Company Quick10K Filing
American National Bankshares
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 11 $394
10-Q 2019-11-12 Quarter: 2019-09-30
10-Q 2019-08-05 Quarter: 2019-06-30
10-Q 2019-05-09 Quarter: 2019-03-31
10-K 2019-03-08 Annual: 2018-12-31
10-Q 2018-11-05 Quarter: 2018-09-30
10-Q 2018-08-03 Quarter: 2018-06-30
10-Q 2018-05-04 Quarter: 2018-03-31
10-K 2018-03-09 Annual: 2017-12-31
10-Q 2017-11-06 Quarter: 2017-09-30
10-Q 2017-08-04 Quarter: 2017-06-30
10-Q 2017-05-08 Quarter: 2017-03-31
10-K 2017-03-16 Annual: 2016-12-31
10-Q 2016-11-07 Quarter: 2016-09-30
10-Q 2016-08-08 Quarter: 2016-06-30
10-Q 2016-05-09 Quarter: 2016-03-31
10-K 2016-03-15 Annual: 2015-12-31
10-Q 2015-11-09 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-11 Quarter: 2015-03-31
10-K 2015-03-09 Annual: 2014-12-31
10-Q 2014-11-10 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-12 Quarter: 2014-03-31
10-K 2014-03-12 Annual: 2013-12-31
10-Q 2013-11-08 Quarter: 2013-09-30
10-Q 2013-08-09 Quarter: 2013-06-30
10-Q 2013-05-06 Quarter: 2013-03-31
10-Q 2012-11-09 Quarter: 2012-09-30
10-Q 2012-08-09 Quarter: 2012-06-30
10-Q 2012-05-10 Quarter: 2012-03-31
10-K 2012-03-15 Annual: 2011-12-31
10-Q 2011-11-09 Quarter: 2011-09-30
10-Q 2011-08-08 Quarter: 2011-06-30
10-Q 2011-05-09 Quarter: 2011-03-31
10-K 2011-03-11 Annual: 2010-12-31
10-Q 2010-11-08 Quarter: 2010-09-30
10-Q 2010-08-05 Quarter: 2010-06-30
10-Q 2010-05-06 Quarter: 2010-03-31
10-K 2010-03-12 Annual: 2009-12-31
8-K 2020-02-18 Other Events, Exhibits
8-K 2020-01-23 Earnings, Exhibits
8-K 2020-01-15 Other Events, Exhibits
8-K 2019-12-20 Other Events, Exhibits
8-K 2019-12-19 Other Events, Exhibits
8-K 2019-11-20 Other Events, Exhibits
8-K 2019-10-17 Earnings, Exhibits
8-K 2019-10-16 Officers, Exhibits
8-K 2019-08-05 Officers, Exhibits
8-K 2019-07-29 Regulation FD, Exhibits
8-K 2019-07-18 Earnings, Exhibits
8-K 2019-07-08 Regulation FD, Exhibits
8-K 2019-06-05 Officers, Exhibits
8-K 2019-05-24 Shareholder Vote, Other Events
8-K 2019-05-21 Other Events, Exhibits
8-K 2019-04-18 Earnings, Exhibits
8-K 2019-04-01 M&A, Off-BS Arrangement, Officers, Amend Bylaw, Exhibits
8-K 2019-03-25 Regulation FD, Exhibits
8-K 2019-03-21 Shareholder Vote, Other Events, Exhibits
8-K 2019-03-07 Other Events, Exhibits
8-K 2019-02-19 Other Events, Exhibits
8-K 2019-01-17 Earnings, Exhibits
8-K 2018-11-21 Other Events, Exhibits
8-K 2018-10-18 Earnings, Exhibits
8-K 2018-10-01 Enter Agreement, Exhibits
8-K 2018-10-01 Other Events, Exhibits
8-K 2018-07-30 Regulation FD, Exhibits
8-K 2018-07-19 Earnings, Exhibits
8-K 2018-07-19 Other Events, Exhibits
8-K 2018-05-17 Other Events, Exhibits
8-K 2018-05-17 Shareholder Vote
8-K 2018-04-19 Earnings, Exhibits
8-K 2018-02-21 Other Events, Exhibits
8-K 2018-01-19 Other Events, Exhibits
8-K 2018-01-18 Earnings, Exhibits
AMNB 2019-09-30
Item 5. Other Information 64 Item 6. Exhibits 65 Signatures 66
Part I. Financial Information
Item 1. Financial Statements
Note 1 - Accounting Policies
Note 2 - Acquisitions
Note 3 - Securities
Note 4 - Loans
Note 5 - Allowance for Loan Losses and Reserve for Unfunded Lending Commitments
Note 6 - Goodwill and Other Intangible Assets
Note 7 - Leases
Note 8 - Short-Term Borrowings
Note 9 - Long-Term Borrowings
Note 10 - Subordinated Debt
Note 11 - Junior Subordinated Debt
Note 12 - Derivative Financial Instruments and Hedging Activities
Note 13 - Stock Based Compensation
Note 14 - Earnings per Common Share
Note 15 - Employee Benefit Plans
Note 16 - Fair Value Measurements
Note 17 - Segment and Related Information
Note 18 - Supplemental Cash Flow Information
Note 19 - Accumulated Other Comprehensive Income (Loss)
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 amnb-09302019xexhibit311.htm
EX-31.2 amnb-09302019xexhibit312.htm
EX-32.1 amnb-09302019xexhibit321.htm
EX-32.2 amnb-09302019xexhibit322.htm

