• Q3 2018 net income of $5.8 million and diluted EPS of $0.66
  
• Net interest margin of 3.51% for Q3 2018
• Average shareholders’ equity of $215.1 million is 11.87% of average assets
• Nonperforming assets to total assets 0.18% for Q3 2018

DANVILLE, Va., Oct. 18, 2018 (GLOBE NEWSWIRE) -- American National Bankshares Inc. (“American National”) (NASDAQ:  AMNB), parent company of American National Bank and Trust Company, today announced net income of $5,785,000 for the third quarter of 2018 compared to $4,787,000 for the third quarter of 2017, a $998,000 or 20.8% increase.  Basic and diluted net income per common share was $0.66 for the 2018 quarter compared to $0.55 for the 2017 quarter. Net income for the third quarter of 2018 produced annualized returns on average assets of 1.28%, on average equity of 10.76%, and on average tangible equity of 13.70%.

Net income for the first nine months of 2018 was $17,577,000 compared to $13,129,000 for the comparable period of 2017, a $4,448,000 or 33.9% increase. Basic and diluted net income per common share was $2.02 for the 2018 period compared to $1.52 for the 2017 period.

Financial Performance and Overview
Jeffrey V. Haley, President and Chief Executive Officer, reported, “We are very pleased to report net income for the quarter of $5.8 million, an increase of 20.8% over the comparable quarter of 2017. Net income for the nine months was $17.6 million, an increase of 33.9% over the comparable period of 2017. The main drivers of the increase for the quarter and the period were, as has been the case for the past few quarters, greater net interest income, lower loan loss provision and lower corporate income taxes. 

“Net interest income has increased with greater earning assets, mostly loans, and increasing market rates.

“Earnings have also increased due to a significant reduction in loan loss provision. Provision expense in the third quarter of 2018 was $463,000 less than the comparable quarter of 2017. Our need for provision expense was reduced by three factors: loan balances outstanding were effectively flat during the period, continued strong asset quality metrics, and improvements in various qualitative factors we use in computing our allowance for loan losses.

“Also benefiting earnings was the substantial decrease in our corporate tax rate. The tax cut, enacted in December 2017, reduced our statutory rate to 21% from 35% and our effective rate to 20.2% from 31.5%.

“The balance sheet has grown in the last year. Year over year growth in loans was $36 million or 2.8%.  However, net loans fell $5 million or 0.4% during the first nine months of 2018, primarily due to over $40 million in large commercial loan payoffs during the period. Current expectations for the remainder of 2018 and 2019 are for growth in loans at a moderate pace.

“Year over year growth in deposits was $42.9 million or 2.9%. Deposits fell $11.6 million or 0.8% during the first nine months of 2018. The year over year growth is mostly in non-maturity core deposits (noninterest bearing and money market accounts), which are the heart of our balance sheet. Our cost of interest bearing deposits for the third quarter was 0.73%, compared to 0.57% for the 2017 quarter.

“American National benefits from rising market interest rates. However, the yield on loans has been constrained by intense competition for high quality borrowers. On the other side of the balance sheet, after almost ten years of very low rates and as rates now rise customers are beginning to demand more yield for the use of their money. Our net interest margin for the current quarter was 3.51%, down five basis points from the prior year quarter, due in large portion to a decline in accretion income. As rates continue to move up, maintaining and protecting our net interest margin is a continuing strategic imperative.”

Haley concluded, “The fourth quarter got off to an outstanding start. On October 1, 2018, American National and HomeTown Bankshares Corporation (NASDAQ: HMTA - “HomeTown”), headquartered in Roanoke, Va., announced the signing of an agreement that calls for HomeTown to merge with American National in a transaction valued at approximately $95.6 million. The combination deepens American National’s footprint in the Roanoke MSA and creates a presence in the New River Valley.  Upon completion of the merger, American National will have eight offices in the combined Roanoke/New River Valley markets with total deposits of over $700 million.  Based on financial results as of June 30, 2018, the combined company will have approximately $2.4 billion in assets, $1.8 billion in loans, and $2.0 billion in deposits.

“Roanoke and Franklin County are already important markets for our company and the addition of the New River Valley market is an exciting growth opportunity. The combination of HomeTown and American National will create a company that is better positioned to serve the needs of those communities. We believe in community banking and focus on accessible, responsive, and friendly community-based services.  By combining our highly qualified and dedicated teams, we believe we will be the community bank of choice for businesses and individuals in this area. We feel so strongly that our combined organization will be able to offer a hometown banking platform for each of our ten regions in Virginia and North Carolina that we will change our tag line to ‘Welcome to Hometown Banking.’”
   
