8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 17, 2019
AMERICAN NATIONAL BANKSHARES INC.
(Exact name of registrant as specified in its charter)
Virginia	0-12820	54-1284688
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
628 Main Street, Danville, VA		24,541
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: 434-792-5111
Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

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

Item 2.02 Results of Operations and Financial Condition

On January 17, 2019, American National Bankshares Inc. ("the Company") reports earnings for fourth quarter 2018.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits:

99.1 January 17, 2019 News Release

99.2 Quarterly Balance Sheets, Statements of Income, Net Interest Income Analysis and Selected Financial Data

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 hereunto duly authorized.

Date: January 17, 2019                                                                       /s/ William W. Traynham

Executive Vice President and Chief Financial Officer

EX-99.1

Date:	January 17, 2019
Contact:	William W. Traynham, Chief Financial Officer
	434-773-2242
	traynhamw@amnb.com
Traded:	Nasdaq Global Select Market	Symbol:	AMNB

AMERICAN NATIONAL BANKSHARES INC. REPORTS FOURTH QUARTER 2018 EARNINGS

• Q4 2018 annualized loan growth 8%

• Q4 2018 net income of $5.0 million

• 2018 net income $22.6 million

• Q4 2018 net interest margin of 3.48%

• Q4 2018 average shareholders’ equity of $218.4 million is 11.78% of average assets

Danville, VA -- American National Bankshares Inc. (“American National”) (Nasdaq: AMNB), parent company of American National Bank and Trust Company, today announced net income for the fourth quarter of 2018 of $5,002,000 compared to $2,120,000 for the fourth quarter of 2017, a $2,882,000 or 135.9% increase. Basic net income per common share was $0.57 for the fourth quarter of 2018 compared to $0.25 for the 2017 quarter. Diluted net income per common share was $0.57 for the fourth quarter of 2018 compared to $0.24 for the 2017 quarter. Net income for the fourth quarter of 2018 produced a return on average assets of 1.08%, a return on average equity of 9.16%, and a return on average tangible equity of 11.63%.

Net income for the year ended December 31, 2018 was $22,579,000 compared to $15,249,000 for 2017, a $7,330,000 or 48.1% increase. Basic net income per common share was $2.60 for 2018 compared to $1.76 for 2017. Diluted net income per common share was $2.59 for 2018 compared to $1.76 for 2017. Net income for 2018 produced a return on average assets of 1.24%, a return on average equity of 10.56%, and a return on average tangible equity of 13.49%.

The enactment of the new federal tax law in late December 2017 negatively affected net income for the 2017 quarter and year. In order to account for the change in

1

income tax rates from 35% to 21%, American National recognized a $2.7 million charge to its deferred tax asset and a corresponding increase in income tax expense in the fourth quarter of 2017.

Beginning in 2018, income tax expense was positively affected by the substantial reduction in the corporate tax rate.

Financial Performance and Overview

Jeffrey V. Haley, President and Chief Executive Officer, reported, “We are very pleased to report net income for the quarter of $5.0 million, an increase of 135.9% over the comparable quarter of 2017. Net income for 2018 was $22.6 million, an increase of 48.1% over 2017.

“Earnings were positively impacted for the quarter and the year by greater net interest income, lower loan loss provision, and lower corporate income taxes.

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

“Earnings have also increased due to a significant reduction in loan loss provision. Our need for loan loss provision was reduced by three factors: loan balances, continued strong asset quality metrics, and improvements in various qualitative factors we use in computing our allowance for loan losses.

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

“Earnings for the fourth quarter 2018 were negatively impacted by unrealized losses on equity securities of $270,000. Accounting for fair value changes in equity securities changed in 2018 and unrealized gains and losses are now reflected in the income statement.

“Further, earnings were negatively impacted for the fourth quarter of 2018 and for the year by merger related expenses. Our pending acquisition of HomeTown Bank is generating significant non-recurring expense, $872,000 of which hit the fourth quarter.