American National Bankshares Earnings 2019-09-30

AMNB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
BSRR 412 2,577 2,280 0 0 33 59 344 5.9 1%
FSB 412 4,072 3,678 0 0 22 112 261 2.3 1%
FMNB 408 2,406 2,121 0 0 34 61 413 6.8 1%
CCNE 406 3,401 3,114 0 0 37 85 368 4.3 1%
AMNB 394 2,418 2,106 0 0 16 34 339 10.0 1%
RBB 393 2,802 2,408 2 0 38 93 496 0% 5.3 1%
BHB 385 3,688 3,297 21 0 30 86 515 0% 6.0 1%
OSBC 380 2,624 2,366 0 0 36 69 322 4.7 1%
SONA 379 2,724 2,362 0 0 32 73 346 4.7 1%
CATC 374 2,741 2,504 0 0 22 44 336 7.6 1%

10-Q 1 amnb-09302019x10q.htm 10-Q Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2019.
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM             TO           .
Commission file number:  0-12820
AMERICAN NATIONAL BANKSHARES INC.
(Exact name of registrant as specified in its charter)
VIRGINIA
 
54-1284688
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
628 Main Street, Danville, Virginia
 
24541
(Address of principal executive offices)
 
(Zip Code)
(434) 792-5111
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
AMNB
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes
x
No
o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
Yes
x
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  o
Accelerated filer  x
Non-accelerated filer  o 
Smaller reporting company x
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes
o
No
x
At November 1, 2019, the Company had 11,113,336 shares of Common Stock outstanding, $1 par value.



AMERICAN NATIONAL BANKSHARES INC.
Index
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



3



PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Assets
(Unaudited)
September 30, 2019
 
(*) December 31, 2018
Cash and due from banks
$
47,025

 
$
29,587

Interest-bearing deposits in other banks
95,592

 
34,668

 
 
 
 
Equity securities, at fair value

 
1,830

Securities available for sale, at fair value
308,490

 
332,653

Restricted stock, at cost
8,621

 
5,247

Loans held for sale
5,646

 
640

 
 
 
 
Loans, net of unearned income
1,804,447

 
1,357,476

Less allowance for loan losses
(12,758
)
 
(12,805
)
Net loans
1,791,689

 
1,344,671

 
 
 
 
Premises and equipment, net
39,261

 
26,675

Other real estate owned, net of valuation allowance of $155 in 2019 and $109 in 2018
1,353

 
869

Goodwill
84,633

 
43,872

Core deposit intangibles, net
8,165

 
926

Bank owned life insurance
27,612

 
18,941

Accrued interest receivable and other assets
36,442

 
22,287

Total assets
$
2,454,529

 
$
1,862,866

 
 
 
 
Liabilities
 

 
 

Demand deposits -- noninterest bearing
$
604,498

 
$
435,828

Demand deposits -- interest bearing
323,871

 
234,621

Money market deposits
450,022

 
401,461

Savings deposits
176,803

 
132,360

Time deposits
486,668

 
361,957

Total deposits
2,041,862

 
1,566,227

 
 
 
 
Customer repurchase agreements
38,924

 
35,243

Subordinated debt
7,521

 

Junior subordinated debt
28,003

 
27,927

Accrued interest payable and other liabilities
20,973

 
10,927

Total liabilities
2,137,283

 
1,640,324

 
 
 
 
Shareholders' equity
 

 
 

Preferred stock, $5 par, 2,000,000 shares authorized, none outstanding

 

Common stock, $1 par, 20,000,000 shares authorized, 11,116,250 shares outstanding at September 30, 2019 and 8,720,337 shares outstanding at December 31, 2018
11,063

 
8,668

Capital in excess of par value
159,792

 
78,172

Retained earnings
147,030

 
141,537

Accumulated other comprehensive loss, net
(639
)
 
(5,835
)
Total shareholders' equity
317,246

 
222,542

Total liabilities and shareholders' equity
$
2,454,529

 
$
1,862,866

(*) -  Derived from audited consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.