Capital
American National’s capital ratios remain strong and exceed all regulatory requirements. 

For the quarter ended September 30, 2018, average shareholders’ equity was 11.87% of average assets, compared to 11.79% for the quarter ended September 30, 2017.

Book value per common share was $24.79 at September 30, 2018, compared to $24.31 at September 30, 2017.

Tangible book value per common share was $19.65 at September 30, 2018, compared to $19.09 at September 30, 2017.

Credit Quality Measurements
Non-performing assets ($2,238,000 of non-performing loans, $74,000 of 90 day past due and accruing loans, and $916,000 of other real estate owned) represented 0.18% of total assets at September 30, 2018, compared to 0.29% at September 30, 2017. 

Annualized net recoveries to average loans were three basis points (0.03%) for the 2018 third quarter compared to net charge offs of seven basis points (0.07%) for the same quarter in 2017.

Other real estate owned was $916,000 compared to $2,101,000 at September 30, 2017, a decrease of $1,185,000 or 56.4%.

Acquisition Related Financial Impact
The acquisition accounting adjustments related to our 2011 and 2015 acquisitions have had and continue to have a positive impact on net interest income and income before income tax.  The impact of these adjustments is summarized below (dollars in thousands):

For the quarter ended September 30,		2018			2017
Net Interest Income		$	198		$	557
Income Before Income Taxes		$	142		$	477
For the nine months ended September 30,		2018			2017
Net Interest Income		$	1,002		$	1,586
Income Before Income Taxes		$	792		$	1,138

The third quarter of 2018 includes $59,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $333,000 for the comparable quarter of 2017.

The positive financial impact of these merger related accounting adjustments will continue to decline in upcoming quarters.

Net Interest Income
Net interest income before the provision for loan losses increased to $14,751,000 in the third quarter of 2018 from $14,338,000 in the third quarter of 2017, an increase of $413,000 or 2.9%.  

For the 2018 quarter, the net interest margin was 3.51% compared to 3.56% for the same quarter in 2017, a decrease of five basis points (0.05%).  The decrease in net interest margin was driven mostly by higher cost of funds.

Provision for Loan Losses and Allowance for Loan Losses
Provision expense for the third quarter of 2018 was a negative $23,000 compared to $440,000 for the third quarter of 2017. The third quarter 2018 negative provision was related to adjustments on the specific reserves for several impaired loans.

The allowance for loan losses as a percentage of total loans was 1.02% at September 30, 2018 compared to 1.07% at September 30, 2017.

Net loans outstanding fell during the third quarter by $8.2 million or 0.6%. The need for additions to the allowance for loan losses was also reduced by improvement in various qualitative factors used in the determination of the allowance, notably national and local economic conditions, and loan volume.

Noninterest Income
Noninterest income totaled $3,380,000 in the third quarter of 2018, compared with $3,804,000 in the third quarter of 2017, a decrease of $424,000 or 11.1%.  The major driver of the decrease was a $337,000 gain reflected in the 2017 quarter from the sale of a bank owned commercial lot.

Noninterest Expense
Noninterest expense totaled $10,904,000 in the third quarter of 2018, compared to $10,710,000 in the third quarter of 2017, an increase of $194,000 or 1.8%. The major driver of the increase was a $213,000 or 4.2% increase in salaries, mostly related to adjustments of fringe benefit accruals.

About American National
American National is a multi-state bank holding company with total assets of approximately $1.8 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving Virginia and North Carolina with 24 banking offices and two loan production offices. American National Bank also manages an additional $857 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about the company and the bank is available on the bank's website at www.amnb.com.
Shares of American National are traded on the NASDAQ Global Select Market under the symbol "AMNB."

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. These include statements as to the anticipated performance of American National and the benefits of the proposed merger with HomeTown, including future financial and operating results, cost savings and enhanced revenues that may be realized from the merger as well as other statements of expectations regarding the merger and any other statements regarding future results or expectations. 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 and the resulting company after the proposed merger with HomeTown, include but are not limited to: (1) the businesses of American National and/or HomeTown may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe; (3) revenues following the merger may be lower than expected; (4) customer and employee relationships and business operations may be disrupted by the merger; (5) the ability to obtain required regulatory and shareholder approvals, and the ability to complete the merger on the expected timeframe may be more difficult, time-consuming or costly than expected; (6) 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; (7) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in the companies’ respective market areas; (8) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (9) accounting principles, policies, and guidelines; and (10) 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.