“The balance sheet grew last year. Year over year growth in loans was $21.4 million or 1.6%. Most of this growth occurred in the fourth quarter of 2018 where loans

2

increased $26.3 million or 2.0%. Growth was muted in most of 2018 because of over $40 million in large commercial loan payoffs during the year. Current expectations for 2019 are for growth in loans at a moderate pace, probably in the mid-single digit percentage range.

“Year over year growth in deposits was $31.5 million or 2.1%. This growth is mostly in non-maturity core deposits (non-interest bearing accounts), which increased $41.5 million or 10.5%. Our cost of interest bearing deposits for the fourth quarter was 0.83%, compared to 0.61% for the 2017 quarter. Our net interest margin for the current quarter was 3.48%, up two basis points from the prior year quarter, due in large portion to increasing yields on loans. Protecting our net interest margin is a continuing strategic imperative.

“We have noted that many stocks in the financial sector, including American National, have declined substantially and, in many cases, disproportionately, over the last several months. American National approved a stock repurchase program in January 2018 authorizing the repurchase of up to 300,000 shares over the following two years. We will revisit our intention with respect to the plan, subsequent to completion of the merger with HomeTown Bank, based on then current facts and circumstances.”

Haley concluded, “This is an exciting time for American National. Our employees are working diligently with their new friends at HomeTown Bank to consummate our merger in a few months. The transaction will give American National the largest deposit market share of any community bank in the Roanoke, Virginia market. Our earnings for 2018 were good and we’re expecting 2019, excluding merger related costs, and 2020 will be strong. Balance sheet growth took an uptick late in 2018, but sets the stage for strong expectations in 2019. Our operating philosophy will continue to focus on asset quality, volume and rate – in that order.”

Capital

American National’s capital ratios remain strong and exceed all regulatory requirements.

3

For the quarter ended December 31, 2018, average shareholders’ equity was 11.78% of average assets, compared to 11.64% for the quarter ended December 31, 2017.

Book value per common share was $25.52 at December 31, 2018, compared to $24.13 at December 31, 2017.

Tangible book value per common share was $20.38 at December 31, 2018, compared to $18.92 at December 31, 2017.

Credit Quality Measurements

Non-performing assets composed of ($1,090,000 of non-performing loans, $72,000 of 90 day past due and accruing loans, and $869,000 of other real estate owned) represented 0.11% of total assets at December 31, 2018, compared to 0.21% at December 31, 2017.

Annualized net charge offs to average loans were 23 basis points for the fourth quarter of 2018, compared to six basis points for the same quarter in 2017. Net charge offs for 2018 were five basis points, compared to two basis points for 2017.

Other real estate owned was $869,000 at December 31, 2018, compared to $1,225,000 at December 31, 2017, a decrease of $356,000 or 29.1%.

Merger Related Financial Impact

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

For the quarter ended December 31,	2018		2017
Net Interest Income	$	286	$	529
Income Before Income Taxes	$	231	$	449
For the year ended December 31,	2018		2017
Net Interest Income	$	1,288	$	2,114
Income Before Income Taxes	$	1,023	$	1,586

4

The fourth quarter of 2018 includes $143,000 in cash basis accretion income related to the early payoff of several acquired loans, compared to $348,000 for the comparable quarter of 2017. For 2018, cash basis accretion income was $688,000, compared to $968,000 for 2017.

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

Net Interest Income

Net interest income before the provision for loan losses increased to $15,012,000 in the fourth quarter of 2018 from $14,363,000 in the fourth quarter of 2017, an increase of $649,000 or 4.5%.

For the 2018 quarter, the net interest margin was 3.48% compared to 3.46% for the same quarter in 2017, an increase of 0.02%.

The major drivers affecting margin were:

• Positively affecting margin was a $41.4 million (2.4%) increase in average earning assets, at a 19 basis point higher yield.

• Positively affecting margin was a $30.6 million (7.4%) increase in average noninterest bearing deposits.

• Negatively affecting margin was a $7.6 million (0.7%) increase in the average balance of interest bearing deposits at a 22 basis point higher cost.

Provision for Loan Losses and Allowance for Loan Losses

Provision expense for the fourth quarter of 2018 was a negative $6,000 compared to a negative $74,000 for the fourth quarter of 2017. The fourth quarter 2018 negative provision was related to adjustments on the specific reserves for several impaired loans.

