attitude. Any employee who works in a support, operational or administrative capacity is eligible for this award. THE COMMUNITY CHAMPION AWARD ASHLEY MULERO, Customer Support Manager of the Main Office in Danville, has a passion for giving back to the community exceeding her personal goal of 100 volunteer hours in 2022. Some of her efforts included organizing a Movie Night, with donations and food sales benefiting the Danville-Pittsylvania Cancer Association, being named the Danville Heart Walk’s 2022 Overall Top Walker by the American Heart Association, helping construct homes for Habitat for Humanity, and teaching financial education at local schools. Her tireless service in the community truly exemplifies what it means to be a community banker. This award given to an employee who gives back to the community in big ways supporting the community through philanthropy and giving of personal time and talents to make the community a better place to live and work. 9 2022 FINANCIAL HIGHLIGHTS NET LOANS (in billions) CORE DEPOSITS (in billions) $1.83 $1.80 $1.93 $2.19 $1.36 $2.54 $2.34 $2.21 $1.59 $1.20 2018 2019 2020* 2021* 2022* 2018 2019 2020 2021 2022 NON-PERFORMING ASSETS TO TOTAL ASSETS NET INCOME (in millions) .15% .11% .12% $43.5 $34.4 $30.0 .07% .04% $22.6 $20.9 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 EARNINGS PER SHARE (diluted) COMMON STOCK DIVIDEND $4.00 $3.23 $1.00 $1.04 $1.08 $1.09 $1.14 $2.59 $2.73 $1.98 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 For the year ended December 31 (Dollars in thousands except for share and per share data) *Excludes PPP loans 10 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 2022 2021 2020 2019 2018 $96,004 5,766 90,238 1,597 18,807 64,086 43,362 8,934 34,428 $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 $3,065,902 2,186,449 620,713 2,596,328 321,174 232,759 $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 $3.23 3.23 1.14 30.27 21.94 $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 Average common shares outstanding, basic Average common shares outstanding, diluted 10,672,314 10,674,613 10,873,817 10,877,231 10,981,623 10,985,790 10,531,572 10,541,337 8,698,014 8,708,462 SELECTED RATIOS Return on average assets Return on average common equity Return on average tangible equity Dividend payout ratio Efficiency ratio Net interest margin 1.07% 10.36% 14.56% 35.27% 57.37% 2.97% 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% ASSET QUALITY RATIOS Allowance for loan losses to period-end loans Allowance for loan losses to period-end non-performing loans Nonperforming assets to total assets Net (recoveries) charge-offs to average loans 0.89% 0.96% 1.06% 0.72% 0.94% 1,478.08% 0.05% 0.04% 840.59% 0.07% (0.01)% 793.88% 0.12% 0.03% 570.59% 0.15% 0.01% 1,101.98% 0.11 % 0.05% 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 13.67% 11.70% 12.86% 10.36% 7.82% 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% For the year ended December 31 (Dollars in thousands except for share and per share data) 2022 FINANCIALS 11 1 Charles H. Majors Chairman, American National Bankshares Inc., American National Bank & Trust, Danville, VA 2 Jeffrey V. Haley President & CEO, American National Bankshares Inc., American National Bank & Trust, Danville, VA 3 J. Nathan Duggins III Managing Partner, Tuggle Duggins Greensboro, NC 4 7 1 1 5 7 Michael P. Haley Retired Advisor, Fenway Partners Inc. New York, NY 8 F.D. Hornaday III President & CEO, Knit Wear Fabrics Inc. Burlington, NC 9 John H. Love Retired President & COO, W.E. Love & Associates Inc. Burlington, NC 10 11 2 4 Nancy Howell Agee President & CEO, Carilion Clinic Roanoke, VA 5 William J. Farrell II President, Berglund Automotive Roanoke, VA 6 Tammy M. Finley EVP, General Counsel & Corporate Secretary, Advance Auto Parts Inc. Roanoke, VA 8 10 Dan M. Pleasant Senior Consultant, The Dewberry Companies Inc. Fairfax, VA 11 Joel R. Shepherd President, Virginia Home Furnishings Inc. Roanoke, VA 12 Ronda M. Penn CFO, Plexus Capital LLC Raleigh, NC 3 6 9 12 BOARD OF DIRECTORS 12 EXECUTIVE TEAM 1 Jeffrey V. Haley President & Chief Executive Officer 2 Jeffrey W. Farrar Chief Operating Officer Chief Financial Officer 3 Edward C. Martin Chief Administrative Officer 5 7 Lutheria H. Smith Chief Human Resources Officer 8 Charles T. Canaday Jr. Regional President 9 John H. Settle Jr. President, Wealth Management 3 6 9 2 4 Rhonda P. Joyce Co-head of Banking, Commercial 5 Alex Jung Co-head of Banking, Consumer & Financial Services 6 Mark A. Smith Chief Credit Officer 8 1 4 7 13 STATE BANKING BOARD MEMBERS 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 Elizabeth K. Hammond Cobblestone Milk Cooperative & Mountain View Farms of Virginia, LLC Roanoke Nancy A. Hubbard University of Lynchburg Lynchburg NORTH CAROLINA Dr. Yun L. Boylston Burlington Pediatrics Burlington John D. Lugar Virginia Varsity Transfer & Storage Roanoke Thomas E. Chandler, Jr. Chandler Concrete Company Inc. Burlington Monica T. Monday Gentry Locke Attorneys Martinsville William C. Vaughn J&R Management, Inc. Martinsville Barton J. Wilner Entre Computer Roanoke R. Aubrey Linville, III Linville Team Partners Winston-Salem Richard H. Ramsey New Page Capital Greensboro Adrian T. Smith Ice Age Management Greensboro Stephen T. Williams, Jr. Williams Development Group Winston-Salem 14 SHAREHOLDER INFORMATION ANNUAL MEETING The 2023 Annual Meeting of Shareholders of American National Bankshares Inc. will be held at The Wednesday Club at 1002 Main Street, Danville, Virginia 24541 on Tuesday, May 16, 2023, at 9 a.m. (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 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 EQUAL OPPORTUNITY EMPLOYER American National Bank & 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. 2022 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 2022 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 15 800.240.8190 | www.amnb.com 

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