American National Bankshares Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
Unaudited
	June 30
ASSETS	2009			2008
Cash and due from banks	$	13,905		$	20,082
Interest-bearing deposits in other banks		26,879			8,265
Securities available for sale, at fair value		144,706			136,632
Securities held to maturity		6,712			9,828
Total securities		151,418			146,460
Loans held for sale		10,408			2,200
Loans, net of unearned income		557,042			568,830
Less allowance for loan losses		(7,934	)		(7,932	)
Net Loans		549,108			560,898
Premises and equipment, net		18,912			13,230
Other real estate owned		4,033			558
Goodwill		22,468			22,468
Core deposit intangibles, net		1,886			2,264
Accrued interest receivable and other assets		12,466			14,270
Total assets	$	811,483		$	790,695
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- noninterest-bearing	$	101,449		$	98,005
Demand deposits -- interest-bearing		91,424			105,809
Money market deposits		81,306			52,772
Savings deposits		62,768			61,469
Time deposits		278,284			251,189
Total deposits		615,231			569,244
Short-term borrowings:
Customer repurchase agreements		59,437			57,973
Other short-term borrowings		-			23,625
Long-term borrowings		8,712			13,863
Trust preferred capital notes		20,619			20,619
Accrued interest payable and other liabilities		4,866			3,475
Total liabilities		708,865			688,799
Shareholders' equity:
Common stock, $1 par, 10,000,000 shares authorized,
6,100,330 shares outstanding at June 30, 2009 and
6,097,862 shares outstanding at June 30, 2008		6,100			6,098
Capital in excess of par value		26,772			26,463
Retained earnings		70,682			70,233
Accumulated other comprehensive income (loss), net		(936	)		(898	)
Total shareholders' equity		102,618			101,896
Total liabilities and shareholders' equity	$	811,483		$	790,695

American National Bankshares Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
Unaudited
	Three Months Ended						Six Months Ended
	June 30						June 30
	2009			2008			2009			2008
Interest and Dividend Income:
Interest and fees on loans	$	7,917		$	8,987		$	15,951		$	18,431
Interest and dividends on securities:
Taxable		1,233			1,234			2,353			2,465
Tax-exempt		416			420			802			852
Dividends		21			73			43			150
Other interest income		103			74			191			150
Total interest and dividend income		9,690			10,788			19,340			22,048
Interest Expense:
Interest on deposits		2,180			3,116			4,707			6,698
Interest on short-term borrowings		177			427			413			911
Interest on long-term borrowings		80			171			211			297
Interest on trust preferred capital notes		344			344			687			687
Total interest expense		2,781			4,058			6,018			8,593
Net Interest Income		6,909			6,730			13,322			13,455
Provision for loan losses		492			600			842			740
Net Interest Income After Provision
for Loan Losses		6,417			6,130			12,480			12,715
Noninterest Income:
Trust fees		767			916			1,525			1,796
Service charges on deposit accounts		511			601			1,013			1,166
Other fees and commissions		251			226			493			429
Mortgage banking income		568			200			854			395
Brokerage fees		73			101			130			244
Securities gains (losses), net		1			(138	)		1			(108	)
Impairment of securities		-			(255	)		-			(255	)
Net loss on foreclosed real estate		(43	)		-			(1,222	)		(7	)
Other		125			190			193			316
Total noninterest income		2,253			1,841			2,987			3,976
Noninterest Expense:
Salaries		2,732			2,481			5,263			4,950
Employee benefits		832			777			1,645			1,524
Occupancy and equipment		719			1,210			1,470			1,436