The allowance for loan losses as a percentage of total loans was 0.94% at December 31, 2018 compared to 1.02% at December 31, 2017.

Net loans outstanding increased during the fourth quarter by $27.1 million or 2.1%. However, the need for additions to the allowance for loan losses was reduced by

5

improvement in various qualitative factors used in the determination of the allowance, notably national and local economic conditions, and loan volume.

Noninterest Income

Noninterest income totaled $2,998,000 in the fourth quarter of 2018, compared with $3,804,000 in the fourth quarter of 2017, a decrease of $806,000 or 21.2%.     

The major drivers of this decrease were mortgage banking and securities gains and losses.

Mortgage banking income was down $235,000 or 38.8%, primarily due to lower demand.

Securities gains and losses were down $492,000 or 221.6%, almost entirely related to the change in accounting for equity investments requiring unrealized gains and losses to be reflected in the income statement.     

Noninterest Expense

Noninterest expense totaled $11,638,000 in the fourth quarter of 2018, compared to $11,021,000 in the fourth quarter of 2017, an increase of $617,000 or 5.6%.

The primary driver of this increase was merger related expenses related to the pending acquisition of HomeTown Bank. These nonrecurring expenses totaled $872,000 in the fourth quarter of 2018.    

About American National

American National is a multi-state bank holding company with total assets of approximately $1.9 billion. Headquartered in Danville, Virginia, American National is the parent company of American National Bank and Trust Company. American National Bank is a community bank serving Virginia and North Carolina with 24 banking offices and two loan production offices. American National Bank also manages an additional $769 million of trust, investment and brokerage assets in its Trust and Investment Services Division. Additional information about the company and the bank is available on the bank's website at www.amnb.com.

6

Forward-Looking Statements

Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current expectations and involve a number of assumptions. These include statements as to the anticipated performance of American National and the benefits of the proposed merger with HomeTown Bank, including future financial and operating results, cost savings and enhanced revenues that may be realized from the merger as well as other statements of expectations regarding the merger and any other statements regarding future results or expectations. American National intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. American National’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors that could have a material effect on the operations and future prospects of American National and the resulting company after the proposed merger with HomeTown Bank, include but are not limited to: (1) the businesses of American National and/or HomeTown Bank may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe; (3) revenues following the merger may be lower than expected; (4) customer and employee relationships and business operations may be disrupted by the merger; (5) the ability to obtain required regulatory and shareholder approvals, and the ability to complete the merger on the expected timeframe may be more difficult, time-consuming or costly than expected; (6) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (7) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in the companies’ respective market areas; (8) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (9) accounting principles, policies, and guidelines; and (10) other risk factors detailed from time to time in filings made by American National with the Securities and Exchange Commission. American National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

7

EX-99.2

American National Bankshares Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Unaudited
	December 31
Assets	2018			2017
Cash and due from banks	$	29,587		$	28,594
Interest-bearing deposits in other banks	34,668			23,883
Equity securities, at fair value	1,830			—
Securities available for sale, at fair value	332,653			321,337
Restricted stock, at cost	5,247			6,110
Loans held for sale	640			1,639
Loans	1,357,476			1,336,125
Less allowance for loan losses	(12,805		)	(13,603		)
Net Loans	1,344,671			1,322,522
Premises and equipment, net	26,675			25,901
Other real estate owned, net	869			1,225
Goodwill	43,872			43,872
Core deposit intangibles, net	926			1,191
Bank owned life insurance	18,941			18,460
Accrued interest receivable and other assets	22,287			21,344
Total assets	$	1,862,866		$	1,816,078
Liabilities
Demand deposits -- noninterest-bearing	$	435,828		$	394,344
Demand deposits -- interest-bearing	234,621			226,914
Money market deposits	401,461			403,024
Savings deposits	132,360			126,786
Time deposits	361,957			383,658
Total deposits	1,566,227			1,534,726
Short-term borrowings:
Customer repurchase agreements	35,243			10,726
Other short-term borrowings	—			24,000
Junior subordinated debt	27,927			27,826
Accrued interest payable and other liabilities	10,927			10,083
Total liabilities	1,640,324			1,607,361
Shareholders' equity
Preferred stock, $5 par, 2,000,000 shares authorized,
none outstanding	—			—
Common stock, $1 par, 20,000,000 shares authorized,
8,720,337 shares outstanding at December 31, 2018 and
8,650,547 shares outstanding at December 31, 2017	8,668			8,604
Capital in excess of par value	78,172			76,179
Retained earnings	141,537			127,010
Accumulated other comprehensive loss, net	(5,835		)	(3,076		)
Total shareholders' equity	222,542			208,717
Total liabilities and shareholders' equity	$	1,862,866		$	1,816,078