Contact:	William W. Traynham, Chief Financial Officer
	434-773-2242
	traynhamw@amnb.com

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
		September 30
ASSETS		2018				2017
Cash and due from banks		$	32,688			$	26,949
Interest-bearing deposits in other banks			37,355				76,271
Equity securities, at fair value			2,087				-
Securities available for sale, at fair value			295,777				272,205
Restricted stock, at cost			5,239				5,509
Loans held for sale			1,934				3,386
Loans			1,331,153				1,295,154
Less allowance for loan losses			(13,588	)			(13,858	)
Net Loans			1,317,565				1,281,296
Premises and equipment, net			25,690				25,923
Other real estate owned, net			916				2,101
Goodwill			43,872				43,872
Core deposit intangibles, net			981				1,271
Bank owned life insurance			18,785				18,491
Accrued interest receivable and other assets			23,602				23,267
Total assets		$	1,806,491			$	1,780,541
Liabilities
Demand deposits -- noninterest-bearing		$	420,486			$	402,100
Demand deposits -- interest-bearing			230,984				225,279
Money market deposits			362,575				336,752
Savings deposits			135,702				124,025
Time deposits			373,360				392,049
Total deposits			1,523,107				1,480,205
Customer repurchase agreements			29,104				43,240
Long-term borrowings			-				9,996
Junior subordinated debt			27,902				27,800
Accrued interest payable and other liabilities			10,312				9,086
Total liabilities			1,590,425				1,570,327
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding			-				-
Common stock, $1 par, 20,000,000 shares authorized,
8,714,431 shares outstanding at September 30, 2018 and
8,647,345 shares outstanding at September 30, 2017			8,661				8,600
Capital in excess of par value			77,842				75,943
Retained earnings			138,715				126,507
Accumulated other comprehensive loss, net			(9,152	)			(836	)
Total shareholders' equity			216,066				210,214
Total liabilities and shareholders' equity		$	1,806,491			$	1,780,541

 

American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
		Three Months Ended							Nine Months Ended
		September 30							September 30
		2018				2017			2018				2017
Interest and Dividend Income:
Interest and fees on loans		$	15,062			$	14,394		$	44,485			$	40,850
Interest and dividends on securities:
Taxable			1,568				1,108			4,432				3,395
Tax-exempt			362				460			1,204				1,604
Dividends			82				77			240				240
Other interest income			143				235			516				469
Total interest and dividend income			17,217				16,274			50,877				46,558
Interest Expense:
Interest on deposits			2,048				1,529			5,746				4,081
Interest on short-term borrowings			29				52			41				94
Interest on long-term borrowings			-				82			-				243
Interest on junior subordinated debt			389				273			1,008				756
Total interest expense			2,466				1,936			6,795				5,174
Net Interest Income			14,751				14,338			44,082				41,384
Provision for loan losses			(23	)			440			(97	)			1,090
Net Interest Income After Provision for Loan Losses			14,774				13,898			44,179				40,294
Noninterest Income:
Trust fees			1,001				1,098			2,875				2,918
Service charges on deposit accounts			605				622			1,809				1,818
Other fees and commissions			656				618			1,977				1,852
Mortgage banking income			551				612			1,492				1,603
Securities gains (losses), net			(17	)			-			393				590
Brokerage fees			172				219			603				603
Income from Small Business Investment Companies			150				86			476				118
Gains on premises and equipment, net			63				337			66				337
Other			199				212			585				584
Total noninterest income			3,380				3,804			10,276				10,423
Noninterest Expense:
Salaries			5,285				5,072			15,377				14,604
Employee benefits			1,036				1,048			3,322				3,229
Occupancy and equipment			1,069				1,151			3,297				3,367
FDIC assessment			134				138			412				401
Bank franchise tax			291				276			863				795
Core deposit intangible amortization			56				80			210				448
Data processing			420				475			1,309				1,464
Software			307				303			966				853
Other real estate owned, net			46				62			101				173
Other			2,260				2,105			6,751				6,528
Total noninterest expense			10,904				10,710			32,608				31,862
Income Before Income Taxes			7,250				6,992			21,847				18,855
Income Taxes			1,465				2,205			4,270				5,726
Net Income		$	5,785			$	4,787		$	17,577			$	13,129
Net Income Per Common Share:
Basic		$	0.66			$	0.55		$	2.02			$	1.52
Diluted		$	0.66			$	0.55		$	2.02			$	1.52
Average Common Shares Outstanding:
Basic			8,712,443				8,644,310			8,691,423				8,639,433
Diluted			8,718,918				8,663,246			8,703,662				8,657,891