FDIC assessment		564			24			781			41
Bank franchise tax		160			173			323			350
Core deposit intangible amortization		95			95			189			189
Other		1,219			883			2,525			2,602
Total noninterest expense		6,321			5,643			12,196			11,092
Income Before Income Taxes		2,349			2,328			3,271			5,599
Income Taxes		643			519			797			1,485
Net Income	$	1,706		$	1,809		$	2,474		$	4,114
Net Income Per Common Share:
Basic	$	0.28		$	0.30		$	0.41		$	0.67
Diluted	$	0.28		$	0.30		$	0.41		$	0.67
Average Common Shares Outstanding:
Basic		6,096,034			6,098,184			6,089,055			6,103,008
Diluted		6,097,047			6,108,536			6,091,291			6,114,911

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and nonfinancial data, unaudited)
	2nd Qtr			1st Qtr			2nd Qtr			YTD			YTD
	2009			2009			2008			2009			2008
EARNINGS
Interest income	$	9,690		$	9,650		$	10,788		$	19,340		$	22,048
Interest expense		2,781			3,237			4,058			6,018			8,593
Net interest income		6,909			6,413			6,730			13,322			13,455
Provision for loan losses		492			350			600			842			740
Noninterest income		2,253			734			1,841			2,987			3,976
Noninterest expense		6,321			5,875			5,643			12,196			11,092
Income taxes		643			154			519			797			1,485
Net income		1,706			768			1,809			2,474			4,114
PER COMMON SHARE
Earnings per share - basic	$	0.28		$	0.13		$	0.30		$	0.41		$	0.67
Earnings per share - diluted		0.28			0.13			0.30			0.41			0.67
Cash dividends declared		0.23			0.23			0.23			0.46			0.46
Book value per share		16.82			16.76			16.71			16.82			16.71
Book value per share - tangible (a)		12.83			12.74			12.65			12.83			12.65
Closing market price		19.25			15.60			18.25			19.25			18.25
FINANCIAL RATIOS
Return on average assets		0.84	%		0.38	%		0.92	%		0.61	%		1.05	%
Return on average equity		6.63			2.99			7.06			4.81			8.03
Return on average tangible equity (b)		9.40			4.32			9.69			6.86			10.96
Average equity to average assets		12.66			12.80			12.99			12.73			13.05
Net interest margin, taxable equivalent		3.84			3.57			3.83			3.72			3.86
Efficiency ratio		66.98			68.77			61.40			67.83			60.75
Effective tax rate		27.37			16.70			22.29			24.37			26.52
PERIOD-END BALANCES
Securities	$	151,418		$	174,792		$	146,460		$	151,418		$	146,460
Loans held for sale		10,408			2,782			2,200			10,408			2,200
Loans, net of unearned income		557,042			569,003			568,830			557,042			568,830
Goodwill and other intangibles		24,354			24,449			24,732			24,354			24,732
Assets		811,483			829,478			790,695			811,483			790,695
Assets - tangible (a)		787,129			805,029			765,963			787,129			765,963
Deposits		615,231			615,888			569,244			615,231			569,244
Customer repurchase agreements		59,437			60,678			57,973			59,437			57,973
Other short-term borrowings		-			12,440			23,625			-
Long-term borrowings		29,331			34,369			34,482			29,331			58,107
Shareholders' equity		102,618			101,915			101,896			102,618			101,896
Shareholders' equity - tangible (a)		78,264			77,466			77,164			78,264			77,164
AVERAGE BALANCES
Securities	$	147,576		$	138,067		$	150,247		$	142,847		$	150,973
Loans held for sale		7,787			2,996			2,206			5,405			1,910
Loans, net of unearned income		562,654			570,342			564,769			566,476			559,370
Interest-earning assets		744,899			741,631			725,789			739,965			721,741
Goodwill and other intangibles		24,406			24,507			24,785			24,456			24,825
Assets		812,404			803,206			789,412			808,071			784,772
Assets - tangible (a)		787,998			778,699			764,627			783,615			759,947