American National Bankshares Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Unaudited
	Three Months Ended						Twelve Months Ended
	December 31						December 31
	2018			2017			2018			2017
Interest and Dividend Income:
Interest and fees on loans	$	15,481		$	14,426		$	59,966		$	55,276
Interest and dividends on securities:
Taxable	1,674			1,271			6,106			4,666
Tax-exempt	298			439			1,502			2,043
Dividends	81			79			321			319
Other interest income	357			265			873			734
Total interest and dividend income	17,891			16,480			68,768			63,038
Interest Expense:
Interest on deposits	2,340			1,713			8,086			5,794
Interest on short-term borrowings	145			79			186			173
Interest on long-term borrowings	—			53			—			296
Interest on junior subordinated debt	394			272			1,402			1,028
Total interest expense	2,879			2,117			9,674			7,291
Net Interest Income:	15,012			14,363			59,094			55,747
Provision for loan losses	(6		)	(74		)	(103		)	1,016
Net Interest Income After Provision
for Loan Losses	15,018			14,437			59,197			54,731
Noninterest Income:
Trust fees	908			1,008			3,783			3,926
Service charges on deposit accounts	646			608			2,455			2,426
Other fees and commissions	660			619			2,637			2,471
Mortgage banking income	370			605			1,862			2,208
Securities gains (losses), net	(270		)	222			123			812
Brokerage fees	192			226			795			829
Income from Small Business Investment Companies	161			118			637			236
Gains (losses) on premises and equipment, net	(6		)	7			60			344
Other	337			391			922			975
Total noninterest income	2,998			3,804			13,274			14,227
Noninterest Expense:
Salaries	5,132			5,225			20,509			19,829
Employee benefits	1,048			1,045			4,370			4,274
Occupancy and equipment	1,081			1,120			4,378			4,487
FDIC assessment	125			137			537			538
Bank franchise tax	191			277			1,054			1,072
Core deposit intangible amortization	55			80			265			528
Data processing	382			550			1,691			2,014
Software	313			291			1,279			1,144

Other real estate owned, net	21		130		122		303
Merger related expenses	872		—		872		—
Other	2,418		2,166		9,169		8,694
Total noninterest expense	11,638		11,021		44,246		42,883
Income Before Income Taxes	6,378		7,220		28,225		26,075
Income Taxes	1,376		5,100		5,646		10,826
Net Income	5,002		2,120		22,579		15,249
Net Income Per Common Share:
Basic	$	0.57	$	0.25	$	2.60	$	1.76
Diluted	$	0.57	$	0.24	$	2.59	$	1.76
Average Common Shares Outstanding:
Basic	8,717,572		8,648,494		8,698,014		8,641,717
Diluted	8,723,388		8,668,765		8,708,647		8,660,628

