SEC Info - American National Bankshares Inc.

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		Alternative Formats (Word, et al.) Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021 Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited) Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2022 and 2021 (unaudited) Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2022 and 2021 (unaudited) Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021 (unaudited) Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Information Financial Statements Item 1 Item 1A Item 2 Item 3 Item 4 Item 5 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Notes to Consolidated Financial Statements (unaudited) Other Information Part I Part II Quantitative and Qualitative Disclosures about Market Risk Risk Factors Signatures Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Table of Contents
"	Part I
"	Financial Information
"	Item 1
"	Financial Statements
"	Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021
"	Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021 (unaudited)
"	Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2022 and 2021 (unaudited)
"	Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2022 and 2021 (unaudited)
"	Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)
"	Notes to Consolidated Financial Statements (unaudited)
"	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
"	Legal Proceedings
"	Item 1A
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Defaults Upon Senior Securities
"	Mine Safety Disclosures
"	Item 5
"	Item 6
"	Exhibits
"	Signatures

i 0000741516 i AMERICAN NATIONAL BANKSHARES INC. i false i --12-31 i Q2 i 2022 i 5 i 5 i 2,000,000 i 2,000,000 i 0 i 0 i 1 i 1 i 20,000,000 i 20,000,000 i 10,663,599 i 10,766,967 i 93,212 i 5,180 i 5,617 i 0.27 i 54,676 i 4,452 i 0.28 i 147,235 i 5,180 i 15,315 i 35,444 i 0.54 i 143,605 i 713 i 11,943 i 8,701 i 0.56 i 0 i 13 i 0 i 9 i 0 i 9 i 0 i 12 i 0 i 0 i 0 i 0 i 0 i 0 i 0 i 0 i 0 i 0 i 0 i 0 i 2 i 0 i 0 i 1.35 i 3.45 i 2.95 i 33.33 i 0 i 0 i 0 Derived from audited consolidated financial statements Unobservable inputs were weighted by the relative fair value of the impaired loans. Includes PPP loans, which are guaranteed by the SBA and have no related allowance. 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. 00007415162022-01-012022-06-30 xbrli:shares 00007415162022-08-01 thunderdome:item iso4217:USD 00007415162020-06-30 00007415162021-12-31 iso4217:USDxbrli:shares 00007415162022-04-012022-06-30 00007415162021-04-012021-06-30 00007415162021-01-012021-06-30 0000741516us-gaap:AssetManagement1Member2022-04-012022-06-30 0000741516us-gaap:AssetManagement1Member2021-04-012021-06-30 0000741516us-gaap:AssetManagement1Member2022-01-012022-06-30 0000741516us-gaap:AssetManagement1Member2021-01-012021-06-30 0000741516us-gaap:DepositAccountMember2022-04-012022-06-30 0000741516us-gaap:DepositAccountMember2021-04-012021-06-30 0000741516us-gaap:DepositAccountMember2022-01-012022-06-30 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The accompanying notes are an integral part of the consolidated financial statements.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this discussion is to focus on important factors affecting the financial condition and results of operations of the Company. The discussion and analysis should be read in conjunction with the Consolidated Financial Statements.

This report contains forward-looking statements with respect to the financial condition, results of operations and business of American National Bankshares Inc. (the "Company") and its wholly owned subsidiary, American National Bank and Trust Company (the "Bank"). These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Company and on information available to management at the time these statements and disclosures were prepared. Forward-looking statements are subject to numerous assumptions, estimates, risks, and uncertainties that could cause actual conditions, events, or results to differ materially from those stated or implied by such forward-looking statements.

A variety of factors, some of which are discussed in more detail in Item 1A – Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2021, may affect the operations, performance, business strategy, and results of the Company. Those factors include, but are not limited to, the following:

In certain circumstances, reclassifications have been made to prior period information to conform to the 2022 presentation. There were no material reclassifications.

The accounting and reporting policies followed by the Company conform with U.S. generally accepted accounting principles ("GAAP") and they conform to general practices within the banking industry. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them, as needed. Management has discussed the Company's critical accounting policies and estimates with the Audit Committee of the Board of Directors. The Company's critical accounting policies, which are summarized below, relate to (1) the allowance for loan losses, (2) mergers and acquisitions, (3) acquired loans with specific credit-related deterioration, (4) goodwill and intangible assets, (5) deferred tax assets and liabilities, and (6) other-than-temporary impairment of securities. A summary of the Company's significant accounting policies is set forth in Note 1 to the Consolidated Financial Statements contained in the Form 10-K for the year ended December 31, 2021.

The financial information contained within the Company's financial statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained when earning income, recognizing an expense, recovering an asset, or relieving a liability. In addition, GAAP itself may change from one previously acceptable method to another method.

The purpose of the allowance for loan losses ("ALLL") is to provide for probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and by recoveries of previously charged-off loans. Loan charge-offs decrease the allowance.

The goal of the Company is to maintain an appropriate, systematic, and consistently applied process to determine the amounts of the ALLL and the provision for or recovery of loan loss expense.

The Company uses certain practices to manage its credit risk. These practices include (1) appropriate lending limits for loan officers, (2) a loan approval process, (3) careful underwriting of loan requests, including analysis of borrowers, cash flows, collateral, and market risks, (4) regular monitoring of the portfolio, including diversification by type and geography, (5) review of loans by the Loan Review department, which operates independently of loan production, (6) regular meetings of the Credit Committee to discuss portfolio and policy changes and make decisions on large or unusual loan requests, and (7) regular meetings of the Asset Quality Committee which reviews the status of individual loans.