 

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
			3rd Qtr				2nd Qtr				3rd Qtr				YTD				YTD
			2018				2018				2017				2018				2017
EARNINGS
Interest income			$	17,217			$	16,992			$	16,274			$	50,877			$	46,558
Interest expense				2,466				2,204				1,936				6,795				5,174
Net interest income				14,751				14,788				14,338				44,082				41,384
Provision for loan losses				(23	)			(30	)			440				(97	)			1,090
Noninterest income				3,380				3,563				3,804				10,276				10,423
Noninterest expense				10,904				11,002				10,710				32,608				31,862
Income taxes				1,465				1,399				2,205				4,270				5,726
Net income				5,785				5,980				4,787				17,577				13,129
PER COMMON SHARE
Income per share - basic			$	0.66			$	0.69			$	0.55			$	2.02			$	1.52
Income per share - diluted				0.66				0.69				0.55				2.02				1.52
Cash dividends paid				0.25				0.25				0.24				0.75				0.72
Book value per share				24.79				24.50				24.31				24.79				24.31
Book value per share - tangible (a)				19.65				19.34				19.09				19.65				19.09
Closing market price				39.00				40.00				41.20				39.00				41.20
FINANCIAL RATIOS
Return on average assets				1.28		%		1.31		%		1.08		%		1.29		%		1.01		%
Return on average equity				10.76				11.27				9.16				11.04				8.48
Return on average tangible equity (b)				13.70				14.44				11.81				14.14				11.11
Average equity to average assets				11.87				11.62				11.79				11.67				11.89
Tangible equity to tangible assets (a)				9.72				9.46				9.51				9.72				9.51
Net interest margin, taxable equivalent				3.51				3.50				3.56				3.49				3.51
Efficiency ratio (c)				59.65				60.38				59.14				59.94				61.23
Effective tax rate				20.21				18.96				31.54				19.55				30.37
PERIOD-END BALANCES
Securities			$	303,103			$	348,887			$	277,714			$	303,103			$	277,714
Loans held for sale				1,934				2,296				3,386				1,934				3,386
Loans, net of unearned income				1,331,153				1,339,379				1,295,154				1,331,153				1,295,154
Goodwill and other intangibles				44,853				44,909				45,143				44,853				45,143
Assets				1,806,491				1,824,531				1,780,541				1,806,491				1,780,541
Assets - tangible (a)				1,761,638				1,779,622				1,735,398				1,761,638				1,735,398
Deposits				1,523,107				1,560,746				1,480,205				1,523,107				1,480,205
Customer repurchase agreements				29,104				6,776				43,240				29,104				43,240
Other short-term borrowings				-				5,500				-				-				-
Long-term borrowings				27,902				27,876				37,796				27,902				37,796
Shareholders' equity				216,066				213,348				210,214				216,066				210,214
Shareholders' equity - tangible (a)				171,213				168,439				165,071				171,213				165,071
AVERAGE BALANCES
Securities (d)			$	335,320			$	342,486			$	281,246			$	330,561			$	300,407
Loans held for sale				3,282				2,616				3,607				2,650				2,820
Loans, net of unearned income				1,327,060				1,321,812				1,291,822				1,328,936				1,248,929
Interest-earning assets				1,693,912				1,707,223				1,646,241				1,700,128				1,610,541
Goodwill and other intangibles				44,887				44,956				45,191				44,958				45,347
Assets				1,811,631				1,825,860				1,773,636				1,818,615				1,736,955
Assets - tangible (a)				1,766,744				1,780,904				1,728,445				1,773,657				1,691,608
Interest-bearing deposits				1,118,929				1,145,701				1,066,827				1,140,443				1,045,422
Deposits				1,542,945				1,565,321				1,468,523				1,555,086				1,431,777
Customer repurchase agreements				11,896				11,347				48,461				11,829				47,614