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)													At or for the Year Ended
		4th Qtr				3rd Qtr				4th Qtr				December 31,
		2018				2018				2017				2018				2017
EARNINGS
Interest income		$	17,891			$	17,217			$	16,480			$	68,768			$	63,038
Interest expense		2,879				2,466				2,117				9,674				7,291
Net interest income		15,012				14,751				14,363				59,094				55,747
Provision for loan losses		(6		)		(23		)		(74		)		(103		)		1,016
Noninterest income		2,998				3,380				3,804				13,274				14,227
Noninterest expense		11,638				10,904				11,021				44,246				42,883
Income taxes		1,376				1,465				5,100				5,646				10,826
Net income		5,002				5,785				2,120				22,579				15,249
PER COMMON SHARE
Income per share - basic		$	0.57			$	0.66			$	0.25			$	2.60			$	1.76
Income per share - diluted		0.57				0.66				0.24				2.59				1.76
Cash dividends paid		0.25				0.25				0.25				1.00				0.97
Book value per share		25.52				24.79				24.13				25.52				24.13
Book value per share - tangible (a)		20.38				19.65				18.92				20.38				18.92
Closing market price		29.31				39.00				38.30				29.31				38.30
FINANCIAL RATIOS
Return on average assets		1.08			%	1.28			%	0.47			%	1.24			%	0.87		%
Return on average equity		9.16				10.76				4.00				10.56				7.34
Return on average tangible equity (b)		11.63				13.70				5.21				13.49				9.59
Average equity to average assets		11.78				11.87				11.64				11.70				11.82
Tangible equity to tangible assets (a)		9.78				9.72				9.24				9.78				9.24
Net interest margin, taxable equivalent		3.48				3.51				3.46				3.49				3.50
Efficiency ratio (c)		58.45				59.65				59.93				59.57				60.89
Effective tax rate		21.57				20.21				70.64				20.00				41.52
PERIOD-END BALANCES
Securities		$	339,730			$	303,103			$	327,447			$	339,730			$	327,447
Loans held for sale		640				1,934				1,639				640				1,639
Loans, net of unearned income		1,357,476				1,331,153				1,336,125				1,357,476				1,336,125
Goodwill and other intangibles		44,798				44,853				45,063				44,798				45,063
Assets		1,862,866				1,806,491				1,816,078				1,862,866				1,816,078
Assets - tangible (a)		1,818,068				1,761,638				1,771,015				1,818,068				1,771,015
Deposits		1,566,227				1,523,107				1,534,726				1,566,227				1,534,726
Customer repurchase agreements		35,243				29,104				10,726				35,243				10,726
Other short-term borrowings		—				—				24,000				—				24,000
Long-term borrowings		27,927				27,902				27,826				27,927				27,826
Shareholders' equity		222,542				216,066				208,717				222,542				208,717
Shareholders' equity - tangible (a)		177,744				171,213				163,654				177,744				163,654

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)										At or for the Year Ended
		4th Qtr			3rd Qtr			4th Qtr			December 31,
		2018			2018			2017			2018			2017
AVERAGE BALANCES
Securities (d)		$	332,230		$	335,320		$	304,254		$	330,982		$	301,377
Loans held for sale		1,201			3,282			4,269			2,285			3,185
Loans, net of unearned income		1,335,469			1,327,060			1,301,833			1,330,582			1,262,264
Interest-earning assets		1,736,453			1,693,912			1,695,091			1,709,283			1,631,853
Goodwill and other intangibles		44,831			44,887			45,109			44,926			45,287
Assets		1,854,492			1,811,631			1,820,499			1,827,658			1,758,012
Assets - tangible (a)		1,809,661			1,766,744			1,775,390			1,782,732			1,712,725
Interest-bearing deposits		1,116,911			1,118,929			1,109,286			1,134,512			1,061,519
Deposits		1,558,864			1,542,945			1,520,665			1,556,039			1,454,182
Customer repurchase agreements		37,905			11,896			42,540			18,401			46,335
Other short-term borrowings		—			2,176			951			1,149			3,158
Long-term borrowings		27,914			27,886			34,331			27,874			36,887
Shareholders' equity		218,430			215,054			211,864			213,821			207,807
Shareholders' equity - tangible (a)		173,599			170,167			166,755			168,895			162,520
CAPITAL
Average common shares outstanding - basic		8,717,572			8,712,443			8,648,494			8,698,014			8,641,717
Average common shares outstanding - diluted		8,723,388			8,718,918			8,668,765			8,708,647			8,660,628
ALLOWANCE FOR LOAN LOSSES
Beginning balance		$	13,588		$	13,508		$	13,858		$	13,603		$	12,801
Provision for loan losses		(6		)	(23		)	(74		)	(103		)	1,016
Charge-offs		(818		)	(28		)	(280		)	(1,020		)	(690		)
Recoveries		41			131			99			325			476
Ending balance		$	12,805		$	13,588		$	13,603		$	12,805		$	13,603
LOANS
Construction and land development		$	97,240		$	99,546		$	123,147		$	97,240		$	123,147
Commercial real estate		655,800			632,022			637,701			655,800			637,701
Residential real estate		209,438			205,277			209,326			209,438			209,326
Home equity		103,933			104,873			109,857			103,933			109,857
Commercial and industrial		285,972			284,176			251,666			285,972			251,666
Consumer		5,093			5,259			4,428			5,093			4,428
Total		$	1,357,476		$	1,331,153		$	1,336,125		$	1,357,476		$	1,336,125
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due and accruing		$	72		$	74		$	359		$	72		$	359
Nonaccrual		1,090			2,238			2,201			1,090			2,201
Other real estate owned		869			916			1,225			869			1,225
Nonperforming assets		$	2,031		$	3,228		$	3,785		$	2,031		$	3,785