Risk grades are assigned as part of the loan origination process. From time to time, risk grades may be modified as warranted by the facts and circumstances surrounding the credit.

Calculation and analysis of the ALLL is prepared quarterly by the Finance Department with review and input from Credit Administration. The Company's Credit Committee, Risk and Compliance Committee, Audit Committee, and the Board of Directors review the allowance for adequacy.

The Company's ALLL has two basic components: the formula allowance and the specific allowance. Each of these components is determined based upon estimates and judgments.

The formula allowance uses historical loss experience as an indicator of future losses, along with various qualitative factors, including levels and trends in delinquencies, nonaccrual loans, and charge-offs and recoveries; trends in volume and terms of loans; effects of changes in risk selection, underwriting standards, and lending policies; experience of lending staff; national, regional, and local economic trends and conditions; portfolio concentrations; regulatory and legal factors; competition; quality of loan review system; and value of underlying collateral. In the formula allowance for commercial and commercial real estate loans, the historical loss rate is combined with the qualitative factors, resulting in an adjusted loss factor for each risk-grade category of loans. The period-end balances for each loan risk-grade category are multiplied by the adjusted loss factor. Allowance calculations for residential real estate and consumer loans are calculated based on historical losses for each product category without regard to risk grade. This loss rate is combined with qualitative factors resulting in an adjusted loss factor for each product category.

The specific allowance uses various techniques to arrive at an estimate of loss for specifically identified impaired loans. These include:

The use of these computed values is inherently subjective and actual losses could be greater or less than the estimates.

No single statistic, formula, or measurement determines the adequacy of the allowance. Management makes subjective and complex judgments about matters that are inherently uncertain, and different amounts would be reported under different conditions or using different assumptions. For analytical purposes, management allocates a portion of the allowance to specific loan categories and specific loans. However, the entire allowance is used to absorb credit losses inherent in the loan portfolio, including identified and unidentified losses.

The relationships and ratios used in calculating the allowance, including the qualitative factors, may change from period to period as facts and circumstances evolve. Furthermore, management cannot provide assurance that in any particular period the Bank will not have sizable credit losses in relation to the amount reserved. Management may find it necessary to significantly adjust the allowance, considering current factors at the time.

Business combinations are accounted for under the FASB Accounting Standards Codification ("ASC") 805, Business Combinations, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company will rely on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation techniques. Under the acquisition method of accounting, the Company will identify the acquirer and the closing date and apply applicable recognition principles and conditions.

Acquisition-related costs are costs the Company incurs to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversions, integration planning, consultants, and advertising costs. The Company will account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities will be recognized in accordance with other applicable GAAP. These acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expense caption.

Acquired loans with specific credit deterioration are accounted for by the Company in accordance with ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality. Certain acquired loans, those for which specific credit-related deterioration, since origination, is identified, are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. In accounting for purchased credit impaired loans, such loans are not classified as nonaccrual when they become 90 days past due. They are considered to be accruing because their interest income relates to the accretable yield and not to contractual interest payments.

The Company's goodwill was recognized in connection with past business combinations and is reported at the community banking segment. The Company reviews the carrying value annually at June 30 or more frequently if certain impairment indicators exist. In testing goodwill for impairment, the Company may first consider qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further testing is required and the goodwill of the reporting unit is not impaired. If the Company elects to bypass the qualitative assessment or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the fair value of the reporting unit is compared with its carrying value to determine whether an impairment exists. The annual evaluation at June 30, 2022 concluded that no impairment existed. Intangible assets with definite useful lives are amortizing over their estimated useful lives of 5 to 10 years. Goodwill is the only intangible asset with an indefinite life on the Company's consolidated balance sheets.

The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is "more likely than not" that all or a portion of the deferred tax asset will not be realized. "More likely than not" is defined as greater than a 50% chance. Management considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed.

Impairment of securities occurs when the fair value of a security is less than its amortized cost. For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (1) the Company intends to sell the security or (2) it is more-likely-than-not that the Company will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend to sell the security and it is not more-likely-than-not that it will be required to sell the security before recovery, the Company must determine what portion of the impairment is attributable to a credit loss, which occurs when the amortized cost basis of the security exceeds the present value of the cash flows expected to be collected from the security. If there is no credit loss, there is no other-than-temporary impairment. If there is a credit loss, other-than-temporary impairment exists, and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income.

Non-GAAP presentations are provided because the Company believes these may be valuable to investors. These include (1) the analysis of net interest income presented on a taxable equivalent basis to facilitate performance comparisons among various taxable and tax-exempt assets and (2) the calculation of the efficiency ratio.

The Company provides access to its Securities and Exchange Commission ("SEC") filings through a link on the Investor Relations page of the Company's website at www.amnb.com. Reports available include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after the reports are filed electronically with the SEC. The information on the Company's website is not incorporated into this report or any other filing the Company makes with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

*Refer to the Non-GAAP Financial Measures within this section for further information on this non-GAAP financial measurement.