4



American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data) (Unaudited)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2019
 
2018
 
2019
 
2018
Interest and Dividend Income:
 
 
 
 
 
 
 
Interest and fees on loans
$
22,470

 
$
15,062

 
$
60,737

 
$
44,485

Interest and dividends on securities:
 

 
 

 
 
 
 
Taxable
1,890

 
1,568

 
5,691

 
4,432

Tax-exempt
134

 
362

 
660

 
1,204

Dividends
135

 
82

 
324

 
240

Other interest income
329

 
143

 
853

 
516

Total interest and dividend income
24,958

 
17,217

 
68,265

 
50,877

Interest Expense:
 

 
 

 
 

 
 

Interest on deposits
3,655

 
2,048

 
9,647

 
5,746

Interest on short-term borrowings
162

 
29

 
512

 
41

Interest on long-term borrowings

 

 
14

 

Interest on subordinated debt
123

 

 
245

 

Interest on junior subordinated debt
396

 
389

 
1,168

 
1,008

Total interest expense
4,336

 
2,466

 
11,586

 
6,795

Net Interest Income
20,622

 
14,751

 
56,679

 
44,082

Recovery of loan losses
(12
)
 
(23
)
 
(6
)
 
(97
)
Net Interest Income After Recovery of Loan Losses
20,634

 
14,774

 
56,685

 
44,179

Noninterest Income:
 

 
 

 
 

 
 

Trust fees
979

 
1,001

 
2,826

 
2,875

Service charges on deposit accounts
783

 
605

 
2,101

 
1,809

Other fees and commissions
1,003

 
656

 
2,726

 
1,977

Mortgage banking income
710

 
551

 
1,702

 
1,492

Securities gains (losses), net
105

 
(17
)
 
575

 
393

Brokerage fees
183

 
172

 
516

 
603

Income from Small Business Investment Companies
143

 
150

 
174

 
476

Gains (losses) on premises and equipment, net
(2
)
 
63

 
(89
)
 
66

Other
267

 
199

 
773

 
585

Total noninterest income
4,171

 
3,380

 
11,304

 
10,276

Noninterest Expense:
 

 
 

 
 

 
 

Salaries
6,295

 
5,285

 
18,007

 
15,377

Employee benefits
1,367

 
1,036

 
4,022

 
3,322

Occupancy and equipment
1,448

 
1,069

 
3,963

 
3,297

FDIC assessment (credit)
(175
)
 
134

 
119

 
412

Bank franchise tax
411

 
291

 
1,113

 
863

Core deposit intangible amortization
448

 
56

 
961

 
210

Data processing
589

 
420

 
1,838

 
1,309

Software
287

 
307

 
932

 
966

Other real estate owned, net
47

 
46

 
16

 
101

Merger related expense

 

 
11,322

 

Other
3,075

 
2,260

 
8,744

 
6,751

Total noninterest expense
13,792

 
10,904

 
51,037

 
32,608

Income Before Income Taxes
11,013

 
7,250

 
16,952

 
21,847

Income Taxes
2,321

 
1,465

 
3,487

 
4,270

Net Income
$
8,692

 
$
5,785

 
$
13,465

 
$
17,577

 
 
 
 
 
 
 
 

5



Net Income Per Common Share:
 

 
 

 
 

 
 

Basic
$
0.78

 
$
0.66

 
$
1.30

 
$
2.02

Diluted
$
0.78

 
$
0.66

 
$
1.30

 
$
2.02

Weighted Average Common Shares Outstanding:
 

 
 

 
 

 
 

Basic
11,127,603

 
8,712,443

 
10,341,919

 
8,691,423

Diluted
11,138,008

 
8,718,918

 
10,351,753

 
8,703,662

The accompanying notes are an integral part of the consolidated financial statements.

6



American National Bankshares Inc.
Consolidated Statements of Comprehensive Income
(Dollars in thousands) (Unaudited)
 
Three Months Ended 
 September 30,
 
2019
 
2018
Net income
$
8,692

 
$
5,785

 
 
 
 
Other comprehensive income (loss):
 

 
 

 
 
 
 
Unrealized gains (losses) on securities available for sale
1,536

 
(1,965
)
Tax effect
(344
)
 
440

 
 
 
 
Reclassification adjustment for gains on sales or calls of securities available for sale
(102
)
 
(73
)
Tax effect
22

 
16

 
 
 
 
Unrealized gains (losses) on cash flow hedges
(862
)
 
438

Tax effect
194

 
(98
)
 
 
 
 
Other comprehensive income (loss)
444

 
(1,242
)
 
 
 
 
Comprehensive income
$
9,136

 
$
4,543

The accompanying notes are an integral part of the consolidated financial statements.
American National Bankshares Inc.
Consolidated Statements of Comprehensive Income
(Dollars in thousands) (Unaudited)
 
Nine Months Ended 
 September 30,
 
2019
 
2018
Net income
$
13,465

 
$
17,577

 
 
 
 
Other comprehensive income (loss):
 

 
 

 
 
 
 
Unrealized gains (losses) on securities available for sale
9,611

 
(7,145
)
Tax effect
(2,153
)
 
1,626

 
 
 
 
Reclassification adjustment for gains on sales or calls of securities available for sale
(242
)
 
(81
)
Tax effect
54

 
18

 
 
 
 
Unrealized gains (losses) on cash flow hedges
(2,673
)
 
201

Tax effect
599

 
(45
)
 
 
 
 
Other comprehensive income (loss)
5,196

 
(5,426
)
 
 
 
 
Comprehensive income
$
18,661

 
$
12,151

The accompanying notes are an integral part of the consolidated financial statements.

