American National Bankshares (AMNB) 8-K/A Financial Statements and Exhibits

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is designed to show how the merger of American National Bankshares Inc. (“American”) and HomeTown Bankshares Corporation (“HomeTown”) might have affected historical financial statements if the merger had been completed at an earlier time and was prepared on the historical financial results reported by American and HomeTown in other public filings.

The unaudited pro forma condensed combined balance sheet data assumes that the merger took place on December 31, 2018 and combines American’s consolidated balance sheet as of December 31, 2018 with HomeTown’s consolidated balance sheet as of December 31, 2018. The unaudited pro forma condensed combined statement of income for the year ended December 31, 2018 give effect to the merger as if it occurred at the beginning of the period. The unaudited pro forma condensed combined financial statements give effect to the merger under the acquisition method of accounting.

The following unaudited pro forma condensed combined financial information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also is not necessarily indicative of the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the companies been combined during this period.

The unaudited pro forma condensed combined financial statements are based on, and should be read together with, the historical consolidated financial statements and related notes of American contained in its Annual Report on Form10-K for the year ended December 31, 2018 and of HomeTown contained in its Annual Report on Form10-K for the year ended December 31, 2018.

AMERICAN NATIONAL BANKSHARES INC. AND HOMETOWN BANKSHARES CORPORATION

Unaudited Pro Forma Condensed Combined Balance Sheet

December 31, 2018

(dollars in thousands)

	American Historical			HomeTown Historical			Pro Forma Adjustments			Notes			Pro Forma Combined
ASSETS
Cash and due from banks	$	29,587		$	15,332		$	—					$	44,919
Federal funds and interest-bearing deposits in banks		34,668			7,633			—						42,301
Total cash and cash equivalents		64,255			22,965			—						87,220
Equity securities, at fair value		1,830			—			(1,719	)		(1	)		111
Securities available for sale, at fair value		332,653			44,976			88			(2	)		377,717
Mortgage loans held for sale		640			85			—						725
Loans, net of unearned income		1,357,476			471,462			(14,733	)		(3	)		1,814,205
Less allowance for loan losses		12,805			3,992			(3,992	)		(4	)		12,805
Net loans		1,344,671			467,470			(10,741	)					1,801,400
Premises and equipment, net		26,675			12,943			(210	)		(5	)		39,408
Other real estate owned		869			1,893			—						2,762
Core deposit intangibles, net		926			—			8,200			(6	)		9,126
Goodwill		43,872			—			34,244			(7	)		78,116
Bank-owned life insurance		18,941			8,197			—						27,138
Restricted stock		5,247			2,241			—						7,488
Other assets		22,287			4,208			792			(8	)(9)(10)		27,287
Total assets	$	1,862,866		$	564,978		$	30,654					$	2,458,498
LIABILITIES
Noninterest-bearing deposits	$	435,828		$	117,544		$	—					$	553,372
Interest-bearing deposits:
Interest bearing transaction accounts		234,621			107,003			—						341,624
Money market accounts		401,461			99,104			—						500,565
Savings accounts		132,360			44,720			—						177,080
Time deposits		354,398			123,900			724			(11	)		479,022
Brokered deposits		7,559			902			—						8,461
Total interest-bearing deposits		1,130,399			375,629			724						1,506,752
Total deposits		1,566,227			493,173			724						2,060,124
Securities sold under agreements to repurchase		35,243			—			—						35,243
Other short-term borrowings		—			6,333			—						6,333
Long-term borrowings		—			1,694			—						1,694
Subordinated debt		27,927			7,285			30			(12	)		35,242
Other liabilities		10,927			2,794			—						13,721
Total liabilities		1,640,324			511,279			754						2,152,357
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Preferred stock		—			—			—						—
Common stock		8,668			28,909			(26,548	)		(13	)		11,029
Surplus		78,172			18,228			62,661			(13	)		159,061
Retained earnings		141,537			7,024			(7,024	)		(13	)		141,537
Accumulated other comprehensive loss, net		(5,835	)		(811	)		811			(13	)		(5,835	)
Total shareholders’ equity		222,542			53,350			29,900						305,792
Noncontrolling interest		—			349			—						349
Total shareholders’ equity		222,542			53,699			29,900						306,141
Total liabilities and shareholders’ equity	$	1,862,866		$	564,978		$	30,654					$	2,458,498

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial information. Certain reclassifications have been made to HomeTown’s balance sheet to conform with American’s presentation.