Net interest income is the difference between interest income on earning assets, primarily loans and securities, and interest expense on interest-bearing liabilities, primarily deposits and other funding sources. Fluctuations in interest rates as well as volume and mix changes in earning assets and interest-bearing liabilities can materially impact net interest income. The following discussion of net interest income is presented on a taxable equivalent basis to facilitate performance comparisons among various taxable and tax-exempt assets, such as certain state and municipal securities. A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis. Net interest income divided by average earning assets is referred to as the net interest margin. The net interest spread represents the difference between the weighted rate earned on average earning assets and the weighted rate paid on average interest-bearing liabilities.

Net interest income on a taxable equivalent basis was $21.5 million, a decrease of $282 thousand, or 1.3%, for the second quarter of 2022 compared to $21.8 million for the same quarter of 2021. The decrease from the same quarter in 2021 is attributable to decreased accretion and net fee income from the Paycheck Protection Program ("PPP") loans, partially offset with reduced deposit costs from a significantly lower rate environment in 2022. PPP loans had a net balance of $116 thousand at June 30, 2022, compared to $104 million at June 30, 2021. Total net PPP fees recognized in net interest income during the second quarter of 2022 were $15 thousand, compared to $1.8 million for the same period of 2021. Average loan balances for the 2022 quarter were up $47.0 million or 2.4%, over the 2021 quarter reflecting core loan growth in the 2022 quarter. Loan yields for the quarter were 50 basis points lower than the 2021quarter.

For the second quarter of 2022, the Company's yield on interest-earning assets was 2.90%, compared to 3.20% for the second quarter of 2021. The cost of interest-bearing liabilities was 0.22% for the 2022 period compared to 0.30% for the 2021 period. The interest rate spread was 2.68% for the 2022 period compared to 2.90% for the 2021 period. The net interest margin, on a fully taxable equivalent basis, was 2.76% for the 2022 period compared to 3.00% for the 2021 period, a decrease of 24 basis points. The decrease in net interest margin was driven by the decrease in accretion and PPP related net fee income.

The following presentation is an analysis of net interest income and related yields and rates, on a taxable equivalent basis, for the three months ended June 30, 2022 and 2021. Nonaccrual loans are included in average balances. Interest income on nonaccrual loans is only recognized when the loan returns to accrual status or at full payment of principal.

For the quarter ended June 30, 2022, noninterest income decreased $305 thousand, or 5.9%, compared to the comparable 2021 quarter. Details of individual accounts are shown in the table below.

Wealth management income increased $97 thousand for the three months ended June 30, 2022 compared to the same quarter in 2021 primarily the result of growth in clients. Mortgage banking income decreased $713 thousand in the 2022 quarter compared to the 2021 quarter reflecting decreased demand for new home purchases or refinancing in an increasing rate environment. Losses on premises and equipment, net decreased by $348 thousand in the 2022 quarter compared to the 2021 quarter. The Company recognized a loss of $438 thousand in the 2021 quarter from the sale of a building acquired in the HomeTown Bankshares Corporation acquisition.

For the six months ended June 30, 2022, noninterest income decreased $627 thousand, or 5.7%, compared to the comparable 2021 period. Details of individual accounts are shown in the table below.

Wealth management income increased $482 thousand for the six months ended June 30, 2022 compared to the same period in 2021the result of growth in clients and a $200 thousand non-recurring estate settlement fee. Mortgage banking income decreased $1.4 million in the 2022 period compared to the 2021 period due to decreased demand in a significantly higher rate environment in 2022. Income from insurance investments decreased $385 thousand as the Company received less distributions during the six months ended June 30, 2022 compared to the same period in 2021. The 2021 period recorded a loss on the sale of property from the HomeTown Bankshares Corporation acquisition of $438 thousand accounting for the majority of the change of $401 thousand period over period.

For the three months ended June 30, 2022, noninterest expense increased $818 million, or 5.6%, compared to the same quarter of 2021. Details of individual accounts are shown in the table below.

Salaries and employee benefits increased $542 thousand in the 2022 quarter as compared to the 2021 quarter. The 2022 quarter reflected increases for annual salary and incentive accrual adjustments. The increase in other expenses in the second quarter of 2022 compared to the second quarter of 2021 was primarily attributable to annual vendor price increases for operational expenses and additional costs associated with investments in technology.

For the six months ended June 30, 2022, noninterest expense increased $2.1 million, or 7.3%, compared to the same period of 2021. Details of individual accounts are shown in the table below.

Salaries and employee benefits increased $1.6 million in the 2022 period as compared to the 2021 period. The 2022 period reflected increases for annual salary and incentive accrual adjustments which were offset in part by higher deferrals of loan origination costs. The period ended June 30, 2021 reflected a reduction in salary expenses of $704 thousand associated with the origination of PPP loans which were deferred and recognized over the life of the loans. Other real estate owned ("OREO"), net decreased $126 thousand from the same period of 2021, where a loss on the sale of OREO of $111 thousand was recognized. The increase in other expenses in the 2022 period compared to the 2021 period was primarily attributable to annual vendor price increases for operational expenses, data processing and additional costs associated with investments in technology.