7



American National Bankshares Inc.
Consolidated Statements of Changes in Shareholders' Equity
Three Months Ended September 30, 2019 and 2018
(Dollars in thousands, except per share data) (Unaudited)
 
Common
Stock
 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Shareholders'
Equity
Balance, June 30, 2018
$
8,654

 
$
77,496

 
$
135,108

 
$
(7,910
)
 
$
213,348

 
 
 
 
 
 
 
 
 
 
Net income

 

 
5,785

 

 
5,785

 
 
 
 
 
 
 
 
 
 
Other comprehensive loss

 

 

 
(1,242
)
 
(1,242
)
 
 
 
 
 
 
 
 
 
 
Stock options exercised (3,300 shares)
3

 
83

 

 

 
86

 
 
 
 
 
 
 
 
 
 
Vesting of restricted stock (617 shares)
1

 
(1
)
 

 

 

 
 
 
 
 
 
 
 
 
 
Equity based compensation (3,004 shares)
3

 
264

 

 

 
267

 
 
 
 
 
 
 
 
 
 
Cash dividends paid, $0.25 per share

 

 
(2,178
)
 

 
(2,178
)
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2018
$
8,661

 
$
77,842

 
$
138,715

 
$
(9,152
)
 
$
216,066

 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2019
$
11,089

 
$
160,572

 
$
141,339

 
$
(1,083
)
 
$
311,917

 
 
 
 
 
 
 
 
 
 
Net income

 

 
8,692

 

 
8,692

 
 
 
 
 
 
 
 
 
 
Other comprehensive income

 

 

 
444

 
444

 
 
 
 
 
 
 
 
 
 
Stock repurchased (32,165 shares)
(32
)
 
(1,106
)
 

 

 
(1,138
)
 
 
 
 
 
 
 
 
 
 
Stock options exercised (1,826 shares)
2

 
29

 

 

 
31

 
 
 
 
 
 
 
 
 
 
Vesting of restricted stock (617 shares)
1

 
(1
)
 

 

 

 
 
 
 
 
 
 
 
 
 
Equity based compensation (5,234 shares)
3

 
298

 

 

 
301

 
 
 
 
 
 
 
 
 
 
Cash dividends paid, $0.27 per share

 

 
(3,001
)
 

 
(3,001
)
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2019
$
11,063

 
$
159,792

 
$
147,030

 
$
(639
)
 
$
317,246

The accompanying notes are an integral part of the consolidated financial statements.

8



American National Bankshares Inc.
Consolidated Statements of Changes in Shareholders' Equity
Nine Months Ended September 30, 2019 and 2018
(Dollars in thousands, except per share data) (Unaudited)
 
Common
Stock
 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Shareholders'
Equity
Balance, December 31, 2017
$
8,604

 
$
76,179

 
$
127,010

 
$
(3,076
)
 
$
208,717

 
 
 
 
 
 
 
 
 
 
Net income

 

 
17,577

 

 
17,577

 
 
 
 
 
 
 
 
 
 
Other comprehensive loss

 

 

 
(5,426
)
 
(5,426
)
 
 
 
 
 
 
 
 
 
 
Reclassification for ASU 2016-01 adoption

 

 
650

 
(650
)
 

 
 
 
 
 
 
 
 
 
 
Stock options exercised (35,310 shares)
35

 
826

 

 

 
861

 
 
 
 
 
 
 
 
 
 
Vesting of restricted stock (10,718 shares)
11

 
(11
)
 

 

 

 
 
 
 
 
 
 
 
 
 
Equity based compensation (28,574 shares)
11

 
848

 

 

 
859

 
 
 
 
 
 
 
 
 
 
Cash dividends paid, $0.75 per share

 

 
(6,522
)
 

 
(6,522
)
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2018
$
8,661

 
$
77,842

 
$
138,715

 
$
(9,152
)
 
$
216,066

 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
$
8,668

 
$
78,172

 
$
141,537

 
$
(5,835
)
 
$
222,542

 
 
 
 
 
 
 
 
 
 
Net income

 

 
13,465

 

 
13,465

 
 
 
 
 
 
 
 
 
 
Other comprehensive income

 

 

 
5,196

 
5,196

 
 
 
 
 
 
 
 
 
 
Issuance of common stock (2,361,686 shares)
2,362

 
80,108

 

 

 
82,470

 
 
 
 
 
 
 
 
 
 
Issuance of replacement options/restricted stock

 
870

 

 

 
870

 
 
 
 
 
 
 
 
 
 
Stock repurchased (32,165 shares)
(32
)
 
(1,106
)
 

 

 
(1,138
)
 
 
 
 
 
 
 
 
 
 
Stock options exercised (32,356 shares)
32

 
577

 

 

 
609

 
 
 
 
 
 
 
 
 
 
Vesting of restricted stock (20,902 shares)
21

 
(21
)
 

 

 

 
 
 
 
 
 
 
 
 
 
Equity based compensation (34,036 shares)
12

 
1,192

 

 

 
1,204

 
 
 
 
 
 
 
 
 
 
Cash dividends paid, $0.77 per share

 

 
(7,972
)
 

 
(7,972
)
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2019
$
11,063

 
$
159,792

 
$
147,030

 
$
(639
)
 
$
317,246

The accompanying notes are an integral part of the consolidated financial statements.