Notes to Unaudited Pro Forma Condensed Combined Balance Sheet at December 31, 2018

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. Business combinations are accounted for under the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805,Business Combinations, using the acquisition method of accounting. Under acquisition accounting, HomeTown’s assets and liabilities and any identifiable intangible assets are required to be stated at their estimated fair values. American engaged a competent third party valuation specialist to assist in the valuation of the major financial assets and liabilities of the acquired bank. All adjustments are based on current valuations, estimates, and assumptions. Pro forma adjustments reflected herein may vary from the actual purchase price allocation recorded based on the actual balance sheet at the acquisition date.

(1) Elimination of investment in HomeTown common stock.

(2) Fair value adjustments on securities available for sale.

(3) The interest rate portion ($4.0 million) reflects fair value based upon current interest rates for similar loans.

The larger portion ($10.7 million) of the adjustment to loans reflects the estimated credit portion of the fair value adjustment as required under ASC 805. This amount is an estimate of the contractual principal cash flows not expected to be collected over the estimated lives of these loans. It differs from the allowance for loan losses under ASC 450 using the incurred loss model, which estimated probable loan losses incurred as of the balance sheet date. Under the incurred loss model losses expected as a result of future events are not recognized. When using the expected cash flow approach these losses are considered in the valuation. Further, when estimating the present value of expected cash flows the loans are discounted using an effective interest rate, which is not considered in the incurred loss method. Accordingly, the differences in the loss methodologies and the application of a market interest rate have led to a credit loss estimate of $10.7 million.

The fair value of Purchased Credit Impaired (“PCI”) loans is determined using a combination of the income approach and the asset approach. The fair value ofnon-PCI loans is determined using the income approach. In the income approach, the fair value is determined based on a discounted cash flow analysis, while fair value is determined based on the estimated values of the underlying collateral in the asset approach. The key valuation assumptions developed for use in the discounted cash flow analysis are prepayment speeds, expected credit loss rates, discount rates, and foreclosure lags. For PCI loans, a yield is calculated based on the cash flows run at the acquisition date, and the yield is applied against the carrying value as projected accretion over the life of the loan. Fornon-revolvingnon-PCI loans, amortization is projected using the effective interest method. For revolving PCI loans, amortization is projected on a straight line basis.

(4) Elimination of HomeTown’s allowance for loan losses.

(5) Estimated fair value adjustment for HomeTown’s premises and equipment.

(6) Estimation of fair value of core deposit intangible (“CDI”). The estimated CDI represents the estimated future economic benefit resulting from the acquired customer balances and relationships. This value was based upon an independent appraisal at the date of the acquisition. For pro forma purposes, we are amortizing the CDI using thesum-of-the-years-digits method and an estimated life of 10 years.

(7) Estimated amount of goodwill to be recorded in the acquisition of HomeTown, less amounts allocated to the fair value of tangible and specifically identified intangible assets acquired are as follows:

Purchase Price:
Total consideration (purchase price)	$	83,250
Net assets acquired (book value)		53,350
Excess of purchase price over book value		29,900
Fair Value Adjustments:
Eliminate investment in HomeTown common stock		(1,719	)
Securities available for sale		88
Loans		(14,733	)
Eliminate existing allowance for loan losses		3,992
Premises and equipment		(210	)
Core deposit intangible		8,200
Deferred income tax asset		796
Eliminate deferred tax for investment in HomeTown common stock		130
Contra accrued interest receivable - loans		(134	)
Deposits		(724	)
Subordinated debt		(30	)
Total fair value adjustments		(4,344	)
Preliminary pro forma goodwill	$	34,244

(8) Estimated deferred tax asset arising from the adjustments to record the assets and liabilities of HomeTown at fair value of $796,000.

(9) Elimination of deferred tax for investment in HomeTown common stock of $130,000.

(10) Contra accrued interest receivable on acquired loans of $(134,000).

(11) Fair value adjustments on deposits at current market rates for similar products. This adjustment will be accreted into income over the estimated lives of the deposits. Accretion in the pro forma was computed using the effective yield method.