The efficiency ratio is calculated by dividing noninterest expense excluding (1) gains or losses on the sale of OREO and (2) core deposit intangible amortization by net interest income including tax equivalent income on nontaxable loans and securities and noninterest income and excluding (a) gains or losses on securities and (b) gains or losses on sale or disposal of premises and equipment. The efficiency ratio for the 2022 quarter was 57.18% compared to 52.06% for the 2021 quarter. The efficiency ratio is a non-GAAP financial measure that the Company believes provides investors with important information regarding operational efficiency. Such information is not prepared in accordance with GAAP and should not be construed as such. Management believes, however, such financial information is meaningful to the reader in understanding operating performance but cautions that such information not be viewed as a substitute for GAAP information. The Company, in referring to its net income, is referring to income under GAAP. The components of the efficiency ratio calculation are summarized in the following table (dollars in thousands):

Net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Because a portion of interest income earned by the Company is nontaxable, the tax equivalent net interest income is considered in the calculation of this ratio. Tax equivalent net interest income is calculated by adding the tax benefit realized from interest income that is nontaxable to total interest income then subtracting total interest expense. The tax rate utilized in calculating the tax benefit for both the 2022 and 2021 periods is 21%. The reconciliation of tax equivalent net interest income, which is not a measurement under GAAP, to net interest income, is reflected in the table below (dollars in thousands):

The effective tax rate for the second quarter of 2022 was 20.90% compared to 21.00% for the second quarter of 2021. The effective tax rate is ordinarily lower than the statutory rate of 21% due to the benefit of tax-exempt interest, tax-exempt changes in the cash surrender value of bank owned life insurance and excess tax benefits recognized on the exercise of stock options and vesting of restricted stock. However, it can be more than the statutory rate due to the presence of state taxes, changes in pre-tax earnings and the levels of permanent tax differences.

The Company's fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. The net accretion impact for the three and six months ended June 30, 2022 and 2021, as well as the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

The majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. The most significant effect of inflation is on noninterest expense, which tends to rise during periods of inflation. Changes in interest rates have a greater impact on a financial institution's profitability than do the effects of higher costs for goods and services. Through its balance sheet management practices, the Company has the ability to react to those changes and measure and monitor its interest rate and liquidity risk. Price inflation has been consistently modest over the past several years but has substantially increased during the six months of 2022. Management is closely monitoring noninterest expenses as a result of current inflation trends to implement cost measures, as applicable.

The securities portfolio generates income, plays a major role in the management of interest rate sensitivity, provides a source of liquidity, and is used to meet collateral requirements. The securities portfolio consists primarily of high credit quality investments, mostly federal agency, mortgage-backed, and state and municipal securities.

The available for sale securities portfolio was $668.8 million at June 30, 2022, compared to $692.5 million at December 31, 2021, a decrease of $23.7 million, or 3.4%. At June 30, 2022, the available for sale portfolio had an amortized cost of $717.1 million resulting in a net unrealized loss of $48.3 million. At December 31, 2021, the available for sale portfolio had an amortized cost of $694.6 million, resulting in a net unrealized loss of $2.2 million. The increase in the net unrealized loss was the direct result of a substantial rise in market rates during the period. The yield on a 3-year U.S. Treasury Note, for instance, was 202 basis points higher at June 30, 2022 relative to December 31, 2021.

The Company is cognizant of the recent volatility in market interest rates and has elected to execute an asset liability strategy of purchasing high quality securities with relatively low optionality and moderate and overall balanced duration.

The loan portfolio consists primarily of commercial and residential real estate loans, commercial loans to small and medium-sized businesses, construction and land development loans, and home equity loans. At June 30, 2022, the commercial real estate portfolio included concentrations of $88 million, $46 million and $209 million in hotel, restaurants, and retail loans, respectively. These concentrations total 16.9% of total loans, excluding loans in process.

Total loans were $2.0 billion at June 30, 2022, compared to $1.9 billion at December 31, 2021, an increase of $84.2 million, or 4.3%. At June 30, 2022, net PPP loans, which are in the commercial loan category, totaled $116 thousand compared to $12.2 million at December 31, 2021.

Average loans, including loans held for sale, were $2.0 billion for the second quarter of 2022 and 2021, with an increase of $47.0 million, or 2.4%.

Loans held for sale totaled $5.2 million at June 30, 2022 and $8.5 million at December 31, 2021. Secondary loan production volume was $41.2 million for the six month period ended June 30, 2022 and $80.2 million for the same period of 2021. These loans were approximately 50% purchase and 50% refinancing for the quarter ended June 30, 2022, and 35% purchase and 65% refinance for the year ended December 31, 2021.

Management of the loan portfolio is organized around portfolio segments. Each segment is comprised of various loan types that are reflective of operational and regulatory reporting requirements. The following table presents the Company's loan portfolio by segment (dollars in thousands):

The purpose of the ALLL is to provide for probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and by recoveries of previously charged-off loans. Loan charge-offs decrease the allowance.

At June 30, 2022, the ALLL was $18.5 million compared to $18.7 million at December 31, 2021. The ALLL as a percentage of total loans at such dates was 0.91% and 0.96%, respectively. Management will continue to evaluate the adequacy of the Company's ALLL.

The Company recognized a provision of $581 thousand in the second quarter of 2022 and a recovery of provision expense of $1.4 million in the same quarter of 2021. The provision expense for the second quarter of 2022 was a function of continued loan growth during the period and a slight increase in specific reserves. The increased provision expense as compared to the same quarter in 2021 was associated with downward adjustments in qualitative factors during the previous period as the economy improved. Net charge-offs for the three months ended June 30, 2022 were $64 thousand compared to net recoveries of $33 thousand for the same 2021 period.

As part of the Company's methodology to evaluate the adequacy of its ALLL, the Company computed its ASC 450 loan balance by reducing total loans by acquired loans and loans that were evaluated for impairment individually. The FASB ASC 450 loan loss reserve balance is the total ALLL reduced by allowances associated with these other pools of loans.