9


American National Bankshares Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands) (Unaudited)
 
Nine Months Ended 
 September 30,
 
2019
 
2018
Cash Flows from Operating Activities:
 
 
 
Net income
$
13,465

 
$
17,577

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Recovery of loan losses
(6
)
 
(97
)
Depreciation
1,504

 
1,366

Net accretion of acquisition accounting adjustments
(2,321
)
 
(1,002
)
Core deposit intangible amortization
961

 
210

Net amortization of securities
845

 
1,262

Net gain on sale or call of securities available for sale
(242
)
 
(81
)
Net change in fair value of equity securities
(333
)
 
(312
)
Gain on sale of loans held for sale
(1,702
)
 
(1,492
)
Proceeds from sales of loans held for sale
72,452

 
61,772

Originations of loans held for sale
(75,756
)
 
(60,575
)
Net (gain) loss on other real estate owned
(124
)
 
5

Valuation allowance on other real estate owned
68

 
28

Net loss (gain) on sale of premises and equipment
89

 
(66
)
Equity based compensation expense
1,204

 
859

Earnings on bank owned life insurance
(425
)
 
(325
)
Deferred income tax expense
205

 
203

Net change in interest receivable
995

 
(1
)
Net change in other assets
4,695

 
(660
)
Net change in interest payable
29

 
93

Net change in other liabilities
(2,852
)
 
136

Net cash provided by operating activities
12,751

 
18,900

 
 
 
 
Cash Flows from Investing Activities:
 

 
 

Proceeds from sales of equity securities
445

 
431

Proceeds from sales of securities available for sale
29,878

 
57,607

Proceeds from maturities, calls and paydowns of securities available for sale
76,162

 
23,561

Purchases of securities available for sale
(36,517
)
 
(66,221
)
Net change in restricted stock
(786
)
 
871

Net (increase) decrease in loans
(805
)
 
5,600

Proceeds from sale of premises and equipment

 
233

Purchases of premises and equipment
(2,070
)
 
(1,322
)
Proceeds from sales of other real estate owned
1,248

 
808

Cash paid in bank acquisition
(27
)
 

Cash acquired in bank acquisition
26,283

 

Net cash provided by investing activities
93,811

 
21,568

 
 
 
 
Cash Flows from Financing Activities:
 

 
 

Net change in demand, money market, and savings deposits
8,384

 
(1,321
)
Net change in time deposits
(16,103
)
 
(10,298
)
Net change in customer repurchase agreements
3,681

 
18,378

Net change in other short-term borrowings
(14,883
)
 
(24,000
)
Net change in long-term borrowings
(778
)
 

Common stock dividends paid
(7,972
)
 
(6,522
)
Repurchase of common stock
(1,138
)
 

Proceeds from exercise of stock options
609

 
861

Net cash used in financing activities
(28,200
)
 
(22,902
)
Net Increase in Cash and Cash Equivalents
78,362

 
17,566

Cash and Cash Equivalents at Beginning of Period
64,255

 
52,477

Cash and Cash Equivalents at End of Period
$
142,617

 
$
70,043

The accompanying notes are an integral part of the consolidated financial statements.

10



AMERICAN NATIONAL BANKSHARES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Accounting Policies
The consolidated financial statements include the accounts of American National Bankshares Inc. (the "Company") and its wholly owned subsidiary, American National Bank and Trust Company (the "Bank"). The Bank offers a wide variety of retail, commercial, secondary market mortgage lending, and trust and investment services which also include non-deposit products such as mutual funds and insurance policies.
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, goodwill and intangible assets, other-than-temporary impairment of securities, accounting for merger and acquisition activity, accounting for acquired loans with specific credit-related deterioration, and the valuation of deferred tax assets and liabilities.
All significant inter-company transactions and accounts are eliminated in consolidation, with the exception of the AMNB Trust and the MidCarolina Trusts, as detailed in Note 11.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the results of the interim periods. The results of operations for the interim periods are not necessarily indicative of the results that may occur for any other period. Certain reclassifications have been made to prior period balances to conform to the current period presentation. These reclassifications did not have an impact on net income and were considered immaterial. These statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
Adoption of New Accounting Standards
On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)." Among other things, in the amendments in ASU 2016-02, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Financial Accounting Standards Board ("FASB") made subsequent amendments to Topic 842 in July 2018 through ASU 2018-10 ("Codification Improvements to Topic 842, Leases.") and ASU 2018-11 ("Leases (Topic 842): Targeted Improvements."). Among these amendments is the provision in ASU 2018-11 that provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity's reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard continue to be in accordance with current GAAP (Topic 840, Leases). The Company adopted using the additional (and optional) transition method. The effect of adopting this standard on January 1, 2019 was an approximately $4.4 million increase in assets and liabilities on the Company's consolidated balance sheet.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting

11



for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. At the FASB’s October 16, 2019 meeting, the board amended the effective date of this ASU for many companies. Public business entities that are Securities and Exchange Commission ("SEC") filers, excluding those meeting the smaller reporting company definition, will retain the initial required implementation date of fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  All other entities will be required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022As a smaller reporting company, the Company has elected to defer adoption until January, 2023. The Company will continue to validate its models that will be used upon future adoption of the standard. The implementation of this ASU will likely result in increases to the Company's reserves when implemented.
In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendments in this ASU simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Public business entities that are SEC filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this ASU modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. Certain disclosure requirements in Topic 820 are also removed or modified. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain of the amendments are to be applied prospectively while others are to be applied retrospectively. Early adoption is permitted. The Company does not expect the adoption of ASU 2018-13 to have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Certain disclosure requirements have been deleted while the following disclosure requirements have been added: the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed: the projected benefit obligation ("PBO") and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation ("ABO") and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently assessing the impact that ASU 2018-14 will have on its consolidated financial statements.
In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." The amendments in this ASU clarify and improve areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement including improvements resulting from various Transition Resource Group meetings. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-04 will have on its consolidated financial statements.
In May 2019, the FASB issued ASU 2019-05, "Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief." The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments, upon the adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently measure those instruments at fair value with changes in fair value flowing through earnings. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the balance sheet. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-05 will have on its consolidated financial statements.

12



Note 2 - Acquisitions
On April 1, 2019, the Company completed its acquisition of Roanoke-based HomeTown Bankshares Corporation ("HomeTown") and its wholly-owned subsidiary bank, HomeTown Bank. Pursuant and subject to the terms of the merger agreement, as a result of the merger, the holders of shares of HomeTown common stock received 0.4150 shares of the Company's common stock for each share of HomeTown common stock held immediately prior to the effective date of the merger.
The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, in accordance with Accounting Standards Codification ("ASC") 350, Intangibles-Goodwill and Other. The following table provides a preliminary assessment of the consideration transferred, assets acquired, and liabilities assumed as of the date of the acquisition (dollars in thousands):
Consideration Paid:
 
Common shares issued (2,361,686)
$
82,470

Issuance of replacement stock options/restricted stock
753

Cash paid in lieu of fractional shares
27

Value of consideration
83,250

 
 

Assets acquired:
 

Cash and cash equivalents
26,283

Investment securities
34,876

Restricted stock
2,588

Loans
444,324

Premises and equipment
12,554

Deferred income taxes
2,329

Core deposit intangible
8,200

Other real estate owned
1,442

Banked owned life insurance
8,246

Other assets
14,244

Total assets
555,086

 
 

Liabilities assumed:
 

Deposits
483,626

Short-term FHLB advances
14,883

Long-term FHLB advances
778

Subordinated debt
7,530

Other liabilities
5,780

Total liabilities
512,597

Net assets acquired
42,489

Goodwill resulting from merger with HomeTown
$
40,761

The acquired loans were recorded at fair value at the acquisition date without carryover of HomeTown's previously established allowance for loan losses. The fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and leases and then applying a market-based discount rate to those cash flows. In this regard, the acquired loans were segregated into pools based on loan type and credit risk. Loan type was determined based on collateral type, purpose, and lien position. Credit risk characteristics included risk rating groups (pass rated loans and adversely classified loans), and past due status. For valuation purposes, these pools were further disaggregated by maturity, pricing characteristics (e.g., fixed-rate, adjustable-rate) and re-payment structure (e.g., interest only, fully amortizing, balloon). If new information is obtained about facts and circumstances about expected cash flows that existed as of the acquisition date, management will adjust fair values in accordance with accounting for business combinations.

13



The acquired loans were divided into loans with evidence of credit quality deterioration which are accounted for under ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, (acquired impaired) and loans that do not meet these criteria, which are accounted for under ASC 310-20, Receivables - Nonrefundable Fees and Other Costs, (acquired performing).
The following table presents the acquired impaired loans receivable at the acquisition date (dollars in thousands):
Contractually required principal and interest at acquisition
$
45,551

Contractual cash flows not expected to be collected (nonaccretable difference)
8,296

Expected cash flows at acquisition
37,255

Interest component of expected cash flows (accretable yield)
4,410

Fair value of acquired loans accounted for under FASB ASC 310-30
$
32,845

Direct costs related to the acquisition were expensed as incurred. During the nine months ended September 30, 2019, the Company incurred $11.3 million in merger and acquisition integration expenses related to the merger, including $9.1 million in data processing termination and conversion costs, $1.7 million in legal and professional fees, $0.4 million in salary related expense, and $0.1 million in other noninterest expenses. The majority of these expenses were related to integration and are deductible for tax purposes.
The following tables present unaudited pro forma information as if the acquisition of HomeTown had occurred on January 1, 2018. These results combine the historical results of HomeTown in the Company's Consolidated Statements of Income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2018. In particular, no adjustments have been made to eliminate the amount of HomeTown's provision for credit losses that would not have been necessary had the acquired loans been recorded at fair value as of January 1, 2018. Pro forma adjustments below include the net impact of accretion for 2018 and the elimination of merger-related costs for 2019. The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts below (dollars in thousands, except per share data):
 
Pro forma
Three Months Ended
 
September 30, 2019
 
September 30, 2018
Total revenues (1)
$
24,636

 
$
24,478

Net income
8,608

 
7,458

Earnings per share
0.77

 
0.67

(1) Includes net interest income and noninterest income.
 