(12) Fair value adjustment of subordinated debt at current interest rates for similar borrowings. This adjustment will be amortized into income over the estimated life of the debt. Estimated amortization was determined using the straight line method.

(13) Elimination of HomeTown’s shareholders’ equity as part of the acquisition accounting adjustments representing the conversion of all HomeTown common shares into American common shares at a ratio of 0.4150 American shares for each share of HomeTown.

AMERICAN NATIONAL BANKSHARES INC. AND HOMETOWN BANKSHARES CORPORATION

Unaudited Pro Forma Condensed Combined Statement of Income

For the Year Ended December 31, 2018

(dollars in thousands, except per share data)

	American			HomeTown		Pro Forma						Pro Forma
	Historical			Historical		Adjustments			Notes			Combined
Interest Income
Interest and fees on loans	$	59,966		$	20,820	$	2,912			(1	)	$	83,698
Interest on federal funds sold and deposits in other banks		873			188		—						1,061
Dividends		321			151		—						472
Interest and dividends on securities:
Taxable		6,106			1,102		—						7,208
Nontaxable		1,502			229		—						1,731
Total interest and dividend income		68,768			22,490		2,912						94,170
Interest Expense
Interest on deposits		8,086			2,841		(448	)		(2	)		10,479
Interest on short-term borrowings		186			273		—						459
Interest on long-term borrowings		—			50		—						50
Interest on subordinated debt		1,402			536		(17	)		(3	)		1,921
Total interest expense		9,674			3,700		(465	)					12,909
Net interest income		59,094			18,790		3,377						81,261
Provision for loan losses		(103	)		561		—						458
Net interest income after provision for loan losses		59,197			18,229		3,377						80,803
Noninterest Income
Trust fees and brokerage		4,578			—		—						4,578
Service charges on deposit accounts		2,455			578		—						3,033
Other service charges, commissions and fees		2,637			1,055		—						3,692
Mortgage banking income		1,862			712		—						2,574
Gains on securities, net		123			60		—						183
Income from Small Business Investment Companies		637			—		—						637
Gains on bank premises and equipment, net		60			—		—						60
Income from life insurance death benefit		—			642		—						642
Other operating income		922			651		—						1,573
Total noninterest income		13,274			3,698		—						16,972
Noninterest Expense
Salaries and benefits		24,879			8,648		—						33,527
Occupancy expenses		4,378			1,676		—						6,054
FDIC assessment		537			235		—						772
Bank franchise tax		1,054			419		—						1,473
Amortization of core deposit premuims		265			—		1,552			(4	)		1,817
Data processing		2,970			1,588		—						4,558
Other real estate owned, net		122			614		—						736
Merger related expenses		872			788		(1,660	)		(5	)		—
Other expenses		9,169			3,116		—						12,285
Total noninterest expenses		44,246			17,084		(108	)					61,222
Income before income taxes		28,225			4,843		3,485						36,553
Income tax expense		5,646			845		732			(6	)		7,223
Net income	$	22,579		$	3,998	$	2,753					$	29,330
Less income attributable tonon-controlling interest		—			44		—						44
Net income available to common shareholders	$	22,579		$	3,954	$	2,753					$	29,286
Earnings per common share, basic	$	2.60		$	0.68							$	2.65
Earnings per common share, diluted	$	2.59		$	0.68							$	2.65
Weighted average shares outstanding – Basic		8,698,014			5,805,654		(3,443,968	)		(7	)		11,059,700
Weighted average shares outstanding – Diluted		8,708,462			5,853,277		(3,491,591	)		(7	)		11,070,148

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial information. Certain reclassifications have been made to HomeTown’s income statement to conform with American’s presentation.

Notes to Unaudited Pro Forma Condensed Combined Statement of Income

for the Year Ended December 31, 2018

(1) The level yield adjustment is the accretion of the fair value adjustments to loans over the expected life of the loans.

(2) The adjustment is the accretion of the fair value adjustments to deposits over their expected life using the effective yield method.

(3) The straight line adjustment is the amortization of the fair value adjustment to subordinated debt over its expected life.

(4) Amount represents CDI amortization over an estimated life of 10 years using thesum-of-the-years-digits method.

(5) Elimination of costs incurred in relation to the merger.

(6) Amount represents income tax expense estimated at 21%.

(7) Weighted average basic and diluted shares outstanding were adjusted to effect the merger.