Interest-bearing deposits		513,876			510,821			476,207			512,357			481,203
Deposits		612,134			604,002			576,167			608,105			579,789
Customer repurchase agreements		60,876			56,051			53,535			58,477			54,079
Other short-term borrowings		1,553			2,071			14,765			1,811			8,928
Long-term borrowings		30,460			34,398			37,247			32,418			34,013
Shareholders' equity		102,862			102,845			102,511			102,854			102,410
Shareholders' equity - tangible (a)		78,456			78,338			77,726			78,398			77,585
CAPITAL
Average shares outstanding - basic		6,096,034			6,081,998			6,098,184			6,089,055			6,103,008
Average shares outstanding - diluted		6,097,047			6,085,457			6,108,536			6,091,291			6,114,911
Shares repurchased		-			7,600			2,400			7,600			31,200
Average price of shares repurchased	$	-		$	15.92		$	21.43		$	15.92		$	20.85

American National Bankshares Inc. and Subsidiaries
Financial Highlights
(In thousands, except share, ratio and nonfinancial data, unaudited)
	2nd Qtr			1st Qtr			2nd Qtr			YTD			YTD
	2009			2009			2008			2009			2008
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	7,836		$	7,824		$	7,425		$	7,824		$	7,395
Provision for loan losses		492			350			600			842			740
Charge-offs		(422	)		(376	)		(203	)		(798	)		(373	)
Recoveries		28			38			110			66			170
Ending balance	$	7,934		$	7,836		$	7,932		$	7,934		$	7,932
LOANS
Construction and land development	$	50,930		$	53,579		$	66,740		$	50,930		$	66,740
Commercial real estate		210,832			213,508			201,102			210,832			201,102
Residential real estate		128,835			134,510			140,024			128,835			140,024
Home equity		61,818			61,459			52,773			61,818			52,773
Commercial and industrial		96,978			97,259			99,603			96,978			99,603
Consumer		7,649			8,688			8,588			7,649			8,588
Total	$	557,042		$	569,003		$	568,830		$	557,042		$	568,830
NONPERFORMING ASSETS AT PERIOD-END
Nonperforming loans:
90 days past due	$	-		$	-		$	172		$	-		$	172
Nonaccrual		2,745			2,821			6,216			2,745			6,216
Foreclosed real estate		4,033			3,345			558			4,033			558
Nonperforming assets	$	6,778		$	6,166		$	6,946		$	6,778		$	6,946
ASSET QUALITY RATIOS
Annualized net chargeoffs to average loans		0.28	%		0.24	%		0.07	%		0.26	%		0.07	%
Nonperforming assets to total assets		0.84			0.74			0.88			0.84			0.88
Nonperforming loans to total loans		0.49			0.50			1.12			0.49			1.12
Allowance for loan losses to total loans		1.42			1.38			1.39			1.42			1.39
Allowance for loan losses to
nonperforming loans		289.03			277.77			124.17			289.03			124.17
OTHER DATA
Fiduciary assets at period-end (c)	$	333,754		$	305,129		$	377,008		$	333,754		$	377,008
Retail brokerage assets at period-end (c)	$	89,016		$	82,554		$	94,472		$	89,016		$	94,472
Number full time-time equivalent employees (d)		255			258			261			255			261
Number of full service offices		19			20			20			19			20
Number of loan production offices		2			2			1			2			1
Number of ATM's		24			23			23			24			23
Notes:
(a) - Excludes goodwill and other intangible assets
(b) - Excludes amortization expense, net of tax, of intangible assets
(c) - Market value
(d) - Average for quarter
N/A - Percentage change is not applicable or not meaningful

             

Net Interest Income Analysis
For the Three Months Ended June 30, 2009 and 2008
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2009		2008		2009		2008		2009			2008
Loans:
Commercial	$	91,701	$	90,648	$	1,100	$	1,342		4.80	%		5.92	%
Real estate		470,859		467,424		6,669		7,468		5.67			6.39
Consumer		7,881		8,903		175		197		8.88			8.85