The general allowance, ASC 450 (FAS 5) reserves to FASB ASC 450 loans, was 0.93% at June 30, 2022, compared to 1.01% at December 31, 2021. On a dollar basis, the reserve was $17.6 million at June 30, 2022, compared to $18.0 million at December 31, 2021. This segment of the allowance represents by far the largest portion of the loan portfolio and the largest aggregate risk.

The specific allowance, ASC 310-40 (FAS 114) reserves to ASC 310-40 loans, was 5.68% at June 30, 2022, compared to 0.30% at December 31, 2021. On a dollar basis, the reserve was $297 thousand at June 30, 2022 compared to $7 thousand at December 31, 2021. The increase in the reserve was related to one loan relationship.

The specific allowance does not include reserves related to acquired loans with deteriorated credit quality. This reserve was $615 thousand at June 30, 2022 compared to $667 thousand at December 31, 2021. This is the only portion of the reserve related to purchased credit impaired loans. Cash flow expectations for these loans are reviewed on a quarterly basis and unfavorable changes in those estimates relative to the initial estimates can result in the need for additional loan loss provision. The following table presents the Company's loan loss and recovery experience for the periods indicated (dollars in thousands):

The following table provides qualitative indicators relevant to the Company's loan portfolio for the six month period and year indicated below.

Nonperforming loans include loans on which interest is no longer accrued and accruing loans that are contractually past due 90 days or more. Nonperforming loans include loans originated and loans acquired exclusive of purchased credit impaired loans.

Nonperforming loans to total loans were 0.07% at June 30, 2022 and 0.11% at December 31, 2021. Nonperforming assets include nonperforming loans, OREO and repossessions. Nonperforming assets represented 0.05% and 0.07% of total assets at June 30, 2022 and December 31, 2021, respectively. The decrease in nonperforming assets resulted from a decrease of $621 thousand in nonperforming loans.

In most cases, it is the policy of the Company that any loan that becomes 90 days past due will automatically be placed on nonaccrual loan status, accrued interest reversed out of income, and further interest accrual ceased. Any payments received on such loans will be credited to principal. In some cases, a loan in process of renewal may become 90 days past due. In these instances, the loan may still be accruing because of a delayed renewal process in which the customer has not been billed. In accounting for acquired impaired loans, such loans are not classified as nonaccrual when they become 90 days past due. They are considered to be accruing because their interest income relates to the accretable yield and not to contractual interest payments.

Loans will only be restored to full accrual status after six consecutive months of payments that were each less than 30 days delinquent. The Company strictly adheres with this policy before restoring a loan to normal accrual status.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Total impaired loans, exclusive of purchased credit impaired loans, at June 30, 2022 and December 31, 2021 were $5.2 million and $2.2 million, respectively.

TDRs exist whenever the Company makes a concession to a customer based on the customer's financial distress that would not have otherwise been made in the normal course of business.

OREO was $143 thousand at June 30, 2022 and December 31, 2021. OREO is initially recorded at fair value, less estimated costs to sell at the date of foreclosure. Loan losses resulting from foreclosure are charged against the ALLL at that time. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of the new cost basis or fair value, less estimated costs to sell with any additional write-downs charged against earnings. For significant assets, these valuations are typically outside annual appraisals.

The Company's deposits consist primarily of checking, money market, savings, and consumer and commercial time deposits. Total deposits were $2.8 billion at June 30, 2022 and $2.9 billion at December 31, 2021.

Average interest-bearing deposits were $1.9 billion for the second quarter of 2022, compared to $1.8 billion for the second quarter of 2021, an increase of $88.5 million, or 5.0%. Average noninterest-bearing deposits for the 2022 quarter were $1.0 billion, compared to $916 million for the 2021 quarter, an increase of $116 million, or 12.6%.

The Company's primary focus on the liability side of the balance sheet is growing core deposits and their affiliated relationships. The Company's cost of interest-bearing deposits for the second quarter of 2022 was 0.14%, down from 0.21% for the second quarter of 2021.

At June 30, 2022, certificates of deposit that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") insurance limit held by the Company were $72.3 million, and were $153.2 million at December 31, 2021. The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limits at June 30, 2022 (dollars in thousands):

The Company's total uninsured deposits, which are the amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.2 billion at June 30, 2022 and December 31, 2021. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.

The Company's capital management strategy is to be classified as "well capitalized" under regulatory capital ratios and provide as high as possible total return to shareholders.

Shareholders' equity was $327 million at June 30, 2022 compared to $355 million at December 31, 2021, a decrease of $27.4 million, or 7.7%. This decrease is attributable to an increase in net unrealized losses in the available for sale portfolio which increased $46.1 million from December 31, 2021.

The Company paid cash dividends of $0.56 per share during the six months of 2022 while the aggregate diluted earnings per share for the same period was $1.60.

The following table provides information on the regulatory capital ratios for the Company and the Bank at June 30, 2022 and December 31, 2021. Management believes, as of June 30, 2022, that the Company and the Bank more than satisfy all capital adequacy requirements to which they are subject.

The Company has an approved one year stock repurchase plan that authorizes repurchases of up to $13 million of the Company's common stock through December 31, 2022.