American National Bankshares Inc.
Financial Highlights
Unaudited
	(Dollars in thousands, except per share data)										At or for the Year Ended
		4th Qtr			3rd Qtr			4th Qtr			December 31,
		2018			2018			2017			2018			2017
ASSET QUALITY RATIOS
Allowance for loan losses to total loans		0.94		%	1.02		%	1.02		%	0.94		%	1.02		%
Allowance for loan losses to
nonperforming loans		1,101.98			587.72			531.37			1,101.98			531.37
Nonperforming assets to total assets		0.11			0.18			0.21			0.11			0.21
Nonperforming loans to total loans		0.09			0.17			0.19			0.09			0.19
Annualized net charge-offs (recoveries)
to average loans		0.23			(0.03)			0.06			0.05			0.02
OTHER DATA
Fiduciary assets at period-end (e) (f)		$	494,034		$	523,754		$	518,284		$	494,034		$	518,284
Retail brokerage assets at period-end (e) (f)		$	274,552		$	333,565		$	321,151		$	274,552		$	321,151
Number full-time equivalent employees (g)		305			316			328			305			328
Number of full service offices		24			24			26			24			26
Number of loan production offices		2			2			2			2			2
Number of ATM's		33			34			34			33			34
Notes:
(a) - Excludes goodwill and other intangible assets.
(b) - Excludes amortization expense, net of tax, of intangible assets.
(c) - The efficiency ratio is calculated by dividing noninterest expense excluding (i) gains (losses) on the sale of OREO,
net and (ii) merger related expenses by net interest income including tax equivalent income on nontaxable loans
and securities and noninterest income excluding (i) securities gains (losses), net and (ii) gains (losses) on premises and
equipment, net.
(d) - Average does not include unrealized gains and losses.
(e) - Market value.
(f) - Assets are not owned by American National and are not reflected in the consolidated balance sheet.
(g) - Average for quarter.