Pro forma
Nine Months Ended
 
September 30, 2019
 
September 30, 2018
Total revenues (1)
$
70,404

 
$
73,897

Net income
21,996

 
22,213

Earnings per share
1.98

 
2.01

(1) Includes net interest income and noninterest income.

14



Note 3 – Securities 
The amortized cost and fair value of investments in debt securities at September 30, 2019 were as follows (dollars in thousands):
 
September 30, 2019
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
 
Fair Value
Securities available for sale:
 
 
 
 
 
 
 
Federal agencies and GSEs
$
119,682

 
$
1,837

 
$
263

 
$
121,256

Mortgage-backed and CMOs
133,533

 
1,875

 
207

 
135,201

State and municipal
43,012

 
871

 
28

 
43,855

Corporate
8,015

 
163

 

 
8,178

Total securities available for sale
$
304,242

 
$
4,746

 
$
498

 
$
308,490

The Company adopted ASU 2016-01 effective January 1, 2018. The Company recognized in income a $333,000 change in the fair value of equity securities during the nine months of 2019. During the nine months ended September 30, 2019, the Company sold $445,000 in equity securities at fair value and had no remaining equity securities at September 30, 2019. The Company had equity securities with a fair value of $2,087,000 at September 30, 2018 and recognized in income a $312,000 change in the fair value of equity securities during the nine months of 2018. During the 2018 period, the Company sold $431,000 in equity securities at fair value.
The amortized cost and fair value of investments in debt securities at December 31, 2018 were as follows (dollars in thousands):
 
December 31, 2018
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
 
Fair Value
Securities available for sale:
 
 
 
 
 
 
 
Federal agencies and GSEs
$
137,070

 
$
442

 
$
3,473

 
$
134,039

Mortgage-backed and CMOs
113,883

 
385

 
2,401

 
111,867

State and municipal
80,022

 
411

 
531

 
79,902

Corporate
6,799

 
68

 
22

 
6,845

Total securities available for sale
$
337,774

 
$
1,306

 
$
6,427

 
$
332,653

Restricted Stock
Due to restrictions placed upon the Bank's common stock investment in the Federal Reserve Bank of Richmond ("FRB") and Federal Home Loan Bank of Atlanta ("FHLB"), these securities have been classified as restricted equity securities and carried at cost.  The restricted securities are not subject to the investment security classification and are included as a separate line item on the Company's consolidated balance sheets.  The FRB requires the Bank to maintain stock with a par value equal to 3.00% of its outstanding capital and an additional 3.00% is on call.  The FHLB requires the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank's total assets. The cost of restricted stock at September 30, 2019 and December 31, 2018 was as follows (dollars in thousands):
 
September 30, 2019
 
December 31, 2018
FRB stock
$
6,406

 
$
3,621

FHLB stock
2,215

 
1,626

Total restricted stock
$
8,621

 
$
5,247

Temporarily Impaired Securities
The following table shows estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2019.  The reference point for determining when securities are in an unrealized loss position is month-end.  Therefore, it is possible that a security's market value exceeded its amortized cost on other days during the past twelve-month period.

15



Available for sale securities that have been in a continuous unrealized loss position, at September 30, 2019, are as follows (dollars in thousands):
 
Total
 
Less than 12 Months
 
12 Months or More
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Federal agencies and GSEs
$
59,141

 
$
263

 
$
1,889

 
$
30

 
$
57,252

 
$
233

Mortgage-backed and CMOs
32,617

 
207

 
7,468

 
12

 
25,149

 
195

State and municipal
4,579

 
28

 
3,428

 
19

 
1,151

 
9

Total
$
96,337

 
$
498

 
$
12,785

 
$
61

 
$
83,552

 
$
437

Federal agencies and GSEs: The unrealized losses on the Company's investment in 25 government sponsored entities ("GSE") securities were caused by interest rate increases. Twelve of these securities were in an unrealized loss position for 12 months or more. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2019.
Mortgage-backed securities: The unrealized losses on the Company's investment in 24 GSE mortgage-backed securities were caused by interest rate increases. Seventeen of these securities were in an unrealized loss position for 12 months or more. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company's investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2019.
Collateralized Mortgage Obligations: The unrealized losses associated with four private GSE collateralized mortgage obligations ("CMOs") were due to normal market fluctuations. One of these securities was in an unrealized loss position for 12 months or more. The contractual cash flows of that investment is guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the security would not be settled at a price less than the amortized cost basis of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, the Company does not consider the investment to be other-than-temporarily impaired at September 30, 2019.
State and municipal securities:  The unrealized losses on seven state and municipal securities were caused by interest rate increases. Two of these securities were in an unrealized loss position for 12 months or more. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2019.
Corporate securities:  There were no corporate bonds in an unrealized loss position at September 30, 2019.
Restricted stock: When evaluating restricted stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Company does not consider restricted stock to be other-than-temporarily impaired at September 30, 2019, and no impairment has been recognized.