Other short-term borrowings				2,176				247				-				1,536				3,902
Long-term borrowings				27,886				27,861				37,780				27,861				37,748
Shareholders' equity				215,054				212,256				209,026				212,268				206,440
Shareholders' equity - tangible (a)				170,167				167,300				163,835				167,310				161,093
American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)
			3rd Qtr				2nd Qtr				3rd Qtr				YTD				YTD
			2018				2018				2017				2018				2017
CAPITAL
Average shares outstanding - basic				8,712,443				8,692,107				8,644,310				8,691,423				8,639,433
Average shares outstanding - diluted				8,718,918				8,704,726				8,663,246				8,703,662				8,657,891
ALLOWANCE FOR LOAN LOSSES
Beginning balance			$	13,508			$	13,575			$	13,632			$	13,603			$	12,801
Provision for loan losses				(23	)			(30	)			440				(97	)			1,090
Charge-offs				(28	)			(130	)			(277	)			(202	)			(411	)
Recoveries				131				93				63				284				378
Ending balance			$	13,588			$	13,508			$	13,858			$	13,588			$	13,858
LOANS
Construction and land development			$	99,546			$	96,740			$	137,869			$	99,546			$	137,869
Commercial real estate				632,022				633,128				602,434				632,022				602,434
Residential real estate				205,277				207,374				209,201				205,277				209,201
Home equity				104,873				105,558				110,926				104,873				110,926
Commercial and industrial				284,176				291,454				230,484				284,176				230,484
Consumer				5,259				5,125				4,240				5,259				4,240
Total			$	1,331,153			$	1,339,379			$	1,295,154			$	1,331,153			$	1,295,154
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing			$	74			$	229			$	538			$	74			$	538
Nonaccrual				2,238				1,861				2,498				2,238				2,498
Other real estate owned				916				1,124				2,101				916				2,101
Nonperforming assets			$	3,228			$	3,214			$	5,137			$	3,228			$	5,137
ASSET QUALITY RATIOS
Allowance for loan losses to total loans				1.02		%		1.01		%		1.07		%		1.02		%		1.07		%
Allowance for loan losses to
nonperforming loans				587.72				646.32				456.46				587.72				456.46
Nonperforming assets to total assets				0.18				0.18				0.29				0.18				0.29
Nonperforming loans to total loans				0.17				0.16				0.23				0.17				0.23
Annualized net charge-offs (recoveries)
to average loans				(0.03	)			0.01				0.07				(0.01	)			0.00
OTHER DATA
Fiduciary assets at period-end (e) (f)			$	523,754			$	510,552			$	517,294			$	523,754			$	517,294
Retail brokerage assets at period-end (e) (f)			$	333,565			$	326,692			$	307,281			$	333,565			$	307,281
Number full-time equivalent employees (g)				316				323				335				316				335
Number of full service offices				24				26				26				24				26
Number of loan production offices				2				2				2				2				2
Number of ATM's				34				34				34				34				34
Notes:
(a) - Excludes goodwill and other intangible assets.
(b) - Excludes amortization expense, net of tax, of intangible assets.
(c) - The efficiency ratio is calculated by dividing noninterest expense excluding gains or losses on the sale of OREO by net
interest income including tax equivalent income on nontaxable loans and securities and noninterest income and excluding (i) gains or
losses on securities and (ii) gains or losses on sale of premises and equipment.
(d) - Average does not include unrealized gains and losses.
(e) - Market value.
(f) - Assets are not owned by the Company and are not reflected in the consolidated balance sheet.
(g) - Average for quarter.