The Company repurchased 54,676 shares at an average cost of $35.32 per share, for a total of $1.9 million, in the second quarter of 2022. During the six month period ended June 30, 2022, the Company repurchased 143,605 shares at an average cost of $37.09 per share, for a total cost of $5.3 million. In the six month period ended June 30, 2021, the Company repurchased 147,235 shares at an average cost of $32.81 per share, for a total cost of $4.8 million.

Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities in a timely manner. Liquidity management involves maintaining the Company's ability to meet the daily cash flow requirements of its customers, whether they are borrowers requiring funds or depositors desiring to withdraw funds. Additionally, the Company requires cash for various operating needs including dividends to shareholders, the servicing of debt, and the payment of general corporate expenses. The Company manages its exposure to fluctuations in interest rates through policies approved by the Asset Liability Committee ("ALCO") and Board of Directors, both of which receive periodic reports of the Company's interest rate risk and liquidity position. The Company uses a computer simulation model to assist in the management of the future liquidity needs of the Company.

Balance sheet liquidity sources include cash, amounts due from banks, loan repayments, and increases in deposits. The Company also maintains a large, high quality, very liquid bond portfolio, which is generally 50% to 60% unpledged and would, accordingly, be available for sale if necessary.

Off balance sheet sources include lines of credit from the Federal Home Loan Bank of Atlanta ("FHLB"), federal funds lines of credit, and access to the Federal Reserve Bank of Richmond's discount window.

The Company has a line of credit with the FHLB, equal to 30% of the Bank's assets, subject to the amount of collateral pledged. Under the terms of its collateral agreement with the FHLB, the Company provides a blanket lien covering all of its residential first mortgage loans, second mortgage loans, home equity lines of credit, and commercial real estate loans. In addition, the Company pledges as collateral its capital stock in and deposits with the FHLB. The Company had $240.0 million and $275.0 million outstanding in letters of credit at June 30, 2022 and December 31, 2021, respectively. These letters of credit provide the Bank with alternate collateral for securing public entity deposits above FDIC insurance levels, thereby providing less need for collateral pledging from the securities portfolio, and thereby maximizing on balance sheet liquidity.

Short-term borrowings are discussed in Note 7 and long-term borrowings are discussed in Note 8 in the Consolidated Financial Statements included in this report.

The Company has federal funds lines of credit established with correspondent banks in the amount of $60.0 million and has access to the Federal Reserve Bank of Richmond's discount window.

The Company has a relationship with IntraFi Promontory Network, allowing the Company to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250 thousand. This gives the Company the ability, as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, the Company has the option to keep deposits on balance sheet or sell them to other members of the network. Additionally, subject to certain limits, the Bank can use IntraFi to purchase cost-effective funding without collateralization and in lieu of generating funds through traditional brokered CDs or the FHLB. In this manner, IntraFi can provide the Company with another funding option. Thus, it serves as a deposit-gathering tool and an additional liquidity management tool. Under EGRRCPA, a well-capitalized bank with a CAMELS rating of 1 or 2 may hold reciprocal deposits up to the lesser of 20% of its total liabilities or $5 billion without those deposits being treated as brokered deposits. Deposits through IntraFi's program as of June 30, 2022 and December 31, 2021, were $0 and $550 thousand, respectively.

The Company enters into certain financial transactions in the ordinary course of performing traditional banking services that result in off-balance sheet transactions. Other than subsidiaries to issue trust preferred securities, the Company does not have any off-balance sheet subsidiaries. Off-balance sheet transactions at June 30, 2022 and at December 31, 2021 were as follows (dollars in thousands):

Commitments to extend credit to customers represent legally binding agreements with fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future funding requirements. Standby letters of credit are conditional commitments issued by the Company guaranteeing the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements.

Effectively managing market risk is essential to achieving the Company's financial objectives. Market risk reflects the risk of economic loss resulting from changes in interest rates and market prices. The Company is generally not subject to currency exchange risk or commodity price risk. The Company's primary market risk exposure is interest rate risk; however, market risk also includes liquidity risk. Both are discussed in the following sections.

Interest rate risk and its impact on net interest income is a primary market risk exposure. The Company manages its exposure to fluctuations in interest rates through policies approved by the ALCO and Board of Directors, both of which receive and review periodic reports of the Company's interest rate risk position.

The Company uses computer simulation analysis to measure the sensitivity of projected earnings to changes in interest rates. Simulation takes into account current balance sheet volumes and the scheduled repricing dates, instrument level optionality, and maturities of assets and liabilities. It incorporates numerous assumptions including growth, changes in the mix of assets and liabilities, prepayments, and average rates earned and paid. Based on this information, management uses the model to project net interest income under multiple interest rate scenarios.

A balance sheet is considered asset sensitive when its earning assets (loans and securities) reprice faster or to a greater extent than its liabilities (deposits and borrowings). An asset sensitive balance sheet will produce relatively more net interest income when interest rates rise and less net interest income when they decline. Based on the Company's simulation analysis, management believes the Company's interest sensitivity position at June 30, 2022 is asset sensitive. Management expects that the general direction of short-term market interest rates will be increasing in the near term due to the anticipated continuation of monetary policy tightening actions of the Federal Reserve, but the outlook is less certain for longer-term rates during the remainder of 2022 and beyond.

The following table shows the estimated impact of changes in interest rates on net interest income as of June 30, 2022 (dollars in thousands), assuming instantaneous and parallel changes in interest rates, and expected levels of assets and liabilities. Net interest income for the following twelve months is projected to increase when interest rates are higher than current rates.