16



The table below shows estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2018 (dollars in thousands):
 
Total
 
Less than 12 Months
 
12 Months or More
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Federal agencies and GSEs
$
103,797

 
$
3,473

 
$
14,982

 
$
8

 
$
88,815

 
$
3,465

Mortgage-backed and CMOs
86,852

 
2,401

 
5,473

 
15

 
81,379

 
2,386

State and municipal
39,755

 
531

 
7,199

 
18

 
32,556

 
513

Corporate
484

 
22

 

 

 
484

 
22

Total
$
230,888

 
$
6,427

 
$
27,654

 
$
41

 
$
203,234

 
$
6,386

Other-Than-Temporarily-Impaired Securities 
As of September 30, 2019 and December 31, 2018, there were no securities classified as other-than-temporarily impaired.
Realized Gains and Losses
The following table presents the gross realized gains and losses on and the proceeds from the sale of securities available for sale during the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Realized gains (losses):
 
 
 
Gross realized gains
$

 
$
194

Gross realized losses

 
(54
)
Net realized gains
$

 
$
140

Proceeds from sales of securities
$

 
$
29,878

 
 
 
 
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
Realized gains (losses):
 
 
 
Gross realized gains
$
237

 
$
342

Gross realized losses
(164
)
 
(261
)
Net realized gains
$
73

 
$
81

Proceeds from sales of securities
$
35,541

 
$
57,607

Note 4 – Loans
Loans, excluding loans held for sale, at September 30, 2019 and December 31, 2018, were comprised of the following (dollars in thousands):
 
September 30, 2019
 
December 31, 2018
Commercial
$
324,508

 
$
285,972

Commercial real estate:
 

 
 

Construction and land development
143,788

 
97,240

Commercial real estate
883,219

 
655,800

Residential real estate:
 

 
 

Residential
318,833

 
209,438

Home equity
122,074

 
103,933

Consumer
12,025

 
5,093

Total loans
$
1,804,447

 
$
1,357,476


17



Acquired Loans 
The outstanding principal balance and the carrying amount of these loans, including loans accounted for under ASC 310-30, included in the consolidated balance sheets at September 30, 2019 and December 31, 2018 are as follows (dollars in thousands):
 
September 30, 2019
 
December 31, 2018
Outstanding principal balance
$
437,461

 
$
63,619

Carrying amount
420,066

 
58,886

The outstanding principal balance and related carrying amount of acquired impaired loans, for which the Company applies ASC 310-30 to account for interest earned, as of the indicated dates are as follows (dollars in thousands):
 
September 30, 2019
 
December 31, 2018
Outstanding principal balance
$
59,353

 
$
24,500

Carrying amount
48,733

 
20,611

The following table presents changes in the accretable yield on acquired impaired loans, for which the Company applies ASC 310-30, for the nine months ended September 30, 2019 and the year ended December 31, 2018 (dollars in thousands):
 
September 30, 2019
 
December 31, 2018
Balance at January 1
$
4,633

 
$
4,890

Additions from merger with HomeTown
4,410

 

Accretion
(2,436
)
 
(2,362
)
Reclassification from nonaccretable difference
389

 
956

Other changes, net*
506

 
1,149

 
$
7,502

 
$
4,633

* This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate acquired impaired loans, and discounted payoffs that occurred in the period.
Past Due Loans
The following table shows an analysis by portfolio segment of the Company's past due loans at September 30, 2019 (dollars in thousands):
 
30- 59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days +
Past Due
and Still
Accruing
 
Non-
Accrual
Loans
 
Total
Past
Due
 
Current
 
Total
Loans
Commercial
$
776

 
$
121

 
$
39

 
$
110

 
$
1,046

 
$
323,462

 
$
324,508

Commercial real estate:
 

 
 

 
 

 
 

 
 

 
 

 
 

Construction and land development

 

 

 
21

 
21

 
143,767

 
143,788

Commercial real estate
865

 
483

 
136

 
299

 
1,783

 
881,436

 
883,219

Residential:
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential
976

 
5

 
648

 
845

 
2,474

 
316,359

 
318,833

Home equity
321

 
95

 
51

 
171

 
638

 
121,436

 
122,074

Consumer
70

 
14

 

 

 
84

 
11,941

 
12,025

Total
$
3,008

 
$
718

 
$
874

 
$
1,446

 
$
6,046

 
$
1,798,401

 
$
1,804,447


18



The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2018 (dollars in thousands):
 
30- 59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days +
Past Due
and Still
Accruing
 
Non-
Accrual
Loans
 
Total
Past
Due
 
Current
 
Total
Loans
Commercial
$
20

 
$

 
$

 
$
83

 
$
103

 
$
285,869

 
$
285,972

Commercial real estate:
 

 
 

 
 

 
 

 
 

 
 

 
 

Construction and land development

 

 

 
27

 
27

 
97,213

 
97,240

Commercial real estate
42

 

 

 
197

 
239

 
655,561

 
655,800

Residential:
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential
456

 
157

 
72

 
659

 
1,344