 

			Net Interest Income Analysis
			For the Three Months Ended September 30, 2018 and 2017
			(Dollars in thousands)
			Unaudited
										Interest
				Average Balance						Income/Expense						Yield/Rate
				2018			2017			2018			2017			2018		2017
Loans:
	Commercial			$	268,296		$	233,455		$	2,715		$	2,282		4.01	%	3.88	%
	Real estate				1,057,097			1,057,326			12,317			12,102		4.66		4.58
	Consumer				4,949			4,648			76			92		6.09		7.85
	Total loans				1,330,342			1,295,429			15,108			14,476		4.54		4.46
Securities:
	Federal agencies & GSEs				128,284			92,822			732			445		2.28		1.92
	Mortgage-backed & CMOs				107,817			77,663			604			399		2.24		2.06
	State and municipal				84,147			95,861			583			862		2.77		3.60
	Other				15,072			14,900			180			170		4.78		4.56
	Total securities				335,320			281,246			2,099			1,876		2.50		2.67
Deposits in other banks					28,250			69,566			143			235		2.01		1.34
	Total interest-earning assets				1,693,912			1,646,241			17,350			16,587		4.09		4.03
Non-earning assets					117,719			127,395
	Total assets			$	1,811,631		$	1,773,636
Deposits:
	Demand			$	231,339		$	215,486			12			11		0.02		0.02
	Money market				377,074			336,501			839			463		0.88		0.55
	Savings				132,450			124,949			10			9		0.03		0.03
	Time				378,066			389,891			1,187			1,046		1.25		1.06
	Total deposits				1,118,929			1,066,827			2,048			1,529		0.73		0.57
Customer repurchase agreements					11,896			48,461			17			53		0.57		0.43
Other short-term borrowings					2,176			-			12			-		2.21		-
Long-term borrowings					27,886			37,780			389			354		5.58		3.75
	Total interest-bearing
	liabilities				1,160,887			1,153,068			2,466			1,936		0.84		0.67
Noninterest bearing demand deposits					424,016			401,696
Other liabilities					11,674			9,846
Shareholders' equity					215,054			209,026
Total liabilities and shareholders' equity
				$	1,811,631		$	1,773,636
Interest rate spread																3.25	%	3.36	%
Net interest margin																3.51	%	3.56	%
Net interest income (taxable equivalent basis)											14,884			14,651
Less: Taxable equivalent adjustment (a)											133			313
Net interest income										$	14,751		$	14,338
Notes:
(a) - Calculated using 21% and 35% statutory tax rate in 2018 and 2017, respectively, due to tax rate change.

 

			Net Interest Income Analysis
			For the Nine Months Ended September 30, 2018 and 2017
			(Dollars in thousands)
			Unaudited
										Interest
				Average Balance						Income/Expense						Yield/Rate
					2018			2017			2018			2017		2018		2017
Loans:
Commercial				$	264,983		$	227,739		$	7,811		$	6,577		3.94	%	3.86	%
Real estate					1,062,075			1,019,185			36,594			34,228		4.59		4.48
Consumer					4,528			4,825			229			272		6.76		7.54
Total loans					1,331,586			1,251,749			44,634			41,077		4.47		4.38
Securities:
Federal agencies & GSEs					119,597			95,360			1,956			1,340		2.18		1.87
Mortgage-backed & CMOs					108,473			78,572			1,812			1,224		2.23		2.08
State and municipal					87,365			110,328			1,870			2,952		2.85		3.57
Other					15,126			16,147			531			536		4.68		4.43
Total securities					330,561			300,407			6,169			6,052		2.49		2.69
Deposits in other banks					37,981			58,385			516			469		1.82		1.07
Total interest-earning assets					1,700,128			1,610,541			51,319			47,598		4.03		3.94
Non-earning assets					118,487			126,414
Total assets				$	1,818,615		$	1,736,955
Deposits:
Demand				$	236,734		$	217,052			36			32		0.02		0.02
Money market					394,005			321,738			2,424			1,046		0.82		0.43
Savings					131,789			124,780			30			28		0.03		0.03
Time					377,915			381,852			3,256			2,975		1.15		1.04
Total deposits					1,140,443			1,045,422			5,746			4,081		0.67		0.52
Customer repurchase agreements					11,829			47,614			19			68		0.21		0.19
Other short-term borrowings					1,536			3,902			22			27		1.91		0.92
Long-term borrowings					27,861			37,748			1,008			998		4.82		3.53
Total interest-bearing
liabilities					1,181,669			1,134,686			6,795			5,174		0.77		0.61
Noninterest bearing demand deposits					414,643			386,355
Other liabilities					10,035			9,474
Shareholders' equity					212,268			206,440
Total liabilities and
shareholders' equity				$	1,818,615		$	1,736,955
Interest rate spread																3.26	%	3.33	%
Net interest margin																3.49	%	3.51	%
Net interest income (taxable equivalent basis)											44,524			42,424
Less: Taxable equivalent adjustment (a)											442			1,040
Net interest income										$	44,082		$	41,384
Notes:
(a) - Calculated using 21% and 35% statutory tax rate in 2018 and 2017, respectively, due to tax rate change.

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