Management cannot predict future interest rates or their exact effect on net interest income. Computations of future effects of hypothetical interest rate changes are based on numerous assumptions and should not be relied upon as indicative of actual results. Certain limitations are inherent in such computations. Assets and liabilities may react differently than projected to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag changes in market interest rates. Interest rate shifts may not be parallel.

Any changes in interest rates can cause substantial changes in the amount of prepayments of loans and mortgage-backed securities, which may in turn affect the Company's interest rate sensitivity position. Additionally, credit risk may rise if an interest rate increase adversely affects the ability of borrowers to service their debt. Decrease in yields due to the current rate environment have been projected in the model simulation.

Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. Economic values are calculated based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet. The same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses instantaneous rate shocks to the balance sheet.

The following table reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the quarterly period ended June 30, 2022 (dollars in thousands):

The Company's management, including the Chief Executive Officer and Chief Financial Officer, evaluated the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of June 30, 2022. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective, as of such date, to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. There were no significant changes in the Company's internal controls over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

The nature of the business of the Company ordinarily results in a certain amount of litigation. The Company is involved in various legal proceedings, all of which are considered incidental to the normal conduct of business. Management believes that these proceedings will not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company.

There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 14, 2022.

The Company has an approved one year stock repurchase plan that authorizes the repurchase of up to $13 million of the Company's common stock through December 31, 2022. Repurchases may be made through open market purchases or in privately negotiated transactions, and shares repurchased will be returned to the status of authorized and unissued shares of common stock. The actual timing, number, and value of shares repurchased under the program will be determined by management.

Shares of the Company's common stock were repurchased during the three months ended June 30, 2022 as detailed below. Under the stock repurchase program, the Company has the remaining authority to repurchase up to $7.7 million of the Company's common stock as of June 30, 2022.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


i Virginia		i 54-1284688
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

i 628 Main Street, i Danville, i Virginia		i 24541
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
i Common Stock	i AMNB	i Nasdaq Global Select Market


Large accelerated filer ☐	i Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company i ☐
	Emerging growth company i ☐

	*(Unaudited) June 30, 2022*			*December 31, 2021*
Assets					*
Cash and due from banks	$	i 34,409		$	i 23,095
Interest-bearing deposits in other banks		i 307,164			i 487,773
Securities available for sale, at fair value		i 668,765			i 692,467
Restricted stock, at cost		i 8,495			i 8,056
Loans held for sale		i 5,227			i 8,481
Loans, net of deferred fees and costs		i 2,030,818			i 1,946,580
Less allowance for loan losses		( i 18,505	)		( i 18,678	)
Net loans		i 2,012,313			i 1,927,902
Premises and equipment, net		i 34,878			i 35,564
Other real estate owned, net of valuation allowance		i 143			i 143
Goodwill		i 85,048			i 85,048
Core deposit intangibles, net		i 3,977			i 4,627
Bank owned life insurance		i 29,318			i 29,107
Other assets		i 43,991			i 32,334
Total assets	$	i 3,233,728		$	i 3,334,597

Liabilities
Noninterest-bearing deposits	$	i 1,047,931		$	i 1,009,081
Interest-bearing deposits		i 1,782,416			i 1,881,272
Total deposits		i 2,830,347			i 2,890,353
Customer repurchase agreements		i 32,038			i 41,128
Long-term borrowings		i 28,283			i 28,232
Other liabilities		i 15,629			i 20,092
Total liabilities		i 2,906,297			i 2,979,805

Shareholders' equity
Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding		i —			i —
Common stock, $1 par value, 20,000,000 shares authorized, 10,663,599 shares outstanding at June 30, 2022 and 10,766,967 shares outstanding at December 31, 2021		i 10,588			i 10,710
Capital in excess of par value		i 143,337			i 147,777
Retained earnings		i 212,524			i 201,380
Accumulated other comprehensive loss, net		( i 39,018	)		( i 5,075	)
Total shareholders' equity		i 327,431			i 354,792
Total liabilities and shareholders' equity	$	i 3,233,728		$	i 3,334,597

	*Three Months Ended June 30,*
	*2022*			*2021*
Net income	$	i 8,140		$	i 10,766

Other comprehensive (loss) income:

Unrealized gains (losses) on securities available for sale		( i 15,286	)		i 1,416
Tax effect		i 3,300			( i 295	)

Unrealized gains (losses) on cash flow hedges		i 953			( i 408	)
Tax effect		( i 200	)		i 86

Other comprehensive (loss) income		( i 11,233	)		i 799

Comprehensive (loss) income	$	( i 3,093	)	$	i 11,565

American National Bankshares Inc. – ‘10-Q’ for 6/30/22

On: Friday, 8/5/22, at 11:31am ET · For: 6/30/22 · Accession #: 1437749-22-19057 · File #: 0-12820

Previous ‘10-Q’: ‘10-Q’ on 5/9/22 for 3/31/22 · Next: ‘10-Q’ on 11/8/22 for 9/30/22 · Latest: ‘10-Q’ on 11/8/23 for 9/30/23