Total loans		570,441		566,975		7,944		9,007		5.57			6.35
Securities:
Federal agencies		46,225		45,708		525		551		4.54			4.82
Mortgage-backed & CMO's		41,382		50,357		550		642		5.32			5.10
State and municipal		51,718		47,201		731		652		5.65			5.53
Other		8,251		6,981		72		90		3.49			5.16
Total securities		147,576		150,247		1,878		1,935		5.09			5.15
Deposits in other banks		26,882		8,567		103		74		1.53			3.46
Total interest-earning assets		744,899		725,789		9,925		11,016		5.33			6.07
Non-earning assets		67,505		63,623
Total assets	$	812,404	$	789,412
Deposits:
Demand	$	92,447	$	107,154		42		160		0.18			0.60
Money market		78,143		51,124		148		239		0.76			1.87
Savings		62,557		62,648		37		84		0.24			0.54
Time		280,729		255,281		1,953		2,633		2.78			4.13
Total deposits		513,876		476,207		2,180		3,116		1.70			2.62
Customer repurchase agreements		60,876		53,535		176		339		1.16			2.53
Other short-term borrowings		1,553		14,765		1		88		0.26			2.38
Long-term borrowings		30,460		37,247		424		515		5.57			5.53
Total interest-bearing
liabilities		606,765		581,754		2,781		4,058		1.83			2.79
Noninterest bearing
demand deposits		98,258		99,960
Other liabilities		4,519		5,187
Shareholders' equity		102,862		102,511
Total liabilities and
shareholders' equity	$	812,404	$	789,412
Interest rate spread										3.50	%		3.28	%
Net interest margin										3.84	%		3.83	%
Net interest income (taxable equivalent basis)						7,144		6,958
Less: Taxable equivalent adjustment						235		228
Net interest income					$	6,909	$	6,730

Net Interest Income Analysis
For the Six Months Ended June 30, 2009 and 2008
(in thousands, except rates)
					Interest
	Average Balance				Income/Expense				Yield/Rate
	2009		2008		2009		2008		2009			2008
Loans:
Commercial	$	93,887	$	88,140	$	2,200	$	2,796		4.69	%		6.34	%
Real estate		470,106		463,927		13,448		15,257		5.72			6.58
Consumer		7,888		9,213		353		414		8.95			8.99
Total loans		571,881		561,280		16,001		18,467		5.60			6.58
Securities:
Federal agencies		45,997		47,886		1,046		1,148		4.55			4.79
Mortgage-backed & CMO's		42,962		48,881		1,112		1,245		5.18			5.09
State and municipal		47,247		47,524		1,335		1,308		5.65			5.50
Other		6,641		6,682		105		189		3.16			5.66
Total securities		142,847		150,973		3,598		3,890		5.04			5.15
Deposits in other banks		25,237		9,488		191		150		1.51			3.16
Total interest-earning assets		739,965		721,741		19,790		22,507		5.35			6.24
Non-earning assets		68,106		63,031
Total assets	$	808,071	$	784,772
Deposits:
Demand	$	102,397	$	107,574		232		385		0.45			0.72
Money market		71,433		51,222		346		533		0.97			2.08
Savings		61,927		62,916		77		200		0.25			0.64
Time		276,600		259,491		4,052		5,580		2.93			4.30
Total deposits		512,357		481,203		4,707		6,698		1.84			2.78
Customer repurchase agreements		58,477		54,079		409		790		1.40			2.92
Other short-term borrowings		1,811		8,928		4		121		0.44			2.71
Long-term borrowings		32,418		34,013		898		984		5.54			5.79
Total interest-bearing
liabilities		605,063		578,223		6,018		8,593		1.99			2.97
Noninterest bearing
demand deposits		95,748		98,586
Other liabilities		4,406		5,553
Shareholders' equity		102,854		102,410
Total liabilities and
shareholders' equity	$	808,071	$	784,772
Interest rate spread										3.36	%		3.27	%
Net interest margin										3.72	%		3.86	%
Net interest income (taxable equivalent basis)						13,772		13,914
Less: Taxable equivalent adjustment						450		459
Net interest income					$	13,322	$	13,455