			Net Interest Income Analysis
			For the Three Months Ended December 31, 2018 and 2017
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance				Income/Expense				Yield/Rate
				2018		2017		2018		2017		2018		2017
Loans:
	Commercial			$	262,040	$	233,689	$	2,768	$	2,253	4.19	%	3.82	%
	Real estate			1,069,515		1,068,273		12,681		12,171		4.74		4.56
	Consumer			5,115		4,140		76		81		5.89		7.76
		Total loans		1,336,670		1,306,102		15,525		14,505		4.64		4.44
Securities:
	Federal agencies & GSEs			128,826		104,523		752		508		2.33		1.94
	Mortgage-backed & CMOs			110,753		92,339		655		501		2.37		2.17
	State and municipal			78,223		92,636		529		829		2.71		3.58
	Other			14,428		14,756		187		171		5.18		4.64
		Total securities		332,230		304,254		2,123		2,009		2.56		2.64
Deposits in other banks				67,553		84,735		357		265		2.10		1.24
	Total interest-earning assets			1,736,453		1,695,091		18,005		16,779		4.14		3.95
Non-earning assets				118,039		125,408
		Total assets		$	1,854,492	$	1,820,499
Deposits:
	Demand			$	229,286	$	220,150	13		11		0.02		0.02
	Money market			391,289		374,691		1,081		623		1.10		0.66
	Savings			133,350		126,274		10		10		0.03		0.03
	Time			362,986		388,171		1,236		1,069		1.35		1.09
		Total deposits		1,116,911		1,109,286		2,340		1,713		0.83		0.61
Customer repurchase agreements				37,905		42,540		145		74		1.52		0.69
Other short-term borrowings				—		951		—		4		—		1.68
Long-term borrowings				27,914		34,331		394		326		5.65		3.80
	Total interest-bearing
		liabilities		1,182,730		1,187,108		2,879		2,117		0.97		0.71
Noninterest bearing demand deposits				441,953		411,379
Other liabilities				11,379		10,148
Shareholders' equity				218,430		211,864
		Total liabilities and
			shareholders' equity	$	1,854,492	$	1,820,499
Interest rate spread												3.17	%	3.24	%
Net interest margin												3.48	%	3.46	%
Net interest income (taxable equivalent basis)								15,126		14,662
Less: Taxable equivalent adjustment (a)								114		299
Net interest income								$	15,012	$	14,363
Notes:
	(a) - Calculated using 21% and 35% statutory income tax rate in 2018 and 2017, respectively, due to tax rate change.

			Net Interest Income Analysis
			For the Years Ended December 31, 2018 and 2017
			(Dollars in thousands)
			Unaudited
								Interest
				Average Balance				Income/Expense				Yield/Rate
				2018		2017		2018		2017		2018		2017
Loans:
	Commercial			$	264,241	$	229,239	$	10,579	$	8,829	4.00	%	3.85	%
	Real estate			1,063,950		1,031,558		49,275		46,400		4.63		4.50
	Consumer			4,676		4,652		305		352		6.52		7.57
		Total loans		1,332,867		1,265,449		60,159		55,581		4.51		4.39
Securities:
	Federal agencies & GSEs			121,923		97,670		2,708		1,849		2.22		1.89
	Mortgage-backed & CMOs			109,048		82,042		2,467		1,725		2.26		2.10
	State and municipal			85,061		105,869		2,399		3,781		2.82		3.57
	Other			14,950		15,796		718		707		4.80		4.48
		Total securities		330,982		301,377		8,292		8,062		2.51		2.68
Deposits in other banks				45,434		65,027		873		734		1.92		1.13
	Total interest-earning assets			1,709,283		1,631,853		69,324		64,377		4.06		3.95
Non-earning assets				118,375		126,159
		Total assets		$	1,827,658	$	1,758,012
Deposits:
	Demand			$	234,857	$	217,833	49		43		0.02		0.02
	Money market			393,321		335,085		3,505		1,668		0.89		0.50
	Savings			132,182		125,157		40		38		0.03		0.03
	Time			374,152		383,444		4,492		4,045		1.20		1.05
		Total deposits		1,134,512		1,061,519		8,086		5,794		0.71		0.55
Customer repurchase agreements				18,401		46,335		164		142		0.89		0.31
Other short-term borrowings				1,149		3,158		22		31		1.91		0.98
Long-term borrowings				27,874		36,887		1,402		1,324		5.03		3.59
	Total interest-bearing
		liabilities		1,181,936		1,147,899		9,674		7,291		0.82		0.64
Noninterest bearing demand deposits				421,527		392,663
Other liabilities				10,374		9,643
Shareholders' equity				213,821		207,807
		Total liabilities and
			shareholders' equity	$	1,827,658	$	1,758,012
Interest rate spread												3.24	%	3.31	%
Net interest margin												3.49	%	3.50	%
Net interest income (taxable equivalent basis)								59,650		57,086
Less: Taxable equivalent adjustment								556		1,339
Net interest income								$	59,094	$	55,747
Notes:
	(a) - Calculated using 21% and 35% statutory income tax rate in 2018 and 2017, respectively, due to tax rate change.