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference


Index			Page

Part I.		FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	3

		Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021 (unaudited)	4

		Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2022 and 2021 (unaudited)	5

		Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2022 and 2021 (unaudited)	6

		Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	8

		Notes to Consolidated Financial Statements (unaudited)	9

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47

	Item 4.	Controls and Procedures	48

Part II.		OTHER INFORMATION

	Item 1.	Legal Proceedings	49

	Item 1A.	Risk Factors	49

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

	Item 3.	Defaults Upon Senior Securities	50

	Item 4.	Mine Safety Disclosures	50

American National Bankshares Inc.
Consolidated Balance Sheets

American National Bankshares Inc.
Consolidated Statements of Comprehensive (Loss) Income
(Dollars in thousands) (Unaudited)

	*Six Months Ended June 30,*
	*2022*			*2021*
Net income	$	i 17,139		$	i 22,055

Other comprehensive loss:

Unrealized losses on securities available for sale		( i 46,147	)		( i 4,466	)
Tax effect		i 9,962			i 976

Unrealized gains on cash flow hedges		i 2,838			i 1,373
Tax effect		( i 596	)		( i 288	)

Other comprehensive loss		( i 33,943	)		( i 2,405	)

Comprehensive (loss) income:	$	( i 16,804	)	$	i 19,650

American National Bankshares Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands) (Unaudited)

	*June 30, 2022*		*December 31, 2021*
FRB stock	$	i 6,523	$	i 6,500
FHLB stock		i 1,972		i 1,556
Total restricted stock	$	i 8,495	$	i 8,056

	*June 30, 2022*		*December 31, 2021*
Commercial	$	i 291,445	$	i 299,773
Commercial real estate:
Construction and land development		i 174,361		i 134,221
Commercial real estate - owner occupied		i 403,478		i 391,517
Commercial real estate - non-owner occupied		i 749,174		i 731,034
Residential real estate:
Residential		i 310,110		i 289,757
Home equity		i 95,352		i 93,203
Consumer		i 6,898		i 7,075
Total loans, net of deferred fees and costs	$	i 2,030,818	$	i 1,946,580

	*June 30, 2022*		*December 31, 2021*
Outstanding principal balance	$	i 142,631	$	i 163,574
Carrying amount		i 136,962		i 156,975

	*June 30, 2022*			*December 31, 2021*
Balance at January 1	$	i 4,902		$	i 6,513
Accretion		( i 1,132	)		( i 5,292	)
Reclassification from nonaccretable difference		i 537			i 2,780
Other changes, net (1)		( i 311	)		i 901
	$	i 3,996		$	i 4,902

	*Consumer*
Performing	$	i 6,784
Nonperforming		i 114
Total	$	i 6,898

	*Consumer*
Performing	$	i 7,057
Nonperforming		i 18
Total	$	i 7,075

	*Goodwill*		*Intangibles*
Balance at December 31, 2021	$	i 85,048	$	i 4,627
Amortization		—		( i 650	)
Balance at June 30, 2022	$	i 85,048	$	i 3,977

	*June 30, 2022*			*December 31, 2021*
Lease liabilities	$	i 3,686		$	i 4,023
Right-of-use assets	$	i 3,606		$	i 3,939
Weighted average remaining lease term (years)		i 6.89			i 6.90
Weighted average discount rate		i 3.09	%		i 3.09	%

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Lease cost
Operating lease cost	$	i 178	$	i 268
Short-term lease cost		i —		i 1
Total lease cost	$	i 178	$	i 269

Cash paid for amounts included in the measurement of lease liabilities	$	i 270	$	i 264

	*Six Months Ended June 30, 2022*		*Six Months Ended June 30, 2021*
Lease cost
Operating lease cost	$	i 535	$	i 537
Short-term lease cost		i —		i 2
Total lease cost	$	i 535	$	i 539

Cash paid for amounts included in the measurement of lease liabilities	$	i 539	$	i 516

Lease payments due	*As of June 30, 2022*
Six months ending December 31, 2022	$	i 521
Twelve months ending December 31, 2023		i 963
Twelve months ending December 31, 2024		i 533
Twelve months ending December 31, 2025		i 490
Twelve months ending December 31, 2026		i 279
Twelve months ending December 31, 2027		i 208
Thereafter		i 1,143
Total undiscounted cash flows		i 4,137
Discount		( i 451	)
Lease liabilities	$	i 3,686

	*Shares*			*Weighted Average Grant Date Value Per Share*
Nonvested at December 31, 2021		i 58,461		$	i 31.91
Granted		i 31,384			i 38.04
Vested		( i 14,557	)		i 32.48
Forfeited		( i 561	)		i 33.09
Nonvested at June 30, 2022		i 74,727		$	i 34.36

Level 1 –	Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 –	Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
Level 3 –	Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

Assets	*Valuation Technique*	*Unobservable Input*	*Range; Weighted Average (1)*

Impaired loans	Discounted appraised value	Selling cost	i 8.00% - i 15%

Other real estate owned, net	Discounted appraised value	Selling cost	i 8.00%

	*2022*			*2021*
Supplemental Schedule of Cash and Cash Equivalents:
Cash and due from banks	$	i 34,409		$	i 38,237
Interest-bearing deposits in other banks		i 307,164			i 502,300
Cash and Cash Equivalents	$	i 341,573		$	i 540,537

Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest on deposits and borrowed funds	$	i 2,028		$	i 3,495
Income taxes		i 4,654			i 4,222
Noncash investing and financing activities:
Net unrealized losses on securities available for sale		( i 46,147	)		( i 4,466	)
Net unrealized gains on cash flow hedges		i 2,838			i 1,373